<PAGE>
As submitted for review by the Securities and Exchange Commission on December 9,
1997
REGISTRATION NO. 333-40551
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
DISCOVERY ZONE, INC.
(Exact name of Registrant as specified in its charter)
--------------------------
<TABLE>
<S> <C> <C>
DELAWARE 7990 36-3877601
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
</TABLE>
------------------------
565 TAXTER ROAD
FIFTH FLOOR
ELMSFORD, NEW YORK 10523
(914) 345-4500
ATTENTION: ANDREW M. SMITH, ESQ.
(Registrant's Address)
------------------------
COPIES TO:
STEPHEN T. GIOVE, ESQ.
SHEARMAN & STERLING
599 LEXINGTON AVENUE
NEW YORK, NEW YORK 10022
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
CROSS-REFERENCE SHEET
LOCATION IN PROSPECTUS OF INFORMATION
REQUIRED BY PART I OF FORM S-4
<TABLE>
<CAPTION>
ITEM NO. CAPTION LOCATION IN PROSPECTUS
- --------- -------------------------------------------------- --------------------------------------------------
<S> <C> <C>
Item 1 Forepart of Registration Statement and Outside
Front Cover Page of Prospectus.................... Facing Page of Registration Statement;
Cross-Reference Sheet; Outside Front Cover Page
Item 2 Inside Front and Outside Back Cover Pages of
Prospectus........................................ Inside Front Cover Page; "Available Information";
Outside Back Cover Page
Item 3 Risk Factors, Ratio of Earnings to Fixed Charges
and Other Information............................. "Summary"; "Risk Factors"; "Selected Historical
Financial Data"; "Financial Statements"
Item 4 Terms of the Transaction.......................... "Summary"; "The Exchange Offer"; "Description of
Exchange Notes"; "Certain U.S. Federal Income Tax
Considerations"
Item 5 Pro Forma Financial Information................... "Selected Historical Financial Data"
Item 6 Material Contracts with the Company Being
Acquired.......................................... Not applicable
Item 7 Additional Information Required for Reoffering by
Persons and Parties Deemed to Be Underwriters..... Not applicable
Item 8 Interests of Named Experts and Counsel............ "Legal Matters"
Item 9 Disclosure of Commission Position on
Indemnification for Securities Act Liabilities.... Not applicable
Item 10 Information with Respect to S-3 Companies......... Not applicable
Item 11 Incorporation of Certain Information by
Reference......................................... Not applicable
Item 12 Information with Respect to S-2 or S-3
Registrants....................................... Not applicable
Item 13 Incorporation of Certain Information by
Reference......................................... Not applicable
Item 14 Information with Respect to Registrants Other Than
S-2 or S-3 Registrants............................ "Summary"; "Selected Historical Financial Data";
"Management's Discussion and Analysis of Financial
Condition and Results of Operations"; "Business";
"Certain U.S. Federal Income Tax Considerations";
"Financial Statements"
Item 15 Information with Respect to S-3 Companies......... Not applicable
Item 16 Information with Respect to S-2 or S-3
Companies......................................... Not applicable
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ITEM NO. CAPTION LOCATION IN PROSPECTUS
- --------- -------------------------------------------------- --------------------------------------------------
<S> <C> <C>
Item 17 Information with Respect to Companies Other Than
S-2 or S-3 Companies.............................. "Summary"; "Selected Historical Financial Data";
"Management's Discussion and Analysis of Financial
Condition and Results of Operations"; "Business";
"Certain U.S. Federal Income Tax Considerations";
"Financial Statements"
Item 18 Information if Proxies, Consents or Authorizations
Are to Be Solicited............................... Not applicable
Item 19 Information if Proxies, Consents or Authorizations
Are Not to Be Solicited in an Exchange Offer...... "Exchange Offer"; "Management"; "Principal
Stockholders"
</TABLE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article Eight Section 2(a) of the Registrant's Certificate of Incorporation,
as amended (the "Certificate of Incorporation"), provides that each person who
was or is made a party or is threatened to be made a party to or is involved in
any action, suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "proceeding"), by reason of the fact that he or
she, or a person of whom he or she is the legal representative, is or was a
director or officer of the Registrant or is or was serving at the request of the
Registrant as a director or officer of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to
employee benefit plans, whether the basis of such proceeding is alleged action
in an official capacity as a director or officer or in any other capacity while
serving as a director or officer, shall be indemnified and held harmless by the
Registrant to the fullest extent authorized by the General Corporation Law of
the State of Delaware against all expense, liability and loss (including
attorneys' fees, judgments, fines, amounts paid or to be paid in settlement, and
excise taxes or penalties arising under the Employee Retirement Income Security
Act of 1974) reasonably incurred or suffered by such person in connection
therewith and such indemnification shall continue as to a person who has ceased
to be a director or officer and shall inure to the benefit of his or her heirs,
executors and administrators; PROVIDED, HOWEVER, that the Registrant shall
indemnify any such person seeking indemnification in connection with a
proceeding (or part thereof) initiated by such person only if such proceeding
(or part thereof) was authorized by the Board of Directors.
Article Eight Section 2(c) of the Registrant's Certificate of Incorporation
provides that the right to indemnification conferred in Certificate of
Incorporation shall not be exclusive of any other right which any person may
have or hereafter acquire under any statute, provision of the Certificate of
Incorporation, By-law, agreement, vote of stockholders or disinterested
directors or otherwise.
Article Eight Section 2(d) of the Registrant's Certificate of Incorporation
further provides that the Registrant may maintain insurance, at its expense, to
protect itself and any director or officer of the Registrant or another
corporation, partnership, joint venture, trust or other enterprise against any
such expense, liability or loss, whether or not the Registrant would have the
power to indemnify such person against such expense, liability or loss under the
General Corporation Law of the State of Delaware.
Section 145 of the Delaware General Corporation Law makes provision for the
indemnification of officers and directors in terms sufficiently broad to
indemnify officers and directors of the Company under certain circumstances from
liabilities (including reimbursement for expenses incurred) arising under the
Securities Act.
See item 22 of this Registration Statement regarding the position of the
Securities and Exchange Commission on indemnification for liabilities arising
under the Securities Act.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
See Index to Exhibits.
ITEM 22. UNDERTAKINGS
1. The undersigned Registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
Registrant undertakes that such reoffering prospectus will contain the
information called for by the
II-1
<PAGE>
applicable registration form with respect to reofferings by persons who may be
deemed underwriters, in addition to the information called for by the other
items of the applicable form.
2. The Registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Securities Act and is used in
connection with an offering of securities subject to Rule 415, will be filed as
a part of an amendment to the registration statement and will not be used until
such amendment is effective, and that, for purposes of determining any liability
under the Securities Act, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
3. The undersigned Registrant hereby undertakes that insofar as
indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim of indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
4. The undersigned Registrant hereby undertakes that, for the purposes of
determining any liability under the Securities Act, each post-effective
amendment that contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the undersigned
Registrant has duly caused this amendment to the registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in Elmsford,
New York on December 9, 1997.
<TABLE>
<S> <C> <C>
DISCOVERY ZONE, INC.
By: /s/ SCOTT W. BERNSTEIN
-----------------------------------------
Name: Scott W. Bernstein
Title: CHIEF EXECUTIVE OFFICER, PRESIDENT
AND DIRECTOR
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the registration statement has been signed by the following persons in the
capacities indicated on December 9, 1997.
NAME TITLE
- ------------------------------ --------------------------
/S/ SCOTT W. BERNSTEIN
- ------------------------------ Chief Executive Officer,
Scott W. Bernstein President and Director
*
- ------------------------------ Director
Martin S. Davis
*
- ------------------------------ Director
Greg S. Feldman
*
- ------------------------------ Director
Douglas W. Rotatori
*
- ------------------------------ Director
L.G. Schafran
*
- ------------------------------
Christopher R. Director
Smith
*
- ------------------------------ Director
Paul Kurnit
* Senior Vice President,
- ------------------------------ Chief Financial and
Robert G. Rooney Administrative Officer
*
- ------------------------------ Vice President and
Leighton J. Weiss Controller
*By: /S/ SCOTT W. BERNSTEIN
-------------------------
Scott W. Bernstein
ATTORNEY-IN-FACT
II-3
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- -----------
<C> <S> <C>
+1.1 Purchase Agreement, dated July 15, 1997, between the Registrant and Jefferies & Company, Inc., as
the initial Purchaser (the "Initial Purchaser").
2.1 The Third Amended Joint Plan of Reorganization of the Registrant, dated March 11, 1997
(incorporated by reference from the Current Report on Form 8-K of the Registrant, dated July 9,
1997).
+2.2 Agreement and Plan of Merger, dated as of July 28, 1997, between Discovery Zone Children's
Amusement Corp. and the subsidiaries of the Registrant listed therein.
+2.3 Agreement and Plan of Merger, dated as of July 29, 1997, between the Registrant and Discovery
Zone Children's Amusement Corporation.
+3.1 Amended and Restated Certificate of Incorporation of the Registrant.
3.2 Amended and Restated By-laws of the Registrant.
+4.1 Indenture, dated as of July 22, 1997, among Registrant, as issuer, Discovery Zone Limited,
Discovery Zone (Puerto Rico), Inc. and Discovery Zone Licensing, Inc., as guarantors (the
"Guarantors") and State Street Bank and Trust Company, as trustee (the "Trustee").
4.2 Form of Exchange Note (included in Exhibit 4.1).
+4.3 Registration Rights Agreement, dated as of July 22, 1997, between the Registrant and the Initial
Purchaser.
+4.4 Warrant Agreement, dated as of July 22, 1997, between the Registrant and State Street Bank and
Trust Company, as warrant agent.
+4.5 Escrow and Security Agreement, dated as of July 22, 1997, among the Registrant, as pledgor, the
Inital Purchaser Inc. and the Trustee, as collateral agent.
+4.6 Pledge Agreement, dated as of July 22, 1997, between the Registrant and the Trustee, as
collateral agent.
+4.7 Security Agreement, dated as of July 22, 1997, between the Registrant and the Trustee, as
collateral agent.
+4.8 Subsidiary Pledge Agreement, dated as of July 22, 1997, between the Guarantors and the Trustee,
as collateral agent.
+4.9 Subsidiary Security Agreement, dated as of July 22, 1997, between the Guarantors and the Trustee,
as collateral agent.
+4.10 Collateral Assignment of Patents, Trademarks and Copyrights, dated as of July 22, 1997, among the
Registrant, as assignor, the Guarantors, as assignors and the Trustee, as assignee.
+4.11 Assignment and License Agreement, dated as of July 29, 1997, among the Registrant, as assignor,
the Guarantors, as assignors, and DZ Party, Inc., as assignee.
+4.12 Form of Intercreditor Agreement, dated as of July 22, 1997, between a lender and the Trustee, as
collateral agent.
+4.13 The Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated as of
July 29, 1997, between the Company, as mortgagor and the Trustee, as mortgagee, related to
property located in Hamilton County, Ohio.
+4.14 The Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated as of
July 29, 1997, between the Company, as mortgagor and the Trustee, as mortgagee, related to
property located in Cook County, Illinois.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- -----------
+4.15 The Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated as of
July 29, 1997, between the Company, as mortgagor and the Trustee, as mortgagee, related to
property located in Cobb County, Georgia.
<C> <S> <C>
+4.16 The Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated as of
July 29, 1997, between the Company, as mortgagor and the Trustee, as mortgagee, related to
property located in Franklin County, Ohio.
+4.17 The Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated as of
July 29, 1997, between the Company, as mortgagor and the Trustee, as mortgagee, related to
property located in Macomb County, Michigan.
+4.18 The Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated as of
July 29, 1997, between the Company, as mortgagor and the Trustee, as mortgagee, related to
property located in Anoka County, Minnesota.
+4.19 The Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated as of
July 29, 1997, between the Company, as mortgagor and the Trustee, as mortgagee, related to
property located in Philadelphia County, Pennsylvania.
+4.20 The Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated as of
July 29, 1997, between the Company, as mortgagor and the Trustee, as mortgagee, related to
property located in Marion County, Indiana.
+4.21 The Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated
as of July 29, 1997, among the Registrant, as grantor, Kenneth W. Pearson, as trustee and the
Trustee, as beneficiary, relating to property located in Dallas County, Texas.
+4.22 The Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated
as of July 29, 1997, among the Registrant, as grantor, Kenneth W. Pearson, as trustee and the
Trustee, as beneficiary, relating to property located in Bexar County (San Antonio), Texas.
+4.23 The Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated
as of July 29, 1997, among the Registrant, as grantor, Kenneth W. Pearson, as trustee and the
Trustee, as beneficiary, relating to property located in Tarrant County, Texas.
+4.24 The Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated
as of July 29, 1997, among the Registrant, as grantor, Kenneth W. Pearson, as trustee and the
Trustee, as beneficiary, relating to property located in Bexar County (Leon Valley), Texas.
+4.25 The Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated
as of July 29, 1997, among the Registrant, as grantor, Kenneth W. Pearson, as trustee and the
Trustee, as beneficiary, relating to property located in Fort Bend County, Texas.
+4.26 The Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated
as of July 29, 1997, among the Registrant, as grantor, Chicago Title Insurance Company, as
trustee and the Trustee, as beneficiary, relating to property located in Clark County,
Washington.
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- -----------
+4.27 The Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated
as of July 29, 1997, among the Registrant, as grantor, The Public Trustee of Arapahoe County,
Colorado, as trustee and the Trustee, as beneficiary, relating to property located in Arapahoe
County, Colorado.
<C> <S> <C>
+4.28 The Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated
as of July 29, 1997, among the Registrant, as grantor, The Public Trustee of Douglas County,
Colorado, as trustee and the Trustee, as beneficiary, relating to property located in Douglas
County, Colorado.
4.29 Open-end Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing (Amended
and Restated), dated as of July 29, 1997, among the Registrant, as mortgagor and McDonald's
Corporation, as mortgagee, relating to property located in Hamilton County, Ohio.
4.30 Amended and Restated Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture
Filing, dated as of July 29, 1997, among the Registrant, as mortgagor and McDonald's Corporation,
as mortgagee, relating to property located in Cook County, Illinois.
4.31 Amended and Restated Deed to Secure Debt and Security Agreement, dated as of July 29, 1997, among
the Registrant, as mortgagor and McDonald's Corporation, as mortgagee, relating to property in
Cobb County, Georgia.
4.32 Open-end Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing (Amended
and Restated), dated as of July 29, 1997, among the Registrant, as mortgagor and McDonald's
Corporation, as mortgagee, relating to property located in Franklin County, Ohio.
4.33 Amended and Restated Mortgage, dated as of July 29, 1997, among the Registrant, as mortgagor and
McDonald's Corporation, as mortgagee, relating to property located in Macomb County, Michigan.
4.34 Amended and Restated Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture
Filing, dated as of July 29, 1997, among the Registrant, as mortgagor and McDonald's Corporation,
as mortgagee, relating to property located in Anoka County, Minnesota.
4.35 Amended and Restated Open-end Mortgage, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, dated as of July 29, 1997, among the Registrant, as mortgagor and McDonald's
Corporation, as mortgagee, relating to property in Philadelphia County, Pennsylvania.
4.36 Amended and Restated Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture
Filing, dated as of July 29, 1997, among the Registrant, as mortgagor and McDonald's Corporation,
as mortgagee, relating to property in Marion County, Indiana.
4.37 Amended and Restated Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, dated as of July 29, 1997, among the Registrant, as grantor, Kenneth W. Pearson,
as trustee and McDonald's Corporation, as beneficiary, relating to property located in Bexar
County (San Antonio), Texas.
4.38 Amended and Restated Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, dated as of July 29, 1997, among the Registrant, as grantor, Kenneth W. Pearson,
as trustee and McDonald's Corporation, as beneficiary, relating to property located in Tarrant
County, Texas.
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- -----------
4.39 Amended and Restated Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, dated as of July 29, 1997, among the Registrant, as grantor, Kenneth W. Pearson,
as trustee and McDonald's Corporation, as beneficiary, relating to property located in Bexar
County (Leon Valley), Texas.
<C> <S> <C>
4.40 Amended and Restated Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, dated as of July 29, 1997, among the Registrant, as grantor (borrower),
McDonald's Corporation, as grantee (lender) and Chicago Title Insurance Company, as grantee
(trustee), relating to property located in Clark County, Washington.
4.41 Amended and Restated Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, dated as of July 29, 1997, among the Registrant, as grantor, The Public Trustee
of Arapahoe County, Colorado, as trustee and McDonald's Corporation, as beneficiary, relating to
property located in Arapahoe County, Colorado.
4.42 Amended and Restated Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, dated as of July 29, 1997, among the Registrant, as grantor, The Public Trustee
of Douglas County, Colorado, as trustee and McDonald's Corporation, as beneficiary, relating to
property located in Douglas County, Colorado.
4.43 Subordination Agreement, dated as of July 29, 1997, among the Registrant, the Trustee, for itself
and as collateral agent, and McDonald's Corporation, related to property located in Hamilton
County, Ohio.
4.44 Subordination Agreement, dated as of July 29, 1997, among the Registrant, the Trustee, for itself
and as collateral agent, and McDonald's Corporation, related to property located in Cook County,
Illinois.
4.45 Subordination Agreement, dated as of July 29, 1997, among the Registrant, the Trustee, for itself
and as collateral agent, and McDonald's Corporation, related to property located in Cobb County,
Georgia.
4.46 Subordination Agreement, dated as of July 29, 1997, among the Registrant, the Trustee, for itself
and as collateral agent, and McDonald's Corporation, related to property located in Franklin
County, Ohio.
4.47 Subordination Agreement, dated as of July 29, 1997, among the Registrant, the Trustee, for itself
and as collateral agent, and McDonald's Corporation, related to property located in Macomb
County, Michigan.
4.48 Subordination Agreement, dated as of July 29, 1997, among the Registrant, the Trustee, for itself
and as collateral agent, and McDonald's Corporation, related to property located in Anoka County,
Minnesota.
4.49 Subordination Agreement, dated as of July 29, 1997, among the Registrant, the Trustee, for itself
and as collateral agent, and McDonald's Corporation, related to property located in Philadelphia
County, Pennsylvania.
4.50 Subordination Agreement, dated as of July 29, 1997, among the Registrant, the Trustee, for itself
and as collateral agent, and McDonald's Corporation, related to property located in Marion
County, Indiana.
4.51 Subordination Agreement, dated as of July 29, 1997, among the Registrant, the Trustee, for itself
and as collateral agent, and McDonald's Corporation, related to property located in Bexar County
(San Antonio), Texas.
</TABLE>
iv
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- -----------
4.52 Subordination Agreement, dated as of July 29, 1997, among the Registrant, the Trustee, for itself
and as collateral agent, and McDonald's Corporation, related to property located in Tarrant
County, Texas.
<C> <S> <C>
4.53 Subordination Agreement, dated as of July 29, 1997, among the Registrant, the Trustee, for itself
and as collateral agent, and McDonald's Corporation, related to property located in Bexar County
(Leon Valley), Texas.
4.54 Subordination Agreement, dated as of July 29, 1997, among the Registrant, the Trustee, for itself
and as collateral agent, and McDonald's Corporation, related to property located in Clark County,
Washington.
4.55 Subordination Agreement, dated as of July 29, 1997, among the Registrant, the Trustee, for itself
and as collateral agent, and McDonald's Corporation, related to property located in Arapahoe
County, Colorado.
4.56 Subordination Agreement, dated as of July 29, 1997, among the Registrant, the Trustee, for itself
and as collateral agent, and McDonald's Corporation, related to property located in Douglas
County, Colorado.
4.57 Secured Rent Deferral Note of McDonalds Corporation, dated as of July 29, 1997, related to
property located in Independence, Missouri.
4.58 Secured Rent Deferral Note of McDonalds Corporation, dated as of July 29, 1997, related to
property located in Royal Palm, Florida.
4.59 Secured Rent Deferral Note of McDonalds Corporation, dated as of July 29, 1997, related to
property located in Cincinnati, Ohio.
4.60 Secured Rent Deferral Note of McDonalds Corporation, dated as of July 29, 1997, related to
property located in Greenfield, Wisconsin.
4.61 Secured Rent Deferral Note of McDonalds Corporation, dated as of July 29, 1997, related to
property located in Webster, Texas.
4.62 Secured Rent Deferral Note of McDonalds Corporation, dated as of July 29, 1997, related to
property located in Houston, Texas.
4.63 Secured Rent Deferral Note of McDonalds Corporation, dated as of July 29, 1997, related to
property located in Manchester, Missouri.
4.64 Secured Rent Deferral Note of McDonalds Corporation, dated as of July 29, 1997, related to
property located in Rancho Cucomonga, California.
4.65 Secured Rent Deferral Note of McDonalds Corporation, dated as of July 29, 1997, related to
property located in Amherst, New York.
4.66 Secured Rejection Note of McDonalds Corporation, dated as of July 29, 1997.
*5.1 Opinion and Consent of Shearman & Sterling regarding validity of the Exchange Notes.
10.1 Employment Agreement, dated as of July 21, 1997, between the Registrant and Scott W. Bernstein.
10.2 Employment Agreement, dated as of August 1, 1997, between the Registrant and Robert G. Rooney.
10.3 Employment Agreement, dated as of August 1, 1997, between the Registrant and Sharon L. Rothstein.
10.4 1997 Stock Incentive Plan.
+12.1 Statements re computation of ratios.
</TABLE>
v
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- -----------
16.1 Letter re change in certifying accountant (incorporated by reference from the Current Report on
Form 8-K of the Registrant, dated June 3, 1996).
<C> <S> <C>
+21.1 List of Subsidiaries of the Registrant.
+23.1 Consent of Ernst & Young LLP, independent public accountants for the Registrant.
+23.2 Consent of Price Waterhouse LLP, independent public accountants for the Registrant.
+23.3 Consent of Arthur Andersen LLP, independent public accountants for the Registrant.
*23.4 Consent of Shearman & Sterling (included in exhibit 5.1).
+24.1 Power of Attorney (included on signature page).
*25.1 Statement of Eligibility of the Trustee, on Form T-1.
27.1 Financial Data Schedule.
*99.1 Form of Letter of Transmittal.
*99.2 Form of Notice of Guaranteed Delivery.
*99.3 Form of Exchange Agent Agreement.
</TABLE>
- ------------------------
* To be filed by Amendment.
+ Previously filed.
vi
<PAGE>
Exhibit 3.2
AMENDED AND RESTATED BY-LAWS
of
DISCOVERY ZONE, INC.
--------------------------------
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE - The registered office of
Discovery Zone, Inc. (the "Corporation") shall be established and maintained at
the office of The Corporation Trust Company at The Corporation Trust Center,
1209 Orange Street in the City of Wilmington, County of New Castle, State of
Delaware, and said Corporation Trust Company shall be the registered agent of
the Corporation in charge thereof.
SECTION 2. OTHER OFFICES - The Corporation may have other
offices, either within or without the State of Delaware, at such place or places
as the Board of Directors of the Corporation (the "Board of Directors") may from
time to time select or the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. ANNUAL MEETINGS - Annual meetings of stockholders
for the election of directors, and for such other business as may be stated in
the notice of the meeting, shall be held at such place, either within or without
the State of Delaware, and at such time and date as the Board of Directors, by
resolution, shall determine and as set forth in the notice of the meeting. If
the Board of Directors fails so to determine the time, date and place of
meeting, the annual meeting of stockholders shall be held at the registered
office of the Corporation on the first Tuesday in April. If the date of the
annual meeting shall fall upon a legal holiday, the meeting shall be held on the
next succeeding business day. At each annual meeting, the stockholders entitled
to vote shall elect a Board of Directors and they may transact such other
corporate business as shall be stated in the notice of the meeting.
SECTION 2. SPECIAL MEETINGS - Special meetings of the
stockholders for any purpose or purposes may be called by the Chairman of the
Board, the President or the Secretary, or by resolution of the Board of
Directors.
<PAGE>
2
SECTION 3. VOTING - Each stockholder entitled to vote in
accordance with the terms of the Certificate of Incorporation (as the same may
be amended or restated from time to time, the "Certificate of Incorporation")
and these By-Laws may vote in person or by proxy, but no proxy shall be voted
after three years from its date unless such proxy provides for a longer period.
All elections for directors shall be decided by plurality vote; all other
questions shall be decided by majority vote except as otherwise provided by the
Certificate of Incorporation or the laws of the State of Delaware.
A complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, with the address of each, and the
number of shares held by each, shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten days prior to the meeting, either at a place
within the city where the meeting is to be held, which place shall be specified
in the notice of the meeting, or, if not so specified, at the place where the
meeting is to be held. The list shall also be produced and kept at the time and
place of the meeting during the whole time thereof, and may be inspected by any
stockholder who is entitled to be present.
SECTION 4. QUORUM - Except as otherwise required by law, the
Certificate of Incorporation or these By-Laws, the presence, in person or by
proxy, of stockholders holding shares constituting a majority of the voting
power of the Corporation shall constitute a quorum at all meetings of the
stockholders. In case a quorum shall not be present at any meeting, a majority
in interest of the stockholders entitled to vote thereat, present in person or
by proxy, shall have the power to adjourn the meeting from time to time, without
notice other than announcement at the meeting, until the requisite amount of
stock entitled to vote shall be present. At any such adjourned meeting at which
the requisite amount of stock entitled to vote shall be represented, any
business may be transacted that might have been transacted at the meeting is
originally noticed, but only those stockholders entitled to vote at the meeting
as originally noticed shall be entitled to vote at any adjournment or
adjournments thereof.
SECTION 5. NOTICE OF MEETINGS - Written notice, stating the
place, date and time of the meeting, and the general nature of the business to
be considered, shall be given to each stockholder entitled to vote thereat, at
his or her address as it appears on the records of the Corporation, not less
than ten nor more than sixty days before the date of the meeting. No business
other than that stated in the notice shall be transacted at any meeting without
the unanimous consent of all the stockholders entitled to vote thereat.
SECTION 6. ACTION WITHOUT MEETING - Unless otherwise provided
by the Certificate of Incorporation, any action required or permitted to be
taken at any annual or special meeting of stockholders may be taken without a
meeting, without prior notice and without a vote, if a consent in writing,
setting forth the action so taken, shall be
<PAGE>
3
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted.
Prompt notice of the taking of the corporate action without a meeting by less
than unanimous written consent shall be given to those stockholders who have not
consented to writing.
ARTICLE III
DIRECTORS
SECTION 1. NUMBER AND TERM - The business and affairs of the
Corporation shall be managed under the direction of a Board of Directors which
shall consist of not less than three persons. The exact number of directors
shall initially be five and may thereafter be fixed from time to time by the
Board of Directors; provided, however, that the director nominated by the
Official Committee of Unsecured Creditors of the Corporation shall serve a term
of at least three (3) years, notwithstanding any assignment of any ownership
interest in the Corporation. Directors shall be elected at the annual meeting of
stockholders and each director shall be elected to serve until his or her
successor shall be elected and shall qualify. A director need not be a
stockholder.
SECTION 2. RESIGNATIONS - Any director may resign at any time.
Such resignation shall be made in writing, and shall take effect at the time
specified therein, and if no time be specified, at the time of its receipt by
the Chairman of the Board, the President or the Secretary. The acceptance of a
resignation shall not be necessary to make it effective.
SECTION 3. VACANCIES - If the office of any director becomes
vacant, the remaining directors in the office, though less than a quorum, by a
majority vote, may appoint any qualified person to fill such vacancy, who shall
hold office for the unexpired term and until his or her successor shall be duly
chosen. If the office of any director becomes vacant and there are no remaining
directors, the stockholders, by the affirmative vote of the holders of shares
constituting a majority of the voting power of the Corporation, at a special
meeting called for such purpose, may appoint any qualified person to fill such
vacancy.
SECTION 4. REMOVAL - Except as hereinafter provided, any
director or directors may be removed either for or without cause at any time by
the affirmative vote of the holders of a majority of the voting power entitled
to vote for the election of directors, at an annual meeting or a special meeting
called for the purpose, and the vacancy thus created may be filled, at such
meeting, by the affirmative vote of holders of shares constituting a majority of
the voting power of the Corporation.
SECTION 5. COMMITTEES - The Board of Directors may, by resolution or
<PAGE>
4
resolutions passed by a majority of the whole Board of Directors, designate one
or more committees, each committee to consist of one or more directors of the
Corporation; provided, however, that such committee shall consist of not less
than three persons.
Any such committee, to the extent provided in the resolution
of the Board of Directors, or in these By-Laws, shall have and may exercise all
the powers and authority of the Board of Directors in the management of the
business and affairs of the Corporation, and may authorize the seal of the
Corporation to be affixed to all papers which may require it.
SECTION 6. MEETINGS - The newly elected directors may hold
their first meeting for the purpose of organization and the transaction of
business, if a quorum be present, immediately after the annual meeting of the
stockholders; or the time and place of such meeting may be fixed by consent of
all the Directors.
Regular meetings of the Board of Directors may be held without
notice at such places and times as shall be determined from time to time by
resolution of the Board of Directors.
Special meetings of the Board of Directors may be called by
the Chairman of the Board or the President, or by the Secretary on the written
request of any director, on at least two days' notice to each director given
personally or by telegram or facsimile transmission (except that notice of any
director may be waived in writing by such director) and shall be held at such
place or places as may be determined by the Board of Directors, or as shall be
stated in the call of the meeting.
Unless otherwise restricted by the Certificate of
Incorporation or these By-Laws, members of the Board of Directors, or any
committee designated by the Board of Directors, may participate in any meeting
of the Board of Directors or any committee thereof by means of a conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and such participation in a
meeting shall constitute presence in person at the meeting.
SECTION 7. QUORUM - A majority of the Director shall
constitute a quorum for the transaction of business. If at any meeting of the
Board of Directors there shall be less than a quorum present, a majority of
those present may adjourn the meeting from time to time until a quorum is
obtained, and no further notice thereof need be given other than by announcement
at the meeting which shall be so adjourned. The vote of the majority of the
Directors present at a meeting at which a quorum is present shall be the act of
the Board of Directors unless the Certificate of Incorporation or these By-Laws
shall require the vote of a greater number.
SECTION 8. COMPENSATION -Directors shall not receive any stated
<PAGE>
5
salary for their services as directors or as members of committees, but by
resolution of the Board of Directors a fixed fee and expenses of attendance may
be allowed for attendance at each meeting. Nothing herein contained shall be
construed to preclude any director from serving the Corporation in any other
capacity as an officer, agent or otherwise, and receiving compensation therefor.
SECTION 9. ACTION WITHOUT A MEETING - Any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting if a written consent thereto is
signed by all members of the Board of Directors or of such committee, as the
case may be, and such written consent is filed with the minutes of proceedings
of the Board of Directors or such committee.
SECTION 10. CHAIRMAN OF THE BOARD - The Board of Directors
shall designate a member of the Board of Directors to act as the Chairman for
one or more meetings of the Board of Directors or may designate a member of the
Board of Directors to act as the Chairman of all meetings of the Board of
Directors, who shall preside at all meetings of the Board of Directors and shall
have and perform such other duties as may be assigned to him or her by the Board
of Directors. He or she shall be designated Chairman of the Board of Directors
of the Corporation. The Chairman of the Board shall have the power to execute
bonds, mortgages and other contracts on behalf of the Corporation, and to cause
the seal of the Corporation to be affixed to any instrument requiring it, and
when so affixed the seal shall be attested to by the signature of the Secretary
or the Treasurer or an Assistant Secretary or an Assistant Treasurer.
ARTICLE IV
OFFICERS
SECTION 1. OFFICERS - The officers of the Corporation shall be
a President, one or more Vice Presidents, a Treasurer and a Secretary, all of
whom shall be elected by the Board of Directors and shall hold office until
their successors are duly elected and qualified. In addition, the Board of
Directors may elect such Assistant Secretaries and Assistant Treasurers as they
may deem proper. The Board of Directors may appoint such other officers and
agents as it may deem advisable, who shall hold their offices for such terms and
shall exercise such powers and perform such duties as shall be determined from
time to time by the Board of Directors.
SECTION 2. INTENTIONALLY OMITTED
SECTION 3. PRESIDENT - The President shall be the Chief Executive
Officer and/or Chief Operating Officer of the Corporation. He or she shall have
the general powers and duties of supervision and management usually vested in
the office of President of
<PAGE>
6
a corporation. The President shall have the power to execute bonds, mortgages
and other contracts on behalf of the Corporation, and to cause the seal to be
affixed to any instrument requiring it, and when so affixed the seal shall be
attested to by the signature of the Secretary or the Treasurer or an Assistant
Secretary or an Assistant Treasurer.
SECTION 4. VICE PRESIDENTS - Each Vice President shall have
such powers and shall perform such duties as shall be assigned to him or her by
the Board of Directors.
SECTION 5. TREASURER - The Treasurer shall be the Chief
Financial Officer of the Corporation. He or she shall have the custody of the
Corporate funds and securities and shall keep full and accurate account of
receipts and disbursements in books belonging to the Corporation. He or she
shall deposit all moneys and other valuables in the name and to the credit of
the Corporation in such depositaries as may be designated by the Board of
Directors. He or she shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, the Chairman of the Board, or the President,
taking proper vouchers for such disbursements. He or she shall render to the
Chairman of the Board, the President and Board of Directors at the regular
meetings of the Board of Directors, or whenever they may request it, an account
of all his or her transactions as Treasurer and of the financial condition of
the Corporation. If required by the Board of Directors, he or she shall give the
Corporation a bond for the faithful discharge of his or her duties in such
amount and with such surety as the Board of Directors shall prescribe.
SECTION 6. SECRETARY - The Secretary shall give, or cause to
be given, notice of all meetings of stockholders and of the Board of Directors
and all other notices required by law or these By-Laws, and in case of his or
her absence or refusal or neglect so to do, any such notice may be given by any
person thereunto directed by the Chairman of the Board or the President, or by
the Board of Directors, upon whose request the meeting is called as provided in
these By-Laws. He or she shall record all the proceedings of the meetings of the
Board of Directors, any committees thereof and the stockholders of the
Corporation in a book to be kept for that purpose, and shall perform such other
duties as may be assigned to him or her by the Board of Directors, the Chairman
of the Board or the President. He or she shall have the custody of the seal of
the Corporation and shall affix the same to all instruments requiring it, when
authorized by the Board of Directors, the Chairman of the Board or the
President, and attest to the same.
SECTION 7. ASSISTANT TREASURERS AND ASSISTANT SECRETARIES -
Assistant Treasurers and Assistant Secretaries, if any, shall be elected and
shall have such powers and shall perform such duties as shall be assigned to
them, respectively, by the Board of Directors.
<PAGE>
7
ARTICLE V
MISCELLANEOUS
SECTION 1. CERTIFICATES OF STOCK - A certificate of stock
shall be issued to each stockholder certifying the number of shares owned by
such stockholder in the Corporation. Certificates of stock of the Corporation
shall be of such form and device as the Board of Directors may from time to time
determine.
SECTION 2. LOST CERTIFICATES - A new certificate of stock may
be issued to each stockholder certifying the number of shares owned by such
stockholder in the Corporation. Certificates of stock of the Corporation shall
be of such form and device as the Board of Directors may from time to time
determine.
SECTION 3. TRANSFER OF SHARES - The shares of stock of the
Corporation shall be transferable only upon its books by the holders thereof in
person or by their duly authorized attorneys or legal representatives, and upon
such transfer of the old certificates shall be surrendered to the Corporation by
the delivery thereof to the person in charge of the stock and transfer books and
ledgers, or to such other person as the Board of Directors may designate, by
whom they shall be cancelled, and new certificates shall thereupon be issued. A
record shall be made of each transfer and whenever a transfer shall be made for
collateral security, and not absolutely, it shall be so expressed in the entry
of the transfer. The Corporation shall be entitled to treat the holder of record
of any share or shares as the holder in fact thereof and shall not be bound to
recognize any equitable or other claim to or interest in such share on the part
of any other person, and shall not be liable for any registration or transfer of
shares which are registered or to be registered in the name of a fiduciary or
nominee of a fiduciary unless made with actual knowledge that a fiduciary or
nominee of a fiduciary is committing a breach of trust in requesting such
registration or transfer, or with knowledge of such facts that its participation
therein amounts to bad faith.
SECTION 4. STOCKHOLDERS RECORD DATE - In order that the
Corporation may determine the stockholders entitled to notice of or to vote at
any meeting of stockholders or any adjournment thereof, or to express consent to
corporate action in writing without a meeting, or entitled to receive payment of
any dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board of Directors may fix a
record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board of Directors and which
record date: (1) in the case of determination of stockholders entitled to vote
at any meeting of stockholders or adjournment thereof, shall, unless otherwise
required by law, not be more than sixty nor less than ten days before the date
of such meeting; (2) in the case of determination of stockholders entitled to
express consent to corporate action in writing
<PAGE>
8
without a meeting, shall not be more than ten days from the date upon which the
resolution fixing the record date is adopted by the Board of Directors; and (3)
in the case of any other action, shall not be more than sixty days prior to such
other action. if no record date is fixed: (1) the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day next preceding the day on which the
meeting is held; (2) the record date for determining stockholders entitled to
express consent to corporate action in writing without a meeting when no prior
action of the Board of Directors is required by law, shall be the first day on
which a signed Corporation in accordance with applicable law, or, if prior
action by the Board of Directors is required by law, shall be at the close of
business on the day on which the Board of Directors adopts the resolution taking
such prior action; and (3) the record date for determining stockholders for any
other purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholder shall apply to any adjournment of the meeting, provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
SECTION 5. DIVIDENDS - Subject to the provisions of the
Certificate of Incorporation, the Board of Directors may, out of funds legally
available therefor at any regular or special meeting, declare dividends upon
stock of the Corporation as and when they deem appropriate. Before declaring any
dividend there may be set apart out of any funds of the Corporation available
for dividends, such sum or sums as the Board of Directors from time to time in
their discretion deem proper for working capital or as a reserve fund to meet
contingencies or for equalizing dividends or for such other purposes as the
Board of Directors shall deem conducive to the interests of the Corporation.
SECTION 6. SEAL - The corporate seal of the Corporation shall
be in such form as shall be determined by resolution of the Board of Directors.
Said seal may be used by causing it or a facsimile thereof to be impressed or
affixed or reproduced or otherwise imprinted upon the subject document or paper.
SECTION 7. FISCAL YEAR - The fiscal year of the Corporation
shall be determined by resolution of the Board of Directors.
SECTION 8. CHECKS - All checks, drafts or other orders for the
payment of money, notes or other evidences of indebtedness issued in the name of
the Corporation shall be signed by such officer or officers, or agent or agents,
of the Corporation, and in such manner as shall be determined from time to time
by resolution of the Board of Directors.
SECTION 9. NOTICE AND WAIVER OF NOTICE - Whenever any notice
is required to be given under these By-Laws, personal notice is not required
unless expressly
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9
so stated, and any notice so required shall be deemed to be sufficient if given
by depositing the same in the United States mail, postage prepaid, addressed to
the person entitled thereto at his or her address as it appears on the records
of the Corporation, and such notice shall be deemed to have been given on the
day of such mailing. Notice to directors may also be given by telegram or
facsimile transmission. Stockholders not entitled to vote shall not be entitled
to receive notice of any meetings except as otherwise provided by law. Whenever
any notice is required to be given under the provisions of any law, or under the
provisions of the Certificate of Incorporation or of these By-Laws, a waiver
thereof, in writing and signed by the person or persons entitled to said notice,
whether before or after the time stated therein, shall be deemed equivalent to
such required notice.
ARTICLE VI
AMENDMENTS
These By-Laws may be altered, amended or repealed at any
meeting of the stockholders by the affirmative vote of the holders of shares
constituting a majority of the voting power of the Corporation. Except as
otherwise provided in the Certificate of Incorporation, the Board of Directors
may, by majority vote of those present at any meeting at which a quorum is
present, alter, amend or repeal these By-Laws, or enact such other By-Laws as in
their judgment may be advisable for the regulation and conduct of the affairs of
the Corporation.
<PAGE>
EXHIBIT 4.29
- -------------------------------------------------------------------------------
OPEN-END MORTGAGE, ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND
FIXTURE FILING (AMENDED AND RESTATED)
-----------------------------------
DISCOVERY ZONE, INC.
(Mortgagor),
to
McDONALD's CORPORATION
(Mortgagee)
Dated as of July 29, 1997
DOCUMENT PREPARED BY AND
AFTER RECORDING RETURN TO:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attention: Jonathan A. Reiss, Esq.
- -------------------------------------------------------------------------------
[FOREST PARK, OHIO PROPERTY]
<PAGE>
OPEN-END MORTGAGE, ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT
AND FIXTURE FILING (AMENDED AND RESTATED) (as the same may from time to time be
extended, renewed or modified, this "MORTGAGE"), made as of the 29th day of
July, 1997, by DISCOVERY ZONE, INC., a Delaware corporation ("MORTGAGOR"),
having its principal place of business at One Corporate Center, 110 East Broward
Boulevard, Fort Lauderdale, Florida 33301, as successor by merger to LEAPS &
BOUNDS, INC., to McDONALD'S CORPORATION a Delaware corporation ("MORTGAGEE"),
having an address at One McDonald's Plaza, Oak Brook, Illinois 60523.
W I T N E S S E T H:
A. WHEREAS, prior to Mortgagor's several predecessors in interest
filing their voluntary petitions for relief under chapter 11, title 11, United
States Code (the "BANKRUPTCY CODE"), Mortgagor's predecessors in interest with
respect to the Mortgaged Property (as hereinafter defined), Leaps & Bounds, Inc.
("LBI") had provided Mortgagee with a First Mortgage on the Mortgaged Property,
dated as of August 30, 1994 (the "ORIGINAL MORTGAGE") and identified by the
recording information set forth on Schedule A hereto, to secure certain
obligations owed to Mortgagee under the Agreement and Plan of Merger among
Mortgagee, Mortgagor, Discovery Zone, Inc., a Delaware corporation ("OLD DZI")
and Discovery Zone International, Inc. ("DZII"), a Delaware corporation, dated
as of August 30, 1994 (the "MERGER AGREEMENT"); and
B. WHEREAS, pursuant to Section 11.2(a)(iii) of the Merger
Agreement, Old DZI agreed to defend, indemnify and hold Mortgagee and its
affiliates harmless in respect of all expenses, losses, costs, deficiencies,
liabilities and damages (including related and reasonable counsel fees and
expenses, and compensatory and demonstrable consequential damages) incurred or
suffered by Mortgagee as a direct result of, inter alia, any breach by Old DZI
or LBI of the leases or subleases relating to certain properties that result in
any payment by Mortgagee in connection with any guarantee by Mortgagee of such
leases and pursuant to Section 10.3(f) of the Merger Agreement it was agreed
that certain security would be provided to secure the obligations under Section
11.2(a)(iii) of the Merger Agreement, including without limitation, a first
priority security interest in the Land and Improvements (the "AGREEMENT TO
INDEMNIFY"); and
C. WHEREAS, following the filing of their respective prayers for
relief under the Bankruptcy Code, Mortgagor's predecessors in interest, Old DZI,
their affiliated debtors, including DZII and LBI (the "DEBTORS"), and Mortgagee
entered into the Stipulation and Order Between Debtors and McDonald's
Corporation Providing For The Resolution, Settlement And Compromise of Disputes
And For Rent Deferrals And Allowance of Certain Claims (the "STIPULATION AND
ORDER") that was entered by the United States Bankruptcy Court for the District
of Delaware (the "BANKRUPTCY COURT") on November 18, 1996, which was not
appealed or otherwise challenged, became a final order, remains in full force
and effect and to which Mortgagor is bound, Section 7 of which is captioned
"CONTINUING SECURITY" and provides, in pertinent part, that the valid and
enforceable first priority security interest on the
2
<PAGE>
Land and Improvements and certain other collateral shall secure the performance
and payment of all of the obligations of Mortgagor to Mortgagee under the Notes
(as hereinafter defined), any obligations of Mortgagee that may arise in
connection with the Assumption Locations whether pursuant to any guaranty,
lease, sublease or otherwise, any obligations of Mortgagor that may arise in the
event of a Liquidation, and any continuing obligations of Mortgagor relating to
the Rejection Location(s) and the Prior Rejection Locations (as such terms are
defined therein); and
D. WHEREAS, pursuant to the Stipulation and Order and 11 U.S.C.
Section 365, the Debtors, as predecessors in interest to Mortgagor, assumed the
subleases relating to certain properties (the "ASSUMED PROPERTIES") which
subleases (the "ASSUMED PROPERTY SUBLEASES") expressly incorporate the Agreement
to Indemnify as it relates to any current or future obligations of Mortgagee
relating to the Assumed Properties; and
E. WHEREAS, pursuant to the Stipulation and Order and the Plan (as
hereinafter defined), this Mortgage hereby amends and restates the Original
Mortgage in its entirety in accordance with the terms and provisions set forth
herein; and
F. WHEREAS, this Mortgage, together with certain other Deeds of
Trust, Mortgages or similar encumbrances, are intended to and do secure the
obligations of Mortgagor and its predecessors in interest and the other Debtors,
to Mortgagee under all of the Stipulation and Order, the Agreement to Indemnify,
the Secured Rent Deferral Notes (as hereinafter defined) and the Secured
Rejection Note (as hereinafter defined); and
G. WHEREAS, pursuant to the plan of reorganization for Old DZI and
its affiliated debtors confirmed by the Bankruptcy Court by order entered July
18, 1997 (the "PLAN"), and as required by the terms of the Stipulation and
Order, Mortgagor, as the reorganized successor of the Debtors, is obligated to
issue to Mortgagee Secured Rent Deferral Notes in the aggregate original
principal amount of $266,466.24, which amount is subject to increase each month
in accordance with the terms thereof (the "SECURED RENT DEFERRAL NOTES") and
Secured Rejection Note in the aggregate original principal amount of
$4,416,237.90 (the "SECURED REJECTION NOTE", and, together with the Secured Rent
Deferral Notes, the "NOTES"); and
H. WHEREAS, pursuant to the Plan, all of the Debtors and their
reorganized successors have merged into Mortgagor, and simultaneously with such
merger, all property of LBI and the other Debtors, including the Mortgaged
Property (as hereinafter defined) has been revested in Mortgagor, as the
successor entity of the Debtors; and
I. WHEREAS, in accordance with the foregoing, Mortgagor is the fee
simple owner of the real estate described in Exhibit A attached hereto (the
"LAND");
NOW THEREFORE, with reference to the foregoing recitals and for good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged,
3
<PAGE>
Mortgagor and Mortgagee hereby agree that the Original Mortgage is hereby
amended and restated in its entirety as follows:
For the purpose of securing the payment and performance of all of the
obligations (the "OBLIGATIONS") of Mortgagor to Mortgagee, including without
limitation, any and all obligations of Mortgagor, as successor in interest to
Old DZI, DZII, LBI and their affiliated debtors, under this Mortgage, the
Agreement to Indemnify (including, without limitation, any contingent
obligations thereunder), the Stipulation and Order (including, without
limitation, the obligations described in Section 7 thereof which is referred to
in paragraph C of the recitals above), the Plan and the Notes (including any and
all subsequent advances made pursuant to the terms of the Notes), and all other
documents evidencing or securing any such obligations (collectively, the
"RELEVANT DOCUMENTS"), Mortgagor by these presents does hereby mortgage, give,
grant, bargain, sell, alienate, enfeoff, convey, confirm, warrant, pledge,
assign and hypothecate unto Mortgagee, the Land and the buildings, structures
and improvements of every nature whatsoever now or hereafter located thereon to
the extent owned by Mortgagor (including, but not limited to, all gas and
electric fixtures, radiators, heaters, docks and docking facilities, engines and
machinery, boilers, elevators and motors, plumbing, heating and air conditioning
fixtures, carpeting and other floor coverings, water heaters, awnings and storm
sashes which are or shall be attached to the Land or said buildings, structures
or improvements) (the "IMPROVEMENTS");
TOGETHER WITH: all right, title, interest and estate of Mortgagor now
owned, or hereafter acquired, in and to the following property, rights, interest
and estates relating to the Land and the Improvements, together with Mortgagor's
interest in the following property, rights, interests and estates hereinafter
described (the Land, Improvements, and the following property, rights, interests
and estates being hereinafter collectively referred to as the "MORTGAGED
PROPERTY"):
(a) all easements, rights-of-way, strips and gores of land, streets,
ways, alleys, passages, sewer rights, water, water courses, water rights and
powers, air rights and development rights, construction and equipment
warranties, and all estates, rights, titles, interests, privileges, liberties,
tenements, hereditaments and appurtenances of any nature whatsoever, in any way
belonging, relating to or pertaining to the Land and the Improvements and the
reversion and reversions, remainder and remainders, and all land lying in the
bed of any street, road or avenue, opened or proposed, in front of or adjoining
the Land, to the center line thereof and all the estates, rights, titles,
interests, dower and rights of dower, curtesy and rights of curtesy, property,
possession, claim and demand whatsoever, both at law and in equity, of Mortgagor
of, in and to the Land and the Improvements and every part and parcel thereof,
with the appurtenances thereto, and in and to any streets, ways, alleys,
passages, strips or gores of land adjoining the Land or any part thereof;
(b) all fixtures, attachments and other articles attached to the Land
or the Improvements constituting realty or real property now or hereafter owned
by Mortgagor or in which Mortgagor has or shall acquire an interest, now or
hereafter located on, attached to or
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contained in or used or usable in connection with the Mortgaged Property, and
including, without limitation, all building or construction materials intended
for construction, reconstruction, alteration or repair of or installation on or
in the Mortgaged Property, of every kind and nature whatsoever now owned or
hereafter acquired by Mortgagor, and all proceeds thereof, as well as all
additions to, appurtenances, substitutions for, replacements of or accessions to
any of the items recited as aforesaid and all attachments, components, parts
(including spare parts) and accessories, whether installed thereon or affixed
thereto, now or hereafter owned by Mortgagor and used or intended to be used in
connection with, or with the operation of, the Mortgaged Property, to the extent
constituting real property, but not including play equipment or other similar-
type entertainment equipment relating to the operation of the "Discovery Zone"
facility on the Mortgaged Property unless removal of such equipment would cause
structural damage to the Land or the Improvements (collectively, the
"FIXTURES");
(c) all awards or payments, including interest thereon, which may
heretofore and hereafter be made with respect to the Mortgaged Property, whether
from the exercise of the right of eminent domain (including, but not limited to,
any transfer made in lieu of or in anticipation of the exercise of said rights),
or for a change of grade, or for any other injury to or decrease in the value of
the Mortgaged Property;
(d) to the extent assignable (and to the extent relating to the
general occupancy and use of the Mortgaged Property as opposed to the operation
of the "Discovery Zone" entertainment facility on the Mortgaged Property),
leases, subleases (including sub-subleases), lettings, licenses, concessions,
occupancy agreements and other agreements which grant a possessory interest in,
or the right to use or occupy, all or any part of the Mortgaged Property now or
hereafter entered into, and all amendments, extensions, renewals and guarantees
thereof, and all security therefor (collectively, the "LEASES") and all rents,
issues, profits, revenues (including all oil and gas or other mineral royalties
and bonuses) and deposits (including, without limitation, security deposits)
under the Leases (including, without limitation, from the rental of any office
space, retail space or other space, halls, stores, and offices, and security
deposits therefor, exhibit or sales space of every kind, license, lease,
sublease, fees and rentals, letters of credit or cash instruments securing or
evidencing obligations under Leases, service charges, vending machine sales and
proceeds, if any, from business interruption or other loss of income insurance))
(collectively, the "RENTS") and all proceeds from the sale or other disposition
of the Leases and the right to receive and apply the Rents to the payment of the
Obligations;
(e) subject to the rights of Mortgagor hereunder, all proceeds of any
insurance policies covering the Mortgaged Property (including, without
limitation, the right to receive and apply the proceeds of any insurance,
judgments, or settlements made in lieu thereof, for damage to the Mortgaged
Property);
(f) all refundable, returnable or reimbursable fees deposits or other
funds or evidences of credit or indebtedness deposited by or on behalf of
Mortgagor with any
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governmental authorities, boards, corporations, providers of utility services,
public or private, including specifically, but without limitation, all
refundable, returnable or reimbursable tap fees, utility deposits and
development costs in connection with the Mortgaged Property, and all of the
records and books of account now or hereafter maintained by or on behalf of
Mortgagor in connection with the operation of the Mortgaged Property
(collectively, "SECURITY ACCOUNTS");
(g) all proceeds (as defined in the Uniform Commercial Code) of the
Mortgaged Property which, in any event, shall include, without limitation, (i)
cash, instruments and other property received, receivable or otherwise
distributed in exchange for any or all of the Mortgaged Property, (ii) the
collection or other disposition of, or realization upon, any item or portion of
the Mortgaged Property (including, without limitation, all claims of Mortgagor
against third parties for loss of, damage to, destruction of, or for proceeds
payable under policies of insurance in respect of, the Mortgaged Property now
existing or hereafter arising), (iii) any and all proceeds of any insurance,
indemnity, warranty or guaranty payable to Mortgagor from time to time with
respect to damage or loss of or to any of the Mortgaged Property, (iv) any and
all payments (in any form whatsoever) made or due and payable to Mortgagor from
time to time in connection with the requisition, confiscation, condemnation,
seizure or forfeiture of all or any part of the Mortgaged Property by any
Governmental Authority (or any person acting under color of Governmental
Authority), and (v) any and all real estate tax refunds payable to Mortgagor
with respect to the Mortgaged Property, and refunds or reimbursements payable
with respect to bonds, escrow accounts, or other sums payable in connection with
the use, development or ownership of the Mortgaged Property, but excluding any
proceeds obtained, earned or arising directly from the operation of the
"Discovery Zone" entertainment facility operated by Mortgagor on the Mortgaged
Property as opposed to the general occupancy and use of the Mortgaged Property
(collectively, the "PROCEEDS");
(h) to the extent permitted under applicable law, all licenses,
permits (other than proprietary permits of Mortgagor relating to the ordinary
operation of a "Discovery Zone" entertainment facility as opposed to the general
use and occupancy of the Mortgaged Property), variances and certificates used in
connection with the ownership, operation, use or occupancy of the Mortgaged
Property (including, without limitation, business licenses, state health
department licenses, food service licenses, liquor licenses, licenses to conduct
business and all such other permits, licenses and rights, obtained from any
Governmental Authority or private Person concerning ownership, operation, use or
occupancy of the Mortgaged Property) (collectively, "PERMITS");
(i) all plans, specifications, shop drawings and other technical
descriptions prepared for construction, repair or alteration of the Improvements
(including diskettes containing any such data), and all amendments and
modifications thereof; and
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(j) any escrows and escrow accounts established hereunder to secure
the Obligations of Mortgagor, including, without limitation, the Proceeds Escrow
Account described in Section 6(b) hereof; and
(k) any and all replacements and renewals of or additions and
substitutions to any of the foregoing and all proceeds of any of the foregoing.
TO HAVE AND TO HOLD the above granted and described Mortgaged Property
unto and to the use and benefit of Mortgagee, and its successor and assigns,
forever, and Mortgagor does hereby bind itself, its successors and assigns to
WARRANT AND FOREVER DEFEND the title to the Mortgaged Property unto Mortgagee
and its successors and assigns;
AND, TO PROTECT THE SECURITY OF THIS MORTGAGE, Mortgagor represents
and warrants to and covenants and agrees with Mortgagee as follows:
1. DEFINED TERMS. The following terms, when used herein, shall have
the meanings set forth below:
"ENVIRONMENTAL LAWS" means any and all present and future federal,
state or local laws, statutes, ordinances or regulations, any judicial or
administrative orders, decrees or judgments thereunder, and any permits,
approvals, licenses, registrations, filings and authorizations, in each case as
now or hereafter in effect, relating to the protection of the environment, the
impact of Hazardous Substances or the generation, disposal or remediation
thereof on human health or safety, or the Release or threatened Release of
Hazardous Substances or otherwise relating to the Use of Hazardous Substances.
For purposes of this definition, (A) "HAZARDOUS SUBSTANCES" means collectively,
(i) any petroleum or petroleum products or waste oils, explosives, radioactive
materials, asbestos, urea formaldehyde foam insulation, polychlorinated
biphenyls ("PCBs"), and lead-based paint, (ii) any chemicals or other materials
or substances which are now or hereafter become defined as or included in the
definitions of "hazardous substances", "hazardous wastes", "hazardous
materials", "extremely hazardous wastes", "restricted hazardous wastes", "toxic
substances", "toxic pollutants", "contaminants", "pollutants" or words of
similar import under any Environmental Law and (iii) any other chemical or any
other material or substance, exposure to which is now or hereafter prohibited,
limited or regulated under any Environmental Law; (B) "USE" means, with respect
to any Hazardous Substance, the generation, manufacture, processing,
distribution, handling, use, treatment, recycling or storage of such Hazardous
Substance or transportation of such Hazardous Substance; and (C) "RELEASE" means
any release, spill, emission, leaking, pumping, injection, deposit, disposal,
discharge, dispersal, leaching or migration into the indoor or outdoor
environment (including, without limitation, the movement of Hazardous Substances
through ambient air, soil, surface water, ground water, wetlands, land or
subsurface strata).
"GOVERNMENTAL AUTHORITY" means any national or federal government, any
state, regional, local or other political subdivision thereof with jurisdiction
and any Person
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with jurisdiction exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government (including without
limitation any court).
"IMPOSITIONS" means all taxes (including, without limitation, all real
estate, ad valorem, sales (including those imposed on lease rentals), use,
single business, gross receipts, value added, intangible transaction privilege,
privilege or license or similar taxes), assessments (including, without
limitation, all assessments for public improvements or benefits, whether or not
commenced or completed within the term of this Mortgage), ground rents, water,
sewer or other rents and charges, excises, levies, fees (including, without
limitation, license, permit, inspection, authorization and similar fees), and
all other governmental impositions and other charges (including, without
limitation, vault charges and license fees for the use of vaults, chutes and
similar areas adjoining the Mortgaged Property), in each case whether general or
special, ordinary or extraordinary, foreseen or unforeseen, of every character
in respect of the Mortgaged Property, which at any time prior to, during or in
respect of the term hereof may be assessed or imposed on or in respect of or be
a lien upon (i) Mortgagor (including, without limitation, all income, franchise,
single business or other taxes imposed on Mortgagor for the privilege of doing
business in the jurisdiction in which the Mortgaged Property is located),
(ii) the Mortgaged Property, or any part thereof or any revenues therefrom or
any estate, right, title or interest therein, or (iii) any occupancy, operation,
use or possession of, or sales from, or activity conducted on, or in connection
with the Mortgaged Property by Mortgagor or the leasing or use of the Mortgaged
Property or any part thereof by Mortgagor.
"LEGAL REQUIREMENTS" means (i) all governmental statutes, laws, rules,
orders, regulations, ordinances, judgments, decrees and injunctions of
Governmental Authorities (including, without limitation, Environmental Laws)
affecting either the Borrower or any Property or any part thereof or the
construction, ownership, use, alteration or operation thereof, or any part
thereof (whether now or hereafter enacted and in force), (ii) all permits,
licenses and authorizations and regulations relating thereto, and (iii) all
covenants, conditions and restrictions contained in any instruments at any time
in force (whether or not involving Governmental Authorities) affecting the
Mortgaged Property or any part thereof which, in the case of this clause (iii),
require repairs, modifications or alterations in or to the Mortgaged Property or
any part thereof, or in any material way limit or restrict the existing use and
enjoyment thereof.
"PERSON" means any individual, corporation, limited liability company,
partnership, joint venture, estate, trust, unincorporated association, any
federal, state, county or municipal government or any bureau, department or
agency thereof and any fiduciary acting in such capacity on behalf of any of the
foregoing.
"UNIFORM COMMERCIAL CODE" means the Uniform Commercial Code, as
adopted, enacted and amended from time to time by the state or states where any
of the Mortgaged Property is located.
2. PAYMENT OF OBLIGATIONS AND INCORPORATION OF COVENANTS, CONDITIONS
AND AGREEMENTS. Mortgagor will pay the Obligations at the time and in the
manner provided in the
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Relevant Documents and in this Mortgage. All the representations, warranties,
covenants, conditions and agreements of Mortgagor contained in the Relevant
Documents are hereby made a part of this Mortgage to the same extent and with
the same force as if fully set forth herein. If there shall be any
inconsistencies between the terms, covenants, conditions and provisions set
forth in this Mortgage and the terms, covenants, conditions and provisions set
forth in the Relevant Documents, then the terms, covenants, conditions and
provisions of the Relevant Documents shall prevail.
3. WARRANTY OF TITLE/ORGANIZATION. Mortgagor warrants that
Mortgagor has good, marketable and insurable fee simple title to Land and the
Improvements and has good title to the remainder of the Mortgaged Property and
has the full power, authority and right to execute, deliver and perform its
obligations under this Mortgage and to encumber, mortgage, give, grant, bargain,
sell, alienate, enfeoff, convey, confirm, warrant, pledge, assign and
hypothecate the Mortgaged Property and that Mortgagor possesses an unencumbered
fee estate in the Land and the Improvements and that it owns the Mortgaged
Property free and clear of all liens, encumbrances and charges whatsoever except
for (x) those exceptions to title which are existing on the date hereof and
approved by Mortgagee and (y) those exceptions of title that are permitted under
the other terms and conditions of this Mortgage (collectively, the "PERMITTED
ENCUMBRANCES") and that this Mortgage is and will remain a valid and enforceable
first lien on and security interest in the Mortgaged Property, subject only to
the Permitted Encumbrances. Mortgagor shall forever warrant, defend and
preserve such title and the validity and priority of the lien of this Mortgage
and shall forever warrant and defend the same to Mortgagee against the claims of
all persons whomsoever. Mortgagor is duly organized, validly existing and in
good standing under the laws of its jurisdiction of organization. Mortgagor is
qualified to do business and in good standing in the State in which the
Mortgaged Property is located, and to the extent that Mortgagor is not so
qualified or in good standing in such State, Mortgagor shall promptly qualify to
do business and become in good standing in such State and shall promptly present
evidence of such qualification to do business and good standing to Mortgagee,
and shall in any event take such steps as are necessary to insure the
enforceability of the Notes and this Mortgage.
4. TAXES. Mortgagor hereby warrants, covenants and agrees to pay
before any penalty attaches all real property taxes, general and special, and
all other taxes and assessments of any kind or nature whatsoever, against the
Mortgaged Property when due and shall, upon written request, furnish to
Mortgagee duplicate receipts therefor, Mortgagor may, in good faith and with
reasonable diligence, contest the validity or amount of any such taxes or
assessments provided that such contest shall have the effect of preventing the
collection of the tax or assessment so contested and the sale or forfeiture of
said Mortgaged Property or any part thereof, or any interest therein, to satisfy
the same.
5. INDEMNIFICATION. Mortgagor shall indemnify, defend and hold
harmless Mortgagee from and against all of the following (collectively, and
individually referred to as a "LOSS"): claims, demands, causes of action,
judgments, costs, expenses, liabilities, losses and damages (including
consequential and punitive damages), reasonable attorneys' fees and
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expenses and court costs, disbursements and court costs, and all risk of damage
to property and injury to persons in or upon the Mortgaged Property, arising
from: (i) Mortgagor's use of the Property or from the conduct of its business
in or about the Mortgaged Property; (ii) Mortgagor's default or breach of any
term under this Mortgage; and (iii) Mortgagor's violation or failure to comply
with any Legal Requirements, including Environmental Laws; provided that
Mortgagor shall not be liable for Loss arising from Mortgagee's negligence or
willful misconduct or from Mortgagee's breach of any of its obligations
hereunder.
6. TRANSFER OR ENCUMBRANCE OF THE MORTGAGED PROPERTY. (a) Except as
may otherwise be permitted hereunder or pursuant to the Relevant Documents,
Mortgagor shall not sell, convey, alienate, mortgage, encumber, pledge or
otherwise transfer the Mortgaged Property or any part thereof or any of its
interest therein. Mortgagee shall not be required to demonstrate any actual
impairment of its security or any increased risk of default hereunder in order
to declare the Obligations immediately due and payable upon Mortgagor's
conveyance, alienation, mortgage, encumbrance, pledge or transfer of the
Mortgaged Property in violation of this Mortgage or any other Relevant Document.
This provision shall apply to every sale, conveyance, alienation, mortgage,
encumbrance, pledge or transfer of the Mortgaged Property that is not permitted
pursuant to the Relevant Documents, regardless of whether voluntary or not, or
whether or not Mortgagee has consented to any previous sale, conveyance,
alienation, mortgage, encumbrance, pledge or transfer of the Mortgaged Property.
(b) Notwithstanding Section 6(a), Mortgagor shall have the right to
sell the Mortgaged Property at any time to a third party bona fide purchaser
after consultation with Mortgagee and upon the prior written consent of
Mortgagee to such sale and the sales price (such consent not to be unreasonably
withheld), provided that the net proceeds of such sale of the Mortgaged Property
(after payment of transfer taxes and reasonable brokerage commissions, if any,
and other reasonable closing costs) shall be applied towards repayment of the
Obligations, including, without limitation, repayment of the Secured Rejection
Note (including prepayment of any amounts not yet due and payable) and payment
of the Principal Amounts (as defined in the Rent Deferral Notes) then
outstanding under the Rent Deferral Notes, in the order and manner set forth in
the Notes. After the Secured Rejection Note and all Principal Amounts
outstanding under the Notes have been repaid in full, any remaining net proceeds
(including proceeds from any sale or other disposition of the Mortgaged Property
pursuant to Section 24 hereof) not applied towards repayment of the Obligations
shall be deposited into an escrow account designated by Mortgagee for
Mortgagor's account and as security for the performance by Mortgagor of its
Obligations to Mortgagee under the Relevant Documents (the "PROCEEDS ESCROW
ACCOUNT") which escrow account shall be administered by Mortgagee, or, at
Mortgagee's discretion and in accordance with Mortgagee's instructions, may be
administered by an escrow agent (an "ESCROW AGENT") selected by Mortgagee (whose
reasonable fees shall be paid by Mortgagor). Mortgagor may also from time to
time deposit additional funds into the Proceeds Escrow Account as further
security for the Obligations. At Mortgagee's request, Mortgagor agrees to enter
into a separate escrow agreement to further evidence the provisions of this
Section 6(b), and in the event that Mortgagee chooses an Escrow Agent to
administer the Proceeds Escrow Account, Mortgagor agrees to execute an escrow
agreement in form and substance reasonably satisfactory to Mortgagee (including
provisions consistent with the
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provisions of this Section 6(b)) to evidence the duties and responsibilities of
such Escrow Agent. Mortgagee or, if applicable, the Escrow Agent at the
direction of Mortgagee, shall invest the funds in the Proceeds Escrow Account in
obligations of the U.S. Government or its agencies, interest in time accounts or
certificates of deposits, or other interest bearing account of any bank or bank
and trust company or in money market funds available to Mortgagee. Mortgagor
agrees, and shall agree under any escrow agreement entered into pursuant to this
Section 6(b), that the funds on deposit under the escrow arrangement described
herein shall not constitute property of the estate (within the meaning of
Section 541 of the United States Bankruptcy Code) and that Mortgagor shall only
have such rights to such funds as are provided herein and in any escrow
agreement entered into pursuant to this Section. Funds in the Proceeds Escrow
Account shall be disbursed (together with accrued interest) from time to time to
Mortgagee, at Mortgagee's direction (upon seven (7) days prior notice to
Mortgagor), to pay any Obligations that may arise from time to time under the
Agreement to Indemnify, the Notes, the Stipulation and Order or the other
Relevant Documents. Notwithstanding the foregoing, after December 31, 2005,
Mortgagor shall be entitled to retain any net proceeds in excess of the Minimum
Amount set forth below from the sale of the Mortgaged Property, including
amounts previously deposited and remaining in the Proceeds Escrow Account
(including accrued interest thereon) which have not been applied towards payment
of the Obligations, provided that (i) no Obligations are then due and owing by
Mortgagor pursuant to the Agreement to Indemnify, the Stipulation and Order, the
Notes or otherwise, (ii) no default or Event of Default has occurred and is
continuing under any of the Relevant Documents; and (iii) the amount remaining
in the Proceeds Escrow Account is no less than the Minimum Amount (as
hereinafter defined). Except as otherwise set forth in the following sentence,
the "Minimum Amount" shall mean the product of (A) 1.5 times (B) the sum of the
gross rent (including additional rent and percentage rent charges, if any),
common area maintenance charges, taxes, insurance and other charges computed on
a gross basis (collectively, the "BASE CHARGES") which are due or shall become
due under any Assumed Property Subleases still in existence as of December 31,
2005 (the "SURVIVING ASSUMED PROPERTY SUBLEASES") from December 31, 2005 until
the expiration of the terms of such Assumed Property Subleases. Upon the
expiration after December 31, 2005 of any Surviving Assumed Property Sublease,
Mortgagee shall re-calculate the Minimum Amount based upon the product of 1.5
times the Base Charges of the remaining Surviving Assumed Property Subleases as
of the end of the term of such Surviving Assumed Property Sublease (such Base
Charges to be calculated as the sum of the Base Charges from such date through
the end of the expiration dates of the remaining Surviving Assumed Property
Subleases), and provided that (i) no Obligations are then due and owing by
Mortgagor pursuant to the Agreement to Indemnify, the Notes, the Stipulation and
Order or otherwise and that (ii) no default or Event of Default has occurred and
is continuing under any of the Relevant Documents, Mortgagee shall, on the first
anniversary of the expiration of such expired Surviving Assumed Property
Sublease, release to Mortgagor, or cause the Escrow Agent to release to
Mortgagor, the excess of all funds in the Proceeds Escrow Account over the
re-calculated Minimum Amount. Any calculation of Base Charges under this Section
6(b) shall be made by Mortgagee and, absent manifest error, shall be conclusive
and binding upon Mortgagor. Provided that (i) an amount equal to at least the
Minimum Amount is deposited or on deposit in the Proceeds Escrow Account to
secure the
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payment of the Obligations, (ii) no default or Event of Default has occurred and
is continuing under any of the Relevant Documents, (iii) the Notes have been
repaid in full and (iv) no Obligations are then due and owing by Mortgagor
pursuant to the Agreement to Indemnify, the Stipulation and Order or otherwise,
Mortgagor shall be entitled to receive a release of this Mortgage from Mortgagee
at any time after December 31, 2005. Provided that no default or Event of
Default has occurred or is continuing under any of the Relevant Documents and
that no amounts are then owing by Mortgagor or outstanding pursuant to or under
any of the Relevant Documents (and that an amount equal to the Minimum Amount is
at all times on deposit in the Proceeds Escrow Account), interest earned on the
amounts deposited in the Proceeds Escrow Account after December 31, 2005 shall
be distributed to Mortgagor on a quarterly basis. All remaining amounts in the
Proceeds Escrow Account which have not been applied towards payment of the
Obligations shall be released to Mortgagor on the later of (A) December 31, 2014
provided, however, that no Obligations are then due and owing by Mortgagor
pursuant to the Agreement to Indemnify, the Stipulation and Order or otherwise,
and (B) the end of the term of this Mortgage as set forth in Section 13(c)
hereof. Mortgagor shall pay any income taxes attributable to the interest or
other income earned on the Proceeds Escrow Account. Notwithstanding any release
of this Mortgage pursuant to this Section 6(b) or otherwise, the terms and
provisions of this Section 6(b) shall survive the release of this Mortgage.
7. AMENDMENT TO LEGAL DESCRIPTION. If it becomes evident that the
legal description attached to any Relevant Document is inaccurate or does not
fully describe all of the real property which is reasonably connected to the
Land, Mortgagor hereby agrees to an amendment of such legal description and the
legal description contained on the corresponding title policy so that such error
is corrected and to execute and cause to be recorded, if applicable, such
document as may be appropriate for such purpose.
8. ASSIGNMENT OF LEASES AND RENTS. Mortgagor does hereby absolutely
and unconditionally assign to Mortgagee, Mortgagor's right, title and interest
in all current and future Leases and Rents, it being intended by Mortgagor that
this assignment constitutes a present, absolute assignment and not an assignment
for additional security only. Such assignment to Mortgagee shall not be
construed to bind Mortgagee to the performance of any of the covenants,
conditions or provisions contained in any such Lease or otherwise impose any
obligation upon Mortgagee. Mortgagee shall have no responsibility on account of
this assignment for the control, care, maintenance, management or repair of the
Mortgaged Property, for any dangerous or defective condition of the Mortgaged
Property, or for any negligence in the management, upkeep, repair or control of
the Mortgaged Property. Mortgagor agrees to execute and deliver to Mortgagee
such additional instruments, in form and substance satisfactory to Mortgagee, as
may hereafter be requested by Mortgagee to further evidence and confirm such
assignment. Nevertheless, subject to the terms of this paragraph, Mortgagee
grants to Mortgagor a revocable license to collect all of the Rents and retain,
use and enjoy the same and otherwise exercise all rights of Mortgagor under any
Lease, in each case, subject to the terms hereof and of the Relevant Documents.
Upon an Event of Default, the license granted to Mortgagor herein shall
immediately and automatically be
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revoked, and Mortgagee shall immediately be entitled to possession of all Rents,
whether or not Mortgagee enters upon or takes control of the Mortgaged Property,
provided that if such Event of Default ceases to exist, the license shall
automatically be reinstated. In addition, during the continuation of an Event
of Default, Mortgagee may, either in person or by agent, without bringing any
action or proceeding, or by a receiver appointed by a court, without the
necessity of taking possession of the Mortgaged Property in its own name, and in
addition to and without limiting any of Mortgagee's rights and remedies
hereunder, under the Notes and any other Relevant Documents and as otherwise
available at law or in equity, (a) notify any lessee or other person that the
Leases have been assigned to Mortgagee and that all Rents are to be paid
directly to Mortgagee, whether or not Mortgagee has commenced or completed
foreclosure or taken possession of the Mortgaged Property; (b) settle,
compromise, release, extend the time of payment of, and make allowances,
adjustments and discounts of any Rents or other obligations in, to and under the
Leases; (c) demand, sue for or otherwise collect, receive, and enforce payment
of Rents, including those past-due and unpaid and other rights under the Leases,
prosecute any action or proceeding, and defend against any claim with respect to
the Rents and Leases; (d) enter upon, take possession of and operate the
Mortgaged Property; (e) lease all or any part of the Mortgaged Property; and/or
(f) perform any and all obligations of Mortgagor under the Leases and exercise
any and all rights of Mortgagor therein contained to the full extent of
Mortgagor's rights and obligations thereunder, with or without the bringing of
any action or the appointment of a receiver and without need for any other
authorization or other action by Mortgagee or Mortgagor. At Mortgagee's
request, Mortgagor shall deliver a copy of this assignment to each tenant under
a Lease and to each manager and managing agent or operator of the Mortgaged
Property. Mortgagor irrevocably directs any tenant, manager, managing agent, or
operator of the Property, without any requirement for notice to or consent by
Mortgagor, to comply with all demands of Mortgagee under this Section 8 and to
turn over to Mortgagee on demand all Rents which it receives. Mortgagor hereby
acknowledges and agrees that payment of any Rents by a person to Mortgagee as
hereinabove provided shall constitute payment by such person, as fully and with
the same effect as if such Rents had been paid to Mortgagor. Mortgagee is
hereby granted and assigned by Mortgagor the right, at its option, upon
revocation of the license granted herein, to enter upon the Mortgaged Property
in person or by agent, without bringing any action or proceeding, or by
court-appointed receiver to collect the Rents. Any Rents collected after the
revocation of the license shall be applied towards the payment of the
Obligations. Neither the enforcement of any of the remedies under this SECTION
8 nor any other remedies or security interests afforded to Mortgagee under the
Relevant Documents, at law or in equity shall cause Mortgagee to be deemed or
construed to be a Mortgagee in possession of the Mortgaged Property, to obligate
Mortgagee to lease the Mortgaged Property or attempt to do so, or to take any
action, incur any expense, or perform or discharge any obligation, duty or
liability whatsoever under any of the Leases or otherwise. Mortgagor shall, and
hereby agrees to indemnify Mortgagee for, and to hold Mortgagee harmless from
and against, any and all claims, liability, expenses, losses or damages which
may or might be asserted against or incurred by Mortgagee solely by reason of
Mortgagee's status as an assignee pursuant to the assignment of Rents and Leases
contained herein, but excluding any claim (a) to the extent caused by
Mortgagee's gross negligence or willful misconduct, or (b) to the extent arising
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solely from Mortgagee's actions after Mortgagee has taken possession of the
Mortgaged Property. Should Mortgagee incur any such claim, liability, expense,
loss or damage, the amount thereof, including all actual expenses and reasonable
fees of attorneys, shall constitute Obligations secured hereby, and Mortgagor
shall reimburse Mortgagee therefor immediately upon demand. Mortgagor agrees
that all Leases shall be subject to the prior written approval of Mortgagee,
such approval not to be unreasonably withheld.
9. MAINTENANCE OF MORTGAGED PROPERTY. Mortgagor shall cause the
Mortgaged Property to be maintained in a good and safe condition and repair
(subject to ordinary wear and tear), and shall otherwise operate and maintain
the Mortgaged Property in a manner consistent with the manner in which it
operates and maintains the other properties on which it operates similar
businesses ("SIMILAR PROPERTIES"). Except as otherwise permitted by the
Relevant Documents, the Improvements, the Fixtures and the equipment located on
the Land or the Improvements shall not be removed, demolished or materially
altered (except for normal replacement of equipment) without the consent of
Mortgagee which shall not unreasonably be withheld or delayed. Mortgagor shall
comply with all laws, orders and ordinances affecting the Mortgaged Property, or
the use thereof. Except to the extent that Mortgagee fails to turn over
insurance proceeds, if any, received by Mortgagee pursuant to SECTIONS 10 and 11
with respect to the Mortgaged Property to Mortgagor, Mortgagor shall promptly
repair, replace or rebuild any part of the Mortgaged Property that, following
the date hereof, becomes damaged, worn or dilapidated and Mortgagor shall
complete and pay for any structure at any time in the process of construction or
repair on the Land. Notwithstanding anything to the contrary contained herein,
Mortgagor hereby confirms its obligation to comply with all relevant Legal
Requirements, including Environmental Laws, with respect to the Mortgaged
Property. Mortgagor shall not initiate, join in, acquiesce in, or consent to
any change in any private restrictive covenant, zoning law or other public or
private restriction, limiting or defining the uses which may be made of the
Mortgaged Property or any part thereof, unless Mortgagor shall have received
Mortgagee's prior written consent, such consent not to be unreasonably withheld
or delayed. If under applicable zoning provisions the use of all or any portion
of the Mortgaged Property is or shall become a nonconforming use, Mortgagor will
not cause such nonconforming use to be discontinued or abandoned without the
express written consent of Mortgagee, such consent not to be unreasonably
withheld or delayed. Mortgagor shall not (i) change the use of the Land in any
material respect or (ii) permit or suffer to occur any waste on or to the
Mortgaged Property or to any portion thereof.
10. INSURANCE.
(a) Mortgagor shall maintain casualty, liability and other policies
of insurance relating to the Mortgaged Property in form and substance, and with
insurers and coverages, reasonably satisfactory to Mortgagee and consistent with
insurance that it maintains on Similar Properties. Mortgagor shall keep the
Mortgaged Property insured against loss by flood if the Mortgaged Property is
located in an area identified by the Secretary of Housing and Urban Development
as an area having a special flood hazards and in which flood insurance has been
made available under the National Flood Insurance Act of 1968 (or any
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successor act thereto). All policies of insurance to be furnished hereunder (i)
shall have standard non-contributory Mortgagee clauses attached to all policies
in favor of Mortgagee, without contribution, under a standard New York (or local
equivalent) Mortgagee clause naming Mortgagee as the party to which all payments
made under such insurance policies in excess of $150,000 should be paid, (ii)
shall contain an endorsement providing that neither Mortgagor nor Mortgagee nor
any other party shall be a co-insurer under said policies and shall contain a
provision requiring that the coverage evidenced thereby shall not be terminated
or materially modified without ten (10) days prior written notice to Mortgagee,
(iii) shall provide that no act or thing done by Mortgagor shall invalidate the
policy as against Mortgagee, and (iv) with respect to property insurance
policies, shall contain a waiver of subrogation against Mortgagee. Mortgagor
shall deliver certificates evidencing additional and renewal policies, together
with evidence of payment of premiums thereon, to Mortgagee, and in the case of
all insurance about to expire, shall deliver renewal policies or certificates
evidencing such policies not less than ten (10) days prior to their respective
dates of expiration.
(b) Mortgagor shall not take out separate insurance concurrent in
form or contributing in the event of loss with that required to be maintained
hereunder unless Mortgagee is included thereon under a standard,
non-contributory Mortgagee clause acceptable to Mortgagee. Mortgagor shall
promptly notify Mortgagee whenever any such separate insurance is taken out and
shall promptly deliver to Mortgagee the certificates evidencing the policy or
policies of such insurance.
(c) The insurance required by this Mortgage, at the option of
Mortgagor, may be effected by blanket and/or umbrella policies covering the
Mortgaged Property and other properties, provided, however, that in each case,
such insurance policies otherwise comply with the provisions of this Mortgage
and allocate to the Mortgaged Property, from time to time, the coverage
specified in this Mortgage without possibility of reduction or co-insurance by
reason of, or damage to, any other property named therein. If the insurance
required by this Mortgage shall be effected by any such blanket or umbrella
policies, Mortgagor shall furnish to Mortgagee certificates with respect to,
with schedules attached thereto showing the amount of the insurance provided
under such policies which is applicable to the Mortgaged Property.
(d) If Mortgagor fails to maintain insurance in compliance with this
Section, Mortgagee may obtain such insurance and pay the premium therefor and
Mortgagor shall, on demand, reimburse Mortgagee for all expenses incurred in
connection therewith. Mortgagor shall deliver original certificates to Mortgagee
of all insurance policies maintained pursuant to this Section 10. Each property
insurance policy shall name Mortgagee as Mortgagee, and loss payee with respect
to all casualty coverage and each liability policy shall name Mortgagee as an
additional insured thereunder.
11. CASUALTY. (a) Mortgagor shall give Mortgagee prompt notice of
any loss or damage to the Mortgaged Property.
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(b) In case of loss or damage to the Mortgaged Property covered by any of
the insurance policies described in Section 10 above, Mortgagee (or, after entry
of decree of foreclosure, the purchaser at the foreclosure sale or decree
creditor, as the case may be) is hereby authorized at its option either (i) to
settle and adjust any claim under such insurance policies without the consent of
Mortgagor or (ii) to allow Mortgagor to settle and adjust such claim (either
jointly with Mortgagee or by Mortgagor alone, at Mortgagee's discretion);
provided that in either case Mortgagee shall, and is hereby authorized to,
collect and receipt for any such insurance proceeds. Notwithstanding anything
in the preceding sentence to the contrary, Mortgagee agrees that it will allow
Mortgagor to settle and adjust any claims under the insurance policies which are
in an amount less than $150,000, per incident of loss, up to an aggregate amount
of no greater than $300,000. The expenses incurred by Mortgagee in the
adjustment and collection of insurance proceeds shall be included in the
Obligations, and shall be reimbursed to Mortgagee upon demand or may be deducted
by Mortgagee from said insurance proceeds prior to another application thereof.
Interest on such amount shall accrue at the Default Rate, beginning ten (10)
days after Mortgagor receives notice of a request for payment of such amount
from Mortgagee, until such amount, plus interest, is paid in full.
(c) Mortgagee shall permit Mortgagor to apply the proceeds of
insurance policies received in connection with any casualty to pay for the cost
of restoring, repairing, replacing or rebuilding the loss or damage to the
Mortgaged Property resulting from the casualty ("RESTORATION") if: (i) there is
no Event of Default hereunder at the time of such application; (ii) restoration
can, in the reasonable judgment of Mortgagee, be completed prior to the maturity
of the Obligations; and (iii) restoration can, in the reasonable judgment of
Mortgagee, be effected within two (2) years after the date of such casualty and
in such a manner so that the Mortgaged Property will be of at least equal or
greater value to the value than the Mortgaged Property prior to such casualty.
Otherwise, Mortgagee may elect in its sole discretion to apply such proceeds
either (x) towards payment of the Obligations, notwithstanding the fact that the
Obligations, or a portion thereof, may not then be due and payable, or (y) to
pay for the cost of Restoration. In all events, disbursement of insurance
proceeds by Mortgagee (or at Mortgagee's election by a disbursing or escrow
agent who shall be selected by Mortgagee and whose fees shall be paid by
Mortgagor), to pay the cost of restoration shall require (i) evidence reasonably
satisfactory to Mortgagee of the estimated costs of Restoration, (ii) funds (or
assurances reasonably satisfactory to Mortgagee that such funds are available)
sufficient in addition to the proceeds of insurance to complete and fully pay
for Restoration; and (iii) such architect's certificates, waivers of lien,
contractor's sworn statements, title insurance endorsements, plats of surveys
and such other evidences of cost, payment and performance as Mortgagee may
reasonably require and approve. Except to the extent Mortgagee fails to turn
over insurance proceeds, if any, received by Mortgagee hereunder with respect to
such casualty to Mortgagor, Mortgagor hereby covenants to restore, repair,
replace or rebuild the Improvements, to be of at least equal value, and of
substantially the same character as prior to such loss or damage, all to be
effected in accordance with plans, specifications and procedures to be first
submitted to and reasonably approved by Mortgagee, and Mortgagor shall pay all
costs of such restoring, repairing, replacing or rebuilding.
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12. EMINENT DOMAIN. Mortgagor warrants, covenants and agrees that
should the Mortgaged Property, or any part thereof or interest therein, be taken
or damaged by reason of any public improvement or condemnation proceeding, or in
any other manner, or should Mortgagor receive any notice of other information
regarding such proceeding, Mortgagor shall give written notice thereof within
five (5) business days to Mortgagee. Without Mortgagee's prior consent,
Mortgagor (1) shall not agree to any compensation or award, and (2) shall not
take any action or fail to take any action which would cause the compensation to
be determined. Mortgagee shall be entitled to: (1) all compensation, awards and
other payments or relief therefor, (2) to commence, appear in and prosecute in
its own name any action or proceedings, and (3) to make any compromise or
settlement in connection with such taking or damage. Mortgagor authorizes
Mortgagee to collect and receive such awards and compensation, to give proper
receipts and acquittances therefor and in Mortgagee's discretion to apply the
same toward the payment of the Obligations, notwithstanding the fact that the
Obligations, or a portion thereof, may not then be due and payable, or to the
restoration of the Mortgaged Property in accordance with the provisions set
forth in the second-to-last sentence of Section 11(c) above. Mortgagor further
agrees to make, execute, and deliver to Mortgagee, at any time upon request,
free and clear of any encumbrance of any kind whatsoever, any and all further
assignments and other instruments deemed necessary by Mortgagee for the purpose
of validly and sufficiently assigning all compensations and awards made to
Mortgagor for any taking, either permanent or temporary, under any such
proceeding.
13. RELEASE OF MORTGAGE. Mortgagee agrees to promptly and
unconditionally release this Mortgage (subject to the provisions set forth in
Section 6(b)) as follows:
(a) in the event of a bona fide sale (other than a "sale leaseback"
or other similar financing transaction) of the Mortgaged Property to a third
party that is not affiliated with Mortgagor, provided that each of the following
conditions is satisfied: (i) neither Mortgagor nor any of its respective
affiliates continue to use or occupy the Mortgaged Property or any part thereof;
(ii) Mortgagor shall consult with Mortgagee prior to such sale and shall obtain
Mortgagee's prior written consent with respect to such sale and the sales price
(such consent not to be unreasonably withheld); and (iii) all of the proceeds of
such sale are applied towards repayment of the Obligations or otherwise applied
in compliance with the provisions of Section 6(b) hereof.
(b) in the event that Mortgagee is paid in full for all amounts owing
(or what shall or may become owing under the Relevant Documents) to Mortgagee by
Mortgagor and any of its former affiliated debtors, including the indefeasible
payment and satisfaction in full of the Obligations.
(c) on December 31, 2014 (or on such earlier date as permitted under
and pursuant to the provisions of Section 6(b) hereof); provided, however, that
if on such date, any amount secured by this Mortgage has not been indefeasibly
paid in full, then this Mortgage shall be deemed amended to extend the term
hereof until such obligations are so paid.
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14. CHANGES IN THE LAWS REGARDING TAXATION. If any law is enacted or
adopted or amended after the date of this Mortgage which imposes a tax, either
directly or indirectly, on the Obligations or Mortgagee's interest in the
Mortgaged Property, Mortgagor will pay such tax, with interest and penalties
thereon, if any, PROVIDED, HOWEVER, that Mortgagor shall not be obligated to pay
any tax which is imposed on the net income of Mortgagee or franchise taxes or
doing business taxes imposed on Mortgagee. In the event that the payment of
such tax or interest and penalties by Mortgagor would be unlawful or taxable to
Mortgagee or unenforceable or provide the basis for a defense of usury, then in
any such event, Mortgagee shall have the option, by written notice of not less
than ninety (90) days, to declare the Obligations immediately due and payable.
15. NO CREDITS ON ACCOUNT OF THE OBLIGATIONS. (i) Mortgagor will not
claim or demand or be entitled to any credit or credits on account of the
Obligations for any part of the Impositions assessed against the Mortgaged
Property, or any part thereof, and (ii) no deduction shall otherwise be made or
claimed from the assessed value of the Mortgaged Property, or any part hereof,
for real estate tax purposes by reason of this Mortgage or the Obligations if
the effect of such deduction would impose on Mortgagee a tax, either directly or
indirectly, for which it otherwise would not have been liable.
16. DOCUMENTARY STAMPS. If at any time the United States of America,
any State thereof or any subdivision of any such State shall require revenue or
other stamps to be affixed to the Notes or this Mortgage, or impose any other
tax or charge on the same, Mortgagor will pay for the same, with interest and
penalties thereon, if any.
17. CONTROLLING AGREEMENT. It is expressly stipulated and agreed to
be the intent of Mortgagor and Mortgagee at all times to comply with applicable
state law or applicable United States federal law (to the extent that it permits
Mortgagee to contract for, charge, take, reserve, or receive a greater amount of
interest than under state law) and that this Section shall control every other
covenant and agreement in this Mortgage and the other Relevant Documents. If
the applicable law (state or federal) is ever judicially interpreted so as to
render usurious any amount called for under the Notes or under any of the other
Relevant Documents, or contracted for, charged, taken, reserved, or received
with respect to the Obligations, or if Mortgagee's exercise of the option to
accelerate the maturity of the Notes, or if any prepayment by Mortgagor results
in Mortgagor having paid any interest in excess of that permitted by applicable
law, then it is Mortgagor's and Mortgagee's express intent that all excess
amounts theretofore collected by Mortgagee shall be credited on the principal
balance of the Notes and all other Obligations (or, if the Notes and all other
Obligations have been or would thereby be paid in full, refunded to Mortgagor),
and the provisions of the Notes and the other Relevant Documents immediately be
deemed reformed and the amounts thereafter collectible hereunder and thereunder
reduced, without the necessity of the execution of any new documents, so as to
comply with the applicable law, but so as to permit the recovery of the fullest
amount otherwise called for hereunder or thereunder. All sums paid or agreed to
be paid to Mortgagee for the use, forbearance, or detention of the Obligations
shall, to the extent permitted by applicable law, be amortized, prorated,
allocated, and spread throughout the full
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stated term of the Obligations until payment in full so that the rate or amount
of interest on account of the Obligations does not exceed the maximum rate of
interest permitted by law from time to time in effect and applicable to the
Obligations for so long as the Obligations are outstanding.
18. PERFORMANCE OF OTHER AGREEMENTS. Mortgagor shall observe and
perform in all respects the terms to be observed or performed by Mortgagor under
any agreement or recorded instrument affecting or pertaining to the Mortgaged
Property.
19. RIGHT TO PERFORM THE OBLIGATIONS. Subject to the terms of the
Relevant Documents, if any default exists, Mortgagee shall have the right, but
not the obligation, to cure such default in the name and on behalf of Mortgagor.
All sums advanced and expenses incurred at any time by Mortgagee under this
Section 19, or otherwise under this Mortgage or any of the other Relevant
Documents or applicable law (including, without limitation, the costs and
expenses of Mortgagee and its agents incurred in connection with the
preservation, collection and enforcement of this Mortgage or of the liens
created hereby), shall bear interest from the date that such sum is advanced or
expense incurred, to and including the date of reimbursement, computed at the
Default Rate (as defined in the Notes), and all such sums, together with
interest thereon, shall constitute additions to the Obligations and shall be
secured by this Mortgage and Mortgagor covenants and agrees to pay them to the
order of the Mortgagee promptly upon demand.
20. FURTHER ACTS, ETC. Mortgagor will, at the cost of Mortgagor, and
without expense to Mortgagee, do, execute, acknowledge and deliver all and every
such further acts, deeds, conveyances, mortgages, assignments, notices of
assignment, Uniform Commercial Code financing statements or continuation
statements, transfers and assurances as Mortgagee shall, from time to time,
reasonably require, for the better assuring, conveying, assigning, transferring,
and confirming unto Mortgagee the property and rights hereby mortgaged, given,
granted, bargained, sold, alienated, enfeoffed, conveyed, confirmed, warranted,
pledged, assigned and hypothecated (including, without limitation, the
assignment of leases and rents contained in Section 8 hereof) or intended now or
hereafter so to be, or which Mortgagor may be or may hereafter become bound to
convey or assign to Mortgagee, or for carrying out the intention or facilitating
the performance of the terms of this Mortgage or for filing, registering or
recording this Mortgage. Mortgagor, on demand, will execute and deliver and,
Mortgagor hereby authorizes Mortgagee to execute in the name of Mortgagor or
without the signature of Mortgagor to the extent Mortgagee may lawfully do so,
one or more financing statements, chattel mortgages or other instruments, to
evidence more effectively the security interest of Mortgagee in the Mortgaged
Property. Notwithstanding anything to the contrary contained herein, Mortgagor
shall not be obligated to execute, deliver, file or record any additional
documents which increase Mortgagor's obligations under this Mortgage or the
Relevant Documents. Mortgagor grants to Mortgagee an irrevocable power of
attorney coupled with an interest for the purpose of exercising the rights
provided for in Section 19 and this Section 20.
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21. RECORDING OF MORTGAGE, ETC. Mortgagor forthwith upon the
execution and delivery of this Mortgage and thereafter, from time to time, will
cause this Mortgage, and any security instrument creating a lien or security
interest or evidencing the lien hereof upon the Mortgaged Property and each
instrument of further assurance to be filed, registered or recorded in such
manner and in such places as may be required by any present or future law in
order to publish notice of and fully to protect the lien or security interest
hereof upon, and the interest of Mortgagee in, the Mortgaged Property.
Mortgagor will pay all filing, registration or recording fees, the costs and
fees of local counsel for Mortgagee, including, without limitation, costs and
fees for local counsel review of the Mortgage and Subordination Agreement and
the preparation of opinion letters in connection therewith, and all expenses
incident to the execution and acknowledgment of this Mortgage (but not including
fees of Mortgagee's New York counsel in connection with the preparation of this
Mortgage), any deed of trust or mortgage supplemental hereto, any security
instrument with respect to the Mortgaged Property and any instrument of further
assurance, and all federal, state, county and municipal, taxes, duties, imposts,
assessments and charges arising out of or in connection with the execution and
delivery of this Mortgage, any deed of trust or mortgage supplemental hereto,
any security instrument with respect to the Mortgaged Property or any instrument
of further assurance (other than income or franchise taxes imposed on
Mortgagee), except where prohibited by law so to do. Mortgagor shall hold
harmless and indemnify Mortgagee, its successors and assigns, against any
liability incurred by reason of the imposition of any tax on the making and
recording of this Mortgage. Mortgagor shall pay all title costs and premiums in
connection with the ALTA lender's title insurance policy issued by Chicago Title
Insurance Company for the benefit of Mortgagee in connection with this Mortgage
(including payment for the cost of any property surveys ("Surveys") prepared in
connection therewith), which title insurance policy shall be in form and
substance satisfactory to Mortgagee containing such endorsements as Mortgagee
may reasonably request, including, without limitation, the deletion of any
creditor's rights exception and (to the extent available) a variable rate
endorsement; survey endorsement; comprehensive endorsement; first loss
endorsement; last dollar endorsement; tie-in endorsement; future advances
endorsement; access coverage; tax parcel coverage; contiguity (if applicable)
coverage; and such other endorsements as Mortgagee shall reasonably require. In
the event that any Survey with respect to the Mortgaged Property reveals any
encumbrances, restrictions, building code or zoning violations or other matters
which in Mortgagee's reasonable judgment, materially impair Mortgagee's first
priority lien in the Mortgaged Property, Mortgagor agrees to cooperate with
Mortgagee in performing any acts reasonably requested by Mortgagee to cause such
encumbrances, restrictions, violations or other matters to be removed or
remedied as appropriate.
22. REPORTING REQUIREMENTS. Mortgagor agrees to give prompt notice
to Mortgagee of the insolvency or bankruptcy filing of Mortgagor. In addition,
Mortgagor will give notice to Mortgagee in writing not later than ten (10) days
after: (i) the occurrence of any Event of Default with respect to Mortgagor
hereunder, or (ii) notice to Mortgagor of any action, litigation or proceeding
instituted to recover possession of the Mortgaged Property from Mortgagor or for
any other purpose affecting this Mortgage or of any other action, litigation or
proceeding instituted against Mortgagor or judgment rendered against Mortgagor;
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and such notice to Mortgagee shall include a true copy of any notice of default,
or if any action is then proceeding, copies of any pleadings and papers received
by Mortgagor.
23. EVENTS OF DEFAULT. The term "EVENT OF DEFAULT" as used herein
shall mean the occurrence or happening, at any time and from time to time, of
one or more of the following events:
(a) a default or event of default under any of the Notes (including,
without limitation, any event of default described in Section 3 of any of the
Notes), which remains uncured following the expiration of any applicable cure
periods;
(b) Mortgagor (i) shall fail to perform when due any payment
obligation under the terms of this Mortgage or the other Relevant Documents
within ten days after such amount becomes due, or (ii) shall be in violation of
any of the obligations or covenants contained herein or therein and such default
shall continued unremedied for a period of thirty (30) days, provided that if
such default is not readily susceptible of cure in such thirty (30) day period,
and provided that Mortgagor proceeds in a diligent manner to cure such default,
Mortgagor shall have such additional time to effect such cure as shall be
reasonably necessary to effect such cure;
(c) Failure by Mortgagor to maintain insurance and deliver evidence
thereof pursuant to Section 10; or
(d) a default under any other mortgage, deed of trust or other
security instrument covering the Mortgaged Property or a portion thereof which
remains uncured following the expiration of any applicable cure periods.
24. REMEDIES. (a) Upon the occurrence of any Event of Default,
Mortgagee may take such action permitted in law or at equity, without notice or
demand, as it deems advisable to protect and enforce its rights against
Mortgagor and in and to the Mortgaged Property, by Mortgagee itself or
otherwise, including, but not limited to, the following actions, each of which
may be pursued concurrently or otherwise, at such time and in such order as
Mortgagee may determine, in its sole discretion, without impairing or otherwise
affecting the other rights and remedies of Mortgagee:
(i) declare the entire principal amount of the indebtedness and
Obligations secured hereby with interest accrued thereon to be
immediately due and payable;
(ii) institute a proceeding or proceedings, judicial or
nonjudicial, by advertisement or otherwise, for the complete
foreclosure of this Mortgage in which case the Mortgaged Property or
any interest therein may be sold for cash or upon credit in one or
more parcels or in several interests or portions and in
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any order or manner in accordance with the laws of the jurisdiction in
which such Mortgaged Property is located;
(iii) with or without entry, to the extent permitted, and pursuant
to the procedures provided by, applicable law, institute proceedings
for the foreclosure of this Mortgage for the Obligations then due and
payable subject to the continuing lien of this Mortgage, in accordance
with the laws of the jurisdiction in which such Mortgaged Property is
located, for the balance of the Obligations not then due;
(iv) sell for cash or upon credit the Mortgaged Property or any
part thereof and all estate, claim, demand, right, title and interest
of Mortgagor therein and rights of redemption thereof, pursuant to
power of sale or otherwise, at one or more sales, as an entirety or in
parcels, at such time and place, upon such terms and after such notice
thereof as may be required or permitted by the laws of the
jurisdiction in which such Mortgaged Property is located;
(v) institute an action, suit or proceeding in equity for the
specific performance of any covenant, condition or agreement contained
herein or in the other Relevant Documents;
(vi) recover judgment on the Notes either before, during or after
any proceedings for the enforcement of this Mortgage;
(vii) prior to, concurrently with, or subsequent to the institution
of foreclosure proceedings, apply for the appointment of a trustee,
receiver, liquidator or conservator of the Mortgaged Property, as a
matter of strict right, without notice and without regard for the
adequacy of the security for the Obligations or the interest of the
Mortgagor therein and without regard for the solvency of the Mortgagor
or of any person, firm or other entity liable for the payment of the
Obligations, and Mortgagor hereby consents to such appointment;
(viii) prior to, concurrently with or subsequent to the institution
of foreclosure proceedings, enforce Mortgagee's interest in the Leases
and Rents and enter into or upon the Mortgaged Property and take
exclusive possession thereof, either personally or by its agents,
nominees or attorneys and dispossess Mortgagor and its agents and
servants therefrom, and thereupon Mortgagee may (whether or not a
receiver has been appointed) as attorney-in-fact or agent of
Mortgagor, or in its own name and under the powers herein granted,(A)
use, operate, manage, control, insure, maintain, repair, restore and
otherwise deal with all and every part of the Mortgaged Property and
conduct the business thereat; (B) complete any construction on the
Mortgaged Property in such manner and form as Mortgagee deems
advisable; (C) make alterations, additions, renewals, replacements and
improvements to or on the Mortgaged
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Property; (D) exercise all rights and powers of Mortgagor with respect
to the Mortgaged Property, whether in the name of Mortgagor or
otherwise (including, without limitation, the right to make, cancel,
enforce or modify Leases, obtain and evict tenants, and demand, sue
for, collect and receive all earnings, revenues, rents, issues,
profits and other income of the Mortgaged Property and every part
thereof); and (E) apply the receipts from the Mortgaged Property to
the payment of the Obligations, after deducting therefrom all
reasonable expenses (including, without limitation, reasonable
attorneys' fees) incurred in connection with the aforesaid operations
and all amounts necessary to pay the taxes, assessments, insurance and
other charges in connection with the Mortgaged Property, it being
agreed that should Mortgagee incur any liability, loss or damage in
the defense of any claims or demands, the amount thereof, including
costs, expenses and reasonable attorneys' fees shall be secured
hereby, and Mortgagor shall reimburse Mortgagee therefor immediately
upon demand;
(ix) require Mortgagor to pay monthly in advance to Mortgagee, or
any receiver appointed to collect the Rents, the fair and reasonable
rental value for the use and occupation of any portion of the
Mortgaged Property occupied by Mortgagor and require Mortgagor to
vacate and surrender possession to Mortgagee of the Mortgaged Property
or to such receiver and, in default thereof, evict Mortgagor by
summary proceedings or otherwise; and
(x) pursue such other rights and remedies as may be available
under the Relevant Documents or otherwise at law or in equity or under
the Uniform Commercial Code including the right to establish a lock
box for all Rents and other receivables of Mortgagor relating to the
Mortgaged Property.
In the event of a sale, by foreclosure or otherwise, of less than all of the
Mortgaged Property, this Mortgage shall continue as a lien on the remaining
portions of the Mortgaged Property.
The proceeds of any sale made under or by virtue of this Section 24,
together with any other sums which then may be held by Mortgagee under this
Mortgage, whether under the provisions of this Section or otherwise, shall be
applied by Mortgagee in the following order of priority: first, on account of
all reasonable costs and expenses incident to the foreclosure proceedings,
including all such items as are mentioned in this Section 24; second, all other
items which under the terms hereof constitute secured indebtedness, which are
any amounts due under this Mortgage, or under the other Relevant Documents
(including any amounts required to be escrowed pursuant to Section 6(b)); third,
any surplus to Mortgagor, its successors or assigns, as their rights may appear.
(b) Upon any sale made under or by virtue of this Section 24, whether
made under the power of sale herein granted or under or by virtue of judicial
proceedings or of a judgment or decree of foreclosure and sale, Mortgagee may
bid for and acquire the Mortgaged Property or any part thereof and in lieu of
paying cash therefor may make settlement for the
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purchase price by crediting upon the Obligations the net sales price after
deducting therefrom the expenses of the sale and costs of the action and any
other sums which Mortgagee is authorized to deduct under this Mortgage.
(c) No recovery of any judgment by Mortgagee and no levy of an
execution under any judgment upon the Mortgaged Property or upon any other
property of Mortgagor shall affect in any manner or to any extent the lien of
this Mortgage upon the Mortgaged Property or any part thereof, or any liens,
rights, powers or remedies of Mortgagee hereunder, but such liens, rights,
powers and remedies of Mortgagee shall continue unimpaired as before.
(d) Mortgagee may adjourn, terminate or rescind any proceeding or
other action brought in connection with its exercise of the remedies provided in
this Section 24 at any time before the conclusion thereof, as determined in
Mortgagee's sole discretion and without prejudice to Mortgagee.
(e) Mortgagee may resort to any remedies and the security given by
this Mortgage or the other Relevant Documents in whole or in part, and in such
portions and in such order as determined by Mortgagee's sole discretion. No
such action shall in any way be considered a waiver of any rights, benefits or
remedies evidenced or provided by this Mortgage or the other Relevant Documents.
The failure of Mortgagee to exercise any right, remedy or option provided in
this Mortgage or the other Relevant Documents shall not be deemed a waiver of
such right, remedy or option or of any covenant or obligation secured by this
Mortgage or the other Relevant Documents. Subject to the provisions of the
Relevant Documents, no acceptance by Mortgagee of any payment after the
occurrence of any Event of Default and no payment by Mortgagee of any obligation
for which Mortgagor is liable hereunder shall be deemed to waive or cure any
Event of Default with respect to Mortgagor, or Mortgagor's liability to pay such
obligation. No sale of all or any portion of the Mortgaged Property, no
forbearance on the part of Mortgagee and no extension of time for the payment of
the whole or any portion of the Obligations or any other indulgence given by
Mortgagee to Mortgagor, shall operate to release or in any manner affect the
interest of Mortgagee in the remaining Mortgaged Property or the liability of
Mortgagor to pay the Obligations. No waiver by Mortgagee shall be effective,
unless it is in writing and then only to the extent specifically stated.
(f) The interests and rights of Mortgagee under this Mortgage and the
other Relevant Documents, and the liens and security interests created and
evidenced by this Mortgage and the other Relevant Documents, shall not be
impaired by any indulgence, including (i) any renewal, extension or modification
which Mortgagee may grant with respect to any of the Obligations, (ii) any
surrender, compromise, release, renewal, extension, exchange or substitution
which Mortgagee may grant with respect to the Mortgaged Property or any portion
thereof; or (iii) any release or indulgence granted to any maker, endorser,
guarantor or surety of any of the Obligations.
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(g) Upon the occurrence of any Event of Default under Section 23, in
any suit to foreclose the lien hereof or enforce any other remedy of Mortgagee
under this Mortgage, there shall be allowed and included as additional
indebtedness in the decree for sale or other judgment or decree all reasonable
expenditures and expenses which may be paid or incurred by or on behalf of
Mortgagee for attorneys' fees, appraiser's fees, outlays for documentary and
expert evidence, stenographers' charges, publication costs, and costs (which may
be estimated as to items to be expended after entry of the decree) of procuring
all such abstracts of title, title searches and examinations, title insurance
policies, Torrens certificates, and similar data and assurances with respect to
title as Mortgagee may deem reasonably necessary either to prosecute such suit
or to evidence to bidders at any sale which may be had pursuant to such decree
the true condition of the title to or the value of the Mortgaged Property. All
such reasonable expenditures and expenses which Mortgagee may incur as permitted
by this Section for the protection of the Mortgaged Property and the maintenance
of the lien of this Mortgage, including, but not limited to, the fees and
out-of-pocket disbursements of any attorney employed by Mortgagee in any
litigation or proceeding affecting this Mortgage, including, but not limited to,
bankruptcy proceedings or preparations for the commencement or defense of any
proceeding or threatened suit or proceeding, shall be immediately due and
payable by Mortgagor and shall be secured by this Mortgage.
25. RIGHT OF ACCESS. Mortgagor shall permit agents, representatives
and employees of Mortgagee to (i) inspect the Mortgaged Property or any part
thereof, PROVIDED that such inspection does not materially interfere with the
tenants of the Mortgaged Property or violate the terms of any Lease, (ii) to
examine and make abstracts from any of Mortgagor's books and records and (iii)
to discuss the business, operations, properties and financial and other
condition of Mortgagor with officers of Mortgagor and with its independent
certified public accountants, at such reasonable times as may be requested by
Mortgagee upon reasonable advance notice.
26. SECURITY AGREEMENT. This Mortgage is both a real property
mortgage and a "security agreement" within the meaning of the Uniform Commercial
Code. The Mortgaged Property includes both real and personal property and all
other rights and interests, whether tangible or intangible in nature, of
Mortgagor in the Mortgaged Property. Mortgagor by executing and delivering this
Mortgage has granted and hereby grants to Mortgagee, as security for the
Obligations, a security interest in the Mortgaged Property to the full extent
that the Mortgaged Property may be subject to the Uniform Commercial Code (said
portion of the Mortgaged Property so subject to the Uniform Commercial Code
being called in this paragraph the "COLLATERAL"). Mortgagor hereby agrees with
Mortgagee to execute and deliver to Mortgagee, in form and substance
satisfactory to Mortgagee, such financing statements and such further assurances
as Mortgagee may from time to time, reasonably consider necessary to create,
perfect, and preserve Mortgagee's security interest herein granted. All or part
of the Mortgaged Property is or is to become "fixtures" as defined in the
Uniform Commercial Code, and this Mortgage, upon being filed for record in the
real estate records of the city or county wherein such fixtures are situated,
shall also constitute a "fixture filing" for the purposes of the Uniform
Commercial Code upon such of the Mortgaged Property that is or
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may become fixtures. Information concerning the security interest herein
granted may be obtained from the parties at the addresses of the parties set
forth in the first paragraph of this Mortgage. Mortgagor's chief executive
office and principal place of business is the Mortgagor's address set forth in
the first paragraph of this Mortgage, and the place where Mortgagor's books and
records in respect of where the Mortgaged Property is located are kept is the
address of Mortgagor set forth in the first paragraph of this Mortgage. If an
Event of Default shall occur which shall remain uncured, Mortgagee, in addition
to any other rights and remedies which it may have, shall have and may exercise
immediately and without demand, any and all rights and remedies granted to a
secured party upon default under the Uniform Commercial Code, (including,
without limitation, to the extent permitted by law, the right to take possession
of the Collateral or any part thereof, and to take such other measures as
Mortgagee may deem necessary for the care, protection and preservation of the
Collateral). Upon request or demand of Mortgagee, Mortgagor shall at its
expense assemble the Collateral and make it available to Mortgagee at a
convenient place acceptable to Mortgagee. Mortgagor shall pay to Mortgagee on
demand therefor any and all reasonable expenses (including, without limitation,
reasonable legal expenses and attorneys' fees) incurred or paid by Mortgagee in
protecting the interest in the Collateral and in enforcing the rights hereunder
with respect to the Collateral. Any notice of sale, disposition or other
intended action by Mortgagee with respect to the Collateral sent to Mortgagor at
least ten (10) business days prior to such action or such notice as is otherwise
required by law or the Relevant Documents, shall constitute commercially
reasonable notice to Mortgagor. The proceeds of any disposition of the
Collateral, or any part thereof, may be applied by Mortgagee to the payment of
the Obligations in such priority and proportions as Mortgagee shall determine in
its sole discretion. In the event of any change in name, identity or structure
of Mortgagor, Mortgagor shall notify Mortgagee thereof and, promptly after
request, shall execute, file and record such Uniform Commercial Code forms as
are necessary to maintain the priority of Mortgagee's lien upon and security
interest in the Collateral, and shall pay all expenses and fees in connection
with the filing and recording thereof. If Mortgagee shall require the filing or
recording of additional Uniform Commercial Code forms or continuation
statements, Mortgagor shall, promptly after request, execute, file and record
such Uniform Commercial Code forms or continuation statements as Mortgagee shall
deem necessary, and shall pay all expenses and fees in connection with the
filing and recording thereof, it being understood and agreed, however, that no
such additional documents shall materially increase Mortgagor's obligations
under this Mortgage or the other Relevant Documents. Mortgagor hereby
irrevocably appoints Mortgagee as its attorney-in-fact, coupled with an
interest, to file with the appropriate public office on its behalf any UCC
financing statements (or related documents) signed only by Mortgagee, as secured
party, in connection with the Collateral covered by this Mortgage, such
appointment to terminate upon the release of this Mortgage.
27. ACTIONS AND PROCEEDINGS. Mortgagee has the right to appear in
and defend any action or proceeding brought with respect to the Mortgaged
Property and to bring any action or proceeding, in the name and on behalf of
Mortgagor, which Mortgagee, in its reasonable discretion, decides should be
brought to protect its interest under this Mortgage or in the Mortgaged
Property. Subject to the foregoing, Mortgagor shall appear in and contest
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any action or proceeding purporting to affect the security hereof and shall pay
all reasonable costs and expenses including cost of evidence of title and
attorney's fees, in any such action or proceeding in which Mortgagee may appear.
Mortgagee shall, at its option, be subrogated to the lien of any mortgage or
other security instrument discharged in whole or in part by the Obligations, and
any such subrogation rights shall constitute additional security for the payment
of the Obligations.
28. WAIVER OF SETOFF AND COUNTERCLAIM. Except as may be permitted
under the Relevant Documents, all amounts due under this Mortgage, the Notes and
the other Relevant Documents shall be payable without setoff or counterclaim
whatsoever.
29. LIENS. Mortgagor warrants, covenants and agrees to pay and
promptly discharge, at Mortgagor's cost and expense, all taxes, assessments and
governmental charges levied upon it, its income and assets as and when such
taxes, assessments and charges are due and payable (including, without
limitation, all Impositions), as well as all lawful claims for labor materials
and supplies or otherwise which could become a lien, and all liens, encumbrances
and charges upon the Mortgaged Property, or any part thereof or interest
therein; provided that the existence of any mechanic's, laborer's,
materialman's, supplier's or vendor's lien or right thereto shall not constitute
a violation of this Section if payment is not yet due under the contract which
is the foundation thereof. Notwithstanding the foregoing, Mortgagor shall not
be in default for failure to pay or discharge Impositions or mechanic's or
materialman's or similar lien asserted against the Mortgaged Property if, and so
long as, (a) Mortgagor shall have notified Mortgagee of same within seven (7)
days of obtaining knowledge thereof; (b) Mortgagor shall diligently and in good
faith contest the same by appropriate legal proceedings which shall operate to
prevent the enforcement or collection of the same and the sale of the Mortgaged
Property or any part thereof, to satisfy the same; (c) unless funds are
otherwise reserved, Mortgagor shall furnish to Mortgagee such security as
Mortgagee may reasonably request to insure payment of such Impositions and to
secure and indemnify Mortgagee against any cost, expense, loss or damage in
connection with such contest or postponement of payment,; (d) Mortgagor shall
timely upon final determination thereof pay the amount of any such Impositions,
claim, fine or penalty so determined, together with all costs, interest and
penalties which may be payable in connection therewith; (e) the failure to pay
the Impositions, or mechanic's or materialman's or similar lien claim does not
constitute a default under any other deed of trust, mortgage or security
interest covering or affecting any part of the Mortgaged Property; and (f)
notwithstanding the foregoing, Mortgagor shall immediately upon request of
Mortgagee pay (and if Mortgagor shall fail so to do, Mortgagee may, but shall
not be required to, pay or cause to be discharged or bonded against) any such
Impositions, or claim notwithstanding such contest, if in the reasonable opinion
of Mortgagee, the Mortgaged Property or any part thereof or interest therein may
be in imminent danger of being sold, forfeited, foreclosed, terminated, canceled
or lost.
30. RECOVERY OF SUMS REQUIRED TO BE PAID. Mortgagee shall have the
right from time to time to take action to recover any sum or sums which
constitute a part of the Obligations as the same become due and owing, without
regard to whether or not the balance
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of the Obligations shall be due, and without prejudice to the right of Mortgagee
thereafter to bring an action of foreclosure, or any other action, for a default
or defaults by Mortgagor existing at the time such earlier action was commenced.
31. MARSHALING, WAIVER OF REDEMPTION AND OTHER MATTERS. Mortgagor
hereby waives, to the extent permitted by law, the benefit of all appraisement,
valuation, stay, extension, reinstatement, moratorium and redemption laws now or
hereafter in force and all rights of marshaling in the event of any sale
hereunder of the Mortgaged Property or any part thereof or any interest therein.
Further, Mortgagor hereby expressly waives any and all rights of redemption from
sale under any order or decree of foreclosure of this Mortgage on behalf of
Mortgagor, and on behalf of each and every person acquiring any interest in or
title to the Mortgaged Property subsequent to the date of this Mortgage and on
behalf of all persons to the extent permitted by applicable law.
32. NOTICE. Any notice which either party hereto may desire or be
required to give to the other party shall be in writing and delivered by: (x) a
commercial courier or messenger service or (y) by U.S. registered or certified
mail with return receipt requested. Notice by commercial messenger or courier
service will be deemed to have been given on the day when delivered before 4:00
p.m. on a business day in the city in which notice is delivered, provided that
payment for the cost of delivery is not requested of the recipient. Notice by
mail shall be given by registered or certified U.S. Mail, return receipt
requested. Delivery of notice by commercial messenger or courier service or
mail shall be assumed if acceptance of delivery is refused. Notice may be given
by fax but will only be treated as delivered hereunder if: (x) sent between the
hours of 9:00 a.m. and 5:00 p.m. (based on local time at the destination); and
(y) receipt is acknowledged by fax and delivery will be deemed to have been
given on the date the fax acknowledgment is sent. Notices shall be delivered as
follows or at such other place as either party hereto may by notice in writing
(given in accordance with this Section 32) designate:
To Mortgagor: Discovery Zone, Inc.
One Corporate Center
110 East Broward Boulevard
Fort Lauderdale, Florida 33301
Attn: President
Telecopy Number: (954) 627-2670
To Mortgagee: McDonald's Corporation
One McDonald's Plaza
Oak Brook, IL 60523
Attn: General Counsel
Telecopy Number: (630) 623-3000
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33. SOLE DISCRETION OF MORTGAGEE. Wherever pursuant to this
Mortgage, Mortgagee exercises any right given to it to approve or disapprove, or
any arrangement or term is to be satisfactory to Mortgagee, the decision of
Mortgagee to approve or disapprove or to decide that arrangements or terms are
satisfactory or not satisfactory shall be in the sole discretion of Mortgagee
and shall be final and conclusive, except as may be otherwise expressly and
specifically provided herein.
34. NON-WAIVER. The failure of Mortgagee to insist upon strict
performance of any term hereof shall not be deemed to be a waiver of any term of
this Mortgage. Mortgagor shall not be relieved of Mortgagor's Obligations
hereunder by reason of (a) the failure of Mortgagee to comply with any request
of Mortgagor to take any action to foreclose this Mortgage or otherwise enforce
any of the provisions hereof or of the other Relevant Documents, (b) the
release, regardless of consideration, of the whole or any part of the Mortgaged
Property, or of any person liable for the Obligations or any portion thereof, or
(c) any agreement or stipulation by Mortgagee extending the time of payment or
otherwise modifying or supplementing the terms of this Mortgage or the other
Relevant Documents. Mortgagee may resort for the payment of the Obligations to
any other security held by Mortgagee in such order and manner as Mortgagee, in
its discretion, may elect. Mortgagee may take action to recover the
Obligations, or any portion thereof, or to enforce any covenant hereof without
prejudice to the right of Mortgagee thereafter to foreclosure this Mortgage.
The rights and remedies of Mortgagee under this Mortgage shall be separate,
distinct and cumulative and none shall be given effect to the exclusion of the
others. No act of Mortgagee shall be construed as an election to proceed under
any one provision herein to the exclusion of any other provision. Mortgagee
shall not be limited exclusively to the rights and remedies herein stated but
shall be entitled to every right and remedy now or hereafter afforded at law or
in equity.
35. NO ORAL CHANGE. This Mortgage and the other Relevant Documents
constitute the final expression of the entire agreement among the parties
pertaining to the subject matter hereof and thereof and supersede all prior and
contemporaneous agreements, understanding, representations or other
arrangements, whether express or implied, written or oral, of the parties in
connection herewith or therewith except to the extent expressly incorporated or
specifically referred to herein or therein. This Mortgage, and any provisions
hereof, may not be modified, amended, waived, extended, changed, discharged or
terminated orally or by any act or failure to act on the part of Mortgagor or
Mortgagee, but only by an agreement in writing signed by the party against whom
enforcement of any modification, amendment, waiver, extension, change, discharge
or termination is sought.
36. SUCCESSORS AND ASSIGNS. Subject to the provisions hereof
requiring Mortgagee's consent to any transfer of the Mortgaged Property, this
Mortgage shall be binding upon and inure to the benefit of Mortgagor and
Mortgagee and their respective permitted successors and assigns forever.
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37. SEVERABILITY. If any term, covenant or condition of this
Mortgage or the Relevant Documents is held to be invalid, illegal or
unenforceable in any respect, this Mortgage and any such other Relevant Document
shall be construed without such provision.
38. HEADINGS, ETC. The headings and captions of various paragraphs
of this Mortgage are for convenience of reference only and are not to be
construed as defining or limiting, in any way, the scope or intent of the
provisions hereof.
39. DUPLICATE ORIGINALS. This Mortgage may be executed in any number
of duplicate originals and each such duplicate original shall be deemed to be an
original.
40. DEFINITIONS. Unless the context clearly indicates a contrary
intent or unless otherwise specifically provided herein, words used in this
Mortgage may be used interchangeably in singular or plural form and the word
"Mortgagor" shall mean "each Mortgagor and any subsequent owner or owners of the
Mortgaged Property or any part thereof or any interest therein," the word
"Mortgagee" shall mean "Mortgagee and any subsequent holder(s) of the Notes,"
the word "person" shall include an individual, corporation, partnership, trust,
unincorporated association, government, governmental authority, and any other
entity, and the words "Mortgaged Property" shall include any portion of the
Mortgaged Property and any interest therein and the words "attorneys' fees"
shall include any and all attorneys' fees, paralegal and law clerk fees
(including, without limitation, fees at the pre-trial, trial and appellate
levels incurred or paid by Mortgagee in protecting its interest in the Mortgaged
Property and Collateral and enforcing its rights hereunder and all such fees
incurred in connection with any bankruptcy or insolvency proceedings). Whenever
the context may require, any pronouns used herein shall include the
corresponding masculine, feminine or neuter forms, and the singular form of
nouns and pronouns shall include the plural and vice versa.
41. HOMESTEAD. Mortgagor hereby waives and renounces all homestead
and exemption rights provided by the constitution and the laws of the United
States and of any state, in and to the Land as against the collection of the
Obligations, or any part hereof.
42. ASSIGNMENTS. Consistent with and subject to the applicable
provisions of the Relevant Documents, Mortgagee shall have the right to assign
or transfer its rights under this Mortgage without limitation. Any Mortgagee or
transferee shall be entitled to all the benefits afforded Mortgagee under this
Mortgage.
43. WAIVER OF JURY TRIAL. TO THE MAXIMUM EXTENT PERMITTED BY
APPLICABLE LAW, EACH PARTY HERETO HEREBY AGREES NOT TO ELECT A TRIAL BY JURY OF
ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY JURY FULLY
TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO
THE NOTES, THIS MORTGAGE, OR THE OTHER RELEVANT DOCUMENTS, OR ANY CLAIM,
COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH.
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THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY SUCH
PARTY, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS
TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE. MORTGAGEE IS
HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS
CONCLUSIVE EVIDENCE OF THIS WAIVER BY MORTGAGOR.
44. CONSENT TO JURISDICTION. MORTGAGOR AND MORTGAGEE HERETO CONSENT
FOR THEMSELVES AND IN RESPECT OF THEIR PROPERTIES, GENERALLY, UNCONDITIONALLY
AND IRREVOCABLY, TO THE NONEXCLUSIVE JURISDICTION OF THE FEDERAL AND STATE
COURTS IN THE STATE OF NEW YORK WITH RESPECT TO ANY PROCEEDING RELATING TO ANY
MATTER, CLAIM OR DISPUTE ARISING UNDER THE RELEVANT DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED THEREBY. MORTGAGOR FURTHER CONSENTS, GENERALLY,
UNCONDITIONALLY AND IRREVOCABLY, TO THE NONEXCLUSIVE JURISDICTION OF THE STATE
AND FEDERAL COURTS OF THE STATE IN WHICH ANY OF THE COLLATERAL IS LOCATED IN
RESPECT OF ANY PROCEEDING RELATING TO ANY MATTER, CLAIM OR DISPUTE ARISING WITH
RESPECT TO SUCH COLLATERAL. MORTGAGOR FURTHER IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS, GENERALLY, UNCONDITIONALLY AND IRREVOCABLY, AT THE ADDRESSES
SET FORTH IN THE FIRST PARAGRAPH HEREOF IN CONNECTION WITH ANY OF THE AFORESAID
PROCEEDINGS IN ACCORDANCE WITH THE RULES APPLICABLE TO SUCH PROCEEDINGS. TO THE
EXTENT PERMITTED BY APPLICABLE LAW, MORTGAGOR HEREBY IRREVOCABLY WAIVES ANY
OBJECTION WHICH IT MAY NOW HAVE OR HAVE IN THE FUTURE TO THE LAYING OF VENUE IN
RESPECT OF ANY OF THE AFORESAID PROCEEDINGS BROUGHT IN THE COURTS REFERRED TO
ABOVE AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
NOTHING HEREIN SHALL AFFECT THE RIGHT OF MORTGAGEE TO SERVE PROCESS IN ANY
MANNER PERMITTED BY LAW OR TO COMMENCE PROCEEDINGS OR OTHERWISE PROCEED AGAINST
MORTGAGOR IN ANY JURISDICTION.
45. GOVERNING LAW. This Mortgage shall be governed by and construed
in accordance with the laws of the State of New York including, without
limitation, Section 5-1401 of the General Obligations Law, but otherwise without
regard to conflict of law principles; PROVIDED, HOWEVER, that with respect to
the creation, attachment, perfection, priority and procedures relating to the
enforcement of the liens and security interests created by or pursuant to this
Mortgage and relating to real property, this Mortgage shall be governed by and
construed in accordance with the laws of the state in which the Land is located.
46. LIEN ABSOLUTE, MULTI-SITE REAL ESTATE AND MULTIPLE COLLATERAL
TRANSACTION. Mortgagor acknowledges that this Mortgage and a number of other
Relevant
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<PAGE>
Documents and those documents required by the Relevant Documents together secure
the Obligations. Mortgagor agrees that the lien of this Mortgage and all
obligations of the Mortgagor hereunder shall be absolute and unconditional and
shall not in any manner be affected or impaired by:
(a) any lack of validity or enforceability of the Notes or any other
Relevant Document, any agreement with respect to any of the Obligations or any
other agreement or instrument relating to any of the foregoing;
(b) any acceptance by Mortgagee of any security for or guarantees of
any of the indebtedness hereby secured;
(c) any failure, neglect or omission on the part of Mortgagee to
realize upon or protect any of the indebtedness hereby secured or any of the
collateral security therefor, including the Relevant Documents;
(d) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations;
(e) any release (except as to the property or obligation released),
sale, pledge, surrender, compromise, settlement, nonperfection, renewal
extension, indulgence, alteration, exchange, modification or disposition of any
of the Obligations hereby secured or of any of the collateral security therefor;
(f) any amendment or waiver of or any consent to any departure from
the Notes or any other Relevant Documents or of any guaranty thereof (except to
the extent of such amendment, waiver or consent in writing by Mortgagee), if
any, and Mortgagee may in its discretion foreclose, exercise any power of sale,
or exercise any other remedy available to it under any or all of the Relevant
Documents without first exercising or enforcing any of its rights and remedies
hereunder; and
(g) any exercise of the rights or remedies of Mortgagee hereunder or
under any or all of the Relevant Documents.
Mortgagor specifically consents and agrees that Mortgagee may exercise its
rights and remedies hereunder and under the other Relevant Documents separately
or concurrently and in any order that Mortgagee may deem appropriate.
47. FUTURE ADVANCES. This Mortgage shall secure not only existing
indebtedness, but also such future advances, whether such advances are
obligatory or are to be made at the option of Mortgagee, or otherwise, as are
made by Mortgagee to Mortgagor after the date hereof, to the same extent as if
such future advances were made on the date of the execution of this Mortgage.
Nothing in this Mortgage shall be deemed an obligation on the part of the
Mortgagee to make any future advances.
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48. STATE SPECIFIC PROVISIONS. The provisions of Exhibit B are
hereby incorporated by reference as though set forth in full herein.
49. NO MERGER OF ESTATES. It is the intention and agreement of
Mortgagor and Mortgagee that there shall be no merger of any leasehold estate in
the Mortgaged Property with the fee interest in the Mortgaged Property or any
other estate or interest in the Mortgaged Property, and there shall be no merger
of this Mortgage and any estate in the Mortgaged Property, by reason of the fact
that the same person may own or hold (a) any leasehold interest in the Mortgaged
Property, and/or (b) this Mortgage, and/or (c) the fee interest in the Mortgaged
Property or any other estate or interest in the Mortgaged Property.
50. SUBORDINATE LIEN. Notwithstanding anything to the contrary
contained herein, Mortgagor shall be permitted to grant a subordinate lien on
the Mortgaged Property in favor of State Street Bank and Trust Company, solely
in its capacity as trustee and collateral agent under and pursuant to the
Indenture (as hereinafter defined) (the "SUBORDINATED CREDITOR") as security for
the obligations of Mortgagor under that certain Indenture between Mortgagor and
the Subordinated Creditor dated as of July 22, 1997 (the "INDENTURE"), provided
that such lien in favor of the Subordinated Creditor is junior, subject and
subordinate to the lien of this Mortgage in accordance with and pursuant to the
terms and conditions set forth in that certain Subordination Agreement dated as
of the date hereof between Mortgagee and the Subordinated Creditor with respect
to the Mortgaged Property (the "SUBORDINATION AGREEMENT"), and provided,
further, that any event which gives the Subordinated Creditor the right to
accelerate the obligations secured by such subordinate lien shall automatically
constitute an Event of Default hereunder.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE AND NOTARY PAGES FOLLOW.]
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IN WITNESS WHEREOF, this Mortgage has been duly executed under seal by
the Mortgagor as of the day and year first written above.
In the Presence of: MORTGAGOR:
DISCOVERY ZONE, INC., a Delaware
/s/ Mark D. Woodward corporation, as successor in interest to
- ----------------------- LEAPS & BOUNDS, INC.
Print Name:Mark D. Woodward
/s/ Seth L. Grossman By: /s/ Scott Bernstein
- ----------------------- ---------------------------
Print Name: Scott Bernstein
Print Name: Seth L. Grossman Title: President
In the Presence of:
/s/ Mark D. Woodward
- ---------------------------
Print Name: Mark D. Woodward
/s/ Seth L. Grossman By: /s/ Robert Rooney
- --------------------------- ---------------------------
Print Name: Robert Rooney
Print Name: Seth L. Grossman Title: Sr. V.P.
<PAGE>
STATE OF NEW YORK )
COUNTY OF WESTCHESTER)
Before me, a Notary Public in and for said County and State,
personally appeared the above-named DISCOVERY ZONE, INC., a corporation
organized under the laws of Delaware by Scott Bernstein and Robert Rooney, its
President and Sr. Vice Pres., who acknowledged that they did sign the foregoing
instrument for and on behalf of DISCOVERY ZONE, INC., and that the same is the
free act and deed of DISCOVERY ZONE, INC. and their free act and deed
individually and as such officers.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal at
50 Main Street, White Plains, N.Y., this 28th day of July 1997.
/s/ Mark D. Woodward
-------------------------
Notary Public
THIS DOCUMENT PREPARED BY AND
RECORDING REQUESTED BY AND
WHEN RECORDED MAIL TO:
Jonathan Reiss, Esq. [NOTARIAL SEAL]
Cleary, Gottlieb, Steen & Hamilton
1 Liberty Plaza
New York, New York 10006
<PAGE>
Forest Park
Hamilton County, Ohio
EXHIBIT A
Situate in the City of Forest Park, County of Hamilton, and State of Ohio, in
Section 19, Town 2 Entire Range 2, Springfield Township, and being more
particularly described as follows:
Commencing at the northwest corner of Section 19; thence with the section line
S. 00degrees 10' 00" W. for 1,709.00 feet to a point on the western right-of-way
of Interstate 275; thence crossing said right-of-way of Interstate 275, N.
88degrees 19' 00" E. for 440.65 feet to a point on the eastern right-of-way of
Interstate 275, being the TRUE POINT OF BEGINNING;
Thence with the eastern right-of-way of Interstate 275, N. 44degrees 38' 05"
E. for 86.23 feet to a point; thence N. 44degrees 38' 05" E. for 366.76 feet
to an iron pin; thence N. 67degrees 02" 20" E. for 216.79 feet to a point;
thence leaving the eastern right-of-way of Interstate 275, S. 01degrees 41'
05" E. for 331.97 feet to a point; thence S. 88degrees 19' 00" W. for 10.81
feet to a point; thence S. 02degrees 01' 04" W. for 35.39 feet to an iron pin
on the line of Esther Willer; thence with the line of Esther Willer, S.
88degrees 34' 29" W. for 170.00 feet to a point; thence N. 01degrees 40' 59"
W. for 10.00 feet to a point; thence S. 88degrees 33' 53" W. for 75.00 feet
to a point; thence S. 01degrees 40' 04" E. 35.32 feet to a point; thence S.
88degrees 19' 00" W. for 271.52 feet to a point being the TRUE POINT OF
BEGINNING; containing 2.636 acres.
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EXHIBIT B
STATE SPECIFIC PROVISIONS (Ohio)
The following provisions are incorporated by reference into Section 48
of the attached Mortgage. If any conflict or inconsistency exists between this
Exhibit B and the remainder of the attached Mortgage, this Exhibit B shall
govern.
A. MAXIMUM PRINCIPAL INDEBTEDNESS. This Mortgage secures the unpaid
balance of loan advances which may be made after this Mortgage is filed for
record. The maximum amount of the unpaid principal balance of all loan advances
(in the aggregate and exclusive of interest thereon and other advances made for
the payment of taxes, insurance, or for protection of the Mortgaged Property)
which may be outstanding at any time is $59 million. In addition to any other
debt or obligation secured hereby, this Mortgage shall also secure unpaid
balances of advances made with respect to the Mortgaged Property for the payment
of taxes, assessments, insurance premiums, and costs incurred for maintaining
the Improvements on, or for the protection of, the Mortgaged Property.
B. MECHANICS' LIEN LAW. Mortgagee shall be and hereby is authorized
and empowered to do, as mortgagee, all things provided to be done in the
mechanics' lien laws of the State of Ohio (including Section 1311.14 of the Ohio
Revised Code), and all acts amendatory or supplementary thereto.
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SCHEDULE A
DESCRIPTION OF ORIGINAL MORTGAGE
PROPERTY RECORDING OFFICE VOLUME PAGE RECORDING DATE
- -------- ---------------- ------ ---- --------------
Forest Park, OH Hamilton, Ohio County 6566 662 9/12/94
Recorder's Office
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EXHIBIT 4.30
- ------------------------------------------------------------------------------
DISCOVERY ZONE, INC.
(Mortgagor),
to
McDONALD's CORPORATION
(Mortgagee)
---------------------------------------
AMENDED AND RESTATED MORTGAGE, ASSIGNMENT OF LEASES AND RENTS, SECURITY
AGREEMENT AND FIXTURE FILING
---------------------------------------
Dated as of July 29, 1997
DOCUMENT PREPARED BY AND
AFTER RECORDING RETURN TO:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attention: Jonathan A. Reiss, Esq.
- ------------------------------------------------------------------------------
[SCHAUMBURG, ILLINOIS PROPERTY]
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THIS AMENDED AND RESTATED MORTGAGE, ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FIXTURE FILING (as the same may from time to time be
extended, renewed or modified, this "MORTGAGE"), made as of the 29th day of
July, 1997, by DISCOVERY ZONE, INC., a Delaware corporation ("MORTGAGOR"),
having its principal place of business at One Corporate Center, 110 East Broward
Boulevard, Fort Lauderdale, Florida 33301, as successor by merger to LEAPS &
BOUNDS, INC., to McDONALD'S CORPORATION a Delaware corporation ("MORTGAGEE"),
having an address at One McDonald's Plaza, Oak Brook, Illinois 60523.
W I T N E S S E T H:
A. WHEREAS, prior to Mortgagor's several predecessors in interest
filing their voluntary petitions for relief under chapter 11, title 11, United
States Code (the "BANKRUPTCY CODE"), Mortgagor's predecessors in interest with
respect to the Mortgaged Property (as hereinafter defined), Leaps & Bounds, Inc.
("LBI") had provided Mortgagee with a First Mortgage on the Mortgaged Property,
dated as of August 30, 1994 (the "ORIGINAL MORTGAGE") and identified by the
recording information set forth on Schedule A hereto, to secure certain
obligations owed to Mortgagee under the Agreement and Plan of Merger among
Mortgagee, Mortgagor, Discovery Zone, Inc., a Delaware corporation ("OLD DZI")
and Discovery Zone International, Inc. ("DZII"), a Delaware corporation, dated
as of August 30, 1994 (the "MERGER AGREEMENT"); and
B. WHEREAS, pursuant to Section 11.2(a)(iii) of the Merger
Agreement, Old DZI agreed to defend, indemnify and hold Mortgagee and its
affiliates harmless in respect of all expenses, losses, costs, deficiencies,
liabilities and damages (including related and reasonable counsel fees and
expenses, and compensatory and demonstrable consequential damages) incurred or
suffered by Mortgagee as a direct result of, inter alia, any breach by Old DZI
or LBI of the leases or subleases relating to certain properties that result in
any payment by Mortgagee in connection with any guarantee by Mortgagee of such
leases and pursuant to Section 10.3(f) of the Merger Agreement it was agreed
that certain security would be provided to secure the obligations under Section
11.2(a)(iii) of the Merger Agreement, including without limitation, a first
priority security interest in the Land and Improvements (the "AGREEMENT TO
INDEMNIFY"); and
C. WHEREAS, following the filing of their respective prayers for
relief under the Bankruptcy Code, Mortgagor's predecessors in interest, Old DZI,
their affiliated
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debtors, including DZII and LBI (the "DEBTORS"), and Mortgagee entered into the
Stipulation and Order Between Debtors and McDonald's Corporation Providing For
The Resolution, Settlement And Compromise of Disputes And For Rent Deferrals And
Allowance of Certain Claims (the "STIPULATION AND ORDER") that was entered by
the United States Bankruptcy Court for the District of Delaware (the "BANKRUPTCY
COURT") on November 18, 1996, which was not appealed or otherwise challenged,
became a final order, remains in full force and effect and to which Mortgagor is
bound, Section 7 of which is captioned "CONTINUING SECURITY" and provides, in
pertinent part, that the valid and enforceable first priority security interest
on the Land and Improvements and certain other collateral shall secure the
performance and payment of all of the obligations of Mortgagor to Mortgagee
under the Notes (as hereinafter defined), any obligations of Mortgagee that may
arise in connection with the Assumption Locations whether pursuant to any
guaranty, lease, sublease or otherwise, any obligations of Mortgagor that may
arise in the event of a Liquidation, and any continuing obligations of Mortgagor
relating to the Rejection Location(s) and the Prior Rejection Locations (as such
terms are defined therein); and
D. WHEREAS, pursuant to the Stipulation and Order and 11 U.S.C.
Section 365, the Debtors, as predecessors in interest to Mortgagor, assumed the
subleases relating to certain properties (the "ASSUMED PROPERTIES") which
subleases (the "ASSUMED PROPERTY SUBLEASES") expressly incorporate the Agreement
to Indemnify as it relates to any current or future obligations of Mortgagee
relating to the Assumed Properties; and
E. WHEREAS, pursuant to the Stipulation and Order and the Plan (as
hereinafter defined), this Mortgage hereby amends and restates the Original
Mortgage in its entirety in accordance with the terms and provisions set forth
herein; and
F. WHEREAS, this Mortgage, together with certain other Deeds of
Trust, Mortgages or similar encumbrances, are intended to and do secure the
obligations of Mortgagor and its predecessors in interest and the other Debtors,
to Mortgagee under all of the Stipulation and Order, the Agreement to Indemnify,
the Secured Rent Deferral Notes (as hereinafter defined) and the Secured
Rejection Note (as hereinafter defined); and
G. WHEREAS, pursuant to the plan of reorganization for Old DZI and
its affiliated debtors confirmed by the Bankruptcy Court by order entered July
18, 1997 (the "PLAN"), and as required by the terms of the Stipulation and
Order, Mortgagor, as the reorganized successor of the Debtors, is obligated to
issue to Mortgagee Secured Rent Deferral Notes in the aggregate original
principal amount of $266,466.24, which amount is subject to increase each month
in accordance with the terms thereof (the "SECURED RENT DEFERRAL NOTES") and
Secured Rejection Note in the aggregate original principal amount of
$4,416,237.90 (the "SECURED REJECTION NOTE", and, together with the Secured Rent
Deferral Notes, the "NOTES"); and
H. WHEREAS, pursuant to the Plan, all of the Debtors and their
reorganized successors have merged into Mortgagor, and simultaneously with such
merger, all
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property of LBI and the other Debtors, including the Mortgaged Property (as
hereinafter defined) has been revested in Mortgagor, as the successor entity of
the Debtors; and
I. WHEREAS, in accordance with the foregoing, Mortgagor is the fee
simple owner of the real estate described in Exhibit A attached hereto (the
"LAND");
NOW THEREFORE, with reference to the foregoing recitals and for good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Mortgagor and Mortgagee hereby agree that the Original Mortgage is
hereby amended and restated in its entirety as follows:
For the purpose of securing the payment and performance of all of the
obligations (the "OBLIGATIONS") of Mortgagor to Mortgagee, including without
limitation, any and all obligations of Mortgagor, as successor in interest to
Old DZI, DZII, LBI and their affiliated debtors, under this Mortgage, the
Agreement to Indemnify (including, without limitation, any contingent
obligations thereunder), the Stipulation and Order (including, without
limitation, the obligations described in Section 7 thereof which are referred to
in paragraph C of the recitals above), the Plan and the Notes (including any and
all subsequent advances made pursuant to the terms of the Notes) and all other
documents evidencing or securing any such obligations (collectively, the
"RELEVANT DOCUMENTS"), Mortgagor by these presents does hereby mortgage, give,
grant, bargain, sell, alienate, enfeoff, convey, confirm, warrant, pledge,
assign and hypothecate unto Mortgagee, the Land and the buildings, structures
and improvements of every nature whatsoever now or hereafter located thereon to
the extent owned by Mortgagor (including, but not limited to, all gas and
electric fixtures, radiators, heaters, docks and docking facilities, engines and
machinery, boilers, elevators and motors, plumbing, heating and air conditioning
fixtures, carpeting and other floor coverings, water heaters, awnings and storm
sashes which are or shall be attached to the Land or said buildings, structures
or improvements) (the "IMPROVEMENTS");
TOGETHER WITH: all right, title, interest and estate of Mortgagor now
owned, or hereafter acquired, in and to the following property, rights, interest
and estates relating to the Land and the Improvements, together with Mortgagor's
interest in the following property, rights, interests and estates hereinafter
described (the Land, Improvements, and the following property, rights, interests
and estates being hereinafter collectively referred to as the "MORTGAGED
PROPERTY"):
(a) all easements, rights-of-way, strips and gores of land, streets,
ways, alleys, passages, sewer rights, water, water courses, water rights and
powers, air rights and development rights, construction and equipment
warranties, and all estates, rights, titles, interests, privileges, liberties,
tenements, hereditaments and appurtenances of any nature whatsoever, in any way
belonging, relating to or pertaining to the Land and the Improvements and the
reversion and reversions, remainder and remainders, and all land lying in the
bed of any street, road or avenue, opened or proposed, in front of or adjoining
the Land, to the center line thereof and all the estates, rights, titles,
interests, dower and rights of dower,
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curtesy and rights of curtesy, property, possession, claim and demand
whatsoever, both at law and in equity, of Mortgagor of, in and to the Land and
the Improvements and every part and parcel thereof, with the appurtenances
thereto, and in and to any streets, ways, alleys, passages, strips or gores of
land adjoining the Land or any part thereof;
(b) all fixtures, attachments and other articles attached to the Land
or the Improvements constituting realty or real property now or hereafter owned
by Mortgagor or in which Mortgagor has or shall acquire an interest, now or
hereafter located on, attached to or contained in or used or usable in
connection with the Mortgaged Property, and including, without limitation, all
building or construction materials intended for construction, reconstruction,
alteration or repair of or installation on or in the Mortgaged Property, of
every kind and nature whatsoever now owned or hereafter acquired by Mortgagor,
and all proceeds thereof, as well as all additions to, appurtenances,
substitutions for, replacements of or accessions to any of the items recited as
aforesaid and all attachments, components, parts (including spare parts) and
accessories, whether installed thereon or affixed thereto, now or hereafter
owned by Mortgagor and used or intended to be used in connection with, or with
the operation of, the Mortgaged Property, to the extent constituting real
property, but not including play equipment or other similar-type entertainment
equipment relating to the operation of the "Discovery Zone" facility on the
Mortgaged Property unless removal of such equipment would cause structural
damage to the Land or the Improvements (collectively, the "FIXTURES");
(c) all awards or payments, including interest thereon, which may
heretofore and hereafter be made with respect to the Mortgaged Property, whether
from the exercise of the right of eminent domain (including, but not limited to,
any transfer made in lieu of or in anticipation of the exercise of said rights),
or for a change of grade, or for any other injury to or decrease in the value of
the Mortgaged Property;
(d) to the extent assignable (and to the extent relating to the
general occupancy and use of the Mortgaged Property as opposed to the operation
of the "Discovery Zone" entertainment facility on the Mortgaged Property),
leases, subleases (including sub-subleases), lettings, licenses, concessions,
occupancy agreements and other agreements which grant a possessory interest in,
or the right to use or occupy, all or any part of the Mortgaged Property now or
hereafter entered into, and all amendments, extensions, renewals and guarantees
thereof, and all security therefor (collectively, the "LEASES") and all rents,
issues, profits, revenues (including all oil and gas or other mineral royalties
and bonuses) and deposits (including, without limitation, security deposits)
under the Leases (including, without limitation, from the rental of any office
space, retail space or other space, halls, stores, and offices, and security
deposits therefor, exhibit or sales space of every kind, license, lease,
sublease, fees and rentals, letters of credit or cash instruments securing or
evidencing obligations under Leases, service charges, vending machine sales and
proceeds, if any, from business interruption or other loss of income insurance))
(collectively, the "RENTS") and all proceeds from the sale or other disposition
of the Leases and the right to receive and apply the Rents to the payment of the
Obligations;
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(e) subject to the rights of Mortgagor hereunder, all proceeds of any
insurance policies covering the Mortgaged Property (including, without
limitation, the right to receive and apply the proceeds of any insurance,
judgments, or settlements made in lieu thereof, for damage to the Mortgaged
Property);
(f) all refundable, returnable or reimbursable fees deposits or other
funds or evidences of credit or indebtedness deposited by or on behalf of
Mortgagor with any governmental authorities, boards, corporations, providers of
utility services, public or private, including specifically, but without
limitation, all refundable, returnable or reimbursable tap fees, utility
deposits and development costs in connection with the Mortgaged Property, and
all of the records and books of account now or hereafter maintained by or on
behalf of Mortgagor in connection with the operation of the Mortgaged Property
(collectively, "SECURITY ACCOUNTS");
(g) all proceeds (as defined in the Uniform Commercial Code) of the
Mortgaged Property which, in any event, shall include, without limitation, (i)
cash, instruments and other property received, receivable or otherwise
distributed in exchange for any or all of the Mortgaged Property, (ii) the
collection or other disposition of, or realization upon, any item or portion of
the Mortgaged Property (including, without limitation, all claims of Mortgagor
against third parties for loss of, damage to, destruction of, or for proceeds
payable under policies of insurance in respect of, the Mortgaged Property now
existing or hereafter arising), (iii) any and all proceeds of any insurance,
indemnity, warranty or guaranty payable to Mortgagor from time to time with
respect to damage or loss of or to any of the Mortgaged Property, (iv) any and
all payments (in any form whatsoever) made or due and payable to Mortgagor from
time to time in connection with the requisition, confiscation, condemnation,
seizure or forfeiture of all or any part of the Mortgaged Property by any
Governmental Authority (or any person acting under color of Governmental
Authority), and (v) any and all real estate tax refunds payable to Mortgagor
with respect to the Mortgaged Property, and refunds or reimbursements payable
with respect to bonds, escrow accounts, or other sums payable in connection with
the use, development or ownership of the Mortgaged Property, but excluding any
proceeds obtained, earned or arising directly from the operation of the
"Discovery Zone" entertainment facility operated by Mortgagor on the Mortgaged
Property as opposed to the general occupancy and use of the Mortgaged Property
(collectively, the "PROCEEDS");
(h) to the extent permitted under applicable law, all licenses,
permits (other than proprietary permits of Mortgagor relating to the ordinary
operation of a "Discovery Zone" entertainment facility as opposed to the general
use and occupancy of the Mortgaged Property), variances and certificates used in
connection with the ownership, operation, use or occupancy of the Mortgaged
Property (including, without limitation, business licenses, state health
department licenses, food service licenses, liquor licenses, licenses to conduct
business and all such other permits, licenses and rights, obtained from any
Governmental Authority or private Person concerning ownership, operation, use or
occupancy of the Mortgaged Property) (collectively, "PERMITS");
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(i) all plans, specifications, shop drawings and other technical
descriptions prepared for construction, repair or alteration of the Improvements
(including diskettes containing any such data), and all amendments and
modifications thereof; and
(j) any escrows or escrow accounts established hereunder to secure
the Obligations of Mortgagor, including, without limitation, the Proceeds Escrow
Account described in Section 6(b) hereof; and
(k) any and all replacements and renewals of or additions and
substitutions to any of the foregoing and all proceeds of any of the foregoing.
TO HAVE AND TO HOLD the above granted and described Mortgaged Property
unto and to the use and benefit of Mortgagee, and its successor and assigns,
forever, and Mortgagor does hereby bind itself, its successors and assigns to
WARRANT AND FOREVER DEFEND the title to the Mortgaged Property unto Mortgagee
and its successors and assigns;
AND, TO PROTECT THE SECURITY OF THIS MORTGAGE, Mortgagor represents
and warrants to and covenants and agrees with Mortgagee as follows:
1. DEFINED TERMS. The following terms, when used herein, shall have
the meanings set forth below:
"ENVIRONMENTAL LAWS" means any and all present and future federal,
state or local laws, statutes, ordinances or regulations, any judicial or
administrative orders, decrees or judgments thereunder, and any permits,
approvals, licenses, registrations, filings and authorizations, in each case as
now or hereafter in effect, relating to the protection of the environment, the
impact of Hazardous Substances or the generation, disposal or remediation
thereof on human health or safety, or the Release or threatened Release of
Hazardous Substances or otherwise relating to the Use of Hazardous Substances.
For purposes of this definition, (A) "HAZARDOUS SUBSTANCES" means collectively,
(i) any petroleum or petroleum products or waste oils, explosives, radioactive
materials, asbestos, urea formaldehyde foam insulation, polychlorinated
biphenyls ("PCBs"), and lead-based paint, (ii) any chemicals or other materials
or substances which are now or hereafter become defined as or included in the
definitions of "hazardous substances", "hazardous wastes", "hazardous
materials", "extremely hazardous wastes", "restricted hazardous wastes", "toxic
substances", "toxic pollutants", "contaminants", "pollutants" or words of
similar import under any Environmental Law and (iii) any other chemical or any
other material or substance, exposure to which is now or hereafter prohibited,
limited or regulated under any Environmental Law; (B) "USE" means, with respect
to any Hazardous Substance, the generation, manufacture, processing,
distribution, handling, use, treatment, recycling or storage of such Hazardous
Substance or transportation of such Hazardous Substance; and (C) "RELEASE" means
any release, spill, emission, leaking, pumping, injection, deposit, disposal,
discharge, dispersal, leaching or migration into the indoor or outdoor
environment (including, without limitation, the movement
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of Hazardous Substances through ambient air, soil, surface water, ground water,
wetlands, land or subsurface strata).
"GOVERNMENTAL AUTHORITY" means any national or federal government, any
state, regional, local or other political subdivision thereof with jurisdiction
and any Person with jurisdiction exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government (including
without limitation any court).
"IMPOSITIONS" means all taxes (including, without limitation, all real
estate, ad valorem, sales (including those imposed on lease rentals), use,
single business, gross receipts, value added, intangible transaction privilege,
privilege or license or similar taxes), assessments (including, without
limitation, all assessments for public improvements or benefits, whether or not
commenced or completed within the term of this Mortgage), ground rents, water,
sewer or other rents and charges, excises, levies, fees (including, without
limitation, license, permit, inspection, authorization and similar fees), and
all other governmental impositions and other charges (including, without
limitation, vault charges and license fees for the use of vaults, chutes and
similar areas adjoining the Mortgaged Property), in each case whether general or
special, ordinary or extraordinary, foreseen or unforeseen, of every character
in respect of the Mortgaged Property, which at any time prior to, during or in
respect of the term hereof may be assessed or imposed on or in respect of or be
a lien upon (i) Mortgagor (including, without limitation, all income, franchise,
single business or other taxes imposed on Mortgagor for the privilege of doing
business in the jurisdiction in which the Mortgaged Property is located),
(ii) the Mortgaged Property, or any part thereof or any revenues therefrom or
any estate, right, title or interest therein, or (iii) any occupancy, operation,
use or possession of, or sales from, or activity conducted on, or in connection
with the Mortgaged Property by Mortgagor or the leasing or use of the Mortgaged
Property or any part thereof by Mortgagor.
"LEGAL REQUIREMENTS" means (i) all governmental statutes, laws, rules,
orders, regulations, ordinances, judgments, decrees and injunctions of
Governmental Authorities (including, without limitation, Environmental Laws)
affecting either the Borrower or any Property or any part thereof or the
construction, ownership, use, alteration or operation thereof, or any part
thereof (whether now or hereafter enacted and in force), (ii) all permits,
licenses and authorizations and regulations relating thereto, and (iii) all
covenants, conditions and restrictions contained in any instruments at any time
in force (whether or not involving Governmental Authorities) affecting the
Mortgaged Property or any part thereof which, in the case of this clause (iii),
require repairs, modifications or alterations in or to the Mortgaged Property or
any part thereof, or in any material way limit or restrict the existing use and
enjoyment thereof.
"PERSON" means any individual, corporation, limited liability company,
partnership, joint venture, estate, trust, unincorporated association, any
federal, state, county or municipal government or any bureau, department or
agency thereof and any fiduciary acting in such capacity on behalf of any of the
foregoing.
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"UNIFORM COMMERCIAL CODE" means the Uniform Commercial Code, as
adopted, enacted and amended from time to time by the state or states where any
of the Mortgaged Property is located.
2. PAYMENT OF OBLIGATIONS AND INCORPORATION OF COVENANTS, CONDITIONS
AND AGREEMENTS. Mortgagor will pay the Obligations at the time and in the
manner provided in the Relevant Documents and in this Mortgage. All the
representations, warranties, covenants, conditions and agreements of Mortgagor
contained in the Relevant Documents are hereby made a part of this Mortgage to
the same extent and with the same force as if fully set forth herein. If there
shall be any inconsistencies between the terms, covenants, conditions and
provisions set forth in this Mortgage and the terms, covenants, conditions and
provisions set forth in the Relevant Documents, then the terms, covenants,
conditions and provisions of the Relevant Documents shall prevail.
3. WARRANTY OF TITLE/ORGANIZATION. Mortgagor warrants that
Mortgagor has good, marketable and insurable fee simple title to Land and the
Improvements and has good title to the remainder of the Mortgaged Property and
has the full power, authority and right to execute, deliver and perform its
obligations under this Mortgage and to encumber, mortgage, give, grant, bargain,
sell, alienate, enfeoff, convey, confirm, warrant, pledge, assign and
hypothecate the Mortgaged Property and that Mortgagor possesses an unencumbered
fee estate in the Land and the Improvements and that it owns the Mortgaged
Property free and clear of all liens, encumbrances and charges whatsoever except
for (x) those exceptions to title which are existing on the date hereof and
approved by Mortgagee and (y) those exceptions of title that are permitted under
the other terms and conditions of this Mortgage (collectively, the "PERMITTED
ENCUMBRANCES") and that this Mortgage is and will remain a valid and enforceable
first lien on and security interest in the Mortgaged Property, subject only to
the Permitted Encumbrances. Mortgagor shall forever warrant, defend and
preserve such title and the validity and priority of the lien of this Mortgage
and shall forever warrant and defend the same to Mortgagee against the claims of
all persons whomsoever. Mortgagor is duly organized, validly existing and in
good standing under the laws of its jurisdiction of organization. Mortgagor is
qualified to do business and in good standing in the State in which the
Mortgaged Property is located, and to the extent that Mortgagor is not so
qualified or in good standing in such State, Mortgagor shall promptly qualify to
do business and become in good standing in such State and shall promptly present
evidence of such qualification to do business and good standing to Mortgagee,
and shall in any event take such steps as are necessary to insure the
enforceability of the Notes and this Mortgage.
4. TAXES. Mortgagor hereby warrants, covenants and agrees to pay
before any penalty attaches all real property taxes, general and special, and
all other taxes and assessments of any kind or nature whatsoever, against the
Mortgaged Property when due and shall, upon written request, furnish to
Mortgagee duplicate receipts therefor, Mortgagor may, in good faith and with
reasonable diligence, contest the validity or amount of any such taxes or
assessments provided that such contest shall have the effect of preventing the
collection of the
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tax or assessment so contested and the sale or forfeiture of said Mortgaged
Property or any part thereof, or any interest therein, to satisfy the same.
5. INDEMNIFICATION. Mortgagor shall indemnify, defend and hold
harmless Mortgagee from and against all of the following (collectively, and
individually referred to as a "LOSS"): claims, demands, causes of action,
judgments, costs, expenses, liabilities, losses and damages (including
consequential and punitive damages), reasonable attorneys' fees and expenses and
court costs, disbursements and court costs, and all risk of damage to property
and injury to persons in or upon the Mortgaged Property, arising from: (i)
Mortgagor's use of the Property or from the conduct of its business in or about
the Mortgaged Property; (ii) Mortgagor's default or breach of any term under
this Mortgage; and (iii) Mortgagor's violation or failure to comply with any
Legal Requirements, including Environmental Laws; provided that Mortgagor shall
not be liable for Loss arising from Mortgagee's negligence or willful misconduct
or from Mortgagee's breach of any of its obligations hereunder.
6. TRANSFER OR ENCUMBRANCE OF THE MORTGAGED PROPERTY. (a) Except as
may otherwise be permitted hereunder or pursuant to the Relevant Documents,
Mortgagor shall not sell, convey, alienate, mortgage, encumber, pledge or
otherwise transfer the Mortgaged Property or any part thereof or any of its
interest therein. Mortgagee shall not be required to demonstrate any actual
impairment of its security or any increased risk of default hereunder in order
to declare the Obligations immediately due and payable upon Mortgagor's
conveyance, alienation, mortgage, encumbrance, pledge or transfer of the
Mortgaged Property in violation of this Mortgage or any other Relevant Document.
This provision shall apply to every sale, conveyance, alienation, mortgage,
encumbrance, pledge or transfer of the Mortgaged Property that is not permitted
pursuant to the Relevant Documents, regardless of whether voluntary or not, or
whether or not Mortgagee has consented to any previous sale, conveyance,
alienation, mortgage, encumbrance, pledge or transfer of the Mortgaged Property.
(b) Notwithstanding Section 6(a), Mortgagor shall have the right to
sell the Mortgaged Property at any time to a third party bona fide purchaser
after consultation with Mortgagee and upon the prior written consent of
Mortgagee to such sale and the sales price (such consent not to be unreasonably
withheld), provided that the net proceeds of such sale of the Mortgaged Property
(after payment of transfer taxes and reasonable brokerage commissions, if any,
and other reasonable closing costs) shall be applied towards repayment of the
Obligations, including, without limitation, repayment of the Secured Rejection
Note (including prepayment of any amounts not yet due and payable) and payment
of the Principal Amounts (as defined in the Rent Deferral Notes) then
outstanding under the Rent Deferral Notes, in the order and manner set forth in
the Notes. After the Secured Rejection Note and all Principal Amounts
outstanding under the Notes have been repaid in full, any remaining net proceeds
(including proceeds from any sale or other disposition of the Mortgaged Property
pursuant to Section 24 hereof) not applied towards repayment of the Obligations
shall be deposited into an escrow account designated by Mortgagee for
Mortgagor's account and as security for the performance by Mortgagor of its
Obligations to Mortgagee under the Relevant Documents (the "PROCEEDS ESCROW
ACCOUNT") which escrow account shall be administered by Mortgagee, or, at
Mortgagee's discretion and in accordance with Mortgagee's instructions, may be
administered
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by an escrow agent (an "ESCROW AGENT") selected by Mortgagee (whose reasonable
fees shall be paid by Mortgagor). Mortgagor may also from time to time deposit
additional funds into the Proceeds Escrow Account as further security for the
Obligations. At Mortgagee's request, Mortgagor agrees to enter into a separate
escrow agreement to further evidence the provisions of this Section 6(b), and in
the event that Mortgagee chooses an Escrow Agent to administer the Proceeds
Escrow Account, Mortgagor agrees to execute an escrow agreement in form and
substance reasonably satisfactory to Mortgagee (including provisions consistent
with the provisions of this Section 6(b)) to evidence the duties and
responsibilities of such Escrow Agent. Mortgagee or, if applicable, the Escrow
Agent at the direction of Mortgagee, shall invest the funds in the Proceeds
Escrow Account in obligations of the U.S. Government or its agencies, interest
in time accounts or certificates of deposits, or other interest bearing account
of any bank or bank and trust company or in money market funds available to
Mortgagee. Mortgagor agrees, and shall agree under any escrow agreement entered
into pursuant to this Section 6(b), that the funds on deposit under the escrow
arrangement described herein shall not constitute property of the estate (within
the meaning of Section 541 of the United States Bankruptcy Code) and that
Mortgagor shall only have such rights to such funds as are provided herein and
in any escrow agreement entered into pursuant to this Section. Funds in the
Proceeds Escrow Account shall be disbursed (together with accrued interest) from
time to time to Mortgagee, at Mortgagee's direction (upon seven (7) days prior
notice to Mortgagor), to pay any Obligations that may arise from time to time
under the Agreement to Indemnify, the Notes, the Stipulation and Order or the
other Relevant Documents. Notwithstanding the foregoing, after December 31,
2005, Mortgagor shall be entitled to retain any net proceeds in excess of the
Minimum Amount set forth below from the sale of the Mortgaged Property,
including amounts previously deposited and remaining in the Proceeds Escrow
Account (including accrued interest thereon) which have not been applied towards
payment of the Obligations, provided that (i) no Obligations are then due and
owing by Mortgagor pursuant to the Agreement to Indemnify, the Stipulation and
Order, the Notes or otherwise, (ii) no default or Event of Default has occurred
and is continuing under any of the Relevant Documents; and (iii) the amount
remaining in the Proceeds Escrow Account is no less than the Minimum Amount (as
hereinafter defined). Except as otherwise set forth in the following sentence,
the "Minimum Amount" shall mean the product of (A) 1.5 times (B) the sum of the
gross rent (including additional rent and percentage rent charges, if any),
common area maintenance charges, taxes, insurance and other charges computed on
a gross basis (collectively, the "BASE CHARGES") which are due or shall become
due under any Assumed Property Subleases still in existence as of December 31,
2005 (the "SURVIVING ASSUMED PROPERTY SUBLEASES") from December 31, 2005 until
the expiration of the terms of such Assumed Property Subleases. Upon the
expiration after December 31, 2005 of any Surviving Assumed Property Sublease,
Mortgagee shall re-calculate the Minimum Amount based upon the product of 1.5
times the Base Charges of the remaining Surviving Assumed Property Subleases as
of the end of the term of such Surviving Assumed Property Sublease (such Base
Charges to be calculated as the sum of the Base Charges from such date through
the end of the expiration dates of the remaining Surviving Assumed Property
Subleases), and provided that (i) no Obligations are then due and owing by
Mortgagor pursuant to the Agreement to Indemnify, the Notes, the Stipulation and
Order or otherwise and that (ii) no default or Event of Default has occurred
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and is continuing under any of the Relevant Documents, Mortgagee shall, on the
first anniversary of the expiration of such expired Surviving Assumed Property
Sublease, release to Mortgagor, or cause the Escrow Agent to release to
Mortgagor, the excess of all funds in the Proceeds Escrow Account over the re-
calculated Minimum Amount. Any calculation of Base Charges under this Section
6(b) shall be made by Mortgagee and, absent manifest error, shall be conclusive
and binding upon Mortgagor. Provided that (i) an amount equal to at least the
Minimum Amount is deposited or on deposit in the Proceeds Escrow Account to
secure the payment of the Obligations, (ii) no default or Event of Default has
occurred and is continuing under any of the Relevant Documents, (iii) the Notes
have been repaid in full and (iv) no Obligations are then due and owing by
Mortgagor pursuant to the Agreement to Indemnify, the Stipulation and Order or
otherwise, Mortgagor shall be entitled to receive a release of this Mortgage
from Mortgagee at any time after December 31, 2005. Provided that no default or
Event of Default has occurred or is continuing under any of the Relevant
Documents and that no amounts are then owing by Mortgagor or outstanding
pursuant to or under any of the Relevant Documents (and that an amount equal to
the Minimum Amount is at all times on deposit in the Proceeds Escrow Account),
interest earned on the amounts deposited in the Proceeds Escrow Account after
December 31, 2005 shall be distributed to Mortgagor on a quarterly basis. All
remaining amounts in the Proceeds Escrow Account which have not been applied
towards payment of the Obligations shall be released to Mortgagor on the later
of (A) December 31, 2014 provided, however, that no Obligations are then due and
owing by Mortgagor pursuant to the Agreement to Indemnify, the Stipulation and
Order or otherwise, and (B) the end of the term of this Mortgage as set forth in
Section 13(c) hereof. Mortgagor shall pay any income taxes attributable to the
interest or other income earned on the Proceeds Escrow Account. Notwithstanding
any release of this Mortgage pursuant to this Section 6(b) or otherwise, the
terms and provisions of this Section 6(b) shall survive the release of this
Mortgage.
7. AMENDMENT TO LEGAL DESCRIPTION. If it becomes evident that the
legal description attached to any Relevant Document is inaccurate or does not
fully describe all of the real property which is reasonably connected to the
Land, Mortgagor hereby agrees to an amendment of such legal description and the
legal description contained on the corresponding title policy so that such error
is corrected and to execute and cause to be recorded, if applicable, such
document as may be appropriate for such purpose.
8. ASSIGNMENT OF LEASES AND RENTS. Mortgagor does hereby absolutely
and unconditionally assign to Mortgagee, Mortgagor's right, title and interest
in all current and future Leases and Rents, it being intended by Mortgagor that
this assignment constitutes a present, absolute assignment and not an assignment
for additional security only. Such assignment to Mortgagee shall not be
construed to bind Mortgagee to the performance of any of the covenants,
conditions or provisions contained in any such Lease or otherwise impose any
obligation upon Mortgagee. Mortgagee shall have no responsibility on account of
this assignment for the control, care, maintenance, management or repair of the
Mortgaged Property, for any dangerous or defective condition of the Mortgaged
Property, or for any negligence in the management, upkeep, repair or control of
the Mortgaged Property.
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Mortgagor agrees to execute and deliver to Mortgagee such additional
instruments, in form and substance satisfactory to Mortgagee, as may hereafter
be requested by Mortgagee to further evidence and confirm such assignment.
Nevertheless, subject to the terms of this paragraph, Mortgagee grants to
Mortgagor a revocable license to collect all of the Rents and retain, use and
enjoy the same and otherwise exercise all rights of Mortgagor under any Lease,
in each case, subject to the terms hereof and of the Relevant Documents. Upon
an Event of Default, the license granted to Mortgagor herein shall immediately
and automatically be revoked, and Mortgagee shall immediately be entitled to
possession of all Rents, whether or not Mortgagee enters upon or takes control
of the Mortgaged Property, provided that if such Event of Default ceases to
exist, the license shall automatically be reinstated. In addition, during the
continuation of an Event of Default, Mortgagee may, either in person or by
agent, without bringing any action or proceeding, or by a receiver appointed by
a court, without the necessity of taking possession of the Mortgaged Property in
its own name, and in addition to and without limiting any of Mortgagee's rights
and remedies hereunder, under the Notes and any other Relevant Documents and as
otherwise available at law or in equity, (a) notify any lessee or other person
that the Leases have been assigned to Mortgagee and that all Rents are to be
paid directly to Mortgagee, whether or not Mortgagee has commenced or completed
foreclosure or taken possession of the Mortgaged Property; (b) settle,
compromise, release, extend the time of payment of, and make allowances,
adjustments and discounts of any Rents or other obligations in, to and under the
Leases; (c) demand, sue for or otherwise collect, receive, and enforce payment
of Rents, including those past-due and unpaid and other rights under the Leases,
prosecute any action or proceeding, and defend against any claim with respect to
the Rents and Leases; (d) enter upon, take possession of and operate the
Mortgaged Property; (e) lease all or any part of the Mortgaged Property; and/or
(f) perform any and all obligations of Mortgagor under the Leases and exercise
any and all rights of Mortgagor therein contained to the full extent of
Mortgagor's rights and obligations thereunder, with or without the bringing of
any action or the appointment of a receiver and without need for any other
authorization or other action by Mortgagee or Mortgagor. At Mortgagee's
request, Mortgagor shall deliver a copy of this assignment to each tenant under
a Lease and to each manager and managing agent or operator of the Mortgaged
Property. Mortgagor irrevocably directs any tenant, manager, managing agent, or
operator of the Property, without any requirement for notice to or consent by
Mortgagor, to comply with all demands of Mortgagee under this Section 8 and to
turn over to Mortgagee on demand all Rents which it receives. Mortgagor hereby
acknowledges and agrees that payment of any Rents by a person to Mortgagee as
hereinabove provided shall constitute payment by such person, as fully and with
the same effect as if such Rents had been paid to Mortgagor. Mortgagee is
hereby granted and assigned by Mortgagor the right, at its option, upon
revocation of the license granted herein, to enter upon the Mortgaged Property
in person or by agent, without bringing any action or proceeding, or by
court-appointed receiver to collect the Rents. Any Rents collected after the
revocation of the license shall be applied towards the payment of the
Obligations. Neither the enforcement of any of the remedies under this Section
8 nor any other remedies or security interests afforded to Mortgagee under the
Relevant Documents, at law or in equity shall cause Mortgagee to be deemed or
construed to be a Mortgagee in possession of the Mortgaged Property, to obligate
Mortgagee to lease the Mortgaged Property or attempt to do so, or to
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take any action, incur any expense, or perform or discharge any obligation, duty
or liability whatsoever under any of the Leases or otherwise. Mortgagor shall,
and hereby agrees to indemnify Mortgagee for, and to hold Mortgagee harmless
from and against, any and all claims, liability, expenses, losses or damages
which may or might be asserted against or incurred by Mortgagee solely by reason
of Mortgagee's status as an assignee pursuant to the assignment of Rents and
Leases contained herein, but excluding any claim (a) to the extent caused by
Mortgagee's gross negligence or willful misconduct, or (b) to the extent arising
solely from Mortgagee's actions after Mortgagee has taken possession of the
Mortgaged Property. Should Mortgagee incur any such claim, liability, expense,
loss or damage, the amount thereof, including all actual expenses and reasonable
fees of attorneys, shall constitute Obligations secured hereby, and Mortgagor
shall reimburse Mortgagee therefor immediately upon demand. Mortgagor agrees
that all Leases shall be subject to the prior written approval of Mortgagee,
such approval not to be unreasonably withheld.
9. MAINTENANCE OF MORTGAGED PROPERTY. Mortgagor shall cause the
Mortgaged Property to be maintained in a good and safe condition and repair
(subject to ordinary wear and tear), and shall otherwise operate and maintain
the Mortgaged Property in a manner consistent with the manner in which it
operates and maintains the other properties on which it operates similar
businesses ("SIMILAR PROPERTIES"). Except as otherwise permitted by the
Relevant Documents, the Improvements, the Fixtures and the equipment located on
the Land or the Improvements shall not be removed, demolished or materially
altered (except for normal replacement of equipment) without the consent of
Mortgagee which shall not unreasonably be withheld or delayed. Mortgagor shall
comply with all laws, orders and ordinances affecting the Mortgaged Property, or
the use thereof. Except to the extent that Mortgagee fails to turn over
insurance proceeds, if any, received by Mortgagee pursuant to SECTIONS 10 and 11
with respect to the Mortgaged Property to Mortgagor, Mortgagor shall promptly
repair, replace or rebuild any part of the Mortgaged Property that, following
the date hereof, becomes damaged, worn or dilapidated and Mortgagor shall
complete and pay for any structure at any time in the process of construction or
repair on the Land. Notwithstanding anything to the contrary contained herein,
Mortgagor hereby confirms its obligation to comply with all relevant Legal
Requirements, including Environmental Laws, with respect to the Mortgaged
Property. Mortgagor shall not initiate, join in, acquiesce in, or consent to
any change in any private restrictive covenant, zoning law or other public or
private restriction, limiting or defining the uses which may be made of the
Mortgaged Property or any part thereof, unless Mortgagor shall have received
Mortgagee's prior written consent, such consent not to be unreasonably withheld
or delayed. If under applicable zoning provisions the use of all or any portion
of the Mortgaged Property is or shall become a nonconforming use, Mortgagor will
not cause such nonconforming use to be discontinued or abandoned without the
express written consent of Mortgagee, such consent not to be unreasonably
withheld or delayed. Mortgagor shall not (i) change the use of the Land in any
material respect or (ii) permit or suffer to occur any waste on or to the
Mortgaged Property or to any portion thereof.
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10. INSURANCE.
(a) Mortgagor shall maintain casualty, liability and other policies
of insurance relating to the Mortgaged Property in form and substance, and with
insurers and coverages, reasonably satisfactory to Mortgagee and consistent with
insurance that it maintains on Similar Properties. Mortgagor shall keep the
Mortgaged Property insured against loss by flood if the Mortgaged Property is
located in an area identified by the Secretary of Housing and Urban Development
as an area having a special flood hazards and in which flood insurance has been
made available under the National Flood Insurance Act of 1968 (or any successor
act thereto). All policies of insurance to be furnished hereunder (i) shall have
standard non-contributory Mortgagee clauses attached to all policies in favor of
Mortgagee, without contribution, under a standard New York (or local equivalent)
Mortgagee clause naming Mortgagee as the party to which all payments made under
such insurance policies in excess of $150,000 should be paid, (ii) shall contain
an endorsement providing that neither Mortgagor nor Mortgagee nor any other
party shall be a co-insurer under said policies and shall contain a provision
requiring that the coverage evidenced thereby shall not be terminated or
materially modified without ten (10) days prior written notice to Mortgagee,
(iii) shall provide that no act or thing done by Mortgagor shall invalidate the
policy as against Mortgagee, and (iv) with respect to property insurance
policies, shall contain a waiver of subrogation against Mortgagee. Mortgagor
shall deliver certificates evidencing additional and renewal policies, together
with evidence of payment of premiums thereon, to Mortgagee, and in the case of
all insurance about to expire, shall deliver renewal policies or certificates
evidencing such policies not less than ten (10) days prior to their respective
dates of expiration.
(b) Mortgagor shall not take out separate insurance concurrent in
form or contributing in the event of loss with that required to be maintained
hereunder unless Mortgagee is included thereon under a standard,
non-contributory Mortgagee clause acceptable to Mortgagee. Mortgagor shall
promptly notify Mortgagee whenever any such separate insurance is taken out and
shall promptly deliver to Mortgagee the certificates evidencing the policy or
policies of such insurance.
(c) The insurance required by this Mortgage, at the option of
Mortgagor, may be effected by blanket and/or umbrella policies covering the
Mortgaged Property and other properties, provided, however, that in each case,
such insurance policies otherwise comply with the provisions of this Mortgage
and allocate to the Mortgaged Property, from time to time, the coverage
specified in this Mortgage without possibility of reduction or co-insurance by
reason of, or damage to, any other property named therein. If the insurance
required by this Mortgage shall be effected by any such blanket or umbrella
policies, Mortgagor shall furnish to Mortgagee certificates with respect to,
with schedules attached thereto showing the amount of the insurance provided
under such policies which is applicable to the Mortgaged Property.
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(d) If Mortgagor fails to maintain insurance in compliance with this
Section, Mortgagee may obtain such insurance and pay the premium therefor and
Mortgagor shall, on demand, reimburse Mortgagee for all expenses incurred in
connection therewith. Mortgagor shall deliver original certificates to Mortgagee
of all insurance policies maintained pursuant to this Section 10. Each property
insurance policy shall name Mortgagee as Mortgagee, and loss payee with respect
to all casualty coverage and each liability policy shall name Mortgagee as an
additional insured thereunder.
11. CASUALTY. (a) Mortgagor shall give Mortgagee prompt notice of
any loss or damage to the Mortgaged Property.
(b) In case of loss or damage to the Mortgaged Property covered by
any of the insurance policies described in Section 10 above, Mortgagee (or,
after entry of decree of foreclosure, the purchaser at the foreclosure sale or
decree creditor, as the case may be) is hereby authorized at its option either
(i) to settle and adjust any claim under such insurance policies without the
consent of Mortgagor or (ii) to allow Mortgagor to settle and adjust such claim
(either jointly with Mortgagee or by Mortgagor alone, at Mortgagee's
discretion); provided that in either case Mortgagee shall, and is hereby
authorized to, collect and receipt for any such insurance proceeds.
Notwithstanding anything in the preceding sentence to the contrary, Mortgagee
agrees that it will allow Mortgagor to settle and adjust any claims under the
insurance policies which are in an amount less than $150,000, per incident of
loss, up to an aggregate amount of no greater than $300,000. The expenses
incurred by Mortgagee in the adjustment and collection of insurance proceeds
shall be included in the Obligations, and shall be reimbursed to Mortgagee upon
demand or may be deducted by Mortgagee from said insurance proceeds prior to
another application thereof. Interest on such amount shall accrue at the
Default Rate, beginning ten (10) days after Mortgagor receives notice of a
request for payment of such amount from Mortgagee, until such amount, plus
interest, is paid in full.
(c) Mortgagee shall permit Mortgagor to apply the proceeds of
insurance policies received in connection with any casualty to pay for the cost
of restoring, repairing, replacing or rebuilding the loss or damage to the
Mortgaged Property resulting from the casualty ("RESTORATION") if: (i) there is
no Event of Default hereunder at the time of such application; (ii) restoration
can, in the reasonable judgment of Mortgagee, be completed prior to the maturity
of the Obligations; and (iii) restoration can, in the reasonable judgment of
Mortgagee, be effected within two (2) years after the date of such casualty and
in such a manner so that the Mortgaged Property will be of at least equal or
greater value to the value than the Mortgaged Property prior to such casualty.
Otherwise, Mortgagee may elect in its sole discretion to apply such proceeds
either (x) towards payment of the Obligations, notwithstanding the fact that the
Obligations, or a portion thereof, may not then be due and payable, or (y) to
pay for the cost of Restoration. In all events, disbursement of insurance
proceeds by Mortgagee (or at Mortgagee's election by a disbursing or escrow
agent who shall be selected by Mortgagee and whose fees shall be paid by
Mortgagor), to pay the cost of restoration shall require (i) evidence reasonably
satisfactory to Mortgagee of the estimated costs of Restoration, (ii) funds (or
assurances reasonably satisfactory to Mortgagee that such
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funds are available) sufficient in addition to the proceeds of insurance to
complete and fully pay for Restoration; and (iii) such architect's certificates,
waivers of lien, contractor's sworn statements, title insurance endorsements,
plats of surveys and such other evidences of cost, payment and performance as
Mortgagee may reasonably require and approve. Except to the extent Mortgagee
fails to turn over insurance proceeds, if any, received by Mortgagee hereunder
with respect to such casualty to Mortgagor, Mortgagor hereby covenants to
restore, repair, replace or rebuild the Improvements, to be of at least equal
value, and of substantially the same character as prior to such loss or damage,
all to be effected in accordance with plans, specifications and procedures to be
first submitted to and reasonably approved by Mortgagee, and Mortgagor shall pay
all costs of such restoring, repairing, replacing or rebuilding.
12. EMINENT DOMAIN. Mortgagor warrants, covenants and agrees that
should the Mortgaged Property, or any part thereof or interest therein, be taken
or damaged by reason of any public improvement or condemnation proceeding, or in
any other manner, or should Mortgagor receive any notice of other information
regarding such proceeding, Mortgagor shall give written notice thereof within
five (5) business days to Mortgagee. Without Mortgagee's prior consent,
Mortgagor (1) shall not agree to any compensation or award, and (2) shall not
take any action or fail to take any action which would cause the compensation to
be determined. Mortgagee shall be entitled to: (1) all compensation, awards and
other payments or relief therefor, (2) to commence, appear in and prosecute in
its own name any action or proceedings, and (3) to make any compromise or
settlement in connection with such taking or damage. Mortgagor authorizes
Mortgagee to collect and receive such awards and compensation, to give proper
receipts and acquittances therefor and in Mortgagee's discretion to apply the
same toward the payment of the Obligations, notwithstanding the fact that the
Obligations, or a portion thereof, may not then be due and payable, or to the
restoration of the Mortgaged Property in accordance with the provisions set
forth in the second-to-last sentence of Section 11(c) above. Mortgagor further
agrees to make, execute, and deliver to Mortgagee, at any time upon request,
free and clear of any encumbrance of any kind whatsoever, any and all further
assignments and other instruments deemed necessary by Mortgagee for the purpose
of validly and sufficiently assigning all compensations and awards made to
Mortgagor for any taking, either permanent or temporary, under any such
proceeding.
13. RELEASE OF MORTGAGE. Mortgagee agrees to promptly and
unconditionally release this Mortgage (subject to the provisions set forth in
Section 6(b)) as follows:
(a) in the event of a bona fide sale (other than a "sale leaseback"
or other similar financing transaction) of the Mortgaged Property to a third
party that is not affiliated with Mortgagor, provided that each of the following
conditions is satisfied: (i) neither Mortgagor nor any of its respective
affiliates continue to use or occupy the Mortgaged Property or any part thereof;
(ii) Mortgagor shall consult with Mortgagee prior to such sale and shall obtain
Mortgagee's prior written consent with respect to such sale and the sales price
(such consent not to be unreasonably withheld); and (iii) all of the proceeds of
such sale are
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applied towards repayment of the Obligations or otherwise applied in compliance
with the provisions of Section 6(b) hereof.
(b) in the event that Mortgagee is paid in full for all amounts owing
(or what shall or may become owing under the Relevant Documents) to Mortgagee by
Mortgagor and any of its former affiliated debtors, including the indefeasible
payment and satisfaction in full of the Obligations.
(c) on December 31, 2014 (or on such earlier date as permitted under
and pursuant to the provisions of Section 6(b) hereof); provided, however, that
if on such date, any amount secured by this Mortgage has not been indefeasibly
paid in full, then this Mortgage shall be deemed amended to extend the term
hereof until such obligations are so paid.
14. CHANGES IN THE LAWS REGARDING TAXATION. If any law is enacted or
adopted or amended after the date of this Mortgage which imposes a tax, either
directly or indirectly, on the Obligations or Mortgagee's interest in the
Mortgaged Property, Mortgagor will pay such tax, with interest and penalties
thereon, if any, PROVIDED, HOWEVER, that Mortgagor shall not be obligated to pay
any tax which is imposed on the net income of Mortgagee or franchise taxes or
doing business taxes imposed on Mortgagee. In the event that the payment of
such tax or interest and penalties by Mortgagor would be unlawful or taxable to
Mortgagee or unenforceable or provide the basis for a defense of usury, then in
any such event, Mortgagee shall have the option, by written notice of not less
than ninety (90) days, to declare the Obligations immediately due and payable.
15. NO CREDITS ON ACCOUNT OF THE OBLIGATIONS. (i) Mortgagor will not
claim or demand or be entitled to any credit or credits on account of the
Obligations for any part of the Impositions assessed against the Mortgaged
Property, or any part thereof, and (ii) no deduction shall otherwise be made or
claimed from the assessed value of the Mortgaged Property, or any part hereof,
for real estate tax purposes by reason of this Mortgage or the Obligations if
the effect of such deduction would impose on Mortgagee a tax, either directly or
indirectly, for which it otherwise would not have been liable.
16. DOCUMENTARY STAMPS. If at any time the United States of America,
any State thereof or any subdivision of any such State shall require revenue or
other stamps to be affixed to the Notes or this Mortgage, or impose any other
tax or charge on the same, Mortgagor will pay for the same, with interest and
penalties thereon, if any.
17. CONTROLLING AGREEMENT. It is expressly stipulated and agreed to
be the intent of Mortgagor and Mortgagee at all times to comply with applicable
state law or applicable United States federal law (to the extent that it permits
Mortgagee to contract for, charge, take, reserve, or receive a greater amount of
interest than under state law) and that this Section shall control every other
covenant and agreement in this Mortgage and the other Relevant Documents. If
the applicable law (state or federal) is ever judicially interpreted so as to
render usurious any amount called for under the Notes or under any of the other
Relevant
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Documents, or contracted for, charged, taken, reserved, or received with respect
to the Obligations, or if Mortgagee's exercise of the option to accelerate the
maturity of the Notes, or if any prepayment by Mortgagor results in Mortgagor
having paid any interest in excess of that permitted by applicable law, then it
is Mortgagor's and Mortgagee's express intent that all excess amounts
theretofore collected by Mortgagee shall be credited on the principal balance of
the Notes and all other Obligations (or, if the Notes and all other Obligations
have been or would thereby be paid in full, refunded to Mortgagor), and the
provisions of the Notes and the other Relevant Documents immediately be deemed
reformed and the amounts thereafter collectible hereunder and thereunder
reduced, without the necessity of the execution of any new documents, so as to
comply with the applicable law, but so as to permit the recovery of the fullest
amount otherwise called for hereunder or thereunder. All sums paid or agreed to
be paid to Mortgagee for the use, forbearance, or detention of the Obligations
shall, to the extent permitted by applicable law, be amortized, prorated,
allocated, and spread throughout the full stated term of the Obligations until
payment in full so that the rate or amount of interest on account of the
Obligations does not exceed the maximum rate of interest permitted by law from
time to time in effect and applicable to the Obligations for so long as the
Obligations are outstanding.
18. PERFORMANCE OF OTHER AGREEMENTS. Mortgagor shall observe and
perform in all respects the terms to be observed or performed by Mortgagor under
any agreement or recorded instrument affecting or pertaining to the Mortgaged
Property.
19. RIGHT TO PERFORM THE OBLIGATIONS. Subject to the terms of the
Relevant Documents, if any default exists, Mortgagee shall have the right, but
not the obligation, to cure such default in the name and on behalf of Mortgagor.
All sums advanced and expenses incurred at any time by Mortgagee under this
Section 19, or otherwise under this Mortgage or any of the other Relevant
Documents or applicable law (including, without limitation, the costs and
expenses of Mortgagee and its agents incurred in connection with the
preservation, collection and enforcement of this Mortgage or of the liens
created hereby), shall bear interest from the date that such sum is advanced or
expense incurred, to and including the date of reimbursement, computed at the
Default Rate (as defined in the Notes), and all such sums, together with
interest thereon, shall constitute additions to the Obligations and shall be
secured by this Mortgage and Mortgagor covenants and agrees to pay them to the
order of the Mortgagee promptly upon demand.
20. FURTHER ACTS, ETC. Mortgagor will, at the cost of Mortgagor, and
without expense to Mortgagee, do, execute, acknowledge and deliver all and every
such further acts, deeds, conveyances, mortgages, assignments, notices of
assignment, Uniform Commercial Code financing statements or continuation
statements, transfers and assurances as Mortgagee shall, from time to time,
reasonably require, for the better assuring, conveying, assigning, transferring,
and confirming unto Mortgagee the property and rights hereby mortgaged, given,
granted, bargained, sold, alienated, enfeoffed, conveyed, confirmed, warranted,
pledged, assigned and hypothecated (including, without limitation, the
assignment of leases and rents contained in Section 8 hereof) or intended now or
hereafter so to be, or
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which Mortgagor may be or may hereafter become bound to convey or assign to
Mortgagee, or for carrying out the intention or facilitating the performance of
the terms of this Mortgage or for filing, registering or recording this
Mortgage. Mortgagor, on demand, will execute and deliver and, Mortgagor hereby
authorizes Mortgagee to execute in the name of Mortgagor or without the
signature of Mortgagor to the extent Mortgagee may lawfully do so, one or more
financing statements, chattel mortgages or other instruments, to evidence more
effectively the security interest of Mortgagee in the Mortgaged Property.
Notwithstanding anything to the contrary contained herein, Mortgagor shall not
be obligated to execute, deliver, file or record any additional documents which
increase Mortgagor's obligations under this Mortgage or the Relevant Documents.
Mortgagor grants to Mortgagee an irrevocable power of attorney coupled with an
interest for the purpose of exercising the rights provided for in Section 19 and
this Section 20.
21. RECORDING OF MORTGAGE, ETC. Mortgagor forthwith upon the
execution and delivery of this Mortgage and thereafter, from time to time, will
cause this Mortgage, and any security instrument creating a lien or security
interest or evidencing the lien hereof upon the Mortgaged Property and each
instrument of further assurance to be filed, registered or recorded in such
manner and in such places as may be required by any present or future law in
order to publish notice of and fully to protect the lien or security interest
hereof upon, and the interest of Mortgagee in, the Mortgaged Property.
Mortgagor will pay all filing, registration or recording fees, the costs and
fees of local counsel for Mortgagee, including, without limitation, costs and
fees for local counsel review of the Mortgage and Subordination Agreement and
the preparation of opinion letters in connection therewith, and all expenses
incident to the execution and acknowledgment of this Mortgage (but not including
fees of Mortgagee's New York counsel in connection with the preparation of this
Mortgage), any deed of trust or mortgage supplemental hereto, any security
instrument with respect to the Mortgaged Property and any instrument of further
assurance, and all federal, state, county and municipal, taxes, duties, imposts,
assessments and charges arising out of or in connection with the execution and
delivery of this Mortgage, any deed of trust or mortgage supplemental hereto,
any security instrument with respect to the Mortgaged Property or any instrument
of further assurance (other than income or franchise taxes imposed on
Mortgagee), except where prohibited by law so to do. Mortgagor shall hold
harmless and indemnify Mortgagee, its successors and assigns, against any
liability incurred by reason of the imposition of any tax on the making and
recording of this Mortgage. Mortgagor shall pay all title costs and premiums in
connection with the ALTA lender's title insurance policy issued by Chicago Title
Insurance Company for the benefit of Mortgagee in connection with this Mortgage
(including payment for the cost of any property surveys ("Surveys") prepared in
connection therewith), which title insurance policy shall be in form and
substance satisfactory to Mortgagee containing such endorsements as Mortgagee
may reasonably request, including, without limitation, the deletion of any
creditor's rights exception and (to the extent available) a variable rate
endorsement; survey endorsement; comprehensive endorsement; first loss
endorsement; last dollar endorsement; tie-in endorsement; future advances
endorsement; access coverage; tax parcel coverage; contiguity (if applicable)
coverage; and such other endorsements as Mortgagee shall reasonably require. In
the event that any Survey with respect to the Mortgaged Property
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reveals any encumbrances, restrictions, building code or zoning violations or
other matters which in Mortgagee's reasonable judgment, materially impair
Mortgagee's first priority lien in the Mortgaged Property, Mortgagor agrees to
cooperate with Mortgagee in performing any acts reasonably requested by
Mortgagee to cause such encumbrances, restrictions, violations or other matters
to be removed or remedied as appropriate.
22. REPORTING REQUIREMENTS. Mortgagor agrees to give prompt notice
to Mortgagee of the insolvency or bankruptcy filing of Mortgagor. In addition,
Mortgagor will give notice to Mortgagee in writing not later than ten (10) days
after: (i) the occurrence of any Event of Default with respect to Mortgagor
hereunder, or (ii) notice to Mortgagor of any action, litigation or proceeding
instituted to recover possession of the Mortgaged Property from Mortgagor or for
any other purpose affecting this Mortgage or of any other action, litigation or
proceeding instituted against Mortgagor or judgment rendered against Mortgagor;
and such notice to Mortgagee shall include a true copy of any notice of default,
or if any action is then proceeding, copies of any pleadings and papers received
by Mortgagor.
23. EVENTS OF DEFAULT. The term "EVENT OF DEFAULT" as used herein
shall mean the occurrence or happening, at any time and from time to time, of
one or more of the following events:
(a) a default or event of default under any of the Notes (including,
without limitation, any event of default described in Section 3 of any of the
Notes), which remains uncured following the expiration of any applicable cure
periods;
(b) Mortgagor (i) shall fail to perform when due any payment
obligation under the terms of this Mortgage or the other Relevant Documents
within ten days after such amount becomes due, or (ii) shall be in violation of
any of the obligations or covenants contained herein or therein and such default
shall continued unremedied for a period of thirty (30) days, provided that if
such default is not readily susceptible of cure in such thirty (30) day period,
and provided that Mortgagor proceeds in a diligent manner to cure such default,
Mortgagor shall have such additional time to effect such cure as shall be
reasonably necessary to effect such cure;
(c) Failure by Mortgagor to maintain insurance and deliver evidence
thereof pursuant to Section 10; or
(d) a default under any other mortgage, deed of trust or other
security instrument covering the Mortgaged Property or a portion thereof which
remains uncured following the expiration of any applicable cure periods.
24. REMEDIES. (a) Upon the occurrence of any Event of Default,
Mortgagee may take such action permitted in law or at equity, without notice or
demand, as it deems advisable to protect and enforce its rights against
Mortgagor and in and to the Mortgaged
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Property, by Mortgagee itself or otherwise, including, but not limited to, the
following actions, each of which may be pursued concurrently or otherwise, at
such time and in such order as Mortgagee may determine, in its sole discretion,
without impairing or otherwise affecting the other rights and remedies of
Mortgagee:
(i) declare the entire principal amount of the indebtedness and
Obligations secured hereby with interest accrued thereon to be
immediately due and payable;
(ii) institute a proceeding or proceedings, judicial or
nonjudicial, by advertisement or otherwise, for the complete
foreclosure of this Mortgage in which case the Mortgaged Property or
any interest therein may be sold for cash or upon credit in one or
more parcels or in several interests or portions and in any order or
manner in accordance with the laws of the jurisdiction in which such
Mortgaged Property is located;
(iii) with or without entry, to the extent permitted, and pursuant
to the procedures provided by, applicable law, institute proceedings
for the foreclosure of this Mortgage for the Obligations then due and
payable subject to the continuing lien of this Mortgage, in accordance
with the laws of the jurisdiction in which such Mortgaged Property is
located, for the balance of the Obligations not then due;
(iv) sell for cash or upon credit the Mortgaged Property or any
part thereof and all estate, claim, demand, right, title and interest
of Mortgagor therein and rights of redemption thereof, pursuant to
power of sale or otherwise, at one or more sales, as an entirety or in
parcels, at such time and place, upon such terms and after such notice
thereof as may be required or permitted by the laws of the
jurisdiction in which such Mortgaged Property is located;
(v) institute an action, suit or proceeding in equity for the
specific performance of any covenant, condition or agreement contained
herein or in the other Relevant Documents;
(vi) recover judgment on the Notes either before, during or after
any proceedings for the enforcement of this Mortgage;
(vii) prior to, concurrently with, or subsequent to the institution
of foreclosure proceedings, apply for the appointment of a trustee,
receiver, liquidator or conservator of the Mortgaged Property, as a
matter of strict right, without notice and without regard for the
adequacy of the security for the Obligations or the interest of the
Mortgagor therein and without regard for the solvency of the Mortgagor
or of any person, firm or other entity liable for the payment of the
Obligations, and Mortgagor hereby consents to such appointment;
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(viii) prior to, concurrently with or subsequent to the institution
of foreclosure proceedings, enforce Mortgagee's interest in the Leases
and Rents and enter into or upon the Mortgaged Property and take
exclusive possession thereof, either personally or by its agents,
nominees or attorneys and dispossess Mortgagor and its agents and
servants therefrom, and thereupon Mortgagee may (whether or not a
receiver has been appointed) as attorney-in-fact or agent of
Mortgagor, or in its own name and under the powers herein granted,(A)
use, operate, manage, control, insure, maintain, repair, restore and
otherwise deal with all and every part of the Mortgaged Property and
conduct the business thereat; (B) complete any construction on the
Mortgaged Property in such manner and form as Mortgagee deems
advisable; (C) make alterations, additions, renewals, replacements and
improvements to or on the Mortgaged Property; (D) exercise all rights
and powers of Mortgagor with respect to the Mortgaged Property,
whether in the name of Mortgagor or otherwise (including, without
limitation, the right to make, cancel, enforce or modify Leases,
obtain and evict tenants, and demand, sue for, collect and receive all
earnings, revenues, rents, issues, profits and other income of the
Mortgaged Property and every part thereof); and (E) apply the receipts
from the Mortgaged Property to the payment of the Obligations, after
deducting therefrom all reasonable expenses (including, without
limitation, reasonable attorneys' fees) incurred in connection with
the aforesaid operations and all amounts necessary to pay the taxes,
assessments, insurance and other charges in connection with the
Mortgaged Property, it being agreed that should Mortgagee incur any
liability, loss or damage in the defense of any claims or demands, the
amount thereof, including costs, expenses and reasonable attorneys'
fees shall be secured hereby, and Mortgagor shall reimburse Mortgagee
therefor immediately upon demand;
(ix) require Mortgagor to pay monthly in advance to Mortgagee, or
any receiver appointed to collect the Rents, the fair and reasonable
rental value for the use and occupation of any portion of the
Mortgaged Property occupied by Mortgagor and require Mortgagor to
vacate and surrender possession to Mortgagee of the Mortgaged Property
or to such receiver and, in default thereof, evict Mortgagor by
summary proceedings or otherwise; and
(x) pursue such other rights and remedies as may be available
under the Relevant Documents or otherwise at law or in equity or under
the Uniform Commercial Code including the right to establish a lock
box for all Rents and other receivables of Mortgagor relating to the
Mortgaged Property.
In the event of a sale, by foreclosure or otherwise, of less than all of the
Mortgaged Property, this Mortgage shall continue as a lien on the remaining
portions of the Mortgaged Property.
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The proceeds of any sale made under or by virtue of this Section 24,
together with any other sums which then may be held by Mortgagee under this
Mortgage, whether under the provisions of this Section or otherwise, shall be
applied by Mortgagee in the following order of priority: first, on account of
all reasonable costs and expenses incident to the foreclosure proceedings,
including all such items as are mentioned in this Section 24; second, all other
items which under the terms hereof constitute secured indebtedness, which are
any amounts due under this Mortgage, or under the other Relevant Documents
(including any amounts required to be escrowed pursuant to Section 6(b)); third,
any surplus to Mortgagor, its successors or assigns, as their rights may appear.
(b) Upon any sale made under or by virtue of this Section 24,
whether made under the power of sale herein granted or under or by virtue of
judicial proceedings or of a judgment or decree of foreclosure and sale,
Mortgagee may bid for and acquire the Mortgaged Property or any part thereof and
in lieu of paying cash therefor may make settlement for the purchase price by
crediting upon the Obligations the net sales price after deducting therefrom the
expenses of the sale and costs of the action and any other sums which Mortgagee
is authorized to deduct under this Mortgage.
(c) No recovery of any judgment by Mortgagee and no levy of an
execution under any judgment upon the Mortgaged Property or upon any other
property of Mortgagor shall affect in any manner or to any extent the lien of
this Mortgage upon the Mortgaged Property or any part thereof, or any liens,
rights, powers or remedies of Mortgagee hereunder, but such liens, rights,
powers and remedies of Mortgagee shall continue unimpaired as before.
(d) Mortgagee may adjourn, terminate or rescind any proceeding or
other action brought in connection with its exercise of the remedies provided in
this Section 24 at any time before the conclusion thereof, as determined in
Mortgagee's sole discretion and without prejudice to Mortgagee.
(e) Mortgagee may resort to any remedies and the security given by
this Mortgage or the other Relevant Documents in whole or in part, and in such
portions and in such order as determined by Mortgagee's sole discretion. No
such action shall in any way be considered a waiver of any rights, benefits or
remedies evidenced or provided by this Mortgage or the other Relevant Documents.
The failure of Mortgagee to exercise any right, remedy or option provided in
this Mortgage or the other Relevant Documents shall not be deemed a waiver of
such right, remedy or option or of any covenant or obligation secured by this
Mortgage or the other Relevant Documents. Subject to the provisions of the
Relevant Documents, no acceptance by Mortgagee of any payment after the
occurrence of any Event of Default and no payment by Mortgagee of any obligation
for which Mortgagor is liable hereunder shall be deemed to waive or cure any
Event of Default with respect to Mortgagor, or Mortgagor's liability to pay such
obligation. No sale of all or any portion of the Mortgaged Property, no
forbearance on the part of Mortgagee and no extension of time for the payment of
the whole or any portion of the Obligations or any other indulgence given by
Mortgagee to
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Mortgagor, shall operate to release or in any manner affect the interest of
Mortgagee in the remaining Mortgaged Property or the liability of Mortgagor to
pay the Obligations. No waiver by Mortgagee shall be effective, unless it is in
writing and then only to the extent specifically stated.
(f) The interests and rights of Mortgagee under this Mortgage and
the other Relevant Documents, and the liens and security interests created and
evidenced by this Mortgage and the other Relevant Documents, shall not be
impaired by any indulgence, including (i) any renewal, extension or modification
which Mortgagee may grant with respect to any of the Obligations, (ii) any
surrender, compromise, release, renewal, extension, exchange or substitution
which Mortgagee may grant with respect to the Mortgaged Property or any portion
thereof; or (iii) any release or indulgence granted to any maker, endorser,
guarantor or surety of any of the Obligations.
(g) Upon the occurrence of any Event of Default under Section 23,
in any suit to foreclose the lien hereof or enforce any other remedy of
Mortgagee under this Mortgage, there shall be allowed and included as additional
indebtedness in the decree for sale or other judgment or decree all reasonable
expenditures and expenses which may be paid or incurred by or on behalf of
Mortgagee for attorneys' fees, appraiser's fees, outlays for documentary and
expert evidence, stenographers' charges, publication costs, and costs (which may
be estimated as to items to be expended after entry of the decree) of procuring
all such abstracts of title, title searches and examinations, title insurance
policies, Torrens certificates, and similar data and assurances with respect to
title as Mortgagee may deem reasonably necessary either to prosecute such suit
or to evidence to bidders at any sale which may be had pursuant to such decree
the true condition of the title to or the value of the Mortgaged Property. All
such reasonable expenditures and expenses which Mortgagee may incur as permitted
by this Section for the protection of the Mortgaged Property and the maintenance
of the lien of this Mortgage, including, but not limited to, the fees and
out-of-pocket disbursements of any attorney employed by Mortgagee in any
litigation or proceeding affecting this Mortgage, including, but not limited to,
bankruptcy proceedings or preparations for the commencement or defense of any
proceeding or threatened suit or proceeding, shall be immediately due and
payable by Mortgagor and shall be secured by this Mortgage.
25. RIGHT OF ACCESS. Mortgagor shall permit agents,
representatives and employees of Mortgagee to (i) inspect the Mortgaged Property
or any part thereof, PROVIDED that such inspection does not materially interfere
with the tenants of the Mortgaged Property or violate the terms of any Lease,
(ii) to examine and make abstracts from any of Mortgagor's books and records and
(iii) to discuss the business, operations, properties and financial and other
condition of Mortgagor with officers of Mortgagor and with its independent
certified public accountants, at such reasonable times as may be requested by
Mortgagee upon reasonable advance notice.
26. SECURITY AGREEMENT. This Mortgage is both a real property
mortgage and a "security agreement" within the meaning of the Uniform Commercial
Code. The
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Mortgaged Property includes both real and personal property and all other rights
and interests, whether tangible or intangible in nature, of Mortgagor in the
Mortgaged Property. Mortgagor by executing and delivering this Mortgage has
granted and hereby grants to Mortgagee, as security for the Obligations, a
security interest in the Mortgaged Property to the full extent that the
Mortgaged Property may be subject to the Uniform Commercial Code (said portion
of the Mortgaged Property so subject to the Uniform Commercial Code being called
in this paragraph the "COLLATERAL"). Mortgagor hereby agrees with Mortgagee to
execute and deliver to Mortgagee, in form and substance satisfactory to
Mortgagee, such financing statements and such further assurances as Mortgagee
may from time to time, reasonably consider necessary to create, perfect, and
preserve Mortgagee's security interest herein granted. All or part of the
Mortgaged Property is or is to become "fixtures" as defined in the Uniform
Commercial Code, and this Mortgage, upon being filed for record in the real
estate records of the city or county wherein such fixtures are situated, shall
also constitute a "fixture filing" for the purposes of the Uniform Commercial
Code upon such of the Mortgaged Property that is or may become fixtures.
Information concerning the security interest herein granted may be obtained from
the parties at the addresses of the parties set forth in the first paragraph of
this Mortgage. Mortgagor's chief executive office and principal place of
business is the Mortgagor's address set forth in the first paragraph of this
Mortgage, and the place where Mortgagor's books and records in respect of where
the Mortgaged Property is located are kept is the address of Mortgagor set forth
in the first paragraph of this Mortgage. If an Event of Default shall occur
which shall remain uncured, Mortgagee, in addition to any other rights and
remedies which it may have, shall have and may exercise immediately and without
demand, any and all rights and remedies granted to a secured party upon default
under the Uniform Commercial Code, (including, without limitation, to the extent
permitted by law, the right to take possession of the Collateral or any part
thereof, and to take such other measures as Mortgagee may deem necessary for the
care, protection and preservation of the Collateral). Upon request or demand of
Mortgagee, Mortgagor shall at its expense assemble the Collateral and make it
available to Mortgagee at a convenient place acceptable to Mortgagee. Mortgagor
shall pay to Mortgagee on demand therefor any and all reasonable expenses
(including, without limitation, reasonable legal expenses and attorneys' fees)
incurred or paid by Mortgagee in protecting the interest in the Collateral and
in enforcing the rights hereunder with respect to the Collateral. Any notice of
sale, disposition or other intended action by Mortgagee with respect to the
Collateral sent to Mortgagor at least ten (10) business days prior to such
action or such notice as is otherwise required by law or the Relevant Documents,
shall constitute commercially reasonable notice to Mortgagor. The proceeds of
any disposition of the Collateral, or any part thereof, may be applied by
Mortgagee to the payment of the Obligations in such priority and proportions as
Mortgagee shall determine in its sole discretion. In the event of any change in
name, identity or structure of Mortgagor, Mortgagor shall notify Mortgagee
thereof and, promptly after request, shall execute, file and record such Uniform
Commercial Code forms as are necessary to maintain the priority of Mortgagee's
lien upon and security interest in the Collateral, and shall pay all expenses
and fees in connection with the filing and recording thereof. If Mortgagee
shall require the filing or recording of additional Uniform Commercial Code
forms or continuation statements, Mortgagor shall, promptly after request,
execute, file and record such Uniform Commercial Code forms or
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continuation statements as Mortgagee shall deem necessary, and shall pay all
expenses and fees in connection with the filing and recording thereof, it being
understood and agreed, however, that no such additional documents shall
materially increase Mortgagor's obligations under this Mortgage or the other
Relevant Documents. Mortgagor hereby irrevocably appoints Mortgagee as its
attorney-in-fact, coupled with an interest, to file with the appropriate public
office on its behalf any UCC financing statements (or related documents) signed
only by Mortgagee, as secured party, in connection with the Collateral covered
by this Mortgage, such appointment to terminate upon the release of this
Mortgage.
27. ACTIONS AND PROCEEDINGS. Mortgagee has the right to appear in
and defend any action or proceeding brought with respect to the Mortgaged
Property and to bring any action or proceeding, in the name and on behalf of
Mortgagor, which Mortgagee, in its reasonable discretion, decides should be
brought to protect its interest under this Mortgage or in the Mortgaged
Property. Subject to the foregoing, Mortgagor shall appear in and contest any
action or proceeding purporting to affect the security hereof and shall pay all
reasonable costs and expenses including cost of evidence of title and attorney's
fees, in any such action or proceeding in which Mortgagee may appear. Mortgagee
shall, at its option, be subrogated to the lien of any mortgage or other
security instrument discharged in whole or in part by the Obligations, and any
such subrogation rights shall constitute additional security for the payment of
the Obligations.
28. WAIVER OF SETOFF AND COUNTERCLAIM. Except as may be permitted
under the Relevant Documents, all amounts due under this Mortgage, the Notes and
the other Relevant Documents shall be payable without setoff or counterclaim
whatsoever.
29. LIENS. Mortgagor warrants, covenants and agrees to pay and
promptly discharge, at Mortgagor's cost and expense, all taxes, assessments and
governmental charges levied upon it, its income and assets as and when such
taxes, assessments and charges are due and payable (including, without
limitation, all Impositions), as well as all lawful claims for labor materials
and supplies or otherwise which could become a lien, and all liens, encumbrances
and charges upon the Mortgaged Property, or any part thereof or interest
therein; provided that the existence of any mechanic's, laborer's,
materialman's, supplier's or vendor's lien or right thereto shall not constitute
a violation of this Section if payment is not yet due under the contract which
is the foundation thereof. Notwithstanding the foregoing, Mortgagor shall not
be in default for failure to pay or discharge Impositions or mechanic's or
materialman's or similar lien asserted against the Mortgaged Property if, and so
long as, (a) Mortgagor shall have notified Mortgagee of same within seven (7)
days of obtaining knowledge thereof; (b) Mortgagor shall diligently and in good
faith contest the same by appropriate legal proceedings which shall operate to
prevent the enforcement or collection of the same and the sale of the Mortgaged
Property or any part thereof, to satisfy the same; (c) unless funds are
otherwise reserved, Mortgagor shall furnish to Mortgagee such security as
Mortgagee may reasonably request to insure payment of such Impositions and to
secure and indemnify Mortgagee against any cost, expense, loss or damage in
connection with such contest or postponement of payment,; (d) Mortgagor shall
timely upon final determination
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thereof pay the amount of any such Impositions, claim, fine or penalty so
determined, together with all costs, interest and penalties which may be payable
in connection therewith; (e) the failure to pay the Impositions, or mechanic's
or materialman's or similar lien claim does not constitute a default under any
other deed of trust, mortgage or security interest covering or affecting any
part of the Mortgaged Property; and (f) notwithstanding the foregoing, Mortgagor
shall immediately upon request of Mortgagee pay (and if Mortgagor shall fail so
to do, Mortgagee may, but shall not be required to, pay or cause to be
discharged or bonded against) any such Impositions, or claim notwithstanding
such contest, if in the reasonable opinion of Mortgagee, the Mortgaged Property
or any part thereof or interest therein may be in imminent danger of being sold,
forfeited, foreclosed, terminated, canceled or lost.
30. RECOVERY OF SUMS REQUIRED TO BE PAID. Mortgagee shall have
the right from time to time to take action to recover any sum or sums which
constitute a part of the Obligations as the same become due and owing, without
regard to whether or not the balance of the Obligations shall be due, and
without prejudice to the right of Mortgagee thereafter to bring an action of
foreclosure, or any other action, for a default or defaults by Mortgagor
existing at the time such earlier action was commenced.
31. MARSHALING, WAIVER OF REDEMPTION AND OTHER MATTERS. Mortgagor
hereby waives, to the extent permitted by law, the benefit of all appraisement,
valuation, stay, extension, reinstatement, moratorium and redemption laws now or
hereafter in force and all rights of marshaling in the event of any sale
hereunder of the Mortgaged Property or any part thereof or any interest therein.
Further, Mortgagor hereby expressly waives any and all rights of redemption from
sale under any order or decree of foreclosure of this Mortgage on behalf of
Mortgagor, and on behalf of each and every person acquiring any interest in or
title to the Mortgaged Property subsequent to the date of this Mortgage and on
behalf of all persons to the extent permitted by applicable law.
32. NOTICE. Any notice which either party hereto may desire or be
required to give to the other party shall be in writing and delivered by: (x) a
commercial courier or messenger service or (y) by U.S. registered or certified
mail with return receipt requested. Notice by commercial messenger or courier
service will be deemed to have been given on the day when delivered before 4:00
p.m. on a business day in the city in which notice is delivered, provided that
payment for the cost of delivery is not requested of the recipient. Notice by
mail shall be given by registered or certified U.S. Mail, return receipt
requested. Delivery of notice by commercial messenger or courier service or
mail shall be assumed if acceptance of delivery is refused. Notice may be given
by fax but will only be treated as delivered hereunder if: (x) sent between the
hours of 9:00 a.m. and 5:00 p.m. (based on local time at the destination); and
(y) receipt is acknowledged by fax and delivery will be deemed to have been
given on the date the fax acknowledgment is sent. Notices shall be delivered as
follows
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or at such other place as either party hereto may by notice in writing (given in
accordance with this Section 32) designate:
To Mortgagor: Discovery Zone, Inc.
One Corporate Center
110 East Broward Boulevard
Fort Lauderdale, Florida 33301
Attn: President
Telecopy Number: (954) 627-2670
To Mortgagee: McDonald's Corporation
One McDonald's Plaza
Oak Brook, IL 60523
Attn: General Counsel
Telecopy Number: (630) 623-3000
33. SOLE DISCRETION OF MORTGAGEE. Wherever pursuant to this
Mortgage, Mortgagee exercises any right given to it to approve or disapprove, or
any arrangement or term is to be satisfactory to Mortgagee, the decision of
Mortgagee to approve or disapprove or to decide that arrangements or terms are
satisfactory or not satisfactory shall be in the sole discretion of Mortgagee
and shall be final and conclusive, except as may be otherwise expressly and
specifically provided herein.
34. NON-WAIVER. The failure of Mortgagee to insist upon strict
performance of any term hereof shall not be deemed to be a waiver of any term of
this Mortgage. Mortgagor shall not be relieved of Mortgagor's Obligations
hereunder by reason of (a) the failure of Mortgagee to comply with any request
of Mortgagor to take any action to foreclose this Mortgage or otherwise enforce
any of the provisions hereof or of the other Relevant Documents, (b) the
release, regardless of consideration, of the whole or any part of the Mortgaged
Property, or of any person liable for the Obligations or any portion thereof, or
(c) any agreement or stipulation by Mortgagee extending the time of payment or
otherwise modifying or supplementing the terms of this Mortgage or the other
Relevant Documents. Mortgagee may resort for the payment of the Obligations to
any other security held by Mortgagee in such order and manner as Mortgagee, in
its discretion, may elect. Mortgagee may take action to recover the
Obligations, or any portion thereof, or to enforce any covenant hereof without
prejudice to the right of Mortgagee thereafter to foreclosure this Mortgage.
The rights and remedies of Mortgagee under this Mortgage shall be separate,
distinct and cumulative and none shall be given effect to the exclusion of the
others. No act of Mortgagee shall be construed as an election to proceed under
any one provision herein to the exclusion of any other provision. Mortgagee
shall not be limited exclusively to the rights and remedies herein stated but
shall be entitled to every right and remedy now or hereafter afforded at law or
in equity.
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35. NO ORAL CHANGE. This Mortgage and the other Relevant
Documents constitute the final expression of the entire agreement among the
parties pertaining to the subject matter hereof and thereof and supersede all
prior and contemporaneous agreements, understanding, representations or other
arrangements, whether express or implied, written or oral, of the parties in
connection herewith or therewith except to the extent expressly incorporated or
specifically referred to herein or therein. This Mortgage, and any provisions
hereof, may not be modified, amended, waived, extended, changed, discharged or
terminated orally or by any act or failure to act on the part of Mortgagor or
Mortgagee, but only by an agreement in writing signed by the party against whom
enforcement of any modification, amendment, waiver, extension, change, discharge
or termination is sought.
36. SUCCESSORS AND ASSIGNS. Subject to the provisions hereof
requiring Mortgagee's consent to any transfer of the Mortgaged Property, this
Mortgage shall be binding upon and inure to the benefit of Mortgagor and
Mortgagee and their respective permitted successors and assigns forever.
37. SEVERABILITY. If any term, covenant or condition of this
Mortgage or the Relevant Documents is held to be invalid, illegal or
unenforceable in any respect, this Mortgage and any such other Relevant Document
shall be construed without such provision.
38. HEADINGS, ETC. The headings and captions of various
paragraphs of this Mortgage are for convenience of reference only and are not to
be construed as defining or limiting, in any way, the scope or intent of the
provisions hereof.
39. DUPLICATE ORIGINALS. This Mortgage may be executed in any
number of duplicate originals and each such duplicate original shall be deemed
to be an original.
40. DEFINITIONS. Unless the context clearly indicates a contrary
intent or unless otherwise specifically provided herein, words used in this
Mortgage may be used interchangeably in singular or plural form and the word
"Mortgagor" shall mean "each Mortgagor and any subsequent owner or owners of the
Mortgaged Property or any part thereof or any interest therein," the word
"Mortgagee" shall mean "Mortgagee and any subsequent holder(s) of the Notes,"
the word "person" shall include an individual, corporation, partnership, trust,
unincorporated association, government, governmental authority, and any other
entity, and the words "Mortgaged Property" shall include any portion of the
Mortgaged Property and any interest therein and the words "attorneys' fees"
shall include any and all attorneys' fees, paralegal and law clerk fees
(including, without limitation, fees at the pre-trial, trial and appellate
levels incurred or paid by Mortgagee in protecting its interest in the Mortgaged
Property and Collateral and enforcing its rights hereunder and all such fees
incurred in connection with any bankruptcy or insolvency proceedings). Whenever
the context may require, any pronouns used herein shall include the
corresponding masculine, feminine or neuter forms, and the singular form of
nouns and pronouns shall include the plural and vice versa.
30
<PAGE>
41. HOMESTEAD. Mortgagor hereby waives and renounces all
homestead and exemption rights provided by the constitution and the laws of the
United States and of any state, in and to the Land as against the collection of
the Obligations, or any part hereof.
42. ASSIGNMENTS. Consistent with and subject to the applicable
provisions of the Relevant Documents, Mortgagee shall have the right to assign
or transfer its rights under this Mortgage without limitation. Any Mortgagee or
transferee shall be entitled to all the benefits afforded Mortgagee under this
Mortgage.
43. WAIVER OF JURY TRIAL. TO THE MAXIMUM EXTENT PERMITTED BY
APPLICABLE LAW, EACH PARTY HERETO HEREBY AGREES NOT TO ELECT A TRIAL BY JURY OF
ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY JURY FULLY
TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO
THE NOTES, THIS MORTGAGE, OR THE OTHER RELEVANT DOCUMENTS, OR ANY CLAIM,
COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH. THIS WAIVER OF
RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY SUCH PARTY, AND IS
INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE
RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE. MORTGAGEE IS HEREBY AUTHORIZED
TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF
THIS WAIVER BY MORTGAGOR.
44. CONSENT TO JURISDICTION. MORTGAGOR AND MORTGAGEE HERETO
CONSENT FOR THEMSELVES AND IN RESPECT OF THEIR PROPERTIES, GENERALLY,
UNCONDITIONALLY AND IRREVOCABLY, TO THE NONEXCLUSIVE JURISDICTION OF THE FEDERAL
AND STATE COURTS IN THE STATE OF NEW YORK WITH RESPECT TO ANY PROCEEDING
RELATING TO ANY MATTER, CLAIM OR DISPUTE ARISING UNDER THE RELEVANT DOCUMENTS OR
THE TRANSACTIONS CONTEMPLATED THEREBY. MORTGAGOR FURTHER CONSENTS, GENERALLY,
UNCONDITIONALLY AND IRREVOCABLY, TO THE NONEXCLUSIVE JURISDICTION OF THE STATE
AND FEDERAL COURTS OF THE STATE IN WHICH ANY OF THE COLLATERAL IS LOCATED IN
RESPECT OF ANY PROCEEDING RELATING TO ANY MATTER, CLAIM OR DISPUTE ARISING WITH
RESPECT TO SUCH COLLATERAL. MORTGAGOR FURTHER IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS, GENERALLY, UNCONDITIONALLY AND IRREVOCABLY, AT THE ADDRESSES
SET FORTH IN THE FIRST PARAGRAPH HEREOF IN CONNECTION WITH ANY OF THE AFORESAID
PROCEEDINGS IN ACCORDANCE WITH THE RULES APPLICABLE TO SUCH PROCEEDINGS. TO THE
EXTENT PERMITTED BY APPLICABLE LAW, MORTGAGOR HEREBY IRREVOCABLY WAIVES ANY
OBJECTION WHICH IT MAY NOW HAVE OR HAVE IN THE FUTURE TO THE LAYING OF VENUE IN
RESPECT OF ANY OF THE AFORESAID PROCEEDINGS BROUGHT IN THE COURTS REFERRED TO
ABOVE AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH
31
<PAGE>
ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. NOTHING HEREIN SHALL AFFECT THE RIGHT OF MORTGAGEE TO SERVE
PROCESS IN ANY MANNER PERMITTED BY LAW OR TO COMMENCE PROCEEDINGS OR OTHERWISE
PROCEED AGAINST MORTGAGOR IN ANY JURISDICTION.
45. GOVERNING LAW. This Mortgage shall be governed by and
construed in accordance with the laws of the State of New York including,
without limitation, Section 5-1401 of the General Obligations Law, but otherwise
without regard to conflict of law principles; PROVIDED, HOWEVER, that with
respect to the creation, attachment, perfection, priority and procedures
relating to the enforcement of the liens and security interests created by or
pursuant to this Mortgage and relating to real property, this Mortgage shall be
governed by and construed in accordance with the laws of the state in which the
Land is located.
46. LIEN ABSOLUTE, MULTI-SITE REAL ESTATE AND MULTIPLE COLLATERAL
TRANSACTION. Mortgagor acknowledges that this Mortgage and a number of other
Relevant Documents and those documents required by the Relevant Documents
together secure the Obligations. Mortgagor agrees that the lien of this
Mortgage and all obligations of the Mortgagor hereunder shall be absolute and
unconditional and shall not in any manner be affected or impaired by:
(a) any lack of validity or enforceability of the Notes or any other
Relevant Document, any agreement with respect to any of the Obligations or any
other agreement or instrument relating to any of the foregoing;
(b) any acceptance by Mortgagee of any security for or guarantees of
any of the indebtedness hereby secured;
(c) any failure, neglect or omission on the part of Mortgagee to
realize upon or protect any of the indebtedness hereby secured or any of the
collateral security therefor, including the Relevant Documents;
(d) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations;
(e) any release (except as to the property or obligation released),
sale, pledge, surrender, compromise, settlement, nonperfection, renewal
extension, indulgence, alteration, exchange, modification or disposition of any
of the Obligations hereby secured or of any of the collateral security therefor;
(f) any amendment or waiver of or any consent to any departure from
the Notes or any other Relevant Documents or of any guaranty thereof (except to
the extent of such amendment, waiver or consent in writing by Mortgagee), if
any, and Mortgagee may in its discretion foreclose, exercise any power of sale,
or exercise any other remedy available to it
32
<PAGE>
under any or all of the Relevant Documents without first exercising or enforcing
any of its rights and remedies hereunder; and
(g) any exercise of the rights or remedies of Mortgagee hereunder or
under any or all of the Relevant Documents.
Mortgagor specifically consents and agrees that Mortgagee may exercise its
rights and remedies hereunder and under the other Relevant Documents separately
or concurrently and in any order that Mortgagee may deem appropriate.
47. FUTURE ADVANCES. This Mortgage shall secure not only existing
indebtedness, but also such future advances, whether such advances are
obligatory or are to be made at the option of Mortgagee, or otherwise, as are
made by Mortgagee to Mortgagor after the date hereof, to the same extent as if
such future advances were made on the date of the execution of this Mortgage.
Nothing in this Mortgage shall be deemed an obligation on the part of the
Mortgagee to make any future advances.
48. STATE SPECIFIC PROVISIONS. The provisions of Exhibit B are
hereby incorporated by reference as though set forth in full herein.
49. NO MERGER OF ESTATES. It is the intention and agreement of
Mortgagor and Mortgagee that there shall be no merger of any leasehold estate in
the Mortgaged Property with the fee interest in the Mortgaged Property or any
other estate or interest in the Mortgaged Property, and there shall be no merger
of this Mortgage and any estate in the Mortgaged Property, by reason of the fact
that the same person may own or hold (a) any leasehold interest in the Mortgaged
Property, and/or (b) this Mortgage, and/or (c) the fee interest in the Mortgaged
Property or any other estate or interest in the Mortgaged Property.
50. SUBORDINATE LIEN. Notwithstanding anything to the contrary
contained herein, Mortgagor shall be permitted to grant a subordinate lien on
the Mortgaged Property in favor of State Street Bank and Trust Company, solely
in its capacity as trustee and collateral agent under and pursuant to the
Indenture (as hereinafter defined) (the "SUBORDINATED CREDITOR") as security for
the obligations of Mortgagor under that certain Indenture between Mortgagor and
the Subordinated Creditor dated as of July 22, 1997 (the "INDENTURE"), provided
that such lien in favor of the Subordinated Creditor is junior, subject and
subordinate to the lien of this Mortgage in accordance with and pursuant to the
terms and conditions set forth in that certain Subordination Agreement dated as
of the date hereof between Mortgagee and the Subordinated Creditor with respect
to the Mortgaged Property (the "SUBORDINATION AGREEMENT"), and provided,
further, that any event which gives the Subordinated Creditor the right to
accelerate the obligations secured by such subordinate lien shall automatically
constitute an Event of Default hereunder.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE AND NOTARY PAGES FOLLOW.]
33
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Mortgagor has executed this instrument as of the day and year first above
written.
MORTGAGOR:
DISCOVERY ZONE, INC.,
a Delaware corporation, as
successor in interest to LEAPS &
BOUNDS, INC.
By: /s/ Robert Rooney
-----------------------
Name: Robert Rooney
Its: Sr. V.P.
<PAGE>
STATE OF NEW YORK )
COUNTY OF WESTCHESTER)
On this 28 day of July, 1997, before me, the undersigned, a Notary
Public in and for the State of New York, personally appeared Robert Rooney, to
me personally known, who, being by me duly sworn, did say that [s]he is the Sr.
V.P. of Discovery Zone, Inc., a Delaware corporation; that the instrument was
signed on behalf of the corporation, by authority of the corporation's Board of
Directors; and that Robert Rooney as that officer acknowledged execution of the
instrument to be the voluntary act and deed of the corporation by it and by the
officer voluntarily executed.
/s/ Mark D. Woodward
-------------------------------------
Notary Public in the State of New York
[Notarial Seal]
<PAGE>
SCHAUMBURG
COOK COUNTY, ILLINOIS
PIN: 07-19-105-003-000
Address: 2570 West Schaumburg
Road, Schaumburg, IL
EXHIBIT A
PARCEL 1:
LOT 3 IN PRAIRIE TOWER CENTER, BEING A SUBDIVISION OF THAT PART OF THE NORTHWEST
FRACTIONAL QUARTER OF SECTION 19, TOWNSHIP 41 NORTH, RANGE 10, EAST OF THE THIRD
PRINCIPAL MERIDIAN, IN COOK COUNTY, ILLINOIS.
PARCEL 2:
ALL THOSE CERTAIN RIGHTS, BENEFITS AND EASEMENTS AS CREATED PURSUANT TO THE
EASEMENT AGREEMENT MADE BY AND BETWEEN K-MART CORPORATION, LEAPS AND BOUNDS
INC., AND KOHL'S DEPARTMENT STORES RECORDED MAY 20, 1993 AS DOCUMENT 93382707,
AS AMENDED BY AMENDMENT TO OPERATION AND EASEMENT AGREEMENT DATED MARCH 16,
1994, RECORDED MARCH 22, 1994 AS DOCUMENT 94259759, AS FURTHER AMENDED BY
DECLARATION RECORDED JANUARY 31, 1995 AS DOCUMENT 95072883
<PAGE>
EXHIBIT B
STATE SPECIFIC PROVISIONS (Illinois)
The following provisions are incorporated by reference into Section 48
of the attached Mortgage. If any conflict or inconsistency exists between this
Exhibit B and the remainder of the attached Mortgage, this Exhibit B shall
govern.
A. ILLINOIS RESPONSIBLE PROPERTY TRANSFER ACT. Mortgagor
represents and warrants to Mortgagee that none of the Mortgaged Property falls
within the definition of "real property" set forth in the Illinois Responsible
Property Transfer Act of 1988, 765 ILCS 90/1 et seq. and no disclosure statement
is required to be filed thereunder as a consequence of any transaction related
to this Mortgage.
B. WAIVER OF RIGHT OF REDEMPTION AND REINSTATEMENT. In addition
to the provisions of Section 24 hereof, Mortgagor hereby voluntarily and
knowingly releases and waives any and all rights to retain possession of the
Mortgaged Property after the occurrence of an Event of Default hereunder and any
and all rights of redemption from judgment, as allowed under Section 15-1601(b)
of the Illinois Mortgage Foreclosure Law (735 ILCS 5/15-1101 et seq.), as
amended from time to time ("IMFL"), and any and all rights of reinstatement
under Section 15-1602 of IMFL, on its own behalf, on behalf of all persons
claiming or having an interest (direct or indirect) by, through or under
Mortgagor and on behalf of each and every person acquiring any interest in the
Mortgaged Property subsequent to the date hereof, it being the intent hereof
that any and all such rights of redemption and reinstatement of Mortgagor and
all such other persons are and shall be deemed to be hereby waived to the
fullest extent permitted by applicable law or replacement statute. Mortgagor
shall not invoke or use any such law or laws or otherwise hinder, delay or
impede the execution of any right, power, or remedy herein or otherwise granted
or delegated to the Mortgagee, but shall permit the execution of every such
right, power, and remedy as though no such law or laws had been made or enacted.
Mortgagor acknowledges that the Mortgaged Property does not contain agricultural
real estate, as said term is defined in Section 15-1201 of IMFL, or residential
real estate, as said term is defined in Section 15-1219 of IMFL.
C. COMPLIANCE WITH IMFL.
1. If any provision in this Mortgage shall be inconsistent with
any provision of IMFL, the provisions of IMFL shall take precedence over the
provisions of this Mortgage, but shall not invalidate or render unenforceable
any other provision of this Mortgage that can be construed in a manner
consistent with IMFL.
2. If any provision of this Mortgage shall grant to Mortgagee
any rights or remedies upon default of the Mortgagor which are more limited than
the rights that would
<PAGE>
otherwise be vested in Mortgagee under IMFL in the absence of said provision,
Mortgagee shall be vested with the rights granted in IMFL to the full extent
permitted by Law.
3. Without limiting the generality of the foregoing, all expenses
incurred by Mortgagee to the extent reimbursable under Sections 15-1510 and
15-1512 of IMFL, whether incurred before or after any decree or judgment of
foreclosure, and whether or not enumerated in this Exhibit B or elsewhere in
this Mortgage, shall be added to the Obligations secured by this Mortgage or by
the judgment of foreclosure.
D. RIGHTS OF TENANTS; OPTION OF MORTGAGEE TO SUBORDINATE.
Mortgagee shall have the right and option to commence a civil action to
foreclose this Mortgage and to obtain a Decree of Foreclosure and Sale subject
to the rights of any tenant or tenants of the Mortgaged Property having an
interest in the Mortgaged Property prior and superior to that of Mortgagee. The
failure to join any such tenant or tenants of the Mortgaged Property as party
defendant or defendants in any such civil action or the failure of any Decree of
Foreclosure and Sale to foreclose their rights shall not be asserted by
Mortgagor as a defense in any civil action instituted to collect the Obligations
secured hereby, or any part thereof or any deficiency remaining unpaid after
foreclosure and sale of the Mortgaged Property, any statute or rule of Law at
any time existing to the contrary notwithstanding. At the option of Mortgagee,
this Mortgage shall become subject and subordinate, in whole or in part (but not
with respect to priority of entitlement to insurance proceeds or 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, at any time hereafter, in
the Office of the Recorder of Deeds in and for the county wherein the Land is
located, of a unilateral declaration to that effect.
E. RELATIONSHIP OF THE MORTGAGEE AND MORTGAGOR. Mortgagee shall
in no event be construed for any purpose to be a partner, joint venturer, agent
or associate of Mortgagor or of any tenant, subtenant, operator, concessionaire
or licensee of Mortgagor in the conduct of their respective businesses, and
without limiting the foregoing, Mortgagee shall not be deemed to be such
partner, joint venturer, agent or associate on account of Mortgagee becoming a
"mortgagee in possession" or exercising any rights pursuant to this Mortgage or
any of the other Relevant Documents.
F. SUBORDINATION OF PROPERTY MANAGER'S LIEN AND REAL ESTATE
BROKER'S LIEN. Any property management agreement for the Mortgaged Property
entered into hereafter by Mortgagor with a property manager shall contain a "no
lien" provision whereby the property manager waives and releases any and all
mechanics' lien rights that the property manager or anyone claiming by, through
or under the property manager may have pursuant to the Illinois Mechanics Lien
Act, 770 ILCS 60/0.01 ET SEQ. Such property management agreement or a short
form thereof shall, at Mortgagee's request, be recorded with the Recorder of
Deeds of the county where the Land is located. In addition, Mortgagor shall
cause the property manager to enter into a subordination of management agreement
with Mortgagee, in recordable form, whereby the property manager subordinates
its present and future lien rights, and those of any party claiming by, through
or under the property manager,
<PAGE>
to the lien of this Mortgage. Any agreement entered into hereafter by Mortgagor
or any agent of Mortgagor with any "broker," as defined in the Real Estate
License Act of 1983, 225 ILCS 455/1 et seq., for the purpose of selling, leasing
or otherwise conveying an interest in the Mortgaged Property shall contain a "no
lien" provision whereby such broker waives and releases any and all lien rights
that such broker or anyone claiming by, through or under such broker may have
pursuant to the Commercial Broker Lien Act, 770 ILCS 15/1 et seq. Mortgagor
shall cause such broker to enter into a subordination agreement with Mortgagee,
in recordable form, whereby such broker subordinates its present and future lien
rights, and those of any party claiming by, through or under such broker, to the
lien of this Mortgage.
G. MORTGAGEE'S OPTION REGARDING ENFORCEMENT OF SECURITY INTEREST
IN PERSONAL PROPERTY. Upon an Event of Default occurring, Mortgagee, as the
secured party under Section 26 of this Mortgage, may, at its sole option and in
its sole discretion, proceed against the Collateral (as defined in Section 26 of
this Mortgage) under Part 5 of the Uniform Commercial Code, 810 ILCS 5/9-501 et
seq., or may, pursuant to 810 ILCS 5/9-501(4), proceed against both the real
property covered by this Mortgage and the Collateral together, in accordance
with Mortgagee's rights and remedies under this Mortgage and the other Relevant
Documents and pursuant to IMFL.
H. MORTGAGEE'S RIGHT OF POSSESSION IN CASE OF DEFAULT. In any
case in which under the provisions of this Mortgage a default has occurred and
is continuing and Mortgagee has a right to institute foreclosure proceedings
pursuant to Section 24 hereof and such proceedings have commenced, Mortgagor
shall surrender to Mortgagee and Mortgagee shall be entitled to take actual
possession of, the Mortgaged Property or any part thereof, personally, or by its
agent or attorneys as provided in Subsections (b)(2) and (c) of Sections 1701 of
the IMFL. In such event Mortgagee in its discretion may, with or without force
or process of law, enter upon and take and maintain possession of all or any
part of said Mortgaged Property, together with all documents, books, records,
papers and accounts of Mortgagor or the then owner of the Mortgaged Property
relating thereto, and may exclude Mortgagor and its agents wholly therefrom, and
may as attorney-in-fact or agent of Mortgagor, or in its own name as Mortgagee
and under the powers herein granted, hold, operate, manage and control the
Mortgaged Property and conduct the business, if any, thereof, either personally
or by its agents. Without limiting the generality of the foregoing provisions
of this Section, Mortgagee shall also have all power, authority and duties as
provided in Section 15-1703 of the IMFL. Should Mortgagee incur any such
liability, loss or damage in the defense of any claims or demands, the amount
thereof, including costs, expenses and reasonable attorneys' fees, shall be
secured hereby, and Mortgagor shall reimburse Mortgagee therefor immediately
upon demand.
I. ACTIONS OF MORTGAGEE. Mortgagor recognizes that, during the
term of this Mortgage, Mortgagee:
1. May be involved in court or administrative proceedings,
including, without restricting the foregoing, foreclosure, probate, bankruptcy,
creditors' arrangements,
<PAGE>
insolvency, housing authority and pollution control proceedings of any kind, to
which Mortgagee shall be a party by reason of the Relevant Documents or in which
the Relevant Documents or the Mortgaged Property, or any portion thereof, are
involved directly or indirectly;
2. May make preparations following the occurrence of an Event of
Default hereunder for the commencement of any suit for the foreclosure hereof,
which may or may not be actually commenced;
3. May make preparations following the occurrence of an Event of
Default hereunder for, and do work in connection with, Mortgagee's taking
possession of and managing the Mortgaged Property, which event may or may not
actually occur;
4. May make preparations for and commence other private or public
actions to remedy an Event of Default hereunder, which other actions may or may
not be actually commenced;
5. May enter into negotiations with Mortgagor or any of its
agents, employees or attorneys in connection with the existence or curing of any
Event of Default hereunder, the sale of the Mortgaged Property, the assumption
of liability for any of the Obligations secured hereby or the transfer of the
Mortgaged Property in lieu of foreclosure; or
6. May enter into negotiations with Mortgagor or any of its
agents, employees or attorneys pertaining to Mortgagee's approval of actions
taken or proposed to be taken by Mortgagor which approval is required by the
terms of this Mortgage.
J. PROTECTIVE ADVANCES.
1. In connection with any actions taken by Mortgagee as described
in the foregoing Section I, this Mortgage shall be a lien for all Protective
Advances (as defined herein) as to subsequent purchasers and judgment creditors
from the time the Mortgage is recorded, pursuant to Subsection (b)(5) of Section
15-1302 of the IMFL. Protective Advances ("Protective Advances") refer to all
advances, disbursements and expenditures (collectively, "advances") made by
Mortgagee before and during foreclosure, prior to sale, and where applicable,
after sale, for the following purposes:
(a) advances pursuant to this Exhibit B;
(b) advances in accordance with the terms of this Mortgage to: (i)
protect, preserve or restore the Mortgaged Property; (ii) preserve the lien of
this Mortgage or the priority thereof; or (iii) enforce this Mortgage, as
referred to in Subsection (b)(5) of Section 15-1302 of the IMFL, as amended from
time to time;
(c) payments of (i) when due installments of taxes and assessments
against the Mortgaged Property; (ii) other obligations authorized by this
Mortgage; or (iii) with court
<PAGE>
approval any other amounts in connection with other liens, encumbrances or
interests reasonably necessary to preserve the status of title, all as referred
to herein and in Section 15-1505 of the IMFL;
(d) attorneys' fees and other costs incurred in connection with
the foreclosure of this Mortgage as referred to in Sections 1504 (d)(2) and
15-1510 of the IMFL and in connection with any other litigation or
administrative proceeding to which the Mortgagee may be or become or be
threatened or contemplated to be a party, including probate and bankruptcy
proceedings, or in the preparation for the commencement or defense of any such
suit or proceeding; including filing fees, appraisers' fees, outlays for
documents and expert evidence, witness fees, stenographer's charges, publication
costs, and costs (which may be estimated as to items to be expended after entry
of judgment) of procuring all such abstracts of title, title charges and
examinations, foreclosure minutes, title insurance policies, Torrens
certificates, appraisals, and similar data and assurances with respect to title
and value as Mortgagee may deem reasonably necessary either to prosecute or
defend such suit or, in case of foreclosure, to evidence to bidders at any sale
which may be had pursuant to the foreclosure judgment the true condition of the
title to or the value of the Mortgaged Property;
(e) Mortgagee's fees and costs arising between the entry of
judgment of foreclosure and the confirmation hearing as referred to in
Subsection (b) (1) of Section 15-1508 of the IMFL;
(f) expenses deductible from proceeds of sale referred to in
Subsections (a) and (b) of Section 15-1512 of the IMFL; and
(g) expenses incurred and expenditures made by Mortgagee for any
one or more of the following: (i) if the Mortgaged Property or any portion
thereof constitutes one or more units under a condominium declaration,
assessments imposed upon the owner thereof; (ii) if any of the Mortgaged
Property consists of an interest in a leasehold estate under a lease or
sublease, rentals or other payments required to be made by the lessee under the
terms of the lease or sublease; (iii) premiums upon casualty and liability
insurance made by Mortgagee whether or not Mortgagee or a receiver is in
possession, if reasonably required, without regard to the limitation to
maintaining of insurance in effect at the time any receiver or mortgagee takes
possession of the Mortgaged Property imposed by Subsection (c) (1) of Section
15-1704 of the IMFL; (iv) payments required or deemed by Mortgagee to be for the
benefit of the Mortgaged Property or required to be made by the owner of the
Mortgaged Property under any grant or declaration of easement, easement
agreement, reciprocal easement agreement, agreement with any adjoining land
owners or other instruments creating covenants or restrictions for the benefit
of or affecting the Mortgaged Property; (v) shared or common expense assessments
payable to any association or corporation in which the owner of the Mortgaged
Property is a member in any way affecting the Mortgaged Property; (vi) operating
deficits incurred by Mortgagee in possession or reimbursed by Mortgagee to any
receiver; and (vii) fees and costs incurred to obtain an environmental
assessment report relating to the Mortgaged Property.
<PAGE>
2. The Protective Advances shall, except to the extent, if any,
that any of the same is clearly contrary to or inconsistent with the provisions
of the IMFL, be included in:
(a) determination of the amount of indebtedness secured by this
Mortgage at any time;
(b) the indebtedness found due and owing to the Mortgagee in the
judgment of foreclosure and any subsequent amendment of such judgment,
supplemental judgments, orders, adjudications or findings by the court of any
additional indebtedness becoming due after entry of such judgment, it being
hereby agreed that in any foreclosure judgment, the court may reserve
jurisdiction for such purpose;
(c) if right of redemption has not been waived by this Mortgage,
computation of the amount required to redeem, pursuant to Subsections (d)(2) and
(e) of Section 15-1603 of the IMFL;
(d) determination of amounts deductible from sale proceeds
pursuant to Section 15-1512 of the IMFL;
(e) determination of the application of income in the hands of any
receiver or mortgagee in possession; and
(f) computation of any deficiency judgment pursuant to Subsections
(b)(2) and (e) of Section 15-1508 and Section 15-1511 of the IMFL.
3. All moneys paid for Protective Advances or any of the other
purposes herein authorized and all expenses paid or incurred in connection
therewith, including attorneys' fees, and any other moneys advanced by Mortgagee
to protect the Mortgaged Property and the lien hereof, shall be so much
additional indebtedness secured hereby, and shall become immediately due and
payable without notice and with interest thereon at the maximum rate permissible
under state law. Inaction of Mortgagee shall never be considered as a waiver of
any right accruing to it on account of any default on the part of Mortgagor.
K. CONSENT TO APPOINTMENT OF RECEIVER. Without limiting the
generality of any other provisions of this Mortgage, the Mortgagor hereby and in
accordance with the provisions of Sections 15-1701, 1702 and 1703 of the IMFL,
735 ILCS 5/15-1701, 1702 and 1703, expressly authorizes and consents to the
placing of the mortgagee in possession and the appointment of a receiver in the
manner permitted thereunder. In addition to all other powers described in
Section 24 of this Mortgage, such receiver, which Mortgagee may be, shall have
all powers and duties prescribed by Section 15-1704 of the IMFL, including the
power to make leases to be binding upon all parties, including the Mortgagor
after redemption, the purchaser at a sale pursuant to a judgment of foreclosure
and any person acquiring an interest in the Mortgaged Property after entry of a
judgment of foreclosure, all as provided in Subsection (g) of Section 15-1701 of
the IMFL.
<PAGE>
L. USE OF PROCEEDS. Mortgagor hereby represents and agrees that
the proceeds of the Mortgage Note secured by this Mortgage shall be used for
business purposes and that the indebtedness secured hereby constitutes a
business loan.
M. MAXIMUM AMOUNT SECURED BY THIS MORTGAGE. The total
indebtedness (or obligations) secured by this Mortgage shall not exceed in the
aggregate $59,000,000.
<PAGE>
SCHEDULE A
DESCRIPTION OF ORIGINAL MORTGAGE
PROPERTY RECORDING OFFICE DOCUMENT NO. RECORDING DATE
- -------- ---------------- ------------ --------------
Schaumburg, IL Cook County Recorder, Cook 94791159 9/12/94
County, IL
<PAGE>
Exhibit 4.31
DOCUMENT PREPARED BY AND MORTGAGEE'S MAILING ADDRESS:
AFTER RECORDING RETURN TO: McDonald's Corporation
Jonathan A. Reiss, Esq. One McDonald's Plaza
Cleary, Gottlieb, Steen & Hamilton Oak Brook, IL 60523
One Liberty Plaza Attention: General Counsel
New York, New York 10006
- ------------------------------------------------------------------------------
DISCOVERY ZONE, INC.
(Mortgagor),
to
McDONALD's CORPORATION
(Mortgagee)
--------------------------------------
AMENDED AND RESTATED DEED TO SECURE DEBT AND SECURITY
AGREEMENT
--------------------------------------
Dated as of July 29, 1997
- -------------------------------------------------------------------------------
THIS INSTRUMENT IS EXEMPT FROM INTANGIBLES TAX UNDER REGULATION 560-11-8-.14
OF THE GEORGIA DEPARTMENT OF REVENUE, AS AN INSTRUMENT RECORDED PURSUANT TO A
PLAN OF REORGANIZATION CONFIRMED IN IN RE DISCOVERY ZONE, INC., CASE NO.
96-411 (HSB), UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE, BY
ORDER ENTERED JULY 18, 1997.
[KENNESAW, GEORGIA PROPERTY]
<PAGE>
THIS AMENDED AND RESTATED DEED TO SECURE DEBT AND SECURITY AGREEMENT (as
the same may from time to time be extended, renewed or modified, this
"Mortgage"), made as of the 29th day of July, 1997, by DISCOVERY ZONE, INC.,
a Delaware corporation ("Mortgagor"), having its principal place of business
at One Corporate Center, 110 East Broward Boulevard, Fort Lauderdale, Florida
33301, as successor by merger to LEAPS & BOUNDS, INC., to McDONALD'S
CORPORATION a Delaware corporation ("Mortgagee"), having an address at One
McDonald's Plaza, Oak Brook, Illinois 60523.
WITNESSETH:
A. WHEREAS, prior to Mortgagor's several predecessors in interest filing
their voluntary petitions for relief under chapter 11, title 11, United
States Code (the "Bankruptcy Code"), Mortgagor's predecessors in interest
with respect to the Mortgaged Property (as hereinafter defined), Leaps &
Bounds, Inc. ("LBI") had provided Mortgagee with a First Deed to Secure Debt
on the Mortgaged Property, dated as of August 30, 1994 (the "Original
Mortgage") and identified by the recording of information set forth in
Schedule A hereto, to secure certain obligations owed to Mortgagee under the
Agreement and Plan of Merger among Mortgagee, Mortgagor, Discovery Zone,
Inc., a Delaware corporation ("Old DZI") and Discovery Zone International,
Inc. ("DZII"), a Delaware corporation, dated as of August 30, 1994 (the
"Merger Agreement"); and
B. WHEREAS, pursuant to Section 11.2(a)(iii) of the Merger Agreement, Old
DZI agreed to defend, indemnify and hold Mortgagee and its affiliates
harmless in respect of all expenses, losses, costs, deficiencies, liabilities
and damages (including related and reasonable counsel fees and expenses, and
compensatory and demonstrable consequential damages) incurred or suffered by
Mortgagee as a direct result of, inter alia, any breach by Old DZI or LBI of
the leases or subleases relating to certain properties that result in any
payment by Mortgagee in connection with any guarantee by Mortgagee of such
leases and pursuant to Section 10.3(f) of the Merger Agreement it was agreed
that certain security would be provided to secure the obligations under
Section 11.2(a)(iii) of the Merger Agreement, including without limitation, a
first priority security interest in the Land and Improvements (as defined
herein) (the "Agreement to Indemnify"); and
C. WHEREAS, following the filing of their respective prayers for relief
under the Bankruptcy Code, Mortgagor's predecessors in interest, Old DZI,
their affiliated debtors, including DZII and LBI (the "Debtors"), and
Mortgagee entered into the Stipulation and Order Between Debtors and
McDonald's Corporation Providing For The Resolution, Settlement And
Compromise of Disputes And For Rent Deferrals And Allowance of Certain Claims
(the "Stipulation and Order") that was entered by the United States
Bankruptcy Court for the District of Delaware (the "Bankruptcy Court") on
November 18, 1996, which was not appealed or otherwise challenged, became a
final order, remains in full force and effect and to which Mortgagor is
bound, Section 7 of which is captioned "CONTINUING SECURITY" and provides, in
pertinent part, that the valid and enforceable first priority security
interest on the
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Land and Improvements and certain other collateral shall secure the
performance and payment of all of the obligations of Mortgagor to Mortgagee
under the Notes (as hereinafter defined), any obligations of Mortgagee that
may arise in connection with the Assumption Locations whether pursuant to any
guaranty, lease, sublease or otherwise, any obligations of Mortgagor that may
arise in the event of a Liquidation, and any continuing obligations of
Mortgagor relating to the Rejection Location(s) and the Prior Rejection
Locations (as such terms are defined therein); and
D. WHEREAS, pursuant to the Stipulation and Order and 11 U.S. C. Section
365, the Debtors, as predecessors in interest to Mortgagor, assumed the
subleases relating to certain properties (the "Assumed Properties") which
subleases (the "Assumed Property Subleases") expressly incorporate the
Agreement to Indemnify as it relates to any current or future obligations of
Mortgagee relating to the Assumed Properties; and
E. WHEREAS, pursuant to the Stipulation and Order and the Plan (as
hereinafter defined), this Mortgage hereby amends and restates the Original
Mortgage in its entirety in accordance with the terms and provisions set
forth herein; and
F. WHEREAS, this Mortgage, together with certain other Deeds of Trust,
Mortgages or similar encumbrances, are intended to and do secure the
obligations of Mortgagor and its predecessors in interest and the other
Debtors, to Mortgagee under all of the Stipulation and Order, the Agreement
to Indemnify, the Secured Rent Deferral Notes (as hereinafter defined) and
the Secured Rejection Note (as hereinafter defined); and
G. WHEREAS, pursuant to the plan of reorganization for Old DZI and its
affiliated debtors confirmed by the Bankruptcy Court by order entered July
18, 1997 (the "Plan") and as required by the terms of the Stipulation and
Order, Mortgagor, as the reorganized successor of the Debtors, is obligated
to issue to Mortgagee Secured Rent Deferral Notes in the aggregate original
principal amount of $266,466.24, which amount is subject to increase each
month in accordance with the terms thereof, (the "Secured Rent Deferral") and
Secured Rejection Note in the aggregate original principal amount of
$4,416,237.90 (the "Secured Rejection Note" and, together with the Secured
Rent Deferral Notes, the "Notes"); and
H. WHEREAS, pursuant to the Plan, all of the Debtors and their
reorganized successors have merged into Mortgagor, and simultaneously with
such merger, all property of LBI and the other Debtors, including the
Mortgaged Property (as hereinafter defined), has been revested in Mortgagor,
as the successor entity of the Debtors; and
I. WHEREAS, in accordance with the foregoing, Mortgagor is the fee simple
owner of the real estate described in Exhibit A attached hereto (the "Land");
NOW THEREFORE, with reference to the foregoing recitals and for good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged,
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<PAGE>
Mortgagor and Mortgagee hereby agree that the Original Mortgage is hereby
amended and restated in its entirety as follows:
For the purpose of securing the payment and performance of all of the
obligations (the "Obligations") of Mortgagor to Mortgagee, including without
limitation, any and all obligations of Mortgagor, as successor in interest to
Old DZI, DZII, LBI and their affiliated debtors, under this Mortgage, the
Agreement to Indemnify (including, without limitation, any contingent
obligations thereunder), the Stipulation and Order (including, without
limitation, the obligations described in Section 7 thereof which are referred
to in paragraph C of the recitals above), the Plan and the Notes (including
any and all subsequent advances made pursuant to the terms of the Notes), and
all other documents evidencing or securing any such obligations
(collectively, the "Relevant Documents"), Mortgagor by these presents does
hereby mortgage, give, grant, bargain, sell, alienate, enfeoff, convey,
confirm, warrant, pledge, assign and hypothecate unto Mortgagee, the Land and
the buildings, structures and improvements of every nature whatsoever now or
hereafter located thereon to the extent owned by Mortgagor (including, but
not limited to, all gas and electric fixtures, radiators, heaters, docks and
docking facilities, engines and machinery, boilers, elevators and motors,
plumbing, heating and air conditioning fixtures, carpeting and other floor
coverings, water heaters, awnings and storm sashes which are or shall be
attached to the Land or said buildings, structures or improvements) (the
"Improvements");
TOGETHER WITH: all right, title, interest and estate of Mortgagor now
owned, or hereafter acquired, in and to the following property, rights,
interest and estates relating to the Land and the Improvements, together with
Mortgagor's interest in the following property, rights, interests and estates
hereinafter described (the Land, Improvements, and the following property,
rights, interests and estates being hereinafter collectively referred to as
the "Mortgaged Property"):
(a) all easements, rights-of-way, strips and gores of land, streets,
ways, alleys, passages, sewer rights, water, water courses, water rights and
powers, air rights and development rights, construction and equipment
warranties, and all estates, rights, titles, interests, privileges,
liberties, tenements, hereditaments and appurtenances of any nature
whatsoever, in any way belonging, relating to or pertaining to the Land and
the Improvements and the reversion and reversions, remainder and remainders,
and all land lying in the bed of any street, road or avenue, opened or
proposed, in front of or adjoining the Land, to the center line thereof and
all the estates, rights, titles, interests, dower and rights of dower,
curtesy and rights of curtesy, property, possession, claim and demand
whatsoever, both at law and in equity, of Mortgagor of, in and to the Land
and the Improvements and every part and parcel thereof, with the
appurtenances thereto, and in and to any streets, ways, alleys, passages,
strips or gores of land adjoining the Land or any part thereof;
(b) all fixtures, attachments and other articles attached to the Land
or the Improvements constituting realty or real property now or hereafter owned
by Mortgagor or in which Mortgagor has or shall acquire an interest, now or
hereafter located on, attached to or
4
<PAGE>
contained in or used or usable in connection with the Mortgaged Property, and
including, without limitation, all building or construction materials
intended for construction, reconstruction, alteration or repair of or
installation on or in the Mortgaged Property, of every kind and nature
whatsoever now owned or hereafter acquired by Mortgagor, and all proceeds
thereof, as well as all additions to, appurtenances, substitutions for,
replacements of or accessions to any of the items recited as aforesaid and
all attachments, components, parts (including spare parts) and accessories,
whether installed thereon or affixed thereto, now or hereafter owned by
Mortgagor and used or intended to be used in connection with, or with the
operation of, the Mortgaged Property, to the extent constituting real
property, but not including play equipment or other similar-type
entertainment equipment relating to the operation of the "Discovery Zone"
facility on the Mortgaged Property unless removal of such equipment would
cause structural damage to the Land or the Improvements (collectively, the
"Fixtures");
(c) all awards or payments, including interest thereon, which may
heretofore and hereafter be made with respect to the Mortgaged Property, whether
from the exercise of the right of eminent domain (including, but not limited to,
any transfer made in lieu of or in anticipation of the exercise of said rights),
or for a change of grade, or for any other injury to or decrease in the value of
the Mortgaged Property;
(d) to the extent assignable (and to the extent relating to the general
occupancy and use of the Mortgaged Property as opposed to the operation of
the "Discovery Zone" entertainment facility on the Mortgaged Property),
leases, subleases (including sub-subleases), lettings, licenses, concessions,
occupancy agreements and other agreements which grant a possessory interest
in, or the right to use or occupy, all or any part of the Mortgaged Property
now or hereafter entered into, and all amendments, extensions, renewals and
guarantees thereof, and all security therefor (collectively, the "Leases")
and all rents, issues, profits, revenues (including all oil and gas or other
mineral royalties and bonuses) and deposits (including, without limitation,
security deposits) under the Leases (including, without limitation, from the
rental of any office space, retail space or other space, halls, stores, and
offices, and security deposits therefor, exhibit or sales space of every
kind, license, lease, sublease, fees and rentals, letters of credit or cash
instruments securing or evidencing obligations under Leases, service charges,
vending machine sales and proceeds, if any, from business interruption or
other loss of income insurance)) (collectively, the "Rents") and all proceeds
from the sale or other disposition of the Leases and the right to receive and
apply the Rents to the payment of the Obligations;
(e) subject to the rights of Mortgagor hereunder, all proceeds of any
insurance policies covering the Mortgaged Property (including, without
limitation, the right to receive and apply the proceeds of any insurance,
judgments, or settlements made in lieu thereof, for damage to the Mortgaged
Property);
(f) all refundable, returnable or reimbursable fees deposits or other
funds or evidences of credit or indebtedness deposited by or on behalf of
Mortgagor with any
5
<PAGE>
governmental authorities, boards, corporations, providers of utility
services, public or private, including specifically, but without limitation,
all refundable, returnable or reimbursable tap fees, utility deposits and
development costs in connection with the Mortgaged Property, and all of the
records and books of account now or hereafter maintained by or on behalf of
Mortgagor in connection with the operation of the Mortgaged Property
(collectively, "Security Accounts");
(g) all proceeds (as defined in the Uniform Commercial Code) of the
Mortgaged Property which, in any event, shall include, without limitation,
(i) cash, instruments and other property received, receivable or otherwise
distributed in exchange for any or all of the Mortgaged Property, (ii) the
collection or other disposition of, or realization upon, any item or portion
of the Mortgaged Property (including, without limitation, all claims of
Mortgagor against third parties for loss of, damage to, destruction of, or
for proceeds payable under policies of insurance in respect of, the Mortgaged
Property now existing or hereafter arising), (iii) any and all proceeds of
any insurance, indemnity, warranty or guaranty payable to Mortgagor from time
to time with respect to damage or loss of or to any of the Mortgaged
Property, (iv) any and all payments (in any form whatsoever) made or due and
payable to Mortgagor from time to time in connection with the requisition,
confiscation, condemnation, seizure or forfeiture of all or any part of the
Mortgaged Property by any Governmental Authority (or any person acting under
color of Governmental Authority), and (v) any and all real estate tax refunds
payable to Mortgagor with respect to the Mortgaged Property, and refunds or
reimbursements payable with respect to bonds, escrow accounts, or other sums
payable in connection with the use, development or ownership of the Mortgaged
Property, but excluding any proceeds obtained, earned or arising directly
from the operation of the "Discovery Zone" entertainment facility operated by
Grantor on the Mortgaged Property as opposed to the general occupancy and use
of the Mortgaged Property (collectively, the "Proceeds");
(h) to the extent permitted under applicable law, all licenses, permits
(other than proprietary permits of Mortgagor relating to the ordinary
operation of a "Discovery Zone" entertainment facility as opposed to the
general use and occupancy of the Mortgaged Property), variances and
certificates used in connection with the ownership, operation, use or
occupancy of the Mortgaged Property (including, without limitation, business
licenses, state health department licenses, food service licenses, liquor
licenses, licenses to conduct business and all such other permits, licenses
and rights, obtained from any Governmental Authority or private Person
concerning ownership, operation, use or occupancy of the Mortgaged Property)
(collectively, "Permits");
(i) all plans, specifications, shop drawings and other technical
descriptions prepared for construction, repair or alteration of the
Improvements (including diskettes containing any such data), and all
amendments and modifications thereof; and
6
<PAGE>
(j) any escrows or escrow accounts established hereunder to secure
the Obligations of Mortgagor, including, without limitation, the Proceeds Escrow
Account described in Section 6(b) hereof; and
(k) any and all replacements and renewals of or additions and
substitutions to any of the foregoing and all proceeds of any of the
foregoing.
TO HAVE AND TO HOLD the above granted and described Mortgaged Property
unto and to the use and benefit of Mortgagee, and its successor and assigns,
forever, and Mortgagor does hereby bind itself, its successors and assigns to
WARRANT AND FOREVER DEFEND the title to the Mortgaged Property unto Mortgagee
and its successors and assigns;
AND, TO PROTECT THE SECURITY OF THIS MORTGAGE, Mortgagor represents and
warrants to and covenants and agrees with Mortgagee as follows:
1. Defined Terms. The following terms, when used herein, shall have the
meanings set forth below:
"Environmental Laws" means any and all present and future federal, state
or local laws, statutes, ordinances or regulations, any judicial or
administrative orders, decrees or judgments thereunder, and any permits,
approvals, licenses, registrations, filings and authorizations, in each case
as now or hereafter in effect, relating to the protection of the environment,
the impact of Hazardous Substances or the generation, disposal or remediation
thereof on human health or safety, or the Release or threatened Release of
Hazardous Substances or otherwise relating to the Use of Hazardous
Substances. For purposes of this definition, (A) "Hazardous Substances" means
collectively, (i) any petroleum or petroleum products or waste oils,
explosives, radioactive materials, asbestos, urea formaldehyde foam
insulation, polychlorinated biphenyls ("PCBs"), and lead-based paint, (ii)
any chemicals or other materials or substances which are now or hereafter
become defined as or included in the definitions of "hazardous substances",
"hazardous wastes", "hazardous materials", "extremely hazardous wastes",
"restricted hazardous wastes", "toxic substances", "toxic pollutants",
"contaminants", "pollutants" or words of similar import under any
Environmental Law and (iii) any other chemical or any other material or
substance, exposure to which is now or hereafter prohibited, limited or
regulated under any Environmental Law; (B) "Use" means, with respect to any
Hazardous Substance, the generation, manufacture, processing, distribution,
handling, use, treatment, recycling or storage of such Hazardous Substance or
transportation of such Hazardous Substance; and (C) "Release" means any
release, spill, emission, leaking, pumping, injection, deposit, disposal,
discharge, dispersal, leaching or migration into the indoor or outdoor
environment (including, without limitation, the movement of Hazardous
Substances through ambient air, soil, surface water, ground water, wetlands,
land or subsurface strata).
"Governmental Authority" means any national or federal government, any
state, regional, local or other political subdivision thereof with
jurisdiction and any Person
7
<PAGE>
with jurisdiction exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government (including without
limitation any court).
"Impositions" means all taxes (including, without limitation, all real
estate, ad valorem, sales (including those imposed on lease rentals), use,
single business, gross receipts, value added, intangible transaction
privilege, privilege or license or similar taxes), assessments (including,
without limitation, all assessments for public improvements or benefits,
whether or not commenced or completed within the term of this Mortgage),
ground rents, water, sewer or other rents and charges, excises, levies, fees
(including, without limitation, license, permit, inspection, authorization
and similar fees), and all other governmental impositions and other charges
(including, without limitation, vault charges and license fees for the use of
vaults, chutes and similar areas adjoining the Mortgaged Property), in each
case whether general or special, ordinary or extraordinary, foreseen or
unforeseen, of every character in respect of the Mortgaged Property, which at
any time prior to, during or in respect of the term hereof may be assessed or
imposed on or in respect of or be a lien upon (i) Mortgagor (including,
without limitation, all income, franchise, single business or other taxes
imposed on Mortgagor for the privilege of doing business in the jurisdiction
in which the Mortgaged Property is located), (ii) the Mortgaged Property, or
any part thereof or any revenues therefrom or any estate, right, title or
interest therein, or (iii) any occupancy, operation, use or possession of, or
sales from, or activity conducted on, or in connection with the Mortgaged
Property by Mortgagor or the leasing or use of the Mortgaged Property or any
part thereof by Mortgagor.
"Legal Requirements" means (i) all governmental statutes, laws, rules,
orders, regulations, ordinances, judgments, decrees and injunctions of
Governmental Authorities (including, without limitation, Environmental Laws)
affecting either the Borrower or any Property or any part thereof or the
construction, ownership, use, alteration or operation thereof, or any part
thereof (whether now or hereafter enacted and in force), (ii) all permits,
licenses and authorizations and regulations relating thereto, and (iii) all
covenants, conditions and restrictions contained in any instruments at any
time in force (whether or not involving Governmental Authorities) affecting
the Mortgaged Property or any part thereof which, in the case of this clause
(iii), require repairs, modifications or alterations in or to the Mortgaged
Property or any part thereof, or in any material way limit or restrict the
existing use and enjoyment thereof.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, estate, trust, unincorporated association, any
federal, state, county or municipal government or any bureau, department or
agency thereof and any fiduciary acting in such capacity on behalf of any of
the foregoing.
"Uniform Commercial Code" means the Uniform Commercial Code, as adopted,
enacted and amended from time to time by the state or states where any of the
Mortgaged Property is located.
2. Payment of Obligations and Incorporation of Covenants, Conditions
and Agreements. Mortgagor will pay the Obligations at the time and in the
manner provided in the
8
<PAGE>
Relevant Documents and in this Mortgage. All the representations,
warranties, covenants, conditions and agreements of Mortgagor contained in
the Relevant Documents are hereby made a part of this Mortgage to the same
extent and with the same force as if fully set forth herein. If there shall
be any inconsistencies between the terms, covenants, conditions and
provisions set forth in this Mortgage and the terms, covenants, conditions
and provisions set forth in the Relevant Documents, then the terms,
covenants, conditions and provisions of the Relevant Documents shall prevail.
3. Warranty of Title/Organization. Mortgagor warrants that Mortgagor has
good and marketable fee simple title to Land and the Improvements and has
good title to the remainder of the Mortgaged Property and has the full power,
authority and right to execute, deliver and perform its obligations under
this Mortgage and to encumber, mortgage, give, grant, bargain, sell,
alienate, enfeoff, convey, confirm, warrant, pledge, assign and hypothecate
the Mortgaged Property and that Mortgagor possesses an unencumbered fee
estate in the Land and the Improvements and that it owns the Mortgaged
Property free and clear of all liens, encumbrances and charges whatsoever
except for (x) those exceptions to title which are existing on the date
hereof and approved by Mortgagee and (y) those exceptions of title that are
permitted under the other terms and conditions of this Mortgage
(collectively, the "Permitted Encumbrances") and that this Mortgage is and
will remain a valid and enforceable first lien on and security interest in
the Mortgaged Property, subject only to the Permitted Encumbrances.
Mortgagor shall forever warrant, defend and preserve such title and the
validity and priority of the lien of this Mortgage and shall forever warrant
and defend the same to Mortgagee against the claims of all persons
whomsoever. Mortgagor is duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization. Mortgagor is
qualified to do business and in good standing in the State in which the
Mortgaged Property is located, and to the extent that Mortgagor is not so
qualified or in good standing in such State, Mortgagor shall promptly qualify
to do business and become in good standing in such State and shall promptly
present evidence of such qualification to do business and good standing to
Mortgagee, and shall in any event take such steps as are necessary to insure
the enforceability of the Notes and this Mortgage.
4. Taxes. Mortgagor hereby warrants, covenants and agrees to pay before
any penalty attaches all real property taxes, general and special, and all
other taxes and assessments of any kind or nature whatsoever, against the
Mortgaged Property when due and shall, upon written request, furnish to
Mortgagee duplicate receipts therefor, Mortgagor may, in good faith and with
reasonable diligence, contest the validity or amount of any such taxes or
assessments provided that such contest shall have the effect of preventing
the collection of the tax or assessment so contested and the sale or
forfeiture of said Mortgaged Property or any part thereof, or any interest
therein, to satisfy the same.
5. Indemnification. Mortgagor shall indemnify, defend and hold harmless
Mortgagee from and against all of the following (collectively, and
individually referred to as a "Loss"): claims, demands, causes of action,
judgments, costs, expenses, liabilities, losses and damages (including
consequential and punitive damages), reasonable attorneys' fees and
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<PAGE>
expenses and court costs, disbursements and court costs, and all risk of
damage to property and injury to persons in or upon the Mortgaged Property,
arising from: (i) Mortgagor's use of the Property or from the conduct of its
business in or about the Mortgaged Property; (ii) Mortgagor's default or
breach of any term under this Mortgage; and (iii) Mortgagor's violation or
failure to comply with any Legal Requirements, including Environmental Laws;
provided that Mortgagor shall not be liable for Loss arising from Mortgagee's
negligence or willful misconduct or from Mortgagee's breach of any of its
obligations hereunder.
6. Transfer or Encumbrance of the Mortgaged Property. (a) Except as may
otherwise be permitted hereunder or pursuant to the Relevant Documents,
Mortgagor shall not sell, convey, alienate, mortgage, encumber, pledge or
otherwise transfer the Mortgaged Property or any part thereof or any of its
interest therein. Mortgagee shall not be required to demonstrate any actual
impairment of its security or any increased risk of default hereunder in
order to declare the Obligations immediately due and payable upon Mortgagor's
conveyance, alienation, mortgage, encumbrance, pledge or transfer of the
Mortgaged Property in violation of this Mortgage or any other Relevant
Document. This provision shall apply to every sale, conveyance, alienation,
mortgage, encumbrance, pledge or transfer of the Mortgaged Property that is
not permitted pursuant to the Relevant Documents, regardless of whether
voluntary or not, or whether or not Mortgagee has consented to any previous
sale, conveyance, alienation, mortgage, encumbrance, pledge or transfer of
the Mortgaged Property.
(b) Notwithstanding Section 6(a), Mortgagor shall have the right to sell
the Mortgaged Property at any time to a third party bona fide purchaser after
consultation with Mortgagee and upon the prior written consent of Mortgagee
to such sale and the sales price (such consent not to be unreasonably
withheld), provided that the net proceeds of such sale of the Mortgaged
Property (after payment of transfer taxes and reasonable brokerage
commissions, if any, and other reasonable closing costs) shall be applied
towards repayment of the Obligations, including, without limitation,
repayment of the Secured Rejection Note (including prepayment of any amounts
not yet due and payable) and payment of the Principal Amounts (as defined in
the Rent Deferral Notes) then outstanding under the Rent Deferral Notes, in
the order and manner set forth in the Notes. After the Secured Rejection
Note and all Principal Amounts outstanding under the Notes have been repaid
in full, any remaining net proceeds (including proceeds from any sale or
other disposition of the Mortgaged Property pursuant to Section 24 hereof)
not applied towards repayment of the Obligations shall be deposited into an
escrow account designated by Mortgagee for Mortgagor's account and as
security for the performance by Mortgagor of its Obligations to Mortgagee
under the Relevant Documents (the "Proceeds Escrow Account") which escrow
account shall be administered by Mortgagee, or, at Mortgagee's discretion and
in accordance with Mortgagee's instructions, may be administered by an escrow
agent (an "Escrow Agent") selected by Mortgagee (whose reasonable fees shall
be paid by Mortgagor). Mortgagor may also from time to time deposit
additional funds into the Proceeds Escrow Account as further security for the
Obligations. At Mortgagee's request, Mortgagor agrees to enter into a
separate escrow agreement to further evidence the provisions of this Section
6(b), and in the event that Mortgagee chooses an Escrow Agent to administer
the Proceeds Escrow Account, Mortgagor agrees to execute an escrow agreement
in form and substance reasonably satisfactory to Mortgagee (including
provisions consistent with the
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provisions of this Section 6(b)) to evidence the duties and responsibilities
of such Escrow Agent. Mortgagee or, if applicable, the Escrow Agent at the
direction of Mortgagee, shall invest the funds in the Proceeds Escrow Account
in obligations of the U.S. Government or its agencies, interest in time
accounts or certificates of deposits, or other interest bearing account of
any bank or bank and trust company or in money market funds available to
Mortgagee. Mortgagor agrees, and shall agree under any escrow agreement
entered into pursuant to this Section 6(b), that the funds on deposit under
the escrow arrangement described herein shall not constitute property of the
estate (within the meaning of Section 541 of the United States Bankruptcy
Code) and that Mortgagor shall only have such rights to such funds as are
provided herein and in any escrow agreement entered into pursuant to this
Section. Funds in the Proceeds Escrow Account shall be disbursed (together
with accrued interest) from time to time to Mortgagee, at Mortgagee's
direction (upon seven (7) days prior notice to Mortgagor), to pay any
Obligations that may arise from time to time under the Agreement to
Indemnify, the Notes, the Stipulation and Order or the other Relevant
Documents. Notwithstanding the foregoing, after December 31, 2005, Mortgagor
shall be entitled to retain any net proceeds in excess of the Minimum Amount
set forth below from the sale of the Mortgaged Property, including amounts
previously deposited and remaining in the Proceeds Escrow Account (including
accrued interest thereon) which have not been applied towards payment of the
Obligations, provided that (i) no Obligations are then due and owing by
Mortgagor pursuant to the Agreement to Indemnify, the Stipulation and Order,
the Notes or otherwise, (ii) no default or Event of Default has occurred and
is continuing under any of the Relevant Documents; and (iii) the amount
remaining in the Proceeds Escrow Account is no less than the Minimum Amount
(as hereinafter defined). Except as otherwise set forth in the following
sentence, the "Minimum Amount" shall mean the product of (A) 1.5 times (B)
the sum of the gross rent (including additional rent and percentage rent
charges, if any), common area maintenance charges, taxes, insurance and other
charges computed on a gross basis (collectively, the "Base Charges") which
are due or shall become due under any Assumed Property Subleases still in
existence as of December 31, 2005 (the "Surviving Assumed Property
Subleases") from December 31, 2005 until the expiration of the terms of such
Assumed Property Subleases. Upon the expiration after December 31, 2005 of
any Surviving Assumed Property Sublease, Mortgagee shall re-calculate the
Minimum Amount based upon the product of 1.5 times the Base Charges of the
remaining Surviving Assumed Property Subleases as of the end of the term of
such Surviving Assumed Property Sublease (such Base Charges to be calculated
as the sum of the Base Charges from such date through the end of the
expiration dates of the remaining Surviving Assumed Property Subleases), and
provided that (i) no Obligations are then due and owing by Mortgagor pursuant
to the Agreement to Indemnify, the Notes, the Stipulation and Order or
otherwise and that (ii) no default or Event of Default has occurred and is
continuing under any of the Relevant Documents, Mortgagee shall, on the first
anniversary of the expiration of such expired Surviving Assumed Property
Sublease, release to Mortgagor, or cause the Escrow Agent to release to
Mortgagor, the excess of all funds in the Proceeds Escrow Account over the
re-calculated Minimum Amount. Any calculation of Base Charges under this
Section 6(b) shall be made by Mortgagee and, absent manifest error, shall be
conclusive and binding upon Mortgagor. Provided that (i) an amount equal to
at least the Minimum Amount is deposited or on deposit in the Proceeds Escrow
Account to secure the
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payment of the Obligations, (ii) no default or Event of Default has occurred
and is continuing under any of the Relevant Documents, (iii) the Notes have
been repaid in full and (iv) no Obligations are then due and owing by
Mortgagor pursuant to the Agreement to Indemnify, the Stipulation and Order
or otherwise, Mortgagor shall be entitled to receive a release of this
Mortgage from Mortgagee at any time after December 31, 2005. Provided that
no default or Event of Default has occurred or is continuing under any of the
Relevant Documents and that no amounts are then owing by Mortgagor or
outstanding pursuant to or under any of the Relevant Documents (and that an
amount equal to the Minimum Amount is at all times on deposit in the Proceeds
Escrow Account), interest earned on the amounts deposited in the Proceeds
Escrow Account after December 31, 2005 shall be distributed to Mortgagor on a
quarterly basis. All remaining amounts in the Proceeds Escrow Account which
have not been applied towards payment of the Obligations shall be released to
Mortgagor on the later of (A) December 31, 2014 provided, however, that no
Obligations are then due and owing by Mortgagor pursuant to the Agreement to
Indemnify, the Stipulation and Order or otherwise, and (B) the end of the
term of this Mortgage as set forth in Section 13(c) hereof. Mortgagor shall
pay any income taxes attributable to the interest or other income earned on
the Proceeds Escrow Account. Notwithstanding any release of this Mortgage
pursuant to this Section 6(b) or otherwise, the terms and provisions of this
Section 6(b) shall survive the release of this Mortgage.
7. Amendment to Legal Description. If it becomes evident that the legal
description attached to any Relevant Document is inaccurate or does not fully
describe all of the real property which is reasonably connected to the Land,
Mortgagor hereby agrees to an amendment of such legal description and the
legal description contained on the corresponding title policy so that such
error is corrected and to execute and cause to be recorded, if applicable,
such document as may be appropriate for such purpose.
8. Assignment of Leases and Rents. Mortgagor does hereby absolutely and
unconditionally assign to Mortgagee, Mortgagor's right, title and interest in
all current and future Leases and Rents, it being intended by Mortgagor that
this assignment constitutes a present, absolute assignment and not an
assignment for additional security only. Such assignment to Mortgagee shall
not be construed to bind Mortgagee to the performance of any of the
covenants, conditions or provisions contained in any such Lease or otherwise
impose any obligation upon Mortgagee. Mortgagee shall have no responsibility
on account of this assignment for the control, care, maintenance, management
or repair of the Mortgaged Property, for any dangerous or defective condition
of the Mortgaged Property, or for any negligence in the management, upkeep,
repair or control of the Mortgaged Property. Mortgagor agrees to execute and
deliver to Mortgagee such additional instruments, in form and substance
satisfactory to Mortgagee, as may hereafter be requested by Mortgagee to
further evidence and confirm such assignment. Nevertheless, subject to the
terms of this paragraph, Mortgagee grants to Mortgagor a revocable license to
collect all of the Rents and retain, use and enjoy the same and otherwise
exercise all rights of Mortgagor under any Lease, in each case, subject to
the terms hereof and of the Relevant Documents. Upon an Event of Default, the
license granted to Mortgagor herein shall immediately and automatically be
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revoked, and Mortgagee shall immediately be entitled to possession of all
Rents, whether or not Mortgagee enters upon or takes control of the Mortgaged
Property, provided that if such Event of Default ceases to exist, the license
shall automatically be reinstated. In addition, during the continuation of
an Event of Default, Mortgagee may, either in person or by agent, without
bringing any action or proceeding, or by a receiver appointed by a court,
without the necessity of taking possession of the Mortgaged Property in its
own name, and in addition to and without limiting any of Mortgagee's rights
and remedies hereunder, under the Notes and any other Relevant Documents and
as otherwise available at law or in equity, (a) notify any lessee or other
person that the Leases have been assigned to Mortgagee and that all Rents are
to be paid directly to Mortgagee, whether or not Mortgagee has commenced or
completed foreclosure or taken possession of the Mortgaged Property; (b)
settle, compromise, release, extend the time of payment of, and make
allowances, adjustments and discounts of any Rents or other obligations in,
to and under the Leases; (c) demand, sue for or otherwise collect, receive,
and enforce payment of Rents, including those past-due and unpaid and other
rights under the Leases, prosecute any action or proceeding, and defend
against any claim with respect to the Rents and Leases; (d) enter upon, take
possession of and operate the Mortgaged Property; (e) lease all or any part
of the Mortgaged Property; and/or (f) perform any and all obligations of
Mortgagor under the Leases and exercise any and all rights of Mortgagor
therein contained to the full extent of Mortgagor's rights and obligations
thereunder, with or without the bringing of any action or the appointment of
a receiver and without need for any other authorization or other action by
Mortgagee or Mortgagor. At Mortgagee's request, Mortgagor shall deliver a
copy of this assignment to each tenant under a Lease and to each manager and
managing agent or operator of the Mortgaged Property. Mortgagor irrevocably
directs any tenant, manager, managing agent, or operator of the Property,
without any requirement for notice to or consent by Mortgagor, to comply with
all demands of Mortgagee under this Section 8 and to turn over to Mortgagee
on demand all Rents which it receives. Mortgagor hereby acknowledges and
agrees that payment of any Rents by a person to Mortgagee as hereinabove
provided shall constitute payment by such person, as fully and with the same
effect as if such Rents had been paid to Mortgagor. Mortgagee is hereby
granted and assigned by Mortgagor the right, at its option, upon revocation
of the license granted herein, to enter upon the Mortgaged Property in person
or by agent, without bringing any action or proceeding, or by court-appointed
receiver to collect the Rents. Any Rents collected after the revocation of
the license shall be applied towards the payment of the Obligations. Neither
the enforcement of any of the remedies under this Section 8 nor any other
remedies or security interests afforded to Mortgagee under the Relevant
Documents, at law or in equity shall cause Mortgagee to be deemed or
construed to be a Mortgagee in possession of the Mortgaged Property, to
obligate Mortgagee to lease the Mortgaged Property or attempt to do so, or to
take any action, incur any expense, or perform or discharge any obligation,
duty or liability whatsoever under any of the Leases or otherwise. Mortgagor
shall, and hereby agrees to indemnify Mortgagee for, and to hold Mortgagee
harmless from and against, any and all claims, liability, expenses, losses or
damages which may or might be asserted against or incurred by Mortgagee
solely by reason of Mortgagee's status as an assignee pursuant to the
assignment of Rents and Leases contained herein, but excluding any claim (a)
to the extent caused by Mortgagee's gross negligence or willful misconduct,
or (b) to the extent arising
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solely from Mortgagee's actions after Mortgagee has taken possession of the
Mortgaged Property. Should Mortgagee incur any such claim, liability,
expense, loss or damage, the amount thereof, including all actual expenses
and reasonable fees of attorneys, shall constitute Obligations secured
hereby, and Mortgagor shall reimburse Mortgagee therefor immediately upon
demand. Mortgagor agrees that all Leases shall be subject to the prior
written approval of Mortgagee, such approval not to be unreasonably withheld.
9. Maintenance of Mortgaged Property. Mortgagor shall cause the
Mortgaged Property to be maintained in a good and safe condition and repair
(subject to ordinary wear and tear), and shall otherwise operate and maintain
the Mortgaged Property in a manner consistent with the manner in which it
operates and maintains the other properties on which it operates similar
businesses ("Similar Properties"). Except as otherwise permitted by the
Relevant Documents, the Improvements, the Fixtures and the equipment located
on the Land or the Improvements shall not be removed, demolished or
materially altered (except for normal replacement of equipment) without the
consent of Mortgagee which shall not unreasonably be withheld or delayed.
Mortgagor shall comply with all laws, orders and ordinances affecting the
Mortgaged Property, or the use thereof. Except to the extent that Mortgagee
fails to turn over insurance proceeds, if any, received by Mortgagee pursuant
to Sections 10 and 11 with respect to the Mortgaged Property to Mortgagor,
Mortgagor shall promptly repair, replace or rebuild any part of the Mortgaged
Property that, following the date hereof, becomes damaged, worn or
dilapidated and Mortgagor shall complete and pay for any structure at any
time in the process of construction or repair on the Land. Notwithstanding
anything to the contrary contained herein, Mortgagor hereby confirms its
obligation to comply with all relevant Legal Requirements, including
Environmental Laws, with respect to the Mortgaged Property. Mortgagor shall
not initiate, join in, acquiesce in, or consent to any change in any private
restrictive covenant, zoning law or other public or private restriction,
limiting or defining the uses which may be made of the Mortgaged Property or
any part thereof, unless Mortgagor shall have received Mortgagee's prior
written consent, such consent not to be unreasonably withheld or delayed. If
under applicable zoning provisions the use of all or any portion of the
Mortgaged Property is or shall become a nonconforming use, Mortgagor will not
cause such nonconforming use to be discontinued or abandoned without the
express written consent of Mortgagee, such consent not to be unreasonably
withheld or delayed. Mortgagor shall not (i) change the use of the Land in
any material respect or (ii) permit or suffer to occur any waste on or to the
Mortgaged Property or to any portion thereof.
