SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the period ended December 31, 1998
Commission file number: 1-12216
CROWN AMERICAN REALTY TRUST
(Exact name of registrant as specified in its charter)
Maryland 25-1713733
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
Pasquerilla Plaza
Johnstown, Pennsylvania 15901 (814) 536-4441
(Address of principal executive offices) (Registrant's telephone number)
Securities registered pursuant to Section 12(b) of the Act:
Common Shares of Beneficial Interest, par value $.01 per share
11.00% Senior Preferred Shares, par value $.01 per share ($50.00 Liquidation
Preference)
(Title of Class)
New York Stock Exchange
(Name of Exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months and (2) has been subject to such
filing requirements for at least the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
As of February 16, 1999, 26,207,919 Common Shares of Beneficial
Interest and 2,500,000 11.00% Senior Preferred Shares of the registrant
were issued and outstanding. The registrant estimates that as of
February 16, 1999 the aggregate market value of the voting common shares held
by non-affiliates of the registrant was approximately $174.2 million based on
the closing price on the New York Stock Exchange for such stock.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Proxy Statement for the registrant's Annual Meeting
of Shareholders to be held on April 26, 1999, are incorporated by reference into
Part III of this Form 10-K.
Exhibit Index on pages 58 to 59
TABLE OF CONTENTS
Item No.
PART I
1. Business
2. Properties
3. Legal Proceedings
4. Submission of Matters to a Vote of Security Holders
Executive Officers of the Company
PART II
5. Market for Registrant's Common Shares of Beneficial
Interest and Related Shareholder Matters
6. Selected Financial Data
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
7 (a). Quantitative and Qualitative Disclosures about Market Risk
8. Financial Statements and Supplementary Data
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
PART III
10. Directors and Executive Officers of the Registrant
11. Executive Compensation
12. Security Ownership of Certain Beneficial Owners and
Management
13. Certain Relationships and Related Transactions
PART IV
14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
Signatures
PART I
Item 1. Business.
(a) General Development of Business
Crown American Realty Trust (the "Company") was formed on May 14, 1993
as a Maryland real estate investment trust (a "REIT") to acquire and operate
substantially all of the enclosed shopping mall properties and two office
buildings (the "Properties") owned by Crown American Associates ("CAA" or "Crown
Associates"), formerly Crown American Corporation. Crown Associates is a wholly-
owned subsidiary of Crown Holding Company ("Crown Holding"), which is owned by
Frank J. Pasquerilla, Chairman of the Board of Trustees and Chief Executive
Officer of the Company, and members of his immediate family. CAA, which was
founded in 1950, was engaged principally in the development, acquisition,
ownership and management of enclosed shopping malls and, to a lesser extent,
strip shopping centers, hotels and office buildings.
On August 17, 1993, the Company consummated simultaneously the
acquisition of the Properties (the "Acquisition") and an initial public offering
(the "IPO") of 24,540,000 of its common shares of beneficial interest (the
"Shares"). Eleven Properties were acquired by Crown American Properties, L.P.,
a Delaware limited partnership (the "Operating Partnership") which is controlled
by the Company as the sole general partner, and 15 Properties were acquired by
Crown American Financing Partnership, a Delaware general partnership (the
"Financing Partnership") in which the Operating Partnership owns a 99.5% general
partnership interest and in which the Company, through Crown American Financing
Corporation, a wholly-owned corporate subsidiary of the Company (the "Financing
Corporation"), owns a 0.5% general partnership interest. The net proceeds of
the IPO were contributed by the Company to the Operating Partnership in exchange
for the general partnership interest in the Operating Partnership. The
Operating Partnership contributed a portion of the net proceeds from the IPO to
the Financing Partnership in exchange for the 99.5% general partnership interest
in the Financing Partnership. Concurrently with the transactions described
above, the Financing Partnership consummated the borrowing of $300 million of
loans (the "Mortgage Loans") secured by mortgages on the 15 Properties then
owned by the Financing Partnership; these Mortgage Loans were refinanced in
August 1998. The Operating Partnership and the Financing Partnership
(collectively, the "OP/FP Partnerships") used the proceeds of the IPO and the
Mortgage Loans to pay down existing mortgage debt on the Properties. On
September 15, 1993, the Company sold an additional 978,500 Shares as a result of
the underwriters of the IPO exercising the over-allotment option granted to them
in connection with the IPO.
The consideration paid by the Company and the OP/FP Partnerships for
the Properties consisted of: (i) the issuance to CAA of 1,450,000 Shares (having
a value of approximately $25.0 million, based on the initial public offering
price), and a 22% limited partnership interest in the Operating Partnership,
held by Crown Investments Trust ("CIT" or "Crown Investments"), an affiliate of
CAA and the Initial Limited Partner of the Operating Partnership, (having a
value of approximately $132 million based on the initial public offering price
and the fact that each partnership unit is initially equivalent to one Share)
and (ii) the issuance to Pasquerilla Partnership (a partnership comprised of
Frank J. Pasquerilla, and members of his immediate family) of 150,000 Shares
(having a value of approximately $2.6 million based on the initial public
offering price). In addition, with the proceeds of the IPO, the Company paid
off certain of the debt on the Properties, of which approximately $37 million
was cross-collateralized debt that encumbered certain of the Properties as well
as certain of the assets retained by CAA, and of which another approximately $67
million was construction debt that was recourse to CAA. Also, by virtue of
acquiring certain of the Properties, which were subject to recourse construction
loans, the Operating Partnership assumed sole responsibility for $98 million of
recourse debt. In addition to the transactions described above, all of the
executive, property and asset management, leasing, construction, financial,
legal services, development and administrative personnel of CAA relating to its
regional mall and shopping center business became employees of the Operating
Partnership.
At the time of the IPO, the Company held an initial 78.00% partnership
interest in the Operating Partnership and Crown Investments held the remaining
22.00% interest. Subsequently, the ownership interests have changed due to (a)
Company shares issued for cash, issued under the Company's option plans, and
issued under the dividend reinvestment plan (proceeds then reinvested by the
Company in the Operating Partnership in exchange for an equivalent number of
additional common Partnership Units), (b) additional Partnership Units issued as
partial consideration for the purchase of Wyoming Valley and Middletown Malls
and Greater Lewistown Plaza in 1998 (see below), (c) issuance of preferred
Partnership Units in exchange for cash contributed by the Company to the
Operating Partnership in connection with the Company's 1997 offering of senior
preferred shares, and (d) redemption of common Partnership Units in connection
with the Company's repurchase in the open market of its common shares. The
number of common and preferred Partnership Units outstanding at December 31,
1998 were as follows:
Held by Common Units Preferred Units
Number % Number %
Crown American Realty Trust 26,207,144 72.47% 2,500,000 100.00%
Crown Investments Trust and
its subsidiary Crown
American Investment Company 9,876,847 27.31% - -
Frank J. Pasquerilla 79,551 0.22% - -
Totals 36,163,542 100.00% 2,500,000 100.00%
Prior to and through November 1994, Hess's Department Stores, Inc.
("Hess's") was an anchor tenant at 12 of the Company's malls, in the joint
venture's enclosed shopping mall, at an anchor pad in which the Company holds a
ground leasehold interest, and at the two malls purchased by the Company in
January 1995 as described below. Hess's was a subsidiary of Crown Holding. In
1994 all of Hess's store locations were transferred or sold to The Bon-Ton
Stores, Inc. ("Bon-Ton") and to The May Department Stores Company ("May");
Hess's operations ceased at that time and it began to liquidate its remaining
assets and liabilities which was largely completed in 1997. Management believes
that the May and Bon-Ton transactions were consistent with, and in furtherance
of, the Company's growth strategy of upgrading its existing properties. Refer to
Note 8 of the Company's Consolidated Financial Statements in Item 8 hereto for
additional information concerning these transactions as they affect the Company.
At the time of the Company's formation in 1993, CAA and First Union
Real Estate Equity and Mortgage Investments ("First Union"), an unrelated
entity, each owned an undivided fifty percent (50%) fee interest in each of the
Wyoming Valley Mall and Middletown Mall properties (the "Acquisition
Properties"). Each of CAA's and First Union's undivided interests were leased
to subsidiaries of CAA pursuant to separate long-term ground leases. Based on
the agreements between CAA and First Union relating to their co-ownership of the
Acquisition Properties, which contained a right of first refusal with respect to
any third-party offer to purchase either party's interest, First Union objected
to the transfer of CAA's interests in the Acquisition Properties to the
Operating Partnership pursuant to such purchase offer made shortly after the
Company's formation.
In September 1994, Crown Investments entered into a Purchase and Sale
Agreement with First Union (the "PSA") to acquire First Union's interests in
each of the Acquisition Properties for an aggregate purchase price of
$33,500,000. The total consideration consisted of $27,500,000, payable in cash,
for its interest in Wyoming Valley Mall, and $6,000,000, payable pursuant to a
purchase money note in favor of First Union due January 31, 1998 with interest
at the rate of 9% per annum of which 8% per annum was payable in current monthly
installments (the "Middletown Note"), for its interest in Middletown Mall.
On December 14, 1994, the independent members of the Company's Board
of Trustees (the "Independent Trustees") unanimously approved the assignment by
CIT to the Operating Partnership of the right to acquire First Union's interest
in Wyoming Valley Mall pursuant to the PSA, and the assumption by the Operating
Partnership of the obligation to purchase such interest from First Union, upon
the simultaneous contribution of the respective interests of CAA and its
subsidiary in Wyoming Valley Mall to the Operating Partnership in exchange for
the issuance to such entities of additional common Partnership Units and cash in
amounts to be determined by the Independent Trustees after receipt of an
appraisal approved by an executive officer of the Company, but not less than
750,000 Partnership Units to CIT or a subsidiary of CIT and not less than
$10,000,000 in cash to CAA.
The Independent Trustees adopted a similar resolution regarding
Middletown Mall (except that there was to be no cash payment by the Operating
Partnership nor any specified minimum number of common Partnership Units to be
issued), subject to satisfaction of certain conditions. On January 27, 1995,
the Independent Trustees unanimously approved the assignment by CIT or its
immediate assignee to the Operating Partnership of the right to acquire First
Union's interest in Middletown Mall pursuant to the PSA, upon the simultaneous
contribution to the Operating Partnership of the respective interests of CAA and
its subsidiary in Middletown Mall, in return for the assumption by the Operating
Partnership of the existing first mortgage indebtedness on Middletown Mall
(approximately $1,784,000 principal amount outstanding as of such date) and the
Operating Partnership's agreement to take title subject to a second mortgage to
be delivered to First Union to secure the $6.0 million Middletown Note (but
without any recourse to the Operating Partnership or the Company). In addition,
the Independent Trustees approved the issuance to CAA, CAA's subsidiary and a
subsidiary of CIT (as CIT's assignee), in exchange for the contribution of their
respective interests in Middletown Mall, of an aggregate number of additional
common Partnership Units to be determined by the Independent Trustees at the
time of the payment of the Middletown Note in full (retroactive to January 1 of
the year in which such payment occurs).
The total number of additional common Partnership Units issued and to
be issued in exchange for the respective contributions of such interests in
Wyoming Valley Mall and Middletown Mall was determined by dividing the estimated
annualized distribution of Funds from Operations, as defined, attributable to
Wyoming Valley Mall or Middletown Mall, as the case may be (after taking into
account adjustments to ground rent and debt service refinanced or assumed by the
Operating Partnership), by the dividend distribution rate per Share in effect
for the year ended prior to the year in which the units are issued.
On May 3, 1995, the Independent Trustees made the final determination
of the total number of additional common Partnership Units to be issued in
exchange for the contribution of the interests of CAA and CAA's subsidiary in
Wyoming Valley Mall; 1,786,459 additional common Partnership units were issued,
effective as of January 31, 1995, to Crown American Investment Company, a new
wholly-owned subsidiary of CIT (as successor by merger with CAA's subsidiary) in
exchange for such contributions. The new units represented approximately 5.1%
of the total units outstanding prior to the issuance of the new units.
On January 30, 1998, the Company paid in full the $6,000,000 note to
First Union in respect of the Middletown purchase. 437,888 additional common
Partnership Units were issued to CAA and/or its affiliates, effective as of
January 1, 1998, as the deferred contingent consideration for the contribution
of Middletown Mall to the Operating Partnership. The 437,888 units represented
approximately 1.2% of the total common Partnership Units outstanding prior to
the issuance of the new units. The Company sold Middletown Mall in July 1998 to
an unrelated third party for $12.2 million. The Company received $8.5 million in
cash, net of closing costs, and received a $3.5 million one-year 9.5% mortgage
from the purchaser, secured by a first mortgage on all the undeveloped land and
outparcels and by a second mortgage on the mall. Gain on the sale of
approximately $1.3 million has been deferred until all conditions for profit
recognition under FASB 66 are satisfied. For the year ended December 31, 1997
Middletown contributed $2.2 million in revenues and $0.2 million in income
before minority interest.
On April 29, 1998 the Independent Trustees approved the purchase of
the partnership interests in Greater Lewistown Shopping Mall. The partnership
owned an existing ground lease interest in Greater Lewistown Plaza, a 192,000
square feet non-enclosed retail shopping center located near Lewistown, PA
together with fee simple interests in 4 separate adjacent parcels that total
0.59 acres (together the "Greater Lewistown Plaza"). The partnership had been
99.5% owned by Frank Pasquerilla and 0.5% owned by Crown American Enterprises, a
company that is a wholly-owned indirect subsidiary of Crown Holding. The
purchase price was $4.5 million and was paid by the assumption of the existing
first mortgage ($3.686 million), issuance of 79,551 common partnership units to
Frank Pasquerilla, valued at $10.183 per unit which was based on the weighted
average closing market price of the Company's common shares for the ten days
preceding the May 31, 1998 closing date, and a cash payment of $4,071 to Crown
American Enterprises for its 0.5% ownership interest. Greater Lewistown Plaza
is currently 94.4% leased, and the major tenants include a Weis Markets and a
J.C. Penney store.
As more fully described in Note 14 to the Consolidated Financial
Statements, in May 1998 the Company acquired, in a single transaction, two
regional shopping malls: Jacksonville Mall in Jacksonville, North Carolina, and
Crossroads Mall in Beckley, West Virginia. The two malls include gross leasable
area of 416,000 and 450,000 square feet, respectively. Sears, J.C. Penney and
Belk Stores anchor both malls. The total purchase price was approximately $61
million. The purchase was funded from existing credit lines and also from
assumption of $11.0 million in first mortgage debt related to one of the
properties. In November 1997 the Company acquired Valley Mall located in
Hagerstown, Maryland for $31.7 million in cash, plus $0.4 million in transaction
costs. Valley Mall is an enclosed regional mall that currently consists of
approximately 613,000 square feet of gross leaseable area ("GLA"), of which
123,400 is owned by the current department store occupant. In addition, the
purchase included 48,762 square feet of out-parcel GLA, and 30.8 acres of
additional adjacent undeveloped land. Valley Mall is being expanded as further
described in Note 14 to the Consolidated Financial Statements.
As more fully described in Note 6 to the Consolidated Financial
Statements, the Company completed an offering of 2,500,000 11.00% non-
convertible senior preferred shares on July 3, 1997. The initial offering price
was $50.00 per share and the net proceeds to the Company were $118.7 million
after underwriter's commission and other offering expenses. The preferred
shares are listed on the New York Stock Exchange. The net proceeds were
contributed by the Company to the Operating Partnership in exchange for
2,500,000 preferred Partnership Units. The terms of the new class of preferred
Partnership Units generally parallel those of the Company's preferred shares as
to distributions and redemption rights. In turn, the Operating Partnership used
the proceeds to repay $58.3 million of debt and to acquire Valley Mall. In
connection with the preferred share offering, the Company's Board of Trustees
also authorized the Company to make open market purchases of the Company's
common shares. As of December 31, 1998, the Company had repurchased 1,534,398
common shares for an aggregate purchase price of $14.7 million; these shares are
currently held as treasury shares. Under the current Board resolution, the
Company is authorized, but not obligated, to repurchase up to an additional
965,602 common shares. In connection with such repurchases, the Operating
Partnership redeemed from the Company an equivalent number of common Partnership
Units for the equivalent repurchase cost, thus maintaining a 1.0 to 1.0
relationship between the number of the Company's outstanding common shares of
beneficial interest and the number of common Partnership Units in the Operating
Partnership that are owned by the Company.
(b) Financial Information About Industry Segments
The Company is primarily engaged in the business of owning, operating,
managing, leasing, acquiring, developing, redeveloping, expanding, renovating
and financing enclosed shopping malls and, therefore, only operates in one
segment. See the Consolidated Financial Statements and Notes thereto referred
to in Item 8 of this Annual Report on Form 10-K for certain financial
information required by Item 1.
(c) Narrative Description of Business
General
The Company conducts all of its business activities through the
Operating Partnership, the Financing Partnership and other subsidiary
partnerships or limited liability corporations (collectively the
"Partnerships"). Through its ownership interests in the Partnerships, as of
December 31, 1998 the Company owns: (a) 26 enclosed shopping malls, a 50%
partnership interest in Palmer Park Mall (an enclosed shopping mall), and a non-
enclosed strip shopping center (Greater Lewistown Plaza) (collectively, the
"Malls"), (b) an office building in Johnstown, Pennsylvania with approximately
102,500 gross leasable square feet, which serves as the headquarters of the
Company and also is leased to CAA's hotel division and third parties
("Pasquerilla Plaza"), (c) a ground leasehold interest in a parcel of land with
an approximate 107,000 square foot building sub-leased to an anchor department
store at Westgate Mall, a mall owned by an unaffiliated third party (the "Anchor
Pad"), and (d) approximately 80 acres of outparcels and undeveloped land, the
majority of which adjoins or is in the vicinity of certain of the Malls
(hereinafter all such real estate assets to be referred to as the "Properties").
The Operating Partnership manages 26 of the Malls, the non-enclosed strip
shopping center, and Pasquerilla Plaza (the "Managed Properties"); the Anchor
Pad and Palmer Park Mall are managed by non-affiliated third party property
managers.
The Company is self-administered and self-managed. The Company,
together with the Partnerships, is a fully-integrated real estate company
engaged in the ownership, operation, management, leasing, acquisition,
development, redevelopment, expansion, renovation and financing of enclosed and
non-enclosed shopping malls.
The Company's executive offices are located at Pasquerilla Plaza,
Johnstown, Pennsylvania 15901 and its telephone number is (814) 536-4441.
Operating Strategies and Practices
General. The Company's management believes that the shopping center
business has evolved from primarily a development activity to an operating
business. The Company's management believes that a shopping center company must
be a fully integrated real estate company with asset management, property
management, leasing, expansion and renovation, acquisition, development and
redevelopment, and financing expertise.
Mall Management. The Operating Partnership performs all day-to-day
property management functions for the Managed Properties. These functions
include leasing, construction, management, accounting, finance, data processing,
maintenance, marketing, promotion and security. The Company typically provides
each Managed Property with a general manager, who oversees the on-site staff,
and a marketing director. In addition, each Managed Property is further
supported by regional group managers and multi-property operations, marketing
and support personnel.
Marketing Support. The Company has a Vice President of Marketing and
a corporate marketing director who, in conjunction with Managed Property
marketing directors, develop customized marketing plans for each Managed
Property, including special events, direct mail and television, radio and
newspaper advertising.
Cost Controls. Management has developed a centralized program for
purchasing selected supply items, which permits all Managed Properties to share
in bulk purchase discounts. Management believes that effective control of
operating expenses will reduce common area charges which may enable the Company
to increase base rent levels.
To preserve and increase the value of the Managed Properties over the
long term, the Company has a program of preventive maintenance, renovations and
expansion plans. The maintenance plans encompass paving, roofing, HVAC and
general improvements to the Managed Property common areas.
Business Objectives and Policies
The Company's business objective is to achieve long-term capital
appreciation through increases in cash flow and the value of the Company. The
Company seeks to accomplish this objective through its direct and indirect
ownership of the Properties, selective acquisitions of additional malls or other
real estate properties in the United States, improved operations of the
Properties, lease-up of unleased space and any acquired shopping centers and,
where deemed appropriate, renovations and expansions of these properties. The
Company intends to pursue development activities as opportunities arise. A
criterion for new investments will be that they offer the opportunity for growth
in Funds from Operations. As used herein, "Funds from Operations" means net
income before minority interest, extraordinary items and non-recurring items,
real estate depreciation and amortization, and additionally includes gain on
sale of outparcel land sales and cash flow support earned from Crown Investments
(See Note 8 to the Consolidated Financial Statements). The Company anticipates
that new real estate investments will be located primarily in the Eastern United
States, but it may also consider purchasing properties in other regions of the
United States. All of the Company's activities will be conducted through the
Partnerships, although the Company may hold temporary cash investments from time
to time pending investment or distribution to shareholders.
The Company may purchase or lease properties for long-term investment,
expand and improve the Properties presently owned, or sell such Properties, in
whole or in part, when circumstances warrant. The Company may also participate
with other entities in property ownership, through joint ventures or other types
of co-ownership. The Company expects that any single investment in a property
would not exceed 10% of the Company's assets. The Company's policy is to
acquire assets primarily for income and long-term appreciation in value through
the implementation of the Company's asset management and operating strategies.
Disposition Objectives and Policies
The Company will dispose of any of the Properties, if, based upon
management's periodic review of the Company's portfolio, the Board of Trustees
determines that such action would be in the best interests of the Company.
Other than the Patrick Henry Corporate Center, an office building located in
Newport News, Virginia, which was sold to a third party in September 1996, and
Middletown Mall, which was sold to a third party in July 1998, none of the
Properties have been sold to date, or are under a sale agreement at this time.
Financing
The Company maintains working capital and lines of credit that,
together with potential access to borrowings and other sources of funds, it
believes is adequate for the current conduct of its business and investments in
the ordinary course. The principal financing activities of the Company during
1998 included: (1) $465.0 million 10-year mortgage loan with GE Capital Real
Estate (GECRE) offset by the related refinancing of $421 million of debt (see
Note 5 to the Consolidated Financial Statements), (2) $46.7 million in
borrowings under the existing GECRE lines of credit that was used for property
acquisitions, (3) $22.0 million in net borrowings under the GECRE general line
of credit for general working capital purposes, (4) $7.2 million in construction
loan draws for the Washington Crown Center redevelopment and for a theater and
other tenants at Oak Ridge Mall, (5) $3.3 million in other borrowings, (6) $9.9
million in loan paydowns and scheduled principal amortization, and (7) $16.6
million cash portion of the total $22.5 million in extraordinary losses on early
extinguishment of debt that occurred in connection with GECRE loan and
refinancings.
If the Board of Trustees determines that additional funding is
required, the Company or the Partnerships may raise such funds through
additional infusions of equity (public or private and at the Company or the
Partnership level), debt financing or retention of additional cash flow by
reducing the dividend amount per share (subject to considerations regarding the
taxability of undistributed real estate investment trust income), or a
combination of these methods. In August 1995 the Company reduced its quarterly
dividend from $.35 per share to $.20 per share in order to reinvest more
internally-generated funds in various property expansions, improvements, and
related investments. It is anticipated that any additional borrowings will be
made through the Partnerships either directly or indirectly, although the
Company may also incur indebtedness which may be re-loaned to the Partnerships.
Indebtedness incurred by the Company may be in the form of bank borrowings,
secured and unsecured, and publicly and privately placed debt. Indebtedness
incurred by the Partnerships may be in the form of purchase money obligations to
the sellers of properties, publicly or privately placed debt, financing from
banks, institutional investors or other lenders, any of which indebtedness may
be unsecured or may be secured by mortgages or other interests in the property
owned by the Partnerships. Such indebtedness may be recourse to all or any part
of the Properties to be owned by the Partnerships, may be limited to the
particular property to which the indebtedness relates, and may be guaranteed by
the Company.
Strategy for Growth
The Company was formed to provide a public vehicle for the further
growth of CAA's enclosed shopping mall business. It is the objective of the
Company's management to achieve growth in Funds from Operations by maximizing
cash flow from existing Properties through increased occupancy and increased
rent, expanding and/or renovating existing Properties, acquiring and, to a
lesser extent, developing new enclosed and non-enclosed shopping malls, and by
selling properties that are not consistent with or essential to the Company's
long-term growth strategies.
The Company follows a program of renovation and expansion in
circumstances where management believes that higher rental rates and occupancy
levels can be achieved. The Company intends to continue to monitor
opportunities for expansion and reconfiguration and to capitalize on such
opportunities in part through utilizing its relationships with existing tenants
and its extensive contacts with the retailing community. The Company intends to
undertake development activities as opportunities arise. The Company's primary
acquisition strategy is to purchase under-performing shopping centers in
desirable areas and to improve their performance through a comprehensive program
of renovation, expansion, reconfiguration, and re-merchandising. The Company
may acquire shopping centers in different regional markets to facilitate
geographic diversification of its real estate holdings. The acquisition of
larger properties, or a group of properties, may be undertaken with an
institutional or joint venture partner.
Because the Company's revenues are subject to a variety of factors,
many of which (such as local and national economic conditions, interest rates
and the financial performance of the Company's tenants) are beyond the Company's
control, there can be no assurance that the Company's management, leasing and
acquisition strategies will achieve the Company's growth objectives.
Competitive Position
The Malls are generally located in middle markets where there are
relatively few other enclosed malls, making most of them the dominant enclosed
mall in their respective trade areas; 23 Malls are the largest enclosed malls in
their trade areas, of which 14 are the only enclosed mall in their trade areas.
Seventeen Malls are located in the state of Pennsylvania and one is
located in New Jersey near the Pennsylvania border, approximately 25 miles from
Allentown. Two of the Malls are located in Virginia, two in Maryland, two in
West Virginia, two in eastern Tennessee, one in eastern North Carolina, and one
in northwestern Georgia.
CAA had continually expanded and renovated its Malls to maintain their
competitive position. 23 of the Malls have had at least one expansion or
renovation since they were completed, and 19 of the Malls have been expanded
more than once. Management of the Company intends to utilize the approximately
1.9 million square feet of remaining expansion capacity to maintain and enhance
the quality of the Malls and their competitive position in their trade areas.
Although management believes the Malls can compete effectively within
their trade areas, the Company must also compete with other owners, managers and
developers of retail shopping centers and malls. Many of its competitors may be
at an advantage to the extent they can utilize working capital and retained
earnings to finance projects while the Company is required to satisfy the REIT
qualification requirements under the Internal Revenue Code of 1986 (the "Code"),
which include a requirement to distribute specified amounts of its annual
taxable income, as defined in the Code (See Income Taxes section following for
additional information). In addition, retailers at the Malls face increasing
competition from discount shopping centers, outlet malls, shopping clubs, direct
mail, telemarketing, internet shopping, and home shopping television networks.
Employees
At the time of the initial public offering, all of the executive,
property and asset management, leasing, construction, financial, legal services,
development and administrative personnel of CAA relating to its regional mall
and shopping center business became employees of the Operating Partnership. As
of December 31, 1998, the Operating Partnership has approximately 517 full-time
employees in the following operational areas:
Number of
Employees
Asset and property management (including on-site) 385
Leasing and lease administration 25
Development and construction services 25
Financial, accounting, MIS and legal services 56
Executive management and corporate administration 26
Total 517
None of the Operating Partnership's employees are currently
represented by any union. The Company, the Financing Partnership and other
partnerships do not have any paid employees, but officers of the Operating
Partnership are also officers of the Company and the other partnerships. The
Company's management considers its relations with the employees of the Operating
Partnership to be satisfactory.
Business Issues
As the owner of real estate, the Company is subject to risks arising
in connection with the underlying real estate, including defaults under or
non-renewal of tenant leases, bankruptcy of tenants, competition, inability to
rent unleased space, failure to generate sufficient income to meet operating
expenses, as well as debt service, capital expenditures and tenant improvements,
environmental matters, financing availability and changes in real estate and
zoning laws. The success of the Company also depends upon certain key
personnel, the Company's ability to maintain its qualification as a REIT,
compliance with the terms and conditions of the Mortgage Loans and other
indebtedness, and trends in the national and local economy, including income tax
laws, governmental regulations and legislation and population trends.
Income Taxes
The Company elected to be taxed as a Real Estate Investment Trust
(REIT) under Sections 856 through 860 of the Code, commencing with its first
taxable year ended December 31, 1993, and intends to conduct its operations so
as to continue to qualify as a REIT under the Code. As a REIT, the Company
generally will not be subject to Federal and state income taxes on its net
taxable income that it currently distributes to shareholders. Qualification
and taxation as a REIT depends on the Company's ability to meet certain dividend
distribution tests, share ownership requirements and various qualification tests
prescribed in the Code.
If the Company fails to qualify as a REIT in any taxable year, the
Company will be subject to Federal and state income taxes (including any
applicable alternative minimum tax) on its taxable income at regular corporate
rates. Even if the Company qualifies for taxation as a REIT, the Company may be
subject to certain state and local taxes on its income and property and to
Federal income and excise taxes on its undistributed income.
Environmental Matters
The Company believes that the Properties are in compliance in all
material respects with all federal, state and local ordinances and regulations
regarding hazardous or toxic substances. The Company is not aware of any
environmental condition which the Company believes would have a material adverse
effect on the Company's business, assets or results of operations (before
consideration of any potential insurance coverage). Nevertheless, it is possible
that there are material environmental liabilities of which the Company is
unaware. Moreover, no assurances can be given that (i) future laws, ordinances
or regulations will not impose any material environmental liability or (ii) the
current environmental condition of the Properties have not been or will not be
affected by tenants and occupants of the Properties, by the condition of
properties in the vicinity of the Properties or by third parties unrelated to
the Company.
Many of the Malls contain, or at one time contained, underground
and/or above ground storage tanks used to store waste oils or other petroleum
products primarily related to the operation of auto service center
establishments at such Malls, and one Mall was constructed on a site a portion
of which had been previously used as a municipal landfill. In some cases,
underground storage tanks have been abandoned in place, filled in with inert
materials or removed and replaced with above ground tanks. Historical records
indicate that soil and groundwater contamination from underground tanks and, in
one case, a hydraulic lift, requiring remediation has occurred at five of the
Properties, and subsurface investigations (Phase II assessments) and remediation
work are either ongoing or scheduled to be conducted by the Company at such
Properties. The costs of remediation with respect to such matters have not been
and are not expected to be material.
There are also minor amounts of asbestos-containing materials ("ACM")
in most of the Properties, primarily in the form of floor tiles, mastics and
roofing materials, which are generally in good condition. Fireproofing and
insulation containing asbestos is also present in certain Properties in
non-public areas, such as mechanical rooms. The Company believes that the
presence of these ACM does not violate current law. In addition, the Company
has an ongoing program of reviewing spaces that have been vacated by tenants and
occupants of the Properties for the presence of ACM, and removing any ACM
discovered in such spaces before reletting the same to new tenants or occupants.
Two Malls also contain waste water treatment facilities which treat
waste water at the Malls before discharge into local streams. Operation of such
facilities is subject to federal and state regulation. All necessary permits
have been obtained and the Company's management believes such facilities are in
compliance with current law.
Item 2. Properties.
(a) The Malls
Through its ownership interests in the Partnerships, the Company owns
the Malls, which consist of 27 enclosed shopping malls, which include a 50%
partnership interest in Palmer Park Mall (an enclosed shopping mall) and one
strip shopping center. All of the Malls have department stores, theaters, and
other large space users as anchor tenants (the "Anchors"), as described in the
table on the following pages. All of the Malls have numerous diversified retail
stores, and in some instances a few office or non-retail tenants (the "Mall
Stores"), which are located along enclosed malls connecting the Anchors.
Additional freestanding retail stores and ground lease properties (the
"Freestanding Stores") are located along the perimeter of the parking areas at
17 of the Malls. Unless otherwise indicated, the information provided in this
Item 2 is stated as of December 31, 1998.
The Company, through the Partnerships, owns all of the properties in
fee, except Palmer Park Mall, Shenango Valley Mall, Uniontown Mall, Crossroads
Mall (owned partially in fee and partially under ground lease) and Greater
Lewistown Center. Palmer Park Mall Venture, in which the Company has a 50%
general partnership interest, holds title in fee to Palmer Park Mall. Shenango
Valley Mall, Uniontown Mall, Crossroads Mall and Greater Lewistown Center are
subject to third-party ground leases.
The total gross leasable area ("GLA") of the Malls is approximately
15.9 million square feet, including Anchors, Mall Stores and Freestanding
Stores. As used herein, GLA of a Mall includes the GLA attributable to all
Anchors, including nine anchor locations owned by their occupants or other
entities. Anchors, Mall Stores and Freestanding Stores account for
approximately 59%, 36% and 5%, respectively, of the total GLA of the Malls.
Excluding Freestanding Stores, the enclosed Malls range in size from
approximately 300,000 to 821,000 square feet of GLA with an average size of
approximately 540,000 square feet of GLA. Each Mall has ample surface parking
with 21 of the Malls having parking ratios above 5.0 per 1,000 square feet of
GLA.
At December 31, 1998, 99% of the Company-owned anchor GLA was leased
and occupied, and all nine non-owned anchor stores were occupied, including a
May Department Stores unit (Kaufmann's) that is under construction at Nittany
Mall (site of former Value City anchor) and which will open in Spring 1999. A
multi-screen theater is scheduled to be constructed in 1999 on the site of the
former Hess's store at Washington Crown Center. Vacant anchor premises at
December 31, 1998 consist of a former Kmart location (Carlisle Mall) bought-out
by Kmart in late 1996 and a J.C. Penney store at Carlisle which closed in early
1998 although rental payments will continue through March 1999.
The Company is in discussions with department store chains and other
tenants as replacements for the vacant anchor store locations. Mall Store GLA
was 82% leased at December 31, 1998, and freestanding space was 73% occupied at
December 31, 1998. All references herein to occupancy rates and to leased space
for mall shop tenants include signed leases with tenants that have not yet taken
occupancy.
On December 16, 1994 a fire occurred at the Logan Valley Mall located
in Altoona, Pennsylvania. The fire destroyed 44 small shops aggregating 148,800
square feet of gross leasable space as well as affecting three additional small
shops containing approximately 18,000 square feet of gross leasable space. The
net book value of the destroyed assets approximated $3.5 million. The Company
settled the property damage insurance claim with its insurance company in the
third quarter of 1995 for $15.9 million. The difference between the amount
received and the net book value of destroyed assets and the related demolition
and clean up costs is $11.2 million, which has been recorded as an extraordinary
gain in 1995. During 1995 and 1996 the Company also recorded $1.9 million and
$0.8 million, respectively, in business interruption insurance, which is
included in revenues. Because of the business interruption insurance coverage,
the fire had no material impact on 1996, 1995 and 1994 results of operations.
The reconstruction and expansion of the fire-damaged mall was completed in
August 1997 at a cost of approximately $68 million, including capitalized
interest and tenant allowances for new tenants. The construction costs were
financed with a construction loan obtained from a bank lending consortium. In
November 1997 the construction loan was refinanced as more fully described in
Note 5 to the Consolidated Financial Statements.
There are several types of retail shopping centers, varying primarily
by size and marketing strategy. Retail shopping centers of 100,000 square feet
to 400,000 square feet of GLA, are considered "community" shopping centers,
those in excess of 400,000 square feet of GLA are considered "regional" shopping
centers, while those having in excess of 800,000 square feet of GLA are
considered "super-regional" shopping centers. Twenty four of the Malls are
considered regional shopping centers and four are community shopping centers.
The Malls generally are located in middle markets where there are
relatively few other enclosed shopping malls. The Company's management believes
that the Malls have strong competitive positions because 23 are the largest, of
which 14 are the only, enclosed regional shopping malls in their respective
trade areas. No one Mall accounted for more than 5.7% of the total GLA of the
Malls or 7.4% of total revenues for the year ended December 31, 1998.
A substantial portion of the income from the Malls consists of rent
received under long-term leases. Generally, the leases provide for tenants to
pay rent comprised of two elements. The first element is fixed base rent, often
subject to increases according to a schedule agreed upon at the time of lease
inception. The second element is percentage rent, which is based on a
percentage of gross sales in excess of a specified minimum annual amount. In
some cases tenants only pay fixed base rent and, in a few cases, tenants only
pay percentage rent.
Virtually all of the leases for Mall Stores contain provisions
allowing the Company to recover certain costs for common area maintenance,
property taxes and other expenditures related to the day-to-day operations of
the Malls. In addition, most of the Mall Store leases include provisions that
allow the Company to recover costs associated with roof and parking lot repairs
and other capital expenditures. Most Anchors also contribute to certain of
these costs.
Unless otherwise noted, the following table sets forth certain
information regarding the Malls as of December 31, 1998:
% of GLA
Leased as of Lease or
December 31, Easement
Property/Location(1) Square Feet of GLA(1) 1998 (2) Anchors Expiration
Pennsylvania
Capital City Mall Mall 237,095 95.7% Sears 2000
Harrisburg, PA Anchor 322,512 100.0% Hecht's (3) 2093
Freestanding 46,158 100.0% J.C. Penney 2010
Total GLA 605,765 98.3%
Carlisle Plaza Mall Mall 121,532 65.5% Vacant (4) -
Carlisle, PA Anchor 178,821 55.2% Bon-Ton 2002
Freestanding 44,660 87.9% Vacant -
Total GLA 345,013 63.1%
Chambersburg Mall Mall 214,106 88.7% Sears 2010
Chambersburg, PA Anchor 240,948 100.0% J.C. Penney 2012
Total GLA 455,054 94.7% Value City 2007
Bon-Ton 2005
Greater Lewistown Anchor 94,284 100.0% Weis Markets 2011
Lewistown, PA Freestanding 76,971 87.5% J.C. Penney 1999
Total GLA 171,255 94.4%
Logan Valley Mall Mall 329,422 87.7% Kaufmann's 2005
Altoona, PA Anchor 453,643 100.0% Sears 2016
Total GLA 783,065 94.8% J.C. Penney 2017
Lycoming Mall Mall 317,717 79.8% Sears 2008
Williamsport, PA Anchor 453,936 100.0% J.C. Penney 2005
Freestanding 25,857 100.0% Bon-Ton 2006
Total GLA 797,510 92.0% Kaufmann's(3)2093
Value City 2008
Nittany Mall Mall 213,512 89.1% Sears 2005
State College, PA Anchor 317,134 100.0% J.C. Penney 2005
Freestanding 4,168 100.0% Kaufmann's(5)
(3)2097
Total GLA 534,814 95.6% Bon-Ton 2003
North Hanover Mall Mall 133,788 93.5% Sears 2000
Hanover, PA Anchor 286,596 100.0% J.C. Penney 2001
Freestanding 29,027 50.2% Bon-Ton 2001
Total GLA 449,411 94.9% Black Rose
Antiques (7) -
Palmer Park Mall Mall 143,556 73.0% Bon-Ton 2014
Easton, PA Anchor 312,110 100.0% Boscov's 2018
Freestanding 684 100.0%
Total GLA 456,350 91.5%
Schuylkill Mall Mall 277,554 68.1% Sears 2005
Frackville, PA Anchor 376,799 100.0% Kmart 2005
Freestanding 78,096 49.7% Bon-Ton (10) 2032
Total GLA 732,449 81.1% Phar-Mor 2006
U.S. Factory
Outlets 2009
Shenango Valley Mall Mall 105,906 78.6% Sears 2000
Sharon, PA Anchor 385,276 100.0% J.C. Penney 2004
Freestanding 21,416 0.0% Kaufmann's 2001
Total GLA 512,598 91.4%
South Mall Mall 123,461 94.5% Bon-Ton 2005
Allentown, PA Anchor 229,985 100.0% Stein Mart 2006
Freestanding 24,920 100.0% Phar-Mor 2006
Total GLA 378,366 98.2% Weis Market 1999
Uniontown Mall Mall 243,229 86.7% Sears 2000
Uniontown, PA Anchor 411,381 100.0% J.C. Penney 2005
Freestanding 45,978 100.0% Bon-Ton 2006
Total GLA 700,588 95.4% Value City 2002
Teletech 2005
Freight
Liquidators 2005
Viewmont Mall Mall 207,934 91.0% Sears 2005
Scranton, PA Anchor 532,058 100.0% J.C. Penney 2000
Freestanding 31,029 99.1% Kaufmann's(3)2093
Total GLA 771,021 97.5%
Washington Crown
Center (6) Mall 238,666 50.0% Sears 2009
Washington, PA Anchor 254,611 100.0% Hills 2006
Freestanding 3,132 100.0% Bon-Ton 2010
Total GLA 496,409 75.9%
West Manchester Mall Mall 296,128 74.6% Value City 2011
York, PA Anchor 407,366 100.0% Bon-Ton 2001
Total GLA 703,494 89.3% Wal-Mart 2014
Hecht's (3) 2094
Wyoming Valley Mall Mall 235,685 93.9% Sears 2001
Wilkes-Barre, PA Anchor 585,676 100.0% J.C. Penney 2002
Freestanding 93,647 97.2% Bon-Ton 2002
Total GLA 915,008 98.1% Kaufmann's(8)2002
Kaufmann's(8)2002
Maryland
Francis Scott Key Mall Mall 276,510 91.7% Sears 2003
Frederick, MD Anchor 435,347 100.0% J.C. Penney 2001
Freestanding 2,417 100.0% Value City 2010
Total GLA 714,274 96.8% Hecht's (10) 2044
Valley Mall (11) Mall 229,625 82.2% J.C. Penney 2004
Hagerstown, MD Anchor 383,010 100.0% Bon-Ton 2013
Freestanding 48,762 100.0% Montgomery
Total GLA 661,397 93.8% Ward (10) 2044
New Jersey
Phillipsburg Mall Mall 214,541 75.5% Bon-Ton 2010
Phillipsburg, NJ Anchor 306,541 100.0% J.C. Penney 2010
Freestanding 15,065 76.8% Kmart 2015
Total GLA 536,147 89.6% Sears 2004
North Carolina
Jacksonville Mall Mall 170,974 96.8% Belk-Rhodes 2011
Jacksonville, NC Anchor 244,609 100.0% J.C. Penney 2004
Total GLA 415,583 98.7% Sears 2011
Virginia
New River Valley Mall Mall 182,701 79.7% Sears 2008
Christiansburg, VA Anchor 240,753 100.0% J.C. Penney 2008
Total GLA 423,454 91.3% Belk-Rhodes 2008
Peebles 2009
Patrick Henry Mall Mall 236,387 91.3% Upton's 2007
Newport News, VA Anchor 407,644 100.0% Dillards (9) 2008
Total GLA 644,031 96.8% Hecht's (3) 2099
Dillards (9) 2013
Georgia
Mount Berry Square Mall 208,766 76.1% Sears 2011
Rome, GA Anchor 269,868 100.0% J.C. Penney 2006
Total GLA 478,634 89.6% Proffitt's 2012
Belk-Rhodes 2011
Tennessee
Bradley Square Mall 145,570 66.0% Sears 2005
Cleveland, TN Anchor 240,628 100.0% J.C. Penney 2006
Total GLA 386,198 87.1% Proffitt's 2006
Kmart 2012
Oak Ridge Mall Mall 269,261 38.8% Sears 2005
Oak Ridge, TN Anchor 368,272 100.0% J.C. Penney 2007
Freestanding 235,016 46.1% Wal-Mart 2008
Total GLA 872,549 66.6% Proffitt's(8)1999
Proffitt's(8)2013
West Virginia
Crossroads Mall Mall 194,081 85.4% Belk-Rhodes 2008
Beckley, WV Anchor 256,248 100.0% J.C. Penney 2001
Total GLA 450,329 93.7% Sears 2001
Martinsburg Mall Mall 165,876 78.0% Sears 2011
Martinsburg, WV Anchor 391,270 100.0% Wal-Mart 2011
Total GLA 557,146 93.5% J.C. Penney 2011
Bon-Ton 2012
Totals for all Mall Stores 5,733,583 81.8%
Malls Anchor 9,387,326(12) 99.1%
Freestanding 827,003 73.0%
Total GLA 15,947,912 91.6%
(1) Location is the major city or town nearest to the property, and is not
necessarily the local jurisdiction in which the property is located. GLA
includes the total square footage of the Anchors, Mall Stores and
Freestanding Stores.
(2) Occupancy includes both tenants in occupancy and tenants that have signed
leases but have not yet taken occupancy as of December 31, 1998.
(3) Tenant currently holds a long-term ground lease with nominal purchase
option. See Note 8 to the Consolidated Financial Statements. These
locations are deemed owned by their anchor occupants as they only pay a
nominal rent.
(4) The 38,000 square foot J.C. Penney store at Carlisle Mall closed in January
1998 but remains obligated for monthly rental payments through March 1999
when the lease expires.
(5) A new 95,000 square foot Kaufmann's department store is under construction
and scheduled to open in 1999. Kaufmann's replaced the Value City store
which closed in January 1998.
(6) Washington Crown Center, formerly known as Franklin Mall, is in the process
of being expanded and redeveloped. The redevelopment includes a new 140,000
square foot Kaufmann's department store and a 56,000 square foot 14 screen
stadium style movie theater which is scheduled to replace the former Hess's
department store. Both Kaufmann's and the theater are expected to be
constructed and open by late 1999.
(7) Black Rose Antiques is the name given to the former Kmart anchor space now
substantially leased on a month-to-month basis to a number of antique
dealers. Black Rose Antiques is currently generating approximately
$200,000 in annual income from these tenants, and accordingly this space is
considered to be occupied in the accompanying occupancy statistics.
(8) Proffitt's operates two stores at Oak Ridge Mall, one is a children's and
men's store and one is a women's and home furnishings store. Kaufmann's
(a division of May Department Stores) operates two stores at Wyoming
Valley Mall; one for women's and children's apparel and home furnishings
and one for men's apparel.
(9) Dillards operates two full line stores one of which was formerly occupied
by Proffitt's and the other which was formerly occupied by Belks.
(10) Tenant owns its store and the land under the store and operates under a
reciprocal easement agreement. The lease expiration date reflects the
expiration of the agreement.
(11) Valley Mall is in the process of being expanded to add a 120,000 square
feet Hechts department store, a 54,000 16 screen stadium style theater,
60,000 square feet of new mall shops plus a 30,000 square feet expansion of
The Bon-Ton store. The expansion is scheduled to open in late 1999.
(12) Includes 823,346 square feet of space related to 9 stores that are
owned or deemed owned under long-term lease purchase agreements by
their anchor occupants.
(b) Other Properties
The Company also has ownership interests in Pasquerilla Plaza and the
Anchor Pad, as described below, and also owns approximately 80 acres of
undeveloped land adjacent to most of the Malls which is available for
development, lease or sale to tenants or others.
Pasquerilla Plaza is a five-story building located in Johnstown,
Pennsylvania, built in 1989, and contains 102,500 square feet of gross leasable
area. The Company, as owner of Pasquerilla Plaza, uses approximately 71,000
square feet as its headquarters space. Approximately 14,300 square feet is
leased to CAA and affiliates for annual base rent of approximately $266,000.
Approximately 16,900 square feet is currently leased to third parties. Net
rental revenue from Pasquerilla Plaza from tenants other than CAA was $243,156
for the year ended December 31, 1998.
The Anchor Pad. The Anchor Pad is located at Westgate Mall in
Bethlehem, Pennsylvania. Westgate Mall is owned by a third party unaffiliated
with the Company and the Anchor Pad is ground leased by such third party to the
Company. The site encompasses 10 acres with an approximately 107,000 gross
square foot anchor store and a detached freestanding building of 5,000 square
feet. Bon-Ton subleases the anchor store and the freestanding building from
the Company. The ground lease and the sublease expire on November 22, 2000, at
which time the Company has an option to purchase the land fee interest for
$500,000. Rental revenue from the Anchor sublease was $426,000 in 1998.
(c) Property Insurance
The Company's management believes that all Properties described under
Items 2(a) and 2(b) which are owned by the Company, in whole or in part, are
adequately covered by insurance.
Item 3. Legal Proceedings
The Company from time to time is involved in litigation incidental to
its business. Except as described below, neither the Company nor any of the
Partnerships are currently involved in any material litigation and, to the best
of the Company's knowledge, there is no material litigation currently threatened
against the Company or the Partnerships, other than routine litigation arising
in the ordinary course of business, most of which is expected to be covered by
liability insurance or established reserves.
Shareholder litigation
On August 10, 1995, August 17, 1995, and September 8, 1995 complaints
were filed by various individuals on behalf of themselves and also purportedly
on behalf of other similarly situated persons against the Company and certain of
its executive officers in United States District Court for the Western District
of Pennsylvania to recover unspecified damages under the federal securities laws
resulting from a decline in the market price for the Company's common shares of
beneficial interest which are listed and traded on the New York Stock Exchange.
The decline in the Company's share price followed the announcement on August 8,
1995 of various operational and capital resource initiatives by the Company,
including the reduction of the Company's quarterly dividend to increase its
levels of retained internal cash flow and the planned sale of certain assets
that at the time did not fit the Company's growth strategy. The complaints in
these three cases were consolidated by the Court and a consolidated amended
complaint was filed on July 30, 1996. The consolidated amended complaint
asserts a class period extending from March 1, 1995 to August 8, 1995,
inclusive.
A fourth Complaint was filed the week of December 15, 1995 by an
individual on behalf of himself and also purportedly on behalf of other
similarly situated persons against the Company and certain of its current and
former executive officers in the United States District Court for the Eastern
District of Pennsylvania (the Warden action). This action was subsequently
transferred to the Western District of Pennsylvania. While this Complaint is
substantially similar to the previous Complaints, it alleged a class period
extending from August 17, 1993 (the IPO date) to August 8, 1995.
The Company filed a motion seeking to dismiss the consolidated action
and negotiated a stay of the Warden action pending resolution of the motion to
dismiss the consolidated actions. On September 15, 1997 the Court issued an
opinion dismissing the consolidated amended complaint. In its ruling, the Court
dismissed certain allegations with prejudice and others with an opportunity to
amend. On October 10, 1997 the Plaintiffs filed a second amended complaint in
the consolidated action. On December 2, 1997 the court entered an order
consolidating the cases for pretrial purposes. On December 16, 1997 the
Plaintiff in the Warden action filed a second amended complaint, which changed
the end of the putative class period to February 28, 1995. On January 16, 1998
the Company filed motions seeking dismissal of both the consolidated action and
the Warden action. On October 15, 1998 the Court in the Warden action granted
the Company's motion to dismiss and permitted the plaintiffs to file a third
amended complaint.
On November 2, 1998, the Court granted in part and denied in part the
Company's motion to dismiss the second amended complaint in the consolidated
action. In its ruling, the Court dismissed the Company as a defendant and
dismissed all of the plaintiff's claims with prejudice, except for a narrow set
of allegations relating to projections of the 1995 dividend at a March 1995 REIT
conference and in the 1994 annual report. On November 30, 1998, the plaintiffs
in the Warden action and the consolidated action each filed third amended
complaints. In the consolidated action, plaintiffs seek to renew certain claims
against the Company notwithstanding the Court's prior rulings. On December 21,
1998, the Company filed a motion seeking dismissal of the third amended
complaint in the Warden action. On February 5, 1999, the Company filed a motion
to dismiss the third amended complaint in the consolidated action. These
motions are currently pending.
The consolidated legal action and the Warden action are in a
preliminary stage. However, the Company believes, based on the advice of legal
counsel, that it and the named officers have substantial defenses to the
plaintiffs' claims, and the Company intends to vigorously defend the actions.
The Company's current and former officers that are named in this litigation are
covered under a liability insurance policy paid for by the Company. The
Company's officers also have indemnification agreements with the Company. While
the final resolution of this litigation cannot be presently determined,
management does not believe that it will have a material adverse effect on the
Company's results of operations or financial condition.
Tenant litigation
In July 1997, the Bon-Ton Department Stores, Inc. filed suit in a
Pennsylvania state court against Crown American Financing Partnership and The
May Department Stores Company seeking to enjoin the development of a Kaufmann's
department store at the Nittany Mall. Bon-Ton claims that the proposed
Kaufmann's store would violate a restrictive covenant in Bon-Ton's lease with
Crown. Crown and May disputed Bon-Ton's position and filed a counterclaim
seeking a declaratory judgment that the proposed transaction did not violate the
restrictive covenant. The parties stipulated to a trial of all issues (except
the availability of damages to Bon-Ton should it establish liability but not the
entitlement to injunctive relief). After this trial, the Court ruled in favor
of Crown and May, denying Bon-Ton's request for injunctive relief and granting
Crown's and May's motion for a declaratory judgment. Bon-Ton appealed to the
Pennsylvania Superior Court, and this appeal is pending. While the final
resolution of this litigation cannot be presently determined, management does
not believe that it will have a material adverse effect on the Company's results
of operations or financial condition.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of security holders of the Company
during the fiscal quarter ended December 31, 1998.
EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth certain information with respect to the
executive officers of the Company as of February 15, 1999.
Name Age Office with the Company
Frank J. Pasquerilla 72 Trustee, Chairman of the Board of Trustees
and Chief Executive Officer
Mark E. Pasquerilla 39 Trustee, Vice-Chairman and President
John M. Kriak 51 Trustee, Vice-Chairman and Chief Operating
Officer
Nicholas O. Antonazzo 61 Executive Vice President, Real Estate
Development
Thomas Stephenson 57 Executive Vice President, Asset Management
Terry L. Stevens 50 Senior Vice President, Chief Financial
Officer
Frank J. Pasquerilla became Chairman and Chief Executive Officer of
the Company upon its formation. Mr. Pasquerilla directs all financial and
development activities, establishes corporate policy and provides overall
strategic direction for the Company. He joined CAA within a year of its
founding in 1950 and became president in 1953. Mr. Pasquerilla became CAA's
sole owner in 1961 and has served as its Chairman and Chief Executive Officer.
He is a Trustee of the University of Notre Dame, a member of the Board of
Directors of Georgetown University and was a Trustee of the International
Council of Shopping Centers.
Mark E. Pasquerilla became President of the Company upon its
formation. Effective September 1, 1998, Mr. Pasquerilla assumed the additional
position of Vice Chairman with responsibility for the Company's top line revenue
growth through leasing and other income sources. Mr. Pasquerilla directs
leasing and the general administration of the Company and also assists the Chief
Executive Officer with strategic planning and the establishment of corporate
policy. He has also served as President of CAA since 1990, and was Executive
Vice President of Operations of CAA from 1987 to 1990. Mr. Pasquerilla was a
member of the Governor of Pennsylvania's Economic Development Partnership
Council from 1987 to 1995, and is a former Fulbright-Hays Scholar. In addition,
Mr. Pasquerilla is a member of the Board of Directors and the Executive and
Discount Committees of USBANCORP, INC. Mark E. Pasquerilla is the son of Frank
J. Pasquerilla.
John M. Kriak became Vice-Chairman and Chief Operating Officer of the
Company on September 1, 1998. Mr. Kriak is responsible for coordinating the
operational aspects of the Company including development, asset management,
finance, acquisitions and facilities planning functions. From May 1995 to
August 31, 1998, Mr. Kriak had been Executive Vice President and Chief Financial
Officer and was responsible for financial services, with emphasis on corporate
and project financing, financial reporting, and management information systems.
Mr. Kriak has been Executive Vice President of Crown Holding Company, the parent
of Crown Investments Trust, since May 1993. He was formerly the Chief Financial
Officer, Vice President, Secretary, and Treasurer of Penn Traffic Company, a
food retailer and supermarket operator, from 1976 until May 1993. Mr. Kriak is
a CPA, CMA and CFM.
Nicholas O. Antonazzo became Executive Vice President, Real Estate
Development, of the Company upon its formation. Mr. Antonazzo directs the
expansion and redevelopment of regional malls, anchor department store
relations, build-to-suit development, value-added tenant relations and
peripheral land development and sales. He has also served as Executive Vice
President of Development of CAA from 1987 to August 16, 1993. Mr. Antonazzo is
a former state director for the International Council of Shopping Centers and is
admitted to practice law before the Pennsylvania Supreme and Superior Courts.
Thomas Stephenson became Executive Vice President, Asset Management of
the Company in April 1994. Mr. Stephenson is responsible for strategic planning
as well as directing the operations of the Company's regional shopping mall
portfolio. He served as Senior Vice President of Operations for The Hahn
Company (a shopping center developer and manager) from 1987 to 1994 and as Vice
President of Operations from 1983 to 1987. Previously, he was with Trizec
Corporation, Ltd. ( a shopping center developer and manager) from 1971 to 1983
as Vice President of Operations. Mr. Stephenson is a CPA.
Terry L. Stevens became Senior Vice President and Chief Financial
Officer on September 1, 1998 and is responsible for financial services, with
emphasis on corporate and project financing, financial reporting, and management
information systems. Mr. Stevens joined the Company in May 1994 as Vice
President and Chief Accounting Officer, and he was promoted to Senior Vice
President on February 1, 1995. Prior to joining the Company Mr. Stevens was
Director of Financial Systems at AlliedSignal, Inc., a large multi-national
manufacturer, from 1990 to 1994. He also spent 18 years with Price Waterhouse,
an international accounting firm, including seven years as an audit partner.
Mr. Stevens is a CPA.
The executive officers are elected annually by the Board of Trustees
at an organization meeting which is held immediately after each Annual Meeting
of Shareholders. The executive officers of the Company serve in the identical
offices in each of the Partnerships.
PART II
Item 5. Market for Registrant's Common Shares of Beneficial Interest and
Related Shareholder Matters
The shares are listed on the New York Stock Exchange (symbol: CWN).
As of February 16, 1999, there were 26,207,919 common shares issued and
outstanding, held by 1,089 holders of record. The high and low sales price of
the common shares and dividends paid per common share during each quarter in the
period January 1, 1997 through December 31, 1998 were as follows:
1997 1998
High Low Dividend High Low Dividend
Quarter ended March 31 $8 3/8 $7 3/8 $0.20 $9 9/16 $8 1/2 $0.20
Quarter ended June 30 $9 3/8 $7 1/2 $0.20 $10 13/16 $9 1/8 $0.20
Quarter ended September 30 $9 15/16 $9 3/16 $0.20 $10 1/8 $71/2 $0.20
Quarter ended December 31 $9 11/16 $8 1/8 $0.20 $8 3/4 $71/2 $0.20
Item 6. Selected Financial Data
The following table sets forth selected consolidated financial data
for the Company, its wholly-owned subsidiaries, and its majority-owned
subsidiary, the Operating Partnership. The Company is sole general partner in
the Operating Partnership, and as of December 31, 1998 holds 100% of the
preferred partnership interests (see Note 6 to the Consolidated Financial
Statements) and 72.47% of the common partnership interests. The Operating
Partnership directly owns seven malls, the 50% joint venture interest in Palmer
Park Mall, the Corporate headquarters building, and the Westgate anchor pad.
All remaining properties are owned by seven partnerships and limited liability
companies that are 99.5% or 100.0% owned by the Operating Partnership. The
remaining 0.5% interests in these second-tier entities are owned by the Company
through its wholly-owned subsidiaries. The financial data should be read in
conjunction with the Consolidated Financial Statements and Notes in Item 8, and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in Item 7. (See Item 1 in this Annual Report on Form 10-K for a
discussion of the business combination completed on August 17, 1993).
Industry analysts generally consider Funds from Operations ("FFO") an
appropriate measure of performance for an equity REIT. Funds from Operations
means net income (computed in accordance with generally accepted accounting
principles - "GAAP") before minority interest, real estate depreciation and
amortization, and extraordinary and unusual non-recurring items, and
additionally includes earned cash flow support. Management believes that Funds
from Operations is an appropriate measure of the Company's operating performance
because reductions for real estate depreciation and amortization charges are not
meaningful in evaluating the operating results of the Properties, which have
historically been appreciating assets. Gains on sales of outparcel land are
included in this measure of performance. Gains or losses on sales of operating
properties and anchor store locations are excluded from FFO because such
transactions are uncommon and not a part of ongoing operations.
Beginning in 1996 the Company adopted a change in the definition of
FFO as promulgated by The National Association of Real Estate Investment Trusts
(NAREIT). Under the new definition, amortization of deferred financing costs
and depreciation of non-real estate assets, as defined, are not adjustments to
GAAP income in the calculation of FFO. All prior periods' FFO results have been
retroactively restated. The revised definition resulted in reductions of 1996,
1995, and 1994 total FFO of $4.6 million, $4.5 million, and $3.9 million,
respectively.
EBITDA is defined as revenues and gain on sales of outparcel land,
less operating costs and general and administrative expenses, but before
interest, and all depreciation and amortization. Management believes this
measure provides the clearest indicator of property operating performance for
the following reasons: (i) it is industry practice to evaluate the performance
of real estate properties based on net operating income (or NOI), which is
generally equivalent to EBITDA; and (ii) both NOI and EBITDA are unaffected by
the capital structure of the property owner.
Funds from Operations and EBITDA (i) do not represent cash flow from
operations as defined by generally accepted accounting principles, (ii) are not
necessarily indicative of cash available to fund all cash flow needs and (iii)
should not be considered as an alternative to net income for purposes of
evaluating the Company's operating performance.
Other data that management believes is important in understanding
trends in its business and properties are also included in the following table.
<TABLE>
<CAPTION>
Item 6. Selected Financial Data (continued)
Year Ended December 31,
1998 1997 1996 1995 1994
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Operating Data:
Total revenues $146,748 $130,994 $133,972 $132,248 $119,859
Operating costs:
Property operating costs 48,550 43,779 46,457 45,408 39,368
Depreciation and amortization 41,712 38,311 35,315 34,634 29,171
General and administrative 5,066 4,698 4,135 4,420 2,622
expenses
Operating income before 51,420 44,206 48,065 47,786 48,698
interest
Interest 45,417 42,663 45,337 42,923 36,240
Adjustment to carrying value of (35,000)
assets
Gain on sale of property 1,210 1,051 5,776 3,492 6,591
Income (loss) before minority
interest and
extraordinary items 7,213 2,594 8,504 (26,645) 19,049
Minority interest in Operating 8,363 1,644 (1,979) 4,205 (4,192)
Partnership
Cumulative effect of change in (1,703)
accounting method
Extraordinary gain on fire 11,244
insurance claim
Extraordinary loss on early (22,512) (2,331) (718) (765)
extinguishment of debt
Net income (loss) (8,639) 1,907 5,807 (11,961) 14,857
Dividends on preferred shares (13,750) (6,646)
Net income (loss) applicable to $(22,389) $(4,739) $ 5,807 $(11,961) $14,857
common shares
Per share data (after minority
interest): (1)
Basic EPS:
Income (loss) before $ (0.18) $ (0.11) $ 0.23 $ (0.72) $ 0.55
extraordinary items
Extraordinary items (0.62) (0.06) (0.02) 0.29
Cumulative effect of change in (0.05)
accounting method
Net income (loss) $ (0.85) $ (0.17) $ 0.21 $ (0.43) $ 0.55
Diluted EPS:
Income (loss) before $ (0.18) $ (0.11) $ 0.23 $ (0.72) $ 0.55
extraordinary
items
Extraordinary items (0.62) (0.06) (0.02) 0.29
Cumulative effect of change in (0.05)
accounting method
Net income (loss) $ (0.85) $ (0.17) $ 0.21 $ (0.43) $ 0.55
Other Data:
EBITDA (2 & 4) $ 98,499 $ 88,028 $91,514 $ 91,269 $ 84,876
Funds from Operations (FFO):
(3,
4, & 5,)
Net income (loss) $ (8,639) $ 1,907 $ 5,807 $(11,961) $ 14,857
Adjustments:
Minority interest in Operating (8,363) (1,644) 1,979 (4,205) 4,192
Partnership
Adjustment to carrying value of 35,000
assets
Less gain on asset sales other (2,351) (4,498)
than outparcels
Depreciation and amortization - 42,992 39,682 36,678 36,417 30,859
real estate
Operating covenant amortization 2,630 2,630 2,630 2,685 2,592
Cash flow support earned 3,784 3,733 2,889 2,591 3,703
Cumulative effect of change in 1,703
accounting method
Extraordinary gain on fire (11,244)
insurance claim
Extraordinary loss on early 22,512 2,331 718 765
extinguishment of debt
Funds from Operations before
allocations to
minority interest and preferred 56,619 48,639 48,350 50,048 51,705
shares
Less:
Amounts allocable to preferred 13,750 6,646
shares
Amounts allocable to minority 11,653 10,810 12,287 12,653 11,379
interest
Funds from Operations applicable
to common shares $ 31,216 $ 31,183 $ 36,063 $ 37,395 $ 40,326
Weighted average common shares 26,393 27,228 27,515 27,372 27,119
outstanding (000)
Weighted average common shares
and Operating Partnership units
outstanding (000) 36,317 36,667 36,956 36,668 34,772
Cash Flows:
Net cash provided by operating $ 54,834 $ 38,747 $ 44,848 $ 57,174 $ 50,489
activities
Net cash (used in) investing (102,795) (70,983) (41,730) (100,238) (20,031)
activities
Net cash provided by (used in) 52,001 34,962 (2,408) 46,964 (34,136)
financing activities
(1), (2), (3), (4), (5) - See page 21 for explanation.
</TABLE>
<TABLE>
<CAPTION>
Item 6. Selected Financial Data (continued)
December 31,
Balance Sheet Data ($000): 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Income-producing properties
(before accumulated depreciation
and amortization) $1,134,349 $1,024,641 $960,692 $933,220 $856,213
Total assets 869,288 785,949 740,638 737,518 701,409
Total debt and liabilities 708,047 570,845 600,986 580,234 502,856
Minority interest 11,724 25,334 35,576 39,873 43,670
Shareholders' equity 149,517 189,770 104,076 117,411 154,883
Portfolio Property Data (6):
Number of retail properties
at end of year 28 26 25 25 23
Total GLA at end of year 15,948 14,999 14,321 14,063 12,695
(000 sq. ft.) (7)
Mall shop GLA at end of year 5,734 5,539 5,355 5,221 4,895
(000 sq. ft.)
Comparable store mall shop $ 242 $ 228 $ 217 $ 206 $ 204
tenant sales per square foot
(8)
Mall Shop occupancy percentage
at year end (9) 82% 79% 76% 82% 84%
(1) All per share data are based on the weighted average common shares
outstanding shown for the respective periods.
(2) EBITDA represents earnings before interest, all depreciation and
amortization, and unusual items. The derivation of EBITA is shown in
Item 7 (c) herein. As a REIT, the Company is generally not subject to
federal or state income taxes.
(3) Funds from Operations represents net income before minority interest, real
estate depreciation and amortization, plus earned cash flow support and
adjusted for certain unusual and non-recurring items.
(4) EBITDA and Funds from Operations (i) do not represent cash flow from
operations as defined by generally accepted accounting principles,
(ii) are not necessarily indicative of cash available to fund all
cash flow needs and (iii) should not be considered as an
alternative to net income for purposes of evaluating the Company's
operating performance.
(5) As noted in the narrative preceding the above table, beginning in 1996, the
Company adopted a revised definition of FFO as promulgated by NAREIT.
FFO for all prior periods has been restated.
(6) The data prior to 1995 excludes Wyoming Valley Mall and Middletown Mall
which were acquired by the Company in 1995. The data for 1997 includes the
impact of the Valley Mall acquisition completed in November 199. The data
for 1998 includes the additions of Crossroads and Jacksonville Malls and
the Greater Lewistown Strip Center, all of which were acquired in May 1998,
and the sale of Middletown Mall in July 1998. See Note 14 to the
Consolidated Financial Statements.
(7) Total GLA includes anchor stores (company-owned and tenant-owned), mall
shops, and freestanding space.
(8) Total sales for all mall shop tenants, excluding freestanding space, movie
theaters, and supermarkets, amounted to $909 million, $721 million,
$719 million, $715 million, and $700 million for 1998, 1997, 1996, 1995
and 1994, respectively. Sales reported in 1998, 1997, 1996, 1995, and
1994 for all owned anchor stores were $1,249 million, $1,132 million,
$1,112 million, $962 million and $922 million, respectively. The
Company owns 96 of 105 anchor store premises as of December 31, 1998.
(9) Includes both tenants in occupancy and tenants that have signed leases but
have not yet taken occupancy as of the dates indicated.
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion should be read in conjunction with the
Selected Financial Data and the Consolidated Financial Statements and Notes
thereto in Item 8 in this Annual Report on Form 10-K. The Note references in
this item can be found on pages 39 to 56. Historical results set forth in the
Selected Financial Data and the Consolidated Financial Statements of Crown
American Realty Trust (the "Company") are not necessarily indicative of future
financial position and results of operations of the Company.
(a) General Background and Performance Measurement
Organization
Crown American Realty Trust (the "Company") was formed in 1993 to
acquire interests in 23 enclosed shopping malls and certain other real estate
(collectively the "Properties") then currently owned by Crown American
Corporation, a wholly-owned subsidiary of Crown Holding Company ("Crown
Holding"). The Company is a real estate investment trust under the Internal
Revenue Code of 1986, as amended. On August 17, 1993 the Company completed its
initial public offering and raised net proceeds of approximately $405 million in
equity from issuing approximately 25.5 million shares, including the subsequent
exercise of the underwriters' over-allotment option. The Company used the
proceeds to purchase an initial 78% general partnership interest in Crown
American Properties, L.P. (the "Operating Partnership"), a partnership which was
formed just prior to consummation of the offering referred to above and is the
successor entity of Crown American Realty Properties (the "Predecessor"). The
current 27.53% minority limited common partnership interests are held by Crown
Investments Trust, by Crown American Investment Company, a wholly-owned
subsidiary of Crown Investments Trust, both of which are affiliates of Crown
American Associates ("Crown Associates") which was also formed in 1993 as a
wholly-owned subsidiary of Crown Holding and as "Successor to Crown American
Corporation", and by Frank J. Pasquerilla. The funds were used by the Operating
Partnership to retire debt related to the Properties. As described in Note 6,
the Company also holds 100% of the preferred partnership interests in the
Operating Partnership that arose in connection with the Company's issuance of
preferred shares in July 1997.
Simultaneous with the offering, Crown Associates and an affiliate
transferred the Properties and the management operations into either the
Company, the Operating Partnership, or Crown American Financing Partnership (the
"Financing Partnership"), a partnership which is 99.5% owned by the Operating
Partnership and 0.5% owned by the Company. As a result of these transactions,
the Company is engaged primarily in the ownership, operation, management,
leasing, acquisition, expansion, development and financing of shopping malls.
In addition, simultaneous with the above transaction, the Financing Partnership
borrowed $300 million of mortgage debt initially secured by 15 properties. The
$300 million was used to retire existing debt contributed by the Predecessor.
As described in Note 5, in August 1998 the remaining balance of the $300 million
of mortgage debt was refinanced in its entirety.
The properties held by the Company at December 31, 1998 consist of:
(1) 26 enclosed shopping malls (together with adjoining outparcels and
undeveloped land) and a non-enclosed strip shopping center (Greater Lewistown
Plaza) located in Pennsylvania, New Jersey, Maryland, Tennessee, North Carolina,
West Virginia, Virginia and Georgia, (2) a 50% general partnership interest in
Palmer Park Mall Venture, which owns Palmer Park Mall located in Easton,
Pennsylvania, (3) Pasquerilla Plaza, an office building in Johnstown,
Pennsylvania, which serves as the headquarters of the Company and is partially
leased to other parties, and (4) a parcel of land (under ground lease with
purchase option) improved with a building leased to a department store chain.
(b) Funds from Operations
Year ended December 31, 1998 versus year ended December 31, 1997
Total 1998 FFO (before allocations to minority interest and to
preferred shareholders) was $56.6 million compared to $48.6 million in 1997, a
16% increase. FFO applicable to common shareholders for the year ended December
31, 1998 was $31.2 million or even with the amount reported for the year ended
December 31, 1997. The average common shares outstanding during 1998 and 1997
were 26,393,000 and 27,228,000, respectively.
FFO contributed from existing mall operations (before interest,
general and administrative costs, and cash flow support) was up $3.2 million.
FFO contributed by the recently acquired properties, net of financing costs, was
$2.2 million. These increases were partially offset by: $4.2 million full year
impact of the preferred shares dividends (net of amount allocated to acquired
properties); and $0.6 million higher general and administrative expenses, due
mostly to higher costs in the leasing and acquisition departments. After
allocations to acquired properties, interest expense was down by $0.2 million.
The $3.2 million increase from existing properties resulted from: a)
an increase in mall shop minimum and percentage rent of $5.0 million, b) an
increase in anchor minimum and percentage rent of $0.4 million, and c) an
increase in straight-line rental income and miscellaneous revenues of $0.3
million, offset by d) an increase in property operating costs (net of
recoveries) in the amount of $2.1 million, primarily due to one-time expense
reductions in 1997 as a result of real estate tax and franchise tax credits due
to settlements, and e) lower temporary and promotional income in 1998 in the
amount of $0.4 million due to less space available due to the increase in
permanent leasing.
Year ended December 31, 1997 versus year ended December 31, 1996
FFO applicable to common shareholders for the year ended December 31,
1997 was $31.2 million, compared to $36.1 million for the year ended December
31, 1996. Total 1997 FFO before allocations to minority interests and preferred
shareholders was $48.6 million compared to $48.4 million in 1996.
FFO contributed from the Company's core property operations (i.e.,
anchor and mall shop rents, percentage rents, straight-line rents, operating
costs net of tenant recoveries, temporary and seasonal leasing, and
miscellaneous mall revenues) increased $3.5 million over 1996. The $3.6 million
improvement in property operations includes $2.5 million from lower operating
costs, net of tenant recoveries, $0.8 million higher temporary and seasonal
leasing income reflecting increased emphasis on this area to mitigate the lower
mall shop occupancy, $0.5 million higher straight-line rental income, and $0.5
million contributed from Valley Mall which was acquired in November 1997, offset
by $0.2 million lower small shop base and percentage rents from lower average
occupancy partially offset by higher average base rents, and $0.8 million from
lower anchor base and percentage rents due largely to higher anchor vacancies in
1997. Other positive impacts on total 1997 FFO included: a) a decrease in net
interest costs of $2.7 million of which $3.3 million is the effect of the
paydown of debt and increased short-term investments associated with the July
1997 preferred share offering offset by $0.6 million higher interest from
increased borrowings and less capitalized interest, mainly related to the Logan
Valley Mall reconstruction, and b) an increase in Cash Flow Support (see Note 8)
by $0.8 million. Negative impacts on total 1997 FFO included: a) a decrease
in gain on land sales of $2.4 million, b) a decrease in lease buyout income of
$2.3 million, c) lower business interruption income from the Logan Valley fire
of $0.8 million, d) lower fees on sales of non-REIT assets of $0.4 million, and
e) higher general and administrative costs in the amount of $0.8 million.
(c) EBITDA - Earnings before Interest, Taxes, Depreciation and
Amortization
The computation of EBITDA is shown below for the years ended December
31, 1996, 1997, and 1998 ($000):
December 31,
1998 1997 1996
Total revenues $ 146,748 $ 130,994 $133,972
Add back operating covenant
amortization deducted in
minimum rent 2,630 2,630 2,630
Net 149,378 133,624 136,602
Less recoverable costs and expenses (43,755) (39,467) (41,324)
Less non-recoverable costs and expenses (2,262) (1,963) (3,065)
Less property general & administrative
costs (2,533) (2,349) (2,068)
Less corporate general & administrative
costs (5,066) (4,698) (4,135)
Add back depreciation/amortization in
above expenses lines and joint
venture depreciation 1,527 1,830 2,079
Gain on outparcel land sales 1,210 1,051 3,425
EBITDA, as reported $ 98,499 $ 88,028 $ 91,514
Year ended December 31, 1998 versus year ended December 31, 1997
Total EBITDA for the year ended December 31, 1998 was $98.5 million,
an increase of $10.5 million from 1997's EBITDA of $88.0 million. Of this total
increase, $8.2 million was attributable to the recently acquired properties and
$2.7 million came from existing properties; the sale of Middletown Mall produced
a decrease in EBITDA of $0.4 million.
Year ended December 31, 1997 versus year ended December 31, 1996
Total EBITDA for the year ended December 31, 1997 was $88.0 million, a
decrease of $3.5 million from 1996's $91.5 million. The principal factors
impacting EBITDA in 1997 were: a) $2.3 million lower lease buyout income, b)
$0.8 million lower business interruption income from the 1994 fire at Logan
Valley Mall, c) $2.4 million lower gain on land sales, offset by d) $2.1
million lower net property operating costs and administrative costs.
(d) Property Operating Results and Trends
Aggregate Tenant Sales Volume
Over the long term, the level of anchor and mall shop tenant sales is
the single most important determinant of revenues of the Company as anchor and
mall shop tenants provide over 90% of total revenues and because tenant sales
determine the amount of rent, percentage rent and recoverable expenses
(together, total occupancy costs) that tenants can afford to pay. However,
levels of tenant sales are considerably more volatile in the short run than
total occupancy costs.
Total reported sales for all tenants that reported sales for the
applicable years are shown below ($ in millions):
1998 1997 1996
Anchors (owned locations) $ 1,249 $ 1,132 $ 1,112
Mall shop tenants, excluding 909 721 719
freestanding, theater, and
supermarkets
The above data excludes sales from all seasonal and temporary tenants
who generally do not report their sales to the Company. The Company owned 96
of 105 anchor store locations at December 31, 1998.
In a period of rapidly increasing sales, rents on new leases will tend
to rise as tenants' expectations of future growth become more optimistic. In
periods of declining sales, rents on new leases tend to grow more slowly.
However, revenues generally increase as older leases roll over or are terminated
early and replaced with new leases negotiated at current rental rates that are
usually higher than the average rates for existing leases.
Average base rents per square foot for mall shop tenants at quarter
end for the last three years are shown in the following table. The increase in
average base rent during these three years results primarily from renewing
existing leases at higher base rents, from leasing vacant space at higher base
rents, and from elimination of lower paying tenants that closed during these
periods.
1998 1997 1996
March 31 $ 16.94 $ 15.96 $ 15.42
June 30 16.95 16.13 15.56
September 30 17.30 16.69 15.71
December 31 17.54 16.82 15.85
Comparable Mall Store Sales and Occupancy Cost
Management believes that over long periods of time the ability of
tenants to pay occupancy costs and earn profits increases as sales per square
foot increase, whether through inflation or real growth in customer spending.
Because most mall shop tenants have certain fixed expenses, the occupancy costs
(base fixed rents, percentage rents, and expense recoveries - pro rata share of
real estate taxes and common area maintenance and other costs pertaining to the
property) that they can afford to pay and still be profitable is a higher
percentage of sales at higher sales per square foot. While such increased
occupancy costs as a percentage of sales cannot grow indefinitely for any one
tenant, management believes that it is possible to increase the percentage paid
by all tenants as a group by aggressively working to replace under-performing
tenants with better performing ones.
Comparable mall store sales per square foot in each reporting period
is based on sales reported by mall store tenants (excludes anchors and certain
other large space users) that occupied space in both the current and immediately
preceding reporting period. Comparable mall store sales per square foot for the
last three years are set out below. Also shown below is the percentage of mall
shop tenants' occupancy costs as a percentage of their annual sales.
1998 1997 1996
Comparable mall store sales per square foot $ 242 $ 228 $ 217
Occupancy cost percentage at period end 10.3% 10.4% 10.6%
Seasonality and Occupancy
The enclosed shopping mall industry is seasonal in nature, with anchor
and mall shop tenant sales highest in the fourth quarter due to the Christmas
season, and with lesser, though still significant, sales fluctuations associated
with the Easter holiday and back-to-school events. While minimum rents and
expense recoveries are generally not subject to seasonal factors, many leases
are scheduled to expire in the first calendar quarter, and the majority of new
stores open in the second half of the year in anticipation of the Christmas
selling season. Accordingly, revenues and occupancy levels are generally lowest
in the first quarter and highest in the fourth quarter.
The aggregate mall shop occupancy percentage, defined as the ratio of
total mall shop space that is leased (including both tenants occupying space and
tenants that have signed leases but have not yet taken occupancy) to the total
mall shop space gross leasable area ("GLA") at quarter-end for the last three
years is set out below.
Mall Shop Occupancy
1998 1997 1996
March 31 79% 75% 79%
June 30 81% 77% 77%
September 30 81% 77% 77%
December 31 82% 79% 76%
The decline in occupancy in 1996 and early 1997 occurred due to a
higher than normal number of tenant bankruptcies and early closings,
particularly in the first and second quarters of 1996, and, to a lesser extent,
from slower leasing activity in 1996. Occupancy at December 31, 1997 does not
include Valley Mall which was purchased in November 1997.
At December 31, 1998, anchor occupancy was 99.0% and total portfolio
occupancy (anchors, mall stores and freestanding) was 91.6%.
(e) Results of Operations
Comparison of Year Ended December 31, 1998, versus Year Ended December
31, 1997
Revenues
Components of minimum rents and percentage rents for the years ended
December 31, 1996, 1997 and 1998 are as follows ($000):
Year Ended December 31,
1998 1997 1996
Components of Minimum Rents:
Anchor - base rents $ 23,527 $ 22,213 $ 22,624
Mall shops & freestanding - base rents 67,195 57,251 58,064
Mall shops & freestanding - percentage
rent in lieu of fixed
base rent 2,908 2,397 1,821
Straight line rental income 564 89 (457)
Ground leases - base rents 1,949 1,542 1,540
Lease buyout income 8 182 2,479
Operating covenant amortization (2,630) (2,630) (2,630)
Total Minimum Rents $ 93,521 $ 81,044 $ 83,441
Components of Percentage (Overage)
Rents:
Anchors $ 3,899 $ 3,454 $ 3,763
Mall shops, freestanding, and ground
leases 3,292 3,090 2,726
Total Percentage (Overage) Rents $ 7,191 $ 6,544 $ 6,489
Total revenues increased by $15.7 million, or 12.0%, in 1998 over
1997's reported revenues of $131.0 million. Of the $15.7 million increase, $11.7
million was the result of the four recently-acquired properties, $4.9 million
came from previously-owned centers, offset by a $0.9 million decrease from one
sold property.
The composition of the $15.7 million increase, by revenue category, is
as follows (dollars in thousands):
Same Acquired Sold
Centers Properties Property Total
Minimum rents $ 5,506 $ 7,562 $ (591) $ 12,477
Percentage rents (44) 716 (25) 647
Cost recovery income (281) 2,476 (138) 2,057
Temporary & promotional leasing (399) 790 (42) 349
Net utility income 89 96 - 185
Miscellaneous income 69 37 (67) 39
Total revenues $ 4,940 $ 11,677 $ (863) $ 15,754
Property Operating Costs
Property operating and administrative costs, excluding depreciation
and amortization, increased $4.8 million in 1998, a 10.9% increase over 1997.
The composition of this $4.8 million increase was $3.4 million from the recently
acquired properties and $1.9 million from previously-owned centers, offset by
$0.5 million from one sold property.
The breakdown of the $4.8 million increase in property operating
costs, by major expense category, is as follows (dollars in thousands):
Same Acquired Sold
Centers Properties Property Total
Recoverable operating costs $ 1,640 $ 3,017 $ (369) $ 4,288
Property administrative costs 13 179 (8) 184
Other operating costs 191 198 (90) 299
Total property operating costs $ 1,844 $ 3,394 $ (467) $ 4,771
Depreciation and Amortization
Depreciation and amortization expense increased by $3.4 million in
1998. The four recently-acquired properties accounted for $3.6 million of this
increase, existing centers were even with 1997 and the sold property accounted
for a $0.2 million decrease.
General and Administrative
General and administrative expenses increased by $0.4 million in 1998
over a year ago primarily as a result of higher compensation costs and travel
and entertainment costs due to the concentrated effort in both leasing and
acquisitions. This effort resulted in a record high leasing volume in 1998 and
the acquisition of two enclosed malls and one community strip center.
Interest Expense
Interest expense (net of capitalized amounts) increased to $45.4
million, a $2.7 million increase over 1997. Of this $2.7 million increase, $2.2
million was directly associated with debt incurred to purchase the recently-
acquired properties. The sold property resulted in a decrease in interest
expense of $0.3 million, with the remaining increase of $0.8 million coming from
increased borrowings related to existing centers.
Gain on Sale of Outparcel Land
The gain on sale of outparcel land was $1.2 million in 1998, or $0.2
million higher than 1997.
Extraordinary Losses
The Company recorded $22.5 million of losses on early extinguishment
of debt in 1998 and $2.3 million in 1997. The 1998 loss of $22.5 million
consisted of primarily a) $16.6 million of prepayment penalties associated with
the payoff of the Kidder Peabody Mortgage Loans in August 1998, and b) $5.9
million of unamortized deferred financing costs related to the Kidder Mortgage
Loans and the $110.0 million interim loan with General Electric Capital Real
Estate.
Change in Accounting Method
On May 21, 1998 the Emerging Issues Task Force ("EITF") discussed
Issue 98-9 "Accounting for Contingent Rent" and reached a consensus that lessors
should defer the accounting recognition of contingent rent, such as percentage
rent, until the specific tenant sales breakpoint target is achieved. The
Company's previous accounting method, which was fully acceptable under Generally
Accepted Accounting Principles ("GAAP"), recognized percentage rent on a pro-
rata basis when a tenant's achievement of its sales breakpoint was considered
probable. This EITF consensus can be implemented on a prospective basis, or
retroactively as a change in accounting method.
During the third quarter of 1998, the Company implemented this EITF
consensus as a change in accounting method and accordingly recorded as of
January 1, 1998 a $1.7 million cumulative effect adjustment representing the
change on prior years' percentage rent income based on the new method of
accounting. The impact on percentage rent income of the new method for the year
ended December 31, 1998 was a reduction of percentage rents of about $12,000
from what would have been reported under the Company's previous method of
accounting. The impact on the fourth quarter of 1998 was an increase in
percentage rent of approximately $66,000 over what would have been reported.
The impact on the previously reported first, second, and third quarters was
immaterial.
New Accounting Pronouncements
In the first quarter of 1998, the Company adopted Statement of
Financial Accounting Standards ("FAS") No. 130, Reporting Comprehensive Income,
which requires companies to report all changes in equity during a period, except
those resulting from investment by owners and distribution to owners, in a
financial statement for the period in which they are recognized. FAS No.130 has
no impact on the Company's financial statements, as the Company's comprehensive
income (loss) is equal to its net income (loss) at December 31, 1998, as the
Company has just one reportable operating segment. In the fourth quarter of
1998, the Company adopted FAS No. 131, Disclosures About Segments of an
Enterprise and Related Information. This new standard has not had a material
effect on the Company's consolidated financial statements.
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133, Accounting for Derivative
Instruments and Hedging Activities. The Statement establishes accounting and
reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded in the
balance sheet as either an asset or liability measured at its fair value. FAS
No. 133 is effective for fiscal years beginning after June 15, 1999. Had the
Company applied this standard currently, the effect on the Company's results of
operations at December 31, 1998 would be immaterial.
Comparison of Year Ended December 31, 1997, versus Year Ended December
31, 1996
Total 1997 revenues were $131.0 million compared to $134.0 million in
1996. Contributing to the decrease in revenues were: $0.8 million lower
business interruption insurance, $0.6 lower cost recovery income due to lower
recoverable costs at the properties, $2.3 million lower lease buyout income due
mainly to two Kmart anchor lease buyouts in the third and fourth quarters of
1996, $0.2 million lower small shop base and percentage rents due to lower
occupancy earlier in the year partially offset by higher average base rent per
foot, $0.8 million lower anchor base and percentage rents from higher anchor
vacancies in 1997, and $0.4 million lower fees and commissions from sales of non
Company properties (included in miscellaneous income). Offsetting these
decreases were: $0.8 million in higher temporary and promotional income, $0.2
million higher net utility income, $0.5 million higher straight-line rental
income, and $0.7 million in revenues from Valley Mall purchased in mid November
1997. Of the total $3.0 million decrease in revenues for 1997, $2.5 million
occurred in the first six months.
Property operating and administrative costs, excluding depreciation
and amortization, decreased by $2.7 million in 1997 compared to 1996. Factors
contributing to this decrease were lower snow removal costs, lower insurance
costs and real estate tax expense due mainly to adjustments in assessed values,
and lower consulting fees and non-recoverable mall repairs. Depreciation and
amortization expense increased by $3.0 million in 1997 due primarily to an
increased level of real estate assets, including Logan Valley Mall, and to a
cessation of depreciation in the first half of 1996 on certain assets that had
been held for possible sale in 1996. These assets were withdrawn from held for
sale status during the second quarter of 1996.
General and administrative expenses were approximately $0.6 million
higher in 1997 compared to 1996. This increase was primarily attributable to
higher compensation and travel costs associated with income generating
activities, principally leasing and acquisitions. Interest expense decreased by
$2.7 million in 1997 compared to 1996, of which $3.3 million resulted from the
paydown of $58.3 million of debt from the proceeds of the July 1997 preferred
share offering and interest income from temporary short-term investment of the
proceeds from the preferred shares, offset by $0.6 million from higher
borrowings and lower capitalized interest mainly from the Logan Valley Mall
reconstruction.
The gain on the sale of outparcel land was $1.1 million in 1997, a
decrease of $2.4 million compared to 1996 due to fewer sale transactions. In
addition, in September 1996, the Company sold its Patrick Henry Corporate
Center, an office building located in Newport News, Virginia to an insurance
company. The net gain from this transaction of $2.4 million is shown as a gain
on asset sales.
During 1997 the Company recorded $2.3 million in extraordinary losses
on the early extinguishment of debt. These losses result from writing off
unamortized deferred financing costs and from prepayment penalties associated
with certain loans that were prepaid. Similarly, during 1996 the Company
recorded $0.7 million in extraordinary losses representing the early
extinguishment of debt related to the sale of the Patrick Henry Corporate Center
and to the refinancing of two loans.
(f) Cash Flows, Liquidity and Capital Resources
For the years ended December 31, 1998, 1997, and 1996, the Company
generated $54.8 million, $38.7 million, and $44.8 million, respectively, in cash
from operating activities, as shown in the accompanying Consolidated Statements
of Cash Flows in Item 8 hereto.
1998 Cash Flows
During 1998 the Company generated $54.8 million in cash flows from
operating activities, which is net of $0.4 million net negative impact from
changes in receivables, restricted cash and escrow deposits, deferred charges
and other assets, and accounts payable and other liabilities. The Company
invested $64.2 million in its existing properties in 1998 which included $11.7
million in the expansion/renovation of Washington Crown Center, $9.5 million in
the expansion/renovation of Patrick Henry Mall, $4.1 million in the Valley Mall
Redevelopment Project, and $16.5 million in mall shop tenant allowances for the
remaining projects. The company also invested $46.7 million in three acquired
properties not including $14.7 million of debt assumed in connection with the
Crossroads Mall and Greater Lewistown Plaza acquisitions and $4.5 million in
additional partnership units issued in 1998 related to Middletown Mall and
Greater Lewistown Plaza (see Notes 14 and 15). The Company also received $8.1
million in cash from the sale of Middletown Mall. The Company generated net
$52.0 million from its financing activities, which included (1) $465.0 million
from the 10-year mortgage loan with GE Capital Real Estate offset by the related
refinancing of $421.0 million of debt (see Note 5), (2) $46.7 million in
borrowings under the GECRE lines of credit that was used for property
acquisitions, (3) $22.0 million in new borrowings under the GECRE general line
of credit for general working capital purposes, (4) $10.5 million in
construction loan draws and other borrowings, (5) $9.9 million in loan paydowns
and principal amortization, (6) $16.6 million cash portion of extraordinary
losses on early extinguishment of debt, (7) $42.8 million paid in common and
preferred dividends, and (8) $3.8 million in Cash Flow Support. These financing
cash flows exclude $14.7 million of debt that was assumed as part of property
acquisitions and $4.5 million in issuance of partnership units as disclosed
above.
1997 Cash Flows
During 1997 the Company generated $38.7 million in cash from operating
activities, which is net of $9.2 million negative impact from changes in
receivables, deferred charges and other assets, and payables and other
liabilities. The Company invested $39.2 million in its existing properties and
related escrows; this included $15.3 million to complete Logan Valley mall
reconstruction and related tenant allowances, $5.3 in mall shop and anchor
tenant allowances other than Logan Valley, and $2.4 million in capitalized lease
acquisition costs. The Company also purchased Valley Mall in Hagerstown,
Maryland for $32.0 million as described in Note 14 to the Consolidated Financial
Statements. The Company generated $35.0 million from financing activities,
which included (1) $118.7 million net proceeds from the issuance of senior
preferred shares in July 1997 (see Note 6), (2) $33.3 million net reduction in
debt, plus $4.8 in debt issuance costs (3) $35.2 million of cash dividends and
distributions paid, and (4) $12.2 million to repurchase common shares held in
treasury. The $33.3 million net reduction in debt during 1997 consisted of:
$171.0 million new borrowings, less $6.2 million in related loan deposits and
reserves, from refinancing $161.8 million in existing loans on four malls; $17.1
million drawn under construction loans, primarily for Logan Valley Mall; $49.8
million in borrowings under lines of credit and $42.3 million repayments under
lines of credit; use of the preferred share proceeds to pay-off $42.2 million
of mortgages on three properties, $13.1 million in line of credit borrowings and
$3.0 million partial reduction of another mortgage loan; and $2.6 million of
scheduled principal amortization.
1996 Cash Flows
During 1996 the Company generated $44.8 million in cash from operating
activities, which is net of $4.4 million negative impact from changes in
accounts receivables, other assets, and accounts payable, $9.5 million in
proceeds from asset sales, $1.3 million from issuance of new shares under the
Dividend Reinvestment Plan, and $25.9 million in borrowings net of repayments
and debt issuance costs. The Company invested $51.5 million in its properties
which included $31.9 million for the Logan Valley Mall reconstruction and
expansion project and related tenant allowances, $4.4 million for anchor
allowances and expansions and $5.6 million for mall shop tenant allowances other
than Logan Valley, $2.2 million for leasing costs and commissions, and $7.4
million for other capitalized costs. The Company also paid $29.6 million in
dividends and distributions on its outstanding common shares and Operating
Partnership units at an annual rate of $0.80 per common share or Operating
Partnership unit. The $25.9 million of net borrowings in 1996 was comprised of
$30.7 million in borrowings under the Logan Valley Mall construction loan that
was obtained in 1995, $53.8 million in three refinancings, and $3.9 million in
draws under other loan or line of credit facilities; these increases were offset
by $3.2 million in scheduled debt amortization, $51.3 million repayments on the
refinanced debt, and $6.2 million of debt repaid related to the sale of Patrick
Henry Corporate Center and certain land out-parcels.
Liquidity and Capital Resources
The Company has significant ongoing capital requirements. The Company
believes that its cash generated from property operations and funds obtained
from property financings and general corporate borrowings will provide the
necessary funds on a short-term and long-term basis for its operating expenses,
interest expense on outstanding indebtedness and recurring capital expenditures
and tenant allowances, and all dividends to the shareholders necessary to
satisfy the REIT dividend distribution requirements under the Internal Revenue
Code (see Note 2 to the Consolidated Financial Statements). The Company
intends to pay regular quarterly dividends to its shareholders. However, the
Company's ability to pay dividends is affected by several factors, including
cash flow from operations, capital expenditures, and its ability to refinance
its maturing debt as described below. Dividends by the Company will be at the
discretion of the Board of Trustees and will depend on the cash available to the
Company, its financial condition, capital and other requirements, and such other
factors as the Trustees may consider.
Sources of capital for non-recurring capital expenditures, such as
major building renovations and expansions, as well as for scheduled principal
payments, including balloon payments on the outstanding indebtedness, are
expected to be obtained from additional Company or property financings and
refinancings, sale of non-strategic assets, additional equity raised in the
public or private markets, and from retained internally generated cash flows, or
from combinations thereof. The Company has commenced construction of an
expansion and redevelopment of Washington Crown Center and an expansion at
Valley Mall. The total cost of the two projects, including capitalized
construction overhead, interest, and tenant allowances, are estimated at $32
million and $27 million respectively, of which $12 million and $4 million,
respectively, had been incurred as of December 31, 1998. In addition to amounts
incurred at December 31, 1998, the Company is committed for future payments
under various construction purchase orders and certain leases. The Company has
secured through a bank lender a $26.8 million construction and three-year
permanent loan for the Washington Crown Center expansion and redevelopment; the
loan bears interest at LIBOR plus 1.90%, and $2.9 million was borrowed and
outstanding at December 31, 1998. For the Valley Mall expansion, GE Capital
Real Estate (GECRE) has agreed to enter into a loan for up to $26.0 million.
This $26.0 million loan will be part of the existing $100 million acquisition
line of credit with GECRE, but will be subject to a separate loan agreement that
is currently being prepared and will bear interest at LIBOR plus 3.0%. It is
anticipated the first construction draw under the GECRE loan will occur in
spring 1999.
Also, as more fully described in Note 5 to the Consolidated Financial
Statements, on August 28, 1998 the Company closed a $465 million 10-year
mortgage with GE Capital Real Estate ("GECRE"). The gross proceeds from the new
loan (the "GECRE Mortgage Loan") were used to refinance the $280.6 million
Kidder Mortgage Loans, the $110.0 million interim mortgage loan (see below), and
the $30.0 million secured term loan. The remaining proceeds were used largely
to establish escrows to fund the remaining expansion and redevelopment costs of
Patrick Henry Mall and Nittany Mall, and to fund closing costs, initial loan
reserves and prepayment penalties with respect to $200.0 million of the Kidder
Mortgage Loans and the $30.0 million secured term loan that were pre-paid prior
to their maturity dates. The prepayment penalties for the Kidder Mortgage Loans
and the $30 million term loan were approximately $16.6 million. In addition,
approximately $5.9 million of unamortized deferred financing costs related to
the Kidder Mortgage Loans and the $110 million interim mortgage loan were
written off. Both of these items were accounted for as an extraordinary loss on
early extinguishment of debt. The GECRE Mortgage Loan has a fixed stated
interest rate of 7.43% and is secured by cross-collateralized mortgages on 15 of
the malls. In connection with the GECRE Mortgage Loan, in November 1997, the
Company made a $6.0 million interest-bearing good-faith deposit with GECRE, and
in July and August 1998, the Company made $12.2 million in non-interest bearing
rate lock deposits with GECRE. These deposits were refunded at closing.
As of December 31, 1998 the scheduled principal payments on all debt
are $2.8 million, $5.5 million, $78.7 million, $40.4 million, and $12.7 million
for the years ended December 31, 1999 through 2002, respectively, and $529.9
million thereafter. The Company expects to refinance or extend the majority of
the maturities over the next five years through additional Company financings
and from refinancing the maturing loans. The Company's ability to refinance or
extend these loans on or before their due dates depends on the level of income
generated by the properties, prevailing interest rates, credit market trends,
and other factors that may be in effect at the time of such refinancings or
extensions and there is no assurance that such refinancings or extensions will
be executed. The ratios of the Company's EBITDA to interest paid on total
indebtedness (exclusive of capitalized interest and interest income) for the
years ended December 31, 1998, 1997, and 1996 were 2.14 to 1, 2.04 to 1, and
2.08 to 1, respectively.
As further described in Note 8 to the Consolidated Financial
Statements, Crown Investments and its subsidiary and Frank J. Pasquerilla have
been granted rights, subject to certain restrictions, whereby they may redeem
part or all of their common partnership units for common shares, on a one-to-one
basis, or cash at a price equal to the value of the Company's common shares.
Crown Investments has pledged substantially all of its limited partnership units
as collateral for a loan it has received from an unrelated third party.
(g) Economic Trends
Because inflation has remained relatively low during the last three
years it has had little impact on the operations of the Company during this
period. Tenant leases also provide, in part, a mechanism to help protect the
Company during highly inflationary periods. As operating costs increase, leases
permit a pass-through of the common area maintenance and other operating costs,
including real estate taxes and insurance, to the tenants and therefore, the
tenants will absorb part of this increased operating cost. Most of the leases
provide for percentage rent after a certain minimum sales level is achieved.
Thus, during highly inflationary periods, when retail sales at the Malls
increase, the Company should receive additional rental income through percentage
rent increases, partially offsetting the effect of inflation.
Year 2000
Management of the Company has made a preliminary and partial
assessment of the so-called "Year 2000 problem" which relates to the ability of
electronic equipment, computer hardware and software to properly recognize date
sensitive information on or after January 1, 2000. Systems that do not properly
recognize such information could generate erroneous data or cause a system to
fail. The Company's assessment and corrective action efforts to date have
focused primarily on internal equipment and software used by the Company. Based
on this preliminary assessment, management estimates that the cost to replace
certain electronic and computer equipment and to reprogram certain software will
approximate $300 thousand. Beginning in 1994, the Company has made significant
investments in upgraded computer hardware and third-party software operating and
financial systems; management believes such new systems are Year 2000 capable
based on communications with the hardware and software vendors and on limited
testing. Management also believes that the potential impact and disruption of
Year 2000 on internally used equipment and software, to the extent not replaced
or repaired by 2000, should not result in direct material adverse effects on the
Company's ability to operate. Contributing to this preliminary assessment is
the relatively passive nature of the Company's business of leasing space to
retailers.
However, the Company may be impacted in a number of direct and
indirect ways if its suppliers and customers (tenants and the ultimate
consumers), or if the general United States or world economies, are disrupted
from the impact of Year 2000. Such effects could include, for example,
temporary loss of utilities and telecommunications services which could prevent
the shopping malls or tenants from maintaining normal sales hours, disruption of
financial services such as processing of checks or credit card transactions,
adverse effects on the manufacture and delivery of goods to tenants to be sold
in the Company's mall properties (many such goods are produced outside the
United States), and the inability of tenants' systems to process sales and
control inventories. It is possible that these effects could reduce tenant
sales and thus reduce percentage rents received by the Company. It is also
possible that some tenants may be unable to remain in business and thus cease
paying rents. Some commentators on Year 2000 have suggested that Year 2000
issues could cause, or contribute to, an economic recession which could affect
the overall levels of tenant sales, future leasing activity, interest rates, and
other general economic factors that could adversely impact the Company. While
management of the Company is unable to estimate the magnitude of all these
effects, they could have a material adverse effect on the future results of
operations and financial condition of the Company.
Management is continuing to complete its efforts to identify non-
compliant equipment and systems, and to correct and/or replace such systems.
Management is also beginning to develop contingency plans for both its
headquarters and mall properties. These contingency plans will also address
certain potential external effects on the Company, including possible loss of
utilities. No assurance can be given that these contingency plans will be
sufficient to mitigate all Year 2000 effects that could impact the Company.
(h) Forward Looking Statements
This Annual Report on Form 10-K contains certain forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Act of 1934, as amended. Such
statements are based on assumptions and expectations, which may not be realized
and are inherently subject to risks and uncertainties, many of which cannot be
predicted with accuracy. Future events and actual results, financial and
otherwise, may differ from the results discussed in the forward-looking
statements. Risk and other factors that might cause differences, some of which
could be material, include, but are not limited to, economic and credit market
conditions, the ability to refinance maturing indebtedness, the impact of
competition, consumer buying trends, financing and development risks,
construction and lease-up delays, cost overruns, the level and volatility of
interest rates, the rate of revenue increases versus expense increases and
financial stability of tenants within the retail industry, as well as other
risks listed from time to time in the Company's reports filed with the
Securities and Exchange Commission or otherwise publicly disseminated by the
Company. Although management believes that the assumptions made in connection
with the forward-looking statements are reasonable, there are no assurances that
the assumptions and expectations will prove to have been correct due to the
foregoing and other factors.
Item 7 (a) Quantitative and Qualitative Disclosures About Market Risk
Accounts receivable and accounts payable carrying amounts approximates
the fair value of the accounts receivable and accounts payable balances,
respectively at December 31, 1998.
In the ordinary course of business, the Company is exposed to risks
that increases in interest rates may adversely affect funding costs associated
with $71.0 million of variable-rate debt, which represents 10.6% of total long-
term debt. The following table presents principal cash flows and related
weighted average interest rates by expected maturity dates (dollars in
millions):
December 31, 1998
2004 and
1999 2000 2001 2002 2003 Thereafter
Long-term debt
Fixed rate debt $2.8 $5.5 $10.6 $40.4 $9.8 $529.9
Average interest rate 7.78% 7.46% 7.52% 8.09% 7.34% 7.61%
Variable rate debt $0.0 $0.0 $68.1 $0.0 $2.9 $0.0
Average interest rate - - 7.19% - 6.98% -
Interest rate risk for the Company decreased in 1998 due to a
reduction in variable rate debt from $141.7 million at December 31, 1997 to
$71.0 million at December 31, 1998. The Company's variable rate debt is based
primarily on LIBOR, and the Company will incur increasing interest costs if
LIBOR increases. The Company may enter into interest rate derivative
instruments to mitigate such risks in the future, but as of December 31, 1998,
the Company has no such instruments outstanding.
Item 8. Financial Statements and Supplementary Data
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Trustees and Shareholders of
Crown American Realty Trust:
We have audited the accompanying consolidated balance sheets of Crown American
Realty Trust (a Maryland real estate investment trust) and subsidiaries as of
December 31, 1998 and 1997, and the related consolidated statements of
operations, shareholders' equity and cash flows for each of the three years in
the period ended December 31, 1998. These consolidated financial statements and
the schedules referred to below are the responsibility of the management of
Crown American Realty Trust. Our responsibility is to express an opinion on
these financial statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Crown
American Realty Trust and subsidiaries, as of December 31, 1998 and 1997, and
the results of their operations and their cash flows for each of the three years
in the period ended December 31, 1998, in conformity with generally accepted
accounting principles.
As explained in Note 2 of the consolidated financial statements, effective
January 1, 1998, the Company changed its method of accounting for contingent
rent.
Our audit of Crown American Realty Trust and subsidiaries was made for the
purpose of forming an opinion on the basic financial statements taken as a
whole. The schedules listed in the index of financial statements are presented
for purposes of complying with the Securities and Exchange Commission's rules
and are not part of the basic financial statements. These schedules have been
subjected to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, are fairly stated in all material respects in
relation to the basic financial statements taken as a whole.
/s/ ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
February 19, 1999
<TABLE>
<CAPTION>
CROWN AMERICAN REALTY TRUST
Consolidated Statements of
Operations
Year Ended December 31,
1998 1997 1996
(in thousands, except
per share data)
<S> <C> <C> <C>
Rental operations:
Revenues:
Minimum rent $ 93,521 $ 81,044 $ 83,441
Percentage rent 7,191 6,544 6,489
Property operating cost recoveries 32,570 30,513 30,975
Temporary and promotional leasing 9,661 9,312 8,411
Net utility income 2,991 2,806 2,559
Business interruption insurance 830
Miscellaneous income 814 775 1,267
Net 146,748 130,994 133,972
Property operating costs:
Recoverable operating costs 43,755 39,467 41,324
Property administrative costs 2,533 2,349 2,068
Other operating costs 2,262 1,963 3,065
Depreciation and amortization 41,712 38,311 35,315
Net 90,262 82,090 81,772
Net 56,486 48,904 52,200
Other expenses:
General and administrative 5,066 4,698 4,135
Interest 45,417 42,663 45,337
Net 50,483 47,361 49,472
Net 6,003 1,543 2,728
Property sales and adjustments:
Gain on sale of outparcel land 1,210 1,051 3,425
Gain on asset sales 2,351
Net 1,210 1,051 5,776
Income before cumulative effect of
accounting change, extraordinary items
and minority interest 7,213 2,594 8,504
Cumulative effect of change in accounting (1,703)
method
Extraordinary loss on early (22,512) (2,331) (718)
extinguishment of debt
Income (loss) before minority interest in
Operating Partnership (17,002) 263 7,786
Minority interest in (income) loss of
Operating Partnership 8,363 1,644 (1,979)
Net income (loss) (8,639) 1,907 5,807
Dividends on preferred shares (13,750) (6,646)
Net income (loss) applicable to common $(22,389) $ (4,739) $ 5,807
shares
Per common share information:
Basic EPS
Income (loss) before extraordinary items $ (0.18) $ (0.11) $ 0.23
Cumulative effect of a change in (0.05)
accounting method
Extraordinary items (0.62) (0.06) (0.02)
Net income (loss) $ (0.85) $ (0.17) $ 0.21
Weighted average shares outstanding (000) 26,393 27,228 27,515
Diluted EPS
Income (loss) before extraordinary items $ (0.18) $ (0.11) $ 0.23
Cumulative effect of a change in (0.05)
accounting method
Extraordinary items (0.62) (0.06) (0.02)
Net income (loss) $ (0.85) $ (0.17) $ 0.21
Weighted average shares outstanding (000) 26,393 27,228 27,519
The accompanying notes are an integral part of these statements.
</TABLE>
<TABLE>
<CAPTION>
CROWN AMERICAN REALTY TRUST
Consolidated Balance Sheets
December 31,
1998 1997
(in thousands, except share
and per share data)
<S> <C> <C>
Assets
Income-producing properties:
Land $ 145,226 $ 132,055
Buildings and improvements 946,654 852,674
Deferred leasing and other charges 42,469 39,912
Net 1,134,349 1,024,641
Accumulated depreciation and amortization (347,649) (315,125)
Net 786,700 709,516
Other Assets:
Investment in joint venture 5,799 5,808
Cash and cash equivalents 13,512 9,472
Restricted cash and escrow deposits 15,005 14,237
Tenant and other receivables 17,430 16,986
Deferred charges and other assets 30,842 29,930
Net $ 869,288 $ 785,949
Liabilities and Shareholders' Equity
Liabilities:
Debt on income-producing properties $ 669,971 $ 541,713
Accounts payable and other liabilities 38,076 29,132
Net 708,047 570,845
Minority interest in Operating Partnership 11,724 25,334
Commitments and contingencies
Shareholders' equity:
Non-redeemable senior preferred shares, 11.00%
cumulative, $.01 par value, 2,500,000 shares
issued and outstanding 25 25
Common shares, par value $.01 per share,
120,000,000 shares authorized, 27,741,542, and
27,727,212 shares issued at
December 31, 1998 and 1997, respectively 277 277
Additional paid-in capital 314,252 308,571
Accumulated deficit (150,385) (106,881)
Net 164,169 201,992
Less common shares held in treasury at cost,
1,534,398 and 1,251,898 shares at
December 31, 1998 and 1997, respectively (14,652) (12,222)
149,517 189,770
$ 869,288 $ 785,949
The accompanying notes are an integral part of these statements.
</TABLE>
<TABLE>
<CAPTION>
CROWN AMERICAN REALTY TRUST
Consolidated Statements of Cash Flows
Year Ended December 31,
1998 1997 1996
(in thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (8,639) $ 1,907 $ 5,807
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Minority interest in Operating Partnership (8,363) (1,644) 1,979
Equity earnings in joint venture (360) (528) (575)
Depreciation and amortization 48,411 45,886 43,713
Gain on asset sales (2,351)
Extraordinary loss on early extinguishment 22,512 2,331 718
of debt
Cumulative effect of a change in accounting 1,703
method
Net changes in:
Tenant and other receivables (2,147) 520 (1,386)
Restricted cash and escrow deposits (768) (11,013) 2,925
Deferred charges and other assets (9,393) 3,156 (1,616)
Accounts payable and other liabilities 11,878 (1,868) (4,366)
Net cash provided by operating activities 54,834 38,747 44,848
Cash flows from investing activities:
Investment in income properties (64,223) (39,152) (51,482)
Acquisitions of enclosed malls, net of debt (46,720) (31,981)
assumed
Proceeds from asset sales 8,148 9,452
Distributions from joint venture 150 300
Net cash (used in) investing activities (102,795) (70,983) (41,730)
Cash flows from financing activities:
Net proceeds from issuance of senior 118,671
preferred shares
Net proceeds from exercise of share options
and from dividend reinvestment plan 117 921 1,257
Proceeds from issuance of debt, net of loan
deposits prepayment penalties 576,257 231,723 88,499
Cost of issuance of debt (6,806) (4,774) (1,804)
Debt repayments (476,108) (265,002) (60,796)
Dividends and distributions paid on common
shares and partnership units (29,063) (29,287) (29,564)
Dividends paid on senior preferred shares (13,750) (5,921)
Purchase of common shares held in treasury (2,430) (12,222)
Cash flow support payments 3,784 853
Net cash provided by (used in) financing 52,001 34,962 (2,408)
activities
Net increase in cash and cash equivalents 4,040 2,726 710
Cash and cash equivalents, beginning of 9,472 6,746 6,036
period
Cash and cash equivalents, end of period $ 13,512 $ 9,472 $ 6,746
Interest paid (net of amounts capitalized) $ 42,674 $ 39,351 $ 41,480
Interest cost capitalized $ 2,192 $ 2,463 $ 2,943
Non-cash financing activities:
Issuance of partnership units related to the
purchase of Middletown Mall and Greater
Lewistown Center $ 4,479 $ $
Cash flow support credited to minority
interest and paid-in capital
that was prefunded in 1995 $ $ 1,889 $ 2,889
Difference between preferred dividends $ $ 725 $
accrued versus paid
Debt assumed as part of properties acquired $ 14,718 $ $
The accompanying notes are an integral part of these statements.
</TABLE>
<TABLE>
<CAPTION>
CROWN AMERICAN REALTY TRUST
Consolidated Statements of Shareholders' Equity
Common Senior
Shares Preferred Common
Outstanding Shares Shares
(in thousands)
<S> <C> <C> <C>
Balance, December 31, 1995 27,450 $ $ 274
Shares issued under dividend
reinvestment plan 163 2
Capital contributions from Crown
Investments Trust:
Cash flow support payments
Transfer in (out) of limited
partner's interest in the Operating
Partnership
Net income
Dividends paid
Balance, December 31, 1996 27,613 276
Issuance of Preferred Shares 25
Common Shares issued under
dividend reinvestment plan 114 1
Common Shares purchased and
held in treasury (1,252)
Transfer in (out) of limited
partners' interest in the Operating
Partnership
Capital contributions from Crown
Investments Trust:
Cash flow support
Net income
Dividends paid and accrued
Balance, December 31, 1997 26,475 25 277
Issuance of Preferred Shares
Common Shares issued under
dividend reinvestment plan 14
Common Shares purchased and
held in treasury (282)
Transfer in (out) of limited
partners' interest in the Operating
Partnership
Capital contributions from Crown
Investments Trust:
Cash flow support
Net income (loss)
Dividends paid and accrued
Balance December 31, 1998 26,207 $ 25 $ 277
Retained
Earnings Common
Additional (Accumu- Shares
Paid-In lated Held in
Capital Deficit) Treasury Total
(in thousands)
Balance, December 31, 1995 $ 181,337 $ (64,200) $ $ 117,411
Shares issued under dividend
reinvestment plan 1,225 1,257
Capital contributions from Crown
Investments Trust:
Cash flow support payments 2,152 2,152
Transfer in (out) of limited partner's
interest in the Operating Partnership (539) (539)
Net income 5,807 5,807
Dividends paid (22,012) (22,012)
Balance, December 31, 1996 184,205 (80,405) 104,076
Issuance of Preferred Shares 118,646 118,671
Common Shares issued under
dividend reinvestment plan 920 921
Common Shares purchased and
held in treasury (12,222) (12,222)
Transfer in (out) of limited partners'
interest in the Operating Partnership 2,029 2,209
Capital contributions from Crown
Investments Trust:
Cash flow support 2,771 2,771
Net income 1,907 1,907
Dividends paid and accrued (28,383) (28,383)
Balance, December 31, 1997 308,571 (106,881) (12,222) 189,770
Common Shares issued under
dividend reinvestment plan 117 117
Common Shares purchased and
held in treasury (2,430) (2,430)
Transfer in (out) of limited partners'
interest in the Operating Partnership 2,817 2,817
Capital contributions from Crown
Investments Trust:
Cash flow support 2,747 2,747
Net (loss) (8,639) (8,639)
Dividends paid and accrued (34,865) (34,865)
Balance December 31, 1998 $ 314,252 $(150,385) $ (14,652) $149,517
The accompanying notes are an integral part of these statements.
CROWN AMERICAN REALTY TRUST
Notes to Consolidated Financial Statements
NOTE 1 - ORGANIZATION, NATURE OF OPERATIONS, AND BASIS OF PRESENTATION
Organization
Crown American Realty Trust (the "Company") was formed on May 14, 1993 as a
Maryland real estate investment trust (a "REIT") to acquire and operate
substantially all of the enclosed shopping mall properties and two office
buildings (the "Properties") owned by Crown American Associates ("Crown
Associates"), formerly Crown American Corporation. Crown Associates is a wholly-
owned subsidiary of Crown Holding Company ("Crown Holding"). Crown Associates,
which was founded in 1950, was engaged principally in the development,
acquisition, ownership and management of enclosed shopping malls and, to a
lesser extent, strip shopping centers, hotels and office buildings. The Company
raised approximately $405 million in equity through an initial public offering
of approximately 25.5 million shares, which occurred on August 17, 1993, and
used the proceeds to purchase an initial 78% general partnership interest in
Crown American Properties, L.P. (the "Operating Partnership"), a partnership
which was formed just prior to consummation of the offering to own and operate
the Properties. These proceeds, along with new borrowings, were used by the
Operating Partnership to retire debt related to the Properties.
Simultaneously with the public offering, Crown Associates and an affiliate
transferred the Properties and the management operations into either the
Company, the Operating Partnership, or Crown American Financing Partnership (the
"Financing Partnership"), a partnership which is 99.5% owned by the Operating
Partnership and 0.5% owned by the Company.
The limited partnership interest in the Operating Partnership and the 1.6
million shares in the Company received for two malls transferred in 1993 are
currently held by Crown Investments Trust ("Crown Investments"), by Crown
American Investment Company (a subsidiary of Crown Investments), and by members
of the Pasquerilla family. As described in Notes 14 and 15, the Company
acquired two properties in 1995, one property in 1997, three properties in 1998,
and sold one mall in 1998.
As further described in Note 6, on July 3, 1997 the Company completed an
offering of 2,500,000 11.00% non-convertible senior preferred shares at an
initial offering price of $50.00 per share.
Nature of Operations
The Company is a fully-integrated real estate company primarily engaged in the
ownership, operation, management, leasing, acquisition, development,
redevelopment, expansion, renovation and financing of enclosed shopping malls.
The Company's revenues are primarily derived under real estate leases with
national, regional and local department store and other retailing companies.
The Company's top five tenants in terms of total revenues are as follows:
Percent of Total Revenues
1998 1997
Sears Roebuck and Co. 5.8% 7.5%
J C Penney, Inc. 4.3% 5.2%
The Limited Stores, Inc. 3.9% 4.6%
Venator Group, Inc. 3.5% 3.8%
The Bon-Ton Stores, Inc. 3.3% 3.4%
Amounts for Venator Group, Inc. includes Woolworth, Afterthoughts, Kinney,
Footlocker, Lady Footlocker, Champs, and Northern Reflections.
The Properties currently consist of: (1) 26 enclosed shopping malls (and
adjacent leased outparcels and strip centers at certain of the enclosed malls)
located in Pennsylvania, New Jersey, Maryland, Tennessee, North Carolina, West
Virginia, Virginia and Georgia, (2) a 50% general partnership interest in Palmer
Park Mall Venture, which owns Palmer Park Mall located in Easton, Pennsylvania,
(3) a non-enclosed strip shopping center located in Lewistown, PA, (4)
Pasquerilla Plaza, an office building in Johnstown, Pennsylvania, which serves
as the headquarters of the Company and is partially leased to other parties, and
(5) a parcel of land and building improvements located in Pennsylvania (under
ground lease with a purchase option) sub-leased to a department store chain.
The Company also owns approximately 80 acres of land adjacent to a number of the
mall properties which are held for development, ground lease, or sale to third
parties.
As the owner of real estate, the Company is subject to risks arising in
connection with the underlying real estate, including defaults under or
non-renewal of tenant leases, tenant bankruptcies, competition, inability to
rent unleased space, failure to generate sufficient income to meet operating
expenses, as well as debt service, capital expenditures and tenant improvements,
environmental matters, financing availability and changes in real estate and
zoning laws. The success of the Company also depends upon certain key
personnel, the Company's ability to maintain its qualification as a REIT,
compliance with the terms and conditions of the Mortgage Loans and other debt
instruments, and trends in the national and local economy, including income tax
laws, governmental regulations and legislation, and population trends.
Basis of Presentation
The accompanying consolidated financial statements of the Company include all
accounts of the Company, its wholly-owned subsidiaries, and its majority-owned
subsidiary, the Operating Partnership. The Operating Partnership directly owns
seven malls, the 50% joint venture interest in Palmer Park Mall, the Corporate
headquarters building, and the Westgate anchor pad. All remaining properties
are owned by seven partnerships and limited liability companies that are either
99.5% or 100.0% owned by the Operating Partnership. The remaining 0.5%
interests in these second-tier entities are owned by the Company through its
wholly-owned subsidiaries. The Operating Partnership also has all paid
employees and manages all properties except the Palmer Park Mall and the
Westgate anchor pad. Other than its ownership interests in its subsidiaries,
the Company owns no other assets and has no other business activities. The
Company is the sole general partner in the Operating Partnership, and at
December 31, 1998 the Company held 100% of the preferred partnership interests
(see Note 6) and 72.47% of the common partnership interests. All significant
intercompany amounts have been eliminated.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Certain reclassifications have been made to prior year amounts to conform to the
current year presentation.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Change in Accounting Method
On May 21, 1998 the Emerging Issues Task Force ("EITF") discussed Issue 98-9
"Accounting for Contingent Rent" and reached a consensus that lessors should
defer the accounting recognition of contingent rent, such as percentage rent,
until the specific tenant sales breakpoint target is achieved. The Company's
previous accounting method, which was fully acceptable under Generally Accepted
Accounting Principles ("GAAP"), recognized percentage rent on a pro-rata basis
when a tenant's achievement of its sales breakpoint was considered probable.
This EITF consensus can be implemented on a prospective basis, or retroactively
as a change in accounting method.
During the third quarter of 1998, the Company implemented this EITF consensus as
a change in accounting method and accordingly recorded as of January 1, 1998 a
$1.7 million cumulative effect adjustment representing the change in prior
years' percentage rent income based on the new method of accounting. The impact
on percentage rent income of the new method for the year ended December 31, 1998
was a reduction of percentage rents of about $12,000 from what would have been
reported under the Company's previous method of accounting. The impact on the
fourth quarter of 1998 was an increase in percentage rent of approximately
$66,000 over what would have been reported. The impact on the previously
reported first, second, and third quarters was immaterial.
Income-Producing Properties
Income-producing properties are recorded at the lower of cost or net realizable
value. Included in such costs are acquisition, development, construction,
tenant improvements, interest incurred during construction, certain capitalized
improvements and replacements and certain allocated overhead. Allocated
overhead is computed primarily on the basis of time spent by certain departments
in various operations and represents costs which meet the definition of
"indirect costs" in Statement of Financial Accounting Standards No. 67,
"Accounting for Costs and Initial Rental Operations of Real Estate Projects."
Depreciation on buildings and improvements is provided utilizing the
straight-line method over estimated useful lives of 10 to 45 years resulting in
an average composite life of approximately 30 years. Depreciation on tenant
improvements is provided utilizing the straight-line method over the life of the
related leases.
With respect to assets held for the long-term production of income, the Company
assesses impairment based on whether the estimated future net cash flows
expected to be generated by the asset (undiscounted and without interest) is in
excess of the net book value of the asset. If a property held for long term
production of income is impaired, its basis is adjusted to fair value. With
respect to assets held for sale, the Company assesses impairment based on
whether the net realizable value (estimated fair value sales price less direct
cost to sell) is in excess of the net book value of the asset. If a property
held for sale is impaired, its net book value is adjusted to fair value less
estimated direct cost to sell.
Certain improvements and replacements are capitalized when they extend the
useful life, increase capacity, or improve the efficiency of the asset. All
other repair and maintenance items are expensed as incurred. Total repairs and
maintenance expenses were $9.3 million, $8.5 million, and $9.2 million for the
years ended December 31, 1998, 1997, and 1996, respectively.
Leasing charges, including tenant construction allowances and direct costs
incurred by the Company to obtain a lease, are deferred and amortized over the
related leases or terms appropriate to the expenditure. Substantially all of
the income-producing properties have been pledged to secure the Company's
currently outstanding debt and the $155.6 million in lines of credit ($68.1
million borrowed under the lines of credit as of December 31, 1998).
Interest and Financing Costs
Interest costs are capitalized related to income-producing properties under
construction, to the extent such assets qualify for capitalization. Total
interest capitalized was $2.2 million, $2.5 million, and $2.9 million for the
years ended December 31, 1998, 1997, and 1996, respectively. Interest expense
includes amortization of deferred financing costs related to completed
financings (see Note 3) and is net of miscellaneous interest income on cash and
escrow deposit balances aggregating $1.3 million, $1.5 million, and $0.5
million, for the years ended December 31, 1998, 1997, and 1996, respectively.
Financing costs are based on actual costs incurred in obtaining the financing
and are deferred and amortized as part of interest expense over the term of the
related debt instrument. Costs incurred for financings which are not completed
are expensed as part of interest costs. Unamortized financing costs related to
debt that is extinguished early is written off as an extraordinary item.
Revenue Recognition
The Company, as a lessor, has retained substantially all of the risks and
benefits of ownership and accounts for its leases as operating leases. Minimum
rents are recognized on a straight-line basis; as such, the rental revenues for
leases which contain rent abatements and contractual increases are recognized on
a straight-line basis over the initial term of the related lease. Property
operating cost recoveries from tenants of common area maintenance, real estate
taxes, and other recoverable costs are recognized in the period the expenses are
incurred. These recoveries also include certain capital expenditures that are
recovered from the tenants in the period the depreciation is recognized.
Income Taxes
The Company elected to be taxed as a Real Estate Investment Trust (REIT) under
Sections 856 through 860 of the Internal Revenue Code of 1986 (the "Code"),
commencing with its first taxable year ended December 31, 1993, and intends to
conduct its operations so as to continue to qualify as a REIT under the Code.
As a REIT, the Company generally will not be subject to Federal or state income
tax on its net income that it currently distributes to shareholders.
Qualification and taxation as a REIT depends on the Company's ability to meet
certain dividend distribution tests, share ownership requirements, and various
qualification tests prescribed in the Code.
The Company's taxable income (loss) (before the dividends paid deduction) for
the years ended December 31, 1998, 1997, and 1996 was approximately $(6.4)
million, $1.8 million, and $2.1 million, respectively. These amounts differ
significantly from net income (loss) as reported in the Company's consolidated
financial statements for the same periods. In order to maintain REIT status,
the Company must distribute to its shareholders at least 95% of its taxable
income in the form of deductible dividends. This required distribution is
significantly less than the amounts actually distributed each year since the
Company elected REIT status in 1993.
If the Company fails to qualify as a REIT in any taxable year, the Company will
be subject to Federal and state income taxes (including any applicable
alternative minimum tax) on its taxable income at regular corporate rates. Even
if the Company qualifies for taxation as a REIT, the Company may be subject to
certain state and local taxes on its income and property and to Federal income
and excise taxes on its undistributed income.
The annual amount and the federal tax treatment of dividends paid on common
shares were as follows:
Total Paid Current
Per Common Taxable Non-Taxable
Share Dividends Return of Capital
Year ended December 31, 1998 $0.80 0% 100%
Year ended December 31, 1997 $0.80 0% 100%
Year ended December 31, 1996 $0.80 44% 56%
The decrease in the taxable portion of the 1998 and 1997 dividends results from
the allocation of taxable income first to the preferred share dividends with any
remainder allocable to the common share dividends. During the year ended
December 31, 1998 the Company paid dividends of $5.50 per preferred share, all
of which was tax deferred return of capital. During the year ended December 31,
1997, the Company paid dividends of $2.3681 per preferred share, all of which
was current taxable income.
Investment in Joint Venture
The Company's 50% joint venture investment in Palmer Park Mall Venture, which
owns Palmer Park Mall (not managed by the Company), is accounted for under the
equity method. As such, earnings of the joint venture are reflected in
miscellaneous income in the period earned and distributions of the joint venture
are reflected as a reduction in the carrying amount of the investment. The
investment amount in excess of the underlying net assets, net of accumulated
amortization, is $4.2 million at December 31, 1998, with a remaining
amortization period of approximately 12 years. The Company has guaranteed $10.0
million of the total $20.0 million of debt owed by the joint venture.
Cash and Cash Equivalents
Cash and cash equivalents includes all unrestricted cash and cash equivalent
investments with original maturities of three months or less.
Net Income (Loss) Per Share
During 1997 the Company adopted Statement of Financial Accounting Standards
("SFAS") No. 128, Earnings Per Share. Under SFAS No. 128, basic income (loss)
per common share is computed by dividing net income (loss) applicable to common
shares, as shown in the Consolidated Statements of Operations, by the weighted
average number of common shares outstanding for the year. Diluted income (loss)
per share is computed the same way except that the weighted average number of
common shares outstanding is increased, using the treasury stock method, for the
assumed exercise of options under the Company's share incentive plans, which are
the Company's only dilutive securities. Because no anti-dilution is permitted
under SFAS No. 128, diluted and basic EPS for 1998 and 1997 are identical.
Below is the computation of basic and diluted EPS for the year ended December
31, 1996 (in thousands, except per share amounts):
Common Per Share
Income Shares Amount
Basic EPS:
Income available to common shareholders $ 5,807 27,515 $ .21
Effect of dilutive securities:
Stock options - 4 .00
Diluted EPS:
Income available to common shareholders $ 5,807 27,519 $ .21
The calculation of diluted earnings per share for 1998 and 1997 would have
included approximately 115,000 shares and 20,000 shares, respectively, for the
assumed exercise of options under the Company's share incentive plans, except
that no anti-dilution is permitted under SFAS No. 128.