10. Insurance.
(a) Mortgagor shall maintain casualty, liability and other policies
of insurance relating to the Mortgaged Property in form and substance, and
with insurers and coverages, reasonably satisfactory to Mortgagee and
consistent with insurance that it maintains on Similar Properties. Mortgagor
shall keep the Mortgaged Property insured against loss by flood if the
Mortgaged Property is located in an area identified by the Secretary of
Housing and Urban Development as an area having a special flood hazards and
in which flood insurance has been made available under the National Flood
Insurance Act of 1968 (or any
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successor act thereto). All policies of insurance to be furnished hereunder
(i) shall have standard non-contributory Mortgagee clauses attached to all
policies in favor of Mortgagee, without contribution, under a standard New
York (or local equivalent) Mortgagee clause naming Mortgagee as the party to
which all payments made under such insurance policies in excess of $150,000
should be paid, (ii) shall contain an endorsement providing that neither
Mortgagor nor Mortgagee nor any other party shall be a co-insurer under said
policies and shall contain a provision requiring that the coverage evidenced
thereby shall not be terminated or materially modified without ten (10) days
prior written notice to Mortgagee, (iii) shall provide that no act or thing
done by Mortgagor shall invalidate the policy as against Mortgagee, and (iv)
with respect to property insurance policies, shall contain a waiver of
subrogation against Mortgagee. Mortgagor shall deliver certificates
evidencing additional and renewal policies, together with evidence of payment
of premiums thereon, to Mortgagee, and in the case of all insurance about to
expire, shall deliver renewal policies or certificates evidencing such
policies not less than ten (10) days prior to their respective dates of
expiration.
(b) Mortgagor shall not take out separate insurance concurrent in
form or contributing in the event of loss with that required to be maintained
hereunder unless Mortgagee is included thereon under a standard,
non-contributory Mortgagee clause acceptable to Mortgagee. Mortgagor shall
promptly notify Mortgagee whenever any such separate insurance is taken out
and shall promptly deliver to Mortgagee the certificates evidencing the
policy or policies of such insurance.
(c) The insurance required by this Mortgage, at the option of
Mortgagor, may be effected by blanket and/or umbrella policies covering the
Mortgaged Property and other properties, provided, however, that in each
case, such insurance policies otherwise comply with the provisions of this
Mortgage and allocate to the Mortgaged Property, from time to time, the
coverage specified in this Mortgage without possibility of reduction or
coinsurance by reason of, or damage to, any other property named therein. If
the insurance required by this Mortgage shall be effected by any such blanket
or umbrella policies, Mortgagor shall furnish to Mortgagee certificates with
respect to, with schedules attached thereto showing the amount of the
insurance provided under such policies which is applicable to the Mortgaged
Property.
(d) If Mortgagor fails to maintain insurance in compliance with this
Section, Mortgagee may obtain such insurance and pay the premium therefor and
Mortgagor shall, on demand, reimburse Mortgagee for all expenses incurred in
connection therewith. Mortgagor shall deliver original certificates to
Mortgagee of all insurance policies maintained pursuant to this Section 10.
Each property insurance policy shall name Mortgagee as Mortgagee, and loss
payee with respect to all casualty coverage and each liability policy shall
name Mortgagee as an additional insured thereunder.
11. Casualty. (a) Mortgagor shall give Mortgagee prompt notice of
any loss or damage to the Mortgaged Property.
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(b) In case of loss or damage to the Mortgaged Property covered by
any of the insurance policies described in Section 10 above, Mortgagee (or,
after foreclosure, the purchaser at the foreclosure sale or decree creditor,
as the case may be) is hereby authorized at its option either (i) to settle
and adjust any claim under such insurance policies without the consent of
Mortgagor; or (ii) to allow Mortgagor to settle and adjust such claim (either
jointly with Mortgagee or by Mortgagor alone, at Mortgagee's discretion);
provided that in either case Mortgagee shall, and is hereby authorized to,
collect and receipt for any such insurance proceeds. Notwithstanding
anything in the preceding sentence to the contrary, Mortgagee agrees that it
will allow Mortgagor to settle and adjust any claims under the insurance
policies which are in an amount less than $150,000, per incident of loss, up
to an aggregate amount of no greater than $300,000. The expenses incurred by
Mortgagee in the adjustment and collection of insurance proceeds shall be
included in the Obligations, and shall be reimbursed to Mortgagee upon demand
or may be deducted by Mortgagee from said insurance proceeds prior to another
application thereof. Interest on such amount shall accrue at the Default
Rate, beginning ten (10) days after Mortgagor receives notice of a request
for payment of such amount from Mortgagee, until such amount, plus interest,
is paid in full.
(c) Mortgagee shall permit Mortgagor to apply the proceeds of
insurance policies received in connection with any casualty to pay for the
cost of restoring, repairing, replacing or rebuilding the loss or damage to
the Mortgaged Property resulting from the casualty ("Restoration") if: (i)
there is no Event of Default hereunder at the time of such application; (ii)
restoration can, in the reasonable judgment of Mortgagee, be completed prior
to the maturity of the Obligations; and (iii) restoration can, in the
reasonable judgment of Mortgagee, be effected within two (2) years after the
date of such casualty and in such a manner so that the Mortgaged Property
will be of at least equal or greater value to the value than the Mortgaged
Property prior to such casualty. Otherwise, Mortgagee may elect in its sole
discretion to apply such proceeds either (x) towards payment of the
Obligations, notwithstanding the fact that the Obligations, or a portion
thereof, may not then be due and payable, or (y) to pay for the cost of
Restoration. In all events, disbursement of insurance proceeds by Mortgagee
(or at Mortgagee's election by a disbursing or escrow agent who shall be
selected by Mortgagee and whose fees shall be paid by Mortgagor), to pay the
cost of restoration shall require (i) evidence reasonably satisfactory to
Mortgagee of the estimated costs of Restoration, (ii) funds (or assurances
reasonably satisfactory to Mortgagee that such funds are available)
sufficient in addition to the proceeds of insurance to complete and fully pay
for Restoration; and (iii) such architect's certificates, waivers of lien,
contractor's sworn statements, title insurance endorsements, plats of surveys
and such other evidences of cost, payment and performance as Mortgagee may
reasonably require and approve. Except to the extent Mortgagee fails to turn
over insurance proceeds, if any, received by Mortgagee hereunder with respect
to such casualty to Mortgagor, Mortgagor hereby covenants to restore, repair,
replace or rebuild the Improvements, to be of at least equal value, and of
substantially the same character as prior to such loss or damage, all to be
effected in accordance with plans, specifications and procedures to be first
submitted to and reasonably approved by Mortgagee, and Mortgagor shall pay
all costs of such restoring, repairing, replacing or rebuilding.
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12. Eminent Domain. Mortgagor warrants, covenants and agrees that should
the Mortgaged Property, or any part thereof or interest therein, be taken or
damaged by reason of any public improvement or condemnation proceeding, or in
any other manner, or should Mortgagor receive any notice of other information
regarding such proceeding, Mortgagor shall give written notice thereof within
five (5) business days to Mortgagee. Without Mortgagee's prior consent,
Mortgagor (1) shall not agree to any compensation or award, and (2) shall not
take any action or fail to take any action which would cause the compensation
to be determined. Mortgagee shall be entitled to: (1) all compensation,
awards and other payments or relief therefor, (2) to commence, appear in and
prosecute in its own name any action or proceedings, and (3) to make any
compromise or settlement in connection with such taking or damage. Mortgagor
authorizes Mortgagee to collect and receive such awards and compensation, to
give proper receipts and acquittances therefor and in Mortgagee's discretion
to apply the same toward the payment of the Obligations, notwithstanding the
fact that the Obligations, or a portion thereof, may not then be due and
payable, or to the restoration of the Mortgaged Property in accordance with
the provisions set forth in the second-to-last sentence of Section 11(c)
above. Mortgagor further agrees to make, execute, and deliver to Mortgagee,
at any time upon request, free and clear of any encumbrance of any kind
whatsoever, any and all further assignments and other instruments deemed
necessary by Mortgagee for the purpose of validly and sufficiently assigning
all compensations and awards made to Mortgagor for any taking, either
permanent or temporary, under any such proceeding.
13. Release of Mortgage. Mortgagee agrees (subject to the provisions set
forth in Section 6(b)) as follows:
(a) promptly and unconditionally to release the Mortgaged Property
from the security title of this Mortgage in the event of a bona fide sale
(other than a "sale leaseback" or other similar financing transaction) of the
Mortgaged Property to a third party that is not affiliated with Mortgagor,
provided that each of the following conditions is satisfied: (i) neither
Mortgagor nor any of its respective affiliates continue to use or occupy the
Mortgaged Property or any part thereof; (ii) Mortgagor shall consult with
Mortgagee prior to such sale and shall obtain Mortgagee's prior written
consent with respect to such sale and the sales price (such consent not to be
unreasonably withheld); and (iii) all of the proceeds of such sale are
applied towards repayment of the Obligations or otherwise applied in
compliance with the provisions of Section 6(b) hereof.
(b) promptly and unconditionally to cancel and surrender this
Mortgage in the event that Mortgagee is paid in full for all amounts owing
(or what shall or may become owing under the Relevant Documents) to Mortgagee
by Mortgagor and any of its former affiliated debtors, including the
indefeasible payment and satisfaction in full of the Obligations.
(c) the security title of this Mortgage, if not sooner released or
canceled, shall revert to Mortgagor on December 31, 2014 (or on such earlier
date as permitted under and pursuant to the provisions of Section 6(b)
hereof); provided, however, that if thirty (30) days prior to such
anniversary any amount is then owing by Mortgagor or any of its former
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affiliated debtors to Mortgagee pursuant to any of the Agreement to
Indemnify, the Stipulation and Order, the Notes or any other Relevant
Documents, then Mortgagor agrees to amend in writing this Mortgage to extend
the term hereof until such obligations are so paid.
14. Changes in the Laws Regarding Taxation. If any law is enacted or
adopted or amended after the date of this Mortgage which imposes a tax,
either directly or indirectly, on the Obligations or Mortgagee's interest in
the Mortgaged Property, Mortgagor will pay such tax, with interest and
penalties thereon, if any, provided, however, that Mortgagor shall not be
obligated to pay any tax which is imposed on the net income of Mortgagee or
franchise taxes or doing business taxes imposed on Mortgagee. In the event
that the payment of such tax or interest and penalties by Mortgagor would be
unlawful or taxable to Mortgagee or unenforceable or provide the basis for a
defense of usury, then in any such event, Mortgagee shall have the option, by
written notice of not less than ninety (90) days, to declare the Obligations
immediately due and payable.
15. No Credits on Account of the Obligations. (i) Mortgagor will not
claim or demand or be entitled to any credit or credits on account of the
Obligations for any part of the Impositions assessed against the Mortgaged
Property, or any part thereof, and (ii) no deduction shall otherwise be made
or claimed from the assessed value of the Mortgaged Property, or any part
hereof, for real estate tax purposes by reason of this Mortgage or the
Obligations if the effect of such deduction would impose on Mortgagee a tax,
either directly or indirectly, for which it otherwise would not have been
liable.
16. Documentary Stamps. If at any time the United States of America,
any State thereof or any subdivision of any such State shall require revenue
or other stamps to be affixed to the Notes or this Mortgage, or impose any
other tax or charge on the same, Mortgagor will pay for the same, with
interest and penalties thereon, if any.
17. Controlling Agreement. It is expressly stipulated and agreed to be
the intent of Mortgagor and Mortgagee at all times to comply with applicable
state law or applicable United States federal law (to the extent that it
permits Mortgagee to contract for, charge, take, reserve, or receive a
greater amount of interest than under state law) and that this Section shall
control every other covenant and agreement in this Mortgage and the other
Relevant Documents. If the applicable law (state or federal) is ever
judicially interpreted so as to render usurious any amount called for under
the Notes or under any of the other Relevant Documents, or contracted for,
charged, taken, reserved, or received with respect to the Obligations, or if
Mortgagee's exercise of the option to accelerate the maturity of the Notes,
or if any prepayment by Mortgagor results in Mortgagor having paid any
interest in excess of that permitted by applicable law, then it is
Mortgagor's and Mortgagee's express intent that all excess amounts
theretofore collected by Mortgagee shall be credited on the principal balance
of the Notes and all other Obligations (or, if the Notes and all other
Obligations have been or would thereby be paid in full, refunded to
Mortgagor), and the provisions of the Notes and the other Relevant Documents
immediately be deemed reformed and the amounts thereafter collectible
hereunder and thereunder reduced, without the necessity of the execution of
any
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new documents, so as to comply with the applicable law, but so as to
permit the recovery of the fullest amount otherwise called for hereunder or
thereunder. All sums paid or agreed to be paid to Mortgagee for the use,
forbearance, or detention of the Obligations shall, to the extent permitted
by applicable law, be amortized, prorated, allocated, and spread throughout
the full stated term of the Obligations until payment in full so that the
rate or amount of interest on account of the Obligations does not exceed the
maximum rate of interest permitted by law from time to time in effect and
applicable to the Obligations for so long as the Obligations are outstanding.
18. Performance of Other Agreements. Mortgagor shall observe and
perform in all respects the terms to be observed or performed by Mortgagor
under any agreement or recorded instrument affecting or pertaining to the
Mortgaged Property.
19. Right to Perform the Obligations. Subject to the terms of the
Relevant Documents, if any default exists, Mortgagee shall have the right,
but not the obligation, to cure such default in the name and on behalf of
Mortgagor. All sums advanced and expenses incurred at any time by Mortgagee
under this Section 19, or otherwise under this Mortgage or any of the other
Relevant Documents or applicable law (including, without limitation, the
costs and expenses of Mortgagee and its agents incurred in connection with
the preservation, collection and enforcement of this Mortgage or of the liens
created hereby), shall bear interest from the date that such sum is advanced
or expense incurred, to and including the date of reimbursement, computed at
the Default Rate (as defined in the Notes), and all such sums, together with
interest thereon, shall constitute additions to the Obligations and shall be
secured by this Mortgage and Mortgagor covenants and agrees to pay them to
the order of the Mortgagee promptly upon demand.
20. Further Acts, etc. Mortgagor will, at the cost of Mortgagor, and
without expense to Mortgagee, do, execute, acknowledge and deliver all and every
such further acts, deeds, conveyances, mortgages, assignments, notices of
assignment, Uniform Commercial Code financing statements or continuation
statements, transfers and assurances as Mortgagee shall, from time to time,
reasonably require, for the better assuring, conveying, assigning, transferring,
and confirming unto Mortgagee the property and rights hereby mortgaged, given,
granted, bargained, sold, alienated, enfeoffed, conveyed, confirmed, warranted,
pledged, assigned and hypothecated (including, without limitation, the
assignment of leases and rents contained in Section 8 hereof) or intended now or
hereafter so to be, or which Mortgagor may be or may hereafter become bound to
convey or assign to Mortgagee, or for carrying out the intention or facilitating
the performance of the terms of this Mortgage or for filing, registering or
recording this Mortgage. Mortgagor, on demand, will execute and deliver and,
Mortgagor hereby authorizes Mortgagee to execute in the name of Mortgagor or
without the signature of Mortgagor to the extent Mortgagee may lawfully do so,
one or more financing statements, chattel mortgages or other instruments, to
evidence more effectively the security interest of Mortgagee in the Mortgaged
Property. Notwithstanding anything to the contrary contained herein, Mortgagor
shall not be obligated to execute, deliver, file or record any additional
documents which increase Mortgagor's obligations under this Mortgage or the
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Relevant Documents. Mortgagor grants to Mortgagee an irrevocable power of
attorney coupled with an interest for the purpose of exercising the rights
provided for in Section 19 and this Section 20.
21. Recording of Mortgage, etc. Mortgagor forthwith upon the execution
and delivery of this Mortgage and thereafter, from time to time, will cause
this Mortgage, and any security instrument creating a lien or security
interest or evidencing the security title hereof upon the Mortgaged Property,
and each instrument of further assurance to be filed, registered or recorded
in such manner and in such places as may be required by any present or future
law in order to publish notice of and fully to protect the lien or security
interest hereof upon, and the interest of Mortgagee in, the Mortgaged
Property. Mortgagor will pay all filing, registration or recording fees, the
costs and fees of local counsel for Mortgagee, including, without limitation,
costs and fees for local counsel review of the Mortgage and Subordination
Agreement, and the preparation of opinion letters in connection therewith,
and all expenses incident to the execution and acknowledgment of this
Mortgage (but not including fees of Mortgagee's New York counsel in
connection with the preparation of this Mortgage), any deed of trust or
mortgage supplemental hereto, any security instrument with respect to the
Mortgaged Property and any instrument of further assurance, and all federal,
state, county and municipal, taxes, duties, imposts, assessments and charges
arising out of or in connection with the execution and delivery of this
Mortgage, any deed of trust or mortgage supplemental hereto, any security
instrument with respect to the Mortgaged Property or any instrument of
further assurance (other than income or franchise taxes imposed on
Mortgagee), except where prohibited by law so to do. Mortgagor shall hold
harmless and indemnify Mortgagee, its successors and assigns, against any
liability incurred by reason of the imposition of any tax on the making and
recording of this Mortgage. Mortgagor shall pay all title costs and premiums
in connection with the ALTA lender's title insurance policy issued by Chicago
Title Insurance Company for the benefit of Mortgagee in connection with this
Mortgage (including payment for the cost of any property surveys prepared in
connection therewith), which title insurance policy shall be in form and
substance satisfactory to Mortgagee containing such endorsements as Mortgagee
may reasonably request, including, without limitation, the deletion of any
creditor's rights exception and (to the extent available) a variable rate
endorsement; survey endorsement; comprehensive endorsement; first loss
endorsement; last dollar endorsement; tie-in endorsement; future advances
endorsement; access coverage; tax parcel coverage; contiguity (if applicable)
coverage; and such other endorsements as Mortgagee shall reasonably require.
In the event that any Survey with respect to the Mortgaged Property reveals
any encumbrances, restrictions, building code or zoning violations or other
matters which in Mortgagee's reasonable judgment, materially impair
Mortgagee's first priority lien in the Mortgaged Property, Mortgagor agrees
to cooperate with Mortgagee in performing any acts reasonably requested by
Mortgagee to cause such encumbrances, restrictions, violations or other
matters to be removed or remedied as appropriate.
22. Reporting Requirements. Mortgagor agrees to give prompt notice to
Mortgagee of the insolvency or bankruptcy filing of Mortgagor. In addition,
Mortgagor will give notice to Mortgagee in writing not later than ten (10)
days after: (i) the occurrence of any
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Event of Default with respect to Mortgagor hereunder; or (ii) notice to
Mortgagor of any action, litigation or proceeding instituted to recover
possession of the Mortgaged Property from Mortgagor or for any other purpose
affecting this Mortgage or of any other action, litigation or proceeding
instituted against Mortgagor or judgment rendered against Mortgagor; and such
notice to Mortgagee shall include a true copy of any notice of default, or if
any action is then proceeding, copies of any pleadings and papers received by
Mortgagor.
23. Events of Default. The term "Event of Default" as used herein shall
mean the occurrence or happening, at any time and from time to time, of one
or more of the following events:
(a) a default or event of default under any of the Notes
(including, without limitation, any event of default described in Section 3
of any of the Notes), which remains uncured following the expiration of any
applicable cure periods;
(b) Mortgagor (i) shall fail to perform when due any payment
obligation under the terms of this Mortgage or the other Relevant Documents
within ten days after such amount becomes due, or (ii) shall be in violation
of any of the obligations or covenants contained herein or therein and such
default shall continued unremedied for a period of thirty (30) days, provided
that if such default is not readily susceptible of cure in such thirty (30)
day period, and provided that Mortgagor proceeds in a diligent manner to cure
such default, Mortgagor shall have such additional time to effect such cure
as shall be reasonably necessary to effect such cure;
(c) Failure by Mortgagor to maintain insurance and deliver evidence
thereof pursuant to Section 10; or
(d) a default under any other mortgage, deed of trust or other
security instrument covering the Mortgaged Property or a portion thereof
which remains uncured following the expiration of any applicable cure periods.
24. Remedies. (a) Upon the occurrence of any Event of Default,
Mortgagee may take such action permitted in law or at equity, without notice
or demand, as it deems advisable to protect and enforce its rights against
Mortgagor and in and to the Mortgaged Property, by Mortgagee itself or
otherwise, including, but not limited to, the following actions, each of
which may be pursued concurrently or otherwise, at such time and in such
order as Mortgagee may determine, in its sole discretion, without impairing
or otherwise affecting the other rights and remedies of Mortgagee:
(i) declare the entire principal amount of the indebtedness and
Obligations secured hereby with interest accrued thereon to be
immediately due and payable;
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(ii) institute a proceeding or proceedings, judicial or nonjudicial,
by advertisement or otherwise, for the complete foreclosure of this
Mortgage in which case the Mortgaged Property or any interest therein
may be sold for cash or upon credit in one or more parcels or in
several interests or portions and in any order or manner in accordance
with the laws of the jurisdiction in which such Mortgaged Property is
located;
(iii) with or without entry, to the extent permitted, and pursuant to
the procedures provided by, applicable law, institute proceedings for
the foreclosure of this Mortgage for the Obligations then due and
payable subject to the continuing lien of this Mortgage, in
accordance with the laws of the jurisdiction in which such Mortgaged
Property is located, for the balance of the Obligations not then due;
(iv) sell for cash or upon credit the Mortgaged Property or any part
thereof and all estate, claim, demand, right, title and interest of
Mortgagor therein and rights of redemption thereof, pursuant to
power of sale or otherwise, at one or more sales, as an entirety or
in parcels, at such time and place, upon such terms and after such
notice thereof as may be required or permitted by the laws of the
jurisdiction in which such Mortgaged Property is located;
(v) institute an action, suit or proceeding in equity for the
specific performance of any covenant, condition or agreement
contained herein or in the other Relevant Documents;
(vi) recover judgment on the Notes either before, during or after any
proceedings for the enforcement of this Mortgage;
(vii) prior to, concurrently with, or subsequent to the institution
of foreclosure proceedings, apply for the appointment of a trustee,
receiver, liquidator or conservator of the Mortgaged Property, as a
matter of strict right, without notice and without regard for the
adequacy of the security for the Obligations or the interest of the
Mortgagor therein and without regard for the solvency of the
Mortgagor or of any person, firm or other entity liable for the
payment of the Obligations, and Mortgagor hereby consents to such
appointment;
(viii) prior to, concurrently with or subsequent to the institution
of foreclosure proceedings, enforce Mortgagee's interest in the
Leases and Rents and enter into or upon the Mortgaged Property and
take exclusive possession thereof, either personally or by its
agents, nominees or attorneys and dispossess Mortgagor and its
agents and servants therefrom, and thereupon Mortgagee may (whether
or not a receiver has been appointed) as attorney-in-fact or agent
of Mortgagor, or in its own name and under the powers herein
granted, (A) use, operate, manage, control, insure, maintain,
repair, restore and otherwise deal
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with all and every part of the Mortgaged Property and conduct the
business thereat; (B) complete any construction on the Mortgaged
Property in such manner and form as Mortgagee deems advisable; (C)
make alterations, additions, renewals, replacements and improvements
to or on the Mortgaged Property; (D) exercise all rights and powers
of Mortgagor with respect to the Mortgaged Property, whether in the
name of Mortgagor or otherwise (including, without limitation, the
right to make, cancel, enforce or modify Leases, obtain and evict
tenants, and demand, sue for, collect and receive all earnings,
revenues, rents, issues, profits and other income of the Mortgaged
Property and every part thereof); and (E) apply the receipts from
the Mortgaged Property to the payment of the Obligations, after
deducting therefrom all reasonable expenses (including, without
limitation, reasonable attorneys' fees) incurred in connection with
the aforesaid operations and all amounts necessary to pay the taxes,
assessments, insurance and other charges in connection with the
Mortgaged Property, it being agreed that should Mortgagee incur any
liability, loss or damage in the defense of any claims or demands,
the amount thereof, including costs, expenses and reasonable
attorneys' fees shall be secured hereby, and Mortgagor shall
reimburse Mortgagee therefor immediately upon demand;
(ix) require Mortgagor to pay monthly in advance to Mortgagee, or any
receiver appointed to collect the Rents, the fair and reasonable
rental value for the use and occupation of any portion of the
Mortgaged Property occupied by Mortgagor and require Mortgagor to
vacate and surrender possession to Mortgagee of the Mortgaged Property
or to such receiver and, in default thereof, evict Mortgagor by
summary proceedings or otherwise; and
(x) pursue such other rights and remedies as may be available under
the Relevant Documents or otherwise at law or in equity or under the
Uniform Commercial Code including the right to establish a lock box
for all Rents and other receivables of Mortgagor relating to the
Mortgaged Property.
In the event of a sale, by foreclosure or otherwise, of less than all of the
Mortgaged Property, the security title of this Mortgage shall continue with
respect to the remaining portions of the Mortgaged Property.
The proceeds of any sale made under or by virtue of this Section 24,
together with any other sums which then may be held by Mortgagee under this
Mortgage, whether under the provisions of this Section or otherwise, shall be
applied by Mortgagee in the following order of priority: first, on account
of all reasonable costs and expenses incident to the foreclosure proceedings,
including all such items as are mentioned in this Section 24; second, all
other items which under the terms hereof constitute secured indebtedness,
which are any amounts due under this Mortgage, or under the other Relevant
Documents (including
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any amounts required to be escrowed pursuant to Section 6(b)); third, any
surplus to Mortgagor, its successors or assigns, as their rights may appear.
(b) Upon any sale made under or by virtue of this Section 24, whether
made under the power of sale herein granted or under or by virtue of judicial
proceedings or of a judgment or decree of foreclosure and sale, Mortgagee may
bid for and acquire the Mortgaged Property or any part thereof and in lieu of
paying cash therefor may make settlement for the purchase price by crediting
upon the Obligations the net sales price after deducting therefrom the
expenses of the sale and costs of the action and any other sums which
Mortgagee is authorized to deduct under this Mortgage.
(c) No recovery of any judgment by Mortgagee and no levy of an execution
under any judgment upon the Mortgaged Property or upon any other property of
Mortgagor shall affect in any manner or to any extent the security title of
this Mortgage upon the Mortgaged Property or any part thereof, or any liens,
rights, powers or remedies of Mortgagee hereunder, but such liens, rights,
powers and remedies of Mortgagee shall continue unimpaired as before.
(d) Mortgagee may adjourn, terminate or rescind any proceeding or other
action brought in connection with its exercise of the remedies provided in
this Section 24 at any time before the conclusion thereof, as determined in
Mortgagee's sole discretion and without prejudice to Mortgagee.
(e) Mortgagee may resort to any remedies and the security given by this
Mortgage or the other Relevant Documents in whole or in part, and in such
portions and in such order as determined by Mortgagee's sole discretion. No
such action shall in any way be considered a waiver of any rights, benefits
or remedies evidenced or provided by this Mortgage or the other Relevant
Documents. The failure of Mortgagee to exercise any right, remedy or option
provided in this Mortgage or the other Relevant Documents shall not be deemed
a waiver of such right, remedy or option or of any covenant or obligation
secured by this Mortgage or the other Relevant Documents. Subject to the
provisions of the Relevant Documents, no acceptance by Mortgagee of any
payment after the occurrence of any Event of Default and no payment by
Mortgagee of any obligation for which Mortgagor is liable hereunder shall be
deemed to waive or cure any Event of Default with respect to Mortgagor, or
Mortgagor's liability to pay such obligation. No sale of all or any portion
of the Mortgaged Property, no forbearance on the part of Mortgagee and no
extension of time for the payment of the whole or any portion of the
Obligations or any other indulgence given by Mortgagee to Mortgagor, shall
operate to release or in any manner affect the interest of Mortgagee in the
remaining Mortgaged Property or the liability of Mortgagor to pay the
Obligations. No waiver by Mortgagee shall be effective, unless it is in
writing and then only to the extent specifically stated.
(f) The interests and rights of Mortgagee under this Mortgage and the
other Relevant Documents, and the liens and security interests created and
evidenced by this Mortgage and the other Relevant Documents, shall not be
impaired by any indulgence,
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including (i) any renewal, extension or modification which Mortgagee may
grant with respect to any of the Obligations, (ii) any surrender, compromise,
release, renewal, extension, exchange or substitution which Mortgagee may
grant with respect to the Mortgaged Property or any portion thereof; or (iii)
any release or indulgence granted to any maker, endorser, guarantor or surety
of any of the Obligations.
(g) Upon the occurrence of any Event of Default under Section 23, in any
suit to foreclose the lien hereof or enforce any other remedy of Mortgagee
under this Mortgage, there shall be allowed and included as additional
indebtedness in the decree for sale or other judgment or decree all
reasonable expenditures and expenses which may be paid or incurred by or on
behalf of Mortgagee for attorneys' fees, appraiser's fees, outlays for
documentary and expert evidence, stenographers' charges, publication costs,
and costs (which may be estimated as to items to be expended after entry of
the decree) of procuring all such abstracts of title, title searches and
examinations, title insurance policies, Torrens certificates, and similar
data and assurances with respect to title as Mortgagee may deem reasonably
necessary either to prosecute such suit or to evidence to bidders at any sale
which may be had pursuant to such decree the true condition of the title to
or the value of the Mortgaged Property. All such reasonable expenditures and
expenses which Mortgagee may incur as permitted by this Section for the
protection of the Mortgaged Property and the maintenance of the lien of this
Mortgage, including, but not limited to, the fees and out-of-pocket
disbursements of any attorney employed by Mortgagee in any litigation or
proceeding affecting this Mortgage, including, but not limited to, bankruptcy
proceedings or preparations for the commencement or defense of any proceeding
or threatened suit or proceeding, shall be immediately due and payable by
Mortgagor and shall be secured by this Mortgage.
25. Right of Access. Mortgagor shall permit agents, representatives and
employees of Mortgagee to (i) inspect the Mortgaged Property or any part
thereof, provided that such inspection does not materially interfere with the
tenants of the Mortgaged Property or violate the terms of any Lease, (ii) to
examine and make abstracts from any of Mortgagor's books and records and
(iii) to discuss the business, operations, properties and financial and other
condition of Mortgagor with officers of Mortgagor and with its independent
certified public accountants, at such reasonable times as may be requested by
Mortgagee upon reasonable advance notice.
26. Security Agreement. This Mortgage is both a real property deed to
secure debt and a "security agreement" within the meaning of the Uniform
Commercial Code. The Mortgaged Property includes both real and personal
property and all other rights and interests, whether tangible or intangible
in nature, of Mortgagor in the Mortgaged Property. Mortgagor by executing
and delivering this Mortgage has granted and hereby grants to Mortgagee, as
security for the Obligations, a security interest in the Mortgaged Property
to the full extent that the Mortgaged Property may be subject to the Uniform
Commercial Code (said portion of the Mortgaged Property so subject to the
Uniform Commercial Code being called in this paragraph the "Collateral").
Mortgagor hereby agrees with Mortgagee to execute and deliver to Mortgagee,
in form and substance satisfactory to Mortgagee, such financing
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statements and such further assurances as Mortgagee may from time to time,
reasonably consider necessary to create, perfect, and preserve Mortgagee's
security interest herein granted. All or part of the Mortgaged Property is
or is to become "fixtures" as defined in the Uniform Commercial Code, and
this Mortgage, upon being filed for record in the real estate records of the
city or county wherein such fixtures are situated, shall also constitute a
"fixture filing" for the purposes of the Uniform Commercial Code upon such of
the Mortgaged Property that is or may become fixtures. Information
concerning the security interest herein granted may be obtained from the
parties at the addresses of the parties set forth in the first paragraph of
this Mortgage. Mortgagor's chief executive office and principal place of
business is the Mortgagor's address set forth in the first paragraph of this
Mortgage, and the place where Mortgagor's books and records in respect of
where the Mortgaged Property is located are kept is the address of Mortgagor
set forth in the first paragraph of this Mortgage. If an Event of Default
shall occur which shall remain uncured, Mortgagee, in addition to any other
rights and remedies which it may have, shall have and may exercise
immediately and without demand, any and all rights and remedies granted to a
secured party upon default under the Uniform Commercial Code, (including,
without limitation, to the extent permitted by law, the right to take
possession of the Collateral or any part thereof, and to take such other
measures as Mortgagee may deem necessary for the care, protection and
preservation of the Collateral). Upon request or demand of Mortgagee,
Mortgagor shall at its expense assemble the Collateral and make it available
to Mortgagee at a convenient place acceptable to Mortgagee. Mortgagor shall
pay to Mortgagee on demand therefor any and all reasonable expenses
(including, without limitation, reasonable legal expenses and attorneys'
fees) incurred or paid by Mortgagee in protecting the interest in the
Collateral and in enforcing the rights hereunder with respect to the
Collateral. Any notice of sale, disposition or other intended action by
Mortgagee with respect to the Collateral sent to Mortgagor at least ten (10)
business days prior to such action or such notice as is otherwise required by
law or the Relevant Documents, shall constitute commercially reasonable
notice to Mortgagor. The proceeds of any disposition of the Collateral, or
any part thereof, may be applied by Mortgagee to the payment of the
Obligations in such priority and proportions as Mortgagee shall determine in
its sole discretion. In the event of any change in name, identity or
structure of Mortgagor, Mortgagor shall notify Mortgagee thereof and,
promptly after request, shall execute, file and record such Uniform
Commercial Code forms as are necessary to maintain the priority of
Mortgagee's lien upon and security interest in the Collateral, and shall pay
all expenses and fees in connection with the filing and recording thereof.
If Mortgagee shall require the filing or recording of additional Uniform
Commercial Code forms or continuation statements, Mortgagor shall, promptly
after request, execute, file and record such Uniform Commercial Code forms or
continuation statements as Mortgagee shall deem necessary, and shall pay all
expenses and fees in connection with the filing and recording thereof, it
being understood and agreed, however, that no such additional documents shall
materially increase Mortgagor's obligations under this Mortgage or the other
Relevant Documents. Mortgagor hereby irrevocably appoints Mortgagee as its
attorney-in-fact, coupled with an interest, to file with the appropriate
public office on its behalf any UCC financing statements (or related
documents) signed only by Mortgagee, as secured party, in connection with the
Collateral covered by this Mortgage, such appointment to terminate upon the
release of this Mortgage.
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27. Actions and Proceedings. Mortgagee has the right to appear in and
defend any action or proceeding brought with respect to the Mortgaged
Property and to bring any action or proceeding, in the name and on behalf of
Mortgagor, which Mortgagee, in its reasonable discretion, decides should be
brought to protect its interest under this Mortgage or in the Mortgaged
Property. Subject to the foregoing, Mortgagor shall appear in and contest
any action or proceeding purporting to affect the security hereof and shall
pay all reasonable costs and expenses including cost of evidence of title and
attorney's fees, in any such action or proceeding in which Mortgagee may
appear. Mortgagee shall, at its option, be subrogated to the lien of any
mortgage or other security instrument discharged in whole or in part by the
Obligations, and any such subrogation rights shall constitute additional
security for the payment of the Obligations.
28. Waiver of Setoff and Counterclaim. Except as may be permitted under
the Relevant Documents, all amounts due under this Mortgage, the Notes and
the other Relevant Documents shall be payable without setoff or counterclaim
whatsoever.
29. Liens. Mortgagor warrants, covenants and agrees to pay and promptly
discharge, at Mortgagor's cost and expense, all taxes, assessments and
governmental charges levied upon it, its income and assets as and when such
taxes, assessments and charges are due and payable (including, without
limitation, all Impositions), as well as all lawful claims for labor
materials and supplies or otherwise which could become a lien, and all liens,
encumbrances and charges upon the Mortgaged Property, or any part thereof or
interest therein; provided that the existence of any mechanic's, laborer's,
materialman's, supplier's or vendor's lien or right thereto shall not
constitute a violation of this Section if payment is not yet due under the
contract which is the foundation thereof. Notwithstanding the foregoing,
Mortgagor shall not be in default for failure to pay or discharge Impositions
or mechanic's or materialman's or similar lien asserted against the Mortgaged
Property if, and so long as, (a) Mortgagor shall have notified Mortgagee of
same within seven (7) days of obtaining knowledge thereof; (b) Mortgagor
shall diligently and in good faith contest the same by appropriate legal
proceedings which shall operate to prevent the enforcement or collection of
the same and the sale of the Mortgaged Property or any part thereof, to
satisfy the same; (c) unless funds are otherwise reserved, Mortgagor shall
furnish to Mortgagee such security as Mortgagee may reasonably request to
insure payment of such Impositions and to secure and indemnify Mortgagee
against any cost, expense, loss or damage in connection with such contest or
postponement of payment,; (d) Mortgagor shall timely upon final determination
thereof pay the amount of any such Impositions, claim, fine or penalty so
determined, together with all costs, interest and penalties which may be
payable in connection therewith; (e) the failure to pay the Impositions, or
mechanic's or materialman's or similar lien claim does not constitute a
default under any other deed of trust, mortgage or security interest covering
or affecting any part of the Mortgaged Property; and (f) notwithstanding the
foregoing, Mortgagor shall immediately upon request of Mortgagee pay (and if
Mortgagor shall fail so to do, Mortgagee may, but shall not be required to,
pay or cause to be discharged or bonded against) any such Impositions, or
claim notwithstanding such contest, if in the reasonable
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opinion of Mortgagee, the Mortgaged Property or any part thereof or interest
therein may be in imminent danger of being sold, forfeited, foreclosed,
terminated, canceled or lost.
30. Recovery of Sums Required to Be Paid. Mortgagee shall have the right
from time to time to take action to recover any sum or sums which constitute
a part of the Obligations as the same become due and owing, without regard to
whether or not the balance of the Obligations shall be due, and without
prejudice to the right of Mortgagee thereafter to bring an action of
foreclosure, or any other action, for a default or defaults by Mortgagor
existing at the time such earlier action was commenced.
31. Marshaling, Waiver of Redemption and Other Matters. Mortgagor hereby
waives, to the extent permitted by law, the benefit of all appraisement,
valuation, stay, extension, reinstatement, moratorium and redemption laws now
or hereafter in force and all rights of marshaling in the event of any sale
hereunder of the Mortgaged Property or any part thereof or any interest
therein. Further, Mortgagor hereby expressly waives any and all rights of
redemption from sale under any order or decree of foreclosure of this
Mortgage on behalf of Mortgagor, and on behalf of each and every person
acquiring any interest in or title to the Mortgaged Property subsequent to
the date of this Mortgage and on behalf of all persons to the extent
permitted by applicable law.
32. Notice. Any notice which either party hereto may desire or be
required to give to the other party shall be in writing and delivered by:
(x) a commercial courier or messenger service or (y) by U.S. registered or
certified mail with return receipt requested. Notice by commercial messenger
or courier service will be deemed to have been given on the day when
delivered before 4:00 p.m. on a business day in the city in which notice is
delivered, provided that payment for the cost of delivery is not requested of
the recipient. Notice by mail shall be given by registered or certified U.S.
Mail, return receipt requested. Delivery of notice by commercial messenger
or courier service or mail shall be assumed if acceptance of delivery is
refused. Notice may be given by fax but will only be treated as delivered
hereunder if: (x) sent between the hours of 9:00 a.m. and 5:00 p.m. (based
on local time at the destination); and (y) receipt is acknowledged by fax and
delivery will be deemed to have been given on the date the fax acknowledgment
is sent. Notices shall be delivered as follows or at such other place as
either party hereto may by notice in writing (given in accordance with this
Section 32) designate:
To Mortgagor: Discovery Zone, Inc.
One Corporate Center
110 East Broward Boulevard
Fort Lauderdale, Florida 33301
Attn: President
Telecopy Number: (954) 627-2670
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To Mortgagee: McDonald's Corporation
One McDonald's Plaza
Oak Brook, IL 60523
Attn: General Counsel
Telecopy Number: (630) 623-3000
33. Sole Discretion of Mortgagee. Wherever pursuant to this Mortgage,
Mortgagee exercises any right given to it to approve or disapprove, or any
arrangement or term is to be satisfactory to Mortgagee, the decision of
Mortgagee to approve or disapprove or to decide that arrangements or terms
are satisfactory or not satisfactory shall be in the sole discretion of
Mortgagee and shall be final and conclusive, except as may be otherwise
expressly and specifically provided herein.
34. Non-Waiver. The failure of Mortgagee to insist upon strict
performance of any term hereof shall not be deemed to be a waiver of any term
of this Mortgage. Mortgagor shall not be relieved of Mortgagor's Obligations
hereunder by reason of (a) the failure of Mortgagee to comply with any
request of Mortgagor to take any action to foreclose this Mortgage or
otherwise enforce any of the provisions hereof or of the other Relevant
Documents, (b) the release, regardless of consideration, of the whole or any
part of the Mortgaged Property, or of any person liable for the Obligations
or any portion thereof, or (c) any agreement or stipulation by Mortgagee
extending the time of payment or otherwise modifying or supplementing the
terms of this Mortgage or the other Relevant Documents. Mortgagee may resort
for the payment of the Obligations to any other security held by Mortgagee in
such order and manner as Mortgagee, in its discretion, may elect. Mortgagee
may take action to recover the Obligations, or any portion thereof, or to
enforce any covenant hereof without prejudice to the right of Mortgagee
thereafter to foreclosure this Mortgage. The rights and remedies of Mortgagee
under this Mortgage shall be separate, distinct and cumulative and none shall
be given effect to the exclusion of the others. No act of Mortgagee shall be
construed as an election to proceed under any one provision herein to the
exclusion of any other provision. Mortgagee shall not be limited exclusively
to the rights and remedies herein stated but shall be entitled to every right
and remedy now or hereafter afforded at law or in equity.
35. No Oral Change. This Mortgage and the other Relevant Documents
constitute the final expression of the entire agreement among the parties
pertaining to the subject matter hereof and thereof and supersede all prior
and contemporaneous agreements, understanding, representations or other
arrangements, whether express or implied, written or oral, of the parties in
connection herewith or therewith except to the extent expressly incorporated
or specifically referred to herein or therein. This Mortgage, and any
provisions hereof, may not be modified, amended, waived, extended, changed,
discharged or terminated orally or by any act or failure to act on the part
of Mortgagor or Mortgagee, but only by an agreement in writing signed by the
party against whom enforcement of any modification, amendment, waiver,
extension, change, discharge or termination is sought.
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36. Successors and Assigns. Subject to the provisions hereof requiring
Mortgagee's consent to any transfer of the Mortgaged Property, this Mortgage
shall be binding upon and inure to the benefit of Mortgagor and Mortgagee and
their respective permitted successors and assigns forever.
37. Severability. If any term, covenant or condition of this
Mortgage or the Relevant Documents is held to be invalid, illegal or
unenforceable in any respect, this Mortgage and any such other Relevant Document
shall be construed without such provision.
38. Headings, etc. The headings and captions of various paragraphs of
this Mortgage are for convenience of reference only and are not to be
construed as defining or limiting, in any way, the scope or intent of the
provisions hereof.
39. Duplicate Originals. This Mortgage may be executed in any number of
duplicate originals and each such duplicate original shall be deemed to be an
original.
40. Definitions. Unless the context clearly indicates a contrary intent
or unless otherwise specifically provided herein, words used in this Mortgage
may be used interchangeably in singular or plural form and the word
"Mortgagor" shall mean "each Mortgagor and any subsequent owner or owners of
the Mortgaged Property or any part thereof or any interest therein," the word
"Mortgagee" shall mean "Mortgagee and any subsequent holder(s) of the Notes,"
the word "person" shall include an individual, corporation, partnership,
trust, unincorporated association, government, governmental authority, and
any other entity, and the words "Mortgaged Property" shall include any
portion of the Mortgaged Property and any interest therein and the words
"attorneys' fees" shall include any and all attorneys' fees, paralegal and
law clerk fees (including, without limitation, fees at the pre-trial, trial
and appellate levels incurred or paid by Mortgagee in protecting its interest
in the Mortgaged Property and Collateral and enforcing its rights hereunder
and all such fees incurred in connection with any bankruptcy or insolvency
proceedings). Whenever the context may require, any pronouns used herein
shall include the corresponding masculine, feminine or neuter forms, and the
singular form of nouns and pronouns shall include the plural and vice versa.
41. Homestead. Mortgagor hereby waives and renounces all homestead and
exemption rights provided by the constitution and the laws of the United
States and of any state, in and to the Land as against the collection of the
Obligations, or any part hereof.
42. Assignments. Consistent with and subject to the applicable
provisions of the Relevant Documents, Mortgagee shall have the right to
assign or transfer its rights under this Mortgage without limitation. Any
Mortgagee or transferee shall be entitled to all the benefits afforded
Mortgagee under this Mortgage.
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<PAGE>
43. Waiver of Jury Trial. TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE
LAW, EACH PARTY HERETO HEREBY AGREES NOT TO ELECT A TRIAL BY JURY OF ANY
ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY JURY FULLY
TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO
THE NOTES, THIS MORTGAGE, OR THE OTHER RELEVANT DOCUMENTS, OR ANY CLAIM,
COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH. THIS WAIVER OF
RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY SUCH PARTY, AND
IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO
WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE. MORTGAGEE IS
HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS
CONCLUSIVE EVIDENCE OF THIS WAIVER BY MORTGAGOR.
44. Consent to Jurisdiction. MORTGAGOR AND MORTGAGEE HERETO CONSENT FOR
THEMSELVES AND IN RESPECT OF THEIR PROPERTIES, GENERALLY, UNCONDITIONALLY AND
IRREVOCABLY, TO THE NONEXCLUSIVE JURISDICTION OF THE FEDERAL AND STATE COURTS
IN THE STATE OF NEW YORK WITH RESPECT TO ANY PROCEEDING RELATING TO ANY
MATTER, CLAIM OR DISPUTE ARISING UNDER THE RELEVANT DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED THEREBY. MORTGAGOR FURTHER CONSENTS, GENERALLY,
UNCONDITIONALLY AND IRREVOCABLY, TO THE NONEXCLUSIVE JURISDICTION OF THE
STATE AND FEDERAL COURTS OF THE STATE IN WHICH ANY OF THE COLLATERAL IS
LOCATED IN RESPECT OF ANY PROCEEDING RELATING TO ANY MATTER, CLAIM OR DISPUTE
ARISING WITH RESPECT TO SUCH COLLATERAL. MORTGAGOR FURTHER IRREVOCABLY
CONSENTS TO THE SERVICE OF PROCESS, GENERALLY, UNCONDITIONALLY AND
IRREVOCABLY, AT THE ADDRESSES SET FORTH IN THE FIRST PARAGRAPH HEREOF IN
CONNECTION WITH ANY OF THE AFORESAID PROCEEDINGS IN ACCORDANCE WITH THE RULES
APPLICABLE TO SUCH PROCEEDINGS. TO THE EXTENT PERMITTED BY APPLICABLE LAW,
MORTGAGOR HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW HAVE OR
HAVE IN THE FUTURE TO THE LAYING OF VENUE IN RESPECT OF ANY OF THE AFORESAID
PROCEEDINGS BROUGHT IN THE COURTS REFERRED TO ABOVE AND AGREES NOT TO PLEAD
OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY
SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTHING HEREIN SHALL
AFFECT THE RIGHT OF MORTGAGEE TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW
OR TO COMMENCE PROCEEDINGS OR OTHERWISE PROCEED AGAINST MORTGAGOR IN ANY
JURISDICTION.
45. Governing Law. This Mortgage shall be governed by and construed in
accordance with the laws of the State of New York including, without
limitation, Section 5-1401 of the General Obligations Law, but otherwise
without regard to conflict of law
31
<PAGE>
principles; provided, however, that with respect to the creation, attachment,
perfection, priority and procedures relating to the enforcement of the liens
and security interests created by or pursuant to this Mortgage and relating
to real property, this Mortgage shall be governed by and construed in
accordance with the laws of the state in which the Land is located.
46. Security Title Absolute, Multi-site Real Estate and Multiple
Collateral Transaction. Mortgagor acknowledges that this Mortgage and a
number of other Relevant Documents and those documents required by the
Relevant Documents together secure the Obligations. Mortgagor agrees that
the security title of this Mortgage and all obligations of the Mortgagor
hereunder shall be absolute and unconditional and shall not in any manner be
affected or impaired by:
(a) any lack of validity or enforceability of the Notes or any other
Relevant Document, any agreement with respect to any of the Obligations or
any other agreement or instrument relating to any of the foregoing;
(b) any acceptance by Mortgagee of any security for or guarantees of any
of the indebtedness hereby secured;
(c) any failure, neglect or omission on the part of Mortgagee to realize
upon or protect any of the indebtedness hereby secured or any of the
collateral security therefor, including the Relevant Documents;
(d) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations;
(e) any release (except as to the property or obligation released),
sale, pledge, surrender, compromise, settlement, nonperfection, renewal
extension, indulgence, alteration, exchange, modification or disposition of
any of the Obligations hereby secured or of any of the collateral security
therefor;
(f) any amendment or waiver of or any consent to any departure from the
Notes or any other Relevant Documents or of any guaranty thereof (except to
the extent of such amendment, waiver or consent in writing by Mortgagee), if
any, and Mortgagee may in its discretion foreclose, exercise any power of
sale, or exercise any other remedy available to it under any or all of the
Relevant Documents without first exercising or enforcing any of its rights
and remedies hereunder; and
(g) any exercise of the rights or remedies of Mortgagee hereunder or
under any or all of the Relevant Documents.
Mortgagor specifically consents and agrees that Mortgagee may exercise its
rights and remedies hereunder and under the other Relevant Documents
separately or concurrently and in any order that Mortgagee may deem
appropriate.
32
<PAGE>
47. Future Advances. This Mortgage shall secure not only existing
indebtedness, but also such future advances, whether such advances are
obligatory or are to be made at the option of Mortgagee, or otherwise, as are
made by Mortgagee to Mortgagor after the date hereof, to the same extent as
if such future advances were made on the date of the execution of this
Mortgage. Nothing in this Mortgage shall be deemed an obligation on the part
of the Mortgagee to make any future advances.
48. State Specific Provisions. The provisions of Exhibit B are hereby
incorporated by reference as though set forth in full herein.
49. No Merger of Estates. It is the intention and agreement of Mortgagor
and Mortgagee that there shall be no merger of any leasehold estate in the
Mortgaged Property with the fee interest in the Mortgaged Property or any
other estate or interest in the Mortgaged Property, and there shall be no
merger of this Mortgage and any estate in the Mortgaged Property, by reason
of the fact that the same person may own or hold (a) any leasehold interest
in the Mortgaged Property, and/or (b) this Mortgage, and/or (c) the fee
interest in the Mortgaged Property or any other estate or interest in the
Mortgaged Property.
50. Subordinate Lien. Notwithstanding anything to the contrary
contained herein, Mortgagor shall be permitted to grant a subordinate lien or
security title on the Mortgaged Property in favor of State Street Bank and
Trust Company, solely in its capacity as trustee and collateral agent under
and pursuant to the Indenture as hereinafter defined (the "Subordinated
Creditor") as security for the obligations of Mortgagor under that certain
Indenture between Mortgagor and the Subordinated Creditor dated as of July
22, 1997 (the "Indenture"), provided that such lien in favor of the
Subordinated Creditor is junior, subject and subordinate to the lien of this
Mortgage in accordance with and pursuant to the terms and conditions set
forth in that certain Subordination Agreement dated as of the date hereof
between Mortgagee and the Subordinated Creditor with respect to the Mortgaged
Property (the "Subordination Agreement"), and provided, further, that any
event which gives the Subordinated Creditor the right to accelerate the
obligations secured by such subordinate lien shall automatically constitute
an Event of Default hereunder.
[Remainder of Page intentionally left blank;
signature and notary pages follow.]
33
<PAGE>
IN WITNESS WHEREOF, this Mortgage has been duly executed under seal by
the Mortgagor as of the day and year first written above.
MORTGAGOR:
DISCOVERY ZONE, INC., a Delaware
corporation, as successor in interest to
LEAPS & BOUNDS, INC.
By: /s/ Scott Bernstein
----------------------------------
Name: Scott Bernstein
Title: President
ATTEST:
By: /s/ Robert Rooney
------------------------------------
Name: Robert Rooney
Title: Secretary
[Corporate Seal]
Signed, sealed and delivered
in the presence of:
[Illegible]
- -----------------------------------
Unofficial Witness
/s/ Mark D. Woodward
- -----------------------------------
Notary Public
My Commission expires:
- -------------------------------------
[Notarial Seal]
<PAGE>
Kennesaw
Cobb County, Georgia
EXHIBIT A
All that tract or parcel of land lying and being in Land Lot 720 of the 16th
District, 2nd Section, Cobb County, Georgia, and being more particularly
described as follows:
Commencing at the intersection of the easterly line of said land lot with the
northwesterly right-of-way line of Ernest Barrett Parkway (120 foot
right-of-way); proceeding thence along said northwesterly right-of-way line
South 54degrees 26' 25" West a distance of 35.25 feet to a point, said point
being the True Point of Beginning; continuing thence along said northwesterly
right-of-way line South 54degrees 25' 25" West a distance of 414.75 feet to
a point; leaving said northwesterly right-of-way line and proceeding thence
southwesterly, westerly and northwesterly 113.79 feet along the arc of a
curve to the right, said curve having a radius of 72.44 feet and being
subtended by a chord having a bearing and distance of North 80degrees 33'
34" West 102.45 feet to a point; proceeding thence northwesterly, northerly
and northeasterly along the arc of a curve to the right, said curve having a
radius of 97.40 feet and being subtended by a chord having a bearing and
distance of North 03degrees 05' 43" East 121.68 feet to a point; proceeding
thence North 41degrees 45' 00" East a distance of 132.52 feet to a point;
proceeding thence northeasterly 64.69 feet along the arc of a curve to the
left, said curve having a radius of 313.34 feet and being subtended by a
chord having a bearing and a distance of North 35degrees 50' 09" East 64.57
feet to a point; proceeding thence South 89degrees 00' 00" East a distance
of 274.77 feet to a point; proceeding thence South 35degrees 33' 35" East a
distance of 53.51 feet to the true point of beginning.
Said tract or parcel of land contains 1.7391 acres.
INCLUDING THE ADDITIONAL PARCEL
All that tract or parcel of land lying and being in Land Lot 720 of the 16th
District, 2nd Section, Cobb County, Georgia, and being more particularly
described as follows:
<PAGE>
Kennesaw
Cobb County, Georgia
EXHIBIT A
(continued)
Commencing at the intersection of the easterly line of said land lot with the
northwesterly right-of-way line of Ernest Barrett Parkway (130 foot
right-of-way); proceeding thence along said northwesterly right-of-way line
South 54degrees 25' 25" West a distance of 450.00 feet to a point; leaving
said northwesterly right-of-way line and proceeding thence southwesterly,
westerly and northwesterly 113.79 feet along the arc of a curve to the right,
said curve having a radius of 72.44 feet and being subtended by a chord
having a bearing and distance of North 80degrees 33' 34" West 102.45 feet
to a point; proceeding thence northwesterly, northerly and northeasterly
along the arc of a curve to the right, said curve having a radius of 97.40
feet and being subtended by a chord having a bearing and distance of North
03degrees 05' 43" East 121.68 feet to a point, said point being the True
Point of Beginning; proceeding thence North 36degrees 38' 25" East a
distance of 188.75 feet to a point; proceeding thence South 89degrees 00'
00" East a distance of 13.41 feet to a point; proceeding thence southwesterly
64.69 feet along the arc of a curve to the right, said curve having a radius
of 313.34 feet and being subtended by a chord having a bearing and distance
of South 35degrees 50' 09" West 64.57 feet to a point; proceeding thence
South 41degrees 45' 00" West a distance of 132.52 feet to the true point of
beginning.
TOGETHER WITH the rights, easements, privileges and obligations
appurtenant to the above-described land created and established under the
following instruments:
(a) Restrictions, easements, covenants and agreements contained in that
certain Limited Warranty Deed from Jose Manuel Lomelin, et al., to CA
Cobb Retail Investors, Limited, a Georgia Limited Partnership, dated
June 24, 1985, filed June 27, 1985, and recorded in Deed Book 3548,
page 367, Records of Cobb County, Georgia;
<PAGE>
Kennesaw
Cobb County, Georgia
EXHIBIT A
(continued)
(b) Easement Agreement by and among AMLI Land Development-I Limited
Partnership, The Barrett Place Company Limited I, L.P. and Stanley E.
Thomas dated August 19, 1992, filed August 20, 1992, and recorded in
Deed Book 6804, page 48, aforesaid records; as amended by that certain
First Supplement to Easement Agreement filed May 12, 1994, and
recorded in Deed Book 8235, page 243, aforesaid records; as modified
by that certain Affidavit Affecting Title filed October 12, 1994, and
recorded in Deed Book 8530, page 210, aforesaid records; as
terminated, canceled and superseded by that certain Easement Agreement
by and among AMLI Land Development-I Limited Partnership, The Barrett
Place Company Limited I, L.P., Stanley E. Thomas and Barrett Pavilion
Company, Inc., dated September 30, 1994, filed October 12, 1994, and
recorded in Deed Book 8530, page 213, aforesaid records;
(c) Easements contained in that certain Limited Warranty Deed from Stanley
E. Thomas to B. R. D., Inc., dated October 30, 1992, filed October 30,
1992, and recorded in Deed Book 6948, page 443, aforesaid records;
and
(d) Permanent & Perpetual Non-Exclusive Easement Agreement, Covenants and
Restrictions for Barrett Pavilion by Stanley E. Thomas dated April 2,
1993, filed April 27, 1993, and recorded in Deed Book 7276, page 490,
aforesaid records; as amended by that certain First Amendment to
Permanent & Perpetual Non-Exclusive Easement Agreement, Covenants and
Restrictions for Barrett Pavilion dated May 27, 1994, and recorded in
Deed Book 8282, page 3, aforesaid records; as last amended by that
certain Second Amendment to Permanent & Perpetual Non-Exclusive
Easement Agreement, Covenants and Restrictions for Barrett Pavilion
dated August 11, 1994, and recorded in Deed Book 8455, page 163,
aforesaid records.
<PAGE>
EXHIBIT B
STATE SPECIFIC PROVISIONS (Georgia)
The following provisions are incorporated by reference into Section 48
of the attached Mortgage. If any conflict or inconsistency exists between this
Exhibit B and the remainder of the attached Mortgage, this Exhibit B shall
govern.
A. Security Deed. Notwithstanding any use of the words "lien" or
"mortgage" (or any variation thereof) when referring to this instrument, the
Mortgaged Property encumbered hereby, or the nature or effect of this
instrument or the interests granted or created hereby, it is intended by the
parties hereto that this instrument is a deed conveying title to the
Mortgaged Property, and not a mortgage creating a lien only, is made under
the provisions of the existing laws of the State of Georgia relating to deeds
to secure debt (including, but not limited to, Georgia Code Section
44-14-60), and constitutes a security agreement under the UCC. The words
"lien" or "liens" when used with reference to the nature or effect of this
instrument or the interests granted or created hereby, shall be deemed to
include the security title granted hereby.
B. If this Mortgage secures a "revolving loan account" as defined
in the Official Code of Georgia Annotated, as amended, Section 44-14-3 under
which periodic advances and repayments will be made from time to time,
payment of all amounts outstanding on the Note from time to time shall not
cancel or release this Mortgage; no release of any part of the Mortgaged
Property (as hereinafter defined) or all or any part of the indebtedness
hereby secured, shall affect personal liability under the Note nor the
priority of this Mortgage. Readvances will be secured to the same extent as
original obligations hereunder.
C. Mortgagor's Continuing Obligation. Mortgagor shall remain
liable for full payment of the Obligations (or any advancement or obligation)
notwithstanding any of the following: (a) the sale of all or a part of the
Mortgaged Property, (b) the assumption by another party of Mortgagor's
obligations hereunder, (c) the forbearance or extension of time for payment
or performance of any obligation hereunder, whether granted to Mortgagor or a
subsequent owner of the Mortgaged Property, and (d) the release of all or any
part of the Mortgaged Property securing said obligations or the release of
any party who assumes payment of the same. None of the foregoing shall in
any way affect the full force and effect of the security title of the
Mortgage or impair Mortgagee's right to a deficiency judgment (in the event
of foreclosure) against Mortgagor or any party assuming the obligations
hereunder. None of the foregoing shall in any way be deemed to be a consent
by Mortgagee to a sale of all or any part of the Mortgaged Property, the
release of Mortgagor of its obligations hereunder, or the agreement to
release all or any part of the Mortgaged Property.
D. Release of Lien. Notwithstanding anything contained in the
previous Section C hereof and in addition to the provisions set forth in
Section 13 of this Mortgage, if
<PAGE>
all of the Obligations shall be fully satisfied, paid and performed, then and
in that event only, all rights and obligations hereunder shall be terminated
and Mortgagee shall cancel this Mortgage. In such event, Mortgagee shall, at
the request of Mortgagor, promptly deliver to Mortgagor, in recordable form,
all such documents as shall be necessary to reconvey the Mortgaged Property
to Mortgagor and to release the Mortgaged Property from the liens, security
interests, conveyances and assigrunents created or evidenced hereby. Neither
this Section nor Section 13 of this Mortgage nor any other provision of this
Mortgage shall, under any circumstance, be interpreted to be a defeasance
clause, this instrument constituting a deed to secure debt with regard to
such property, and not a mortgage.
E. Attorney's Fees. If Mortgagee employs an attorney to enforce
compliance by Mortgagor of any provision herein, or becomes party to a suit
to protect the Mortgaged Property or to protect the security title of the
Mortgage, then Mortgagor agrees to pay Mortgagee's reasonable and actual
attorneys' fees and all collection costs.
F. Anti-Marshaling Provision. Mortgagor agrees that Mortgagee may
make a partial release or releases of the Mortgaged Property or any other
security for the Obligations, provided Mortgagor is not in default under the
Note or other Relevant Documents (whether or not such releases are required
by agreement among the parties), without notice to, or the consent, approval
or agreement of other parties in interest, including junior lienors and
purchasers subject to this lien, which partial release or releases shall not
impair in any manner the validity of or priority of this Mortgage on the
Mortgaged Property remaining hereunder, nor release Mortgagor from personal
liability for the Obligations. Notwithstanding the existence of any other
security interests in the Mortgaged Property, Mortgagee shall have the right
to determine the order in which any or all of the Mortgaged Property or other
collateral securing the Obligations shall be subjected to the remedies
provided herein. Mortgagee shall have the right to determine the order in
which any or all portions of the Obligations are satisfied from the proceeds
realized upon the exercise of the remedies provided herein. Mortgagor and
any party who consents to this or who has actual or constructive notice
hereof, hereby waives any and all right to require the marshaling of assets
in connection with the exercise of any of the remedies permitted by
applicable law or provided herein. None of the foregoing shall in any way be
deemed to be a consent by Mortgagee to a sale by Mortgagor of the Mortgaged
Property or any part hereof or as a consent or agreement to release the
Mortgaged Property or any part thereof under any circumstances unless
specifically set forth herein.
G. Appointment of Receiver. If an Event of Default shall have
occurred and not be cured within any applicable cure period, Mortgagee, upon
application to a court of competent jurisdiction, shall be entitled, as a
matter of strict right, without further notice and without regard to the
value of the Mortgaged Property or to the solvency of any person or persons
liable for the payment of the Obligations, to the appointment of a receiver.
Mortgagor hereby expressly consents and agrees to such appointment upon the
occurrence of an Event of Default that is not cured within any applicable
cure period. Mortgagor will pay to Mortgagee upon demand, all expenses,
including receivers' fees, attorneys' fees, costs and agents'
<PAGE>
compensation incurred pursuant to the provisions of this paragraph, and any
such amounts paid by Mortgagee shall be added to the indebtedness secured
hereby and shall be secured by this Deed.
H. Remedies. Upon the occurrence of an Event of Default the
entire balance of the Obligations, including all accrued interest, shall, at
the option of Mortgagee, become immediately due and payable with further
notice or demand. Upon failure to pay the Obligations in full at any stated
or accelerated maturity, Mortgagee may foreclose the lien and security title
of this Mortgage pursuant to the power of sale hereby granted or by judicial
proceeding.
I. Power of Sale. Mortgagee is hereby granted a power of sale and
may sell the Mortgaged Property, to the full extent that the Mortgaged
Property constitutes real property, or such part or parts thereof or
interests therein as Mortgagee may select, at one or more public sales before
the door of the courthouse of the county in which the Mortgaged Property or
any part of the Mortgaged Property is situated, without notice except as
required or set forth herein (the Mortgaged Property not being residential),
to the highest bidder for cash, in order to pay the Obligations and all
expenses of sale and of all proceedings in connection therewith, including
reasonable attorneys' fees actually incurred and all costs of such sale,
after advertising the time, place and terms of sale one a week for four (4)
weeks immediately preceding such sale (but without regard to the number of
days or the number of days intervening between the date of publication of the
first advertisement and the date of sale) in a newspaper in which Sheriff's
sales are advertised in said county, all other notice being hereby waived by
Mortgagor; and Mortgagee shall collect the proceeds of such sale, and after
reserving therefrom the entire amount secured thereby, including the amount
of any taxes, assessments or premium of insurance or other payments or
amounts advance by Mortgagee to protect or preserve the Mortgaged Property or
Mortgagee's security title thereon, together with all costs and expenses of
said sale and reasonable attorneys' fees actually incurred, shall pay any
overages as provided by law.
J. Foreclosure Deed. At any such public sale, Mortgagee may
execute and deliver to the purchaser a conveyance of the Mortgaged Property
sold or any part thereof in fee simple, with full warranties of title, and to
this end Mortgagor hereby constitutes and appoints Mortgagee as the agent and
attorney-in-fact of Mortgagor to make such sale and conveyance, and thereby
to divest Mortgagor of all right, title and equity that Mortgagor may have in
and to the Mortgaged Property sold and to vest the same in the purchaser or
purchasers at such sale or sales; and all the acts and doings of said agent
and attorney-in-fact are hereby ratified and confirmed. Mortgagor hereby
constitutes and appoints Mortgagee as the agent and attorney-in fact of
Mortgagor to make such recitals, and Mortgagor hereby covenants and agrees
that the recitals so to be made by Mortgagee shall be binding and conclusive
upon Mortgagor, and the heirs, executors, administrators and assigns of
Mortgagor, and that the conveyance to be made by Mortgagee shall be effectual
to bar all equity of redemption (including any statutory redemption) of
Mortgagor, or the successors in interest of Mortgagor, in and to said
Mortgaged Property.
<PAGE>
K. Power Irrevocable. The aforesaid power of sale and agency
hereby granted are coupled with an interest and are irrevocable by death or
otherwise, are granted as cumulative of the other remedies provided hereby or
by law for collection of the Obligations, and shall not be exhausted by one
exercise thereof but may be exercised until full payment of the Obligations.
L. Separate Sales. In the event of any sale under this Mortgage
by virtue of the exercise of the powers herein granted, or pursuant to any
order in any judicial proceedings or otherwise, the Mortgaged Property may be
sold as a entirety or in separate parcels and in such manner or order as
Mortgagee in its sole discretion may elect, and if Mortgagee so elects,
Mortgagee may sell the Collateral (as defmed in Section 26), at one or more
separate sales in any manner permitted by the Uniform Commercial Code of the
State of Georgia, and one or more exercises of the powers herein granted
shall not extinguish nor exhaust such powers, until the entire Mortgaged
Property is sold or the Note is paid in full. If the Obligations is now or
hereafter further secured by any chattel, mortgages, pledges, contracts or
guaranty, assignments of lease or other security instruments, Mortgagee may
at its option exhaust the remedies granted under any of said security
instruments, either concurrently or independently, and in such order as
Mortgagee may determine.
M. Judicial Enforcement. Mortgagee may, in addition to and not in
abrogation of the rights covered under the immediately preceding provisions
or elsewhere herein, either with or without entry or taking possession as
herein provided or otherwise, proceed by a suit or suits in law or in equity
or by any other appropriate proceeding or remedy (i) to enforce payment of
the Obligations, any guaranty given in connection therewith, or the
performance of any term, covenant, condition or agreement of this Mortgage or
any other right, and (ii) to pursue any other remedy available to it, all as
Mortgagee in its sole discretion shall elect.
N. Leases. Mortgagee, at its option, is authorized to foreclose
this Mortgage subject to the rights of any lessees of the Mortgaged Property
under any leases, and the failure to make any such lessees parties to any
such foreclosure proceedings and to foreclose their rights will not be, nor
be asserted to be by Mortgagor, a defense to any proceedings instituted by
Mortgagee to collect the Obligations.
O. Purchase by Mortgagee. Upon any foreclosure sale or sales of
all or any portion of the Mortgaged Property under the power herein granted,
Mortgagee may bid for and purchase the Mortgaged Property and may apply all
or any part of the Obligations secured hereby as a credit to the purchase.
P. Mortgagor as Tenant Holding Over. In the event of any such
foreclosure sale or sales under the power herein granted, Mortgagor shall be
deemed a tenant holding over and shall forthwith deliver possession to the
purchaser or purchasers at such sale or be sununarily dispossessed according
to provisions of law applicable to tenants holding over.
<PAGE>
Q. Commercial Transaction. The interest of Mortgagee under this
Mortgage and the liability and obligation of Mortgagor for the payment of the
indebtedness secured hereby arise from a "commercial transaction" within the
meaning of Official Code of Georgia Annotated Section 44-14-260(1).
Accordingly, pursuant to Official Code of Georgia Annotated Section
44-14-263, Mortgagor hereby expressly waives any and all rights which
Mortgagor may have to notice prior to seizure by Mortgagee of any interest in
personal property of Mortgagor which constitutes part of the Mortgaged
Property, whether such seizure is by writ of possession or otherwise.
R. Homestead and Exemption Rights. Mortgagor hereby waives and
renounces all homestead and exemption rights provided for by the Constitution
and the laws of the United States and any state, in and to the Mortgaged
Property as against the collection of the Obligations, or any part hereof.
S. Waiver. BY EXECUTING THIS MORTGAGE, MORTGAGOR EXPRESSLY:
(A) ACKNOWLEDGES THE RIGHT OF MORTGAGEE TO ACCELERATE THE OBLIGATIONS SECURED
HEREBY AND THE POWER OF ATTORNEY GIVEN HEREIN TO GRANTEE TO SELL THE PROPERTY
BY NONJUDICIAL FORECLOSURE UPON THE OCCURRENCE OF AN EVENT OF DEFAULT
HEREUNDER WITHOUT ANY JUDICIAL HEARING AND WITHOUT ANY NOTICE OTHER THAN SUCH
NOTICE (IF ANY) AS IS SPECIFICALLY REQUIRED TO BE GIVEN UNDER THE PROVISIONS
OF THIS MORTGAGE, (B) WAIVES ANY AND ALL RIGHTS MORTGAGOR MAY HAVE UNDER THE
CONSTITUTION OF THE STATE OF GEORGIA OR THE CONSTITUTION OF THE UNITED STATES
OF AMERICA (INCLUDING, WITHOUT LIMITATION, THE FIFTH AND FOURTEENTH
AMENDMENTS THEREOF) OR BY REASON OF ANY OTHER APPLICABLE LAW, (1) TO NOTICE
AND TO JUDICIAL HEARING PRIOR TO THE EXERCISE BY MORTGAGEE OF ANY POWER OF
SALE HEREIN PROVIDED TO ISSUE, EXCEPT SUCH NOTICE (IF ANY) AS IS SPECIFICALLY
REQUIRED TO BE GIVEN UNDER THE PROVISIONS OF THIS MORTGAGE OR APPLICABLE LAW,
AND (2) CONCERNING THE APPLICATION, RIGHTS OR BENEFITS OF ANY STATUTE OF
LIMITATION OR ANY MORATORIUM, REINSTATEMENT, MARSHALING, FOREBEARANCE,
APPRAISEMENT, VALUATION, STAY, EXTENSION, HOMESTEAD, EXEMPTION OR REDEMPTION
LAWS; (C) WAIVES THE RIGHTS, IF ANY, TO SET ASIDE OR INVALIDATE ANY SALE DULY
CONSUMMATED WITHOUT A PRIOR JUDICIAL HEARING; (D) ACKNOWLEDGES THAT MORTGAGOR
HAS READ THIS MORTGAGE AND ANY AND ALL QUESTIONS OF MORTGAGOR REGARDING THE
LEGAL EFFECT OF THIS MORTGAGE AND ITS PROVISIONS HAVE BEEN EXPLAINED FULLY TO
MORTGAGOR AND MORTGAGOR HAS CONSULTED WITH COUNSEL OF MORTGAGOR'S CHOICE
PRIOR TO EXECUTING THIS MORTGAGE; AND (E) ACKNOWLEDGES (1) THAT ALL WAIVERS
OF THE AFORESAID RIGHTS OF MORTGAGOR HAVE BEEN MADE KNOWINGLY, INTENTIONALLY
AND WILLINGLY BY MORTGAGOR AS PART OF A BARGAINED-FOR LOAN TRANSACTION,
(2) THAT THIS WAIVER HAS BEEN
<PAGE>
GRANTED BY MORTGAGOR AS AN INTENTIONAL RELINQUISHMENT AND ABANDONMENT OF A
KNOWN RIGHT AND PRIVILEGE, AND (3) THAT THIS MORTGAGE IS VALID AND
ENFORCEABLE BY MORTGAGEE IN ACCORDANCE WITH ALL THE TERMS AND CONDITIONS
HEREOF.
Initialed by Mortgagor: [Illegible]
--------------
T. Perpetual Security Title. Mortgagor and Mortgagee hereby state
their intention to establish by this Mortgage a perpetual security title to
and interest in the Mortgaged Property in favor of the Mortgagee and their
intention that there shall be no reversion of title sooner than December 31,
2009.
<PAGE>
SCHEDULE A
DESCRIPTION OF ORIGINAL MORTGAGE
Property Recording Office Deed Book Page Recording Date
- ------------ ----------------------------- --------- ---- --------------
Kennesaw, GA Clerk of the Superior 8475 22 9/12/94
Court of Cobb County, Georgia
<PAGE>
Exhibit 4.32
- -------------------------------------------------------------------------------
OPEN-END MORTGAGE, ASSIGNMENT OF LEASES AND RENTS, SECURITY
AGREEMENT AND FIXTURE FILING (AMENDED AND RESTATED)
---------------------------------------------------
DISCOVERY ZONE, INC.
(Mortgagor),
to
McDONALD's CORPORATION
(Mortgagee)
Dated as of July 29, 1997
DOCUMENT PREPARED BY AND
AFTER RECORDING RETURN TO:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attention: Jonathan A. Reiss, Esq.
- -------------------------------------------------------------------------------
[COLUMBUS, OHIO PROPERTY]
<PAGE>
OPEN-END MORTGAGE, ASSIGNMENT OF LEASES AND RENTS, SECURITY
AGREEMENT AND FIXTURE FILING (AMENDED AND RESTATED) (as the same may from
time to time be extended, renewed or modified, this "Mortgage"), made as of
the 29th day of July, 1997, by DISCOVERY ZONE, INC., a Delaware corporation
("Mortgagor"), having its principal place of business at One Corporate
Center, 110 East Broward Boulevard, Fort Lauderdale, Florida 33301, as
successor by merger to LEAPS & BOUNDS, INC., to McDONALD'S CORPORATION a
Delaware corporation ("Mortgagee"), having an address at One McDonald's
Plaza, Oak Brook, Illinois 60523.
W I T N E S S E T H:
A. WHEREAS, prior to Mortgagor's several predecessors in interest
filing their voluntary petitions for relief under chapter 11, title 11,
United States Code (the "Bankruptcy Code"), Mortgagor's predecessors in
interest with respect to the Mortgaged Property (as hereinafter defined),
Leaps & Bounds, Inc. ("LBI") had provided Mortgagee with a First Mortgage on
the Mortgaged Property, dated as of August 30, 1994 (the "Original
Mortgage,") and identified by the recording information set forth on Schedule
A hereto, to secure certain obligations owed to Mortgagee under the Agreement
and Plan of Merger among Mortgagee, Mortgagor, Discovery Zone, Inc., a
Delaware corporation ("Old DZI") and Discovery Zone International, Inc.
("DZII"), a Delaware corporation, dated as of August 30, 1994 (the "Merger
Agreement"); and
B. WHEREAS, pursuant to Section 11.2(a)(iii) of the Merger
Agreement, Old DZI agreed to defend, indemnify and hold Mortgagee and its
affiliates harmless in respect of all expenses, losses, costs, deficiencies,
liabilities and damages (including related and reasonable counsel fees and
expenses, and compensatory and demonstrable consequential damages) incurred
or suffered by Mortgagee as a direct result of, inter alia, any breach by Old
DZI or LBI of the leases or subleases relating to certain properties that
result in any payment by Mortgagee in connection with any guarantee by
Mortgagee of such leases and pursuant to Section 10.3(f) of the Merger
Agreement it was agreed that certain security would be provided to secure the
obligations under Section 11.2(a)(iii) of the Merger Agreement, including
without limitation, a first priority security interest in the Land and
Improvements (the "Agreement to Indemnify"); and
C. WHEREAS, following the filing of their respective prayers for
relief under the Bankruptcy Code, Mortgagor's predecessors in interest, Old
DZI, their affiliated debtors, including DZII and LBI (the "Debtors"), and
Mortgagee entered into the Stipulation and Order Between Debtors and
McDonald's Corporation Providing For The Resolution, Settlement And
Compromise of Disputes And For Rent Deferrals And Allowance of Certain Claims
(the "Stipulation and Order") that was entered by the United States
Bankruptcy Court for the District of Delaware (the "Bankruptcy Court") on
November 18, 1996, which was not appealed or otherwise challenged, became a
final order, remains in full force and effect and to which Mortgagor is
bound, Section 7 of which is captioned "CONTINUING SECURITY" and provides, in
pertinent part, that the valid and enforceable first priority security
interest on the
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Land and Improvements and certain other collateral shall secure the
performance and payment of all of the obligations of Mortgagor to Mortgagee
under the Notes (as hereinafter defined), any obligations of Mortgagee that
may arise in connection with the Assumption Locations whether pursuant to any
guaranty, lease, sublease or otherwise, any obligations of Mortgagor that may
arise in the event of a Liquidation, and any continuing obligations of
Mortgagor relating to the Rejection Location(s) and the Prior Rejection
Locations (as such terms are defined therein); and
D. WHEREAS, pursuant to the Stipulation and Order and 11 U.S.C.
Section 365, the Debtors, as predecessors in interest to Mortgagor, assumed
the subleases relating to certain properties (the "Assumed Properties") which
subleases (the "Assumed Property Subleases") expressly incorporate the
Agreement to Indemnify as it relates to any current or future obligations of
Mortgagee relating to the Assumed Properties; and
E. WHEREAS, pursuant to the Stipulation and Order and the Plan (as
hereinafter defined), this Mortgage hereby amends and restates the Original
Mortgage in its entirety in accordance with the terms and provisions set
forth herein; and
F. WHEREAS, this Mortgage, together with certain other Deeds of
Trust, Mortgages or similar encumbrances, are intended to and do secure the
obligations of Mortgagor and its predecessors in interest and the other
Debtors, to Mortgagee under all of the Stipulation and Order, the Agreement
to Indemnify, the Secured Rent Deferral Notes (as hereinafter defined) and
the Secured Rejection Note (as hereinafter defined); and
G. WHEREAS, pursuant to the plan of reorganization for Old DZI and
its affiliated debtors confirmed by the Bankruptcy Court by order entered
July 18, 1997 (the "Plan"), and as required by the terms of the Stipulation
and Order, Mortgagor, as the reorganized successor of the Debtors, is
obligated to issue to Mortgagee Secured Rent Deferral Notes in the aggregate
original principal amount of $266,466.24, which amount is subject to increase
each month in accordance with the terms thereof (the "Secured Rent Deferral
Notes") and Secured Rejection Note in the aggregate original principal amount
of $4,416,237.90 (the "Secured Rejection Note", and, together with the
Secured Rent Deferral Notes, the "Notes"); and
H. WHEREAS, pursuant to the Plan, all of the Debtors and their
reorganized successors have merged into Mortgagor, and simultaneously with
such merger, all property of LBI and the other Debtors, including the
Mortgaged Property (as hereinafter defined) has been revested in Mortgagor,
as the successor entity of the Debtors; and
I. WHEREAS, in accordance with the foregoing, Mortgagor is the fee
simple owner of the real estate described in Exhibit A attached hereto (the
"Land");
NOW THEREFORE, with reference to the foregoing recitals and for good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged,
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<PAGE>
Mortgagor and Mortgagee hereby agree that the Original Mortgage is hereby
amended and restated in its entirety as follows:
For the purpose of securing the payment and performance of all of
the obligations (the "Obligations") of Mortgagor to Mortgagee, including
without limitation, any and all obligations of Mortgagor, as successor in
interest to Old DZI, DZII, LBI and their affiliated debtors, under this
Mortgage, the Agreement to Indemnify (including, without limitation, any
contingent obligations thereunder), the Stipulation and Order (including,
without limitation, the obligations described in Section 7 thereof which is
referred to in paragraph C of the recitals above), the Plan and the Notes
(including any and all subsequent advances made pursuant to the terms of the
Notes), and all other documents evidencing or securing any such obligations
(collectively, the "Relevant Documents"), Mortgagor by these presents does
hereby mortgage, give, grant, bargain, sell, alienate, enfeoff, convey,
confirm, warrant, pledge, assign and hypothecate unto Mortgagee, the Land and
the buildings, structures and improvements of every nature whatsoever now or
hereafter located thereon to the extent owned by Mortgagor (including, but
not limited to, all gas and electric fixtures, radiators, heaters, docks and
docking facilities, engines and machinery, boilers, elevators and motors,
plumbing, heating and air conditioning fixtures, carpeting and other floor
coverings, water heaters, awnings and storm sashes which are or shall be
attached to the Land or said buildings, structures or improvements) (the
"Improvements");
TOGETHER WITH: all right, title, interest and estate of Mortgagor
now owned, or hereafter acquired, in and to the following property, rights,
interest and estates relating to the Land and the Improvements, together with
Mortgagor's interest in the following property, rights, interests and estates
hereinafter described (the Land, Improvements, and the following property,
rights, interests and estates being hereinafter collectively referred to as
the "Mortgaged Property"):
(a) all easements, rights-of-way, strips and gores of land,
streets, ways, alleys, passages, sewer rights, water, water courses, water
rights and powers, air rights and development rights, construction and
equipment warranties, and all estates, rights, titles, interests, privileges,
liberties, tenements, hereditaments and appurtenances of any nature
whatsoever, in any way belonging, relating to or pertaining to the Land and
the Improvements and the reversion and reversions, remainder and remainders,
and all land lying in the bed of any street, road or avenue, opened or
proposed, in front of or adjoining the Land, to the center line thereof and
all the estates, rights, titles, interests, dower and rights of dower,
curtesy and rights of curtesy, property, possession, claim and demand
whatsoever, both at law and in equity, of Mortgagor of, in and to the Land
and the Improvements and every part and parcel thereof, with the
appurtenances thereto, and in and to any streets, ways, alleys, passages,
strips or gores of land adjoining the Land or any part thereof;
(b) all fixtures, attachments and other articles attached to the
Land or the Improvements constituting realty or real property now or
hereafter owned by Mortgagor or in which Mortgagor has or shall acquire an
interest, now or hereafter located on, attached to or
4
<PAGE>
contained in or used or usable in connection with the Mortgaged Property, and
including, without limitation, all building or construction materials
intended for construction, reconstruction, alteration or repair of or
installation on or in the Mortgaged Property, of every kind and nature
whatsoever now owned or hereafter acquired by Mortgagor, and all proceeds
thereof, as well as all additions to, appurtenances, substitutions for,
replacements of or accessions to any of the items recited as aforesaid and
all attachments, components, parts (including spare parts) and accessories,
whether installed thereon or affixed thereto, now or hereafter owned by
Mortgagor and used or intended to be used in connection with, or with the
operation of, the Mortgaged Property, to the extent constituting real
property, but not including play equipment or other similar-type
entertainment equipment relating to the operation of the "Discovery Zone"
facility on the Mortgaged Property unless removal of such equipment would
cause structural damage to the Land or the Improvements (collectively, the
"Fixtures");
(c) all awards or payments, including interest thereon, which may
heretofore and hereafter be made with respect to the Mortgaged Property,
whether from the exercise of the right of eminent domain (including, but not
limited to, any transfer made in lieu of or in anticipation of the exercise
of said rights), or for a change of grade, or for any other injury to or
decrease in the value of the Mortgaged Property;
(d) to the extent assignable (and to the extent relating to the
general occupancy and use of the Mortgaged Property as opposed to the
operation of the "Discovery Zone" entertainment facility on the Mortgaged
Property), leases, subleases (including sub-subleases), lettings, licenses,
concessions, occupancy agreements and other agreements which grant a
possessory interest in, or the right to use or occupy, all or any part of the
Mortgaged Property now or hereafter entered into, and all amendments,
extensions, renewals and guarantees thereof, and all security therefor
(collectively, the "Leases") and all rents, issues, profits, revenues
(including all oil and gas or other mineral royalties and bonuses) and
deposits (including, without limitation, security deposits) under the Leases
(including, without limitation, from the rental of any office space, retail
space or other space, halls, stores, and offices, and security deposits
therefor, exhibit or sales space of every kind, license, lease, sublease,
fees and rentals, letters of credit or cash instruments securing or
evidencing obligations under Leases, service charges, vending machine sales
and proceeds, if any, from business interruption or other loss of income
insurance) (collectively, the "Rents") and all proceeds from the sale or
other disposition of the Leases and the right to receive and apply the Rents
to the payment of the Obligations;
(e) subject to the rights of Mortgagor hereunder, all proceeds of
any insurance policies covering the Mortgaged Property (including, without
limitation, the right to receive and apply the proceeds of any insurance,
judgments, or settlements made in lieu thereof, for damage to the Mortgaged
Property);
(f) all refundable, returnable or reimbursable fees deposits or
other funds or evidences of credit or indebtedness deposited by or on behalf
of Mortgagor with any
5
<PAGE>
governmental authorities, boards, corporations, providers of utility
services, public or private, including specifically, but without limitation,
all refundable, returnable or reimbursable tap fees, utility deposits and
development costs in connection with the Mortgaged Property, and all of the
records and books of account now or hereafter maintained by or on behalf of
Mortgagor in connection with the operation of the Mortgaged Property
(collectively, "Security Accounts");
(g) all proceeds (as defined in the Uniform Commercial Code) of
the Mortgaged Property which, in any event, shall include, without
limitation, (i) cash, instruments and other property received, receivable or
otherwise distributed in exchange for any or all of the Mortgaged Property,
(ii) the collection or other disposition of, or realization upon, any item or
portion of the Mortgaged Property (including, without limitation, all claims
of Mortgagor against third parties for loss of, damage to, destruction of, or
for proceeds payable under policies of insurance in respect of, the Mortgaged
Property now existing or hereafter arising), (iii) any and all proceeds of
any insurance, indemnity, warranty or guaranty payable to Mortgagor from time
to time with respect to damage or loss of or to any of the Mortgaged
Property, (iv) any and all payments (in any form whatsoever) made or due and
payable to Mortgagor from time to time in connection with the requisition,
confiscation, condemnation, seizure or forfeiture of all or any part of the
Mortgaged Property by any Governmental Authority (or any person acting under
color of Governmental Authority), and (v) any and all real estate tax refunds
payable to Mortgagor with respect to the Mortgaged Property, and refunds or
reimbursements payable with respect to bonds, escrow accounts, or other sums
payable in connection with the use, development or ownership of the Mortgaged
Property, but excluding any proceeds obtained, earned or arising directly
from the operation of the "Discovery Zone" entertainment facility operated by
Mortgagor on the Mortgaged Property as opposed to the general occupancy and
use of the Mortgaged Property (collectively, the "Proceeds");
(h) to the extent permitted under applicable law, all licenses,
permits (other than proprietary permits of Mortgagor relating to the ordinary
operation of a "Discovery Zone" entertainment facility as opposed to the
general use and occupancy of the Mortgaged Property), variances and
certificates used in connection with the ownership, operation, use or
occupancy of the Mortgaged Property (including, without limitation, business
licenses, state health department licenses, food service licenses, liquor
licenses, licenses to conduct business and all such other permits, licenses
and rights, obtained from any Governmental Authority or private Person
concerning ownership, operation, use or occupancy of the Mortgaged Property)
(collectively, "Permits");
(i) all plans, specifications, shop drawings and other technical
descriptions prepared for construction, repair or alteration of the
Improvements (including diskettes containing any such data), and all
amendments and modifications thereof; and
6
<PAGE>
(j) any escrows and escrow accounts established hereunder to
secure the Obligations of Mortgagor, including, without limitation, the
Proceeds Escrow Account described in Section 6(b) hereof; and
(k) any and all replacements and renewals of or additions and
substitutions to any of the foregoing and all proceeds of any of the
foregoing.
TO HAVE AND TO HOLD the above granted and described Mortgaged
Property unto and to the use and benefit of Mortgagee, and its successor and
assigns, forever, and Mortgagor does hereby bind itself, its successors and
assigns to WARRANT AND FOREVER DEFEND the title to the Mortgaged Property
unto Mortgagee and its successors and assigns;
AND, TO PROTECT THE SECURITY OF THIS MORTGAGE, Mortgagor represents
and warrants to and covenants and agrees with Mortgagee as follows:
1. Defined Terms. The following terms, when used herein, shall
have the meanings set forth below:
"Environmental Laws" means any and all present and future federal,
state or local laws, statutes, ordinances or regulations, any judicial or
administrative orders, decrees or judgments thereunder, and any permits,
approvals, licenses, registrations, filings and authorizations, in each case
as now or hereafter in effect, relating to the protection of the environment,
the impact of Hazardous Substances or the generation, disposal or remediation
thereof on human health or safety, or the Release or threatened Release of
Hazardous Substances or otherwise relating to the Use of Hazardous
Substances. For purposes of this definition, (A) "Hazardous Substances" means
collectively, (i) any petroleum or petroleum products or waste oils,
explosives, radioactive materials, asbestos, urea formaldehyde foam
insulation, polychlorinated biphenyls ("PCBs"), and lead-based paint, (ii)
any chemicals or other materials or substances which are now or hereafter
become defined as or included in the definitions of "hazardous substances",
"hazardous wastes", "hazardous materials", "extremely hazardous wastes",
"restricted hazardous wastes", "toxic substances", "toxic pollutants",
"contaminants", "pollutants" or words of similar import under any
Environmental Law and (iii) any other chemical or any other material or
substance, exposure to which is now or hereafter prohibited, limited or
regulated under any Environmental Law; (B) "Use" means, with respect to any
Hazardous Substance, the generation, manufacture, processing, distribution,
handling, use, treatment, recycling or storage of such Hazardous Substance or
transportation of such Hazardous Substance; and (C) "Release" means any
release, spill, emission, leaking, pumping, injection, deposit, disposal,
discharge, dispersal, leaching or migration into the indoor or outdoor
environment (including, without limitation, the movement of Hazardous
Substances through ambient air, soil, surface water, ground water, wetlands,
land or subsurface strata).
"Governmental Authority" means any national or federal government,
any state, regional, local or other political subdivision thereof with
jurisdiction and any Person
7
<PAGE>
with jurisdiction exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government (including without
limitation any court).
"Impositions" means all taxes (including, without limitation, all
real estate, ad valorem, sales (including those imposed on lease rentals),
use, single business, gross receipts, value added, intangible transaction
privilege, privilege or license or similar taxes), assessments (including,
without limitation, all assessments for public improvements or benefits,
whether or not commenced or completed within the term of this Mortgage),
ground rents, water, sewer or other rents and charges, excises, levies, fees
(including, without limitation, license, permit, inspection, authorization
and similar fees), and all other governmental impositions and other charges
(including, without limitation, vault charges and license fees for the use of
vaults, chutes and similar areas adjoining the Mortgaged Property), in each
case whether general or special, ordinary or extraordinary, foreseen or
unforeseen, of every character in respect of the Mortgaged Property, which at
any time prior to, during or in respect of the term hereof may be assessed or
imposed on or in respect of or be a lien upon (i) Mortgagor (including,
without limitation, all income, franchise, single business or other taxes
imposed on Mortgagor for the privilege of doing business in the jurisdiction
in which the Mortgaged Property is located), (ii) the Mortgaged Property, or
any part thereof or any revenues therefrom or any estate, right, title or
interest therein, or (iii) any occupancy, operation, use or possession of, or
sales from, or activity conducted on, or in connection with the Mortgaged
Property by Mortgagor or the leasing or use of the Mortgaged Property or any
part thereof by Mortgagor.
"Legal Requirements" means (i) all governmental statutes, laws,
rules, orders, regulations, ordinances, judgments, decrees and injunctions of
Governmental Authorities (including, without limitation, Environmental Laws)
affecting either the Borrower or any Property or any part thereof or the
construction, ownership, use, alteration or operation thereof, or any part
thereof (whether now or hereafter enacted and in force), (ii) all permits,
licenses and authorizations and regulations relating thereto, and (iii) all
covenants, conditions and restrictions contained in any instruments at any
time in force (whether or not involving Governmental Authorities) affecting
the Mortgaged Property or any part thereof which, in the case of this clause
(iii), require repairs, modifications or alterations in or to the Mortgaged
Property or any part thereof, or in any material way limit or restrict the
existing use and enjoyment thereof.
"Person" means any individual, corporation, limited liability
company, partnership, joint venture, estate, trust, unincorporated
association, any federal, state, county or municipal government or any
bureau, department or agency thereof and any fiduciary acting in such
capacity on behalf of any of the foregoing.
"Uniform Commercial Code" means the Uniform Commercial Code, as
adopted, enacted and amended from time to time by the state or states where
any of the Mortgaged Property is located.
2. Payment of Obligations and Incorporation of Covenants,
Conditions and Agreements. Mortgagor will pay the Obligations at the time
and in the manner provided in the
8
<PAGE>
Relevant Documents and in this Mortgage. All the representations,
warranties, covenants, conditions and agreements of Mortgagor contained in
the Relevant Documents are hereby made a part of this Mortgage to the same
extent and with the same force as if fully set forth herein. If there shall
be any inconsistencies between the terms, covenants, conditions and
provisions set forth in this Mortgage and the terms, covenants, conditions
and provisions set forth in the Relevant Documents, then the terms,
covenants, conditions and provisions of the Relevant Documents shall prevail.
3. Warranty of Title/Organization. Mortgagor warrants that
Mortgagor has good, marketable and insurable fee simple title to Land and the
Improvements and has good title to the remainder of the Mortgaged Property
and has the full power, authority and right to execute, deliver and perform
its obligations under this Mortgage and to encumber, mortgage, give, grant,
bargain, sell, alienate, enfeoff, convey, confirm, warrant, pledge, assign
and hypothecate the Mortgaged Property and that Mortgagor possesses an
unencumbered fee estate in the Land and the Improvements and that it owns the
Mortgaged Property free and clear of all liens, encumbrances and charges
whatsoever except for (x) those exceptions to title which are existing on the
date hereof and approved by Mortgagee and (y) those exceptions of title that
are permitted under the other terms and conditions of this Mortgage
(collectively, the "Permitted Encumbrances") and that this Mortgage is and
will remain a valid and enforceable first lien on and security interest in
the Mortgaged Property, subject only to the Permitted Encumbrances.
Mortgagor shall forever warrant, defend and preserve such title and the
validity and priority of the lien of this Mortgage and shall forever warrant
and defend the same to Mortgagee against the claims of all persons
whomsoever. Mortgagor is duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization. Mortgagor is
qualified to do business and in good standing in the State in which the
Mortgaged Property is located, and to the extent that Mortgagor is not so
qualified or in good standing in such State, Mortgagor shall promptly qualify
to do business and become in good standing in such State and shall promptly
present evidence of such qualification to do business and good standing to
Mortgagee, and shall in any event take such steps as are necessary to insure
the enforceability of the Notes and this Mortgage.
4. Taxes. Mortgagor hereby warrants, covenants and agrees to pay
before any penalty attaches all real property taxes, general and special, and
all other taxes and assessments of any kind or nature whatsoever, against the
Mortgaged Property when due and shall, upon written request, furnish to
Mortgagee duplicate receipts therefor, Mortgagor may, in good faith and with
reasonable diligence, contest the validity or amount of any such taxes or
assessments provided that such contest shall have the effect of preventing
the collection of the tax or assessment so contested and the sale or
forfeiture of said Mortgaged Property or any part thereof, or any interest
therein, to satisfy the same.
5. Indemnification. Mortgagor shall indemnify, defend and hold
harmless Mortgagee from and against all of the following (collectively, and
individually referred to as a "Loss"): claims, demands, causes of action,
judgments, costs, expenses, liabilities, losses and damages (including
consequential and punitive damages), reasonable attorneys' fees and
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<PAGE>
expenses and court costs, disbursements and court costs, and all risk of
damage to property and injury to persons in or upon the Mortgaged Property,
arising from: (i) Mortgagor's use of the Property or from the conduct of its
business in or about the Mortgaged Property; (ii) Mortgagor's default or
breach of any term under this Mortgage; and (iii) Mortgagor's violation or
failure to comply with any Legal Requirements, including Environmental Laws;
provided that Mortgagor shall not be liable for Loss arising from Mortgagee's
negligence or willful misconduct or from Mortgagee's breach of any of its
obligations hereunder.
6. Transfer or Encumbrance of the Mortgaged Property. (a) Except
as may otherwise be permitted hereunder or pursuant to the Relevant
Documents, Mortgagor shall not sell, convey, alienate, mortgage, encumber,
pledge or otherwise transfer the Mortgaged Property or any part thereof or
any of its interest therein. Mortgagee shall not be required to demonstrate
any actual impairment of its security or any increased risk of default
hereunder in order to declare the Obligations immediately due and payable
upon Mortgagor's conveyance, alienation, mortgage, encumbrance, pledge or
transfer of the Mortgaged Property in violation of this Mortgage or any other
Relevant Document. This provision shall apply to every sale, conveyance,
alienation, mortgage, encumbrance, pledge or transfer of the Mortgaged
Property that is not permitted pursuant to the Relevant Documents, regardless
of whether voluntary or not, or whether or not Mortgagee has consented to any
previous sale, conveyance, alienation, mortgage, encumbrance, pledge or
transfer of the Mortgaged Property.
(b) Notwithstanding Section 6(a), Mortgagor shall have the right to
sell the Mortgaged Property at any time to a third party bona fide purchaser
after consultation with Mortgagee and upon the prior written consent of
Mortgagee to such sale and the sales price (such consent not to be
unreasonably withheld), provided that the net proceeds of such sale of the
Mortgaged Property (after payment of transfer taxes and reasonable brokerage
commissions, if any, and other reasonable closing costs) shall be applied
towards repayment of the Obligations, including, without limitation,
repayment of the Secured Rejection Note (including prepayment of any amounts
not yet due and payable) and payment of the Principal Amounts (as defined in
the Rent Deferral Notes) then outstanding under the Rent Deferral Notes, in
the order and manner set forth in the Notes. After the Secured Rejection
Note and all Principal Amounts outstanding under the Notes have been repaid
in full, any remaining net proceeds (including proceeds from any sale or
other disposition of the Mortgaged Property pursuant to Section 24 hereof)
not applied towards repayment of the Obligations shall be deposited into an
escrow account designated by Mortgagee for Mortgagor's account and as
security for the performance by Mortgagor of its Obligations to Mortgagee
under the Relevant Documents (the "Proceeds Escrow Account") which escrow
account shall be administered by Mortgagee, or, at Mortgagee's discretion and
in accordance with Mortgagee's instructions, may be administered by an escrow
agent (an "Escrow Agent") selected by Mortgagee (whose reasonable fees shall
be paid by Mortgagor). Mortgagor may also from time to time deposit
additional funds into the Proceeds Escrow Account as further security for the
Obligations. At Mortgagee's request, Mortgagor agrees to enter into a
separate escrow agreement to further evidence the provisions of this Section
6(b), and in the event that Mortgagee chooses an Escrow Agent to administer
the Proceeds Escrow Account, Mortgagor agrees to execute an escrow agreement
in form and substance reasonably satisfactory to Mortgagee (including
provisions consistent with the
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provisions of this Section 6(b)) to evidence the duties and responsibilities
of such Escrow Agent. Mortgagee or, if applicable, the Escrow Agent at the
direction of Mortgagee, shall invest the funds in the Proceeds Escrow Account
in obligations of the U.S. Government or its agencies, interest in time
accounts or certificates of deposits, or other interest bearing account of
any bank or bank and trust company or in money market funds available to
Mortgagee. Mortgagor agrees, and shall agree under any escrow agreement
entered into pursuant to this Section 6(b), that the funds on deposit under
the escrow arrangement described herein shall not constitute property of the
estate (within the meaning of Section 541 of the United States Bankruptcy
Code) and that Mortgagor shall only have such rights to such funds as are
provided herein and in any escrow agreement entered into pursuant to this
Section. Funds in the Proceeds Escrow Account shall be disbursed (together
with accrued interest) from time to time to Mortgagee, at Mortgagee's
direction (upon seven (7) days prior notice to Mortgagor), to pay any
Obligations that may arise from time to time under the Agreement to
Indemnify, the Notes, the Stipulation and Order or the other Relevant
Documents. Notwithstanding the foregoing, after December 31, 2005, Mortgagor
shall be entitled to retain any net proceeds in excess of the Minimum Amount
set forth below from the sale of the Mortgaged Property, including amounts
previously deposited and remaining in the Proceeds Escrow Account (including
accrued interest thereon) which have not been applied towards payment of the
Obligations, provided that (i) no Obligations are then due and owing by
Mortgagor pursuant to the Agreement to Indemnify, the Stipulation and Order,
the Notes or otherwise, (ii) no default or Event of Default has occurred and
is continuing under any of the Relevant Documents; and (iii) the amount
remaining in the Proceeds Escrow Account is no less than the Minimum Amount
(as hereinafter defined). Except as otherwise set forth in the following
sentence, the "Minimum Amount" shall mean the product of (A) 1.5 times (B)
the sum of the gross rent (including additional rent and percentage rent
charges, if any), common area maintenance charges, taxes, insurance and other
charges computed on a gross basis (collectively, the "Base Charges") which
are due or shall become due under any Assumed Property Subleases still in
existence as of December 31, 2005 (the "Surviving Assumed Property
Subleases") from December 31, 2005 until the expiration of the terms of such
Assumed Property Subleases. Upon the expiration after December 31, 2005 of
any Surviving Assumed Property Sublease, Mortgagee shall re-calculate the
Minimum Amount based upon the product of 1.5 times the Base Charges of the
remaining Surviving Assumed Property Subleases as of the end of the term of
such Surviving Assumed Property Sublease (such Base Charges to be calculated
as the sum of the Base Charges from such date through the end of the
expiration dates of the remaining Surviving Assumed Property Subleases), and
provided that (i) no Obligations are then due and owing by Mortgagor pursuant
to the Agreement to Indemnify, the Notes, the Stipulation and Order or
otherwise and that (ii) no default or Event of Default has occurred and is
continuing under any of the Relevant Documents, Mortgagee shall, on the first
anniversary of the expiration of such expired Surviving Assumed Property
Sublease, release to Mortgagor, or cause the Escrow Agent to release to
Mortgagor, the excess of all funds in the Proceeds Escrow Account over the
re-calculated Minimum Amount. Any calculation of Base Charges under this
Section 6(b) shall be made by Mortgagee and, absent manifest error, shall be
conclusive and binding upon Mortgagor. Provided that (i) an amount equal to
at least the Minimum Amount is deposited or on deposit in the Proceeds Escrow
Account to secure the
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payment of the Obligations, (ii) no default or Event of Default has occurred
and is continuing under any of the Relevant Documents, (iii) the Notes have
been repaid in full and (iv) no Obligations are then due and owing by
Mortgagor pursuant to the Agreement to Indemnify, the Stipulation and Order
or otherwise, Mortgagor shall be entitled to receive a release of this
Mortgage from Mortgagee at any time after December 31, 2005. Provided that
no default or Event of Default has occurred or is continuing under any of the
Relevant Documents and that no amounts are then owing by Mortgagor or
outstanding pursuant to or under any of the Relevant Documents (and that an
amount equal to the Minimum Amount is at all times on deposit in the Proceeds
Escrow Account), interest earned on the amounts deposited in the Proceeds
Escrow Account after December 31, 2005 shall be distributed to Mortgagor on a
quarterly basis. All remaining amounts in the Proceeds Escrow Account which
have not been applied towards payment of the Obligations shall be released to
Mortgagor on the later of (A) December 31, 2014 provided, however, that no
Obligations are then due and owing by Mortgagor pursuant to the Agreement to
Indemnify, the Stipulation and Order or otherwise, and (B) the end of the
term of this Mortgage as set forth in Section 13(c) hereof. Mortgagor shall
pay any income taxes attributable to the interest or other income earned on
the Proceeds Escrow Account. Notwithstanding any release of this Mortgage
pursuant to this Section 6(b) or otherwise, the terms and provisions of this
Section 6(b) shall survive the release of this Mortgage.
7. Amendment to Legal Description. If it becomes evident that the
legal description attached to any Relevant Document is inaccurate or does not
fully describe all of the real property which is reasonably connected to the
Land, Mortgagor hereby agrees to an amendment of such legal description and
the legal description contained on the corresponding title policy so that
such error is corrected and to execute and cause to be recorded, if
applicable, such document as may be appropriate for such purpose.
8. Assignment of Leases and Rents. Mortgagor does hereby
absolutely and unconditionally assign to Mortgagee, Mortgagor's right, title
and interest in all current and future Leases and Rents, it being intended by
Mortgagor that this assignment constitutes a present, absolute assignment and
not an assignment for additional security only. Such assignment to Mortgagee
shall not be construed to bind Mortgagee to the performance of any of the
covenants, conditions or provisions contained in any such Lease or otherwise
impose any obligation upon Mortgagee. Mortgagee shall have no responsibility
on account of this assignment for the control, care, maintenance, management
or repair of the Mortgaged Property, for any dangerous or defective condition
of the Mortgaged Property, or for any negligence in the management, upkeep,
repair or control of the Mortgaged Property. Mortgagor agrees to execute and
deliver to Mortgagee such additional instruments, in form and substance
satisfactory to Mortgagee, as may hereafter be requested by Mortgagee to
further evidence and confirm such assignment. Nevertheless, subject to the
terms of this paragraph, Mortgagee grants to Mortgagor a revocable license to
collect all of the Rents and retain, use and enjoy the same and otherwise
exercise all rights of Mortgagor under any Lease, in each case, subject to
the terms hereof and of the Relevant Documents. Upon an Event of Default, the
license granted to Mortgagor herein shall immediately and automatically be
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revoked, and Mortgagee shall immediately be entitled to possession of all
Rents, whether or not Mortgagee enters upon or takes control of the Mortgaged
Property, provided that if such Event of Default ceases to exist, the license
shall automatically be reinstated. In addition, during the continuation of
an Event of Default, Mortgagee may, either in person or by agent, without
bringing any action or proceeding, or by a receiver appointed by a court,
without the necessity of taking possession of the Mortgaged Property in its
own name, and in addition to and without limiting any of Mortgagee's rights
and remedies hereunder, under the Notes and any other Relevant Documents and
as otherwise available at law or in equity, (a) notify any lessee or other
person that the Leases have been assigned to Mortgagee and that all Rents are
to be paid directly to Mortgagee, whether or not Mortgagee has commenced or
completed foreclosure or taken possession of the Mortgaged Property; (b)
settle, compromise, release, extend the time of payment of, and make
allowances, adjustments and discounts of any Rents or other obligations in,
to and under the Leases; (c) demand, sue for or otherwise collect, receive,
and enforce payment of Rents, including those past-due and unpaid and other
rights under the Leases, prosecute any action or proceeding, and defend
against any claim with respect to the Rents and Leases; (d) enter upon, take
possession of and operate the Mortgaged Property; (e) lease all or any part
of the Mortgaged Property; and/or (f) perform any and all obligations of
Mortgagor under the Leases and exercise any and all rights of Mortgagor
therein contained to the full extent of Mortgagor's rights and obligations
thereunder, with or without the bringing of any action or the appointment of
a receiver and without need for any other authorization or other action by
Mortgagee or Mortgagor. At Mortgagee's request, Mortgagor shall deliver a
copy of this assignment to each tenant under a Lease and to each manager and
managing agent or operator of the Mortgaged Property. Mortgagor irrevocably
directs any tenant, manager, managing agent, or operator of the Property,
without any requirement for notice to or consent by Mortgagor, to comply with
all demands of Mortgagee under this Section 8 and to turn over to Mortgagee
on demand all Rents which it receives. Mortgagor hereby acknowledges and
agrees that payment of any Rents by a person to Mortgagee as hereinabove
provided shall constitute payment by such person, as fully and with the same
effect as if such Rents had been paid to Mortgagor. Mortgagee is hereby
granted and assigned by Mortgagor the right, at its option, upon revocation
of the license granted herein, to enter upon the Mortgaged Property in person
or by agent, without bringing any action or proceeding, or by court-appointed
receiver to collect the Rents. Any Rents collected after the revocation of
the license shall be applied towards the payment of the Obligations. Neither
the enforcement of any of the remedies under this Section 8 nor any other
remedies or security interests afforded to Mortgagee under the Relevant
Documents, at law or in equity shall cause Mortgagee to be deemed or
construed to be a Mortgagee in possession of the Mortgaged Property, to
obligate Mortgagee to lease the Mortgaged Property or attempt to do so, or to
take any action, incur any expense, or perform or discharge any obligation,
duty or liability whatsoever under any of the Leases or otherwise. Mortgagor
shall, and hereby agrees to indemnify Mortgagee for, and to hold Mortgagee
harmless from and against, any and all claims, liability, expenses, losses or
damages which may or might be asserted against or incurred by Mortgagee
solely by reason of Mortgagee's status as an assignee pursuant to the
assignment of Rents and Leases contained herein, but excluding any claim (a)
to the extent caused by Mortgagee's gross negligence or willful misconduct,
or (b) to the extent arising
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solely from Mortgagee's actions after Mortgagee has taken possession of the
Mortgaged Property. Should Mortgagee incur any such claim, liability,
expense, loss or damage, the amount thereof, including all actual expenses
and reasonable fees of attorneys, shall constitute Obligations secured
hereby, and Mortgagor shall reimburse Mortgagee therefor immediately upon
demand. Mortgagor agrees that all Leases shall be subject to the prior
written approval of Mortgagee, such approval not to be unreasonably withheld.
9. Maintenance of Mortgaged Property. Mortgagor shall cause the
Mortgaged Property to be maintained in a good and safe condition and repair
(subject to ordinary wear and tear), and shall otherwise operate and maintain
the Mortgaged Property in a manner consistent with the manner in which it
operates and maintains the other properties on which it operates similar
businesses ("Similar Properties"). Except as otherwise permitted by the
Relevant Documents, the Improvements, the Fixtures and the equipment located
on the Land or the Improvements shall not be removed, demolished or
materially altered (except for normal replacement of equipment) without the
consent of Mortgagee which shall not unreasonably be withheld or delayed.
Mortgagor shall comply with all laws, orders and ordinances affecting the
Mortgaged Property, or the use thereof. Except to the extent that Mortgagee
fails to turn over insurance proceeds, if any, received by Mortgagee pursuant
to Sections 10 and 11 with respect to the Mortgaged Property to Mortgagor,
Mortgagor shall promptly repair, replace or rebuild any part of the Mortgaged
Property that, following the date hereof, becomes damaged, worn or
dilapidated and Mortgagor shall complete and pay for any structure at any
time in the process of construction or repair on the Land. Notwithstanding
anything to the contrary contained herein, Mortgagor hereby confirms its
obligation to comply with all relevant Legal Requirements, including
Environmental Laws, with respect to the Mortgaged Property. Mortgagor shall
not initiate, join in, acquiesce in, or consent to any change in any private
restrictive covenant, zoning law or other public or private restriction,
limiting or defining the uses which may be made of the Mortgaged Property or
any part thereof, unless Mortgagor shall have received Mortgagee's prior
written consent, such consent not to be unreasonably withheld or delayed. If
under applicable zoning provisions the use of all or any portion of the
Mortgaged Property is or shall become a nonconforming use, Mortgagor will not
cause such nonconforming use to be discontinued or abandoned without the
express written consent of Mortgagee, such consent not to be unreasonably
withheld or delayed. Mortgagor shall not (i) change the use of the Land in
any material respect or (ii) permit or suffer to occur any waste on or to the
Mortgaged Property or to any portion thereof.
10. Insurance.
(a) Mortgagor shall maintain casualty, liability and other policies
of insurance relating to the Mortgaged Property in form and substance, and
with insurers and coverages, reasonably satisfactory to Mortgagee and
consistent with insurance that it maintains on Similar Properties. Mortgagor
shall keep the Mortgaged Property insured against loss by flood if the
Mortgaged Property is located in an area identified by the Secretary of
Housing and Urban Development as an area having a special flood hazards and
in which flood insurance has been made available under the National Flood
Insurance Act of 1968 (or any
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successor act thereto). All policies of insurance to be furnished hereunder
(i) shall have standard non-contributory Mortgagee clauses attached to all
policies in favor of Mortgagee, without contribution, under a standard New
York (or local equivalent) Mortgagee clause naming Mortgagee as the party to
which all payments made under such insurance policies in excess of $150,000
should be paid, (ii) shall contain an endorsement providing that neither
Mortgagor nor Mortgagee nor any other party shall be a co-insurer under said
policies and shall contain a provision requiring that the coverage evidenced
thereby shall not be terminated or materially modified without ten (10) days
prior written notice to Mortgagee, (iii) shall provide that no act or thing
done by Mortgagor shall invalidate the policy as against Mortgagee, and (iv)
with respect to property insurance policies, shall contain a waiver of
subrogation against Mortgagee. Mortgagor shall deliver certificates
evidencing additional and renewal policies, together with evidence of payment
of premiums thereon, to Mortgagee, and in the case of all insurance about to
expire, shall deliver renewal policies or certificates evidencing such
policies not less than ten (10) days prior to their respective dates of
expiration.
(b) Mortgagor shall not take out separate insurance concurrent in
form or contributing in the event of loss with that required to be maintained
hereunder unless Mortgagee is included thereon under a standard,
non-contributory Mortgagee clause acceptable to Mortgagee. Mortgagor shall
promptly notify Mortgagee whenever any such separate insurance is taken out
and shall promptly deliver to Mortgagee the certificates evidencing the
policy or policies of such insurance.
(c) The insurance required by this Mortgage, at the option of
Mortgagor, may be effected by blanket and/or umbrella policies covering the
Mortgaged Property and other properties, provided, however, that in each
case, such insurance policies otherwise comply with the provisions of this
Mortgage and allocate to the Mortgaged Property, from time to time, the
coverage specified in this Mortgage without possibility of reduction or
co-insurance by reason of, or damage to, any other property named therein.
If the insurance required by this Mortgage shall be effected by any such
blanket or umbrella policies, Mortgagor shall furnish to Mortgagee
certificates with respect to, with schedules attached thereto showing the
amount of the insurance provided under such policies which is applicable to
the Mortgaged Property.
(d) If Mortgagor fails to maintain insurance in compliance with
this Section, Mortgagee may obtain such insurance and pay the premium
therefor and Mortgagor shall, on demand, reimburse Mortgagee for all expenses
incurred in connection therewith. Mortgagor shall deliver original
certificates to Mortgagee of all insurance policies maintained pursuant to
this Section 10. Each property insurance policy shall name Mortgagee as
Mortgagee, and loss payee with respect to all casualty coverage and each
liability policy shall name Mortgagee as an additional insured thereunder.
11. Casualty. (a) Mortgagor shall give Mortgagee prompt notice of
any loss or damage to the Mortgaged Property.
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(b) In case of loss or damage to the Mortgaged Property covered by
any of the insurance policies described in Section 10 above, Mortgagee (or,
after entry of decree of foreclosure, the purchaser at the foreclosure sale
or decree creditor, as the case may be) is hereby authorized at its option
either (i) to settle and adjust any claim under such insurance policies
without the consent of Mortgagor or (ii) to allow Mortgagor to settle and
adjust such claim (either jointly with Mortgagee or by Mortgagor alone, at
Mortgagee's discretion); provided that in either case Mortgagee shall, and is
hereby authorized to, collect and receipt for any such insurance proceeds.
Notwithstanding anything in the preceding sentence to the contrary, Mortgagee
agrees that it will allow Mortgagor to settle and adjust any claims under the
insurance policies which are in an amount less than $150,000, per incident of
loss, up to an aggregate amount of no greater than $300,000. The expenses
incurred by Mortgagee in the adjustment and collection of insurance proceeds
shall be included in the Obligations, and shall be reimbursed to Mortgagee
upon demand or may be deducted by Mortgagee from said insurance proceeds
prior to another application thereof. Interest on such amount shall accrue
at the Default Rate, beginning ten (10) days after Mortgagor receives notice
of a request for payment of such amount from Mortgagee, until such amount,
plus interest, is paid in full.
(c) Mortgagee shall permit Mortgagor to apply the proceeds of
insurance policies received in connection with any casualty to pay for the
cost of restoring, repairing, replacing or rebuilding the loss or damage to
the Mortgaged Property resulting from the casualty ("Restoration") if: (i)
there is no Event of Default hereunder at the time of such application; (ii)
restoration can, in the reasonable judgment of Mortgagee, be completed prior
to the maturity of the Obligations; and (iii) restoration can, in the
reasonable judgment of Mortgagee, be effected within two (2) years after the
date of such casualty and in such a manner so that the Mortgaged Property
will be of at least equal or greater value to the value than the Mortgaged
Property prior to such casualty. Otherwise, Mortgagee may elect in its sole
discretion to apply such proceeds either (x) towards payment of the
Obligations, notwithstanding the fact that the Obligations, or a portion
thereof, may not then be due and payable, or (y) to pay for the cost of
Restoration. In all events, disbursement of insurance proceeds by Mortgagee
(or at Mortgagee's election by a disbursing or escrow agent who shall be
selected by Mortgagee and whose fees shall be paid by Mortgagor), to pay the
cost of restoration shall require (i) evidence reasonably satisfactory to
Mortgagee of the estimated costs of Restoration, (ii) funds (or assurances
reasonably satisfactory to Mortgagee that such funds are available)
sufficient in addition to the proceeds of insurance to complete and fully pay
for Restoration; and (iii) such architect's certificates, waivers of lien,
contractor's sworn statements, title insurance endorsements, plats of surveys
and such other evidences of cost, payment and performance as Mortgagee may
reasonably require and approve. Except to the extent Mortgagee fails to turn
over insurance proceeds, if any, received by Mortgagee hereunder with respect
to such casualty to Mortgagor, Mortgagor hereby covenants to restore, repair,
replace or rebuild the Improvements, to be of at least equal value, and of
substantially the same character as prior to such loss or damage, all to be
effected in accordance with plans, specifications and procedures to be first
submitted to and reasonably approved by Mortgagee, and Mortgagor shall pay
all costs of such restoring, repairing, replacing or rebuilding.
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12. Eminent Domain. Mortgagor warrants, covenants and agrees that
should the Mortgaged Property, or any part thereof or interest therein, be
taken or damaged by reason of any public improvement or condemnation
proceeding, or in any other manner, or should Mortgagor receive any notice of
other information regarding such proceeding, Mortgagor shall give written
notice thereof within five (5) business days to Mortgagee. Without
Mortgagee's prior consent, Mortgagor (1) shall not agree to any compensation
or award, and (2) shall not take any action or fail to take any action which
would cause the compensation to be determined. Mortgagee shall be entitled
to: (1) all compensation, awards and other payments or relief therefor, (2)
to commence, appear in and prosecute in its own name any action or
proceedings, and (3) to make any compromise or settlement in connection with
such taking or damage. Mortgagor authorizes Mortgagee to collect and receive
such awards and compensation, to give proper receipts and acquittances
therefor and in Mortgagee's discretion to apply the same toward the payment
of the Obligations, notwithstanding the fact that the Obligations, or a
portion thereof, may not then be due and payable, or to the restoration of
the Mortgaged Property in accordance with the provisions set forth in the
second-to-last sentence of Section 11(c) above. Mortgagor further agrees to
make, execute, and deliver to Mortgagee, at any time upon request, free and
clear of any encumbrance of any kind whatsoever, any and all further
assignments and other instruments deemed necessary by Mortgagee for the
purpose of validly and sufficiently assigning all compensations and awards
made to Mortgagor for any taking, either permanent or temporary, under any
such proceeding.
13. Release of Mortgage. Mortgagee agrees to promptly and
unconditionally release this Mortgage (subject to the provisions set forth
in Section 6(b)) as follows:
(a) in the event of a bona fide sale (other than a "sale
leaseback" or other similar financing transaction) of the Mortgaged
Property to a third party that is not affiliated with Mortgagor, provided
that each of the following conditions is satisfied: (i) neither Mortgagor
nor any of its respective affiliates continue to use or occupy the Mortgaged
Property or any part thereof; (ii) Mortgagor shall consult with Mortgagee
prior to such sale and shall obtain Mortgagee's prior written consent with
respect to such sale and the sales price (such consent not to be unreasonably
withheld); and (iii) all of the proceeds of such sale are applied towards
repayment of the Obligations or otherwise applied in compliance with the
provisions of Section 6(b) hereof.
(b) in the event that Mortgagee is paid in full for all amounts
owing (or what shall or may become owing under the Relevant Documents) to
Mortgagee by Mortgagor and any of its former affiliated debtors, including
the indefeasible payment and satisfaction in full of the Obligations.
(c) on December 31, 2014 (or on such earlier date as permitted
under and pursuant to the provisions of Section 6(b) hereof); provided,
however, that if on such date, any amount secured by this Mortgage has not
been indefeasibly paid in full, then this Mortgage shall be deemed amended to
extend the term hereof until such obligations are so paid.
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14. Changes in the Laws Regarding Taxation. If any law is enacted
or adopted or amended after the date of this Mortgage which imposes a tax,
either directly or indirectly, on the Obligations or Mortgagee's interest in
the Mortgaged Property, Mortgagor will pay such tax, with interest and
penalties thereon, if any, provided, however, that Mortgagor shall not be
obligated to pay any tax which is imposed on the net income of Mortgagee or
franchise taxes or doing business taxes imposed on Mortgagee. In the event
that the payment of such tax or interest and penalties by Mortgagor would be
unlawful or taxable to Mortgagee or unenforceable or provide the basis for a
defense of usury, then in any such event, Mortgagee shall have the option, by
written notice of not less than ninety (90) days, to declare the Obligations
immediately due and payable.
15. No Credits on Account of the Obligations. (i) Mortgagor will
not claim or demand or be entitled to any credit or credits on account of the
Obligations for any part of the Impositions assessed against the Mortgaged
Property, or any part thereof, and (ii) no deduction shall otherwise be made
or claimed from the assessed value of the Mortgaged Property, or any part
hereof, for real estate tax purposes by reason of this Mortgage or the
Obligations if the effect of such deduction would impose on Mortgagee a tax,
either directly or indirectly, for which it otherwise would not have been
liable.
16. Documentary Stamps. If at any time the United States of
America, any State thereof or any subdivision of any such State shall require
revenue or other stamps to be affixed to the Notes or this Mortgage, or
impose any other tax or charge on the same, Mortgagor will pay for the same,
with interest and penalties thereon, if any.
17. Controlling Agreement. It is expressly stipulated and agreed
to be the intent of Mortgagor and Mortgagee at all times to comply with
applicable state law or applicable United States federal law (to the extent
that it permits Mortgagee to contract for, charge, take, reserve, or receive
a greater amount of interest than under state law) and that this Section
shall control every other covenant and agreement in this Mortgage and the
other Relevant Documents. If the applicable law (state or federal) is ever
judicially interpreted so as to render usurious any amount called for under
the Notes or under any of the other Relevant Documents, or contracted for,
charged, taken, reserved, or received with respect to the Obligations, or if
Mortgagee's exercise of the option to accelerate the maturity of the Notes,
or if any prepayment by Mortgagor results in Mortgagor having paid any
interest in excess of that permitted by applicable law, then it is
Mortgagor's and Mortgagee's express intent that all excess amounts
theretofore collected by Mortgagee shall be credited on the principal balance
of the Notes and all other Obligations (or, if the Notes and all other
Obligations have been or would thereby be paid in full, refunded to
Mortgagor), and the provisions of the Notes and the other Relevant Documents
immediately be deemed reformed and the amounts thereafter collectible
hereunder and thereunder reduced, without the necessity of the execution of
any new documents, so as to comply with the applicable law, but so as to
permit the recovery of the fullest amount otherwise called for hereunder or
thereunder. All sums paid or agreed to be paid to Mortgagee for the use,
forbearance, or detention of the Obligations shall, to the extent permitted
by applicable law, be amortized, prorated, allocated, and spread throughout
the full
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stated term of the Obligations until payment in full so that the rate or
amount of interest on account of the Obligations does not exceed the maximum
rate of interest permitted by law from time to time in effect and applicable
to the Obligations for so long as the Obligations are outstanding.
18. Performance of Other Agreements. Mortgagor shall observe and
perform in all respects the terms to be observed or performed by Mortgagor
under any agreement or recorded instrument affecting or pertaining to the
Mortgaged Property.
19. Right to Perform the Obligations. Subject to the terms of the
Relevant Documents, if any default exists, Mortgagee shall have the right,
but not the obligation, to cure such default in the name and on behalf of
Mortgagor. All sums advanced and expenses incurred at any time by Mortgagee
under this Section 19, or otherwise under this Mortgage or any of the other
Relevant Documents or applicable law (including, without limitation, the
costs and expenses of Mortgagee and its agents incurred in connection with
the preservation, collection and enforcement of this Mortgage or of the liens
created hereby), shall bear interest from the date that such sum is advanced
or expense incurred, to and including the date of reimbursement, computed at
the Default Rate (as defined in the Notes), and all such sums, together with
interest thereon, shall constitute additions to the Obligations and shall be
secured by this Mortgage and Mortgagor covenants and agrees to pay them to
the order of the Mortgagee promptly upon demand.
20. Further Acts, etc. Mortgagor will, at the cost of Mortgagor,
and without expense to Mortgagee, do, execute, acknowledge and deliver all
and every such further acts, deeds, conveyances, mortgages, assignments,
notices of assignment, Uniform Commercial Code financing statements or
continuation statements, transfers and assurances as Mortgagee shall, from
time to time, reasonably require, for the better assuring, conveying,
assigning, transferring, and confirming unto Mortgagee the property and
rights hereby mortgaged, given, granted, bargained, sold, alienated,
enfeoffed, conveyed, confirmed, warranted, pledged, assigned and hypothecated
(including, without limitation, the assignment of leases and rents contained
in Section 8 hereof) or intended now or hereafter so to be, or which
Mortgagor may be or may hereafter become bound to convey or assign to
Mortgagee, or for carrying out the intention or facilitating the performance
of the terms of this Mortgage or for filing, registering or recording this
Mortgage. Mortgagor, on demand, will execute and deliver and, Mortgagor
hereby authorizes Mortgagee to execute in the name of Mortgagor or without
the signature of Mortgagor to the extent Mortgagee may lawfully do so, one or
more financing statements, chattel mortgages or other instruments, to
evidence more effectively the security interest of Mortgagee in the Mortgaged
Property. Notwithstanding anything to the contrary contained herein,
Mortgagor shall not be obligated to execute, deliver, file or record any
additional documents which increase Mortgagor's obligations under this
Mortgage or the Relevant Documents. Mortgagor grants to Mortgagee an
irrevocable power of attorney coupled with an interest for the purpose of
exercising the rights provided for in Section 19 and this Section 20.
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21. Recording of Mortgage, etc. Mortgagor forthwith upon the
execution and delivery of this Mortgage and thereafter, from time to time,
will cause this Mortgage, and any security instrument creating a lien or
security interest or evidencing the lien hereof upon the Mortgaged Property
and each instrument of further assurance to be filed, registered or recorded
in such manner and in such places as may be required by any present or future
law in order to publish notice of and fully to protect the lien or security
interest hereof upon, and the interest of Mortgagee in, the Mortgaged
Property. Mortgagor will pay all filing, registration or recording fees, the
costs and fees of local counsel for Mortgagee, including, without limitation,
costs and fees for local counsel review of the Mortgage and Subordination
Agreement and the preparation of opinion letters in connection therewith, and
all expenses incident to the execution and acknowledgment of this Mortgage
(but not including fees of Mortgagee's New York counsel in connection with
the preparation of this Mortgage), any deed of trust or mortgage supplemental
hereto, any security instrument with respect to the Mortgaged Property and
any instrument of further assurance, and all federal, state, county and
municipal, taxes, duties, imposts, assessments and charges arising out of or
in connection with the execution and delivery of this Mortgage, any deed of
trust or mortgage supplemental hereto, any security instrument with respect
to the Mortgaged Property or any instrument of further assurance (other than
income or franchise taxes imposed on Mortgagee), except where prohibited by
law so to do. Mortgagor shall hold harmless and indemnify Mortgagee, its
successors and assigns, against any liability incurred by reason of the
imposition of any tax on the making and recording of this Mortgage.
Mortgagor shall pay all title costs and premiums in connection with the ALTA
lender's title insurance policy issued by Chicago Title Insurance Company for
the benefit of Mortgagee in connection with this Mortgage (including payment
for the cost of any property surveys ("Surveys") prepared in connection
therewith), which title insurance policy shall be in form and substance
satisfactory to Mortgagee containing such endorsements as Mortgagee may
reasonably request, including, without limitation, the deletion of any
creditor's rights exception and (to the extent available) a variable rate
endorsement; survey endorsement; comprehensive endorsement; first loss
endorsement; last dollar endorsement; tie-in endorsement; future advances
endorsement; access coverage; tax parcel coverage; contiguity (if applicable)
coverage; and such other endorsements as Mortgagee shall reasonably require.
In the event that any Survey with respect to the Mortgaged Property reveals
any encumbrances, restrictions, building code or zoning violations or other
matters which in Mortgagee's reasonable judgment, materially impair
Mortgagee's first priority lien in the Mortgaged Property, Mortgagor agrees
to cooperate with Mortgagee in performing any acts reasonably requested by
Mortgagee to cause such encumbrances, restrictions, violations or other
matters to be removed or remedied as appropriate.
22. Reporting Requirements. Mortgagor agrees to give prompt notice
to Mortgagee of the insolvency or bankruptcy filing of Mortgagor. In
addition, Mortgagor will give notice to Mortgagee in writing not later than
ten (10) days after: (i) the occurrence of any Event of Default with respect
to Mortgagor hereunder, or (ii) notice to Mortgagor of any action, litigation
or proceeding instituted to recover possession of the Mortgaged Property from
Mortgagor or for any other purpose affecting this Mortgage or of any other
action, litigation or proceeding instituted against Mortgagor or judgment
rendered against Mortgagor;
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and such notice to Mortgagee shall include a true copy of any notice of
default, or if any action is then proceeding, copies of any pleadings and
papers received by Mortgagor.
23. Events of Default. The term "Event of Default" as used herein
shall mean the occurrence or happening, at any time and from time to time, of
one or more of the following events:
(a) a default or event of default under any of the Notes
(including, without limitation, any event of default described in Section 3
of any of the Notes), which remains uncured following the expiration of any
applicable cure periods;
(b) Mortgagor (i) shall fail to perform when due any payment
obligation under the terms of this Mortgage or the other Relevant Documents
within ten days after such amount becomes due, or (ii) shall be in violation
of any of the obligations or covenants contained herein or therein and such
default shall continued unremedied for a period of thirty (30) days, provided
that if such default is not readily susceptible of cure in such thirty (30)
day period, and provided that Mortgagor proceeds in a diligent manner to cure
such default, Mortgagor shall have such additional time to effect such cure
as shall be reasonably necessary to effect such cure;
(c) Failure by Mortgagor to maintain insurance and deliver evidence
thereof pursuant to Section 10; or
(d) a default under any other mortgage, deed of trust or other
security instrument covering the Mortgaged Property or a portion thereof
which remains uncured following the expiration of any applicable cure periods.
24. Remedies. (a) Upon the occurrence of any Event of Default,
Mortgagee may take such action permitted in law or at equity, without notice
or demand, as it deems advisable to protect and enforce its rights against
Mortgagor and in and to the Mortgaged Property, by Mortgagee itself or
otherwise, including, but not limited to, the following actions, each of
which may be pursued concurrently or otherwise, at such time and in such
order as Mortgagee may determine, in its sole discretion, without impairing
or otherwise affecting the other rights and remedies of Mortgagee:
(i) declare the entire principal amount of the indebtedness and
Obligations secured hereby with interest accrued thereon to be
immediately due and payable;
(ii) institute a proceeding or proceedings, judicial or nonjudicial,
by advertisement or otherwise, for the complete foreclosure of this
Mortgage in which case the Mortgaged Property or any interest therein
may be sold for cash or upon credit in one or more parcels or in
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several interests or portions and in any order or manner in accordance
with the laws of the jurisdiction in which such Mortgaged Property is
located;
(iii) with or without entry, to the extent permitted, and pursuant
to the procedures provided by, applicable law, institute proceedings
for the foreclosure of this Mortgage for the Obligations then due and
payable subject to the continuing lien of this Mortgage, in accordance
with the laws of the jurisdiction in which such Mortgaged Property is
located, for the balance of the Obligations not then due;
(iv) sell for cash or upon credit the Mortgaged Property or any part
thereof and all estate, claim, demand, right, title and interest of
Mortgagor therein and rights of redemption thereof, pursuant to power
of sale or otherwise, at one or more sales, as an entirety or in
parcels, at such time and place, upon such terms and after such notice
thereof as may be required or permitted by the laws of the
jurisdiction in which such Mortgaged Property is located;
(v) institute an action, suit or proceeding in equity for the
specific performance of any covenant, condition or agreement contained
herein or in the other Relevant Documents;
(vi) recover judgment on the Notes either before, during or after any
proceedings for the enforcement of this Mortgage;
(vii) prior to, concurrently with, or subsequent to the institution
of foreclosure proceedings, apply for the appointment of a
trustee, receiver, liquidator or conservator of the Mortgaged
Property, as a matter of strict right, without notice and without
regard for the adequacy of the security for the Obligations or the
interest of the Mortgagor therein and without regard for the solvency
of the Mortgagor or of any person, firm or other entity liable for the
payment of the Obligations, and Mortgagor hereby consents to such
appointment;
(viii) prior to, concurrently with or subsequent to the institution
of foreclosure proceedings, enforce Mortgagee's interest in the Leases
and Rents and enter into or upon the Mortgaged Property and take
exclusive possession thereof, either personally or by its agents,
nominees or attorneys and dispossess Mortgagor and its agents and
servants therefrom, and thereupon Mortgagee may (whether or not a
receiver has been appointed) as attorney-in-fact or agent of
Mortgagor, or in its own name and under the powers herein granted, (A)
use, operate, manage, control, insure, maintain, repair, restore and
otherwise deal with all and every part of the Mortgaged Property and
conduct the business thereat; (B) complete any construction on the
Mortgaged Property in such manner and form as Mortgagee deems
advisable; (C) make alterations, additions, renewals, replacements and
improvements to or on the Mortgaged
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Property; (D) exercise all rights and powers of Mortgagor with
respect to the Mortgaged Property, whether in the name of Mortgagor
or otherwise (including, without limitation, the right to make,
cancel, enforce or modify Leases, obtain and evict tenants, and
demand, sue for, collect and receive all earnings, revenues, rents,
issues, profits and other income of the Mortgaged Property and
every part thereof); and (E) apply the receipts from the Mortgaged
Property to the payment of the Obligations, after deducting
therefrom all reasonable expenses (including, without limitation,
reasonable attorneys' fees) incurred in connection with the aforesaid
operations and all amounts necessary to pay the taxes, assessments,
insurance and other charges in connection with the Mortgaged Property,
it being agreed that should Mortgagee incur any liability, loss or
damage in the defense of any claims or demands, the amount thereof,
including costs, expenses and reasonable attorneys' fees shall be
secured hereby, and Mortgagor shall reimburse Mortgagee therefor
immediately upon demand;
(ix) require Mortgagor to pay monthly in advance to Mortgagee, or any
receiver appointed to collect the Rents, the fair and reasonable
rental value for the use and occupation of any portion of the
Mortgaged Property occupied by Mortgagor and require Mortgagor to
vacate and surrender possession to Mortgagee of the Mortgaged Property
or to such receiver and, in default thereof, evict Mortgagor by
summary proceedings or otherwise; and
(x) pursue such other rights and remedies as may be available under
the Relevant Documents or otherwise at law or in equity or under the
Uniform Commercial Code including the right to establish a lock box
for all Rents and other receivables of Mortgagor relating to the
Mortgaged Property.
In the event of a sale, by foreclosure or otherwise, of less than all of the
Mortgaged Property, this Mortgage shall continue as a lien on the remaining
portions of the Mortgaged Property.
The proceeds of any sale made under or by virtue of this Section 24,
together with any other sums which then may be held by Mortgagee under this
Mortgage, whether under the provisions of this Section or otherwise, shall be
applied by Mortgagee in the following order of priority: first, on account of
all reasonable costs and expenses incident to the foreclosure proceedings,
including all such items as are mentioned in this Section 24; second, all
other items which under the terms hereof constitute secured indebtedness,
which are any amounts due under this Mortgage, or under the other Relevant
Documents (including any amounts required to be escrowed pursuant to Section
6(b)); third, any surplus to Mortgagor, its successors or assigns, as their
rights may appear.
(b) Upon any sale made under or by virtue of this Section 24,
whether made under the power of sale herein granted or under or by virtue of
judicial proceedings or of a judgment or decree of foreclosure and sale,
Mortgagee may bid for and acquire the Mortgaged Property or any part thereof
and in lieu of paying cash therefor may make settlement for the
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purchase price by crediting upon the Obligations the net sales price after
deducting therefrom the expenses of the sale and costs of the action and any
other sums which Mortgagee is authorized to deduct under this Mortgage.
(c) No recovery of any judgment by Mortgagee and no levy of an
execution under any judgment upon the Mortgaged Property or upon any other
property of Mortgagor shall affect in any manner or to any extent the lien of
this Mortgage upon the Mortgaged Property or any part thereof, or any liens,
rights, powers or remedies of Mortgagee hereunder, but such liens, rights,
powers and remedies of Mortgagee shall continue unimpaired as before.
(d) Mortgagee may adjourn, terminate or rescind any proceeding or
other action brought in connection with its exercise of the remedies provided
in this Section 24 at any time before the conclusion thereof, as determined
in Mortgagee's sole discretion and without prejudice to Mortgagee.
(e) Mortgagee may resort to any remedies and the security given by
this Mortgage or the other Relevant Documents in whole or in part, and in
such portions and in such order as determined by Mortgagee's sole discretion.
No such action shall in any way be considered a waiver of any rights,
benefits or remedies evidenced or provided by this Mortgage or the other
Relevant Documents. The failure of Mortgagee to exercise any right, remedy or
option provided in this Mortgage or the other Relevant Documents shall not be
deemed a waiver of such right, remedy or option or of any covenant or
obligation secured by this Mortgage or the other Relevant Documents. Subject
to the provisions of the Relevant Documents, no acceptance by Mortgagee of
any payment after the occurrence of any Event of Default and no payment by
Mortgagee of any obligation for which Mortgagor is liable hereunder shall be
deemed to waive or cure any Event of Default with respect to Mortgagor, or
Mortgagor's liability to pay such obligation. No sale of all or any portion
of the Mortgaged Property, no forbearance on the part of Mortgagee and no
extension of time for the payment of the whole or any portion of the
Obligations or any other indulgence given by Mortgagee to Mortgagor, shall
operate to release or in any manner affect the interest of Mortgagee in the
remaining Mortgaged Property or the liability of Mortgagor to pay the
Obligations. No waiver by Mortgagee shall be effective, unless it is in
writing and then only to the extent specifically stated.
(f) The interests and rights of Mortgagee under this Mortgage and
the other Relevant Documents, and the liens and security interests created
and evidenced by this Mortgage and the other Relevant Documents, shall not be
impaired by any indulgence, including (i) any renewal, extension or
modification which Mortgagee may grant with respect to any of the
Obligations, (ii) any surrender, compromise, release, renewal, extension,
exchange or substitution which Mortgagee may grant with respect to the
Mortgaged Property or any portion thereof; or (iii) any release or indulgence
granted to any maker, endorser, guarantor or surety of any of the
Obligations.
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(g) Upon the occurrence of any Event of Default under Section 23,
in any suit to foreclose the lien hereof or enforce any other remedy of
Mortgagee under this Mortgage, there shall be allowed and included as
additional indebtedness in the decree for sale or other judgment or decree
all reasonable expenditures and expenses which may be paid or incurred by or
on behalf of Mortgagee for attorneys' fees, appraiser's fees, outlays for
documentary and expert evidence, stenographers' charges, publication costs,
and costs (which may be estimated as to items to be expended after entry of
the decree) of procuring all such abstracts of title, title searches and
examinations, title insurance policies, Torrens certificates, and similar
data and assurances with respect to title as Mortgagee may deem reasonably
necessary either to prosecute such suit or to evidence to bidders at any sale
which may be had pursuant to such decree the true condition of the title to
or the value of the Mortgaged Property. All such reasonable expenditures and
expenses which Mortgagee may incur as permitted by this Section for the
protection of the Mortgaged Property and the maintenance of the lien of this
Mortgage, including, but not limited to, the fees and out-of-pocket
disbursements of any attorney employed by Mortgagee in any litigation or
proceeding affecting this Mortgage, including, but not limited to, bankruptcy
proceedings or preparations for the commencement or defense of any proceeding
or threatened suit or proceeding, shall be immediately due and payable by
Mortgagor and shall be secured by this Mortgage.
25. Right of Access. Mortgagor shall permit agents,
representatives and employees of Mortgagee to (i) inspect the Mortgaged
Property or any part thereof, provided that such inspection does not
materially interfere with the tenants of the Mortgaged Property or violate
the terms of any Lease, (ii) to examine and make abstracts from any of
Mortgagor's books and records and (iii) to discuss the business, operations,
properties and financial and other condition of Mortgagor with officers of
Mortgagor and with its independent certified public accountants, at such
reasonable times as may be requested by Mortgagee upon reasonable advance
notice.
26. Security Agreement. This Mortgage is both a real property
mortgage and a "security agreement" within the meaning of the Uniform
Commercial Code. The Mortgaged Property includes both real and personal
property and all other rights and interests, whether tangible or intangible
in nature, of Mortgagor in the Mortgaged Property. Mortgagor by executing
and delivering this Mortgage has granted and hereby grants to Mortgagee, as
security for the Obligations, a security interest in the Mortgaged Property
to the full extent that the Mortgaged Property may be subject to the Uniform
Commercial Code (said portion of the Mortgaged Property so subject to the
Uniform Commercial Code being called in this paragraph the "Collateral").
Mortgagor hereby agrees with Mortgagee to execute and deliver to Mortgagee,
in form and substance satisfactory to Mortgagee, such financing statements
and such further assurances as Mortgagee may from time to time, reasonably
consider necessary to create, perfect, and preserve Mortgagee's security
interest herein granted. All or part of the Mortgaged Property is or is to
become "fixtures" as defined in the Uniform Commercial Code, and this
Mortgage, upon being filed for record in the real estate records of the city
or county wherein such fixtures are situated, shall also constitute a
"fixture filing" for the purposes of the Uniform Commercial Code upon such of
the Mortgaged Property that is or
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may become fixtures. Information concerning the security interest herein
granted may be obtained from the parties at the addresses of the parties set
forth in the first paragraph of this Mortgage. Mortgagor's chief executive
office and principal place of business is the Mortgagor's address set forth
in the first paragraph of this Mortgage, and the place where Mortgagor's
books and records in respect of where the Mortgaged Property is located are
kept is the address of Mortgagor set forth in the first paragraph of this
Mortgage. If an Event of Default shall occur which shall remain uncured,
Mortgagee, in addition to any other rights and remedies which it may have,
shall have and may exercise immediately and without demand, any and all
rights and remedies granted to a secured party upon default under the Uniform
Commercial Code (including, without limitation, to the extent permitted by
law, the right to take possession of the Collateral or any part thereof, and
to take such other measures as Mortgagee may deem necessary for the care,
protection and preservation of the Collateral). Upon request or demand of
Mortgagee, Mortgagor shall at its expense assemble the Collateral and make it
available to Mortgagee at a convenient place acceptable to Mortgagee.
Mortgagor shall pay to Mortgagee on demand therefor any and all reasonable
expenses (including, without limitation, reasonable legal expenses and
attorneys' fees) incurred or paid by Mortgagee in protecting the interest in
the Collateral and in enforcing the rights hereunder with respect to the
Collateral. Any notice of sale, disposition or other intended action by
Mortgagee with respect to the Collateral sent to Mortgagor at least ten (10)
business days prior to such action or such notice as is otherwise required by
law or the Relevant Documents, shall constitute commercially reasonable
notice to Mortgagor. The proceeds of any disposition of the Collateral, or
any part thereof, may be applied by Mortgagee to the payment of the
Obligations in such priority and proportions as Mortgagee shall determine in
its sole discretion. In the event of any change in name, identity or
structure of Mortgagor, Mortgagor shall notify Mortgagee thereof and,
promptly after request, shall execute, file and record such Uniform
Commercial Code forms as are necessary to maintain the priority of
Mortgagee's lien upon and security interest in the Collateral, and shall pay
all expenses and fees in connection with the filing and recording thereof.
If Mortgagee shall require the filing or recording of additional Uniform
Commercial Code forms or continuation statements, Mortgagor shall, promptly
after request, execute, file and record such Uniform Commercial Code forms or
continuation statements as Mortgagee shall deem necessary, and shall pay all
expenses and fees in connection with the filing and recording thereof, it
being understood and agreed, however, that no such additional documents shall
materially increase Mortgagor's obligations under this Mortgage or the other
Relevant Documents. Mortgagor hereby irrevocably appoints Mortgagee as its
attorney-in-fact, coupled with an interest, to file with the appropriate
public office on its behalf any UCC financing statements (or related
documents) signed only by Mortgagee, as secured party, in connection with the
Collateral covered by this Mortgage, such appointment to terminate upon the
release of this Mortgage.
27. Actions and Proceedings. Mortgagee has the right to appear in
and defend any action or proceeding brought with respect to the Mortgaged
Property and to bring any action or proceeding, in the name and on behalf of
Mortgagor, which Mortgagee, in its reasonable discretion, decides should be
brought to protect its interest under this Mortgage or in the Mortgaged
Property. Subject to the foregoing, Mortgagor shall appear in and contest
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any action or proceeding purporting to affect the security hereof and shall
pay all reasonable costs and expenses including cost of evidence of title and
attorney's fees, in any such action or proceeding in which Mortgagee may
appear. Mortgagee shall, at its option, be subrogated to the lien of any
mortgage or other security instrument discharged in whole or in part by the
Obligations, and any such subrogation rights shall constitute additional
security for the payment of the Obligations.
28. Waiver of Setoff and Counterclaim. Except as may be permitted
under the Relevant Documents, all amounts due under this Mortgage, the Notes
and the other Relevant Documents shall be payable without setoff or
counterclaim whatsoever.
29. Liens. Mortgagor warrants, covenants and agrees to pay and
promptly discharge, at Mortgagor's cost and expense, all taxes, assessments
and governmental charges levied upon it, its income and assets as and when
such taxes, assessments and charges are due and payable (including, without
limitation, all Impositions), as well as all lawful claims for labor
materials and supplies or otherwise which could become a lien, and all liens,
encumbrances and charges upon the Mortgaged Property, or any part thereof or
interest therein; provided that the existence of any mechanic's, laborer's,
materialman's, supplier's or vendor's lien or right thereto shall not
constitute a violation of this Section if payment is not yet due under the
contract which is the foundation thereof. Notwithstanding the foregoing,
Mortgagor shall not be in default for failure to pay or discharge Impositions
or mechanic's or materialman's or similar lien asserted against the Mortgaged
Property if, and so long as, (a) Mortgagor shall have notified Mortgagee of
same within seven (7) days of obtaining knowledge thereof; (b) Mortgagor
shall diligently and in good faith contest the same by appropriate legal
proceedings which shall operate to prevent the enforcement or collection of
the same and the sale of the Mortgaged Property or any part thereof, to
satisfy the same; (c) unless funds are otherwise reserved, Mortgagor shall
furnish to Mortgagee such security as Mortgagee may reasonably request to
insure payment of such Impositions and to secure and indemnify Mortgagee
against any cost, expense, loss or damage in connection with such contest or
postponement of payment; (d) Mortgagor shall timely upon final determination
thereof pay the amount of any such Impositions, claim, fine or penalty so
determined, together with all costs, interest and penalties which may be
payable in connection therewith; (e) the failure to pay the Impositions, or
mechanic's or materialman's or similar lien claim does not constitute a
default under any other deed of trust, mortgage or security interest covering
or affecting any part of the Mortgaged Property; and (f) notwithstanding the
foregoing, Mortgagor shall immediately upon request of Mortgagee pay (and if
Mortgagor shall fail so to do, Mortgagee may, but shall not be required to,
pay or cause to be discharged or bonded against) any such Impositions, or
claim notwithstanding such contest, if in the reasonable opinion of
Mortgagee, the Mortgaged Property or any part thereof or interest therein may
be in imminent danger of being sold, forfeited, foreclosed, terminated,
canceled or lost.
30. Recovery of Sums Required to Be Paid. Mortgagee shall have the
right from time to time to take action to recover any sum or sums which
constitute a part of the Obligations as the same become due and owing,
without regard to whether or not the balance
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of the Obligations shall be due, and without prejudice to the right of
Mortgagee thereafter to bring an action of foreclosure, or any other action,
for a default or defaults by Mortgagor existing at the time such earlier
action was commenced.
31. Marshaling, Waiver of Redemption and Other Matters. Mortgagor
hereby waives, to the extent permitted by law, the benefit of all
appraisement, valuation, stay, extension, reinstatement, moratorium and
redemption laws now or hereafter in force and all rights of marshaling in the
event of any sale hereunder of the Mortgaged Property or any part thereof or
any interest therein. Further, Mortgagor hereby expressly waives any and all
rights of redemption from sale under any order or decree of foreclosure of
this Mortgage on behalf of Mortgagor, and on behalf of each and every person
acquiring any interest in or title to the Mortgaged Property subsequent to
the date of this Mortgage and on behalf of all persons to the extent
permitted by applicable law.
32. Notice. Any notice which either party hereto may desire or be
required to give to the other party shall be in writing and delivered by:
(x) a commercial courier or messenger service or (y) by U.S. registered or
certified mail with return receipt requested. Notice by commercial messenger
or courier service will be deemed to have been given on the day when
delivered before 4:00 p.m. on a business day in the city in which notice is
delivered, provided that payment for the cost of delivery is not requested of
the recipient. Notice by mail shall be given by registered or certified U.S.
Mail, return receipt requested. Delivery of notice by commercial messenger
or courier service or mail shall be assumed if acceptance of delivery is
refused. Notice may be given by fax but will only be treated as delivered
hereunder if: (x) sent between the hours of 9:00 a.m. and 5:00 p.m. (based
on local time at the destination); and (y) receipt is acknowledged by fax and
delivery will be deemed to have been given on the date the fax acknowledgment
is sent. Notices shall be delivered as follows or at such other place as
either party hereto may by notice in writing (given in accordance with this
Section 32) designate:
To Mortgagor: Discovery Zone, Inc.
One Corporate Center
110 East Broward Boulevard
Fort Lauderdale, Florida 33301
Attn: President
Telecopy Number: (954) 627-2670
To Mortgagee: McDonald's Corporation
One McDonald's Plaza
Oak Brook, IL 60523
Attn: General Counsel
Telecopy Number: (630) 623-3000
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33. Sole Discretion of Mortgagee. Wherever pursuant to this
Mortgage, Mortgagee exercises any right given to it to approve or disapprove,
or any arrangement or term is to be satisfactory to Mortgagee, the decision
of Mortgagee to approve or disapprove or to decide that arrangements or terms
are satisfactory or not satisfactory shall be in the sole discretion of
Mortgagee and shall be final and conclusive, except as may be otherwise
expressly and specifically provided herein.
34. Non-Waiver. The failure of Mortgagee to insist upon strict
performance of any term hereof shall not be deemed to be a waiver of any term
of this Mortgage. Mortgagor shall not be relieved of Mortgagor's Obligations
hereunder by reason of (a) the failure of Mortgagee to comply with any
request of Mortgagor to take any action to foreclose this Mortgage or
otherwise enforce any of the provisions hereof or of the other Relevant
Documents, (b) the release, regardless of consideration, of the whole or any
part of the Mortgaged Property, or of any person liable for the Obligations
or any portion thereof, or (c) any agreement or stipulation by Mortgagee
extending the time of payment or otherwise modifying or supplementing the
terms of this Mortgage or the other Relevant Documents. Mortgagee may resort
for the payment of the Obligations to any other security held by Mortgagee in
such order and manner as Mortgagee, in its discretion, may elect. Mortgagee
may take action to recover the Obligations, or any portion thereof, or to
enforce any covenant hereof without prejudice to the right of Mortgagee
thereafter to foreclosure this Mortgage. The rights and remedies of Mortgagee
under this Mortgage shall be separate, distinct and cumulative and none shall
be given effect to the exclusion of the others. No act of Mortgagee shall be
construed as an election to proceed under any one provision herein to the
exclusion of any other provision. Mortgagee shall not be limited exclusively
to the rights and remedies herein stated but shall be entitled to every right
and remedy now or hereafter afforded at law or in equity.
35. No Oral Change. This Mortgage and the other Relevant Documents
constitute the final expression of the entire agreement among the parties
pertaining to the subject matter hereof and thereof and supersede all prior
and contemporaneous agreements, understanding, representations or other
arrangements, whether express or implied, written or oral, of the parties in
connection herewith or therewith except to the extent expressly incorporated
or specifically referred to herein or therein. This Mortgage, and any
provisions hereof, may not be modified, amended, waived, extended, changed,
discharged or terminated orally or by any act or failure to act on the part
of Mortgagor or Mortgagee, but only by an agreement in writing signed by the
party against whom enforcement of any modification, amendment, waiver,
extension, change, discharge or termination is sought.
36. Successors and Assigns. Subject to the provisions hereof
requiring Mortgagee's consent to any transfer of the Mortgaged Property, this
Mortgage shall be binding upon and inure to the benefit of Mortgagor and
Mortgagee and their respective permitted successors and assigns forever.
29
<PAGE>
37. Severability. If any term, covenant or condition of this
Mortgage or the Relevant Documents is held to be invalid, illegal or
unenforceable in any respect, this Mortgage and any such other Relevant
Document shall be construed without such provision.
38. Headings, etc. The headings and captions of various paragraphs
of this Mortgage are for convenience of reference only and are not to be
construed as defining or limiting, in any way, the scope or intent of the
provisions hereof.
39. Duplicate Originals. This Mortgage may be executed in any
number of duplicate originals and each such duplicate original shall be
deemed to be an original.
40. Definitions. Unless the context clearly indicates a contrary
intent or unless otherwise specifically provided herein, words used in this
Mortgage may be used interchangeably in singular or plural form and the word
"Mortgagor" shall mean "each Mortgagor and any subsequent owner or owners of
the Mortgaged Property or any part thereof or any interest therein," the word
"Mortgagee" shall mean "Mortgagee and any subsequent holder(s) of the Notes,"
the word "person" shall include an individual, corporation, partnership,
trust, unincorporated association, government, governmental authority, and
any other entity, and the words "Mortgaged Property" shall include any
portion of the Mortgaged Property and any interest therein and the words
"attorneys' fees" shall include any and all attorneys' fees, paralegal and
law clerk fees (including, without limitation, fees at the pre-trial, trial
and appellate levels incurred or paid by Mortgagee in protecting its interest
in the Mortgaged Property and Collateral and enforcing its rights hereunder
and all such fees incurred in connection with any bankruptcy or insolvency
proceedings). Whenever the context may require, any pronouns used herein
shall include the corresponding masculine, feminine or neuter forms, and the
singular form of nouns and pronouns shall include the plural and vice versa.
41. Homestead. Mortgagor hereby waives and renounces all homestead
and exemption rights provided by the constitution and the laws of the United
States and of any state, in and to the Land as against the collection of the
Obligations, or any part hereof.
42. Assignments. Consistent with and subject to the applicable
provisions of the Relevant Documents, Mortgagee shall have the right to
assign or transfer its rights under this Mortgage without limitation. Any
Mortgagee or transferee shall be entitled to all the benefits afforded
Mortgagee under this Mortgage.
43. Waiver of Jury Trial. TO THE MAXIMUM EXTENT PERMITTED BY
APPLICABLE LAW, EACH PARTY HERETO HEREBY AGREES NOT TO ELECT A TRIAL BY JURY
OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY JURY
FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH
REGARD TO THE NOTES, THIS MORTGAGE, OR THE OTHER RELEVANT DOCUMENTS, OR ANY
CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH.
30
<PAGE>
THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY
SUCH PARTY, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH
ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE.
MORTGAGEE IS HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY
PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY MORTGAGOR.
44. Consent to Jurisdiction. MORTGAGOR AND MORTGAGEE HERETO
CONSENT FOR THEMSELVES AND IN RESPECT OF THEIR PROPERTIES, GENERALLY,
UNCONDITIONALLY AND IRREVOCABLY, TO THE NONEXCLUSIVE JURISDICTION OF THE
FEDERAL AND STATE COURTS IN THE STATE OF NEW YORK WITH RESPECT TO ANY
PROCEEDING RELATING TO ANY MATTER, CLAIM OR DISPUTE ARISING UNDER THE
RELEVANT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY. MORTGAGOR
FURTHER CONSENTS, GENERALLY, UNCONDITIONALLY AND IRREVOCABLY, TO THE
NONEXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS OF THE STATE IN
WHICH ANY OF THE COLLATERAL IS LOCATED IN RESPECT OF ANY PROCEEDING RELATING
TO ANY MATTER, CLAIM OR DISPUTE ARISING WITH RESPECT TO SUCH COLLATERAL.
MORTGAGOR FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS, GENERALLY,
UNCONDITIONALLY AND IRREVOCABLY, AT THE ADDRESSES SET FORTH IN THE FIRST
PARAGRAPH HEREOF IN CONNECTION WITH ANY OF THE AFORESAID PROCEEDINGS IN
ACCORDANCE WITH THE RULES APPLICABLE TO SUCH PROCEEDINGS. TO THE EXTENT
PERMITTED BY APPLICABLE LAW, MORTGAGOR HEREBY IRREVOCABLY WAIVES ANY
OBJECTION WHICH IT MAY NOW HAVE OR HAVE IN THE FUTURE TO THE LAYING OF VENUE
IN RESPECT OF ANY OF THE AFORESAID PROCEEDINGS BROUGHT IN THE COURTS
REFERRED TO ABOVE AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT
ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN
AN INCONVENIENT FORUM. NOTHING HEREIN SHALL AFFECT THE RIGHT OF MORTGAGEE
TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW OR TO COMMENCE PROCEEDINGS
OR OTHERWISE PROCEED AGAINST MORTGAGOR IN ANY JURISDICTION.
45. Governing Law. This Mortgage shall be governed by and
construed in accordance with the laws of the State of New York including,
without limitation, Section 51401 of the General Obligations Law, but
otherwise without regard to conflict of law principles; provided, however,
that with respect to the creation, attachment, perfection, priority and
procedures relating to the enforcement of the liens and security interests
created by or pursuant to this Mortgage and relating to real property, this
Mortgage shall be governed by and construed in accordance with the laws of
the state in which the Land is located.
46. Lien Absolute, Multi-site Real Estate and Multiple Collateral
Transaction. Mortgagor acknowledges that this Mortgage and a number of other
Relevant
31
<PAGE>
Documents and those documents required by the Relevant Documents together
secure the Obligations. Mortgagor agrees that the lien of this Mortgage and
all obligations of the Mortgagor hereunder shall be absolute and
unconditional and shall not in any manner be affected or impaired by:
(a) any lack of validity or enforceability of the Notes or any
other Relevant Document, any agreement with respect to any of the Obligations
or any other agreement or instrument relating to any of the foregoing;
(b) any acceptance by Mortgagee of any security for or guarantees
of any of the indebtedness hereby secured;
(c) any failure, neglect or omission on the part of Mortgagee to
realize upon or protect any of the indebtedness hereby secured or any of the
collateral security therefor, including the Relevant Documents;
(d) any change in the time, manner or place of payment of, or in
any other term of, all or any of the Obligations;
(e) any release (except as to the property or obligation released),
sale, pledge, surrender, compromise, settlement, nonperfection, renewal
extension, indulgence, alteration, exchange, modification or disposition of
any of the Obligations hereby secured or of any of the collateral security
therefor;
(f) any amendment or waiver of or any consent to any departure from
the Notes or any other Relevant Documents or of any guaranty thereof (except
to the extent of such amendment, waiver or consent in writing by Mortgagee),
if any, and Mortgagee may in its discretion foreclose, exercise any power of
sale, or exercise any other remedy available to it under any or all of the
Relevant Documents without first exercising or enforcing any of its rights
and remedies hereunder; and
(g) any exercise of the rights or remedies of Mortgagee hereunder
or under any or all of the Relevant Documents.
Mortgagor specifically consents and agrees that Mortgagee may exercise its
rights and remedies hereunder and under the other Relevant Documents
separately or concurrently and in any order that Mortgagee may deem
appropriate.
47. Future Advances. This Mortgage shall secure not only existing
indebtedness, but also such future advances, whether such advances are
obligatory or are to be made at the option of Mortgagee, or otherwise, as are
made by Mortgagee to Mortgagor after the date hereof, to the same extent as
if such future advances were made on the date of the execution of this
Mortgage. Nothing in this Mortgage shall be deemed an obligation on the part
of the Mortgagee to make any future advances.
32
<PAGE>
48. State Specific Provisions. The provisions of Exhibit B are
hereby incorporated by reference as though set forth in full herein.
49. No Merger of Estates. It is the intention and agreement of
Mortgagor and Mortgagee that there shall be no merger of any leasehold estate
in the Mortgaged Property with the fee interest in the Mortgaged Property or
any other estate or interest in the Mortgaged Property, and there shall be no
merger of this Mortgage and any estate in the Mortgaged Property, by reason
of the fact that the same person may own or hold (a) any leasehold interest
in the Mortgaged Property, and/or (b) this Mortgage, and/or (c) the fee
interest in the Mortgaged Property or any other estate or interest in the
Mortgaged Property.
50. Subordinate Lien. Notwithstanding anything to the contrary
contained herein, Mortgagor shall be permitted to grant a subordinate lien on
the Mortgaged Property in favor of State Street Bank and Trust Company,
solely in its capacity as trustee and collateral agent under and pursuant to
the Indenture (as hereinafter defined) (the "Subordinated Creditor") as
security for the obligations of Mortgagor under that certain Indenture
between Mortgagor and the Subordinated Creditor dated as of July 22, 1997
(the "Indenture"), provided that such lien in favor of the Subordinated
Creditor is junior, subject and subordinate to the lien of this Mortgage in
accordance with and pursuant to the terms and conditions set forth in that
certain Subordination Agreement dated as of the date hereof between Mortgagee
and the Subordinated Creditor with respect to the Mortgaged Property (the
"Subordination Agreement"), and provided, further, that any event which gives
the Subordinated Creditor the right to accelerate the obligations secured by
such subordinate lien shall automatically constitute an Event of Default
hereunder.
[Remainder of page intentionally left blank; signature and notary pages follow.]
33
<PAGE>
IN WITNESS WHEREOF, this Mortgage has been duly executed under seal
by the Mortgagor as of the day and year first written above.
In the Presence of: MORTGAGOR:
/s/ Mark D. Woodward DISCOVERY ZONE, INC., a Delaware
- ---------------------------- corporation, as successor in interest to
LEAPS & BOUNDS, INC.
Print Name: Mark D. Woodward
----------------
/s/ Seth L. Grossman By: /s/ Scott Bernstein
- ---------------------------- ------------------------------
Print Name: Seth L. Grossman Print Name: Scott Bernstein
Title: President
In the Presence of:
/s/ Mark D. Woodward
- ----------------------------
Print Name: Mark D. Woodward
----------------
/s/ Seth L. Grossman By: /s/ Robert Rooney
- ---------------------------- ------------------------------
Print Name: Seth L. Grossman Print Name: Robert Rooney
Title: SrVP.
<PAGE>
STATE OF NEW YORK )
COUNTY OF WESTCHESTER)
Before me, a Notary Public in and for said County and State,
personally appeared the above-named DISCOVERY ZONE, INC., a corporation
organized under the laws of Delaware by Scott Bernstein and Robert Rooney,
its President and Sr. Vice Pres., who acknowledged that they did sign the
foregoing instrument for and on behalf of DISCOVERY ZONE, INC., and that the
same is the free act and deed of DISCOVERY ZONE, INC. and their free act and
deed individually and as such officers.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal at
50 Main Street, White Plains, this 28th day of July 1997.
/s/ Mark D. Woodward
-------------------------
Notary Public
MARK D. WOODWARD
Notary Public State of New York
No. 4997846
Qualified in New York County
Commission Expires June 15, 1998
THIS DOCUMENT PREPARED BY AND
RECORDING REQUESTED BY AND
WHEN RECORDED MAIL TO:
Jonathan Reiss, Esq.
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION
DESCRIPTION OF 1.899 ACRES OF LAND
LOCATED ON THE SOUTHERLY SIDE OF CHANTRY
DRIVE AND WEST OF BRICE ROAD, IN THE
CITY OF COLUMBUS, COUNTY OF FRANKLIN,
STATE OF OHIO
SITUATED IN THE STATE OF OHIO, COUNTY OF FRANKLIN, CITY OF COLUMBUS,
BEING IN HALF SECTION 45, SECTION 26, TOWNSHIP 12, RANGE 21, REFUGEE LANDS,
CONTAINING 1.899 ACRES OF LAND, MORE OR LESS, SAID 1.899 ACRES OF LAND BEING
OUT OF THAT 50.917 ACRE TRACT OF LAND DESCRIBED IN THE DEED TO CHANTRY SQUARE
JOINT VENTURE, OF RECORD IN OFFICIAL RECORD 09543J14, RECORDER'S OFFICE,
FRANKLIN COUNTY, OHIO, SAID 1.899 ACRES OF LAND MORE PARTICULARLY DESCRIBED
AS FOLLOWS:
BEGINNING AT A POINT IN A SOUTHERLY RIGHT-OF-WAY LINE OF CHANTRY DRIVE,
EIGHTY FEET IN WIDTH, AS SAID CHANTRY DRIVE IS DESIGNATED AND DELINEATED UPON
THE RECORDED PLAT OF THE DEDICATION OF SCARBOROUGH BOULEVARD, CHANTRY DRIVE,
PARK CRESCENT, ALSHIRE ROAD AND EASEMENTS, OF RECORD IN PLAT BOOK 46, PAGE
52, 53, 54 AND 55, SAID POINT BEING THE NORTHEASTERLY CORNER OF THAT 1.972
ACRE TRACT OF LAND DESIGNATED AS TRACT II AND DESCRIBED IN THE DEED TO
BRATCHER, CAMANITI, CURRY AND SNYDER, OF RECORD IN OFFICIAL RECORD 03520A07,
BOTH BEING OF RECORD IN THE RECORDER'S OFFICE, FRANKLIN COUNTY, OHIO, SAID
POINT ALSO BEING THE TRUE PLACE OF BEGINNING FOR THE PARCEL HEREIN DESCRIBED:
THENCE EASTWARDLY, WITH THE SOUTHERLY RIGHT-OF-WAY BOUNDARY OF SAID
CHANTRY DRIVE AND WITH THE NORTHERLY BOUNDARY OF SAID 50.917 ACRE TRACT, THE
FOLLOWING SEVEN (7) COURSES AND DISTANCES:
1) S 86 DEGREES 10' 30" E, A DISTANCE OF 232.07 FEET TO POINT OF
CURVATURE;
2) WITH THE ARC OF A CURVE TO THE RIGHT HAVING A RADIUS OF 35.00 FEET, A
CENTRAL ANGLE OF 90 DEGREES 00' 00" AND A CHORD THAT BEARS S 41
DEGREES 10' 30" E, A CHORD DISTANCE OF 49.50 FEET TO A POINT.
3) S 86 DEGREES 10' 30" E, A DISTANCE OF 16.71 FEET TO A POINT;
4) S 17 DEGREES 53' 38" E, A DISTANCE OF 19.49 FEET TO POINT;
5) S 3 DEGREES 49' 30" W, A DISTANCE OF 166.92 FEET TO A POINT;
6) S 49 DEGREES 34' 9" W, A DISTANCE OF 113.8 FEET TO A POINT;
7) N 86 DEGREES 10' 30" W, A DISTANCE OF 209.44 FEET TO A POINT;
8) N 3 DEGREES 49' 30" E, A DISTANCE OF 299.49 FEET TO THE TRUE POINT OF
BEGINNING AND CONTAINING 1.899 ACRES OF LAND MORE OR LESS.
Parcel 2
The Easement interest created by Article III of the Construction and
Easement Agreement recorded in Official Records Volume 24988, page D07,
Recorder's Office, Franklin County, Ohio.
<PAGE>
EXHIBIT B
STATE SPECIFIC PROVISIONS (Ohio)
The following provisions are incorporated by reference into Section
48 of the attached Mortgage. If any conflict or inconsistency exists between
this Exhibit B and the remainder of the attached Mortgage, this Exhibit B
shall govern.
A. Maximum Principal Indebtedness. This Mortgage secures the
unpaid balance of loan advances which may be made after this Mortgage is
filed for record. The maximum amount of the unpaid principal balance of all
loan advances (in the aggregate and exclusive of interest thereon and other
advances made for the payment of taxes, insurance, or for protection of the
Mortgaged Property) which may be outstanding at any time is $59 million. In
addition to any other debt or obligation secured hereby, this Mortgage shall
also secure unpaid balances of advances made with respect to the Mortgaged
Property for the payment of taxes, assessments, insurance premiums, and costs
incurred for maintaining the Improvements on, or for the protection of, the
Mortgaged Property.
B. Mechanics' Lien Law. Mortgagee shall be and hereby is
authorized and empowered to do, as mortgagee, all things provided to be done
in the mechanics' lien laws of the State of Ohio (including Section 1311.14
of the Ohio Revised Code), and all acts amendatory or supplementary thereto.
<PAGE>
SCHEDULE A
DESCRIPTION OF ORIGINAL MORTGAGE
Recording
Property Recording Office Volume Page Date
- -------- ---------------- ------ ---- ---------
Columbus, OH Franklin, Ohio County 27420 114 9/12/94
Recorder's Office
<PAGE>
EXHIBIT 4.33
----------------------------------------------------------------
DISCOVERY ZONE, INC.
(Mortgagor),
to
McDONALD's CORPORATION
(Mortgagee)
---------------------------------
AMENDED AND RESTATED MORTGAGE
---------------------------------
Dated as of July 29, 1997
DOCUMENT PREPARED BY AND
AFTER RECORDING RETURN TO:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attention: Jonathan A. Reiss, Esq.
----------------------------------------------------------------
[STERLING HEIGHTS, MICHIGAN PROPERTY]
<PAGE>
THIS AMENDED AND RESTATED MORTGAGE (as the same may from time to time
be extended, renewed or modified, this "MORTGAGE"), made as of the 29th day of
July, 1997, by DISCOVERY ZONE, INC., a Delaware corporation ("MORTGAGOR"),
having its principal place of business at One Corporate Center, 110 East Broward
Boulevard, Fort Lauderdale, Florida 33301, as successor by merger to LEAPS &
BOUNDS, INC., to McDONALD'S CORPORATION a Delaware corporation ("MORTGAGEE"),
having an address at One McDonald's Plaza, Oak Brook, Illinois 60523.
W I T N E S S E T H:
A. WHEREAS, prior to Mortgagor's several predecessors in interest
filing their voluntary petitions for relief under chapter 11, title 11, United
States Code (the "BANKRUPTCY CODE"), Mortgagor's predecessors in interest with
respect to the Mortgaged Property (as hereinafter defined), Leaps & Bounds, Inc.
("LBI") had provided Mortgagee with a First Mortgage on the Mortgaged Property,
dated as of August 30, 1994 (the "ORIGINAL MORTGAGE") and identified by the
recording information set forth on Schedule A hereto, to secure certain
obligations owed to Mortgagee under the Agreement and Plan of Merger among
Mortgagee, Mortgagor, Discovery Zone, Inc., a Delaware corporation ("OLD DZI")
and Discovery Zone International, Inc. ("DZII"), a Delaware corporation, dated
as of August 30, 1994 (the "MERGER AGREEMENT"); and
B. WHEREAS, pursuant to Section 11.2(a)(iii) of the Merger
Agreement, Old DZI agreed to defend, indemnify and hold Mortgagee and its
affiliates harmless in respect of all expenses, losses, costs, deficiencies,
liabilities and damages (including related and reasonable counsel fees and
expenses, and compensatory and demonstrable consequential damages) incurred or
suffered by Mortgagee as a direct result of, inter alia, any breach by Old DZI
or LBI of the leases or subleases relating to certain properties that result in
any payment by Mortgagee in connection with any guarantee by Mortgagee of such
leases and pursuant to Section 10.3(f) of the Merger Agreement it was agreed
that certain security would be provided to secure the obligations under Section
11.2(a)(iii) of the Merger Agreement, including without limitation, a first
priority security interest in the Land and Improvements (the "AGREEMENT TO
INDEMNIFY"); and
C. WHEREAS, following the filing of their respective prayers for
relief under the Bankruptcy Code, Mortgagor's predecessors in interest, Old DZI,
their affiliated debtors, including DZII and LBI (the "DEBTORS"), and Mortgagee
entered into the Stipulation and Order Between Debtors and McDonald's
Corporation Providing For The Resolution, Settlement And Compromise of Disputes
And For Rent Deferrals And Allowance of Certain Claims (the "STIPULATION AND
ORDER") that was entered by the United States Bankruptcy Court for the District
of Delaware (the "BANKRUPTCY COURT") on November 18, 1996, which was not
appealed or otherwise challenged, became a final order, remains in full force
and effect and to which Mortgagor is bound, Section 7 of which is captioned
"CONTINUING SECURITY" and provides, in pertinent part, that the valid and
enforceable first priority security interest on the Land and Improvements and
certain other collateral shall secure the performance and payment
2
<PAGE>
of all of the obligations of Mortgagor to Mortgagee under the Notes (as
hereinafter defined), any obligations of Mortgagee that may arise in connection
with the Assumption Locations whether pursuant to any guaranty, lease, sublease
or otherwise, any obligations of Mortgagor that may arise in the event of a
Liquidation, and any continuing obligations of Mortgagor relating to the
Rejection Location(s) and the Prior Rejection Locations (as such terms are
defined therein); and
D. WHEREAS, pursuant to the Stipulation and Order and 11 U.S.C.
Section 365, the Debtors, as predecessors in interest to Mortgagor, assumed the
subleases relating to certain properties (the "ASSUMED PROPERTIES") which
subleases (the "ASSUMED PROPERTY SUBLEASES") expressly incorporate the Agreement
to Indemnify as it relates to any current or future obligations of Mortgagee
relating to the Assumed Properties; and
E. WHEREAS, pursuant to the Stipulation and Order and the Plan (as
hereinafter defined), this Mortgage hereby amends and restates the Original
Mortgage in its entirety in accordance with the terms and provisions set forth
herein; and
F. WHEREAS, this Mortgage, together with certain other Deeds of
Trust, Mortgages or similar encumbrances, are intended to and do secure the
obligations of Mortgagor and its predecessors in interest and the other Debtors,
to Mortgagee under all of the Stipulation and Order, the Agreement to Indemnify,
the Secured Rent Deferral Notes (as hereinafter defined) and the Secured
Rejection Note (as hereinafter defined); and
G. WHEREAS, pursuant to the plan of reorganization for Old DZI and
its affiliated debtors confirmed by the Bankruptcy Court by order entered July
18, 1997 (the "PLAN"), and as required by the terms of the Stipulation and
Order, Mortgagor, as the reorganized successor of the Debtors, is obligated to
issue to Mortgagee Secured Rent Deferral Notes in the aggregate original
principal amount of $266,466.24, which amount is subject to increase each month
in accordance with the terms thereof (the "SECURED RENT DEFERRAL NOTES") and
Secured Rejection Note in the aggregate original principal amount of
$4,416,237.90 (the "SECURED REJECTION NOTE", and, together with the Secured Rent
Deferral Notes, the "NOTES"); and
H. WHEREAS, pursuant to the Plan, all of the Debtors and their
reorganized successors have merged into Mortgagor, and simultaneously with such
merger, all property of LBI and the other Debtors, including the Mortgaged
Property (as hereinafter defined) has been revested in Mortgagor, as the
successor entity of the Debtors; and
I. WHEREAS, in accordance with the foregoing, Mortgagor is the fee
simple owner of the real estate described in Exhibit A attached hereto (the
"LAND");
NOW THEREFORE, with reference to the foregoing recitals and for good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged,
3
<PAGE>
Mortgagor and Mortgagee hereby agree that the Original Mortgage is hereby
amended and restated in its entirety as follows:
For the purpose of securing the payment and performance of all of the
obligations (the "OBLIGATIONS") of Mortgagor to Mortgagee, including without
limitation, any and all obligations of Mortgagor, as successor in interest to
Old DZI, DZII, LBI and their affiliated debtors, under this Mortgage, the
Agreement to Indemnify (including, without limitation, any contingent
obligations thereunder), the Stipulation and Order (including, without
limitation, the obligations described in Section 7 thereof which are referred to
in paragraph C of the recitals above), the Plan and the Notes (including any and
all subsequent advances made pursuant to the terms of the Notes), and all other
documents evidencing or securing any such obligations (collectively, the
"RELEVANT DOCUMENTS"), Mortgagor by these presents does hereby mortgage, give,
grant, bargain, sell, alienate, enfeoff, convey, confirm, warrant, pledge,
assign and hypothecate unto Mortgagee, the Land and the buildings, structures
and improvements of every nature whatsoever now or hereafter located thereon to
the extent owned by Mortgagor (including, but not limited to, all gas and
electric fixtures, radiators, heaters, docks and docking facilities, engines and
machinery, boilers, elevators and motors, plumbing, heating and air conditioning
fixtures, carpeting and other floor coverings, water heaters, awnings and storm
sashes which are or shall be attached to the Land or said buildings, structures
or improvements) (the "IMPROVEMENTS");
TOGETHER WITH: all right, title, interest and estate of Mortgagor now
owned, or hereafter acquired, in and to the following property, rights, interest
and estates relating to the Land and the Improvements, together with Mortgagor's
interest in the following property, rights, interests and estates hereinafter
described (the Land, Improvements, and the following property, rights, interests
and estates being hereinafter collectively referred to as the "MORTGAGED
PROPERTY"):
(a) all easements, rights-of-way, strips and gores of land, streets,
ways, alleys, passages, sewer rights, water, water courses, water rights and
powers, air rights and development rights, construction and equipment
warranties, and all estates, rights, titles, interests, privileges, liberties,
tenements, hereditaments and appurtenances of any nature whatsoever, in any way
belonging, relating to or pertaining to the Land and the Improvements and the
reversion and reversions, remainder and remainders, and all land lying in the
bed of any street, road or avenue, opened or proposed, in front of or adjoining
the Land, to the center line thereof and all the estates, rights, titles,
interests, dower and rights of dower, curtesy and rights of curtesy, property,
possession, claim and demand whatsoever, both at law and in equity, of Mortgagor
of, in and to the Land and the Improvements and every part and parcel thereof,
with the appurtenances thereto, and in and to any streets, ways, alleys,
passages, strips or gores of land adjoining the Land or any part thereof;
(b) all fixtures, attachments and other articles attached to the Land
or the Improvements constituting realty or real property now or hereafter owned
by Mortgagor or in which Mortgagor has or shall acquire an interest, now or
hereafter located on, attached to or
4
<PAGE>
contained in or used or usable in connection with the Mortgaged Property, and
including, without limitation, all building or construction materials intended
for construction, reconstruction, alteration or repair of or installation on or
in the Mortgaged Property, of every kind and nature whatsoever now owned or
hereafter acquired by Mortgagor, and all proceeds thereof, as well as all
additions to, appurtenances, substitutions for, replacements of or accessions to
any of the items recited as aforesaid and all attachments, components, parts
(including spare parts) and accessories, whether installed thereon or affixed
thereto, now or hereafter owned by Mortgagor and used or intended to be used in
connection with, or with the operation of, the Mortgaged Property, to the extent
constituting real property, but not including play equipment or other similar-
type entertainment equipment relating to the operation of the "Discovery Zone"
facility on the Mortgaged Property unless removal of such equipment would cause
structural damage to the Land or the Improvements (collectively, the
"FIXTURES");
(c) all awards or payments, including interest thereon, which may
heretofore and hereafter be made with respect to the Mortgaged Property, whether
from the exercise of the right of eminent domain (including, but not limited to,
any transfer made in lieu of or in anticipation of the exercise of said rights),
or for a change of grade, or for any other injury to or decrease in the value of
the Mortgaged Property;
(d) to the extent assignable (and to the extent relating to the
general occupancy and use of the Mortgaged Property as opposed to the operation
of the "Discovery Zone" entertainment facility on the Mortgaged Property),
leases, subleases (including sub-subleases), lettings, licenses, concessions,
occupancy agreements and other agreements which grant a possessory interest in,
or the right to use or occupy, all or any part of the Mortgaged Property now or
hereafter entered into, and all amendments, extensions, renewals and guarantees
thereof, and all security therefor (collectively, the "LEASES") and all rents,
issues, profits, revenues (including all oil and gas or other mineral royalties
and bonuses) and deposits (including, without limitation, security deposits)
under the Leases (including, without limitation, from the rental of any office
space, retail space or other space, halls, stores, and offices, and security
deposits therefor, exhibit or sales space of every kind, license, lease,
sublease, fees and rentals, letters of credit or cash instruments securing or
evidencing obligations under Leases, service charges, vending machine sales and
proceeds, if any, from business interruption or other loss of income insurance))
(collectively, the "RENTS") and all proceeds from the sale or other disposition
of the Leases and the right to receive and apply the Rents to the payment of the
Obligations;
(e) subject to the rights of Mortgagor hereunder, all proceeds of any
insurance policies covering the Mortgaged Property (including, without
limitation, the right to receive and apply the proceeds of any insurance,
judgments, or settlements made in lieu thereof, for damage to the Mortgaged
Property);
(f) all refundable, returnable or reimbursable fees deposits or other
funds or evidences of credit or indebtedness deposited by or on behalf of
Mortgagor with any
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governmental authorities, boards, corporations, providers of utility services,
public or private, including specifically, but without limitation, all
refundable, returnable or reimbursable tap fees, utility deposits and
development costs in connection with the Mortgaged Property, and all of the
records and books of account now or hereafter maintained by or on behalf of
Mortgagor in connection with the operation of the Mortgaged Property
(collectively, "SECURITY ACCOUNTS");
(g) all proceeds (as defined in the Uniform Commercial Code) of the
Mortgaged Property which, in any event, shall include, without limitation, (i)
cash, instruments and other property received, receivable or otherwise
distributed in exchange for any or all of the Mortgaged Property, (ii) the
collection or other disposition of, or realization upon, any item or portion of
the Mortgaged Property (including, without limitation, all claims of Mortgagor
against third parties for loss of, damage to, destruction of, or for proceeds
payable under policies of insurance in respect of, the Mortgaged Property now
existing or hereafter arising), (iii) any and all proceeds of any insurance,
indemnity, warranty or guaranty payable to Mortgagor from time to time with
respect to damage or loss of or to any of the Mortgaged Property, (iv) any and
all payments (in any form whatsoever) made or due and payable to Mortgagor from
time to time in connection with the requisition, confiscation, condemnation,
seizure or forfeiture of all or any part of the Mortgaged Property by any
Governmental Authority (or any person acting under color of Governmental
Authority), and (v) any and all real estate tax refunds payable to Mortgagor
with respect to the Mortgaged Property, and refunds or reimbursements payable
with respect to bonds, escrow accounts, or other sums payable in connection with
the use, development or ownership of the Mortgaged Property, but excluding any
proceeds obtained, earned or arising directly from the operation of the
"Discovery Zone" entertainment facility operated by Mortgagor on the Mortgaged
Property as opposed to the general occupancy and use of the Mortgaged Property
(collectively, the "PROCEEDS");
(h) to the extent permitted under applicable law, all licenses,
permits (other than proprietary permits of Mortgagor relating to the ordinary
operation of a "Discovery Zone" entertainment facility as opposed to the general
use and occupancy of the Mortgaged Property), variances and certificates used in
connection with the ownership, operation, use or occupancy of the Mortgaged
Property (including, without limitation, business licenses, state health
department licenses, food service licenses, liquor licenses, licenses to conduct
business and all such other permits, licenses and rights, obtained from any
Governmental Authority or private Person concerning ownership, operation, use or
occupancy of the Mortgaged Property) (collectively, "PERMITS");
(i) all plans, specifications, shop drawings and other technical
descriptions prepared for construction, repair or alteration of the Improvements
(including diskettes containing any such data), and all amendments and
modifications thereof;
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(j) any escrows or escrow accounts established hereunder to secure
the Obligations of Mortgagor, including, without limitation, the Proceeds Escrow
Account described in Section 6(b) hereof; and
(k) any and all replacements and renewals of or additions and
substitutions to any of the foregoing and all proceeds of any of the foregoing.
TO HAVE AND TO HOLD the above granted and described Mortgaged Property
unto and to the use and benefit of Mortgagee, and its successor and assigns,
forever, and Mortgagor does hereby bind itself, its successors and assigns to
WARRANT AND FOREVER DEFEND the title to the Mortgaged Property unto Mortgagee
and its successors and assigns;
AND, TO PROTECT THE SECURITY OF THIS MORTGAGE, Mortgagor represents
and warrants to and covenants and agrees with Mortgagee as follows:
1. DEFINED TERMS. The following terms, when used herein, shall have
the meanings set forth below:
"ENVIRONMENTAL LAWS" means any and all present and future federal,
state or local laws, statutes, ordinances or regulations, any judicial or
administrative orders, decrees or judgments thereunder, and any permits,
approvals, licenses, registrations, filings and authorizations, in each case as
now or hereafter in effect, relating to the protection of the environment, the
impact of Hazardous Substances or the generation, disposal or remediation
thereof on human health or safety, or the Release or threatened Release of
Hazardous Substances or otherwise relating to the Use of Hazardous Substances.
For purposes of this definition, (A) "HAZARDOUS SUBSTANCES" means collectively,
(i) any petroleum or petroleum products or waste oils, explosives, radioactive
materials, asbestos, urea formaldehyde foam insulation, polychlorinated
biphenyls ("PCBs"), and lead-based paint, (ii) any chemicals or other materials
or substances which are now or hereafter become defined as or included in the
definitions of "hazardous substances", "hazardous wastes", "hazardous
materials", "extremely hazardous wastes", "restricted hazardous wastes", "toxic
substances", "toxic pollutants", "contaminants", "pollutants" or words of
similar import under any Environmental Law and (iii) any other chemical or any
other material or substance, exposure to which is now or hereafter prohibited,
limited or regulated under any Environmental Law; (B) "USE" means, with respect
to any Hazardous Substance, the generation, manufacture, processing,
distribution, handling, use, treatment, recycling or storage of such Hazardous
Substance or transportation of such Hazardous Substance; and (C) "RELEASE" means
any release, spill, emission, leaking, pumping, injection, deposit, disposal,
discharge, dispersal, leaching or migration into the indoor or outdoor
environment (including, without limitation, the movement of Hazardous Substances
through ambient air, soil, surface water, ground water, wetlands, land or
subsurface strata).
"GOVERNMENTAL AUTHORITY" means any national or federal government, any
state, regional, local or other political subdivision thereof with jurisdiction
and any Person
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with jurisdiction exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government (including without
limitation any court).
"IMPOSITIONS" means all taxes (including, without limitation, all real
estate, ad valorem, sales (including those imposed on lease rentals), use,
single business, gross receipts, value added, intangible transaction privilege,
privilege or license or similar taxes), assessments (including, without
limitation, all assessments for public improvements or benefits, whether or not
commenced or completed within the term of this Mortgage), ground rents, water,
sewer or other rents and charges, excises, levies, fees (including, without
limitation, license, permit, inspection, authorization and similar fees), and
all other governmental impositions and other charges (including, without
limitation, vault charges and license fees for the use of vaults, chutes and
similar areas adjoining the Mortgaged Property), in each case whether general or
special, ordinary or extraordinary, foreseen or unforeseen, of every character
in respect of the Mortgaged Property, which at any time prior to, during or in
respect of the term hereof may be assessed or imposed on or in respect of or be
a lien upon (i) Mortgagor (including, without limitation, all income, franchise,
single business or other taxes imposed on Mortgagor for the privilege of doing
business in the jurisdiction in which the Mortgaged Property is located),
(ii) the Mortgaged Property, or any part thereof or any revenues therefrom or
any estate, right, title or interest therein, or (iii) any occupancy, operation,
use or possession of, or sales from, or activity conducted on, or in connection
with the Mortgaged Property by Mortgagor or the leasing or use of the Mortgaged
Property or any part thereof by Mortgagor.
"LEGAL REQUIREMENTS" means (i) all governmental statutes, laws, rules,
orders, regulations, ordinances, judgments, decrees and injunctions of
Governmental Authorities (including, without limitation, Environmental Laws)
affecting either the Borrower or any Property or any part thereof or the
construction, ownership, use, alteration or operation thereof, or any part
thereof (whether now or hereafter enacted and in force), (ii) all permits,
licenses and authorizations and regulations relating thereto, and (iii) all
covenants, conditions and restrictions contained in any instruments at any time
in force (whether or not involving Governmental Authorities) affecting the
Mortgaged Property or any part thereof which, in the case of this clause (iii),
require repairs, modifications or alterations in or to the Mortgaged Property or
any part thereof, or in any material way limit or restrict the existing use and
enjoyment thereof.
"PERSON" means any individual, corporation, limited liability company,
partnership, joint venture, estate, trust, unincorporated association any
federal, state, county or municipal government or any bureau, department or
agency thereof and any fiduciary acting in such capacity on behalf of any of the
foregoing.
"UNIFORM COMMERCIAL CODE" means the Uniform Commercial Code, as
adopted, enacted and amended from time to time by the state or states where any
of the Mortgaged Property is located.
2. PAYMENT OF OBLIGATIONS AND INCORPORATION OF COVENANTS, CONDITIONS
AND AGREEMENTS. Mortgagor will pay the Obligations at the time and in the
manner provided in the
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Relevant Documents and in this Mortgage. All the representations, warranties,
covenants, conditions and agreements of Mortgagor contained in the Relevant,
Documents are hereby made a part of this Mortgage to the same extent and with
the same force as if fully set forth herein. If there shall be any
inconsistencies between the terms, covenants, conditions and provisions set
forth in this Mortgage and the terms, covenants, conditions and provisions set
forth in the Relevant Documents, then the terms, covenants, conditions and
provisions of the Relevant Documents shall prevail.
3. WARRANTY OF TITLE/ORGANIZATION. Mortgagor warrants that
Mortgagor has good, marketable and insurable fee simple title to Land and the
Improvements and has good title to the remainder of the Mortgaged Property and
has the full power, authority and right to execute, deliver and perform its
obligations under this Mortgage and to encumber, mortgage, give, grant, bargain,
sell, alienate, enfeoff, convey, confirm, warrant, pledge, assign and
hypothecate the Mortgaged Property and that Mortgagor possesses an unencumbered
fee estate in the Land and the Improvements and that it owns the Mortgaged
Property free and clear of all liens, encumbrances and charges whatsoever except
for (x) those exceptions to title which are existing on the date hereof and
approved by Mortgagee and (y) those exceptions of title that are permitted under
the other terms and conditions of this Mortgage (collectively, the "PERMITTED
ENCUMBRANCES") and that this Mortgage is and will remain a valid and enforceable
first lien on and security interest in the Mortgaged Property, subject only to
the Permitted Encumbrances. Mortgagor shall forever warrant, defend and
preserve such title and the validity and priority of the lien of this Mortgage
and shall forever warrant and defend the same to Mortgagee against the claims of
all persons whomsoever. Mortgagor is duly organized, validly existing and in
good standing under the laws of its jurisdiction of organization. Mortgagor is
qualified to do business and in good standing in the State in which the
Mortgaged Property is located, and to the extent that Mortgagor is not so
qualified or in good standing in such State, Mortgagor shall promptly qualify to
do business and become in good standing in such State and shall promptly present
evidence of such qualification to do business and good standing to Mortgagee,
and shall in any event take such steps as are necessary to insure the
enforceability of the Notes and this Mortgage.
4. TAXES. Mortgagor hereby warrants, covenants and agrees to pay
before any penalty attaches all real property taxes, general and special, and
all other taxes and assessments of any kind or nature whatsoever, against the
Mortgaged Property when due and shall, upon written request, furnish to
Mortgagee duplicate receipts therefor, Mortgagor may, in good faith and with
reasonable diligence, contest the validity or amount of any such taxes or
assessments provided that such contest shall have the effect of preventing the
collection of the tax or assessment so contested and the sale or forfeiture of
said Mortgaged Property or any part thereof, or any interest therein, to satisfy
the same.
5. INDEMNIFICATION. Mortgagor shall indemnify, defend and hold
harmless Mortgagee from and against all of the following (collectively, and
individually referred to as a "Loss"): claims, demands, causes of action,
judgments, costs, expenses, liabilities, losses and damages (including
consequential and punitive damages), reasonable attorneys' fees and
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expenses and court costs, disbursements and court costs, and all risk of damage
to property and injury to persons in or upon the Mortgaged Property, arising
from: (i) Mortgagor's use of the Property or from the conduct of its business
in or about the Mortgaged Property; (ii) Mortgagor's default or breach of any
term under this Mortgage; and (iii) Mortgagor's violation or failure to comply
with any Legal Requirements, including Environmental Laws; provided that
Mortgagor shall not be liable for Loss arising from Mortgagee's negligence or
willful misconduct or from Mortgagee's breach of any of its obligations
hereunder.
6. TRANSFER OR ENCUMBRANCE OF THE MORTGAGED PROPERTY. (a) Except as
may otherwise be permitted hereunder or pursuant to the Relevant Documents,
Mortgagor shall not sell, convey, alienate, mortgage, encumber, pledge or
otherwise transfer the Mortgaged Property or any part thereof or any of its
interest therein. Mortgagee shall not be required to demonstrate any actual
impairment of its security or any increased risk of default hereunder in order
to declare the Obligations immediately due and payable upon Mortgagor's
conveyance, alienation, mortgage, encumbrance, pledge or transfer of the
Mortgaged Property in violation of this Mortgage or any other Relevant Document.
This provision shall apply to every sale, conveyance, alienation, mortgage,
encumbrance, pledge or transfer of the Mortgaged Property that is not permitted
pursuant to the Relevant Documents, regardless of whether voluntary or not, or
whether or not Mortgagee has consented to any previous sale, conveyance,
alienation, mortgage, encumbrance, pledge or transfer of the Mortgaged Property.
(b) Notwithstanding Section 6(a), Mortgagor shall have the right to
sell the Mortgaged Property at any time to a third party bona fide purchaser
after consultation with Mortgagee and upon the prior written consent of
Mortgagee to such sale and the sales price (such consent not to be unreasonably
withheld), provided that the net proceeds of such sale of the Mortgaged Property
(after payment of transfer taxes and reasonable brokerage commissions, if any,
and other reasonable closing costs) shall be applied towards repayment of the
Obligations, including, without limitation, repayment of the Secured Rejection
Note (including prepayment of any amounts not yet due and payable) and payment
of the Principal Amounts (as defined in the Rent Deferral Notes) then
outstanding under the Rent Deferral Notes, in the order and manner set forth in
the Notes. After the Secured Rejection Note and all Principal Amounts
outstanding under the Notes have been repaid in full, any remaining net proceeds
(including proceeds from any sale or other disposition of the Mortgaged Property
pursuant to Section 24 hereof) not applied towards repayment of the Obligations
shall be deposited into an escrow account designated by Mortgagee for
Mortgagor's account and as security for the performance by Mortgagor of its
Obligations to Mortgagee under the Relevant Documents (the "PROCEEDS ESCROW
ACCOUNT") which escrow account shall be administered by Mortgagee, or, at
Mortgagee's discretion and in accordance with Mortgagee's instructions, may be
administered by an escrow agent (an "ESCROW AGENT") selected by Mortgagee (whose
reasonable fees shall be paid by Mortgagor). Mortgagor may also from time to
time deposit additional funds into the Proceeds Escrow Account as further
security for the Obligations. At Mortgagee's request, Mortgagor agrees to enter
into a separate escrow agreement to further evidence the provisions of this
Section 6(b), and in the event that Mortgagee chooses an Escrow Agent to
administer the Proceeds Escrow Account, Mortgagor agrees to execute an escrow
agreement in form and substance reasonably satisfactory to Mortgagee (including
provisions consistent with the
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provisions of this Section 6(b)) to evidence the duties and responsibilities of
such Escrow Agent. Mortgagee or, if applicable, the Escrow Agent at the
direction of Mortgagee, shall invest the funds in the Proceeds Escrow Account in
obligations of the U.S. Government or its agencies, interest in time accounts or
certificates of deposits, or other interest bearing account of any bank or bank
and trust company or in money market funds available to Mortgagee. Mortgagor
agrees, and shall agree under any escrow agreement entered into pursuant to this
Section 6(b), that the funds on deposit under the escrow arrangement described
herein shall not constitute property of the estate of Mortgagor (within the
meaning of Section 541 of the United States Bankruptcy Code) and that Mortgagor
shall only have such rights to such funds as are provided herein and in any
escrow agreement entered into pursuant to this Section. Funds in the Proceeds
Escrow Account shall be disbursed (together with accrued interest) from time to
time to Mortgagee, at Mortgagee's direction (upon seven (7) days prior notice to
Mortgagor), to pay any Obligations that may arise from time to time under the
Agreement to Indemnify, the Notes, the Stipulation and Order or the other
Relevant Documents. Notwithstanding the foregoing, after December 31, 2005,
Mortgagor shall be entitled to retain any net proceeds in excess of the Minimum
Amount set forth below from the sale of the Mortgaged Property, including
amounts previously deposited and remaining in the Proceeds Escrow Account
(including accrued interest thereon) which have not been applied towards payment
of the Obligations, provided that (i) no Obligations are then due and owing by
Mortgagor pursuant to the Agreement to Indemnify, the Stipulation and Order, or
otherwise; (ii) the Notes have been repaid in full, (iii) no default or Event of
Default has occurred and is continuing under any of the Relevant Documents; and
(iv) the amount remaining in the Proceeds Escrow Account is no less than the
Minimum Amount (as hereinafter defined) and shall thereafter remain no less than
the Minimum Amount. Except as otherwise set forth in the following sentence,
the "Minimum Amount" shall mean the product of (A) 1.5 times (B) the sum of the
gross rent (including additional rent and percentage rent charges, if any),
common area maintenance charges, taxes, insurance and other charges computed on
a gross basis (collectively, the "BASE CHARGES") which are due or shall become
due under any Assumed Property Subleases still in existence as of December 31,
2005 (the "SURVIVING ASSUMED PROPERTY SUBLEASES") from December 31, 2005 until
the expiration of the terms of such Assumed Property Subleases. Upon the
expiration after December 31, 2005 of any Surviving Assumed Property Sublease,
Mortgagee shall re-calculate the Minimum Amount based upon the product of 1.5
times the Base Charges of the remaining Surviving Assumed Property Subleases as
of the end of the term of such Surviving Assumed Property Sublease (such Base
Charges to be calculated as the sum of the Base Charges from such date through
the end of the expiration dates of the remaining Surviving Assumed Property
Subleases), and provided that (i) no Obligations are then due and owing by
Mortgagor pursuant to the Agreement to Indemnify, the Stipulation and Order or
otherwise, (ii) the Notes have been repaid in full, and that (iii) no default or
Event of Default has occurred and is continuing under any of the Relevant
Documents, Mortgagee shall, on the first anniversary of the expiration of such
expired Surviving Assumed Property Sublease, release to Mortgagor, or cause the
Escrow Agent to release to Mortgagor, the excess of all funds in the Proceeds
Escrow Account over the re-calculated Minimum Amount. Any calculation of Base
Charges and the Minimum Amount under this Section 6(b) shall be made by
Mortgagee and, absent manifest error, shall be conclusive and binding upon
Mortgagor.
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Provided that (i) an amount equal to at least the Minimum Amount is deposited or
on deposit in the Proceeds Escrow Account (and shall so remain on deposit
thereafter) to secure the payment of the Obligations, (ii) no default or Event
of Default has occurred and is continuing under any of the Relevant Documents,
(iii) the Notes have been repaid in full and (iv) no Obligations are then due
and owing by Mortgagor pursuant to the Agreement to Indemnify, the Stipulation
and Order or otherwise, Mortgagor shall be entitled to receive a release of this
Mortgage from Mortgagee at any time after December 31, 2005. Provided that no
default or Event of Default has occurred or is continuing under any of the
Relevant Documents and that no amounts are then owing by Mortgagor or
outstanding pursuant to or under any of the Relevant Documents (and that an
amount equal to the Minimum Amount is at all times on deposit in the Proceeds
Escrow Account), interest earned on the amounts deposited in the Proceeds Escrow
Account after December 31, 2005 shall be distributed to Mortgagor on a quarterly
basis. All remaining amounts in the Proceeds Escrow Account which have not been
applied towards payment of the Obligations shall be released to Mortgagor on the
later of (A) December 31, 2014 provided, however, that no Obligations are then
due and owing by Mortgagor pursuant to the Agreement to Indemnify, the
Stipulation and Order or otherwise, and (B) the end of the term of this Mortgage
as set forth in Section 13(c) hereof. Mortgagor shall pay any income taxes
attributable to the interest or other income earned on the Proceeds Escrow
Account. Notwithstanding any release of this Mortgage pursuant to this Section
6(b) or otherwise, the terms and provisions of this Section 6(b) shall survive
the release of this Mortgage.
7. AMENDMENT TO LEGAL DESCRIPTION. If it becomes evident that the
legal description attached to any Relevant Document is inaccurate or does not
fully describe all of the real property which is reasonably connected to the
Land, Mortgagor hereby agrees to an amendment of such legal description and the
legal description contained on the corresponding title policy so that such error
is corrected and to execute and cause to be recorded, if applicable, such
document as may be appropriate for such purpose.
8. ASSIGNMENT OF LEASES AND RENTS. Mortgagor does hereby absolutely
and unconditionally assign to Mortgagee, Mortgagor's right, title and interest
in all current and future Leases and Rents, it being intended by Mortgagor that
this assignment constitutes a present, absolute assignment and not an assignment
for additional security only. Such assignment to Mortgagee shall not be
construed to bind Mortgagee to the performance of any of the covenants,
conditions or provisions contained in any such Lease or otherwise impose any
obligation upon Mortgagee. Mortgagee shall have no responsibility on account of
this assignment for the control, care, maintenance, management or repair of the
Mortgaged Property, for any dangerous or defective condition of the Mortgaged
Property, or for any negligence in the management, upkeep, repair or control of
the Mortgaged Property. Mortgagor agrees to execute and deliver to Mortgagee
such additional instruments, in form and substance satisfactory to Mortgagee, as
may hereafter be requested by Mortgagee to further evidence and confirm such
assignment. Nevertheless, subject to the terms of this paragraph, Mortgagee
grants to Mortgagor a revocable license to collect all of the Rents and retain,
use and enjoy the same and otherwise exercise all rights of Mortgagor under any
Lease,
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in each case, subject to the terms hereof and of the Relevant Documents. Upon
an Event of Default, the license granted to Mortgagor herein shall immediately
and automatically be revoked, and Mortgagee shall immediately be entitled to
possession of all Rents, whether or not Mortgagee enters upon or takes control
of the Mortgaged Property, provided that if such Event of Default ceases to
exist, the license shall automatically be reinstated. In addition, during the
continuation of an Event of Default, Mortgagee may, either in person or by
agent, without bringing any action or proceeding, or by a receiver appointed by
a court, without the necessity of taking possession of the Mortgaged Property in
its own name, and in addition to and without limiting any of Mortgagee's rights
and remedies hereunder, under the Notes and any other Relevant Documents and as
otherwise available at law or in equity, (a) notify any lessee or other person
that the Leases have been assigned to Mortgagee and that all Rents are to be
paid directly to Mortgagee, whether or not Mortgagee has commenced or completed
foreclosure or taken possession of the Mortgaged Property; (b) settle,
compromise, release, extend the time of payment of, and make allowances,
adjustments and discounts of any Rents or other obligations in, to and under the
Leases; (c) demand, sue for or otherwise collect, receive, and enforce payment
of Rents, including those past-due and unpaid and other rights under the Leases,
prosecute any action or proceeding, and defend against any claim with respect to
the Rents and Leases; (d) enter upon, take possession of and operate the
Mortgaged Property; (e) lease all or any part of the Mortgaged Property; and/or
(f) perform any and all obligations of Mortgagor under the Leases and exercise
any and all rights of Mortgagor therein contained to the full extent of
Mortgagor's rights and obligations thereunder, with or without the bringing of
any action or the appointment of a receiver and without need for any other
authorization or other action by Mortgagee or Mortgagor. At Mortgagee's
request, Mortgagor shall deliver a copy of this assignment to each tenant under
a Lease and to each manager and managing agent or operator of the Mortgaged
Property. Mortgagor irrevocably directs any tenant, manager, managing agent, or
operator of the Property, without any requirement for notice to or consent by
Mortgagor, to comply with all demands of Mortgagee under this Section 8 and to
turn over to Mortgagee on demand all Rents which it receives. Mortgagor hereby
acknowledges and agrees that payment of any Rents by a person to Mortgagee as
hereinabove provided shall constitute payment by such person, as fully and with
the same effect as if such Rents had been paid to Mortgagor. Mortgagee is
hereby granted and assigned by Mortgagor the right, at its option, upon
revocation of the license granted herein, to enter upon the Mortgaged Property
in person or by agent, without bringing any action or proceeding, or by
court-appointed receiver to collect the Rents. Any Rents collected after the
revocation of the license shall be applied towards the payment of the
Obligations. Neither the enforcement of any of the remedies under this SECTION
8 nor any other remedies or security interests afforded to Mortgagee under the
Relevant Documents, at law or in equity shall cause Mortgagee to be deemed or
construed to be a Mortgagee in possession of the Mortgaged Property, to obligate
Mortgagee to lease the Mortgaged Property or attempt to do so, or to take any
action, incur any expense, or perform or discharge any obligation, duty or
liability whatsoever under any of the Leases or otherwise. Mortgagor shall, and
hereby agrees to indemnify Mortgagee for, and to hold Mortgagee harmless from
and against, any and all claims, liability, expenses, losses or damages which
may or might be asserted against or incurred by Mortgagee solely by reason of
Mortgagee's status as an assignee pursuant to the
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assignment of Rents and Leases contained herein, but excluding any claim (a) to
the extent caused by Mortgagee's gross negligence or willful misconduct, or (b)
to the extent arising solely from Mortgagee's actions after Mortgagee has taken
possession of the Mortgaged Property. Should Mortgagee incur any such claim,
liability, expense, loss or damage, the amount thereof, including all actual
expenses and reasonable fees of attorneys, shall constitute Obligations secured
hereby, and Mortgagor shall reimburse Mortgagee therefor immediately upon
demand. Mortgagor agrees that all Leases shall be subject to the prior written
approval of Mortgagee, such approval not to be unreasonably withheld.
9. MAINTENANCE OF MORTGAGED PROPERTY. Mortgagor shall cause the
Mortgaged Property to be maintained in a good and safe condition and repair
(subject to ordinary wear and tear), and shall otherwise operate and maintain
the Mortgaged Property in a manner consistent with the manner in which it
operates and maintains the other properties on which it operates similar
businesses ("SIMILAR PROPERTIES"). Except as otherwise permitted by the
Relevant Documents, the Improvements, the Fixtures and the equipment located on
the Land or the Improvements shall not be removed, demolished or materially
altered (except for normal replacement of equipment) without the consent of
Mortgagee which shall not unreasonably be withheld or delayed. Mortgagor shall
comply with all laws, orders and ordinances affecting the Mortgaged Property, or
the use thereof. Except to the extent that Mortgagee fails to turn over
insurance proceeds, if any, received by Mortgagee pursuant to SECTIONS 10 and 11
with respect to the Mortgaged Property to Mortgagor, Mortgagor shall promptly
repair, replace or rebuild any part of the Mortgaged Property that, following
the date hereof, becomes damaged, worn or dilapidated and Mortgagor shall
complete and pay for any structure at any time in the process of construction or
repair on the Land. Notwithstanding anything to the contrary contained herein,
Mortgagor hereby confirms its obligation to comply with all relevant Legal
Requirements, including Environmental Laws, with respect to the Mortgaged
Property. Mortgagor shall not initiate, join in, acquiesce in, or consent to
any change in any private restrictive covenant, zoning law or other public or
private restriction, limiting or defining the uses which may be made of the
Mortgaged Property or any part thereof, unless Mortgagor shall have received
Mortgagee's prior written consent, such consent not to be unreasonably withheld
or delayed. If under applicable zoning provisions the use of all or any portion
of the Mortgaged Property is or shall become a nonconforming use, Mortgagor will
not cause such nonconforming use to be discontinued or abandoned without the
express written consent of Mortgagee, such consent not to be unreasonably
withheld or delayed. Mortgagor shall not (i) change the use of the Land in any
material respect or (ii) permit or suffer to occur any waste on or to the
Mortgaged Property or to any portion thereof.
10. INSURANCE.
(a) Mortgagor shall maintain casualty, liability and other policies
of insurance relating to the Mortgaged Property in form and substance, and with
insurers and coverages, reasonably satisfactory to Mortgagee and consistent with
insurance that it maintains on Similar Properties. Mortgagor shall keep the
Mortgaged Property insured against loss by flood if the Mortgaged Property is
located in an area identified by the Secretary of Housing
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and Urban Development as an area having a special flood hazards and in which
flood insurance has been made available under the National Flood Insurance Act
of 1968 (or any successor act thereto). All policies of insurance to be
furnished hereunder (i) shall have standard non-contributory Mortgagee clauses
attached to all policies in favor of Mortgagee, without contribution, under a
standard New York (or local equivalent) Mortgagee clause naming Mortgagee as the
party to which all payments made under such insurance policies in excess of
$150,000 should be paid, (ii) shall contain an endorsement providing that
neither Mortgagor nor Mortgagee nor any other party shall be a co-insurer under
said policies and shall contain a provision requiring that the coverage
evidenced thereby shall not be terminated or materially modified without ten
(10) days prior written notice to Mortgagee, (iii) shall provide that no act or
thing done by Mortgagor shall invalidate the policy as against Mortgagee, and
(iv) with respect to property insurance policies, shall contain a waiver of
subrogation against Mortgagee. Mortgagor shall deliver certificates evidencing
additional and renewal policies, together with evidence of payment of premiums
thereon, to Mortgagee, and in the case of all insurance about to expire, shall
deliver renewal policies or certificates evidencing such policies not less than
ten (10) days prior to their respective dates of expiration.
(b) Mortgagor shall not take out separate insurance concurrent in
form or contributing in the event of loss with that required to be maintained
hereunder unless Mortgagee is included thereon under a standard,
non-contributory Mortgagee clause acceptable to Mortgagee. Mortgagor shall
promptly notify Mortgagee whenever any such separate insurance is taken out and
shall promptly deliver to Mortgagee the certificates evidencing the policy or
policies of such insurance.
(c) The insurance required by this Mortgage, at the option of
Mortgagor, may be effected by blanket and/or umbrella policies covering the
Mortgaged Property and other properties, provided, however, that in each case,
such insurance policies otherwise comply with the provisions of this Mortgage
and allocate to the Mortgaged Property, from time to time, the coverage
specified in this Mortgage without possibility of reduction or co-insurance by
reason of, or damage to, any other property named therein. If the insurance
required by this Mortgage shall be effected by any such blanket or umbrella
policies, Mortgagor shall furnish to Mortgagee certificates with respect to,
with schedules attached thereto showing the amount of the insurance provided
under such policies which is applicable to the Mortgaged Property.
(d) If Mortgagor fails to maintain insurance in compliance with this
Section, Mortgagee may obtain such insurance and pay the premium therefor and
Mortgagor shall, on demand, reimburse Mortgagee for all expenses incurred in
connection therewith. Mortgagor shall deliver original certificates to Mortgagee
of all insurance policies maintained pursuant to this Section 10. Each property
insurance policy shall name Mortgagee as Mortgagee, and loss payee with respect
to all casualty coverage and each liability policy shall name Mortgagee as an
additional insured thereunder.
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11. CASUALTY. (a) Mortgagor shall give Mortgagee prompt notice of
any loss or damage to the Mortgaged Property.
(b) In case of loss or damage to the Mortgaged Property covered by
any of the insurance policies described in Section 10 above, Mortgagee (or,
after entry of decree of foreclosure, the purchaser at the foreclosure sale or
decree creditor, as the case may be) is hereby authorized at its option either
(i) to settle and adjust any claim under such insurance policies without the
consent of Mortgagor or (ii) to allow Mortgagor to settle and adjust such claim
(either jointly with Mortgagee or by Mortgagor alone, at Mortgagee's
discretion); provided that in either case Mortgagee shall, and is hereby
authorized to, collect and receipt for any such insurance proceeds.
Notwithstanding anything in the preceding sentence to the contrary, Mortgagee
agrees that it will allow Mortgagor to settle and adjust any claims under the
insurance policies which are in an amount less than $150,000, per incident of
loss, up to an aggregate amount of no greater than $300,000. The expenses
incurred by Mortgagee in the adjustment and collection of insurance proceeds
shall be included in the Obligations, and shall be reimbursed to Mortgagee upon
demand or may be deducted by Mortgagee from said insurance proceeds prior to
another application thereof. Interest on such amount shall accrue at the
Default Rate, beginning ten (10) days after Mortgagor receives notice of a
request for payment of such amount from Mortgagee, until such amount, plus
interest, is paid in full.
(c) Mortgagee shall permit Mortgagor to apply the proceeds of
insurance policies received in connection with any casualty to pay for the cost
of restoring, repairing, replacing or rebuilding the loss or damage to the
Mortgaged Property resulting from the casualty ("RESTORATION") if: (i) there is
no Event of Default hereunder at the time of such application; (ii) restoration
can, in the reasonable judgment of Mortgagee, be completed prior to the maturity
of the Obligations; and (iii) restoration can, in the reasonable judgment of
Mortgagee, be effected within two (2) years after the date of such casualty and
in such a manner so that the Mortgaged Property will be of at least equal or
greater value to the value than the Mortgaged Property prior to such casualty.
Otherwise, Mortgagee may elect in its sole discretion to apply such proceeds
either (x) towards payment of the Obligations, notwithstanding the fact that the
Obligations, or a portion thereof, may not then be due and payable, or (y) to
pay for the cost of Restoration. In all events, disbursement of insurance
proceeds by Mortgagee (or at Mortgagee's election by a disbursing or escrow
agent who shall be selected by Mortgagee and whose fees shall be paid by
Mortgagor), to pay the cost of restoration shall require (i) evidence reasonably
satisfactory to Mortgagee of the estimated costs of Restoration, (ii) funds (or
assurances reasonably satisfactory to Mortgagee that such funds are available)
sufficient in addition to the proceeds of insurance to complete and fully pay
for Restoration; and (iii) such architect's certificates, waivers of lien,
contractor's sworn statements, title insurance endorsements, plats of surveys
and such other evidences of cost, payment and performance as Mortgagee may
reasonably require and approve. Except to the extent Mortgagee fails to turn
over insurance proceeds, if any, received by Mortgagee hereunder with respect to
such casualty to Mortgagor, Mortgagor hereby covenants to restore, repair,
replace or rebuild the Improvements, to be of at least equal value, and of
substantially the same character as prior to such loss or damage, all to be
effected in accordance with plans,
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specifications and procedures to be first submitted to and reasonably approved
by Mortgagee, and Mortgagor shall pay all costs of such restoring, repairing,
replacing or rebuilding.
12. EMINENT DOMAIN. Mortgagor warrants, covenants and agrees that
should the Mortgaged Property, or any part thereof or interest therein, be taken
or damaged by reason of any public improvement or condemnation proceeding, or in
any other manner, or should Mortgagor receive any notice of other information
regarding such proceeding, Mortgagor shall give written notice thereof within
five (5) business days to Mortgagee. Without Mortgagee's prior consent,
Mortgagor (1) shall not agree to any compensation or award, and (2) shall not
take any action or fail to take any action which would cause the compensation to
be determined. Mortgagee shall be entitled to: (1) all compensation, awards and
other payments or relief therefor, (2) to commence, appear in and prosecute in
its own name any action or proceedings, and (3) to make any compromise or
settlement in connection with such taking or damage. Mortgagor authorizes
Mortgagee to collect and receive such awards and compensation, to give proper
receipts and acquittances therefor and in Mortgagee's discretion to apply the
same toward the payment of the Obligations, notwithstanding the fact that the
Obligations, or a portion thereof, may not then be due and payable, or to the
restoration of the Mortgaged Property in accordance with the provisions set
forth in the second-to-last sentence of Section 11(c) above. Mortgagor further
agrees to make, execute, and deliver to Mortgagee, at any time upon request,
free and clear of any encumbrance of any kind whatsoever, any and all further
assignments and other instruments deemed necessary by Mortgagee for the purpose
of validly and sufficiently assigning all compensations and awards made to
Mortgagor for any taking, either permanent or temporary, under any such
proceeding.
13. RELEASE OF MORTGAGE. Mortgagee agrees to promptly and
unconditionally release this Mortgage (subject to the provisions set forth in
Section 6(b)) as follows:
(a) in the event of a bona fide sale (other than a "sale leaseback"
or other similar financing transaction) of the Mortgaged Property to a third
party that is not affiliated with Mortgagor, provided that each of the following
conditions is satisfied: (i) neither Mortgagor nor any of its respective
affiliates continue to use or occupy the Mortgaged Property or any part thereof;
(ii) Mortgagor shall consult with Mortgagee prior to such sale and shall obtain
Mortgagee's prior written consent with respect to such sale and the sales price
(such consent not to be unreasonably withheld); and (iii) all of the proceeds of
such sale are applied towards repayment of the Obligations or otherwise applied
in compliance with the provisions of Section 6(b) hereof.
(b) in the event that Mortgagee is paid in full for all amounts owing
(or what shall or may become owing under the Relevant Documents) to Mortgagee by
Mortgagor and any of its former affiliated debtors, including the indefeasible
payment and satisfaction in full of the Obligations.
(c) on December 31, 2014 (or on such earlier date as permitted under
and pursuant to the provisions of Section 6(b) hereof); provided, however, that
if on such date, any
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amount secured by this Mortgage has not been indefeasibly paid in full, then
this Mortgage shall be deemed amended to extend the term hereof until such
obligations are so paid.
14. CHANGES IN THE LAWS REGARDING TAXATION. If any law is enacted or
adopted or amended after the date of this Mortgage which imposes a tax, either
directly or indirectly, on the Obligations or Mortgagee's interest in the
Mortgaged Property, Mortgagor will pay such tax, with interest and penalties
thereon, if any, PROVIDED, HOWEVER, that Mortgagor shall not be obligated to pay
any tax which is imposed on the net income of Mortgagee or franchise taxes or
doing business taxes imposed on Mortgagee. In the event that the payment of
such tax or interest and penalties by Mortgagor would be unlawful or taxable to
Mortgagee or unenforceable or provide the basis for a defense of usury, then in
any such event, Mortgagee shall have the option, by written notice of not less
than ninety (90) days, to declare the Obligations immediately due and payable.
15. NO CREDITS ON ACCOUNT OF THE OBLIGATIONS. (i) Mortgagor will not
claim or demand or be entitled to any credit or credits on account of the
Obligations for any part of the Impositions assessed against the Mortgaged
Property, or any part thereof, and (ii) no deduction shall otherwise be made or
claimed from the assessed value of the Mortgaged Property, or any part hereof,
for real estate tax purposes by reason of this Mortgage or the Obligations if
the effect of such deduction would impose on Mortgagee a tax, either directly or
indirectly, for which it otherwise would not have been liable.
16. DOCUMENTARY STAMPS. If at any time the United States of America,
any State thereof or any subdivision of any such State shall require revenue or
other stamps to be affixed to the Notes or this Mortgage, or impose any other
tax or charge on the same, Mortgagor will pay for the same, with interest and
penalties thereon, if any.
17. CONTROLLING AGREEMENT. It is expressly stipulated and agreed to
be the intent of Mortgagor and Mortgagee at all times to comply with applicable
state law or applicable United States federal law (to the extent that it permits
Mortgagee to contract for, charge, take, reserve, or receive a greater amount of
interest than under state law) and that this Section shall control every other
covenant and agreement in this Mortgage and the other Relevant Documents. If
the applicable law (state or federal) is ever judicially interpreted so as to
render usurious any amount called for under the Notes or under any of the other
Relevant Documents, or contracted for, charged, taken, reserved, or received
with respect to the Obligations, or if Mortgagee's exercise of the option to
accelerate the maturity of the Notes, or if any prepayment by Mortgagor results
in Mortgagor having paid any interest in excess of that permitted by applicable
law, then it is Mortgagor's and Mortgagee's express intent that all excess
amounts theretofore collected by Mortgagee shall be credited on the principal
balance of the Notes and all other Obligations (or, if the Notes and all other
Obligations have been or would thereby be paid in full, refunded to Mortgagor),
and the provisions of the Notes and the other Relevant Documents immediately be
deemed reformed and the amounts thereafter collectible hereunder and thereunder
reduced, without the necessity of the execution of any new documents, so as to
comply with the applicable law, but so as to permit the recovery of
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the fullest amount otherwise called for hereunder or thereunder. All sums paid
or agreed to be paid to Mortgagee for the use, forbearance, or detention of the
Obligations shall, to the extent permitted by applicable law, be amortized,
prorated, allocated, and spread throughout the full stated term of the
Obligations until payment in full so that the rate or amount of interest on
account of the Obligations does not exceed the maximum rate of interest
permitted by law from time to time in effect and applicable to the Obligations
for so long as the Obligations are outstanding.
18. PERFORMANCE OF OTHER AGREEMENTS. Mortgagor shall observe and
perform in all respects the terms to be observed or performed by Mortgagor under
any agreement or recorded instrument affecting or pertaining to the Mortgaged
Property.
19. RIGHT TO PERFORM THE OBLIGATIONS. Subject to the terms of the
Relevant Documents, if any default exists, Mortgagee shall have the right, but
not the obligation, to cure such default in the name and on behalf of Mortgagor.
All sums advanced and expenses incurred at any time by Mortgagee under this
Section 19, or otherwise under this Mortgage or any of the other Relevant
Documents or applicable law (including, without limitation, the costs and
expenses of Mortgagee and its agents incurred in connection with the
preservation, collection and enforcement of this Mortgage or of the liens
created hereby), shall bear interest from the date that such sum is advanced or
expense incurred, to and including the date of reimbursement, computed at the
Default Rate (as defined in the Notes), and all such sums, together with
interest thereon, shall constitute additions to the Obligations and shall be
secured by this Mortgage and Mortgagor covenants and agrees to pay them to the
order of the Mortgagee promptly upon demand.
20. FURTHER ACTS, ETC. Mortgagor will, at the cost of Mortgagor, and
without expense to Mortgagee, do, execute, acknowledge and deliver all and every
such further acts, deeds, conveyances, mortgages, assignments, notices of
assignment, Uniform Commercial Code financing statements or continuation
statements, transfers and assurances as Mortgagee shall, from time to time,
reasonably require, for the better assuring, conveying, assigning, transferring,
and confirming unto Mortgagee the property and rights hereby mortgaged, given,
granted, bargained, sold, alienated, enfeoffed, conveyed, confirmed, warranted,
pledged, assigned and hypothecated (including, without limitation, the
assignment of leases and rents contained in Section 8 hereof) or intended now or
hereafter so to be, or which Mortgagor may be or may hereafter become bound to
convey or assign to Mortgagee, or for carrying out the intention or facilitating
the performance of the terms of this Mortgage or for filing, registering or
recording this Mortgage. Mortgagor, on demand, will execute and deliver and,
Mortgagor hereby authorizes Mortgagee to execute in the name of Mortgagor or
without the signature of Mortgagor to the extent Mortgagee may lawfully do so,
one or more financing statements, chattel mortgages or other instruments, to
evidence more effectively the security interest of Mortgagee in the Mortgaged
Property. Notwithstanding anything to the contrary contained herein, Mortgagor
shall not be obligated to execute, deliver, file or record any additional
documents which increase Mortgagor's obligations under this Mortgage or the
Relevant Documents. Mortgagor grants to Mortgagee an irrevocable power of
attorney
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coupled with an interest for the purpose of exercising the rights provided for
in Section 19 and this Section 20.
21. RECORDING OF MORTGAGE, ETC. Mortgagor forthwith upon the
execution and delivery of this Mortgage and thereafter, from time to time, will
cause this Mortgage, and any security instrument creating a lien or security
interest or evidencing the lien hereof upon the Mortgaged Property and each
instrument of further assurance to be filed, registered or recorded in such
manner and in such places as may be required by any present or future law in
order to publish notice of and fully to protect the lien or security interest
hereof upon, and the interest of Mortgagee in, the Mortgaged Property.
Mortgagor will pay all filing, registration or recording fees, the costs and
fees of local counsel for Mortgagee, including, without limitation, costs and
fees for local counsel review of the Mortgage and Subordination Agreement and
the preparation of opinion letters in connection therewith, and all expenses
incident to the execution and acknowledgment of this Mortgage (but not including
fees of Mortgagee's New York counsel in connection with the preparation of this
Mortgage), any deed of trust or mortgage supplemental hereto, any security
instrument with respect to the Mortgaged Property and any instrument of further
assurance, and all federal, state, county and municipal, taxes, duties, imposts,
assessments and charges arising out of or in connection with the execution and
delivery of this Mortgage, any deed of trust or mortgage supplemental hereto,
any security instrument with respect to the Mortgaged Property or any instrument
of further assurance (other than income or franchise taxes imposed on
Mortgagee), except where prohibited by law so to do. Mortgagor shall hold
harmless and indemnify Mortgagee, its successors and assigns, against any
liability incurred by reason of the imposition of any tax on the making and
recording of this Mortgage. Mortgagor shall pay all title costs and premiums in
connection with the ALTA lender's title insurance policy issued by Chicago Title
Insurance Company for the benefit of Mortgagee in connection with this Mortgage
(including payment for the cost of any property surveys ("Surveys") prepared in
connection therewith), which title insurance policy shall be in form and
substance satisfactory to Mortgagee containing such endorsements as Mortgagee
may reasonably request, including, without limitation, the deletion of any
creditor's rights exception and (to the extent available) a variable rate
endorsement; survey endorsement; comprehensive endorsement; first loss
endorsement; last dollar endorsement; tie-in endorsement; future advances
endorsement; access coverage; tax parcel coverage; contiguity (if applicable)
coverage; and such other endorsements as Mortgagee shall reasonably require. In
the event that any Survey with respect to the Mortgaged Property reveals any
encumbrances, restrictions, building code or zoning violations or other matters
which in Mortgagee's reasonable judgment, materially impair Mortgagee's first
priority lien in the Mortgaged Property, Mortgagor agrees to cooperate with
Mortgagee in performing any acts reasonably requested by Mortgagee to cause such
encumbrances, restrictions, violations or other matters to be removed or
remedied as appropriate.
22. REPORTING REQUIREMENTS. Mortgagor agrees to give prompt notice
to Mortgagee of the insolvency or bankruptcy filing of Mortgagor. In addition,
Mortgagor will give notice to Mortgagee in writing not later than ten (10) days
after: (i) the occurrence of any Event of Default with respect to Mortgagor
hereunder, or (ii) notice to Mortgagor of any
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action, litigation or proceeding instituted to recover possession of the
Mortgaged Property from Mortgagor or for any other purpose affecting this
Mortgage or of any other action, litigation or proceeding instituted against
Mortgagor or judgment rendered against Mortgagor; and such notice to Mortgagee
shall include a true copy of any notice of default, or if any action is then
proceeding, copies of any pleadings and papers received by Mortgagor.
23. EVENTS OF DEFAULT. The term "EVENT OF DEFAULT" as used herein
shall mean the occurrence or happening, at any time and from time to time, of
one or more of the following events:
(a) a default or event of default under any of the Notes (including,
without limitation, any event of default described in Section 3 of any of the
Notes), which remains uncured following the expiration of any applicable cure
periods;
(b) Mortgagor (i) shall fail to perform when due any payment
obligation under the terms of this Mortgage or the other Relevant Documents
within ten days after such amount becomes due, or (ii) shall be in violation of
any of the obligations or covenants contained herein or therein and such default
shall continued unremedied for a period of thirty (30) days, provided that if
such default is not readily susceptible of cure in such thirty (30) day period,
and provided that Mortgagor proceeds in a diligent manner to cure such default,
Mortgagor shall have such additional time to effect such cure as shall be
reasonably necessary to effect such cure;
(c) Failure by Mortgagor to maintain insurance and deliver evidence
thereof pursuant to Section 10; or
(d) a default under any other mortgage, deed of trust or other
security instrument covering the Mortgaged Property or a portion thereof which
remains uncured following the expiration of any applicable cure periods.
24. REMEDIES. (a) Upon the occurrence of any Event of Default,
Mortgagee may take such action permitted in law or at equity, without notice or
demand, as it deems advisable to protect and enforce its rights against
Mortgagor and in and to the Mortgaged Property, by Mortgagee itself or
otherwise, including, but not limited to, the following actions, each of which
may be pursued concurrently or otherwise, at such time and in such order as
Mortgagee may determine, in its sole discretion, without impairing or otherwise
affecting the other rights and remedies of Mortgagee:
(i) declare the entire principal amount of the indebtedness and
Obligations secured hereby with interest accrued thereon to be
immediately due and payable;
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(ii) institute a proceeding or proceedings, judicial or
nonjudicial, by advertisement or otherwise, for the complete
foreclosure of this Mortgage in which case the Mortgaged Property or
any interest therein may be sold for cash or upon credit in one or
more parcels or in several interests or portions and in any order or
manner in accordance with the laws of the jurisdiction in which such
Mortgaged Property is located;
(iii) with or without entry, to the extent permitted, and pursuant
to the procedures provided by, applicable law, institute proceedings
for the foreclosure of this Mortgage for the Obligations then due and
payable subject to the continuing lien of this Mortgage, in accordance
with the laws of the jurisdiction in which such Mortgaged Property is
located, for the balance of the Obligations not then due;
(iv) sell for cash or upon credit the Mortgaged Property or any
part thereof and all estate, claim, demand, right, title and interest
of Mortgagor therein and rights of redemption thereof, pursuant to
power of sale or otherwise, at one or more sales, as an entirety or in
parcels, at such time and place, upon such terms and after such notice
thereof as may be required or permitted by the laws of the
jurisdiction in which such Mortgaged Property is located;
(v) institute an action, suit or proceeding in equity for the
specific performance of any covenant, condition or agreement contained
herein or in the other Relevant Documents;
(vi) recover judgment on the Notes either before, during or after
any proceedings for the enforcement of this Mortgage;
(vii) prior to, concurrently with, or subsequent to the institution
of foreclosure proceedings, apply for the appointment of a trustee,
receiver, liquidator or conservator of the Mortgaged Property, as a
matter of strict right, without notice and without regard for the
adequacy of the security for the Obligations or the interest of the
Mortgagor therein and without regard for the solvency of the Mortgagor
or of any person, firm or other entity liable for the payment of the
Obligations, and Mortgagor hereby consents to such appointment;
(viii) prior to, concurrently with or subsequent to the institution
of foreclosure proceedings, enforce Mortgagee's interest in the Leases
and Rents and enter into or upon the Mortgaged Property and take
exclusive possession thereof, either personally or by its agents,
nominees or attorneys and dispossess Mortgagor and its agents and
servants therefrom, and thereupon Mortgagee may (whether or not a
receiver has been appointed) as attorney-in-fact or agent of
Mortgagor, or in its own name and under the powers herein granted,(A)
use, operate, manage, control, insure, maintain, repair, restore and
otherwise deal
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with all and every part of the Mortgaged Property and conduct the
business thereat; (B) complete any construction on the Mortgaged
Property in such manner and form as Mortgagee deems advisable; (C)
make alterations, additions, renewals, replacements and improvements
to or on the Mortgaged Property; (D) exercise all rights and powers of
Mortgagor with respect to the Mortgaged Property, whether in the name
of Mortgagor or otherwise (including, without limitation, the right to
make, cancel, enforce or modify Leases, obtain and evict tenants, and
demand, sue for, collect and receive all earnings, revenues, rents,
issues, profits and other income of the Mortgaged Property and every
part thereof); and (E) apply the receipts from the Mortgaged Property
to the payment of the Obligations, after deducting therefrom all
reasonable expenses (including, without limitation, reasonable
attorneys' fees) incurred in connection with the aforesaid operations
and all amounts necessary to pay the taxes, assessments, insurance and
other charges in connection with the Mortgaged Property, it being
agreed that should Mortgagee incur any liability, loss or damage in
the defense of any claims or demands, the amount thereof, including
costs, expenses and reasonable attorneys' fees shall be secured
hereby, and Mortgagor shall reimburse Mortgagee therefor immediately
upon demand;
(ix) require Mortgagor to pay monthly in advance to Mortgagee, or
any receiver appointed to collect the Rents, the fair and reasonable
rental value for the use and occupation of any portion of the
Mortgaged Property occupied by Mortgagor and require Mortgagor to
vacate and surrender possession to Mortgagee of the Mortgaged Property
or to such receiver and, in default thereof, evict Mortgagor by
summary proceedings or otherwise; and
(x) pursue such other rights and remedies as may be available
under the Relevant Documents or otherwise at law or in equity or under
the Uniform Commercial Code including the right to establish a lock
box for all Rents and other receivables of Mortgagor relating to the
Mortgaged Property.
In the event of a sale, by foreclosure or otherwise, of less than all of the
Mortgaged Property, this Mortgage shall continue as a lien on the remaining
portions of the Mortgaged Property.
The proceeds of any sale made under or by virtue of this Section 24,
together with any other sums which then may be held by Mortgagee under this
Mortgage, whether under the provisions of this Section or otherwise, shall be
applied by Mortgagee in the following order of priority: first, on account of
all reasonable costs and expenses incident to the foreclosure proceedings,
including all such items as are mentioned in this Section 24; second, all other
items which under the terms hereof constitute secured indebtedness, which are
any amounts due under this Mortgage, or under the other Relevant Documents
(including any amounts required to be escrowed pursuant to Section 6(b)); third,
any surplus to Mortgagor, its successors or assigns, as their rights may appear.
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(b) Upon any sale made under or by virtue of this Section 24, whether
made under the power of sale herein granted or under or by virtue of judicial
proceedings or of a judgment or decree of foreclosure and sale, Mortgagee may
bid for and acquire the Mortgaged Property or any part thereof and in lieu of
paying cash therefor may make settlement for the purchase price by crediting
upon the Obligations the net sales price after deducting therefrom the expenses
of the sale and costs of the action and any other sums which Mortgagee is
authorized to deduct under this Mortgage.
(c) No recovery of any judgment by Mortgagee and no levy of an
execution under any judgment upon the Mortgaged Property or upon any other
property of Mortgagor shall affect in any manner or to any extent the lien of
this Mortgage upon the Mortgaged Property or any part thereof, or any liens,
rights, powers or remedies of Mortgagee hereunder, but such liens, rights,
powers and remedies of Mortgagee shall continue unimpaired as before.
(d) Mortgagee may adjourn, terminate or rescind any proceeding or
other action brought in connection with its exercise of the remedies provided in
this Section 24 at any time before the conclusion thereof, as determined in
Mortgagee's sole discretion and without prejudice to Mortgagee.
(e) Mortgagee may resort to any remedies and the security given by
this Mortgage or the other Relevant Documents in whole or in part, and in such
portions and in such order as determined by Mortgagee's sole discretion. No
such action shall in any way be considered a waiver of any rights, benefits or
remedies evidenced or provided by this Mortgage or the other Relevant Documents.
The failure of Mortgagee to exercise any right, remedy or option provided in
this Mortgage or the other Relevant Documents shall not be deemed a waiver of
such right, remedy or option or of any covenant or obligation secured by this
Mortgage or the other Relevant Documents. Subject to the provisions of the
Relevant Documents, no acceptance by Mortgagee of any payment after the
occurrence of any Event of Default and no payment by Mortgagee of any obligation
for which Mortgagor is liable hereunder shall be deemed to waive or cure any
Event of Default with respect to Mortgagor, or Mortgagor's liability to pay such
obligation. No sale of all or any portion of the Mortgaged Property, no
forbearance on the part of Mortgagee and no extension of time for the payment of
the whole or any portion of the Obligations or any other indulgence given by
Mortgagee to Mortgagor, shall operate to release or in any manner affect the
interest of Mortgagee in the remaining Mortgaged Property or the liability of
Mortgagor to pay the Obligations. No waiver by Mortgagee shall be effective,
unless it is in writing and then only to the extent specifically stated.
(f) The interests and rights of Mortgagee under this Mortgage and the
other Relevant Documents, and the liens and security interests created and
evidenced by this Mortgage and the other Relevant Documents, shall not be
impaired by any indulgence, including (i) any renewal, extension or modification
which Mortgagee may grant with respect to any of the Obligations, (ii) any
surrender, compromise, release, renewal, extension,
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exchange or substitution which Mortgagee may grant with respect to the Mortgaged
Property or any portion thereof; or (iii) any release or indulgence granted to
any maker, endorser, guarantor or surety of any of the Obligations.
(g) Upon the occurrence of any Event of Default under Section 23, in
any suit to foreclose the lien hereof or enforce any other remedy of Mortgagee
under this Mortgage, there shall be allowed and included as additional
indebtedness in the decree for sale or other judgment or decree all reasonable
expenditures and expenses which may be paid or incurred by or on behalf of
Mortgagee for attorneys' fees, appraiser's fees, outlays for documentary and
expert evidence, stenographers' charges, publication costs, and costs (which may
be estimated as to items to be expended after entry of the decree) of procuring
all such abstracts of title, title searches and examinations, title insurance
policies, Torrens certificates, and similar data and assurances with respect to
title as Mortgagee may deem reasonably necessary either to prosecute such suit
or to evidence to bidders at any sale which may be had pursuant to such decree
the true condition of the title to or the value of the Mortgaged Property. All
such reasonable expenditures and expenses which Mortgagee may incur as permitted
by this Section for the protection of the Mortgaged Property and the maintenance
of the lien of this Mortgage, including, but not limited to, the fees and
out-of-pocket disbursements of any attorney employed by Mortgagee in any
litigation or proceeding affecting this Mortgage, including, but not limited to,
bankruptcy proceedings or preparations for the commencement or defense of any
proceeding or threatened suit or proceeding, shall be immediately due and
payable by Mortgagor and shall be secured by this Mortgage.
25. RIGHT OF ACCESS. Mortgagor shall permit agents, representatives
and employees of Mortgagee to (i) inspect the Mortgaged Property or any part
thereof, PROVIDED that such inspection does not materially interfere with the
tenants of the Mortgaged Property or violate the terms of any Lease, (ii) to
examine and make abstracts from any of Mortgagor's books and records and (iii)
to discuss the business, operations, properties and financial and other
condition of Mortgagor with officers of Mortgagor and with its independent
certified public accountants, at such reasonable times as may be requested by
Mortgagee upon reasonable advance notice.
26. SECURITY AGREEMENT. This Mortgage is both a real property
mortgage and a "security agreement" within the meaning of the Uniform Commercial
Code. The Mortgaged Property includes both real and personal property and all
other rights and interests, whether tangible or intangible in nature, of
Mortgagor in the Mortgaged Property. Mortgagor by executing and delivering this
Mortgage has granted and hereby grants to Mortgagee, as security for the
Obligations, a security interest in the Mortgaged Property to the full extent
that the Mortgaged Property may be subject to the Uniform Commercial Code (said
portion of the Mortgaged Property so subject to the Uniform Commercial Code
being called in this paragraph the "COLLATERAL"). Mortgagor hereby agrees with
Mortgagee to execute and deliver to Mortgagee, in form and substance
satisfactory to Mortgagee, such financing statements and such further assurances
as Mortgagee may from time to time, reasonably consider necessary to create,
perfect, and preserve Mortgagee's security interest herein granted. All or part
of the
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Mortgaged Property is or is to become "fixtures" as defined in the Uniform
Commercial Code. Information concerning the security interest herein granted
may be obtained from the parties at the addresses of the parties set forth in
the first paragraph of this Mortgage. Mortgagor's chief executive office and
principal place of business is the Mortgagor's address set forth in the first
paragraph of this Mortgage, and the place where Mortgagor's books and records in
respect of where the Mortgaged Property is located are kept is the address of
Mortgagor set forth in the first paragraph of this Mortgage. If an Event of
Default shall occur which shall remain uncured, Mortgagee, in addition to any
other rights and remedies which it may have, shall have and may exercise
immediately and without demand, any and all rights and remedies granted to a
secured party upon default under the Uniform Commercial Code, (including,
without limitation, to the extent permitted by law, the right to take possession
of the Collateral or any part thereof, and to take such other measures as
Mortgagee may deem necessary for the care, protection and preservation of the
Collateral). Upon request or demand of Mortgagee, Mortgagor shall at its
expense assemble the Collateral and make it available to Mortgagee at a
convenient place acceptable to Mortgagee. Mortgagor shall pay to Mortgagee on
demand therefor any and all reasonable expenses (including, without limitation,
reasonable legal expenses and attorneys' fees) incurred or paid by Mortgagee in
protecting the interest in the Collateral and in enforcing the rights hereunder
with respect to the Collateral. Any notice of sale, disposition or other
intended action by Mortgagee with respect to the Collateral sent to Mortgagor at
least ten (10) business days prior to such action or such notice as is otherwise
required by law or the Relevant Documents, shall constitute commercially
reasonable notice to Mortgagor. The proceeds of any disposition of the
Collateral, or any part thereof, may be applied by Mortgagee to the payment of
the Obligations in such priority and proportions as Mortgagee shall determine in
its sole discretion. In the event of any change in name, identity or structure
of Mortgagor, Mortgagor shall notify Mortgagee thereof and, promptly after
request, shall execute, file and record such Uniform Commercial Code forms as
are necessary to maintain the priority of Mortgagee's lien upon and security
interest in the Collateral, and shall pay all expenses and fees in connection
with the filing and recording thereof. If Mortgagee shall require the filing or
recording of additional Uniform Commercial Code forms or continuation
statements, Mortgagor shall, promptly after request, execute, file and record
such Uniform Commercial Code forms or continuation statements as Mortgagee shall
deem necessary, and shall pay all expenses and fees in connection with the
filing and recording thereof, it being understood and agreed, however, that no
such additional documents shall materially increase Mortgagor's obligations
under this Mortgage or the other Relevant Documents. Mortgagor hereby
irrevocably appoints Mortgagee as its attorney-in-fact, coupled with an
interest, to file with the appropriate public office on its behalf any UCC
financing statements (or related documents) signed only by Mortgagee, as secured
party, in connection with the Collateral covered by this Mortgage, such
appointment to terminate upon the release of this Mortgage.
27. ACTIONS AND PROCEEDINGS. Mortgagee has the right to appear in
and defend any action or proceeding brought with respect to the Mortgaged
Property and to bring any action or proceeding, in the name and on behalf of
Mortgagor, which Mortgagee, in its reasonable discretion, decides should be
brought to protect its interest under this Mortgage or
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<PAGE>
in the Mortgaged Property. Subject to the foregoing, Mortgagor shall appear in
and contest any action or proceeding purporting to affect the security hereof
and shall pay all reasonable costs and expenses including cost of evidence of
title and attorney's fees, in any such action or proceeding in which Mortgagee
may appear. Mortgagee shall, at its option, be subrogated to the lien of any
mortgage or other security instrument discharged in whole or in part by the
Obligations, and any such subrogation rights shall constitute additional
security for the payment of the Obligations.
28. WAIVER OF SETOFF AND COUNTERCLAIM. Except as may be permitted
under the Relevant Documents, all amounts due under this Mortgage, the Notes and
the other Relevant Documents shall be payable without setoff or counterclaim
whatsoever.
29. LIENS. Mortgagor warrants, covenants and agrees to pay and
promptly discharge, at Mortgagor's cost and expense, all taxes, assessments and
governmental charges levied upon it, its income and assets as and when such
taxes, assessments and charges are due and payable (including, without
limitation, all Impositions), as well as all lawful claims for labor materials
and supplies or otherwise which could become a lien, and all liens, encumbrances
and charges upon the Mortgaged Property, or any part thereof or interest
therein; provided that the existence of any mechanic's, laborer's,
materialman's, supplier's or vendor's lien or right thereto shall not constitute
a violation of this Section if payment is not yet due under the contract which
is the foundation thereof. Notwithstanding the foregoing, Mortgagor shall not
be in default for failure to pay or discharge Impositions or mechanic's or
materialman's or similar lien asserted against the Mortgaged Property if, and so
long as, (a) Mortgagor shall have notified Mortgagee of same within seven (7)
days of obtaining knowledge thereof; (b) Mortgagor shall diligently and in good
faith contest the same by appropriate legal proceedings which shall operate to
prevent the enforcement or collection of the same and the sale of the Mortgaged
Property or any part thereof, to satisfy the same; (c) unless funds are
otherwise reserved, Mortgagor shall furnish to Mortgagee such security as
Mortgagee may reasonably request to insure payment of such Impositions and to
secure and indemnify Mortgagee against any cost, expense, loss or damage in
connection with such contest or postponement of payment,; (d) Mortgagor shall
timely upon final determination thereof pay the amount of any such Impositions,
claim, fine or penalty so determined, together with all costs, interest and
penalties which may be payable in connection therewith; (e) the failure to pay
the Impositions, or mechanic's or materialman's or similar lien claim does not
constitute a default under any other deed of trust, mortgage or security
interest covering or affecting any part of the Mortgaged Property; and (f)
notwithstanding the foregoing, Mortgagor shall immediately upon request of
Mortgagee pay (and if Mortgagor shall fail so to do, Mortgagee may, but shall
not be required to, pay or cause to be discharged or bonded against) any such
Impositions, or claim notwithstanding such contest, if in the reasonable opinion
of Mortgagee, the Mortgaged Property or any part thereof or interest therein may
be in imminent danger of being sold, forfeited, foreclosed, terminated, canceled
or lost.
30. RECOVERY OF SUMS REQUIRED TO BE PAID. Mortgagee shall have the
right from time to time to take action to recover any sum or sums which
constitute a part of the
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Obligations as the same become due and owing, without regard to whether or not
the balance of the Obligations shall be due, and without prejudice to the right
of Mortgagee thereafter to bring an action of foreclosure, or any other action,
for a default or defaults by Mortgagor existing at the time such earlier action
was commenced.
31. MARSHALING, WAIVER OF REDEMPTION AND OTHER MATTERS. Mortgagor
hereby waives, to the extent permitted by law, the benefit of all appraisement,
valuation, stay, minimum bid or upset price, extension, reinstatement,
moratorium and redemption laws now or hereafter in force and all rights of
marshaling in the event of any sale hereunder of the Mortgaged Property or any
part thereof or any interest therein. Further, Mortgagor hereby expressly
waives any and all rights of redemption from sale pursuant to a foreclosure of
this Mortgage on behalf of Mortgagor, and on behalf of each and every person
acquiring any interest in or title to the Mortgaged Property subsequent to the
date of this Mortgage and on behalf of all persons to the extent permitted by
applicable law.
32. NOTICE. Any notice which either party hereto may desire or be
required to give to the other party shall be in writing and delivered by: (x) a
commercial courier or messenger service or (y) by U.S. registered or certified
mail with return receipt requested. Notice by commercial messenger or courier
service will be deemed to have been given on the day when delivered before 4:00
p.m. on a business day in the city in which notice is delivered, provided that
payment for the cost of delivery is not requested of the recipient. Notice by
mail shall be given by registered or certified U.S. Mail, return receipt
requested. Delivery of notice by commercial messenger or courier service or
mail shall be assumed if acceptance of delivery is refused. Notice may be given
by fax but will only be treated as delivered hereunder if: (x) sent between the
hours of 9:00 a.m. and 5:00 p.m. (based on local time at the destination); and
(y) receipt is acknowledged by fax and delivery will be deemed to have been
given on the date the fax acknowledgment is sent. Notices shall be delivered as
follows or at such other place as either party hereto may by notice in writing
(given in accordance with this Section 32) designate:
To Mortgagor: Discovery Zone, Inc.
One Corporate Center
110 East Broward Boulevard
Fort Lauderdale, Florida 33301
Attn: President
Telecopy Number: (954) 627-2670
To Mortgagee: McDonald's Corporation
One McDonald's Plaza
Oak Brook, IL 60523
Attn: General Counsel
Telecopy Number: (630) 623-3000
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<PAGE>
33. SOLE DISCRETION OF MORTGAGEE. Wherever pursuant to this
Mortgage, Mortgagee exercises any right given to it to approve or disapprove, or
any arrangement or term is to be satisfactory to Mortgagee, the decision of
Mortgagee to approve or disapprove or to decide that arrangements or terms are
satisfactory or not satisfactory shall be in the sole discretion of Mortgagee
and shall be final and conclusive, except as may be otherwise expressly and
specifically provided herein.
34. NON-WAIVER. The failure of Mortgagee to insist upon strict
performance of any term hereof shall not be deemed to be a waiver of any term of
this Mortgage. Mortgagor shall not be relieved of Mortgagor's Obligations
hereunder by reason of (a) the failure of Mortgagee to comply with any request
of Mortgagor to take any action to foreclose this Mortgage or otherwise enforce
any of the provisions hereof or of the other Relevant Documents, (b) the
release, regardless of consideration, of the whole or any part of the Mortgaged
Property, or of any person liable for the Obligations or any portion thereof, or
(c) any agreement or stipulation by Mortgagee extending the time of payment or
otherwise modifying or supplementing the terms of this Mortgage or the other
Relevant Documents. Mortgagee may resort for the payment of the Obligations to
any other security held by Mortgagee in such order and manner as Mortgagee, in
its discretion, may elect. Mortgagee may take action to recover the
Obligations, or any portion thereof, or to enforce any covenant hereof without
prejudice to the right of Mortgagee thereafter to foreclosure this Mortgage.
The rights and remedies of Mortgagee under this Mortgage shall be separate,
distinct and cumulative and none shall be given effect to the exclusion of the
others. No act of Mortgagee shall be construed as an election to proceed under
any one provision herein to the exclusion of any other provision. Mortgagee
shall not be limited exclusively to the rights and remedies herein stated but
shall be entitled to every right and remedy now or hereafter afforded at law or
in equity.
35. NO ORAL CHANGE. This Mortgage and the other Relevant Documents
constitute the final expression of the entire agreement among the parties
pertaining to the subject matter hereof and thereof and supersede all prior and
contemporaneous agreements, understanding, representations or other
arrangements, whether express or implied, written or oral, of the parties in
connection herewith or therewith except to the extent expressly incorporated or
specifically referred to herein or therein. This Mortgage, and any provisions
hereof, may not be modified, amended, waived, extended, changed, discharged or
terminated orally or by any act or failure to act on the part of Mortgagor or
Mortgagee, but only by an agreement in writing signed by the party against whom
enforcement of any modification, amendment, waiver, extension, change, discharge
or termination is sought.
36. SUCCESSORS AND ASSIGNS. Subject to the provisions hereof
requiring Mortgagee's consent to any transfer of the Mortgaged Property, this
Mortgage shall be binding upon and inure to the benefit of Mortgagor and
Mortgagee and their respective permitted successors and assigns forever.
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37. SEVERABILITY. If any term, covenant or condition of this
Mortgage or the Relevant Documents is held to be invalid, illegal or
unenforceable in any respect, this Mortgage and any such other Relevant Document
shall be construed without such provision.
38. HEADINGS, ETC. The headings and captions of various paragraphs
of this Mortgage are for convenience of reference only and are not to be
construed as defining or limiting, in any way, the scope or intent of the
provisions hereof.
39. DUPLICATE ORIGINALS. This Mortgage may be executed in any number
of duplicate originals and each such duplicate original shall be deemed to be an
original.
40. DEFINITIONS. Unless the context clearly indicates a contrary
intent or unless otherwise specifically provided herein, words used in this
Mortgage may be used interchangeably in singular or plural form and the word
"Mortgagor" shall mean "each Mortgagor and any subsequent owner or owners of the
Mortgaged Property or any part thereof or any interest therein," the word
"Mortgagee" shall mean "Mortgagee and any subsequent holder(s) of the Notes,"
the word "person" shall include an individual, corporation, partnership, trust,
unincorporated association, government, governmental authority, and any other
entity, and the words "Mortgaged Property" shall include any portion of the
Mortgaged Property and any interest therein and the words "attorneys' fees"
shall include any and all attorneys' fees, paralegal and law clerk fees
(including, without limitation, fees at the pre-trial, trial and appellate
levels incurred or paid by Mortgagee in protecting its interest in the Mortgaged
Property and Collateral and enforcing its rights hereunder and all such fees
incurred in connection with any bankruptcy or insolvency proceedings). Whenever
the context may require, any pronouns used herein shall include the
corresponding masculine, feminine or neuter forms, and the singular form of
nouns and pronouns shall include the plural and vice versa.
41. HOMESTEAD. Mortgagor hereby waives and renounces all homestead
and exemption rights provided by the constitution and the laws of the United
States and of any state, in and to the Land as against the collection of the
Obligations, or any part hereof.
42. ASSIGNMENTS. Consistent with and subject to the applicable
provisions of the Relevant Documents, Mortgagee shall have the right to assign
or transfer its rights under this Mortgage without limitation. Any Mortgagee or
transferee shall be entitled to all the benefits afforded Mortgagee under this
Mortgage.
43. WAIVER OF JURY TRIAL. TO THE MAXIMUM EXTENT PERMITTED BY
APPLICABLE LAW, EACH PARTY HERETO HEREBY AGREES NOT TO ELECT A TRIAL BY JURY OF
ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY JURY FULLY
TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO
THE NOTES, THIS MORTGAGE, OR THE OTHER RELEVANT DOCUMENTS, OR ANY CLAIM,
COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH.
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THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY SUCH
PARTY, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS
TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE. MORTGAGEE IS
HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS
CONCLUSIVE EVIDENCE OF THIS WAIVER BY MORTGAGOR.
44. CONSENT TO JURISDICTION. MORTGAGOR AND MORTGAGEE HERETO CONSENT
FOR THEMSELVES AND IN RESPECT OF THEIR PROPERTIES, GENERALLY, UNCONDITIONALLY
AND IRREVOCABLY, TO THE NONEXCLUSIVE JURISDICTION OF THE FEDERAL AND STATE
COURTS IN THE STATE OF NEW YORK WITH RESPECT TO ANY PROCEEDING RELATING TO ANY
MATTER, CLAIM OR DISPUTE ARISING UNDER THE RELEVANT DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED THEREBY. MORTGAGOR FURTHER CONSENTS, GENERALLY,
UNCONDITIONALLY AND IRREVOCABLY, TO THE NONEXCLUSIVE JURISDICTION OF THE STATE
AND FEDERAL COURTS OF THE STATE IN WHICH ANY OF THE COLLATERAL IS LOCATED IN
RESPECT OF ANY PROCEEDING RELATING TO ANY MATTER, CLAIM OR DISPUTE ARISING WITH
RESPECT TO SUCH COLLATERAL. MORTGAGOR FURTHER IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS, GENERALLY, UNCONDITIONALLY AND IRREVOCABLY, AT THE ADDRESSES
SET FORTH IN THE FIRST PARAGRAPH HEREOF IN CONNECTION WITH ANY OF THE AFORESAID
PROCEEDINGS IN ACCORDANCE WITH THE RULES APPLICABLE TO SUCH PROCEEDINGS. TO THE
EXTENT PERMITTED BY APPLICABLE LAW, MORTGAGOR HEREBY IRREVOCABLY WAIVES ANY
OBJECTION WHICH IT MAY NOW HAVE OR HAVE IN THE FUTURE TO THE LAYING OF VENUE IN
RESPECT OF ANY OF THE AFORESAID PROCEEDINGS BROUGHT IN THE COURTS REFERRED TO
ABOVE AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
NOTHING HEREIN SHALL AFFECT THE RIGHT OF MORTGAGEE TO SERVE PROCESS IN ANY
MANNER PERMITTED BY LAW OR TO COMMENCE PROCEEDINGS OR OTHERWISE PROCEED AGAINST
MORTGAGOR IN ANY JURISDICTION.
45. GOVERNING LAW. This Mortgage shall be governed by and construed
in accordance with the laws of the State of New York including, without
limitation, Section 5-1401 of the General Obligations Law, but otherwise without
regard to conflict of law principles; PROVIDED, HOWEVER, that with respect to
the creation, attachment, perfection, priority and procedures relating to the
enforcement of the liens and security interests created by or pursuant to this
Mortgage and relating to real property, this Mortgage shall be governed by and
construed in accordance with the laws of the state in which the Land is located.
46. LIEN ABSOLUTE, MULTI-SITE REAL ESTATE AND MULTIPLE COLLATERAL
TRANSACTION. Mortgagor acknowledges that this Mortgage and a number of other
Relevant
31
<PAGE>
Documents and those documents required by the Relevant Documents together secure
the Obligations. Mortgagor agrees that the lien of this Mortgage and all
obligations of the Mortgagor hereunder shall be absolute and unconditional and
shall not in any manner be affected or impaired by:
(a) any lack of validity or enforceability of the Notes or any other
Relevant Document, any agreement with respect to any of the Obligations or any
other agreement or instrument relating to any of the foregoing;
(b) any acceptance by Mortgagee of any security for or guarantees of
any of the indebtedness hereby secured;
(c) any failure, neglect or omission on the part of Mortgagee to
realize upon or protect any of the indebtedness hereby secured or any of the
collateral security therefor, including the Relevant Documents;
(d) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations;
(e) any release (except as to the property or obligation released),
sale, pledge, surrender, compromise, settlement, nonperfection, renewal
extension, indulgence, alteration, exchange, modification or disposition of any
of the Obligations hereby secured or of any of the collateral security therefor;
(f) any amendment or waiver of or any consent to any departure from
the Notes or any other Relevant Documents or of any guaranty thereof (except to
the extent of such amendment, waiver or consent in writing by Mortgagee), if
any, and Mortgagee may in its discretion foreclose, exercise any power of sale,
or exercise any other remedy available to it under any or all of the Relevant
Documents without first exercising or enforcing any of its rights and remedies
hereunder; and
(g) any exercise of the rights or remedies of Mortgagee hereunder or
under any or all of the Relevant Documents.
Mortgagor specifically consents and agrees that Mortgagee may exercise its
rights and remedies hereunder and under the other Relevant Documents separately
or concurrently and in any order that Mortgagee may deem appropriate.
47. FUTURE ADVANCES. This Mortgage shall secure not only existing
indebtedness, but also such future advances, whether such advances are
obligatory or are to be made at the option of Mortgagee, or otherwise, as are
made by Mortgagee to Mortgagor after the date hereof, to the same extent as if
such future advances were made on the date of the execution of this Mortgage.
Nothing in this Mortgage shall be deemed an obligation on the part of the
Mortgagee to make any future advances.
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48. STATE SPECIFIC PROVISIONS. The provisions of Exhibit B are
hereby incorporated by reference as though set forth in full herein.
49. NO MERGER OF ESTATES. It is the intention and agreement of
Mortgagor and Mortgagee that there shall be no merger of any leasehold estate in
the Mortgaged Property with the fee interest in the Mortgaged Property or any
other estate or interest in the Mortgaged Property, and there shall be no merger
of this Mortgage and any estate in the Mortgaged Property, by reason of the fact
that the same person may own or hold (a) any leasehold interest in the Mortgaged
Property, and/or (b) this Mortgage, and/or (c) the fee interest in the Mortgaged
Property or any other estate or interest in the Mortgaged Property.
50. SUBORDINATE LIEN. Notwithstanding anything to the contrary
contained herein, Mortgagor shall be permitted to grant a subordinate lien on
the Mortgaged Property in favor of State Street Bank and Trust Company, solely
in its capacity as trustee and collateral agent under and pursuant to the
Indenture (as hereinafter defined) (the "SUBORDINATED CREDITOR") as security for
the obligations of Mortgagor under that certain Indenture between Mortgagor and
the Subordinated Creditor dated as of July 22, 1997 (the "INDENTURE"), provided
that such lien in favor of the Subordinated Creditor is junior, subject and
subordinate to the lien of this Mortgage in accordance with and pursuant to the
terms and conditions set forth in that certain Subordination Agreement dated as
of the date hereof between Mortgagee and the Subordinated Creditor with respect
to the Mortgaged Property (the "SUBORDINATION AGREEMENT"), and provided,
further, that any event which gives the Subordinated Creditor the right to
accelerate the obligations secured by such subordinate lien shall automatically
constitute an Event of Default hereunder.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE AND NOTARY PAGES FOLLOW.]
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IN WITNESS WHEREOF, this Mortgage has been duly executed under seal by
the Mortgagor as of the day and year first written above.
MORTGAGOR:
DISCOVERY ZONE, INC., a
Delaware corporation, as successor in
interest to LEAPS & BOUNDS, INC.
By:/s/ Robert Rooney
--------------------------
Name: Robert Rooney
Title: Sr. V.P.
[Corporate Seal]
Signed, sealed and delivered
in the presence of:
Witness: /s/ Mark D. Woodward
------------------------
Print Name: Mark D. Woodward
Witness: /s/ Seth L. Grossman
-------------------------
Print Name: Seth L. Grossman
<PAGE>
STATE OF NEW YORK )
)
COUNTY OF WESTCHESTER)
On the 28 day of July, 1997, before me personally came Robert Rooney, to me
known, who, being duly sworn, did depose and say that he/she resides at 50 Main
Street, White Plains, N.Y.; that he is a Sr. V.P. of DISCOVERY ZONE, INC., the
Delaware corporation described in and which executed the foregoing instrument;
and that he had the authority to sign the same, and he acknowledged to me that
he executed the same as the act and deed of said corporation by order of the
board of directors thereof.
/s/ Mark D. Woodward
--------------------------
Notary Public
MARK D. WOODWARD
Notary Public State of New York
THIS INSTRUMENT WAS DRAFTED BY No. 4997846
(NAME AND ADDRESS) Qualified in New York County
Commission Expires June 15, 1998
Jonathan Reiss, Esq.
Cleary, Gottlieb, Steen & Hamilton
1 Liberty Plaza
New York, New York 10006
<PAGE>
Sterling Heights
Macomb County, Michigan
EXHIBIT A
All of Lot 33 and part of Lot 34, Lakeside Subdivision No. 4, according to the
plat thereof as recorded in liber 73, pages 1 and 2 of Plats, Macomb County
Records, and being more particularly described as: Beginning at the southwest
corner of Lot 33; thence north 02 degrees 50 minutes 00 seconds west 156.00 feet
along the westerly line of said Lot 33 to the northwest corner of said Lot 33,
said point also being the southwesterly corner of Lot 34; thence continuing
north 02 degrees 50 minutes 00 seconds west 126.00 feet along the westerly line
of said Lot 34; thence north 87 degrees 10 minutes 00 seconds east 307.47 feet
to a point on a curve said point being on the easterly line of said Lot 34;
thence along the arc of a curve to the left 126.98 feet, said curve having a
radius of 779.58 feet central angle of 09 degrees 19 minutes 57 seconds and a
chord bearing and distance of south 09 degrees 26 minutes 09 second east 126.84
feet to the southeast corner of said Lot 34 said point also being the northeast
corner of Lot 33; thence continuing along the arc of a curve to the left 152.79
feet said curve having a radius of 779.58 feet center angle of 11 degrees 13
minutes 45 seconds and a chord bearing and distance of south 19 degrees 43
minutes 00 seconds east 152.54 feet; thence south 25 degrees 19 minutes 52
seconds east 10.86 feet to the southeast corner of Lot 33; thence south 87
degrees 10 minutes 00 seconds west 370.51 feet along the south line of said Lot
33 to the point of beginning.
<PAGE>
EXHIBIT B
STATE SPECIFIC PROVISIONS (Michigan)
The following provisions are incorporated by reference into Section 48
of the attached Mortgage. If any conflict or inconsistency exists between this
Exhibit B and the remainder of the attached Mortgage, this Exhibit B shall
govern.
A. FORECLOSURE BY ADVERTISEMENT. Mortgagee may foreclose this
Mortgage by advertisement pursuant to the statutes in such case made and
provided in addition to all other rights and remedies hereunder. By execution
of this Mortgage, Mortgagor hereby grants to Mortgagee, in connection with a
foreclosure of this Mortgage, the power to sell and convey the Mortgaged
Property at public sale in accordance with the statutes providing therefor.
B. MICHIGAN STATUTES REGARDING ASSIGNMENT OF RENTS. The Mortgagee
shall be entitled to all the rights and remedies conferred by Act No. 210 of the
Michigan Public Acts of 1953 as amended by Act No. 151 of the Michigan Public
Acts of 1966 (MCLA 554.231 ET SEQ.). The assignment of Rents provided for in
Section 8 of this Mortgage shall, notwithstanding anything to the contrary
contained therein, constitute an assignment of rents pursuant to MCLA 554.231 ET
SEQ., and shall be interpreted and applied in accordance therewith.
C. WASTE. The failure of the Mortgagor to pay any taxes or
assessments assessed against the Mortgaged Property, or any installment thereof,
or any premiums payable with respect to any insurance policy covering the
Mortgaged Property, shall constitute waste, as provided by Act. No. 236 of the
Michigan Public Acts of 1961 as amended (MCLA 600.2927). The Mortgagor further
hereby consents to the appointment of a receiver under said statute, should
Mortgagee elect to seek such relief thereunder.
D. FUTURE ADVANCE MORTGAGE. This Mortgage secures future advances
and is a future advance mortgage under Act No. 348 of the Michigan Public Acts
of 1990 (MCL 565.901 ET SEQ.).
E. POWER OF SALE; WAIVER OF NOTICE AND HEARING ON FORECLOSURE. THIS
MORTGAGE CONTAINS A POWER OF SALE AND UPON THE OCCURRENCE OF AN EVENT OF DEFAULT
MAY BE FORECLOSED BY ADVERTISEMENT. IN FORECLOSURE BY ADVERTISEMENT AND THE
SALE OF THE MORTGAGED PROPERTY IN CONNECTION THEREWITH NO HEARING IS REQUIRED
AND THE ONLY NOTICE REQUIRED IS THE PUBLICATION OF NOTICE IN A LOCAL NEWSPAPER
AND THE POSTING OF A COPY OF THE NOTICE ON THE MORTGAGED PROPERTY. THE
MORTGAGOR HEREBY WAIVES ALL RIGHTS UNDER THE CONSTITUTION AND LAWS OF THE UNITED
STATES AND THE STATE OF MICHIGAN TO A HEARING PRIOR TO SALE IN CONNECTION WITH
FORECLOSURE OF THIS MORTGAGE BY ADVERTISEMENT AND ALL NOTICE
<PAGE>
REQUIREMENTS EXCEPT AS SET FORTH IN THE MICHIGAN STATUTE PROVIDING FOR
FORECLOSURE BY ADVERTISEMENT.
<PAGE>
SCHEDULE A
DESCRIPTION OF ORIGINAL MORTGAGE
PROPERTY RECORDING OFFICE LIBER PAGE RECORDING DATE
- -------- ---------------- ----- ---- --------------
Sterling Heights, MI Clerk-Register of 6446 427 9/9/94
Deeds of Macomb
County, MI
<PAGE>
EXHIBIT 4.34
- ----------------------------------------------------------------------------
DISCOVERY ZONE, INC.
(Mortgagor),
to
McDONALD's CORPORATION
(Mortgagee)
------------------------------------------
AMENDED AND RESTATED MORTGAGE, ASSIGNMENT OF LEASES AND RENTS, SECURITY
AGREEMENT AND FIXTURE FILING
------------------------------------------
Dated as of July 29, 1997
DOCUMENT PREPARED BY AND
AFTER RECORDING RETURN TO:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attention: Jonathan A. Reiss, Esq.
------------------------------------------------------------------------------
THIS MORTGAGE IS EXECUTED AND DELIVERED UNDER A PLAN CONFIRMED UNDER SECTION
1129 OF THE BANKRUPTCY CODE AND IS EXEMPT FROM MORTGAGE REGISTRATION TAX
PURSUANT TO SECTION 1146(C) OF THE BANKRUPTCY CODE
[BLAINE, MINNESOTA PROPERTY]
<PAGE>
THIS AMENDED AND RESTATED MORTGAGE, ASSIGNMENT OF LEASES AND
RENTS, SECURITY AGREEMENT AND FIXTURE FILING (as the same may from time to time
be extended, renewed or modified, this "MORTGAGE"), made as of the 29th day of
July, 1997, by DISCOVERY ZONE, INC., a Delaware corporation ("MORTGAGOR"),
having its principal place of business at One Corporate Center, 110 East Broward
Boulevard, Fort Lauderdale, Florida 33301, as successor by merger to LEAPS &
BOUNDS, INC., to McDONALD'S CORPORATION a Delaware corporation ("MORTGAGEE"),
having an address at One McDonald's Plaza, Oak Brook, Illinois 60523.
W I T N E S S E T H:
A. WHEREAS, prior to Mortgagor's several predecessors in interest
filing their voluntary petitions for relief under chapter 11, title 11, United
States Code (the "BANKRUPTCY CODE"), Mortgagor's predecessors in interest with
respect to the Mortgaged Property (as hereinafter defined), Leaps & Bounds, Inc.
("LBI") had provided Mortgagee with a First Mortgage on the Mortgaged Property,
dated as of August 30, 1994 (the "ORIGINAL MORTGAGE") and identified by the
recording information set forth on Schedule A hereto, to secure certain
obligations owed to Mortgagee under the Agreement and Plan of Merger among
Mortgagee, Mortgagor, Discovery Zone, Inc., a Delaware corporation ("OLD DZI")
and Discovery Zone International, Inc. ("DZII"), a Delaware corporation, dated
as of August 30, 1994 (the "MERGER AGREEMENT"); and
B. WHEREAS, pursuant to Section 11.2(a)(iii) of the Merger
Agreement, Old DZI agreed to defend, indemnify and hold Mortgagee and its
affiliates harmless in respect of all expenses, losses, costs, deficiencies,
liabilities and damages (including related and reasonable counsel fees and
expenses, and compensatory and demonstrable consequential damages) incurred or
suffered by Mortgagee as a direct result of, inter alia, any breach by Old DZI
or LBI of the leases or subleases relating to certain properties that result in
any payment by Mortgagee in connection with any guarantee by Mortgagee of such
leases and pursuant to Section 10.3(f) of the Merger Agreement it was agreed
that certain security would be provided to secure the obligations under Section
11.2(a)(iii) of the Merger Agreement, including without limitation, a first
priority security interest in the Land and Improvements (the "AGREEMENT TO
INDEMNIFY"); and
C. WHEREAS, following the filing of their respective prayers for
relief under the Bankruptcy Code, Mortgagor's predecessors in interest, Old DZI,
their affiliated debtors, including DZII and LBI (the "DEBTORS"), and Mortgagee
entered into the Stipulation and Order Between Debtors and McDonald's
Corporation Providing For The Resolution, Settlement And Compromise of Disputes
And For Rent Deferrals And Allowance of Certain Claims (the "STIPULATION AND
ORDER") that was entered by the United States Bankruptcy Court for the District
of Delaware (the "BANKRUPTCY COURT") on November 18, 1996, which was not
appealed or otherwise challenged, became a final order, remains in full force
and effect and to which Mortgagor is bound, Section 7 of which is captioned
"CONTINUING SECURITY" and provides, in pertinent part, that the valid and
enforceable first priority security interest on the
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Land and Improvements and certain other collateral shall secure the performance
and payment of all of the obligations of Mortgagor to Mortgagee under the Notes
(as hereinafter defined), any obligations of Mortgagee that may arise in
connection with the Assumption Locations whether pursuant to any guaranty,
lease, sublease or otherwise, any obligations of Mortgagor that may arise in the
event of a Liquidation, and any continuing obligations of Mortgagor relating to
the Rejection Location(s) and the Prior Rejection Locations (as such terms are
defined therein); and
D. WHEREAS, pursuant to the Stipulation and Order and 11 U.S.C.
ss.365, the Debtors, as predecessors in interest to Mortgagor, assumed the
subleases relating to certain properties (the "ASSUMED PROPERTIES") which
subleases (the "ASSUMED PROPERTY SUBLEASES") expressly incorporate the Agreement
to Indemnify as it relates to any current or future obligations of Mortgagee
relating to the Assumed Properties; and
E. WHEREAS, pursuant to the Stipulation and Order and the Plan
(as hereinafter defined), this Mortgage hereby amends and restates the Original
Mortgage in its entirety in accordance with the terms and provisions set forth
herein; and
F. WHEREAS, this Mortgage, together with certain other Deeds of
Trust, Mortgages or similar encumbrances, are intended to and do secure the
obligations of Mortgagor and its predecessors in interest and the other Debtors,
to Mortgagee under all of the Stipulation and Order, the Agreement to Indemnify,
the Secured Rent Deferral Notes (as hereinafter defined) and the Secured
Rejection Note (as hereinafter defined); and
G. WHEREAS, pursuant to the plan of reorganization for Old DZI
and its affiliated debtors confirmed by the Bankruptcy Court by order entered
July 18, 1997 (the "PLAN"), and as required by the terms of the Stipulation and
Order, Mortgagor, as the reorganized successor of the Debtors, is obligated to
issue to Mortgagee Secured Rent Deferral Notes in the aggregate original
principal amount of $266,466.24, which amount is subject to increase each month
in accordance with the terms thereof (the "SECURED RENT DEFERRAL NOTES") and
Secured Rejection Note in the aggregate original principal amount of
$4,416,237.90 (the "SECURED REJECTION NOTE", and, together with the Secured Rent
Deferral Notes, the "NOTES"); and
H. WHEREAS, pursuant to the Plan, all of the Debtors and their
reorganized successors have merged into Mortgagor, and simultaneously with such
merger, all property of LBI and the other Debtors, including the Mortgaged
Property (as hereinafter defined) has been revested in Mortgagor, as the
successor entity of the Debtors; and
I. WHEREAS, in accordance with the foregoing, Mortgagor is the
fee simple owner of the real estate described in Exhibit A attached hereto (the
"LAND"); and
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<PAGE>
J. WHEREAS, mortgage registration tax in the amount of $4625.50
has been paid on the obligations secured hereby as evidenced by receipt No.
94044023, Anoka County Recorder;
NOW THEREFORE, with reference to the foregoing recitals and for
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Mortgagor and Mortgagee hereby agree that the Original Mortgage is
hereby amended and restated in its entirety as follows:
For the purpose of securing the payment and performance of all of
the obligations (the "OBLIGATIONS") of Mortgagor to Mortgagee, including without
limitation, any and all obligations of Mortgagor, as successor in interest to
Old DZI, DZII, LBI and their affiliated debtors, under this Mortgage, the
Agreement to Indemnify (including, without limitation, any contingent
obligations thereunder), the Stipulation and Order (including, without
limitation, the obligations described in Section 7 thereof which is described in
paragraph C of the recitals above), the Plan and the Notes (including any and
all subsequent advances made pursuant to the terms of the Notes), and all other
documents evidencing or securing any such obligations (collectively, the
"RELEVANT DOCUMENTS"), Mortgagor by these presents does hereby mortgage, give,
grant, bargain, sell, alienate, enfeoff, convey, confirm, warrant, pledge,
assign and hypothecate unto Mortgagee, the Land and the buildings, structures
and improvements of every nature whatsoever now or hereafter located thereon to
the extent owned by Mortgagor (including, but not limited to, all gas and
electric fixtures, radiators, heaters, docks and docking facilities, engines and
machinery, boilers, elevators and motors, plumbing, heating and air conditioning
fixtures, carpeting and other floor coverings, water heaters, awnings and storm
sashes which are or shall be attached to the Land or said buildings, structures
or improvements) (the "IMPROVEMENTS");
TOGETHER WITH: all right, title, interest and estate of Mortgagor
now owned, or hereafter acquired, in and to the following property, rights,
interest and estates relating to the Land and the Improvements, together with
Mortgagor's interest in the following property, rights, interests and estates
hereinafter described (the Land, Improvements, and the following property,
rights, interests and estates being hereinafter collectively referred to as the
"MORTGAGED PROPERTY"):
(a) all easements, rights-of-way, strips and gores of land,
streets, ways, alleys, passages, sewer rights, water, water courses, water
rights and powers, air rights and development rights, construction and equipment
warranties, and all estates, rights, titles, interests, privileges, liberties,
tenements, hereditaments and appurtenances of any nature whatsoever, in any way
belonging, relating to or pertaining to the Land and the Improvements and the
reversion and reversions, remainder and remainders, and all land lying in the
bed of any street, road or avenue, opened or proposed, in front of or adjoining
the Land, to the center line thereof and all the estates, rights, titles,
interests, dower and rights of dower, curtesy and rights of curtesy, property,
possession, claim and demand whatsoever, both at law and in equity, of Mortgagor
of, in and to the Land and the Improvements and every part and
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<PAGE>
parcel thereof, with the appurtenances thereto, and in and to any streets, ways,
alleys, passages, strips or gores of land adjoining the Land or any part
thereof;
(b) all fixtures, attachments and other articles attached to the
Land or the Improvements constituting realty or real property now or hereafter
owned by Mortgagor or in which Mortgagor has or shall acquire an interest, now
or hereafter located on, attached to or contained in or used or usable in
connection with the Mortgaged Property, and including, without limitation, all
building or construction materials intended for construction, reconstruction,
alteration or repair of or installation on or in the Mortgaged Property, of
every kind and nature whatsoever now owned or hereafter acquired by Mortgagor,
and all proceeds thereof, as well as all additions to, appurtenances,
substitutions for, replacements of or accessions to any of the items recited as
aforesaid and all attachments, components, parts (including spare parts) and
accessories, whether installed thereon or affixed thereto, now or hereafter
owned by Mortgagor and used or intended to be used in connection with, or with
the operation of, the Mortgaged Property, to the extent constituting real
property, but not including play equipment or other similar-type entertainment
equipment relating to the operation of the "Discovery Zone" facility on the
Mortgaged Property unless removal of such equipment would cause structural
damage to the Land or the Improvements (collectively, the "FIXTURES");
(c) all awards or payments, including interest thereon, which may
heretofore and hereafter be made with respect to the Mortgaged Property, whether
from the exercise of the right of eminent domain (including, but not limited to,
any transfer made in lieu of or in anticipation of the exercise of said rights),
or for a change of grade, or for any other injury to or decrease in the value of
the Mortgaged Property;
(d) to the extent assignable (and to the extent relating to the
general occupancy and use of the Mortgaged Property as opposed to the operation
of the "Discovery Zone" entertainment facility on the Mortgaged Property),
leases, subleases (including sub-subleases), lettings, licenses, concessions,
occupancy agreements and other agreements which grant a possessory interest in,
or the right to use or occupy, all or any part of the Mortgaged Property now or
hereafter entered into, and all amendments, extensions, renewals and guarantees
thereof, and all security therefor (collectively, the "LEASES") and all rents,
issues, profits, revenues (including all oil and gas or other mineral royalties
and bonuses) and deposits (including, without limitation, security deposits)
under the Leases (including, without limitation, from the rental of any office
space, retail space or other space, halls, stores, and offices, and security
deposits therefor, exhibit or sales space of every kind, license, lease,
sublease, fees and rentals, letters of credit or cash instruments securing or
evidencing obligations under Leases, service charges, vending machine sales and
proceeds, if any, from business interruption or other loss of income insurance))
(collectively, the "RENTS") and all proceeds from the sale or other disposition
of the Leases and the right to receive and apply the Rents to the payment of the
Obligations;
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<PAGE>
(e) subject to the rights of Mortgagor hereunder, all proceeds of
any insurance policies covering the Mortgaged Property (including, without
limitation, the right to receive and apply the proceeds of any insurance,
judgments, or settlements made in lieu thereof, for damage to the Mortgaged
Property);
(f) all refundable, returnable or reimbursable fees deposits or
other funds or evidences of credit or indebtedness deposited by or on behalf of
Mortgagor with any governmental authorities, boards, corporations, providers of
utility services, public or private, including specifically, but without
limitation, all refundable, returnable or reimbursable tap fees, utility
deposits and development costs in connection with the Mortgaged Property, and
all of the records and books of account now or hereafter maintained by or on
behalf of Mortgagor in connection with the operation of the Mortgaged Property
(collectively, "SECURITY ACCOUNTS");
(g) all proceeds (as defined in the Uniform Commercial Code) of
the Mortgaged Property which, in any event, shall include, without limitation,
(i) cash, instruments and other property received, receivable or otherwise
distributed in exchange for any or all of the Mortgaged Property, (ii) the
collection or other disposition of, or realization upon, any item or portion of
the Mortgaged Property (including, without limitation, all claims of Mortgagor
against third parties for loss of, damage to, destruction of, or for proceeds
payable under policies of insurance in respect of, the Mortgaged Property now
existing or hereafter arising), (iii) any and all proceeds of any insurance,
indemnity, warranty or guaranty payable to Mortgagor from time to time with
respect to damage or loss of or to any of the Mortgaged Property, (iv) any and
all payments (in any form whatsoever) made or due and payable to Mortgagor from
time to time in connection with the requisition, confiscation, condemnation,
seizure or forfeiture of all or any part of the Mortgaged Property by any
Governmental Authority (or any person acting under color of Governmental
Authority), and (v) any and all real estate tax refunds payable to Mortgagor
with respect to the Mortgaged Property, and refunds or reimbursements payable
with respect to bonds, escrow accounts, or other sums payable in connection with
the use, development or ownership of the Mortgaged Property, but excluding any
proceeds obtained, earned or arising directly from the operation of the
"Discovery Zone" entertainment facility operated by Mortgagor on the Mortgaged
Property as opposed to the general occupancy and use of the Mortgaged Property
(collectively, the "PROCEEDS");
(h) to the extent permitted under applicable law, all licenses,
permits (other than proprietary permits of Mortgagor relating to the ordinary
operation of a "Discovery Zone" entertainment facility as opposed to the general
use and occupancy of the Mortgaged Property), variances and certificates used in
connection with the ownership, operation, use or occupancy of the Mortgaged
Property (including, without limitation, business licenses, state health
department licenses, food service licenses, liquor licenses, licenses to conduct
business and all such other permits, licenses and rights, obtained from any
Governmental Authority or private Person concerning ownership, operation, use or
occupancy of the Mortgaged Property) (collectively, "PERMITS");
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<PAGE>
(i) all plans, specifications, shop drawings and other technical
descriptions prepared for construction, repair or alteration of the Improvements
(including diskettes containing any such data), and all amendments and
modifications thereof; and
(j) any escrows or escrow accounts established hereunder to
secure the Obligations of Mortgagor, including, without limitation, the Proceeds
Escrow Account described in Section 6(b) hereof; and
(k) any and all replacements and renewals of or additions and
substitutions to any of the foregoing and all proceeds of any of the foregoing.
TO HAVE AND TO HOLD the above granted and described Mortgaged
Property unto and to the use and benefit of Mortgagee, and its successor and
assigns, forever, and Mortgagor does hereby bind itself, its successors and
assigns to WARRANT AND FOREVER DEFEND the title to the Mortgaged Property unto
Mortgagee and its successors and assigns;
AND, TO PROTECT THE SECURITY OF THIS MORTGAGE, Mortgagor
represents and warrants to and covenants and agrees with Mortgagee as follows:
1. DEFINED TERMS. The following terms, when used herein, shall
have the meanings set forth below:
"ENVIRONMENTAL LAWS" means any and all present and future
federal, state or local laws, statutes, ordinances or regulations, any judicial
or administrative orders, decrees or judgments thereunder, and any permits,
approvals, licenses, registrations, filings and authorizations, in each case as
now or hereafter in effect, relating to the protection of the environment, the
impact of Hazardous Substances or the generation, disposal or remediation
thereof on human health or safety, or the Release or threatened Release of
Hazardous Substances or otherwise relating to the Use of Hazardous Substances.
For purposes of this definition, (A) "HAZARDOUS SUBSTANCES" means collectively,
(i) any petroleum or petroleum products or waste oils, explosives, radioactive
materials, asbestos, urea formaldehyde foam insulation, polychlorinated
biphenyls ("PCBs"), and lead-based paint, (ii) any chemicals or other materials
or substances which are now or hereafter become defined as or included in the
definitions of "hazardous substances", "hazardous wastes", "hazardous
materials", "extremely hazardous wastes", "restricted hazardous wastes", "toxic
substances", "toxic pollutants", "contaminants", "pollutants" or words of
similar import under any Environmental Law and (iii) any other chemical or any
other material or substance, exposure to which is now or hereafter prohibited,
limited or regulated under any Environmental Law; (B) "USE" means, with respect
to any Hazardous Substance, the generation, manufacture, processing,
distribution, handling, use, treatment, recycling or storage of such Hazardous
Substance or transportation of such Hazardous Substance; and (C) "RELEASE" means
any release, spill, emission, leaking, pumping, injection, deposit, disposal,
discharge, dispersal, leaching or migration into the indoor or outdoor
environment (including, without limitation, the movement
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<PAGE>
of Hazardous Substances through ambient air, soil, surface water, ground water,
wetlands, land or subsurface strata).
"GOVERNMENTAL AUTHORITY" means any national or federal
government, any state, regional, local or other political subdivision thereof
with jurisdiction and any Person with jurisdiction exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government (including without limitation any court).
"IMPOSITIONS" means all taxes (including, without limitation, all
real estate, ad valorem, sales (including those imposed on lease rentals), use,
single business, gross receipts, value added, intangible transaction privilege,
privilege or license or similar taxes), assessments (including, without
limitation, all assessments for public improvements or benefits, whether or not
commenced or completed within the term of this Mortgage), ground rents, water,
sewer or other rents and charges, excises, levies, fees (including, without
limitation, license, permit, inspection, authorization and similar fees), and
all other governmental impositions and other charges (including, without
limitation, vault charges and license fees for the use of vaults, chutes and
similar areas adjoining the Mortgaged Property), in each case whether general or
special, ordinary or extraordinary, foreseen or unforeseen, of every character
in respect of the Mortgaged Property, which at any time prior to, during or in
respect of the term hereof may be assessed or imposed on or in respect of or be
a lien upon (i) Mortgagor (including, without limitation, all income, franchise,
single business or other taxes imposed on Mortgagor for the privilege of doing
business in the jurisdiction in which the Mortgaged Property is located), (ii)
the Mortgaged Property, or any part thereof or any revenues therefrom or any
estate, right, title or interest therein, or (iii) any occupancy, operation, use
or possession of, or sales from, or activity conducted on, or in connection with
the Mortgaged Property by Mortgagor or the leasing or use of the Mortgaged
Property or any part thereof by Mortgagor.
"LEGAL REQUIREMENTS" means (i) all governmental statutes, laws,
rules, orders, regulations, ordinances, judgments, decrees and injunctions of
Governmental Authorities (including, without limitation, Environmental Laws)
affecting either the Borrower or any Property or any part thereof or the
construction, ownership, use, alteration or operation thereof, or any part
thereof (whether now or hereafter enacted and in force), (ii) all permits,
licenses and authorizations and regulations relating thereto, and (iii) all
covenants, conditions and restrictions contained in any instruments at any time
in force (whether or not involving Governmental Authorities) affecting the
Mortgaged Property or any part thereof which, in the case of this clause (iii),
require repairs, modifications or alterations in or to the Mortgaged Property or
any part thereof, or in any material way limit or restrict the existing use and
enjoyment thereof.
"PERSON" means any individual, corporation, limited liability
company, partnership, joint venture, estate, trust, unincorporated association,
any federal, state, county or municipal government or any bureau, department or
agency thereof and any fiduciary acting in such capacity on behalf of any of the
foregoing.
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"UNIFORM COMMERCIAL CODE" means the Uniform Commercial Code, as
adopted, enacted and amended from time to time by the state or states where any
of the Mortgaged Property is located.
2. PAYMENT OF OBLIGATIONS AND INCORPORATION OF COVENANTS,
CONDITIONS AND AGREEMENTS. Mortgagor will pay the Obligations at the time and
in the manner provided in the Relevant Documents and in this Mortgage. All
the representations, warranties, covenants, conditions and agreements of
Mortgagor contained in the Relevant Documents are hereby made a part of this
Mortgage to the same extent and with the same force as if fully set forth
herein. If there shall be any inconsistencies between the terms, covenants,
conditions and provisions set forth in this Mortgage and the terms,
covenants, conditions and provisions set forth in the Relevant Documents,
then the terms, covenants, conditions and provisions of the Relevant
Documents shall prevail.
3. WARRANTY OF TITLE/ORGANIZATION. Mortgagor warrants that
Mortgagor has good, marketable and insurable fee simple title to Land and the
Improvements and has good title to the remainder of the Mortgaged Property and
has the full power, authority and right to execute, deliver and perform its
obligations under this Mortgage and to encumber, mortgage, give, grant, bargain,
sell, alienate, enfeoff, convey, confirm, warrant, pledge, assign and
hypothecate the Mortgaged Property and that Mortgagor possesses an unencumbered
fee estate in the Land and the Improvements and that it owns the Mortgaged
Property free and clear of all liens, encumbrances and charges whatsoever except
for (x) those exceptions to title which are existing on the date hereof and
approved by Mortgagee and (y) those exceptions of title that are permitted under
the other terms and conditions of this Mortgage (collectively, the "PERMITTED
ENCUMBRANCES") and that this Mortgage is and will remain a valid and enforceable
first lien on and security interest in the Mortgaged Property, subject only to
the Permitted Encumbrances. Mortgagor shall forever warrant, defend and preserve
such title and the validity and priority of the lien of this Mortgage and shall
forever warrant and defend the same to Mortgagee against the claims of all
persons whomsoever. Mortgagor is duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization. Mortgagor is
qualified to do business and in good standing in the State in which the
Mortgaged Property is located, and to the extent that Mortgagor is not so
qualified or in good standing in such State, Mortgagor shall promptly qualify to
do business and become in good standing in such State and shall promptly present
evidence of such qualification to do business and good standing to Mortgagee,
and shall in any event take such steps as are necessary to insure the
enforceability of the Notes and this Mortgage.
4. TAXES. Mortgagor hereby warrants, covenants and agrees to pay
before any penalty attaches all real property taxes, general and special, and
all other taxes and assessments of any kind or nature whatsoever, against the
Mortgaged Property when due and shall, upon written request, furnish to
Mortgagee duplicate receipts therefor, Mortgagor may, in good faith and with
reasonable diligence, contest the validity or amount of any such taxes or
assessments provided that such contest shall have the effect of preventing the
collection of the
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tax or assessment so contested and the sale or forfeiture of said Mortgaged
Property or any part thereof, or any interest therein, to satisfy the same.
5. INDEMNIFICATION. Mortgagor shall indemnify, defend and hold
harmless Mortgagee from and against all of the following (collectively, and
individually referred to as a "LOSS"): claims, demands, causes of action,
judgments, costs, expenses, liabilities, losses and damages (including
consequential and punitive damages), reasonable attorneys' fees and expenses and
court costs, disbursements and court costs, and all risk of damage to property
and injury to persons in or upon the Mortgaged Property, arising from: (i)
Mortgagor's use of the Property or from the conduct of its business in or about
the Mortgaged Property; (ii) Mortgagor's default or breach of any term under
this Mortgage; and (iii) Mortgagor's violation or failure to comply with any
Legal Requirements, including Environmental Laws; provided that Mortgagor shall
not be liable for Loss arising from Mortgagee's negligence or willful misconduct
or from Mortgagee's breach of any of its obligations hereunder.
6. TRANSFER OR ENCUMBRANCE OF THE MORTGAGED PROPERTY. (a)
Except as may otherwise be permitted hereunder or pursuant to the Relevant
Documents, Mortgagor shall not sell, convey, alienate, mortgage, encumber,
pledge or otherwise transfer the Mortgaged Property or any part thereof or any
of its interest therein. Mortgagee shall not be required to demonstrate any
actual impairment of its security or any increased risk of default hereunder in
order to declare the Obligations immediately due and payable upon Mortgagor's
conveyance, alienation, mortgage, encumbrance, pledge or transfer of the
Mortgaged Property in violation of this Mortgage or any other Relevant Document.
This provision shall apply to every sale, conveyance, alienation, mortgage,
encumbrance, pledge or transfer of the Mortgaged Property that is not permitted
pursuant to the Relevant Documents, regardless of whether voluntary or not, or
whether or not Mortgagee has consented to any previous sale, conveyance,
alienation, mortgage, encumbrance, pledge or transfer of the Mortgaged Property.
(b) Notwithstanding Section 6(a), Mortgagor shall have the right
to sell the Mortgaged Property at any time to a third party bona fide purchaser
after consultation with Mortgagee and upon the prior written consent of
Mortgagee to such sale and the sales price (such consent not to be unreasonably
withheld), provided that the net proceeds of such sale of the Mortgaged Property
(after payment of transfer taxes and reasonable brokerage commissions, if any,
and other reasonable closing costs) shall be applied towards repayment of the
Obligations, including, without limitation, repayment of the Secured Rejection
Note (including prepayment of any amounts not yet due and payable) and payment
of the Principal Amounts (as defined in the Rent Deferral Notes) then
outstanding under the Rent Deferral Notes, in the order and manner set forth in
the Notes. After the Secured Rejection Note and all Principal Amounts
outstanding under the Notes have been repaid in full, any remaining net proceeds
(including proceeds from any sale or other disposition of the Mortgaged Property
pursuant to Section 24 hereof) not applied towards repayment of the Obligations
shall be deposited into an escrow account designated by Mortgagee for
Mortgagor's account and as security for the performance by Mortgagor of its
Obligations to Mortgagee under the Relevant Documents (the "PROCEEDS ESCROW
ACCOUNT") which escrow account shall be administered by Mortgagee, or, at
Mortgagee's discretion and in accordance with Mortgagee's instructions, may be
administered
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by an escrow agent (an "ESCROW AGENT") selected by Mortgagee (whose reasonable
fees shall be paid by Mortgagor). Mortgagor may also from time to time deposit
additional funds into the Proceeds Escrow Account as further security for the
Obligations. At Mortgagee's request, Mortgagor agrees to enter into a separate
escrow agreement to further evidence the provisions of this Section 6(b), and in
the event that Mortgagee chooses an Escrow Agent to administer the Proceeds
Escrow Account, Mortgagor agrees to execute an escrow agreement in form and
substance reasonably satisfactory to Mortgagee (including provisions consistent
with the provisions of this Section 6(b)) to evidence the duties and
responsibilities of such Escrow Agent. Mortgagee or, if applicable, the Escrow
Agent at the direction of Mortgagee, shall invest the funds in the Proceeds
Escrow Account in obligations of the U.S. Government or its agencies, interest
in time accounts or certificates of deposits, or other interest bearing account
of any bank or bank and trust company or in money market funds available to
Mortgagee. Mortgagor agrees, and shall agree under any escrow agreement entered
into pursuant to this Section 6(b), that the funds on deposit under the escrow
arrangement described herein shall not constitute property of the estate (within
the meaning of Section 541 of the United States Bankruptcy Code) and that
Mortgagor shall only have such rights to such funds as are provided herein and
in any escrow agreement entered into pursuant to this Section. Funds in the
Proceeds Escrow Account shall be disbursed (together with accrued interest) from
time to time to Mortgagee, at Mortgagee's direction (upon seven (7) days prior
notice to Mortgagor), to pay any Obligations that may arise from time to time
under the Agreement to Indemnify, the Notes, the Stipulation and Order or the
other Relevant Documents. Notwithstanding the foregoing, after December 31,
2005, Mortgagor shall be entitled to retain any net proceeds in excess of the
Minimum Amount set forth below from the sale of the Mortgaged Property,
including amounts previously deposited and remaining in the Proceeds Escrow
Account (including accrued interest thereon) which have not been applied towards
payment of the Obligations, provided that (i) no Obligations are then due and
owing by Mortgagor pursuant to the Agreement to Indemnify, the Stipulation and
Order, the Notes or otherwise, (ii) no default or Event of Default has occurred
and is continuing under any of the Relevant Documents; and (iii) the amount
remaining in the Proceeds Escrow Account is no less than the Minimum Amount (as
hereinafter defined). Except as otherwise set forth in the following sentence,
the "Minimum Amount" shall mean the product of (A) 1.5 times (B) the sum of the
gross rent (including additional rent and percentage rent charges, if any),
common area maintenance charges, taxes, insurance and other charges computed on
a gross basis (collectively, the "BASE CHARGES") which are due or shall become
due under any Assumed Property Subleases still in existence as of December 31,
2005 (the "SURVIVING ASSUMED PROPERTY SUBLEASES") from December 31, 2005 until
the expiration of the terms of such Assumed Property Subleases. Upon the
expiration after December 31, 2005 of any Surviving Assumed Property Sublease,
Mortgagee shall re-calculate the Minimum Amount based upon the product of 1.5
times the Base Charges of the remaining Surviving Assumed Property Subleases as
of the end of the term of such Surviving Assumed Property Sublease (such Base
Charges to be calculated as the sum of the Base Charges from such date through
the end of the expiration dates of the remaining Surviving Assumed Property
Subleases), and provided that (i) no Obligations are then due and owing by
Mortgagor pursuant to the Agreement to Indemnify, the Notes, the Stipulation and
Order or otherwise and that (ii) no default or Event of Default has occurred
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and is continuing under any of the Relevant Documents, Mortgagee shall, on the
first anniversary of the expiration of such expired Surviving Assumed Property
Sublease, release to Mortgagor, or cause the Escrow Agent to release to
Mortgagor, the excess of all funds in the Proceeds Escrow Account over the
re-calculated Minimum Amount. Any calculation of Base Charges under this Section
6(b) shall be made by Mortgagee and, absent manifest error, shall be conclusive
and binding upon Mortgagor. Provided that (i) an amount equal to at least the
Minimum Amount is deposited or on deposit in the Proceeds Escrow Account to
secure the payment of the Obligations, (ii) no default or Event of Default has
occurred and is continuing under any of the Relevant Documents, (iii) the Notes
have been repaid in full and (iv) no Obligations are then due and owing by
Mortgagor pursuant to the Agreement to Indemnify, the Stipulation and Order or
otherwise, Mortgagor shall be entitled to receive a release of this Mortgage
from Mortgagee at any time after December 31, 2005. Provided that no default or
Event of Default has occurred or is continuing under any of the Relevant
Documents and that no amounts are then owing by Mortgagor or outstanding
pursuant to or under any of the Relevant Documents (and that an amount equal to
the Minimum Amount is at all times on deposit in the Proceeds Escrow Account),
interest earned on the amounts deposited in the Proceeds Escrow Account after
December 31, 2005 shall be distributed to Mortgagor on a quarterly basis. All
remaining amounts in the Proceeds Escrow Account which have not been applied
towards payment of the Obligations shall be released to Mortgagor on the later
of (A) December 31, 2014 provided, however, that no Obligations are then due and
owing by Mortgagor pursuant to the Agreement to Indemnify, the Stipulation and
Order or otherwise, and (B) the end of the term of this Mortgage as set forth in
Section 13(c) hereof. Mortgagor shall pay any income taxes attributable to the
interest or other income earned on the Proceeds Escrow Account. Notwithstanding
any release of this Mortgage pursuant to this Section 6(b) or otherwise, the
terms and provisions of this Section 6(b) shall survive the release of this
Mortgage.
7. AMENDMENT TO LEGAL DESCRIPTION. If it becomes evident that the
legal description attached to any Relevant Document is inaccurate or does not
fully describe all of the real property which is reasonably connected to the
Land, Mortgagor hereby agrees to an amendment of such legal description and the
legal description contained on the corresponding title policy so that such error
is corrected and to execute and cause to be recorded, if applicable, such
document as may be appropriate for such purpose.
8. ASSIGNMENT OF LEASES AND RENTS. Mortgagor does hereby
absolutely and unconditionally assign to Mortgagee, Mortgagor's right, title and
interest in all current and future Leases and Rents, it being intended by
Mortgagor that this assignment constitutes a present, absolute assignment and
not an assignment for additional security only. Such assignment to Mortgagee
shall not be construed to bind Mortgagee to the performance of any of the
covenants, conditions or provisions contained in any such Lease or otherwise
impose any obligation upon Mortgagee. Mortgagee shall have no responsibility on
account of this assignment for the control, care, maintenance, management or
repair of the Mortgaged Property, for any dangerous or defective condition of
the Mortgaged Property, or for any negligence in the management, upkeep, repair
or control of the Mortgaged Property.
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Mortgagor agrees to execute and deliver to Mortgagee such additional
instruments, in form and substance satisfactory to Mortgagee, as may hereafter
be requested by Mortgagee to further evidence and confirm such assignment.
Nevertheless, subject to the terms of this paragraph, Mortgagee grants to
Mortgagor a revocable license to collect all of the Rents and retain, use and
enjoy the same and otherwise exercise all rights of Mortgagor under any Lease,
in each case, subject to the terms hereof and of the Relevant Documents. Upon an
Event of Default, the license granted to Mortgagor herein shall immediately and
automatically be revoked, and Mortgagee shall immediately be entitled to
possession of all Rents, whether or not Mortgagee enters upon or takes control
of the Mortgaged Property, provided that if such Event of Default ceases to
exist, the license shall automatically be reinstated. In addition, during the
continuation of an Event of Default, Mortgagee may, either in person or by
agent, without bringing any action or proceeding, or by a receiver appointed by
a court, without the necessity of taking possession of the Mortgaged Property in
its own name, and in addition to and without limiting any of Mortgagee's rights
and remedies hereunder, under the Notes and any other Relevant Documents and as
otherwise available at law or in equity, (a) notify any lessee or other person
that the Leases have been assigned to Mortgagee and that all Rents are to be
paid directly to Mortgagee, whether or not Mortgagee has commenced or completed
foreclosure or taken possession of the Mortgaged Property; (b) settle,
compromise, release, extend the time of payment of, and make allowances,
adjustments and discounts of any Rents or other obligations in, to and under the
Leases; (c) demand, sue for or otherwise collect, receive, and enforce payment
of Rents, including those past-due and unpaid and other rights under the Leases,
prosecute any action or proceeding, and defend against any claim with respect to
the Rents and Leases; (d) enter upon, take possession of and operate the
Mortgaged Property; (e) lease all or any part of the Mortgaged Property; and/or
(f) perform any and all obligations of Mortgagor under the Leases and exercise
any and all rights of Mortgagor therein contained to the full extent of
Mortgagor's rights and obligations thereunder, with or without the bringing of
any action or the appointment of a receiver and without need for any other
authorization or other action by Mortgagee or Mortgagor. At Mortgagee's request,
Mortgagor shall deliver a copy of this assignment to each tenant under a Lease
and to each manager and managing agent or operator of the Mortgaged Property.
Mortgagor irrevocably directs any tenant, manager, managing agent, or operator
of the Property, without any requirement for notice to or consent by Mortgagor,
to comply with all demands of Mortgagee under this Section 8 and to turn over to
Mortgagee on demand all Rents which it receives. Mortgagor hereby acknowledges
and agrees that payment of any Rents by a person to Mortgagee as hereinabove
provided shall constitute payment by such person, as fully and with the same
effect as if such Rents had been paid to Mortgagor. Mortgagee is hereby granted
and assigned by Mortgagor the right, at its option, upon revocation of the
license granted herein, to enter upon the Mortgaged Property in person or by
agent, without bringing any action or proceeding, or by court-appointed receiver
to collect the Rents. Any Rents collected after the revocation of the license
shall be applied towards the payment of the Obligations. Neither the enforcement
of any of the remedies under this Section 8 nor any other remedies or security
interests afforded to Mortgagee under the Relevant Documents, at law or in
equity shall cause Mortgagee to be deemed or construed to be a Mortgagee in
possession of the Mortgaged Property, to obligate Mortgagee to lease the
Mortgaged Property or attempt to do so, or to
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take any action, incur any expense, or perform or discharge any obligation, duty
or liability whatsoever under any of the Leases or otherwise. Mortgagor shall,
and hereby agrees to indemnify Mortgagee for, and to hold Mortgagee harmless
from and against, any and all claims, liability, expenses, losses or damages
which may or might be asserted against or incurred by Mortgagee solely by reason
of Mortgagee's status as an assignee pursuant to the assignment of Rents and
Leases contained herein, but excluding any claim (a) to the extent caused by
Mortgagee's gross negligence or willful misconduct, or (b) to the extent arising
solely from Mortgagee's actions after Mortgagee has taken possession of the
Mortgaged Property. Should Mortgagee incur any such claim, liability, expense,
loss or damage, the amount thereof, including all actual expenses and reasonable
fees of attorneys, shall constitute Obligations secured hereby, and Mortgagor
shall reimburse Mortgagee therefor immediately upon demand. Mortgagor agrees
that all Leases shall be subject to the prior written approval of Mortgagee,
such approval not to be unreasonably withheld.
9. MAINTENANCE OF MORTGAGED PROPERTY. Mortgagor shall cause the
Mortgaged Property to be maintained in a good and safe condition and repair
(subject to ordinary wear and tear), and shall otherwise operate and maintain
the Mortgaged Property in a manner consistent with the manner in which it
operates and maintains the other properties on which it operates similar
businesses ("SIMILAR PROPERTIES"). Except as otherwise permitted by the Relevant
Documents, the Improvements, the Fixtures and the equipment located on the Land
or the Improvements shall not be removed, demolished or materially altered
(except for normal replacement of equipment) without the consent of Mortgagee
which shall not unreasonably be withheld or delayed. Mortgagor shall comply with
all laws, orders and ordinances affecting the Mortgaged Property, or the use
thereof. Except to the extent that Mortgagee fails to turn over insurance
proceeds, if any, received by Mortgagee pursuant to SECTIONS 10 and 11 with
respect to the Mortgaged Property to Mortgagor, Mortgagor shall promptly repair,
replace or rebuild any part of the Mortgaged Property that, following the date
hereof, becomes damaged, worn or dilapidated and Mortgagor shall complete and
pay for any structure at any time in the process of construction or repair on
the Land. Notwithstanding anything to the contrary contained herein, Mortgagor
hereby confirms its obligation to comply with all relevant Legal Requirements,
including Environmental Laws, with respect to the Mortgaged Property. Mortgagor
shall not initiate, join in, acquiesce in, or consent to any change in any
private restrictive covenant, zoning law or other public or private restriction,
limiting or defining the uses which may be made of the Mortgaged Property or any
part thereof, unless Mortgagor shall have received Mortgagee's prior written
consent, such consent not to be unreasonably withheld or delayed. If under
applicable zoning provisions the use of all or any portion of the Mortgaged
Property is or shall become a nonconforming use, Mortgagor will not cause such
nonconforming use to be discontinued or abandoned without the express written
consent of Mortgagee, such consent not to be unreasonably withheld or delayed.
Mortgagor shall not (i) change the use of the Land in any material respect or
(ii) permit or suffer to occur any waste on or to the Mortgaged Property or to
any portion thereof.
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10. INSURANCE.
(a) Mortgagor shall maintain casualty, liability and other
policies of insurance relating to the Mortgaged Property in form and substance,
and with insurers and coverages, reasonably satisfactory to Mortgagee and
consistent with insurance that it maintains on Similar Properties. Mortgagor
shall keep the Mortgaged Property insured against loss by flood if the Mortgaged
Property is located in an area identified by the Secretary of Housing and Urban
Development as an area having a special flood hazards and in which flood
insurance has been made available under the National Flood Insurance Act of 1968
(or any successor act thereto). All policies of insurance to be furnished
hereunder (i) shall have standard non-contributory Mortgagee clauses attached to
all policies in favor of Mortgagee, without contribution, under a standard New
York (or local equivalent) Mortgagee clause naming Mortgagee as the party to
which all payments made under such insurance policies in excess of $150,000
should be paid, (ii) shall contain an endorsement providing that neither
Mortgagor nor Mortgagee nor any other party shall be a co-insurer under said
policies and shall contain a provision requiring that the coverage evidenced
thereby shall not be terminated or materially modified without ten (10) days
prior written notice to Mortgagee, (iii) shall provide that no act or thing done
by Mortgagor shall invalidate the policy as against Mortgagee, and (iv) with
respect to property insurance policies, shall contain a waiver of subrogation
against Mortgagee. Mortgagor shall deliver certificates evidencing additional
and renewal policies, together with evidence of payment of premiums thereon, to
Mortgagee, and in the case of all insurance about to expire, shall deliver
renewal policies or certificates evidencing such policies not less than ten (10)
days prior to their respective dates of expiration.
(b) Mortgagor shall not take out separate insurance concurrent in
form or contributing in the event of loss with that required to be maintained
hereunder unless Mortgagee is included thereon under a standard,
non-contributory Mortgagee clause acceptable to Mortgagee. Mortgagor shall
promptly notify Mortgagee whenever any such separate insurance is taken out and
shall promptly deliver to Mortgagee the certificates evidencing the policy or
policies of such insurance.
(c) The insurance required by this Mortgage, at the option of
Mortgagor, may be effected by blanket and/or umbrella policies covering the
Mortgaged Property and other properties, provided, however, that in each case,
such insurance policies otherwise comply with the provisions of this Mortgage
and allocate to the Mortgaged Property, from time to time, the coverage
specified in this Mortgage without possibility of reduction or co-insurance by
reason of, or damage to, any other property named therein. If the insurance
required by this Mortgage shall be effected by any such blanket or umbrella
policies, Mortgagor shall furnish to Mortgagee certificates with respect to,
with schedules attached thereto showing the amount of the insurance provided
under such policies which is applicable to the Mortgaged Property.
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(d) If Mortgagor fails to maintain insurance in compliance with
this Section, Mortgagee may obtain such insurance and pay the premium therefor
and Mortgagor shall, on demand, reimburse Mortgagee for all expenses incurred in
connection therewith. Mortgagor shall deliver original certificates to Mortgagee
of all insurance policies maintained pursuant to this Section 10. Each property
insurance policy shall name Mortgagee as Mortgagee, and loss payee with respect
to all casualty coverage and each liability policy shall name Mortgagee as an
additional insured thereunder.
11. CASUALTY. (a) Mortgagor shall give Mortgagee prompt notice of
any loss or damage to the Mortgaged Property.
(b) In case of loss or damage to the Mortgaged Property covered
by any of the insurance policies described in Section 10 above, Mortgagee (or,
after entry of decree of foreclosure, the purchaser at the foreclosure sale or
decree creditor, as the case may be) is hereby authorized at its option either
(i) to settle and adjust any claim under such insurance policies without the
consent of Mortgagor or (ii) to allow Mortgagor to settle and adjust such claim
(either jointly with Mortgagee or by Mortgagor alone, at Mortgagee's
discretion); provided that in either case Mortgagee shall, and is hereby
authorized to, collect and receipt for any such insurance proceeds.
Notwithstanding anything in the preceding sentence to the contrary, Mortgagee
agrees that it will allow Mortgagor to settle and adjust any claims under the
insurance policies which are in an amount less than $150,000, per incident of
loss, up to an aggregate amount of no greater than $300,000. The expenses
incurred by Mortgagee in the adjustment and collection of insurance proceeds
shall be included in the Obligations, and shall be reimbursed to Mortgagee upon
demand or may be deducted by Mortgagee from said insurance proceeds prior to
another application thereof. Interest on such amount shall accrue at the Default
Rate, beginning ten (10) days after Mortgagor receives notice of a request for
payment of such amount from Mortgagee, until such amount, plus interest, is paid
in full.
(c) Mortgagee shall permit Mortgagor to apply the proceeds of
insurance policies received in connection with any casualty to pay for the cost
of restoring, repairing, replacing or rebuilding the loss or damage to the
Mortgaged Property resulting from the casualty ("RESTORATION") if: (i) there is
no Event of Default hereunder at the time of such application; (ii) restoration
can, in the reasonable judgment of Mortgagee, be completed prior to the maturity
of the Obligations; and (iii) restoration can, in the reasonable judgment of
Mortgagee, be effected within two (2) years after the date of such casualty and
in such a manner so that the Mortgaged Property will be of at least equal or
greater value to the value than the Mortgaged Property prior to such casualty.
Otherwise, Mortgagee may elect in its sole discretion to apply such proceeds
either (x) towards payment of the Obligations, notwithstanding the fact that the
Obligations, or a portion thereof, may not then be due and payable, or (y) to
pay for the cost of Restoration. In all events, disbursement of insurance
proceeds by Mortgagee (or at Mortgagee's election by a disbursing or escrow
agent who shall be selected by Mortgagee and whose fees shall be paid by
Mortgagor), to pay the cost of restoration shall require (i) evidence reasonably
satisfactory to Mortgagee of the estimated costs of Restoration, (ii) funds (or
assurances reasonably satisfactory to Mortgagee that such
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funds are available) sufficient in addition to the proceeds of insurance to
complete and fully pay for Restoration; and (iii) such architect's certificates,
waivers of lien, contractor's sworn statements, title insurance endorsements,
plats of surveys and such other evidences of cost, payment and performance as
Mortgagee may reasonably require and approve. Except to the extent Mortgagee
fails to turn over insurance proceeds, if any, received by Mortgagee hereunder
with respect to such casualty to Mortgagor, Mortgagor hereby covenants to
restore, repair, replace or rebuild the Improvements, to be of at least equal
value, and of substantially the same character as prior to such loss or damage,
all to be effected in accordance with plans, specifications and procedures to be
first submitted to and reasonably approved by Mortgagee, and Mortgagor shall pay
all costs of such restoring, repairing, replacing or rebuilding.
12. EMINENT DOMAIN. Mortgagor warrants, covenants and agrees that
should the Mortgaged Property, or any part thereof or interest therein, be taken
or damaged by reason of any public improvement or condemnation proceeding, or in
any other manner, or should Mortgagor receive any notice of other information
regarding such proceeding, Mortgagor shall give written notice thereof within
five (5) business days to Mortgagee. Without Mortgagee's prior consent,
Mortgagor (1) shall not agree to any compensation or award, and (2) shall not
take any action or fail to take any action which would cause the compensation to
be determined. Mortgagee shall be entitled to: (1) all compensation, awards and
other payments or relief therefor, (2) to commence, appear in and prosecute in
its own name any action or proceedings, and (3) to make any compromise or
settlement in connection with such taking or damage. Mortgagor authorizes
Mortgagee to collect and receive such awards and compensation, to give proper
receipts and acquittances therefor and in Mortgagee's discretion to apply the
same toward the payment of the Obligations, notwithstanding the fact that the
Obligations, or a portion thereof, may not then be due and payable, or to the
restoration of the Mortgaged Property in accordance with the provisions set
forth in the second-to-last sentence of Section 11(c) above. Mortgagor further
agrees to make, execute, and deliver to Mortgagee, at any time upon request,
free and clear of any encumbrance of any kind whatsoever, any and all further
assignments and other instruments deemed necessary by Mortgagee for the purpose
of validly and sufficiently assigning all compensations and awards made to
Mortgagor for any taking, either permanent or temporary, under any such
proceeding.
13. RELEASE OF MORTGAGE. Mortgagee agrees to promptly and
unconditionally release this Mortgage (subject to the provisions set forth in
Section 6(b)) as follows:
(a) in the event of a bona fide sale (other than a "sale
leaseback" or other similar financing transaction) of the Mortgaged Property to
a third party that is not affiliated with Mortgagor, provided that each of the
following conditions is satisfied: (i) neither Mortgagor nor any of its
respective affiliates continue to use or occupy the Mortgaged Property or any
part thereof; (ii) Mortgagor shall consult with Mortgagee prior to such sale and
shall obtain Mortgagee's prior written consent with respect to such sale and the
sales price (such consent not to be unreasonably withheld); and (iii) all of the
proceeds of such sale are
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applied towards repayment of the Obligations or otherwise applied in compliance
with the provisions of Section 6(b) hereof.
(b) in the event that Mortgagee is paid in full for all amounts
owing (or what shall or may become owing under the Relevant Documents) to
Mortgagee by Mortgagor and any of its former affiliated debtors, including the
indefeasible payment and satisfaction in full of the Obligations.
(c) on December 31, 2014 (or on such earlier date as permitted
under and pursuant to the provisions of Section 6(b) hereof); provided, however,
that if on such date, any amount secured by this Mortgage has not been
indefeasibly paid in full, then this Mortgage shall be deemed amended to extend
the term hereof until such obligations are so paid.
14. CHANGES IN THE LAWS REGARDING TAXATION. If any law is enacted
or adopted or amended after the date of this Mortgage which imposes a tax,
either directly or indirectly, on the Obligations or Mortgagee's interest in the
Mortgaged Property, Mortgagor will pay such tax, with interest and penalties
thereon, if any, PROVIDED, HOWEVER, that Mortgagor shall not be obligated to pay
any tax which is imposed on the net income of Mortgagee or franchise taxes or
doing business taxes imposed on Mortgagee. In the event that the payment of such
tax or interest and penalties by Mortgagor would be unlawful or taxable to
Mortgagee or unenforceable or provide the basis for a defense of usury, then in
any such event, Mortgagee shall have the option, by written notice of not less
than ninety (90) days, to declare the Obligations immediately due and payable.
15. NO CREDITS ON ACCOUNT OF THE OBLIGATIONS. (i) Mortgagor will
not claim or demand or be entitled to any credit or credits on account of the
Obligations for any part of the Impositions assessed against the Mortgaged
Property, or any part thereof, and (ii) no deduction shall otherwise be made or
claimed from the assessed value of the Mortgaged Property, or any part hereof,
for real estate tax purposes by reason of this Mortgage or the Obligations if
the effect of such deduction would impose on Mortgagee a tax, either directly or
indirectly, for which it otherwise would not have been liable.
16. DOCUMENTARY STAMPS. If at any time the United States of
America, any State thereof or any subdivision of any such State shall require
revenue or other stamps to be affixed to the Notes or this Mortgage, or impose
any other tax or charge on the same, Mortgagor will pay for the same, with
interest and penalties thereon, if any.
17. CONTROLLING AGREEMENT. It is expressly stipulated and agreed
to be the intent of Mortgagor and Mortgagee at all times to comply with
applicable state law or applicable United States federal law (to the extent that
it permits Mortgagee to contract for, charge, take, reserve, or receive a
greater amount of interest than under state law) and that this Section shall
control every other covenant and agreement in this Mortgage and the other
Relevant Documents. If the applicable law (state or federal) is ever judicially
interpreted so as to render usurious any amount called for under the Notes or
under any of the other Relevant
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Documents, or contracted for, charged, taken, reserved, or received with respect
to the Obligations, or if Mortgagee's exercise of the option to accelerate the
maturity of the Notes, or if any prepayment by Mortgagor results in Mortgagor
having paid any interest in excess of that permitted by applicable law, then it
is Mortgagor's and Mortgagee's express intent that all excess amounts
theretofore collected by Mortgagee shall be credited on the principal balance of
the Notes and all other Obligations (or, if the Notes and all other Obligations
have been or would thereby be paid in full, refunded to Mortgagor), and the
provisions of the Notes and the other Relevant Documents immediately be deemed
reformed and the amounts thereafter collectible hereunder and thereunder
reduced, without the necessity of the execution of any new documents, so as to
comply with the applicable law, but so as to permit the recovery of the fullest
amount otherwise called for hereunder or thereunder. All sums paid or agreed to
be paid to Mortgagee for the use, forbearance, or detention of the Obligations
shall, to the extent permitted by applicable law, be amortized, prorated,
allocated, and spread throughout the full stated term of the Obligations until
payment in full so that the rate or amount of interest on account of the
Obligations does not exceed the maximum rate of interest permitted by law from
time to time in effect and applicable to the Obligations for so long as the
Obligations are outstanding.
18. PERFORMANCE OF OTHER AGREEMENTS. Mortgagor shall observe and
perform in all respects the terms to be observed or performed by Mortgagor under
any agreement or recorded instrument affecting or pertaining to the Mortgaged
Property.
19. RIGHT TO PERFORM THE OBLIGATIONS. Subject to the terms of the
Relevant Documents, if any default exists, Mortgagee shall have the right, but
not the obligation, to cure such default in the name and on behalf of Mortgagor.
All sums advanced and expenses incurred at any time by Mortgagee under this
Section 19, or otherwise under this Mortgage or any of the other Relevant
Documents or applicable law (including, without limitation, the costs and
expenses of Mortgagee and its agents incurred in connection with the
preservation, collection and enforcement of this Mortgage or of the liens
created hereby), shall bear interest from the date that such sum is advanced or
expense incurred, to and including the date of reimbursement, computed at the
Default Rate (as defined in the Notes), and all such sums, together with
interest thereon, shall constitute additions to the Obligations and shall be
secured by this Mortgage and Mortgagor covenants and agrees to pay them to the
order of the Mortgagee promptly upon demand.
20. FURTHER ACTS, ETC. Mortgagor will, at the cost of Mortgagor,
and without expense to Mortgagee, do, execute, acknowledge and deliver all and
every such further acts, deeds, conveyances, mortgages, assignments, notices of
assignment, Uniform Commercial Code financing statements or continuation
statements, transfers and assurances as Mortgagee shall, from time to time,
reasonably require, for the better assuring, conveying, assigning, transferring,
and confirming unto Mortgagee the property and rights hereby mortgaged, given,
granted, bargained, sold, alienated, enfeoffed, conveyed, confirmed, warranted,
pledged, assigned and hypothecated (including, without limitation, the
assignment of leases and rents contained in Section 8 hereof) or intended now or
hereafter so to be, or
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which Mortgagor may be or may hereafter become bound to convey or assign to
Mortgagee, or for carrying out the intention or facilitating the performance of
the terms of this Mortgage or for filing, registering or recording this
Mortgage. Mortgagor, on demand, will execute and deliver and, Mortgagor hereby
authorizes Mortgagee to execute in the name of Mortgagor or without the
signature of Mortgagor to the extent Mortgagee may lawfully do so, one or more
financing statements, chattel mortgages or other instruments, to evidence more
effectively the security interest of Mortgagee in the Mortgaged Property.
Notwithstanding anything to the contrary contained herein, Mortgagor shall not
be obligated to execute, deliver, file or record any additional documents which
increase Mortgagor's obligations under this Mortgage or the Relevant Documents.
Mortgagor grants to Mortgagee an irrevocable power of attorney coupled with an
interest for the purpose of exercising the rights provided for in Section 19 and
this Section 20.
21. RECORDING OF MORTGAGE, ETC. Mortgagor forthwith upon the
execution and delivery of this Mortgage and thereafter, from time to time, will
cause this Mortgage, and any security instrument creating a lien or security
interest or evidencing the lien hereof upon the Mortgaged Property and each
instrument of further assurance to be filed, registered or recorded in such
manner and in such places as may be required by any present or future law in
order to publish notice of and fully to protect the lien or security interest
hereof upon, and the interest of Mortgagee in, the Mortgaged Property. Mortgagor
will pay all filing, registration or recording fees, the costs and fees of local
counsel for Mortgagee, including, without limitation, costs and fees for local
counsel review of the Mortgage and Subordination Agreement and the preparation
of opinion letters in connection therewith, and all expenses incident to the
execution and acknowledgment of this Mortgage (but not including fees of
Mortgagee's New York counsel in connection with the preparation of this
Mortgage), any deed of trust or mortgage supplemental hereto, any security
instrument with respect to the Mortgaged Property and any instrument of further
assurance, and all federal, state, county and municipal, taxes, duties, imposts,
assessments and charges arising out of or in connection with the execution and
delivery of this Mortgage, any deed of trust or mortgage supplemental hereto,
any security instrument with respect to the Mortgaged Property or any instrument
of further assurance (other than income or franchise taxes imposed on
Mortgagee), except where prohibited by law so to do. Mortgagor shall hold
harmless and indemnify Mortgagee, its successors and assigns, against any
liability incurred by reason of the imposition of any tax on the making and
recording of this Mortgage. Mortgagor shall pay all title costs and premiums in
connection with the ALTA lender's title insurance policy issued by Chicago Title
Insurance Company for the benefit of Mortgagee in connection with this Mortgage
(including payment for the cost of any property surveys ("Surveys") prepared in
connection therewith), which title insurance policy shall be in form and
substance satisfactory to Mortgagee containing such endorsements as Mortgagee
may reasonably request, including, without limitation, the deletion of any
creditor's rights exception and (to the extent available) a variable rate
endorsement; survey endorsement; comprehensive endorsement; first loss
endorsement; last dollar endorsement; tie-in endorsement; future advances
endorsement; access coverage; tax parcel coverage; contiguity (if applicable)
coverage; and such other endorsements as Mortgagee shall reasonably require. In
the event that any Survey with respect to the Mortgaged Property
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reveals any encumbrances, restrictions, building code or zoning violations or
other matters which in Mortgagee's reasonable judgment, materially impair
Mortgagee's first priority lien in the Mortgaged Property, Mortgagor agrees to
cooperate with Mortgagee in performing any acts reasonably requested by
Mortgagee to cause such encumbrances, restrictions, violations or other matters
to be removed or remedied as appropriate.
22. REPORTING REQUIREMENTS. Mortgagor agrees to give prompt
notice to Mortgagee of the insolvency or bankruptcy filing of Mortgagor. In
addition, Mortgagor will give notice to Mortgagee in writing not later than ten
(10) days after: (i) the occurrence of any Event of Default with respect to
Mortgagor hereunder, or (ii) notice to Mortgagor of any action, litigation or
proceeding instituted to recover possession of the Mortgaged Property from
Mortgagor or for any other purpose affecting this Mortgage or of any other
action, litigation or proceeding instituted against Mortgagor or judgment
rendered against Mortgagor; and such notice to Mortgagee shall include a true
copy of any notice of default, or if any action is then proceeding, copies of
any pleadings and papers received by Mortgagor.
23. EVENTS OF DEFAULT. The term "EVENT OF DEFAULT" as used herein
shall mean the occurrence or happening, at any time and from time to time, of
one or more of the following events:
(a) a default or event of default under any of the Notes
(including, without limitation, any event of default described in Section 3 of
any of the Notes), which remains uncured following the expiration of any
applicable cure periods;
(b) Mortgagor (i) shall fail to perform when due any payment
obligation under the terms of this Mortgage or the other Relevant Documents
within ten days after such amount becomes due, or (ii) shall be in violation of
any of the obligations or covenants contained herein or therein and such default
shall continued unremedied for a period of thirty (30) days, provided that if
such default is not readily susceptible of cure in such thirty (30) day period,
and provided that Mortgagor proceeds in a diligent manner to cure such default,
Mortgagor shall have such additional time to effect such cure as shall be
reasonably necessary to effect such cure;
(c) Failure by Mortgagor to maintain insurance and deliver
evidence thereof pursuant to Section 10; or
(d) a default under any other mortgage, deed of trust or other
security instrument covering the Mortgaged Property or a portion thereof which
remains uncured following the expiration of any applicable cure periods.
24. REMEDIES. (a) Upon the occurrence of any Event of Default,
Mortgagee may take such action permitted in law or at equity, without notice or
demand, as it deems advisable to protect and enforce its rights against
Mortgagor and in and to the Mortgaged
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Property, by Mortgagee itself or otherwise, including, but not limited to, the
following actions, each of which may be pursued concurrently or otherwise, at
such time and in such order as Mortgagee may determine, in its sole discretion,
without impairing or otherwise affecting the other rights and remedies of
Mortgagee:
(i) declare the entire principal amount of the indebtedness and
Obligations secured hereby with interest accrued thereon to be
immediately due and payable;
(ii) institute a proceeding or proceedings, judicial or
nonjudicial, by advertisement or otherwise, for the complete
foreclosure of this Mortgage in which case the Mortgaged Property
or any interest therein may be sold for cash or upon credit in
one or more parcels or in several interests or portions and in
any order or manner in accordance with the laws of the
jurisdiction in which such Mortgaged Property is located;
(iii) with or without entry, to the extent permitted, and
pursuant to the procedures provided by, applicable law, institute
proceedings for the foreclosure of this Mortgage for the
Obligations then due and payable subject to the continuing lien
of this Mortgage, in accordance with the laws of the jurisdiction
in which such Mortgaged Property is located, for the balance of
the Obligations not then due;
(iv) sell for cash or upon credit the Mortgaged Property or any
part thereof and all estate, claim, demand, right, title and
interest of Mortgagor therein and rights of redemption thereof,
pursuant to power of sale or otherwise, at one or more sales, as
an entirety or in parcels, at such time and place, upon such
terms and after such notice thereof as may be required or
permitted by the laws of the jurisdiction in which such Mortgaged
Property is located;
(v) institute an action, suit or proceeding in equity for the
specific performance of any covenant, condition or agreement
contained herein or in the other Relevant Documents;
(vi) recover judgment on the Notes either before, during or after
any proceedings for the enforcement of this Mortgage;
(vii) prior to, concurrently with, or subsequent to the
institution of foreclosure proceedings, apply for the appointment
of a trustee, receiver, liquidator or conservator of the
Mortgaged Property, as a matter of strict right, without notice
and without regard for the adequacy of the security for the
Obligations or the interest of the Mortgagor therein and without
regard for the solvency of the Mortgagor or of any person, firm
or other entity liable for the payment of the Obligations, and
Mortgagor hereby consents to such appointment;
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(viii) prior to, concurrently with or subsequent to the
institution of foreclosure proceedings, enforce Mortgagee's
interest in the Leases and Rents and enter into or upon the
Mortgaged Property and take exclusive possession thereof, either
personally or by its agents, nominees or attorneys and dispossess
Mortgagor and its agents and servants therefrom, and thereupon
Mortgagee may (whether or not a receiver has been appointed) as
attorney-in-fact or agent of Mortgagor, or in its own name and
under the powers herein granted,(A) use, operate, manage,
control, insure, maintain, repair, restore and otherwise deal
with all and every part of the Mortgaged Property and conduct the
business thereat; (B) complete any construction on the Mortgaged
Property in such manner and form as Mortgagee deems advisable;
(C) make alterations, additions, renewals, replacements and
improvements to or on the Mortgaged Property; (D) exercise all
rights and powers of Mortgagor with respect to the Mortgaged
Property, whether in the name of Mortgagor or otherwise
(including, without limitation, the right to make, cancel,
enforce or modify Leases, obtain and evict tenants, and demand,
sue for, collect and receive all earnings, revenues, rents,
issues, profits and other income of the Mortgaged Property and
every part thereof); and (E) apply the receipts from the
Mortgaged Property to the payment of the Obligations, after
deducting therefrom all reasonable expenses (including, without
limitation, reasonable attorneys' fees) incurred in connection
with the aforesaid operations and all amounts necessary to pay
the taxes, assessments, insurance and other charges in connection
with the Mortgaged Property, it being agreed that should
Mortgagee incur any liability, loss or damage in the defense of
any claims or demands, the amount thereof, including costs,
expenses and reasonable attorneys' fees shall be secured hereby,
and Mortgagor shall reimburse Mortgagee therefor immediately upon
demand;
(ix) require Mortgagor to pay monthly in advance to Mortgagee, or
any receiver appointed to collect the Rents, the fair and
reasonable rental value for the use and occupation of any portion
of the Mortgaged Property occupied by Mortgagor and require
Mortgagor to vacate and surrender possession to Mortgagee of the
Mortgaged Property or to such receiver and, in default thereof,
evict Mortgagor by summary proceedings or otherwise; and
(x) pursue such other rights and remedies as may be available
under the Relevant Documents or otherwise at law or in equity or
under the Uniform Commercial Code including the right to
establish a lock box for all Rents and other receivables of
Mortgagor relating to the Mortgaged Property.
In the event of a sale, by foreclosure or otherwise, of less than all of the
Mortgaged Property, this Mortgage shall continue as a lien on the remaining
portions of the Mortgaged Property.
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The proceeds of any sale made under or by virtue of this Section
24, together with any other sums which then may be held by Mortgagee under this
Mortgage, whether under the provisions of this Section or otherwise, shall be
applied by Mortgagee in the following order of priority: first, on account of
all reasonable costs and expenses incident to the foreclosure proceedings,
including all such items as are mentioned in this Section 24; second, all other
items which under the terms hereof constitute secured indebtedness, which are
any amounts due under this Mortgage, or under the other Relevant Documents
(including any amounts required to be escrowed pursuant to Section 6(b)); third,
any surplus to Mortgagor, its successors or assigns, as their rights may appear.
(b) Upon any sale made under or by virtue of this Section 24,
whether made under the power of sale herein granted or under or by virtue of
judicial proceedings or of a judgment or decree of foreclosure and sale,
Mortgagee may bid for and acquire the Mortgaged Property or any part thereof and
in lieu of paying cash therefor may make settlement for the purchase price by
crediting upon the Obligations the net sales price after deducting therefrom the
expenses of the sale and costs of the action and any other sums which Mortgagee
is authorized to deduct under this Mortgage.
(c) No recovery of any judgment by Mortgagee and no levy of an
execution under any judgment upon the Mortgaged Property or upon any other
property of Mortgagor shall affect in any manner or to any extent the lien of
this Mortgage upon the Mortgaged Property or any part thereof, or any liens,
rights, powers or remedies of Mortgagee hereunder, but such liens, rights,
powers and remedies of Mortgagee shall continue unimpaired as before.
(d) Mortgagee may adjourn, terminate or rescind any proceeding or
other action brought in connection with its exercise of the remedies provided in
this Section 24 at any time before the conclusion thereof, as determined in
Mortgagee's sole discretion and without prejudice to Mortgagee.
(e) Mortgagee may resort to any remedies and the security given
by this Mortgage or the other Relevant Documents in whole or in part, and in
such portions and in such order as determined by Mortgagee's sole discretion. No
such action shall in any way be considered a waiver of any rights, benefits or
remedies evidenced or provided by this Mortgage or the other Relevant Documents.
The failure of Mortgagee to exercise any right, remedy or option provided in
this Mortgage or the other Relevant Documents shall not be deemed a waiver of
such right, remedy or option or of any covenant or obligation secured by this
Mortgage or the other Relevant Documents. Subject to the provisions of the
Relevant Documents, no acceptance by Mortgagee of any payment after the
occurrence of any Event of Default and no payment by Mortgagee of any obligation
for which Mortgagor is liable hereunder shall be deemed to waive or cure any
Event of Default with respect to Mortgagor, or Mortgagor's liability to pay such
obligation. No sale of all or any portion of the Mortgaged Property, no
forbearance on the part of Mortgagee and no extension of time for the payment of
the whole or any portion of the Obligations or any other indulgence given by
Mortgagee to
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Mortgagor, shall operate to release or in any manner affect the interest of
Mortgagee in the remaining Mortgaged Property or the liability of Mortgagor to
pay the Obligations. No waiver by Mortgagee shall be effective, unless it is in
writing and then only to the extent specifically stated.
(f) The interests and rights of Mortgagee under this Mortgage and
the other Relevant Documents, and the liens and security interests created and
evidenced by this Mortgage and the other Relevant Documents, shall not be
impaired by any indulgence, including (i) any renewal, extension or modification
which Mortgagee may grant with respect to any of the Obligations, (ii) any
surrender, compromise, release, renewal, extension, exchange or substitution
which Mortgagee may grant with respect to the Mortgaged Property or any portion
thereof; or (iii) any release or indulgence granted to any maker, endorser,
guarantor or surety of any of the Obligations.
(g) Upon the occurrence of any Event of Default under Section 23,
in any suit to foreclose the lien hereof or enforce any other remedy of
Mortgagee under this Mortgage, there shall be allowed and included as additional
indebtedness in the decree for sale or other judgment or decree all reasonable
expenditures and expenses which may be paid or incurred by or on behalf of
Mortgagee for attorneys' fees, appraiser's fees, outlays for documentary and
expert evidence, stenographers' charges, publication costs, and costs (which may
be estimated as to items to be expended after entry of the decree) of procuring
all such abstracts of title, title searches and examinations, title insurance
policies, Torrens certificates, and similar data and assurances with respect to
title as Mortgagee may deem reasonably necessary either to prosecute such suit
or to evidence to bidders at any sale which may be had pursuant to such decree
the true condition of the title to or the value of the Mortgaged Property. All
such reasonable expenditures and expenses which Mortgagee may incur as permitted
by this Section for the protection of the Mortgaged Property and the maintenance
of the lien of this Mortgage, including, but not limited to, the fees and
out-of-pocket disbursements of any attorney employed by Mortgagee in any
litigation or proceeding affecting this Mortgage, including, but not limited to,
bankruptcy proceedings or preparations for the commencement or defense of any
proceeding or threatened suit or proceeding, shall be immediately due and
payable by Mortgagor and shall be secured by this Mortgage.
25. RIGHT OF ACCESS. Mortgagor shall permit agents,
representatives and employees of Mortgagee to (i) inspect the Mortgaged Property
or any part thereof, PROVIDED that such inspection does not materially interfere
with the tenants of the Mortgaged Property or violate the terms of any Lease,
(ii) to examine and make abstracts from any of Mortgagor's books and records and
(iii) to discuss the business, operations, properties and financial and other
condition of Mortgagor with officers of Mortgagor and with its independent
certified public accountants, at such reasonable times as may be requested by
Mortgagee upon reasonable advance notice.
26. SECURITY AGREEMENT. This Mortgage is both a real property
mortgage and a "security agreement" within the meaning of the Uniform
Commercial Code. The
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Mortgaged Property includes both real and personal property and all other rights
and interests, whether tangible or intangible in nature, of Mortgagor in the
Mortgaged Property. Mortgagor by executing and delivering this Mortgage has
granted and hereby grants to Mortgagee, as security for the Obligations, a
security interest in the Mortgaged Property to the full extent that the
Mortgaged Property may be subject to the Uniform Commercial Code (said portion
of the Mortgaged Property so subject to the Uniform Commercial Code being called
in this paragraph the "COLLATERAL"). Mortgagor hereby agrees with Mortgagee to
execute and deliver to Mortgagee, in form and substance satisfactory to
Mortgagee, such financing statements and such further assurances as Mortgagee
may from time to time, reasonably consider necessary to create, perfect, and
preserve Mortgagee's security interest herein granted. All or part of the
Mortgaged Property is or is to become "fixtures" as defined in the Uniform
Commercial Code, and this Mortgage, upon being filed for record in the real
estate records of the city or county wherein such fixtures are situated, shall
also constitute a "fixture filing" for the purposes of the Uniform Commercial
Code upon such of the Mortgaged Property that is or may become fixtures.
Information concerning the security interest herein granted may be obtained from
the parties at the addresses of the parties set forth in the first paragraph of
this Mortgage. Mortgagor's chief executive office and principal place of
business is the Mortgagor's address set forth in the first paragraph of this
Mortgage, and the place where Mortgagor's books and records in respect of where
the Mortgaged Property is located are kept is the address of Mortgagor set forth
in the first paragraph of this Mortgage. If an Event of Default shall occur
which shall remain uncured, Mortgagee, in addition to any other rights and
remedies which it may have, shall have and may exercise immediately and without
demand, any and all rights and remedies granted to a secured party upon default
under the Uniform Commercial Code, (including, without limitation, to the extent
permitted by law, the right to take possession of the Collateral or any part
thereof, and to take such other measures as Mortgagee may deem necessary for the
care, protection and preservation of the Collateral). Upon request or demand of
Mortgagee, Mortgagor shall at its expense assemble the Collateral and make it
available to Mortgagee at a convenient place acceptable to Mortgagee. Mortgagor
shall pay to Mortgagee on demand therefor any and all reasonable expenses
(including, without limitation, reasonable legal expenses and attorneys' fees)
incurred or paid by Mortgagee in protecting the interest in the Collateral and
in enforcing the rights hereunder with respect to the Collateral. Any notice of
sale, disposition or other intended action by Mortgagee with respect to the
Collateral sent to Mortgagor at least ten (10) business days prior to such
action or such notice as is otherwise required by law or the Relevant Documents,
shall constitute commercially reasonable notice to Mortgagor. The proceeds of
any disposition of the Collateral, or any part thereof, may be applied by
Mortgagee to the payment of the Obligations in such priority and proportions as
Mortgagee shall determine in its sole discretion. In the event of any change in
name, identity or structure of Mortgagor, Mortgagor shall notify Mortgagee
thereof and, promptly after request, shall execute, file and record such Uniform
Commercial Code forms as are necessary to maintain the priority of Mortgagee's
lien upon and security interest in the Collateral, and shall pay all expenses
and fees in connection with the filing and recording thereof. If Mortgagee shall
require the filing or recording of additional Uniform Commercial Code forms or
continuation statements, Mortgagor shall, promptly after request, execute, file
and record such Uniform Commercial Code forms or
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continuation statements as Mortgagee shall deem necessary, and shall pay all
expenses and fees in connection with the filing and recording thereof, it being
understood and agreed, however, that no such additional documents shall
materially increase Mortgagor's obligations under this Mortgage or the other
Relevant Documents. Mortgagor hereby irrevocably appoints Mortgagee as its
attorney-in-fact, coupled with an interest, to file with the appropriate public
office on its behalf any UCC financing statements (or related documents) signed
only by Mortgagee, as secured party, in connection with the Collateral covered
by this Mortgage, such appointment to terminate upon the release of this
Mortgage.
27. ACTIONS AND PROCEEDINGS. Mortgagee has the right to appear in
and defend any action or proceeding brought with respect to the Mortgaged
Property and to bring any action or proceeding, in the name and on behalf of
Mortgagor, which Mortgagee, in its reasonable discretion, decides should be
brought to protect its interest under this Mortgage or in the Mortgaged
Property. Subject to the foregoing, Mortgagor shall appear in and contest any
action or proceeding purporting to affect the security hereof and shall pay all
reasonable costs and expenses including cost of evidence of title and attorney's
fees, in any such action or proceeding in which Mortgagee may appear. Mortgagee
shall, at its option, be subrogated to the lien of any mortgage or other
security instrument discharged in whole or in part by the Obligations, and any
such subrogation rights shall constitute additional security for the payment of
the Obligations.
28. WAIVER OF SETOFF AND COUNTERCLAIM. Except as may be permitted
under the Relevant Documents, all amounts due under this Mortgage, the Notes and
the other Relevant Documents shall be payable without setoff or counterclaim
whatsoever.
29. LIENS. Mortgagor warrants, covenants and agrees to pay and
promptly discharge, at Mortgagor's cost and expense, all taxes, assessments and
governmental charges levied upon it, its income and assets as and when such
taxes, assessments and charges are due and payable (including, without
limitation, all Impositions), as well as all lawful claims for labor materials
and supplies or otherwise which could become a lien, and all liens, encumbrances
and charges upon the Mortgaged Property, or any part thereof or interest
therein; provided that the existence of any mechanic's, laborer's,
materialman's, supplier's or vendor's lien or right thereto shall not constitute
a violation of this Section if payment is not yet due under the contract which
is the foundation thereof. Notwithstanding the foregoing, Mortgagor shall not be
in default for failure to pay or discharge Impositions or mechanic's or
materialman's or similar lien asserted against the Mortgaged Property if, and so
long as, (a) Mortgagor shall have notified Mortgagee of same within seven (7)
days of obtaining knowledge thereof; (b) Mortgagor shall diligently and in good
faith contest the same by appropriate legal proceedings which shall operate to
prevent the enforcement or collection of the same and the sale of the Mortgaged
Property or any part thereof, to satisfy the same; (c) unless funds are
otherwise reserved, Mortgagor shall furnish to Mortgagee such security as
Mortgagee may reasonably request to insure payment of such Impositions and to
secure and indemnify Mortgagee against any cost, expense, loss or damage in
connection with such contest or postponement of payment,; (d) Mortgagor shall
timely upon final determination
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thereof pay the amount of any such Impositions, claim, fine or penalty so
determined, together with all costs, interest and penalties which may be payable
in connection therewith; (e) the failure to pay the Impositions, or mechanic's
or materialman's or similar lien claim does not constitute a default under any
other deed of trust, mortgage or security interest covering or affecting any
part of the Mortgaged Property; and (f) notwithstanding the foregoing, Mortgagor
shall immediately upon request of Mortgagee pay (and if Mortgagor shall fail so
to do, Mortgagee may, but shall not be required to, pay or cause to be
discharged or bonded against) any such Impositions, or claim notwithstanding
such contest, if in the reasonable opinion of Mortgagee, the Mortgaged Property
or any part thereof or interest therein may be in imminent danger of being sold,
forfeited, foreclosed, terminated, canceled or lost.
30. RECOVERY OF SUMS REQUIRED TO BE PAID. Mortgagee shall have
the right from time to time to take action to recover any sum or sums which
constitute a part of the Obligations as the same become due and owing, without
regard to whether or not the balance of the Obligations shall be due, and
without prejudice to the right of Mortgagee thereafter to bring an action of
foreclosure, or any other action, for a default or defaults by Mortgagor
existing at the time such earlier action was commenced.
31. MARSHALING, WAIVER OF REDEMPTION AND OTHER MATTERS. Mortgagor
hereby waives, to the extent permitted by law, the benefit of all appraisement,
valuation, stay, extension, reinstatement, moratorium and redemption laws now or
hereafter in force and all rights of marshaling in the event of any sale
hereunder of the Mortgaged Property or any part thereof or any interest therein.
Further, Mortgagor hereby expressly waives any and all rights of redemption from
sale under any order or decree of foreclosure of this Mortgage on behalf of
Mortgagor, and on behalf of each and every person acquiring any interest in or
title to the Mortgaged Property subsequent to the date of this Mortgage and on
behalf of all persons to the extent permitted by applicable law.
32. NOTICE. Any notice which either party hereto may desire or be
required to give to the other party shall be in writing and delivered by: (x) a
commercial courier or messenger service or (y) by U.S. registered or certified
mail with return receipt requested. Notice by commercial messenger or courier
service will be deemed to have been given on the day when delivered before 4:00
p.m. on a business day in the city in which notice is delivered, provided that
payment for the cost of delivery is not requested of the recipient. Notice by
mail shall be given by registered or certified U.S. Mail, return receipt
requested. Delivery of notice by commercial messenger or courier service or mail
shall be assumed if acceptance of delivery is refused. Notice may be given by
fax but will only be treated as delivered hereunder if: (x) sent between the
hours of 9:00 a.m. and 5:00 p.m. (based on local time at
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the destination); and (y) receipt is acknowledged by fax and delivery will be
deemed to have been given on the date the fax acknowledgment is sent. Notices
shall be delivered as follows or at such other place as either party hereto may
by notice in writing (given in accordance with this Section 32) designate:
To Mortgagor: Discovery Zone, Inc.
One Corporate Center
110 East Broward Boulevard
Fort Lauderdale, Florida 33301
Attn: President
Telecopy Number: (954) 627-2670
To Mortgagee: McDonald's Corporation
One McDonald's Plaza
Oak Brook, IL 60523
Attn: General Counsel
Telecopy Number: (630) 623-3000
33. SOLE DISCRETION OF MORTGAGEE. Wherever pursuant to this
Mortgage, Mortgagee exercises any right given to it to approve or disapprove, or
any arrangement or term is to be satisfactory to Mortgagee, the decision of
Mortgagee to approve or disapprove or to decide that arrangements or terms are
satisfactory or not satisfactory shall be in the sole discretion of Mortgagee
and shall be final and conclusive, except as may be otherwise expressly and
specifically provided herein.
34. NON-WAIVER. The failure of Mortgagee to insist upon strict
performance of any term hereof shall not be deemed to be a waiver of any term of
this Mortgage. Mortgagor shall not be relieved of Mortgagor's Obligations
hereunder by reason of (a) the failure of Mortgagee to comply with any request
of Mortgagor to take any action to foreclose this Mortgage or otherwise enforce
any of the provisions hereof or of the other Relevant Documents, (b) the
release, regardless of consideration, of the whole or any part of the Mortgaged
Property, or of any person liable for the Obligations or any portion thereof, or
(c) any agreement or stipulation by Mortgagee extending the time of payment or
otherwise modifying or supplementing the terms of this Mortgage or the other
Relevant Documents. Mortgagee may resort for the payment of the Obligations to
any other security held by Mortgagee in such order and manner as Mortgagee, in
its discretion, may elect. Mortgagee may take action to recover the Obligations,
or any portion thereof, or to enforce any covenant hereof without prejudice to
the right of Mortgagee thereafter to foreclosure this Mortgage. The rights and
remedies of Mortgagee under this Mortgage shall be separate, distinct and
cumulative and none shall be given effect to the exclusion of the others. No act
of Mortgagee shall be construed as an election to proceed under any one
provision herein to the exclusion of any other provision. Mortgagee shall not be
limited exclusively to the rights and remedies
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herein stated but shall be entitled to every right and remedy now or hereafter
afforded at law or in equity.
35. NO ORAL CHANGE. This Mortgage and the other Relevant
Documents constitute the final expression of the entire agreement among the
parties pertaining to the subject matter hereof and thereof and supersede all
prior and contemporaneous agreements, understanding, representations or other
arrangements, whether express or implied, written or oral, of the parties in
connection herewith or therewith except to the extent expressly incorporated or
specifically referred to herein or therein. This Mortgage, and any provisions
hereof, may not be modified, amended, waived, extended, changed, discharged or
terminated orally or by any act or failure to act on the part of Mortgagor or
Mortgagee, but only by an agreement in writing signed by the party against whom
enforcement of any modification, amendment, waiver, extension, change, discharge
or termination is sought.
36. SUCCESSORS AND ASSIGNS. Subject to the provisions hereof
requiring Mortgagee's consent to any transfer of the Mortgaged Property, this
Mortgage shall be binding upon and inure to the benefit of Mortgagor and
Mortgagee and their respective permitted successors and assigns forever.
37. SEVERABILITY. If any term, covenant or condition of this
Mortgage or the Relevant Documents is held to be invalid, illegal or
unenforceable in any respect, this Mortgage and any such other Relevant Document
shall be construed without such provision.
38. HEADINGS, ETC.The headings and captions of various paragraphs
of this Mortgage are for convenience of reference only and are not to be
construed as defining or limiting, in any way, the scope or intent of the
provisions hereof.
39. DUPLICATE ORIGINALS. This Mortgage may be executed in any
number of duplicate originals and each such duplicate original shall be deemed
to be an original.
40. DEFINITIONS. Unless the context clearly indicates a contrary
intent or unless otherwise specifically provided herein, words used in this
Mortgage may be used interchangeably in singular or plural form and the word
"Mortgagor" shall mean "each Mortgagor and any subsequent owner or owners of the
Mortgaged Property or any part thereof or any interest therein," the word
"Mortgagee" shall mean "Mortgagee and any subsequent holder(s) of the Notes,"
the word "person" shall include an individual, corporation, partnership, trust,
unincorporated association, government, governmental authority, and any other
entity, and the words "Mortgaged Property" shall include any portion of the
Mortgaged Property and any interest therein and the words "attorneys' fees"
shall include any and all attorneys' fees, paralegal and law clerk fees
(including, without limitation, fees at the pre-trial, trial and appellate
levels incurred or paid by Mortgagee in protecting its interest in the Mortgaged
Property and Collateral and enforcing its rights hereunder and all such fees
incurred in connection with any bankruptcy or insolvency proceedings). Whenever
the context may require, any pronouns used herein shall include the
corresponding masculine, feminine or
30
<PAGE>
neuter forms, and the singular form of nouns and pronouns shall include the
plural and vice versa.
41. HOMESTEAD. Mortgagor hereby waives and renounces all
homestead and exemption rights provided by the constitution and the laws of the
United States and of any state, in and to the Land as against the collection of
the Obligations, or any part hereof.
42. ASSIGNMENTS. Consistent with and subject to the applicable
provisions of the Relevant Documents, Mortgagee shall have the right to assign
or transfer its rights under this Mortgage without limitation. Any Mortgagee or
transferee shall be entitled to all the benefits afforded Mortgagee under this
Mortgage.
43. WAIVER OF JURY TRIAL. TO THE MAXIMUM EXTENT PERMITTED BY
APPLICABLE LAW, EACH PARTY HERETO HEREBY AGREES NOT TO ELECT A TRIAL BY JURY OF
ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY JURY FULLY
TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO
THE NOTES, THIS MORTGAGE, OR THE OTHER RELEVANT DOCUMENTS, OR ANY CLAIM,
COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH. THIS WAIVER OF
RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY SUCH PARTY, AND IS
INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE
RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE. MORTGAGEE IS HEREBY AUTHORIZED
TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF
THIS WAIVER BY MORTGAGOR.
44. CONSENT TO JURISDICTION. MORTGAGOR AND MORTGAGEE HERETO
CONSENT FOR THEMSELVES AND IN RESPECT OF THEIR PROPERTIES, GENERALLY,
UNCONDITIONALLY AND IRREVOCABLY, TO THE NONEXCLUSIVE JURISDICTION OF THE FEDERAL
AND STATE COURTS IN THE STATE OF NEW YORK WITH RESPECT TO ANY PROCEEDING
RELATING TO ANY MATTER, CLAIM OR DISPUTE ARISING UNDER THE RELEVANT DOCUMENTS OR
THE TRANSACTIONS CONTEMPLATED THEREBY. MORTGAGOR FURTHER CONSENTS, GENERALLY,
UNCONDITIONALLY AND IRREVOCABLY, TO THE NONEXCLUSIVE JURISDICTION OF THE STATE
AND FEDERAL COURTS OF THE STATE IN WHICH ANY OF THE COLLATERAL IS LOCATED IN
RESPECT OF ANY PROCEEDING RELATING TO ANY MATTER, CLAIM OR DISPUTE ARISING WITH
RESPECT TO SUCH COLLATERAL. MORTGAGOR FURTHER IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS, GENERALLY, UNCONDITIONALLY AND IRREVOCABLY, AT THE ADDRESSES
SET FORTH IN THE FIRST PARAGRAPH HEREOF IN CONNECTION WITH ANY OF THE AFORESAID
PROCEEDINGS IN ACCORDANCE WITH THE RULES APPLICABLE TO SUCH PROCEEDINGS. TO THE
EXTENT PERMITTED BY APPLICABLE LAW, MORTGAGOR HEREBY IRREVOCABLY WAIVES ANY
OBJECTION WHICH IT MAY NOW HAVE OR HAVE
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<PAGE>
IN THE FUTURE TO THE LAYING OF VENUE IN RESPECT OF ANY OF THE AFORESAID
PROCEEDINGS BROUGHT IN THE COURTS REFERRED TO ABOVE AND AGREES NOT TO PLEAD OR
CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH
COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTHING HEREIN SHALL AFFECT THE
RIGHT OF MORTGAGEE TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW OR TO
COMMENCE PROCEEDINGS OR OTHERWISE PROCEED AGAINST MORTGAGOR IN ANY JURISDICTION.
45. GOVERNING LAW. This Mortgage shall be governed by and
construed in accordance with the laws of the State of New York including,
without limitation, Section 5-1401 of the General Obligations Law, but otherwise
without regard to conflict of law principles; PROVIDED, HOWEVER, that with
respect to the creation, attachment, perfection, priority and procedures
relating to the enforcement of the liens and security interests created by or
pursuant to this Mortgage and relating to real property, this Mortgage shall be
governed by and construed in accordance with the laws of the state in which the
Land is located.
46. LIEN ABSOLUTE, MULTI-SITE REAL ESTATE AND MULTIPLE COLLATERAL
TRANSACTION. Mortgagor acknowledges that this Mortgage and a number of other
Relevant Documents and those documents required by the Relevant Documents
together secure the Obligations. Mortgagor agrees that the lien of this Mortgage
and all obligations of the Mortgagor hereunder shall be absolute and
unconditional and shall not in any manner be affected or impaired by:
(a) any lack of validity or enforceability of the Notes or any
other Relevant Document, any agreement with respect to any of the Obligations or
any other agreement or instrument relating to any of the foregoing;
(b) any acceptance by Mortgagee of any security for or guarantees
of any of the indebtedness hereby secured;
(c) any failure, neglect or omission on the part of Mortgagee to
realize upon or protect any of the indebtedness hereby secured or any of the
collateral security therefor, including the Relevant Documents;
(d) any change in the time, manner or place of payment of, or in
any other term of, all or any of the Obligations;
(e) any release (except as to the property or obligation
released), sale, pledge, surrender, compromise, settlement, nonperfection,
renewal extension, indulgence, alteration, exchange, modification or disposition
of any of the Obligations hereby secured or of any of the collateral security
therefor;
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<PAGE>
(f) any amendment or waiver of or any consent to any departure
from the Notes or any other Relevant Documents or of any guaranty thereof
(except to the extent of such amendment, waiver or consent in writing by
Mortgagee), if any, and Mortgagee may in its discretion foreclose, exercise any
power of sale, or exercise any other remedy available to it under any or all of
the Relevant Documents without first exercising or enforcing any of its rights
and remedies hereunder; and
(g) any exercise of the rights or remedies of Mortgagee hereunder
or under any or all of the Relevant Documents.
Mortgagor specifically consents and agrees that Mortgagee may exercise its
rights and remedies hereunder and under the other Relevant Documents separately
or concurrently and in any order that Mortgagee may deem appropriate.
47. FUTURE ADVANCES. This Mortgage shall secure not only existing
indebtedness, but also such future advances, whether such advances are
obligatory or are to be made at the option of Mortgagee, or otherwise, as are
made by Mortgagee to Mortgagor after the date hereof, to the same extent as if
such future advances were made on the date of the execution of this Mortgage.
Nothing in this Mortgage shall be deemed an obligation on the part of the
Mortgagee to make any future advances.
48. STATE SPECIFIC PROVISIONS. The provisions of Exhibit B are
hereby incorporated by reference as though set forth in full herein.
49. NO MERGER OF ESTATES. It is the intention and agreement of
Mortgagor and Mortgagee that there shall be no merger of any leasehold estate in
the Mortgaged Property with the fee interest in the Mortgaged Property or any
other estate or interest in the Mortgaged Property, and there shall be no merger
of this Mortgage and any estate in the Mortgaged Property, by reason of the fact
that the same person may own or hold (a) any leasehold interest in the Mortgaged
Property, and/or (b) this Mortgage, and/or (c) the fee interest in the Mortgaged
Property or any other estate or interest in the Mortgaged Property.
50. SUBORDINATE LIEN. Notwithstanding anything to the contrary
contained herein, Mortgagor shall be permitted to grant a subordinate lien on
the Mortgaged Property in favor of State Street Bank and Trust Company, solely
in its capacity as trustee and collateral agent under and pursuant to the
Indenture (as hereinafter defined) (the "SUBORDINATED CREDITOR") as security for
the obligations of Mortgagor under that certain Indenture between Mortgagor and
the Subordinated Creditor dated as of July 22, 1997 (the "INDENTURE"), provided
that such lien in favor of the Subordinated Creditor is junior, subject and
subordinate to the lien of this Mortgage in accordance with and pursuant to the
terms and conditions set forth in that certain Subordination Agreement dated as
of the date hereof between Mortgagee and the Subordinated Creditor with respect
to the Mortgaged Property (the "SUBORDINATION AGREEMENT"), and provided,
further, that any event which gives the Subordinated Creditor the
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<PAGE>
right to accelerate the obligations secured by such subordinate lien shall
automatically constitute an Event of Default hereunder.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE AND NOTARY PAGES FOLLOW.]
34
<PAGE>
IN WITNESS WHEREOF, this Mortgage has been duly executed under
seal by the Mortgagor as of the day and year first written above.
MORTGAGOR:
DISCOVERY ZONE, INC., a
Delaware corporation, as
successor in interest to
LEAPS & BOUNDS, INC.
By: /s/ Robert Rooney
--------------------
Name: Robert Rooney
Title: Sr. V.P.
<PAGE>
STATE OF NEW YORK )
COUNTY OF WESTCHESTER)
The foregoing was acknowledged before me this 28 day of July,
1997, by Robert Rooney, Sr. V.P. of DISCOVERY ZONE, INC., a
corporation under the laws of Delaware on behalf of the corporation.
NOTARIAL STAMP OR SEAL (OR OTHER TITLE OR RANK)
/s/ Mark D. Woodward
[NOTARIAL SEAL] ----------------------
Signature of Person Taking
Acknowledgment
THIS INSTRUMENT WAS DRAFTED BY (NAME AND ADDRESS)
Jonathan Reiss, Esq.
Cleary, Gottlieb, Steen & Hamilton
1 Liberty Plaza
New York, New York 10006
<PAGE>
Blaine
Anoka County, Minnesota
EXHIBIT A
Lot 1. Block 1. Springbrook Mall Second Addition, according to the plat thereof
on file or of record in the office of the County Recorder, Anoka County,
Minnesota, together with the appurtenant easement(s) contained in Document No.
952364.
<PAGE>
EXHIBIT B
STATE SPECIFIC PROVISIONS (Minnesota)
The following provisions are incorporated by reference into Section 48
of the attached Mortgage. If any conflict or inconsistency exists between this
Exhibit B and the remainder of the attached Mortgage, this Exhibit B shall
govern. Notwithstanding anything in this Mortgage to the contrary, the following
provisions shall apply:
A. all Rents and revenues collected by Mortgagee or any receiver
following an Event of Default shall be applied as follows:
1. to the payment of all reasonable fees of any receiver approved
by court;
2. to the payment of all tenant security deposits then owing to
any lessee under any Lease pursuant to the provisions of Minn. Stat. ss. 504.20;
3. to the payment of all prior real estate taxes and special
assessments with respect to the Mortgaged Property, or if this Mortgage requires
periodic escrow payments for such taxes and assessments, to the escrow payments
then due;
4. to the payment of all premiums then due for the insurance
required by the provisions of this Mortgage, or if this Mortgage requires
periodic escrow payments for such premiums, to the escrow payments then due;
5. to the payment of costs incurred in normal maintenance and
operation of the Mortgaged Property;
6. if received prior to any foreclosure sale of the Mortgaged
Property, to the Mortgagee for the payment of indebtedness secured by this
Mortgage, but no such payment made after the acceleration of the indebtedness
shall affect such acceleration;
7. if received during or with respect to the period of redemption
after a foreclosure sale of the Mortgaged Property:
(a) if the purchaser at the foreclosure sale is not the
Mortgagee, first to the Mortgagee to the extent of any deficiency of the sale
proceeds to repay the indebtedness secured by this Mortgage, second to the
purchaser as a credit to the redemption price, but if the Mortgaged Property is
not redeemed, then to the purchaser of the Mortgaged Property; and
(b) if the purchaser at the foreclosure sale is the Mortgagee, to
the Mortgagee to the extent of any deficiency of the sale proceeds to repay the
indebtedness secured by this
<PAGE>
Mortgage and the balance to be retained by the Mortgagee as a credit to the
redemption price, but if the Mortgaged Property is not redeemed, then to the
Mortgagee, whether or not such deficiency exists.
The rights and power of the Mortgagee under this Mortgage and the application of
Rents and revenue under this Subsection (A) shall continue until the expiration
of the redemption period from any foreclosure sale, whether or not any
deficiency remains after a foreclosure.
B. The Mortgagor represents and warrants that as of the date of
this Mortgage the Mortgaged Property is not in agricultural use as defined in
Minn. Stat. ss. 40A.02, Subd. 3 and is not used for agricultural purposes.
C. From the date of its recording in the State of Minnesota, this
Mortgage shall be effective as a financing statement filed as a financing
statement with respect to all goods constituting part of the Mortgaged Property
which are or are to become fixtures related to the real estate covered by this
Section. For this purpose the following information is included: (i) The
Mortgagor shall be deemed the "Debtor" with the address set forth in Section 32;
(ii) the Mortgagee shall be deemed the "Secured Party" with the address set
forth in Section 32; (iii) this document covers goods which are or are to become
fixtures; (iv) the name of the record owner of the real estate included in the
Mortgaged Property is the Mortgagor; and (v) the Mortgagor's Internal Revenue
Service Taxpayer I.D. number is 36-3877601.
D. This Mortgage is granted pursuant to a plan of reorganization
duly confirmed under Section 1129 of the Bankruptcy Code and is therefore exempt
from mortgage registration tax.
E. The Mortgagor hereby grants to Mortgagee the power of sale.
<PAGE>
SCHEDULE A
DESCRIPTION OF ORIGINAL MORTGAGE
<TABLE>
<CAPTION>
PROPERTY RECORDING OFFICE DOCUMENT NO. RECORDING DATE
- ------------------ --------------------------------- ----------------- -------------------------
<S> <C> <C> <C>
Blaine, MN Office of the County Recorder, 1135049 9/12/94
Anoka County, MN
</TABLE>
<PAGE>
EXHIBIT 4.35
RECORDER: PLEASE NOTE THAT THIS INSTRUMENT
AMENDS AND RESTATES THE INSTRUMENT RECORDED AT
MORTGAGE BOOK VOLUME VCS 1300, PAGE 325 AND
SHOULD BE INDEXED ACCORDINGLY.
-----------------------------------------------------------------------------
DISCOVERY ZONE, INC.
(Mortgagor), as successor by
merger to LEAPS & BOUNDS, INC.
to
McDONALD's CORPORATION
(Mortgagee)
- ----------------------------------------------------------------------------
AMENDED AND RESTATED OPEN-END MORTGAGE, ASSIGNMENT OF LEASES AND RENTS, SECURITY
AGREEMENT AND FIXTURE FILING
- ----------------------------------------------------------------------------
Dated as of July 29, 1997
DOCUMENT PREPARED BY AND
AFTER RECORDING RETURN TO:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attention: Jonathan A. Reiss, Esq.
- -----------------------------------------------------------------------------
THIS MORTGAGE (AS DEFINED HEREIN) SECURES FUTURE ADVANCES.
[PHILADELPHIA, PENNSYLVANIA PROPERTY]
<PAGE>
THIS AMENDED AND RESTATED OPEN-END MORTGAGE, ASSIGNMENT OF LEASES
AND RENTS, SECURITY AGREEMENT AND FIXTURE FILING (as the same may from time to
time be extended, renewed or modified, this "MORTGAGE"), made as of the 29th day
of July, 1997, by DISCOVERY ZONE, INC., a Delaware corporation ("MORTGAGOR"),
having its principal place of business at One Corporate Center, 110 East Broward
Boulevard, Fort Lauderdale, Florida 33301, as successor by merger to LEAPS &
BOUNDS, INC., to McDONALD'S CORPORATION a Delaware corporation ("MORTGAGEE"),
having an address at One McDonald's Plaza, Oak Brook, Illinois 60523.
W I T N E S S E T H:
A. WHEREAS, prior to Mortgagor's several predecessors in interest
filing their voluntary petitions for relief under chapter 11, title 11, United
States Code (the "BANKRUPTCY CODE"), Mortgagor's predecessors in interest with
respect to the Mortgaged Property (as hereinafter defined), Leaps & Bounds, Inc.
("LBI") had provided Mortgagee with a First Mortgage on the Mortgaged Property,
dated as of August 30, 1994 (the "ORIGINAL MORTGAGE") and identified by the
recording information set forth on Schedule A hereto, to secure certain
obligations owed to Mortgagee under the Agreement and Plan of Merger among
Mortgagee, Mortgagor, Discovery Zone, Inc., a Delaware corporation ("OLD DZI")
and Discovery Zone International, Inc. ("DZII"), a Delaware corporation, dated
as of August 30, 1994 (the "MERGER AGREEMENT"); and
B. WHEREAS, pursuant to Section 11.2(a)(iii) of the Merger
Agreement, Old DZI agreed to defend, indemnify and hold Mortgagee and its
affiliates harmless in respect of all expenses, losses, costs, deficiencies,
liabilities and damages (including related and reasonable counsel fees and
expenses, and compensatory and demonstrable consequential damages) incurred or
suffered by Mortgagee as a direct result of, inter alia, any breach by Old DZI
or LBI of the leases or subleases relating to certain properties that result in
any payment by Mortgagee in connection with any guarantee by Mortgagee of such
leases and pursuant to Section 10.3(f) of the Merger Agreement it was agreed
that certain security would be provided to secure the obligations under Section
11.2(a)(iii) of the Merger Agreement, including without limitation, a first
priority security interest in the Land and Improvements (the "AGREEMENT TO
INDEMNIFY"); and
C. WHEREAS, following the filing of their respective prayers for
relief under the Bankruptcy Code, Mortgagor's predecessors in interest, Old DZI,
their affiliated debtors, including DZII and LBI (the "DEBTORS"), and Mortgagee
entered into the Stipulation and Order Between Debtors and McDonald's
Corporation Providing For The Resolution, Settlement And Compromise of Disputes
And For Rent Deferrals And Allowance of Certain Claims (the "STIPULATION AND
ORDER") that was entered by the United States Bankruptcy Court for the District
of Delaware (the "BANKRUPTCY COURT") on November 18, 1996, which was not
appealed or otherwise challenged, became a final order, remains in full force
and effect and to which Mortgagor is bound, Section 7 of which is captioned
"CONTINUING SECURITY" and provides, in pertinent part, that the valid and
enforceable first priority security interest on the
2
<PAGE>
Land and Improvements and certain other collateral shall secure the performance
and payment of all of the obligations of Mortgagor to Mortgagee under the Notes
(as hereinafter defined), any obligations of Mortgagee that may arise in
connection with the Assumption Locations whether pursuant to any guaranty,
lease, sublease or otherwise, any obligations of Mortgagor that may arise in the
event of a Liquidation, and any continuing obligations of Mortgagor relating to
the Rejection Location(s) and the Prior Rejection Locations (as such terms are
defined therein); and
D. WHEREAS, pursuant to the Stipulation and Order and 11 U.S.C.
ss.365, the Debtors, as predecessors in interest to Mortgagor, assumed the
subleases relating to certain properties (the "ASSUMED PROPERTIES") which
subleases (the "ASSUMED PROPERTY SUBLEASES") expressly incorporate the Agreement
to Indemnify as it relates to any current or future obligations of Mortgagee
relating to the Assumed Properties; and
E. WHEREAS, pursuant to the Stipulation and Order and the Plan
(as hereinafter defined), this Mortgage hereby amends and restates the Original
Mortgage in its entirety in accordance with the terms and provisions set forth
herein; and
F. WHEREAS, this Mortgage, together with certain other Deeds of
Trust, Mortgages or similar encumbrances, are intended to and do secure the
obligations of Mortgagor and its predecessors in interest and the other Debtors,
to Mortgagee under all of the Stipulation and Order, the Agreement to Indemnify,
the Secured Rent Deferral Notes (as hereinafter defined) and the Secured
Rejection Note (as hereinafter defined); and
G. WHEREAS, pursuant to the plan of reorganization for Old DZI
and its affiliated debtors confirmed by the Bankruptcy Court by order entered
July 18, 1997 (the "PLAN"), and as required by the terms of the Stipulation and
Order, Mortgagor, as the reorganized successor of the Debtors, is obligated to
issue to Mortgagee Secured Rent Deferral Notes in the aggregate original
principal amount of $266,466.24, which amount is subject to increase each month
in accordance with the terms thereof (the "SECURED RENT DEFERRAL NOTES") and
Secured Rejection Note in the aggregate original principal amount of
$4,416,237.90 (the "SECURED REJECTION NOTE", and, together with the Secured Rent
Deferral Notes, the "NOTES"); and
H. WHEREAS, pursuant to the Plan, all of the Debtors and their
reorganized successors have merged into Mortgagor, and simultaneously with such
merger, all property of LBI and the other Debtors, including the Mortgaged
Property (as hereinafter defined) has been revested in Mortgagor, as the
successor entity of the Debtors; and
I. WHEREAS, in accordance with the foregoing, Mortgagor is the
fee simple owner of the real estate described in Exhibit A attached hereto (the
"LAND");
NOW THEREFORE, with reference to the foregoing recitals and for
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and
3
<PAGE>
intending to be legally bound hereby, Mortgagor and Mortgagee hereby agree that
the Original Mortgage is hereby amended and restated in its entirety as follows:
For the purpose of securing the payment and performance of all of
the obligations (the "OBLIGATIONS") of Mortgagor to Mortgagee, including without
limitation, any and all obligations of Mortgagor, as successor in interest to
Old DZI, DZII, LBI and their affiliated debtors, under this Mortgage, the
Agreement to Indemnify (including, without limitation, any contingent
obligations thereunder), the Stipulation and Order (including, without
limitation, the obligations described in Section 7 thereof which are referred to
in paragraph C of the recitals above), the Plan and the Notes (including any and
all subsequent advances made pursuant to the terms of the Notes) and all other
documents evidencing or securing any such obligations (collectively, the
"RELEVANT DOCUMENTS"), Mortgagor by these presents does hereby mortgage, give,
grant, bargain, sell, alienate, enfeoff, convey, confirm, warrant, pledge,
assign and hypothecate unto Mortgagee, the Land and the buildings, structures
and improvements of every nature whatsoever now or hereafter located thereon to
the extent owned by Mortgagor (including, but not limited to, all gas and
electric fixtures, radiators, heaters, docks and docking facilities, engines and
machinery, boilers, elevators and motors, plumbing, heating and air conditioning
fixtures, carpeting and other floor coverings, water heaters, awnings and storm
sashes which are or shall be attached to the Land or said buildings, structures
or improvements) (the "IMPROVEMENTS");
TOGETHER WITH: all right, title, interest and estate of Mortgagor
now owned, or hereafter acquired, in and to the following property, rights,
interest and estates relating to the Land and the Improvements, together with
Mortgagor's interest in the following property, rights, interests and estates
hereinafter described (the Land, Improvements, and the following property,
rights, interests and estates being hereinafter collectively referred to as the
"MORTGAGED PROPERTY"):
(a) all easements, rights-of-way, strips and gores of land,
streets, ways, alleys, passages, sewer rights, water, water courses, water
rights and powers, air rights and development rights, construction and equipment
warranties, and all estates, rights, titles, interests, privileges, liberties,
tenements, hereditaments and appurtenances of any nature whatsoever, in any way
belonging, relating to or pertaining to the Land and the Improvements and the
reversion and reversions, remainder and remainders, and all land lying in the
bed of any street, road or avenue, opened or proposed, in front of or adjoining
the Land, to the center line thereof and all the estates, rights, titles,
interests, dower and rights of dower, curtesy and rights of curtesy, property,
possession, claim and demand whatsoever, both at law and in equity, of Mortgagor
of, in and to the Land and the Improvements and every part and parcel thereof,
with the appurtenances thereto, and in and to any streets, ways, alleys,
passages, strips or gores of land adjoining the Land or any part thereof;
(b) all fixtures, attachments and other articles attached to the
Land or the Improvements constituting realty or real property now or hereafter
owned by Mortgagor or in which Mortgagor has or shall acquire an interest, now
or hereafter located on, attached to or
4
<PAGE>
contained in or used or usable in connection with the Mortgaged Property, and
including, without limitation, all building or construction materials intended
for construction, reconstruction, alteration or repair of or installation on or
in the Mortgaged Property, of every kind and nature whatsoever now owned or
hereafter acquired by Mortgagor, and all proceeds thereof, as well as all
additions to, appurtenances, substitutions for, replacements of or accessions to
any of the items recited as aforesaid and all attachments, components, parts
(including spare parts) and accessories, whether installed thereon or affixed
thereto, now or hereafter owned by Mortgagor and used or intended to be used in
connection with, or with the operation of, the Mortgaged Property, to the extent
constituting real property, but not including play equipment or other
similar-type entertainment equipment relating to the operation of the "Discovery
Zone" facility on the Mortgaged Property unless removal of such equipment would
cause structural damage to the Land or the Improvements (collectively, the
"FIXTURES");
(c) all awards or payments, including interest thereon, which may
heretofore and hereafter be made with respect to the Mortgaged Property, whether
from the exercise of the right of eminent domain (including, but not limited to,
any transfer made in lieu of or in anticipation of the exercise of said rights),
or for a change of grade, or for any other injury to or decrease in the value of
the Mortgaged Property;
(d) to the extent assignable (and to the extent relating to the
general occupancy and use of the Mortgaged Property as opposed to the operation
of the "Discovery Zone" entertainment facility on the Mortgaged Property),
leases, subleases (including sub-subleases), lettings, licenses, concessions,
occupancy agreements and other agreements which grant a possessory interest in,
or the right to use or occupy, all or any part of the Mortgaged Property now or
hereafter entered into, and all amendments, extensions, renewals and guarantees
thereof, and all security therefor (collectively, the "LEASES") and all rents,
issues, profits, revenues (including all oil and gas or other mineral royalties
and bonuses) and deposits (including, without limitation, security deposits)
under the Leases (including, without limitation, from the rental of any office
space, retail space or other space, halls, stores, and offices, and security
deposits therefor, exhibit or sales space of every kind, license, lease,
sublease, fees and rentals, letters of credit or cash instruments securing or
evidencing obligations under Leases, service charges, vending machine sales and
proceeds, if any, from business interruption or other loss of income insurance))
(collectively, the "RENTS") and all proceeds from the sale or other disposition
of the Leases and the right to receive and apply the Rents to the payment of the
Obligations;
(e) subject to the rights of Mortgagor hereunder, all proceeds of
any insurance policies covering the Mortgaged Property (including, without
limitation, the right to receive and apply the proceeds of any insurance,
judgments, or settlements made in lieu thereof, for damage to the Mortgaged
Property);
(f) all refundable, returnable or reimbursable fees deposits or
other funds or evidences of credit or indebtedness deposited by or on behalf of
Mortgagor with any
5
<PAGE>
governmental authorities, boards, corporations, providers of utility services,
public or private, including specifically, but without limitation, all
refundable, returnable or reimbursable tap fees, utility deposits and
development costs in connection with the Mortgaged Property, and all of the
records and books of account now or hereafter maintained by or on behalf of
Mortgagor in connection with the operation of the Mortgaged Property
(collectively, "SECURITY ACCOUNTS");
(g) all proceeds (as defined in the Uniform Commercial Code) of
the Mortgaged Property which, in any event, shall include, without limitation,
(i) cash, instruments and other property received, receivable or otherwise
distributed in exchange for any or all of the Mortgaged Property, (ii) the
collection or other disposition of, or realization upon, any item or portion of
the Mortgaged Property (including, without limitation, all claims of Mortgagor
against third parties for loss of, damage to, destruction of, or for proceeds
payable under policies of insurance in respect of, the Mortgaged Property now
existing or hereafter arising), (iii) any and all proceeds of any insurance,
indemnity, warranty or guaranty payable to Mortgagor from time to time with
respect to damage or loss of or to any of the Mortgaged Property, (iv) any and
all payments (in any form whatsoever) made or due and payable to Mortgagor from
time to time in connection with the requisition, confiscation, condemnation,
seizure or forfeiture of all or any part of the Mortgaged Property by any
Governmental Authority (or any person acting under color of Governmental
Authority), and (v) any and all real estate tax refunds payable to Mortgagor
with respect to the Mortgaged Property, and refunds or reimbursements payable
with respect to bonds, escrow accounts, or other sums payable in connection with
the use, development or ownership of the Mortgaged Property, but excluding any
proceeds obtained, earned or arising directly from the operation of the
"Discovery Zone" entertainment facility operated by Mortgagor on the Mortgaged
Property as opposed to the general occupancy and use of the Mortgaged Property
(collectively, the "PROCEEDS");
(h) to the extent permitted under applicable law, all licenses,
permits (other than proprietary permits of Mortgagor relating to the ordinary
operation of a "Discovery Zone" entertainment facility as opposed to the general
use and occupancy of the Mortgaged Property), variances and certificates used in
connection with the ownership, operation, use or occupancy of the Mortgaged
Property (including, without limitation, business licenses, state health
department licenses, food service licenses, liquor licenses, licenses to conduct
business and all such other permits, licenses and rights, obtained from any
Governmental Authority or private Person concerning ownership, operation, use or
occupancy of the Mortgaged Property) (collectively, "PERMITS");
(i) all plans, specifications, shop drawings and other technical
descriptions prepared for construction, repair or alteration of the Improvements
(including diskettes containing any such data), and all amendments and
modifications thereof; and
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(j) any escrows or escrow accounts established hereunder to
secure the Obligations of Mortgagor, including, without limitation, the Proceeds
Escrow Account described in Section 6(b) hereof; and
(k) any and all replacements and renewals of or additions and
substitutions to any of the foregoing and all proceeds of any of the foregoing.
TO HAVE AND TO HOLD the above granted and described Mortgaged
Property unto and to the use and benefit of Mortgagee, and its successor and
assigns, forever, and Mortgagor does hereby bind itself, its successors and
assigns to WARRANT AND FOREVER DEFEND the title to the Mortgaged Property unto
Mortgagee and its successors and assigns;
AND, TO PROTECT THE SECURITY OF THIS MORTGAGE, Mortgagor
represents and warrants to and covenants and agrees with Mortgagee as follows:
1. DEFINED TERMS. The following terms, when used herein, shall
have the meanings set forth below:
"ENVIRONMENTAL LAWS" means any and all present and future
federal, state or local laws, statutes, ordinances or regulations, any judicial
or administrative orders, decrees or judgments thereunder, and any permits,
approvals, licenses, registrations, filings and authorizations, in each case as
now or hereafter in effect, relating to the protection of the environment, the
impact of Hazardous Substances or the generation, disposal or remediation
thereof on human health or safety, or the Release or threatened Release of
Hazardous Substances or otherwise relating to the Use of Hazardous Substances.
For purposes of this definition, (A) "HAZARDOUS SUBSTANCES" means collectively,
(i) any petroleum or petroleum products or waste oils, explosives, radioactive
materials, asbestos, urea formaldehyde foam insulation, polychlorinated
biphenyls ("PCBs"), and lead-based paint, (ii) any chemicals or other materials
or substances which are now or hereafter become defined as or included in the
definitions of "hazardous substances", "hazardous wastes", "hazardous
materials", "extremely hazardous wastes", "restricted hazardous wastes", "toxic
substances", "toxic pollutants", "contaminants", "pollutants" or words of
similar import under any Environmental Law and (iii) any other chemical or any
other material or substance, exposure to which is now or hereafter prohibited,
limited or regulated under any Environmental Law; (B) "USE" means, with respect
to any Hazardous Substance, the generation, manufacture, processing,
distribution, handling, use, treatment, recycling or storage of such Hazardous
Substance or transportation of such Hazardous Substance; and (C) "RELEASE" means
any release, spill, emission, leaking, pumping, injection, deposit, disposal,
discharge, dispersal, leaching or migration into the indoor or outdoor
environment (including, without limitation, the movement of Hazardous Substances
through ambient air, soil, surface water, ground water, wetlands, land or
subsurface strata).
"GOVERNMENTAL AUTHORITY" means any national or federal
government, any state, regional, local or other political subdivision thereof
with jurisdiction and any Person
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with jurisdiction exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government (including without
limitation any court).
"IMPOSITIONS" means all taxes (including, without limitation, all
real estate, ad valorem, sales (including those imposed on lease rentals), use,
single business, gross receipts, value added, intangible transaction privilege,
privilege or license or similar taxes), assessments (including, without
limitation, all assessments for public improvements or benefits, whether or not
commenced or completed within the term of this Mortgage), ground rents, water,
sewer or other rents and charges, excises, levies, fees (including, without
limitation, license, permit, inspection, authorization and similar fees), and
all other governmental impositions and other charges (including, without
limitation, vault charges and license fees for the use of vaults, chutes and
similar areas adjoining the Mortgaged Property), in each case whether general or
special, ordinary or extraordinary, foreseen or unforeseen, of every character
in respect of the Mortgaged Property, which at any time prior to, during or in
respect of the term hereof may be assessed or imposed on or in respect of or be
a lien upon (i) Mortgagor (including, without limitation, all income, franchise,
single business or other taxes imposed on Mortgagor for the privilege of doing
business in the jurisdiction in which the Mortgaged Property is located), (ii)
the Mortgaged Property, or any part thereof or any revenues therefrom or any
estate, right, title or interest therein, or (iii) any occupancy, operation, use
or possession of, or sales from, or activity conducted on, or in connection with
the Mortgaged Property by Mortgagor or the leasing or use of the Mortgaged
Property or any part thereof by Mortgagor.
"LEGAL REQUIREMENTS" means (i) all governmental statutes, laws,
rules, orders, regulations, ordinances, judgments, decrees and injunctions of
Governmental Authorities (including, without limitation, Environmental Laws)
affecting either the Borrower or any Property or any part thereof or the
construction, ownership, use, alteration or operation thereof, or any part
thereof (whether now or hereafter enacted and in force), (ii) all permits,
licenses and authorizations and regulations relating thereto, and (iii) all
covenants, conditions and restrictions contained in any instruments at any time
in force (whether or not involving Governmental Authorities) affecting the
Mortgaged Property or any part thereof which, in the case of this clause (iii),
require repairs, modifications or alterations in or to the Mortgaged Property or
any part thereof, or in any material way limit or restrict the existing use and
enjoyment thereof.
"PERSON" means any individual, corporation, limited liability
company, partnership, joint venture, estate, trust, unincorporated association,
any federal, state, county or municipal government or any bureau, department or
agency thereof and any fiduciary acting in such capacity on behalf of any of the
foregoing.
"UNIFORM COMMERCIAL CODE" means the Uniform Commercial Code, as
adopted, enacted and amended from time to time by the state or states where any
of the Mortgaged Property is located.
2. PAYMENT OF OBLIGATIONS AND INCORPORATION OF COVENANTS,
CONDITIONS AND AGREEMENTS. Mortgagor will pay the Obligations at the time and
in the manner provided in the
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Relevant Documents and in this Mortgage. All the representations, warranties,
covenants, conditions and agreements of Mortgagor contained in the Relevant
Documents are hereby made a part of this Mortgage to the same extent and with
the same force as if fully set forth herein. If there shall be any
inconsistencies between the terms, covenants, conditions and provisions set
forth in this Mortgage and the terms, covenants, conditions and provisions set
forth in the Relevant Documents, then the terms, covenants, conditions and
provisions of the Relevant Documents shall prevail.
3. WARRANTY OF TITLE/ORGANIZATION. Mortgagor warrants that
Mortgagor has good, marketable and insurable fee simple title to Land and the
Improvements and has good title to the remainder of the Mortgaged Property and
has the full power, authority and right to execute, deliver and perform its
obligations under this Mortgage and to encumber, mortgage, give, grant, bargain,
sell, alienate, enfeoff, convey, confirm, warrant, pledge, assign and
hypothecate the Mortgaged Property and that Mortgagor possesses an unencumbered
fee estate in the Land and the Improvements and that it owns the Mortgaged
Property free and clear of all liens, encumbrances and charges whatsoever except
for (x) those exceptions to title which are existing on the date hereof and
approved by Mortgagee and (y) those exceptions of title that are permitted under
the other terms and conditions of this Mortgage (collectively, the "PERMITTED
ENCUMBRANCES") and that this Mortgage is and will remain a valid and enforceable
first lien on and security interest in the Mortgaged Property, subject only to
the Permitted Encumbrances. Mortgagor shall forever warrant, defend and preserve
such title and the validity and priority of the lien of this Mortgage and shall
forever warrant and defend the same to Mortgagee against the claims of all
persons whomsoever. Mortgagor is duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization. Mortgagor is
qualified to do business and in good standing in the State in which the
Mortgaged Property is located, and to the extent that Mortgagor is not so
qualified or in good standing in such State, Mortgagor shall promptly qualify to
do business and become in good standing in such State and shall promptly present
evidence of such qualification to do business and good standing to Mortgagee,
and shall in any event take such steps as are necessary to insure the
enforceability of the Notes and this Mortgage.
4. TAXES. Mortgagor hereby warrants, covenants and agrees to pay
before any penalty attaches all real property taxes, general and special, and
all other taxes and assessments of any kind or nature whatsoever, against the
Mortgaged Property when due and shall, upon written request, furnish to
Mortgagee duplicate receipts therefor, Mortgagor may, in good faith and with
reasonable diligence, contest the validity or amount of any such taxes or
assessments provided that such contest shall have the effect of preventing the
collection of the tax or assessment so contested and the sale or forfeiture of
said Mortgaged Property or any part thereof, or any interest therein, to satisfy
the same.
5. INDEMNIFICATION. Mortgagor shall indemnify, defend and hold
harmless Mortgagee from and against all of the following (collectively, and
individually referred to as a "LOSS"): claims, demands, causes of action,
judgments, costs, expenses, liabilities, losses and damages (including
consequential and punitive damages), reasonable attorneys' fees and
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expenses and court costs, disbursements and court costs, and all risk of damage
to property and injury to persons in or upon the Mortgaged Property, arising
from: (i) Mortgagor's use of the Property or from the conduct of its business in
or about the Mortgaged Property; (ii) Mortgagor's default or breach of any term
under this Mortgage; and (iii) Mortgagor's violation or failure to comply with
any Legal Requirements, including Environmental Laws; provided that Mortgagor
shall not be liable for Loss arising from Mortgagee's negligence or willful
misconduct or from Mortgagee's breach of any of its obligations hereunder.
6. TRANSFER OR ENCUMBRANCE OF THE MORTGAGED PROPERTY. (a)
Except as may otherwise be permitted hereunder or pursuant to the Relevant
Documents, Mortgagor shall not sell, convey, alienate, mortgage, encumber,
pledge or otherwise transfer the Mortgaged Property or any part thereof or any
of its interest therein. Mortgagee shall not be required to demonstrate any
actual impairment of its security or any increased risk of default hereunder in
order to declare the Obligations immediately due and payable upon Mortgagor's
conveyance, alienation, mortgage, encumbrance, pledge or transfer of the
Mortgaged Property in violation of this Mortgage or any other Relevant Document.
This provision shall apply to every sale, conveyance, alienation, mortgage,
encumbrance, pledge or transfer of the Mortgaged Property that is not permitted
pursuant to the Relevant Documents, regardless of whether voluntary or not, or
whether or not Mortgagee has consented to any previous sale, conveyance,
alienation, mortgage, encumbrance, pledge or transfer of the Mortgaged Property.
(b) Notwithstanding Section 6(a), Mortgagor shall have the right
to sell the Mortgaged Property at any time to a third party bona fide purchaser
after consultation with Mortgagee and upon the prior written consent of
Mortgagee to such sale and the sales price (such consent not to be unreasonably
withheld), provided that the net proceeds of such sale of the Mortgaged Property
(after payment of transfer taxes and reasonable brokerage commissions, if any,
and other reasonable closing costs) shall be applied towards repayment of the
Obligations, including, without limitation, repayment of the Secured Rejection
Note (including prepayment of any amounts not yet due and payable) and payment
of the Principal Amounts (as defined in the Rent Deferral Notes) then
outstanding under the Rent Deferral Notes, in the order and manner set forth in
the Notes. After the Secured Rejection Note and all Principal Amounts
outstanding under the Notes have been repaid in full, any remaining net proceeds
(including proceeds from any sale or other disposition of the Mortgaged Property
pursuant to Section 24 hereof) not applied towards repayment of the Obligations
shall be deposited into an escrow account designated by Mortgagee for
Mortgagor's account and as security for the performance by Mortgagor of its
Obligations to Mortgagee under the Relevant Documents (the "PROCEEDS ESCROW
ACCOUNT") which escrow account shall be administered by Mortgagee, or, at
Mortgagee's discretion and in accordance with Mortgagee's instructions, may be
administered by an escrow agent (an "ESCROW AGENT") selected by Mortgagee (whose
reasonable fees shall be paid by Mortgagor). Mortgagor may also from time to
time deposit additional funds into the Proceeds Escrow Account as further
security for the Obligations. At Mortgagee's request, Mortgagor agrees to enter
into a separate escrow agreement to further evidence the provisions of this
Section 6(b), and in the event that Mortgagee chooses an Escrow Agent to
administer the Proceeds Escrow Account, Mortgagor agrees to execute an escrow
agreement in form and substance reasonably satisfactory to Mortgagee (including
provisions consistent with the
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provisions of this Section 6(b)) to evidence the duties and responsibilities of
such Escrow Agent. Mortgagee or, if applicable, the Escrow Agent at the
direction of Mortgagee, shall invest the funds in the Proceeds Escrow Account in
obligations of the U.S. Government or its agencies, interest in time accounts or
certificates of deposits, or other interest bearing account of any bank or bank
and trust company or in money market funds available to Mortgagee. Mortgagor
agrees, and shall agree under any escrow agreement entered into pursuant to this
Section 6(b), that the funds on deposit under the escrow arrangement described
herein shall not constitute property of the estate (within the meaning of
Section 541 of the United States Bankruptcy Code) and that Mortgagor shall only
have such rights to such funds as are provided herein and in any escrow
agreement entered into pursuant to this Section. Funds in the Proceeds Escrow
Account shall be disbursed (together with accrued interest) from time to time to
Mortgagee, at Mortgagee's direction (upon seven (7) days prior notice to
Mortgagor), to pay any Obligations that may arise from time to time under the
Agreement to Indemnify, the Notes, the Stipulation and Order or the other
Relevant Documents. Notwithstanding the foregoing, after December 31, 2005,
Mortgagor shall be entitled to retain any net proceeds in excess of the Minimum
Amount set forth below from the sale of the Mortgaged Property, including
amounts previously deposited and remaining in the Proceeds Escrow Account
(including accrued interest thereon) which have not been applied towards payment
of the Obligations, provided that (i) no Obligations are then due and owing by
Mortgagor pursuant to the Agreement to Indemnify, the Stipulation and Order, the
Notes or otherwise, (ii) no default or Event of Default has occurred and is
continuing under any of the Relevant Documents; and (iii) the amount remaining
in the Proceeds Escrow Account is no less than the Minimum Amount (as
hereinafter defined). Except as otherwise set forth in the following sentence,
the "Minimum Amount" shall mean the product of (A) 1.5 times (B) the sum of the
gross rent (including additional rent and percentage rent charges, if any),
common area maintenance charges, taxes, insurance and other charges computed on
a gross basis (collectively, the "BASE CHARGES") which are due or shall become
due under any Assumed Property Subleases still in existence as of December 31,
2005 (the "SURVIVING ASSUMED PROPERTY SUBLEASES") from December 31, 2005 until
the expiration of the terms of such Assumed Property Subleases. Upon the
expiration after December 31, 2005 of any Surviving Assumed Property Sublease,
Mortgagee shall re-calculate the Minimum Amount based upon the product of 1.5
times the Base Charges of the remaining Surviving Assumed Property Subleases as
of the end of the term of such Surviving Assumed Property Sublease (such Base
Charges to be calculated as the sum of the Base Charges from such date through
the end of the expiration dates of the remaining Surviving Assumed Property
Subleases), and provided that (i) no Obligations are then due and owing by
Mortgagor pursuant to the Agreement to Indemnify, the Notes, the Stipulation and
Order or otherwise and that (ii) no default or Event of Default has occurred and
is continuing under any of the Relevant Documents, Mortgagee shall, on the first
anniversary of the expiration of such expired Surviving Assumed Property
Sublease, release to Mortgagor, or cause the Escrow Agent to release to
Mortgagor, the excess of all funds in the Proceeds Escrow Account over the
re-calculated Minimum Amount. Any calculation of Base Charges under this Section
6(b) shall be made by Mortgagee and, absent manifest error, shall be conclusive
and binding upon Mortgagor. Provided that (i) an amount equal to at least the
Minimum Amount is deposited or on deposit in the Proceeds Escrow Account to
secure the
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payment of the Obligations, (ii) no default or Event of Default has occurred and
is continuing under any of the Relevant Documents, (iii) the Notes have been
repaid in full and (iv) no Obligations are then due and owing by Mortgagor
pursuant to the Agreement to Indemnify, the Stipulation and Order or otherwise,
Mortgagor shall be entitled to receive a release of this Mortgage from Mortgagee
at any time after December 31, 2005. Provided that no default or Event of
Default has occurred or is continuing under any of the Relevant Documents and
that no amounts are then owing by Mortgagor or outstanding pursuant to or under
any of the Relevant Documents (and that an amount equal to the Minimum Amount is
at all times on deposit in the Proceeds Escrow Account), interest earned on the
amounts deposited in the Proceeds Escrow Account after December 31, 2005 shall
be distributed to Mortgagor on a quarterly basis. All remaining amounts in the
Proceeds Escrow Account which have not been applied towards payment of the
Obligations shall be released to Mortgagor on the later of (A) December 31, 2014
provided, however, that no Obligations are then due and owing by Mortgagor
pursuant to the Agreement to Indemnify, the Stipulation and Order or otherwise,
and (B) the end of the term of this Mortgage as set forth in Section 13(c)
hereof. Mortgagor shall pay any income taxes attributable to the interest or
other income earned on the Proceeds Escrow Account. Notwithstanding any release
of this Mortgage pursuant to this Section 6(b) or otherwise, the terms and
provisions of this Section 6(b) shall survive the release of this Mortgage.
7. AMENDMENT TO LEGAL DESCRIPTION. If it becomes evident that the
legal description attached to any Relevant Document is inaccurate or does not
fully describe all of the real property which is reasonably connected to the
Land, Mortgagor hereby agrees to an amendment of such legal description and the
legal description contained on the corresponding title policy so that such error
is corrected and to execute and cause to be recorded, if applicable, such
document as may be appropriate for such purpose.
8. ASSIGNMENT OF LEASES AND RENTS. Mortgagor does hereby
absolutely and unconditionally assign to Mortgagee, Mortgagor's right, title and
interest in all current and future Leases and Rents, it being intended by
Mortgagor that this assignment constitutes a present, absolute assignment and
not an assignment for additional security only. Such assignment to Mortgagee
shall not be construed to bind Mortgagee to the performance of any of the
covenants, conditions or provisions contained in any such Lease or otherwise
impose any obligation upon Mortgagee. Mortgagee shall have no responsibility on
account of this assignment for the control, care, maintenance, management or
repair of the Mortgaged Property, for any dangerous or defective condition of
the Mortgaged Property, or for any negligence in the management, upkeep, repair
or control of the Mortgaged Property. Mortgagor agrees to execute and deliver to
Mortgagee such additional instruments, in form and substance satisfactory to
Mortgagee, as may hereafter be requested by Mortgagee to further evidence and
confirm such assignment. Nevertheless, subject to the terms of this paragraph,
Mortgagee grants to Mortgagor a revocable license to collect all of the Rents
and retain, use and enjoy the same and otherwise exercise all rights of
Mortgagor under any Lease, in each case, subject to the terms hereof and of the
Relevant Documents. Upon an Event of Default, the license granted to Mortgagor
herein shall immediately and automatically be
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revoked, and Mortgagee shall immediately be entitled to possession of all Rents,
whether or not Mortgagee enters upon or takes control of the Mortgaged Property,
provided that if such Event of Default ceases to exist, the license shall
automatically be reinstated. In addition, during the continuation of an Event of
Default, Mortgagee may, either in person or by agent, without bringing any
action or proceeding, or by a receiver appointed by a court, without the
necessity of taking possession of the Mortgaged Property in its own name, and in
addition to and without limiting any of Mortgagee's rights and remedies
hereunder, under the Notes and any other Relevant Documents and as otherwise
available at law or in equity, (a) notify any lessee or other person that the
Leases have been assigned to Mortgagee and that all Rents are to be paid
directly to Mortgagee, whether or not Mortgagee has commenced or completed
foreclosure or taken possession of the Mortgaged Property; (b) settle,
compromise, release, extend the time of payment of, and make allowances,
adjustments and discounts of any Rents or other obligations in, to and under the
Leases; (c) demand, sue for or otherwise collect, receive, and enforce payment
of Rents, including those past-due and unpaid and other rights under the Leases,
prosecute any action or proceeding, and defend against any claim with respect to
the Rents and Leases; (d) enter upon, take possession of and operate the
Mortgaged Property; (e) lease all or any part of the Mortgaged Property; and/or
(f) perform any and all obligations of Mortgagor under the Leases and exercise
any and all rights of Mortgagor therein contained to the full extent of
Mortgagor's rights and obligations thereunder, with or without the bringing of
any action or the appointment of a receiver and without need for any other
authorization or other action by Mortgagee or Mortgagor. At Mortgagee's request,
Mortgagor shall deliver a copy of this assignment to each tenant under a Lease
and to each manager and managing agent or operator of the Mortgaged Property.
Mortgagor irrevocably directs any tenant, manager, managing agent, or operator
of the Property, without any requirement for notice to or consent by Mortgagor,
to comply with all demands of Mortgagee under this Section 8 and to turn over to
Mortgagee on demand all Rents which it receives. Mortgagor hereby acknowledges
and agrees that payment of any Rents by a person to Mortgagee as hereinabove
provided shall constitute payment by such person, as fully and with the same
effect as if such Rents had been paid to Mortgagor. Mortgagee is hereby granted
and assigned by Mortgagor the right, at its option, upon revocation of the
license granted herein, to enter upon the Mortgaged Property in person or by
agent, without bringing any action or proceeding, or by court-appointed receiver
to collect the Rents. Any Rents collected after the revocation of the license
shall be applied towards the payment of the Obligations. Neither the enforcement
of any of the remedies under this Section 8 nor any other remedies or security
interests afforded to Mortgagee under the Relevant Documents, at law or in
equity shall cause Mortgagee to be deemed or construed to be a Mortgagee in
possession of the Mortgaged Property, to obligate Mortgagee to lease the
Mortgaged Property or attempt to do so, or to take any action, incur any
expense, or perform or discharge any obligation, duty or liability whatsoever
under any of the Leases or otherwise. Mortgagor shall, and hereby agrees to
indemnify Mortgagee for, and to hold Mortgagee harmless from and against, any
and all claims, liability, expenses, losses or damages which may or might be
asserted against or incurred by Mortgagee solely by reason of Mortgagee's status
as an assignee pursuant to the assignment of Rents and Leases contained herein,
but excluding any claim (a) to the extent caused by Mortgagee's gross negligence
or willful misconduct, or (b) to the extent arising
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solely from Mortgagee's actions after Mortgagee has taken possession of the
Mortgaged Property. Should Mortgagee incur any such claim, liability, expense,
loss or damage, the amount thereof, including all actual expenses and reasonable
fees of attorneys, shall constitute Obligations secured hereby, and Mortgagor
shall reimburse Mortgagee therefor immediately upon demand. Mortgagor agrees
that all Leases shall be subject to the prior written approval of Mortgagee,
such approval not to be unreasonably withheld.
9. MAINTENANCE OF MORTGAGED PROPERTY. Mortgagor shall cause the
Mortgaged Property to be maintained in a good and safe condition and repair
(subject to ordinary wear and tear), and shall otherwise operate and maintain
the Mortgaged Property in a manner consistent with the manner in which it
operates and maintains the other properties on which it operates similar
businesses ("SIMILAR PROPERTIES"). Except as otherwise permitted by the Relevant
Documents, the Improvements, the Fixtures and the equipment located on the Land
or the Improvements shall not be removed, demolished or materially altered
(except for normal replacement of equipment) without the consent of Mortgagee
which shall not unreasonably be withheld or delayed. Mortgagor shall comply with
all laws, orders and ordinances affecting the Mortgaged Property, or the use
thereof. Except to the extent that Mortgagee fails to turn over insurance
proceeds, if any, received by Mortgagee pursuant to SECTIONS 10 and 11 with
respect to the Mortgaged Property to Mortgagor, Mortgagor shall promptly repair,
replace or rebuild any part of the Mortgaged Property that, following the date
hereof, becomes damaged, worn or dilapidated and Mortgagor shall complete and
pay for any structure at any time in the process of construction or repair on
the Land. Notwithstanding anything to the contrary contained herein, Mortgagor
hereby confirms its obligation to comply with all relevant Legal Requirements,
including Environmental Laws, with respect to the Mortgaged Property. Mortgagor
shall not initiate, join in, acquiesce in, or consent to any change in any
private restrictive covenant, zoning law or other public or private restriction,
limiting or defining the uses which may be made of the Mortgaged Property or any
part thereof, unless Mortgagor shall have received Mortgagee's prior written
consent, such consent not to be unreasonably withheld or delayed. If under
applicable zoning provisions the use of all or any portion of the Mortgaged
Property is or shall become a nonconforming use, Mortgagor will not cause such
nonconforming use to be discontinued or abandoned without the express written
consent of Mortgagee, such consent not to be unreasonably withheld or delayed.
Mortgagor shall not (i) change the use of the Land in any material respect or
(ii) permit or suffer to occur any waste on or to the Mortgaged Property or to
any portion thereof.
10. INSURANCE.
(a) Mortgagor shall maintain casualty, liability and other
policies of insurance relating to the Mortgaged Property in form and substance,
and with insurers and coverages, reasonably satisfactory to Mortgagee and
consistent with insurance that it maintains on Similar Properties. Mortgagor
shall keep the Mortgaged Property insured against loss by flood if the Mortgaged
Property is located in an area identified by the Secretary of Housing and Urban
Development as an area having a special flood hazards and in which flood
insurance has been made available under the National Flood Insurance Act of 1968
(or any
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successor act thereto). All policies of insurance to be furnished hereunder (i)
shall have standard non-contributory Mortgagee clauses attached to all policies
in favor of Mortgagee, without contribution, under a standard New York (or local
equivalent) Mortgagee clause naming Mortgagee as the party to which all payments
made under such insurance policies in excess of $150,000 should be paid, (ii)
shall contain an endorsement providing that neither Mortgagor nor Mortgagee nor
any other party shall be a co-insurer under said policies and shall contain a
provision requiring that the coverage evidenced thereby shall not be terminated
or materially modified without ten (10) days prior written notice to Mortgagee,
(iii) shall provide that no act or thing done by Mortgagor shall invalidate the
policy as against Mortgagee, and (iv) with respect to property insurance
policies, shall contain a waiver of subrogation against Mortgagee. Mortgagor
shall deliver certificates evidencing additional and renewal policies, together
with evidence of payment of premiums thereon, to Mortgagee, and in the case of
all insurance about to expire, shall deliver renewal policies or certificates
evidencing such policies not less than ten (10) days prior to their respective
dates of expiration.
(b) Mortgagor shall not take out separate insurance concurrent in
form or contributing in the event of loss with that required to be maintained
hereunder unless Mortgagee is included thereon under a standard,
non-contributory Mortgagee clause acceptable to Mortgagee. Mortgagor shall
promptly notify Mortgagee whenever any such separate insurance is taken out and
shall promptly deliver to Mortgagee the certificates evidencing the policy or
policies of such insurance.
(c) The insurance required by this Mortgage, at the option of
Mortgagor, may be effected by blanket and/or umbrella policies covering the
Mortgaged Property and other properties, provided, however, that in each case,
such insurance policies otherwise comply with the provisions of this Mortgage
and allocate to the Mortgaged Property, from time to time, the coverage
specified in this Mortgage without possibility of reduction or co-insurance by
reason of, or damage to, any other property named therein. If the insurance
required by this Mortgage shall be effected by any such blanket or umbrella
policies, Mortgagor shall furnish to Mortgagee certificates with respect to,
with schedules attached thereto showing the amount of the insurance provided
under such policies which is applicable to the Mortgaged Property.
(d) If Mortgagor fails to maintain insurance in compliance with
this Section, Mortgagee may obtain such insurance and pay the premium therefor
and Mortgagor shall, on demand, reimburse Mortgagee for all expenses incurred in
connection therewith. Mortgagor shall deliver original certificates to Mortgagee
of all insurance policies maintained pursuant to this Section 10. Each property
insurance policy shall name Mortgagee as Mortgagee, and loss payee with respect
to all casualty coverage and each liability policy shall name Mortgagee as an
additional insured thereunder.
11. CASUALTY. (a) Mortgagor shall give Mortgagee prompt notice of
any loss or damage to the Mortgaged Property.
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(b) In case of loss or damage to the Mortgaged Property covered
by any of the insurance policies described in Section 10 above, Mortgagee (or,
after entry of decree of foreclosure, the purchaser at the foreclosure sale or
decree creditor, as the case may be) is hereby authorized at its option either
(i) to settle and adjust any claim under such insurance policies without the
consent of Mortgagor or (ii) to allow Mortgagor to settle and adjust such claim
(either jointly with Mortgagee or by Mortgagor alone, at Mortgagee's
discretion); provided that in either case Mortgagee shall, and is hereby
authorized to, collect and receipt for any such insurance proceeds.
Notwithstanding anything in the preceding sentence to the contrary, Mortgagee
agrees that it will allow Mortgagor to settle and adjust any claims under the
insurance policies which are in an amount less than $150,000, per incident of
loss, up to an aggregate amount of no greater than $300,000. The expenses
incurred by Mortgagee in the adjustment and collection of insurance proceeds
shall be included in the Obligations, and shall be reimbursed to Mortgagee upon
demand or may be deducted by Mortgagee from said insurance proceeds prior to
another application thereof. Interest on such amount shall accrue at the Default
Rate, beginning ten (10) days after Mortgagor receives notice of a request for
payment of such amount from Mortgagee, until such amount, plus interest, is paid
in full.
(c) Mortgagee shall permit Mortgagor to apply the proceeds of
insurance policies received in connection with any casualty to pay for the cost
of restoring, repairing, replacing or rebuilding the loss or damage to the
Mortgaged Property resulting from the casualty ("RESTORATION") if: (i) there is
no Event of Default hereunder at the time of such application; (ii) restoration
can, in the reasonable judgment of Mortgagee, be completed prior to the maturity
of the Obligations; and (iii) restoration can, in the reasonable judgment of
Mortgagee, be effected within two (2) years after the date of such casualty and
in such a manner so that the Mortgaged Property will be of at least equal or
greater value to the value than the Mortgaged Property prior to such casualty.
Otherwise, Mortgagee may elect in its sole discretion to apply such proceeds
either (x) towards payment of the Obligations, notwithstanding the fact that the
Obligations, or a portion thereof, may not then be due and payable, or (y) to
pay for the cost of Restoration. In all events, disbursement of insurance
proceeds by Mortgagee (or at Mortgagee's election by a disbursing or escrow
agent who shall be selected by Mortgagee and whose fees shall be paid by
Mortgagor), to pay the cost of restoration shall require (i) evidence reasonably
satisfactory to Mortgagee of the estimated costs of Restoration, (ii) funds (or
assurances reasonably satisfactory to Mortgagee that such funds are available)
sufficient in addition to the proceeds of insurance to complete and fully pay
for Restoration; and (iii) such architect's certificates, waivers of lien,
contractor's sworn statements, title insurance endorsements, plats of surveys
and such other evidences of cost, payment and performance as Mortgagee may
reasonably require and approve. Except to the extent Mortgagee fails to turn
over insurance proceeds, if any, received by Mortgagee hereunder with respect to
such casualty to Mortgagor, Mortgagor hereby covenants to restore, repair,
replace or rebuild the Improvements, to be of at least equal value, and of
substantially the same character as prior to such loss or damage, all to be
effected in accordance with plans, specifications and procedures to be first
submitted to and reasonably approved by Mortgagee, and Mortgagor shall pay all
costs of such restoring, repairing, replacing or rebuilding.
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12. EMINENT DOMAIN. Mortgagor warrants, covenants and agrees that
should the Mortgaged Property, or any part thereof or interest therein, be taken
or damaged by reason of any public improvement or condemnation proceeding, or in
any other manner, or should Mortgagor receive any notice of other information
regarding such proceeding, Mortgagor shall give written notice thereof within
five (5) business days to Mortgagee. Without Mortgagee's prior consent,
Mortgagor (1) shall not agree to any compensation or award, and (2) shall not
take any action or fail to take any action which would cause the compensation to
be determined. Mortgagee shall be entitled to: (1) all compensation, awards and
other payments or relief therefor, (2) to commence, appear in and prosecute in
its own name any action or proceedings, and (3) to make any compromise or
settlement in connection with such taking or damage. Mortgagor authorizes
Mortgagee to collect and receive such awards and compensation, to give proper
receipts and acquittances therefor and in Mortgagee's discretion to apply the
same toward the payment of the Obligations, notwithstanding the fact that the
Obligations, or a portion thereof, may not then be due and payable, or to the
restoration of the Mortgaged Property in accordance with the provisions set
forth in the second-to-last sentence of Section 11(c) above. Mortgagor further
agrees to make, execute, and deliver to Mortgagee, at any time upon request,
free and clear of any encumbrance of any kind whatsoever, any and all further
assignments and other instruments deemed necessary by Mortgagee for the purpose
of validly and sufficiently assigning all compensations and awards made to
Mortgagor for any taking, either permanent or temporary, under any such
proceeding.
13. RELEASE OF MORTGAGE. Mortgagee agrees to promptly and
unconditionally release this Mortgage (subject to the provisions set forth in
Section 6(b)) as follows:
(a) in the event of a bona fide sale (other than a "sale
leaseback" or other similar financing transaction) of the Mortgaged Property to
a third party that is not affiliated with Mortgagor, provided that each of the
following conditions is satisfied: (i) neither Mortgagor nor any of its
respective affiliates continue to use or occupy the Mortgaged Property or any
part thereof; (ii) Mortgagor shall consult with Mortgagee prior to such sale and
shall obtain Mortgagee's prior written consent with respect to such sale and the
sales price (such consent not to be unreasonably withheld); and (iii) all of the
proceeds of such sale are applied towards repayment of the Obligations or
otherwise applied in compliance with the provisions of Section 6(b) hereof.
(b) in the event that Mortgagee is paid in full for all amounts
owing (or what shall or may become owing under the Relevant Documents) to
Mortgagee by Mortgagor and any of its former affiliated debtors, including the
indefeasible payment and satisfaction in full of the Obligations.
(c) on December 31, 2014 (or on such earlier date as permitted
under and pursuant to the provisions of Section 6(b) hereof); provided, however,
that if on such date, any amount secured by this Mortgage has not been
indefeasibly paid in full, then this Mortgage shall be deemed amended to extend
the term hereof until such obligations are so paid.
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14. CHANGES IN THE LAWS REGARDING TAXAION. If any law is enacted
or adopted or amended after the date of this Mortgage which imposes a tax,
either directly or indirectly, on the Obligations or Mortgagee's interest in the
Mortgaged Property, Mortgagor will pay such tax, with interest and penalties
thereon, if any, PROVIDED, HOWEVER, that Mortgagor shall not be obligated to pay
any tax which is imposed on the net income of Mortgagee or franchise taxes or
doing business taxes imposed on Mortgagee. In the event that the payment of such
tax or interest and penalties by Mortgagor would be unlawful or taxable to
Mortgagee or unenforceable or provide the basis for a defense of usury, then in
any such event, Mortgagee shall have the option, by written notice of not less
than ninety (90) days, to declare the Obligations immediately due and payable.
15. NO CREDITS ON ACCOUNT OF THE OBLIGATIONS. (i) Mortgagor will
not claim or demand or be entitled to any credit or credits on account of the
Obligations for any part of the Impositions assessed against the Mortgaged
Property, or any part thereof, and (ii) no deduction shall otherwise be made or
claimed from the assessed value of the Mortgaged Property, or any part hereof,
for real estate tax purposes by reason of this Mortgage or the Obligations if
the effect of such deduction would impose on Mortgagee a tax, either directly or
indirectly, for which it otherwise would not have been liable.
16. DOCUMENTARY STAMPS. If at any time the United States of
America, any State thereof or any subdivision of any such State shall require
revenue or other stamps to be affixed to the Notes or this Mortgage, or impose
any other tax or charge on the same, Mortgagor will pay for the same, with
interest and penalties thereon, if any.
17. CONTROLLING AGREEMENT. It is expressly stipulated and agreed
to be the intent of Mortgagor and Mortgagee at all times to comply with
applicable state law or applicable United States federal law (to the extent that
it permits Mortgagee to contract for, charge, take, reserve, or receive a
greater amount of interest than under state law) and that this Section shall
control every other covenant and agreement in this Mortgage and the other
Relevant Documents. If the applicable law (state or federal) is ever judicially
interpreted so as to render usurious any amount called for under the Notes or
under any of the other Relevant Documents, or contracted for, charged, taken,
reserved, or received with respect to the Obligations, or if Mortgagee's
exercise of the option to accelerate the maturity of the Notes, or if any
prepayment by Mortgagor results in Mortgagor having paid any interest in excess
of that permitted by applicable law, then it is Mortgagor's and Mortgagee's
express intent that all excess amounts theretofore collected by Mortgagee shall
be credited on the principal balance of the Notes and all other Obligations (or,
if the Notes and all other Obligations have been or would thereby be paid in
full, refunded to Mortgagor), and the provisions of the Notes and the other
Relevant Documents immediately be deemed reformed and the amounts thereafter
collectible hereunder and thereunder reduced, without the necessity of the
execution of any new documents, so as to comply with the applicable law, but so
as to permit the recovery of the fullest amount otherwise called for hereunder
or thereunder. All sums paid or agreed to be paid to Mortgagee for the use,
forbearance, or detention of the Obligations shall, to the extent permitted by
applicable law, be amortized, prorated, allocated, and spread throughout the
full
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stated term of the Obligations until payment in full so that the rate or amount
of interest on account of the Obligations does not exceed the maximum rate of
interest permitted by law from time to time in effect and applicable to the
Obligations for so long as the Obligations are outstanding.
18. PERFORMANCE OF OTHER AGREEMENTS. Mortgagor shall observe and
perform in all respects the terms to be observed or performed by Mortgagor under
any agreement or recorded instrument affecting or pertaining to the Mortgaged
Property.
19. RIGHT TO PERFORM THE OBLIGATIONS. Subject to the terms of the
Relevant Documents, if any default exists, Mortgagee shall have the right, but
not the obligation, to cure such default in the name and on behalf of Mortgagor.
All sums advanced and expenses incurred at any time by Mortgagee under this
Section 19, or otherwise under this Mortgage or any of the other Relevant
Documents or applicable law (including, without limitation, the costs and
expenses of Mortgagee and its agents incurred in connection with the
preservation, collection and enforcement of this Mortgage or of the liens
created hereby), shall bear interest from the date that such sum is advanced or
expense incurred, to and including the date of reimbursement, computed at the
Default Rate (as defined in the Notes), and all such sums, together with
interest thereon, shall constitute additions to the Obligations and shall be
secured by this Mortgage and Mortgagor covenants and agrees to pay them to the
order of the Mortgagee promptly upon demand.
20. FURTHER ACTS, ETC. Mortgagor will, at the cost of Mortgagor,
and without expense to Mortgagee, do, execute, acknowledge and deliver all and
every such further acts, deeds, conveyances, mortgages, assignments, notices of
assignment, Uniform Commercial Code financing statements or continuation
statements, transfers and assurances as Mortgagee shall, from time to time,
reasonably require, for the better assuring, conveying, assigning, transferring,
and confirming unto Mortgagee the property and rights hereby mortgaged, given,
granted, bargained, sold, alienated, enfeoffed, conveyed, confirmed, warranted,
pledged, assigned and hypothecated (including, without limitation, the
assignment of leases and rents contained in Section 8 hereof) or intended now or
hereafter so to be, or which Mortgagor may be or may hereafter become bound to
convey or assign to Mortgagee, or for carrying out the intention or facilitating
the performance of the terms of this Mortgage or for filing, registering or
recording this Mortgage. Mortgagor, on demand, will execute and deliver and,
Mortgagor hereby authorizes Mortgagee to execute in the name of Mortgagor or
without the signature of Mortgagor to the extent Mortgagee may lawfully do so,
one or more financing statements, chattel mortgages or other instruments, to
evidence more effectively the security interest of Mortgagee in the Mortgaged
Property. Notwithstanding anything to the contrary contained herein, Mortgagor
shall not be obligated to execute, deliver, file or record any additional
documents which increase Mortgagor's obligations under this Mortgage or the
Relevant Documents. Mortgagor grants to Mortgagee an irrevocable power of
attorney coupled with an interest for the purpose of exercising the rights
provided for in Section 19 and this Section 20.
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21. RECORDING OF MORTGAGE, ETC. Mortgagor forthwith upon the
execution and delivery of this Mortgage and thereafter, from time to time, will
cause this Mortgage, and any security instrument creating a lien or security
interest or evidencing the lien hereof upon the Mortgaged Property and each
instrument of further assurance to be filed, registered or recorded in such
manner and in such places as may be required by any present or future law in
order to publish notice of and fully to protect the lien or security interest
hereof upon, and the interest of Mortgagee in, the Mortgaged Property. Mortgagor
will pay all filing, registration or recording fees, the costs and fees of local
counsel for Mortgagee, including, without limitation, costs and fees for local
counsel review of the Mortgage and Subordination Agreement and the preparation
of opinion letters in connection therewith, and all expenses incident to the
execution and acknowledgment of this Mortgage (but not including fees of
Mortgagee's New York counsel in connection with the preparation of this
Mortgage), any deed of trust or mortgage supplemental hereto, any security
instrument with respect to the Mortgaged Property and any instrument of further
assurance, and all federal, state, county and municipal, taxes, duties, imposts,
assessments and charges arising out of or in connection with the execution and
delivery of this Mortgage, any deed of trust or mortgage supplemental hereto,
any security instrument with respect to the Mortgaged Property or any instrument
of further assurance (other than income or franchise taxes imposed on
Mortgagee), except where prohibited by law so to do. Mortgagor shall hold
harmless and indemnify Mortgagee, its successors and assigns, against any
liability incurred by reason of the imposition of any tax on the making and
recording of this Mortgage. Mortgagor shall pay all title costs and premiums in
connection with the ALTA lender's title insurance policy issued by Chicago Title
Insurance Company for the benefit of Mortgagee in connection with this Mortgage
(including payment for the cost of any property surveys ("Surveys") prepared in
connection therewith), which title insurance policy shall be in form and
substance satisfactory to Mortgagee containing such endorsements as Mortgagee
may reasonably request, including, without limitation, the deletion of any
creditor's rights exception and (to the extent available) a variable rate
endorsement; survey endorsement; comprehensive endorsement; first loss
endorsement; last dollar endorsement; tie-in endorsement; future advances
endorsement; access coverage; tax parcel coverage; contiguity (if applicable)
coverage; and such other endorsements as Mortgagee shall reasonably require. In
the event that any Survey with respect to the Mortgaged Property reveals any
encumbrances, restrictions, building code or zoning violations or other matters
which in Mortgagee's reasonable judgment, materially impair Mortgagee's first
priority lien in the Mortgaged Property, Mortgagor agrees to cooperate with
Mortgagee in performing any acts reasonably requested by Mortgagee to cause such
encumbrances, restrictions, violations or other matters to be removed or
remedied as appropriate.
22. REPORTING REQUIREMENTS. Mortgagor agrees to give prompt
notice to Mortgagee of the insolvency or bankruptcy filing of Mortgagor. In
addition, Mortgagor will give notice to Mortgagee in writing not later than ten
(10) days after: (i) the occurrence of any Event of Default with respect to
Mortgagor hereunder, or (ii) notice to Mortgagor of any action, litigation or
proceeding instituted to recover possession of the Mortgaged Property from
Mortgagor or for any other purpose affecting this Mortgage or of any other
action, litigation or proceeding instituted against Mortgagor or judgment
rendered against Mortgagor;
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and such notice to Mortgagee shall include a true copy of any notice of default,
or if any action is then proceeding, copies of any pleadings and papers received
by Mortgagor.
23. EVENTS OF DEFAULT. The term "EVENT OF DEFAULT" as used herein
shall mean the occurrence or happening, at any time and from time to time, of
one or more of the following events:
(a) a default or event of default under any of the Notes
(including, without limitation, any event of default described in Section 3 of
any of the Notes), which remains uncured following the expiration of any
applicable cure periods;
(b) Mortgagor (i) shall fail to perform when due any payment
obligation under the terms of this Mortgage or the other Relevant Documents
within ten days after such amount becomes due, or (ii) shall be in violation of
any of the obligations or covenants contained herein or therein and such default
shall continued unremedied for a period of thirty (30) days, provided that if
such default is not readily susceptible of cure in such thirty (30) day period,
and provided that Mortgagor proceeds in a diligent manner to cure such default,
Mortgagor shall have such additional time to effect such cure as shall be
reasonably necessary to effect such cure;
(c) Failure by Mortgagor to maintain insurance and deliver
evidence thereof pursuant to Section 10; or
(d) a default under any other mortgage, deed of trust or other
security instrument covering the Mortgaged Property or a portion thereof which
remains uncured following the expiration of any applicable cure periods.
24. REMEDIES. (a) Upon the occurrence of any Event of Default,
Mortgagee may take such action permitted in law or at equity, without notice or
demand, as it deems advisable to protect and enforce its rights against
Mortgagor and in and to the Mortgaged Property, by Mortgagee itself or
otherwise, including, but not limited to, the following actions, each of which
may be pursued concurrently or otherwise, at such time and in such order as
Mortgagee may determine, in its sole discretion, without impairing or otherwise
affecting the other rights and remedies of Mortgagee:
(i) declare the entire principal amount of the indebtedness and
Obligations secured hereby with interest accrued thereon to be
immediately due and payable;
(ii) institute a proceeding or proceedings, judicial or
nonjudicial, by advertisement or otherwise, for the complete
foreclosure of this Mortgage or for the sale of the Mortgaged
Property upon execution in which case the Mortgaged Property or
any interest therein may be sold for cash or upon credit in one
or more parcels or in several interests or portions and in any
order or manner in
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accordance with the laws of the jurisdiction in which such
Mortgaged Property is located;
(iii) with or without entry, to the extent permitted, and
pursuant to the procedures provided by, applicable law, institute
proceedings for the foreclosure of this Mortgage or for the sale
of the Mortgaged Property upon execution for the Obligations then
due and payable subject to the continuing lien of this Mortgage,
in accordance with the laws of the jurisdiction in which such
Mortgaged Property is located, for the balance of the Obligations
not then due;
(iv) sell for cash or upon credit the Mortgaged Property or any
part thereof and all estate, claim, demand, right, title and
interest of Mortgagor therein and rights of redemption thereof,
pursuant to power of sale or otherwise, at one or more sales, as
an entirety or in parcels, at such time and place, upon such
terms and after such notice thereof as may be required or
permitted by the laws of the jurisdiction in which such Mortgaged
Property is located;
(v) institute an action, suit or proceeding in equity for the
specific performance of any covenant, condition or agreement
contained herein or in the other Relevant Documents;
(vi) recover judgment on the Notes either before, during or after
any proceedings for the enforcement of this Mortgage;
(vii) prior to, concurrently with, or subsequent to the
institution of foreclosure proceedings or the sale of the
Mortgaged Property upon execution, apply for the appointment of a
trustee, receiver, liquidator or conservator of the Mortgaged
Property, as a matter of strict right, without notice and without
regard for the adequacy of the security for the Obligations or
the interest of the Mortgagor therein and without regard for the
solvency of the Mortgagor or of any person, firm or other entity
liable for the payment of the Obligations, and Mortgagor hereby
consents to such appointment;
(viii) prior to, concurrently with or subsequent to the
institution of foreclosure proceedings or the sale of the
Mortgaged Property upon execution, enforce Mortgagee's interest
in the Leases and Rents and enter into or upon the Mortgaged
Property and take exclusive possession thereof, either personally
or by its agents, nominees or attorneys and dispossess Mortgagor
and its agents and servants therefrom, and thereupon Mortgagee
may (whether or not a receiver has been appointed) as
attorney-in-fact or agent of Mortgagor, or in its own name and
under the powers herein granted,(A) use, operate, manage,
control, insure, maintain, repair, restore and otherwise deal
with all and every part of the Mortgaged Property and conduct the
business thereat; (B) complete any construction on the Mortgaged
Property in such manner and form as Mortgagee deems advisable;
(C) make alterations, additions, renewals,
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replacements and improvements to or on the Mortgaged Property;
(D) exercise all rights and powers of Mortgagor with respect to
the Mortgaged Property, whether in the name of Mortgagor or
otherwise (including, without limitation, the right to make,
cancel, enforce or modify Leases, obtain and evict tenants, and
demand, sue for, collect and receive all earnings, revenues,
rents, issues, profits and other income of the Mortgaged Property
and every part thereof); and (E) apply the receipts from the
Mortgaged Property to the payment of the Obligations, after
deducting therefrom all reasonable expenses (including, without
limitation, reasonable attorneys' fees) incurred in connection
with the aforesaid operations and all amounts necessary to pay
the taxes, assessments, insurance and other charges in connection
with the Mortgaged Property, it being agreed that should
Mortgagee incur any liability, loss or damage in the defense of
any claims or demands, the amount thereof, including costs,
expenses and reasonable attorneys' fees shall be secured hereby,
and Mortgagor shall reimburse Mortgagee therefor immediately upon
demand;
(ix) require Mortgagor to pay monthly in advance to Mortgagee, or
any receiver appointed to collect the Rents, the fair and
reasonable rental value for the use and occupation of any portion
of the Mortgaged Property occupied by Mortgagor and require
Mortgagor to vacate and surrender possession to Mortgagee of the
Mortgaged Property or to such receiver and, in default thereof,
evict Mortgagor by summary proceedings or otherwise; and
(x) pursue such other rights and remedies as may be available
under the Relevant Documents or otherwise at law or in equity or
under the Uniform Commercial Code including the right to
establish a lock box for all Rents and other receivables of
Mortgagor relating to the Mortgaged Property.
In the event of a sale, by foreclosure or otherwise, of less than all of the
Mortgaged Property, this Mortgage shall continue as a lien on the remaining
portions of the Mortgaged Property.
The proceeds of any sale made under or by virtue of this Section
24, together with any other sums which then may be held by Mortgagee under this
Mortgage, whether under the provisions of this Section or otherwise, shall be
applied by Mortgagee in the following order of priority: first, on account of
all reasonable costs and expenses incident to the foreclosure proceedings,
including all such items as are mentioned in this Section 24; second, all other
items which under the terms hereof constitute secured indebtedness, which are
any amounts due under this Mortgage, or under the other Relevant Documents
(including any amounts required to be escrowed pursuant to Section 6(b)); third,
any surplus to Mortgagor, its successors or assigns, as their rights may appear.
(b) Upon any sale made under or by virtue of this Section 24,
whether made under the power of sale herein granted or under or by virtue of
judicial proceedings or of a judgment or decree of foreclosure and sale,
Mortgagee may bid for and acquire the Mortgaged Property or any part thereof and
in lieu of paying cash therefor may make settlement for the
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purchase price by crediting upon the Obligations the net sales price after
deducting therefrom the expenses of the sale and costs of the action and any
other sums which Mortgagee is authorized to deduct under this Mortgage.
(c) No recovery of any judgment by Mortgagee and no levy of an
execution under any judgment upon the Mortgaged Property or upon any other
property of Mortgagor shall affect in any manner or to any extent the lien of
this Mortgage upon the Mortgaged Property or any part thereof, or any liens,
rights, powers or remedies of Mortgagee hereunder, but such liens, rights,
powers and remedies of Mortgagee shall continue unimpaired as before.
(d) Mortgagee may adjourn, terminate or rescind any proceeding or
other action brought in connection with its exercise of the remedies provided in
this Section 24 at any time before the conclusion thereof, as determined in
Mortgagee's sole discretion and without prejudice to Mortgagee.
(e) Mortgagee may resort to any remedies and the security given
by this Mortgage or the other Relevant Documents in whole or in part, and in
such portions and in such order as determined by Mortgagee's sole discretion. No
such action shall in any way be considered a waiver of any rights, benefits or
remedies evidenced or provided by this Mortgage or the other Relevant Documents.
The failure of Mortgagee to exercise any right, remedy or option provided in
this Mortgage or the other Relevant Documents shall not be deemed a waiver of
such right, remedy or option or of any covenant or obligation secured by this
Mortgage or the other Relevant Documents. Subject to the provisions of the
Relevant Documents, no acceptance by Mortgagee of any payment after the
occurrence of any Event of Default and no payment by Mortgagee of any obligation
for which Mortgagor is liable hereunder shall be deemed to waive or cure any
Event of Default with respect to Mortgagor, or Mortgagor's liability to pay such
obligation. No sale of all or any portion of the Mortgaged Property, no
forbearance on the part of Mortgagee and no extension of time for the payment of
the whole or any portion of the Obligations or any other indulgence given by
Mortgagee to Mortgagor, shall operate to release or in any manner affect the
interest of Mortgagee in the remaining Mortgaged Property or the liability of
Mortgagor to pay the Obligations. No waiver by Mortgagee shall be effective,
unless it is in writing and then only to the extent specifically stated.
(f) The interests and rights of Mortgagee under this Mortgage and
the other Relevant Documents, and the liens and security interests created and
evidenced by this Mortgage and the other Relevant Documents, shall not be
impaired by any indulgence, including (i) any renewal, extension or modification
which Mortgagee may grant with respect to any of the Obligations, (ii) any
surrender, compromise, release, renewal, extension, exchange or substitution
which Mortgagee may grant with respect to the Mortgaged Property or any portion
thereof; or (iii) any release or indulgence granted to any maker, endorser,
guarantor or surety of any of the Obligations.
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(g) Upon the occurrence of any Event of Default under Section 23,
in any suit to foreclose the lien hereof or enforce any other remedy of
Mortgagee under this Mortgage, there shall be allowed and included as additional
indebtedness in the decree for sale or other judgment or decree all reasonable
expenditures and expenses which may be paid or incurred by or on behalf of
Mortgagee for attorneys' fees, appraiser's fees, outlays for documentary and
expert evidence, stenographers' charges, publication costs, and costs (which may
be estimated as to items to be expended after entry of the decree) of procuring
all such abstracts of title, title searches and examinations, title insurance
policies, Torrens certificates, and similar data and assurances with respect to
title as Mortgagee may deem reasonably necessary either to prosecute such suit
or to evidence to bidders at any sale which may be had pursuant to such decree
the true condition of the title to or the value of the Mortgaged Property. All
such reasonable expenditures and expenses which Mortgagee may incur as permitted
by this Section for the protection of the Mortgaged Property and the maintenance
of the lien of this Mortgage, including, but not limited to, the fees and
out-of-pocket disbursements of any attorney employed by Mortgagee in any
litigation or proceeding affecting this Mortgage, including, but not limited to,
bankruptcy proceedings or preparations for the commencement or defense of any
proceeding or threatened suit or proceeding, shall be immediately due and
payable by Mortgagor and shall be secured by this Mortgage.
25. RIGHT OF ACCESS. Mortgagor shall permit agents,
representatives and employees of Mortgagee to (i) inspect the Mortgaged Property
or any part thereof, PROVIDED that such inspection does not materially interfere
with the tenants of the Mortgaged Property or violate the terms of any Lease,
(ii) to examine and make abstracts from any of Mortgagor's books and records and
(iii) to discuss the business, operations, properties and financial and other
condition of Mortgagor with officers of Mortgagor and with its independent
certified public accountants, at such reasonable times as may be requested by
Mortgagee upon reasonable advance notice.
26. SECURITY AGREEMENT. This Mortgage is both a real property
mortgage and a "security agreement" within the meaning of the Uniform Commercial
Code. The Mortgaged Property includes both real and personal property and all
other rights and interests, whether tangible or intangible in nature, of
Mortgagor in the Mortgaged Property. Mortgagor by executing and delivering this
Mortgage has granted and hereby grants to Mortgagee, as security for the
Obligations, a security interest in the Mortgaged Property to the full extent
that the Mortgaged Property may be subject to the Uniform Commercial Code (said
portion of the Mortgaged Property so subject to the Uniform Commercial Code
being called in this paragraph the "COLLATERAL"). Mortgagor hereby agrees with
Mortgagee to execute and deliver to Mortgagee, in form and substance
satisfactory to Mortgagee, such financing statements and such further assurances
as Mortgagee may from time to time, reasonably consider necessary to create,
perfect, and preserve Mortgagee's security interest herein granted. All or part
of the Mortgaged Property is or is to become "fixtures" as defined in the
Uniform Commercial Code, and this Mortgage, upon being filed for record in the
real estate records of the city or county wherein such fixtures are situated,
shall also constitute a "fixture filing" for the purposes of the Uniform
Commercial Code upon such of the Mortgaged Property that is or
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<PAGE>
may become fixtures. Information concerning the security interest herein granted
may be obtained from the parties at the addresses of the parties set forth in
the first paragraph of this Mortgage. Mortgagor's chief executive office and
principal place of business is the Mortgagor's address set forth in the first
paragraph of this Mortgage, and the place where Mortgagor's books and records in
respect of where the Mortgaged Property is located are kept is the address of
Mortgagor set forth in the first paragraph of this Mortgage. If an Event of
Default shall occur which shall remain uncured, Mortgagee, in addition to any
other rights and remedies which it may have, shall have and may exercise
immediately and without demand, any and all rights and remedies granted to a
secured party upon default under the Uniform Commercial Code, (including,
without limitation, to the extent permitted by law, the right to take possession
of the Collateral or any part thereof, and to take such other measures as
Mortgagee may deem necessary for the care, protection and preservation of the
Collateral). Upon request or demand of Mortgagee, Mortgagor shall at its expense
assemble the Collateral and make it available to Mortgagee at a convenient place
acceptable to Mortgagee. Mortgagor shall pay to Mortgagee on demand therefor any
and all reasonable expenses (including, without limitation, reasonable legal
expenses and attorneys' fees) incurred or paid by Mortgagee in protecting the
interest in the Collateral and in enforcing the rights hereunder with respect to
the Collateral. Any notice of sale, disposition or other intended action by
Mortgagee with respect to the Collateral sent to Mortgagor at least ten (10)
business days prior to such action or such notice as is otherwise required by
law or the Relevant Documents, shall constitute commercially reasonable notice
to Mortgagor. The proceeds of any disposition of the Collateral, or any part
thereof, may be applied by Mortgagee to the payment of the Obligations in such
priority and proportions as Mortgagee shall determine in its sole discretion. In
the event of any change in name, identity or structure of Mortgagor, Mortgagor
shall notify Mortgagee thereof and, promptly after request, shall execute, file
and record such Uniform Commercial Code forms as are necessary to maintain the
priority of Mortgagee's lien upon and security interest in the Collateral, and
shall pay all expenses and fees in connection with the filing and recording
thereof. If Mortgagee shall require the filing or recording of additional
Uniform Commercial Code forms or continuation statements, Mortgagor shall,
promptly after request, execute, file and record such Uniform Commercial Code
forms or continuation statements as Mortgagee shall deem necessary, and shall
pay all expenses and fees in connection with the filing and recording thereof,
it being understood and agreed, however, that no such additional documents shall
materially increase Mortgagor's obligations under this Mortgage or the other
Relevant Documents. Mortgagor hereby irrevocably appoints Mortgagee as its
attorney-in-fact, coupled with an interest, to file with the appropriate public
office on its behalf any UCC financing statements (or related documents) signed
only by Mortgagee, as secured party, in connection with the Collateral covered
by this Mortgage, such appointment to terminate upon the release of this
Mortgage.
27. ACTIONS AND PROCEEDSING. Mortgagee has the right to appear in
and defend any action or proceeding brought with respect to the Mortgaged
Property and to bring any action or proceeding, in the name and on behalf of
Mortgagor, which Mortgagee, in its reasonable discretion, decides should be
brought to protect its interest under this Mortgage or in the Mortgaged
Property. Subject to the foregoing, Mortgagor shall appear in and contest
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<PAGE>
any action or proceeding purporting to affect the security hereof and shall pay
all reasonable costs and expenses including cost of evidence of title and
attorney's fees, in any such action or proceeding in which Mortgagee may appear.
Mortgagee shall, at its option, be subrogated to the lien of any mortgage or
other security instrument discharged in whole or in part by the Obligations, and
any such subrogation rights shall constitute additional security for the payment
of the Obligations.
28. WAIVER OF SETOFF AND COUNTERCLAIM. Except as may be permitted
under the Relevant Documents, all amounts due under this Mortgage, the Notes and
the other Relevant Documents shall be payable without setoff or counterclaim
whatsoever.
29. LIENS. Mortgagor warrants, covenants and agrees to pay and
promptly discharge, at Mortgagor's cost and expense, all taxes, assessments and
governmental charges levied upon it, its income and assets as and when such
taxes, assessments and charges are due and payable (including, without
limitation, all Impositions), as well as all lawful claims for labor materials
and supplies or otherwise which could become a lien, and all liens, encumbrances
and charges upon the Mortgaged Property, or any part thereof or interest
therein; provided that the existence of any mechanic's, laborer's,
materialman's, supplier's or vendor's lien or right thereto shall not constitute
a violation of this Section if payment is not yet due under the contract which
is the foundation thereof. Notwithstanding the foregoing, Mortgagor shall not be
in default for failure to pay or discharge Impositions or mechanic's or
materialman's or similar lien asserted against the Mortgaged Property if, and so
long as, (a) Mortgagor shall have notified Mortgagee of same within seven (7)
days of obtaining knowledge thereof; (b) Mortgagor shall diligently and in good
faith contest the same by appropriate legal proceedings which shall operate to
prevent the enforcement or collection of the same and the sale of the Mortgaged
Property or any part thereof, to satisfy the same; (c) unless funds are
otherwise reserved, Mortgagor shall furnish to Mortgagee such security as
Mortgagee may reasonably request to insure payment of such Impositions and to
secure and indemnify Mortgagee against any cost, expense, loss or damage in
connection with such contest or postponement of payment,; (d) Mortgagor shall
timely upon final determination thereof pay the amount of any such Impositions,
claim, fine or penalty so determined, together with all costs, interest and
penalties which may be payable in connection therewith; (e) the failure to pay
the Impositions, or mechanic's or materialman's or similar lien claim does not
constitute a default under any other deed of trust, mortgage or security
interest covering or affecting any part of the Mortgaged Property; and (f)
notwithstanding the foregoing, Mortgagor shall immediately upon request of
Mortgagee pay (and if Mortgagor shall fail so to do, Mortgagee may, but shall
not be required to, pay or cause to be discharged or bonded against) any such
Impositions, or claim notwithstanding such contest, if in the reasonable opinion
of Mortgagee, the Mortgaged Property or any part thereof or interest therein may
be in imminent danger of being sold, forfeited, foreclosed, terminated, canceled
or lost.
30. RECOVERY OF SUMS REQUIRED TO BE PAID. Mortgagee shall have
the right from time to time to take action to recover any sum or sums which
constitute a part of the Obligations as the same become due and owing, without
regard to whether or not the balance
27
<PAGE>
of the Obligations shall be due, and without prejudice to the right of Mortgagee
thereafter to bring an action of foreclosure, or any other action, for a default
or defaults by Mortgagor existing at the time such earlier action was commenced.
31. MARSHALING, WAIVER OF REDEMPTION AND OTHER MATTERS. Mortgagor
hereby waives, to the extent permitted by law, the benefit of all appraisement,
valuation, stay, extension, reinstatement, moratorium and redemption laws now or
hereafter in force and all rights of marshaling in the event of any sale
hereunder of the Mortgaged Property or any part thereof or any interest therein.
Further, Mortgagor hereby expressly waives any and all rights of redemption from
sale under any order or decree of foreclosure of this Mortgage on behalf of
Mortgagor, and on behalf of each and every person acquiring any interest in or
title to the Mortgaged Property subsequent to the date of this Mortgage and on
behalf of all persons to the extent permitted by applicable law.
32. NOTICE. Any notice which either party hereto may desire or be
required to give to the other party shall be in writing and delivered by: (x) a
commercial courier or messenger service or (y) by U.S. registered or certified
mail with return receipt requested. Notice by commercial messenger or courier
service will be deemed to have been given on the day when delivered before 4:00
p.m. on a business day in the city in which notice is delivered, provided that
payment for the cost of delivery is not requested of the recipient. Notice by
mail shall be given by registered or certified U.S. Mail, return receipt
requested. Delivery of notice by commercial messenger or courier service or mail
shall be assumed if acceptance of delivery is refused. Notice may be given by
fax but will only be treated as delivered hereunder if: (x) sent between the
hours of 9:00 a.m. and 5:00 p.m. (based on local time at the destination); and
(y) receipt is acknowledged by fax and delivery will be deemed to have been
given on the date the fax acknowledgment is sent. Notices shall be delivered as
follows or at such other place as either party hereto may by notice in writing
(given in accordance with this Section 32) designate:
To Mortgagor: Discovery Zone, Inc.
One Corporate Center
110 East Broward Boulevard
Fort Lauderdale, Florida 33301
Attn: President
Telecopy Number: (954) 627-2670
To Mortgagee: McDonald's Corporation
One McDonald's Plaza
Oak Brook, IL 60523
Attn: General Counsel
Telecopy Number: (630) 623-3000
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33. SOLE DISCRETION OF MORTGAGEE. Wherever pursuant to this
Mortgage, Mortgagee exercises any right given to it to approve or disapprove, or
any arrangement or term is to be satisfactory to Mortgagee, the decision of
Mortgagee to approve or disapprove or to decide that arrangements or terms are
satisfactory or not satisfactory shall be in the sole discretion of Mortgagee
and shall be final and conclusive, except as may be otherwise expressly and
specifically provided herein.
34. NON-WAIVER. The failure of Mortgagee to insist upon strict
performance of any term hereof shall not be deemed to be a waiver of any term of
this Mortgage. Mortgagor shall not be relieved of Mortgagor's Obligations
hereunder by reason of (a) the failure of Mortgagee to comply with any request
of Mortgagor to take any action to foreclose this Mortgage or otherwise enforce
any of the provisions hereof or of the other Relevant Documents, (b) the
release, regardless of consideration, of the whole or any part of the Mortgaged
Property, or of any person liable for the Obligations or any portion thereof, or
(c) any agreement or stipulation by Mortgagee extending the time of payment or
otherwise modifying or supplementing the terms of this Mortgage or the other
Relevant Documents. Mortgagee may resort for the payment of the Obligations to
any other security held by Mortgagee in such order and manner as Mortgagee, in
its discretion, may elect. Mortgagee may take action to recover the Obligations,
or any portion thereof, or to enforce any covenant hereof without prejudice to
the right of Mortgagee thereafter to foreclosure this Mortgage. The rights and
remedies of Mortgagee under this Mortgage shall be separate, distinct and
cumulative and none shall be given effect to the exclusion of the others. No act
of Mortgagee shall be construed as an election to proceed under any one
provision herein to the exclusion of any other provision. Mortgagee shall not be
limited exclusively to the rights and remedies herein stated but shall be
entitled to every right and remedy now or hereafter afforded at law or in
equity.
35 NO ORAL CHANGE. This Mortgage and the other Relevant Documents
constitute the final expression of the entire agreement among the parties
pertaining to the subject matter hereof and thereof and supersede all prior and
contemporaneous agreements, understanding, representations or other
arrangements, whether express or implied, written or oral, of the parties in
connection herewith or therewith except to the extent expressly incorporated or
specifically referred to herein or therein. This Mortgage, and any provisions
hereof, may not be modified, amended, waived, extended, changed, discharged or
terminated orally or by any act or failure to act on the part of Mortgagor or
Mortgagee, but only by an agreement in writing signed by the party against whom
enforcement of any modification, amendment, waiver, extension, change, discharge
or termination is sought.
36. SUCCESSORS AND ASSIGNS. Subject to the provisions hereof
requiring Mortgagee's consent to any transfer of the Mortgaged Property, this
Mortgage shall be binding upon and inure to the benefit of Mortgagor and
Mortgagee and their respective permitted successors and assigns forever.
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37. SEVERABILITY. If any term, covenant or condition of this
Mortgage or the Relevant Documents is held to be invalid, illegal or
unenforceable in any respect, this Mortgage and any such other Relevant Document
shall be construed without such provision.
38. HEADINGS, ETC. The headings and captions of various
paragraphs of this Mortgage are for convenience of reference only and are not to
be construed as defining or limiting, in any way, the scope or intent of the
provisions hereof.
39. DUPLICATE ORIGINALS. This Mortgage may be executed in any
number of duplicate originals and each such duplicate original shall be deemed
to be an original.
40. DEFINITIONS. Unless the context clearly indicates a contrary
intent or unless otherwise specifically provided herein, words used in this
Mortgage may be used interchangeably in singular or plural form and the word
"Mortgagor" shall mean "each Mortgagor and any subsequent owner or owners of the
Mortgaged Property or any part thereof or any interest therein," the word
"Mortgagee" shall mean "Mortgagee and any subsequent holder(s) of the Notes,"
the word "person" shall include an individual, corporation, partnership, trust,
unincorporated association, government, governmental authority, and any other
entity, and the words "Mortgaged Property" shall include any portion of the
Mortgaged Property and any interest therein and the words "attorneys' fees"
shall include any and all attorneys' fees, paralegal and law clerk fees
(including, without limitation, fees at the pre-trial, trial and appellate
levels incurred or paid by Mortgagee in protecting its interest in the Mortgaged
Property and Collateral and enforcing its rights hereunder and all such fees
incurred in connection with any bankruptcy or insolvency proceedings). Whenever
the context may require, any pronouns used herein shall include the
corresponding masculine, feminine or neuter forms, and the singular form of
nouns and pronouns shall include the plural and vice versa.
41. HOMESTEAD. Mortgagor hereby waives and renounces all
homestead and exemption rights provided by the constitution and the laws of the
United States and of any state, in and to the Land as against the collection of
the Obligations, or any part hereof.
42. ASSIGNMENTS. Consistent with and subject to the applicable
provisions of the Relevant Documents, Mortgagee shall have the right to assign
or transfer its rights under this Mortgage without limitation. Any Mortgagee or
transferee shall be entitled to all the benefits afforded Mortgagee under this
Mortgage.
43. WAIVER OF JURY TRIAL. TO THE MAXIMUM EXTENT PERMITTED BY
APPLICABLE LAW, EACH PARTY HERETO HEREBY AGREES NOT TO ELECT A TRIAL BY JURY OF
ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY JURY FULLY
TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO
THE NOTES, THIS MORTGAGE, OR THE OTHER RELEVANT DOCUMENTS, OR ANY CLAIM,
COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH. THIS WAIVER OF
RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND
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<PAGE>
VOLUNTARILY BY SUCH PARTY, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH
INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE
ACCRUE. MORTGAGEE IS HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY
PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY MORTGAGOR.
44. CONSENT TO JURISDICTION. MORTGAGOR AND MORTGAGEE HERETO
CONSENT FOR THEMSELVES AND IN RESPECT OF THEIR PROPERTIES, GENERALLY,
UNCONDITIONALLY AND IRREVOCABLY, TO THE NONEXCLUSIVE JURISDICTION OF THE FEDERAL
AND STATE COURTS IN THE STATE OF NEW YORK WITH RESPECT TO ANY PROCEEDING
RELATING TO ANY MATTER, CLAIM OR DISPUTE ARISING UNDER THE RELEVANT DOCUMENTS OR
THE TRANSACTIONS CONTEMPLATED THEREBY. MORTGAGOR FURTHER CONSENTS, GENERALLY,
UNCONDITIONALLY AND IRREVOCABLY, TO THE NONEXCLUSIVE JURISDICTION OF THE STATE
AND FEDERAL COURTS OF THE STATE IN WHICH ANY OF THE COLLATERAL IS LOCATED IN
RESPECT OF ANY PROCEEDING RELATING TO ANY MATTER, CLAIM OR DISPUTE ARISING WITH
RESPECT TO SUCH COLLATERAL. MORTGAGOR FURTHER IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS, GENERALLY, UNCONDITIONALLY AND IRREVOCABLY, AT THE ADDRESSES
SET FORTH IN THE FIRST PARAGRAPH HEREOF IN CONNECTION WITH ANY OF THE AFORESAID
PROCEEDINGS IN ACCORDANCE WITH THE RULES APPLICABLE TO SUCH PROCEEDINGS. TO THE
EXTENT PERMITTED BY APPLICABLE LAW, MORTGAGOR HEREBY IRREVOCABLY WAIVES ANY
OBJECTION WHICH IT MAY NOW HAVE OR HAVE IN THE FUTURE TO THE LAYING OF VENUE IN
RESPECT OF ANY OF THE AFORESAID PROCEEDINGS BROUGHT IN THE COURTS REFERRED TO
ABOVE AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
NOTHING HEREIN SHALL AFFECT THE RIGHT OF MORTGAGEE TO SERVE PROCESS IN ANY
MANNER PERMITTED BY LAW OR TO COMMENCE PROCEEDINGS OR OTHERWISE PROCEED AGAINST
MORTGAGOR IN ANY JURISDICTION.
45. GOVERNING LAW. This Mortgage shall be governed by and
construed in accordance with the laws of the State of New York including,
without limitation, Section 5-1401 of the General Obligations Law, but otherwise
without regard to conflict of law principles; PROVIDED, HOWEVER, that with
respect to the creation, attachment, perfection, priority and procedures
relating to the enforcement of the liens and security interests created by or
pursuant to this Mortgage and relating to real property, this Mortgage shall be
governed by and construed in accordance with the laws of the state in which the
Land is located.
46. LIEN ABSOLUTE, MULTI-SITE REAL ESTATE AND MULTIPLE COLLATERAL
TRANSACTION. Mortgagor acknowledges that this Mortgage and a number of other
Relevant Documents and those documents required by the Relevant Documents
together secure the
31
<PAGE>
Obligations. Mortgagor agrees that the lien of this Mortgage and all obligations
of the Mortgagor hereunder shall be absolute and unconditional and shall not in
any manner be affected or impaired by:
(a) any lack of validity or enforceability of the Notes or any
other Relevant Document, any agreement with respect to any of the Obligations or
any other agreement or instrument relating to any of the foregoing;
(b) any acceptance by Mortgagee of any security for or guarantees
of any of the indebtedness hereby secured;
(c) any failure, neglect or omission on the part of Mortgagee to
realize upon or protect any of the indebtedness hereby secured or any of the
collateral security therefor, including the Relevant Documents;
(d) any change in the time, manner or place of payment of, or in
any other term of, all or any of the Obligations;
(e) any release (except as to the property or obligation
released), sale, pledge, surrender, compromise, settlement, nonperfection,
renewal extension, indulgence, alteration, exchange, modification or disposition
of any of the Obligations hereby secured or of any of the collateral security
therefor;
(f) any amendment or waiver of or any consent to any departure
from the Notes or any other Relevant Documents or of any guaranty thereof
(except to the extent of such amendment, waiver or consent in writing by
Mortgagee), if any, and Mortgagee may in its discretion foreclose, exercise any
power of sale, or exercise any other remedy available to it under any or all of
the Relevant Documents without first exercising or enforcing any of its rights
and remedies hereunder; and
(g) any exercise of the rights or remedies of Mortgagee hereunder
or under any or all of the Relevant Documents.
Mortgagor specifically consents and agrees that Mortgagee may exercise its
rights and remedies hereunder and under the other Relevant Documents separately
or concurrently and in any order that Mortgagee may deem appropriate.
47. FUTURE ADVANCES. This Mortgage shall secure not only existing
indebtedness, but also such future advances, whether such advances are
obligatory or are to be made at the option of Mortgagee, or otherwise, as are
made by Mortgagee to Mortgagor after the date hereof, to the same extent as if
such future advances were made on the date of the execution of this Mortgage.
Nothing in this Mortgage shall be deemed an obligation on the part of the
Mortgagee to make any future advances.
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<PAGE>
48. STATE SPECIFIC PROVISIONS. The provisions of Exhibit B are
hereby incorporated by reference as though set forth in full herein.
49. NO MERGER OF ESTATES. It is the intention and agreement of
Mortgagor and Mortgagee that there shall be no merger of any leasehold estate in
the Mortgaged Property with the fee interest in the Mortgaged Property or any
other estate or interest in the Mortgaged Property, and there shall be no merger
of this Mortgage and any estate in the Mortgaged Property, by reason of the fact
that the same person may own or hold (a) any leasehold interest in the Mortgaged
Property, and/or (b) this Mortgage, and/or (c) the fee interest in the Mortgaged
Property or any other estate or interest in the Mortgaged Property.
50. SUBORDINATE LIEN. Notwithstanding anything to the contrary
contained herein, Mortgagor shall be permitted to grant a subordinate lien on
the Mortgaged Property in favor of State Street Bank and Trust Company, solely
in its capacity as trustee and collateral agent under and pursuant to the
Indenture (as hereinafter defined) (the "SUBORDINATED CREDITOR") as security for
the obligations of Mortgagor under that certain Indenture between Mortgagor and
the Subordinated Creditor dated as of July 22, 1997 (the "INDENTURE"), provided
that such lien in favor of the Subordinated Creditor is junior, subject and
subordinate to the lien of this Mortgage in accordance with and pursuant to the
terms and conditions set forth in that certain Subordination Agreement dated as
of the date hereof between Mortgagee and the Subordinated Creditor with respect
to the Mortgaged Property (the "SUBORDINATION AGREEMENT"), and provided,
further, that any event which gives the Subordinated Creditor the right to
accelerate the obligations secured by such subordinate lien shall automatically
constitute an Event of Default hereunder.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE AND NOTARY PAGES FOLLOW.]
33
<PAGE>
IN WITNESS WHEREOF, this Mortgage has been duly executed under
seal by Mortgagor as of the day and year first above written.
MORTGAGOR:
ATTEST: DISCOVERY ZONE, INC., a
Delaware corporation
By: /s/ Robert Rooney By: /s/ Scott Bernstein
-------------------- -----------------------
Name: Robert Rooney Name: Scott Bernstein
Title: Secretary Title: President
[Corporate Seal]
MORTGAGEE:
ATTEST: McDONALD'S CORPORATION,
a Delaware corporation
By: /s/ Joseph R. Thomas By: /s/ Gloria Santona
--------------------- --------------------
Name: Joseph R. Thomas Name: Gloria Santona
Title: Vice President, Associate Title: Vice President,
General Counsel & Assistant Deputy General
Secretary Counsel &
Secretary
[Corporate Seal]
<PAGE>
STATE OF NEW YORK )
COUNTY OF WESTCHESTER)
BEFORE ME, the undersigned Notary Public, personally appeared
Scott Bernstein and Robert Rooney, known to me (or satisfactorily proven) to be
the persons who executed the foregoing document, who, having been duly sworn in
accordance with law, acknowledged themselves to be President and Secretary of
DISCOVERY ZONE, INC., a Delaware corporation, and that, being duly authorized to
do so, they executed the foregoing instrument for and on behalf of said
corporation.
WITNESS my hand and seal this 28 day of July, 1997.
[Notarial Seal]
/s/ Mark D. Woodward
--------------------
Notary Public
My commission expires: _______
<PAGE>
STATE OF ILLINOIS )
COUNTY OF Dupage )
BEFORE ME, the undersigned Notary Public, personally appeared
Gloria Santona and Joseph R. Thomas, known to me (or satisfactorily proven) to
be the persons who executed the foregoing document, who, having been duly sworn
in accordance with law, acknowledged themselves to be VP, Deputy General Counsel
& Secretary and VP, Associate General Counsel & Asst. Secretary of McDONALD'S
CORPORATION, a Delaware corporation, and that, being duly authorized to do so,
they executed the foregoing instrument for and on behalf of said corporation.
WITNESS my hand and seal this 31st day of July, 1997.
[Notarial Seal]
/s/ Gordana Vujanovich
-----------------------
Notary Public
My commission expires: 2/15/99
<PAGE>
Philadelphia
Philadelphia County, Pennsylvania
EXHIBIT A
ALL THAT CERTAIN lot or piece of ground, Situate in the 66th Ward of the City of
Philadelphia, Commonwealth of Pennsylvania and described in accordance with
ALTA/ACSM Land Title Survey of Parcel M-7R made for Leaps and Bounds Inc. by
Pennoni Associates Inc. dated May 18, 1993, as follows, to wit:
BEGINNING at a point the following course and distance from a point being the
intersection of the extended Easterlymost right-of-way line of Woodhaven Road
(State Highway 0063) (variable width) and the extended Southerlymost line of
Knights Road (State Highway 1015) (100' wide):
(A) North 53 degrees, 47 minutes, 12 seconds East a distance of 3943.48 feet to
the aforementioned point of beginning.
Thence (1) North 50 degrees, 54 minutes, 30 seconds East a distance of 326.52
feet to a point;
Thence (2) North 41 degrees, 17 minutes, 20 seconds West a distance of 338.54
feet to a point;
Thence (3) North 89 degrees, 35 minutes, 24 seconds West a distance of 64.92
feet to a point on the Southerly line of Knights Road (State Highway 1015);
Thence (4) along said line North 40 degrees, 12 minutes, 51 seconds East, a
distance of 1.29 feet to a point of curvature.
Thence (5) along the same, on a curve to the left having a radius of 1478.86
feet, an arc length of 98.72 feet to a point;
Thence (6) leaving said line of Knights Road, South 41 degrees, 17 minutes, 20
seconds East a distance of 573.53 feet to a point;
Thence (7) South 49 degrees, 00 minutes, 00 seconds West a distance of 42.97
feet to a point;
Thence (8) South 51 degrees, 30 minutes, 36 seconds East a distance of 134.72
feet to a point of curvature;
Thence (9) on a curve to the right having a radius of 329.04 feet, an arc length
of 136.57 feet, and a chord which bears South 31 degrees, 29 minutes, 05 seconds
East, to a point;
Thence (10) South 88 degrees, 40 minutes, 00 seconds West a distance of 444.08
feet to a point;
Thence (11) North 39 degrees, 05 minutes, 30 seconds West a distance of 167.21
*** CONTINUED ***
<PAGE>
Philadelphia
Philadelphia County, Pennsylvania
EXHIBIT A
(continued)
feet to the first mentioned point of beginning.
BEING NO. 4301 Byberry Road.
PROPERTY ADDRESS: 4301 Byberry Road Unit M-7R
BRT TAX NUMBER: 88-2-6932-00
REGISTRY NUMBER: 155 N 23 LOT 198
WARD: 66TH
Together with all rights and subject to all conditions contained within that
certain Master Declaration and Agreement of Easements, Covenants, Conditions and
Restrictions between Liberty Mills Limited Partnership and Liberty Mills
Residual Limited Partnership dated 6/28/1988 and recorded 6/30/1988 in Deed Book
FHS 1111 page 508, as amended by First Amendment to Master Declaration and
Agreement of Easements, Covenants, Conditions and Restrictions dated 2/5/1990
and recorded 3/12/1990 in Deed Book FHS 1576 page 347.
<PAGE>
EXHIBIT B
STATE SPECIFIC PROVISIONS (Pennsylvania)
The following provisions are incorporated by reference into
Section 48 of the attached Mortgage. If any conflict or inconsistency exists
between this Exhibit B and the remainder of the attached Mortgage, this Exhibit
B shall govern.
A. OPEN-END MORTGAGE. This Mortgage is an Open-End Mortgage under
the Open-End Mortgage Statute of the Commonwealth of Pennsylvania, Act of
October 12, 1990, P.L. 126; 42 Pa. C.S. ss.ss.8143-44, as amended. As such, it
may secure amounts current and future obligations and advances up to a maximum
amount of $59,000,000, plus accrued and unpaid interest and costs advanced
to protect Mortgagee's interest in the Mortgaged Property.
B. CERTIFICATE OF RESIDENCE.
I, the undersigned, hereby certify that the precise address of
Mortgagee is One McDonald's Plaza, Oak Brook, Illinois 60523.
For Mortgagee:
/s/ Gloria Santona
--------------------
Name: Gloria Santona
Title: Vice President,
Deputy General
Counsel & Secretary
[CORPORATE SEAL]
<PAGE>
SCHEDULE A
DESCRIPTION OF ORIGINAL MORTGAGE
<TABLE>
<CAPTION>
PROPERTY RECORDING OFFICE BOOK PAGE RECORDING DATE
- ------------------- ----------------------------- ------------ ------------ --------------------
<S> <C> <C> <C> <C>
Philadelphia, PA County of Philadelphia, VCS 1300 325 10/18/94
Philadelphia, Pennsylvania
</TABLE>
<PAGE>
EXHIBIT 4.36
- -------------------------------------------------------------------------------
DISCOVERY ZONE, INC.
(Mortgagor),
to
McDONALD's CORPORATION
(Mortgagee)
----------------------------------------------------
AMENDED AND RESTATED MORTGAGE, ASSIGNMENT OF LEASES AND RENTS, SECURITY
AGREEMENT AND FIXTURE FILING
----------------------------------------------------
Dated as of July 29, 1997
DOCUMENT PREPARED BY AND
AFTER RECORDING RETURN TO:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attention: Jonathan A. Reiss, Esq.
- ------------------------------------------------------------------------------
[WASHINGTON TOWNSHIP, INDIANA PROPERTY]
<PAGE>
THIS AMENDED AND RESTATED MORTGAGE, ASSIGNMENT OF LEASES AND
RENTS, SECURITY AGREEMENT AND FIXTURE FILING (as the same may from time to time
be extended, renewed or modified, this "MORTGAGE"), made as of the 29th day of
July, 1997, by DISCOVERY ZONE, INC., a Delaware corporation ("MORTGAGOR"),
having its principal place of business at One Corporate Center, 110 East Broward
Boulevard, Fort Lauderdale, Florida 33301, as successor by merger to LEAPS &
BOUNDS, INC., to McDONALD'S CORPORATION a Delaware corporation ("MORTGAGEE"),
having an address at One McDonald's Plaza, Oak Brook, Illinois 60523.
W I T N E S S E T H:
A. WHEREAS, prior to Mortgagor's several predecessors in interest
filing their voluntary petitions for relief under chapter 11, title 11, United
States Code (the "BANKRUPTCY CODE"), Mortgagor's predecessors in interest with
respect to the Mortgaged Property (as hereinafter defined), Leaps & Bounds, Inc.
("LBI") had provided Mortgagee with a First Mortgage on the Mortgaged Property,
dated as of August 30, 1994 (the "ORIGINAL MORTGAGE") and identified by the
recording information set forth on Schedule A hereto, to secure certain
obligations owed to Mortgagee under the Agreement and Plan of Merger among
Mortgagee, Mortgagor, Discovery Zone, Inc., a Delaware corporation ("OLD DZI")
and Discovery Zone International, Inc. ("DZII"), a Delaware corporation, dated
as of August 30, 1994 (the "MERGER AGREEMENT"); and
B. WHEREAS, pursuant to Section 11.2(a)(iii) of the Merger
Agreement, Old DZI agreed to defend, indemnify and hold Mortgagee and its
affiliates harmless in respect of all expenses, losses, costs, deficiencies,
liabilities and damages (including related and reasonable counsel fees and
expenses, and compensatory and demonstrable consequential damages) incurred or
suffered by Mortgagee as a direct result of, inter alia, any breach by Old DZI
or LBI of the leases or subleases relating to certain properties that result in
any payment by Mortgagee in connection with any guarantee by Mortgagee of such
leases and pursuant to Section 10.3(f) of the Merger Agreement it was agreed
that certain security would be provided to secure the obligations under Section
11.2(a)(iii) of the Merger Agreement, including without limitation, a first
priority security interest in the Land and Improvements (the "AGREEMENT TO
INDEMNIFY"); and
C. WHEREAS, following the filing of their respective prayers for
relief under the Bankruptcy Code, Mortgagor's predecessors in interest, Old DZI,
their affiliated debtors, including DZII and LBI (the "DEBTORS"), and Mortgagee
entered into the Stipulation and Order Between Debtors and McDonald's
Corporation Providing For The Resolution, Settlement And Compromise of Disputes
And For Rent Deferrals And Allowance of Certain Claims (the "STIPULATION AND
ORDER") that was entered by the United States Bankruptcy Court for the District
of Delaware (the "BANKRUPTCY COURT") on November 18, 1996, which was not
appealed or otherwise challenged, became a final order, remains in full force
and effect and to which Mortgagor is bound, Section 7 of which is captioned
"CONTINUING SECURITY" and provides, in pertinent part, that the valid and
enforceable first priority security interest on the
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<PAGE>
Land and Improvements and certain other collateral shall secure the performance
and payment of all of the obligations of Mortgagor to Mortgagee under the Notes
(as hereinafter defined), any obligations of Mortgagee that may arise in
connection with the Assumption Locations whether pursuant to any guaranty,
lease, sublease or otherwise, any obligations of Mortgagor that may arise in the
event of a Liquidation, and any continuing obligations of Mortgagor relating to
the Rejection Location(s) and the Prior Rejection Locations (as such terms are
defined therein); and
D. WHEREAS, pursuant to the Stipulation and Order and 11 U.S.C.
ss.365, the Debtors, as predecessors in interest to Mortgagor, assumed the
subleases relating to certain properties (the "ASSUMED PROPERTIES") which
subleases (the "ASSUMED PROPERTY SUBLEASES") expressly incorporate the Agreement
to Indemnify as it relates to any current or future obligations of Mortgagee
relating to the Assumed Properties; and
E. WHEREAS, pursuant to the Stipulation and Order and the Plan
(as hereinafter defined), this Mortgage hereby amends and restates the Original
Mortgage in its entirety in accordance with the terms and provisions set forth
herein; and
F. WHEREAS, this Mortgage, together with certain other Deeds of
Trust, Mortgages or similar encumbrances, are intended to and do secure the
obligations of Mortgagor and its predecessors in interest and the other Debtors,
to Mortgagee under all of the Stipulation and Order, the Agreement to Indemnify,
the Secured Rent Deferral Notes (as hereinafter defined) and the Secured
Rejection Note (as hereinafter defined); and
G. WHEREAS, pursuant to the plan of reorganization for Old DZI
and its affiliated debtors confirmed by the Bankruptcy Court by order entered
July 18, 1997 (the "PLAN"), and as required by the terms of the Stipulation and
Order, Mortgagor, as the reorganized successor of the Debtors, is obligated to
issue to Mortgagee Secured Rent Deferral Notes in the aggregate original
principal amount of $266,466.24, which amount is subject to increase each month
in accordance with the terms thereof (the "SECURED RENT DEFERRAL NOTES") and
Secured Rejection Note in the aggregate original principal amount of
$4,416,237.90 (the "SECURED REJECTION NOTE", and, together with the Secured Rent
Deferral Notes, the "NOTES"); and
H. WHEREAS, pursuant to the Plan, all of the Debtors and their
reorganized successors have merged into Mortgagor, and simultaneously with such
merger, all property of LBI and the other Debtors, including the Mortgaged
Property (as hereinafter defined) has been revested in Mortgagor, as the
successor entity of the Debtors; and
I. WHEREAS, in accordance with the foregoing, Mortgagor is the
fee simple owner of the real estate described in Exhibit A attached hereto (the
"LAND");
NOW THEREFORE, with reference to the foregoing recitals and for
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged,
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<PAGE>
Mortgagor and Mortgagee hereby agree that the Original Mortgage is hereby
amended and restated in its entirety as follows:
For the purpose of securing the payment and performance of all of
the obligations (the "OBLIGATIONS") of Mortgagor to Mortgagee, including without
limitation, any and all obligations of Mortgagor, as successor in interest to
Old DZI, DZII, LBI and their affiliated debtors, under this Mortgage, the
Agreement to Indemnify (including, without limitation, any contingent
obligations thereunder), the Stipulation and Order (including, without
limitation, the obligations described in Section 7 thereof which are referred to
in paragraph C of the recitals above), the Plan and the Notes (including any and
all subsequent advances made pursuant to the terms of the Notes) and all other
documents evidencing or securing any such obligations (collectively, the
"RELEVANT DOCUMENTS"), Mortgagor by these presents does hereby mortgage, give,
grant, bargain, sell, alienate, enfeoff, convey, confirm, warrant, pledge,
assign and hypothecate unto Mortgagee, the Land and the buildings, structures
and improvements of every nature whatsoever now or hereafter located thereon to
the extent owned by Mortgagor (including, but not limited to, all gas and
electric fixtures, radiators, heaters, docks and docking facilities, engines and
machinery, boilers, elevators and motors, plumbing, heating and air conditioning
fixtures, carpeting and other floor coverings, water heaters, awnings and storm
sashes which are or shall be attached to the Land or said buildings, structures
or improvements) (the "IMPROVEMENTS");
TOGETHER WITH: all right, title, interest and estate of Mortgagor
now owned, or hereafter acquired, in and to the following property, rights,
interest and estates relating to the Land and the Improvements, together with
Mortgagor's interest in the following property, rights, interests and estates
hereinafter described (the Land, Improvements, and the following property,
rights, interests and estates being hereinafter collectively referred to as the
"MORTGAGED PROPERTY"):
(a) all easements, rights-of-way, strips and gores of land,
streets, ways, alleys, passages, sewer rights, water, water courses, water
rights and powers, air rights and development rights, construction and equipment
warranties, and all estates, rights, titles, interests, privileges, liberties,
tenements, hereditaments and appurtenances of any nature whatsoever, in any way
belonging, relating to or pertaining to the Land and the Improvements and the
reversion and reversions, remainder and remainders, and all land lying in the
bed of any street, road or avenue, opened or proposed, in front of or adjoining
the Land, to the center line thereof and all the estates, rights, titles,
interests, dower and rights of dower, curtesy and rights of curtesy, property,
possession, claim and demand whatsoever, both at law and in equity, of Mortgagor
of, in and to the Land and the Improvements and every part and parcel thereof,
with the appurtenances thereto, and in and to any streets, ways, alleys,
passages, strips or gores of land adjoining the Land or any part thereof;
(b) all fixtures, attachments and other articles attached to the
Land or the Improvements constituting realty or real property now or hereafter
owned by Mortgagor or in which Mortgagor has or shall acquire an interest, now
or hereafter located on, attached to or
4
<PAGE>
contained in or used or usable in connection with the Mortgaged Property, and
including, without limitation, all building or construction materials intended
for construction, reconstruction, alteration or repair of or installation on or
in the Mortgaged Property, of every kind and nature whatsoever now owned or
hereafter acquired by Mortgagor, and all proceeds thereof, as well as all
additions to, appurtenances, substitutions for, replacements of or accessions to
any of the items recited as aforesaid and all attachments, components, parts
(including spare parts) and accessories, whether installed thereon or affixed
thereto, now or hereafter owned by Mortgagor and used or intended to be used in
connection with, or with the operation of, the Mortgaged Property, to the extent
constituting real property, but not including play equipment or other
similar-type entertainment equipment relating to the operation of the "Discovery
Zone" facility on the Mortgaged Property unless removal of such equipment would
cause structural damage to the Land or the Improvements (collectively, the
"FIXTURES");
(c) all awards or payments, including interest thereon, which may
heretofore and hereafter be made with respect to the Mortgaged Property, whether
from the exercise of the right of eminent domain (including, but not limited to,
any transfer made in lieu of or in anticipation of the exercise of said rights),
or for a change of grade, or for any other injury to or decrease in the value of
the Mortgaged Property;
(d) to the extent assignable (and to the extent relating to the
general occupancy and use of the Mortgaged Property as opposed to the operation
of the "Discovery Zone" entertainment facility on the Mortgaged Property),
leases, subleases (including sub-subleases), lettings, licenses, concessions,
occupancy agreements and other agreements which grant a possessory interest in,
or the right to use or occupy, all or any part of the Mortgaged Property now or
hereafter entered into, and all amendments, extensions, renewals and guarantees
thereof, and all security therefor (collectively, the "LEASES") and all rents,
issues, profits, revenues (including all oil and gas or other mineral royalties
and bonuses) and deposits (including, without limitation, security deposits)
under the Leases (including, without limitation, from the rental of any office
space, retail space or other space, halls, stores, and offices, and security
deposits therefor, exhibit or sales space of every kind, license, lease,
sublease, fees and rentals, letters of credit or cash instruments securing or
evidencing obligations under Leases, service charges, vending machine sales and
proceeds, if any, from business interruption or other loss of income insurance))
(collectively, the "RENTS") and all proceeds from the sale or other disposition
of the Leases and the right to receive and apply the Rents to the payment of the
Obligations;
(e) subject to the rights of Mortgagor hereunder, all proceeds of
any insurance policies covering the Mortgaged Property (including, without
limitation, the right to receive and apply the proceeds of any insurance,
judgments, or settlements made in lieu thereof, for damage to the Mortgaged
Property);
(f) all refundable, returnable or reimbursable fees deposits or
other funds or evidences of credit or indebtedness deposited by or on behalf of
Mortgagor with any
5
<PAGE>
governmental authorities, boards, corporations, providers of utility services,
public or private, including specifically, but without limitation, all
refundable, returnable or reimbursable tap fees, utility deposits and
development costs in connection with the Mortgaged Property, and all of the
records and books of account now or hereafter maintained by or on behalf of
Mortgagor in connection with the operation of the Mortgaged Property
(collectively, "SECURITY ACCOUNTS");
(g) all proceeds (as defined in the Uniform Commercial Code) of
the Mortgaged Property which, in any event, shall include, without limitation,
(i) cash, instruments and other property received, receivable or otherwise
distributed in exchange for any or all of the Mortgaged Property, (ii) the
collection or other disposition of, or realization upon, any item or portion of
the Mortgaged Property (including, without limitation, all claims of Mortgagor
against third parties for loss of, damage to, destruction of, or for proceeds
payable under policies of insurance in respect of, the Mortgaged Property now
existing or hereafter arising), (iii) any and all proceeds of any insurance,
indemnity, warranty or guaranty payable to Mortgagor from time to time with
respect to damage or loss of or to any of the Mortgaged Property, (iv) any and
all payments (in any form whatsoever) made or due and payable to Mortgagor from
time to time in connection with the requisition, confiscation, condemnation,
seizure or forfeiture of all or any part of the Mortgaged Property by any
Governmental Authority (or any person acting under color of Governmental
Authority), and (v) any and all real estate tax refunds payable to Mortgagor
with respect to the Mortgaged Property, and refunds or reimbursements payable
with respect to bonds, escrow accounts, or other sums payable in connection with
the use, development or ownership of the Mortgaged Property, but excluding any
proceeds obtained, earned or arising directly from the operation of the
"Discovery Zone" entertainment facility operated by Mortgagor on the Mortgaged
Property as opposed to the general occupancy and use of the Mortgaged Property
(collectively, the "PROCEEDS");
(h) to the extent permitted under applicable law, all licenses,
permits (other than proprietary permits of Mortgagor relating to the ordinary
operation of a "Discovery Zone" entertainment facility as opposed to the general
use and occupancy of the Mortgaged Property), variances and certificates used in
connection with the ownership, operation, use or occupancy of the Mortgaged
Property (including, without limitation, business licenses, state health
department licenses, food service licenses, liquor licenses, licenses to conduct
business and all such other permits, licenses and rights, obtained from any
Governmental Authority or private Person concerning ownership, operation, use or
occupancy of the Mortgaged Property) (collectively, "PERMITS");
(i) all plans, specifications, shop drawings and other technical
descriptions prepared for construction, repair or alteration of the Improvements
(including diskettes containing any such data), and all amendments and
modifications thereof; and
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<PAGE>
(j) any escrow or escrow accounts established hereunder to secure
the Obligations of Mortgagor, including, without limitation, the Proceeds Escrow
Account described in Section 6(b) hereof; and
(k) any and all replacements and renewals of or additions and
substitutions to any of the foregoing and all proceeds of any of the foregoing.
TO HAVE AND TO HOLD the above granted and described Mortgaged
Property unto and to the use and benefit of Mortgagee, and its successor and
assigns, forever, and Mortgagor does hereby bind itself, its successors and
assigns to WARRANT AND FOREVER DEFEND the title to the Mortgaged Property unto
Mortgagee and its successors and assigns;
AND, TO PROTECT THE SECURITY OF THIS MORTGAGE, Mortgagor
represents and warrants to and covenants and agrees with Mortgagee as follows:
1. DEFINED TERMS. The following terms, when used herein, shall
have the meanings set forth below:
"ENVIRONMENTAL LAWS" means any and all present and future
federal, state or local laws, statutes, ordinances or regulations, any judicial
or administrative orders, decrees or judgments thereunder, and any permits,
approvals, licenses, registrations, filings and authorizations, in each case as
now or hereafter in effect, relating to the protection of the environment, the
impact of Hazardous Substances or the generation, disposal or remediation
thereof on human health or safety, or the Release or threatened Release of
Hazardous Substances or otherwise relating to the Use of Hazardous Substances.
For purposes of this definition, (A) "HAZARDOUS SUBSTANCES" means collectively,
(i) any petroleum or petroleum products or waste oils, explosives, radioactive
materials, asbestos, urea formaldehyde foam insulation, polychlorinated
biphenyls ("PCBs"), and lead-based paint, (ii) any chemicals or other materials
or substances which are now or hereafter become defined as or included in the
definitions of "hazardous substances", "hazardous wastes", "hazardous
materials", "extremely hazardous wastes", "restricted hazardous wastes", "toxic
substances", "toxic pollutants", "contaminants", "pollutants" or words of
similar import under any Environmental Law and (iii) any other chemical or any
other material or substance, exposure to which is now or hereafter prohibited,
limited or regulated under any Environmental Law; (B) "USE" means, with respect
to any Hazardous Substance, the generation, manufacture, processing,
distribution, handling, use, treatment, recycling or storage of such Hazardous
Substance or transportation of such Hazardous Substance; and (C) "RELEASE" means
any release, spill, emission, leaking, pumping, injection, deposit, disposal,
discharge, dispersal, leaching or migration into the indoor or outdoor
environment (including, without limitation, the movement of Hazardous Substances
through ambient air, soil, surface water, ground water, wetlands, land or
subsurface strata).
"GOVERNMENTAL AUTHORITY" means any national or federal
government, any state, regional, local or other political subdivision thereof
with jurisdiction and any Person
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<PAGE>
with jurisdiction exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government (including without
limitation any court).
"IMPOSITIONS" means all taxes (including, without limitation, all
real estate, ad valorem, sales (including those imposed on lease rentals), use,
single business, gross receipts, value added, intangible transaction privilege,
privilege or license or similar taxes), assessments (including, without
limitation, all assessments for public improvements or benefits, whether or not
commenced or completed within the term of this Mortgage), ground rents, water,
sewer or other rents and charges, excises, levies, fees (including, without
limitation, license, permit, inspection, authorization and similar fees), and
all other governmental impositions and other charges (including, without
limitation, vault charges and license fees for the use of vaults, chutes and
similar areas adjoining the Mortgaged Property), in each case whether general or
special, ordinary or extraordinary, foreseen or unforeseen, of every character
in respect of the Mortgaged Property, which at any time prior to, during or in
respect of the term hereof may be assessed or imposed on or in respect of or be
a lien upon (i) Mortgagor (including, without limitation, all income, franchise,
single business or other taxes imposed on Mortgagor for the privilege of doing
business in the jurisdiction in which the Mortgaged Property is located), (ii)
the Mortgaged Property, or any part thereof or any revenues therefrom or any
estate, right, title or interest therein, or (iii) any occupancy, operation, use
or possession of, or sales from, or activity conducted on, or in connection with
the Mortgaged Property by Mortgagor or the leasing or use of the Mortgaged
Property or any part thereof by Mortgagor.
"LEGAL REQUIREMENTS" means (i) all governmental statutes, laws,
rules, orders, regulations, ordinances, judgments, decrees and injunctions of
Governmental Authorities (including, without limitation, Environmental Laws)
affecting either the Borrower or any Property or any part thereof or the
construction, ownership, use, alteration or operation thereof, or any part
thereof (whether now or hereafter enacted and in force), (ii) all permits,
licenses and authorizations and regulations relating thereto, and (iii) all
covenants, conditions and restrictions contained in any instruments at any time
in force (whether or not involving Governmental Authorities) affecting the
Mortgaged Property or any part thereof which, in the case of this clause (iii),
require repairs, modifications or alterations in or to the Mortgaged Property or
any part thereof, or in any material way limit or restrict the existing use and
enjoyment thereof.
"PERSON" means any individual, corporation, limited liability
company, partnership, joint venture, estate, trust, unincorporated association,
any federal, state, county or municipal government or any bureau, department or
agency thereof and any fiduciary acting in such capacity on behalf of any of the
foregoing.
"UNIFORM COMMERCIAL CODE" means the Uniform Commercial Code, as
adopted, enacted and amended from time to time by the state or states where any
of the Mortgaged Property is located.
2. PAYMENT OF OBLIGATIONS AND INCORPORATION OF COVENANTS,
CONDITIONS AND AGREEMENTS. Mortgagor will pay the Obligations at the time and
in the manner provided in the
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<PAGE>
Relevant Documents and in this Mortgage. All the representations, warranties,
covenants, conditions and agreements of Mortgagor contained in the Relevant
Documents are hereby made a part of this Mortgage to the same extent and with
the same force as if fully set forth herein. If there shall be any
inconsistencies between the terms, covenants, conditions and provisions set
forth in this Mortgage and the terms, covenants, conditions and provisions set
forth in the Relevant Documents, then the terms, covenants, conditions and
provisions of the Relevant Documents shall prevail.
3. WARRANTY OF TITLE/ORGANIZATION. Mortgagor warrants that
Mortgagor has good, marketable and insurable fee simple title to Land and the
Improvements and has good title to the remainder of the Mortgaged Property and
has the full power, authority and right to execute, deliver and perform its
obligations under this Mortgage and to encumber, mortgage, give, grant, bargain,
sell, alienate, enfeoff, convey, confirm, warrant, pledge, assign and
hypothecate the Mortgaged Property and that Mortgagor possesses an unencumbered
fee estate in the Land and the Improvements and that it owns the Mortgaged
Property free and clear of all liens, encumbrances and charges whatsoever except
for (x) those exceptions to title which are existing on the date hereof and
approved by Mortgagee and (y) those exceptions of title that are permitted under
the other terms and conditions of this Mortgage (collectively, the "PERMITTED
ENCUMBRANCES") and that this Mortgage is and will remain a valid and enforceable
first lien on and security interest in the Mortgaged Property, subject only to
the Permitted Encumbrances. Mortgagor shall forever warrant, defend and preserve
such title and the validity and priority of the lien of this Mortgage and shall
forever warrant and defend the same to Mortgagee against the claims of all
persons whomsoever. Mortgagor is duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization. Mortgagor is
qualified to do business and in good standing in the State in which the
Mortgaged Property is located, and to the extent that Mortgagor is not so
qualified or in good standing in such State, Mortgagor shall promptly qualify to
do business and become in good standing in such State and shall promptly present
evidence of such qualification to do business and good standing to Mortgagee,
and shall in any event take such steps as are necessary to insure the
enforceability of the Notes and this Mortgage.
4. TAXES. Mortgagor hereby warrants, covenants and agrees to pay
before any penalty attaches all real property taxes, general and special, and
all other taxes and assessments of any kind or nature whatsoever, against the
Mortgaged Property when due and shall, upon written request, furnish to
Mortgagee duplicate receipts therefor, Mortgagor may, in good faith and with
reasonable diligence, contest the validity or amount of any such taxes or
assessments provided that such contest shall have the effect of preventing the
collection of the tax or assessment so contested and the sale or forfeiture of
said Mortgaged Property or any part thereof, or any interest therein, to satisfy
the same.
5. INDEMNIFICATION. Mortgagor shall indemnify, defend and hold
harmless Mortgagee from and against all of the following (collectively, and
individually referred to as a "LOSS"): claims, demands, causes of action,
judgments, costs, expenses, liabilities, losses and damages (including
consequential and punitive damages), reasonable attorneys' fees and
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<PAGE>
expenses and court costs, disbursements and court costs, and all risk of damage
to property and injury to persons in or upon the Mortgaged Property, arising
from: (i) Mortgagor's use of the Property or from the conduct of its business in
or about the Mortgaged Property; (ii) Mortgagor's default or breach of any term
under this Mortgage; and (iii) Mortgagor's violation or failure to comply with
any Legal Requirements, including Environmental Laws; provided that Mortgagor
shall not be liable for Loss arising from Mortgagee's negligence or willful
misconduct or from Mortgagee's breach of any of its obligations hereunder.
6. TRANSFER OR ENCUMBRANCE OF THE MORTGAGED PROPERTY. (a)
Except as may otherwise be permitted hereunder or pursuant to the Relevant
Documents, Mortgagor shall not sell, convey, alienate, mortgage, encumber,
pledge or otherwise transfer the Mortgaged Property or any part thereof or any
of its interest therein. Mortgagee shall not be required to demonstrate any
actual impairment of its security or any increased risk of default hereunder in
order to declare the Obligations immediately due and payable upon Mortgagor's
conveyance, alienation, mortgage, encumbrance, pledge or transfer of the
Mortgaged Property in violation of this Mortgage or any other Relevant Document.
This provision shall apply to every sale, conveyance, alienation, mortgage,
encumbrance, pledge or transfer of the Mortgaged Property that is not permitted
pursuant to the Relevant Documents, regardless of whether voluntary or not, or
whether or not Mortgagee has consented to any previous sale, conveyance,
alienation, mortgage, encumbrance, pledge or transfer of the Mortgaged Property.
(b) Notwithstanding Section 6(a), Mortgagor shall have the right
to sell the Mortgaged Property at any time to a third party bona fide purchaser
after consultation with Mortgagee and upon the prior written consent of
Mortgagee to such sale and the sales price (such consent not to be unreasonably
withheld), provided that the net proceeds of such sale of the Mortgaged Property
(after payment of transfer taxes and reasonable brokerage commissions, if any,
and other reasonable closing costs) shall be applied towards repayment of the
Obligations, including, without limitation, repayment of the Secured Rejection
Note (including prepayment of any amounts not yet due and payable) and payment
of the Principal Amounts (as defined in the Rent Deferral Notes) then
outstanding under the Rent Deferral Notes, in the order and manner set forth in
the Notes. After the Secured Rejection Note and all Principal Amounts
outstanding under the Notes have been repaid in full, any remaining net proceeds
(including proceeds from any sale or other disposition of the Mortgaged Property
pursuant to Section 24 hereof) not applied towards repayment of the Obligations
shall be deposited into an escrow account designated by Mortgagee for
Mortgagor's account and as security for the performance by Mortgagor of its
Obligations to Mortgagee under the Relevant Documents (the "PROCEEDS ESCROW
ACCOUNT") which escrow account shall be administered by Mortgagee, or, at
Mortgagee's discretion and in accordance with Mortgagee's instructions, may be
administered by an escrow agent (an "ESCROW AGENT") selected by Mortgagee (whose
reasonable fees shall be paid by Mortgagor). Mortgagor may also from time to
time deposit additional funds into the Proceeds Escrow Account as further
security for the Obligations. At Mortgagee's request, Mortgagor agrees to enter
into a separate escrow agreement to further evidence the provisions of this
Section 6(b), and in the event that Mortgagee chooses an Escrow Agent to
administer the Proceeds Escrow Account, Mortgagor agrees to execute an escrow
agreement in form and substance reasonably satisfactory to Mortgagee (including
provisions consistent with the
10
<PAGE>
provisions of this Section 6(b)) to evidence the duties and responsibilities of
such Escrow Agent. Mortgagee or, if applicable, the Escrow Agent at the
direction of Mortgagee, shall invest the funds in the Proceeds Escrow Account in
obligations of the U.S. Government or its agencies, interest in time accounts or
certificates of deposits, or other interest bearing account of any bank or bank
and trust company or in money market funds available to Mortgagee. Mortgagor
agrees, and shall agree under any escrow agreement entered into pursuant to this
Section 6(b), that the funds on deposit under the escrow arrangement described
herein shall not constitute property of the estate (within the meaning of
Section 541 of the United States Bankruptcy Code) and that Mortgagor shall only
have such rights to such funds as are provided herein and in any escrow
agreement entered into pursuant to this Section. Funds in the Proceeds Escrow
Account shall be disbursed (together with accrued interest) from time to time to
Mortgagee, at Mortgagee's direction (upon seven (7) days prior notice to
Mortgagor), to pay any Obligations that may arise from time to time under the
Agreement to Indemnify, the Notes, the Stipulation and Order or the other
Relevant Documents. Notwithstanding the foregoing, after December 31, 2005,
Mortgagor shall be entitled to retain any net proceeds in excess of the Minimum
Amount set forth below from the sale of the Mortgaged Property, including
amounts previously deposited and remaining in the Proceeds Escrow Account
(including accrued interest thereon) which have not been applied towards payment
of the Obligations, provided that (i) no Obligations are then due and owing by
Mortgagor pursuant to the Agreement to Indemnify, the Stipulation and Order, the
Notes or otherwise, (ii) no default or Event of Default has occurred and is
continuing under any of the Relevant Documents; and (iii) the amount remaining
in the Proceeds Escrow Account is no less than the Minimum Amount (as
hereinafter defined). Except as otherwise set forth in the following sentence,
the "Minimum Amount" shall mean the product of (A) 1.5 times (B) the sum of the
gross rent (including additional rent and percentage rent charges, if any),
common area maintenance charges, taxes, insurance and other charges computed on
a gross basis (collectively, the "BASE CHARGES") which are due or shall become
due under any Assumed Property Subleases still in existence as of December 31,
2005 (the "SURVIVING ASSUMED PROPERTY SUBLEASES") from December 31, 2005 until
the expiration of the terms of such Assumed Property Subleases. Upon the
expiration after December 31, 2005 of any Surviving Assumed Property Sublease,
Mortgagee shall re-calculate the Minimum Amount based upon the product of 1.5
times the Base Charges of the remaining Surviving Assumed Property Subleases as
of the end of the term of such Surviving Assumed Property Sublease (such Base
Charges to be calculated as the sum of the Base Charges from such date through
the end of the expiration dates of the remaining Surviving Assumed Property
Subleases), and provided that (i) no Obligations are then due and owing by
Mortgagor pursuant to the Agreement to Indemnify, the Notes, the Stipulation and
Order or otherwise and that (ii) no default or Event of Default has occurred and
is continuing under any of the Relevant Documents, Mortgagee shall, on the first
anniversary of the expiration of such expired Surviving Assumed Property
Sublease, release to Mortgagor, or cause the Escrow Agent to release to
Mortgagor, the excess of all funds in the Proceeds Escrow Account over the
re-calculated Minimum Amount. Any calculation of Base Charges under this Section
6(b) shall be made by Mortgagee and, absent manifest error, shall be conclusive
and binding upon Mortgagor. Provided that (i) an amount equal to at least the
Minimum Amount is deposited or on deposit in the Proceeds Escrow Account to
secure the
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payment of the Obligations, (ii) no default or Event of Default has occurred and
is continuing under any of the Relevant Documents, (iii) the Notes have been
repaid in full and (iv) no Obligations are then due and owing by Mortgagor
pursuant to the Agreement to Indemnify, the Stipulation and Order or otherwise,
Mortgagor shall be entitled to receive a release of this Mortgage from Mortgagee
at any time after December 31, 2005. Provided that no default or Event of
Default has occurred or is continuing under any of the Relevant Documents and
that no amounts are then owing by Mortgagor or outstanding pursuant to or under
any of the Relevant Documents (and that an amount equal to the Minimum Amount is
at all times on deposit in the Proceeds Escrow Account), interest earned on the
amounts deposited in the Proceeds Escrow Account after December 31, 2005 shall
be distributed to Mortgagor on a quarterly basis. All remaining amounts in the
Proceeds Escrow Account which have not been applied towards payment of the
Obligations shall be released to Mortgagor on the later of (A) December 31, 2014
provided, however, that no Obligations are then due and owing by Mortgagor
pursuant to the Agreement to Indemnify, the Stipulation and Order or otherwise,
and (B) the end of the term of this Mortgage as set forth in Section 13(c)
hereof. Mortgagor shall pay any income taxes attributable to the interest or
other income earned on the Proceeds Escrow Account. Notwithstanding any release
of this Mortgage pursuant to this Section 6(b) or otherwise, the terms and
provisions of this Section 6(b) shall survive the release of this Mortgage.
7. AMENDMENT TO LEGAL DESCRIPTION. If it becomes evident that the
legal description attached to any Relevant Document is inaccurate or does not
fully describe all of the real property which is reasonably connected to the
Land, Mortgagor hereby agrees to an amendment of such legal description and the
legal description contained on the corresponding title policy so that such error
is corrected and to execute and cause to be recorded, if applicable, such
document as may be appropriate for such purpose.
8. ASSIGNMENT OF LEASES AND RENTS. Mortgagor does hereby
absolutely and unconditionally assign to Mortgagee, Mortgagor's right, title and
interest in all current and future Leases and Rents, it being intended by
Mortgagor that this assignment constitutes a present, absolute assignment and
not an assignment for additional security only. Such assignment to Mortgagee
shall not be construed to bind Mortgagee to the performance of any of the
covenants, conditions or provisions contained in any such Lease or otherwise
impose any obligation upon Mortgagee. Mortgagee shall have no responsibility on
account of this assignment for the control, care, maintenance, management or
repair of the Mortgaged Property, for any dangerous or defective condition of
the Mortgaged Property, or for any negligence in the management, upkeep, repair
or control of the Mortgaged Property. Mortgagor agrees to execute and deliver to
Mortgagee such additional instruments, in form and substance satisfactory to
Mortgagee, as may hereafter be requested by Mortgagee to further evidence and
confirm such assignment. Nevertheless, subject to the terms of this paragraph,
Mortgagee grants to Mortgagor a revocable license to collect all of the Rents
and retain, use and enjoy the same and otherwise exercise all rights of
Mortgagor under any Lease, in each case, subject to the terms hereof and of the
Relevant Documents. Upon an Event of Default, the license granted to Mortgagor
herein shall immediately and automatically be
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revoked, and Mortgagee shall immediately be entitled to possession of all Rents,
whether or not Mortgagee enters upon or takes control of the Mortgaged Property,
provided that if such Event of Default ceases to exist, the license shall
automatically be reinstated. In addition, during the continuation of an Event of
Default, Mortgagee may, either in person or by agent, without bringing any
action or proceeding, or by a receiver appointed by a court, without the
necessity of taking possession of the Mortgaged Property in its own name, and in
addition to and without limiting any of Mortgagee's rights and remedies
hereunder, under the Notes and any other Relevant Documents and as otherwise
available at law or in equity, (a) notify any lessee or other person that the
Leases have been assigned to Mortgagee and that all Rents are to be paid
directly to Mortgagee, whether or not Mortgagee has commenced or completed
foreclosure or taken possession of the Mortgaged Property; (b) settle,
compromise, release, extend the time of payment of, and make allowances,
adjustments and discounts of any Rents or other obligations in, to and under the
Leases; (c) demand, sue for or otherwise collect, receive, and enforce payment
of Rents, including those past-due and unpaid and other rights under the Leases,
prosecute any action or proceeding, and defend against any claim with respect to
the Rents and Leases; (d) enter upon, take possession of and operate the
Mortgaged Property; (e) lease all or any part of the Mortgaged Property; and/or
(f) perform any and all obligations of Mortgagor under the Leases and exercise
any and all rights of Mortgagor therein contained to the full extent of
Mortgagor's rights and obligations thereunder, with or without the bringing of
any action or the appointment of a receiver and without need for any other
authorization or other action by Mortgagee or Mortgagor. At Mortgagee's request,
Mortgagor shall deliver a copy of this assignment to each tenant under a Lease
and to each manager and managing agent or operator of the Mortgaged Property.
Mortgagor irrevocably directs any tenant, manager, managing agent, or operator
of the Property, without any requirement for notice to or consent by Mortgagor,
to comply with all demands of Mortgagee under this Section 8 and to turn over to
Mortgagee on demand all Rents which it receives. Mortgagor hereby acknowledges
and agrees that payment of any Rents by a person to Mortgagee as hereinabove
provided shall constitute payment by such person, as fully and with the same
effect as if such Rents had been paid to Mortgagor. Mortgagee is hereby granted
and assigned by Mortgagor the right, at its option, upon revocation of the
license granted herein, to enter upon the Mortgaged Property in person or by
agent, without bringing any action or proceeding, or by court-appointed receiver
to collect the Rents. Any Rents collected after the revocation of the license
shall be applied towards the payment of the Obligations. Neither the enforcement
of any of the remedies under this SECTION 8 nor any other remedies or security
interests afforded to Mortgagee under the Relevant Documents, at law or in
equity shall cause Mortgagee to be deemed or construed to be a Mortgagee in
possession of the Mortgaged Property, to obligate Mortgagee to lease the
Mortgaged Property or attempt to do so, or to take any action, incur any
expense, or perform or discharge any obligation, duty or liability whatsoever
under any of the Leases or otherwise. Mortgagor shall, and hereby agrees to
indemnify Mortgagee for, and to hold Mortgagee harmless from and against, any
and all claims, liability, expenses, losses or damages which may or might be
asserted against or incurred by Mortgagee solely by reason of Mortgagee's status
as an assignee pursuant to the assignment of Rents and Leases contained herein,
but excluding any claim (a) to the extent caused by Mortgagee's gross negligence
or willful misconduct, or (b) to the extent arising
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solely from Mortgagee's actions after Mortgagee has taken possession of the
Mortgaged Property. Should Mortgagee incur any such claim, liability, expense,
loss or damage, the amount thereof, including all actual expenses and reasonable
fees of attorneys, shall constitute Obligations secured hereby, and Mortgagor
shall reimburse Mortgagee therefor immediately upon demand. Mortgagor agrees
that all Leases shall be subject to the prior written approval of Mortgagee,
such approval not to be unreasonably withheld.
9. MAINTENANCE OF MORTGAGED PROPERTY. Mortgagor shall cause the
Mortgaged Property to be maintained in a good and safe condition and repair
(subject to ordinary wear and tear), and shall otherwise operate and maintain
the Mortgaged Property in a manner consistent with the manner in which it
operates and maintains the other properties on which it operates similar
businesses ("SIMILAR PROPERTIES"). Except as otherwise permitted by the Relevant
Documents, the Improvements, the Fixtures and the equipment located on the Land
or the Improvements shall not be removed, demolished or materially altered
(except for normal replacement of equipment) without the consent of Mortgagee
which shall not unreasonably be withheld or delayed. Mortgagor shall comply with
all laws, orders and ordinances affecting the Mortgaged Property, or the use
thereof. Except to the extent that Mortgagee fails to turn over insurance
proceeds, if any, received by Mortgagee pursuant to SECTIONS 10 and 11 with
respect to the Mortgaged Property to Mortgagor, Mortgagor shall promptly repair,
replace or rebuild any part of the Mortgaged Property that, following the date
hereof, becomes damaged, worn or dilapidated and Mortgagor shall complete and
pay for any structure at any time in the process of construction or repair on
the Land. Notwithstanding anything to the contrary contained herein, Mortgagor
hereby confirms its obligation to comply with all relevant Legal Requirements,
including Environmental Laws, with respect to the Mortgaged Property. Mortgagor
shall not initiate, join in, acquiesce in, or consent to any change in any
private restrictive covenant, zoning law or other public or private restriction,
limiting or defining the uses which may be made of the Mortgaged Property or any
part thereof, unless Mortgagor shall have received Mortgagee's prior written
consent, such consent not to be unreasonably withheld or delayed. If under
applicable zoning provisions the use of all or any portion of the Mortgaged
Property is or shall become a nonconforming use, Mortgagor will not cause such
nonconforming use to be discontinued or abandoned without the express written
consent of Mortgagee, such consent not to be unreasonably withheld or delayed.
Mortgagor shall not (i) change the use of the Land in any material respect or
(ii) permit or suffer to occur any waste on or to the Mortgaged Property or to
any portion thereof.
10. INSURANCE.
(a) Mortgagor shall maintain casualty, liability and other
policies of insurance relating to the Mortgaged Property in form and substance,
and with insurers and coverages, reasonably satisfactory to Mortgagee and
consistent with insurance that it maintains on Similar Properties. Mortgagor
shall keep the Mortgaged Property insured against loss by flood if the Mortgaged
Property is located in an area identified by the Secretary of Housing and Urban
Development as an area having a special flood hazards and in which flood
insurance has been made available under the National Flood Insurance Act of 1968
(or any
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successor act thereto). All policies of insurance to be furnished hereunder (i)
shall have standard non-contributory Mortgagee clauses attached to all policies
in favor of Mortgagee, without contribution, under a standard New York (or local
equivalent) Mortgagee clause naming Mortgagee as the party to which all payments
made under such insurance policies in excess of $150,000 should be paid, (ii)
shall contain an endorsement providing that neither Mortgagor nor Mortgagee nor
any other party shall be a co-insurer under said policies and shall contain a
provision requiring that the coverage evidenced thereby shall not be terminated
or materially modified without ten (10) days prior written notice to Mortgagee,
(iii) shall provide that no act or thing done by Mortgagor shall invalidate the
policy as against Mortgagee, and (iv) with respect to property insurance
policies, shall contain a waiver of subrogation against Mortgagee. Mortgagor
shall deliver certificates evidencing additional and renewal policies, together
with evidence of payment of premiums thereon, to Mortgagee, and in the case of
all insurance about to expire, shall deliver renewal policies or certificates
evidencing such policies not less than ten (10) days prior to their respective
dates of expiration.
(b) Mortgagor shall not take out separate insurance concurrent in
form or contributing in the event of loss with that required to be maintained
hereunder unless Mortgagee is included thereon under a standard,
non-contributory Mortgagee clause acceptable to Mortgagee. Mortgagor shall
promptly notify Mortgagee whenever any such separate insurance is taken out and
shall promptly deliver to Mortgagee the certificates evidencing the policy or
policies of such insurance.
(c) The insurance required by this Mortgage, at the option of
Mortgagor, may be effected by blanket and/or umbrella policies covering the
Mortgaged Property and other properties, provided, however, that in each case,
such insurance policies otherwise comply with the provisions of this Mortgage
and allocate to the Mortgaged Property, from time to time, the coverage
specified in this Mortgage without possibility of reduction or co-insurance by
reason of, or damage to, any other property named therein. If the insurance
required by this Mortgage shall be effected by any such blanket or umbrella
policies, Mortgagor shall furnish to Mortgagee certificates with respect to,
with schedules attached thereto showing the amount of the insurance provided
under such policies which is applicable to the Mortgaged Property.
(d) If Mortgagor fails to maintain insurance in compliance with
this Section, Mortgagee may obtain such insurance and pay the premium therefor
and Mortgagor shall, on demand, reimburse Mortgagee for all expenses incurred in
connection therewith. Mortgagor shall deliver original certificates to Mortgagee
of all insurance policies maintained pursuant to this Section 10. Each property
insurance policy shall name Mortgagee as Mortgagee, and loss payee with respect
to all casualty coverage and each liability policy shall name Mortgagee as an
additional insured thereunder.
11. CASUALTY. (a) Mortgagor shall give Mortgagee prompt notice of
any loss or damage to the Mortgaged Property.
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(b) In case of loss or damage to the Mortgaged Property covered
by any of the insurance policies described in Section 10 above, Mortgagee (or,
after entry of decree of foreclosure, the purchaser at the foreclosure sale or
decree creditor, as the case may be) is hereby authorized at its option either
(i) to settle and adjust any claim under such insurance policies without the
consent of Mortgagor or (ii) to allow Mortgagor to settle and adjust such claim
(either jointly with Mortgagee or by Mortgagor alone, at Mortgagee's
discretion); provided that in either case Mortgagee shall, and is hereby
authorized to, collect and receipt for any such insurance proceeds.
Notwithstanding anything in the preceding sentence to the contrary, Mortgagee
agrees that it will allow Mortgagor to settle and adjust any claims under the
insurance policies which are in an amount less than $150,000, per incident of
loss, up to an aggregate amount of no greater than $300,000. The expenses
incurred by Mortgagee in the adjustment and collection of insurance proceeds
shall be included in the Obligations, and shall be reimbursed to Mortgagee upon
demand or may be deducted by Mortgagee from said insurance proceeds prior to
another application thereof. Interest on such amount shall accrue at the Default
Rate, beginning ten (10) days after Mortgagor receives notice of a request for
payment of such amount from Mortgagee, until such amount, plus interest, is paid
in full.
(c) Mortgagee shall permit Mortgagor to apply the proceeds of
insurance policies received in connection with any casualty to pay for the cost
of restoring, repairing, replacing or rebuilding the loss or damage to the
Mortgaged Property resulting from the casualty ("RESTORATION") if: (i) there is
no Event of Default hereunder at the time of such application; (ii) restoration
can, in the reasonable judgment of Mortgagee, be completed prior to the maturity
of the Obligations; and (iii) restoration can, in the reasonable judgment of
Mortgagee, be effected within two (2) years after the date of such casualty and
in such a manner so that the Mortgaged Property will be of at least equal or
greater value to the value than the Mortgaged Property prior to such casualty.
Otherwise, Mortgagee may elect in its sole discretion to apply such proceeds
either (x) towards payment of the Obligations, notwithstanding the fact that the
Obligations, or a portion thereof, may not then be due and payable, or (y) to
pay for the cost of Restoration. In all events, disbursement of insurance
proceeds by Mortgagee (or at Mortgagee's election by a disbursing or escrow
agent who shall be selected by Mortgagee and whose fees shall be paid by
Mortgagor), to pay the cost of restoration shall require (i) evidence reasonably
satisfactory to Mortgagee of the estimated costs of Restoration, (ii) funds (or
assurances reasonably satisfactory to Mortgagee that such funds are available)
sufficient in addition to the proceeds of insurance to complete and fully pay
for Restoration; and (iii) such architect's certificates, waivers of lien,
contractor's sworn statements, title insurance endorsements, plats of surveys
and such other evidences of cost, payment and performance as Mortgagee may
reasonably require and approve. Except to the extent Mortgagee fails to turn
over insurance proceeds, if any, received by Mortgagee hereunder with respect to
such casualty to Mortgagor, Mortgagor hereby covenants to restore, repair,
replace or rebuild the Improvements, to be of at least equal value, and of
substantially the same character as prior to such loss or damage, all to be
effected in accordance with plans, specifications and procedures to be first
submitted to and reasonably approved by Mortgagee, and Mortgagor shall pay all
costs of such restoring, repairing, replacing or rebuilding.
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12. EMINENT DOMAIN. Mortgagor warrants, covenants and agrees that
should the Mortgaged Property, or any part thereof or interest therein, be taken
or damaged by reason of any public improvement or condemnation proceeding, or in
any other manner, or should Mortgagor receive any notice of other information
regarding such proceeding, Mortgagor shall give written notice thereof within
five (5) business days to Mortgagee. Without Mortgagee's prior consent,
Mortgagor (1) shall not agree to any compensation or award, and (2) shall not
take any action or fail to take any action which would cause the compensation to
be determined. Mortgagee shall be entitled to: (1) all compensation, awards and
other payments or relief therefor, (2) to commence, appear in and prosecute in
its own name any action or proceedings, and (3) to make any compromise or
settlement in connection with such taking or damage. Mortgagor authorizes
Mortgagee to collect and receive such awards and compensation, to give proper
receipts and acquittances therefor and in Mortgagee's discretion to apply the
same toward the payment of the Obligations, notwithstanding the fact that the
Obligations, or a portion thereof, may not then be due and payable, or to the
restoration of the Mortgaged Property in accordance with the provisions set
forth in the second-to-last sentence of Section 11(c) above. Mortgagor further
agrees to make, execute, and deliver to Mortgagee, at any time upon request,
free and clear of any encumbrance of any kind whatsoever, any and all further
assignments and other instruments deemed necessary by Mortgagee for the purpose
of validly and sufficiently assigning all compensations and awards made to
Mortgagor for any taking, either permanent or temporary, under any such
proceeding.
13. RELEASE OF MORTGAGE. Mortgagee agrees to promptly and
unconditionally release this Mortgage (subject to the provisions set forth in
Section 6(b)) as follows:
(a) in the event of a bona fide sale (other than a "sale
leaseback" or other similar financing transaction) of the Mortgaged Property to
a third party that is not affiliated with Mortgagor, provided that each of the
following conditions is satisfied: (i) neither Mortgagor nor any of its
respective affiliates continue to use or occupy the Mortgaged Property or any
part thereof; (ii) Mortgagor shall consult with Mortgagee prior to such sale and
shall obtain Mortgagee's prior written consent with respect to such sale and the
sales price (such consent not to be unreasonably withheld); and (iii) all of the
proceeds of such sale are applied towards repayment of the Obligations or
otherwise applied in compliance with the provisions of Section 6(b) hereof.
(b) in the event that Mortgagee is paid in full for all amounts
owing (or what shall or may become owing under the Relevant Documents) to
Mortgagee by Mortgagor and any of its former affiliated debtors, including the
indefeasible payment and satisfaction in full of the Obligations.
(c) on December 31, 2014 (or on such earlier date as permitted
under and pursuant to the provisions of Section 6(b) hereof); provided, however,
that if on such date, any amount secured by this Mortgage has not been
indefeasibly paid in full, then this Mortgage shall be deemed amended to extend
the term hereof until such obligations are so paid.
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14. CHANGES IN THE LAWS REGARDING TAXATION. If any law is enacted
or adopted or amended after the date of this Mortgage which imposes a tax,
either directly or indirectly, on the Obligations or Mortgagee's interest in the
Mortgaged Property, Mortgagor will pay such tax, with interest and penalties
thereon, if any, PROVIDED, HOWEVER, that Mortgagor shall not be obligated to pay
any tax which is imposed on the net income of Mortgagee or franchise taxes or
doing business taxes imposed on Mortgagee. In the event that the payment of such
tax or interest and penalties by Mortgagor would be unlawful or taxable to
Mortgagee or unenforceable or provide the basis for a defense of usury, then in
any such event, Mortgagee shall have the option, by written notice of not less
than ninety (90) days, to declare the Obligations immediately due and payable.
15. NO CREDITS ON ACCOUNT OF THE OBLIGATIONS. (i) Mortgagor will
not claim or demand or be entitled to any credit or credits on account of the
Obligations for any part of the Impositions assessed against the Mortgaged
Property, or any part thereof, and (ii) no deduction shall otherwise be made or
claimed from the assessed value of the Mortgaged Property, or any part hereof,
for real estate tax purposes by reason of this Mortgage or the Obligations if
the effect of such deduction would impose on Mortgagee a tax, either directly or
indirectly, for which it otherwise would not have been liable.
16. DOCUMENTARY STAMPS. If at any time the United States of
America, any State thereof or any subdivision of any such State shall require
revenue or other stamps to be affixed to the Notes or this Mortgage, or impose
any other tax or charge on the same, Mortgagor will pay for the same, with
interest and penalties thereon, if any.
17. CONTROLLING AGREEMENT. It is expressly stipulated and agreed
to be the intent of Mortgagor and Mortgagee at all times to comply with
applicable state law or applicable United States federal law (to the extent that
it permits Mortgagee to contract for, charge, take, reserve, or receive a
greater amount of interest than under state law) and that this Section shall
control every other covenant and agreement in this Mortgage and the other
Relevant Documents. If the applicable law (state or federal) is ever judicially
interpreted so as to render usurious any amount called for under the Notes or
under any of the other Relevant Documents, or contracted for, charged, taken,
reserved, or received with respect to the Obligations, or if Mortgagee's
exercise of the option to accelerate the maturity of the Notes, or if any
prepayment by Mortgagor results in Mortgagor having paid any interest in excess
of that permitted by applicable law, then it is Mortgagor's and Mortgagee's
express intent that all excess amounts theretofore collected by Mortgagee shall
be credited on the principal balance of the Notes and all other Obligations (or,
if the Notes and all other Obligations have been or would thereby be paid in
full, refunded to Mortgagor), and the provisions of the Notes and the other
Relevant Documents immediately be deemed reformed and the amounts thereafter
collectible hereunder and thereunder reduced, without the necessity of the
execution of any new documents, so as to comply with the applicable law, but so
as to permit the recovery of the fullest amount otherwise called for hereunder
or thereunder. All sums paid or agreed to be paid to Mortgagee for the use,
forbearance, or detention of the Obligations shall, to the extent permitted by
applicable law, be amortized, prorated, allocated, and spread throughout the
full
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stated term of the Obligations until payment in full so that the rate or amount
of interest on account of the Obligations does not exceed the maximum rate of
interest permitted by law from time to time in effect and applicable to the
Obligations for so long as the Obligations are outstanding.
18. PERFORMANCE OF OTHER AGREEMENTS. Mortgagor shall observe and
perform in all respects the terms to be observed or performed by Mortgagor under
any agreement or recorded instrument affecting or pertaining to the Mortgaged
Property.
19. RIGHT TO PERFORM THE OBLIGATIONS. Subject to the terms of the
Relevant Documents, if any default exists, Mortgagee shall have the right, but
not the obligation, to cure such default in the name and on behalf of Mortgagor.
All sums advanced and expenses incurred at any time by Mortgagee under this
Section 19, or otherwise under this Mortgage or any of the other Relevant
Documents or applicable law (including, without limitation, the costs and
expenses of Mortgagee and its agents incurred in connection with the
preservation, collection and enforcement of this Mortgage or of the liens
created hereby), shall bear interest from the date that such sum is advanced or
expense incurred, to and including the date of reimbursement, computed at the
Default Rate (as defined in the Notes), and all such sums, together with
interest thereon, shall constitute additions to the Obligations and shall be
secured by this Mortgage and Mortgagor covenants and agrees to pay them to the
order of the Mortgagee promptly upon demand.
20. FURTHER ACTS, ETC. Mortgagor will, at the cost of Mortgagor,
and without expense to Mortgagee, do, execute, acknowledge and deliver all and
every such further acts, deeds, conveyances, mortgages, assignments, notices of
assignment, Uniform Commercial Code financing statements or continuation
statements, transfers and assurances as Mortgagee shall, from time to time,
reasonably require, for the better assuring, conveying, assigning, transferring,
and confirming unto Mortgagee the property and rights hereby mortgaged, given,
granted, bargained, sold, alienated, enfeoffed, conveyed, confirmed, warranted,
pledged, assigned and hypothecated (including, without limitation, the
assignment of leases and rents contained in Section 8 hereof) or intended now or
hereafter so to be, or which Mortgagor may be or may hereafter become bound to
convey or assign to Mortgagee, or for carrying out the intention or facilitating
the performance of the terms of this Mortgage or for filing, registering or
recording this Mortgage. Mortgagor, on demand, will execute and deliver and,
Mortgagor hereby authorizes Mortgagee to execute in the name of Mortgagor or
without the signature of Mortgagor to the extent Mortgagee may lawfully do so,
one or more financing statements, chattel mortgages or other instruments, to
evidence more effectively the security interest of Mortgagee in the Mortgaged
Property. Notwithstanding anything to the contrary contained herein, Mortgagor
shall not be obligated to execute, deliver, file or record any additional
documents which increase Mortgagor's obligations under this Mortgage or the
Relevant Documents. Mortgagor grants to Mortgagee an irrevocable power of
attorney coupled with an interest for the purpose of exercising the rights
provided for in Section 19 and this Section 20.
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21. RECORDING OF MORTGAGE, ETC. Mortgagor forthwith upon the
execution and delivery of this Mortgage and thereafter, from time to time, will
cause this Mortgage, and any security instrument creating a lien or security
interest or evidencing the lien hereof upon the Mortgaged Property and each
instrument of further assurance to be filed, registered or recorded in such
manner and in such places as may be required by any present or future law in
order to publish notice of and fully to protect the lien or security interest
hereof upon, and the interest of Mortgagee in, the Mortgaged Property. Mortgagor
will pay all filing, registration or recording fees, the costs and fees of local
counsel for Mortgagee, including, without limitation, costs and fees for local
counsel review of the Mortgage and Subordination Agreement and the preparation
of opinion letters in connection therewith, and all expenses incident to the
execution and acknowledgment of this Mortgage (but not including fees of
Mortgagee's New York counsel in connection with the preparation of this
Mortgage), any deed of trust or mortgage supplemental hereto, any security
instrument with respect to the Mortgaged Property and any instrument of further
assurance, and all federal, state, county and municipal, taxes, duties, imposts,
assessments and charges arising out of or in connection with the execution and
delivery of this Mortgage, any deed of trust or mortgage supplemental hereto,
any security instrument with respect to the Mortgaged Property or any instrument
of further assurance (other than income or franchise taxes imposed on
Mortgagee), except where prohibited by law so to do. Mortgagor shall hold
harmless and indemnify Mortgagee, its successors and assigns, against any
liability incurred by reason of the imposition of any tax on the making and
recording of this Mortgage. Mortgagor shall pay all title costs and premiums in
connection with the ALTA lender's title insurance policy issued by Chicago Title
Insurance Company for the benefit of Mortgagee in connection with this Mortgage
(including payment for the cost of any property surveys ("Surveys") prepared in
connection therewith), which title insurance policy shall be in form and
substance satisfactory to Mortgagee containing such endorsements as Mortgagee
may reasonably request, including, without limitation, the deletion of any
creditor's rights exception and (to the extent available) a variable rate
endorsement; survey endorsement; comprehensive endorsement; first loss
endorsement; last dollar endorsement; tie-in endorsement; future advances
endorsement; access coverage; tax parcel coverage; contiguity (if applicable)
coverage; and such other endorsements as Mortgagee shall reasonably require. In
the event that any Survey with respect to the Mortgaged Property reveals any
encumbrances, restrictions, building code or zoning violations or other matters
which in Mortgagee's reasonable judgment, materially impair Mortgagee's first
priority lien in the Mortgaged Property, Mortgagor agrees to cooperate with
Mortgagee in performing any acts reasonably requested by Mortgagee to cause such
encumbrances, restrictions, violations or other matters to be removed or
remedied as appropriate.
22. REPORTING REQUIREMENTS. Mortgagor agrees to give prompt
notice to Mortgagee of the insolvency or bankruptcy filing of Mortgagor. In
addition, Mortgagor will give notice to Mortgagee in writing not later than ten
(10) days after: (i) the occurrence of any Event of Default with respect to
Mortgagor hereunder, or (ii) notice to Mortgagor of any action, litigation or
proceeding instituted to recover possession of the Mortgaged Property from
Mortgagor or for any other purpose affecting this Mortgage or of any other
action, litigation or proceeding instituted against Mortgagor or judgment
rendered against Mortgagor;
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and such notice to Mortgagee shall include a true copy of any notice of default,
or if any action is then proceeding, copies of any pleadings and papers received
by Mortgagor.
23. EVENTS OF DEFAULT. The term "EVENT OF DEFAULT" as used herein
shall mean the occurrence or happening, at any time and from time to time, of
one or more of the following events:
(a) a default or event of default under any of the Notes
(including, without limitation, any event of default described in Section 3 of
any of the Notes), which remains uncured following the expiration of any
applicable cure periods;
(b) Mortgagor (i) shall fail to perform when due any payment
obligation under the terms of this Mortgage or the other Relevant Documents
within ten days after such amount becomes due, or (ii) shall be in violation of
any of the obligations or covenants contained herein or therein and such default
shall continued unremedied for a period of thirty (30) days, provided that if
such default is not readily susceptible of cure in such thirty (30) day period,
and provided that Mortgagor proceeds in a diligent manner to cure such default,
Mortgagor shall have such additional time to effect such cure as shall be
reasonably necessary to effect such cure;
(c) Failure by Mortgagor to maintain insurance and deliver
evidence thereof pursuant to Section 10; or
(d) a default under any other mortgage, deed of trust or other
security instrument covering the Mortgaged Property or a portion thereof which
remains uncured following the expiration of any applicable cure periods.
24. REMEDIES. (a) Upon the occurrence of any Event of Default,
Mortgagee may take such action permitted in law or at equity, without notice or
demand, as it deems advisable to protect and enforce its rights against
Mortgagor and in and to the Mortgaged Property, by Mortgagee itself or
otherwise, including, but not limited to, the following actions, each of which
may be pursued concurrently or otherwise, at such time and in such order as
Mortgagee may determine, in its sole discretion, without impairing or otherwise
affecting the other rights and remedies of Mortgagee:
(i) declare the entire principal amount of the indebtedness and
Obligations secured hereby with interest accrued thereon to be
immediately due and payable;
(ii) institute a proceeding or proceedings, judicial or
nonjudicial, by advertisement or otherwise, for the complete
foreclosure of this Mortgage in which case the Mortgaged Property
or any interest therein may be sold for cash or upon credit in
one or more parcels or in several interests or portions and in
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any order or manner in accordance with the laws of the
jurisdiction in which such Mortgaged Property is located;
(iii) with or without entry, to the extent permitted, and
pursuant to the procedures provided by, applicable law, institute
proceedings for the foreclosure of this Mortgage for the
Obligations then due and payable subject to the continuing lien
of this Mortgage, in accordance with the laws of the jurisdiction
in which such Mortgaged Property is located, for the balance of
the Obligations not then due;
(iv) sell for cash or upon credit the Mortgaged Property or any
part thereof and all estate, claim, demand, right, title and
interest of Mortgagor therein and rights of redemption thereof,
pursuant to power of sale or otherwise, at one or more sales, as
an entirety or in parcels, at such time and place, upon such
terms and after such notice thereof as may be required or
permitted by the laws of the jurisdiction in which such Mortgaged
Property is located;
(v) institute an action, suit or proceeding in equity for the
specific performance of any covenant, condition or agreement
contained herein or in the other Relevant Documents;
(vi) recover judgment on the Notes either before, during or after
any proceedings for the enforcement of this Mortgage;
(vii) prior to, concurrently with, or subsequent to the
institution of foreclosure proceedings, apply for the appointment
of a trustee, receiver, liquidator or conservator of the
Mortgaged Property, as a matter of strict right, without notice
and without regard for the adequacy of the security for the
Obligations or the interest of the Mortgagor therein and without
regard for the solvency of the Mortgagor or of any person, firm
or other entity liable for the payment of the Obligations, and
Mortgagor hereby consents to such appointment;
(viii) prior to, concurrently with or subsequent to the
institution of foreclosure proceedings, enforce Mortgagee's
interest in the Leases and Rents and enter into or upon the
Mortgaged Property and take exclusive possession thereof, either
personally or by its agents, nominees or attorneys and dispossess
Mortgagor and its agents and servants therefrom, and thereupon
Mortgagee may (whether or not a receiver has been appointed) as
attorney-in-fact or agent of Mortgagor, or in its own name and
under the powers herein granted,(A) use, operate, manage,
control, insure, maintain, repair, restore and otherwise deal
with all and every part of the Mortgaged Property and conduct the
business thereat; (B) complete any construction on the Mortgaged
Property in such manner and form as Mortgagee deems advisable;
(C) make alterations, additions, renewals, replacements and
improvements to or on the Mortgaged
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Property; (D) exercise all rights and powers of Mortgagor with
respect to the Mortgaged Property, whether in the name of
Mortgagor or otherwise (including, without limitation, the right
to make, cancel, enforce or modify Leases, obtain and evict
tenants, and demand, sue for, collect and receive all earnings,
revenues, rents, issues, profits and other income of the
Mortgaged Property and every part thereof); and (E) apply the
receipts from the Mortgaged Property to the payment of the
Obligations, after deducting therefrom all reasonable expenses
(including, without limitation, reasonable attorneys' fees)
incurred in connection with the aforesaid operations and all
amounts necessary to pay the taxes, assessments, insurance and
other charges in connection with the Mortgaged Property, it being
agreed that should Mortgagee incur any liability, loss or damage
in the defense of any claims or demands, the amount thereof,
including costs, expenses and reasonable attorneys' fees shall be
secured hereby, and Mortgagor shall reimburse Mortgagee therefor
immediately upon demand;
(ix) require Mortgagor to pay monthly in advance to Mortgagee, or
any receiver appointed to collect the Rents, the fair and
reasonable rental value for the use and occupation of any portion
of the Mortgaged Property occupied by Mortgagor and require
Mortgagor to vacate and surrender possession to Mortgagee of the
Mortgaged Property or to such receiver and, in default thereof,
evict Mortgagor by summary proceedings or otherwise; and
(x) pursue such other rights and remedies as may be available
under the Relevant Documents or otherwise at law or in equity or
under the Uniform Commercial Code including the right to
establish a lock box for all Rents and other receivables of
Mortgagor relating to the Mortgaged Property.
In the event of a sale, by foreclosure or otherwise, of less than all of the
Mortgaged Property, this Mortgage shall continue as a lien on the remaining
portions of the Mortgaged Property.
The proceeds of any sale made under or by virtue of this Section
24, together with any other sums which then may be held by Mortgagee under this
Mortgage, whether under the provisions of this Section or otherwise, shall be
applied by Mortgagee in the following order of priority: first, on account of
all reasonable costs and expenses incident to the foreclosure proceedings,
including all such items as are mentioned in this Section 24; second, all other
items which under the terms hereof constitute secured indebtedness, which are
any amounts due under this Mortgage, or under the other Relevant Documents
(including any amounts required to be escrowed pursuant to Section 6(b)); third,
any surplus to Mortgagor, its successors or assigns, as their rights may appear.
(b) Upon any sale made under or by virtue of this Section 24,
whether made under the power of sale herein granted or under or by virtue of
judicial proceedings or of a judgment or decree of foreclosure and sale,
Mortgagee may bid for and acquire the Mortgaged Property or any part thereof and
in lieu of paying cash therefor may make settlement for the
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purchase price by crediting upon the Obligations the net sales price after
deducting therefrom the expenses of the sale and costs of the action and any
other sums which Mortgagee is authorized to deduct under this Mortgage.
(c) No recovery of any judgment by Mortgagee and no levy of an
execution under any judgment upon the Mortgaged Property or upon any other
property of Mortgagor shall affect in any manner or to any extent the lien of
this Mortgage upon the Mortgaged Property or any part thereof, or any liens,
rights, powers or remedies of Mortgagee hereunder, but such liens, rights,
powers and remedies of Mortgagee shall continue unimpaired as before.
(d) Mortgagee may adjourn, terminate or rescind any proceeding or
other action brought in connection with its exercise of the remedies provided in
this Section 24 at any time before the conclusion thereof, as determined in
Mortgagee's sole discretion and without prejudice to Mortgagee.
(e) Mortgagee may resort to any remedies and the security given
by this Mortgage or the other Relevant Documents in whole or in part, and in
such portions and in such order as determined by Mortgagee's sole discretion. No
such action shall in any way be considered a waiver of any rights, benefits or
remedies evidenced or provided by this Mortgage or the other Relevant Documents.
The failure of Mortgagee to exercise any right, remedy or option provided in
this Mortgage or the other Relevant Documents shall not be deemed a waiver of
such right, remedy or option or of any covenant or obligation secured by this
Mortgage or the other Relevant Documents. Subject to the provisions of the
Relevant Documents, no acceptance by Mortgagee of any payment after the
occurrence of any Event of Default and no payment by Mortgagee of any obligation
for which Mortgagor is liable hereunder shall be deemed to waive or cure any
Event of Default with respect to Mortgagor, or Mortgagor's liability to pay such
obligation. No sale of all or any portion of the Mortgaged Property, no
forbearance on the part of Mortgagee and no extension of time for the payment of
the whole or any portion of the Obligations or any other indulgence given by
Mortgagee to Mortgagor, shall operate to release or in any manner affect the
interest of Mortgagee in the remaining Mortgaged Property or the liability of
Mortgagor to pay the Obligations. No waiver by Mortgagee shall be effective,
unless it is in writing and then only to the extent specifically stated.
(f) The interests and rights of Mortgagee under this Mortgage and
the other Relevant Documents, and the liens and security interests created and
evidenced by this Mortgage and the other Relevant Documents, shall not be
impaired by any indulgence, including (i) any renewal, extension or modification
which Mortgagee may grant with respect to any of the Obligations, (ii) any
surrender, compromise, release, renewal, extension, exchange or substitution
which Mortgagee may grant with respect to the Mortgaged Property or any portion
thereof; or (iii) any release or indulgence granted to any maker, endorser,
guarantor or surety of any of the Obligations.
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(g) Upon the occurrence of any Event of Default under Section 23,
in any suit to foreclose the lien hereof or enforce any other remedy of
Mortgagee under this Mortgage, there shall be allowed and included as additional
indebtedness in the decree for sale or other judgment or decree all reasonable
expenditures and expenses which may be paid or incurred by or on behalf of
Mortgagee for attorneys' fees, appraiser's fees, outlays for documentary and
expert evidence, stenographers' charges, publication costs, and costs (which may
be estimated as to items to be expended after entry of the decree) of procuring
all such abstracts of title, title searches and examinations, title insurance
policies, Torrens certificates, and similar data and assurances with respect to
title as Mortgagee may deem reasonably necessary either to prosecute such suit
or to evidence to bidders at any sale which may be had pursuant to such decree
the true condition of the title to or the value of the Mortgaged Property. All
such reasonable expenditures and expenses which Mortgagee may incur as permitted
by this Section for the protection of the Mortgaged Property and the maintenance
of the lien of this Mortgage, including, but not limited to, the fees and
out-of-pocket disbursements of any attorney employed by Mortgagee in any
litigation or proceeding affecting this Mortgage, including, but not limited to,
bankruptcy proceedings or preparations for the commencement or defense of any
proceeding or threatened suit or proceeding, shall be immediately due and
payable by Mortgagor and shall be secured by this Mortgage.
25. RIGHT OF ACCESS. Mortgagor shall permit agents,
representatives and employees of Mortgagee to (i) inspect the Mortgaged Property
or any part thereof, PROVIDED that such inspection does not materially interfere
with the tenants of the Mortgaged Property or violate the terms of any Lease,
(ii) to examine and make abstracts from any of Mortgagor's books and records and
(iii) to discuss the business, operations, properties and financial and other
condition of Mortgagor with officers of Mortgagor and with its independent
certified public accountants, at such reasonable times as may be requested by
Mortgagee upon reasonable advance notice.
26. SECURITY AGREEMENT. This Mortgage is both a real
property mortgage and a "security agreement" within the meaning of the
Uniform Commercial Code. The Mortgaged Property includes both real and
personal property and all other rights and interests, whether tangible or
intangible in nature, of Mortgagor in the Mortgaged Property. Mortgagor by
executing and delivering this Mortgage has granted and hereby grants to
Mortgagee, as security for the Obligations, a security interest in the Mortgaged
Property to the full extent that the Mortgaged Property may be subject to the
Uniform Commercial Code (said portion of the Mortgaged Property so subject to
the Uniform Commercial Code being called in this paragraph the "COLLATERAL").
Mortgagor hereby agrees with Mortgagee to execute and deliver to Mortgagee, in
form and substance satisfactory to Mortgagee, such financing statements and such
further assurances as Mortgagee may from time to time, reasonably consider
necessary to create, perfect, and preserve Mortgagee's security interest herein
granted. All or part of the Mortgaged Property is or is to become "fixtures" as
defined in the Uniform Commercial Code, and this Mortgage, upon being filed for
record in the real estate records of the city or county wherein such fixtures
are situated, shall also constitute a "fixture filing" for the purposes of the
Uniform Commercial Code upon such of the Mortgaged Property that is or
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may become fixtures. Information concerning the security interest herein granted
may be obtained from the parties at the addresses of the parties set forth in
the first paragraph of this Mortgage. Mortgagor's chief executive office and
principal place of business is the Mortgagor's address set forth in the first
paragraph of this Mortgage, and the place where Mortgagor's books and records in
respect of where the Mortgaged Property is located are kept is the address of
Mortgagor set forth in the first paragraph of this Mortgage. If an Event of
Default shall occur which shall remain uncured, Mortgagee, in addition to any
other rights and remedies which it may have, shall have and may exercise
immediately and without demand, any and all rights and remedies granted to a
secured party upon default under the Uniform Commercial Code, (including,
without limitation, to the extent permitted by law, the right to take possession
of the Collateral or any part thereof, and to take such other measures as
Mortgagee may deem necessary for the care, protection and preservation of the
Collateral). Upon request or demand of Mortgagee, Mortgagor shall at its expense
assemble the Collateral and make it available to Mortgagee at a convenient place
acceptable to Mortgagee. Mortgagor shall pay to Mortgagee on demand therefor any
and all reasonable expenses (including, without limitation, reasonable legal
expenses and attorneys' fees) incurred or paid by Mortgagee in protecting the
interest in the Collateral and in enforcing the rights hereunder with respect to
the Collateral. Any notice of sale, disposition or other intended action by
Mortgagee with respect to the Collateral sent to Mortgagor at least ten (10)
business days prior to such action or such notice as is otherwise required by
law or the Relevant Documents, shall constitute commercially reasonable notice
to Mortgagor. The proceeds of any disposition of the Collateral, or any part
thereof, may be applied by Mortgagee to the payment of the Obligations in such
priority and proportions as Mortgagee shall determine in its sole discretion. In
the event of any change in name, identity or structure of Mortgagor, Mortgagor
shall notify Mortgagee thereof and, promptly after request, shall execute, file
and record such Uniform Commercial Code forms as are necessary to maintain the
priority of Mortgagee's lien upon and security interest in the Collateral, and
shall pay all expenses and fees in connection with the filing and recording
thereof. If Mortgagee shall require the filing or recording of additional
Uniform Commercial Code forms or continuation statements, Mortgagor shall,
promptly after request, execute, file and record such Uniform Commercial Code
forms or continuation statements as Mortgagee shall deem necessary, and shall
pay all expenses and fees in connection with the filing and recording thereof,
it being understood and agreed, however, that no such additional documents shall
materially increase Mortgagor's obligations under this Mortgage or the other
Relevant Documents. Mortgagor hereby irrevocably appoints Mortgagee as its
attorney-in-fact, coupled with an interest, to file with the appropriate public
office on its behalf any UCC financing statements (or related documents) signed
only by Mortgagee, as secured party, in connection with the Collateral covered
by this Mortgage, such appointment to terminate upon the release of this
Mortgage.
27. ACTIONS AND PROCEEDINGS. Mortgagee has the right to appear in
and defend any action or proceeding brought with respect to the Mortgaged
Property and to bring any action or proceeding, in the name and on behalf of
Mortgagor, which Mortgagee, in its reasonable discretion, decides should be
brought to protect its interest under this Mortgage or in the Mortgaged
Property. Subject to the foregoing, Mortgagor shall appear in and contest
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any action or proceeding purporting to affect the security hereof and shall pay
all reasonable costs and expenses including cost of evidence of title and
attorney's fees, in any such action or proceeding in which Mortgagee may appear.
Mortgagee shall, at its option, be subrogated to the lien of any mortgage or
other security instrument discharged in whole or in part by the Obligations, and
any such subrogation rights shall constitute additional security for the payment
of the Obligations.
28. WAIVER OF SETOFF AND COUNTERCLAIM. Except as may be permitted
under the Relevant Documents, all amounts due under this Mortgage, the Notes and
the other Relevant Documents shall be payable without setoff or counterclaim
whatsoever.
29. LIENS. Mortgagor warrants, covenants and agrees to pay and
promptly discharge, at Mortgagor's cost and expense, all taxes, assessments and
governmental charges levied upon it, its income and assets as and when such
taxes, assessments and charges are due and payable (including, without
limitation, all Impositions), as well as all lawful claims for labor materials
and supplies or otherwise which could become a lien, and all liens, encumbrances
and charges upon the Mortgaged Property, or any part thereof or interest
therein; provided that the existence of any mechanic's, laborer's,
materialman's, supplier's or vendor's lien or right thereto shall not constitute
a violation of this Section if payment is not yet due under the contract which
is the foundation thereof. Notwithstanding the foregoing, Mortgagor shall not be
in default for failure to pay or discharge Impositions or mechanic's or
materialman's or similar lien asserted against the Mortgaged Property if, and so
long as, (a) Mortgagor shall have notified Mortgagee of same within seven (7)
days of obtaining knowledge thereof; (b) Mortgagor shall diligently and in good
faith contest the same by appropriate legal proceedings which shall operate to
prevent the enforcement or collection of the same and the sale of the Mortgaged
Property or any part thereof, to satisfy the same; (c) unless funds are
otherwise reserved, Mortgagor shall furnish to Mortgagee such security as
Mortgagee may reasonably request to insure payment of such Impositions and to
secure and indemnify Mortgagee against any cost, expense, loss or damage in
connection with such contest or postponement of payment,; (d) Mortgagor shall
timely upon final determination thereof pay the amount of any such Impositions,
claim, fine or penalty so determined, together with all costs, interest and
penalties which may be payable in connection therewith; (e) the failure to pay
the Impositions, or mechanic's or materialman's or similar lien claim does not
constitute a default under any other deed of trust, mortgage or security
interest covering or affecting any part of the Mortgaged Property; and (f)
notwithstanding the foregoing, Mortgagor shall immediately upon request of
Mortgagee pay (and if Mortgagor shall fail so to do, Mortgagee may, but shall
not be required to, pay or cause to be discharged or bonded against) any such
Impositions, or claim notwithstanding such contest, if in the reasonable opinion
of Mortgagee, the Mortgaged Property or any part thereof or interest therein may
be in imminent danger of being sold, forfeited, foreclosed, terminated, canceled
or lost.
30. RECOVERY OF SUMS REQUIRED TO BE PAID. Mortgagee shall have
the right from time to time to take action to recover any sum or sums which
constitute a part of the Obligations as the same become due and owing, without
regard to whether or not the balance
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of the Obligations shall be due, and without prejudice to the right of Mortgagee
thereafter to bring an action of foreclosure, or any other action, for a default
or defaults by Mortgagor existing at the time such earlier action was commenced.
31. MARSHALING, WAIVER OF REDEMPTION AND OTHER MATTERS. Mortgagor
hereby waives, to the extent permitted by law, the benefit of all appraisement,
valuation, stay, extension, reinstatement, moratorium and redemption laws now or
hereafter in force and all rights of marshaling in the event of any sale
hereunder of the Mortgaged Property or any part thereof or any interest therein.
Further, Mortgagor hereby expressly waives any and all rights of redemption from
sale under any order or decree of foreclosure of this Mortgage on behalf of
Mortgagor, and on behalf of each and every person acquiring any interest in or
title to the Mortgaged Property subsequent to the date of this Mortgage and on
behalf of all persons to the extent permitted by applicable law.
32. NOTICE. Any notice which either party hereto may desire or be
required to give to the other party shall be in writing and delivered by: (x) a
commercial courier or messenger service or (y) by U.S. registered or certified
mail with return receipt requested. Notice by commercial messenger or courier
service will be deemed to have been given on the day when delivered before 4:00
p.m. on a business day in the city in which notice is delivered, provided that
payment for the cost of delivery is not requested of the recipient. Notice by
mail shall be given by registered or certified U.S. Mail, return receipt
requested. Delivery of notice by commercial messenger or courier service or mail
shall be assumed if acceptance of delivery is refused. Notice may be given by
fax but will only be treated as delivered hereunder if: (x) sent between the
hours of 9:00 a.m. and 5:00 p.m. (based on local time at the destination); and
(y) receipt is acknowledged by fax and delivery will be deemed to have been
given on the date the fax acknowledgment is sent. Notices shall be delivered as
follows or at such other place as either party hereto may by notice in writing
(given in accordance with this Section 32) designate:
To Mortgagor: Discovery Zone, Inc.
One Corporate Center
110 East Broward Boulevard
Fort Lauderdale, Florida 33301
Attn: President
Telecopy Number: (954) 627-2670
To Mortgagee: McDonald's Corporation
One McDonald's Plaza
Oak Brook, IL 60523
Attn: General Counsel
Telecopy Number: (630) 623-3000
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33. SOLE DISCRETION OF MORTGAGEE. Wherever pursuant to this
Mortgage, Mortgagee exercises any right given to it to approve or disapprove, or
any arrangement or term is to be satisfactory to Mortgagee, the decision of
Mortgagee to approve or disapprove or to decide that arrangements or terms are
satisfactory or not satisfactory shall be in the sole discretion of Mortgagee
and shall be final and conclusive, except as may be otherwise expressly and
specifically provided herein.
34. NON-WAIVER. The failure of Mortgagee to insist upon strict
performance of any term hereof shall not be deemed to be a waiver of any term of
this Mortgage. Mortgagor shall not be relieved of Mortgagor's Obligations
hereunder by reason of (a) the failure of Mortgagee to comply with any request
of Mortgagor to take any action to foreclose this Mortgage or otherwise enforce
any of the provisions hereof or of the other Relevant Documents, (b) the
release, regardless of consideration, of the whole or any part of the Mortgaged
Property, or of any person liable for the Obligations or any portion thereof, or
(c) any agreement or stipulation by Mortgagee extending the time of payment or
otherwise modifying or supplementing the terms of this Mortgage or the other
Relevant Documents. Mortgagee may resort for the payment of the Obligations to
any other security held by Mortgagee in such order and manner as Mortgagee, in
its discretion, may elect. Mortgagee may take action to recover the Obligations,
or any portion thereof, or to enforce any covenant hereof without prejudice to
the right of Mortgagee thereafter to foreclosure this Mortgage. The rights and
remedies of Mortgagee under this Mortgage shall be separate, distinct and
cumulative and none shall be given effect to the exclusion of the others. No act
of Mortgagee shall be construed as an election to proceed under any one
provision herein to the exclusion of any other provision. Mortgagee shall not be
limited exclusively to the rights and remedies herein stated but shall be
entitled to every right and remedy now or hereafter afforded at law or in
equity.
35. NO ORAL CHANGE. This Mortgage and the other Relevant
Documents constitute the final expression of the entire agreement among the
parties pertaining to the subject matter hereof and thereof and supersede all
prior and contemporaneous agreements, understanding, representations or other
arrangements, whether express or implied, written or oral, of the parties in
connection herewith or therewith except to the extent expressly incorporated or
specifically referred to herein or therein. This Mortgage, and any provisions
hereof, may not be modified, amended, waived, extended, changed, discharged or
terminated orally or by any act or failure to act on the part of Mortgagor or
Mortgagee, but only by an agreement in writing signed by the party against whom
enforcement of any modification, amendment, waiver, extension, change, discharge
or termination is sought.
36. SUCCESSORS AND ASSIGNS. Subject to the provisions hereof
requiring Mortgagee's consent to any transfer of the Mortgaged Property, this
Mortgage shall be binding upon and inure to the benefit of Mortgagor and
Mortgagee and their respective permitted successors and assigns forever.
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37. SEVERABILITY. If any term, covenant or condition of this
Mortgage or the Relevant Documents is held to be invalid, illegal or
unenforceable in any respect, this Mortgage and any such other Relevant Document
shall be construed without such provision.
38. HEADINGS, ETC." The headings and captions of various
paragraphs of this Mortgage are for convenience of reference only and are not to
be construed as defining or limiting, in any way, the scope or intent of the
provisions hereof.
39. DUPLICATE ORIGINALS. This Mortgage may be executed in any
number of duplicate originals and each such duplicate original shall be deemed
to be an original.
40. DEFINITIONS. Unless the context clearly indicates a contrary
intent or unless otherwise specifically provided herein, words used in this
Mortgage may be used interchangeably in singular or plural form and the word
"Mortgagor" shall mean "each Mortgagor and any subsequent owner or owners of the
Mortgaged Property or any part thereof or any interest therein," the word
"Mortgagee" shall mean "Mortgagee and any subsequent holder(s) of the Notes,"
the word "person" shall include an individual, corporation, partnership, trust,
unincorporated association, government, governmental authority, and any other
entity, and the words "Mortgaged Property" shall include any portion of the
Mortgaged Property and any interest therein and the words "attorneys' fees"
shall include any and all attorneys' fees, paralegal and law clerk fees
(including, without limitation, fees at the pre-trial, trial and appellate
levels incurred or paid by Mortgagee in protecting its interest in the Mortgaged
Property and Collateral and enforcing its rights hereunder and all such fees
incurred in connection with any bankruptcy or insolvency proceedings). Whenever
the context may require, any pronouns used herein shall include the
corresponding masculine, feminine or neuter forms, and the singular form of
nouns and pronouns shall include the plural and vice versa.
41. HOMESTEAD. Mortgagor hereby waives and renounces all
homestead and exemption rights provided by the constitution and the laws of the
United States and of any state, in and to the Land as against the collection of
the Obligations, or any part hereof.
42. ASSIGNMENTS. Consistent with and subject to the applicable
provisions of the Relevant Documents, Mortgagee shall have the right to assign
or transfer its rights under this Mortgage without limitation. Any Mortgagee or
transferee shall be entitled to all the benefits afforded Mortgagee under this
Mortgage.
43. WAIVER OF JURY TRIAL. TO THE MAXIMUM EXTENT PERMITTED BY
APPLICABLE LAW, EACH PARTY HERETO HEREBY AGREES NOT TO ELECT A TRIAL BY JURY OF
ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY JURY FULLY
TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO
THE NOTES, THIS MORTGAGE, OR THE OTHER RELEVANT DOCUMENTS, OR ANY CLAIM,
COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH.
30
<PAGE>
THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY SUCH
PARTY, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS
TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE. MORTGAGEE IS
HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS
CONCLUSIVE EVIDENCE OF THIS WAIVER BY MORTGAGOR.
44. CONSENT TO JURISDICTION. MORTGAGOR AND MORTGAGEE HERETO
CONSENT FOR THEMSELVES AND IN RESPECT OF THEIR PROPERTIES, GENERALLY,
UNCONDITIONALLY AND IRREVOCABLY, TO THE NONEXCLUSIVE JURISDICTION OF THE FEDERAL
AND STATE COURTS IN THE STATE OF NEW YORK WITH RESPECT TO ANY PROCEEDING
RELATING TO ANY MATTER, CLAIM OR DISPUTE ARISING UNDER THE RELEVANT DOCUMENTS OR
THE TRANSACTIONS CONTEMPLATED THEREBY. MORTGAGOR FURTHER CONSENTS, GENERALLY,
UNCONDITIONALLY AND IRREVOCABLY, TO THE NONEXCLUSIVE JURISDICTION OF THE STATE
AND FEDERAL COURTS OF THE STATE IN WHICH ANY OF THE COLLATERAL IS LOCATED IN
RESPECT OF ANY PROCEEDING RELATING TO ANY MATTER, CLAIM OR DISPUTE ARISING WITH
RESPECT TO SUCH COLLATERAL. MORTGAGOR FURTHER IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS, GENERALLY, UNCONDITIONALLY AND IRREVOCABLY, AT THE ADDRESSES
SET FORTH IN THE FIRST PARAGRAPH HEREOF IN CONNECTION WITH ANY OF THE AFORESAID
PROCEEDINGS IN ACCORDANCE WITH THE RULES APPLICABLE TO SUCH PROCEEDINGS. TO THE
EXTENT PERMITTED BY APPLICABLE LAW, MORTGAGOR HEREBY IRREVOCABLY WAIVES ANY
OBJECTION WHICH IT MAY NOW HAVE OR HAVE IN THE FUTURE TO THE LAYING OF VENUE IN
RESPECT OF ANY OF THE AFORESAID PROCEEDINGS BROUGHT IN THE COURTS REFERRED TO
ABOVE AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
NOTHING HEREIN SHALL AFFECT THE RIGHT OF MORTGAGEE TO SERVE PROCESS IN ANY
MANNER PERMITTED BY LAW OR TO COMMENCE PROCEEDINGS OR OTHERWISE PROCEED AGAINST
MORTGAGOR IN ANY JURISDICTION.
45. GOVERNING LAW. This Mortgage shall be governed by and
construed in accordance with the laws of the State of New York including,
without limitation, Section 5-1401 of the General Obligations Law, but otherwise
without regard to conflict of law principles; PROVIDED, HOWEVER, that with
respect to the creation, attachment, perfection, priority and procedures
relating to the enforcement of the liens and security interests created by or
pursuant to this Mortgage and relating to real property, this Mortgage shall be
governed by and construed in accordance with the laws of the state in which the
Land is located.
46. LIEN ABSOLUTE, MULTI-SITE REAL ESTATE AND MULTIPLE COLLATERAL
TRANSACTION. Mortgagor acknowledges that this Mortgage and a number of other
Relevant
31
<PAGE>
Documents and those documents required by the Relevant Documents together secure
the Obligations. Mortgagor agrees that the lien of this Mortgage and all
obligations of the Mortgagor hereunder shall be absolute and unconditional and
shall not in any manner be affected or impaired by:
(a) any lack of validity or enforceability of the Notes or any
other Relevant Document, any agreement with respect to any of the Obligations or
any other agreement or instrument relating to any of the foregoing;
(b) any acceptance by Mortgagee of any security for or guarantees
of any of the indebtedness hereby secured;
(c) any failure, neglect or omission on the part of Mortgagee to
realize upon or protect any of the indebtedness hereby secured or any of the
collateral security therefor, including the Relevant Documents;
(d) any change in the time, manner or place of payment of, or in
any other term of, all or any of the Obligations;
(e) any release (except as to the property or obligation
released), sale, pledge, surrender, compromise, settlement, nonperfection,
renewal extension, indulgence, alteration, exchange, modification or disposition
of any of the Obligations hereby secured or of any of the collateral security
therefor;
(f) any amendment or waiver of or any consent to any departure
from the Notes or any other Relevant Documents or of any guaranty thereof
(except to the extent of such amendment, waiver or consent in writing by
Mortgagee), if any, and Mortgagee may in its discretion foreclose, exercise any
power of sale, or exercise any other remedy available to it under any or all of
the Relevant Documents without first exercising or enforcing any of its rights
and remedies hereunder; and
(g) any exercise of the rights or remedies of Mortgagee hereunder
or under any or all of the Relevant Documents.
Mortgagor specifically consents and agrees that Mortgagee may exercise its
rights and remedies hereunder and under the other Relevant Documents separately
or concurrently and in any order that Mortgagee may deem appropriate.
47. FUTURE ADVANCES. This Mortgage shall secure not only existing
indebtedness, but also such future advances, whether such advances are
obligatory or are to be made at the option of Mortgagee, or otherwise, as are
made by Mortgagee to Mortgagor after the date hereof, to the same extent as if
such future advances were made on the date of the execution of this Mortgage.
Nothing in this Mortgage shall be deemed an obligation on the part of the
Mortgagee to make any future advances.
32
<PAGE>
48. STATE SPECIFIC PROVISIONS. The provisions of Exhibit B are
hereby incorporated by reference as though set forth in full herein.
49. NO MERGER OF ESTATES. It is the intention and agreement of
Mortgagor and Mortgagee that there shall be no merger of any leasehold estate in
the Mortgaged Property with the fee interest in the Mortgaged Property or any
other estate or interest in the Mortgaged Property, and there shall be no merger
of this Mortgage and any estate in the Mortgaged Property, by reason of the fact
that the same person may own or hold (a) any leasehold interest in the Mortgaged
Property, and/or (b) this Mortgage, and/or (c) the fee interest in the Mortgaged
Property or any other estate or interest in the Mortgaged Property.
50. SUBORDINATE LIEN. Notwithstanding anything to the contrary
contained herein, Mortgagor shall be permitted to grant a subordinate lien on
the Mortgaged Property in favor of State Street Bank and Trust Company, solely
in its capacity as trustee and collateral agent under and pursuant to the
Indenture (as hereinafter defined) (the "SUBORDINATED CREDITOR") as security for
the obligations of Mortgagor under that certain Indenture between Mortgagor and
the Subordinated Creditor dated as of July 22, 1997 (the "INDENTURE"), provided
that such lien in favor of the Subordinated Creditor is junior, subject and
subordinate to the lien of this Mortgage in accordance with and pursuant to the
terms and conditions set forth in that certain Subordination Agreement dated as
of the date hereof between Mortgagee and the Subordinated Creditor with respect
to the Mortgaged Property (the "SUBORDINATION AGREEMENT"), and provided,
further, that any event which gives the Subordinated Creditor the right to
accelerate the obligations secured by such subordinate lien shall automatically
constitute an Event of Default hereunder.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE AND NOTARY PAGES FOLLOW.]
33
<PAGE>
Mortgagor has executed this instrument as of the day and year first above
written.
MORTGAGOR:
DISCOVERY ZONE, INC., a
Delaware corporation, as
successor in interest to LEAPS
& BOUNDS, INC.
By: /s/ Robert Rooney
------------------------
Name: Robert Rooney
Title: Sr. V.P.
<PAGE>
STATE OF NEW YORK )
)
COUNTY OF WESTCHESTER)
On the 28 day of July, 1997, before me personally came
Robert Rooney, to me known, who, being duly sworn, did depose and say
that he/she resides at 50 Main Street White Plains,N.Y.; that he is a
Sr. V.P. of DISCOVERY ZONE, INC., the Delaware corporation
described in and which executed the foregoing instrument; and that he/she had
the authority to sign the same, and he/she acknowledged to me that he/she
executed the same as the act and deed of said corporation by order of the board
of directors thereof.
/s/ Mark D. Woodward
------------------------------
Notary Public
[NOTARIAL SEAL]
THIS INSTRUMENT WAS DRAFTED BY (NAME AND ADDRESS)
Jonathan Reiss, Esq.
Cleary, Gottlieb, Steen & Hamilton
1 Liberty Plaza
New York, New York 10006
<PAGE>
Washington
Marion County, Indiana
EXHIBIT A
Parcel I:
A part of the Northeast Quarter of Section 20, Township 17 North, Range 4 East
located in Washington Township, Marion County, Indiana, being bounded as
follows:
Commencing at the Southeast corner of the Southwest Quarter of Section 20,
Township 17 North, Range 4 East; thence North 00 degrees 07 minutes 10 seconds
East (assumed bearing) 2,650.77 feet along the East line of said Southwest
Quarter to its Northeast corner and the Southeast corner of the Northwest
Quarter of Section; thence North 00 degrees 17 minutes 57 seconds East 1,026.00
feet along the East line of said Northwest Quarter to the centerline of East
82nd Street; thence continuing North 00 degrees 17 minutes 57 seconds East
101.27 feet along the East line of said Northwest Quarter to the terminus of
the sixth course of the land description of the 0.675 acre tract of land
described in a Warranty Deed recorded as Instrument No. 87-77965 in the Office
of the Recorder of Marion County, Indiana (the next three (3) courses are along
the Northeastern boundary of said 0.675 acre tract of land); 1.) thence
North 71 degrees 30 minutes 37 seconds West 455.99 feet; 2.) thence North
63 degrees 29 minutes 12 seconds West 99.20 feet; 3.) thence North 70 degrees
49 minutes 29 seconds West 109.51 feet; thence North 70 degrees 46 minutes
35 seconds West 81.32 to the terminus of the ninth course of the land
description of the 0.836 acre tract of land described in said Warranty Deed
(the next three (3) courses are along the Northern boundary of said 0.836
acre tract of land); 1.) thence North 69 degrees 01 minutes 49 seconds West
105.71 feet to a point on a non-tangent curve concave to the Northeast, said
point being South 24 degrees 13 minutes 40 seconds West 5,664.58 feet from the
radius point of said curve; 2.) thence Northwesterly 286.89 feet along said
curve to its point of tangency, said point of tangency being South 27 degrees
07 minutes 46 seconds West 5,664.58 feet from the radius point of said curve;
2.) thence Northwesterly 286.89 feet along said curve to its point of tangency,
said point of tangency being South 27 degrees 07 minutes 46 seconds West
5,664.58 feet from the radius point of said curve; 3.) thence North 62 degrees
52 minutes 14 seconds West 287.00 feet; thence North 50 degrees 45 minutes
35 seconds East 32.43 feet to a point on a non-tangent curve being concave
to the West said point being South 62 degrees 52 minutes 14 seconds East
183.00 feet from the radius point of said curve; thence Northeasterly and
Northerly 46.03 feet along said curve to a point; said point being South 77
degrees 16 minutes 57 seconds East 183.00 feet from the radius point of said
curve; thence 13 degrees 23 minutes 55 seconds East 126.16 feet; thence North 23
degrees 51 minutes 51 seconds East 65.36 feet; thence North 66 degrees 08
minutes 09 seconds West 25.00 feet to the POINT OF BEGINNING of this
description; thence North 23 degrees 51 minutes 51 seconds East 130.00 feet;
thence North 66 degrees 08 minutes 09 seconds West 134.00 feet; thence South 23
degrees 51 minutes 51 seconds West 130.00 feet; thence South 66 degrees 08
minutes 09 seconds East 134.00 feet to the POINT OF BEGINNING.
Parcel II:
An easement for vehicular parking and driveways, pedestrian walkways,
directional signs, lot lighting, trash enclosures, recycling bins and
landscaping over the land described in Exhibit "B" of the deed from Clearwater
Crossing Associates to Leaps & Bounds, Inc. recorded November 10, 1992 as
Instrument No. 92-149615 in the Office of the Recorder of Marion County,
Indiana.
(Continued)
<PAGE>
Washington
Marion County, Indiana
EXHIBIT A
(continued)
Parcel III:
Non-exclusive easements for access, parking and utilities as set out in a
Declaration And Grant Of Easements recorded November 13, 1991 as Instrument No.
91-117692, as amended by Amendment To Declaration And Grant Of Easements
recorded February 13, 1992, as Instrument No. 92-17668, and as further amended
by Second Amendment To Declaration And Grant Of Easements recorded September 21,
1992 as Instrument No. 92-123846, all in the Office of the Recorder of Marion
County, Indiana.
Parcel IV:
Non-Exclusive easement for ingress and egress as set out in Declaration and
Grant of Easements dated September 28, 1990 and recorded October 2, 1990 as
Instrument #90-102836, amended by Amendment to Declaration and Grant of
Easements dated September 15, 1992 and recorded September 18, 1992 as Instrument
#92-123838, all in the Office of the Recorder of Marion County, Indiana.
<PAGE>
EXHIBIT B
STATE SPECIFIC PROVISIONS (Indiana)
The following provisions are incorporated by reference into
Section 48 of the attached Mortgage. If any conflict or inconsistency exists
between this Exhibit B and the remainder of the attached Mortgage, this Exhibit
B shall govern.
A. SPECIAL FORECLOSURE PROVISIONS. To the extent the applicable
portion of the Mortgaged Property is situated in the State of Indiana, the
Mortgagor shall pay all sums of money secured hereby in the manner provided
herein and without relief from valuation or appraisement laws. Anything herein
to the contrary notwithstanding, upon the occurrence of an Event of Default, as
to all of the Mortgaged Property located in the State of Indiana, Mortgagee
shall have the right to foreclose this Mortgage in the manner provided under the
laws of Indiana and to exercise remedies available under Indiana law. In the
event a foreclosure action is commenced, as aforesaid, and a receiver is
appointed as to the Mortgaged Property located in Indiana, said receiver shall
possess all rights and powers granted to the Mortgagee hereunder to the extent
said receiver may possess and exercise said rights and powers under Indiana law.
A foreclosure action or actions or other judicial action or actions pending or
concluded in any other state against any of the security described herein which
is located in a state other than Indiana shall be construed as an action brought
under a separate mortgage and shall not prevent or preclude a concurrent
foreclosure action or other judicial action brought in Indiana to enforce this
mortgage or any provisions thereof against any or all of the security located in
Indiana.
B. WAIVER OF STATUTORY RIGHTS. To the extent permitted by law,
Mortgagor hereby agrees that it shall not and will not apply for or avail itself
of any appraisement, valuation, stay, extension or exemption laws, or any
so-called "Moratorium Laws," now existing or hereafter enacted, in order to
prevent or hinder the enforcement or foreclosure of this Mortgage, but hereby
waives the benefit of such laws. Mortgagor for itself and all who may claim
through or under it waives any and all right to have the Mortgaged Property
marshaled upon any foreclosure of the lien hereof and agrees that any court
having jurisdiction to foreclose such lien may order the Property sold as an
entirety. To the maximum extent permitted by law, but subject to the terms of
the next sentence, Mortgagor hereby waives any and all rights of redemption (but
not reinstatement) from sale under any order or decree of foreclosure of this
Mortgage on its behalf and on behalf of each and every person, except decree or
judgment creditors of Mortgagor, acquiring any interest in or title to the
Mortgaged Property subsequent to the date of this Mortgage. In the event any
waiver set forth herein could be deemed to limit Mortgagee's rights hereunder or
under the Relevant Documents, including any rights to a deficiency judgment,
such waiver shall be deemed void and of no further force and effect.
C. OTHER. Anything contained in I.C. 32-8-16-1.5 to the contrary
notwithstanding, no waiver made by Mortgagor in this Mortgage or in the Relevant
<PAGE>
Documents shall constitute the consideration for or be deemed to be a waiver or
release by Mortgagee or any judgment holder of the obligations hereby secured of
the right to seek a deficiency judgment against the Mortgagor or any other
person or entity who may be personally liable for the obligations hereby
secured, which right to seek a deficiency judgment is hereby reserved, preserved
and retained by Mortgagee for its own behalf and its successors and assigns.
<PAGE>
SCHEDULE A
DESCRIPTION OF ORIGINAL MORTGAGE
<TABLE>
<CAPTION>
PROPERTY RECORDING OFFICE INSTRUMENT NO. RECORDING DATE
- ------------------------------ ------------------------------------ --------------- ---------------
<S> <C> <C> <C>
Washington Township, IN Marion County Recorder, Marion 94-138715 9/12/94
County, IN
</TABLE>
<PAGE>
EXHIBIT 4.37
- -----------------------------------------------------------------------------
DISCOVERY ZONE, INC.
(Grantor),
to
KENNETH W. PEARSON, as Trustee
(Trustee)
for the benefit of
McDONALD's CORPORATION
(Beneficiary)
--------------------------------------------------------------
AMENDED AND RESTATED DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS, SECURITY
AGREEMENT AND FIXTURE FILING
--------------------------------------------------------------
Dated as of July 29, 1997
DOCUMENT PREPARED BY AND
AFTER RECORDING RETURN TO:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attention: Jonathan A. Reiss, Esq.
- ------------------------------------------------------------------------------
[SAN ANTONIO, TEXAS PROPERTY]
<PAGE>
THIS AMENDED AND RESTATED DEED OF TRUST, ASSIGNMENT OF LEASES AND
RENTS, SECURITY AGREEMENT AND FIXTURE FILING (as the same may from time to time
be extended, renewed or modified, this "DEED OF TRUST"), made as of the 29th day
of July, 1997, by DISCOVERY ZONE, INC., a Delaware corporation ("GRANTOR"),
having its principal place of business at One Corporate Center, 110 East Broward
Boulevard, Fort Lauderdale, Florida 33301, as successor by merger to LEAPS &
BOUNDS, INC., to KENNETH W. PEARSON, having his principal place of business at
c/o Brown, McCarroll & Oaks Hartline, 300 Crescent Court, Suite 1400, Dallas,
Texas 75201 (and any subsequent substitutes or successors thereof pursuant to
Section 50 below, "Trustee"), to and for the benefit of McDONALD'S CORPORATION a
Delaware corporation ("BENEFICIARY"), having an address at One McDonald's Plaza,
Oak Brook, Illinois 60523.
W I T N E S S E T H:
A. WHEREAS, prior to Grantor's several predecessors in interest
filing their voluntary petitions for relief under chapter 11, title 11, United
States Code (the "BANKRUPTCY CODE"), Grantor's predecessors in interest with
respect to the Trust Property (as hereinafter defined), Leaps & Bounds, Inc.