New Accounting Pronouncements
In the first quarter of 1998, the Company adopted Statement of Financial
Accounting Standards ("FAS") No. 130, Reporting Comprehensive Income, which
requires companies to report all changes in equity during a period, except those
resulting from investment by owners and distribution to owners, in a financial
statement for the period in which they are recognized. FAS No.130 has no impact
on the Company's financial statements, as the Company's comprehensive income
(loss) is equal to its net income (loss) at December 31, 1998, as the Company
has just one reportable operating segment. In the fourth quarter of 1998, the
Company adopted FAS No. 131, Disclosures About Segments of an Enterprise and
Related Information. This new standard has not had a material effect on the
Company's consolidated financial statements.
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities. The Statement establishes accounting and reporting
standards requiring that every derivative instrument (including certain
derivative instruments embedded in other contracts) be recorded in the balance
sheet as either an asset or liability measured at its fair value. FAS No. 133 is
effective for fiscal years beginning after June 15, 1999. Had the Company
applied this standard currently, the effect on the Company's results of
operations at December 31, 1998 would be immaterial.
NOTE 3 - DEFERRED CHARGES AND OTHER ASSETS
Deferred charges, net of amortization, and other assets are summarized as
follows (in thousands):
December 31, 1998 December 31, 1997
Deferred operating covenant costs $ 5,253 $ 7,883
Deferred financing costs 8,721 10,667
Prepaid expenses and miscellaneous
receivables 12,538 7,278
Furniture, fixtures, equipment, and other 4,330 4,102
Net $ 30,842 $ 29,930
Deferred Operating Covenant Costs
During fiscal year 1991, approximately $23 million was paid to three anchor
tenants with respect to leases at ten of the malls and in 1992 an additional $4
million was paid in order to obtain operating covenants (a covenant requiring
the anchor, among other things, to maintain operations in certain of the
Properties for the duration of the lease period) and to extend the terms of
their leases beyond fiscal year 2000. In April 1993, an additional $0.2 million
was paid to another tenant to obtain similar rights. These costs were
capitalized and are being amortized over the life of the operating covenants
with the amortization recorded as a reduction of minimum rent. Amortization
was $2.6 million, $2.6 million, and $2.6 million, for the years ended December
31, 1998, 1997, and 1996, respectively.
In addition, one of these tenants has exercised its option to require the
Company to expand and renovate certain of the leased premises, at the Company's
expense, and to reimburse the tenant for fixtures allowances, which together
aggregate approximately $9.0 million. As of December 31, 1998, $8.1 million of
these costs have been incurred and capitalized in the financial statements with
the remainder expected to be incurred in 1999.
Deferred Financing Costs
Deferred financing costs, net of accumulated amortization, at December 31, 1998,
consists of approximately $5.2 million related to the $465 million mortgage debt
refinancing with GECC in August, 1998 and $3.5 million for new debt obtained
after the formation of the Company. Amortization of deferred financing costs
was $2.7 million, $3.3 million, and $3.9 million for the years ended December
31, 1998, 1997 and 1996, respectively. Deferred financing costs written off as
part of extraordinary losses on early extinguishment of debt were $5.9 million,
$1.6 million, and $0.4 million for the years ended December 31, 1998, 1997, and
1996, respectively. Deferred financing costs incurred and capitalized were $6.8
million, $4.8 million, and $1.8 million for the years ended December 31, 1998,
1997, and 1996, respectively.
NOTE 4 - INSURED FIRE AT MALL
On December 16, 1994 a fire occurred at the Logan Valley Mall located in
Altoona, Pennsylvania. The fire destroyed 44 small shops aggregating 148,800
square feet of gross leasable space and also affected three additional small
shops containing approximately 18,000 square feet of gross leasable space. The
net book value of the destroyed assets approximated $3.5 million. The Company
settled the property damage insurance claim with its insurance company in the
third quarter of 1995 for $15.9 million. The difference between the amount
received and the net book value of destroyed assets and the related demolition
and clean up costs was $11.2 million, which was recorded as an extraordinary
gain in 1995. The Company also recorded $0.8 million and $1.9 million in
business interruption insurance, during the years ended December 31, 1996 and
1995, respectively, which is included in revenues. The business interruption
insurance coverage expired in May 1996. Because of the business interruption
insurance coverage, the fire had no material impact on 1996, 1995 and 1994
results of operations. During 1995 the Company started the reconstruction and
expansion of the fire-damaged mall; the entire construction project was
completed in August 1997 and cost approximately $68 million, including tenant
allowances. The project costs were partially funded from a construction loan
obtained from a bank consortium, which aggregated $51.4 million by November 1997
when it was refinanced with a new loan with GE Capital Real Estate (see Note 5
to the Consolidated Financial Statements).
NOTE 5 - DEBT ON INCOME-PRODUCING PROPERTIES
Debt on income-producing properties consisted of the following (in thousands):
December 31, 1998 December 31, 1997
Mortgage loans $ 465,000 $ 280,637
Permanent loans 133,960 229,417
Construction loans 2,932 1,659
Secured term loans and lines of credit 68,079 30,000
Net $ 669,971 $ 541,713
Mortgage Loans
Concurrently with the offering of shares of the Company in 1993, the Financing
Partnership borrowed an aggregate $300 million in mortgage debt through Kidder
Peabody Mortgage Capital Corporation (collectively, the "Kidder Mortgage
Loans"). In connection with obtaining a construction loan for rebuilding and
expanding Logan Valley Mall, in December 1995 the Company repaid $19.4 million
of the Kidder Mortgage Loans in order to release the Logan Valley Mall from the
Kidder Mortgage Loans and Financing Partnership. No prepayment penalty was
incurred. On August 28, 1998, the Company closed a $465 million 10-year
mortgage with GE Capital Real Estate ("GECRE"). The gross proceeds from the new
loan (the "GECRE Mortgage Loan") were used to refinance the $280.6 million
Kidder Mortgage Loans, the $110.0 million interim mortgage loan (see below), and
the $30.0 million secured term loan. The remaining proceeds were used largely
to establish escrows to fund the remaining expansion and redevelopment costs of
Patrick Henry Mall and Nittany Mall, and to fund closing costs, initial loan
reserves and prepayment penalties with respect to $200.0 million of the Kidder
Mortgage Loans and the $30.0 million secured term loan that were pre-paid prior
to their maturity dates. The prepayment penalties for the Kidder Mortgage Loans
and the $30 million term loan were approximately $16.6 million. In addition,
approximately $5.9 million of unamortized deferred financing costs related to
the Kidder Mortgage Loans and the $110.0 million interim mortgage loan were
written off. Both of these items were accounted for as an extraordinary loss on
early extinguishment of debt. The GECRE Mortgage Loan has a fixed stated
interest rate of 7.43% and is secured by cross-collateralized mortgages on 15 of
the malls. Crown Investments has guaranteed $250 million of the GECRE Mortgage
Loan. In connection with the GECRE Mortgage Loan, in November 1997, the Company
made a $6.0 million interest-bearing good-faith deposit with GECRE, and in July
and August 1998, the Company made $12.2 million in non-interest bearing rate
lock deposits with GECRE. These deposits were refunded at closing.
Permanent Loans
At December 31, 1998, permanent loans consisted of nine loans secured by seven
properties held by the Operating Partnership. Included in permanent loans is a
$3.1 million interest free Urban Development Action Grant loan with the City of
Johnstown, Pennsylvania, secured by an office building and due October 2006. A
$1.1 million loan related to Carlisle Plaza Mall is an Industrial Development
Bond secured with a $1.1 million letter of credit, which expires in January,
2008. Crown Holding has guaranteed one of the permanent loans with a current
outstanding balance of $10.9 million.
Construction Loans
In September 1998 the Company entered into a $26.8 million construction and
three-year permanent loan with a bank lender to finance a renovation/expansion
program at Washington Crown Center. The loan has an interest rate of LIBOR plus
1.90%. The construction loan term is for two years followed by a three-year
permanent term loan.
In June 1997 the Company refinanced one construction loan with a new five-year
permanent loan with a bank lender, together with a $6.0 million one-year
construction loan facility that converted to a four-year permanent loan in 1998.
This new construction loan relates to a theater and other expansion construction
at one of the Company's malls. The permanent loan bears fixed interest at 8.12%
and the four-year permanent loan bears interest at 6.71%. During July 1997 the
Company repaid two of its outstanding construction loans from the proceeds of
the senior preferred shares (see Note 6) and in November 1997 refinanced the
Logan Valley construction loan as described further below.
Secured Term Loans and Lines of Credit
At December 31, 1998 the Company had $155.6 million in available revolving lines
of credit, which includes a $100.0 million acquisition credit facility with
GECRE bearing interest at LIBOR plus 2.35%, a $50.0 million general credit
facility with GECRE secured by cross collateralized mortgages on four of the
Company's mall properties bearing interest at LIBOR plus 1.95%, and a $5.6
million line with a bank secured by a mortgage on the Company's headquarters
office building bearing interest at prime plus 0.625%. Amounts outstanding
under all lines of credit at December 31, 1998, 1997, and 1996 were $68.1
million, $0.0 million, and $5.6 million, respectively. The $68.1 million
outstanding at December 31, 1998 includes $27.4 million under the acquisition
line, and $40.6 million under the general lines. Both of the GECRE lines have a
minimum initial term ending November 17, 1999, have no required amortization,
and can be extended to November 17, 2001 under renewal provisions so long as
certain conditions are satisfied. The remaining $5.6 million line is renewable
annually on April 30. All the lines have a 0.125% per annum commitment fee
based on the unused amounts of the line.
The $100 million acquisition line is restricted for real estate acquisitions as
may be approved by the lender in amounts up to 75% of the value of the acquired
properties; in addition $26.0 million of this line has been earmarked for the
Valley Mall construction loan as further described in Note 14. Any properties
acquired under this line will be mortgaged to secure the borrowings under this
line. Amounts may be borrowed under the other $55.6 million credit lines for
general corporate purposes.
Interim Mortgage Loan with GE Capital Real Estate
In November 1997 the Company closed with GECRE a $110 million interim mortgage
loan and the $150 million secured credit facilities described above. The $110
million mortgage loan was placed through a new subsidiary, Crown American W L
Associates, L.P., and was secured by Logan Valley and Wyoming Valley malls and
bore interest at LIBOR plus 1.60%. The interim mortgage loan proceeds were
primarily used to repay in full the existing $51.4 million construction loan on
Logan Valley Mall and the existing $50.0 million mortgage loan on Wyoming Valley
Mall. These two loans bore interest at LIBOR plus 2.375% and 1.75%,
respectively. The interim mortgage loan was repaid as part of the refinancing
in August 1998, as noted above.
Covenants and Restrictions
Various of the above loans and lines of credit contain certain financial
covenants and other restrictions, including limitations on the ratios, as
defined, of total Company debt to EBITDA, EBITDA to fixed charges, and floating
rate debt to total debt. The Company was in compliance with all such loan
covenants as of and during the period ended December 31, 1998. Twenty of the
Company's malls are mortgaged under the GECRE Mortgage Loan and the GECRE lines
of credit. All of these malls are owned by special purpose subsidiaries of the
Company. The sole business purpose of these subsidiaries, as an ongoing
covenant under the related loan agreements, is the ownership and operation of
the properties. The mortgaged malls and related assets owned by these
subsidiary entities are restricted under the loan agreements for the payment of
the related mortgage loans and are not available to pay other debts of the
consolidated Company. However, so long as the loans are not under an event of
default, as defined in the loan agreements, the cash flows from these
properties, after debt service and reserve payments are made, are available for
the general use of the consolidated Company.
Interest Rates
The Mortgage Loans on the Financing Partnership properties and nine of the
permanent loans with an aggregate principal balance of $599.0 million at
December 31, 1998 have fixed interest rates ranging from 4.50% to 9.625%. The
weighted average interest rate on this fixed-rate debt at December 31, 1998, and
1997 was 7.64% and 7.53%, respectively. The weighted average interest rate
during the years ended December 31, 1998, 1997, and 1996 was 7.58%, 7.73%, and
7.87%, respectively. All of the remaining loans with an aggregate principal
balance of $71.0 million at December 31, 1998 have variable interest rates based
on spreads ranging from 1.60% to 2.25% above 30 day LIBOR. The weighted average
interest rate on the variable rate debt at December 31, 1998 and 1997 was 7.18%
and 7.37%, respectively. The weighted average interest rate during the years
ended December 31, 1998, 1997, and 1996 was 7.50%, 7.93%, and 7.93%,
respectively.
Debt Maturities
As of December 31, 1998, the scheduled principal payments on all debt, including
extensions available at the Company's option provided the debt is not in default
at the extension dates, are as follows (in thousands):
Year Ending
December 31,
1999 $ 2,771
2000 5,502
2001 78,707
2002 40,351
2003 12,745
Thereafter 529,895
$669,971
NOTE 6 - PREFERRED SHARE OFFERING AND TREASURY SHARES
The Company completed an offering of 2,500,000 11.00% non-convertible senior
preferred shares on July 3, 1997. The initial offering price was $50.00 per
share. The preferred shares are non-callable by the Company for a ten-year
period (until July 31, 2007). On or after July 31, 2007, the Company, at its
option, may redeem the preferred shares for cash at the redemption price per
share set forth below:
Redemption Price
Redemption Period Per Share
July 31, 2007 through July 30, 2009 $52.50
July 31, 2009 through July 20, 2010 $51.50
On or after July 31, 2010 $50.00
The net proceeds from the offering were $118.7 million after underwriter's
commission and other offering expenses. The net proceeds were contributed by the
Company to the Operating Partnership in exchange for 2,500,000 preferred
Partnership Units. The terms of the new class of preferred Partnership Units
generally parallel those of the Company's preferred shares as to distributions
and redemption rights. In turn, the Operating Partnership used the proceeds
received from the Company primarily to repay $58.3 million of debt in early
July, to repurchase $12.2 million of common shares held in treasury under a
common share repurchase program approved by the Board of Trustees, and to
acquire Valley Mall for $32.0 million in November 1997.
As stipulated in the Prospectus Supplement, additional dividends shall be paid
quarterly to the holders of the preferred shares if the Company's total debt (as
defined) exceeds the product of 6.5 times EBITDA, as defined, (the "Leverage
Ratio") without the consent of the holders of at least 50% of the preferred
shares outstanding at the time. The Leverage Ratio computed as of December 31,
1998, is 5.85 to 1. If required to be paid, additional dividends will be for an
amount per preferred share equal to 0.25% of the Preferred Liquidation
Preference Amount (defined below) on an annualized basis for the first quarter
with respect to which an additional dividend is due. For each quarter
thereafter that the Company continues to exceed the permitted Leverage Ratio,
the additional dividend will increase by an amount per preferred share equal to
an additional 0.25% of the Preferred Liquidation Preference Amount on an
annualized basis. However, the maximum total dividend on the preferred shares,
including any additional dividends, will not at any time exceed 13.00% of the
Preferred Liquidation Preference Amount per annum. The Preferred Liquidation
Preference Amount is equal to the sum of $50.00 per share plus an amount equal
to any accrued and unpaid dividends thereon (including any additional dividends)
and whether or not earned or declared to the date of payment.
In connection with the preferred share offering, the Company's Board of Trustees
also authorized the Company to make open market purchases of the Company's
common shares. As of December 31, 1998, the Company had repurchased 1,534,398
common shares for an aggregate purchase price of $14.7 million; these shares are
currently held as treasury shares. Under the current Board resolution,
additional repurchases of common shares will require re-approval by the Board.
In connection with such repurchases, the Operating Partnership redeemed from the
Company an equivalent number of common Partnership Units for the equivalent
repurchase cost, thus maintaining a 1.0 to 1.0 relationship between the number
of the Company's outstanding common shares of beneficial interest and the number
of common Partnership Units in the Operating Partnership that are owned by the
Company.
NOTE 7 - LEASING ACTIVITIES
The Company is primarily a lessor of shopping malls and the concentration of
tenants are in the retail industry. Leases are generally noncancelable and
expire on various dates through approximately the year 2021. The future minimum
lease payments to be received under existing leases as of December 31, 1998, are
as follows (in thousands):
Year Ending
December 31,
1999 $ 96,069
2000 88,258
2001 79,145
2002 68,752
2003 61,509
Thereafter 238,569
$632,302
The future minimum lease payments above do not include payments from tenants
which are due based upon a percentage of their gross sales or payments for the
tenants' share of common area maintenance costs and real estate taxes.
Total direct costs incurred by the Company to obtain leases, which are deferred
and amortized over the life of the lease, are as follows (in thousands):
Beginning Ending
Year Ended Balance Additions Amortization Other Balance
December 31, 1998 $ 16,348 $ 4,550 $ 3,673 $ (751) $ 16,474
December 31, 1997 17,914 2,398 3,964 - 16,348
December 31, 1996 20,041 2,156 4,015 (268) 17,914
NOTE 8 - RELATED PARTY TRANSACTIONS
Crown Rights
Pursuant to the Operating Partnership Agreement, Crown Investments, its
subsidiary, Crown American Investment Company, and Frank J. Pasquerilla have
certain rights (the "Crown Rights"), which enable them to require the Operating
Partnership to redeem part or all of their common Partnership Units for a price
equal to the equivalent value of the common shares of the Company (on a
one-for-one basis). Crown Investments currently owns 8,090,388 common
Partnership Units, Crown American Investment Company owns 1,786,459 common
Partnership Units, and Frank J. Pasquerilla owns 79,551 common Partnership
Units. The obligation to redeem these Partnership Units may be assumed by the
Company in exchange for, at the Company's election, either shares (on a
one-for-one basis) or the cash equivalent thereof, provided that the Company may
not pay for such redemption with shares to the extent that it would result in
Crown Investments and its affiliates (including Frank J. Pasquerilla)
beneficially or constructively owning more than 12.0% of the outstanding shares.
Crown Investments and its affiliates may require the Company to assume the
obligation to pay for such redemption with shares to the extent that Crown
Investments and its affiliates own less than 12.0% of the outstanding shares.
Crown Investments and its subsidiary have pledged substantially all their
Partnership Units (the "Pledged Units") as collateral for a loan made by an
unrelated third party. In June 1995 the Company filed a Registration Statement
on Form S-3 with the Securities and Exchange Commission relating to the Pledged
Units. If at the time of any such permitted exchange the Shelf Registration is
not effective, the Company is obligated to purchase a specified portion of the
Pledged Units. The Company also has the right to purchase the Pledged Units in
lieu of effecting an exchange.
Management Agreements
The Company manages certain retail properties for Crown Associates pursuant to a
management agreement. Certain of these properties were transferred to an
affiliate of Crown Associates in 1995 and 1996. For its services, the Company
receives management and leasing fees which amounted to $0.1 million, $0.2
million, and $0.1 million, for the years ended December 31, 1998, 1997, and
1996, respectively.
In addition, Crown Investments, Crown Associates, and their affiliates have
agreed to pay the Company sales commissions up to 15% of the net sales price for
its services in selling certain land and other assets owned by these parties.
Total commissions earned were $0.1 million, $0.0 million, and $0.4 million, for
the years ended December 31, 1998, 1997, and 1996, respectively, and are
included in miscellaneous income.
Support Agreement
In connection with the Company's formation and the consummation of the
offerings, Crown Investments entered into a cash flow support agreement (the
"Support Agreement"), which was subsequently amended in 1997 and 1994, with the
Operating Partnership and the Financing Partnership with respect to Mount Berry
Square, Martinsburg Mall, Oak Ridge Mall and Bradley Square, all of which were
opened in 1991 and were in various stages of initial lease-up, with mall store
occupancy rates below 75%.
The Support Agreement provides that Crown Investments will guarantee, on a
quarterly basis, up to a maximum of $1.0 million per quarter, that each of these
four malls will generate a stipulated aggregate amount of base rents from each
such mall. The quarterly amounts due under the Support Agreement are calculated
as the difference between the aggregate amount of actual base rents earned in
the quarter at each mall and the stipulated aggregate amount of base rents. The
1997 amendment provided that the quarterly support amounts after 1997 shall be
reduced by 2.5% of the gross sales price of any sales of outparcel land that
occur after 1997, which is intended to approximate the base rents that could
have been earned had such outparcel land been leased or developed, rather than
sold. Crown Investments was also obligated to fund any tenant improvement and
leasing costs associated with a fixed amount of shortfall space, as defined.
The obligations of Crown Investments under the Support Agreement presently
continue as to all four malls and will terminate as to a mall when the aggregate
base rents at such mall achieve the stipulated amount over four consecutive
quarters (as determined by the independent trustees of the Company).
Total cash flow support earned by the Company was $3.8 million, $3.7 million,
and $2.9 million, for the years ended December 31, 1998, 1997, and 1996,
respectively. In addition, Crown Investments agreed to fund certain tenant
improvement costs incurred for signed leases as of June 30, 1993 scheduled to
commence subsequent thereto. These tenant improvement costs were funded in 1993
and 1994 and have been insignificant thereafter. During 1995 Crown Holding
advanced $6.4 million to the Company primarily to pre-fund future payments under
the Support Agreement. This pre-funding did not change or terminate the Support
Agreement, and additional funding recommenced in 1997. Earned support payments
and funded tenant improvements under the Support Agreement are accounted for as
capital contributions made by the minority owner in the Operating Partnership
and are credited to minority interest (as to the minority ownership percentage)
with the remainder to the Company's paid-in capital. As a result of the above
transactions, the Company had a receivable of $0.9 million from Crown
Investments at December 31, 1998.
Crown Associates Lease at Pasquerilla Plaza
Approximately 14,300 square feet of Pasquerilla Plaza is leased to Crown
Associates for annual base rent of approximately $266,000 under a lease with a
term ending July 31, 2003. The rent was determined based on rental rates being
paid by existing third party tenants and on the fact that Crown Associates'
lease includes certain furnishings and equipment and allows Crown Associates use
of certain facilities in the building not available to other third party
tenants. The lease includes a five-year renewal option at then market rents.
Total rent earned by the Company for the years ended December 31, 1998, 1997,
and 1996 was $262,063, $245,500, and $204,500, respectively.
Lease at Logan Valley Mall between the Company and Crown American Enterprises
Crown American Enterprises (CAE) entered into a lease for a 1,962 square foot
mall shop space at the Company's Logan Valley Mall. CAE subsequently assigned
this lease to Crown Max LLC, a company which is owned by CAE and an unrelated
third party. The lease began on January 1, 1998 and had a ten-year term with an
annual base rent of $44,000 plus contributions to common area maintenance and
real estate taxes. The terms were comparable to rates for similar space rented
to third parties at this property. During the year ended December 31, 1998 CAE
paid an aggregate of $64,728 to the Company for this space. CAE used this space
to operate a virtual-reality entertainment facility. In addition to the rental
income, the Company was interested in determining the economic feasibility of
adding similar entertainment facilities to other Company malls. CAE closed the
entertainment facility on December 31, 1998, and the Company and CAE have
negotiated a lease surrender and termination agreement whereby CAE will pay an
additional $22,000 to the Company as consideration for the lease termination as
of December 31, 1998. The total amounts received by the Company under the
lease, including the lease termination payment, exceeded the Company's non-
recoverable investment in the leased premises.
Line of Credit with Crown Financing Company
In December 1996 the Board of Trustees approved the terms of a $10 million
standby line of credit with Crown Financing Company, a wholly-owned subsidiary
of Crown Holding Company. Under this unsecured facility, the Company was
permitted to borrow up to $10 million with interest based on the prime rate plus
1 5/8%. This line of credit expired during 1998 and no amounts were ever
borrowed under this line.
Amounts due to or from Crown Associates and Crown Investments
In addition to the above items, the Company allocates a portion of the costs
related to its construction, development, MIS, legal, and risk management
departments to Crown Associates based on estimated usage. These allocated costs
aggregated $0.5 million, $0.5 million, and $0.5 million for the years ended
December 31, 1998, 1997, and 1996, respectively. Conversely, Crown Associates
and its affiliates charge the Company for use of their corporate aircraft, hotel
and dining services. Such costs totaled $0.8 million for 1998, $0.1 million for
1997 and were de minimus for 1996. As a result of the above transactions, the
Company had a net receivable from Crown Associates and Crown Holding at
December 31, 1998 of $0.1 million.
Hess's Department Stores, Inc.
Hess's Department Stores, Inc. ("Hess's") was a wholly-owned indirect subsidiary
of Crown Holding until November 1994 when all of Hess's operations were sold.
Hess's was a tenant in 13 of the income-producing properties and also was a
tenant in the joint venture's enclosed shopping mall. At a special meeting of
the Company's shareholders held on September 9, 1994, the shareholders approved
modifications of leases with Hess's in connection with the sale by Hess's of its
store locations at Company properties to The May Department Stores Company
("May") and The Bon-Ton Stores, Inc. ("Bon-Ton").
Under the transaction with Bon-Ton, which closed in September 1994, Bon-Ton
assumed leases and agreed to operate six Hess's stores, and also agreed to
temporarily operate five Hess's stores through January 1996 (two stores) and
January 1997 (three stores). One temporary location was at Middletown Mall
which was sold in 1998; the remaining four locations have been leased to
replacement tenants.
Under the transaction with May, which closed in November 1994, May purchased
(pursuant to 99 year ground leases with nominal purchase options) three Hess's
store locations from the Company for $17.6 million and leased the Hess's store
at two other locations. One of the leased locations is subject to a purchase
option by May in the amount of $3.5 million. In 1994 the Company recorded a
gain of $4.5 million on the sale of the three store locations. The Company also
committed to renovate the mall where one of the leased stores is located, which
was done in 1995. During 1995 May expanded the stores at all five of these
locations. In 1994 the Company also received $2.4 million from Hess's relating
to one of the stores that May is leasing to make up the difference between the
rent formerly paid by Hess's and rent being paid by May. This amount was
recorded as deferred income and is being amortized over the remaining lease term
(10 years). Hess's also paid $0.8 million to the Company in 1995 for lost or
reduced rents from mall shop tenants that occurred during the construction
period when the former Hess's locations were being expanded.
NOTE 9 - LEASES
The Company is the lessee under a ground lease with a third party for Shenango
Valley Mall, Crossroads Mall, and Greater Lewistown Plaza, and is the lessee
under two ground leases with third parties for Uniontown Mall. The Shenango
Valley Mall lease expires on July 24, 2017. One lease for Uniontown Mall
expires on March 30, 2038 with up to seven five-year renewal options and the
other lease expires on April 30, 2039 with up to four five-year renewal options.
The Greater Lewistown lease expires on February 1, 2045 and the Crossroads lease
expires in October, 2027 with a 49 year option period. All five leases require
fixed annual payments. Fixed rental expense related to these leases for the
years ended December 31, 1998, 1997, and 1996 was $246,000, $153,000, and
$153,000, respectively. Future minimum lease payments on these leases are
$290,569 per year through 2003 and $9,761,000 for all years thereafter.
Under the Uniontown Mall and Greater Lewistown leases additional rents are paid
based on mall tenant percentage rents. These additional rents were $64,000,
$58,000, and $56,000 for the years ended December 31, 1998, 1997, and 1996,
respectively.
Capital Leases
Assets under capital leases, primarily office and mall equipment, are
capitalized using interest rates appropriate at the inception of each lease.
Capital lease obligations amounted to $0.5 million and $1.0 million at
December 31, 1998 and 1997, respectively, and are included in accounts payable
and other liabilities.
NOTE 10 - RETIREMENT SAVINGS AND SHARE INCENTIVE PLANS
Retirement Savings Plan and Savings Restoration Plan
The Company established the Crown American Realty Trust Retirement Savings Plan
(the "Retirement Savings Plan") pursuant to Section 401(k) of the Internal
Revenue Code to cover employees of the Operating Partnership. Employees who
have completed at least one year of service, working 1,000 hours per year, and
have attained age 21 are eligible to participate in the Retirement Savings Plan.
The Operating Partnership contributes a percentage of each eligible employee's
base pay (the "Supplemental Employer Contribution") to the Retirement Savings
Plan on behalf of each eligible employee. The Supplemental Employer
Contribution is 2% of base pay if the employee is under 35 years of age, 3% if
35 to 49 years of age, and 5% if 50 years of age or older. In addition,
participants may elect to contribute between 1% and (subject to certain
restrictions) 15%. Employee contributions are matched (the "Matching
Contribution") by the Company up to 50% of the first 3% of the participant's
compensation.
The receipt of benefits attributable to the Operating Partnership's Matching
Contribution and Supplemental Employer Contribution is subject to the vesting
and forfeiture provisions of the Retirement Savings Plan. Supplemental Employer
Contributions become 100% vested after five years of service is credited to the
employee. Matching Contributions become vested 20% after two years of service
and an additional 20% becomes vested per year thereafter. Years of service
include service with Crown American Corporation. Other amounts are fully vested
at all times.
Total plan costs for the years ended December 31, 1998, 1997, and 1996 were
$605,000, $512,000, and $465,000, respectively. The plans of predecessor
affiliated entities were terminated upon the formation of the Company.
In late 1996 the Company adopted The Savings Restoration Plan which is designed
to allow eligible employees to defer current compensation in amounts that exceed
the limits that can be deferred under The Retirement Savings Plan. The plan
became effective January 1, 1997 and $129,000 and $114,000 was deferred in 1998
and 1997, respectively, under the plan. Amounts deferred are charged to expense
in the current period; as such, all compensation expense under the above plans
is being fully recognized as it is earned.
Share Incentive Plans
Prior to the initial public offering, the shareholders of the Company approved
the 1993 Crown American Realty Option Plan (the "Employee Option Plan"), and the
1993 Crown American Realty Trustees' Option Plan (the "Trustees' Option Plan").
Under the Employee Option Plan, options to purchase a total of 1,200,000 common
Partnership "Units" of the Operating Partnership are available for grant to
officers and key employees; the Chairman and President currently do not
participate in any share incentive plan. Under the Employee Option Plan,
options are to be granted at not less than the market value of the common shares
on the date of grant. In certain circumstances, option holders may redeem the
Units for cash or Shares (at the option of the Company).
Currently, all the Employee Option Agreements except for one participant provide
that an option may only be exercised after the optionee has completed two years
of employment with the Operating Partnership after the date of the grant of the
option. Under such Option Agreements, an option first becomes exercisable to
the extent of 20% of the total number of Units subject to the option on each of
the second, third, fourth, fifth and sixth anniversaries of the date of the
grant of the option. One participant has an option received in 1996 that
provides for full vesting of the options granted thereunder three years after
the date of grant, and another option received in 1998 that provides for
immediate vesting. If employment is terminated after the option has partially
or fully vested, the option may be exercised to the extent it was exercisable at
the time of termination of employment. There are certain limitations on the
timing of exercise of the option after termination of employment. Currently,
all the Option Agreements provide that options expire five years after the date
they first become exercisable. Effective on January 3, 1996, the Board of
Trustees canceled all then outstanding options (except for 30,000 options that
were granted in November 1995) and issued 968,000 new options at the then
current market price of $8.00 per share, pursuant to the terms described above.
Option transactions under the Employee Option Plan are as follows:
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31,
1998 1997 1996
Weighted Weighted Weighted
Number Average Number Average Number Average
of Exercise of Exercse of Exercise
Units Price Units Price Units Price
<S> <C> <C> <C> <C> <C> <C>
Options outstanding,
beginning of period 1,126,000 $ 8.13 1,036,000 $ 8.00 998,000 $ 15.78
Granted 150,000 8.84 90,000 9.53 1,062,000 8.00
Canceled (88,800) 9.13 (1,024,000) 15.59
Exercised (7,330) 7.83
Options outstanding,
end of period 1,179,870 $ 8.14 1,126,000 $ 8.13 1,036,000 $ 8.00
Range of option $ 7.75 to $ 7.50 to $ 7.50 to
exercise prices $ 9.25 $ 9.75 $ 8.50
Weighted average
fair value of options
granted during the year
(per option) $ 0.30 $ 0.59 $ 0.54
Weighted average
contractual life at end
of period (in years) 5.9 7.1 8.0
Options exercisable at
period end 187,974 2,000 0
Total compensation
expense recognized
during the period $ 0 $ 0 $ 0
</TABLE>
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted-average
assumptions used for grants in 1998, 1997, and 1996, respectively: dividend
yield of 9.06%, 8.40%, and 10.0%; expected volatility of 16%, 17%, and 23%; risk
free interest rates of 5%, 6.3%, and 6.6%; and expected lives of 7.4 years, 9.0
years, and 9.0 years.
The Trustees' Option Plan was amended and restated effective as of December 30,
1997. As amended, options to purchase a total of 125,000 common shares of
beneficial interest of the Company are available to non-employee Trustees. Each
non-employee Trustee automatically is granted on December 31 of each year an
option to purchase 5,000 common shares having an exercise price equal to 100% of
the fair market value of the shares at the date of grant. Previously, the plan
provided for annual grants of 500 shares. On December 31, 1998 and 1997 each of
the four non-employee trustees were granted options to purchase 5,000 common
shares at exercise prices of $7.75 and $9.313, respectively. On December 31,
1996, 1995 and 1994, each of the four non-employee trustees was granted an
option to purchase 500 shares at an exercise price of $7.50, $7.875, and $13.50,
respectively. The amended Trustees' Option Plan also provides for an automatic
grant of 5,000 options to purchase common shares with an exercise price equal to
100% of the fair market value of the shares at the date of grant upon the
appointment or election of each new non-employee Trustee to the Board.
Previously, the Company awarded options to purchase 500 common shares at an
exercise price of $17.25 per share (the initial public offering price of the
common shares) to each of the four non-employee Trustees upon their initial
election to the Board in August 1993. As of December 31, 1998 there were 46,500
options to purchase common shares held by the Trustees. To date, all options
granted to the Trustees under the Trustees' Option Plan have been exercisable
immediately upon grant, but as of December 31, 1998 none had been exercised.
Options under the Trustees' Option Plan expire five years from the date of
grant.
The Company applies APB Opinion 25 and related Interpretations in accounting for
its plans. Accordingly, no compensation cost has been recognized for its option
plans. Had compensation cost for the Company's option plans been determined
based on the fair value at the grant dates for awards under those plans
consistent with the method of SFAS No. 123, the Company's net income for the
years ended December 31, 1998, 1997, and 1996 would have been reduced by
approximately $0.10 million, $0.13 million, and $0.12 million, respectively, or
$0.004, $0.005, and $0.004 per share, respectively.
NOTE 11 - FAIR VALUE OF FINANCIAL INSTRUMENTS AND MARKET RISKS
Statement of Financial Accounting Standards No. 107 "Fair Value of Financial
Instruments" requires disclosures about fair value for all financial
instruments. Based on the borrowing rates currently available to the Company,
the carrying amount of the Company's $599.0 million of fixed rate debt has an
estimated fair value of $616.4 million at December 31, 1998. The remaining
$71.0 million of debt is at floating interest rates which approximate current
rates available to the Company for such debt, and accordingly the fair value of
such floating rate debt approximates the current carrying amount.
NOTE 12 - QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data for 1998 and 1997 is shown below (in
thousands, except per share data):
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
Year ended December 31, 1998:
<S> <C> <C> <C> <C>
Revenues $ 34,308 $ 35,263 $ 35,952 $ 41,225
Operating income before interest,
asset sales and adjustments, and
extraordinary items 11,384 12,276 11,760 16,000
Extraordinary (losses) (1,703) (22,512)
Income (loss)before minority
interest in Operating Partnership 45 1,685 (22,532) 3,800
Net income (loss) allocated to
common shares 970 2,171 (15,788) 4,008
Net income (loss) per share:
Basic EPS $ (.09) $ (.05) $ (.73) $ (.02)
Diluted EPS $ (.09) $ (.05) $ (.73) $ (.02)
Year ended December 31, 1997:
Revenues $ 30,873 $ 30,986 $ 30,741 $ 38,394
Operating income before interest,
asset sales and adjustments, and
extraordinary items 9,361 10,512 9,702 14,631
Extraordinary gains (losses) (732) (631) (968)
Income (loss) before minority
interest in Operating Partnership (1,703) (1,407) (174) 3,547
Net income (loss) allocated
to common shares $ (1,269) $(1,048) $ (2,520) $ 98
Net income (loss) per share:
Basic EPS $ (.05) $ (.04) $ (.09) $ .00
Diluted EPS $ (.05) $ (.04) $ (.09) $ .00
</TABLE>
NOTE 13 - COMMITMENTS AND CONTINGENCIES
The Company obtains insurance for worker's compensation, automobile, general
liability, property damage, and medical claims. However, the Company has
elected to retain a portion of expected losses for property damage, and general
liability through the use of deductibles which generally range up to $250,000
per claim with certain maximum aggregate policy limits per year. Provisions for
losses expected under these programs are recorded based on estimates, provided
by consulting actuaries who utilize the Company's claims experience and
actuarial assumptions, of the aggregate liability for claims incurred and claims
incurred but not reported. The total estimated liability for these losses at
December 31, 1998 and 1997 was $4.0 million and $3.8 million, respectively, and
is included in accounts payable and other liabilities.
Based on environmental studies completed on the Properties, management believes
any exposure related to environmental clean-up will be immaterial.
The Company from time to time is involved in litigation incidental to its
business. Except as described below, neither the Company nor any of the
Partnerships are currently involved in any material litigation and, to the best
of the Company's knowledge, there is no material litigation currently threatened
against the Company or the Partnerships, other than routine litigation arising
in the ordinary course of business, most of which is expected to be covered by
liability insurance or established reserves.
Shareholder litigation
On August 10, 1995, August 17, 1995, and September 8, 1995 complaints were filed
by various individuals on behalf of themselves and also purportedly on behalf of
other similarly situated persons against the Company and certain of its
executive officers in United States District Court for the Western District of
Pennsylvania to recover unspecified damages under the federal securities laws
resulting from a decline in the market price for the Company's common shares of
beneficial interest which are listed and traded on the New York Stock Exchange.
The decline in the Company's share price followed the announcement on August 8,
1995 of various operational and capital resource initiatives by the Company,
including the reduction of the Company's quarterly dividend to increase its
levels of retained internal cash flow and the planned sale of certain assets
that at the time did not fit the Company's growth strategy. The complaints in
these three cases were consolidated by the Court and a consolidated amended
complaint was filed on July 30, 1996. The consolidated amended complaint
asserts a class period extending from March 1, 1995 to August 8, 1995,
inclusive.
A fourth Complaint was filed the week of December 15, 1995 by an individual on
behalf of himself and also purportedly on behalf of other similarly situated
persons against the Company and certain of its current and former executive
officers in the United States District Court for the Eastern District of
Pennsylvania (the Warden action). This action was subsequently transferred to
the Western District of Pennsylvania. While this Complaint is substantially
similar to the previous Complaints, it alleged a class period extending from
August 17, 1993 (the IPO date) to August 8, 1995.
The Company filed a motion seeking to dismiss the consolidated action and
negotiated a stay of the Warden action pending resolution of the motion to
dismiss the consolidated actions. On September 15, 1997 the Court issued an
opinion dismissing the consolidated amended complaint. In its ruling, the Court
dismissed certain allegations with prejudice and others with an opportunity to
amend. On October 10, 1997 the Plaintiffs filed a second amended complaint in
the consolidated action. On December 2, 1997 the court entered an order
consolidating the cases for pretrial purposes. On December 16, 1997 the
Plaintiff in the Warden action filed a second amended complaint, which changed
the end of the putative class period to February 28, 1995. On January 16, 1998
the Company filed motions seeking dismissal of both the consolidated action and
the Warden action. On October 15, 1998 the Court in the Warden action granted
the Company's motion to dismiss and permitted the plaintiffs to file a third
amended complaint.
On November 2, 1998, the Court granted in part and denied in part the Company's
motion to dismiss the second amended complaint in the consolidated action. In
its ruling, the Court dismissed the Company as a defendant and dismissed all of
the plaintiff's claims with prejudice, except for a narrow set of allegations
relating to projections of the 1995 dividend at a March 1995 REIT conference and
in the 1994 annual report. On November 30, 1998, the plaintiffs in the Warden
action and the consolidated action each filed third amended complaints. In the
consolidated action, plaintiffs seek to renew certain claims against the Company
notwithstanding the Court's prior rulings. On December 21, 1998, the Company
filed a motion seeking dismissal of the third amended complaint in the Warden
action. On February 5, 1999, the Company filed a motion to dismiss the third
amended complaint in the consolidated action. These motions are currently
pending.
The consolidated legal action and the Warden action are in a preliminary stage.
However, the Company believes, based on the advice of legal counsel, that it and
the named officers have substantial defenses to the plaintiffs' claims, and the
Company intends to vigorously defend the actions. The Company's current and
former officers that are named in this litigation are covered under a liability
insurance policy paid for by the Company. The Company's officers also have
indemnification agreements with the Company. While the final resolution of this
litigation cannot be presently determined, management does not believe that it
will have a material adverse effect on the Company's results of operations or
financial condition.
Tenant litigation
In July 1997, the Bon-Ton Department Stores, Inc. filed suit in a Pennsylvania
state court against Crown American Financing Partnership and The May Department
Stores Company seeking to enjoin the development of a Kaufmann's department
store at the Nittany Mall. Bon-Ton claims that the proposed Kaufmann's store
would violate a restrictive covenant in Bon-Ton's lease with Crown. Crown and
May disputed Bon-Ton's position and filed a counterclaim seeking a declaratory
judgment that the proposed transaction did not violate the restrictive covenant.
The parties stipulated to a trial of all issues (except the availability of
damages to Bon-Ton should it establish liability but not the entitlement to
injunctive relief). After this trial, the Court ruled in favor of Crown and
May, denying Bon-Ton's request for injunctive relief and granting Crown's and
May's motion for a declaratory judgment. Bon-Ton appealed to the Pennsylvania
Superior Court, and this appeal is pending. While the final resolution of this
litigation cannot be presently determined, management does not believe that it
will have a material adverse effect on the Company's results of operations or
financial condition.
Commitments
The Company has various purchase commitments in the normal course of business.
The Company also has commitments under signed leases with tenants to make future
cash allowances and/or to construct tenant premises, which aggregate
approximately $12.0 million as of December 31, 1998, excluding amounts committed
in connection with mall expansions as described in Note 14.
NOTE 14 - MALL ACQUISITIONS AND EXPANSIONS
In May 1998 the Company acquired, in a single transaction, two regional shopping
malls: Jacksonville Mall in Jacksonville, North Carolina, and Crossroads Mall
in Beckley, West Virginia. The two malls include gross leasable area of 416,000
and 450,000 square feet, respectively. Sears, JCPenney and Belk Stores anchor
both malls. The total purchase price was approximately $61 million, which
includes 10 acres of vacant land available for future development. The purchase
was funded from existing credit lines and also from assumption of debt related
to one of the properties. Each property is held in a limited partnership or a
limited liability corporation.
On April 29, 1998 the Independent Trustees approved the purchase of the
partnership interests in Greater Lewistown Shopping Mall. The partnership owned
an existing ground lease interest in Greater Lewistown Plaza, a 192,000 square
feet non-enclosed retail shopping center located near Lewistown, PA together
with fee simple interests in 4 separate adjacent parcels that total 0.59 acres
(together the "Greater Lewistown Plaza"). The partnership had been 99.5% owned
by Frank Pasquerilla and 0.5% owned by Crown American Enterprises, a company
that is a wholly-owned indirect subsidiary of Crown Holding. The purchase price
was $4.5 million and was paid by the assumption of the existing first mortgage
($3.686 million), issuance of 79,551 common partnership units to Frank
Pasquerilla, valued at $10.183 per unit which was based on the weighted average
closing market price of the Company's common shares for the ten days preceding
the May 31, 1998 closing date, and a cash payment of $4,071 to Crown American
Enterprises for its 0.5% ownership interest. Greater Lewistown Plaza is
currently 94.4% leased, and the major tenants include a Weis Markets and a J.C.
Penney store.
In November 1997 the Company, through a new subsidiary, Crown American
Acquisitions I, L.P., acquired Valley Mall located in Hagerstown, Maryland for
$31.7 million in cash, plus $0.4 million in transaction costs. The purchase was
funded entirely from the proceeds of the Preferred Share Offering (see Note 6).
Valley Mall is an enclosed regional mall consisting of approximately 613,000
square feet of gross leasable area ("GLA"), of which 123,400 square feet is
owned by the current department store occupant. In addition, the purchase
included 48,762 square feet of outparcel GLA and 30.8 acres of additional
adjacent undeveloped land.
The Company has commenced construction of an expansion and redevelopment of
Washington Crown Center and an expansion at Valley Mall. The total cost of the
two projects, including capitalized construction overhead, interest, and tenant
allowances, are estimated at $32 million and $27 million respectively, of which
$12 million and $4 million, respectively, had been incurred as of December 31,
1998. In addition to amounts incurred at December 31, 1998, the Company is
committed for future payments under various construction purchase orders and
certain leases. The Company has secured through a bank lender a $26.8 million
construction and three-year permanent loan for the Washington Crown Center
expansion and redevelopment; the loan bears interest at LIBOR plus 1.90%, and
$2.9 million was borrowed and outstanding at December 31, 1998. For the Valley
Mall expansion, GE Capital Real Estate (GECRE) has agreed to enter into a loan
for up to $26.0 million. This $26.0 million loan will be part of the existing
$100 million acquisition line of credit with GECRE, but will be subject to a
separate loan agreement that is currently being prepared and will bear interest
at LIBOR plus 3.0%. It is anticipated the first construction draw under the
GECRE loan will occur in spring 1999.
NOTE 15 - PROPERTY SALES AND DISPOSALS
With respect to Middletown Mall, a property acquired by the Company on February
1, 1995 from Crown Associates, additional contingent consideration, in the form
of 437,888 common Partnership Units, was paid to Crown Investments Trust
effective as of January 1, 1998, as consideration for the contribution of
Middletown Mall to the Operating Partnership. The 437,888 units represent
approximately 1.2% of the total common Partnership Units outstanding prior to
the issuance of the new units. In July 1998 the Company sold Middletown Mall,
together with approximately 60 acres of undeveloped outparcels and vacant land,
to an unrelated third party. The aggregate purchase price was $12.2 million.
The Company received $8.5 million in cash, net of closing costs, and received a
$3.5 million one-year 9.5% mortgage from the purchaser, secured by a first
mortgage on all the undeveloped land and outparcels and by a second mortgage on
the mall. Gain on the sale of approximately $1.3 million has been deferred
until all conditions for profit recognition under FASB 66 are satisfied.
In September 1996, the Company sold its Patrick Henry Corporate Center, an
office building located in Newport News, Virginia to an insurance company. The
net sales price was $9.45 million, and the net gain was $2.35 million. Existing
debt on the property of $5.36 million was repaid from the sales proceeds,
resulting in $364 thousand extraordinary loss on early extinguishment of debt
arising from a prepayment penalty and the write off of unamoritzed deferred
financing costs.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
Not applicable
PART III
Items 10 through 13.
In accordance with the provisions of General Instruction G (3) to
Form 10-K, the information required by Item 10 (Directors and Executive
Officers of the Registrant), Item 11 (Executive Compensation), Item 12
(Security Ownership of Certain Beneficial Owners and Management) and
Item 13 (Certain Relationships and Related Transactions) is not set forth herein
(except for the information concerning "Executive Officers of the Company" which
appears at the end of Part I hereof) because the Company's definitive Proxy
Statement for its Annual Meeting of Shareholders to be held on April 26, 1999,
which includes such information, will be filed with the Commission not later
than 120 days after the end of the fiscal year covered by this annual report.
Such information is incorporated in this annual report by reference, except for
the information required to be included in the Proxy Statement by paragraphs (k)
and (l) of Item 402 of Regulation S-K.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
The financial statements, financial statement schedules and exhibits listed
below are filed as part of this annual report:
(a) (1) Financial Statements
Report of Independent Public Accountants
Consolidated Statements of Operations of Crown American
Realty Trust for the years ended December 31, 1998,
1997 and 1996.
Consolidated Balance Sheets of Crown American Realty Trust
as of December 31, 1998, and 1997.
Consolidated Statements of Cash Flows of Crown American
Realty Trust for the years ended December 31, 1998, 1997
and 1996.
Consolidated Statements of Shareholders' Equity of Crown
American Realty Trust for the years ended December 31,
1998, 1997 and 1996.
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules
Schedule III - Consolidated Real Estate and Accumulated
Depreciation
Schedule IV - Valuation and Qualifying Accounts and
Reserves
(b) Reports on Form 8-K No events which resulted in the filing of a
current report on Form 8-K occurred during the fiscal quarter ended December 31,
1998.
(c) Exhibits
3.1 Second Amended and Restated Declaration of Trust of the Company. (c)
3.2 Bylaws of the Company. (c)
4.1 See Second Amended and Restated Declaration of Trust of the Company,
(Exhibit 3.1). (c) 4.2 Articles Supplementary Classifying and
Designating a Series of Preferred Shares (filed as Exhibit 4.4 to the
Company's Amendment No. 2 to Registration Statement on Form S-3,
filed on June 27, 1997)
4.3 Form of Preferred Share Certificate (filed as Exhibit 4.5 to the
Company's Amendment No. 2 to Registration Statement on Form S-3,
filed on June 27, 1997
10.1 Amended and Restated Agreement of Limited Partnership of Crown
American Properties, L.P. (b)
10.2 (a) First Amendment to Amended and Restated Agreement of Limited
Partnership of Crown American Properties, L.P. (b)
10.2 (b) Second Amendment to Amended and Restated Agreement of Limited
Partnership of Crown American Properties, L.P. (a)
10.2 (c) Third Amendment to Amended and Restated Agreement of Limited
Partnership of Crown American Properties, L.P. (a)
10.2 (d) Fourth Amendment to Amended and Restated Agreement of Limited
Partnership of Crown American Properties, L.P. (f)
10.2 (e) Fifth Amendment to Amended and Restated Agreement of Limited
Partnership of Crown American Properties, L.P. (g)
10.2 (f) Sixth Amendment to Amended and Restated Agreement of Limited
Partnership of Crown American Properties, L.P. (g)
10.2 (g) Amendment dated September 10, 1998, to the Sixth Amendment to
Amended and Restated Agreement of Limited Partnership of
Crown American Properties, L.P. (g)
10.3 Amended and Restated Partnership Agreement of Crown American Financing
Partnership. (b)
10.4 Certificate of Incorporation and Bylaws of Crown American Financing
Corporation. (b)
10.5 Real Estate Management Agreements between the Operating Partnership
and the following entities:
(a) Financing Partnership(g)
(b) Crown American Associates (b)
(h) Crown American WL Associates, L.P., as amended (g)
(i) Crown American Acquisition Associates I, L.P. (f)
(j) Crown American Lewistown Associates, L.P. (g)
(k) Crown American Acquisition Associates II, L.P. (g)
(l) Crown American Crossroads LLC (g)
(m) Washington Crown Center Associates, L.P. (g)
10.6 Key Executive Bonus Incentive Plan. (c) #
10.7 Retirement Savings Plan.(c) #
10.8 Sample Indemnification Agreement between the Company and its
Trustees and officers (together with a schedule identifying the
other agreements not being filed and material differences therein).(b)
10.9 Permanent Loan Agreement between Crown American Financing, L.P. and
Crown American W L Associates, L.P. and General Electric Capital
Corporation (g)
10.10 (Not used)
10.11 Amended and Restated Cash Flow Support Agreement, dated
May 9, 1994 (a)
10.11 (a) Amendment dated December 3, 1997, to the Amended and Restated Cash
Flow Support Agreement dated May 9, 1994. (f)
10.12 1993 Crown American Realty Option Plan. (c) #
10.13 Amended and Restated Crown American Realty Trustees' Option Plan, as
of December 30, 1997 (f) #
10.14 Sample Option Agreement for Employees (together with a schedule
identifying the other agreements not being filed and material
differences therein). (b) #
10.15 Sample Option Agreement for Trustees (together with a schedule
identifying the other agreements not being filed and material
differences therein). (b)#
10.16 Option Agreement dated as of April 24, 1995 among CBA Funding, L.L.C.,
Crown American Realty Trust, Crown American Properties, L.P. and
Crown Investments Trust. (d)
10.17 Registration Rights Agreement dated as of April 24, 1995 between Crown
American Realty Trust and CBA Funding, L.L.C., as Agent (d)
10.18 Exchange Agreement dated as of April 24, 1995 among CBA Funding,
L.L.C., as Agent, Crown American Realty Trust, Crown American
Properties, L.P., Crown Investments Trust and Crown American
Investment Company (d)
10.19 Crown American Properties L.P. Savings Restoration Plan (e) #
21 List of subsidiaries of the Company. (g)
23 Consent of Arthur Andersen LLP (g)
24 Powers of Attorney (g)
99(a) Press release dated February 25, 1999 (g)
99(b) Fourth Quarter 1998 Supplemental Financial and Operational Information
Package (g)
(a) Filed as an Exhibit to the Company's Report on Form 10K for the year
ended December 31, 1994.
(b) Filed as an Exhibit to the Company's Report on Form 10K for the period
ended December 31, 1993.
(c) Filed as an Exhibit to the Company's Registration Statement on Form
S-11, effective as of August 9, 1993.
(d) Filed as an Exhibit to Amendment No. 1 to the Company's Registration
Statement on Form S-3, Registration No. 33-91880, effective as of
June 9, 1995.
(e) Filed as an Exhibit to the Company's report on Form 10K for the year
ended December 31, 1996.
(f) Filed as an Exhibit to the Company's report on Form 10K for the year
ended December 31, 1997.
(g) Filed herewith
# Indicates management contract or compensatory plan or arrangement.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the Company has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
CROWN AMERICAN REALTY TRUST
By /s/ Frank J. Pasquerilla
Frank J. Pasquerilla
Chief Executive Officer
Date: March 9, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Company in the capacities indicated and on the dates indicated.
Signature Title Date
/s/Frank J. Pasquerilla Trustee, Chairman of March 9, 1999
Frank J. Pasquerilla the Board and Chief
Executive Officer
/s/Mark E. Pasquerilla Trustee, Vice-Chairman March 9, 1999
Mark E. Pasquerilla and President
/s/John M. Kriak Trustee, Vice-Chairman March 9, 1999
John M. Kriak and Chief Operating
Officer (Principal
Operating Officer)
/s/Terry L. Stevens Senior Vice President March 9, 1999
Terry L. Stevens and Chief Financial Officer
/s/John A. Washko Vice President and March 9, 1999
John A. Washko Chief Accounting Officer
* Trustee March 9, 1999
Clifford A. Barton
* Trustee March 9, 1999
Donald F. Mazziotti
* Trustee March 9, 1999
Peter J. Siris
* Trustee March 9, 1999
Zachary L. Solomon
*By: /s/ Terry L. Stevens
Terry L. Stevens
as Attorney-in-Fact
<TABLE>
<CAPTION>
Schedule III
CROWN AMERICAN REALTY TRUST
Consolidated Real Estate and Accumulated Depreciation as of December 31, 1998
(Dollars in Thousands)
Costs Capitalized
Initial Cost Subsequent To Acquisitions
Buildings Buildings
and Land and
Encum- Improve- Improve- Improve- Carrying
Properties brances Land ments ments ments Costs
<S> <C> <C> <C> <C> <C> <C> <C>
Bradley Square
Cleveland, TN $ (H) $ 7,012 $ 29,385 $ (281) $ 2,794 $
Capital City
Harrisburg, PA 40,212 1,580 11,269 (193) 9,730 216
Carlisle
Carlisle, PA 12,022 (A) 379 611 9 9,019 139
Chambersburg
Chambersburg, 20,000 (F) 2,363 14,063 38 11,993 271
PA
Crossroads
Beckley, WV 14,296 2,732 19,941
Francis Scott
Key
Frederick, MD 35,000 (F) 3,784 12,170 (636) 19,824 100
Franklin
Washington, PA 2,931 2,977 3,915 44 29,183 355
Greater
Lewistown
Lewistown, PA 3,617 657 3,845
Jacksonville
Jacksonville, 27,436 (I) 11,062 26,835
NC
Logan Valley
Altoona, PA 57,000 (G) 2,138 954 2,230 78,450 7,411
Lycoming
Williamsport, 35,000 (F) 2,110 14,204 (24) 16,965 638
PA
Martinsburg
Martinsburg,WV 17,500 (F) 8,375 37,547 (653) 4,114 22
Middletown
Fairmont, WV (J) 1,610 10,359 (1,610) (10,360) 1
Mt. Berry
Square
Rome, GA (H) 6,260 37,434 2 4,552
New River
Valley
Christiansburg, 17,000 (F) 3,923 27,094 38 5,850
VA
Nittany
State College, 30,000 (F) 6,683 6,204 95 31,109 5,834
PA
North Hanover
Hanover, PA 20,000 (F) 1,272 1,325 591 15,324 194
Oak Ridge
Oak Ridge, TN 25,111 9,393 31,323 (272) 8,252 1,371
Pasquerilla
Plaza
Johnstown, PA 43,489 3,289 23,010 3 741
Patrick Henry
Newport News, 50,500 (F) 3,953 22,432 14 16,201 541
VA
Phillipsburg
Phillipsburg, 30,000 (F) 11,169 50,368 36 3,526
NJ
Schuylkill
Frackville, PA 35,857 10,332 24,843 105 10,437 5
Shenango
Valley
Sharon, PA (H) 6,403 22 9,001 151
South
Allentown, PA 15,000 (F) 3,465 2,331 23 14,093
Uniontown
Uniontown, PA 24,000 (F) 6,635 1,384 33,137 2,540
Valley Mall
Hagerstown, MD (H) 12,036 19,945 359 3,360 40
Viewmont
Scranton, PA 30,000 1,696 4,602 6,768 39,418 7,701
(B), (F)
West
Manchester
York, PA 27,000 (F) 7,694 24,122 2,455 19,928 777
Westgate
Anchor Pad
Bethlehem, PA 3,219
Wyoming Valley
Wilkes-Barre, 57,000 (G) 6,825 52,057 (90) 3,249 12
PA
Total $669,971 $134,769 $528,445 $10,457 $389,890 $28,319
See following page for note references (A) to (J).
</TABLE>
<TABLE>
<CAPTION>
Gross Amounts at Which
Carried at Close of Period
Buildings
and
Improve- Accum. Date of Date
Properties Land ments Total Deprec. Construction Acquired
<S> <C> <C> <C> <C> <C> <C>
Bradley Square
Cleveland, TN $ 6,731 $ 32,179 $ 38,910 $ (10,103) 1991
Capital City
Harrisburg, PA 1,387 21,215 22,602 (11,447) 1974
Carlisle
Carlisle, PA 388 9,769 10,157 (5,873) 1964
Chambersburg
Chambersburg, 2,401 26,327 28,728 (13,358) 1982
PA
Crossroads
Beckley, WV 2,732 19,941 22,673 (868) 1998
Francis Scott
Key
Frederick, MD 3,148 32,094 35,242 (16,441) 1978
Franklin
Washington, PA 3,021 33,453 36,474 (12,242) 1969
Greater
Lewistown
Lewistown, PA 657 3,845 4,502 (135) 1998
Jacksonville
Jacksonville, 11,062 26,835 37,897 (1,135) 1998
NC
Logan Valley
Altoona, PA 4,368 86,815 91,183 (16,641) 1965,
1995-96
Lycoming
Williamsport, 2,086 31,807 33,893 (15,539) 1978,
PA 1990
Martinsburg
Martinsburg,WV 7,722 41,683 49,405 (12,126) 1991
Middletown
Fairmont, WV 1995
Mt. Berry
Square
Rome, GA 6,262 41,986 48,248 (12,532) 1991
New River
Valley
Christiansburg, 3,961 32,944 36,905 (9,735) 1988
VA
Nittany
State College, 6,778 43,147 49,925 (15,849) 1968,
PA 1970,
1991
North Hanover
Hanover, PA 1,863 16,843 18,706 (10,684) 1967
Oak Ridge
Oak Ridge, TN 9,121 40,946 50,067 (16,879) 1989
Pasquerilla
Plaza
Johnstown, PA 3,292 23,751 27,043 (7,782) 1989
Patrick Henry
Newport News, 3,967 39,174 43,141 (12,394) 1987
VA
Phillipsburg
Phillipsburg, 11,205 53,894 65,099 (18,725) 1989
NJ
Schuylkill
Frackville, PA 10,437 35,285 45,722 (18,608) 1980
Shenango
Valley
Sharon, PA 22 15,555 15,577 (8,564) 1967,
1995
South
Allentown, PA 3,488 16,424 19,912 (5,956) 1980
Uniontown
Uniontown, PA 1,384 42,312 43,696 (19,497) 1969,
1984
1989
Valley Mall
Hagerstown, MD 12,395 23,345 35,740 (1,575) 1997
Viewmont
Scranton, PA 8,464 51,721 60,185 (15,887) 1968,
1994-95
West
Manchester
York, PA 10,149 44,827 54,976 (14,838) 1981,
1995
Westgate
Anchor Pad
Bethlehem, PA 3,219 3,219 (1,031) 1988
Wyoming Valley
Wilkes-Barre, 6,735 55,318 62,053 (16,981) 1995
PA
Total $145,226 $ 946,654 $ 1,091,880 $ (323,425)
</TABLE>
<TABLE>
<CAPTION>
Schedule III (continued)
CROWN AMERICAN REALTY TRUST
Consolidated Real Estate and Accumulated Depreciation as of December 31, 1998
(Dollars in Thousands)
Depreciation and amortization of the Company's investment in buildings and
improvements reflected in the statements of operations are calculated over the
estimated useful lives of the assets as follows:
Base Building 45 years
Building 10 - 20 years
Components
Tenant Improvement Terms of Leases or useful lives,
whichever is shorter
The aggregate cost for Federal income tax purposes was approximately $1,054
million at December 31, 1998.
The changes in total real estate assets and accumulated depreciation and
amortization for the periods February 1, 1993 to August 16, 1993, and
August 17, 1993 to December 31, 1993, and the years ended December 31, 1994,
1995, 1996, and 1997 are as follows:
Total Real Estate Assets
Years ended December 31,
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Balance, beginning of $ 984,729 $ 919,469 $ 880,279 $ 799,090 $ 779,184
period
Additions and 59,988 34,230 50,245 46,916 39,809
improvements
Acquisitions 65,602 31,981 70,180
Adjustments to (35,000)
carrying value
Cost of real estate (16,270) (341) (9,612) (907) (19,903)
sold
Other writeoffs (2,169) (610) (1,443)
Balance, end of $1,091,880 $ 984,729 $ 919,469 $ 880,279 $ 799,090
period
Accumulated Depreciation & Amortization
Years ended December 31,
1998 1997 1996 1995 1994
Balance, beginning of $ 292,375 $ 259,099 $ 232,771 $ 190,379 $ 173,930
period
Depreciation and 38,979 33,886 29,987 29,546 24,816
amortization
Acquisitions 12,846
Cost of real estate (5,760) (2,216) (8,367)
sold
Other writeoffs (2,169) (610) (1,443)
Balance, end of $ 323,425 $ 292,375 $ 259,099 $ 232,771 $ 190,379
period
(A) Includes $1,250 secured only by a bank letter of credit.
(B) Includes $30,000 secured only by assignment of leases.
(C) Improvements are reported net of dispositions.
(D) Initial cost for constructed malls is cost at end of first complete
fiscal year subsequent to opening and includes carrying costs on
initial construction.
(E) Carrying costs consist of capitalized construction period interest and
taxes on expansions and major renovations subsequent to initial
construction of the mall.
(F) Thirteen malls in the Financing Partnership are cross-defaulted and
cross-collateralized.
(G) Logan Valley and Wyoming Valley are cross-defaulted and cross-
collateralized.
(H) Shenango Valley, Mt. Berry Square, Bradley Square and Valley Mall are
mortgaged to secure the $50.0 million GECRE working capital line of
credit. These four properties are cross-defaulted and cross-
collateralized.
(I) Jacksonville is mortgaged to secure the $100.0 million GECRE acquisition
line of credit.
(J) Middletown Mall was sold to an unrelated third party in 1998.
</TABLE>
<TABLE>
<CAPTION>
Schedule IV
CROWN AMERICAN REALTY TRUST
Valuation and Qualifying Accounts and Reserves
(Dollars in Thousands)
Balance Balance
at Additions at
January Charged December
1, to 31,
Description 1998 Expense Other Deductions 1998
<S> <C> <C> <C> <C>
Allowance for doubtful $ 1,966 $ 629 $ $ (1,478) $ 1,117
accounts
Reserve for uninsured 3,803 1,273 (1,095) 3,981
risks
</TABLE>
EXHIBIT 10.2 (e)
FIFTH AMENDMENT TO AMENDED
AND RESTATED AGREEMENT OF
LIMITED PARTNERSHIP OF
CROWN AMERICAN PROPERTIES, L.P.