("LBI") had provided Beneficiary with a First Deed of Trust on the Trust
Property, dated as of August 30, 1994 (the "ORIGINAL DEED OF TRUST") and
identified by the recording information set forth on Schedule A hereto, to
secure certain obligations owed to Beneficiary under the Agreement and Plan of
Merger among Beneficiary, Grantor, Discovery Zone, Inc., a Delaware corporation
("OLD DZI") and Discovery Zone International, Inc. ("DZII"), a Delaware
corporation, dated as of August 30, 1994 (the "MERGER AGREEMENT"); and
B. WHEREAS, pursuant to Section 11.2(a)(iii) of the Merger
Agreement, Old DZI agreed to defend, indemnify and hold Beneficiary and its
affiliates harmless in respect of all expenses, losses, costs, deficiencies,
liabilities and damages (including related and reasonable counsel fees and
expenses, and compensatory and demonstrable consequential damages) incurred or
suffered by Beneficiary as a direct result of, inter alia, any breach by Old DZI
or LBI of the leases or subleases relating to certain properties that result in
any payment by Beneficiary in connection with any guarantee by Beneficiary of
such leases and pursuant to Section 10.3(f) of the Merger Agreement it was
agreed that certain security would be provided to secure the obligations under
Section 11.2(a)(iii) of the Merger Agreement, including without limitation, a
first priority security interest in the Land and Improvements (the "AGREEMENT TO
INDEMNIFY"); and
C. WHEREAS, following the filing of their respective prayers for
relief under the Bankruptcy Code, Grantor's predecessors in interest, Old DZI,
their affiliated debtors, including DZII and LBI (the "DEBTORS"), and
Beneficiary entered into the Stipulation and Order Between Debtors and
McDonald's Corporation Providing For The Resolution, Settlement And Compromise
of Disputes And For Rent Deferrals And Allowance of Certain Claims (the
"STIPULATION AND ORDER") that was entered by the United States Bankruptcy Court
for the District of Delaware (the "BANKRUPTCY COURT") on November 18, 1996,
which was not
2
<PAGE>
appealed or otherwise challenged, became a final order, remains in full force
and effect and to which Grantor is bound, Section 7 of which is captioned
"CONTINUING SECURITY" and provides, in pertinent part, that the valid and
enforceable first priority security interest on the Land and Improvements and
certain other collateral shall secure the performance and payment of all of the
obligations of Grantor to Beneficiary under the Notes (as hereinafter defined),
any obligations of Beneficiary that may arise in connection with the Assumption
Locations whether pursuant to any guaranty, lease, sublease or otherwise, any
obligations of Grantor that may arise in the event of a Liquidation, and any
continuing obligations of Grantor relating to the Rejection Location(s) and the
Prior Rejection Locations (as such terms are defined therein); and
D. WHEREAS, pursuant to the Stipulation and Order and 11 U.S.C.
ss.365, the Debtors, as predecessors in interest to Grantor, assumed the
subleases relating to certain properties (the "ASSUMED PROPERTIES") which
subleases (the "ASSUMED PROPERTY SUBLEASES") expressly incorporate the Agreement
to Indemnify as it relates to any current or future obligations of Beneficiary
relating to the Assumed Properties; and
E. WHEREAS, pursuant to the Stipulation and Order and the Plan
(as hereinafter defined), this Deed of Trust hereby amends and restates the
Original Deed of Trust in its entirety in accordance with the terms and
provisions set forth herein; and
F. WHEREAS, this Deed of Trust, together with certain other Deeds
of Trust, Mortgages or similar encumbrances, are intended to and do secure the
obligations of Grantor and its predecessors in interest and the other Debtors,
to Beneficiary under all of the Stipulation and Order, the Agreement to
Indemnify, the Secured Rent Deferral Notes (as hereinafter defined) and the
Secured Rejection Note (as hereinafter defined); and
G. WHEREAS, pursuant to the plan of reorganization for Old DZI
and its affiliated debtors confirmed by the Bankruptcy Court by order entered on
July 18, 1997 (the "PLAN"), and as required by the terms of the Stipulation and
Order, Grantor, as the reorganized successor of the Debtors, is obligated to
issue to Beneficiary Secured Rent Deferral Notes in the aggregate original
principal amount of $266,466.24, which amount is subject to increase each month
in accordance with the terms thereof (the "SECURED RENT DEFERRAL NOTES") and
Secured Rejection Note in the aggregate original principal amount of
$4,416,237.90 (the "SECURED REJECTION NOTE" and, together with the Secured Rent
Deferral Notes, the "NOTES"); and
H. WHEREAS, pursuant to the Plan, all of the Debtors and their
reorganized successors have merged into Grantor, and simultaneously with such
merger, all property of LBI and the other Debtors, including the Trust Property
(as hereinafter defined), has been revested in Grantor, as the successor entity
of the Debtors; and
I. WHEREAS, in accordance with the foregoing, Grantor is the fee
simple owner of the real estate described in Exhibit A attached hereto (the
"LAND");
3
<PAGE>
NOW THEREFORE, with reference to the foregoing recitals and for
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Grantor and Beneficiary hereby agree that the Original Deed of
Trust is hereby amended and restated in its entirety as follows:
For the purpose of securing the payment and performance of all of
the obligations (the "OBLIGATIONS") of Grantor to Beneficiary, including without
limitation, any and all obligations of Grantor, as successor in interest to Old
DZI, DZII, LBI and their affiliated debtors, under this Deed of Trust, the
Agreement to Indemnify (including, without limitation, any contingent
obligations thereunder), the Stipulation and Order (including, without
limitation, the obligations described in Section 7 thereof which are referred to
in paragraph C of the recitals above), the Plan and the Notes (including any and
all subsequent advances made pursuant to the terms of the Notes), and all other
documents evidencing or securing any such obligations (collectively, the
"RELEVANT DOCUMENTS"), Grantor by these presents hereby GRANTS, BARGAINS, SELLS,
WARRANTS, PLEDGES, ASSIGNS AND CONVEYS to Trustee and its successors and assigns
forever in trust, WITH POWER OF SALE, for the benefit of Beneficiary, the Land
and the buildings, structures and improvements of every nature whatsoever now or
hereafter located thereon to the extent owned by Grantor (including, but not
limited to, all gas and electric fixtures, radiators, heaters, docks and docking
facilities, engines and machinery, boilers, elevators and motors, plumbing,
heating and air conditioning fixtures, carpeting and other floor coverings,
water heaters, awnings and storm sashes which are or shall be attached to the
Land or said buildings, structures or improvements) (the "IMPROVEMENTS");
TOGETHER WITH: all right, title, interest and estate of Grantor
now owned, or hereafter acquired, in and to the following property, rights,
interest and estates relating to the Land and the Improvements, together with
Grantor's interest in the following property, rights, interests and estates
hereinafter described (the Land, Improvements, and the following property,
rights, interests and estates being hereinafter collectively referred to as the
"TRUST PROPERTY"):
(a) all easements, rights-of-way, strips and gores of land,
streets, ways, alleys, passages, sewer rights, water, water courses, water
rights and powers, air rights and development rights, construction and equipment
warranties, and all estates, rights, titles, interests, privileges, liberties,
tenements, hereditaments and appurtenances of any nature whatsoever, in any way
belonging, relating to or pertaining to the Land and the Improvements and the
reversion and reversions, remainder and remainders, and all land lying in the
bed of any street, road or avenue, opened or proposed, in front of or adjoining
the Land, to the center line thereof and all the estates, rights, titles,
interests, dower and rights of dower, curtesy and rights of curtesy, property,
possession, claim and demand whatsoever, both at law and in equity, of Grantor
of, in and to the Land and the Improvements and every part and parcel thereof,
with the appurtenances thereto, and in and to any streets, ways, alleys,
passages, strips or gores of land adjoining the Land or any part thereof;
4
<PAGE>
(b) all fixtures, attachments and other articles attached to the
Land or the Improvements constituting realty or real property now or hereafter
owned by Grantor or in which Grantor has or shall acquire an interest, now or
hereafter located on, attached to or contained in or used or usable in
connection with the Trust Property, and including, without limitation, all
building or construction materials intended for construction, reconstruction,
alteration or repair of or installation on or in the Trust Property, of every
kind and nature whatsoever now owned or hereafter acquired by Grantor, and all
proceeds thereof, as well as all additions to, appurtenances, substitutions for,
replacements of or accessions to any of the items recited as aforesaid and all
attachments, components, parts (including spare parts) and accessories, whether
installed thereon or affixed thereto, now or hereafter owned by Grantor and used
or intended to be used in connection with, or with the operation of, the Trust
Property, to the extent constituting real property, but not including play
equipment or other similar-type entertainment equipment relating to the
operation of the "Discovery Zone" facility on the Trust Property unless removal
of such equipment would cause structural damage to the Land or the Improvements
(collectively, the "FIXTURES");
(c) all awards or payments, including interest thereon, which may
heretofore and hereafter be made with respect to the Trust Property, whether
from the exercise of the right of eminent domain (including, but not limited to,
any transfer made in lieu of or in anticipation of the exercise of said rights),
or for a change of grade, or for any other injury to or decrease in the value of
the Trust Property;
(d) to the extent assignable (and to the extent relating to the
general occupancy and use of the Trust Property as opposed to the operation of
the "Discovery Zone" entertainment facility on the Trust Property), leases,
subleases (including sub-subleases), lettings, licenses, concessions, occupancy
agreements and other agreements which grant a possessory interest in, or the
right to use or occupy, all or any part of the Trust Property now or hereafter
entered into, and all amendments, extensions, renewals and guarantees thereof,
and all security therefor (collectively, the "LEASES") and all rents, issues,
profits, revenues (including all oil and gas or other mineral royalties and
bonuses) and deposits (including, without limitation, security deposits) under
the Leases (including, without limitation, from the rental of any office space,
retail space or other space, halls, stores, and offices, and security deposits
therefor, exhibit or sales space of every kind, license, lease, sublease fees
and rentals, letters of credit or cash instruments securing or evidencing
obligations under Leases, service charges, vending machine sales and proceeds,
if any, from business interruption or other loss of income insurance))
(collectively, the "Rents") and all proceeds from the sale or other disposition
of the Leases and the right to receive and apply the Rents to the payment of the
Obligations;
(e) subject to the rights of Grantor hereunder, all proceeds of
any insurance policies covering the Trust Property (including, without
limitation, the right to receive and apply the proceeds of any insurance,
judgments, or settlements made in lieu thereof, for damage to the Trust
Property);
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(f) all refundable, returnable or reimbursable fees deposits or
other funds or evidences of credit or indebtedness deposited by or on behalf of
Grantor with any governmental authorities, boards, corporations, providers of
utility services, public or private, including specifically, but without
limitation, all refundable, returnable or reimbursable tap fees, utility
deposits and development costs in connection with the Trust Property, and all of
the records and books of account now or hereafter maintained by or on behalf of
Grantor in connection with the operation of the Trust Property (collectively,
"SECURITY ACCOUNTS");
(g) all proceeds (as defined in the Uniform Commercial Code) of
the Trust Property which, in any event, shall include, without limitation, (i)
cash, instruments and other property received, receivable or otherwise
distributed in exchange for any or all of the Trust Property, (ii) the
collection or other disposition of, or realization upon, any item or portion of
the Trust Property (including, without limitation, all claims of Grantor against
third parties for loss of, damage to, destruction of, or for proceeds payable
under policies of insurance in respect of, the Trust Property now existing or
hereafter arising), (iii) any and all proceeds of any insurance, indemnity,
warranty or guaranty payable to Grantor from time to time with respect to damage
or loss of or to any of the Trust Property, (iv) any and all payments (in any
form whatsoever) made or due and payable to Grantor from time to time in
connection with the requisition, confiscation, condemnation, seizure or
forfeiture of all or any part of the Trust Property by any Governmental
Authority (or any person acting under color of Governmental Authority), and (v)
any and all real estate tax refunds payable to Grantor with respect to the Trust
Property, and refunds or reimbursements payable with respect to bonds, escrow
accounts, or other sums payable in connection with the use, development or
ownership of the Trust Property, but excluding any proceeds obtained, earned or
arising directly from the operation of the "Discovery Zone" entertainment
facility operated by Grantor on the Trust Property as opposed to general
occupancy and use of the Trust Property (collectively, the "PROCEEDS");
(h) to the extent permitted under applicable law, all licenses,
permits (other than proprietary permits of Grantor relating to the ordinary
operation of a "Discovery Zone" entertainment facility, as opposed to the
general use and occupancy of the Trust Property), variances and certificates
used in connection with the ownership, operation, use or occupancy of the Trust
Property (including, without limitation, business licenses, state health
department licenses, food service licenses, liquor licenses, licenses to conduct
business and all such other permits, licenses and rights, obtained from any
Governmental Authority or private Person concerning ownership, operation, use or
occupancy of the Trust Property) (collectively, "PERMITS");
(i) all plans, specifications, shop drawings and other technical
descriptions prepared for construction, repair or alteration of the Improvements
(including diskettes containing any such data), and all amendments and
modifications thereof; and
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(j) any escrows or escrow accounts established hereunder to
secure the Obligations of Grantor, including without limitation, the Proceeds
Escrow Account described in Section 6(b) hereof; and
(k) any and all replacements and renewals of or additions and
substitutions to any of the foregoing and all proceeds of any of the foregoing.
TO HAVE AND TO HOLD the above granted and described Trust
Property unto and to the use and benefit of Trustee, and the successors,
substitutes and assigns of Trustee forever, IN TRUST WITH POWER OF SALE, for the
benefit of Beneficiary, and its successors and assigns, and Grantor does hereby
bind itself, its successors and assigns to WARRANT AND FOREVER DEFEND the title
to the Trust Property unto Trustee and its successors, substitutes and assigns,
for the benefit of Beneficiary, and its successors and assigns;
AND, TO PROTECT THE SECURITY OF THIS DEED OF TRUST, Grantor
represents and warrants to and covenants and agrees with Beneficiary as follows:
1. DEFINED TERMS. The following terms, when used herein, shall
have the meanings set forth below:
"ENVIRONMENTAL LAWS" means any and all present and future
federal, state or local laws, statutes, ordinances or regulations, any judicial
or administrative orders, decrees or judgments thereunder, and any permits,
approvals, licenses, registrations, filings and authorizations, in each case as
now or hereafter in effect, relating to the protection of the environment, the
impact of Hazardous Substances or the generation, disposal or remediation
thereof on human health or safety, or the Release or threatened Release of
Hazardous Substances or otherwise relating to the Use of Hazardous Substances.
For purposes of this definition, (A) "HAZARDOUS SUBSTANCES" means collectively,
(i) any petroleum or petroleum products or waste oils, explosives, radioactive
materials, asbestos, urea formaldehyde foam insulation, polychlorinated
biphenyls ("PCBs"), and lead-based paint, (ii) any chemicals or other materials
or substances which are now or hereafter become defined as or included in the
definitions of "hazardous substances", "hazardous wastes", "hazardous
materials", "extremely hazardous wastes", "restricted hazardous wastes", "toxic
substances", "toxic pollutants", "contaminants", "pollutants" or words of
similar import under any Environmental Law and (iii) any other chemical or any
other material or substance, exposure to which is now or hereafter prohibited,
limited or regulated under any Environmental Law; (B) "USE" means, with respect
to any Hazardous Substance, the generation, manufacture, processing,
distribution, handling, use, treatment, recycling or storage of such Hazardous
Substance or transportation of such Hazardous Substance; and (C) "RELEASE" means
any release, spill, emission, leaking, pumping, injection, deposit, disposal,
discharge, dispersal, leaching or migration into the indoor or outdoor
environment (including, without limitation, the movement of Hazardous Substances
through ambient air, soil, surface water, ground water, wetlands, land or
subsurface strata).
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"GOVERNMENTAL AUTHORITY" means any national or federal
government, any state, regional, local or other political subdivision thereof
with jurisdiction and any Person with jurisdiction exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government (including without limitation any court).
"IMPOSITIONS" means all taxes (including, without limitation, all
real estate, ad valorem, sales (including those imposed on lease rentals), use,
single business, gross receipts, value added, intangible transaction privilege,
privilege or license or similar taxes), assessments (including, without
limitation, all assessments for public improvements or benefits, whether or not
commenced or completed within the term of this Deed of Trust), ground rents,
water, sewer or other rents and charges, excises, levies, fees (including,
without limitation, license, permit, inspection, authorization and similar
fees), and all other governmental impositions and other charges (including,
without limitation, vault charges and license fees for the use of vaults, chutes
and similar areas adjoining the Trust Property), in each case whether general or
special, ordinary or extraordinary, foreseen or unforeseen, of every character
in respect of the Trust Property, which at any time prior to, during or in
respect of the term hereof may be assessed or imposed on or in respect of or be
a lien upon (i) Grantor (including, without limitation, all income, franchise,
single business or other taxes imposed on Grantor for the privilege of doing
business in the jurisdiction in which the Trust Property is located), (ii) the
Trust Property, or any part thereof or any revenues therefrom or any estate,
right, title or interest therein, or (iii) any occupancy, operation, use or
possession of, or sales from, or activity conducted on, or in connection with
the Trust Property by Grantor or the leasing or use of the Trust Property or any
part thereof by Grantor.
"LEGAL REQUIREMENTS" means (i) all governmental statutes, laws,
rules, orders, regulations, ordinances, judgments, decrees and injunctions of
Governmental Authorities (including, without limitation, Environmental Laws)
affecting either the Borrower or any Property or any part thereof or the
construction, ownership, use, alteration or operation thereof, or any part
thereof (whether now or hereafter enacted and in force), (ii) all permits,
licenses and authorizations and regulations relating thereto, and (iii) all
covenants, conditions and restrictions contained in any instruments at any time
in force (whether or not involving Governmental Authorities) affecting the Trust
Property or any part thereof which, in the case of this clause (iii), require
repairs, modifications or alterations in or to the Trust Property or any part
thereof, or in any material way limit or restrict the existing use and enjoyment
thereof.
"PERSON" means any individual, corporation, limited liability
company, partnership, joint venture, estate, trust, unincorporated association,
any federal, state, county or municipal government or any bureau, department or
agency thereof and any fiduciary acting in such capacity on behalf of any of the
foregoing.
"UNIFORM COMMERCIAL CODE" means the Uniform Commercial Code, as
adopted, enacted and amended from time to time by the state or states where any
of the Trust Property is located.
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2. PAYMENT OF OBLIGATIONS AND INCORPORATION OF COVENANTS,
CONDITIONS AND AGREEMENTS. Grantor will pay the Obligations at the time and
in the manner provided in the Relevant Documents and in this Deed of Trust.
All the representations, warranties, covenants, conditions and agreements of
Grantor contained in the Relevant Documents are hereby made a part of this
Deed of Trust to the same extent and with the same force as if fully set
forth herein. If there shall be any inconsistencies between the terms,
covenants, conditions and provisions set forth in this Deed of Trust and the
terms, covenants, conditions and provisions set forth in the Relevant
Documents, then the terms, covenants, conditions and provisions of the
Relevant Documents shall prevail.
Grantor warrants that Grantor has good, marketable and
insurable fee simple title to Land and the Improvements and has good title to
the remainder of the Trust Property and has the full power, authority and right
to execute, deliver and perform its obligations under this Deed of Trust and to
encumber, mortgage, give, grant, bargain, sell, alienate, enfeoff, convey,
confirm, warrant, pledge, assign and hypothecate the Trust Property and that
Grantor possesses an unencumbered fee estate in the Land and the Improvements
and that it owns the Trust Property free and clear of all liens, encumbrances
and charges whatsoever except for (x) those exceptions to title which are
existing on the date hereof and approved by Beneficiary and (y) those exceptions
of title that are permitted under the other terms and conditions of this Deed of
Trust (collectively, the "PERMITTED ENCUMBRANCES") and that this Deed of Trust
is and will remain a valid and enforceable first lien on and security interest
in the Trust Property, subject only to the Permitted Encumbrances. Grantor shall
forever warrant, defend and preserve such title and the validity and priority of
the lien of this Deed of Trust and shall forever warrant and defend the same to
Beneficiary against the claims of all persons whomsoever. Grantor is duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization. Grantor is qualified to do business and in good
standing in the State in which the Trust Property is located, and to the extent
that Grantor is not so qualified or in good standing in such State, Grantor
shall promptly qualify to do business and become in good standing in such State
and shall promptly present evidence of such qualification to do business and
good standing to Beneficiary, and shall in any event take such steps as are
necessary to insure the enforceability of the Notes and this Deed of Trust.
4. TAXES. Grantor hereby warrants, covenants and agrees to pay
before any penalty attaches all real property taxes, general and special, and
all other taxes and assessments of any kind or nature whatsoever, against the
Trust Property when due and shall, upon written request, furnish to Beneficiary
duplicate receipts therefor, Grantor may, in good faith and with reasonable
diligence, contest the validity or amount of any such taxes or assessments
provided that such contest shall have the effect of preventing the collection of
the tax or assessment so contested and the sale or forfeiture of said Trust
Property or any part thereof, or any interest therein, to satisfy the same.
5. INDEMNIFICATION. Grantor shall indemnify, defend and hold
harmless Beneficiary from and against all of the following (collectively, and
individually referred to as a
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"LOSS"): claims, demands, causes of action, judgments, costs, expenses,
liabilities, losses and damages (including consequential and punitive damages),
reasonable attorneys' fees and expenses and court costs, disbursements and court
costs, and all risk of damage to property and injury to persons in or upon the
Trust Property, arising from: (i) Grantor's use of the Property or from the
conduct of its business in or about the Trust Property; (ii) Grantor's default
or breach of any term under this Deed of Trust; and (iii) Grantor's violation or
failure to comply with any Legal Requirements, including Environmental Laws;
provided that Grantor shall not be liable for Loss arising from Beneficiary's or
Trustee's negligence or willful misconduct or from Beneficiary's or Trustee's
breach of any of their obligations hereunder.
6. TRANSFER OR ENCUMBRANCE OF THE TRUST PROPERTY. (a) Except as
may otherwise be permitted hereunder or pursuant to the Relevant Documents,
Grantor shall not sell, convey, alienate, mortgage, encumber, pledge or
otherwise transfer the Trust Property or any part thereof or any of its interest
therein. Beneficiary shall not be required to demonstrate any actual impairment
of its security or any increased risk of default hereunder in order to declare
the Obligations immediately due and payable upon Grantor's conveyance,
alienation, mortgage, encumbrance, pledge or transfer of the Trust Property in
violation of this Deed of Trust or any other Relevant Document. This provision
shall apply to every sale, conveyance, alienation, mortgage, encumbrance, pledge
or transfer of the Trust Property that is not permitted pursuant to the Relevant
Documents, regardless of whether voluntary or not, or whether or not Beneficiary
has consented to any previous sale, conveyance, alienation, mortgage,
encumbrance, pledge or transfer of the Trust Property.
(b) Notwithstanding Section 6(a), Grantor shall have the right to
sell the Trust Property at any time to a third party bona fide purchaser after
consultation with Beneficiary and upon the prior written consent of Beneficiary
to such sale and the sales price (such consent not to be unreasonably withheld),
provided that the net proceeds of such sale of the Trust Property (after payment
of transfer taxes and reasonable brokerage commissions, if any, and other
reasonable closing costs) shall be applied towards repayment of the Obligations,
including, without limitation, repayment of the Secured Rejection Note
(including prepayment of any amounts not yet due and payable) and payment of the
Principal Amounts (as defined in the Rent Deferral Notes) then outstanding under
the Rent Deferral Notes, in the order and manner set forth in the Notes. After
the Secured Rejection Note and all Principal Amounts outstanding under the Notes
have been repaid in full, any remaining net proceeds (including proceeds from
any sale or other disposition of the Trust Property pursuant to Section 24
hereof) not applied towards repayment of the Obligations shall be deposited into
an escrow account designated by Beneficiary for Grantor's account and as
security for the performance by Grantor of its Obligations to Beneficiary under
the Relevant Documents (the "PROCEEDS ESCROW ACCOUNT") which escrow account
shall be administered by Beneficiary, or, at Beneficiary's discretion and in
accordance with Beneficiary's instructions, may be administered by an escrow
agent (an "ESCROW AGENT") selected by Beneficiary (whose reasonable fees shall
be paid by Grantor). Grantor may also from time to time deposit additional funds
into the Proceeds Escrow Account as further security for the Obligations. At
Beneficiary's request, Grantor agrees to enter into a separate escrow agreement
to further evidence the provisions of this Section 6(b), and in the
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event that Beneficiary chooses an Escrow Agent to administer the Proceeds Escrow
Account, Grantor agrees to execute an escrow agreement in form and substance
reasonably satisfactory to Beneficiary (including provisions consistent with the
provisions of this Section 6(b)) to evidence the duties and responsibilities of
such Escrow Agent. Beneficiary or, if applicable, the Escrow Agent at the
direction of Beneficiary, shall invest the funds in the Proceeds Escrow Account
in obligations of the U.S. Government or its agencies, interest in time accounts
or certificates of deposits, or other interest bearing account of any bank or
bank and trust company or in money market funds available to Beneficiary.
Grantor agrees, and shall agree under any escrow agreement entered into pursuant
to this Section 6(b), that the funds on deposit under the escrow arrangement
described herein shall not constitute property of the estate (within the meaning
of Section 541 of the United States Bankruptcy Code) and that Grantor shall only
have such rights to such funds as are provided herein and in any escrow
agreement entered into pursuant to this Section. Funds in the Proceeds Escrow
Account shall be disbursed (together with accrued interest) from time to time to
Beneficiary, at Beneficiary's direction (upon seven (7) days prior notice to
Grantor), to pay any Obligations that may arise from time to time under the
Agreement to Indemnify, the Notes, the Stipulation and Order or the other
Relevant Documents. Notwithstanding the foregoing, after December 31, 2005,
Grantor shall be entitled to retain any net proceeds in excess of the Minimum
Amount set forth below from the sale of the Trust Property, including amounts
previously deposited and remaining in the Proceeds Escrow Account (including
accrued interest thereon) which have not been applied towards payment of the
Obligations, provided that (i) no Obligations are then due and owing by Grantor
pursuant to the Agreement to Indemnify, the Stipulation and Order, the Notes or
otherwise, (ii) no default or Event of Default has occurred and is continuing
under any of the Relevant Documents; and (iii) the amount remaining in the
Proceeds Escrow Account is no less than the Minimum Amount (as hereinafter
defined). Except as otherwise set forth in the following sentence, the "Minimum
Amount" shall mean the product of (A) 1.5 times (B) the sum of the gross rent
(including additional rent and percentage rent charges, if any), common area
maintenance charges, taxes, insurance and other charges computed on a gross
basis (collectively, the "BASE CHARGES") which are due or shall become due under
any Assumed Property Subleases still in existence as of December 31, 2005 (the
"SURVIVING ASSUMED PROPERTY SUBLEASES") from December 31, 2005 until the
expiration of the terms of such Assumed Property Subleases. Upon the expiration
after December 31, 2005 of any Surviving Assumed Property Sublease, Beneficiary
shall re-calculate the Minimum Amount based upon the product of 1.5 times the
Base Charges of the remaining Surviving Assumed Property Subleases as of the end
of the term of such Surviving Assumed Property Sublease (such Base Charges to be
calculated as the sum of the Base Charges from such date through the end of the
expiration dates of the remaining Surviving Assumed Property Subleases), and
provided that (i) no Obligations are then due and owing by Grantor pursuant to
the Agreement to Indemnify, the Notes, the Stipulation and Order or otherwise
and that (ii) no default or Event of Default has occurred and is continuing
under any of the Relevant Documents, Beneficiary shall, on the first anniversary
of the expiration of such expired Surviving Assumed Property Sublease, release
to Grantor, or cause the Escrow Agent to release to Grantor, the excess of all
funds in the Proceeds Escrow Account over the re-calculated Minimum Amount. Any
calculation of Base Charges under this Section 6(b) shall be made by Beneficiary
and,
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absent manifest error, shall be conclusive and binding upon Grantor. Provided
that (i) an amount equal to at least the Minimum Amount is deposited or on
deposit in the Proceeds Escrow Account to secure the payment of the Obligations,
(ii) no default or Event of Default has occurred and is continuing under any of
the Relevant Documents, (iii) the Notes have been repaid in full and (iv) no
Obligations are then due and owing by Grantor pursuant to the Agreement to
Indemnify, the Stipulation and Order or otherwise, Grantor shall be entitled to
receive a release of this Deed of Trust from Beneficiary at any time after
December 31, 2005. Provided that no default or Event of Default has occurred or
is continuing under any of the Relevant Documents and that no amounts are then
owing by Grantor or outstanding pursuant to or under any of the Relevant
Documents (and that an amount equal to the Minimum Amount is at all times on
deposit in the Proceeds Escrow Account), interest earned on the amounts
deposited in the Proceeds Escrow Account after December 31, 2005 shall be
distributed to Grantor on a quarterly basis. All remaining amounts in the
Proceeds Escrow Account which have not been applied towards payment of the
Obligations shall be released to Grantor on the later of (A) December 31, 2014
provided, however, that no Obligations are then due and owing by Grantor
pursuant to the Agreement to Indemnify, the Stipulation and Order or otherwise,
and (B) the end of the term of this Deed of Trust as set forth in Section 13(c)
hereof. Grantor shall pay any income taxes attributable to the interest or other
income earned on the Proceeds Escrow Account. Notwithstanding any release of
this Deed of Trust pursuant to this Section 6(b) or otherwise, the terms and
provisions of this Section 6(b) shall survive the release of this Deed of Trust.
7. AMENDMENT TO LEGAL DESCRIPTION. If it becomes evident that the
legal description attached to any Relevant Document is inaccurate or does not
fully describe all of the real property which is reasonably connected to the
Land, Grantor hereby agrees to an amendment of such legal description and the
legal description contained on the corresponding title policy so that such error
is corrected and to execute and cause to be recorded, if applicable, such
document as may be appropriate for such purpose.
8. ASSIGNMENT OF LEASES AND RENTS. Grantor does hereby absolutely
and unconditionally assign to Beneficiary, Grantor's right, title and interest
in all current and future Leases and Rents, it being intended by Grantor that
this assignment constitutes a present, absolute assignment and not an assignment
for additional security only. Such assignment to Beneficiary shall not be
construed to bind Beneficiary to the performance of any of the covenants,
conditions or provisions contained in any such Lease or otherwise impose any
obligation upon Beneficiary. Beneficiary shall have no responsibility on account
of this assignment for the control, care, maintenance, management or repair of
the Trust Property, for any dangerous or defective condition of the Trust
Property, or for any negligence in the management, upkeep, repair or control of
the Trust Property. Grantor agrees to execute and deliver to Beneficiary such
additional instruments, in form and substance satisfactory to Beneficiary, as
may hereafter be requested by Beneficiary to further evidence and confirm such
assignment. Nevertheless, subject to the terms of this paragraph, Beneficiary
grants to Grantor a revocable license to collect all of the Rents and retain,
use and enjoy the same and otherwise exercise all rights of Grantor under any
Lease, in each case, subject to the terms
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hereof and of the Relevant Documents. Upon an Event of Default, the license
granted to Grantor herein shall immediately and automatically be revoked, and
Beneficiary shall immediately be entitled to possession of all Rents, whether or
not Beneficiary enters upon or takes control of the Trust Property, provided
that if such Event of Default ceases to exist, the license shall automatically
be reinstated. In addition, during the continuation of an Event of Default,
Beneficiary may, either in person or by agent, without bringing any action or
proceeding, or by a receiver appointed by a court, without the necessity of
taking possession of the Trust Property in its own name, and in addition to and
without limiting any of Beneficiary's rights and remedies hereunder, under the
Notes and any other Relevant Documents and as otherwise available at law or in
equity, (a) notify any lessee or other person that the Leases have been assigned
to Beneficiary and that all Rents are to be paid directly to Beneficiary,
whether or not Beneficiary has commenced or completed foreclosure or taken
possession of the Trust Property; (b) settle, compromise, release, extend the
time of payment of, and make allowances, adjustments and discounts of any Rents
or other obligations in, to and under the Leases; (c) demand, sue for or
otherwise collect, receive, and enforce payment of Rents, including those
past-due and unpaid and other rights under the Leases, prosecute any action or
proceeding, and defend against any claim with respect to the Rents and Leases;
(d) enter upon, take possession of and operate the Trust Property; (e) lease all
or any part of the Trust Property; and/or (f) perform any and all obligations of
Grantor under the Leases and exercise any and all rights of Grantor therein
contained to the full extent of Grantor's rights and obligations thereunder,
with or without the bringing of any action or the appointment of a receiver and
without need for any other authorization or other action by Beneficiary or
Grantor. At Beneficiary's request, Grantor shall deliver a copy of this
assignment to each tenant under a Lease and to each manager and managing agent
or operator of the Trust Property. Grantor irrevocably directs any tenant,
manager, managing agent, or operator of the Property, without any requirement
for notice to or consent by Grantor, to comply with all demands of Beneficiary
under this Section 8 and to turn over to Beneficiary on demand all Rents which
it receives. Grantor hereby acknowledges and agrees that payment of any Rents by
a person to Beneficiary as hereinabove provided shall constitute payment by such
person, as fully and with the same effect as if such Rents had been paid to
Grantor. Beneficiary is hereby granted and assigned by Grantor the right, at its
option, upon revocation of the license granted herein, to enter upon the Trust
Property in person or by agent, without bringing any action or proceeding, or by
court-appointed receiver to collect the Rents. Any Rents collected after the
revocation of the license shall be applied towards the payment of the
Obligations. Neither the enforcement of any of the remedies under this Section 8
nor any other remedies or security interests afforded to Beneficiary under the
Relevant Documents, at law or in equity shall cause Beneficiary to be deemed or
construed to be a Beneficiary in possession of the Trust Property, to obligate
Beneficiary to lease the Trust Property or attempt to do so, or to take any
action, incur any expense, or perform or discharge any obligation, duty or
liability whatsoever under any of the Leases or otherwise. Grantor shall, and
hereby agrees to indemnify Beneficiary for, and to hold Beneficiary harmless
from and against, any and all claims, liability, expenses, losses or damages
which may or might be asserted against or incurred by Beneficiary solely by
reason of Beneficiary's status as an assignee pursuant to the assignment of
Rents and Leases contained herein, but excluding any claim (a) to the extent
caused by Beneficiary's gross
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negligence or willful misconduct, or (b) to the extent arising solely from
Beneficiary's actions after Beneficiary has taken possession of the Trust
Property. Should Beneficiary incur any such claim, liability, expense, loss or
damage, the amount thereof, including all actual expenses and reasonable fees of
attorneys, shall constitute Obligations secured hereby, and Grantor shall
reimburse Beneficiary therefor immediately upon demand. Grantor agrees that all
Leases shall be subject to the prior written approval of Beneficiary, such
approval not to be unreasonably withheld.
9. MAINTENANCE OF TRUST PROPERTY. Grantor shall cause the Trust
Property to be maintained in a good and safe condition and repair (subject to
ordinary wear and tear), and shall otherwise operate and maintain the Trust
Property in a manner consistent with the manner in which it operates and
maintains the other properties on which it operates similar businesses ("SIMILAR
PROPERTIES"). Except as otherwise permitted by the Relevant Documents, the
Improvements, the Fixtures and the equipment located on the Land or the
Improvements shall not be removed, demolished or materially altered (except for
normal replacement of equipment) without the consent of Beneficiary which shall
not unreasonably be withheld or delayed. Grantor shall comply with all laws,
orders and ordinances affecting the Trust Property, or the use thereof. Except
to the extent that Beneficiary fails to turn over insurance proceeds, if any,
received by Beneficiary pursuant to SECTIONS 10 and 11 with respect to the Trust
Property to Grantor, Grantor shall promptly repair, replace or rebuild any part
of the Trust Property that, following the date hereof, becomes damaged, worn or
dilapidated and Grantor shall complete and pay for any structure at any time in
the process of construction or repair on the Land. Notwithstanding anything to
the contrary contained herein, Grantor hereby confirms its obligation to comply
with all relevant Legal Requirements, including Environmental Laws, with respect
to the Trust Property. Grantor shall not initiate, join in, acquiesce in, or
consent to any change in any private restrictive covenant, zoning law or other
public or private restriction, limiting or defining the uses which may be made
of the Trust Property or any part thereof, unless Grantor shall have received
Beneficiary's prior written consent, such consent not to be unreasonably
withheld or delayed. If under applicable zoning provisions the use of all or any
portion of the Trust Property is or shall become a nonconforming use, Grantor
will not cause such nonconforming use to be discontinued or abandoned without
the express written consent of Beneficiary, such consent not to be unreasonably
withheld or delayed. Grantor shall not (i) change the use of the Land in any
material respect or (ii) permit or suffer to occur any waste on or to the Trust
Property or to any portion thereof.
10. INSURANCE.
(a) Grantor shall maintain casualty, liability and other policies
of insurance relating to the Trust Property in form and substance, and with
insurers and coverages, reasonably satisfactory to Beneficiary and consistent
with insurance that it maintains on Similar Properties. Grantor shall keep the
Trust Property insured against loss by flood if the Trust Property is located in
an area identified by the Secretary of Housing and Urban Development as an area
having a special flood hazards and in which flood insurance has been made
available
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under the National Flood Insurance Act of 1968 (or any successor act thereto).
All policies of insurance to be furnished hereunder (i) shall have standard
non-contributory mortgagee clauses attached to all policies in favor of
Beneficiary, without contribution, under a standard New York (or local
equivalent) mortgagee clause naming Beneficiary as the party to which all
payments made under such insurance policies in excess of $150,000 should be
paid, (ii) shall contain an endorsement providing that neither Grantor nor
Beneficiary nor any other party shall be a co-insurer under said policies and
shall contain a provision requiring that the coverage evidenced thereby shall
not be terminated or materially modified without ten (10) days prior written
notice to Beneficiary, (iii) shall provide that no act or thing done by Grantor
shall invalidate the policy as against Beneficiary, and (iv) with respect to
property insurance policies, shall contain a waiver of subrogation against
Beneficiary. Grantor shall deliver certificates evidencing additional and
renewal policies, together with evidence of payment of premiums thereon, to
Beneficiary, and in the case of all insurance about to expire, shall deliver
renewal policies or certificates evidencing such policies not less than ten (10)
days prior to their respective dates of expiration.
(b) Grantor shall not take out separate insurance concurrent in
form or contributing in the event of loss with that required to be maintained
hereunder unless Beneficiary is included thereon under a standard,
non-contributory mortgagee clause acceptable to Beneficiary. Grantor shall
promptly notify Beneficiary whenever any such separate insurance is taken out
and shall promptly deliver to Beneficiary the certificates evidencing the policy
or policies of such insurance.
(c) The insurance required by this Deed of Trust, at the option
of Grantor, may be effected by blanket and/or umbrella policies covering the
Trust Property and other properties, provided, however, that in each case, such
insurance policies otherwise comply with the provisions of this Deed of Trust
and allocate to the Trust Property, from time to time, the coverage specified in
this Deed of Trust without possibility of reduction or co-insurance by reason
of, or damage to, any other property named therein. If the insurance required by
this Deed of Trust shall be effected by any such blanket or umbrella policies,
Grantor shall furnish to Beneficiary certificates with respect to, with
schedules attached thereto showing the amount of the insurance provided under
such policies which is applicable to the Trust Property.
(d) If Grantor fails to maintain insurance in compliance with
this Section, Beneficiary may obtain such insurance and pay the premium therefor
and Grantor shall, on demand, reimburse Beneficiary for all expenses incurred in
connection therewith. Grantor shall deliver original certificates to Beneficiary
of all insurance policies maintained pursuant to this Section 10. Each property
insurance policy shall name Beneficiary as mortgagee, and loss payee with
respect to all casualty coverage and each liability policy shall name
Beneficiary as an additional insured thereunder.
11. CASUALTY. (a) Grantor shall give Beneficiary prompt notice of
any loss or damage to the Trust Property.
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(b) In case of loss or damage to the Trust Property covered by
any of the insurance policies described in Section 10 above, Beneficiary (or,
after entry of decree of foreclosure, the purchaser at the foreclosure sale or
decree creditor, as the case may be) is hereby authorized at its option either
(i) to settle and adjust any claim under such insurance policies without the
consent of Grantor or (ii) to allow Grantor to settle and adjust such claim
(either jointly with Beneficiary or by Grantor alone, at Beneficiary's
discretion); provided that in either case Beneficiary shall, and is hereby
authorized to, collect and receipt for any such insurance proceeds.
Notwithstanding anything in the preceding sentence to the contrary, Beneficiary
agrees that it will allow Grantor to settle and adjust any claims under the
insurance policies which are in an amount less than $150,000, per incident of
loss, up to an aggregate amount of no greater than $300,000. The expenses
incurred by Beneficiary in the adjustment and collection of insurance proceeds
shall be included in the Obligations, and shall be reimbursed to Beneficiary
upon demand or may be deducted by Beneficiary from said insurance proceeds prior
to another application thereof. Interest on such amount shall accrue at the
Default Rate, beginning ten (10) days after Grantor receives notice of a request
for payment of such amount from Beneficiary, until such amount, plus interest,
is paid in full.
(c) Beneficiary shall permit Grantor to apply the proceeds of
insurance policies received in connection with any casualty to pay for the cost
of restoring, repairing, replacing or rebuilding the loss or damage to the Trust
Property resulting from the casualty ("RESTORATION") if: (i) there is no Event
of Default hereunder at the time of such application; (ii) restoration can, in
the reasonable judgment of Beneficiary, be completed prior to the maturity of
the Obligations; and (iii) restoration can, in the reasonable judgment of
Beneficiary, be effected within two (2) years after the date of such casualty
and in such a manner so that the Trust Property will be of at least equal or
greater value to the value than the Trust Property prior to such casualty.
Otherwise, Beneficiary may elect in its sole discretion to apply such proceeds
either (x) towards payment of the Obligations, notwithstanding the fact that the
Obligations, or a portion thereof, may not then be due and payable, or (y) to
pay for the cost of Restoration. In all events, disbursement of insurance
proceeds by Beneficiary (or at Beneficiary's election by a disbursing or escrow
agent who shall be selected by Beneficiary and whose fees shall be paid by
Grantor), to pay the cost of restoration shall require (i) evidence reasonably
satisfactory to Beneficiary of the estimated costs of Restoration, (ii) funds
(or assurances reasonably satisfactory to Beneficiary that such funds are
available) sufficient in addition to the proceeds of insurance to complete and
fully pay for Restoration; and (iii) such architect's certificates, waivers of
lien, contractor's sworn statements, title insurance endorsements, plats of
surveys and such other evidences of cost, payment and performance as Beneficiary
may reasonably require and approve. Except to the extent Beneficiary fails to
turn over insurance proceeds, if any, received by Beneficiary hereunder with
respect to such casualty to Grantor, Grantor hereby covenants to restore,
repair, replace or rebuild the Improvements, to be of at least equal value, and
of substantially the same character as prior to such loss or damage, all to be
effected in accordance with plans, specifications and procedures to be first
submitted to and reasonably approved by Beneficiary, and Grantor shall pay all
costs of such restoring, repairing, replacing or rebuilding.
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12. EMINENT DOMAIN. Grantor warrants, covenants and agrees that
should the Trust Property, or any part thereof or interest therein, be taken or
damaged by reason of any public improvement or condemnation proceeding, or in
any other manner, or should Grantor receive any notice of other information
regarding such proceeding, Grantor shall give written notice thereof within five
(5) business days to Beneficiary. Without Beneficiary's prior consent, Grantor
(1) shall not agree to any compensation or award, and (2) shall not take any
action or fail to take any action which would cause the compensation to be
determined. Beneficiary shall be entitled to: (1) all compensation awards and
other payments or relief therefor, (2) to commence, appear in and prosecute in
its own name any action or proceedings, and (3) to make any compromise or
settlement in connection with such taking or damage. Grantor authorizes
Beneficiary to collect and receive such awards and compensation, to give proper
receipts and acquittances therefor and in Beneficiary's discretion to apply the
same toward the payment of the Obligations, notwithstanding the fact that the
Obligations, or a portion thereof, may not then be due and payable, or to the
restoration of the Trust Property in accordance with the provisions set forth in
the second-to-last sentence of Section 11(c) above. Grantor further agrees to
make, execute, and deliver to Beneficiary, at any time upon request, free and
clear of any encumbrance of any kind whatsoever, any and all further assignments
and other instruments deemed necessary by Beneficiary for the purpose of validly
and sufficiently assigning all compensations and awards made to Grantor for any
taking, either permanent or temporary, under any such proceeding.
13. RELEASE OF DEED OF TRUST. Beneficiary agrees to promptly and
unconditionally release this Deed of Trust (subject to the provisions set forth
in Section 6(b)) as follows:
(a) in the event of a bona fide sale (other than a "sale
leaseback" or other similar financing transaction) of the Trust Property to a
third party that is not affiliated with Grantor, provided that each of the
following conditions is satisfied: (i) neither Grantor nor any of its respective
affiliates continue to use or occupy the Trust Property or any part thereof;
(ii) Grantor shall consult with Beneficiary prior to such sale and shall obtain
Beneficiary's prior written consent with respect to such sale and the sales
price (such consent not to be unreasonably withheld); and (iii) all of the
proceeds of such sale are applied towards repayment of the Obligations or
otherwise applied in compliance with the provisions of Section 6(b) hereof.
(b) in the event that Beneficiary is paid in full for all amounts
owing (or which shall or may become owing under the Relevant Documents) to
Beneficiary by Grantor and any of its former affiliated debtors, including the
indefeasible payment and satisfaction in full of the Obligations.
(c) on December 31, 2014 (or on such earlier date as permitted
under and pursuant to the provisions of Section 6(b) hereof); provided, however,
that if on such date, any amount secured by this Deed of Trust has not been
indefeasibly paid in full, then this Deed of Trust shall be deemed amended to
extend the term hereof until such obligations are so paid..
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14. CHANGES IN THE LAWS REGARDING TAXATION. If any law is enacted
or adopted or amended after the date of this Deed of Trust which imposes a tax,
either directly or indirectly, on the Obligations or Beneficiary's interest in
the Trust Property, Grantor will pay such tax, with interest and penalties
thereon, if any, PROVIDED, HOWEVER, that Grantor shall not be obligated to pay
any tax which is imposed on the net income of Beneficiary or franchise taxes or
doing business taxes imposed on Beneficiary. In the event that the payment of
such tax or interest and penalties by Grantor would be unlawful or taxable to
Beneficiary or unenforceable or provide the basis for a defense of usury, then
in any such event, Beneficiary shall have the option, by written notice of not
less than ninety (90) days, to declare the Obligations immediately due and
payable.
15. NO CREDITS ON ACCOUNT OF THE OBLIGATIONS. (i) Grantor will
not claim or demand or be entitled to any credit or credits on account of the
Obligations for any part of the Impositions assessed against the Trust Property,
or any part thereof, and (ii) no deduction shall otherwise be made or claimed
from the assessed value of the Trust Property, or any part hereof, for real
estate tax purposes by reason of this Deed of Trust or the Obligations if the
effect of such deduction would impose on Beneficiary a tax, either directly or
indirectly, for which it otherwise would not have been liable.
16. DOCUMENTARY STAMPS. If at any time the United States of
America, any State thereof or any subdivision of any such State shall require
revenue or other stamps to be affixed to the Notes or this Deed of Trust, or
impose any other tax or charge on the same, Grantor will pay for the same, with
interest and penalties thereon, if any.
17. CONTROLLING AGREEMENT. It is expressly stipulated and agreed
to be the intent of Grantor and Beneficiary at all times to comply with
applicable state law or applicable United States federal law (to the extent that
it permits Beneficiary to contract for, charge, take, reserve, or receive a
greater amount of interest than under state law) and that this Section shall
control every other covenant and agreement in this Deed of Trust and the other
Relevant Documents. If the applicable law (state or federal) is ever judicially
interpreted so as to render usurious any amount called for under the Notes or
under any of the other Relevant Documents, or contracted for, charged, taken,
reserved, or received with respect to the Obligations, or if Beneficiary's
exercise of the option to accelerate the maturity of the Notes, or if any
prepayment by Grantor results in Grantor having paid any interest in excess of
that permitted by applicable law, then it is Grantor's and Beneficiary's express
intent that all excess amounts theretofore collected by Beneficiary shall be
credited on the principal balance of the Notes and all other Obligations (or, if
the Notes and all other Obligations have been or would thereby be paid in full,
refunded to Grantor), and the provisions of the Notes and the other Relevant
Documents immediately be deemed reformed and the amounts thereafter collectible
hereunder and thereunder reduced, without the necessity of the execution of any
new documents, so as to comply with the applicable law, but so as to permit the
recovery of the fullest amount otherwise called for hereunder or thereunder. All
sums paid or agreed to be paid to Beneficiary for the use, forbearance, or
detention of the Obligations shall, to the extent permitted by applicable law,
be amortized, prorated, allocated, and spread throughout the full
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stated term of the Obligations until payment in full so that the rate or amount
of interest on account of the Obligations does not exceed the maximum rate of
interest permitted by law from time to time in effect and applicable to the
Obligations for so long as the Obligations are outstanding.
18. PERFORMANCE OF OTHER AGREEMENTS. Grantor shall observe and
perform in all respects the terms to be observed or performed by Grantor under
any agreement or recorded instrument affecting or pertaining to the Trust
Property.
19. RIGHT TO PERFORM THE OBLIGATIONS. Subject to the terms of the
Relevant Documents, if any default exists, Beneficiary shall have the right, but
not the obligation, to cure such default in the name and on behalf of Grantor.
All sums advanced and expenses incurred at any time by Beneficiary under this
Section 19, or otherwise under this Deed of Trust or any of the other Relevant
Documents or applicable law (including, without limitation, the costs and
expenses of Beneficiary and its agents incurred in connection with the
preservation, collection and enforcement of this Deed of Trust or of the liens
created hereby), shall bear interest from the date that such sum is advanced or
expense incurred, to and including the date of reimbursement, computed at the
Default Rate (as defined in the Notes), and all such sums, together with
interest thereon, shall constitute additions to the Obligations and shall be
secured by this Deed of Trust and Grantor covenants and agrees to pay them to
the order of the Beneficiary promptly upon demand.
20. FURTHER ACTS, ETC. Grantor will, at the cost of Grantor, and
without expense to Beneficiary, do, execute, acknowledge and deliver all and
every such further acts, deeds, conveyances, mortgages, deeds of trust,
assignments, notices of assignment, Uniform Commercial Code financing statements
or continuation statements, transfers and assurances as Beneficiary shall, from
time to time, reasonably require, for the better assuring, conveying, assigning,
transferring, and confirming unto Beneficiary the property and rights hereby
mortgaged, given, granted, bargained, sold, alienated, enfeoffed, conveyed,
confirmed, warranted, pledged, assigned and hypothecated (including, without
limitation, the assignment of leases and rents contained in Section 8 hereof) or
intended now or hereafter so to be, or which Grantor may be or may hereafter
become bound to convey or assign to Beneficiary, or for carrying out the
intention or facilitating the performance of the terms of this Deed of Trust or
for filing, registering or recording this Deed of Trust. Grantor, on demand,
will execute and deliver and, Grantor hereby authorizes Beneficiary to execute
in the name of Grantor or without the signature of Grantor to the extent
Beneficiary may lawfully do so, one or more financing statements, chattel
mortgages or other instruments, to evidence more effectively the security
interest of Beneficiary in the Trust Property. Notwithstanding anything to the
contrary contained herein, Grantor shall not be obligated to execute, deliver,
file or record any additional documents which increase Grantor's obligations
under this Deed of Trust or the Relevant Documents. Grantor grants to
Beneficiary an irrevocable power of attorney coupled with an interest for the
purpose of exercising the rights provided for in Section 19 and this Section 20.
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21. RECORDING OF DEED OF TRUST, ETC. Grantor forthwith upon the
execution and delivery of this Deed of Trust and thereafter, from time to time,
will cause this Deed of Trust, and any security instrument creating a lien or
security interest or evidencing the lien hereof upon the Trust Property and each
instrument of further assurance to be filed, registered or recorded in such
manner and in such places as may be required by any present or future law in
order to publish notice of and fully to protect the lien or security interest
hereof upon, and the interest of Beneficiary in, the Trust Property. Grantor
will pay all filing, registration or recording fees, the costs and fees of local
counsel for Beneficiary, including, without limitation, costs and fees for local
counsel review of the Deed of Trust and Subordinated Agreement, and the
preparation of opinion letters in connection therewith, and all expenses
incident to the execution and acknowledgment of this Deed of Trust (but not
including fees of Beneficiary's New York counsel in connection with the
preparation of this Deed of Trust), any deed of trust or mortgage supplemental
hereto, any security instrument with respect to the Trust Property and any
instrument of further assurance, and all federal, state, county and municipal,
taxes, duties, imposts, assessments and charges arising out of or in connection
with the execution and delivery of this Deed of Trust, any deed of trust or
mortgage supplemental hereto, any security instrument with respect to the Trust
Property or any instrument of further assurance (other than income or franchise
taxes imposed on Beneficiary), except where prohibited by law so to do. Grantor
shall hold harmless and indemnify Beneficiary, its successors and assigns,
against any liability incurred by reason of the imposition of any tax on the
making and recording of this Deed of Trust. Grantor shall pay all title costs
and premiums in connection with the Beneficiary's policy of title insurance
issued by Chicago Title Insurance Company for the benefit of Beneficiary in
connection with this Deed of Trust (including payment for the cost of any
property surveys prepared in connection therewith), which title insurance policy
shall be in form and substance satisfactory to Beneficiary containing such
endorsements as Beneficiary may reasonably request, including, without
limitation, the deletion of any creditor's rights exception and (to the extent
available) a variable rate endorsement; survey endorsement; comprehensive
endorsement; first loss endorsement; last dollar endorsement; tie-in
endorsement; future advances endorsement; access coverage; tax parcel coverage;
contiguity (if applicable) coverage; and such other endorsements as Beneficiary
shall reasonably require. In the event that any Survey with respect to the Trust
Property reveals any encumbrances, restrictions, building code or zoning
violations or other matters which in Beneficiary's reasonable judgment,
materially impair Beneficiary's first priority lien in the Trust Property,
Grantor agrees to cooperate with Beneficiary in performing any acts reasonably
requested by Beneficiary to cause such encumbrances, restrictions, violations or
other matters to be removed or remedied as appropriate.
22. REPORTING REQUIREMENTS. Grantor agrees to give prompt notice
to Beneficiary of the insolvency or bankruptcy filing of Grantor. In addition,
Grantor will give notice to Beneficiary in writing not later than ten (10) days
after: (i) the occurrence of any Event of Default with respect to Grantor
hereunder, or (ii) notice to Grantor of any action, litigation or proceeding
instituted to recover possession of the Trust Property from Grantor or for any
other purpose affecting this Deed of Trust or of any other action, litigation or
proceeding instituted against Grantor or judgment rendered against Grantor; and
such notice to
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Beneficiary shall include a true copy of any notice of default, or if any action
is then proceeding, copies of any pleadings and papers received by Grantor.
23. EVENTS OF DEFAULT. The term "EVENT OF DEFAULT" as used herein
shall mean the occurrence or happening, at any time and from time to time, of
one or more of the following events:
(a) a default or event of default under any of the Notes
(including, without limitation, any event of default described in Section 3 of
any of the Notes), which remains uncured following the expiration of any
applicable cure periods;
(b) Grantor (i) shall fail to perform when due any payment
obligation under the terms of this Deed of Trust or the other Relevant Documents
within ten days after such amount becomes due, or (ii) shall be in violation of
any of the obligations or covenants contained herein or therein and such default
shall continued unremedied for a period of thirty (30) days, provided that if
such default is not readily susceptible of cure in such thirty (30) day period,
and provided that Grantor proceeds in a diligent manner to cure such default,
Grantor shall have such additional time to effect such cure as shall be
reasonably necessary to effect such cure;
(c) Failure by Grantor to maintain insurance and deliver evidence
thereof pursuant to Section 10; or
(d) a default under any other mortgage, deed of trust or other
security instrument covering the Trust Property or a portion thereof which
remains uncured following the expiration of any applicable cure periods.
24. REMEDIES. (a) Upon the occurrence of any Event of Default,
Beneficiary may take such action or cause Trustee to take such action permitted
in law or at equity, without notice or demand, as it deems advisable to protect
and enforce its rights against Grantor and in and to the Trust Property, by
Beneficiary itself, or through Trustee or otherwise, including, but not limited
to, the following actions, each of which may be pursued concurrently or
otherwise, at such time and in such order as Beneficiary may determine, in its
sole discretion, without impairing or otherwise affecting the other rights and
remedies of Beneficiary:
(i) declare the entire principal amount of the indebtedness and
Obligations secured hereby with interest accrued thereon to be
immediately due and payable;
(ii) institute a proceeding or proceedings, judicial or
nonjudicial, by advertisement or otherwise, for the complete
foreclosure of this Deed of Trust in which case the Trust
Property or any interest therein may be sold for cash or
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upon credit in one or more parcels or in several interests or
portions and in any order or manner in accordance with the laws
of the jurisdiction in which such Trust Property is located;
(iii) with or without entry, to the extent permitted, and
pursuant to the procedures provided by, applicable law, institute
proceedings for the foreclosure of this Deed of Trust for the
Obligations then due and payable subject to the continuing lien
of this Deed of Trust, in accordance with the laws of the
jurisdiction in which such Trust Property is located, for the
balance of the Obligations not then due;
(iv) sell for cash or upon credit the Trust Property or any part
thereof and all estate, claim, demand, right, title and interest
of Grantor therein and rights of redemption thereof, pursuant to
power of sale or otherwise, at one or more sales, as an entirety
or in parcels, at such time and place, upon such terms and after
such notice thereof as may be required or permitted by the laws
of the jurisdiction in which such Trust Property is located;
(v) institute an action, suit or proceeding in equity for the
specific performance of any covenant, condition or agreement
contained herein or in the other Relevant Documents;
(vi) recover judgment on the Notes either before, during or after
any proceedings for the enforcement of this Deed of Trust;
(vii) prior to, concurrently with, or subsequent to the
institution of foreclosure proceedings, apply for the appointment
of a trustee, receiver, liquidator or conservator of the Trust
Property, as a matter of strict right, without notice and without
regard for the adequacy of the security for the Obligations or
the interest of the Grantor therein and without regard for the
solvency of the Grantor or of any person, firm or other entity
liable for the payment of the Obligations, and Grantor hereby
consents to such appointment;
(viii) prior to, concurrently with or subsequent to the
institution of foreclosure proceedings, enforce Beneficiary's
interest in the Leases and Rents and enter into or upon the Trust
Property and take exclusive possession thereof, either personally
or by its agents, nominees or attorneys and dispossess Grantor
and its agents and servants therefrom, and thereupon Beneficiary
may (whether or not a receiver has been appointed) as
attorney-in-fact or agent of Grantor, or in its own name and
under the powers herein granted,(A) use, operate, manage,
control, insure, maintain, repair, restore and otherwise deal
with all and every part of the Trust Property and conduct the
business thereat; (B) complete any construction on the Trust
Property in such manner and form as Beneficiary deems advisable;
(C) make alterations, additions, renewals, replacements and
improvements to or on the Trust Property; (D) exercise all rights
and powers of
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Grantor with respect to the Trust Property, whether in the name
of Grantor or otherwise (including, without limitation, the right
to make, cancel, enforce or modify Leases, obtain and evict
tenants, and demand, sue for, collect and receive all earnings,
revenues, rents, issues, profits and other income of the Trust
Property and every part thereof); and (E) apply the receipts from
the Trust Property to the payment of the Obligations, after
deducting therefrom all reasonable expenses (including, without
limitation, reasonable attorneys' fees) incurred in connection
with the aforesaid operations and all amounts necessary to pay
the taxes, assessments, insurance and other charges in connection
with the Trust Property, it being agreed that should Beneficiary
incur any liability, loss or damage in the defense of any claims
or demands, the amount thereof, including costs, expenses and
reasonable attorneys' fees shall be secured hereby, and Grantor
shall reimburse Beneficiary therefor immediately upon demand;
(ix) require Grantor to pay monthly in advance to Beneficiary, or
any receiver appointed to collect the Rents, the fair and
reasonable rental value for the use and occupation of any portion
of the Trust Property occupied by Grantor and require Grantor to
vacate and surrender possession to Beneficiary of the Trust
Property or to such receiver and, in default thereof, evict
Grantor by summary proceedings or otherwise; and
(x) pursue such other rights and remedies as may be available
under the Relevant Documents or otherwise at law or in equity or
under the Uniform Commercial Code including the right to
establish a lock box for all Rents and other receivables of
Grantor relating to the Trust Property.
In the event of a sale, by foreclosure or otherwise, of less than all of the
Trust Property, this Deed of Trust shall continue as a lien on the remaining
portions of the Trust Property.
The proceeds of any sale made under or by virtue of this Section
24, together with any other sums which then may be held by Beneficiary under
this Deed of Trust, whether under the provisions of this Section or otherwise,
shall be applied by Beneficiary in the following order of priority: first, on
account of all reasonable costs and expenses incident to the foreclosure
proceedings, including all such items as are mentioned in this Section 24;
second, all other items which under the terms hereof constitute secured
indebtedness, which are any amounts due under this Deed of Trust, or under the
other Relevant Documents (including any amounts required to be escrowed pursuant
to Section 6(b)); third, any surplus to Grantor, its successors or assigns, as
their rights may appear.
(b) Upon any sale made under or by virtue of this Section 24,
whether made under the power of sale herein granted or under or by virtue of
judicial proceedings or of a judgment or decree of foreclosure and sale,
Beneficiary may bid for and acquire the Trust Property or any part thereof and
in lieu of paying cash therefor may make settlement for the purchase price by
crediting upon the Obligations the net sales price after deducting therefrom
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the expenses of the sale and costs of the action and any other sums which
Beneficiary is authorized to deduct under this Deed of Trust.
(c) No recovery of any judgment by Beneficiary and no levy of an
execution under any judgment upon the Trust Property or upon any other property
of Grantor shall affect in any manner or to any extent the lien of this Deed of
Trust upon the Trust Property or any part thereof, or any liens, rights, powers
or remedies of Beneficiary hereunder, but such liens, rights, powers and
remedies of Beneficiary shall continue unimpaired as before.
(d) Beneficiary may adjourn, terminate or rescind any proceeding
or other action brought in connection with its exercise of the remedies provided
in this Section 24 at any time before the conclusion thereof, as determined in
Beneficiary's sole discretion and without prejudice to Beneficiary.
(e) Beneficiary may resort to any remedies and the security given
by this Deed of Trust or the other Relevant Documents in whole or in part, and
in such portions and in such order as determined by Beneficiary's sole
discretion. No such action shall in any way be considered a waiver of any
rights, benefits or remedies evidenced or provided by this Deed of Trust or the
other Relevant Documents. The failure of Beneficiary to exercise any right,
remedy or option provided in this Deed of Trust or the other Relevant Documents
shall not be deemed a waiver of such right, remedy or option or of any covenant
or obligation secured by this Deed of Trust or the other Relevant Documents.
Subject to the provisions of the Relevant Documents, no acceptance by
Beneficiary of any payment after the occurrence of any Event of Default and no
payment by Beneficiary of any obligation for which Grantor is liable hereunder
shall be deemed to waive or cure any Event of Default with respect to Grantor,
or Grantor's liability to pay such obligation. No sale of all or any portion of
the Trust Property, no forbearance on the part of Beneficiary and no extension
of time for the payment of the whole or any portion of the Obligations or any
other indulgence given by Beneficiary to Grantor, shall operate to release or in
any manner affect the interest of Beneficiary in the remaining Trust Property or
the liability of Grantor to pay the Obligations. No waiver by Beneficiary shall
be effective, unless it is in writing and then only to the extent specifically
stated.
(f) The interests and rights of Beneficiary under this Deed of
Trust and the other Relevant Documents, and the liens and security interests
created and evidenced by this Deed of Trust and the other Relevant Documents,
shall not be impaired by any indulgence, including (i) any renewal, extension or
modification which Beneficiary may grant with respect to any of the Obligations,
(ii) any surrender, compromise, release, renewal, extension, exchange or
substitution which Beneficiary may grant with respect to the Trust Property or
any portion thereof; or (iii) any release or indulgence granted to any maker,
endorser, guarantor or surety of any of the Obligations.
(g) Upon the occurrence of any Event of Default under Section 23,
in any suit to foreclose the lien hereof or enforce any other remedy of
Beneficiary under this Deed of Trust, there shall be allowed and included as
additional indebtedness in the decree for sale or other judgment or decree all
reasonable expenditures and expenses which may be paid or
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incurred by or on behalf of Beneficiary for attorneys' fees, appraiser's fees,
outlays for documentary and expert evidence, stenographers' charges, publication
costs, and costs (which may be estimated as to items to be expended after entry
of the decree) of procuring all such abstracts of title, title searches and
examinations, title insurance policies, Torrens certificates, and similar data
and assurances with respect to title as Beneficiary may deem reasonably
necessary either to prosecute such suit or to evidence to bidders at any sale
which may be had pursuant to such decree the true condition of the title to or
the value of the Trust Property. All such reasonable expenditures and expenses
which Beneficiary may incur as permitted by this Section for the protection of
the Trust Property and the maintenance of the lien of this Deed of Trust,
including, but not limited to, the fees and out-of-pocket disbursements of any
attorney employed by Beneficiary in any litigation or proceeding affecting this
Deed of Trust, including, but not limited to, bankruptcy proceedings or
preparations for the commencement or defense of any proceeding or threatened
suit or proceeding, shall be immediately due and payable by Grantor and shall be
secured by this Deed of Trust.
25. RIGHT OF ACCESS. Grantor shall permit agents, representatives
and employees of Beneficiary to (i) inspect the Trust Property or any part
thereof, PROVIDED that such inspection does not materially interfere with the
tenants of the Trust Property or violate the terms of any Lease, (ii) to examine
and make abstracts from any of Grantor's books and records and (iii) to discuss
the business, operations, properties and financial and other condition of
Grantor with officers of Grantor and with its independent certified public
accountants, at such reasonable times as may be requested by Beneficiary upon
reasonable advance notice.
26. SECURITY AGREEMENT. This Deed of Trust is both a real
property deed of trust and a "security agreement" within the meaning of the
Uniform Commercial Code. The Trust Property includes both real and personal
property and all other rights and interests, whether tangible or intangible in
nature, of Grantor in the Trust Property. Grantor by executing and delivering
this Deed of Trust has granted and hereby grants to Beneficiary, as security for
the Obligations, a security interest in the Trust Property to the full extent
that the Trust Property may be subject to the Uniform Commercial Code (said
portion of the Trust Property so subject to the Uniform Commercial Code being
called in this paragraph the "COLLATERAL"). Grantor hereby agrees with
Beneficiary to execute and deliver to Beneficiary, in form and substance
satisfactory to Beneficiary, such financing statements and such further
assurances as Beneficiary may from time to time, reasonably consider necessary
to create, perfect, and preserve Beneficiary's security interest herein granted.
All or part of the Trust Property is or is to become "fixtures" as defined in
the Uniform Commercial Code, and this Deed of Trust, upon being filed for record
in the real estate records of the city or county wherein such fixtures are
situated, shall also constitute a "fixture filing" for the purposes of the
Uniform Commercial Code upon such of the Trust Property that is or may become
fixtures. Information concerning the security interest herein granted may be
obtained from the parties at the addresses of the parties set forth in the first
paragraph of this Deed of Trust. Grantor's chief executive office and principal
place of business is the Grantor's address set forth in the first paragraph of
this Deed of Trust, and the place where Grantor's books and
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<PAGE>
records in respect of where the Trust Property is located are kept is the
address of Grantor set forth in the first paragraph of this Deed of Trust. If an
Event of Default shall occur which shall remain uncured, Beneficiary, in
addition to any other rights and remedies which it may have, shall have and may
exercise immediately and without demand, any and all rights and remedies granted
to a secured party upon default under the Uniform Commercial Code, (including,
without limitation, to the extent permitted by law, the right to take possession
of the Collateral or any part thereof, and to take such other measures as
Beneficiary may deem necessary for the care, protection and preservation of the
Collateral). Upon request or demand of Beneficiary or Trustee, Grantor shall at
its expense assemble the Collateral and make it available to Beneficiary at a
convenient place acceptable to Beneficiary. Grantor shall pay to Beneficiary on
demand therefor any and all reasonable expenses (including, without limitation,
reasonable legal expenses and attorneys' fees) incurred or paid by Beneficiary
in protecting the interest in the Collateral and in enforcing the rights
hereunder with respect to the Collateral. Any notice of sale, disposition or
other intended action by Beneficiary with respect to the Collateral sent to
Grantor at least ten (10) business days prior to such action or such notice as
is otherwise required by law or the Relevant Documents, shall constitute
commercially reasonable notice to Grantor. The proceeds of any disposition of
the Collateral, or any part thereof, may be applied by Beneficiary to the
payment of the Obligations in such priority and proportions as Beneficiary shall
determine in its sole discretion. In the event of any change in name, identity
or structure of Grantor, Grantor shall notify Beneficiary thereof and, promptly
after request, shall execute, file and record such Uniform Commercial Code forms
as are necessary to maintain the priority of Beneficiary's lien upon and
security interest in the Collateral, and shall pay all expenses and fees in
connection with the filing and recording thereof. If Beneficiary shall require
the filing or recording of additional Uniform Commercial Code forms or
continuation statements, Grantor shall, promptly after request, execute, file
and record such Uniform Commercial Code forms or continuation statements as
Beneficiary shall deem necessary, and shall pay all expenses and fees in
connection with the filing and recording thereof, it being understood and
agreed, however, that no such additional documents shall materially increase
Grantor's obligations under this Deed of Trust or the other Relevant Documents.
Grantor hereby irrevocably appoints Beneficiary as its attorney-in-fact, coupled
with an interest, to file with the appropriate public office on its behalf any
UCC financing statements (or related documents) signed only by Beneficiary, as
secured party, in connection with the Collateral covered by this Deed of Trust,
such appointment to terminate upon the release of this Deed of Trust.
27. ACTIONS AND PROCEEDINGS. Beneficiary has the right to appear
in and defend any action or proceeding brought with respect to the Trust
Property and to bring any action or proceeding, in the name and on behalf of
Grantor, which Beneficiary, in its reasonable discretion, decides should be
brought to protect its interest under this Deed of Trust or in the Trust
Property. Subject to the foregoing, Grantor shall appear in and contest any
action or proceeding purporting to affect the security hereof and shall pay all
reasonable costs and expenses including cost of evidence of title and attorney's
fees, in any such action or proceeding in which Beneficiary may appear.
Beneficiary shall, at its option, be subrogated to the lien of any mortgage or
other security instrument discharged in whole or in part by the
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Obligations, and any such subrogation rights shall constitute additional
security for the payment of the Obligations.
28. WAIVER OF SETOFF AND COUNTERCLAIM. Except as may be permitted
under the Relevant Documents, all amounts due under this Deed of Trust, the
Notes and the other Relevant Documents shall be payable without setoff or
counterclaim whatsoever.
29. LIENS. Grantor warrants, covenants and agrees to pay and
promptly discharge, at Grantor's cost and expense, all taxes, assessments and
governmental charges levied upon it, its income and assets as and when such
taxes, assessments and charges are due and payable (including, without
limitation, all Impositions), as well as all lawful claims for labor materials
and supplies or otherwise which could become a lien, and all liens, encumbrances
and charges upon the Trust Property, or any part thereof or interest therein;
provided that the existence of any mechanic's, laborer's, materialman's,
supplier's or vendor's lien or right thereto shall not constitute a violation of
this Section if payment is not yet due under the contract which is the
foundation thereof. Notwithstanding the foregoing, Grantor shall not be in
default for failure to pay or discharge Impositions or mechanic's or
materialman's or similar lien asserted against the Trust Property if, and so
long as, (a) Grantor shall have notified Beneficiary of same within seven (7)
days of obtaining knowledge thereof; (b) Grantor shall diligently and in good
faith contest the same by appropriate legal proceedings which shall operate to
prevent the enforcement or collection of the same and the sale of the Trust
Property or any part thereof, to satisfy the same; (c) unless funds are
otherwise reserved, Grantor shall furnish to Beneficiary such security as
Beneficiary may reasonably request to insure payment of such Impositions and to
secure and indemnify Beneficiary against any cost, expense, loss or damage in
connection with such contest or postponement of payment,; (d) Grantor shall
timely upon final determination thereof pay the amount of any such Impositions,
claim, fine or penalty so determined, together with all costs, interest and
penalties which may be payable in connection therewith; (e) the failure to pay
the Impositions, or mechanic's or materialman's or similar lien claim does not
constitute a default under any other deed of trust, mortgage or security
interest covering or affecting any part of the Trust Property; and (f)
notwithstanding the foregoing, Grantor shall immediately upon request of
Beneficiary pay (and if Grantor shall fail so to do, Beneficiary may, but shall
not be required to, pay or cause to be discharged or bonded against) any such
Impositions, or claim notwithstanding such contest, if in the reasonable opinion
of Beneficiary, the Trust Property or any part thereof or interest therein may
be in imminent danger of being sold, forfeited, foreclosed, terminated, canceled
or lost.
30. RECOVERY OF SUMS REQUIRED TO BE PAID. Beneficiary shall have
the right from time to time to take action to recover any sum or sums which
constitute a part of the Obligations as the same become due and owing, without
regard to whether or not the balance of the Obligations shall be due, and
without prejudice to the right of Beneficiary thereafter to bring an action of
foreclosure, or any other action, for a default or defaults by Grantor existing
at the time such earlier action was commenced.
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31. MARSHALING, WAIVER OF REDEMPTION AND OTHER MATTERS. Grantor
hereby waives, to the extent permitted by law, the benefit of all appraisement,
valuation, stay, extension, reinstatement, moratorium and redemption laws now or
hereafter in force and all rights of marshaling in the event of any sale
hereunder of the Trust Property or any part thereof or any interest therein.
Further, Grantor hereby expressly waives any and all rights of redemption from
sale under any order or decree of foreclosure of this Deed of Trust on behalf of
Grantor, and on behalf of each and every person acquiring any interest in or
title to the Trust Property subsequent to the date of this Deed of Trust and on
behalf of all persons to the extent permitted by applicable law.
32. NOTICE. Any notice which either party hereto may desire or be
required to give to the other party shall be in writing and delivered by: (x) a
commercial courier or messenger service or (y) by U.S. registered or certified
mail with return receipt requested. Notice by commercial messenger or courier
service will be deemed to have been given on the day when delivered before 4:00
p.m. on a business day in the city in which notice is delivered, provided that
payment for the cost of delivery is not requested of the recipient. Notice by
mail shall be given by registered or certified U.S. Mail, return receipt
requested. Delivery of notice by commercial messenger or courier service or mail
shall be assumed if acceptance of delivery is refused. Notice may be given by
fax but will only be treated as delivered hereunder if: (x) sent between the
hours of 9:00 a.m. and 5:00 p.m. (based on local time at the destination); and
(y) receipt is acknowledged by fax and delivery will be deemed to have been
given on the date the fax acknowledgment is sent. Notices shall be delivered as
follows or at such other place as either party hereto may by notice in writing
(given in accordance with this Section 32) designate:
To Grantor: Discovery Zone, Inc.
One Corporate Center
110 East Broward Boulevard
Fort Lauderdale, Florida 33301
Attn: President
Telecopy Number: (954) 627-2670
To Beneficiary: McDonald's Corporation
One McDonald's Plaza
Oak Brook, IL 60523
Attn: General Counsel
Telecopy Number: (630) 623-3000
33. SOLE DISCRETION OF BENEFICIARY. Wherever pursuant to this
Deed of Trust, Beneficiary exercises any right given to it to approve or
disapprove, or any arrangement or term is to be satisfactory to Beneficiary, the
decision of Beneficiary to approve or disapprove or to decide that arrangements
or terms are satisfactory or not satisfactory shall be
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<PAGE>
in the sole discretion of Beneficiary and shall be final and conclusive, except
as may be otherwise expressly and specifically provided herein.
34. NON-WAIVER. The failure of Beneficiary to insist upon strict
performance of any term hereof shall not be deemed to be a waiver of any term of
this Deed of Trust. Grantor shall not be relieved of Grantor's Obligations
hereunder by reason of (a) the failure of Beneficiary to comply with any request
of Grantor to take any action to foreclose this Deed of Trust or otherwise
enforce any of the provisions hereof or of the other Relevant Documents, (b) the
release, regardless of consideration, of the whole or any part of the Trust
Property, or of any person liable for the Obligations or any portion thereof, or
(c) any agreement or stipulation by Beneficiary extending the time of payment or
otherwise modifying or supplementing the terms of this Deed of Trust or the
other Relevant Documents. Beneficiary may resort for the payment of the
Obligations to any other security held by Beneficiary in such order and manner
as Beneficiary, in its discretion, may elect. Beneficiary may take action to
recover the Obligations, or any portion thereof, or to enforce any covenant
hereof without prejudice to the right of Beneficiary thereafter to foreclosure
this Deed of Trust. The rights and remedies of Beneficiary under this Deed of
Trust shall be separate, distinct and cumulative and none shall be given effect
to the exclusion of the others. No act of Beneficiary shall be construed as an
election to proceed under any one provision herein to the exclusion of any other
provision. Beneficiary shall not be limited exclusively to the rights and
remedies herein stated but shall be entitled to every right and remedy now or
hereafter afforded at law or in equity.
35. NO ORAL CHANGE. This Deed of Trust and the other Relevant
Documents constitute the final expression of the entire agreement among the
parties pertaining to the subject matter hereof and thereof and supersede all
prior and contemporaneous agreements, understanding, representations or other
arrangements, whether express or implied, written or oral, of the parties in
connection herewith or therewith except to the extent expressly incorporated or
specifically referred to herein or therein. This Deed of Trust, and any
provisions hereof, may not be modified, amended, waived, extended, changed,
discharged or terminated orally or by any act or failure to act on the part of
Grantor or Beneficiary, but only by an agreement in writing signed by the party
against whom enforcement of any modification, amendment, waiver, extension,
change, discharge or termination is sought.
36. SUCCESSORS AND ASSIGNS. Subject to the provisions hereof
requiring Beneficiary's consent to any transfer of the Trust Property, this Deed
of Trust shall be binding upon and inure to the benefit of Grantor and
Beneficiary and their respective permitted successors and assigns forever.
37. SEVERABILITY. If any term, covenant or condition of this Deed
of Trust or the Relevant Documents is held to be invalid, illegal or
unenforceable in any respect, this Deed of Trust and any such other Relevant
Document shall be construed without such provision.
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38. HEADINGS, ETC. The headings and captions of various
paragraphs of this Deed of Trust are for convenience of reference only and are
not to be construed as defining or limiting, in any way, the scope or intent of
the provisions hereof.
39. DUPLICATE ORIGINALS. This Deed of Trust may be executed in
any number of duplicate originals and each such duplicate original shall be
deemed to be an original.
40. DEFINITIONS. Unless the context clearly indicates a contrary
intent or unless otherwise specifically provided herein, words used in this Deed
of Trust may be used interchangeably in singular or plural form and the word
"Grantor" shall mean "each Grantor and any subsequent owner or owners of the
Trust Property or any part thereof or any interest therein," the word
"Beneficiary" shall mean "Beneficiary and any subsequent holder(s) of the
Notes," the word "person" shall include an individual, corporation, partnership,
trust, unincorporated association, government, governmental authority, and any
other entity, and the words "Trust Property" shall include any portion of the
Trust Property and any interest therein and the words "attorneys' fees" shall
include any and all attorneys' fees, paralegal and law clerk fees (including,
without limitation, fees at the pre-trial, trial and appellate levels incurred
or paid by Beneficiary in protecting its interest in the Trust Property and
Collateral and enforcing its rights hereunder and all such fees incurred in
connection with any bankruptcy or insolvency proceedings). Whenever the context
may require, any pronouns used herein shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns and pronouns shall
include the plural and vice versa.
41. HOMESTEAD. Grantor hereby waives and renounces all homestead
and exemption rights provided by the constitution and the laws of the United
States and of any state, in and to the Land as against the collection of the
Obligations, or any part hereof.
42. ASSIGNMENTS. Consistent with and subject to the applicable
provisions of the Relevant Documents, Beneficiary shall have the right to assign
or transfer its rights under this Deed of Trust without limitation. Any
Beneficiary or transferee shall be entitled to all the benefits afforded
Beneficiary under this Deed of Trust.
43. WAIVER OF JURY TRIAL. TO THE MAXIMUM EXTENT PERMITTED BY
APPLICABLE LAW, EACH PARTY HERETO HEREBY AGREES NOT TO ELECT A TRIAL BY JURY OF
ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY JURY FULLY
TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO
THE NOTES, THIS DEED OF TRUST, OR THE OTHER RELEVANT DOCUMENTS, OR ANY CLAIM,
COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH. THIS WAIVER OF
RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY SUCH PARTY, AND IS
INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE
RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE. BENEFICIARY IS HEREBY
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AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE
EVIDENCE OF THIS WAIVER BY GRANTOR.
44. CONSENT TO JURISDICTION. GRANTOR AND BENEFICIARY HERETO
CONSENT FOR THEMSELVES AND IN RESPECT OF THEIR PROPERTIES, GENERALLY,
UNCONDITIONALLY AND IRREVOCABLY, TO THE NONEXCLUSIVE JURISDICTION OF THE FEDERAL
AND STATE COURTS IN THE STATE OF NEW YORK WITH RESPECT TO ANY PROCEEDING
RELATING TO ANY MATTER, CLAIM OR DISPUTE ARISING UNDER THE RELEVANT DOCUMENTS OR
THE TRANSACTIONS CONTEMPLATED THEREBY. GRANTOR FURTHER CONSENTS, GENERALLY,
UNCONDITIONALLY AND IRREVOCABLY, TO THE NONEXCLUSIVE JURISDICTION OF THE STATE
AND FEDERAL COURTS OF THE STATE IN WHICH ANY OF THE COLLATERAL IS LOCATED IN
RESPECT OF ANY PROCEEDING RELATING TO ANY MATTER, CLAIM OR DISPUTE ARISING WITH
RESPECT TO SUCH COLLATERAL. GRANTOR FURTHER IRREVOCABLY CONSENTS TO THE SERVICE
OF PROCESS, GENERALLY, UNCONDITIONALLY AND IRREVOCABLY, AT THE ADDRESSES SET
FORTH IN THE FIRST PARAGRAPH HEREOF IN CONNECTION WITH ANY OF THE AFORESAID
PROCEEDINGS IN ACCORDANCE WITH THE RULES APPLICABLE TO SUCH PROCEEDINGS. TO THE
EXTENT PERMITTED BY APPLICABLE LAW, GRANTOR HEREBY IRREVOCABLY WAIVES ANY
OBJECTION WHICH IT MAY NOW HAVE OR HAVE IN THE FUTURE TO THE LAYING OF VENUE IN
RESPECT OF ANY OF THE AFORESAID PROCEEDINGS BROUGHT IN THE COURTS REFERRED TO
ABOVE AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
NOTHING HEREIN SHALL AFFECT THE RIGHT OF BENEFICIARY TO SERVE PROCESS IN ANY
MANNER PERMITTED BY LAW OR TO COMMENCE PROCEEDINGS OR OTHERWISE PROCEED AGAINST
GRANTOR IN ANY JURISDICTION.
45. GOVERNING LAW. This Deed of Trust shall be governed by and
construed in accordance with the laws of the State of New York including,
without limitation, Section 5-1401 of the General Obligations Law, but otherwise
without regard to conflict of law principles; PROVIDED, HOWEVER, that with
respect to the creation, attachment, perfection, priority and procedures
relating to the enforcement of the liens and security interests created by or
pursuant to this Deed of Trust and relating to real property, this Deed of Trust
shall be governed by and construed in accordance with the laws of the state in
which the Land is located.
46. LIEN ABSOLUTE, MULTI-SITE REAL ESTATE AND MULTIPLE COLLATERAL
TRANSACTION. Grantor acknowledges that this Deed of Trust and a number of other
Relevant Documents and those documents required by the Relevant Documents
together secure the Obligations. Grantor agrees that the lien of this Deed of
Trust and all obligations of the
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Grantor hereunder shall be absolute and unconditional and shall not in any
manner be affected or impaired by:
(a) any lack of validity or enforceability of the Notes or any
other Relevant Document, any agreement with respect to any of the Obligations or
any other agreement or instrument relating to any of the foregoing;
(b) any acceptance by Beneficiary of any security for or
guarantees of any of the indebtedness hereby secured;
(c) any failure, neglect or omission on the part of Beneficiary
to realize upon or protect any of the indebtedness hereby secured or any of the
collateral security therefor, including the Relevant Documents;
(d) any change in the time, manner or place of payment of, or in
any other term of, all or any of the Obligations;
(e) any release (except as to the property or obligation
released), sale, pledge, surrender, compromise, settlement, nonperfection,
renewal extension, indulgence, alteration, exchange, modification or disposition
of any of the Obligations hereby secured or of any of the collateral security
therefor;
(f) any amendment or waiver of or any consent to any departure
from the Notes or any other Relevant Documents or of any guaranty thereof
(except to the extent of such amendment, waiver or consent in writing by
Beneficiary), if any, and Beneficiary may in its discretion foreclose, exercise
any power of sale, or exercise any other remedy available to it under any or all
of the Relevant Documents without first exercising or enforcing any of its
rights and remedies hereunder; and
(g) any exercise of the rights or remedies of Beneficiary
hereunder or under any or all of the Relevant Documents.
Grantor specifically consents and agrees that Beneficiary may exercise its
rights and remedies hereunder and under the other Relevant Documents separately
or concurrently and in any order that Beneficiary may deem appropriate.
47. FUTURE ADVANCES. Grantor and Beneficiary expressly intend
that future and additional loans and advances will be secured by this Deed of
Trust and this Deed of Trust shall secure not only the existing indebtedness,
but shall also secure all funds hereafter advanced as contemplated by any
covenant or provision herein or for any other purpose, and all other
indebtedness, of whatever kind or character, owing or which may hereafter become
owing, however such indebtedness is evidenced. Such future advances shall be
secured to the same extent as if made on the date of execution of this Deed of
Trust.
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48. STATE SPECIFIC PROVISIONS. The provisions of Exhibit B are
hereby incorporated by reference as though set forth in full herein.
49. NO MERGER OF ESTATES. It is the intention and agreement of
Grantor and Beneficiary that there shall be no merger of any leasehold estate in
the Trust Property with the fee interest in the Trust Property or any other
estate or interest in the Trust Property, and there shall be no merger of this
Deed of Trust and any estate in the Trust Property, by reason of the fact that
the same person may own or hold (a) any leasehold interest in the Trust
Property, and/or (b) this Deed of Trust, and/or (c) the fee interest in the
Trust Property or any other estate or interest in the Trust Property.
50. CONCERNING THE TRUSTEE. Trustee shall be under no duty to
take any action hereunder except as expressly required hereunder or by law, or
to perform any act which would involve Trustee in any expense or liability or to
institute or defend any suit in respect hereof, unless properly indemnified to
Trustee's reasonable satisfaction. Trustee, by acceptance of this Deed of Trust,
covenants to perform and fulfill the trusts herein created, being liable,
however, only for willful negligence or misconduct, and hereby waives any
statutory fee and agrees to accept reasonable compensation, in lieu thereof, for
any services rendered by Trustee in accordance with the terms hereof. Trustee
may resign at any time upon giving thirty (30) days' notice to Grantor and to
Beneficiary. Beneficiary may remove Trustee at any time or from time to time,
and select a successor trustee. In the event of the death, removal, resignation,
refusal to act, or inability to act of Trustee, or in its sole discretion for
any reason whatsoever Beneficiary may, without notice and without specifying any
reason therefor and without applying to any court, select and appoint a
successor trustee, and, if necessary, several successor Trustees in succession,
who shall succeed to all the estate, rights, powers, and duties of the original
Trustee named herein, without any other formality than an appointment and
designation in writing (or other formality required by applicable law, if any).
Such substitute trustee shall not be required to give bond for the faithful
performance of the duties of Trustee hereunder unless required by Beneficiary.
The procedure provided for in this paragraph for substitution of Trustee shall
be in addition to and not in exclusion of any other provisions for substitution,
by law or otherwise.
51. TRUSTEE'S FEES. Grantor shall pay all reasonable costs, fees
and expenses incurred by Trustee and Trustee's agents and counsel in connection
with the performance by Trustee of Trustee's duties hereunder and all such
costs, fees and expenses shall be secured by this Deed of Trust. TRUSTEE SHALL
BE INDEMNIFIED, HELD HARMLESS AND REIMBURSED BY GRANTOR FOR ANY LIABILITY,
DAMAGE OR EXPENSE, INCLUDING REASONABLE ATTORNEYS' FEES AND AMOUNTS PAID IN
SETTLEMENT, WHICH TRUSTEE MAY INCUR OR SUSTAIN IN CONNECTION WITH THIS DEED OF
TRUST OR IN THE DOING OF ANY ACT WHICH TRUSTEE IS REQUIRED OR PERMITTED TO DO BY
THE TERMS HEREOF OR BY LAW (EXCEPT TO THE EXTENT ARISING FROM THE GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OF TRUSTEE), AND SHALL BE REIMBURSED THEREFOR
UPON DEMAND.
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52. SUBORDINATE LIEN. Notwithstanding anything to the contrary
contained herein, Grantor shall be permitted to grant a subordinate lien on the
Trust Property in favor of State Street Bank and Trust Company, solely in its
capacity as trustee and collateral agent under and pursuant to the Indenture (as
hereinafter defined) (the "SUBORDINATED CREDITOR") as security for the
obligations of Grantor under that certain Indenture between Grantor and the
Subordinated Creditor dated as of July 22, 1997 (the "INDENTURE"), provided that
such lien in favor of the Subordinated Creditor is junior, subject and
subordinate to the lien of this Deed of Trust in accordance with and pursuant to
the terms and conditions set forth in that certain Subordination Agreement dated
as of the date hereof between Beneficiary and the Subordinated Creditor with
respect to the Trust Property (the "SUBORDINATION AGREEMENT"), and provided,
further, that any event which gives the Subordinated Creditor the right to
accelerate the obligations secured by such subordinate lien shall automatically
constitute an Event of Default hereunder.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE AND NOTARY PAGES FOLLOW.]
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Grantor has executed this instrument as of the day and year first above written.
GRANTOR:
DISCOVERY ZONE, INC., a
Delaware corporation, as
successor in interest to LEAPS
& BOUNDS, INC.
By: /s/ Robert Rooney
-----------------------------
Name: Robert Rooney
Title: Sr. V.P.
<PAGE>
STATE OF NEW YORK )
COUNTY OF WESTCHESTER)
This instrument was acknowledged before me on July 28, 1997, by
Robert Rooney, Sr. V.P. of DISCOVERY ZONE, INC., a Delaware corporation, on
behalf of said corporation.
/s/ Mark D. Woodward
---------------------------
Notary Public, State of New York
[NOTARIAL SEAL]
<PAGE>
San Antonio
Bexar County, Texas
EXHIBIT A
2.488 acre tract out of Lot 38, NCB 12059, Embassy North Subdivision, Unit 5,
recorded in Volume 9518, Page 141, Deed and Plat Records of Bexar County, Texas
described as follows:
BEGINNING At a 1/2" iron pin found in the East Right of Way line of Embassy
Row, a 60 ft. Right of Way, for the Southwest corner of Lot 47, NCB
12059, recorded in Volume 9525, Page 111, Deed Records, Bexar
County, Texas and the Northwest corner of said Lot 38 and Northwest
corner and Point of Beginning of this tract;
THENCE S 72 degrees 57' 27"E, 300.00 ft along the South line of said Lot
47 to a 1/2" iron pin in the North line of Lot 3, NCB 12059, Sanbit
Subdivision, recorded in Volume 7300, Page 109, Deed and Plat
Records, Bexar County, Texas for the Northease corner of this
tract;
THENCE Along the North line of said Lot 3 as follows:
S 17 degrees 02' 33" W, 231.97 ft to a 1/2" iron pin for an angle
point
S 20 degrees 12' 54" W, 97.41 ft to a 1/2" iron pin set for the
Southeast corner of this tract;
THENCE N 72 degrees 57' 27"W, 324.58 ft to a 1/2" iron pin set in the East
Right of Way line of Embassy ROW for the Southwest corner of this
tract;
THENCE N 17 degrees 02' 33"E, 329.33 ft along the East Right of Way line
to the Point of Beginning and NOW KNOWN AS Lot 48, New City Block
12059, Embassy North Subdivision, Unit 5C, an addition to the City
of San Antonio, Bexar County, Texas according to the map or plat
thereof recorded in Volume 9527, Page 221, Deed and Plat Records of
Bexar County, Texas.
<PAGE>
EXHIBIT B
STATE SPECIFIC PROVISIONS (Texas)
The following provisions are incorporated by reference into
Section 48 of the attached Deed of Trust. If any conflict or inconsistency
exists between this Exhibit B and the remainder of the attached Deed of Trust,
this Exhibit B shall govern.
A. FORECLOSURE PROCEEDINGS. The provisions of Section 24
notwithstanding, foreclosure proceedings shall include without limitation
non-judicial foreclosure pursuant to a power of sale in accordance with statutes
of the State of Texas then in force governing sales of real estate under powers
of sale conferred by deed of trust. Upon the occurrence and during the
continuance of an Event of Default, or at any time thereafter, Grantor
authorizes and empowers the Trustee, at the request of Beneficiary (which
request is hereby conclusively presumed), to enforce this Deed of Trust by
selling, in one or more sales as Beneficiary or Trustee may elect, the Trust
Property then subject to the lien hereof at public auction, to the highest
bidder, for cash or for credit against the indebtedness secured hereby if
Beneficiary is the highest bidder, at the county court house in the county in
Texas in which such Trust Property or any part thereof is situated, as herein
described, in the area designated by the commissioners court for such purpose
pursuant to a recordation of such designation in the real property records of
such county, or if no such recorded designation by the commissioners court has
been made, in the area at the county court house designated in the notice of
proposed sale posted, filed and served in accordance with the further provisions
of this paragraph, between the hours of 10:00 a.m. and 4:00 p.m. on the first
Tuesday of any month. The Trustee shall give notice of the time, place and terms
of said sale, and of the property to be sold as follows: (i) Notice of such
proposed sale shall be given by posting written notice thereof at least
twenty-one days preceding the date of the sale at the court house door, and by
filing a copy of the Notice in the office of the county clerk of the county in
which the sale is to be made, and if the property to be sold is situated in more
than one county, one notice shall be posted at the court house door and filed
with the county clerk of each county in which the property to be sold is
situated. In addition, Beneficiary shall, at least twenty-one days preceding the
date of sale, serve written notice of the proposed sale by certified mail on
each debtor obligated to pay the debt secured hereby according to the records of
Beneficiary. Service of such notice shall be completed upon deposit of the
notice, enclosed in a postpaid wrapper, properly addressed to each such debtor
at the most recent address as shown by the records of Beneficiary, in a post
office or official depository under the care and custody of the United States
Postal Service. The affidavit of any person having knowledge of the facts to the
effect that such service was completed shall be prima facie evidence of the fact
of service; (ii) Any notice that is required or permitted to be given to Grantor
may be addressed to Grantor at Grantor's mailing address. Any notice that is to
be given by certified mail to any other debtor may, if no address for such other
debtor is shown by the records of Beneficiary, be addressed to such other debtor
at Grantor's mailing address. Notwithstanding the foregoing provisions of this
paragraph (ii), notice of such sale given in accordance with the requirements of
the applicable law of the State of Texas in effect at the time of such sale
shall constitute sufficient
<PAGE>
notice of such sale. Grantor hereby authorizes and empowers the Trustee to sell
all or any portion of the Trust Property, together or in lots or parcels, as the
Trustee may deem expedient, and to execute and deliver to the purchaser or
purchasers of such property, good and sufficient deeds of conveyance of fee
simple title with covenants of general warranty made on behalf of the Grantor.
The recitals in the conveyance to the purchaser or purchasers of the Trust
Property shall be full and conclusive evidence of the truth of the matters
therein stated, and all prerequisites to such sale shall be presumed to have
been performed and such sale and conveyance shall be conclusive against Grantor,
its heirs, successors and assigns. In no event shall the Trustee be required to
exhibit, present or display at any such sale, any of the personalty described
herein to be sold at such sale. The Trustee making such sale shall receive the
proceeds thereof and shall apply the same as follows: (1) first, he shall pay
the reasonable expense of executing this deed of trust including a reasonable
Trustee's fee or commission; (2) second, he shall pay so far as may be possible,
the indebtedness secured hereby (the "INDEBTEDNESS"), discharging first that
portion of the indebtedness arising under the covenants or agreements herein
contained and not evidenced by the Note; (3) third, he shall pay the residue, if
any, to the person or persons legally entitled thereto.
Payment of the purchase price to Trustee shall satisfy the
obligation of the purchaser at such sale therefor, and such purchaser shall not
be responsible for the application thereof. Said sale shall forever be a bar
against Grantor, its successors and assigns, and all other persons claiming
under it. In addition to and cumulative of the remedies provided in this clause,
the Beneficiary may foreclose or cause to be foreclosed the lien and security
interest of this instrument, in whole or in part, through judicial foreclosure,
private sale, or in any other manner as may at any time be authorized under the
laws of the State of Texas. Beneficiary shall have the right to bid for the
Trust Property and to become the purchaser at any sale made pursuant to this
clause, if it is the highest bidder therefor and in lieu of paying cash
therefor, may make settlement for the purchase price by crediting against the
Obligations the amount of the bid made, after deducting therefrom the expenses
of the sale, the cost of any enforcement proceeding hereunder and any other sums
which Trustee or Beneficiary is authorized to deduct under the terms hereof, to
the extent necessary to satisfy such bid. If foreclosure should be commenced by
the Trustee, the Beneficiary may at any time before the sale direct the Trustee
to abandon the sale, and may at any time or times thereafter direct the Trustee
to again commence foreclosure; or, irrespective of whether foreclosure is
commenced by the Trustee, the Beneficiary may at any time after an Event of
Default institute suit for foreclosure of the lien of this instrument. If
Beneficiary should institute suit for foreclosure of the lien of this
instrument, Beneficiary may at any time before the entry of final judgment
dismiss the same, and require the Trustee to sell all or part of the Trust
Property in accordance with the provisions of this instrument. No single sale or
series of sales by the Trustee or by any substitute or successor Trustee under
this instrument and no judicial foreclosure shall extinguish the lien or exhaust
the power of sale under this instrument except with respect to the items of
property sold, but such lien and power shall exist for so long as, and may be
exercised in any manner provided by law or as provided in this instrument as
often as the circumstances require to give Beneficiary full relief hereunder.
Grantor agrees for itself and its trustees, receivers, successors and assigns
that if any of them shall hold possession of the
<PAGE>
Trust Property or any part thereof subsequent to foreclosure of the lien hereof,
Grantor, or the parties so holding possession, shall become and be considered as
tenants at will of the purchaser or purchasers at such foreclosure sale or
sales; and any such tenant failing or refusing to surrender possession upon
demand shall be guilty of forcible detainer and shall be liable to such
purchaser or purchasers for rental on said premises, and shall be subject to
eviction and removal, forcible or otherwise, with or without process of law, all
damages which may be sustained by any such tenant as a result thereof being
hereby expressly waived.
The sale or sales by Trustee of less than the whole of the Trust
Property shall not exhaust the power of sale herein granted, and Trustee is
specifically empowered to make successive sale or sales under such power until
the whole of the Trust Property shall be sold; and if the proceeds of such sale
or sales of less than the whole of the Trust Property shall be less than the
aggregate of the Indebtedness, this Deed of Trust and the lien, security
interest and assignment hereof shall remain in full force and effect as to the
unsold portion of the Trust Property just as though no sale or sales had been
made; provided, however, that Grantor shall never have any right to require the
sale or sales of less than the whole of the Trust Property, but Beneficiary
shall have the right, at its sole election, to request Trustee to sell less than
the whole of the Trust Property. If an Event of Default has occurred and is
continuing hereunder, Beneficiary shall have the option to proceed with
foreclosure in satisfaction of such item either through judicial proceedings or
by directing Trustee to proceed as if under a full foreclosure, conducting the
sale as herein provided without declaring the entire Indebtedness due, and if
sale is made because an Event of Default has occurred and is continuing on an
installment, or a part of any installment, such sale may be made subject to the
unmatured part of the Indebtedness; and it is agreed that such sale, if so made,
shall not in any manner affect the unmatured part of the Indebtedness, but as to
such unmatured part, this Deed of Trust shall remain in full force and effect as
though no sale had been made under the provisions of this paragraph. Several
sales may be made hereunder without exhausting the right of sale for any
unmatured part of the Indebtedness. At any such sale (I) Grantor hereby agrees,
in its behalf and in behalf of its heirs, executors, administrators, successors,
personal representatives and assigns, that any and all recitals made in any
assignment of lease or deed of conveyance given by Trustee with respect to the
identity of Beneficiary, the occurrence or existence of any Event of Default,
the acceleration of the maturity of any of the Indebtedness, the request to
sell, the notice of sale, the giving of notice to all debtors legally entitled
thereto, the time, place, terms, and manner of sale, and receipt, distribution
and application of the money realized therefrom, or the due and proper
appointment of a substitute Trustee, and, without being limited by the
foregoing, with respect to any other act or thing having been duly done by
Beneficiary or by Trustee hereunder, shall be taken by all courts of law and
equity as prima facie evidence that the statements or recitals are the state of
facts and are without further question to be so accepted, and Grantor hereby
ratifies and confirms every act that Trustee or any substitute Trustee hereunder
may lawfully do in the Trust Property by virtue hereof; and (II) the purchaser
may disaffirm any easement granted, or rental, lease or other contract made, in
violation of any provision of this Deed of Trust and may take immediate
possession of the Trust Property free from, and despite the terms of, such grant
of easement and rental or lease contract.
<PAGE>
B. FINANCIAL INSTITUTIONS. Section 35 of this Deed of Trust is
hereby amended by adding the following paragraph at the end thereof:
To the extent that Beneficiary is a "financial institution" as
defined in Section 26.02 of the Texas Business & Commerce Code, the following
shall apply:
THIS DEED OF TRUST AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
C. RIGHTS AND REMEDIES OF SURETIES. Grantor waives any right or
remedy which Grantor may have or be able to assert pursuant to Chapter 34 of the
Business and Commerce Code of the State of Texas pertaining to the rights and
remedies of sureties.
<PAGE>
SCHEDULE A
DESCRIPTION OF ORIGINAL DEED OF TRUST
<TABLE>
<CAPTION>
PROPERTY RECORDING OFFICE VOLUME PAGE RECORDING
DATE
- ------------------- ----------------------------------------------------- --------- ------- -----------
<S> <C> <C> <C> <C>
San Antonio, TX Office of the County Clerk of Bexar County, Texas 6198 800 9/12/94
6198 815 9/12/94
</TABLE>
<PAGE>
EXHIBIT 4.38
- ---------------------------------------------------------------------------
DISCOVERY ZONE, INC.
(Grantor),
to
KENNETH W. PEARSON, as Trustee
(Trustee)
for the benefit of
McDONALD's CORPORATION
(Beneficiary)
- ----------------------------------------------------------------------------
AMENDED AND RESTATED DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS, SECURITY
AGREEMENT AND FIXTURE FILING
- ----------------------------------------------------------------------------
Dated as of July 29, 1997
DOCUMENT PREPARED BY AND
AFTER RECORDING RETURN TO:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attention: Jonathan A. Reiss, Esq.
- ------------------------------------------------------------------------------
[ARLINGTON, TEXAS PROPERTY]
<PAGE>
THIS AMENDED AND RESTATED DEED OF TRUST, ASSIGNMENT OF LEASES AND
RENTS, SECURITY AGREEMENT AND FIXTURE FILING (as the same may from time to time
be extended, renewed or modified, this "DEED OF TRUST"), made as of the 29th day
of July, 1997, by DISCOVERY ZONE, INC., a Delaware corporation ("GRANTOR"),
having its principal place of business at One Corporate Center, 110 East Broward
Boulevard, Fort Lauderdale, Florida 33301, as successor by merger to LEAPS &
BOUNDS, INC., to KENNETH W. PEARSON, having his principal place of business at
c/o Brown, McCarroll & Oaks Hartline, 300 Crescent Court, Suite 1400, Dallas,
Texas 75201 (and any subsequent substitutes or successors thereof pursuant to
Section 50 below, "Trustee"), to and for the benefit of McDONALD'S CORPORATION a
Delaware corporation ("BENEFICIARY"), having an address at One McDonald's Plaza,
Oak Brook, Illinois 60523.
W I T N E S S E T H:
A. WHEREAS, prior to Grantor's several predecessors in interest
filing their voluntary petitions for relief under chapter 11, title 11, United
States Code (the "BANKRUPTCY CODE"), Grantor's predecessors in interest with
respect to the Trust Property (as hereinafter defined), Leaps & Bounds, Inc.
("LBI") had provided Beneficiary with a First Deed of Trust on the Trust
Property, dated as of August 30, 1994 (the "ORIGINAL DEED OF Trust") and
identified by the recording information set forth on Schedule A hereto, to
secure certain obligations owed to Beneficiary under the Agreement and Plan of
Merger among Beneficiary, Grantor, Discovery Zone, Inc., a Delaware corporation
("OLD DZI") and Discovery Zone International, Inc. ("DZII"), a Delaware
corporation, dated as of August 30, 1994 (the "MERGER AGREEMENT"); and
B. WHEREAS, pursuant to Section 11.2(a)(iii) of the Merger
Agreement, Old DZI agreed to defend, indemnify and hold Beneficiary and its
affiliates harmless in respect of all expenses, losses, costs, deficiencies,
liabilities and damages (including related and reasonable counsel fees and
expenses, and compensatory and demonstrable consequential damages) incurred or
suffered by Beneficiary as a direct result of, inter alia, any breach by Old DZI
or LBI of the leases or subleases relating to certain properties that result in
any payment by Beneficiary in connection with any guarantee by Beneficiary of
such leases and pursuant to Section 10.3(f) of the Merger Agreement it was
agreed that certain security would be provided to secure the obligations under
Section 11.2(a)(iii) of the Merger Agreement, including without limitation, a
first priority security interest in the Land and Improvements (the "AGREEMENT TO
INDEMNIFY"); and
C. WHEREAS, following the filing of their respective prayers for
relief under the Bankruptcy Code, Grantor's predecessors in interest, Old DZI,
their affiliated debtors, including DZII and LBI (the "DEBTORS"), and
Beneficiary entered into the Stipulation and Order Between Debtors and
McDonald's Corporation Providing For The Resolution, Settlement And Compromise
of Disputes And For Rent Deferrals And Allowance of Certain Claims (the
"STIPULATION AND ORDER") that was entered by the United States Bankruptcy Court
for the District of Delaware (the "BANKRUPTCY COURT") on November 18, 1996,
which was not
2
<PAGE>
appealed or otherwise challenged, became a final order, remains in full force
and effect and to which Grantor is bound, Section 7 of which is captioned
"CONTINUING SECURITY" and provides, in pertinent part, that the valid and
enforceable first priority security interest on the Land and Improvements and
certain other collateral shall secure the performance and payment of all of the
obligations of Grantor to Beneficiary under the Notes (as hereinafter defined),
any obligations of Beneficiary that may arise in connection with the Assumption
Locations whether pursuant to any guaranty, lease, sublease or otherwise, any
obligations of Grantor that may arise in the event of a Liquidation, and any
continuing obligations of Grantor relating to the Rejection Location(s) and the
Prior Rejection Locations (as such terms are defined therein); and
D. WHEREAS, pursuant to the Stipulation and Order and 11 U.S.C.
ss.365, the Debtors, as predecessors in interest to Grantor, assumed the
subleases relating to certain properties (the "ASSUMED PROPERTIES") which
subleases (the "ASSUMED PROPERTY SUBLEASES") expressly incorporate the Agreement
to Indemnify as it relates to any current or future obligations of Beneficiary
relating to the Assumed Properties; and
E. WHEREAS, pursuant to the Stipulation and Order and the Plan
(as hereinafter defined), this Deed of Trust hereby amends and restates the
Original Deed of Trust in its entirety in accordance with the terms and
provisions set forth herein; and
F. WHEREAS, this Deed of Trust, together with certain other Deeds
of Trust, Mortgages or similar encumbrances, are intended to and do secure the
obligations of Grantor and its predecessors in interest and the other Debtors,
to Beneficiary under all of the Stipulation and Order, the Agreement to
Indemnify, the Secured Rent Deferral Notes (as hereinafter defined) and the
Secured Rejection Note (as hereinafter defined); and
G. WHEREAS, pursuant to the plan of reorganization for Old DZI
and its affiliated debtors confirmed by the Bankruptcy Court by order entered on
July 18, 1997 (the "PLAN"), and as required by the terms of the Stipulation and
Order, Grantor, as the reorganized successor of the Debtors, is obligated to
issue to Beneficiary Secured Rent Deferral Notes in the aggregate original
principal amount of $266,466.24, which amount is subject to increase each month
in accordance with the terms thereof (the "SECURED RENT DEFERRAL NOTES") and
Secured Rejection Note in the aggregate original principal amount of
$4,416,237.90 (the "SECURED REJECTION NOTE" and, together with the Secured Rent
Deferral Notes, the "NOTES"); and
H. WHEREAS, pursuant to the Plan, all of the Debtors and their
reorganized successors have merged into Grantor, and simultaneously with such
merger, all property of LBI and the other Debtors, including the Trust Property
(as hereinafter defined), has been revested in Grantor, as the successor entity
of the Debtors; and
I. WHEREAS, in accordance with the foregoing, Grantor is the fee
simple owner of the real estate described in Exhibit A attached hereto (the
"LAND");
3
<PAGE>
NOW THEREFORE, with reference to the foregoing recitals and for
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Grantor and Beneficiary hereby agree that the Original Deed of
Trust is hereby amended and restated in its entirety as follows:
For the purpose of securing the payment and performance of all of
the obligations (the "OBLIGATIONS") of Grantor to Beneficiary, including without
limitation, any and all obligations of Grantor, as successor in interest to Old
DZI, DZII, LBI and their affiliated debtors, under this Deed of Trust, the
Agreement to Indemnify (including, without limitation, any contingent
obligations thereunder), the Stipulation and Order (including, without
limitation, the obligations described in Section 7 thereof which are referred to
in paragraph C of the recitals above), the Plan and the Notes (including any and
all subsequent advances made pursuant to the terms of the Notes), and all other
documents evidencing or securing any such obligations (collectively, the
"RELEVANT DOCUMENTS"), Grantor by these presents hereby GRANTS, BARGAINS, SELLS,
WARRANTS, PLEDGES, ASSIGNS AND CONVEYS to Trustee and its successors and assigns
forever in trust, WITH POWER OF SALE, for the benefit of Beneficiary, the Land
and the buildings, structures and improvements of every nature whatsoever now or
hereafter located thereon to the extent owned by Grantor (including, but not
limited to, all gas and electric fixtures, radiators, heaters, docks and docking
facilities, engines and machinery, boilers, elevators and motors, plumbing,
heating and air conditioning fixtures, carpeting and other floor coverings,
water heaters, awnings and storm sashes which are or shall be attached to the
Land or said buildings, structures or improvements) (the "IMPROVEMENTS");
TOGETHER WITH: all right, title, interest and estate of Grantor
now owned, or hereafter acquired, in and to the following property, rights,
interest and estates relating to the Land and the Improvements, together with
Grantor's interest in the following property, rights, interests and estates
hereinafter described (the Land, Improvements, and the following property,
rights, interests and estates being hereinafter collectively referred to as the
"TRUST PROPERTY"):
(a) all easements, rights-of-way, strips and gores of land,
streets, ways, alleys, passages, sewer rights, water, water courses, water
rights and powers, air rights and development rights, construction and equipment
warranties, and all estates, rights, titles, interests, privileges, liberties,
tenements, hereditaments and appurtenances of any nature whatsoever, in any way
belonging, relating to or pertaining to the Land and the Improvements and the
reversion and reversions, remainder and remainders, and all land lying in the
bed of any street, road or avenue, opened or proposed, in front of or adjoining
the Land, to the center line thereof and all the estates, rights, titles,
interests, dower and rights of dower, curtesy and rights of curtesy, property,
possession, claim and demand whatsoever, both at law and in equity, of Grantor
of, in and to the Land and the Improvements and every part and parcel thereof,
with the appurtenances thereto, and in and to any streets, ways, alleys,
passages, strips or gores of land adjoining the Land or any part thereof;
4
<PAGE>
(b) all fixtures, attachments and other articles attached to the
Land or the Improvements constituting realty or real property now or hereafter
owned by Grantor or in which Grantor has or shall acquire an interest, now or
hereafter located on, attached to or contained in or used or usable in
connection with the Trust Property, and including, without limitation, all
building or construction materials intended for construction, reconstruction,
alteration or repair of or installation on or in the Trust Property, of every
kind and nature whatsoever now owned or hereafter acquired by Grantor, and all
proceeds thereof, as well as all additions to, appurtenances, substitutions for,
replacements of or accessions to any of the items recited as aforesaid and all
attachments, components, parts (including spare parts) and accessories, whether
installed thereon or affixed thereto, now or hereafter owned by Grantor and used
or intended to be used in connection with, or with the operation of, the Trust
Property, to the extent constituting real property, but not including play
equipment or other similar-type entertainment equipment relating to the
operation of the "Discovery Zone" facility on the Trust Property unless removal
of such equipment would cause structural damage to the Land or the Improvements
(collectively, the "FIXTURES");
(c) all awards or payments, including interest thereon, which may
heretofore and hereafter be made with respect to the Trust Property, whether
from the exercise of the right of eminent domain (including, but not limited to,
any transfer made in lieu of or in anticipation of the exercise of said rights),
or for a change of grade, or for any other injury to or decrease in the value of
the Trust Property;
(d) to the extent assignable (and to the extent relating to the
general occupancy and use of the Trust Property as opposed to the operation of
the "Discovery Zone" entertainment facility on the Trust Property), leases,
subleases (including sub-subleases), lettings, licenses, concessions, occupancy
agreements and other agreements which grant a possessory interest in, or the
right to use or occupy, all or any part of the Trust Property now or hereafter
entered into, and all amendments, extensions, renewals and guarantees thereof,
and all security therefor (collectively, the "LEASES") and all rents, issues,
profits, revenues (including all oil and gas or other mineral royalties and
bonuses) and deposits (including, without limitation, security deposits) under
the Leases (including, without limitation, from the rental of any office space,
retail space or other space, halls, stores, and offices, and security deposits
therefor, exhibit or sales space of every kind, license, lease, sublease fees
and rentals, letters of credit or cash instruments securing or evidencing
obligations under Leases, service charges, vending machine sales and proceeds,
if any, from business interruption or other loss of income insurance))
(collectively, the "Rents") and all proceeds from the sale or other disposition
of the Leases and the right to receive and apply the Rents to the payment of the
Obligations;
(e) subject to the rights of Grantor hereunder, all proceeds of
any insurance policies covering the Trust Property (including, without
limitation, the right to receive and apply the proceeds of any insurance,
judgments, or settlements made in lieu thereof, for damage to the Trust
Property);
5
<PAGE>
(f) all refundable, returnable or reimbursable fees deposits or
other funds or evidences of credit or indebtedness deposited by or on behalf of
Grantor with any governmental authorities, boards, corporations, providers of
utility services, public or private, including specifically, but without
limitation, all refundable, returnable or reimbursable tap fees, utility
deposits and development costs in connection with the Trust Property, and all of
the records and books of account now or hereafter maintained by or on behalf of
Grantor in connection with the operation of the Trust Property (collectively,
"SECURITY ACCOUNTS");
(g) all proceeds (as defined in the Uniform Commercial Code) of
the Trust Property which, in any event, shall include, without limitation, (i)
cash, instruments and other property received, receivable or otherwise
distributed in exchange for any or all of the Trust Property, (ii) the
collection or other disposition of, or realization upon, any item or portion of
the Trust Property (including, without limitation, all claims of Grantor against
third parties for loss of, damage to, destruction of, or for proceeds payable
under policies of insurance in respect of, the Trust Property now existing or
hereafter arising), (iii) any and all proceeds of any insurance, indemnity,
warranty or guaranty payable to Grantor from time to time with respect to damage
or loss of or to any of the Trust Property, (iv) any and all payments (in any
form whatsoever) made or due and payable to Grantor from time to time in
connection with the requisition, confiscation, condemnation, seizure or
forfeiture of all or any part of the Trust Property by any Governmental
Authority (or any person acting under color of Governmental Authority), and (v)
any and all real estate tax refunds payable to Grantor with respect to the Trust
Property, and refunds or reimbursements payable with respect to bonds, escrow
accounts, or other sums payable in connection with the use, development or
ownership of the Trust Property, but excluding any proceeds obtained, earned or
arising directly from the operation of the "Discovery Zone" entertainment
facility operated by Grantor on the Trust Property as opposed to general
occupancy and use of the Trust Property (collectively, the "PROCEEDS");
(h) to the extent permitted under applicable law, all licenses,
permits (other than proprietary permits of Grantor relating to the ordinary
operation of a "Discovery Zone" entertainment facility, as opposed to the
general use and occupancy of the Trust Property), variances and certificates
used in connection with the ownership, operation, use or occupancy of the Trust
Property (including, without limitation, business licenses, state health
department licenses, food service licenses, liquor licenses, licenses to conduct
business and all such other permits, licenses and rights, obtained from any
Governmental Authority or private Person concerning ownership, operation, use or
occupancy of the Trust Property) (collectively, "PERMITS");
(i) all plans, specifications, shop drawings and other technical
descriptions prepared for construction, repair or alteration of the Improvements
(including diskettes containing any such data), and all amendments and
modifications thereof; and
6
<PAGE>
(j) any escrows or escrow accounts established hereunder to
secure the Obligations of Grantor, including without limitation, the Proceeds
Escrow Account described in Section 6(b) hereof; and
(k) any and all replacements and renewals of or additions and
substitutions to any of the foregoing and all proceeds of any of the foregoing.
TO HAVE AND TO HOLD the above granted and described Trust
Property unto and to the use and benefit of Trustee, and the successors,
substitutes and assigns of Trustee forever, IN TRUST WITH POWER OF SALE, for the
benefit of Beneficiary, and its successors and assigns, and Grantor does hereby
bind itself, its successors and assigns to WARRANT AND FOREVER DEFEND the title
to the Trust Property unto Trustee and its successors, substitutes and assigns,
for the benefit of Beneficiary, and its successors and assigns;
AND, TO PROTECT THE SECURITY OF THIS DEED OF TRUST, Grantor
represents and warrants to and covenants and agrees with Beneficiary as follows:
1. DEFINED TERMS. The following terms, when used herein, shall
have the meanings set forth below:
"ENVIRONMENTAL LAWS" means any and all present and future
federal, state or local laws, statutes, ordinances or regulations, any judicial
or administrative orders, decrees or judgments thereunder, and any permits,
approvals, licenses, registrations, filings and authorizations, in each case as
now or hereafter in effect, relating to the protection of the environment, the
impact of Hazardous Substances or the generation, disposal or remediation
thereof on human health or safety, or the Release or threatened Release of
Hazardous Substances or otherwise relating to the Use of Hazardous Substances.
For purposes of this definition, (A) "HAZARDOUS SUBSTANCES" means collectively,
(i) any petroleum or petroleum products or waste oils, explosives, radioactive
materials, asbestos, urea formaldehyde foam insulation, polychlorinated
biphenyls ("PCBs"), and lead-based paint, (ii) any chemicals or other materials
or substances which are now or hereafter become defined as or included in the
definitions of "hazardous substances", "hazardous wastes", "hazardous
materials", "extremely hazardous wastes", "restricted hazardous wastes", "toxic
substances", "toxic pollutants", "contaminants", "pollutants" or words of
similar import under any Environmental Law and (iii) any other chemical or any
other material or substance, exposure to which is now or hereafter prohibited,
limited or regulated under any Environmental Law; (B) "USE" means, with respect
to any Hazardous Substance, the generation, manufacture, processing,
distribution, handling, use, treatment, recycling or storage of such Hazardous
Substance or transportation of such Hazardous Substance; and (C) "RELEASE" means
any release, spill, emission, leaking, pumping, injection, deposit, disposal,
discharge, dispersal, leaching or migration into the indoor or outdoor
environment (including, without limitation, the movement of Hazardous Substances
through ambient air, soil, surface water, ground water, wetlands, land or
subsurface strata).
7
<PAGE>
"GOVERNMENTAL AUTHORITY" means any national or federal
government, any state, regional, local or other political subdivision thereof
with jurisdiction and any Person with jurisdiction exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government (including without limitation any court).
"IMPOSITIONS" means all taxes (including, without limitation, all
real estate, ad valorem, sales (including those imposed on lease rentals), use,
single business, gross receipts, value added, intangible transaction privilege,
privilege or license or similar taxes), assessments (including, without
limitation, all assessments for public improvements or benefits, whether or not
commenced or completed within the term of this Deed of Trust), ground rents,
water, sewer or other rents and charges, excises, levies, fees (including,
without limitation, license, permit, inspection, authorization and similar
fees), and all other governmental impositions and other charges (including,
without limitation, vault charges and license fees for the use of vaults, chutes
and similar areas adjoining the Trust Property), in each case whether general or
special, ordinary or extraordinary, foreseen or unforeseen, of every character
in respect of the Trust Property, which at any time prior to, during or in
respect of the term hereof may be assessed or imposed on or in respect of or be
a lien upon (i) Grantor (including, without limitation, all income, franchise,
single business or other taxes imposed on Grantor for the privilege of doing
business in the jurisdiction in which the Trust Property is located), (ii) the
Trust Property, or any part thereof or any revenues therefrom or any estate,
right, title or interest therein, or (iii) any occupancy, operation, use or
possession of, or sales from, or activity conducted on, or in connection with
the Trust Property by Grantor or the leasing or use of the Trust Property or any
part thereof by Grantor.
"LEGAL REQUIREMENTS" means (i) all governmental statutes, laws,
rules, orders, regulations, ordinances, judgments, decrees and injunctions of
Governmental Authorities (including, without limitation, Environmental Laws)
affecting either the Borrower or any Property or any part thereof or the
construction, ownership, use, alteration or operation thereof, or any part
thereof (whether now or hereafter enacted and in force), (ii) all permits,
licenses and authorizations and regulations relating thereto, and (iii) all
covenants, conditions and restrictions contained in any instruments at any time
in force (whether or not involving Governmental Authorities) affecting the Trust
Property or any part thereof which, in the case of this clause (iii), require
repairs, modifications or alterations in or to the Trust Property or any part
thereof, or in any material way limit or restrict the existing use and enjoyment
thereof.
"PERSON" means any individual, corporation, limited liability
company, partnership, joint venture, estate, trust, unincorporated association,
any federal, state, county or municipal government or any bureau, department or
agency thereof and any fiduciary acting in such capacity on behalf of any of the
foregoing.
"UNIFORM COMMERCIAL CODE" means the Uniform Commercial Code, as
adopted, enacted and amended from time to time by the state or states where any
of the Trust Property is located.
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2. PAYMENT OF OBLIGATIONS AND INCORPORATION OF COVENANTS,
CONDITIONS AND AGREEMENTS. Grantor will pay the Obligations at the time and
in the manner provided in the Relevant Documents and in this Deed of Trust.
All the representations, warranties, covenants, conditions and agreements of
Grantor contained in the Relevant Documents are hereby made a part of this
Deed of Trust to the same extent and with the same force as if fully set
forth herein. If there shall be any inconsistencies between the terms,
covenants, conditions and provisions set forth in this Deed of Trust and the
terms, covenants, conditions and provisions set forth in the Relevant
Documents, then the terms, covenants, conditions and provisions of the
Relevant Documents shall prevail.
3. WARRANTY OF TITLE/ORGANIZATION. Grantor warrants that Grantor
has good, marketable and insurable fee simple title to Land and the Improvements
and has good title to the remainder of the Trust Property and has the full
power, authority and right to execute, deliver and perform its obligations under
this Deed of Trust and to encumber, mortgage, give, grant, bargain, sell,
alienate, enfeoff, convey, confirm, warrant, pledge, assign and hypothecate the
Trust Property and that Grantor possesses an unencumbered fee estate in the Land
and the Improvements and that it owns the Trust Property free and clear of all
liens, encumbrances and charges whatsoever except for (x) those exceptions to
title which are existing on the date hereof and approved by Beneficiary and (y)
those exceptions of title that are permitted under the other terms and
conditions of this Deed of Trust (collectively, the "PERMITTED ENCUMBRANCES")
and that this Deed of Trust is and will remain a valid and enforceable first
lien on and security interest in the Trust Property, subject only to the
Permitted Encumbrances. Grantor shall forever warrant, defend and preserve such
title and the validity and priority of the lien of this Deed of Trust and shall
forever warrant and defend the same to Beneficiary against the claims of all
persons whomsoever. Grantor is duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization. Grantor is
qualified to do business and in good standing in the State in which the Trust
Property is located, and to the extent that Grantor is not so qualified or in
good standing in such State, Grantor shall promptly qualify to do business and
become in good standing in such State and shall promptly present evidence of
such qualification to do business and good standing to Beneficiary, and shall in
any event take such steps as are necessary to insure the enforceability of the
Notes and this Deed of Trust.
4. TAXES. Grantor hereby warrants, covenants and agrees to pay
before any penalty attaches all real property taxes, general and special, and
all other taxes and assessments of any kind or nature whatsoever, against the
Trust Property when due and shall, upon written request, furnish to Beneficiary
duplicate receipts therefor, Grantor may, in good faith and with reasonable
diligence, contest the validity or amount of any such taxes or assessments
provided that such contest shall have the effect of preventing the collection of
the tax or assessment so contested and the sale or forfeiture of said Trust
Property or any part thereof, or any interest therein, to satisfy the same.
5. INDEMNIFICATION. Grantor shall indemnify, defend and hold
harmless Beneficiary from and against all of the following (collectively, and
individually referred to as a
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"LOSS"): claims, demands, causes of action, judgments, costs, expenses,
liabilities, losses and damages (including consequential and punitive damages),
reasonable attorneys' fees and expenses and court costs, disbursements and court
costs, and all risk of damage to property and injury to persons in or upon the
Trust Property, arising from: (i) Grantor's use of the Property or from the
conduct of its business in or about the Trust Property; (ii) Grantor's default
or breach of any term under this Deed of Trust; and (iii) Grantor's violation or
failure to comply with any Legal Requirements, including Environmental Laws;
provided that Grantor shall not be liable for Loss arising from Beneficiary's or
Trustee's negligence or willful misconduct or from Beneficiary's or Trustee's
breach of any of their obligations hereunder.
6. TRANSFER OR ENCUMBRANCE OF THE TRUST PROPERTY. (a) Except as
may otherwise be permitted hereunder or pursuant to the Relevant Documents,
Grantor shall not sell, convey, alienate, mortgage, encumber, pledge or
otherwise transfer the Trust Property or any part thereof or any of its interest
therein. Beneficiary shall not be required to demonstrate any actual impairment
of its security or any increased risk of default hereunder in order to declare
the Obligations immediately due and payable upon Grantor's conveyance,
alienation, mortgage, encumbrance, pledge or transfer of the Trust Property in
violation of this Deed of Trust or any other Relevant Document. This provision
shall apply to every sale, conveyance, alienation, mortgage, encumbrance, pledge
or transfer of the Trust Property that is not permitted pursuant to the Relevant
Documents, regardless of whether voluntary or not, or whether or not Beneficiary
has consented to any previous sale, conveyance, alienation, mortgage,
encumbrance, pledge or transfer of the Trust Property.
(b) Notwithstanding Section 6(a), Grantor shall have the right to
sell the Trust Property at any time to a third party bona fide purchaser after
consultation with Beneficiary and upon the prior written consent of Beneficiary
to such sale and the sales price (such consent not to be unreasonably withheld),
provided that the net proceeds of such sale of the Trust Property (after payment
of transfer taxes and reasonable brokerage commissions, if any, and other
reasonable closing costs) shall be applied towards repayment of the Obligations,
including, without limitation, repayment of the Secured Rejection Note
(including prepayment of any amounts not yet due and payable) and payment of the
Principal Amounts (as defined in the Rent Deferral Notes) then outstanding under
the Rent Deferral Notes, in the order and manner set forth in the Notes. After
the Secured Rejection Note and all Principal Amounts outstanding under the Notes
have been repaid in full, any remaining net proceeds (including proceeds from
any sale or other disposition of the Trust Property pursuant to Section 24
hereof) not applied towards repayment of the Obligations shall be deposited into
an escrow account designated by Beneficiary for Grantor's account and as
security for the performance by Grantor of its Obligations to Beneficiary under
the Relevant Documents (the "PROCEEDS ESCROW ACCOUNT") which escrow account
shall be administered by Beneficiary, or, at Beneficiary's discretion and in
accordance with Beneficiary's instructions, may be administered by an escrow
agent (an "ESCROW AGENT") selected by Beneficiary (whose reasonable fees shall
be paid by Grantor). Grantor may also from time to time deposit additional funds
into the Proceeds Escrow Account as further security for the Obligations. At
Beneficiary's request, Grantor agrees to enter into a separate escrow agreement
to further evidence the provisions of this Section 6(b), and in the
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event that Beneficiary chooses an Escrow Agent to administer the Proceeds Escrow
Account, Grantor agrees to execute an escrow agreement in form and substance
reasonably satisfactory to Beneficiary (including provisions consistent with the
provisions of this Section 6(b)) to evidence the duties and responsibilities of
such Escrow Agent. Beneficiary or, if applicable, the Escrow Agent at the
direction of Beneficiary, shall invest the funds in the Proceeds Escrow Account
in obligations of the U.S. Government or its agencies, interest in time accounts
or certificates of deposits, or other interest bearing account of any bank or
bank and trust company or in money market funds available to Beneficiary.
Grantor agrees, and shall agree under any escrow agreement entered into pursuant
to this Section 6(b), that the funds on deposit under the escrow arrangement
described herein shall not constitute property of the estate (within the meaning
of Section 541 of the United States Bankruptcy Code) and that Grantor shall only
have such rights to such funds as are provided herein and in any escrow
agreement entered into pursuant to this Section. Funds in the Proceeds Escrow
Account shall be disbursed (together with accrued interest) from time to time to
Beneficiary, at Beneficiary's direction (upon seven (7) days prior notice to
Grantor), to pay any Obligations that may arise from time to time under the
Agreement to Indemnify, the Notes, the Stipulation and Order or the other
Relevant Documents. Notwithstanding the foregoing, after December 31, 2005,
Grantor shall be entitled to retain any net proceeds in excess of the Minimum
Amount set forth below from the sale of the Trust Property, including amounts
previously deposited and remaining in the Proceeds Escrow Account (including
accrued interest thereon) which have not been applied towards payment of the
Obligations, provided that (i) no Obligations are then due and owing by Grantor
pursuant to the Agreement to Indemnify, the Stipulation and Order, the Notes or
otherwise, (ii) no default or Event of Default has occurred and is continuing
under any of the Relevant Documents; and (iii) the amount remaining in the
Proceeds Escrow Account is no less than the Minimum Amount (as hereinafter
defined). Except as otherwise set forth in the following sentence, the "Minimum
Amount" shall mean the product of (A) 1.5 times (B) the sum of the gross rent
(including additional rent and percentage rent charges, if any), common area
maintenance charges, taxes, insurance and other charges computed on a gross
basis (collectively, the "BASE CHARGES") which are due or shall become due under
any Assumed Property Subleases still in existence as of December 31, 2005 (the
"SURVIVING ASSUMED PROPERTY SUBLEASES") from December 31, 2005 until the
expiration of the terms of such Assumed Property Subleases. Upon the expiration
after December 31, 2005 of any Surviving Assumed Property Sublease, Beneficiary
shall re-calculate the Minimum Amount based upon the product of 1.5 times the
Base Charges of the remaining Surviving Assumed Property Subleases as of the end
of the term of such Surviving Assumed Property Sublease (such Base Charges to be
calculated as the sum of the Base Charges from such date through the end of the
expiration dates of the remaining Surviving Assumed Property Subleases), and
provided that (i) no Obligations are then due and owing by Grantor pursuant to
the Agreement to Indemnify, the Notes, the Stipulation and Order or otherwise
and that (ii) no default or Event of Default has occurred and is continuing
under any of the Relevant Documents, Beneficiary shall, on the first anniversary
of the expiration of such expired Surviving Assumed Property Sublease, release
to Grantor, or cause the Escrow Agent to release to Grantor, the excess of all
funds in the Proceeds Escrow Account over the re-calculated Minimum Amount. Any
calculation of Base Charges under this Section 6(b) shall be made by Beneficiary
and,
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absent manifest error, shall be conclusive and binding upon Grantor. Provided
that (i) an amount equal to at least the Minimum Amount is deposited or on
deposit in the Proceeds Escrow Account to secure the payment of the Obligations,
(ii) no default or Event of Default has occurred and is continuing under any of
the Relevant Documents, (iii) the Notes have been repaid in full and (iv) no
Obligations are then due and owing by Grantor pursuant to the Agreement to
Indemnify, the Stipulation and Order or otherwise, Grantor shall be entitled to
receive a release of this Deed of Trust from Beneficiary at any time after
December 31, 2005. Provided that no default or Event of Default has occurred or
is continuing under any of the Relevant Documents and that no amounts are then
owing by Grantor or outstanding pursuant to or under any of the Relevant
Documents (and that an amount equal to the Minimum Amount is at all times on
deposit in the Proceeds Escrow Account), interest earned on the amounts
deposited in the Proceeds Escrow Account after December 31, 2005 shall be
distributed to Grantor on a quarterly basis. All remaining amounts in the
Proceeds Escrow Account which have not been applied towards payment of the
Obligations shall be released to Grantor on the later of (A) December 31, 2014
provided, however, that no Obligations are then due and owing by Grantor
pursuant to the Agreement to Indemnify, the Stipulation and Order or otherwise,
and (B) the end of the term of this Deed of Trust as set forth in Section 13(c)
hereof. Grantor shall pay any income taxes attributable to the interest or other
income earned on the Proceeds Escrow Account. Notwithstanding any release of
this Deed of Trust pursuant to this Section 6(b) or otherwise, the terms and
provisions of this Section 6(b) shall survive the release of this Deed of Trust.
7. AMENDMENT TO LEGAL DESCRIPTION. If it becomes evident that the
legal description attached to any Relevant Document is inaccurate or does not
fully describe all of the real property which is reasonably connected to the
Land, Grantor hereby agrees to an amendment of such legal description and the
legal description contained on the corresponding title policy so that such error
is corrected and to execute and cause to be recorded, if applicable, such
document as may be appropriate for such purpose.
8. ASSIGNMENT OF LEASES AND RENTS. Grantor does hereby absolutely
and unconditionally assign to Beneficiary, Grantor's right, title and interest
in all current and future Leases and Rents, it being intended by Grantor that
this assignment constitutes a present, absolute assignment and not an assignment
for additional security only. Such assignment to Beneficiary shall not be
construed to bind Beneficiary to the performance of any of the covenants,
conditions or provisions contained in any such Lease or otherwise impose any
obligation upon Beneficiary. Beneficiary shall have no responsibility on account
of this assignment for the control, care, maintenance, management or repair of
the Trust Property, for any dangerous or defective condition of the Trust
Property, or for any negligence in the management, upkeep, repair or control of
the Trust Property. Grantor agrees to execute and deliver to Beneficiary such
additional instruments, in form and substance satisfactory to Beneficiary, as
may hereafter be requested by Beneficiary to further evidence and confirm such
assignment. Nevertheless, subject to the terms of this paragraph, Beneficiary
grants to Grantor a revocable license to collect all of the Rents and retain,
use and enjoy the same and otherwise exercise all rights of Grantor under any
Lease, in each case, subject to the terms
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hereof and of the Relevant Documents. Upon an Event of Default, the license
granted to Grantor herein shall immediately and automatically be revoked, and
Beneficiary shall immediately be entitled to possession of all Rents, whether or
not Beneficiary enters upon or takes control of the Trust Property, provided
that if such Event of Default ceases to exist, the license shall automatically
be reinstated. In addition, during the continuation of an Event of Default,
Beneficiary may, either in person or by agent, without bringing any action or
proceeding, or by a receiver appointed by a court, without the necessity of
taking possession of the Trust Property in its own name, and in addition to and
without limiting any of Beneficiary's rights and remedies hereunder, under the
Notes and any other Relevant Documents and as otherwise available at law or in
equity, (a) notify any lessee or other person that the Leases have been assigned
to Beneficiary and that all Rents are to be paid directly to Beneficiary,
whether or not Beneficiary has commenced or completed foreclosure or taken
possession of the Trust Property; (b) settle, compromise, release, extend the
time of payment of, and make allowances, adjustments and discounts of any Rents
or other obligations in, to and under the Leases; (c) demand, sue for or
otherwise collect, receive, and enforce payment of Rents, including those
past-due and unpaid and other rights under the Leases, prosecute any action or
proceeding, and defend against any claim with respect to the Rents and Leases;
(d) enter upon, take possession of and operate the Trust Property; (e) lease all
or any part of the Trust Property; and/or (f) perform any and all obligations of
Grantor under the Leases and exercise any and all rights of Grantor therein
contained to the full extent of Grantor's rights and obligations thereunder,
with or without the bringing of any action or the appointment of a receiver and
without need for any other authorization or other action by Beneficiary or
Grantor. At Beneficiary's request, Grantor shall deliver a copy of this
assignment to each tenant under a Lease and to each manager and managing agent
or operator of the Trust Property. Grantor irrevocably directs any tenant,
manager, managing agent, or operator of the Property, without any requirement
for notice to or consent by Grantor, to comply with all demands of Beneficiary
under this Section 8 and to turn over to Beneficiary on demand all Rents which
it receives. Grantor hereby acknowledges and agrees that payment of any Rents by
a person to Beneficiary as hereinabove provided shall constitute payment by such
person, as fully and with the same effect as if such Rents had been paid to
Grantor. Beneficiary is hereby granted and assigned by Grantor the right, at its
option, upon revocation of the license granted herein, to enter upon the Trust
Property in person or by agent, without bringing any action or proceeding, or by
court-appointed receiver to collect the Rents. Any Rents collected after the
revocation of the license shall be applied towards the payment of the
Obligations. Neither the enforcement of any of the remedies under this Section 8
nor any other remedies or security interests afforded to Beneficiary under the
Relevant Documents, at law or in equity shall cause Beneficiary to be deemed or
construed to be a Beneficiary in possession of the Trust Property, to obligate
Beneficiary to lease the Trust Property or attempt to do so, or to take any
action, incur any expense, or perform or discharge any obligation, duty or
liability whatsoever under any of the Leases or otherwise. Grantor shall, and
hereby agrees to indemnify Beneficiary for, and to hold Beneficiary harmless
from and against, any and all claims, liability, expenses, losses or damages
which may or might be asserted against or incurred by Beneficiary solely by
reason of Beneficiary's status as an assignee pursuant to the assignment of
Rents and Leases contained herein, but excluding any claim (a) to the extent
caused by Beneficiary's gross
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negligence or willful misconduct, or (b) to the extent arising solely from
Beneficiary's actions after Beneficiary has taken possession of the Trust
Property. Should Beneficiary incur any such claim, liability, expense, loss or
damage, the amount thereof, including all actual expenses and reasonable fees of
attorneys, shall constitute Obligations secured hereby, and Grantor shall
reimburse Beneficiary therefor immediately upon demand. Grantor agrees that all
Leases shall be subject to the prior written approval of Beneficiary, such
approval not to be unreasonably withheld.
9. MAINTENANCE OF TRUST PROPERTY. Grantor shall cause the Trust
Property to be maintained in a good and safe condition and repair (subject to
ordinary wear and tear), and shall otherwise operate and maintain the Trust
Property in a manner consistent with the manner in which it operates and
maintains the other properties on which it operates similar businesses ("SIMILAR
PROPERTIES"). Except as otherwise permitted by the Relevant Documents, the
Improvements, the Fixtures and the equipment located on the Land or the
Improvements shall not be removed, demolished or materially altered (except for
normal replacement of equipment) without the consent of Beneficiary which shall
not unreasonably be withheld or delayed. Grantor shall comply with all laws,
orders and ordinances affecting the Trust Property, or the use thereof. Except
to the extent that Beneficiary fails to turn over insurance proceeds, if any,
received by Beneficiary pursuant to SECTIONS 10 and 11 with respect to the Trust
Property to Grantor, Grantor shall promptly repair, replace or rebuild any part
of the Trust Property that, following the date hereof, becomes damaged, worn or
dilapidated and Grantor shall complete and pay for any structure at any time in
the process of construction or repair on the Land. Notwithstanding anything to
the contrary contained herein, Grantor hereby confirms its obligation to comply
with all relevant Legal Requirements, including Environmental Laws, with respect
to the Trust Property. Grantor shall not initiate, join in, acquiesce in, or
consent to any change in any private restrictive covenant, zoning law or other
public or private restriction, limiting or defining the uses which may be made
of the Trust Property or any part thereof, unless Grantor shall have received
Beneficiary's prior written consent, such consent not to be unreasonably
withheld or delayed. If under applicable zoning provisions the use of all or any
portion of the Trust Property is or shall become a nonconforming use, Grantor
will not cause such nonconforming use to be discontinued or abandoned without
the express written consent of Beneficiary, such consent not to be unreasonably
withheld or delayed. Grantor shall not (i) change the use of the Land in any
material respect or (ii) permit or suffer to occur any waste on or to the Trust
Property or to any portion thereof.
10. INSURANCE.
(a) Grantor shall maintain casualty, liability and other policies
of insurance relating to the Trust Property in form and substance, and with
insurers and coverages, reasonably satisfactory to Beneficiary and consistent
with insurance that it maintains on Similar Properties. Grantor shall keep the
Trust Property insured against loss by flood if the Trust Property is located in
an area identified by the Secretary of Housing and Urban Development as an area
having a special flood hazards and in which flood insurance has been made
available
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under the National Flood Insurance Act of 1968 (or any successor act thereto).
All policies of insurance to be furnished hereunder (i) shall have standard
non-contributory mortgagee clauses attached to all policies in favor of
Beneficiary, without contribution, under a standard New York (or local
equivalent) mortgagee clause naming Beneficiary as the party to which all
payments made under such insurance policies in excess of $150,000 should be
paid, (ii) shall contain an endorsement providing that neither Grantor nor
Beneficiary nor any other party shall be a co-insurer under said policies and
shall contain a provision requiring that the coverage evidenced thereby shall
not be terminated or materially modified without ten (10) days prior written
notice to Beneficiary, (iii) shall provide that no act or thing done by Grantor
shall invalidate the policy as against Beneficiary, and (iv) with respect to
property insurance policies, shall contain a waiver of subrogation against
Beneficiary. Grantor shall deliver certificates evidencing additional and
renewal policies, together with evidence of payment of premiums thereon, to
Beneficiary, and in the case of all insurance about to expire, shall deliver
renewal policies or certificates evidencing such policies not less than ten (10)
days prior to their respective dates of expiration.
(b) Grantor shall not take out separate insurance concurrent in
form or contributing in the event of loss with that required to be maintained
hereunder unless Beneficiary is included thereon under a standard,
non-contributory mortgagee clause acceptable to Beneficiary. Grantor shall
promptly notify Beneficiary whenever any such separate insurance is taken out
and shall promptly deliver to Beneficiary the certificates evidencing the policy
or policies of such insurance.
(c) The insurance required by this Deed of Trust, at the option
of Grantor, may be effected by blanket and/or umbrella policies covering the
Trust Property and other properties, provided, however, that in each case, such
insurance policies otherwise comply with the provisions of this Deed of Trust
and allocate to the Trust Property, from time to time, the coverage specified in
this Deed of Trust without possibility of reduction or co-insurance by reason
of, or damage to, any other property named therein. If the insurance required by
this Deed of Trust shall be effected by any such blanket or umbrella policies,
Grantor shall furnish to Beneficiary certificates with respect to, with
schedules attached thereto showing the amount of the insurance provided under
such policies which is applicable to the Trust Property.
(d) If Grantor fails to maintain insurance in compliance with
this Section, Beneficiary may obtain such insurance and pay the premium therefor
and Grantor shall, on demand, reimburse Beneficiary for all expenses incurred in
connection therewith. Grantor shall deliver original certificates to Beneficiary
of all insurance policies maintained pursuant to this Section 10. Each property
insurance policy shall name Beneficiary as mortgagee, and loss payee with
respect to all casualty coverage and each liability policy shall name
Beneficiary as an additional insured thereunder.
11. CASUALTY. (a) Grantor shall give Beneficiary prompt notice of
any loss or damage to the Trust Property.
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(b) In case of loss or damage to the Trust Property covered by
any of the insurance policies described in Section 10 above, Beneficiary (or,
after entry of decree of foreclosure, the purchaser at the foreclosure sale or
decree creditor, as the case may be) is hereby authorized at its option either
(i) to settle and adjust any claim under such insurance policies without the
consent of Grantor or (ii) to allow Grantor to settle and adjust such claim
(either jointly with Beneficiary or by Grantor alone, at Beneficiary's
discretion); provided that in either case Beneficiary shall, and is hereby
authorized to, collect and receipt for any such insurance proceeds.
Notwithstanding anything in the preceding sentence to the contrary, Beneficiary
agrees that it will allow Grantor to settle and adjust any claims under the
insurance policies which are in an amount less than $150,000, per incident of
loss, up to an aggregate amount of no greater than $300,000. The expenses
incurred by Beneficiary in the adjustment and collection of insurance proceeds
shall be included in the Obligations, and shall be reimbursed to Beneficiary
upon demand or may be deducted by Beneficiary from said insurance proceeds prior
to another application thereof. Interest on such amount shall accrue at the
Default Rate, beginning ten (10) days after Grantor receives notice of a request
for payment of such amount from Beneficiary, until such amount, plus interest,
is paid in full.
(c) Beneficiary shall permit Grantor to apply the proceeds of
insurance policies received in connection with any casualty to pay for the cost
of restoring, repairing, replacing or rebuilding the loss or damage to the Trust
Property resulting from the casualty ("RESTORATION") if: (i) there is no Event
of Default hereunder at the time of such application; (ii) restoration can, in
the reasonable judgment of Beneficiary, be completed prior to the maturity of
the Obligations; and (iii) restoration can, in the reasonable judgment of
Beneficiary, be effected within two (2) years after the date of such casualty
and in such a manner so that the Trust Property will be of at least equal or
greater value to the value than the Trust Property prior to such casualty.
Otherwise, Beneficiary may elect in its sole discretion to apply such proceeds
either (x) towards payment of the Obligations, notwithstanding the fact that the
Obligations, or a portion thereof, may not then be due and payable, or (y) to
pay for the cost of Restoration. In all events, disbursement of insurance
proceeds by Beneficiary (or at Beneficiary's election by a disbursing or escrow
agent who shall be selected by Beneficiary and whose fees shall be paid by
Grantor), to pay the cost of restoration shall require (i) evidence reasonably
satisfactory to Beneficiary of the estimated costs of Restoration, (ii) funds
(or assurances reasonably satisfactory to Beneficiary that such funds are
available) sufficient in addition to the proceeds of insurance to complete and
fully pay for Restoration; and (iii) such architect's certificates, waivers of
lien, contractor's sworn statements, title insurance endorsements, plats of
surveys and such other evidences of cost, payment and performance as Beneficiary
may reasonably require and approve. Except to the extent Beneficiary fails to
turn over insurance proceeds, if any, received by Beneficiary hereunder with
respect to such casualty to Grantor, Grantor hereby covenants to restore,
repair, replace or rebuild the Improvements, to be of at least equal value, and
of substantially the same character as prior to such loss or damage, all to be
effected in accordance with plans, specifications and procedures to be first
submitted to and reasonably approved by Beneficiary, and Grantor shall pay all
costs of such restoring, repairing, replacing or rebuilding.
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12. EMINENT DOMAIN. Grantor warrants, covenants and agrees that
should the Trust Property, or any part thereof or interest therein, be taken or
damaged by reason of any public improvement or condemnation proceeding, or in
any other manner, or should Grantor receive any notice of other information
regarding such proceeding, Grantor shall give written notice thereof within five
(5) business days to Beneficiary. Without Beneficiary's prior consent, Grantor
(1) shall not agree to any compensation or award, and (2) shall not take any
action or fail to take any action which would cause the compensation to be
determined. Beneficiary shall be entitled to: (1) all compensation awards and
other payments or relief therefor, (2) to commence, appear in and prosecute in
its own name any action or proceedings, and (3) to make any compromise or
settlement in connection with such taking or damage. Grantor authorizes
Beneficiary to collect and receive such awards and compensation, to give proper
receipts and acquittances therefor and in Beneficiary's discretion to apply the
same toward the payment of the Obligations, notwithstanding the fact that the
Obligations, or a portion thereof, may not then be due and payable, or to the
restoration of the Trust Property in accordance with the provisions set forth in
the second-to-last sentence of Section 11(c) above. Grantor further agrees to
make, execute, and deliver to Beneficiary, at any time upon request, free and
clear of any encumbrance of any kind whatsoever, any and all further assignments
and other instruments deemed necessary by Beneficiary for the purpose of validly
and sufficiently assigning all compensations and awards made to Grantor for any
taking, either permanent or temporary, under any such proceeding.
13. RELEASE OF DEED OF TRUST. Beneficiary agrees to promptly and
unconditionally release this Deed of Trust (subject to the provisions set forth
in Section 6(b)) as follows:
(a) in the event of a bona fide sale (other than a "sale
leaseback" or other similar financing transaction) of the Trust Property to a
third party that is not affiliated with Grantor, provided that each of the
following conditions is satisfied: (i) neither Grantor nor any of its respective
affiliates continue to use or occupy the Trust Property or any part thereof;
(ii) Grantor shall consult with Beneficiary prior to such sale and shall obtain
Beneficiary's prior written consent with respect to such sale and the sales
price (such consent not to be unreasonably withheld); and (iii) all of the
proceeds of such sale are applied towards repayment of the Obligations or
otherwise applied in compliance with the provisions of Section 6(b) hereof.
(b) in the event that Beneficiary is paid in full for all amounts
owing (or which shall or may become owing under the Relevant Documents) to
Beneficiary by Grantor and any of its former affiliated debtors, including the
indefeasible payment and satisfaction in full of the Obligations.
(c) on December 31, 2014 (or on such earlier date as permitted
under and pursuant to the provisions of Section 6(b) hereof); provided, however,
that if on such date, any amount secured by this Deed of Trust has not been
indefeasibly paid in full, then this Deed of Trust shall be deemed amended to
extend the term hereof until such obligations are so paid.
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14. CHANGES IN THE LAWS REGARDING TAXATION. If any law is enacted
or adopted or amended after the date of this Deed of Trust which imposes a tax,
either directly or indirectly, on the Obligations or Beneficiary's interest in
the Trust Property, Grantor will pay such tax, with interest and penalties
thereon, if any, PROVIDED, HOWEVER, that Grantor shall not be obligated to pay
any tax which is imposed on the net income of Beneficiary or franchise taxes or
doing business taxes imposed on Beneficiary. In the event that the payment of
such tax or interest and penalties by Grantor would be unlawful or taxable to
Beneficiary or unenforceable or provide the basis for a defense of usury, then
in any such event, Beneficiary shall have the option, by written notice of not
less than ninety (90) days, to declare the Obligations immediately due and
payable.
15. NO CREDITS ON ACCOUNT OF THE OBLIGATIONS. (i) Grantor will
not claim or demand or be entitled to any credit or credits on account of the
Obligations for any part of the Impositions assessed against the Trust Property,
or any part thereof, and (ii) no deduction shall otherwise be made or claimed
from the assessed value of the Trust Property, or any part hereof, for real
estate tax purposes by reason of this Deed of Trust or the Obligations if the
effect of such deduction would impose on Beneficiary a tax, either directly or
indirectly, for which it otherwise would not have been liable.
16. DOCUMENTARY STAMPS. If at any time the United States of
America, any State thereof or any subdivision of any such State shall require
revenue or other stamps to be affixed to the Notes or this Deed of Trust, or
impose any other tax or charge on the same, Grantor will pay for the same, with
interest and penalties thereon, if any.
17. CONTROLLING AGREEMENT. It is expressly stipulated and agreed
to be the intent of Grantor and Beneficiary at all times to comply with
applicable state law or applicable United States federal law (to the extent that
it permits Beneficiary to contract for, charge, take, reserve, or receive a
greater amount of interest than under state law) and that this Section shall
control every other covenant and agreement in this Deed of Trust and the other
Relevant Documents. If the applicable law (state or federal) is ever judicially
interpreted so as to render usurious any amount called for under the Notes or
under any of the other Relevant Documents, or contracted for, charged, taken,
reserved, or received with respect to the Obligations, or if Beneficiary's
exercise of the option to accelerate the maturity of the Notes, or if any
prepayment by Grantor results in Grantor having paid any interest in excess of
that permitted by applicable law, then it is Grantor's and Beneficiary's express
intent that all excess amounts theretofore collected by Beneficiary shall be
credited on the principal balance of the Notes and all other Obligations (or, if
the Notes and all other Obligations have been or would thereby be paid in full,
refunded to Grantor), and the provisions of the Notes and the other Relevant
Documents immediately be deemed reformed and the amounts thereafter collectible
hereunder and thereunder reduced, without the necessity of the execution of any
new documents, so as to comply with the applicable law, but so as to permit the
recovery of the fullest amount otherwise called for hereunder or thereunder. All
sums paid or agreed to be paid to Beneficiary for the use, forbearance, or
detention of the Obligations shall, to the extent permitted by applicable law,
be amortized, prorated, allocated, and spread throughout the full
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stated term of the Obligations until payment in full so that the rate or amount
of interest on account of the Obligations does not exceed the maximum rate of
interest permitted by law from time to time in effect and applicable to the
Obligations for so long as the Obligations are outstanding.
18. PERFORMANCE OF OTHER AGREEMENTS. Grantor shall observe and
perform in all respects the terms to be observed or performed by Grantor under
any agreement or recorded instrument affecting or pertaining to the Trust
Property.
19. RIGHT TO PERFORM THE OBLIGATIONS. Subject to the terms of the
Relevant Documents, if any default exists, Beneficiary shall have the right, but
not the obligation, to cure such default in the name and on behalf of Grantor.
All sums advanced and expenses incurred at any time by Beneficiary under this
Section 19, or otherwise under this Deed of Trust or any of the other Relevant
Documents or applicable law (including, without limitation, the costs and
expenses of Beneficiary and its agents incurred in connection with the
preservation, collection and enforcement of this Deed of Trust or of the liens
created hereby), shall bear interest from the date that such sum is advanced or
expense incurred, to and including the date of reimbursement, computed at the
Default Rate (as defined in the Notes), and all such sums, together with
interest thereon, shall constitute additions to the Obligations and shall be
secured by this Deed of Trust and Grantor covenants and agrees to pay them to
the order of the Beneficiary promptly upon demand.
20. FURTHER ACTS, ETC. Grantor will, at the cost of Grantor, and
without expense to Beneficiary, do, execute, acknowledge and deliver all and
every such further acts, deeds, conveyances, mortgages, deeds of trust,
assignments, notices of assignment, Uniform Commercial Code financing statements
or continuation statements, transfers and assurances as Beneficiary shall, from
time to time, reasonably require, for the better assuring, conveying, assigning,
transferring, and confirming unto Beneficiary the property and rights hereby
mortgaged, given, granted, bargained, sold, alienated, enfeoffed, conveyed,
confirmed, warranted, pledged, assigned and hypothecated (including, without
limitation, the assignment of leases and rents contained in Section 8 hereof) or
intended now or hereafter so to be, or which Grantor may be or may hereafter
become bound to convey or assign to Beneficiary, or for carrying out the
intention or facilitating the performance of the terms of this Deed of Trust or
for filing, registering or recording this Deed of Trust. Grantor, on demand,
will execute and deliver and, Grantor hereby authorizes Beneficiary to execute
in the name of Grantor or without the signature of Grantor to the extent
Beneficiary may lawfully do so, one or more financing statements, chattel
mortgages or other instruments, to evidence more effectively the security
interest of Beneficiary in the Trust Property. Notwithstanding anything to the
contrary contained herein, Grantor shall not be obligated to execute, deliver,
file or record any additional documents which increase Grantor's obligations
under this Deed of Trust or the Relevant Documents. Grantor grants to
Beneficiary an irrevocable power of attorney coupled with an interest for the
purpose of exercising the rights provided for in Section 19 and this Section 20.
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21. RECORDING OF DEED OF TRUST, ETC. Grantor forthwith upon the
execution and delivery of this Deed of Trust and thereafter, from time to time,
will cause this Deed of Trust, and any security instrument creating a lien or
security interest or evidencing the lien hereof upon the Trust Property and each
instrument of further assurance to be filed, registered or recorded in such
manner and in such places as may be required by any present or future law in
order to publish notice of and fully to protect the lien or security interest
hereof upon, and the interest of Beneficiary in, the Trust Property. Grantor
will pay all filing, registration or recording fees, the costs and fees of local
counsel for Beneficiary, including, without limitation, costs and fees for local
counsel review of the Deed of Trust and Subordinated Agreement, and the
preparation of opinion letters in connection therewith, and all expenses
incident to the execution and acknowledgment of this Deed of Trust (but not
including fees of Beneficiary's New York counsel in connection with the
preparation of this Deed of Trust), any deed of trust or mortgage supplemental
hereto, any security instrument with respect to the Trust Property and any
instrument of further assurance, and all federal, state, county and municipal,
taxes, duties, imposts, assessments and charges arising out of or in connection
with the execution and delivery of this Deed of Trust, any deed of trust or
mortgage supplemental hereto, any security instrument with respect to the Trust
Property or any instrument of further assurance (other than income or franchise
taxes imposed on Beneficiary), except where prohibited by law so to do. Grantor
shall hold harmless and indemnify Beneficiary, its successors and assigns,
against any liability incurred by reason of the imposition of any tax on the
making and recording of this Deed of Trust. Grantor shall pay all title costs
and premiums in connection with the Beneficiary's policy of title insurance
issued by Chicago Title Insurance Company for the benefit of Beneficiary in
connection with this Deed of Trust (including payment for the cost of any
property surveys prepared in connection therewith), which title insurance policy
shall be in form and substance satisfactory to Beneficiary containing such
endorsements as Beneficiary may reasonably request, including, without
limitation, the deletion of any creditor's rights exception and (to the extent
available) a variable rate endorsement; survey endorsement; comprehensive
endorsement; first loss endorsement; last dollar endorsement; tie-in
endorsement; future advances endorsement; access coverage; tax parcel coverage;
contiguity (if applicable) coverage; and such other endorsements as Beneficiary
shall reasonably require. In the event that any Survey with respect to the Trust
Property reveals any encumbrances, restrictions, building code or zoning
violations or other matters which in Beneficiary's reasonable judgment,
materially impair Beneficiary's first priority lien in the Trust Property,
Grantor agrees to cooperate with Beneficiary in performing any acts reasonably
requested by Beneficiary to cause such encumbrances, restrictions, violations or
other matters to be removed or remedied as appropriate.
22. REPORTING REQUIREMENTS. Grantor agrees to give prompt notice
to Beneficiary of the insolvency or bankruptcy filing of Grantor. In addition,
Grantor will give notice to Beneficiary in writing not later than ten (10) days
after: (i) the occurrence of any Event of Default with respect to Grantor
hereunder, or (ii) notice to Grantor of any action, litigation or proceeding
instituted to recover possession of the Trust Property from Grantor or for any
other purpose affecting this Deed of Trust or of any other action, litigation or
proceeding instituted against Grantor or judgment rendered against Grantor; and
such notice to
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Beneficiary shall include a true copy of any notice of default, or if any action
is then proceeding, copies of any pleadings and papers received by Grantor.
23. EVENTS OF DEFAULT. The term "EVENT OF DEFAULT" as used herein
shall mean the occurrence or happening, at any time and from time to time, of
one or more of the following events:
(a) a default or event of default under any of the Notes
(including, without limitation, any event of default described in Section 3 of
any of the Notes), which remains uncured following the expiration of any
applicable cure periods;
(b) Grantor (i) shall fail to perform when due any payment
obligation under the terms of this Deed of Trust or the other Relevant Documents
within ten days after such amount becomes due, or (ii) shall be in violation of
any of the obligations or covenants contained herein or therein and such default
shall continued unremedied for a period of thirty (30) days, provided that if
such default is not readily susceptible of cure in such thirty (30) day period,
and provided that Grantor proceeds in a diligent manner to cure such default,
Grantor shall have such additional time to effect such cure as shall be
reasonably necessary to effect such cure;
(c) Failure by Grantor to maintain insurance and deliver evidence
thereof pursuant to Section 10; or
(d) a default under any other mortgage, deed of trust or other
security instrument covering the Trust Property or a portion thereof which
remains uncured following the expiration of any applicable cure periods.
24. REMEDIES. (a) Upon the occurrence of any Event of Default,
Beneficiary may take such action or cause Trustee to take such action permitted
in law or at equity, without notice or demand, as it deems advisable to protect
and enforce its rights against Grantor and in and to the Trust Property, by
Beneficiary itself, or through Trustee or otherwise, including, but not limited
to, the following actions, each of which may be pursued concurrently or
otherwise, at such time and in such order as Beneficiary may determine, in its
sole discretion, without impairing or otherwise affecting the other rights and
remedies of Beneficiary:
(i) declare the entire principal amount of the indebtedness and
Obligations secured hereby with interest accrued thereon to be
immediately due and payable;
(ii) institute a proceeding or proceedings, judicial or
nonjudicial, by advertisement or otherwise, for the complete
foreclosure of this Deed of Trust in which case the Trust
Property or any interest therein may be sold for cash or
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upon credit in one or more parcels or in several interests or
portions and in any order or manner in accordance with the laws
of the jurisdiction in which such Trust Property is located;
(iii) with or without entry, to the extent permitted, and
pursuant to the procedures provided by, applicable law, institute
proceedings for the foreclosure of this Deed of Trust for the
Obligations then due and payable subject to the continuing lien
of this Deed of Trust, in accordance with the laws of the
jurisdiction in which such Trust Property is located, for the
balance of the Obligations not then due;
(iv) sell for cash or upon credit the Trust Property or any part
thereof and all estate, claim, demand, right, title and interest
of Grantor therein and rights of redemption thereof, pursuant to
power of sale or otherwise, at one or more sales, as an entirety
or in parcels, at such time and place, upon such terms and after
such notice thereof as may be required or permitted by the laws
of the jurisdiction in which such Trust Property is located;
(v) institute an action, suit or proceeding in equity for the
specific performance of any covenant, condition or agreement
contained herein or in the other Relevant Documents;
(vi) recover judgment on the Notes either before, during or after
any proceedings for the enforcement of this Deed of Trust;
(vii) prior to, concurrently with, or subsequent to the
institution of foreclosure proceedings, apply for the appointment
of a trustee, receiver, liquidator or conservator of the Trust
Property, as a matter of strict right, without notice and without
regard for the adequacy of the security for the Obligations or
the interest of the Grantor therein and without regard for the
solvency of the Grantor or of any person, firm or other entity
liable for the payment of the Obligations, and Grantor hereby
consents to such appointment;
(viii) prior to, concurrently with or subsequent to the
institution of foreclosure proceedings, enforce Beneficiary's
interest in the Leases and Rents and enter into or upon the Trust
Property and take exclusive possession thereof, either personally
or by its agents, nominees or attorneys and dispossess Grantor
and its agents and servants therefrom, and thereupon Beneficiary
may (whether or not a receiver has been appointed) as
attorney-in-fact or agent of Grantor, or in its own name and
under the powers herein granted,(A) use, operate, manage,
control, insure, maintain, repair, restore and otherwise deal
with all and every part of the Trust Property and conduct the
business thereat; (B) complete any construction on the Trust
Property in such manner and form as Beneficiary deems advisable;
(C) make alterations, additions, renewals, replacements and
improvements to or on the Trust Property; (D) exercise all rights
and powers of
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Grantor with respect to the Trust Property, whether in the name
of Grantor or otherwise (including, without limitation, the right
to make, cancel, enforce or modify Leases, obtain and evict
tenants, and demand, sue for, collect and receive all earnings,
revenues, rents, issues, profits and other income of the Trust
Property and every part thereof); and (E) apply the receipts from
the Trust Property to the payment of the Obligations, after
deducting therefrom all reasonable expenses (including, without
limitation, reasonable attorneys' fees) incurred in connection
with the aforesaid operations and all amounts necessary to pay
the taxes, assessments, insurance and other charges in connection
with the Trust Property, it being agreed that should Beneficiary
incur any liability, loss or damage in the defense of any claims
or demands, the amount thereof, including costs, expenses and
reasonable attorneys' fees shall be secured hereby, and Grantor
shall reimburse Beneficiary therefor immediately upon demand;
(ix) require Grantor to pay monthly in advance to Beneficiary, or
any receiver appointed to collect the Rents, the fair and
reasonable rental value for the use and occupation of any portion
of the Trust Property occupied by Grantor and require Grantor to
vacate and surrender possession to Beneficiary of the Trust
Property or to such receiver and, in default thereof, evict
Grantor by summary proceedings or otherwise; and
(x) pursue such other rights and remedies as may be available
under the Relevant Documents or otherwise at law or in equity or
under the Uniform Commercial Code including the right to
establish a lock box for all Rents and other receivables of
Grantor relating to the Trust Property.
In the event of a sale, by foreclosure or otherwise, of less than all of the
Trust Property, this Deed of Trust shall continue as a lien on the remaining
portions of the Trust Property.
The proceeds of any sale made under or by virtue of this Section
24, together with any other sums which then may be held by Beneficiary under
this Deed of Trust, whether under the provisions of this Section or otherwise,
shall be applied by Beneficiary in the following order of priority: first, on
account of all reasonable costs and expenses incident to the foreclosure
proceedings, including all such items as are mentioned in this Section 24;
second, all other items which under the terms hereof constitute secured
indebtedness, which are any amounts due under this Deed of Trust, or under the
other Relevant Documents (including any amounts required to be escrowed pursuant
to Section 6(b)); third, any surplus to Grantor, its successors or assigns, as
their rights may appear.
(b) Upon any sale made under or by virtue of this Section 24,
whether made under the power of sale herein granted or under or by virtue of
judicial proceedings or of a judgment or decree of foreclosure and sale,
Beneficiary may bid for and acquire the Trust Property or any part thereof and
in lieu of paying cash therefor may make settlement for the purchase price by
crediting upon the Obligations the net sales price after deducting therefrom
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the expenses of the sale and costs of the action and any other sums which
Beneficiary is authorized to deduct under this Deed of Trust.
(c) No recovery of any judgment by Beneficiary and no levy of an
execution under any judgment upon the Trust Property or upon any other property
of Grantor shall affect in any manner or to any extent the lien of this Deed of
Trust upon the Trust Property or any part thereof, or any liens, rights, powers
or remedies of Beneficiary hereunder, but such liens, rights, powers and
remedies of Beneficiary shall continue unimpaired as before.
(d) Beneficiary may adjourn, terminate or rescind any proceeding
or other action brought in connection with its exercise of the remedies provided
in this Section 24 at any time before the conclusion thereof, as determined in
Beneficiary's sole discretion and without prejudice to Beneficiary.
(e) Beneficiary may resort to any remedies and the security given
by this Deed of Trust or the other Relevant Documents in whole or in part, and
in such portions and in such order as determined by Beneficiary's sole
discretion. No such action shall in any way be considered a waiver of any
rights, benefits or remedies evidenced or provided by this Deed of Trust or the
other Relevant Documents. The failure of Beneficiary to exercise any right,
remedy or option provided in this Deed of Trust or the other Relevant Documents
shall not be deemed a waiver of such right, remedy or option or of any covenant
or obligation secured by this Deed of Trust or the other Relevant Documents.
Subject to the provisions of the Relevant Documents, no acceptance by
Beneficiary of any payment after the occurrence of any Event of Default and no
payment by Beneficiary of any obligation for which Grantor is liable hereunder
shall be deemed to waive or cure any Event of Default with respect to Grantor,
or Grantor's liability to pay such obligation. No sale of all or any portion of
the Trust Property, no forbearance on the part of Beneficiary and no extension
of time for the payment of the whole or any portion of the Obligations or any
other indulgence given by Beneficiary to Grantor, shall operate to release or in
any manner affect the interest of Beneficiary in the remaining Trust Property or
the liability of Grantor to pay the Obligations. No waiver by Beneficiary shall
be effective, unless it is in writing and then only to the extent specifically
stated.
(f) The interests and rights of Beneficiary under this Deed of
Trust and the other Relevant Documents, and the liens and security interests
created and evidenced by this Deed of Trust and the other Relevant Documents,
shall not be impaired by any indulgence, including (i) any renewal, extension or
modification which Beneficiary may grant with respect to any of the Obligations,
(ii) any surrender, compromise, release, renewal, extension, exchange or
substitution which Beneficiary may grant with respect to the Trust Property or
any portion thereof; or (iii) any release or indulgence granted to any maker,
endorser, guarantor or surety of any of the Obligations.
(g) Upon the occurrence of any Event of Default under Section 23,
in any suit to foreclose the lien hereof or enforce any other remedy of
Beneficiary under this Deed of Trust, there shall be allowed and included as
additional indebtedness in the decree for sale or other judgment or decree all
reasonable expenditures and expenses which may be paid or
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incurred by or on behalf of Beneficiary for attorneys' fees, appraiser's fees,
outlays for documentary and expert evidence, stenographers' charges, publication
costs, and costs (which may be estimated as to items to be expended after entry
of the decree) of procuring all such abstracts of title, title searches and
examinations, title insurance policies, Torrens certificates, and similar data
and assurances with respect to title as Beneficiary may deem reasonably
necessary either to prosecute such suit or to evidence to bidders at any sale
which may be had pursuant to such decree the true condition of the title to or
the value of the Trust Property. All such reasonable expenditures and expenses
which Beneficiary may incur as permitted by this Section for the protection of
the Trust Property and the maintenance of the lien of this Deed of Trust,
including, but not limited to, the fees and out-of-pocket disbursements of any
attorney employed by Beneficiary in any litigation or proceeding affecting this
Deed of Trust, including, but not limited to, bankruptcy proceedings or
preparations for the commencement or defense of any proceeding or threatened
suit or proceeding, shall be immediately due and payable by Grantor and shall be
secured by this Deed of Trust.
25. RIGHT OF ACCESS. Grantor shall permit agents, representatives
and employees of Beneficiary to (i) inspect the Trust Property or any part
thereof, PROVIDED that such inspection does not materially interfere with the
tenants of the Trust Property or violate the terms of any Lease, (ii) to examine
and make abstracts from any of Grantor's books and records and (iii) to discuss
the business, operations, properties and financial and other condition of
Grantor with officers of Grantor and with its independent certified public
accountants, at such reasonable times as may be requested by Beneficiary upon
reasonable advance notice.
26. SECURITY AGREEMENT. This Deed of Trust is both a real
property deed of trust and a "security agreement" within the meaning of the
Uniform Commercial Code. The Trust Property includes both real and personal
property and all other rights and interests, whether tangible or intangible in
nature, of Grantor in the Trust Property. Grantor by executing and delivering
this Deed of Trust has granted and hereby grants to Beneficiary, as security for
the Obligations, a security interest in the Trust Property to the full extent
that the Trust Property may be subject to the Uniform Commercial Code (said
portion of the Trust Property so subject to the Uniform Commercial Code being
called in this paragraph the "COLLATERAL"). Grantor hereby agrees with
Beneficiary to execute and deliver to Beneficiary, in form and substance
satisfactory to Beneficiary, such financing statements and such further
assurances as Beneficiary may from time to time, reasonably consider necessary
to create, perfect, and preserve Beneficiary's security interest herein granted.
All or part of the Trust Property is or is to become "fixtures" as defined in
the Uniform Commercial Code, and this Deed of Trust, upon being filed for record
in the real estate records of the city or county wherein such fixtures are
situated, shall also constitute a "fixture filing" for the purposes of the
Uniform Commercial Code upon such of the Trust Property that is or may become
fixtures. Information concerning the security interest herein granted may be
obtained from the parties at the addresses of the parties set forth in the first
paragraph of this Deed of Trust. Grantor's chief executive office and principal
place of business is the Grantor's address set forth in the first paragraph of
this Deed of Trust, and the place where Grantor's books and
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records in respect of where the Trust Property is located are kept is the
address of Grantor set forth in the first paragraph of this Deed of Trust. If an
Event of Default shall occur which shall remain uncured, Beneficiary, in
addition to any other rights and remedies which it may have, shall have and may
exercise immediately and without demand, any and all rights and remedies granted
to a secured party upon default under the Uniform Commercial Code, (including,
without limitation, to the extent permitted by law, the right to take possession
of the Collateral or any part thereof, and to take such other measures as
Beneficiary may deem necessary for the care, protection and preservation of the
Collateral). Upon request or demand of Beneficiary or Trustee, Grantor shall at
its expense assemble the Collateral and make it available to Beneficiary at a
convenient place acceptable to Beneficiary. Grantor shall pay to Beneficiary on
demand therefor any and all reasonable expenses (including, without limitation,
reasonable legal expenses and attorneys' fees) incurred or paid by Beneficiary
in protecting the interest in the Collateral and in enforcing the rights
hereunder with respect to the Collateral. Any notice of sale, disposition or
other intended action by Beneficiary with respect to the Collateral sent to
Grantor at least ten (10) business days prior to such action or such notice as
is otherwise required by law or the Relevant Documents, shall constitute
commercially reasonable notice to Grantor. The proceeds of any disposition of
the Collateral, or any part thereof, may be applied by Beneficiary to the
payment of the Obligations in such priority and proportions as Beneficiary shall
determine in its sole discretion. In the event of any change in name, identity
or structure of Grantor, Grantor shall notify Beneficiary thereof and, promptly
after request, shall execute, file and record such Uniform Commercial Code forms
as are necessary to maintain the priority of Beneficiary's lien upon and
security interest in the Collateral, and shall pay all expenses and fees in
connection with the filing and recording thereof. If Beneficiary shall require
the filing or recording of additional Uniform Commercial Code forms or
continuation statements, Grantor shall, promptly after request, execute, file
and record such Uniform Commercial Code forms or continuation statements as
Beneficiary shall deem necessary, and shall pay all expenses and fees in
connection with the filing and recording thereof, it being understood and
agreed, however, that no such additional documents shall materially increase
Grantor's obligations under this Deed of Trust or the other Relevant Documents.
Grantor hereby irrevocably appoints Beneficiary as its attorney-in-fact, coupled
with an interest, to file with the appropriate public office on its behalf any
UCC financing statements (or related documents) signed only by Beneficiary, as
secured party, in connection with the Collateral covered by this Deed of Trust,
such appointment to terminate upon the release of this Deed of Trust.
27. ACTIONS AND PROCEEDINGS. Beneficiary has the right to appear
in and defend any action or proceeding brought with respect to the Trust
Property and to bring any action or proceeding, in the name and on behalf of
Grantor, which Beneficiary, in its reasonable discretion, decides should be
brought to protect its interest under this Deed of Trust or in the Trust
Property. Subject to the foregoing, Grantor shall appear in and contest any
action or proceeding purporting to affect the security hereof and shall pay all
reasonable costs and expenses including cost of evidence of title and attorney's
fees, in any such action or proceeding in which Beneficiary may appear.
Beneficiary shall, at its option, be subrogated to the lien of any mortgage or
other security instrument discharged in whole or in part by the
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Obligations, and any such subrogation rights shall constitute additional
security for the payment of the Obligations.
28. WAIVER OF SETOFF AND COUNTERCLAIM. Except as may be permitted
under the Relevant Documents, all amounts due under this Deed of Trust, the
Notes and the other Relevant Documents shall be payable without setoff or
counterclaim whatsoever.
29. LIENS. Grantor warrants, covenants and agrees to pay and
promptly discharge, at Grantor's cost and expense, all taxes, assessments and
governmental charges levied upon it, its income and assets as and when such
taxes, assessments and charges are due and payable (including, without
limitation, all Impositions), as well as all lawful claims for labor materials
and supplies or otherwise which could become a lien, and all liens, encumbrances
and charges upon the Trust Property, or any part thereof or interest therein;
provided that the existence of any mechanic's, laborer's, materialman's,
supplier's or vendor's lien or right thereto shall not constitute a violation of
this Section if payment is not yet due under the contract which is the
foundation thereof. Notwithstanding the foregoing, Grantor shall not be in
default for failure to pay or discharge Impositions or mechanic's or
materialman's or similar lien asserted against the Trust Property if, and so
long as, (a) Grantor shall have notified Beneficiary of same within seven (7)
days of obtaining knowledge thereof; (b) Grantor shall diligently and in good
faith contest the same by appropriate legal proceedings which shall operate to
prevent the enforcement or collection of the same and the sale of the Trust
Property or any part thereof, to satisfy the same; (c) unless funds are
otherwise reserved, Grantor shall furnish to Beneficiary such security as
Beneficiary may reasonably request to insure payment of such Impositions and to
secure and indemnify Beneficiary against any cost, expense, loss or damage in
connection with such contest or postponement of payment,; (d) Grantor shall
timely upon final determination thereof pay the amount of any such Impositions,
claim, fine or penalty so determined, together with all costs, interest and
penalties which may be payable in connection therewith; (e) the failure to pay
the Impositions, or mechanic's or materialman's or similar lien claim does not
constitute a default under any other deed of trust, mortgage or security
interest covering or affecting any part of the Trust Property; and (f)
notwithstanding the foregoing, Grantor shall immediately upon request of
Beneficiary pay (and if Grantor shall fail so to do, Beneficiary may, but shall
not be required to, pay or cause to be discharged or bonded against) any such
Impositions, or claim notwithstanding such contest, if in the reasonable opinion
of Beneficiary, the Trust Property or any part thereof or interest therein may
be in imminent danger of being sold, forfeited, foreclosed, terminated, canceled
or lost.
30. RECOVERY OF SUMS REQUIRED TO BE PAID. Beneficiary shall have
the right from time to time to take action to recover any sum or sums which
constitute a part of the Obligations as the same become due and owing, without
regard to whether or not the balance of the Obligations shall be due, and
without prejudice to the right of Beneficiary thereafter to bring an action of
foreclosure, or any other action, for a default or defaults by Grantor existing
at the time such earlier action was commenced.
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31. MARSHALING, WAIVER OF REDEMPTION AND OTHER MATTERS. Grantor
hereby waives, to the extent permitted by law, the benefit of all appraisement,
valuation, stay, extension, reinstatement, moratorium and redemption laws now or
hereafter in force and all rights of marshaling in the event of any sale
hereunder of the Trust Property or any part thereof or any interest therein.
Further, Grantor hereby expressly waives any and all rights of redemption from
sale under any order or decree of foreclosure of this Deed of Trust on behalf of
Grantor, and on behalf of each and every person acquiring any interest in or
title to the Trust Property subsequent to the date of this Deed of Trust and on
behalf of all persons to the extent permitted by applicable law.
32. NOTICE. Any notice which either party hereto may desire or be
required to give to the other party shall be in writing and delivered by: (x) a
commercial courier or messenger service or (y) by U.S. registered or certified
mail with return receipt requested. Notice by commercial messenger or courier
service will be deemed to have been given on the day when delivered before 4:00
p.m. on a business day in the city in which notice is delivered, provided that
payment for the cost of delivery is not requested of the recipient. Notice by
mail shall be given by registered or certified U.S. Mail, return receipt
requested. Delivery of notice by commercial messenger or courier service or mail
shall be assumed if acceptance of delivery is refused. Notice may be given by
fax but will only be treated as delivered hereunder if: (x) sent between the
hours of 9:00 a.m. and 5:00 p.m. (based on local time at the destination); and
(y) receipt is acknowledged by fax and delivery will be deemed to have been
given on the date the fax acknowledgment is sent. Notices shall be delivered as
follows or at such other place as either party hereto may by notice in writing
(given in accordance with this Section 32) designate:
To Grantor: Discovery Zone, Inc.
One Corporate Center
110 East Broward Boulevard
Fort Lauderdale, Florida 33301
Attn: President
Telecopy Number: (954) 627-2670
To Beneficiary: McDonald's Corporation
One McDonald's Plaza
Oak Brook, IL 60523
Attn: General Counsel
Telecopy Number: (630) 623-3000
33. SOLE DISCRETION OF BENEFICIARY. Wherever pursuant to this
Deed of Trust, Beneficiary exercises any right given to it to approve or
disapprove, or any arrangement or term is to be satisfactory to Beneficiary, the
decision of Beneficiary to approve or disapprove or to decide that arrangements
or terms are satisfactory or not satisfactory shall be
28
<PAGE>
in the sole discretion of Beneficiary and shall be final and conclusive, except
as may be otherwise expressly and specifically provided herein.
34. NON-WAIVER. The failure of Beneficiary to insist upon strict
performance of any term hereof shall not be deemed to be a waiver of any term of
this Deed of Trust. Grantor shall not be relieved of Grantor's Obligations
hereunder by reason of (a) the failure of Beneficiary to comply with any request
of Grantor to take any action to foreclose this Deed of Trust or otherwise
enforce any of the provisions hereof or of the other Relevant Documents, (b) the
release, regardless of consideration, of the whole or any part of the Trust
Property, or of any person liable for the Obligations or any portion thereof, or
(c) any agreement or stipulation by Beneficiary extending the time of payment or
otherwise modifying or supplementing the terms of this Deed of Trust or the
other Relevant Documents. Beneficiary may resort for the payment of the
Obligations to any other security held by Beneficiary in such order and manner
as Beneficiary, in its discretion, may elect. Beneficiary may take action to
recover the Obligations, or any portion thereof, or to enforce any covenant
hereof without prejudice to the right of Beneficiary thereafter to foreclosure
this Deed of Trust. The rights and remedies of Beneficiary under this Deed of
Trust shall be separate, distinct and cumulative and none shall be given effect
to the exclusion of the others. No act of Beneficiary shall be construed as an
election to proceed under any one provision herein to the exclusion of any other
provision. Beneficiary shall not be limited exclusively to the rights and
remedies herein stated but shall be entitled to every right and remedy now or
hereafter afforded at law or in equity.
35. NO ORAL CHANGE. This Deed of Trust and the other Relevant
Documents constitute the final expression of the entire agreement among the
parties pertaining to the subject matter hereof and thereof and supersede all
prior and contemporaneous agreements, understanding, representations or other
arrangements, whether express or implied, written or oral, of the parties in
connection herewith or therewith except to the extent expressly incorporated or
specifically referred to herein or therein. This Deed of Trust, and any
provisions hereof, may not be modified, amended, waived, extended, changed,
discharged or terminated orally or by any act or failure to act on the part of
Grantor or Beneficiary, but only by an agreement in writing signed by the party
against whom enforcement of any modification, amendment, waiver, extension,
change, discharge or termination is sought.
36. SUCCESSORS AND ASSIGNS. Subject to the provisions hereof
requiring Beneficiary's consent to any transfer of the Trust Property, this Deed
of Trust shall be binding upon and inure to the benefit of Grantor and
Beneficiary and their respective permitted successors and assigns forever.
37. SEVERABILITY. If any term, covenant or condition of this Deed
of Trust or the Relevant Documents is held to be invalid, illegal or
unenforceable in any respect, this Deed of Trust and any such other Relevant
Document shall be construed without such provision.
29
<PAGE>
38. HEADINGS, ETC. The headings and captions of various
paragraphs of this Deed of Trust are for convenience of reference only and are
not to be construed as defining or limiting, in any way, the scope or intent of
the provisions hereof.
39. DUPLICATE ORIGINALS. This Deed of Trust may be executed in
any number of duplicate originals and each such duplicate original shall be
deemed to be an original.
40. DEFINITIONS. Unless the context clearly indicates a contrary
intent or unless otherwise specifically provided herein, words used in this Deed
of Trust may be used interchangeably in singular or plural form and the word
"Grantor" shall mean "each Grantor and any subsequent owner or owners of the
Trust Property or any part thereof or any interest therein," the word
"Beneficiary" shall mean "Beneficiary and any subsequent holder(s) of the
Notes," the word "person" shall include an individual, corporation, partnership,
trust, unincorporated association, government, governmental authority, and any
other entity, and the words "Trust Property" shall include any portion of the
Trust Property and any interest therein and the words "attorneys' fees" shall
include any and all attorneys' fees, paralegal and law clerk fees (including,
without limitation, fees at the pre-trial, trial and appellate levels incurred
or paid by Beneficiary in protecting its interest in the Trust Property and
Collateral and enforcing its rights hereunder and all such fees incurred in
connection with any bankruptcy or insolvency proceedings). Whenever the context
may require, any pronouns used herein shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns and pronouns shall
include the plural and vice versa.
41. HOMESTEAD. Grantor hereby waives and renounces all homestead
and exemption rights provided by the constitution and the laws of the United
States and of any state, in and to the Land as against the collection of the
Obligations, or any part hereof.
42. ASSIGNMENTS. Consistent with and subject to the applicable
provisions of the Relevant Documents, Beneficiary shall have the right to assign
or transfer its rights under this Deed of Trust without limitation. Any
Beneficiary or transferee shall be entitled to all the benefits afforded
Beneficiary under this Deed of Trust.
43. WAIVER OF JURY TRIAL. TO THE MAXIMUM EXTENT PERMITTED BY
APPLICABLE LAW, EACH PARTY HERETO HEREBY AGREES NOT TO ELECT A TRIAL BY JURY OF
ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY JURY FULLY
TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO
THE NOTES, THIS DEED OF TRUST, OR THE OTHER RELEVANT DOCUMENTS, OR ANY CLAIM,
COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH. THIS WAIVER OF
RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY SUCH PARTY, AND IS
INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE
RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE. BENEFICIARY IS HEREBY
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<PAGE>
AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE
EVIDENCE OF THIS WAIVER BY GRANTOR.
44. CONSENT TO JURISDICTION. GRANTOR AND BENEFICIARY HERETO
CONSENT FOR THEMSELVES AND IN RESPECT OF THEIR PROPERTIES, GENERALLY,
UNCONDITIONALLY AND IRREVOCABLY, TO THE NONEXCLUSIVE JURISDICTION OF THE FEDERAL
AND STATE COURTS IN THE STATE OF NEW YORK WITH RESPECT TO ANY PROCEEDING
RELATING TO ANY MATTER, CLAIM OR DISPUTE ARISING UNDER THE RELEVANT DOCUMENTS OR
THE TRANSACTIONS CONTEMPLATED THEREBY. GRANTOR FURTHER CONSENTS, GENERALLY,
UNCONDITIONALLY AND IRREVOCABLY, TO THE NONEXCLUSIVE JURISDICTION OF THE STATE
AND FEDERAL COURTS OF THE STATE IN WHICH ANY OF THE COLLATERAL IS LOCATED IN
RESPECT OF ANY PROCEEDING RELATING TO ANY MATTER, CLAIM OR DISPUTE ARISING WITH
RESPECT TO SUCH COLLATERAL. GRANTOR FURTHER IRREVOCABLY CONSENTS TO THE SERVICE
OF PROCESS, GENERALLY, UNCONDITIONALLY AND IRREVOCABLY, AT THE ADDRESSES SET
FORTH IN THE FIRST PARAGRAPH HEREOF IN CONNECTION WITH ANY OF THE AFORESAID
PROCEEDINGS IN ACCORDANCE WITH THE RULES APPLICABLE TO SUCH PROCEEDINGS. TO THE
EXTENT PERMITTED BY APPLICABLE LAW, GRANTOR HEREBY IRREVOCABLY WAIVES ANY
OBJECTION WHICH IT MAY NOW HAVE OR HAVE IN THE FUTURE TO THE LAYING OF VENUE IN
RESPECT OF ANY OF THE AFORESAID PROCEEDINGS BROUGHT IN THE COURTS REFERRED TO
ABOVE AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
NOTHING HEREIN SHALL AFFECT THE RIGHT OF BENEFICIARY TO SERVE PROCESS IN ANY
MANNER PERMITTED BY LAW OR TO COMMENCE PROCEEDINGS OR OTHERWISE PROCEED AGAINST
GRANTOR IN ANY JURISDICTION.
45. GOVERNING LAW. This Deed of Trust shall be governed by and
construed in accordance with the laws of the State of New York including,
without limitation, Section 5-1401 of the General Obligations Law, but otherwise
without regard to conflict of law principles; PROVIDED, HOWEVER, that with
respect to the creation, attachment, perfection, priority and procedures
relating to the enforcement of the liens and security interests created by or
pursuant to this Deed of Trust and relating to real property, this Deed of Trust
shall be governed by and construed in accordance with the laws of the state in
which the Land is located.
46. LIEN ABSOLUTE, MULTI-SITE REAL ESTATE AND MULTIPLE COLLATERAL
TRANSACTION. Grantor acknowledges that this Deed of Trust and a number of other
Relevant Documents and those documents required by the Relevant Documents
together secure the Obligations. Grantor agrees that the lien of this Deed of
Trust and all obligations of the
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Grantor hereunder shall be absolute and unconditional and shall not in any
manner be affected or impaired by:
(a) any lack of validity or enforceability of the Notes or any
other Relevant Document, any agreement with respect to any of the Obligations or
any other agreement or instrument relating to any of the foregoing;
(b) any acceptance by Beneficiary of any security for or
guarantees of any of the indebtedness hereby secured;
(c) any failure, neglect or omission on the part of Beneficiary
to realize upon or protect any of the indebtedness hereby secured or any of the
collateral security therefor, including the Relevant Documents;
(d) any change in the time, manner or place of payment of, or in
any other term of, all or any of the Obligations;
(e) any release (except as to the property or obligation
released), sale, pledge, surrender, compromise, settlement, nonperfection,
renewal extension, indulgence, alteration, exchange, modification or disposition
of any of the Obligations hereby secured or of any of the collateral security
therefor;
(f) any amendment or waiver of or any consent to any departure
from the Notes or any other Relevant Documents or of any guaranty thereof
(except to the extent of such amendment, waiver or consent in writing by
Beneficiary), if any, and Beneficiary may in its discretion foreclose, exercise
any power of sale, or exercise any other remedy available to it under any or all
of the Relevant Documents without first exercising or enforcing any of its
rights and remedies hereunder; and
(g) any exercise of the rights or remedies of Beneficiary
hereunder or under any or all of the Relevant Documents.
Grantor specifically consents and agrees that Beneficiary may exercise its
rights and remedies hereunder and under the other Relevant Documents separately
or concurrently and in any order that Beneficiary may deem appropriate.
47. FUTURE ADVANCES. Grantor and Beneficiary expressly intend
that future and additional loans and advances will be secured by this Deed of
Trust and this Deed of Trust shall secure not only the existing indebtedness,
but shall also secure all funds hereafter advanced as contemplated by any
covenant or provision herein or for any other purpose, and all other
indebtedness, of whatever kind or character, owing or which may hereafter become
owing, however such indebtedness is evidenced. Such future advances shall be
secured to the same extent as if made on the date of execution of this Deed of
Trust.
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<PAGE>
48. STATE SPECIFIC PROVISIONS. The provisions of Exhibit B are
hereby incorporated by reference as though set forth in full herein.
49. NO MERGER OF ESTATES. It is the intention and agreement of
Grantor and Beneficiary that there shall be no merger of any leasehold estate in
the Trust Property with the fee interest in the Trust Property or any other
estate or interest in the Trust Property, and there shall be no merger of this
Deed of Trust and any estate in the Trust Property, by reason of the fact that
the same person may own or hold (a) any leasehold interest in the Trust
Property, and/or (b) this Deed of Trust, and/or (c) the fee interest in the
Trust Property or any other estate or interest in the Trust Property.
50. CONCERNING THE TRUSTEE. Trustee shall be under no duty to
take any action hereunder except as expressly required hereunder or by law, or
to perform any act which would involve Trustee in any expense or liability or to
institute or defend any suit in respect hereof, unless properly indemnified to
Trustee's reasonable satisfaction. Trustee, by acceptance of this Deed of Trust,
covenants to perform and fulfill the trusts herein created, being liable,
however, only for willful negligence or misconduct, and hereby waives any
statutory fee and agrees to accept reasonable compensation, in lieu thereof, for
any services rendered by Trustee in accordance with the terms hereof. Trustee
may resign at any time upon giving thirty (30) days' notice to Grantor and to
Beneficiary. Beneficiary may remove Trustee at any time or from time to time,
and select a successor trustee. In the event of the death, removal, resignation,
refusal to act, or inability to act of Trustee, or in its sole discretion for
any reason whatsoever Beneficiary may, without notice and without specifying any
reason therefor and without applying to any court, select and appoint a
successor trustee, and, if necessary, several successor Trustees in succession,
who shall succeed to all the estate, rights, powers, and duties of the original
Trustee named herein, without any other formality than an appointment and
designation in writing (or other formality required by applicable law, if any).
Such substitute trustee shall not be required to give bond for the faithful
performance of the duties of Trustee hereunder unless required by Beneficiary.
The procedure provided for in this paragraph for substitution of Trustee shall
be in addition to and not in exclusion of any other provisions for substitution,
by law or otherwise.
51. TRUSTEE'S FEES. Grantor shall pay all reasonable costs, fees
and expenses incurred by Trustee and Trustee's agents and counsel in connection
with the performance by Trustee of Trustee's duties hereunder and all such
costs, fees and expenses shall be secured by this Deed of Trust. TRUSTEE SHALL
BE INDEMNIFIED, HELD HARMLESS AND REIMBURSED BY GRANTOR FOR ANY LIABILITY,
DAMAGE OR EXPENSE, INCLUDING REASONABLE ATTORNEYS' FEES AND AMOUNTS PAID IN
SETTLEMENT, WHICH TRUSTEE MAY INCUR OR SUSTAIN IN CONNECTION WITH THIS DEED OF
TRUST OR IN THE DOING OF ANY ACT WHICH TRUSTEE IS REQUIRED OR PERMITTED TO DO BY
THE TERMS HEREOF OR BY LAW (EXCEPT TO THE EXTENT ARISING FROM THE GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OF TRUSTEE), AND SHALL BE REIMBURSED THEREFOR
UPON DEMAND.
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52. SUBORDINATE LIEN. Notwithstanding anything to the contrary
contained herein, Grantor shall be permitted to grant a subordinate lien on the
Trust Property in favor of State Street Bank and Trust Company, solely in its
capacity as trustee and collateral agent under and pursuant to the Indenture (as
hereinafter defined) (the "SUBORDINATED CREDITOR") as security for the
obligations of Grantor under that certain Indenture between Grantor and the
Subordinated Creditor dated as of July 22, 1997 (the "INDENTURE"), provided that
such lien in favor of the Subordinated Creditor is junior, subject and
subordinate to the lien of this Deed of Trust in accordance with and pursuant to
the terms and conditions set forth in that certain Subordination Agreement dated
as of the date hereof between Beneficiary and the Subordinated Creditor with
respect to the Trust Property (the "SUBORDINATION AGREEMENT"), and provided,
further, that any event which gives the Subordinated Creditor the right to
accelerate the obligations secured by such subordinate lien shall automatically
constitute an Event of Default hereunder.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE AND NOTARY PAGES FOLLOW.]
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Grantor has executed this instrument as of the day and year first above written.
GRANTOR:
DISCOVERY ZONE, INC., a
Delaware corporation, as
successor in interest to LEAPS
& BOUNDS, INC.
By: /s/ Robert Rooney
-----------------------
Name: Robert Rooney
Title: Sr. V.P.
<PAGE>
STATE OF NEW YORK )
COUNTY OF WESTCHESTER)
This instrument was acknowledged before me on July 25, 1997, by
Robert Rooney, Sr. V.P. of DISCOVERY ZONE, INC., a Delaware corporation, on
behalf of said corporation.
/s/ Mark D. Woodward
---------------------------
Notary Public, State of New York
[NOTARIAL SEAL]
<PAGE>
Arlington
Tarrant County, Texas
EXHIBIT A
TRACT I:
Lot 4B, Block A, THE PARKS RETAIL CENTER, an Addition to the City of Arlington,
Tarrant County, Texas, according to plat recorded in Cabinet A, Slide 1545, Deed
Records of Tarrant County, Texas.
TRACT II:
BEING a non-exclusive easement for parking, ingress, egress, and utilities, as
created by Shopping Center Easement Agreement recorded in Volume 11379, Page
1387, Deed Records of Tarrant County, Texas, and being more particulary
described by metes and bounds on attached Exhibit "A".
TRACT III:
BEING a non-exclusive access easement as created by Reciprocal Easement
Agreement recorded in Volume 8866, Page 1411, Deed Records of Tarrant County,
Texas.
TRACT 2
BEING a non-exclusive easeement for parking, ingress, egress, and utilities, as
created by Shopping Center Easement Agreement recorded in Volume 11379, Page
1387, Deed Records, Tarrant County, Texas, in and to the following property:
BEING a description of all that certain lot, tract or parcel of land situated in
the J.W. Lane Survey, Abstract No. 950, Tarrant County, Texas, same being a part
of Lot 4A, Block A of the Revised Plat of Lot 4 of PARKS RETAIL CENTER, an
addition to the city of Arlington of record, in Cabinet A, Slide 1545, of the
Tarrant County Map Records, same being a portion of that tract of land, which is
described as "Tract One" in a conveyance from Petro-Hunt Corporation to HWP
Parks Arlington, Ltd., by deed dated June 10, 1993 and recorded in Volume 11121,
Page 472, of the Tarrant County Deed Records, and being more particularly
described as follows:
BEGINNING at a 5/8 inch iron rod marking and located at the Northeast corner of
Lot 4B of said Raplat of Lot 4 of PARKS RETAIL CENTER, same being the most
northerly Northwest corner of said Lot 4A, for the Northwest corner of the tract
of land herein described, and being on the arc of a curve on the South line of
West Arbrook Boulevard, a 120 foot right-of-way:
<PAGE>
Arlington
Tarrant County, Texas
EXHIBIT A
(continued)
THENCE leaving said Lot 4B, along and with the South right-of-way line of said
West Arbrook Boulevard, same being a North line of said Lot 4A, 48.14 feet to
the left, along the arc of said curve, having a radius of 1805.00 feet, a delta
angle of 01 degree 31 minutes 41 seconds, and a sub-chord which bears South 84
degrees 38 minutes 48 seconds East, a distance of 48.14 feet to the Northeast
corner of the tract of land herein described:
THENCE leaving said West Arbrook Boulevard, through said Lot 4A, the following
courses and distances unumbered (1) through (5);
(1) SOUTH, 40 degrees 33 minutes West, a distance of 30.65 feet to a corner of
the tract of land herein described;
(2) SOUTH, a distance of 482.00 feet to a corner of the tract of land herein
described;
(3) WEST, a distance of 174.00 feet to a reentrant corner of the tract of land
herein described;
(4) SOUTH, a distance of 227.00 feet to a corner of the tract of land herein
described;
(5) WEST, a distance of 74.00 feet to the most southerly Southwest corner of the
tract of land herein described, same being on a West line of said Lot 4A, and
being on the East line of the HOMART ADDITION (Amended), an addition to the City
of Arlington or record in Cabinet A, Slide 901-904, of the Tarrant County Map
Records;
THENCE along and with a West line of said Lot 4A, and the East line of said
HOMART ADDITION, NORTH, a distance of 291.50 feet to a 5/8 inch iron rod marking
and lcoated at an easterly Northeast corner of said Lot 4A, for an easterly
Northeast corner of the tract of land herein described, same being the Southwest
corner of aforesaid Lot 4B;
THENCE leaving said HOMART ADDITION, along and with a North line of said Lot 4A,
same being the South line of said Lot 4B, East, a distance of 220.70 feet to a
5/8 inch iron rod marking and located at the Southeast corner of said Lot 4B,
same being a reentrant corner of said Lot 4A, for a reentrant corner of the
tract of land herein described;
THENCE along and with a West line of said Lot 4A, the East line of said Lot 4B,
North, a distance of 445.28 feet to the PLACE OR POINT OF BEGINNING and
Containing 1.0449 Acres or 45,516 Square Feet of land, more or less, within the
herein described metes and bounds.
<PAGE>
EXHIBIT B
STATE SPECIFIC PROVISIONS (Texas)
The following provisions are incorporated by reference into
Section 48 of the attached Deed of Trust. If any conflict or inconsistency
exists between this Exhibit B and the remainder of the attached Deed of Trust,
this Exhibit B shall govern.
A. FORECLOSURE PROCEEDINGS. The provisions of Section 24
notwithstanding, foreclosure proceedings shall include without limitation
non-judicial foreclosure pursuant to a power of sale in accordance with statutes
of the State of Texas then in force governing sales of real estate under powers
of sale conferred by deed of trust. Upon the occurrence and during the
continuance of an Event of Default, or at any time thereafter, Grantor
authorizes and empowers the Trustee, at the request of Beneficiary (which
request is hereby conclusively presumed), to enforce this Deed of Trust by
selling, in one or more sales as Beneficiary or Trustee may elect, the Trust
Property then subject to the lien hereof at public auction, to the highest
bidder, for cash or for credit against the indebtedness secured hereby if
Beneficiary is the highest bidder, at the county court house in the county in
Texas in which such Trust Property or any part thereof is situated, as herein
described, in the area designated by the commissioners court for such purpose
pursuant to a recordation of such designation in the real property records of
such county, or if no such recorded designation by the commissioners court has
been made, in the area at the county court house designated in the notice of
proposed sale posted, filed and served in accordance with the further provisions
of this paragraph, between the hours of 10:00 a.m. and 4:00 p.m. on the first
Tuesday of any month. The Trustee shall give notice of the time, place and terms
of said sale, and of the property to be sold as follows: (i) Notice of such
proposed sale shall be given by posting written notice thereof at least
twenty-one days preceding the date of the sale at the court house door, and by
filing a copy of the Notice in the office of the county clerk of the county in
which the sale is to be made, and if the property to be sold is situated in more
than one county, one notice shall be posted at the court house door and filed
with the county clerk of each county in which the property to be sold is
situated. In addition, Beneficiary shall, at least twenty-one days preceding the
date of sale, serve written notice of the proposed sale by certified mail on
each debtor obligated to pay the debt secured hereby according to the records of
Beneficiary. Service of such notice shall be completed upon deposit of the
notice, enclosed in a postpaid wrapper, properly addressed to each such debtor
at the most recent address as shown by the records of Beneficiary, in a post
office or official depository under the care and custody of the United States
Postal Service. The affidavit of any person having knowledge of the facts to the
effect that such service was completed shall be prima facie evidence of the fact
of service; (ii) Any notice that is required or permitted to be given to Grantor
may be addressed to Grantor at Grantor's mailing address. Any notice that is to
be given by certified mail to any other debtor may, if no address for such other
debtor is shown by the records of Beneficiary, be addressed to such other debtor
at Grantor's mailing address. Notwithstanding the foregoing provisions of this
paragraph (ii), notice of such sale given in accordance with the requirements of
the applicable law of the State of Texas in effect at the time of such sale
shall constitute sufficient
<PAGE>
notice of such sale. Grantor hereby authorizes and empowers the Trustee to sell
all or any portion of the Trust Property, together or in lots or parcels, as the
Trustee may deem expedient, and to execute and deliver to the purchaser or
purchasers of such property, good and sufficient deeds of conveyance of fee
simple title with covenants of general warranty made on behalf of the Grantor.
The recitals in the conveyance to the purchaser or purchasers of the Trust
Property shall be full and conclusive evidence of the truth of the matters
therein stated, and all prerequisites to such sale shall be presumed to have
been performed and such sale and conveyance shall be conclusive against Grantor,
its heirs, successors and assigns. In no event shall the Trustee be required to
exhibit, present or display at any such sale, any of the personalty described
herein to be sold at such sale. The Trustee making such sale shall receive the
proceeds thereof and shall apply the same as follows: (1) first, he shall pay
the reasonable expense of executing this deed of trust including a reasonable
Trustee's fee or commission; (2) second, he shall pay so far as may be possible,
the indebtedness secured hereby (the "INDEBTEDNESS"), discharging first that
portion of the indebtedness arising under the covenants or agreements herein
contained and not evidenced by the Note; (3) third, he shall pay the residue, if
any, to the person or persons legally entitled thereto.
Payment of the purchase price to Trustee shall satisfy the
obligation of the purchaser at such sale therefor, and such purchaser shall not
be responsible for the application thereof. Said sale shall forever be a bar
against Grantor, its successors and assigns, and all other persons claiming
under it. In addition to and cumulative of the remedies provided in this clause,
the Beneficiary may foreclose or cause to be foreclosed the lien and security
interest of this instrument, in whole or in part, through judicial foreclosure,
private sale, or in any other manner as may at any time be authorized under the
laws of the State of Texas. Beneficiary shall have the right to bid for the
Trust Property and to become the purchaser at any sale made pursuant to this
clause, if it is the highest bidder therefor and in lieu of paying cash
therefor, may make settlement for the purchase price by crediting against the
Obligations the amount of the bid made, after deducting therefrom the expenses
of the sale, the cost of any enforcement proceeding hereunder and any other sums
which Trustee or Beneficiary is authorized to deduct under the terms hereof, to
the extent necessary to satisfy such bid. If foreclosure should be commenced by
the Trustee, the Beneficiary may at any time before the sale direct the Trustee
to abandon the sale, and may at any time or times thereafter direct the Trustee
to again commence foreclosure; or, irrespective of whether foreclosure is
commenced by the Trustee, the Beneficiary may at any time after an Event of
Default institute suit for foreclosure of the lien of this instrument. If
Beneficiary should institute suit for foreclosure of the lien of this
instrument, Beneficiary may at any time before the entry of final judgment
dismiss the same, and require the Trustee to sell all or part of the Trust
Property in accordance with the provisions of this instrument. No single sale or
series of sales by the Trustee or by any substitute or successor Trustee under
this instrument and no judicial foreclosure shall extinguish the lien or exhaust
the power of sale under this instrument except with respect to the items of
property sold, but such lien and power shall exist for so long as, and may be
exercised in any manner provided by law or as provided in this instrument as
often as the circumstances require to give Beneficiary full relief hereunder.
Grantor agrees for itself and its trustees, receivers, successors and assigns
that if any of them shall hold possession of the
<PAGE>
Trust Property or any part thereof subsequent to foreclosure of the lien hereof,
Grantor, or the parties so holding possession, shall become and be considered as
tenants at will of the purchaser or purchasers at such foreclosure sale or
sales; and any such tenant failing or refusing to surrender possession upon
demand shall be guilty of forcible detainer and shall be liable to such
purchaser or purchasers for rental on said premises, and shall be subject to
eviction and removal, forcible or otherwise, with or without process of law, all
damages which may be sustained by any such tenant as a result thereof being
hereby expressly waived.
The sale or sales by Trustee of less than the whole of the Trust
Property shall not exhaust the power of sale herein granted, and Trustee is
specifically empowered to make successive sale or sales under such power until
the whole of the Trust Property shall be sold; and if the proceeds of such sale
or sales of less than the whole of the Trust Property shall be less than the
aggregate of the Indebtedness, this Deed of Trust and the lien, security
interest and assignment hereof shall remain in full force and effect as to the
unsold portion of the Trust Property just as though no sale or sales had been
made; provided, however, that Grantor shall never have any right to require the
sale or sales of less than the whole of the Trust Property, but Beneficiary
shall have the right, at its sole election, to request Trustee to sell less than
the whole of the Trust Property. If an Event of Default has occurred and is
continuing hereunder, Beneficiary shall have the option to proceed with
foreclosure in satisfaction of such item either through judicial proceedings or
by directing Trustee to proceed as if under a full foreclosure, conducting the
sale as herein provided without declaring the entire Indebtedness due, and if
sale is made because an Event of Default has occurred and is continuing on an
installment, or a part of any installment, such sale may be made subject to the
unmatured part of the Indebtedness; and it is agreed that such sale, if so made,
shall not in any manner affect the unmatured part of the Indebtedness, but as to
such unmatured part, this Deed of Trust shall remain in full force and effect as
though no sale had been made under the provisions of this paragraph. Several
sales may be made hereunder without exhausting the right of sale for any
unmatured part of the Indebtedness. At any such sale (I) Grantor hereby agrees,
in its behalf and in behalf of its heirs, executors, administrators, successors,
personal representatives and assigns, that any and all recitals made in any
assignment of lease or deed of conveyance given by Trustee with respect to the
identity of Beneficiary, the occurrence or existence of any Event of Default,
the acceleration of the maturity of any of the Indebtedness, the request to
sell, the notice of sale, the giving of notice to all debtors legally entitled
thereto, the time, place, terms, and manner of sale, and receipt, distribution
and application of the money realized therefrom, or the due and proper
appointment of a substitute Trustee, and, without being limited by the
foregoing, with respect to any other act or thing having been duly done by
Beneficiary or by Trustee hereunder, shall be taken by all courts of law and
equity as prima facie evidence that the statements or recitals are the state of
facts and are without further question to be so accepted, and Grantor hereby
ratifies and confirms every act that Trustee or any substitute Trustee hereunder
may lawfully do in the Trust Property by virtue hereof; and (II) the purchaser
may disaffirm any easement granted, or rental, lease or other contract made, in
violation of any provision of this Deed of Trust and may take immediate
possession of the Trust Property free from, and despite the terms of, such grant
of easement and rental or lease contract.
<PAGE>
B. FINANCIAL INSTITUTIONS. Section 35 of this Deed of Trust is
hereby amended by adding the following paragraph at the end thereof:
To the extent that Beneficiary is a "financial institution" as
defined in Section 26.02 of the Texas Business & Commerce Code, the following
shall apply:
THIS DEED OF TRUST AND THE OTHER LOAN DOCUMENTS REPRESENT THE
FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE
NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
C. RIGHTS AND REMEDIES OF SURETIES. Grantor waives any right or
remedy which Grantor may have or be able to assert pursuant to Chapter 34 of the
Business and Commerce Code of the State of Texas pertaining to the rights and
remedies of sureties.
<PAGE>
SCHEDULE A
DESCRIPTION OF ORIGINAL DEED OF TRUST
<TABLE>
<CAPTION>
PROPERTY RECORDING OFFICE VOLUME PAGE RECORDING DATE
- --------------------- -------------------------------------- ---------- ---------- --------------------
<S> <C> <C> <C> <C>
Arlington, TX Office of the County Clerk of 11723 590 9/12/94
Tarrant County, Texas
</TABLE>
<PAGE>
EXHIBIT 4.39
- ------------------------------------------------------------------------------
DISCOVERY ZONE, INC.
(Grantor),
to
KENNETH W. PEARSON, as Trustee
(Trustee)
for the benefit of
McDONALD's CORPORATION
(Beneficiary)
------------------------------------------------------
AMENDED AND RESTATED DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS, SECURITY
AGREEMENT AND FIXTURE FILING
------------------------------------------------------
Dated as of July 29, 1997
DOCUMENT PREPARED BY AND
AFTER RECORDING RETURN TO:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attention: Jonathan A. Reiss, Esq.
- ------------------------------------------------------------------------------
[LEON VALLEY, TEXAS PROPERTY]
<PAGE>
THIS AMENDED AND RESTATED DEED OF TRUST, ASSIGNMENT OF LEASES
AND RENTS, SECURITY AGREEMENT AND FIXTURE FILING (as the same may from time
to time be extended, renewed or modified, this "DEED OF TRUST"), made as of
the 29th day of July, 1997, by DISCOVERY ZONE, INC., a Delaware corporation
("GRANTOR"), having its principal place of business at One Corporate Center,
110 East Broward Boulevard, Fort Lauderdale, Florida 33301, as successor by
merger to LEAPS & BOUNDS, INC., to KENNETH W. PEARSON, having his principal
place of business at c/o Brown, McCarroll & Oaks Hartline, 300 Crescent
Court, Suite 1400, Dallas, Texas 75201 (and any subsequent substitutes or
successors thereof pursuant to Section 50 below, "Trustee"), to and for the
benefit of McDONALD'S CORPORATION a Delaware corporation ("BENEFICIARY"),
having an address at One McDonald's Plaza, Oak Brook, Illinois 60523.
W I T N E S S E T H:
A. WHEREAS, prior to Grantor's several predecessors in
interest filing their voluntary petitions for relief under chapter 11, title
11, United States Code (the "BANKRUPTCY CODE"), Grantor's predecessors in
interest with respect to the Trust Property (as hereinafter defined), Leaps &
Bounds, Inc. ("LBI") had provided Beneficiary with a First Deed of Trust on
the Trust Property, dated as of August 30, 1994 (the "ORIGINAL DEED OF
Trust") and identified by the recording information set forth on Schedule A
hereto, to secure certain obligations owed to Beneficiary under the Agreement
and Plan of Merger among Beneficiary, Grantor, Discovery Zone, Inc., a
Delaware corporation ("OLD DZI") and Discovery Zone International, Inc.
("DZII"), a Delaware corporation, dated as of August 30, 1994 (the "MERGER
AGREEMENT"); and
B. WHEREAS, pursuant to Section 11.2(a)(iii) of the Merger
Agreement, Old DZI agreed to defend, indemnify and hold Beneficiary and its
affiliates harmless in respect of all expenses, losses, costs, deficiencies,
liabilities and damages (including related and reasonable counsel fees and
expenses, and compensatory and demonstrable consequential damages) incurred
or suffered by Beneficiary as a direct result of, inter alia, any breach by
Old DZI or LBI of the leases or subleases relating to certain properties that
result in any payment by Beneficiary in connection with any guarantee by
Beneficiary of such leases and pursuant to Section 10.3(f) of the Merger
Agreement it was agreed that certain security would be provided to secure the
obligations under Section 11.2(a)(iii) of the Merger Agreement, including
without limitation, a first priority security interest in the Land and
Improvements (the "AGREEMENT TO INDEMNIFY"); and
C. WHEREAS, following the filing of their respective prayers
for relief under the Bankruptcy Code, Grantor's predecessors in interest, Old
DZI, their affiliated debtors, including DZII and LBI (the "DEBTORS"), and
Beneficiary entered into the Stipulation and Order Between Debtors and
McDonald's Corporation Providing For The Resolution, Settlement And
Compromise of Disputes And For Rent Deferrals And Allowance of Certain Claims
(the "STIPULATION AND ORDER") that was entered by the United States
Bankruptcy Court for the District of Delaware (the "BANKRUPTCY COURT") on
November 18, 1996, which was not
2
<PAGE>
appealed or otherwise challenged, became a final order, remains in full force
and effect and to which Grantor is bound, Section 7 of which is captioned
"CONTINUING SECURITY" and provides, in pertinent part, that the valid and
enforceable first priority security interest on the Land and Improvements and
certain other collateral shall secure the performance and payment of all of
the obligations of Grantor to Beneficiary under the Notes (as hereinafter
defined), any obligations of Beneficiary that may arise in connection with
the Assumption Locations whether pursuant to any guaranty, lease, sublease or
otherwise, any obligations of Grantor that may arise in the event of a
Liquidation, and any continuing obligations of Grantor relating to the
Rejection Location(s) and the Prior Rejection Locations (as such terms are
defined therein); and
D. WHEREAS, pursuant to the Stipulation and Order and 11
U.S.C. ss.365, the Debtors, as predecessors in interest to Grantor, assumed
the subleases relating to certain properties (the "ASSUMED PROPERTIES") which
subleases (the "ASSUMED PROPERTY SUBLEASES") expressly incorporate the
Agreement to Indemnify as it relates to any current or future obligations of
Beneficiary relating to the Assumed Properties; and
E. WHEREAS, pursuant to the Stipulation and Order and the Plan
(as hereinafter defined), this Deed of Trust hereby amends and restates the
Original Deed of Trust in its entirety in accordance with the terms and
provisions set forth herein; and
F. WHEREAS, this Deed of Trust, together with certain other
Deeds of Trust, Mortgages or similar encumbrances, are intended to and do
secure the obligations of Grantor and its predecessors in interest and the
other Debtors, to Beneficiary under all of the Stipulation and Order, the
Agreement to Indemnify, the Secured Rent Deferral Notes (as hereinafter
defined) and the Secured Rejection Note (as hereinafter defined); and
G. WHEREAS, pursuant to the plan of reorganization for Old DZI
and its affiliated debtors confirmed by the Bankruptcy Court by order entered
on July 18, 1997 (the "PLAN"), and as required by the terms of the
Stipulation and Order, Grantor, as the reorganized successor of the Debtors,
is obligated to issue to Beneficiary Secured Rent Deferral Notes in the
aggregate original principal amount of $266,466.24, which amount is subject
to increase each month in accordance with the terms thereof (the "SECURED
RENT DEFERRAL NOTES") and Secured Rejection Note in the aggregate original
principal amount of $4,416,237.90 (the "SECURED REJECTION NOTE" and, together
with the Secured Rent Deferral Notes, the "NOTES"); and
H. WHEREAS, pursuant to the Plan, all of the Debtors and their
reorganized successors have merged into Grantor, and simultaneously with such
merger, all property of LBI and the other Debtors, including the Trust
Property (as hereinafter defined), has been revested in Grantor, as the
successor entity of the Debtors; and
I. WHEREAS, in accordance with the foregoing, Grantor is the fee
simple owner of the real estate described in Exhibit A attached hereto (the
"LAND");
3
<PAGE>
NOW THEREFORE, with reference to the foregoing recitals and
for good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Grantor and Beneficiary hereby agree that the Original
Deed of Trust is hereby amended and restated in its entirety as follows:
For the purpose of securing the payment and performance of all
of the obligations (the "OBLIGATIONS") of Grantor to Beneficiary, including
without limitation, any and all obligations of Grantor, as successor in
interest to Old DZI, DZII, LBI and their affiliated debtors, under this Deed
of Trust, the Agreement to Indemnify (including, without limitation, any
contingent obligations thereunder), the Stipulation and Order (including,
without limitation, the obligations described in Section 7 thereof which are
referred to in paragraph C of the recitals above), the Plan and the Notes
(including any and all subsequent advances made pursuant to the terms of the
Notes), and all other documents evidencing or securing any such obligations
(collectively, the "RELEVANT DOCUMENTS"), Grantor by these presents hereby
GRANTS, BARGAINS, SELLS, WARRANTS, PLEDGES, ASSIGNS AND CONVEYS to Trustee
and its successors and assigns forever in trust, WITH POWER OF SALE, for the
benefit of Beneficiary, the Land and the buildings, structures and
improvements of every nature whatsoever now or hereafter located thereon to
the extent owned by Grantor (including, but not limited to, all gas and
electric fixtures, radiators, heaters, docks and docking facilities, engines
and machinery, boilers, elevators and motors, plumbing, heating and air
conditioning fixtures, carpeting and other floor coverings, water heaters,
awnings and storm sashes which are or shall be attached to the Land or said
buildings, structures or improvements) (the "IMPROVEMENTS");
TOGETHER WITH: all right, title, interest and estate of
Grantor now owned, or hereafter acquired, in and to the following property,
rights, interest and estates relating to the Land and the Improvements,
together with Grantor's interest in the following property, rights, interests
and estates hereinafter described (the Land, Improvements, and the following
property, rights, interests and estates being hereinafter collectively
referred to as the "TRUST PROPERTY"):
(a) all easements, rights-of-way, strips and gores of land,
streets, ways, alleys, passages, sewer rights, water, water courses, water
rights and powers, air rights and development rights, construction and
equipment warranties, and all estates, rights, titles, interests, privileges,
liberties, tenements, hereditaments and appurtenances of any nature
whatsoever, in any way belonging, relating to or pertaining to the Land and
the Improvements and the reversion and reversions, remainder and remainders,
and all land lying in the bed of any street, road or avenue, opened or
proposed, in front of or adjoining the Land, to the center line thereof and
all the estates, rights, titles, interests, dower and rights of dower,
curtesy and rights of curtesy, property, possession, claim and demand
whatsoever, both at law and in equity, of Grantor of, in and to the Land and
the Improvements and every part and parcel thereof, with the appurtenances
thereto, and in and to any streets, ways, alleys, passages, strips or gores
of land adjoining the Land or any part thereof;
4
<PAGE>
(b) all fixtures, attachments and other articles attached to
the Land or the Improvements constituting realty or real property now or
hereafter owned by Grantor or in which Grantor has or shall acquire an
interest, now or hereafter located on, attached to or contained in or used or
usable in connection with the Trust Property, and including, without
limitation, all building or construction materials intended for construction,
reconstruction, alteration or repair of or installation on or in the Trust
Property, of every kind and nature whatsoever now owned or hereafter acquired
by Grantor, and all proceeds thereof, as well as all additions to,
appurtenances, substitutions for, replacements of or accessions to any of the
items recited as aforesaid and all attachments, components, parts (including
spare parts) and accessories, whether installed thereon or affixed thereto,
now or hereafter owned by Grantor and used or intended to be used in
connection with, or with the operation of, the Trust Property, to the extent
constituting real property, but not including play equipment or other
similar-type entertainment equipment relating to the operation of the
"Discovery Zone" facility on the Trust Property unless removal of such
equipment would cause structural damage to the Land or the Improvements
(collectively, the "FIXTURES");
(c) all awards or payments, including interest thereon, which
may heretofore and hereafter be made with respect to the Trust Property,
whether from the exercise of the right of eminent domain (including, but not
limited to, any transfer made in lieu of or in anticipation of the exercise
of said rights), or for a change of grade, or for any other injury to or
decrease in the value of the Trust Property;
(d) to the extent assignable (and to the extent relating to
the general occupancy and use of the Trust Property as opposed to the
operation of the "Discovery Zone" entertainment facility on the Trust
Property), leases, subleases (including sub-subleases), lettings, licenses,
concessions, occupancy agreements and other agreements which grant a
possessory interest in, or the right to use or occupy, all or any part of the
Trust Property now or hereafter entered into, and all amendments, extensions,
renewals and guarantees thereof, and all security therefor (collectively, the
"LEASES") and all rents, issues, profits, revenues (including all oil and gas
or other mineral royalties and bonuses) and deposits (including, without
limitation, security deposits) under the Leases (including, without
limitation, from the rental of any office space, retail space or other space,
halls, stores, and offices, and security deposits therefor, exhibit or sales
space of every kind, license, lease, sublease fees and rentals, letters of
credit or cash instruments securing or evidencing obligations under Leases,
service charges, vending machine sales and proceeds, if any, from business
interruption or other loss of income insurance)) (collectively, the "Rents")
and all proceeds from the sale or other disposition of the Leases and the
right to receive and apply the Rents to the payment of the Obligations;
(e) subject to the rights of Grantor hereunder, all proceeds
of any insurance policies covering the Trust Property (including, without
limitation, the right to receive and apply the proceeds of any insurance,
judgments, or settlements made in lieu thereof, for damage to the Trust
Property);
5
<PAGE>
(f) all refundable, returnable or reimbursable fees deposits
or other funds or evidences of credit or indebtedness deposited by or on
behalf of Grantor with any governmental authorities, boards, corporations,
providers of utility services, public or private, including specifically, but
without limitation, all refundable, returnable or reimbursable tap fees,
utility deposits and development costs in connection with the Trust Property,
and all of the records and books of account now or hereafter maintained by or
on behalf of Grantor in connection with the operation of the Trust Property
(collectively, "SECURITY ACCOUNTS");
(g) all proceeds (as defined in the Uniform Commercial Code)
of the Trust Property which, in any event, shall include, without limitation,
(i) cash, instruments and other property received, receivable or otherwise
distributed in exchange for any or all of the Trust Property, (ii) the
collection or other disposition of, or realization upon, any item or portion
of the Trust Property (including, without limitation, all claims of Grantor
against third parties for loss of, damage to, destruction of, or for proceeds
payable under policies of insurance in respect of, the Trust Property now
existing or hereafter arising), (iii) any and all proceeds of any insurance,
indemnity, warranty or guaranty payable to Grantor from time to time with
respect to damage or loss of or to any of the Trust Property, (iv) any and
all payments (in any form whatsoever) made or due and payable to Grantor from
time to time in connection with the requisition, confiscation, condemnation,
seizure or forfeiture of all or any part of the Trust Property by any
Governmental Authority (or any person acting under color of Governmental
Authority), and (v) any and all real estate tax refunds payable to Grantor
with respect to the Trust Property, and refunds or reimbursements payable
with respect to bonds, escrow accounts, or other sums payable in connection
with the use, development or ownership of the Trust Property, but excluding
any proceeds obtained, earned or arising directly from the operation of the
"Discovery Zone" entertainment facility operated by Grantor on the Trust
Property as opposed to general occupancy and use of the Trust Property
(collectively, the "PROCEEDS");
(h) to the extent permitted under applicable law, all
licenses, permits (other than proprietary permits of Grantor relating to the
ordinary operation of a "Discovery Zone" entertainment facility, as opposed
to the general use and occupancy of the Trust Property), variances and
certificates used in connection with the ownership, operation, use or
occupancy of the Trust Property (including, without limitation, business
licenses, state health department licenses, food service licenses, liquor
licenses, licenses to conduct business and all such other permits, licenses
and rights, obtained from any Governmental Authority or private Person
concerning ownership, operation, use or occupancy of the Trust Property)
(collectively, "PERMITS");
(i) all plans, specifications, shop drawings and other
technical descriptions prepared for construction, repair or alteration of the
Improvements (including diskettes containing any such data), and all
amendments and modifications thereof; and
6
<PAGE>
(j) any escrows or escrow accounts established hereunder to
secure the Obligations of Grantor, including without limitation, the Proceeds
Escrow Account described in Section 6(b) hereof; and
(k) any and all replacements and renewals of or additions and
substitutions to any of the foregoing and all proceeds of any of the
foregoing.
TO HAVE AND TO HOLD the above granted and described Trust
Property unto and to the use and benefit of Trustee, and the successors,
substitutes and assigns of Trustee forever, IN TRUST WITH POWER OF SALE, for
the benefit of Beneficiary, and its successors and assigns, and Grantor does
hereby bind itself, its successors and assigns to WARRANT AND FOREVER DEFEND
the title to the Trust Property unto Trustee and its successors, substitutes
and assigns, for the benefit of Beneficiary, and its successors and assigns;
AND, TO PROTECT THE SECURITY OF THIS DEED OF TRUST, Grantor
represents and warrants to and covenants and agrees with Beneficiary as
follows:
1. DEFINED TERMS. The following terms, when used herein, shall
have the meanings set forth below:
"ENVIRONMENTAL LAWS" means any and all present and future
federal, state or local laws, statutes, ordinances or regulations, any
judicial or administrative orders, decrees or judgments thereunder, and any
permits, approvals, licenses, registrations, filings and authorizations, in
each case as now or hereafter in effect, relating to the protection of the
environment, the impact of Hazardous Substances or the generation, disposal
or remediation thereof on human health or safety, or the Release or
threatened Release of Hazardous Substances or otherwise relating to the Use
of Hazardous Substances. For purposes of this definition, (A) "HAZARDOUS
SUBSTANCES" means collectively, (i) any petroleum or petroleum products or
waste oils, explosives, radioactive materials, asbestos, urea formaldehyde
foam insulation, polychlorinated biphenyls ("PCBs"), and lead-based paint,
(ii) any chemicals or other materials or substances which are now or
hereafter become defined as or included in the definitions of "hazardous
substances", "hazardous wastes", "hazardous materials", "extremely hazardous
wastes", "restricted hazardous wastes", "toxic substances", "toxic
pollutants", "contaminants", "pollutants" or words of similar import under
any Environmental Law and (iii) any other chemical or any other material or
substance, exposure to which is now or hereafter prohibited, limited or
regulated under any Environmental Law; (B) "USE" means, with respect to any
Hazardous Substance, the generation, manufacture, processing, distribution,
handling, use, treatment, recycling or storage of such Hazardous Substance or
transportation of such Hazardous Substance; and (C) "RELEASE" means any
release, spill, emission, leaking, pumping, injection, deposit, disposal,
discharge, dispersal, leaching or migration into the indoor or outdoor
environment (including, without limitation, the movement of Hazardous
Substances through ambient air, soil, surface water, ground water, wetlands,
land or subsurface strata).
7
<PAGE>
"GOVERNMENTAL AUTHORITY" means any national or federal
government, any state, regional, local or other political subdivision thereof
with jurisdiction and any Person with jurisdiction exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government (including without limitation any court).
"IMPOSITIONS" means all taxes (including, without limitation,
all real estate, ad valorem, sales (including those imposed on lease
rentals), use, single business, gross receipts, value added, intangible
transaction privilege, privilege or license or similar taxes), assessments
(including, without limitation, all assessments for public improvements or
benefits, whether or not commenced or completed within the term of this Deed
of Trust), ground rents, water, sewer or other rents and charges, excises,
levies, fees (including, without limitation, license, permit, inspection,
authorization and similar fees), and all other governmental impositions and
other charges (including, without limitation, vault charges and license fees
for the use of vaults, chutes and similar areas adjoining the Trust
Property), in each case whether general or special, ordinary or
extraordinary, foreseen or unforeseen, of every character in respect of the
Trust Property, which at any time prior to, during or in respect of the term
hereof may be assessed or imposed on or in respect of or be a lien upon (i)
Grantor (including, without limitation, all income, franchise, single
business or other taxes imposed on Grantor for the privilege of doing
business in the jurisdiction in which the Trust Property is located), (ii)
the Trust Property, or any part thereof or any revenues therefrom or any
estate, right, title or interest therein, or (iii) any occupancy, operation,
use or possession of, or sales from, or activity conducted on, or in
connection with the Trust Property by Grantor or the leasing or use of the
Trust Property or any part thereof by Grantor.
"LEGAL REQUIREMENTS" means (i) all governmental statutes,
laws, rules, orders, regulations, ordinances, judgments, decrees and
injunctions of Governmental Authorities (including, without limitation,
Environmental Laws) affecting either the Borrower or any Property or any part
thereof or the construction, ownership, use, alteration or operation thereof,
or any part thereof (whether now or hereafter enacted and in force), (ii) all
permits, licenses and authorizations and regulations relating thereto, and
(iii) all covenants, conditions and restrictions contained in any instruments
at any time in force (whether or not involving Governmental Authorities)
affecting the Trust Property or any part thereof which, in the case of this
clause (iii), require repairs, modifications or alterations in or to the
Trust Property or any part thereof, or in any material way limit or restrict
the existing use and enjoyment thereof.
"PERSON" means any individual, corporation, limited liability
company, partnership, joint venture, estate, trust, unincorporated
association, any federal, state, county or municipal government or any
bureau, department or agency thereof and any fiduciary acting in such
capacity on behalf of any of the foregoing.
"UNIFORM COMMERCIAL CODE" means the Uniform Commercial Code,
as adopted, enacted and amended from time to time by the state or states
where any of the Trust Property is located.
8
<PAGE>
2. PAYMENT OF OBLIGATIONS AND INCORPORATION OF COVENANTS,
CONDITIONS AND AGREEMENTS. Grantor will pay the Obligations at the time and
in the manner provided in the Relevant Documents and in this Deed of Trust.
All the representations, warranties, covenants, conditions and agreements of
Grantor contained in the Relevant Documents are hereby made a part of this
Deed of Trust to the same extent and with the same force as if fully set
forth herein. If there shall be any inconsistencies between the terms,
covenants, conditions and provisions set forth in this Deed of Trust and the
terms, covenants, conditions and provisions set forth in the Relevant
Documents, then the terms, covenants, conditions and provisions of the
Relevant Documents shall prevail.
3. WARRANTY OF TITLE/ORGANIZATION. Grantor warrants that
Grantor has good, marketable and insurable fee simple title to Land and the
Improvements and has good title to the remainder of the Trust Property and
has the full power, authority and right to execute, deliver and perform its
obligations under this Deed of Trust and to encumber, mortgage, give, grant,
bargain, sell, alienate, enfeoff, convey, confirm, warrant, pledge, assign
and hypothecate the Trust Property and that Grantor possesses an unencumbered
fee estate in the Land and the Improvements and that it owns the Trust
Property free and clear of all liens, encumbrances and charges whatsoever
except for (x) those exceptions to title which are existing on the date
hereof and approved by Beneficiary and (y) those exceptions of title that are
permitted under the other terms and conditions of this Deed of Trust
(collectively, the "PERMITTED ENCUMBRANCES") and that this Deed of Trust is
and will remain a valid and enforceable first lien on and security interest
in the Trust Property, subject only to the Permitted Encumbrances. Grantor
shall forever warrant, defend and preserve such title and the validity and
priority of the lien of this Deed of Trust and shall forever warrant and
defend the same to Beneficiary against the claims of all persons whomsoever.
Grantor is duly organized, validly existing and in good standing under the
laws of its jurisdiction of organization. Grantor is qualified to do business
and in good standing in the State in which the Trust Property is located, and
to the extent that Grantor is not so qualified or in good standing in such
State, Grantor shall promptly qualify to do business and become in good
standing in such State and shall promptly present evidence of such
qualification to do business and good standing to Beneficiary, and shall in
any event take such steps as are necessary to insure the enforceability of
the Notes and this Deed of Trust.
4. TAXES. Grantor hereby warrants, covenants and agrees to pay
before any penalty attaches all real property taxes, general and special, and
all other taxes and assessments of any kind or nature whatsoever, against the
Trust Property when due and shall, upon written request, furnish to
Beneficiary duplicate receipts therefor, Grantor may, in good faith and with
reasonable diligence, contest the validity or amount of any such taxes or
assessments provided that such contest shall have the effect of preventing
the collection of the tax or assessment so contested and the sale or
forfeiture of said Trust Property or any part thereof, or any interest
therein, to satisfy the same.
5. INDEMNIFICATION. Grantor shall indemnify, defend and hold
harmless Beneficiary from and against all of the following (collectively, and
individually referred to as a
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"LOSS"): claims, demands, causes of action, judgments, costs, expenses,
liabilities, losses and damages (including consequential and punitive
damages), reasonable attorneys' fees and expenses and court costs,
disbursements and court costs, and all risk of damage to property and injury
to persons in or upon the Trust Property, arising from: (i) Grantor's use of
the Property or from the conduct of its business in or about the Trust
Property; (ii) Grantor's default or breach of any term under this Deed of
Trust; and (iii) Grantor's violation or failure to comply with any Legal
Requirements, including Environmental Laws; provided that Grantor shall not
be liable for Loss arising from Beneficiary's or Trustee's negligence or
willful misconduct or from Beneficiary's or Trustee's breach of any of their
obligations hereunder.
6. TRANSFER OR ENCUMBRANCE OF THE TRUST PROPERTY. (a) Except
as may otherwise be permitted hereunder or pursuant to the Relevant
Documents, Grantor shall not sell, convey, alienate, mortgage, encumber,
pledge or otherwise transfer the Trust Property or any part thereof or any of
its interest therein. Beneficiary shall not be required to demonstrate any
actual impairment of its security or any increased risk of default hereunder
in order to declare the Obligations immediately due and payable upon
Grantor's conveyance, alienation, mortgage, encumbrance, pledge or transfer
of the Trust Property in violation of this Deed of Trust or any other
Relevant Document. This provision shall apply to every sale, conveyance,
alienation, mortgage, encumbrance, pledge or transfer of the Trust Property
that is not permitted pursuant to the Relevant Documents, regardless of
whether voluntary or not, or whether or not Beneficiary has consented to any
previous sale, conveyance, alienation, mortgage, encumbrance, pledge or
transfer of the Trust Property.
(b) Notwithstanding Section 6(a), Grantor shall have the right
to sell the Trust Property at any time to a third party bona fide purchaser
after consultation with Beneficiary and upon the prior written consent of
Beneficiary to such sale and the sales price (such consent not to be
unreasonably withheld), provided that the net proceeds of such sale of the
Trust Property (after payment of transfer taxes and reasonable brokerage
commissions, if any, and other reasonable closing costs) shall be applied
towards repayment of the Obligations, including, without limitation,
repayment of the Secured Rejection Note (including prepayment of any amounts
not yet due and payable) and payment of the Principal Amounts (as defined in
the Rent Deferral Notes) then outstanding under the Rent Deferral Notes, in
the order and manner set forth in the Notes. After the Secured Rejection Note
and all Principal Amounts outstanding under the Notes have been repaid in
full, any remaining net proceeds (including proceeds from any sale or other
disposition of the Trust Property pursuant to Section 24 hereof) not applied
towards repayment of the Obligations shall be deposited into an escrow
account designated by Beneficiary for Grantor's account and as security for
the performance by Grantor of its Obligations to Beneficiary under the
Relevant Documents (the "PROCEEDS ESCROW ACCOUNT") which escrow account shall
be administered by Beneficiary, or, at Beneficiary's discretion and in
accordance with Beneficiary's instructions, may be administered by an escrow
agent (an "ESCROW AGENT") selected by Beneficiary (whose reasonable fees
shall be paid by Grantor). Grantor may also from time to time deposit
additional funds into the Proceeds Escrow Account as further security for the
Obligations. At Beneficiary's request, Grantor agrees to enter into a
separate escrow agreement to further evidence the provisions of this Section
6(b), and in the
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event that Beneficiary chooses an Escrow Agent to administer the Proceeds
Escrow Account, Grantor agrees to execute an escrow agreement in form and
substance reasonably satisfactory to Beneficiary (including provisions
consistent with the provisions of this Section 6(b)) to evidence the duties
and responsibilities of such Escrow Agent. Beneficiary or, if applicable, the
Escrow Agent at the direction of Beneficiary, shall invest the funds in the
Proceeds Escrow Account in obligations of the U.S. Government or its
agencies, interest in time accounts or certificates of deposits, or other
interest bearing account of any bank or bank and trust company or in money
market funds available to Beneficiary. Grantor agrees, and shall agree under
any escrow agreement entered into pursuant to this Section 6(b), that the
funds on deposit under the escrow arrangement described herein shall not
constitute property of the estate (within the meaning of Section 541 of the
United States Bankruptcy Code) and that Grantor shall only have such rights
to such funds as are provided herein and in any escrow agreement entered into
pursuant to this Section. Funds in the Proceeds Escrow Account shall be
disbursed (together with accrued interest) from time to time to Beneficiary,
at Beneficiary's direction (upon seven (7) days prior notice to Grantor), to
pay any Obligations that may arise from time to time under the Agreement to
Indemnify, the Notes, the Stipulation and Order or the other Relevant
Documents. Notwithstanding the foregoing, after December 31, 2005, Grantor
shall be entitled to retain any net proceeds in excess of the Minimum Amount
set forth below from the sale of the Trust Property, including amounts
previously deposited and remaining in the Proceeds Escrow Account (including
accrued interest thereon) which have not been applied towards payment of the
Obligations, provided that (i) no Obligations are then due and owing by
Grantor pursuant to the Agreement to Indemnify, the Stipulation and Order,
the Notes or otherwise, (ii) no default or Event of Default has occurred and
is continuing under any of the Relevant Documents; and (iii) the amount
remaining in the Proceeds Escrow Account is no less than the Minimum Amount
(as hereinafter defined). Except as otherwise set forth in the following
sentence, the "Minimum Amount" shall mean the product of (A) 1.5 times (B)
the sum of the gross rent (including additional rent and percentage rent
charges, if any), common area maintenance charges, taxes, insurance and other
charges computed on a gross basis (collectively, the "BASE CHARGES") which
are due or shall become due under any Assumed Property Subleases still in
existence as of December 31, 2005 (the "SURVIVING ASSUMED PROPERTY
SUBLEASES") from December 31, 2005 until the expiration of the terms of such
Assumed Property Subleases. Upon the expiration after December 31, 2005 of
any Surviving Assumed Property Sublease, Beneficiary shall re-calculate the
Minimum Amount based upon the product of 1.5 times the Base Charges of the
remaining Surviving Assumed Property Subleases as of the end of the term of
such Surviving Assumed Property Sublease (such Base Charges to be calculated
as the sum of the Base Charges from such date through the end of the
expiration dates of the remaining Surviving Assumed Property Subleases), and
provided that (i) no Obligations are then due and owing by Grantor pursuant
to the Agreement to Indemnify, the Notes, the Stipulation and Order or
otherwise and that (ii) no default or Event of Default has occurred and is
continuing under any of the Relevant Documents, Beneficiary shall, on the
first anniversary of the expiration of such expired Surviving Assumed
Property Sublease, release to Grantor, or cause the Escrow Agent to release
to Grantor, the excess of all funds in the Proceeds Escrow Account over the
re-calculated Minimum Amount. Any calculation of Base Charges under this
Section 6(b) shall be made by Beneficiary and,
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absent manifest error, shall be conclusive and binding upon Grantor. Provided
that (i) an amount equal to at least the Minimum Amount is deposited or on
deposit in the Proceeds Escrow Account to secure the payment of the
Obligations, (ii) no default or Event of Default has occurred and is
continuing under any of the Relevant Documents, (iii) the Notes have been
repaid in full and (iv) no Obligations are then due and owing by Grantor
pursuant to the Agreement to Indemnify, the Stipulation and Order or
otherwise, Grantor shall be entitled to receive a release of this Deed of
Trust from Beneficiary at any time after December 31, 2005. Provided that no
default or Event of Default has occurred or is continuing under any of the
Relevant Documents and that no amounts are then owing by Grantor or
outstanding pursuant to or under any of the Relevant Documents (and that an
amount equal to the Minimum Amount is at all times on deposit in the Proceeds
Escrow Account), interest earned on the amounts deposited in the Proceeds
Escrow Account after December 31, 2005 shall be distributed to Grantor on a
quarterly basis. All remaining amounts in the Proceeds Escrow Account which
have not been applied towards payment of the Obligations shall be released to
Grantor on the later of (A) December 31, 2014 provided, however, that no
Obligations are then due and owing by Grantor pursuant to the Agreement to
Indemnify, the Stipulation and Order or otherwise, and (B) the end of the
term of this Deed of Trust as set forth in Section 13(c) hereof. Grantor
shall pay any income taxes attributable to the interest or other income
earned on the Proceeds Escrow Account. Notwithstanding any release of this
Deed of Trust pursuant to this Section 6(b) or otherwise, the terms and
provisions of this Section 6(b) shall survive the release of this Deed of
Trust.
7. AMENDMENT TO LEGAL DESCRIPTION. If it becomes evident that
the legal description attached to any Relevant Document is inaccurate or does
not fully describe all of the real property which is reasonably connected to
the Land, Grantor hereby agrees to an amendment of such legal description and
the legal description contained on the corresponding title policy so that
such error is corrected and to execute and cause to be recorded, if
applicable, such document as may be appropriate for such purpose.
8. ASSIGNMENT OF LEASES AND RENTS. Grantor does hereby
absolutely and unconditionally assign to Beneficiary, Grantor's right, title
and interest in all current and future Leases and Rents, it being intended by
Grantor that this assignment constitutes a present, absolute assignment and
not an assignment for additional security only. Such assignment to
Beneficiary shall not be construed to bind Beneficiary to the performance of
any of the covenants, conditions or provisions contained in any such Lease or
otherwise impose any obligation upon Beneficiary. Beneficiary shall have no
responsibility on account of this assignment for the control, care,
maintenance, management or repair of the Trust Property, for any dangerous or
defective condition of the Trust Property, or for any negligence in the
management, upkeep, repair or control of the Trust Property. Grantor agrees
to execute and deliver to Beneficiary such additional instruments, in form
and substance satisfactory to Beneficiary, as may hereafter be requested by
Beneficiary to further evidence and confirm such assignment. Nevertheless,
subject to the terms of this paragraph, Beneficiary grants to Grantor a
revocable license to collect all of the Rents and retain, use and enjoy the
same and otherwise exercise all rights of Grantor under any Lease, in each
case, subject to the terms
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hereof and of the Relevant Documents. Upon an Event of Default, the license
granted to Grantor herein shall immediately and automatically be revoked, and
Beneficiary shall immediately be entitled to possession of all Rents, whether
or not Beneficiary enters upon or takes control of the Trust Property,
provided that if such Event of Default ceases to exist, the license shall
automatically be reinstated. In addition, during the continuation of an Event
of Default, Beneficiary may, either in person or by agent, without bringing
any action or proceeding, or by a receiver appointed by a court, without the
necessity of taking possession of the Trust Property in its own name, and in
addition to and without limiting any of Beneficiary's rights and remedies
hereunder, under the Notes and any other Relevant Documents and as otherwise
available at law or in equity, (a) notify any lessee or other person that the
Leases have been assigned to Beneficiary and that all Rents are to be paid
directly to Beneficiary, whether or not Beneficiary has commenced or
completed foreclosure or taken possession of the Trust Property; (b) settle,
compromise, release, extend the time of payment of, and make allowances,
adjustments and discounts of any Rents or other obligations in, to and under
the Leases; (c) demand, sue for or otherwise collect, receive, and enforce
payment of Rents, including those past-due and unpaid and other rights under
the Leases, prosecute any action or proceeding, and defend against any claim
with respect to the Rents and Leases; (d) enter upon, take possession of and
operate the Trust Property; (e) lease all or any part of the Trust Property;
and/or (f) perform any and all obligations of Grantor under the Leases and
exercise any and all rights of Grantor therein contained to the full extent
of Grantor's rights and obligations thereunder, with or without the bringing
of any action or the appointment of a receiver and without need for any other
authorization or other action by Beneficiary or Grantor. At Beneficiary's
request, Grantor shall deliver a copy of this assignment to each tenant under
a Lease and to each manager and managing agent or operator of the Trust
Property. Grantor irrevocably directs any tenant, manager, managing agent, or
operator of the Property, without any requirement for notice to or consent by
Grantor, to comply with all demands of Beneficiary under this Section 8 and
to turn over to Beneficiary on demand all Rents which it receives. Grantor
hereby acknowledges and agrees that payment of any Rents by a person to
Beneficiary as hereinabove provided shall constitute payment by such person,
as fully and with the same effect as if such Rents had been paid to Grantor.
Beneficiary is hereby granted and assigned by Grantor the right, at its
option, upon revocation of the license granted herein, to enter upon the
Trust Property in person or by agent, without bringing any action or
proceeding, or by court-appointed receiver to collect the Rents. Any Rents
collected after the revocation of the license shall be applied towards the
payment of the Obligations. Neither the enforcement of any of the remedies
under this Section 8 nor any other remedies or security interests afforded to
Beneficiary under the Relevant Documents, at law or in equity shall cause
Beneficiary to be deemed or construed to be a Beneficiary in possession of
the Trust Property, to obligate Beneficiary to lease the Trust Property or
attempt to do so, or to take any action, incur any expense, or perform or
discharge any obligation, duty or liability whatsoever under any of the
Leases or otherwise. Grantor shall, and hereby agrees to indemnify
Beneficiary for, and to hold Beneficiary harmless from and against, any and
all claims, liability, expenses, losses or damages which may or might be
asserted against or incurred by Beneficiary solely by reason of Beneficiary's
status as an assignee pursuant to the assignment of Rents and Leases
contained herein, but excluding any claim (a) to the extent caused by
Beneficiary's gross
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negligence or willful misconduct, or (b) to the extent arising solely from
Beneficiary's actions after Beneficiary has taken possession of the Trust
Property. Should Beneficiary incur any such claim, liability, expense, loss
or damage, the amount thereof, including all actual expenses and reasonable
fees of attorneys, shall constitute Obligations secured hereby, and Grantor
shall reimburse Beneficiary therefor immediately upon demand. Grantor agrees
that all Leases shall be subject to the prior written approval of
Beneficiary, such approval not to be unreasonably withheld.
9. MAINTENANCE OF TRUST PROPERTY. Grantor shall cause the
Trust Property to be maintained in a good and safe condition and repair
(subject to ordinary wear and tear), and shall otherwise operate and maintain
the Trust Property in a manner consistent with the manner in which it
operates and maintains the other properties on which it operates similar
businesses ("SIMILAR PROPERTIES"). Except as otherwise permitted by the
Relevant Documents, the Improvements, the Fixtures and the equipment located
on the Land or the Improvements shall not be removed, demolished or
materially altered (except for normal replacement of equipment) without the
consent of Beneficiary which shall not unreasonably be withheld or delayed.
Grantor shall comply with all laws, orders and ordinances affecting the Trust
Property, or the use thereof. Except to the extent that Beneficiary fails to
turn over insurance proceeds, if any, received by Beneficiary pursuant to
SECTIONS 10 and 11 with respect to the Trust Property to Grantor, Grantor
shall promptly repair, replace or rebuild any part of the Trust Property
that, following the date hereof, becomes damaged, worn or dilapidated and
Grantor shall complete and pay for any structure at any time in the process
of construction or repair on the Land. Notwithstanding anything to the
contrary contained herein, Grantor hereby confirms its obligation to comply
with all relevant Legal Requirements, including Environmental Laws, with
respect to the Trust Property. Grantor shall not initiate, join in, acquiesce
in, or consent to any change in any private restrictive covenant, zoning law
or other public or private restriction, limiting or defining the uses which
may be made of the Trust Property or any part thereof, unless Grantor shall
have received Beneficiary's prior written consent, such consent not to be
unreasonably withheld or delayed. If under applicable zoning provisions the
use of all or any portion of the Trust Property is or shall become a
nonconforming use, Grantor will not cause such nonconforming use to be
discontinued or abandoned without the express written consent of Beneficiary,
such consent not to be unreasonably withheld or delayed. Grantor shall not
(i) change the use of the Land in any material respect or (ii) permit or
suffer to occur any waste on or to the Trust Property or to any portion
thereof.
10. INSURANCE.
(a) Grantor shall maintain casualty, liability and other
policies of insurance relating to the Trust Property in form and substance,
and with insurers and coverages, reasonably satisfactory to Beneficiary and
consistent with insurance that it maintains on Similar Properties. Grantor
shall keep the Trust Property insured against loss by flood if the Trust
Property is located in an area identified by the Secretary of Housing and
Urban Development as an area having a special flood hazards and in which
flood insurance has been made available
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under the National Flood Insurance Act of 1968 (or any successor act
thereto). All policies of insurance to be furnished hereunder (i) shall have
standard non-contributory mortgagee clauses attached to all policies in favor
of Beneficiary, without contribution, under a standard New York (or local
equivalent) mortgagee clause naming Beneficiary as the party to which all
payments made under such insurance policies in excess of $150,000 should be
paid, (ii) shall contain an endorsement providing that neither Grantor nor
Beneficiary nor any other party shall be a co-insurer under said policies and
shall contain a provision requiring that the coverage evidenced thereby shall
not be terminated or materially modified without ten (10) days prior written
notice to Beneficiary, (iii) shall provide that no act or thing done by
Grantor shall invalidate the policy as against Beneficiary, and (iv) with
respect to property insurance policies, shall contain a waiver of subrogation
against Beneficiary. Grantor shall deliver certificates evidencing additional
and renewal policies, together with evidence of payment of premiums thereon,
to Beneficiary, and in the case of all insurance about to expire, shall
deliver renewal policies or certificates evidencing such policies not less
than ten (10) days prior to their respective dates of expiration.
(b) Grantor shall not take out separate insurance concurrent
in form or contributing in the event of loss with that required to be
maintained hereunder unless Beneficiary is included thereon under a standard,
non-contributory mortgagee clause acceptable to Beneficiary. Grantor shall
promptly notify Beneficiary whenever any such separate insurance is taken out
and shall promptly deliver to Beneficiary the certificates evidencing the
policy or policies of such insurance.
(c) The insurance required by this Deed of Trust, at the
option of Grantor, may be effected by blanket and/or umbrella policies
covering the Trust Property and other properties, provided, however, that in
each case, such insurance policies otherwise comply with the provisions of
this Deed of Trust and allocate to the Trust Property, from time to time, the
coverage specified in this Deed of Trust without possibility of reduction or
co-insurance by reason of, or damage to, any other property named therein. If
the insurance required by this Deed of Trust shall be effected by any such
blanket or umbrella policies, Grantor shall furnish to Beneficiary
certificates with respect to, with schedules attached thereto showing the
amount of the insurance provided under such policies which is applicable to
the Trust Property.
(d) If Grantor fails to maintain insurance in compliance with
this Section, Beneficiary may obtain such insurance and pay the premium
therefor and Grantor shall, on demand, reimburse Beneficiary for all expenses
incurred in connection therewith. Grantor shall deliver original certificates
to Beneficiary of all insurance policies maintained pursuant to this Section
10. Each property insurance policy shall name Beneficiary as mortgagee, and
loss payee with respect to all casualty coverage and each liability policy
shall name Beneficiary as an additional insured thereunder.
11. CASUALTY. (a) Grantor shall give Beneficiary prompt notice
of any loss or damage to the Trust Property.
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(b) In case of loss or damage to the Trust Property covered by
any of the insurance policies described in Section 10 above, Beneficiary (or,
after entry of decree of foreclosure, the purchaser at the foreclosure sale
or decree creditor, as the case may be) is hereby authorized at its option
either (i) to settle and adjust any claim under such insurance policies
without the consent of Grantor or (ii) to allow Grantor to settle and adjust
such claim (either jointly with Beneficiary or by Grantor alone, at
Beneficiary's discretion); provided that in either case Beneficiary shall,
and is hereby authorized to, collect and receipt for any such insurance
proceeds. Notwithstanding anything in the preceding sentence to the contrary,
Beneficiary agrees that it will allow Grantor to settle and adjust any claims
under the insurance policies which are in an amount less than $150,000, per
incident of loss, up to an aggregate amount of no greater than $300,000. The
expenses incurred by Beneficiary in the adjustment and collection of
insurance proceeds shall be included in the Obligations, and shall be
reimbursed to Beneficiary upon demand or may be deducted by Beneficiary from
said insurance proceeds prior to another application thereof. Interest on
such amount shall accrue at the Default Rate, beginning ten (10) days after
Grantor receives notice of a request for payment of such amount from
Beneficiary, until such amount, plus interest, is paid in full.
(c) Beneficiary shall permit Grantor to apply the proceeds of
insurance policies received in connection with any casualty to pay for the
cost of restoring, repairing, replacing or rebuilding the loss or damage to
the Trust Property resulting from the casualty ("RESTORATION") if: (i) there
is no Event of Default hereunder at the time of such application; (ii)
restoration can, in the reasonable judgment of Beneficiary, be completed
prior to the maturity of the Obligations; and (iii) restoration can, in the
reasonable judgment of Beneficiary, be effected within two (2) years after
the date of such casualty and in such a manner so that the Trust Property
will be of at least equal or greater value to the value than the Trust
Property prior to such casualty. Otherwise, Beneficiary may elect in its sole
discretion to apply such proceeds either (x) towards payment of the
Obligations, notwithstanding the fact that the Obligations, or a portion
thereof, may not then be due and payable, or (y) to pay for the cost of
Restoration. In all events, disbursement of insurance proceeds by Beneficiary
(or at Beneficiary's election by a disbursing or escrow agent who shall be
selected by Beneficiary and whose fees shall be paid by Grantor), to pay the
cost of restoration shall require (i) evidence reasonably satisfactory to
Beneficiary of the estimated costs of Restoration, (ii) funds (or assurances
reasonably satisfactory to Beneficiary that such funds are available)
sufficient in addition to the proceeds of insurance to complete and fully pay
for Restoration; and (iii) such architect's certificates, waivers of lien,
contractor's sworn statements, title insurance endorsements, plats of surveys
and such other evidences of cost, payment and performance as Beneficiary may
reasonably require and approve. Except to the extent Beneficiary fails to
turn over insurance proceeds, if any, received by Beneficiary hereunder with
respect to such casualty to Grantor, Grantor hereby covenants to restore,
repair, replace or rebuild the Improvements, to be of at least equal value,
and of substantially the same character as prior to such loss or damage, all
to be effected in accordance with plans, specifications and procedures to be
first submitted to and reasonably approved by Beneficiary, and Grantor shall
pay all costs of such restoring, repairing, replacing or rebuilding.
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12. EMINENT DOMAIN. Grantor warrants, covenants and agrees
that should the Trust Property, or any part thereof or interest therein, be
taken or damaged by reason of any public improvement or condemnation
proceeding, or in any other manner, or should Grantor receive any notice of
other information regarding such proceeding, Grantor shall give written
notice thereof within five (5) business days to Beneficiary. Without
Beneficiary's prior consent, Grantor (1) shall not agree to any compensation
or award, and (2) shall not take any action or fail to take any action which
would cause the compensation to be determined. Beneficiary shall be entitled
to: (1) all compensation awards and other payments or relief therefor, (2) to
commence, appear in and prosecute in its own name any action or proceedings,
and (3) to make any compromise or settlement in connection with such taking
or damage. Grantor authorizes Beneficiary to collect and receive such awards
and compensation, to give proper receipts and acquittances therefor and in
Beneficiary's discretion to apply the same toward the payment of the
Obligations, notwithstanding the fact that the Obligations, or a portion
thereof, may not then be due and payable, or to the restoration of the Trust
Property in accordance with the provisions set forth in the second-to-last
sentence of Section 11(c) above. Grantor further agrees to make, execute, and
deliver to Beneficiary, at any time upon request, free and clear of any
encumbrance of any kind whatsoever, any and all further assignments and other
instruments deemed necessary by Beneficiary for the purpose of validly and
sufficiently assigning all compensations and awards made to Grantor for any
taking, either permanent or temporary, under any such proceeding.
13. RELEASE OF DEED OF TRUST. Beneficiary agrees to promptly
and unconditionally release this Deed of Trust (subject to the provisions set
forth in Section 6(b)) as follows:
(a) in the event of a bona fide sale (other than a "sale
leaseback" or other similar financing transaction) of the Trust Property to a
third party that is not affiliated with Grantor, provided that each of the
following conditions is satisfied: (i) neither Grantor nor any of its
respective affiliates continue to use or occupy the Trust Property or any
part thereof; (ii) Grantor shall consult with Beneficiary prior to such sale
and shall obtain Beneficiary's prior written consent with respect to such
sale and the sales price (such consent not to be unreasonably withheld); and
(iii) all of the proceeds of such sale are applied towards repayment of the
Obligations or otherwise applied in compliance with the provisions of Section
6(b) hereof.
(b) in the event that Beneficiary is paid in full for all
amounts owing (or which shall or may become owing under the Relevant
Documents) to Beneficiary by Grantor and any of its former affiliated
debtors, including the indefeasible payment and satisfaction in full of the
Obligations.
(c) on December 31, 2014 (or on such earlier date as permitted
under and pursuant to the provisions of Section 6(b) hereof); provided,
however, that if on such date, any amount secured by this Deed of Trust has
not been indefeasibly paid in full, then this Deed of Trust shall be deemed
amended to extend the term hereof until such obligations are so paid.
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14. CHANGES IN THE LAWS REGARDING TAXATION. If any law is
enacted or adopted or amended after the date of this Deed of Trust which
imposes a tax, either directly or indirectly, on the Obligations or
Beneficiary's interest in the Trust Property, Grantor will pay such tax, with
interest and penalties thereon, if any, PROVIDED, HOWEVER, that Grantor shall
not be obligated to pay any tax which is imposed on the net income of
Beneficiary or franchise taxes or doing business taxes imposed on
Beneficiary. In the event that the payment of such tax or interest and
penalties by Grantor would be unlawful or taxable to Beneficiary or
unenforceable or provide the basis for a defense of usury, then in any such
event, Beneficiary shall have the option, by written notice of not less than
ninety (90) days, to declare the Obligations immediately due and payable.
15. NO CREDITS ON ACCOUNT OF THE OBLIGATIONS. (i) Grantor will
not claim or demand or be entitled to any credit or credits on account of the
Obligations for any part of the Impositions assessed against the Trust
Property, or any part thereof, and (ii) no deduction shall otherwise be made
or claimed from the assessed value of the Trust Property, or any part hereof,
for real estate tax purposes by reason of this Deed of Trust or the
Obligations if the effect of such deduction would impose on Beneficiary a
tax, either directly or indirectly, for which it otherwise would not have
been liable.
16. DOCUMENTARY STAMPS. If at any time the United States of
America, any State thereof or any subdivision of any such State shall require
revenue or other stamps to be affixed to the Notes or this Deed of Trust, or
impose any other tax or charge on the same, Grantor will pay for the same,
with interest and penalties thereon, if any.
17. CONTROLLING AGREEMENT. It is expressly stipulated and
agreed to be the intent of Grantor and Beneficiary at all times to comply
with applicable state law or applicable United States federal law (to the
extent that it permits Beneficiary to contract for, charge, take, reserve, or
receive a greater amount of interest than under state law) and that this
Section shall control every other covenant and agreement in this Deed of
Trust and the other Relevant Documents. If the applicable law (state or
federal) is ever judicially interpreted so as to render usurious any amount
called for under the Notes or under any of the other Relevant Documents, or
contracted for, charged, taken, reserved, or received with respect to the
Obligations, or if Beneficiary's exercise of the option to accelerate the
maturity of the Notes, or if any prepayment by Grantor results in Grantor
having paid any interest in excess of that permitted by applicable law, then
it is Grantor's and Beneficiary's express intent that all excess amounts
theretofore collected by Beneficiary shall be credited on the principal
balance of the Notes and all other Obligations (or, if the Notes and all
other Obligations have been or would thereby be paid in full, refunded to
Grantor), and the provisions of the Notes and the other Relevant Documents
immediately be deemed reformed and the amounts thereafter collectible
hereunder and thereunder reduced, without the necessity of the execution of
any new documents, so as to comply with the applicable law, but so as to
permit the recovery of the fullest amount otherwise called for hereunder or
thereunder. All sums paid or agreed to be paid to Beneficiary for the use,
forbearance, or detention of the Obligations shall, to the extent permitted
by applicable law, be amortized, prorated, allocated, and spread throughout
the full
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stated term of the Obligations until payment in full so that the rate or
amount of interest on account of the Obligations does not exceed the maximum
rate of interest permitted by law from time to time in effect and applicable
to the Obligations for so long as the Obligations are outstanding.
18. PERFORMANCE OF OTHER AGREEMENTS. Grantor shall observe and
perform in all respects the terms to be observed or performed by Grantor
under any agreement or recorded instrument affecting or pertaining to the
Trust Property.
19. RIGHT TO PERFORM THE OBLIGATIONS. Subject to the terms of
the Relevant Documents, if any default exists, Beneficiary shall have the
right, but not the obligation, to cure such default in the name and on behalf
of Grantor. All sums advanced and expenses incurred at any time by
Beneficiary under this Section 19, or otherwise under this Deed of Trust or
any of the other Relevant Documents or applicable law (including, without
limitation, the costs and expenses of Beneficiary and its agents incurred in
connection with the preservation, collection and enforcement of this Deed of
Trust or of the liens created hereby), shall bear interest from the date that
such sum is advanced or expense incurred, to and including the date of
reimbursement, computed at the Default Rate (as defined in the Notes), and
all such sums, together with interest thereon, shall constitute additions to
the Obligations and shall be secured by this Deed of Trust and Grantor
covenants and agrees to pay them to the order of the Beneficiary promptly
upon demand.
20. FURTHER ACTS, ETC. Grantor will, at the cost of Grantor,
and without expense to Beneficiary, do, execute, acknowledge and deliver all
and every such further acts, deeds, conveyances, mortgages, deeds of trust,
assignments, notices of assignment, Uniform Commercial Code financing
statements or continuation statements, transfers and assurances as
Beneficiary shall, from time to time, reasonably require, for the better
assuring, conveying, assigning, transferring, and confirming unto Beneficiary
the property and rights hereby mortgaged, given, granted, bargained, sold,
alienated, enfeoffed, conveyed, confirmed, warranted, pledged, assigned and
hypothecated (including, without limitation, the assignment of leases and
rents contained in Section 8 hereof) or intended now or hereafter so to be,
or which Grantor may be or may hereafter become bound to convey or assign to
Beneficiary, or for carrying out the intention or facilitating the
performance of the terms of this Deed of Trust or for filing, registering or
recording this Deed of Trust. Grantor, on demand, will execute and deliver
and, Grantor hereby authorizes Beneficiary to execute in the name of Grantor
or without the signature of Grantor to the extent Beneficiary may lawfully do
so, one or more financing statements, chattel mortgages or other instruments,
to evidence more effectively the security interest of Beneficiary in the
Trust Property. Notwithstanding anything to the contrary contained herein,
Grantor shall not be obligated to execute, deliver, file or record any
additional documents which increase Grantor's obligations under this Deed of
Trust or the Relevant Documents. Grantor grants to Beneficiary an irrevocable
power of attorney coupled with an interest for the purpose of exercising the
rights provided for in Section 19 and this Section 20.
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21. RECORDING OF DEED OF TRUST, ETC. Grantor forthwith upon
the execution and delivery of this Deed of Trust and thereafter, from time to
time, will cause this Deed of Trust, and any security instrument creating a
lien or security interest or evidencing the lien hereof upon the Trust
Property and each instrument of further assurance to be filed, registered or
recorded in such manner and in such places as may be required by any present
or future law in order to publish notice of and fully to protect the lien or
security interest hereof upon, and the interest of Beneficiary in, the Trust
Property. Grantor will pay all filing, registration or recording fees, the
costs and fees of local counsel for Beneficiary, including, without
limitation, costs and fees for local counsel review of the Deed of Trust and
Subordinated Agreement, and the preparation of opinion letters in connection
therewith, and all expenses incident to the execution and acknowledgment of
this Deed of Trust (but not including fees of Beneficiary's New York counsel
in connection with the preparation of this Deed of Trust), any deed of trust
or mortgage supplemental hereto, any security instrument with respect to the
Trust Property and any instrument of further assurance, and all federal,
state, county and municipal, taxes, duties, imposts, assessments and charges
arising out of or in connection with the execution and delivery of this Deed
of Trust, any deed of trust or mortgage supplemental hereto, any security
instrument with respect to the Trust Property or any instrument of further
assurance (other than income or franchise taxes imposed on Beneficiary),
except where prohibited by law so to do. Grantor shall hold harmless and
indemnify Beneficiary, its successors and assigns, against any liability
incurred by reason of the imposition of any tax on the making and recording
of this Deed of Trust. Grantor shall pay all title costs and premiums in
connection with the Beneficiary's policy of title insurance issued by Chicago
Title Insurance Company for the benefit of Beneficiary in connection with
this Deed of Trust (including payment for the cost of any property surveys
prepared in connection therewith), which title insurance policy shall be in
form and substance satisfactory to Beneficiary containing such endorsements
as Beneficiary may reasonably request, including, without limitation, the
deletion of any creditor's rights exception and (to the extent available) a
variable rate endorsement; survey endorsement; comprehensive endorsement;
first loss endorsement; last dollar endorsement; tie-in endorsement; future
advances endorsement; access coverage; tax parcel coverage; contiguity (if
applicable) coverage; and such other endorsements as Beneficiary shall
reasonably require. In the event that any Survey with respect to the Trust
Property reveals any encumbrances, restrictions, building code or zoning
violations or other matters which in Beneficiary's reasonable judgment,
materially impair Beneficiary's first priority lien in the Trust Property,
Grantor agrees to cooperate with Beneficiary in performing any acts
reasonably requested by Beneficiary to cause such encumbrances, restrictions,
violations or other matters to be removed or remedied as appropriate.
22. REPORTING REQUIREMENTS. Grantor agrees to give prompt
notice to Beneficiary of the insolvency or bankruptcy filing of Grantor. In
addition, Grantor will give notice to Beneficiary in writing not later than
ten (10) days after: (i) the occurrence of any Event of Default with respect
to Grantor hereunder, or (ii) notice to Grantor of any action, litigation or
proceeding instituted to recover possession of the Trust Property from
Grantor or for any other purpose affecting this Deed of Trust or of any other
action, litigation or proceeding instituted against Grantor or judgment
rendered against Grantor; and such notice to
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Beneficiary shall include a true copy of any notice of default, or if any
action is then proceeding, copies of any pleadings and papers received by
Grantor.
23. EVENTS OF DEFAULT. The term "EVENT OF DEFAULT" as used
herein shall mean the occurrence or happening, at any time and from time to
time, of one or more of the following events:
(a) a default or event of default under any of the Notes
(including, without limitation, any event of default described in Section 3
of any of the Notes), which remains uncured following the expiration of any
applicable cure periods;
(b) Grantor (i) shall fail to perform when due any payment
obligation under the terms of this Deed of Trust or the other Relevant
Documents within ten days after such amount becomes due, or (ii) shall be in
violation of any of the obligations or covenants contained herein or therein
and such default shall continued unremedied for a period of thirty (30) days,
provided that if such default is not readily susceptible of cure in such
thirty (30) day period, and provided that Grantor proceeds in a diligent
manner to cure such default, Grantor shall have such additional time to
effect such cure as shall be reasonably necessary to effect such cure;
(c) Failure by Grantor to maintain insurance and deliver
evidence thereof pursuant to Section 10; or
(d) a default under any other mortgage, deed of trust or other
security instrument covering the Trust Property or a portion thereof which
remains uncured following the expiration of any applicable cure periods.
24. REMEDIES. (a) Upon the occurrence of any Event of Default,
Beneficiary may take such action or cause Trustee to take such action
permitted in law or at equity, without notice or demand, as it deems
advisable to protect and enforce its rights against Grantor and in and to the
Trust Property, by Beneficiary itself, or through Trustee or otherwise,
including, but not limited to, the following actions, each of which may be
pursued concurrently or otherwise, at such time and in such order as
Beneficiary may determine, in its sole discretion, without impairing or
otherwise affecting the other rights and remedies of Beneficiary:
(i) declare the entire principal amount of the indebtedness and
Obligations secured hereby with interest accrued thereon to be
immediately due and payable;
(ii) institute a proceeding or proceedings, judicial or
nonjudicial, by advertisement or otherwise, for the complete
foreclosure of this Deed of Trust in which case the Trust
Property or any interest therein may be sold for cash or
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upon credit in one or more parcels or in several interests or
portions and in any order or manner in accordance with the laws
of the jurisdiction in which such Trust Property is located;
(iii) with or without entry, to the extent permitted, and
pursuant to the procedures provided by, applicable law, institute
proceedings for the foreclosure of this Deed of Trust for the
Obligations then due and payable subject to the continuing lien
of this Deed of Trust, in accordance with the laws of the
jurisdiction in which such Trust Property is located, for the
balance of the Obligations not then due;
(iv) sell for cash or upon credit the Trust Property or any part
thereof and all estate, claim, demand, right, title and interest
of Grantor therein and rights of redemption thereof, pursuant to
power of sale or otherwise, at one or more sales, as an entirety
or in parcels, at such time and place, upon such terms and after
such notice thereof as may be required or permitted by the laws
of the jurisdiction in which such Trust Property is located;
(v) institute an action, suit or proceeding in equity for
the specific performance of any covenant, condition or agreement
contained herein or in the other Relevant Documents;
(vi) recover judgment on the Notes either before, during or
after any proceedings for the enforcement of this Deed of Trust;
(vii) prior to, concurrently with, or subsequent to the
institution of foreclosure proceedings, apply for the appointment
of a trustee, receiver, liquidator or conservator of the Trust
Property, as a matter of strict right, without notice and without
regard for the adequacy of the security for the Obligations or
the interest of the Grantor therein and without regard for the
solvency of the Grantor or of any person, firm or other entity
liable for the payment of the Obligations, and Grantor hereby
consents to such appointment;
(viii) prior to, concurrently with or subsequent to the
institution of foreclosure proceedings, enforce Beneficiary's
interest in the Leases and Rents and enter into or upon the Trust
Property and take exclusive possession thereof, either personally
or by its agents, nominees or attorneys and dispossess Grantor
and its agents and servants therefrom, and thereupon Beneficiary
may (whether or not a receiver has been appointed) as
attorney-in-fact or agent of Grantor, or in its own name and
under the powers herein granted,(A) use, operate, manage,
control, insure, maintain, repair, restore and otherwise deal
with all and every part of the Trust Property and conduct the
business thereat; (B) complete any construction on the Trust
Property in such manner and form as Beneficiary deems advisable;
(C) make alterations, additions, renewals, replacements and
improvements to or on the Trust Property; (D) exercise all rights
and powers of
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Grantor with respect to the Trust Property, whether in the name
of Grantor or otherwise (including, without limitation, the right
to make, cancel, enforce or modify Leases, obtain and evict
tenants, and demand, sue for, collect and receive all earnings,
revenues, rents, issues, profits and other income of the Trust
Property and every part thereof); and (E) apply the receipts from
the Trust Property to the payment of the Obligations, after
deducting therefrom all reasonable expenses (including, without
limitation, reasonable attorneys' fees) incurred in connection
with the aforesaid operations and all amounts necessary to pay
the taxes, assessments, insurance and other charges in connection
with the Trust Property, it being agreed that should Beneficiary
incur any liability, loss or damage in the defense of any claims
or demands, the amount thereof, including costs, expenses and
reasonable attorneys' fees shall be secured hereby, and Grantor
shall reimburse Beneficiary therefor immediately upon demand;
(ix) require Grantor to pay monthly in advance to Beneficiary, or
any receiver appointed to collect the Rents, the fair and
reasonable rental value for the use and occupation of any portion
of the Trust Property occupied by Grantor and require Grantor to
vacate and surrender possession to Beneficiary of the Trust
Property or to such receiver and, in default thereof, evict
Grantor by summary proceedings or otherwise; and
(x) pursue such other rights and remedies as may be available
under the Relevant Documents or otherwise at law or in equity or
under the Uniform Commercial Code including the right to
establish a lock box for all Rents and other receivables of
Grantor relating to the Trust Property.
In the event of a sale, by foreclosure or otherwise, of less than all of the
Trust Property, this Deed of Trust shall continue as a lien on the remaining
portions of the Trust Property.
The proceeds of any sale made under or by virtue of this
Section 24, together with any other sums which then may be held by
Beneficiary under this Deed of Trust, whether under the provisions of this
Section or otherwise, shall be applied by Beneficiary in the following order
of priority: first, on account of all reasonable costs and expenses incident
to the foreclosure proceedings, including all such items as are mentioned in
this Section 24; second, all other items which under the terms hereof
constitute secured indebtedness, which are any amounts due under this Deed of
Trust, or under the other Relevant Documents (including any amounts required
to be escrowed pursuant to Section 6(b)); third, any surplus to Grantor, its
successors or assigns, as their rights may appear.
(b) Upon any sale made under or by virtue of this Section 24,
whether made under the power of sale herein granted or under or by virtue of
judicial proceedings or of a judgment or decree of foreclosure and sale,
Beneficiary may bid for and acquire the Trust Property or any part thereof
and in lieu of paying cash therefor may make settlement for the purchase
price by crediting upon the Obligations the net sales price after deducting
therefrom
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the expenses of the sale and costs of the action and any other sums which
Beneficiary is authorized to deduct under this Deed of Trust.
(c) No recovery of any judgment by Beneficiary and no levy of
an execution under any judgment upon the Trust Property or upon any other
property of Grantor shall affect in any manner or to any extent the lien of
this Deed of Trust upon the Trust Property or any part thereof, or any liens,
rights, powers or remedies of Beneficiary hereunder, but such liens, rights,
powers and remedies of Beneficiary shall continue unimpaired as before.
(d) Beneficiary may adjourn, terminate or rescind any
proceeding or other action brought in connection with its exercise of the
remedies provided in this Section 24 at any time before the conclusion
thereof, as determined in Beneficiary's sole discretion and without prejudice
to Beneficiary.
(e) Beneficiary may resort to any remedies and the security
given by this Deed of Trust or the other Relevant Documents in whole or in
part, and in such portions and in such order as determined by Beneficiary's
sole discretion. No such action shall in any way be considered a waiver of
any rights, benefits or remedies evidenced or provided by this Deed of Trust
or the other Relevant Documents. The failure of Beneficiary to exercise any
right, remedy or option provided in this Deed of Trust or the other Relevant
Documents shall not be deemed a waiver of such right, remedy or option or of
any covenant or obligation secured by this Deed of Trust or the other
Relevant Documents. Subject to the provisions of the Relevant Documents, no
acceptance by Beneficiary of any payment after the occurrence of any Event of
Default and no payment by Beneficiary of any obligation for which Grantor is
liable hereunder shall be deemed to waive or cure any Event of Default with
respect to Grantor, or Grantor's liability to pay such obligation. No sale of
all or any portion of the Trust Property, no forbearance on the part of
Beneficiary and no extension of time for the payment of the whole or any
portion of the Obligations or any other indulgence given by Beneficiary to
Grantor, shall operate to release or in any manner affect the interest of
Beneficiary in the remaining Trust Property or the liability of Grantor to
pay the Obligations. No waiver by Beneficiary shall be effective, unless it
is in writing and then only to the extent specifically stated.
(f) The interests and rights of Beneficiary under this Deed of
Trust and the other Relevant Documents, and the liens and security interests
created and evidenced by this Deed of Trust and the other Relevant Documents,
shall not be impaired by any indulgence, including (i) any renewal, extension
or modification which Beneficiary may grant with respect to any of the
Obligations, (ii) any surrender, compromise, release, renewal, extension,
exchange or substitution which Beneficiary may grant with respect to the
Trust Property or any portion thereof; or (iii) any release or indulgence
granted to any maker, endorser, guarantor or surety of any of the Obligations.
(g) Upon the occurrence of any Event of Default under Section
23, in any suit to foreclose the lien hereof or enforce any other remedy of
Beneficiary under this Deed of Trust, there shall be allowed and included as
additional indebtedness in the decree for sale or other judgment or decree
all reasonable expenditures and expenses which may be paid or
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incurred by or on behalf of Beneficiary for attorneys' fees, appraiser's
fees, outlays for documentary and expert evidence, stenographers' charges,
publication costs, and costs (which may be estimated as to items to be
expended after entry of the decree) of procuring all such abstracts of title,
title searches and examinations, title insurance policies, Torrens
certificates, and similar data and assurances with respect to title as
Beneficiary may deem reasonably necessary either to prosecute such suit or to
evidence to bidders at any sale which may be had pursuant to such decree the
true condition of the title to or the value of the Trust Property. All such
reasonable expenditures and expenses which Beneficiary may incur as permitted
by this Section for the protection of the Trust Property and the maintenance
of the lien of this Deed of Trust, including, but not limited to, the fees
and out-of-pocket disbursements of any attorney employed by Beneficiary in
any litigation or proceeding affecting this Deed of Trust, including, but not
limited to, bankruptcy proceedings or preparations for the commencement or
defense of any proceeding or threatened suit or proceeding, shall be
immediately due and payable by Grantor and shall be secured by this Deed of
Trust.
25. RIGHT OF ACCESS. Grantor shall permit agents,
representatives and employees of Beneficiary to (i) inspect the Trust
Property or any part thereof, PROVIDED that such inspection does not
materially interfere with the tenants of the Trust Property or violate the
terms of any Lease, (ii) to examine and make abstracts from any of Grantor's
books and records and (iii) to discuss the business, operations, properties
and financial and other condition of Grantor with officers of Grantor and
with its independent certified public accountants, at such reasonable times
as may be requested by Beneficiary upon reasonable advance notice.
26. SECURITY AGREEMENT. This Deed of Trust is both a real
property deed of trust and a "security agreement" within the meaning of the
Uniform Commercial Code. The Trust Property includes both real and personal
property and all other rights and interests, whether tangible or intangible
in nature, of Grantor in the Trust Property. Grantor by executing and
delivering this Deed of Trust has granted and hereby grants to Beneficiary,
as security for the Obligations, a security interest in the Trust Property to
the full extent that the Trust Property may be subject to the Uniform
Commercial Code (said portion of the Trust Property so subject to the Uniform
Commercial Code being called in this paragraph the "COLLATERAL"). Grantor
hereby agrees with Beneficiary to execute and deliver to Beneficiary, in form
and substance satisfactory to Beneficiary, such financing statements and such
further assurances as Beneficiary may from time to time, reasonably consider
necessary to create, perfect, and preserve Beneficiary's security interest
herein granted. All or part of the Trust Property is or is to become
"fixtures" as defined in the Uniform Commercial Code, and this Deed of Trust,
upon being filed for record in the real estate records of the city or county
wherein such fixtures are situated, shall also constitute a "fixture filing"
for the purposes of the Uniform Commercial Code upon such of the Trust
Property that is or may become fixtures. Information concerning the security
interest herein granted may be obtained from the parties at the addresses of
the parties set forth in the first paragraph of this Deed of Trust. Grantor's
chief executive office and principal place of business is the Grantor's
address set forth in the first paragraph of this Deed of Trust, and the place
where Grantor's books and
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records in respect of where the Trust Property is located are kept is the
address of Grantor set forth in the first paragraph of this Deed of Trust. If
an Event of Default shall occur which shall remain uncured, Beneficiary, in
addition to any other rights and remedies which it may have, shall have and
may exercise immediately and without demand, any and all rights and remedies
granted to a secured party upon default under the Uniform Commercial Code,
(including, without limitation, to the extent permitted by law, the right to
take possession of the Collateral or any part thereof, and to take such other
measures as Beneficiary may deem necessary for the care, protection and
preservation of the Collateral). Upon request or demand of Beneficiary or
Trustee, Grantor shall at its expense assemble the Collateral and make it
available to Beneficiary at a convenient place acceptable to Beneficiary.
Grantor shall pay to Beneficiary on demand therefor any and all reasonable
expenses (including, without limitation, reasonable legal expenses and
attorneys' fees) incurred or paid by Beneficiary in protecting the interest
in the Collateral and in enforcing the rights hereunder with respect to the
Collateral. Any notice of sale, disposition or other intended action by
Beneficiary with respect to the Collateral sent to Grantor at least ten (10)
business days prior to such action or such notice as is otherwise required by
law or the Relevant Documents, shall constitute commercially reasonable
notice to Grantor. The proceeds of any disposition of the Collateral, or any
part thereof, may be applied by Beneficiary to the payment of the Obligations
in such priority and proportions as Beneficiary shall determine in its sole
discretion. In the event of any change in name, identity or structure of
Grantor, Grantor shall notify Beneficiary thereof and, promptly after
request, shall execute, file and record such Uniform Commercial Code forms as
are necessary to maintain the priority of Beneficiary's lien upon and
security interest in the Collateral, and shall pay all expenses and fees in
connection with the filing and recording thereof. If Beneficiary shall
require the filing or recording of additional Uniform Commercial Code forms
or continuation statements, Grantor shall, promptly after request, execute,
file and record such Uniform Commercial Code forms or continuation statements
as Beneficiary shall deem necessary, and shall pay all expenses and fees in
connection with the filing and recording thereof, it being understood and
agreed, however, that no such additional documents shall materially increase
Grantor's obligations under this Deed of Trust or the other Relevant
Documents. Grantor hereby irrevocably appoints Beneficiary as its
attorney-in-fact, coupled with an interest, to file with the appropriate
public office on its behalf any UCC financing statements (or related
documents) signed only by Beneficiary, as secured party, in connection with
the Collateral covered by this Deed of Trust, such appointment to terminate
upon the release of this Deed of Trust.
27. ACTIONS AND PROCEEDINGS. Beneficiary has the right to
appear in and defend any action or proceeding brought with respect to the
Trust Property and to bring any action or proceeding, in the name and on
behalf of Grantor, which Beneficiary, in its reasonable discretion, decides
should be brought to protect its interest under this Deed of Trust or in the
Trust Property. Subject to the foregoing, Grantor shall appear in and contest
any action or proceeding purporting to affect the security hereof and shall
pay all reasonable costs and expenses including cost of evidence of title and
attorney's fees, in any such action or proceeding in which Beneficiary may
appear. Beneficiary shall, at its option, be subrogated to the lien of any
mortgage or other security instrument discharged in whole or in part by the
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Obligations, and any such subrogation rights shall constitute additional
security for the payment of the Obligations.
28. WAIVER OF SETOFF AND COUNTERCLAIM. Except as may be
permitted under the Relevant Documents, all amounts due under this Deed of
Trust, the Notes and the other Relevant Documents shall be payable without
setoff or counterclaim whatsoever.
29. LIENS. Grantor warrants, covenants and agrees to pay and
promptly discharge, at Grantor's cost and expense, all taxes, assessments and
governmental charges levied upon it, its income and assets as and when such
taxes, assessments and charges are due and payable (including, without
limitation, all Impositions), as well as all lawful claims for labor
materials and supplies or otherwise which could become a lien, and all liens,
encumbrances and charges upon the Trust Property, or any part thereof or
interest therein; provided that the existence of any mechanic's, laborer's,
materialman's, supplier's or vendor's lien or right thereto shall not
constitute a violation of this Section if payment is not yet due under the
contract which is the foundation thereof. Notwithstanding the foregoing,
Grantor shall not be in default for failure to pay or discharge Impositions
or mechanic's or materialman's or similar lien asserted against the Trust
Property if, and so long as, (a) Grantor shall have notified Beneficiary of
same within seven (7) days of obtaining knowledge thereof; (b) Grantor shall
diligently and in good faith contest the same by appropriate legal
proceedings which shall operate to prevent the enforcement or collection of
the same and the sale of the Trust Property or any part thereof, to satisfy
the same; (c) unless funds are otherwise reserved, Grantor shall furnish to
Beneficiary such security as Beneficiary may reasonably request to insure
payment of such Impositions and to secure and indemnify Beneficiary against
any cost, expense, loss or damage in connection with such contest or
postponement of payment,; (d) Grantor shall timely upon final determination
thereof pay the amount of any such Impositions, claim, fine or penalty so
determined, together with all costs, interest and penalties which may be
payable in connection therewith; (e) the failure to pay the Impositions, or
mechanic's or materialman's or similar lien claim does not constitute a
default under any other deed of trust, mortgage or security interest covering
or affecting any part of the Trust Property; and (f) notwithstanding the
foregoing, Grantor shall immediately upon request of Beneficiary pay (and if
Grantor shall fail so to do, Beneficiary may, but shall not be required to,
pay or cause to be discharged or bonded against) any such Impositions, or
claim notwithstanding such contest, if in the reasonable opinion of
Beneficiary, the Trust Property or any part thereof or interest therein may
be in imminent danger of being sold, forfeited, foreclosed, terminated,
canceled or lost.
30. RECOVERY OF SUMS REQUIRED TO BE PAID. Beneficiary shall
have the right from time to time to take action to recover any sum or sums
which constitute a part of the Obligations as the same become due and owing,
without regard to whether or not the balance of the Obligations shall be due,
and without prejudice to the right of Beneficiary thereafter to bring an
action of foreclosure, or any other action, for a default or defaults by
Grantor existing at the time such earlier action was commenced.
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31. MARSHALING, WAIVER OF REDEMPTION AND OTHER MATTERS.
Grantor hereby waives, to the extent permitted by law, the benefit of all
appraisement, valuation, stay, extension, reinstatement, moratorium and
redemption laws now or hereafter in force and all rights of marshaling in the
event of any sale hereunder of the Trust Property or any part thereof or any
interest therein. Further, Grantor hereby expressly waives any and all rights
of redemption from sale under any order or decree of foreclosure of this Deed
of Trust on behalf of Grantor, and on behalf of each and every person
acquiring any interest in or title to the Trust Property subsequent to the
date of this Deed of Trust and on behalf of all persons to the extent
permitted by applicable law.
32. NOTICE. Any notice which either party hereto may desire or
be required to give to the other party shall be in writing and delivered by:
(x) a commercial courier or messenger service or (y) by U.S. registered or
certified mail with return receipt requested. Notice by commercial messenger
or courier service will be deemed to have been given on the day when
delivered before 4:00 p.m. on a business day in the city in which notice is
delivered, provided that payment for the cost of delivery is not requested of
the recipient. Notice by mail shall be given by registered or certified U.S.
Mail, return receipt requested. Delivery of notice by commercial messenger or
courier service or mail shall be assumed if acceptance of delivery is
refused. Notice may be given by fax but will only be treated as delivered
hereunder if: (x) sent between the hours of 9:00 a.m. and 5:00 p.m. (based on
local time at the destination); and (y) receipt is acknowledged by fax and
delivery will be deemed to have been given on the date the fax acknowledgment
is sent. Notices shall be delivered as follows or at such other place as
either party hereto may by notice in writing (given in accordance with this
Section 32) designate:
To Grantor: Discovery Zone, Inc.
One Corporate Center
110 East Broward Boulevard
Fort Lauderdale, Florida 33301
Attn: President
Telecopy Number: (954) 627-2670
To Beneficiary: McDonald's Corporation
One McDonald's Plaza
Oak Brook, IL 60523
Attn: General Counsel
Telecopy Number: (630) 623-3000
33. SOLE DISCRETION OF BENEFICIARY. Wherever pursuant to this
Deed of Trust, Beneficiary exercises any right given to it to approve or
disapprove, or any arrangement or term is to be satisfactory to Beneficiary,
the decision of Beneficiary to approve or disapprove or to decide that
arrangements or terms are satisfactory or not satisfactory shall be
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in the sole discretion of Beneficiary and shall be final and conclusive, except
as may be otherwise expressly and specifically provided herein.
34. NON-WAIVER. The failure of Beneficiary to insist upon
strict performance of any term hereof shall not be deemed to be a waiver of
any term of this Deed of Trust. Grantor shall not be relieved of Grantor's
Obligations hereunder by reason of (a) the failure of Beneficiary to comply
with any request of Grantor to take any action to foreclose this Deed of
Trust or otherwise enforce any of the provisions hereof or of the other
Relevant Documents, (b) the release, regardless of consideration, of the
whole or any part of the Trust Property, or of any person liable for the
Obligations or any portion thereof, or (c) any agreement or stipulation by
Beneficiary extending the time of payment or otherwise modifying or
supplementing the terms of this Deed of Trust or the other Relevant
Documents. Beneficiary may resort for the payment of the Obligations to any
other security held by Beneficiary in such order and manner as Beneficiary,
in its discretion, may elect. Beneficiary may take action to recover the
Obligations, or any portion thereof, or to enforce any covenant hereof
without prejudice to the right of Beneficiary thereafter to foreclosure this
Deed of Trust. The rights and remedies of Beneficiary under this Deed of
Trust shall be separate, distinct and cumulative and none shall be given
effect to the exclusion of the others. No act of Beneficiary shall be
construed as an election to proceed under any one provision herein to the
exclusion of any other provision. Beneficiary shall not be limited
exclusively to the rights and remedies herein stated but shall be entitled to
every right and remedy now or hereafter afforded at law or in equity.
35. NO ORAL CHANGE. This Deed of Trust and the other Relevant
Documents constitute the final expression of the entire agreement among the
parties pertaining to the subject matter hereof and thereof and supersede all
prior and contemporaneous agreements, understanding, representations or other
arrangements, whether express or implied, written or oral, of the parties in
connection herewith or therewith except to the extent expressly incorporated or
specifically referred to herein or therein. This Deed of Trust, and any
provisions hereof, may not be modified, amended, waived, extended, changed,
discharged or terminated orally or by any act or failure to act on the part of
Grantor or Beneficiary, but only by an agreement in writing signed by the party
against whom enforcement of any modification, amendment, waiver, extension,
change, discharge or termination is sought.
36. SUCCESSORS AND ASSIGNS. Subject to the provisions hereof
requiring Beneficiary's consent to any transfer of the Trust Property, this Deed
of Trust shall be binding upon and inure to the benefit of Grantor and
Beneficiary and their respective permitted successors and assigns forever.
37. SEVERABILITY. If any term, covenant or condition of this Deed
of Trust or the Relevant Documents is held to be invalid, illegal or
unenforceable in any respect, this Deed of Trust and any such other Relevant
Document shall be construed without such provision.
29
<PAGE>
38. HEADINGS, ETC. The headings and captions of various
paragraphs of this Deed of Trust are for convenience of reference only and are
not to be construed as defining or limiting, in any way, the scope or intent of
the provisions hereof.
39. DUPLICATE ORIGINALS. This Deed of Trust may be executed in
any number of duplicate originals and each such duplicate original shall be
deemed to be an original.
40. DEFINITIONS. Unless the context clearly indicates a contrary
intent or unless otherwise specifically provided herein, words used in this Deed
of Trust may be used interchangeably in singular or plural form and the word
"Grantor" shall mean "each Grantor and any subsequent owner or owners of the
Trust Property or any part thereof or any interest therein," the word
"Beneficiary" shall mean "Beneficiary and any subsequent holder(s) of the
Notes," the word "person" shall include an individual, corporation, partnership,
trust, unincorporated association, government, governmental authority, and any
other entity, and the words "Trust Property" shall include any portion of the
Trust Property and any interest therein and the words "attorneys' fees" shall
include any and all attorneys' fees, paralegal and law clerk fees (including,
without limitation, fees at the pre-trial, trial and appellate levels incurred
or paid by Beneficiary in protecting its interest in the Trust Property and
Collateral and enforcing its rights hereunder and all such fees incurred in
connection with any bankruptcy or insolvency proceedings). Whenever the context
may require, any pronouns used herein shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns and pronouns shall
include the plural and vice versa.
41. HOMESTEAD. Grantor hereby waives and renounces all homestead
and exemption rights provided by the constitution and the laws of the United
States and of any state, in and to the Land as against the collection of the
Obligations, or any part hereof.
42. ASSIGNMENTS. Consistent with and subject to the applicable
provisions of the Relevant Documents, Beneficiary shall have the right to assign
or transfer its rights under this Deed of Trust without limitation. Any
Beneficiary or transferee shall be entitled to all the benefits afforded
Beneficiary under this Deed of Trust.
43. WAIVER OF JURY TRIAL. TO THE MAXIMUM EXTENT PERMITTED BY
APPLICABLE LAW, EACH PARTY HERETO HEREBY AGREES NOT TO ELECT A TRIAL BY JURY OF
ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY JURY FULLY
TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO
THE NOTES, THIS DEED OF TRUST, OR THE OTHER RELEVANT DOCUMENTS, OR ANY CLAIM,
COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH. THIS WAIVER OF
RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY SUCH PARTY, AND IS
INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE
RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE. BENEFICIARY IS HEREBY
30
<PAGE>
AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE
EVIDENCE OF THIS WAIVER BY GRANTOR.
44. CONSENT TO JURISDICTION. GRANTOR AND BENEFICIARY HERETO
CONSENT FOR THEMSELVES AND IN RESPECT OF THEIR PROPERTIES, GENERALLY,
UNCONDITIONALLY AND IRREVOCABLY, TO THE NONEXCLUSIVE JURISDICTION OF THE FEDERAL
AND STATE COURTS IN THE STATE OF NEW YORK WITH RESPECT TO ANY PROCEEDING
RELATING TO ANY MATTER, CLAIM OR DISPUTE ARISING UNDER THE RELEVANT DOCUMENTS OR
THE TRANSACTIONS CONTEMPLATED THEREBY. GRANTOR FURTHER CONSENTS, GENERALLY,
UNCONDITIONALLY AND IRREVOCABLY, TO THE NONEXCLUSIVE JURISDICTION OF THE STATE
AND FEDERAL COURTS OF THE STATE IN WHICH ANY OF THE COLLATERAL IS LOCATED IN
RESPECT OF ANY PROCEEDING RELATING TO ANY MATTER, CLAIM OR DISPUTE ARISING WITH
RESPECT TO SUCH COLLATERAL. GRANTOR FURTHER IRREVOCABLY CONSENTS TO THE SERVICE
OF PROCESS, GENERALLY, UNCONDITIONALLY AND IRREVOCABLY, AT THE ADDRESSES SET
FORTH IN THE FIRST PARAGRAPH HEREOF IN CONNECTION WITH ANY OF THE AFORESAID
PROCEEDINGS IN ACCORDANCE WITH THE RULES APPLICABLE TO SUCH PROCEEDINGS. TO THE
EXTENT PERMITTED BY APPLICABLE LAW, GRANTOR HEREBY IRREVOCABLY WAIVES ANY
OBJECTION WHICH IT MAY NOW HAVE OR HAVE IN THE FUTURE TO THE LAYING OF VENUE IN
RESPECT OF ANY OF THE AFORESAID PROCEEDINGS BROUGHT IN THE COURTS REFERRED TO
ABOVE AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
NOTHING HEREIN SHALL AFFECT THE RIGHT OF BENEFICIARY TO SERVE PROCESS IN ANY
MANNER PERMITTED BY LAW OR TO COMMENCE PROCEEDINGS OR OTHERWISE PROCEED AGAINST
GRANTOR IN ANY JURISDICTION.
45. GOVERNING LAW. This Deed of Trust shall be governed by and
construed in accordance with the laws of the State of New York including,
without limitation, Section 5-1401 of the General Obligations Law, but otherwise
without regard to conflict of law principles; PROVIDED, HOWEVER, that with
respect to the creation, attachment, perfection, priority and procedures
relating to the enforcement of the liens and security interests created by or
pursuant to this Deed of Trust and relating to real property, this Deed of Trust
shall be governed by and construed in accordance with the laws of the state in
which the Land is located.
46. LIEN ABSOLUTE, MULTI-SITE REAL ESTATE AND MULTIPLE COLLATERAL
TRANSACTION. Grantor acknowledges that this Deed of Trust and a number of other
Relevant Documents and those documents required by the Relevant Documents
together secure the Obligations. Grantor agrees that the lien of this Deed of
Trust and all obligations of the
31
<PAGE>
Grantor hereunder shall be absolute and unconditional and shall not in any
manner be affected or impaired by:
(a) any lack of validity or enforceability of the Notes or any
other Relevant Document, any agreement with respect to any of the Obligations or
any other agreement or instrument relating to any of the foregoing;
(b) any acceptance by Beneficiary of any security for or
guarantees of any of the indebtedness hereby secured;
(c) any failure, neglect or omission on the part of Beneficiary
to realize upon or protect any of the indebtedness hereby secured or any of the
collateral security therefor, including the Relevant Documents;
(d) any change in the time, manner or place of payment of, or in
any other term of, all or any of the Obligations;
(e) any release (except as to the property or obligation
released), sale, pledge, surrender, compromise, settlement, nonperfection,
renewal extension, indulgence, alteration, exchange, modification or disposition
of any of the Obligations hereby secured or of any of the collateral security
therefor;
(f) any amendment or waiver of or any consent to any departure
from the Notes or any other Relevant Documents or of any guaranty thereof
(except to the extent of such amendment, waiver or consent in writing by
Beneficiary), if any, and Beneficiary may in its discretion foreclose, exercise
any power of sale, or exercise any other remedy available to it under any or all
of the Relevant Documents without first exercising or enforcing any of its
rights and remedies hereunder; and
(g) any exercise of the rights or remedies of Beneficiary
hereunder or under any or all of the Relevant Documents.
Grantor specifically consents and agrees that Beneficiary may exercise its
rights and remedies hereunder and under the other Relevant Documents separately
or concurrently and in any order that Beneficiary may deem appropriate.
47. FUTURE ADVANCES. Grantor and Beneficiary expressly intend
that future and additional loans and advances will be secured by this Deed of
Trust and this Deed of Trust shall secure not only the existing indebtedness,
but shall also secure all funds hereafter advanced as contemplated by any
covenant or provision herein or for any other purpose, and all other
indebtedness, of whatever kind or character, owing or which may hereafter become
owing, however such indebtedness is evidenced. Such future advances shall be
secured to the same extent as if made on the date of execution of this Deed of
Trust.
32
<PAGE>
48. STATE SPECIFIC PROVISIONS. The provisions of Exhibit B are
hereby incorporated by reference as though set forth in full herein.
49. NO MERGER OF ESTATES. It is the intention and agreement of
Grantor and Beneficiary that there shall be no merger of any leasehold estate in
the Trust Property with the fee interest in the Trust Property or any other
estate or interest in the Trust Property, and there shall be no merger of this
Deed of Trust and any estate in the Trust Property, by reason of the fact that
the same person may own or hold (a) any leasehold interest in the Trust
Property, and/or (b) this Deed of Trust, and/or (c) the fee interest in the
Trust Property or any other estate or interest in the Trust Property.
50. CONCERNING THE TRUSTEE. Trustee shall be under no duty to
take any action hereunder except as expressly required hereunder or by law, or
to perform any act which would involve Trustee in any expense or liability or to
institute or defend any suit in respect hereof, unless properly indemnified to
Trustee's reasonable satisfaction. Trustee, by acceptance of this Deed of Trust,
covenants to perform and fulfill the trusts herein created, being liable,
however, only for willful negligence or misconduct, and hereby waives any
statutory fee and agrees to accept reasonable compensation, in lieu thereof, for
any services rendered by Trustee in accordance with the terms hereof. Trustee
may resign at any time upon giving thirty (30) days' notice to Grantor and to
Beneficiary. Beneficiary may remove Trustee at any time or from time to time,
and select a successor trustee. In the event of the death, removal, resignation,
refusal to act, or inability to act of Trustee, or in its sole discretion for
any reason whatsoever Beneficiary may, without notice and without specifying any
reason therefor and without applying to any court, select and appoint a
successor trustee, and, if necessary, several successor Trustees in succession,
who shall succeed to all the estate, rights, powers, and duties of the original
Trustee named herein, without any other formality than an appointment and
designation in writing (or other formality required by applicable law, if any).
Such substitute trustee shall not be required to give bond for the faithful
performance of the duties of Trustee hereunder unless required by Beneficiary.
The procedure provided for in this paragraph for substitution of Trustee shall
be in addition to and not in exclusion of any other provisions for substitution,
by law or otherwise.
51. TRUSTEE'S FEES. Grantor shall pay all reasonable costs, fees
and expenses incurred by Trustee and Trustee's agents and counsel in connection
with the performance by Trustee of Trustee's duties hereunder and all such
costs, fees and expenses shall be secured by this Deed of Trust. TRUSTEE SHALL
BE INDEMNIFIED, HELD HARMLESS AND REIMBURSED BY GRANTOR FOR ANY LIABILITY,
DAMAGE OR EXPENSE, INCLUDING REASONABLE ATTORNEYS' FEES AND AMOUNTS PAID IN
SETTLEMENT, WHICH TRUSTEE MAY INCUR OR SUSTAIN IN CONNECTION WITH THIS DEED OF
TRUST OR IN THE DOING OF ANY ACT WHICH TRUSTEE IS REQUIRED OR PERMITTED TO DO BY
THE TERMS HEREOF OR BY LAW (EXCEPT TO THE EXTENT ARISING FROM THE GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OF TRUSTEE), AND SHALL BE REIMBURSED THEREFOR
UPON DEMAND.
33
<PAGE>
52. SUBORDINATE LIEN. Notwithstanding anything to the contrary
contained herein, Grantor shall be permitted to grant a subordinate lien on the
Trust Property in favor of State Street Bank and Trust Company, solely in its
capacity as trustee and collateral agent under and pursuant to the Indenture (as
hereinafter defined) (the "SUBORDINATED CREDITOR") as security for the
obligations of Grantor under that certain Indenture between Grantor and the
Subordinated Creditor dated as of July 22, 1997 (the "INDENTURE"), provided that
such lien in favor of the Subordinated Creditor is junior, subject and
subordinate to the lien of this Deed of Trust in accordance with and pursuant to
the terms and conditions set forth in that certain Subordination Agreement dated
as of the date hereof between Beneficiary and the Subordinated Creditor with
respect to the Trust Property (the "SUBORDINATION AGREEMENT"), and provided,
further, that any event which gives the Subordinated Creditor the right to
accelerate the obligations secured by such subordinate lien shall automatically
constitute an Event of Default hereunder.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE AND NOTARY PAGES FOLLOW.]
34
<PAGE>
Grantor has executed this instrument as of the day and year first above written.
GRANTOR:
DISCOVERY ZONE, INC., a
Delaware corporation, as
successor in interest to LEAPS
& BOUNDS, INC.
By: /s/ Robert Rooney
---------------------------
Name: Robert Rooney
Title: Sr. V.P.
<PAGE>
STATE OF NEW YORK )
COUNTY OF WESTCHESTER)
This instrument was acknowledged before me on July __, 1997, by
Robert Rooney, Sr. V.P. of DISCOVERY ZONE, INC., a Delaware corporation, on
behalf of said corporation.
/s/ Mark D. Woodward
---------------------------
Notary Public, State of New York
[NOTARIAL SEAL]
<PAGE>
Leon Valley
Bexar County, Texas
EXHIBIT A
LOT 9,
BLOCK 6,
COUNTY BLOCK 4429,
BANDERA EXCHANGE
UNIT 16,
AN ADDITION TO THE CITYY OF LEON VALLEY, BEXAR COUNTY, TEXAS ACCORDING TO THE
MAP OR PLAT THEREOF, RECORDED IN VOLUME 9528, PAGE 8, DEED AND PLAT RECORDS OF
BEXAR COUNTY, TEXAS.
<PAGE>
EXHIBIT B
STATE SPECIFIC PROVISIONS (Texas)
The following provisions are incorporated by reference into
Section 48 of the attached Deed of Trust. If any conflict or inconsistency
exists between this Exhibit B and the remainder of the attached Deed of Trust,
this Exhibit B shall govern.
A. FORECLOSURE PROCEEDINGS. The provisions of Section 24
notwithstanding, foreclosure proceedings shall include without limitation
non-judicial foreclosure pursuant to a power of sale in accordance with statutes
of the State of Texas then in force governing sales of real estate under powers
of sale conferred by deed of trust. Upon the occurrence and during the
continuance of an Event of Default, or at any time thereafter, Grantor
authorizes and empowers the Trustee, at the request of Beneficiary (which
request is hereby conclusively presumed), to enforce this Deed of Trust by
selling, in one or more sales as Beneficiary or Trustee may elect, the Trust
Property then subject to the lien hereof at public auction, to the highest
bidder, for cash or for credit against the indebtedness secured hereby if
Beneficiary is the highest bidder, at the county court house in the county in
Texas in which such Trust Property or any part thereof is situated, as herein
described, in the area designated by the commissioners court for such purpose
pursuant to a recordation of such designation in the real property records of
such county, or if no such recorded designation by the commissioners court has
been made, in the area at the county court house designated in the notice of
proposed sale posted, filed and served in accordance with the further provisions
of this paragraph, between the hours of 10:00 a.m. and 4:00 p.m. on the first
Tuesday of any month. The Trustee shall give notice of the time, place and terms
of said sale, and of the property to be sold as follows: (i) Notice of such
proposed sale shall be given by posting written notice thereof at least
twenty-one days preceding the date of the sale at the court house door, and by
filing a copy of the Notice in the office of the county clerk of the county in
which the sale is to be made, and if the property to be sold is situated in more
than one county, one notice shall be posted at the court house door and filed
with the county clerk of each county in which the property to be sold is
situated. In addition, Beneficiary shall, at least twenty-one days preceding the
date of sale, serve written notice of the proposed sale by certified mail on
each debtor obligated to pay the debt secured hereby according to the records of
Beneficiary. Service of such notice shall be completed upon deposit of the
notice, enclosed in a postpaid wrapper, properly addressed to each such debtor
at the most recent address as shown by the records of Beneficiary, in a post
office or official depository under the care and custody of the United States
Postal Service. The affidavit of any person having knowledge of the facts to the
effect that such service was completed shall be prima facie evidence of the fact
of service; (ii) Any notice that is required or permitted to be given to Grantor
may be addressed to Grantor at Grantor's mailing address. Any notice that is to
be given by certified mail to any other debtor may, if no address for such other
debtor is shown by the records of Beneficiary, be addressed to such other debtor
at Grantor's mailing address. Notwithstanding the foregoing provisions of this
paragraph (ii), notice of such sale given in accordance with the requirements of
the applicable law of the State of Texas in effect at the time of such sale
shall constitute sufficient
<PAGE>
notice of such sale. Grantor hereby authorizes and empowers the Trustee to sell
all or any portion of the Trust Property, together or in lots or parcels, as the
Trustee may deem expedient, and to execute and deliver to the purchaser or
purchasers of such property, good and sufficient deeds of conveyance of fee
simple title with covenants of general warranty made on behalf of the Grantor.
The recitals in the conveyance to the purchaser or purchasers of the Trust
Property shall be full and conclusive evidence of the truth of the matters
therein stated, and all prerequisites to such sale shall be presumed to have
been performed and such sale and conveyance shall be conclusive against Grantor,
its heirs, successors and assigns. In no event shall the Trustee be required to
exhibit, present or display at any such sale, any of the personalty described
herein to be sold at such sale. The Trustee making such sale shall receive the
proceeds thereof and shall apply the same as follows: (1) first, he shall pay
the reasonable expense of executing this deed of trust including a reasonable
Trustee's fee or commission; (2) second, he shall pay so far as may be possible,
the indebtedness secured hereby (the "INDEBTEDNESS"), discharging first that
portion of the indebtedness arising under the covenants or agreements herein
contained and not evidenced by the Note; (3) third, he shall pay the residue, if
any, to the person or persons legally entitled thereto.
Payment of the purchase price to Trustee shall satisfy the
obligation of the purchaser at such sale therefor, and such purchaser shall not
be responsible for the application thereof. Said sale shall forever be a bar
against Grantor, its successors and assigns, and all other persons claiming
under it. In addition to and cumulative of the remedies provided in this clause,
the Beneficiary may foreclose or cause to be foreclosed the lien and security
interest of this instrument, in whole or in part, through judicial foreclosure,
private sale, or in any other manner as may at any time be authorized under the
laws of the State of Texas. Beneficiary shall have the right to bid for the
Trust Property and to become the purchaser at any sale made pursuant to this
clause, if it is the highest bidder therefor and in lieu of paying cash
therefor, may make settlement for the purchase price by crediting against the
Obligations the amount of the bid made, after deducting therefrom the expenses
of the sale, the cost of any enforcement proceeding hereunder and any other sums
which Trustee or Beneficiary is authorized to deduct under the terms hereof, to
the extent necessary to satisfy such bid. If foreclosure should be commenced by
the Trustee, the Beneficiary may at any time before the sale direct the Trustee
to abandon the sale, and may at any time or times thereafter direct the Trustee
to again commence foreclosure; or, irrespective of whether foreclosure is
commenced by the Trustee, the Beneficiary may at any time after an Event of
Default institute suit for foreclosure of the lien of this instrument. If
Beneficiary should institute suit for foreclosure of the lien of this
instrument, Beneficiary may at any time before the entry of final judgment
dismiss the same, and require the Trustee to sell all or part of the Trust
Property in accordance with the provisions of this instrument. No single sale or
series of sales by the Trustee or by any substitute or successor Trustee under
this instrument and no judicial foreclosure shall extinguish the lien or exhaust
the power of sale under this instrument except with respect to the items of
property sold, but such lien and power shall exist for so long as, and may be
exercised in any manner provided by law or as provided in this instrument as
often as the circumstances require to give Beneficiary full relief hereunder.
Grantor agrees for itself and its trustees, receivers, successors and assigns
that if any of them shall hold possession of the
<PAGE>
Trust Property or any part thereof subsequent to foreclosure of the lien hereof,
Grantor, or the parties so holding possession, shall become and be considered as
tenants at will of the purchaser or purchasers at such foreclosure sale or
sales; and any such tenant failing or refusing to surrender possession upon
demand shall be guilty of forcible detainer and shall be liable to such
purchaser or purchasers for rental on said premises, and shall be subject to
eviction and removal, forcible or otherwise, with or without process of law, all
damages which may be sustained by any such tenant as a result thereof being
hereby expressly waived.
The sale or sales by Trustee of less than the whole of the Trust
Property shall not exhaust the power of sale herein granted, and Trustee is
specifically empowered to make successive sale or sales under such power until
the whole of the Trust Property shall be sold; and if the proceeds of such sale
or sales of less than the whole of the Trust Property shall be less than the
aggregate of the Indebtedness, this Deed of Trust and the lien, security
interest and assignment hereof shall remain in full force and effect as to the
unsold portion of the Trust Property just as though no sale or sales had been
made; provided, however, that Grantor shall never have any right to require the
sale or sales of less than the whole of the Trust Property, but Beneficiary
shall have the right, at its sole election, to request Trustee to sell less than
the whole of the Trust Property. If an Event of Default has occurred and is
continuing hereunder, Beneficiary shall have the option to proceed with
foreclosure in satisfaction of such item either through judicial proceedings or
by directing Trustee to proceed as if under a full foreclosure, conducting the
sale as herein provided without declaring the entire Indebtedness due, and if
sale is made because an Event of Default has occurred and is continuing on an
installment, or a part of any installment, such sale may be made subject to the
unmatured part of the Indebtedness; and it is agreed that such sale, if so made,
shall not in any manner affect the unmatured part of the Indebtedness, but as to
such unmatured part, this Deed of Trust shall remain in full force and effect as
though no sale had been made under the provisions of this paragraph. Several
sales may be made hereunder without exhausting the right of sale for any
unmatured part of the Indebtedness. At any such sale (I) Grantor hereby agrees,
in its behalf and in behalf of its heirs, executors, administrators, successors,
personal representatives and assigns, that any and all recitals made in any
assignment of lease or deed of conveyance given by Trustee with respect to the
identity of Beneficiary, the occurrence or existence of any Event of Default,
the acceleration of the maturity of any of the Indebtedness, the request to
sell, the notice of sale, the giving of notice to all debtors legally entitled
thereto, the time, place, terms, and manner of sale, and receipt, distribution
and application of the money realized therefrom, or the due and proper
appointment of a substitute Trustee, and, without being limited by the
foregoing, with respect to any other act or thing having been duly done by
Beneficiary or by Trustee hereunder, shall be taken by all courts of law and
equity as prima facie evidence that the statements or recitals are the state of
facts and are without further question to be so accepted, and Grantor hereby
ratifies and confirms every act that Trustee or any substitute Trustee hereunder
may lawfully do in the Trust Property by virtue hereof; and (II) the purchaser
may disaffirm any easement granted, or rental, lease or other contract made, in
violation of any provision of this Deed of Trust and may take immediate
possession of the Trust Property free from, and despite the terms of, such grant
of easement and rental or lease contract.
<PAGE>
B. FINANCIAL INSTITUTIONS. Section 35 of this Deed of Trust is
hereby amended by adding the following paragraph at the end thereof:
To the extent that Beneficiary is a "financial institution" as
defined in Section 26.02 of the Texas Business & Commerce Code, the following
shall apply:
THIS DEED OF TRUST AND THE OTHER LOAN DOCUMENTS REPRESENT THE
FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE
NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
C. RIGHTS AND REMEDIES OF SURETIES. Grantor waives any right or
remedy which Grantor may have or be able to assert pursuant to Chapter 34 of the
Business and Commerce Code of the State of Texas pertaining to the rights and
remedies of sureties.
<PAGE>
SCHEDULE A
DESCRIPTION OF ORIGINAL DEED OF TRUST
<TABLE>
<CAPTION>
PROPERTY RECORDING OFFICE FILE CLERK'S NO. RECORDING DATE
- --------------------- -------------------------------------- --------------------- --------------------
<S> <C> <C> <C>
Leon Valley, TX Office of the County Clerk of Bexar 970107424 7/31/97
County, Texas
</TABLE>
<PAGE>
EXHIBIT 4.40
DOCUMENT PREPARED BY AND
AFTER RECORDING RETURN TO:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attention: Jonathan A. Reiss, Esq.
AMENDED AND RESTATED DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS, SECURITY
AGREEMENT AND FIXTURE FILING
GRANTOR (BORROWER): DISCOVERY ZONE, INC., A DELAWARE CORPORATION
GRANTEE (LENDER): MCDONALD'S CORPORATION, A DELAWARE CORPORATION
GRANTEE (TRUSTEE): CHICAGO TITLE INSURANCE COMPANY, A MISSOURI CORPORATION
LEGAL DESCRIPTION: LOT 1, AS DESCRIBED IN AND DELINEATED ON SHORT PLAT RECORDED
IN BOOK 2 AT PAGE 865 OF SHORT PLATS AND AS RECORDED UNDER
AUDITOR'S FILE NO. 9404150033, BEING A PORTION OF LOT 2 OF
SHORT PLAT AT PAGE 535, RECORDS OF CLARK COUNTY BEING A
PARCEL OF PROPERTY IN THE NORTHEAST QUARTER OF SECTION 17,
TOWNSHIP 2 NORTH, RANGE 2 EAST OF THE WILLAMETTE MERIDIAN,
CLARK COUNTY, WASHINGTON. ADDITIONAL LEGAL(S) ON EXHIBIT A.
ASSESSOR'S TAX PARCEL
ID NUMBER: 160080-005
Dated as of July 29, 1997
[VANCOUVER, WASHINGTON PROPERTY]
<PAGE>
THIS AMENDED AND RESTATED DEED OF TRUST, ASSIGNMENT OF LEASES AND
RENTS, SECURITY AGREEMENT AND FIXTURE FILING (as the same may from time to time
be extended, renewed or modified, this "DEED OF TRUST"), made as of the 29th day
of July, 1997, by DISCOVERY ZONE, INC., a Delaware corporation ("GRANTOR"),
having its principal place of business at One Corporate Center, 110 East Broward
Boulevard, Fort Lauderdale, Florida 33301, as successor by merger to LEAPS &
BOUNDS, INC., to CHICAGO TITLE INSURANCE COMPANY, a Missouri corporation, having
its principal place of business at 701 Fifth Avenue, Suite 1800, Seattle,
Washington 98104 (and any subsequent substitutes or successors thereof pursuant
to Section 50 below, "Trustee"), to and for the benefit of McDONALD'S
CORPORATION a Delaware corporation ("BENEFICIARY"), having an address at One
McDonald's Plaza, Oak Brook, Illinois 60523.
W I T N E S S E T H:
A. WHEREAS, prior to Grantor's several predecessors in interest
filing their voluntary petitions for relief under chapter 11, title 11, United
States Code (the "BANKRUPTCY CODE"), Grantor's predecessors in interest with
respect to the Trust Property (as hereinafter defined), Leaps & Bounds, Inc.
("LBI") had provided Beneficiary with a First Deed of Trust on the Trust
Property, dated as of August 30, 1994 (the "ORIGINAL DEED OF Trust") and
identified by the recording information set forth on Schedule A hereto, to
secure certain obligations owed to Beneficiary under the Agreement and Plan of
Merger among Beneficiary, Grantor, Discovery Zone, Inc., a Delaware corporation
("OLD DZI") and Discovery Zone International, Inc. ("DZII"), a Delaware
corporation, dated as of August 30, 1994 (the "MERGER AGREEMENT"); and
B. WHEREAS, pursuant to Section 11.2(a)(iii) of the Merger
Agreement, Old DZI agreed to defend, indemnify and hold Beneficiary and its
affiliates harmless in respect of all expenses, losses, costs, deficiencies,
liabilities and damages (including related and reasonable counsel fees and
expenses, and compensatory and demonstrable consequential damages) incurred or
suffered by Beneficiary as a direct result of, inter alia, any breach by Old DZI
or LBI of the leases or subleases relating to certain properties that result in
any payment by Beneficiary in connection with any guarantee by Beneficiary of
such leases and pursuant to Section 10.3(f) of the Merger Agreement it was
agreed that certain security would be provided to secure the obligations under
Section 11.2(a)(iii) of the Merger Agreement, including without limitation, a
first priority security interest in the Land and Improvements (the "AGREEMENT TO
INDEMNIFY"); and
C. WHEREAS, following the filing of their respective prayers for
relief under the Bankruptcy Code, Grantor's predecessors in interest, Old DZI,
their affiliated debtors, including DZII and LBI (the "DEBTORS"), and
Beneficiary entered into the Stipulation and Order Between Debtors and
McDonald's Corporation Providing For The Resolution,
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Settlement And Compromise of Disputes And For Rent Deferrals And Allowance of
Certain Claims (the "STIPULATION AND ORDER") that was entered by the United
States Bankruptcy Court for the District of Delaware (the "BANKRUPTCY COURT") on
November 18, 1996, which was not appealed or otherwise challenged, became a
final order, remains in full force and effect and to which Grantor is bound,
Section 7 of which is captioned "CONTINUING SECURITY" and provides, in pertinent
part, that the valid and enforceable first priority security interest on the
Land and Improvements and certain other collateral shall secure the performance
and payment of all of the obligations of Grantor to Beneficiary under the Notes
(as hereinafter defined), any obligations of Beneficiary that may arise in
connection with the Assumption Locations whether pursuant to any guaranty,
lease, sublease or otherwise, any obligations of Grantor that may arise in the
event of a Liquidation, and any continuing obligations of Grantor relating to
the Rejection Location(s) and the Prior Rejection Locations (as such terms are
defined therein); and
D. WHEREAS, pursuant to the Stipulation and Order and 11 U.S.C.
ss.365, the Debtors, as predecessors in interest to Grantor, assumed the
subleases relating to certain properties (the "ASSUMED PROPERTIES") which
subleases (the "ASSUMED PROPERTY SUBLEASES") expressly incorporate the Agreement
to Indemnify as it relates to any current or future obligations of Beneficiary
relating to the Assumed Properties; and
E. WHEREAS, pursuant to the Stipulation and Order and the Plan
(as hereinafter defined), this Deed of Trust hereby amends and restates the
Original Deed of Trust in its entirety in accordance with the terms and
provisions set forth herein; and
F. WHEREAS, this Deed of Trust, together with certain other Deeds
of Trust, Mortgages or similar encumbrances, are intended to and do secure the
obligations of Grantor and its predecessors in interest and the other Debtors,
to Beneficiary under all of the Stipulation and Order, the Agreement to
Indemnify, the Secured Rent Deferral Notes (as hereinafter defined) and the
Secured Rejection Note (as hereinafter defined); and
G. WHEREAS, pursuant to the plan of reorganization for Old DZI
and its affiliated debtors confirmed by the Bankruptcy Court by order entered on
July 18, 1997 (the "PLAN"), and as required by the terms of the Stipulation and
Order, Grantor, as the reorganized successor of the Debtors, is obligated to
issue to Beneficiary Secured Rent Deferral Notes in the aggregate original
principal amount of $266,466.24, which amount is subject to increase each month
in accordance with the terms thereof (the "SECURED RENT DEFERRAL NOTES") and
Secured Rejection Note in the aggregate original principal amount of
$4,416,237.90 (the "SECURED REJECTION NOTE" and, together with the Secured Rent
Deferral Notes, the "NOTES"); and
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H. WHEREAS, pursuant to the Plan, all of the Debtors and their
reorganized successors have merged into Grantor, and simultaneously with such
merger, all property of LBI and the other Debtors, including the Trust Property
(as hereinafter defined), has been revested in Grantor, as the successor entity
of the Debtors; and
I. WHEREAS, in accordance with the foregoing, Grantor is the fee
simple owner of the real estate described in Exhibit A attached hereto (the
"LAND");
NOW THEREFORE, with reference to the foregoing recitals and for
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Grantor and Beneficiary hereby agree that the Original Deed of
Trust is hereby amended and restated in its entirety as follows:
For the purpose of securing the payment and performance of all of
the obligations (the "OBLIGATIONS") of Grantor to Beneficiary, including without
limitation, any and all obligations of Grantor, as successor in interest to Old
DZI, DZII, LBI and their affiliated debtors, under this Deed of Trust, the
Agreement to Indemnify (including, without limitation, any contingent
obligations thereunder), the Stipulation and Order (including, without
limitation, the obligations described in Section 7 thereof which are referred to
in paragraph C of the recitals above), the Plan and the Notes (including any and
all subsequent advances made pursuant to the terms of the Notes) and all other
documents evidencing or securing any such obligations (collectively, the
"RELEVANT DOCUMENTS"), Grantor by these presents hereby GRANTS, BARGAINS, SELLS,
WARRANTS, PLEDGES, ASSIGNS AND CONVEYS to Trustee and its successors and assigns
forever in trust, WITH POWER OF SALE, for the benefit of Beneficiary, the Land
and the buildings, structures and improvements of every nature whatsoever now or
hereafter located thereon to the extent owned by Grantor (including, but not
limited to, all gas and electric fixtures, radiators, heaters, docks and docking
facilities, engines and machinery, boilers, elevators and motors, plumbing,
heating and air conditioning fixtures, carpeting and other floor coverings,
water heaters, awnings and storm sashes which are or shall be attached to the
Land or said buildings, structures or improvements) (the "IMPROVEMENTS");
TOGETHER WITH: all right, title, interest and estate of Grantor
now owned, or hereafter acquired, in and to the following property, rights,
interest and estates relating to the Land and the Improvements, together with
Grantor's interest in the following property, rights, interests and estates
hereinafter described (the Land, Improvements, and the following property,
rights, interests and estates being hereinafter collectively referred to as the
"TRUST PROPERTY"):
(a) all easements, rights-of-way, strips and gores of land,
streets, ways, alleys, passages, sewer rights, water, water courses, water
rights and powers, air rights and
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development rights, construction and equipment warranties, and all estates,
rights, titles, interests, privileges, liberties, tenements, hereditaments and
appurtenances of any nature whatsoever, in any way belonging, relating to or
pertaining to the Land and the Improvements and the reversion and reversions,
remainder and remainders, and all land lying in the bed of any street, road or
avenue, opened or proposed, in front of or adjoining the Land, to the center
line thereof and all the estates, rights, titles, interests, dower and rights of
dower, curtesy and rights of curtesy, property, possession, claim and demand
whatsoever, both at law and in equity, of Grantor of, in and to the Land and the
Improvements and every part and parcel thereof, with the appurtenances thereto,
and in and to any streets, ways, alleys, passages, strips or gores of land
adjoining the Land or any part thereof;
(b) all fixtures, attachments and other articles attached to the
Land or the Improvements constituting realty or real property now or hereafter
owned by Grantor or in which Grantor has or shall acquire an interest, now or
hereafter located on, attached to or contained in or used or usable in
connection with the Trust Property, and including, without limitation, all
building or construction materials intended for construction, reconstruction,
alteration or repair of or installation on or in the Trust Property, of every
kind and nature whatsoever now owned or hereafter acquired by Grantor, and all
proceeds thereof, as well as all additions to, appurtenances, substitutions for,
replacements of or accessions to any of the items recited as aforesaid and all
attachments, components, parts (including spare parts) and accessories, whether
installed thereon or affixed thereto, now or hereafter owned by Grantor and used
or intended to be used in connection with, or with the operation of, the Trust
Property, to the extent constituting real property, but not including play
equipment or other similar-type entertainment equipment relating to the
operation of the "Discovery Zone" facility on the Trust Property unless removal
of such equipment would cause structural damage to the Land or the Improvements
(collectively, the "FIXTURES");
(c) all awards or payments, including interest thereon, which may
heretofore and hereafter be made with respect to the Trust Property, whether
from the exercise of the right of eminent domain (including, but not limited to,
any transfer made in lieu of or in anticipation of the exercise of said rights),
or for a change of grade, or for any other injury to or decrease in the value of
the Trust Property;
(d) to the extent assignable (and to the extent relating to the
general occupancy and use of the Trust Property as opposed to the operation of
the "Discovery Zone" entertainment facility on the Trust Property), leases,
subleases (including sub-subleases), lettings, licenses, concessions, occupancy
agreements and other agreements which grant a possessory interest in, or the
right to use or occupy, all or any part of the Trust Property now or hereafter
entered into, and all amendments, extensions, renewals and guarantees thereof,
and all security therefor (collectively, the "LEASES") and all rents, issues,
profits, revenues (including all oil and gas or other mineral royalties and
bonuses) and deposits (including,
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without limitation, security deposits) under the Leases (including, without
limitation, from the rental of any office space, retail space or other space,
halls, stores, and offices, and security deposits therefor, exhibit or sales
space of every kind, license, lease, sublease fees and rentals, letters of
credit or cash instruments securing or evidencing obligations under Leases,
service charges, vending machine sales and proceeds, if any, from business
interruption or other loss of income insurance)) (collectively, the "Rents") and
all proceeds from the sale or other disposition of the Leases and the right to
receive and apply the Rents to the payment of the Obligations;
(e) subject to the rights of Grantor hereunder, all proceeds of
any insurance policies covering the Trust Property (including, without
limitation, the right to receive and apply the proceeds of any insurance,
judgments, or settlements made in lieu thereof, for damage to the Trust
Property);
(f) all refundable, returnable or reimbursable fees deposits or
other funds or evidences of credit or indebtedness deposited by or on behalf of
Grantor with any governmental authorities, boards, corporations, providers of
utility services, public or private, including specifically, but without
limitation, all refundable, returnable or reimbursable tap fees, utility
deposits and development costs in connection with the Trust Property, and all of
the records and books of account now or hereafter maintained by or on behalf of
Grantor in connection with the operation of the Trust Property (collectively,
"SECURITY ACCOUNTS");
(g) all proceeds (as defined in the Uniform Commercial Code) of
the Trust Property which, in any event, shall include, without limitation, (i)
cash, instruments and other property received, receivable or otherwise
distributed in exchange for any or all of the Trust Property, (ii) the
collection or other disposition of, or realization upon, any item or portion of
the Trust Property (including, without limitation, all claims of Grantor against
third parties for loss of, damage to, destruction of, or for proceeds payable
under policies of insurance in respect of, the Trust Property now existing or
hereafter arising), (iii) any and all proceeds of any insurance, indemnity,
warranty or guaranty payable to Grantor from time to time with respect to damage
or loss of or to any of the Trust Property, (iv) any and all payments (in any
form whatsoever) made or due and payable to Grantor from time to time in
connection with the requisition, confiscation, condemnation, seizure or
forfeiture of all or any part of the Trust Property by any Governmental
Authority (or any person acting under color of Governmental Authority), and (v)
any and all real estate tax refunds payable to Grantor with respect to the Trust
Property, and refunds or reimbursements payable with respect to bonds, escrow
accounts, or other sums payable in connection with the use, development or
ownership of the Trust Property, but excluding any proceeds obtained, earned or
arising directly from the operation of the "Discovery Zone" entertainment
facility operated by Grantor on the Trust Property as opposed to general
occupancy and use of the Trust Property (collectively, the "PROCEEDS");
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(h) to the extent permitted under applicable law, all licenses,
permits (other than proprietary permits of Grantor relating to the ordinary
operation of a "Discovery Zone" entertainment facility, as opposed to the
general use and occupancy of the Trust Property), variances and certificates
used in connection with the ownership, operation, use or occupancy of the Trust
Property (including, without limitation, business licenses, state health
department licenses, food service licenses, liquor licenses, licenses to conduct
business and all such other permits, licenses and rights, obtained from any
Governmental Authority or private Person concerning ownership, operation, use or
occupancy of the Trust Property) (collectively, "PERMITS");
(i) all plans, specifications, shop drawings and other technical
descriptions prepared for construction, repair or alteration of the Improvements
(including diskettes containing any such data), and all amendments and
modifications thereof; and
(j) any escrows or escrow accounts established hereunder to
secure the Obligations of Grantor, including, without limitation, the Proceeds
Escrow Account described in Section 6(b) hereof; and
(k) any and all replacements and renewals of or additions and
substitutions to any of the foregoing and all proceeds of any of the foregoing.
TO HAVE AND TO HOLD the above granted and described Trust
Property unto and to the use and benefit of Trustee, and the successors,
substitutes and assigns of Trustee forever, IN TRUST WITH POWER OF SALE, for the
benefit of Beneficiary, and its successors and assigns, and Grantor does hereby
bind itself, its successors and assigns to WARRANT AND FOREVER DEFEND the title
to the Trust Property unto Trustee and its successors, substitutes and assigns,
for the benefit of Beneficiary, and its successors and assigns;
AND, TO PROTECT THE SECURITY OF THIS DEED OF TRUST, Grantor
represents and warrants to and covenants and agrees with Beneficiary as follows:
1. DEFINED TERMS. The following terms, when used herein, shall
have the meanings set forth below:
"ENVIRONMENTAL LAWS" means any and all present and future
federal, state or local laws, statutes, ordinances or regulations, any judicial
or administrative orders, decrees or judgments thereunder, and any permits,
approvals, licenses, registrations, filings and authorizations, in each case as
now or hereafter in effect, relating to the protection of the environment, the
impact of Hazardous Substances or the generation, disposal or remediation
thereof on human health or safety, or the Release or threatened Release of
Hazardous Substances or otherwise relating to the Use of Hazardous Substances.
For purposes of this
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definition, (A) "HAZARDOUS SUBSTANCES" means collectively, (i) any petroleum or
petroleum products or waste oils, explosives, radioactive materials, asbestos,
urea formaldehyde foam insulation, polychlorinated biphenyls ("PCBs"), and
lead-based paint, (ii) any chemicals or other materials or substances which are
now or hereafter become defined as or included in the definitions of "hazardous
substances", "hazardous wastes", "hazardous materials", "extremely hazardous
wastes", "restricted hazardous wastes", "toxic substances", "toxic pollutants",
"contaminants", "pollutants" or words of similar import under any Environmental
Law and (iii) any other chemical or any other material or substance, exposure to
which is now or hereafter prohibited, limited or regulated under any
Environmental Law; (B) "USE" means, with respect to any Hazardous Substance, the
generation, manufacture, processing, distribution, handling, use, treatment,
recycling or storage of such Hazardous Substance or transportation of such
Hazardous Substance; and (C) "RELEASE" means any release, spill, emission,
leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching
or migration into the indoor or outdoor environment (including, without
limitation, the movement of Hazardous Substances through ambient air, soil,
surface water, ground water, wetlands, land or subsurface strata).
"GOVERNMENTAL AUTHORITY" means any national or federal
government, any state, regional, local or other political subdivision thereof
with jurisdiction and any Person with jurisdiction exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government (including without limitation any court).
"IMPOSITIONS" means all taxes (including, without limitation, all
real estate, ad valorem, sales (including those imposed on lease rentals), use,
single business, gross receipts, value added, intangible transaction privilege,
privilege or license or similar taxes), assessments (including, without
limitation, all assessments for public improvements or benefits, whether or not
commenced or completed within the term of this Deed of Trust), ground rents,
water, sewer or other rents and charges, excises, levies, fees (including,
without limitation, license, permit, inspection, authorization and similar
fees), and all other governmental impositions and other charges (including,
without limitation, vault charges and license fees for the use of vaults, chutes
and similar areas adjoining the Trust Property), in each case whether general or
special, ordinary or extraordinary, foreseen or unforeseen, of every character
in respect of the Trust Property, which at any time prior to, during or in
respect of the term hereof may be assessed or imposed on or in respect of or be
a lien upon (i) Grantor (including, without limitation, all income, franchise,
single business or other taxes imposed on Grantor for the privilege of doing
business in the jurisdiction in which the Trust Property is located), (ii) the
Trust Property, or any part thereof or any revenues therefrom or any estate,
right, title or interest therein, or (iii) any occupancy, operation, use or
possession of, or sales from, or activity conducted on, or in connection with
the Trust Property by Grantor or the leasing or use of the Trust Property or any
part thereof by Grantor.
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"LEGAL REQUIREMENTS" means (i) all governmental statutes, laws,
rules, orders, regulations, ordinances, judgments, decrees and injunctions of
Governmental Authorities (including, without limitation, Environmental Laws)
affecting either the Borrower or any Property or any part thereof or the
construction, ownership, use, alteration or operation thereof, or any part
thereof (whether now or hereafter enacted and in force), (ii) all permits,
licenses and authorizations and regulations relating thereto, and (iii) all
covenants, conditions and restrictions contained in any instruments at any time
in force (whether or not involving Governmental Authorities) affecting the Trust
Property or any part thereof which, in the case of this clause (iii), require
repairs, modifications or alterations in or to the Trust Property or any part
thereof, or in any material way limit or restrict the existing use and enjoyment
thereof.
"PERSON" means any individual, corporation, limited liability
company, partnership, joint venture, estate, trust, unincorporated association,
any federal, state, county or municipal government or any bureau, department or
agency thereof and any fiduciary acting in such capacity on behalf of any of the
foregoing.
"UNIFORM COMMERCIAL CODE" means the Uniform Commercial Code, as
adopted, enacted and amended from time to time by the state or states where any
of the Trust Property is located.
2. PAYMENT OF OBLIGATIONS AND INCORPORATION OF COVENANTS,
CONDITIONS AND AGREEMENTS. Grantor will pay the Obligations at the time and
in the manner provided in the Relevant Documents and in this Deed of Trust.
All the representations, warranties, covenants, conditions and agreements of
Grantor contained in the Relevant Documents are hereby made a part of this
Deed of Trust to the same extent and with the same force as if fully set
forth herein. If there shall be any inconsistencies between the terms,
covenants, conditions and provisions set forth in this Deed of Trust and the
terms, covenants, conditions and provisions set forth in the Relevant
Documents, then the terms, covenants, conditions and provisions of the
Relevant Documents shall prevail.
3. WARRANTY OF TITLE/ORGANIZATION. Grantor warrants that Grantor
has good, marketable and insurable fee simple title to Land and the Improvements
and has good title to the remainder of the Trust Property and has the full
power, authority and right to execute, deliver and perform its obligations under
this Deed of Trust and to encumber, mortgage, give, grant, bargain, sell,
alienate, enfeoff, convey, confirm, warrant, pledge, assign and hypothecate the
Trust Property and that Grantor possesses an unencumbered fee estate in the Land
and the Improvements and that it owns the Trust Property free and clear of all
liens, encumbrances and charges whatsoever except for (x) those exceptions to
title which are existing on the date hereof and approved by Beneficiary and (y)
those exceptions of title that are permitted under the other terms and
conditions of this Deed of Trust (collectively, the
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"PERMITTED ENCUMBRANCES") and that this Deed of Trust is and will remain a valid
and enforceable first lien on and security interest in the Trust Property,
subject only to the Permitted Encumbrances. Grantor shall forever warrant,
defend and preserve such title and the validity and priority of the lien of this
Deed of Trust and shall forever warrant and defend the same to Beneficiary
against the claims of all persons whomsoever. Grantor is duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization. Grantor is qualified to do business and in good standing in the
State in which the Trust Property is located, and to the extent that Grantor is
not so qualified or in good standing in such State, Grantor shall promptly
qualify to do business and become in good standing in such State and shall
promptly present evidence of such qualification to do business and good standing
to Beneficiary, and shall in any event take such steps as are necessary to
insure the enforceability of the Notes and this Deed of Trust.
4. TAXES. Grantor hereby warrants, covenants and agrees to pay
before any penalty attaches all real property taxes, general and special, and
all other taxes and assessments of any kind or nature whatsoever, against the
Trust Property when due and shall, upon written request, furnish to Beneficiary
duplicate receipts therefor, Grantor may, in good faith and with reasonable
diligence, contest the validity or amount of any such taxes or assessments
provided that such contest shall have the effect of preventing the collection of
the tax or assessment so contested and the sale or forfeiture of said Trust
Property or any part thereof, or any interest therein, to satisfy the same.
5. INDEMNIFICATION. Grantor shall indemnify, defend and hold
harmless Beneficiary from and against all of the following (collectively, and
individually referred to as a "LOSS"): claims, demands, causes of action,
judgments, costs, expenses, liabilities, losses and damages (including
consequential and punitive damages), reasonable attorneys' fees and expenses and
court costs, disbursements and court costs, and all risk of damage to property
and injury to persons in or upon the Trust Property, arising from: (i) Grantor's
use of the Property or from the conduct of its business in or about the Trust
Property; (ii) Grantor's default or breach of any term under this Deed of Trust;
and (iii) Grantor's violation or failure to comply with any Legal Requirements,
including Environmental Laws; provided that Grantor shall not be liable for Loss
arising from Beneficiary's or Trustee's negligence or willful misconduct or from
Beneficiary's or Trustee's breach of any of their obligations hereunder.
6. TRANSFER OR ENCUMBRANCE OF THE TRUST PROPERTY. (a) Except as
may otherwise be permitted hereunder or pursuant to the Relevant Documents,
Grantor shall not sell, convey, alienate, mortgage, encumber, pledge or
otherwise transfer the Trust Property or any part thereof or any of its interest
therein. Beneficiary shall not be required to demonstrate any actual impairment
of its security or any increased risk of default hereunder in order to declare
the Obligations immediately due and payable upon Grantor's conveyance,
alienation,
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mortgage, encumbrance, pledge or transfer of the Trust Property in violation of
this Deed of Trust or any other Relevant Document. This provision shall apply to
every sale, conveyance, alienation, mortgage, encumbrance, pledge or transfer of
the Trust Property that is not permitted pursuant to the Relevant Documents,
regardless of whether voluntary or not, or whether or not Beneficiary has
consented to any previous sale, conveyance, alienation, mortgage, encumbrance,
pledge or transfer of the Trust Property.
(b) Notwithstanding Section 6(a), Grantor shall have the right to
sell the Trust Property at any time to a third party bona fide purchaser after
consultation with Beneficiary and upon the prior written consent of Beneficiary
to such sale and the sales price (such consent not to be unreasonably withheld),
provided that the net proceeds of such sale of the Trust Property (after payment
of transfer taxes and reasonable brokerage commissions, if any, and other
reasonable closing costs) shall be applied towards repayment of the Obligations,
including, without limitation, repayment of the Secured Rejection Note
(including prepayment of any amounts not yet due and payable) and payment of the
Principal Amounts (as defined in the Rent Deferral Notes) then outstanding under
the Rent Deferral Notes, in the order and manner set forth in the Notes. After
the Secured Rejection Note and all Principal Amounts outstanding under the Notes
have been repaid in full, any remaining net proceeds (including proceeds from
any sale or other disposition of the Trust Property pursuant to Section 24
hereof) not applied towards repayment of the Obligations shall be deposited into
an escrow account designated by Beneficiary for Grantor's account and as
security for the performance by Grantor of its Obligations to Beneficiary under
the Relevant Documents (the "PROCEEDS ESCROW ACCOUNT") which escrow account
shall be administered by Beneficiary, or, at Beneficiary's discretion and in
accordance with Beneficiary's instructions, may be administered by an escrow
agent (an "ESCROW AGENT") selected by Beneficiary (whose reasonable fees shall
be paid by Grantor). Grantor may also from time to time deposit additional funds
into the Proceeds Escrow Account as further security for the Obligations. At
Beneficiary's request, Grantor agrees to enter into a separate escrow agreement
to further evidence the provisions of this Section 6(b), and in the event that
Beneficiary chooses an Escrow Agent to administer the Proceeds Escrow Account,
Grantor agrees to execute an escrow agreement in form and substance reasonably
satisfactory to Beneficiary (including provisions consistent with the provisions
of this Section 6(b)) to evidence the duties and responsibilities of such Escrow
Agent. Beneficiary or, if applicable, the Escrow Agent at the direction of
Beneficiary, shall invest the funds in the Proceeds Escrow Account in
obligations of the U.S. Government or its agencies, interest in time accounts or
certificates of deposits, or other interest bearing account of any bank or bank
and trust company or in money market funds available to Beneficiary. Grantor
agrees, and shall agree under any escrow agreement entered into pursuant to this
Section 6(b), that the funds on deposit under the escrow arrangement described
herein shall not constitute property of the estate (within the meaning of
Section 541 of the United States Bankruptcy Code) and that Grantor shall only
have such rights to such funds as are provided herein and in any escrow
agreement entered into pursuant to this Section. Funds in the Proceeds Escrow
Account shall be disbursed (together with accrued interest) from time to time to
Beneficiary, at Beneficiary's
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direction (upon seven (7) days prior notice to Grantor), to pay any Obligations
that may arise from time to time under the Agreement to Indemnify, the Notes,
the Stipulation and Order or the other Relevant Documents. Notwithstanding the
foregoing, after December 31, 2005, Grantor shall be entitled to retain any net
proceeds in excess of the Minimum Amount set forth below from the sale of the
Trust Property, including amounts previously deposited and remaining in the
Proceeds Escrow Account (including accrued interest thereon) which have not been
applied towards payment of the Obligations, provided that (i) no Obligations are
then due and owing by Grantor pursuant to the Agreement to Indemnify, the
Stipulation and Order, the Notes or otherwise, (ii) no default or Event of
Default has occurred and is continuing under any of the Relevant Documents; and
(iii) the amount remaining in the Proceeds Escrow Account is no less than the
Minimum Amount (as hereinafter defined). Except as otherwise set forth in the
following sentence, the "Minimum Amount" shall mean the product of (A) 1.5 times
(B) the sum of the gross rent (including additional rent and percentage rent
charges, if any), common area maintenance charges, taxes, insurance and other
charges computed on a gross basis (collectively, the "BASE Charges") which are
due or shall become due under any Assumed Property Subleases still in existence
as of December 31, 2005 (the "SURVIVING ASSUMED PROPERTY SUBLEASES") from
December 31, 2005 until the expiration of the terms of such Assumed Property
Subleases. Upon the expiration after December 31, 2005 of any Surviving Assumed
Property Sublease, Beneficiary shall re-calculate the Minimum Amount based upon
the product of 1.5 times the Base Charges of the remaining Surviving Assumed
Property Subleases as of the end of the term of such Surviving Assumed Property
Sublease (such Base Charges to be calculated as the sum of the Base Charges from
such date through the end of the expiration dates of the remaining Surviving
Assumed Property Subleases), and provided that (i) no Obligations are then due
and owing by Grantor pursuant to the Agreement to Indemnify, the Notes, the
Stipulation and Order or otherwise and that (ii) no default or Event of Default
has occurred and is continuing under any of the Relevant Documents, Beneficiary
shall, on the first anniversary of the expiration of such expired Surviving
Assumed Property Sublease, release to Grantor, or cause the Escrow Agent to
release to Grantor, the excess of all funds in the Proceeds Escrow Account over
the re-calculated Minimum Amount. Any calculation of Base Charges under this
Section 6(b) shall be made by Beneficiary and, absent manifest error, shall be
conclusive and binding upon Grantor. Provided that (i) an amount equal to at
least the Minimum Amount is deposited or on deposit in the Proceeds Escrow
Account to secure the payment of the Obligations, (ii) no default or Event of
Default has occurred and is continuing under any of the Relevant Documents,
(iii) the Notes have been repaid in full and (iv) no Obligations are then due
and owing by Grantor pursuant to the Agreement to Indemnify, the Stipulation and
Order or otherwise, Grantor shall be entitled to receive a release of this Deed
of Trust from Beneficiary at any time after December 31, 2005. Provided that no
amounts are then owing by Grantor or outstanding pursuant to or under any of the
Relevant Documents (and that an amount equal to the Minimum Amount is at all
times on deposit in the Proceeds Escrow Account), interest earned on the amounts
deposited in the Proceeds Escrow Account after December 31, 2005 shall be
distributed to Grantor on a
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quarterly basis. All remaining amounts in the Proceeds Escrow Account which have
not been applied towards payment of the Obligations shall be released to Grantor
on the later of (A) December 31, 2014 provided, however, that no Obligations are
then due and owing by Grantor pursuant to the Agreement to Indemnify, the
Stipulation and Order or otherwise, and (B) the end of the term of this Deed of
Trust as set forth in Section 13(c) hereof. Grantor shall pay any income taxes
attributable to the interest or other income earned on the Proceeds Escrow
Account. Notwithstanding any release of this Deed of Trust pursuant to this
Section 6(b) or otherwise, the terms and provisions of this Section 6(b) shall
survive the release of this Deed of Trust.
7. AMENDMENT TO LEGAL DESCRIPTION. If it becomes evident that the
legal description attached to any Relevant Document is inaccurate or does not
fully describe all of the real property which is reasonably connected to the
Land, Grantor hereby agrees to an amendment of such legal description and the
legal description contained on the corresponding title policy so that such error
is corrected and to execute and cause to be recorded, if applicable, such
document as may be appropriate for such purpose.
8. ASSIGNMENT OF LEASES AND RENTS. Grantor does hereby absolutely
and unconditionally assign to Beneficiary, Grantor's right, title and interest
in all current and future Leases and Rents, it being intended by Grantor that
this assignment constitutes a present, absolute assignment and not an assignment
for additional security only. Such assignment to Beneficiary shall not be
construed to bind Beneficiary to the performance of any of the covenants,
conditions or provisions contained in any such Lease or otherwise impose any
obligation upon Beneficiary. Beneficiary shall have no responsibility on account
of this assignment for the control, care, maintenance, management or repair of
the Trust Property, for any dangerous or defective condition of the Trust
Property, or for any negligence in the management, upkeep, repair or control of
the Trust Property. Grantor agrees to execute and deliver to Beneficiary such
additional instruments, in form and substance satisfactory to Beneficiary, as
may hereafter be requested by Beneficiary to further evidence and confirm such
assignment. Nevertheless, subject to the terms of this paragraph, Beneficiary
grants to Grantor a revocable license to collect all of the Rents and retain,
use and enjoy the same and otherwise exercise all rights of Grantor under any
Lease, in each case, subject to the terms hereof and of the Relevant Documents.
Upon an Event of Default, the license granted to Grantor herein shall
immediately and automatically be revoked, and Beneficiary shall immediately be
entitled to possession of all Rents, whether or not Beneficiary enters upon or
takes control of the Trust Property, provided that if such Event of Default
ceases to exist, the license shall automatically be reinstated. In addition,
during the continuation of an Event of Default, Beneficiary may, either in
person or by agent, without bringing any action or proceeding, or by a receiver
appointed by a court, without the necessity of taking possession of the Trust
Property in its own name, and in addition to and without limiting any of
Beneficiary's rights and remedies hereunder, under the Notes and any other
Relevant
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Documents and as otherwise available at law or in equity, (a) notify any lessee
or other person that the Leases have been assigned to Beneficiary and that all
Rents are to be paid directly to Beneficiary, whether or not Beneficiary has
commenced or completed foreclosure or taken possession of the Trust Property;
(b) settle, compromise, release, extend the time of payment of, and make
allowances, adjustments and discounts of any Rents or other obligations in, to
and under the Leases; (c) demand, sue for or otherwise collect, receive, and
enforce payment of Rents, including those past-due and unpaid and other rights
under the Leases, prosecute any action or proceeding, and defend against any
claim with respect to the Rents and Leases; (d) enter upon, take possession of
and operate the Trust Property; (e) lease all or any part of the Trust Property;
and/or (f) perform any and all obligations of Grantor under the Leases and
exercise any and all rights of Grantor therein contained to the full extent of
Grantor's rights and obligations thereunder, with or without the bringing of any
action or the appointment of a receiver and without need for any other
authorization or other action by Beneficiary or Grantor. At Beneficiary's
request, Grantor shall deliver a copy of this assignment to each tenant under a
Lease and to each manager and managing agent or operator of the Trust Property.
Grantor irrevocably directs any tenant, manager, managing agent, or operator of
the Property, without any requirement for notice to or consent by Grantor, to
comply with all demands of Beneficiary under this Section 8 and to turn over to
Beneficiary on demand all Rents which it receives. Grantor hereby acknowledges
and agrees that payment of any Rents by a person to Beneficiary as hereinabove
provided shall constitute payment by such person, as fully and with the same
effect as if such Rents had been paid to Grantor. Beneficiary is hereby granted
and assigned by Grantor the right, at its option, upon revocation of the license
granted herein, to enter upon the Trust Property in person or by agent, without
bringing any action or proceeding, or by court-appointed receiver to collect the
Rents. Any Rents collected after the revocation of the license shall be applied
towards the payment of the Obligations. Neither the enforcement of any of the
remedies under this Section 8 nor any other remedies or security interests
afforded to Beneficiary under the Relevant Documents, at law or in equity shall
cause Beneficiary to be deemed or construed to be a Beneficiary in possession of
the Trust Property, to obligate Beneficiary to lease the Trust Property or
attempt to do so, or to take any action, incur any expense, or perform or
discharge any obligation, duty or liability whatsoever under any of the Leases
or otherwise. Grantor shall, and hereby agrees to indemnify Beneficiary for, and
to hold Beneficiary harmless from and against, any and all claims, liability,
expenses, losses or damages which may or might be asserted against or incurred
by Beneficiary solely by reason of Beneficiary's status as an assignee pursuant
to the assignment of Rents and Leases contained herein, but excluding any claim
(a) to the extent caused by Beneficiary's gross negligence or willful
misconduct, or (b) to the extent arising solely from Beneficiary's actions after
Beneficiary has taken possession of the Trust Property. Should Beneficiary incur
any such claim, liability, expense, loss or damage, the amount thereof,
including all actual expenses and reasonable fees of attorneys, shall constitute
Obligations secured hereby, and Grantor shall reimburse Beneficiary therefor
immediately upon demand. Grantor agrees that
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all Leases shall be subject to the prior written approval of Beneficiary, such
approval not to be unreasonably withheld.
9. MAINTENANCE OF TRUST PROPERTY. Grantor shall cause the Trust
Property to be maintained in a good and safe condition and repair (subject to
ordinary wear and tear), and shall otherwise operate and maintain the Trust
Property in a manner consistent with the manner in which it operates and
maintains the other properties on which it operates similar businesses ("SIMILAR
PROPERTIES"). Except as otherwise permitted by the Relevant Documents, the
Improvements, the Fixtures and the equipment located on the Land or the
Improvements shall not be removed, demolished or materially altered (except for
normal replacement of equipment) without the consent of Beneficiary which shall
not unreasonably be withheld or delayed. Grantor shall comply with all laws,
orders and ordinances affecting the Trust Property, or the use thereof. Except
to the extent that Beneficiary fails to turn over insurance proceeds, if any,
received by Beneficiary pursuant to SECTIONS 10 and 11 with respect to the Trust
Property to Grantor, Grantor shall promptly repair, replace or rebuild any part
of the Trust Property that, following the date hereof, becomes damaged, worn or
dilapidated and Grantor shall complete and pay for any structure at any time in
the process of construction or repair on the Land. Notwithstanding anything to
the contrary contained herein, Grantor hereby confirms its obligation to comply
with all relevant Legal Requirements, including Environmental Laws, with respect
to the Trust Property. Grantor shall not initiate, join in, acquiesce in, or
consent to any change in any private restrictive covenant, zoning law or other
public or private restriction, limiting or defining the uses which may be made
of the Trust Property or any part thereof, unless Grantor shall have received
Beneficiary's prior written consent, such consent not to be unreasonably
withheld or delayed. If under applicable zoning provisions the use of all or any
portion of the Trust Property is or shall become a nonconforming use, Grantor
will not cause such nonconforming use to be discontinued or abandoned without
the express written consent of Beneficiary, such consent not to be unreasonably
withheld or delayed. Grantor shall not (i) change the use of the Land in any
material respect or (ii) permit or suffer to occur any waste on or to the Trust
Property or to any portion thereof.
10. INSURANCE.
(a) Grantor shall maintain casualty, liability and other policies
of insurance relating to the Trust Property in form and substance, and with
insurers and coverages, reasonably satisfactory to Beneficiary and consistent
with insurance that it maintains on Similar Properties. Grantor shall keep the
Trust Property insured against loss by flood if the Trust Property is located in
an area identified by the Secretary of Housing and Urban Development as an area
having a special flood hazards and in which flood insurance has been made
available under the National Flood Insurance Act of 1968 (or any successor act
thereto). All policies of insurance to be furnished hereunder (i) shall have
standard non-contributory mortgagee clauses
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attached to all policies in favor of Beneficiary, without contribution, under a
standard New York (or local equivalent) mortgagee clause naming Beneficiary as
the party to which all payments made under such insurance policies in excess of
$150,000 should be paid, (ii) shall contain an endorsement providing that
neither Grantor nor Beneficiary nor any other party shall be a co-insurer under
said policies and shall contain a provision requiring that the coverage
evidenced thereby shall not be terminated or materially modified without ten
(10) days prior written notice to Beneficiary, (iii) shall provide that no act
or thing done by Grantor shall invalidate the policy as against Beneficiary, and
(iv) with respect to property insurance policies, shall contain a waiver of
subrogation against Beneficiary. Grantor shall deliver certificates evidencing
additional and renewal policies, together with evidence of payment of premiums
thereon, to Beneficiary, and in the case of all insurance about to expire, shall
deliver renewal policies or certificates evidencing such policies not less than
ten (10) days prior to their respective dates of expiration.
(b) Grantor shall not take out separate insurance concurrent in
form or contributing in the event of loss with that required to be maintained
hereunder unless Beneficiary is included thereon under a standard,
non-contributory mortgagee clause acceptable to Beneficiary. Grantor shall
promptly notify Beneficiary whenever any such separate insurance is taken out
and shall promptly deliver to Beneficiary the certificates evidencing the policy
or policies of such insurance.
(c) The insurance required by this Deed of Trust, at the option
of Grantor, may be effected by blanket and/or umbrella policies covering the
Trust Property and other properties, provided, however, that in each case, such
insurance policies otherwise comply with the provisions of this Deed of Trust
and allocate to the Trust Property, from time to time, the coverage specified in
this Deed of Trust without possibility of reduction or co-insurance by reason
of, or damage to, any other property named therein. If the insurance required by
this Deed of Trust shall be effected by any such blanket or umbrella policies,
Grantor shall furnish to Beneficiary certificates with respect to, with
schedules attached thereto showing the amount of the insurance provided under
such policies which is applicable to the Trust Property.
(d) If Grantor fails to maintain insurance in compliance with
this Section, Beneficiary may obtain such insurance and pay the premium therefor
and Grantor shall, on demand, reimburse Beneficiary for all expenses incurred in
connection therewith. Grantor shall deliver original certificates to Beneficiary
of all insurance policies maintained pursuant to this Section 10. Each property
insurance policy shall name Beneficiary as mortgagee, and loss payee with
respect to all casualty coverage and each liability policy shall name
Beneficiary as an additional insured thereunder.
11. CASUALTY. (a) Grantor shall give Beneficiary prompt notice of
any loss or damage to the Trust Property.
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(b) In case of loss or damage to the Trust Property covered by
any of the insurance policies described in Section 10 above, Beneficiary (or,
after a trustee's sale or sheriff's sale under this Deed of Trust, the purchaser
at such sale) is hereby authorized at its option either (i) to settle and adjust
any claim under such insurance policies without the consent of Grantor or (ii)
to allow Grantor to settle and adjust such claim (either jointly with
Beneficiary or by Grantor alone, at Beneficiary's discretion); provided that in
either case Beneficiary shall, and is hereby authorized to, collect and receipt
for any such insurance proceeds. Notwithstanding anything in the preceding
sentence to the contrary, Beneficiary agrees that it will allow Grantor to
settle and adjust any claims under the insurance policies which are in an amount
less than $150,000, per incident of loss, up to an aggregate amount of no
greater than $300,000. The expenses incurred by Beneficiary in the adjustment
and collection of insurance proceeds shall be included in the Obligations, and
shall be reimbursed to Beneficiary upon demand or may be deducted by Beneficiary
from said insurance proceeds prior to another application thereof. Interest on
such amount shall accrue at the Default Rate, beginning ten (10) days after
Grantor receives notice of a request for payment of such amount from
Beneficiary, until such amount, plus interest, is paid in full.
(c) Beneficiary shall permit Grantor to apply the proceeds of
insurance policies received in connection with any casualty to pay for the cost
of restoring, repairing, replacing or rebuilding the loss or damage to the Trust
Property resulting from the casualty ("RESTORATION") if: (i) there is no Event
of Default hereunder at the time of such application; (ii) restoration can, in
the reasonable judgment of Beneficiary, be completed prior to the maturity of
the Obligations; and (iii) restoration can, in the reasonable judgment of
Beneficiary, be effected within two (2) years after the date of such casualty
and in such a manner so that the Trust Property will be of at least equal or
greater value to the value than the Trust Property prior to such casualty.
Otherwise, Beneficiary may elect in its sole discretion to apply such proceeds
either (x) towards payment of the Obligations, notwithstanding the fact that the
Obligations, or a portion thereof, may not then be due and payable, or (y) to
pay for the cost of Restoration. In all events, disbursement of insurance
proceeds by Beneficiary (or at Beneficiary's election by a disbursing or escrow
agent who shall be selected by Beneficiary and whose fees shall be paid by
Grantor), to pay the cost of restoration shall require (i) evidence reasonably
satisfactory to Beneficiary of the estimated costs of Restoration, (ii) funds
(or assurances reasonably satisfactory to Beneficiary that such funds are
available) sufficient in addition to the proceeds of insurance to complete and
fully pay for Restoration; and (iii) such architect's certificates, waivers of
lien, contractor's sworn statements, title insurance endorsements, plats of
surveys and such other evidences of cost, payment and performance as Beneficiary
may reasonably require and approve. Except to the extent Beneficiary fails to
turn over insurance proceeds, if any, received by Beneficiary hereunder with
respect to such casualty to Grantor, Grantor hereby covenants to restore,
repair, replace or rebuild the Improvements, to be of at least equal value, and
of substantially the same character as prior to such loss or damage, all to be
effected in accordance with plans,
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specifications and procedures to be first submitted to and reasonably approved
by Beneficiary, and Grantor shall pay all costs of such restoring, repairing,
replacing or rebuilding.
12. EMINENT DOMAIN. Grantor warrants, covenants and agrees that
should the Trust Property, or any part thereof or interest therein, be taken or
damaged by reason of any public improvement or condemnation proceeding, or in
any other manner, or should Grantor receive any notice of other information
regarding such proceeding, Grantor shall give written notice thereof within five
(5) business days to Beneficiary. Without Beneficiary's prior consent, Grantor
(1) shall not agree to any compensation or award, and (2) shall not take any
action or fail to take any action which would cause the compensation to be
determined. Beneficiary shall be entitled to: (1) all compensation awards and
other payments or relief therefor, (2) to commence, appear in and prosecute in
its own name any action or proceedings, and (3) to make any compromise or
settlement in connection with such taking or damage. Grantor authorizes
Beneficiary to collect and receive such awards and compensation, to give proper
receipts and acquittances therefor and in Beneficiary's discretion to apply the
same toward the payment of the Obligations, notwithstanding the fact that the
Obligations, or a portion thereof, may not then be due and payable, or to the
restoration of the Trust Property in accordance with the provisions set forth in
the second-to-last sentence of Section 11(c) above. Grantor further agrees to
make, execute, and deliver to Beneficiary, at any time upon request, free and
clear of any encumbrance of any kind whatsoever, any and all further assignments
and other instruments deemed necessary by Beneficiary for the purpose of validly
and sufficiently assigning all compensations and awards made to Grantor for any
taking, either permanent or temporary, under any such proceeding.
13. RELEASE OF DEED OF TRUST. Beneficiary agrees to promptly and
unconditionally release this Deed of Trust (subject to the provisions set forth
in Section 6(b)) as follows:
(a) in the event of a bona fide sale (other than a "sale
leaseback" or other similar financing transaction) of the Trust Property to a
third party that is not affiliated with Grantor, provided that each of the
following conditions is satisfied: (i) neither Grantor nor any of its respective
affiliates continue to use or occupy the Trust Property or any part thereof;
(ii) Grantor shall consult with Beneficiary prior to such sale and shall obtain
Beneficiary's prior written consent with respect to such sale and the sales
price (such consent not to be unreasonably withheld); and (iii) all of the
proceeds of such sale are applied towards repayment of the Obligations or
otherwise applied in compliance with the provisions of Section 6(b) hereof.
(b) in the event that Beneficiary is paid in full for all amounts
owing (or which shall or may become owing under the Relevant Documents) to
Beneficiary by Grantor, including the indefeasible payment and satisfaction in
full of the Obligations.
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(c) on December 31, 2014 (or on such earlier date as permitted
under and pursuant to the provisions of Section 6(b) hereof); provided, however,
that if on such date, any amount secured by this Deed of Trust has not been
indefeasibly paid in full, then this Deed of Trust shall be deemed amended to
extend the term hereof until such obligations are so paid.
14. CHANGES IN THE LAWS REGARDING TAXATION. If any law is enacted
or adopted or amended after the date of this Deed of Trust which imposes a tax,
either directly or indirectly, on the Obligations or Beneficiary's interest in
the Trust Property, Grantor will pay such tax, with interest and penalties
thereon, if any, PROVIDED, HOWEVER, that Grantor shall not be obligated to pay
any tax which is imposed on the net income of Beneficiary or franchise taxes or
doing business taxes imposed on Beneficiary. In the event that the payment of
such tax or interest and penalties by Grantor would be unlawful or taxable to
Beneficiary or unenforceable or provide the basis for a defense of usury, then
in any such event, Beneficiary shall have the option, by written notice of not
less than ninety (90) days, to declare the Obligations immediately due and
payable.
15. NO CREDITS ON ACCOUNT OF THE OBLIGATIONS. (i) Grantor will
not claim or demand or be entitled to any credit or credits on account of the
Obligations for any part of the Impositions assessed against the Trust Property,
or any part thereof, and (ii) no deduction shall otherwise be made or claimed
from the assessed value of the Trust Property, or any part hereof, for real
estate tax purposes by reason of this Deed of Trust or the Obligations if the
effect of such deduction would impose on Beneficiary a tax, either directly or
indirectly, for which it otherwise would not have been liable.
16. DOCUMENTARY STAMPS. If at any time the United States of
America, any State thereof or any subdivision of any such State shall require
revenue or other stamps to be affixed to the Notes or this Deed of Trust, or
impose any other tax or charge on the same, Grantor will pay for the same, with
interest and penalties thereon, if any.
17. CONTROLLING AGREEMENT. It is expressly stipulated and agreed
to be the intent of Grantor and Beneficiary at all times to comply with
applicable state law or applicable United States federal law (to the extent that
it permits Beneficiary to contract for, charge, take, reserve, or receive a
greater amount of interest than under state law) and that this Section shall
control every other covenant and agreement in this Deed of Trust and the other
Relevant Documents. If the applicable law (state or federal) is ever judicially
interpreted so as to render usurious any amount called for under the Notes or
under any of the other Relevant Documents, or contracted for, charged, taken,
reserved, or received with respect to the Obligations, or if Beneficiary's
exercise of the option to accelerate the maturity of the Notes, or if any
prepayment by Grantor results in Grantor having paid any interest in excess of
that permitted by applicable law, then it is Grantor's and Beneficiary's express
intent that all excess amounts theretofore collected by Beneficiary shall be
credited on the principal balance of the
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Notes and all other Obligations (or, if the Notes and all other Obligations have
been or would thereby be paid in full, refunded to Grantor), and the provisions
of the Notes and the other Relevant Documents immediately be deemed reformed and
the amounts thereafter collectible hereunder and thereunder reduced, without the
necessity of the execution of any new documents, so as to comply with the
applicable law, but so as to permit the recovery of the fullest amount otherwise
called for hereunder or thereunder. All sums paid or agreed to be paid to
Beneficiary for the use, forbearance, or detention of the Obligations shall, to
the extent permitted by applicable law, be amortized, prorated, allocated, and
spread throughout the full stated term of the Obligations until payment in full
so that the rate or amount of interest on account of the Obligations does not
exceed the maximum rate of interest permitted by law from time to time in effect
and applicable to the Obligations for so long as the Obligations are
outstanding.
18. PERFORMANCE OF OTHER AGREEMENTS. Grantor shall observe and
perform in all respects the terms to be observed or performed by Grantor under
any agreement or recorded instrument affecting or pertaining to the Trust
Property.
19. RIGHT TO PERFORM THE OBLIGATIONS. Subject to the terms of the
Relevant Documents, if any default exists, Beneficiary shall have the right, but
not the obligation, to cure such default in the name and on behalf of Grantor.
All sums advanced and expenses incurred at any time by Beneficiary under this
Section 19, or otherwise under this Deed of Trust or any of the other Relevant
Documents or applicable law (including, without limitation, the costs and
expenses of Beneficiary and its agents incurred in connection with the
preservation, collection and enforcement of this Deed of Trust or of the liens
created hereby), shall bear interest from the date that such sum is advanced or
expense incurred, to and including the date of reimbursement, computed at the
Default Rate (as defined in the Notes), and all such sums, together with
interest thereon, shall constitute additions to the Obligations and shall be
secured by this Deed of Trust and Grantor covenants and agrees to pay them to
the order of the Beneficiary promptly upon demand.
20. FURTHER ACTS, ETC. Grantor will, at the cost of Grantor, and
without expense to Beneficiary, do, execute, acknowledge and deliver all and
every such further acts, deeds, conveyances, mortgages, deeds of trust,
assignments, notices of assignment, Uniform Commercial Code financing statements
or continuation statements, transfers and assurances as Beneficiary shall, from
time to time, reasonably require, for the better assuring, conveying, assigning,
transferring, and confirming unto Beneficiary the property and rights hereby
mortgaged, given, granted, bargained, sold, alienated, enfeoffed, conveyed,
confirmed, warranted, pledged, assigned and hypothecated (including, without
limitation, the assignment of leases and rents contained in Section 8 hereof) or
intended now or hereafter so to be, or which Grantor may be or may hereafter
become bound to convey or assign to Beneficiary, or for carrying out the
intention or facilitating the performance of the terms of this Deed of Trust
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or for filing, registering or recording this Deed of Trust. Grantor, on demand,
will execute and deliver and, Grantor hereby authorizes Beneficiary to execute
in the name of Grantor or without the signature of Grantor to the extent
Beneficiary may lawfully do so, one or more financing statements, chattel
mortgages or other instruments, to evidence more effectively the security
interest of Beneficiary in the Trust Property. Notwithstanding anything to the
contrary contained herein, Grantor shall not be obligated to execute, deliver,
file or record any additional documents which increase Grantor's obligations
under this Deed of Trust or the Relevant Documents. Grantor grants to
Beneficiary an irrevocable power of attorney coupled with an interest for the
purpose of exercising the rights provided for in Section 19 and this Section 20.
21. RECORDING OF DEED OF TRUST, ETC. Grantor forthwith upon the
execution and delivery of this Deed of Trust and thereafter, from time to time,
will cause this Deed of Trust, and any security instrument creating a lien or
security interest or evidencing the lien hereof upon the Trust Property and each
instrument of further assurance to be filed, registered or recorded in such
manner and in such places as may be required by any present or future law in
order to publish notice of and fully to protect the lien or security interest
hereof upon, and the interest of Beneficiary in, the Trust Property. Grantor
will pay all filing, registration or recording fees, the costs and fees of local
counsel for Beneficiary, including, without limitation, costs and fees for local
counsel review of the Deed of Trust and Subordination Agreement, and the
preparation of opinion letters in connection therewith, and all expenses
incident to the execution and acknowledgment of this Deed of Trust (but not
including fees of Beneficiary's New York counsel in connection with the
preparation of this Deed of Trust), any deed of trust or mortgage supplemental
hereto, any security instrument with respect to the Trust Property and any
instrument of further assurance, and all federal, state, county and municipal,
taxes, duties, imposts, assessments and charges arising out of or in connection
with the execution and delivery of this Deed of Trust, any deed of trust or
mortgage supplemental hereto, any security instrument with respect to the Trust
Property or any instrument of further assurance (other than income or franchise
taxes imposed on Beneficiary), except where prohibited by law so to do. Grantor
shall hold harmless and indemnify Beneficiary, its successors and assigns,
against any liability incurred by reason of the imposition of any tax on the
making and recording of this Deed of Trust. Grantor shall pay all title costs
and premiums in connection with the ALTA lender's title insurance policy issued
by Chicago Title Insurance Company for the benefit of Beneficiary in connection
with this Deed of Trust (including payment for the cost of any property surveys
prepared in connection therewith), which title insurance policy shall be in form
and substance satisfactory to Beneficiary containing such endorsements as
Beneficiary may reasonably request, including, without limitation, the deletion
of any creditor's rights exception and (to the extent available) a variable rate
endorsement; survey endorsement; comprehensive endorsement; first loss
endorsement; last dollar endorsement; tie-in endorsement; future advances
endorsement; access coverage; tax parcel coverage; contiguity (if applicable)
coverage; and such other endorsements as
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Beneficiary shall reasonably require. In the event that any Survey with respect
to the Trust Property reveals any encumbrances, restrictions, building code or
zoning violations or other matters which in Beneficiary's reasonable judgment,
materially impair Beneficiary's first priority lien in the Trust Property,
Grantor agrees to cooperate with Beneficiary in performing any acts reasonably
requested by Beneficiary to cause such encumbrances, restrictions, violations or
other matters to be removed or remedied as appropriate.
22. REPORTING REQUIREMENTS. Grantor agrees to give prompt notice
to Beneficiary of the insolvency or bankruptcy filing of Grantor. In addition,
Grantor will give notice to Beneficiary in writing not later than ten (10) days
after: (i) the occurrence of any Event of Default with respect to Grantor
hereunder, or (ii) notice to Grantor of any action, litigation or proceeding
instituted to recover possession of the Trust Property from Grantor or for any
other purpose affecting this Deed of Trust or of any other action, litigation or
proceeding instituted against Grantor or judgment rendered against Grantor; and
such notice to Beneficiary shall include a true copy of any notice of default,
or if any action is then proceeding, copies of any pleadings and papers received
by Grantor.
23. EVENTS OF DEFAULT. The term "EVENT OF DEFAULT" as used herein
shall mean the occurrence or happening, at any time and from time to time, of
one or more of the following events:
(a) a default or event of default under any of the Notes
(including, without limitation, any event of default described in Section 3 of
any of the Notes), which remains uncured following the expiration of any
applicable cure periods;
(b) Grantor (i) shall fail to perform when due any payment
obligation under the terms of this Deed of Trust or the other Relevant Documents
within ten days after such amount becomes due, or (ii) shall be in violation of
any of the obligations or covenants contained herein or therein and such default
shall continued unremedied for a period of thirty (30) days, provided that if
such default is not readily susceptible of cure in such thirty (30) day period,
and provided that Grantor proceeds in a diligent manner to cure such default,
Grantor shall have such additional time to effect such cure as shall be
reasonably necessary to effect such cure;
(c) Failure by Grantor to maintain insurance and deliver evidence
thereof pursuant to Section 10; or
(d) a default under any other mortgage, deed of trust or other
security instrument covering the Trust Property or a portion thereof which
remains uncured following the expiration of any applicable cure periods.
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24. REMEDIES. (a) Upon the occurrence of any Event of Default,
Beneficiary may take such action or cause Trustee to take such action permitted
in law or at equity, without notice or demand, as it deems advisable to protect
and enforce its rights against Grantor and in and to the Trust Property, by
Beneficiary itself, or through Trustee or otherwise, including, but not limited
to, the following actions, each of which may be pursued concurrently or
otherwise, at such time and in such order as Beneficiary may determine, in its
sole discretion, without impairing or otherwise affecting the other rights and
remedies of Beneficiary:
(i) declare the entire principal amount of the indebtedness and
Obligations secured hereby with interest accrued thereon to be
immediately due and payable;
(ii) institute a proceeding or proceedings, judicial or
nonjudicial, by advertisement or otherwise, for the complete
foreclosure of this Deed of Trust in which case the Trust
Property or any interest therein may be sold for cash or upon
credit in one or more parcels or in several interests or portions
and in any order or manner in accordance with the laws of the
jurisdiction in which such Trust Property is located;
(iii) with or without entry, to the extent permitted, and
pursuant to the procedures provided by, applicable law, institute
proceedings for the foreclosure of this Deed of Trust for the
Obligations then due and payable subject to the continuing lien
of this Deed of Trust, in accordance with the laws of the
jurisdiction in which such Trust Property is located, for the
balance of the Obligations not then due;
(iv) sell for cash or upon credit the Trust Property or any part
thereof and all estate, claim, demand, right, title and interest
of Grantor therein and rights of redemption thereof, pursuant to
power of sale or otherwise, at one or more sales, as an entirety
or in parcels, at such time and place, upon such terms and after
such notice thereof as may be required or permitted by the laws
of the jurisdiction in which such Trust Property is located;
(v) institute an action, suit or proceeding in equity for the
specific performance of any covenant, condition or agreement
contained herein or in the other Relevant Documents;
(vi) recover judgment on the Notes either before, during or after
any proceedings for the enforcement of this Deed of Trust;
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(vii) prior to, concurrently with, or subsequent to the
institution of foreclosure proceedings, apply for the appointment
of a trustee, receiver, liquidator or conservator of the Trust
Property, as a matter of strict right, without notice and without
regard for the adequacy of the security for the Obligations or
the interest of the Grantor therein and without regard for the
solvency of the Grantor or of any person, firm or other entity
liable for the payment of the Obligations, and Grantor hereby
consents to such appointment;
(viii) prior to, concurrently with or subsequent to the
institution of foreclosure proceedings, enforce Beneficiary's
interest in the Leases and Rents and enter into or upon the Trust
Property and take exclusive possession thereof, either personally
or by its agents, nominees or attorneys and dispossess Grantor
and its agents and servants therefrom, and thereupon Beneficiary
may (whether or not a receiver has been appointed) as
attorney-in-fact or agent of Grantor, or in its own name and
under the powers herein granted,(A) use, operate, manage,
control, insure, maintain, repair, restore and otherwise deal
with all and every part of the Trust Property and conduct the
business thereat; (B) complete any construction on the Trust
Property in such manner and form as Beneficiary deems advisable;
(C) make alterations, additions, renewals, replacements and
improvements to or on the Trust Property; (D) exercise all rights
and powers of Grantor with respect to the Trust Property, whether
in the name of Grantor or otherwise (including, without
limitation, the right to make, cancel, enforce or modify Leases,
obtain and evict tenants, and demand, sue for, collect and
receive all earnings, revenues, rents, issues, profits and other
income of the Trust Property and every part thereof); and (E)
apply the receipts from the Trust Property to the payment of the
Obligations, after deducting therefrom all reasonable expenses
(including, without limitation, reasonable attorneys' fees)
incurred in connection with the aforesaid operations and all
amounts necessary to pay the taxes, assessments, insurance and
other charges in connection with the Trust Property, it being
agreed that should Beneficiary incur any liability, loss or
damage in the defense of any claims or demands, the amount
thereof, including costs, expenses and reasonable attorneys' fees
shall be secured hereby, and Grantor shall reimburse Beneficiary
therefor immediately upon demand;
(ix) require Grantor to pay monthly in advance to Beneficiary, or
any receiver appointed to collect the Rents, the fair and
reasonable rental value for the use and occupation of any portion
of the Trust Property occupied by Grantor and require Grantor to
vacate and surrender possession to Beneficiary of the Trust
Property or to such receiver and, in default thereof, evict
Grantor by summary proceedings or otherwise; and
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(x) pursue such other rights and remedies as may be available
under the Relevant Documents or otherwise at law or in equity or
under the Uniform Commercial Code including the right to
establish a lock box for all Rents and other receivables of
Grantor relating to the Trust Property.
In the event of a sale, by foreclosure or otherwise, of less than all of the
Trust Property, this Deed of Trust shall continue as a lien on the remaining
portions of the Trust Property.
The proceeds of any sale made under or by virtue of this Section
24, together with any other sums which then may be held by Beneficiary under
this Deed of Trust, whether under the provisions of this Section or otherwise,
shall be applied by Beneficiary in the following order of priority: first, on
account of all reasonable costs and expenses incident to the foreclosure
proceedings, including all such items as are mentioned in this Section 24;
second, all other items which under the terms hereof constitute secured
indebtedness, which are any amounts due under this Deed of Trust, or under the
other Relevant Documents (including any amounts required to be escrowed pursuant
to Section 6(b)); third, any surplus to Grantor, its successors or assigns, as
their rights may appear.
(b) Upon any sale made under or by virtue of this Section 24,
whether made under the power of sale herein granted or under or by virtue of
judicial proceedings or of a judgment or decree of foreclosure and sale,
Beneficiary may bid for and acquire the Trust Property or any part thereof and
in lieu of paying cash therefor may make settlement for the purchase price by
crediting upon the Obligations the net sales price after deducting therefrom the
expenses of the sale and costs of the action and any other sums which
Beneficiary is authorized to deduct under this Deed of Trust.
(c) No recovery of any judgment by Beneficiary and no levy of an
execution under any judgment upon the Trust Property or upon any other property
of Grantor shall affect in any manner or to any extent the lien of this Deed of
Trust upon the Trust Property or any part thereof, or any liens, rights, powers
or remedies of Beneficiary hereunder, but such liens, rights, powers and
remedies of Beneficiary shall continue unimpaired as before.
(d) Beneficiary may adjourn, terminate or rescind any proceeding
or other action brought in connection with its exercise of the remedies provided
in this Section 24 at any time before the conclusion thereof, as determined in
Beneficiary's sole discretion and without prejudice to Beneficiary.
(e) Beneficiary may resort to any remedies and the security given
by this Deed of Trust or the other Relevant Documents in whole or in part, and
in such portions and in such order as determined by Beneficiary's sole
discretion. No such action shall in any way be considered a waiver of any
rights, benefits or remedies evidenced or provided by this Deed of Trust or the
other Relevant Documents. The failure of Beneficiary to exercise any right,
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remedy or option provided in this Deed of Trust or the other Relevant Documents
shall not be deemed a waiver of such right, remedy or option or of any covenant
or obligation secured by this Deed of Trust or the other Relevant Documents.
Subject to the provisions of the Relevant Documents, no acceptance by
Beneficiary of any payment after the occurrence of any Event of Default and no
payment by Beneficiary of any obligation for which Grantor is liable hereunder
shall be deemed to waive or cure any Event of Default with respect to Grantor,
or Grantor's liability to pay such obligation. No sale of all or any portion of
the Trust Property, no forbearance on the part of Beneficiary and no extension
of time for the payment of the whole or any portion of the Obligations or any
other indulgence given by Beneficiary to Grantor, shall operate to release or in
any manner affect the interest of Beneficiary in the remaining Trust Property or
the liability of Grantor to pay the Obligations. No waiver by Beneficiary shall
be effective, unless it is in writing and then only to the extent specifically
stated.
(f) The interests and rights of Beneficiary under this Deed of
Trust and the other Relevant Documents, and the liens and security interests
created and evidenced by this Deed of Trust and the other Relevant Documents,
shall not be impaired by any indulgence, including (i) any renewal, extension or
modification which Beneficiary may grant with respect to any of the Obligations,
(ii) any surrender, compromise, release, renewal, extension, exchange or
substitution which Beneficiary may grant with respect to the Trust Property or
any portion thereof; or (iii) any release or indulgence granted to any maker,
endorser, guarantor or surety of any of the Obligations.
(g) Upon the occurrence of any Event of Default under Section 23,
in any suit to foreclose the lien hereof or enforce any other remedy of
Beneficiary under this Deed of Trust, there shall be allowed and included as
additional indebtedness in the decree for sale or other judgment or decree all
reasonable expenditures and expenses which may be paid or incurred by or on
behalf of Beneficiary for attorneys' fees, appraiser's fees, outlays for
documentary and expert evidence, stenographers' charges, publication costs, and
costs (which may be estimated as to items to be expended after entry of the
decree) of procuring all such abstracts of title, title searches and
examinations, title insurance policies, Torrens certificates, and similar data
and assurances with respect to title as Beneficiary may deem reasonably
necessary either to prosecute such suit or to evidence to bidders at any sale
which may be had pursuant to such decree the true condition of the title to or
the value of the Trust Property. All such reasonable expenditures and expenses
which Beneficiary may incur as permitted by this Section for the protection of
the Trust Property and the maintenance of the lien of this Deed of Trust,
including, but not limited to, the fees and out-of-pocket disbursements of any
attorney employed by Beneficiary in any litigation or proceeding affecting this
Deed of Trust, including, but not limited to, bankruptcy proceedings or
preparations for the commencement or defense of any proceeding or threatened
suit or proceeding, shall be immediately due and payable by Grantor and shall be
secured by this Deed of Trust.
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25. RIGHT OF ACCESS. Grantor shall permit agents, representatives
and employees of Beneficiary to (i) inspect the Trust Property or any part
thereof, PROVIDED that such inspection does not materially interfere with the
tenants of the Trust Property or violate the terms of any Lease, (ii) to examine
and make abstracts from any of Grantor's books and records and (iii) to discuss
the business, operations, properties and financial and other condition of
Grantor with officers of Grantor and with its independent certified public
accountants, at such reasonable times as may be requested by Beneficiary upon
reasonable advance notice.
26. SECURITY AGREEMENT. This Deed of Trust is both a real
property deed of trust and a "security agreement" within the meaning of the
Uniform Commercial Code. The Trust Property includes both real and personal
property and all other rights and interests, whether tangible or intangible in
nature, of Grantor in the Trust Property. Grantor by executing and delivering
this Deed of Trust has granted and hereby grants to Beneficiary, as security for
the Obligations, a security interest in the Trust Property to the full extent
that the Trust Property may be subject to the Uniform Commercial Code (said
portion of the Trust Property so subject to the Uniform Commercial Code being
called in this paragraph the "COLLATERAL"). Grantor hereby agrees with
Beneficiary to execute and deliver to Beneficiary, in form and substance
satisfactory to Beneficiary, such financing statements and such further
assurances as Beneficiary may from time to time, reasonably consider necessary
to create, perfect, and preserve Beneficiary's security interest herein granted.
All or part of the Trust Property is or is to become "fixtures" as defined in
the Uniform Commercial Code, and this Deed of Trust, upon being filed for record
in the real estate records of the city or county wherein such fixtures are
situated, shall also constitute a "fixture filing" for the purposes of the
Uniform Commercial Code upon such of the Trust Property that is or may become
fixtures. Information concerning the security interest herein granted may be
obtained from the parties at the addresses of the parties set forth in the first
paragraph of this Deed of Trust. Grantor's chief executive office and principal
place of business is the Grantor's address set forth in the first paragraph of
this Deed of Trust, and the place where Grantor's books and records in respect
of where the Trust Property is located are kept is the address of Grantor set
forth in the first paragraph of this Deed of Trust. If an Event of Default shall
occur which shall remain uncured, Beneficiary, in addition to any other rights
and remedies which it may have, shall have and may exercise immediately and
without demand, any and all rights and remedies granted to a secured party upon
default under the Uniform Commercial Code, (including, without limitation, to
the extent permitted by law, the right to take possession of the Collateral or
any part thereof, and to take such other measures as Beneficiary may deem
necessary for the care, protection and preservation of the Collateral). Upon
request or demand of Beneficiary or Trustee, Grantor shall at its expense
assemble the Collateral and make it available to Beneficiary at a convenient
place acceptable to Beneficiary. Grantor shall pay to Beneficiary on demand
therefor any and all reasonable expenses (including, without limitation,
reasonable legal expenses and attorneys' fees) incurred or paid by Beneficiary
in protecting the
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interest in the Collateral and in enforcing the rights hereunder with respect to
the Collateral. Any notice of sale, disposition or other intended action by
Beneficiary with respect to the Collateral sent to Grantor at least ten (10)
business days prior to such action or such notice as is otherwise required by
law or the Relevant Documents, shall constitute commercially reasonable notice
to Grantor. The proceeds of any disposition of the Collateral, or any part
thereof, may be applied by Beneficiary to the payment of the Obligations in such
priority and proportions as Beneficiary shall determine in its sole discretion.
In the event of any change in name, identity or structure of Grantor, Grantor
shall notify Beneficiary thereof and, promptly after request, shall execute,
file and record such Uniform Commercial Code forms as are necessary to maintain
the priority of Beneficiary's lien upon and security interest in the Collateral,
and shall pay all expenses and fees in connection with the filing and recording
thereof. If Beneficiary shall require the filing or recording of additional
Uniform Commercial Code forms or continuation statements, Grantor shall,
promptly after request, execute, file and record such Uniform Commercial Code
forms or continuation statements as Beneficiary shall deem necessary, and shall
pay all expenses and fees in connection with the filing and recording thereof,
it being understood and agreed, however, that no such additional documents shall
materially increase Grantor's obligations under this Deed of Trust or the other
Relevant Documents. Grantor hereby irrevocably appoints Beneficiary as its
attorney-in-fact, coupled with an interest, to file with the appropriate public
office on its behalf any UCC financing statements (or related documents) signed
only by Beneficiary, as secured party, in connection with the Collateral covered
by this Deed of Trust, such appointment to terminate upon the release of this
Deed of Trust.
27. ACTIONS AND PROCEEDINGS. Beneficiary has the right to appear
in and defend any action or proceeding brought with respect to the Trust
Property and to bring any action or proceeding, in the name and on behalf of
Grantor, which Beneficiary, in its reasonable discretion, decides should be
brought to protect its interest under this Deed of Trust or in the Trust
Property. Subject to the foregoing, Grantor shall appear in and contest any
action or proceeding purporting to affect the security hereof and shall pay all
reasonable costs and expenses including cost of evidence of title and attorney's
fees, in any such action or proceeding in which Beneficiary may appear.
Beneficiary shall, at its option, be subrogated to the lien of any mortgage or
other security instrument discharged in whole or in part by the Obligations, and
any such subrogation rights shall constitute additional security for the payment
of the Obligations.
28. WAIVER OF SETOFF AND COUNTERCLAIM. Except as may be permitted
under the Relevant Documents, all amounts due under this Deed of Trust, the
Notes and the other Relevant Documents shall be payable without setoff or
counterclaim whatsoever.
29. LIENS. Grantor warrants, covenants and agrees to pay and
promptly discharge, at Grantor's cost and expense, all taxes, assessments and
governmental charges
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levied upon it, its income and assets as and when such taxes, assessments and
charges are due and payable (including, without limitation, all Impositions), as
well as all lawful claims for labor materials and supplies or otherwise which
could become a lien, and all liens, encumbrances and charges upon the Trust
Property, or any part thereof or interest therein; provided that the existence
of any mechanic's, laborer's, materialman's, supplier's or vendor's lien or
right thereto shall not constitute a violation of this Section if payment is not
yet due under the contract which is the foundation thereof. Notwithstanding the
foregoing, Grantor shall not be in default for failure to pay or discharge
Impositions or mechanic's or materialman's or similar lien asserted against the
Trust Property if, and so long as, (a) Grantor shall have notified Beneficiary
of same within seven (7) days of obtaining knowledge thereof; (b) Grantor shall
diligently and in good faith contest the same by appropriate legal proceedings
which shall operate to prevent the enforcement or collection of the same and the
sale of the Trust Property or any part thereof, to satisfy the same; (c) unless
funds are otherwise reserved, Grantor shall furnish to Beneficiary such security
as Beneficiary may reasonably request to insure payment of such Impositions and
to secure and indemnify Beneficiary against any cost, expense, loss or damage in
connection with such contest or postponement of payment,; (d) Grantor shall
timely upon final determination thereof pay the amount of any such Impositions,
claim, fine or penalty so determined, together with all costs, interest and
penalties which may be payable in connection therewith; (e) the failure to pay
the Impositions, or mechanic's or materialman's or similar lien claim does not
constitute a default under any other deed of trust, mortgage or security
interest covering or affecting any part of the Trust Property; and (f)
notwithstanding the foregoing, Grantor shall immediately upon request of
Beneficiary pay (and if Grantor shall fail so to do, Beneficiary may, but shall
not be required to, pay or cause to be discharged or bonded against) any such
Impositions, or claim notwithstanding such contest, if in the reasonable opinion
of Beneficiary, the Trust Property or any part thereof or interest therein may
be in imminent danger of being sold, forfeited, foreclosed, terminated, canceled
or lost.
30. RECOVERY OF SUMS REQUIRED TO BE PAID. Beneficiary shall have
the right from time to time to take action to recover any sum or sums which
constitute a part of the Obligations as the same become due and owing, without
regard to whether or not the balance of the Obligations shall be due, and
without prejudice to the right of Beneficiary thereafter to bring an action of
foreclosure, or any other action, for a default or defaults by Grantor existing
at the time such earlier action was commenced.
31. MARSHALING, WAIVER OF REDEMPTION AND OTHER MATTERS. Grantor
hereby waives, to the extent permitted by law, the benefit of all appraisement,
valuation, stay, extension, reinstatement, moratorium and redemption laws now or
hereafter in force and all rights of marshaling in the event of any sale
hereunder of the Trust Property or any part thereof or any interest therein.
Further, Grantor hereby expressly waives any and all rights of redemption from
sale under any order or decree of foreclosure of this Deed of Trust on behalf
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of Grantor, and on behalf of each and every person acquiring any interest in or
title to the Trust Property subsequent to the date of this Deed of Trust and on
behalf of all persons to the extent permitted by applicable law.
32. NOTICE. Any notice which either party hereto may desire or be
required to give to the other party shall be in writing and delivered by: (x) a
commercial courier or messenger service or (y) by U.S. registered or certified
mail with return receipt requested. Notice by commercial messenger or courier
service will be deemed to have been given on the day when delivered before 4:00
p.m. on a business day in the city in which notice is delivered, provided that
payment for the cost of delivery is not requested of the recipient. Notice by
mail shall be given by registered or certified U.S. Mail, return receipt
requested. Delivery of notice by commercial messenger or courier service or mail
shall be assumed if acceptance of delivery is refused. Notice may be given by
fax but will only be treated as delivered hereunder if: (x) sent between the
hours of 9:00 a.m. and 5:00 p.m. (based on local time at the destination); and
(y) receipt is acknowledged by fax and delivery will be deemed to have been
given on the date the fax acknowledgment is sent. Notices shall be delivered as
follows or at such other place as either party hereto may by notice in writing
(given in accordance with this Section 32) designate:
To Grantor: Discovery Zone, Inc.
One Corporate Center
110 East Broward Boulevard
Fort Lauderdale, Florida 33301
Attn: President
Telecopy Number: (954) 627-2670
To Beneficiary: McDonald's Corporation
One McDonald's Plaza
Oak Brook, IL 60523
Attn: General Counsel
Telecopy Number: (630) 623-3000
33. SOLE DISCRETION OF BENEFICIARY. Wherever pursuant to this
Deed of Trust, Beneficiary exercises any right given to it to approve or
disapprove, or any arrangement or term is to be satisfactory to Beneficiary, the
decision of Beneficiary to approve or disapprove or to decide that arrangements
or terms are satisfactory or not satisfactory shall be in the sole discretion of
Beneficiary and shall be final and conclusive, except as may be otherwise
expressly and specifically provided herein.
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34. NON-WAIVER. The failure of Beneficiary to insist upon strict
performance of any term hereof shall not be deemed to be a waiver of any term of
this Deed of Trust. Grantor shall not be relieved of Grantor's Obligations
hereunder by reason of (a) the failure of Beneficiary to comply with any request
of Grantor to take any action to foreclose this Deed of Trust or otherwise
enforce any of the provisions hereof or of the other Relevant Documents, (b) the
release, regardless of consideration, of the whole or any part of the Trust
Property, or of any person liable for the Obligations or any portion thereof, or
(c) any agreement or stipulation by Beneficiary extending the time of payment or
otherwise modifying or supplementing the terms of this Deed of Trust or the
other Relevant Documents. Beneficiary may resort for the payment of the
Obligations to any other security held by Beneficiary in such order and manner
as Beneficiary, in its discretion, may elect. Beneficiary may take action to
recover the Obligations, or any portion thereof, or to enforce any covenant
hereof without prejudice to the right of Beneficiary thereafter to foreclosure
this Deed of Trust. The rights and remedies of Beneficiary under this Deed of
Trust shall be separate, distinct and cumulative and none shall be given effect
to the exclusion of the others. No act of Beneficiary shall be construed as an
election to proceed under any one provision herein to the exclusion of any other
provision. Beneficiary shall not be limited exclusively to the rights and
remedies herein stated but shall be entitled to every right and remedy now or
hereafter afforded at law or in equity.
35. NO ORAL CHANGE. This Deed of Trust and the other Relevant
Documents constitute the final expression of the entire agreement among the
parties pertaining to the subject matter hereof and thereof and supersede all
prior and contemporaneous agreements, understanding, representations or other
arrangements, whether express or implied, written or oral, of the parties in
connection herewith or therewith except to the extent expressly incorporated or
specifically referred to herein or therein. This Deed of Trust, and any
provisions hereof, may not be modified, amended, waived, extended, changed,
discharged or terminated orally or by any act or failure to act on the part of
Grantor or Beneficiary, but only by an agreement in writing signed by the party
against whom enforcement of any modification, amendment, waiver, extension,
change, discharge or termination is sought.
36. SUCCESSORS AND ASSIGNS. Subject to the provisions hereof
requiring Beneficiary's consent to any transfer of the Trust Property, this Deed
of Trust shall be binding upon and inure to the benefit of Grantor and
Beneficiary and their respective permitted successors and assigns forever.
37. SEVERABILITY. If any term, covenant or condition of this Deed
of Trust or the Relevant Documents is held to be invalid, illegal or
unenforceable in any respect, this Deed of Trust and any such other Relevant
Document shall be construed without such provision.
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38. HEADINGS, ETC. The headings and captions of various
paragraphs of this Deed of Trust are for convenience of reference only and are
not to be construed as defining or limiting, in any way, the scope or intent of
the provisions hereof.
39. DUPLICATE ORIGINALS. This Deed of Trust may be executed in
any number of duplicate originals and each such duplicate original shall be
deemed to be an original.
40. DEFINITIONS. Unless the context clearly indicates a contrary
intent or unless otherwise specifically provided herein, words used in this Deed
of Trust may be used interchangeably in singular or plural form and the word
"Grantor" shall mean "each Grantor and any subsequent owner or owners of the
Trust Property or any part thereof or any interest therein," the word
"Beneficiary" shall mean "Beneficiary and any subsequent holder(s) of the
Notes," the word "person" shall include an individual, corporation, partnership,
trust, unincorporated association, government, governmental authority, and any
other entity, and the words "Trust Property" shall include any portion of the
Trust Property and any interest therein and the words "attorneys' fees" shall
include any and all attorneys' fees, paralegal and law clerk fees (including,
without limitation, fees at the pre-trial, trial and appellate levels incurred
or paid by Beneficiary in protecting its interest in the Trust Property and
Collateral and enforcing its rights hereunder and all such fees incurred in
connection with any bankruptcy or insolvency proceedings). Whenever the context
may require, any pronouns used herein shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns and pronouns shall
include the plural and vice versa.
41. HOMESTEAD. Grantor hereby waives and renounces all homestead
and exemption rights provided by the constitution and the laws of the United
States and of any state, in and to the Land as against the collection of the
Obligations, or any part hereof.
42. ASSIGNMENTS. Consistent with and subject to the applicable
provisions of the Relevant Documents, Beneficiary shall have the right to assign
or transfer its rights under this Deed of Trust without limitation. Any
Beneficiary or transferee shall be entitled to all the benefits afforded
Beneficiary under this Deed of Trust.
43. WAIVER OF JURY TRIAL. TO THE MAXIMUM EXTENT PERMITTED BY
APPLICABLE LAW, EACH PARTY HERETO HEREBY AGREES NOT TO ELECT A TRIAL BY JURY OF
ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY JURY FULLY
TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO
THE NOTES, THIS DEED OF TRUST, OR THE OTHER RELEVANT DOCUMENTS, OR ANY CLAIM,
COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH. THIS WAIVER OF
RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY SUCH PARTY, AND IS
INTENDED TO ENCOMPASS
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INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY
JURY WOULD OTHERWISE ACCRUE. BENEFICIARY IS HEREBY AUTHORIZED TO FILE A COPY OF
THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY
GRANTOR.
44. CONSENT TO JURISDICTION. GRANTOR AND BENEFICIARY HERETO
CONSENT FOR THEMSELVES AND IN RESPECT OF THEIR PROPERTIES, GENERALLY,
UNCONDITIONALLY AND IRREVOCABLY, TO THE NONEXCLUSIVE JURISDICTION OF THE FEDERAL
AND STATE COURTS IN THE STATE OF NEW YORK WITH RESPECT TO ANY PROCEEDING
RELATING TO ANY MATTER, CLAIM OR DISPUTE ARISING UNDER THE RELEVANT DOCUMENTS OR
THE TRANSACTIONS CONTEMPLATED THEREBY. GRANTOR FURTHER CONSENTS, GENERALLY,
UNCONDITIONALLY AND IRREVOCABLY, TO THE NONEXCLUSIVE JURISDICTION OF THE STATE
AND FEDERAL COURTS OF THE STATE IN WHICH ANY OF THE COLLATERAL IS LOCATED IN
RESPECT OF ANY PROCEEDING RELATING TO ANY MATTER, CLAIM OR DISPUTE ARISING WITH
RESPECT TO SUCH COLLATERAL. GRANTOR FURTHER IRREVOCABLY CONSENTS TO THE SERVICE
OF PROCESS, GENERALLY, UNCONDITIONALLY AND IRREVOCABLY, AT THE ADDRESSES SET
FORTH IN THE FIRST PARAGRAPH HEREOF IN CONNECTION WITH ANY OF THE AFORESAID
PROCEEDINGS IN ACCORDANCE WITH THE RULES APPLICABLE TO SUCH PROCEEDINGS. TO THE
EXTENT PERMITTED BY APPLICABLE LAW, GRANTOR HEREBY IRREVOCABLY WAIVES ANY
OBJECTION WHICH IT MAY NOW HAVE OR HAVE IN THE FUTURE TO THE LAYING OF VENUE IN
RESPECT OF ANY OF THE AFORESAID PROCEEDINGS BROUGHT IN THE COURTS REFERRED TO
ABOVE AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
NOTHING HEREIN SHALL AFFECT THE RIGHT OF BENEFICIARY TO SERVE PROCESS IN ANY
MANNER PERMITTED BY LAW OR TO COMMENCE PROCEEDINGS OR OTHERWISE PROCEED AGAINST
GRANTOR IN ANY JURISDICTION.
45. GOVERNING LAW. This Deed of Trust shall be governed by and
construed in accordance with the laws of the State of New York including,
without limitation, Section 5-1401 of the General Obligations Law, but otherwise
without regard to conflict of law principles; PROVIDED, HOWEVER, that with
respect to the creation, attachment, perfection, priority and procedures
relating to the enforcement of the liens and security interests created by or
pursuant to this Deed of Trust and relating to real property, this Deed of Trust
shall be governed by and construed in accordance with the laws of the state in
which the Land is located.
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46. LIEN ABSOLUTE, MULTI-SITE REAL ESTATE AND MULTIPLE COLLATERAL
TRANSACTION. Grantor acknowledges that this Deed of Trust and a number of other
Relevant Documents and those documents required by the Relevant Documents
together secure the Obligations. Grantor agrees that the lien of this Deed of
Trust and all obligations of the Grantor hereunder shall be absolute and
unconditional and shall not in any manner be affected or impaired by:
(a) any lack of validity or enforceability of the Notes or any
other Relevant Document, any agreement with respect to any of the Obligations or
any other agreement or instrument relating to any of the foregoing;
(b) any acceptance by Beneficiary of any security for or
guarantees of any of the indebtedness hereby secured;
(c) any failure, neglect or omission on the part of Beneficiary
to realize upon or protect any of the indebtedness hereby secured or any of the
collateral security therefor, including the Relevant Documents;
(d) any change in the time, manner or place of payment of, or in
any other term of, all or any of the Obligations;
(e) any release (except as to the property or obligation
released), sale, pledge, surrender, compromise, settlement, nonperfection,
renewal extension, indulgence, alteration, exchange, modification or disposition
of any of the Obligations hereby secured or of any of the collateral security
therefor;
(f) any amendment or waiver of or any consent to any departure
from the Notes or any other Relevant Documents or of any guaranty thereof
(except to the extent of such amendment, waiver or consent in writing by
Beneficiary), if any, and Beneficiary may in its discretion foreclose, exercise
any power of sale, or exercise any other remedy available to it under any or all
of the Relevant Documents without first exercising or enforcing any of its
rights and remedies hereunder; and
(g) any exercise of the rights or remedies of Beneficiary
hereunder or under any or all of the Relevant Documents.
Grantor specifically consents and agrees that Beneficiary may exercise its
rights and remedies hereunder and under the other Relevant Documents separately
or concurrently and in any order that Beneficiary may deem appropriate.
34
<PAGE>
47. FUTURE ADVANCES. This Deed of Trust shall secure not only
existing indebtedness, but also such future advances, whether such advances are
obligatory or are to be made at the option of Beneficiary, or otherwise, as are
made by Beneficiary to Grantor after the date hereof, to the same extent as if
such future advances were made on the date of the execution of this Deed of
Trust. Nothing in this Deed of Trust shall be deemed an obligation on the part
of the Beneficiary to make any future advances.
48. STATE SPECIFIC PROVISIONS. The provisions of Exhibit B are
hereby incorporated by reference as though set forth in full herein.
49. NO MERGER OF ESTATES. It is the intention and agreement of
Grantor and Beneficiary that there shall be no merger of any leasehold estate in
the Trust Property with the fee interest in the Trust Property or any other
estate or interest in the Trust Property, and there shall be no merger of this
Deed of Trust and any estate in the Trust Property, by reason of the fact that
the same person may own or hold (a) any leasehold interest in the Trust
Property, and/or (b) this Deed of Trust, and/or (c) the fee interest in the
Trust Property or any other estate or interest in the Trust Property.
50. CONCERNING THE TRUSTEE. Trustee shall be under no duty to
take any action hereunder except as expressly required hereunder or by law, or
to perform any act which would involve Trustee in any expense or liability or to
institute or defend any suit in respect hereof, unless properly indemnified to
Trustee's reasonable satisfaction. Trustee, by acceptance of this Deed of Trust,
covenants to perform and fulfill the trusts herein created, being liable,
however, only for willful negligence or misconduct, and hereby waives any
statutory fee and agrees to accept reasonable compensation, in lieu thereof, for
any services rendered by Trustee in accordance with the terms hereof. Trustee
may resign at any time upon giving thirty (30) days' notice to Grantor and to
Beneficiary. Beneficiary may remove Trustee at any time or from time to time,
and select a successor trustee. In the event of the death, removal, resignation,
refusal to act, or inability to act of Trustee, or in its sole discretion for
any reason whatsoever Beneficiary may, without notice and without specifying any
reason therefor and without applying to any court, select and appoint a
successor trustee, by an instrument recorded wherever this Deed of Trust is
recorded and all powers, rights, duties and authority of Trustee, as aforesaid,
shall thereupon become vested in such successor. Such substitute trustee shall
not be required to give bond for the faithful performance of the duties of
Trustee hereunder unless required by Beneficiary. The procedure provided for in
this paragraph for substitution of Trustee shall be in addition to and not in
exclusion of any other provisions for substitution, by law or otherwise.
51. TRUSTEE'S FEES. Grantor shall pay all reasonable costs, fees
and expenses incurred by Trustee and Trustee's agents and counsel in connection
with the performance by Trustee of Trustee's duties hereunder and all such
costs, fees and expenses
35
<PAGE>
shall be secured by this Deed of Trust. TRUSTEE SHALL BE INDEMNIFIED, HELD
HARMLESS AND REIMBURSED BY GRANTOR FOR ANY LIABILITY, DAMAGE OR EXPENSE,
INCLUDING REASONABLE ATTORNEYS' FEES AND AMOUNTS PAID IN SETTLEMENT, WHICH
TRUSTEE MAY INCUR OR SUSTAIN IN CONNECTION WITH THIS DEED OF TRUST OR IN THE
DOING OF ANY ACT WHICH TRUSTEE IS REQUIRED OR PERMITTED TO DO BY THE TERMS
HEREOF OR BY LAW (EXCEPT TO THE EXTENT ARISING FROM THE GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT OF TRUSTEE), AND SHALL BE REIMBURSED THEREFOR UPON DEMAND.
52. SUBORDINATE LIEN. Notwithstanding anything to the contrary
contained herein, Grantor shall be permitted to grant a subordinate lien on the
Trust Property in favor of State Street Bank and Trust Company, solely in its
capacity as trustee and collateral agent under and pursuant to the Indenture (as
hereinafter defined) (the "SUBORDINATED CREDITOR") as security for the
obligations of Grantor under that certain Indenture between Grantor and the
Subordinated Creditor dated as of July 22, 1997 (the "INDENTURE"), provided that
such lien in favor of the Subordinated Creditor is junior, subject and
subordinate to the lien of this Deed of Trust in accordance with and pursuant to
the terms and conditions set forth in that certain Subordination Agreement dated
as of the date hereof between Beneficiary and the Subordinated Creditor with
respect to the Trust Property (the "SUBORDINATION AGREEMENT"), and provided,
further, that any event which gives the Subordinated Creditor the right to
accelerate the obligations secured by such subordinate lien shall automatically
constitute an Event of Default hereunder.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE AND NOTARY PAGES FOLLOW.]
36
<PAGE>
Grantor has executed this instrument as of the day and year first above written.
GRANTOR:
DISCOVERY ZONE, INC., a
Delaware corporation, as
successor in interest to LEAPS
& BOUNDS, INC.
By: /s/ Scott Bernstein
-------------------------
Name: Scott Bernstein
Its: President
<PAGE>
STATE OF NEW YORK )
) ss.
COUNTY OF WESTCHESTER )
I certify that I know or have satisfactory evidence that
Scott Bernstein is the person who appeared before me, and said person
acknowledged that said person signed this instrument, on oath stated that said
person was authorized to execute the instrument and acknowledged it as
President of DISCOVERY ZONE, INC., a Delaware corporation, to be the free
and voluntary act of such corporation for the uses and purposes mentioned in the
instrument.
Dated this 28th day of July, 1997.
[Notarial Seal] Dated: July 28, 1997
[Notarial Seal] /s/ Mark D. Woodward
-----------------------
(Signature)
[STAMP]
-------------------------
(Legibly Print or Stamp Name
of Notary)
Notary Public in and for the
State of New York, residing at
(home address):
New York, New York
My appointment expires 6/15/98
<PAGE>
Vancouver
Clark County, Washington
EXHIBIT A
Lot 1, as described in and delineated on SHORT PLAT, recorded in Book 2 at Page
865, of Short Plats and as recorded under Auditor's File No. 9404150033, being a
portion of Lot 2 of Short Plats at page 535, records of Clark County being a
parcel of property in the Northeast quarter of Section 17, Township 2 North,
Range 2 East of the Willamette Meridian, Clark County, Washington.
TOGETHER WITH that certain road easement for the purpose of ingress, egress and
passage and utilities as set forth and defined by document recorded May 8, 1991,
under Auditor's File No. 9105080180.
TOGETHER WITH a non-exclusive easement for ingress, egress, parking and
utilities as granted and described in document recorded under Auditor's File No.
G 705215 and as amended and restated by documents recorded under Auditor's File
Nos. 7806280148 and 8106250036.
TOGETHER WITH a non-exclusive easement for ingress and egress as delineated and
described in access easement recorded under Clark County Auditor's File No.
9404150214.
<PAGE>
EXHIBIT B
STATE SPECIFIC PROVISIONS (Washington)
The following provisions are incorporated by reference into
Section 48 of the attached Deed of Trust. If any conflict or inconsistency
exists between this Exhibit B and the remainder of the attached Deed of Trust,
this Exhibit B shall govern.
A. RIGHTS PERTAINING TO SALES. The following provisions shall
apply to any sale or sales of the Trust Property under or by virtue of this
Paragraph A, whether made under the power of sale granted in this Deed of Trust
or by virtue of judicial proceedings or of judgment or decree of foreclosure and
sale:
1. The Beneficiary or the Trustee may conduct any number of sales
for cash or upon credit from time to time. The power of sale set forth in
Section 24 shall not be exhausted by any one or more such sales as to any part
of the Trust Property which shall not have been sold, nor by any sale which is
not completed or is defective in the opinion of the Trustee or the Beneficiary,
until the Obligations shall have been paid in full.
2. Any sale may be postponed or adjourned by public announcement
at the time and place appointed for such sale or for such postponed or adjourned
sale without further notice.
3. Any and all statements of fact or other recitals made in any
instruments given by the Trustee or the Beneficiary as to nonpayment of the
Obligations, or as to the occurrence of any Event of Default, or as to the
Beneficiary having declared all or any of the Obligations to be due and payable,
or as to the request to sell, or as to notice of time, place and terms of sale
and of the property or rights to be sold having been duly given, or as to the
refusal, failure or inability to act of the Trustee, or as to the appointment of
any substitute or successor Trustee, or as to any other act or thing having been
duly done by the Trustee or the Beneficiary, shall be taken as PRIMA FACIE
evidence of the truth of the facts so stated and recited. The Trustee or the
Beneficiary may appoint or delegate any one or more persons as agent to perform
any act or acts necessary or incident to any sale so held, including the posting
of notices and the conduct of sale.
4. The receipt of the Trustee or the Beneficiary for the purchase
money paid at any such sale, or the receipt of any other person authorized to
give the same, shall be sufficient discharge therefor to any purchaser of any
property or rights sold as aforesaid, and no such purchaser, or its
representatives, grantees or assigns, after paying such purchase price and
receiving such receipt, shall be bound to see to the application of such
purchase price or any part thereof upon or for any trust or purpose of this Deed
of Trust or, in any manner
<PAGE>
whatsoever, be answerable for any loss, misapplication or nonapplication of any
such purchase money, or part thereof, or be bound to inquire as to the
authorization, necessity, expediency or regularity of any such sale.
5. Any such sale or sales shall operate to divest all of the
estate, right, title, interest, claim and demand whatsoever, whether at law or
in equity, of the Grantor in and to the properties and rights so sold, and shall
be a perpetual bar both at law and in equity against the Grantor and any and all
persons claiming or who may claim the same, or any part thereof, by, through or
under the Grantor to the fullest extent permitted by applicable law.
6. In the event that the Grantor, or any person claiming by,
through or under the Grantor, shall transfer or refuse or fail to surrender
possession of the Trust Property after any sale of the Trust Property, then the
Grantor or such person shall be deemed a tenant at sufferance of the purchaser
at such sale, subject to eviction by means of forcible entry and detainer
proceedings, or subject to any other right or remedy available under this Deed
of Trust or under applicable law.
7. Upon any such sale, the Trustee, the Beneficiary or any public
officer acting under execution or order of court shall not be required to have
present or constructively in its possession any or all of the Trust Property.
8. In the event a foreclosure under this Deed of Trust shall be
commenced by the Trustee, the Trustee or the Beneficiary may, at any time before
the sale of the Trust Property, abandon or direct the Trustee to abandon the
sale, and may institute suit for the collection of the Obligations and for the
foreclosure of this Deed of Trust, or in the event that the Trustee or the
Beneficiary should institute a suit for collection of the Obligations, and for
the foreclosure of this Deed of Trust, the Beneficiary may at any time before
the entry of final judgment in said suit dismiss the same and require the
Trustee to sell the Trust Property in accordance with the provisions of this
Deed of Trust.
9. EXERCISE BY TRUSTEE. Notwithstanding anything in this Deed of
Trust to the contrary, the Trustee (a) shall not exercise or waive the exercise
of, any of its rights or remedies under this Deed of Trust (other than its right
to reimbursement) except upon the request of the Beneficiary and (b) shall
exercise, or waive the exercise of, any or all of such rights or remedies upon
the request of the Beneficiary and at the direction of the Beneficiary as to the
manner of such exercise or waiver, PROVIDED that the Trustee shall have the
right to decline to follow any such request or direction if the Trustee shall be
advised by counsel that the action or proceeding, or manner thereof, so directed
may not lawfully be taken or waived.
B. TRUSTEE'S RESIGNATION. The Trustee may resign by an instrument
in writing addressed to the Beneficiary, or the Trustee may be removed at any
time with or without cause by an instrument in writing executed by the
Beneficiary. In case of the death,
<PAGE>
resignation, removal or disqualification of the Trustee or if for any reason the
Beneficiary shall deem it desirable to appoint a substitute or successor trustee
to act instead of the Trustee named in this Deed of Trust or instead of any
substitute or successor Trustee, then the Beneficiary shall have the right and
is hereby authorized and empowered to appoint a successor Trustee, or a
substitute Trustee, without other formality than appointment and designation in
writing executed by the Beneficiary, and the authority conferred by this
Paragraph B shall extend to the appointment of other successor and substitute
Trustees successively until the Obligations have been paid in full or until the
Trust Property is sold under this Deed of Trust. Such appointment and
designation by the Beneficiary shall be full evidence of the right and authority
to make the same and of all facts therein recited. Any such appointment executed
on behalf of the Beneficiary by an officer of the Beneficiary shall be
conclusively presumed to be executed with authority and shall be valid and
sufficient without proof of any action by the board of directors or any superior
officer of the Beneficiary. Upon the making of such appointment and designation,
all of the estate and title of the Trustee in the Trust Property shall vest in
the named successor or substitute Trustee, and the named successor or substitute
Trustee shall thereupon succeed to and shall hold, possess and execute all the
rights, powers, privileges, immunities and duties conferred upon the Trustee in
this Deed of Trust. Upon the written request of the Beneficiary or of the
successor or substitute Trustee, the Trustee ceasing to act shall execute and
deliver an instrument transferring to such successor or substitute Trustee all
of the estate and title in the Trust Property of the Trustee so ceasing to act,
together with all the rights, powers, privileges, immunities and duties
conferred upon the Trustee in this Deed of Trust, and shall duly assign,
transfer and deliver any of the properties and moneys held by said Trustee under
this Deed of Trust to said successor or substitute Trustee. All references in
this Deed of Trust to the Trustee shall be deemed to refer to the Trustee
(including any successor or substitute appointed and designated as provided in
this Deed of Trust) from time to time acting under this Deed of Trust. The
Grantor hereby ratifies and confirms any and all acts which the Trustee or its
successor or successors, substitute or substitutes, in this trust, shall do
lawfully by virtue of this Deed of Trust.
C. EXCULPATION. The Trustee shall not be liable for any error of
judgment or act done by the Trustee in good faith, or be otherwise responsible
or accountable under any circumstances whatsoever, except for the Trustee's
gross negligence or willful misconduct. The Trustee shall have the right to rely
on any instrument, document or signature authorizing or supporting any action
taken or proposed to be taken by the Trustee under this Beneficiary, believed by
the Trustee in good faith to be genuine. All moneys received by the Trustee,
until used or applied as provided in this Deed of Trust, shall be held in trust
for the purposes for which they were received, but need not be segregated in any
manner from any other moneys (except to the extent required by law), and the
Trustee shall be under no liability for interest on any moneys received by it
under this Deed of Trust.
<PAGE>
D. RECONVEYANCE, Upon Beneficiary's written request and surrender
of this Deed of Trust and the Note secured hereby for endorsement, the Trustee
shall reconvey, without warranty, all or any part of the Trust Property then
held hereunder. Recitals in such reconveyance of any matters of fact shall be
conclusive proof of the accuracy thereof. The grantee may be described in such
reconveyance as "the person or persons legally entitled thereto."
E. ORAL AGREEMENTS UNENFORCEABLE. ORAL AGREEMENTS OR ORAL
COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, OR TO FORBEAR FROM ENFORCING REPAYMENT
OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.
F. The real property conveyed by this Deed of Trust is not used
principally for agricultural or farming purposes.
<PAGE>
SCHEDULE A
DESCRIPTION OF ORIGINAL DEED OF TRUST
PROPERTY RECORDING OFFICE AUDITOR'S RECORDING
FILE NO. DATE
- ------------------ ------------------------------- ------------- ------------
Vancouver, WA Recorder of Clark County, WA 9409120039 9/12/94
<PAGE>
EXHIBIT 4.41
- ------------------------------------------------------------------------------
DISCOVERY ZONE, INC.
(Grantor),
to
THE PUBLIC TRUSTEE OF ARAPAHOE COUNTY,
COLORADO, as Trustee
(Trustee)
for the benefit of
McDONALD's CORPORATION
(Beneficiary)
----------------------------------------------------
AMENDED AND RESTATED DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS, SECURITY
AGREEMENT AND FIXTURE FILING
----------------------------------------------------
Dated as of July 29, 1997
DOCUMENT PREPARED BY AND
AFTER RECORDING RETURN TO:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attention: Jonathan A. Reiss, Esq.
- ------------------------------------------------------------------------------
[AURORA, COLORADO PROPERTY]
<PAGE>
THIS AMENDED AND RESTATED DEED OF TRUST, ASSIGNMENT OF LEASES AND
RENTS, SECURITY AGREEMENT AND FIXTURE FILING (as the same may from time to time
be extended, renewed or modified, this "DEED OF TRUST"), made as of the 29th day
of July, 1997, by DISCOVERY ZONE, INC., a Delaware corporation ("GRANTOR"),
having its principal place of business at One Corporate Center, 110 East Broward
Boulevard, Fort Lauderdale, Florida 33301, as successor by merger to LEAPS &
BOUNDS, INC., to The Public Trustee of Arapahoe County, Colorado (and any
subsequent substitutes or successors thereof pursuant to Section 50 below,
"Trustee"), to and for the benefit of McDONALD'S CORPORATION a Delaware
corporation ("BENEFICIARY"), having an address at One McDonald's Plaza, Oak
Brook, Illinois 60523.
W I T N E S S E T H:
A. WHEREAS, prior to Grantor's several predecessors in interest
filing their voluntary petitions for relief under chapter 11, title 11, United
States Code (the "BANKRUPTCY CODE"), Grantor's predecessors in interest with
respect to the Trust Property (as hereinafter defined), Leaps & Bounds, Inc.
("LBI") had provided Beneficiary with a First Deed of Trust on the Trust
Property (as hereinafter defined), dated as of August 30, 1994 (the "ORIGINAL
DEED OF TRUST") and identified by the recording information set forth on
Schedule A hereto, to secure certain obligations owed to Beneficiary under the
Agreement and Plan of Merger among Beneficiary, Grantor, Discovery Zone, Inc., a
Delaware corporation ("OLD DZI") and Discovery Zone International, Inc.
("DZII"), a Delaware corporation, dated as of August 30, 1994 (the "MERGER
AGREEMENT"); and
B. WHEREAS, pursuant to Section 11.2(a)(iii) of the Merger
Agreement, Old DZI agreed to defend, indemnify and hold Beneficiary and its
affiliates harmless in respect of all expenses, losses, costs, deficiencies,
liabilities and damages (including related and reasonable counsel fees and
expenses, and compensatory and demonstrable consequential damages) incurred or
suffered by Beneficiary as a direct result of, inter alia, any breach by Old DZI
or LBI of the leases or subleases relating to certain properties that result in
any payment by Beneficiary in connection with any guarantee by Beneficiary of
such leases and pursuant to Section 10.3(f) of the Merger Agreement it was
agreed that certain security would be provided to secure the obligations under
Section 11.2(a)(iii) of the Merger Agreement, including without limitation, a
first priority security interest in the Land and Improvements (the "AGREEMENT TO
INDEMNIFY"); and
C. WHEREAS, following the filing of their respective prayers for
relief under the Bankruptcy Code, Grantor's predecessors in interest, Old DZI,
their affiliated debtors, including DZII and LBI (the "DEBTORS"), and
Beneficiary entered into the Stipulation and Order Between Debtors and
McDonald's Corporation Providing For The Resolution, Settlement And Compromise
of Disputes And For Rent Deferrals And Allowance of Certain Claims (the
"STIPULATION AND ORDER") that was entered by the United States Bankruptcy Court
for the District of Delaware (the "BANKRUPTCY COURT") on November 18, 1996,
which was not appealed or otherwise challenged, became a final order, remains in
full force and effect and to
2
<PAGE>
which Grantor is bound, Section 7 of which is captioned "CONTINUING SECURITY"
and provides, in pertinent part, that the valid and enforceable first priority
security interest on the Land and Improvements and certain other collateral
shall secure the performance and payment of all of the obligations of Grantor to
Beneficiary under the Notes (as hereinafter defined), any obligations of
Beneficiary that may arise in connection with the Assumption Locations whether
pursuant to any guaranty, lease, sublease or otherwise, any obligations of
Grantor that may arise in the event of a Liquidation, and any continuing
obligations of Grantor relating to the Rejection Location(s) and the Prior
Rejection Locations (as such terms are defined therein); and
D. WHEREAS, pursuant to the Stipulation and Order and 11 U.S.C.
ss.365, the Debtors, as predecessors in interest to Grantor, assumed the
subleases relating to certain properties (the "ASSUMED PROPERTIES") which
subleases (the "ASSUMED PROPERTY SUBLEASES") expressly incorporate the Agreement
to Indemnify as it relates to any current or future obligations of Beneficiary
relating to the Assumed Properties; and
E. WHEREAS, pursuant to the Stipulation and Order and the Plan
(as hereinafter defined), this Deed of Trust hereby amends and restates the
Original Deed of Trust in its entirety in accordance with the terms and
provisions set forth herein; and
F. WHEREAS, this Deed of Trust, together with certain other Deeds
of Trust, Mortgages or similar encumbrances, are intended to and do secure the
obligations of Grantor and its predecessors in interest and the other Debtors,
to Beneficiary under all of the Stipulation and Order, the Agreement to
Indemnify, the Secured Rent Deferral Notes (as hereinafter defined) and the
Secured Rejection Note (as hereinafter defined); and
G. WHEREAS, pursuant to the plan of reorganization for Old DZI
and its affiliated debtors confirmed by the Bankruptcy Court by order entered on
July 18, 1997 (the "PLAN"), and as required by the terms of the Stipulation and
Order, Grantor, as the reorganized successor of the Debtors, is obligated to
issue to Beneficiary Secured Rent Deferral Notes in the aggregate original
principal amount of $266,466.24, which amount is subject to increase each month
in accordance with the terms thereof (the "SECURED RENT DEFERRAL NOTES") and
Secured Rejection Note in the aggregate original principal amount of
$4,416,237.90 (the "SECURED REJECTION NOTE" and, together with the Secured Rent
Deferral Notes, the "NOTES"); and
H. WHEREAS, pursuant to the Plan, all of the Debtors and their
reorganized successors have merged into Grantor, and simultaneously with such
merger, all property of LBI and the other Debtors, including the Trust Property,
has been revested in Grantor, as the successor entity of the Debtors; and
I. WHEREAS, in accordance with the foregoing, Grantor is the fee
simple owner of the real estate described in Exhibit A attached hereto commonly
known as 14281 East Exposition Avenue, Aurora, Colorado (the "LAND");
3
<PAGE>
NOW THEREFORE, with reference to the foregoing recitals and for
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Grantor and Beneficiary hereby agree that the Original Deed of
Trust is hereby amended and restated in its entirety as follows:
For the purpose of securing the payment and performance of all of
the obligations (the "OBLIGATIONS") of Grantor to Beneficiary, including without
limitation, any and all obligations of Grantor, as successor in interest to Old
DZI, DZII, LBI and their affiliated debtors, under this Deed of Trust, the
Agreement to Indemnify (including, without limitation, any contingent
obligations thereunder), the Stipulation and Order (including, without
limitation, the obligations described in Section 7 thereof which are referred to
in paragraph C of the recitals above), the Plan and the Notes (including any and
all subsequent advances made pursuant to the terms of the Notes), and all other
documents evidencing or securing any such obligations (collectively, the
"RELEVANT DOCUMENTS"), Grantor by these presents hereby GRANTS, BARGAINS, SELLS,
WARRANTS, PLEDGES, ASSIGNS AND CONVEYS to Trustee and its successors and assigns
forever in trust, WITH POWER OF SALE, for the benefit of Beneficiary, the Land
and the buildings, structures and improvements of every nature whatsoever now or
hereafter located thereon to the extent owned by Grantor (including, but not
limited to, all gas and electric fixtures, radiators, heaters, docks and docking
facilities, engines and machinery, boilers, elevators and motors, plumbing,
heating and air conditioning fixtures, carpeting and other floor coverings,
water heaters, awnings and storm sashes which are or shall be attached to the
Land or said buildings, structures or improvements) (the "IMPROVEMENTS");
TOGETHER WITH: all right, title, interest and estate of Grantor
now owned, or hereafter acquired, in and to the following property, rights,
interest and estates relating to the Land and the Improvements, together with
Grantor's interest in the following property, rights, interests and estates
hereinafter described (the Land, Improvements, and the following property,
rights, interests and estates being hereinafter collectively referred to as the
"TRUST PROPERTY"):
(a) all easements, rights-of-way, strips and gores of land,
streets, ways, alleys, passages, sewer rights, water, water courses, water
rights and powers, air rights and development rights, construction and equipment
warranties, and all estates, rights, titles, interests, privileges, liberties,
tenements, hereditaments and appurtenances of any nature whatsoever, in any way
belonging, relating to or pertaining to the Land and the Improvements and the
reversion and reversions, remainder and remainders, and all land lying in the
bed of any street, road or avenue, opened or proposed, in front of or adjoining
the Land, to the center line thereof and all the estates, rights, titles,
interests, dower and rights of dower, curtesy and rights of curtesy, property,
possession, claim and demand whatsoever, both at law and in equity, of Grantor
of, in and to the Land and the Improvements and every part and parcel thereof,
with the appurtenances thereto, and in and to any streets, ways, alleys,
passages, strips or gores of land adjoining the Land or any part thereof;
4
<PAGE>
(b) all fixtures, attachments and other articles attached to the
Land or the Improvements constituting realty or real property now or hereafter
owned by Grantor or in which Grantor has or shall acquire an interest, now or
hereafter located on, attached to or contained in or used or usable in
connection with the Trust Property, and including, without limitation, all
building or construction materials intended for construction, reconstruction,
alteration or repair of or installation on or in the Trust Property, of every
kind and nature whatsoever now owned or hereafter acquired by Grantor, and all
proceeds thereof, as well as all additions to, appurtenances, substitutions for,
replacements of or accessions to any of the items recited as aforesaid and all
attachments, components, parts (including spare parts) and accessories, whether
installed thereon or affixed thereto, now or hereafter owned by Grantor and used
or intended to be used in connection with, or with the operation of, the Trust
Property, to the extent constituting real property, but not including play
equipment or other similar-type entertainment equipment relating to the
operation of the "Discovery Zone" facility on the Trust Property unless removal
of such equipment would cause structural damage to the Land or the Improvements
(collectively, the "FIXTURES");
(c) all awards or payments, including interest thereon, which may
heretofore and hereafter be made with respect to the Trust Property, whether
from the exercise of the right of eminent domain (including, but not limited to,
any transfer made in lieu of or in anticipation of the exercise of said rights),
or for a change of grade, or for any other injury to or decrease in the value of
the Trust Property;
(d) to the extent assignable (and to the extent relating to the
general occupancy and use of the Trust Property as opposed to the operation of
the "Discovery Zone" entertainment facility on the Trust Property), leases,
subleases (including sub-subleases), lettings, licenses, concessions, occupancy
agreements and other agreements which grant a possessory interest in, or the
right to use or occupy, all or any part of the Trust Property now or hereafter
entered into, and all amendments, extensions, renewals and guarantees thereof,
and all security therefor (collectively, the "LEASES") and all rents, issues,
profits, revenues (including all oil and gas or other mineral royalties and
bonuses) and deposits (including, without limitation, security deposits) under
the Leases (including, without limitation, from the rental of any office space,
retail space or other space, halls, stores, and offices, and security deposits
therefor, exhibit or sales space of every kind, license, lease, sublease fees
and rentals, letters of credit or cash instruments securing or evidencing
obligations under Leases, service charges, vending machine sales and proceeds,
if any, from business interruption or other loss of income insurance))
(collectively, the "Rents") and all proceeds from the sale or other disposition
of the Leases and the right to receive and apply the Rents to the payment of the
Obligations;
(e) subject to the rights of Grantor hereunder, all proceeds of
any insurance policies covering the Trust Property (including, without
limitation, the right to receive and apply the proceeds of any insurance,
judgments, or settlements made in lieu thereof, for damage to the Trust
Property);
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(f) all refundable, returnable or reimbursable fees deposits or
other funds or evidences of credit or indebtedness deposited by or on behalf of
Grantor with any governmental authorities, boards, corporations, providers of
utility services, public or private, including specifically, but without
limitation, all refundable, returnable or reimbursable tap fees, utility
deposits and development costs in connection with the Trust Property, and all of
the records and books of account now or hereafter maintained by or on behalf of
Grantor in connection with the operation of the Trust Property (collectively,
"SECURITY ACCOUNTS");
(g) all proceeds (as defined in the Uniform Commercial Code) of
the Trust Property which, in any event, shall include, without limitation, (i)
cash, instruments and other property received, receivable or otherwise
distributed in exchange for any or all of the Trust Property, (ii) the
collection or other disposition of, or realization upon, any item or portion of
the Trust Property (including, without limitation, all claims of Grantor against
third parties for loss of, damage to, destruction of, or for proceeds payable
under policies of insurance in respect of, the Trust Property now existing or
hereafter arising), (iii) any and all proceeds of any insurance, indemnity,
warranty or guaranty payable to Grantor from time to time with respect to damage
or loss of or to any of the Trust Property, (iv) any and all payments (in any
form whatsoever) made or due and payable to Grantor from time to time in
connection with the requisition, confiscation, condemnation, seizure or
forfeiture of all or any part of the Trust Property by any Governmental
Authority (or any person acting under color of Governmental Authority), and (v)
any and all real estate tax refunds payable to Grantor with respect to the Trust
Property, and refunds or reimbursements payable with respect to bonds, escrow
accounts, or other sums payable in connection with the use, development or
ownership of the Trust Property, but excluding any proceeds obtained, earned or
arising directly from the operation of the "Discovery Zone" entertainment
facility operated by Grantor on the Trust Property as opposed to general
occupancy and use of the Trust Property (collectively, the "PROCEEDS");
(h) to the extent permitted under applicable law, all licenses,
permits (other than proprietary permits of Grantor relating to the ordinary
operation of a "Discovery Zone" entertainment facility, as opposed to the
general use and occupancy of the Trust Property), variances and certificates
used in connection with the ownership, operation, use or occupancy of the Trust
Property (including, without limitation, business licenses, state health
department licenses, food service licenses, liquor licenses, licenses to conduct
business and all such other permits, licenses and rights, obtained from any
Governmental Authority or private Person concerning ownership, operation, use or
occupancy of the Trust Property) (collectively, "PERMITS");
(i) all plans, specifications, shop drawings and other technical
descriptions prepared for construction, repair or alteration of the Improvements
(including diskettes containing any such data), and all amendments and
modifications thereof; and
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(j) any escrows or escrow accounts established hereunder to
secure the Obligations of Grantor, including, without limitation, the Proceeds
Escrow Account described in Section 6(b) hereof; and
(k) any and all replacements and renewals of or additions and
substitutions to any of the foregoing and all proceeds of any of the foregoing.
TO HAVE AND TO HOLD the above granted and described Trust
Property unto and to the use and benefit of Trustee, and the successors,
substitutes and assigns of Trustee forever, IN TRUST WITH POWER OF SALE, for the
benefit of Beneficiary, and its successors and assigns, and Grantor does hereby
bind itself, its successors and assigns to WARRANT AND FOREVER DEFEND the title
to the Trust Property unto Trustee and its successors, substitutes and assigns,
for the benefit of Beneficiary, and its successors and assigns;
AND, TO PROTECT THE SECURITY OF THIS DEED OF TRUST, Grantor
represents and warrants to and covenants and agrees with Beneficiary as follows:
1. DEFINED TERMS. The following terms, when used herein, shall
have the meanings set forth below:
"ENVIRONMENTAL LAWS" means any and all present and future
federal, state or local laws, statutes, ordinances or regulations, any judicial
or administrative orders, decrees or judgments thereunder, and any permits,
approvals, licenses, registrations, filings and authorizations, in each case as
now or hereafter in effect, relating to the protection of the environment, the
impact of Hazardous Substances or the generation, disposal or remediation
thereof on human health or safety, or the Release or threatened Release of
Hazardous Substances or otherwise relating to the Use of Hazardous Substances.
For purposes of this definition, (A) "HAZARDOUS SUBSTANCES" means collectively,
(i) any petroleum or petroleum products or waste oils, explosives, radioactive
materials, asbestos, urea formaldehyde foam insulation, polychlorinated
biphenyls ("PCBs"), and lead-based paint, (ii) any chemicals or other materials
or substances which are now or hereafter become defined as or included in the
definitions of "hazardous substances", "hazardous wastes", "hazardous
materials", "extremely hazardous wastes", "restricted hazardous wastes", "toxic
substances", "toxic pollutants", "contaminants", "pollutants" or words of
similar import under any Environmental Law and (iii) any other chemical or any
other material or substance, exposure to which is now or hereafter prohibited,
limited or regulated under any Environmental Law; (B) "USE" means, with respect
to any Hazardous Substance, the generation, manufacture, processing,
distribution, handling, use, treatment, recycling or storage of such Hazardous
Substance or transportation of such Hazardous Substance; and (C) "RELEASE" means
any release, spill, emission, leaking, pumping, injection, deposit, disposal,
discharge, dispersal, leaching or migration into the indoor or outdoor
environment (including, without limitation, the movement of Hazardous Substances
through ambient air, soil, surface water, ground water, wetlands, land or
subsurface strata).
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"GOVERNMENTAL AUTHORITY" means any national or federal
government, any state, regional, local or other political subdivision thereof
with jurisdiction and any Person with jurisdiction exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government (including without limitation any court).
"IMPOSITIONS" means all taxes (including, without limitation, all
real estate, ad valorem, sales (including those imposed on lease rentals), use,
single business, gross receipts, value added, intangible transaction privilege,
privilege or license or similar taxes), assessments (including, without
limitation, all assessments for public improvements or benefits, whether or not
commenced or completed within the term of this Deed of Trust), ground rents,
water, sewer or other rents and charges, excises, levies, fees (including,
without limitation, license, permit, inspection, authorization and similar
fees), and all other governmental impositions and other charges (including,
without limitation, vault charges and license fees for the use of vaults, chutes
and similar areas adjoining the Trust Property), in each case whether general or
special, ordinary or extraordinary, foreseen or unforeseen, of every character
in respect of the Trust Property, which at any time prior to, during or in
respect of the term hereof may be assessed or imposed on or in respect of or be
a lien upon (i) Grantor (including, without limitation, all income, franchise,
single business or other taxes imposed on Grantor for the privilege of doing
business in the jurisdiction in which the Trust Property is located), (ii) the
Trust Property, or any part thereof or any revenues therefrom or any estate,
right, title or interest therein, or (iii) any occupancy, operation, use or
possession of, or sales from, or activity conducted on, or in connection with
the Trust Property by Grantor or the leasing or use of the Trust Property or any
part thereof by Grantor.
"LEGAL REQUIREMENTS" means (i) all governmental statutes, laws,
rules, orders, regulations, ordinances, judgments, decrees and injunctions of
Governmental Authorities (including, without limitation, Environmental Laws)
affecting either the Borrower or any Property or any part thereof or the
construction, ownership, use, alteration or operation thereof, or any part
thereof (whether now or hereafter enacted and in force), (ii) all permits,
licenses and authorizations and regulations relating thereto, and (iii) all
covenants, conditions and restrictions contained in any instruments at any time
in force (whether or not involving Governmental Authorities) affecting the Trust
Property or any part thereof which, in the case of this clause (iii), require
repairs, modifications or alterations in or to the Trust Property or any part
thereof, or in any material way limit or restrict the existing use and enjoyment
thereof.
"PERSON" means any individual, corporation, limited liability
company, partnership, joint venture, estate, trust, unincorporated association,
any federal, state, county or municipal government or any bureau, department or
agency thereof and any fiduciary acting in such capacity on behalf of any of the
foregoing.
"UNIFORM COMMERCIAL CODE" means the Uniform Commercial Code, as
adopted, enacted and amended from time to time by the state or states where any
of the Trust Property is located.
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2. PAYMENT OF OBLIGATIONS AND INCORPORATION OF COVENANTS,
CONDITIONS AND AGREEMENTS. Grantor will pay the Obligations at the time and
in the manner provided in the Relevant Documents and in this Deed of Trust.
All the representations, warranties, covenants, conditions and agreements of
Grantor contained in the Relevant Documents are hereby made a part of this
Deed of Trust to the same extent and with the same force as if fully set
forth herein. If there shall be any inconsistencies between the terms,
covenants, conditions and provisions set forth in this Deed of Trust and the
terms, covenants, conditions and provisions set forth in the Relevant
Documents, then the terms, covenants, conditions and provisions of the
Relevant Documents shall prevail.
3. WARRANTY OF TITLE/ORGANIZATION. Grantor warrants that Grantor
has good, marketable and insurable fee simple title to Land and the Improvements
and has good title to the remainder of the Trust Property and has the full
power, authority and right to execute, deliver and perform its obligations under
this Deed of Trust and to encumber, mortgage, give, grant, bargain, sell,
alienate, enfeoff, convey, confirm, warrant, pledge, assign and hypothecate the
Trust Property and that Grantor possesses an unencumbered fee estate in the Land
and the Improvements and that it owns the Trust Property free and clear of all
liens, encumbrances and charges whatsoever except for (x) those exceptions to
title which are existing on the date hereof and approved by Beneficiary and (y)
those exceptions of title that are permitted under the other terms and
conditions of this Deed of Trust (collectively, the "PERMITTED ENCUMBRANCES")
and that this Deed of Trust is and will remain a valid and enforceable first
lien on and security interest in the Trust Property, subject only to the
Permitted Encumbrances. Grantor shall forever warrant, defend and preserve such
title and the validity and priority of the lien of this Deed of Trust and shall
forever warrant and defend the same to Beneficiary against the claims of all
persons whomsoever. Grantor is duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization. Grantor is
qualified to do business and in good standing in the State in which the Trust
Property is located, and to the extent that Grantor is not so qualified or in
good standing in such State, Grantor shall promptly qualify to do business and
become in good standing in such State and shall promptly present evidence of
such qualification to do business and good standing to Beneficiary, and shall in
any event take such steps as are necessary to insure the enforceability of the
Notes and this Deed of Trust.
4. TAXES. Grantor hereby warrants, covenants and agrees to pay
before any penalty attaches all real property taxes, general and special, and
all other taxes and assessments of any kind or nature whatsoever, against the
Trust Property when due and shall, upon written request, furnish to Beneficiary
duplicate receipts therefor, Grantor may, in good faith and with reasonable
diligence, contest the validity or amount of any such taxes or assessments
provided that such contest shall have the effect of preventing the collection of
the tax or assessment so contested and the sale or forfeiture of said Trust
Property or any part thereof, or any interest therein, to satisfy the same.
5. INDEMNIFICATION. Grantor shall indemnify, defend and hold
harmless Beneficiary from and against all of the following (collectively, and
individually referred to as a
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"LOSS"): claims, demands, causes of action, judgments, costs, expenses,
liabilities, losses and damages (including consequential and punitive damages),
reasonable attorneys' fees and expenses and court costs, disbursements and court
costs, and all risk of damage to property and injury to persons in or upon the
Trust Property, arising from: (i) Grantor's use of the Property or from the
conduct of its business in or about the Trust Property; (ii) Grantor's default
or breach of any term under this Deed of Trust; and (iii) Grantor's violation or
failure to comply with any Legal Requirements, including Environmental Laws;
provided that Grantor shall not be liable for Loss arising from Beneficiary's or
Trustee's negligence or willful misconduct or from Beneficiary's or Trustee's
breach of any of their obligations hereunder.
6. TRANSFER OR ENCUMBRANCE OF THE TRUST PROPERTY. (a) Except as
may otherwise be permitted hereunder or pursuant to the Relevant Documents,
Grantor shall not sell, convey, alienate, mortgage, encumber, pledge or
otherwise transfer the Trust Property or any part thereof or any of its interest
therein. Beneficiary shall not be required to demonstrate any actual impairment
of its security or any increased risk of default hereunder in order to declare
the Obligations immediately due and payable upon Grantor's conveyance,
alienation, mortgage, encumbrance, pledge or transfer of the Trust Property in
violation of this Deed of Trust or any other Relevant Document. This provision
shall apply to every sale, conveyance, alienation, mortgage, encumbrance, pledge
or transfer of the Trust Property that is not permitted pursuant to the Relevant
Documents, regardless of whether voluntary or not, or whether or not Beneficiary
has consented to any previous sale, conveyance, alienation, mortgage,
encumbrance, pledge or transfer of the Trust Property.
(b) Notwithstanding Section 6(a), Grantor shall have the right to
sell the Trust Property at any time to a third party bona fide purchaser after
consultation with Beneficiary and upon the prior written consent of Beneficiary
to such sale and the sales price (such consent not to be unreasonably withheld),
provided that the net proceeds of such sale of the Trust Property (after payment
of transfer taxes and reasonable brokerage commissions, if any, and other
reasonable closing costs) shall be applied towards repayment of the Obligations,
including, without limitation, repayment of the Secured Rejection Note
(including prepayment of any amounts not yet due and payable) and payment of the
Principal Amounts (as defined in the Rent Deferral Notes) then outstanding under
the Rent Deferral Notes, in the order and manner set forth in the Notes. After
the Secured Rejection Note and all Principal Amounts outstanding under the Notes
have been repaid in full, any remaining net proceeds (including proceeds from
any sale or other disposition of the Trust Property pursuant to Section 24
hereof) not applied towards repayment of the Obligations shall be deposited into
an escrow account designated by Beneficiary for Grantor's account and as
security for the performance by Grantor of its Obligations to Beneficiary under
the Relevant Documents (the "PROCEEDS ESCROW ACCOUNT") which escrow account
shall be administered by Beneficiary, or, at Beneficiary's discretion and in
accordance with Beneficiary's instructions, may be administered by an escrow
agent (an "ESCROW AGENT") selected by Beneficiary (whose reasonable fees shall
be paid by Grantor). Grantor may also from time to time deposit additional funds
into the Proceeds Escrow Account as further security for the Obligations. At
Beneficiary's request, Grantor agrees to enter into a separate escrow agreement
to further evidence the provisions of this Section 6(b), and in the
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event that Beneficiary chooses an Escrow Agent to administer the Proceeds Escrow
Account, Grantor agrees to execute an escrow agreement in form and substance
reasonably satisfactory to Beneficiary (including provisions consistent with the
provisions of this Section 6(b)) to evidence the duties and responsibilities of
such Escrow Agent. Beneficiary or, if applicable, the Escrow Agent at the
direction of Beneficiary, shall invest the funds in the Proceeds Escrow Account
in obligations of the U.S. Government or its agencies, interest in time accounts
or certificates of deposits, or other interest bearing account of any bank or
bank and trust company or in money market funds available to Beneficiary.
Grantor agrees, and shall agree under any escrow agreement entered into pursuant
to this Section 6(b), that the funds on deposit under the escrow arrangement
described herein shall not constitute property of the estate (within the meaning
of Section 541 of the United States Bankruptcy Code) and that Grantor shall only
have such rights to such funds as are provided herein and in any escrow
agreement entered into pursuant to this Section. Funds in the Proceeds Escrow
Account shall be disbursed (together with accrued interest) from time to time to
Beneficiary, at Beneficiary's direction (upon seven (7) days prior notice to
Grantor), to pay any Obligations that may arise from time to time under the
Agreement to Indemnify, the Notes, the Stipulation and Order or the other
Relevant Documents. Notwithstanding the foregoing, after December 31, 2005,
Grantor shall be entitled to retain any net proceeds in excess of the Minimum
Amount set forth below from the sale of the Trust Property, including amounts
previously deposited and remaining in the Proceeds Escrow Account (including
accrued interest thereon) which have not been applied towards payment of the
Obligations, provided that (i) no Obligations are then due and owing by Grantor
pursuant to the Agreement to Indemnify, the Stipulation and Order, the Notes or
otherwise, (ii) no default or Event of Default has occurred and is continuing
under any of the Relevant Documents; and (iii) the amount remaining in the
Proceeds Escrow Account is no less than the Minimum Amount (as hereinafter
defined). Except as otherwise set forth in the following sentence, the "Minimum
Amount" shall mean the product of (A) 1.5 times (B) the sum of the gross rent
(including additional rent and percentage rent charges, if any), common area
maintenance charges, taxes, insurance and other charges computed on a gross
basis (collectively, the "BASE CHARGES") which are due or shall become due under
any Assumed Property Subleases still in existence as of December 31, 2005 (the
"SURVIVING ASSUMED PROPERTY SUBLEASES") from December 31, 2005 until the
expiration of the terms of such Assumed Property Subleases. Upon the expiration
after December 31, 2005 of any Surviving Assumed Property Sublease, Beneficiary
shall re-calculate the Minimum Amount based upon the product of 1.5 times the
Base Charges of the remaining Surviving Assumed Property Subleases as of the end
of the term of such Surviving Assumed Property Sublease (such Base Charges to be
calculated as the sum of the Base Charges from such date through the end of the
expiration dates of the remaining Surviving Assumed Property Subleases), and
provided that (i) no Obligations are then due and owing by Grantor pursuant to
the Agreement to Indemnify, the Notes, the Stipulation and Order or otherwise
and that (ii) no default or Event of Default has occurred and is continuing
under any of the Relevant Documents, Beneficiary shall, on the first anniversary
of the expiration of such expired Surviving Assumed Property Sublease, release
to Grantor, or cause the Escrow Agent to release to Grantor, the excess of all
funds in the Proceeds Escrow Account over the re-calculated Minimum Amount. Any
calculation of Base Charges under this Section 6(b) shall be made by Beneficiary
and,
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absent manifest error, shall be conclusive and binding upon Grantor. Provided
that (i) an amount equal to at least the Minimum Amount is deposited or on
deposit in the Proceeds Escrow Account to secure the payment of the Obligations,
(ii) no default or Event of Default has occurred and is continuing under any of
the Relevant Documents, (iii) the Notes have been repaid in full and (iv) no
Obligations are then due and owing by Grantor pursuant to the Agreement to
Indemnify, the Stipulation and Order or otherwise, Grantor shall be entitled to
receive a release of this Deed of Trust from Beneficiary at any time after
December 31, 2005. Provided that no default or Event of Default has occurred or
is continuing under any of the Relevant Documents and that no amounts are then
owing by Grantor or outstanding pursuant to or under any of the Relevant
Documents (and that an amount equal to the Minimum Amount is at all times on
deposit in the Proceeds Escrow Account), interest earned on the amounts
deposited in the Proceeds Escrow Account after December 31, 2005 shall be
distributed to Grantor on a quarterly basis. All remaining amounts in the
Proceeds Escrow Account which have not been applied towards payment of the
Obligations shall be released to Grantor on the later of (A) December 31, 2014
provided, however, that no Obligations are then due and owing by Grantor
pursuant to the Agreement to Indemnify, the Stipulation and Order or otherwise,
and (B) the end of the term of this Deed of Trust as set forth in Section 13(c)
hereof. Grantor shall pay any income taxes attributable to the interest or other
income earned on the Proceeds Escrow Account. Notwithstanding any release of
this Deed of Trust pursuant to this Section 6(b) or otherwise, the terms and
provisions of this Section 6(b) shall survive the release of this Deed of Trust.
7. AMENDMENT TO LEGAL DESCRIPTION. If it becomes evident that the
legal description attached to any Relevant Document is inaccurate or does not
fully describe all of the real property which is reasonably connected to the
Land, Grantor hereby agrees to an amendment of such legal description and the
legal description contained on the corresponding title policy so that such error
is corrected and to execute and cause to be recorded, if applicable, such
document as may be appropriate for such purpose.
8. ASSIGNMENT OF LEASES AND RENTS. Grantor does hereby absolutely
and unconditionally assign to Beneficiary, Grantor's right, title and interest
in all current and future Leases and Rents, it being intended by Grantor that
this assignment constitutes a present, absolute assignment and not an assignment
for additional security only. Such assignment to Beneficiary shall not be
construed to bind Beneficiary to the performance of any of the covenants,
conditions or provisions contained in any such Lease or otherwise impose any
obligation upon Beneficiary. Beneficiary shall have no responsibility on account
of this assignment for the control, care, maintenance, management or repair of
the Trust Property, for any dangerous or defective condition of the Trust
Property, or for any negligence in the management, upkeep, repair or control of
the Trust Property. Grantor agrees to execute and deliver to Beneficiary such
additional instruments, in form and substance satisfactory to Beneficiary, as
may hereafter be requested by Beneficiary to further evidence and confirm such
assignment. Nevertheless, subject to the terms of this paragraph, Beneficiary
grants to Grantor a revocable license to collect all of the Rents and retain,
use and enjoy the same and otherwise exercise all rights of Grantor under any
Lease, in each case, subject to the terms
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hereof and of the Relevant Documents. Upon an Event of Default, the license
granted to Grantor herein shall immediately and automatically be revoked, and
Beneficiary shall immediately be entitled to possession of all Rents, whether or
not Beneficiary enters upon or takes control of the Trust Property, provided
that if such Event of Default ceases to exist, the license shall automatically
be reinstated. In addition, during the continuation of an Event of Default,
Beneficiary may, either in person or by agent, without bringing any action or
proceeding, or by a receiver appointed by a court, without the necessity of
taking possession of the Trust Property in its own name, and in addition to and
without limiting any of Beneficiary's rights and remedies hereunder, under the
Notes and any other Relevant Documents and as otherwise available at law or in
equity, (a) notify any lessee or other person that the Leases have been assigned
to Beneficiary and that all Rents are to be paid directly to Beneficiary,
whether or not Beneficiary has commenced or completed foreclosure or taken
possession of the Trust Property; (b) settle, compromise, release, extend the
time of payment of, and make allowances, adjustments and discounts of any Rents
or other obligations in, to and under the Leases; (c) demand, sue for or
otherwise collect, receive, and enforce payment of Rents, including those
past-due and unpaid and other rights under the Leases, prosecute any action or
proceeding, and defend against any claim with respect to the Rents and Leases;
(d) enter upon, take possession of and operate the Trust Property; (e) lease all
or any part of the Trust Property; and/or (f) perform any and all obligations of
Grantor under the Leases and exercise any and all rights of Grantor therein
contained to the full extent of Grantor's rights and obligations thereunder,
with or without the bringing of any action or the appointment of a receiver and
without need for any other authorization or other action by Beneficiary or
Grantor. At Beneficiary's request, Grantor shall deliver a copy of this
assignment to each tenant under a Lease and to each manager and managing agent
or operator of the Trust Property. Grantor irrevocably directs any tenant,
manager, managing agent, or operator of the Property, without any requirement
for notice to or consent by Grantor, to comply with all demands of Beneficiary
under this Section 8 and to turn over to Beneficiary on demand all Rents which
it receives. Grantor hereby acknowledges and agrees that payment of any Rents by
a person to Beneficiary as hereinabove provided shall constitute payment by such
person, as fully and with the same effect as if such Rents had been paid to
Grantor. Beneficiary is hereby granted and assigned by Grantor the right, at its
option, upon revocation of the license granted herein, to enter upon the Trust
Property in person or by agent, without bringing any action or proceeding, or by
court-appointed receiver to collect the Rents. Any Rents collected after the
revocation of the license shall be applied towards the payment of the
Obligations. Neither the enforcement of any of the remedies under this Section 8
nor any other remedies or security interests afforded to Beneficiary under the
Relevant Documents, at law or in equity shall cause Beneficiary to be deemed or
construed to be a Beneficiary in possession of the Trust Property, to obligate
Beneficiary to lease the Trust Property or attempt to do so, or to take any
action, incur any expense, or perform or discharge any obligation, duty or
liability whatsoever under any of the Leases or otherwise. Grantor shall, and
hereby agrees to indemnify Beneficiary for, and to hold Beneficiary harmless
from and against, any and all claims, liability, expenses, losses or damages
which may or might be asserted against or incurred by Beneficiary solely by
reason of Beneficiary's status as an assignee pursuant to the assignment of
Rents and Leases contained herein, but excluding any claim (a) to the extent
caused by Beneficiary's gross
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negligence or willful misconduct, or (b) to the extent arising solely from
Beneficiary's actions after Beneficiary has taken possession of the Trust
Property. Should Beneficiary incur any such claim, liability, expense, loss or
damage, the amount thereof, including all actual expenses and reasonable fees of
attorneys, shall constitute Obligations secured hereby, and Grantor shall
reimburse Beneficiary therefor immediately upon demand. Grantor agrees that all
Leases shall be subject to the prior written approval of Beneficiary, such
approval not to be unreasonably withheld.
9. MAINTENANCE OF TRUST PROPERTY. Grantor shall cause the Trust
Property to be maintained in a good and safe condition and repair (subject to
ordinary wear and tear), and shall otherwise operate and maintain the Trust
Property in a manner consistent with the manner in which it operates and
maintains the other properties on which it operates similar businesses ("SIMILAR
PROPERTIES"). Except as otherwise permitted by the Relevant Documents, the
Improvements, the Fixtures and the equipment located on the Land or the
Improvements shall not be removed, demolished or materially altered (except for
normal replacement of equipment) without the consent of Beneficiary which shall
not unreasonably be withheld or delayed. Grantor shall comply with all laws,
orders and ordinances affecting the Trust Property, or the use thereof. Except
to the extent that Beneficiary fails to turn over insurance proceeds, if any,
received by Beneficiary pursuant to SECTIONS 10 and 11 with respect to the Trust
Property to Grantor, Grantor shall promptly repair, replace or rebuild any part
of the Trust Property that, following the date hereof, becomes damaged, worn or
dilapidated and Grantor shall complete and pay for any structure at any time in
the process of construction or repair on the Land. Notwithstanding anything to
the contrary contained herein, Grantor hereby confirms its obligation to comply
with all relevant Legal Requirements, including Environmental Laws, with respect
to the Trust Property. Grantor shall not initiate, join in, acquiesce in, or
consent to any change in any private restrictive covenant, zoning law or other
public or private restriction, limiting or defining the uses which may be made
of the Trust Property or any part thereof, unless Grantor shall have received
Beneficiary's prior written consent, such consent not to be unreasonably
withheld or delayed. If under applicable zoning provisions the use of all or any
portion of the Trust Property is or shall become a nonconforming use, Grantor
will not cause such nonconforming use to be discontinued or abandoned without
the express written consent of Beneficiary, such consent not to be unreasonably
withheld or delayed. Grantor shall not (i) change the use of the Land in any
material respect or (ii) permit or suffer to occur any waste on or to the Trust
Property or to any portion thereof.
10. INSURANCE.
(a) Grantor shall maintain casualty, liability and other policies
of insurance relating to the Trust Property in form and substance, and with
insurers and coverages, reasonably satisfactory to Beneficiary and consistent
with insurance that it maintains on Similar Properties. Grantor shall keep the
Trust Property insured against loss by flood if the Trust Property is located in
an area identified by the Secretary of Housing and Urban Development as an area
having a special flood hazards and in which flood insurance has been made
available
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under the National Flood Insurance Act of 1968 (or any successor act thereto).
All policies of insurance to be furnished hereunder (i) shall have standard
non-contributory mortgagee clauses attached to all policies in favor of
Beneficiary, without contribution, under a standard New York (or local
equivalent) mortgagee clause naming Beneficiary as the party to which all
payments made under such insurance policies in excess of $150,000 should be
paid, (ii) shall contain an endorsement providing that neither Grantor nor
Beneficiary nor any other party shall be a co-insurer under said policies and
shall contain a provision requiring that the coverage evidenced thereby shall
not be terminated or materially modified without ten (10) days prior written
notice to Beneficiary, (iii) shall provide that no act or thing done by Grantor
shall invalidate the policy as against Beneficiary, and (iv) with respect to
property insurance policies, shall contain a waiver of subrogation against
Beneficiary. Grantor shall deliver certificates evidencing additional and
renewal policies, together with evidence of payment of premiums thereon, to
Beneficiary, and in the case of all insurance about to expire, shall deliver
renewal policies or certificates evidencing such policies not less than ten (10)
days prior to their respective dates of expiration.
(b) Grantor shall not take out separate insurance concurrent in
form or contributing in the event of loss with that required to be maintained
hereunder unless Beneficiary is included thereon under a standard,
non-contributory mortgagee clause acceptable to Beneficiary. Grantor shall
promptly notify Beneficiary whenever any such separate insurance is taken out
and shall promptly deliver to Beneficiary the certificates evidencing the policy
or policies of such insurance.
(c) The insurance required by this Deed of Trust, at the option
of Grantor, may be effected by blanket and/or umbrella policies covering the
Trust Property and other properties, provided, however, that in each case, such
insurance policies otherwise comply with the provisions of this Deed of Trust
and allocate to the Trust Property, from time to time, the coverage specified in
this Deed of Trust without possibility of reduction or co-insurance by reason
of, or damage to, any other property named therein. If the insurance required by
this Deed of Trust shall be effected by any such blanket or umbrella policies,
Grantor shall furnish to Beneficiary certificates with respect to, with
schedules attached thereto showing the amount of the insurance provided under
such policies which is applicable to the Trust Property.
(d) If Grantor fails to maintain insurance in compliance with
this Section, Beneficiary may obtain such insurance and pay the premium therefor
and Grantor shall, on demand, reimburse Beneficiary for all expenses incurred in
connection therewith. Grantor shall deliver original certificates to Beneficiary
of all insurance policies maintained pursuant to this Section 10. Each property
insurance policy shall name Beneficiary as mortgagee, and loss payee with
respect to all casualty coverage and each liability policy shall name
Beneficiary as an additional insured thereunder.
11. CASUALTY. (a) Grantor shall give Beneficiary prompt notice of
any loss or damage to the Trust Property.
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(b) In case of loss or damage to the Trust Property covered by
any of the insurance policies described in Section 10 above, Beneficiary (or,
after entry of decree of foreclosure, the purchaser at the foreclosure sale or
decree creditor, as the case may be) is hereby authorized at its option either
(i) to settle and adjust any claim under such insurance policies without the
consent of Grantor or (ii) to allow Grantor to settle and adjust such claim
(either jointly with Beneficiary or by Grantor alone, at Beneficiary's
discretion); provided that in either case Beneficiary shall, and is hereby
authorized to, collect and receipt for any such insurance proceeds.
Notwithstanding anything in the preceding sentence to the contrary, Beneficiary
agrees that it will allow Grantor to settle and adjust any claims under the
insurance policies which are in an amount less than $150,000, per incident of
loss, up to an aggregate amount of no greater than $300,000. The expenses
incurred by Beneficiary in the adjustment and collection of insurance proceeds
shall be included in the Obligations, and shall be reimbursed to Beneficiary
upon demand or may be deducted by Beneficiary from said insurance proceeds prior
to another application thereof. Interest on such amount shall accrue at the
Default Rate, beginning ten (10) days after Grantor receives notice of a request
for payment of such amount from Beneficiary, until such amount, plus interest,
is paid in full.
(c) Beneficiary shall permit Grantor to apply the proceeds of
insurance policies received in connection with any casualty to pay for the cost
of restoring, repairing, replacing or rebuilding the loss or damage to the Trust
Property resulting from the casualty ("RESTORATION") if: (i) there is no Event
of Default hereunder at the time of such application; (ii) restoration can, in
the reasonable judgment of Beneficiary, be completed prior to the maturity of
the Obligations; and (iii) restoration can, in the reasonable judgment of
Beneficiary, be effected within two (2) years after the date of such casualty
and in such a manner so that the Trust Property will be of at least equal or
greater value to the value than the Trust Property prior to such casualty.
Otherwise, Beneficiary may elect in its sole discretion to apply such proceeds
either (x) towards payment of the Obligations, notwithstanding the fact that the
Obligations, or a portion thereof, may not then be due and payable, or (y) to
pay for the cost of Restoration. In all events, disbursement of insurance
proceeds by Beneficiary (or at Beneficiary's election by a disbursing or escrow
agent who shall be selected by Beneficiary and whose fees shall be paid by
Grantor), to pay the cost of restoration shall require (i) evidence reasonably
satisfactory to Beneficiary of the estimated costs of Restoration, (ii) funds
(or assurances reasonably satisfactory to Beneficiary that such funds are
available) sufficient in addition to the proceeds of insurance to complete and
fully pay for Restoration; and (iii) such architect's certificates, waivers of
lien, contractor's sworn statements, title insurance endorsements, plats of
surveys and such other evidences of cost, payment and performance as Beneficiary
may reasonably require and approve. Except to the extent Beneficiary fails to
turn over insurance proceeds, if any, received by Beneficiary hereunder with
respect to such casualty to Grantor, Grantor hereby covenants to restore,
repair, replace or rebuild the Improvements, to be of at least equal value, and
of substantially the same character as prior to such loss or damage, all to be
effected in accordance with plans, specifications and procedures to be first
submitted to and reasonably approved by Beneficiary, and Grantor shall pay all
costs of such restoring, repairing, replacing or rebuilding.
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12. EMINENT DOMAIN. Grantor warrants, covenants and agrees that
should the Trust Property, or any part thereof or interest therein, be taken or
damaged by reason of any public improvement or condemnation proceeding, or in
any other manner, or should Grantor receive any notice of other information
regarding such proceeding, Grantor shall give written notice thereof within five
(5) business days to Beneficiary. Without Beneficiary's prior consent, Grantor
(1) shall not agree to any compensation or award, and (2) shall not take any
action or fail to take any action which would cause the compensation to be
determined. Beneficiary shall be entitled to: (1) all compensation awards and
other payments or relief therefor, (2) to commence, appear in and prosecute in
its own name any action or proceedings, and (3) to make any compromise or
settlement in connection with such taking or damage. Grantor authorizes
Beneficiary to collect and receive such awards and compensation, to give proper
receipts and acquittances therefor and in Beneficiary's discretion to apply the
same toward the payment of the Obligations, notwithstanding the fact that the
Obligations, or a portion thereof, may not then be due and payable, or to the
restoration of the Trust Property in accordance with the provisions set forth in
the second-to-last sentence of Section 11(c) above. Grantor further agrees to
make, execute, and deliver to Beneficiary, at any time upon request, free and
clear of any encumbrance of any kind whatsoever, any and all further assignments
and other instruments deemed necessary by Beneficiary for the purpose of validly
and sufficiently assigning all compensations and awards made to Grantor for any
taking, either permanent or temporary, under any such proceeding.
13. RELEASE OF DEED OF TRUST. Beneficiary agrees to promptly
and unconditionally release this Deed of Trust (subject to the provisions set
forth in Section 6(b)) as follows:
(a) in the event of a bona fide sale (other than a "sale
leaseback" or other similar financing transaction) of the Trust Property to a
third party that is not affiliated with Grantor, provided that each of the
following conditions is satisfied: (i) neither Grantor nor any of its respective
affiliates continue to use or occupy the Trust Property or any part thereof;
(ii) Grantor shall consult with Beneficiary prior to such sale and shall obtain
Beneficiary's prior written consent with respect to such sale and the sales
price (such consent not to be unreasonably withheld); and (iii) all of the
proceeds of such sale are applied towards repayment of the Obligations or
otherwise applied in compliance with the provisions of Section 6(b) hereof,
notwithstanding the fact that the Obligations, or a portion thereof, may not
then be due and payable.
(b) in the event that Beneficiary is paid in full for all amounts
owing (or which shall or may become owing under the Relevant Documents) to
Beneficiary by Grantor and any of its former affiliated debtors, including the
indefeasible payment and satisfaction in full of the Obligations.
(c) on December 31, 2014 (or on such earlier date as permitted
under and pursuant to the provisions of Section 6(b) hereof); provided, however,
that if on such date, any
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amount secured by this Deed of Trust has not been indefeasibly paid in full,
then this Deed of Trust shall be deemed amended to extend the term hereof until
such obligations are so paid.
14. CHANGES IN THE LAWS REGARDING TAXATION. If any law is enacted
or adopted or amended after the date of this Deed of Trust which imposes a tax,
either directly or indirectly, on the Obligations or Beneficiary's interest in
the Trust Property, Grantor will pay such tax, with interest and penalties
thereon, if any, PROVIDED, HOWEVER, that Grantor shall not be obligated to pay
any tax which is imposed on the net income of Beneficiary or franchise taxes or
doing business taxes imposed on Beneficiary. In the event that the payment of
such tax or interest and penalties by Grantor would be unlawful or taxable to
Beneficiary or unenforceable or provide the basis for a defense of usury, then
in any such event, Beneficiary shall have the option, by written notice of not
less than ninety (90) days, to declare the Obligations immediately due and
payable.
15. NO CREDITS ON ACCOUNT OF THE OBLIGATIONS. (i) Grantor will
not claim or demand or be entitled to any credit or credits on account of the
Obligations for any part of the Impositions assessed against the Trust Property,
or any part thereof, and (ii) no deduction shall otherwise be made or claimed
from the assessed value of the Trust Property, or any part hereof, for real
estate tax purposes by reason of this Deed of Trust or the Obligations if the
effect of such deduction would impose on Beneficiary a tax, either directly or
indirectly, for which it otherwise would not have been liable.
16. DOCUMENTARY STAMPS. If at any time the United States of
America, any State thereof or any subdivision of any such State shall require
revenue or other stamps to be affixed to the Notes or this Deed of Trust, or
impose any other tax or charge on the same, Grantor will pay for the same, with
interest and penalties thereon, if any.
17. CONTROLLING AGREEMENT. It is expressly stipulated and agreed
to be the intent of Grantor and Beneficiary at all times to comply with
applicable state law or applicable United States federal law (to the extent that
it permits Beneficiary to contract for, charge, take, reserve, or receive a
greater amount of interest than under state law) and that this Section shall
control every other covenant and agreement in this Deed of Trust and the other
Relevant Documents. If the applicable law (state or federal) is ever judicially
interpreted so as to render usurious any amount called for under the Notes or
under any of the other Relevant Documents, or contracted for, charged, taken,
reserved, or received with respect to the Obligations, or if Beneficiary's
exercise of the option to accelerate the maturity of the Notes, or if any
prepayment by Grantor results in Grantor having paid any interest in excess of
that permitted by applicable law, then it is Grantor's and Beneficiary's express
intent that all excess amounts theretofore collected by Beneficiary shall be
credited on the principal balance of the Notes and all other Obligations (or, if
the Notes and all other Obligations have been or would thereby be paid in full,
refunded to Grantor), and the provisions of the Notes and the other Relevant
Documents immediately be deemed reformed and the amounts thereafter collectible
hereunder and thereunder reduced, without the necessity of the execution of any
new documents, so as to comply with the applicable law, but so as to permit the
recovery of the
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fullest amount otherwise called for hereunder or thereunder. All sums paid or
agreed to be paid to Beneficiary for the use, forbearance, or detention of the
Obligations shall, to the extent permitted by applicable law, be amortized,
prorated, allocated, and spread throughout the full stated term of the
Obligations until payment in full so that the rate or amount of interest on
account of the Obligations does not exceed the maximum rate of interest
permitted by law from time to time in effect and applicable to the Obligations
for so long as the Obligations are outstanding.
18. PERFORMANCE OF OTHER AGREEMENTS. Grantor shall observe and
perform in all respects the terms to be observed or performed by Grantor under
any agreement or recorded instrument affecting or pertaining to the Trust
Property.
19. RIGHT TO PERFORM THE OBLIGATIONS. Subject to the terms of the
Relevant Documents, if any default exists, Beneficiary shall have the right, but
not the obligation, to cure such default in the name and on behalf of Grantor.
All sums advanced and expenses incurred at any time by Beneficiary under this
Section 19, or otherwise under this Deed of Trust or any of the other Relevant
Documents or applicable law (including, without limitation, the costs and
expenses of Beneficiary and its agents incurred in connection with the
preservation, collection and enforcement of this Deed of Trust or of the liens
created hereby), shall bear interest from the date that such sum is advanced or
expense incurred, to and including the date of reimbursement, computed at the
Default Rate (as defined in the Notes), and all such sums, together with
interest thereon, shall constitute additions to the Obligations and shall be
secured by this Deed of Trust and Grantor covenants and agrees to pay them to
the order of the Beneficiary promptly upon demand.
20. FURTHER ACTS, ETC. Grantor will, at the cost of Grantor, and
without expense to Beneficiary, do, execute, acknowledge and deliver all and
every such further acts, deeds, conveyances, mortgages, deeds of trust,
assignments, notices of assignment, Uniform Commercial Code financing statements
or continuation statements, transfers and assurances as Beneficiary shall, from
time to time, reasonably require, for the better assuring, conveying, assigning,
transferring, and confirming unto Beneficiary the property and rights hereby
mortgaged, given, granted, bargained, sold, alienated, enfeoffed, conveyed,
confirmed, warranted, pledged, assigned and hypothecated (including, without
limitation, the assignment of leases and rents contained in Section 8 hereof) or
intended now or hereafter so to be, or which Grantor may be or may hereafter
become bound to convey or assign to Beneficiary, or for carrying out the
intention or facilitating the performance of the terms of this Deed of Trust or
for filing, registering or recording this Deed of Trust. Grantor, on demand,
will execute and deliver and, Grantor hereby authorizes Beneficiary to execute
in the name of Grantor or without the signature of Grantor to the extent
Beneficiary may lawfully do so, one or more financing statements, chattel
mortgages or other instruments, to evidence more effectively the security
interest of Beneficiary in the Trust Property. Notwithstanding anything to the
contrary contained herein, Grantor shall not be obligated to execute, deliver,
file or record any additional documents which increase Grantor's obligations
under this Deed of Trust or the Relevant Documents. Grantor grants to
Beneficiary an irrevocable power of attorney coupled
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with an interest for the purpose of exercising the rights provided for in
Section 19 and this Section 20.
21. RECORDING OF DEED OF TRUST, ETC. Grantor forthwith upon the
execution and delivery of this Deed of Trust and thereafter, from time to time,
will cause this Deed of Trust, and any security instrument creating a lien or
security interest or evidencing the lien hereof upon the Trust Property and each
instrument of further assurance to be filed, registered or recorded in such
manner and in such places as may be required by any present or future law in
order to publish notice of and fully to protect the lien or security interest
hereof upon, and the interest of Beneficiary in, the Trust Property. Grantor
will pay all filing, registration or recording fees, the costs and fees of local
counsel for Beneficiary, including, without limitation, costs and fees for local
counsel review of the Deed of Trust and Subordinated Agreement, and the
preparation of opinion letters in connection therewith, and all expenses
incident to the execution and acknowledgment of this Deed of Trust (but not
including fees of Beneficiary's New York counsel in connection with the
preparation of this Deed of Trust), any deed of trust or mortgage supplemental
hereto, any security instrument with respect to the Trust Property and any
instrument of further assurance, and all federal, state, county and municipal,
taxes, duties, imposts, assessments and charges arising out of or in connection
with the execution and delivery of this Deed of Trust, any deed of trust or
mortgage supplemental hereto, any security instrument with respect to the Trust
Property or any instrument of further assurance (other than income or franchise
taxes imposed on Beneficiary), except where prohibited by law so to do. Grantor
shall hold harmless and indemnify Beneficiary, its successors and assigns,
against any liability incurred by reason of the imposition of any tax on the
making and recording of this Deed of Trust. Grantor shall pay all title costs
and premiums in connection with the ALTA lender's title insurance policy issued
by Chicago Title Insurance Company for the benefit of Beneficiary in connection
with this Deed of Trust (including payment for the cost of any property surveys
prepared in connection therewith), which title insurance policy shall be in form
and substance satisfactory to Beneficiary containing such endorsements as
Beneficiary may reasonably request, including, without limitation, the deletion
of any creditor's rights exception and (to the extent available) a variable rate
endorsement; survey endorsement; comprehensive endorsement; first loss
endorsement; last dollar endorsement; tie-in endorsement; future advances
endorsement; access coverage; tax parcel coverage; contiguity (if applicable)
coverage; and such other endorsements as Beneficiary shall reasonably require.
In the event that any Survey with respect to the Trust Property reveals any
encumbrances, restrictions, building code or zoning violations or other matters
which in Beneficiary's reasonable judgment, materially impair Beneficiary's
first priority lien in the Trust Property, Grantor agrees to cooperate with
Beneficiary in performing any acts reasonably requested by Beneficiary to cause
such encumbrances, restrictions, violations or other matters to be removed or
remedied as appropriate.
22. REPORTING REQUIREMENTS. Grantor agrees to give prompt notice
to Beneficiary of the insolvency or bankruptcy filing of Grantor. In addition,
Grantor will give notice to Beneficiary in writing not later than ten (10) days
after: (i) the occurrence of any Event of Default with respect to Grantor
hereunder, or (ii) notice to Grantor of any action,
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litigation or proceeding instituted to recover possession of the Trust Property
from Grantor or for any other purpose affecting this Deed of Trust or of any
other action, litigation or proceeding instituted against Grantor or judgment
rendered against Grantor; and such notice to Beneficiary shall include a true
copy of any notice of default, or if any action is then proceeding, copies of
any pleadings and papers received by Grantor.
23. EVENTS OF DEFAULT. The term "EVENT OF DEFAULT" as used herein
shall mean the occurrence or happening, at any time and from time to time, of
one or more of the following events:
(a) a default or event of default under any of the Notes
(including, without limitation, any event of default described in Section 3 of
any of the Notes), which remains uncured following the expiration of any
applicable cure periods;
(b) Grantor (i) shall fail to perform when due any payment
obligation under the terms of this Deed of Trust or the other Relevant Documents
within ten days after such amount becomes due, or (ii) shall be in violation of
any of the obligations or covenants contained herein or therein and such default
shall continued unremedied for a period of thirty (30) days, provided that if
such default is not readily susceptible of cure in such thirty (30) day period,
and provided that Grantor proceeds in a diligent manner to cure such default,
Grantor shall have such additional time to effect such cure as shall be
reasonably necessary to effect such cure;
(c) Failure by Grantor to maintain insurance and deliver evidence
thereof pursuant to Section 10; or
(d) a default under any other mortgage, deed of trust or other
security instrument covering the Trust Property or a portion thereof which
remains uncured following the expiration of any applicable cure periods.
24. REMEDIES. (a) Upon the occurrence of any Event of Default,
Beneficiary may take such action or cause Trustee to take such action permitted
in law or at equity, without notice or demand, as it deems advisable to protect
and enforce its rights against Grantor and in and to the Trust Property, by
Beneficiary itself, or through Trustee or otherwise, including, but not limited
to, the following actions, each of which may be pursued concurrently or
otherwise, at such time and in such order as Beneficiary may determine, in its
sole discretion, without impairing or otherwise affecting the other rights and
remedies of Beneficiary:
(i) declare the entire principal amount of the indebtedness and
Obligations secured hereby with interest accrued thereon to be
immediately due and payable;
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(ii) institute a proceeding or proceedings, judicial or
nonjudicial, by advertisement or otherwise, for the complete
foreclosure of this Deed of Trust in which case the Trust
Property or any interest therein may be sold for cash or upon
credit in one or more parcels or in several interests or portions
and in any order or manner in accordance with the laws of the
jurisdiction in which such Trust Property is located;
(iii) with or without entry, to the extent permitted, and
pursuant to the procedures provided by, applicable law, institute
proceedings for the foreclosure of this Deed of Trust for the
Obligations then due and payable subject to the continuing lien
of this Deed of Trust, in accordance with the laws of the
jurisdiction in which such Trust Property is located, for the
balance of the Obligations not then due;
(iv) sell for cash or upon credit the Trust Property or any part
thereof and all estate, claim, demand, right, title and interest
of Grantor therein and rights of redemption thereof, pursuant to
power of sale or otherwise, at one or more sales, as an entirety
or in parcels, at such time and place, upon such terms and after
such notice thereof as may be required or permitted by the laws
of the jurisdiction in which such Trust Property is located;
(v) institute an action, suit or proceeding in equity for the
specific performance of any covenant, condition or agreement
contained herein or in the other Relevant Documents;
(vi) recover judgment on the Notes either before, during or after
any proceedings for the enforcement of this Deed of Trust;
(vii) prior to, concurrently with, or subsequent to the
institution of foreclosure proceedings, apply for the appointment
of a trustee, receiver, liquidator or conservator of the Trust
Property, as a matter of strict right, EX PARTE and without
notice and without regard for the adequacy of the security for
the Obligations or the interest of the Grantor therein and
without regard for the solvency of the Grantor or of any person,
firm or other entity liable for the payment of the Obligations,
and Grantor hereby consents to such appointment;
(viii) prior to, concurrently with or subsequent to the
institution of foreclosure proceedings, enforce Beneficiary's
interest in the Leases and Rents and enter into or upon the Trust
Property and take exclusive possession thereof, either personally
or by its agents, nominees or attorneys and dispossess Grantor
and its agents and servants therefrom, and thereupon Beneficiary
may (whether or not a receiver has been appointed) as
attorney-in-fact or agent of Grantor, or in its own name and
under the powers herein granted,(A) use, operate, manage,
control, insure, maintain, repair, restore and otherwise deal
with all and every part of the Trust Property and conduct the
business thereat; (B) complete any
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construction on the Trust Property in such manner and form as
Beneficiary deems advisable; (C) make alterations, additions,
renewals, replacements and improvements to or on the Trust
Property; (D) exercise all rights and powers of Grantor with
respect to the Trust Property, whether in the name of Grantor or
otherwise (including, without limitation, the right to make,
cancel, enforce or modify Leases, obtain and evict tenants, and
demand, sue for, collect and receive all earnings, revenues,
rents, issues, profits and other income of the Trust Property and
every part thereof); and (E) apply the receipts from the Trust
Property to the payment of the Obligations, after deducting
therefrom all reasonable expenses (including, without limitation,
reasonable attorneys' fees) incurred in connection with the
aforesaid operations and all amounts necessary to pay the taxes,
assessments, insurance and other charges in connection with the
Trust Property, it being agreed that should Beneficiary incur any
liability, loss or damage in the defense of any claims or
demands, the amount thereof, including costs, expenses and
reasonable attorneys' fees shall be secured hereby, and Grantor
shall reimburse Beneficiary therefor immediately upon demand;
(ix) require Grantor to pay monthly in advance to Beneficiary, or
any receiver appointed to collect the Rents, the fair and
reasonable rental value for the use and occupation of any portion
of the Trust Property occupied by Grantor and require Grantor to
vacate and surrender possession to Beneficiary of the Trust
Property or to such receiver and, in default thereof, evict
Grantor by summary proceedings or otherwise; and
(x) pursue such other rights and remedies as may be available
under the Relevant Documents or otherwise at law or in equity or
under the Uniform Commercial Code including the right to
establish a lock box for all Rents and other receivables of
Grantor relating to the Trust Property.
In the event of a sale, by foreclosure or otherwise, of less than all of the
Trust Property, this Deed of Trust shall continue as a lien on the remaining
portions of the Trust Property.
The proceeds of any sale made under or by virtue of this Section
24, together with any other sums which then may be held by Beneficiary under
this Deed of Trust, whether under the provisions of this Section or otherwise,
shall be applied by Beneficiary in the following order of priority: first, on
account of all reasonable costs and expenses incident to the foreclosure
proceedings, including all such items as are mentioned in this Section 24;
second, all other items which under the terms hereof constitute secured
indebtedness, which are any amounts due under this Deed of Trust, or under the
other Relevant Documents (including any amounts required to be escrowed pursuant
to Section 6(b)); third, any surplus to Grantor, its successors or assigns, as
their rights may appear.
(b) Upon any sale made under or by virtue of this Section 24,
whether made under the power of sale herein granted or under or by virtue of
judicial proceedings or of a
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judgment or decree of foreclosure and sale, Beneficiary may bid for and acquire
the Trust Property or any part thereof and in lieu of paying cash therefor may
make settlement for the purchase price by crediting upon the Obligations the net
sales price after deducting therefrom the expenses of the sale and costs of the
action and any other sums which Beneficiary is authorized to deduct under this
Deed of Trust.
(c) No recovery of any judgment by Beneficiary and no levy of an
execution under any judgment upon the Trust Property or upon any other property
of Grantor shall affect in any manner or to any extent the lien of this Deed of
Trust upon the Trust Property or any part thereof, or any liens, rights, powers
or remedies of Beneficiary hereunder, but such liens, rights, powers and
remedies of Beneficiary shall continue unimpaired as before.
(d) Beneficiary may adjourn, terminate or rescind any proceeding
or other action brought in connection with its exercise of the remedies provided
in this Section 24 at any time before the conclusion thereof, as determined in
Beneficiary's sole discretion and without prejudice to Beneficiary.
(e) Beneficiary may resort to any remedies and the security given
by this Deed of Trust or the other Relevant Documents in whole or in part, and
in such portions and in such order as determined by Beneficiary's sole
discretion. No such action shall in any way be considered a waiver of any
rights, benefits or remedies evidenced or provided by this Deed of Trust or the
other Relevant Documents. The failure of Beneficiary to exercise any right,
remedy or option provided in this Deed of Trust or the other Relevant Documents
shall not be deemed a waiver of such right, remedy or option or of any covenant
or obligation secured by this Deed of Trust or the other Relevant Documents.
Subject to the provisions of the Relevant Documents, no acceptance by
Beneficiary of any payment after the occurrence of any Event of Default and no
payment by Beneficiary of any obligation for which Grantor is liable hereunder
shall be deemed to waive or cure any Event of Default with respect to Grantor,
or Grantor's liability to pay such obligation. No sale of all or any portion of
the Trust Property, no forbearance on the part of Beneficiary and no extension
of time for the payment of the whole or any portion of the Obligations or any
other indulgence given by Beneficiary to Grantor, shall operate to release or in
any manner affect the interest of Beneficiary in the remaining Trust Property or
the liability of Grantor to pay the Obligations. No waiver by Beneficiary shall
be effective, unless it is in writing and then only to the extent specifically
stated.
(f) The interests and rights of Beneficiary under this Deed of
Trust and the other Relevant Documents, and the liens and security interests
created and evidenced by this Deed of Trust and the other Relevant Documents,
shall not be impaired by any indulgence, including (i) any renewal, extension or
modification which Beneficiary may grant with respect to any of the Obligations,
(ii) any surrender, compromise, release, renewal, extension, exchange or
substitution which Beneficiary may grant with respect to the Trust Property or
any portion thereof; or (iii) any release or indulgence granted to any maker,
endorser, guarantor or surety of any of the Obligations.
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(g) Upon the occurrence of any Event of Default under Section 23,
in any suit to foreclose the lien hereof or enforce any other remedy of
Beneficiary under this Deed of Trust, there shall be allowed and included as
additional indebtedness in the decree for sale or other judgment or decree all
reasonable expenditures and expenses which may be paid or incurred by or on
behalf of Beneficiary for attorneys' fees, appraiser's fees, outlays for
documentary and expert evidence, stenographers' charges, publication costs, and
costs (which may be estimated as to items to be expended after entry of the
decree) of procuring all such abstracts of title, title searches and
examinations, title insurance policies, Torrens certificates, and similar data
and assurances with respect to title as Beneficiary may deem reasonably
necessary either to prosecute such suit or to evidence to bidders at any sale
which may be had pursuant to such decree the true condition of the title to or
the value of the Trust Property. All such reasonable expenditures and expenses
which Beneficiary may incur as permitted by this Section for the protection of
the Trust Property and the maintenance of the lien of this Deed of Trust,
including, but not limited to, the fees and out-of-pocket disbursements of any
attorney employed by Beneficiary in any litigation or proceeding affecting this
Deed of Trust, including, but not limited to, bankruptcy proceedings or
preparations for the commencement or defense of any proceeding or threatened
suit or proceeding, shall be immediately due and payable by Grantor and shall be
secured by this Deed of Trust.
25. RIGHT OF ACCESS. Grantor shall permit agents, representatives
and employees of Beneficiary to (i) inspect the Trust Property or any part
thereof, PROVIDED that such inspection does not materially interfere with the
tenants of the Trust Property or violate the terms of any Lease, (ii) to examine
and make abstracts from any of Grantor's books and records and (iii) to discuss
the business, operations, properties and financial and other condition of
Grantor with officers of Grantor and with its independent certified public
accountants, at such reasonable times as may be requested by Beneficiary upon
reasonable advance notice.
26. SECURITY AGREEMENT. This Deed of Trust is both a real
property deed of trust and a "security agreement" within the meaning of the
Uniform Commercial Code. The Trust Property includes both real and personal
property and all other rights and interests, whether tangible or intangible in
nature, of Grantor in the Trust Property. Grantor by executing and delivering
this Deed of Trust has granted and hereby grants to Beneficiary, as security for
the Obligations, a security interest in the Trust Property to the full extent
that the Trust Property may be subject to the Uniform Commercial Code (said
portion of the Trust Property so subject to the Uniform Commercial Code being
called in this paragraph the "COLLATERAL"). Grantor hereby agrees with
Beneficiary to execute and deliver to Beneficiary, in form and substance
satisfactory to Beneficiary, such financing statements and such further
assurances as Beneficiary may from time to time, reasonably consider necessary
to create, perfect, and preserve Beneficiary's security interest herein granted.
All or part of the Trust Property is or is to become "fixtures" as defined in
the Uniform Commercial Code, and this Deed of Trust, upon being filed for record
in the real estate records of the city or county wherein such fixtures are
situated, shall also constitute a "fixture filing" for the purposes of the
Uniform Commercial Code upon such of the Trust Property that is or may become
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fixtures. Information concerning the security interest herein granted may be
obtained from the parties at the addresses of the parties set forth in the first
paragraph of this Deed of Trust. Grantor's chief executive office and principal
place of business is the Grantor's address set forth in the first paragraph of
this Deed of Trust, and the place where Grantor's books and records in respect
of where the Trust Property is located are kept is the address of Grantor set
forth in the first paragraph of this Deed of Trust. If an Event of Default shall
occur which shall remain uncured, Beneficiary, in addition to any other rights
and remedies which it may have, shall have and may exercise immediately and
without demand, any and all rights and remedies granted to a secured party upon
default under the Uniform Commercial Code, (including, without limitation, to
the extent permitted by law, the right to take possession of the Collateral or
any part thereof, and to take such other measures as Beneficiary may deem
necessary for the care, protection and preservation of the Collateral). Upon
request or demand of Beneficiary or Trustee, Grantor shall at its expense
assemble the Collateral and make it available to Beneficiary at a convenient
place acceptable to Beneficiary. Grantor shall pay to Beneficiary on demand
therefor any and all reasonable expenses (including, without limitation,
reasonable legal expenses and attorneys' fees) incurred or paid by Beneficiary
in protecting the interest in the Collateral and in enforcing the rights
hereunder with respect to the Collateral. Any notice of sale, disposition or
other intended action by Beneficiary with respect to the Collateral sent to
Grantor at least ten (10) business days prior to such action or such notice as
is otherwise required by law or the Relevant Documents, shall constitute
commercially reasonable notice to Grantor. The proceeds of any disposition of
the Collateral, or any part thereof, may be applied by Beneficiary to the
payment of the Obligations in such priority and proportions as Beneficiary shall
determine in its sole discretion. In the event of any change in name, identity
or structure of Grantor, Grantor shall notify Beneficiary thereof and, promptly
after request, shall execute, file and record such Uniform Commercial Code forms
as are necessary to maintain the priority of Beneficiary's lien upon and
security interest in the Collateral, and shall pay all expenses and fees in
connection with the filing and recording thereof. If Beneficiary shall require
the filing or recording of additional Uniform Commercial Code forms or
continuation statements, Grantor shall, promptly after request, execute, file
and record such Uniform Commercial Code forms or continuation statements as
Beneficiary shall deem necessary, and shall pay all expenses and fees in
connection with the filing and recording thereof, it being understood and
agreed, however, that no such additional documents shall materially increase
Grantor's obligations under this Deed of Trust or the other Relevant Documents.
Grantor hereby irrevocably appoints Beneficiary as its attorney-in-fact, coupled
with an interest, to file with the appropriate public office on its behalf any
UCC financing statements (or related documents) signed only by Beneficiary, as
secured party, in connection with the Collateral covered by this Deed of Trust,
such appointment to terminate upon the release of this Deed of Trust.
27. ACTIONS AND PROCEEDINGS. Beneficiary has the right to appear
in and defend any action or proceeding brought with respect to the Trust
Property and to bring any action or proceeding, in the name and on behalf of
Grantor, which Beneficiary, in its reasonable discretion, decides should be
brought to protect its interest under this Deed of Trust or in the Trust
Property. Subject to the foregoing, Grantor shall appear in and contest any
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action or proceeding purporting to affect the security hereof and shall pay all
reasonable costs and expenses including cost of evidence of title and attorney's
fees, in any such action or proceeding in which Beneficiary may appear.
Beneficiary shall, at its option, be subrogated to the lien of any mortgage or
other security instrument discharged in whole or in part by the Obligations, and
any such subrogation rights shall constitute additional security for the payment
of the Obligations.
28. WAIVER OF SETOFF AND COUNTERCLAIM. Except as may be permitted
under the Relevant Documents, all amounts due under this Deed of Trust, the
Notes and the other Relevant Documents shall be payable without setoff or
counterclaim whatsoever.
29. LIENS. Grantor warrants, covenants and agrees to pay and
promptly discharge, at Grantor's cost and expense, all taxes, assessments and
governmental charges levied upon it, its income and assets as and when such
taxes, assessments and charges are due and payable (including, without
limitation, all Impositions), as well as all lawful claims for labor materials
and supplies or otherwise which could become a lien, and all liens, encumbrances
and charges upon the Trust Property, or any part thereof or interest therein;
provided that the existence of any mechanic's, laborer's, materialman's,
supplier's or vendor's lien or right thereto shall not constitute a violation of
this Section if payment is not yet due under the contract which is the
foundation thereof. Notwithstanding the foregoing, Grantor shall not be in
default for failure to pay or discharge Impositions or mechanic's or
materialman's or similar lien asserted against the Trust Property if, and so
long as, (a) Grantor shall have notified Beneficiary of same within seven (7)
days of obtaining knowledge thereof; (b) Grantor shall diligently and in good
faith contest the same by appropriate legal proceedings which shall operate to
prevent the enforcement or collection of the same and the sale of the Trust
Property or any part thereof, to satisfy the same; (c) unless funds are
otherwise reserved, Grantor shall furnish to Beneficiary such security as
Beneficiary may reasonably request to insure payment of such Impositions and to
secure and indemnify Beneficiary against any cost, expense, loss or damage in
connection with such contest or postponement of payment,; (d) Grantor shall
timely upon final determination thereof pay the amount of any such Impositions,
claim, fine or penalty so determined, together with all costs, interest and
penalties which may be payable in connection therewith; (e) the failure to pay
the Impositions, or mechanic's or materialman's or similar lien claim does not
constitute a default under any other deed of trust, mortgage or security
interest covering or affecting any part of the Trust Property; and (f)
notwithstanding the foregoing, Grantor shall immediately upon request of
Beneficiary pay (and if Grantor shall fail so to do, Beneficiary may, but shall
not be required to, pay or cause to be discharged or bonded against) any such
Impositions, or claim notwithstanding such contest, if in the reasonable opinion
of Beneficiary, the Trust Property or any part thereof or interest therein may
be in imminent danger of being sold, forfeited, foreclosed, terminated, canceled
or lost.
30. RECOVERY OF SUMS REQUIRED TO BE PAID. Beneficiary shall have
the right from time to time to take action to recover any sum or sums which
constitute a part of the Obligations as the same become due and owing, without
regard to whether or not the balance
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<PAGE>
of the Obligations shall be due, and without prejudice to the right of
Beneficiary thereafter to bring an action of foreclosure, or any other action,
for a default or defaults by Grantor existing at the time such earlier action
was commenced.
31. MARSHALING, WAIVER OF REDEMPTION AND OTHER MATTERS. Grantor
hereby waives, to the extent permitted by law, the benefit of all appraisement,
valuation, stay, extension, reinstatement, moratorium and redemption laws now or
hereafter in force and all rights of marshaling in the event of any sale
hereunder of the Trust Property or any part thereof or any interest therein.
Further, Grantor hereby expressly waives any and all rights of redemption from
sale under any order or decree of foreclosure of this Deed of Trust on behalf of
Grantor, and on behalf of each and every person acquiring any interest in or
title to the Trust Property subsequent to the date of this Deed of Trust and on
behalf of all persons to the extent permitted by applicable law.
32. NOTICE. Any notice which either party hereto may desire or be
required to give to the other party shall be in writing and delivered by: (x) a
commercial courier or messenger service or (y) by U.S. registered or certified
mail with return receipt requested. Notice by commercial messenger or courier
service will be deemed to have been given on the day when delivered before 4:00
p.m. on a business day in the city in which notice is delivered, provided that
payment for the cost of delivery is not requested of the recipient. Notice by
mail shall be given by registered or certified U.S. Mail, return receipt
requested. Delivery of notice by commercial messenger or courier service or mail
shall be assumed if acceptance of delivery is refused. Notice may be given by
fax but will only be treated as delivered hereunder if: (x) sent between the
hours of 9:00 a.m. and 5:00 p.m. (based on local time at the destination); and
(y) receipt is acknowledged by fax and delivery will be deemed to have been
given on the date the fax acknowledgment is sent. Notices shall be delivered as
follows or at such other place as either party hereto may by notice in writing
(given in accordance with this Section 32) designate:
To Grantor: Discovery Zone, Inc.
One Corporate Center
110 East Broward Boulevard
Fort Lauderdale, Florida 33301
Attn: President
Telecopy Number: (954) 627-2670
To Beneficiary: McDonald's Corporation
One McDonald's Plaza
Oak Brook, IL 60523
Attn: General Counsel
Telecopy Number: (630) 623-3000
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33. SOLE DISCRETION OF BENEFICIARY. Wherever pursuant to this
Deed of Trust, Beneficiary exercises any right given to it to approve or
disapprove, or any arrangement or term is to be satisfactory to Beneficiary, the
decision of Beneficiary to approve or disapprove or to decide that arrangements
or terms are satisfactory or not satisfactory shall be in the sole discretion of
Beneficiary and shall be final and conclusive, except as may be otherwise
expressly and specifically provided herein.
34. NON-WAIVER. The failure of Beneficiary to insist upon
strict performance of any term hereof shall not be deemed to be a waiver of
any term of this Deed of Trust. Grantor shall not be relieved of Grantor's
Obligations hereunder by reason of (a) the failure of Beneficiary to comply
with any request of Grantor to take any action to foreclose this Deed of
Trust or otherwise enforce any of the provisions hereof or of the other
Relevant Documents, (b) the release, regardless of consideration, of the
whole or any part of the Trust Property, or of any person liable for the
Obligations or any portion thereof, or (c) any agreement or stipulation by
Beneficiary extending the time of payment or otherwise modifying or
supplementing the terms of this Deed of Trust or the other Relevant
Documents. Beneficiary may resort for the payment of the Obligations to any
other security held by Beneficiary in such order and manner as Beneficiary,
in its discretion, may elect. Beneficiary may take action to recover the
Obligations, or any portion thereof, or to enforce any covenant hereof
without prejudice to the right of Beneficiary thereafter to foreclosure this
Deed of Trust. The rights and remedies of Beneficiary under this Deed of
Trust shall be separate, distinct and cumulative and none shall be given
effect to the exclusion of the others. No act of Beneficiary shall be
construed as an election to proceed under any one provision herein to the
exclusion of any other provision. Beneficiary shall not be limited
exclusively to the rights and remedies herein stated but shall be entitled to
every right and remedy now or hereafter afforded at law or in equity.
35. NO ORAL CHANGE. This Deed of Trust and the other Relevant
Documents constitute the final expression of the entire agreement among the
parties pertaining to the subject matter hereof and thereof and supersede all
prior and contemporaneous agreements, understanding, representations or other
arrangements, whether express or implied, written or oral, of the parties in
connection herewith or therewith except to the extent expressly incorporated or
specifically referred to herein or therein. This Deed of Trust, and any
provisions hereof, may not be modified, amended, waived, extended, changed,
discharged or terminated orally or by any act or failure to act on the part of
Grantor or Beneficiary, but only by an agreement in writing signed by the party
against whom enforcement of any modification, amendment, waiver, extension,
change, discharge or termination is sought.
36. SUCCESSORS AND ASSIGNS. Subject to the provisions hereof
requiring Beneficiary's consent to any transfer of the Trust Property, this Deed
of Trust shall be binding upon and inure to the benefit of Grantor and
Beneficiary and their respective permitted successors and assigns forever.
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37. SEVERABILITY. If any term, covenant or condition of this Deed
of Trust or the Relevant Documents is held to be invalid, illegal or
unenforceable in any respect, this Deed of Trust and any such other Relevant
Document shall be construed without such provision.
38. HEADINGS, ETC. The headings and captions of various
paragraphs of this Deed of Trust are for convenience of reference only and are
not to be construed as defining or limiting, in any way, the scope or intent of
the provisions hereof.
39. DUPLICATE ORIGINALS. This Deed of Trust may be executed in
any number of duplicate originals and each such duplicate original shall be
deemed to be an original.
40. DEFINITIONS. Unless the context clearly indicates a contrary
intent or unless otherwise specifically provided herein, words used in this Deed
of Trust may be used interchangeably in singular or plural form and the word
"Grantor" shall mean "each Grantor and any subsequent owner or owners of the
Trust Property or any part thereof or any interest therein," the word
"Beneficiary" shall mean "Beneficiary and any subsequent holder(s) of the
Notes," the word "person" shall include an individual, corporation, partnership,
trust, unincorporated association, government, governmental authority, and any
other entity, and the words "Trust Property" shall include any portion of the
Trust Property and any interest therein and the words "attorneys' fees" shall
include any and all attorneys' fees, paralegal and law clerk fees (including,
without limitation, fees at the pre-trial, trial and appellate levels incurred
or paid by Beneficiary in protecting its interest in the Trust Property and
Collateral and enforcing its rights hereunder and all such fees incurred in
connection with any bankruptcy or insolvency proceedings). Whenever the context
may require, any pronouns used herein shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns and pronouns shall
include the plural and vice versa.
41. HOMESTEAD. Grantor hereby waives and renounces all homestead
and exemption rights provided by the constitution and the laws of the United
States and of any state, in and to the Land as against the collection of the
Obligations, or any part hereof.
42. ASSIGNMENTS. Consistent with and subject to the applicable
provisions of the Relevant Documents, Beneficiary shall have the right to assign
or transfer its rights under this Deed of Trust without limitation. Any
Beneficiary or transferee shall be entitled to all the benefits afforded
Beneficiary under this Deed of Trust.
43. WAIVER OF JURY TRIAL. TO THE MAXIMUM EXTENT PERMITTED BY
APPLICABLE LAW, EACH PARTY HERETO HEREBY AGREES NOT TO ELECT A TRIAL BY JURY OF
ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY JURY FULLY
TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO
THE NOTES, THIS DEED OF TRUST, OR THE OTHER RELEVANT DOCUMENTS, OR ANY CLAIM,
COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH.
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THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY SUCH
PARTY, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS
TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE. BENEFICIARY IS
HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS
CONCLUSIVE EVIDENCE OF THIS WAIVER BY GRANTOR.
44. CONSENT TO JURISDICTION. GRANTOR AND BENEFICIARY HERETO
CONSENT FOR THEMSELVES AND IN RESPECT OF THEIR PROPERTIES, GENERALLY,
UNCONDITIONALLY AND IRREVOCABLY, TO THE NONEXCLUSIVE JURISDICTION OF THE FEDERAL
AND STATE COURTS IN THE STATE OF NEW YORK WITH RESPECT TO ANY PROCEEDING
RELATING TO ANY MATTER, CLAIM OR DISPUTE ARISING UNDER THE RELEVANT DOCUMENTS OR
THE TRANSACTIONS CONTEMPLATED THEREBY. GRANTOR FURTHER CONSENTS, GENERALLY,
UNCONDITIONALLY AND IRREVOCABLY, TO THE NONEXCLUSIVE JURISDICTION OF THE STATE
AND FEDERAL COURTS OF THE STATE IN WHICH ANY OF THE COLLATERAL IS LOCATED IN
RESPECT OF ANY PROCEEDING RELATING TO ANY MATTER, CLAIM OR DISPUTE ARISING WITH
RESPECT TO SUCH COLLATERAL. GRANTOR FURTHER IRREVOCABLY CONSENTS TO THE SERVICE
OF PROCESS, GENERALLY, UNCONDITIONALLY AND IRREVOCABLY, AT THE ADDRESSES SET
FORTH IN THE FIRST PARAGRAPH HEREOF IN CONNECTION WITH ANY OF THE AFORESAID
PROCEEDINGS IN ACCORDANCE WITH THE RULES APPLICABLE TO SUCH PROCEEDINGS. TO THE
EXTENT PERMITTED BY APPLICABLE LAW, GRANTOR HEREBY IRREVOCABLY WAIVES ANY
OBJECTION WHICH IT MAY NOW HAVE OR HAVE IN THE FUTURE TO THE LAYING OF VENUE IN
RESPECT OF ANY OF THE AFORESAID PROCEEDINGS BROUGHT IN THE COURTS REFERRED TO
ABOVE AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
NOTHING HEREIN SHALL AFFECT THE RIGHT OF BENEFICIARY TO SERVE PROCESS IN ANY
MANNER PERMITTED BY LAW OR TO COMMENCE PROCEEDINGS OR OTHERWISE PROCEED AGAINST
GRANTOR IN ANY JURISDICTION.
45. GOVERNING LAW. This Deed of Trust shall be governed by and
construed in accordance with the laws of the State of New York including,
without limitation, Section 5-1401 of the General Obligations Law, but otherwise
without regard to conflict of law principles; PROVIDED, HOWEVER, that with
respect to the creation, attachment, perfection, priority and procedures
relating to the enforcement of the liens and security interests created by or
pursuant to this Deed of Trust and relating to real property, this Deed of Trust
shall be governed by and construed in accordance with the laws of the state in
which the Land is located.
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46. LIEN ABSOLUTE, MULTI-SITE REAL ESTATE AND MULTIPLE COLLATERAL
TRANSACTION. Grantor acknowledges that this Deed of Trust and a number of other
Relevant Documents and those documents required by the Relevant Documents
together secure the Obligations. Grantor agrees that the lien of this Deed of
Trust and all obligations of the Grantor hereunder shall be absolute and
unconditional and shall not in any manner be affected or impaired by:
(a) any lack of validity or enforceability of the Notes or any
other Relevant Document, any agreement with respect to any of the Obligations or
any other agreement or instrument relating to any of the foregoing;
(b) any acceptance by Beneficiary of any security for or
guarantees of any of the indebtedness hereby secured;
(c) any failure, neglect or omission on the part of Beneficiary
to realize upon or protect any of the indebtedness hereby secured or any of the
collateral security therefor, including the Relevant Documents;
(d) any change in the time, manner or place of payment of, or in
any other term of, all or any of the Obligations;
(e) any release (except as to the property or obligation
released), sale, pledge, surrender, compromise, settlement, nonperfection,
renewal extension, indulgence, alteration, exchange, modification or disposition
of any of the Obligations hereby secured or of any of the collateral security
therefor;
(f) any amendment or waiver of or any consent to any departure
from the Notes or any other Relevant Documents or of any guaranty thereof
(except to the extent of such amendment, waiver or consent in writing by
Beneficiary), if any, and Beneficiary may in its discretion foreclose, exercise
any power of sale, or exercise any other remedy available to it under any or all
of the Relevant Documents without first exercising or enforcing any of its
rights and remedies hereunder; and
(g) any exercise of the rights or remedies of Beneficiary
hereunder or under any or all of the Relevant Documents.
Grantor specifically consents and agrees that Beneficiary may exercise its
rights and remedies hereunder and under the other Relevant Documents separately
or concurrently and in any order that Beneficiary may deem appropriate.
47. FUTURE ADVANCES. This Deed of Trust shall secure not only
existing indebtedness, but also such future advances, whether such advances are
obligatory or are to be made at the option of Beneficiary, or otherwise, as are
made by Beneficiary to Grantor after the date hereof, to the same extent as if
such future advances were made on the date of the
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<PAGE>
execution of this Deed of Trust. Nothing in this Deed of Trust shall be deemed
an obligation on the part of the Beneficiary to make any future advances.
48. STATE SPECIFIC PROVISIONS. The provisions of Exhibit B are
hereby incorporated by reference as though set forth in full herein.
49. NO MERGER OF ESTATES. It is the intention and agreement of
Grantor and Beneficiary that there shall be no merger of any leasehold estate in
the Trust Property with the fee interest in the Trust Property or any other
estate or interest in the Trust Property, and there shall be no merger of this
Deed of Trust and any estate in the Trust Property, by reason of the fact that
the same person may own or hold (a) any leasehold interest in the Trust
Property, and/or (b) this Deed of Trust, and/or (c) the fee interest in the
Trust Property or any other estate or interest in the Trust Property.
50. CONCERNING THE TRUSTEE. Trustee shall be under no duty to
take any action hereunder except as expressly required hereunder or by law, or
to perform any act which would involve Trustee in any expense or liability or to
institute or defend any suit in respect hereof, unless properly indemnified to
Trustee's reasonable satisfaction. Trustee, by acceptance of this Deed of Trust,
covenants to perform and fulfill the trusts herein created, being liable,
however, only for willful negligence or misconduct.
51. TRUSTEE'S FEES. Grantor shall pay all reasonable costs, fees
and expenses incurred by Trustee and Trustee's agents and counsel in connection
with the performance by Trustee of Trustee's duties hereunder and all such
costs, fees and expenses shall be secured by this Deed of Trust. TRUSTEE SHALL
BE INDEMNIFIED, HELD HARMLESS AND REIMBURSED BY GRANTOR FOR ANY LIABILITY,
DAMAGE OR EXPENSE, INCLUDING REASONABLE ATTORNEYS' FEES AND AMOUNTS PAID IN
SETTLEMENT, WHICH TRUSTEE MAY INCUR OR SUSTAIN IN CONNECTION WITH THIS DEED OF
TRUST OR IN THE DOING OF ANY ACT WHICH TRUSTEE IS REQUIRED OR PERMITTED TO DO BY
THE TERMS HEREOF OR BY LAW (EXCEPT TO THE EXTENT ARISING FROM THE GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OF TRUSTEE), AND SHALL BE REIMBURSED THEREFOR
UPON DEMAND.
52. SUBORDINATE LIEN. Notwithstanding anything to the contrary
contained herein, Grantor shall be permitted to grant a subordinate lien on the
Trust Property in favor of State Street Bank and Trust Company, solely in its
capacity as trustee and collateral agent under and pursuant to the Indenture (as
hereinafter defined) (the "SUBORDINATED CREDITOR") as security for the
obligations of Grantor under that certain Indenture between Grantor and the
Subordinated Creditor dated as of July 22, 1997 (the "INDENTURE"), provided that
such lien in favor of the Subordinated Creditor is junior, subject and
subordinate to the lien of this Deed of Trust in accordance with and pursuant to
the terms and conditions set forth in that certain Subordination Agreement dated
as of the date hereof between Beneficiary and the Subordinated Creditor with
respect to the Trust Property (the "SUBORDINATION AGREEMENT"), and provided,
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further, that any event which gives the Subordinated Creditor the right to
accelerate the obligations secured by such subordinate lien shall automatically
constitute an Event of Default hereunder.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE AND NOTARY PAGES FOLLOW.]
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Grantor has executed this instrument as of the day and year first above written.
GRANTOR:
DISCOVERY ZONE, INC., a
Delaware corporation, as
successor in interest to LEAPS
& BOUNDS, INC.
By: /s/ Robert Rooney
---------------------------
Name: Robert Rooney
Its: Sr. V.P.
<PAGE>
STATE OF NEW YORK )
COUNTY OF WESTCHESTER )
This instrument was acknowledged before me this 28 day of July,
1997, by Robert Rooney as Sr. V.P. of Discovery Zone, Inc., a Delaware
corporation, on behalf of said corporation.
WITNESS my hand and official seal.
My Commission Expires:
/s/ Mark D. Woodward
- -------------- -------------------------
Notary Public
[NOTARIAL SEAL]
<PAGE>
Aurora
Arapahoe County, Colorado
EXHIBIT A
PARCEL 1:
LOT 1,
BLOCK 1,
THE PLAZA AT AURORA MALL SUBDIVISION FILING NO. 3,
ACCORDING TO PLAT THEREOF, RECORDED JANUARY 21, 1994 IN BOOK 111 AT PAGE 80,
RECEPTION NO. 94-011275,
COUNTY OF ARAPAHOE,
STATE OF COLORADO.
PARCEL 2:
THE RIGHTS, BENEFITS AND EASEMENTS AS CONTAINED IN THAT CERTAIN OPERATING
AGREEMENT RECORDED MAY 2, 1974 IN BOOK 2234 AT PAGE 139, AND AS AMENDED BY THE
AURORA MALL SUPPLEMENTS TO OPERATING AGREEMENT AS EVIDENCED ON PAGE 274 OF THE
DEED OF TRUST RECORDED JULY 26, 1977 IN BOOK 2623 AT PAGE 252,
COUNTY OF ARAPAHOE,
STATE OF COLORADO.
PARCEL 3:
THE RIGHTS AND BENEFITS AS CONTAINED IN THAT CERTAIN RECIPROCAL EASEMENT
AGREEMENT RECORDED MARCH 4, 1991 IN BOOK 6105 AT PAGE 431 OVER LOT 2, BLOCK 1,
THE PLAZA AT AURORA MALL SUBDIVISION FILING NO. 2,
COUNTY OF ARAPAHOE,
STATE OF COLORADO.
PARCEL 4:
THE RIGHTS AND BENEFITS AS CONTAINED IN THAT CERTAIN DECLARATION OF RESTRICTIONS
AND GRANT OF EASEMENTS RECORDED FEBRUARY 3, 1994 IN BOOK 7399 AT PAGE 636,
COUNTY OF ARAPAHOE,
STATE OF COLORADO.
PARCEL 5:
THE RIGHTS AND BENEFITS AS CONTAINED IN THAT CERTAIN EASEMENT AGREEMENT
RECORDED JANUARY 14, 1994 IN BOOK 7367 AT PAGE 189,
COUNTY OF ARAPAHOE,
STATE OF COLORADO.
<PAGE>
EXHIBIT B
STATE SPECIFIC PROVISIONS (Colorado)
The following provisions are incorporated by reference into
Section 48 of the attached Deed of Trust. If any conflict or inconsistency
exists between this Exhibit B and the remainder of the attached Deed of Trust,
this Exhibit B shall govern.
A. SPECIAL FORECLOSURE PROVISIONS. Notwithstanding anything to
the contrary contained in Section 24 hereof, Beneficiary may foreclose this Deed
of Trust either by judicial action or through Trustee. Foreclosure through
Trustee will be initiated by Beneficiary's filing of its notice of election and
demand for sale with Trustee. Upon the filing of such notice of election and
demand for sale, Trustee shall promptly comply with all notice and other
requirements of the laws of Colorado then in force with respect to such sales,
and shall give four weeks' public notice of the time and place of such sale by
advertisement weekly in some newspaper of general circulation then published in
the county or city and county in which the Land is located. Any sale conducted
by Trustee pursuant to this paragraph shall be held at the front door of the
county courthouse for such county or city and county, or on the Land, or at such
other place as similar sales are then customarily held in such county or city
and county, provided that the actual place of sale shall be specified in the
notice of sale. In any such sale, it shall and may be lawful for the Trustee to
sell and dispose of the Trust Property en masse or in separate parcels, as the
Trustee may think best.
All fees, costs and expenses of any kind incurred by Beneficiary
in connection with foreclosure of this Deed of Trust, including, without
limitation, the costs of any appraisals of the Land obtained by Beneficiary, all
costs of any receivership for the Land advanced by Beneficiary, all costs of any
environmental audits or tests incurred by Beneficiary and all attorneys' and
consultants' fees incurred by Beneficiary, shall constitute a part of the
Obligations and may be included as part of the amount owing from Grantor to
Beneficiary at any foreclosure sale. The proceeds of any sale under this
paragraph shall be applied first to the fees and expenses of the officer
conducting the sale, and then as set forth in Section 24(a) of this Deed of
Trust. At the conclusion of any foreclosure sale, the officer conducting the
sale shall execute and deliver to the purchaser at the sale a certificate of
purchase which shall describe the property sold to such purchaser and shall
state that upon the expiration of the applicable periods for redemption, the
holder of such certificate will be entitled to a deed to the property described
in the certificate. After the expiration of all applicable periods of
redemption, unless the property sold has been redeemed by Grantor, the officer
who conducted such sale shall, upon request, execute and deliver an appropriate
deed to the holder of the certificate of purchase or the last certificate of
redemption, as the case may be. Nothing in this paragraph dealing with
foreclosure procedures or specifying particular actions to be taken by
Beneficiary or by Trustee or any similar officer shall be deemed to contradict
or add to the requirements and procedures now or hereafter specified by Colorado
law, and any such inconsistency shall be resolved in favor of Colorado law
applicable at the time of foreclosure.
<PAGE>
B. NON-AGRICULTURAL USE. The Land encumbered by this Deed of
Trust is not used principally or primarily for agricultural or farming purposes.
C. MAXIMUM AMOUNT SECURED BY THIS DEED OF TRUST. The portion of
the Obligations which shall be secured by this Deed of Trust shall be limited to
an amount equal to $3,000,000.
<PAGE>
SCHEDULE A
DESCRIPTION OF ORIGINAL DEED OF TRUST
<TABLE>
<CAPTION>
PROPERTY RECORDING OFFICE BOOK PAGE RECORDING DATE
- ------------------------ --------------------------------------- ---------- ----------- -----------------
<S> <C> <C> <C>
Aurora, CO Office of the Recorder of Arapahoe 7701 549 9/12/94
County, CO
</TABLE>
<PAGE>
Exhibit 4.42
DISCOVERY ZONE, INC.
(Grantor),
to
THE PUBLIC TRUSTEE OF DOUGLAS COUNTY,
COLORADO, as Trustee
(Trustee)
for the benefit of
McDONALD's CORPORATION
(Beneficiary)
--------------------------------------------
AMENDED AND RESTATED DEED OF TRUST, ASSIGNMENT OF LEASES AND
RENTS, SECURITY AGREEMENT AND FIXTURE FILING
--------------------------------------------
Dated as of July 29, 1997
DOCUMENT PREPARED BY AND
AFTER RECORDING RETURN TO:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attention: Jonathan A. Reiss, Esq.
[LITTLETON, COLORADO PROPERTY]
<PAGE>
THIS AMENDED AND RESTATED DEED OF TRUST, ASSIGNMENT OF LEASES AND
RENTS, SECURITY AGREEMENT AND FIXTURE FILING (as the same may from time to time
be extended, renewed or modified, this "Deed of Trust"), made as of the 29th day
of July, 1997, by DISCOVERY ZONE, INC., a Delaware corporation ("Grantor"),
having its principal place of business at One Corporate Center, 110 East Broward
Boulevard, Fort Lauderdale, Florida 33301, as successor by merger to LEAPS &
BOUNDS, INC., to The Public Trustee of Douglas County, Colorado (and any
subsequent substitutes or successors thereof pursuant to Section 50 below,
"Trustee"), to and for the benefit of McDONALD'S CORPORATION a Delaware
corporation ("Beneficiary"), having an address at One McDonald's Plaza, Oak
Brook, Illinois 60523.
W I T N E S S E T H:
A. WHEREAS, prior to Grantor's several predecessors in interest
filing their voluntary petitions for relief under chapter 11, title 11, United
States Code (the "Bankruptcy Code"), Grantor's predecessors in interest with
respect to the Trust Property (as hereinafter defined), Leaps & Bounds, Inc.
("LBI") had provided Beneficiary with a First Deed of Trust on the Trust
Property (as hereinafter defined), dated as of August 30, 1994 (the "Original
Deed of Trust") and identified by the recording information set forth on
Schedule A hereto, to secure certain obligations owed to Beneficiary under the
Agreement and Plan of Merger among Beneficiary, Grantor, Discovery Zone, Inc., a
Delaware corporation ("Old DZI") and Discovery Zone International, Inc.
("DZII"), a Delaware corporation, dated as of August 30, 1994 (the "Merger
Agreement"); and
B. WHEREAS, pursuant to Section 11.2(a)(iii) of the Merger
Agreement, Old DZI agreed to defend, indemnify and hold Beneficiary and its
affiliates harmless in respect of all expenses, losses, costs, deficiencies,
liabilities and damages (including related and reasonable counsel fees and
expenses, and compensatory and demonstrable consequential damages) incurred or
suffered by Beneficiary as a direct result of, inter alia, any breach by Old DZI
or LBI of the leases or subleases relating to certain properties that result in
any payment by Beneficiary in connection with any guarantee by Beneficiary of
such leases and pursuant to Section 10.3(f) of the Merger Agreement it was
agreed that certain security would be provided to secure the obligations under
Section 11.2(a)(iii) of the Merger Agreement, including without limitation, a
first priority security interest in the Land and Improvements (the "Agreement to
Indemnify"); and
C. WHEREAS, following the filing of their respective prayers for
relief under the Bankruptcy Code, Grantor's predecessors in interest, Old DZI,
their affiliated debtors, including DZII and LBI (the "Debtors"), and
Beneficiary entered into the Stipulation and Order Between Debtors and
McDonald's Corporation Providing For The Resolution, Settlement And Compromise
of Disputes And For Rent Deferrals And Allowance of Certain Claims (the
"Stipulation and Order") that was entered by the United States Bankruptcy Court
for the District of Delaware (the "Bankruptcy Court") on November 18, 1996,
which was not appealed or otherwise challenged, became a final order, remains in
full force and effect and to
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<PAGE>
which Grantor is bound, Section 7 of which is captioned "CONTINUING SECURITY"
and provides, in pertinent part, that the valid and enforceable first priority
security interest on the Land and Improvements and certain other collateral
shall secure the performance and payment of all of the obligations of Grantor to
Beneficiary under the Notes (as hereinafter defined), any obligations of
Beneficiary that may arise in connection with the Assumption Locations whether
pursuant to any guaranty, lease, sublease or otherwise, any obligations of
Grantor that may arise in the event of a Liquidation, and any continuing
obligations of Grantor relating to the Rejection Location(s) and the Prior
Rejection Locations (as such terms are defined therein); and
D. WHEREAS, pursuant to the Stipulation and Order and 11 U.S.C.
Section 365, the Debtors, as predecessors in interest to Grantor, assumed the
subleases relating to certain properties (the "Assumed Properties") which
subleases (the "Assumed Property Subleases") expressly incorporate the Agreement
to Indemnify as it relates to any current or future obligations of Beneficiary
relating to the Assumed Properties; and
E. WHEREAS, pursuant to the Stipulation and Order and the Plan (as
hereinafter defined), this Deed of Trust hereby amends and restates the Original
Deed of Trust in its entirety in accordance with the terms and provisions set
forth herein; and
F. WHEREAS, this Deed of Trust, together with certain other Deeds of
Trust, Mortgages or similar encumbrances, are intended to and do secure the
obligations of Grantor and its predecessors in interest and the other Debtors,
to Beneficiary under all of the Stipulation and Order, the Agreement to
Indemnify, the Secured Rent Deferral Notes (as hereinafter defined) and the
Secured Rejection Note (as hereinafter defined); and
G. WHEREAS, pursuant to the plan of reorganization for Old DZI and
its affiliated debtors confirmed by the Bankruptcy Court by order entered on
July 18, 1997 (the "Plan"), and as required by the terms of the Stipulation
and Order, Grantor, as the reorganized successor of the Debtors, is obligated
to issue to Beneficiary Secured Rent Deferral Notes in the aggregate original
principal amount of $266,466.24, which amount is subject to increase each
month in accordance with the terms thereof (the "Secured Rent Deferral
Notes") and Secured Rejection Note in the aggregate original principal amount
of $4,416,237.90 (the "Secured Reduction Note" and, together with the Secured
Rent Deferral Notes, the "Notes"); and
H. WHEREAS, pursuant to the Plan, all of the Debtors and their
reorganized successors have merged into Grantor, and simultaneously with such
merger, all property of LBI and the other Debtors, including the Trust Property,
has been revested in Grantor, as the successor entity of the Debtors; and
1. WHEREAS, in accordance with the foregoing, Grantor is the fee
simple owner of the real estate described in Exhibit A attached hereto commonly
known as 7510 East Parkway Drive, Littleton, Colorado (the "Land");
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<PAGE>
NOW THEREFORE, with reference to the foregoing recitals and for good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Grantor and Beneficiary hereby agree that the Original Deed of
Trust is hereby amended and restated in its entirety as follows:
For the purpose of securing the payment and performance of all of the
obligations (the "Obligations") of Grantor to Beneficiary, including without
limitation, any and all obligations of Grantor, as successor in interest to Old
DZI, DZII, LBI and their affiliated debtors, under this Deed of Trust, the
Agreement to Indemnify (including, without limitation, any contingent
obligations thereunder), the Stipulation and Order (including, without
limitation, the obligations described in Section 7 thereof which are referred to
in paragraph C of the recitals above), the Plan and the Notes (including any and
all subsequent advances made pursuant to the terms of the Notes), and all other
documents evidencing or securing any such obligations (collectively, the
"Relevant Documents"), Grantor by these presents hereby GRANTS, BARGAINS, SELLS,
WARRANTS, PLEDGES, ASSIGNS AND CONVEYS to Trustee and its successors and assigns
forever in trust, WITH POWER OF SALE, for the benefit of Beneficiary, the Land
and the buildings, structures and improvements of every nature whatsoever now or
hereafter located thereon to the extent owned by Grantor (including, but not
limited to, all gas and electric fixtures, radiators, heaters, docks and docking
facilities, engines and machinery, boilers, elevators and motors, plumbing,
heating and air conditioning fixtures, carpeting and other floor coverings,
water heaters, awnings and storm sashes which are or shall be attached to the
Land or said buildings, structures or improvements) (the "Improvements");
TOGETHER WITH: all right, title, interest and estate of Grantor now
owned, or hereafter acquired, in and to the following property, rights, interest
and estates relating to the Land and the Improvements, together with Grantor's
interest in the following property, rights, interests and estates hereinafter
described (the Land, Improvements, and the following property, rights, interests
and estates being hereinafter collectively referred to as the "Trust Property"):
(a) all easements, rights-of-way, strips and gores of land, streets,
ways, alleys, passages, sewer rights, water, water courses, water rights and
powers, air rights and development rights, construction and equipment
warranties, and all estates, rights, titles, interests, privileges, liberties,
tenements, hereditaments and appurtenances of any nature whatsoever, in any way
belonging, relating to or pertaining to the Land and the Improvements and the
reversion and reversions, remainder and remainders, and all land lying in the
bed of any street, road or avenue, opened or proposed, in front of or adjoining
the Land, to the center line thereof and all the estates, rights, titles,
interests, dower and rights of dower, curtesy and rights of curtesy, property,
possession, claim and demand whatsoever, both at law and in equity, of Grantor
of, in and to the Land and the Improvements and every part and parcel thereof,
with the appurtenances thereto, and in and to any streets, ways, alleys,
passages, strips or gores of land adjoining the Land or any part thereof;
4
<PAGE>
(b) all fixtures, attachments and other articles attached to the Land
or the Improvements constituting realty or real property now or hereafter owned
by Grantor or in which Grantor has or shall acquire an interest, now or
hereafter located on, attached to or contained in or used or usable in
connection with the Trust Property, and including, without limitation, all
building or construction materials intended for construction, reconstruction,
alteration or repair of or installation on or in the Trust Property, of every
kind and nature whatsoever now owned or hereafter acquired by Grantor, and all
proceeds thereof, as well as all additions to, appurtenances, substitutions for,
replacements of or accessions to any of the items recited as aforesaid and all
attachments, components, parts (including spare parts) and accessories, whether
installed thereon or affixed thereto, now or hereafter owned by Grantor and used
or intended to be used in connection with, or with the operation of, the Trust
Property, to the extent constituting real property, but not including play
equipment or other similar-type entertainment equipment relating to the
operation of the "Discovery Zone" facility on the Trust Property unless removal
of such equipment would cause structural damage to the Land or the Improvements
(collectively, the "Fixtures");
(c) all awards or payments, including interest thereon, which may
heretofore and hereafter be made with respect to the Trust Property, whether
from the exercise of the right of eminent domain (including, but not limited to,
any transfer made in lieu of or in anticipation of the exercise of said rights),
or for a change of grade, or for any other injury to or decrease in the value of
the Trust Property;
(d) to the extent assignable (and to the extent relating to the
general occupancy and use of the Trust Property as opposed to the operation of
the "Discovery Zone" entertainment facility on the Trust Property), leases,
subleases (including sub-subleases), lettings, licenses, concessions, occupancy
agreements and other agreements which grant a possessory interest in, or the
right to use or occupy, all or any part of the Trust Property now or hereafter
entered into, and all amendments, extensions, renewals and guarantees thereof,
and all security therefor (collectively, the "Leases") and all rents, issues,
profits, revenues (including all oil and gas or other mineral royalties and
bonuses) and deposits (including, without limitation, security deposits) under
the Leases (including, without limitation, from the rental of any office space,
retail space or other space, halls, stores, and offices, and security deposits
therefor, exhibit or sales space of every kind, license, lease, sublease fees
and rentals, letters of credit or cash instruments securing or evidencing
obligations under Leases, service charges, vending machine sales and proceeds,
if any, from business interruption or other loss of income insurance))
(collectively, the "Rents") and all proceeds from the sale or other disposition
of the Leases and the right to receive and apply the Rents to the payment of the
Obligations;
(e) subject to the rights of Grantor hereunder, all proceeds of any
insurance policies covering the Trust Property (including, without limitation,
the right to receive and apply the proceeds of any insurance, judgments, or
settlements made in lieu thereof, for damage to the Trust Property);
5
<PAGE>
(f) all refundable, returnable or reimbursable fees deposits or other
funds or evidences of credit or indebtedness deposited by or on behalf of
Grantor with any governmental authorities, boards, corporations, providers of
utility services, public or private, including specifically, but without
limitation, all refundable, returnable or reimbursable tap fees, utility
deposits and development costs in connection with the Trust Property, and all of
the records and books of account now or hereafter maintained by or on behalf of
Grantor in connection with the operation of the Trust Property (collectively,
"Security Accounts");
(g) all proceeds (as defined in the Uniform Commercial Code) of the
Trust Property which, in any event, shall include, without limitation, (i) cash,
instruments and other property received, receivable or otherwise distributed in
exchange for any or all of the Trust Property, (ii) the collection or other
disposition of, or realization upon, any item or portion of the Trust Property
(including, without limitation, all claims of Grantor against third parties for
loss of, damage to, destruction of, or for proceeds payable under policies of
insurance in respect of, the Trust Property now existing or hereafter arising),
(iii) any and all proceeds of any insurance, indemnity, warranty or guaranty
payable to Grantor from time to time with respect to damage or loss of or to any
of the Trust Property, (iv) any and all payments (in any form whatsoever) made
or due and payable to Grantor from time to time in connection with the
requisition, confiscation, condemnation, seizure or forfeiture of all or any
part of the Trust Property by any Governmental Authority (or any person acting
under color of Governmental Authority), and (v) any and all real estate tax
refunds payable to Grantor with respect to the Trust Property, and refunds or
reimbursements payable with respect to bonds, escrow accounts, or other sums
payable in connection with the use, development or ownership of the Trust
Property, but excluding any proceeds obtained, earned or arising directly from
the operation of the "Discovery Zone" entertainment facility operated by Grantor
on the Trust Property as opposed to general occupancy and use of the Trust
Property (collectively, the "Proceeds");
(h) to the extent permitted under applicable law, all licenses,
permits (other than proprietary permits of Grantor relating to the ordinary
operation of a "Discovery Zone" entertainment facility, as opposed to the
general use and occupancy of the Trust Property), variances and certificates
used in connection with the ownership, operation, use or occupancy of the Trust
Property (including, without limitation, business licenses, state health
department licenses, food service licenses, liquor licenses, licenses to conduct
business and all such other permits, licenses and rights, obtained from any
Governmental Authority or private Person concerning ownership, operation, use or
occupancy of the Trust Property) (collectively, "Permits");
(i) all plans, specifications, shop drawings and other technical
descriptions prepared for construction, repair or alteration of the Improvements
(including diskettes containing any such data), and all amendments and
modifications thereof; and
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<PAGE>
(j) any escrows or escrow accounts established hereunder to secure
the Obligations of Grantor, including, without limitation, the Proceeds Escrow
Account described in Section 6(b) hereof; and
(k) any and all replacements and renewals of or additions and
substitutions to any of the foregoing and all proceeds of any of the foregoing.
TO HAVE AND TO HOLD the above granted and described Trust Property
unto and to the use and benefit of Trustee, and the successors, substitutes and
assigns of Trustee forever, IN TRUST WITH POWER OF SALE, for the benefit of
Beneficiary, and its successors and assigns, and Grantor does hereby bind
itself, its successors and assigns to WARRANT AND FOREVER DEFEND the title to
the Trust Property unto Trustee and its successors, substitutes and assigns, for
the benefit of Beneficiary, and its successors and assigns;
AND, TO PROTECT THE SECURITY OF THIS DEED OF TRUST, Grantor represents
and warrants to and covenants and agrees with Beneficiary as follows:
1. Defined Terms. The following terms, when used herein, shall have
the meanings set forth below:
"Environmental Laws" means any and all present and future federal,
state or local laws, statutes, ordinances or regulations, any judicial or
administrative orders, decrees or judgments thereunder, and any permits,
approvals, licenses, registrations, filings and authorizations, in each case as
now or hereafter in effect, relating to the protection of the environment, the
impact of Hazardous Substances or the generation, disposal or remediation
thereof on human health or safety, or the Release or threatened Release of
Hazardous Substances or otherwise relating to the Use of Hazardous Substances.
For purposes of this definition, (A) "Hazardous Substances" means collectively,
(i) any petroleum or petroleum products or waste oils, explosives, radioactive
materials, asbestos, urea formaldehyde foam insulation, polychlorinated
biphenyls ("PCBs"), and lead-based paint, (ii) any chemicals or other materials
or substances which are now or hereafter become defined as or included in the
definitions of "hazardous substances", "hazardous wastes", "hazardous
materials", "extremely hazardous wastes", "restricted hazardous wastes", "toxic
substances", "toxic pollutants", "contaminants", "pollutants" or words of
similar import under any Environmental Law and (iii) any other chemical or any
other material or substance, exposure to which is now or hereafter prohibited,
limited or regulated under any Environmental Law; (B) "Use" means, with respect
to any Hazardous Substance, the generation, manufacture, processing,
distribution, handling, use, treatment, recycling or storage of such Hazardous
Substance or transportation of such Hazardous Substance; and (C) "Release" means
any release, spill, emission, leaking, pumping, injection, deposit, disposal,
discharge, dispersal, leaching or migration into the indoor or outdoor
environment (including, without limitation, the movement of Hazardous Substances
through ambient air, soil, surface water, ground water, wetlands, land or
subsurface strata).
7
<PAGE>
"Governmental Authority" means any national or federal government, any
state, regional, local or other political subdivision thereof with jurisdiction
and any Person with jurisdiction exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government (including
without limitation any court).
"Impositions" means all taxes (including, without limitation, all real
estate, ad valorem, sales (including those imposed on lease rentals), use,
single business, gross receipts, value added, intangible transaction privilege,
privilege or license or similar taxes), assessments (including, without
limitation, all assessments for public improvements or benefits, whether or not
commenced or completed within the term of this Deed of Trust), ground rents,
water, sewer or other rents and charges, excises, levies, fees (including,
without limitation, license, permit, inspection, authorization and similar
fees), and all other governmental impositions and other charges (including,
without limitation, vault charges and license fees for the use of vaults, chutes
and similar areas adjoining the Trust Property), in each case whether general or
special, ordinary or extraordinary, foreseen or unforeseen, of every character
in respect of the Trust Property, which at any time prior to, during or in
respect of the term hereof may be assessed or imposed on or in respect of or be
a lien upon (i) Grantor (including, without limitation, all income, franchise,
single business or other taxes imposed on Grantor for the privilege of doing
business in the jurisdiction in which the Trust Property is located), (ii) the
Trust Property, or any part thereof or any revenues therefrom or any estate,
right, title or interest therein, or (iii) any occupancy, operation, use or
possession of, or sales from, or activity conducted on, or in connection with
the Trust Property by Grantor or the leasing or use of the Trust Property or any
part thereof by Grantor.
"Legal Requirements" means (i) all governmental statutes, laws, rules,
orders, regulations, ordinances, judgments, decrees and injunctions of
Governmental Authorities (including, without limitation, Environmental Laws)
affecting either the Borrower or any Property or any part thereof or the
construction, ownership, use, alteration or operation thereof, or any part
thereof (whether now or hereafter enacted and in force), (ii) all permits,
licenses and authorizations and regulations relating thereto, and (iii) all
covenants, conditions and restrictions contained in any instruments at any time
in force (whether or not involving Governmental Authorities) affecting the Trust
Property or any part thereof which, in the case of this clause (iii), require
repairs, modifications or alterations in or to the Trust Property or any part
thereof, or in any material way limit or restrict the existing use and enjoyment
thereof.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, estate, trust, unincorporated association, any
federal, state, county or municipal government or any bureau, department or
agency thereof and any fiduciary acting in such capacity on behalf of any of the
foregoing.
"Uniform Commercial Code" means the Uniform Commercial Code, as
adopted, enacted and amended from time to time by the state or states where any
of the Trust Property is located.
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<PAGE>
2. Payment of Obligations and Incorporation of Covenants, Conditions
and Agreements. Grantor will pay the Obligations at the time and in the manner
provided in the Relevant Documents and in this Deed of Trust. All the
representations, warranties, covenants, conditions and agreements of Grantor
contained in the Relevant Documents are hereby made a part of this Deed of Trust
to the same extent and with the same force as if fully set forth herein. If
there shall be any inconsistencies between the terms, covenants, conditions and
provisions set forth in this Deed of Trust and the terms, covenants, conditions
and provisions set forth in the Relevant Documents, then the terms, covenants,
conditions and provisions of the Relevant Documents shall prevail.
3. Warranty of Title/Organization. Grantor warrants that Grantor
has good, marketable and insurable fee simple title to Land and the Improvements
and has good title to the remainder of the Trust Property and has the full
power, authority and right to execute, deliver and perform its obligations under
this Deed of Trust and to encumber, mortgage, give, grant, bargain, sell,
alienate, enfeoff, convey, confirm, warrant, pledge, assign and hypothecate the
Trust Property and that Grantor possesses an unencumbered fee estate in the Land
and the Improvements and that it owns the Trust Property free and clear of all
liens, encumbrances and charges whatsoever except for (x) those exceptions to
title which are existing on the date hereof and approved by Beneficiary and (y)
those exceptions of title that are permitted under the other terms and
conditions of this Deed of Trust (collectively, the "Permitted Encumbrances")
and that this Deed of Trust is and will remain a valid and enforceable first
lien on and security interest in the Trust Property, subject only to the
Permitted Encumbrances. Grantor shall forever warrant, defend and preserve such
title and the validity and priority of the lien of this Deed of Trust and shall
forever warrant and defend the same to Beneficiary against the claims of all
persons whomsoever. Grantor is duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization. Grantor is
qualified to do business and in good standing in the State in which the Trust
Property is located, and to the extent that Grantor is not so qualified or in
good standing in such State, Grantor shall promptly qualify to do business and
become in good standing in such State and shall promptly present evidence of
such qualification to do business and good standing to Beneficiary, and shall in
any event take such steps as are necessary to insure the enforceability of the
Notes and this Deed of Trust.
4. Taxes. Grantor hereby warrants, covenants and agrees to pay
before any penalty attaches all real property taxes, general and special, and
all other taxes and assessments of any kind or nature whatsoever, against the
Trust Property when due and shall, upon written request, furnish to Beneficiary
duplicate receipts therefor, Grantor may, in good faith and with reasonable
diligence, contest the validity or amount of any such taxes or assessments
provided that such contest shall have the effect of preventing the collection of
the tax or assessment so contested and the sale or forfeiture of said Trust
Property or any part thereof, or any interest therein, to satisfy the same.
5. Indemnification. Grantor shall indemnify, defend and hold
harmless Beneficiary from and against all of the following (collectively, and
individually referred to as a
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"Loss"): claims, demands, causes of action, judgments, costs, expenses,
liabilities, losses and damages (including consequential and punitive damages),
reasonable attorneys' fees and expenses and court costs, disbursements and court
costs, and all risk of damage to property and injury to persons in or upon the
Trust Property, arising from: (i) Grantor's use of the Property or from the
conduct of its business in or about the Trust Property; (ii) Grantor's default
or breach of any term under this Deed of Trust; and (iii) Grantor's violation or
failure to comply with any Legal Requirements, including Environmental Laws;
provided that Grantor shall not be liable for Loss arising from Beneficiary's or
Trustee's negligence or willful misconduct or from Beneficiary's or Trustee's
breach of any of their obligations hereunder.
6. Transfer or Encumbrance of the Trust Property. (a) Except as
may otherwise be permitted hereunder or pursuant to the Relevant Documents,
Grantor shall not sell, convey, alienate, mortgage, encumber, pledge or
otherwise transfer the Trust Property or any part thereof or any of its interest
therein. Beneficiary shall not be required to demonstrate any actual impairment
of its security or any increased risk of default hereunder in order to declare
the Obligations immediately due and payable upon Grantor's conveyance,
alienation, mortgage, encumbrance, pledge or transfer of the Trust Property in
violation of this Deed of Trust or any other Relevant Document. This provision
shall apply to every sale, conveyance, alienation, mortgage, encumbrance, pledge
or transfer of the Trust Property that is not permitted pursuant to the Relevant
Documents, regardless of whether voluntary or not, or whether or not Beneficiary
has consented to any previous sale, conveyance, alienation, mortgage,
encumbrance, pledge or transfer of the Trust Property.
(b) Notwithstanding Section 6(a), Grantor shall have the right to
sell the Trust Property at any time to a third party bona fide purchaser after
consultation with Beneficiary and upon the prior written consent of Beneficiary
to such sale and the sales price (such consent not to be unreasonably withheld),
provided that the net proceeds of such sale of the Trust Property (after payment
of transfer taxes and reasonable brokerage commissions, if any, and other
reasonable closing costs) shall be applied towards repayment of the Obligations,
including, without limitation, repayment of the Secured Rejection Note
(including prepayment of any amounts not yet due and payable) and payment of the
Principal Amounts (as defined in the Rent Deferral Notes) then outstanding under
the Rent Deferral Notes, in the order and manner set forth in the Notes. After
the Secured Rejection Note and all Principal Amounts outstanding under the Notes
have been repaid in full, any remaining net proceeds (including proceeds from
any sale or other disposition of the Trust Property pursuant to Section 24
hereof) not applied towards repayment of the Obligations shall be deposited into
an escrow account designated by Beneficiary for Grantor's account and as
security for the performance by Grantor of its Obligations to Beneficiary under
the Relevant Documents (the "Proceeds Escrow Account") which escrow account
shall be administered by Beneficiary, or, at Beneficiary's discretion and in
accordance with Beneficiary's instructions, may be administered by an escrow
agent (an "Escrow Agent") selected by Beneficiary (whose reasonable fees shall
be paid by Grantor). Grantor may also from time to time deposit additional
funds into the Proceeds Escrow Account as further security for the Obligations.
At Beneficiary's request, Grantor agrees to enter into a separate escrow
agreement to further evidence the provisions of this Section 6(b), and in the
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<PAGE>
event that Beneficiary chooses an Escrow Agent to administer the Proceeds Escrow
Account, Grantor agrees to execute an escrow agreement in form and substance
reasonably satisfactory to Beneficiary (including provisions consistent with the
provisions of this Section 6(b)) to evidence the duties and responsibilities of
such Escrow Agent. Beneficiary or, if applicable, the Escrow Agent at the
direction of Beneficiary, shall invest the funds in the Proceeds Escrow Account
in obligations of the U.S. Government or its agencies, interest in time accounts
or certificates of deposits, or other interest bearing account of any bank or
bank and trust company or in money market funds available to Beneficiary.
Grantor agrees, and shall agree under any escrow agreement entered into pursuant
to this Section 6(b), that the funds on deposit under the escrow arrangement
described herein shall not constitute property of the estate (within the meaning
of Section 541 of the United States Bankruptcy Code) and that Grantor shall only
have such rights to such funds as are provided herein and in any escrow
agreement entered into pursuant to this Section. Funds in the Proceeds Escrow
Account shall be disbursed (together with accrued interest) from time to time to
Beneficiary, at Beneficiary's direction (upon seven (7) days prior notice to
Grantor), to pay any Obligations that may arise from time to time under the
Agreement to Indemnify, the Notes, the Stipulation and Order or the other
Relevant Documents. Notwithstanding the foregoing, after December 31, 2005,
Grantor shall be entitled to retain any net proceeds in excess of the Minimum
Amount set forth below from the sale of the Trust Property, including amounts
previously deposited and remaining in the Proceeds Escrow Account (including
accrued interest thereon) which have not been applied towards payment of the
Obligations, provided that (i) no Obligations are then due and owing by Grantor
pursuant to the Agreement to Indemnify, the Stipulation and Order, the Notes or
otherwise, (ii) no default or Event of Default has occurred and is continuing
under any of the Relevant Documents; and (iii) the amount remaining in the
Proceeds Escrow Account is no less than the Minimum Amount (as hereinafter
defined). Except as otherwise set forth in the following sentence, the "Minimum
Amount" shall mean the product of (A) 1.5 times (B) the sum of the gross rent
(including additional rent and percentage rent charges, if any), common area
maintenance charges, taxes, insurance and other charges computed on a gross
basis (collectively, the "Base Charges") which are due or shall become due under
any Assumed Property Subleases still in existence as of December 31, 2005 (the
"Surviving Assumed Property Subleases") from December 31, 2005 until the
expiration of the terms of such Assumed Property Subleases. Upon the expiration
after December 31, 2005 of any Surviving Assumed Property Sublease, Beneficiary
shall re-calculate the Minimum Amount based upon the product of 1.5 times the
Base Charges of the remaining Surviving Assumed Property Subleases as of the end
of the term of such Surviving Assumed Property Sublease (such Base Charges to be
calculated as the sum of the Base Charges from such date through the end of the
expiration dates of the remaining Surviving Assumed Property Subleases), and
provided that (i) no Obligations are then due and owing by Grantor pursuant to
the Agreement to Indemnify, the Notes, the Stipulation and Order or otherwise
and that (ii) no default or Event of Default has occurred and is continuing
under any of the Relevant Documents, Beneficiary shall, on the first anniversary
of the expiration of such expired Surviving Assumed Property Sublease, release
to Grantor, or cause the Escrow Agent to release to Grantor, the excess of all
funds in the Proceeds Escrow Account over the re-calculated Minimum Amount. Any
calculation of Base Charges under this Section 6(b) shall be made by Beneficiary
and,
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absent manifest error, shall be conclusive and binding upon Grantor. Provided
that (i) an amount equal to at least the Minimum Amount is deposited or on
deposit in the Proceeds Escrow Account to secure the payment of the Obligations,
(ii) no default or Event of Default has occurred and is continuing under any of
the Relevant Documents, (iii) the Notes have been repaid in full and (iv) no
Obligations are then due and owing by Grantor pursuant to the Agreement to
Indemnify, the Stipulation and Order or otherwise, Grantor shall be entitled to
receive a release of this Deed of Trust from Beneficiary at any time after
December 31, 2005. Provided that no default or Event of Default has occurred or
is continuing under any of the Relevant Documents and that no amounts are then
owing by Grantor or outstanding pursuant to or under any of the Relevant
Documents (and that an amount equal to the Minimum Amount is at all times on
deposit in the Proceeds Escrow Account), interest earned on the amounts
deposited in the Proceeds Escrow Account after December 31, 2005 shall be
distributed to Grantor on a quarterly basis. All remaining amounts in the
Proceeds Escrow Account which have not been applied towards payment of the
Obligations shall be released to Grantor on the later of (A) December 31, 2014
provided, however, that no Obligations are then due and owing by Grantor
pursuant to the Agreement to Indemnify, the Stipulation and Order or otherwise,
and (B) the end of the term of this Deed of Trust as set forth in Section 13(c)
hereof. Grantor shall pay any income taxes attributable to the interest or
other income earned on the Proceeds Escrow Account. Notwithstanding any release
of this Deed of Trust pursuant to this Section 6(b) or otherwise, the terms and
provisions of this Section 6(b) shall survive the release of this Deed of Trust.
7. Amendment to Legal Description. If it becomes evident that the
legal description attached to any Relevant Document is inaccurate or does not
fully describe all of the real property which is reasonably connected to the
Land, Grantor hereby agrees to an amendment of such legal description and the
legal description contained on the corresponding title policy so that such error
is corrected and to execute and cause to be recorded, if applicable, such
document as may be appropriate for such purpose.
8. Assignment of Leases and Rents. Grantor does hereby absolutely
and unconditionally assign to Beneficiary, Grantor's right, title and interest
in all current and future Leases and Rents, it being intended by Grantor that
this assignment constitutes a present, absolute assignment and not an assignment
for additional security only. Such assignment to Beneficiary shall not be
construed to bind Beneficiary to the performance of any of the covenants,
conditions or provisions contained in any such Lease or otherwise impose any
obligation upon Beneficiary. Beneficiary shall have no responsibility on
account of this assignment for the control, care, maintenance, management or
repair of the Trust Property, for any dangerous or defective condition of the
Trust Property, or for any negligence in the management, upkeep, repair or
control of the Trust Property. Grantor agrees to execute and deliver to
Beneficiary such additional instruments, in form and substance satisfactory to
Beneficiary, as may hereafter be requested by Beneficiary to further evidence
and confirm such assignment. Nevertheless, subject to the terms of this
paragraph, Beneficiary grants to Grantor a revocable license to collect all of
the Rents and retain, use and enjoy the same and otherwise exercise all rights
of Grantor under any Lease, in each case, subject to the terms
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hereof and of the Relevant Documents. Upon an Event of Default, the license
granted to Grantor herein shall immediately and automatically be revoked, and
Beneficiary shall immediately be entitled to possession of all Rents, whether or
not Beneficiary enters upon or takes control of the Trust Property, provided
that if such Event of Default ceases to exist, the license shall automatically
be reinstated. In addition, during the continuation of an Event of Default,
Beneficiary may, either in person or by agent, without bringing any action or
proceeding, or by a receiver appointed by a court, without the necessity of
taking possession of the Trust Property in its own name, and in addition to and
without limiting any of Beneficiary's rights and remedies hereunder, under the
Notes and any other Relevant Documents and as otherwise available at law or in
equity, (a) notify any lessee or other person that the Leases have been assigned
to Beneficiary and that all Rents are to be paid directly to Beneficiary,
whether or not Beneficiary has commenced or completed foreclosure or taken
possession of the Trust Property; (b) settle, compromise, release, extend the
time of payment of, and make allowances, adjustments and discounts of any Rents
or other obligations in, to and under the Leases; (c) demand, sue for or
otherwise collect, receive, and enforce payment of Rents, including those
past-due and unpaid and other rights under the Leases, prosecute any action or
proceeding, and defend against any claim with respect to the Rents and Leases;
(d) enter upon, take possession of and operate the Trust Property; (e) lease all
or any part of the Trust Property; and/or (f) perform any and all obligations of
Grantor under the Leases and exercise any and all rights of Grantor therein
contained to the full extent of Grantor's rights and obligations thereunder,
with or without the bringing of any action or the appointment of a receiver and
without need for any other authorization or other action by Beneficiary or
Grantor. At Beneficiary's request, Grantor shall deliver a copy of this
assignment to each tenant under a Lease and to each manager and managing agent
or operator of the Trust Property. Grantor irrevocably directs any tenant,
manager, managing agent, or operator of the Property, without any requirement
for notice to or consent by Grantor, to comply with all demands of Beneficiary
under this Section 8 and to turn over to Beneficiary on demand all Rents which
it receives. Grantor hereby acknowledges and agrees that payment of any Rents
by a person to Beneficiary as hereinabove provided shall constitute payment by
such person, as fully and with the same effect as if such Rents had been paid to
Grantor. Beneficiary is hereby granted and assigned by Grantor the right, at
its option, upon revocation of the license granted herein, to enter upon the
Trust Property in person or by agent, without bringing any action or proceeding,
or by court-appointed receiver to collect the Rents. Any Rents collected after
the revocation of the license shall be applied towards the payment of the
Obligations. Neither the enforcement of any of the remedies under this Section
8 nor any other remedies or security interests afforded to Beneficiary under the
Relevant Documents, at law or in equity shall cause Beneficiary to be deemed or
construed to be a Beneficiary in possession of the Trust Property, to obligate
Beneficiary to lease the Trust Property or attempt to do so, or to take any
action, incur any expense, or perform or discharge any obligation, duty or
liability whatsoever under any of the Leases or otherwise. Grantor shall, and
hereby agrees to indemnify Beneficiary for, and to hold Beneficiary harmless
from and against, any and all claims, liability, expenses, losses or damages
which may or might be asserted against or incurred by Beneficiary solely by
reason of Beneficiary's status as an assignee pursuant to the assignment of
Rents and Leases contained herein, but excluding any claim (a) to the extent
caused by Beneficiary's gross
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negligence or willful misconduct, or (b) to the extent arising solely from
Beneficiary's actions after Beneficiary has taken possession of the Trust
Property. Should Beneficiary incur any such claim, liability, expense, loss or
damage, the amount thereof, including all actual expenses and reasonable fees of
attorneys, shall constitute Obligations secured hereby, and Grantor shall
reimburse Beneficiary therefor immediately upon demand. Grantor agrees that all
Leases shall be subject to the prior written approval of Beneficiary, such
approval not to be unreasonably withheld.
9. Maintenance of Trust Property. Grantor shall cause the Trust
Property to be maintained in a good and safe condition and repair (subject to
ordinary wear and tear), and shall otherwise operate and maintain the Trust
Property in a manner consistent with the manner in which it operates and
maintains the other properties on which it operates similar businesses ("Similar
Properties"). Except as otherwise permitted by the Relevant Documents, the
Improvements, the Fixtures and the equipment located on the Land or the
Improvements shall not be removed, demolished or materially altered (except for
normal replacement of equipment) without the consent of Beneficiary which shall
not unreasonably be withheld or delayed. Grantor shall comply with all laws,
orders and ordinances affecting the Trust Property, or the use thereof. Except
to the extent that Beneficiary fails to turn over insurance proceeds, if any,
received by Beneficiary pursuant to Sections 10 and 11 with respect to the Trust
Property to Grantor, Grantor shall promptly repair, replace or rebuild any part
of the Trust Property that, following the date hereof, becomes damaged, worn or
dilapidated and Grantor shall complete and pay for any structure at any time in
the process of construction or repair on the Land. Notwithstanding anything to
the contrary contained herein, Grantor hereby confirms its obligation to comply
with all relevant Legal Requirements, including Environmental Laws, with respect
to the Trust Property. Grantor shall not initiate, join in, acquiesce in, or
consent to any change in any private restrictive covenant, zoning law or other
public or private restriction, limiting or defining the uses which may be made
of the Trust Property or any part thereof, unless Grantor shall have received
Beneficiary's prior written consent, such consent not to be unreasonably
withheld or delayed. If under applicable zoning provisions the use of all or
any portion of the Trust Property is or shall become a nonconforming use,
Grantor will not cause such nonconforming use to be discontinued or abandoned
without the express written consent of Beneficiary, such consent not to be
unreasonably withheld or delayed. Grantor shall not (i) change the use of the
Land in any material respect or (ii) permit or suffer to occur any waste on or
to the Trust Property or to any portion thereof.
10. Insurance.
(a) Grantor shall maintain casualty, liability and other policies of
insurance relating to the Trust Property in form and substance, and with
insurers and coverages, reasonably satisfactory to Beneficiary and consistent
with insurance that it maintains on Similar Properties. Grantor shall keep the
Trust Property insured against loss by flood if the Trust Property is located in
an area identified by the Secretary of Housing and Urban Development as an area
having a special flood hazards and in which flood insurance has been made
available
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under the National Flood Insurance Act of 1968 (or any successor act thereto).
All policies of insurance to be furnished hereunder (i) shall have standard
non-contributory mortgagee clauses attached to all policies in favor of
Beneficiary, without contribution, under a standard New York (or local
equivalent) mortgagee clause naming Beneficiary as the party to which all
payments made under such insurance policies in excess of $150,000 should be
paid, (ii) shall contain an endorsement providing that neither Grantor nor
Beneficiary nor any other party shall be a co-insurer under said policies and
shall contain a provision requiring that the coverage evidenced thereby shall
not be terminated or materially modified without ten (10) days prior written
notice to Beneficiary, (iii) shall provide that no act or thing done by Grantor
shall invalidate the policy as against Beneficiary, and (iv) with respect to
property insurance policies, shall contain a waiver of subrogation against
Beneficiary. Grantor shall deliver certificates evidencing additional and
renewal policies, together with evidence of payment of premiums thereon, to
Beneficiary, and in the case of all insurance about to expire, shall deliver
renewal policies or certificates evidencing such policies not less than ten (10)
days prior to their respective dates of expiration.
(b) Grantor shall not take out separate insurance concurrent in form
or contributing in the event of loss with that required to be maintained
hereunder unless Beneficiary is included thereon under a standard,
non-contributory mortgagee clause acceptable to Beneficiary. Grantor shall
promptly notify Beneficiary whenever any such separate insurance is taken out
and shall promptly deliver to Beneficiary the certificates evidencing the policy
or policies of such insurance.
(c) The insurance required by this Deed of Trust, at the option of
Grantor, may be effected by blanket and/or umbrella policies covering the Trust
Property and other properties, provided, however, that in each case, such
insurance policies otherwise comply with the provisions of this Deed of Trust
and allocate to the Trust Property, from time to time, the coverage specified in
this Deed of Trust without possibility of reduction or co-insurance by reason
of, or damage to, any other property named therein. If the insurance required
by this Deed of Trust shall be effected by any such blanket or umbrella
policies, Grantor shall furnish to Beneficiary certificates with respect to,
with schedules attached thereto showing the amount of the insurance provided
under such policies which is applicable to the Trust Property.
(d) If Grantor fails to maintain insurance in compliance with this
Section, Beneficiary may obtain such insurance and pay the premium therefor and
Grantor shall, on demand, reimburse Beneficiary for all expenses incurred in
connection therewith. Grantor shall deliver original certificates to
Beneficiary of all insurance policies maintained pursuant to this Section 10.
Each property insurance policy shall name Beneficiary as mortgagee, and loss
payee with respect to all casualty coverage and each liability policy shall name
Beneficiary as an additional insured thereunder.
11. Casualty. (a) Grantor shall give Beneficiary prompt notice of
any loss or damage to the Trust Property.
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(b) In case of loss or damage to the Trust Property covered by any of
the insurance policies described in Section 10 above, Beneficiary (or, after
entry of decree of foreclosure, the purchaser at the foreclosure sale or decree
creditor, as the case may be) is hereby authorized at its option either (i) to
settle and adjust any claim under such insurance policies without the consent of
Grantor or (ii) to allow Grantor to settle and adjust such claim (either jointly
with Beneficiary or by Grantor alone at Beneficiary's discretion); provided that
in either case Beneficiary shall, and is hereby authorized to, collect and
receipt for any such insurance proceeds. Notwithstanding anything in the
preceding sentence to the contrary, Beneficiary agrees that it will allow
Grantor to settle and adjust any claims under the insurance policies which are
in an amount less than $150,000, per incident of loss, up to an aggregate amount
of no greater than $300,000. The expenses incurred by Beneficiary in the
adjustment and collection of insurance proceeds shall be included in the
Obligations, and shall be reimbursed to Beneficiary upon demand or may be
deducted by Beneficiary from said insurance proceeds prior to another
application thereof. Interest on such amount shall accrue at the Default Rate,
beginning ten (10) days after Grantor receives notice of a request for payment
of such amount from Beneficiary, until such amount, plus interest, is paid in
full.
(c) Beneficiary shall permit Grantor to apply the proceeds of
insurance policies received in connection with any casualty to pay for the cost
of restoring, repairing, replacing or rebuilding the loss or damage to the Trust
Property resulting from the casualty ("Restoration") if: (i) there is no Event
of Default hereunder at the time of such application; (ii) restoration can, in
the reasonable judgment of Beneficiary, be completed prior to the maturity of
the Obligations; and (iii) restoration can, in the reasonable judgment of
Beneficiary, be effected with two (2) years after the date of such casualty and
in such a manner so that the Trust Property will be of at least equal or greater
value to the value than the Trust Property prior to such casualty. Otherwise,
Beneficiary may elect in its sole discretion to apply such proceeds either (x)
towards payment of the Obligations, notwithstanding the fact that the
Obligations, or a portion thereof, may not then be due and payable, or (y) to
pay for the cost of Restoration. In all events, disbursement of insurance
proceeds by Beneficiary (or at Beneficiary's election by a disbursing or escrow
agent who shall be selected by Beneficiary and whose fees shall be paid by
Grantor), to pay the cost of restoration shall require (i) evidence reasonably
satisfactory to Beneficiary of the estimated costs of Restoration, (iii) funds
(or assurances reasonably satisfactory to Beneficiary that such funds are
available) sufficient in addition to the proceeds of insurance to complete and
fully pay for Restoration; and (iii) such architect's certificates, waivers of
lien, contractor's sworn statements, title insurance endorsements, plats of
surveys and such other evidences of cost, payment and performance as Beneficiary
may reasonably require and approve. Except to the extent Beneficiary fails to
turn over insurance proceeds, if any, received by Beneficiary hereunder with
respect to such casualty to Grantor, Grantor hereby covenants to restore,
repair, replace or rebuild the Improvements, to be of at least equal value, and
of substantially the same character as prior to such loss or damage, all to be
effected in accordance with plans, specifications and procedures to be first
submitted to and reasonably approved by Beneficiary, and Grantor shall pay all
costs of such restoring, repairing, replacing or rebuilding.
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12. Eminent Domain. Grantor warrants, covenants and agrees that
should the Trust Property, or any part thereof or interest therein, be taken or
damaged by reason of any public improvement or condemnation proceeding, or in
any other manner, or should Grantor receive any notice of other information
regarding such proceeding, Grantor shall give written notice thereof within five
(5) business days to Beneficiary. Without Beneficiary's prior consent, Grantor
(1) shall not agree to any compensation or award, and (2) shall not take any
action or fail to take any action which would cause the compensation to be
determined. Beneficiary shall be entitled to: (1) all compensation awards and
other payments or relief therefor, (2) to commence, appear in and prosecute in
its own name any action or proceedings, and (3) to make any compromise or
settlement in connection with such taking or damage. Grantor authorizes
Beneficiary to collect and receive such awards and compensation, to give proper
receipts and acquittances therefor and in Beneficiary's discretion to apply the
same toward the payment of the Obligations, notwithstanding the fact that the
Obligations, or a portion thereof, may not then be due and payable, or to the
restoration of the Trust Property in accordance with the provisions set forth in
the second-to-last sentence of Section 11(c) above. Grantor further agrees to
make, execute, and deliver to Beneficiary, at any time upon request, free and
clear of any encumbrance of any kind whatsoever, any and all further assignments
and other instruments deemed necessary by Beneficiary for the purpose of validly
and sufficiently assigning all compensations and awards made to Grantor for any
taking, either permanent or temporary, under any such proceeding.
13. Release of Deed of Trust. Beneficiary agrees to promptly and
unconditionally release this Deed of Trust (subject to the provisions set forth
in Section 6(b)) as follows:
(a) in the event of a bona fide sale (other than a "sale leaseback"or
other similar financing transaction) of the Trust Property to a third party that
is not affiliated with Grantor, provided that each of the following conditions
is satisfied: (i) neither Grantor nor any of its respective affiliates continue
to use or occupy the Trust Property or any part thereof; (ii) Grantor shall
consult with Beneficiary prior to such sale and shall obtain Beneficiary's prior
written consent with respect to such sale and the sales price (such consent not
to be unreasonably withheld); and (iii) all of the proceeds of such sale are
applied towards repayment of the Obligations or otherwise applied in compliance
with the provisions of Section 6(b) hereof, notwithstanding the fact that the
Obligations, or a portion thereof, may not then be due and payable.
(b) in the event that Beneficiary is paid in full for all amounts
owing (or which shall or may become owing under the Relevant Documents) to
Beneficiary by Grantor and any of its former affiliated debtors, including the
indefeasible payment and satisfaction in full of the Obligations.
(c) on December 31, 2014 (or on such earlier date as permitted under
and pursuant to the provisions of Section 6(b) hereof); provided, however, that
if on such date, any
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amount secured by this Deed of Trust has not been indefeasibly paid in full,
then this Deed of Trust shall be deemed amended to extend the term hereof until
such obligations are so paid.
14. Changes in the Laws Regarding Taxation. If any law is enacted or
adopted or amended after the date of this Deed of Trust which imposes a tax,
either directly or indirectly, on the Obligations or Beneficiary's interest in
the Trust Property, Grantor will pay such tax, with interest and penalties
thereon, if any, provided, however, that Grantor shall not be obligated to pay
any tax which is imposed on the net income of Beneficiary or franchise taxes or
doing business taxes imposed on Beneficiary. In the event that the payment of
such tax or interest and penalties by Grantor would be unlawful or taxable to
Beneficiary or unenforceable or provide the basis for a defense of usury, then
in any such event, Beneficiary shall have the option, by written notice of not
less than ninety (90) days, to declare the Obligations immediately due and
payable.
15. No Credits on Account of the Obligations. (i) Grantor will not
claim or demand or be entitled to any credit or credits on account of the
Obligations for any part of the Impositions assessed against the Trust Property,
or any part thereof, and (ii) no deduction shall otherwise be made or claimed
from the assessed value of the Trust Property, or any part hereof, for real
estate tax purposes by reason of this Deed of Trust or the Obligations if the
effect of such deduction would impose on Beneficiary a tax, either directly or
indirectly, for which it otherwise would not have been liable.
16. Documentary Stamps. If at any time the United States of America,
any State thereof or any subdivision of any such State shall require revenue or
other stamps to be affixed to the Notes or this Deed of Trust, or impose any
other tax or charge on the same, Grantor will pay for the same, with interest
and penalties thereon, if any.
17. Controlling Agreement. It is expressly stipulated and agreed to
be the intent of Grantor and Beneficiary at all times to comply with applicable
state law or applicable United States federal law (to the extent that it permits
Beneficiary to contract for, charge, take, reserve, or receive a greater amount
of interest than under state law) and that this Section shall control every
other covenant and agreement in this Deed of Trust and the other Relevant
Documents. If the applicable law (state or federal) is ever judicially
interpreted so as to render usurious any amount called for under the Notes or
under any of the other Relevant Documents, or contracted for, charged, taken,
reserved, or received with respect to the Obligations, or if Beneficiary's
exercise of the option to accelerate the maturity of the Notes, or if any
prepayment by Grantor results in Grantor having paid any interest in excess of
that permitted by applicable law, then it is Grantor's and Beneficiary's express
intent that all excess amounts theretofore collected by Beneficiary shall be
credited on the principal balance of the Notes and all other Obligations (or, if
the Notes and all other Obligations have been or would thereby be paid in full,
refunded to Grantor), and the provisions of the Notes and the other Relevant
Documents immediately be deemed reformed and the amounts thereafter collectible
hereunder and thereunder reduced, without the necessity of the execution of any
new documents, so as to comply with the applicable law, but so as to permit the
recovery of the
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fullest amount otherwise called for hereunder or thereunder. All sums paid or
agreed to be paid to Beneficiary for the use, forbearance, or detention of the
Obligations shall, to the extent permitted by applicable law, be amortized,
prorated, allocated, and spread throughout the full stated term of the
Obligations until payment in full so that the rate or amount of interest on
account of the Obligations does not exceed the maximum rate of interest
permitted by law from time to time in effect and applicable to the Obligations
for so long as the Obligations are outstanding.
18. Performance of Other Agreements. Grantor shall observe and
perform in all respects the terms to be observed or performed by Grantor under
any agreement or recorded instrument affecting or pertaining to the Trust
Property.
19. Right to Perform the Obligations. Subject to the terms of the
Relevant Documents, if any default exists, Beneficiary shall have the right, but
not the obligation, to cure such default in the name and on behalf of Grantor.
All sums advanced and expenses incurred at any time by Beneficiary under this
Section 19, or otherwise under this Deed of Trust or any of the other Relevant
Documents or applicable law (including, without limitation, the costs and
expenses of Beneficiary and its agents incurred in connection with the
preservation, collection and enforcement of this Deed of Trust or of the liens
created hereby), shall bear interest from the date that such sum is advanced or
expense incurred, to and including the date of reimbursement, computed at the
Default Rate (as defined in the Notes), and all such sums, together with
interest thereon, shall constitute additions to the Obligations and shall be
secured by this Deed of Trust and Grantor covenants and agrees to pay them to
the order of the Beneficiary promptly upon demand.
20. Further Acts, etc. Grantor will, at the cost of Grantor, and
without expense to Beneficiary, do, execute, acknowledge and deliver all and
every such further acts, deeds, conveyances, mortgages, deeds of trust,
assignments, notices of assignment, Uniform Commercial Code financing statements
or continuation statements, transfers and assurances as Beneficiary shall, from
time to time, reasonably require, for the better assuring, conveying, assigning,
transferring, and confirming unto Beneficiary the property and rights hereby
mortgaged, given, granted, bargained, sold, alienated, enfeoffed, conveyed,
confirmed, warranted, pledged, assigned and hypothecated (including, without
limitation, the assignment of leases and rents contained in Section 8 hereof) or
intended now or hereafter so to be, or which Grantor may be or may hereafter
become bound to convey or assign to Beneficiary, or for carrying out the
intention or facilitating the performance of the terms of this Deed of Trust or
for filing, registering or recording this Deed of Trust. Grantor, on demand,
will execute and deliver and, Grantor hereby authorizes Beneficiary to execute
in the name of Grantor or without the signature of Grantor to the extent
Beneficiary may lawfully do so, one or more financing statements, chattel
mortgages or other instruments, to evidence more effectively the security
interest of Beneficiary in the Trust Property. Notwithstanding anything to the
contrary contained herein, Grantor shall not be obligated to execute, deliver,
file or record any additional documents which increase Grantor's obligations
under this Deed of Trust or the Relevant Documents. Grantor grants to
Beneficiary an irrevocable power of attorney coupled
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with an interest for the purpose of exercising the rights provided for in
Section 19 and this Section 20.
21. Recording of Deed of Trust, etc. Grantor forthwith upon the
execution and delivery of this Deed of Trust and thereafter, from time to time,
will cause this Deed of Trust, and any security instrument creating a lien or
security interest or evidencing the lien hereof upon the Trust Property and each
instrument of further assurance to be filed, registered or recorded in such
manner and in such places as may be required by any present or future law in
order to publish notice of and fully to protect the lien or security interest
hereof upon, and the interest of Beneficiary in, the Trust Property. Grantor
will pay all filing, registration or recording fees, the costs and fees of local
counsel for Beneficiary, including, without limitation, costs and fees for local
counsel review of the Deed of Trust and Subordinated Agreement, and the
preparation of opinion letters in connection therewith, and all expenses
incident to the execution and acknowledgment of this Deed of Trust (but not
including fees of Beneficiary's New York counsel in connection with the
preparation of this Deed of Trust), any deed of trust or mortgage supplemental
hereto, any security instrument with respect to the Trust Property and any
instrument of further assurance, and all federal, state, county and municipal,
taxes, duties, imposts, assessments and charges arising out of or in connection
with the execution and delivery of this Deed of Trust, any deed of trust or
mortgage supplemental hereto, any security instrument with respect to the Trust
Property or any instrument of further assurance (other than income or franchise
taxes imposed on Beneficiary), except where prohibited by law so to do. Grantor
shall hold harmless and indemnify Beneficiary, its successors and assigns,
against any liability incurred by reason of the imposition of any tax on the
making and recording of this Deed of Trust. Grantor shall pay all title costs
and premiums in connection with the ALTA lender's title insurance policy issued
by Chicago Title Insurance Company for the benefit of Beneficiary in connection
with this Deed of Trust (including payment for the cost of any property surveys
prepared in connection therewith), which title insurance policy shall be in form
and substance satisfactory to Beneficiary containing such endorsements as
Beneficiary may reasonably request, including, without limitation, the deletion
of any creditor's rights exception and (to the extent available) a variable rate
endorsement; survey endorsement; comprehensive endorsement; first loss
endorsement; last dollar endorsement; tie-in endorsement; future advances
endorsement; access coverage; tax parcel coverage; contiguity (if applicable)
coverage; and such other endorsements as Beneficiary shall reasonably require.