THIS FIFTH AMENDMENT TO AMENDED AND RESTATED AGREEMENT OF LIMITED
PARTNERSHIP OF CROWN AMERICAN PROPERTIES, L.P. (this "Amendment") is made and
entered into as of December 31, 1997 by and among the undersigned parties.
W I T N E S S E T H:
WHEREAS, Crown American Properties, L.P. (the "Partnership") was
formed as a Delaware limited partnership on July 23, 1993 pursuant to an
Agreement of Limited Partnership dated July 18, 1993, with Crown American Realty
Trust, a Maryland real estate investment trust (the "General Partner"), as
general partner and Crown American Corporation, a Pennsylvania corporation
("CAC"), as limited partner;
WHEREAS, the General Partner, CAC and Crown Investment Trust, a
Delaware business trust, entered into an Amended and Restated Agreement of
Limited Partnership dated as of August 17, 1993, as amended by a First Amendment
dated as of December 31, 1993, a Second Amendment dated as of January 27, 1995,
a Third Amendment dated as of February 1, 1995; and a Fourth Amendment dated as
of July 1, 1997;
WHEREAS, capitalized terms used herein and not otherwise defined
herein shall have the meanings given them in the Agreement;
WHEREAS, the Partnership previously has adopted the 1993 Crown
American Realty Option Plan (the "Option Plan") pursuant to which eligible
employees have been, and will in the future be, granted options to purchase
Partnership Units in the Partnership ("Options");
WHEREAS, the General Partner deems it advisable to amend the Agreement
to provide expressly for the redemption of Partnership Units issuable upon
exercise of underlying Options;
WHEREAS, the General Partner has further determined that it is
advisable that such redemption be solely for Shares and that it should occur
automatically upon exercise of the Options and without any further action being
required on the part of the holder of the Options; and
WHEREAS, the number of Shares issuable upon the exercise of each
Option shall be determined based upon the Conversion Factor in effect at the
time of such exercise.
NOW, THEREFORE, in consideration of the foregoing, and of the mutual
covenants and agreements herein contained and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto, intending to be legally bound, hereby agree as follows:
1. Amendment to Article IX. The Agreement is hereby amended to add
thereto a new Section 9.5 as follows:
9.5. Redemption of Partnership Units Issuable Upon exercise of
Options. Notwithstanding the other provisions of this
Agreement, including without limitation Section 9.3 hereof, the
provisions of this Section 9.5 shall apply with respect to
options ("Options") currently issued or that may be issued in
the future to employees of the Partnership to acquire
Partnership Units under the 1993 Crown American Realty Option
Plan or any successor or supplementary plan. Any Partnership
Units issuable upon exercise of Options will be deemed to be
automatically redeemed immediately upon exercise and exchanged
for a corresponding number of Shares determined by reference to
the Conversion Factor in effect at the time of such exercise.
The Partnership shall retain the exercise price and shall
deliver to the General Partner a corresponding number of
Partnership Units in exchange for the shares to be delivered by
the Partnership to the person excercising the Options.
2. Ratification of Agreement. As amended hereby, the provisions of
the Agreement are hereby ratified and confirmed in all respects.
3. Miscellaneous. This Amendment shall be governed by and construed
in accordance with the laws of the State of Delaware, and shall be binding upon
and shall inure to the benefit of all Partners, and their legal representatives,
heirs, successors and permitted assigns. This Amendment may be executed in
counterparts, each of which shall constitute an original, but all of which shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment or
caused this Amendment to be executed as of the day and year first above written.
GENERAL PARTNER:
CROWN AMERICAN REALTY TRUST,
a Maryland real estate investment trust
By: /s/ John M. Kriak
Name: John M. Kriak
Title: Executive Vice-President
INITIAL LIMITED PARTNER:
CROWN INVESTMENTS TRUST,
a Delaware business trust
By: /s/ Ronald P. Rusinak
Name: Ronald P. Rusinak
Title: Vice-President
ADDITIONAL LIMITED PARTNER:
CROWN AMERICAN INVESTMENT COMPANY,
a Delaware corporation
By: /s/ Ronald J. Hamilton
Name: Ronald J. Hamilton
Title: Vice President
EXHIBIT 10.2 (f)
SIXTH AMENDMENT TO AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP OF
CROWN AMERICAN PROPERTIES, L.P.
THIS SIXTH AMENDMENT TO AMENDED AND RESTATED AGREEMENT OF LIMITED
PARTNERSHIP OF CROWN AMERICAN PROPERTIES, L.P. (this "Amendment") is made and
entered into as of the 28th day of May, 1998 by and among the undersigned
parties. The effective date of this Amendment is as provided in Section 10
hereof.
WITNESSETH:
WHEREAS, Crown American Properties, L.P. (the "Partnership") was
formed as a Delaware limited partnership on July 23, 1993 pursuant to an
Agreement of Limited Partnership dated July 18, 1993, with Crown American Realty
Trust, a Maryland real estate investment trust (the "General Partner"), as
general partner and Crown American Corporation, a Pennsylvania corporation
("CAC"), as limited partner;
WHEREAS, the General Partner, CAC and Crown Investment Trust, a
Delaware business trust, entered into an Amended and Restated Agreement of
Limited Partnership dated as of August 17, 1993, as amended by a First Amendment
dated as of December 31, 1993, a Second Amendment dated as of January 27, 1995,
a Third Amendment dated as of February 1, 1995; a Fourth Amendment dated as of
July 1, 1997; and a Fifth Amendment dated as of December 31, 1997 (the
"Agreement") in which certain amendments added Additional Limited Partners to
the Partnership;
WHEREAS, capitalized terms used herein and not otherwise defined
herein shall have the meanings given them in the Agreement;
WHEREAS, the Partners have determined that it is in the best interests
of the Partnership for Pasquerilla and Crown American Enterprises, Inc., a
Pennsylvania corporation ("CAE") to contribute their respective interests in
Greater Lewistown Shopping Mall, a Pennsylvania general partnership ("GLSP") of
which Pasquerilla and CAE are the sole partners (the "Interests") to Crown
American Lewistown Associates, L.P., a Pennsylvania limited partnership
("CALA"), of which the Partnership is a limited partner holding 99.5% interest
in exchange for (1) the issuance of Additional Interests pursuant to Section 9.3
of the Agreement to Frank J. Pasquerilla ("Pasquerilla"), (2) a cash payment to
CAE and (3) the assumption of certain indebtedness owed by GLSP to NBOC Bank
pursuant to a certain Loan Agreement dated April 29, 1996 by and between GLSP
and NBOC Bank for a principal amount of $3,850,000 (the "Senior Indebtedness").
WHEREAS, the sole assets of GLSP are (a) Ground Lease dated as of May
18, 1965 by and between Stanley H. Rothermel and George D. Zamias, as amended,
as described on Exhibit A attached hereto (the "Ground Lease") and (b) a fee
interest in (i) two parcels totaling 0.40 acres, and (ii) a fee interest in two
parcels totaling 0.19 acres, as described on Exhibit B (the "Fee Interests")
attached hereto (the Ground Lease and the Fee Interests are collectively, the
"Property");
WHEREAS, the Partners desire to have Pasquerilla admitted as a limited
partner of the Partnership pursuant to Section 9.3 of the Agreement; and
WHEREAS, by virtue of the contribution by Pasquerilla of his Interests
to CALA, Pasquerilla will be entitled to a limited partnership Percentage
Interest in the Partnership (which Percentage Interests will be determined after
giving effect to the issuance of such Additional Interests to Pasquerilla.
NOW, THEREFORE, in consideration of the foregoing, and of the mutual
covenants and agreements herein contained and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto, intending to be legally bound, hereby agree as follows:
1. Capital Contributions. Concurrently with the execution and
delivery of this Amendment, Pasquerilla and CAE shall transfer or cause to be
transferred to CALA, as its contribution to the capital of the Partnership,
their Interests. The contribution of the Property to CALA on behalf of the
Partnership shall be deemed a proper contribution of property desirable to
further the purposes of the Partnership under Section 2.3 of the Agreement.
2. Issuance of Additional Partnership Interests and Admittance of
Limited Partners.
(a) In exchange for the capital contributions referred to in
Section 1 hereof, the Partnership shall issue Additional Interests to
Pasquerilla in accordance with Section 9.3 of the Agreement in accordance
with the following formula: $4,500,000 less the amount of the Senior
Indebtedness assumed by CALA (the "Net Consideration"), multiplied by
0.995, divided by the average trading price of the shares for the ten (10)
trading days prior to the earlier of a public announcement of the
transaction or closing of the purchase. The number of Additional Interests
to be issued to Pasquerilla shall be determined conclusively by the General
Partner pursuant to the formula set forth above and issued to Pasquerilla
no later than [thirty days] after the effective date hereof. The
determination by the General Partner of the aggregate number of Additional
Interests and the aggregate amount of cash to be so issued shall, absent
manifest error, be conclusive and binding on the parties. Promptly upon
making such determination, the General Partner, the Additional Limited
Partners and Pasquerilla shall execute an addendum to this Amendment
substantially in the form of Annex 1 hereto, with appropriate insertions
(the "Addendum"), setting forth the total number of Partnership Units
outstanding and the Percentage Interest of each Partner in the Partnership,
after giving effect to the transactions contemplated hereby.
(b) CAE shall receive cash in an amount equal to the Net
Consideration multiplied by 0.005.
(c) Concurrently with the date hereof and the contribution to the
Partnership of the Interests referred to in Section 1 hereof, Pasquerilla
shall be admitted as a limited partners in the Partnership (an "Additional
Limited Partner").
(d) The Partnership Units to be issued to Pasquerilla pursuant hereto
will be ordinary in nature and will not be Preferred Partnership Interests
or Preferred Partnership Units.
3. Concurrent Transactions. Concurrently with, or as soon as
practicable after, the execution and delivery of this Amendment, the following
events shall occur, the following transactions shall be consummated and/or the
following documents shall be executed and delivered:
(a) CALA, Pasquerilla and CAE will consummate the contribution of the
Interests to CALA pursuant to an Assignment and Assumption and the
transaction contemplated thereunder, which shall provide, inter alias for
the assumption by CALA of the Senior Indebtedness; and
(b) the Partnership shall execute and deliver such further
instruments and undertake such further acts as may be necessary or
desirable to carry out the intent and purposes of the Agreement and this
Amendment and as are not inconsistent with the terms thereof and hereof.
4. Apportionments. With respect to the Interests contributed to
CALA by Pasquerilla and CAE on the date hereof, CALA, on one hand, and
Pasquerilla and CAE, on the other hand, shall apportion the Apportioned Items
(as defined in Exhibit G to the Agreement), as of the close of business on the
date immediately preceding the date hereof, between CALA, on one hand, and
Pasquerilla and CAE, on the other hand, in accordance with the provisions of
such Exhibit G. All references to "Crown" shall be deemed to refer to GLSP.
All references to "Initial Limited Partner" shall be deemed to refer to
Pasquerilla and CAE. All references to the "Partnership" shall be deemed to
refer to CALA. [Such apportionments shall be determined in the manner set
forth in Section 5.4 of the Agreement (with corresponding references to "the
date hereof" being deemed to refer to the date of this Amendment).] Any net
amounts owing after giving effect to such apportionment shall be settled by a
payment in cash to the party entitled thereto on the date such property is
contributed or as soon thereafter as is practicable.
5. Representations and Warranties of Pasquerilla and CAE.
Pasquerilla and CAE represent and warrant to the Partnership and the General
Partner that:
(a) Organization; Authority. GLSP is duly organized and validly
existing under the laws of the Commonwealth of Pennsylvania
(b) Due Authorization: Binding Agreement. This Amendment has been
duly executed and delivered by Pasquerilla and constitutes a legal, valid
and binding obligation of him, enforceable against him in accordance with
the terms hereof. CAE has joined in this Amendment for purposes of this
Section 5 (the "Joinder"), which such Joinder has been duly authorized,
executed and delivered by CAE and constitutes a legal, valid and binding
obligation of it, enforceable against it in accordance with the terms
hereof.
(c) Consents and Approvals. No consent, waiver, approval or
authorization of, or filing, registration or qualification with, or notice
to, any governmental unit or any other person is required to be made,
obtained or given by Pasquerilla and CAE in connection with the execution,
delivery and performance of this Amendment.
(d) No Violation. None of the execution, delivery or performance of
this Amendment by Pasquerilla and or the Joinder by CAE does or will, with
or without the giving of notice, lapse of time or both, (i) violate,
conflict with or constitute a default under any term or condition of
(A) the organizational documents of GLSP or CAE, or any Significant
Agreement to which GLSP, Pasquerilla or CAE is a party or by which GLSP,
Pasquerilla or CAE or the Property is bound, or (B) any terms or provision
of any judgment, decree, order, statute, injunction, rule or regulation of
a governmental unit applicable to GLSP or Pasquerilla and CAE, or any
Significant Agreement to which GLSP, Pasquerilla or CAE is a party or by
which GLSP, Pasquerilla or CAE or their assets are bound or (ii) result in
the creation of any Lien or other encumbrance upon the Property.
(e) Compliance with Laws. To the best of Pasquerilla's and CAE's
knowledge, the Property is in compliance with all laws applicable to the
use and operation of the Property and all licenses and permits required for
the use or operation of the Property have been obtained, except where the
failure to so comply or obtain could not or would not have a material
adverse effect on the Property. To the best of Pasquerilla's and CAE's
knowledge, such licenses and permits are in full force and effect,
Pasquerilla and CAE have not taken any action that would (or failed to take
any action the omission of which would) result in the revocation of such
licenses or permits and Pasquerilla and CAE have not received any notice of
violation from any federal, state or municipal entity or notice of an
intention by any such government entity to revoke any certificate of
occupancy or other certificate, license or permit issued by it in
connection with the use of the Property or any part thereof, that in each
case has not been cured or otherwise resolved to the satisfaction of such
government entity, except where such failure or such action could not or
would not have a material adverse effect on the Property.
(f) Environmental Matters. Pasquerilla and CAE have not knowingly
caused or permitted any Hazardous Material to be improperly maintained or
disposed of on, under or at the Property or any part thereof in
concentrations which exceed cleanup guidelines under applicable
Environmental Laws. To the best of Pasquerilla's and CAE's knowledge:
(i) the Property is in compliance, and has heretofore complied, in all
material respects with all Environmental Laws, (ii) none of Pasquerilla,
CAE or GLSP have received any written notice from any governmental unit or
other person that it, its current or former operations or the Property now
or heretofore leased or used by it or any of its predecessors, is not or
has not been in compliance with any Environmental Laws or that it has any
material liability with respect thereto, (iii) there are no administrative,
regulatory or judicial proceedings pending or threatened against GLSP
pursuant to, or alleging any material violation of, or material liability
under any Environmental Laws relating to the Property, (iv) except in
compliance in all material respects with all Environmental Laws, the
Property has not been used as a storage or disposal site (whether temporary
or permanent) for any hazardous, toxic or dangerous materials the storage
or disposal of which is governed by any Environmental Laws, and (v) there
are no underground storage tanks located on, under or about the Property
which are not in compliance with all applicable Environmental Laws,
including the notification requirements under Section 9002 of the Solid
Waste Disposal Act, as now or hereafter amended (42 U.S.C. 6991, 6991a),
and there is no facility located on or at the Property that is subject to
the reporting requirements of Section 312 of the Federal Emergency Planning
and Community Right to know Act of 1986 and the federal regulations
promulgated thereunder (42 U.S.C. 11022).
(g) Rent Roll. The rent roll for the Property attached hereto as
Exhibit C, is true, correct and complete and there are no renewal or
extension options other than those summarized on each of such rent rolls,
except in each case to the extent any inaccuracies would not, individually
or in the aggregate, have a material adverse effect on the value of the
Property.
(h) Significant Agreements. Each of the Significant Agreements is
valid and binding and in full force and effect, enforceable against the
parties thereto in accordance with its terms, subject to the bankruptcy or
insolvency of such parties, similar laws of general applicability relating
to or affecting creditors' rights and to general equity principles.
(i) Ownership of the Property. Prior to its conveyance to the
Partnership, GLSP is the sole owner of the Property, and upon such
contributions to CALA pursuant to Section 1 hereof, CALA will have good,
valid and marketable title thereto, free and clear of all Liens, other than
the Senior Indebtedness and Permitted Exceptions.
(j) Litigation. There are no claims, actions, suits, proceedings or
investigations pending or, to the best of Pasquerilla's and CAE's
knowledge, threatened before any court, governmental unit or any arbitrator
with respect to the Property which are not adequately covered by insurance.
(k) Non-Foreign Status. Neither of Pasquerilla and CAE are a
"foreign person" within the meaning of Section 1445(f) of the Code or a
"foreign partner" within the meaning of Section 1446 of the Code.
(l) Transfer Taxes. There are no transfer taxes payable, accruing or
otherwise arising out of the transfer of the Property to CALA which shall
not have been paid prior to the date hereof or for which a cash provision
in the amount of such taxes has not been made.
(m) Service Agreements. Service Agreements appropriate for the
intended use and operation of the Property have been entered into and,
except for any such Service Agreements that are necessary for the intended
use and operation of the Property, are terminable by the owner of the
Property within not more than 45 days.
(n) Property Equipment. The equipment located at the Property is
sufficient to permit the full operation of the improvements for their
intended purpose.
(o) Condemnation Proceedings. No proceedings have been commenced,
or, to the best of Pasquerilla's and CAE's knowledge, threatened, by an
authority having the power of eminent domain to condemn any part of the
Property or any improvements thereon or, to the best of Pasquerilla's and
CAE's knowledge, any property owned by a party to a reciprocal easement
agreement affecting the Property.
(p) Bankruptcy and Insolvency. To the best of Pasquerilla's and
CAE's knowledge, none of the tenants now occupying the Property or having a
current lease affecting the Property is the subject of any bankruptcy,
reorganization, insolvency or similar proceedings.
(q) Insurance. The disclosure schedule attached hereto as Exhibit D
(the "Property Disclosure Schedule") sets forth an accurate and complete
list of the insurance policies relating to the Property or any part thereof
and naming GLSP as an insured; all such policies are in full force and
effect and all premiums thereunder have been paid to the extent due; and no
notice of cancellation has been received with respect thereto and, to the
best of GLSP's, Pasquerilla's and CAE's knowledge, none is threatened.
(r) Full Disclosure. No representation or warranty by Pasquerilla
and CAE herein contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained
herein, in light of the circumstances under which they were made, not
misleading.
Neither Pasquerilla nor CAE owns, directly or indirectly, (i) one
percent (1%) or more of the total combined voting power of all classes of
stock entitled to vote, or one percent (1%) or more of the total number of
shares of all classes of stock, of any corporation that is a tenant of the
Property, or (ii) an interest of one percent (1%) or more in the assets or
net profits of any tenant of the Property.
(s) REAs and Leases. To the best of Pasquerilla's and CAE's
knowledge, no condition exists which, with the giving of notice or the
passage of time, or both, would permit any party to cancel its obligations
under any reciprocal easement agreement or lease affecting the Property or
to be relieved of its operating covenants thereunder. Pasquerilla and CAE
have not received written notice or, to the best of their knowledge, any
notice, whether or not in writing, that any anchor tenant operating a store
at the Property as of the date hereof intends either to cease such
operation (other than temporarily due to casualty, remodeling, renovation
or any similar cause) or to cease operating under the name under which it
was operating as of the date hereof.
(t) Alterations. All alterations, improvements or other work
required to have been completed by GLSP under any reciprocal easement
agreement and lease to which it is a party affecting the Property,
including, without limitation, all alterations, improvements and other work
required to prepare space for the initial occupancy of each tenant under a
lease, has heretofore been completed and paid for in full.
(u) Independent Unit. The Property is an independent unit which does
not now rely on any facilities (other than facilities covered by Permitted
Exceptions, including, without limitation, any reciprocal easement
agreements or facilities of municipalities or public utility and water
companies and other than parking areas which the Property makes use of
under any reciprocal easement agreements) located on any property not
included in the Property to fulfill any municipal or governmental
requirement or for the furnishing to the Property, or any part thereof, of
any essential building systems or utilities.
(v) Easements and Restrictive Covenants. Neither Pasquerilla nor CAE
have received or been informed in writing of the receipt of any written
notice which is still in effect that there is, and, to the best of their
knowledge, there does not exist, any violation of a condition or agreement
contained in any easement, restrictive covenant or any similar instrument
or agreement affecting the Property, or any portion thereof.
(w) Radius Clauses. To the best of Pasquerilla's and CAE's knowledge
(but without having made any special investigation), the Property is not in
violation of any radius restrictions, exclusive or similar provisions
contained in any reciprocal easement agreements, tenant leases or any other
agreements with the parties to any reciprocal easement agreements or leases
affecting the Property.
For the purposes of the above representations and warranties, a
statement that a fact is true to "the best of Pasquerilla's and CAE's knowledge"
or words of similar import means that, after due investigation including
reasonable inquiry (unless the context otherwise requires) made by Pasquerilla
or any director, officer, agent or employee of CAE actually knows such statement
to be untrue.
6. Applicability of Article XII. The provisions of Article XII
(other than Section 12.1, 12.7 and 12.8) of the Agreement applicable to the
Initial Limited Partner with respect to representations and warranties made by
it shall be applicable to Pasquerilla and CAE with respect to the
representations and warranties made by Pasquerilla and CAE in Section 5 hereof
(it being understood for this purpose that any reference therein to the
Completion of the Offering shall be deemed to refer to the date of the
contribution by Pasquerilla and CAE to the Partnership of their respective
interests in the Property and any reference to Article XII or a respective
Section thereunder shall be deemed to refer to Section 5 hereof or the
respective subsection thereunder. In addition for purposes of this Section 6,
Article XII will be amended as follows:
(a) Clause (ii) in Section 12.3 shall be deleted.
(b) Section 12.4(b) shall be amended by replacing "$1,000,000" in
lines 4, 6 and 11 thereof with "$10.00".
(c) The term "Pledged Shares" set forth in Section 12.5 of the
Agreement shall be deemed to include the Partnership Units issued to
Pasquerilla pursuant to Section 2 hereof.
7. Amendment of the definition of "Partnership Unit". Upon the
issuance of Additional Interests to Pasquerilla, respectively, in exchange for
the contribution of his interest in the Property pursuant to Section 2 hereof,
the definition of "Partnership Unit" in Section 1.1 of the Agreement shall be
deemed amended and restated in its entirety in accordance with the provisions of
the Addendum.
8. Ratification of Agreement. As amended hereby, the provisions of
the Agreement are hereby ratified and confirmed in all respects.
9. Miscellaneous. This Amendment shall be governed by and construed
in accordance with the laws of the State of Delaware, and shall be binding upon
and shall inure to the benefit of all Partners, and their legal representatives,
heirs, successors and permitted assigns. This Amendment may be executed in
counterparts, each of which shall constitute an original, but all of which shall
constitute one and the same instrument.
10. Effective Date. This Amendment shall be effective as of May 31,
1998; provided, however, that the parties hereto, by unanimous consent, may
designate an earlier effective date if appropriate to more adequately effect the
intent of the parties.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment or
caused this Amendment to be executed as of the day and year first above written.
GENERAL PARTNER:
CROWN AMERICAN REALTY TRUST,
a Maryland real estate investment trust
By: /s/John M. Kriak
Name: John M. Kriak
Title: Executive Vice President
INITIAL LIMITED PARTNER:
CROWN INVESTMENTS TRUST,
a Delaware business trust
By: /s/Ronald P. Rusinak
Name: Ronald P. Rusinak
Title: Vice President
ADDITIONAL LIMITED PARTNERS:
CROWN AMERICAN INVESTMENT COMPANY,
a Delaware corporation
By: /s/ John M. Kriak
Name: John M. Kriak
Title: Executive Vice President
/s/ Frank J. Pasquerilla
Frank J. Pasquerilla
LIMITED JOINDER
Crown American Enterprises, Inc., as an inducement to the parties
hereto to enter into this Amendment and intending to be legally bound, has
executed this Limited Joinder solely for the purpose of agreeing to be bound by
the provisions of Section 5 of this Amendment.
IN WITNESS WHEREOF, this Limited Joinder is executed as of the date
first above written.
CROWN AMERICAN ENTERPRISES, INC.
By: /s/ Frank J. Paquerilla
Frank J. Pasquerilla
Chief Executive Officer
EXHIBIT A
Description of Ground Lease
Lease from Stanley H. Rothermel and Helen D. Rothermel (the "Ground
Lessor") to George D. Zamias and Crown Construction Company dated May 18, 1965,
a memorandum of which is recorded in the Recorder's Office of Mifflin County,
Pennsylvania (the "Recorder's Office") in Deed Book Volume 162, Page 334; as
amended by Amendment dated July 23, 1965 and recorded in the Recorder's Office
in Record Book Volume 171. Page 433; as assigned by Assignment of Lease from
George D. Zamias and Crown Construction Company to Greater Lewistown Shopping
Plaza, Inc. dated December 17, 1965, and recorded in the Recorder's Office in
Misc. Book Volume 59, Page 843; as amended by Agreements dated March 10, 1966
and January 28, 1967 and recorded in the Recorder's Office in Record Book Volume
171, Page 439; as assigned by Assignment of Lease from Greater Lewistown
Shopping Plaza, Inc., a Pennsylvania corporation, to Greater Lewistown Shopping
Plaza, a Pennsylvania general partnership of Frank J. Pasquerilla and George D.
Zamias dated April 5, 1985; as amended by Second Amendment of Lease dated June
9, 1995; as amended by Third Amendment of Lease by and between Mellon Bank and
Helen D. Rothermel, Co-Trustees of the Treat created under the Will of Stanley
E. Rothermel, deceased, and Helen D. Rothermel, individually, and Greater
Lewistown Shopping Plaza, a Pennsylvania general partnership, dated April 1,
1996, a memorandum of which is dated April 1, 1996 and recorded in the
Recorder's Office on April 22, 1996 in Record Book Volume 432, Page 1873.
EXHIBIT B
FIRST:
ALL THAT CERTAIN tract or parcel of land situate in the Borough of Burnham,
Mifflin County, Pennsylvania, more particularly bounded and described as
follows:
TRACT NO. 1
BEGINNING at an iron pin on the western right of way of Logan Boulevard
(S.R. 1005), said iron pin being a common corner of land now or formerly of
Greater Lewistown Shopping Plaza; thence along said right of way, South 29
degrees 30 minutes East, 78.00 feet to a point; thence along land now or
formerly of Greater Lewistown Shopping Plaza, Inc., South 60 degrees 45 minutes
West, 159.25 feet to an iron pin; thence along land now or formerly of
Stanley H. Rothermel and Helen D. Rothermel and leased by Greater Lewistown
Shopping Plaza, Inc., North 31 degrees 39 minutes 55 seconds West, 55.05 feet to
an iron pin; thence along said land, North 26 degrees 11 minutes 23 seconds
West, 23.03 feet to an iron pin; thence along land now or formerly of Greater
Lewistown Shopping Plaza, North 60 degrees 45 minutes East, 160.00 feet to an
iron pin, the place of beginning.
CONTAINING 0.29 acres.
TRACT NO. 2:
BEGINNING at a point on the western right of way of Logan Boulevard
(S.R. 1005), said point being a common corner of land now or formerly of Greater
Lewistown Shopping Plaza, Inc., thence along said right of way, South 29 degrees
30 minutes East, 30.00 feet to an iron pin; thence along land now or formerly of
Stanley H. Rothermel and Helen D. Rothermel and leased by Greater Lewistown
Shopping Plaza, Inc., South 60 degrees 45 minutes West, 158.58 feet to an iron
pin; thence along said land, North 30 degrees 46 minutes 45 seconds West, 30.01
feet to an iron pin; thence along land now or formerly of Greater Lewistown
Shopping Plaza, Inc., North 60 degrees 45 minutes East, 159.25 feet to an iron
pin, the place of beginning.
CONTAINING 0.11 acres
BEING the same property which Greater Lewistown Shopping Plaza, Inc., by
its deed dated April 10, 1996 and recorded in the Recorder's Office of Mifflin
County, Pennsylvania on April 30, 1996 in Record Book Volume 432, page 2524, as
amended by Corrective Deed dated April 29, 1996 and recorded on April 30, 1996
in Record Book Volume 432, page 2350 granted and conveyed to Grantor herein.
SECOND:
ALL those certain pieces, parcels or lots of ground situate in the Borough
of Burnham, County of Mifflin and Commonwealth of Pennsylvania, bounded and
described as follows, to wit:
TRACT NO. 1:
FRONTING 22 feet, more or less, on the State Highway, formerly Lewistown
and Kishacoquillas Turnpike, and extending back 160 feet to lands now of Stanley
Rothermel and wife (formerly Joseph Kelley); bounded on the North by property
now or formerly of Robert Shuttlesworth, on the West by property now or Stanley
Rothermel and wife (formerly Joseph Kelley), on the South by property now or
formerly of Paul C. Runkle, and on the East by State Highway, formerly Lewistown
and Kishacoquillas Turnpike.
Tax Map Reference No. 08-08-119.
TRACT NO. 2:
FRONTING 30-1/2 feet on Logan Boulevard, formerly Lewistown and
Kishacoquillas Turnpike, and extending back between two parallel lines about 160
feet to property now or formerly of Joseph Kelley, bounded on the North by
remainder of Lot No. 42, on the East by said Logan Boulevard, on the South by
remainder of property of which this is a part, and on the West by land now or
formerly of Joseph Kelley.
BEING the same premises Greater Lewistown Shopping Plaza, Inc., a
Pennsylvania corporation, by Deed dated April 10, 1996 and recorded among the
records of Mifflin County on April 30, 1996 in Deed Book Volume 432, Page 2524,
sold and conveyed to Greater Lewistown Shopping Plaza, a Pennsylvania general
partnership.
ADDENDUM TO SIXTH AMENDMENT TO AMENDED AND
RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF
CROWN AMERICAN PROPERTIES, L.P.
THIS ADDENDUM TO SIXTH AMENDMENT TO AMENDED AND RESTATED AGREEMENT OF
LIMITED PARTNERSHIP OF CROWN AMERICAN PROPERTIES, L.P. (this "Addendum") is made
and entered into as of the 16th day of June, 1998 by and among the undersigned
parties. Capitalized terms not otherwise defined shall have same definitions as
set forth in the Sixth Amendment.
1. Pursuant to Section 9.3 of the Agreement and Sections 1 and 2 of
the Sixth Amendment, Pasquerilla has contributed his respective Interests in
GLSP to CALA in exchange for the issuance by the Partnership to Pasquerilla of
the following Additional Interests:
Additional Additional
Limited Partner Interests
Pasquerilla 79,551 Partnership Units
2. The definition of "Partnership Unit" in Section 1.1 of the
Agreement is accordingly amended and restated in its entirety to read as
follows:
"Partnership Unit" shall mean a fractional, undivided share of
the Partnership Interests of all Partners issued pursuant hereto. As
of May 31, 1998, there shall be considered to be 36,431,842
Partnership Units outstanding, with each 1,000 Partnership Units
representing a .02745% Percentage Interest in the Partnership. The
allocation of Partnership Units as of such date is as follows:
General Partner
(the REIT): 26,475,444 Partnership Units
Initial Limited
Partner (CIT): 8,090,388 Partnership Units
Additional Limited
Partner (CAIC): 1,786,459 Partnership Units
Additional Limited
Partner (Pasquerilla): 79,551 Partnership Units
IN WITNESS WHEREOF, the parties hereto have duly executed this
Addendum this 16th day of June, 1998.
GENERAL PARTNER:
CROWN AMERICAN REALTY TRUST,
a Maryland real estate investment trust
By: /s/John M. Kriak
Name: John M. Kriak
Title: Chief Financial Officer
INITIAL LIMITED PARTNER:
CROWN INVESTMENTS TRUST,
a Delaware business trust
By: /s/Ronald P. Rusinak
Name: Ronald P. Rusinak
Title: Vice-President
ADDITIONAL LIMITED PARTNERS:
CROWN AMERICAN INVESTMENT COMPANY,
a Delaware corporation
By: /s/John M. Kriak
Name: John M. Kriak
Title: Executive Vice-President
/s/ Frank J. Pasquerilla
Frank J. Pasquerilla
EXHIBIT 10.2 (g)
AMENDMENT
THIS AMENDMENT TO SIXTH AMENDMENT TO AMENDED AND RESTATED AGREEMENT OF
LIMITED PARTNERSHIP OF CROWN AMERICAN PROPERTIES, L.P., made as of this 10th day
of September, 1998,
By Crown American Realty Trust, sole General Partner; Crown Investments Trust,
Initial Limited Partner; Crown American Investment Company, Additional Limited
Partner, and Frank J. Pasquerilla, Additional Limited Partner,
W I T N E S S E T H:
WHEREAS, Crown American Properties, L.P. (the "Partnership") was formed as
a Delaware limited partnership on July 23, 1993, pursuant to an Agreement of
Limited Partnership dated July 18, 1993, with Crown American Realty Trust, a
Maryland real estate investment trust (the "General Partner"), as a general
partner and Crown American Corporation, a Pennsylvania corporation ("CAC"), as
limited partner;
WHEREAS, the General Partner, CAC and Crown Investments Trust, a Delaware
business trust, entered into an Amended and Restated Agreement of Limited
Partnership dated as of August 17, 1993, as amended by a First Amendment dated
as of December 31, 1993, a Second Amendment dated as of January 27, 1995, a
Third Amendment dated as of February 1, 1995; a Fourth Amendment dated as of
July 1, 1997; a Fifth Amendment dated as of December 31, 1997, and a Sixth
Amendment dated as of May 28, 1998; (the "Agreement") in which certain
amendments added Additional Limited Partners to the Partnership;
WHEREAS, capitalized terms used herein and not otherwise defined herein
shall have the meanings given them in the Agreement;
WHEREAS, the parties hereto intend to modify the Effective Date of the
Sixth Amendment as provided in Section Ten (10) of the Sixth Amendment.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements herein contained and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto, intending to be legally bound hereby, agree as follows:
1. Effective Date (Section Ten {10} of the Sixth Amendment) shall be
amended by adding the following paragraph to the end thereof:
"The parties agree that it shall be in the best interests of the
Partnership that the Effective Date shall be May 1, 1998, in order to more
adequately effect the intent of the parties. Notwithstanding the aforesaid, the
Issuance of Additional Partnership Interests and Admittance of Limited Partners
as set forth in Section Two (2) hereof shall use May 31, 1998 as the date for
the calculation for the issuance of Additional Partnership Interests only."
IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment to
the Sixth Amendment To Amended and Restated Agreement of Limited Partnership of
Crown American Properties, L.P., as of the 10th day of September, 1998.
GENERAL PARTNER:
CROWN AMERICAN REALTY TRUST,
a Maryland real estate investment trust
By: /s/ John M. Kriak
John M. Kriak
Executive Vice-President
INITIAL LIMITED PARTNER:
CROWN INVESTMENTS TRUST,
a Delaware business trust
By: /s/ Ronald P. Rusinak
Ronald P. Rusinak
Vice President
ADDITIONAL LIMITED PARTNERS:
CROWN AMERICAN INVESTMENT COMPANY,
A Delaware corporation
By: /s/ John M. Kriak
John M. Kriak
Executive Vice-President
/s/ Frank J. Pasquerilla
Frank J. Pasquerilla
EXHIBIT 10.5 (a)
REAL ESTATE MANAGEMENT AGREEMENT
THIS AGREEMENT, made as of the 28th day of August, 1998, between Crown
American Financing Partnership, L.P., a Delaware limited partnership, having its
principal address at Pasquerilla Plaza, Johnstown, Pennsylvania 15907 ("Owner"),
and CROWN AMERICAN PROPERTIES, L.P., a Delaware limited partnership, having its
principal address at Pasquerilla Plaza, Johnstown, Pennsylvania 15907
("Agent").
W I T N E S S E T H
In consideration of the mutual Covenants herein contained, and intending to
be legally bound, the parties hereto agree as follows:
ARTICLE I
APPOINTMENT AND AUTHORITY OF AGENT
1.1 Owner owns fee simple and leasehold interests in certain retail
properties identified on Exhibit A attached hereto and made a part hereof (the
"Premises"). Owner hereby appoints Agent as the exclusive managing and renting
agent for the Premises, and hereby authorizes Agent to exercise such powers with
respect to the Premises as may be necessary for the performance of Agent's
obligations under Article II, and Agent accepts such appointment on the terms
and conditions hereinafter set forth for the term as provided in Article V.
Agent shall have no right or authority, express or implied, to commit or
otherwise obligate Owner in any manner whatsoever except to the extent
specifically provided herein and agrees that it shall not hold itself out as
having authority to act on behalf of Owner in any manner which is beyond the
scope of authority granted to Agent in this Agreement.
ARTICLE II
AGENT'S AGREEEMENT
2.1 Agent, on behalf of Owner, shall implement, or cause to be
implemented, the decisions of Owner and shall conduct the ordinary and usual
business affairs of Owner with respect to the management, operation and leasing
of the Premises as provided in this Agreement. Agent shall at all times conform
to the policies and programs established by Owner and the scope of Agent's
authority shall be limited to said policies. Agent shall act in a fiduciary
capacity with respect to the cash and cash equivalent assets of Owner which are
within the custody or control of Agent. Agent shall deal at arm's length with
all parties and shall serve Owner's interests at all times. All undertakings
incurred by Agent on behalf of Owner in accordance with this Agreement shall be
at the cost and expense of Owner unless otherwise provided for herein. Agent
agrees to use its best efforts in the management and operation of the Premises.
Agent shall perform the following duties in connection with the management and
operation of the Premises:
(a) Contract, for periods not longer than the term of Owner's
leasehold estate, in the name of Owner, for gas, electricity, water and such
other services as are currently being furnished to the Premises. Service
contracts shall be written to include a provision allowing termination by Owner
upon 30 days' notice wherever possible. All service contracts, including those
in effect at the date hereof in respect of the Premises, including the terms
thereof (with cancellation right, if any), the services provided thereunder and
the charges called for thereby, should be detailed in the annual budget package.
No such contract, other than for utilities, including water, which involves an
expenditure in excess of the amount set forth in paragraph 3 of Exhibit A
attached hereto shall hereinafter be entered into by Agent without the prior
approval of Owner. Agent shall also perform the obligations of the Owner under
any utility service agreement and any reciprocal easement agreements.
(b) Select, employ, pay, supervise, direct and discharge all
employees necessary for the proper, safe and economic operation and maintenance
of the Premises, in number and at wages in accordance with industry practices
and the annual budget, carry Worker's Compensation Insurance (and, when required
by law, compulsory Non-Occupational Disability Insurance) covering such
employees, and use reasonable care in the selection, discharge, and supervision
of such employees. Agent will keep bi-weekly time sheets which shall be
available for inspection by Owner. Agent shall prepare or cause to be prepared
and timely filed and paid, all necessary returns, forms and payments in
connection with unemployment insurance, medical and life insurance policies,
pensions, withholding and social security taxes and all other taxes relating to
said employees which are imposed on employees by any federal, state or municipal
authority. Agent shall also provide usual management services in connection
with labor relations and shall prepare, maintain and file all necessary reports
with respect to the Fair Labor Standards Act and all other required statements
and reports pertaining to employees at the Premises. Agent shall use its best
efforts to comply with all laws and regulations and collective bargaining
agreements, if any, affecting such employment. Owner shall have the right to
review and approve all collective bargaining agreements which affect the
Premises prior to their implementation or acceptance by Agent. Agent will be
and will continue throughout the term of this Agreement to be an equal
opportunity employer. All persons employed in connection with the operation and
maintenance of the Premises shall be employees of Agent or employees of
contractors approved by Owner to provide contract services to the Premises.
(c) Keep the Premises in a safe, clean, rentable and sightly
condition and make and contract for all repairs, alterations, replacements, and
installations, do all decorating and landscaping, and purchase all supplies
necessary for the proper operation and maintenance of the Premises and for the
fulfillment of Owner's obligations under any lease, operating agreement or other
agreement or compliance with all governmental and insurance requirements,
provided that, except as provided in Section 2.5 hereof, Agent shall not make
any purchase or do any work, the cost of which shall exceed the approved budget
or the amount set forth in paragraph 3 of Exhibit A attached hereto, without
obtaining in each instance the prior approval of Owner, except in circumstances
which Agent shall deem to constitute an emergency requiring immediate action for
the protection of the Premises or of tenants or other persons or to avoid the
suspension of necessary services or in order to cure any violation or other
condition which would subject Owner or Agent to any criminal penalty or any
civil fine in excess of $5,000.00. Agent shall notify Owner immediately of the
necessity for, the nature of, and the cost of, any such emergency repairs or any
action to cure any such violation or other condition. Agent shall arrange for
and supervise, on behalf of Owner, the performance of all alterations and other
work to prepare or alter space in the Premises for occupancy by tenants thereof.
If Owner shall require, Agent shall submit a list of contractors and
subcontractors performing tenant work, repairs, alterations or services at the
Premises under Agent's direction.
It is understood that Agent shall not be required to undertake the making
or supervision of extensive reconstruction of the Premises or any part thereof
except after written agreement by the parties hereto as to any additional fee to
be paid for such services.
Owner shall receive the benefit of all discounts and rebates obtainable by
Agent in its operation of the Premises. When requested by Owner, Agent agrees
to obtain competitive bids for the performance of any work at the Premises, to
furnish copies of such bids to Owner and to accept such bid as Owner may
direct.
If Agent desires to contract for repair, construction or other service
described in this paragraph (c) (other than work done at the request of a tenant
and at the tenant's sole cost and expense, hereinafter referred to as "Tenant
Work") with a party with respect to which any partner or shareholder of Agent
holds a beneficial interest, or with any subsidiary, affiliate or related
corporation in which Agent shall have a financial interest, such interest shall
be disclosed to, and approved by, Owner before such services are procured. The
cost of any such services shall likewise be at competitive rates,
notwithstanding that tenants of the Premises may be required to pay such costs.
Agent, or a general contractor working under the supervision of Agent is
authorized to make and install Tenant Work. Agent may collect from such tenant
or such general contractor, for its sole account, its charge for supervisory
overhead on all such Tenant Work. Agent shall hold Owner harmless from any
claims which may be advanced by any such tenant in connection with Tenant Work
performed by Agent or under Agent's supervision. Agent, however, shall not
require any tenant to use Agent, its subsidiary, affiliate or related
corporation as its general contractor to perform such Tenant Work.
(d) Handle promptly complaints and requests from tenants and parties
to reciprocal easement and/or operating agreements, notify Owner of any major
complaint made by any such tenant or party and notify owner promptly (together
with copies of supporting documentation) of: the receipt of any notice of
violation of any governmental requirements; any known orders or requirements of
insurers, insurance rating organizations, Board of Fire Underwriters or similar
bodies; any known defect in the Premises; any known fire or other damage to the
Premises, and, in the case of any serious fire or other serious damage to the
Premises, Agent also shall immediately provide telephone notice thereof to
Owner's General Insurance Office, so that an insurance adjuster can view the
damage before repairs are started, and complete customary loss reports in
connection with fire or other damage to the Premises.
(e) Notify Owner's General Liability Insurance carrier and Owner
promptly of any personal injury or property damage known to Agent occurring to
or claimed by any tenant or third party on or with respect to the Premises and
promptly forward to the carrier, completed insurance forms, any summons,
subpoena, or other like legal document served upon Agent relating to actual or
alleged potential liability of Owner, Agent, or the Premises, with copies to
Owner of all such documents.
(f) Advise Owner of those exceptions in leases, operating agreements
and other agreements executed on or after the date hereof in which the tenants
or parties to such agreements do not agree to hold Owner harmless with respect
to liability from any accidents.
(g) At the option of Owner, or as otherwise provided in the Loan
Documents, as hereinafter defined, receive and collect rent and all other monies
payable to Owner by all tenants and licensees in the Premises and by all other
parties including department stores under ground leases and reciprocal easement
agreements and tenants under leases of free-standing stores. In this
connection, Agent shall calculate all amounts due to Owner from such tenants,
licensees and other parties, including annual or periodic adjustments where
applicable, and shall, when appropriate, submit statements or invoices to such
tenants, licensees and parties. Agent shall deposit the same promptly in the
bank named on Exhibit A attached hereto (the "Bank") in an account with title
including a distinctive portion of Agent's name and such designation as Owner
may direct (the "Bank Account"), which account shall be used exclusively for
such funds. Owner's representative will be a signatory on all bank accounts
maintained by Agent and such representative's signature shall be required on all
checks in excess of $50,000 and for withdrawals in excess of $1,000,000 in any
month. All amounts received by Agent for or on behalf of Owner shall be and
remain the property of Owner. Checks may be drawn on the above-mentioned bank
account only for purposes authorized under this Agreement. No funds of Agent or
others shall be commingled with funds in any such bank account. Owner has the
right to control the types of cash management accounts and dictate the specifics
of said accounts with respect to disbursement and management of funds.
(h) Serve notice of default upon tenants of space in the Premises and
other parties which are in default in performing obligations under their leases,
reciprocal easement agreements or other agreements, with copies sent
simultaneously to Owner, and attempt to cause such defaults to be cured by the
defaulting tenant or other party. Agent shall, subject to Owner's consent with
respect to any tenant who occupies more than 1,000 square feet, utilizing
counsel theretofore approved by Owner, institute all necessary legal action or
proceedings for the collection of rent or other income from the Premises or the
ousting or dispossessing of tenants or other persons therefrom and all other
matters requiring legal attention. Agent agrees to use its best efforts to
collect rent and other charges from tenants in a timely manner and to pursue
Owner's legal remedies for nonpayment of same. Agent shall not terminate tenant
leases in the Premises without Owner's consent. Owner reserves the right to
designate or approve counsel and to control litigation of any character
affecting or arising out of the operation of the Premises and the settlement of
such litigation.
(i) Bond Agent and all of Agent's employees who may handle or be
responsible for monies or property of Owner with a "comprehensive 3-D" or
"Commercial Blanket" bond, in an amount of $500,000.00.
(j) Notify Owner immediately of any known fire, accident or other
casualty, condemnation proceedings, rezoning or other governmental order,
lawsuit or threat thereof involving the Premises; and the receipt of any notice
of violations relative to the leasing, use, repair and maintenance of the
Premises under governmental laws, rules, regulations, ordinances or like
provisions.
(k) If Owner so directs, make timely payment of real estate and
personal property taxes and assessments levied or assessed against the Premises
or personal property used in connection therewith and any other charge that may
become a lien against the Premises. Owner may direct that payment of such taxes
and assessments either be made to the taxing authority or to a mortgage lender
holding an escrow account for such items. Agent shall participate in Owner's
tax review program and check tax assessments and, when so requested, Agent shall
assist Owner in its efforts to reduce such taxes. Agent shall promptly furnish
Owner with copies of all assessment notices and receipt tax bills.
(l) Promptly comply with all present and future laws, ordinances,
orders, rules, regulations and requirements of all Federal, state and local
governments, courts, departments, commissions, boards and offices, any national
or local Board of Fire Underwriters or Insurance Services offices having
jurisdiction, or any other body exercising functions similar to those of any of
the foregoing ("Legal Requirements") which may be applicable to the Premises or
any part thereof or to the leasing, use, repair, operation and management
thereof, but only to the extent that such compliance is reasonably capable of
being carried out by Agent and Agent has available the necessary funds therefor
from collections or advances by Owner. Agent shall give prompt notice to Owner
of any known violation or the receipt of notice of alleged violation of such
laws and Agent shall not bear responsibility for failure of the Premises or the
operation thereof to comply with such laws unless Agent has committed gross
negligence or a willful act of omission in the performance of its obligations
under this Agreement or in the performance of any other duties owed to Owner or
third parties by Agent. As and when directed by Owner, Agent shall institute in
its name, or in the name of Owner using counsel selected by Owner, appropriate
actions or proceedings to contest any such law, ordinance, rule, regulation,
order, determination or requirement.
(m) Promote the Premises and participate as Owner's representative in
any Merchant's Associations or Promotional Organizations (collectively, the
"Promotional Organizations") established to promote the Premises.
(n) Consent to and approve tenant alteration work and installations
which are performed by tenants of space in the Premises and are provided for in
the leases of such tenants and are within such tenant's space. Agent is
authorized to approve tenant alteration work and installations not provided for
in leases if (i) such alteration work and installations are made solely at the
expense of the tenant, and (ii) such alteration work and installations do not
affect the structural integrity or facade of any building. Agent shall
periodically monitor the progress of any tenant alteration work and
installations to confirm that the work is being done in a good and workmanlike
manner and in substantial conformity with any plans and specifications approved
by Owner or Agent, and shall notify Owner of any material deficiencies or
material variations from the approved plans and specifications.
(o) Provide, upon Owner's request in accordance with the provisions
of Section 10 and Section 11 of Exhibit A, general contracting and construction
management services ("Development Services") and consultation to Owner for the
Premises, which shall include, without limitation, the management, supervision
and administration of, and provisions for services for the improvement or
expansion (and in the event of damage or condemnation, the reconstruction) of
the Premises, including advice, expertise and support of Agent provided and/or
retained and/or coordinated by home office and on-site personnel including,
without limitation, executive personnel, design and engineering personnel,
clerical personnel, legal and accounting personnel. Such personnel will perform
consultation and various functions involved with Development Services including,
without limitation, the following: design, planning, architectural,
engineering, acquisition and negotiation, negotiations with department stores
for site acquisition and operation in the Premises; permits and licenses;
preopening advertising and publicity; market research, site work; negotiations
with public authorities; attendance at public hearings; project management and
all other activities necessary to accomplish the improvement, expansion or
reconstruction of the Premises. It is understood that Development Services and
consultation with Owner may or may not involve Agent's in-house personnel; by
mutual agreement of Agent and Owner, outside professionals or other persons may
be engaged to provide Development Services and consultation with Owner, provided
that Agent agrees to require any contractor or subcontractor brought onto the
Premises to have workers' compensation and employers' liability insurance in the
necessity statutory amounts and comprehensive general liability insurance for at
least $1,000,000.00.
(p) If Owner so directs, pay when due (i) all debt service and other
amounts due under any mortgages that encumber the Premises or any part thereof,
and (ii) all rent and other charges payable under any ground lease of land
included in the Premises under which Owner is the tenant and give Owner notice
of the making of each payment.
(q) Carry out and comply with, directly or through a third party, all
requirements on the part of Owner under all such mortgages and ground leases,
all leases of space in the Premises, all ground leases and reciprocal easement
agreements with department stores and all other agreements affecting or relating
to the Premises which are known or made known to Agent, including, without
limitation, the furnishing of all services and utilities called for therein, but
only to the extent that such requirements are at the time reasonably capable of
being carried out by Agent and Agent has available the necessary funds therefor
from collections or advances by Owner, provided that Agent shall promptly notify
Owner if Agent cannot carry out such requirement or has insufficient funds
available to do so. Agent shall notify Owner promptly of any default under any
such mortgage, lease, ground lease, reciprocal easement or other agreement on
the part of Owner, the tenant or other party thereto of which agent becomes
aware.
(r) Use reasonable efforts to comply with and require compliance with
the requirements of leases of space in the Premises, ground leases, reciprocal
easement agreements and all other agreements affecting or relating to the
Premises which are known or made known to Agent on the part of Tenants,
department stores and other parties thereto and enforce compliance with the
rules and regulations, sign criteria and like standards for the Premises adopted
by Owner from time to time.
(s) Upon request, furnish Owner with an executed copy of each lease,
lease renewal, lease amendment, service contract and other agreement entered
into on or after the date of this Agreement in connection with the operation,
management and leasing of the Premises, and use reasonable efforts to secure
from tenants and parties to reciprocal easement agreements, and furnish to
Owner, any certificates of insurance and renewals thereof required to be
furnished by the terms of their leases or agreements. All such executed copies
of leases shall be maintained in Agent's main office, with additional lease
copies together with insurance certificates also maintained at the Agent's
office at the relevant property, if any such office exists.
(t) Inspect the Premises periodically and submit reports of findings
and recommendations to Owner which shall include, without limitation,
recommendations as to required repairs, replacements or maintenance. Agent
shall keep and submit annual written reports of all material alterations made to
the Premises, no matter by whom effected.
(u) Erect barriers or chains for the purpose of blocking access to
the common areas of and buildings included in the Premises as local law may
require, or, as directed in writing by owner, in order to avoid the dedication
of the same for public use and furnish appropriate evidence of same to Owner.
Agent shall give any advance notice of the erection of such barriers or chains
which may be required under reciprocal easement agreements or ground leases with
department stores.
(v) Use its reasonable efforts to obtain from tenants of the Premises
and department stores which are parties to reciprocal easement agreements or
ground leases waivers of their insurers' rights of subrogation in respect to
policies of fire and extended coverage and other property damage insurance
carried by them in favor of Owner, Agent and any department store or tenant for
which Owner is obligated to attempt to obtain such waivers under a ground lease,
reciprocal easement agreement or space lease.
(w) Assist owner in preparing any statements required to be submitted
by Owner under the terms of mortgages, ground leases, reciprocal easement
agreements and leases.
(x) Perform its duties in renting, managing, operating and
maintaining the Premises applying prudent and reasonable business practices
which are consistent with those followed in respect of the Premises prior to the
date of this Agreement, using reasonable care and diligence in carrying out
properly and efficiently its responsibilities under this Agreement. Agent shall
maintain those portions of the common areas of the Premises which are Owners'
obligation to maintain in a clean, safe and attractive condition, use reasonable
efforts to enforce the provisions of applicable leases, ground leases and
reciprocal easement agreements so as to cause tenants and department stores to
maintain their premises and common areas, if any, in similar condition, arrange
for necessary security for the Premises and their common areas and arrange for
cleaning and snow removal for the parking areas and roadways of the Premises.
Agent shall recommend to Owner from time to time such procedures with respect to
the Premises as Agent may deem advisable for the more efficient and economic
management and operation thereof.
(y) Where leasing guidelines or any Legal Requirement (as defined in
paragraph 2.1 (m) hereof) now or hereafter in effect require that tenant
security deposits be maintained, a separate interest-bearing account for such
security deposits (the "Security Deposit Account") shall be opened by Agent at a
bank approved by Owner. The Security Deposit Account shall be maintained in the
name of Agent in accordance with the relevant lease or Legal Requirement, as the
case may be, and shall be used only for tenant security deposits. The bank
shall be informed that the funds in the Security Deposit Account are held in
trust for Owner. Agent shall have the authority to remit to tenants any
interest to which they are entitled on their security deposit, in accordance
with their leases or any Legal Requirement, but Agent shall obtain the written
approval of Owner prior to the return of such deposits or any other security
(including letters of credit) to any tenant when the amount, in any single
instance, exceed $50,000.00.
Owner recognizes and understands that Environmental Service (as hereinafter
defined) are not actions or services that Agent is required to perform under
this Agreement and Owner further recognizes and understands that Agent is not a
consultant or a contractor that performs Environmental Services. Upon Owner's
request, Agent agrees to obtain and coordinate for and on behalf of Owner, such
Environmental Services as Owner may request or require. Owner shall reimburse
Agent for its administrative costs in connection with the coordination of such
Environmental Services as provided in Exhibit A, paragraph 11 of the Agreement.
In addition, Owner shall reimburse Agent for the costs of outside professionals
retained to perform Environmental Services. Environmental Services is defined
to be those acts or actions involving the presence use, exposure, removal,
restoration, or introduction of Hazardous materials (as hereinafter defined) and
the investigation of and compliance with any and all applicable rules, laws, or
regulations of local, state or federal authorities which apply or regulate
Hazardous Materials. Hazardous Materials means any hazardous, radioactive, or
toxic substance, material or waste listed in the United States Department of
Transportation Hazardous Materials Table; or by the Environmental Protection
Agency as hazardous substances; or such substances, materials and waste which
are or become regulated under applicable local, state or federal law including
materials which are petroleum products, asbestos, polychlorinated biphenyls, or
designated as hazardous substances under the Clean Water Act; or defined
hazardous waste under the Resource Conservation and Recovery Act; or defined as
hazardous substances under the Comprehensive Environmental Response,
Compensation and Inability Act.
2.2 Agent agrees, on behalf of Owner and at Owner's expense, to procure
and continue to maintain in force a comprehensive general liability insurance
policy or polices with respect to the Premises. Such policy or policies shall
provide for coverage in the amount and with such insurers as are required of
Owner under the Loan Documents (as defined below), but in any event, not less
than ten million dollars ($10,000,000.00) combined single limit coverage per
occurrence for bodily injury and property damage. The polices shall include
coverage for contractual liabilities assumed with respect to the Premises,
including, but not limited to, the obligations created by the indemnity set
forth in Section 3.3 hereof as used in this Agreement, the term "Loan Documents"
shall refer to that certain Amended and Restated Permanent Loan Agreement (the
"Loan Agreement"); Mortgage, Assignment of Leases and Rents, Security Agreement
and Fixture Filing (the "Mortgage"); Amended and Restated Promissory Note;
Assignment of Leases and Rents; Manager's Consent and Subordination of
Management Agreement; Hazardous Materials Indemnity Agreement; and Cash
Management Agreement; each dated as of August 28, 1998, from Owner to General
Electric Capital Corporation ("Lender"), and such other documents as may be
executed in connection with the loan (the "Mortgage Loan") secured by the
Mortgage.
Further, at all times during the term of this Agreement, Agent shall keep
or cause to be kept insured, at Owner's cost and expense, all buildings and
improvements on the Premises against loss or damage by fire, windstorm, hail,
explosion, damage from aircraft and vehicles and smoke damage, and such other
risks as are from time to time included in "extended coverage" endorsements in
an amount sufficient to replace said improvements.
All insurance provided for in this Section 2.2 shall be effected under
valid and enforceable polices issued by insurers of recognized responsibility
and shall provide respectively, for the waiver of all rights of subrogation by
Owner or parties claiming through Owner against Agent and its agents and
employees. Owner and Agent hereby waive all rights of recovery as against the
other party hereto arising from loss or damage caused by the perils enumerated
in this Section 2.2 and agree that any policies obtained with respect to such
perils shall be endorsed accordingly, if such endorsements are available. Any
insurance required to be maintained hereunder may be taken out under a blanket
insurance policy or polices covering other properties of the insured. Any
policy required by this Section 2.2 shall provide that such policy shall not be
canceled without at least thirty (30) days' prior notice to Owner and Agent and,
in any event, shall provide that all parties insured thereby shall receive
notice no less than fifteen (15) days prior to the expiration dates of the
expiring policies.
2.3 Agent agrees to render monthly reports relating to the management and
operation of the Premises for the preceding calendar month on or before the
twenty-fifth (25th) day of each month in form as Owner and Agent will mutually
agree. Agent agrees that Owner shall have the right to require the transfer to
Owner at any time of any funds in the Bank Account considered by Owner to be in
excess of an amount reasonably required by Agent for disbursement in connection
with the Premises. Agent agrees to keep records with respect to the management
and operation of the Premises as prescribed by owner, and to retain those
records for periods specified by Owner. Owner shall have the right to inspect
such records and audit the reports required by this Section during business
hours for the life of this Agreement and thereafter during the period such
records are to be retained pursuant to this Section. In addition, Agent agrees
that such records may be examined from time to time during the period aforesaid
by any of the supervisory or regulatory authorities having jurisdiction over
Owner.
2.4 Agent shall ensure such control over accounting and financial
transactions as is reasonably required to protect Owner's assets from loss or
diminution due to gross negligence or willful misconduct on the part of Agent's
associates or employees. Losses caused by gross negligence or willful
misconduct shall be borne by Agent.
2.5 Agent shall establish and prepare, in the form authorized by Owner,
with such additional changes as may be reasonably requested by Owner, operating
and capital improvement budgets for the promotion, operation, repair and
maintenance of the Premises for each calendar year. Preliminary and final
budgets will be due 45 and 30 days, respectively, prior to commencement of the
calendar year to which they relate. Such budgets shall be prepared on both an
accrual basis showing a month-by-month projection of income and expenses and
capital expenditures. At least 30 days prior to the end of each year, Agent
shall meet with Owner to review such budgets for the subsequent year. Upon
receiving Owner's approval, Agent shall use its best efforts to comply with such
final budgets.
(a) Agent shall meet with Owner on a regular basis, not less
frequently than semi-annually and otherwise upon reasonable call by Owner, to
review the operations of the Premises, to review and, if appropriate, revise in
light of actual experience the annual operating and capital improvement budgets
theretofore approved by Owner and to consider other matters which Owner may
raise.
(b) Upon approval of the operating budget by Owner, and unless and
until revoked or revised by Owner, Agent shall have the right, without further
consent or approval by Owner to incur and pay the operating expenses set forth
in the approved operating budget, subject to paragraph 2.1(g) above.
(c) At the request of Owner from time to time Agent shall prepare and
submit to Owner (i) operating projections for the Premises for the ensuing five
(5) years, such projections to be made on a year-by-year basis and to be based
on Agent's best judgment as to the future, taking into consideration known
circumstances and circumstances Agent can reasonably anticipate are likely to
occur, and (ii) a schedule in reasonable detail of capital improvements, repairs
and replacements not provided for in the current capital improvement budget
which Agent reasonably anticipates will be required or should be made in the
foreseeable future, with Agent's opinion as to the relative priority and cost of
each thereof.
2.6 Agent shall also participate in Owner's property review programs to
the extent requested by Owner. Such review shall include asset, investment,
financial and strategy profiles in form satisfactory to Owner. Agent shall
respond, within 10 days, to Owner's management evaluation reports concerning
actions to be taken by Agent to correct or modify its management standards for
the operations, leasing or financial services provided for the Premises. If
Owner shall request that Agent's home office or regional office personnel travel
to the Premises to participate in Owner's property review programs or for any
other reason (unless such reason is for normal supervision), the reasonable cost
of meals, travel and hotel accommodations expenses incurred by such home office
personnel in connection with such travel shall be reimbursed to Agent by Owner.
Agent shall, however, bear the full cost and expenses incurred by its home
office or regional office personnel in connection with their travel to the
Premises to the extent such travel is required by the Agent for the normal
supervision of the management and leasing of the Premises.
2.7 Agent agrees to use its best efforts to have all space within the
Premises rented to desirable tenants, satisfactory to Owner, considering the
nature of the Premises, and in connection therewith:
(a) To negotiate, as the exclusive agent of Owner, all leases and
renewals of leases at the appropriate time, it being understood that all
inquiries to Owner with respect to leasing any portion of the Premises shall be
referred to Agent. Except for license agreements for temporary tenants, all
leases and renewals for lease terms in excess of one (1) year must be prepared
in accordance with Exhibit C by Agent and in accordance with the annual approved
budget and be submitted to Owner's representative for execution by Owner. Agent
is authorized to negotiate and execute license agreements prepared in accordance
with Exhibit C for temporary tenants and/or short term promotional activities.
If Agent shall receive a prospective tenant reference from a property other than
the Premises, which Agent or any subsidiary or affiliate manages, Agent shall
promptly declare its potential conflict of interest to Owner and Owner shall
determine if negotiations with such prospective tenant shall be undertaken by
Agent, Owner, or a third party approved by Owner. References of prospective
tenants, as well as their varying use requirements, shall be investigated
carefully by Agent. Agent also is authorized to negotiate and execute on
Owner's behalf lease amendments which: (i) change a Tenant's commencement date
by sixty (60) days or less (or for such longer period as is approved by Owner);
(ii) change a Tenant's permitted use by allowing the sale of such additional
items as are reasonably related to the Tenant's primary and principal use,
provided Agent has no reason to know of any lease at the center prohibiting such
use; (iii) change a tenant's marketing charge or promotional charge or
advertising obligation.
Owner acknowledges and understands that Agent manages properties for third
parties. Owner further acknowledges and understands that Agent routinely and
customarily negotiates tenant leases from multiple locations involving two or
more properties (one or more of which may be the Premises and one or more of
which may be properties owned by Agent or by others). Agent conducts such
multiple location negotiations in good faith for the benefit and interests of
Owner and other property owners, including Agent. Agent shall be entitled to
assume that such leasing practices are approved and acceptable to Owner, unless
and until Owner specifically disapproves the practice and so notifies Agent.
(b) With Owner's prior approval, to advertise the Premises or
portions thereat for rent, by means of periodicals, signs, plans, brochures and
other means appropriate to the Premises. Owner acknowledges and agrees that the
Premises may be included in brochures or other advertising media of Agent, which
may include other properties being offered for lease by Agent.
(c) In no event shall Agent engage or utilize the services of an
outside broker in connection with any lease without Owner's prior written
consent. In any case in which Owner requests or gives such consent, Agent shall
cause such broker to enter into a written agreement with Owner, on terms
reasonably satisfactory to Owner, with respect to such broker's commission and
Owner shall be responsible for the payment of such commission pursuant to the
terms of said agreement.
(d) Agent will, in each instance, negotiate for the inclusion in all
leases entered into by Owner of a provision to the effect that recourse on such
obligation shall be had only against the property to which such obligation
relates and no recourse shall be sought against Owner or any other person
holding, directly or indirectly, a beneficial interest in the property.