In the event that any Survey with respect to the Trust Property reveals any
encumbrances, restrictions, building code or zoning violations or other matters
which in Beneficiary's reasonable judgment, materially impair Beneficiary's
first priority lien in the Trust Property, Grantor agrees to cooperate with
Beneficiary in performing any acts reasonably requested by Beneficiary to cause
such encumbrances, restrictions, violations or other matters to be removed or
remedied as appropriate.
22. Reporting Requirements. Grantor agrees to give prompt notice to
Beneficiary of the insolvency or bankruptcy filing of Grantor. In addition,
Grantor will give notice to Beneficiary in writing not later than ten (10) days
after: (i) the occurrence of any Event of Default with respect to Grantor
hereunder, or (ii) notice to Grantor of any action,
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litigation or proceeding instituted to recover possession of the Trust Property
from Grantor or for any other purpose affecting this Deed of Trust or of any
other action, litigation or proceeding instituted against Grantor or judgment
rendered against Grantor; and such notice to Beneficiary shall include a true
copy of any notice of default, or if any action is then proceeding, copies of
any pleadings and papers received by Grantor.
23. Events of Default. The term "Event of Default" as used herein
shall mean the occurrence or happening, at any time and from time to time, of
one or more of the following events:
(a) a default or event of default under any of the Notes (including,
without limitation, any event of default described in Section 3 of any of the
Notes), which remains uncured following the expiration of any applicable cure
periods;
(b) Grantor (i) shall fail to perform when due any payment obligation
under the terms of this Deed of Trust or the other Relevant Documents within ten
days after such amount becomes due, or (ii) shall be in violation of any of the
obligations or covenants contained herein or therein and such default shall
continued unremedied for a period of thirty (30) days, provided that if such
default is not readily susceptible of cure in such thirty (30) day period, and
provided that Grantor proceeds in a diligent manner to cure such default,
Grantor shall have such additional time to effect such cure as shall be
reasonably necessary to effect such cure;
(c) Failure by Grantor to maintain insurance and deliver evidence
thereof pursuant to Section 10; or
(d) a default under any other mortgage, deed of trust or other
security instrument covering the Trust Property or a portion thereof which
remains uncured following the expiration of any applicable cure periods.
24. Remedies. (a) Upon the occurrence of any Event of Default,
Beneficiary may take such action or cause Trustee to take such action permitted
in law or at equity, without notice or demand, as it deems advisable to protect
and enforce its rights against Grantor and in and to the Trust Property, by
Beneficiary itself, or through Trustee or otherwise, including, but not limited
to, the following actions, each of which may be pursued concurrently or
otherwise, at such time and in such order as Beneficiary may determine, in its
sole discretion, without impairing or otherwise affecting the other rights and
remedies of Beneficiary:
(i) declare the entire principal amount of the indebtedness and
Obligations secured hereby with interest accrued thereon to be
immediately due and payable;
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(ii) institute a proceeding or proceedings, judicial or nonjudicial,
by advertisement or otherwise, for the complete foreclosure of this Deed
of Trust in which case the Trust Property or any interest therein may be
sold for cash or upon credit in one or more parcels or in several interests
or portions and in any order or manner in accordance with the laws of the
jurisdiction in which such Trust Property is located;
(iii) with or without entry, to the extent permitted, and pursuant to
the procedures provided by, applicable law, institute proceedings for the
foreclosure of this Deed of Trust for the Obligations then due and payable
subject to the continuing lien of this Deed of Trust, in accordance with
the laws of the jurisdiction in which such Trust Property is located. for
the balance of the Obligations not then due;
(iv) sell for cash or upon credit the Trust Property or any part
thereof and all estate, claim, demand, right, title and interest of Grantor
therein and rights of redemption thereof, pursuant to power of sale or
otherwise, at one or more sales, as an entirety or in parcels, at such time
and place, upon such terms and after such notice thereof as may be required
or permitted by the laws of the jurisdiction in which such Trust Property
is located;
(v) institute an action, suit or proceeding in equity for the
specific performance of any covenant, condition or agreement contained
herein or in the other Relevant Documents;
(vi) recover judgment on the Notes either before, during or after any
proceedings for the enforcement of this Deed of Trust;
(vii) prior to, concurrently with, or subsequent to the institution of
foreclosure proceedings, apply for the appointment of a trustee, receiver,
liquidator or conservator of the Trust Property, as a matter of strict
right, ex parte and without notice and without regard for the adequacy of
the security for the Obligations or the interest of the Grantor therein and
without regard for the solvency of the Grantor or of any person, firm or
other entity liable for the payment of the Obligations, and Grantor hereby
consents to such appointment;
(viii) prior to, concurrently with or subsequent to the institution of
foreclosure proceedings, enforce Beneficiary's interest in the Leases and
Rents and enter into or upon the Trust Property and take exclusive
possession thereof, either personally or by its agents, nominees or
attorneys and dispossess Grantor and its agents and servants therefrom, and
thereupon Beneficiary may (whether or not a receiver has been appointed) as
attorney-in-fact or agent of Grantor, or in its own name and under the
powers herein granted,(A) use, operate, manage, control, insure, maintain,
repair, restore and otherwise deal with all and every part of the Trust
Property and conduct the business thereat; (B) complete any
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construction on the Trust Property in such manner and form as Beneficiary
deems advisable; (C) make alterations, additions, renewals, replacements
and improvements to or on the Trust Property; (D) exercise all rights and
powers of Grantor with respect to the Trust Property, whether in the name
of Grantor or otherwise (including, without limitation, the right to make,
cancel, enforce or modify Leases, obtain and evict tenants, and demand, sue
for, collect and receive all earnings, revenues, rents, issues, profits and
other income of the Trust Property and every part thereof); and (E) apply
the receipts from the Trust Property to the payment of the Obligations,
after deducting therefrom all reasonable expenses (including, without
limitation, reasonable attorneys' fees) incurred in connection with the
aforesaid operations and all amounts necessary to pay the taxes,
assessments, insurance and other charges in connection with the Trust
Property, it being agreed that should Beneficiary incur any liability, loss
or damage in the defense of any claims or demands, the amount thereof,
including costs, expenses and reasonable attorneys' fees shall be secured
hereby, and Grantor shall reimburse Beneficiary therefor immediately upon
demand;
(ix) require Grantor to pay monthly in advance to Beneficiary,
or any receiver appointed to collect the Rents, the fair and reasonable
rental value for the use and occupation of any portion of the Trust
Property occupied by Grantor and require Grantor to vacate and surrender
possession to Beneficiary of the Trust Property or to such receiver and, in
default thereof, evict Grantor by summary proceedings or otherwise; and
(x) pursue such other rights and remedies as may be available under
the Relevant Documents or otherwise at law or in equity or under the
Uniform Commercial Code including the right to establish a lock box for all
Rents and other receivables of Grantor relating to the Trust Property.
In the event of a sale, by foreclosure or otherwise, of less than all of the
Trust Property, this Deed of Trust shall continue as a lien on the remaining
portions of the Trust Property.
The proceeds of any sale made under or by virtue of this Section 24,
together with any other sums which then may be held by Beneficiary under this
Deed of Trust, whether under the provisions of this Section or otherwise,
shall be applied by Beneficiary in the following order of priority: first, on
account of all reasonable costs and expenses incident to the foreclosure
proceedings, including all such items as are mentioned in this Section 24;
second, all other items which under the terms hereof constitute secured
indebtedness, which are any amounts due under this Deed of Trust, or under
the other Relevant Documents (including any amounts required to be escrowed
pursuant to Section 6(b)); third, any surplus to Grantor, its successors or
assigns, as their rights may appear.
(b) Upon any sale made under or by virtue of this Section 24,
whether made under the power of sale herein granted or under or by virtue of
judicial proceedings or of a
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judgment or decree of foreclosure and sale, Beneficiary may bid for and
acquire the Trust Property or any part thereof and in lieu of paying cash
therefor may make settlement for the purchase price by crediting upon the
Obligations the net sales price after deducting therefrom the expenses of the
sale and costs of the action and any other sums which Beneficiary is
authorized to deduct under this Deed of Trust.
(c) No recovery of any judgment by Beneficiary and no levy of an
execution under any judgment upon the Trust Property or upon any other
property of Grantor shall affect in any manner or to any extent the lien of
this Deed of Trust upon the Trust Property or any part thereof, or any liens,
rights, powers or remedies of Beneficiary hereunder, but such liens, rights,
powers and remedies of Beneficiary shall continue unimpaired as before.
(d) Beneficiary may adjourn, terminate or rescind any proceeding or
other action brought in connection with its exercise of the remedies provided
in this Section 24 at any time before the conclusion thereof, as determined
in Beneficiary's sole discretion and without prejudice to Beneficiary.
(e) Beneficiary may resort to any remedies and the security given
by this Deed of Trust or the other Relevant Documents in whole or in part,
and in such portions and in such order as determined by Beneficiary's sole
discretion. No such action shall in any way be considered a waiver of any
rights, benefits or remedies evidenced or provided by this Deed of Trust or
the other Relevant Documents. The failure of Beneficiary to exercise any
right, remedy or option provided in this Deed of Trust or the other Relevant
Documents shall not be deemed a waiver of such right, remedy or option or of
any covenant or obligation secured by this Deed of Trust or the other
Relevant Documents. Subject to the provisions of the Relevant Documents, no
acceptance by Beneficiary of any payment after the occurrence of any Event of
Default and no payment by Beneficiary of any obligation for which Grantor is
liable hereunder shall be deemed to waive or cure any Event of Default with
respect to Grantor, or Grantor's liability to pay such obligation. No sale
of all or any portion of the Trust Property, no forbearance on the part of
Beneficiary and no extension of time for the payment of the whole or any
portion of the Obligations or any other indulgence given by Beneficiary to
Grantor, shall operate to release or in any manner affect the interest of
Beneficiary in the remaining Trust Property or the liability of Grantor to
pay the Obligations. No waiver by Beneficiary shall be effective, unless it
is in writing and then only to the extent specifically stated.
(f) The interests and rights of Beneficiary under this Deed of
Trust and the other Relevant Documents, and the liens and security interests
created and evidenced by this Deed of Trust and the other Relevant Documents,
shall not be impaired by any indulgence, including (i) any renewal, extension
or modification which Beneficiary may grant with respect to any of the
Obligations, (ii) any surrender, compromise, release, renewal, extension,
exchange or substitution which Beneficiary may grant with respect to the
Trust Property or any portion thereof; or (iii) any release or indulgence
granted to any maker, endorser, guarantor or surety of any of the Obligations.
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(g) Upon the occurrence of any Event of Default under Section 23,
in any suit to foreclose the lien hereof or enforce any other remedy of
Beneficiary under this Deed of Trust, there shall be allowed and included as
additional indebtedness in the decree for sale or other judgment or decree
all reasonable expenditures and expenses which may be paid or incurred by or
on behalf of Beneficiary for attorneys' fees, appraiser's fees, outlays for
documentary and expert evidence, stenographers' charges, publication costs,
and costs (which may be estimated as to items to be expended after entry of
the decree) of procuring all such abstracts of title, title searches and
examinations, title insurance policies, Torrens certificates, and similar
data and assurances with respect to title as Beneficiary may deem reasonably
necessary either to prosecute such suit or to evidence to bidders at any sale
which may be had pursuant to such decree the true condition of the title to
or the value of the Trust Property. All such reasonable expenditures and
expenses which Beneficiary may incur as permitted by this Section for the
protection of the Trust Property and the maintenance of the lien of this Deed
of Trust, including, but not limited to, the fees and out-of-pocket
disbursements of any attorney employed by Beneficiary in any litigation or
proceeding affecting this Deed of Trust, including, but not limited to,
bankruptcy proceedings or preparations for the commencement or defense of any
proceeding or threatened suit or proceeding, shall be immediately due and
payable by Grantor and shall be secured by this Deed of Trust.
25. Right of Access. Grantor shall permit agents, representatives
and employees of Beneficiary to (i) inspect the Trust Property or any part
thereof, provided that such inspection does not materially interfere with the
tenants of the Trust Property or violate the terms of any Lease, (ii) to
examine and make abstracts from any of Grantor's books and records and (iii)
to discuss the business, operations, properties and financial and other
condition of Grantor with officers of Grantor and with its independent
certified public accountants, at such reasonable times as may be requested by
Beneficiary upon reasonable advance notice.
26. Security Agreement. This Deed of Trust is both a real property
deed of trust and a "security agreement" within the meaning of the Uniform
Commercial Code. The Trust Property includes both real and personal property
and all other rights and interests, whether tangible or intangible in nature,
of Grantor in the Trust Property. Grantor by executing and delivering this
Deed of Trust has granted and hereby grants to Beneficiary, as security for
the Obligations, a security interest in the Trust Property to the full extent
that the Trust Property may be subject to the Uniform Commercial Code (said
portion of the Trust Property so subject to the Uniform Commercial Code being
called in this paragraph the "Collateral"). Grantor hereby agrees with
Beneficiary to execute and deliver to Beneficiary, in form and substance
satisfactory to Beneficiary, such financing statements and such further
assurances as Beneficiary may from time to time, reasonably consider
necessary to create, perfect, and preserve Beneficiary's security interest
herein granted. All or part of the Trust Property is or is to become
"fixtures" as defined in the Uniform Commercial Code, and this Deed of Trust,
upon being filed for record in the real estate records of the city or county
wherein such fixtures are situated, shall also constitute a "fixture filing"
for the purposes of the Uniform Commercial Code upon such of the Trust
Property that is or may become
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fixtures. Information concerning the security interest herein granted may be
obtained from the parties at the addresses of the parties set forth in the
first paragraph of this Deed of Trust. Grantor's chief executive office and
principal place of business is the Grantor's address set forth in the first
paragraph of this Deed of Trust, and the place where Grantor's books and
records in respect of where the Trust Property is located are kept is the
address of Grantor set forth in the first paragraph of this Deed of Trust.
If an Event of Default shall occur which shall remain uncured, Beneficiary,
in addition to any other rights and remedies which it may have, shall have
and may exercise immediately and without demand, any and all rights and
remedies granted to a secured party upon default under the Uniform Commercial
Code, (including, without limitation, to the extent permitted by law, the
right to take possession of the Collateral or any part thereof, and to take
such other measures as Beneficiary may deem necessary for the care,
protection and preservation of the Collateral). Upon request or demand of
Beneficiary or Trustee, Grantor shall at its expense assemble the Collateral
and make it available to Beneficiary at a convenient place acceptable to
Beneficiary. Grantor shall pay to Beneficiary on demand therefor any and all
reasonable expenses (including, without limitation, reasonable legal expenses
and attorneys' fees) incurred or paid by Beneficiary in protecting the
interest in the Collateral and in enforcing the rights hereunder with respect
to the Collateral. Any notice of sale, disposition or other intended action
by Beneficiary with respect to the Collateral sent to Grantor at least ten
(10) business days prior to such action or such notice as is otherwise
required by law or the Relevant Documents, shall constitute commercially
reasonable notice to Grantor. The proceeds of any disposition of the
Collateral, or any part thereof, may be applied by Beneficiary to the payment
of the Obligations in such priority and proportions as Beneficiary shall
determine in its sole discretion. In the event of any change in name,
identity or structure of Grantor, Grantor shall notify Beneficiary thereof
and, promptly after request, shall execute, file and record such Uniform
Commercial Code forms as are necessary to maintain the priority of
Beneficiary's lien upon and security interest in the Collateral, and shall
pay all expenses and fees in connection with the filing and recording
thereof. If Beneficiary shall require the filing or recording of additional
Uniform Commercial Code forms or continuation statements, Grantor shall,
promptly after request, execute, file and record such Uniform Commercial Code
forms or continuation statements as Beneficiary shall deem necessary, and
shall pay all expenses and fees in connection with the filing and recording
thereof, it being understood and agreed, however, that no such additional
documents shall materially increase Grantor's obligations under this Deed of
Trust or the other Relevant Documents. Grantor hereby irrevocably appoints
Beneficiary as its attorney-in-fact, coupled with an interest, to file with
the appropriate public office on its behalf any UCC financing statements (or
related documents) signed only by Beneficiary, as secured party, in
connection with the Collateral covered by this Deed of Trust, such
appointment to terminate upon the release of this Deed of Trust.
27. Actions and Proceedings. Beneficiary has the right to
appear in and defend any action or proceeding brought with respect to the
Trust Property and to bring any action or proceeding, in the name and on behalf
of Grantor, which Beneficiary, in its reasonable discretion, decides should be
brought to protect its interest under this Deed of Trust or in the Trust
Property. Subject to the foregoing, Grantor shall appear in and contest any
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action or proceeding purporting to affect the security hereof and shall pay
all reasonable costs and expenses including cost of evidence of title and
attorney's fees, in any such action or proceeding in which Beneficiary may
appear. Beneficiary shall, at its option, be subrogated to the lien of any
mortgage or other security instrument discharged in whole or in part by the
Obligations, and any such subrogation rights shall constitute additional
security for the payment of the Obligations.
28. Waiver of Setoff and Counterclaim. Except as may be permitted
under the Relevant Documents, all amounts due under this Deed of Trust, the
Notes and the other Relevant Documents shall be payable without setoff or
counterclaim whatsoever.
29. Liens. Grantor warrants, covenants and agrees to pay and
promptly discharge, at Grantor's cost and expense, all taxes, assessments and
governmental charges levied upon it, its income and assets as and when such
taxes, assessments and charges are due and payable (including, without
limitation, all Impositions), as well as all lawful claims for labor
materials and supplies or otherwise which could become a lien, and all liens,
encumbrances and charges upon the Trust Property, or any part thereof or
interest therein; provided that the existence of any mechanic's, laborer's,
materialman's, supplier's or vendor's lien or right thereto shall not
constitute a violation of this Section if payment is not yet due under the
contract which is the foundation thereof. Notwithstanding the foregoing,
Grantor shall not be in default for failure to pay or discharge Impositions
or mechanic's or materialman's or similar lien asserted against the Trust
Property if, and so long as, (a) Grantor shall have notified Beneficiary of
same within seven (7) days of obtaining knowledge thereof; (b) Grantor shall
diligently and in good faith contest the same by appropriate legal
proceedings which shall operate to prevent the enforcement or collection of
the same and the sale of the Trust Property or any part thereof, to satisfy
the same; (c) unless funds are otherwise reserved, Grantor shall furnish to
Beneficiary such security as Beneficiary may reasonably request to insure
payment of such Impositions and to secure and indemnify Beneficiary against
any cost, expense, loss or damage in connection with such contest or
postponement of payment, (d) Grantor shall timely upon final determination
thereof pay the amount of any such Impositions, claim, fine or penalty so
determined, together with all costs, interest and penalties which may be
payable in connection therewith; (e) the failure to pay the Impositions, or
mechanic's or materialman's or similar lien claim does not constitute a
default under any other deed of trust, mortgage or security interest covering
or affecting any part of the Trust Property; and (f) notwithstanding the
foregoing, Grantor shall immediately upon request of Beneficiary pay (and if
Grantor shall fail so to do, Beneficiary may, but shall not be required to,
pay or cause to be discharged or bonded against) any such Impositions, or
claim notwithstanding such contest, if in the reasonable opinion of
Beneficiary, the Trust Property or any part thereof or interest therein may
be in imminent danger of being sold, forfeited, foreclosed, terminated,
canceled or lost.
30. Recovery of Sums Required to Be Paid. Beneficiary shall have
the right from time to time to take action to recover any sum or sums
which constitute a part of the Obligations as the same become due and
owing, without regard to whether or not the balance
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of the Obligations shall be due, and without prejudice to the right of
Beneficiary thereafter to bring an action of foreclosure, or any other
action, for a default or defaults by Grantor existing at the time such
earlier action was commenced.
31. Marshaling, Waiver of Redemption and Other Matters. Grantor
hereby waives, to the extent permitted by law, the benefit of all
appraisement, valuation, stay, extension, reinstatement, moratorium and
redemption laws now or hereafter in force and all rights of marshaling in the
event of any sale hereunder of the Trust Property or any part thereof or any
interest therein. Further, Grantor hereby expressly waives any and all rights
of redemption from sale under any order or decree of foreclosure of this Deed
of Trust on behalf of Grantor, and on behalf of each and every person
acquiring any interest in or title to the Trust Property subsequent to the
date of this Deed of Trust and on behalf of all persons to the extent
permitted by applicable law.
32. Notice. Any notice which either party hereto may desire or be
required to give to the other party shall be in writing and delivered by: (x)
a commercial courier or messenger service or (y) by U.S. registered or
certified mail with return receipt requested. Notice by commercial messenger
or courier service will be deemed to have been given on the day when
delivered before 4:00 p.m. on a business day in the city in which notice is
delivered, provided that payment for the cost of delivery is not requested of
the recipient. Notice by mail shall be given by registered or certified U.S.
Mail, return receipt requested. Delivery of notice by commercial messenger
or courier service or mail shall be assumed if acceptance of delivery is
refused. Notice may be given by fax but will only be treated as delivered
hereunder if: (x) sent between the hours of 9:00 a m. and 5:00 p.m. (based
on local time at the destination); and (y) receipt is acknowledged by fax and
delivery will be deemed to have been given on the date the fax acknowledgment
is sent. Notices shall be delivered as follows or at such other place as
either party hereto may by notice in writing (given in accordance with this
Section 32) designate:
To Grantor: Discovery Zone, Inc.
One Corporate Center
110 East Broward Boulevard
Fort Lauderdale, Florida 33301
Attn: President
Telecopy Number: (954) 627-2670
To Beneficiary: McDonald's Corporation
One McDonald's Plaza
Oak Brook, IL 60523
Attn: General Counsel
Telecopy Number: (630) 623-3000
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33. Sole Discretion of Beneficiary. Wherever pursuant to this Deed
of Trust, Beneficiary exercises any right given to it to approve or
disapprove, or any arrangement or term is to be satisfactory to Beneficiary,
the decision of Beneficiary to approve or disapprove or to decide that
arrangements or terms are satisfactory or not satisfactory shall be in the
sole discretion of Beneficiary and shall be final and conclusive, except as
may be otherwise expressly and specifically provided herein.
34. Non-Waiver. The failure of Beneficiary to insist upon strict
performance of any term hereof shall not be deemed to be a waiver of any term
of this Deed of Trust. Grantor shall not be relieved of Grantor's
Obligations hereunder by reason of (a) the failure of Beneficiary to comply
with any request of Grantor to take any action to foreclose this Deed of
Trust or otherwise enforce any of the provisions hereof or of the other
Relevant Documents, (b) the release, regardless of consideration, of the
whole or any part of the Trust Property, or of any person liable for the
Obligations or any portion thereof, or (c) any agreement or stipulation by
Beneficiary extending the time of payment or otherwise modifying or
supplementing the terms of this Deed of Trust or the other Relevant
Documents. Beneficiary may resort for the payment of the Obligations to any
other security held by Beneficiary in such order and manner as Beneficiary,
in its discretion, may elect. Beneficiary may take action to recover the
Obligations, or any portion thereof, or to enforce any covenant hereof
without prejudice to the right of Beneficiary thereafter to foreclosure this
Deed of Trust. The rights and remedies of Beneficiary under this Deed of
Trust shall be separate, distinct and cumulative and none shall be given
effect to the exclusion of the others. No act of Beneficiary shall be
construed as an election to proceed under any one provision herein to the
exclusion of any other provision. Beneficiary shall not be limited
exclusively to the rights and remedies herein stated but shall be entitled to
every right and remedy now or hereafter afforded at law or in equity.
35. No Oral Change. This Deed of Trust and the other Relevant
Documents constitute the final expression of the entire agreement among the
parties pertaining to the subject matter hereof and thereof and supersede all
prior and contemporaneous agreements, understanding, representations or other
arrangements, whether express or implied, written or oral, of the parties in
connection herewith or therewith except to the extent expressly incorporated
or specifically referred to herein or therein. This Deed of Trust, and any
provisions hereof, may not be modified, amended, waived, extended, changed,
discharged or terminated orally or by any act or failure to act on the part
of Grantor or Beneficiary, but only by an agreement in writing signed by the
party against whom enforcement of any modification, amendment, waiver,
extension, change, discharge or termination is sought.
36. Successors and Assigns. Subject to the provisions hereof
requiring Beneficiary's consent to any transfer of the Trust Property, this
Deed of Trust shall be binding upon and inure to the benefit of Grantor and
Beneficiary and their respective permitted successors and assigns forever.
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37. Severability. If any term, covenant or condition of this Deed
of Trust or the Relevant Documents is held to be invalid, illegal or
unenforceable in any respect, this Deed of Trust and any such other Relevant
Document shall be construed without such provision.
38. Headings, etc. The headings and captions of various
paragraphs of this Deed of Trust are for convenience of reference only and
are not to be construed as defining or limiting, in any way, the scope or
intent of the provisions hereof.
39. Duplicate Originals. This Deed of Trust may be executed in any
number of duplicate originals and each such duplicate original shall be
deemed to be an original.
40. Definitions. Unless the context clearly indicates a contrary
intent or unless otherwise specifically provided herein, words used in this
Deed of Trust may be used interchangeably in singular or plural form and the
word "Grantor" shall mean "each Grantor and any subsequent owner or owners of
the Trust Property or any part thereof or any interest therein," the word
"Beneficiary" shall mean "Beneficiary and any subsequent holder(s) of the
Notes," the word "person" shall include an individual, corporation,
partnership, trust, unincorporated association, government, governmental
authority, and any other entity, and the words "Trust Property" shall include
any portion of the Trust Property and any interest therein and the words
"attorneys' fees" shall include any and all attorneys' fees, paralegal and
law clerk fees (including, without limitation, fees at the pre-trial, trial
and appellate levels incurred or paid by Beneficiary in protecting its
interest in the Trust Property and Collateral and enforcing its rights
hereunder and all such fees incurred in connection with any bankruptcy or
insolvency proceedings). Whenever the context may require, any pronouns used
herein shall include the corresponding masculine, feminine or neuter forms,
and the singular form of nouns and pronouns shall include the plural and vice
versa.
41. Homestead. Grantor hereby waives and renounces all homestead
and exemption rights provided by the constitution and the laws of the United
States and of any state, in and to the Land as against the collection of the
Obligations, or any part hereof.
42. Assignments. Consistent with and subject to the applicable
provisions of the Relevant Documents, Beneficiary shall have the right to
assign or transfer its rights under this Deed of Trust without limitation.
Any Beneficiary or transferee shall he entitled to all the benefits afforded
Beneficiary under this Deed of Trust.
43. Waiver of Jury Trial. TO THE MAXIMUM EXTENT PERMITTED BY
APPLICABLE LAW, EACH PARTY HERETO HEREBY AGREES NOT TO ELECT A TRIAL BY JURY
OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY JURY
FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH
REGARD TO THE NOTES, THIS DEED OF TRUST, OR THE OTHER RELEVANT DOCUMENTS, OR
ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH.
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THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY
SUCH PARTY, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH
ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE.
BENEFICIARY IS HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY
PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY GRANTOR.
44. Consent to Jurisdiction. GRANTOR AND BENEFICIARY HERETO
CONSENT FOR THEMSELVES AND IN RESPECT OF THEIR PROPERTIES, GENERALLY,
UNCONDITIONALLY AND IRREVOCABLY, TO THE NONEXCLUSIVE JURISDICTION OF THE
FEDERAL AND STATE COURTS IN THE STATE OF NEW YORK WITH RESPECT TO ANY
PROCEEDING RELATING TO ANY MATTER, CLAIM OR DISPUTE ARISING UNDER THE
RELEVANT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY. GRANTOR FURTHER
CONSENTS, GENERALLY, UNCONDITIONALLY AND IRREVOCABLY, TO THE NONEXCLUSIVE
JURISDICTION OF THE STATE AND FEDERAL COURTS OF THE STATE IN WHICH ANY OF THE
COLLATERAL IS LOCATED IN RESPECT OF ANY PROCEEDING RELATING TO ANY MATTER,
CLAIM OR DISPUTE ARISING WITH RESPECT TO SUCH COLLATERAL. GRANTOR FURTHER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS, GENERALLY, UNCONDITIONALLY
AND IRREVOCABLY, AT THE ADDRESSES SET FORTH IN THE FIRST PARAGRAPH HEREOF IN
CONNECTION WITH ANY OF THE AFORESAID PROCEEDINGS IN ACCORDANCE WITH THE RULES
APPLICABLE TO SUCH PROCEEDINGS. TO THE EXTENT PERMITTED BY APPLICABLE LAW,
GRANTOR HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW HAVE OR HAVE
IN THE FUTURE TO THE LAYING OF VENUE IN RESPECT OF ANY OF THE AFORESAID
PROCEEDINGS BROUGHT IN THE COURTS REFERRED TO ABOVE AND AGREES NOT TO PLEAD
OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY
SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTHING HEREIN SHALL
AFFECT THE RIGHT OF BENEFICIARY TO SERVE PROCESS IN ANY MANNER PERMITTED BY
LAW OR TO COMMENCE PROCEEDINGS OR OTHERWISE PROCEED AGAINST GRANTOR IN ANY
JURISDICTION.
45. Governing Law. This Deed of Trust shall be governed by and
construed in accordance with the laws of the State of New York including,
without limitation, Section 5-1401 of the General Obligations Law, but
otherwise without regard to conflict of law principles; provided, however,
that with respect to the creation, attachment, perfection, priority and
procedures relating to the enforcement of the liens and security interests
created by or pursuant to this Deed of Trust and relating to real property,
this Deed of Trust shall be governed by and construed in accordance with the
laws of the state in which the Land is located.
31
<PAGE>
46. Lien Absolute, Multi-site Real Estate and Multiple Collateral
Transaction. Grantor acknowledges that this Deed of Trust and a number of
other Relevant Documents and those documents required by the Relevant
Documents together secure the Obligations. Grantor agrees that the lien of
this Deed of Trust and all obligations of the Grantor hereunder shall be
absolute and unconditional and shall not in any manner be affected or
impaired by:
(a) any lack of validity or enforceability of the Notes or any
other Relevant Document, any agreement with respect to any of the Obligations
or any other agreement or instrument relating to any of the foregoing;
(b) any acceptance by Beneficiary of any security for or guarantees
of any of the indebtedness hereby secured;
(c) any failure, neglect or omission on the part of Beneficiary to
realize upon or protect any of the indebtedness hereby secured or any of the
collateral security therefor, including the Relevant Documents;
(d) any change in the time, manner or place of payment of, or in
any other term of, all or any of the Obligations;
(e) any release (except as to the property or obligation released),
sale, pledge, surrender, compromise, settlement, nonperfection, renewal
extension, indulgence, alteration, exchange, modification or disposition of
any of the Obligations hereby secured or of any of the collateral security
therefor;
(f) any amendment or waiver of or any consent to any departure from
the Notes or any other Relevant Documents or of any guaranty thereof (except
to the extent of such amendment, waiver or consent in writing by
Beneficiary), if any, and Beneficiary may in its discretion foreclose,
exercise any power of sale, or exercise any other remedy available to it
under any or all of the Relevant Documents without first exercising or
enforcing any of its rights and remedies hereunder; and
(g) any exercise of the rights or remedies of Beneficiary hereunder
or under any or all of the Relevant Documents.
Grantor specifically consents and agrees that Beneficiary may exercise its
rights and remedies hereunder and under the other Relevant Documents
separately or concurrently and in any order that Beneficiary may deem
appropriate.
47. Future Advances. This Deed of Trust shall secure not only
existing indebtedness, but also such future advances, whether such advances
are obligatory or are to be made at the option of Beneficiary, or otherwise,
as are made by Beneficiary to Grantor after the date hereof, to the same
extent as if such future advances were made on the date of the
32
<PAGE>
execution of this Deed of Trust. Nothing in this Deed of Trust shall be
deemed an obligation on the part of the Beneficiary to make any future
advances.
48. State Specific Provisions. The provisions of Exhibit B are
hereby incorporated by reference as though set forth in full herein.
49. No Merger of Estates. It is the intention and agreement of
Grantor and Beneficiary that there shall be no merger of any leasehold estate
in the Trust Property with the fee interest in the Trust Property or any
other estate or interest in the Trust Property, and there shall be no merger
of this Deed of Trust and any estate in the Trust Property, by reason of the
fact that the same person may own or hold (a) any leasehold interest in the
Trust Property, and/or (b) this Deed of Trust, and/or (c) the fee interest in
the Trust Property or any other estate or interest in the Trust Property.
50. Concerning the Trustee. Trustee shall be under no duty to take
any action hereunder except as expressly required hereunder or by law, or to
perform any act which would involve Trustee in any expense or liability or to
institute or defend any suit in respect hereof, unless properly indemnified
to Trustee's reasonable satisfaction. Trustee, by acceptance of this Deed of
Trust, covenants to perform and fulfill the trusts herein created, being
liable, however, only for willful negligence or misconduct.
51. Trustee's Fees. Grantor shall pay all reasonable costs, fees
and expenses incurred by Trustee and Trustee's agents and counsel in
connection with the performance by Trustee of Trustee's duties hereunder and
all such costs, fees and expenses shall be secured by this Deed of Trust.
TRUSTEE SHALL BE INDEMNIFIED, HELD HARMLESS AND REIMBURSED BY GRANTOR FOR ANY
LIABILITY, DAMAGE OR EXPENSE, INCLUDING REASONABLE ATTORNEYS' FEES AND
AMOUNTS PAID IN SETTLEMENT, WHICH TRUSTEE MAY INCUR OR SUSTAIN IN CONNECTION
WITH THIS DEED OF TRUST OR IN THE DOING OF ANY ACT WHICH TRUSTEE IS REQUIRED
OR PERMITTED TO DO BY THE TERMS HEREOF OR BY LAW (EXCEPT TO THE EXTENT
ARISING FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF TRUSTEE), AND
SHALL BE REIMBURSED THEREFOR UPON DEMAND.
52. Subordinate Lien. Notwithstanding anything to the contrary
contained herein, Grantor shall be permitted to grant a subordinate lien on
the Trust Property in favor of State Street Bank and Trust Company, solely in
its capacity as trustee and collateral agent under and pursuant to the
Indenture (as hereinafter defined) (the "Subordinated Creditor") as security
for the obligations of Grantor under that certain Indenture between Grantor
and the Subordinated Creditor dated as of July 22, 1997 (the "Indenture"),
provided that such lien in favor of the Subordinated Creditor is junior,
subject and subordinate to the lien of this Deed of Trust in accordance with
and pursuant to the terms and conditions set forth in that certain
Subordination Agreement dated as of the date hereof between Beneficiary and
the Subordinated Creditor with respect to the Trust Property (the
"Subordinated Agreement"), and provided,
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<PAGE>
further, that any event which gives the Subordinated Creditor the right to
accelerate the obligations secured by such subordinate lien shall
automatically constitute an Event of Default hereunder.
[Remainder of page intentionally left blank; signature and notary pages follow.]
34
<PAGE>
Grantor has executed this instrument as of the day and year first above written.
GRANTOR:
DISCOVERY ZONE, INC.,
a Delaware corporation, as successor in
interest to LEAPS & BOUNDS, INC.
By: /s/ Robert Rooney
-------------------------
Name: Robert Rooney
Its: Sr. V.P.
<PAGE>
STATE OF NEW YORK )
COUNTY OF WESTCHESTER)
This instrument was acknowledged before me this 28th day of July,
1997, by Robert Rooney as Sr. V.P. of Discovery Zone, Inc., a Delaware
corporation, on behalf of said corporation.
WITNESS my hand and official seal.
My Commission Expires:
/s/ Mark D. Woodward
- ---------------- ----------------------------
Notary Public
[NOTARIAL SEAL]
Commission Expires June 15, 1998
<PAGE>
Denver
Douglas County, Colorado
EXHIBIT A
LOT 1,
BLOCK 1,
PARKWAY SUBDIVISION FILING NO. 1,
COUNTY OF DOUGLAS
STATE OF COLORADO
<PAGE>
EXHIBIT B
STATE SPECIFIC PROVISIONS (Colorado)
The following provisions are incorporated by reference into Section
48 of the attached Deed of Trust. If any conflict or inconsistency exists
between this Exhibit B and the remainder of the attached Deed of Trust, this
Exhibit B shall govern.
A. Special Foreclosure Provisions. Notwithstanding anything to
the contrary contained in Section 24 hereof, Beneficiary may foreclose this
Deed of Trust either by judicial action or through Trustee. Foreclosure
through Trustee will be initiated by Beneficiary's filing of its notice of
election and demand for sale with Trustee. Upon the filing of such notice of
election and demand for sale, Trustee shall promptly comply with all notice
and other requirements of the laws of Colorado then in force with respect to
such sales, and shall give four weeks' public notice of the time and place of
such sale by advertisement weekly in some newspaper of general circulation
then published in the county or city and county in which the Land is located.
Any sale conducted by Trustee pursuant to this paragraph shall be held at
the front door of the county courthouse for such county or city and county,
or on the Land, or at such other place as similar sales are then customarily
held in such county or city and county, provided that the actual place of
sale shall be specified in the notice of sale. In any such sale, it shall
and may be lawful for the Trustee to sell and dispose of the Trust Property
en masse or in separate parcels, as the Trustee may think best.
All fees, costs and expenses of any kind incurred by Beneficiary in
connection with foreclosure of this Deed of Trust, including, without
limitation, the costs of any appraisals of the Land obtained by Beneficiary,
all costs of any receivership for the Land advanced by Beneficiary, all costs
of any environmental audits or tests incurred by Beneficiary and all
attorneys' and consultants' fees incurred by Beneficiary, shall constitute a
part of the Obligations and may be included as part of the amount owing from
Grantor to Beneficiary at any foreclosure sale. The proceeds of any sale
under this paragraph shall be applied first to the fees and expenses of the
officer conducting the sale, and then as set forth in Section 24(a) of this
Deed of Trust. At the conclusion of any foreclosure sale, the officer
conducting the sale shall execute and deliver to the purchaser at the sale a
certificate of purchase which shall describe the property sold to such
purchaser and shall state that upon the expiration of the applicable periods
for redemption, the holder of such certificate will be entitled to a deed to
the property described in the certificate. After the expiration of all
applicable periods of redemption, unless the property sold has been redeemed
by Grantor, the officer who conducted such sale shall, upon request, execute
and deliver an appropriate deed to the holder of the certificate of purchase
or the last certificate of redemption, as the case may be. Nothing in this
paragraph dealing with foreclosure procedures or specifying particular
actions to be taken by Beneficiary or by Trustee or any similar officer shall
be deemed to contradict or add to the requirements and procedures now or
hereafter specified by Colorado law, and any such inconsistency shall be
resolved in favor of Colorado law applicable at the time of foreclosure.
<PAGE>
B. Non-Agricultural Use. The Land encumbered by this Deed of
Trust is not used principally or primarily for agricultural or farming
purposes.
C. Maximum Amount Secured by this Deed of Trust. The portion of
the Obligations which shall be secured by this Deed of Trust shall be limited
to an amount equal to $6,000,000.
<PAGE>
SCHEDULE A
DESCRIPTION OF ORIGINAL DEED OF TRUST
<TABLE>
<S> <C> <C> <C> <C>
Property Recording Office Book Page Recording Date
-------- ---------------- ---- ---- --------------
Littleton, CO Office of the Recorder of the County 1218 420 9/12/94
of Douglas, CO
</TABLE>
<PAGE>
Exhibit 4.43
- --------------------------------------------------------------------------------
Space above this line for recorder's use
DOCUMENT PREPARED BY AND
AFTER RECORDING RETURN TO:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attention: Jonathan A. Reiss, Esq.
SUBORDINATION AGREEMENT
AGREEMENT made as of the 29th day of July, 1997, by and among STATE
STREET BANK AND TRUST COMPANY, solely in its capacity as trustee and
collateral agent under and pursuant to the Subordinated Creditor Indenture
(as hereinafter defined) with an address at Two International Place, Boston,
Massachusetts 02110, Attention: Corporate Trust Department, Mary Lee Storrs,
Vice President (the "Subordinated Creditor"), MCDONALD'S CORPORATION, a
Delaware corporation, with an address at McDonald's Plaza, Oak Brook,
Illinois 60523, Attention: General Counsel ("McDonald's") and DISCOVERY ZONE,
INC., a Delaware corporation, successor by merger to Leaps & Bounds, Inc.,
having its principal place of business at One Corporate Center, 110 East
Broward Boulevard, Fort Lauderdale, Florida 33301 ("Borrower").
W I T N E S S E T H:
RECITALS
A. WHEREAS, Borrower is the successor in interest to Discovery Zone,
Inc., a Delaware corporation and debtor and debtor in possession ("Old DZI"),
and Old DZI's affiliated debtors and debtors in possession including Leaps &
Bounds, Inc. (the "Debtors"),
[FOREST PARK, OHIO PROPERTY]
<PAGE>
all in the chapter 11 proceedings captioned In re Discovery Zone, Inc., et al.,
Case No. 96-411 (HSB) (Jointly Administered), before the United States
Bankruptcy Court for the District of Delaware (the "Bankruptcy Court"); and
B. WHEREAS, pursuant to an Agreement and Plan of Merger, dated as of
August 30, 1994 (the "Merger Agreement"), by and among Old DZI, and two of the
Debtors, Discovery Zone International, Inc. and Leaps & Bounds, Inc. on the one
hand, and McDonald's on the other hand, and related documentation, McDonald's
was or is the sublessor to Leaps & Bounds, Inc. of certain properties, and Old
DZI agreed to defend, indemnify and hold McDonald's and its affiliates harmless
in respect of all expenses, losses, costs, deficiencies, liabilities and damages
(including related and reasonable counsel fees and expenses, and compensatory
and demonstrable consequential damages) incurred or suffered by McDonald's as a
direct result of, inter alia, any breach that results in any payment by
McDonald's in connection with any guarantee by McDonald's relating to such
properties (the "Agreement to Indemnify"); and
C. WHEREAS, On November 18, 1996, the Bankruptcy Court entered the
Stipulation and Order Between Debtors and McDonald's Corporation Providing for
the Resolution, Settlement and Compromise of Disputes and for Rent Deferrals and
Allowance of Certain Claims (the "Stipulation and Order"), pursuant to which,
inter alia, the Debtors assumed certain subleases relating to properties
subleased by McDonald's to the Debtors pursuant to 11 U.S.C. Section 365 as to
which the Agreement to Indemnify remains in full force and effect, the
Bankruptcy Court approved the allowance of certain claims of McDonald's,
including those claims based on the Agreement to Indemnify, and the Bankruptcy
Court approved the validity, perfection, priority and enforceability of certain
claims and liens of McDonald's against the Debtors, including, without
limitation, the validity, perfection, priority and enforceability of the Senior
Mortgages (as defined below) and the Stipulation and Order was not appealed or
otherwise challenged and remains in full force and effect; and
D. WHEREAS, pursuant to the plan of reorganization for Old DZI and
its affiliated debtors confirmed by the Bankruptcy Court by order entered July
18, 1997 (the "Plan"), and as required by the terms of the Stipulation and
Order, Borrower, as the reorganized successor of the Debtors, is obligated to
issue to McDonald's Secured Rent Deferral Notes in the aggregate original
principal amount of $266,466.24, which amount is subject to increase each month
in accordance with the terms thereof (the "Senior Secured Rent Deferral Notes,"
and individually a "Senior Secured Rent Deferral Note") and Secured Rejection
Note in the aggregate original principal amount of $4,416,237.90 (the "Senior
Secured Rejection Note"); and
E. WHEREAS pursuant to the terms and conditions of the Stipulation
and Order, the Plan, the Agreement to Indemnify, the Senior Secured Rejection
Note and the Senior Secured Rent Deferral Notes and any related documentation
(the "McDonald's Documentation"), the repayment and performance of the
obligations of Borrower to McDonald's under the McDonald's Documentation
(including any contingent obligations under
2
<PAGE>
the Agreement to Indemnify, the Stipulation and Order, including Section 7
thereof and otherwise) (the "Senior Obligations") is secured by certain
amended and restated first priority mortgages, deeds of trust and/or deeds to
secure debt described on Exhibit A attached hereto and made a part hereof
(collectively, including all modifications, extensions and additions thereto,
the "Senior Mortgages," and individually, a "Senior Mortgage"), including the
Senior Mortgage identified by the recording information set forth in Exhibit
A-1, reaffirming and creating, to the extent necessary, valid and perfected
first priority liens on the real properties described on Exhibit B attached
hereto and made a part hereof, and other collateral described in the Senior
Mortgages (collectively, the "Real Properties," and individually, a "Real
Property"); and
F. WHEREAS, Borrower and the Subordinated Creditor entered into an
Indenture, dated July 22, 1997 (the "Subordinated Creditor Indenture") and
certain other documents and instruments related thereto, pursuant to which and
upon the terms and conditions therein indebtedness and other obligations were
incurred by the Borrower (the "Subordinated Indenture Indebtedness"), the
repayment and performance of which are secured by, among other things, certain
subordinated mortgages, deeds of trust and/or deeds to secure debt described on
Exhibit C hereto and made a part hereof (collectively, including all
modifications, extensions and additions thereto, the "Subordinated Mortgages,"
and individually, a "Subordinated Mortgage"), including the Subordinated
Mortgage identified by the recording information set forth in Exhibit C-1,
creating valid and perfected liens on the Real Properties subordinate to the
Senior Mortgages; and
G. WHEREAS, pursuant to the Senior Mortgages, the Borrower cannot
grant a subordinated lien on any of the Real Properties without the express
approval of McDonald's and the Subordinated Indenture Indebtedness will not be
able to be issued without the agreement of McDonald's to permit the issuance of
the Subordinated Mortgages; and
H. WHEREAS, McDonald's approval of the Borrower's granting of the
Subordinated Mortgages is conditioned on the entry into this Subordination
Agreement by the Subordinated Creditor, which hereby warrants and represents
that it has full power and authority under the Subordinated Creditor Indenture
to enter into this Subordination Agreement on behalf of all holders of any
securities or obligations whatsoever issued pursuant to the Subordinated
Creditor Indenture; and
I. WHEREAS, the Subordinated Creditor and McDonald's each desire to
enter into this Subordination Agreement to confirm the subordination of the
liens of the Subordinated Mortgages to the liens of the Senior Mortgages in
accordance with the terms of this Agreement;
NOW THEREFORE, IN CONSIDERATION OF THE MUTUAL BENEFITS accruing to the
parties hereto, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
3
<PAGE>
1. Consent. Pursuant and subject to the other terms of this
Agreement, McDonald's consents to the Subordinate Mortgages. This consent
shall not be deemed to (i) be a consent to any future encumbrances, (ii) be a
waiver of the limitation on future encumbrances contained in the Senior
Mortgages, (iii) be a consent to or waiver of any other term or condition of
the Senior Mortgages or (iv) prejudice any right or rights which McDonald's
may now or in the future have under or in connection with the Senior
Mortgages.
2. Priority of McDonald's.
(a) Subordination. The Subordinated Creditor hereby agrees for
itself and its successors and assigns that, except as otherwise expressly
provided herein, the terms, provisions and liens of the Subordinated Mortgages,
and any of the Subordinated Creditor's liens or security interests in the Real
Properties (but only to the extent of McDonald's interest in such Real
Properties), are hereby intentionally and unconditionally subordinated to, and
at all times shall be junior, subject and subordinate to the terms, provisions
and liens of the Senior Mortgages (including, without limitation, the liens
securing future optional and/or obligatory increases in the amount of the Senior
Obligations or advances by McDonald's to or for the benefit of the Borrower,
regardless of the use to which such advances are put), as well as to any and all
increases therein and all extensions, consolidations, modifications, renewals,
refinancings and supplements thereto. The Subordinated Creditor hereby waives
any right it may have to require that McDonald's marshal any assets of the
Borrower in favor of the Subordinated Creditor and the Subordinated Creditor
agrees that it shall not acquire, by subrogation or otherwise, any lien, estate,
right or other interest in the Real Properties which is or may be prior or
superior in right to the Senior Mortgages, including but not limited to advances
for real estate taxes and assessments. The rights and priorities set forth in
this Paragraph 2(a) shall be effective notwithstanding the order of creation,
attachment, vesting or perfection of the rights of McDonald's under the Senior
Mortgages, or of the Subordinated Creditor under the Subordinated Mortgages, the
Subordinated Creditor Indenture or any other documents executed in connection
therewith (including, without limitation, any UCC-1 financing statements or
fixture filings). The Subordinated Creditor shall be deemed to have consented
(i) to any action by Borrower to which McDonald's consents pursuant to the
Senior Mortgages and (ii) to each act of, or failure to act by, the Borrower
that is not prohibited by the Senior Mortgages, provided that, both with respect
to (i) and (ii), such deemed consent is applicable only to acts or failures to
act in connection with the sale, construction, restoration, insurance,
condemnation or alterations of, to or on, or with respect to the Real Properties
and any other matters relating to the Real Properties.
(b) Insurance; Condemnation Awards. The Subordinated Creditor
hereby assigns and releases unto McDonald's, until payment in full of the
Senior Obligations:
(i) all of its right, title, interest or claim, if any, in
and to the proceeds of all policies of insurance
covering the Real Properties, for application in
accordance with the provisions of the Senior Mortgages
or as the Borrower and McDonald's may otherwise agree;
and
4
<PAGE>
(ii) all of its right, title and interest or claim, if any,
in and to all awards or other compensation made for any
taking of any part of the Real Properties for
application in accordance with the provisions of the
Senior Mortgages or as the Borrower and McDonald's may
otherwise agree.
All such insurance proceeds or awards which may become due and
payable to the Subordinated Creditor shall be payable directly to McDonald's,
and the Subordinated Creditor directs any insurance company or governmental
authority to make payment thereof directly to McDonald's for application in
accordance with the Senior Mortgages. In the event that any such insurance
proceeds or awards are made payable to the Subordinated Creditor despite such
direction, the Subordinated Creditor shall promptly transfer the same, or
promptly cause the same to be transferred, to McDonald's.
(c) Assignment of Leases and Rents. Any assignment in favor
of the Subordinated Creditor of any Leases or Rents (as such terms are
defined in the Senior Mortgages) contained in the Subordinated Mortgages or
the Subordinated Creditor Indenture, or in any other document or instrument
related thereto or delivered in connection therewith, and all rights of the
Subordinated Creditor thereunder, are hereby intentionally and
unconditionally subordinated to, and shall be in all respects junior, subject
and subordinate to any assignment of rents, leases or other agreements
relating to the Real Properties contained in (i) the Senior Mortgages, and
(ii) any other document now in existence or hereafter made by the Borrower to
secure the Senior Obligations, and to all rights of McDonald's thereunder.
Without limiting the foregoing provisions of this Paragraph 2(c), from and
after the execution and delivery of the Subordinated Mortgages to the
Subordinated Creditor, the Subordinated Creditor shall not be entitled to
receive or retain any Rents or other amounts assigned to the Subordinated
Creditor under any such document or instrument until such time as the Senior
Obligations shall have been completely paid in full.
(d) Non-Disturbance Agreements. The Subordinated Creditor
shall be required to give a non-disturbance agreement to any lessee or tenant
of the Real Properties with respect to whose lease McDonald's, as holder of
the Senior Mortgages, shall have executed a non-disturbance agreement, and,
if the Subordinated Creditor fails to give any such non-disturbance
agreement, the Subordinated Creditor nevertheless agrees not to disturb the
possession, occupancy or rights of any such lessee or tenant without the
prior written consent of McDonald's in each instance.
(e) Further Assurances. To further evidence the subordination
hereinabove provided for, the Subordinated Creditor agrees that, within 30
days after request by McDonald's, it will, at the Subordinated Creditor's
sole cost and expense, do, execute, acknowledge and deliver all and every
such further acts, deeds, conveyances and instruments as McDonald's may
reasonably request for the better assuring and evidencing of this
subordination (including, without limitation, further affirmation of the
application of this
5
<PAGE>
Agreement to future optional and/or obligatory increases in the amount of the
Senior Obligations or advances, regardless of the use to which such increases
or advances are put).
(f) Release or Subordination of Lien. If McDonald's shall at
any time release its lien on the Real Properties (or any part thereof) in
connection with a sale or refinancing of the Real Properties or any part
thereof, the Subordinated Creditor shall, without any payment to it, be
deemed to have consented to such sale or refinancing and shall release the
lien of the Subordinated Mortgages thereon at the same time that McDonald's
releases the lien of the Senior Mortgages thereon, and, in the event that the
Subordinated Creditor has not executed a release within seven (7) business
days of being requested to do so by Borrower of McDonald's in connection with
such sale or refinancing, the Subordinated Creditor hereby irrevocably
appoints McDonald's as its attorney in fact (coupled with an interest) to
execute in the name of the Subordinated Creditor or without the signature of
the Subordinated Creditor to the extent McDonald's may lawfully do so, one or
more releases or reconveyances of mortgages/deeds of trust or other documents
to evidence such release of the lien of the Subordinated Mortgages. Until
the Senior Obligations have been completely paid in full (including, without
limitation, any obligations which may arise under the Agreement to
Indemnify), all proceeds from or with respect to the sale, refinancing or
other disposition of the Real Properties or any part thereof shall be paid to
McDonald's (or placed into escrow for the benefit of McDonald's pursuant to
the terms of the Senior Mortgages) in satisfaction of the Senior Obligations
pursuant to the terms of the Senior Mortgages and the McDonald's
Documentation, and the Subordinated Creditor shall have no right, claim or
interest in or to any such proceeds.
(g) Enforcement. The Subordinated Creditor agrees that no
remedies provided for under the Subordinated Mortgages or other documents (to
the extent relating to the Real Properties in which McDonald's has an
interest) executed in connection with the Subordinated Creditor Indenture
shall be exercised with respect to the Real Properties, including, without
limitation, the commencement or prosecution of foreclosure proceedings, the
exercise of any power of sale, or the appointment of a receiver (or the
Subordinated Creditor as mortgagee in possession), without obtaining the
prior written consent of McDonald's. The Subordinated Creditor hereby
consents and agrees that any lawful action taken by or on behalf of
McDonald's in the exercise of McDonald's rights and/or remedies under the
Senior Mortgages (including, without limitation, any foreclosure or
acquisition of title to a Real Property by deed in lieu of foreclosure or
otherwise) are hereby deemed to be consented to by the Subordinated Creditor
in all respects.
(h) No Third-Party Beneficiaries. The provisions of clauses
(a)-(g) of this Paragraph 2 are solely for the benefit of the holder of the
Senior Mortgages and shall not create any rights in the Borrower or any other
person.
3. Bankruptcy. The provisions of this Agreement shall continue in
full force and effect notwithstanding the occurrence of any proceeding under
Title 11 of the United States Code (11 U.S.C. Sec. 101 et seq.) or any other
bankruptcy, insolvency, liquidation, reorganization, dissolution, winding up,
liquidation, readjustment or other similar proceeding
6
<PAGE>
relating to the Borrower or to its property (whether voluntary or
involuntary, partial or complete, and whether in bankruptcy, insolvency or
receivership, or upon a general assignment for the benefit of creditors, or
any other marshaling of the assets and liabilities of the Borrower, or any
sale of all or substantially all of the assets of the Borrower, or otherwise)
(each, an "Insolvency Proceeding"). Without limiting the generality of the
foregoing, in the event of an Insolvency Proceeding, (i) the Senior
Obligations (including post-petition interest on the Senior Obligations,
whether or not such interest is allowable under Section 502 or 506 of the
United States Bankruptcy Code) shall first be completely paid in full before
the Subordinated Creditor shall be entitled to receive or retain any proceeds
from or relating to the sale, refinancing or other disposition of the Real
Properties or any portion thereof in respect of the Subordinated Indenture
Indebtedness; and (ii) the Subordinated Creditor shall not object to or
oppose any efforts by McDonald's to obtain relief from the automatic stay
with respect to the Real Properties under Section 362 of the United States
Bankruptcy Code.
4. Payments Received by the Subordinated Creditor. In the event
that the Subordinated Creditor receives any payment or other distribution of
any kind or character from the Borrower or from any other source whatsoever
in respect of any of the Subordinated Indenture Indebtedness, or receives any
security therefor, whether by way of agreement or compromise or otherwise,
which it is not entitled to retain pursuant to the terms of this Agreement,
the Subordinated Creditor shall immediately deliver the same to McDonald's,
in the form received, together with any necessary endorsements, in each case
for application on account of the Senior Obligations, but until so received
by McDonald's, the same shall be held in trust by the Subordinated Creditor
as the property of McDonald's.
5. No Consent Required. The Subordinated Creditor hereby agrees that
McDonald's may, from time to time, at its sole discretion and without notice to
or consent of or from the Subordinated Creditor, and without affecting the
obligations of the Subordinated Creditor herein or the subordination provided
for hereunder, take any or all of the following actions:
(a) retain or obtain a lien or security interest in any
property to secure all or any part of the Senior Obligations;
(b) retain, obtain or permit the release of the primary or
secondary obligations of any other obligor or obligors with respect to all or
any part of the Senior Obligations;
(c) fail to perfect, or release McDonald's lien or security
interest in, or surrender, release or permit any substitution or exchange
for, all or any part of any property (including, without limitation, the Real
Properties) securing all or any part of the Senior Obligations;
(d) change the manner, place or terms of payments, and/or
change or extend the time of payment of, renew or alter, all or any part of
the Senior Obligations, any security therefor, or any liability incurred
directly or indirectly in respect thereof, and the
7
<PAGE>
provisions hereof shall apply to the Senior Obligations as so changed,
extended, renewed or altered;
(e) sell, exchange, release, surrender, realize upon or
otherwise deal with in any manner and in any order the Real Properties or any
part thereof;
(f) exercise or refrain from exercising or release any rights
and/or remedies against the Borrower or others (including, without
limitation, any guarantor of all or a portion of the Senior Obligations) or
otherwise act or refrain from acting; and/or
(g) settle or compromise the Senior Obligations or any part
thereof or any security therefor, or any liability incurred directly or
indirectly in respect thereof or hereof.
6. Transfer. McDonald's may, from time to time, without notice to
Subordinated Creditor, assign or transfer any or all of the Senior Obligations
or any interest therein or any security therefor. Notwithstanding any such
assignment or transfer or any subsequent assignment or transfer thereof, the
holders of the Senior Obligations and the holders of any interest therein shall
be entitled to the benefits of this Agreement to the same extent as if such
holders were McDonald's specifically named in this Agreement.
7. Other Liens. Nothing in this Agreement shall prohibit, prevent or
otherwise impede the Subordinated Creditor from exercising any rights, remedy or
power which it may have against the Borrower and/or its subsidiaries with
respect to any collateral other than the Real Properties, which secures the
Subordinated Indenture Indebtedness, provided, however, that the Subordinated
Creditor shall not take any action which could impair the lien of the Senior
Mortgages or the ability of McDonald's to foreclose or otherwise enforce its
security interests or liens thereunder.
8. Termination. This Agreement shall in all respects be a continuing
agreement and shall remain in full force and effect until (a) the complete
payment in full of all of the Senior Obligations, and (b) the execution by
McDonald's of releases of all of the Senior Mortgages and the recording of such
releases in the appropriate real property records.
9. Miscellaneous.
(a) No Waiver. No delay on the part of McDonald's in the
exercise of any right or remedy shall operate as a waiver thereof, and no
single or partial exercise by McDonald's of any right or remedy shall
preclude any other or further exercise thereof or the exercise of any other
right or remedy, nor shall any modification, waiver or discharge of any of
the provisions of this Agreement be binding upon McDonald's except as
expressly set forth in a writing duly signed and delivered by McDonald's.
(b) Obligations Absolute. The obligations of the Subordinated
Creditor herein shall be absolute and unconditional, and the subordination of
the lien of the Subordinated Mortgages herein contained shall be effective
with respect to the Senior
8
<PAGE>
Obligations, notwithstanding any right or power of the Borrower or anyone
else to assert any claim or defense as to the invalidity or unenforceability
of any such obligation and/or any lien securing the same, in whole or in
part, or any determination of such invalidity or unenforceability and no such
event shall affect or impair the agreements and obligations of the
Subordinated Creditor hereunder. In the event that any of the Senior
Obligations and/or any lien securing the same is determined to be invalid or
unenforceable, in whole or in part, the Subordinated Creditor agrees that, as
between McDonald's and the Subordinated Creditor, the Senior Obligations and
such lien shall be deemed valid and enforceable, and the obligations of the
Subordinated Creditor hereunder with respect thereto shall not be affected by
any such determination but shall continue in full force and effect.
(c) Sole Discretion. It is understood and agreed that in the
event of any dissolution, winding up, liquidation, readjustment,
reorganization or other similar proceedings relating to the Borrower or to
its property, McDonald's may use its sole discretion with respect to the
enforcement of the Senior Mortgages, or in otherwise exercising or refraining
from exercising any rights or in taking or refraining from taking any action
which it may be entitled to take or assert hereunder; and that McDonald's
shall not be under any liability for doing or refraining from doing anything
relative thereto in the exercise of its own reasonable judgment or which it
may deem necessary or desirable.
(d) Waiver of Notice and Diligence. The Subordinated Creditor
hereby waives: (i) notice of acceptance by McDonald's of this Agreement; (ii)
notice of the existence or creation or nonpayment of all or any of the Senior
Obligations; and (iii) all diligence in collection or protection of or
realization upon the Senior Obligations or any security therefor.
(e) Reinstatement. If, as a result of, or arising from, any
bankruptcy, insolvency or similar proceeding, claim is ever made upon McDonald's
or any participant in the Senior Obligations for repayment or recovery of any
amount or amounts received by it in payment or on account of the Senior
Obligations from the proceeds of the sale, refinancing or other disposition of
all or a portion of the Real Properties and McDonald's or such participant
repays the Borrower or its legal representative or a trustee in bankruptcy, all
or part of such amount by reason of (i) any judgment, decree or order of any
court or administrative body having jurisdiction or (ii) any settlement or
compromise of any such claim effected by McDonald's or such participant with any
such claimant (including the Borrower or any guarantor), then in such event the
Subordinated Creditor agrees that it shall be and remain obligated hereunder
with respect to the amount so repaid or recovered to the same extent as if such
amount had never originally been received by McDonald's or such participant and
to the extent the Subordinated Creditor has received payments or distributions
in respect of the Subordinated Indenture Indebtedness from the proceeds of the
sale, refinancing or other disposition of the Real Properties.
10. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns.
9
<PAGE>
11. Notices. Any notices or other communications required or
permitted hereunder shall be in writing, and shall be sufficiently given if
made by hand delivery, by telecopier or registered or certified mail, postage
prepaid, return receipt requested, to the addresses listed in the first
paragraph of this Agreement. Each party may designate additional or
different addresses for notices to such party. Any notice or communication
to either party hereto shall be deemed to have been given or made as of the
date so delivered if personally delivered; when receipt is acknowledged
electronically (with copy by U.S. mail), if faxed (the fax number for the
Subordinated Creditor is (617) 664-5371; the fax number for McDonald's is
(630) 623-3000; and five (5) calendar days after mailing if sent by
registered or certified mail, postage prepaid (except that a notice of change
of address shall not be deemed to have been given until actually received by
the addressee).
12. Representations by the Subordinated Creditor. The Subordinated
Creditor has the power, authority and legal right pursuant to the Subordinated
Creditor Indenture to execute, deliver and perform this Agreement. The
Subordinated Creditor has been duly authorized pursuant to the Subordinated
Creditor Indenture to enter into this Subordination Agreement on behalf of the
Holders (as defined in the Subordinated Creditor Indenture) and this
Subordination Agreement constitutes the valid and binding obligations of the
Subordinated Creditor on behalf of such Holders enforceable against the
Subordinated Creditor on behalf of such Holders in accordance with its terms.
13. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York including both
matters of internal law and conflicts of law, except that matters as to the
priority of liens on the Real Properties and remedies and procedural matters
relating thereto shall be governed by the laws of the State in which the Real
Properties is located.
14. Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
15. Singular and Plural. Words used in this Agreement in the
singular, where the context so permits, shall be deemed to include the plural
and vice versa. The definitions of words in the singular in this Agreement
shall apply to such words when used in the plural where the context so
permits and vice versa.
10
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto as of the date first above written.
In The Presence of (witnesses for STATE STREET BANK AND TRUST
both STATE STREET BANK AND TRUST COMPANY, solely in its capacity
COMPANY signatories): as trustee and collateral agent
under and pursuant to the
Subordinated Creditor Indenture
/s/ Deborah M. Roellchen By: /s/ Mary Lee Storrs
- ---------------------------------- ---------------------------------
Print Name: Mary Lee Storrs
Print Name: Deborah M. Roellchen Title: Vice President
----------------------
/s/ Deborah Taueira By: /s/ Ruth A. Smith
- ---------------------------------- ---------------------------------
Print Name: Ruth A. Smith
Print Name: Deborah Taueira Title: Vice President
----------------------
In The Presence of (witnesses MCDONALD'S CORPORATION
for both McDONALD'S CORPORATION
signatories):
/s/ Mark A. Moreno By: /s/ Gloria Santona
- ---------------------------------- ---------------------------------
Print Name: Gloria Santona
Print Name: Mark A. Moreno Title: Vice President, Deputy
---------------------- General Counsel &
Secretary
/s/ Ann Ferguson By: /s/ Joseph R. Thomas
- ---------------------------------- ---------------------------------
Print Name: Joseph R. Thomas
Print Name: Ann Ferguson Title: Vice President, Associate
---------------------- General Counsel and
Assistant Secretary
In The Presence of (witnesses DISCOVERY ZONE, INC.
for both DISCOVERY ZONE, INC.
signatories):
/s/ Mark D. Woodward By: /s/ Scott Bernstien
- ---------------------------------- ---------------------------
Print Name: Scott Bernstien
Print Name: Mark D. Woodward Title: President
----------------------
/s/ Seth L. Grossman By: /s/ Robert Rooney
- ---------------------------------- ---------------------------
Print Name: Robert Rooney
Print Name: Seth L. Grossman Title: Sr. VP
----------------------
<PAGE>
STATE OF MASSACHUSETTS)
COUNTY OF Suffolk )
-----------
Before me, a Notary Public in and for said County and State,
personally appeared the above-named STATE STREET BANK AND TRUST COMPANY, a
trust company organized under the laws of Massachusetts by Mary Lee Storrs
---------------
and Ruth A. Smith, its Vice President and Vice President, who acknowledged
------------- -------------- --------------
that they did sign the foregoing instrument for and on behalf of STATE STREET
BANK AND TRUST COMPANY, and that the same is the free act and deed of STATE
STREET BANK AND TRUST COMPANY and their free act and deed individually and as
such officers.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal at
Boston, Massachusetts, this 31 day of July 1997.
- ------ ------------- --
/s/ Agnes G. Dillion
------------------------------
Notary Public
Agnes G. Dillon
THIS DOCUMENT PREPARED BY AND My Commission
RECORDING REQUESTED BY AND Expires 5/15/03
WHEN RECORDED MAIL TO:
Jonathan Reiss, Esq.
Cleary, Gottlieb, Steen & Hamilton
1 Liberty Plaza
New York, New York 10006
<PAGE>
STATE OF ILLINOIS )
COUNTY OF DuPAGE )
------------
Before me, a Notary Public in and for said County and State,
personally appeared the above-named McDONALD'S CORPORATION, a corporation
organized under the laws of Delaware by Gloria Santona and Joseph R. Thomas,
-------------- ----------------
its VP, Deputy General Counsel & Secretary and VP, Associate/General Counsel
-------------------------------------- -----------------------------
& Assistant Secretary, who acknowledged that they did sign the foregoing
- ---------------------
instrument for and on behalf of McDONALD'S CORPORATION, and that the same is
the free act and deed of McDONALD'S CORPORATION and their free act and deed
individually and as such officers.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal at
Oak Brook, Illinois, this 31st day of July 1997.
- --------- -------- ----
/s/ Gordana Vujanovich
------------------------------
Notary Public
THIS DOCUMENT PREPARED BY AND
RECORDING REQUESTED BY AND "OFFICIAL SEAL"
WHEN RECORDED MAIL TO: Gordana Vujanovich
Jonathan Reiss, Esq. Notary Public, State of Illinois
Cleary, Gottlieb, Steen & Hamilton My Commission Expires 02/15/99
1 Liberty Plaza
New York, New York 10006
<PAGE>
STATE OF NEW YORK )
COUNTY OF WESTCHESTER)
Before me, a Notary Public in and for said County and State,
personally appeared the above-named DISCOVERY ZONE, INC., a corporation
organized under the laws of Delaware by Scott Bernstein and Robert Rooney,
--------------- -------------
its President and Sr. VP, who acknowledged that they did sign the foregoing
--------- ------
instrument for and on behalf of DISCOVERY ZONE, INC., and that the same is
the free act and deed of DISCOVERY ZONE, INC. and their free act and deed
individually and as such officers.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal at
50 Main St., White Plains, NY, this 28 day of July 1997.
- ----------- ---------------- --
/s/ Mark D. Woodward
------------------------------
Notary Public
THIS DOCUMENT PREPARED BY AND MARK D. WOODWARD
RECORDING REQUESTED BY AND Notory Public State of New York
WHEN RECORDED MAIL TO: No. 4997846
Jonathan Reiss, Esq. Qualified in New York County
Cleary, Gottlieb, Steen & Hamilton Commission Expires June 15, 1998
1 Liberty Plaza
New York, New York 10006
<PAGE>
EXHIBIT A
DESCRIPTIONS OF SENIOR MORTGAGES
The following is a list of the amended and restated first priority
mortgages, deeds of trust and/or deeds to secure debt entered executed by
Borrower, on behalf of McDonald's, pursuant to the terms and conditions of
the McDonald's Documentation:
1. Amended and Restated Deed To Secure Debt and Security Agreement, made as of
July 29, 1997, by Borrower to McDonald's, relating to mortgaged property
located in Kennesaw, in the County of Cobb, in the State of Georgia.
2. Amended and Restated Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to Chicago Title Insurance Company, a Missouri Corporation, as
trustee, for the benefit of McDonald's, relating to trust property located
in Vancouver, in the County of Clark, in the State of Washington.
3. Amended and Restated Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to Kenneth W. Pearson, as trustee, to and for the benefit of
McDonald's, relating to trust property located in Leon Valley, in the
County of Bexar, in the State of Texas.
4. Amended and Restated Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to Kenneth W. Pearson, as trustee, for the benefit of McDonald's,
relating to trust property located in Arlington, in the County of Tarrant,
in the State of Texas.
5. Amended and Restated Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to Kenneth W. Pearson, as trustee, for the benefit of McDonald's,
relating to trust property located in San Antonio, in the County of Bexar,
in the State of Texas.
6. Amended and Restated Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to The Public Trustee of the County of Douglas, Colorado, as
trustee, to and for the benefit of McDonald's, relating to trust property
located in Littleton, in the County of Douglas, in the State of Colorado.
<PAGE>
7. Amended and Restated Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to The Public Trustee of the County of Arapahoe, Colorado, as
trustee, to and for the benefit of McDonald's, relating to trust property
located in Aurora, in the County of Arapahoe, in the State of Colorado.
8. Amended and Restated Mortgage, Assignment of Leases and Rents, Security
Agreement and Fixture Filing, made as of July 29, 1997, by Borrower to
McDonald's, relating to mortgaged property located in Schaumburg, in the
County of Cook, in the State of Illinois.
9. Amended and Restated Mortgage, made as of July 29, 1997, by Borrower to
McDonald's, relating to mortgaged property located in Sterling Heights, in
the County of Macomb, in the State of Michigan.
10. Open-End Mortgage, Assignment of Leases and Rents, Security Agreement and
Fixture Filing (Amended and Restated), made as of July 29, 1997, by
Borrower to McDonald's, relating to mortgaged property located in Forest
Park, in the County of Hamilton, in the State of Ohio.
11. Open-End Mortgage, Assignment of Leases and Rents, Security Agreement and
Fixture Filing (Amended and Restated), made as of July 29, 1997, by
Borrower to McDonald's, relating to mortgaged property located in Columbus,
in the County of Franklin, in the State of Ohio.
12. Amended and Restated Open-End Mortgage, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to McDonald's, relating to mortgaged property located in
Philadelphia, in the County of Philadelphia, in the State of Pennsylvania.
13. Amended and Restated Mortgage, Assignment of Leases and Rents, Security
Agreement and Fixture Filing, made as of July 29, 1997, by Borrower to
McDonald's, relating to mortgaged property located in Blaine, in the County
of Anoka, in the State of Minnesota.
14. Amended and Restated Mortgage, Assignment of Leases and Rents, Security
Agreement and Fixture Filing, made as of July 29, 1997, by Borrower to
McDonald's, relating to mortgaged property located in Washington Township,
in the County of Marion, in the State of Indiana.
<PAGE>
EXHIBIT A-1
Recording Information For Senior Mortgage In Favor Of McDonald's
County Book Volume
Senior Mortgage (Forest Park)
<PAGE>
Forest Park
Hamilton County, Ohio
EXHIBIT B
Situate in the City of Forest Park, County of Hamilton, and State of Ohio,
in Section 19, Town 2, Entire Range 2, Springfield Township, and being
more particularly described as follows:
Commencing at the northwest corner of Section 19; thence with the section
line S. OO degrees 10' 00" W. for 1,709.00 feet to a point on the western
right-of-way of Interstate 275; thence crossing said right-of-way of
Interstate 275, N. 88 degrees 19' 00" E. for 440.65 feet to a point on the
eastern right-of-way of Interstate 275, being the TRUE POINT OF BEGINNING;
Thence with the eastern right-of-way of Interstate 275, N. 44 degrees 38' 05"
E. for 86.23 feet to a point; thence N. 44 degrees 38' 05" E. for 366.76 feet
to an iron pin; thence N. 67 degrees 02' 20" E. for 216.79 feet to a point;
thence leaving the eastern right-of-way of Interstate 275, S. 01 degrees 41'
05" E. for 331.97 feet to a point; thence S. 88 degrees 19' 00" W. for 10.81
feet to a point; thence S. 02 degrees 01' 04" W. for 35.39 feet to an iron
pin on the line of Esther Willer; thence with the line of Esther Willer, S.
88 degrees 34' 29" W. for 170.00 feet to a point; thence N. 01 degrees 40'
59" W. for 10.00 feet to a point; thence S. 88 degrees 33' 53" W. for 75.00
feet to a point; thence S. 01 degrees 40' 04" E. for 35.32 feet to a point;
thence S. 88 degrees 19' 00" W. for 271.52 feet to a point being the TRUE
POINT OF BEGINNING; containing 2.636 acres.
<PAGE>
EXHIBIT C
DESCRIPTIONS OF SUBORDINATED MORTGAGES IN FAVOR OF STATE
The following is a list of the subordinated mortgages, deeds of
trust and/or deeds to secure debt entered executed by Borrower, on behalf of
the Subordinated Creditor, pursuant to the terms and conditions of the
McDonald's Documentation:
1. Deed To Secure Debt and Security Agreement, made as of July 29, 1997, by
Borrower to Subordinated Creditor, relating to mortgaged property located
in Kennesaw, in the County of Cobb, in the State of Georgia.
2. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Chicago Title
Insurance Company, a Missouri corporation, as trustee, for the benefit of
Subordinated Creditor, relating to trust property located in Vancouver, in
the County of Clark, in the State of Washington.
3. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Kenneth W.
Pearson, as trustee, to and for the benefit of Subordinated Creditor,
relating to trust property located in Leon Valley, in the County of Bexar,
in the State of Texas.
4. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Kenneth W.
Pearson, as trustee, for the benefit of Subordinated Creditor, relating to
trust property located in Arlington, in the County of Tarrant, in the State
of Texas.
5. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Kenneth W.
Pearson, as trustee, for the benefit of Subordinated Creditor, relating to
trust property located in San Antonio, in the County of Bexar, in the State
of Texas.
6. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to The Public Trustee
of the County of Douglas, Colorado, as trustee, to and for the benefit of
Subordinated Creditor, relating to trust property located in Littleton, in
the County of Douglas, in the State of Colorado.
7. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to The Public Trustee
of the County of Arapahoe, Colorado, as trustee, to and for the benefit of
Subordinated Creditor, relating to trust property located in Aurora, in the
County of Arapahoe, in the State of Colorado.
<PAGE>
8. Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture
Filing, made as of July 29, 1997, by Borrower to Subordinated Creditor,
relating to mortgaged property located in Schaumburg, in the County of
Cook, in the State of Illinois.
9. Mortgage, made as of July 29, 1997, by Borrower to Subordinated Creditor,
relating to mortgaged property located in Sterling Heights, in the County
of Macomb, in the State of Michigan.
10. Open-End Mortgage, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Subordinated
Creditor, relating to mortgaged property located in Forest Park, in the
County of Hamilton, in the State of Ohio.
11. Open-End Mortgage, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Subordinated
Creditor, relating to mortgaged property located in Columbus, in the County
of Franklin, in the State of Ohio.
12. Open-End Mortgage, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Subordinated
Creditor, relating to mortgaged property located in Philadelphia, in the
County of Philadelphia, in the State of Pennsylvania.
13. Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture
Filing, made as of July 29, 1997, by Borrower to Subordinated Creditor,
relating to mortgaged property located in Blaine, in the County of Anoka,
in the State of Minnesota.
14. Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture
Filing, made as of July 29, 1997, by Borrower to Subordinated Creditor,
relating to mortgaged property located in Washington Township, in the
County of Marion, in the State of Indiana.
<PAGE>
EXHIBIT C-1
RECORDING INFORMATION FOR SUBORDINATED MORTGAGE IN FAVOR OF STATE STREET BANK
AND TRUST COMPANY (SOLELY IN ITS CAPACITY AS TRUSTEE AND COLLATERAL AGENT UNDER
AND PURSUANT TO THE SUBORDINATED CREDITOR INDENTURE)
County Book Volume
Subordinated Mortgage (Forest
Park)
<PAGE>
Exhibit 4.44
- ------------------------------------------------------------------------------
Space above this line for recorder's use
DOCUMENT PREPARED BY AND
AFTER RECORDING RETURN TO:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attention: Jonathan A. Reiss, Esq.
SUBORDINATION AGREEMENT
AGREEMENT made as of the 29th day of July, 1997, by and among STATE
STREET BANK AND TRUST COMPANY, solely in its capacity as trustee and
collateral agent under and pursuant to the Subordinated Creditor Indenture
(as hereinafter defined) with an address at Two International Place, Boston,
Massachusetts 02110, Attention: Corporate Trust Department, Mary Lee Storrs,
Vice President (the "Subordinated Creditor"), MCDONALD'S CORPORATION, a
Delaware corporation, with an address at McDonald's Plaza, Oak Brook,
Illinois 60523, Attention: General Counsel ("McDonald's") and DISCOVERY ZONE,
INC., a Delaware corporation, successor by merger to Leaps & Bounds, Inc.,
having its principal place of business at One Corporate Center, 110 East
Broward Boulevard, Fort Lauderdale, Florida 33301 ("Borrower").
W I T N E S S E T H:
RECITALS
A. WHEREAS, Borrower is the successor in interest to Discovery
Zone, Inc., a Delaware corporation and debtor and debtor in possession ("Old
DZI"), and Old DZI's affiliated debtors and debtors in possession including
Leaps & Bounds, Inc. (the "Debtors"),
[SCHAUMBURG, ILLINOIS PROPERTY]
<PAGE>
all in the chapter 11 proceedings captioned In re Discovery Zone, Inc., et
al., Case No. 96-411 (HSB) (Jointly Administered), before the United States
Bankruptcy Court for the District of Delaware (the "Bankruptcy Court"); and
B. WHEREAS, pursuant to an Agreement and Plan of Merger, dated as
of August 30, 1994 (the "Merger Agreement"), by and among Old DZI, and two of
the Debtors, Discovery Zone International, Inc. and Leaps & Bounds, Inc. on
the one hand, and McDonald's on the other hand, and related documentation,
McDonald's was or is the sublessor to Leaps & Bounds, Inc. of certain
properties, and Old DZI agreed to defend, indemnify and hold McDonald's and
its affiliates harmless in respect of all expenses, losses, costs,
deficiencies, liabilities and damages (including related and reasonable
counsel fees and expenses, and compensatory and demonstrable consequential
damages) incurred or suffered by McDonald's as a direct result of, inter
alia, any breach that results in any payment by McDonald's in connection with
any guarantee by McDonald's relating to such properties (the "Agreement to
Indemnify"); and
C. WHEREAS, On November 18, 1996, the Bankruptcy Court entered the
Stipulation and Order Between Debtors and McDonald's Corporation Providing
for the Resolution, Settlement and Compromise of Disputes and for Rent
Deferrals and Allowance of Certain Claims (the "Stipulation and Order"),
pursuant to which, inter alia, the Debtors assumed certain subleases relating
to properties subleased by McDonald's to the Debtors pursuant to 11 U.S.C.
Section 365 as to which the Agreement to Indemnify remains in full force and
effect, the Bankruptcy Court approved the allowance of certain claims of
McDonald's, including those claims based on the Agreement to Indemnify, and
the Bankruptcy Court approved the validity, perfection, priority and
enforceability of certain claims and liens of McDonald's against the Debtors,
including, without limitation, the validity, perfection, priority and
enforceability of the Senior Mortgages (as defined below) and the Stipulation
and Order was not appealed or otherwise challenged and remains in full force
and effect; and
D. WHEREAS, pursuant to the plan of reorganization for Old DZI and
its affiliated debtors confirmed by the Bankruptcy Court by order entered
July 18, 1997 (the "Plan"), and as required by the terms of the Stipulation
and Order, Borrower, as the reorganized successor of the Debtors, is
obligated to issue to McDonald's Secured Rent Deferral Notes in the aggregate
original principal amount of $266,466.24, which amount is subject to increase
each month in accordance with the terms thereof (the "Senior Secured Rent
Deferral Notes," and individually a "Senior Secured Rent Deferral Note") and
Secured Rejection Note in the aggregate original principal amount of
$4,416,237.90 (the "Senior Secured Rejection Note"); and
E. WHEREAS pursuant to the terms and conditions of the Stipulation
and Order, the Plan, the Agreement to Indemnify, the Senior Secured Rejection
Note and the Senior Secured Rent Deferral Notes and any related documentation
(the "McDonald's Documentation"), the repayment and performance of the
obligations of Borrower to McDonald's under the McDonald's Documentation
(including any contingent obligations under
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the Agreement to Indemnify, the Stipulation and Order, including Section 7
thereof, or otherwise) (the "Senior Obligations") is secured by certain
amended and restated first priority mortgages, deeds of trust and/or deeds to
secure debt described on Exhibit A attached hereto and made a part hereof
(collectively, including all modifications, extensions and additions thereto,
the "Senior Mortgages," and individually, a "Senior Mortgage"), including the
Senior Mortgage identified by the recording information set forth in Exhibit
A-1, reaffirming and creating, to the extent necessary, valid and perfected
first priority liens on the real properties described on Exhibit B attached
hereto and made a part hereof, and other collateral described in the Senior
Mortgages (collectively, the "Real Properties," and individually, a "Real
Property"); and
F. WHEREAS, Borrower and the Subordinated Creditor entered into an
Indenture, dated July 22, 1997 (the "Subordinated Creditor Indenture") and
certain other documents and instruments related thereto, pursuant to which
and upon the terms and conditions therein indebtedness and other obligations
were incurred by the Borrower (the "Subordinated Indenture Indebtedness"),
the repayment and performance of which are secured by, among other things,
certain subordinated mortgages, deeds of trust and/or deeds to secure debt
described on Exhibit C hereto and made a part hereof (collectively, including
all modifications, extensions and additions thereto, the "Subordinated
Mortgages," and individually, a "Subordinated Mortgage"), including the
Subordinated Mortgage identified by the recording information set forth in
Exhibit C-1, creating valid and perfected liens on the Real Properties
subordinate to the Senior Mortgages; and
G. WHEREAS, pursuant to the Senior Mortgages, the Borrower cannot
grant a subordinated lien on any of the Real Properties without the express
approval of McDonald's and the Subordinated Indenture Indebtedness will not
be able to be issued without the agreement of McDonald's to permit the
issuance of the Subordinated Mortgages; and
H. WHEREAS, McDonald's approval of the Borrower's granting of the
Subordinated Mortgages is conditioned on the entry into this Subordination
Agreement by the Subordinated Creditor, which hereby warrants and represents
that it has full power and authority under the Subordinated Creditor
Indenture to enter into this Subordination Agreement on behalf of all holders
of any securities or obligations whatsoever issued pursuant to the
Subordinated Creditor Indenture; and
I. WHEREAS, the Subordinated Creditor and McDonald's each desire
to enter into this Subordination Agreement to confirm the subordination of
the liens of the Subordinated Mortgages to the liens of the Senior Mortgages
in accordance with the terms of this Agreement;
NOW THEREFORE, IN CONSIDERATION OF THE MUTUAL BENEFITS accruing to
the parties hereto, and other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
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1. Consent. Pursuant and subject to the other terms of this
Agreement, McDonald's consents to the Subordinate Mortgages. This consent
shall not be deemed to (i) be a consent to any future encumbrances, (ii) be a
waiver of the limitation on future encumbrances contained in the Senior
Mortgages, (iii) be a consent to or waiver of any other term or condition of
the Senior Mortgages or (iv) prejudice any right or rights which McDonald's
may now or in the future have under or in connection with the Senior
Mortgages.
2. Priority of McDonald's.
(a) Subordination. The Subordinated Creditor hereby agrees
for itself and its successors and assigns that, except as otherwise expressly
provided herein, the terms, provisions and liens of the Subordinated
Mortgages, and any of the Subordinated Creditor's liens or security interests
in the Real Properties (but only to the extent of McDonald's interest in such
Real Properties), are hereby intentionally and unconditionally subordinated
to, and at all times shall be junior, subject and subordinate to the terms,
provisions and liens of the Senior Mortgages (including, without limitation,
the liens securing future optional and/or obligatory increases in the amount
of the Senior Obligations or advances by McDonald's to or for the benefit of
the Borrower, regardless of the use to which such advances are put), as well
as to any and all increases therein and all extensions, consolidations,
modifications, renewals, refinancings and supplements thereto. The
Subordinated Creditor hereby waives any right it may have to require that
McDonald's marshal any assets of the Borrower in favor of the Subordinated
Creditor and the Subordinated Creditor agrees that it shall not acquire, by
subrogation or otherwise, any lien, estate, right or other interest in the
Real Properties which is or may be prior or superior in right to the Senior
Mortgages, including but not limited to advances for real estate taxes and
assessments. The rights and priorities set forth in this Paragraph 2(a) shall
be effective notwithstanding the order of creation, attachment, vesting or
perfection of the rights of McDonald's under the Senior Mortgages, or of the
Subordinated Creditor under the Subordinated Mortgages, the Subordinated
Creditor Indenture or any other documents executed in connection therewith
(including, without limitation, any UCC-1 financing statements or fixture
filings). The Subordinated Creditor shall be deemed to have consented (i) to
any action by Borrower to which McDonald's consents pursuant to the Senior
Mortgages and (ii) to each act of, or failure to act by, the Borrower that is
not prohibited by the Senior Mortgages, provided that, both with respect to
(i) and (ii), such deemed consent is applicable only to acts or failures to
act in connection with the sale, construction, restoration, insurance,
condemnation or alterations of, to or on, or with respect to the Real
Properties and any other matters relating to the Real Properties.
(b) Insurance; Condemnation Awards. The Subordinated Creditor
hereby assigns and releases unto McDonald's, until payment in full of the
Senior Obligations:
(i) all of its right, title, interest or claim, if any,
in and to the proceeds of all policies of insurance
covering the Real Properties, for application in
accordance with the provisions of the Senior
Mortgages or as the Borrower and McDonald's may
otherwise agree; and
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(ii) all of its right, title and interest or claim, if
any, in and to all awards or other compensation made
for any taking of any part of the Real Properties for
application in accordance with the provisions of the
Senior Mortgages or as the Borrower and McDonald's
may otherwise agree.
All such insurance proceeds or awards which may become due and
payable to the Subordinated Creditor shall be payable directly to McDonald's,
and the Subordinated Creditor directs any insurance company or governmental
authority to make payment thereof directly to McDonald's for application in
accordance with the Senior Mortgages. In the event that any such insurance
proceeds or awards are made payable to the Subordinated Creditor despite such
direction, the Subordinated Creditor shall promptly transfer the same, or
promptly cause the same to be transferred, to McDonald's.
(c) Assignment of Leases and Rents. Any assignment in favor
of the Subordinated Creditor of any Leases or Rents (as such terms are
defined in the Senior Mortgages) contained in the Subordinated Mortgages or
the Subordinated Creditor Indenture, or in any other document or instrument
related thereto or delivered in connection therewith, and all rights of the
Subordinated Creditor thereunder, are hereby intentionally and
unconditionally subordinated to, and shall be in all respects junior, subject
and subordinate to any assignment of rents, leases or other agreements
relating to the Real Properties contained in (i) the Senior Mortgages, and
(ii) any other document now in existence or hereafter made by the Borrower to
secure the Senior Obligations, and to all rights of McDonald's thereunder.
Without limiting the foregoing provisions of this Paragraph 2(c), from and
after the execution and delivery of the Subordinated Mortgages to the
Subordinated Creditor, the Subordinated Creditor shall not be entitled to
receive or retain any Rents or other amounts assigned to the Subordinated
Creditor under any such document or instrument until such time as the Senior
Obligations shall have been completely paid in full.
(d) Non-Disturbance Agreements. The Subordinated Creditor
shall be required to give a non-disturbance agreement to any lessee or tenant
of the Real Properties with respect to whose lease McDonald's, as holder of
the Senior Mortgages, shall have executed a non-disturbance agreement, and,
if the Subordinated Creditor fails to give any such non-disturbance
agreement, the Subordinated Creditor nevertheless agrees not to disturb the
possession, occupancy or rights of any such lessee or tenant without the
prior written consent of McDonald's in each instance.
(e) Further Assurances. To further evidence the subordination
hereinabove provided for, the Subordinated Creditor agrees that, within 30
days after request by McDonald's, it will, at the Subordinated Creditor's
sole cost and expense, do, execute, acknowledge and deliver all and every
such further acts, deeds, conveyances and instruments as McDonald's may
reasonably request for the better assuring and evidencing of this
subordination (including, without limitation, further affirmation of the
application of this
5
<PAGE>
Agreement to future optional and/or obligatory increases in the amount of the
Senior Obligations or advances, regardless of the use to which such increases
or advances are put).
(f) Release or Subordination of Lien. If McDonald's shall at
any time release its lien on the Real Properties (or any part thereof) in
connection with a sale or refinancing of the Real Properties or any part
thereof, the Subordinated Creditor shall, without any payment to it, be
deemed to have consented to such sale or refinancing and shall release the
lien of the Subordinated Mortgages thereon at the same time that McDonald's
releases the lien of the Senior Mortgages thereon, and, in the event that the
Subordinated Creditor has not executed a release within seven (7) business
days of being requested to do so by Borrower of McDonald's in connection with
such sale or refinancing, the Subordinated Creditor hereby irrevocably
appoints McDonald's as its attorney in fact (coupled with an interest) to
execute in the name of the Subordinated Creditor or without the signature of
the Subordinated Creditor to the extent McDonald's may lawfully do so, one or
more releases or reconveyances of mortgages/deeds of trust or other documents
to evidence such release of the lien of the Subordinated Mortgages. Until
the Senior Obligations have been completely paid in full (including, without
limitation, any obligations which may arise under the Agreement to
Indemnify), all proceeds from or with respect to the sale, refinancing or
other disposition of the Real Properties or any part thereof shall be paid to
McDonald's (or placed into escrow for the benefit of McDonald's pursuant to
the terms of the Senior Mortgages) in satisfaction of the Senior Obligations
pursuant to the terms of the Senior Mortgages and the McDonald's
Documentation, and the Subordinated Creditor shall have no right, claim or
interest in or to any such proceeds.
(g) Enforcement. The Subordinated Creditor agrees that no
remedies provided for under the Subordinated Mortgages or other documents (to
the extent relating to the Real Properties in which McDonald's has an
interest) executed in connection with the Subordinated Creditor Indenture
shall be exercised with respect to the Real Properties, including, without
limitation, the commencement or prosecution of foreclosure proceedings, the
exercise of any power of sale, or the appointment of a receiver (or the
Subordinated Creditor as mortgagee in possession), without obtaining the
prior written consent of McDonald's. The Subordinated Creditor hereby
consents and agrees that any lawful action taken by or on behalf of
McDonald's in the exercise of McDonald's rights and/or remedies under the
Senior Mortgages (including, without limitation, any foreclosure or
acquisition of title to a Real Property by deed in lieu of foreclosure or
otherwise) are hereby deemed to be consented to by the Subordinated Creditor
in all respects.
(h) No Third-Party Beneficiaries. The provisions of clauses
(a)-(g) of this Paragraph 2 are solely for the benefit of the holder of the
Senior Mortgages and shall not create any rights in the Borrower or any other
person.
3. Bankruptcy. The provisions of this Agreement shall continue in
full force and effect notwithstanding the occurrence of any proceeding under
Title 11 of the United States Code (11 U.S.C. Sec. 101 et seq.) or any other
bankruptcy, insolvency, liquidation, reorganization, dissolution, winding up,
liquidation, readjustment or other similar proceeding
6
<PAGE>
relating to the Borrower or to its property (whether voluntary or
involuntary, partial or complete, and whether in bankruptcy, insolvency or
receivership, or upon a general assignment for the benefit of creditors, or
any other marshaling of the assets and liabilities of the Borrower, or any
sale of all or substantially all of the assets of the Borrower, or otherwise)
(each, an "Insolvency Proceeding"). Without limiting the generality of the
foregoing, in the event of an Insolvency Proceeding, (i) the Senior
Obligations (including post-petition interest on the Senior Obligations,
whether or not such interest is allowable under Section 502 or 506 of the
United States Bankruptcy Code) shall first be completely paid in full before
the Subordinated Creditor shall be entitled to receive or retain any proceeds
from or relating to the sale, refinancing or other disposition of the Real
Properties or any portion thereof in respect of the Subordinated Indenture
Indebtedness; and (ii) the Subordinated Creditor shall not object to or
oppose any efforts by McDonald's to obtain relief from the automatic stay
with respect to the Real Properties under Section 362 of the United States
Bankruptcy Code.
4. Payments Received by the Subordinated Creditor. In the event
that the Subordinated Creditor receives any payment or other distribution of
any kind or character from the Borrower or from any other source whatsoever
in respect of any of the Subordinated Indenture Indebtedness, or receives any
security therefor, whether by way of agreement or compromise or otherwise,
which it is not entitled to retain pursuant to the terms of this Agreement,
the Subordinated Creditor shall immediately deliver the same to McDonald's,
in the form received, together with any necessary endorsements, in each case
for application on account of the Senior Obligations, but until so received
by McDonald's, the same shall be held in trust by the Subordinated Creditor
as the property of McDonald's.
5. No Consent Required. The Subordinated Creditor hereby agrees
that McDonald's may, from time to time, at its sole discretion and without
notice to or consent of or from the Subordinated Creditor, and without
affecting the obligations of the Subordinated Creditor herein or the
subordination provided for hereunder, take any or all of the following
actions:
(a) retain or obtain a lien or security interest in any
property to secure all or any part of the Senior Obligations;
(b) retain, obtain or permit the release of the primary or
secondary obligations of any other obligor or obligors with
respect to all or any part of the Senior Obligations;
(c) fail to perfect, or release McDonald's lien or security
interest in, or surrender, release or permit any substitution or exchange
for, all or any part of any property (including, without limitation, the Real
Properties) securing all or any part of the Senior Obligations;
(d) change the manner, place or terms of payments, and/or
change or extend the time of payment of, renew or alter, all or any part of
the Senior Obligations, any security therefor, or any liability incurred
directly or indirectly in respect thereof, and the
7
<PAGE>
provisions hereof shall apply to the Senior Obligations as so changed,
extended, renewed or altered;
(e) sell, exchange, release, surrender, realize upon or
otherwise deal with in any manner and in any order the Real Properties or any
part thereof;
(f) exercise or refrain from exercising or release any rights
and/or remedies against the Borrower or others (including, without
limitation, any guarantor of all or a portion of the Senior Obligations) or
otherwise act or refrain from acting; and/or
(g) settle or compromise the Senior Obligations or any part
thereof or any security therefor, or any liability incurred directly or
indirectly in respect thereof or hereof.
6. Transfer. McDonald's may, from time to time, without notice to
Subordinated Creditor, assign or transfer any or all of the Senior
Obligations or any interest therein or any security therefor.
Notwithstanding any such assignment or transfer or any subsequent assignment
or transfer thereof, the holders of the Senior Obligations and the holders of
any interest therein shall be entitled to the benefits of this Agreement to
the same extent as if such holders were McDonald's specifically named in this
Agreement.
7. Other Liens. Nothing in this Agreement shall prohibit, prevent
or otherwise impede the Subordinated Creditor from exercising any rights,
remedy or power which it may have against the Borrower and/or its
subsidiaries with respect to any collateral other than the Real Properties,
which secures the Subordinated Indenture Indebtedness, provided, however,
that the Subordinated Creditor shall not take any action which could impair
the lien of the Senior Mortgages or the ability of McDonald's to foreclose or
otherwise enforce its security interests or liens thereunder.
8. Termination. This Agreement shall in all respects be a
continuing agreement and shall remain in full force and effect until (a) the
complete payment in full of all of the Senior Obligations, and (b) the
execution by McDonald's of releases of all of the Senior Mortgages and the
recording of such releases in the appropriate real property records.
9. Miscellaneous.
(a) No Waiver. No delay on the part of McDonald's in the
exercise of any right or remedy shall operate as a waiver thereof, and no
single or partial exercise by McDonald's of any right or remedy shall
preclude any other or further exercise thereof or the exercise of any other
right or remedy, nor shall any modification, waiver or discharge of any of
the provisions of this Agreement be binding upon McDonald's except as
expressly set forth in a writing duly signed and delivered by McDonald's.
(b) Obligations Absolute. The obligations of the Subordinated
Creditor herein shall be absolute and unconditional, and the subordination of
the lien of the Subordinated Mortgages herein contained shall be effective
with respect to the Senior
8
<PAGE>
Obligations, notwithstanding any right or power of the Borrower or anyone
else to assert any claim or defense as to the invalidity or unenforceability
of any such obligation and/or any lien securing the same, in whole or in
part, or any determination of such invalidity or unenforceability and no such
event shall affect or impair the agreements and obligations of the
Subordinated Creditor hereunder. In the event that any of the Senior
Obligations and/or any lien securing the same is determined to be invalid or
unenforceable, in whole or in part, the Subordinated Creditor agrees that, as
between McDonald's and the Subordinated Creditor, the Senior Obligations and
such lien shall be deemed valid and enforceable, and the obligations of the
Subordinated Creditor hereunder with respect thereto shall not be affected by
any such determination but shall continue in full force and effect.
(c) Sole Discretion. It is understood and agreed that in the
event of any dissolution, winding up, liquidation, readjustment,
reorganization or other similar proceedings relating to the Borrower or to
its property, McDonald's may use its sole discretion with respect to the
enforcement of the Senior Mortgages, or in otherwise exercising or refraining
from exercising any rights or in taking or refraining from taking any action
which it may be entitled to take or assert hereunder; and that McDonald's
shall not be under any liability for doing or refraining from doing anything
relative thereto in the exercise of its own reasonable judgment or which it
may deem necessary or desirable.
(d) Waiver of Notice and Diligence. The Subordinated Creditor
hereby waives: (i) notice of acceptance by McDonald's of this Agreement; (ii)
notice of the existence or creation or nonpayment of all or any of the Senior
Obligations; and (iii) all diligence in collection or protection of or
realization upon the Senior Obligations or any security therefor.
(e) Reinstatement. If, as a result of, or arising from, any
bankruptcy, insolvency or similar proceeding, claim is ever made upon
McDonald's or any participant in the Senior Obligations for repayment or
recovery of any amount or amounts received by it in payment or on account of
the Senior Obligations from the proceeds of the sale, refinancing or other
disposition of all or a portion of the Real Properties and McDonald's or such
participant repays the Borrower or its legal representative or a trustee in
bankruptcy, all or part of such amount by reason of (i) any judgment, decree
or order of any court or administrative body having jurisdiction or (ii) any
settlement or compromise of any such claim effected by McDonald's or such
participant with any such claimant (including the Borrower or any guarantor),
then in such event the Subordinated Creditor agrees that it shall be and
remain obligated hereunder with respect to the amount so repaid or recovered
to the same extent as if such amount had never originally been received by
McDonald's or such participant and to the extent the Subordinated Creditor
has received payments or distributions in respect of the Subordinated
Indenture Indebtedness from the proceeds of the sale, refinancing or other
disposition of the Real Properties.
10. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective
successors and assigns.
9
<PAGE>
11. Notices. Any notices or other communications required or
permitted hereunder shall be in writing, and shall be sufficiently given if
made by hand delivery, by telecopier or registered or certified mail, postage
prepaid, return receipt requested, to the addresses listed in the first
paragraph of this Agreement. Each party may designate additional or
different addresses for notices to such party. Any notice or communication
to either party hereto shall be deemed to have been given or made as of the
date so delivered if personally delivered; when receipt is acknowledged
electronically (with copy by U.S. mail), if faxed (the fax number for the
Subordinated Creditor is (617) 664-5371; the fax number for McDonald's is
(630) 623-3000; and five (5) calendar days after mailing if sent by
registered or certified mail, postage prepaid (except that a notice of change
of address shall not be deemed to have been given until actually received by
the addressee).
12. Representations by the Subordinated Creditor. The Subordinated
Creditor has the power, authority and legal right pursuant to the
Subordinated Creditor Indenture to execute, deliver and perform this
Agreement. The Subordinated Creditor has been duly authorized pursuant to
the Subordinated Creditor Indenture to enter into this Subordination
Agreement on behalf of the Holders (as defined in the Subordinated Creditor
Indenture) and this Subordination Agreement constitutes the valid and binding
obligations of the Subordinated Creditor on behalf of such Holders
enforceable against the Subordinated Creditor on behalf of such Holders in
accordance with its terms.
13. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York including both
matters of internal law and conflicts of law, except that matters as to the
priority of liens on the Real Properties and remedies and procedural matters
relating thereto shall be governed by the laws of the State in which the Real
Properties is located.
14. Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by
signing any such counterpart.
15. Singular and Plural. Words used in this Agreement in the
singular, where the context so permits, shall be deemed to include the plural
and vice versa. The definitions of words in the singular in this Agreement
shall apply to such words when used in the plural where the context so
permits and vice versa.
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<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto as of the date first above written.
STATE STREET BANK AND TRUST COMPANY, solely in its
capacity as trustee and collateral agent under and
pursuant to the Subordinated Creditor Indenture
By: /s/ Mary Lee Storrs
------------------------------------------------
Name: Mary Lee Storrs
Title: Vice President
MCDONALD'S CORPORATION
By: /s/ Gloria Santona
------------------------------------------------
Name: Gloria Santona
Title: Vice President, Deputy General Counsel
and Secretary
DISCOVERY ZONE, INC.
By: /s/ Robert Rooney
------------------------------------------------
Name: Robert Rooney
Title: Sr VP
<PAGE>
STATE OF MASSACHUSETTS)
COUNTY OF SUFFOLK )
On this 31 day of July, 1997, before me, the undersigned, a Notary
Public in and for the State of Pennsylvania, personally appeared Mary Lee
Storrs, to me personally known, who, being by me duly sworn, did say that
[s]he is a Vice President of STATE STREET BANK AND TRUST COMPANY, a
Massachusetts trust company; that the instrument was signed on behalf of the
trust company, by authority of the trust company's Board of Directors; and
that Mary Lee Storrs as that officer acknowledged execution of the instrument
to be the voluntary act and deed of the trust company by it and by the
officer voluntarily executed.
/s/ Agnes G. Dillon
-------------------------------------------
Notary Public in the State of Massachusetts
Agnes G. Dillon
My Commission Expires 5/15/2003
[Notarial Seal]
<PAGE>
STATE OF ILLINOIS )
COUNTY OF DUPAGE )
------
On this __ day of July, 1997, before me, the undersigned, a Notary
Public in and for the State of Illinois, personally appeared Gloria Santona,
to me personally known, who, being by me duly sworn, did say that [s]he is
the Vice President, Deputy General Counsel and Secretary of McDONALD'S
CORPORATION, a Delaware corporation; that the instrument was signed on behalf
of the corporation, by authority of the corporation's Board of Directors; and
that Gloria Santona as that officer acknowledged execution of the instrument
to be the voluntary act and deed of the corporation by it and by the officer
voluntarily executed.
/s/ Gordana Vujanovich
-----------------------------------------
Notary Public in the State of Illinois
[Notarial Seal] -----------------------------------
"OFFICIAL SEAL"
Gordana Vujanovich
Notary Public, State of Illinois
My Commission Expires 02/15/99
-----------------------------------
<PAGE>
STATE OF NEW YORK )
COUNTY OF WESTCHESTER )
On this 28 day of July, 1997, before me, the undersigned, a Notary
Public in and for the State of New York, personally appeared Robert Rooney,
to me personally known, who, being by me duly sworn, did say that [s]he is
the Sr. VP of DISCOVERY ZONE, INC., a Delaware corporation; that the
instrument was signed on behalf of the corporation, by authority of the
corporation's Board of Directors; and that Robert Rooney as that officer
acknowledged execution of the instrument to be the voluntary act and deed of
the corporation by it and by the officer voluntarily executed.
/s/ Mark D. Woodward
----------------------------------------
Notary Public in the State of New York
[Notarial Seal]
----------------------------------------
Mark D. Woodward
Notary Public State of New York
Lic. 4397846
Qualified in New York County
Commission Expires June 15, 1998
----------------------------------------
<PAGE>
EXHIBIT A
DESCRIPTIONS OF SENIOR MORTGAGES
The following is a list of the amended and restated first priority
mortgages, deeds of trust and/or deeds to secure debt entered executed by
Borrower, on behalf of McDonald's, pursuant to the terms and conditions of
the McDonald's Documentation:
1. Amended and Restated Deed To Secure Debt and Security Agreement, made as
of July 29, 1997, by Borrower to McDonald's, relating to mortgaged
property located in Kennesaw, in the County of Cobb, in the State of
Georgia.
2. Amended and Restated Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to Chicago Title Insurance Company, a Missouri Corporation, as
trustee, for the benefit of McDonald's, relating to trust property
located in Vancouver, in the County of Clark, in the State of Washington.
3. Amended and Restated Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to Kenneth W. Pearson, as trustee, to and for the benefit of
McDonald's, relating to trust property located in Leon Valley, in the
County of Bexar, in the State of Texas.
4. Amended and Restated Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to Kenneth W. Pearson, as trustee, for the benefit of
McDonald's, relating to trust property located in Arlington, in the
County of Tarrant, in the State of Texas.
5. Amended and Restated Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to Kenneth W. Pearson, as trustee, for the benefit of
McDonald's, relating to trust property located in San Antonio, in the
County of Bexar, in the State of Texas.
6. Amended and Restated Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to The Public Trustee of the County of Douglas, Colorado, as
trustee, to and for the benefit of McDonald's, relating to trust
property located in Littleton, in the County of Douglas, in the State of
Colorado.
<PAGE>
7. Amended and Restated Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to The Public Trustee of the County of Arapahoe, Colorado, as
trustee, to and for the benefit of McDonald's, relating to trust
property located in Aurora, in the County of Arapahoe, in the State of
Colorado.
8. Amended and Restated Mortgage, Assignment of Leases and Rents, Security
Agreement and Fixture Filing, made as of July 29, 1997, by Borrower to
McDonald's, relating to mortgaged property located in Schaumburg, in the
County of Cook, in the State of Illinois.
9. Amended and Restated Mortgage, made as of July 29, 1997, by Borrower to
McDonald's, relating to mortgaged property located in Sterling Heights,
in the County of Macomb, in the State of Michigan.
10. Open-End Mortgage, Assignment of Leases and Rents, Security Agreement
and Fixture Filing (Amended and Restated), made as of July 29, 1997, by
Borrower to McDonald's, relating to mortgaged property located in Forest
Park, in the County of Hamilton, in the State of Ohio.
11. Open-End Mortgage, Assignment of Leases and Rents, Security Agreement
and Fixture Filing (Amended and Restated), made as of July 29, 1997, by
Borrower to McDonald's, relating to mortgaged property located in
Columbus, in the County of Franklin, in the State of Ohio.
12. Amended and Restated Open-End Mortgage, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to McDonald's, relating to mortgaged property located in
Philadelphia, in the County of Philadelphia, in the State of
Pennsylvania.
13. Amended and Restated Mortgage, Assignment of Leases and Rents, Security
Agreement and Fixture Filing, made as of July 29, 1997, by Borrower to
McDonald's, relating to mortgaged property located in Blaine, in the
County of Anoka, in the State of Minnesota.
14. Amended and Restated Mortgage, Assignment of Leases and Rents, Security
Agreement and Fixture Filing, made as of July 29, 1997, by Borrower to
McDonald's, relating to mortgaged property located in Washington
Township, in the County of Marion, in the State of Indiana.
<PAGE>
EXHIBIT A-1
RECORDING INFORMATION FOR SENIOR MORTGAGE IN FAVOR OF MCDONALD'S
County Book Volume
------ ---- ------
Senior Mortgage (Schaumburg)
<PAGE>
Schaumburg
Cook County, Illinois
PIN: 07-19-105-003-0000
Address: 2570 West Schaumburg Road,
Schaumburg, IL
EXHIBIT B
PARCEL 1:
LOT 3 IN PRAIRIE TOWNE CENTER, BEING A SUBDIVISION OF THAT PART OF THE
NORTHWEST FRACTIONAL QUARTER OF SECTION 19, TOWNSHIP 41 NORTH, RANGE 10, EAST
OF THE THIRD PRINCIPAL MERIDIAN, IN COOK COUNTY, ILLINOIS.
PARCEL 2:
ALL THOSE CERTAIN RIGHTS, BENEFITS AND EASEMENTS AS CREATED PURSUANT TO THE
EASEMENT AGREEMENT MADE BY AND BETWEEN K-MART CORPORATION, LEAPS AND BOUNDS
INC., AND KOHL'S DEPARTMENT STORES RECORDED MAY 20, 1993 AS DOCUMENT
93382707, AS AMENDED BY AMENDMENT TO OPERATION AND EASEMENT AGREEMENT DATED
MARCH 16, 1994, RECORDED MARCH 22, 1994 AS DOCUMENT 94259759, AS FURTHER
AMENDED BY DECLARATION RECORDED JANUARY 31, 1995 AS DOCUMENT 95072883
<PAGE>
EXHIBIT C
DESCRIPTIONS OF SUBORDINATED MORTGAGES
The following is a list of the subordinated mortgages, deeds of trust
and/or deeds to secure debt entered executed by Borrower, on behalf of the
Subordinated Creditor, pursuant to the terms and conditions of the McDonald's
Documentation:
1. Deed To Secure Debt and Security Agreement, made as of July 29, 1997, by
Borrower to Subordinated Creditor, relating to mortgaged property
located in Kennesaw, in the County of Cobb, in the State of Georgia.
2. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Chicago Title
Insurance Company, a Missouri corporation, as trustee, for the benefit
of Subordinated Creditor, relating to trust property located in
Vancouver, in the County of Clark, in the State of Washington.
3. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Kenneth W.
Pearson, as trustee, to and for the benefit of Subordinated Creditor,
relating to trust property located in Leon Valley, in the County of
Bexar, in the State of Texas.
4. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Kenneth W.
Pearson, as trustee, for the benefit of Subordinated Creditor, relating
to trust property located in Arlington, in the County of Tarrant, in the
State of Texas.
5. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Kenneth W.
Pearson, as trustee, for the benefit of Subordinated Creditor, relating
to trust property located in San Antonio, in the County of Bexar, in the
State of Texas.
6. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to The Public
Trustee of the County of Douglas, Colorado, as trustee, to and for the
benefit of Subordinated Creditor, relating to trust property located in
Littleton, in the County of Douglas, in the State of Colorado.
7. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to The Public
Trustee of the County of Arapahoe, Colorado, as trustee, to and for the
benefit of Subordinated Creditor, relating to trust property located in
Aurora, in the County of Arapahoe, in the State of Colorado.
<PAGE>
8. Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture
Filing, made as of July 29, 1997, by Borrower to Subordinated Creditor,
relating to mortgaged property located in Schaumburg, in the County of
Cook, in the State of Illinois.
9. Mortgage, made as of July 29, 1997, by Borrower to Subordinated
Creditor, relating to mortgaged property located in Sterling Heights, in
the County of Macomb, in the State of Michigan.
10. Open-End Mortgage, Assignment of Leases and Rents, Security Agreement
and Fixture Filing, made as of July 29, 1997, by Borrower to
Subordinated Creditor, relating to mortgaged property located in Forest
Park, in the County of Hamilton, in the State of Ohio.
11. Open-End Mortgage, Assignment of Leases and Rents, Security Agreement
and Fixture Filing, made as of July 29, 1997, by Borrower to
Subordinated Creditor, relating to mortgaged property located in
Columbus, in the County of Franklin, in the State of Ohio.
12. Open-End Mortgage, Assignment of Leases and Rents, Security Agreement
and Fixture Filing, made as of July 29, 1997, by Borrower to
Subordinated Creditor, relating to mortgaged property located in
Philadelphia, in the County of Philadelphia, in the State of
Pennsylvania.
13. Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture
Filing, made as of July 29, 1997, by Borrower to Subordinated Creditor,
relating to mortgaged property located in Blaine, in the County of
Anoka, in the State of Minnesota.
14. Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture
Filing, made as of July 29, 1997, by Borrower to Subordinated Creditor,
relating to mortgaged property located in Washington Township, in the
County of Marion, in the State of Indiana.
<PAGE>
EXHIBIT C-1
RECORDING INFORMATION FOR SUBORDINATED MORTGAGE IN FAVOR OF STATE STREET BANK
AND TRUST COMPANY (SOLELY IN ITS CAPACITY AS TRUSTEE AND COLLATERAL AGENT
UNDER AND PURSUANT TO THE SUBORDINATED CREDITOR INDENTURE)
County Book Volume
------ ---- ------
Subordinated Mortgage
(Schaumburg)
<PAGE>
Exhibit 4.45
- ------------------------------------------------------------------------------
Space above this line for recorder's use
DOCUMENT PREPARED BY AND
AFTER RECORDING RETURN TO:
Jonathan A. Reiss, Esq.
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
SUBORDINATION AGREEMENT (1)
AGREEMENT made as of the 29th day of July, 1997, by and among State Street
Bank and Trust Company, solely in its capacity as trustee and collateral
agent under and pursuant to the Subordinated Creditor Indenture (as
hereinafter defined) with an address at Two International Place, Boston,
Massachusetts 02110, Attention: Corporate Trust Department, Mary Lee Storrs,
Vice President (the "Subordinated Creditor"), McDonald's Corporation, a
Delaware corporation, with an address at McDonald's Plaza, Oak Brook,
Illinois 60523, Attention: General Counsel ("McDonald's") and Discovery Zone,
Inc., a Delaware corporation, successor by merger to Leaps & Bounds, Inc.,
having its principal place of business at One Corporate Center, 110 East
Broward Boulevard, Fort Lauderdale, Florida 33301 ("Borrower").
- -----------------------
(1) For recording information as to the Senior Mortgage and Subordinated
Mortgage (as such terms are defined herein) referenced by this Subordination
Agreement, see Exhibit A-1 and Exhibit C-1.
[KENNESAW, GEORGIA PROPERTY]
<PAGE>
W I T N E S S E T H:
RECITALS
A. WHEREAS, Borrower is the successor in interest to Discovery
Zone, Inc., a Delaware corporation and debtor and debtor in possession ("Old
DZI"), and Old DZI's affiliated debtors and debtors in possession including
Leaps & Bounds, Inc. (the "Debtors"), all in the chapter 11 proceedings
captioned In re Discovery Zone, Inc., et al., Case No. 96-411 (HSB) (Jointly
Administered), before the United States Bankruptcy Court for the District of
Delaware (the "Bankruptcy Court"); and
B. WHEREAS, pursuant to an Agreement and Plan of Merger, dated as
of August 30, 1994 (the "Merger Agreement"), by and among Old DZI, and two of
the Debtors, Discovery Zone International, Inc. and Leaps & Bounds, Inc. on
the one hand, and McDonald's on the other hand, and related documentation,
McDonald's was or is the sublessor to Leaps & Bounds, Inc. of certain
properties, and Old DZI agreed to defend, indemnify and hold McDonald's and
its affiliates harmless in respect of all expenses, losses, costs,
deficiencies, liabilities and damages (including related and reasonable
counsel fees and expenses, and compensatory and demonstrable consequential
damages) incurred or suffered by McDonald's as a direct result of, inter
alia, any breach that results in any payment by McDonald's in connection with
any guarantee by McDonald's relating to such properties (the "Agreement to
Indemnify"); and
C. WHEREAS, On November 18, 1996, the Bankruptcy Court entered
the Stipulation and Order Between Debtors and McDonald's Corporation
Providing for the Resolution, Settlement and Compromise of Disputes and for
Rent Deferrals and Allowance of Certain Claims (the "Stipulation and Order"),
pursuant to which, inter alia, the Debtors assumed certain subleases relating
to properties subleased by McDonald's to the Debtors pursuant to 11 U.S.C.
Section 365 as to which the Agreement to Indemnify remains in full force and
effect, the Bankruptcy Court approved the allowance of certain claims of
McDonald's, including those claims based on the Agreement to Indemnify, and
the Bankruptcy Court approved the validity, perfection, priority and
enforceability of certain claims and liens of McDonald's against the Debtors,
including, without limitation, the validity, perfection, priority and
enforceability of the Senior Mortgages (as defined below) and the Stipulation
and Order was not appealed or otherwise challenged and remains in full force
and effect; and
D. WHEREAS, pursuant to the plan of reorganization for Old DZI
and its affiliated debtors confirmed by the Bankruptcy Court by order entered
July 18, 1997 (the "Plan"), and as required by the terms of the Stipulation
and Order, Borrower, as the reorganized successor of the Debtors, is
obligated to issue to McDonald's Secured Rent Deferral Notes in the aggregate
original principal amount of $266,466.24, which amount is subject to increase
each month in accordance with the terms thereof (the "Senior Secured Rent
Deferral Notes," and individually a "Senior Secured Rent Deferral Note") and
Secured
2
<PAGE>
Rejection Note in the aggregate original principal amount of $4,416,237.90
(the "Senior Secured Rejection Note"); and
E. WHEREAS pursuant to the terms and conditions of the
Stipulation and Order, the Plan, the Agreement to Indemnify, the Senior
Secured Rejection Note and the Senior Secured Rent Deferral Notes and any
related documentation (the "McDonald's Documentation"), the repayment and
performance of the obligations of Borrower to McDonald's under the McDonald's
Documentation (including any contingent obligations under the Agreement to
Indemnify, the Stipulation and Order, including Section 7 thereof, or
otherwise) (the "Senior Obligations") is secured by certain amended and
restated first priority mortgages, deeds of trust and/or deeds to secure debt
described on Exhibit A attached hereto and made a part hereof (collectively,
including all modifications, extensions and additions thereto, the "Senior
Mortgages," and individually, a "Senior Mortgage"), including the Senior
Mortgage identified by the recording information set forth in Exhibit A-1,
reaffirming and creating, to the extent necessary, valid and perfected first
priority liens on the real properties described on Exhibit B attached hereto
and made a part hereof, and other collateral described in the Senior
Mortgages (collectively, the "Real Properties," and individually, a "Real
Property"); and
F. WHEREAS, Borrower and the Subordinated Creditor entered into
an Indenture, dated July 22, 1997 (the "Subordinated Creditor Indenture") and
certain other documents and instruments related thereto, pursuant to which
and upon the terms and conditions therein indebtedness and other obligations
were incurred by the Borrower (the "Subordinated Indenture Indebtedness"),
the repayment and performance of which are secured by, among other things,
certain subordinated mortgages, deeds of trust and/or deeds to secure debt
described on Exhibit C hereto and made a part hereof (collectively, including
all modifications, extensions and additions thereto, the "Subordinated
Mortgages," and individually, a "Subordinated Mortgage"), including the
Subordinated Mortgage identified by the recording information set forth in
Exhibit C-1, creating valid and perfected liens on the Real Properties
subordinate to the Senior Mortgages; and
G. WHEREAS, pursuant to the Senior Mortgages, the Borrower cannot
grant a subordinated lien on any of the Real Properties without the express
approval of McDonald's and the Subordinated Indenture Indebtedness will not
be able to be issued without the agreement of McDonald's to permit the
issuance of the Subordinated Mortgages; and
H. WHEREAS, McDonald's approval of the Borrower's granting of the
Subordinated Mortgages is conditioned on the entry into this Subordination
Agreement by the Subordinated Creditor, which hereby warrants and represents
that it has full power and authority under the Subordinated Creditor
Indenture to enter into this Subordination Agreement on behalf of all holders
of any securities or obligations whatsoever issued pursuant to the
Subordinated Creditor Indenture; and
I. WHEREAS, the Subordinated Creditor and McDonald's each desire
to enter into this Subordination Agreement to confirm the subordination of
the liens of the
3
<PAGE>
Subordinated Mortgages to the liens of the Senior Mortgages in accordance
with the terms of this Agreement;
NOW THEREFORE, IN CONSIDERATION OF THE MUTUAL BENEFITS accruing to
the parties hereto, and other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Consent. Pursuant and subject to the other terms of this Agreement,
McDonald's consents to the Subordinate Mortgages. This consent shall not be
deemed to (i) be a consent to any future encumbrances, (ii) be a waiver of
the limitation on future encumbrances contained in the Senior Mortgages,
(iii) be a consent to or waiver of any other term or condition of the Senior
Mortgages or (iv) prejudice any right or rights which McDonald's may now or
in the future have under or in connection with the Senior Mortgages.
2. Priority of McDonald's.
(a) Subordination. The Subordinated Creditor hereby agrees for
itself and its successors and assigns that, except as otherwise expressly
provided herein, the terms, provisions and liens of the Subordinated
Mortgages, and any of the Subordinated Creditor's liens or security titles or
interests in the Real Properties (but only to the extent of McDonald's
interest in such Real Properties), are hereby intentionally and
unconditionally subordinated to, and at all times shall be junior, subject
and subordinate to the terms, provisions and liens of the Senior Mortgages
(including, without limitation, the liens securing future optional and/or
obligatory increases in the amount of the Senior Obligations or advances by
McDonald's to or for the benefit of the Borrower, regardless of the use to
which such advances are put), as well as to any and all increases therein and
all extensions, consolidations, modifications, renewals, refinancings and
supplements thereto. The Subordinated Creditor hereby waives any right it
may have to require that McDonald's marshal any assets of the Borrower in
favor of the Subordinated Creditor and the Subordinated Creditor agrees that
it shall not acquire, by subrogation or otherwise, any lien, estate, right or
other interest in the Real Properties which is or may be prior or superior in
right to the Senior Mortgages, including but not limited to advances for real
estate taxes and assessments. The rights and priorities set forth in this
Paragraph 2(a) shall be effective notwithstanding the order of creation,
attachment, vesting or perfection of the rights of McDonald's under the
Senior Mortgages, or of the Subordinated Creditor under the Subordinated
Mortgages, the Subordinated Creditor Indenture or any other documents
executed in connection therewith (including, without limitation, any UCC-1
financing statements or fixture filings). The Subordinated Creditor shall be
deemed to have consented (i) to any action by Borrower to which McDonald's
consents pursuant to the Senior Mortgages and (ii) to each act of, or failure
to act by, the Borrower that is not prohibited by the Senior Mortgages,
provided that, both with respect to (i) and (ii), such deemed consent is
applicable only to acts or failures to act in connection with the sale,
construction, restoration, insurance, condemnation or alterations of, to or
on, or with respect to the Real Properties and any other matters relating to
the Real Properties.
4
<PAGE>
(b) Insurance; Condemnation Awards. The Subordinated Creditor hereby
assigns and releases unto McDonald's, until payment in full of the Senior
Obligations:
(i) all of its right, title, interest or claim, if any, in and to
the proceeds of all policies of insurance covering the Real
Properties, for application in accordance with the provisions
of the Senior Mortgages or as the Borrower and McDonald's may
otherwise agree; and
(ii) all of its right, title and interest or claim, if any, in
and to all awards or other compensation made for any taking
of any part of the Real Properties for application in
accordance with the provisions of the Senior Mortgages or as
the Borrower and McDonald's may otherwise agree.
All such insurance proceeds or awards which may become due and payable
to the Subordinated Creditor shall be payable directly to McDonald's, and the
Subordinated Creditor directs any insurance company or governmental authority
to make payment thereof directly to McDonald's for application in accordance
with the Senior Mortgages. In the event that any such insurance proceeds or
awards are made payable to the Subordinated Creditor despite such direction,
the Subordinated Creditor shall promptly transfer the same, or promptly cause
the same to be transferred, to McDonald's.
(c) Assignment of Leases and Rents. Any assignment in favor of the
Subordinated Creditor of any Leases or Rents (as such terms are defined in
the Senior Mortgages) contained in the Subordinated Mortgages or the
Subordinated Creditor Indenture, or in any other document or instrument
related thereto or delivered in connection therewith, and all rights of the
Subordinated Creditor thereunder, are hereby intentionally and
unconditionally subordinated to, and shall be in all respects junior, subject
and subordinate to any assignment of rents, leases or other agreements
relating to the Real Properties contained in (i) the Senior Mortgages, and
(ii) any other document now in existence or hereafter made by the Borrower to
secure the Senior Obligations, and to all rights of McDonald's thereunder.
Without limiting the foregoing provisions of this Paragraph 2(c), from and
after the execution and delivery of the Subordinated Mortgages to the
Subordinated Creditor, the Subordinated Creditor shall not be entitled to
receive or retain any Rents or other amounts assigned to the Subordinated
Creditor under any such document or instrument until such time as the Senior
Obligations shall have been completely paid in full.
(d) Non-Disturbance Agreements. The Subordinated Creditor shall be
required to give a non-disturbance agreement to any lessee or tenant of the
Real Properties with respect to whose lease McDonald's, as holder of the
Senior Mortgages, shall have executed a non-disturbance agreement, and, if
the Subordinated Creditor fails to give any such non-disturbance agreement,
the Subordinated Creditor nevertheless agrees not to disturb the possession,
occupancy or rights of any such lessee or tenant without the prior written
consent of McDonald's in each instance.
5
<PAGE>
(e) Further Assurances. To further evidence the subordination
hereinabove provided for, the Subordinated Creditor agrees that, within 30
days after request by McDonald's, it will, at the Subordinated Creditor's
sole cost and expense, do, execute, acknowledge and deliver all and every
such further acts, deeds, conveyances and instruments as McDonald's may
reasonably request for the better assuring and evidencing of this
subordination (including, without limitation, further affirmation of the
application of this Agreement to future optional and/or obligatory increases
in the amount of the Senior Obligations or advances, regardless of the use to
which such increases or advances are put).
(f) Release or Subordination of Lien. If McDonald's shall at any
time release its lien on the Real Properties (or any part thereof) in
connection with a sale or refinancing of the Real Properties or any part
thereof, the Subordinated Creditor shall, without any payment to it, be
deemed to have consented to such sale or refinancing and shall release the
lien of the Subordinated Mortgages thereon at the same time that McDonald's
releases the lien of the Senior Mortgages thereon, and, in the event that the
Subordinated Creditor has not executed a release within seven (7) business
days of being requested to do so by Borrower of McDonald's in connection with
such sale or refinancing, the Subordinated Creditor hereby irrevocably
appoints McDonald's as its attorney in fact (coupled with an interest) to
execute in the name of the Subordinated Creditor or without the signature of
the Subordinated Creditor to the extent McDonald's may lawfully do so, one or
more releases or reconveyances of mortgages/deeds of trust or other documents
to evidence such release of the lien of the Subordinated Mortgages. Until
the Senior Obligations have been completely paid in full (including, without
limitation, any obligations which may arise under the Agreement to
Indemnify), all proceeds from or with respect to the sale, refinancing or
other disposition of the Real Properties or any part thereof shall be paid to
McDonald's (or placed into escrow for the benefit of McDonald's pursuant to
the terms of the Senior Mortgages) in satisfaction of the Senior Obligations
pursuant to the terms of the Senior Mortgages and the McDonald's
Documentation, and the Subordinated Creditor shall have no right, claim or
interest in or to any such proceeds.
(g) Enforcement. The Subordinated Creditor agrees that no remedies
provided for under the Subordinated Mortgages or other documents (to the
extent relating to the Real Properties in which McDonald's has an interest)
executed in connection with the Subordinated Creditor Indenture shall be
exercised with respect to the Real Properties, including, without limitation,
the commencement or prosecution of foreclosure proceedings, the exercise of
any power of sale, or the appointment of a receiver (or the Subordinated
Creditor as mortgagee in possession), without obtaining the prior written
consent of McDonald's. The Subordinated Creditor hereby consents and agrees
that any lawful action taken by or on behalf of McDonald's in the exercise of
McDonald's rights and/or remedies under the Senior Mortgages (including,
without limitation, any foreclosure or acquisition of title to a Real
Property by deed in lieu of foreclosure or otherwise) are hereby deemed to be
consented to by the Subordinated Creditor in all respects.
6
<PAGE>
(h) No Third-Party Beneficiaries. The provisions of clauses (a)-(g)
of this Paragraph 2 are solely for the benefit of the holder of the Senior
Mortgages and shall not create any rights in the Borrower or any other person.
3. Bankruptcy. The provisions of this Agreement shall continue in full
force and effect notwithstanding the occurrence of any proceeding under Title
11 of the United States Code (11 U.S.C. Sec. 101 et seq.) or any other
bankruptcy, insolvency, liquidation, reorganization, dissolution, winding up,
liquidation, readjustment or other similar proceeding relating to the
Borrower or to its property (whether voluntary or involuntary, partial or
complete, and whether in bankruptcy, insolvency or receivership, or upon a
general assignment for the benefit of creditors, or any other marshaling of
the assets and liabilities of the Borrower, or any sale of all or
substantially all of the assets of the Borrower, or otherwise) (each, an
"Insolvency Proceeding"). Without limiting the generality of the foregoing,
in the event of an Insolvency Proceeding, (i) the Senior Obligations
(including post-petition interest on the Senior Obligations, whether or not
such interest is allowable under Section 502 or 506 of the United States
Bankruptcy Code) shall first be completely paid in full before the
Subordinated Creditor shall be entitled to receive or retain any proceeds
from or relating to the sale, refinancing or other disposition of the Real
Properties or any portion thereof in respect of the Subordinated Indenture
Indebtedness; and (ii) the Subordinated Creditor shall not object to or
oppose any efforts by McDonald's to obtain relief from the automatic stay
with respect to the Real Properties under Section 362 of the United States
Bankruptcy Code.
4. Payments Received by the Subordinated Creditor. In the event that
the Subordinated Creditor receives any payment or other distribution of any
kind or character from the Borrower or from any other source whatsoever in
respect of any of the Subordinated Indenture Indebtedness, or receives any
security therefor, whether by way of agreement or compromise or otherwise,
which it is not entitled to retain pursuant to the terms of this Agreement,
the Subordinated Creditor shall immediately deliver the same to McDonald's,
in the form received, together with any necessary endorsements, in each case
for application on account of the Senior Obligations, but until so received
by McDonald's, the same shall be held in trust by the Subordinated Creditor
as the property of McDonald's.
5. No Consent Required. The Subordinated Creditor hereby agrees that
McDonald's may, from time to time, at its sole discretion and without notice
to or consent of or from the Subordinated Creditor, and without affecting the
obligations of the Subordinated Creditor herein or the subordination provided
for hereunder, take any or all of the following actions:
(a) retain or obtain a lien or security interest in any property to
secure all or any part of the Senior Obligations;
(b) retain, obtain or permit the release of the primary or secondary
obligations of any other obligor or obligors with respect to all or any part
of the Senior Obligations;
7
<PAGE>
(c) fail to perfect, or release McDonald's lien or security interest
in, or surrender, release or permit any substitution or exchange for, all or
any part of any property (including, without limitation, the Real Properties)
securing all or any part of the Senior Obligations;
(d) change the manner, place or terms of payments, and/or change or
extend the time of payment of, renew or alter, all or any part of the Senior
Obligations, any security therefor, or any liability incurred directly or
indirectly in respect thereof, and the provisions hereof shall apply to the
Senior Obligations as so changed, extended, renewed or altered;
(e) sell, exchange, release, surrender, realize upon or otherwise
deal with in any manner and in any order the Real Properties or any part
thereof;
(f) exercise or refrain from exercising or release any rights and/or
remedies against the Borrower or others (including, without limitation, any
guarantor of all or a portion of the Senior Obligations) or otherwise act or
refrain from acting; and/or
(g) settle or compromise the Senior Obligations or any part thereof
or any security therefor, or any liability incurred directly or indirectly in
respect thereof or hereof.
6. Transfer. McDonald's may, from time to time, without notice to
Subordinated Creditor, assign or transfer any or all of the Senior
Obligations or any interest therein or any security therefor.
Notwithstanding any such assignment or transfer or any subsequent assignment
or transfer thereof, the holders of the Senior Obligations and the holders of
any interest therein shall be entitled to the benefits of this Agreement to
the same extent as if such holders were McDonald's specifically named in this
Agreement.
7. Other Liens. Nothing in this Agreement shall prohibit, prevent or
otherwise impede the Subordinated Creditor from exercising any rights, remedy
or power which it may have against the Borrower and/or its subsidiaries with
respect to any collateral other than the Real Properties, which secures the
Subordinated Indenture Indebtedness, provided, however, that the Subordinated
Creditor shall not take any action which could impair the lien of the Senior
Mortgages or the ability of McDonald's to foreclose or otherwise enforce its
security interests or liens thereunder.
8. Termination. This Agreement shall in all respects be a continuing
agreement and shall remain in full force and effect until (a) the complete
payment in full of all of the Senior Obligations, and (b) the execution by
McDonald's of releases of all of the Senior Mortgages and the recording of
such releases in the appropriate real property records.
9. Miscellaneous.
(a) No Waiver. No delay on the part of McDonald's in the exercise of
any right or remedy shall operate as a waiver thereof, and no single or
partial exercise by
8
<PAGE>
McDonald's of any right or remedy shall preclude any other or further
exercise thereof or the exercise of any other right or remedy, nor shall any
modification, waiver or discharge of any of the provisions of this Agreement
be binding upon McDonald's except as expressly set forth in a writing duly
signed and delivered by McDonald's.
(b) Obligations Absolute. The obligations of the Subordinated
Creditor herein shall be absolute and unconditional, and the subordination of
the lien of the Subordinated Mortgages herein contained shall be effective
with respect to the Senior Obligations, notwithstanding any right or power of
the Borrower or anyone else to assert any claim or defense as to the
invalidity or unenforceability of any such obligation and/or any lien
securing the same, in whole or in part, or any determination of such
invalidity or unenforceability and no such event shall affect or impair the
agreements and obligations of the Subordinated Creditor hereunder. In the
event that any of the Senior Obligations and/or any lien securing the same is
determined to be invalid or unenforceable, in whole or in part, the
Subordinated Creditor agrees that, as between McDonald's and the Subordinated
Creditor, the Senior Obligations and such lien shall be deemed valid and
enforceable, and the obligations of the Subordinated Creditor hereunder with
respect thereto shall not be affected by any such determination but shall
continue in full force and effect.
(c) Sole Discretion. It is understood and agreed that in the event
of any dissolution, winding up, liquidation, readjustment, reorganization or
other similar proceedings relating to the Borrower or to its property,
McDonald's may use its sole discretion with respect to the enforcement of the
Senior Mortgages, or in otherwise exercising or refraining from exercising
any rights or in taking or refraining from taking any action which it may be
entitled to take or assert hereunder; and that McDonald's shall not be under
any liability for doing or refraining from doing anything relative thereto in
the exercise of its own reasonable judgment or which it may deem necessary or
desirable.
(d) Waiver of Notice and Diligence. The Subordinated Creditor hereby
waives: (i) notice of acceptance by McDonald's of this Agreement; (ii) notice
of the existence or creation or nonpayment of all or any of the Senior
Obligations; and (iii) all diligence in collection or protection of or
realization upon the Senior Obligations or any security therefor.
(e) Reinstatement. If, as a result of, or arising from, any
bankruptcy, insolvency or similar proceeding, claim is ever made upon
McDonald's or any participant in the Senior Obligations for repayment or
recovery of any amount or amounts received by it in payment or on account of
the Senior Obligations from the proceeds of the sale, refinancing or other
disposition of all or a portion of the Real Properties and McDonald's or such
participant repays the Borrower or its legal representative or a trustee in
bankruptcy, all or part of such amount by reason of (i) any judgment, decree
or order of any court or administrative body having jurisdiction or (ii) any
settlement or compromise of any such claim effected by McDonald's or such
participant with any such claimant (including the Borrower or any guarantor),
then in such event the Subordinated Creditor agrees that it shall be and
remain obligated hereunder with respect to the amount so repaid or recovered
to the same extent as if
9
<PAGE>
such amount had never originally been received by McDonald's or such
participant and to the extent the Subordinated Creditor has received payments
or distributions in respect of the Subordinated Indenture Indebtedness from
the proceeds of the sale, refinancing or other disposition of the Real
Properties.
10. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors
and assigns.
11. Notices. Any notices or other communications required or permitted
hereunder shall be in writing, and shall be sufficiently given if made by
hand delivery, by telecopier or registered or certified mail, postage
prepaid, return receipt requested, to the addresses listed in the first
paragraph of this Agreement. Each party may designate additional or
different addresses for notices to such party. Any notice or communication
to either party hereto shall be deemed to have been given or made as of the
date so delivered if personally delivered; when receipt is acknowledged
electronically (with copy by U.S. mail), if faxed (the fax number for the
Subordinated Creditor is (617) 664-5371; the fax number for McDonald's is
(630) 623-3000; and five (5) calendar days after mailing if sent by
registered or certified mail, postage prepaid (except that a notice of change
of address shall not be deemed to have been given until actually received by
the addressee).
12. Representations by the Subordinated Creditor. The Subordinated
Creditor has the power, authority and legal right pursuant to the
Subordinated Creditor Indenture to execute, deliver and perform this
Agreement. The Subordinated Creditor has been duly authorized pursuant to
the Subordinated Creditor Indenture to enter into this Subordination
Agreement on behalf of the Holders (as defined in the Subordinated Creditor
Indenture) and this Subordination Agreement constitutes the valid and binding
obligations of the Subordinated Creditor on behalf of such Holders
enforceable against the Subordinated Creditor on behalf of such Holders in
accordance with its terms.
13. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York including both matters of
internal law and conflicts of law, except that matters as to the priority of
liens on the Real Properties and remedies and procedural matters relating
thereto shall be governed by the laws of the State in which the Real
Properties is located.
14. Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by
signing any such counterpart.
15. Singular and Plural. Words used in this Agreement in the singular,
where the context so permits, shall be deemed to include the plural and vice
versa. The definitions of words in the singular in this Agreement shall
apply to such words when used in the plural where the context so permits and
vice versa.
10
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed under seal by the
parties hereto as of the date first above written.
STATE STREET BANK AND TRUST COMPANY,
solely in its capacity as trustee and
collateral agent under and pursuant to
the Subordinated Creditor Indenture
By: /s/ Mary Lee Storrs
---------------------------------
Name: Mary Lee Storrs
Title: Vice President
ATTEST:
By: /s/ Jacklyn Thompson
---------------------------------
Name: Jacklyn Thompson
Title: Assistant Secretary
[Corporate Seal]
Signed, sealed and delivered
in the presence of:
/s/ E. Decker Adams
- -----------------------------
Unofficial Witness
E. DECKER ADAMS
/s/ Agnes G. Dillon
- -----------------------------
Notary Public
Agnes G. Dillon
My Commission expires:
May 15, 2003
- -----------------------------
[Notarial Seal]
<PAGE>
MCDONALD'S CORPORATION
By: /s/ Gloria Santona
------------------------------
Name: Gloria Santona
Title: Vice President, Deputy
General Counsel and
Secretary
ATTEST:
By: /s/ Joseph R. Thomas
------------------------------
Name: Joseph R. Thomas
Title: Vice President, Associate
General Counsel and
Assistant Secretary
[Corporate Seal]
Signed, sealed and delivered
in the presence of:
/s/ Ann Ferguson
- ---------------------------
Unofficial Witness
Ann Ferguson
/s/ Gordana Vujanovich
- ----------------------------
Notary Public
My Commission expires:
February 15, 1999
- ----------------------------
[Notarial Seal]
- ---------------------------------
"OFFICIAL SEAL"
Gordana Vujanovich
Notary Public, State of Illinois
My Commission Expires 02/15/99
- ---------------------------------
<PAGE>
Discovery Zone, Inc.
By: /s/ Scott Bernstein
-----------------------------------
Name: Scott Bernstein
Title: President
ATTEST:
By: /s/ Robert Rooney
-----------------------------------
Name: Robert Rooney
Title: Secretary
[Corporate Seal]
Signed, sealed and delivered
in the presence of:
/s/ illegible
- ------------------------------
Unofficial Witness
/s/ Mark D. Woodward
- ------------------------------
Notary Public
My Commission expires:
Mark D. Woodward
Notary Public State of New York
No. 4997846
Qualified in New York County
Commission Expires June 15, 1998
- ------------------------------
[Notarial Seal]
<PAGE>
EXHIBIT A
DESCRIPTIONS OF SENIOR MORTGAGES
The following is a list of the amended and restated first priority
mortgages, deeds of trust and/or deeds to secure debt entered executed by
Borrower, on behalf of McDonald's, pursuant to the terms and conditions of
the McDonald's Documentation:
1. Amended and Restated Deed To Secure Debt and Security Agreement,
made as of July 29, 1997, by Borrower to McDonald's, relating to
mortgaged property located in Kennesaw, in the County of Cobb, in
the State of Georgia.
2. Amended and Restated Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to Chicago Title Insurance Company, a Missouri
Corporation, as trustee, for the benefit of McDonald's, relating to
trust property located in Vancouver, in the County of Clark, in the
State of Washington.
3. Amended and Restated Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to Kenneth W. Pearson, as trustee, to and for the benefit
of McDonald's, relating to trust property located in Leon Valley,
in the County of Bexar, in the State of Texas.
4. Amended and Restated Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to Kenneth W. Pearson, as trustee, for the benefit of
McDonald's, relating to trust property located in Arlington, in the
County of Tarrant, in the State of Texas.
5. Amended and Restated Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to Kenneth W. Pearson, as trustee, for the benefit of
McDonald's, relating to trust property located in San Antonio, in
the County of Bexar, in the State of Texas.
6. Amended and Restated Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to The Public Trustee of the County of Douglas, Colorado,
as trustee, to and for the benefit of McDonald's, relating to trust
property located in Littleton, in the County of Douglas, in the
State of Colorado.
<PAGE>
7. Amended and Restated Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to The Public Trustee of the County of Arapahoe, Colorado,
as trustee, to and for the benefit of McDonald's, relating to trust
property located in Aurora, in the County of Arapahoe, in the State
of Colorado.
8. Amended and Restated Mortgage, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to McDonald's, relating to mortgaged property located in
Schaumburg, in the County of Cook, in the State of Illinois.
9. Amended and Restated Mortgage, made as of July 29, 1997, by
Borrower to McDonald's, relating to mortgaged property located in
Sterling Heights, in the County of Macomb, in the State of Michigan.
10. Open-End Mortgage, Assignment of Leases and Rents, Security
Agreement and Fixture Filing (Amended and Restated), made as of
July 29, 1997, by Borrower to McDonald's, relating to mortgaged
property located in Forest Park, in the County of Hamilton, in the
State of Ohio.
11. Open-End Mortgage, Assignment of Leases and Rents, Security
Agreement and Fixture Filing (Amended and Restated), made as of
July 29, 1997, by Borrower to McDonald's, relating to mortgaged
property located in Columbus, in the County of Franklin, in the
State of Ohio.
12. Amended and Restated Open-End Mortgage, Assignment of Leases and
Rents, Security Agreement and Fixture Filing, made as of July 29,
1997, by Borrower to McDonald's, relating to mortgaged property
located in Philadelphia, in the County of Philadelphia, in the
State of Pennsylvania.
13. Amended and Restated Mortgage, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to McDonald's, relating to mortgaged property located in
Blaine, in the County of Anoka, in the State of Minnesota.
14. Amended and Restated Mortgage, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to McDonald's, relating to mortgaged property located in
Washington Township, in the County of Marion, in the State of
Indiana.
<PAGE>
EXHIBIT A-1
RECORDING INFORMATION FOR SENIOR MORTGAGE IN FAVOR OF MCDONALD'S
County Book Volume
------ ---- ------
Senior Mortgage (Kennesaw)
<PAGE>
Kennesaw
Cobb County, Georgia
EXHIBIT B
All that tract or parcel of land lying and being in Land Lot 720 of the 16th
District, 2nd Section, Cobb County, Georgia, and being more particularly
described as follows:
Commencing at the intersection of the easterly line of said land lot with the
northwesterly right-of-way line of Ernest Barrett Parkway (120 foot
right-of-way); proceeding thence along said northwesterly right-of-way line
South 54 degrees 25' 25" West a distance of 35.25 feet to a point, said point
being the True Point of Beginning; continuing thence along said northwesterly
right-of-way line South 54 degrees 25' 25" West a distance of 414.75 feet to a
point; leaving said northwesterly right-of-way line and proceeding thence
southwesterly, westerly and northwesterly 113.79 feet along the arc of a
curve to the right, said curve having a radius of 72.44 feet and being
subtended by a chord having a bearing and distance of North 80 degrees 33' 34"
West 102.45 feet to a point; proceeding thence northwesterly, northerly and
northeasterly along the arc of a curve to the right, said curve having a
radius of 97.40 feet and being subtended by a chord having a bearing and
distance of North 03 degrees 05' 43" East 121.88 feet to a point; proceeding
thence North 41 degrees 45' 00" East a distance of 132.52 feet to a point;
proceeding thence northeasterly 64.69 feet along the arc of a curve to the
left, said curve having a radius of 313.34 feet and being subtended by a
chord having a bearing and a distance of North 35 degrees 50' 09" East 64.57
feet to a point; proceeding thence South 89 degrees 00' 00" East a distance of
274.77 feet to a point; proceeding thence South 35 degrees 33' 35" East a
distance of 53.51 feet to the true point of beginning.
Said tract or parcel of land contains 1.7391 acres.
INCLUDING THE ADDITIONAL PARCEL
All that tract or parcel of land lying and being in Land Lot 720 of the 16th
District, 2nd Section, Cobb County, Georgia, and being more particularly
described as follows:
<PAGE>
Kennesaw
Cobb County, Georgia
EXHIBIT B
(continued)
Commencing at the intersection of the easterly line of said land lot with the
northwesterly right-of-way line of Ernest Barrett Parkway (120 foot
right-of-way); proceeding thence along said northwesterly right-of-way line
South 54 degrees 26' 25" West a distance of 450.00 feet to a point; leaving
said northwesterly right-of-way line and proceeding thence southwesterly,
westerly and northwesterly 113.79 feet along the arc of a curve to the right,
said curve having a radius of 72.44 feet and being subtended by a chord
having a bearing and distance of North 80 degrees 33' 34" West 102.45 feet to
a point; proceeding thence northwesterly, northerly and northeasterly along
the arc of a curve to the right, said curve having a radius of 97.40 feet and
being subtended by a chord having a bearing and distance of North 03 degrees
05' 43" East 121.68 feet to a point, said point being the True Point of
Beginning; proceeding thence North 36 degrees 38' 25" East a distance of
188.75 feet to a point; proceeding thence South 89 degrees 00' 00" East a
distance of 13.41 feet to a point; proceeding thence southwesterly 64.69 feet
along the arc of a curve to the right, said curve having a radius of 313.34
feet and being subtended by a chord having a bearing and distance of South
35 degrees 50' 09" West 64.57 feet to a point; proceeding thence South
41 degrees 45' 00" West a distance of 132.52 feet to the true point of
beginning.
TOGETHER WITH the rights, easements, privileges and obligations
appurtenant to the above-described land created and established under the
following instruments:
(a) Restrictions, easements, covenants and agreements contained in
that certain Limited Warranty Deed from Jose Manuel Lomelin, et
al., to CA Cobb Retail Investors, Limited, a Georgia Limited
Partnership, dated June 24, 1985, filed June 27, 1985, and
recorded in Deed Book 3548, page 367, Records of Cobb County,
Georgia;
<PAGE>
Kennesaw
Cobb County, Georgia
EXHIBIT B
(continued)
(b) Easement Agreement by and among AMLI Land Development-I Limited
Partnership, The Barrett Place Company Limited I, L.P. and
Stanley E. Thomas dated August 19, 1992, filed August 20, 1992,
and recorded in Deed Book 6804, page 48, aforesaid records; as
amended by that certain First Supplement to Easement Agreement
filed May 12, 1994, and recorded in Deed Book 8235, page 243,
aforesaid records; as modified by that certain Affidavit
Affecting Title filed October 12, 1994, and recorded in Deed Book
8530, page 210, aforesaid records; as terminated, canceled and
superseded by that certain Easement Agreement by and among AMLI
Land Development-I Limited Partnership, The Barrett Place Company
Limited I, L.P., Stanley E. Thomas and Barrett Pavilion Company,
Inc., dated September 30, 1994, filed October 12, 1994, and
recorded in Deed Book 8530, page 213, aforesaid records;
(c) Easements contained in that certain Limited Warranty Deed from
Stanley E. Thomas to B. R. D., Inc., dated October 30, 1992,
filed October 30, 1992, and recorded in Deed Book 6948, page
443, aforesaid records; and
(d) Permanent & Perpetual Non-Exclusive Easement Agreement, Covenants
and Restrictions for Barrett Pavilion by Stanley E. Thomas dated
April 2, 1993, filed April 27, 1993, and recorded in Deed Book
7276, page 490, aforesaid records; as amended by that certain
First Amendment to Permanent & Perpetual Non-Exclusive Easement
Agreement, Covenants and Restrictions for Barrett Pavilion dated
May 27, 1994, and recorded in Deed Book 8282, page 3, aforesaid
records; as last amended by that certain Second Amendment to
Permanent & Perpetual Non-Exclusive Easement Agreement, Covenants
and Restrictions for Barrett Pavilion dated August 11, 1994, and
recorded in Deed Book 8455, page 163, aforesaid records.
<PAGE>
EXHIBIT C
DESCRIPTIONS OF SUBORDINATED MORTGAGES
The following is a list of the subordinated mortgages, deeds of
trust and/or deeds to secure debt entered executed by Borrower, on behalf of
the Subordinated Creditor, pursuant to the terms and conditions of the
McDonald's Documentation:
1. Deed To Secure Debt and Security Agreement, made as of July 29,
1997, by Borrower to Subordinated Creditor, relating to mortgaged
property located in Kennesaw, in the County of Cobb, in the State
of Georgia.
2. Deed of Trust, Assignment of Leases and Rents, Security Agreement
and Fixture Filing, made as of July 29, 1997, by Borrower to
Chicago Title Insurance Company, a Missouri corporation, as
trustee, for the benefit of Subordinated Creditor, relating to
trust property located in Vancouver, in the County of Clark, in the
State of Washington.
3. Deed of Trust, Assignment of Leases and Rents, Security Agreement
and Fixture Filing, made as of July 29, 1997, by Borrower to
Kenneth W. Pearson, as trustee, to and for the benefit of
Subordinated Creditor, relating to trust property located in Leon
Valley, in the County of Bexar, in the State of Texas.
4. Deed of Trust, Assignment of Leases and Rents, Security Agreement
and Fixture Filing, made as of July 29, 1997, by Borrower to
Kenneth W. Pearson, as trustee, for the benefit of Subordinated
Creditor, relating to trust property located in Arlington, in the
County of Tarrant, in the State of Texas.
5. Deed of Trust, Assignment of Leases and Rents, Security Agreement
and Fixture Filing, made as of July 29, 1997, by Borrower to
Kenneth W. Pearson, as trustee, for the benefit of Subordinated
Creditor, relating to trust property located in San Antonio, in the
County of Bexar, in the State of Texas.
6. Deed of Trust, Assignment of Leases and Rents, Security Agreement
and Fixture Filing, made as of July 29, 1997, by Borrower to The
Public Trustee of the County of Douglas, Colorado, as trustee, to
and for the benefit of Subordinated Creditor, relating to trust
property located in Littleton, in the County of Douglas, in the
State of Colorado.
7. Deed of Trust, Assignment of Leases and Rents, Security Agreement
and Fixture Filing, made as of July 29, 1997, by Borrower to The
Public Trustee of the County of Arapahoe, Colorado, as trustee, to
and for the benefit of Subordinated Creditor, relating to trust
property located in Aurora, in the County of Arapahoe, in the State
of Colorado.
<PAGE>
8. Mortgage, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to
Subordinated Creditor, relating to mortgaged property located in
Schaumburg, in the County of Cook, in the State of Illinois.
9. Mortgage, made as of July 29, 1997, by Borrower to Subordinated
Creditor, relating to mortgaged property located in Sterling
Heights, in the County of Macomb, in the State of Michigan.
10. Open-End Mortgage, Assignment of Leases and Rents, Security
Agreement and Fixture Filing, made as of July 29, 1997, by Borrower
to Subordinated Creditor, relating to mortgaged property located in
Forest Park, in the County of Hamilton, in the State of Ohio.
11. Open-End Mortgage, Assignment of Leases and Rents, Security
Agreement and Fixture Filing, made as of July 29, 1997, by Borrower
to Subordinated Creditor, relating to mortgaged property located in
Columbus, in the County of Franklin, in the State of Ohio.
12. Open-End Mortgage, Assignment of Leases and Rents, Security
Agreement and Fixture Filing, made as of July 29, 1997, by Borrower
to Subordinated Creditor, relating to mortgaged property located in
Philadelphia, in the County of Philadelphia, in the State of
Pennsylvania.
13. Mortgage, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to
Subordinated Creditor, relating to mortgaged property located in
Blaine, in the County of Anoka, in the State of Minnesota.
14. Mortgage, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to
Subordinated Creditor, relating to mortgaged property located in
Washington Township, in the County of Marion, in the State of
Indiana.
<PAGE>
EXHIBIT C-1
RECORDING INFORMATION FOR SUBORDINATED MORTGAGE IN FAVOR OF STATE STREET BANK
AND TRUST COMPANY (SOLELY IN ITS CAPACITY AS TRUSTEE AND COLLATERAL AGENT
UNDER AND PURSUANT TO THE SUBORDINATED CREDITOR INDENTURE)
County Book Volume
------ ---- ------
Subordinated Mortgage
(Kennesaw)
<PAGE>
Exhibit 4.46
_______________________________________________________________________________
Space above this line for recorder's use
DOCUMENT PREPARED BY AND
AFTER RECORDING RETURN TO:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attention: Jonathan A. Reiss, Esq.
SUBORDINATION AGREEMENT
AGREEMENT made as of the 29th day of July, 1997, by and among STATE
STREET BANK AND TRUST COMPANY, solely in its capacity as trustee and
collateral agent under and pursuant to the Subordinated Creditor Indenture
(as hereinafter defined) with an address at Two International Place, Boston,
Massachusetts 02110, Attention: Corporate Trust Department, Mary Lee Storrs,
Vice President (the "Subordinated Creditor"), MCDONALD'S CORPORATION, a
Delaware corporation, with an address at McDonald's Plaza, Oak Brook,
Illinois 60523, Attention: General Counsel ("McDonald's") and DISCOVERY ZONE,
INC., a Delaware corporation, successor by merger to Leaps & Bounds, Inc.,
having its principal place of business at One Corporate Center, 110 East
Broward Boulevard, Fort Lauderdale, Florida 33301 ("Borrower").
W I T N E S S E T H:
RECITALS
A. WHEREAS, Borrower is the successor in interest to Discovery Zone,
Inc., a Delaware corporation and debtor and debtor in possession ("Old DZI"),
and Old DZI's affiliated debtors and debtors in possession including Leaps &
Bounds, Inc. (the "Debtors"),
[COLUMBUS, OHIO PROPERTY]
<PAGE>
all in the chapter 11 proceedings captioned In re Discovery Zone, Inc., et al.,
Case No. 96-411 (HSB) (Jointly Administered), before the United States
Bankruptcy Court for the District of Delaware (the "Bankruptcy Court"); and
B. WHEREAS, pursuant to an Agreement and Plan of Merger, dated as
of August 30, 1994 (the "Merger Agreement"), by and among Old DZI, and two of
the Debtors, Discovery Zone International, Inc. and Leaps & Bounds, Inc. on
the one hand, and McDonald's on the other hand, and related documentation,
McDonald's was or is the sublessor to Leaps & Bounds, Inc. of certain
properties, and Old DZI agreed to defend, indemnify and hold McDonald's and
its affiliates harmless in respect of all expenses, losses, costs,
deficiencies, liabilities and damages (including related and reasonable
counsel fees and expenses, and compensatory and demonstrable consequential
damages) incurred or suffered by McDonald's as a direct result of, inter
alia, any breach that results in any payment by McDonald's in connection with
any guarantee by McDonald's relating to such properties (the "Agreement to
Indemnify"); and
C. WHEREAS, On November 18, 1996, the Bankruptcy Court entered the
Stipulation and Order Between Debtors and McDonald's Corporation Providing
for the Resolution, Settlement and Compromise of Disputes and for Rent
Deferrals and Allowance of Certain Claims (the "Stipulation and Order"),
pursuant to which, inter alia, the Debtors assumed certain subleases relating
to properties subleased by McDonald's to the Debtors pursuant to 11 U.S.C.
Section 365 as to which the Agreement to Indemnify remains in full force and
effect, the Bankruptcy Court approved the allowance of certain claims of
McDonald's, including those claims based on the Agreement to Indemnify, and
the Bankruptcy Court approved the validity, perfection, priority and
enforceability of certain claims and liens of McDonald's against the Debtors,
including, without limitation, the validity, perfection, priority and
enforceability of the Senior Mortgages (as defined below) and the Stipulation
and Order was not appealed or otherwise challenged and remains in full force
and effect; and
D. WHEREAS, pursuant to the plan of reorganization for Old DZI and
its affiliated debtors confirmed by the Bankruptcy Court by order entered
July 18, 1997 (the "Plan"), and as required by the terms of the Stipulation
and Order, Borrower, as the reorganized successor of the Debtors, is
obligated to issue to McDonald's Secured Rent Deferral Notes in the aggregate
original principal amount of $266,466.24, which amount is subject to increase
each month in accordance with the terms thereof (the "Senior Secured Rent
Deferral Notes," and individually a "Senior Secured Rent Deferral Note") and
Secured Rejection Note in the aggregate original principal amount of
$4,416,237.90 (the "Senior Secured Rejection Note"); and
E. WHEREAS pursuant to the terms and conditions of the Stipulation
and Order, the Plan, the Agreement to Indemnify, the Senior Secured Rejection
Note and the Senior Secured Rent Deferral Notes and any related documentation
(the "McDonald's Documentation"), the repayment and performance of the
obligations of Borrower to McDonald's under the McDonald's Documentation
(including any contingent obligations under the Agreement to Indemnify, the
Stipulation and Order, including Section 7 thereof and otherwise) (the
"Senior Obligations") is secured by certain amended and restated first
priority mortgages, deeds of trust and/or deeds to secure debt described on
Exhibit A attached hereto and made a part hereof (collectively, including all
modifications, extensions and additions thereto, the "Senior Mortgages," and
individually, a "Senior Mortgage"), including the Senior Mortgages identified
by the recording information set forth in Exhibit A-1, reaffirming and
creating, to the extent necessary, valid and perfected first priority liens
on the real properties described on Exhibit B attached hereto and made a part
hereof, and other collateral described in the Senior Mortgages (collectively,
the "Real Properties," and individually, a "Real Property"); and
2
<PAGE>
F. WHEREAS, Borrower and the Subordinated Creditor entered into an
Indenture, dated July 22, 1997 (the "Subordinated Creditor Indenture") and
certain other documents and instruments related thereto, pursuant to which
and upon the terms and conditions therein indebtedness and other obligations
were incurred by the Borrower (the "Subordinated Indenture Indebtedness"),
the repayment and performance of which are secured by, among other things,
certain subordinated mortgages, deeds of trust and/or deeds to secure debt
described on Exhibit C hereto and made a part hereof (collectively, including
all modifications, extensions and additions thereto, the "Subordinated
Mortgages," and individually, a "Subordinated Mortgage"), including the
Subordinated Mortgages identified by the recording information set forth in
Exhibit C-1, creating valid and perfected liens on the Real Properties
subordinate to the Senior Mortgages; and
G. WHEREAS, pursuant to the Senior Mortgages, the Borrower cannot
grant a subordinated lien on any of the Real Properties without the express
approval of McDonald's and the Subordinated Indenture Indebtedness will not be
able to be issued without the agreement of McDonald's to permit the issuance of
the Subordinated Mortgages; and
H. WHEREAS, McDonald's approval of the Borrower's granting of the
Subordinated Mortgages is conditioned on the entry into this Subordination
Agreement by the Subordinated Creditor, which hereby warrants and represents
that it has full power and authority under the Subordinated Creditor
Indenture to enter into this Subordination Agreement on behalf of all holders
of any securities or obligations whatsoever issued pursuant to the
Subordinated Creditor Indenture; and
I. WHEREAS, the Subordinated Creditor and McDonald's each desire
to enter into this Subordination Agreement to confirm the subordination of
the liens of the Subordinated Mortgages to the liens of the Senior Mortgages
in accordance with the terms of this Agreement;
NOW THEREFORE, IN CONSIDERATION OF THE MUTUAL BENEFITS accruing to
the parties hereto, and other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
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1. Consent. Pursuant and subject to the other terms of this
Agreement, McDonald's consents to the Subordinate Mortgages. This consent
shall not be deemed to (i) be a consent to any future encumbrances, (ii) be a
waiver of the limitation on future encumbrances contained in the Senior
Mortgages, (iii) be a consent to or waiver of any other term or condition of
the Senior Mortgages or (iv) prejudice any right or rights which McDonald's
may now or in the future have under or in connection with the Senior
Mortgages.
2. Priority of McDonald's.
(a) Subordination. The Subordinated Creditor hereby agrees for
itself and its successors and assigns that, except as otherwise expressly
provided herein, the terms, provisions and liens of the Subordinated
Mortgages, and any of the Subordinated Creditor's liens or security interests
in the Real Properties (but only to the extent of McDonald's interest in such
Real Properties), are hereby intentionally and unconditionally subordinated
to, and at all times shall be junior, subject and subordinate to the terms,
provisions and liens of the Senior Mortgages (including, without limitation,
the liens securing future optional and/or obligatory increases in the amount
of the Senior Obligations or advances by McDonald's to or for the benefit of
the Borrower, regardless of the use to which such advances are put), as well
as to any and all increases therein and all extensions, consolidations,
modifications, renewals, refinancings and supplements thereto. The
Subordinated Creditor hereby waives any right it may have to require that
McDonald's marshal any assets of the Borrower in favor of the Subordinated
Creditor and the Subordinated Creditor agrees that it shall not acquire, by
subrogation or otherwise, any lien, estate, right or other interest in the
Real Properties which is or may be prior or superior in right to the Senior
Mortgages, including but not limited to advances for real estate taxes and
assessments. The rights and priorities set forth in this Paragraph 2(a) shall
be effective notwithstanding the order of creation, attachment, vesting or
perfection of the rights of McDonald's under the Senior Mortgages, or of the
Subordinated Creditor under the Subordinated Mortgages, the Subordinated
Creditor Indenture or any other documents executed in connection therewith
(including, without limitation, any UCC-1 financing statements or fixture
filings). The Subordinated Creditor shall be deemed to have consented (i) to
any action by Borrower to which McDonald's consents pursuant to the Senior
Mortgages and (ii) to each act of, or failure to act by, the Borrower that is
not prohibited by the Senior Mortgages, provided that, both with respect to
(i) and (ii), such deemed consent is applicable only to acts or failures to
act in connection with the sale, construction, restoration, insurance,
condemnation or alterations of, to or on, or with respect to the Real
Properties and any other matters relating to the Real Properties.
(b) Insurance; Condemnation Awards. The Subordinated Creditor
hereby assigns and releases unto McDonald's, until payment in full of the
Senior Obligations:
(i) all of its right, title, interest or claim, if
any, in and to the proceeds of all policies of insurance
covering the Real Properties, for application in accordance
with the provisions of the Senior Mortgages or as the
Borrower and McDonald's may otherwise agree; and
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(ii) all of its right, title and interest or claim, if any, in
and to all awards or other compensation made for any taking
of any part of the Real Properties for application in
accordance with the provisions of the Senior Mortgages or as
the Borrower and McDonald's may otherwise agree.
All such insurance proceeds or awards which may become due and
payable to the Subordinated Creditor shall be payable directly to McDonald's,
and the Subordinated Creditor directs any insurance company or governmental
authority to make payment thereof directly to McDonald's for application in
accordance with the Senior Mortgages. In the event that any such insurance
proceeds or awards are made payable to the Subordinated Creditor despite such
direction, the Subordinated Creditor shall promptly transfer the same, or
promptly cause the same to be transferred, to McDonald's.
(c) Assignment of Leases and Rents. Any assignment in favor of the
Subordinated Creditor of any Leases or Rents (as such terms are defined in
the Senior Mortgages) contained in the Subordinated Mortgages or the
Subordinated Creditor Indenture, or in any other document or instrument
related thereto or delivered in connection therewith, and all rights of the
Subordinated Creditor thereunder, are hereby intentionally and
unconditionally subordinated to, and shall be in all respects junior, subject
and subordinate to any assignment of rents, leases or other agreements
relating to the Real Properties contained in (i) the Senior Mortgages, and
(ii) any other document now in existence or hereafter made by the Borrower to
secure the Senior Obligations, and to all rights of McDonald's thereunder.
Without limiting the foregoing provisions of this Paragraph 2(c), from and
after the execution and delivery of the Subordinated Mortgages to the
Subordinated Creditor, the Subordinated Creditor shall not be entitled to
receive or retain any Rents or other amounts assigned to the Subordinated
Creditor under any such document or instrument until such time as the Senior
Obligations shall have been completely paid in full.
(d) Non-Disturbance Agreements. The Subordinated Creditor shall be
required to give a non-disturbance agreement to any lessee or tenant of the
Real Properties with respect to whose lease McDonald's, as holder of the
Senior Mortgages, shall have executed a non-disturbance agreement, and, if
the Subordinated Creditor fails to give any such non-disturbance agreement,
the Subordinated Creditor nevertheless agrees not to disturb the possession,
occupancy or rights of any such lessee or tenant without the prior written
consent of McDonald's in each instance.
(e) Further Assurances. To further evidence the subordination
hereinabove provided for, the Subordinated Creditor agrees that, within 30
days after request by McDonald's, it will, at the Subordinated Creditor's
sole cost and expense, do, execute, acknowledge and deliver all and every
such further acts, deeds, conveyances and instruments as McDonald's may
reasonably request for the better assuring and evidencing of this
subordination (including, without limitation, further affirmation of the
application of this Agreement to future optional and/or obligatory increases
in the amount of the Senior Obligations or advances, regardless of the use to
which such increases or advances are put).
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<PAGE>
(f) Release or Subordination of Lien. If McDonald's shall at any
time release its lien on the Real Properties (or any part thereof) in
connection with a sale or refinancing of the Real Properties or any part
thereof, the Subordinated Creditor shall, without any payment to it, be
deemed to have consented to such sale or refinancing and shall release the
lien of the Subordinated Mortgages thereon at the same time that McDonald's
releases the lien of the Senior Mortgages thereon, and, in the event that the
Subordinated Creditor has not executed a release within seven (7) business
days of being requested to do so by Borrower of McDonald's in connection with
such sale or refinancing, the Subordinated Creditor hereby irrevocably
appoints McDonald's as its attorney in fact (coupled with an interest) to
execute in the name of the Subordinated Creditor or without the signature of
the Subordinated Creditor to the extent McDonald's may lawfully do so, one or
more releases or reconveyances of mortgages/deeds of trust or other documents
to evidence such release of the lien of the Subordinated Mortgages. Until
the Senior Obligations have been completely paid in full (including, without
limitation, any obligations which may arise under the Agreement to
Indemnify), all proceeds from or with respect to the sale, refinancing or
other disposition of the Real Properties or any part thereof shall be paid to
McDonald's (or placed into escrow for the benefit of McDonald's pursuant to
the terms of the Senior Mortgages) in satisfaction of the Senior Obligations
pursuant to the terms of the Senior Mortgages and the McDonald's
Documentation, and the Subordinated Creditor shall have no right, claim or
interest in or to any such proceeds.
(g) Enforcement. The Subordinated Creditor agrees that no remedies
provided for under the Subordinated Mortgages or other documents (to the
extent relating to the Real Properties in which McDonald's has an interest)
executed in connection with the Subordinated Creditor Indenture shall be
exercised with respect to the Real Properties, including, without limitation,
the commencement or prosecution of foreclosure proceedings, the exercise of
any power of sale, or the appointment of a receiver (or the Subordinated
Creditor as mortgagee in possession), without obtaining the prior written
consent of McDonald's. The Subordinated Creditor hereby consents and agrees
that any lawful action taken by or on behalf of McDonald's in the exercise of
McDonald's rights and/or remedies under the Senior Mortgages (including,
without limitation, any foreclosure or acquisition of title to a Real
Property by deed in lieu of foreclosure or otherwise) are hereby deemed to be
consented to by the Subordinated Creditor in all respects.
(h) No Third-Party Beneficiaries. The provisions of clauses
(a)-(g) of this Paragraph 2 are solely for the benefit of the holder of the
Senior Mortgages and shall not create any rights in the Borrower or any other
person.
3. Bankruptcy. The provisions of this Agreement shall continue in
full force and effect notwithstanding the occurrence of any proceeding under
Title 11 of the United States Code (11 U.S.C. Sec. 101 et seq.) or any other
bankruptcy, insolvency, liquidation, reorganization, dissolution, winding up,
liquidation, readjustment or other similar proceeding relating to the
Borrower or to its property (whether voluntary or involuntary, partial or
complete, and whether in bankruptcy, insolvency or receivership, or upon a
general assignment for the benefit of creditors, or any other marshaling of
the assets and liabilities of
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the Borrower, or any sale of all or substantially all of the assets of the
Borrower, or otherwise) (each, an "Insolvency Proceeding"). Without limiting
the generality of the foregoing, in the event of an Insolvency Proceeding,
(i) the Senior Obligations (including post-petition interest on the Senior
Obligations, whether or not such interest is allowable under Section 502 or
506 of the United States Bankruptcy Code) shall first be completely paid in
full before the Subordinated Creditor shall be entitled to receive or retain
any proceeds from or relating to the sale, refinancing or other disposition
of the Real Properties or any portion thereof in respect of the Subordinated
Indenture Indebtedness; and (ii) the Subordinated Creditor shall not object
to or oppose any efforts by McDonald's to obtain relief from the automatic
stay with respect to the Real Properties under Section 362 of the United
States Bankruptcy Code.
4. Payments Received by the Subordinated Creditor. In the event
that the Subordinated Creditor receives any payment or other distribution of
any kind or character from the Borrower or from any other source whatsoever
in respect of any of the Subordinated Indenture Indebtedness, or receives any
security therefor, whether by way of agreement or compromise or otherwise,
which it is not entitled to retain pursuant to the terms of this Agreement,
the Subordinated Creditor shall immediately deliver the same to McDonald's,
in the form received, together with any necessary endorsements, in each case
for application on account of the Senior Obligations, but until so received
by McDonald's, the same shall be held in trust by the Subordinated Creditor
as the property of McDonald's.
5. No Consent Required. The Subordinated Creditor hereby agrees
that McDonald's may, from time to time, at its sole discretion and without
notice to or consent of or from the Subordinated Creditor, and without
affecting the obligations of the Subordinated Creditor herein or the
subordination provided for hereunder, take any or all of the following
actions:
(a) retain or obtain a lien or security interest in any
property to secure all or any part of the Senior Obligations;
(b) retain, obtain or permit the release of the primary or
secondary obligations of any other obligor or obligors with respect to all or
any part of the Senior Obligations;
(c) fail to perfect, or release McDonald's lien or security
interest in, or surrender, release or permit any substitution or exchange
for, all or any part of any property (including, without limitation, the Real
Properties) securing all or any part of the Senior Obligations;
(d) change the manner, place or terms of payments, and/or
change or extend the time of payment of, renew or alter, all or any part of
the Senior Obligations, any security therefor, or any liability incurred
directly or indirectly in respect thereof, and the provisions hereof shall
apply to the Senior Obligations as so changed, extended, renewed or altered;
7
<PAGE>
(e) sell, exchange, release, surrender, realize upon or
otherwise deal with in any manner and in any order the Real Properties or any
part thereof;
(f) exercise or refrain from exercising or release any rights
and/or remedies against the Borrower or others (including, without
limitation, any guarantor of all or a portion of the Senior Obligations) or
otherwise act or refrain from acting; and/or
(g) settle or compromise the Senior Obligations or any part
thereof or any security therefor, or any liability incurred directly or
indirectly in respect thereof or hereof.
6. Transfer. McDonald's may, from time to time, without notice to
Subordinated Creditor, assign or transfer any or all of the Senior
Obligations or any interest therein or any security therefor.
Notwithstanding any such assignment or transfer or any subsequent assignment
or transfer thereof, the holders of the Senior Obligations and the holders of
any interest therein shall be entitled to the benefits of this Agreement to
the same extent as if such holders were McDonald's specifically named in this
Agreement.
7. Other Liens. Nothing in this Agreement shall prohibit, prevent
or otherwise impede the Subordinated Creditor from exercising any rights,
remedy or power which it may have against the Borrower and/or its
subsidiaries with respect to any collateral other than the Real Properties,
which secures the Subordinated Indenture Indebtedness, provided, however,
that the Subordinated Creditor shall not take any action which could impair
the lien of the Senior Mortgages or the ability of McDonald's to foreclose or
otherwise enforce its security interests or liens thereunder.
8. Termination. This Agreement shall in all respects be a
continuing agreement and shall remain in full force and effect until (a) the
complete payment in full of all of the Senior Obligations, and (b) the
execution by McDonald's of releases of all of the Senior Mortgages and the
recording of such releases in the appropriate real property records.
9. Miscellaneous.
(a) No Waiver. No delay on the part of McDonald's in the
exercise of any right or remedy shall operate as a waiver thereof, and no
single or partial exercise by McDonald's of any right or remedy shall
preclude any other or further exercise thereof or the exercise of any other
right or remedy, nor shall any modification, waiver or discharge of any of
the provisions of this Agreement be binding upon McDonald's except as
expressly set forth in a writing duly signed and delivered by McDonald's.
(b) Obligations Absolute. The obligations of the Subordinated
Creditor herein shall be absolute and unconditional, and the subordination of
the lien of the Subordinated Mortgages herein contained shall be effective
with respect to the Senior Obligations, notwithstanding any right or power of
the Borrower or anyone else to assert any claim or defense as to the
invalidity or unenforceability of any such obligation and/or any lien
securing the same, in whole or in part, or any determination of such
invalidity or
8
<PAGE>
unenforceability and no such event shall affect or impair the agreements and
obligations of the Subordinated Creditor hereunder. In the event that any of
the Senior Obligations and/or any lien securing the same is determined to be
invalid or unenforceable, in whole or in part, the Subordinated Creditor
agrees that, as between McDonald's and the Subordinated Creditor, the Senior
Obligations and such lien shall be deemed valid and enforceable, and the
obligations of the Subordinated Creditor hereunder with respect thereto shall
not be affected by any such determination but shall continue in full force
and effect.
(c) Sole Discretion. It is understood and agreed that in the
event of any dissolution, winding up, liquidation, readjustment,
reorganization or other similar proceedings relating to the Borrower or to
its property, McDonald's may use its sole discretion with respect to the
enforcement of the Senior Mortgages, or in otherwise exercising or refraining
from exercising any rights or in taking or refraining from taking any action
which it may be entitled to take or assert hereunder; and that McDonald's
shall not be under any liability for doing or refraining from doing anything
relative thereto in the exercise of its own reasonable judgment or which it
may deem necessary or desirable.
(d) Waiver of Notice and Diligence. The Subordinated Creditor
hereby waives: (i) notice of acceptance by McDonald's of this Agreement; (ii)
notice of the existence or creation or nonpayment of all or any of the Senior
Obligations; and (iii) all diligence in collection or protection of or
realization upon the Senior Obligations or any security therefor.
(e) Reinstatement. If, as a result of, or arising from, any
bankruptcy, insolvency or similar proceeding, claim is ever made upon
McDonald's or any participant in the Senior Obligations for repayment or
recovery of any amount or amounts received by it in payment or on account of
the Senior Obligations from the proceeds of the sale, refinancing or other
disposition of all or a portion of the Real Properties and McDonald's or such
participant repays the Borrower or its legal representative or a trustee in
bankruptcy, all or part of such amount by reason of (i) any judgment, decree
or order of any court or administrative body having jurisdiction or (ii) any
settlement or compromise of any such claim effected by McDonald's or such
participant with any such claimant (including the Borrower or any guarantor),
then in such event the Subordinated Creditor agrees that it shall be and
remain obligated hereunder with respect to the amount so repaid or recovered
to the same extent as if such amount had never originally been received by
McDonald's or such participant and to the extent the Subordinated Creditor
has received payments or distributions in respect of the Subordinated
Indenture Indebtedness from the proceeds of the sale, refinancing or other
disposition of the Real Properties.
10. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective
successors and assigns.
11. Notices. Any notices or other communications required or
permitted hereunder shall be in writing, and shall be sufficiently given if
made by hand delivery, by telecopier or registered or certified mail, postage
prepaid, return receipt requested, to the
9
<PAGE>
addresses listed in the first paragraph of this Agreement. Each party may
designate additional or different addresses for notices to such party. Any
notice or communication to either party hereto shall be deemed to have been
given or made as of the date so delivered if personally delivered; when
receipt is acknowledged electronically (with copy by U.S. mail), if faxed
(the fax number for the Subordinated Creditor is (617) 664-5371; the fax
number for McDonald's is (630) 623-3000; and five (5) calendar days after
mailing if sent by registered or certified mail, postage prepaid (except that
a notice of change of address shall not be deemed to have been given until
actually received by the addressee).
12. Representations by the Subordinated Creditor. The Subordinated
Creditor has the power, authority and legal right pursuant to the
Subordinated Creditor Indenture to execute, deliver and perform this
Agreement. The Subordinated Creditor has been duly authorized pursuant to
the Subordinated Creditor Indenture to enter into this Subordination
Agreement on behalf of the Holders (as defined in the Subordinated Creditor
Indenture) and this Subordination Agreement constitutes the valid and binding
obligations of the Subordinated Creditor on behalf of such Holders
enforceable against the Subordinated Creditor on behalf of such Holders in
accordance with its terms.
13. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York including both
matters of internal law and conflicts of law, except that matters as to the
priority of liens on the Real Properties and remedies and procedural matters
relating thereto shall be governed by the laws of the State in which the Real
Properties is located.
14. Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by
signing any such counterpart.
15. Singular and Plural. Words used in this Agreement in the
singular, where the context so permits, shall be deemed to include the plural
and vice versa. The definitions of words in the singular in this Agreement
shall apply to such words when used in the plural where the context so
permits and vice versa.
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IN WITNESS WHEREOF, this Agreement has been duly executed by
the parties hereto as of the date first above written.
In The Presence of (witnesses STATE STREET BANK AND TRUST COMPANY,
for both STATE STREET BANK AND soley in its capacity as trustee and
TRUST COMPANY signatories): collateral agent under and pursuant to
the Subordinated Creditor Indenture
/s/ Deborah M. Riellchen By: /s/ Mary Lee Storrs
______________________________________ __________________________________
Deborah M. Riellchen Print Name: Mary Lee Storrs
Print Name____________________________ Title: Vice President
/s/ Deborah Tauerja By: /s/ Ruth A. Smith
______________________________________ __________________________________
Deborah Tauerja Print Name: Ruth A. Smith
Print Name____________________________ Title: Vice President
In The Presence of (witnesses McDONALD'S CORPORATION
for both McDONALD'S CORPORATION
signatories):
/s/ Mark A Moreno By: /s/ Gloria Santona
______________________________________ __________________________________
Mark A Moreno Print Name: Gloria Santona
Print Name____________________________ Title: Vice President,
Deputy General
Counsel & Secretary
/s/ Ann Ferguson By: /s/ Joseph R. Thomas
______________________________________ __________________________________
Ann Ferguson Print Name: Joseph R. Thomas
Print Name____________________________ Title: Vice President, Associate
Associate General
Counsel and Assistant
Secretary
In The Presence of (witnesses DISCOVERY ZONE, INC.
for both DISCOVERY ZONE, INC.
signatories):
/s/ Mark D. Woodward By: /s/ Scott Bernstein
______________________________________ __________________________________
Mark D. Woodward Print Name: Scott Bernstein
Print Name____________________________ Title: President
/s/ Seth L. Grossman By: /s/ Robert Rooney
______________________________________ __________________________________
Seth L. Grossman Print Name: Robert Rooney
Print Name____________________________ Title: Sr. Vice President
<PAGE>
STATE OF MASSACHUSETTS)
COUNTY OF SUFFOLK )
Before me, a Notary Public in and for said County and State,
personally appeared the above-named STATE STREET BANK AND TRUST COMPANY, a trust
company organized under the laws of Massachusetts by Mary Lee Storrs and
Ruth A. Smith, its Vice President and Vice President, who acknowledged
that they did sign the foregoing instrument for and on behalf of STATE STREET
BANK AND TRUST COMPANY, and that the same is the free act and deed of STATE
STREET BANK AND TRUST COMPANY and their free act and deed individually and as
such officers.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal at
Boston, MA, this 31 day of July 1997.
/s/ Agnes G. Dillon
________________________
Notary Public
THIS DOCUMENT PREPARED BY AND Agnes G. Dillon
RECORDING REQUESTED BY AND My commission expires
WHEN RECORDED MAIL TO: 5/15/03
Jonathan Reiss, Esq.
Cleary, Gottlieb, Steen & Hamilton
1 Liberty Plaza
New York, New York 10006
<PAGE>
STATE OF ILLINOIS )
COUNTY OF DuPAGE )
Before me, a Notary Public in and for said County and State,
personally appeared the above-named McDONALD'S CORPORATION, a corporation
organized under the laws of Delaware by Gloria Santona and Joseph R. Thomas,
its VP, Deputy General Counsel and Secretary and VP, Associate General
Counsel and Assistant Secretary, who acknowledged that they did sign the
foregoing instrument for and on behalf of McDONALD'S CORPORATION, and that
the same is the free act and deed of McDONALD'S CORPORATION and their free
act and deed individually and as such officers.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal at
Oak Brook, Illinois, this 31st day of July 1997.
/s/ Gordana Vujanovich
________________________
Notary Public
THIS DOCUMENT PREPARED BY AND ------------------------
RECORDING REQUESTED BY AND | "OFFICIAL SEAL" |
WHEN RECORDED MAIL TO: | Gordana Vujanovich |
Jonathan Reiss, Esq. |Notary Public, State of|
Cleary, Gottlieb, Steen & Hamilton |Illinois. My commission|
1 Liberty Plaza |expires 02/15/99 |
New York, New York 10006 -------------------------
<PAGE>
STATE OF NEW YORK )
COUNTY OF WESTCHESTER )
Before me, a Notary Public in and for said County and State,
personally appeared the above-named DISCOVERY ZONE, INC., a corporation
organized under the laws of Delaware by Scott Bernstein and
Robert Rooney, its President and Vice President, who acknowledged
that they did sign the foregoing instrument for and on behalf of DISCOVERY ZONE,
INC., and that the same is the free act and deed of DISCOVERY ZONE, INC. and
their free act and deed individually and as such officers.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal at
50 Main Street, White Plains, NY, this 28th day of July 1997.
/s/ Mark D. Woodward
________________________
Notary Public
THIS DOCUMENT PREPARED BY AND MARK D. WOODWARD
RECORDING REQUESTED BY AND Notary Public State of New York
WHEN RECORDED MAIL TO: No. 4997846
Jonathan Reiss, Esq. Qualified in New York County
Cleary, Gottlieb, Steen & Hamilton Commission expires June 15, 1998
1 Liberty Plaza
New York, New York 10006
<PAGE>
EXHIBIT A
DESCRIPTIONS OF SENIOR MORTGAGES
The following is a list of the amended and restated first priority
mortgages, deeds of trust and/or deeds to secure debt entered executed by
Borrower, on behalf of McDonald's, pursuant to the terms and conditions of
the McDonald's Documentation:
1. Amended and Restated Deed To Secure Debt and Security Agreement, made as of
July 29, 1997, by Borrower to McDonald's, relating to mortgaged property
located in Kennesaw, in the County of Cobb, in the State of Georgia.
2. Amended and Restated Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to Chicago Title Insurance Company, a Missouri Corporation, as
trustee, for the benefit of McDonald's, relating to trust property located
in Vancouver, in the County of Clark, in the State of Washington.
3. Amended and Restated Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to Kenneth W. Pearson, as trustee, to and for the benefit of
McDonald's, relating to trust property located in Leon Valley, in the
County of Bexar, in the State of Texas.
4. Amended and Restated Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to Kenneth W. Pearson, as trustee, for the benefit of McDonald's,
relating to trust property located in Arlington, in the County of Tarrant,
in the State of Texas.
5. Amended and Restated Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to Kenneth W. Pearson, as trustee, for the benefit of McDonald's,
relating to trust property located in San Antonio, in the County of Bexar,
in the State of Texas.
6. Amended and Restated Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to The Public Trustee of the County of Douglas, Colorado, as
trustee, to and for the benefit of McDonald's, relating to trust property
located in Littleton, in the County of Douglas, in the State of Colorado.
<PAGE>
7. Amended and Restated Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to The Public Trustee of the County of Arapahoe, Colorado, as
trustee, to and for the benefit of McDonald's, relating to trust property
located in Aurora, in the County of Arapahoe, in the State of Colorado.
8. Amended and Restated Mortgage, Assignment of Leases and Rents, Security
Agreement and Fixture Filing, made as of July 29, 1997, by Borrower to
McDonald's, relating to mortgaged property located in Schaumburg, in the
County of Cook, in the State of Illinois.
9. Amended and Restated Mortgage, made as of July 29, 1997, by Borrower to
McDonald's, relating to mortgaged property located in Sterling Heights, in
the County of Macomb, in the State of Michigan.
10. Open-End Mortgage, Assignment of Leases and Rents, Security Agreement and
Fixture Filing (Amended and Restated), made as of July 29, 1997, by
Borrower to McDonald's, relating to mortgaged property located in Forest
Park, in the County of Hamilton, in the State of Ohio.
11. Open-End Mortgage, Assignment of Leases and Rents, Security Agreement and
Fixture Filing (Amended and Restated), made as of July 29, 1997, by
Borrower to McDonald's, relating to mortgaged property located in Columbus,
in the County of Franklin, in the State of Ohio.
12. Amended and Restated Open-End Mortgage, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to McDonald's, relating to mortgaged property located in
Philadelphia, in the County of Philadelphia, in the State of Pennsylvania.
13. Amended and Restated Mortgage, Assignment of Leases and Rents, Security
Agreement and Fixture Filing, made as of July 29, 1997, by Borrower to
McDonald's, relating to mortgaged property located in Blaine, in the County
of Anoka, in the State of Minnesota.
14. Amended and Restated Mortgage, Assignment of Leases and Rents, Security
Agreement and Fixture Filing, made as of July 29, 1997, by Borrower to
McDonald's, relating to mortgaged property located in Washington Township,
in the County of Marion, in the State of Indiana.
<PAGE>
EXHIBIT A-1
RECORDING INFORMATION FOR SENIOR MORTGAGE IN FAVOR OF MCDONALD'S
County Book Volume
Senior Mortgage (Columbus)
<PAGE>
EXHIBIT B
LEGAL DESCRIPTION
DESCRIPTION OF 1.899 ACRES OF LAND
LOCATED ON THE SOUTHERLY SIDE OF CHANTRY
DRIVE AND WEST OF BRICE ROAD, IN THE
CITY OF COLUMBUS, COUNTY OF FRANKLIN,
STATE OF OHIO
SITUATED IN THE STATE OF OHIO, COUNTY OF FRANKLIN, CITY OF
COLUMBUS, BEING IN HALF SECTION 45, SECTION 26, TOWNSHIP 12, RANGE 21,
REFUGEE LANDS, CONTAINING 1.899 ACRES OF LAND, MORE OR LESS, SAID 1.899 ACRES
OF LAND BEING OUT OF THAT 50.917 ACRE TRACT OF LAND DESCRIBED IN THE DEED TO
CHANTRY SQUARE JOINT VENTURE, OF RECORD IN OFFICIAL RECORD 09543J14,
RECORDER'S OFFICE, FRANKLIN COUNTY, OHIO, SAID 1.899 ACRES OF LAND MORE
PARTICULARLY DESCRIBED AS FOLLOWS:
BEGINNING AT A POINT IN A SOUTHERLY RIGHT-OF-WAY LINE OF CHANTRY
DRIVE, EIGHTY FEET IN WIDTH, AS SAID CHANTRY DRIVE IS DESIGNATED AND
DELINEATED UPON THE RECORDED PLAT OF THE DEDICATION OF SCARBOROUGH BOULEVARD,
CHANTRY DRIVE, PARK CRESCENT, ALSHIRE ROAD AND EASEMENTS, OF RECORD IN PLAT
BOOK 46, PAGE 52, 53, 54, AND 55, SAID POINT BEING THE NORTHEASTERLY CORNER
OF THAT 1.972 ACRE TRACT OF LAND DESIGNATED AS TRACT II AND DESCRIBED IN THE
DEED TO BRATCHER, CAMANITI, CURRY AND SNYDER, OF RECORD IN OFFICIAL RECORD
03520A07, BOTH BEING OF RECORD IN THE RECORDER'S OFFICE, FRANKLIN COUNTY,
OHIO, SAID POINT ALSO BEING THE TRUE PLACE OF BEGINNING FOR THE PARCEL HEREIN
DESCRIBED:
THENCE EASTWARDLY, WITH THE SOUTHERLY RIGHT-OF-WAY BOUNDARY OF SAID
CHANTRY DRIVE AND WITH THE NORTHERLY BOUNDARY OF SAID 50.917 ACRE TRACT, THE
FOLLOWING SEVEN (7) COURSES AND DISTANCES:
1) S 86 DEGREES 10' 30" E, A DISTANCE OF 232.07 FEET TO POINT OF
CURVATURE;
2) WITH THE ARC OF A CURVE TO THE RIGHT HAVING A RADIUS OF
35.00 FEET, A CENTRAL ANGLE OF 90 DEGREES 00' 00" AND A CHORD THAT
BEARS S 41 DEGREES 10' 30" E, A CHORD DISTANCE OF 49.50 FEET TO A
POINT.
3) S 86 DEGREES 10' 30" E, A DISTANCE OF 16.71 FEET TO A POINT;
4) S 17 DEGREES 53' 38" E, A DISTANCE OF 19.49 FEET TO POINT;
5) S 3 DEGREES 49' 30" W, A DISTANCE OF 166.92 FEET TO A POINT;
6) S 49 DEGREES 34' 9" W, A DISTANCE OF 113.86 FEET TO A POINT;
7) N 86 DEGREES 10' 30" W, A DISTANCE OF 209.44 FEET TO A POINT;
8) N 3 DEGREES 49' 30" E, A DISTANCE OF 299.49 FEET TO THE TRUE POINT OF
BEGINNING AND CONTAINING 1.899 ACRES OF LAND MORE OR LESS.
PARCEL 2
The Easement interest created by Article III of the Construction and Easement
Agreement recorded in Official Records Volume 24988, page D07, Recorder's
Office; Franklin County, Ohio.
<PAGE>
EXHIBIT C
DESCRIPTIONS OF SUBORDINATED MORTGAGES
The following is a list of the subordinated mortgages, deeds of
trust and/or deeds to secure debt entered executed by Borrower, on behalf of
the Subordinated Creditor, pursuant to the terms and conditions of the
McDonald's Documentation:
1. Deed To Secure Debt and Security Agreement, made as of July 29, 1997, by
Borrower to Subordinated Creditor, relating to mortgaged property located
in Kennesaw, in the County of Cobb, in the State of Georgia.
2. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Chicago Title
Insurance Company, a Missouri corporation, as trustee, for the benefit of
Subordinated Creditor, relating to trust property located in Vancouver, in
the County of Clark, in the State of Washington.
3. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Kenneth W.
Pearson, as trustee, to and for the benefit of Subordinated Creditor,
relating to trust property located in Leon Valley, in the County of Bexar,
in the State of Texas.
4. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Kenneth W.
Pearson, as trustee, for the benefit of Subordinated Creditor, relating to
trust property located in Arlington, in the County of Tarrant, in the State
of Texas.
5. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Kenneth W.
Pearson, as trustee, for the benefit of Subordinated Creditor, relating to
trust property located in San Antonio, in the County of Bexar, in the State
of Texas.
6. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to The Public Trustee
of the County of Douglas, Colorado, as trustee, to and for the benefit of
Subordinated Creditor, relating to trust property located in Littleton, in
the County of Douglas, in the State of Colorado.
7. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to The Public Trustee
of the County of Arapahoe, Colorado, as trustee, to and for the benefit of
Subordinated Creditor, relating to trust property located in Aurora, in the
County of Arapahoe, in the State of Colorado.
<PAGE>
8. Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture
Filing, made as of July 29, 1997, by Borrower to Subordinated Creditor,
relating to mortgaged property located in Schaumburg, in the County of
Cook, in the State of Illinois.
9. Mortgage, made as of July 29, 1997, by Borrower to Subordinated Creditor,
relating to mortgaged property located in Sterling Heights, in the County
of Macomb, in the State of Michigan.
10. Open-End Mortgage, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Subordinated
Creditor, relating to mortgaged property located in Forest Park, in the
County of Hamilton, in the State of Ohio.
11. Open-End Mortgage, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Subordinated
Creditor, relating to mortgaged property located in Columbus, in the County
of Franklin, in the State of Ohio.
12. Open-End Mortgage, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Subordinated
Creditor, relating to mortgaged property located in Philadelphia, in the
County of Philadelphia, in the State of Pennsylvania.
13. Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture
Filing, made as of July 29, 1997, by Borrower to Subordinated Creditor,
relating to mortgaged property located in Blaine, in the County of Anoka,
in the State of Minnesota.
14. Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture
Filing, made as of July 29, 1997, by Borrower to Subordinated Creditor,
relating to mortgaged property located in Washington Township, in the
County of Marion, in the State of Indiana.
<PAGE>
EXHIBIT C-1
RECORDING INFORMATION FOR SUBORDINATED MORTGAGE IN FAVOR OF STATE STREET
BANK AND TRUST COMPANY (SOLELY IN ITS CAPACITY AS TRUSTEE AND COLLATERAL
AGENT UNDER AND PURSUANT TO THE SUBORDINATED CREDITOR INDENTURE)
County Book Volume
Subordinated Mortgage (Columbus)
<PAGE>
Exhibit 4.47
________________________________________________________________________________
Space above this line for recorder's use
DOCUMENT PREPARED BY AND
AFTER RECORDING RETURN TO:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attention: Jonathan A. Reiss, Esq.
SUBORDINATION AGREEMENT
AGREEMENT made as of the 29th day of July, 1997, by and among STATE
STREET BANK AND TRUST COMPANY, solely in its capacity as trustee and
collateral agent under and pursuant to the Subordinated Creditor Indenture
(as hereinafter defined) with an address at Two International Place, Boston,
Massachusetts 02110, Attention: Corporate Trust Department, Mary Lee Storrs,
Vice President (the "Subordinated Creditor"), MCDONALD'S CORPORATION, a
Delaware corporation, with an address at McDonald's Plaza, Oak Brook,
Illinois 60523, Attention: General Counsel ("McDonald's") and DISCOVERY ZONE,
INC., a Delaware corporation, successor by merger to Leaps & Bounds, Inc.,
having its principal place of business at One Corporate Center, 110 East
Broward Boulevard, Fort Lauderdale, Florida 33301 ("Borrower").
W I T N E S S E T H:
RECITALS
A. WHEREAS, Borrower is the successor in interest to Discovery Zone,
Inc., a Delaware corporation and debtor and debtor in possession ("Old DZI"),
and Old DZI's affiliated debtors and debtors in possession including Leaps &
Bounds, Inc. (the "Debtors"),
[STERLING HEIGHTS, MICHIGAN PROPERTY]
<PAGE>
all in the chapter 11 proceedings captioned In re Discovery Zone, Inc., et
al., Case No. 96-411 (HSB) (Jointly Administered), before the United States
Bankruptcy Court for the District of Delaware (the "Bankruptcy Court"); and
B. WHEREAS, pursuant to an Agreement and Plan of Merger, dated as of
August 30, 1994 (the "Merger Agreement"), by and among Old DZI, and two of
the Debtors, Discovery Zone International, Inc. and Leaps & Bounds, Inc. on
the one hand, and McDonald's on the other hand, and related documentation,
McDonald's was or is the sublessor to Leaps & Bounds, Inc. of certain
properties, and Old DZI agreed to defend, indemnify and hold McDonald's and
its affiliates harmless in respect of all expenses, losses, costs,
deficiencies, liabilities and damages (including related and reasonable
counsel fees and expenses, and compensatory and demonstrable consequential
damages) incurred or suffered by McDonald's as a direct result of, inter
alia, any breach that results in any payment by McDonald's in connection with
any guarantee by McDonald's relating to such properties (the "Agreement to
Indemnify"); and
C. WHEREAS, On November 18, 1996, the Bankruptcy Court entered the
Stipulation and Order Between Debtors and McDonald's Corporation Providing
for the Resolution, Settlement and Compromise of Disputes and for Rent
Deferrals and Allowance of Certain Claims (the "Stipulation and Order"),
pursuant to which, inter alia, the Debtors assumed certain subleases relating
to properties subleased by McDonald's to the Debtors pursuant to 11 U.S.C.
Section 365 as to which the Agreement to Indemnify remains in full force and
effect, the Bankruptcy Court approved the allowance of certain claims of
McDonald's, including those claims based on the Agreement to Indemnify, and
the Bankruptcy Court approved the validity, perfection, priority and
enforceability of certain claims and liens of McDonald's against the Debtors,
including, without limitation, the validity, perfection, priority and
enforceability of the Senior Mortgages (as defined below) and the Stipulation
and Order was not appealed or otherwise challenged and remains in full force
and effect; and
D. WHEREAS, pursuant to the plan of reorganization for Old DZI and its
affiliated debtors confirmed by the Bankruptcy Court by order entered July
18, 1997 (the "Plan"), and as required by the terms of the Stipulation and
Order, Borrower, as the reorganized successor of the Debtors, is obligated to
issue to McDonald's Secured Rent Deferral Notes in the aggregate original
principal amount of $266,466.24, which amount is subject to increase each
month in accordance with the terms thereof (the "Senior Secured Rent Deferral
Notes," and individually a "Senior Secured Rent Deferral Note") and Secured
Rejection Note in the aggregate original principal amount of $4,416,237.90
(the "Senior Secured Rejection Note"); and
E. WHEREAS pursuant to the terms and conditions of the Stipulation and
Order, the Plan, the Agreement to Indemnify, the Senior Secured Rejection
Note and the Senior Secured Rent Deferral Notes and any related documentation
(the "McDonald's Documentation"), the repayment and performance of the
obligations of Borrower to McDonald's under the McDonald's Documentation
(including any contingent obligations under
2
<PAGE>
the Agreement to Indemnify, the Stipulation and Order, including Section 7
thereof, or otherwise) (the "Senior Obligations") is secured by certain
amended and restated first priority mortgages, deeds of trust and/or deeds to
secure debt described on Exhibit A attached hereto and made a part hereof
(collectively, including all modifications, extensions and additions thereto,
the "Senior Mortgages," and individually, a "Senior Mortgage"), including the
Senior Mortgage identified by the recording information set forth in Exhibit
A-1, reaffirming and creating, to the extent necessary, valid and perfected
first priority liens on the real properties described on Exhibit B attached
hereto and made a part hereof, and other collateral described in the Senior
Mortgages (collectively, the "Real Properties," and individually, a "Real
Property"); and
F. WHEREAS, Borrower and the Subordinated Creditor entered into an
Indenture, dated July 22, 1997 (the "Subordinated Creditor Indenture") and
certain other documents and instruments related thereto, pursuant to which
and upon the terms and conditions therein indebtedness and other obligations
were incurred by the Borrower (the "Subordinated Indenture Indebtedness"),
the repayment and performance of which are secured by, among other things,
certain subordinated mortgages, deeds of trust and/or deeds to secure debt
described on Exhibit C hereto and made a part hereof (collectively, including
all modifications, extensions and additions thereto, the "Subordinated
Mortgages," and individually, a "Subordinated Mortgage"), including the
Subordinated Mortgage identified by the recording information set forth in
Exhibit C-1, creating valid and perfected liens on the Real Properties
subordinate to the Senior Mortgages; and
G. WHEREAS, pursuant to the Senior Mortgages, the Borrower cannot grant
a subordinated lien on any of the Real Properties without the express
approval of McDonald's and the Subordinated Indenture Indebtedness will not
be able to be issued without the agreement of McDonald's to permit the
issuance of the Subordinated Mortgages; and
H. WHEREAS, McDonald's approval of the Borrower's granting of the
Subordinated Mortgages is conditioned on the entry into this Subordination
Agreement by the Subordinated Creditor, which hereby warrants and represents
that it has full power and authority under the Subordinated Creditor
Indenture to enter into this Subordination Agreement on behalf of all holders
of any securities or obligations whatsoever issued pursuant to the
Subordinated Creditor Indenture; and
I. WHEREAS, the Subordinated Creditor and McDonald's each desire to
enter into this Subordination Agreement to confirm the subordination of the
liens of the Subordinated Mortgages to the liens of the Senior Mortgages in
accordance with the terms of this Agreement;
NOW THEREFORE, IN CONSIDERATION OF THE MUTUAL BENEFITS accruing to the
parties hereto, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
3
<PAGE>
1. Consent. Pursuant and subject to the other terms of this
Agreement, McDonald's consents to the Subordinate Mortgages. This consent
shall not be deemed to (i) be a consent to any future encumbrances, (ii) be a
waiver of the limitation on future encumbrances contained in the Senior
Mortgages, (iii) be a consent to or waiver of any other term or condition of
the Senior Mortgages or (iv) prejudice any right or rights which McDonald's
may now or in the future have under or in connection with the Senior
Mortgages.
2. Priority of McDonald's.
(a) Subordination. The Subordinated Creditor hereby agrees for
itself and its successors and assigns that, except as otherwise expressly
provided herein, the terms, provisions and liens of the Subordinated
Mortgages, and any of the Subordinated Creditor's liens or security interests
in the Real Properties (but only to the extent of McDonald's interest in such
Real Properties), are hereby intentionally and unconditionally subordinated
to, and at all times shall be junior, subject and subordinate to the terms,
provisions and liens of the Senior Mortgages (including, without limitation,
the liens securing future optional and/or obligatory increases in the amount
of the Senior Obligations or advances by McDonald's to or for the benefit of
the Borrower, regardless of the use to which such advances are put), as well
as to any and all increases therein and all extensions, consolidations,
modifications, renewals, refinancings and supplements thereto. The
Subordinated Creditor hereby waives any right it may have to require that
McDonald's marshal any assets of the Borrower in favor of the Subordinated
Creditor and the Subordinated Creditor agrees that it shall not acquire, by
subrogation or otherwise, any lien, estate, right or other interest in the
Real Properties which is or may be prior or superior in right to the Senior
Mortgages, including but not limited to advances for real estate taxes and
assessments. The rights and priorities set forth in this Paragraph 2(a) shall
be effective notwithstanding the order of creation, attachment, vesting or
perfection of the rights of McDonald's under the Senior Mortgages, or of the
Subordinated Creditor under the Subordinated Mortgages, the Subordinated
Creditor Indenture or any other documents executed in connection therewith
(including, without limitation, any UCC-1 financing statements or fixture
filings). The Subordinated Creditor shall be deemed to have consented (i) to
any action by Borrower to which McDonald's consents pursuant to the Senior
Mortgages and (ii) to each act of, or failure to act by, the Borrower that is
not prohibited by the Senior Mortgages, provided that, both with respect to
(i) and (ii), such deemed consent is applicable only to acts or failures to
act in connection with the sale, construction, restoration, insurance,
condemnation or alterations of, to or on, or with respect to the Real
Properties and any other matters relating to the Real Properties.
(b) Insurance; Condemnation Awards. The Subordinated Creditor
hereby assigns and releases unto McDonald's, until payment in full of the
Senior Obligations:
(i) all of its right, title, interest or claim, if any, in
and to the proceeds of all policies of insurance covering
the Real Properties, for application in accordance with
the provisions of the Senior Mortgages or as the
Borrower and McDonald's may otherwise agree; and
4
<PAGE>
(ii) all of its right, title and interest or claim, if any,
in and to all awards or other compensation made for any
taking of any part of the Real Properties for application
in accordance with the provisions of the Senior Mortgages
or as the Borrower and McDonald's may otherwise agree.
All such insurance proceeds or awards which may become due and payable to
the Subordinated Creditor shall be payable directly to McDonald's, and the
Subordinated Creditor directs any insurance company or governmental authority
to make payment thereof directly to McDonald's for application in accordance
with the Senior Mortgages. In the event that any such insurance proceeds or
awards are made payable to the Subordinated Creditor despite such direction,
the Subordinated Creditor shall promptly transfer the same, or promptly cause
the same to be transferred, to McDonald's.
(c) Assignment of Leases and Rents. Any assignment in favor of
the Subordinated Creditor of any Leases or Rents (as such terms are defined
in the Senior Mortgages) contained in the Subordinated Mortgages or the
Subordinated Creditor Indenture, or in any other document or instrument
related thereto or delivered in connection therewith, and all rights of the
Subordinated Creditor thereunder, are hereby intentionally and
unconditionally subordinated to, and shall be in all respects junior, subject
and subordinate to any assignment of rents, leases or other agreements
relating to the Real Properties contained in (i) the Senior Mortgages, and
(ii) any other document now in existence or hereafter made by the Borrower to
secure the Senior Obligations, and to all rights of McDonald's thereunder.
Without limiting the foregoing provisions of this Paragraph 2(c), from and
after the execution and delivery of the Subordinated Mortgages to the
Subordinated Creditor, the Subordinated Creditor shall not be entitled to
receive or retain any Rents or other amounts assigned to the Subordinated
Creditor under any such document or instrument until such time as the Senior
Obligations shall have been completely paid in full.
(d) Non-Disturbance Agreements. The Subordinated Creditor
shall be required to give a non-disturbance agreement to any lessee or tenant
of the Real Properties with respect to whose lease McDonald's, as holder of
the Senior Mortgages, shall have executed a non-disturbance agreement, and,
if the Subordinated Creditor fails to give any such non-disturbance
agreement, the Subordinated Creditor nevertheless agrees not to disturb the
possession, occupancy or rights of any such lessee or tenant without the
prior written consent of McDonald's in each instance.
(e) Further Assurances. To further evidence the subordination
hereinabove provided for, the Subordinated Creditor agrees that, within 30
days after request by McDonald's, it will, at the Subordinated Creditor's
sole cost and expense, do, execute, acknowledge and deliver all and every
such further acts, deeds, conveyances and instruments as McDonald's may
reasonably request for the better assuring and evidencing of this
subordination (including, without limitation, further affirmation of the
application of this Agreement to future optional and/or obligatory increases
in the amount of the Senior Obligations or advances, regardless of the use to
which such increases or advances are put).
5
<PAGE>
(f) Release or Subordination of Lien. If McDonald's shall at
any time release its lien on the Real Properties (or any part thereof) in
connection with a sale or refinancing of the Real Properties or any part
thereof, the Subordinated Creditor shall, without any payment to it, be
deemed to have consented to such sale or refinancing and shall release the
lien of the Subordinated Mortgages thereon at the same time that McDonald's
releases the lien of the Senior Mortgages thereon, and, in the event that the
Subordinated Creditor has not executed a release within seven (7) business
days of being requested to do so by Borrower of McDonald's in connection with
such sale or refinancing, the Subordinated Creditor hereby irrevocably
appoints McDonald's as its attorney in fact (coupled with an interest) to
execute in the name of the Subordinated Creditor or without the signature of
the Subordinated Creditor to the extent McDonald's may lawfully do so, one or
more releases or reconveyances of mortgages/deeds of trust or other documents
to evidence such release of the lien of the Subordinated Mortgages. Until
the Senior Obligations have been completely paid in full (including, without
limitation, any obligations which may arise under the Agreement to
Indemnify), all proceeds from or with respect to the sale, refinancing or
other disposition of the Real Properties or any part thereof shall be paid to
McDonald's (or placed into escrow for the benefit of McDonald's pursuant to
the terms of the Senior Mortgages) in satisfaction of the Senior Obligations
pursuant to the terms of the Senior Mortgages and the McDonald's
Documentation, and the Subordinated Creditor shall have no right, claim or
interest in or to any such proceeds.
(g) Enforcement. The Subordinated Creditor agrees that no
remedies provided for under the Subordinated Mortgages or other documents (to
the extent relating to the Real Properties in which McDonald's has an
interest) executed in connection with the Subordinated Creditor Indenture
shall be exercised with respect to the Real Properties, including, without
limitation, the commencement or prosecution of foreclosure proceedings, the
exercise of any power of sale, or the appointment of a receiver (or the
Subordinated Creditor as mortgagee in possession), without obtaining the
prior written consent of McDonald's. The Subordinated Creditor hereby
consents and agrees that any lawful action taken by or on behalf of
McDonald's in the exercise of McDonald's rights and/or remedies under the
Senior Mortgages (including, without limitation, any foreclosure or
acquisition of title to a Real Property by deed in lieu of foreclosure or
otherwise) are hereby deemed to be consented to by the Subordinated Creditor
in all respects.
(h) No Third-Party Beneficiaries. The provisions of clauses
(a)-(g) of this Paragraph 2 are solely for the benefit of the holder of the
Senior Mortgages and shall not create any rights in the Borrower or any other
person.
3. Bankruptcy. The provisions of this Agreement shall continue in
full force and effect notwithstanding the occurrence of any proceeding under
Title 11 of the United States Code (11 U.S.C. Sec. 101 et seq.) or any other
bankruptcy, insolvency, liquidation, reorganization, dissolution, winding up,
liquidation, readjustment or other similar proceeding relating to the
Borrower or to its property (whether voluntary or involuntary, partial or
complete, and whether in bankruptcy, insolvency or receivership, or upon a
general assignment for the benefit of creditors, or any other marshaling of
the assets and liabilities of
6
<PAGE>
the Borrower, or any sale of all or substantially all of the assets of the
Borrower, or otherwise) (each, an "Insolvency Proceeding"). Without limiting
the generality of the foregoing, in the event of an Insolvency Proceeding,
(i) the Senior Obligations (including post-petition interest on the Senior
Obligations, whether or not such interest is allowable under Section 502 or
506 of the United States Bankruptcy Code) shall first be completely paid in
full before the Subordinated Creditor shall be entitled to receive or retain
any proceeds from or relating to the sale, refinancing or other disposition
of the Real Properties or any portion thereof in respect of the Subordinated
Indenture Indebtedness; and (ii) the Subordinated Creditor shall not object
to or oppose any efforts by McDonald's to obtain relief from the automatic
stay with respect to the Real Properties under Section 362 of the United
States Bankruptcy Code.
4. Payments Received by the Subordinated Creditor. In the event
that the Subordinated Creditor receives any payment or other distribution of
any kind or character from the Borrower or from any other source whatsoever
in respect of any of the Subordinated Indenture Indebtedness, or receives any
security therefor, whether by way of agreement or compromise or otherwise,
which it is not entitled to retain pursuant to the terms of this Agreement,
the Subordinated Creditor shall immediately deliver the same to McDonald's,
in the form received, together with any necessary endorsements, in each case
for application on account of the Senior Obligations, but until so received
by McDonald's, the same shall be held in trust by the Subordinated Creditor
as the property of McDonald's.
5. No Consent Required. The Subordinated Creditor hereby agrees
that McDonald's may, from time to time, at its sole discretion and without
notice to or consent of or from the Subordinated Creditor, and without
affecting the obligations of the Subordinated Creditor herein or the
subordination provided for hereunder, take any or all of the following
actions:
(a) retain or obtain a lien or security interest in any
property to secure all or any part of the Senior Obligations;
(b) retain, obtain or permit the release of the primary or
secondary obligations of any other obligor or obligors with respect to all or
any part of the Senior Obligations;
(c) fail to perfect, or release McDonald's lien or security
interest in, or surrender, release or permit any substitution or exchange
for, all or any part of any property (including, without limitation, the Real
Properties) securing all or any part of the Senior Obligations;
(d) change the manner, place or terms of payments, and/or
change or extend the time of payment of, renew or alter, all or any part of
the Senior Obligations, any security therefor, or any liability incurred
directly or indirectly in respect thereof, and the provisions hereof shall
apply to the Senior Obligations as so changed, extended, renewed or altered;
7
<PAGE>
(e) sell, exchange, release, surrender, realize upon or
otherwise deal with in any manner and in any order the Real Properties or any
part thereof;
(f) exercise or refrain from exercising or release any rights
and/or remedies against the Borrower or others (including, without
limitation, any guarantor of all or a portion of the Senior Obligations) or
otherwise act or refrain from acting; and/or
(g) settle or compromise the Senior Obligations or any part
thereof or any security therefor, or any liability incurred directly or
indirectly in respect thereof or hereof.
6. Transfer. McDonald's may, from time to time, without notice to
Subordinated Creditor, assign or transfer any or all of the Senior
Obligations or any interest therein or any security therefor.
Notwithstanding any such assignment or transfer or any subsequent assignment
or transfer thereof, the holders of the Senior Obligations and the holders of
any interest therein shall be entitled to the benefits of this Agreement to
the same extent as if such holders were McDonald's specifically named in this
Agreement.
7. Other Liens. Nothing in this Agreement shall prohibit, prevent
or otherwise impede the Subordinated Creditor from exercising any rights,
remedy or power which it may have against the Borrower and/or its
subsidiaries with respect to any collateral other than the Real Properties,
which secures the Subordinated Indenture Indebtedness, provided, however,
that the Subordinated Creditor shall not take any action which could impair
the lien of the Senior Mortgages or the ability of McDonald's to foreclose or
otherwise enforce its security interests or liens thereunder.
8. Termination. This Agreement shall in all respects be a
continuing agreement and shall remain in full force and effect until (a) the
complete payment in full of all of the Senior Obligations, and (b) the
execution by McDonald's of releases of all of the Senior Mortgages and the
recording of such releases in the appropriate real property records.
9. Miscellaneous.
(a) No Waiver. No delay on the part of McDonald's in the
exercise of any right or remedy shall operate as a waiver thereof, and no
single or partial exercise by McDonald's of any right or remedy shall
preclude any other or further exercise thereof or the exercise of any other
right or remedy, nor shall any modification, waiver or discharge of any of
the provisions of this Agreement be binding upon McDonald's except as
expressly set forth in a writing duly signed and delivered by McDonald's.
(b) Obligations Absolute. The obligations of the Subordinated
Creditor herein shall be absolute and unconditional, and the subordination of
the lien of the Subordinated Mortgages herein contained shall be effective with
respect to the Senior Obligations, notwithstanding any right or power of the
Borrower or anyone else to assert any claim or defense as to the invalidity or
unenforceability of any such obligation and/or any lien securing the same, in
whole or in part, or any determination of such invalidity or
8
<PAGE>
unenforceability and no such event shall affect or impair the agreements and
obligations of the Subordinated Creditor hereunder. In the event that any of
the Senior Obligations and/or any lien securing the same is determined to be
invalid or unenforceable, in whole or in part, the Subordinated Creditor
agrees that, as between McDonald's and the Subordinated Creditor, the Senior
Obligations and such lien shall be deemed valid and enforceable, and the
obligations of the Subordinated Creditor hereunder with respect thereto shall
not be affected by any such determination but shall continue in full force
and effect.
(c) Sole Discretion. It is understood and agreed that in the
event of any dissolution, winding up, liquidation, readjustment,
reorganization or other similar proceedings relating to the Borrower or to
its property, McDonald's may use its sole discretion with respect to the
enforcement of the Senior Mortgages, or in otherwise exercising or refraining
from exercising any rights or in taking or refraining from taking any action
which it may be entitled to take or assert hereunder; and that McDonald's
shall not be under any liability for doing or refraining from doing anything
relative thereto in the exercise of its own reasonable judgment or which it
may deem necessary or desirable.
(d) Waiver of Notice and Diligence. The Subordinated Creditor
hereby waives: (i) notice of acceptance by McDonald's of this Agreement; (ii)
notice of the existence or creation or nonpayment of all or any of the Senior
Obligations; and (iii) all diligence in collection or protection of or
realization upon the Senior Obligations or any security therefor.
(e) Reinstatement. If, as a result of, or arising from, any
bankruptcy, insolvency or similar proceeding, claim is ever made upon
McDonald's or any participant in the Senior Obligations for repayment or
recovery of any amount or amounts received by it in payment or on account of
the Senior Obligations from the proceeds of the sale, refinancing or other
disposition of all or a portion of the Real Properties and McDonald's or such
participant repays the Borrower or its legal representative or a trustee in
bankruptcy, all or part of such amount by reason of (i) any judgment, decree
or order of any court or administrative body having jurisdiction or (ii) any
settlement or compromise of any such claim effected by McDonald's or such
participant with any such claimant (including the Borrower or any guarantor),
then in such event the Subordinated Creditor agrees that it shall be and
remain obligated hereunder with respect to the amount so repaid or recovered
to the same extent as if such amount had never originally been received by
McDonald's or such participant and to the extent the Subordinated Creditor
has received payments or distributions in respect of the Subordinated
Indenture Indebtedness from the proceeds of the sale, refinancing or other
disposition of the Real Properties.
10. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective
successors and assigns.
11. Notices. Any notices or other communications required or
permitted hereunder shall be in writing, and shall be sufficiently given if
made by hand delivery, by telecopier or registered or certified mail, postage
prepaid, return receipt requested, to the
9
<PAGE>
addresses listed in the first paragraph of this Agreement. Each party may
designate additional or different addresses for notices to such party. Any
notice or communication to either party hereto shall be deemed to have been
given or made as of the date so delivered if personally delivered; when
receipt is acknowledged electronically (with copy by U.S. mail), if faxed
(the fax number for the Subordinated Creditor is (617) 664-5371; the fax
number for McDonald's is (630) 623-3000; and five (5) calendar days after
mailing if sent by registered or certified mail, postage prepaid (except that
a notice of change of address shall not be deemed to have been given until
actually received by the addressee).
12. Representations by the Subordinated Creditor. The Subordinated
Creditor has the power, authority and legal right pursuant to the Subordinated
Creditor Indenture to execute, deliver and perform this Agreement. The
Subordinated Creditor has been duly authorized pursuant to the Subordinated
Creditor Indenture to enter into this Subordination Agreement on behalf of the
Holders (as defined in the Subordinated Creditor Indenture) and this
Subordination Agreement constitutes the valid and binding obligations of the
Subordinated Creditor on behalf of such Holders enforceable against the
Subordinated Creditor on behalf of such Holders in accordance with its terms.
13. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York including both
matters of internal law and conflicts of law, except that matters as to the
priority of liens on the Real Properties and remedies and procedural matters
relating thereto shall be governed by the laws of the State in which the Real
Properties is located.
14. Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by
signing any such counterpart.
15. Singular and Plural. Words used in this Agreement in the
singular, where the context so permits, shall be deemed to include the plural
and vice versa. The definitions of words in the singular in this Agreement
shall apply to such words when used in the plural where the context so
permits and vice versa.
10
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed under seal by
the parties hereto as of the date first above written.
Signed, sealed and delivered in the STATE STREET BANK AND TRUST COMPANY
presence of: solely in its capacity as trustee
and collateral agent under and
Witness: /s/ Deborah M. Roellchen pursuant to the Subordinated
_____________________________ Creditor Indenture
Print Name: Deborah M. Roellchen By: /s/ Mary Lee Storrs
__________________________ __________________________
Name: Mary Lee Storrs
Witness: /s/ Deborah Taveira Title: Vice President
_____________________________
Print Name: Deborah Taveira
__________________________ [Corporate Seal]
Signed, sealed and delivered in the MCDONALD'S CORPORATION
presence of:
Witness: /s/ Mary C. Allen By: /s/ Gloria Santona
_____________________________ __________________________
Name: Gloria Santona
Print Name: Mary C. Allen Title: Vice President, Deputy
__________________________ General Counsel and
Secretary
Witness: /s/ Ann Ferguson
_____________________________
Print Name: Ann Ferguson
__________________________ [Corporate Seal]
Signed, sealed and delivered in the DISCOVERY ZONE, INC.
presence of:
Witness: /s/ Mark D. Woodward By: /s/ Robert Rooney
_____________________________ __________________________
Name: Robert Rooney
Print Name: Mark D. Woodward Title: Sr VP
__________________________
Witness: /s/ Seth L. Grossman
_____________________________
Print Name: Seth L. Grossman
__________________________ [Corporate Seal]
<PAGE>
STATE OF MASSACHUSETTS)
)
COUNTY OF Suffolk )
On July 31, 1997, before me, _________________________, a Notary Public,
personally appeared _______________________, personally known to me (or
proved to me on the basis of satisfactory evidence) to be the person whose
name is subscribed to the within instrument and acknowledged to me that [s]he
executed the same in [her] [his] authorized capacity, and that by [her][his]
signature on the instrument the person, or the entity upon behalf of which
the person acted, executed the instrument and acknowledged the foregoing to
be [her] [his] free act and deed on behalf of STATE STREET BANK AND TRUST
COMPANY, a Massachusetts trust company.
WITNESS my hand and official seal.
/s/ Agnes G. Dillon
________________________________
Notary Public
[SEAL]
<PAGE>
STATE OF ILLINOIS )
COUNTY OF DuPage )
On this 31st day of July, 1997, before me, the undersigned, a Notary
Public in and for the State of Illinois, personally appeared Gloria Santona,
to me personally known, who, being by me duly sworn, did say that [s]he was
the Vice President, Deputy General Counsel and General Counsel of McDONALD'S
CORPORATION, a Delaware corporation; that the seal affixed to said instrument
is the seal of said corporation; that the instrument was signed on behalf of
the corporation, by authority of the corporation's Board of Directors; and
that Gloria Santona as that officer acknowledged execution of the instrument
to be the voluntary act and deed of the corporation by it and by the officer
voluntarily executed.
/s/ Gordana Vujanovich
__________________________________
Notary Public in the State of Illinois
[Notarial Seal]
"OFFICIAL SEAL"
Gordana Vujanovich
Notary Public, State of Illinois
My Commission Expires 02/15/99
<PAGE>
STATE OF NEW YORK )
COUNTY OF WESTCHESTER )
On the 28 day of July, 1997, before me personally came Robert Rooney,
to me known, who, being duly sworn, did depose and say that he/she resides at
50 Main Street, White Plains, NY that he is Sr. VP of DISCOVERY ZONE, INC.,
the Delaware corporation described in and which executed the foregoing
instrument; and that he had the authority to sign the same, and he/she
acknowledged to me that he executed the same as the act and deed of said
corporation by order of the board of directors thereof.
/s/ Mark D. Woodward
________________________________
Notary Public
MARK D. WOODWARD
Notary Public State of New York
No. 4997846
Qualified in New York County
Commission Expires June 15, 1998
THIS INSTRUMENT WAS DRAFTED BY (NAME AND ADDRESS)
Jonathan Reiss, Esq.
Cleary, Gottlieb, Steen & Hamilton
1 Liberty Plaza
New York, New York 10006
<PAGE>
EXHIBIT A
DESCRIPTIONS OF SENIOR MORTGAGES
The following is a list of the amended and restated first priority
mortgages, deeds of trust and/or deeds to secure debt entered executed by
Borrower, on behalf of McDonald's, pursuant to the terms and conditions of
the McDonald's Documentation:
1. Amended and Restated Deed To Secure Debt and Security Agreement, made as of
July 29, 1997, by Borrower to McDonald's, relating to mortgaged property
located in Kennesaw, in the County of Cobb, in the State of Georgia.
2. Amended and Restated Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to Chicago Title Insurance Company, a Missouri Corporation, as
trustee, for the benefit of McDonald's, relating to trust property located
in Vancouver, in the County of Clark, in the State of Washington.
3. Amended and Restated Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to Kenneth W. Pearson, as trustee, to and for the benefit
of McDonald's, relating to trust property located in Leon Valley, in
the County of Bexar, in the State of Texas.
4. Amended and Restated Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to Kenneth W. Pearson, as trustee, for the benefit of
McDonald's, relating to trust property located in Arlington, in
the County of Tarrant, in the State of Texas.
5. Amended and Restated Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to Kenneth W. Pearson, as trustee, for the benefit of
McDonald's, relating to trust property located in San Antonio, in
the County of Bexar, in the State of Texas.
6. Amended and Restated Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to The Public Trustee of the County of Douglas, Colorado,
as trustee, to and for the benefit of McDonald's, relating to trust
property located in Littleton, in the County of Douglas, in the State
of Colorado.
<PAGE>
7. Amended and Restated Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to The Public Trustee of the County of Arapahoe, Colorado, as
trustee, to and for the benefit of McDonald's, relating to trust property
located in Aurora, in the County of Arapahoe, in the State of Colorado.
8. Amended and Restated Mortgage, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to McDonald's, relating to mortgaged property located in
Schaumburg, in the County of Cook, in the State of Illinois.
9. Amended and Restated Mortgage, made as of July 29, 1997, by Borrower to
McDonald's, relating to mortgaged property located in Sterling Heights,
in the County of Macomb, in the State of Michigan.
10. Open-End Mortgage, Assignment of Leases and Rents, Security Agreement and
Fixture Filing (Amended and Restated), made as of July 29, 1997, by
Borrower to McDonald's, relating to mortgaged property located in Forest
Park, in the County of Hamilton, in the State of Ohio.
11. Open-End Mortgage, Assignment of Leases and Rents, Security Agreement and
Fixture Filing (Amended and Restated), made as of July 29, 1997, by
Borrower to McDonald's, relating to mortgaged property located in Columbus,
in the County of Franklin, in the State of Ohio.
12. Amended and Restated Open-End Mortgage, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to McDonald's, relating to mortgaged property located in
Philadelphia, in the County of Philadelphia, in the State of Pennsylvania.
13. Amended and Restated Mortgage, Assignment of Leases and Rents, Security
Agreement and Fixture Filing, made as of July 29, 1997, by Borrower to
McDonald's, relating to mortgaged property located in Blaine, in the County
of Anoka, in the State of Minnesota.
14. Amended and Restated Mortgage, Assignment of Leases and Rents, Security
Agreement and Fixture Filing, made as of July 29, 1997, by Borrower to
McDonald's, relating to mortgaged property located in Washington Township,
in the County of Marion, in the State of Indiana.
<PAGE>
EXHIBIT A-1
RECORDING INFORMATION FOR SENIOR MORTGAGE IN FAVOR OF MCDONALD'S
County Book Volume
------ ---- ------
Senior Mortgage (Sterling Heights)
<PAGE>
Sterling Heights
Macomb County, Michigan
EXHIBIT B
All of Lot 33 and part of Lot 34, Lakeside Subdivision No. 4, according to
the plat thereof as recorded in liber 73, pages 1 and 2 of Plats, Macomb
County Records, and being more particularly described as: Beginning at the
southwest corner of Lot 33; thence north of 02 degrees 50 minutes 00 seconds
west 156.00 feet along the westerly line of said Lot 33 to the northwest
corner of said Lot 33; said point also being the southwesterly corner of Lot
34; thence continuing north 02 degrees 50 minutes 00 seconds west 126.00 feet
along the westerly line of said Lot 34; thence north 87 degrees 10 minutes 00
seconds east 307.47 feet to a point on a curve said point being on the
easterly line of said Lot 34; thence along the arc of a curve to the left
126.98 feet, said curve having a radius of 779.58 feet central angle of 09
degrees 19 minutes 57 seconds and a chord bearing and distance of south 09
degrees 26 minutes 09 second east 126.84 feet to the southwest corner of said
Lot 34 said point also being the northeast corner of Lot 33; thence continuing
along the arc of a curve to the left 152.79 feet said curve having a radius of
779.58 feet center angle of 11 degrees 13 minutes 45 seconds and a chord
bearing and distance of south 19 degrees 43 minutes 00 seconds east 152.54
feet; thence south 25 degrees 19 minutes 52 seconds east 10.86 feet to the
southeast corner of Lot 33; thence south 87 degrees 10 minutes 00 seconds west
370.51 feet along the south line of said Lot 33 to the point of beginning.
<PAGE>
EXHIBIT C
DESCRIPTIONS OF SUBORDINATED MORTGAGES
The following is a list of the subordinated mortgages, deeds of trust
and/or deeds to secure debt entered executed by Borrower, on behalf of the
Subordinated Creditor, pursuant to the terms and conditions of the McDonald's
Documentation:
1. Deed To Secure Debt and Security Agreement, made as of July 29, 1997, by
Borrower to Subordinated Creditor, relating to mortgaged property located
in Kennesaw, in the County of Cobb, in the State of Georgia.
2. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Chicago Title
Insurance Company, a Missouri corporation, as trustee, for the benefit of
Subordinated Creditor, relating to trust property located in Vancouver, in
the County of Clark, in the State of Washington.
3. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Kenneth W.
Pearson, as trustee, to and for the benefit of Subordinated Creditor,
relating to trust property located in Leon Valley, in the County of Bexar,
in the State of Texas.
4. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Kenneth W.
Pearson, as trustee, for the benefit of Subordinated Creditor, relating to
trust property located in Arlington, in the County of Tarrant, in the State
of Texas.
5. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Kenneth W.
Pearson, as trustee, for the benefit of Subordinated Creditor, relating to
trust property located in San Antonio, in the County of Bexar, in the State
of Texas.
6. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to The Public Trustee
of the County of Douglas, Colorado, as trustee, to and for the benefit of
Subordinated Creditor, relating to trust property located in Littleton, in
the County of Douglas, in the State of Colorado.
7. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to The Public Trustee
of the County of Arapahoe, Colorado, as trustee, to and for the benefit of
Subordinated Creditor, relating to trust property located in Aurora, in the
County of Arapahoe, in the State of Colorado.
<PAGE>
8. Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture
Filing, made as of July 29, 1997, by Borrower to Subordinated Creditor,
relating to mortgaged property located in Schaumburg, in the County of
Cook, in the State of Illinois.
9. Mortgage, made as of July 29, 1997, by Borrower to Subordinated Creditor,
relating to mortgaged property located in Sterling Heights, in the County
of Macomb, in the State of Michigan.
10. Open-End Mortgage, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Subordinated
Creditor, relating to mortgaged property located in Forest Park, in the
County of Hamilton, in the State of Ohio.
11. Open-End Mortgage, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Subordinated
Creditor, relating to mortgaged property located in Columbus, in the County
of Franklin, in the State of Ohio.
12. Open-End Mortgage, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Subordinated
Creditor, relating to mortgaged property located in Philadelphia, in the
County of Philadelphia, in the State of Pennsylvania.
13. Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture
Filing, made as of July 29, 1997, by Borrower to Subordinated Creditor,
relating to mortgaged property located in Blaine, in the County of Anoka,
in the State of Minnesota.
14. Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture
Filing, made as of July 29, 1997, by Borrower to Subordinated Creditor,
relating to mortgaged property located in Washington Township, in the
County of Marion, in the State of Indiana.
<PAGE>
EXHIBIT C-1
RECORDING INFORMATION FOR SUBORDINATED MORTGAGE IN FAVOR OF STATE STREET
BANK AND TRUST COMPANY (SOLELY IN ITS CAPACITY AS TRUSTEE AND COLLATERAL
AGENT UNDER AND PURSUANT TO THE SUBORDINATED CREDITOR INDENTURE)
County Liber Page
------ ----- ----
Subordinated Mortgage (Sterling
Heights)
<PAGE>
Exhibit 4.48
- ----------------------------------------------------------------------------
Space above this line for recorder's use
DOCUMENT PREPARED BY AND
AFTER RECORDING RETURN TO:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attention: Jonathan A. Reiss, Esq.
SUBORDINATION AGREEMENT
AGREEMENT made as of the 29th day of July, 1997, by and among STATE
STREET BANK AND TRUST COMPANY, solely in its capacity as trustee and
collateral agent under and pursuant to the Subordinated Creditor Indenture
(as hereinafter defined) with an address at Two International Place, Boston,
Massachusetts 02110, Attention: Corporate Trust Department, Mary Lee Storrs,
Vice President (the "Subordinated Creditor"), MCDONALD'S CORPORATION, a
Delaware corporation, with an address at McDonald's Plaza, Oak Brook,
Illinois 60523, Attention: General Counsel ("McDonald's") and DISCOVERY ZONE,
INC., a Delaware corporation, successor by merger to Leaps & Bounds, Inc.,
having its principal place of business at One Corporate Center, 110 East
Broward Boulevard, Fort Lauderdale, Florida 33301 ("Borrower").
W I T N E S S E T H:
RECITALS
A. WHEREAS, Borrower is the successor in interest to Discovery
Zone, Inc., a Delaware corporation and debtor and debtor in possession ("Old
DZI"), and Old DZI's affiliated debtors and debtors in possession including
Leaps & Bounds, Inc. (the "Debtors"), all in the chapter 11 proceedings
captioned In re Discovery Zone, Inc., et al., Case No. 96-
[BLAINE, MINNESOTA PROPERTY]
<PAGE>
411 (HSB) (Jointly Administered), before the United States Bankruptcy Court
for the District of Delaware (the "Bankruptcy Court"); and
B. WHEREAS, pursuant to an Agreement and Plan of Merger, dated as
of August 30, 1994 (the "Merger Agreement"), by and among Old DZI, and two of
the Debtors, Discovery Zone International, Inc. and Leaps & Bounds, Inc. on
the one hand, and McDonald's on the other hand, and related documentation,
McDonald's was or is the sublessor to Leaps & Bounds, Inc. of certain
properties, and Old DZI agreed to defend, indemnify and hold McDonald's and
its affiliates harmless in respect of all expenses, losses, costs,
deficiencies, liabilities and damages (including related and reasonable
counsel fees and expenses, and compensatory and demonstrable consequential
damages) incurred or suffered by McDonald's as a direct result of, inter
alia, any breach that results in any payment by McDonald's in connection with
any guarantee by McDonald's relating to such properties (the "Agreement to
Indemnify"); and
C. WHEREAS, On November 18, 1996, the Bankruptcy Court entered the
Stipulation and Order Between Debtors and McDonald's Corporation Providing
for the Resolution, Settlement and Compromise of Disputes and for Rent
Deferrals and Allowance of Certain Claims (the "Stipulation and Order"),
pursuant to which, inter alia, the Debtors assumed certain subleases relating
to properties subleased by McDonald's to the Debtors pursuant to 11 U.S.C.
Section 365 as to which the Agreement to Indemnify remains in full force and
effect, the Bankruptcy Court approved the allowance of certain claims of
McDonald's, including those claims based on the Agreement to Indemnify, and
the Bankruptcy Court approved the validity, perfection, priority and
enforceability of certain claims and liens of McDonald's against the Debtors,
including, without limitation, the validity, perfection, priority and
enforceability of the Senior Mortgages (as defined below) and the Stipulation
and Order was not appealed or otherwise challenged and remains in full force
and effect; and
D. WHEREAS, pursuant to the plan of reorganization for Old DZI and
its affiliated debtors confirmed by the Bankruptcy Court by order entered
July 18, 1997 (the "Plan"), and as required by the terms of the Stipulation
and Order, Borrower, as the reorganized successor of the Debtors, is
obligated to issue to McDonald's Secured Rent Deferral Notes in the aggregate
original principal amount of $266,466.24, which amount is subject to increase
each month in accordance with the terms thereof (the "Senior Secured Rent
Deferral Notes," and individually a "Senior Secured Rent Deferral Note") and
Secured Rejection Note in the aggregate original principal amount of
$4,416,237.90 (the "Senior Secured Rejection Note"); and
E. WHEREAS pursuant to the terms and conditions of the Stipulation
and Order, the Plan, the Agreement to Indemnify, the Senior Secured Rejection
Note and the Senior Secured Rent Deferral Notes and any related documentation
(the "McDonald's Documentation"), the repayment and performance of the
obligations of Borrower to McDonald's under the McDonald's Documentation
(including any contingent obligations under
2
<PAGE>
the Agreement to Indemnify, the Stipulation and Order, including Section 7
thereof, or otherwise) (the "Senior Obligations") is secured by certain
amended and restated first priority mortgages, deeds of trust and/or deeds to
secure debt described on Exhibit A attached hereto and made a part hereof
(collectively, including all modifications, extensions and additions thereto,
the "Senior Mortgages," and individually, a "Senior Mortgage"), including the
Senior Mortgage identified by the recording information set forth in Exhibit
A-1, reaffirming and creating, to the extent necessary, valid and perfected
first priority liens on the real properties described on Exhibit B attached
hereto and made a part hereof, and other collateral described in the Senior
Mortgages (collectively, the "Real Properties," and individually, a "Real
Property"); and
F. WHEREAS, Borrower and the Subordinated Creditor entered into an
Indenture, dated July 22, 1997 (the "Subordinated Creditor Indenture") and
certain other documents and instruments related thereto, pursuant to which
and upon the terms and conditions therein indebtedness and other obligations
were incurred by the Borrower (the "Subordinated Indenture Indebtedness"),
the repayment and performance of which are secured by, among other things,
certain subordinated mortgages, deeds of trust and/or deeds to secure debt
described on Exhibit C hereto and made a part hereof (collectively, including
all modifications, extensions and additions thereto, the "Subordinated
Mortgages," and individually, a "Subordinated Mortgage"), including the
Subordinated Mortgage identified by the recording information set forth in
Exhibit C-1, creating valid and perfected liens on the Real Properties
subordinate to the Senior Mortgages; and
G. WHEREAS, pursuant to the Senior Mortgages, the Borrower cannot
grant a subordinated lien on any of the Real Properties without the express
approval of McDonald's and the Subordinated Indenture Indebtedness will not
be able to be issued without the agreement of McDonald's to permit the
issuance of the Subordinated Mortgages; and
H. WHEREAS, McDonald's approval of the Borrower's granting of the
Subordinated Mortgages is conditioned on the entry into this Subordination
Agreement by the Subordinated Creditor, which hereby warrants and represents
that it has full power and authority under the Subordinated Creditor
Indenture to enter into this Subordination Agreement on behalf of all holders
of any securities or obligations whatsoever issued pursuant to the
Subordinated Creditor Indenture; and
I. WHEREAS, the Subordinated Creditor and McDonald's each desire
to enter into this Subordination Agreement to confirm the subordination of
the liens of the Subordinated Mortgages to the liens of the Senior Mortgages
in accordance with the terms of this Agreement;
NOW THEREFORE, IN CONSIDERATION OF THE MUTUAL BENEFITS accruing to
the parties hereto, and other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
3
<PAGE>
1. Consent. Pursuant and subject to the other terms of this
Agreement, McDonald's consents to the Subordinate Mortgages. This consent
shall not be deemed to (i) be a consent to any future encumbrances, (ii) be a
waiver of the limitation on future encumbrances contained in the Senior
Mortgages, (iii) be a consent to or waiver of any other term or condition of
the Senior Mortgages or (iv) prejudice any right or rights which McDonald's
may now or in the future have under or in connection with the Senior
Mortgages.
2. Priority of McDonald's.
(a) Subordination. The Subordinated Creditor hereby agrees
for itself and its successors and assigns that, except as otherwise expressly
provided herein, the terms, provisions and liens of the Subordinated
Mortgages, and any of the Subordinated Creditor's liens or security interests
in the Real Properties (but only to the extent of McDonald's interest in such
Real Properties), are hereby intentionally and unconditionally subordinated
to, and at all times shall be junior, subject and subordinate to the terms,
provisions and liens of the Senior Mortgages (including, without limitation,
the liens securing future optional and/or obligatory increases in the amount
of the Senior Obligations or advances by McDonald's to or for the benefit of
the Borrower, regardless of the use to which such advances are put), as well
as to any and all increases therein and all extensions, consolidations,
modifications, renewals, refinancings and supplements thereto. The
Subordinated Creditor hereby waives any right it may have to require that
McDonald's marshal any assets of the Borrower in favor of the Subordinated
Creditor and the Subordinated Creditor agrees that it shall not acquire, by
subrogation or otherwise, any lien, estate, right or other interest in the
Real Properties which is or may be prior or superior in right to the Senior
Mortgages, including but not limited to advances for real estate taxes and
assessments. The rights and priorities set forth in this Paragraph 2(a) shall
be effective notwithstanding the order of creation, attachment, vesting or
perfection of the rights of McDonald's under the Senior Mortgages, or of the
Subordinated Creditor under the Subordinated Mortgages, the Subordinated
Creditor Indenture or any other documents executed in connection therewith
(including, without limitation, any UCC-1 financing statements or fixture
filings). The Subordinated Creditor shall be deemed to have consented (i) to
any action by Borrower to which McDonald's consents pursuant to the Senior
Mortgages and (ii) to each act of, or failure to act by, the Borrower that is
not prohibited by the Senior Mortgages, provided that, both with respect to
(i) and (ii), such deemed consent is applicable only to acts or failures to
act in connection with the sale, construction, restoration, insurance,
condemnation or alterations of, to or on, or with respect to the Real
Properties and any other matters relating to the Real Properties.
(b) Insurance; Condemnation Awards. The Subordinated Creditor
hereby assigns and releases unto McDonald's, until payment in full of the
Senior Obligations:
(i) all of its right, title, interest or claim, if any,
in and to the proceeds of all policies of insurance
covering the Real Properties, for application in
accordance with the provisions
4
<PAGE>
of the Senior Mortgages or as the Borrower and
McDonald's may otherwise agree; and
(ii) all of its right, title and interest or claim, if
any, in and to all awards or other compensation made
for any taking of any part of the Real Properties for
application in accordance with the provisions of the
Senior Mortgages or as the Borrower and McDonald's
may otherwise agree.
All such insurance proceeds or awards which may become due and
payable to the Subordinated Creditor shall be payable directly to McDonald's,
and the Subordinated Creditor directs any insurance company or governmental
authority to make payment thereof directly to McDonald's for application in
accordance with the Senior Mortgages. In the event that any such insurance
proceeds or awards are made payable to the Subordinated Creditor despite such
direction, the Subordinated Creditor shall promptly transfer the same, or
promptly cause the same to be transferred, to McDonald's.
(c) Assignment of Leases and Rents. Any assignment in favor
of the Subordinated Creditor of any Leases or Rents (as such terms are
defined in the Senior Mortgages) contained in the Subordinated Mortgages or
the Subordinated Creditor Indenture, or in any other document or instrument
related thereto or delivered in connection therewith, and all rights of the
Subordinated Creditor thereunder, are hereby intentionally and
unconditionally subordinated to, and shall be in all respects junior, subject
and subordinate to any assignment of rents, leases or other agreements
relating to the Real Properties contained in (i) the Senior Mortgages, and
(ii) any other document now in existence or hereafter made by the Borrower to
secure the Senior Obligations, and to all rights of McDonald's thereunder.
Without limiting the foregoing provisions of this Paragraph 2(c), from and
after the execution and delivery of the Subordinated Mortgages to the
Subordinated Creditor, the Subordinated Creditor shall not be entitled to
receive or retain any Rents or other amounts assigned to the Subordinated
Creditor under any such document or instrument until such time as the Senior
Obligations shall have been completely paid in full.
(d) Non-Disturbance Agreements. The Subordinated Creditor
shall be required to give a non-disturbance agreement to any lessee or tenant
of the Real Properties with respect to whose lease McDonald's, as holder of
the Senior Mortgages, shall have executed a non-disturbance agreement, and,
if the Subordinated Creditor fails to give any such non-disturbance
agreement, the Subordinated Creditor nevertheless agrees not to disturb the
possession, occupancy or rights of any such lessee or tenant without the
prior written consent of McDonald's in each instance.
(e) Further Assurances. To further evidence the subordination
hereinabove provided for, the Subordinated Creditor agrees that, within 30
days after request by McDonald's, it will, at the Subordinated Creditor's
sole cost and expense, do, execute, acknowledge and deliver all and every
such further acts, deeds, conveyances and instruments
5
<PAGE>
as McDonald's may reasonably request for the better assuring and evidencing
of this subordination (including, without limitation, further affirmation of
the application of this Agreement to future optional and/or obligatory
increases in the amount of the Senior Obligations or advances, regardless of
the use to which such increases or advances are put).
(f) Release or Subordination of Lien. If McDonald's shall at
any time release its lien on the Real Properties (or any part thereof) in
connection with a sale or refinancing of the Real Properties or any part
thereof, the Subordinated Creditor shall, without any payment to it, be
deemed to have consented to such sale or refinancing and shall release the
lien of the Subordinated Mortgages thereon at the same time that McDonald's
releases the lien of the Senior Mortgages thereon, and, in the event that the
Subordinated Creditor has not executed a release within seven (7) business
days of being requested to do so by Borrower of McDonald's in connection with
such sale or refinancing, the Subordinated Creditor hereby irrevocably
appoints McDonald's as its attorney in fact (coupled with an interest) to
execute in the name of the Subordinated Creditor or without the signature of
the Subordinated Creditor to the extent McDonald's may lawfully do so, one or
more releases or reconveyances of mortgages/deeds of trust or other documents
to evidence such release of the lien of the Subordinated Mortgages. Until
the Senior Obligations have been completely paid in full (including, without
limitation, any obligations which may arise under the Agreement to
Indemnify), all proceeds from or with respect to the sale, refinancing or
other disposition of the Real Properties or any part thereof shall be paid to
McDonald's (or placed into escrow for the benefit of McDonald's pursuant to
the terms of the Senior Mortgages) in satisfaction of the Senior Obligations
pursuant to the terms of the Senior Mortgages and the McDonald's
Documentation, and the Subordinated Creditor shall have no right, claim or
interest in or to any such proceeds.
(g) Enforcement. The Subordinated Creditor agrees that no
remedies provided for under the Subordinated Mortgages or other documents (to
the extent relating to the Real Properties in which McDonald's has an
interest) executed in connection with the Subordinated Creditor Indenture
shall be exercised with respect to the Real Properties, including, without
limitation, the commencement or prosecution of foreclosure proceedings, the
exercise of any power of sale, or the appointment of a receiver (or the
Subordinated Creditor as mortgagee in possession), without obtaining the
prior written consent of McDonald's. The Subordinated Creditor hereby
consents and agrees that any lawful action taken by or on behalf of
McDonald's in the exercise of McDonald's rights and/or remedies under the
Senior Mortgages (including, without limitation, any foreclosure or
acquisition of title to a Real Property by deed in lieu of foreclosure or
otherwise) are hereby deemed to be consented to by the Subordinated Creditor
in all respects.
(h) No Third-Party Beneficiaries. The provisions of clauses
(a)-(g) of this Paragraph 2 are solely for the benefit of the holder of the
Senior Mortgages and shall not create any rights in the Borrower or any other
person.
6
<PAGE>
3. Bankruptcy. The provisions of this Agreement shall continue in
full force and effect notwithstanding the occurrence of any proceeding under
Title 11 of the United States Code (11 U.S.C. Sec. 101 et seq.) or any other
bankruptcy, insolvency, liquidation, reorganization, dissolution, winding up,
liquidation, readjustment or other similar proceeding relating to the
Borrower or to its property (whether voluntary or involuntary, partial or
complete, and whether in bankruptcy, insolvency or receivership, or upon a
general assignment for the benefit of creditors, or any other marshaling of
the assets and liabilities of the Borrower, or any sale of all or
substantially all of the assets of the Borrower, or otherwise) (each, an
"Insolvency Proceeding"). Without limiting the generality of the foregoing,
in the event of an Insolvency Proceeding, (i) the Senior Obligations
(including post-petition interest on the Senior Obligations, whether or not
such interest is allowable under Section 502 or 506 of the United States
Bankruptcy Code) shall first be completely paid in full before the
Subordinated Creditor shall be entitled to receive or retain any proceeds
from or relating to the sale, refinancing or other disposition of the Real
Properties or any portion thereof in respect of the Subordinated Indenture
Indebtedness; and (ii) the Subordinated Creditor shall not object to or
oppose any efforts by McDonald's to obtain relief from the automatic stay
with respect to the Real Properties under Section 362 of the United States
Bankruptcy Code.
4. Payments Received by the Subordinated Creditor. In the event
that the Subordinated Creditor receives any payment or other distribution of
any kind or character from the Borrower or from any other source whatsoever
in respect of any of the Subordinated Indenture Indebtedness, or receives any
security therefor, whether by way of agreement or compromise or otherwise,
which it is not entitled to retain pursuant to the terms of this Agreement,
the Subordinated Creditor shall immediately deliver the same to McDonald's,
in the form received, together with any necessary endorsements, in each case
for application on account of the Senior Obligations, but until so received
by McDonald's, the same shall be held in trust by the Subordinated Creditor
as the property of McDonald's.
5. No Consent Required. The Subordinated Creditor hereby agrees
that McDonald's may, from time to time, at its sole discretion and without
notice to or consent of or from the Subordinated Creditor, and without
affecting the obligations of the Subordinated Creditor herein or the
subordination provided for hereunder, take any or all of the following
actions:
(a) retain or obtain a lien or security interest in any
property to secure all or any part of the Senior Obligations;
(b) retain, obtain or permit the release of the primary or
secondary obligations of any other obligor or obligors with respect to all or
any part of the Senior Obligations;
(c) fail to perfect, or release McDonald's lien or security
interest in, or surrender, release or permit any substitution or exchange for,
all or any part of any
7
<PAGE>
property (including, without limitation, the Real Properties) securing all or
any part of the Senior Obligations;
(d) change the manner, place or terms of payments, and/or
change or extend the time of payment of, renew or alter, all or any part of
the Senior Obligations, any security therefor, or any liability incurred
directly or indirectly in respect thereof, and the provisions hereof shall
apply to the Senior Obligations as so changed, extended, renewed or altered;
(e) sell, exchange, release, surrender, realize upon or
otherwise deal with in any manner and in any order the Real Properties or any
part thereof;
(f) exercise or refrain from exercising or release any rights
and/or remedies against the Borrower or others (including, without
limitation, any guarantor of all or a portion of the Senior Obligations) or
otherwise act or refrain from acting; and/or
(g) settle or compromise the Senior Obligations or any part
thereof or any security therefor, or any liability incurred directly or
indirectly in respect thereof or hereof.
6. Transfer. McDonald's may, from time to time, without notice to
Subordinated Creditor, assign or transfer any or all of the Senior
Obligations or any interest therein or any security therefor.
Notwithstanding any such assignment or transfer or any subsequent assignment
or transfer thereof, the holders of the Senior Obligations and the holders of
any interest therein shall be entitled to the benefits of this Agreement to
the same extent as if such holders were McDonald's specifically named in this
Agreement.
7. Other Liens. Nothing in this Agreement shall prohibit, prevent
or otherwise impede the Subordinated Creditor from exercising any rights,
remedy or power which it may have against the Borrower and/or its
subsidiaries with respect to any collateral other than the Real Properties,
which secures the Subordinated Indenture Indebtedness, provided, however,
that the Subordinated Creditor shall not take any action which could impair
the lien of the Senior Mortgages or the ability of McDonald's to foreclose or
otherwise enforce its security interests or liens thereunder.
8. Termination. This Agreement shall in all respects be a
continuing agreement and shall remain in full force and effect until (a) the
complete payment in full of all of the Senior Obligations, and (b) the
execution by McDonald's of releases of all of the Senior Mortgages and the
recording of such releases in the appropriate real property records.
9. Miscellaneous.
(a) No Waiver. No delay on the part of McDonald's in the
exercise of any right or remedy shall operate as a waiver thereof, and no
single or partial exercise by McDonald's of any right or remedy shall
preclude any other or further exercise thereof or the
8
<PAGE>
exercise of any other right or remedy, nor shall any modification, waiver or
discharge of any of the provisions of this Agreement be binding upon
McDonald's except as expressly set forth in a writing duly signed and
delivered by McDonald's.
(b) Obligations Absolute. The obligations of the Subordinated
Creditor herein shall be absolute and unconditional, and the subordination of
the lien of the Subordinated Mortgages herein contained shall be effective
with respect to the Senior Obligations, notwithstanding any right or power of
the Borrower or anyone else to assert any claim or defense as to the
invalidity or unenforceability of any such obligation and/or any lien
securing the same, in whole or in part, or any determination of such
invalidity or unenforceability and no such event shall affect or impair the
agreements and obligations of the Subordinated Creditor hereunder. In the
event that any of the Senior Obligations and/or any lien securing the same is
determined to be invalid or unenforceable, in whole or in part, the
Subordinated Creditor agrees that, as between McDonald's and the Subordinated
Creditor, the Senior Obligations and such lien shall be deemed valid and
enforceable, and the obligations of the Subordinated Creditor hereunder with
respect thereto shall not be affected by any such determination but shall
continue in full force and effect.
(c) Sole Discretion. It is understood and agreed that in the
event of any dissolution, winding up, liquidation, readjustment,
reorganization or other similar proceedings relating to the Borrower or to
its property, McDonald's may use its sole discretion with respect to the
enforcement of the Senior Mortgages, or in otherwise exercising or refraining
from exercising any rights or in taking or refraining from taking any action
which it may be entitled to take or assert hereunder; and that McDonald's
shall not be under any liability for doing or refraining from doing anything
relative thereto in the exercise of its own reasonable judgment or which it
may deem necessary or desirable.
(d) Waiver of Notice and Diligence. The Subordinated Creditor
hereby waives: (i) notice of acceptance by McDonald's of this Agreement; (ii)
notice of the existence or creation or nonpayment of all or any of the Senior
Obligations; and (iii) all diligence in collection or protection of or
realization upon the Senior Obligations or any security therefor.
(e) Reinstatement. If, as a result of, or arising from, any
bankruptcy, insolvency or similar proceeding, claim is ever made upon
McDonald's or any participant in the Senior Obligations for repayment or
recovery of any amount or amounts received by it in payment or on account of
the Senior Obligations from the proceeds of the sale, refinancing or other
disposition of all or a portion of the Real Properties and McDonald's or such
participant repays the Borrower or its legal representative or a trustee in
bankruptcy, all or part of such amount by reason of (i) any judgment, decree
or order of any court or administrative body having jurisdiction or (ii) any
settlement or compromise of any such claim effected by McDonald's or such
participant with any such claimant (including the Borrower or any guarantor),
then in such event the Subordinated Creditor agrees that it shall be and
remain obligated hereunder with respect to the amount so repaid or recovered
to the same extent as if
9
<PAGE>
such amount had never originally been received by McDonald's or such
participant and to the extent the Subordinated Creditor has received payments
or distributions in respect of the Subordinated Indenture Indebtedness from
the proceeds of the sale, refinancing or other disposition of the Real
Properties.
10. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective
successors and assigns.
11. Notices. Any notices or other communications required or
permitted hereunder shall be in writing, and shall be sufficiently given if
made by hand delivery, by telecopier or registered or certified mail, postage
prepaid, return receipt requested, to the addresses listed in the first
paragraph of this Agreement. Each party may designate additional or
different addresses for notices to such party. Any notice or communication
to either party hereto shall be deemed to have been given or made as of the
date so delivered if personally delivered; when receipt is acknowledged
electronically (with copy by U.S. mail), if faxed (the fax number for the
Subordinated Creditor is (617) 664-5371; the fax number for McDonald's is
(630) 623-3000; and five (5) calendar days after mailing if sent by
registered or certified mail, postage prepaid (except that a notice of change
of address shall not be deemed to have been given until actually received by
the addressee).
12. Representations by the Subordinated Creditor. The Subordinated
Creditor has the power, authority and legal right pursuant to the
Subordinated Creditor Indenture to execute, deliver and perform this
Agreement. The Subordinated Creditor has been duly authorized pursuant to
the Subordinated Creditor Indenture to enter into this Subordination
Agreement on behalf of the Holders (as defined in the Subordinated Creditor
Indenture) and this Subordination Agreement constitutes the valid and binding
obligations of the Subordinated Creditor on behalf of such Holders
enforceable against the Subordinated Creditor on behalf of such Holders in
accordance with its terms.
13. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York including both
matters of internal law and conflicts of law, except that matters as to the
priority of liens on the Real Properties and remedies and procedural matters
relating thereto shall be governed by the laws of the State in which the Real
Properties is located.
14. Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by
signing any such counterpart.
15. Singular and Plural. Words used in this Agreement in the
singular, where the context so permits, shall be deemed to include the plural
and vice versa. The definitions of words in the singular in this Agreement
shall apply to such words when used in the plural where the context so
permits and vice versa.
10
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto as of the date first above written.
STATE STREET BANK AND TRUST COMPANY, solely in its
capacity as trustee and collateral agent under and
pursuant to the Subordinated Creditor Indenture
By: /s/ MARY LEE STORRS
------------------------------------------------
Name: Mary Lee Storrs
Title: Vice President
MCDONALD'S CORPORATION
By: /s/ GLORIA SANTONA
-----------------------------------------------
Name: Gloria Santona
Title: Vice President, Deputy General Counsel
and Secretary
DISCOVERY ZONE, INC.
By: /s/ ROBERT ROONEY
----------------------------------------------
Name: Robert Rooney
Title: Sr VP
<PAGE>
STATE OF MASSACHUSETTS)
COUNTY OF SUFFOLK )
The foregoing was acknowledged before me this 31ST day of July, 1997,
by Mary Lee Storrs, Vice President of STATE STREET BANK AND TRUST COMPANY,
a trust company under the laws of Massachusetts on behalf of
the trust company.
NOTARIAL STAMP OR SEAL (OR OTHER TITLE OR RANK)
/s/ Agnes G. Dillon
--------------------------------
Signature of Person Taking
Acknowledgment
Agnes G. Dillon
My Commission Expires 5/15/2003
THIS INSTRUMENT WAS DRAFTED BY (NAME AND ADDRESS)
Jonathan Reiss, Esq.
Cleary, Gottlieb, Steen & Hamilton
1 Liberty Plaza
New York, New York 10006
<PAGE>
STATE OF ILLINOIS )
COUNTY OF DUPAGE )
The foregoing was acknowledged before me this 31st day of July, 1997,
by Gloria Santona,Vice President, Deputy General Counsel and Secretary of
McDONALD'S CORPORATION, a corporation under the laws of Delaware on behalf of
the trust company.
NOTARIAL STAMP OR SEAL (OR OTHER TITLE OR RANK)
[Notarial Seal] /s/ Gordana Vujanovich
---------------------------------
Signature of Person Taking
Acknowledgment
THIS INSTRUMENT WAS DRAFTED BY (NAME AND ADDRESS)
Jonathan Reiss, Esq.
Cleary, Gottlieb, Steen & Hamilton
1 Liberty Plaza
New York, New York 10006
<PAGE>
STATE OF NEW YORK )
COUNTY OF WESTCHESTER)
The foregoing was acknowledged before me this 28 day of July, 1997,
by Robert Rooney, Sr. VP of DISCOVERY ZONE, INC., a
corporation under the laws of Delaware on behalf of the trust company.
NOTARIAL STAMP OR SEAL (OR OTHER TITLE OR RANK)
[Notarial Seal] /s/ Mark D. Woodward
---------------------------------
Signature of Person Taking
Acknowledgment
THIS INSTRUMENT WAS DRAFTED BY (NAME AND ADDRESS)
Jonathan Reiss, Esq.
Cleary, Gottlieb, Steen & Hamilton
1 Liberty Plaza
New York, New York 10006
<PAGE>
EXHIBIT A
DESCRIPTIONS OF SENIOR MORTGAGES
The following is a list of the amended and restated first priority
mortgages, deeds of trust and/or deeds to secure debt entered executed by
Borrower, on behalf of McDonald's, pursuant to the terms and conditions of
the McDonald's Documentation:
1. Amended and Restated Deed To Secure Debt and Security Agreement, made as
of July 29, 1997, by Borrower to McDonald's, relating to mortgaged
property located in Kennesaw, in the County of Cobb, in the State of
Georgia.
2. Amended and Restated Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to Chicago Title Insurance Company, a Missouri Corporation, as
trustee, for the benefit of McDonald's, relating to trust property
located in Vancouver, in the County of Clark, in the State of Washington.
3. Amended and Restated Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to Kenneth W. Pearson, as trustee, to and for the benefit of
McDonald's, relating to trust property located in Leon Valley, in the
County of Bexar, in the State of Texas.
4. Amended and Restated Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to Kenneth W. Pearson, as trustee, for the benefit of
McDonald's, relating to trust property located in Arlington, in the
County of Tarrant, in the State of Texas.
5. Amended and Restated Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to Kenneth W. Pearson, as trustee, for the benefit of
McDonald's, relating to trust property located in San Antonio, in the
County of Bexar, in the State of Texas.
6. Amended and Restated Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to The Public Trustee of the County of Douglas, Colorado, as
trustee, to and for the benefit of McDonald's, relating to trust property
located in Littleton, in the County of Douglas, in the State of Colorado.
<PAGE>
7. Amended and Restated Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to The Public Trustee of the County of Arapahoe, Colorado, as
trustee, to and for the benefit of McDonald's, relating to trust property
located in Aurora, in the County of Arapahoe, in the State of Colorado.
8. Amended and Restated Mortgage, Assignment of Leases and Rents, Security
Agreement and Fixture Filing, made as of July 29, 1997, by Borrower to
McDonald's, relating to mortgaged property located in Schaumburg, in the
County of Cook, in the State of Illinois.
9. Amended and Restated Mortgage, made as of July 29, 1997, by Borrower to
McDonald's, relating to mortgaged property located in Sterling Heights,
in the County of Macomb, in the State of Michigan.
10. Open-End Mortgage, Assignment of Leases and Rents, Security Agreement and
Fixture Filing (Amended and Restated), made as of July 29, 1997, by
Borrower to McDonald's, relating to mortgaged property located in Forest
Park, in the County of Hamilton, in the State of Ohio.
11. Open-End Mortgage, Assignment of Leases and Rents, Security Agreement and
Fixture Filing (Amended and Restated), made as of July 29, 1997, by
Borrower to McDonald's, relating to mortgaged property located in
Columbus, in the County of Franklin, in the State of Ohio.
12. Amended and Restated Open-End Mortgage, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to McDonald's, relating to mortgaged property located in
Philadelphia, in the County of Philadelphia, in the State of Pennsylvania.
13. Amended and Restated Mortgage, Assignment of Leases and Rents, Security
Agreement and Fixture Filing, made as of July 29, 1997, by Borrower to
McDonald's, relating to mortgaged property located in Blaine, in the
County of Anoka, in the State of Minnesota.
14. Amended and Restated Mortgage, Assignment of Leases and Rents, Security
Agreement and Fixture Filing, made as of July 29, 1997, by Borrower to
McDonald's, relating to mortgaged property located in Washington
Township, in the County of Marion, in the State of Indiana.
<PAGE>
EXHIBIT A-1
RECORDING INFORMATION FOR SENIOR MORTGAGE IN FAVOR OF MCDONALD'S
County Book Volume
------ ---- ------
Senior Mortgage (Blaine)
<PAGE>
Blaine
Anoka County, Minnesota
EXHIBIT B
Lot 1, Block 1, Springbrook Mall Second Addition, according to the plat
thereof on file or of record in the office of the County Recorder, Anoka
County, Minnesota, together with the appurtenant easement(s) contained in
Document No. 952364.
<PAGE>
EXHIBIT C
DESCRIPTIONS OF SUBORDINATED MORTGAGES
The following is a list of the subordinated mortgages, deeds of
trust and/or deeds to secure debt entered executed by Borrower, on behalf of
the Subordinated Creditor, pursuant to the terms and conditions of the
McDonald's Documentation:
1. Deed To Secure Debt and Security Agreement, made as of July 29, 1997, by
Borrower to Subordinated Creditor, relating to mortgaged property
located in Kennesaw, in the County of Cobb, in the State of Georgia.
2. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Chicago Title
Insurance Company, a Missouri corporation, as trustee, for the benefit
of Subordinated Creditor, relating to trust property located in
Vancouver, in the County of Clark, in the State of Washington.
3. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Kenneth W.
Pearson, as trustee, to and for the benefit of Subordinated Creditor,
relating to trust property located in Leon Valley, in the County of
Bexar, in the State of Texas.
4. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Kenneth W.
Pearson, as trustee, for the benefit of Subordinated Creditor, relating
to trust property located in Arlington, in the County of Tarrant, in the
State of Texas.
5. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Kenneth W.
Pearson, as trustee, for the benefit of Subordinated Creditor, relating
to trust property located in San Antonio, in the County of Bexar, in the
State of Texas.
6. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to The Public
Trustee of the County of Douglas, Colorado, as trustee, to and for the
benefit of Subordinated Creditor, relating to trust property located in
Littleton, in the County of Douglas, in the State of Colorado.
7. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to The Public
Trustee of the County of Arapahoe, Colorado, as trustee, to and for the
benefit of Subordinated Creditor, relating to trust property located in
Aurora, in the County of Arapahoe, in the State of Colorado.
<PAGE>
8. Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture
Filing, made as of July 29, 1997, by Borrower to Subordinated Creditor,
relating to mortgaged property located in Schaumburg, in the County of
Cook, in the State of Illinois.
9. Mortgage, made as of July 29, 1997, by Borrower to Subordinated
Creditor, relating to mortgaged property located in Sterling Heights, in
the County of Macomb, in the State of Michigan.
10. Open-End Mortgage, Assignment of Leases and Rents, Security Agreement
and Fixture Filing, made as of July 29, 1997, by Borrower to
Subordinated Creditor, relating to mortgaged property located in Forest
Park, in the County of Hamilton, in the State of Ohio.
11. Open-End Mortgage, Assignment of Leases and Rents, Security Agreement
and Fixture Filing, made as of July 29, 1997, by Borrower to
Subordinated Creditor, relating to mortgaged property located in
Columbus, in the County of Franklin, in the State of Ohio.
12. Open-End Mortgage, Assignment of Leases and Rents, Security Agreement
and Fixture Filing, made as of July 29, 1997, by Borrower to
Subordinated Creditor, relating to mortgaged property located in
Philadelphia, in the County of Philadelphia, in the State of
Pennsylvania.
13. Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture
Filing, made as of July 29, 1997, by Borrower to Subordinated Creditor,
relating to mortgaged property located in Blaine, in the County of
Anoka, in the State of Minnesota.
14. Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture
Filing, made as of July 29, 1997, by Borrower to Subordinated Creditor,
relating to mortgaged property located in Washington Township, in the
County of Marion, in the State of Indiana.
<PAGE>
EXHIBIT C-1
RECORDING INFORMATION FOR SUBORDINATED MORTGAGE IN FAVOR OF STATE STREET BANK
AND TRUST COMPANY (SOLELY IN ITS CAPACITY AS TRUSTEE AND COLLATERAL AGENT
UNDER AND PURSUANT TO THE SUBORDINATED CREDITOR INDENTURE)
County Book Volume
------ ---- ------
Subordinated Mortgage (Blaine)
<PAGE>
Exhibit 4.49
________________________________________________________________________________
Space above this line for recorder's use
DOCUMENT PREPARED BY AND
AFTER RECORDING RETURN TO:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attention: Jonathan A. Reiss, Esq.
SUBORDINATION AGREEMENT
AGREEMENT made as of the 29th day of July, 1997, by and among STATE
STREET BANK AND TRUST COMPANY, solely in its capacity as trustee and
collateral agent under and pursuant to the Subordinated Creditor Indenture
(as hereinafter defined) with an address at Two International Place, Boston,
Massachusetts 02110, Attention: Corporate Trust Department, Mary Lee Storrs,
Vice President (the "Subordinated Creditor"), MCDONALD'S CORPORATION, a
Delaware corporation, with an address at McDonald's Plaza, Oak Brook,
Illinois 60523, Attention: General Counsel ("McDonald's") and DISCOVERY ZONE,
INC., a Delaware corporation, successor by merger to Leaps & Bounds, Inc.,
having its principal place of business at One Corporate Center, 110 East
Broward Boulevard, Fort Lauderdale, Florida 33301 ("Borrower").
W I T N E S S E T H:
RECITALS
A. WHEREAS, Borrower is the successor in interest to Discovery Zone,
Inc., a Delaware corporation and debtor and debtor in possession ("Old DZI"),
and Old DZI's affiliated debtors and debtors in possession including Leaps &
Bounds, Inc. (the "Debtors"),
[PHILADELPHIA, PENNSYLVANIA PROPERTY]
<PAGE>
all in the chapter 11 proceedings captioned In re Discovery Zone, Inc., et al.,
Case No. 96-411 (HSB) (Jointly Administered), before the United States
Bankruptcy Court for the District of Delaware (the "Bankruptcy Court"); and
B. WHEREAS, pursuant to an Agreement and Plan of Merger, dated as of
August 30, 1994 (the "Merger Agreement"), by and among Old DZI, and two of the
Debtors, Discovery Zone International, Inc. and Leaps & Bounds, Inc. on the one
hand, and McDonald's on the other hand, and related documentation, McDonald's
was or is the sublessor to Leaps & Bounds, Inc. of certain properties, and Old
DZI agreed to defend, indemnify and hold McDonald's and its affiliates harmless
in respect of all expenses, losses, costs, deficiencies, liabilities and damages
(including related and reasonable counsel fees and expenses, and compensatory
and demonstrable consequential damages) incurred or suffered by McDonald's as a
direct result of, inter alia, any breach that results in any payment by
McDonald's in connection with any guarantee by McDonald's relating to such
properties (the "Agreement to Indemnify"); and
C. WHEREAS, On November 18, 1996, the Bankruptcy Court entered the
Stipulation and Order Between Debtors and McDonald's Corporation Providing for
the Resolution, Settlement and Compromise of Disputes and for Rent Deferrals and
Allowance of Certain Claims (the "Stipulation and Order"), pursuant to which,
inter alia, the Debtors assumed certain subleases relating to properties
subleased by McDonald's to the Debtors pursuant to 11 U.S.C. Section 365 as to
which the Agreement to Indemnify remains in full force and effect, the
Bankruptcy Court approved the allowance of certain claims of McDonald's,
including those claims based on the Agreement to Indemnify, and the Bankruptcy
Court approved the validity, perfection, priority and enforceability of certain
claims and liens of McDonald's against the Debtors, including, without
limitation, the validity, perfection, priority and enforceability of the Senior
Mortgages (as defined below) and the Stipulation and Order was not appealed or
otherwise challenged and remains in full force and effect; and
D. WHEREAS, pursuant to the plan of reorganization for Old DZI and
its affiliated debtors confirmed by the Bankruptcy Court by order entered July
18, 1997 (the "Plan"), and as required by the terms of the Stipulation and
Order, Borrower, as the reorganized successor of the Debtors, is obligated to
issue to McDonald's Secured Rent Deferral Notes in the aggregate original
principal amount of $266,466.24, which amount is subject to increase each month
in accordance with the terms thereof (the "Senior Secured Rent Deferral Notes,"
and individually a "Senior Secured Rent Deferral Note") and Secured Rejection
Note in the aggregate original principal amount of $4,416,237.90 (the "Senior
Secured Rejection Note"); and
E. WHEREAS pursuant to the terms and conditions of the Stipulation
and Order, the Plan, the Agreement to Indemnify, the Senior Secured Rejection
Note and the Senior Secured Rent Deferral Notes and any related documentation
(the "McDonald's Documentation"), the repayment and performance of the
obligations of Borrower to McDonald's under the McDonald's Documentation
(including any contingent obligations under
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<PAGE>
the Agreement to Indemnify, the Stipulation and Order, including Section 7
thereof, or otherwise) (the "Senior Obligations") is secured by certain
amended and restated first priority mortgages, deeds of trust and/or deeds to
secure debt described on Exhibit A attached hereto and made a part hereof
(collectively, including all modifications, extensions and additions thereto,
the "Senior Mortgages," and individually, a "Senior Mortgage"), including the
Senior Mortgage identified by the recording information set forth in Exhibit
A-1, reaffirming and creating, to the extent necessary, valid and perfected
first priority liens on the real properties described on Exhibit B attached
hereto and made a part hereof, and other collateral described in the Senior
Mortgages (collectively, the "Real Properties," and individually, a "Real
Property"); and
F. WHEREAS, Borrower and the Subordinated Creditor entered into an
Indenture, dated July 22, 1997 (the "Subordinated Creditor Indenture") and
certain other documents and instruments related thereto, pursuant to which and
upon the terms and conditions therein indebtedness and other obligations were
incurred by the Borrower (the "Subordinated Indenture Indebtedness"), the
repayment and performance of which are secured by, among other things, certain
subordinated mortgages, deeds of trust and/or deeds to secure debt described on
Exhibit C hereto and made a part hereof (collectively, including all
modifications, extensions and additions thereto, the "Subordinated Mortgages,"
and individually, a "Subordinated Mortgage"), including the Subordinated
Mortgage identified by the recording information set forth in Exhibit C-1,
creating valid and perfected liens on the Real Properties subordinate to the
Senior Mortgages; and
G. WHEREAS, pursuant to the Senior Mortgages, the Borrower cannot
grant a subordinated lien on any of the Real Properties without the express
approval of McDonald's and the Subordinated Indenture Indebtedness will not be
able to be issued without the agreement of McDonald's to permit the issuance of
the Subordinated Mortgages; and
H. WHEREAS, McDonald's approval of the Borrower's granting of the
Subordinated Mortgages is conditioned on the entry into this Subordination
Agreement by the Subordinated Creditor, which hereby warrants and represents
that it has full power and authority under the Subordinated Creditor Indenture
to enter into this Subordination Agreement on behalf of all holders of any
securities or obligations whatsoever issued pursuant to the Subordinated
Creditor Indenture; and
I. WHEREAS, the Subordinated Creditor and McDonald's each desire to
enter into this Subordination Agreement to confirm the subordination of the
liens of the Subordinated Mortgages to the liens of the Senior Mortgages in
accordance with the terms of this Agreement;
NOW THEREFORE, IN CONSIDERATION OF THE MUTUAL BENEFITS accruing to the
parties hereto, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
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<PAGE>
1. Consent. Pursuant and subject to the other terms of this Agreement,
McDonald's consents to the Subordinate Mortgages. This consent shall not be
deemed to (i) be a consent to any future encumbrances, (ii) be a waiver of the
limitation on future encumbrances contained in the Senior Mortgages, (iii) be a
consent to or waiver of any other term or condition of the Senior Mortgages or
(iv) prejudice any right or rights which McDonald's may now or in the future
have under or in connection with the Senior Mortgages.
2. Priority of McDonald's.
(a) Subordination. The Subordinated Creditor hereby agrees for
itself and its successors and assigns that, except as otherwise expressly
provided herein, the terms, provisions and liens of the Subordinated Mortgages,
and any of the Subordinated Creditor's liens or security interests in the Real
Properties (but only to the extent of McDonald's interest in such Real
Properties), are hereby intentionally and unconditionally subordinated to, and
at all times shall be junior, subject and subordinate to the terms, provisions
and liens of the Senior Mortgages (including, without limitation, the liens
securing future optional and/or obligatory increases in the amount of the Senior
Obligations or advances by McDonald's to or for the benefit of the Borrower,
regardless of the use to which such advances are put), as well as to any and all
increases therein and all extensions, consolidations, modifications, renewals,
refinancings and supplements thereto. The Subordinated Creditor hereby waives
any right it may have to require that McDonald's marshal any assets of the
Borrower in favor of the Subordinated Creditor and the Subordinated Creditor
agrees that it shall not acquire, by subrogation or otherwise, any lien, estate,
right or other interest in the Real Properties which is or may be prior or
superior in right to the Senior Mortgages, including but not limited to advances
for real estate taxes and assessments. The rights and priorities set forth in
this Paragraph 2(a) shall be effective notwithstanding the order of creation,
attachment, vesting or perfection of the rights of McDonald's under the Senior
Mortgages, or of the Subordinated Creditor under the Subordinated Mortgages, the
Subordinated Creditor Indenture or any other documents executed in connection
therewith (including, without limitation, any UCC-1 financing statements or
fixture filings). The Subordinated Creditor shall be deemed to have consented
(i) to any action by Borrower to which McDonald's consents pursuant to the
Senior Mortgages and (ii) to each act of, or failure to act by, the Borrower
that is not prohibited by the Senior Mortgages, provided that, both with respect
to (i) and (ii), such deemed consent is applicable only to acts or failures to
act in connection with the sale, construction, restoration, insurance,
condemnation or alterations of, to or on, or with respect to the Real Properties
and any other matters relating to the Real Properties.
(b) Insurance; Condemnation Awards. The Subordinated Creditor hereby
assigns and releases unto McDonald's, until payment in full of the Senior
Obligations:
(i) all of its right, title, interest or claim, if any, in and to
the proceeds of all policies of insurance covering the Real
Properties, for application in accordance with the provisions
of the Senior Mortgages or as the Borrower and McDonald's may
otherwise agree; and
4
<PAGE>
(ii) all of its right, title and interest or claim, if any, in and
to all awards or other compensation made for any taking of
any part of the Real Properties for application in accordance
with the provisions of the Senior Mortgages or as the
Borrower and McDonald's may otherwise agree.
All such insurance proceeds or awards which may become due and payable
to the Subordinated Creditor shall be payable directly to McDonald's, and the
Subordinated Creditor directs any insurance company or governmental authority to
make payment thereof directly to McDonald's for application in accordance with
the Senior Mortgages. In the event that any such insurance proceeds or awards
are made payable to the Subordinated Creditor despite such direction, the
Subordinated Creditor shall promptly transfer the same, or promptly cause the
same to be transferred, to McDonald's.
(c) Assignment of Leases and Rents. Any assignment in favor of
the Subordinated Creditor of any Leases or Rents (as such terms are defined in
the Senior Mortgages) contained in the Subordinated Mortgages or the
Subordinated Creditor Indenture, or in any other document or instrument related
thereto or delivered in connection therewith, and all rights of the Subordinated
Creditor thereunder, are hereby intentionally and unconditionally subordinated
to, and shall be in all respects junior, subject and subordinate to any
assignment of rents, leases or other agreements relating to the Real Properties
contained in (i) the Senior Mortgages, and (ii) any other document now in
existence or hereafter made by the Borrower to secure the Senior Obligations,
and to all rights of McDonald's thereunder. Without limiting the foregoing
provisions of this Paragraph 2(c), from and after the execution and delivery of
the Subordinated Mortgages to the Subordinated Creditor, the Subordinated
Creditor shall not be entitled to receive or retain any Rents or other amounts
assigned to the Subordinated Creditor under any such document or instrument
until such time as the Senior Obligations shall have been completely paid in
full.
(d) Non-Disturbance Agreements. The Subordinated Creditor shall be
required to give a non-disturbance agreement to any lessee or tenant of the Real
Properties with respect to whose lease McDonald's, as holder of the Senior
Mortgages, shall have executed a non-disturbance agreement, and, if the
Subordinated Creditor fails to give any such non-disturbance agreement, the
Subordinated Creditor nevertheless agrees not to disturb the possession,
occupancy or rights of any such lessee or tenant without the prior written
consent of McDonald's in each instance.
(e) Further Assurances. To further evidence the subordination
hereinabove provided for, the Subordinated Creditor agrees that, within 30 days
after request by McDonald's, it will, at the Subordinated Creditor's sole cost
and expense, do, execute, acknowledge and deliver all and every such further
acts, deeds, conveyances and instruments as McDonald's may reasonably request
for the better assuring and evidencing of this subordination (including, without
limitation, further affirmation of the application of this
5
<PAGE>
Agreement to future optional and/or obligatory increases in the amount of the
Senior Obligations or advances, regardless of the use to which such increases
or advances are put).
(f) Release or Subordination of Lien. If McDonald's shall at any
time release its lien on the Real Properties (or any part thereof) in connection
with a sale or refinancing of the Real Properties or any part thereof, the
Subordinated Creditor shall, without any payment to it, be deemed to have
consented to such sale or refinancing and shall release the lien of the
Subordinated Mortgages thereon at the same time that McDonald's releases the
lien of the Senior Mortgages thereon, and, in the event that the Subordinated
Creditor has not executed a release within seven (7) business days of being
requested to do so by Borrower of McDonald's in connection with such sale or
refinancing, the Subordinated Creditor hereby irrevocably appoints McDonald's as
its attorney in fact (coupled with an interest) to execute in the name of the
Subordinated Creditor or without the signature of the Subordinated Creditor to
the extent McDonald's may lawfully do so, one or more releases or reconveyances
of mortgages/deeds of trust or other documents to evidence such release of the
lien of the Subordinated Mortgages. Until the Senior Obligations have been
completely paid in full (including, without limitation, any obligations which
may arise under the Agreement to Indemnify), all proceeds from or with respect
to the sale, refinancing or other disposition of the Real Properties or any part
thereof shall be paid to McDonald's (or placed into escrow for the benefit of
McDonald's pursuant to the terms of the Senior Mortgages) in satisfaction of the
Senior Obligations pursuant to the terms of the Senior Mortgages and the
McDonald's Documentation, and the Subordinated Creditor shall have no right,
claim or interest in or to any such proceeds.
(g) Enforcement. The Subordinated Creditor agrees that no remedies
provided for under the Subordinated Mortgages or other documents (to the extent
relating to the Real Properties in which McDonald's has an interest) executed in
connection with the Subordinated Creditor Indenture shall be exercised with
respect to the Real Properties, including, without limitation, the commencement
or prosecution of foreclosure proceedings, the exercise of any power of sale, or
the appointment of a receiver (or the Subordinated Creditor as mortgagee in
possession), without obtaining the prior written consent of McDonald's. The
Subordinated Creditor hereby consents and agrees that any lawful action taken by
or on behalf of McDonald's in the exercise of McDonald's rights and/or remedies
under the Senior Mortgages (including, without limitation, any foreclosure or
acquisition of title to a Real Property by deed in lieu of foreclosure or
otherwise) are hereby deemed to be consented to by the Subordinated Creditor in
all respects.
(h) No Third-Party Beneficiaries. The provisions of clauses (a)-(g)
of this Paragraph 2 are solely for the benefit of the holder of the Senior
Mortgages and shall not create any rights in the Borrower or any other person.
3. Bankruptcy. The provisions of this Agreement shall continue in full
force and effect notwithstanding the occurrence of any proceeding under Title 11
of the United States Code (11 U.S.C. Sec. 101 et seq.) or any other bankruptcy,
insolvency, liquidation, reorganization, dissolution, winding up, liquidation,
readjustment or other similar proceeding
6
<PAGE>
relating to the Borrower or to its property (whether voluntary or
involuntary, partial or complete, and whether in bankruptcy, insolvency or
receivership, or upon a general assignment for the benefit of creditors, or
any other marshaling of the assets and liabilities of the Borrower, or any
sale of all or substantially all of the assets of the Borrower, or otherwise)
(each, an "Insolvency Proceeding"). Without limiting the generality of the
foregoing, in the event of an Insolvency Proceeding, (i) the Senior
Obligations (including post-petition interest on the Senior Obligations,
whether or not such interest is allowable under Section 502 or 506 of the
United States Bankruptcy Code) shall first be completely paid in full before
the Subordinated Creditor shall be entitled to receive or retain any proceeds
from or relating to the sale, refinancing or other disposition of the Real
Properties or any portion thereof in respect of the Subordinated Indenture
Indebtedness; and (ii) the Subordinated Creditor shall not object to or
oppose any efforts by McDonald's to obtain relief from the automatic stay
with respect to the Real Properties under Section 362 of the United States
Bankruptcy Code.
4. Payments Received by the Subordinated Creditor. In the event that the
Subordinated Creditor receives any payment or other distribution of any kind or
character from the Borrower or from any other source whatsoever in respect of
any of the Subordinated Indenture Indebtedness, or receives any security
therefor, whether by way of agreement or compromise or otherwise, which it is
not entitled to retain pursuant to the terms of this Agreement, the Subordinated
Creditor shall immediately deliver the same to McDonald's, in the form received,
together with any necessary endorsements, in each case for application on
account of the Senior Obligations, but until so received by McDonald's, the same
shall be held in trust by the Subordinated Creditor as the property of
McDonald's.
5. No Consent Required. The Subordinated Creditor hereby agrees that
McDonald's may, from time to time, at its sole discretion and without notice to
or consent of or from the Subordinated Creditor, and without affecting the
obligations of the Subordinated Creditor herein or the subordination provided
for hereunder, take any or all of the following actions:
(a) retain or obtain a lien or security interest in any property to
secure all or any part of the Senior Obligations;
(b) retain, obtain or permit the release of the primary or secondary
obligations of any other obligor or obligors with respect to all or any part of
the Senior Obligations;
(c) fail to perfect, or release McDonald's lien or security interest
in, or surrender, release or permit any substitution or exchange for, all or any
part of any property (including, without limitation, the Real Properties)
securing all or any part of the Senior Obligations;
(d) change the manner, place or terms of payments, and/or change or
extend the time of payment of, renew or alter, all or any part of the Senior
Obligations, any security therefor, or any liability incurred directly or
indirectly in respect thereof, and the
7
<PAGE>
provisions hereof shall apply to the Senior Obligations as so changed,
extended, renewed or altered;
(e) sell, exchange, release, surrender, realize upon or otherwise
deal with in any manner and in any order the Real Properties or any part
thereof;
(f) exercise or refrain from exercising or release any rights and/or
remedies against the Borrower or others (including, without limitation, any
guarantor of all or a portion of the Senior Obligations) or otherwise act or
refrain from acting; and/or
(g) settle or compromise the Senior Obligations or any part thereof
or any security therefor, or any liability incurred directly or indirectly in
respect thereof or hereof.
6. Transfer. McDonald's may, from time to time, without notice to
Subordinated Creditor, assign or transfer any or all of the Senior Obligations
or any interest therein or any security therefor. Notwithstanding any such
assignment or transfer or any subsequent assignment or transfer thereof, the
holders of the Senior Obligations and the holders of any interest therein shall
be entitled to the benefits of this Agreement to the same extent as if such
holders were McDonald's specifically named in this Agreement.
7. Other Liens. Nothing in this Agreement shall prohibit, prevent or
otherwise impede the Subordinated Creditor from exercising any rights, remedy or
power which it may have against the Borrower and/or its subsidiaries with
respect to any collateral other than the Real Properties, which secures the
Subordinated Indenture Indebtedness, provided, however, that the Subordinated
Creditor shall not take any action which could impair the lien of the Senior
Mortgages or the ability of McDonald's to foreclose or otherwise enforce its
security interests or liens thereunder.
8. Termination. This Agreement shall in all respects be a continuing
agreement and shall remain in full force and effect until (a) the complete
payment in full of all of the Senior Obligations, and (b) the execution by
McDonald's of releases of all of the Senior Mortgages and the recording of such
releases in the appropriate real property records.
9. Miscellaneous.
(a) No Waiver. No delay on the part of McDonald's in the exercise of
any right or remedy shall operate as a waiver thereof, and no single or partial
exercise by McDonald's of any right or remedy shall preclude any other or
further exercise thereof or the exercise of any other right or remedy, nor shall
any modification, waiver or discharge of any of the provisions of this Agreement
be binding upon McDonald's except as expressly set forth in a writing duly
signed and delivered by McDonald's.
(b) Obligations Absolute. The obligations of the Subordinated
Creditor herein shall be absolute and unconditional, and the subordination of
the lien of the Subordinated Mortgages herein contained shall be effective with
respect to the Senior
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Obligations, notwithstanding any right or power of the Borrower or anyone
else to assert any claim or defense as to the invalidity or unenforceability
of any such obligation and/or any lien securing the same, in whole or in
part, or any determination of such invalidity or unenforceability and no such
event shall affect or impair the agreements and obligations of the
Subordinated Creditor hereunder. In the event that any of the Senior
Obligations and/or any lien securing the same is determined to be invalid or
unenforceable, in whole or in part, the Subordinated Creditor agrees that, as
between McDonald's and the Subordinated Creditor, the Senior Obligations and
such lien shall be deemed valid and enforceable, and the obligations of the
Subordinated Creditor hereunder with respect thereto shall not be affected by
any such determination but shall continue in full force and effect.
(c) Sole Discretion. It is understood and agreed that in the event
of any dissolution, winding up, liquidation, readjustment, reorganization or
other similar proceedings relating to the Borrower or to its property,
McDonald's may use its sole discretion with respect to the enforcement of the
Senior Mortgages, or in otherwise exercising or refraining from exercising any
rights or in taking or refraining from taking any action which it may be
entitled to take or assert hereunder; and that McDonald's shall not be under any
liability for doing or refraining from doing anything relative thereto in the
exercise of its own reasonable judgment or which it may deem necessary or
desirable.
(d) Waiver of Notice and Diligence. The Subordinated Creditor hereby
waives: (i) notice of acceptance by McDonald's of this Agreement; (ii) notice of
the existence or creation or nonpayment of all or any of the Senior Obligations;
and (iii) all diligence in collection or protection of or realization upon the
Senior Obligations or any security therefor.
(e) Reinstatement. If, as a result of, or arising from, any
bankruptcy, insolvency or similar proceeding, claim is ever made upon McDonald's
or any participant in the Senior Obligations for repayment or recovery of any
amount or amounts received by it in payment or on account of the Senior
Obligations from the proceeds of the sale, refinancing or other disposition of
all or a portion of the Real Properties and McDonald's or such participant
repays the Borrower or its legal representative or a trustee in bankruptcy, all
or part of such amount by reason of (i) any judgment, decree or order of any
court or administrative body having jurisdiction or (ii) any settlement or
compromise of any such claim effected by McDonald's or such participant with any
such claimant (including the Borrower or any guarantor), then in such event the
Subordinated Creditor agrees that it shall be and remain obligated hereunder
with respect to the amount so repaid or recovered to the same extent as if such
amount had never originally been received by McDonald's or such participant and
to the extent the Subordinated Creditor has received payments or distributions
in respect of the Subordinated Indenture Indebtedness from the proceeds of the
sale, refinancing or other disposition of the Real Properties.
10. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns.
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11. Notices. Any notices or other communications required or permitted
hereunder shall be in writing, and shall be sufficiently given if made by hand
delivery, by telecopier or registered or certified mail, postage prepaid, return
receipt requested, to the addresses listed in the first paragraph of this
Agreement. Each party may designate additional or different addresses for
notices to such party. Any notice or communication to either party hereto shall
be deemed to have been given or made as of the date so delivered if personally
delivered; when receipt is acknowledged electronically (with copy by U.S. mail),
if faxed (the fax number for the Subordinated Creditor is (617) 664-5371; the
fax number for McDonald's is (630) 623-3000; and five (5) calendar days after
mailing if sent by registered or certified mail, postage prepaid (except that a
notice of change of address shall not be deemed to have been given until
actually received by the addressee).
12. Representations by the Subordinated Creditor. The Subordinated
Creditor has the power, authority and legal right pursuant to the Subordinated
Creditor Indenture to execute, deliver and perform this Agreement. The
Subordinated Creditor has been duly authorized pursuant to the Subordinated
Creditor Indenture to enter into this Subordination Agreement on behalf of the
Holders (as defined in the Subordinated Creditor Indenture) and this
Subordination Agreement constitutes the valid and binding obligations of the
Subordinated Creditor on behalf of such Holders enforceable against the
Subordinated Creditor on behalf of such Holders in accordance with its terms.
13. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York including both matters of
internal law and conflicts of law, except that matters as to the priority of
liens on the Real Properties and remedies and procedural matters relating
thereto shall be governed by the laws of the State in which the Real Properties
is located.
14. Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
15. Singular and Plural. Words used in this Agreement in the singular,
where the context so permits, shall be deemed to include the plural and vice
versa. The definitions of words in the singular in this Agreement shall apply
to such words when used in the plural where the context so permits and vice
versa.
10
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed under seal
by the parties hereto as of the date first above written.
ATTEST: STATE STREET BANK AND TRUST
COMPANY, solely in its capacity
as trustee and collateral agent
under and pursuant to the
Subordinated Creditor Indenture
By: /s/ Carolina D. Altomare By: /s/ Mary Lee Storrs
___________________________ ___________________________
Name: Carolina D. Altomare Name: Mary Lee Storrs
Title: Assistant Secretary Title: Vice President
[Corporate Seal]
ATTEST: MCDONALD'S CORPORATION
By:____________________________ By:____________________________
Name: Name:
Title: Title:
[Corporate Seal]
ATTEST: DISCOVERY ZONE, INC.
By:____________________________ By:____________________________
Name: Name:
Title: Title:
[Corporate Seal]
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed under seal
by the parties hereto as of the date first above written.
ATTEST: STATE STREET BANK AND TRUST
COMPANY, solely in its capacity
as trustee and collateral agent
under and pursuant to the
Subordinated Creditor Indenture
By: ___________________________ By: ___________________________
Name: Name:
Title: Title:
[Corporate Seal]
ATTEST: MCDONALD'S CORPORATION
By: /s/ Joseph R. Thomas By: /s/ Gloria Santona
____________________________ ____________________________
Name: Joseph R. Thomas Name: Gloria Santona
Title: Vice President, Title: Vice President,
Associate General Counsel and Deputy General
Assistant Secretary Counsel & Secretary
[Corporate Seal]
ATTEST: DISCOVERY ZONE, INC.
By:____________________________ By:____________________________
Name: Name:
Title: Title:
[Corporate Seal]
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed under seal
by the parties hereto as of the date first above written.
ATTEST: STATE STREET BANK AND TRUST
COMPANY, solely in its capacity
as trustee and collateral agent
under and pursuant to the
Subordinated Creditor Indenture
By: ___________________________ By: ___________________________
Name: Name:
Title: Title:
[Corporate Seal]
ATTEST: MCDONALD'S CORPORATION
By:____________________________ By:____________________________
Name: Name:
Title: Title:
[Corporate Seal]
ATTEST: DISCOVERY ZONE, INC.
By: /s/ Robert Rooney By: /s/ Scott Bernstein
____________________________ ___________________________
Name: Robert Rooney Name: Scott Bernstein
Title: Secretary Title: President
[Corporate Seal]
<PAGE>
STATE OF MASSACHUSETTS)
COUNTY OF SUFFOLK)
BEFORE ME, the undersigned Notary Public, personally appeared
Mary Lee Storrs and Carolina D. Altomare, known to me (or satisfactorily
proven) to be the persons who executed the foregoing document, who, having been
duly sworn in accordance with law, acknowledged themselves to be Vice President
and Assistant Secretary of STATE STREET BANK AND TRUST COMPANY, a Massachusetts
trust company, and that, being duly authorized to do so, they executed the
foregoing instrument for and on behalf of said trust company.
WITNESS my hand and seal this 31st day of July, 1997.
[Notarial Seal]
/s/ Stacye M. Junior
____________________
Notary Public
STACYE M. JUNIOR
Notary Public
My Commission Expires 9/13/2002
<PAGE>
STATE OF ILLINOIS )
COUNTY OF DUPAGE )
BEFORE ME, the undersigned Notary Public, personally appeared
Gloria Santona and Joseph R. Thomas, known to me (or satisfactorily proven)
to be the persons who executed the foregoing document, who, having been duly
sworn in accordance with law, acknowledged themselves to be VP, Deputy
General Counsel & Secretary and VP, Associate General Counsel & Asst.
Secretary of McDONALD'S CORPORATION, a Delaware corporation, and that, being
duly authorized to do so, they executed the foregoing instrument for and on
behalf of said corporation.
WITNESS my hand and seal this 31st day of July, 1997.
[Notarial Seal]
/s/ Gordana Vujanovich
_______________________
Notary Public
- -----------------------------------
"OFFICIAL SEAL"
Gordana Vujanovich
Notary Public State of Illinois
My Commission Expires 02/15/99
- -----------------------------------
My commission expires: 2/15/99
<PAGE>
STATE OF NEW YORK )
COUNTY OF WESTCHESTER)
BEFORE ME, the undersigned Notary Public, personally appeared
Scott Bernstein and Robert Rooney, known to me (or satisfactorily
proven) to be the persons who executed the foregoing document, who, having been
duly sworn in accordance with law, acknowledged themselves to be President
and Secretary of DISCOVERY ZONE, INC., a Delaware corporation, and that,
being duly authorized to do so, they executed the foregoing instrument for and
on behalf of said corporation.
WITNESS my hand and seal this 28th day of July, 1997.
[Notarial Seal]
/s/ Mark D. Woodward
_____________________
Notary Public
MARK D. WOODWARD
Notary Public State of New York
No. 4997846
Qualified in New York County
Commission Expires June 15, 1998
My commission expires: _______
<PAGE>
EXHIBIT A
DESCRIPTIONS OF SENIOR MORTGAGES
The following is a list of the amended and restated first priority
mortgages, deeds of trust and/or deeds to secure debt entered executed by
Borrower, on behalf of McDonald's, pursuant to the terms and conditions of
the McDonald's Documentation:
1. Amended and Restated Deed To Secure Debt and Security Agreement, made as of
July 29, 1997, by Borrower to McDonald's, relating to mortgaged property
located in Kennesaw, in the County of Cobb, in the State of Georgia.
2. Amended and Restated Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to Chicago Title Insurance Company, a Missouri Corporation, as
trustee, for the benefit of McDonald's, relating to trust property located
in Vancouver, in the County of Clark, in the State of Washington.
3. Amended and Restated Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to Kenneth W. Pearson, as trustee, to and for the benefit of
McDonald's, relating to trust property located in Leon Valley, in the
County of Bexar, in the State of Texas.
4. Amended and Restated Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to Kenneth W. Pearson, as trustee, for the benefit of McDonald's,
relating to trust property located in Arlington, in the County of Tarrant,
in the State of Texas.
5. Amended and Restated Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to Kenneth W. Pearson, as trustee, for the benefit of McDonald's,
relating to trust property located in San Antonio, in the County of Bexar,
in the State of Texas.
6. Amended and Restated Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to The Public Trustee of the County of Douglas, Colorado, as
trustee, to and for the benefit of McDonald's, relating to trust property
located in Littleton, in the County of Douglas, in the State of Colorado.
<PAGE>
7. Amended and Restated Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to The Public Trustee of the County of Arapahoe, Colorado, as
trustee, to and for the benefit of McDonald's, relating to trust property
located in Aurora, in the County of Arapahoe, in the State of Colorado.
8. Amended and Restated Mortgage, Assignment of Leases and Rents, Security
Agreement and Fixture Filing, made as of July 29, 1997, by Borrower to
McDonald's, relating to mortgaged property located in Schaumburg, in the
County of Cook, in the State of Illinois.
9. Amended and Restated Mortgage, made as of July 29, 1997, by Borrower to
McDonald's, relating to mortgaged property located in Sterling Heights, in
the County of Macomb, in the State of Michigan.
10. Open-End Mortgage, Assignment of Leases and Rents, Security Agreement and
Fixture Filing (Amended and Restated), made as of July 29, 1997, by
Borrower to McDonald's, relating to mortgaged property located in Forest
Park, in the County of Hamilton, in the State of Ohio.
11. Open-End Mortgage, Assignment of Leases and Rents, Security Agreement and
Fixture Filing (Amended and Restated), made as of July 29, 1997, by
Borrower to McDonald's, relating to mortgaged property located in Columbus,
in the County of Franklin, in the State of Ohio.
12. Amended and Restated Open-End Mortgage, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to McDonald's, relating to mortgaged property located in
Philadelphia, in the County of Philadelphia, in the State of Pennsylvania.
13. Amended and Restated Mortgage, Assignment of Leases and Rents, Security
Agreement and Fixture Filing, made as of July 29, 1997, by Borrower to
McDonald's, relating to mortgaged property located in Blaine, in the County
of Anoka, in the State of Minnesota.
14. Amended and Restated Mortgage, Assignment of Leases and Rents, Security
Agreement and Fixture Filing, made as of July 29, 1997, by Borrower to
McDonald's, relating to mortgaged property located in Washington Township,
in the County of Marion, in the State of Indiana.
<PAGE>
EXHIBIT A-1
RECORDING INFORMATION FOR SENIOR MORTGAGE IN FAVOR OF MCDONALD'S
County Book Volume
Senior Mortgage (Philadelphia)
<PAGE>
Philadelphia
Philadelphia County, Pennsylvania
EXHIBIT B
ALL THAT CERTAIN lot or piece of ground. Situate in the 66th Ward of the City
of Philadelphia, Commonwealth of Pennsylvania and described in accordance
with ALTA/ACSM Land Title Survey of Parcel M-72 made for Leaps and Bounds
Inc. by Pennoni Associates Inc. dated May 18, 1993, as follows, to wit:
BEGINNING at a point the following course and distance from a point being the
intersection of the extended Easterlymost right-of-way line of Woodhaven Road
(State Highway 0063) (variable width) and the extended Southerlymost line of
Knights Road (State Highway 1015) (100' wide):
(A) North 53 degrees, 47 minutes, 12 seconds East a distance of 3943.48 feet
to the aforementioned point of beginning.
Thence (1) North 50 degrees, 54 minutes, 30 seconds East a distance of 326.52
feet to a point;
Thence (2) North 41 degrees, 17 minutes, 20 seconds West a distance of 338.54
feet to a point;
Thence (3) North 89 degrees, 35 minutes, 24 seconds West a distance of 64.92
feet to a point on the Southerly line of Knights Road (State Highway 1015);
Thence (4) along said line North 40 degrees, 12 minutes, 51 seconds East, a
distance of 1.29 feet to a point of curvature.
Thence (5) along the same, on a curve to the left having a radius of 1478.86
feet, an arc length of 98.72 feet to a point;
Thence (6) leaving said line of Knights Road, South 41 degrees, 17 minutes,
20 seconds East a distance of 573.53 feet to a point;
Thence (7) South 49 degrees, 00 minutes, 00 seconds West a distance of 42.97
feet to a point;
Thence (8) South 51 degrees, 30 minutes, 36 seconds East a distance of 134.72
feet to a point of curvature;
Thence (9) on a curve to the right having a radius of 329.04 feet, an arc
length of 136.57 feet, and a chord which bears South 31 degrees, 29 minutes,
05 seconds East, to a point;
Thence (10) South 88 degrees, 40 minutes, 00 seconds West a distance of
444.08 feet to a point;
Thence (11) North 39 degrees, 05 minutes, 30 seconds West a distance of 167.21
***CONTINUED***
<PAGE>
Philadelphia
Philadelphia County, Pennsylvania
EXHIBIT B
(continued)
feet to the first mentioned point of beginning.
BEING NO. 4301 Byberry Road.
PROPERTY ADDRESS: 4301 Byberry Road Unit M-7R
ERT TAX NUMBER: 88-2-6932-00
REGISTRY NUMBER: 155 N 23 LOT 198
Ward: 66th
Together with all rights and subject to all conditions contained within that
certain Master Declaration and Agreement of Easements, Covenants, Conditions
and Restrictions between Liberty Mills Limited Partnership and Liberty Mills
Residual Limited Partnership dated 6/28/1988 and recorded 6/30/1988 in Deed
Book FHS 1111 page 506, as amended by First Amendment to Master Declaration
and Agreement of Easements, Covenants, Conditions and Restrictions dated
2/5/1990 and recorded 3/12/1990 in Deed Book FHS 1576 page 347.
<PAGE>
EXHIBIT C
DESCRIPTIONS OF SUBORDINATED MORTGAGES
The following is a list of the subordinated mortgages, deeds of trust
and/or deeds to secure debt entered executed by Borrower, on behalf of the
Subordinated Creditor, pursuant to the terms and conditions of the McDonald's
Documentation:
1. Deed To Secure Debt and Security Agreement, made as of July 29, 1997, by
Borrower to Subordinated Creditor, relating to mortgaged property located
in Kennesaw, in the County of Cobb, in the State of Georgia.
2. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Chicago Title
Insurance Company, a Missouri corporation, as trustee, for the benefit of
Subordinated Creditor, relating to trust property located in Vancouver, in
the County of Clark, in the State of Washington.
3. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Kenneth W.
Pearson, as trustee, to and for the benefit of Subordinated Creditor,
relating to trust property located in Leon Valley, in the County of Bexar,
in the State of Texas.
4. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Kenneth W.
Pearson, as trustee, for the benefit of Subordinated Creditor, relating to
trust property located in Arlington, in the County of Tarrant, in the State
of Texas.
5. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Kenneth W.
Pearson, as trustee, for the benefit of Subordinated Creditor, relating to
trust property located in San Antonio, in the County of Bexar, in the State
of Texas.
6. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to The Public Trustee
of the County of Douglas, Colorado, as trustee, to and for the benefit of
Subordinated Creditor, relating to trust property located in Littleton, in
the County of Douglas, in the State of Colorado.
7. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to The Public Trustee
of the County of Arapahoe, Colorado, as trustee, to and for the benefit of
Subordinated Creditor, relating to trust property located in Aurora, in the
County of Arapahoe, in the State of Colorado.
<PAGE>
8. Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture
Filing, made as of July 29, 1997, by Borrower to Subordinated Creditor,
relating to mortgaged property located in Schaumburg, in the County of
Cook, in the State of Illinois.
9. Mortgage, made as of July 29, 1997, by Borrower to Subordinated Creditor,
relating to mortgaged property located in Sterling Heights, in the County
of Macomb, in the State of Michigan.
10. Open-End Mortgage, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Subordinated
Creditor, relating to mortgaged property located in Forest Park, in the
County of Hamilton, in the State of Ohio.
11. Open-End Mortgage, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Subordinated
Creditor, relating to mortgaged property located in Columbus, in the County
of Franklin, in the State of Ohio.
12. Open-End Mortgage, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Subordinated
Creditor, relating to mortgaged property located in Philadelphia, in the
County of Philadelphia, in the State of Pennsylvania.
13. Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture
Filing, made as of July 29, 1997, by Borrower to Subordinated Creditor,
relating to mortgaged property located in Blaine, in the County of Anoka,
in the State of Minnesota.
14. Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture
Filing, made as of July 29, 1997, by Borrower to Subordinated Creditor,
relating to mortgaged property located in Washington Township, in the
County of Marion, in the State of Indiana.
<PAGE>
EXHIBIT C-1
RECORDING INFORMATION FOR SUBORDINATED MORTGAGE IN FAVOR OF STATE STREET BANK
AND TRUST COMPANY (SOLELY IN ITS CAPACITY AS TRUSTEE AND COLLATERAL AGENT
UNDER AND PURSUANT TO THE SUBORDINATED CREDITOR INDENTURE)
County Book Volume
Subordinated Mortgage
(Philadelphia)
<PAGE>
Exhibit 4.50
- ------------------------------------------------------------------------------
Space above this line for recorder's use
DOCUMENT PREPARED BY AND
AFTER RECORDING RETURN TO:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attention: Jonathan A. Reiss, Esq.
SUBORDINATION AGREEMENT
AGREEMENT made as of the 29th day of July, 1997, by and among STATE
STREET BANK AND TRUST COMPANY, solely in its capacity as trustee and collateral
agent under and pursuant to the Subordinated Creditor Indenture (as hereinafter
defined) with an address at Two International Place, Boston, Massachusetts
02110, Attention: Corporate Trust Department, Mary Lee Storrs, Vice President
(the "Subordinated Creditor"), MCDONALD'S CORPORATION, a Delaware corporation,
with an address at McDonald's Plaza, Oak Brook, Illinois 60523, Attention:
General Counsel ("McDonald's") and DISCOVERY ZONE, INC., a Delaware corporation,
successor by merger to Leaps & Bounds, Inc., having its principal place of
business at One Corporate Center, 110 East Broward Boulevard, Fort Lauderdale,
Florida 33301 ("Borrower").
W I T N E S S E T H:
RECITALS
A. WHEREAS, Borrower is the successor in interest to Discovery Zone,
Inc., a Delaware corporation and debtor and debtor in possession ("Old DZI"),
and Old DZI's affiliated debtors and debtors in possession including Leaps &
Bounds, Inc. (the "Debtors"),
[WASHINGTON TOWNSHIP, INDIANA PROPERTY]
<PAGE>
all in the chapter 11 proceedings captioned In re Discovery Zone, Inc., et al.,
Case No. 96-411 (HSB) (Jointly Administered), before the United States
Bankruptcy Court for the District of Delaware (the "Bankruptcy Court"); and
B. WHEREAS, pursuant to an Agreement and Plan of Merger, dated as of
August 30, 1994 (the "Merger Agreement"), by and among Old DZI, and two of the
Debtors, Discovery Zone International, Inc. and Leaps & Bounds, Inc. on the one
hand, and McDonald's on the other hand, and related documentation, McDonald's
was or is the sublessor to Leaps & Bounds, Inc. of certain properties, and Old
DZI agreed to defend, indemnify and hold McDonald's and its affiliates harmless
in respect of all expenses, losses, costs, deficiencies, liabilities and damages
(including related and reasonable counsel fees and expenses, and compensatory
and demonstrable consequential damages) incurred or suffered by McDonald's as a
direct result of, inter alia, any breach that results in any payment by
McDonald's in connection with any guarantee by McDonald's relating to such
properties (the "Agreement to Indemnify"); and
C. WHEREAS, On November 18, 1996, the Bankruptcy Court entered the
Stipulation and Order Between Debtors and McDonald's Corporation Providing for
the Resolution, Settlement and Compromise of Disputes and for Rent Deferrals and
Allowance of Certain Claims (the "Stipulation and Order"), pursuant to which,
inter alia, the Debtors assumed certain subleases relating to properties
subleased by McDonald's to the Debtors pursuant to 11 U.S.C. Section 365 as to
which the Agreement to Indemnify remains in full force and effect, the
Bankruptcy Court approved the allowance of certain claims of McDonald's,
including those claims based on the Agreement to Indemnify, and the Bankruptcy
Court approved the validity, perfection, priority and enforceability of certain
claims and liens of McDonald's against the Debtors, including, without
limitation, the validity, perfection, priority and enforceability of the Senior
Mortgages (as defined below) and the Stipulation and Order was not appealed or
otherwise challenged and remains in full force and effect; and
D. WHEREAS, pursuant to the plan of reorganization for Old DZI and
its affiliated debtors confirmed by the Bankruptcy Court by order entered July
18, 1997 (the "Plan"), and as required by the terms of the Stipulation and
Order, Borrower, as the reorganized successor of the Debtors, is obligated to
issue to McDonald's Secured Rent Deferral Notes in the aggregate original
principal amount of $266,466.24, which amount is subject to increase each month
in accordance with the terms thereof (the "Senior Secured Rent Deferral Notes,"
and individually a "Senior Secured Rent Deferral Note") and Secured Rejection
Note in the aggregate original principal amount of $4,416,237.90 (the "Senior
Secured Rejection Note"); and
E. WHEREAS pursuant to the terms and conditions of the Stipulation
and Order, the Plan, the Agreement to Indemnify, the Senior Secured Rejection
Note and the Senior Secured Rent Deferral Notes and any related documentation
(the "McDonald's Documentation"), the repayment and performance of the
obligations of Borrower to McDonald's under the McDonald's Documentation
(including any contingent obligations under
2
<PAGE>
the Agreement to Indemnify, the Stipulation and Order, including Section 7
thereof, or otherwise) (the "Senior Obligations") is secured by certain
amended and restated first priority mortgages, deeds of trust and/or deeds to
secure debt described on Exhibit A attached hereto and made a part hereof
(collectively, including all modifications, extensions and additions thereto,
the "Senior Mortgages," and individually, a "Senior Mortgage"), including the
Senior Mortgage identified by the recording information set forth in Exhibit
A-1, reaffirming and creating, to the extent necessary, valid and perfected
first priority liens on the real properties described on Exhibit B attached
hereto and made a part hereof, and other collateral described in the Senior
Mortgages (collectively, the "Real Properties," and individually, a "Real
Property"); and
F. WHEREAS, Borrower and the Subordinated Creditor entered into an
Indenture, dated July 22, 1997 (the "Subordinated Creditor Indenture") and
certain other documents and instruments related thereto, pursuant to which and
upon the terms and conditions therein indebtedness and other obligations were
incurred by the Borrower (the "Subordinated Indenture Indebtedness"), the
repayment and performance of which are secured by, among other things, certain
subordinated mortgages, deeds of trust and/or deeds to secure debt described on
Exhibit C hereto and made a part hereof (collectively, including all
modifications, extensions and additions thereto, the "Subordinated Mortgages,"
and individually, a "Subordinated Mortgage"), including the Subordinated
Mortgage identified by the recording information set forth in Exhibit C-1,
creating valid and perfected liens on the Real Properties subordinate to the
Senior Mortgages; and
G. WHEREAS, pursuant to the Senior Mortgages, the Borrower cannot
grant a subordinated lien on any of the Real Properties without the express
approval of McDonald's and the Subordinated Indenture Indebtedness will not be
able to be issued without the agreement of McDonald's to permit the issuance of
the Subordinated Mortgages; and
H. WHEREAS, McDonald's approval of the Borrower's granting of the
Subordinated Mortgages is conditioned on the entry into this Subordination
Agreement by the Subordinated Creditor, which hereby warrants and represents
that it has full power and authority under the Subordinated Creditor Indenture
to enter into this Subordination Agreement on behalf of all holders of any
securities or obligations whatsoever issued pursuant to the Subordinated
Creditor Indenture; and
I. WHEREAS, the Subordinated Creditor and McDonald's each desire to
enter into this Subordination Agreement to confirm the subordination of the
liens of the Subordinated Mortgages to the liens of the Senior Mortgages in
accordance with the terms of this Agreement;
NOW THEREFORE, IN CONSIDERATION OF THE MUTUAL BENEFITS accruing to the
parties hereto, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
3
<PAGE>
1. Consent. Pursuant and subject to the other terms of this
Agreement, McDonald's consents to the Subordinate Mortgages. This consent shall
not be deemed to (i) be a consent to any future encumbrances, (ii) be a waiver
of the limitation on future encumbrances contained in the Senior Mortgages,
(iii) be a consent to or waiver of any other term or condition of the Senior
Mortgages or (iv) prejudice any right or rights which McDonald's may now or in
the future have under or in connection with the Senior Mortgages.
2. Priority of McDonald's.
(a) Subordination. The Subordinated Creditor hereby agrees for
itself and its successors and assigns that, except as otherwise expressly
provided herein, the terms, provisions and liens of the Subordinated Mortgages,
and any of the Subordinated Creditor's liens or security interests in the Real
Properties (but only to the extent of McDonald's interest in such Real
Properties), are hereby intentionally and unconditionally subordinated to, and
at all times shall be junior, subject and subordinate to the terms, provisions
and liens of the Senior Mortgages (including, without limitation, the liens
securing future optional and/or obligatory increases in the amount of the Senior
Obligations or advances by McDonald's to or for the benefit of the Borrower,
regardless of the use to which such advances are put), as well as to any and all
increases therein and all extensions, consolidations, modifications, renewals,
refinancings and supplements thereto. The Subordinated Creditor hereby waives
any right it may have to require that McDonald's marshal any assets of the
Borrower in favor of the Subordinated Creditor and the Subordinated Creditor
agrees that it shall not acquire, by subrogation or otherwise, any lien, estate,
right or other interest in the Real Properties which is or may be prior or
superior in right to the Senior Mortgages, including but not limited to advances
for real estate taxes and assessments. The rights and priorities set forth in
this Paragraph 2(a) shall be effective notwithstanding the order of creation,
attachment, vesting or perfection of the rights of McDonald's under the Senior
Mortgages, or of the Subordinated Creditor under the Subordinated Mortgages, the
Subordinated Creditor Indenture or any other documents executed in connection
therewith (including, without limitation, any UCC-1 financing statements or
fixture filings). The Subordinated Creditor shall be deemed to have consented
(i) to any action by Borrower to which McDonald's consents pursuant to the
Senior Mortgages and (ii) to each act of, or failure to act by, the Borrower
that is not prohibited by the Senior Mortgages, provided that, both with respect
to (i) and (ii), such deemed consent is applicable only to acts or failures to
act in connection with the sale, construction, restoration, insurance,
condemnation or alterations of, to or on, or with respect to the Real Properties
and any other matters relating to the Real Properties.
(b) Insurance; Condemnation Awards. The Subordinated Creditor
hereby assigns and releases unto McDonald's, until payment in full of the Senior
Obligations:
(i) all of its right, title, interest or claim, if any, in
and to the proceeds of all policies of insurance
covering the Real Properties, for application in
accordance with the provisions of the Senior Mortgages
or as the Borrower and McDonald's may otherwise agree;
and
4
<PAGE>
(ii) all of its right, title and interest or claim, if any,
in and to all awards or other compensation made for any
taking of any part of the Real Properties for
application in accordance with the provisions of the
Senior Mortgages or as the Borrower and McDonald's may
otherwise agree.
All such insurance proceeds or awards which may become due and payable
to the Subordinated Creditor shall be payable directly to McDonald's, and the
Subordinated Creditor directs any insurance company or governmental authority to
make payment thereof directly to McDonald's for application in accordance with
the Senior Mortgages. In the event that any such insurance proceeds or awards
are made payable to the Subordinated Creditor despite such direction, the
Subordinated Creditor shall promptly transfer the same, or promptly cause the
same to be transferred, to McDonald's.
(c) Assignment of Leases and Rents. Any assignment in favor of the
Subordinated Creditor of any Leases or Rents (as such terms are defined in the
Senior Mortgages) contained in the Subordinated Mortgages or the Subordinated
Creditor Indenture, or in any other document or instrument related thereto or
delivered in connection therewith, and all rights of the Subordinated Creditor
thereunder, are hereby intentionally and unconditionally subordinated to, and
shall be in all respects junior, subject and subordinate to any assignment of
rents, leases or other agreements relating to the Real Properties contained in
(i) the Senior Mortgages, and (ii) any other document now in existence or
hereafter made by the Borrower to secure the Senior Obligations, and to all
rights of McDonald's thereunder. Without limiting the foregoing provisions of
this Paragraph 2(c), from and after the execution and delivery of the
Subordinated Mortgages to the Subordinated Creditor, the Subordinated Creditor
shall not be entitled to receive or retain any Rents or other amounts assigned
to the Subordinated Creditor under any such document or instrument until such
time as the Senior Obligations shall have been completely paid in full.
(d) Non-Disturbance Agreements. The Subordinated Creditor shall
be required to give a non-disturbance agreement to any lessee or tenant of the
Real Properties with respect to whose lease McDonald's, as holder of the Senior
Mortgages, shall have executed a non-disturbance agreement, and, if the
Subordinated Creditor fails to give any such non-disturbance agreement, the
Subordinated Creditor nevertheless agrees not to disturb the possession,
occupancy or rights of any such lessee or tenant without the prior written
consent of McDonald's in each instance.
(e) Further Assurances. To further evidence the subordination
hereinabove provided for, the Subordinated Creditor agrees that, within 30 days
after request by McDonald's, it will, at the Subordinated Creditor's sole cost
and expense, do, execute, acknowledge and deliver all and every such further
acts, deeds, conveyances and instruments as McDonald's may reasonably request
for the better assuring and evidencing of this subordination (including, without
limitation, further affirmation of the application of this
5
<PAGE>
Agreement to future optional and/or obligatory increases in the amount of the
Senior Obligations or advances, regardless of the use to which such increases
or advances are put).
(f) Release or Subordination of Lien. If McDonald's shall at
any time release its lien on the Real Properties (or any part thereof) in
connection with a sale or refinancing of the Real Properties or any part
thereof, the Subordinated Creditor shall, without any payment to it, be deemed
to have consented to such sale or refinancing and shall release the lien of the
Subordinated Mortgages thereon at the same time that McDonald's releases the
lien of the Senior Mortgages thereon, and, in the event that the Subordinated
Creditor has not executed a release within seven (7) business days of being
requested to do so by Borrower of McDonald's in connection with such sale or
refinancing, the Subordinated Creditor hereby irrevocably appoints McDonald's as
its attorney in fact (coupled with an interest) to execute in the name of the
Subordinated Creditor or without the signature of the Subordinated Creditor to
the extent McDonald's may lawfully do so, one or more releases or reconveyances
of mortgages/deeds of trust or other documents to evidence such release of the
lien of the Subordinated Mortgages. Until the Senior Obligations have been
completely paid in full (including, without limitation, any obligations which
may arise under the Agreement to Indemnify), all proceeds from or with respect
to the sale, refinancing or other disposition of the Real Properties or any part
thereof shall be paid to McDonald's (or placed into escrow for the benefit of
McDonald's pursuant to the terms of the Senior Mortgages) in satisfaction of the
Senior Obligations pursuant to the terms of the Senior Mortgages and the
McDonald's Documentation, and the Subordinated Creditor shall have no right,
claim or interest in or to any such proceeds.
(g) Enforcement. The Subordinated Creditor agrees that no
remedies provided for under the Subordinated Mortgages or other documents (to
the extent relating to the Real Properties in which McDonald's has an interest)
executed in connection with the Subordinated Creditor Indenture shall be
exercised with respect to the Real Properties, including, without limitation,
the commencement or prosecution of foreclosure proceedings, the exercise of any
power of sale, or the appointment of a receiver (or the Subordinated Creditor as
mortgagee in possession), without obtaining the prior written consent of
McDonald's. The Subordinated Creditor hereby consents and agrees that any
lawful action taken by or on behalf of McDonald's in the exercise of McDonald's
rights and/or remedies under the Senior Mortgages (including, without
limitation, any foreclosure or acquisition of title to a Real Property by deed
in lieu of foreclosure or otherwise) are hereby deemed to be consented to by the
Subordinated Creditor in all respects.
(h) No Third-Party Beneficiaries. The provisions of clauses
(a)-(g) of this Paragraph 2 are solely for the benefit of the holder of the
Senior Mortgages and shall not create any rights in the Borrower or any other
person.
3. Bankruptcy. The provisions of this Agreement shall continue in
full force and effect notwithstanding the occurrence of any proceeding under
Title 11 of the United States Code (11 U.S.C. Sec. 101 et seq.) or any other
bankruptcy, insolvency, liquidation, reorganization, dissolution, winding up,
liquidation, readjustment or other similar proceeding
6
<PAGE>
relating to the Borrower or to its property (whether voluntary or
involuntary, partial or complete, and whether in bankruptcy, insolvency or
receivership, or upon a general assignment for the benefit of creditors, or
any other marshaling of the assets and liabilities of the Borrower, or any
sale of all or substantially all of the assets of the Borrower, or otherwise)
(each, an "Insolvency Proceeding"). Without limiting the generality of the
foregoing, in the event of an Insolvency Proceeding, (i) the Senior
Obligations (including post-petition interest on the Senior Obligations,
whether or not such interest is allowable under Section 502 or 506 of the
United States Bankruptcy Code) shall first be completely paid in full before
the Subordinated Creditor shall be entitled to receive or retain any proceeds
from or relating to the sale, refinancing or other disposition of the Real
Properties or any portion thereof in respect of the Subordinated Indenture
Indebtedness; and (ii) the Subordinated Creditor shall not object to or
oppose any efforts by McDonald's to obtain relief from the automatic stay
with respect to the Real Properties under Section 362 of the United States
Bankruptcy Code.
4. Payments Received by the Subordinated Creditor. In the event that
the Subordinated Creditor receives any payment or other distribution of any kind
or character from the Borrower or from any other source whatsoever in respect of
any of the Subordinated Indenture Indebtedness, or receives any security
therefor, whether by way of agreement or compromise or otherwise, which it is
not entitled to retain pursuant to the terms of this Agreement, the Subordinated
Creditor shall immediately deliver the same to McDonald's, in the form received,
together with any necessary endorsements, in each case for application on
account of the Senior Obligations, but until so received by McDonald's, the same
shall be held in trust by the Subordinated Creditor as the property of
McDonald's.
5. No Consent Required. The Subordinated Creditor hereby agrees that
McDonald's may, from time to time, at its sole discretion and without notice to
or consent of or from the Subordinated Creditor, and without affecting the
obligations of the Subordinated Creditor herein or the subordination provided
for hereunder, take any or all of the following actions:
(a) retain or obtain a lien or security interest in any property
to secure all or any part of the Senior Obligations;
(b) retain, obtain or permit the release of the primary or
secondary obligations of any other obligor or obligors with respect to all or
any part of the Senior Obligations;
(c) fail to perfect, or release McDonald's lien or security
interest in, or surrender, release or permit any substitution or exchange for,
all or any part of any property (including, without limitation, the Real
Properties) securing all or any part of the Senior Obligations;
(d) change the manner, place or terms of payments, and/or change
or extend the time of payment of, renew or alter, all or any part of the Senior
Obligations, any security therefor, or any liability incurred directly or
indirectly in respect thereof, and the
7
<PAGE>
provisions hereof shall apply to the Senior Obligations as so changed,
extended, renewed or altered;
(e) sell, exchange, release, surrender, realize upon or
otherwise deal with in any manner and in any order the Real Properties or any
part thereof;
(f) exercise or refrain from exercising or release any rights
and/or remedies against the Borrower or others (including, without limitation,
any guarantor of all or a portion of the Senior Obligations) or otherwise act or
refrain from acting; and/or
(g) settle or compromise the Senior Obligations or any part
thereof or any security therefor, or any liability incurred directly or
indirectly in respect thereof or hereof.
6. Transfer. McDonald's may, from time to time, without notice to
Subordinated Creditor, assign or transfer any or all of the Senior Obligations
or any interest therein or any security therefor. Notwithstanding any such
assignment or transfer or any subsequent assignment or transfer thereof, the
holders of the Senior Obligations and the holders of any interest therein shall
be entitled to the benefits of this Agreement to the same extent as if such
holders were McDonald's specifically named in this Agreement.
7. Other Liens. Nothing in this Agreement shall prohibit, prevent or
otherwise impede the Subordinated Creditor from exercising any rights, remedy or
power which it may have against the Borrower and/or its subsidiaries with
respect to any collateral other than the Real Properties, which secures the
Subordinated Indenture Indebtedness, provided, however, that the Subordinated
Creditor shall not take any action which could impair the lien of the Senior
Mortgages or the ability of McDonald's to foreclose or otherwise enforce its
security interests or liens thereunder.
8. Termination. This Agreement shall in all respects be a continuing
agreement and shall remain in full force and effect until (a) the complete
payment in full of all of the Senior Obligations, and (b) the execution by
McDonald's of releases of all of the Senior Mortgages and the recording of such
releases in the appropriate real property records.
9. Miscellaneous.
(a) No Waiver. No delay on the part of McDonald's in the
exercise of any right or remedy shall operate as a waiver thereof, and no single
or partial exercise by McDonald's of any right or remedy shall preclude any
other or further exercise thereof or the exercise of any other right or remedy,
nor shall any modification, waiver or discharge of any of the provisions of this
Agreement be binding upon McDonald's except as expressly set forth in a writing
duly signed and delivered by McDonald's.
(b) Obligations Absolute. The obligations of the Subordinated
Creditor herein shall be absolute and unconditional, and the subordination of
the lien of the Subordinated Mortgages herein contained shall be effective with
respect to the Senior
8
<PAGE>
Obligations, notwithstanding any right or power of the Borrower or anyone
else to assert any claim or defense as to the invalidity or unenforceability
of any such obligation and/or any lien securing the same, in whole or in
part, or any determination of such invalidity or unenforceability and no such
event shall affect or impair the agreements and obligations of the
Subordinated Creditor hereunder. In the event that any of the Senior
Obligations and/or any lien securing the same is determined to be invalid or
unenforceable, in whole or in part, the Subordinated Creditor agrees that, as
between McDonald's and the Subordinated Creditor, the Senior Obligations and
such lien shall be deemed valid and enforceable, and the obligations of the
Subordinated Creditor hereunder with respect thereto shall not be affected by
any such determination but shall continue in full force and effect.
(c) Sole Discretion. It is understood and agreed that in the
event of any dissolution, winding up, liquidation, readjustment, reorganization
or other similar proceedings relating to the Borrower or to its property,
McDonald's may use its sole discretion with respect to the enforcement of the
Senior Mortgages, or in otherwise exercising or refraining from exercising any
rights or in taking or refraining from taking any action which it may be
entitled to take or assert hereunder; and that McDonald's shall not be under any
liability for doing or refraining from doing anything relative thereto in the
exercise of its own reasonable judgment or which it may deem necessary or
desirable.
(d) Waiver of Notice and Diligence. The Subordinated Creditor
hereby waives: (i) notice of acceptance by McDonald's of this Agreement; (ii)
notice of the existence or creation or nonpayment of all or any of the Senior
Obligations; and (iii) all diligence in collection or protection of or
realization upon the Senior Obligations or any security therefor.
(e) Reinstatement. If, as a result of, or arising from, any
bankruptcy, insolvency or similar proceeding, claim is ever made upon McDonald's
or any participant in the Senior Obligations for repayment or recovery of any
amount or amounts received by it in payment or on account of the Senior
Obligations from the proceeds of the sale, refinancing or other disposition of
all or a portion of the Real Properties and McDonald's or such participant
repays the Borrower or its legal representative or a trustee in bankruptcy, all
or part of such amount by reason of (i) any judgment, decree or order of any
court or administrative body having jurisdiction or (ii) any settlement or
compromise of any such claim effected by McDonald's or such participant with any
such claimant (including the Borrower or any guarantor), then in such event the
Subordinated Creditor agrees that it shall be and remain obligated hereunder
with respect to the amount so repaid or recovered to the same extent as if such
amount had never originally been received by McDonald's or such participant and
to the extent the Subordinated Creditor has received payments or distributions
in respect of the Subordinated Indenture Indebtedness from the proceeds of the
sale, refinancing or other disposition of the Real Properties.
10. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns.
9
<PAGE>
11. Notices. Any notices or other communications required or
permitted hereunder shall be in writing, and shall be sufficiently given if made
by hand delivery, by telecopier or registered or certified mail, postage
prepaid, return receipt requested, to the addresses listed in the first
paragraph of this Agreement. Each party may designate additional or different
addresses for notices to such party. Any notice or communication to either
party hereto shall be deemed to have been given or made as of the date so
delivered if personally delivered; when receipt is acknowledged electronically
(with copy by U.S. mail), if faxed (the fax number for the Subordinated Creditor
is (617) 664-5371; the fax number for McDonald's is (630) 623-3000; and five (5)
calendar days after mailing if sent by registered or certified mail, postage
prepaid (except that a notice of change of address shall not be deemed to have
been given until actually received by the addressee).
12. Representations by the Subordinated Creditor. The Subordinated
Creditor has the power, authority and legal right pursuant to the Subordinated
Creditor Indenture to execute, deliver and perform this Agreement. The
Subordinated Creditor has been duly authorized pursuant to the Subordinated
Creditor Indenture to enter into this Subordination Agreement on behalf of the
Holders (as defined in the Subordinated Creditor Indenture) and this
Subordination Agreement constitutes the valid and binding obligations of the
Subordinated Creditor on behalf of such Holders enforceable against the
Subordinated Creditor on behalf of such Holders in accordance with its terms.
13. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York including both matters of
internal law and conflicts of law, except that matters as to the priority of
liens on the Real Properties and remedies and procedural matters relating
thereto shall be governed by the laws of the State in which the Real Properties
is located.
14. Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
15. Singular and Plural. Words used in this Agreement in the
singular, where the context so permits, shall be deemed to include the plural
and vice versa. The definitions of words in the singular in this Agreement
shall apply to such words when used in the plural where the context so permits
and vice versa.
10
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto as of the date first above written.
STATE STREET BANK AND TRUST
COMPANY, solely in its capacity
as trustee and collateral agent
under and pursuant to the
Subordinated Creditor Indenture
By: /s/ Mary Lee Storrs
----------------------
Name: Mary Lee Storrs
Title: Vice President
MCDONALD'S CORPORATION
By: /s/ Gloria Santona
-------------------
Name: Gloria Santona
Title: Vice President, Dupty General Counsel
and Secretary
DISCOVERY ZONE, INC.
By: /s/ Robert Rooney
------------------
Name: Robert Rooney
Title: Sr VP
<PAGE>
STATE OF MASSACHUSETTS)
)
COUNTY OF SUFFOLK )
On July 31, 1997, before me, Agnes G. Dillon,
a Notary Public, personally appeared Mary Lee Storrs, personally known
to me (or proved to me on the basis of satisfactory evidence) to be the person
whose name is subscribed to the within instrument and acknowledged to me that
[s]he executed the same in [her] [his] authorized capacity, and that by [her]
[his] signature on the instrument the person, or the entity upon behalf of which
the person acted, executed the instrument and acknowledged the foregoing to be
[her] free act and deed on behalf of STATE STREET BANK AND TRUST COMPANY,
a Massachusetts trust company.
WITNESS my hand and official seal.
/s/ Agnes G. Dillon
-------------------
Notary Public
[SEAL]
Agnes G. Dillon
My Commission Expires
5/15/2003
<PAGE>
STATE OF ILLINOIS )
COUNTY OF DuPage )
On this 31st day of July, 1997, before me, the undersigned, a
Notary Public in and for the State of Illinois, personally appeared
Gloria Santona, to me personally known, who, being by me duly sworn,
did say that [s]he was the Vice President, Duputy General Counsel and
Secretary of McDONALD'S CORPORATION, a Delaware corporation; that the seal
affixed to said instrument is the seal of said corporation; that the
instrument was signed on behalf of the corporation, by authority of the
corporation's Board of Directors; and that Gloria Santona as that officer
acknowledged execution of the instrument to be the voluntary act and deed of
the corporation by it and by the officer voluntarily executed.
/s/ Gordana Vujanovick
--------------------------------------
Notary Public in the State of Illinois
[Notarial Seal]
__________________________________
"OFFICIAL SEAL"
Gordana Vujanovich
Notary Public, State of Illinois
My Commission Expires 02/15/99
___________________________________
<PAGE>
STATE OF NEW YORK )
COUNTY OF WESTCHESTER)
On the 28th day of July, 1997, before me personally came Robert Rooney,
to me known, who, being duly sworn, did depose and say that he/she resides at
50 Main Street, White Plains, NY that he is Sr VP. of DISCOVERY ZONE, INC.,
the Delaware corporation described in and which executed the foregoing
instrument; and that he had the authority to sign the same, and he
acknowledged to me that he executed the same as the act and deed of said
corporation by order of the board of directors thereof.
/s/ Mark D. Woodward
--------------------
Notary Public
MARK D. WOODWARD
Notary Public State of New York
No. 4597846
Qualified in New York County
Commission expires June 15, 1998
THIS INSTRUMENT WAS DRAFTED BY (NAME AND ADDRESS)
Jonathan Reiss, Esq.
Cleary, Gottlieb, Steen & Hamilton
1 Liberty Plaza
New York, New York 10006
<PAGE>
EXHIBIT A
DESCRIPTIONS OF SENIOR MORTGAGES
The following is a list of the amended and restated first priority
mortgages, deeds of trust and/or deeds to secure debt entered executed by
Borrower, on behalf of McDonald's, pursuant to the terms and conditions of the
McDonald's Documentation:
1. Amended and Restated Deed To Secure Debt and Security Agreement, made as of
July 29, 1997, by Borrower to McDonald's, relating to mortgaged property
located in Kennesaw, in the County of Cobb, in the State of Georgia.
2. Amended and Restated Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to Chicago Title Insurance Company, a Missouri Corporation, as
trustee, for the benefit of McDonald's, relating to trust property located
in Vancouver, in the County of Clark, in the State of Washington.
3. Amended and Restated Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to Kenneth W. Pearson, as trustee, to and for the benefit of
McDonald's, relating to trust property located in Leon Valley, in the
County of Bexar, in the State of Texas.
4. Amended and Restated Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to Kenneth W. Pearson, as trustee, for the benefit of McDonald's,
relating to trust property located in Arlington, in the County of Tarrant,
in the State of Texas.
5. Amended and Restated Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to Kenneth W. Pearson, as trustee, for the benefit of McDonald's,
relating to trust property located in San Antonio, in the County of Bexar,
in the State of Texas.
6. Amended and Restated Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to The Public Trustee of the County of Douglas, Colorado, as
trustee, to and for the benefit of McDonald's, relating to trust property
located in Littleton, in the County of Douglas, in the State of Colorado.
<PAGE>
7. Amended and Restated Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to The Public Trustee of the County of Arapahoe, Colorado, as
trustee, to and for the benefit of McDonald's, relating to trust property
located in Aurora, in the County of Arapahoe, in the State of Colorado.
8. Amended and Restated Mortgage, Assignment of Leases and Rents, Security
Agreement and Fixture Filing, made as of July 29, 1997, by Borrower to
McDonald's, relating to mortgaged property located in Schaumburg, in the
County of Cook, in the State of Illinois.
9. Amended and Restated Mortgage, made as of July 29, 1997, by Borrower to
McDonald's, relating to mortgaged property located in Sterling Heights, in
the County of Macomb, in the State of Michigan.
10. Open-End Mortgage, Assignment of Leases and Rents, Security Agreement and
Fixture Filing (Amended and Restated), made as of July 29, 1997, by
Borrower to McDonald's, relating to mortgaged property located in Forest
Park, in the County of Hamilton, in the State of Ohio.
11. Open-End Mortgage, Assignment of Leases and Rents, Security Agreement and
Fixture Filing (Amended and Restated), made as of July 29, 1997, by
Borrower to McDonald's, relating to mortgaged property located in Columbus,
in the County of Franklin, in the State of Ohio.
12. Amended and Restated Open-End Mortgage, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to McDonald's, relating to mortgaged property located in
Philadelphia, in the County of Philadelphia, in the State of Pennsylvania.
13. Amended and Restated Mortgage, Assignment of Leases and Rents, Security
Agreement and Fixture Filing, made as of July 29, 1997, by Borrower to
McDonald's, relating to mortgaged property located in Blaine, in the County
of Anoka, in the State of Minnesota.
14. Amended and Restated Mortgage, Assignment of Leases and Rents, Security
Agreement and Fixture Filing, made as of July 29, 1997, by Borrower to
McDonald's, relating to mortgaged property located in Washington Township,
in the County of Marion, in the State of Indiana.
<PAGE>
EXHIBIT A-1
RECORDING INFORMATION FOR SENIOR MORTGAGE IN FAVOR OF MCDONALD'S
County Book Volume
------ ---- ------
Senior Mortgage (Washington
Township)
<PAGE>
Washington
Marion County, Indiana
EXHIBIT B
Parcel I:
A part of the Northwest Quarter of Section 20, Township 17 North, Range 4 East
located in Washington Township, Marion County, Indiana, being bounded as
follows:
Commencing at the Southeast corner of the Southwest Quarter of Section 20,
Township 17 North, Range 4 East; thence North 00 degrees 07 minutes 10
seconds East (assumed bearing) 2,650.77 feet along the East line of said
Southwest Quarter to its Northeast corner and the Southeast corner of the
Northwest Quarter of Section; thence North 00 degrees 17 minutes 57 seconds
East 1,026.00 feet along the East line of said Northwest Quarter to the
centerline of East 82nd. Street; thence continuing North 00 degrees 17
minutes 57 seconds East 101.27 feet along the East line of said Northwest
Quarter to the terminus of the sixth course of the land description of the
0.675 acre tract of land described in a Warranty Deed recorded as Instrument
No. 87-77965 in the Office of the Recorder of Marion County, Indiana (the
next three (3) courses are along the Northeastern boundary of said 0.675 acre
tract of land); 1.) thence North 71 degrees 30 minutes 37 seconds West 455.99
feet; 2.) thence North 63 degrees 29 minutes 12 seconds West 99.20 feet; 3.)
thence North 70 degrees 49 minutes 29 seconds West 109.51 feet; thence North
70 degrees 46 minutes 35 seconds West 81.32 feet to the terminus of the ninth
course of the land description of the 0.836 acre tract of land described in
said Warranty Deed (the next three (3) courses are along the Northern
boundary of said 0.836 acre tract of land); 1.) thence North 69 degrees 01
minutes 49 seconds West 105.71 feet to a point on a non-tangent curve concave
to the Northeast, said point being South 24 degrees 13 minutes 40 seconds
West 5,664.58 feet from the radius point of said curve; 2.) thence
Northwesterly 286.89 feet along said curve to its point of tangency, said
point of tangency being South 27 degrees 07 minutes 46 seconds West 5,664.58
feet from the radius point of said curve; 3.) thence North 62 degrees 52
minutes 14 seconds West 287.00 feet; thence North 50 degrees 45 minutes 35
seconds East 32.43 East to a point on a non-tangent curve being concave to
the West said point being South 62 degrees 52 minutes 14 seconds East 183.00
feet from the radius point of said curve; thence Northeasterly and Northerly
46.03 feet along said curve to a point, said point being South 77 degrees 16
minutes 57 seconds East 183.00 feet from the radius point of said curve;
thence 13 degrees 23 minutes 55 seconds East 126.16 feet; thence North 23
degrees 51 minutes 51 seconds East 65.36 feet; thence North 66 degrees 08
minutes 09 seconds West 35.00 feet to the POINT OF BEGINNING of this
description; thence North 23 degrees 51 minutes 51 seconds East 130.00 feet;
thence North 66 degrees 08 minutes 09 seconds West 134.00 feet; thence South
23 degrees 51 minutes 51 seconds West 130.00 feet; thence South 66 degrees 08
minutes 09 seconds East 134.00 feet to the POINT OF BEGINNING.
Parcel II:
An easement for vehicular parking and driveways, pedestrian walkways,
directional signs, lot lighting, trash enclosures, recycling bins and
landscaping over the land described in Exhibit "B" of the deed from
Clearwater Crossing Associates to Leaps & Bounds, Inc. recorded November 10,
1992 as Instrument No. 92-149615 in the Office of the Recorder of Marion
County, Indiana.
(Continued)
<PAGE>
Washington
Marion County, Indiana
EXHIBIT B
(continued)
Parcel III:
Non-exclusive easements for access, parking and utilities as set out in a
Declaration And Grant Of Easements recorded November 13, 1991 as Instrument
No. 91-117692, as amended by Amendment To Declaration And Grant Of Easements
recorded February 13, 1992, as Instrument No. 92-17668, and as further
amended by Second Amendment To Declaration And Grant Of Easements recorded
September 21, 1992 as Instrument No. 92-123846, all in the Office of the
Recorder of Marion County, Indiana.
Parcel IV:
Non-Exclusive easement for ingress and egress as set out in Declaration and
Grant of Easements dated September 28, 1990 and recorded October 2, 1990 as
Instrument #90-102836, amended by Amendment to Declaration and Grant of
Easements dated September 15, 1992 and recorded September 18, 1992 as
Instrument #92-123838, all in the Office of the Recorder of Marion County,
Indiana.
<PAGE>
EXHIBIT C
DESCRIPTIONS OF SUBORDINATED MORTGAGES
The following is a list of the subordinated mortgages, deeds of trust
and/or deeds to secure debt entered executed by Borrower, on behalf of the
Subordinated Creditor, pursuant to the terms and conditions of the McDonald's
Documentation:
1. Deed To Secure Debt and Security Agreement, made as of July 29, 1997, by
Borrower to Subordinated Creditor, relating to mortgaged property located
in Kennesaw, in the County of Cobb, in the State of Georgia.
2. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Chicago Title
Insurance Company, a Missouri corporation, as trustee, for the benefit of
Subordinated Creditor, relating to trust property located in Vancouver, in
the County of Clark, in the State of Washington.
3. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Kenneth W.
Pearson, as trustee, to and for the benefit of Subordinated Creditor,
relating to trust property located in Leon Valley, in the County of Bexar,
in the State of Texas.
4. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Kenneth W.
Pearson, as trustee, for the benefit of Subordinated Creditor, relating to
trust property located in Arlington, in the County of Tarrant, in the State
of Texas.
5. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Kenneth W.
Pearson, as trustee, for the benefit of Subordinated Creditor, relating to
trust property located in San Antonio, in the County of Bexar, in the State
of Texas.
6. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to The Public Trustee
of the County of Douglas, Colorado, as trustee, to and for the benefit of
Subordinated Creditor, relating to trust property located in Littleton, in
the County of Douglas, in the State of Colorado.
7. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to The Public Trustee
of the County of Arapahoe, Colorado, as trustee, to and for the benefit of
Subordinated Creditor, relating to trust property located in Aurora, in the
County of Arapahoe, in the State of Colorado.
<PAGE>
8. Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture
Filing, made as of July 29, 1997, by Borrower to Subordinated Creditor,
relating to mortgaged property located in Schaumburg, in the County of
Cook, in the State of Illinois.
9. Mortgage, made as of July 29, 1997, by Borrower to Subordinated Creditor,
relating to mortgaged property located in Sterling Heights, in the County
of Macomb, in the State of Michigan.
10. Open-End Mortgage, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Subordinated
Creditor, relating to mortgaged property located in Forest Park, in the
County of Hamilton, in the State of Ohio.
11. Open-End Mortgage, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Subordinated
Creditor, relating to mortgaged property located in Columbus, in the County
of Franklin, in the State of Ohio.
12. Open-End Mortgage, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Subordinated
Creditor, relating to mortgaged property located in Philadelphia, in the
County of Philadelphia, in the State of Pennsylvania.
13. Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture
Filing, made as of July 29, 1997, by Borrower to Subordinated Creditor,
relating to mortgaged property located in Blaine, in the County of Anoka,
in the State of Minnesota.
14. Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture
Filing, made as of July 29, 1997, by Borrower to Subordinated Creditor,
relating to mortgaged property located in Washington Township, in the
County of Marion, in the State of Indiana.
<PAGE>
EXHIBIT C-1
RECORDING INFORMATION FOR SUBORDINATED MORTGAGE IN FAVOR OF STATE STREET BANK
AND TRUST COMPANY (SOLELY IN ITS CAPACITY AS TRUSTEE AND COLLATERAL AGENT UNDER
AND PURSUANT TO THE SUBORDINATED CREDITOR INDENTURE)
County Book Volume
------ ---- ------
Subordinated Mortgage
(Washington Township)
<PAGE>
Exhibit 4.51
99-0117693
- -----------------------------------------------------------------------------
Space above this line for recorder's use
DOCUMENT PREPARED BY AND
AFTER RECORDING RETURN TO:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attention: Jonathan A. Reiss, Esq.
SUBORDINATION AGREEMENT
AGREEMENT made as of the 29th day of July, 1997, by and among STATE
STREET BANK AND TRUST COMPANY, solely in its capacity as trustee and
collateral agent under and pursuant to the Subordinated Creditor Indenture
(as hereinafter defined) with an address at Two International Place, Boston,
Massachusetts 02110, Attention: Corporate Trust Department, Mary Lee Storrs,
Vice President (the "Subordinated Creditor"), MCDONALD'S CORPORATION, a
Delaware corporation, with an address at McDonald's Plaza, Oak Brook,
Illinois 60523, Attention: General Counsel ("McDonald's") and DISCOVERY ZONE,
INC., a Delaware corporation, successor by merger to Leaps & Bounds, Inc.,
having its principal place of business at One Corporate Center, 110 East
Broward Boulevard, Fort Lauderdale, Florida 33301 ("Borrower").
W I T N E S S E T H:
RECITALS
A. WHEREAS, Borrower is the successor in interest to Discovery
Zone, Inc., a Delaware corporation and debtor and debtor in possession ("Old
DZI"), and Old DZI's affiliated debtors and debtors in possession including
Leaps & Bounds, Inc. (the "Debtors"), all in the chapter 11 proceedings
captioned In re Discovery Zone, Inc., et al., Case No. 96-
<PAGE>
411 (HSB) (Jointly Administered), before the United States Bankruptcy Court
for the District of Delaware (the "Bankruptcy Court"); and
B. WHEREAS, pursuant to an Agreement and Plan of Merger, dated as
of August 30, 1994 (the "Merger Agreement"), by and among Old DZI, and two of
the Debtors, Discovery Zone International, Inc. and Leaps & Bounds, Inc. on
the one hand, and McDonald's on the other hand, and related documentation,
McDonald's was or is the sublessor to Leaps & Bounds, Inc. of certain
properties, and Old DZI agreed to defend, indemnify and hold McDonald's and
its affiliates harmless in respect of all expenses, losses, costs,
deficiencies, liabilities and damages (including related and reasonable
counsel fees and expenses, and compensatory and demonstrable consequential
damages) incurred or suffered by McDonald's as a direct result of, inter
alia, any breach that results in any payment by McDonald's in connection with
any guarantee by McDonald's relating to such properties (the "Agreement to
Indemnify"); and
C. WHEREAS, On November 18, 1996, the Bankruptcy Court entered the
Stipulation and Order Between Debtors and McDonald's Corporation Providing
for the Resolution, Settlement and Compromise of Disputes and for Rent
Deferrals and Allowance of Certain Claims (the "Stipulation and Order"),
pursuant to which, inter alia, the Debtors assumed certain subleases relating
to properties subleased by McDonald's to the Debtors pursuant to 11 U.S.C.
Section 365 as to which the Agreement to Indemnify remains in full force and
effect, the Bankruptcy Court approved the allowance of certain claims of
McDonald's, including those claims based on the Agreement to Indemnify, and
the Bankruptcy Court approved the validity, perfection, priority and
enforceability of certain claims and liens of McDonald's against the Debtors,
including, without limitation, the validity, perfection, priority and
enforceability of the Senior Mortgages (as defined below) and the Stipulation
and Order was not appealed or otherwise challenged and remains in full force
and effect; and
D. WHEREAS, pursuant to the plan of reorganization for Old DZI and
its affiliated debtors confirmed by the Bankruptcy Court by order entered
July 18, 1997 (the "Plan"), and as required by the terms of the Stipulation
and Order, Borrower, as the reorganized successor of the Debtors, is
obligated to issue to McDonald's Secured Rent Deferral Notes in the aggregate
original principal amount of $266,466.24, which amount is subject to increase
each month in accordance with the terms thereof (the "Senior Secured Rent
Deferral Notes," and individually a "Senior Secured Rent Deferral Note") and
Secured Rejection Note in the aggregate original principal amount of
$4,416,237.90 (the "Senior Secured Rejection Note"); and
E. WHEREAS pursuant to the terms and conditions of the Stipulation
and Order, the Plan, the Agreement to Indemnify, the Senior Secured Rejection
Note and the Senior Secured Rent Deferral Notes and any related documentation
(the "McDonald's Documentation"), the repayment and performance of the
obligations of Borrower to McDonald's under the McDonald's Documentation
(including any contingent obligations under the Agreement to Indemnify, the
Stipulation and Order, including Section 7 thereof, or
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<PAGE>
otherwise) (the "Senior Obligations") is secured by certain amended and
restated first priority mortgages, deeds of trust and/or deeds to secure debt
described on Exhibit A attached hereto and made a part hereof (collectively,
including all modifications, extensions and additions thereto, the "Senior
Mortgages," and individually, a "Senior Mortgage"), including the Senior
Mortgage identified by the recording information set forth in Exhibit A-1,
reaffirming and creating, to the extent necessary, valid and perfected first
priority liens on the real properties described on Exhibit B attached hereto
and made a part hereof, and other collateral described in the Senior
Mortgages (collectively, the "Real Properties," and individually, a "Real
Property"); and
F. WHEREAS, Borrower and the Subordinated Creditor entered into an
Indenture, dated July 22, 1997 (the "Subordinated Creditor Indenture") and
certain other documents and instruments related thereto, pursuant to which
and upon the terms and conditions therein indebtedness and other obligations
were incurred by the Borrower (the "Subordinated Indenture Indebtedness"),
the repayment and performance of which are secured by, among other things,
certain subordinated mortgages, deeds of trust and/or deeds to secure debt
described on Exhibit C hereto and made a part hereof (collectively, including
all modifications, extensions and additions thereto, the "Subordinated
Mortgages," and individually, a "Subordinated Mortgage"), including the
Subordinated Mortgage identified by the recording information set forth in
Exhibit C-1, creating valid and perfected liens on the Real Properties
subordinate to the Senior Mortgages; and
G. WHEREAS, pursuant to the Senior Mortgages, the Borrower cannot
grant a subordinated lien on any of the Real Properties without the express
approval of McDonald's and the Subordinated Indenture Indebtedness will not
be able to be issued without the agreement of McDonald's to permit the
issuance of the Subordinated Mortgages; and
H. WHEREAS, McDonald's approval of the Borrower's granting of the
Subordinated Mortgages is conditioned on the entry into this Subordination
Agreement by the Subordinated Creditor, which hereby warrants and represents
that it has full power and authority under the Subordinated Creditor
Indenture to enter into this Subordination Agreement on behalf of all holders
of any securities or obligations whatsoever issued pursuant to the
Subordinated Creditor Indenture; and
I. WHEREAS, the Subordinated Creditor and McDonald's each desire to
enter into this Subordination Agreement to confirm the subordination of the
liens of the Subordinated Mortgages to the liens of the Senior Mortgages in
accordance with the terms of this Agreement;
NOW THEREFORE, IN CONSIDERATION OF THE MUTUAL BENEFITS accruing to
the parties hereto, and other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Consent. Pursuant and subject to the other terms of this
Agreement, McDonald's consents to the Subordinate Mortgages. This consent
shall not be deemed to (i)
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<PAGE>
be a consent to any future encumbrances, (ii) be a waiver of the limitation
on future encumbrances contained in the Senior Mortgages, (iii) be a consent
to or waiver of any other term or condition of the Senior Mortgages or (iv)
prejudice any right or rights which McDonald's may now or in the future have
under or in connection with the Senior Mortgages.
2. Priority of McDonald's.
(a) Subordination. The Subordinated Creditor hereby agrees
for itself and its successors and assigns that, except as otherwise expressly
provided herein, the terms, provisions and liens of the Subordinated
Mortgages, and any of the Subordinated Creditor's liens or security interests
in the Real Properties (but only to the extent of McDonald's interest in such
Real Properties), are hereby intentionally and unconditionally subordinated
to, and at all times shall be junior, subject and subordinate to the terms,
provisions and liens of the Senior Mortgages (including, without limitation,
the liens securing future optional and/or obligatory increases in the amount
of the Senior Obligations or advances by McDonald's to or for the benefit of
the Borrower, regardless of the use to which such advances are put), as well
as to any and all increases therein and all extensions, consolidations,
modifications, renewals, refinancings and supplements thereto. The
Subordinated Creditor hereby waives any right it may have to require that
McDonald's marshal any assets of the Borrower in favor of the Subordinated
Creditor and the Subordinated Creditor agrees that it shall not acquire, by
subrogation or otherwise, any lien, estate, right or other interest in the
Real Properties which is or may be prior or superior in right to the Senior
Mortgages, including but not limited to advances for real estate taxes and
assessments. The rights and priorities set forth in this Paragraph 2(a) shall
be effective notwithstanding the order of creation, attachment, vesting or
perfection of the rights of McDonald's under the Senior Mortgages, or of the
Subordinated Creditor under the Subordinated Mortgages, the Subordinated
Creditor Indenture or any other documents executed in connection therewith
(including, without limitation, any UCC-1 financing statements or fixture
filings). The Subordinated Creditor shall be deemed to have consented (i) to
any action by Borrower to which McDonald's consents pursuant to the Senior
Mortgages and (ii) to each act of, or failure to act by, the Borrower that is
not prohibited by the Senior Mortgages, provided that, both with respect to
(i) and (ii), such deemed consent is applicable only to acts or failures to
act in connection with the sale, construction, restoration, insurance,
condemnation or alterations of, to or on, or with respect to the Real
Properties and any other matters relating to the Real Properties.
(b) Insurance; Condemnation Awards. The Subordinated Creditor
hereby assigns and releases unto McDonald's, until payment in full of the
Senior Obligations:
(i) all of its right, title, interest or claim, if any, in
and to the proceeds of all policies of insurance
covering the Real Properties, for application in
accordance with the provisions of the Senior Mortgages
or as the Borrower and McDonald's may otherwise agree;
and
4
<PAGE>
(ii) all of its right, title and interest or claim, if any,
in and to all awards or other compensation made for
any taking of any part of the Real Properties for
application in accordance with the provisions of the
Senior Mortgages or as the Borrower and McDonald's may
otherwise agree.
All such insurance proceeds or awards which may become due and payable to
the Subordinated Creditor shall be payable directly to McDonald's, and the
Subordinated Creditor directs any insurance company or governmental authority
to make payment thereof directly to McDonald's for application in accordance
with the Senior Mortgages. In the event that any such insurance proceeds or
awards are made payable to the Subordinated Creditor despite such direction,
the Subordinated Creditor shall promptly transfer the same, or promptly cause
the same to be transferred, to McDonald's.
(c) Assignment of Leases and Rents. Any assignment in favor of
the Subordinated Creditor of any Leases or Rents (as such terms are defined
in the Senior Mortgages) contained in the Subordinated Mortgages or the
Subordinated Creditor Indenture, or in any other document or instrument
related thereto or delivered in connection therewith, and all rights of the
Subordinated Creditor thereunder, are hereby intentionally and
unconditionally subordinated to, and shall be in all respects junior, subject
and subordinate to any assignment of rents, leases or other agreements
relating to the Real Properties contained in (i) the Senior Mortgages, and
(ii) any other document now in existence or hereafter made by the Borrower to
secure the Senior Obligations, and to all rights of McDonald's thereunder.
Without limiting the foregoing provisions of this Paragraph 2(c), from and
after the execution and delivery of the Subordinated Mortgages to the
Subordinated Creditor, the Subordinated Creditor shall not be entitled to
receive or retain any Rents or other amounts assigned to the Subordinated
Creditor under any such document or instrument until such time as the Senior
Obligations shall have been completely paid in full.
(d) Non-Disturbance Agreements. The Subordinated Creditor
shall be required to give a non-disturbance agreement to any lessee or tenant
of the Real Properties with respect to whose lease McDonald's, as holder of
the Senior Mortgages, shall have executed a non-disturbance agreement, and,
if the Subordinated Creditor fails to give any such non-disturbance
agreement, the Subordinated Creditor nevertheless agrees not to disturb the
possession, occupancy or rights of any such lessee or tenant without the
prior written consent of McDonald's in each instance.
(e) Further Assurances. To further evidence the subordination
hereinabove provided for, the Subordinated Creditor agrees that, within 30 days
after request by McDonald's, it will, at the Subordinated Creditor's sole cost
and expense, do, execute, acknowledge and deliver all and every such further
acts, deeds, conveyances and instruments as McDonald's may reasonably request
for the better assuring and evidencing of this subordination (including, without
limitation, further affirmation of the application of this
5
<PAGE>
Agreement to future optional and/or obligatory increases in the amount of the
Senior Obligations or advances, regardless of the use to which such increases
or advances are put).
(f) Release or Subordination of Lien. If McDonald's shall at
any time release its lien on the Real Properties (or any part thereof) in
connection with a sale or refinancing of the Real Properties or any part
thereof, the Subordinated Creditor shall, without any payment to it, be
deemed to have consented to such sale or refinancing and shall release the
lien of the Subordinated Mortgages thereon at the same time that McDonald's
releases the lien of the Senior Mortgages thereon, and, in the event that the
Subordinated Creditor has not executed a release within seven (7) business
days of being requested to do so by Borrower of McDonald's in connection with
such sale or refinancing, the Subordinated Creditor hereby irrevocably
appoints McDonald's as its attorney in fact (coupled with an interest) to
execute in the name of the Subordinated Creditor or without the signature of
the Subordinated Creditor to the extent McDonald's may lawfully do so, one or
more releases or reconveyances of mortgages/deeds of trust or other documents
to evidence such release of the lien of the Subordinated Mortgages. Until
the Senior Obligations have been completely paid in full (including, without
limitation, any obligations which may arise under the Agreement to
Indemnify), all proceeds from or with respect to the sale, refinancing or
other disposition of the Real Properties or any part thereof shall be paid to
McDonald's (or placed into escrow for the benefit of McDonald's pursuant to
the terms of the Senior Mortgages) in satisfaction of the Senior Obligations
pursuant to the terms of the Senior Mortgages and the McDonald's
Documentation, and the Subordinated Creditor shall have no right, claim or
interest in or to any such proceeds.
(g) Enforcement. The Subordinated Creditor agrees that no
remedies provided for under the Subordinated Mortgages or other documents (to
the extent relating to the Real Properties in which McDonald's has an
interest) executed in connection with the Subordinated Creditor Indenture
shall be exercised with respect to the Real Properties, including, without
limitation, the commencement or prosecution of foreclosure proceedings, the
exercise of any power of sale, or the appointment of a receiver (or the
Subordinated Creditor as mortgagee in possession), without obtaining the
prior written consent of McDonald's. The Subordinated Creditor hereby
consents and agrees that any lawful action taken by or on behalf of
McDonald's in the exercise of McDonald's rights and/or remedies under the
Senior Mortgages (including, without limitation, any foreclosure or
acquisition of title to a Real Property by deed in lieu of foreclosure or
otherwise) are hereby deemed to be consented to by the Subordinated Creditor
in all respects.
(h) No Third-Party Beneficiaries. The provisions of clauses
(a)-(g) of this Paragraph 2 are solely for the benefit of the holder of the
Senior Mortgages and shall not create any rights in the Borrower or any other
person.
3. Bankruptcy. The provisions of this Agreement shall continue in
full force and effect notwithstanding the occurrence of any proceeding under
Title 11 of the United States Code (11 U.S.C. Sec. 101 et seq.) or any other
bankruptcy, insolvency, liquidation, reorganization, dissolution, winding up,
liquidation, readjustment or other similar proceeding
6
<PAGE>
relating to the Borrower or to its property (whether voluntary or
involuntary, partial or complete, and whether in bankruptcy, insolvency or
receivership, or upon a general assignment for the benefit of creditors, or
any other marshaling of the assets and liabilities of the Borrower, or any
sale of all or substantially all of the assets of the Borrower, or otherwise)
(each, an "Insolvency Proceeding"). Without limiting the generality of the
foregoing, in the event of an Insolvency Proceeding, (i) the Senior
Obligations (including post-petition interest on the Senior Obligations,
whether or not such interest is allowable under Section 502 or 506 of the
United States Bankruptcy Code) shall first be completely paid in full before
the Subordinated Creditor shall be entitled to receive or retain any proceeds
from or relating to the sale, refinancing or other disposition of the Real
Properties or any portion thereof in respect of the Subordinated Indenture
Indebtedness; and (ii) the Subordinated Creditor shall not object to or
oppose any efforts by McDonald's to obtain relief from the automatic stay
with respect to the Real Properties under Section 362 of the United States
Bankruptcy Code.
4. Payments Received by the Subordinated Creditor. In the event
that the Subordinated Creditor receives any payment or other distribution of
any kind or character from the Borrower or from any other source whatsoever
in respect of any of the Subordinated Indenture Indebtedness, or receives any
security therefor, whether by way of agreement or compromise or otherwise,
which it is not entitled to retain pursuant to the terms of this Agreement,
the Subordinated Creditor shall immediately deliver the same to McDonald's,
in the form received, together with any necessary endorsements, in each case
for application on account of the Senior Obligations, but until so received
by McDonald's, the same shall be held in trust by the Subordinated Creditor
as the property of McDonald's.
5. No Consent Required. The Subordinated Creditor hereby agrees
that McDonald's may, from time to time, at its sole discretion and without
notice to or consent of or from the Subordinated Creditor, and without
affecting the obligations of the Subordinated Creditor herein or the
subordination provided for hereunder, take any or all of the following
actions:
(a) retain or obtain a lien or security interest in any
property to secure all or any part of the Senior Obligations;
(b) retain, obtain or permit the release of the primary or
secondary obligations of any other obligor or obligors with respect to all or
any part of the Senior Obligations;
(c) fail to perfect, or release McDonald's lien or security
interest in, or surrender, release or permit any substitution or exchange
for, all or any part of any property (including, without limitation, the Real
Properties) securing all or any part of the Senior Obligations;
(d) change the manner, place or terms of payments, and/or
change or extend the time of payment of, renew or alter, all or any part of
the Senior Obligations, any security therefor, or any liability incurred
directly or indirectly in respect thereof, and the
7
<PAGE>
provisions hereof shall apply to the Senior Obligations as so changed,
extended, renewed or altered;
(e) sell, exchange, release, surrender, realize upon or
otherwise deal with in any manner and in any order the Real Properties or any
part thereof;
(f) exercise or refrain from exercising or release any rights
and/or remedies against the Borrower or others (including, without
limitation, any guarantor of all or a portion of the Senior Obligations) or
otherwise act or refrain from acting; and/or
(g) settle or compromise the Senior Obligations or any part
thereof or any security therefor, or any liability incurred directly or
indirectly in respect thereof or hereof.
6. Transfer. McDonald's may, from time to time, without notice to
Subordinated Creditor, assign or transfer any or all of the Senior
Obligations or any interest therein or any security therefor.
Notwithstanding any such assignment or transfer or any subsequent assignment
or transfer thereof, the holders of the Senior Obligations and the holders of
any interest therein shall be entitled to the benefits of this Agreement to
the same extent as if such holders were McDonald's specifically named in this
Agreement.
7. Other Liens. Nothing in this Agreement shall prohibit, prevent
or otherwise impede the Subordinated Creditor from exercising any rights,
remedy or power which it may have against the Borrower and/or its
subsidiaries with respect to any collateral other than the Real Properties,
which secures the Subordinated Indenture Indebtedness, provided, however,
that the Subordinated Creditor shall not take any action which could impair
the lien of the Senior Mortgages or the ability of McDonald's to foreclose or
otherwise enforce its security interests or liens thereunder.
8. Termination. This Agreement shall in all respects be a
continuing agreement and shall remain in full force and effect until (a) the
complete payment in full of all of the Senior Obligations, and (b) the
execution by McDonald's of releases of all of the Senior Mortgages and the
recording of such releases in the appropriate real property records.
9. Miscellaneous.
(a) No Waiver. No delay on the part of McDonald's in the
exercise of any right or remedy shall operate as a waiver thereof, and no
single or partial exercise by McDonald's of any right or remedy shall
preclude any other or further exercise thereof or the exercise of any other
right or remedy, nor shall any modification, waiver or discharge of any of
the provisions of this Agreement be binding upon McDonald's except as
expressly set forth in a writing duly signed and delivered by McDonald's.
(b) Obligations Absolute. The obligations of the Subordinated
Creditor herein shall be absolute and unconditional, and the subordination of
the lien of the Subordinated Mortgages herein contained shall be effective
with respect to the Senior
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Obligations, notwithstanding any right or power of the Borrower or anyone
else to assert any claim or defense as to the invalidity or unenforceability
of any such obligation and/or any lien securing the same, in whole or in
part, or any determination of such invalidity or unenforceability and no such
event shall affect or impair the agreements and obligations of the
Subordinated Creditor hereunder. In the event that any of the Senior
Obligations and/or any lien securing the same is determined to be invalid or
unenforceable, in whole or in part, the Subordinated Creditor agrees that, as
between McDonald's and the Subordinated Creditor, the Senior Obligations and
such lien shall be deemed valid and enforceable, and the obligations of the
Subordinated Creditor hereunder with respect thereto shall not be affected by
any such determination but shall continue in full force and effect.
(c) Sole Discretion. It is understood and agreed that in the
event of any dissolution, winding up, liquidation, readjustment,
reorganization or other similar proceedings relating to the Borrower or to
its property, McDonald's may use its sole discretion with respect to the
enforcement of the Senior Mortgages, or in otherwise exercising or refraining
from exercising any rights or in taking or refraining from taking any action
which it may be entitled to take or assert hereunder; and that McDonald's
shall not be under any liability for doing or refraining from doing anything
relative thereto in the exercise of its own reasonable judgment or which it
may deem necessary or desirable.
(d) Waiver of Notice and Diligence. The Subordinated Creditor
hereby waives: (i) notice of acceptance by McDonald's of this Agreement; (ii)
notice of the existence or creation or nonpayment of all or any of the Senior
Obligations; and (iii) all diligence in collection or protection of or
realization upon the Senior Obligations or any security therefor.
(e) Reinstatement. If, as a result of, or arising from, any
bankruptcy, insolvency or similar proceeding, claim is ever made upon
McDonald's or any participant in the Senior Obligations for repayment or
recovery of any amount or amounts received by it in payment or on account of
the Senior Obligations from the proceeds of the sale, refinancing or other
disposition of all or a portion of the Real Properties and McDonald's or such
participant repays the Borrower or its legal representative or a trustee in
bankruptcy, all or part of such amount by reason of (i) any judgment, decree
or order of any court or administrative body having jurisdiction or (ii) any
settlement or compromise of any such claim effected by McDonald's or such
participant with any such claimant (including the Borrower or any guarantor),
then in such event the Subordinated Creditor agrees that it shall be and
remain obligated hereunder with respect to the amount so repaid or recovered
to the same extent as if such amount had never originally been received by
McDonald's or such participant and to the extent the Subordinated Creditor
has received payments or distributions in respect of the Subordinated
Indenture Indebtedness from the proceeds of the sale, refinancing or other
disposition of the Real Properties.
10. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective
successors and assigns.
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11. Notices. Any notices or other communications required or
permitted hereunder shall be in writing, and shall be sufficiently given if
made by hand delivery, by telecopier or registered or certified mail, postage
prepaid, return receipt requested, to the addresses listed in the first
paragraph of this Agreement. Each party may designate additional or
different addresses for notices to such party. Any notice or communication
to either party hereto shall be deemed to have been given or made as of the
date so delivered if personally delivered; when receipt is acknowledged
electronically (with copy by U.S. mail), if faxed (the fax number for the
Subordinated Creditor is (617) 664-5371; the fax number for McDonald's is
(630) 623-3000; and five (5) calendar days after mailing if sent by
registered or certified mail, postage prepaid (except that a notice of change
of address shall not be deemed to have been given until actually received by
the addressee).
12. Representations by the Subordinated Creditor. The Subordinated
Creditor has the power, authority and legal right pursuant to the
Subordinated Creditor Indenture to execute, deliver and perform this
Agreement. The Subordinated Creditor has been duly authorized pursuant to
the Subordinated Creditor Indenture to enter into this Subordination
Agreement on behalf of the Holders (as defined in the Subordinated Creditor
Indenture) and this Subordination Agreement constitutes the valid and binding
obligations of the Subordinated Creditor on behalf of such Holders
enforceable against the Subordinated Creditor on behalf of such Holders in
accordance with its terms.
13. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York including both
matters of internal law and conflicts of law, except that matters as to the
priority of liens on the Real Properties and remedies and procedural matters
relating thereto shall be governed by the laws of the State in which the Real
Properties is located.
14. Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by
signing any such counterpart.
15. Singular and Plural. Words used in this Agreement in the
singular, where the context so permits, shall be deemed to include the plural
and vice versa. The definitions of words in the singular in this Agreement
shall apply to such words when used in the plural where the context so
permits and vice versa.
10
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto as of the date first above written.
STATE STREET BANK AND TRUST COMPANY, solely in its
capacity as trustee and collateral agent under and
pursuant to the Subordinated Creditor Indenture
By: /s/ Mary Lee Storrs
---------------------------------------------
Name: Mary Lee Storrs
Title: Vice President
MCDONALD'S CORPORATION
By: /s/ Gloria Santona
---------------------------------------------
Name: Gloria Santona
Title: Vice President, Deputy General Counsel
and Secretary
DISCOVERY ZONE, INC.
By: /s/ Robert Rooney
---------------------------------------------
Name: Robert Rooney
Title: Supervisor
<PAGE>
STATE OF MASSACHUSETTS)
COUNTY OF Suffolk )
-------------
This instrument was acknowledged before me on July 31, 1997, by
--
Mary Lee Storrs of STATE STREET BANK AND TRUST COMPANY, a Massachusetts
- ---------------
trust company, on behalf of said trust company.
/s/ Agnes G. Dillon
----------------------------------------
Notary Public, State of Massachusetts
Agnes G. Dillon
My commission expires 5/15/03
<PAGE>
STATE OF ILLINOIS )
COUNTY OF DuPage )
------
This instrument was acknowledged before me on July 31st, 1997, by
--
Gloria Santona of McDONALD'S CORPORATION, a Delaware corporation, on
- --------------
behalf of said corporation.
/s/ Gordana Vujanovich
-----------------------------------
Notary Public, State of Illinois
"OFFICIAL SEAL"
Gordana Vujanovich
Notary Public, State of Illinois
My Commission Expires 02/15/99
<PAGE>
STATE OF NEW YORK )
COUNTY OF WESTCHESTER)
This instrument was acknowledged before me on July 28, 1997, by
--
Robert Rooney Sr. VP of DISCOVERY ZONE, INC., a Delaware corporation, on
- -----------------
behalf of said corporation.
/s/ Mark D. Woodward
-----------------------------------
Notary Public, State of New York
MARK D. WOODWARD
Notary Public State of New York
No. 4997846
Qualified in New York County
Commission Expires June 15, 1998
[SEAL]
<PAGE>
EXHIBIT A
DESCRIPTIONS OF SENIOR MORTGAGES
The following is a list of the amended and restated first priority
mortgages, deeds of trust and/or deeds to secure debt entered executed by
Borrower, on behalf of McDonald's, pursuant to the terms and conditions of
the McDonald's Documentation:
1. Amended and Restated Deed To Secure Debt and Security Agreement, made as
of July 29, 1997, by Borrower to McDonald's, relating to mortgaged
property located in Kennesaw, in the County of Cobb, in the State of
Georgia.
2. Amended and Restated Deed of Trust, Assignment of Lease and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to Chicago Title Insurance Company, a Missouri Corporation, as
trustee, for the benefit of McDonald's, relating to trust property
located in Vancouver, in the County of Clark, in the State of Washington.
3. Amended and Restated Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to Kenneth W. Pearson, as trustee, to and for the benefit of
McDonald's, relating to trust property located in Leon Valley, in the
County of Bexar, in the State of Texas.
4. Amended and Restated Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to Kenneth W. Pearson, as trustee, for the benefit of
McDonald's, relating to trust property located in Arlington, in the
County of Tarrant, in the State of Texas.
5. Amended and Restated Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to Kenneth W. Pearson, as trustee, for the benefit of
McDonald's, relating to trust property located in San Antonio, in the
County of Bexar, in the State of Texas.
6. Amended and Restated Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to The Public Trustee of the County of Douglas, Colorado, as
trustee, to and for the benefit of McDonald's, relating to trust
property located in Littleton, in the County of Douglas, in the State of
Colorado.
<PAGE>
7. Amended and Restated Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to The Public Trustee of the County of Arapahoe, Colorado, as
trustee, to and for the benefit of McDonald's, relating to trust
property located in Aurora, in the County of Arapahoe, in the State of
Colorado.
8. Amended and Restated Mortgage, Assignment of Leases and Rents, Security
Agreement and Fixture Filing, made as of July 29, 1997, by Borrower to
McDonald's, relating to mortgaged property located in Schaumburg, in the
County of Cook, in the State of Illinois.
9. Amended and Restated Mortgage, made as of July 29, 1997, by Borrower to
McDonald's, relating to mortgaged property located in Sterling Heights,
in the County of Macomb, in the State of Michigan.
10. Open-End Mortgage, Assignment of Leases and Rents, Security Agreement
and Fixture Filing (Amended and Restated), made as of July 29, 1997, by
Borrower to McDonald's, relating to mortgaged property located in Forest
Park, in the County of Hamilton, in the State of Ohio.
11. Open-End Mortgage, Assignment of Leases and Rents, Security Agreement
and Fixture Filing (Amended and Restated), made as of July 29, 1997, by
Borrower to McDonald's, relating to mortgaged property located in
Columbus, in the County of Franklin, in the State of Ohio.
12. Amended and Restated Open-End Mortgage, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to McDonald's, relating to mortgaged property located in
Philadelphia, in the County of Philadelphia, in the State of
Pennsylvania.
13. Amended and Restated Mortgage, Assignment of Leases and Rents, Security
Agreement and Fixture Filing, made as of July 29, 1997, by Borrower to
McDonald's, relating to mortgaged property located in Blaine, in the
County of Anoka, in the State of Minnesota.
14. Amended and Restated Mortgage, Assignment of Leases and Rents, Security
Agreement and Fixture Filing, made as of July 29, 1997, by Borrower to
McDonald's, relating to mortgaged property located in Washington
Township, in the County of Marion, in the State of Indiana.
<PAGE>
EXHIBIT A-1
RECORDING INFORMATION FOR SENIOR MORTGAGE IN FAVOR OF MCDONALD'S
County Book Volume
------ ---- ------
Senior Mortgage (San Antonio) Bexar 7178 0491
<PAGE>
San Antonio
Bexar County, Texas
EXHIBIT B
2.488 acre tract out of Lot 38, NCE 12059, Embassy North Subdivision, Unit 5,
recorded in Volume 9518, Page 141, Deed and Plat Records of Bexar County,
Texas described as follows:
BEGINNING At a 1/2" iron pin found in the East Right of Way line of Embassy
Row, a 60 ft. Right of Way, for the Southwest corner of Lot 47, NCE
12059, recorded in Volume 9525, Page 111, Deed Records, Bexar
County, Texas and the Northwest corner of said Lot 38 and Northwest
corner and Point of Beginning of this tract;
THENCE S72degrees.57'27"E, 300.00 ft along the South line of said Lot 47
to a 1/2" iron pin in the North line of Lot 3, NCE 12059, Sanbit
Subdivision, recorded in Volume 7300, Page 109, Deed and Plat
Records, Bexar County, Texas for the Northeast corner of this
tract;
THENCE Along the North line of said Lot 3 as follows: S17degrees.02'33"W,
231.97 ft to a 1/2" iron pin for an angle point S20degrees.12'54"W,
97.41 ft to a 1/2" iron pin set for the Southeast corner of this
tract;
THENCE N 72degrees.57'27"W, 324.58 ft to a 1/2" iron pin set in the East
Right of Way line of Embassy ROW for the Southwest corner of this
tract;
THENCE N17degrees.02'33"E, 329.33 ft along the East Right of Way line to
the Point of Beginning and NOW KNOWN AS Lot 48, New City Block
12059, Embassy North Subdivision, Unit 5C, an addition to the City
of San Antonio, Bexar County, Texas according to the map or plat
thereof, recorded in Volume 9527, Page 221, Deed and Plat Records
of Bexar County, Texas.
<PAGE>
EXHIBIT C
DESCRIPTIONS OF SUBORDINATED MORTGAGES
The following is a list of the subordinated mortgages, deeds of trust
and/or deeds to secure debt entered executed by Borrower, on behalf of the
Subordinated Creditor, pursuant to the terms and conditions of the McDonald's
Documentation:
1. Deed To Secure Debt and Security Agreement, made as of July 29, 1997, by
Borrower to Subordinated Creditor, relating to mortgaged property
located in Kennesaw, in the County of Cobb, in the State of Georgia.
2. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Chicago Title
Insurance Company, a Missouri corporation, as trustee, for the benefit
of Subordinated Creditor, relating to trust property located in
Vancouver, in the County of Clark, in the State of Washington.
3. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Kenneth W.
Pearson, as trustee, to and for the benefit of Subordinated Creditor,
relating to trust property located in Leon Valley, in the County of
Bexar, in the State of Texas.
4. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Kenneth W.
Pearson, as trustee, for the benefit of Subordinated Creditor, relating
to trust property located in Arlington, in the County of Tarrant, in the
State of Texas.
5. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Kenneth W.
Pearson, as trustee, for the benefit of Subordinated Creditor, relating
to trust property located in San Antonio, in the County of Bexar, in the
State of Texas.
6. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to The Public
Trustee of the County of Douglas, Colorado, as trustee, to and for the
benefit of Subordinated Creditor, relating to trust property located in
Littleton, in the County of Douglas, in the State of Colorado.
7. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to The Public
Trustee of the County of Arapahoe, Colorado, as trustee, to and for the
benefit of Subordinated Creditor, relating to trust property located in
Aurora, in the County of Arapahoe, in the State of Colorado.
<PAGE>
8. Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture
Filing, made as of July 29, 1997, by Borrower to Subordinated Creditor,
relating to mortgaged property located in Schaumburg, in the County of
Cook, in the State of Illinois.
9. Mortgage, made as of July 29, 1997, by Borrower to Subordinated
Creditor, relating to mortgaged property located in Sterling Heights, in
the County of Macomb, in the State of Michigan.
10. Open-End Mortgage, Assignment of Leases and Rents, Security Agreement
and Fixture Filing, made as of July 29, 1997, by Borrower to
Subordinated Creditor, relating to mortgaged property located in Forest
Park, in the County of Hamilton, in the State of Ohio.
11. Open-End Mortgage, Assignment of Leases and Rents, Security Agreement
and Fixture Filing, made as of July 29, 1997, by Borrower to
Subordinated Creditor, relating to mortgaged property located in
Columbus, in the County of Franklin, in the State of Ohio.
12. Open-End Mortgage, Assignment of Leases and Rents, Security Agreement
and Fixture Filing, made as of July 29, 1997, by Borrower to
Subordinated Creditor, relating to mortgaged property located in
Philadelphia, in the County of Philadelphia, in the State of
Pennsylvania.
13. Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture
Filing, made as of July 29, 1997, by Borrower to Subordinated Creditor,
relating to mortgaged property located in Blaine, in the County of
Anoka, in the State of Minnesota.
14. Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture
Filing, made as of July 29, 1997, by Borrower to Subordinated Creditor,
relating to mortgaged property located in Washington Township, in the
County of Marion, in the State of Indiana.
<PAGE>
EXHIBIT C-1
RECORDING INFORMATION FOR SUBORDINATED MORTGAGE IN FAVOR OF STATE STREET
BANK AND TRUST COMPANY (SOLELY IN ITS CAPACITY AS TRUSTEE AND COLLATERAL
AGENT UNDER AND PURSUANT TO THE SUBORDINATED CREDITOR INDENTURE)
County Book Volume
------ ---- ------
Subordinated Mortgage (San Antonio) Bexar 7178 0541
<PAGE>
_______________________________________________________________________________
Space above this line for recorder's use
Exhibit 4.52
DOCUMENT PREPARED BY AND
AFTER RECORDING RETURN TO:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attention: Jonathan A. Reiss, Esq.
SUBORDINATION AGREEMENT
AGREEMENT made as of the 29th day of July, 1997, by and among
STATE STREET BANK AND TRUST COMPANY, solely in its capacity as trustee and
collateral agent under and pursuant to the Subordinated Creditor Indenture
(as hereinafter defined) with an address at Two International Place, Boston,
Massachusetts 02110, Attention: Corporate Trust Department, Mary Lee Storrs,
Vice President (the "Subordinated Creditor"), MCDONALD'S CORPORATION, a
Delaware corporation, with an address at McDonald's Plaza, Oak Brook,
Illinois 60523, Attention: General Counsel ("McDonald's") and DISCOVERY ZONE,
INC., a Delaware corporation, successor by merger to Leaps & Bounds, Inc.,
having its principal place of business at One Corporate Center, 110 East
Broward Boulevard, Fort Lauderdale, Florida 33301 ("Borrower").
W I T N E S S E T H:
RECITALS
A. WHEREAS, Borrower is the successor in interest to Discovery Zone,
Inc., a Delaware corporation and debtor and debtor in possession ("Old DZI"),
and Old DZI's affiliated debtors and debtors in possession including Leaps &
Bounds, Inc. (the "Debtors"), all in the chapter 11 proceedings captioned In re
Discovery Zone, Inc., et al., Case No. 96-
<PAGE>
411 (HSB) (Jointly Administered), before the United States Bankruptcy Court for
the District of Delaware (the "Bankruptcy Court"); and
B. WHEREAS, pursuant to an Agreement and Plan of Merger, dated as
of August 30, 1994 (the "Merger Agreement"), by and among Old DZI, and two of
the Debtors, Discovery Zone International, Inc. and Leaps & Bounds, Inc. on
the one hand, and McDonald's on the other hand, and related documentation,
McDonald's was or is the sublessor to Leaps & Bounds, Inc. of certain
properties, and Old DZI agreed to defend, indemnify and hold McDonald's and
its affiliates harmless in respect of all expenses, losses, costs,
deficiencies, liabilities and damages (including related and reasonable
counsel fees and expenses, and compensatory and demonstrable consequential
damages) incurred or suffered by McDonald's as a direct result of, inter
alia, any breach that results in any payment by McDonald's in connection with
any guarantee by McDonald's relating to such properties (the "Agreement to
Indemnify"); and
C. WHEREAS, On November 18, 1996, the Bankruptcy Court entered the
Stipulation and Order Between Debtors and McDonald's Corporation Providing for
the Resolution, Settlement and Compromise of Disputes and for Rent Deferrals and
Allowance of Certain Claims (the "Stipulation and Order"), pursuant to which,
inter alia, the Debtors assumed certain subleases relating to properties
subleased by McDonald's to the Debtors pursuant to 11 U.S.C. Section 365 as to
which the Agreement to Indemnify remains in full force and effect, the
Bankruptcy Court approved the allowance of certain claims of McDonald's,
including those claims based on the Agreement to Indemnify, and the Bankruptcy
Court approved the validity, perfection, priority and enforceability of certain
claims and liens of McDonald's against the Debtors, including, without
limitation, the validity, perfection, priority and enforceability of the Senior
Mortgages (as defined below) and the Stipulation and Order was not appealed or
otherwise challenged and remains in full force and effect; and
D. WHEREAS, pursuant to the plan of reorganization for Old DZI and
its affiliated debtors confirmed by the Bankruptcy Court by order entered July
18, 1997 (the "Plan"), and as required by the terms of the Stipulation and
Order, Borrower, as the reorganized successor of the Debtors, is obligated to
issue to McDonald's Secured Rent Deferral Notes in the aggregate original
principal amount of $266,466.24, which amount is subject to increase each month
in accordance with the terms thereof (the "Senior Secured Rent Deferral Notes,"
and individually a "Senior Secured Rent Deferral Note") and Secured Rejection
Note in the aggregate original principal amount of $4,416,237.90 (the "Senior
Secured Rejection Note"); and
E. WHEREAS pursuant to the terms and conditions of the Stipulation
and Order, the Plan, the Agreement to Indemnify, the Senior Secured Rejection
Note and the Senior Secured Rent Deferral Notes and any related documentation
(the "McDonald's Documentation"), the repayment and performance of the
obligations of Borrower to McDonald's under the McDonald's Documentation
(including any contingent obligations under the Agreement to Indemnify, the
Stipulation and Order, including Section 7 thereof, or
2
<PAGE>
otherwise) (the "Senior Obligations") is secured by certain amended and
restated first priority mortgages, deeds of trust and/or deeds to secure debt
described on Exhibit A attached hereto and made a part hereof (collectively,
including all modifications, extensions and additions thereto, the "Senior
Mortgages," and individually, a "Senior Mortgage"), including the Senior
Mortgage identified by the recording information set forth in Exhibit A-1,
reaffirming and creating, to the extent necessary, valid and perfected first
priority liens on the real properties described on Exhibit B attached hereto
and made a part hereof, and other collateral described in the Senior
Mortgages (collectively, the "Real Properties," and individually, a "Real
Property"); and
F. WHEREAS, Borrower and the Subordinated Creditor entered into an
Indenture, dated July 22, 1997 (the "Subordinated Creditor Indenture") and
certain other documents and instruments related thereto, pursuant to which and
upon the terms and conditions therein indebtedness and other obligations were
incurred by the Borrower (the "Subordinated Indenture Indebtedness"), the
repayment and performance of which are secured by, among other things, certain
subordinated mortgages, deeds of trust and/or deeds to secure debt described on
Exhibit C hereto and made a part hereof (collectively, including all
modifications, extensions and additions thereto, the "Subordinated Mortgages,"
and individually, a "Subordinated Mortgage"), including the Subordinated
Mortgage identified by the recording information set forth in Exhibit C-1,
creating valid and perfected liens on the Real Properties subordinate to the
Senior Mortgages; and
G. WHEREAS, pursuant to the Senior Mortgages, the Borrower cannot
grant a subordinated lien on any of the Real Properties without the express
approval of McDonald's and the Subordinated Indenture Indebtedness will not be
able to be issued without the agreement of McDonald's to permit the issuance of
the Subordinated Mortgages; and
H. WHEREAS, McDonald's approval of the Borrower's granting of the
Subordinated Mortgages is conditioned on the entry into this Subordination
Agreement by the Subordinated Creditor, which hereby warrants and represents
that it has full power and authority under the Subordinated Creditor Indenture
to enter into this Subordination Agreement on behalf of all holders of any
securities or obligations whatsoever issued pursuant to the Subordinated
Creditor Indenture; and
I. WHEREAS, the Subordinated Creditor and McDonald's each desire to
enter into this Subordination Agreement to confirm the subordination of the
liens of the Subordinated Mortgages to the liens of the Senior Mortgages in
accordance with the terms of this Agreement;
NOW THEREFORE, IN CONSIDERATION OF THE MUTUAL BENEFITS accruing to the
parties hereto, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Consent. Pursuant and subject to the other terms of this Agreement,
McDonald's consents to the Subordinate Mortgages. This consent shall not be
deemed to (i)
3
<PAGE>
be a consent to any future encumbrances, (ii) be a waiver of the limitation
on future encumbrances contained in the Senior Mortgages, (iii) be a consent
to or waiver of any other term or condition of the Senior Mortgages or (iv)
prejudice any right or rights which McDonald's may now or in the future have
under or in connection with the Senior Mortgages.
2. Priority of McDonald's.
(a) Subordination. The Subordinated Creditor hereby agrees for
itself and its successors and assigns that, except as otherwise expressly
provided herein, the terms, provisions and liens of the Subordinated Mortgages,
and any of the Subordinated Creditor's liens or security interests in the Real
Properties (but only to the extent of McDonald's interest in such Real
Properties), are hereby intentionally and unconditionally subordinated to, and
at all times shall be junior, subject and subordinate to the terms, provisions
and liens of the Senior Mortgages (including, without limitation, the liens
securing future optional and/or obligatory increases in the amount of the Senior
Obligations or advances by McDonald's to or for the benefit of the Borrower,
regardless of the use to which such advances are put), as well as to any and all
increases therein and all extensions, consolidations, modifications, renewals,
refinancings and supplements thereto. The Subordinated Creditor hereby waives
any right it may have to require that McDonald's marshal any assets of the
Borrower in favor of the Subordinated Creditor and the Subordinated Creditor
agrees that it shall not acquire, by subrogation or otherwise, any lien, estate,
right or other interest in the Real Properties which is or may be prior or
superior in right to the Senior Mortgages, including but not limited to advances
for real estate taxes and assessments. The rights and priorities set forth in
this Paragraph 2(a) shall be effective notwithstanding the order of creation,
attachment, vesting or perfection of the rights of McDonald's under the Senior
Mortgages, or of the Subordinated Creditor under the Subordinated Mortgages, the
Subordinated Creditor Indenture or any other documents executed in connection
therewith (including, without limitation, any UCC-1 financing statements or
fixture filings). The Subordinated Creditor shall be deemed to have consented
(i) to any action by Borrower to which McDonald's consents pursuant to the
Senior Mortgages and (ii) to each act of, or failure to act by, the Borrower
that is not prohibited by the Senior Mortgages, provided that, both with respect
to (i) and (ii), such deemed consent is applicable only to acts or failures to
act in connection with the sale, construction, restoration, insurance,
condemnation or alterations of, to or on, or with respect to the Real Properties
and any other matters relating to the Real Properties.
(b) Insurance; Condemnation Awards. The Subordinated Creditor hereby
assigns and releases unto McDonald's, until payment in full of the Senior
Obligations:
(i) all of its right, title, interest or claim, if any, in and to
the proceeds of all policies of insurance covering the
Real Properties, for application in accordance with the
provisions of the Senior Mortgages or as the Borrower and
McDonald's may otherwise agree; and
4
<PAGE>
(ii) all of its right, title and interest or claim, if any,
in and to all awards or other compensation made for
any taking of any part of the Real Properties for
application in accordance with the provisions of the
Senior Mortgages or as the Borrower and McDonald's may
otherwise agree.
All such insurance proceeds or awards which may become due and payable
to the Subordinated Creditor shall be payable directly to McDonald's, and the
Subordinated Creditor directs any insurance company or governmental authority
to make payment thereof directly to McDonald's for application in accordance
with the Senior Mortgages. In the event that any such insurance proceeds or
awards are made payable to the Subordinated Creditor despite such direction,
the Subordinated Creditor shall promptly transfer the same, or promptly cause
the same to be transferred, to McDonald's.
(c) Assignment of Leases and Rents. Any assignment in favor of
the Subordinated Creditor of any Leases or Rents (as such terms are defined in
the Senior Mortgages) contained in the Subordinated Mortgages or the
Subordinated Creditor Indenture, or in any other document or instrument related
thereto or delivered in connection therewith, and all rights of the Subordinated
Creditor thereunder, are hereby intentionally and unconditionally subordinated
to, and shall be in all respects junior, subject and subordinate to any
assignment of rents, leases or other agreements relating to the Real Properties
contained in (i) the Senior Mortgages, and (ii) any other document now in
existence or hereafter made by the Borrower to secure the Senior Obligations,
and to all rights of McDonald's thereunder. Without limiting the foregoing
provisions of this Paragraph 2(c), from and after the execution and delivery of
the Subordinated Mortgages to the Subordinated Creditor, the Subordinated
Creditor shall not be entitled to receive or retain any Rents or other amounts
assigned to the Subordinated Creditor under any such document or instrument
until such time as the Senior Obligations shall have been completely paid in
full.
(d) Non-Disturbance Agreements. The Subordinated Creditor shall be
required to give a non-disturbance agreement to any lessee or tenant of the Real
Properties with respect to whose lease McDonald's, as holder of the Senior
Mortgages, shall have executed a non-disturbance agreement, and, if the
Subordinated Creditor fails to give any such non-disturbance agreement, the
Subordinated Creditor nevertheless agrees not to disturb the possession,
occupancy or rights of any such lessee or tenant without the prior written
consent of McDonald's in each instance.
(e) Further Assurances. To further evidence the subordination
hereinabove provided for, the Subordinated Creditor agrees that, within 30 days
after request by McDonald's, it will, at the Subordinated Creditor's sole cost
and expense, do, execute, acknowledge and deliver all and every such further
acts, deeds, conveyances and instruments as McDonald's may reasonably request
for the better assuring and evidencing of this subordination (including, without
limitation, further affirmation of the application of this
5
<PAGE>
Agreement to future optional and/or obligatory increases in the amount of the
Senior Obligations or advances, regardless of the use to which such increases
or advances are put).
(f) Release or Subordination of Lien. If McDonald's shall at any
time release its lien on the Real Properties (or any part thereof) in connection
with a sale or refinancing of the Real Properties or any part thereof, the
Subordinated Creditor shall, without any payment to it, be deemed to have
consented to such sale or refinancing and shall release the lien of the
Subordinated Mortgages thereon at the same time that McDonald's releases the
lien of the Senior Mortgages thereon, and, in the event that the Subordinated
Creditor has not executed a release within seven (7) business days of being
requested to do so by Borrower of McDonald's in connection with such sale or
refinancing, the Subordinated Creditor hereby irrevocably appoints McDonald's as
its attorney in fact (coupled with an interest) to execute in the name of the
Subordinated Creditor or without the signature of the Subordinated Creditor to
the extent McDonald's may lawfully do so, one or more releases or reconveyances
of mortgages/deeds of trust or other documents to evidence such release of the
lien of the Subordinated Mortgages. Until the Senior Obligations have been
completely paid in full (including, without limitation, any obligations which
may arise under the Agreement to Indemnify), all proceeds from or with respect
to the sale, refinancing or other disposition of the Real Properties or any part
thereof shall be paid to McDonald's (or placed into escrow for the benefit of
McDonald's pursuant to the terms of the Senior Mortgages) in satisfaction of the
Senior Obligations pursuant to the terms of the Senior Mortgages and the
McDonald's Documentation, and the Subordinated Creditor shall have no right,
claim or interest in or to any such proceeds.
(g) Enforcement. The Subordinated Creditor agrees that no remedies
provided for under the Subordinated Mortgages or other documents (to the extent
relating to the Real Properties in which McDonald's has an interest) executed in
connection with the Subordinated Creditor Indenture shall be exercised with
respect to the Real Properties, including, without limitation, the commencement
or prosecution of foreclosure proceedings, the exercise of any power of sale, or
the appointment of a receiver (or the Subordinated Creditor as mortgagee in
possession), without obtaining the prior written consent of McDonald's. The
Subordinated Creditor hereby consents and agrees that any lawful action taken by
or on behalf of McDonald's in the exercise of McDonald's rights and/or remedies
under the Senior Mortgages (including, without limitation, any foreclosure or
acquisition of title to a Real Property by deed in lieu of foreclosure or
otherwise) are hereby deemed to be consented to by the Subordinated Creditor in
all respects.
(h) No Third-Party Beneficiaries. The provisions of clauses (a)-(g)
of this Paragraph 2 are solely for the benefit of the holder of the Senior
Mortgages and shall not create any rights in the Borrower or any other person.
3. Bankruptcy. The provisions of this Agreement shall continue in full
force and effect notwithstanding the occurrence of any proceeding under Title 11
of the United States Code (11 U.S.C. Sec. 101 et seq.) or any other bankruptcy,
insolvency, liquidation, reorganization, dissolution, winding up, liquidation,
readjustment or other similar proceeding
6
<PAGE>
relating to the Borrower or to its property (whether voluntary or
involuntary, partial or complete, and whether in bankruptcy, insolvency or
receivership, or upon a general assignment for the benefit of creditors, or
any other marshaling of the assets and liabilities of the Borrower, or any
sale of all or substantially all of the assets of the Borrower, or otherwise)
(each, an "Insolvency Proceeding"). Without limiting the generality of the
foregoing, in the event of an Insolvency Proceeding, (i) the Senior
Obligations (including post-petition interest on the Senior Obligations,
whether or not such interest is allowable under Section 502 or 506 of the
United States Bankruptcy Code) shall first be completely paid in full before
the Subordinated Creditor shall be entitled to receive or retain any proceeds
from or relating to the sale, refinancing or other disposition of the Real
Properties or any portion thereof in respect of the Subordinated Indenture
Indebtedness; and (ii) the Subordinated Creditor shall not object to or
oppose any efforts by McDonald's to obtain relief from the automatic stay
with respect to the Real Properties under Section 362 of the United States
Bankruptcy Code.
4. Payments Received by the Subordinated Creditor. In the event that the
Subordinated Creditor receives any payment or other distribution of any kind or
character from the Borrower or from any other source whatsoever in respect of
any of the Subordinated Indenture Indebtedness, or receives any security
therefor, whether by way of agreement or compromise or otherwise, which it is
not entitled to retain pursuant to the terms of this Agreement, the Subordinated
Creditor shall immediately deliver the same to McDonald's, in the form received,
together with any necessary endorsements, in each case for application on
account of the Senior Obligations, but until so received by McDonald's, the same
shall be held in trust by the Subordinated Creditor as the property of
McDonald's.
5. No Consent Required. The Subordinated Creditor hereby agrees that
McDonald's may, from time to time, at its sole discretion and without notice to
or consent of or from the Subordinated Creditor, and without affecting the
obligations of the Subordinated Creditor herein or the subordination provided
for hereunder, take any or all of the following actions:
(a) retain or obtain a lien or security interest in any property to
secure all or any part of the Senior Obligations;
(b) retain, obtain or permit the release of the primary or secondary
obligations of any other obligor or obligors with respect to all or any part of
the Senior Obligations;
(c) fail to perfect, or release McDonald's lien or security interest
in, or surrender, release or permit any substitution or exchange for, all or any
part of any property (including, without limitation, the Real Properties)
securing all or any part of the Senior Obligations;
(d) change the manner, place or terms of payments, and/or change or
extend the time of payment of, renew or alter, all or any part of the Senior
Obligations, any security therefor, or any liability incurred directly or
indirectly in respect thereof, and the
7
<PAGE>
provisions hereof shall apply to the Senior Obligations as so changed,
extended, renewed or altered;
(e) sell, exchange, release, surrender, realize upon or otherwise
deal with in any manner and in any order the Real Properties or any part
thereof;
(f) exercise or refrain from exercising or release any rights and/or
remedies against the Borrower or others (including, without limitation, any
guarantor of all or a portion of the Senior Obligations) or otherwise act or
refrain from acting; and/or
(g) settle or compromise the Senior Obligations or any part thereof
or any security therefor, or any liability incurred directly or indirectly in
respect thereof or hereof.
6. Transfer. McDonald's may, from time to time, without notice to
Subordinated Creditor, assign or transfer any or all of the Senior Obligations
or any interest therein or any security therefor. Notwithstanding any such
assignment or transfer or any subsequent assignment or transfer thereof, the
holders of the Senior Obligations and the holders of any interest therein shall
be entitled to the benefits of this Agreement to the same extent as if such
holders were McDonald's specifically named in this Agreement.
7. Other Liens. Nothing in this Agreement shall prohibit, prevent or
otherwise impede the Subordinated Creditor from exercising any rights, remedy or
power which it may have against the Borrower and/or its subsidiaries with
respect to any collateral other than the Real Properties, which secures the
Subordinated Indenture Indebtedness, provided, however, that the Subordinated
Creditor shall not take any action which could impair the lien of the Senior
Mortgages or the ability of McDonald's to foreclose or otherwise enforce its
security interests or liens thereunder.
8. Termination. This Agreement shall in all respects be a continuing
agreement and shall remain in full force and effect until (a) the complete
payment in full of all of the Senior Obligations, and (b) the execution by
McDonald's of releases of all of the Senior Mortgages and the recording of such
releases in the appropriate real property records.
9.Miscellaneous.
(a) No Waiver. No delay on the part of McDonald's in the exercise of
any right or remedy shall operate as a waiver thereof, and no single or partial
exercise by McDonald's of any right or remedy shall preclude any other or
further exercise thereof or the exercise of any other right or remedy, nor shall
any modification, waiver or discharge of any of the provisions of this Agreement
be binding upon McDonald's except as expressly set forth in a writing duly
signed and delivered by McDonald's.
(b) Obligations Absolute. The obligations of the Subordinated
Creditor herein shall be absolute and unconditional, and the subordination of
the lien of the Subordinated Mortgages herein contained shall be effective with
respect to the Senior
8
<PAGE>
Obligations, notwithstanding any right or power of the Borrower or anyone
else to assert any claim or defense as to the invalidity or unenforceability
of any such obligation and/or any lien securing the same, in whole or in
part, or any determination of such invalidity or unenforceability and no such
event shall affect or impair the agreements and obligations of the
Subordinated Creditor hereunder. In the event that any of the Senior
Obligations and/or any lien securing the same is determined to be invalid or
unenforceable, in whole or in part, the Subordinated Creditor agrees that, as
between McDonald's and the Subordinated Creditor, the Senior Obligations and
such lien shall be deemed valid and enforceable, and the obligations of the
Subordinated Creditor hereunder with respect thereto shall not be affected by
any such determination but shall continue in full force and effect.
(c) Sole Discretion. It is understood and agreed that in the
event of any dissolution, winding up, liquidation, readjustment, reorganization
or other similar proceedings relating to the Borrower or to its property,
McDonald's may use its sole discretion with respect to the enforcement of the
Senior Mortgages, or in otherwise exercising or refraining from exercising any
rights or in taking or refraining from taking any action which it may be
entitled to take or assert hereunder; and that McDonald's shall not be under any
liability for doing or refraining from doing anything relative thereto in the
exercise of its own reasonable judgment or which it may deem necessary or
desirable.
(d) Waiver of Notice and Diligence. The Subordinated Creditor hereby
waives: (i) notice of acceptance by McDonald's of this Agreement; (ii) notice of
the existence or creation or nonpayment of all or any of the Senior Obligations;
and (iii) all diligence in collection or protection of or realization upon the
Senior Obligations or any security therefor.
(e) Reinstatement. If, as a result of, or arising from, any
bankruptcy, insolvency or similar proceeding, claim is ever made upon McDonald's
or any participant in the Senior Obligations for repayment or recovery of any
amount or amounts received by it in payment or on account of the Senior
Obligations from the proceeds of the sale, refinancing or other disposition of
all or a portion of the Real Properties and McDonald's or such participant
repays the Borrower or its legal representative or a trustee in bankruptcy, all
or part of such amount by reason of (i) any judgment, decree or order of any
court or administrative body having jurisdiction or (ii) any settlement or
compromise of any such claim effected by McDonald's or such participant with any
such claimant (including the Borrower or any guarantor), then in such event the
Subordinated Creditor agrees that it shall be and remain obligated hereunder
with respect to the amount so repaid or recovered to the same extent as if such
amount had never originally been received by McDonald's or such participant and
to the extent the Subordinated Creditor has received payments or distributions
in respect of the Subordinated Indenture Indebtedness from the proceeds of the
sale, refinancing or other disposition of the Real Properties.
10. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns.
9
<PAGE>
11. Notices. Any notices or other communications required or permitted
hereunder shall be in writing, and shall be sufficiently given if made by hand
delivery, by telecopier or registered or certified mail, postage prepaid, return
receipt requested, to the addresses listed in the first paragraph of this
Agreement. Each party may designate additional or different addresses for
notices to such party. Any notice or communication to either party hereto shall
be deemed to have been given or made as of the date so delivered if personally
delivered; when receipt is acknowledged electronically (with copy by U.S. mail),
if faxed (the fax number for the Subordinated Creditor is (617) 664-5371; the
fax number for McDonald's is (630) 623-3000; and five (5) calendar days after
mailing if sent by registered or certified mail, postage prepaid (except that a
notice of change of address shall not be deemed to have been given until
actually received by the addressee).
12. Representations by the Subordinated Creditor. The Subordinated
Creditor has the power, authority and legal right pursuant to the Subordinated
Creditor Indenture to execute, deliver and perform this Agreement. The
Subordinated Creditor has been duly authorized pursuant to the Subordinated
Creditor Indenture to enter into this Subordination Agreement on behalf of the
Holders (as defined in the Subordinated Creditor Indenture) and this
Subordination Agreement constitutes the valid and binding obligations of the
Subordinated Creditor on behalf of such Holders enforceable against the
Subordinated Creditor on behalf of such Holders in accordance with its terms.
13. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York including both matters of
internal law and conflicts of law, except that matters as to the priority of
liens on the Real Properties and remedies and procedural matters relating
thereto shall be governed by the laws of the State in which the Real Properties
is located.
14. Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
15. Singular and Plural. Words used in this Agreement in the singular,
where the context so permits, shall be deemed to include the plural and vice
versa. The definitions of words in the singular in this Agreement shall apply
to such words when used in the plural where the context so permits and vice
versa.
10
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto as of the date first above written.
STATE STREET BANK AND TRUST COMPANY, solely in its
capacity as trustee and collateral agent under and
pursuant to the Subordinated Creditor Indenture
By: /s/ Mary Lee Storrs
----------------------------------------
Name: Mary Lee Storrs
Title: Vice President
MCDONALD'S CORPORATION
By: /s/ Gloria Santona
----------------------------------------
Name: Gloria Santona
Title: Vice President, Deputy General Counsel
and Secretary
DISCOVERY ZONE, INC.
By: /s/ Robert Rooney
----------------------------------------
Name: Robert Rooney
Title: Sr VP
<PAGE>
STATE OF MASSACHUSETTS)
COUNTY OF SUFFOLK )
This instrument was acknowledged before me on July 31, 1997, by
Mary Lee Storrs of STATE STREET BANK AND TRUST COMPANY, a Massachusetts
trust company, on behalf of said trust company.
/s/ Agnes G. Dillon
-------------------------------------
Notary Public, State of Massachusetts
Agnes G. Dillon
My Commission
Expires 5/15/03
<PAGE>
STATE OF ILLINOIS )
COUNTY OF DUPAGE )
This instrument was acknowledged before me on July 31st, 1997, by
Gloria Santona of McDONALD'S CORPORATION, a Delaware corporation, on
behalf of said corporation.
/s/ Gordana Vujanovich
--------------------------------
Notary Public, State of Illinois
"OFFICIAL SEAL"
Gordana Vujanovich
Notary Public, State of Illinois
My Commission Expires 02/15/99
<PAGE>
STATE OF NEW YORK )
COUNTY OF WESTCHESTER)
This instrument was acknowledged before me on July 25, 1997, by
Robert Rooney Sr VP of DISCOVERY ZONE, INC., a Delaware corporation, on behalf
of said corporation.
/s/ Mark D. Woodward
--------------------------------
Notary Public, State of New York
MARK D. WOODWARD
Notary Public State of New York
No 4997846
Qualified in New York County
Commission Expires June 15, 1998
<PAGE>
EXHIBIT A
DESCRIPTIONS OF SENIOR MORTGAGES
The following is a list of the amended and restated first priority
mortgages, deeds of trust and/or deeds to secure debt entered executed by
Borrower, on behalf of McDonald's, pursuant to the terms and conditions of
the McDonald's Documentation:
1. Amended and Restated Deed To Secure Debt and Security Agreement, made as of
July 29, 1997, by Borrower to McDonald's, relating to mortgaged property
located in Kennesaw, in the County of Cobb, in the State of Georgia.
2. Amended and Restated Deed of Trust,
Assignment of Leases and Rents, Security Agreement and Fixture Filing,
made as of July 29, 1997, by Borrower to Chicago Title Insurance
Company, a Missouri Corporation, as trustee, for the benefit of
McDonald's, relating to trust property located in Vancouver, in the
County of Clark, in the State of Washington.
3. Amended and Restated Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to Kenneth W. Pearson, as trustee, to and for the benefit of
McDonald's, relating to trust property located in Leon Valley, in the
County of Bexar, in the State of Texas.
4. Amended and Restated Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to Kenneth W. Pearson, as trustee, for the benefit of
McDonald's, relating to trust property located in Arlington, in the
County of Tarrant, in the State of Texas.
5. Amended and Restated Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to Kenneth W. Pearson, as trustee, for the benefit of
McDonald's, relating to trust property located in San Antonio, in the
County of Bexar, in the State of Texas.
6. Amended and Restated Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to The Public Trustee of the County of Douglas, Colorado, as
trustee, to and for the benefit of McDonald's, relating to trust
property located in Littleton, in the County of Douglas, in the State of
Colorado.
<PAGE>
7. Amended and Restated Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to The Public Trustee of the County of Arapahoe, Colorado, as
trustee, to and for the benefit of McDonald's, relating to trust property
located in Aurora, in the County of Arapahoe, in the State of Colorado.
8. Amended and Restated Mortgage, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to McDonald's, relating to mortgaged property located in
Schaumburg, in the County of Cook, in the State of Illinois.
9. Amended and Restated Mortgage, made as of July 29, 1997, by
Borrower to McDonald's, relating to mortgaged property located in
Sterling Heights, in the County of Macomb, in the State of Michigan.
10. Open-End Mortgage, Assignment of Leases and Rents, Security
Agreement and Fixture Filing (Amended and Restated), made as of July 29,
1997, by Borrower to McDonald's, relating to mortgaged property located
in Forest Park, in the County of Hamilton, in the State of Ohio.
11. Open-End Mortgage, Assignment of Leases and Rents, Security
Agreement and Fixture Filing (Amended and Restated), made as of July 29,
1997, by Borrower to McDonald's, relating to mortgaged property located
in Columbus, in the County of Franklin, in the State of Ohio.
12. Amended and Restated Open-End Mortgage, Assignment of Leases and
Rents, Security Agreement and Fixture Filing, made as of July 29, 1997,
by Borrower to McDonald's, relating to mortgaged property located in
Philadelphia, in the County of Philadelphia, in the State of
Pennsylvania.
13. Amended and Restated Mortgage, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to McDonald's, relating to mortgaged property located in
Blaine, in the County of Anoka, in the State of Minnesota.
14. Amended and Restated Mortgage, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to McDonald's, relating to mortgaged property located in
Washington Township, in the County of Marion, in the State of Indiana.
<PAGE>
EXHIBIT A-1
RECORDING INFORMATION FOR SENIOR MORTGAGE IN FAVOR OF MCDONALD'S
County Book Volume
------ ---- ------
Senior Mortgage (Arlington) Tarrant File Clerks # D197149865
<PAGE>
Arlington
Tarrant County, Texas
EXHIBIT B
TRACT I:
Lot 4B, Block A, THE PARKS RETAIL CENTER, an Addition to the City of
Arlington, Tarrant County, Texas, according to plat recorded in Cabinet A,
Slide 1545, Deed Records of Tarrant County, Texas.
TRACT II:
BEING a non-exclusive easement for parking, ingress, egress, and
utilities, as created by Shopping Center Easement Agreement recorded in
Volume 11379, Page 1387, Deed Records of Tarrant County, Texas, and being
more particularly described by metes and bounds on attached Exhibit "A".
TRACT III:
BEING a non-exclusive access easement as created by Reciprocal Easement
Agreement recorded in Volume 8866, Page 1411, Deed Records of Tarrant County,
Texas.
TRACT 2
BEING a non-exclusive easement for parking, ingress, egress, and
utilities, as created by Shopping Center Easement Agreement recorded in
Volume 11379, Page 1387, Deed Records, Tarrant County, Texas, in and to the
following property:
BEING a description of all that certain lot, tract or parcel of land
situated in the J.W. Lane Survey, Abstract No. 950, Tarrant County, Texas,
same being a part of Lot 4A, Block A of the Revised Plat of Lot 4 of PARKS
RETAIL CENTER, an addition to the City of Arlington of record in Cabinet A,
Slide 1545, of the Tarrant County Map Records, same being a portion of that
tract of land, which is described as "Tract One" in a conveyance from
Petro-Hunt Corporation to HWP Parks Arlington, Ltd., by deed dated June 10,
1993 and recorded in Volume 11121, Page 472, of the Tarrant County Deed
Records, and being more particularly described as follows:
BEGINNING at a 5/8 inch iron rod marking and located at the Northwest
corner of Lot 4B of said Replat of Lot 4 of PARKS RETAIL CENTER, same being
the most northerly Northwest corner of said Lot 4A, for the Northwest corner
of the tract of land herein described, and being on the arc of a curve on the
South line of West Arbrook Boulevard, a 120 foot right-of-way;
<PAGE>
Arlington
Tarrant County, Texas
EXHIBIT B
(continued)
THENCE leaving said Lot 4B, along and with the South right-of-way line of
said West Arbrook Boulevard, same being a North line of said Lot 4A, 48.14
feet to the left, along the arc of said curve, having a radius of 1805.00
feet, a delta angle of 01 degree 31 minutes 41 seconds, and a sub-chord which
bears South 84 degrees 38 minutes 48 seconds East, a distance of 48.14 feet
to the Northwest corner of the tract of land herein described;
THENCE leaving said West Arbrook Boulevard, through said Lot 4A, the
following courses and distances numbered (1) through (5);
(1) SOUTH, 40 degrees 33 minutes West, a distance of 30.65 feet to a corner
of the tract of land herein described;
(2) SOUTH, a distance of 482.00 feet to a corner of the tract of land herein
described;
(3) WEST, a distance of 174.00 feet to a reentrant of the tract of land
herein described;
(4) SOUTH, a distance of 227.00 feet to a corner of the tract of land herein
described;
(5) WEST, a distance of 74.00 feet to the most southerly Southwest corner of
the tract of land herein described, same being on a West line of said Lot 4A,
and being on the East line of the HOMART ADDITION (Amended), an addition to
the City of Arlington of record in Cabinet A, Slide 901-904, of the Tarrant
County Map Records;
THENCE along with a West line of said Lot 4A, and the East line of said
HOMART ADDITION, NORTH, a distance of 291.50 feet to a 5/8 inch iron rod
marking and located at an easterly Northeast corner of said Lot 4A, for an
easterly Northeast corner of the tract of land herein described, same being
the Southwest corner of aforesaid Lot 4B;
THENCE leaving the HOMART ADDITION, along and with North line of said Lot 4A,
same being the South line of said Lot 4B, East, a distance of 220.70 feet to
a 5/8 inch iron rod marking and located at the Southeast corner of said Lot
4B, same being a reentrant corner of said Lot 4A, for a reentrant corner of
the tract of land herein described;
THENCE along and with a West line of said Lot 4A, the East line of said Lot
4B, North, a distance of 445.28 feet to the PLACE OR POINT OF BEGINNING and
Containing 1.0449 Acres or 45,516 Square Feet of land, more or less, within
the herein described metes and bounds.
<PAGE>
EXHIBIT C
DESCRIPTIONS OF SUBORDINATED MORTGAGES
The following is a list of the subordinated mortgages, deeds of trust
and/or deeds to secure debt entered executed by Borrower, on behalf of the
Subordinated Creditor, pursuant to the terms and conditions of the McDonald's
Documentation:
1. Deed To Secure Debt and Security Agreement, made as of July 29, 1997, by
Borrower to Subordinated Creditor, relating to mortgaged property located
in Kennesaw, in the County of Cobb, in the State of Georgia.
2. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Chicago Title
Insurance Company, a Missouri corporation, as trustee, for the benefit of
Subordinated Creditor, relating to trust property located in Vancouver, in
the County of Clark, in the State of Washington.
3. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Kenneth W.
Pearson, as trustee, to and for the benefit of Subordinated Creditor,
relating to trust property located in Leon Valley, in the County of Bexar,
in the State of Texas.
4. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Kenneth W.
Pearson, as trustee, for the benefit of Subordinated Creditor, relating to
trust property located in Arlington, in the County of Tarrant, in the State
of Texas.
5. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Kenneth W.
Pearson, as trustee, for the benefit of Subordinated Creditor, relating to
trust property located in San Antonio, in the County of Bexar, in the State
of Texas.
6. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to The Public Trustee
of the County of Douglas, Colorado, as trustee, to and for the benefit of
Subordinated Creditor, relating to trust property located in Littleton, in
the County of Douglas, in the State of Colorado.
7. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to The Public Trustee
of the County of Arapahoe, Colorado, as trustee, to and for the benefit of
Subordinated Creditor, relating to trust property located in Aurora, in the
County of Arapahoe, in the State of Colorado.
<PAGE>
8. Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture
Filing, made as of July 29, 1997, by Borrower to Subordinated Creditor,
relating to mortgaged property located in Schaumburg, in the County of
Cook, in the State of Illinois.
9. Mortgage, made as of July 29, 1997, by Borrower to Subordinated Creditor,
relating to mortgaged property located in Sterling Heights, in the County
of Macomb, in the State of Michigan.
10. Open-End Mortgage, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Subordinated
Creditor, relating to mortgaged property located in Forest Park, in the
County of Hamilton, in the State of Ohio.
11. Open-End Mortgage, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Subordinated
Creditor, relating to mortgaged property located in Columbus, in the County
of Franklin, in the State of Ohio.
12. Open-End Mortgage, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Subordinated
Creditor, relating to mortgaged property located in Philadelphia, in the
County of Philadelphia, in the State of Pennsylvania.
13. Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture
Filing, made as of July 29, 1997, by Borrower to Subordinated Creditor,
relating to mortgaged property located in Blaine, in the County of Anoka,
in the State of Minnesota.
14. Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture
Filing, made as of July 29, 1997, by Borrower to Subordinated Creditor,
relating to mortgaged property located in Washington Township, in the
County of Marion, in the State of Indiana.
<PAGE>
EXHIBIT C-1
RECORDING INFORMATION FOR SUBORDINATED MORTGAGE IN FAVOR OF STATE STREET BANK
AND TRUST COMPANY (SOLELY IN ITS CAPACITY AS TRUSTEE AND COLLATERAL AGENT UNDER
AND PURSUANT TO THE SUBORDINATED CREDITOR INDENTURE)
County Book Volume
------ ---- ------
Subordinated Mortgage (Arlington) Tarrant File Clerks# D197149869
<PAGE>
<PAGE>
Exhibit 4.53
- -----------------------------------------------------------------------------
Space above this line for recorder's use
DOCUMENT PREPARED BY AND
AFTER RECORDING RETURN TO:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attention: Jonathan A. Reiss, Esq.
SUBORDINATION AGREEMENT
AGREEMENT made as of the 29th day of July, 1997, by and among STATE
STREET BANK AND TRUST COMPANY, solely in its capacity as trustee and
collateral agent under and pursuant to the Subordinated Creditor Indenture
(as hereinafter defined) with an address at Two International Place, Boston,
Massachusetts 02110, Attention: Corporate Trust Department, Mary Lee Storrs,
Vice President (the "Subordinated Creditor"), MCDONALD'S CORPORATION, a
Delaware corporation, with an address at McDonald's Plaza, Oak Brook,
Illinois 60523, Attention: General Counsel ("McDonald's") and DISCOVERY ZONE,
INC., a Delaware corporation, successor by merger to Leaps & Bounds, Inc.,
having its principal place of business at One Corporate Center, 110 East
Broward Boulevard, Fort Lauderdale, Florida 33301 ("Borrower").
W I T N E S S E T H:
RECITALS
A. WHEREAS, Borrower is the successor in interest to Discovery
Zone, Inc., a Delaware corporation and debtor and debtor in possession ("Old
DZI"), and Old DZI's affiliated debtors and debtors in possession including
Leaps & Bounds, Inc. (the "Debtors"), all in the chapter 11 proceedings
captioned In re Discovery Zone, Inc., et al., Case No. 96-
<PAGE>
411 (HSB) (Jointly Administered), before the United States Bankruptcy Court
for the District of Delaware (the "Bankruptcy Court"); and
B. WHEREAS, pursuant to an Agreement and Plan of Merger, dated as
of August 30, 1994 (the "Merger Agreement"), by and among Old DZI, and two of
the Debtors, Discovery Zone International, Inc. and Leaps & Bounds, Inc. on
the one hand, and McDonald's on the other hand, and related documentation,
McDonald's was or is the sublessor to Leaps & Bounds, Inc. of certain
properties, and Old DZI agreed to defend, indemnify and hold McDonald's and
its affiliates harmless in respect of all expenses, losses, costs,
deficiencies, liabilities and damages (including related and reasonable
counsel fees and expenses, and compensatory and demonstrable consequential
damages) incurred or suffered by McDonald's as a direct result of, inter
alia, any breach that results in any payment by McDonald's in connection with
any guarantee by McDonald's relating to such properties (the "Agreement to
Indemnify"); and
C. WHEREAS, On November 18, 1996, the Bankruptcy Court entered the
Stipulation and Order Between Debtors and McDonald's Corporation Providing
for the Resolution, Settlement and Compromise of Disputes and for Rent
Deferrals and Allowance of Certain Claims (the "Stipulation and Order"),
pursuant to which, inter alia, the Debtors assumed certain subleases relating
to properties subleased by McDonald's to the Debtors pursuant to 11 U.S.C.
Section 365 as to which the Agreement to Indemnify remains in full force and
effect, the Bankruptcy Court approved the allowance of certain claims of
McDonald's, including those claims based on the Agreement to Indemnify, and
the Bankruptcy Court approved the validity, perfection, priority and
enforceability of certain claims and liens of McDonald's against the Debtors,
including, without limitation, the validity, perfection, priority and
enforceability of the Senior Mortgages (as defined below) and the Stipulation
and Order was not appealed or otherwise challenged and remains in full force
and effect; and
D. WHEREAS, pursuant to the plan of reorganization for Old DZI and
its affiliated debtors confirmed by the Bankruptcy Court by order entered
July 18, 1997 (the "Plan"), and as required by the terms of the Stipulation
and Order, Borrower, as the reorganized successor of the Debtors, is
obligated to issue to McDonald's Secured Rent Deferral Notes in the aggregate
original principal amount of $266,466.24, which amount is subject to increase
each month in accordance with the terms thereof (the "Senior Secured Rent
Deferral Notes," and individually a "Senior Secured Rent Deferral Note") and
Secured Rejection Note in the aggregate original principal amount of
$4,416,237.90 (the "Senior Secured Rejection Note"); and
E. WHEREAS pursuant to the terms and conditions of the Stipulation
and Order, the Plan, the Agreement to Indemnify, the Senior Secured Rejection
Note and the Senior Secured Rent Deferral Notes and any related documentation
(the "McDonald's Documentation"), the repayment and performance of the
obligations of Borrower to McDonald's under the McDonald's Documentation
(including any contingent obligations under the Agreement to Indemnify, the
Stipulation and Order, including Section 7 thereof, or
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otherwise) (the "Senior Obligations") is secured by certain amended and
restated first priority mortgages, deeds of trust and/or deeds to secure debt
described on Exhibit A attached hereto and made a part hereof (collectively,
including all modifications, extensions and additions thereto, the "Senior
Mortgages," and individually, a "Senior Mortgage"), including the Senior
Mortgage identified by the recording information set forth in Exhibit A-1,
reaffirming and creating, to the extent necessary, valid and perfected first
priority liens on the real properties described on Exhibit B attached hereto
and made a part hereof, and other collateral described in the Senior
Mortgages (collectively, the "Real Properties," and individually, a "Real
Property"); and
F. WHEREAS, Borrower and the Subordinated Creditor entered into an
Indenture, dated July 22, 1997 (the "Subordinated Creditor Indenture") and
certain other documents and instruments related thereto, pursuant to which
and upon the terms and conditions therein indebtedness and other obligations
were incurred by the Borrower (the "Subordinated Indenture Indebtedness"),
the repayment and performance of which are secured by, among other things,
certain subordinated mortgages, deeds of trust and/or deeds to secure debt
described on Exhibit C hereto and made a part hereof (collectively, including
all modifications, extensions and additions thereto, the "Subordinated
Mortgages," and individually, a "Subordinated Mortgage"), including the
Subordinated Mortgage identified by the recording information set forth in
Exhibit C-1, creating valid and perfected liens on the Real Properties
subordinate to the Senior Mortgages; and
G. WHEREAS, pursuant to the Senior Mortgages, the Borrower cannot
grant a subordinated lien on any of the Real Properties without the express
approval of McDonald's and the Subordinated Indenture Indebtedness will not
be able to be issued without the agreement of McDonald's to permit the
issuance of the Subordinated Mortgages; and
H. WHEREAS, McDonald's approval of the Borrower's granting of the
Subordinated Mortgages is conditioned on the entry into this Subordination
Agreement by the Subordinated Creditor, which hereby warrants and represents
that it has full power and authority under the Subordinated Creditor
Indenture to enter into this Subordination Agreement on behalf of all holders
of any securities or obligations whatsoever issued pursuant to the
Subordinated Creditor Indenture; and
I. WHEREAS, the Subordinated Creditor and McDonald's each desire to
enter into this Subordination Agreement to confirm the subordination of the
liens of the Subordinated Mortgages to the liens of the Senior Mortgages in
accordance with the terms of this Agreement;
NOW THEREFORE, IN CONSIDERATION OF THE MUTUAL BENEFITS accruing to
the parties hereto, and other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Consent. Pursuant and subject to the other terms of this
Agreement, McDonald's consents to the Subordinate Mortgages. This consent
shall not be deemed to (i)
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be a consent to any future encumbrances, (ii) be a waiver of the limitation
on future encumbrances contained in the Senior Mortgages, (iii) be a consent
to or waiver of any other term or condition of the Senior Mortgages or (iv)
prejudice any right or rights which McDonald's may now or in the future have
under or in connection with the Senior Mortgages.
2. Priority of McDonald's.
(a) Subordination. The Subordinated Creditor hereby agrees for
itself and its successors and assigns that, except as otherwise expressly
provided herein, the terms, provisions and liens of the Subordinated
Mortgages, and any of the Subordinated Creditor's liens or security interests
in the Real Properties (but only to the extent of McDonald's interest in such
Real Properties), are hereby intentionally and unconditionally subordinated
to, and at all times shall be junior, subject and subordinate to the terms,
provisions and liens of the Senior Mortgages (including, without limitation,
the liens securing future optional and/or obligatory increases in the amount
of the Senior Obligations or advances by McDonald's to or for the benefit of
the Borrower, regardless of the use to which such advances are put), as well
as to any and all increases therein and all extensions, consolidations,
modifications, renewals, refinancings and supplements thereto. The
Subordinated Creditor hereby waives any right it may have to require that
McDonald's marshal any assets of the Borrower in favor of the Subordinated
Creditor and the Subordinated Creditor agrees that it shall not acquire, by
subrogation or otherwise, any lien, estate, right or other interest in the
Real Properties which is or may be prior or superior in right to the Senior
Mortgages, including but not limited to advances for real estate taxes and
assessments. The rights and priorities set forth in this Paragraph 2(a) shall
be effective notwithstanding the order of creation, attachment, vesting or
perfection of the rights of McDonald's under the Senior Mortgages, or of the
Subordinated Creditor under the Subordinated Mortgages, the Subordinated
Creditor Indenture or any other documents executed in connection therewith
(including, without limitation, any UCC-1 financing statements or fixture
filings). The Subordinated Creditor shall be deemed to have consented (i) to
any action by Borrower to which McDonald's consents pursuant to the Senior
Mortgages and (ii) to each act of, or failure to act by, the Borrower that is
not prohibited by the Senior Mortgages, provided that, both with respect to
(i) and (ii), such deemed consent is applicable only to acts or failures to
act in connection with the sale, construction, restoration, insurance,
condemnation or alterations of, to or on, or with respect to the Real
Properties and any other matters relating to the Real Properties.
(b) Insurance; Condemnation Awards. The Subordinated Creditor
hereby assigns and releases unto McDonald's, until payment in full of the
Senior Obligations:
(i) all of its right, title, interest or claim, if any, in
and to the proceeds of all policies of insurance
covering the Real Properties, for application in
accordance with the provisions of the Senior Mortgages
or as the Borrower and McDonald's may otherwise agree;
and
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(ii) all of its right, title and interest or claim, if any,
in and to all awards or other compensation made for
any taking of any part of the Real Properties for
application in accordance with the provisions of the
Senior Mortgages or as the Borrower and McDonald's may
otherwise agree.
All such insurance proceeds or awards which may become due and payable to
the Subordinated Creditor shall be payable directly to McDonald's, and the
Subordinated Creditor directs any insurance company or governmental authority
to make payment thereof directly to McDonald's for application in accordance
with the Senior Mortgages. In the event that any such insurance proceeds or
awards are made payable to the Subordinated Creditor despite such direction,
the Subordinated Creditor shall promptly transfer the same, or promptly cause
the same to be transferred, to McDonald's.
(c) Assignment of Leases and Rents. Any assignment in favor of the
Subordinated Creditor of any Leases or Rents (as such terms are defined in
the Senior Mortgages) contained in the Subordinated Mortgages or the
Subordinated Creditor Indenture, or in any other document or instrument
related thereto or delivered in connection therewith, and all rights of the
Subordinated Creditor thereunder, are hereby intentionally and
unconditionally subordinated to, and shall be in all respects junior, subject
and subordinate to any assignment of rents, leases or other agreements
relating to the Real Properties contained in (i) the Senior Mortgages, and
(ii) any other document now in existence or hereafter made by the Borrower to
secure the Senior Obligations, and to all rights of McDonald's thereunder.
Without limiting the foregoing provisions of this Paragraph 2(c), from and
after the execution and delivery of the Subordinated Mortgages to the
Subordinated Creditor, the Subordinated Creditor shall not be entitled to
receive or retain any Rents or other amounts assigned to the Subordinated
Creditor under any such document or instrument until such time as the Senior
Obligations shall have been completely paid in full.
(d) Non-Disturbance Agreements. The Subordinated Creditor shall be
required to give a non-disturbance agreement to any lessee or tenant of the
Real Properties with respect to whose lease McDonald's, as holder of the
Senior Mortgages, shall have executed a non-disturbance agreement, and, if
the Subordinated Creditor fails to give any such non-disturbance agreement,
the Subordinated Creditor nevertheless agrees not to disturb the possession,
occupancy or rights of any such lessee or tenant without the prior written
consent of McDonald's in each instance.
(e) Further Assurances. To further evidence the subordination
hereinabove provided for, the Subordinated Creditor agrees that, within 30
days after request by McDonald's, it will, at the Subordinated Creditor's
sole cost and expense, do, execute, acknowledge and deliver all and every
such further acts, deeds, conveyances and instruments as McDonald's may
reasonably request for the better assuring and evidencing of this
subordination (including, without limitation, further affirmation of the
application of this
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Agreement to future optional and/or obligatory increases in the amount of the
Senior Obligations or advances, regardless of the use to which such increases
or advances are put).
(f) Release or Subordination of Lien. If McDonald's shall at any
time release its lien on the Real Properties (or any part thereof) in
connection with a sale or refinancing of the Real Properties or any part
thereof, the Subordinated Creditor shall, without any payment to it, be
deemed to have consented to such sale or refinancing and shall release the
lien of the Subordinated Mortgages thereon at the same time that McDonald's
releases the lien of the Senior Mortgages thereon, and, in the event that the
Subordinated Creditor has not executed a release within seven (7) business
days of being requested to do so by Borrower of McDonald's in connection with
such sale or refinancing, the Subordinated Creditor hereby irrevocably
appoints McDonald's as its attorney in fact (coupled with an interest) to
execute in the name of the Subordinated Creditor or without the signature of
the Subordinated Creditor to the extent McDonald's may lawfully do so, one or
more releases or reconveyances of mortgages/deeds of trust or other documents
to evidence such release of the lien of the Subordinated Mortgages. Until
the Senior Obligations have been completely paid in full (including, without
limitation, any obligations which may arise under the Agreement to
Indemnify), all proceeds from or with respect to the sale, refinancing or
other disposition of the Real Properties or any part thereof shall be paid to
McDonald's (or placed into escrow for the benefit of McDonald's pursuant to
the terms of the Senior Mortgages) in satisfaction of the Senior Obligations
pursuant to the terms of the Senior Mortgages and the McDonald's
Documentation, and the Subordinated Creditor shall have no right, claim or
interest in or to any such proceeds.
(g) Enforcement. The Subordinated Creditor agrees that no remedies
provided for under the Subordinated Mortgages or other documents (to the
extent relating to the Real Properties in which McDonald's has an interest)
executed in connection with the Subordinated Creditor Indenture shall be
exercised with respect to the Real Properties, including, without limitation,
the commencement or prosecution of foreclosure proceedings, the exercise of
any power of sale, or the appointment of a receiver (or the Subordinated
Creditor as mortgagee in possession), without obtaining the prior written
consent of McDonald's. The Subordinated Creditor hereby consents and agrees
that any lawful action taken by or on behalf of McDonald's in the exercise of
McDonald's rights and/or remedies under the Senior Mortgages (including,
without limitation, any foreclosure or acquisition of title to a Real
Property by deed in lieu of foreclosure or otherwise) are hereby deemed to be
consented to by the Subordinated Creditor in all respects.
(h) No Third-Party Beneficiaries. The provisions of clauses
(a)-(g) of this Paragraph 2 are solely for the benefit of the holder of the
Senior Mortgages and shall not create any rights in the Borrower or any other
person.
3. Bankruptcy. The provisions of this Agreement shall continue in full
force and effect notwithstanding the occurrence of any proceeding under Title
11 of the United States Code (11 U.S.C. Sec. 101 et seq.) or any other
bankruptcy, insolvency, liquidation, reorganization, dissolution, winding up,
liquidation, readjustment or other similar proceeding
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relating to the Borrower or to its property (whether voluntary or
involuntary, partial or complete, and whether in bankruptcy, insolvency or
receivership, or upon a general assignment for the benefit of creditors, or
any other marshaling of the assets and liabilities of the Borrower, or any
sale of all or substantially all of the assets of the Borrower, or otherwise)
(each, an "Insolvency Proceeding"). Without limiting the generality of the
foregoing, in the event of an Insolvency Proceeding, (i) the Senior
Obligations (including post-petition interest on the Senior Obligations,
whether or not such interest is allowable under Section 502 or 506 of the
United States Bankruptcy Code) shall first be completely paid in full before
the Subordinated Creditor shall be entitled to receive or retain any proceeds
from or relating to the sale, refinancing or other disposition of the Real
Properties or any portion thereof in respect of the Subordinated Indenture
Indebtedness; and (ii) the Subordinated Creditor shall not object to or
oppose any efforts by McDonald's to obtain relief from the automatic stay
with respect to the Real Properties under Section 362 of the United States
Bankruptcy Code.
4. Payments Received by the Subordinated Creditor. In the event that
the Subordinated Creditor receives any payment or other distribution of any
kind or character from the Borrower or from any other source whatsoever in
respect of any of the Subordinated Indenture Indebtedness, or receives any
security therefor, whether by way of agreement or compromise or otherwise,
which it is not entitled to retain pursuant to the terms of this Agreement,
the Subordinated Creditor shall immediately deliver the same to McDonald's,
in the form received, together with any necessary endorsements, in each case
for application on account of the Senior Obligations, but until so received
by McDonald's, the same shall be held in trust by the Subordinated Creditor
as the property of McDonald's.
5. No Consent Required. The Subordinated Creditor hereby agrees that
McDonald's may, from time to time, at its sole discretion and without notice
to or consent of or from the Subordinated Creditor, and without affecting the
obligations of the Subordinated Creditor herein or the subordination provided
for hereunder, take any or all of the following actions:
(a) retain or obtain a lien or security interest in any property to
secure all or any part of the Senior Obligations;
(b) retain, obtain or permit the release of the primary or
secondary obligations of any other obligor or obligors with respect to all or
any part of the Senior Obligations;
(c) fail to perfect, or release McDonald's lien or security
interest in, or surrender, release or permit any substitution or exchange
for, all or any part of any property (including, without limitation, the Real
Properties) securing all or any part of the Senior Obligations;
(d) change the manner, place or terms of payments, and/or change or
extend the time of payment of, renew or alter, all or any part of the Senior
Obligations, any security therefor, or any liability incurred directly or
indirectly in respect thereof, and the
7
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provisions hereof shall apply to the Senior Obligations as so changed,
extended, renewed or altered;
(e) sell, exchange, release, surrender, realize upon or otherwise
deal with in any manner and in any order the Real Properties or any part
thereof;
(f) exercise or refrain from exercising or release any rights
and/or remedies against the Borrower or others (including, without
limitation, any guarantor of all or a portion of the Senior Obligations) or
otherwise act or refrain from acting; and/or
(g) settle or compromise the Senior Obligations or any part thereof
or any security therefor, or any liability incurred directly or indirectly in
respect thereof or hereof.
6. Transfer. McDonald's may, from time to time, without notice to
Subordinated Creditor, assign or transfer any or all of the Senior
Obligations or any interest therein or any security therefor.
Notwithstanding any such assignment or transfer or any subsequent assignment
or transfer thereof, the holders of the Senior Obligations and the holders of
any interest therein shall be entitled to the benefits of this Agreement to
the same extent as if such holders were McDonald's specifically named in this
Agreement.
7. Other Liens. Nothing in this Agreement shall prohibit, prevent or
otherwise impede the Subordinated Creditor from exercising any rights, remedy
or power which it may have against the Borrower and/or its subsidiaries with
respect to any collateral other than the Real Properties, which secures the
Subordinated Indenture Indebtedness, provided, however, that the Subordinated
Creditor shall not take any action which could impair the lien of the Senior
Mortgages or the ability of McDonald's to foreclose or otherwise enforce its
security interests or liens thereunder.
8. Termination. This Agreement shall in all respects be a continuing
agreement and shall remain in full force and effect until (a) the complete
payment in full of all of the Senior Obligations, and (b) the execution by
McDonald's of releases of all of the Senior Mortgages and the recording of
such releases in the appropriate real property records.
9. Miscellaneous.
(a) No Waiver. No delay on the part of McDonald's in the exercise
of any right or remedy shall operate as a waiver thereof, and no single or
partial exercise by McDonald's of any right or remedy shall preclude any
other or further exercise thereof or the exercise of any other right or
remedy, nor shall any modification, waiver or discharge of any of the
provisions of this Agreement be binding upon McDonald's except as expressly
set forth in a writing duly signed and delivered by McDonald's.
(b) Obligations Absolute. The obligations of the Subordinated
Creditor herein shall be absolute and unconditional, and the subordination of
the lien of the Subordinated Mortgages herein contained shall be effective
with respect to the Senior
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Obligations, notwithstanding any right or power of the Borrower or anyone
else to assert any claim or defense as to the invalidity or unenforceability
of any such obligation and/or any lien securing the same, in whole or in
part, or any determination of such invalidity or unenforceability and no such
event shall affect or impair the agreements and obligations of the
Subordinated Creditor hereunder. In the event that any of the Senior
Obligations and/or any lien securing the same is determined to be invalid or
unenforceable, in whole or in part, the Subordinated Creditor agrees that, as
between McDonald's and the Subordinated Creditor, the Senior Obligations and
such lien shall be deemed valid and enforceable, and the obligations of the
Subordinated Creditor hereunder with respect thereto shall not be affected by
any such determination but shall continue in full force and effect.
(c) Sole Discretion. It is understood and agreed that in the event
of any dissolution, winding up, liquidation, readjustment, reorganization or
other similar proceedings relating to the Borrower or to its property,
McDonald's may use its sole discretion with respect to the enforcement of the
Senior Mortgages, or in otherwise exercising or refraining from exercising
any rights or in taking or refraining from taking any action which it may be
entitled to take or assert hereunder; and that McDonald's shall not be under
any liability for doing or refraining from doing anything relative thereto in
the exercise of its own reasonable judgment or which it may deem necessary or
desirable.
(d) Waiver of Notice and Diligence. The Subordinated Creditor
hereby waives: (i) notice of acceptance by McDonald's of this Agreement; (ii)
notice of the existence or creation or nonpayment of all or any of the Senior
Obligations; and (iii) all diligence in collection or protection of or
realization upon the Senior Obligations or any security therefor.
(e) Reinstatement. If, as a result of, or arising from, any
bankruptcy, insolvency or similar proceeding, claim is ever made upon
McDonald's or any participant in the Senior Obligations for repayment or
recovery of any amount or amounts received by it in payment or on account of
the Senior Obligations from the proceeds of the sale, refinancing or other
disposition of all or a portion of the Real Properties and McDonald's or such
participant repays the Borrower or its legal representative or a trustee in
bankruptcy, all or part of such amount by reason of (i) any judgment, decree
or order of any court or administrative body having jurisdiction or (ii) any
settlement or compromise of any such claim effected by McDonald's or such
participant with any such claimant (including the Borrower or any guarantor),
then in such event the Subordinated Creditor agrees that it shall be and
remain obligated hereunder with respect to the amount so repaid or recovered
to the same extent as if such amount had never originally been received by
McDonald's or such participant and to the extent the Subordinated Creditor
has received payments or distributions in respect of the Subordinated
Indenture Indebtedness from the proceeds of the sale, refinancing or other
disposition of the Real Properties.
10. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors
and assigns.
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11. Notices. Any notices or other communications required or permitted
hereunder shall be in writing, and shall be sufficiently given if made by
hand delivery, by telecopier or registered or certified mail, postage
prepaid, return receipt requested, to the addresses listed in the first
paragraph of this Agreement. Each party may designate additional or
different addresses for notices to such party. Any notice or communication
to either party hereto shall be deemed to have been given or made as of the
date so delivered if personally delivered; when receipt is acknowledged
electronically (with copy by U.S. mail), if faxed (the fax number for the
Subordinated Creditor is (617) 664-5371; the fax number for McDonald's is
(630) 623-3000; and five (5) calendar days after mailing if sent by
registered or certified mail, postage prepaid (except that a notice of change
of address shall not be deemed to have been given until actually received by
the addressee).
12. Representations by the Subordinated Creditor. The Subordinated
Creditor has the power, authority and legal right pursuant to the
Subordinated Creditor Indenture to execute, deliver and perform this
Agreement. The Subordinated Creditor has been duly authorized pursuant to
the Subordinated Creditor Indenture to enter into this Subordination
Agreement on behalf of the Holders (as defined in the Subordinated Creditor
Indenture) and this Subordination Agreement constitutes the valid and binding
obligations of the Subordinated Creditor on behalf of such Holders
enforceable against the Subordinated Creditor on behalf of such Holders in
accordance with its terms.
13. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York including both matters of
internal law and conflicts of law, except that matters as to the priority of
liens on the Real Properties and remedies and procedural matters relating
thereto shall be governed by the laws of the State in which the Real
Properties is located.
14. Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by
signing any such counterpart.
15. Singular and Plural. Words used in this Agreement in the
singular, where the context so permits, shall be deemed to include the plural
and vice versa. The definitions of words in the singular in this Agreement
shall apply to such words when used in the plural where the context so
permits and vice versa.
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IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto as of the date first above written.
STATE STREET BANK AND TRUST COMPANY, solely in its
capacity as trustee and collateral agent under and
pursuant to the Subordinated Creditor Indenture
By: /s/ Mary Lee Storrs
---------------------------------------------
Name: Mary Lee Storrs
Title: Vice President
MCDONALD'S CORPORATION
By: /s/ Gloria Santona
--------------------------------------------
Name: Gloria Santona
Title: Vice President, Deputy General Counsel
and Secretary
DISCOVERY ZONE, INC.
By: /s/ Robert Rooney
--------------------------------------------
Name: Robert Rooney
Title: Supervisor
<PAGE>
STATE OF MASSACHUSETTS)
COUNTY OF SUFFOLK)
This instrument was acknowledged before me on July 31, 1997, by
Mary Lee Storrs of STATE STREET BANK AND TRUST COMPANY, a Massachusetts
trust company, on behalf of said trust company.
/s/ Agnes G. Dillon
------------------------------------------
Notary Public, State of Massachusetts
Agnes G. Dillon
My Commission Expires 5/15/03
<PAGE>
STATE OF ILLINOIS )
COUNTY OF DUPAGE )
This instrument was acknowledged before me on July 31st, 1997, by
Gloria Santona of McDONALD'S CORPORATION, a Delaware corporation, on
behalf of said corporation.
[Notarial Seal] /s/ Gordana Vujanovich
-----------------------------------
Notary Public, State of Illinois
<PAGE>
STATE OF NEW YORK )
COUNTY OF WESTCHESTER)
This instrument was acknowledged before me on July 28, 1997, by
Robert Rooney, Sr. VP, of DISCOVERY ZONE, INC., a Delaware corporation, on
behalf of said corporation.
/s/ Mark D. Woodward
-----------------------------------
Notary Public, State of New York
MARK D. WOODWARD
Notary Public State of New York
No. 4997848
Qualified in New York County
Commission Expires June 15, 1998
[SEAL]
<PAGE>
EXHIBIT A
DESCRIPTIONS OF SENIOR MORTGAGES
The following is a list of the amended and restated first priority
mortgages, deeds of trust and/or deeds to secure debt entered executed by
Borrower, on behalf of McDonald's, pursuant to the terms and conditions of
the McDonald's Documentation:
1. Amended and Restated Deed To Secure Debt and Security Agreement, made as
of July 29, 1997, by Borrower to McDonald's, relating to mortgaged
property located in Kennesaw, in the County of Cobb, in the State of
Georgia.
2. Amended and Restated Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to Chicago Title Insurance Company, a Missouri Corporation, as
trustee, for the benefit of McDonald's, relating to trust property
located in Vancouver, in the County of Clark, in the State of Washington.
3. Amended and Restated Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to Kenneth W. Pearson, as trustee, to and for the benefit of
McDonald's, relating to trust property located in Leon Valley, in the
County of Bexar, in the State of Texas.
4. Amended and Restated Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to Kenneth W. Pearson, as trustee, for the benefit of
McDonald's, relating to trust property located in Arlington, in the
County of Tarrant, in the State of Texas.
5. Amended and Restated Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to Kenneth W. Pearson, as trustee, for the benefit of
McDonald's, relating to trust property located in San Antonio, in the
County of Bexar, in the State of Texas.
6. Amended and Restated Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to The Public Trustee of the County of Douglas, Colorado, as
trustee, to and for the benefit of McDonald's, relating to trust
property located in Littleton, in the County of Douglas, in the State of
Colorado.
<PAGE>
7. Amended and Restated Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to The Public Trustee of the County of Arapahoe, Colorado, as
trustee, to and for the benefit of McDonald's, relating to trust
property located in Aurora, in the County of Arapahoe, in the State of
Colorado.
8. Amended and Restated Mortgage, Assignment of Leases and Rents, Security
Agreement and Fixture Filing, made as of July 29, 1997, by Borrower to
McDonald's, relating to mortgaged property located in Schaumburg, in the
County of Cook, in the State of Illinois.
9. Amended and Restated Mortgage, made as of July 29, 1997, by Borrower to
McDonald's, relating to mortgaged property located in Sterling Heights,
in the County of Macomb, in the State of Michigan.
10. Open-End Mortgage, Assignment of Leases and Rents, Security Agreement
and Fixture Filing (Amended and Restated), made as of July 29, 1997, by
Borrower to McDonald's, relating to mortgaged property located in Forest
Park, in the County of Hamilton, in the State of Ohio.
11. Open-End Mortgage, Assignment of Leases and Rents, Security Agreement
and Fixture Filing (Amended and Restated), made as of July 29, 1997, by
Borrower to McDonald's, relating to mortgaged property located in
Columbus, in the County of Franklin, in the State of Ohio.
12. Amended and Restated Open-End Mortgage, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to McDonald's, relating to mortgaged property located in
Philadelphia, in the County of Philadelphia, in the State of
Pennsylvania.
13. Amended and Restated Mortgage, Assignment of Leases and Rents, Security
Agreement and Fixture Filing, made as of July 29, 1997, by Borrower to
McDonald's, relating to mortgaged property located in Blaine, in the
County of Anoka, in the State of Minnesota.
14. Amended and Restated Mortgage, Assignment of Leases and Rents, Security
Agreement and Fixture Filing, made as of July 29, 1997, by Borrower to
McDonald's, relating to mortgaged property located in Washington
Township, in the County of Marion, in the State of Indiana.
<PAGE>
EXHIBIT A-1
RECORDING INFORMATION FOR SENIOR MORTGAGE IN FAVOR OF MCDONALD'S
County Book Volume
------ ---- ------
Senior Mortgage (Leon Valley) Bear 7178 0612
<PAGE>
Leon Valley
Bexar County, Texas
EXHIBIT B
LOT 9
BLOCK 6,
COUNTY BLOCK 4429,
BANDERA EXCHANGE,
UNIT 16,
AN ADDITION TO THE CITY OF LEON VALLEY, BEXAR COUNTY, TEXAS
ACCORDING TO THE MAP OR PLAT THEREOF, RECORDED IN VOLUME 9528, PAGE
8, DEED AND PLAT RECORDS OF BEXAR COUNTY, TEXAS.
<PAGE>
EXHIBIT C
DESCRIPTIONS OF SUBORDINATED MORTGAGES
The following is a list of the subordinated mortgages, deeds of trust
and/or deeds to secure debt entered executed by Borrower, on behalf of the
Subordinated Creditor, pursuant to the terms and conditions of the McDonald's
Documentation:
1. Deed To Secure Debt and Security Agreement, made as of July 29, 1997, by
Borrower to Subordinated Creditor, relating to mortgaged property
located in Kennesaw, in the County of Cobb, in the State of Georgia.
2. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Chicago Title
Insurance Company, a Missouri corporation, as trustee, for the benefit
of Subordinated Creditor, relating to trust property located in
Vancouver, in the County of Clark, in the State of Washington.
3. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Kenneth W.
Pearson, as trustee, to and for the benefit of Subordinated Creditor,
relating to trust property located in Leon Valley, in the County of
Bexar, in the State of Texas.
4. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Kenneth W.
Pearson, as trustee, for the benefit of Subordinated Creditor, relating
to trust property located in Arlington, in the County of Tarrant, in the
State of Texas.
5. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Kenneth W.
Pearson, as trustee, for the benefit of Subordinated Creditor, relating
to trust property located in San Antonio, in the County of Bexar, in the
State of Texas.
6. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to The Public
Trustee of the County of Douglas, Colorado, as trustee, to and for the
benefit of Subordinated Creditor, relating to trust property located in
Littleton, in the County of Douglas, in the State of Colorado.
7. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to The Public
Trustee of the County of Arapahoe, Colorado, as trustee, to and for the
benefit of Subordinated Creditor, relating to trust property located in
Aurora, in the County of Arapahoe, in the State of Colorado.
<PAGE>
8. Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture
Filing, made as of July 29, 1997, by Borrower to Subordinated Creditor,
relating to mortgaged property located in Schaumburg, in the County of
Cook, in the State of Illinois.
9. Mortgage, made as of July 29, 1997, by Borrower to Subordinated
Creditor, relating to mortgaged property located in Sterling Heights, in
the County of Macomb, in the State of Michigan.
10. Open-End Mortgage, Assignment of Leases and Rents, Security Agreement
and Fixture Filing, made as of July 29, 1997, by Borrower to
Subordinated Creditor, relating to mortgaged property located in Forest
Park, in the County of Hamilton, in the State of Ohio.
11. Open-End Mortgage, Assignment of Leases and Rents, Security Agreement
and Fixture Filing, made as of July 29, 1997, by Borrower to
Subordinated Creditor, relating to mortgaged property located in
Columbus, in the County of Franklin, in the State of Ohio.
12. Open-End Mortgage, Assignment of Leases and Rents, Security Agreement
and Fixture Filing, made as of July 29, 1997, by Borrower to
Subordinated Creditor, relating to mortgaged property located in
Philadelphia, in the County of Philadelphia, in the State of
Pennsylvania.
13. Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture
Filing, made as of July 29, 1997, by Borrower to Subordinated Creditor,
relating to mortgaged property located in Blaine, in the County of
Anoka, in the State of Minnesota.
14. Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture
Filing, made as of July 29, 1997, by Borrower to Subordinated Creditor,
relating to mortgaged property located in Washington Township, in the
County of Marion, in the State of Indiana.
<PAGE>
EXHIBIT C-1
RECORDING INFORMATION FOR SUBORDINATED MORTGAGE IN FAVOR OF STATE STREET BANK
AND TRUST COMPANY (SOLELY IN ITS CAPACITY AS TRUSTEE AND COLLATERAL AGENT
UNDER AND PURSUANT TO THE SUBORDINATED CREDITOR INDENTURE)
County Book Volume
------ ---- ------
Subordinated Mortgage (Leon Valley) Bear 7128 0662
<PAGE>
Exhibit 4.54
DOCUMENT PREPARED BY AND
AFTER RECORDING RETURN TO:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attention: Jonathan A. Reiss, Esq.
SUBORDINATION AGREEMENT
Grantor (Subordinator): STATE STREET BANK AND TRUST COMPANY, a
Massachusetts trust company
Grantee (Lender): McDONALD'S CORPORATION, a Delaware corporation
Legal Description: [Lot 1, as described in and delineated on Short Plat
recorded in Book 2 at Page 865 of Short Plats and as
recorded under Auditor's File No. 9404150033, being a
portion of Lot 2 of Short Plat at Page 535, records of
Clark County being a parcel of property in the
Northeast quarter of Section 17, Township 2 North,
Range 2 East of the Willamette Meridian, Clark County,
Washington. Additional Legal(s) on Exhibit A.
Assessor's Tax Parcel
ID Number: 160080-005
Dated as of July 29, 1997
[VANCOUVER, WASHINGTON PROPERTY]
<PAGE>
SUBORDINATION AGREEMENT
AGREEMENT made as of the 29th day of July, 1997, by and among
STATE STREET BANK AND TRUST COMPANY, solely in its capacity as trustee and
collateral agent under and pursuant to the Subordinated Creditor Indenture
(as hereinafter defined) with an address at Two International Place, Boston,
Massachusetts 02110, Attention: Corporate Trust Department, Mary Lee Storrs,
Vice President (the "Subordinated Creditor"), MCDONALD'S CORPORATION, a
Delaware corporation, with an address at McDonald's Plaza, Oak Brook,
Illinois 60523, Attention: General Counsel ("McDonald's") and DISCOVERY ZONE,
INC., a Delaware corporation, successor by merger to Leaps & Bounds, Inc.,
having its principal place of business at One Corporate Center, 110 East
Broward Boulevard, Fort Lauderdale, Florida 33301("Borrower").
W I T N E S S E T H:
RECITALS
A. WHEREAS, Borrower is the successor in interest to Discovery
Zone, Inc., a Delaware corporation and debtor and debtor in possession ("Old
DZI"), and Old DZI's affiliated debtors and debtors in possession including
Leaps & Bounds, Inc. (the "Debtors"), all in the chapter 11 proceedings
captioned In re Discovery Zone, Inc., et al., Case No. 96-411 (HSB) (Jointly
Administered), before the United States Bankruptcy Court for the District of
Delaware (the "Bankruptcy Court"); and
B. WHEREAS, pursuant to an Agreement and Plan of Merger, dated as
of August 30, 1994 (the "Merger Agreement"), by and among Old DZI, and two of
the Debtors, Discovery Zone International, Inc. and Leaps & Bounds, Inc. on
the one hand, and McDonald's on the other hand, and related documentation,
McDonald's was or is the sublessor to Leaps & Bounds, Inc. of certain
properties, and Old DZI agreed to defend, indemnify and hold McDonald's and
its affiliates harmless in respect of all expenses, losses, costs,
deficiencies, liabilities and damages (including related and reasonable
counsel fees and expenses, and compensatory and demonstrable consequential
damages) incurred or suffered by McDonald's as a direct result of, inter
alia, any breach that results in any payment by McDonald's in connection with
any guarantee by McDonald's relating to such properties (the "Agreement to
Indemnify"); and
C. WHEREAS, On November 18, 1996, the Bankruptcy Court entered
the Stipulation and Order Between Debtors and McDonald's Corporation
Providing for the Resolution, Settlement and Compromise of Disputes and for
Rent Deferrals and Allowance of Certain Claims (the "Stipulation and Order"),
pursuant to which, inter alia, the Debtors assumed certain subleases relating
to properties subleased by McDonald's to the Debtors pursuant to 11 U.S.C.
Section 365 as to which the Agreement to Indemnify remains in full force and
2
<PAGE>
effect, the Bankruptcy Court approved the allowance of certain claims of
McDonald's, including those claims based on the Agreement to Indemnify, and
the Bankruptcy Court approved the validity, perfection, priority and
enforceability of certain claims and liens of McDonald's against the Debtors,
including, without limitation, the validity, perfection, priority and
enforceability of the Senior Mortgages (as defined below) and the Stipulation
and Order was not appealed or otherwise challenged and remains in full force
and effect; and
D. WHEREAS, pursuant to the plan of reorganization for Old DZI
and its affiliated debtors confirmed by the Bankruptcy Court by order entered
July 18, 1997 (the "Plan"), and as required by the terms of the Stipulation
and Order, Borrower, as the reorganized successor of the Debtors, is
obligated to issue to McDonald's Secured Rent Deferral Notes in the aggregate
original principal amount of $266,466.24, which amount is subject to increase
each month in accordance with the terms thereof (the "Senior Secured Rent
Deferral Notes," and individually a "Senior Secured Rent Deferral Note") and
Secured Rejection Note in the aggregate original principal amount of
$4,416,237.90 (the "Senior Secured Rejection Note"); and
E. WHEREAS pursuant to the terms and conditions of the
Stipulation and Order, the Plan, the Agreement to Indemnify, the Senior
Secured Rejection Note and the Senior Secured Rent Deferral Notes and any
related documentation (the "McDonald's Documentation"), the repayment and
performance of the obligations of Borrower to McDonald's under the McDonald's
Documentation (including any contingent obligations under the Agreement to
Indemnify, the Stipulation and Order, including Section 7 thereof, or
otherwise) (the "Senior Obligations") is secured by certain amended and
restated first priority mortgages, deeds of trust and/or deeds to secure debt
described on Exhibit A attached hereto and made a part hereof (collectively,
including all modifications, extensions and additions thereto, the "Senior
Mortgages," and individually, a "Senior Mortgage"), including the Senior
Mortgage identified by the recording information set forth in Exhibit A-1,
reaffirming and creating, to the extent necessary, valid and perfected first
priority liens on the real properties described on Exhibit B attached hereto
and made a part hereof, and other collateral described in the Senior
Mortgages (collectively, the "Real Properties," and individually, a "Real
Property"); and
F. WHEREAS, Borrower and the Subordinated Creditor entered into
an Indenture, dated July 22, 1997 (the "Subordinated Creditor Indenture") and
certain other documents and instruments related thereto, pursuant to which
and upon the terms and conditions therein indebtedness and other obligations
were incurred by the Borrower (the "Subordinated Indenture Indebtedness"),
the repayment and performance of which are secured by, among other things,
certain subordinated mortgages, deeds of trust and/or deeds to secure debt
described on Exhibit C hereto and made a part hereof (collectively, including
all modifications, extensions and additions thereto, the "Subordinated
Mortgages," and individually, a "Subordinated Mortgage"), including the
Subordinated Mortgage identified by
3
<PAGE>
the recording information set forth in Exhibit C-1, creating valid and
perfected liens on the Real Properties subordinate to the Senior Mortgages;
and
G. WHEREAS, pursuant to the Senior Mortgages, the Borrower cannot
grant a subordinated lien on any of the Real Properties without the express
approval of McDonald's and the Subordinated Indenture Indebtedness will not
be able to be issued without the agreement of McDonald's to permit the
issuance of the Subordinated Mortgages; and
H. WHEREAS, McDonald's approval of the Borrower's granting of the
Subordinated Mortgages is conditioned on the entry into this Subordination
Agreement by the Subordinated Creditor, which hereby warrants and represents
that it has full power and authority under the Subordinated Creditor Indenture
to enter into this Subordination Agreement on behalf of all holders of any
securities or obligations whatsoever issued pursuant to the Subordinated
Creditor Indenture; and
I. WHEREAS, the Subordinated Creditor and McDonald's each desire
to enter into this Subordination Agreement to confirm the subordination of
the liens of the Subordinated Mortgages to the liens of the Senior Mortgages
in accordance with the terms of this Agreement;
NOW THEREFORE, IN CONSIDERATION OF THE MUTUAL BENEFITS accruing to
the parties hereto, and other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Consent. Pursuant and subject to the other terms of this
Agreement, McDonald's consents to the Subordinate Mortgages. This consent
shall not be deemed to (i) be a consent to any future encumbrances, (ii) be a
waiver of the limitation on future encumbrances contained in the Senior
Mortgages, (iii) be a consent to or waiver of any other term or condition of
the Senior Mortgages or (iv) prejudice any right or rights which McDonald's
may now or in the future have under or in connection with the Senior
Mortgages.
2. Priority of McDonald's.
(a) Subordination. The Subordinated Creditor hereby agrees
for itself and its successors and assigns that, except as otherwise expressly
provided herein, the terms, provisions and liens of the Subordinated
Mortgages, and any of the Subordinated Creditor's liens or security interests
in the Real Properties (but only to the extent of McDonald's interest in such
Real Properties), are hereby intentionally and unconditionally subordinated
to, and at all times shall be junior, subject and subordinate to the terms,
provisions and liens of the Senior Mortgages (including, without limitation,
the liens securing future optional and/or obligatory increases in the amount
of the Senior Obligations or advances by McDonald's to or for the benefit of
the Borrower, regardless of the use to which such advances are put), as well
4
<PAGE>
as to any and all increases therein and all extensions, consolidations,
modifications, renewals, refinancings and supplements thereto. The
Subordinated Creditor hereby waives any right it may have to require that
McDonald's marshal any assets of the Borrower in favor of the Subordinated
Creditor and the Subordinated Creditor agrees that it shall not acquire, by
subrogation or otherwise, any lien, estate, right or other interest in the
Real Properties which is or may be prior or superior in right to the Senior
Mortgages, including but not limited to advances for real estate taxes and
assessments. The rights and priorities set forth in this Paragraph 2(a) shall
be effective notwithstanding the order of creation, attachment, vesting or
perfection of the rights of McDonald's under the Senior Mortgages, or of the
Subordinated Creditor under the Subordinated Mortgages or the Subordinated
Creditor Indenture or any other documents executed in connection therewith
(including, without limitation, any UCC-1 financing statements or fixture
filings). The Subordinated Creditor shall be deemed to have consented (i) to
any action by Borrower to which McDonald's consents pursuant to the Senior
Mortgages and (ii) to each act of, or failure to act by, the Borrower that is
not prohibited by the Senior Mortgages, provided that, both with respect to
(i) and (ii), such deemed consent is applicable only to acts or failures to
act in connection with the sale, construction, restoration, insurance,
condemnation or alterations of, to or on, or with respect to the Real
Properties and any other matters relating to the Real Properties.
(b) Insurance; Condemnation Awards. The Subordinated Creditor
hereby assigns and releases unto McDonald's, until payment in full of the
Senior Obligations:
(i) all of its right, title, interest or claim, if any,
in and to the proceeds of all policies of insurance
covering the Real Properties, for application in
accordance with the provisions of the Senior
Mortgages or as the Borrower and McDonald's may
otherwise agree; and
(ii) all of its right, title and interest or claim, if any,
in and to all awards or other compensation made for
any taking of any part of the Real Properties for
application in accordance with the provisions of the
Senior Mortgages or as the Borrower and McDonald's may
otherwise agree.
All such insurance proceeds or awards which may become due and
payable to the Subordinated Creditor shall be payable directly to McDonald's,
and the Subordinated Creditor directs any insurance company or governmental
authority to make payment thereof directly to McDonald's for application in
accordance with the Senior Mortgages. In the event that any such insurance
proceeds or awards are made payable to the Subordinated Creditor despite such
direction, the Subordinated Creditor shall promptly transfer the same, or
promptly cause the same to be transferred, to McDonald's.
5
<PAGE>
(c) Assignment of Leases and Rents. Any assignment in favor of
the Subordinated Creditor of any Leases or Rents (as such terms are defined
in the Senior Mortgages) contained in the Subordinated Mortgages or the
Subordinated Creditor Indenture, or in any other document or instrument
related thereto or delivered in connection therewith, and all rights of the
Subordinated Creditor thereunder, are hereby intentionally and
unconditionally subordinated to, and shall be in all respects junior, subject
and subordinate to any assignment of rents, leases or other agreements
relating to the Real Properties contained in (i) the Senior Mortgages, and
(ii) any other document now in existence or hereafter made by the Borrower to
secure the Senior Obligations, and to all rights of McDonald's thereunder.
Without limiting the foregoing provisions of this Paragraph 2(c), from and
after the execution and delivery of the Subordinated Mortgages to the
Subordinated Creditor, the Subordinated Creditor shall not be entitled to
receive or retain any Rents or other amounts assigned to the Subordinated
Creditor under any such document or instrument until such time as the Senior
Obligations shall have been completely paid in full.
(d) Non-Disturbance Agreements. The Subordinated Creditor shall
be required to give a non-disturbance agreement to any lessee or tenant of
the Real Properties with respect to whose lease McDonald's, as holder of the
Senior Mortgages, shall have executed a non-disturbance agreement, and, if
the Subordinated Creditor fails to give any such non-disturbance agreement,
the Subordinated Creditor nevertheless agrees not to disturb the possession,
occupancy or rights of any such lessee or tenant without the prior written
consent of McDonald's in each instance.
(e) Further Assurances. To further evidence the subordination
hereinabove provided for, the Subordinated Creditor agrees that, within 30
days after request by McDonald's, it will, at the Subordinated Creditor's
sole cost and expense, do, execute, acknowledge and deliver all and every
such further acts, deeds, conveyances and instruments as McDonald's may
reasonably request for the better assuring and evidencing of this
subordination (including, without limitation, further affirmation of the
application of this Agreement to future optional and/or obligatory increases
in the amount of the Senior Obligations or advances, regardless of the use to
which such increases or advances are put).
(f) Release or Subordination of Lien. If McDonald's shall at
any time release its lien on the Real Properties (or any part thereof) in
connection with a sale or refinancing of the Real Properties or any part
thereof, the Subordinated Creditor shall, without any payment to it, be
deemed to have consented to such sale or refinancing and shall release the
lien of the Subordinated Mortgages thereon at the same time that McDonald's
releases the lien of the Senior Mortgages thereon, and, in the event that the
Subordinated Creditor has not executed a release within seven (7) business
days of being requested to do so by Borrower of McDonald's in connection with
such sale or refinancing, the Subordinated Creditor hereby irrevocably
appoints McDonald's as its attorney in fact (coupled with an interest) to
execute in the name of the Subordinated Creditor or without the signature of
the Subordinated Creditor to the extent McDonald's may lawfully do so, one or
more releases or reconveyances of
6
<PAGE>
mortgages/deeds of trust or other documents to evidence such release of the
lien of the Subordinated Mortgages. Until the Senior Obligations have been
completely paid in full (including, without limitation, any obligations which
may arise under the Agreement to Indemnify), all proceeds from or with
respect to the sale, refinancing or other disposition of the Real Properties
or any part thereof shall be paid to McDonald's (or placed into escrow for
the benefit of McDonald's pursuant to the terms of the Senior Mortgages) in
satisfaction of the Senior Obligations pursuant to the terms of the Senior
Mortgages and the McDonald's Documentation, and the Subordinated Creditor
shall have no right, claim or interest in or to any such proceeds.
(g) Enforcement. The Subordinated Creditor agrees that no
remedies provided for under the Subordinated Mortgages or other documents (to
the extent relating to the Real Properties in which McDonald's has an
interest) executed in connection with the Subordinated Creditor Indenture
shall be exercised with respect to the Real Properties, including, without
limitation, the commencement or prosecution of foreclosure proceedings, the
exercise of any power of sale, or the appointment of a receiver (or the
Subordinated Creditor as mortgagee in possession), without obtaining the
prior written consent of McDonald's. The Subordinated Creditor hereby
consents and agrees that any lawful action taken by or on behalf of
McDonald's in the exercise of McDonald's rights and/or remedies under the
Senior Mortgages (including, without limitation, any foreclosure or
acquisition of title to a Real Property by deed in lieu of foreclosure or
otherwise) are hereby deemed to be consented to by the Subordinated Creditor
in all respects.
(h) No Third-Party Beneficiaries. The provisions of clauses
(a)-(g) of this Paragraph 2 are solely for the benefit of the holder of the
Senior Mortgages and shall not create any rights in the Borrower or any other
person.
3. Bankruptcy. The provisions of this Agreement shall continue
in full force and effect notwithstanding the occurrence of any proceeding
under Title 11 of the United States Code (11 U.S.C. Sec. 101 et seq.) or any
other bankruptcy, insolvency, liquidation, reorganization, dissolution,
winding up, liquidation, readjustment or other similar proceeding relating to
the Borrower or to its property (whether voluntary or involuntary, partial or
complete, and whether in bankruptcy, insolvency or receivership, or upon a
general assignment for the benefit of creditors, or any other marshaling of
the assets and liabilities of the Borrower, or any sale of all or
substantially all of the assets of the Borrower, or otherwise) (each, an
"Insolvency Proceeding"). Without limiting the generality of the foregoing,
in the event of an Insolvency Proceeding, (i) the Senior Obligations
(including post-petition interest on the Senior Obligations, whether or not
such interest is allowable under Section 502 or 506 of the United States
Bankruptcy Code) shall first be completely paid in full before the
Subordinated Creditor shall be entitled to receive or retain any proceeds
from or relating to the sale, refinancing or other disposition of the Real
Properties or any portion thereof in respect of the Subordinated Indenture
Indebtedness; and (ii) the Subordinated Creditor shall not object to
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<PAGE>
or oppose any efforts by McDonald's to obtain relief from the automatic stay
with respect to the Real Properties under Section 362 of the United States
Bankruptcy Code.
4. Payments Received by the Subordinated Creditor. In the event
that the Subordinated Creditor receives any payment or other distribution of
any kind or character from the Borrower or from any other source whatsoever
in respect of any of the Subordinated Indenture Indebtedness, or receives any
security therefor, whether by way of agreement or compromise or otherwise,
which it is not entitled to retain pursuant to the terms of this Agreement,
the Subordinated Creditor shall immediately deliver the same to McDonald's,
in the form received, together with any necessary endorsements, in each case
for application on account of the Senior Obligations, but until so received
by McDonald's, the same shall be held in trust by the Subordinated Creditor
as the property of McDonald's.
5. No Consent Required. The Subordinated Creditor hereby agrees
that McDonald's may, from time to time, at its sole discretion and without
notice to or consent of or from the Subordinated Creditor, and without
affecting the obligations of the Subordinated Creditor herein or the
subordination provided for hereunder, take any or all of the following
actions:
(a) retain or obtain a lien or security interest in any
property to secure all or any part of the Senior Obligations;
(b) retain, obtain or permit the release of the primary or
secondary obligations of any other obligor or obligors with respect to all or
any part of the Senior Obligations;
(c) fail to perfect, or release McDonald's lien or security
interest in, or surrender, release or permit any substitution or exchange
for, all or any part of any property (including, without limitation, the Real
Properties) securing all or any part of the Senior Obligations;
(d) change the manner, place or terms of payments, and/or
change or extend the time of payment of, renew or alter, all or any part of
the Senior Obligations, any security therefor, or any liability incurred
directly or indirectly in respect thereof, and the provisions hereof shall
apply to the Senior Obligations as so changed, extended, renewed or altered;
(e) sell, exchange, release, surrender, realize upon or
otherwise deal with in any manner and in any order the Real Properties or any
part thereof;
(f) exercise or refrain from exercising or release any
rights and/or remedies against the Borrower or others (including, without
limitation, any guarantor of all or a portion of the Senior Obligations) or
otherwise act or refrain from acting; and/or
8
<PAGE>
(g) settle or compromise the Senior Obligations or any part
thereof or any security therefor, or any liability incurred directly or
indirectly in respect thereof or hereof.
6. Transfer. McDonald's may, from time to
time, without notice to Subordinated Creditor, assign or transfer any or all
of the Senior Obligations or any interest therein or any security therefor.
Notwithstanding any such assignment or transfer or any subsequent assignment
or transfer thereof, the holders of the Senior Obligations and the holders of
any interest therein shall be entitled to the benefits of this Agreement to
the same extent as if such holders were McDonald's specifically named in this
Agreement.
7. Other Liens. Nothing in this Agreement shall prohibit,
prevent or otherwise impede the Subordinated Creditor from exercising any
rights, remedy or power which it may have against the Borrower and/or its
subsidiaries with respect to any collateral other than the Real Properties,
which secures the Subordinated Indenture Indebtedness, provided, however,
that the Subordinated Creditor shall not take any action which could impair
the lien of the Senior Mortgages or the ability of McDonald's to foreclose or
otherwise enforce its security interests or liens thereunder.
8. Termination. This Agreement shall in all respects be a
continuing agreement and shall remain in full force and effect until (a) the
complete payment in full of all of the Senior Obligations, and (b) the
execution by McDonald's of releases of all of the Senior Mortgages and the
recording of such releases in the appropriate real property records.
9. Miscellaneous.
(a) No Waiver. No delay on the part of McDonald's in
the exercise of any right or remedy shall operate as a waiver thereof, and no
single or partial exercise by McDonald's of any right or remedy shall
preclude any other or further exercise thereof or the exercise of any other
right or remedy, nor shall any modification, waiver or discharge of any of
the provisions of this Agreement be binding upon McDonald's except as
expressly set forth in a writing duly signed and delivered by McDonald's.
(b) Obligations Absolute. The obligations of the
Subordinated Creditor herein shall be absolute and unconditional, and the
subordination of the lien of the Subordinated Mortgages herein contained
shall be effective with respect to the Senior Obligations, notwithstanding
any right or power of the Borrower or anyone else to assert any claim or
defense as to the invalidity or unenforceability of any such obligation
and/or any lien securing the same, in whole or in part, or any determination
of such invalidity or unenforceability and no such event shall affect or
impair the agreements and obligations of the Subordinated Creditor hereunder.
In the event that any of the Senior Obligations and/or any lien securing the
same is determined to be invalid or unenforceable, in whole or in part, the
Subordinated Creditor agrees that, as between McDonald's and the Subordinated
Creditor, the
9
<PAGE>
Senior Obligations and such lien shall be deemed valid and enforceable, and
the obligations of the Subordinated Creditor hereunder with respect thereto
shall not be affected by any such determination but shall continue in full
force and effect.
(c) Sole Discretion. It is understood and agreed that in the
event of any dissolution, winding up, liquidation, readjustment,
reorganization or other similar proceedings relating to the Borrower or to
its property, McDonald's may use its sole discretion with respect to the
enforcement of the Senior Mortgages, or in otherwise exercising or refraining
from exercising any rights or in taking or refraining from taking any action
which it may be entitled to take or assert hereunder; and that McDonald's
shall not be under any liability for doing or refraining from doing anything
relative thereto in the exercise of its own reasonable judgment or which it
may deem necessary or desirable.
(d) Waiver of Notice and Diligence. The Subordinated Creditor
hereby waives: (i) notice of acceptance by McDonald's of this Agreement; (ii)
notice of the existence or creation or nonpayment of all or any of the Senior
Obligations; and (iii) all diligence in collection or protection of or
realization upon the Senior Obligations or any security therefor.
(e) Reinstatement. If, as a result of, or arising from, any
bankruptcy, insolvency or similar proceeding, claim is ever made upon
McDonald's or any participant in the Senior Obligations for repayment or
recovery of any amount or amounts received by it in payment or on account of
the Senior Obligations from the proceeds of the sale, refinancing or other
disposition of all or a portion of the Real Properties and McDonald's or such
participant repays the Borrower or its legal representative or a trustee in
bankruptcy, all or part of such amount by reason of (i) any judgment, decree
or order of any court or administrative body having jurisdiction or (ii) any
settlement or compromise of any such claim effected by McDonald's or such
participant with any such claimant (including the Borrower or any guarantor),
then in such event the Subordinated Creditor agrees that it shall be and
remain obligated hereunder with respect to the amount so repaid or recovered
to the same extent as if such amount had never originally been received by
McDonald's or such participant and to the extent the Subordinated Creditor
has received payments or distributions in respect of the Subordinated
Indenture Indebtedness from the proceeds of the sale, refinancing or other
disposition of the Real Properties.
10. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective
successors and assigns.
11. Notices. Any notices or other communications required or
permitted hereunder shall be in writing, and shall be sufficiently given if
made by hand delivery, by telecopier or registered or certified mail, postage
prepaid, return receipt requested, to the addresses listed in the first
paragraph of this Agreement. Each party may designate additional or
different addresses for notices to such party. Any notice or communication
to either party
10
<PAGE>
hereto shall be deemed to have been given or made as of the date so delivered
if personally delivered; when receipt is acknowledged electronically (with
copy by U.S. mail), if faxed (the fax number for the Subordinated Creditor is
(617) 664-5371; the fax number for McDonald's is (630) 623-3000; and five (5)
calendar days after mailing if sent by registered or certified mail, postage
prepaid (except that a notice of change of address shall not be deemed to
have been given until actually received by the addressee).
12. Representations by the Subordinated Creditor. The
Subordinated Creditor has the power, authority and legal right pursuant to
the Subordinated Creditor Indenture to execute, deliver and perform this
Agreement. The Subordinated Creditor has been duly authorized pursuant to
the Subordinated Creditor Indenture to enter into this Subordination
Agreement on behalf of the Holders (as defined in the Subordinated Creditor
Indenture) and this Subordination Agreement constitutes the valid and binding
obligations of the Subordinated Creditor on behalf of such Holders
enforceable against the Subordinated Creditor on behalf of such Holders in
accordance with its terms.
13. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York including both
matters of internal law and conflicts of law, except that matters as to the
priority of liens on the Real Properties and remedies and procedural matters
relating thereto shall be governed by the laws of the State in which the Real
Properties is located.
14. Counterparts. This Agreement may be executed in any number
of counterparts, all of which taken together shall constitute one and the
same instrument and any of the parties hereto may execute this Agreement by
signing any such counterpart.
15. Singular and Plural. Words used in this Agreement in the
singular, where the context so permits, shall be deemed to include the plural
and vice versa. The definitions of words in the singular in this Agreement
shall apply to such words when used in the plural where the context so
permits and vice versa.
11
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto as of the date first above written.
STATE STREET BANK AND TRUST COMPANY, solely in its
capacity as trustee and collateral agent under and
pursuant to the Subordinated Creditor Indenture
By: /s/ Mary Lee Storrs
________________________________________
Name: Mary Lee Storrs
Title: Vice President
MCDONALD'S CORPORATION
By: /s/ Gloria Santona
________________________________________
[SEAL] Name: Gloria Santona
Title: Vice President, Deputy General Counsel
and Secretary
DISCOVERY ZONE, INC.
By: /s/ Scott Bernstein
________________________________________
Name: Scott Bernstein
Title: President
<PAGE>
STATE OF MASSACHUSETTS)
) ss.
COUNTY OF SUFFOLK )
I certify that I know or have satisfactory evidence that
Mary Lee Storrs is the person who appeared before me, and said person
acknowledged that said person signed this instrument, on oath stated that said
person was authorized to execute the instrument and acknowledged it as
Vice President of STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust
company, to be the free and voluntary act of such trust company for the uses and
purposes mentioned in the instrument.
Dated this 31 day of July, 1997.
Dated: July [], 1997
/s/ Agnes G. Dillon
---------------------------------
[Notarial Seal] (Signature)
AGNES G. DILLON
---------------------------------
(Legibly Print or Stamp Name
of Notary)
Notary Public in and for the State of
Massachusetts, residing at (home address):
54 Avalon Rd.
Milton MA 02186
My appointment expires 5/15/2003
<PAGE>
STATE OF ILLINOIS )
) ss.
COUNTY OF DuPage )
I certify that I know or have satisfactory evidence that Gloria
Santona is the person who appeared before me, and said person acknowledged
that said person signed this instrument, on oath stated that said person was
authorized to execute the instrument and acknowledged it as Vice President,
Deputy General Counsel & Secretary of McDONALD'S CORPORATION, a Delaware
corporation, to be the free and voluntary act of such corporation for the
uses and purposes mentioned in the instrument.
Dated this 31st day of July, 1997.
Dated: July 31, 1997
/s/ Gordana Vujanovich
-----------------------------
[Notarial Seal] (Signature)
GORDANA VUJANOVICH
-----------------------------
(Legibly Print or Stamp Name
of Notary)
"OFFICIAL SEAL"
Gordana Vujanovich Notary Public in and for the State of
Notary Public, State of Illinois Illinois,
My Commission Expires 02/15/99 McDonald's Corporation
McDonald's Plaza
Oak Brook, IL 60523
My appointment expires 2/15/99
<PAGE>
STATE OF NEW YORK )
) ss.
COUNTY OF WESTCHESTER )
I certify that I know or have satisfactory evidence that
Scott Bernstein is the person who appeared before me, and said person
acknowledged that said person signed this instrument, on oath stated that said
person was authorized to execute the instrument and acknowledged it as
President of DISCOVERY ZONE, INC., a Delaware corporation, to be the free
and voluntary act of such corporation for the uses and purposes mentioned in the
instrument.
Dated this 28th day of July, 1997.
Dated: July 28, 1997
/s/ Mark D. Woodward
------------------------------
[Notarial Seal] (Signature)
MARK D. WOODWARD
NOTARY PUBLIC, STATE OF NEW YORK
No. 4997846
Qualified in New York County
Commission Expires June 15, 1998
------------------------------
(Legibly Print or Stamp Name
of Notary)
Notary Public in and for the State of New
York, residing at (home address):
----------------------------------
New York, New York
My appointment expires 6/15/97
<PAGE>
EXHIBIT A
DESCRIPTIONS OF SENIOR MORTGAGES
The following is a list of the amended and restated
first priority mortgages, deeds of trust and/or deeds to secure debt entered
executed by Borrower, on behalf of McDonald's, pursuant to the terms and
conditions of the McDonald's Documentation:
1. Amended and Restated Deed To Secure Debt and Security Agreement, made as
of July 29, 1997, by Borrower to McDonald's, relating to mortgaged
property located in Kennesaw, in the County of Cobb, in the State of
Georgia.
2. Amended and Restated Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997,
by Borrower to Chicago Title Insurance Company, a Missouri Corporation,
as trustee, for the benefit of McDonald's, relating to trust property
located in Vancouver, in the County of Clark, in the State of Washington.
3. Amended and Restated Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997,
by Borrower to Kenneth W. Pearson, as trustee, to and for the benefit
of McDonald's, relating to trust property located in Leon Valley, in
the County of Bexar, in the State of Texas.
4. Amended and Restated Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997,
by Borrower to Kenneth W. Pearson, as trustee, for the benefit of
McDonald's, relating to trust property located in Arlington, in
the County of Tarrant, in the State of Texas.
5. Amended and Restated Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997,
by Borrower to Kenneth W. Pearson, as trustee, for the benefit of
McDonald's, relating to trust property located in San Antonio, in
the County of Bexar, in the State of Texas.
6. Amended and Restated Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997,
by Borrower to The Public Trustee of the County of Douglas, Colorado,
as trustee, to and for the benefit of McDonald's, relating to trust
property located in Littleton, in the County of Douglas, in the State
of Colorado.
<PAGE>
7. Amended and Restated Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to The Public Trustee of the County of Arapahoe, Colorado, as
trustee, to and for the benefit of McDonald's, relating to trust property
located in Aurora, in the County of Arapahoe, in the State of Colorado.
8. Amended and Restated Mortgage, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997,
by Borrower to McDonald's, relating to mortgaged property located in
Schaumberg, in the County of Cook, in the State of Illinois.
9. Amended and Restated Mortgage, made as of July 29, 1997, by Borrower to
McDonald's, relating to mortgaged property located in Sterling Heights,
in the County of Macomb, in the State of Michigan.
10. Open-End Mortgage, Assignment of Leases and Rents, Security
Agreement and Fixture Filing (Amended and Restated), made as of
July 29, 1997, by Borrower to McDonald's, relating to mortgaged
property located in Forest Park, in the County of Hamilton, in the
State of Ohio.
11. Open-End Mortgage, Assignment of Leases and Rents, Security
Agreement and Fixture Filing (Amended and Restated), made as of
July 29, 1997, by Borrower to McDonald's, relating to mortgaged
property located in Columbus, in the County of Franklin, in the
State of Ohio.
12. Amended and Restated Open-End Mortgage, Assignment of Leases and
Rents, Security Agreement and Fixture Filing, made as of July 29,
1997, by Borrower to McDonald's, relating to mortgaged property
located in Philadelphia, in the County of Philadelphia, in the
State of Pennsylvania.
13. Amended and Restated Mortgage, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997,
by Borrower to McDonald's, relating to mortgaged property located in
Blaine, in the County of Anoka, in the State of Minnesota.
14. Amended and Restated Mortgage, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997,
by Borrower to McDonald's, relating to mortgaged property located in
Indianapolis, in the County of Marion, in the State of Indiana.
<PAGE>
EXHIBIT A-1
RECORDING INFORMATION FOR SENIOR MORTGAGE IN FAVOR OF MCDONALD'S
County Book Volume
Senior Mortgage (Vancouver)
<PAGE>
Vancouver
Clark County, Washington
EXHIBIT B
Lot 1, as described in and delineated on SHORT PLAT, recorded in Book 2 at
Page 865, of Short Plats and as recorded under Auditor's File No. 9404150033,
being a portion of Lot 2 of Short Plats at page 535, records of Clark County
being a parcel of property in the Northeast quarter of Section 17, Township 2
North, Range 2 East of the Willamette Meridian, Clark County, Washington.
TOGETHER WITH that certain road easement for the purpose of ingress, egress
and passage and utilities as set forth and defined by document recorded May
8, 1991, under Auditor's File No. 9105080180.
TOGETHER WITH a non-exclusive easement for ingress, egress, parking and
utilities as granted and described in document recorded under Auditor's File
No. G 705215 and as amended and restated by documents recorded under
Auditor's File Nos. 7806280148 and 8106250036.
TOGETHER WITH a non-exclusive easement for ingress and egress as delineated
and described in access easement recorded under Clark County Auditor's File
No. 9404150214.
<PAGE>
EXHIBIT C
DESCRIPTIONS OF SUBORDINATED MORTGAGES
The following is a list of the subordinated mortgages, deeds of
trust and/or deeds to secure debt entered executed by Borrower, on behalf of
the Subordinated Creditor, pursuant to the terms and conditions of the
McDonald's Documentation:
1. Deed To Secure Debt and Security Agreement, made as of July 29, 1997, by
Borrower to Subordinated Creditor, relating to mortgaged property located
in Kennesaw, in the County of Cobb, in the State of Georgia.
2. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Chicago Title
Insurance Company, a Missouri corporation, as trustee, for the benefit of
Subordinated Creditor, relating to trust property located in Vancouver, in
the County of Clark, in the State of Washington.
3. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Kenneth W.
Pearson, as trustee, to and for the benefit of Subordinated Creditor,
relating to trust property located in Leon Valley, in the County of Bexar,
in the State of Texas.
4. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Kenneth W.
Pearson, as trustee, for the benefit of Subordinated Creditor, relating to
trust property located in Arlington, in the County of Tarrant, in the State
of Texas.
5. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Kenneth W.
Pearson, as trustee, for the benefit of Subordinated Creditor, relating to
trust property located in San Antonio, in the County of Bexar, in the State
of Texas.
6. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to The Public Trustee
of the County of Douglas, Colorado, as trustee, to and for the benefit of
Subordinated Creditor, relating to trust property located in Littleton, in
the County of Douglas, in the State of Colorado.
7. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to The Public Trustee
of the County of Arapahoe, Colorado, as trustee, to and for the benefit of
Subordinated Creditor, relating to trust property located in Aurora, in the
County of Arapahoe, in the State of Colorado.
<PAGE>
8. Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture
Filing, made as of July 29, 1997, by Borrower to Subordinated Creditor,
relating to mortgaged property located in Schaumberg, in the County of
Cook, in the State of Illinois.
9. Mortgage, made as of July 29, 1997, by Borrower to Subordinated Creditor,
relating to mortgaged property located in Sterling Heights, in the County
of Macomb, in the State of Michigan.
10. Open-End Mortgage, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Subordinated
Creditor, relating to mortgaged property located in Forest Park, in the
County of Hamilton, in the State of Ohio.
11. Open-End Mortgage, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Subordinated
Creditor, relating to mortgaged property located in Columbus, in the County
of Franklin, in the State of Ohio.
12. Open-End Mortgage, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Subordinated
Creditor, relating to mortgaged property located in Philadelphia, in the
County of Philadelphia, in the State of Pennsylvania.
13. Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture
Filing, made as of July 29, 1997, by Borrower to Subordinated Creditor,
relating to mortgaged property located in Blaine, in the County of Anoka,
in the State of Minnesota.
14. Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture
Filing, made as of July 29, 1997, by Borrower to Subordinated Creditor,
relating to mortgaged property located in Washington Township, in the
County of Marion, in the State of Indiana.
<PAGE>
EXHIBIT C-1
RECORDING INFORMATION FOR SUBORDINATED MORTGAGE IN FAVOR OF
STATE STREET BANK AND TRUST COMPANY (SOLELY IN ITS
CAPACITY AS TRUSTEE AND COLLATERAL AGENT UNDER AND PURSUANT
TO THE SUBORDINATED CREDITOR INDENTURE)
County Book Volume
Subordinated Mortgage
(Vancouver)
<PAGE>
Exhibit 4.55
_______________________________________________________________________________
Space above this line for recorder's use
DOCUMENT PREPARED BY AND
AFTER RECORDING RETURN TO:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attention: Jonathan A. Reiss, Esq.
SUBORDINATION AGREEMENT
AGREEMENT made as of the 29th day of July, 1997, by and among State
Street Bank and Trust Company, solely in its capacity as trustee and
collateral agent under and pursuant to the Subordinated Creditor Indenture
(as hereinafter defined) with an address at Two International Place, Boston,
Massachusetts 02110, Attention: Corporate Trust Department, Mary Lee Storrs,
Vice President (the "Subordinated Creditor"), McDonald's Corporation, a
Delaware corporation, with an address at McDonald's Plaza, Oak Brook,
Illinois 60523, Attention: General Counsel ("McDonald's") and Discovery Zone,
Inc., a Delaware corporation, successor by merger to Leaps & Bounds, Inc.,
having its principal place of business at One Corporate Center, 110 East
Broward Boulevard, Fort Lauderdale, Florida 33301 ("Borrower").
W I T N E S S E T H:
RECITALS
A. WHEREAS, Borrower is the successor in interest to Discovery Zone,
Inc., a Delaware corporation and debtor and debtor in possession ("Old DZI"),
and Old DZI's affiliated debtors and debtors in possession including Leaps &
Bounds, Inc. (the "Debtors"),
[AURORA, COLORADO PROPERTY]
<PAGE>
all in the chapter 11 proceedings captioned In re Discovery Zone, Inc., et
al., Case No. 96-411 (HSB) (Jointly Administered), before the United States
Bankruptcy Court for the District of Delaware (the "Bankruptcy Court"); and
B. WHEREAS, pursuant to an Agreement and Plan of Merger, dated as of
August 30, 1994 (the "Merger Agreement"), by and among Old DZI, and two of
the Debtors, Discovery Zone International, Inc. and Leaps & Bounds, Inc. on
the one hand, and McDonald's on the other hand, and related documentation,
McDonald's was or is the sublessor to Leaps & Bounds, Inc. of certain
properties, and Old DZI agreed to defend, indemnify and hold McDonald's and
its affiliates harmless in respect of all expenses, losses, costs,
deficiencies, liabilities and damages (including related and reasonable
counsel fees and expenses, and compensatory and demonstrable consequential
damages) incurred or suffered by McDonald's as a direct result of, inter
alia, any breach that results in any payment by McDonald's in connection with
any guarantee by McDonald's relating to such properties (the "Agreement to
Indemnify"); and
C. WHEREAS, On November 18, 1996, the Bankruptcy Court entered the
Stipulation and Order Between Debtors and McDonald's Corporation Providing
for the Resolution, Settlement and Compromise of Disputes and for Rent
Deferrals and Allowance of Certain Claims (the "Stipulation and Order"),
pursuant to which, inter alia, the Debtors assumed certain subleases relating
to properties subleased by McDonald's to the Debtors pursuant to 11 U.S.C.
Section 365 as to which the Agreement to Indemnify remains in full force and
effect, the Bankruptcy Court approved the allowance of certain claims of
McDonald's, including those claims based on the Agreement to Indemnify, and
the Bankruptcy Court approved the validity, perfection, priority and
enforceability of certain claims and liens of McDonald's against the Debtors,
including, without limitation, the validity, perfection, priority and
enforceability of the Senior Mortgages (as defined below) and the Stipulation
and Order was not appealed or otherwise challenged and remains in full force
and effect; and
D. WHEREAS, pursuant to the plan of reorganization for Old DZI and its
affiliated debtors confirmed by the Bankruptcy Court by order entered July
18, 1997 (the "Plan"), and as required by the terms of the Stipulation and
Order, Borrower, as the reorganized successor of the Debtors, is obligated to
issue to McDonald's Secured Rent Deferral Notes in the aggregate original
principal amount of $266,466.24, which amount is subject to increase each
month in accordance with the terms thereof (the "Senior Secured Rent Deferral
Notes," and individually a "Senior Secured Rent Deferral Note") and Secured
Rejection Note in the aggregate original principal amount of $4,416,237.90
(the "Senior Secured Rejection Note"); and
E. WHEREAS pursuant to the terms and conditions of the Stipulation and
Order, the Plan, the Agreement to Indemnify, the Senior Secured Rejection
Note and the Senior Secured Rent Deferral Notes and any related documentation
(the "McDonald's Documentation"), the repayment and performance of the
obligations of Borrower to McDonald's under the McDonald's Documentation
(including any contingent obligations under
2
<PAGE>
the Agreement to Indemnify, the Stipulation and Order, including Section 7
thereof, or otherwise) (the "Senior Obligations") is secured by certain
amended and restated first priority mortgages, deeds of trust and/or deeds to
secure debt described on Exhibit A attached hereto and made a part hereof
(collectively, including all modifications, extensions and additions thereto,
the "Senior Mortgages," and individually, a "Senior Mortgage"), including the
Senior Mortgage identified by the recording information set forth in Exhibit
A-1, reaffirming and creating, to the extent necessary, valid and perfected
first priority liens on the real properties described on Exhibit B attached
hereto and made a part hereof, and other collateral described in the Senior
Mortgages (collectively, the "Real Properties," and individually, a "Real
Property"); and
F. WHEREAS, Borrower and the Subordinated Creditor entered into an
Indenture, dated July 22, 1997 (the "Subordinated Creditor Indenture") and
certain other documents and instruments related thereto, pursuant to which
and upon the terms and conditions therein indebtedness and other obligations
were incurred by the Borrower (the "Subordinated Indenture Indebtedness"),
the repayment and performance of which are secured by, among other things,
certain subordinated mortgages, deeds of trust and/or deeds to secure debt
described on Exhibit C hereto and made a part hereof (collectively, including
all modifications, extensions and additions thereto, the "Subordinated
Mortgages," and individually, a "Subordinated Mortgage"), including the
Subordinated Mortgage identified by the recording information set forth in
Exhibit C-1, creating valid and perfected liens on the Real Properties
subordinate to the Senior Mortgages; and
G. WHEREAS, pursuant to the Senior Mortgages, the Borrower cannot grant
a subordinated lien on any of the Real Properties without the express
approval of McDonald's and the Subordinated Indenture Indebtedness will not
be able to be issued without the agreement of McDonald's to permit the
issuance of the Subordinated Mortgages; and
H. WHEREAS, McDonald's approval of the Borrower's granting of the
Subordinated Mortgages is conditioned on the entry into this Subordination
Agreement by the Subordinated Creditor, which hereby warrants and represents
that it has full power and authority under the Subordinated Creditor
Indenture to enter into this Subordination Agreement on behalf of all holders
of any securities or obligations whatsoever issued pursuant to the
Subordinated Creditor Indenture; and
I. WHEREAS, the Subordinated Creditor and McDonald's each desire to
enter into this Subordination Agreement to confirm the subordination of the
liens of the Subordinated Mortgages to the liens of the Senior Mortgages in
accordance with the terms of this Agreement;
NOW THEREFORE, IN CONSIDERATION OF THE MUTUAL BENEFITS accruing to the
parties hereto, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
3
<PAGE>
1. Consent. Pursuant and subject to the other terms of this
Agreement, McDonald's consents to the Subordinate Mortgages. This consent
shall not be deemed to (i) be a consent to any future encumbrances, (ii) be a
waiver of the limitation on future encumbrances contained in the Senior
Mortgages, (iii) be a consent to or waiver of any other term or condition of
the Senior Mortgages or (iv) prejudice any right or rights which McDonald's
may now or in the future have under or in connection with the Senior
Mortgages.
2. Priority of McDonald's.
(a) Subordination. The Subordinated Creditor hereby agrees for
itself and its successors and assigns that, except as otherwise expressly
provided herein, the terms, provisions and liens of the Subordinated
Mortgages, and any of the Subordinated Creditor's liens or security interests
in the Real Properties (but only to the extent of McDonald's interest in such
Real Properties), are hereby intentionally and unconditionally subordinated
to, and at all times shall be junior, subject and subordinate to the terms,
provisions and liens of the Senior Mortgages (including, without limitation,
the liens securing future optional and/or obligatory increases in the amount
of the Senior Obligations or advances by McDonald's to or for the benefit of
the Borrower, regardless of the use to which such advances are put), as well
as to any and all increases therein and all extensions, consolidations,
modifications, renewals, refinancings and supplements thereto. The
Subordinated Creditor hereby waives any right it may have to require that
McDonald's marshal any assets of the Borrower in favor of the Subordinated
Creditor and the Subordinated Creditor agrees that it shall not acquire, by
subrogation or otherwise, any lien, estate, right or other interest in the
Real Properties which is or may be prior or superior in right to the Senior
Mortgages, including but not limited to advances for real estate taxes and
assessments. The rights and priorities set forth in this Paragraph 2(a) shall
be effective notwithstanding the order of creation, attachment, vesting or
perfection of the rights of McDonald's under the Senior Mortgages, or of the
Subordinated Creditor under the Subordinated Mortgages, the Subordinated
Creditor Indenture or any other documents executed in connection therewith
(including, without limitation, any UCC-1 financing statements or fixture
filings). The Subordinated Creditor shall be deemed to have consented (i) to
any action by Borrower to which McDonald's consents pursuant to the Senior
Mortgages and (ii) to each act of, or failure to act by, the Borrower that is
not prohibited by the Senior Mortgages, provided that, both with respect to
(i) and (ii), such deemed consent is applicable only to acts or failures to
act in connection with the sale, construction, restoration, insurance,
condemnation or alterations of, to or on, or with respect to the Real
Properties and any other matters relating to the Real Properties.
(b) Insurance; Condemnation Awards. The Subordinated Creditor
hereby assigns and releases unto McDonald's, until payment in full of the
Senior Obligations:
(i) all of its right, title, interest or claim, if any, in
and to the proceeds of all policies of insurance covering
the Real Properties, for application in accordance with
the provisions of the Senior Mortgages or as the Borrower
and McDonald's may otherwise agree; and
4
<PAGE>
(ii) all of its right, title and interest or claim, if any,
in and to all awards or other compensation made for any
taking of any part of the Real Properties for application
in accordance with the provisions of the Senior Mortgages
or as the Borrower and McDonald's may otherwise agree.
All such insurance proceeds or awards which may become due and payable to
the Subordinated Creditor shall be payable directly to McDonald's, and the
Subordinated Creditor directs any insurance company or governmental authority
to make payment thereof directly to McDonald's for application in accordance
with the Senior Mortgages. In the event that any such insurance proceeds or
awards are made payable to the Subordinated Creditor despite such direction,
the Subordinated Creditor shall promptly transfer the same, or promptly cause
the same to be transferred, to McDonald's.
(c) Assignment of Leases and Rents. Any assignment in favor of
the Subordinated Creditor of any Leases or Rents (as such terms are defined
in the Senior Mortgages) contained in the Subordinated Mortgages or the
Subordinated Creditor Indenture, or in any other document or instrument
related thereto or delivered in connection therewith, and all rights of the
Subordinated Creditor thereunder, are hereby intentionally and
unconditionally subordinated to, and shall be in all respects junior, subject
and subordinate to any assignment of rents, leases or other agreements
relating to the Real Properties contained in (i) the Senior Mortgages, and
(ii) any other document now in existence or hereafter made by the Borrower to
secure the Senior Obligations, and to all rights of McDonald's thereunder.
Without limiting the foregoing provisions of this Paragraph 2(c), from and
after the execution and delivery of the Subordinated Mortgages to the
Subordinated Creditor, the Subordinated Creditor shall not be entitled to
receive or retain any Rents or other amounts assigned to the Subordinated
Creditor under any such document or instrument until such time as the Senior
Obligations shall have been completely paid in full.
(d) Non-Disturbance Agreements. The Subordinated Creditor
shall be required to give a non-disturbance agreement to any lessee or tenant
of the Real Properties with respect to whose lease McDonald's, as holder of
the Senior Mortgages, shall have executed a non-disturbance agreement, and,
if the Subordinated Creditor fails to give any such non-disturbance
agreement, the Subordinated Creditor nevertheless agrees not to disturb the
possession, occupancy or rights of any such lessee or tenant without the
prior written consent of McDonald's in each instance.
(e) Further Assurances. To further evidence the subordination
hereinabove provided for, the Subordinated Creditor agrees that, within 30
days after request by McDonald's, it will, at the Subordinated Creditor's
sole cost and expense, do, execute, acknowledge and deliver all and every
such further acts, deeds, conveyances and instruments as McDonald's may
reasonably request for the better assuring and evidencing of this
subordination (including, without limitation, further affirmation of the
application of this
5
<PAGE>
Agreement to future optional and/or obligatory increases in the amount of the
Senior Obligations or advances, regardless of the use to which such increases
or advances are put).
(f) Release or Subordination of Lien. If McDonald's shall at
any time release its lien on the Real Properties (or any part thereof) in
connection with a sale or refinancing of the Real Properties or any part
thereof, the Subordinated Creditor shall, without any payment to it, be
deemed to have consented to such sale or refinancing and shall release the
lien of the Subordinated Mortgages thereon at the same time that McDonald's
releases the lien of the Senior Mortgages thereon, and, in the event that the
Subordinated Creditor has not executed a release within seven (7) business
days of being requested to do so by Borrower of McDonald's in connection with
such sale or refinancing, the Subordinated Creditor hereby irrevocably
appoints McDonald's as its attorney in fact (coupled with an interest) to
execute in the name of the Subordinated Creditor or without the signature of
the Subordinated Creditor to the extent McDonald's may lawfully do so, one or
more releases or reconveyances of mortgages/deeds of trust or other documents
to evidence such release of the lien of the Subordinated Mortgages. Until
the Senior Obligations have been completely paid in full (including, without
limitation, any obligations which may arise under the Agreement to
Indemnify), all proceeds from or with respect to the sale, refinancing or
other disposition of the Real Properties or any part thereof shall be paid to
McDonald's (or placed into escrow for the benefit of McDonald's pursuant to
the terms of the Senior Mortgages) in satisfaction of the Senior Obligations
pursuant to the terms of the Senior Mortgages and the McDonald's
Documentation, and the Subordinated Creditor shall have no right, claim or
interest in or to any such proceeds.
(g) Enforcement. The Subordinated Creditor agrees that no
remedies provided for under the Subordinated Mortgages or other documents (to
the extent relating to the Real Properties in which McDonald's has an
interest) executed in connection with the Subordinated Creditor Indenture
shall be exercised with respect to the Real Properties, including, without
limitation, the commencement or prosecution of foreclosure proceedings, the
exercise of any power of sale, or the appointment of a receiver (or the
Subordinated Creditor as mortgagee in possession), without obtaining the
prior written consent of McDonald's. The Subordinated Creditor hereby
consents and agrees that any lawful action taken by or on behalf of
McDonald's in the exercise of McDonald's rights and/or remedies under the
Senior Mortgages (including, without limitation, any foreclosure or
acquisition of title to a Real Property by deed in lieu of foreclosure or
otherwise) are hereby deemed to be consented to by the Subordinated Creditor
in all respects.
(h) No Third-Party Beneficiaries. The provisions of clauses
(a)-(g) of this Paragraph 2 are solely for the benefit of the holder of the
Senior Mortgages and shall not create any rights in the Borrower or any other
person.
3. Bankruptcy. The provisions of this Agreement shall continue in
full force and effect notwithstanding the occurrence of any proceeding under
Title 11 of the United States Code (11 U.S.C. Sec. 101 et seq.) or any other
bankruptcy, insolvency, liquidation, reorganization, dissolution, winding up,
liquidation, readjustment or other similar proceeding
6
<PAGE>
relating to the Borrower or to its property (whether voluntary or
involuntary, partial or complete, and whether in bankruptcy, insolvency or
receivership, or upon a general assignment for the benefit of creditors, or
any other marshaling of the assets and liabilities of the Borrower, or any
sale of all or substantially all of the assets of the Borrower, or otherwise)
(each, an "Insolvency Proceeding"). Without limiting the generality of the
foregoing, in the event of an Insolvency Proceeding, (i) the Senior
Obligations (including post-petition interest on the Senior Obligations,
whether or not such interest is allowable under Section 502 or 506 of the
United States Bankruptcy Code) shall first be completely paid in full before
the Subordinated Creditor shall be entitled to receive or retain any proceeds
from or relating to the sale, refinancing or other disposition of the Real
Properties or any portion thereof in respect of the Subordinated Indenture
Indebtedness; and (ii) the Subordinated Creditor shall not object to or
oppose any efforts by McDonald's to obtain relief from the automatic stay
with respect to the Real Properties under Section 362 of the United States
Bankruptcy Code.
4. Payments Received by the Subordinated Creditor. In the event
that the Subordinated Creditor receives any payment or other distribution of
any kind or character from the Borrower or from any other source whatsoever
in respect of any of the Subordinated Indenture Indebtedness, or receives any
security therefor, whether by way of agreement or compromise or otherwise,
which it is not entitled to retain pursuant to the terms of this Agreement,
the Subordinated Creditor shall immediately deliver the same to McDonald's,
in the form received, together with any necessary endorsements, in each case
for application on account of the Senior Obligations, but until so received
by McDonald's, the same shall be held in trust by the Subordinated Creditor
as the property of McDonald's.
5. No Consent Required. The Subordinated Creditor hereby agrees
that McDonald's may, from time to time, at its sole discretion and without
notice to or consent of or from the Subordinated Creditor, and without
affecting the obligations of the Subordinated Creditor herein or the
subordination provided for hereunder, take any or all of the following
actions:
(a) retain or obtain a lien or security interest in any
property to secure all or any part of the Senior Obligations;
(b) retain, obtain or permit the release of the primary or
secondary obligations of any other obligor or obligors with respect to all or
any part of the Senior Obligations;
(c) fail to perfect, or release McDonald's lien or security
interest in, or surrender, release or permit any substitution or exchange
for, all or any part of any property (including, without limitation, the Real
Properties) securing all or any part of the Senior Obligations;
(d) change the manner, place or terms of payments, and/or
change or extend the time of payment of, renew or alter, all or any part of
the Senior Obligations, any security therefor, or any liability incurred
directly or indirectly in respect thereof, and the
7
<PAGE>
provisions hereof shall apply to the Senior Obligations as so changed,
extended, renewed or altered;
(e) sell, exchange, release, surrender, realize upon or
otherwise deal with in any manner and in any order the Real Properties or any
part thereof;
(f) exercise or refrain from exercising or release any rights
and/or remedies against the Borrower or others (including, without
limitation, any guarantor of all or a portion of the Senior Obligations) or
otherwise act or refrain from acting; and/or
(g) settle or compromise the Senior Obligations or any part
thereof or any security therefor, or any liability incurred directly or
indirectly in respect thereof or hereof.
6. Transfer. McDonald's may, from time to time, without notice to
Subordinated Creditor, assign or transfer any or all of the Senior
Obligations or any interest therein or any security therefor.
Notwithstanding any such assignment or transfer or any subsequent assignment
or transfer thereof, the holders of the Senior Obligations and the holders of
any interest therein shall be entitled to the benefits of this Agreement to
the same extent as if such holders were McDonald's specifically named in this
Agreement.
7. Other Liens. Nothing in this Agreement shall prohibit, prevent
or otherwise impede the Subordinated Creditor from exercising any rights,
remedy or power which it may have against the Borrower and/or its
subsidiaries with respect to any collateral other than the Real Properties,
which secures the Subordinated Indenture Indebtedness, provided, however,
that the Subordinated Creditor shall not take any action which could impair
the lien of the Senior Mortgages or the ability of McDonald's to foreclose or
otherwise enforce its security interests or liens thereunder.
8. Termination. This Agreement shall in all respects be a
continuing agreement and shall remain in full force and effect until (a) the
complete payment in full of all of the Senior Obligations, and (b) the
execution by McDonald's of releases of all of the Senior Mortgages and the
recording of such releases in the appropriate real property records.
9. Miscellaneous.
(a) No Waiver. No delay on the part of McDonald's in the
exercise of any right or remedy shall operate as a waiver thereof, and no
single or partial exercise by McDonald's of any right or remedy shall
preclude any other or further exercise thereof or the exercise of any other
right or remedy, nor shall any modification, waiver or discharge of any of
the provisions of this Agreement be binding upon McDonald's except as
expressly set forth in a writing duly signed and delivered by McDonald's.
(b) Obligations Absolute. The obligations of the Subordinated
Creditor herein shall be absolute and unconditional, and the subordination of
the lien of the Subordinated Mortgages herein contained shall be effective
with respect to the Senior
8
<PAGE>
Obligations, notwithstanding any right or power of the Borrower or anyone
else to assert any claim or defense as to the invalidity or unenforceability
of any such obligation and/or any lien securing the same, in whole or in
part, or any determination of such invalidity or unenforceability and no such
event shall affect or impair the agreements and obligations of the
Subordinated Creditor hereunder. In the event that any of the Senior
Obligations and/or any lien securing the same is determined to be invalid or
unenforceable, in whole or in part, the Subordinated Creditor agrees that, as
between McDonald's and the Subordinated Creditor, the Senior Obligations and
such lien shall be deemed valid and enforceable, and the obligations of the
Subordinated Creditor hereunder with respect thereto shall not be affected by
any such determination but shall continue in full force and effect.
(c) Sole Discretion. It is understood and agreed that in the
event of any dissolution, winding up, liquidation, readjustment,
reorganization or other similar proceedings relating to the Borrower or to
its property, McDonald's may use its sole discretion with respect to the
enforcement of the Senior Mortgages, or in otherwise exercising or refraining
from exercising any rights or in taking or refraining from taking any action
which it may be entitled to take or assert hereunder; and that McDonald's
shall not be under any liability for doing or refraining from doing anything
relative thereto in the exercise of its own reasonable judgment or which it
may deem necessary or desirable.
(d) Waiver of Notice and Diligence. The Subordinated Creditor
hereby waives: (i) notice of acceptance by McDonald's of this Agreement; (ii)
notice of the existence or creation or nonpayment of all or any of the Senior
Obligations; and (iii) all diligence in collection or protection of or
realization upon the Senior Obligations or any security therefor.
(e) Reinstatement. If, as a result of, or arising from, any
bankruptcy, insolvency or similar proceeding, claim is ever made upon
McDonald's or any participant in the Senior Obligations for repayment or
recovery of any amount or amounts received by it in payment or on account of
the Senior Obligations from the proceeds of the sale, refinancing or other
disposition of all or a portion of the Real Properties and McDonald's or such
participant repays the Borrower or its legal representative or a trustee in
bankruptcy, all or part of such amount by reason of (i) any judgment, decree
or order of any court or administrative body having jurisdiction or (ii) any
settlement or compromise of any such claim effected by McDonald's or such
participant with any such claimant (including the Borrower or any guarantor),
then in such event the Subordinated Creditor agrees that it shall be and
remain obligated hereunder with respect to the amount so repaid or recovered
to the same extent as if such amount had never originally been received by
McDonald's or such participant and to the extent the Subordinated Creditor
has received payments or distributions in respect of the Subordinated
Indenture Indebtedness from the proceeds of the sale, refinancing or other
disposition of the Real Properties.
10. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective
successors and assigns.
9
<PAGE>
11. Notices. Any notices or other communications required or
permitted hereunder shall be in writing, and shall be sufficiently given if
made by hand delivery, by telecopier or registered or certified mail, postage
prepaid, return receipt requested, to the addresses listed in the first
paragraph of this Agreement. Each party may designate additional or
different addresses for notices to such party. Any notice or communication
to either party hereto shall be deemed to have been given or made as of the
date so delivered if personally delivered; when receipt is acknowledged
electronically (with copy by U.S. mail), if faxed (the fax number for the
Subordinated Creditor is (617) 664-5371; the fax number for McDonald's is
(630) 623-3000; and five (5) calendar days after mailing if sent by
registered or certified mail, postage prepaid (except that a notice of change
of address shall not be deemed to have been given until actually received by
the addressee).
12. Representations by the Subordinated Creditor. The Subordinated
Creditor has the power, authority and legal right pursuant to the
Subordinated Creditor Indenture to execute, deliver and perform this
Agreement. The Subordinated Creditor has been duly authorized pursuant to
the Subordinated Creditor Indenture to enter into this Subordination
Agreement on behalf of the Holders (as defined in the Subordinated Creditor
Indenture) and this Subordination Agreement constitutes the valid and binding
obligations of the Subordinated Creditor on behalf of such Holders
enforceable against the Subordinated Creditor on behalf of such Holders in
accordance with its terms.
13. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York including both
matters of internal law and conflicts of law, except that matters as to the
priority of liens on the Real Properties and remedies and procedural matters
relating thereto shall be governed by the laws of the State in which the Real
Properties is located.
14. Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by
signing any such counterpart.
15. Singular and Plural. Words used in this Agreement in the
singular, where the context so permits, shall be deemed to include the plural
and vice versa. The definitions of words in the singular in this Agreement
shall apply to such words when used in the plural where the context so
permits and vice versa.
10
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
hereto as of the date first above written.
STATE STREET BANK AND TRUST COMPANY,
solely in its capacity as trustee and
collateral agent under and pursuant to
the Subordinated Creditor Indenture
By: /s/ Mary Lee Storrs
____________________________________
Name: Mary Lee Storrs
Title: Vice President
MCDONALD'S CORPORATION
By: /s/ Gloria Santona
____________________________________
Name: Gloria Santona
Title: Vice President, Deputy General
Counsel and Secretary
DISCOVERY ZONE, INC.
By: /s/ Robert Rooney
____________________________________
Name: Robert Rooney
Title: Sr. VP
<PAGE>
STATE OF MASSACHUSETTS)
COUNTY OF Suffolk )
This instrument was acknowledged before me this 31st day of July, 1997,
by Mary Lee Storrs as Vice President of STATE STREET BANK AND TRUST COMPANY,
a Massachusetts trust company, on behalf of said corporation.
WITNESS my hand and official seal.
My Commission Expires:
5/15/2003 /s/ Agnes G. Dillon
_________ ___________________
Notary Public
Agnes G. Dillon
My commission expires 5/15/2003
<PAGE>
STATE OF ILLINOIS )
COUNTY OF DuPage )
This instrument was acknowledged before me this 31st day of July, 1997,
by Gloria Santona as VP, Deputy General Counsel & Secretary of McDONALD'S
CORPORATION, a Delaware corporation, on behalf of said corporation.
WITNESS my hand and official seal.
My Commission Expires: February 15, 1999
/s/ Gordana Vujanovich
______________ _________________________
Notary Public
--------------------------------
"OFFICIAL SEAL"
Gordana Vujanovich
Notary Public, State of Illinois
My Commission Expires 02/15/99
--------------------------------
<PAGE>
STATE OF NEW YORK )
COUNTY OF WESTCHESTER )
This instrument was acknowledged before me this 28th day of July, 1997,
by Robert Rooney as Sr. VP of DISCOVERY ZONE, INC., a Delaware corporation,
on behalf of said corporation.
WITNESS my hand and official seal.
My Commission Expires:
/s/ Mark D. Woodward
______________ _________________________
Notary Public
Mark D. Woodward
Notary Public, State of New York
No. 4997846
Qualified in New York County
Commission Expires June 15, 1998
<PAGE>
EXHIBIT A
DESCRIPTIONS OF SENIOR MORTGAGES
The following is a list of the amended and restated first priority
mortgages, deeds of trust and/or deeds to secure debt entered executed by
Borrower, on behalf of McDonald's, pursuant to the terms and conditions of
the McDonald's Documentation:
1. Amended and Restated Deed To Secure Debt and Security Agreement, made as of
July 29, 1997, by Borrower to McDonald's, relating to mortgaged property
located in Kennesaw, in the County of Cobb, in the State of Georgia.
2. Amended and Restated Deed of Trust, Assignment of Leases and Rents, Security
Agreement and Fixture Filing, made as of July 29, 1997, by Borrower to
Chicago Title Insurance Company, a Missouri Corporation, as trustee, for
the benefit of McDonald's, relating to trust property located in Vancouver,
in the County of Clark, in the State of Washington.
3. Amended and Restated Deed of Trust, Assignment of Leases and Rents, Security
Agreement and Fixture Filing, made as of July 29, 1997, by Borrower to
Kenneth W. Pearson, as trustee, to and for the benefit of McDonald's,
relating to trust property located in Leon Valley, in the County of Bexar,
in the State of Texas.
4. Amended and Restated Deed of Trust, Assignment of Leases and Rents, Security
Agreement and Fixture Filing, made as of July 29, 1997, by Borrower to
Kenneth W. Pearson, as trustee, for the benefit of McDonald's, relating to
trust property located in Arlington, in the County of Tarrant, in the State
of Texas.
5. Amended and Restated Deed of Trust, Assignment of Leases and Rents, Security
Agreement and Fixture Filing, made as of July 29, 1997, by Borrower to
Kenneth W. Pearson, as trustee, for the benefit of McDonald's, relating to
trust property located in San Antonio, in the County of Bexar, in the State
of Texas.
6. Amended and Restated Deed of Trust, Assignment of Leases and Rents, Security
Agreement and Fixture Filing, made as of July 29, 1997, by Borrower to The
Public Trustee of the County of Douglas, Colorado, as trustee, to and for
the benefit of McDonald's, relating to trust property located in Littleton,
in the County of Douglas, in the State of Colorado.
<PAGE>
7. Amended and Restated Deed of Trust, Assignment of Leases and Rents, Security
Agreement and Fixture Filing, made as of July 29, 1997, by Borrower to The
Public Trustee of the County of Arapahoe, Colorado, as trustee, to and for
the benefit of McDonald's, relating to trust property located in Aurora, in
the County of Arapahoe, in the State of Colorado.
8. Amended and Restated Mortgage, Assignment of Leases and Rents, Security
Agreement and Fixture Filing, made as of July 29, 1997, by Borrower to
McDonald's, relating to mortgaged property located in Schaumburg, in the
County of Cook, in the State of Illinois.
9. Amended and Restated Mortgage, made as of July 29, 1997, by Borrower to
McDonald's, relating to mortgaged property located in Sterling Heights, in
the County of Macomb, in the State of Michigan.
10. Open-End Mortgage, Assignment of Leases and Rents, Security Agreement and
Fixture Filing (Amended and Restated), made as of July 29, 1997, by Borrower
to McDonald's, relating to mortgaged property located in Forest Park, in
the County of Hamilton, in the State of Ohio.
11. Open-End Mortgage, Assignment of Leases and Rents, Security Agreement and
Fixture Filing (Amended and Restated), made as of July 29, 1997, by Borrower
to McDonald's, relating to mortgaged property located in Columbus, in the
County of Franklin, in the State of Ohio.
12. Amended and Restated Open-End Mortgage, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by Borrower
to McDonald's, relating to mortgaged property located in Philadelphia, in
the County of Philadelphia, in the State of Pennsylvania.
13. Amended and Restated Mortgage, Assignment of Leases and Rents, Security
Agreement and Fixture Filing, made as of July 29, 1997, by Borrower to
McDonald's, relating to mortgaged property located in Blaine, in the County
of Anoka, in the State of Minnesota.
14. Amended and Restated Mortgage, Assignment of Leases and Rents, Security
Agreement and Fixture Filing, made as of July 29, 1997, by Borrower to
McDonald's, relating to mortgaged property located in Washington Township,
in the County of Marion, in the State of Indiana.
<PAGE>
EXHIBIT A-1
RECORDING INFORMATION FOR SENIOR MORTGAGE IN FAVOR OF MCDONALD'S
<TABLE>
<CAPTION>
County Book Volume
______ ____ ______
<S> <C> <C> <C>
Senior Mortgage (Aurora)
</TABLE>
<PAGE>
Aurora
Arapahoe County, Colorado
EXHIBIT B
PARCEL 1:
LOT 1,
BLOCK 1,
THE PLAZA AT AURORA MALL SUBDIVISION FILING NO. 3,
ACCORDING TO PLAT THEREOF, RECORDED JANUARY 21, 1994 IN BOOK 111 AT PAGE 80,
RECEPTION NO. 94-011275,
COUNTY OF ARAPAHOE,
STATE OF COLORADO
PARCEL 2:
THE RIGHTS, BENEFITS AND EASEMENTS AS CONTAINED IN THAT CERTAIN OPERATING
AGREEMENT RECORDED MAY 2, 1974 IN BOOK 2234 AT PAGE 139, AND AS AMENDED BY
THE AURORA MALL SUPPLEMENTS TO OPERATING AGREEMENT AS EVIDENCED ON PAGE 274
OF THE DEED OF TRUST RECORDED JULY 26, 1977 IN BOOK 2623 AT PAGE 252,
COUNTY OF ARAPAHOE,
STATE OF COLORADO
PARCEL 3:
THE RIGHTS AND BENEFITS AS CONTAINED IN THAT CERTAIN RECIPROCAL EASEMENT
AGREEMENT RECORDED MARCH 4, 1991 IN BOOK 6105 AT PAGE 431 OVER LOT 2, BLOCK 1,
THE PLAZA AT AURORA MALL SUBDIVISION FILING NO. 2,
COUNTY OF ARAPAHOE,
STATE OF COLORADO
PARCEL 4:
THE RIGHTS AND BENEFITS AS CONTAINED IN THAT CERTAIN DECLARATION OF
RESTRICTIONS AND GRANT OF EASEMENTS RECORDED FEBRUARY 3, 1994 IN BOOK 7399 AT
PAGE 636,
COUNTY OF ARAPAHOE,
STATE OF COLORADO
PARCEL 5:
THE RIGHTS AND BENEFITS AS CONTAINED IN THAT CERTAIN EASEMENT AGREEMENT
RECORDED JANUARY 14, 1994 IN BOOK 7367 AT PAGE 189,
COUNTY OF ARAPAHOE,
STATE OF COLORADO
<PAGE>
EXHIBIT C
DESCRIPTIONS OF SUBORDINATED MORTGAGES
The following is a list of the subordinated mortgages, deeds of trust
and/or deeds to secure debt entered executed by Borrower, on behalf of the
Subordinated Creditor, pursuant to the terms and conditions of the McDonald's
Documentation:
1. Deed To Secure Debt and Security Agreement, made as of July 29, 1997, by
Borrower to Subordinated Creditor, relating to mortgaged property located
in Kennesaw, in the County of Cobb, in the State of Georgia.
2. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Chicago Title
Insurance Company, a Missouri corporation, as trustee, for the benefit of
Subordinated Creditor, relating to trust property located in Vancouver, in
the County of Clark, in the State of Washington.
3. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Kenneth W.
Pearson, as trustee, to and for the benefit of Subordinated Creditor,
relating to trust property located in Leon Valley, in the County of Bexar,
in the State of Texas.
4. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Kenneth W.
Pearson, as trustee, for the benefit of Subordinated Creditor, relating to
trust property located in Arlington, in the County of Tarrant, in the State
of Texas.
5. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Kenneth W.
Pearson, as trustee, for the benefit of Subordinated Creditor, relating to
trust property located in San Antonio, in the County of Bexar, in the State
of Texas.
6. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to The Public Trustee
of the County of Douglas, Colorado, as trustee, to and for the benefit of
Subordinated Creditor, relating to trust property located in Littleton, in
the County of Douglas, in the State of Colorado.
7. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to The Public Trustee
of the County of Arapahoe, Colorado, as trustee, to and for the benefit of
Subordinated Creditor, relating to trust property located in Aurora, in the
County of Arapahoe, in the State of Colorado.
<PAGE>
8. Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture
Filing, made as of July 29, 1997, by Borrower to Subordinated Creditor,
relating to mortgaged property located in Schaumburg, in the County of
Cook, in the State of Illinois.
9. Mortgage, made as of July 29, 1997, by Borrower to Subordinated Creditor,
relating to mortgaged property located in Sterling Heights, in the County
of Macomb, in the State of Michigan.
10. Open-End Mortgage, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Subordinated
Creditor, relating to mortgaged property located in Forest Park, in the
County of Hamilton, in the State of Ohio.
11. Open-End Mortgage, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Subordinated
Creditor, relating to mortgaged property located in Columbus, in the County
of Franklin, in the State of Ohio.
12. Open-End Mortgage, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Subordinated
Creditor, relating to mortgaged property located in Philadelphia, in the
County of Philadelphia, in the State of Pennsylvania.
13. Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture
Filing, made as of July 29, 1997, by Borrower to Subordinated Creditor,
relating to mortgaged property located in Blaine, in the County of Anoka,
in the State of Minnesota.
14. Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture
Filing, made as of July 29, 1997, by Borrower to Subordinated Creditor,
relating to mortgaged property located in Washington Township, in the
County of Marion, in the State of Indiana.
<PAGE>
EXHIBIT C-1
RECORDING INFORMATION FOR SUBORDINATED MORTGAGE IN FAVOR OF STATE STREET
BANK AND TRUST COMPANY (SOLELY IN ITS CAPACITY AS TRUSTEE AND
COLLATERAL AGENT UNDER AND PURSUANT TO THE
SUBORDINATED CREDITOR INDENTURE)
<TABLE>
<CAPTION>
County Book Volume
______ ____ ______
<S> <C> <C> <C>
Subordinated Mortgage (Aurora)
</TABLE>
<PAGE>
Exhibit 4.56
________________________________________________________________________________
Space above this line for recorder's use
DOCUMENT PREPARED BY AND
AFTER RECORDING RETURN TO:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attention: Jonathan A. Reiss, Esq.
SUBORDINATION AGREEMENT
AGREEMENT made as of the 29th day of July, 1997, by and among STATE
STREET BANK AND TRUST COMPANY, solely in its capacity as trustee and
collateral agent under and pursuant to the Subordinated Creditor Indenture
(as hereinafter defined) with an address at Two International Place, Boston,
Massachusetts 02110, Attention: Corporate Trust Department, Mary Lee Storrs,
Vice President (the "Subordinated Creditor"), MCDONALD'S CORPORATION, a
Delaware corporation, with an address at McDonald's Plaza, Oak Brook,
Illinois 60523, Attention: General Counsel ("McDonald's") and DISCOVERY ZONE,
INC., a Delaware corporation, successor by merger to Leaps & Bounds, Inc.,
having its principal place of business at One Corporate Center, 110 East
Broward Boulevard, Fort Lauderdale, Florida 33301 ("Borrower").
W I T N E S S E T H:
RECITALS
A. WHEREAS, Borrower is the successor in interest to Discovery Zone,
Inc., a Delaware corporation and debtor and debtor in possession ("Old DZI"),
and Old DZI's affiliated debtors and debtors in possession including Leaps &
Bounds, Inc. (the "Debtors"),
[LITTLETON, COLORADO PROPERTY]
<PAGE>
all in the chapter 11 proceedings captioned In re Discovery Zone, Inc., et al.,
Case No. 96-411 (HSB) (Jointly Administered), before the United States
Bankruptcy Court for the District of Delaware (the "Bankruptcy Court"); and
B. WHEREAS, pursuant to an Agreement and Plan of Merger, dated as of
August 30, 1994 (the "Merger Agreement"), by and among Old DZI, and two of the
Debtors, Discovery Zone International, Inc. and Leaps & Bounds, Inc. on the one
hand, and McDonald's on the other hand, and related documentation, McDonald's
was or is the sublessor to Leaps & Bounds, Inc. of certain properties, and Old
DZI agreed to defend, indemnify and hold McDonald's and its affiliates harmless
in respect of all expenses, losses, costs, deficiencies, liabilities and damages
(including related and reasonable counsel fees and expenses, and compensatory
and demonstrable consequential damages) incurred or suffered by McDonald's as a
direct result of, inter alia, any breach that results in any payment by
McDonald's in connection with any guarantee by McDonald's relating to such
properties (the "Agreement to Indemnify"); and
C. WHEREAS, On November 18, 1996, the Bankruptcy Court entered the
Stipulation and Order Between Debtors and McDonald's Corporation Providing for
the Resolution, Settlement and Compromise of Disputes and for Rent Deferrals and
Allowance of Certain Claims (the "Stipulation and Order"), pursuant to which,
inter alia, the Debtors assumed certain subleases relating to properties
subleased by McDonald's to the Debtors pursuant to 11 U.S.C. Section 365 as to
which the Agreement to Indemnify remains in full force and effect, the
Bankruptcy Court approved the allowance of certain claims of McDonald's,
including those claims based on the Agreement to Indemnify, and the Bankruptcy
Court approved the validity, perfection, priority and enforceability of certain
claims and liens of McDonald's against the Debtors, including, without
limitation, the validity, perfection, priority and enforceability of the Senior
Mortgages (as defined below) and the Stipulation and Order was not appealed or
otherwise challenged and remains in full force and effect; and
D. WHEREAS, pursuant to the plan of reorganization for Old DZI and
its affiliated debtors confirmed by the Bankruptcy Court by order entered July
18, 1997 (the "Plan"), and as required by the terms of the Stipulation and
Order, Borrower, as the reorganized successor of the Debtors, is obligated to
issue to McDonald's Secured Rent Deferral Notes in the aggregate original
principal amount of $266,466.24, which amount is subject to increase each month
in accordance with the terms thereof (the "Senior Secured Rent Deferral Notes,"
and individually a "Senior Secured Rent Deferral Note") and Secured Rejection
Note in the aggregate original principal amount of $4,416,237.90 (the "Senior
Secured Rejection Note"); and
E. WHEREAS pursuant to the terms and conditions of the Stipulation
and Order, the Plan, the Agreement to Indemnify, the Senior Secured Rejection
Note and the Senior Secured Rent Deferral Notes and any related documentation
(the "McDonald's Documentation"), the repayment and performance of the
obligations of Borrower to McDonald's under the McDonald's Documentation
(including any contingent obligations under
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<PAGE>
the Agreement to Indemnify, the Stipulation and Order, including Section 7
thereof, or otherwise) (the "Senior Obligations") is secured by certain
amended and restated first priority mortgages, deeds of trust and/or deeds to
secure debt described on Exhibit A attached hereto and made a part hereof
(collectively, including all modifications, extensions and additions thereto,
the "Senior Mortgages," and individually, a "Senior Mortgage"), including the
Senior Mortgage identified by the recording information set forth in Exhibit
A-1, reaffirming and creating, to the extent necessary, valid and perfected
first priority liens on the real properties described on Exhibit B attached
hereto and made a part hereof, and other collateral described in the Senior
Mortgages (collectively, the "Real Properties," and individually, a "Real
Property"); and
F. WHEREAS, Borrower and the Subordinated Creditor entered into an
Indenture, dated July 22, 1997 (the "Subordinated Creditor Indenture") and
certain other documents and instruments related thereto, pursuant to which and
upon the terms and conditions therein indebtedness and other obligations were
incurred by the Borrower (the "Subordinated Indenture Indebtedness"), the
repayment and performance of which are secured by, among other things, certain
subordinated mortgages, deeds of trust and/or deeds to secure debt described on
Exhibit C hereto and made a part hereof (collectively, including all
modifications, extensions and additions thereto, the "Subordinated Mortgages,"
and individually, a "Subordinated Mortgage"), including the Subordinated
Mortgage identified by the recording information set forth in Exhibit C-1,
creating valid and perfected liens on the Real Properties subordinate to the
Senior Mortgages; and
G. WHEREAS, pursuant to the Senior Mortgages, the Borrower cannot
grant a subordinated lien on any of the Real Properties without the express
approval of McDonald's and the Subordinated Indenture Indebtedness will not be
able to be issued without the agreement of McDonald's to permit the issuance of
the Subordinated Mortgages; and
H. WHEREAS, McDonald's approval of the Borrower's granting of the
Subordinated Mortgages is conditioned on the entry into this Subordination
Agreement by the Subordinated Creditor, which hereby warrants and represents
that it has full power and authority under the Subordinated Creditor Indenture
to enter into this Subordination Agreement on behalf of all holders of any
securities or obligations whatsoever issued pursuant to the Subordinated
Creditor Indenture; and
I. WHEREAS, the Subordinated Creditor and McDonald's each desire to
enter into this Subordination Agreement to confirm the subordination of the
liens of the Subordinated Mortgages to the liens of the Senior Mortgages in
accordance with the terms of this Agreement;
NOW THEREFORE, IN CONSIDERATION OF THE MUTUAL BENEFITS accruing to the
parties hereto, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
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<PAGE>
1. Consent. Pursuant and subject to the other terms of this Agreement,
McDonald's consents to the Subordinate Mortgages. This consent shall not be
deemed to (i) be a consent to any future encumbrances, (ii) be a waiver of the
limitation on future encumbrances contained in the Senior Mortgages, (iii) be a
consent to or waiver of any other term or condition of the Senior Mortgages or
(iv) prejudice any right or rights which McDonald's may now or in the future
have under or in connection with the Senior Mortgages.
2. Priority of McDonald's.
(a) Subordination. The Subordinated Creditor hereby agrees for
itself and its successors and assigns that, except as otherwise expressly
provided herein, the terms, provisions and liens of the Subordinated Mortgages,
and any of the Subordinated Creditor's liens or security interests in the Real
Properties (but only to the extent of McDonald's interest in such Real
Properties), are hereby intentionally and unconditionally subordinated to, and
at all times shall be junior, subject and subordinate to the terms, provisions
and liens of the Senior Mortgages (including, without limitation, the liens
securing future optional and/or obligatory increases in the amount of the Senior
Obligations or advances by McDonald's to or for the benefit of the Borrower,
regardless of the use to which such advances are put), as well as to any and all
increases therein and all extensions, consolidations, modifications, renewals,
refinancings and supplements thereto. The Subordinated Creditor hereby waives
any right it may have to require that McDonald's marshal any assets of the
Borrower in favor of the Subordinated Creditor and the Subordinated Creditor
agrees that it shall not acquire, by subrogation or otherwise, any lien, estate,
right or other interest in the Real Properties which is or may be prior or
superior in right to the Senior Mortgages, including but not limited to advances
for real estate taxes and assessments. The rights and priorities set forth in
this Paragraph 2(a) shall be effective notwithstanding the order of creation,
attachment, vesting or perfection of the rights of McDonald's under the Senior
Mortgages, or of the Subordinated Creditor under the Subordinated Mortgages, the
Subordinated Creditor Indenture or any other documents executed in connection
therewith (including, without limitation, any UCC-1 financing statements or
fixture filings). The Subordinated Creditor shall be deemed to have consented
(i) to any action by Borrower to which McDonald's consents pursuant to the
Senior Mortgages and (ii) to each act of, or failure to act by, the Borrower
that is not prohibited by the Senior Mortgages, provided that, both with respect
to (i) and (ii), such deemed consent is applicable only to acts or failures to
act in connection with the sale, construction, restoration, insurance,
condemnation or alterations of, to or on, or with respect to the Real Properties
and any other matters relating to the Real Properties.
(b) Insurance; Condemnation Awards. The Subordinated Creditor
hereby assigns and releases unto McDonald's, until payment in full of the Senior
Obligations:
(i) all of its right, title, interest or claim, if any, in and to
the proceeds of all policies of insurance covering the Real
Properties, for application in accordance with the provisions
of the Senior Mortgages or as the Borrower and McDonald's may
otherwise agree; and
4
<PAGE>
(ii) all of its right, title and interest or claim, if any, in and
to all awards or other compensation made for any taking of
any part of the Real Properties for application in accordance
with the provisions of the Senior Mortgages or as the
Borrower and McDonald's may otherwise agree.
All such insurance proceeds or awards which may become due and payable
to the Subordinated Creditor shall be payable directly to McDonald's, and the
Subordinated Creditor directs any insurance company or governmental authority to
make payment thereof directly to McDonald's for application in accordance with
the Senior Mortgages. In the event that any such insurance proceeds or awards
are made payable to the Subordinated Creditor despite such direction, the
Subordinated Creditor shall promptly transfer the same, or promptly cause the
same to be transferred, to McDonald's.
(c) Assignment of Leases and Rents. Any assignment in favor of
the Subordinated Creditor of any Leases or Rents (as such terms are defined in
the Senior Mortgages) contained in the Subordinated Mortgages or the
Subordinated Creditor Indenture, or in any other document or instrument related
thereto or delivered in connection therewith, and all rights of the Subordinated
Creditor thereunder, are hereby intentionally and unconditionally subordinated
to, and shall be in all respects junior, subject and subordinate to any
assignment of rents, leases or other agreements relating to the Real Properties
contained in (i) the Senior Mortgages, and (ii) any other document now in
existence or hereafter made by the Borrower to secure the Senior Obligations,
and to all rights of McDonald's thereunder. Without limiting the foregoing
provisions of this Paragraph 2(c), from and after the execution and delivery of
the Subordinated Mortgages to the Subordinated Creditor, the Subordinated
Creditor shall not be entitled to receive or retain any Rents or other amounts
assigned to the Subordinated Creditor under any such document or instrument
until such time as the Senior Obligations shall have been completely paid in
full.
(d) Non-Disturbance Agreements. The Subordinated Creditor shall be
required to give a non-disturbance agreement to any lessee or tenant of the Real
Properties with respect to whose lease McDonald's, as holder of the Senior
Mortgages, shall have executed a non-disturbance agreement, and, if the
Subordinated Creditor fails to give any such non-disturbance agreement, the
Subordinated Creditor nevertheless agrees not to disturb the possession,
occupancy or rights of any such lessee or tenant without the prior written
consent of McDonald's in each instance.
(e) Further Assurances. To further evidence the subordination
hereinabove provided for, the Subordinated Creditor agrees that, within 30 days
after request by McDonald's, it will, at the Subordinated Creditor's sole cost
and expense, do, execute, acknowledge and deliver all and every such further
acts, deeds, conveyances and instruments as McDonald's may reasonably request
for the better assuring and evidencing of this subordination (including, without
limitation, further affirmation of the application of this Agreement to future
optional and/or obligatory increases in the amount of the Senior Obligations or
advances, regardless of the use to which such increases or advances are put).
5
<PAGE>
(f) Release or Subordination of Lien. If McDonald's shall at any
time release its lien on the Real Properties (or any part thereof) in connection
with a sale or refinancing of the Real Properties or any part thereof, the
Subordinated Creditor shall, without any payment to it, be deemed to have
consented to such sale or refinancing and shall release the lien of the
Subordinated Mortgages thereon at the same time that McDonald's releases the
lien of the Senior Mortgages thereon, and, in the event that the Subordinated
Creditor has not executed a release within seven (7) business days of being
requested to do so by Borrower of McDonald's in connection with such sale or
refinancing, the Subordinated Creditor hereby irrevocably appoints McDonald's as
its attorney in fact (coupled with an interest) to execute in the name of the
Subordinated Creditor or without the signature of the Subordinated Creditor to
the extent McDonald's may lawfully do so, one or more releases or reconveyances
of mortgages/deeds of trust or other documents to evidence such release of the
lien of the Subordinated Mortgages. Until the Senior Obligations have been
completely paid in full (including, without limitation, any obligations which
may arise under the Agreement to Indemnify), all proceeds from or with respect
to the sale, refinancing or other disposition of the Real Properties or any part
thereof shall be paid to McDonald's (or placed into escrow for the benefit of
McDonald's pursuant to the terms of the Senior Mortgages) in satisfaction of the
Senior Obligations pursuant to the terms of the Senior Mortgages and the
McDonald's Documentation, and the Subordinated Creditor shall have no right,
claim or interest in or to any such proceeds.
(g) Enforcement. The Subordinated Creditor agrees that no
remedies provided for under the Subordinated Mortgages or other documents (to
the extent relating to the Real Properties in which McDonald's has an interest)
executed in connection with the Subordinated Creditor Indenture shall be
exercised with respect to the Real Properties, including, without limitation,
the commencement or prosecution of foreclosure proceedings, the exercise of any
power of sale, or the appointment of a receiver (or the Subordinated Creditor as
mortgagee in possession), without obtaining the prior written consent of
McDonald's. The Subordinated Creditor hereby consents and agrees that any
lawful action taken by or on behalf of McDonald's in the exercise of McDonald's
rights and/or remedies under the Senior Mortgages (including, without
limitation, any foreclosure or acquisition of title to a Real Property by deed
in lieu of foreclosure or otherwise) are hereby deemed to be consented to by the
Subordinated Creditor in all respects.
(h) No Third-Party Beneficiaries. The provisions of clauses (a)-(g)
of this Paragraph 2 are solely for the benefit of the holder of the Senior
Mortgages and shall not create any rights in the Borrower or any other person.
3. Bankruptcy. The provisions of this Agreement shall continue in full
force and effect notwithstanding the occurrence of any proceeding under Title 11
of the United States Code (11 U.S.C. Sec. 101 et seq.) or any other bankruptcy,
insolvency, liquidation, reorganization, dissolution, winding up, liquidation,
readjustment or other similar proceeding relating to the Borrower or to its
property (whether voluntary or involuntary, partial or complete, and whether in
bankruptcy, insolvency or receivership, or upon a general assignment for the
benefit of creditors, or any other marshaling of the assets and liabilities of
6
<PAGE>
the Borrower, or any sale of all or substantially all of the assets of the
Borrower, or otherwise) (each, an "Insolvency Proceeding"). Without limiting
the generality of the foregoing, in the event of an Insolvency Proceeding, (i)
the Senior Obligations (including post-petition interest on the Senior
Obligations, whether or not such interest is allowable under Section 502 or 506
of the United States Bankruptcy Code) shall first be completely paid in full
before the Subordinated Creditor shall be entitled to receive or retain any
proceeds from or relating to the sale, refinancing or other disposition of the
Real Properties or any portion thereof in respect of the Subordinated Indenture
Indebtedness; and (ii) the Subordinated Creditor shall not object to or oppose
any efforts by McDonald's to obtain relief from the automatic stay with respect
to the Real Properties under Section 362 of the United States Bankruptcy Code.
4. Payments Received by the Subordinated Creditor. In the event that the
Subordinated Creditor receives any payment or other distribution of any kind or
character from the Borrower or from any other source whatsoever in respect of
any of the Subordinated Indenture Indebtedness, or receives any security
therefor, whether by way of agreement or compromise or otherwise, which it is
not entitled to retain pursuant to the terms of this Agreement, the Subordinated
Creditor shall immediately deliver the same to McDonald's, in the form received,
together with any necessary endorsements, in each case for application on
account of the Senior Obligations, but until so received by McDonald's, the same
shall be held in trust by the Subordinated Creditor as the property of
McDonald's.
5. No Consent Required. The Subordinated Creditor hereby agrees that
McDonald's may, from time to time, at its sole discretion and without notice to
or consent of or from the Subordinated Creditor, and without affecting the
obligations of the Subordinated Creditor herein or the subordination provided
for hereunder, take any or all of the following actions:
(a) retain or obtain a lien or security interest in any property to
secure all or any part of the Senior Obligations;
(b) retain, obtain or permit the release of the primary or secondary
obligations of any other obligor or obligors with respect to all or any part of
the Senior Obligations;
(c) fail to perfect, or release McDonald's lien or security interest
in, or surrender, release or permit any substitution or exchange for, all or any
part of any property (including, without limitation, the Real Properties)
securing all or any part of the Senior Obligations;
(d) change the manner, place or terms of payments, and/or change or
extend the time of payment of, renew or alter, all or any part of the Senior
Obligations, any security therefor, or any liability incurred directly or
indirectly in respect thereof, and the provisions hereof shall apply to the
Senior Obligations as so changed, extended, renewed or altered;
7
<PAGE>
(e) sell, exchange, release, surrender, realize upon or otherwise
deal with in any manner and in any order the Real Properties or any part
thereof;
(f) exercise or refrain from exercising or release any rights and/or
remedies against the Borrower or others (including, without limitation, any
guarantor of all or a portion of the Senior Obligations) or otherwise act or
refrain from acting; and/or
(g) settle or compromise the Senior Obligations or any part thereof
or any security therefor, or any liability incurred directly or indirectly in
respect thereof or hereof.
6. Transfer. McDonald's may, from time to time, without notice to
Subordinated Creditor, assign or transfer any or all of the Senior Obligations
or any interest therein or any security therefor. Notwithstanding any such
assignment or transfer or any subsequent assignment or transfer thereof, the
holders of the Senior Obligations and the holders of any interest therein shall
be entitled to the benefits of this Agreement to the same extent as if such
holders were McDonald's specifically named in this Agreement.
7. Other Liens. Nothing in this Agreement shall prohibit, prevent or
otherwise impede the Subordinated Creditor from exercising any rights, remedy or
power which it may have against the Borrower and/or its subsidiaries with
respect to any collateral other than the Real Properties, which secures the
Subordinated Indenture Indebtedness, provided, however, that the Subordinated
Creditor shall not take any action which could impair the lien of the Senior
Mortgages or the ability of McDonald's to foreclose or otherwise enforce its
security interests or liens thereunder.
8. Termination. This Agreement shall in all respects be a continuing
agreement and shall remain in full force and effect until (a) the complete
payment in full of all of the Senior Obligations, and (b) the execution by
McDonald's of releases of all of the Senior Mortgages and the recording of such
releases in the appropriate real property records.
9. Miscellaneous.
(a) No Waiver. No delay on the part of McDonald's in the exercise of
any right or remedy shall operate as a waiver thereof, and no single or partial
exercise by McDonald's of any right or remedy shall preclude any other or
further exercise thereof or the exercise of any other right or remedy, nor shall
any modification, waiver or discharge of any of the provisions of this Agreement
be binding upon McDonald's except as expressly set forth in a writing duly
signed and delivered by McDonald's.
(b) Obligations Absolute. The obligations of the Subordinated
Creditor herein shall be absolute and unconditional, and the subordination of
the lien of the Subordinated Mortgages herein contained shall be effective with
respect to the Senior Obligations, notwithstanding any right or power of the
Borrower or anyone else to assert any claim or defense as to the invalidity or
unenforceability of any such obligation and/or any lien securing the same, in
whole or in part, or any determination of such invalidity or
8
<PAGE>
unenforceability and no such event shall affect or impair the agreements and
obligations of the Subordinated Creditor hereunder. In the event that any of
the Senior Obligations and/or any lien securing the same is determined to be
invalid or unenforceable, in whole or in part, the Subordinated Creditor
agrees that, as between McDonald's and the Subordinated Creditor, the Senior
Obligations and such lien shall be deemed valid and enforceable, and the
obligations of the Subordinated Creditor hereunder with respect thereto shall
not be affected by any such determination but shall continue in full force
and effect.
(c) Sole Discretion. It is understood and agreed that in the
event of any dissolution, winding up, liquidation, readjustment, reorganization
or other similar proceedings relating to the Borrower or to its property,
McDonald's may use its sole discretion with respect to the enforcement of the
Senior Mortgages, or in otherwise exercising or refraining from exercising any
rights or in taking or refraining from taking any action which it may be
entitled to take or assert hereunder; and that McDonald's shall not be under any
liability for doing or refraining from doing anything relative thereto in the
exercise of its own reasonable judgment or which it may deem necessary or
desirable.
(d) Waiver of Notice and Diligence. The Subordinated Creditor hereby
waives: (i) notice of acceptance by McDonald's of this Agreement; (ii) notice of
the existence or creation or nonpayment of all or any of the Senior Obligations;
and (iii) all diligence in collection or protection of or realization upon the
Senior Obligations or any security therefor.
(e) Reinstatement. If, as a result of, or arising from, any
bankruptcy, insolvency or similar proceeding, claim is ever made upon McDonald's
or any participant in the Senior Obligations for repayment or recovery of any
amount or amounts received by it in payment or on account of the Senior
Obligations from the proceeds of the sale, refinancing or other disposition of
all or a portion of the Real Properties and McDonald's or such participant
repays the Borrower or its legal representative or a trustee in bankruptcy, all
or part of such amount by reason of (i) any judgment, decree or order of any
court or administrative body having jurisdiction or (ii) any settlement or
compromise of any such claim effected by McDonald's or such participant with any
such claimant (including the Borrower or any guarantor), then in such event the
Subordinated Creditor agrees that it shall be and remain obligated hereunder
with respect to the amount so repaid or recovered to the same extent as if such
amount had never originally been received by McDonald's or such participant and
to the extent the Subordinated Creditor has received payments or distributions
in respect of the Subordinated Indenture Indebtedness from the proceeds of the
sale, refinancing or other disposition of the Real Properties.
10. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns.
11. Notices. Any notices or other communications required or permitted
hereunder shall be in writing, and shall be sufficiently given if made by hand
delivery, by telecopier or registered or certified mail, postage prepaid, return
receipt requested, to the
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addresses listed in the first paragraph of this Agreement. Each party may
designate additional or different addresses for notices to such party. Any
notice or communication to either party hereto shall be deemed to have been
given or made as of the date so delivered if personally delivered; when
receipt is acknowledged electronically (with copy by U.S. mail), if faxed
(the fax number for the Subordinated Creditor is (617) 664-5371; the fax
number for McDonald's is (630) 623-3000; and five (5) calendar days after
mailing if sent by registered or certified mail, postage prepaid (except that
a notice of change of address shall not be deemed to have been given until
actually received by the addressee).
12. Representations by the Subordinated Creditor. The Subordinated
Creditor has the power, authority and legal right pursuant to the Subordinated
Creditor Indenture to execute, deliver and perform this Agreement. The
Subordinated Creditor has been duly authorized pursuant to the Subordinated
Creditor Indenture to enter into this Subordination Agreement on behalf of the
Holders (as defined in the Subordinated Creditor Indenture) and this
Subordination Agreement constitutes the valid and binding obligations of the
Subordinated Creditor on behalf of such Holders enforceable against the
Subordinated Creditor on behalf of such Holders in accordance with its terms.
13. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York including both matters of
internal law and conflicts of law, except that matters as to the priority of
liens on the Real Properties and remedies and procedural matters relating
thereto shall be governed by the laws of the State in which the Real Properties
is located.
14. Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
15. Singular and Plural. Words used in this Agreement in the singular,
where the context so permits, shall be deemed to include the plural and vice
versa. The definitions of words in the singular in this Agreement shall apply
to such words when used in the plural where the context so permits and vice
versa.
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IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto as of the date first above written.
STATE STREET BANK AND TRUST COMPANY, solely in its
capacity as trustee and collateral agent under and
pursuant to the Subordinated Creditor Indenture
By: /s/ Mary Lee Storrs
________________________________________
Name: Mary Lee Storrs
Title: Vice President
MCDONALD'S CORPORATION
By: /s/ Gloria Santona
________________________________________
Name: Gloria Santona
Title: Vice President, Deputy General
Counsel and Secretary [SEAL]
DISCOVERY ZONE, INC.
By: /s/ Robert Rooney
________________________________________
Name: Robert Rooney
Title: Sr. VP
<PAGE>
STATE OF MASSACHUSETTS)
COUNTY OF SUFFOLK )
This instrument was acknowledged before me this 31 day of July,
1997, by Mary Lee Storrs as Vice President of STATE STREET BANK AND TRUST
COMPANY, a Massachusetts trust company, on behalf of said corporation.
WITNESS my hand and official seal.
My Commission Expires:
5/15/2003 /s/ Agnes G. Dillon
______________ _________________________
Notary Public
Agnes G. Dillon
My Commission Expires 5/15/2003
<PAGE>
STATE OF ILLINOIS )
COUNTY OF DUPAGE )
This instrument was acknowledged before me this 31st day of July,
1997, by Gloria Santona as VP, Deputy General Counsel & Secretary of
McDONALD'S CORPORATION, a Delaware corporation, on behalf of said corporation.
WITNESS my hand and official seal.
My Commission Expires: February 15, 1999
/s/ Gordana Vujanovich -----------------------------------
______________ _________________________ "OFFICIAL SEAL"
Notary Public Gordana Vujanovich
Notary Public, State of Illinois
My Commission Expires 02/15/99
-----------------------------------
<PAGE>
STATE OF NEW YORK )
COUNTY OF WESTCHESTER)
This instrument was acknowledged before me this 28 day of July,
1997, by Robert Rooney as Sr. VP of DISCOVERY ZONE, INC., a Delaware
corporation, on behalf of said corporation.
WITNESS my hand and official seal.
My Commission Expires:
/s/ Mark D. Woodward
______________ _________________________
Notary Public
Mark D. Woodward
Notary Public State of New York
No. 4997846
Qualified in New York County
Commission Expires June 15, 1998
[SEAL]
<PAGE>
EXHIBIT A
DESCRIPTIONS OF SENIOR MORTGAGES
The following is a list of the amended and restated first priority
mortgages, deeds of trust and/or deeds to secure debt entered executed by
Borrower, on behalf of McDonald's, pursuant to the terms and conditions of
the McDonald's Documentation:
1. Amended and Restated Deed To Secure Debt and Security Agreement, made as of
July 29, 1997, by Borrower to McDonald's, relating to mortgaged property
located in Kennesaw, in the County of Cobb, in the State of Georgia.
2. Amended and Restated Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997,
by Borrower to Chicago Title Insurance Company, a Missouri
Corporation, as trustee, for the benefit of McDonald's, relating to
trust property located in Vancouver, in the County of Clark,
in the State of Washington.
3. Amended and Restated Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997,
by Borrower to Kenneth W. Pearson, as trustee, to and for the benefit
of McDonald's, relating to trust property located in Leon Valley, in
the County of Bexar, in the State of Texas.
4. Amended and Restated Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997,
by Borrower to Kenneth W. Pearson, as trustee, for the benefit of
McDonald's, relating to trust property located in Arlington, in
the County of Tarrant, in the State of Texas.
5. Amended and Restated Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997,
by Borrower to Kenneth W. Pearson, as trustee, for the benefit of
McDonald's, relating to trust property located in San Antonio, in
the County of Bexar, in the State of Texas.
6. Amended and Restated Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997,
by Borrower to The Public Trustee of the County of Douglas, Colorado,
as trustee, to and for the benefit of McDonald's, relating to trust
property located in Littleton, in the County of Douglas, in the State
of Colorado.
<PAGE>
7. Amended and Restated Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997, by
Borrower to The Public Trustee of the County of Arapahoe, Colorado, as
trustee, to and for the benefit of McDonald's, relating to trust property
located in Aurora, in the County of Arapahoe, in the State of Colorado.
8. Amended and Restated Mortgage, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997,
by Borrower to McDonald's, relating to mortgaged property located in
Schaumburg, in the County of Cook, in the State of Illinois.
9. Amended and Restated Mortgage, made as of July 29, 1997, by Borrower to
McDonald's, relating to mortgaged property located in Sterling
Heights, in the County of Macomb, in the State of Michigan.
10. Open-End Mortgage, Assignment of Leases and Rents, Security
Agreement and Fixture Filing (Amended and Restated), made as of
July 29, 1997, by Borrower to McDonald's, relating to mortgaged
property located in Forest Park, in the County of Hamilton, in the
State of Ohio.
11. Open-End Mortgage, Assignment of Leases and Rents, Security
Agreement and Fixture Filing (Amended and Restated), made as of
July 29, 1997, by Borrower to McDonald's, relating to mortgaged
property located in Columbus, in the County of Franklin, in the
State of Ohio.
12. Amended and Restated Open-End Mortgage, Assignment of Leases and
Rents, Security Agreement and Fixture Filing, made as of July 29,
1997, by Borrower to McDonald's, relating to mortgaged property
located in Philadelphia, in the County of Philadelphia, in the
State of Pennsylvania.
13. Amended and Restated Mortgage, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997,
by Borrower to McDonald's, relating to mortgaged property located in
Blaine, in the County of Anoka, in the State of Minnesota.
14. Amended and Restated Mortgage, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, made as of July 29, 1997,
by Borrower to McDonald's, relating to mortgaged property located in
Washington Township, in the County of Marion, in the State of Indiana.
<PAGE>
EXHIBIT A-1
RECORDING INFORMATION FOR SENIOR MORTGAGE IN FAVOR OF MCDONALD'S
County Book Volume
Senior Mortgage (Littleton)
<PAGE>
Denver
Douglas County, Colorado
EXHIBIT B
LOT 1,
BLOCK 1,
PARKWAY SUBDIVISION FILING NO. 1,
COUNTY OF DOUGLAS
STATE OF COLORADO
<PAGE>
EXHIBIT C
DESCRIPTIONS OF SUBORDINATED MORTGAGES
The following is a list of the subordinated mortgages, deeds of trust
and/or deeds to secure debt entered executed by Borrower, on behalf of the
Subordinated Creditor, pursuant to the terms and conditions of the McDonald's
Documentation:
1. Deed To Secure Debt and Security Agreement, made as of July 29, 1997, by
Borrower to Subordinated Creditor, relating to mortgaged property located
in Kennesaw, in the County of Cobb, in the State of Georgia.
2. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Chicago Title
Insurance Company, a Missouri corporation, as trustee, for the benefit of
Subordinated Creditor, relating to trust property located in Vancouver, in
the County of Clark, in the State of Washington.
3. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Kenneth W.
Pearson, as trustee, to and for the benefit of Subordinated Creditor,
relating to trust property located in Leon Valley, in the County of Bexar,
in the State of Texas.
4. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Kenneth W.
Pearson, as trustee, for the benefit of Subordinated Creditor, relating to
trust property located in Arlington, in the County of Tarrant, in the State
of Texas.
5. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Kenneth W.
Pearson, as trustee, for the benefit of Subordinated Creditor, relating to
trust property located in San Antonio, in the County of Bexar, in the State
of Texas.
6. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to The Public Trustee
of the County of Douglas, Colorado, as trustee, to and for the benefit of
Subordinated Creditor, relating to trust property located in Littleton, in
the County of Douglas, in the State of Colorado.
7. Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to The Public Trustee
of the County of Arapahoe, Colorado, as trustee, to and for the benefit of
Subordinated Creditor, relating to trust property located in Aurora, in the
County of Arapahoe, in the State of Colorado.
<PAGE>
8. Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture
Filing, made as of July 29, 1997, by Borrower to Subordinated Creditor,
relating to mortgaged property located in Schaumburg, in the County of
Cook, in the State of Illinois.
9. Mortgage, made as of July 29, 1997, by Borrower to Subordinated Creditor,
relating to mortgaged property located in Sterling Heights, in the County
of Macomb, in the State of Michigan.
10. Open-End Mortgage, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Subordinated
Creditor, relating to mortgaged property located in Forest Park, in the
County of Hamilton, in the State of Ohio.
11. Open-End Mortgage, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Subordinated
Creditor, relating to mortgaged property located in Columbus, in the County
of Franklin, in the State of Ohio.
12. Open-End Mortgage, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, made as of July 29, 1997, by Borrower to Subordinated
Creditor, relating to mortgaged property located in Philadelphia, in the
County of Philadelphia, in the State of Pennsylvania.
13. Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture
Filing, made as of July 29, 1997, by Borrower to Subordinated Creditor,
relating to mortgaged property located in Blaine, in the County of Anoka,
in the State of Minnesota.
14. Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture
Filing, made as of July 29, 1997, by Borrower to Subordinated Creditor,
relating to mortgaged property located in Washington Township, in the
County of Marion, in the State of Indiana.
<PAGE>
EXHIBIT C-1
RECORDING INFORMATION FOR SUBORDINATED MORTGAGE IN FAVOR OF STATE STREET BANK
AND TRUST COMPANY (SOLELY IN ITS CAPACITY AS TRUSTEE AND COLLATERAL
AGENT UNDER AND PURSUANT TO THE SUBORDINATED CREDITOR INDENTURE)
County Book Volume
Subordinated Mortgage (Littleton)
<PAGE>
Exhibit 4.57
Independence, MO (Location No. 315)
Discovery Zone, Inc. Secured Rent Deferral Note
(the "Secured Rent Deferral Note")
$49,061.36 (Initial Face Amount) July 29, 1997
(the "Effective Date")
FOR VALUE RECEIVED, the undersigned, Discovery Zone, Inc., a
Delaware corporation ("MAKER"), promises to pay to the order of McDonald's
Corporation, a Delaware corporation, its successors and assigns ("HOLDER"),
on or before the stated Maturity Date at such place as Holder may from time
to time designate in writing, the principal sum of (i) FORTY-NINE THOUSAND
SIXTY-ONE AND THIRTY-SIX ONE HUNDREDTHS DOLLARS ($49,061.36) (such sum, the
"Original Principal Amount") plus (ii) effective as of the first day of each
month occurring after the date hereof through the Maturity Date (as
hereinafter defined), an amount equal to SIX THOUSAND ONE HUNDRED THIRTY-TWO
AND SIXTY SEVEN ONE HUNDREDTHS DOLLARS ($6,132.67) (such amount, cumulatively
for each month elapsed after the Effective Date through the Maturity Date,
the "Additional Principal Amount") plus (iii) effective as of each
anniversary of the Effective Date occurring after the date hereof until the
Maturity Date, an amount equal to the amount of then unpaid and accrued
interest (such amount, the "Capitalized Interest Amount" and, collectively
with the Original Principal Amount and the Additional Principal Amount, the
"Principal Amount"), in lawful money of the United States of America,
together with interest accrued thereon, to be computed and paid as specified
in Section 1 below.
1. Payment of Principal and Interest.
The Principal Amount of the Secured Rent Deferral Note together with
all interest accrued thereon shall be due and payable on the earlier of (i) the
last day of the term of the lease relating to the premises now known as location
no. 315 in Independence, Missouri (the "Lease") and (ii) the date to which the
obligations under this Secured Rent Deferral Note become due and payable in
accordance with Section 3 below (the "Maturity Date"). On the Maturity Date,
Maker shall pay the Principal Amount then outstanding plus all unpaid and
uncapitalized interest accrued thereon to but not including the Maturity Date in
full.
The Maker may at any time and from time to time prepay the Principal
Amount then outstanding, in whole or in part, without premium or penalty, upon
at least one business day's prior written notice to Holder, specifying the date
and the amount of the prepayment. If any such notice is given, the amount set
forth in the notice shall be due and payable on the date set forth in the
notice, without any accrued interest to such date on the amount to be prepaid.
Amounts prepaid shall be in an aggregate principal amount of at least $25,000 or
a whole multiple of $10,000 in excess thereof.
Within five Business Days following the consummation of the sale of
any of the Collateral (as hereinafter defined), the Maker shall apply the Net
Proceeds first, to the prepayment of the Secured Rejection Note issued by the
Maker to the Holder as of the Effective
<PAGE>
Date in the manner provided therein, second, to the prepayment of this
Secured Rent Deferral Note and any other notes secured by the Collateral
(including the other Secured Rent Deferral Notes issued by the Maker to the
Holder) then outstanding, pro rata based on the then outstanding principal
amounts of any such notes, and the balance, if any, as provided in Section
6(b) of the Mortgages. "Collateral" shall mean the Mortgaged Property or
Trust Property, as the case may be, as such terms are defined in the
Mortgages and Assignments of Rents, Deeds of Trust and/or similar security
instruments granted by Maker in favor of Holder of even date herewith with
respect to the fourteen properties listed on Exhibit A hereto (the
"Mortgages"). "Net Proceeds" shall mean the sales price for any item of the
Collateral after deducting any brokerage fees and commissions, transfer taxes
and other customary closing costs payable by Maker in connection with such
sale.
The Principal Amount outstanding from time to time shall bear interest
at a rate per annum equal to 11% (the "Base Rate"). Interest on the Principal
Amount shall be due and payable on the Maturity Date. If all or any portion of
(i) any Principal Amount, (ii) any interest payable thereon or (iii) any other
amount payable hereunder shall not be paid when due (whether at the stated
maturity, by acceleration or otherwise), the delinquent amount shall bear
interest at a rate per annum which is equal to the Base Rate plus 2% (the
"Default Rate") for each day elapsed from the date of such nonpayment until such
amount is paid in full (as well as after as before judgment).
2. Security for the Loan.
This Secured Rent Deferral Note is secured by the Mortgages.