(e) Agent will, upon the request of Owner, undertake to find buyers
for the sale of any of the Owner's outparcels, peripheral land or such other
real estate situate upon the Premises, ("Sale Property"), and, in addition to
any other compensation provided to be paid to Agent under this Agreement, Owner
agrees to pay to Agent as compensation for its services hereunder, a fee at the
rate specified in Paragraph 7(iii) of Exhibit "A", attached hereto. In
performing its duties hereunder, Agent shall perform the following:
(i) Submit to Owner for approval, a pricing schedule on the Sale
Property;
(ii) Upon request, submit to Owner for approval, contract form(s)
to be used in the sale of the Sale Property;
(iii) Upon request, furnish Owner with a written report
regarding its progress in such sale activities;
(iv) Negotiate on behalf of Owner, the sale of the subject Sale
Property; and
(v) Provide legal services, limited to:
(a) Preparation of the Purchase and Sale Agreement;
(b) Deed and Easement(s) preparation;
(c) Preparation and submittal to Owner of the Seller's
closing statement;
(d) Preparation of closing instructions;
(e) Coordination of title work;
(f) Upon approval of Owner, retain local counsel,
whose fees will be reimbursed by Owner; and
(g) Submit to Owner, for final execution, all
documents necessary to consummate the
transaction.
Agent shall pursue these duties and obligations with diligence and in the
best interests of Owner.
2.8 Agent agrees, for itself and all persons retained or employed by Agent
in performing its services, to hold in confidence and not to use or disclose to
others any confidential or proprietary information of Owner heretofore or
hereafter disclosed to Agent ("Confidential Information"), including, but not
limited to, any data, information plans, programs, processes, costs, operations
or the names of any tenants which may come within the knowledge of Agent in the
performance of, or as a result of, its services, except where required by
judicial or administrative order, or where Owner specifically gives Agent
written authorization to disclose any of the foregoing to others or such
disclosure as is required in the direct performance of Agent's duties hereunder.
If Agent is required by a judicial or administrative order to disclose any
Confidential Information, Agent will promptly notify Owner thereof, consult with
Owner on the advisability of taking steps to resist or narrow such request and
cooperate with Owner in any attempt it may make to obtain an order or other
assurance that confidential treatment will be accorded to the Confidential
Information disclosed.
2.9 If at any time there shall be insufficient funds available to Agent
from collections to pay any obligations of Owner required to be paid under this
Agreement, Agent shall promptly notify Owner and Agent shall not be obligated to
pay such obligations unless Owner furnishes Agent with funds therefor.
2.10 Agent assumes no responsibility under this Agreement other than to
render the services called for hereunder in good faith, and Owner shall make no
claim against Agent on account of any alleged errors of judgment made in good
faith in connection with Agent's obligations hereunder and with the operation of
the Premises. Agent shall not be liable to Owner or others except by reason of
acts constituting willful misfeasance or gross negligence on the part of Agent,
and Owner agrees to indemnify, defend and hold harmless Agent and its partners
(and the shareholders, trustees and officers thereof) and employees from and
against all claims, actions, causes of action, costs and expenses (including,
but not limited to, reasonable attorney's fees) directly or indirectly arising
from the claims of any third party, except only those claims where liability
arises from acts constituting willful misfeasance or gross negligence on the
part of Agent.
ARTICLE III
OWNER'S AGREEMENTS
3.1 Owner, at its option, may pay directly all taxes, special assessments,
ground rents, insurance premiums and mortgage payments. If Owner makes such
election, Agent shall advise Owner of the due dates of such taxes assessments,
insurance premiums and mortgage payments.
3.2 Owner shall bear the cost of all premiums relating to insurance
procured by Agent for Owner pursuant to Section 2.2 hereof. Owner shall look
solely to such insurance for indemnity against any loss or damage to the
Premises and shall obtain waivers of subrogation against the Agent under such
policies if available at no additional cost to Owner.
3.3 Owner agrees to indemnify and save harmless Agent and its partners
(and the shareholders, trustees and officers thereof) and employees from and
against all claims, losses and liabilities resulting from: (i) damage to
property or injury to, or death of, persons from any cause whatsoever when Agent
is carrying out the provisions of this Agreement or acting under the direction
of Owner in or about the Premises; (ii) claims for defamation and false arrest
when Agent is carrying out the provisions of this Agreement or acting under the
direction of Owner; and (iii) claims occasioned by or in connection with or
arising out of acts or omissions, other than criminal acts, of the Agent when
Agent is carrying out the provisions of this Agreement or acting under the
direction of Owner (except in cases of Agent's willful misconduct or gross
negligence), and to defend or cause to be defended, at no expense to Agent or
such persons, any claim, action or proceeding brought against Agent or such
persons or Agent and Owner, jointly or severally, arising out of the foregoing,
and to hold Agent and such persons harmless from any judgment, loss or
settlement on account thereof.
Notwithstanding the foregoing, Owner shall not be responsible for
indemnifying or defending Agent or such persons in respect of any matter, claim
or liability in respect of which Agent is obligated to indemnify Owner as
provided in the following sentence. Agent agrees to indemnify and save harmless
Owner from and against all claims, losses and liabilities resulting from injury
to, or death of, persons in or about the Premises or for deformation and false
arrest in each case caused in whole or in part by the willful misfeasance or
gross negligence of Agent, and to defend, at no expense to Owner, any claim,
action or proceeding brought against Owner or Owner and Agent, jointly or
severally, arising out of the foregoing, and to hold Owner harmless from any
judgments, loss or settlement on account thereof.
Notwithstanding the foregoing, Agent shall not be responsible for
indemnifying or defending Owner in respect of any matter, claim or liability
which is covered by any public liability insurance policies carried by Owner and
under which Agent is named as an additional insured. The indemnification
obligations of Owner and Agent under this Section 3.3 shall in each case be
conditioned upon (a) prompt notice from the other party after such party learns
of any claim or basis therefor which is covered by such indemnity, (b) such
party's not taking any steps which would bar Owner or Agent, as the case may be,
from obtaining recovery under applicable insurance policies or would prejudice
the defense of the claim in question, and (c) such party's taking of all
necessary steps which if not taken would result in Owner or Agent, as the case
may be, being barred from obtaining recovery under applicable insurance policies
or would prejudice the defense of the claim in question. The provisions of this
Section 3.3 shall survive the expiration or termination of this Agreement.
3.4 Owner shall provide such office space on the Premises as may be
necessary for Agent to properly perform its functions under this Agreement.
Agent shall not be required to pay for utilities, telephone service or rent for
the office area on the Premises occupied by Agent. Agent shall have the right
to use the fixtures, furniture, furnishings and equipment, if any, which are the
property of Owner in said office space. Owner shall also provide space on the
Premises for use as community rooms and information and service centers where
the use of such space is determined by Owner to be in the best interest of the
Premises. All income derived from the utilization and/or operation of such
community rooms and/or information or service centers shall belong to the Owner
and all expenses relating thereto shall be borne by Owner.
3.5 Except as otherwise provided in this Agreement, everything done by
Agent in the performance of its obligations under this Agreement and all
expenses incurred pursuant hereto shall be for and on behalf of Owner and for
its account. Except as otherwise provided herein, all debts and liabilities
incurred to third parties in the ordinary course of business of managing the
Premises as provided herein are and shall be obligations of Owner, and Agent
shall not be liable for any such obligations by reason of its management,
supervision or operation of the Premises for Owner.
ARTICLE IV
COMPENSATION
4.1 In addition to any other compensation provided to be paid to Agent
under this Agreement, Owner agrees to pay to Agent as compensation for its
management services hereunder, a fee at the rate specified in paragraph 5 of
Exhibit A attached hereto. Said fee shall be payable monthly no later than the
twenty-fifth (25th) day of the following month, and shall be based on the
following components of income from the preceding calendar month determined in
accordance with GAAP. It is understood that the management fee shall be
calculated upon the following items: (i) minimum rents from all permanent
tenants (anchor, mall shops, ground leases and all other tenants); (ii) Lease
buyout income; (iii) Percentage rents in lieu of minimum rents; (iv) Percentage
rents; (v) all cost recovery income (CAM, taxes, food court, security, other);
(vi) income from all temporary tenants (initial term of one year or less); (vii)
income from all promotional activity; (viii) miscellaneous mall income such as
payphone commissions, stroller rentals, etc. and (ix) bad debts expense related
to any of the above revenue items. The following items shall not be subject to
management fees: (i) business interruption insurance income; (ii) recoveries
from insurance companies for casualty and other losses; (iii) payments from
tenants for leasehold improvements and related services provided by Agent; (iv)
payments from tenants to Merchants' Associations or to Marketing Funds; (v)
tenant security deposits; (vi) straight line rental income or losses, and (vii)
operating covenant and amortization (classified as a reduction of minimum rent).
Agent shall withdraw said fee from the operating account for the Premises and
shall account for same as provided for in Section 2.3 hereof.
4.2 The following expenses or costs incurred by or on behalf of Agent in
connection with the management and leasing of the Premises shall be the sole
cost and expense of Agent and shall not be reimbursable by Owner and Agent shall
indemnify Owner for such expenses and costs:
(a) cost of gross salary and wages, payroll taxes, insurance,
worker's compensation, pension benefits and any other benefits of Agent's
employees, except that Owner will reimburse Agent for all costs of employees who
provide either full or part time services on-site at any of the Premises.
Within the category of "on-site" personnel, Agent may include the pro-rata costs
for regional personnel performing required services at the Premises on a regular
basis (but which personnel may share time working at other properties managed by
Agent); provided, however, that the costs for any employees who are based at or
work from Agent's home office shall not be included, and provided further that
the pro-rata costs for any such regional personnel are included and identified
as such within the annual operating budget as approved by Owner.
(b) general accounting and reporting services, as such services are
considered to be within the reasonable scope of Agent's responsibility to Owner;
(c) costs of forms, stationery, ledgers, supplies, equipment and
other "general overhead" items used in Agent's home office or regional offices;
(d) cost or pro rata cost of telephone and general office expenses
incurred in the Premises by Agent for the operation and management of properties
not owned by Owner;
(e) cost of all bonuses, incentive compensation, profit sharing, or
any pay advances by Agent to Agent's employees, except such costs pertaining to
employees employed by Agent in accordance with Paragraph 2.1 (b) hereof;
(f) cost attributable to losses arising from criminal acts, gross
negligence or fraud on the part of Agent or Agent's associates or employees;
(g) cost for meals, travel and hotel accommodations for Agent's home
office or regional office personnel who travel to and from the Premises, except
as provided in Section 2.6;
(h) cost of automobile purchase and/or rental, except if furnished or
approved by Owner;
(i) except as otherwise provided in Exhibit A attached hereto,
expenses incurred in connection with the leasing of the Premises, it is being
understood and agreed, however, that Agent shall be reimbursed for advertising
expenses incurred in connection with the leasing of the Premises;
(j) cost of liability or other insurance carried by Agent, except
costs incurred by Agent in satisfaction of its obligations under Section 2.2
hereof; and
(k) cost of bonds purchased pursuant to Section 2.1(i) of this
Agreement.
ARTICLE V
DURATION, TERMINATION, DEFAULT
5.1 This Agreement shall become effective on the date hereof.
5.2 Subject to earlier termination as hereinafter provided, this Agreement
shall have an initial term ending on September 10, 2008. Thereafter, this
Agreement shall continue year-to-year on the same terms and conditions as herein
contained subject to being terminated by either Agent or Owner upon no less than
six (6) months written notice. The Agent may not terminate this Agreement
except in the case of non-payment of management fees for a period of ninety (90)
days after notice of such non-payment to Owner and Lender. In addition, Lender
shall have the right to terminate (or direct Owner to terminate, as applicable)
this Agreement: (i) upon the insolvency of Agent, (ii) the occurrence of an
Event of Default (as defined in the Loan Documents), (iii) the failure of the
Premises to meet the Net Operating Income requirements (as defined in the Loan
Documents), or (iv) pursuant to the provisions of the Manager's Consent and
Subordination of Management Agreement.
5.3 It shall be an Event of Default under this Agreement on the part of
Agent if Agent shall default in any material respect in performing any of its
obligations under this Agreement and such default shall not be cured within 30
days after written notice thereof is given by Owner to Agent (or, if the default
in question is curable but is of such nature that it cannot reasonably be
completely cured within such 30-day period, if Agent does not promptly after
receiving such notice commence to cure such default and thereafter proceed with
reasonable diligence to complete the curing thereof within 180 days after notice
is given by Owner to Agent). If an Event of Default by Agent shall occur, Owner
shall have the right to terminate this Agreement by written notice given to
Agent, and upon the giving of such notice this Agreement and the term hereof
shall terminate without any obligation on the part of Owner to make any payments
to Agent hereunder except as hereinafter provided.
5.4 If at any time during the term of this Agreement any involuntary
petition in bankruptcy or similar proceeding shall be filed against Agent
seeking its reorganization, liquidation or appointment of a receiver, trustee or
liquidator for it or for all or substantially all of its assets, and such
petition shall not be dismissed within 90 days after the filing thereof, or if
Agent shall:
(a) apply for or consent in writing to the appointment of a receiver,
trustee or liquidator of all or substantially all of its assets;
(b) file a voluntary petition in bankruptcy or admit in writing its
inability to pay its debts as they become due;
(c) make a general assignment for the benefit of creditors;
(d) file a petition or an answer seeking reorganization or an
arrangement with creditors or take advantage of any insolvency law; or
(e) file an answer admitting the material allegations of a petition
filed against it in any bankruptcy, reorganization or insolvency proceedings;
then upon the occurrence of any such event, Owner, at its option, may terminate
this Agreement by written notice given to Agent, and upon the giving of such
notice this Agreement and the term hereof shall terminate without any obligation
on the part of Owner to make any payments to Agent hereunder except as
hereinafter provided.
5.5 Owner shall have the additional right to terminate this Agreement on
at least 10 days' written notice to Agent, if Agent without Owner's prior
written consent shall assign or attempt to assign its rights or obligations
under this Agreement or subcontract (except for normal service agreements or as
otherwise specified in this Agreement) any of the services to be performed by
Agent. Owner shall also have the right to terminate this Agreement as to any
property included within the Premises on at least 10 days' written notice to
Agent if (a) such property shall be damaged or destroyed to the extent of 25% or
more by fire or other casualty and Owner elects not to restore or repair such
property or (b) there shall be a condemnation or deed in lieu thereof of 25% or
more of such property.
5.6 Agent acknowledges and agrees that Owner shall have the right to
subordinate and/or assign this agreement in connection with the Loan Documents.
Agent further agrees to execute such further instruments as Owner or Lender
deems necessary to effectuate such subordination, provided that in the event
Lender becomes entitled to possession of the Premises, the Lender shall be
entitled, at its option, to retain Agent to manage the Premises, in which case
the Agent shall be entitled to the compensation set forth in this Agreement
during all periods in which Agent is providing services to the Premises for the
Lender. Moreover, notwithstanding anything to the contrary contained herein,
for so long as any amounts remain outstanding under the Loan Documents, (i) this
Agreement and all fees payable by Owner hereunder shall be subject to and
subordinate to any mortgage liens on the Premises established by the Loan
Documents and (ii) Agent shall comply with any and all applicable provisions of
the Loan Documents and in the event there is a conflict between the terms of
this Agreement and the terms of the Loan Documents, the Loan Documents shall
control.
5.7 Upon any termination of this Agreement pursuant to the provisions of
this Article V, Owner shall remain obligated to pay to Agent fees and other
amounts due to Agent hereunder which accrued prior to the effective date of such
termination. Nothing contained in this Section 5.7 shall be deemed to waive,
affect or impair (a) Owner's rights to seek recourse against Agent for damages
or other relief in the event of the termination of this Agreement by Owner
pursuant to Section 5.3, 5.4 or 5.5 hereof, and (b) Agent's right to seek
recourse against Owner for damages or other relief in the event of the
termination of this Agreement by Agent pursuant to Section 5.2 hereof.
5.8 Upon the expiration or earlier termination of this Agreement, Agent
shall forthwith surrender and deliver to Owner any space in the Premises
occupied by Agent and shall make delivery to Owner or to Owner's designee or
agent, at Agent's home or regional offices or at its offices at the Premises, of
the following:
(a) a final accounting, reflecting the balance of income from and
expenses of the Premises as at the date of expiration or termination of this
Agreement;
(b) any funds of Owner or tenant security or advance rent deposits,
or both, held by agent with respect to the Premises; and
(c) all Confidential Information (in whatever medium stored) and all
other records, contracts, leases, ground leases, reciprocal easement agreements,
receipts for deposits, unpaid bills, lease summaries, canceled checks, bank
statements, paid bills and all other records, papers and documents and any
microfilm and/or computer disk of any of the foregoing which relate to the
Premises and the operation, maintenance, management and leasing thereof; all
such data, information and documents being at all times the property of Owner.
In addition, Agent shall furnish all such information and take all such
action as Owner shall reasonably require to effectuate an orderly and systematic
termination of Agent's duties and activities under this Agreement.
5.9 This Agreement shall terminate at the election of Owner as to any of
the properties set forth in Exhibit A upon thirty (30) days written notice to
the Agent if such properties are sold by Owner to a non-affiliated third party
purchaser or (unless the Lender shall otherwise notify the Agent in writing)
automatically if such properties were acquired on foreclosure of a mortgage
encumbering all or a portion of the Premises. In the event such properties are
sold by Owner to a non-affiliated third party purchaser and this Agreement is
not thereby terminated by Owner, the Agent shall have the right to terminate
this Agreement as to such properties upon sixty (60) days prior written notice
which notice must be given within ninety (90) days after the date of such sale
is consummated. If such properties are sold, Agent will not be entitled to
sales commission unless the Agent has been retained by Owner pursuant to a
separate commission arrangement. This Agreement shall remain in full force and
effect as to all properties not terminated pursuant to this Section 5.9.
5.10 The provisions of this Article V shall survive the expiration or
termination of this Agreement.
ARTICLE VI
ASSIGNMENT
6.1 Agent, except for a transfer to a "Permissible Transferee", shall not
assign its rights or obligations under this Agreement, either directly or by a
transfer of shares of beneficial interest or voting control either voluntarily
or by operation of law. Any change other than to a "Permissible Transferee"
shall constitute a breach of this Agreement by Agent and Owner may terminate
this Agreement in accordance with Section 5.5 A "Permissible Transferee" shall
mean any corporation, partnership, trust or other entity, more than 50% of the
outstanding stock of which, or more than 50% interest in which, is owned or
controlled by Agent.
6.2 In the event of a sale or conveyance of any of the Premises, Owner
shall have the right to cancel or assign this Agreement and its rights and
obligations hereunder to any person or entity to whom or which Owner sells or
conveys such property or properties. Upon such assignment, Owner shall be
relieved of its obligations under this Agreement with respect to such property
or properties that accrue from and after the date of such assignment, provided
that the assignee shall assume the obligations of Owner under this Agreement and
shall agree to perform and be bound by all of the terms and provisions hereof,
effective from and after the date of such assignment and an executed copy of
such assumption agreement shall be delivered to Agent. Agent shall not be
entitled to a "termination fee" in connection with an assignment or cancellation
as set forth in this Section 6.2, but otherwise shall be entitled to collect
from Owner such fees and expenses, including termination and/or relocation
expenses of Agent's full-time employees, if any, as Agent has earned pursuant to
this Agreement prior to the date of such assignment or cancellation.
ARTICLE VII
MISCELLANEOUS
7.1 Owner's representative ("Owner's Representative"), whose name and
address is set forth in paragraph 2 of Exhibit A attached hereto, shall be the
duly authorized representative of Owner for the purpose of this Agreement. Any
statement, notice, recommendation, request, demand, consent or approval under
this Agreement shall be in writing and shall be deemed given by Owner when made
or given by Owner's Representative or any officer of Owner and delivered
personally to an officer of Agent or mailed, addressed to Agent, at his address
first above set forth. Either party may, by notice to the other, designate a
different address for the receipt of the aforementioned communications and Owner
may, by notice to Agent, from time to time, designate a different Owner's
Representative to act as such. All communications mailed by one party to
another shall be sent by first class mail, postage prepaid or Express Mail
Service, or other commercial overnight delivery service, except that notices of
default shall be sent by registered or certified mail, return receipt requested,
postage prepaid, Express Mail Service or other commercial overnight delivery
service with receipt acknowledged in writing. Communications so mailed shall be
deemed given or served on the date mailed. Notwithstanding the foregoing, any
notices, requests, consents, approvals and other communications, other than
notices of default or approvals of annual budgets, and other communications,
approvals or agreements which are required by the express terms of other
provisions of this Agreement to be in writing, may be given by telegram,
telephonic communication or orally in person. Agent and Owner shall furnish to
the other the names and telephone numbers of one or more persons who can be
reached at any time during the term of this Agreement in the event of an
emergency.
7.2 Agent shall, at its own expense, qualify to do business and obtain and
maintain such licenses as may be required for the performance by Agent of its
services.
7.3 Each provision of this Agreement is intended to be severable. If any
term or provision hereof shall be determined by a court of competent
jurisdiction to be illegal or invalid for any reason whatsoever, such provision
shall be severed from this Agreement and shall not affect the validity of the
remainder of this Agreement.
7.4 In the event either of the parties hereto shall institute any action
or proceeding against the other party relating to this Agreement, the
unsuccessful party in such action or proceeding shall reimburse the successful
party for its disbursements incurred in connection therewith and for its
reasonable attorney's fees as fixed by the court.
7.5 No consent or waiver, express or implied, by either party hereto or of
any breach or default by the other party in the performance by the other of its
obligations hereunder shall be valid unless in writing, and no such consent or
waiver shall be deemed or construed to be a consent or waiver to or of any other
breach or default in the performance by such other party of the same or any
other obligations of such party hereunder. Failure on the part of either party
to complain of any act or failure to act of the other party or to declare the
other party in default, irrespective of how long such failure continues, shall
not constitute a waiver by such party of its rights hereunder. The granting of
any consent or approval in any one instance by or on behalf of Owner shall not
be construed to waive or limit the need for such consent in any other or
subsequent instance.
7.6 The venue of any action or proceeding brought by either party against
the other arising out of this Agreement shall be in the state or federal courts
of the Commonwealth of Pennsylvania.
7.7 This Agreement may not be changed or modified except by an agreement
in writing executed by each of the parties hereto and consented to by the
Lender. This Agreement constitutes all of the understandings and agreements
between the parties in connection with the agency herein created.
7.8 This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their permitted successors and assigns, but shall not inure
to the benefit of, or be enforceable by, any other person or entity.
7.9 Nothing contained in this Agreement shall be construed as making Owner
and gent partners or joint ventures or as making either of such parties liable
for the debts or obligations of the other, except as in this Agreement is
expressly provided.
7.10 The Real Estate Management Agreement dated as of the 17th day of
August, 1993, by and between Owner, as a Delaware general partnership, and
Agent, shall become null and void as of the date of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
CROWN AMERICAN FINANCING
PARTNERSHIP, L.P., a Delaware limited
partnership
(Owner)
BY: CROWN AMERICAN FINANCING
CORPORATION, as sole general partner
By: /s/ Ronald P. Rusinak
Name: Ronald P. Rusinak
Title: Vice President
CROWN AMERICAN PROPERTIES, L.P.
(Agent)
BY: CROWN AMERICAN REALTY TRUST,
as sole general partner
By: /s/ Ronald P. Rusinak
Name: Ronald P. Rusinak
Title: Vice President
EXHIBIT A
1. Premises (1.1):
A. Leasehold Estate:
(i) Uniontown Mall
Uniontown, Pennsylvania;
B. Fee Estate:
(i) Chambersburg Mall
Chambersburg, Pennsylvania;
(ii) Francis Scott Key Mall
Frederick, Maryland;
(iii) Lycoming Mall
Muncy, Pennsylvania;
(iv) Martinsburg Mall
Martinsburg, West Virginia;
(v) New River Valley Mall
Christiansburg, Virginia;
(vi) Nittany Mall
State College, Pennsylvania;
(vii) North Hanover Mall
Hanover, Pennsylvania;
(viii) Patrick Henry Mall
Newport News, Virginia;
(ix) Phillipsburg Mall
Phillipsburg, New Jersey;
(x) South Mall
Allentown, Pennsylvania;
(xi) Viewmont Mall
Scranton, Pennsylvania;
(xii) West Manchester Mall
York, Pennsylvania.
2. Name and Address of Owner's Representative (7.1):
John M. Kriak
Pasquerilla Plaza
Johnstown, PA 15907.
3. Limit of amount authorized for non-emergency purchases and repairs (2.1(a)
and (c)):
$50,000.00.
4. Name of Banks (2.1(g)):
PNC Bank, N.A.
5. Management Fees (4.1):
Owner agrees to pay Agent as compensation for its management services
hereunder an amount equal to 5% of the amounts set forth in Section 4.1.
Such management fee shall be payable monthly based on the income earned for
the categories described in Section 4.1, computed in accordance with GAAP.
Agent shall be entitled to receive the management fee on the pro rata
portion of percentage rents received by Owner after the termination of this
Agreement but applicable to time periods prior to the termination of this
Agreement based upon the actual number of days lapsed divided by 365.
6. Legal and Tenant Coordination Expenses:
Owner agrees to pay Agent, to defray in-house legal expenses and tenant
coordination expenses (a) with respect to each new lease and each lease
renewal of mall shops and free-standing buildings (other than a lease
renewal or extension resulting from the exercise of an option contained in
such lease), an amount equal to the Agent's actual costs of providing such
services, limited however to the annual amount which is capitalized as
tenant allowance costs under the Owner's customary accounting practices as
Agent and Owner shall mutually agree and as recorded in the Owner's audited
annual financial statements. Such fees shall be payable monthly in arrears
using estimated fees per square foot, based on the estimated annual fee;
the monthly estimated fees shall be adjusted to a final actual amount
within 90 days after the Owner's fiscal year end. Agent and Owner shall
use their best efforts to estimate the monthly fee per square foot and
shall adjust the amount periodically during the year as mutually agreed
upon.
7. Leasing and Land Sale Fees:
(i) Leasing Commission:
Agent shall be entitled to commissions for leases secured, in addition
to
other fees and compensation provided in this Agreement, equal to the
Agent's actual costs of providing leasing services related to permanent
leases (those with an initial term in excess of one year), limited however
to the aggregate amount which is capitalized as lease acquisition costs
under the Owner's customary accounting practices as Agent and Owner shall
mutually agree and as recorded in the Owner's audited annual financial
statements. Such fees shall be payable monthly in arrears using estimated
fees per square foot, based on the estimated annual fee; the monthly
estimated fees shall be adjusted to a final actual amount within 90 days
after the Owner's fiscal year end. Agent and Owner shall use their best
efforts to estimate the monthly fee per square foot and shall adjust the
amount periodically during the year as mutually agreed upon.
(ii) Brokerage Commissions:
Owner and Agent acknowledge that some leasing and land sale
transactions will involve the use of an independent real estate broker or
real estate sales agent, who will be paid a commission for introducing and
bringing a prospective tenant or purchaser to the Premises. Agent may
utilize brokers in connection with carrying out its leasing and land sale
activities, and shall be reimbursed by Owner for the cost of those
Brokerage Commissions in the following circumstances:
(a) Agent was required to recognize the broker or sales agent as the
representative of the prospective tenant or purchaser and was not
allowed or permitted the opportunity to contact or negotiate with
the tenant or purchaser except through the broker or sales agent,
and this fact was disclosed to Owner.
(b) Agent disclosed to Owner the existence of the broker or sales
agent and the brokerage fee at the time the proposed leasing or
land sale transaction was submitted to Owner for approval.
Except as provided in (a) and (b) above, Agent shall assume the sole cost and
responsibility for broker commissions.
(iii) Land Sale Commission:
For services provided pursuant to Section 2.7(e), Owner shall pay the
Agent a sales commission equal to fifteen percent (15%) of the adjusted
sales price ("Sales Commission"), as compensation for overhead associated
with the services of certain employees of Agent. For purposes of the
foregoing "adjusted sales price" shall mean the gross proceeds payable to
Owner less reasonable and necessary development costs paid by Owner in
connection with the transfer. One-half (1/2) of the Sales Commission shall
be due and payable to Agent at the time a mutually binding Agreement of
Sale with respect to any Sale Property is fully-executed, with the
computation of such amount being based on the gross proceeds payable to
Owner. The balance of the Sales Commission shall be paid to Agent at the
time of closing of any such sale.
8. Excluded Services:
Notwithstanding anything to the contrary contained herein, the parties
acknowledge that it is not within the contemplation of this Agreement or
the fee structure included herein that the Agent perform any services with
respect to the following: any "due diligence" or similar efforts relating
to any financing, refinancing or sale or disposition of the Premises;
zoning compliance of the Premises; performing or supervising (including
tenant room build-outs or remodeling) any extensive alteration or
renovation to the Premises; asbestos and/or other environmental studies and
any related abatement or remediation activities for any tenant premises,
site acquisitions of additional ground for the expansion of the Premises;
reconstruction after casualty or condemnation; leasing, management, or
construction relating to any proposed or implemented expansion of the
Premises or work generally classified as "development" work in connection
with the same; renewals or renegation of leases or other agreements with
department stores if such involves substantial changes from existing
documents (including, without limitation, negotiation of new leases,
renewal leases, operating covenants, renovation provisions, expansion
rights, and like matters); or replacement of department stores tenancies.
Owner shall reimburse Agent for all such services rendered equal to the
Agent's actual costs of providing such services, limited however to the
annual amount which is capitalized as tenant allowance or construction
costs under the Owner's customary accounting practices as Agent and Owner
shall mutually agree and as recorded in the Owner's audited annual
financial statements. Such fees shall be payable monthly in arrears using
estimated based on the estimated annual fee; the monthly estimated fees
shall be adjusted to a final actual amount within 90 days after the Owner's
fiscal year end. Agent and Owner shall use their best efforts to estimate
the monthly fees and shall adjust the amount periodically during the year
as mutually agreed upon.
9. Other Requested Services:
If Owner requests Agent to provide its own personnel for non-routine
services which Agent is not obligated elsewhere in this Agreement to
perform the compensation for which is not provided for hereinabove,
unless Owner and Agent otherwise agree to an acceptable fee for such
services, Owner shall pay Agent an amount equal to two and one-half
times the actual base cost of Agent's departmental personnel, as
computed by Agent, for their time involved in performing such requested
services, plus reimbursement for any out-of-pocket costs incurred
incident to furnishing such requested services. Owner and Agent
shall agree in advance as to the hourly base cost to be applicable for
the specific services to be provided. Such amount or amounts shall be
payable to Agent monthly within ten (10) days after Owner's receipt of
Agent's statement setting for the amount payable to Agent.
EXHIBIT B
INTENTIONALLY OMITTED
EXHIBIT C
Leasing Guidelines
Agent shall use a form or forms of lease; or with respect to temporary
tenants and/or short term promotional activities, a form or forms of license
agreement, which have been prepared and submitted to Owner for Owner's prior
review and approval. Agent will negotiate and make modifications to such forms
as directed by Owner, or as necessary or appropriate with respect to the needs
of the particular transactions, utilizing methods and techniques consistent with
prevailing practices employed in management and leasing of shopping centers.
For all agreements, excepting license agreements for temporary tenants
and/or for short term promotion activities, all essential financial and
business terms and provisions of the lease or agreement, including construction
and improvements of the leasehold, shall be presented for Owner's approval.
Tenant-signed leases presented by Agent for Owner's review and execution shall
be consistent with such terms and conditions previously approved by Owner, or
with such deviations or modifications identified for Owner's review. Execution
of tenant-signed leases that are presented by Agent for Owner's signature will
acknowledge Owner's approval of the lease, its form, its terms and provisions.
No lease or other agreement shall be entered into, modified, canceled or
extended if the consent of any mortgagee or ground lessor is required unless
such consent has been obtained. Agent will notify Owner when consent is
required.
EXHIBIT 10.5 (h)
AMENDED AND RESTATED REAL ESTATE MANAGEMENT AGREEMENT
THIS AMENDED AND RESTATED REAL ESTATE MANAGEMENT AGREEMENT (this
"Agreement"), made as of the 28th day of August, 1998, between CROWN AMERICAN
WL ASSOCIATES, L.P., a Pennsylvania limited partnership, having its principal
address at Pasquerilla Plaza, Johnstown, Pennsylvania 15907 ("Owner"), and CROWN
AMERICAN PROPERTIES, L.P., a Delaware limited partnership, having its principal
address at Pasquerilla Plaza, Johnstown, Pennsylvania 15907 ("Agent").
W I T N E S S E T H
WHEREAS, Owner and Agent were parties to that certain Real Estate
Agreement, dated November 17, 1997 (the "Management Agreement");
WHEREAS, Owner and Agent have agreed to amend and restate the terms of the
Management Agreement in order to extend the initial term thereof and to modify,
amend and restate all other terms and provisions thereof in accordance with the
terms and provisions of this Agreement;
NOW, THEREFORE, in consideration of the premises, the mutual covenants,
agreements, representations and warranties hereinafter contained, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto agree that
the Management Agreement is hereby amended and restated in its entirety to read
as follows:
ARTICLE I
APPOINTMENT AND AUTHORITY OF AGENT
1.1 Owner owns leasehold interests in certain retail properties
identified on Exhibit A attached hereto and made a part hereof (the "Premises").
Owner hereby appoints Agent as the exclusive managing and renting agent for the
Premises, and hereby authorizes Agent to exercise such powers with respect to
the Premises as may be necessary for the performance of Agent's obligations
under Article II, and Agent accepts such appointment on the terms and conditions
hereinafter set forth for the term as provided in Article V. Agent shall have
no right or authority, express or implied, to commit or otherwise obligate Owner
in any manner whatsoever except to the extent specifically provided herein and
agrees that it shall not hold itself out as having authority to act on behalf of
Owner in any manner which is beyond the scope of authority granted to Agent in
this Agreement.
ARTICLE II
AGENT'S AGREEEMENT
2.1 Agent, on behalf of Owner, shall implement, or cause to be
implemented, the decisions of Owner and shall conduct the ordinary and usual
business affairs of Owner with respect to the management, operation and leasing
of the Premises as provided in this Agreement. Agent shall at all times conform
to the policies and programs established by Owner and the scope of Agent's
authority shall be limited to said policies. Agent shall act in a fiduciary
capacity with respect to the cash and cash equivalent assets of Owner which are
within the custody or control of Agent. Agent shall deal at arm's length with
all parties and shall serve Owner's interests at all times. All undertakings
incurred by Agent on behalf of Owner in accordance with this Agreement shall be
at the cost and expense of Owner unless otherwise provided for herein. Agent
agrees to use its best efforts in the management and operation of the Premises.
Agent shall perform the following duties in connection with the management and
operation of the Premises:
(a) Contract, for periods not longer than the term of Owner's
leasehold estate, in the name of Owner, for gas, electricity, water and such
other services as are currently being furnished to the Premises. Service
contracts shall be written to include a provision allowing termination by Owner
upon 30 days' notice wherever possible. All service contracts, including those
in effect at the date hereof in respect of the Premises, including the terms
thereof (with cancellation right, if any), the services provided thereunder and
the charges called for thereby, should be detailed in the annual budget package.
No such contract, other than for utilities, including water, which involves an
expenditure in excess of the amount set forth in paragraph 3 of Exhibit A
attached hereto shall hereinafter be entered into by Agent without the prior
approval of Owner. Agent shall also perform the obligations of the Owner under
any utility service agreement and any reciprocal easement agreements.
(b) Select, employ, pay, supervise, direct and discharge all
employees necessary for the proper, safe and economic operation and maintenance
of the Premises, in number and at wages in accordance with industry practices
and the annual budget, carry Worker's Compensation Insurance (and, when required
by law, compulsory Non-Occupational Disability Insurance) covering such
employees, and use reasonable care in the selection, discharge, and supervision
of such employees. Agent will keep bi-weekly time sheets which shall be
available for inspection by Owner. Agent shall prepare or cause to be prepared
and timely filed and paid, all necessary returns, forms and payments in
connection with unemployment insurance, medical and life insurance policies,
pensions, withholding and social security taxes and all other taxes relating to
said employees which are imposed on employees by any federal, state or municipal
authority. Agent shall also provide usual management services in connection
with labor relations and shall prepare, maintain and file all necessary reports
with respect to the Fair Labor Standards Act and all other required statements
and reports pertaining to employees at the Premises. Agent shall use its best
efforts to comply with all laws and regulations and collective bargaining
agreements, if any, affecting such employment. Owner shall have the right to
review and approve all collective bargaining agreements which affect the
Premises prior to their implementation or acceptance by Agent. Agent will be
and will continue throughout the term of this Agreement to be an equal
opportunity employer. All persons employed in connection with the operation and
maintenance of the Premises shall be employees of Agent or employees of
contractors approved by Owner to provide contract services to the Premises.
(c) Keep the Premises in a safe, clean, rentable and sightly
condition and make and contract for all repairs, alterations, replacements, and
installations, do all decorating and landscaping, and purchase all supplies
necessary for the proper operation and maintenance of the Premises and for the
fulfillment of Owner's obligations under any lease, operating agreement or other
agreement or compliance with all governmental and insurance requirements,
provided that, except as provided in Section 2.5 hereof, Agent shall not make
any purchase or do any work, the cost of which shall exceed the approved budget
or the amount set forth in paragraph 3 of Exhibit A attached hereto, without
obtaining in each instance the prior approval of Owner, except in circumstances
which Agent shall deem to constitute an emergency requiring immediate action for
the protection of the Premises or of tenants or other persons or to avoid the
suspension of necessary services or in order to cure any violation or other
condition which would subject Owner or Agent to any criminal penalty or any
civil fine in excess of $5,000.00. Agent shall notify Owner immediately of the
necessity for, the nature of, and the cost of, any such emergency repairs or any
action to cure any such violation or other condition. Agent shall arrange for
and supervise, on behalf of Owner, the performance of all alterations and other
work to prepare or alter space in the Premises for occupancy by tenants thereof.
If Owner shall require, Agent shall submit a list of contractors and
subcontractors performing tenant work, repairs, alterations or services at the
Premises under Agent's direction.
It is understood that Agent shall not be required to undertake the making
or supervision of extensive reconstruction of the Premises or any part thereof
except after written agreement by the parties hereto as to any additional fee to
be paid for such services.
Owner shall receive the benefit of all discounts and rebates obtainable by
Agent in its operation of the Premises. When requested by Owner, Agent agrees
to obtain competitive bids for the performance of any work at the Premises, to
furnish copies of such bids to Owner and to accept such bid as Owner may
direct.
If Agent desires to contract for repair, construction or other service
described in this paragraph (c) (other than work done at the request of a tenant
and at the tenant's sole cost and expense, hereinafter referred to as "Tenant
Work") with a party with respect to which any partner or shareholder of Agent
holds a beneficial interest, or with any subsidiary, affiliate or related
corporation in which Agent shall have a financial interest, such interest shall
be disclosed to, and approved by, Owner before such services are procured. The
cost of any such services shall likewise be at competitive rates,
notwithstanding that tenants of the Premises may be required to pay such costs.
Agent, or a general contractor working under the supervision of Agent is
authorized to make and install Tenant Work. Agent may collect from such tenant
or such general contractor, for its sole account, its charge for supervisory
overhead on all such Tenant Work. Agent shall hold Owner harmless from any
claims which may be advanced by any such tenant in connection with Tenant Work
performed by Agent or under Agent's supervision. Agent, however, shall not
require any tenant to use Agent, its subsidiary, affiliate or related
corporation as its general contractor to perform such Tenant Work.
(d) Handle promptly complaints and requests from tenants and parties
to reciprocal easement and/or operating agreements, notify Owner of any major
complaint made by any such tenant or party and notify owner promptly (together
with copies of supporting documentation) of: the receipt of any notice of
violation of any governmental requirements; any known orders or requirements of
insurers, insurance rating organizations, Board of Fire Underwriters or similar
bodies; any known defect in the Premises; any known fire or other damage to the
Premises, and, in the case of any serious fire or other serious damage to the
Premises, Agent also shall immediately provide telephone notice thereof to
Owner's General Insurance Office, so that an insurance adjuster can view the
damage before repairs are started, and complete customary loss reports in
connection with fire or other damage to the Premises.
(e) Notify Owner's General Liability Insurance carrier and Owner
promptly of any personal injury or property damage known to Agent occurring to
or claimed by any tenant or third party on or with respect to the Premises and
promptly forward to the carrier, completed insurance forms, any summons,
subpoena, or other like legal document served upon Agent relating to actual or
alleged potential liability of Owner, Agent, or the Premises, with copies to
Owner of all such documents.
(f) Advise Owner of those exceptions in leases, operating agreements
and other agreements executed on or after the date hereof in which the tenants
or parties to such agreements do not agree to hold Owner harmless with respect
to liability from any accidents.
(g) At the option of Owner, or as otherwise provided in the Loan
Documents, as hereinafter defined, receive and collect rent and all other monies
payable to Owner by all tenants and licensees in the Premises and by all other
parties including department stores under ground leases and reciprocal easement
agreements and tenants under leases of free-standing stores. In this
connection, Agent shall calculate all amounts due to Owner from such tenants,
licensees and other parties, including annual or periodic adjustments where
applicable, and shall, when appropriate, submit statements or invoices to such
tenants, licensees and parties. Agent shall deposit the same promptly in the
bank named on Exhibit A attached hereto (the "Bank") in an account with title
including a distinctive portion of Agent's name and such designation as Owner
may direct (the "Bank Account"), which account shall be used exclusively for
such funds. Owner's representative will be a signatory on all bank accounts
maintained by Agent and such representative's signature shall be required on all
checks in excess of $50,000 and for withdrawals in excess of $1,000,000 in any
month. All amounts received by Agent for or on behalf of Owner shall be and
remain the property of Owner. Checks may be drawn on the above-mentioned bank
account only for purposes authorized under this Agreement. No funds of Agent or
others shall be commingled with funds in any such bank account. Owner has the
right to control the types of cash management accounts and dictate the specifics
of said accounts with respect to disbursement and management of funds.
(h) Serve notice of default upon tenants of space in the Premises and
other parties which are in default in performing obligations under their leases,
reciprocal easement agreements or other agreements, with copies sent
simultaneously to Owner, and attempt to cause such defaults to be cured by the
defaulting tenant or other party. Agent shall, subject to Owner's consent with
respect to any tenant who occupies more than 1,000 square feet, utilizing
counsel theretofore approved by Owner, institute all necessary legal action or
proceedings for the collection of rent or other income from the Premises or the
ousting or dispossessing of tenants or other persons therefrom and all other
matters requiring legal attention. Agent agrees to use its best efforts to
collect rent and other charges from tenants in a timely manner and to pursue
Owner's legal remedies for nonpayment of same. Agent shall not terminate tenant
leases in the Premises without Owner's consent. Owner reserves the right to
designate or approve counsel and to control litigation of any character
affecting or arising out of the operation of the Premises and the settlement of
such litigation.
(i) Bond Agent and all of Agent's employees who may handle or be
responsible for monies or property of Owner with a "comprehensive 3-D" or
"Commercial Blanket" bond, in an amount of $500,000.00.
(j) Notify Owner immediately of any known fire, accident or other
casualty, condemnation proceedings, rezoning or other governmental order,
lawsuit or threat thereof involving the Premises; and the receipt of any notice
of violations relative to the leasing, use, repair and maintenance of the
Premises under governmental laws, rules, regulations, ordinances or like
provisions.
(k) If Owner so directs, make timely payment of real estate and
personal property taxes and assessments levied or assessed against the Premises
or personal property used in connection therewith and any other charge that may
become a lien against the Premises. Owner may direct that payment of such taxes
and assessments either be made to the taxing authority or to a mortgage lender
holding an escrow account for such items. Agent shall participate in Owner's
tax review program and check tax assessments and, when so requested, Agent shall
assist Owner in its efforts to reduce such taxes. Agent shall promptly furnish
Owner with copies of all assessment notices and receipt tax bills.
(l) Promptly comply with all present and future laws, ordinances,
orders, rules, regulations and requirements of all Federal, state and local
governments, courts, departments, commissions, boards and offices, any national
or local Board of Fire Underwriters or Insurance Services offices having
jurisdiction, or any other body exercising functions similar to those of any of
the foregoing ("Legal Requirements") which may be applicable to the Premises or
any part thereof or to the leasing, use, repair, operation and management
thereof, but only to the extent that such compliance is reasonably capable of
being carried out by Agent and Agent has available the necessary funds therefor
from collections or advances by Owner. Agent shall give prompt notice to Owner
of any known violation or the receipt of notice of alleged violation of such
laws and Agent shall not bear responsibility for failure of the Premises or the
operation thereof to comply with such laws unless Agent has committed gross
negligence or a willful act of omission in the performance of its obligations
under this Agreement or in the performance of any other duties owed to Owner or
third parties by Agent. As and when directed by Owner, Agent shall institute in
its name, or in the name of Owner using counsel selected by Owner, appropriate
actions or proceedings to contest any such law, ordinance, rule, regulation,
order, determination or requirement.
(m) Promote the Premises and participate as Owner's representative in
any Merchant's Associations or Promotional Organizations (collectively, the
"Promotional Organizations") established to promote the Premises.
(n) Consent to and approve tenant alteration work and installations
which are performed by tenants of space in the Premises and are provided for in
the leases of such tenants and are within such tenant's space. Agent is
authorized to approve tenant alteration work and installations not provided for
in leases if (i) such alteration work and installations are made solely at the
expense of the tenant, and (ii) such alteration work and installations do not
affect the structural integrity or facade of any building. Agent shall
periodically monitor the progress of any tenant alteration work and
installations to confirm that the work is being done in a good and workmanlike
manner and in substantial conformity with any plans and specifications approved
by Owner or Agent, and shall notify Owner of any material deficiencies or
material variations from the approved plans and specifications.
(o) Provide, upon Owner's request in accordance with the provisions
of Section 10 and Section 11 of Exhibit A, general contracting and construction
management services ("Development Services") and consultation to Owner for the
Premises, which shall include, without limitation, the management, supervision
and administration of, and provisions for services for the improvement or
expansion (and in the event of damage or condemnation, the reconstruction) of
the Premises, including advice, expertise and support of Agent provided and/or
retained and/or coordinated by home office and on-site personnel including,
without limitation, executive personnel, design and engineering personnel,
clerical personnel, legal and accounting personnel. Such personnel will perform
consultation and various functions involved with Development Services including,
without limitation, the following: design, planning, architectural,
engineering, acquisition and negotiation, negotiations with department stores
for site acquisition and operation in the Premises; permits and licenses;
preopening advertising and publicity; market research, site work; negotiations
with public authorities; attendance at public hearings; project management and
all other activities necessary to accomplish the improvement, expansion or
reconstruction of the Premises. It is understood that Development Services and
consultation with Owner may or may not involve Agent's in-house personnel; by
mutual agreement of Agent and Owner, outside professionals or other persons may
be engaged to provide Development Services and consultation with Owner, provided
that Agent agrees to require any contractor or subcontractor brought onto the
Premises to have workers' compensation and employers' liability insurance in the
necessity statutory amounts and comprehensive general liability insurance for at
least $1,000,000.00.
(p) If Owner so directs, pay when due (i) all debt service and other
amounts due under any mortgages that encumber the Premises or any part thereof,
and (ii) all rent and other charges payable under any ground lease of land
included in the Premises under which Owner is the tenant and give Owner notice
of the making of each payment.
(q) Carry out and comply with, directly or through a third party, all
requirements on the part of Owner under all such mortgages and ground leases,
all leases of space in the Premises, all ground leases and reciprocal easement
agreements with department stores and all other agreements affecting or relating
to the Premises which are known or made known to Agent, including, without
limitation, the furnishing of all services and utilities called for therein, but
only to the extent that such requirements are at the time reasonably capable of
being carried out by Agent and Agent has available the necessary funds therefor
from collections or advances by Owner, provided that Agent shall promptly notify
Owner if Agent cannot carry out such requirement or has insufficient funds
available to do so. Agent shall notify Owner promptly of any default under any
such mortgage, lease, ground lease, reciprocal easement or other agreement on
the part of Owner, the tenant or other party thereto of which agent becomes
aware.
(r) Use reasonable efforts to comply with and require compliance with
the requirements of leases of space in the Premises, ground leases, reciprocal
easement agreements and all other agreements affecting or relating to the
Premises which are known or made known to Agent on the part of Tenants,
department stores and other parties thereto and enforce compliance with the
rules and regulations, sign criteria and like standards for the Premises adopted
by Owner from time to time.
(s) Upon request, furnish Owner with an executed copy of each lease,
lease renewal, lease amendment, service contract and other agreement entered
into on or after the date of this Agreement in connection with the operation,
management and leasing of the Premises, and use reasonable efforts to secure
from tenants and parties to reciprocal easement agreements, and furnish to
Owner, any certificates of insurance and renewals thereof required to be
furnished by the terms of their leases or agreements. All such executed copies
of leases shall be maintained in Agent's main office, with additional lease
copies together with insurance certificates also maintained at the Agent's
office at the relevant property, if any such office exists.
(t) Inspect the Premises periodically and submit reports of findings
and recommendations to Owner which shall include, without limitation,
recommendations as to required repairs, replacements or maintenance. Agent
shall keep and submit annual written reports of all material alterations made to
the Premises, no matter by whom effected.
(u) Erect barriers or chains for the purpose of blocking access to
the common areas of and buildings included in the Premises as local law may
require, or, as directed in writing by owner, in order to avoid the dedication
of the same for public use and furnish appropriate evidence of same to Owner.
Agent shall give any advance notice of the erection of such barriers or chains
which may be required under reciprocal easement agreements or ground leases with
department stores.
(v) Use its reasonable efforts to obtain from tenants of the Premises
and department stores which are parties to reciprocal easement agreements or
ground leases waivers of their insurers' rights of subrogation in respect to
policies of fire and extended coverage and other property damage insurance
carried by them in favor of Owner, Agent and any department store or tenant for
which Owner is obligated to attempt to obtain such waivers under a ground lease,
reciprocal easement agreement or space lease.
(w) Assist owner in preparing any statements required to be submitted
by Owner under the terms of mortgages, ground leases, reciprocal easement
agreements and leases.
(x) Perform its duties in renting, managing, operating and
maintaining the Premises applying prudent and reasonable business practices
which are consistent with those followed in respect of the Premises prior to the
date of this Agreement, using reasonable care and diligence in carrying out
properly and efficiently its responsibilities under this Agreement. Agent shall
maintain those portions of the common areas of the Premises which are Owners'
obligation to maintain in a clean, safe and attractive condition, use reasonable
efforts to enforce the provisions of applicable leases, ground leases and
reciprocal easement agreements so as to cause tenants and department stores to
maintain their premises and common areas, if any, in similar condition, arrange
for necessary security for the Premises and their common areas and arrange for
cleaning and snow removal for the parking areas and roadways of the Premises.
Agent shall recommend to Owner from time to time such procedures with respect to
the Premises as Agent may deem advisable for the more efficient and economic
management and operation thereof.
(y) Where leasing guidelines or any Legal Requirement (as defined in
paragraph 2.1 (m) hereof) now or hereafter in effect require that tenant
security deposits be maintained, a separate interest-bearing account for such
security deposits (the "Security Deposit Account") shall be opened by Agent at a
bank approved by Owner. The Security Deposit Account shall be maintained in the
name of Agent in accordance with the relevant lease or Legal Requirement, as the
case may be, and shall be used only for tenant security deposits. The bank
shall be informed that the funds in the Security Deposit Account are held in
trust for Owner. Agent shall have the authority to remit to tenants any
interest to which they are entitled on their security deposit, in accordance
with their leases or any Legal Requirement, but Agent shall obtain the written
approval of Owner prior to the return of such deposits or any other security
(including letters of credit) to any tenant when the amount, in any single
instance, exceed $50,000.00.
Owner recognizes and understands that Environmental Service (as hereinafter
defined) are not actions or services that Agent is required to perform under
this Agreement and Owner further recognizes and understands that Agent is not a
consultant or a contractor that performs Environmental Services. Upon Owner's
request, Agent agrees to obtain and coordinate for and on behalf of Owner, such
Environmental Services as Owner may request or require. Owner shall reimburse
Agent for its administrative costs in connection with the coordination of such
Environmental Services as provided in Exhibit A, paragraph 11 of the Agreement.
In addition, Owner shall reimburse Agent for the costs of outside professionals
retained to perform Environmental Services. Environmental Services is defined
to be those acts or actions involving the presence use, exposure, removal,
restoration, or introduction of Hazardous materials (as hereinafter defined) and
the investigation of and compliance with any and all applicable rules, laws, or
regulations of local, state or federal authorities which apply or regulate
Hazardous Materials. Hazardous Materials means any hazardous, radioactive, or
toxic substance, material or waste listed in the United States Department of
Transportation Hazardous Materials Table; or by the Environmental Protection
Agency as hazardous substances; or such substances, materials and waste which
are or become regulated under applicable local, state or federal law including
materials which are petroleum products, asbestos, polychlorinated biphenyls, or
designated as hazardous substances under the Clean Water Act; or defined
hazardous waste under the Resource Conservation and Recovery Act; or defined as
hazardous substances under the Comprehensive Environmental Response,
Compensation and Inability Act.
2.2 Agent agrees, on behalf of Owner and at Owner's expense, to procure
and continue to maintain in force a comprehensive general liability insurance
policy or polices with respect to the Premises. Such policy or policies shall
provide for coverage in the amount and with such insurers as are required of
Owner under the Loan Documents (as defined below), but in any event, not less
than ten million dollars ($10,000,000.00) combined single limit coverage per
occurrence for bodily injury and property damage. The polices shall include
coverage for contractual liabilities assumed with respect to the Premises,
including, but not limited to, the obligations created by the indemnity set
forth in Section 3.3 hereof as used in this Agreement, the term "Loan Documents"
shall refer to that certain Amended and Restated Permanent Loan Agreement (the
"Loan Agreement"); Mortgage, Assignment of Leases and Rents, Security Agreement
and Fixture Filing (the "Mortgage"); Amended and Restated Promissory Note;
Assignment of Leases and Rents; Manager's Consent and Subordination of
Management Agreement; Second Mortgage, Assignment of Leases and Rents, Security
Agreement and Fixture Filing; Hazardous Materials Indemnity Agreement; Cash
Management Agreement; and that certain Second Assignment of Leases and Rents;
each dated as of August 28, 1998, from Owner to General Electric Capital
Corporation ("Lender"), and such other documents as may be executed in
connection with the loan (the "Mortgage Loan") secured by the Mortgage.
Further, at all times during the term of this Agreement, Agent shall keep
or cause to be kept insured, at Owner's cost and expense, all buildings and
improvements on the Premises against loss or damage by fire, windstorm, hail,
explosion, damage from aircraft and vehicles and smoke damage, and such other
risks as are from time to time included in "extended coverage" endorsements in
an amount sufficient to replace said improvements.
All insurance provided for in this Section 2.2 shall be effected under
valid and enforceable polices issued by insurers of recognized responsibility
and shall provide respectively, for the waiver of all rights of subrogation by
Owner or parties claiming through Owner against Agent and its agents and
employees. Owner and Agent hereby waive all rights of recovery as against the
other party hereto arising from loss or damage caused by the perils enumerated
in this Section 2.2 and agree that any policies obtained with respect to such
perils shall be endorsed accordingly, if such endorsements are available. Any
insurance required to be maintained hereunder may be taken out under a blanket
insurance policy or polices covering other properties of the insured. Any
policy required by this Section 2.2 shall provide that such policy shall not be
canceled without at least thirty (30) days' prior notice to Owner and Agent and,
in any event, shall provide that all parties insured thereby shall receive
notice no less than fifteen (15) days prior to the expiration dates of the
expiring policies.
2.3 Agent agrees to render monthly reports relating to the management and
operation of the Premises for the preceding calendar month on or before the
twenty-fifth (25th) day of each month in form as Owner and Agent will mutually
agree. Agent agrees that Owner shall have the right to require the transfer to
Owner at any time of any funds in the Bank Account considered by Owner to be in
excess of an amount reasonably required by Agent for disbursement in connection
with the Premises. Agent agrees to keep records with respect to the management
and operation of the Premises as prescribed by owner, and to retain those
records for periods specified by Owner. Owner shall have the right to inspect
such records and audit the reports required by this Section during business
hours for the life of this Agreement and thereafter during the period such
records are to be retained pursuant to this Section. In addition, Agent agrees
that such records may be examined from time to time during the period aforesaid
by any of the supervisory or regulatory authorities having jurisdiction over
Owner.
2.4 Agent shall ensure such control over accounting and financial
transactions as is reasonably required to protect Owner's assets from loss or
diminution due to gross negligence or willful misconduct on the part of Agent's
associates or employees. Losses caused by gross negligence or willful
misconduct shall be borne by Agent.
2.5 Agent shall establish and prepare, in the form authorized by Owner,
with such additional changes as may be reasonably requested by Owner, operating
and capital improvement budgets for the promotion, operation, repair and
maintenance of the Premises for each calendar year. Preliminary and final
budgets will be due 45 and 30 days, respectively, prior to commencement of the
calendar year to which they relate. Such budgets shall be prepared on both an
accrual basis showing a month-by-month projection of income and expenses and
capital expenditures. At least 30 days prior to the end of each year, Agent
shall meet with Owner to review such budgets for the subsequent year. Upon
receiving Owner's approval, Agent shall use its best efforts to comply with such
final budgets.
(a) Agent shall meet with Owner on a regular basis, not less
frequently than semi-annually and otherwise upon reasonable call by Owner, to
review the operations of the Premises, to review and, if appropriate, revise in
light of actual experience the annual operating and capital improvement budgets
theretofore approved by Owner and to consider other matters which Owner may
raise.
(b) Upon approval of the operating budget by Owner, and unless and
until revoked or revised by Owner, Agent shall have the right, without further
consent or approval by Owner to incur and pay the operating expenses set forth
in the approved operating budget, subject to paragraph 2.1(g) above.
(c) At the request of Owner from time to time Agent shall prepare and
submit to Owner (i) operating projections for the Premises for the ensuing five
(5) years, such projections to be made on a year-by-year basis and to be based
on Agent's best judgment as to the future, taking into consideration known
circumstances and circumstances Agent can reasonably anticipate are likely to
occur, and (ii) a schedule in reasonable detail of capital improvements, repairs
and replacements not provided for in the current capital improvement budget
which Agent reasonably anticipates will be required or should be made in the
foreseeable future, with Agent's opinion as to the relative priority and cost of
each thereof.
2.6 Agent shall also participate in Owner's property review programs to
the extent requested by Owner. Such review shall include asset, investment,
financial and strategy profiles in form satisfactory to Owner. Agent shall
respond, within 10 days, to Owner's management evaluation reports concerning
actions to be taken by Agent to correct or modify its management standards for
the operations, leasing or financial services provided for the Premises. If
Owner shall request that Agent's home office or regional office personnel travel
to the Premises to participate in Owner's property review programs or for any
other reason (unless such reason is for normal supervision), the reasonable cost
of meals, travel and hotel accommodations expenses incurred by such home office
personnel in connection with such travel shall be reimbursed to Agent by Owner.
Agent shall, however, bear the full cost and expenses incurred by its home
office or regional office personnel in connection with their travel to the
Premises to the extent such travel is required by the Agent for the normal
supervision of the management and leasing of the Premises.
2.7 Agent agrees to use its best efforts to have all space within the
Premises rented to desirable tenants, satisfactory to Owner, considering the
nature of the Premises, and in connection therewith:
(a) To negotiate, as the exclusive agent of Owner, all leases and
renewals of leases at the appropriate time, it being understood that all
inquiries to Owner with respect to leasing any portion of the Premises shall be
referred to Agent. Except for license agreements for temporary tenants, all
leases and renewals for lease terms in excess of one (1) year must be prepared
in accordance with Exhibit C by Agent and in accordance with the annual approved
budget and be submitted to Owner's representative for execution by Owner. Agent
is authorized to negotiate and execute license agreements prepared in accordance
with Exhibit C for temporary tenants and/or short term promotional activities.
If Agent shall receive a prospective tenant reference from a property other than
the Premises, which Agent or any subsidiary or affiliate manages, Agent shall
promptly declare its potential conflict of interest to Owner and Owner shall
determine if negotiations with such prospective tenant shall be undertaken by
Agent, Owner, or a third party approved by Owner. References of prospective
tenants, as well as their varying use requirements, shall be investigated
carefully by Agent. Agent also is authorized to negotiate and execute on
Owner's behalf lease amendments which: (i) change a Tenant's commencement date
by sixty (60) days or less (or for such longer period as is approved by Owner);
(ii) change a Tenant's permitted use by allowing the sale of such additional
items as are reasonably related to the Tenant's primary and principal use,
provided Agent has no reason to know of any lease at the center prohibiting such
use; (iii) change a tenant's marketing charge or promotional charge or
advertising obligation.
Owner acknowledges and understands that Agent manages properties for third
parties. Owner further acknowledges and understands that Agent routinely and
customarily negotiates tenant leases from multiple locations involving two or
more properties (one or more of which may be the Premises and one or more of
which may be properties owned by Agent or by others). Agent conducts such
multiple location negotiations in good faith for the benefit and interests of
Owner and other property owners, including Agent. Agent shall be entitled to
assume that such leasing practices are approved and acceptable to Owner, unless
and until Owner specifically disapproves the practice and so notifies Agent.
(b) With Owner's prior approval, to advertise the Premises or
portions thereat for rent, by means of periodicals, signs, plans, brochures and
other means appropriate to the Premises. Owner acknowledges and agrees that the
Premises may be included in brochures or other advertising media of Agent, which
may include other properties being offered for lease by Agent.
(c) In no event shall Agent engage or utilize the services of an
outside broker in connection with any lease without Owner's prior written
consent. In any case in which Owner requests or gives such consent, Agent shall
cause such broker to enter into a written agreement with Owner, on terms
reasonably satisfactory to Owner, with respect to such broker's commission and
Owner shall be responsible for the payment of such commission pursuant to the
terms of said agreement.
(d) Agent will, in each instance, negotiate for the inclusion in all
leases entered into by Owner of a provision to the effect that recourse on such
obligation shall be had only against the property to which such obligation
relates and no recourse shall be sought against Owner or any other person
holding, directly or indirectly, a beneficial interest in the property.
(e) Agent will, upon the request of Owner, undertake to find buyers
for the sale of any of the Owner's outparcels, peripheral land or such other
real estate situate upon the Premises, ("Sale Property"), and, in addition to
any other compensation provided to be paid to Agent under this Agreement, Owner
agrees to pay to Agent as compensation for its services hereunder, a fee at the
rate specified in Paragraph 7(iii) of Exhibit "A", attached hereto. In
performing its duties hereunder, Agent shall perform the following:
(i) Submit to Owner for approval, a pricing schedule on the Sale
Property;
(ii) Upon request, submit to Owner for approval, contract form(s)
to be used in the sale of the Sale Property;
(iii) Upon request, furnish Owner with a written report
regarding its progress in such sale activities;
(iv) Negotiate on behalf of Owner, the sale of the subject Sale
Property; and
(v) Provide legal services, limited to:
(a) Preparation of the Purchase and Sale Agreement;
(b) Deed and Easement(s) preparation;
(c) Preparation and submittal to Owner of the Seller's
closing statement;
(d) Preparation of closing instructions;
(e) Coordination of title work;
(f) Upon approval of Owner, retain local counsel,
whose fees will be reimbursed by Owner; and
(g) Submit to Owner, for final execution, all
documents necessary to consummate the
transaction.
Agent shall pursue these duties and obligations with diligence and in the
best interests of Owner.
2.8 Agent agrees, for itself and all persons retained or employed by Agent
in performing its services, to hold in confidence and not to use or disclose to
others any confidential or proprietary information of Owner heretofore or
hereafter disclosed to Agent ("Confidential Information"), including, but not
limited to, any data, information plans, programs, processes, costs, operations
or the names of any tenants which may come within the knowledge of Agent in the
performance of, or as a result of, its services, except where required by
judicial or administrative order, or where Owner specifically gives Agent
written authorization to disclose any of the foregoing to others or such
disclosure as is required in the direct performance of Agent's duties hereunder.
If Agent is required by a judicial or administrative order to disclose any
Confidential Information, Agent will promptly notify Owner thereof, consult with
Owner on the advisability of taking steps to resist or narrow such request and
cooperate with Owner in any attempt it may make to obtain an order or other
assurance that confidential treatment will be accorded to the Confidential
Information disclosed.
2.9 If at any time there shall be insufficient funds available to Agent
from collections to pay any obligations of Owner required to be paid under this
Agreement, Agent shall promptly notify Owner and Agent shall not be obligated to
pay such obligations unless Owner furnishes Agent with funds therefor.