3. Events of Default.
If any of the following events shall occur and be continuing:
(a) Maker shall fail to pay any Principal Amount when such Principal
Amount becomes due in accordance with the terms hereof within ten days after
receipt of written notice from the Holder of Maker's failure to pay such
Principal Amount or Maker shall fail to pay any interest on the Principal Amount
such interest becomes due in accordance with the terms hereof within ten days
after receipt of written notice from the Holder of Maker's failure to pay such
interest on the Principal Amount;
(b) Maker or any of its subsidiaries (i) shall default in any payment
of principal of or interest of any indebtedness (other than this and the other
Secured Rent Deferral Notes and the Secured Rejection Note) beyond the period of
grace, if any, provided in the instrument or agreement under which such
indebtedness was created in an aggregate amount equal to or greater than $2.5
million or (ii) shall default in the observance or performance of any other
agreement or condition relating to any such indebtedness or contained in any
instrument or agreement evidencing, securing or relating thereto (beyond the
expiration of any cure period), or any other event shall occur or condition
exist, the effect of which default or event or condition is
2
<PAGE>
to cause, or to permit the holder or holders of such indebtedness to cause,
with the giving of notice if required, such indebtedness to become due prior
to its stated maturity;
(c) Maker or any of its subsidiaries shall default in the observance
or performance of any payment or other obligation under two or more any of the
lease agreement under which Maker or such affiliate leases real property from
McDonald's Corporation and, as a result of such defaults, McDonald's Corporation
terminates two or more of such leases in accordance with their respective terms;
(d) Maker or any of its subsidiaries shall default in the observance
or performance of any agreement or condition contained in this Secured Rent
Deferral Note (other than any agreement relating to the payment of the Principal
Amount and/or any interest thereon) or in any of the Mortgages and such default
shall continued unremedied for a period of thirty (30) days; provided that if
such default is not readily susceptible of cure in such thirty (30) day period,
and provided that Maker proceeds in a diligent manner to cure such default,
Maker shall have such additional time to effect such cure as shall be reasonably
necessary to effect such cure;
(e) Excepting only those continuing proceedings relating to the
bankruptcy cases of Maker's debtor predecessors in interest captioned In re
Discovery Zone, Inc., et al., Case No. 96-411 (HSB) (Jointly Administered),
before the United States Bankruptcy Court for the District of Delaware, Maker or
any of its subsidiaries shall commence any case, proceeding or other action (A)
under any existing or future law of any jurisdiction, domestic or foreign,
relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking
to have an order for relief entered with respect to it, or seeking to adjudicate
it a bankruptcy or insolvent, or seeking reorganization, arrangement,
adjustment, winding-up, liquidation, dissolution, composition or other relief
with respect to it or its debts, or (B) seeking appointment of a receiver,
trustee, custodian, conservator or other similar official for it or for all or
any substantial part of its assets, or the Maker or any of its subsidiaries
shall make a general assignment for the benefit of its creditors; or (ii) there
shall be commenced against the Maker or any of its subsidiaries any case
proceeding or other action of a nature referred to in clause (i) above which (A)
results in the entry of an order fro relief or any such adjudication or
appointment or (B) remains undismissed, undischarged or unbonded for a period of
60 days; or (iii) there shall be commenced against the Maker or any of its
subsidiaries any case, proceeding or other action seeking issuance of a warrant
of attachment, execution, distraint or similar process against all or any
substantial part of its assets which results in the entry of an order for any
such relief which shall not have been vacated, discharged, or stayed or bonded
pending appeal within 60 days from the entry thereof; or (iv) the Maker or any
of its subsidiaries shall take any action in furtherance of, or indicating its
consent to, approval of, or acquiescence in, any of the acts set froth in clause
(i), (ii) or (iii) above; or (v) the Maker or any of its subsidiaries shall
generally not, or shall be unable to, or shall admit in writing its inability
to, pay its debts as they become due;
(f) One or more judgments or decrees shall be entered against the
Maker or any of its subsidiaries involving in the aggregate a liability (not
paid or fully covered by insurance, subject to a commercially reasonable
deductible) of $2.5 million or more and all such
3
<PAGE>
judgments or decrees shall not have been vacated, discharged, stayed or
bonded pending appeal within 60 days from he entry thereof; or
(g) Any of the Mortgages shall cease, for any reason, to be in full
force and effect, or Maker or any of its subsidiaries shall so assert or the
liens created by any of the Mortgages shall cease to be enforceable and of the
same effect and priority purported to be created thereby;
then, (A) if such event is an event specified in clause (i), (ii) or (iv) of
subparagraph (e) above, automatically this Secured Rent Deferral Note and all
amounts owing hereunder shall immediately become due and payable and all rent
deferrals in respect of the Lease shall cease, and (B) if such event is any
other event specified in this Section 3, Holder may, by notice to Maker, declare
the Secured Rent Deferral Note and all amounts owing hereunder to be immediately
due and payable, whereupon the same shall immediately become due and payable and
all rent deferrals in respect of the Lease shall cease. Except as expressly
provided in this paragraph, presentment, demand, protest and all other notices
of any kind are hereby expressly waived.
4. Payment of Expenses and Taxes.
Maker agrees (i) to pay or reimburse Holder for all its costs and
expenses incurred in connection with the enforcement or preservation of any
rights under this Secured Rent Deferral Note and the Mortgages, including
without limitation the reasonable fees and disbursements of counsel to Holder
and (ii) to pay, indemnify, and hold Holder harmless from, any and all recording
and filing fees and any and all liabilities with respect to, or resulting from
any delay in paying, stamp and other similar taxes, if any, which may be payable
or determined to be payable in connection with the execution and delivery of, or
consummation or administration of any of the transactions contemplated by, or
any amendment, supplement or modification of, or any waiver or consent under or
in respect of, this Secured Rent Deferral Note and the Mortgages and (iii) to
pay, indemnify and hold Holder harmless from and against any and all other
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever with respect
to the execution, delivery, enforcement, performance and administration of this
Secured Rent Deferral Note and the Mortgages, including without limitation any
of the foregoing relating to the violation of, noncompliance with or liability
under environmental law applicable to the operations of Maker or any of its
subsidiaries on the Collateral; provided that Maker shall have no obligation
hereunder to Holder with respect to indemnified liabilities arising from the
gross negligence or willful misconduct of the Holder or any environmental
activities or contamination occurring on any Collateral after Maker transfers or
conveys such Collateral to Holder or any other person following a foreclosure on
such Collateral or deed-in-lieu thereof. The agreements in this Section 4 shall
survive repayment of the Secured Rent Deferral Note and all other amounts
payable hereunder.
4
<PAGE>
5. Authority.
Maker represents that it has full power authority and legal right to
execute and deliver this Secured Rent Deferral Note and the Mortgages and to
perform its obligations hereunder and thereunder, and that this Secured Rent
Deferral Note and the Mortgages constitute the valid and binding obligation
of Maker, enforceable against Maker in accordance with its terms, except as
enforceability may be limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium, or similar laws affecting the enforcement of
creditors' rights generally and (ii) general principles of equity, regardless
of whether considered in proceedings at law or in equity.
6. Notices.
All notices, requests and demands to or upon Maker or Holder to be
effective shall be in writing (including by facsimile transmission), and,
unless otherwise expressly provided therein, shall be deemed to have been
duly given or made (a) in the case of delivery by hand, when delivered, (b)
in the case of delivery by mail, three days after being deposited in the
mails, postage prepaid, or (c) in the case of delivery by facsimile
transmission, when sent and receipt has been confirmed, addressed as follows,
or to such other address as may be hereafter notified by the respective
parities hereto:
Maker: Discovery Zone, Inc.
110 East Broward Blvd
Fort Lauderdale, Florida 33301
Attn: Chief Executive Officer
Telephone Number: (954) 627-2400
Telecopy Number: (954) 627-2760
Holder: McDonald's Corporation
One McDonald's Plaza
Oak Brook, Illinois 60523
Attn: General Counsel
Telephone Number: (630) 623-3000
Telecopy Number: (630) 623-5865
7. Consent to Jurisdiction; Governing Law.
(a) THIS SECURED RENT DEFERRAL NOTE WAS NEGOTIATED IN THE STATE OF
NEW YORK, AND MADE BY MAKER AND ACCEPTED BY HOLDER IN THE STATE OF NEW YORK,
WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND
TO THE UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL RESPECTS, INCLUDING
MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS SECURED RENT DEFERRAL
NOTE AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE
5
<PAGE>
STATE OF NEW YORK APPLICABLE TO NOTES MADE AND PERFORMED IN SUCH STATE AND
ANY APPLICABLE LAW OF THE UNITED STATES OF AMERICA. IT IS BEING UNDERSTOOD
THAT THE LAW OF THE STATE OF NEW YORK SHALL GOVERN THE VALIDITY AND THE
ENFORCEABILITY OF THIS SECURED RENT DEFERRAL NOTE AND ALL OF THE INDEBTEDNESS
OR OBLIGATIONS ARISING HEREUNDER. TO THE FULLEST EXTENT PERMITTED BY LAW,
MAKER HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY CLAIM TO ASSERT THAT
THE LAW OF ANY OTHER JURISDICTION GOVERNS THIS SECURED RENT DEFERRAL NOTE,
AND THIS SECURED RENT DEFERRAL NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(b) ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST MAKER OR HOLDER
ARISING OUT OF OR RELATING TO THIS SECURED RENT DEFERRAL NOTE SHALL BE
INSTITUTED IN ANY FEDERAL OR STATE COURT IN NEW YORK, NEW YORK, AND MAKER
WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF
VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND MAKER HEREBY IRREVOCABLY
SUBMITS TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION OR
PROCEEDING. MAKER DOES HEREBY DESIGNATE AND APPOINT SHEARMAN & STERLING, 599
LEXINGTON AVENUE, NEW YORK, NEW YORK 10022-6069 (ATTN: DOUGLAS P. BARTNER,
ESQ.), AS ITS AUTHORIZED AGENT TO ACCEPT AND ACKNOWLEDGE ON ITS BEHALF
SERVICE OF ANY AND ALL PROCESS WHICH MAY BE SERVED IN ANY SUCH SUIT, ACTION
OR PROCEEDING IN ANY FEDERAL OR STATE COURT IN NEW YORK, NEW YORK, AND AGREES
THAT SERVICE OF PROCESS UPON SAID AGENT AT SAID ADDRESS AND WRITTEN NOTICE OF
SAID SERVICE OF MAKER MAILED OR DELIVERED TO MAKER IN THE MANNER PROVIDED
HEREIN SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON
MAKER, IN ANY SUCH SUIT, ACTION OR PROCEEDING IN THE STATE OF NEW YORK.
MAKER (I) SHALL GIVE PROMPT NOTICE TO HOLDER OF ANY CHANGED ADDRESS OF ITS
AUTHORIZED AGENT HEREUNDER, (II) MAY AT ANY TIME AND FROM TIME TO TIME
DESIGNATE A SUBSTITUTE AUTHORIZED AGENT WITH AN OFFICE IN NEW YORK, NEW YORK
(WHICH OFFICE SHALL BE DESIGNATED AS THE ADDRESS FOR SERVICE OF PROCESS), AND
(III) SHALL PROMPTLY DESIGNATE SUCH A SUBSTITUTE IF ITS AUTHORIZED AGENT
CEASES TO HAVE AN OFFICE IN NEW YORK, NEW YORK OR IS DISSOLVED WITHOUT
LEAVING A SUCCESSOR.
8. Miscellaneous
(a) This Secured Rent Deferral Note may be modified, amended, waived,
extended, changed, discharged or terminated only by an agreement in writing
signed by the party against whom enforcement of any such modification,
amendment, waiver, extension, change, discharge or termination is sought.
6
<PAGE>
(b) No failure to exercise and no delay in exercising any right,
remedy, power or privilege hereunder or under the Mortgages shall operate as a
waiver thereof; nor shall any single or partial exercise of any right, remedy,
power or privilege hereunder or under the Mortgages preclude any other or
further exercise thereof or the exercise of any other right, remedy, power or
privilege. The rights, remedies, powers and privileges herein and under the
Mortgages are cumulative and not exclusive of any rights, remedies, powers and
privileges provided by law.
(c) This Secured Rent Deferral Note shall be binding upon and inure
to the benefit of Maker and Holder and their respective successors and assign,
except that Maker may not assign or transfer any of its rights or obligations
under this Secured Rent Deferral Note without the prior written consent of
Holder. Holder may sell, transfer or assign the Secured Rent Deferral Note (or
any of its rights hereunder) to any person upon prior written notice of such
sale, transfer or assignment to Maker. Upon any such sale, transfer or
assignment, the assignee shall have all the rights, remedies, powers and
privileges of Holder hereunder.
IN WITNESS WHEREOF, Maker has duly executed or has caused its
respective duly authorized officers to execute this Secured Rent Deferral Note
on its behalf, as of the day and year first above written.
DISCOVERY ZONE, INC.
By: /s/ Scott Bernstein
------------------------------
Name: Scott Berstein
Title: President
7
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EXHIBIT A
Location Location Number
-------- ---------------
Indianapolis, Indiana (307)
Kennesaw, Georgia (334)
Schaumberg, Illinois (335)
Douglas County (Littleton), Colorado (338)
Columbus, Ohio (339)
Blaine (Coon Rapids), Minnesota (340)
Forest Park, Ohio (343)
Leon Valley, Texas (344)
Arlington, Texas (347)
San Antonio, Texas (348)
Sterling Heights, Michigan (349)
Philadelphia (Franklin Mills), Pennsylvania (352)
Aurora, Colorado (353)
Vancouver, Washington (357)
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Royal Palm Beach, FL (Location No. 342)
Discovery Zone, Inc. Secured Rent Deferral Note
(the "Secured Rent Deferral Note")
$36,666.72 (Initial Face Amount) July 29, 1997
(the "Effective Date")
FOR VALUE RECEIVED, the undersigned, Discovery Zone, Inc., a Delaware
corporation ("MAKER"), promises to pay to the order of McDonald's Corporation, a
Delaware corporation, its successors and assigns ("HOLDER"), on or before the
stated Maturity Date at such place as Holder may from time to time designate in
writing, the principal sum of (i) THIRTY-SIX THOUSAND SIX HUNDRED SIXTY-SIX AND
SEVENTY-TWO ONE HUNDREDTHS DOLLARS ($36,666.72) (such sum, the "Original
Principal Amount") plus (ii) effective as of the first day of each month
occurring after the date hereof through the Maturity Date (as hereinafter
defined), an amount equal to FOUR THOUSAND FIVE HUNDRED EIGHTY-THREE AND
THIRTY-FOUR ONE HUNDREDTHS DOLLARS ($4,583.34) (such amount, cumulatively for
each month elapsed after the Effective Date through the Maturity Date, the
"Additional Principal Amount") plus (iii) effective as of each anniversary of
the Effective Date occurring after the date hereof until the Maturity Date, an
amount equal to the amount of then unpaid and accrued interest (such amount, the
"Capitalized Interest Amount" and, collectively with the Original Principal
Amount and the Additional Principal Amount, the "Principal Amount"), in lawful
money of the United States of America, together with interest accrued thereon,
to be computed and paid as specified in Section 1 below.
1. Payment of Principal and Interest.
The Principal Amount of the Secured Rent Deferral Note together with
all interest accrued thereon shall be due and payable on the earlier of (i) the
last day of the term of the lease relating to the premises now known as location
no. 342 in Royal Palm Beach, Florida (the "Lease") and (ii) the date to which
the obligations under this Secured Rent Deferral Note become due and payable in
accordance with Section 3 below (the "Maturity Date"). On the Maturity Date,
Maker shall pay the Principal Amount then outstanding plus all unpaid and
uncapitalized interest accrued thereon to but not including the Maturity Date in
full.
The Maker may at any time and from time to time prepay the Principal
Amount then outstanding, in whole or in part, without premium or penalty, upon
at least one business day's prior written notice to Holder, specifying the date
and the amount of the prepayment. If any such notice is given, the amount set
forth in the notice shall be due and payable on the date set forth in the
notice, without any accrued interest to such date on the amount to be prepaid.
Amounts prepaid shall be in an aggregate principal amount of at least $25,000 or
a whole multiple of $10,000 in excess thereof.
Within five Business Days following the consummation of the sale of
any of the Collateral (as hereinafter defined), the Maker shall apply the Net
Proceeds first, to the prepayment of the Secured Rejection Note issued by the
Maker to the Holder as of the Effective
<PAGE>
Date in the manner provided therein, second, to the prepayment of this Secured
Rent Deferral Note and any other notes secured by the Collateral (including the
other Secured Rent Deferral Notes issued by the Maker to the Holder) then
outstanding, pro rata based on the then outstanding principal amounts of any
such notes, and the balance, if any, as provided in Section 6(b) of the
Mortgages. "Collateral" shall mean the Mortgaged Property or Trust Property, as
the case may be, as such terms are defined in the Mortgages and Assignments of
Rents, Deeds of Trust and/or similar security instruments granted by Maker in
favor of Holder of even date herewith with respect to the fourteen properties
listed on Exhibit A hereto (the "Mortgages"). "Net Proceeds" shall mean the
sales price for any item of the Collateral after deducting any brokerage fees
and commissions, transfer taxes and other customary closing costs payable by
Maker in connection with such sale.
The Principal Amount outstanding from time to time shall bear interest
at a rate per annum equal to 11% (the "Base Rate"). Interest on the Principal
Amount shall be due and payable on the Maturity Date. If all or any portion of
(i) any Principal Amount, (ii) any interest payable thereon or (iii) any other
amount payable hereunder shall not be paid when due (whether at the stated
maturity, by acceleration or otherwise), the delinquent amount shall bear
interest at a rate per annum which is equal to the Base Rate plus 2% (the
"Default Rate") for each day elapsed from the date of such nonpayment until such
amount is paid in full (as well as after as before judgment).
2. Security for the Loan.
This Secured Rent Deferral Note is secured by the Mortgages.
3. Events of Default.
If any of the following events shall occur and be continuing:
(a) Maker shall fail to pay any Principal Amount when such Principal
Amount becomes due in accordance with the terms hereof within ten days after
receipt of written notice from the Holder of Maker's failure to pay such
Principal Amount or Maker shall fail to pay any interest on the Principal Amount
such interest becomes due in accordance with the terms hereof within ten days
after receipt of written notice from the Holder of Maker's failure to pay such
interest on the Principal Amount;
(b) Maker or any of its subsidiaries (i) shall default in any payment
of principal of or interest of any indebtedness (other than this and the other
Secured Rent Deferral Notes and the Secured Rejection Note) beyond the period of
grace, if any, provided in the instrument or agreement under which such
indebtedness was created in an aggregate amount equal to or greater than $2.5
million or (ii) shall default in the observance or performance of any other
agreement or condition relating to any such indebtedness or contained in any
instrument or agreement evidencing, securing or relating thereto (beyond the
expiration of any cure period), or any other event shall occur or condition
exist, the effect of which default or event or condition is
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to cause, or to permit the holder or holders of such indebtedness to cause, with
the giving of notice if required, such indebtedness to become due prior to its
stated maturity;
(c) Maker or any of its subsidiaries shall default in the observance
or performance of any payment or other obligation under two or more any of the
lease agreement under which Maker or such affiliate leases real property from
McDonald's Corporation and, as a result of such defaults, McDonald's Corporation
terminates two or more of such leases in accordance with their respective terms;
(d) Maker or any of its subsidiaries shall default in the observance
or performance of any agreement or condition contained in this Secured Rent
Deferral Note (other than any agreement relating to the payment of the Principal
Amount and/or any interest thereon) or in any of the Mortgages and such default
shall continued unremedied for a period of thirty (30) days; provided that if
such default is not readily susceptible of cure in such thirty (30) day period,
and provided that Maker proceeds in a diligent manner to cure such default,
Maker shall have such additional time to effect such cure as shall be reasonably
necessary to effect such cure;
(e) Excepting only those continuing proceedings relating to the
bankruptcy cases of Maker's debtor predecessors in interest captioned In re
Discovery Zone, Inc., et al., Case No. 96-411 (HSB) (Jointly Administered),
before the United States Bankruptcy Court for the District of Delaware, Maker or
any of its subsidiaries shall commence any case, proceeding or other action (A)
under any existing or future law of any jurisdiction, domestic or foreign,
relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking
to have an order for relief entered with respect to it, or seeking to adjudicate
it a bankruptcy or insolvent, or seeking reorganization, arrangement,
adjustment, winding-up, liquidation, dissolution, composition or other relief
with respect to it or its debts, or (B) seeking appointment of a receiver,
trustee, custodian, conservator or other similar official for it or for all or
any substantial part of its assets, or the Maker or any of its subsidiaries
shall make a general assignment for the benefit of its creditors; or (ii) there
shall be commenced against the Maker or any of its subsidiaries any case
proceeding or other action of a nature referred to in clause (i) above which (A)
results in the entry of an order fro relief or any such adjudication or
appointment or (B) remains undismissed, undischarged or unbonded for a period of
60 days; or (iii) there shall be commenced against the Maker or any of its
subsidiaries any case, proceeding or other action seeking issuance of a warrant
of attachment, execution, distraint or similar process against all or any
substantial part of its assets which results in the entry of an order for any
such relief which shall not have been vacated, discharged, or stayed or bonded
pending appeal within 60 days from the entry thereof; or (iv) the Maker or any
of its subsidiaries shall take any action in furtherance of, or indicating its
consent to, approval of, or acquiescence in, any of the acts set froth in clause
(i), (ii) or (iii) above; or (v) the Maker or any of its subsidiaries shall
generally not, or shall be unable to, or shall admit in writing its inability
to, pay its debts as they become due;
(f) One or more judgments or decrees shall be entered against the
Maker or any of its subsidiaries involving in the aggregate a liability (not
paid or fully covered by insurance, subject to a commercially reasonable
deductible) of $2.5 million or more and all such
3
<PAGE>
judgments or decrees shall not have been vacated, discharged, stayed or bonded
pending appeal within 60 days from he entry thereof; or
(g) Any of the Mortgages shall cease, for any reason, to be in full
force and effect, or Maker or any of its subsidiaries shall so assert or the
liens created by any of the Mortgages shall cease to be enforceable and of the
same effect and priority purported to be created thereby;
then, (A) if such event is an event specified in clause (i), (ii) or (iv) of
subparagraph (e) above, automatically this Secured Rent Deferral Note and all
amounts owing hereunder shall immediately become due and payable and all rent
deferrals in respect of the Lease shall cease, and (B) if such event is any
other event specified in this Section 3, Holder may, by notice to Maker, declare
the Secured Rent Deferral Note and all amounts owing hereunder to be immediately
due and payable, whereupon the same shall immediately become due and payable and
all rent deferrals in respect of the Lease shall cease. Except as expressly
provided in this paragraph, presentment, demand, protest and all other notices
of any kind are hereby expressly waived.
4. Payment of Expenses and Taxes.
Maker agrees (i) to pay or reimburse Holder for all its costs and
expenses incurred in connection with the enforcement or preservation of any
rights under this Secured Rent Deferral Note and the Mortgages, including
without limitation the reasonable fees and disbursements of counsel to Holder
and (ii) to pay, indemnify, and hold Holder harmless from, any and all recording
and filing fees and any and all liabilities with respect to, or resulting from
any delay in paying, stamp and other similar taxes, if any, which may be payable
or determined to be payable in connection with the execution and delivery of, or
consummation or administration of any of the transactions contemplated by, or
any amendment, supplement or modification of, or any waiver or consent under or
in respect of, this Secured Rent Deferral Note and the Mortgages and (iii) to
pay, indemnify and hold Holder harmless from and against any and all other
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever with respect
to the execution, delivery, enforcement, performance and administration of this
Secured Rent Deferral Note and the Mortgages, including without limitation any
of the foregoing relating to the violation of, noncompliance with or liability
under environmental law applicable to the operations of Maker or any of its
subsidiaries on the Collateral; provided that Maker shall have no obligation
hereunder to Holder with respect to indemnified liabilities arising from the
gross negligence or willful misconduct of the Holder or any environmental
activities or contamination occurring on any Collateral after Maker transfers or
conveys such Collateral to Holder or any other person following a foreclosure on
such Collateral or deed-in-lieu thereof. The agreements in this Section 4 shall
survive repayment of the Secured Rent Deferral Note and all other amounts
payable hereunder.
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5. Authority.
Maker represents that it has full power authority and legal right to
execute and deliver this Secured Rent Deferral Note and the Mortgages and to
perform its obligations hereunder and thereunder, and that this Secured Rent
Deferral Note and the Mortgages constitute the valid and binding obligation of
Maker, enforceable against Maker in accordance with its terms, except as
enforceability may be limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium, or similar laws affecting the enforcement of
creditors' rights generally and (ii) general principles of equity, regardless of
whether considered in proceedings at law or in equity.
6. Notices.
All notices, requests and demands to or upon Maker or Holder to be
effective shall be in writing (including by facsimile transmission), and, unless
otherwise expressly provided therein, shall be deemed to have been duly given or
made (a) in the case of delivery by hand, when delivered, (b) in the case of
delivery by mail, three days after being deposited in the mails, postage
prepaid, or (c) in the case of delivery by facsimile transmission, when sent and
receipt has been confirmed, addressed as follows, or to such other address as
may be hereafter notified by the respective parities hereto:
Maker: Discovery Zone, Inc.
110 East Broward Blvd
Fort Lauderdale, Florida 33301
Attn: Chief Executive Officer
Telephone Number: (954) 627-2400
Telecopy Number: (954) 627-2760
Holder: McDonald's Corporation
One McDonald's Plaza
Oak Brook, Illinois 60523
Attn: General Counsel
Telephone Number: (630) 623-3000
Telecopy Number: (630) 623-5865
7. Consent to Jurisdiction; Governing Law.
(a) THIS SECURED RENT DEFERRAL NOTE WAS NEGOTIATED IN THE STATE OF
NEW YORK, AND MADE BY MAKER AND ACCEPTED BY HOLDER IN THE STATE OF NEW YORK,
WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND
TO THE UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL RESPECTS, INCLUDING
MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS SECURED RENT DEFERRAL
NOTE AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE
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STATE OF NEW YORK APPLICABLE TO NOTES MADE AND PERFORMED IN SUCH STATE AND ANY
APPLICABLE LAW OF THE UNITED STATES OF AMERICA. IT IS BEING UNDERSTOOD THAT THE
LAW OF THE STATE OF NEW YORK SHALL GOVERN THE VALIDITY AND THE ENFORCEABILITY OF
THIS SECURED RENT DEFERRAL NOTE AND ALL OF THE INDEBTEDNESS OR OBLIGATIONS
ARISING HEREUNDER. TO THE FULLEST EXTENT PERMITTED BY LAW, MAKER HEREBY
UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY CLAIM TO ASSERT THAT THE LAW OF ANY
OTHER JURISDICTION GOVERNS THIS SECURED RENT DEFERRAL NOTE, AND THIS SECURED
RENT DEFERRAL NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK.
(b) ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST MAKER OR HOLDER
ARISING OUT OF OR RELATING TO THIS SECURED RENT DEFERRAL NOTE SHALL BE
INSTITUTED IN ANY FEDERAL OR STATE COURT IN NEW YORK, NEW YORK, AND MAKER WAIVES
ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY
SUCH SUIT, ACTION OR PROCEEDING, AND MAKER HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION OR PROCEEDING. MAKER DOES
HEREBY DESIGNATE AND APPOINT SHEARMAN & STERLING, 599 LEXINGTON AVENUE, NEW
YORK, NEW YORK 10022-6069 (ATTN: DOUGLAS P. BARTNER, ESQ.), AS ITS AUTHORIZED
AGENT TO ACCEPT AND ACKNOWLEDGE ON ITS BEHALF SERVICE OF ANY AND ALL PROCESS
WHICH MAY BE SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING IN ANY FEDERAL OR
STATE COURT IN NEW YORK, NEW YORK, AND AGREES THAT SERVICE OF PROCESS UPON SAID
AGENT AT SAID ADDRESS AND WRITTEN NOTICE OF SAID SERVICE OF MAKER MAILED OR
DELIVERED TO MAKER IN THE MANNER PROVIDED HEREIN SHALL BE DEEMED IN EVERY
RESPECT EFFECTIVE SERVICE OF PROCESS UPON MAKER, IN ANY SUCH SUIT, ACTION OR
PROCEEDING IN THE STATE OF NEW YORK. MAKER (I) SHALL GIVE PROMPT NOTICE TO
HOLDER OF ANY CHANGED ADDRESS OF ITS AUTHORIZED AGENT HEREUNDER, (II) MAY AT ANY
TIME AND FROM TIME TO TIME DESIGNATE A SUBSTITUTE AUTHORIZED AGENT WITH AN
OFFICE IN NEW YORK, NEW YORK (WHICH OFFICE SHALL BE DESIGNATED AS THE ADDRESS
FOR SERVICE OF PROCESS), AND (III) SHALL PROMPTLY DESIGNATE SUCH A SUBSTITUTE IF
ITS AUTHORIZED AGENT CEASES TO HAVE AN OFFICE IN NEW YORK, NEW YORK OR IS
DISSOLVED WITHOUT LEAVING A SUCCESSOR.
8. Miscellaneous
(a) This Secured Rent Deferral Note may be modified, amended, waived,
extended, changed, discharged or terminated only by an agreement in writing
signed by the party against whom enforcement of any such modification,
amendment, waiver, extension, change, discharge or termination is sought.
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(b) No failure to exercise and no delay in exercising any right,
remedy, power or privilege hereunder or under the Mortgages shall operate as a
waiver thereof; nor shall any single or partial exercise of any right, remedy,
power or privilege hereunder or under the Mortgages preclude any other or
further exercise thereof or the exercise of any other right, remedy, power or
privilege. The rights, remedies, powers and privileges herein and under the
Mortgages are cumulative and not exclusive of any rights, remedies, powers and
privileges provided by law.
(c) This Secured Rent Deferral Note shall be binding upon and inure
to the benefit of Maker and Holder and their respective successors and assign,
except that Maker may not assign or transfer any of its rights or obligations
under this Secured Rent Deferral Note without the prior written consent of
Holder. Holder may sell, transfer or assign the Secured Rent Deferral Note (or
any of its rights hereunder) to any person upon prior written notice of such
sale, transfer or assignment to Maker. Upon any such sale, transfer or
assignment, the assignee shall have all the rights, remedies, powers and
privileges of Holder hereunder.
IN WITNESS WHEREOF, Maker has duly executed or has caused its
respective duly authorized officers to execute this Secured Rent Deferral Note
on its behalf, as of the day and year first above written.
DISCOVERY ZONE, INC.
By: /s/ Scott Bernstein
--------------------------------
Name: Scott Bernstein
Title: President
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EXHIBIT A
Location Location Number
Indianapolis, Indiana (307)
Kennesaw, Georgia (334)
Schaumberg, Illinois (335)
Douglas County (Littleton), Colorado (338)
Columbus, Ohio (339)
Blaine (Coon Rapids), Minnesota (340)
Forest Park, Ohio (343)
Leon Valley, Texas (344)
Arlington, Texas (347)
San Antonio, Texas (348)
Sterling Heights, Michigan (349)
Philadelphia (Franklin Mills), Pennsylvania (352)
Aurora, Colorado (353)
Vancouver, Washington (357)
<PAGE>
Exhibit 4.59
Cincinnati, OH (Location No. 306)
Discovery Zone, Inc. Secured Rent Deferral Note
(the "Secured Rent Deferral Note")
$26,000.00 (Initial Face Amount) July 29, 1997
(the "Effective Date")
FOR VALUE RECEIVED, the undersigned, Discovery Zone, Inc., a
Delaware corporation ("MAKER"), promises to pay to the order of McDonald's
Corporation, a Delaware corporation, its successors and assigns ("HOLDER"),
on or before the stated Maturity Date at such place as Holder may from time
to time designate in writing, the principal sum of (i) TWENTY-SIX THOUSAND
AND ZERO ONE HUNDREDTHS DOLLARS ($26,000.00) (such sum, the "Original
Principal Amount") plus (ii) effective as of the first day of each month
occurring after the date hereof through the Maturity Date (as hereinafter
defined), an amount equal to THREE THOUSAND TWO HUNDRED FIFTY AND ZERO ONE
HUNDREDTHS DOLLARS ($3,250.00) (such amount, cumulatively for each month
elapsed after the Effective Date through the Maturity Date, the "Additional
Principal Amount") plus (iii) effective as of each anniversary of the
Effective Date occurring after the date hereof until the Maturity Date, an
amount equal to the amount of then unpaid and accrued interest (such amount,
the "Capitalized Interest Amount" and, collectively with the Original
Principal Amount and the Additional Principal Amount, the "Principal
Amount"), in lawful money of the United States of America, together with
interest accrued thereon, to be computed and paid as specified in Section 1
below.
1. Payment of Principal and Interest.
The Principal Amount of the Secured Rent Deferral Note together with
all interest accrued thereon shall be due and payable on the earlier of (i)
the last day of the term of the lease relating to the premises now known as
location no. 306 in Cincinnati, Ohio (the "Lease") and (ii) the date to which
the obligations under this Secured Rent Deferral Note become due and payable
in accordance with Section 3 below (the "Maturity Date"). On the Maturity
Date, Maker shall pay the Principal Amount then outstanding plus all unpaid
and uncapitalized interest accrued thereon to but not including the Maturity
Date in full.
The Maker may at any time and from time to time prepay the Principal
Amount then outstanding, in whole or in part, without premium or penalty,
upon at least one business day's prior written notice to Holder, specifying
the date and the amount of the prepayment. If any such notice is given, the
amount set forth in the notice shall be due and payable on the date set forth
in the notice, without any accrued interest to such date on the amount to be
prepaid. Amounts prepaid shall be in an aggregate principal amount of at
least $25,000 or a whole multiple of $10,000 in excess thereof.
Within five Business Days following the consummation of the sale of
any of the Collateral (as hereinafter defined), the Maker shall apply the Net
Proceeds first, to the prepayment of the Secured Rejection Note issued by the
Maker to the Holder as of the Effective Date in the manner provided therein,
second, to the prepayment of this Secured Rent Deferral
<PAGE>
Note and any other notes secured by the Collateral (including the other
Secured Rent Deferral Notes issued by the Maker to the Holder) then
outstanding, pro rata based on the then outstanding principal amounts of any
such notes, and the balance, if any, as provided in Section 6(b) of the
Mortgages. "Collateral" shall mean the Mortgaged Property or Trust Property,
as the case may be, as such terms are defined in the Mortgages and
Assignments of Rents, Deeds of Trust and/or similar security instruments
granted by Maker in favor of Holder of even date herewith with respect to the
fourteen properties listed on Exhibit A hereto (the "Mortgages"). "Net
Proceeds" shall mean the sales price for any item of the Collateral after
deducting any brokerage fees and commissions, transfer taxes and other
customary closing costs payable by Maker in connection with such sale.
The Principal Amount outstanding from time to time shall bear
interest at a rate per annum equal to 11% (the "Base Rate"). Interest on the
Principal Amount shall be due and payable on the Maturity Date. If all or
any portion of (i) any Principal Amount, (ii) any interest payable thereon or
(iii) any other amount payable hereunder shall not be paid when due (whether
at the stated maturity, by acceleration or otherwise), the delinquent amount
shall bear interest at a rate per annum which is equal to the Base Rate plus
2% (the "Default Rate") for each day elapsed from the date of such nonpayment
until such amount is paid in full (as well as after as before judgment).
2. Security for the Loan.
This Secured Rent Deferral Note is secured by the Mortgages.
3. Events of Default.
If any of the following events shall occur and be continuing:
(a) Maker shall fail to pay any Principal Amount when such
Principal Amount becomes due in accordance with the terms hereof within ten
days after receipt of written notice from the Holder of Maker's failure to
pay such Principal Amount or Maker shall fail to pay any interest on the
Principal Amount such interest becomes due in accordance with the terms
hereof within ten days after receipt of written notice from the Holder of
Maker's failure to pay such interest on the Principal Amount;
(b) Maker or any of its subsidiaries (i) shall default in any
payment of principal of or interest of any indebtedness (other than this and
the other Secured Rent Deferral Notes and the Secured Rejection Note) beyond
the period of grace, if any, provided in the instrument or agreement under
which such indebtedness was created in an aggregate amount equal to or
greater than $2.5 million or (ii) shall default in the observance or
performance of any other agreement or condition relating to any such
indebtedness or contained in any instrument or agreement evidencing, securing
or relating thereto (beyond the expiration of any cure period), or any other
event shall occur or condition exist, the effect of which default or event or
condition is to cause, or to permit the holder or holders of such
indebtedness to cause, with the giving of notice if required, such
indebtedness to become due prior to its stated maturity;
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(c) Maker or any of its subsidiaries shall default in the
observance or performance of any payment or other obligation under two or
more any of the lease agreement under which Maker or such affiliate leases
real property from McDonald's Corporation and, as a result of such defaults,
McDonald's Corporation terminates two or more of such leases in accordance
with their respective terms;
(d) Maker or any of its subsidiaries shall default in the
observance or performance of any agreement or condition contained in this
Secured Rent Deferral Note (other than any agreement relating to the payment
of the Principal Amount and/or any interest thereon) or in any of the
Mortgages and such default shall continued unremedied for a period of thirty
(30) days; provided that if such default is not readily susceptible of cure
in such thirty (30) day period, and provided that Maker proceeds in a
diligent manner to cure such default, Maker shall have such additional time
to effect such cure as shall be reasonably necessary to effect such cure;
(e) Excepting only those continuing proceedings relating to the
bankruptcy cases of Maker's debtor predecessors in interest captioned In re
Discovery Zone, Inc., et al., Case No. 96-411 (HSB) (Jointly Administered),
before the United States Bankruptcy Court for the District of Delaware, Maker
or any of its subsidiaries shall commence any case, proceeding or other
action (A) under any existing or future law of any jurisdiction, domestic or
foreign, relating to bankruptcy, insolvency, reorganization or relief of
debtors, seeking to have an order for relief entered with respect to it, or
seeking to adjudicate it a bankruptcy or insolvent, or seeking
reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it or its debts, or
(B) seeking appointment of a receiver, trustee, custodian, conservator or
other similar official for it or for all or any substantial part of its
assets, or the Maker or any of its subsidiaries shall make a general
assignment for the benefit of its creditors; or (ii) there shall be commenced
against the Maker or any of its subsidiaries any case proceeding or other
action of a nature referred to in clause (i) above which (A) results in the
entry of an order fro relief or any such adjudication or appointment or (B)
remains undismissed, undischarged or unbonded for a period of 60 days; or
(iii) there shall be commenced against the Maker or any of its subsidiaries
any case, proceeding or other action seeking issuance of a warrant of
attachment, execution, distraint or similar process against all or any
substantial part of its assets which results in the entry of an order for any
such relief which shall not have been vacated, discharged, or stayed or
bonded pending appeal within 60 days from the entry thereof; or (iv) the
Maker or any of its subsidiaries shall take any action in furtherance of, or
indicating its consent to, approval of, or acquiescence in, any of the acts
set froth in clause (i), (ii) or (iii) above; or (v) the Maker or any of its
subsidiaries shall generally not, or shall be unable to, or shall admit in
writing its inability to, pay its debts as they become due;
(f) One or more judgments or decrees shall be entered against the
Maker or any of its subsidiaries involving in the aggregate a liability (not
paid or fully covered by insurance, subject to a commercially reasonable
deductible) of $2.5 million or more and all such judgments or decrees shall
not have been vacated, discharged, stayed or bonded pending appeal within 60
days from he entry thereof; or
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(g) Any of the Mortgages shall cease, for any reason, to be in full
force and effect, or Maker or any of its subsidiaries shall so assert or the
liens created by any of the Mortgages shall cease to be enforceable and of
the same effect and priority purported to be created thereby;
then, (A) if such event is an event specified in clause (i), (ii) or (iv) of
subparagraph (e) above, automatically this Secured Rent Deferral Note and all
amounts owing hereunder shall immediately become due and payable and all rent
deferrals in respect of the Lease shall cease, and (B) if such event is any
other event specified in this Section 3, Holder may, by notice to Maker,
declare the Secured Rent Deferral Note and all amounts owing hereunder to be
immediately due and payable, whereupon the same shall immediately become due
and payable and all rent deferrals in respect of the Lease shall cease.
Except as expressly provided in this paragraph, presentment, demand, protest
and all other notices of any kind are hereby expressly waived.
4. Payment of Expenses and Taxes.
Maker agrees (i) to pay or reimburse Holder for all its costs and
expenses incurred in connection with the enforcement or preservation of any
rights under this Secured Rent Deferral Note and the Mortgages, including
without limitation the reasonable fees and disbursements of counsel to Holder
and (ii) to pay, indemnify, and hold Holder harmless from, any and all
recording and filing fees and any and all liabilities with respect to, or
resulting from any delay in paying, stamp and other similar taxes, if any,
which may be payable or determined to be payable in connection with the
execution and delivery of, or consummation or administration of any of the
transactions contemplated by, or any amendment, supplement or modification
of, or any waiver or consent under or in respect of, this Secured Rent
Deferral Note and the Mortgages and (iii) to pay, indemnify and hold Holder
harmless from and against any and all other liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever with respect to the execution,
delivery, enforcement, performance and administration of this Secured Rent
Deferral Note and the Mortgages, including without limitation any of the
foregoing relating to the violation of, noncompliance with or liability under
environmental law applicable to the operations of Maker or any of its
subsidiaries on the Collateral; provided that Maker shall have no obligation
hereunder to Holder with respect to indemnified liabilities arising from the
gross negligence or willful misconduct of the Holder or any environmental
activities or contamination occurring on any Collateral after Maker transfers
or conveys such Collateral to Holder or any other person following a
foreclosure on such Collateral or deed-in-lieu thereof. The agreements in
this Section 4 shall survive repayment of the Secured Rent Deferral Note and
all other amounts payable hereunder.
5. Authority.
Maker represents that it has full power authority and legal right to
execute and deliver this Secured Rent Deferral Note and the Mortgages and to
perform its obligations hereunder and thereunder, and that this Secured Rent
Deferral Note and the Mortgages constitute
4
<PAGE>
the valid and binding obligation of Maker, enforceable against Maker in
accordance with its terms, except as enforceability may be limited by (i)
applicable bankruptcy, insolvency, reorganization, moratorium, or similar
laws affecting the enforcement of creditors' rights generally and (ii)
general principles of equity, regardless of whether considered in proceedings
at law or in equity.
6. Notices.
All notices, requests and demands to or upon Maker or Holder to be
effective shall be in writing (including by facsimile transmission), and,
unless otherwise expressly provided therein, shall be deemed to have been
duly given or made (a) in the case of delivery by hand, when delivered, (b)
in the case of delivery by mail, three days after being deposited in the
mails, postage prepaid, or (c) in the case of delivery by facsimile
transmission, when sent and receipt has been confirmed, addressed as follows,
or to such other address as may be hereafter notified by the respective
parities hereto:
Maker: Discovery Zone, Inc.
110 East Broward Blvd
Fort Lauderdale, Florida 33301
Attn: Chief Executive Officer
Telephone Number: (954) 627-2400
Telecopy Number: (954) 627-2760
Holder: McDonald's Corporation
One McDonald's Plaza
Oak Brook, Illinois 60523
Attn: General Counsel
Telephone Number: (630) 623-3000
Telecopy Number: (630) 623-5865
7. Consent to Jurisdiction; Governing Law.
(a) THIS SECURED RENT DEFERRAL NOTE WAS NEGOTIATED IN THE STATE OF
NEW YORK, AND MADE BY MAKER AND ACCEPTED BY HOLDER IN THE STATE OF NEW YORK,
WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES
AND TO THE UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL RESPECTS,
INCLUDING MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS SECURED
RENT DEFERRAL NOTE AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO NOTES MADE AND PERFORMED IN SUCH STATE AND ANY APPLICABLE LAW
OF THE UNITED STATES OF AMERICA. IT IS BEING UNDERSTOOD THAT THE LAW OF THE
STATE OF NEW YORK SHALL GOVERN THE VALIDITY AND THE ENFORCEABILITY OF THIS
SECURED RENT DEFERRAL NOTE AND ALL OF THE INDEBTEDNESS OR OBLIGATIONS ARISING
5
<PAGE>
HEREUNDER. TO THE FULLEST EXTENT PERMITTED BY LAW, MAKER HEREBY
UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY CLAIM TO ASSERT THAT THE LAW OF
ANY OTHER JURISDICTION GOVERNS THIS SECURED RENT DEFERRAL NOTE, AND THIS
SECURED RENT DEFERRAL NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK.
(b) ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST MAKER OR HOLDER
ARISING OUT OF OR RELATING TO THIS SECURED RENT DEFERRAL NOTE SHALL BE
INSTITUTED IN ANY FEDERAL OR STATE COURT IN NEW YORK, NEW YORK, AND MAKER
WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF
VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND MAKER HEREBY IRREVOCABLY
SUBMITS TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION OR
PROCEEDING. MAKER DOES HEREBY DESIGNATE AND APPOINT SHEARMAN & STERLING, 599
LEXINGTON AVENUE, NEW YORK, NEW YORK 10022-6069 (ATTN: DOUGLAS P. BARTNER,
ESQ.), AS ITS AUTHORIZED AGENT TO ACCEPT AND ACKNOWLEDGE ON ITS BEHALF
SERVICE OF ANY AND ALL PROCESS WHICH MAY BE SERVED IN ANY SUCH SUIT, ACTION
OR PROCEEDING IN ANY FEDERAL OR STATE COURT IN NEW YORK, NEW YORK, AND AGREES
THAT SERVICE OF PROCESS UPON SAID AGENT AT SAID ADDRESS AND WRITTEN NOTICE OF
SAID SERVICE OF MAKER MAILED OR DELIVERED TO MAKER IN THE MANNER PROVIDED
HEREIN SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON
MAKER, IN ANY SUCH SUIT, ACTION OR PROCEEDING IN THE STATE OF NEW YORK.
MAKER (I) SHALL GIVE PROMPT NOTICE TO HOLDER OF ANY CHANGED ADDRESS OF ITS
AUTHORIZED AGENT HEREUNDER, (II) MAY AT ANY TIME AND FROM TIME TO TIME
DESIGNATE A SUBSTITUTE AUTHORIZED AGENT WITH AN OFFICE IN NEW YORK, NEW YORK
(WHICH OFFICE SHALL BE DESIGNATED AS THE ADDRESS FOR SERVICE OF PROCESS), AND
(III) SHALL PROMPTLY DESIGNATE SUCH A SUBSTITUTE IF ITS AUTHORIZED AGENT
CEASES TO HAVE AN OFFICE IN NEW YORK, NEW YORK OR IS DISSOLVED WITHOUT
LEAVING A SUCCESSOR.
8. Miscellaneous
(a) This Secured Rent Deferral Note may be modified, amended, waived,
extended, changed, discharged or terminated only by an agreement in writing
signed by the party against whom enforcement of any such modification,
amendment, waiver, extension, change, discharge or termination is sought.
(b) No failure to exercise and no delay in exercising any right,
remedy, power or privilege hereunder or under the Mortgages shall operate as
a waiver thereof; nor shall any single or partial exercise of any right,
remedy, power or privilege hereunder or under the Mortgages preclude any
other or further exercise thereof or the exercise of any other right, remedy,
power or privilege. The rights, remedies, powers and privileges herein and
under the
6
<PAGE>
Mortgages are cumulative and not exclusive of any rights, remedies, powers
and privileges provided by law.
(c) This Secured Rent Deferral Note shall be binding upon and inure
to the benefit of Maker and Holder and their respective successors and
assign, except that Maker may not assign or transfer any of its rights or
obligations under this Secured Rent Deferral Note without the prior written
consent of Holder. Holder may sell, transfer or assign the Secured Rent
Deferral Note (or any of its rights hereunder) to any person upon prior
written notice of such sale, transfer or assignment to Maker. Upon any such
sale, transfer or assignment, the assignee shall have all the rights,
remedies, powers and privileges of Holder hereunder.
IN WITNESS WHEREOF, Maker has duly executed or has caused its
respective duly authorized officers to execute this Secured Rent Deferral
Note on its behalf, as of the day and year first above written.
DISCOVERY ZONE, INC.
By: /s/ Scott Bernstein
--------------------------------
Name: Scott Bernstein
Title: President
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<PAGE>
EXHIBIT A
Location Location Number
Indianapolis, Indiana (307)
Kennesaw, Georgia (334)
Schaumberg, Illinois (335)
Douglas County (Littleton), Colorado (338)
Columbus, Ohio (339)
Blaine (Coon Rapids), Minnesota (340)
Forest Park, Ohio (343)
Leon Valley, Texas (344)
Arlington, Texas (347)
San Antonio, Texas (348)
Sterling Heights, Michigan (349)
Philadelphia (Franklin Mills), Pennsylvania (352)
Aurora, Colorado (353)
Vancouver, Washington (357)
<PAGE>
Exhibit 4.60
Greenfield, WI (Location No. 304)
Discovery Zone, Inc. Secured Rent Deferral Note
(the "Secured Rent Deferral Note")
$1,826.00 (Initial Face Amount) July 29, 1997
(the "Effective Date")
FOR VALUE RECEIVED, the undersigned, Discovery Zone, Inc., a
Delaware corporation ("MAKER"), promises to pay to the order of McDonald's
Corporation, a Delaware corporation, its successors and assigns ("HOLDER"),
on or before the stated Maturity Date at such place as Holder may from time
to time designate in writing, the principal sum of (i) ONE THOUSAND EIGHT
HUNDRED TWENTY-SIX AND ZERO ONE HUNDREDTHS DOLLARS ($1,826.00) (such sum, the
"Original Principal Amount") plus (ii) effective as of the first day of each
month occurring after the date hereof through the Maturity Date (as
hereinafter defined), an amount equal to TWO HUNDRED TWENTY-EIGHT AND
TWENTY-FIVE ONE HUNDREDTHS DOLLARS ($228.25) (such amount, cumulatively for
each month elapsed after the Effective Date through the Maturity Date, the
"Additional Principal Amount") plus (iii) effective as of each anniversary of
the Effective Date occurring after the date hereof until the Maturity Date,
an amount equal to the amount of then unpaid and accrued interest (such
amount, the "Capitalized Interest Amount" and, collectively with the Original
Principal Amount and the Additional Principal Amount, the "Principal
Amount"), in lawful money of the United States of America, together with
interest accrued thereon, to be computed and paid as specified in Section 1
below.
1. Payment of Principal and Interest.
The Principal Amount of the Secured Rent Deferral Note
together with all interest accrued thereon shall be due and payable on the
earlier of (i) the last day of the term of the lease relating to the premises
now known as location no. 304 in Greenfield, Wisconsin (the "Lease") and (ii)
the date to which the obligations under this Secured Rent Deferral Note
become due and payable in accordance with Section 3 below (the "Maturity
Date"). On the Maturity Date, Maker shall pay the Principal Amount then
outstanding plus all unpaid and uncapitalized interest accrued thereon to but
not including the Maturity Date in full.
The Maker may at any time and from time to time prepay the
Principal Amount then outstanding, in whole or in part, without premium or
penalty, upon at least one business day's prior written notice to Holder,
specifying the date and the amount of the prepayment. If any such notice is
given, the amount set forth in the notice shall be due and payable on the
date set forth in the notice, without any accrued interest to such date on
the amount to be prepaid. Amounts prepaid shall be in an aggregate principal
amount of at least $25,000 or a whole multiple of $10,000 in excess thereof.
Within five Business Days following the consummation of the
sale of any of the Collateral (as hereinafter defined), the Maker shall apply
the Net Proceeds first, to the prepayment of the Secured Rejection Note
issued by the Maker to the Holder as of the Effective
<PAGE>
Date in the manner provided therein, second, to the prepayment of this
Secured Rent Deferral Note and any other notes secured by the Collateral
(including the other Secured Rent Deferral Notes issued by the Maker to the
Holder) then outstanding, pro rata based on the then outstanding principal
amounts of any such notes, and the balance, if any, as provided in Section
6(b) of the Mortgages. "Collateral" shall mean the Mortgaged Property or
Trust Property, as the case may be, as such terms are defined in the
Mortgages and Assignments of Rents, Deeds of Trust and/or similar security
instruments granted by Maker in favor of Holder of even date herewith with
respect to the fourteen properties listed on Exhibit A hereto (the
"Mortgages"). "Net Proceeds" shall mean the sales price for any item of the
Collateral after deducting any brokerage fees and commissions, transfer taxes
and other customary closing costs payable by Maker in connection with such
sale.
The Principal Amount outstanding from time to time shall bear
interest at a rate per annum equal to 11% (the "Base Rate"). Interest on the
Principal Amount shall be due and payable on the Maturity Date. If all or
any portion of (i) any Principal Amount, (ii) any interest payable thereon or
(iii) any other amount payable hereunder shall not be paid when due (whether
at the stated maturity, by acceleration or otherwise), the delinquent amount
shall bear interest at a rate per annum which is equal to the Base Rate plus
2% (the "Default Rate") for each day elapsed from the date of such nonpayment
until such amount is paid in full (as well as after as before judgment).
2. Security for the Loan.
This Secured Rent Deferral Note is secured by the Mortgages.
3. Events of Default.
If any of the following events shall occur and be continuing:
(a) Maker shall fail to pay any Principal Amount when such
Principal Amount becomes due in accordance with the terms hereof within ten
days after receipt of written notice from the Holder of Maker's failure to
pay such Principal Amount or Maker shall fail to pay any interest on the
Principal Amount such interest becomes due in accordance with the terms
hereof within ten days after receipt of written notice from the Holder of
Maker's failure to pay such interest on the Principal Amount;
(b) Maker or any of its subsidiaries (i) shall default in any
payment of principal of or interest of any indebtedness (other than this and
the other Secured Rent Deferral Notes and the Secured Rejection Note) beyond
the period of grace, if any, provided in the instrument or agreement under
which such indebtedness was created in an aggregate amount equal to or
greater than $2.5 million or (ii) shall default in the observance or
performance of any other agreement or condition relating to any such
indebtedness or contained in any instrument or agreement evidencing, securing
or relating thereto (beyond the expiration of any cure period), or any other
event shall occur or condition exist, the effect of which default or event or
condition is
2
<PAGE>
to cause, or to permit the holder or holders of such indebtedness to cause,
with the giving of notice if required, such indebtedness to become due prior
to its stated maturity;
(c) Maker or any of its subsidiaries shall default in the
observance or performance of any payment or other obligation under two or
more any of the lease agreement under which Maker or such affiliate leases
real property from McDonald's Corporation and, as a result of such defaults,
McDonald's Corporation terminates two or more of such leases in accordance
with their respective terms;
(d) Maker or any of its subsidiaries shall default in the
observance or performance of any agreement or condition contained in this
Secured Rent Deferral Note (other than any agreement relating to the payment
of the Principal Amount and/or any interest thereon) or in any of the
Mortgages and such default shall continued unremedied for a period of thirty
(30) days; provided that if such default is not readily susceptible of cure
in such thirty (30) day period, and provided that Maker proceeds in a
diligent manner to cure such default, Maker shall have such additional time
to effect such cure as shall be reasonably necessary to effect such cure;
(e) Excepting only those continuing proceedings relating to
the bankruptcy cases of Maker's debtor predecessors in interest captioned In
re Discovery Zone, Inc., et al., Case No. 96-411 (HSB) (Jointly
Administered), before the United States Bankruptcy Court for the District of
Delaware, Maker or any of its subsidiaries shall commence any case,
proceeding or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief
entered with respect to it, or seeking to adjudicate it a bankruptcy or
insolvent, or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with respect to it or
its debts, or (B) seeking appointment of a receiver, trustee, custodian,
conservator or other similar official for it or for all or any substantial
part of its assets, or the Maker or any of its subsidiaries shall make a
general assignment for the benefit of its creditors; or (ii) there shall be
commenced against the Maker or any of its subsidiaries any case proceeding or
other action of a nature referred to in clause (i) above which (A) results in
the entry of an order fro relief or any such adjudication or appointment or
(B) remains undismissed, undischarged or unbonded for a period of 60 days; or
(iii) there shall be commenced against the Maker or any of its subsidiaries
any case, proceeding or other action seeking issuance of a warrant of
attachment, execution, distraint or similar process against all or any
substantial part of its assets which results in the entry of an order for any
such relief which shall not have been vacated, discharged, or stayed or
bonded pending appeal within 60 days from the entry thereof; or (iv) the
Maker or any of its subsidiaries shall take any action in furtherance of, or
indicating its consent to, approval of, or acquiescence in, any of the acts
set froth in clause (i), (ii) or (iii) above; or (v) the Maker or any of its
subsidiaries shall generally not, or shall be unable to, or shall admit in
writing its inability to, pay its debts as they become due;
(f) One or more judgments or decrees shall be entered against
the Maker or any of its subsidiaries involving in the aggregate a liability
(not paid or fully covered by insurance, subject to a commercially reasonable
deductible) of $2.5 million or more and all such
3
<PAGE>
judgments or decrees shall not have been vacated, discharged, stayed or
bonded pending appeal within 60 days from he entry thereof; or
(g) Any of the Mortgages shall cease, for any reason, to be
in full force and effect, or Maker or any of its subsidiaries shall so assert
or the liens created by any of the Mortgages shall cease to be enforceable
and of the same effect and priority purported to be created thereby;
then, (A) if such event is an event specified in clause (i), (ii) or (iv) of
subparagraph (e) above, automatically this Secured Rent Deferral Note and all
amounts owing hereunder shall immediately become due and payable and all rent
deferrals in respect of the Lease shall cease, and (B) if such event is any
other event specified in this Section 3, Holder may, by notice to Maker,
declare the Secured Rent Deferral Note and all amounts owing hereunder to be
immediately due and payable, whereupon the same shall immediately become due
and payable and all rent deferrals in respect of the Lease shall cease.
Except as expressly provided in this paragraph, presentment, demand, protest
and all other notices of any kind are hereby expressly waived.
4. Payment of Expenses and Taxes.
Maker agrees (i) to pay or reimburse Holder for all its costs
and expenses incurred in connection with the enforcement or preservation of
any rights under this Secured Rent Deferral Note and the Mortgages, including
without limitation the reasonable fees and disbursements of counsel to Holder
and (ii) to pay, indemnify, and hold Holder harmless from, any and all
recording and filing fees and any and all liabilities with respect to, or
resulting from any delay in paying, stamp and other similar taxes, if any,
which may be payable or determined to be payable in connection with the
execution and delivery of, or consummation or administration of any of the
transactions contemplated by, or any amendment, supplement or modification
of, or any waiver or consent under or in respect of, this Secured Rent
Deferral Note and the Mortgages and (iii) to pay, indemnify and hold Holder
harmless from and against any and all other liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever with respect to the execution,
delivery, enforcement, performance and administration of this Secured Rent
Deferral Note and the Mortgages, including without limitation any of the
foregoing relating to the violation of, noncompliance with or liability under
environmental law applicable to the operations of Maker or any of its
subsidiaries on the Collateral; provided that Maker shall have no obligation
hereunder to Holder with respect to indemnified liabilities arising from the
gross negligence or willful misconduct of the Holder or any environmental
activities or contamination occurring on any Collateral after Maker transfers
or conveys such Collateral to Holder or any other person following a
foreclosure on such Collateral or deed-in-lieu thereof. The agreements in
this Section 4 shall survive repayment of the Secured Rent Deferral Note and
all other amounts payable hereunder.
4
<PAGE>
5. Authority.
Maker represents that it has full power authority and legal
right to execute and deliver this Secured Rent Deferral Note and the
Mortgages and to perform its obligations hereunder and thereunder, and that
this Secured Rent Deferral Note and the Mortgages constitute the valid and
binding obligation of Maker, enforceable against Maker in accordance with its
terms, except as enforceability may be limited by (i) applicable bankruptcy,
insolvency, reorganization, moratorium, or similar laws affecting the
enforcement of creditors' rights generally and (ii) general principles of
equity, regardless of whether considered in proceedings at law or in equity.
6. Notices.
All notices, requests and demands to or upon Maker or Holder
to be effective shall be in writing (including by facsimile transmission),
and, unless otherwise expressly provided therein, shall be deemed to have
been duly given or made (a) in the case of delivery by hand, when delivered,
(b) in the case of delivery by mail, three days after being deposited in the
mails, postage prepaid, or (c) in the case of delivery by facsimile
transmission, when sent and receipt has been confirmed, addressed as follows,
or to such other address as may be hereafter notified by the respective
parities hereto:
Maker: Discovery Zone, Inc.
110 East Broward Blvd
Fort Lauderdale, Florida 33301
Attn: Chief Executive Officer
Telephone Number: (954) 627-2400
Telecopy Number: (954) 627-2760
Holder: McDonald's Corporation
One McDonald's Plaza
Oak Brook, Illinois 60523
Attn: General Counsel
Telephone Number: (630) 623-3000
Telecopy Number: (630) 623-5865
7. Consent to Jurisdiction; Governing Law.
(a) THIS SECURED RENT DEFERRAL NOTE WAS NEGOTIATED IN THE
STATE OF NEW YORK, AND MADE BY MAKER AND ACCEPTED BY HOLDER IN THE STATE OF
NEW YORK, WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE
PARTIES AND TO THE UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL
RESPECTS, INCLUDING MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS
SECURED RENT DEFERRAL NOTE AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
5
<PAGE>
STATE OF NEW YORK APPLICABLE TO NOTES MADE AND PERFORMED IN SUCH STATE AND
ANY APPLICABLE LAW OF THE UNITED STATES OF AMERICA. IT IS BEING UNDERSTOOD
THAT THE LAW OF THE STATE OF NEW YORK SHALL GOVERN THE VALIDITY AND THE
ENFORCEABILITY OF THIS SECURED RENT DEFERRAL NOTE AND ALL OF THE INDEBTEDNESS
OR OBLIGATIONS ARISING HEREUNDER. TO THE FULLEST EXTENT PERMITTED BY LAW,
MAKER HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY CLAIM TO ASSERT THAT
THE LAW OF ANY OTHER JURISDICTION GOVERNS THIS SECURED RENT DEFERRAL NOTE,
AND THIS SECURED RENT DEFERRAL NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(b) ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST MAKER OR
HOLDER ARISING OUT OF OR RELATING TO THIS SECURED RENT DEFERRAL NOTE SHALL BE
INSTITUTED IN ANY FEDERAL OR STATE COURT IN NEW YORK, NEW YORK, AND MAKER
WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF
VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND MAKER HEREBY IRREVOCABLY
SUBMITS TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION OR
PROCEEDING. MAKER DOES HEREBY DESIGNATE AND APPOINT SHEARMAN & STERLING, 599
LEXINGTON AVENUE, NEW YORK, NEW YORK 10022-6069 (ATTN: DOUGLAS P. BARTNER,
ESQ.), AS ITS AUTHORIZED AGENT TO ACCEPT AND ACKNOWLEDGE ON ITS BEHALF
SERVICE OF ANY AND ALL PROCESS WHICH MAY BE SERVED IN ANY SUCH SUIT, ACTION
OR PROCEEDING IN ANY FEDERAL OR STATE COURT IN NEW YORK, NEW YORK, AND AGREES
THAT SERVICE OF PROCESS UPON SAID AGENT AT SAID ADDRESS AND WRITTEN NOTICE OF
SAID SERVICE OF MAKER MAILED OR DELIVERED TO MAKER IN THE MANNER PROVIDED
HEREIN SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON
MAKER, IN ANY SUCH SUIT, ACTION OR PROCEEDING IN THE STATE OF NEW YORK.
MAKER (I) SHALL GIVE PROMPT NOTICE TO HOLDER OF ANY CHANGED ADDRESS OF ITS
AUTHORIZED AGENT HEREUNDER, (II) MAY AT ANY TIME AND FROM TIME TO TIME
DESIGNATE A SUBSTITUTE AUTHORIZED AGENT WITH AN OFFICE IN NEW YORK, NEW YORK
(WHICH OFFICE SHALL BE DESIGNATED AS THE ADDRESS FOR SERVICE OF PROCESS), AND
(III) SHALL PROMPTLY DESIGNATE SUCH A SUBSTITUTE IF ITS AUTHORIZED AGENT
CEASES TO HAVE AN OFFICE IN NEW YORK, NEW YORK OR IS DISSOLVED WITHOUT
LEAVING A SUCCESSOR.
8. Miscellaneous
(a) This Secured Rent Deferral Note may be modified, amended,
waived, extended, changed, discharged or terminated only by an agreement in
writing signed by the party against whom enforcement of any such
modification, amendment, waiver, extension, change, discharge or termination
is sought.
6
<PAGE>
(b) No failure to exercise and no delay in exercising any
right, remedy, power or privilege hereunder or under the Mortgages shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, remedy, power or privilege hereunder or under the Mortgages preclude
any other or further exercise thereof or the exercise of any other right,
remedy, power or privilege. The rights, remedies, powers and privileges
herein and under the Mortgages are cumulative and not exclusive of any
rights, remedies, powers and privileges provided by law.
(c) This Secured Rent Deferral Note shall be binding upon and
inure to the benefit of Maker and Holder and their respective successors and
assign, except that Maker may not assign or transfer any of its rights or
obligations under this Secured Rent Deferral Note without the prior written
consent of Holder. Holder may sell, transfer or assign the Secured Rent
Deferral Note (or any of its rights hereunder) to any person upon prior
written notice of such sale, transfer or assignment to Maker. Upon any such
sale, transfer or assignment, the assignee shall have all the rights,
remedies, powers and privileges of Holder hereunder.
IN WITNESS WHEREOF, Maker has duly executed or has caused its
respective duly authorized officers to execute this Secured Rent Deferral
Note on its behalf, as of the day and year first above written.
DISCOVERY ZONE, INC.
By: /s/ Scott Bernstein
------------------------------
Name: Scott Bernstein
Title: President
7
<PAGE>
EXHIBIT A
Location Location Number
Indianapolis, Indiana (307)
Kennesaw, Georgia (334)
Schaumberg, Illinois (335)
Douglas County (Littleton), Colorado (338)
Columbus, Ohio (339)
Blaine (Coon Rapids), Minnesota (340)
Forest Park, Ohio (343)
Leon Valley, Texas (344)
Arlington, Texas (347)
San Antonio, Texas (348)
Sterling Heights, Michigan (349)
Philadelphia (Franklin Mills), Pennsylvania (352)
Aurora, Colorado (353)
Vancouver, Washington (357)
<PAGE>
Exhibit 4.61
Webster, TX (Location No. 322)
Discovery Zone, Inc. Secured Rent Deferral Note
(the "Secured Rent Deferral Note")
$24,948.00 (Initial Face Amount) July 29, 1997
(the "Effective Date")
FOR VALUE RECEIVED, the undersigned, Discovery Zone, Inc., a
Delaware corporation ("MAKER"), promises to pay to the order of McDonald's
Corporation, a Delaware corporation, its successors and assigns ("HOLDER"),
on or before the stated Maturity Date at such place as Holder may from time
to time designate in writing, the principal sum of (i) TWENTY-FOUR THOUSAND
NINE HUNDRED FORTY-EIGHT AND ZERO ONE HUNDREDTHS DOLLARS ($24,948.00) (such
sum, the "Original Principal Amount") plus (ii) effective as of the first day
of each month occurring after the date hereof through the Maturity Date (as
hereinafter defined), an amount equal to THREE THOUSAND ONE HUNDRED EIGHTEEN
AND FIFTY-ONE HUNDREDTHS DOLLARS ($3,118.50) (such amount, cumulatively for
each month elapsed after the Effective Date through the Maturity Date, the
"Additional Principal Amount") plus (iii) effective as of each anniversary of
the Effective Date occurring after the date hereof until the Maturity Date,
an amount equal to the amount of then unpaid and accrued interest (such
amount, the "Capitalized Interest Amount" and, collectively with the Original
Principal Amount and the Additional Principal Amount, the "Principal
Amount"), in lawful money of the United States of America, together with
interest accrued thereon, to be computed and paid as specified in Section 1
below.
1. Payment of Principal and Interest.
The Principal Amount of the Secured Rent Deferral Note
together with all interest accrued thereon shall be due and payable on the
earlier of (i) the last day of the term of the lease relating to the premises
now known as location no. 322 in Webster, Texas (the "Lease") and (ii) the
date to which the obligations under this Secured Rent Deferral Note become
due and payable in accordance with Section 3 below (the "Maturity Date"). On
the Maturity Date, Maker shall pay the Principal Amount then outstanding plus
all unpaid and uncapitalized interest accrued thereon to but not including
the Maturity Date in full.
The Maker may at any time and from time to time prepay the
Principal Amount then outstanding, in whole or in part, without premium or
penalty, upon at least one business day's prior written notice to Holder,
specifying the date and the amount of the prepayment. If any such notice is
given, the amount set forth in the notice shall be due and payable on the
date set forth in the notice, without any accrued interest to such date on
the amount to be prepaid. Amounts prepaid shall be in an aggregate principal
amount of at least $25,000 or a whole multiple of $10,000 in excess thereof.
Within five Business Days following the consummation of the
sale of any of the Collateral (as hereinafter defined), the Maker shall apply
the Net Proceeds first, to the prepayment of the Secured Rejection Note
issued by the Maker to the Holder as of the Effective
<PAGE>
Date in the manner provided therein, second, to the prepayment of this Secured
Rent Deferral Note and any other notes secured by the Collateral (including the
other Secured Rent Deferral Notes issued by the Maker to the Holder) then
outstanding, pro rata based on the then outstanding principal amounts of any
such notes, and the balance, if any, as provided in Section 6(b) of the
Mortgages. "Collateral" shall mean the Mortgaged Property or Trust Property, as
the case may be, as such terms are defined in the Mortgages and Assignments of
Rents, Deeds of Trust and/or similar security instruments granted by Maker in
favor of Holder of even date herewith with respect to the fourteen properties
listed on Exhibit A hereto (the "Mortgages"). "Net Proceeds" shall mean the
sales price for any item of the Collateral after deducting any brokerage fees
and commissions, transfer taxes and other customary closing costs payable by
Maker in connection with such sale.
The Principal Amount outstanding from time to time shall bear
interest at a rate per annum equal to 11% (the "Base Rate"). Interest on the
Principal Amount shall be due and payable on the Maturity Date. If all or
any portion of (i) any Principal Amount, (ii) any interest payable thereon or
(iii) any other amount payable hereunder shall not be paid when due (whether
at the stated maturity, by acceleration or otherwise), the delinquent amount
shall bear interest at a rate per annum which is equal to the Base Rate plus
2% (the "Default Rate") for each day elapsed from the date of such nonpayment
until such amount is paid in full (as well as after as before judgment).
2. Security for the Loan.
This Secured Rent Deferral Note is secured by the Mortgages.
3. Events of Default.
If any of the following events shall occur and be continuing:
(a) Maker shall fail to pay any Principal Amount when such
Principal Amount becomes due in accordance with the terms hereof within ten
days after receipt of written notice from the Holder of Maker's failure to
pay such Principal Amount or Maker shall fail to pay any interest on the
Principal Amount such interest becomes due in accordance with the terms
hereof within ten days after receipt of written notice from the Holder of
Maker's failure to pay such interest on the Principal Amount;
(b) Maker or any of its subsidiaries (i) shall default in any
payment of principal of or interest of any indebtedness (other than this and
the other Secured Rent Deferral Notes and the Secured Rejection Note) beyond
the period of grace, if any, provided in the instrument or agreement under
which such indebtedness was created in an aggregate amount equal to or
greater than $2.5 million or (ii) shall default in the observance or
performance of any other agreement or condition relating to any such
indebtedness or contained in any instrument or agreement evidencing, securing
or relating thereto (beyond the expiration of any cure period), or any other
event shall occur or condition exist, the effect of which default or event or
condition
2
<PAGE>
is to cause, or to permit the holder or holders of such indebtedness to
cause, with the giving of notice if required, such indebtedness to become due
prior to its stated maturity;
(c) Maker or any of its subsidiaries shall default in the
observance or performance of any payment or other obligation under two or
more any of the lease agreement under which Maker or such affiliate leases
real property from McDonald's Corporation and, as a result of such defaults,
McDonald's Corporation terminates two or more of such leases in accordance
with their respective terms;
(d) Maker or any of its subsidiaries shall default in the
observance or performance of any agreement or condition contained in this
Secured Rent Deferral Note (other than any agreement relating to the payment
of the Principal Amount and/or any interest thereon) or in any of the
Mortgages and such default shall continued unremedied for a period of thirty
(30) days; provided that if such default is not readily susceptible of cure
in such thirty (30) day period, and provided that Maker proceeds in a
diligent manner to cure such default, Maker shall have such additional time
to effect such cure as shall be reasonably necessary to effect such cure;
(e) Excepting only those continuing proceedings relating to
the bankruptcy cases of Maker's debtor predecessors in interest captioned In
re Discovery Zone, Inc., et al., Case No. 96-411 (HSB) (Jointly
Administered), before the United States Bankruptcy Court for the District of
Delaware, Maker or any of its subsidiaries shall commence any case,
proceeding or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief
entered with respect to it, or seeking to adjudicate it a bankruptcy or
insolvent, or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with respect to it or
its debts, or (B) seeking appointment of a receiver, trustee, custodian,
conservator or other similar official for it or for all or any substantial
part of its assets, or the Maker or any of its subsidiaries shall make a
general assignment for the benefit of its creditors; or (ii) there shall be
commenced against the Maker or any of its subsidiaries any case proceeding or
other action of a nature referred to in clause (i) above which (A) results in
the entry of an order fro relief or any such adjudication or appointment or
(B) remains undismissed, undischarged or unbonded for a period of 60 days; or
(iii) there shall be commenced against the Maker or any of its subsidiaries
any case, proceeding or other action seeking issuance of a warrant of
attachment, execution, distraint or similar process against all or any
substantial part of its assets which results in the entry of an order for any
such relief which shall not have been vacated, discharged, or stayed or
bonded pending appeal within 60 days from the entry thereof; or (iv) the
Maker or any of its subsidiaries shall take any action in furtherance of, or
indicating its consent to, approval of, or acquiescence in, any of the acts
set froth in clause (i), (ii) or (iii) above; or (v) the Maker or any of its
subsidiaries shall generally not, or shall be unable to, or shall admit in
writing its inability to, pay its debts as they become due;
(f) One or more judgments or decrees shall be entered against
the Maker or any of its subsidiaries involving in the aggregate a liability
(not paid or fully covered by insurance, subject to a commercially reasonable
deductible) of $2.5 million or more and all such
3
<PAGE>
judgments or decrees shall not have been vacated, discharged, stayed or
bonded pending appeal within 60 days from he entry thereof; or
(g) Any of the Mortgages shall cease, for any reason, to be
in full force and effect, or Maker or any of its subsidiaries shall so assert
or the liens created by any of the Mortgages shall cease to be enforceable
and of the same effect and priority purported to be created thereby;
then, (A) if such event is an event specified in clause (i), (ii) or (iv) of
subparagraph (e) above, automatically this Secured Rent Deferral Note and all
amounts owing hereunder shall immediately become due and payable and all rent
deferrals in respect of the Lease shall cease, and (B) if such event is any
other event specified in this Section 3, Holder may, by notice to Maker,
declare the Secured Rent Deferral Note and all amounts owing hereunder to be
immediately due and payable, whereupon the same shall immediately become due
and payable and all rent deferrals in respect of the Lease shall cease.
Except as expressly provided in this paragraph, presentment, demand, protest
and all other notices of any kind are hereby expressly waived.
4. Payment of Expenses and Taxes.
Maker agrees (i) to pay or reimburse Holder for all its costs
and expenses incurred in connection with the enforcement or preservation of
any rights under this Secured Rent Deferral Note and the Mortgages, including
without limitation the reasonable fees and disbursements of counsel to Holder
and (ii) to pay, indemnify, and hold Holder harmless from, any and all
recording and filing fees and any and all liabilities with respect to, or
resulting from any delay in paying, stamp and other similar taxes, if any,
which may be payable or determined to be payable in connection with the
execution and delivery of, or consummation or administration of any of the
transactions contemplated by, or any amendment, supplement or modification
of, or any waiver or consent under or in respect of, this Secured Rent
Deferral Note and the Mortgages and (iii) to pay, indemnify and hold Holder
harmless from and against any and all other liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever with respect to the execution,
delivery, enforcement, performance and administration of this Secured Rent
Deferral Note and the Mortgages, including without limitation any of the
foregoing relating to the violation of, noncompliance with or liability under
environmental law applicable to the operations of Maker or any of its
subsidiaries on the Collateral; provided that Maker shall have no obligation
hereunder to Holder with respect to indemnified liabilities arising from the
gross negligence or willful misconduct of the Holder or any environmental
activities or contamination occurring on any Collateral after Maker transfers
or conveys such Collateral to Holder or any other person following a
foreclosure on such Collateral or deed-in-lieu thereof. The agreements in
this Section 4 shall survive repayment of the Secured Rent Deferral Note and
all other amounts payable hereunder.
4
<PAGE>
5. Authority.
Maker represents that it has full power authority and legal
right to execute and deliver this Secured Rent Deferral Note and the
Mortgages and to perform its obligations hereunder and thereunder, and that
this Secured Rent Deferral Note and the Mortgages constitute the valid and
binding obligation of Maker, enforceable against Maker in accordance with its
terms, except as enforceability may be limited by (i) applicable bankruptcy,
insolvency, reorganization, moratorium, or similar laws affecting the
enforcement of creditors' rights generally and (ii) general principles of
equity, regardless of whether considered in proceedings at law or in equity.
6. Notices.
All notices, requests and demands to or upon Maker or Holder
to be effective shall be in writing (including by facsimile transmission),
and, unless otherwise expressly provided therein, shall be deemed to have
been duly given or made (a) in the case of delivery by hand, when delivered,
(b) in the case of delivery by mail, three days after being deposited in the
mails, postage prepaid, or (c) in the case of delivery by facsimile
transmission, when sent and receipt has been confirmed, addressed as follows,
or to such other address as may be hereafter notified by the respective
parities hereto:
Maker: Discovery Zone, Inc.
110 East Broward Blvd
Fort Lauderdale, Florida 33301
Attn: Chief Executive Officer
Telephone Number: (954) 627-2400
Telecopy Number: (954) 627-2760
Holder: McDonald's Corporation
One McDonald's Plaza
Oak Brook, Illinois 60523
Attn: General Counsel
Telephone Number: (630) 623-3000
Telecopy Number: (630) 623-5865
7. Consent to Jurisdiction; Governing Law.
(a) THIS SECURED RENT DEFERRAL NOTE WAS NEGOTIATED IN THE
STATE OF NEW YORK, AND MADE BY MAKER AND ACCEPTED BY HOLDER IN THE STATE OF
NEW YORK, WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE
PARTIES AND TO THE UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL
RESPECTS, INCLUDING MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS
SECURED RENT DEFERRAL NOTE AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
5
<PAGE>
STATE OF NEW YORK APPLICABLE TO NOTES MADE AND PERFORMED IN SUCH STATE AND
ANY APPLICABLE LAW OF THE UNITED STATES OF AMERICA. IT IS BEING UNDERSTOOD
THAT THE LAW OF THE STATE OF NEW YORK SHALL GOVERN THE VALIDITY AND THE
ENFORCEABILITY OF THIS SECURED RENT DEFERRAL NOTE AND ALL OF THE INDEBTEDNESS
OR OBLIGATIONS ARISING HEREUNDER. TO THE FULLEST EXTENT PERMITTED BY LAW,
MAKER HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY CLAIM TO ASSERT THAT
THE LAW OF ANY OTHER JURISDICTION GOVERNS THIS SECURED RENT DEFERRAL NOTE,
AND THIS SECURED RENT DEFERRAL NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(b) ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST MAKER OR
HOLDER ARISING OUT OF OR RELATING TO THIS SECURED RENT DEFERRAL NOTE SHALL BE
INSTITUTED IN ANY FEDERAL OR STATE COURT IN NEW YORK, NEW YORK, AND MAKER
WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF
VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND MAKER HEREBY IRREVOCABLY
SUBMITS TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION OR
PROCEEDING. MAKER DOES HEREBY DESIGNATE AND APPOINT SHEARMAN & STERLING, 599
LEXINGTON AVENUE, NEW YORK, NEW YORK 10022-6069 (ATTN: DOUGLAS P. BARTNER,
ESQ.), AS ITS AUTHORIZED AGENT TO ACCEPT AND ACKNOWLEDGE ON ITS BEHALF
SERVICE OF ANY AND ALL PROCESS WHICH MAY BE SERVED IN ANY SUCH SUIT, ACTION
OR PROCEEDING IN ANY FEDERAL OR STATE COURT IN NEW YORK, NEW YORK, AND AGREES
THAT SERVICE OF PROCESS UPON SAID AGENT AT SAID ADDRESS AND WRITTEN NOTICE OF
SAID SERVICE OF MAKER MAILED OR DELIVERED TO MAKER IN THE MANNER PROVIDED
HEREIN SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON
MAKER, IN ANY SUCH SUIT, ACTION OR PROCEEDING IN THE STATE OF NEW YORK.
MAKER (I) SHALL GIVE PROMPT NOTICE TO HOLDER OF ANY CHANGED ADDRESS OF ITS
AUTHORIZED AGENT HEREUNDER, (II) MAY AT ANY TIME AND FROM TIME TO TIME
DESIGNATE A SUBSTITUTE AUTHORIZED AGENT WITH AN OFFICE IN NEW YORK, NEW YORK
(WHICH OFFICE SHALL BE DESIGNATED AS THE ADDRESS FOR SERVICE OF PROCESS), AND
(III) SHALL PROMPTLY DESIGNATE SUCH A SUBSTITUTE IF ITS AUTHORIZED AGENT
CEASES TO HAVE AN OFFICE IN NEW YORK, NEW YORK OR IS DISSOLVED WITHOUT
LEAVING A SUCCESSOR.
8. Miscellaneous
(a) This Secured Rent Deferral Note may be modified, amended,
waived, extended, changed, discharged or terminated only by an agreement in
writing signed by the party against whom enforcement of any such
modification, amendment, waiver, extension, change, discharge or termination
is sought.
6
<PAGE>
(b) No failure to exercise and no delay in exercising any
right, remedy, power or privilege hereunder or under the Mortgages shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, remedy, power or privilege hereunder or under the Mortgages preclude
any other or further exercise thereof or the exercise of any other right,
remedy, power or privilege. The rights, remedies, powers and privileges
herein and under the Mortgages are cumulative and not exclusive of any
rights, remedies, powers and privileges provided by law.
(c) This Secured Rent Deferral Note shall be binding upon and
inure to the benefit of Maker and Holder and their respective successors and
assign, except that Maker may not assign or transfer any of its rights or
obligations under this Secured Rent Deferral Note without the prior written
consent of Holder. Holder may sell, transfer or assign the Secured Rent
Deferral Note (or any of its rights hereunder) to any person upon prior
written notice of such sale, transfer or assignment to Maker. Upon any such
sale, transfer or assignment, the assignee shall have all the rights,
remedies, powers and privileges of Holder hereunder.
IN WITNESS WHEREOF, Maker has duly executed or has caused its
respective duly authorized officers to execute this Secured Rent Deferral
Note on its behalf, as of the day and year first above written.
DISCOVERY ZONE, INC.
By: /s/ Scott Bernstein
-------------------------------
Name: Scott Bernstein
Title: President
7
<PAGE>
EXHIBIT A
Location Location Number
------------------------------------------ ----------------
Indianapolis, Indiana (307)
Kennesaw, Georgia (334)
Schaumberg, Illinois (335)
Douglas County (Littleton), Colorado (338)
Columbus, Ohio (339)
Blaine (Coon Rapids), Minnesota (340)
Forest Park, Ohio (343)
Leon Valley, Texas (344)
Arlington, Texas (347)
San Antonio, Texas (348)
Sterling Heights, Michigan (349)
Philadelphia (Franklin Mills), Pennsylvania (352)
Aurora, Colorado (353)
Vancouver, Washington (357)
<PAGE>
Exhibit 4.62
Houston, TX (Location No. 313)
Discovery Zone, Inc. Secured Rent Deferral Note
(the "Secured Rent Deferral Note")
$25,512.72 (Initial Face Amount) July 29, 1997
(the "Effective Date")
FOR VALUE RECEIVED, the undersigned, Discovery Zone, Inc., a
Delaware corporation ("MAKER"), promises to pay to the order of McDonald's
Corporation, a Delaware corporation, its successors and assigns ("HOLDER"),
on or before the stated Maturity Date at such place as Holder may from time
to time designate in writing, the principal sum of (i) TWENTY-FIVE THOUSAND
FIVE HUNDRED TWELVE AND SEVENTY-TWO ONE HUNDREDTHS DOLLARS ($25,512.72) (such
sum, the "Original Principal Amount") plus (ii) effective as of the first day
of each month occurring after the date hereof through the Maturity Date (as
hereinafter defined), an amount equal to THREE THOUSAND ONE HUNDRED EIGHTY
NINE AND NINE ONE HUNDREDTHS DOLLARS ($3,189.09) (such amount, cumulatively
for each month elapsed after the Effective Date through the Maturity Date,
the "Additional Principal Amount") plus (iii) effective as of each
anniversary of the Effective Date occurring after the date hereof until the
Maturity Date, an amount equal to the amount of then unpaid and accrued
interest (such amount, the "Capitalized Interest Amount" and, collectively
with the Original Principal Amount and the Additional Principal Amount, the
"Principal Amount"), in lawful money of the United States of America,
together with interest accrued thereon, to be computed and paid as specified
in Section 1 below.
1. Payment of Principal and Interest.
The Principal Amount of the Secured Rent Deferral Note
together with all interest accrued thereon shall be due and payable on the
earlier of (i) the last day of the term of the lease relating to the premises
now known as location no. 313 in Houston, Texas (the "Lease") and (ii) the
date to which the obligations under this Secured Rent Deferral Note become
due and payable in accordance with Section 3 below (the "Maturity Date"). On
the Maturity Date, Maker shall pay the Principal Amount then outstanding plus
all unpaid and uncapitalized interest accrued thereon to but not including
the Maturity Date in full.
The Maker may at any time and from time to time prepay the
Principal Amount then outstanding, in whole or in part, without premium or
penalty, upon at least one business day's prior written notice to Holder,
specifying the date and the amount of the prepayment. If any such notice is
given, the amount set forth in the notice shall be due and payable on the
date set forth in the notice, without any accrued interest to such date on
the amount to be prepaid. Amounts prepaid shall be in an aggregate principal
amount of at least $25,000 or a whole multiple of $10,000 in excess thereof.
Within five Business Days following the consummation of the
sale of any of the Collateral (as hereinafter defined), the Maker shall apply
the Net Proceeds first, to the prepayment of the Secured Rejection Note
issued by the Maker to the Holder as of the Effective
<PAGE>
Date in the manner provided therein, second, to the prepayment of this
Secured Rent Deferral Note and any other notes secured by the Collateral
(including the other Secured Rent Deferral Notes issued by the Maker to the
Holder) then outstanding, pro rata based on the then outstanding principal
amounts of any such notes, and the balance, if any, as provided in Section
6(b) of the Mortgages. "Collateral" shall mean the Mortgaged Property or
Trust Property, as the case may be, as such terms are defined in the
Mortgages and Assignments of Rents, Deeds of Trust and/or similar security
instruments granted by Maker in favor of Holder of even date herewith with
respect to the fourteen properties listed on Exhibit A hereto (the
"Mortgages"). "Net Proceeds" shall mean the sales price for any item of the
Collateral after deducting any brokerage fees and commissions, transfer taxes
and other customary closing costs payable by Maker in connection with such
sale.
The Principal Amount outstanding from time to time shall bear
interest at a rate per annum equal to 11% (the "Base Rate"). Interest on the
Principal Amount shall be due and payable on the Maturity Date. If all or
any portion of (i) any Principal Amount, (ii) any interest payable thereon or
(iii) any other amount payable hereunder shall not be paid when due (whether
at the stated maturity, by acceleration or otherwise), the delinquent amount
shall bear interest at a rate per annum which is equal to the Base Rate plus
2% (the "Default Rate") for each day elapsed from the date of such nonpayment
until such amount is paid in full (as well as after as before judgment).
2. Security for the Loan.
This Secured Rent Deferral Note is secured by the Mortgages.
3. Events of Default.
If any of the following events shall occur and be continuing:
(a) Maker shall fail to pay any Principal Amount when such
Principal Amount becomes due in accordance with the terms hereof within ten
days after receipt of written notice from the Holder of Maker's failure to
pay such Principal Amount or Maker shall fail to pay any interest on the
Principal Amount such interest becomes due in accordance with the terms
hereof within ten days after receipt of written notice from the Holder of
Maker's failure to pay such interest on the Principal Amount;
(b) Maker or any of its subsidiaries (i) shall default in any
payment of principal of or interest of any indebtedness (other than this and
the other Secured Rent Deferral Notes and the Secured Rejection Note) beyond
the period of grace, if any, provided in the instrument or agreement under
which such indebtedness was created in an aggregate amount equal to or
greater than $2.5 million or (ii) shall default in the observance or
performance of any other agreement or condition relating to any such
indebtedness or contained in any instrument or agreement evidencing, securing
or relating thereto (beyond the expiration of any cure period), or any other
event shall occur or condition exist, the effect of which default or event or
condition is
2
<PAGE>
to cause, or to permit the holder or holders of such indebtedness to cause, with
the giving of notice if required, such indebtedness to become due prior to its
stated maturity;
(c) Maker or any of its subsidiaries shall default in the
observance or performance of any payment or other obligation under two or
more any of the lease agreement under which Maker or such affiliate leases
real property from McDonald's Corporation and, as a result of such defaults,
McDonald's Corporation terminates two or more of such leases in accordance
with their respective terms;
(d) Maker or any of its subsidiaries shall default in the
observance or performance of any agreement or condition contained in this
Secured Rent Deferral Note (other than any agreement relating to the payment
of the Principal Amount and/or any interest thereon) or in any of the
Mortgages and such default shall continued unremedied for a period of thirty
(30) days; provided that if such default is not readily susceptible of cure
in such thirty (30) day period, and provided that Maker proceeds in a
diligent manner to cure such default, Maker shall have such additional time
to effect such cure as shall be reasonably necessary to effect such cure;
(e) Excepting only those continuing proceedings relating to
the bankruptcy cases of Maker's debtor predecessors in interest captioned In
re Discovery Zone, Inc., et al., Case No. 96-411 (HSB) (Jointly
Administered), before the United States Bankruptcy Court for the District of
Delaware, Maker or any of its subsidiaries shall commence any case,
proceeding or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief
entered with respect to it, or seeking to adjudicate it a bankruptcy or
insolvent, or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with respect to it or
its debts, or (B) seeking appointment of a receiver, trustee, custodian,
conservator or other similar official for it or for all or any substantial
part of its assets, or the Maker or any of its subsidiaries shall make a
general assignment for the benefit of its creditors; or (ii) there shall be
commenced against the Maker or any of its subsidiaries any case proceeding or
other action of a nature referred to in clause (i) above which (A) results in
the entry of an order fro relief or any such adjudication or appointment or
(B) remains undismissed, undischarged or unbonded for a period of 60 days; or
(iii) there shall be commenced against the Maker or any of its subsidiaries
any case, proceeding or other action seeking issuance of a warrant of
attachment, execution, distraint or similar process against all or any
substantial part of its assets which results in the entry of an order for any
such relief which shall not have been vacated, discharged, or stayed or
bonded pending appeal within 60 days from the entry thereof; or (iv) the
Maker or any of its subsidiaries shall take any action in furtherance of, or
indicating its consent to, approval of, or acquiescence in, any of the acts
set froth in clause (i), (ii) or (iii) above; or (v) the Maker or any of its
subsidiaries shall generally not, or shall be unable to, or shall admit in
writing its inability to, pay its debts as they become due;
(f) One or more judgments or decrees shall be entered against
the Maker or any of its subsidiaries involving in the aggregate a liability
(not paid or fully covered by insurance, subject to a commercially reasonable
deductible) of $2.5 million or more and all such
3
<PAGE>
judgments or decrees shall not have been vacated, discharged, stayed or bonded
pending appeal within 60 days from he entry thereof; or
(g) Any of the Mortgages shall cease, for any reason, to be
in full force and effect, or Maker or any of its subsidiaries shall so assert
or the liens created by any of the Mortgages shall cease to be enforceable
and of the same effect and priority purported to be created thereby;
then, (A) if such event is an event specified in clause (i), (ii) or (iv) of
subparagraph (e) above, automatically this Secured Rent Deferral Note and all
amounts owing hereunder shall immediately become due and payable and all rent
deferrals in respect of the Lease shall cease, and (B) if such event is any
other event specified in this Section 3, Holder may, by notice to Maker,
declare the Secured Rent Deferral Note and all amounts owing hereunder to be
immediately due and payable, whereupon the same shall immediately become due
and payable and all rent deferrals in respect of the Lease shall cease.
Except as expressly provided in this paragraph, presentment, demand, protest
and all other notices of any kind are hereby expressly waived.
4. Payment of Expenses and Taxes.
Maker agrees (i) to pay or reimburse Holder for all its costs
and expenses incurred in connection with the enforcement or preservation of
any rights under this Secured Rent Deferral Note and the Mortgages, including
without limitation the reasonable fees and disbursements of counsel to Holder
and (ii) to pay, indemnify, and hold Holder harmless from, any and all
recording and filing fees and any and all liabilities with respect to, or
resulting from any delay in paying, stamp and other similar taxes, if any,
which may be payable or determined to be payable in connection with the
execution and delivery of, or consummation or administration of any of the
transactions contemplated by, or any amendment, supplement or modification
of, or any waiver or consent under or in respect of, this Secured Rent
Deferral Note and the Mortgages and (iii) to pay, indemnify and hold Holder
harmless from and against any and all other liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever with respect to the execution,
delivery, enforcement, performance and administration of this Secured Rent
Deferral Note and the Mortgages, including without limitation any of the
foregoing relating to the violation of, noncompliance with or liability under
environmental law applicable to the operations of Maker or any of its
subsidiaries on the Collateral; provided that Maker shall have no obligation
hereunder to Holder with respect to indemnified liabilities arising from the
gross negligence or willful misconduct of the Holder or any environmental
activities or contamination occurring on any Collateral after Maker transfers
or conveys such Collateral to Holder or any other person following a
foreclosure on such Collateral or deed-in-lieu thereof. The agreements in
this Section 4 shall survive repayment of the Secured Rent Deferral Note and
all other amounts payable hereunder.
4
<PAGE>
5. Authority.
Maker represents that it has full power authority and legal
right to execute and deliver this Secured Rent Deferral Note and the
Mortgages and to perform its obligations hereunder and thereunder, and that
this Secured Rent Deferral Note and the Mortgages constitute the valid and
binding obligation of Maker, enforceable against Maker in accordance with its
terms, except as enforceability may be limited by (i) applicable bankruptcy,
insolvency, reorganization, moratorium, or similar laws affecting the
enforcement of creditors' rights generally and (ii) general principles of
equity, regardless of whether considered in proceedings at law or in equity.
6. Notices.
All notices, requests and demands to or upon Maker or Holder
to be effective shall be in writing (including by facsimile transmission),
and, unless otherwise expressly provided therein, shall be deemed to have
been duly given or made (a) in the case of delivery by hand, when delivered,
(b) in the case of delivery by mail, three days after being deposited in the
mails, postage prepaid, or (c) in the case of delivery by facsimile
transmission, when sent and receipt has been confirmed, addressed as follows,
or to such other address as may be hereafter notified by the respective
parities hereto:
Maker: Discovery Zone, Inc.
110 East Broward Blvd
Fort Lauderdale, Florida 33301
Attn: Chief Executive Officer
Telephone Number: (954) 627-2400
Telecopy Number: (954) 627-2760
Holder: McDonald's Corporation
One McDonald's Plaza
Oak Brook, Illinois 60523
Attn: General Counsel
Telephone Number: (630) 623-3000
Telecopy Number: (630) 623-5865
7. Consent to Jurisdiction; Governing Law.
(a) THIS SECURED RENT DEFERRAL NOTE WAS NEGOTIATED IN THE
STATE OF NEW YORK, AND MADE BY MAKER AND ACCEPTED BY HOLDER IN THE STATE OF
NEW YORK, WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE
PARTIES AND TO THE UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL
RESPECTS, INCLUDING MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS
SECURED RENT DEFERRAL NOTE AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
5
<PAGE>
STATE OF NEW YORK APPLICABLE TO NOTES MADE AND PERFORMED IN SUCH STATE AND ANY
APPLICABLE LAW OF THE UNITED STATES OF AMERICA. IT IS BEING UNDERSTOOD THAT THE
LAW OF THE STATE OF NEW YORK SHALL GOVERN THE VALIDITY AND THE ENFORCEABILITY OF
THIS SECURED RENT DEFERRAL NOTE AND ALL OF THE INDEBTEDNESS OR OBLIGATIONS
ARISING HEREUNDER. TO THE FULLEST EXTENT PERMITTED BY LAW, MAKER HEREBY
UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY CLAIM TO ASSERT THAT THE LAW OF ANY
OTHER JURISDICTION GOVERNS THIS SECURED RENT DEFERRAL NOTE, AND THIS SECURED
RENT DEFERRAL NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK.
(b) ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST MAKER OR HOLDER
ARISING OUT OF OR RELATING TO THIS SECURED RENT DEFERRAL NOTE SHALL BE
INSTITUTED IN ANY FEDERAL OR STATE COURT IN NEW YORK, NEW YORK, AND MAKER WAIVES
ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY
SUCH SUIT, ACTION OR PROCEEDING, AND MAKER HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION OR PROCEEDING. MAKER DOES
HEREBY DESIGNATE AND APPOINT SHEARMAN & STERLING, 599 LEXINGTON AVENUE, NEW
YORK, NEW YORK 10022-6069 (ATTN: DOUGLAS P. BARTNER, ESQ.), AS ITS AUTHORIZED
AGENT TO ACCEPT AND ACKNOWLEDGE ON ITS BEHALF SERVICE OF ANY AND ALL PROCESS
WHICH MAY BE SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING IN ANY FEDERAL OR
STATE COURT IN NEW YORK, NEW YORK, AND AGREES THAT SERVICE OF PROCESS UPON SAID
AGENT AT SAID ADDRESS AND WRITTEN NOTICE OF SAID SERVICE OF MAKER MAILED OR
DELIVERED TO MAKER IN THE MANNER PROVIDED HEREIN SHALL BE DEEMED IN EVERY
RESPECT EFFECTIVE SERVICE OF PROCESS UPON MAKER, IN ANY SUCH SUIT, ACTION OR
PROCEEDING IN THE STATE OF NEW YORK. MAKER (I) SHALL GIVE PROMPT NOTICE TO
HOLDER OF ANY CHANGED ADDRESS OF ITS AUTHORIZED AGENT HEREUNDER, (II) MAY AT ANY
TIME AND FROM TIME TO TIME DESIGNATE A SUBSTITUTE AUTHORIZED AGENT WITH AN
OFFICE IN NEW YORK, NEW YORK (WHICH OFFICE SHALL BE DESIGNATED AS THE ADDRESS
FOR SERVICE OF PROCESS), AND (III) SHALL PROMPTLY DESIGNATE SUCH A SUBSTITUTE IF
ITS AUTHORIZED AGENT CEASES TO HAVE AN OFFICE IN NEW YORK, NEW YORK OR IS
DISSOLVED WITHOUT LEAVING A SUCCESSOR.
8. Miscellaneous
(a) This Secured Rent Deferral Note may be modified, amended,
waived, extended, changed, discharged or terminated only by an agreement in
writing signed by the party against whom enforcement of any such
modification, amendment, waiver, extension, change, discharge or termination
is sought.
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<PAGE>
(b) No failure to exercise and no delay in exercising any
right, remedy, power or privilege hereunder or under the Mortgages shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, remedy, power or privilege hereunder or under the Mortgages preclude
any other or further exercise thereof or the exercise of any other right,
remedy, power or privilege. The rights, remedies, powers and privileges
herein and under the Mortgages are cumulative and not exclusive of any
rights, remedies, powers and privileges provided by law.
(c) This Secured Rent Deferral Note shall be binding upon and
inure to the benefit of Maker and Holder and their respective successors and
assign, except that Maker may not assign or transfer any of its rights or
obligations under this Secured Rent Deferral Note without the prior written
consent of Holder. Holder may sell, transfer or assign the Secured Rent
Deferral Note (or any of its rights hereunder) to any person upon prior
written notice of such sale, transfer or assignment to Maker. Upon any such
sale, transfer or assignment, the assignee shall have all the rights,
remedies, powers and privileges of Holder hereunder.
IN WITNESS WHEREOF, Maker has duly executed or has caused its
respective duly authorized officers to execute this Secured Rent Deferral
Note on its behalf, as of the day and year first above written.
DISCOVERY ZONE, INC.
By: /s/ Scott Bernstein
--------------------------------
Name: Scott Bernstein
Title: President
7
<PAGE>
EXHIBIT A
Location Location Number
-------- ---------------
Indianapolis, Indiana (307)
Kennesaw, Georgia (334)
Schaumberg, Illinois (335)
Douglas County (Littleton), Colorado (338)
Columbus, Ohio (339)
Blaine (Coon Rapids), Minnesota (340)
Forest Park, Ohio (343)
Leon Valley, Texas (344)
Arlington, Texas (347)
San Antonio, Texas (348)
Sterling Heights, Michigan (349)
Philadelphia (Franklin Mills), Pennsylvania (352)
Aurora, Colorado (353)
Vancouver, Washington (357)
<PAGE>
Exhibit 4.63
Manchester, MO (Location No. 321)
Discovery Zone, Inc. Secured Rent Deferral Note
(the "Secured Rent Deferral Note")
$20,276.00 (Initial Face Amount) July 29, 1997
(the "Effective Date")
FOR VALUE RECEIVED, the undersigned, Discovery Zone, Inc., a
Delaware corporation ("MAKER"), promises to pay to the order of McDonald's
Corporation, a Delaware corporation, its successors and assigns ("HOLDER"),
on or before the stated Maturity Date at such place as Holder may from time
to time designate in writing, the principal sum of (i) TWENTY THOUSAND TWO
HUNDRED SEVENTY-SIX AND ZERO ONE HUNDREDTHS DOLLARS ($20,276.00) (such sum,
the "Original Principal Amount") plus (ii) effective as of the first day of
each month occurring after the date hereof through the Maturity Date (as
hereinafter defined), an amount equal to TWO THOUSAND FIVE HUNDRED
THIRTY-FOUR AND FIFTY ONE HUNDREDTHS DOLLARS ($2,534.50) (such amount,
cumulatively for each month elapsed after the Effective Date through the
Maturity Date, the "Additional Principal Amount") plus (iii) effective as of
each anniversary of the Effective Date occurring after the date hereof until
the Maturity Date, an amount equal to the amount of then unpaid and accrued
interest (such amount, the "Capitalized Interest Amount" and, collectively
with the Original Principal Amount and the Additional Principal Amount, the
"Principal Amount"), in lawful money of the United States of America,
together with interest accrued thereon, to be computed and paid as specified
in Section 1 below.
1. Payment of Principal and Interest.
The Principal Amount of the Secured Rent Deferral Note
together with all interest accrued thereon shall be due and payable on the
earlier of (i) the last day of the term of the lease relating to the premises
now known as location no. 321 in Manchester, Missouri (the "Lease") and (ii)
the date to which the obligations under this Secured Rent Deferral Note
become due and payable in accordance with Section 3 below (the "Maturity
Date"). On the Maturity Date, Maker shall pay the Principal Amount then
outstanding plus all unpaid and uncapitalized interest accrued thereon to but
not including the Maturity Date in full.
The Maker may at any time and from time to time prepay the
Principal Amount then outstanding, in whole or in part, without premium or
penalty, upon at least one business day's prior written notice to Holder,
specifying the date and the amount of the prepayment. If any such notice is
given, the amount set forth in the notice shall be due and payable on the
date set forth in the notice, without any accrued interest to such date on
the amount to be prepaid. Amounts prepaid shall be in an aggregate principal
amount of at least $25,000 or a whole multiple of $10,000 in excess thereof.
Within five Business Days following the consummation of the
sale of any of the Collateral (as hereinafter defined), the Maker shall apply
the Net Proceeds first, to the prepayment of the Secured Rejection Note
issued by the Maker to the Holder as of the Effective
<PAGE>
Date in the manner provided therein, second, to the prepayment of this
Secured Rent Deferral Note and any other notes secured by the Collateral
(including the other Secured Rent Deferral Notes issued by the Maker to the
Holder) then outstanding, pro rata based on the then outstanding principal
amounts of any such notes, and the balance, if any, as provided in Section
6(b) of the Mortgages. "Collateral" shall mean the Mortgaged Property or
Trust Property, as the case may be, as such terms are defined in the
Mortgages and Assignments of Rents, Deeds of Trust and/or similar security
instruments granted by Maker in favor of Holder of even date herewith with
respect to the fourteen properties listed on Exhibit A hereto (the
"Mortgages"). "Net Proceeds" shall mean the sales price for any item of the
Collateral after deducting any brokerage fees and commissions, transfer taxes
and other customary closing costs payable by Maker in connection with such
sale.
The Principal Amount outstanding from time to time shall bear
interest at a rate per annum equal to 11% (the "Base Rate"). Interest on the
Principal Amount shall be due and payable on the Maturity Date. If all or
any portion of (i) any Principal Amount, (ii) any interest payable thereon or
(iii) any other amount payable hereunder shall not be paid when due (whether
at the stated maturity, by acceleration or otherwise), the delinquent amount
shall bear interest at a rate per annum which is equal to the Base Rate plus
2% (the "Default Rate") for each day elapsed from the date of such nonpayment
until such amount is paid in full (as well as after as before judgment).
2. Security for the Loan.
This Secured Rent Deferral Note is secured by the Mortgages.
3. Events of Default.
If any of the following events shall occur and be continuing:
(a) Maker shall fail to pay any Principal Amount when such
Principal Amount becomes due in accordance with the terms hereof within ten
days after receipt of written notice from the Holder of Maker's failure to
pay such Principal Amount or Maker shall fail to pay any interest on the
Principal Amount such interest becomes due in accordance with the terms
hereof within ten days after receipt of written notice from the Holder of
Maker's failure to pay such interest on the Principal Amount;
(b) Maker or any of its subsidiaries (i) shall default in any
payment of principal of or interest of any indebtedness (other than this and
the other Secured Rent Deferral Notes and the Secured Rejection Note) beyond
the period of grace, if any, provided in the instrument or agreement under
which such indebtedness was created in an aggregate amount equal to or
greater than $2.5 million or (ii) shall default in the observance or
performance of any other agreement or condition relating to any such
indebtedness or contained in any instrument or agreement evidencing, securing
or relating thereto (beyond the expiration of any cure period), or any other
event shall occur or condition exist, the effect of which default or event or
condition is
2
<PAGE>
to cause, or to permit the holder or holders of such indebtedness to cause,
with the giving of notice if required, such indebtedness to become due prior
to its stated maturity;
(c) Maker or any of its subsidiaries shall default in the
observance or performance of any payment or other obligation under two or
more any of the lease agreement under which Maker or such affiliate leases
real property from McDonald's Corporation and, as a result of such defaults,
McDonald's Corporation terminates two or more of such leases in accordance
with their respective terms;
(d) Maker or any of its subsidiaries shall default in the
observance or performance of any agreement or condition contained in this
Secured Rent Deferral Note (other than any agreement relating to the payment
of the Principal Amount and/or any interest thereon) or in any of the
Mortgages and such default shall continued unremedied for a period of thirty
(30) days; provided that if such default is not readily susceptible of cure
in such thirty (30) day period, and provided that Maker proceeds in a
diligent manner to cure such default, Maker shall have such additional time
to effect such cure as shall be reasonably necessary to effect such cure;
(e) Excepting only those continuing proceedings relating to
the bankruptcy cases of Maker's debtor predecessors in interest captioned In
re Discovery Zone, Inc., et al., Case No. 96-411 (HSB) (Jointly
Administered), before the United States Bankruptcy Court for the District of
Delaware, Maker or any of its subsidiaries shall commence any case,
proceeding or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief
entered with respect to it, or seeking to adjudicate it a bankruptcy or
insolvent, or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with respect to it or
its debts, or (B) seeking appointment of a receiver, trustee, custodian,
conservator or other similar official for it or for all or any substantial
part of its assets, or the Maker or any of its subsidiaries shall make a
general assignment for the benefit of its creditors; or (ii) there shall be
commenced against the Maker or any of its subsidiaries any case proceeding or
other action of a nature referred to in clause (i) above which (A) results in
the entry of an order fro relief or any such adjudication or appointment or
(B) remains undismissed, undischarged or unbonded for a period of 60 days; or
(iii) there shall be commenced against the Maker or any of its subsidiaries
any case, proceeding or other action seeking issuance of a warrant of
attachment, execution, distraint or similar process against all or any
substantial part of its assets which results in the entry of an order for any
such relief which shall not have been vacated, discharged, or stayed or
bonded pending appeal within 60 days from the entry thereof; or (iv) the
Maker or any of its subsidiaries shall take any action in furtherance of, or
indicating its consent to, approval of, or acquiescence in, any of the acts
set froth in clause (i), (ii) or (iii) above; or (v) the Maker or any of its
subsidiaries shall generally not, or shall be unable to, or shall admit in
writing its inability to, pay its debts as they become due;
(f) One or more judgments or decrees shall be entered against
the Maker or any of its subsidiaries involving in the aggregate a liability
(not paid or fully covered by insurance, subject to a commercially reasonable
deductible) of $2.5 million or more and all such
3
<PAGE>
judgments or decrees shall not have been vacated, discharged, stayed or
bonded pending appeal within 60 days from he entry thereof; or
(g) Any of the Mortgages shall cease, for any reason, to be
in full force and effect, or Maker or any of its subsidiaries shall so assert
or the liens created by any of the Mortgages shall cease to be enforceable
and of the same effect and priority purported to be created thereby;
then, (A) if such event is an event specified in clause (i), (ii) or (iv) of
subparagraph (e) above, automatically this Secured Rent Deferral Note and all
amounts owing hereunder shall immediately become due and payable and all rent
deferrals in respect of the Lease shall cease, and (B) if such event is any
other event specified in this Section 3, Holder may, by notice to Maker,
declare the Secured Rent Deferral Note and all amounts owing hereunder to be
immediately due and payable, whereupon the same shall immediately become due
and payable and all rent deferrals in respect of the Lease shall cease.
Except as expressly provided in this paragraph, presentment, demand, protest
and all other notices of any kind are hereby expressly waived.
4. Payment of Expenses and Taxes.
Maker agrees (i) to pay or reimburse Holder for all its costs
and expenses incurred in connection with the enforcement or preservation of
any rights under this Secured Rent Deferral Note and the Mortgages, including
without limitation the reasonable fees and disbursements of counsel to Holder
and (ii) to pay, indemnify, and hold Holder harmless from, any and all
recording and filing fees and any and all liabilities with respect to, or
resulting from any delay in paying, stamp and other similar taxes, if any,
which may be payable or determined to be payable in connection with the
execution and delivery of, or consummation or administration of any of the
transactions contemplated by, or any amendment, supplement or modification
of, or any waiver or consent under or in respect of, this Secured Rent
Deferral Note and the Mortgages and (iii) to pay, indemnify and hold Holder
harmless from and against any and all other liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever with respect to the execution,
delivery, enforcement, performance and administration of this Secured Rent
Deferral Note and the Mortgages, including without limitation any of the
foregoing relating to the violation of, noncompliance with or liability under
environmental law applicable to the operations of Maker or any of its
subsidiaries on the Collateral; provided that Maker shall have no obligation
hereunder to Holder with respect to indemnified liabilities arising from the
gross negligence or willful misconduct of the Holder or any environmental
activities or contamination occurring on any Collateral after Maker transfers
or conveys such Collateral to Holder or any other person following a
foreclosure on such Collateral or deed-in-lieu thereof. The agreements in
this Section 4 shall survive repayment of the Secured Rent Deferral Note and
all other amounts payable hereunder.
4
<PAGE>
5. Authority.
Maker represents that it has full power authority and legal
right to execute and deliver this Secured Rent Deferral Note and the
Mortgages and to perform its obligations hereunder and thereunder, and that
this Secured Rent Deferral Note and the Mortgages constitute the valid and
binding obligation of Maker, enforceable against Maker in accordance with its
terms, except as enforceability may be limited by (i) applicable bankruptcy,
insolvency, reorganization, moratorium, or similar laws affecting the
enforcement of creditors' rights generally and (ii) general principles of
equity, regardless of whether considered in proceedings at law or in equity.
6. Notices.
All notices, requests and demands to or upon Maker or Holder
to be effective shall be in writing (including by facsimile transmission),
and, unless otherwise expressly provided therein, shall be deemed to have
been duly given or made (a) in the case of delivery by hand, when delivered,
(b) in the case of delivery by mail, three days after being deposited in the
mails, postage prepaid, or (c) in the case of delivery by facsimile
transmission, when sent and receipt has been confirmed, addressed as follows,
or to such other address as may be hereafter notified by the respective
parities hereto:
Maker: Discovery Zone, Inc.
110 East Broward Blvd
Fort Lauderdale, Florida 33301
Attn: Chief Executive Officer
Telephone Number: (954) 627-2400
Telecopy Number: (954) 627-2760
Holder: McDonald's Corporation
One McDonald's Plaza
Oak Brook, Illinois 60523
Attn: General Counsel
Telephone Number: (630) 623-3000
Telecopy Number: (630) 623-5865
7. Consent to Jurisdiction; Governing Law.
(a) THIS SECURED RENT DEFERRAL NOTE WAS NEGOTIATED IN THE
STATE OF NEW YORK, AND MADE BY MAKER AND ACCEPTED BY HOLDER IN THE STATE OF
NEW YORK, WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE
PARTIES AND TO THE UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL
RESPECTS, INCLUDING MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS
SECURED RENT DEFERRAL NOTE AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
5
<PAGE>
STATE OF NEW YORK APPLICABLE TO NOTES MADE AND PERFORMED IN SUCH STATE AND
ANY APPLICABLE LAW OF THE UNITED STATES OF AMERICA. IT IS BEING UNDERSTOOD
THAT THE LAW OF THE STATE OF NEW YORK SHALL GOVERN THE VALIDITY AND THE
ENFORCEABILITY OF THIS SECURED RENT DEFERRAL NOTE AND ALL OF THE INDEBTEDNESS
OR OBLIGATIONS ARISING HEREUNDER. TO THE FULLEST EXTENT PERMITTED BY LAW,
MAKER HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY CLAIM TO ASSERT THAT
THE LAW OF ANY OTHER JURISDICTION GOVERNS THIS SECURED RENT DEFERRAL NOTE,
AND THIS SECURED RENT DEFERRAL NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(b) ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST MAKER OR
HOLDER ARISING OUT OF OR RELATING TO THIS SECURED RENT DEFERRAL NOTE SHALL BE
INSTITUTED IN ANY FEDERAL OR STATE COURT IN NEW YORK, NEW YORK, AND MAKER
WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF
VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND MAKER HEREBY IRREVOCABLY
SUBMITS TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION OR
PROCEEDING. MAKER DOES HEREBY DESIGNATE AND APPOINT SHEARMAN & STERLING, 599
LEXINGTON AVENUE, NEW YORK, NEW YORK 10022-6069 (ATTN: DOUGLAS P. BARTNER,
ESQ.), AS ITS AUTHORIZED AGENT TO ACCEPT AND ACKNOWLEDGE ON ITS BEHALF
SERVICE OF ANY AND ALL PROCESS WHICH MAY BE SERVED IN ANY SUCH SUIT, ACTION
OR PROCEEDING IN ANY FEDERAL OR STATE COURT IN NEW YORK, NEW YORK, AND AGREES
THAT SERVICE OF PROCESS UPON SAID AGENT AT SAID ADDRESS AND WRITTEN NOTICE OF
SAID SERVICE OF MAKER MAILED OR DELIVERED TO MAKER IN THE MANNER PROVIDED
HEREIN SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON
MAKER, IN ANY SUCH SUIT, ACTION OR PROCEEDING IN THE STATE OF NEW YORK.
MAKER (I) SHALL GIVE PROMPT NOTICE TO HOLDER OF ANY CHANGED ADDRESS OF ITS
AUTHORIZED AGENT HEREUNDER, (II) MAY AT ANY TIME AND FROM TIME TO TIME
DESIGNATE A SUBSTITUTE AUTHORIZED AGENT WITH AN OFFICE IN NEW YORK, NEW YORK
(WHICH OFFICE SHALL BE DESIGNATED AS THE ADDRESS FOR SERVICE OF PROCESS), AND
(III) SHALL PROMPTLY DESIGNATE SUCH A SUBSTITUTE IF ITS AUTHORIZED AGENT
CEASES TO HAVE AN OFFICE IN NEW YORK, NEW YORK OR IS DISSOLVED WITHOUT
LEAVING A SUCCESSOR.
8. Miscellaneous
(a) This Secured Rent Deferral Note may be modified, amended,
waived, extended, changed, discharged or terminated only by an agreement in
writing signed by the party against whom enforcement of any such
modification, amendment, waiver, extension, change, discharge or termination
is sought.
6
<PAGE>
(b) No failure to exercise and no delay in exercising any
right, remedy, power or privilege hereunder or under the Mortgages shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, remedy, power or privilege hereunder or under the Mortgages preclude
any other or further exercise thereof or the exercise of any other right,
remedy, power or privilege. The rights, remedies, powers and privileges
herein and under the Mortgages are cumulative and not exclusive of any
rights, remedies, powers and privileges provided by law.
(c) This Secured Rent Deferral Note shall be binding upon and
inure to the benefit of Maker and Holder and their respective successors and
assign, except that Maker may not assign or transfer any of its rights or
obligations under this Secured Rent Deferral Note without the prior written
consent of Holder. Holder may sell, transfer or assign the Secured Rent
Deferral Note (or any of its rights hereunder) to any person upon prior
written notice of such sale, transfer or assignment to Maker. Upon any such
sale, transfer or assignment, the assignee shall have all the rights,
remedies, powers and privileges of Holder hereunder.
IN WITNESS WHEREOF, Maker has duly executed or has caused its
respective duly authorized officers to execute this Secured Rent Deferral
Note on its behalf, as of the day and year first above written.
DISCOVERY ZONE, INC.
By: /s/ Scott Bernstein
--------------------------------
Name: Scott Bernstein
Title: President
7
<PAGE>
EXHIBIT A
Location Location Number
Indianapolis, Indiana (307)
Kennesaw, Georgia (334)
Schaumberg, Illinois (335)
Douglas County (Littleton), Colorado (338)
Columbus, Ohio (339)
Blaine (Coon Rapids), Minnesota (340)
Forest Park, Ohio (343)
Leon Valley, Texas (344)
Arlington, Texas (347)
San Antonio, Texas (348)
Sterling Heights, Michigan (349)
Philadelphia (Franklin Mills), Pennsylvania (352)
Aurora, Colorado (353)
Vancouver, Washington (357)
<PAGE>
Exhibit 4.64
Rancho Cucomonga, CA (Store No. 362)
Discovery Zone, Inc. Secured Rent Deferral Note
(the "Secured Rent Deferral Note")
$45,508.72 (Initial Face Amount) July 29, 1997
(the "Effective Date")
FOR VALUE RECEIVED, the undersigned, Discovery Zone, Inc., a
Delaware corporation ("MAKER"), promises to pay to the order of McDonald's
Corporation, a Delaware corporation, its successors and assigns ("HOLDER"),
on or before the stated Maturity Date at such place as Holder may from time
to time designate in writing, the principal sum of (i) FORTY-FIVE THOUSAND
FIVE HUNDRED AND EIGHT AND SEVENTY-TWO ONE HUNDREDTHS DOLLARS ($45,508.72)
(such sum, the "Original Principal Amount") plus (ii) effective as of the
first day of each month occurring after the date hereof through the Maturity
Date (as hereinafter defined), an amount equal to FIVE THOUSAND FIVE HUNDRED
AND SIXTY-THREE AND FIFTY-NINE ONE HUNDREDTHS DOLLARS ($5,563.59) (such
amount, cumulatively for each month elapsed after the Effective Date through
the Maturity Date, the "Additional Principal Amount")plus (iii) effective as
of each anniversary of the Effective Date occurring after the date hereof
until the Maturity Date, an amount equal to the amount of then unpaid and
accrued interest (such amount, the "Capitalized Interest Amount" and,
collectively with the Original Principal Amount and the Additional Principal
Amount, the "Principal Amount"), in lawful money of the United States of
America, together with interest accrued thereon, to be computed and paid as
specified in Section 1 below.
1. Payment of Principal and Interest.
The Principal Amount of the Secured Rent Deferral Note
together with all interest accrued thereon shall be due and payable on the
earlier of (i) the last day of the term of the lease relating to the premises
now known as location no. 362 in Rancho Cucomonga, California (the "Lease")
and (ii) the date to which the obligations under this Secured Rent Deferral
Note become due and payable in accordance with Section 3 below (the "Maturity
Date"). On the Maturity Date, Maker shall pay the Principal Amount then
outstanding plus all unpaid and uncapitalized interest accrued thereon to but
not including the Maturity Date in full.
The Maker may at any time and from time to time prepay the
Principal Amount then outstanding, in whole or in part, without premium or
penalty, upon at least one business day's prior written notice to Holder,
specifying the date and the amount of the prepayment. If any such notice is
given, the amount set forth in the notice shall be due and payable on the
date set forth in the notice, without any accrued interest to such date on
the amount to be prepaid. Amounts prepaid shall be in an aggregate principal
amount of at least $25,000 or a whole multiple of $10,000 in excess thereof.
Within five Business Days following the consummation of the
sale of any of the Collateral (as hereinafter defined), the Maker shall apply
the Net Proceeds first, to the prepayment of the Secured Rejection Note
issued by the Maker to the Holder as of the Effective
<PAGE>
Date in the manner provided therein, second, to the prepayment of this
Secured Rent Deferral Note and any other notes secured by the Collateral
(including the other Secured Rent Deferral Notes issued by the Maker to the
Holder) then outstanding, pro rata based on the then outstanding principal
amounts of any such notes, and the balance, if any, as provided in Section
6(b) of the Mortgages. "Collateral" shall mean the Mortgaged Property or
Trust Property, as the case may be, as such terms are defined in the
Mortgages and Assignments of Rents, Deeds of Trust and/or similar security
instruments granted by Maker in favor of Holder of even date herewith with
respect to the fourteen properties listed on Exhibit A hereto (the
"Mortgages"). "Net Proceeds" shall mean the sales price for any item of the
Collateral after deducting any brokerage fees and commissions, transfer taxes
and other customary closing costs payable by Maker in connection with such
sale.
The Principal Amount outstanding from time to time shall bear
interest at a rate per annum equal to 11% (the "Base Rate"). Interest on the
Principal Amount shall be due and payable on the Maturity Date. If all or
any portion of (i) any Principal Amount, (ii) any interest payable thereon or
(iii) any other amount payable hereunder shall not be paid when due (whether
at the stated maturity, by acceleration or otherwise), the delinquent amount
shall bear interest at a rate per annum which is equal to the Base Rate plus
2% (the "Default Rate") for each day elapsed from the date of such nonpayment
until such amount is paid in full (as well as after as before judgment).
2. Security for the Loan.
This Secured Rent Deferral Note is secured by the Mortgages.
3. Events of Default.
If any of the following events shall occur and be continuing:
(a) Maker shall fail to pay any Principal Amount when such
Principal Amount becomes due in accordance with the terms hereof within ten
days after receipt of written notice from the Holder of Maker's failure to
pay such Principal Amount or Maker shall fail to pay any interest on the
Principal Amount such interest becomes due in accordance with the terms
hereof within ten days after receipt of written notice from the Holder of
Maker's failure to pay such interest on the Principal Amount;
(b) Maker or any of its subsidiaries (i) shall default in any
payment of principal of or interest of any indebtedness (other than this and
the other Secured Rent Deferral Notes and the Secured Rejection Note) beyond
the period of grace, if any, provided in the instrument or agreement under
which such indebtedness was created in an aggregate amount equal to or
greater than $2.5 million or (ii) shall default in the observance or
performance of any other agreement or condition relating to any such
indebtedness or contained in any instrument or agreement evidencing, securing
or relating thereto (beyond the expiration of any cure period), or any other
event shall occur or condition exist, the effect of which default or event or
condition is
2
<PAGE>
to cause, or to permit the holder or holders of such indebtedness to cause,
with the giving of notice if required, such indebtedness to become due prior
to its stated maturity;
(c) Maker or any of its subsidiaries shall default in the
observance or performance of any payment or other obligation under two or
more any of the lease agreement under which Maker or such affiliate leases
real property from McDonald's Corporation and, as a result of such defaults,
McDonald's Corporation terminates two or more of such leases in accordance
with their respective terms;
(d) Maker or any of its subsidiaries shall default in the
observance or performance of any agreement or condition contained in this
Secured Rent Deferral Note (other than any agreement relating to the payment
of the Principal Amount and/or any interest thereon) or in any of the
Mortgages and such default shall continued unremedied for a period of thirty
(30) days; provided that if such default is not readily susceptible of cure
in such thirty (30) day period, and provided that Maker proceeds in a
diligent manner to cure such default, Maker shall have such additional time
to effect such cure as shall be reasonably necessary to effect such cure;
(e) Excepting only those continuing proceedings relating to
the bankruptcy cases of Maker's debtor predecessors in interest captioned In
re Discovery Zone, Inc., et al., Case No. 96-411 (HSB) (Jointly
Administered), before the United States Bankruptcy Court for the District of
Delaware, Maker or any of its subsidiaries shall commence any case,
proceeding or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief
entered with respect to it, or seeking to adjudicate it a bankruptcy or
insolvent, or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with respect to it or
its debts, or (B) seeking appointment of a receiver, trustee, custodian,
conservator or other similar official for it or for all or any substantial
part of its assets, or the Maker or any of its subsidiaries shall make a
general assignment for the benefit of its creditors; or (ii) there shall be
commenced against the Maker or any of its subsidiaries any case proceeding or
other action of a nature referred to in clause (i) above which (A) results in
the entry of an order fro relief or any such adjudication or appointment or
(B) remains undismissed, undischarged or unbonded for a period of 60 days; or
(iii) there shall be commenced against the Maker or any of its subsidiaries
any case, proceeding or other action seeking issuance of a warrant of
attachment, execution, distraint or similar process against all or any
substantial part of its assets which results in the entry of an order for any
such relief which shall not have been vacated, discharged, or stayed or
bonded pending appeal within 60 days from the entry thereof; or (iv) the
Maker or any of its subsidiaries shall take any action in furtherance of, or
indicating its consent to, approval of, or acquiescence in, any of the acts
set froth in clause (i), (ii) or (iii) above; or (v) the Maker or any of its
subsidiaries shall generally not, or shall be unable to, or shall admit in
writing its inability to, pay its debts as they become due;
(f) One or more judgments or decrees shall be entered against
the Maker or any of its subsidiaries involving in the aggregate a liability
(not paid or fully covered by insurance, subject to a commercially reasonable
deductible) of $2.5 million or more and all such
3
<PAGE>
judgments or decrees shall not have been vacated, discharged, stayed or
bonded pending appeal within 60 days from he entry thereof; or
(g) Any of the Mortgages shall cease, for any reason, to be
in full force and effect, or Maker or any of its subsidiaries shall so assert
or the liens created by any of the Mortgages shall cease to be enforceable
and of the same effect and priority purported to be created thereby;
then, (A) if such event is an event specified in clause (i), (ii) or (iv) of
subparagraph (e) above, automatically this Secured Rent Deferral Note and all
amounts owing hereunder shall immediately become due and payable and all rent
deferrals in respect of the Lease shall cease, and (B) if such event is any
other event specified in this Section 3, Holder may, by notice to Maker,
declare the Secured Rent Deferral Note and all amounts owing hereunder to be
immediately due and payable, whereupon the same shall immediately become due
and payable and all rent deferrals in respect of the Lease shall cease.
Except as expressly provided in this paragraph, presentment, demand, protest
and all other notices of any kind are hereby expressly waived.
4. Payment of Expenses and Taxes.
Maker agrees (i) to pay or reimburse Holder for all its costs
and expenses incurred in connection with the enforcement or preservation of
any rights under this Secured Rent Deferral Note and the Mortgages, including
without limitation the reasonable fees and disbursements of counsel to Holder
and (ii) to pay, indemnify, and hold Holder harmless from, any and all
recording and filing fees and any and all liabilities with respect to, or
resulting from any delay in paying, stamp and other similar taxes, if any,
which may be payable or determined to be payable in connection with the
execution and delivery of, or consummation or administration of any of the
transactions contemplated by, or any amendment, supplement or modification
of, or any waiver or consent under or in respect of, this Secured Rent
Deferral Note and the Mortgages and (iii) to pay, indemnify and hold Holder
harmless from and against any and all other liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever with respect to the execution,
delivery, enforcement, performance and administration of this Secured Rent
Deferral Note and the Mortgages, including without limitation any of the
foregoing relating to the violation of, noncompliance with or liability under
environmental law applicable to the operations of Maker or any of its
subsidiaries on the Collateral; provided that Maker shall have no obligation
hereunder to Holder with respect to indemnified liabilities arising from the
gross negligence or willful misconduct of the Holder or any environmental
activities or contamination occurring on any Collateral after Maker transfers
or conveys such Collateral to Holder or any other person following a
foreclosure on such Collateral or deed-in-lieu thereof. The agreements in
this Section 4 shall survive repayment of the Secured Rent Deferral Note and
all other amounts payable hereunder.
4
<PAGE>
5. Authority.
Maker represents that it has full power authority and legal
right to execute and deliver this Secured Rent Deferral Note and the
Mortgages and to perform its obligations hereunder and thereunder, and that
this Secured Rent Deferral Note and the Mortgages constitute the valid and
binding obligation of Maker, enforceable against Maker in accordance with its
terms, except as enforceability may be limited by (i) applicable bankruptcy,
insolvency, reorganization, moratorium, or similar laws affecting the
enforcement of creditors' rights generally and (ii) general principles of
equity, regardless of whether considered in proceedings at law or in equity.
6. Notices.
All notices, requests and demands to or upon Maker or Holder
to be effective shall be in writing (including by facsimile transmission),
and, unless otherwise expressly provided therein, shall be deemed to have
been duly given or made (a) in the case of delivery by hand, when delivered,
(b) in the case of delivery by mail, three days after being deposited in the
mails, postage prepaid, or (c) in the case of delivery by facsimile
transmission, when sent and receipt has been confirmed, addressed as follows,
or to such other address as may be hereafter notified by the respective
parities hereto:
Maker: Discovery Zone, Inc.
110 East Broward Blvd
Fort Lauderdale, Florida 33301
Attn: Chief Executive Officer
Telephone Number: (954) 627-2400
Telecopy Number: (954) 627-2760
Holder: McDonald's Corporation
One McDonald's Plaza
Oak Brook, Illinois 60523
Attn: General Counsel
Telephone Number: (630) 623-3000
Telecopy Number: (630) 623-5865
7. Consent to Jurisdiction; Governing Law.
(a) THIS SECURED RENT DEFERRAL NOTE WAS NEGOTIATED IN THE
STATE OF NEW YORK, AND MADE BY MAKER AND ACCEPTED BY HOLDER IN THE STATE OF
NEW YORK, WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE
PARTIES AND TO THE UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL
RESPECTS, INCLUDING MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS
SECURED RENT DEFERRAL NOTE AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
5
<PAGE>
STATE OF NEW YORK APPLICABLE TO NOTES MADE AND PERFORMED IN SUCH STATE AND
ANY APPLICABLE LAW OF THE UNITED STATES OF AMERICA. IT IS BEING UNDERSTOOD
THAT THE LAW OF THE STATE OF NEW YORK SHALL GOVERN THE VALIDITY AND THE
ENFORCEABILITY OF THIS SECURED RENT DEFERRAL NOTE AND ALL OF THE INDEBTEDNESS
OR OBLIGATIONS ARISING HEREUNDER. TO THE FULLEST EXTENT PERMITTED BY LAW,
MAKER HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY CLAIM TO ASSERT THAT
THE LAW OF ANY OTHER JURISDICTION GOVERNS THIS SECURED RENT DEFERRAL NOTE,
AND THIS SECURED RENT DEFERRAL NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(b) ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST MAKER OR
HOLDER ARISING OUT OF OR RELATING TO THIS SECURED RENT DEFERRAL NOTE SHALL BE
INSTITUTED IN ANY FEDERAL OR STATE COURT IN NEW YORK, NEW YORK, AND MAKER
WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF
VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND MAKER HEREBY IRREVOCABLY
SUBMITS TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION OR
PROCEEDING. MAKER DOES HEREBY DESIGNATE AND APPOINT SHEARMAN & STERLING, 599
LEXINGTON AVENUE, NEW YORK, NEW YORK 10022-6069 (ATTN: DOUGLAS P. BARTNER,
ESQ.), AS ITS AUTHORIZED AGENT TO ACCEPT AND ACKNOWLEDGE ON ITS BEHALF
SERVICE OF ANY AND ALL PROCESS WHICH MAY BE SERVED IN ANY SUCH SUIT, ACTION
OR PROCEEDING IN ANY FEDERAL OR STATE COURT IN NEW YORK, NEW YORK, AND AGREES
THAT SERVICE OF PROCESS UPON SAID AGENT AT SAID ADDRESS AND WRITTEN NOTICE OF
SAID SERVICE OF MAKER MAILED OR DELIVERED TO MAKER IN THE MANNER PROVIDED
HEREIN SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON
MAKER, IN ANY SUCH SUIT, ACTION OR PROCEEDING IN THE STATE OF NEW YORK.
MAKER (I) SHALL GIVE PROMPT NOTICE TO HOLDER OF ANY CHANGED ADDRESS OF ITS
AUTHORIZED AGENT HEREUNDER, (II) MAY AT ANY TIME AND FROM TIME TO TIME
DESIGNATE A SUBSTITUTE AUTHORIZED AGENT WITH AN OFFICE IN NEW YORK, NEW YORK
(WHICH OFFICE SHALL BE DESIGNATED AS THE ADDRESS FOR SERVICE OF PROCESS), AND
(III) SHALL PROMPTLY DESIGNATE SUCH A SUBSTITUTE IF ITS AUTHORIZED AGENT
CEASES TO HAVE AN OFFICE IN NEW YORK, NEW YORK OR IS DISSOLVED WITHOUT
LEAVING A SUCCESSOR.
8. Miscellaneous
(a) This Secured Rent Deferral Note may be modified, amended,
waived, extended, changed, discharged or terminated only by an agreement in
writing signed by the party against whom enforcement of any such
modification, amendment, waiver, extension, change, discharge or termination
is sought.
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<PAGE>
(b) No failure to exercise and no delay in exercising any
right, remedy, power or privilege hereunder or under the Mortgages shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, remedy, power or privilege hereunder or under the Mortgages preclude
any other or further exercise thereof or the exercise of any other right,
remedy, power or privilege. The rights, remedies, powers and privileges
herein and under the Mortgages are cumulative and not exclusive of any
rights, remedies, powers and privileges provided by law.
(c) This Secured Rent Deferral Note shall be binding upon and
inure to the benefit of Maker and Holder and their respective successors and
assign, except that Maker may not assign or transfer any of its rights or
obligations under this Secured Rent Deferral Note without the prior written
consent of Holder. Holder may sell, transfer or assign the Secured Rent
Deferral Note (or any of its rights hereunder) to any person upon prior
written notice of such sale, transfer or assignment to Maker. Upon any such
sale, transfer or assignment, the assignee shall have all the rights,
remedies, powers and privileges of Holder hereunder.
IN WITNESS WHEREOF, Maker has duly executed or has caused its
respective duly authorized officers to execute this Secured Rent Deferral
Note on its behalf, as of the day and year first above written.
DISCOVERY ZONE, INC.
By: /s/ Scott Bernstein
--------------------------------
Name: Scott Bernstein
Title: President
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<PAGE>
EXHIBIT A
Location Location Number
Indianapolis, Indiana (307)
Kennesaw, Georgia (334)
Schaumberg, Illinois (335)
Douglas County (Littleton), Colorado (338)
Columbus, Ohio (339)
Blaine (Coon Rapids), Minnesota (340)
Forest Park, Ohio (343)
Leon Valley, Texas (344)
Arlington, Texas (347)
San Antonio, Texas (348)
Sterling Heights, Michigan (349)
Philadelphia (Franklin Mills), Pennsylvania (352)
Aurora, Colorado (353)
Vancouver, Washington (357)
<PAGE>
Exhibit 4.65
Amherst, NY (Location No. 326)
Discovery Zone, Inc. Secured Rent Deferral Note
(the "Secured Rent Deferral Note")
$36,666.72 (Initial Face Amount) July 29, 1997
(the "Effective Date")
FOR VALUE RECEIVED, the undersigned, Discovery Zone, Inc., a Delaware
corporation ("MAKER"), promises to pay to the order of McDonald's Corporation, a
Delaware corporation, its successors and assigns ("HOLDER"), on or before the
stated Maturity Date at such place as Holder may from time to time designate in
writing, the principal sum of (i) THIRTY-SIX THOUSAND SIX HUNDRED SIXTY-SIX AND
SEVENTY-TWO ONE HUNDREDTHS DOLLARS ($36,666.72) (such sum, the "Original
Principal Amount") plus (ii) effective as of the first day of each month
occurring after the date hereof through the Maturity Date (as hereinafter
defined), an amount equal to FOUR THOUSAND FIVE HUNDRED EIGHTY-THREE AND
THIRTY-FOUR ONE HUNDREDTHS DOLLARS ($4,583.34) (such amount, cumulatively for
each month elapsed after the Effective Date through the Maturity Date, the
"Additional Principal Amount") plus (iii) effective as of each anniversary of
the Effective Date occurring after the date hereof until the Maturity Date, an
amount equal to the amount of then unpaid and accrued interest (such amount, the
"Capitalized Interest Amount" and, collectively with the Original Principal
Amount and the Additional Principal Amount, the "Principal Amount"), in lawful
money of the United States of America, together with interest accrued thereon,
to be computed and paid as specified in Section 1 below.
1. Payment of Principal and Interest.
The Principal Amount of the Secured Rent Deferral Note together with
all interest accrued thereon shall be due and payable on the earlier of (i) the
last day of the term of the lease relating to the premises now known as location
no. 326 in Amherst, New York (the "Lease") and (ii) the date to which the
obligations under this Secured Rent Deferral Note become due and payable in
accordance with Section 3 below (the "Maturity Date"). On the Maturity Date,
Maker shall pay the Principal Amount then outstanding plus all unpaid and
uncapitalized interest accrued thereon to but not including the Maturity Date in
full.
The Maker may at any time and from time to time prepay the Principal
Amount then outstanding, in whole or in part, without premium or penalty, upon
at least one business day's prior written notice to Holder, specifying the date
and the amount of the prepayment. If any such notice is given, the amount set
forth in the notice shall be due and payable on the date set forth in the
notice, without any accrued interest to such date on the amount to be prepaid.
Amounts prepaid shall be in an aggregate principal amount of at least $25,000 or
a whole multiple of $10,000 in excess thereof.
Within five Business Days following the consummation of the sale of
any of the Collateral (as hereinafter defined), the Maker shall apply the Net
Proceeds first, to the prepayment of the Secured Rejection Note issued by the
Maker to the Holder as of the Effective
<PAGE>
Date in the manner provided therein, second, to the prepayment of this
Secured Rent Deferral Note and any other notes secured by the Collateral
(including the other Secured Rent Deferral Notes issued by the Maker to the
Holder) then outstanding, pro rata based on the then outstanding principal
amounts of any such notes, and the balance, if any, as provided in Section
6(b) of the Mortgages. "Collateral" shall mean the Mortgaged Property or
Trust Property, as the case may be, as such terms are defined in the
Mortgages and Assignments of Rents, Deeds of Trust and/or similar security
instruments granted by Maker in favor of Holder of even date herewith with
respect to the fourteen properties listed on Exhibit A hereto (the
"Mortgages"). "Net Proceeds" shall mean the sales price for any item of the
Collateral after deducting any brokerage fees and commissions, transfer taxes
and other customary closing costs payable by Maker in connection with such
sale.
The Principal Amount outstanding from time to time shall bear interest
at a rate per annum equal to 11% (the "Base Rate"). Interest on the Principal
Amount shall be due and payable on the Maturity Date. If all or any portion of
(i) any Principal Amount, (ii) any interest payable thereon or (iii) any other
amount payable hereunder shall not be paid when due (whether at the stated
maturity, by acceleration or otherwise), the delinquent amount shall bear
interest at a rate per annum which is equal to the Base Rate plus 2% (the
"Default Rate") for each day elapsed from the date of such nonpayment until such
amount is paid in full (as well as after as before judgment).
2. Security for the Loan.
This Secured Rent Deferral Note is secured by the Mortgages.
3. Events of Default.
If any of the following events shall occur and be continuing:
(a) Maker shall fail to pay any Principal Amount when such Principal
Amount becomes due in accordance with the terms hereof within ten days after
receipt of written notice from the Holder of Maker's failure to pay such
Principal Amount or Maker shall fail to pay any interest on the Principal Amount
such interest becomes due in accordance with the terms hereof within ten days
after receipt of written notice from the Holder of Maker's failure to pay such
interest on the Principal Amount;
(b) Maker or any of its subsidiaries (i) shall default in any payment
of principal of or interest of any indebtedness (other than this and the other
Secured Rent Deferral Notes and the Secured Rejection Note) beyond the period of
grace, if any, provided in the instrument or agreement under which such
indebtedness was created in an aggregate amount equal to or greater than $2.5
million or (ii) shall default in the observance or performance of any other
agreement or condition relating to any such indebtedness or contained in any
instrument or agreement evidencing, securing or relating thereto (beyond the
expiration of any cure period), or any other event shall occur or condition
exist, the effect of which default or event or condition is
2
<PAGE>
to cause, or to permit the holder or holders of such indebtedness to cause,
with the giving of notice if required, such indebtedness to become due prior
to its stated maturity;
(c) Maker or any of its subsidiaries shall default in the observance
or performance of any payment or other obligation under two or more any of the
lease agreement under which Maker or such affiliate leases real property from
McDonald's Corporation and, as a result of such defaults, McDonald's Corporation
terminates two or more of such leases in accordance with their respective terms;
(d) Maker or any of its subsidiaries shall default in the observance
or performance of any agreement or condition contained in this Secured Rent
Deferral Note (other than any agreement relating to the payment of the Principal
Amount and/or any interest thereon) or in any of the Mortgages and such default
shall continued unremedied for a period of thirty (30) days; provided that if
such default is not readily susceptible of cure in such thirty (30) day period,
and provided that Maker proceeds in a diligent manner to cure such default,
Maker shall have such additional time to effect such cure as shall be reasonably
necessary to effect such cure;
(e) Excepting only those continuing proceedings relating to the
bankruptcy cases of Maker's debtor predecessors in interest captioned In re
Discovery Zone, Inc., et al., Case No. 96-411 (HSB) (Jointly Administered),
before the United States Bankruptcy Court for the District of Delaware, Maker or
any of its subsidiaries shall commence any case, proceeding or other action (A)
under any existing or future law of any jurisdiction, domestic or foreign,
relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking
to have an order for relief entered with respect to it, or seeking to adjudicate
it a bankruptcy or insolvent, or seeking reorganization, arrangement,
adjustment, winding-up, liquidation, dissolution, composition or other relief
with respect to it or its debts, or (B) seeking appointment of a receiver,
trustee, custodian, conservator or other similar official for it or for all or
any substantial part of its assets, or the Maker or any of its subsidiaries
shall make a general assignment for the benefit of its creditors; or (ii) there
shall be commenced against the Maker or any of its subsidiaries any case
proceeding or other action of a nature referred to in clause (i) above which (A)
results in the entry of an order fro relief or any such adjudication or
appointment or (B) remains undismissed, undischarged or unbonded for a period of
60 days; or (iii) there shall be commenced against the Maker or any of its
subsidiaries any case, proceeding or other action seeking issuance of a warrant
of attachment, execution, distraint or similar process against all or any
substantial part of its assets which results in the entry of an order for any
such relief which shall not have been vacated, discharged, or stayed or bonded
pending appeal within 60 days from the entry thereof; or (iv) the Maker or any
of its subsidiaries shall take any action in furtherance of, or indicating its
consent to, approval of, or acquiescence in, any of the acts set froth in clause
(i), (ii) or (iii) above; or (v) the Maker or any of its subsidiaries shall
generally not, or shall be unable to, or shall admit in writing its inability
to, pay its debts as they become due;
(f) One or more judgments or decrees shall be entered against the
Maker or any of its subsidiaries involving in the aggregate a liability (not
paid or fully covered by insurance, subject to a commercially reasonable
deductible) of $2.5 million or more and all such
3
<PAGE>
judgments or decrees shall not have been vacated, discharged, stayed or
bonded pending appeal within 60 days from he entry thereof; or
(g) Any of the Mortgages shall cease, for any reason, to be in full
force and effect, or Maker or any of its subsidiaries shall so assert or the
liens created by any of the Mortgages shall cease to be enforceable and of the
same effect and priority purported to be created thereby;
then, (A) if such event is an event specified in clause (i), (ii) or (iv) of
subparagraph (e) above, automatically this Secured Rent Deferral Note and all
amounts owing hereunder shall immediately become due and payable and all rent
deferrals in respect of the Lease shall cease, and (B) if such event is any
other event specified in this Section 3, Holder may, by notice to Maker, declare
the Secured Rent Deferral Note and all amounts owing hereunder to be immediately
due and payable, whereupon the same shall immediately become due and payable and
all rent deferrals in respect of the Lease shall cease. Except as expressly
provided in this paragraph, presentment, demand, protest and all other notices
of any kind are hereby expressly waived.
4. Payment of Expenses and Taxes.
Maker agrees (i) to pay or reimburse Holder for all its costs and
expenses incurred in connection with the enforcement or preservation of any
rights under this Secured Rent Deferral Note and the Mortgages, including
without limitation the reasonable fees and disbursements of counsel to Holder
and (ii) to pay, indemnify, and hold Holder harmless from, any and all recording
and filing fees and any and all liabilities with respect to, or resulting from
any delay in paying, stamp and other similar taxes, if any, which may be payable
or determined to be payable in connection with the execution and delivery of, or
consummation or administration of any of the transactions contemplated by, or
any amendment, supplement or modification of, or any waiver or consent under or
in respect of, this Secured Rent Deferral Note and the Mortgages and (iii) to
pay, indemnify and hold Holder harmless from and against any and all other
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever with respect
to the execution, delivery, enforcement, performance and administration of this
Secured Rent Deferral Note and the Mortgages, including without limitation any
of the foregoing relating to the violation of, noncompliance with or liability
under environmental law applicable to the operations of Maker or any of its
subsidiaries on the Collateral; provided that Maker shall have no obligation
hereunder to Holder with respect to indemnified liabilities arising from the
gross negligence or willful misconduct of the Holder or any environmental
activities or contamination occurring on any Collateral after Maker transfers or
conveys such Collateral to Holder or any other person following a foreclosure on
such Collateral or deed-in-lieu thereof. The agreements in this Section 4 shall
survive repayment of the Secured Rent Deferral Note and all other amounts
payable hereunder.
4
<PAGE>
5. Authority.
Maker represents that it has full power authority and legal right to
execute and deliver this Secured Rent Deferral Note and the Mortgages and to
perform its obligations hereunder and thereunder, and that this Secured Rent
Deferral Note and the Mortgages constitute the valid and binding obligation
of Maker, enforceable against Maker in accordance with its terms, except as
enforceability may be limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium, or similar laws affecting the enforcement of
creditors' rights generally and (ii) general principles of equity, regardless
of whether considered in proceedings at law or in equity.
6. Notices.
All notices, requests and demands to or upon Maker or Holder to be
effective shall be in writing (including by facsimile transmission), and,
unless otherwise expressly provided therein, shall be deemed to have been
duly given or made (a) in the case of delivery by hand, when delivered, (b)
in the case of delivery by mail, three days after being deposited in the
mails, postage prepaid, or (c) in the case of delivery by facsimile
transmission, when sent and receipt has been confirmed, addressed as follows,
or to such other address as may be hereafter notified by the respective
parities hereto:
Maker: Discovery Zone, Inc.
110 East Broward Blvd
Fort Lauderdale, Florida 33301
Attn: Chief Executive Officer
Telephone Number: (954) 627-2400
Telecopy Number: (954) 627-2760
Holder: McDonald's Corporation
One McDonald's Plaza
Oak Brook, Illinois 60523
Attn: General Counsel
Telephone Number: (630) 623-3000
Telecopy Number: (630) 623-5865
7. Consent to Jurisdiction; Governing Law.
(a) THIS SECURED RENT DEFERRAL NOTE WAS NEGOTIATED IN THE STATE OF
NEW YORK, AND MADE BY MAKER AND ACCEPTED BY HOLDER IN THE STATE OF NEW YORK,
WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND
TO THE UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL RESPECTS, INCLUDING
MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS SECURED RENT DEFERRAL
NOTE AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE
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<PAGE>
STATE OF NEW YORK APPLICABLE TO NOTES MADE AND PERFORMED IN SUCH STATE AND
ANY APPLICABLE LAW OF THE UNITED STATES OF AMERICA. IT IS BEING UNDERSTOOD
THAT THE LAW OF THE STATE OF NEW YORK SHALL GOVERN THE VALIDITY AND THE
ENFORCEABILITY OF THIS SECURED RENT DEFERRAL NOTE AND ALL OF THE INDEBTEDNESS
OR OBLIGATIONS ARISING HEREUNDER. TO THE FULLEST EXTENT PERMITTED BY LAW,
MAKER HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY CLAIM TO ASSERT THAT
THE LAW OF ANY OTHER JURISDICTION GOVERNS THIS SECURED RENT DEFERRAL NOTE,
AND THIS SECURED RENT DEFERRAL NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(b) ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST MAKER OR HOLDER
ARISING OUT OF OR RELATING TO THIS SECURED RENT DEFERRAL NOTE SHALL BE
INSTITUTED IN ANY FEDERAL OR STATE COURT IN NEW YORK, NEW YORK, AND MAKER WAIVES
ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY
SUCH SUIT, ACTION OR PROCEEDING, AND MAKER HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION OR PROCEEDING. MAKER DOES
HEREBY DESIGNATE AND APPOINT SHEARMAN & STERLING, 599 LEXINGTON AVENUE, NEW
YORK, NEW YORK 10022-6069 (ATTN: DOUGLAS P. BARTNER, ESQ.), AS ITS AUTHORIZED
AGENT TO ACCEPT AND ACKNOWLEDGE ON ITS BEHALF SERVICE OF ANY AND ALL PROCESS
WHICH MAY BE SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING IN ANY FEDERAL OR
STATE COURT IN NEW YORK, NEW YORK, AND AGREES THAT SERVICE OF PROCESS UPON SAID
AGENT AT SAID ADDRESS AND WRITTEN NOTICE OF SAID SERVICE OF MAKER MAILED OR
DELIVERED TO MAKER IN THE MANNER PROVIDED HEREIN SHALL BE DEEMED IN EVERY
RESPECT EFFECTIVE SERVICE OF PROCESS UPON MAKER, IN ANY SUCH SUIT, ACTION OR
PROCEEDING IN THE STATE OF NEW YORK. MAKER (I) SHALL GIVE PROMPT NOTICE TO
HOLDER OF ANY CHANGED ADDRESS OF ITS AUTHORIZED AGENT HEREUNDER, (II) MAY AT ANY
TIME AND FROM TIME TO TIME DESIGNATE A SUBSTITUTE AUTHORIZED AGENT WITH AN
OFFICE IN NEW YORK, NEW YORK (WHICH OFFICE SHALL BE DESIGNATED AS THE ADDRESS
FOR SERVICE OF PROCESS), AND (III) SHALL PROMPTLY DESIGNATE SUCH A SUBSTITUTE IF
ITS AUTHORIZED AGENT CEASES TO HAVE AN OFFICE IN NEW YORK, NEW YORK OR IS
DISSOLVED WITHOUT LEAVING A SUCCESSOR.
8. Miscellaneous
(a) This Secured Rent Deferral Note may be modified, amended, waived,
extended, changed, discharged or terminated only by an agreement in writing
signed by the party against whom enforcement of any such modification,
amendment, waiver, extension, change, discharge or termination is sought.
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<PAGE>
(b) No failure to exercise and no delay in exercising any right,
remedy, power or privilege hereunder or under the Mortgages shall operate as a
waiver thereof; nor shall any single or partial exercise of any right, remedy,
power or privilege hereunder or under the Mortgages preclude any other or
further exercise thereof or the exercise of any other right, remedy, power or
privilege. The rights, remedies, powers and privileges herein and under the
Mortgages are cumulative and not exclusive of any rights, remedies, powers and
privileges provided by law.
(c) This Secured Rent Deferral Note shall be binding upon and inure
to the benefit of Maker and Holder and their respective successors and assign,
except that Maker may not assign or transfer any of its rights or obligations
under this Secured Rent Deferral Note without the prior written consent of
Holder. Holder may sell, transfer or assign the Secured Rent Deferral Note (or
any of its rights hereunder) to any person upon prior written notice of such
sale, transfer or assignment to Maker. Upon any such sale, transfer or
assignment, the assignee shall have all the rights, remedies, powers and
privileges of Holder hereunder.
IN WITNESS WHEREOF, Maker has duly executed or has caused its
respective duly authorized officers to execute this Secured Rent Deferral Note
on its behalf, as of the day and year first above written.
DISCOVERY ZONE, INC.
By: /s/ Scott Bernstein
------------------------------
Name: Scott Bernstein
Title: President
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EXHIBIT A
Location Location Number
Indianapolis, Indiana (307)
Kennesaw, Georgia (334)
Schaumberg, Illinois (335)
Douglas County (Littleton), Colorado (338)
Columbus, Ohio (339)
Blaine (Coon Rapids), Minnesota (340)
Forest Park, Ohio (343)
Leon Valley, Texas (344)
Arlington, Texas (347)
San Antonio, Texas (348)
Sterling Heights, Michigan (349)
Philadelphia (Franklin Mills), Pennsylvania (352)
Aurora, Colorado (353)
Vancouver, Washington (357)
<PAGE>
Exhibit 4.66
Discovery Zone, Inc. Secured Rejection Note (the "Secured Rejection Note")
$4,416,237.90 July 29, 1997
(the "Effective Date")
FOR VALUE RECEIVED, the undersigned, Discovery Zone, Inc., a
Delaware corporation ("MAKER"), promises to pay to the order of McDonald's
Corporation, a Delaware corporation, its successors and assigns ("HOLDER"),
on or before the stated Maturity Date at such place as Holder may from time
to time designate in writing, the principal sum of FOUR MILLION FOUR HUNDRED
SIXTEEN THOUSAND TWO HUNDRED THIRTY-SEVEN AND NINETY ONE HUNDREDTHS DOLLARS
($4,416,237.90) (such sum, as the same may be reduced from time to time as
herein provided, the "Principal Amount"), in lawful money of the United
States of America, together with interest accrued thereon, to be computed and
paid as specified in Section 1 below.
1. Payment of Principal and Interest.
The Principal Amount of the Secured Rejection Note shall be due and
payable in six equal annual installments (each, a "Principal Installment") of
SEVEN HUNDRED THIRTY-SIX THOUSAND THIRTY-NINE AND SIXTY-FIVE ONE HUNDREDTHS
DOLLARS ($736,039.65), commencing on the first anniversary of the Effective
Date and on each successive anniversary thereof through and including the
sixth anniversary (the sixth anniversary of the Effective Date, the "Maturity
Date"). On the date on which any Principal Amount is due and payable, the
Maker shall pay the Principal Amount then due plus all unpaid interest
accrued thereon to, but not including, such payment date in full.
The Maker may at any time and from time to time prepay the Principal
Amount then outstanding, in whole or in part, without premium or penalty,
upon at least one business day's prior written notice to Holder, specifying
the date and the amount of the prepayment. If any such notice is given, the
amount set forth in the notice shall be due and payable on the date set forth
in the notice, together with accrued interest to, but not including, such
date on the amount to be prepaid. Amounts prepaid shall be in an aggregate
principal amount of at least $25,000 or a whole multiple of $10,000 in excess
thereof and shall be applied to the Principal Amount of the Secured Rejection
Note and, upon such application, the amount of each Principal Installment due
thereafter shall be reduced to an amount equal to the reduced Principal
Amount divided by the remaining number of Principal Installments (including,
but not limited to, that Principal Installment due on the Maturity Date).
Within five Business Days following the consummation of the sale of
any of the Collateral (as hereinafter defined), the Maker shall apply the Net
Proceeds first, to the prepayment of the Secured Rejection Note in the manner
provided in the immediately preceding paragraph, second, to the prepayment of
any other notes secured by the Mortgages (including the Secured Rent Deferral
Notes issued by the Maker to the Holder) then outstanding, pro rata based
<PAGE>
on the then outstanding principal amounts of any such notes, and the balance,
if any, as provided in Section 6(b) of the Mortgages. "Collateral" shall
mean the Mortgaged Property or Trust Property, as the case may be, as such
terms are defined in the Mortgages and Assignments of Rents, Deeds of Trust
and/or similar security instruments granted by Maker in favor of Holder of
even date herewith with respect to the fourteen properties listed on Exhibit
A hereto (the "Mortgages"). "Net Proceeds" shall mean the sales price for
any item of the Collateral after deducting any brokerage fees and
commissions, transfer taxes and other customary closing costs payable by
Maker in connection with such sale.
The Principal Amount outstanding from time to time shall bear
interest at a rate per annum equal to 11% (the "Base Rate"). Interest shall
be due and payable annually, in arrears, on each due date for each Principal
Installment (each an "Interest Payment Date") and on the Maturity Date. In
the event that any Interest Payment Date falls on a day that Banks in the
City of New York are not open for business, such Interest Payment Date will
fall on the next day Banks in the City of New York are open for business. If
all or any portion of (i) any Principal Amount, (ii) any interest payable
thereon or (iii) any other amount payable hereunder shall not be paid when
due (whether at the stated maturity, by acceleration or otherwise), the
delinquent amount shall bear interest at a rate per annum which is equal to
the Base Rate plus 2% (the "Default Rate") for each day elapsed from the date
of such nonpayment until such amount is paid in full (as well as after as
before judgment).
2. Security for the Loan.
This Secured Rejection Note is secured by the Mortgages.
3. Events of Default.
If any of the following events shall occur and be continuing:
(a) Maker shall fail to pay any Principal Amount when such
Principal Amount becomes due in accordance with the terms hereof within ten
days after receipt of written notice from the Holder of Maker's failure to
pay such Principal Amount or Maker shall fail to pay any interest on the
Principal Amount such interest becomes due in accordance with the terms
hereof within ten days after receipt of written notice from the Holder of
Maker's failure to pay such interest on the Principal Amount;
(b) Maker or any of its subsidiaries (i) shall default in any
payment of principal of or interest of any indebtedness (other than this
Secured Rejection Note or the Secured Rent Deferral Notes) beyond the period
of grace, if any, provided in the instrument or agreement under which such
indebtedness was created equal to or greater than $2.5 million; or (ii) shall
default in the observance or performance of any other agreement or condition
relating to any such indebtedness or contained in any instrument or agreement
evidencing, securing or relating thereto (beyond the expiration of any cure
period), or any other event shall occur or condition exist, the effect of
which default or event or condition is to cause, or to permit the
2
<PAGE>
holder or holders of such indebtedness to cause, with the giving of notice if
required, such indebtedness to become due prior to its stated maturity;
(c) Maker or any of its subsidiaries shall default in the
observance or performance of any payment or other obligation under two or
more of any of the lease or sublease agreements under which Maker or such
affiliate leases or subleases real property from McDonald's Corporation and,
as a result of such defaults, McDonald's Corporation terminates two or more
of such leases in accordance with their respective terms;
(d) Maker or any of its subsidiaries shall default in the
observance or performance of any agreement or condition contained in this
Secured Rejection Note (other than any agreement relating to the payment of
the Principal Amount and/or any interest thereon) or in any of the Mortgages
and such default shall continued unremedied for a period of thirty (30) days;
provided that if such default is not readily susceptible of cure in such
thirty (30) day period, and provided that Maker proceeds in a diligent manner
to cure such default, Maker shall have such additional time to effect such
cure as shall be reasonably necessary to effect such cure;
(e) Excepting only those continuing proceedings relating to the
bankruptcy cases of Maker's debtor predecessors in interest captioned In re
Discovery Zone, Inc., et al., Case No. 96-411 (HSB) (Jointly Administered),
before the United States Bankruptcy Court for the District of Delaware, Maker
or any of its subsidiaries shall commence any case, proceeding or other
action (A) under any existing or future law of any jurisdiction, domestic or
foreign, relating to bankruptcy, insolvency, reorganization or relief of
debtors, seeking to have an order for relief entered with respect to it, or
seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution, composition or
other relief with respect to it or its debts, or (B) seeking appointment of a
receiver, trustee, custodian, conservator or other similar official for it or
for all or any substantial part of its assets, or the Maker or any of its
subsidiaries shall make a general assignment for the benefit of its
creditors; or (ii) there shall be commenced against the Maker or any of its
subsidiaries any case proceeding or other action of a nature referred to in
clause (i) above which (A) results in the entry of an order for relief or any
such adjudication or appointment or (B) remains undismissed, undischarged or
unbonded for a period of 60 days; or (iii) there shall be commenced against
the Maker or any of its subsidiaries any case, proceeding or other action
seeking issuance of a warrant of attachment, execution, distraint or similar
process against all or any substantial part of its assets which results in
the entry of an order for any such relief which shall not have been vacated,
discharged, or stayed or bonded pending appeal within 60 days from the entry
thereof; or (iv) the Maker or any of its subsidiaries shall take any action
in furtherance of, or indicating its consent to, approval of, or acquiescence
in, any of the acts set froth in clause (i), (ii) or (iii) above; or (v) the
Maker or any of its subsidiaries shall generally not, or shall be unable to,
or shall admit in writing its inability to, pay its debts as they become due;
(f) One or more judgments or decrees shall be entered against the
Maker or any of its subsidiaries involving in the aggregate a liability (not
paid or fully covered by insurance, subject to a commercially reasonable
deductible) of $2.5 million or more and all such
3
<PAGE>
judgments or decrees shall not have been vacated, discharged, stayed or
bonded pending appeal within 60 days from he entry thereof; or
(g) Any of the Mortgages shall cease, for any reason, to be in full
force and effect, or Maker or any of its subsidiaries shall so assert or the
liens created by any of the Mortgages shall cease to be enforceable and of
the same effect and priority purported to be created thereby;
then, (A) if such event is an event specified in clause (i), (ii) or (iv) of
subparagraph (e) above, automatically this Secured Rejection Note and all
amounts owing hereunder shall immediately become due and payable, and (B) if
such event is any other event specified in this Section 3, Holder may, by
notice to Maker, declare the Secured Rejection Note and all amounts owing
hereunder to be immediately due and payable, whereupon the same shall
immediately become due and payable. Except as expressly provided in this
paragraph, presentment, demand, protest and all other notices of any kind are
hereby expressly waived.
4. Payment of Expenses and Taxes.
Maker agrees (i) to pay or reimburse Holder for all its costs and
expenses incurred in connection with the enforcement or preservation of any
rights under this Secured Rejection Note and the Mortgages, including without
limitation the reasonable fees and disbursements of counsel to Holder and
(ii) to pay, indemnify, and hold Holder harmless from, any and all recording
and filing fees and any and all liabilities with respect to, or resulting
from any delay in paying, stamp and other similar taxes, if any, which may be
payable or determined to be payable in connection with the execution and
delivery of, or consummation or administration of any of the transactions
contemplated by, or any amendment, supplement or modification of, or any
waiver or consent under or in respect of, this Secured Rejection Note and the
Mortgages and (iii) to pay, indemnify and hold Holder harmless from and
against any and all other liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever with respect to the enforcement, performance and
administration of this Secured Rejection Note and the Mortgages, including
without limitation any of the foregoing relating to the violation of,
noncompliance with or liability under environmental law applicable to the
operations of Maker or any of its subsidiaries on the Collateral; provided
that Maker shall have no obligation hereunder to Holder with respect to
indemnified liabilities arising from the gross negligence or willful
misconduct of the Holder or any environmental activities or contamination
occurring on any Collateral after Maker transfers or conveys such Collateral
to Holder or any other person following a foreclosure on such Collateral or
deed-in-lieu thereof. The agreements in this Section 4 shall survive
repayment of the Secured Rejection Note and all other amounts payable
hereunder.
5. Authority.
Maker represents that it has full power authority and legal right to
execute and deliver this Secured Rejection Note and the Mortgages and to
perform its obligations hereunder and thereunder, and that this Secured
Rejection Note and the Mortgages constitute the valid and
4
<PAGE>
binding obligation of Maker, enforceable against Maker in accordance with its
terms, except as enforceability may be limited by (i) applicable bankruptcy,
insolvency, reorganization, moratorium, or similar laws affecting the
enforcement of creditors' rights generally and (ii) general principles of
equity, regardless of whether considered in proceedings at law or in equity.
6. Notices.
All notices, requests and demands to or upon Maker or Holder to be
effective shall be in writing (including by facsimile transmission), and,
unless otherwise expressly provided therein, shall be deemed to have been
duly given or made (a) in the case of delivery by hand, when delivered, (b)
in the case of delivery by mail, three days after being deposited in the
mails, postage prepaid, or (c) in the case of delivery by facsimile
transmission, when sent and receipt has been confirmed, addressed as follows,
or to such other address as may be hereafter notified by the respective
parities hereto:
Maker: Discovery Zone, Inc.
110 East Broward Blvd
Fort Lauderdale, Florida 33301
Attn: Chief Executive Officer
Telephone Number: (954) 627-2400
Telecopy Number: (954) 627-2760
Holder: McDonald's Corporation
One McDonald's Plaza
Oak Brook, Illinois 60523
Attn: General Counsel
Telephone Number: (630) 623-3000
Telecopy Number: (630) 623-5865
7. Consent to Jurisdiction; Governing Law.
(a) THIS SECURED REJECTION NOTE WAS NEGOTIATED IN THE STATE OF NEW
YORK, AND MADE BY MAKER AND ACCEPTED BY HOLDER IN THE STATE OF NEW YORK,
WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES
AND TO THE UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL RESPECTS,
INCLUDING MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS SECURED
REJECTION NOTE AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO NOTES MADE AND PERFORMED IN SUCH STATE AND ANY APPLICABLE LAW
OF THE UNITED STATES OF AMERICA. IT IS BEING UNDERSTOOD THAT THE LAW OF THE
STATE OF NEW YORK SHALL GOVERN THE VALIDITY AND THE ENFORCEABILITY OF THIS
SECURED REJECTION NOTE AND ALL OF THE INDEBTEDNESS OR OBLIGATIONS ARISING
HEREUNDER. TO THE FULLEST EXTENT PERMITTED BY LAW, MAKER HEREBY
UNCONDITIONALLY
5
<PAGE>
AND IRREVOCABLY WAIVES ANY CLAIM TO ASSERT THAT THE LAW OF ANY OTHER
JURISDICTION GOVERNS THIS SECURED REJECTION NOTE, AND THIS SECURED REJECTION
NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK.
(b) ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST MAKER OR HOLDER
ARISING OUT OF OR RELATING TO THIS SECURED REJECTION NOTE SHALL BE INSTITUTED
IN ANY FEDERAL OR STATE COURT IN NEW YORK, NEW YORK, AND MAKER WAIVES ANY
OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY
SUCH SUIT, ACTION OR PROCEEDING, AND MAKER HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION OR PROCEEDING. MAKER DOES
HEREBY DESIGNATE AND APPOINT SHEARMAN & STERLING, 599 LEXINGTON AVENUE, NEW
YORK, NEW YORK 10022-6069 (ATTN: DOUGLAS P. BARTNER, ESQ.), AS ITS
AUTHORIZED AGENT TO ACCEPT AND ACKNOWLEDGE ON ITS BEHALF SERVICE OF ANY AND
ALL PROCESS WHICH MAY BE SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING IN ANY
FEDERAL OR STATE COURT IN NEW YORK, NEW YORK, AND AGREES THAT SERVICE OF
PROCESS UPON SAID AGENT AT SAID ADDRESS AND WRITTEN NOTICE OF SAID SERVICE OF
MAKER MAILED OR DELIVERED TO MAKER IN THE MANNER PROVIDED HEREIN SHALL BE
DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON MAKER, IN ANY SUCH
SUIT, ACTION OR PROCEEDING IN THE STATE OF NEW YORK. MAKER (I) SHALL GIVE
PROMPT NOTICE TO HOLDER OF ANY CHANGED ADDRESS OF ITS AUTHORIZED AGENT
HEREUNDER, (II) MAY AT ANY TIME AND FROM TIME TO TIME DESIGNATE A SUBSTITUTE
AUTHORIZED AGENT WITH AN OFFICE IN NEW YORK, NEW YORK (WHICH OFFICE SHALL BE
DESIGNATED AS THE ADDRESS FOR SERVICE OF PROCESS), AND (III) SHALL PROMPTLY
DESIGNATE SUCH A SUBSTITUTE IF ITS AUTHORIZED AGENT CEASES TO HAVE AN OFFICE
IN NEW YORK, NEW YORK OR IS DISSOLVED WITHOUT LEAVING A SUCCESSOR.
8. Miscellaneous
(a) This Secured Rejection Note may be modified, amended, waived,
extended, changed, discharged or terminated only by an agreement in writing
signed by the party against whom enforcement of any such modification,
amendment, waiver, extension, change, discharge or termination is sought.
(b) No failure to exercise and no delay in exercising any right,
remedy, power or privilege hereunder or under the Mortgages shall operate as
a waiver thereof; nor shall any single or partial exercise of any right,
remedy, power or privilege hereunder or under the Mortgages preclude any
other or further exercise thereof or the exercise of any other right, remedy,
power or privilege. The rights, remedies, powers and privileges herein and
under the Mortgages are cumulative and not exclusive of any rights, remedies,
powers and privileges provided by law.
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<PAGE>
(c) This Secured Rejection Note shall be binding upon and inure to
the benefit of Maker and Holder and their respective successors and assign,
except that Maker may not assign or transfer any of its rights or obligations
under this Secured Rejection Note without the prior written consent of
Holder. Holder may sell, transfer or assign the Secured Rejection Note (or
any of its rights hereunder) to any person upon prior written notice of such
sale, transfer or assignment to Maker. Upon any such sale, transfer or
assignment, the assignee shall have all the rights, remedies, powers and
privileges of Holder hereunder.
IN WITNESS WHEREOF, Maker has duly executed or has caused its
respective duly authorized officers to execute this Secured Rejection Note on
its behalf, as of the day and year first above written.
DISCOVERY ZONE, INC.
By:/s/ Scott Bernstein
--------------------------------
Name: Scott Bernstein
Title: President
7
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EXHIBIT A
Location Location Number
Indianapolis, Indiana (307)
Kennesaw, Georgia (334)
Schaumberg, Illinois (335)
Douglas County (Littleton), Colorado (338)
Columbus, Ohio (339)
Blaine (Coon Rapids), Minnesota (340)
Forest Park, Ohio (343)
Leon Valley, Texas (344)
Arlington, Texas (347)
San Antonio, Texas (348)
Sterling Heights, Michigan (349)
Philadelphia (Franklin Mills), Pennsylvania (352)
Aurora, Colorado (353)
Vancouver, Washington (357)
<PAGE>
Exhibit 10.1
EMPLOYMENT AGREEMENT
--------------------
EMPLOYMENT AGREEMENT dated as of July 21, 1997 by and between
Discovery Zone, Inc., a Delaware corporation (the "Company"), and Scott
Bernstein ("Executive").
WHEREAS, the Board of Directors of the predecessor in interest of
the Company, as debtor-in-possession (the "Debtor"), approved hiring
Executive as President and Chief Executive Officer on December 5, 1996 (the
"Commencement Date") and the Bankruptcy Court having jurisdiction over the
Debtor's bankruptcy case authorized such hiring on January 23, 1997;
WHEREAS, the Debtor's Third Amended Joint Plan of Reorganization
(the "Plan") was confirmed on July 18, 1997;
WHEREAS, the Board of Directors of the Company (the "Board"),
considers it essential to the Company's best interests and the best interests
of its shareholders to retain and foster the continued employment of
Executive by the Company following its emergence from bankruptcy proceedings
and to enter into an agreement embodying the terms of such employment (the
"Agreement"); and
WHEREAS, Executive is willing to accept and continue his employment
on the terms set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein and for other good and valuable consideration, the parties
agree as follows:
1. TERM OF EMPLOYMENT. Subject to the provisions of Section 7 of
this Agreement, the Company shall employ Executive for a period (the
"Employment Term") initially ending on January 1, 2001 (such initial period,
the "Initial Employment Term"); provided that the Employment Term will
automatically extend for successive one year periods unless not later than
sixty (60) days prior to such automatic extension the Company or Executive
gives the other written notice to the contrary.
2. POSITION.
(a) During the term of Executive's employment hereunder, Executive
will serve as the President and Chief Executive Officer of the Company and
any holding company thereof and will report directly to the Board. In such
position, Executive will have such duties and authority as are customarily
exercised by a President and Chief Executive Officer of business
corporation of similar size and public stature and as the Board
<PAGE>
determines, from time to time, are reasonably related to the business of the
Company and do not limit or otherwise hamper Executive's ability to perform
his duties. Subject to the authority and direction of the Board and within
the scope of the business plan approved by the Board, Executive will be
ultimately responsible for overall management, administration and operation
of all present and future business of the Company and its subsidiaries,
including, but not limited to, finance, budgeting, strategic and business
planning, customer development, corporate development, service development,
personnel management, consulting and marketing. Executive will also serve
without additional compensation as the chief executive officer of each
subsidiary of the Company. In addition, Executive will serve on the Board,
the board of directors of the holding company, if any, or which the Company
is a subsidiary and on the boards of directors of the Company's subsidiaries,
in each case, without additional compensation.
(b) During the term of Executive's employment hereunder, Executive
shall devote substantially all of his business time and best efforts to the
performance of his duties hereunder and will not engage in any other
business, profession or occupation for compensation or otherwise which would
conflict with the rendition of such services either directly or indirectly,
without the prior written consent of the Board; provided that nothing herein
will preclude Executive from continuing to serve on the board of directors of
any business corporation or any charitable organization on which he now
serves and which has been disclosed to the Company in writing, or subject to
the prior approval of the Board, from accepting appointment to additional
boards of directors, in either case, provided that such activities do not
materially interfere with the performance of Executive's duties hereunder.
(c) The Company shall indemnify Executive against directors' and
officers' liability to the fullest extent permitted by law.
3. BASE SALARY. For the period commencing on the Effective Date
(as defined in Section 13(m) of this Agreement) and ending on December 31,
1997, the Company shall pay Executive a base salary at the initial annual
rate of $440,000, payable in regular installments in accordance with the
Company's usual payment practices. On January 1, 1998 and on each January 1
thereafter during the Employment Term, the Company shall increase Executive's
annual base salary at least $40,000 above the base salary in effect
immediately prior thereto. Such base salary, as in effect from time to time,
is hereinafter referred to as the "Base Salary".
-2-
<PAGE>
4. BONUS OPPORTUNITY. Executive is entitled to a cash bonus for
each fiscal year of the Company (the "Annual Bonus") equal to not less than
two percent (2%) of the Company's Operating Cash Flow for such fiscal year.
The Company shall pay the Annual Bonus as soon as practicable following each
fiscal year, and in no event later than ninety days after the end of the
relevant fiscal year. Notwithstanding the foregoing, Executive's Annual
Bonus for the 1997 fiscal year will be not less than $200,000. For purposes
of this Agreement, "Operating Cash Flow" means the Company's consolidated net
income determined in conformity with generally accepted accounting practices
plus, in each case, to the extent deducted from the Company's consolidated
net income for such fiscal year, (i) net income and franchise tax expenses,
(ii) amortization and depreciation and (iii) consolidated interest expenses.
5. EQUITY OPPORTUNITY.
(a) OPTION GRANT UNDER STOCK INCENTIVE PLAN. The Company shall
adopt a Stock Incentive Plan for the benefit of Executive and certain other
selected members of the Company's senior management on substantially the
terms attached as Exhibit F to the Plan. The Company shall grant to
Executive on or about the Effective Date an option pursuant to the Stock
Incentive Plan (the "Option") exercisable at $11.88 per share for 357,845
shares of Common Stock of the Company ("Common Stock") (representing 5% of
the outstanding Common Stock on the Effective Date on a fully diluted basis
assuming the exercise of all warrants, options or other securities issued
under the Plan or issued in connection with the exit financing therefor which
are convertible into Common Stock). Except to the extent inconsistent with
the specific provisions of this Section 5, the Option will be subject to the
terms and conditions of the Stock Incentive Plan and such other terms to be
determined by the compensation committee of the Board.
(b) MATERIAL TERMS. On January 1 of each of 1998, 1999 and 2000,
the Option shall vest and become exercisable with respect to thirty-three and
1/3 percent (331/3%) of the aggregate amount of shares of Common Stock
subject to the Option (the "Initial Amount"). The period commencing on the
Effective Date and ending on January 1, 2000 is referred to herein as the
"Vesting Period." Subject to the provisions of the next paragraph, to the
extent vested, the Option is excisable at any time during the period ending
on the tenth anniversary of the Effective Date (such period, the "Exercise
Period").
If Executive's employment with the Company is terminated during the
Vesting Period by the Company for "Cause" (as
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defined in Section 7(a)) or during the Vesting Period by Executive without
"Good Reason" (as defined in Section 7(d)), the Option shall, to the extent
not previously exercised, be canceled without consideration and any shares of
Common Stock previously acquired by Executive upon the exercise in whole or
in part of the Option shall be subject to redemption by the Company at a
redemption price per share equal to the exercise price per share under the
Option. If Executive's employment with the Company is terminated during the
Vesting Period due to his death or disability, the then unvested portion of
the Option, if any, will be canceled without consideration and Executive will
be entitled to retain the then vested portion of the Option which will remain
exercisable for the remainder of the Exercise Period. Following the Vesting
Period, the Option is not subject to cancellation and no termination of
Executive's employment with the Company for any reason, whether by Executive
or Company, will affect the remainder of the Exercise Period and no shares of
Common Stock acquired by Executive upon the exercise of the Option are
subject to forced redemption by the Company.
If a "Change of Control" (as defined in that certain Indenture dated
as of July 22, 197, between the Company and State Street Bank and Trust Company,
as trustee, in respect of the Company's 13 1/2% Senior Secured Notes) occurs
during the term of Executive's employment with the Company or Executive's
employment is terminated by the Company without Cause or by the Executive for
Good Reason, any unvested portion of the Option will vest and become exercisable
immediately (or, in the case of a Change of Control, immediately prior to such
Change of Control) and will remain exercisable for the remainder of the Exercise
Period; provided that in connection with the consummation of any such Change of
Control in which the selling holders of Common Stock are receiving cash
consideration for their shares, the Company may elect to cancel the unexercised
portion of the Option (the "Unexercised Portion") in exchange for a cash payment
to Executive equal to the excess of (x) the fair market value of the shares of
Common Stock covered by the Unexercised Portion over (y) the aggregate exercise
price of the Unexercised Portion. For purposes of this Section 5, "fair market
value" shall be determined by the Board in good faith and, in the event of a
Change of Control involving the sale of shares of Common Stock, shall be based
upon the price per share of Common Stock paid by the acquiror in connection with
such Change of Control.
(c) TAG ALONG RIGHTS. If at any time (x) Birch Holdings LLC and its
successors and assigns (collectively, "Birch") intends to transfer all or a
portion of the shares of Common Stock then held by Birch to any person or
persons other
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than an affiliate of Birch and (y) Birch has previously received aggregate
proceeds in excess of $32 million in respect of prior transfers of Common
Stock, then Birch shall notify Executive of such intended transfer and its
terms and conditions. Within 15 days of the date of receipt of such notice,
Executive shall notify Birch in writing whether he elects to participate in
such transfer. If Executive timely notifies Birch in writing of his election
to participate in such transfer, Executive will have the right to sell, at
the same price and on the same terms as Birch, such number of shares of
Common Stock then beneficially owned by Executive equal to the product of (i)
the number of shares of Common Stock Birch actually proposes to transfer
multiplied by (ii) a fraction, the numerator of which is the number of shares
of Common Stock then beneficially owned by Executive and the denominator of
which is the aggregate number of shares of Common Stock then beneficially
owned by Birch and Executive.
6. EMPLOYEE BENEFITS.
(a) PLAN PARTICIPATION. During the term of Executive's employment
hereunder, the Company shall provide Executive with employee benefits
(including fringe benefits, vacation, pension and profit sharing plan
participation and life, health, accident and disability insurance) on the
same basis as it generally makes those benefits available to senior
executives of the Company and commensurate with those benefits customarily
provided to the President and Chief Executive Officer of business
corporations of similar size and public stature in this industry.
(b) BUSINESS EXPENSES AND PERQUISITES. The Company shall reimburse
reasonable travel, entertainment and other business expenses incurred by
Executive in the performance of his duties hereunder in accordance with the
Company policies. In addition, the Company shall provide Executive with an
automobile allowance of $2,000 per month and shall reimburse Executive for
his out-of-pocket expenses in respect of annual dues for one country club
membership.
7. TERMINATION.
(a) TERMINATION FOR CAUSE BY THE COMPANY.
(i) The Company may terminate Executive's employment hereunder
for "Cause." For purposes of this Agreement, "Cause" means (A) Executive's
willful and continued failure substantially to perform his duties hereunder
(other than as a result of total or partial incapacity due to physical or
mental illness) which is not cured by Executive within ten (10)
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days following written notice given by the Company of such failure, (B)
Executive has stolen funds or property from the Company or otherwise engaged
in fraudulent conduct against the Company, (C) Executive's conviction of, or
plea of guilty or nolo contendere to a crime constituting a felony under the
laws of the United States or any state thereof involving moral turpitude, or
(D) an intentional breach by Executive of the covenants set forth in Sections
8 or 9 of this Agreement which is not cured by Executive within ten (10) days
following written notice from the Company of such breach.
(ii) If Executive's employment is terminated by the Company for
Cause, he will receive his Base Salary through the date of termination and
Executive will be entitled to no other payments of Base Salary or Annual
Bonus under this Agreement. All other benefits, if any, due Executive
following Executive's termination of employment by the Company for Cause will
be determined in accordance with the plans, policies and practices of the
Company.
(b) TERMINATION BY THE COMPANY WITHOUT CAUSE, BY EXECUTIVE WITH
GOOD REASON, OR DUE TO NON-RENEWAL OR EXECUTIVE'S DEATH OR DISABILITY.
(i) Executive's employment hereunder may be terminated under
any of the following circumstances: by the Company without Cause, by
Executive with Good Reason, upon Executive's death, at the end of the
Employment Term following the Company's delivery of a notice of non-renewal
as provided in Section 1 and if Executive becomes physically or mentally
incapacitated and is therefore reasonably expected to be unable for a period
of six (6) consecutive months or for an aggregate of nine (9) months in any
twenty-four (24) consecutive month period to perform his duties (such
incapacity is hereinafter referred to as "Disability"). Any question as to
the existence of a Disability as to which Executive and the Company cannot
agree will be determined in writing by a qualified independent physician
mutually acceptable to Executive and the Company. If Executive and the
Company cannot agree as to a qualified independent physician, each will
appoint such a physician and those two physicians shall select a third who
will make such determination in writing. The determination of Disability made
in writing to the Company and Executive will be final and conclusive for all
purposes of the Agreement.
(ii) Except as otherwise provided in Sections 7(c) and 13(f) below,
upon the termination of Executive's employment hereunder under any
circumstance described in paragraph (i) of this Section 7(b), Executive or
his estate (as the case may be) is entitled to receive, as and when due under
the
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terms of this Agreement, his Base Salary, the benefits described in Section 6
of this Agreement and an annual bonus for each year the Company remains
obligated to make payments under this Section 7(b)(ii) equal to the average
of the Annual Bonuses received by Executive during the two years immediately
preceding such termination (or in the immediately preceding year if Executive
received only one Annual Bonus before such termination) until the later of
(A) the end of the Initial Employment Term and (B) the date one year after
the date of such termination; PROVIDED that in the event of Executive's
termination of employment due to death or Disability, such payments shall be
reduced by the aggregate amount of payments received or to be received by
Executive under any disability or life insurance program maintained by the
Company or its affiliates.
(c) TERMINATION BY THE COMPANY WITHOUT CAUSE OR BY EXECUTIVE WITH
GOOD REASON WITHIN ONE YEAR FOLLOWING A CHANGE OF CONTROL. If Executive's
employment hereunder is terminated by the Company (or by another entity which
directly or indirectly acquired the business, assets or the equity of the
Company) without Cause or is terminated by Executive with Good Reason, in
either case, within one (1) year following a "Change of Control", Executive
shall be entitled to receive, in lieu of the compensation set forth in
paragraph (b) above, a lump sum payment equal to the product of (x) 2.99
times (y) Executive's "base amount," as defined in Section 280G(b)(3) of the
Code (the "Executive Base Amount"). Executive shall be entitled to no other
payments of Base Salary or Annual Bonus under this Agreement. All other
benefits, if any, due Executive following Executive's termination of
employment by the Company without Cause within one year following a Change of
Control shall be determined in accordance with the plans, policies and
practices of the Company.
(d) TERMINATION BY EXECUTIVE WITHOUT GOOD REASON.
(i) If Executive terminates his employment hereunder with the
Company for any reason (other than for Good Reason), he will receive his Base
Salary through the date of termination and will be entitled to no other
payments of Base Salary or Annual Bonus under this Agreement. All other
benefits, if any, due Executive following any such termination of Executive's
employment will be determined in accordance with the plans, policies and
practices of the Company.
(ii) For purposes of this Agreement "Good Reason" means (t) a
reduction in Base Salary, (u) an adverse change in Executive's title, (v) a
material reduction in the scope of Executive's duties and responsibilities to
the extent that they become materially inconsistent with his position as
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President and Chief Executive Officer of the Company (w) the failure of
Executive to report directly to the Board, (x) the failure of the Company to
pay Executive any of the compensation due and owing to Executive hereunder,
(y) the failure of the Company to maintain Executive's principal office in
the greater New York metropolitan area without Executive's written consent or
(z) any other material breach of this Agreement by the Company, in any such
case, following written notice from Executive to the Company describing the
event allegedly constituting Good Reason and the Company's failure to cure or
to in good faith commence the cure of such event within ten (10) days
following Executive's giving of such written notice.
(e) LIMITATION ON CERTAIN PAYMENTS FOLLOWING TERMINATION OF
EMPLOYMENT. Notwithstanding any other provision of this Agreement:
(i) In the event it is determined pursuant to clause (ii)
below, that part or all of the consideration, compensation or benefits to be
paid to Executive under this Agreement in connection with Executive's
termination of employment coincident with or following a Change of Control or
under any other plan, arrangement or agreement in connection therewith,
constitutes a "parachute payment" (or payments) under Section 280G(b)(2) of
the Code, then, if the aggregate present value of such parachute payments
(the "Parachute Amount") exceeds 2.99 times the Executive Base Amount, the
amounts constituting "parachute payments" which would otherwise be payable to
or for the benefit of Executive shall be reduced to the extent necessary so
that the Parachute Amount is equal to 2.99 times the Executive Base Amount;
PROVIDED, HOWEVER, that unless Executive otherwise agrees, in no event shall
the Parachute Amount otherwise payable to Executive be reduced by more than
10% pursuant to this Section 7(e).
(ii) Any determination that a payment constitutes a parachute
payment and any calculation described in this Section 7(e) ("determination")
shall be made by the independent public accountants for the Company, and may,
at the Company's election, be made prior to termination of Executive's
employment where the Company determines that a Change in Control, as provided
in this Section 7, is imminent. Such determination shall be furnished in
writing no later than 30 days following the date of the Change in Control by
the accountants to Executive.
(iii) If the determination made pursuant to clause (ii) of this
Section 7(e) results in a reduction of the payments that would otherwise be
paid to Executive except for the application of clause (i) of this Section
7(e), Executive
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may then elect, in his sole discretion, which and how much of any particular
entitlement shall be eliminated or reduced and shall advise the Company in
writing of his election within ten (10) days of the determination of the
reduction in payments. If no such election is made by Executive within such
ten-day period, the Company may elect which and how much of any entitlement
shall be eliminated or reduced and shall notify Executive promptly of such
election. Within ten (10) days following such determination and the
elections hereunder, the Company shall pay to or distribute to or for the
benefit of Executive such amounts as are then due to Executive under this
Agreement and shall promptly pay to or distribute to or for the benefit of
Executive in the future such amounts as become due to Executive under this
Agreement.
(iv) As a result of the uncertainty in the application of
Section 280G of the Code at the time of a determination hereunder, it is
possible that payments will be made by the Company which should not have been
made under clause (i) of this Section 7(e) ("Overpayment") or that additional
payments which are not made by the Company pursuant to clause (i) of this
Section 7(e) should have been made ("Underpayment"). In the event that there
is a final determination by the Internal Revenue Service, or a final
determination by a court of competent jurisdiction, that an Overpayment has
been made, any such Overpayment shall be treated for all purposes as a loan
to Executive which Executive shall repay to the Company together with
interest at the applicable Federal rate provided for in Section 7872(f)(2) of
the Code. In the event that there is a final determination by the Internal
Revenue Service, a final determination by a court of competent jurisdiction
or a change in the provisions of the Code or regulations pursuant to which an
Underpayment arises under this Agreement, any such Underpayment shall be
promptly paid by the Company to or for the benefit of Executive, together
with interest at the applicable Federal rate provided for in Section
7872(f)(2) of the Code.
(f) EXPIRATION OF EMPLOYMENT TERM. Unless otherwise agreed in
writing between the Company and Executive, Executive's employment hereunder
terminates upon the expiration of the Employment Term following delivery of a
notice of non-renewal as provided in Section 1 of this Agreement. Following
such expiration of the Employment Term, the Company will have no further
obligations to Executive hereunder, other than (i) if Executive delivers the
notice of non-renewal, with respect to compensation (including, but not
limited to, Annual Bonus, any amounts payable under any employee benefit
program of the Company in which Executive is or was a participant, accrued
vacation time not taken, unreimbursed business expenses
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and any other amounts which may be due and/or owing to Executive hereunder)
which shall have accrued to Executive during the Employment Term but which
shall then remain unpaid, and (ii) if the Company delivers the notice of
non-renewal, as provided in Section 7(b)(ii). Executive's continuation of
employment with the Company beyond the expiration of the Employment Term will
be deemed an employment at will which may be terminated by the Company or
Executive at any time and will not extend any of the provisions of this
Agreement. Any payments received by Executive in connection with such
employment-at-will reduce the amounts payable by the Company under Section
7(b)(ii).
(g) NOTICE OF TERMINATION. Any purported termination of employment
by the Company or by Executive must be communicated by written Notice of
Termination to the other party hereto in accordance with Section 13(h)
hereof. For purposes of this Agreement, a "Notice of Termination" means a
notice which indicates the specific termination provision in this Agreement
relied upon and which sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of employment under
the provision so indicated.
8. NON-COMPETITION. Executive acknowledges and recognizes the
highly competitive nature of the businesses of the Company and its affiliates
and accordingly agrees as follows:
(a) During the term of Executive's employment hereunder and
for a period of one year following the termination of Executive's employment
with the Company, Executive shall not become an employee, owner (except for
passive investments of not more than one percent (1%) of the outstanding
shares of, or any other equity interest in, any company or entity listed or
traded on a national securities exchange or in an over-the-counter securities
market), officer, agent or director of any company or entity engaged in the
location-based entertainment center business (other than major theme parks)
which directly competes with the Company.
(b) For one year following the termination of Executive's
employment with Company, Executive shall not directly or indirectly induce
any employee of the Company or any of its affiliates to engage in any
activity in which Executive is prohibited from engaging by Section 8(a) above
or to terminate such employee's employment with the Company or any of its
affiliates, and shall not directly or indirectly employ or offer employment
to any person who was employed by the Company or any of its affiliates unless
such person has ceased to be employed by the Company or any of its affiliates
for a period of at least 12 months.
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(c) It is expressly understood and agreed that although
Executive and the Company consider the restrictions contained in this Section
8 to be reasonable, if a final judicial determination is made by a court of
competent jurisdiction that the time or territory or any other restriction
contained in this Agreement is an unenforceable restriction against
Executive, the provisions of this Agreement shall not be rendered void but
shall be deemed amended to apply as to such maximum time and territory and to
such maximum extent as such court may judicially determine or indicate to be
enforceable. Alternatively, if any court of competent jurisdiction finds
that any restriction contained in this Agreement is unenforceable, and such
restriction cannot be amended so as to make it enforceable, such finding
shall not affect the enforceability of any of the other restrictions
contained herein.
(d) Notwithstanding the foregoing, it is expressly understood
and agreed that Executive's obligation to comply with the provisions of this
Section 8 during any period following the termination of his employment with
the Company will cease in the event that the Company is in material breach of
any of its obligations to make payments to Executive hereunder; PROVIDED that
(i) Executive has notified the Company in writing of such alleged breach and
the Company has failed to cure such breach within ten (10) days of its
receipt of such written notice and (ii) Executive shall continue to be bound
by the provisions of this Section 8 in the event of any bona fide dispute
over Executive's entitlement to any such payments pending settlement or
judicial resolution of such bona fide dispute.
9. CONFIDENTIALITY. Executive shall not at any time (whether
during or after his employment with the Company) disclose or use for his own
benefit or purposes or the benefit or purposes of any other person, firm,
partnership, joint venture, association, corporation or other business
organization, entity or enterprise other than the Company and any of its
affiliates, any trade secrets, information, data, or other confidential
information relating to customers, development programs, costs, marketing,
trading, investing, sales activities, promotion, credit and financial data,
financing methods, plans, or the business and affairs of the Company
generally, or of any affiliate of the Company, PROVIDED that the foregoing
prohibition shall apply only to information (i) which is or could be material
to the Company, (ii) which is not generally known to the industry or the
public other than as a result of Executive's breach of this covenant and
(iii) which is or could be used by the recipient thereof in a manner
materially detrimental to the Company. Upon the Company's request after
termination of Executive's employment with the Company for any reason,
Executive shall return to the Company immediately all memoranda, books,
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papers, plans, information, letters and other data, and all copies thereof or
therefrom, in any way relating to the business of the Company and its
affiliates, except that he may retain personal notes, notebooks and diaries.
Further, Executive shall not retain or use for his account at any time any
trade names, trademark or other proprietary business designation used or
owned in connection with the business of the Company or its affiliates. It
is understood and agreed that nothing contained in this Section 9 shall
restrict Executive's ability to obtain future employment.
10. COOPERATION WITH REGARD TO LITIGATION. Executive shall
cooperate with the Company during the Employment Term and thereafter
(including following Executive's termination of employment for any reason) by
making himself reasonably available to testify on behalf of the Company or
its affiliates, in any action, suit or proceeding, whether civil, criminal,
administrative, or investigative and to assist the Company or any of its
affiliates in any such action, suit, or proceeding by providing information
and meeting and consulting with the Board or its representatives or counsel
or representatives or counsel to the Company or its affiliates, as reasonably
requested by the Board or such representatives or counsel. Executive shall
be reimbursed by the Company for any expenses (including, but not limited to,
legal fees) reasonably incurred by Executive in connection with his
compliance with the foregoing covenant.
11. NOTIFICATION REQUIREMENT. During the Employment Term and for
the one year period following Executive's termination of employment with the
Company for any reason, Executive shall give notice to the Company of any
change in Executive's address and of each new employment that Executive plans
to undertake at least seven (7) days prior to beginning any such new
employment. Such notice must state the nature of the new employment, the
name and address of the person for whom such new employment is undertaken and
Executive shall provide the Company with such other pertinent information
concerning such new employment as the Company may reasonably request in order
to determine Executive's continued compliance with his obligations under
Sections 8 and 9.
12. SPECIFIC PERFORMANCE. Executive acknowledges and agrees that
the Company's remedies at law for a breach or threatened breach of any of the
provisions of Section 8 or Section 9 would be inadequate and, in recognition
of this fact, Executive agrees that, in the event of such a breach or
threatened breach, in addition to any remedies at law, the Company may seek
equitable relief in the form of specific performance,
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temporary restraining order, temporary or permanent injunction or any other
equitable remedy which may then be available.
13. MISCELLANEOUS.
(a) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York
without reference to conflicts of laws provisions.
(b) ENTIRE AGREEMENT/AMENDMENTS. This Agreement contains the
entire understanding of the parties with respect to the employment of
Executive by the Company. There are no restrictions, agreements, promises,
warranties, covenants or undertakings between the parties with respect to the
subject matter herein other than those expressly set forth herein. This
Agreement may not be altered, modified, or amended except by written
instrument signed by the parties hereto.
(c) NO WAIVER. The failure of a party to insist upon strict
adherence to any term of this Agreement on any occasion shall not be
considered a waiver of such party's rights or deprive such party of the right
thereafter to insist upon strict adherence to that term or any other term of
this Agreement.
(d) SEVERABILITY. In the event that any one or more of the
provisions of this Agreement shall be or become invalid, illegal or
unenforceable in any respects, the validity, legality and enforceability of
the remaining provisions of this Agreement shall not be affected thereby.
(e) ASSIGNMENT. This Agreement is not assignable by Executive
and is assignable by the Company only with the consent of Executive; PROVIDED
that if the Company effects a reorganization, consolidates with, or merges
into any other entity or transfers all of substantially all of its properties
or assets to any other entity the Company must assign its rights and
obligations under this Agreement (and Executive hereby consents to any such
assignment); and provided, further, that any assignee of the Company must
expressly assume the obligations, rights and privileges of this Agreement.
(f) MITIGATION. Executive has no duty to mitigate damages
following termination of his employment. However, the Company's obligation
to make the severance payments described in Section 7(b)(ii) as a result of
its delivery of a notice of non-renewal will be reduced on a
dollar-for-dollar basis to the extent Executive receives compensation in
connection with new employment.
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(g) SUCCESSORS; BINDING AGREEMENT. This Agreement shall inure
to the benefit of and be binding upon the Company, its successors and
permitted assigns. This Agreement shall also inure to the benefit of and be
binding upon Executive, his executors, administrators and heirs.
(h) NOTICE. For the purpose of this Agreement, notices and
all other communications provided for in the Agreement must be in writing and
will be deemed to have been duly given when delivered by hand or nationally
recognized overnight courier or five (5) business days after being mailed by
United States registered mail, return receipt requested, postage prepaid,
addressed to the Company at its executive offices with a copy sent to the
address set forth below, and addressed to Executive at the last known address
of Executive contained in the personnel records of the Company, or to such
other address as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be
effective only upon receipt.
Copies of Notices to Company:
Wellspring Associates, L.L.C.
620 Fifth Avenue
Suite 216
New York, N.Y. 10020
(i) WITHHOLDING TAXES. The Company may withhold from any
amounts payable under this Agreement such federal, state and local taxes as
may be required to be withheld pursuant to any applicable law or regulation.
(j) REPRESENTATION AS TO NO CONFLICT. Each of Executive and
the Company hereby represents and warrants to the other than neither the
execution nor performance by such party of this Agreement is prohibited or
restricted by or constitutes or will constitute, directly or indirectly, a
breach or violation of any written or other agreement to which such party is
or has been a party or by which such party is otherwise bound. The Company
further represents to Executive that it has been duly formed as a corporation
under the laws of the state of Delaware, is in good standing, is authorized
to conduct and carry on its business and that the Agreement has been
authorized by the Board and that all corporate action required to be taken to
enter into this Agreement has been duly taken.
(k) SURVIVAL. Provisions of this Agreement shall survive any
termination to the extent necessary or desirable to fully accomplish the
purposes of such provision; provided that the provisions of Sections 5, 7, 8,
9, 10, 11, 12 and 13(j)
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shall in all events survive any termination of Executive's employment and the
expiration of the Employment Term.
(l) COUNTERPARTS. This Agreement may be signed in
counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instruments.
(m) EFFECTIVE DATE. This Agreement becomes effective on the
later of the following dates (such later date the "Effective Date"): (i) the
date this Agreement is executed by the parties hereto and Birch and (ii) the
"Effective Date" as defined in the Plan.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
Discovery Zone, Inc.
By: /s/ Robert Rooney
---------------------------
Name: Robert Rooney
Title: Senior Vice President
/s/ Scott Bernstein
---------------------------
Scott Bernstein
Consented and Agreed
With Respect to Sections 2(a) and 5(c):
BIRCH HOLDINGS LLC
By: /s/ Greg Feldman
-----------------------------
Name: Greg Feldman
Title: Member
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Exhibit 10.2
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT dated as of August 1, 1997 (the "Agreement")
between Discovery Zone, Inc. (the "Company") and Robert G. Rooney (the
"Executive").
WHEREAS, the Company desires to employ the Executive, and the
Executive desires to be employed by the Company, upon the terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the covenants and agreements
hereinafter set forth, the parties hereto agree as follows:
1. EMPLOYMENT AND DUTIES
1.1. GENERAL. The Company hereby employs the Executive, and the
Executive agrees to serve, as Senior Vice President, Chief Financial and
Administrative Officer upon the terms and conditions herein contained. In
such capacity, the Executive agrees to serve the Company faithfully and to
the best of his ability under the direction of and reporting to the Chief
Executive Officer of the Company (the "CEO"). The Executive also agrees to
serve, if elected, at no compensation in addition to that provided for in
this Agreement, in the position of officer or director of any subsidiary of
the Company.
1.2. TERM OF EMPLOYMENT. The Executive's employment under this
Agreement shall commence on August 1, 1997 (the "EFFECTIVE DATE") and shall
terminate on the earlier of (i) December 31, 2000, which term shall be
automatically extended for successive one-year periods unless, not later than
60 days prior to December 31, 2000 or any extension thereof pursuant to this
Section 1.2, the Company or the Executive shall have given notice to the
other party that it does not wish to extend the term, or (ii) the termination
of the Executive's employment pursuant to Article 4 or 5 of this Agreement.
The term commencing on the Effective Date and ending on December 31, 2000 or
any extension thereof pursuant to this Section 1.2 is hereinafter referred to
as the "EMPLOYMENT TERM".
1.3. PLACE OF EMPLOYMENT. The Executive's principal place of
employment will be in the New York metropolitan area (as defined herein).
"NEW YORK METROPOLITAN AREA" for purposes of this Agreement shall mean New
York City, Westchester County, southern Connecticut or northern New Jersey.
1.4. EXCLUSIVE SERVICES. During the Executive's employment under
this Agreement, the Executive shall devote substantially all of his business
time and best efforts to the performance of his duties hereunder and will not
engage in any other business, profession or occupation for compensation or
otherwise that would conflict with the rendition of such services, either
directly or indirectly, without the prior written consent of the Board of
Directors of the Company (the "BOARD"); PROVIDED that nothing herein will
preclude the Executive from continuing to serve on the board of directors of
any business corporation or
<PAGE>
2
any charitable organization on which he now serves and that has been
disclosed to the Company in writing, or subject to the prior approval of the
Board, from accepting appointment to additional boards of directors, in
either case, PROVIDED that such activities do not materially interfere with
the performance of the Executive's duties hereunder.
1.5. INDEMNIFICATION. The Company shall indemnify the Executive
against any directors' and officers' liability with respect to the Company to
the fullest extent permitted by law.
2. COMPENSATION
2.1. BASE SALARY. From the Effective Date, the Executive shall be
entitled to receive a base salary ("BASE SALARY") at a rate of $185,000 per
annum, payable in arrears in equal installments not less frequently than
monthly in accordance with the Company's payroll practices, with such annual
increases as may be provided in accordance with Section 2.2. Once increased,
such higher amount shall constitute the Executive's annual Base Salary.
2.2. ANNUAL REVIEW. The Executive's Base Salary shall be reviewed by
the Company annually, and such Base Salary may be increased in the sole
discretion of the Company (but not decreased) upon such review during the
remainder of the Employment Term. The Company has no obligation to increase the
Executive's Base Salary during the Employment Term.
2.3. BONUS. For the Company's fiscal years after 1997, the
Executive shall be eligible to participate in the Company's annual Management
Incentive Plan ("MIP"). Under the MIP, the Executive's annual target bonus
for achievement of all individual and Company goals shall be $90,000. The
MIP shall provide that the portion of the Executive's potential bonus tied to
the Company's achieving its EBITDA goal for that year (as determined by the
CEO with the approval of the Board) will increase or decrease proportionately
to the extent that the Company's actual EBITDA for that year exceeds or is
less than, as the case may be, such EBITDA goal. In addition, the Executive
shall be eligible to receive such additional bonus, if any, as the Company in
its sole discretion may grant the Executive. The Executive's 1997 annual
bonus, if any, will be discretionary.
2.4. STOCK OPTIONS.
2.4.1. OPTION GRANT. On or as soon as practicable after July 29,
1997 (the "REORGANIZATION DATE"), the effective date of the plan of
reorganization of the Company (the "PLAN OF REORGANIZATION"), the Executive
shall be granted an option (the "OPTION") to purchase 89,500 shares of the
common stock of the reorganized Company ("COMMON STOCK") at an exercise price
of $11.88 per share in accordance with the terms of the employee stock
incentive plan that is incorporated in the Plan of Reorganization.
2.4.2. MATERIAL TERMS. On January 1 of each of 1998, 1999 and
2000, the Option shall vest and become exercisable with respect to 331/3% of
the aggregate amount of
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3
shares of Common Stock subject to the Option (the "INITIAL AMOUNT"). The
period commencing on the Reorganization Date and ending on January 1, 2000 is
referred to herein as the "VESTING PERIOD." Subject to the provisions of the
next paragraph, to the extent vested, the Option is exercisable at any time
during the period ending on the tenth anniversary of the Reorganization Date
(such period, the "EXERCISE PERIOD").
If the Executive's employment with the Company is terminated during
the Vesting Period by the Company for Cause (as defined in Section 4.3) or
during the Vesting Period by the Executive without Good Reason (as defined in
Section 4.4), the Option shall, to the extent not previously exercised, be
canceled without consideration and any shares of Common Stock previously
acquired by the Executive upon the exercise in whole or in part of the Option
shall be subject to redemption by the Company at a redemption price per share
equal to the exercise price per share under the Option. If the Executive's
employment with the Company is terminated during the Vesting Period due to
his death or disability, the then unvested portion of the Option, if any,
will be canceled without consideration and the Executive will be entitled to
retain the then vested portion of the Option which will remain exercisable
for the remainder of the Exercise Period. Following the Vesting Period, the
Option is not subject to cancellation, and no termination of the Executive's
employment with the Company for any reason, whether by the Executive or
Company, will affect the remainder of the Exercise Period and no shares of
Common Stock acquired by the Executive upon the exercise of the Option are
subject to forced redemption by the Company.
If a Change of Control (as defined in that certain Indenture dated
as of July 22, 1997, between the Company and State Street Bank and Trust
Company, as trustee, in respect of the Company's 131/2% Senior Secured Notes)
occurs during the term of the Executive's employment with the Company or the
Executive's employment is terminated by the Company without Cause or by the
Executive for Good Reason, any unvested portion of the Option will vest and
become exercisable immediately (or, in the case of a Change of Control,
immediately prior to such Change of Control) and will remain exercisable for
the remainder of the Exercise Period; provided that in connection with the
consummation of any such Change of Control in which the selling holders of
Common Stock are receiving cash consideration for their shares, the Company
may elect to cancel the unexercised portion of the Option (the "Unexercised
Portion") in exchange for a cash payment to the Executive equal to the excess
of (x) the fair market value of the shares of Common Stock covered by the
Unexercised Portion over (y) the aggregate exercise price of the Unexercised
Portion. For purposes or this Section 2.4.2, "fair market value" shall be
determined by the Board in good faith and, in the event of a Change of
Control involving the sale of shares of Common Stock, shall be based upon the
price per share of Common Stock paid by the acquiror in connection with such
Change of Control.
2.4.3. TAG ALONG RIGHTS. If at any time (x) Birch Holdings LLC and
its successors and assigns (collectively, "BIRCH") intends to transfer all or
a portion of the shares of Common Stock then held by Birch to any person or
persons other than an affiliate of Birch and (y) Birch has previously
received aggregate proceeds in excess of $32 million in respect of prior
transfers of Common Stock, then Birch shall notify the Executive of such
intended transfer and its terms and conditions. Within 15 days of the date
of receipt of such notice, the
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4
Executive shall notify Birch in writing whether he elects to participate in
such transfer. If the Executive timely notifies Birch in writing of his
election to participate in such transfer, the Executive will have the right
to sell, at the same price and on the same terms as Birch, such number of
shares of Common Stock then beneficially owned by the Executive equal to the
product of (i) the number of shares of Common Stock Birch actually proposes
to transfer multiplied by (ii) a fraction, the numerator of which is the
number of shares of Common Stock then beneficially owned by the Executive and
the denominator of which is the aggregate number of shares of Common Stock
then beneficially owned by Birch and the Executive.
3. EMPLOYEE BENEFITS
3.1. GENERAL. The Executive shall be included, to the extent
eligible thereunder by virtue of his position, tenure, salary, age and other
qualifications, in all employee benefit plans, programs or arrangements
(including, without limitation, any plans, programs or arrangements providing
for retirement benefits, incentive compensation, profit sharing, bonuses,
disability benefits, health and life insurance, or vacation and paid
holidays) which the Company may establish or maintain from time to time for,
or make available to, its senior executives of equal or lower positions.
3.2. REIMBURSEMENT OF EXPENSES. The Company will reimburse the
Executive for reasonable travel and other business expenses incurred by him
in the fulfillment of his duties hereunder upon presentation by the Executive
of an itemized account of such expenditures, in accordance with Company
policies and practices consistently applied.
3.3. AUTOMOBILE ALLOWANCE. The Company shall provide the Executive
with an automobile allowance of $1,000 per month.
4. TERMINATION OF EMPLOYMENT
4.1. TERMINATION WITHOUT CAUSE; RESIGNATION FOR GOOD REASON.
4.1.1. GENERAL. Subject to the provisions of Section 4.1.2, if,
prior to the expiration of the Employment Term, the Executive's employment is
terminated by the Company without Cause (as defined in Section 4.3), or if
the Executive resigns from his employment hereunder for Good Reason (as
defined in Section 4.4), the Company shall continue to pay the Executive his
Base Salary as of the date of termination or resignation for the duration of
the Severance Period (as defined in this Section 4.1.1) and shall pay a pro
rata bonus to the Executive for the year of termination or resignation. The
Company will also provide the Executive (i) medical and dental insurance
coverage under COBRA until the end of the Severance Period or, if earlier,
the date on which the Executive becomes eligible for medical and dental
coverage from a third-party employer; (ii) continued life and disability
insurance coverage (if such coverage was provided to the Executive
immediately prior to the Executive's termination or resignation) until the
end of the Severance Period; and (iii) continuation of the Executive's
automobile allowance under Section 3.3 until the end of the Severance Period.
Any stock options the Executive holds will be governed by Section 2.4.2.
<PAGE>
5
The Executive shall have no further right to receive any other compensation
or benefits after such termination or resignation except as determined in
accordance with the terms of the employee benefit plans or programs of the
Company. The "Severance Period" shall mean (i) if the Executive's date of
termination or resignation occurs prior to the expiration of the Employment
Term and within 18 months after the Reorganization Date, the period beginning
on the date of termination or resignation and ending 18 months thereafter, or
(ii) if the Executive's date of termination or resignation occurs prior to
the expiration of the Employment Term and after the date that is 18 months
after the Reorganization Date, the period beginning on the date of
termination or resignation and ending on the later of the last day of the
Employment Term or the date that is one year after the date of termination or
resignation.
4.1.2. CONDITIONS APPLICABLE TO THE SEVERANCE PERIOD. If, during
the Severance Period, the Executive materially breaches his obligations under
Section 6 of this Agreement, the Company may, upon written notice to the
Executive, terminate the Severance Period and cease to make any further
payments, or to provide any further benefits, described in Section 4.1.1.
4.1.3. DEATH DURING SEVERANCE PERIOD. In the event of the
Executive's death during the Severance Period, payments of Base Salary under
Section 4.1.1 shall continue to be made during the remainder of the Severance
Period to the Executive's estate.
4.1.4. MITIGATION. The Executive shall be required to mitigate the
amount of any payment provided for in Section 4.1 by seeking other
employment; provided, however, that the Executive shall not be required to
accept a lesser position, and any such payment or benefit shall be reduced by
the amount of the Executive's compensation from such other employment.
4.2. TERMINATION FOR CAUSE; RESIGNATION WITHOUT GOOD REASON. If,
prior to the expiration of the Employment Term, the Executive's employment is
terminated by the Company for Cause, or if the Executive resigns from his
employment hereunder other than for Good Reason, the Executive shall be
entitled only to payment of his Base Salary earned through and including the
date of termination or resignation. The Executive shall have no further
right to receive any other compensation, or to participate in any other plan,
arrangement, or benefit, after such termination or resignation of employment.
4.3. CAUSE. Termination for "CAUSE" shall mean termination of the
Executive's employment because of (i) the Executive's conviction of, or plea
of guilty or NOLO CONTENDERE to, a felony, (ii) a breach by the Executive of
his covenants contained in Section 6 of this Agreement, (iii) the Executive's
theft of funds or property from the Company or otherwise engaging in
fraudulent conduct against the Company or (iv) the continued failure or
refusal of the Executive to substantially perform the material duties
required of him as an employee of the Company under this Agreement after
specific directive by the CEO.
<PAGE>
6
4.4. GOOD REASON. For purposes of this Agreement, "GOOD REASON"
shall mean (i) a material diminution in the Executive's Base Salary, duties,
responsibilities or title as Chief Financial and Administrative Officer (it
being understood that a change in reporting of legal, real estate and
business development shall not be a diminution), (ii) the failure of the
Company to pay the Executive's bonus in accordance with Section 2.3 or (iii)
a breach by the Company of the reporting provision set forth in Section 1.1
or the location provision set forth in Section 1.3; PROVIDED, HOWEVER, that
no resignation for Good Reason shall be effective unless the Executive shall
have given notice thereof to the Company specifically identifying the basis
therefor, and the Company shall have failed to cure the event or condition
identified in the notice within 30 days after its receipt of the notice.
5. DEATH OR PERMANENT DISABILITY
If the Executive's employment is terminated by reason of his death
or Permanent Disability (as defined herein), the Company will pay the
Executive or his estate or beneficiary, as applicable, his Base Salary
through the date of termination and a pro rata bonus under Section 2.3 for
the year of termination, plus one additional year of Base Salary (or three
additional years of Base Salary if the Executive's death or Permanent
Disability occurred as the result of an accident while on Company business),
PROVIDED that such payments shall be reduced by the aggregate amount of
payments received or to be received by the Executive or his estate or
beneficiary under any Company-paid benefit plans or policies. For purposes
hereof, "PERMANENT DISABILITY" means a physical or mental disability or
infirmity of the Executive that prevents the normal performance of
substantially all his duties under this Agreement, which disability or
infirmity has lasted or can be expected to last for a continuous period of
180 days.
6. CONFIDENTIALITY; NONSOLICITATION; NONCOMPETITION
6.1. CONFIDENTIALITY. The Executive covenants and agrees with the
Company that he will not at any time, except in performance of his
obligations to the Company or hereunder or with the prior written consent of
the Company, directly or indirectly, disclose any secret or confidential
information that he may learn or has learned by reason of his association
with the Company or any of its subsidiaries and affiliates. The term
"CONFIDENTIAL INFORMATION" includes material information not previously
disclosed to the public or to the trade by the Company's management, or
otherwise in the public domain, with respect to the Company's or any of its
affiliates' or subsidiaries' products, facilities, applications and methods,
trade secrets and other intellectual property, systems, procedures, manuals,
confidential reports, product price lists, customer lists, technical
information, financial information (including the revenues, costs or profits
associated with any of the Company's products), business plans, prospects or
opportunities.
6.2. NONSOLICITATION. For so long as the Executive is employed by
the Company and continuing for one year thereafter, the Executive shall not,
without the prior written consent of the Company, directly or indirectly, as
a sole proprietor, member of a partnership, stockholder or investor, officer
or director of a corporation, or as an employee,
<PAGE>
7
associate, consultant or agent of any person, partnership, corporation or
other business organization or entity other than the Company, solicit or
endeavor to entice away from the Company, or any of its subsidiaries or
affiliates, any person or entity who is employed by the Company, or any of
its subsidiaries or affiliates.
6.3. NO COMPETING EMPLOYMENT. For so long as the Executive is
employed by the Company, and continuing for one year thereafter (or, if the
Executive is entitled to a continuation of his Base Salary under Section
4.1.1, the period during which such Base Salary is continued, if less), the
Executive shall not, directly or indirectly, as a sole proprietor, member of
a partnership, stockholder, investor, officer or director of a corporation,
or as an employee, associate, consultant or agent of any person, partnership,
corporation or other business organization or entity other than the Company
or any of its subsidiaries, render any service to or in any way be affiliated
with a competitor of the Company or any of its subsidiaries or affiliates in
the family entertainment center business (or any person or entity that is
reasonably anticipated, to the general knowledge of the Executive or the
public, to become a competitor in such business). For the purposes of this
Section 6.3, ownership of securities having no more than one percent of the
outstanding voting power of any competitor which is listed on any national
securities exchange or traded actively in the national over-the-counter
market shall not be deemed to be in violation of this Section 6.3 so long as
the Executive has no other connection or relationship with such competitor.
6.4. EXCLUSIVE PROPERTY. The Executive confirms that all
confidential information is and shall remain the exclusive property of the
Company. All business records, papers and documents kept or made by
Executive relating to the business of the Company shall be and remain the
property of the Company.
6.5. INJUNCTIVE RELIEF. Without intending to limit the remedies
available to the Company, the Executive acknowledges that a breach of any of
the covenants contained in this Section 6 may result in material and
irreparable injury to the Company or its affiliates or subsidiaries for which
there is no adequate remedy at law, that it will not be possible to measure
damages for such injuries precisely and that, in the event of such a breach
or threat thereof, the Company shall be entitled to obtain a temporary
restraining order and/or a preliminary or permanent injunction restraining
the Executive from engaging in activities prohibited by this Section 6 or
such other relief as may be required specifically to enforce any of the
covenants in this Section 6. If for any reasons a final decision of any
court determines that the restrictions under this Section 6 are not
reasonable or that consideration therefor is inadequate, such restrictions
shall be interpreted, modified or rewritten by such court to include as much
of the duration and scope identified in this Section 6 as will render such
restrictions valid and enforceable.
<PAGE>
8
7. MISCELLANEOUS
7.1. NOTICES. All notices and communications hereunder shall be in
writing, addressed, if to the Company, at its corporate headquarters, to the
attention of the CEO, and, if to the Executive, at 10 Mannetti Lane, Cos Cob,
Connecticut 06807, or such other address as the Executive has most recently
filed with the Company. Any such notice or communication shall be delivered in
person, by cable, by telecopy (with confirmation copy of such telecopied
material delivered in person or by registered or certified mail, return receipt
requested) or by certified or registered mail, return receipt requested,
addressed as above (or to such other address as such party may designate in
writing from time to time), and the actual date of receipt, as shown by the
receipt therefor, shall determine the time at which notice was given.
7.2. SEVERABILITY. If a court of competent jurisdiction determines
that any term or provision hereof is invalid or unenforceable, (a) the
remaining terms and provisions hereof shall be unimpaired and (b) such court
shall have the authority to replace such invalid or unenforceable term or
provision with a term or provision that is valid and enforceable and that
comes closest to expressing the intention of the invalid or unenforceable
term or provision.
7.3. ENTIRE AGREEMENT. This Agreement represents the entire
agreement of the parties and shall supersede any and all previous contracts,
arrangements or understandings between the Company and the Executive. This
Agreement may be amended at any time by mutual written agreement of the
parties hereto.
7.4. WITHHOLDING. The Company shall be entitled to withhold, or
cause to be withheld, from payment any amount of withholding taxes required
by law with respect to payments made to the Executive in connection with his
employment hereunder.
7.5. GOVERNING LAW. This Agreement shall be construed, interpreted,
and governed in accordance with the law of the State of New York without
reference to rules relating to conflict of law.
7.6. SUCCESSORS. This Agreement shall be binding upon and inure to
the benefit of, and shall be enforceable by the Executive and the Company,
their respective heirs, executors, administrators and assigns. In the event
the Company is merged, consolidated, liquidated by a parent corporation, or
otherwise transferred to or combined into one or more entities, the
provisions of this Agreement shall be binding upon and inure to the benefit
of the parent corporation or the entity resulting from such merger or to
which the assets shall be sold or transferred (and any such transfer by
operation of law or otherwise is expressly permitted hereunder), which entity
from and after the date of such merger, consolidation, sale or transfer shall
be deemed to be the Company for purposes of this Agreement. In the event of
any other assignment of this Agreement by the Company, by operation of law or
otherwise, the Company shall remain primarily liable for its obligations
hereunder. This Agreement shall not be assignable by the Executive.
<PAGE>
9
7.7. HEADINGS. The headings of sections herein are included solely
for convenience of reference and shall not control the meaning or interpretation
of any of the provisions of this Agreement.
7.8. COUNTERPARTS. This Agreement may be executed by either of the
parties hereto in counterparts, each of which shall be deemed to be an original,
but all such counterparts shall together constitute one and the same instrument.
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed and the Executive has hereunto set his hand, as of the day and year
first above written.
DISCOVERY ZONE, INC.
By: /s/ Scott Bernstein
--------------------------------
Title: President & CEO
----------------------------
EXECUTIVE
/s/ Robert G. Rooney
-----------------------------------
Robert G. Rooney
<PAGE>
Exhibit 10.3
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT dated as of August 1, 1997 (the "AGREEMENT")
between Discovery Zone, Inc. (the "COMPANY") and Sharon Rothstein (the
"EXECUTIVE").
WHEREAS, the Company desires to employ the Executive, and the
Executive desires to be employed by the Company, upon the terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the covenants and agreements
hereinafter set forth, the parties hereto agree as follows:
1. EMPLOYMENT AND DUTIES
1.1 GENERAL. The Company hereby employs the Executive, and the
Executive agrees to serve as Senior Vice President, Marketing and Entertainment,
upon the terms and conditions herein contained. In such capacity, the Executive
agrees to serve the Company faithfully and to the best of her ability under the
direction of and reporting to the Chief Executive Officer of the Company (the
"CEO"). The Executive also agrees to serve, if elected, at no compensation in
addition to that provided for in this Agreement, in the position of officer or
director of any subsidiary of the Company.
1.2. TERM OF EMPLOYMENT. The Executive's employment under this
Agreement shall commence on August 1, 1997 (the "EFFECTIVE DATE") and shall
terminate on the earlier of (i) December 31, 2000, which term shall be
automatically extended for successive one-year periods unless, not later than
60 days prior to December 31, 2000 or any extension thereof pursuant to this
Section 1.2, the Company or the Executive shall have given notice to the
other party that it does not wish to extend the term, or (ii) the termination
of the Executive's employment pursuant to Article 4 or 5 of this Agreement.
The term commencing on the Effective Date and ending on December 31, 2000 or
any extension thereof pursuant to this Section 1.2 is hereinafter referred to
as the "EMPLOYMENT TERM".
1.3. PLACE OF EMPLOYMENT. The Executive's principal place of
employment will be in the New York metropolitan area (as defined herein).
NEW YORK METROPOLITAN AREA" for purposes of this Agreement shall mean New
York City, Westchester County, southern Connecticut or northern New Jersey.
1.4. EXCLUSIVE SERVICES. During the Executive's employment under
this Agreement, the Executive shall devote substantially all of her business
time and best efforts to the performance of her duties hereunder and will not
engage in any other business, profession or occupation for compensation or
otherwise that would conflict with the rendition of such services, either
directly or indirectly, without the prior written consent of the Board of
Directors of the Company (the "BOARD"); PROVIDED that nothing herein will
preclude the
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2
Executive from continuing to serve on the board of directors of any business
corporation or any charitable organization on which she now serves and that
has been disclosed to the Company in writing, or subject to the prior
approval of the Board, from accepting appointment to additional boards of
directors, in either case, PROVIDED that such activities do not materially
interfere with the performance of the Executive's duties hereunder.
1.5. INDEMNIFICATION. The Company shall indemnify the Executive
against any directors' and officers' liability with respect to the Company to
the fullest extent permitted by law.
2. COMPENSATION
2.1. BASE SALARY. From the Effective Date, the Executive shall be
entitled to receive a base salary ("BASE SALARY") at a rate of $185,000 per
annum, payable in arrears in equal installments not less frequently than
monthly in accordance with the Company's payroll practices, with such annual
increases as may be provided in accordance with Section 2.2. Once increased,
such higher amount shall constitute the Executive's annual Base Salary.
2.2. ANNUAL REVIEW. The Executive's Base Salary shall be reviewed
by the Company annually, and such Base Salary may be increased in the sole
discretion of the Company (but not decreased) upon such review during the
remainder of the Employment Term. The Company has no obligation to increase
the Executive's Base Salary during the Employment Term.
2.3. BONUS. For the Company's fiscal years after 1997, the
Executive shall be eligible to participate in the Company's annual Management
Incentive Plan ("MIP"). Under the MIP, the Executive's annual target bonus
for achievement of all individual and Company goals shall be $90,000. The
MIP shall provide that the portion of the Executive's potential bonus tied to
the Company's achieving its EBITDA goal for that year (as determined by the
CEO with the approval of the Board) will increase or decrease
proportionately to the extent that the Company's actual EBITDA for that year
exceeds or is less than, as the case may be, such EBITDA goal. In addition,
the Executive shall be eligible to receive such additional bonus, if any, as
the Company in its sole discretion may grant the Executive. The Executive's
1997 annual bonus, if any, will be discretionary.
2.4. STOCK OPTIONS.
2.4.1. OPTION GRANT. On or as soon as practicable after July 29,
1997 (the "REORGANIZATION DATE"), the effective date of the plan of
reorganization of the Company (the "PLAN OF REORGANIZATION"), the Executive
shall be granted an option (the "OPTION") to purchase 89,500 shares of the
common stock of the reorganized Company ("COMMON STOCK") at an exercise price
of $11.88 per share in accordance with the terms of the employee stock
incentive plan that is incorporated in the Plan of Reorganization.
<PAGE>
3
2.4.2. MATERIAL TERMS. On January 1 of each of 1998, 1999 and
2000, the Option shall vest and become exercisable with respect to 331/3% of
the aggregate amount of shares of Common Stock subject to the Option (the
"INITIAL AMOUNT"). The period commencing on the Reorganization Date and
ending on January 1, 2000 is referred to herein as the "VESTING PERIOD."
Subject to the provisions of the next paragraph, to the extent vested, the
Option is exercisable at any time during the period ending on the tenth
anniversary of the Reorganization Date (such period, the "EXERCISE PERIOD").
If the Executive's employment with the Company is terminated during
the Vesting Period by the Company for Cause (as defined in Section 4.3) or
during the Vesting Period by the Executive without Good Reason (as defined in
Section 4.4), the Option shall, to the extent not previously exercised, be
cancelled without consideration and any shares of Common Stock previously
acquired by the Executive upon the exercise in whole or in part of the Option
shall be subject to redemption by the Company at a redemption price per share
equal to the exercise price per share under the Option. If the Executive's
employment with the Company is terminated during the Vesting Period due to
her death or disability, the then unvested portion of the Option, if any,
will be cancelled without consideration and the Executive will be entitled to
retain the then vested portion of the Option which will remain exercisable
for the remainder of the Exercise Period. Following the Vesting Period, the
Option is not subject to cancellation, and no termination of the Executive's
employment with the Company for any reason, whether by the Executive or
Company, will affect the remainder of the Exercise Period and no shares of
Common Stock acquired by the Executive upon the exercise of the Option are
subject to forced redemption by the Company.
If a Change of Control (as defined in that certain Indenture dated
as of July 22, 1997, between the Company and State Street Bank and Trust
Company, as trustee, in respect of the Company's 131/2% Senior Secured Notes)
occurs during the term of the Executive's employment with the Company or the
Executive's employment is terminated by the Company without Cause or by the
Executive for Good Reason, any unvested portion of the Option will vest and
become exercisable immediately (or, in the case of a Change of Control,
immediately prior to such Change of Control) and will remain exercisable for
the remainder of the Exercise Period; PROVIDED that in connection with the
consummation of any such Change of Control in which the selling holders of
Common Stock are receiving cash consideration for their shares, the Company
may elect to cancel the unexercised portion of the Option (the "UNEXERCISED
PORTION") in exchange for a cash payment to the Executive equal to the excess
of (x) the fair market value of the shares of Common Stock covered by the
Unexercised Portion over (y) the aggregate exercise price of the Unexercised
Portion. For purposes or this Section 2.4.2, "FAIR MARKET VALUE" shall be
determined by the Board in good faith and, in the event of a Change of
Control involving the sale of shares of Common Stock, shall be based upon the
price per share of Common Stock payed by the acquiror in connection with such
Change of Control.
2.4.3. TAG ALONG RIGHTS. If at any time (x) Birch Holdings LLC and
its successors and assigns (collectively, "Birch") intends to transfer all or a
portion of the shares of Common Stock then held by Birch to any person or
persons other than an affiliate of Birch and (y) Birch has previously received
aggregate proceeds in excess of $32 million in respect of
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4
prior transfers of Common Stock, then Birch shall notify the Executive of
such intended transfer and its terms and conditions. Within 15 days of the
date of receipt of such notice, the Executive shall notify Birch in writing
whether she elects to participate in such transfer. If the Executive timely
notifies Birch in writing of her election to participate in such transfer,
the Executive will have the right to sell, at the same price and on the same
terms as Birch, such number of shares of Common Stock then beneficially owned
by the Executive equal to the product of (i) the number of shares of Common
Stock Birch actually proposes to transfer multiplied by (ii) a fraction, the
numerator of which is the number of shares of Common Stock then beneficially
owned by the Executive and the denominator of which is the aggregate number
of shares of Common Stock then beneficially owned by Birch and the Executive.
3. EMPLOYEE BENEFITS
3.1. GENERAL. The Executive shall be included, to the extent
eligible thereunder by virtue of her position, tenure, salary, age and other
qualifications, in all employee benefit plans, programs or arrangements
(including, without limitation, any plans, programs or arrangements providing
for retirement benefits, incentive compensation, profit sharing, bonuses,
disability benefits, health and life insurance, or vacation and paid
holidays) which the Company may establish or maintain from time to time for,
or make available to, its senior executives of equal or lower positions.
3.2. REIMBURSEMENT OF EXPENSES. The Company will reimburse the
Executive for reasonable travel and other business expenses incurred by her
in the fulfillment of her duties hereunder upon presentation by the Executive
of an itemized account of such expenditures, in accordance with Company
policies and practices consistently applied.
3.3. AUTOMOBILE ALLOWANCE. The Company shall provide the Executive
with an automobile allowance of $1,000 per month.
4. TERMINATION OF EMPLOYMENT
4.1. TERMINATION WITHOUT CAUSE; RESIGNATION FOR GOOD REASON.
4.1.1. GENERAL. Subject to the provisions of Section 4.1.2, if,
prior to the expiration of the Employment Term, the Executive's employment is
terminated by the Company without Cause (as defined in Section 4.3), or if
the Executive resigns from her employment hereunder for Good Reason (as
defined in Section 4.4), the Company shall continue to pay the Executive her
Base Salary as of the date of termination or resignation for the duration of
the Severance Period (as defined in this Section 4.1.1) and shall pay a pro
rata bonus to the Executive for the year of termination or resignation. The
Company will also provide the Executive (i) medical and dental insurance
coverage under COBRA until the end of the Severance Period or, if earlier,
the date on which the Executive becomes eligible for medical and dental
coverage from a third-party employer; (ii) continued life and disability
insurance coverage (if such coverage was provided to the Executive
immediately prior to the Executive's termination or resignation) until the
end of the Severance Period; and (iii)
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5
continuation of the Executive's automobile allowance under Section 3.3 until
the end of the Severance Period. Any stock options the Executive holds will
be governed by Section 2.4.2. The Executive shall have no further right to
receive any other compensation or benefits after such termination or
resignation except as determined in accordance with the terms of the employee
benefit plans or programs of the Company. The "SEVERANCE PERIOD" shall mean
(i) if the Executive's date of termination or resignation occurs prior to the
expiration of the Employment Term and within 18 months after the
Reorganization Date, the period beginning on the date of termination or
resignation and ending 18 months thereafter, or (ii) if the Executive's date
of termination or resignation occurs prior to the expiration of the
Employment Term and after the date that is 18 months after the Reorganization
Date, the period beginning on the date of termination or resignation and
ending on the later of the last day of the Employment Term or the date that
is one year after the date of termination or resignation.
4.1.2. CONDITIONS APPLICABLE TO THE SEVERANCE PERIOD. If,
during, the Severance Period, the Executive materially breaches her
obligations under Section 6 of this Agreement, the Company may, upon written
notice to the Executive, terminate the Severance Period and cease to make any
further payments, or to provide any further benefits, described in Section
4.1.1.
4.1.3. DEATH DURING SEVERANCE PERIOD. In the event of the
Executive's death during the Severance Period, payments of Base Salary under
Section 4.1.1 shall continue to be made during the remainder of the Severance
Period to the Executive's estate.
4.1.4. MITIGATION. The Executive shall be required to mitigate
the amount of any payment provided for in Section 4.1 by seeking, other
employment; provided, however, that the Executive shall not be required to
accept a lesser position, and any such payment or benefit shall be reduced by
the amount of the Executive's compensation from such other employment.
4.2. TERMINATION FOR CAUSE; RESIGNATION WITHOUT GOOD REASON. If, prior
to the expiration of the Employment Term, the Executive's employment is
terminated by the Company for Cause, or if the Executive resigns from her
employment hereunder other than for Good Reason, the Executive shall be
entitled only to payment of her Base Salary earned through and including the
date of termination or resignation. The Executive shall have no further
right to receive any other compensation, or to participate in any other plan,
arrangement, or benefit, after such termination or resignation of employment.
4.3. CAUSE. Termination for "CAUSE" shall mean termination of the
Executive's employment because of (i) the Executive's conviction of, or plea
of guilty or NOLO CONTENDERE to, a felony, (ii) a breach by the Executive of
her covenants contained in Section 6 of this Agreement, (iii) the Executive's
theft of funds or property from the Company or otherwise engaging in
fraudulent conduct against the Company or (iv) the continued failure or
refusal of the Executive to substantially perform the material duties
required of her as an employee of the Company under this Agreement after
specific directive by the CEO.
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6
4.4. GOOD REASON. For purposes of this Agreement, "GOOD REASON" shall
mean (i) a material diminution in the Executive's Base Salary, duties,
responsibilities or title, (ii) the failure of the Company to pay the
Executive's bonus in accordance with Section 2.3 or (iii) a breach by the
Company of the reporting provision set forth in Section 1.1 or the location
provision set forth in Section 1.3; PROVIDED, HOWEVER, that no resignation
for Good Reason shall be effective unless the Executive shall have given
notice thereof to the Company specifically identifying the basis therefor,
and the Company shall have failed to cure the event or condition identified
in the notice within 30 days after its receipt of the notice.
5. DEATH OR PERMANENT DISABILITY
If the Executive's employment is terminated by reason of her death
or Permanent Disability (as defined herein), the Company will pay the
Executive or her estate or beneficiary, as applicable, her Base Salary
through the date of termination and a pro rata bonus under Section 2.3 for
the year of termination, plus one additional year of Base Salary (or three
additional years of Base Salary if the Executive's death or Permanent
Disability occurred as the result of an accident while on Company business),
PROVIDED that such payments shall be reduced by the aggregate amount of
payments received or to be received by the Executive or her estate or
beneficiary under any Company-paid benefit plans or policies. For purposes
hereof, "PERMANENT DISABILITY" means a physical or mental disability or
infirmity of the Executive that prevents the normal performance of
substantially all her duties under this Agreement, which disability or
infirmity has lasted or can be expected to last for a continuous period of
180 days.
6. CONFIDENTIALITY; NONSOLICITATION: NONCOMPETITION
6.1. CONFIDENTIALITY. The Executive covenants and agrees with the
Company that she will not at any time, except in performance of her
obligations to the Company or hereunder or with the prior written consent of
the Company, directly or indirectly, disclose any secret or confidential
information that she may learn or has learned by reason of her association
with the Company or any of its subsidiaries and affiliates. The term
"CONFIDENTIAL INFORMATION" includes material information not previously
disclosed to the public or to the trade by the Company's management, or
otherwise in the public domain, with respect to the Company's or any of its
affiliates' or subsidiaries' products, facilities, applications and methods,
trade secrets and other intellectual property, systems, procedures, manuals,
confidential reports, product price lists, customer lists, technical
information, financial information (including the revenues, costs or profits
associated with any of the Company's products), business plans, prospects or
opportunities.
6.2. NONSOLICITATION. For so long as the Executive is employed by the
Company and continuing for one year thereafter, the Executive shall not, without
the prior written consent of the Company, directly or indirectly, as a sole
proprietor, member of a partnership, stockholder or investor, officer or
director of a corporation, or as an employee, associate, consultant or agent of
any person, partnership, corporation or other business organization or entity
other than the Company, solicit or endeavor to entice away from the
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7
Company, or any of its subsidiaries or affiliates, any person or entity who
is employed by the Company, or any of its subsidiaries or affiliates.
6.3. NO COMPETING EMPLOYMENT. For so long as the Executive is
employed by the Company, and continuing for one year thereafter (or, if the
Executive is entitled to a continuation of her Base Salary under Section
4.1.1, the period during which such Base Salary is continued, if less), the
Executive shall not, directly or indirectly, as a sole proprietor, member of
a partnership, stockholder, investor, officer or director of a corporation,
or as an employee, associate, consultant or agent of any person, partnership,
corporation or other business organization or entity other than the Company
or any of its subsidiaries, render any service to or in any way be affiliated
with a competitor of the Company or any of its subsidiaries or affiliates in
the family entertainment center business (or any person or entity that is
reasonably anticipated, to the general knowledge of the Executive or the
public, to become a competitor in such business). For the purposes of this
Section 6.3, ownership of securities having no more than one percent of the
outstanding voting power of any competitor which is listed on any national
securities exchange or traded actively in the national over-the-counter
market shall not be deemed to be in violation of this Section 6.3 so long as
the Executive has no other connection or relationship with such competitor.
6.4. EXCLUSIVE PROPERTY. The Executive confirms that all
confidential information is and shall remain the exclusive property of the
Company. All business records, papers and documents kept or made by
Executive relating to the business of the Company shall be and remain the
property of the Company.
6.5. INJUNCTIVE RELIEF. Without intending to limit the remedies
available to the Company, the Executive acknowledges that a breach of any of
the covenants contained in this Section 6 may result in material and
irreparable injury to the Company or its affiliates or subsidiaries for which
there is no adequate remedy at law, that it will not be possible to measure
damages for such injuries precisely and that, in the event of such a breach
or threat thereof, the Company shall be entitled to obtain a temporary
restraining order and/or a preliminary or permanent injunction restraining
the Executive from engaging in activities prohibited by this Section 6 or
such other relief as may be required specifically to enforce any of the
covenants in this Section 6. If for any reasons a final decision of any
court determines that the restrictions under this Section 6 are not
reasonable or that consideration therefor is inadequate, such restrictions
shall be interpreted, modified or rewritten by such court to include as much
of the duration and scope identified in this Section 6 as will render such
restrictions valid and enforceable.
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8
7. MISCELLANEOUS
7.1. NOTICES. All notices and communications hereunder shall be in
writing, addressed, if to the Company, at its corporate headquarters, to the
attention of the CEO, and, if to the Executive, at 199 West End Avenue,
Ridgewood, New Jersey 07450, or such other address as the Executive has most
recently filed with the Company. Any such notice or communication shall be
delivered in person, by cable, by telecopy (with confirmation copy of such
telecopied material delivered in person or by registered or certified mail,
return receipt requested) or by certified or registered mail, return receipt
requested, addressed as above (or to such other address as such party may
designate in writing from time to time), and the actual date of receipt, as
shown by the receipt therefor, shall determine the time at which notice was
given.
7.2. SEVERABILITY. If a court of competent jurisdiction determines
that any term or provision hereof is invalid or unenforceable, (a) the
remaining terms and provisions hereof shall be unimpaired and (b) such court
shall have the authority to replace such invalid or unenforceable term or
provision with a term or provision that is valid and enforceable and that
comes closest to expressing the intention of the invalid or unenforceable
term or provision.
7.3. ENTIRE AGREEMENT. This Agreement represents the entire
agreement of the parties and shall supersede any and all previous contracts,
arrangements or understandings between the Company and the Executive. This
Agreement may be amended at any time by mutual written agreement of the
parties hereto.
7.4. WITHHOLDING. The Company shall be entitled to withhold, or
cause to be withheld, from payment any amount of withholding taxes required
by law with respect to payments made to the Executive in connection with her
employment hereunder.
7.5. GOVERNING LAW. This Agreement shall be construed, interpreted,
and governed in accordance with the law of the State of New York without
reference to rules relating to conflict of law.
7.6. SUCCESSORS. This Agreement shall be binding upon and inure to
the benefit of, and shall be enforceable by the Executive and the Company,
their respective heirs, executors, administrators and assigns. In the event
the Company is merged, consolidated, liquidated by a parent corporation, or
otherwise transferred to or combined into one or more entities, the
provisions of this Agreement shall be binding upon and inure to the benefit
of the parent corporation or the entity resulting from such merger or to
which the assets shall be sold or transferred (and any such transfer by
operation of law or otherwise is expressly permitted hereunder), which entity
from and after the date of such merger, consolidation, sale or transfer shall
be deemed to be the Company for purposes of this Agreement. In the event of
any other assignment of this Agreement by the Company, by operation of law or
otherwise, the Company shall remain primarily liable for its obligations
hereunder. This Agreement shall not be assignable by the Executive.
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9
7.7. HEADINGS. The headings of sections herein are included solely
for convenience of reference and shall not control the meaning or
interpretation of any of the provisions of this Agreement.
7.8 COUNTERPARTS. This Agreement may be executed by either of the
parties hereto in counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the
same instrument.
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed and the Executive has hereunto set her hand, as of the day and year
first above written.
DISCOVERY ZONE, INC.
By:/s/ Scott Bernstein
----------------------------
Title: President & CEO
------------------------
EXECUTIVE
/s/ Sharon Rothstein
------------------------------
Sharon Rothstein
<PAGE>
Exhibit 10.4
DISCOVERY ZONE, INC.
1997 STOCK INCENTIVE PLAN
SECTION 1. Purpose; Definitions
The purposes of the Plan to give the Corporation a competitive
advantage in attracting, retaining and motivating officers and employees and to
provide the Corporation and its subsidiaries with a stock plan providing
incentives more directly linked to the profitability of the Corporation's
businesses and increases in shareholder value.
For purposes of the Plan, the following terms are defined as set forth
below:
a. "Affiliate" means a corporation or other entity controlled by the
Corporation and designated by the Committee from time to time as such.
b. "Award" means a Stock Appreciation Right, Stock Option, Restricted
Stock or Performance Units.
c. "Award Cycle" shall mean a period of consecutive fiscal years or
portions thereof designated by the Committee over which Performance Units are to
be earned.
d. "Board" means the Board of Directors of the Company.
e. "Cause" means (1) conviction of a participant for committing a
felony under federal law or the law of the state in which such action occurred,
(2) dishonesty in the course of fulfilling a participant's employment duties or
(3) willful and deliberate failure on the part of a participant to perform his
employment duties in any material respect, or such other events as shall be
determined by the Committee. The Committee shall have the sole discretion to
determine whether "Cause" exists, and its determination shall be final.
f. "Change in Control" and "Change in Control Price" have the meanings
set forth in Sections 9(b) and (c), respectively.
g. "Code" means the Internal Revenue Code of 1986, as amended from time
to time, and any successor thereto.
h. "Commission" means the Securities and Exchange Commission or any
successor agency.
i. "Committee" means the Committee referred to in Section 2.
j. "Common Stock" means common stock, par value $0.01 per share, of the
Corporation.
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2
k. "Corporation" means Discovery Zone Inc. a Delaware corporation.
l. "Covered Employee" means a participant designated prior to the grant
of shares of Restricted Stock or Performance Units by the Committee who is or
may be a "covered employee" within the meaning of Section 162(m)(3) of the Code
in the year in which Restricted Stock or Performance Units are expected to be
taxable to such participant.
m. "Disability" means permanent and total disability as determined
under procedures established by the Committee for purposes of the Plan.
n. "Early Retirement" means [retirement from active employment with the
Corporation, a subsidiary or Affiliate pursuant to the early retirement
provisions of the applicable pension plan of such employer].1
o. "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, and any successor thereto.
p. "Fair Market Value" means, as of any given date, the mean between
the highest and lowest reported sales prices of the Common Stock on the New York
Stock Exchange Composite Tape or, if not listed on such exchange, on any other
national securities exchange on which the Common Stock is listed or on NASDAQ.
If there is no regular public trading market for such Common Stock, the Fair
Market Value of the Common Stock shall be determined by the Committee in good
faith.
q. "Incentive Stock Option" means any Stock Option designated as, and
qualified as, an "incentive stock option" within the meaning of Section 422 of
the Code.
r. "Non-Employee Director" means a member of the Board who qualifies as
a Non-Employee Director as defined in Rule 16b-3(b)(3), as promulgated by the
Commission under the Exchange Act, or any successor definition adopted by the
Commission.
s. "NonQualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.
t. "Normal Retirement" means [retirement from active employment with
the Corporation, a subsidiary or Affiliate at or after age 65].1
u. "Qualified Performance-Based Award" means an Award of Restricted
Stock or Performance Units designated as such by the Committee at the time of
grant, based upon a determination that (i) the recipient is or may be a "covered
employee" within the meaning of Section 162(m)(3) of the Code in the year in
which the Company would expect to be able to
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3
claim a tax deduction with respect to such Restricted Stock or Performance Units
and (ii) the Committee wishes such Award to qualify for the Section 162(m)
Exemption.
v. "Performance Goals" means the performance goals established by the
Committee in connection with the grant of Restricted Stock or Performance Units.
In the case of Qualified Performance-Based Awards, (i) such goals shall be based
on the attainment of specified levels of one or more of the following measures:
earnings per share, sales, net profit after tax, gross profit, operating profit,
cash generation, unit volume, return on equity, change in working capital,
return on capital or shareholder return,2 and (ii) such Performance Goals shall
be set by the Committee within the time period prescribed by Section 162(m) of
the Code and related regulations.
w. "Performance Units" means an award made pursuant to Section 8.
x. "Plan" means the Discovery Zone, Inc. 1996 Stock Incentive Plan, as
set forth herein and as hereinafter amended from time to time.
y. "Restricted Stock" means an award granted under Section 7.
z. "Retirement" means Normal or Early Retirement.
aa. "Rule 16b-3" means Rule 16b-3, as promulgated by the Commission
under Section 16(b) of the Exchange Act, as amended from time to time.
bb. "Section 162(m) Exemption" means the exemption from the limitation
on deductibility imposed by Section 162(m) of the Code that is set forth in
Section 162(m)(4)(C) of the Code.
cc. "Stock Appreciation Right" means a right granted under Section 6.
dd. "Stock Option" means an option granted under Section 5.
ee. "Termination of Employment" means the termination of the
participant's employment with the Corporation and any subsidiary or Affiliate. A
participant employed by a subsidiary or an Affiliate shall also be deemed to
incur a Termination of Employment if the subsidiary or Affiliate ceases to be
such a subsidiary or an Affiliate, as the case may be, and the participant does
not immediately thereafter become an employee of the Company or another
subsidiary or Affiliate. Temporary absences from employment because of illness,
vacation or leave of absence and transfers among the Corporation and its
subsidiaries and Affiliates shall not be considered Terminations of Employment.
<PAGE>
4
In addition, certain other terms used herein have definitions given to
them in the first place in which they are used.
SECTION 2. Administration
The Plan shall be administered by the Compensation Committee or such
other committee of the Board as the Board may from time to time designate (the
"Committee"), which shall be composed of not less than two Non-Employee
Directors, each of whom shall be an "outside director" for purposes of Section
162(m)(4) of the Code, and shall be appointed by and serve at the pleasure of
the Board.
The Committee shall have plenary authority to grant Awards pursuant to
the terms of the Plan to officers and employees of the Company and its
subsidiaries and Affiliates.
Among other things, the Committee shall have the authority subject to
the terms of the Plan:
(a) To select the officers and employees to whom Awards may from time
to time be granted;
(b) To determine whether and to what extent Incentive Stock Options,
NonQualified Stock Options, Stock Appreciation Rights, Restricted Stock and
Performance Units or any combination thereof are to be granted hereunder;
(c) To determine the number of shares of Common Stock to be covered by
each Award granted hereunder;
(d) To determine the terms and conditions of any Award granted
hereunder (including, but not limited to, the option price (subject to Section
5(a)), any vesting condition, restriction or limitation (which may be related to
the performance of the participant, the Company or any subsidiary or Affiliate)
and any vesting acceleration or forfeiture waiver regarding any Award and the
shares of Common Stock relating thereto, based on such factors as the Committee
shall determine;
(e) To modify, amend or adjust the terms and conditions of any Award,
at any time or from time to time, including but not limited to Performance
Goals; provided, however, that the Committee may not adjust upwards the amount
payable with respect to a Qualified Performance-Based Award or waive or alter
the Performance Goals associated therewith;
<PAGE>
5
(f) To determine to what extent and under what circumstances Common
Stock, and other amounts payable with respect to an Award shall be deferred; and
(g) To determine under what circumstances an Award may be settled in
cash or Common Stock under Sections 5(j), 6(b)(ii) and 8(b)(v).
The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall
from time to time deem advisable, to interpret the terms and provisions of the
Plan and any Award issued under the Plan (and any agreement relating thereto)
and to otherwise supervise the administration of the Plan.
The Committee may act only by a majority of its members then in office,
except that the members thereof may (i) delegate to an officer of the Company
the authority to make decisions pursuant to paragraphs (c), (f), (g), (h) and
(i) of Section 5 (provided that no such delegation may be made that would cause
Awards or other transactions under the Plan, to cease to be exempt from Section
16(b) of the Exchange Act) and (ii) authorize any one or more of their number or
any officer of the Company to execute and deliver documents on behalf of the
Committee.
Any determination made by the Committee or pursuant to delegated
authority pursuant to the provisions of the Plan with respect to any Award shall
be made in the sole discretion of the Committee or such delegate at the time of
the grant of the Award or, unless in contravention of any express term of the
Plan, at any time thereafter. All decisions made by the Committee or any
appropriately delegated officer pursuant to the provisions of the Plan shall be
final and binding on all persons, including the Corporation and Plan
participants.
Any authority granted to the Committee may also be exercised by the
full Board, except to the extent that the grant or exercise of such authority
would cause any Award or transaction to become subject to (or lose an exemption
under) the short-swing profit recovery provisions of Section 16 of the Exchange
Act or cause an award designated as a Qualified Performance-Based Award not to
qualify for, or to cease to qualify for, the Section 162(m) Exemption. To the
extent that any permitted action taken by the Board conflicts with action taken
by the Committee, the Board action shall control.
SECTION 3. Common Stock Subject to Plan
The total number of shares of Common Stock reserved and available for
grant under the Plan shall be ___ [a number of shares equal to 10% of the Common
Stock]. No participant may be granted Awards covering in excess of ___ shares of
Common Stock in
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6
any fiscal year. Shares subject to an Award under the Plan may be authorized and
unissued shares or may be treasury shares.
If any shares of Restricted Stock are forfeited, or if any Stock Option
(and related Stock Appreciation Right, if any) terminates without being
exercised, or if any Stock Appreciation Right is exercised for cash, shares
subject to such Awards shall again be available for distribution in connection
with Awards under the Plan.
In the event of any change in corporate capitalization, such as a stock
split or a corporate transaction, such as any merger, consolidation, separation,
including a spin-off, or other distribution of stock or property of the
Corporation, any reorganization (whether or not such reorganization comes within
the definition of such term in Section 368 of the Code) or any partial or
complete liquidation of the Corporation, the Committee or Board may make such
substitution or adjustments in the aggregate number and kind of shares reserved
for issuance under the Plan, in the number, kind and option price of shares
subject to outstanding Stock Options and Stock Appreciation Rights, in the
number and kind of shares subject to other outstanding Awards granted under the
Plan and/or such other equitable substitution or adjustments as it may determine
to be appropriate in its sole discretion; provided, however, that the number of
shares subject to any Award shall always be a whole number. Such adjusted option
price shall also be used to determine the amount payable by the Corporation upon
the exercise of any Stock Appreciation Right associated with any Stock Option.
SECTION 4. Eligibility
Officers and employees of the Corporation, its subsidiaries and
Affiliates who are responsible for or contribute to the management, growth and
profitability of the business of the Corporation, its subsidiaries and
Affiliates are eligible to be granted Awards under the Plan.
SECTION 5. Stock Options
Stock Options may be granted alone or in addition to other Awards
granted under the Plan and may be of two types: Incentive Stock Options and
NonQualified Stock Options. Any Stock Option granted under the Plan shall be in
such form as the Committee may from time to time approve.
The Committee shall have the authority to grant any optionee Incentive
Stock Options. NonQualified Stock Options or both types of Stock Options (in
each case with or without Stock Appreciation Rights); provided, however, that
grants hereunder are subject to the aggregate limit on grants to individual
participants set forth in Section 3. Incentive Stock Options may be granted only
to employees of the Corporation and its subsidiaries (within the
<PAGE>
7
meaning of Section 424(f) of the Code). To the extent that any Stock Option is
not designated as an Incentive Stock Option or even if so designated does not
qualify as an Incentive Stock Option, it shall constitute a NonQualified Stock
Option.
Stock Options shall be evidenced by option agreements, the terms and
provisions of which may differ. An option agreement shall indicate on its face
whether it is intended to be an agreement for an Incentive Stock Option or a
NonQualified Stock Option. The grant of a Stock Option shall occur on the date
the Committee by resolution selects an individual to be a participant in any
grant of a Stock Option, determines the number of shares of Common Stock to be
subject to such Stock Option to be granted to such individual and specifies the
terms and provisions of the Stock Option. The Corporation shall notify a
participant of any grant of a Stock Option, and a written option agreement or
agreements shall be duly executed and delivered by the Corporation to the
participant. Such agreement or agreements shall become effective upon execution
by the Corporation and the participant.
Anything in the Plan to the contrary notwithstanding, no term of the
Plan relating to Incentive Stock Options shall be interpreted, amended or
altered nor shall any discretion or authority granted under the Plan be
exercised so as to disqualify the Plan under Section 422 of the Code or, without
the consent of the optionee affected, to disqualify any Incentive Stock Option
under such Section 422.
Stock Options granted under the Plan shall be subject to the following
terms and conditions and shall contain such additional terms and conditions as
the Committee shall deem desirable:
(a) Option Price. The option price per share of Common Stock
purchasable under a Stock Option shall be determined by the Committee and set
forth in the option agreement, and with respect to Incentive Stock Options,
shall not be less than the Fair Market Value of the Common Stock subject to the
Stock Option on the date of grant.
(b) Option Term. The term of each Stock Option shall be fixed by the
Committee, but no Incentive Stock Option shall be exercisable more than 10 years
after the date the Stock Option is granted.
(c) Exercisability. Except as otherwise provided herein, Stock Options
shall be exercisable at such time or times and subject to such terms and
conditions as shall be determined by the Committee. If the Committee provides
that any Stock Option is exercisable only in installments, the Committee may at
any time waive such installment exercise provisions, in whole or in part, based
on such factors as the Committee may determine. In addition, the Committee may
at any time accelerate the exercisability of any Stock Option.
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8
(d) Method of Exercise. Subject to the provisions of this Section 5,
Stock Options may be exercised, in whole or in part, at any time during the
option term by giving written notice of exercise to the Corporation specifying
the number of shares of Common Stock subject to the Stock Option to be
purchased.
Such notice shall be accompanied by payment in full of the purchase
price by certified or bank check or such other instrument as the Company may
accept. If approved by the Committee, payment, in full or in part, may also be
made in the form of unrestricted Common Stock already owned by the optionee of
the same class as the Common Stock subject to the Stock Option (based on the
Fair Market Value of the Common Stock on the date the Stock Option is
exercised); provided, however, that, in the case of an Incentive Stock Option
the right to make a payment in the form of already owned shares of Common Stock
of the same class as the Common Stock subject to the Stock Option may be
authorized only at the time the Stock Option is granted and provided, further,
that such already owned shares have been held by the optionee for at least six
months at the time of exercise.
In the discretion of the Committee, payment for any shares subject to a
Stock Option may also be made by delivering a properly executed exercise notice
to the Corporation, together with a copy of irrevocable instructions to a broker
to deliver promptly to the Corporation the amount of sale or loan proceeds
necessary to pay the purchase price, and, if requested, by the amount of any
federal, state, local or foreign withholding taxes. To facilitate the foregoing,
the Corporation may enter into agreements for coordinated procedures with one or
more brokerage firms.
In addition, in the discretion of the Committee, payment for any shares
subject to a Stock Option may also be made by instructing the Committee to
withhold a number of such shares having a Fair Market Value on the date of
exercise equal to the aggregate exercise price of such Stock Option.
No shares of Common Stock shall be issued until full payment therefor
has been made. Except as otherwise provided in Section 5(l) below, an optionee
shall have all of the rights of a shareholder of the Corporation holding the
class or series of Common Stock that is subject to such Stock Option (including,
if applicable, the right to vote the shares and the right to receive dividends),
when the optionee has given written notice of exercise, has paid in full for
such shares and, if requested, has given the representation described in Section
13(a).
(e) Nontransferability of Stock Options. No Stock Option shall be
transferable by the optionee other than (i) by will or by the laws of descent
and distribution; or (ii) in the case of a NonQualified Stock Option, as
otherwise expressly permitted under the applicable option agreement including,
if so permitted, pursuant to a gift to a member of such optionee's family,
whether directly or indirectly or by means of a trust or partnership or
<PAGE>
9
otherwise. All Stock Options shall be exercisable, subject to the terms of this
Plan, only by the optionee, the guardian or legal representative of the
optionee, or any person to whom such option is transferred pursuant to the
preceding sentence, it being understood that the term "holder" and "optionee"
include such guardian, legal representative and other transferee.
(f) Termination by Death. Unless otherwise determined by the Committee,
if an optionee's employment terminates by reason of death, any Stock Option held
by such optionee may thereafter be exercised, to the extent then exercisable, or
on such accelerated basis as the Committee may determine, for a period of one
year (or such other period as the Committee may specify in the option agreement)
from the date of such death or until the expiration of the stated term of such
Stock Option, whichever period is the shorter.
(g) Termination by Reason of Disability. Unless otherwise determined by
the Committee, if an optionee's employment terminates by reason of Disability,
any Stock Option held by such optionee may thereafter be exercised by the
optionee, to the extent it was exercisable at the time of termination, or on
such accelerated basis as the Committee may determine, for a period of three
years (or such shorter period as the Committee may specify in the option
agreement) from the date of such termination of employment or until the
expiration of the stated term of such Stock Option, whichever period is the
shorter; provided, however, that if the optionee dies within such period, any
unexercised Stock Option held by such optionee shall, notwithstanding the
expiration of such period, continue to be exercisable to the extent to which it
was exercisable at the time of death for a period of 12 months from the date of
such death or until the expiration of the stated term of such Stock Option,
whichever period is the shorter. In the event of termination of employment by
reason of Disability, if an Incentive Stock Option is exercised after the
expiration of the exercise periods that apply for purposes of Section 422 of the
Code, such Stock Option will thereafter be treated as a NonQualified Stock
Option.
(h) Termination by Reason of Retirement. Unless otherwise determined by
the Committee, if an optionee's employment terminates by reason of Retirement,
any Stock Option held by such optionee may thereafter be exercised by the
optionee, to the extent it was exercisable at the time of such Retirement, or on
such accelerated basis as the Committee may determine, for a period of five
years (or such shorter period as the Committee may specify in the option
agreement) from the date of such termination of employment or until the
expiration of the stated term of such Stock Option, whichever period is the
shorter; provided, however, that if the optionee dies within such period any
unexercised Stock Option held by such optionee shall, notwithstanding the
expiration of such period, continue to be exercisable to the extent to which it
was exercisable at the time of death for a period of 12 months from the date of
such death or until the expiration of the stated term of such Stock Option,
whichever period is the shorter. In the event of termination of employment by
reason of Retirement, if an Incentive Stock Option is exercised
<PAGE>
10
after the expiration of the exercise periods that apply for purposes of Section
422 of the Code, such Stock Option will thereafter be treated as a NonQualified
Stock Option.
(i) Other Termination. Unless otherwise determined by the Committee:
(A) if an optionee incurs a Termination of Employment for Cause, all Stock
Options held by such optionee shall thereupon terminate; and (B) if an optionee
incurs a Termination of Employment for any reason other than death, Disability
or Retirement or for Cause, any Stock Option held by such optionee, to the
extent then exercisable, or on such accelerated basis as the Committee may
determine, may be exercised for the lesser of three months from the date of such
Termination of Employment or the balance of such Stock Option's term; provided,
however, that if the optionee dies within such three-month period, any
unexercised Stock Option held by such optionee shall, notwithstanding the
expiration of such three-month period, continue to be exercisable to the extent
to which it was exercisable at the time of death for a period of 12 months from
the date of such death or until the expiration of the stated term of such Stock
Option, whichever period is the shorter. In the event of Termination of
Employment, if an Incentive Stock Option is exercised after the expiration of
the exercise periods that apply for purposes of Section 422 of the Code, such
Stock Option will thereafter be treated as a NonQualified Stock Option.
(j) Cashing Out of Stock Option. On receipt of written notice of
exercise, the Committee may elect to cash out all or part of the portion of the
shares of Common Stock for which a Stock Option is being exercised by paying the
optionee an amount, in cash or Common Stock, equal to the excess of the Fair
Market Value of the Common Stock over the option price times the number of
shares of Common Stock for which the Option is being exercised on the effective
date of such cash-out.
(k) Change in Control Cash-Out. Notwithstanding any other provision of
the Plan, during the 60-day period from and after a Change in Control (the
"Exercise Period"), unless the Committee shall determine otherwise at the time
of grant, an optionee shall have the right, whether or not the Stock Option is
fully exercisable and in lieu of the payment of the exercise price for the
shares of Common Stock being purchased under the Stock Option and by giving
notice to the Corporation, to elect (within the Exercise Period) to surrender
all or part of the Stock Option to the Corporation and to receive cash, within
30 days of such notice, in an amount equal to the amount by which the Change in
Control Price per share of Common Stock on the date of such election shall
exceed the exercise price per share of Common Stock under the Stock Option (the
"Spread") multiplied by the number of shares of Common Stock granted under the
Stock Option as to which the right granted under this Section 5(k) shall have
been exercised. Notwithstanding the foregoing, if any right granted pursuant to
this Section 5(k) would make a Change in Control transaction ineligible for
pooling-of-interests accounting under APB No. 16 that but for the nature of such
grant would otherwise be eligible for such accounting treatment, the Committee
shall have the ability to
<PAGE>
11
substitute for the cash payable pursuant to such right Common Stock with a Fair
Market Value equal to the cash that would otherwise be payable hereunder.
(l) Deferral of Option Shares. The Committee may from time to time
establish procedures pursuant to which an optionee may elect to defer, until a
time or times later than the exercise of an Option, receipt of all or a portion
of the Shares subject to such Option and/or to receive cash at such later time
or times in lieu of such deferred Shares, all on such terms and conditions as
the Committee shall determine. If any such deferrals are permitted, then
notwithstanding Section 5(d) above, an optionee who elects such deferral shall
not have any rights as a stockholder with respect to such deferred Shares unless
and until Shares are actually delivered to the optionee with respect thereto,
except to the extent otherwise determined by the Committee.
SECTION 6. Stock Appreciation Rights
(a) Grant and Exercise. Stock Appreciation Rights may be granted in
conjunction with all or part of any Stock Option granted under the Plan. In the
case of a NonQualified Stock Option, such rights may be granted either at or
after the time of grant of such Stock Option. In the case of an Incentive Stock
Option, such rights may be granted only at the time of grant of such Stock
Option. A Stock Appreciation Right shall terminate and no longer be exercisable
upon the termination or exercise of the related Stock Option.
A Stock Appreciation Right may be exercised by an optionee in
accordance with Section 6(b) by surrendering the applicable portion of the
related Stock Option in accordance with procedures established by the Committee.
Upon such exercise and surrender, the optionee shall be entitled to receive an
amount determined in the manner prescribed in Section 6(b). Stock Options which
have been so surrendered shall no longer be exercisable to the extent the
related Stock Appreciation Rights have been exercised.
(b) Terms and Conditions. Stock Appreciation Rights shall be subject to
such terms and conditions as shall be determined by the Committee, including the
following:
(i) Stock Appreciation Rights shall be exercisable only at
such time or times and to the extent that the Stock Options to which
they relate are exercisable in accordance with the provisions of
Section 5 and this Section 6.
(ii) Upon the exercise of a Stock Appreciation Right, an
optionee shall be entitled to receive an amount in cash, shares of
Common Stock or both, in value equal to the excess of the Fair Market
Value of one share of Common Stock over the option price per share
specified in the related Stock Option multiplied by the number
<PAGE>
12
of shares in respect of which the Stock Appreciation Right shall have
been exercised, with the Committee having the right to determine the
form of payment.
(iii) Stock Appreciation Rights shall be transferable only to
permitted transferees of the underlying Stock Option in accordance with
Section 5(e).
(iv) Upon the exercise of a Stock Appreciation Right, the
Stock Option or part thereof to which such Stock Appreciation Right is
related shall be deemed to have been exercised for the purpose of the
limitation set forth in Section 3 on the number of shares of Common
Stock to be issued under the Plan, but only to the extent of the number
of shares covered by the Stock Appreciation Right at the time of
exercise based on the value of the Stock Appreciation Right at such
time.
SECTION 7. Restricted Stock
(a) Administration. Shares of Restricted Stock may be awarded either
alone or in addition to other Awards granted under the Plan. The Committee shall
determine the officers and employees to whom and the time or times at which
grants of Restricted Stock will be awarded, the number of shares to be awarded
to any participant (subject to the aggregate limit on grants to individual
participants set forth in Section 3), the conditions for vesting the time or
times within which such Awards may be subject to forfeiture and any other terms
and conditions of the Awards, in addition to those contained in Section 7(c).
(b) Awards and Certificates. Shares of Restricted Stock shall be
evidenced in such manner as the Committee may deem appropriate, including
book-entry registration or issuance of one or more stock certificates. Any
certificate issued in respect of shares of Restricted Stock shall be registered
in the name of such participant and shall bear an appropriate legend referring
to the terms, conditions, and restrictions applicable to such Award,
substantially in the following form:
"The transferability of this certificate and the shares of
stock represented hereby are subject to the terms and
conditions (including forfeiture) of the Discovery Zone, Inc.
1996 Stock Incentive Plan and a Restricted Stock Agreement.
Copies of such Plan and Agreement are on file at the offices
of Discovery Zone, Inc., 110 East Broward Boulevard, Fort
Lauderdale, Florida."
The Committee may require that the certificates evidencing such shares be held
in custody by the Company until the restrictions thereon shall have lapsed and
that, as a condition of any Award of Restricted Stock, the participant shall
have delivered a stock power, endorsed in blank, relating to the Common Stock
covered by such Award.
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13
(c) Terms and Conditions. Shares of Restricted Stock shall be subject
to the following terms and conditions:
(i) The Committee may, prior to or at the time of grant,
designate an Award of Restricted Stock as a Qualified Performance-Based
Award, in which event it shall condition the grant or vesting, as
applicable, of such Restricted Stock upon the attainment of Performance
Goals. If the Committee does not designate an Award of Restricted Stock
as a Qualified Performance-Based Award, it may also condition the grant
or vesting thereof upon the attainment of Performance Goals. Regardless
of whether an Award of Restricted Stock is a Qualified
Performance-Based Award, the Committee may also condition the grant or
vesting thereof upon the continued service of the participant. The
conditions for grant or vesting and the other provisions of Restricted
Stock Awards (including without limitation any applicable Performance
Goals) need not be the same with respect to each recipient. The
Committee may at any time, in its sole discretion, accelerate or waive,
in whole or in part, any of the foregoing restrictions; provided,
however, that in the case of Restricted Stock that is a Qualified
Performance-Based Award, the applicable Performance Goals have been
satisfied.
(ii) Subject to the provisions of the Plan and the Restricted
Stock Agreement referred to in Section 7(c)(vi), during the period, if
any, set by the Committee, commencing with the date of such Award for
which such participant's continued service is required (the
"Restriction Period"), and until the later of (i) the expiration of the
Restriction Period and (ii) the date the applicable Performance Goals
(if any) are satisfied, the participant shall not be permitted to sell,
assign, transfer, pledge or otherwise encumber shares of Restricted
Stock; provided that the foregoing shall not prevent a participant from
pledging Restricted Stock as security for a loan, the sole purpose of
which is to provide funds to pay the option price for Stock Options.
(iii) Except as provided in this paragraph (iii) and Sections
7(c)(i) and 7(c)(ii) and the Restricted Stock Agreement, the
participant shall have, with respect to the shares of Restricted Stock,
all of the rights of a stockholder of the Corporation holding the class
or series of Common Stock that is the subject of the Restricted Stock,
including, if applicable, the right to vote the shares and the right to
receive any cash dividends. If so determined by the Committee in the
applicable Restricted Stock Agreement and subject to Section 13(e) of
the Plan, (A) cash dividends on the class or series of Common Stock
that is the subject of the Restricted Stock Award shall be
automatically deferred and reinvested in additional Restricted Stock,
held subject to the vesting of the underlying Restricted Stock, or held
subject to meeting Performance Goals applicable only to dividends, and
(B) dividends payable in Common Stock shall be paid in the form of
Restricted Stock of the same class as the Common Stock with
<PAGE>
14
which such dividend was paid, held subject to the vesting of the
underlying Restricted Stock, or held subject to meeting Performance
Goals applicable only to dividends.
(iv) Except to the extent otherwise provided in the applicable
Restricted Stock Agreement and Sections 7(c)(i), 7(c)(ii), 7(c)(v) and
10(a)(ii), upon a participant's Termination of Employment for any
reason during the Restriction Period or before the applicable
Performance Goals are satisfied, all shares still subject to
restriction shall be forfeited by the participant.
(v) Except to the extent otherwise provided in Section
10(a)(ii), in the event that a participant retires or such
participant's employment is involuntarily terminated (other than for
Cause), the Committee shall have the discretion to waive, in whole or
in part, any or all remaining restrictions (other than, in the case of
Restricted Stock with respect to which a participant is a Covered
Employee, satisfaction of the applicable Performance Goals unless the
participant's employment is terminated by reason of death or
Disability) with respect to any or all of such participant's shares of
Restricted Stock.
(vi) If and when any applicable Performance Goals are
satisfied and the Restriction Period expires without a prior forfeiture
of the Restricted Stock, unlegended certificates for such shares shall
be delivered to the participant upon surrender of the legended
certificates.
(vii) Each Award shall be confirmed by, and be subject to, the
terms of a Restricted Stock Agreement.
SECTION 8. Performance Units
(a) Administration. Performance Units may be awarded either alone or in
addition to other Awards granted under the Plan. The Committee shall determine
the officers and employees to whom and the time or times at which Performance
Units shall be awarded, the number of Performance Units to be awarded to any
participant (subject to the aggregate limit on grants to individual participants
set forth in Section 3), the duration of the Award Cycle and any other terms and
conditions of the Award, in addition to those contained in Section 8(b).
(b) Terms and Conditions. Performance Units Awards shall be subject to
the following terms and conditions:
(i) The Committee may, prior to or at the time of the grant,
designate Performance Units as Qualified Performance-Based Awards, in
which event it shall
<PAGE>
15
condition the settlement thereof upon the attainment of Performance
Goals. If the Committee does not designate Performance Units as
Performance-Based Awards, it may also condition the settlement thereof
upon the attainment of Performance Goals. Regardless of whether
Performance Units are Qualified Performance-Based Awards, the Committee
may also condition the settlement thereof upon the continued service of
the participant. The provisions of such Awards (including without
limitation any applicable Performance Goals) need not be the same with
respect to each recipient. Subject to the provisions of the Plan and
the Performance Units Agreement referred to in Section 8(b)(vi),
Performance Units may not be sold, assigned, transferred, pledged or
otherwise encumbered during the Award Cycle.
(ii) Except to the extent otherwise provided in the applicable
Performance Unit Agreement and Sections 8(b)(iii) and 10(a)(iii), upon
a participant's Termination of Employment for any reason during the
Award Cycle or before any applicable Performance Goals are satisfied,
all rights to receive cash or stock in settlement of the Performance
Units shall be forfeited by the participant.
(iii) Except to the extent otherwise provided in Section
10(a)(iii), in the event that a participant's employment is terminated
(other than for Cause), or in the event a participant retires, the
Committee shall have the discretion to waive, in whole or in part, any
or all remaining payment limitations (other than, in the case of
Performance Units that are Qualified Performance-Based Awards,
satisfaction of the applicable Performance Goals unless the
participant's employment is terminated by reason of death or
Disability) with respect to any or all of such participant's
Performance Units.
(iv) A participant may elect to further defer receipt of cash
or shares in settlement of Performance Units for a specified period or
until a specified event, subject in each case to the Committee's
approval and to such terms as are determined by the Committee (the
"Elective Deferral Period"). Subject to any exceptions adopted by the
Committee, such election must generally be made prior to commencement
of the Award Cycle for the Performance Units in question.
(v) At the expiration of the Award Cycle, the Committee shall
evaluate the Company's performance in light of any Performance Goals
for such Award, and shall determine the number of Performance Units
granted to the participant which have been earned, and the Committee
shall then cause to be delivered (A) a number of shares of Common Stock
equal to the number of Performance Units determined by the Committee to
have been earned, or (B) cash equal to the Fair Market Value of such
number of shares of Common Stock to the participant, as the Committee
shall elect (subject to any deferral pursuant to Section 8(b)(iv)).
<PAGE>
16
(vi) Each Award shall be confirmed by, and be subject to, the
terms of a Performance Unit Agreement.
SECTION 9. Tax Offset Bonuses
At the time an Award is made hereunder or at any time thereafter, the
Committee may grant to the participant receiving such Award the right to receive
a cash payment in an amount specified by the Committee, to be paid at such time
or times (if ever) as the Award results in compensation income to the
participant, for the purpose of assisting the participant to pay the resulting
taxes, all as determined by the Committee and on such other terms and conditions
as the Committee shall determine.
SECTION 10. Change in Control Provisions
(a) Impact of Event. Notwithstanding any other provision of the Plan to
the contrary, in the event of a Change in Control:
(i) Any Stock Options and Stock Appreciation Rights
outstanding as of the date such Change in Control is determined to have
occurred, and which are not then exercisable and vested, shall become
fully exercisable and vested to the full extent of the original grant.
(ii) The restrictions and deferral limitations applicable to
any Restricted Stock shall lapse, and such Restricted Stock shall
become free of all restrictions and become fully vested and
transferable to the full extent of the original grant.
(iii) All Performance Units shall be considered to be earned
and payable in full, and any deferral or other restriction shall lapse
and such Performance Units shall be settled in cash as promptly as is
practicable.
(b) Definition of Change in Control. For purposes of the Plan, a
"Change in Control" shall mean the happening of any of the following events:
(i) An acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a
"Person") of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 20% or more of either (1) the
then outstanding shares of common stock of the Corporation (the
"Outstanding Corporation Common Stock") or (2) the combined voting
power of the then outstanding voting securities of the Corporation
entitled to vote generally in the election of directors (the
"Outstanding Corporation Voting
<PAGE>
17
Securities"); excluding, however, the following: (1) Any acquisition
directly from the Corporation, other than an acquisition by virtue of
the exercise of a conversion privilege unless the security being so
converted was itself acquired directly from the Corporation, (2) Any
acquisition by the Corporation, (3) Any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the
Corporation or any corporation controlled by the Corporation, (4) Any
acquisition by any corporation pursuant to a transaction which complies
with clauses (1), (2) and (3) of subsection (iii) of this Section 9(b),
or (5) Any acquisition from Birch by a member of Birch; or
(ii) A change in the composition of the Board such that the
individuals who, as of the effective date of the Plan, constitute the
Board (such Board shall be hereinafter referred to as the "Incumbent
Board") cease for any reason to constitute at least a majority of the
Board; provided, however, for purposes of this Section 9(b), that any
individual who becomes a member of the Board subsequent to the
effective date of the Plan, whose election, or nomination for election
by the Corporation's shareholders, was approved by a vote of at least a
majority of those individuals who are members of the Board and who were
also members of the Incumbent Board (or deemed to be such pursuant to
this proviso) shall be considered as though such individual were a
member of the Incumbent Board; but, provided further, that any such
individual whose initial assumption of office occurs as a result of
either an actual or threatened election contest (as such terms are used
in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or
other actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board shall not be so considered as a
member of the Incumbent Board; or
(iii) The approval by the shareholders of the Corporation of a
reorganization, merger or consolidation or sale or other disposition of
all or substantially all of the assets of the Corporation ("Corporate
Transaction") or, if consummation of such Corporate Transaction is
subject, at the time of such approval by shareholders, to the consent
of any government or governmental agency, obtaining of such consent
(either explicitly or implicitly by consummation); excluding however,
such a Corporate Transaction pursuant to which (1) all or substantially
all of the individuals and entities who are the beneficial owners,
respectively, of the Outstanding Corporation Common Stock and
Outstanding Corporation Voting Securities immediately prior to such
Corporate Transaction will beneficially own, directly or indirectly,
more than 60% of, respectively, the outstanding shares of common stock,
and the combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such Corporate Transaction
(including, without limitation, a corporation which as a result of such
transaction owns the Corporation or all or substantially all of the
Corporation's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership,
<PAGE>
18
immediately prior to such Corporate Transaction, of the Outstanding
Corporation Common Stock and Outstanding Company Voting Securities, as
the case may be, (2) no Person (other than the Corporation, any
employee benefit plan (or related trust) of the Corporation or such
corporation resulting from such Corporate Transaction) will
beneficially own, directly or indirectly, 20% or more of, respectively,
the outstanding shares of common stock of the corporation resulting
from such Corporate Transaction or the combined voting power of the
outstanding voting securities of such corporation entitled to vote
generally in the election of directors except to the extent that such
ownership existed prior to the Corporate Transaction, and (3)
individuals who were members of the Incumbent Board will constitute at
least a majority of the members of the board of directors of the
corporation resulting from such Corporate Transaction; or
(iv) The approval by the stockholders of the Corporation of a
complete liquidation or dissolution of the Corporation.
Notwithstanding anything in this definition of "Change in Control" to the
contrary, the transfer of securities of the Corporation resulting from a
dissolution or liquidation and winding up of Birch shall not deemed to be a
"Change in Control" for any purposes of the Plan.
(c) Change in Control Price. For purposes of the Plan, "Change in
Control Price" means the higher of (i) the highest reported sales price, regular
way, of a share of Common Stock in any transaction reported on the New York
Stock Exchange Composite Tape or other national exchange on which such shares
are listed or on NASDAQ during the 60-day period prior to and including the date
of a Change in Control or (ii) if the Change in Control is the result of a
tender or exchange offer or a Corporate Transaction, the highest price per share
of Common Stock paid in such tender or exchange offer or Corporate Transaction;
provided, however, that in the case of Incentive Stock Options and Stock
Appreciation Rights relating to Incentive Stock Options, the Change in Control
Price shall be in all cases the Fair Market Value of the Common Stock on the
date such Incentive Stock Option or Stock Appreciation Right is exercised. To
the extent that the consideration paid in any such transaction described above
consists all or in part of securities or other noncash consideration, the value
of such securities or other noncash consideration shall be determined in the
sole discretion of the Board.
SECTION 11. Term, Amendment and Termination
The Plan will terminate 10 years after the effective date of the Plan.
Under the Plan, Awards outstanding as of such date shall not be affected or
impaired by the termination of the Plan.
<PAGE>
19
The Board may amend, alter, or discontinue the Plan, but no amendment,
alteration or discontinuation shall be made which would impair the rights of an
optionee under a Stock Option or a recipient of a Stock Appreciation Right,
Restricted Stock Award or Performance Unit Award theretofore granted without the
optionee's or recipient's consent, except such an amendment made to cause the
Plan to qualify for any exemption provided by Rule 16b-3. In addition, no such
amendment shall be made without the approval of the Corporation's shareholders
to the extent such approval is required by law or agreement.
The Committee may amend the terms of any Stock Option or other Award
theretofore granted, prospectively or retroactively, but no such amendment shall
cause a Qualified Performance-Based Award to cease to qualify for the Section
162(m) Exemption or impair the rights of any holder without the holder's consent
except such an amendment made to cause the Plan or Award to qualify for any
exemption provided by Rule 16b-3.
Subject to the above provisions, the Board shall have authority to
amend the Plan to take into account changes in law and tax and accounting rules
as well as other developments, and to grant Awards which qualify for beneficial
treatment under such rules without stockholder approval.
SECTION 12. Unfunded Status of Plan
It is presently intended that the Plan constitute an "unfunded" plan
for incentive and deferred compensation. The Committee may authorize the
creation of trusts or other arrangements to meet the obligations created under
the Plan to deliver Common Stock or make payments; provided, however, that
unless the Committee otherwise determines, the existence of such trusts or other
arrangements is consistent with the "unfunded" status of the Plan.
SECTION 13. General Provisions
(a) The Committee may require each person purchasing or receiving any
securities pursuant to an Award to represent to and agree with the Corporation
in writing that such person is acquiring such securities without a view to the
distribution thereof. The certificates for such securities may include any
legend which the Committee deemed appropriate to reflect any restrictions on
transfer.
Notwithstanding any other provision of the Plan or agreements made
pursuant thereto, the Corporation shall not be required to issue or deliver any
certificate or certificates for securities under the Plan prior to fulfillment
of all of the following conditions:
<PAGE>
20
(1) Listing or approval for listing upon notice of issuance,
of such securities on the New York Stock Exchange, Inc., or such other
securities exchange or stock market as may at the time be the principal
market for the Common Stock;
(2) Any registration or other qualification of such securities
of the Corporation under any state or federal law or regulation, or the
maintaining in effect of any such registration or other qualification
which the Committee shall, in its absolute discretion upon the advice
of counsel, deem necessary or advisable; and
(3) Obtaining any other consent, approval, or permit from any
state or federal governmental agency which the Committee shall, in its
absolute discretion after receiving the advice of counsel, determine to
be necessary or advisable.
(b) Nothing contained in the Plan shall prevent the Corporation or any
subsidiary or Affiliate from adopting other or additional compensation
arrangements for its employees.
(c) Adoption of the Plan shall not confer upon any employee any right
to continued employment, nor shall it interfere in any way with the right of the
Corporation or any subsidiary or Affiliate to terminate the employment of any
employee at any time.
(d) No later than the date as of which an amount first becomes
includible in the gross income of the participant for federal income tax
purposes with respect to any Award under the Plan, the participant shall pay to
the Corporation, or make arrangements satisfactory to the Corporation regarding
the payment of, any federal, state, local or foreign taxes of any kind required
by law to be withheld with respect to such amount. Unless otherwise determined
by the Corporation, withholding obligations may be settled with Common Stock,
including Common Stock that is part of the Award that gives rise to the
withholding requirement. The obligations of the Corporation under the Plan shall
be conditional on such payment or arrangements, and the Corporation and its
Affiliates shall, to the extent permitted by law, have the right to deduct any
such taxes from any payment otherwise due to the participant. The Committee may
establish such procedures as it deems appropriate, including making irrevocable
elections, for the settlement of withholding obligations with Common Stock.
(e) Reinvestment of dividends in additional Restricted Stock at the
time of any dividend payment shall only be permissible if sufficient shares of
Common Stock are available under Section 3 for such reinvestment (taking into
account then outstanding Stock Options and other Awards).
(f) The Committee shall establish such procedures as it deems
appropriate for participant to designate a beneficiary to whom any amounts
payable in the event of the
<PAGE>
21
participant's death are to be paid or by whom any rights of the participant,
after the participant's death, may be exercised.
(g) In the case of a grant of an Award to any employee of a subsidiary
of the Corporation, the Corporation may if the Committee so directs, issue or
transfer the shares of Common Stock, if any, covered by the Award to the
subsidiary, for such lawful consideration as the Committee may specify, upon the
condition or understanding that the subsidiary will transfer the shares of
Common Stock to the employee in accordance with the terms of the Award specified
by the Committee pursuant to the provisions of the Plan.
(h) The Plan and all Awards made and actions taken thereunder shall be
governed by and construed in accordance with the laws of the State of Delaware,
without reference to principles of conflict of laws.
SECTION 14. Effective Date of Plan
The Plan shall be effective as of the date it is approved by at least a
majority of the outstanding shares of Common Stock of the Corporation.
<TABLE> <S> <C>
<PAGE>
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<S> <C>
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<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
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0
0
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