2.10 Agent assumes no responsibility under this Agreement other than to
render the services called for hereunder in good faith, and Owner shall make no
claim against Agent on account of any alleged errors of judgment made in good
faith in connection with Agent's obligations hereunder and with the operation of
the Premises. Agent shall not be liable to Owner or others except by reason of
acts constituting willful misfeasance or gross negligence on the part of Agent,
and Owner agrees to indemnify, defend and hold harmless Agent and its partners
(and the shareholders, trustees and officers thereof) and employees from and
against all claims, actions, causes of action, costs and expenses (including,
but not limited to, reasonable attorney's fees) directly or indirectly arising
from the claims of any third party, except only those claims where liability
arises from acts constituting willful misfeasance or gross negligence on the
part of Agent.
ARTICLE III
OWNER'S AGREEMENTS
3.1 Owner, at its option, may pay directly all taxes, special assessments,
ground rents, insurance premiums and mortgage payments. If Owner makes such
election, Agent shall advise Owner of the due dates of such taxes assessments,
insurance premiums and mortgage payments.
3.2 Owner shall bear the cost of all premiums relating to insurance
procured by Agent for Owner pursuant to Section 2.2 hereof. Owner shall look
solely to such insurance for indemnity against any loss or damage to the
Premises and shall obtain waivers of subrogation against the Agent under such
policies if available at no additional cost to Owner.
3.3 Owner agrees to indemnify and save harmless Agent and its partners
(and the shareholders, trustees and officers thereof) and employees from and
against all claims, losses and liabilities resulting from: (i) damage to
property or injury to, or death of, persons from any cause whatsoever when Agent
is carrying out the provisions of this Agreement or acting under the direction
of Owner in or about the Premises; (ii) claims for defamation and false arrest
when Agent is carrying out the provisions of this Agreement or acting under the
direction of Owner; and (iii) claims occasioned by or in connection with or
arising out of acts or omissions, other than criminal acts, of the Agent when
Agent is carrying out the provisions of this Agreement or acting under the
direction of Owner (except in cases of Agent's willful misconduct or gross
negligence), and to defend or cause to be defended, at no expense to Agent or
such persons, any claim, action or proceeding brought against Agent or such
persons or Agent and Owner, jointly or severally, arising out of the foregoing,
and to hold Agent and such persons harmless from any judgment, loss or
settlement on account thereof.
Notwithstanding the foregoing, Owner shall not be responsible for
indemnifying or defending Agent or such persons in respect of any matter, claim
or liability in respect of which Agent is obligated to indemnify Owner as
provided in the following sentence. Agent agrees to indemnify and save harmless
Owner from and against all claims, losses and liabilities resulting from injury
to, or death of, persons in or about the Premises or for deformation and false
arrest in each case caused in whole or in part by the willful misfeasance or
gross negligence of Agent, and to defend, at no expense to Owner, any claim,
action or proceeding brought against Owner or Owner and Agent, jointly or
severally, arising out of the foregoing, and to hold Owner harmless from any
judgments, loss or settlement on account thereof.
Notwithstanding the foregoing, Agent shall not be responsible for
indemnifying or defending Owner in respect of any matter, claim or liability
which is covered by any public liability insurance policies carried by Owner and
under which Agent is named as an additional insured. The indemnification
obligations of Owner and Agent under this Section 3.3 shall in each case be
conditioned upon (a) prompt notice from the other party after such party learns
of any claim or basis therefor which is covered by such indemnity, (b) such
party's not taking any steps which would bar Owner or Agent, as the case may be,
from obtaining recovery under applicable insurance policies or would prejudice
the defense of the claim in question, and (c) such party's taking of all
necessary steps which if not taken would result in Owner or Agent, as the case
may be, being barred from obtaining recovery under applicable insurance policies
or would prejudice the defense of the claim in question. The provisions of this
Section 3.3 shall survive the expiration or termination of this Agreement.
3.4 Owner shall provide such office space on the Premises as may be
necessary for Agent to properly perform its functions under this Agreement.
Agent shall not be required to pay for utilities, telephone service or rent for
the office area on the Premises occupied by Agent. Agent shall have the right
to use the fixtures, furniture, furnishings and equipment, if any, which are the
property of Owner in said office space. Owner shall also provide space on the
Premises for use as community rooms and information and service centers where
the use of such space is determined by Owner to be in the best interest of the
Premises. All income derived from the utilization and/or operation of such
community rooms and/or information or service centers shall belong to the Owner
and all expenses relating thereto shall be borne by Owner.
3.5 Except as otherwise provided in this Agreement, everything done by
Agent in the performance of its obligations under this Agreement and all
expenses incurred pursuant hereto shall be for and on behalf of Owner and for
its account. Except as otherwise provided herein, all debts and liabilities
incurred to third parties in the ordinary course of business of managing the
Premises as provided herein are and shall be obligations of Owner, and Agent
shall not be liable for any such obligations by reason of its management,
supervision or operation of the Premises for Owner.
ARTICLE IV
COMPENSATION
4.1 In addition to any other compensation provided to be paid to Agent
under this Agreement, Owner agrees to pay to Agent as compensation for its
management services hereunder, a fee at the rate specified in paragraph 5 of
Exhibit A attached hereto. Said fee shall be payable monthly no later than the
twenty-fifth (25th) day of the following month, and shall be based on the
following components of income from the preceding calendar month determined in
accordance with GAAP. It is understood that the management fee shall be
calculated upon the following items: (i) minimum rents from all permanent
tenants (anchor, mall shops, ground leases and all other tenants); (ii) Lease
buyout income; (iii) Percentage rents in lieu of minimum rents; (iv) Percentage
rents; (v) all cost recovery income (CAM, taxes, food court, security, other);
(vi) income from all temporary tenants (initial term of one year or less); (vii)
income from all promotional activity; (viii) miscellaneous mall income such as
payphone commissions, stroller rentals, etc. and (ix) bad debts expense related
to any of the above revenue items. The following items shall not be subject to
management fees: (i) business interruption insurance income; (ii) recoveries
from insurance companies for casualty and other losses; (iii) payments from
tenants for leasehold improvements and related services provided by Agent; (iv)
payments from tenants to Merchants' Associations or to Marketing Funds; (v)
tenant security deposits; (vi) straight line rental income or losses, and (vii)
operating covenant and amortization (classified as a reduction of minimum rent).
Agent shall withdraw said fee from the operating account for the Premises and
shall account for same as provided for in Section 2.3 hereof.
4.2 The following expenses or costs incurred by or on behalf of Agent in
connection with the management and leasing of the Premises shall be the sole
cost and expense of Agent and shall not be reimbursable by Owner and Agent shall
indemnify Owner for such expenses and costs:
(a) cost of gross salary and wages, payroll taxes, insurance,
worker's compensation, pension benefits and any other benefits of Agent's
employees, except that Owner will reimburse Agent for all costs of employees who
provide either full or part time services on-site at any of the Premises.
Within the category of "on-site" personnel, Agent may include the pro-rata costs
for regional personnel performing required services at the Premises on a regular
basis (but which personnel may share time working at other properties managed by
Agent); provided, however, that the costs for any employees who are based at or
work from Agent's home office shall not be included, and provided further that
the pro-rata costs for any such regional personnel are included and identified
as such within the annual operating budget as approved by Owner.
(b) general accounting and reporting services, as such services are
considered to be within the reasonable scope of Agent's responsibility to Owner;
(c) costs of forms, stationery, ledgers, supplies, equipment and
other "general overhead" items used in Agent's home office or regional offices;
(d) cost or pro rata cost of telephone and general office expenses
incurred in the Premises by Agent for the operation and management of properties
not owned by Owner;
(e) cost of all bonuses, incentive compensation, profit sharing, or
any pay advances by Agent to Agent's employees, except such costs pertaining to
employees employed by Agent in accordance with Paragraph 2.1 (b) hereof;
(f) cost attributable to losses arising from criminal acts, gross
negligence or fraud on the part of Agent or Agent's associates or employees;
(g) cost for meals, travel and hotel accommodations for Agent's home
office or regional office personnel who travel to and from the Premises, except
as provided in Section 2.6;
(h) cost of automobile purchase and/or rental, except if furnished or
approved by Owner;
(i) except as otherwise provided in Exhibit A attached hereto,
expenses incurred in connection with the leasing of the Premises, it is being
understood and agreed, however, that Agent shall be reimbursed for advertising
expenses incurred in connection with the leasing of the Premises;
(j) cost of liability or other insurance carried by Agent, except
costs incurred by Agent in satisfaction of its obligations under Section 2.2
hereof; and
(k) cost of bonds purchased pursuant to Section 2.1(i) of this
Agreement.
ARTICLE V
DURATION, TERMINATION, DEFAULT
5.1 This Agreement shall become effective on the date hereof.
5.2 Subject to earlier termination as hereinafter provided, this Agreement
shall have an initial term ending on September 1, 2008. Thereafter, this
Agreement shall continue year-to-year on the same terms and conditions as herein
contained subject to being terminated by either Agent or Owner upon no less than
six (6) months written notice. The Agent may not terminate this Agreement
except in the case of non-payment of management fees for a period of ninety (90)
days after notice of such non-payment to Owner and Lender. In addition, Lender
shall have the right to terminate (or direct Owner to terminate, as applicable)
this Agreement: (i) upon the insolvency of Agent, (ii) the occurrence of an
Event of Default (as defined in the Loan Documents), (iii) the failure of the
Premises to meet the Net Operating Income requirements (as defined in the Loan
Documents), or (iv) pursuant to the provisions of the Manager's Consent and
Subordination of Management Agreement.
5.3 It shall be an Event of Default under this Agreement on the part of
Agent if Agent shall default in any material respect in performing any of its
obligations under this Agreement and such default shall not be cured within 30
days after written notice thereof is given by Owner to Agent (or, if the default
in question is curable but is of such nature that it cannot reasonably be
completely cured within such 30-day period, if Agent does not promptly after
receiving such notice commence to cure such default and thereafter proceed with
reasonable diligence to complete the curing thereof within 180 days after notice
is given by Owner to Agent). If an Event of Default by Agent shall occur, Owner
shall have the right to terminate this Agreement by written notice given to
Agent, and upon the giving of such notice this Agreement and the term hereof
shall terminate without any obligation on the part of Owner to make any payments
to Agent hereunder except as hereinafter provided.
5.4 If at any time during the term of this Agreement any involuntary
petition in bankruptcy or similar proceeding shall be filed against Agent
seeking its reorganization, liquidation or appointment of a receiver, trustee or
liquidator for it or for all or substantially all of its assets, and such
petition shall not be dismissed within 90 days after the filing thereof, or if
Agent shall:
(a) apply for or consent in writing to the appointment of a receiver,
trustee or liquidator of all or substantially all of its assets;
(b) file a voluntary petition in bankruptcy or admit in writing its
inability to pay its debts as they become due;
(c) make a general assignment for the benefit of creditors;
(d) file a petition or an answer seeking reorganization or an
arrangement with creditors or take advantage of any insolvency law; or
(e) file an answer admitting the material allegations of a petition
filed against it in any bankruptcy, reorganization or insolvency proceedings;
then upon the occurrence of any such event, Owner, at its option, may terminate
this Agreement by written notice given to Agent, and upon the giving of such
notice this Agreement and the term hereof shall terminate without any obligation
on the part of Owner to make any payments to Agent hereunder except as
hereinafter provided.
5.5 Owner shall have the additional right to terminate this Agreement on
at least 10 days' written notice to Agent, if Agent without Owner's prior
written consent shall assign or attempt to assign its rights or obligations
under this Agreement or subcontract (except for normal service agreements or as
otherwise specified in this Agreement) any of the services to be performed by
Agent. Owner shall also have the right to terminate this Agreement as to any
property included within the Premises on at least 10 days' written notice to
Agent if (a) such property shall be damaged or destroyed to the extent of 25% or
more by fire or other casualty and Owner elects not to restore or repair such
property or (b) there shall be a condemnation or deed in lieu thereof of 25% or
more of such property.
5.6 Agent acknowledges and agrees that Owner shall have the right to
subordinate and/or assign this agreement in connection with the Loan Documents.
Agent further agrees to execute such further instruments as Owner or Lender
deems necessary to effectuate such subordination, provided that in the event
Lender becomes entitled to possession of the Premises, the Lender shall be
entitled, at its option, to retain Agent to manage the Premises, in which case
the Agent shall be entitled to the compensation set forth in this Agreement
during all periods in which Agent is providing services to the Premises for the
Lender. Moreover, notwithstanding anything to the contrary contained herein,
for so long as any amounts remain outstanding under the Loan Documents, (i) this
Agreement and all fees payable by Owner hereunder shall be subject to and
subordinate to any mortgage liens on the Premises established by the Loan
Documents and (ii) Agent shall comply with any and all applicable provisions of
the Loan Documents and in the event there is a conflict between the terms of
this Agreement and the terms of the Loan Documents, the Loan Documents shall
control.
5.7 Upon any termination of this Agreement pursuant to the provisions of
this Article V, Owner shall remain obligated to pay to Agent fees and other
amounts due to Agent hereunder which accrued prior to the effective date of such
termination. Nothing contained in this Section 5.7 shall be deemed to waive,
affect or impair (a) Owner's rights to seek recourse against Agent for damages
or other relief in the event of the termination of this Agreement by Owner
pursuant to Section 5.3, 5.4 or 5.5 hereof, and (b) Agent's right to seek
recourse against Owner for damages or other relief in the event of the
termination of this Agreement by Agent pursuant to Section 5.2 hereof.
5.8 Upon the expiration or earlier termination of this Agreement, Agent
shall forthwith surrender and deliver to Owner any space in the Premises
occupied by Agent and shall make delivery to Owner or to Owner's designee or
agent, at Agent's home or regional offices or at its offices at the Premises, of
the following:
(a) a final accounting, reflecting the balance of income from and
expenses of the Premises as at the date of expiration or termination of this
Agreement;
(b) any funds of Owner or tenant security or advance rent deposits,
or both, held by agent with respect to the Premises; and
(c) all Confidential Information (in whatever medium stored) and all
other records, contracts, leases, ground leases, reciprocal easement agreements,
receipts for deposits, unpaid bills, lease summaries, canceled checks, bank
statements, paid bills and all other records, papers and documents and any
microfilm and/or computer disk of any of the foregoing which relate to the
Premises and the operation, maintenance, management and leasing thereof; all
such data, information and documents being at all times the property of Owner.
In addition, Agent shall furnish all such information and take all such
action as Owner shall reasonably require to effectuate an orderly and systematic
termination of Agent's duties and activities under this Agreement.
5.9 This Agreement shall terminate at the election of Owner as to any of
the properties set forth in Exhibit A upon thirty (30) days written notice to
the Agent if such properties are sold by Owner to a non-affiliated third party
purchaser or (unless the Lender shall otherwise notify the Agent in writing)
automatically if such properties were acquired on foreclosure of a mortgage
encumbering all or a portion of the Premises. In the event such properties are
sold by Owner to a non-affiliated third party purchaser and this Agreement is
not thereby terminated by Owner, the Agent shall have the right to terminate
this Agreement as to such properties upon sixty (60) days prior written notice
which notice must be given within ninety (90) days after the date of such sale
is consummated. If such properties are sold, Agent will not be entitled to
sales commission unless the Agent has been retained by Owner pursuant to a
separate commission arrangement. This Agreement shall remain in full force and
effect as to all properties not terminated pursuant to this Section 5.9.
5.10 The provisions of this Article V shall survive the expiration or
termination of this Agreement.
ARTICLE VI
ASSIGNMENT
6.1 Agent, except for a transfer to a "Permissible Transferee", shall not
assign its rights or obligations under this Agreement, either directly or by a
transfer of shares of beneficial interest or voting control either voluntarily
or by operation of law. Any change other than to a "Permissible Transferee"
shall constitute a breach of this Agreement by Agent and Owner may terminate
this Agreement in accordance with Section 5.5 A "Permissible Transferee" shall
mean any corporation, partnership, trust or other entity, more than 50% of the
outstanding stock of which, or more than 50% interest in which, is owned or
controlled by Agent.
6.2 In the event of a sale or conveyance of any of the Premises, Owner
shall have the right to cancel or assign this Agreement and its rights and
obligations hereunder to any person or entity to whom or which Owner sells or
conveys such property or properties. Upon such assignment, Owner shall be
relieved of its obligations under this Agreement with respect to such property
or properties that accrue from and after the date of such assignment, provided
that the assignee shall assume the obligations of Owner under this Agreement and
shall agree to perform and be bound by all of the terms and provisions hereof,
effective from and after the date of such assignment and an executed copy of
such assumption agreement shall be delivered to Agent. Agent shall not be
entitled to a "termination fee" in connection with an assignment or cancellation
as set forth in this Section 6.2, but otherwise shall be entitled to collect
from Owner such fees and expenses, including termination and/or relocation
expenses of Agent's full-time employees, if any, as Agent has earned pursuant to
this Agreement prior to the date of such assignment or cancellation.
ARTICLE VII
MISCELLANEOUS
7.1 Owner's representative ("Owner's Representative"), whose name and
address is set forth in paragraph 2 of Exhibit A attached hereto, shall be the
duly authorized representative of Owner for the purpose of this Agreement. Any
statement, notice, recommendation, request, demand, consent or approval under
this Agreement shall be in writing and shall be deemed given by Owner when made
or given by Owner's Representative or any officer of Owner and delivered
personally to an officer of Agent or mailed, addressed to Agent, at his address
first above set forth. Either party may, by notice to the other, designate a
different address for the receipt of the aforementioned communications and Owner
may, by notice to Agent, from time to time, designate a different Owner's
Representative to act as such. All communications mailed by one party to
another shall be sent by first class mail, postage prepaid or Express Mail
Service, or other commercial overnight delivery service, except that notices of
default shall be sent by registered or certified mail, return receipt requested,
postage prepaid, Express Mail Service or other commercial overnight delivery
service with receipt acknowledged in writing. Communications so mailed shall be
deemed given or served on the date mailed. Notwithstanding the foregoing, any
notices, requests, consents, approvals and other communications, other than
notices of default or approvals of annual budgets, and other communications,
approvals or agreements which are required by the express terms of other
provisions of this Agreement to be in writing, may be given by telegram,
telephonic communication or orally in person. Agent and Owner shall furnish to
the other the names and telephone numbers of one or more persons who can be
reached at any time during the term of this Agreement in the event of an
emergency.
7.2 Agent shall, at its own expense, qualify to do business and obtain and
maintain such licenses as may be required for the performance by Agent of its
services.
7.3 Each provision of this Agreement is intended to be severable. If any
term or provision hereof shall be determined by a court of competent
jurisdiction to be illegal or invalid for any reason whatsoever, such provision
shall be severed from this Agreement and shall not affect the validity of the
remainder of this Agreement.
7.4 In the event either of the parties hereto shall institute any action
or proceeding against the other party relating to this Agreement, the
unsuccessful party in such action or proceeding shall reimburse the successful
party for its disbursements incurred in connection therewith and for its
reasonable attorney's fees as fixed by the court.
7.5 No consent or waiver, express or implied, by either party hereto or of
any breach or default by the other party in the performance by the other of its
obligations hereunder shall be valid unless in writing, and no such consent or
waiver shall be deemed or construed to be a consent or waiver to or of any other
breach or default in the performance by such other party of the same or any
other obligations of such party hereunder. Failure on the part of either party
to complain of any act or failure to act of the other party or to declare the
other party in default, irrespective of how long such failure continues, shall
not constitute a waiver by such party of its rights hereunder. The granting of
any consent or approval in any one instance by or on behalf of Owner shall not
be construed to waive or limit the need for such consent in any other or
subsequent instance.
7.6 The venue of any action or proceeding brought by either party against
the other arising out of this Agreement shall be in the state or federal courts
of the Commonwealth of Pennsylvania.
7.7 This Agreement may not be changed or modified except by an agreement
in writing executed by each of the parties hereto and consented to by the
Lender. This Agreement constitutes all of the understandings and agreements
between the parties in connection with the agency herein created.
7.8 This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their permitted successors and assigns, but shall not inure
to the benefit of, or be enforceable by, any other person or entity.
7.9 Nothing contained in this Agreement shall be construed as making Owner
and gent partners or joint ventures or as making either of such parties liable
for the debts or obligations of the other, except as in this Agreement is
expressly provided.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
CROWN AMERICAN WL ASSOCIATES,
L.P.
(Owner)
BY: CROWN AMERICAN WL ASSOCIATES,
as sole general partner
By: /s/ Ronald P. Rusinak
Name: Ronald P. Rusinak
Title: Vice President
CROWN AMERICAN PROPERTIES, L.P.
(Agent)
BY: CROWN AMERICAN REALTY TRUST,
as sole general partner
By: /s/ Ronald P. Rusinak
Name: Ronald P. Rusinak
Title: Vice President
EXHIBIT A
1. Premises (1.1):
a. Wyoming Valley Mall
Wilkes-Barre, Pennsylvania;
b. Logan Valley Mall
Altoona, Pennsylvania.
2. Name and Address of Owner's Representative (7.1):
John M. Kriak
Pasquerilla Plaza
Johnstown, PA 15907.
3. Limit of amount authorized for non-emergency purchases and repairs (2.1(a)
and (c)):
$50,000.00.
4. Name of Banks (2.1(g)):
PNC Bank, N.A.
5. Management Fees (4.1):
Owner agrees to pay Agent as compensation for its management services
hereunder an amount equal to 5% of the amounts set forth in Section 4.1.
Such management fee shall be payable monthly based on the income earned for
the categories described in Section 4.1, computed in accordance with GAAP.
Agent shall be entitled to receive the management fee on the pro rata
portion of percentage rents received by Owner after the termination of this
Agreement but applicable to time periods prior to the termination of this
Agreement based upon the actual number of days lapsed divided by 365.
6. Legal and Tenant Coordination Expenses:
Owner agrees to pay Agent, to defray in-house legal expenses and tenant
coordination expenses (a) with respect to each new lease and each lease
renewal of mall shops and free-standing buildings (other than a lease
renewal or extension resulting from the exercise of an option contained in
such lease), an amount equal to the Agent's actual costs of providing such
services, limited however to the annual amount which is capitalized as
tenant allowance costs under the Owner's customary accounting practices as
Agent and Owner shall mutually agree and as recorded in the Owner's audited
annual financial statements. Such fees shall be payable monthly in arrears
using estimated fees per square foot, based on the estimated annual fee;
the monthly estimated fees shall be adjusted to a final actual amount
within 90 days after the Owner's fiscal year end. Agent and Owner shall
use their best efforts to estimate the monthly fee per square foot and
shall adjust the amount periodically during the year as mutually agreed
upon.
7. Leasing and Land Sale Fees:
(i) Leasing Commission:
Agent shall be entitled to commissions for leases secured, in addition
to
other fees and compensation provided in this Agreement, equal to the
Agent's actual costs of providing leasing services related to permanent
leases (those with an initial term in excess of one year), limited however
to the aggregate amount which is capitalized as lease acquisition costs
under the Owner's customary accounting practices as Agent and Owner shall
mutually agree and as recorded in the Owner's audited annual financial
statements. Such fees shall be payable monthly in arrears using estimated
fees per square foot, based on the estimated annual fee; the monthly
estimated fees shall be adjusted to a final actual amount within 90 days
after the Owner's fiscal year end. Agent and Owner shall use their best
efforts to estimate the monthly fee per square foot and shall adjust the
amount periodically during the year as mutually agreed upon.
(ii) Brokerage Commissions:
Owner and Agent acknowledge that some leasing and land sale
transactions will involve the use of an independent real estate broker or
real estate sales agent, who will be paid a commission for introducing and
bringing a prospective tenant or purchaser to the Premises. Agent may
utilize brokers in connection with carrying out its leasing and land sale
activities, and shall be reimbursed by Owner for the cost of those
Brokerage Commissions in the following circumstances:
(a) Agent was required to recognize the broker or sales agent as the
representative of the prospective tenant or purchaser and was not
allowed or permitted the opportunity to contact or negotiate with
the tenant or purchaser except through the broker or sales agent,
and this fact was disclosed to Owner.
(b) Agent disclosed to Owner the existence of the broker or sales
agent and the brokerage fee at the time the proposed leasing or
land sale transaction was submitted to Owner for approval.
Except as provided in (a) and (b) above, Agent shall assume the sole cost and
responsibility for broker commissions.
(iii) Land Sale Commission:
For services provided pursuant to Section 2.7(e), Owner shall pay the
Agent a sales commission equal to fifteen percent (15%) of the adjusted
sales price ("Sales Commission"), as compensation for overhead associated
with the services of certain employees of Agent. For purposes of the
foregoing "adjusted sales price" shall mean the gross proceeds payable to
Owner less reasonable and necessary development costs paid by Owner in
connection with the transfer. One-half (1/2) of the Sales Commission shall
be due and payable to Agent at the time a mutually binding Agreement of
Sale with respect to any Sale Property is fully-executed, with the
computation of such amount being based on the gross proceeds payable to
Owner. The balance of the Sales Commission shall be paid to Agent at the
time of closing of any such sale.
8. Excluded Services:
Notwithstanding anything to the contrary contained herein, the parties
acknowledge that it is not within the contemplation of this Agreement or
the fee structure included herein that the Agent perform any services with
respect to the following: any "due diligence" or similar efforts relating
to any financing, refinancing or sale or disposition of the Premises;
zoning compliance of the Premises; performing or supervising (including
tenant room build-outs or remodeling) any extensive alteration or
renovation to the Premises; asbestos and/or other environmental studies and
any related abatement or remediation activities for any tenant premises,
site acquisitions of additional ground for the expansion of the Premises;
reconstruction after casualty or condemnation; leasing, management, or
construction relating to any proposed or implemented expansion of the
Premises or work generally classified as "development" work in connection
with the same; renewals or renegation of leases or other agreements with
department stores if such involves substantial changes from existing
documents (including, without limitation, negotiation of new leases,
renewal leases, operating covenants, renovation provisions, expansion
rights, and like matters); or replacement of department stores tenancies.
Owner shall reimburse Agent for all such services rendered equal to the
Agent's actual costs of providing such services, limited however to the
annual amount which is capitalized as tenant allowance or construction
costs under the Owner's customary accounting practices as Agent and Owner
shall mutually agree and as recorded in the Owner's audited annual
financial statements. Such fees shall be payable monthly in arrears using
estimated based on the estimated annual fee; the monthly estimated fees
shall be adjusted to a final actual amount within 90 days after the Owner's
fiscal year end. Agent and Owner shall use their best efforts to estimate
the monthly fees and shall adjust the amount periodically during the year
as mutually agreed upon.
9. Other Requested Services:
If Owner requests Agent to provide its own personnel for non-routine
services
which Agent is not obligated elsewhere in this Agreement to perform the
compensation for which is not provided for hereinabove, unless Owner and
Agent otherwise agree to an acceptable fee for such services, Owner shall
pay Agent an amount equal to two and one-half times the actual base
cost of Agent's departmental personnel, as computed by Agent, for their
time involved in performing such requested services, plus reimbursement for
any out-of-pocket costs incurred incident to furnishing such requested
services. Owner and Agent shall agree in advance as to the hourly base
cost to be applicable for the specific services to be provided. Such
amount or amounts shall be payable to Agent monthly within ten (10) days
after Owner's receipt of Agent's statement setting for the amount payable
to Agent.
EXHIBIT B
INTENTIONALLY OMITTED
EXHIBIT C
Leasing Guidelines
Agent shall use a form or forms of lease; or with respect to temporary
tenants and/or short term promotional activities, a form or forms of license
agreement, which have been prepared and submitted to Owner for Owner's prior
review and approval. Agent will negotiate and make modifications to such forms
as directed by Owner, or as necessary or appropriate with respect to the needs
of the particular transactions, utilizing methods and techniques consistent with
prevailing practices employed in management and leasing of shopping centers.
For all agreements, excepting license agreements for temporary tenants
and/or for short term promotion activities, all essential financial and
business terms and provisions of the lease or agreement, including construction
and improvements of the leasehold, shall be presented for Owner's approval.
Tenant-signed leases presented by Agent for Owner's review and execution shall
be consistent with such terms and conditions previously approved by Owner, or
with such deviations or modifications identified for Owner's review. Execution
of tenant-signed leases that are presented by Agent for Owner's signature will
acknowledge Owner's approval of the lease, its form, its terms and provisions.
No lease or other agreement shall be entered into, modified, canceled or
extended if the consent of any mortgagee or ground lessor is required unless
such consent has been obtained. Agent will notify Owner when consent is
required.
EXHIBIT 10.5 (j)
REAL ESTATE MANAGEMENT AGREEMENT
THIS AGREEMENT, made as of the 31st day of May, 1998, between CROWN
AMERICAN LEWISTOWN ASSOCIATES, L.P., a Pennsylvania limited partnership, having
its principal address at Pasquerilla Plaza, Johnstown, Pennsylvania 15907
("Owner"), and CROWN AMERICAN PROPERTIES, L.P., a Delaware limited partnership,
having its principal address at Pasquerilla Plaza, Johnstown, Pennsylvania
15907 ("Agent").
W I T N E S S E T H
In consideration of the mutual Covenants herein contained, and intending to
be legally bound, the parties hereto agree as follows:
ARTICLE I
APPOINTMENT AND AUTHORITY OF AGENT
1.1 Owner owns fee simple and leasehold interests in certain retail
property identified on Exhibit A attached hereto and made a part hereof (the
"Premises"). Owner hereby appoints Agent as the exclusive managing and renting
agent for the Premises, and hereby authorizes Agent to exercise such powers with
respect to the Premises as may be necessary for the performance of Agent's
obligations under Article II, and Agent accepts such appointment on the terms
and conditions hereinafter set forth for the term as provided in Article V.
Agent shall have no right or authority, express or implied, to commit or
otherwise obligate Owner in any manner whatsoever except to the extent
specifically provided herein and agrees that it shall not hold itself out as
having authority to act on behalf of Owner in any manner which is beyond the
scope of authority granted to Agent in this Agreement.
ARTICLE II
AGENT'S AGREEEMENT
2.1 Agent, on behalf of Owner, shall implement, or cause to be
implemented, the decisions of Owner and shall conduct the ordinary and usual
business affairs of Owner with respect to the management, operation and leasing
of the Premises as provided in this Agreement. Agent shall at all times conform
to the policies and programs established by Owner and the scope of Agent's
authority shall be limited to said policies. Agent shall act in a fiduciary
capacity with respect to the cash and cash equivalent assets of Owner which are
within the custody or control of Agent. Agent shall deal at arm's length with
all parties and shall serve Owner's interests at all times. All undertakings
incurred by Agent on behalf of Owner in accordance with this Agreement shall be
at the cost and expense of Owner unless otherwise provided for herein. Agent
agrees to use its best efforts in the management and operation of the Premises.
Agent shall perform the following duties in connection with the management and
operation of the Premises:
(a) Contract, for periods not longer than the term of Owner's
leasehold estate, in the name of Owner, for gas, electricity, water and such
other services as are currently being furnished to the Premises. Service
contracts shall be written to include a provision allowing termination by Owner
upon 30 days' notice wherever possible. All service contracts, including those
in effect at the date hereof in respect of the Premises, including the terms
thereof (with cancellation right, if any), the services provided thereunder and
the charges called for thereby, should be detailed in the annual budget package.
No such contract, other than for utilities, including water, which involves an
expenditure in excess of the amount set forth in paragraph 3 of Exhibit A
attached hereto shall hereinafter be entered into by Agent without the prior
approval of Owner. Agent shall also perform the obligations of the Owner under
any utility service agreement and any reciprocal easement agreements.
(b) Select, employ, pay, supervise, direct and discharge all
employees necessary for the proper, safe and economic operation and maintenance
of the Premises, in number and at wages in accordance with industry practices
and the annual budget, carry Worker's Compensation Insurance (and, when required
by law, compulsory Non-Occupational Disability Insurance) covering such
employees, and use reasonable care in the selection, discharge, and supervision
of such employees. Agent will keep bi-weekly time sheets which shall be
available for inspection by Owner. Agent shall prepare or cause to be prepared
and timely filed and paid, all necessary returns, forms and payments in
connection with unemployment insurance, medical and life insurance policies,
pensions, withholding and social security taxes and all other taxes relating to
said employees which are imposed on employees by any federal, state or municipal
authority. Agent shall also provide usual management services in connection
with labor relations and shall prepare, maintain and file all necessary reports
with respect to the Fair Labor Standards Act and all other required statements
and reports pertaining to employees at the Premises. Agent shall use its best
efforts to comply with all laws and regulations and collective bargaining
agreements, if any, affecting such employment. Owner shall have the right to
review and approve all collective bargaining agreements which affect the
Premises prior to their implementation or acceptance by Agent. Agent will be
and will continue throughout the term of this Agreement to be an equal
opportunity employer. All persons employed in connection with the operation and
maintenance of the Premises shall be employees of Agent or employees of
contractors approved by Owner to provide contract services to the Premises.
(c) Keep the Premises in a safe, clean, rentable and sightly
condition and make and contract for all repairs, alterations, replacements, and
installations, do all decorating and landscaping, and purchase all supplies
necessary for the proper operation and maintenance of the Premises and for the
fulfillment of Owner's obligations under any lease, operating agreement or other
agreement or compliance with all governmental and insurance requirements,
provided that, except as provided in Section 2.5 hereof, Agent shall not make
any purchase or do any work, the cost of which shall exceed the approved budget
or the amount set forth in paragraph 3 of Exhibit A attached hereto, without
obtaining in each instance the prior approval of Owner, except in circumstances
which Agent shall deem to constitute an emergency requiring immediate action for
the protection of the Premises or of tenants or other persons or to avoid the
suspension of necessary services or in order to cure any violation or other
condition which would subject Owner or Agent to any criminal penalty or any
civil fine in excess of $5,000.00. Agent shall notify Owner immediately of the
necessity for, the nature of, and the cost of, any such emergency repairs or any
action to cure any such violation or other condition. Agent shall arrange for
and supervise, on behalf of Owner, the performance of all alterations and other
work to prepare or alter space in the Premises for occupancy by tenants thereof.
If Owner shall require, Agent shall submit a list of contractors and
subcontractors performing tenant work, repairs, alterations or services at the
Premises under Agent's direction.
It is understood that Agent shall not be required to undertake the making
or supervision of extensive reconstruction of the Premises or any part thereof
except after written agreement by the parties hereto as to any additional fee to
be paid for such services.
Owner shall receive the benefit of all discounts and rebates obtainable by
Agent in its operation of the Premises. When requested by Owner, Agent agrees
to obtain competitive bids for the performance of any work at the Premises, to
furnish copies of such bids to Owner and to accept such bid as Owner may
direct.
If Agent desires to contract for repair, construction or other service
described in this paragraph (c) (other than work done at the request of a tenant
and at the tenant's sole cost and expense, hereinafter referred to as "Tenant
Work") with a party with respect to which any partner or shareholder of Agent
holds a beneficial interest, or with any subsidiary, affiliate or related
corporation in which Agent shall have a financial interest, such interest shall
be disclosed to, and approved by, Owner before such services are procured. The
cost of any such services shall likewise be at competitive rates,
notwithstanding that tenants of the Premises may be required to pay such costs.
Agent, or a general contractor working under the supervision of Agent is
authorized to make and install Tenant Work, Agent may collect from such tenant
or such general contractor, for its sole account, its charge for supervisory
overhead on all such Tenant Work. Agent shall hold Owner harmless from any
claims which may be advanced by any such tenant in connection with Tenant Work
performed by Agent or under Agent's supervision. Agent, however, shall not
require any tenant to use Agent, its subsidiary, affiliate or related
corporation as its general contractor to perform such Tenant Work.
(d) Handle promptly complaints and requests from tenants and parties
to reciprocal easement and/or operating agreements, notify Owner of any major
complaint made by any such tenant or party and notify owner promptly (together
with copies of supporting documentation) of: the receipt of any notice of
violation of any governmental requirements; any known orders or requirements of
insurers, insurance rating organizations, Board of Fire Underwriters or similar
bodies; any known defect in the Premises; any known fire or other damage to the
Premises, and, in the case of any serious fire or other serious damage to the
Premises, Agent also shall immediately provide telephone notice thereof to
Owner's General Insurance Office, so that an insurance adjuster can view the
damage before repairs are started, and complete customary loss reports in
connection with fire or other damage to the Premises.
(e) Notify Owner's General Liability Insurance carrier and Owner
promptly of any personal injury or property damage known to Agent occurring to
or claimed by any tenant or third party on or with respect to the Premises and
promptly forward to the carrier, completed insurance forms, any summons,
subpoena, or other like legal document served upon Agent relating to actual or
alleged potential liability of Owner, Agent, or the Premises, with copies to
Owner of all such doucments.
(f) Advise Owner of those exceptions in leases, operating agreements
and other agreements executed on or after the date hereof in which the tenants
or parties to such agreements do not agree to hold Owner harmless with respect
to liability from any accidents.
(g) At the option of Owner, or as otherwise provided in the Loan
Documents, as hereinafter defined, receive and collect rent and all other monies
payable to Owner by all tenants and licensees in the Premises and by all other
parties including department stores under ground leases and reciprocal easement
agreements and tenants under leases of free-standing stores. In this
connection, Agent shall calculate all amounts due to Owner from such tenants,
licensees and other parties, including annual or periodic adjustments where
applicable, and shall, when appropriate, submit statements or invoices to such
tenants, licensees and parties. Agent shall deposit the same promptly in the
bank named on Exhibit A attached hereto (the "Bank") in an account with title
including a distinctive portion of Agent's name and such designation as Owner
may direct (the "Bank Account"), which account shall be used exclusively for
such funds. Owner's representative will be a signatory on all bank accounts
maintained by Agent and such representative's signature shall be required on all
checks in excess of $50,000 and for withdrawals in excess of $1,000,000 in any
month. All amounts received by Agent for or on behalf of Owner shall be and
remain the property of Owner. Checks may be drawn on the above-mentioned bank
account only for purposes authorized under this Agreement. No funds of Agent or
others shall be commingled with funds in any such bank account. Owner has the
right to control the types of cash management accounts and dictate the specifics
of said accounts with respect to disbursement and management of funds.
(h) Serve notice of default upon tenants of space in the Premises and
other parties which are in default in performing obligations under their leases,
reciprocal easement agreements or other agreements, with copies sent
simultaneously to Owner, and attempt to cause such defaults to be cured by the
defaulting tenant or other party. Agent shall, subject to Owner's consent with
respect to any tenant who occupies more than 1,000 square feet, utilizing
counsel theretofore approved by Owner, institute all necessary legal action or
proceedings for the collection of rent or other income from the Premises or the
ousting or dispossessing of tenants or other persons therefrom and all other
matters requiring legal attention. Agent agrees to use its best efforts to
collect rent and other charges from tenants in a timely manner and to pursue
Owner's legal remedies for nonpayment of same. Agent shall not terminate tenant
leases in the Premises without Owner's consent. Owner reserves the right to
designate or approve counsel and to control litigation of any character
affecting or arising out of the operation of the Premises and the settlement of
such litigation.
(i) Bond Agent and all of Agent's employees who may handle or be
responsible for monies or property of Owner with a "comprehensive 3-D" or
"Commercial Blanket" bond, in an amount of $500,000.00.
(j) Notify Owner immediately of any known fire, accident or other
casualty, condemnation proceedings, rezoning or other governmental order,
lawsuit or threat thereof involving the Premises; and the receipt of any notice
of violations relative to the leasing, use, repair and maintenance of the
Premises under governmental laws, rules, regulations, ordinances or like
provisions.
(k) If Owner so directs, make timely payment of real estate and
personal property taxes and assessments levied or assessed against the Premises
or personal property used in connection therewith and any other charge that may
become a lien against the Premises. Owner may direct that payment of such taxes
and assessments either be made to the taxing authority or to a mortgage lender
holding an escrow account for such items. Agent shall participate in Owner's
tax review program and check tax assessments and, when so requested, Agent shall
assist Owner in its efforts to reduce such taxes. Agent shall promptly furnish
Owner with copies of all assessment notices and receipt tax bills.
(l) Promptly comply with all present and future laws, ordinances,
orders, rules, regulations and requirements of all Federal, state and local
governments, courts, departments, commissions, boards and offices, any national
or local Board of Fire Underwriters or Insurance Services offices having
jurisdiction, or any other body exercising functions similar to those of any of
the foregoing ("Legal Requirements") which may be applicable to the Premises or
any part thereof or to the leasing, use, repair, operation and management
thereof, but only to the extent that such compliance is reasonably capable of
being carried out by Agent and Agent has available the necessary funds therefor
from collections or advances by Owner. Agent shall give prompt notice to Owner
of any known violation or the receipt of notice of alleged violation of such
laws and Agent shall not bear responsibility for failure of the Premises or the
operation thereof to comply with such laws unless Agent has committed gross
negligence or a willful act of omission in the performance of its obligations
under this Agreement or in the performance of any other duties owed to Owner or
third parties by Agent. As and when directed by Owner, Agent shall institute in
its name, or in the name of Owner using counsel selected by Owner, appropriate
actions or proceedings to contest any such law, ordinance, rule, regulation,
order, determination or requirement.
(m) Promote the Premises and participate as Owner's representative in
any Merchant's Associations or Promotional Organizations (collectively, the
"Promotional Organizations") established to promote the Premises.
(n) Consent to and approve tenant alteration work and installations
which are performed by tenants of space in the Premises and are provided for in
the leases of such tenants and are within such tenant's space. Agent is
authorized to approve tenant alteration work and installations not provided for
in leases if (i) such alteration work and installations are made solely at the
expense of the tenant, and (ii) such alteration work and installations do not
affect the structural integrity or facade of any building. Agent shall
periodically monitor the progress of any tenant alteration work and
installations to confirm that the work is being done in a good and workmanlike
manner and in substantial conformity with any plans and specifications approved
by Owner or Agent, and shall notify Owner of any material deficiencies or
material variations from the approved plans and specifications.
(o) Provide, upon Owner's request in accordance with the provisions
of Section 8 and Section 9 of Exhibit A, general contracting and construction
management services ("Development Services") and consultation to Owner for the
Premises, which shall include, without limitation, the management, supervision
and administration of, and provisions for services for the improvement or
expansion (and in the event of damage or condemnation, the reconstruction) of
the Premises, including advice, expertise and support of Agent provided and/or
retained and/or coordinated by home office and on-site personnel including,
without limitation, executive personnel, design and engineering personnel,
clerical personnel, legal and accounting personnel. Such personnel will perform
consultation and various functions involved with Development Services including,
without limitation, the following: design, planning, architectural,
engineering, acquisition and negotiation, negotiations with department stores
for site acquisition and operation in the Premises; permits and licenses;
preopening advertising and publicity; market research, site work; negotiations
with public authorities; attendance at public hearings; project management and
all other activities necessary to accomplish the improvement, expansion or
reconstruction of the Premises. It is understood that Development Services and
consultation with Owner may or may not involve Agent's in-house personnel; by
mutual agreement of Agent and Owner, outside professionals or other persons may
be engaged to provide Development Services and consultation with Owner, provided
that Agent agrees to require any contractor or subcontractor brought onto the
Premises to have workers' compensation and employers' liability insurance in the
necessity statutory amounts and comprehensive general liability insurance for at
least $1,000,000.00.
(p) If Owner so directs, pay when due (i) all debt service and other
amounts due under any mortgages that encumber the Premises or any part thereof,
and (ii) all rent and other charges payable under any ground lease of land
included in the Premises under which Owner is the tenant and give Owner notice
of the making of each payment.
(q) Carry out and comply with, directly or through a third party, all
requirements on the part of Owner under all such mortgages and ground leases,
all leases of space in the Premises, all ground leases and reciprocal easement
agreements with department stores and all other agreements affecting or relating
to the Premises which are known or made known to Agent, including, without
limitation, the furnishing of all services and utilities called for therein, but
only to the extent that such requirements are at the time reasonably capable of
being carried out by Agent and Agent has available the necessary funds therefor
from collections or advances by Owner, provided that Agent shall promptly notify
Owner if Agent cannot carry out such requirement or has insufficient funds
available to do so. Agent shall notify Owner promptly of any default under any
such mortgage, lease, ground lease, reciprocal easement or other agreement on
the part of Owner, the tenant or other party thereto of which agent becomes
aware.
(r) Use reasonable efforts to comply with and require compliance with
the requirements of leases of space in the Premises, ground leases, reciprocal
easement agreements and all other agreements affecting or relating to the
Premises which are known or made known to Agent on the part of Tenants,
department stores and other parties thereto and enforce compliance with the
rules and regulations, sign criteria and like standards for the Premises adopted
by Owner from time to time.
(s) Upon request, furnish Owner with an executed copy of each lease,
lease renewal, lease amendment, service contract and other agreement entered
into on or after the date of this Agreement in connection with the operation,
management and leasing of the Premises, and use reasonable efforts to secure
from tenants and parties to reciprocal easement agreements, and furnish to
Owner, any certificates of insurance and renewals thereof required to be
furnished by the terms of their leases or agreements. All such executed copies
of leases shall be maintained in Agent's main office, with additional lease
copies together with insurance certificates also maintained at the Agent's
office at the relevant property, if any such office exists.
(t) Inspect the Premises periodically and submit reports of findings
and recommendations to Owner which shall include, without limitation,
recommendations as to required repairs, replacements or maintenance. Agent
shall keep and submit annual written reports of all material alterations made to
the Premises, no matter by whom effected.
(u) Erect barriers or chains for the purpose of blocking access to
the common areas of and buildings included in the Premises as local law may
require, or, as directed in writing by owner, in order to avoid the dedication
of the same for public use and furnish appropriate evidence of same to Owner.
Agent shall give any advance notice of the erection of such barriers or chains
which may be required under reciprocal easement agreements or ground leases with
department stores.
(v) Use its reasonable efforts to obtain from tenants of the Premises
and department stores which are parties to reciprocal easement agreements or
ground leases waivers of their insurers' rights of subrogation in respect to
policies of fire and extended coverage and other property damage insurance
carried by them in favor of Owner, Agent and any department store or tenant for
which Owner is obligated to attempt to obtain such waivers under a ground lease,
reciprocal easement agreement or space lease.
(w) Assist owner in preparing any statements required to be submitted
by Owner under the terms of mortgages, ground leases, reciprocal easement
agreements and leases.
(x) Perform its duties in renting, managing, operating and
maintaining the Premises applying prudent and reasonable business practices
which are consistent with those followed in respect of the Premises prior to the
date of this Agreement, using reasonable care and diligence in carrying out
properly and efficiently its responsibilities under this Agreement. Agent shall
maintain those portions of the common areas of the Premises which are Owners'
obligation to maintain in a clean, safe and attractive condition, use reasonable
efforts to enforce the provisions of applicable leases, ground leases and
reciprocal easement agreements so as to cause tenants and department stores to
maintain their premises and common areas, if any, in similar condition, arrange
for necessary security for the Premises and their common areas and arrange for
cleaning and snow removal for the parking areas and roadways of the Premises.
Agent shall recommend to Owner from time to time such procedures with respect to
the Premises as Agent may deem advisable for the more efficient and economic
management and operation thereof.
(y) Where leasing guidelines or any Legal Requirement (as defined in
paragraph 2.1 (m) hereof) now or hereafter in effect require that tenant
security deposits be maintained, a separate interest-bearing account for such
security deposits (the "Security Deposit Account") shall be opened by Agent at a
bank approved by Owner. The Security Deposit Account shall be maintained in the
name of Agent in accordance with the relevant lease or Legal Requirement, as the
case may be, and shall be used only for tenant security deposits. The bank
shall be informed that the funds in the Security Deposit Account are held in
trust for Owner. Agent shall have the authority to remit to tenants any
interest to which they are entitled on their security deposit, in accordance
with their leases or any Legal Requirement, but Agent shall obtain the written
approval of Owner prior to the return of such deposits or any other security
(including letters of credit) to any tenant when the amount, in any single
instance, exceed $50,000.00.
Owner recognizes and understands that Environmental Service (as hereinafter
defined) are not actions or services that Agent is required to perform under
this Agreement and Owner further recognizes and understands that Agent is not a
consultant or a contractor that performs Environmental Services. Upon Owner's
request, Agent agrees to obtain and coordinate for and on behalf of Owner, such
Environmental Services as Owner may request or require. Owner shall reimburse
Agent for its administrative costs in connection with the coordination of such
Environmental Services as provided in Exhibit A, paragraph 8 of the Agreement.
In addition, Owner shall reimburse Agent for the costs of outside professionals
retained to perform Environmental Services. Environmental Services is defined
to be those acts or actions involving the presence use, exposure, removal,
restoration, or introduction of Hazardous materials (as hereinafter defined) and
the investigation of and compliance with any and all applicable rules, laws, or
regulations of local, state or federal authorities which apply or regulate
Hazardous Materials. Hazardous Materials means any hazardous, radioactive, or
toxic substance, material or waste listed in the United States Department of
Transportation Hazardous Materials Table; or by the Environmental Protection
Agency as hazardous substances; or such substances, materials and waste which
are or become regulated under applicable local, state or federal law including
materials which are petroleum products, asbestos, polychlorinated biphenyls, or
designated as hazardous substances under the Clean Water Act; or defined
hazardous waste under the Resource Conservation and Recovery Act; or defined as
hazardous substances under the Comprehensive Environmental Response,
Compensation and Inability Act.
2.2 Agent agrees, on behalf of Owner and at Owner's expense, to procure
and continue to maintain in force a comprehensive general liability insurance
policy or polices with respect to the Premises. Such policy or policies shall
provide for coverage in the amount and with such insurers as are required of
Owner under the Loan Documents (as defined below), but in any event, not less
than ten million dollars ($10,000,000.00) combined single limit coverage per
occurrence for bodily injury and property damage. The polices shall include
coverage for contractual liabilities assumed with respect to the Premises,
including, but not limited to, the obligations created by the indemnity set
forth in Section 3.3 hereof as used in this Agreement. The term "Loan Documents"
shall refer to that certain Amended and Restated Loan Agreement, dated as of May
31, 1998, by and between Owner, as Borrower, and First Commonwealth Bank, as
Lender; Assumption of Mortgage and Security Agreement, dated as of May 31, 1998,
by and between Owner and Lender ("Mortgage"); Amended and Restated Note, dated
as of May 31, 1998, by and between Owner and Lender, and such other documents or
their amendments as have been or may be executed in connection with the loan
(the "Mortgage Loan") secured by Mortgage.
Further, at all times during the term of this Agreement, Agent shall keep
or cause to be kept insured, at Owner's cost and expense, all buildings and
improvements on the Premises against loss or damage by fire, windstorm, hail,
explosion, damage from aircraft and vehicles and smoke damage, and such other
risks as are from time to time included in "extended coverage" endorsements in
an amount sufficient to replace said improvements.
All insurance provided for in this Section 2.2 shall be effected under
valid and enforceable polices issued by insurers of recognized responsibility
and shall provide respectively, for the waiver of all rights of subrogation by
Owner or parties claiming through Owner against Agent and its agents and
employees. Owner and Agent hereby waive all rights of recovery as against the
other party hereto arising from loss or damage caused by the perils enumerated
in this Section 2.2 and agree that any policies obtained with respect to such
perils shall be endorsed accordingly, if such endorsements are available. Any
insurance required to be maintained hereunder may be taken out under a blanket
insurance policy or polices covering other properties of the insured. Any
policy required by this Section 2.2 shall provide that such policy shall not be
canceled without at least thirty (30) days' prior notice to Owner and Agent and,
in any event, shall provide that all parties insured thereby shall receive
notice no less than fifteen (15) days prior to the expiration dates of the
expiring policies.
2.3 Agent agrees to render monthly reports relating to the management and
operation of the Premises for the preceding calendar month on or before the
twenty-fifth (25th) day of each month in form as Owner and Agent will mutually
agree. Agent agrees that Owner shall have the right to require the transfer to
Owner at any time of any funds in the Bank Account considered by Owner to be in
excess of an amount reasonably required by Agent for disbursement in connection
with the Premises. Agent agrees to keep records with respect to the management
and operation of the Premises as prescribed by owner, and to retain those
records for periods specified by Owner. Owner shall have the right to inspect
such records and audit the reports required by this Section during business
hours for the life of this Agreement and thereafter during the period such
records are to be retained pursuant to this Section. In addition, Agent agrees
that such records may be examined from time to time during the period aforesaid
by any of the supervisory or regulatory authorities having jurisdiction over
Owner.
2.4 Agent shall ensure such control over accounting and financial
transactions as is reasonably required to protect Owner's assets from loss or
diminution due to gross negligence or willful misconduct on the part of Agent's
associates or employees. Losses caused by gross negligence or willful
misconduct shall be borne by Agent.
2.5 Agent shall establish and prepare, in the form authorized by Owner,
with such additional changes as may be reasonably requested by Owner, operating
and capital improvement budgets for the promotion, operation, repair and
maintenance of the Premises for each calendar year. Preliminary and final
budgets will be due 45 and 30 days, respectively, prior to commencement of the
calendar year to which they relate. Such budgets shall be prepared on both an
accrual basis showing a month-by-month projection of income and expenses and
capital expenditures. At least 30 days prior to the end of each year, Agent
shall meet with Owner to review such budgets for the subsequent year. Upon
receiving Owner's approval, Agent shall use its best efforts to comply with such
final budgets.
(a) Agent shall meet with Owner on a regular basis, not less
frequently than semi-annually and otherwise upon reasonable call by Owner, to
review the operations of the Premises, to review and, if appropriate, revise in
light of actual experience the annual operating and capital improvement budgets
theretofore approved by Owner and to consider other matters which Owner may
raise.
(b) Upon approval of the operating budget by Owner, and unless and
until revoked or revised by Owner, Agent shall have the right, without further
consent or approval by Owner to incur and pay the operating expenses set forth
in the approved operating budget, subject to paragraph 2.1(g) above.
(c) At the request of Owner from time to time Agent shall prepare and
submit to Owner (i) operating projections for the Premises for the ensuing five
(5) years, such projections to be made on a year-by-year basis and to be based
on Agent's best judgment as to the future, taking into consideration known
circumstances and circumstances Agent can reasonably anticipate are likely to
occur, and (ii) a schedule in reasonable detail of capital improvements, repairs
and replacements not provided for in the current capital improvement budget
which Agent reasonably anticipates will be required or should be made in the
foreseeable future, with Agent's opinion as to the relative priority and cost of
each thereof.
2.6 Agent shall also participate in Owner's property review programs to
the extent requested by Owner. Such review shall include asset, investment,
financial and strategy profiles in form satisfactory to Owner. Agent shall
respond, within 10 days, to Owner's management evaluation reports concerning
actions to be taken by Agent to correct or modify its management standards for
the operations, leasing or financial services provided for the Premises. If
Owner shall request that Agent's home office or regional office personnel travel
to the Premises to participate in Owner's property review programs or for any
other reason (unless such reason is for normal supervision), the reasonable cost
of meals, travel and hotel accommodations expenses incurred by such home office
personnel in connection with such travel shall be reimbursed to Agent by Owner.
Agent shall, however, bear the full cost and expenses incurred by its home
office or regional office personnel in connection with their travel to the
Premises to the extent such travel is required by the Agent for the normal
supervision of the management and leasing of the Premises.
2.7 Agent agrees to use its best efforts to have all space within the
Premises rented to desirable tenants, satisfactory to Owner, considering the
nature of the Premises, and in connection therewith:
(a) To negotiate, as the exclusive agent of Owner, all leases and
renewals of leases at the appropriate time, it being understood that all
inquiries to Owner with respect to leasing any portion of the Premises shall be
referred to Agent. Except for license agreements for temporary tenants, all
leases and renewals for lease terms in excess of one (1) year must be prepared
in accordance with Exhibit C by Agent and in accordance with the annual approved
budget and be submitted to Owner's representative for execution by Owner. Agent
is authorized to negotiate and execute license agreements prepared in accordance
with Exhibit C for temporary tenants and/or short term promotional activities.
If Agent shall receive a prospective tenant reference from a property other than
the Premises, which Agent or any subsidiary or affiliate manages, Agent shall
promptly declare its potential conflict of interest to Owner and Owner shall
determine if negotiations with such prospective tenant shall be undertaken by
Agent, Owner, or a third party approved by Owner. References of prospective
tenants, as well as their varying use requirements, shall be investigated
carefully by Agent. Agent also is authorized to negotiate and execute on
Owner's behalf lease amendments which: (i) change a Tenant's commencement date
by sixty (60) days or less (or for such longer period as is approved by Owner);
(ii) change a Tenant's permitted use by allowing the sale of such additional
items as are reasonably related to the Tenant's primary and principal use,
provided Agent has no reason to know of any lease at the center prohibiting such
use; (iii) change a tenant's marketing charge or promotional charge or
advertising obligation.
Owner acknowledges and understands that Agent manages properties for third
parties. Owner further acknowledges and understands that Agent routinely and
customarily negotiates tenant leases from multiple locations involving two or
more properties (one or more of which may be the Premises and one or more of
which may be properties owned by Agent or by others). Agent conducts such
multiple location negotiations in good faith for the benefit and interests of
Owner and other property owners, including Agent. Agent shall be entitled to
assume that such leasing practices are approved and acceptable to Owner, unless
and until Owner specifically disapproves the practice and so notifies Agent.
(b) With Owner's prior approval, to advertise the Premises or
portions thereat for rent, by means of periodicals, signs, plans, brochures and
other means appropriate to the Premises. Owner acknowledges and agrees that the
Premises may be included in brochures or other advertising media of Agent, which
may include other properties being offered for lease by Agent.
(c) In no event shall Agent engage or utilize the services of an
outside broker in connection with any lease without Owner's prior written
consent. In any case in which Owner requests or gives such consent, Agent shall
cause such broker to enter into a written agreement with Owner, on terms
reasonably satisfactory to Owner, with respect to such broker's commission and
Owner shall be responsible for the payment of such commission pursuant to the
terms of said agreement.
(d) Agent will, in each instance, negotiate for the inclusion in all
leases entered into by Owner of a provision to the effect that recourse on such
obligation shall be had only against the property to which such obligation
relates and no recourse shall be sought against Owner or any other person
holding, directly or indirectly, a beneficial interest in the property.
(e) Agent will, upon the request of Owner, undertake to find buyers
for the sale of any of the Owner's outparcels, peripheral land or such other
real estate situate upon the Premises, ("Sale Property"), and, in addition to
any other compensation provided to be paid to Agent under this Agreement, Owner
agrees to pay to Agent as compensation for its services hereunder, a fee at the
rate specified in Paragraph 7(iii) of Exhibit "A", attached hereto. In
performing its duties hereunder, Agent shall perform the following:
(i) Submit to Owner for approval, a pricing schedule on the Sale
Property;
(ii) Upon request, submit to Owner for approval, contract form(s)
to be used in the sale of the Sale Property;
(iii) Upon request, furnish Owner with a written report
regarding its progress in such sale activities;
(iv) Negotiate on behalf of Owner, the sale of the subject Sale
Property; and
(v) Provide legal services, limited to:
(a) Preparation of the Purchase and Sale Agreement;
(b) Deed and Easement(s) preparation;
(c) Preparation and submittal to Owner of the Seller's
closing statement;
(d) Preparation of closing instructions;
(e) Coordination of title work;
(f) Upon approval of Owner, retain local counsel,
whose fees will be reimbursed by Owner; and
(g) Submit to Owner, for final execution, all
documents necessary to consummate the
transaction.
Agent shall pursue these duties and obligations with diligence and in the
best interests of Owner.
2.8 Agent agrees, for itself and all persons retained or employed by Agent
in performing its services, to hold in confidence and not to use or disclose to
others any confidential or proprietary information of Owner heretofore or
hereafter disclosed to Agent ("Confidential Information"), including, but not
limited to, any data, information plans, programs, processes, costs, operations
or the names of any tenants which may come within the knowledge of Agent in the
performance of, or as a result of, its services, except where required by
judicial or administrative order, or where Owner specifically gives Agent
written authorization to disclose any of the foregoing to others or such
disclosure as is required in the direct performance of Agent's duties hereunder.
If Agent is required by a judicial or administrative order to disclose any
Confidential Information, Agent will promptly notify Owner thereof, consult with
Owner on the advisability of taking steps to resist or narrow such request and
cooperate with Owner in any attempt it may make to obtain an order or other
assurance that confidential treatment will be accorded to the Confidential
Information disclosed.
2.9 If at any time there shall be insufficient funds available to Agent
from collections to pay any obligations of Owner required to be paid under this
Agreement, Agent shall promptly notify Owner and Agent shall not be obligated to
pay such obligations unless Owner furnishes Agent with funds therefor.
2.10 Agent assumes no responsibility under this Agreement other than to
render the services called for hereunder in good faith, and Owner shall make no
claim against Agent on account of any alleged errors of judgment made in good
faith in connection with Agent's obligations hereunder and with the operation of
the Premises. Agent shall not be liable to Owner or others except by reason of
acts constituting willful misfeasance or gross negligence on the part of Agent,
and Owner agrees to indemnify, defend and hold harmless Agent and its partners
(and the shareholders, trustees and officers thereof)and employees from and
against all claims, actions, causes of action, costs and expenses (including,
but not limited to, reasonable attorney's fees) directly or indirectly arising
from the claims of any third party, except only those claims where liability
arises from acts constituting willful misfeasance or gross negligence on the
part of Agent.
ARTICLE III
OWNER'S AGREEMENTS
3.1 Owner, at its option, may pay directly all taxes, special assessments,
ground rents, insurance premiums and mortgage payments. If Owner makes such
election, Agent shall advise Owner of the due dates of such taxes assessments,
insurance premiums and mortgage payments.
3.2 Owner shall bear the cost of all premiums relating to insurance
procured by Agent for Owner pursuant to Section 2.2 hereof. Owner shall look
solely to such insurance for indemnity against any loss or damage to the
Premises and shall obtain waivers of subrogation against the Agent under such
policies if available at no additional cost to Owner.
3.3 Owner agrees to indemnify and save harmless Agent and its partners
(and the shareholders, trustees and officers thereof) and employees from and
against all claims, losses and liabilities resulting from: (i) damage to
property or injury to, or death of, persons from any cause whatsoever when Agent
is carrying out the provisions of this Agreement or acting under the direction
of Owner in or about the Premises; (ii) claims for defamation and false arrest
when Agent is carrying out the provisions of this Agreement or acting under the
direction of Owner; and (iii) claims occasioned by or in connection with or
arising out of acts or omissions, other than criminal acts, of the Agent when
Agent is carrying out the provisions of this Agreement or acting under the
direction of Owner (except in cases of Agent's willful misconduct or gross
negligence), and to defend or cause to be defended, at no expense to Agent or
such persons, any claim, action or proceeding brought against Agent or such
persons or Agent and Owner, jointly or severally, arising out of the foregoing,
and to hold Agent and such persons harmless from any judgment, loss or
settlement on account thereof.
Notwithstanding the foregoing, Owner shall not be responsible for
indemnifying or defending Agent or such persons in respect of any matter, claim
or liability in respect of which Agent is obligated to indemnify Owner as
provided in the following sentence. Agent agrees to indemnify and save harmless
Owner from and against all claims, losses and liabilities resulting from injury
to, or death of, persons in or about the Premises or for deformation and false
arrest in each case caused in whole or in part by the willful misfeasance or
gross negligence of Agent, and to defend, at no expense to Owner, any claim,
action or proceeding brought against Owner or Owner and Agent, jointly or
severally, arising out of the foregoing, and to hold Owner harmless from any
judgments, loss or settlement on account thereof.
Notwithstanding the foregoing, Agent shall not be responsible for
indemnifying or defending Owner in respect of any matter, claim or liability
which is covered by any public liability insurance policies carried by Owner and
under which Agent is named as an additional insured. The indemnification
obligations of Owner and Agent under this Section 3.3 shall in each case be
conditioned upon (a) prompt notice from the other party after such party learns
of any claim or basis therefor which is covered by such indemnity, (b) such
party's not taking any steps which would bar Owner or Agent, as the case may be,
from obtaining recovery under applicable insurance policies or would prejudice
the defense of the claim in question, and (c) such party's taking of all
necessary steps which if not taken would result in Owner or Agent, as the case
may be, being barred from obtaining recovery under applicable insurance policies
or would prejudice the defense of the claim in question. The provisions of this
Section 3.3 shall survive the expiration or termination of this Agreement.
3.4 Owner shall provide such office space on the Premises as may be
necessary for Agent to properly perform its functions under this Agreement.
Agent shall not be required to pay for utilities, telephone service or rent for
the office area on the Premises occupied by Agent. Agent shall have the right
to use the fixtures, furniture, furnishings and equipment, if any, which are the
property of Owner in said office space. Owner shall also provide space on the
Premises for use as community rooms and information and service centers where
the use of such space is determined by Owner to be in the best interest of the
Premises. All income derived from the utilization and/or operation of such
community rooms and/or information or service centers shall belong to the Owner
and all expenses relating thereto shall be borne by Owner.
3.5 Except as otherwise provided in this Agreement, everything done by
Agent in the performance of its obligations under this Agreement and all
expenses incurred pursuant hereto shall be for and on behalf of Owner and for
its account. Except as otherwise provided herein, all debts and liabilities
incurred to third parties in the ordinary course of business of managing the
Premises as provided herein are and shall be obligations of Owner, and Agent
shall not be liable for any such obligations by reason of its management,
supervision or operation of the Premises for Owner.
ARTICLE IV
COMPENSATION
4.1 In addition to any other compensation provided to be paid to Agent
under this Agreement, Owner agrees to pay to Agent as compensation for its
management services hereunder, a fee at the rate specified in paragraph 5 of
Exhibit A attached hereto. Said fee shall be payable monthly no later than the
twenty-fifth (25th) day of the following month, and shall be based on the
following components of income from the preceding calendar month determined in
accordance with GAAP. It is understood that the management fee shall be
calculated upon the following items: (i) minimum rents from all permanent
tenants (anchor, mall shops, ground leases and all other tenants); (ii) Lease
buyout income; (iii) Percentage rents in lieu of minimum rents; (iv) Percentage
rents; (v) all cost recovery income (CAM, taxes, food court, security, other);
(vi) income from all temporary tenants (initial term of one year or less); (vii)
income from all promotional activity; (viii) miscellaneous mall income such as
payphone commissions, stroller rentals, etc. and (ix) bad debts expense related
to any of the above revenue items. The following items shall not be subject to
management fees: (i) business interruption insurance income; (ii) recoveries
from insurance companies for casualty and other losses; (iii) payments from
tenants for leasehold improvements and related services provided by Agent; (iv)
payments from tenants to Merchants' Associations or to Marketing Funds; (v)
tenant security deposits; (vi) straight line rental income or losses, and (vii)
operating covenant and amortization (classified as a reduction of minimum rent).
Agent shall withdraw said fee from the operating account for the Premises and
shall account for same as provided for in Section 2.3 hereof.
4.2 The following expenses or costs incurred by or on behalf of Agent in
connection with the management and leasing of the Premises shall be the sole
cost and expense of Agent and shall not be reimbursable by Owner and Agent shall
indemnify Owner for such expenses and costs:
(a) cost of gross salary and wages, payroll taxes, insurance,
worker's compensation, pension benefits and any other benefits of Agent's
employees, except that Owner will reimburse Agent for all costs of employees who
provide either full or part time services on-site at any of the Premises.
Within the category of "on-site" personnel, Agent may include the pro-rata costs
for regional personnel performing required services at the Premises on a regular
basis (but which personnel may share time working at other properties managed by
Agent); provided, however, that the costs for any employees who are based at or
work from Agent's home office shall not be included, and provided further that
the pro-rata costs for any such regional personnel are included and identified
as such within the annual operating budget as approved by Owner.
(b) general accounting and reporting services, as such services are
considered to be within the reasonable scope of Agent's responsibility to Owner;
(c) costs of forms, stationery, ledgers, supplies, equipment and
other "general overhead" items used in Agent's home office or regional offices;
(d) cost or pro rata cost of telephone and general office expenses
incurred in the Premises by Agent for the operation and management of properties
not owned by Owner;
(e) cost of all bonuses, incentive compensation, profit sharing, or
any pay advances by Agent to Agent's employees, except such costs pertaining to
employees employed by Agent in accordance with Paragraph 2.1 (b) hereof;
(f) cost attributable to losses arising from criminal acts, gross
negligence or fraud on the part of Agent or Agent's associates or employees;
(g) cost for meals, travel and hotel accommodations for Agent's home
office or regional office personnel who travel to and from the Premises, except
as provided in Section 2.6;
(h) cost of automobile purchase and/or rental, except if furnished or
approved by Owner;
(i) except as otherwise provided in Exhibit A attached hereto,
expenses incurred in connection with the leasing of the Premises, it is being
understood and agreed, however, that Agent shall be reimbursed for advertising
expenses incurred in connection with the leasing of the Premises;
(j) cost of liability or other insurance carried by Agent, except
costs incurred by Agent in satisfaction of its obligations under Section 2.2
hereof; and
(k) cost of bonds purchased pursuant to Section 2.1(i) of this
Agreement.
ARTICLE V
DURATION, TERMINATION, DEFAULT
5.1 This Agreement shall become effective on the date hereof.
5.2 Subject to earlier termination as hereinafter provided, this Agreement
shall have an initial term ending on November 1, 2003. Thereafter, this
Agreement shall continue year-to-year on the same terms and conditions as herein
contained subject to being terminated by either Agent or Owner upon no less than
six (6) months written notice. The Agent may not terminate this Agreement
except in the case of non-payment of management fees for a period of ninety (90)
days after notice of such non-payment to Owner and Lender. In addition, Lender
shall have the right to terminate (or direct Owner to terminate, as applicable)
this Agreement: (i) upon the insolvency of Agent, (ii) the occurrence of an
Event of Default (as defined in the Loan Documents), (iii) the failure of the
Premises to meet the Net Operating Income requirements (as defined in the Loan
Documents), or (iv) pursuant to the provisions of the Manager's Consent and
Subordination of Management Agreement.
5.3 It shall be an Event of Default under this Agreement on the part of
Agent if Agent shall default in any material respect in performing any of its
obligations under this Agreement and such default shall not be cured within 30
days after written notice thereof is given by Owner to Agent (or, if the default
in question is curable but is of such nature that it cannot reasonably be
completely cured within such 30-day period, if Agent does not promptly after
receiving such notice commence to cure such default and thereafter proceed with
reasonable diligence to complete the curing thereof within 180 days after notice
is given by Owner to Agent). If an Event of Default by Agent shall occur, Owner
shall have the right to terminate this Agreement by written notice given to
Agent, and upon the giving of such notice this Agreement and the term hereof
shall terminate without any obligation on the part of Owner to make any payments
to Agent hereunder except as hereinafter provided.
5.4 If at any time during the term of this Agreement any involuntary
petition in bankruptcy or similar proceeding shall be filed against Agent
seeking its reorganization, liquidation or appointment of a receiver, trustee or
liquidator for it or for all or substantially all of its assets, and such
petition shall not be dismissed within 90 days after the filing thereof, or if
Agent shall:
(a) apply for or consent in writing to the appointment of a receiver,
trustee or liquidator of all or substantially all of its assets;
(b) file a voluntary petition in bankruptcy or admit in writing its
inability to pay its debts as they become due;
(c) make a general assignment for the benefit of creditors;
(d) file a petition or an answer seeking reorganization or an
arrangement with creditors or take advantage of any insolvency law; or
(e) file an answer admitting the material allegations of a petition
filed against it in any bankruptcy, reorganization or insolvency proceedings;
then upon the occurrence of any such event, Owner, at its option, may terminate
this Agreement by written notice given to Agent, and upon the giving of such
notice this Agreement and the term hereof shall terminate without any obligation
on the part of Owner to make any payments to Agent hereunder except as
hereinafter provided.
5.5 Owner shall have the additional right to terminate this Agreement on
at least 10 days' written notice to Agent, if Agent without Owner's prior
written consent shall assign or attempt to assign its rights or obligations
under this Agreement or subcontract (except for normal service agreements or as
otherwise specified in this Agreement) any of the services to be performed by
Agent. Owner shall also have the right to terminate this Agreement as to any
property included within the Premises on at least 10 days' written notice to
Agent if (a) such property shall be damaged or destroyed to the extent of 25% or
more by fire or other casualty and Owner elects not to restore or repair such
property or (b) there shall be a condemnation or deed in lieu thereof of 25% or
more of such property.
5.6 Agent acknowledges and agrees that Owner shall have the right to
subordinate and/or assign this agreement in connection with the Loan Documents.
Agent further agrees to execute such further instruments as Owner or Lender
deems necessary to effectuate such subordination, provided that in the event
Lender becomes entitled to possession of the Premises, the Lender shall be
entitled, at its option, to retain Agent to manage the Premises, in which case
the Agent shall be entitled to the compensation set forth in this Agreement
during all periods in which Agent is providing services to the Premises for the
Lender. Moreover, notwithstanding anything to the contrary contained herein,
for so long as any amounts remain outstanding under the Loan Documents, (i) this
Agreement and all fees payable by Owner hereunder shall be subject to and
subordinate to any mortgage liens on the Premises established by the Loan
Documents and (ii) Agent shall comply with any and all applicable provisions of
the Loan Documents and in the event there is a conflict between the terms of
this Agreement and the terms of the Loan Documents, the Loan Documents shall
control.
5.7 Upon any termination of this Agreement pursuant to the provisions of
this Article V, Owner shall remain obligated to pay to Agent fees and other
amounts due to Agent hereunder which accrued prior to the effective date of such
termination. Nothing contained in this Section 5.7 shall be deemed to waive,
affect or impair (a) Owner's rights to seek recourse against Agent for damages
or other relief in the event of the termination of this Agreement by Owner
pursuant to Section 5.3, 5.4 or 5.5 hereof, and (b) Agent's right to seek
recourse against Owner for damages or other relief in the event of the
termination of this Agreement by Agent pursuant to Section 5.2 hereof.
5.8 Upon the expiration or earlier termination of this Agreement, Agent
shall forthwith surrender and deliver to Owner any space in the Premises
occupied by Agent and shall make delivery to Owner or to Owner's designee or
agent, at Agent's home or regional offices or at its offices at the Premises, of
the following:
(a) a final accounting, reflecting the balance of income from and
expenses of the Premises as at the date of expiration or termination of this
Agreement;
(b) any funds of Owner or tenant security or advance rent deposits,
or both, held by agent with respect to the Premises; and
(c) all Confidential Information (in whatever medium stored) and all
other records, contracts, leases, ground leases, reciprocal easement agreements,
receipts for deposits, unpaid bills, lease summaries, canceled checks, bank
statements, paid bills and all other records, papers and documents and any
microfilm and/or computer disk of any of the foregoing which relate to the
Premises and the operation, maintenance, management and leasing thereof; all
such data, information and documents being at all times the property of Owner.
In addition, Agent shall furnish all such information and take all such
action as Owner shall reasonably require to effectuate an orderly and systematic
termination of Agent's duties and activities under this Agreement.
5.9 This Agreement shall terminate at the election of Owner as to any of
the properties set forth in Exhibit A upon thirty (30) days written notice to
the Agent if such properties are sold by Owner to a non-affiliated third party
purchaser or (unless the Lender shall otherwise notify the Agent in writing)
automatically if such properties were acquired on foreclosure of a mortgage
encumbering all or a portion of the Premises. In the event such properties are
sold by Owner to a non-affiliated third party purchaser and this Agreement is
not thereby terminated by Owner, the Agent shall have the right to terminate
this Agreement as to such properties upon sixty (60) days prior written notice
which notice must be given within ninety (90) days after the date of such sale
is consummated. If such properties are sold, Agent will not be entitled to
sales commission unless the Agent has been retained by Owner pursuant to a
separate commission arrangement. This Agreement shall remain in full force and
effect as to all properties not terminated pursuant to this Section 5.9.
5.10 The provisions of this Article V shall survive the expiration or
termination of this Agreement.
ARTICLE VI
ASSIGNMENT
6.1 Agent, except for a transfer to a "Permissible Transferee", shall not
assign its rights or obligations under this Agreement, either directly or by a
transfer of shares of beneficial interest or voting control either voluntarily
or by operation of law. Any change other than to a "Permissible Transferee"
shall constitute a breach of this Agreement by Agent and Owner may terminate
this Agreement in accordance with Section 5.5 A "Permissible Transferee" shall
mean any corporation, partnership, trust or other entity, more than 50% of the
outstanding stock of which, or more than 50% interest in which, is owned or
controlled by Agent, or as otherwise permitted in the Loan Documents.
6.2 In the event of a sale or conveyance of any of the Premises, Owner
shall have the right to cancel or assign this Agreement and its rights and
obligations hereunder to any person or entity to whom or which Owner sells or
conveys such property or properties. Upon such assignment, Owner shall be
relieved of its obligations under this Agreement with respect to such property
or properties that accrue from and after the date of such assignment, provided
that the assignee shall assume the obligations of Owner under this Agreement and
shall agree to perform and be bound by all of the terms and provisions hereof,
effective from and after the date of such assignment and an executed copy of
such assumption agreement shall be delivered to Agent. Agent shall not be
entitled to a "termination fee" in connection with an assignment or cancellation
as set forth in this Section 6.2, but otherwise shall be entitled to collect
from Owner such fees and expenses, including termination and/or relocation
expenses of Agent's full-time employees, if any, as Agent has earned pursuant to
this Agreement prior to the date of such assignment or cancellation.
ARTICLE VII
MISCELLANEOUS
7.1 Owner's representative ("Owner's Representative"), whose name and
address is set forth in paragraph 2 of Exhibit A attached hereto, shall be the
duly authorized representative of Owner for the purpose of this Agreement. Any
statement, notice, recommendation, request, demand, consent or approval under
this Agreement shall be in writing and shall be deemed given by Owner when made
or given by Owner's Representative or any officer of Owner and delivered
personally to an officer of Agent or mailed, addressed to Agent, at his address
first above set forth. Either party may, by notice to the other, designate a
different address for the receipt of the aforementioned communications and Owner
may, by notice to Agent, from time to time, designate a different Owner's
Representative to act as such. All communications mailed by one party to
another shall be sent by first class mail, postage prepaid or Express Mail
Service, or other commercial overnight delivery service, except that notices of
default shall be sent by registered or certified mail, return receipt requested,
postage prepaid, Express Mail Service or other commercial overnight delivery
service with receipt acknowledged in writing. Communications so mailed shall be
deemed given or served on the date mailed. Notwithstanding the foregoing, any
notices, requests, consents, approvals and other communications, other than
notices of default or approvals of annual budgets, and other communications,
approvals or agreements which are required by the express terms of other
provisions of this Agreement to be in writing, may be given by telegram,
telephonic communication or orally in person. Agent and Owner shall furnish to
the other the names and telephone numbers of one or more persons who can be
reached at any time during the term of this Agreement in the event of an
emergency.
7.2 Agent shall, at its own expense, qualify to do business and obtain and
maintain such licenses as may be required for the performance by Agent of its
services.
7.3 Each provision of this Agreement is intended to be severable. If any
term or provision hereof shall be determined by a court of competent
jurisdiction to be illegal or invalid for any reason whatsoever, such provision
shall be severed from this Agreement and shall not affect the validity of the
remainder of this Agreement.
7.4 In the event either of the parties hereto shall institute any action
or proceeding against the other party relating to this Agreement, the
unsuccessful party in such action or proceeding shall reimburse the successful
party for its disbursements incurred in connection therewith and for its
reasonable attorney's fees as fixed by the court.
7.5 No consent or waiver, express or implied, by either party hereto or of
any breach or default by the other party in the performance by the other of its
obligations hereunder shall be valid unless in writing, and no such consent or
waiver shall be deemed or construed to be a consent or waiver to or of any other
breach or default in the performance by such other party of the same or any
other obligations of such party hereunder. Failure on the part of either party
to complain of any act or failure to act of the other party or to declare the
other party in default, irrespective of how long such failure continues, shall
not constitute a waiver by such party of its rights hereunder. The granting of
any consent or approval in any one instance by or on behalf of Owner shall not
be construed to waive or limit the need for such consent in any other or
subsequent instance.
7.6 The venue of any action or proceeding brought by either party against
the other arising out of this Agreement shall be in the state or federal courts
of the Commonwealth of Pennsylvania.
7.7 This Agreement may not be changed or modified except by an agreement
in writing executed by each of the parties hereto and consented to by the
Lender. This Agreement constitutes all of the understandings and agreements
between the parties in connection with the agency herein created.
7.8 This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their permitted successors and assigns, but shall not inure
to the benefit of, or be enforceable by, any other person or entity.
7.9 Nothing contained in this Agreement shall be construed as making Owner
and Agent partners or joint ventures or as making either of such parties liable
for the debts or obligations of the other, except as in this Agreement is
expressly provided.
7.10 The effective date of this Agreement shall be May 1, 1998.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
CROWN AMERICAN LEWISTOWN
ASSOCIATES, L.P.
(Owner)
BY: CROWN AMERICAN LEWISTOWN
ASSOCIATES
as sole general partner
By: /s/ Ronald P. Rusinak
Name: Ronald P. Rusinak
Title: Vice President
CROWN AMERICAN PROPERTIES, L.P.
(Agent)
BY: CROWN AMERICAN REALTY TRUST,
as sole general partner
By: /s/ Ronald P. Rusinak
Name: Ronald P. Rusinak
Title: Vice President
EXHIBIT A
1. Premises (1.1):
a. Greater Lewistown Shopping Plaza
Burnham, PA.
2. Name and Address of Owner's Representative (7.1):
Terry L. Stevens
Pasquerilla Plaza
Johnstown, PA 15907.
3. Limit of amount authorized for non-emergency purchases and repairs (2.1(a)
and (c)):
$50,000.00.
4. Name of Banks (2.1(g)):
PNC Bank, N.A.
5. Management Fees (4.1):
Owner agrees to pay Agent as compensation for its management services
hereunder an amount equal to 5% of the amounts set forth in Section 4.1.
Such management fee shall be payable monthly based on the income earned for
the categories described in Section 4.1, computed in accordance with GAAP.
Agent shall be entitled to receive the management fee on the pro rata
portion of percentage rents received by Owner after the termination of this
Agreement but applicable to time periods prior to the termination of this
Agreement based upon the actual number of days lapsed divided by 365.
6. Legal and Tenant Coordination Expenses:
Owner agrees to pay Agent, to defray in-house legal expenses and tenant
coordination expenses (a) with respect to each new lease and each lease
renewal of mall shops and free-standing buildings (other than a lease
renewal or extension resulting from the exercise of an option contained in
such lease), an amount equal to the Agent's actual costs of providing such
services, limited however to the annual amount which is capitalized as
tenant allowance costs under the Owner's customary accounting practices as
Agent and Owner shall mutually agree and as recorded in the Owner's audited
annual financial statements. Such fees shall be payable monthly in arrears
using estimated fees per square foot, based on the estimated annual fee;
the monthly estimated fees shall be adjusted to a final actual amount
within 90 days after the Owner's fiscal year end. Agent and Owner shall
use their best efforts to estimate the monthly fee per square foot and
shall adjust the amount periodically during the year as mutually agreed
upon.
7. Leasing and Land Sale Fees:
(i) Leasing Commission:
Agent shall be entitled to commissions for leases secured, in addition
to other fees and compensation provided in this Agreement, equal to the
Agent's actual costs of providing leasing services related to permanent
leases (those with an initial term in excess of one year), limited however
to the aggregate amount which is capitalized as lease acquisition costs
under the Owner's customary accounting practices as Agent and Owner shall
mutually agree and as recorded in the Owner's audited annual financial
statements. Such fees shall be payable monthly in arrears using estimated
fees per square foot, based on the estimated annual fee; the monthly
estimated fees shall be adjusted to a final actual amount within 90 days
after the Owner's fiscal year end. Agent and Owner shall use their best
efforts to estimate the monthly fee per square foot and shall adjust the
amount periodically during the year as mutually agreed upon.
(ii) Brokerage Commissions:
Owner and Agent acknowledge that some leasing and land sale
transactions will involve the use of an independent real estate broker or
real estate sales agent, who will be paid a commission for introducing and
bringing a prospective tenant or purchaser to the Premises. Agent may
utilize brokers in connection with carrying out its leasing and land sale
activities, and shall be reimbursed by Owner for the cost of those
Brokerage Commissions in the following circumstances:
(a) Agent was required to recognize the broker or sales agent as the
representative of the prospective tenant or purchaser and was not
allowed or permitted the opportunity to contact or negotiate with
the tenant or purchaser except through the broker or sales agent,
and this fact was disclosed to Owner.
(b) Agent disclosed to Owner the existence of the broker or sales
agent and the brokerage fee at the time the proposed leasing or
land sale transaction was submitted to Owner for approval.
Except as provided in (a) and (b) above, Agent shall assume the sole cost and
responsibility for broker commissions.
(iii) Land Sale Commission:
For services provided pursuant to Section 2.7(e), Owner shall pay the
Agent a sales commission equal to fifteen percent (15%) of the adjusted
sales price ("Sales Commission"), as compensation for overhead associated
with the services of certain employees of Agent. For purposes of the
foregoing "adjusted sales price" shall mean the gross proceeds payable to
Owner less reasonable and necessary development costs paid by Owner in
connection with the transfer. One-half (1/2) of the Sales Commission shall
be due and payable to Agent at the time a mutually binding Agreement of
Sale with respect to any Sale Property is fully-executed, with the
computation of such amount being based on the gross proceeds payable to
Owner. The balance of the Sales Commission shall be paid to Agent at the
time of closing of any such sale.
8. Excluded Services:
Notwithstanding anything to the contrary contained herein, the parties
acknowledge that it is not within the contemplation of this Agreement or
the fee structure included herein that the Agent perform any services with
respect to the following: any "due diligence" or similar efforts relating
to any financing, refinancing or sale or disposition of the Premises;
zoning compliance of the Premises; performing or supervising (including
tenant room build-outs or remodeling) any extensive alteration or
renovation to the Premises; asbestos and/or other environmental studies and
any related abatement or remediation activities for any tenant premises,
site acquisitions of additional ground for the expansion of the Premises;
reconstruction after casualty or condemnation; leasing, management, or
construction relating to any proposed or implemented expansion of the
Premises or work generally classified as "development" work in connection
with the same; renewals or renegation of leases or other agreements with
department stores if such involves substantial changes from existing
documents (including, without limitation, negotiation of new leases,
renewal leases, operating covenants, renovation provisions, expansion
rights, and like matters); or replacement of department stores tenancies.
Owner shall reimburse Agent for all such services rendered equal to the
Agent's actual costs of providing such services, limited however to the
annual amount which is capitalized as tenant allowance or construction
costs under the Owner's customary accounting practices as Agent and Owner
shall mutually agree and as recorded in the Owner's audited annual
financial statements. Such fees shall be payable monthly in arrears using
estimated based on the estimated annual fee; the monthly estimated fees
shall be adjusted to a final actual amount within 90 days after the Owner's
fiscal year end. Agent and Owner shall use their best efforts to estimate
the monthly fees and shall adjust the amount periodically during the year
as mutually agreed upon.
9. Other Requested Services:
If Owner requests Agent to provide its own personnel for non-routine
services which Agent is not obligated elsewhere in this Agreement to
perform the compensation for which is not provided for hereinabove,
unless Owner and Agent otherwise agree to an acceptable fee for such
services, Owner shall pay Agent an amount equal to two and one-half
times the actual base cost of Agent's departmental personnel, as
computed by Agent, for their time involved in performing such requested
services, plus reimbursement for any out-of-pocket costs incurred
incident to furnishing such requested services. Owner and Agent shall
agree in advance as to the hourly base cost to be applicable for the
specific services to be provided. Such amount or amounts shall be
payable to Agent monthly within ten (10) days after Owner's receipt
of Agent's statement setting for the amount payable to Agent.
EXHIBIT B
INTENTIONALLY OMITTED
EXHIBIT C
Leasing Guidelines
Agent shall use a form or forms of lease; or with respect to temporary
tenants and/or short term promotional activities, a form or forms of license
agreement, which have been prepared and submitted to Owner for Owner's prior
review and approval. Agent will negotiate and make modifications to such forms
as directed by Owner, or as necessary or appropriate with respect to the needs
of the particular transactions, utilizing methods and techniques consistent with
prevailing practices employed in management and leasing of shopping centers.
For all agreements, excepting license agreements for temporary tenants
and/or for short term promotion activities, all essential financial and
business terms and provisions of the lease or agreement, including construction
and improvements of the leasehold, shall be presented for Owner's approval.
Tenant-signed leases presented by Agent for Owner's review and execution shall
be consistent with such terms and conditions previously approved by Owner, or
with such deviations or modifications identified for Owner's review. Execution
of tenant-signed leases that are presented by Agent for Owner's signature will
acknowledge Owner's approval of the lease, its form, its terms and provisions.
No lease or other agreement shall be entered into, modified, canceled or
extended if the consent of any mortgagee or ground lessor is required unless
such consent has been obtained. Agent will notify Owner when consent is
required.
EXHIBIT 10.5 (k)
REAL ESTATE MANAGEMENT AGREEMENT
THIS AGREEMENT, made as of 13th day of May, 1998, between CROWN AMERICAN
ACQUISITION ASSOCIATES II, L.P., a Pennsylvania limited partnership, having its
principal address at Pasquerilla Plaza, Johnstown, Pennsylvania 15907 ("Owner"),
and CROWN AMERICAN PROPERTIES, L.P., a Delaware limited partnership, having its
principal address at Pasquerilla Plaza, Johnstown, Pennsylvania 15907
("Agent").
W I T N E S S E T H
In consideration of the mutual Covenants herein contained, and intending to
be legally bound, the parties hereto agree as follows:
ARTICLE I
APPOINTMENT AND AUTHORITY OF AGENT
1.1 Owner owns leasehold interests in certain retail properties identified
on Exhibit A attached hereto and made a part hereof (the "Premises"). Owner
hereby appoints Agent as the exclusive managing and renting agent for the
Premises, and hereby authorizes Agent to exercise such powers with respect to
the Premises as may be necessary for the performance of Agent's obligations
under Article II, and Agent accepts such appointment on the terms and conditions
hereinafter set forth for the term as provided in Article V. Agent shall have
no right or authority, express or implied, to commit or otherwise obligate Owner
in any manner whatsoever except to the extent specifically provided herein and
agrees that it shall not hold itself out as having authority to act on behalf of
Owner in any manner which is beyond the scope of authority granted to Agent in
this Agreement.
ARTICLE II
AGENT'S AGREEEMENT
2.1 Agent, on behalf of Owner, shall implement, or cause to be
implemented, the decisions of Owner and shall conduct the ordinary and usual
business affairs of Owner with respect to the management, operation and leasing
of the Premises as provided in this Agreement. Agent shall at all times conform
to the policies and programs established by Owner and the scope of Agent's
authority shall be limited to said policies. Agent shall act in a fiduciary
capacity with respect to the cash and cash equivalent assets of Owner which are
within the custody or control of Agent. Agent shall deal at arm's length with
all parties and shall serve Owner's interests at all times. All undertakings
incurred by Agent on behalf of Owner in accordance with this Agreement shall be
at the cost and expense of Owner unless otherwise provided for herein. Agent
agrees to use its best efforts in the management and operation of the Premises.
Agent shall perform the following duties in connection with the management and
operation of the Premises:
(a) Contract, for periods not longer than the term of Owner's
leasehold estate, in the name of Owner, for gas, electricity, water and such
other services as are currently being furnished to the Premises. Service
contracts shall be written to include a provision allowing termination by Owner
upon 30 days' notice wherever possible. All service contracts, including those
in effect at the date hereof in respect of the Premises, including the terms
thereof (with cancellation right, if any), the services provided thereunder and
the charges called for thereby, should be detailed in the annual budget package.
No such contract, other than for utilities, including water, which involves an
expenditure in excess of the amount set forth in paragraph 3 of Exhibit A
attached hereto shall hereinafter be entered into by Agent without the prior
approval of Owner. Agent shall also perform the obligations of the Owner under
any utility service agreement and any reciprocal easement agreements.
(b) Select, employ, pay, supervise, direct and discharge all
employees necessary for the proper, safe and economic operation and maintenance
of the Premises, in number and at wages in accordance with industry practices
and the annual budget, carry Worker's Compensation Insurance (and, when required
by law, compulsory Non-Occupational Disability Insurance) covering such
employees, and use reasonable care in the selection, discharge, and supervision
of such employees. Agent will keep bi-weekly time sheets which shall be
available for inspection by Owner. Agent shall prepare or cause to be prepared
and timely filed and paid, all necessary returns, forms and payments in
connection with unemployment insurance, medical and life insurance policies,
pensions, withholding and social security taxes and all other taxes relating to
said employees which are imposed on employees by any federal, state or municipal
authority. Agent shall also provide usual management services in connection
with labor relations and shall prepare, maintain and file all necessary reports
with respect to the Fair Labor Standards Act and all other required statements
and reports pertaining to employees at the Premises. Agent shall use its best
efforts to comply with all laws and regulations and collective bargaining
agreements, if any, affecting such employment. Owner shall have the right to
review and approve all collective bargaining agreements which affect the
Premises prior to their implementation or acceptance by Agent. Agent will be
and will continue throughout the term of this Agreement to be an equal
opportunity employer. All persons employed in connection with the operation and
maintenance of the Premises shall be employees of Agent or employees of
contractors approved by Owner to provide contract services to the Premises.
(c) Keep the Premises in a safe, clean, rentable and sightly
condition and make and contract for all repairs, alterations, replacements, and
installations, do all decorating and landscaping, and purchase all supplies
necessary for the proper operation and maintenance of the Premises and for the
fulfillment of Owner's obligations under any lease, operating agreement or other
agreement or compliance with all governmental and insurance requirements,
provided that, except as provided in Section 2.5 hereof, Agent shall not make
any purchase or do any work, the cost of which shall exceed the approved budget
or the amount set forth in paragraph 3 of Exhibit A attached hereto, without
obtaining in each instance the prior approval of Owner, except in circumstances
which Agent shall deem to constitute an emergency requiring immediate action for
the protection of the Premises or of tenants or other persons or to avoid the
suspension of necessary services or in order to cure any violation or other
condition which would subject Owner or Agent to any criminal penalty or any
civil fine in excess of $5,000.00. Agent shall notify Owner immediately of the
necessity for, the nature of, and the cost of, any such emergency repairs or any
action to cure any such violation or other condition. Agent shall arrange for
and supervise, on behalf of Owner, the performance of all alterations and other
work to prepare or alter space in the Premises for occupancy by tenants thereof.
If Owner shall require, Agent shall submit a list of contractors and
subcontractors performing tenant work, repairs, alterations or services at the
Premises under Agent's direction.
It is understood that Agent shall not be required to undertake the making
or supervision of extensive reconstruction of the Premises or any part thereof
except after written agreement by the parties hereto as to any additional fee to
be paid for such services.
Owner shall receive the benefit of all discounts and rebates obtainable by
Agent in its operation of the Premises. When requested by Owner, Agent agrees
to obtain competitive bids for the performance of any work at the Premises, to
furnish copies of such bids to Owner and to accept such bid as Owner may
direct.
If Agent desires to contract for repair, construction or other service
described in this paragraph (c) (other than work done at the request of a tenant
and at the tenant's sole cost and expense, hereinafter referred to as "Tenant
Work") with a party with respect to which any partner or shareholder of Agent
holds a beneficial interest, or with any subsidiary, affiliate or related
corporation in which Agent shall have a financial interest, such interest shall
be disclosed to, and approved by, Owner before such services are procured. The
cost of any such services shall likewise be at competitive rates,
notwithstanding that tenants of the Premises may be required to pay such costs.
Agent, or a general contractor working under the supervision of Agent is
authorized to make and install Tenant Work, Agent may collect from such tenant
or such general contractor, for its sole account, its charge for supervisory
overhead on all such Tenant Work. Agent shall hold Owner harmless from any
claims which may be advanced by any such tenant in connection with Tenant Work
performed by Agent or under Agent's supervision. Agent, however, shall not
require any tenant to use Agent, its subsidiary, affiliate or related
corporation as its general contractor to perform such Tenant Work.
(d) Handle promptly complaints and requests from tenants and parties
to reciprocal easement and/or operating agreements, notify Owner of any major
complaint made by any such tenant or party and notify owner promptly (together
with copies of supporting documentation) of: the receipt of any notice of
violation of any governmental requirements; any known orders or requirements of
insurers, insurance rating organizations, Board of Fire Underwriters or similar
bodies; any known defect in the Premises; any known fire or other damage to the
Premises, and, in the case of any serious fire or other serious damage to the
Premises, Agent also shall immediately provide telephone notice thereof to
Owner's General Insurance Office, so that an insurance adjuster can view the
damage before repairs are started, and complete customary loss reports in
connection with fire or other damage to the Premises.
(e) Notify Owner's General Liability Insurance carrier and Owner
promptly of any personal injury or property damage known to Agent occurring to
or claimed by any tenant or third party on or with respect to the Premises and
promptly forward to the carrier, completed insurance forms, any summons,
subpoena, or other like legal document served upon Agent relating to actual or
alleged potential liability of Owner, Agent, or the Premises, with copies to
Owner of all such doucments.
(f) Advise Owner of those exceptions in leases, operating agreements
and other agreements executed on or after the date hereof in which the tenants
or parties to such agreements do not agree to hold Owner harmless with respect
to liability from any accidents.
(g) At the option of Owner, or as otherwise provided in the Loan
Documents, as hereinafter defined, receive and collect rent and all other monies
payable to Owner by all tenants and licensees in the Premises and by all other
parties including department stores under ground leases and reciprocal easement
agreements and tenants under leases of free-standing stores. In this
connection, Agent shall calculate all amounts due to Owner from such tenants,
licensees and other parties, including annual or periodic adjustments where
applicable, and shall, when appropriate, submit statements or invoices to such
tenants, licensees and parties. Agent shall deposit the same promptly in the
bank named on Exhibit A attached hereto (the "Bank") in an account with title
including a distinctive portion of Agent's name and such designation as Owner
may direct (the "Bank Account"), which account shall be used exclusively for
such funds. Owner's representative will be a signatory on all bank accounts
maintained by Agent and such representative's signature shall be required on all
checks in excess of $50,000 and for withdrawals in excess of $1,000,000 in any
month. All amounts received by Agent for or on behalf of Owner shall be and
remain the property of Owner. Checks may be drawn on the above-mentioned bank
account only for purposes authorized under this Agreement. No funds of Agent or
others shall be commingled with funds in any such bank account. Owner has the
right to control the types of cash management accounts and dictate the specifics
of said accounts with respect to disbursement and management of funds.
(h) Serve notice of default upon tenants of space in the Premises and
other parties which are in default in performing obligations under their leases,
reciprocal easement agreements or other agreements, with copies sent
simultaneously to Owner, and attempt to cause such defaults to be cured by the
defaulting tenant or other party. Agent shall, subject to Owner's consent with
respect to any tenant who occupies more than 1,000 square feet, utilizing
counsel theretofore approved by Owner, institute all necessary legal action or
proceedings for the collection of rent or other income from the Premises or the
ousting or dispossessing of tenants or other persons therefrom and all other
matters requiring legal attention. Agent agrees to use its best efforts to
collect rent and other charges from tenants in a timely manner and to pursue
Owner's legal remedies for nonpayment of same. Agent shall not terminate tenant
leases in the Premises without Owner's consent. Owner reserves the right to
designate or approve counsel and to control litigation of any character
affecting or arising out of the operation of the Premises and the settlement of
such litigation.
(i) Bond Agent and all of Agent's employees who may handle or be
responsible for monies or property of Owner with a "comprehensive 3-D" or
"Commercial Blanket" bond, in an amount of $500,000.00.
(j) Notify Owner immediately of any known fire, accident or other
casualty, condemnation proceedings, rezoning or other governmental order,
lawsuit or threat thereof involving the Premises; and the receipt of any notice
of violations relative to the leasing, use, repair and maintenance of the
Premises under governmental laws, rules, regulations, ordinances or like
provisions.
(k) If Owner so directs, make timely payment of real estate and
personal property taxes and assessments levied or assessed against the Premises
or personal property used in connection therewith and any other charge that may
become a lien against the Premises. Owner may direct that payment of such taxes
and assessments either be made to the taxing authority or to a mortgage lender
holding an escrow account for such items. Agent shall participate in Owner's
tax review program and check tax assessments and, when so requested, Agent shall
assist Owner in its efforts to reduce such taxes. Agent shall promptly furnish
Owner with copies of all assessment notices and receipt tax bills.
(l) Promptly comply with all present and future laws, ordinances,
orders, rules, regulations and requirements of all Federal, state and local
governments, courts, departments, commissions, boards and offices, any national
or local Board of Fire Underwriters or Insurance Services offices having
jurisdiction, or any other body exercising functions similar to those of any of
the foregoing ("Legal Requirements") which may be applicable to the Premises or
any part thereof or to the leasing, use, repair, operation and management
thereof, but only to the extent that such compliance is reasonably capable of
being carried out by Agent and Agent has available the necessary funds therefor
from collections or advances by Owner. Agent shall give prompt notice to Owner
of any known violation or the receipt of notice of alleged violation of such
laws and Agent shall not bear responsibility for failure of the Premises or the
operation thereof to comply with such laws unless Agent has committed gross
negligence or a willful act of omission in the performance of its obligations
under this Agreement or in the performance of any other duties owed to Owner or
third parties by Agent. As and when directed by Owner, Agent shall institute in
its name, or in the name of Owner using counsel selected by Owner, appropriate
actions or proceedings to contest any such law, ordinance, rule, regulation,
order, determination or requirement.
(m) Promote the Premises and participate as Owner's representative in
any Merchant's Associations or Promotional Organizations (collectively, the
"Promotional Organizations") established to promote the Premises.
(n) Consent to and approve tenant alteration work and installations
which are performed by tenants of space in the Premises and are provided for in
the leases of such tenants and are within such tenant's space. Agent is
authorized to approve tenant alteration work and installations not provided for
in leases if (i) such alteration work and installations are made solely at the
expense of the tenant, and (ii) such alteration work and installations do not
affect the structural integrity or facade of any building. Agent shall
periodically monitor the progress of any tenant alteration work and
installations to confirm that the work is being done in a good and workmanlike
manner and in substantial conformity with any plans and specifications approved
by Owner or Agent, and shall notify Owner of any material deficiencies or
material variations from the approved plans and specifications.
(o) Provide, upon Owner's request in accordance with the provisions
of Section 10 and Section 11 of Exhibit A, general contracting and construction
management services ("Development Services") and consultation to Owner for the
Premises, which shall include, without limitation, the management, supervision
and administration of, and provisions for services for the improvement or
expansion (and in the event of damage or condemnation, the reconstruction) of
the Premises, including advice, expertise and support of Agent provided and/or
retained and/or coordinated by home office and on-site personnel including,
without limitation, executive personnel, design and engineering personnel,
clerical personnel, legal and accounting personnel. Such personnel will perform
consultation and various functions involved with Development Services including,
without limitation, the following: design, planning, architectural,
engineering, acquisition and negotiation, negotiations with department stores
for site acquisition and operation in the Premises; permits and licenses;
preopening advertising and publicity; market research, site work; negotiations
with public authorities; attendance at public hearings; project management and
all other activities necessary to accomplish the improvement, expansion or
reconstruction of the Premises. It is understood that Development Services and
consultation with Owner may or may not involve Agent's in-house personnel; by
mutual agreement of Agent and Owner, outside professionals or other persons may
be engaged to provide Development Services and consultation with Owner, provided
that Agent agrees to require any contractor or subcontractor brought onto the
Premises to have workers' compensation and employers' liability insurance in the
necessity statutory amounts and comprehensive general liability insurance for at
least $1,000,000.00.
(p) If Owner so directs, pay when due (i) all debt service and other
amounts due under any mortgages that encumber the Premises or any part thereof,
and (ii) all rent and other charges payable under any ground lease of land
included in the Premises under which Owner is the tenant and give Owner notice
of the making of each payment.
(q) Carry out and comply with, directly or through a third party, all
requirements on the part of Owner under all such mortgages and ground leases,
all leases of space in the Premises, all ground leases and reciprocal easement
agreements with department stores and all other agreements affecting or relating
to the Premises which are known or made known to Agent, including, without
limitation, the furnishing of all services and utilities called for therein, but
only to the extent that such requirements are at the time reasonably capable of
being carried out by Agent and Agent has available the necessary funds therefor
from collections or advances by Owner, provided that Agent shall promptly notify
Owner if Agent cannot carry out such requirement or has insufficient funds
available to do so. Agent shall notify Owner promptly of any default under any
such mortgage, lease, ground lease, reciprocal easement or other agreement on
the part of Owner, the tenant or other party thereto of which agent becomes
aware.
(r) Use reasonable efforts to comply with and require compliance with
the requirements of leases of space in the Premises, ground leases, reciprocal
easement agreements and all other agreements affecting or relating to the
Premises which are known or made known to Agent on the part of Tenants,
department stores and other parties thereto and enforce compliance with the
rules and regulations, sign criteria and like standards for the Premises adopted
by Owner from time to time.
(s) Upon request, furnish Owner with an executed copy of each lease,
lease renewal, lease amendment, service contract and other agreement entered
into on or after the date of this Agreement in connection with the operation,
management and leasing of the Premises, and use reasonable efforts to secure
from tenants and parties to reciprocal easement agreements, and furnish to
Owner, any certificates of insurance and renewals thereof required to be
furnished by the terms of their leases or agreements. All such executed copies
of leases shall be maintained in Agent's main office, with additional lease
copies together with insurance certificates also maintained at the Agent's
office at the relevant property, if any such office exists.
(t) Inspect the Premises periodically and submit reports of findings
and recommendations to Owner which shall include, without limitation,
recommendations as to required repairs, replacements or maintenance. Agent
shall keep and submit annual written reports of all material alterations made to
the Premises, no matter by whom effected.
(u) Erect barriers or chains for the purpose of blocking access to
the common areas of and buildings included in the Premises as local law may
require, or, as directed in writing by owner, in order to avoid the dedication
of the same for public use and furnish appropriate evidence of same to Owner.
Agent shall give any advance notice of the erection of such barriers or chains
which may be required under reciprocal easement agreements or ground leases with
department stores.
(v) Use its reasonable efforts to obtain from tenants of the Premises
and department stores which are parties to reciprocal easement agreements or
ground leases waivers of their insurers' rights of subrogation in respect to
policies of fire and extended coverage and other property damage insurance
carried by them in favor of Owner, Agent and any department store or tenant for
which Owner is obligated to attempt to obtain such waivers under a ground lease,
reciprocal easement agreement or space lease.
(w) Assist owner in preparing any statements required to be submitted
by Owner under the terms of mortgages, ground leases, reciprocal easement
agreements and leases.
(x) Perform its duties in renting, managing, operating and
maintaining the Premises applying prudent and reasonable business practices
which are consistent with those followed in respect of the Premises prior to the
date of this Agreement, using reasonable care and diligence in carrying out
properly and efficiently its responsibilities under this Agreement. Agent shall
maintain those portions of the common areas of the Premises which are Owners'
obligation to maintain in a clean, safe and attractive condition, use reasonable
efforts to enforce the provisions of applicable leases, ground leases and
reciprocal easement agreements so as to cause tenants and department stores to
maintain their premises and common areas, if any, in similar condition, arrange
for necessary security for the Premises and their common areas and arrange for
cleaning and snow removal for the parking areas and roadways of the Premises.
Agent shall recommend to Owner from time to time such procedures with respect to
the Premises as Agent may deem advisable for the more efficient and economic
management and operation thereof.
(y) Where leasing guidelines or any Legal Requirement (as defined in
paragraph 2.1 (m) hereof) now or hereafter in effect require that tenant
security deposits be maintained, a separate interest-bearing account for such
security deposits (the "Security Deposit Account") shall be opened by Agent at a
bank approved by Owner. The Security Deposit Account shall be maintained in the
name of Agent in accordance with the relevant lease or Legal Requirement, as the
case may be, and shall be used only for tenant security deposits. The bank
shall be informed that the funds in the Security Deposit Account are held in
trust for Owner. Agent shall have the authority to remit to tenants any
interest to which they are entitled on their security deposit, in accordance
with their leases or any Legal Requirement, but Agent shall obtain the written
approval of Owner prior to the return of such deposits or any other security
(including letters of credit) to any tenant when the amount, in any single
instance, exceed $50,000.00.
Owner recognizes and understands that Environmental Service (as hereinafter
defined) are not actions or services that Agent is required to perform under
this Agreement and Owner further recognizes and understands that Agent is not a
consultant or a contractor that performs Environmental Services. Upon Owner's
request, Agent agrees to obtain and coordinate for and on behalf of Owner, such
Environmental Services as Owner may request or require. Owner shall reimburse
Agent for its administrative costs in connection with the coordination of such
Environmental Services as provided in Exhibit A, paragraph 11 of the Agreement.
In addition, Owner shall reimburse Agent for the costs of outside professionals
retained to perform Environmental Services. Environmental Services is defined
to be those acts or actions involving the presence use, exposure, removal,
restoration, or introduction of Hazardous materials (as hereinafter defined) and
the investigation of and compliance with any and all applicable rules, laws, or
regulations of local, state or federal authorities which apply or regulate
Hazardous Materials. Hazardous Materials means any hazardous, radioactive, or
toxic substance, material or waste listed in the United States Department of
Transportation Hazardous Materials Table; or by the Environmental Protection
Agency as hazardous substances; or such substances, materials and waste which
are or become regulated under applicable local, state or federal law including
materials which are petroleum products, asbestos, polychlorinated biphenyls, or
designated as hazardous substances under the Clean Water Act; or defined
hazardous waste under the Resource Conservation and Recovery Act; or defined as
hazardous substances under the Comprehensive Environmental Response,
Compensation and Inability Act.
2.2 Agent agrees, on behalf of Owner and at Owner's expense, to procure
and continue to maintain in force a comprehensive general liability insurance
policy or polices with respect to the Premises. Such policy or policies shall
provide for coverage in the amount and with such insurers as are required of
Owner under the Loan Documents (as defined in that certain Credit Agreement
dated as of November 17,1997, by and between Owner, Agent, and other borrowers,
signatories thereto, as Borrowers, and General Electric Capital Corporation, as
Lender, as may be amended, changed or modified from time to time, "Loan
Documents"), but in any event, not less than ten million dollars
($10,000,000.00) combined single limit coverage per occurrence for bodily injury
and property damage. The polices shall include coverage for contractual
liabilities assumed with respect to the Premises, including, but not limited to,
the obligations created by the indemnity set forth in Section 3.3 hereof as used
in this Agreement.
Further, at all times during the term of this Agreement, Agent shall keep
or cause to be kept insured, at Owner's cost and expense, all buildings and
improvements on the Premises against loss or damage by fire, windstorm, hail,
explosion, damage from aircraft and vehicles and smoke damage, and such other
risks as are from time to time included in "extended coverage" endorsements in
an amount sufficient to replace said improvements.
All insurance provided for in this Section 2.2 shall be effected under
valid and enforceable polices issued by insurers of recognized responsibility
and shall provide respectively, for the waiver of all rights of subrogation by
Owner or parties claiming through Owner against Agent and its agents and
employees. Owner and Agent hereby waive all rights of recovery as against the
other party hereto arising from loss or damage caused by the perils enumerated
in this Section 2.2 and agree that any policies obtained with respect to such
perils shall be endorsed accordingly, if such endorsements are available. Any
insurance required to be maintained hereunder may be taken out under a blanket
insurance policy or polices covering other properties of the insured. Any
policy required by this Section 2.2 shall provide that such policy shall not be
canceled without at least thirty (30) days' prior notice to Owner and Agent and,
in any event, shall provide that all parties insured thereby shall receive
notice no less than fifteen (15) days prior to the expiration dates of the
expiring policies.
2.3 Agent agrees to render monthly reports relating to the management and
operation of the Premises for the preceding calendar month on or before the
twenty-fifth (25th) day of each month in form as Owner and Agent will mutually
agree. Agent agrees that Owner shall have the right to require the transfer to
Owner at any time of any funds in the Bank Account considered by Owner to be in
excess of an amount reasonably required by Agent for disbursement in connection
with the Premises. Agent agrees to keep records with respect to the management
and operation of the Premises as prescribed by owner, and to retain those
records for periods specified by Owner. Owner shall have the right to inspect
such records and audit the reports required by this Section during business
hours for the life of this Agreement and thereafter during the period such
records are to be retained pursuant to this Section. In addition, Agent agrees
that such records may be examined from time to time during the period aforesaid
by any of the supervisory or regulatory authorities having jurisdiction over
Owner.
2.4 Agent shall ensure such control over accounting and financial
transactions as is reasonably required to protect Owner's assets from loss or
diminution due to gross negligence or willful misconduct on the part of Agent's
associates or employees. Losses caused by gross negligence or willful
misconduct shall be borne by Agent.
2.5 Agent shall establish and prepare, in the form authorized by Owner,
with such additional changes as may be reasonably requested by Owner, operating
and capital improvement budgets for the promotion, operation, repair and
maintenance of the Premises for each calendar year. Preliminary and final
budgets will be due 45 and 30 days, respectively, prior to commencement of the
calendar year to which they relate. Such budgets shall be prepared on both an
accrual basis showing a month-by-month projection of income and expenses and
capital expenditures. At least 30 days prior to the end of each year, Agent
shall meet with Owner to review such budgets for the subsequent year. Upon
receiving Owner's approval, Agent shall use its best efforts to comply with such
final budgets.
(a) Agent shall meet with Owner on a regular basis, not less
frequently than semi-annually and otherwise upon reasonable call by Owner, to
review the operations of the Premises, to review and, if appropriate, revise in
light of actual experience the annual operating and capital improvement budgets
theretofore approved by Owner and to consider other matters which Owner may
raise.
(b) Upon approval of the operating budget by Owner, and unless and
until revoked or revised by Owner, Agent shall have the right, without further
consent or approval by Owner to incur and pay the operating expenses set forth
in the approved operating budget, subject to paragraph 2.1(g) above.
(c) At the request of Owner from time to time Agent shall prepare and
submit to Owner (i) operating projections for the Premises for the ensuing five
(5) years, such projections to be made on a year-by-year basis and to be based
on Agent's best judgment as to the future, taking into consideration known
circumstances and circumstances Agent can reasonably anticipate are likely to
occur, and (ii) a schedule in reasonable detail of capital improvements, repairs
and replacements not provided for in the current capital improvement budget
which Agent reasonably anticipates will be required or should be made in the
foreseeable future, with Agent's opinion as to the relative priority and cost of
each thereof.
2.6 Agent shall also participate in Owner's property review programs to
the extent requested by Owner. Such review shall include asset, investment,
financial and strategy profiles in form satisfactory to Owner. Agent shall
respond, within 10 days, to Owner's management evaluation reports concerning
actions to be taken by Agent to correct or modify its management standards for
the operations, leasing or financial services provided for the Premises. If
Owner shall request that Agent's home office or regional office personnel travel
to the Premises to participate in Owner's property review programs or for any
other reason (unless such reason is for normal supervision), the reasonable cost
of meals, travel and hotel accommodations expenses incurred by such home office
personnel in connection with such travel shall be reimbursed to Agent by Owner.
Agent shall, however, bear the full cost and expenses incurred by its home
office or regional office personnel in connection with their travel to the
Premises to the extent such travel is required by the Agent for the normal
supervision of the management and leasing of the Premises.
2.7 Agent agrees to use its best efforts to have all space within the
Premises rented to desirable tenants, satisfactory to Owner, considering the
nature of the Premises, and in connection therewith:
(a) To negotiate, as the exclusive agent of Owner, all leases and
renewals of leases at the appropriate time, it being understood that all
inquiries to Owner with respect to leasing any portion of the Premises shall be
referred to Agent. Except for license agreements for temporary tenants, all
leases and renewals for lease terms in excess of one (1) year must be prepared
in accordance with Exhibit C by Agent and in accordance with the annual approved
budget and be submitted to Owner's representative for execution by Owner. Agent
is authorized to negotiate and execute license agreements prepared in accordance
with Exhibit C for temporary tenants and/or short term promotional activities.
If Agent shall receive a prospective tenant reference from a property other than
the Premises, which Agent or any subsidiary or affiliate manages, Agent shall
promptly declare its potential conflict of interest to Owner and Owner shall
determine if negotiations with such prospective tenant shall be undertaken by
Agent, Owner, or a third party approved by Owner. References of prospective
tenants, as well as their varying use requirements, shall be investigated
carefully by Agent. Agent also is authorized to negotiate and execute on
Owner's behalf lease amendments which: (i) change a Tenant's commencement date
by sixty (60) days or less (or for such longer period as is approved by Owner);
(ii) change a Tenant's permitted use by allowing the sale of such additional
items as are reasonably related to the Tenant's primary and principal use,
provided Agent has no reason to know of any lease at the center prohibiting such
use; (iii) change a tenant's marketing charge or promotional charge or
advertising obligation.
Owner acknowledges and understands that Agent manages properties for third
parties. Owner further acknowledges and understands that Agent routinely and
customarily negotiates tenant leases from multiple locations involving two or
more properties (one or more of which may be the Premises and one or more of
which may be properties owned by Agent or by others). Agent conducts such
multiple location negotiations in good faith for the benefit and interests of
Owner and other property owners, including Agent. Agent shall be entitled to
assume that such leasing practices are approved and acceptable to Owner, unless
and until Owner specifically disapproves the practice and so notifies Agent.
(b) With Owner's prior approval, to advertise the Premises or
portions thereat for rent, by means of periodicals, signs, plans, brochures and
other means appropriate to the Premises. Owner acknowledges and agrees that the
Premises may be included in brochures or other advertising media of Agent, which
may include other properties being offered for lease by Agent.
(c) In no event shall Agent engage or utilize the services of an
outside broker in connection with any lease without Owner's prior written
consent. In any case in which Owner requests or gives such consent, Agent shall
cause such broker to enter into a written agreement with Owner, on terms
reasonably satisfactory to Owner, with respect to such broker's commission and
Owner shall be responsible for the payment of such commission pursuant to the
terms of said agreement.
(d) Agent will, in each instance, negotiate for the inclusion in all
leases entered into by Owner of a provision to the effect that recourse on such
obligation shall be had only against the property to which such obligation
relates and no recourse shall be sought against Owner or any other person
holding, directly or indirectly, a beneficial interest in the property.
(e) Agent will, upon the request of Owner, undertake to find buyers
for the sale of any of the Owner's outparcels, peripheral land or such other
real estate situate upon the Premises, ("Sale Property"), and, in addition to
any other compensation provided to be paid to Agent under this Agreement, Owner
agrees to pay to Agent as compensation for its services hereunder, a fee at the
rate specified in Paragraph 7(iii) of Exhibit "A", attached hereto. In
performing its duties hereunder, Agent shall perform the following:
(i) Submit to Owner for approval, a pricing schedule on the Sale
Property;
(ii) Upon request, submit to Owner for approval, contract form(s)
to be used in the sale of the Sale Property;
(iii) Upon request, furnish Owner with a written report
regarding its progress in such sale activities;
(iv) Negotiate on behalf of Owner, the sale of the subject Sale
Property; and
(v) Provide legal services, limited to:
(a) Preparation of the Purchase and Sale Agreement;
(b) Deed and Easement(s) preparation;
(c) Preparation and submittal to Owner of the Seller's
closing statement;
(d) Preparation of closing instructions;
(e) Coordination of title work;
(f) Upon approval of Owner, retain local counsel,
whose fees will be reimbursed by Owner; and
(g) Submit to Owner, for final execution, all
documents necessary to consummate the
transaction.
Agent shall pursue these duties and obligations with diligence and in the
best interests of Owner.
2.8 Agent agrees, for itself and all persons retained or employed by Agent
in performing its services, to hold in confidence and not to use or disclose to
others any confidential or proprietary information of Owner heretofore or
hereafter disclosed to Agent ("Confidential Information"), including, but not
limited to, any data, information plans, programs, processes, costs, operations
or the names of any tenants which may come within the knowledge of Agent in the
performance of, or as a result of, its services, except where required by
judicial or administrative order, or where Owner specifically gives Agent
written authorization to disclose any of the foregoing to others or such
disclosure as is required in the direct performance of Agent's duties hereunder.
If Agent is required by a judicial or administrative order to disclose any
Confidential Information, Agent will promptly notify Owner thereof, consult with
Owner on the advisability of taking steps to resist or narrow such request and
cooperate with Owner in any attempt it may make to obtain an order or other
assurance that confidential treatment will be accorded to the Confidential
Information disclosed.
2.9 If at any time there shall be insufficient funds available to Agent
from collections to pay any obligations of Owner required to be paid under this
Agreement, Agent shall promptly notify Owner and Agent shall not be obligated to
pay such obligations unless Owner furnishes Agent with funds therefor.
2.10 Agent assumes no responsibility under this Agreement other than to
render the services called for hereunder in good faith, and Owner shall make no
claim against Agent on account of any alleged errors of judgment made in good
faith in connection with Agent's obligations hereunder and with the operation of
the Premises. Agent shall not be liable to Owner or others except by reason of
acts constituting willful misfeasance or gross negligence on the part of Agent,
and Owner agrees to indemnify, defend and hold harmless Agent and its partners
(and the shareholders, trustees and officers thereof)and employees from and
against all claims, actions, causes of action, costs and expenses (including,
but not limited to, reasonable attorney's fees) directly or indirectly arising
from the claims of any third party, except only those claims where liability
arises from acts constituting willful misfeasance or gross negligence on the
part of Agent.
ARTICLE III
OWNER'S AGREEMENTS
3.1 Owner, at its option, may pay directly all taxes, special assessments,
ground rents, insurance premiums and mortgage payments. If Owner makes such
election, Agent shall advise Owner of the due dates of such taxes assessments,
insurance premiums and mortgage payments.
3.2 Owner shall bear the cost of all premiums relating to insurance
procured by Agent for Owner pursuant to Section 2.2 hereof. Owner shall look
solely to such insurance for indemnity against any loss or damage to the
Premises and shall obtain waivers of subrogation against the Agent under such
policies if available at no additional cost to Owner.
3.3 Owner agrees to indemnify and save harmless Agent and its partners
(and the shareholders, trustees and officers thereof) and employees from and
against all claims, losses and liabilities resulting from: (i) damage to
property or injury to, or death of, persons from any cause whatsoever when Agent
is carrying out the provisions of this Agreement or acting under the direction
of Owner in or about the Premises; (ii) claims for defamation and false arrest
when Agent is carrying out the provisions of this Agreement or acting under the
direction of Owner; and (iii) claims occasioned by or in connection with or
arising out of acts or omissions, other than criminal acts, of the Agent when
Agent is carrying out the provisions of this Agreement or acting under the
direction of Owner (except in cases of Agent's willful misconduct or gross
negligence), and to defend or cause to be defended, at no expense to Agent or
such persons, any claim, action or proceeding brought against Agent or such
persons or Agent and Owner, jointly or severally, arising out of the foregoing,
and to hold Agent and such persons harmless from any judgment, loss or
settlement on account thereof.
Notwithstanding the foregoing, Owner shall not be responsible for
indemnifying or defending Agent or such persons in respect of any matter, claim
or liability in respect of which Agent is obligated to indemnify Owner as
provided in the following sentence. Agent agrees to indemnify and save harmless
Owner from and against all claims, losses and liabilities resulting from injury
to, or death of, persons in or about the Premises or for deformation and false
arrest in each case caused in whole or in part by the willful misfeasance or
gross negligence of Agent, and to defend, at no expense to Owner, any claim,
action or proceeding brought against Owner or Owner and Agent, jointly or
severally, arising out of the foregoing, and to hold Owner harmless from any
judgments, loss or settlement on account thereof.
Notwithstanding the foregoing, Agent shall not be responsible for
indemnifying or defending Owner in respect of any matter, claim or liability
which is covered by any public liability insurance policies carried by Owner and
under which Agent is named as an additional insured. The indemnification
obligations of Owner and Agent under this Section 3.3 shall in each case be
conditioned upon (a) prompt notice from the other party after such party learns
of any claim or basis therefor which is covered by such indemnity, (b) such
party's not taking any steps which would bar Owner or Agent, as the case may be,
from obtaining recovery under applicable insurance policies or would prejudice
the defense of the claim in question, and (c) such party's taking of all
necessary steps which if not taken would result in Owner or Agent, as the case
may be, being barred from obtaining recovery under applicable insurance policies
or would prejudice the defense of the claim in question. The provisions of this
Section 3.3 shall survive the expiration or termination of this Agreement.
3.4 Owner shall provide such office space on the Premises as may be
necessary for Agent to properly perform its functions under this Agreement.
Agent shall not be required to pay for utilities, telephone service or rent for
the office area on the Premises occupied by Agent. Agent shall have the right
to use the fixtures, furniture, furnishings and equipment, if any, which are the
property of Owner in said office space. Owner shall also provide space on the
Premises for use as community rooms and information and service centers where
the use of such space is determined by Owner to be in the best interest of the
Premises. All income derived from the utilization and/or operation of such
community rooms and/or information or service centers shall belong to the Owner
and all expenses relating thereto shall be borne by Owner.
3.5 Except as otherwise provided in this Agreement, everything done by
Agent in the performance of its obligations under this Agreement and all
expenses incurred pursuant hereto shall be for and on behalf of Owner and for
its account. Except as otherwise provided herein, all debts and liabilities
incurred to third parties in the ordinary course of business of managing the
Premises as provided herein are and shall be obligations of Owner, and Agent
shall not be liable for any such obligations by reason of its management,
supervision or operation of the Premises for Owner.
ARTICLE IV
COMPENSATION
4.1 In addition to any other compensation provided to be paid to Agent
under this Agreement, Owner agrees to pay to Agent as compensation for its
management services hereunder, a fee at the rate specified in paragraph 5 of
Exhibit A attached hereto. Said fee shall be payable monthly no later than the
twenty-fifth (25th) day of the following month, and shall be based on the
following components of income from the preceding calendar month determined in
accordance with GAAP. It is understood that the management fee shall be
calculated upon the following items: (i) minimum rents from all permanent
tenants (anchor, mall shops, ground leases and all other tenants); (ii) Lease
buyout income; (iii) Percentage rents in lieu of minimum rents; (iv) Percentage
rents; (v) all cost recovery income (CAM, taxes, food court, security, other);
(vi) income from all temporary tenants (initial term of one year or less); (vii)
income from all promotional activity; (viii) miscellaneous mall income such as
payphone commissions, stroller rentals, etc. and (ix) bad debts expense related
to any of the above revenue items. The following items shall not be subject to
management fees: (i) business interruption insurance income; (ii) recoveries
from insurance companies for casualty and other losses; (iii) payments from
tenants for leasehold improvements and related services provided by Agent; (iv)
payments from tenants to Merchants' Associations or to Marketing Funds; (v)
tenant security deposits; (vi) straight line rental income or losses, and (vii)
operating covenant and amortization (classified as a reduction of minimum rent).
Agent shall withdraw said fee from the operating account for the Premises and
shall account for same as provided for in Section 2.3 hereof.
4.2 The following expenses or costs incurred by or on behalf of Agent in
connection with the management and leasing of the Premises shall be the sole
cost and expense of Agent and shall not be reimbursable by Owner and Agent shall
indemnify Owner for such expenses and costs:
(a) cost of gross salary and wages, payroll taxes, insurance,
worker's compensation, pension benefits and any other benefits of Agent's
employees, except that Owner will reimburse Agent for all costs of employees who
provide either full or part time services on-site at any of the Premises.
Within the category of "on-site" personnel, Agent may include the pro-rata costs
for regional personnel performing required services at the Premises on a regular
basis (but which personnel may share time working at other properties managed by
Agent); provided, however, that the costs for any employees who are based at or
work from Agent's home office shall not be included, and provided further that
the pro-rata costs for any such regional personnel are included and identified
as such within the annual operating budget as approved by Owner.
(b) general accounting and reporting services, as such services are
considered to be within the reasonable scope of Agent's responsibility to Owner;
(c) costs of forms, stationery, ledgers, supplies, equipment and
other "general overhead" items used in Agent's home office or regional offices;
(d) cost or pro rata cost of telephone and general office expenses
incurred in the Premises by Agent for the operation and management of properties
not owned by Owner;
(e) cost of all bonuses, incentive compensation, profit sharing, or
any pay advances by Agent to Agent's employees, except such costs pertaining to
employees employed by Agent in accordance with Paragraph 2.1 (b) hereof;
(f) cost attributable to losses arising from criminal acts, gross
negligence or fraud on the part of Agent or Agent's associates or employees;
(g) cost for meals, travel and hotel accommodations for Agent's home
office or regional office personnel who travel to and from the Premises, except
as provided in Section 2.6;
(h) cost of automobile purchase and/or rental, except if furnished or
approved by Owner;
(i) except as otherwise provided in Exhibit A attached hereto,
expenses incurred in connection with the leasing of the Premises, it is being
understood and agreed, however, that Agent shall be reimbursed for advertising
expenses incurred in connection with the leasing of the Premises;
(j) cost of liability or other insurance carried by Agent, except
costs incurred by Agent in satisfaction of its obligations under Section 2.2
hereof; and
(k) cost of bonds purchased pursuant to Section 2.1(i) of this
Agreement.
ARTICLE V
DURATION, TERMINATION, DEFAULT
5.1 This Agreement shall become effective on the date hereof.
5.2 Subject to earlier termination as hereinafter provided, this Agreement
shall have an initial term ending on January 31, 1998. Thereafter, this
Agreement shall continue year-to-year on the same terms and conditions as herein
contained subject to being terminated by either Agent or Owner upon no less than
six (6) months written notice. The Agent may not terminate this Agreement
except in the case of non-payment of management fees for a period of ninety (90)
days after notice of such non-payment to Owner and Lender. In addition, Lender
shall have the right to terminate (or direct Owner to terminate, as applicable)
this Agreement: (i) upon the insolvency of Agent, (ii) the occurrence of an
Event of Default (as defined in the Loan Documents), (iii) the failure of the
Premises to meet the Net Operating Income requirements (as defined in the Loan
Documents), or (iv) pursuant to the provisions of the Manager's Consent and
Subordination of Management Agreement.
5.3 It shall be an Event of Default under this Agreement on the part of
Agent if Agent shall default in any material respect in performing any of its
obligations under this Agreement and such default shall not be cured within 30
days after written notice thereof is given by Owner to Agent (or, if the default
in question is curable but is of such nature that it cannot reasonably be
completely cured within such 30-day period, if Agent does not promptly after
receiving such notice commence to cure such default and thereafter proceed with
reasonable diligence to complete the curing thereof within 180 days after notice
is given by Owner to Agent). If an Event of Default by Agent shall occur, Owner
shall have the right to terminate this Agreement by written notice given to
Agent, and upon the giving of such notice this Agreement and the term hereof
shall terminate without any obligation on the part of Owner to make any payments
to Agent hereunder except as hereinafter provided.
5.4 If at any time during the term of this Agreement any involuntary
petition in bankruptcy or similar proceeding shall be filed against Agent
seeking its reorganization, liquidation or appointment of a receiver, trustee or
liquidator for it or for all or substantially all of its assets, and such
petition shall not be dismissed within 90 days after the filing thereof, or if
Agent shall:
(a) apply for or consent in writing to the appointment of a receiver,
trustee or liquidator of all or substantially all of its assets;
(b) file a voluntary petition in bankruptcy or admit in writing its
inability to pay its debts as they become due;
(c) make a general assignment for the benefit of creditors;
(d) file a petition or an answer seeking reorganization or an
arrangement with creditors or take advantage of any insolvency law; or
(e) file an answer admitting the material allegations of a petition
filed against it in any bankruptcy, reorganization or insolvency proceedings;
then upon the occurrence of any such event, Owner, at its option, may terminate
this Agreement by written notice given to Agent, and upon the giving of such
notice this Agreement and the term hereof shall terminate without any obligation
on the part of Owner to make any payments to Agent hereunder except as
hereinafter provided.
5.5 Owner shall have the additional right to terminate this Agreement on
at least 10 days' written notice to Agent, if Agent without Owner's prior
written consent shall assign or attempt to assign its rights or obligations
under this Agreement or subcontract (except for normal service agreements or as
otherwise specified in this Agreement) any of the services to be performed by
Agent. Owner shall also have the right to terminate this Agreement as to any
property included within the Premises on at least 10 days' written notice to
Agent if (a) such property shall be damaged or destroyed to the extent of 25% or
more by fire or other casualty and Owner elects not to restore or repair such
property or (b) there shall be a condemnation or deed in lieu thereof of 25% or
more of such property.
5.6 Agent acknowledges and agrees that Owner shall have the right to
subordinate and/or assign this agreement in connection with the Loan Documents.
Agent further agrees to execute such further instruments as Owner or Lender
deems necessary to effectuate such subordination, provided that in the event
Lender becomes entitled to possession of the Premises, the Lender shall be
entitled, at its option, to retain Agent to manage the Premises, in which case
the Agent shall be entitled to the compensation set forth in this Agreement
during all periods in which Agent is providing services to the Premises for the
Lender. Moreover, notwithstanding anything to the contrary contained herein,
for so long as any amounts remain outstanding under the Loan Documents, (i) this
Agreement and all fees payable by Owner hereunder shall be subject to and
subordinate to any mortgage liens on the Premises established by the Loan
Documents and (ii) Agent shall comply with any and all applicable provisions of
the Loan Documents and in the event there is a conflict between the terms of
this Agreement and the terms of the Loan Documents, the Loan Documents shall
control.
5.7 Upon any termination of this Agreement pursuant to the provisions of
this Article V, Owner shall remain obligated to pay to Agent fees and other
amounts due to Agent hereunder which accrued prior to the effective date of such
termination. Nothing contained in this Section 5.7 shall be deemed to waive,
affect or impair (a) Owner's rights to seek recourse against Agent for damages
or other relief in the event of the termination of this Agreement by Owner
pursuant to Section 5.3, 5.4 or 5.5 hereof, and (b) Agent's right to seek
recourse against Owner for damages or other relief in the event of the
termination of this Agreement by Agent pursuant to Section 5.2 hereof.
5.8 Upon the expiration or earlier termination of this Agreement, Agent
shall forthwith surrender and deliver to Owner any space in the Premises
occupied by Agent and shall make delivery to Owner or to Owner's designee or
agent, at Agent's home or regional offices or at its offices at the Premises, of
the following:
(a) a final accounting, reflecting the balance of income from and
expenses of the Premises as at the date of expiration or termination of this
Agreement;
(b) any funds of Owner or tenant security or advance rent deposits,
or both, held by agent with respect to the Premises; and
(c) all Confidential Information (in whatever medium stored) and all
other records, contracts, leases, ground leases, reciprocal easement agreements,
receipts for deposits, unpaid bills, lease summaries, canceled checks, bank
statements, paid bills and all other records, papers and documents and any
microfilm and/or computer disk of any of the foregoing which relate to the
Premises and the operation, maintenance, management and leasing thereof; all
such data, information and documents being at all times the property of Owner.
In addition, Agent shall furnish all such information and take all such
action as Owner shall reasonably require to effectuate an orderly and systematic
termination of Agent's duties and activities under this Agreement.
5.9 This Agreement shall terminate at the election of Owner as to any of
the properties set forth in Exhibit A upon thirty (30) days written notice to
the Agent if such properties are sold by Owner to a non-affiliated third party
purchaser or (unless the Lender shall otherwise notify the Agent in writing)
automatically if such properties were acquired on foreclosure of a mortgage
encumbering all or a portion of the Premises. In the event such properties are
sold by Owner to a non-affiliated third party purchaser and this Agreement is
not thereby terminated by Owner, the Agent shall have the right to terminate
this Agreement as to such properties upon sixty (60) days prior written notice
which notice must be given within ninety (90) days after the date of such sale
is consummated. If such properties are sold, Agent will not be entitled to
sales commission unless the Agent has been retained by Owner pursuant to a
separate commission arrangement. This Agreement shall remain in full force and
effect as to all properties not terminated pursuant to this Section 5.9.
5.10 The provisions of this Article V shall survive the expiration or
termination of this Agreement.
ARTICLE VI
ASSIGNMENT
6.1 Agent, except for a transfer to a "Permissible Transferee", shall not
assign its rights or obligations under this Agreement, either directly or by a
transfer of shares of beneficial interest or voting control either voluntarily
or by operation of law. Any change other than to a "Permissible Transferee"
shall constitute a breach of this Agreement by Agent and Owner may terminate
this Agreement in accordance with Section 5.5 A "Permissible Transferee" shall
mean any corporation, partnership, trust or other entity, more than 50% of the
outstanding stock of which, or more than 50% interest in which, is owned or
controlled by Agent.
6.2 In the event of a sale or conveyance of any of the Premises, Owner
shall have the right to cancel or assign this Agreement and its rights and
obligations hereunder to any person or entity to whom or which Owner sells or
conveys such property or properties. Upon such assignment, Owner shall be
relieved of its obligations under this Agreement with respect to such property
or properties that accrue from and after the date of such assignment, provided
that the assignee shall assume the obligations of Owner under this Agreement and
shall agree to perform and be bound by all of the terms and provisions hereof,
effective from and after the date of such assignment and an executed copy of
such assumption agreement shall be delivered to Agent. Agent shall not be
entitled to a "termination fee" in connection with an assignment or cancellation
as set forth in this Section 6.2, but otherwise shall be entitled to collect
from Owner such fees and expenses, including termination and/or relocation
expenses of Agent's full-time employees, if any, as Agent has earned pursuant to
this Agreement prior to the date of such assignment or cancellation.
ARTICLE VII
MISCELLANEOUS
7.1 Owner's representative ("Owner's Representative"), whose name and
address is set forth in paragraph 2 of Exhibit A attached hereto, shall be the
duly authorized representative of Owner for the purpose of this Agreement. Any
statement, notice, recommendation, request, demand, consent or approval under
this Agreement shall be in writing and shall be deemed given by Owner when made
or given by Owner's Representative or any officer of Owner and delivered
personally to an officer of Agent or mailed, addressed to Agent, at his address
first above set forth. Either party may, by notice to the other, designate a
different address for the receipt of the aforementioned communications and Owner
may, by notice to Agent, from time to time, designate a different Owner's
Representative to act as such. All communications mailed by one party to
another shall be sent by first class mail, postage prepaid or Express Mail
Service, or other commercial overnight delivery service, except that notices of
default shall be sent by registered or certified mail, return receipt requested,
postage prepaid, Express Mail Service or other commercial overnight delivery
service with receipt acknowledged in writing. Communications so mailed shall be
deemed given or served on the date mailed. Notwithstanding the foregoing, any
notices, requests, consents, approvals and other communications, other than
notices of default or approvals of annual budgets, and other communications,
approvals or agreements which are required by the express terms of other
provisions of this Agreement to be in writing, may be given by telegram,
telephonic communication or orally in person. Agent and Owner shall furnish to
the other the names and telephone numbers of one or more persons who can be
reached at any time during the term of this Agreement in the event of an
emergency.
7.2 Agent shall, at its own expense, qualify to do business and obtain and
maintain such licenses as may be required for the performance by Agent of its
services.
7.3 Each provision of this Agreement is intended to be severable. If any
term or provision hereof shall be determined by a court of competent
jurisdiction to be illegal or invalid for any reason whatsoever, such provision
shall be severed from this Agreement and shall not affect the validity of the
remainder of this Agreement.
7.4 In the event either of the parties hereto shall institute any action
or proceeding against the other party relating to this Agreement, the
unsuccessful party in such action or proceeding shall reimburse the successful
party for its disbursements incurred in connection therewith and for its
reasonable attorney's fees as fixed by the court.
7.5 No consent or waiver, express or implied, by either party hereto or of
any breach or default by the other party in the performance by the other of its
obligations hereunder shall be valid unless in writing, and no such consent or
waiver shall be deemed or construed to be a consent or waiver to or of any other
breach or default in the performance by such other party of the same or any
other obligations of such party hereunder. Failure on the part of either party
to complain of any act or failure to act of the other party or to declare the
other party in default, irrespective of how long such failure continues, shall
not constitute a waiver by such party of its rights hereunder. The granting of
any consent or approval in any one instance by or on behalf of Owner shall not
be construed to waive or limit the need for such consent in any other or
subsequent instance.
7.6 The venue of any action or proceeding brought by either party against
the other arising out of this Agreement shall be in the state or federal courts
of the Commonwealth of Pennsylvania.
7.7 This Agreement may not be changed or modified except by an agreement
in writing executed by each of the parties hereto and consented to by the
Lender. This Agreement constitutes all of the understandings and agreements
between the parties in connection with the agency herein created.
7.8 This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their permitted successors and assigns, but shall not inure
to the benefit of, or be enforceable by, any other person or entity.
7.9 Nothing contained in this Agreement shall be construed as making Owner
and gent partners or joint ventures or as making either of such parties liable
for the debts or obligations of the other, except as in this Agreement is
expressly provided.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
CROWN AMERICAN ACQUISITION
ASSOCIATES III, L.P.
(Owner)
BY: CROWN AMERICAN ACQUISITION
ASSOCIATES III
as sole general partner
By: /s/ Ronald P. Rusinak
Name: Ronald P. Rusinak
Title: Vice President
CROWN AMERICAN PROPERTIES, L.P.
(Agent)
BY: CROWN AMERICAN REALTY TRUST,
as sole general partner
By: /s/ Ronald P. Rusinak
Name: Ronald P. Rusinak
Title: Vice President
EXHIBIT A
1. Premises (1.1):
a. Valley MallJacksonville Mall
Hagerstown, Maryland.Jacksonville, North Carolina.
2. Name and Address of Owner's Representative (7.1):
Frank J. Pasquerilla
Pasquerilla Plaza
Johnstown, PA 15907.
3. Limit of amount authorized for non-emergency purchases and repairs (2.1(a)
and (c)):
$50,000.00.
4. Name of Banks (2.1(g)):
PNC Bank, N.A.
5. Management Fees (4.1):
Owner agrees to pay Agent as compensation for its management services
hereunder an amount equal to 5% of the amounts set forth in Section 4.1.
Such management fee shall be payable monthly based on the income earned for
the categories described in Section 4.1, computed in accordance with GAAP.
Agent shall be entitled to receive the management fee on the pro rata
portion of percentage rents received by Owner after the termination of this
Agreement but applicable to time periods prior to the termination of this
Agreement based upon the actual number of days lapsed divided by 365.
6. Legal and Tenant Coordination Expenses:
Owner agrees to pay Agent, to defray in-house legal expenses and tenant
coordination expenses (a) with respect to each new lease and each lease
renewal of mall shops and free-standing buildings (other than a lease
renewal or extension resulting from the exercise of an option contained in
such lease), an amount equal to the Agent's actual costs of providing such
services, limited however to the annual amount which is capitalized as
tenant allowance costs under the Owner's customary accounting practices as
Agent and Owner shall mutually agree and as recorded in the Owner's audited
annual financial statements. Such fees shall be payable monthly in arrears
using estimated fees per square foot, based on the estimated annual fee;
the monthly estimated fees shall be adjusted to a final actual amount
within 90 days after the Owner's fiscal year end. Agent and Owner shall
use their best efforts to estimate the monthly fee per square foot and
shall adjust the amount periodically during the year as mutually agreed
upon.
7. Leasing and Land Sale Fees:
(i) Leasing Commission:
Agent shall be entitled to commissions for leases secured, in addition
to
other fees and compensation provided in this Agreement, equal to the
Agent's actual costs of providing leasing services related to permanent
leases (those with an initial term in excess of one year), limited however
to the aggregate amount which is capitalized as lease acquisition costs
under the Owner's customary accounting practices as Agent and Owner shall
mutually agree and as recorded in the Owner's audited annual financial
statements. Such fees shall be payable monthly in arrears using estimated
fees per square foot, based on the estimated annual fee; the monthly
estimated fees shall be adjusted to a final actual amount within 90 days
after the Owner's fiscal year end. Agent and Owner shall use their best
efforts to estimate the monthly fee per square foot and shall adjust the
amount periodically during the year as mutually agreed upon.
(ii) Brokerage Commissions:
Owner and Agent acknowledge that some leasing and land sale
transactions will involve the use of an independent real estate broker or
real estate sales agent, who will be paid a commission for introducing and
bringing a prospective tenant or purchaser to the Premises. Agent may
utilize brokers in connection with carrying out its leasing and land sale
activities, and shall be reimbursed by Owner for the cost of those
Brokerage Commissions in the following circumstances:
(a) Agent was required to recognize the broker or sales agent as the
representative of the prospective tenant or purchaser and was not
allowed or permitted the opportunity to contact or negotiate with
the tenant or purchaser except through the broker or sales agent,
and this fact was disclosed to Owner.
(b) Agent disclosed to Owner the existence of the broker or sales
agent and the brokerage fee at the time the proposed leasing or
land sale transaction was submitted to Owner for approval.
Except as provided in (a) and (b) above, Agent shall assume the sole cost and
responsibility for broker commissions.
(iii) Land Sale Commission:
For services provided pursuant to Section 2.7(e), Owner shall pay the
Agent a sales commission equal to fifteen percent (15%) of the adjusted
sales price ("Sales Commission"), as compensation for overhead associated
with the services of certain employees of Agent. For purposes of the
foregoing "adjusted sales price" shall mean the gross proceeds payable to
Owner less reasonable and necessary development costs paid by Owner in
connection with the transfer. One-half (1/2) of the Sales Commission shall
be due and payable to Agent at the time a mutually binding Agreement of
Sale with respect to any Sale Property is fully-executed, with the
computation of such amount being based on the gross proceeds payable to
Owner. The balance of the Sales Commission shall be paid to Agent at the
time of closing of any such sale.
8. Excluded Services:
Notwithstanding anything to the contrary contained herein, the parties
acknowledge that it is not within the contemplation of this Agreement or
the fee structure included herein that the Agent perform any services with
respect to the following: any "due diligence" or similar efforts relating
to any financing, refinancing or sale or disposition of the Premises;
zoning compliance of the Premises; performing or supervising (including
tenant room build-outs or remodeling) any extensive alteration or
renovation to the Premises; asbestos and/or other environmental studies and
any related abatement or remediation activities for any tenant premises,
site acquisitions of additional ground for the expansion of the Premises;
reconstruction after casualty or condemnation; leasing, management, or
construction relating to any proposed or implemented expansion of the
Premises or work generally classified as "development" work in connection
with the same; renewals or renegation of leases or other agreements with
department stores if such involves substantial changes from existing
documents (including, without limitation, negotiation of new leases,
renewal leases, operating covenants, renovation provisions, expansion
rights, and like matters); or replacement of department stores tenancies.
Owner shall reimburse Agent for all such services rendered equal to the
Agent's actual costs of providing such services, limited however to the
annual amount which is capitalized as tenant allowance or construction
costs under the Owner's customary accounting practices as Agent and Owner
shall mutually agree and as recorded in the Owner's audited annual
financial statements. Such fees shall be payable monthly in arrears using
estimated based on the estimated annual fee; the monthly estimated fees
shall be adjusted to a final actual amount within 90 days after the Owner's
fiscal year end. Agent and Owner shall use their best efforts to estimate
the monthly fees and shall adjust the amount periodically during the year
as mutually agreed upon.
9. Other Requested Services:
If Owner requests Agent to provide its own personnel for non-routine
services
which Agent is not obligated elsewhere in this Agreement to perform the
compensation for which is not provided for hereinabove, unless Owner and
Agent otherwise agree to an acceptable fee for such services, Owner shall
pay Agent an amount equal to two and one-half times the actual base
cost of Agent's departmental personnel, as computed by Agent, for their
time involved in performing such requested services, plus reimbursement for
any out-of-pocket costs incurred incident to furnishing such requested
services. Owner and Agent shall agree in advance as to the hourly base
cost to be applicable for the specific services to be provided. Such
amount or amounts shall be payable to Agent monthly within ten (10) days
after Owner's receipt of Agent's statement setting for the amount payable
to Agent.
EXHIBIT B
INTENTIONALLY OMITTED
EXHIBIT C
Leasing Guidelines
Agent shall use a form or forms of lease; or with respect to temporary
tenants and/or short term promotional activities, a form or forms of license
agreement, which have been prepared and submitted to Owner for Owner's prior
review and approval. Agent will negotiate and make modifications to such forms
as directed by Owner, or as necessary or appropriate with respect to the needs
of the particular transactions, utilizing methods and techniques consistent with
prevailing practices employed in management and leasing of shopping centers.
For all agreements, excepting license agreements for temporary tenants
and/or for short term promotion activities, all essential financial and
business terms and provisions of the lease or agreement, including construction
and improvements of the leasehold, shall be presented for Owner's approval.
Tenant-signed leases presented by Agent for Owner's review and execution shall
be consistent with such terms and conditions previously approved by Owner, or
with such deviations or modifications identified for Owner's review. Execution
of tenant-signed leases that are presented by Agent for Owner's signature will
acknowledge Owner's approval of the lease, its form, its terms and provisions.
No lease or other agreement shall be entered into, modified, canceled or
extended if the consent of any mortgagee or ground lessor is required unless
such consent has been obtained. Agent will notify Owner when consent is
required.
EXHIBIT 10.5 (l)
REAL ESTATE MANAGEMENT AGREEMENT
THIS AGREEMENT, made as of 13th day of May, 1998, between CROWN AMERICAN
CROSSROADS, LLC, a Pennsylvania limited liability company, having its principal
address at Pasquerilla Plaza, Johnstown, Pennsylvania 15907 ("Owner"), and CROWN
AMERICAN PROPERTIES, L.P., a Delaware limited partnership, having its principal
address at Pasquerilla Plaza, Johnstown, Pennsylvania 15907 ("Agent").
W I T N E S S E T H
In consideration of the mutual Covenants herein contained, and intending to
be legally bound, the parties hereto agree as follows:
ARTICLE I
APPOINTMENT AND AUTHORITY OF AGENT
1.1 Owner owns leasehold interests in certain retail properties identified
on Exhibit A attached hereto and made a part hereof (the "Premises"). Owner
hereby appoints Agent as the exclusive managing and renting agent for the
Premises, and hereby authorizes Agent to exercise such powers with respect to
the Premises as may be necessary for the performance of Agent's obligations
under Article II, and Agent accepts such appointment on the terms and conditions
hereinafter set forth for the term as provided in Article V. Agent shall have
no right or authority, express or implied, to commit or otherwise obligate Owner
in any manner whatsoever except to the extent specifically provided herein and
agrees that it shall not hold itself out as having authority to act on behalf of
Owner in any manner which is beyond the scope of authority granted to Agent in
this Agreement.
ARTICLE II
AGENT'S AGREEEMENT
2.1 Agent, on behalf of Owner, shall implement, or cause to be
implemented, the decisions of Owner and shall conduct the ordinary and usual
business affairs of Owner with respect to the management, operation and leasing
of the Premises as provided in this Agreement. Agent shall at all times conform
to the policies and programs established by Owner and the scope of Agent's
authority shall be limited to said policies. Agent shall act in a fiduciary
capacity with respect to the cash and cash equivalent assets of Owner which are
within the custody or control of Agent. Agent shall deal at arm's length with
all parties and shall serve Owner's interests at all times. All undertakings
incurred by Agent on behalf of Owner in accordance with this Agreement shall be
at the cost and expense of Owner unless otherwise provided for herein. Agent
agrees to use its best efforts in the management and operation of the Premises.
Agent shall perform the following duties in connection with the management and
operation of the Premises:
(a) Contract, for periods not longer than the term of Owner's
leasehold estate, in the name of Owner, for gas, electricity, water and such
other services as are currently being furnished to the Premises. Service
contracts shall be written to include a provision allowing termination by Owner
upon 30 days' notice wherever possible. All service contracts, including those
in effect at the date hereof in respect of the Premises, including the terms
thereof (with cancellation right, if any), the services provided thereunder and
the charges called for thereby, should be detailed in the annual budget package.
No such contract, other than for utilities, including water, which involves an
expenditure in excess of the amount set forth in paragraph 3 of Exhibit A
attached hereto shall hereinafter be entered into by Agent without the prior
approval of Owner. Agent shall also perform the obligations of the Owner under
any utility service agreement and any reciprocal easement agreements.
(b) Select, employ, pay, supervise, direct and discharge all
employees necessary for the proper, safe and economic operation and maintenance
of the Premises, in number and at wages in accordance with industry practices
and the annual budget, carry Worker's Compensation Insurance (and, when required
by law, compulsory Non-Occupational Disability Insurance) covering such
employees, and use reasonable care in the selection, discharge, and supervision
of such employees. Agent will keep bi-weekly time sheets which shall be
available for inspection by Owner. Agent shall prepare or cause to be prepared
and timely filed and paid, all necessary returns, forms and payments in
connection with unemployment insurance, medical and life insurance policies,
pensions, withholding and social security taxes and all other taxes relating to
said employees which are imposed on employees by any federal, state or municipal
authority. Agent shall also provide usual management services in connection
with labor relations and shall prepare, maintain and file all necessary reports
with respect to the Fair Labor Standards Act and all other required statements
and reports pertaining to employees at the Premises. Agent shall use its best
efforts to comply with all laws and regulations and collective bargaining
agreements, if any, affecting such employment. Owner shall have the right to
review and approve all collective bargaining agreements which affect the
Premises prior to their implementation or acceptance by Agent. Agent will be
and will continue throughout the term of this Agreement to be an equal
opportunity employer. All persons employed in connection with the operation and
maintenance of the Premises shall be employees of Agent or employees of
contractors approved by Owner to provide contract services to the Premises.
(c) Keep the Premises in a safe, clean, rentable and sightly
condition and make and contract for all repairs, alterations, replacements, and
installations, do all decorating and landscaping, and purchase all supplies
necessary for the proper operation and maintenance of the Premises and for the
fulfillment of Owner's obligations under any lease, operating agreement or other
agreement or compliance with all governmental and insurance requirements,
provided that, except as provided in Section 2.5 hereof, Agent shall not make
any purchase or do any work, the cost of which shall exceed the approved budget
or the amount set forth in paragraph 3 of Exhibit A attached hereto, without
obtaining in each instance the prior approval of Owner, except in circumstances
which Agent shall deem to constitute an emergency requiring immediate action for
the protection of the Premises or of tenants or other persons or to avoid the
suspension of necessary services or in order to cure any violation or other
condition which would subject Owner or Agent to any criminal penalty or any
civil fine in excess of $5,000.00. Agent shall notify Owner immediately of the
necessity for, the nature of, and the cost of, any such emergency repairs or any
action to cure any such violation or other condition. Agent shall arrange for
and supervise, on behalf of Owner, the performance of all alterations and other
work to prepare or alter space in the Premises for occupancy by tenants thereof.
If Owner shall require, Agent shall submit a list of contractors and
subcontractors performing tenant work, repairs, alterations or services at the
Premises under Agent's direction.
It is understood that Agent shall not be required to undertake the making
or supervision of extensive reconstruction of the Premises or any part thereof
except after written agreement by the parties hereto as to any additional fee to
be paid for such services.
Owner shall receive the benefit of all discounts and rebates obtainable by
Agent in its operation of the Premises. When requested by Owner, Agent agrees
to obtain competitive bids for the performance of any work at the Premises, to
furnish copies of such bids to Owner and to accept such bid as Owner may
direct.
If Agent desires to contract for repair, construction or other service
described in this paragraph (c) (other than work done at the request of a tenant
and at the tenant's sole cost and expense, hereinafter referred to as "Tenant
Work") with a party with respect to which any partner or shareholder of Agent
holds a beneficial interest, or with any subsidiary, affiliate or related
corporation in which Agent shall have a financial interest, such interest shall
be disclosed to, and approved by, Owner before such services are procured. The
cost of any such services shall likewise be at competitive rates,
notwithstanding that tenants of the Premises may be required to pay such costs.
Agent, or a general contractor working under the supervision of Agent is
authorized to make and install Tenant Work, Agent may collect from such tenant
or such general contractor, for its sole account, its charge for supervisory
overhead on all such Tenant Work. Agent shall hold Owner harmless from any
claims which may be advanced by any such tenant in connection with Tenant Work
performed by Agent or under Agent's supervision. Agent, however, shall not
require any tenant to use Agent, its subsidiary, affiliate or related
corporation as its general contractor to perform such Tenant Work.
(d) Handle promptly complaints and requests from tenants and parties
to reciprocal easement and/or operating agreements, notify Owner of any major
complaint made by any such tenant or party and notify owner promptly (together
with copies of supporting documentation) of: the receipt of any notice of
violation of any governmental requirements; any known orders or requirements of
insurers, insurance rating organizations, Board of Fire Underwriters or similar
bodies; any known defect in the Premises; any known fire or other damage to the
Premises, and, in the case of any serious fire or other serious damage to the
Premises, Agent also shall immediately provide telephone notice thereof to
Owner's General Insurance Office, so that an insurance adjuster can view the
damage before repairs are started, and complete customary loss reports in
connection with fire or other damage to the Premises.
(e) Notify Owner's General Liability Insurance carrier and Owner
promptly of any personal injury or property damage known to Agent occurring to
or claimed by any tenant or third party on or with respect to the Premises and
promptly forward to the carrier, completed insurance forms, any summons,
subpoena, or other like legal document served upon Agent relating to actual or
alleged potential liability of Owner, Agent, or the Premises, with copies to
Owner of all such doucments.
(f) Advise Owner of those exceptions in leases, operating agreements
and other agreements executed on or after the date hereof in which the tenants
or parties to such agreements do not agree to hold Owner harmless with respect
to liability from any accidents.
(g) At the option of Owner, or as otherwise provided in the Loan
Documents, as hereinafter defined, receive and collect rent and all other monies
payable to Owner by all tenants and licensees in the Premises and by all other
parties including department stores under ground leases and reciprocal easement
agreements and tenants under leases of free-standing stores. In this
connection, Agent shall calculate all amounts due to Owner from such tenants,
licensees and other parties, including annual or periodic adjustments where
applicable, and shall, when appropriate, submit statements or invoices to such
tenants, licensees and parties. Agent shall deposit the same promptly in the
bank named on Exhibit A attached hereto (the "Bank") in an account with title
including a distinctive portion of Agent's name and such designation as Owner
may direct (the "Bank Account"), which account shall be used exclusively for
such funds. Owner's representative will be a signatory on all bank accounts
maintained by Agent and such representative's signature shall be required on all
checks in excess of $50,000 and for withdrawals in excess of $1,000,000 in any
month. All amounts received by Agent for or on behalf of Owner shall be and
remain the property of Owner. Checks may be drawn on the above-mentioned bank
account only for purposes authorized under this Agreement. No funds of Agent or
others shall be commingled with funds in any such bank account. Owner has the
right to control the types of cash management accounts and dictate the specifics
of said accounts with respect to disbursement and management of funds.
(h) Serve notice of default upon tenants of space in the Premises and
other parties which are in default in performing obligations under their leases,
reciprocal easement agreements or other agreements, with copies sent
simultaneously to Owner, and attempt to cause such defaults to be cured by the
defaulting tenant or other party. Agent shall, subject to Owner's consent with
respect to any tenant who occupies more than 1,000 square feet, utilizing
counsel theretofore approved by Owner, institute all necessary legal action or
proceedings for the collection of rent or other income from the Premises or the
ousting or dispossessing of tenants or other persons therefrom and all other
matters requiring legal attention. Agent agrees to use its best efforts to
collect rent and other charges from tenants in a timely manner and to pursue
Owner's legal remedies for nonpayment of same. Agent shall not terminate tenant
leases in the Premises without Owner's consent. Owner reserves the right to
designate or approve counsel and to control litigation of any character
affecting or arising out of the operation of the Premises and the settlement of
such litigation.
(i) Bond Agent and all of Agent's employees who may handle or be
responsible for monies or property of Owner with a "comprehensive 3-D" or
"Commercial Blanket" bond, in an amount of $500,000.00.
(j) Notify Owner immediately of any known fire, accident or other
casualty, condemnation proceedings, rezoning or other governmental order,
lawsuit or threat thereof involving the Premises; and the receipt of any notice
of violations relative to the leasing, use, repair and maintenance of the
Premises under governmental laws, rules, regulations, ordinances or like
provisions.
(k) If Owner so directs, make timely payment of real estate and
personal property taxes and assessments levied or assessed against the Premises
or personal property used in connection therewith and any other charge that may
become a lien against the Premises. Owner may direct that payment of such taxes
and assessments either be made to the taxing authority or to a mortgage lender
holding an escrow account for such items. Agent shall participate in Owner's
tax review program and check tax assessments and, when so requested, Agent shall
assist Owner in its efforts to reduce such taxes. Agent shall promptly furnish
Owner with copies of all assessment notices and receipt tax bills.
(l) Promptly comply with all present and future laws, ordinances,
orders, rules, regulations and requirements of all Federal, state and local
governments, courts, departments, commissions, boards and offices, any national
or local Board of Fire Underwriters or Insurance Services offices having
jurisdiction, or any other body exercising functions similar to those of any of
the foregoing ("Legal Requirements") which may be applicable to the Premises or
any part thereof or to the leasing, use, repair, operation and management
thereof, but only to the extent that such compliance is reasonably capable of
being carried out by Agent and Agent has available the necessary funds therefor
from collections or advances by Owner. Agent shall give prompt notice to Owner
of any known violation or the receipt of notice of alleged violation of such
laws and Agent shall not bear responsibility for failure of the Premises or the
operation thereof to comply with such laws unless Agent has committed gross
negligence or a willful act of omission in the performance of its obligations
under this Agreement or in the performance of any other duties owed to Owner or
third parties by Agent. As and when directed by Owner, Agent shall institute in
its name, or in the name of Owner using counsel selected by Owner, appropriate
actions or proceedings to contest any such law, ordinance, rule, regulation,
order, determination or requirement.
(m) Promote the Premises and participate as Owner's representative in
any Merchant's Associations or Promotional Organizations (collectively, the
"Promotional Organizations") established to promote the Premises.
(n) Consent to and approve tenant alteration work and installations
which are performed by tenants of space in the Premises and are provided for in
the leases of such tenants and are within such tenant's space. Agent is
authorized to approve tenant alteration work and installations not provided for
in leases if (i) such alteration work and installations are made solely at the
expense of the tenant, and (ii) such alteration work and installations do not
affect the structural integrity or facade of any building. Agent shall
periodically monitor the progress of any tenant alteration work and
installations to confirm that the work is being done in a good and workmanlike
manner and in substantial conformity with any plans and specifications approved
by Owner or Agent, and shall notify Owner of any material deficiencies or
material variations from the approved plans and specifications.
(o) Provide, upon Owner's request in accordance with the provisions
of Section 10 and Section 11 of Exhibit A, general contracting and construction
management services ("Development Services") and consultation to Owner for the
Premises, which shall include, without limitation, the management, supervision
and administration of, and provisions for services for the improvement or
expansion (and in the event of damage or condemnation, the reconstruction) of
the Premises, including advice, expertise and support of Agent provided and/or
retained and/or coordinated by home office and on-site personnel including,
without limitation, executive personnel, design and engineering personnel,
clerical personnel, legal and accounting personnel. Such personnel will perform
consultation and various functions involved with Development Services including,
without limitation, the following: design, planning, architectural,
engineering, acquisition and negotiation, negotiations with department stores
for site acquisition and operation in the Premises; permits and licenses;
preopening advertising and publicity; market research, site work; negotiations
with public authorities; attendance at public hearings; project management and
all other activities necessary to accomplish the improvement, expansion or
reconstruction of the Premises. It is understood that Development Services and
consultation with Owner may or may not involve Agent's in-house personnel; by
mutual agreement of Agent and Owner, outside professionals or other persons may
be engaged to provide Development Services and consultation with Owner, provided
that Agent agrees to require any contractor or subcontractor brought onto the
Premises to have workers' compensation and employers' liability insurance in the
necessity statutory amounts and comprehensive general liability insurance for at
least $1,000,000.00.
(p) If Owner so directs, pay when due (i) all debt service and other
amounts due under any mortgages that encumber the Premises or any part thereof,
and (ii) all rent and other charges payable under any ground lease of land
included in the Premises under which Owner is the tenant and give Owner notice
of the making of each payment.
(q) Carry out and comply with, directly or through a third party, all
requirements on the part of Owner under all such mortgages and ground leases,
all leases of space in the Premises, all ground leases and reciprocal easement
agreements with department stores and all other agreements affecting or relating
to the Premises which are known or made known to Agent, including, without
limitation, the furnishing of all services and utilities called for therein, but
only to the extent that such requirements are at the time reasonably capable of
being carried out by Agent and Agent has available the necessary funds therefor
from collections or advances by Owner, provided that Agent shall promptly notify
Owner if Agent cannot carry out such requirement or has insufficient funds
available to do so. Agent shall notify Owner promptly of any default under any
such mortgage, lease, ground lease, reciprocal easement or other agreement on
the part of Owner, the tenant or other party thereto of which agent becomes
aware.
(r) Use reasonable efforts to comply with and require compliance with
the requirements of leases of space in the Premises, ground leases, reciprocal
easement agreements and all other agreements affecting or relating to the
Premises which are known or made known to Agent on the part of Tenants,
department stores and other parties thereto and enforce compliance with the
rules and regulations, sign criteria and like standards for the Premises adopted
by Owner from time to time.
(s) Upon request, furnish Owner with an executed copy of each lease,
lease renewal, lease amendment, service contract and other agreement entered
into on or after the date of this Agreement in connection with the operation,
management and leasing of the Premises, and use reasonable efforts to secure
from tenants and parties to reciprocal easement agreements, and furnish to
Owner, any certificates of insurance and renewals thereof required to be
furnished by the terms of their leases or agreements. All such executed copies
of leases shall be maintained in Agent's main office, with additional lease
copies together with insurance certificates also maintained at the Agent's
office at the relevant property, if any such office exists.
(t) Inspect the Premises periodically and submit reports of findings
and recommendations to Owner which shall include, without limitation,
recommendations as to required repairs, replacements or maintenance. Agent
shall keep and submit annual written reports of all material alterations made to
the Premises, no matter by whom effected.
(u) Erect barriers or chains for the purpose of blocking access to
the common areas of and buildings included in the Premises as local law may
require, or, as directed in writing by owner, in order to avoid the dedication
of the same for public use and furnish appropriate evidence of same to Owner.
Agent shall give any advance notice of the erection of such barriers or chains
which may be required under reciprocal easement agreements or ground leases with
department stores.
(v) Use its reasonable efforts to obtain from tenants of the Premises
and department stores which are parties to reciprocal easement agreements or
ground leases waivers of their insurers' rights of subrogation in respect to
policies of fire and extended coverage and other property damage insurance
carried by them in favor of Owner, Agent and any department store or tenant for
which Owner is obligated to attempt to obtain such waivers under a ground lease,
reciprocal easement agreement or space lease.
(w) Assist owner in preparing any statements required to be submitted
by Owner under the terms of mortgages, ground leases, reciprocal easement
agreements and leases.
(x) Perform its duties in renting, managing, operating and
maintaining the Premises applying prudent and reasonable business practices
which are consistent with those followed in respect of the Premises prior to the
date of this Agreement, using reasonable care and diligence in carrying out
properly and efficiently its responsibilities under this Agreement. Agent shall
maintain those portions of the common areas of the Premises which are Owners'
obligation to maintain in a clean, safe and attractive condition, use reasonable
efforts to enforce the provisions of applicable leases, ground leases and
reciprocal easement agreements so as to cause tenants and department stores to
maintain their premises and common areas, if any, in similar condition, arrange
for necessary security for the Premises and their common areas and arrange for
cleaning and snow removal for the parking areas and roadways of the Premises.
Agent shall recommend to Owner from time to time such procedures with respect to
the Premises as Agent may deem advisable for the more efficient and economic
management and operation thereof.
(y) Where leasing guidelines or any Legal Requirement (as defined in
paragraph 2.1 (m) hereof) now or hereafter in effect require that tenant
security deposits be maintained, a separate interest-bearing account for such
security deposits (the "Security Deposit Account") shall be opened by Agent at a
bank approved by Owner. The Security Deposit Account shall be maintained in the
name of Agent in accordance with the relevant lease or Legal Requirement, as the
case may be, and shall be used only for tenant security deposits. The bank
shall be informed that the funds in the Security Deposit Account are held in
trust for Owner. Agent shall have the authority to remit to tenants any
interest to which they are entitled on their security deposit, in accordance
with their leases or any Legal Requirement, but Agent shall obtain the written
approval of Owner prior to the return of such deposits or any other security
(including letters of credit) to any tenant when the amount, in any single
instance, exceed $50,000.00.
Owner recognizes and understands that Environmental Service (as hereinafter
defined) are not actions or services that Agent is required to perform under
this Agreement and Owner further recognizes and understands that Agent is not a
consultant or a contractor that performs Environmental Services. Upon Owner's
request, Agent agrees to obtain and coordinate for and on behalf of Owner, such
Environmental Services as Owner may request or require. Owner shall reimburse
Agent for its administrative costs in connection with the coordination of such
Environmental Services as provided in Exhibit A, paragraph 11 of the Agreement.
In addition, Owner shall reimburse Agent for the costs of outside professionals
retained to perform Environmental Services. Environmental Services is defined
to be those acts or actions involving the presence use, exposure, removal,
restoration, or introduction of Hazardous materials (as hereinafter defined) and
the investigation of and compliance with any and all applicable rules, laws, or
regulations of local, state or federal authorities which apply or regulate
Hazardous Materials. Hazardous Materials means any hazardous, radioactive, or
toxic substance, material or waste listed in the United States Department of
Transportation Hazardous Materials Table; or by the Environmental Protection
Agency as hazardous substances; or such substances, materials and waste which
are or become regulated under applicable local, state or federal law including
materials which are petroleum products, asbestos, polychlorinated biphenyls, or
designated as hazardous substances under the Clean Water Act; or defined
hazardous waste under the Resource Conservation and Recovery Act; or defined as
hazardous substances under the Comprehensive Environmental Response,
Compensation and Inability Act.
2.2 Agent agrees, on behalf of Owner and at Owner's expense, to procure
and continue to maintain in force a comprehensive general liability insurance
policy or polices with respect to the Premises. Such policy or policies shall
provide for coverage in the amount and with such insurers as are required of
Owner under the Loan Documents (as defined in that certain Credit Agreement
dated as of November 17,1997, by and between Owner, Agent, and other borrowers,
signatories thereto, as Borrowers, and General Electric Capital Corporation, as
Lender, as may be amended, changed or modified from time to time, "Loan
Documents"), but in any event, not less than ten million dollars
($10,000,000.00) combined single limit coverage per occurrence for bodily injury
and property damage. The polices shall include coverage for contractual
liabilities assumed with respect to the Premises, including, but not limited to,
the obligations created by the indemnity set forth in Section 3.3 hereof as used
in this Agreement.
Further, at all times during the term of this Agreement, Agent shall keep
or cause to be kept insured, at Owner's cost and expense, all buildings and
improvements on the Premises against loss or damage by fire, windstorm, hail,
explosion, damage from aircraft and vehicles and smoke damage, and such other
risks as are from time to time included in "extended coverage" endorsements in
an amount sufficient to replace said improvements.
All insurance provided for in this Section 2.2 shall be effected under
valid and enforceable polices issued by insurers of recognized responsibility
and shall provide respectively, for the waiver of all rights of subrogation by
Owner or parties claiming through Owner against Agent and its agents and
employees. Owner and Agent hereby waive all rights of recovery as against the
other party hereto arising from loss or damage caused by the perils enumerated
in this Section 2.2 and agree that any policies obtained with respect to such
perils shall be endorsed accordingly, if such endorsements are available. Any
insurance required to be maintained hereunder may be taken out under a blanket
insurance policy or polices covering other properties of the insured. Any
policy required by this Section 2.2 shall provide that such policy shall not be
canceled without at least thirty (30) days' prior notice to Owner and Agent and,
in any event, shall provide that all parties insured thereby shall receive
notice no less than fifteen (15) days prior to the expiration dates of the
expiring policies.
2.3 Agent agrees to render monthly reports relating to the management and
operation of the Premises for the preceding calendar month on or before the
twenty-fifth (25th) day of each month in form as Owner and Agent will mutually
agree. Agent agrees that Owner shall have the right to require the transfer to
Owner at any time of any funds in the Bank Account considered by Owner to be in
excess of an amount reasonably required by Agent for disbursement in connection
with the Premises. Agent agrees to keep records with respect to the management
and operation of the Premises as prescribed by owner, and to retain those
records for periods specified by Owner. Owner shall have the right to inspect
such records and audit the reports required by this Section during business
hours for the life of this Agreement and thereafter during the period such
records are to be retained pursuant to this Section. In addition, Agent agrees
that such records may be examined from time to time during the period aforesaid
by any of the supervisory or regulatory authorities having jurisdiction over
Owner.
2.4 Agent shall ensure such control over accounting and financial
transactions as is reasonably required to protect Owner's assets from loss or
diminution due to gross negligence or willful misconduct on the part of Agent's
associates or employees. Losses caused by gross negligence or willful
misconduct shall be borne by Agent.
2.5 Agent shall establish and prepare, in the form authorized by Owner,
with such additional changes as may be reasonably requested by Owner, operating
and capital improvement budgets for the promotion, operation, repair and
maintenance of the Premises for each calendar year. Preliminary and final
budgets will be due 45 and 30 days, respectively, prior to commencement of the
calendar year to which they relate. Such budgets shall be prepared on both an
accrual basis showing a month-by-month projection of income and expenses and
capital expenditures. At least 30 days prior to the end of each year, Agent
shall meet with Owner to review such budgets for the subsequent year. Upon
receiving Owner's approval, Agent shall use its best efforts to comply with such
final budgets.
(a) Agent shall meet with Owner on a regular basis, not less
frequently than semi-annually and otherwise upon reasonable call by Owner, to
review the operations of the Premises, to review and, if appropriate, revise in
light of actual experience the annual operating and capital improvement budgets
theretofore approved by Owner and to consider other matters which Owner may
raise.
(b) Upon approval of the operating budget by Owner, and unless and
until revoked or revised by Owner, Agent shall have the right, without further
consent or approval by Owner to incur and pay the operating expenses set forth
in the approved operating budget, subject to paragraph 2.1(g) above.
(c) At the request of Owner from time to time Agent shall prepare and
submit to Owner (i) operating projections for the Premises for the ensuing five
(5) years, such projections to be made on a year-by-year basis and to be based
on Agent's best judgment as to the future, taking into consideration known
circumstances and circumstances Agent can reasonably anticipate are likely to
occur, and (ii) a schedule in reasonable detail of capital improvements, repairs
and replacements not provided for in the current capital improvement budget
which Agent reasonably anticipates will be required or should be made in the
foreseeable future, with Agent's opinion as to the relative priority and cost of
each thereof.
2.6 Agent shall also participate in Owner's property review programs to
the extent requested by Owner. Such review shall include asset, investment,
financial and strategy profiles in form satisfactory to Owner. Agent shall
respond, within 10 days, to Owner's management evaluation reports concerning
actions to be taken by Agent to correct or modify its management standards for
the operations, leasing or financial services provided for the Premises. If
Owner shall request that Agent's home office or regional office personnel travel
to the Premises to participate in Owner's property review programs or for any
other reason (unless such reason is for normal supervision), the reasonable cost
of meals, travel and hotel accommodations expenses incurred by such home office
personnel in connection with such travel shall be reimbursed to Agent by Owner.
Agent shall, however, bear the full cost and expenses incurred by its home
office or regional office personnel in connection with their travel to the
Premises to the extent such travel is required by the Agent for the normal
supervision of the management and leasing of the Premises.
2.7 Agent agrees to use its best efforts to have all space within the
Premises rented to desirable tenants, satisfactory to Owner, considering the
nature of the Premises, and in connection therewith:
(a) To negotiate, as the exclusive agent of Owner, all leases and
renewals of leases at the appropriate time, it being understood that all
inquiries to Owner with respect to leasing any portion of the Premises shall be
referred to Agent. Except for license agreements for temporary tenants, all
leases and renewals for lease terms in excess of one (1) year must be prepared
in accordance with Exhibit C by Agent and in accordance with the annual approved
budget and be submitted to Owner's representative for execution by Owner. Agent
is authorized to negotiate and execute license agreements prepared in accordance
with Exhibit C for temporary tenants and/or short term promotional activities.
If Agent shall receive a prospective tenant reference from a property other than
the Premises, which Agent or any subsidiary or affiliate manages, Agent shall
promptly declare its potential conflict of interest to Owner and Owner shall
determine if negotiations with such prospective tenant shall be undertaken by
Agent, Owner, or a third party approved by Owner. References of prospective
tenants, as well as their varying use requirements, shall be investigated
carefully by Agent. Agent also is authorized to negotiate and execute on
Owner's behalf lease amendments which: (i) change a Tenant's commencement date
by sixty (60) days or less (or for such longer period as is approved by Owner);
(ii) change a Tenant's permitted use by allowing the sale of such additional
items as are reasonably related to the Tenant's primary and principal use,
provided Agent has no reason to know of any lease at the center prohibiting such
use; (iii) change a tenant's marketing charge or promotional charge or
advertising obligation.
Owner acknowledges and understands that Agent manages properties for third
parties. Owner further acknowledges and understands that Agent routinely and
customarily negotiates tenant leases from multiple locations involving two or
more properties (one or more of which may be the Premises and one or more of
which may be properties owned by Agent or by others). Agent conducts such
multiple location negotiations in good faith for the benefit and interests of
Owner and other property owners, including Agent. Agent shall be entitled to
assume that such leasing practices are approved and acceptable to Owner, unless
and until Owner specifically disapproves the practice and so notifies Agent.
(b) With Owner's prior approval, to advertise the Premises or
portions thereat for rent, by means of periodicals, signs, plans, brochures and
other means appropriate to the Premises. Owner acknowledges and agrees that the
Premises may be included in brochures or other advertising media of Agent, which
may include other properties being offered for lease by Agent.
(c) In no event shall Agent engage or utilize the services of an
outside broker in connection with any lease without Owner's prior written
consent. In any case in which Owner requests or gives such consent, Agent shall
cause such broker to enter into a written agreement with Owner, on terms
reasonably satisfactory to Owner, with respect to such broker's commission and
Owner shall be responsible for the payment of such commission pursuant to the
terms of said agreement.
(d) Agent will, in each instance, negotiate for the inclusion in all
leases entered into by Owner of a provision to the effect that recourse on such
obligation shall be had only against the property to which such obligation
relates and no recourse shall be sought against Owner or any other person
holding, directly or indirectly, a beneficial interest in the property.
(e) Agent will, upon the request of Owner, undertake to find buyers
for the sale of any of the Owner's outparcels, peripheral land or such other
real estate situate upon the Premises, ("Sale Property"), and, in addition to
any other compensation provided to be paid to Agent under this Agreement, Owner
agrees to pay to Agent as compensation for its services hereunder, a fee at the
rate specified in Paragraph 7(iii) of Exhibit "A", attached hereto. In
performing its duties hereunder, Agent shall perform the following:
(i) Submit to Owner for approval, a pricing schedule on the Sale
Property;
(ii) Upon request, submit to Owner for approval, contract form(s)
to be used in the sale of the Sale Property;
(iii) Upon request, furnish Owner with a written report
regarding its progress in such sale activities;
(iv) Negotiate on behalf of Owner, the sale of the subject Sale
Property; and
(v) Provide legal services, limited to:
(a) Preparation of the Purchase and Sale Agreement;
(b) Deed and Easement(s) preparation;
(c) Preparation and submittal to Owner of the Seller's
closing statement;
(d) Preparation of closing instructions;
(e) Coordination of title work;
(f) Upon approval of Owner, retain local counsel,
whose fees will be reimbursed by Owner; and
(g) Submit to Owner, for final execution, all
documents necessary to consummate the
transaction.
Agent shall pursue these duties and obligations with diligence and in the
best interests of Owner.
2.8 Agent agrees, for itself and all persons retained or employed by Agent
in performing its services, to hold in confidence and not to use or disclose to
others any confidential or proprietary information of Owner heretofore or
hereafter disclosed to Agent ("Confidential Information"), including, but not
limited to, any data, information plans, programs, processes, costs, operations
or the names of any tenants which may come within the knowledge of Agent in the
performance of, or as a result of, its services, except where required by
judicial or administrative order, or where Owner specifically gives Agent
written authorization to disclose any of the foregoing to others or such
disclosure as is required in the direct performance of Agent's duties hereunder.
If Agent is required by a judicial or administrative order to disclose any
Confidential Information, Agent will promptly notify Owner thereof, consult with
Owner on the advisability of taking steps to resist or narrow such request and
cooperate with Owner in any attempt it may make to obtain an order or other
assurance that confidential treatment will be accorded to the Confidential
Information disclosed.
2.9 If at any time there shall be insufficient funds available to Agent
from collections to pay any obligations of Owner required to be paid under this
Agreement, Agent shall promptly notify Owner and Agent shall not be obligated to
pay such obligations unless Owner furnishes Agent with funds therefor.
2.10 Agent assumes no responsibility under this Agreement other than to
render the services called for hereunder in good faith, and Owner shall make no
claim against Agent on account of any alleged errors of judgment made in good
faith in connection with Agent's obligations hereunder and with the operation of
the Premises. Agent shall not be liable to Owner or others except by reason of
acts constituting willful misfeasance or gross negligence on the part of Agent,
and Owner agrees to indemnify, defend and hold harmless Agent and its partners
(and the shareholders, trustees and officers thereof)and employees from and
against all claims, actions, causes of action, costs and expenses (including,
but not limited to, reasonable attorney's fees) directly or indirectly arising
from the claims of any third party, except only those claims where liability
arises from acts constituting willful misfeasance or gross negligence on the
part of Agent.
ARTICLE III
OWNER'S AGREEMENTS
3.1 Owner, at its option, may pay directly all taxes, special assessments,
ground rents, insurance premiums and mortgage payments. If Owner makes such
election, Agent shall advise Owner of the due dates of such taxes assessments,
insurance premiums and mortgage payments.
3.2 Owner shall bear the cost of all premiums relating to insurance
procured by Agent for Owner pursuant to Section 2.2 hereof. Owner shall look
solely to such insurance for indemnity against any loss or damage to the
Premises and shall obtain waivers of subrogation against the Agent under such
policies if available at no additional cost to Owner.
3.3 Owner agrees to indemnify and save harmless Agent and its partners
(and the shareholders, trustees and officers thereof) and employees from and
against all claims, losses and liabilities resulting from: (i) damage to
property or injury to, or death of, persons from any cause whatsoever when Agent
is carrying out the provisions of this Agreement or acting under the direction
of Owner in or about the Premises; (ii) claims for defamation and false arrest
when Agent is carrying out the provisions of this Agreement or acting under the
direction of Owner; and (iii) claims occasioned by or in connection with or
arising out of acts or omissions, other than criminal acts, of the Agent when
Agent is carrying out the provisions of this Agreement or acting under the
direction of Owner (except in cases of Agent's willful misconduct or gross
negligence), and to defend or cause to be defended, at no expense to Agent or
such persons, any claim, action or proceeding brought against Agent or such
persons or Agent and Owner, jointly or severally, arising out of the foregoing,
and to hold Agent and such persons harmless from any judgment, loss or
settlement on account thereof.
Notwithstanding the foregoing, Owner shall not be responsible for
indemnifying or defending Agent or such persons in respect of any matter, claim
or liability in respect of which Agent is obligated to indemnify Owner as
provided in the following sentence. Agent agrees to indemnify and save harmless
Owner from and against all claims, losses and liabilities resulting from injury
to, or death of, persons in or about the Premises or for deformation and false
arrest in each case caused in whole or in part by the willful misfeasance or
gross negligence of Agent, and to defend, at no expense to Owner, any claim,
action or proceeding brought against Owner or Owner and Agent, jointly or
severally, arising out of the foregoing, and to hold Owner harmless from any
judgments, loss or settlement on account thereof.
Notwithstanding the foregoing, Agent shall not be responsible for
indemnifying or defending Owner in respect of any matter, claim or liability
which is covered by any public liability insurance policies carried by Owner and
under which Agent is named as an additional insured. The indemnification
obligations of Owner and Agent under this Section 3.3 shall in each case be
conditioned upon (a) prompt notice from the other party after such party learns
of any claim or basis therefor which is covered by such indemnity, (b) such
party's not taking any steps which would bar Owner or Agent, as the case may be,
from obtaining recovery under applicable insurance policies or would prejudice
the defense of the claim in question, and (c) such party's taking of all
necessary steps which if not taken would result in Owner or Agent, as the case
may be, being barred from obtaining recovery under applicable insurance policies
or would prejudice the defense of the claim in question. The provisions of this
Section 3.3 shall survive the expiration or termination of this Agreement.
3.4 Owner shall provide such office space on the Premises as may be
necessary for Agent to properly perform its functions under this Agreement.
Agent shall not be required to pay for utilities, telephone service or rent for
the office area on the Premises occupied by Agent. Agent shall have the right
to use the fixtures, furniture, furnishings and equipment, if any, which are the
property of Owner in said office space. Owner shall also provide space on the
Premises for use as community rooms and information and service centers where
the use of such space is determined by Owner to be in the best interest of the
Premises. All income derived from the utilization and/or operation of such
community rooms and/or information or service centers shall belong to the Owner
and all expenses relating thereto shall be borne by Owner.
3.5 Except as otherwise provided in this Agreement, everything done by
Agent in the performance of its obligations under this Agreement and all
expenses incurred pursuant hereto shall be for and on behalf of Owner and for
its account. Except as otherwise provided herein, all debts and liabilities
incurred to third parties in the ordinary course of business of managing the
Premises as provided herein are and shall be obligations of Owner, and Agent
shall not be liable for any such obligations by reason of its management,
supervision or operation of the Premises for Owner.
ARTICLE IV
COMPENSATION
4.1 In addition to any other compensation provided to be paid to Agent
under this Agreement, Owner agrees to pay to Agent as compensation for its
management services hereunder, a fee at the rate specified in paragraph 5 of
Exhibit A attached hereto. Said fee shall be payable monthly no later than the
twenty-fifth (25th) day of the following month, and shall be based on the
following components of income from the preceding calendar month determined in
accordance with GAAP. It is understood that the management fee shall be
calculated upon the following items: (i) minimum rents from all permanent
tenants (anchor, mall shops, ground leases and all other tenants); (ii) Lease
buyout income; (iii) Percentage rents in lieu of minimum rents; (iv) Percentage
rents; (v) all cost recovery income (CAM, taxes, food court, security, other);
(vi) income from all temporary tenants (initial term of one year or less); (vii)
income from all promotional activity; (viii) miscellaneous mall income such as
payphone commissions, stroller rentals, etc. and (ix) bad debts expense related
to any of the above revenue items. The following items shall not be subject to
management fees: (i) business interruption insurance income; (ii) recoveries
from insurance companies for casualty and other losses; (iii) payments from
tenants for leasehold improvements and related services provided by Agent; (iv)
payments from tenants to Merchants' Associations or to Marketing Funds; (v)
tenant security deposits; (vi) straight line rental income or losses, and (vii)
operating covenant and amortization (classified as a reduction of minimum rent).
Agent shall withdraw said fee from the operating account for the Premises and
shall account for same as provided for in Section 2.3 hereof.
4.2 The following expenses or costs incurred by or on behalf of Agent in
connection with the management and leasing of the Premises shall be the sole
cost and expense of Agent and shall not be reimbursable by Owner and Agent shall
indemnify Owner for such expenses and costs:
(a) cost of gross salary and wages, payroll taxes, insurance,
worker's compensation, pension benefits and any other benefits of Agent's
employees, except that Owner will reimburse Agent for all costs of employees who
provide either full or part time services on-site at any of the Premises.
Within the category of "on-site" personnel, Agent may include the pro-rata costs
for regional personnel performing required services at the Premises on a regular
basis (but which personnel may share time working at other properties managed by
Agent); provided, however, that the costs for any employees who are based at or
work from Agent's home office shall not be included, and provided further that
the pro-rata costs for any such regional personnel are included and identified
as such within the annual operating budget as approved by Owner.
(b) general accounting and reporting services, as such services are
considered to be within the reasonable scope of Agent's responsibility to Owner;
(c) costs of forms, stationery, ledgers, supplies, equipment and
other "general overhead" items used in Agent's home office or regional offices;
(d) cost or pro rata cost of telephone and general office expenses
incurred in the Premises by Agent for the operation and management of properties
not owned by Owner;
(e) cost of all bonuses, incentive compensation, profit sharing, or
any pay advances by Agent to Agent's employees, except such costs pertaining to
employees employed by Agent in accordance with Paragraph 2.1 (b) hereof;
(f) cost attributable to losses arising from criminal acts, gross
negligence or fraud on the part of Agent or Agent's associates or employees;
(g) cost for meals, travel and hotel accommodations for Agent's home
office or regional office personnel who travel to and from the Premises, except
as provided in Section 2.6;
(h) cost of automobile purchase and/or rental, except if furnished or
approved by Owner;
(i) except as otherwise provided in Exhibit A attached hereto,
expenses incurred in connection with the leasing of the Premises, it is being
understood and agreed, however, that Agent shall be reimbursed for advertising
expenses incurred in connection with the leasing of the Premises;
(j) cost of liability or other insurance carried by Agent, except
costs incurred by Agent in satisfaction of its obligations under Section 2.2
hereof; and
(k) cost of bonds purchased pursuant to Section 2.1(i) of this
Agreement.
ARTICLE V
DURATION, TERMINATION, DEFAULT
5.1 This Agreement shall become effective on the date hereof.
5.2 Subject to earlier termination as hereinafter provided, this Agreement
shall have an initial term ending on January 31, 1998. Thereafter, this
Agreement shall continue year-to-year on the same terms and conditions as herein
contained subject to being terminated by either Agent or Owner upon no less than
six (6) months written notice. The Agent may not terminate this Agreement
except in the case of non-payment of management fees for a period of ninety (90)
days after notice of such non-payment to Owner and Lender. In addition, Lender
shall have the right to terminate (or direct Owner to terminate, as applicable)
this Agreement: (i) upon the insolvency of Agent, (ii) the occurrence of an
Event of Default (as defined in the Loan Documents), (iii) the failure of the
Premises to meet the Net Operating Income requirements (as defined in the Loan
Documents), or (iv) pursuant to the provisions of the Manager's Consent and
Subordination of Management Agreement.
5.3 It shall be an Event of Default under this Agreement on the part of
Agent if Agent shall default in any material respect in performing any of its
obligations under this Agreement and such default shall not be cured within 30
days after written notice thereof is given by Owner to Agent (or, if the default
in question is curable but is of such nature that it cannot reasonably be
completely cured within such 30-day period, if Agent does not promptly after
receiving such notice commence to cure such default and thereafter proceed with
reasonable diligence to complete the curing thereof within 180 days after notice
is given by Owner to Agent). If an Event of Default by Agent shall occur, Owner
shall have the right to terminate this Agreement by written notice given to
Agent, and upon the giving of such notice this Agreement and the term hereof
shall terminate without any obligation on the part of Owner to make any payments
to Agent hereunder except as hereinafter provided.
5.4 If at any time during the term of this Agreement any involuntary
petition in bankruptcy or similar proceeding shall be filed against Agent
seeking its reorganization, liquidation or appointment of a receiver, trustee or
liquidator for it or for all or substantially all of its assets, and such
petition shall not be dismissed within 90 days after the filing thereof, or if
Agent shall:
(a) apply for or consent in writing to the appointment of a receiver,
trustee or liquidator of all or substantially all of its assets;
(b) file a voluntary petition in bankruptcy or admit in writing its
inability to pay its debts as they become due;
(c) make a general assignment for the benefit of creditors;
(d) file a petition or an answer seeking reorganization or an
arrangement with creditors or take advantage of any insolvency law; or
(e) file an answer admitting the material allegations of a petition
filed against it in any bankruptcy, reorganization or insolvency proceedings;
then upon the occurrence of any such event, Owner, at its option, may terminate
this Agreement by written notice given to Agent, and upon the giving of such
notice this Agreement and the term hereof shall terminate without any obligation
on the part of Owner to make any payments to Agent hereunder except as
hereinafter provided.
5.5 Owner shall have the additional right to terminate this Agreement on
at least 10 days' written notice to Agent, if Agent without Owner's prior
written consent shall assign or attempt to assign its rights or obligations
under this Agreement or subcontract (except for normal service agreements or as
otherwise specified in this Agreement) any of the services to be performed by
Agent. Owner shall also have the right to terminate this Agreement as to any
property included within the Premises on at least 10 days' written notice to
Agent if (a) such property shall be damaged or destroyed to the extent of 25% or
more by fire or other casualty and Owner elects not to restore or repair such
property or (b) there shall be a condemnation or deed in lieu thereof of 25% or
more of such property.
5.6 Agent acknowledges and agrees that Owner shall have the right to
subordinate and/or assign this agreement in connection with the Loan Documents.
Agent further agrees to execute such further instruments as Owner or Lender
deems necessary to effectuate such subordination, provided that in the event
Lender becomes entitled to possession of the Premises, the Lender shall be
entitled, at its option, to retain Agent to manage the Premises, in which case
the Agent shall be entitled to the compensation set forth in this Agreement
during all periods in which Agent is providing services to the Premises for the
Lender. Moreover, notwithstanding anything to the contrary contained herein,
for so long as any amounts remain outstanding under the Loan Documents, (i) this
Agreement and all fees payable by Owner hereunder shall be subject to and
subordinate to any mortgage liens on the Premises established by the Loan
Documents and (ii) Agent shall comply with any and all applicable provisions of
the Loan Documents and in the event there is a conflict between the terms of
this Agreement and the terms of the Loan Documents, the Loan Documents shall
control.
5.7 Upon any termination of this Agreement pursuant to the provisions of
this Article V, Owner shall remain obligated to pay to Agent fees and other
amounts due to Agent hereunder which accrued prior to the effective date of such
termination. Nothing contained in this Section 5.7 shall be deemed to waive,
affect or impair (a) Owner's rights to seek recourse against Agent for damages
or other relief in the event of the termination of this Agreement by Owner
pursuant to Section 5.3, 5.4 or 5.5 hereof, and (b) Agent's right to seek
recourse against Owner for damages or other relief in the event of the
termination of this Agreement by Agent pursuant to Section 5.2 hereof.
5.8 Upon the expiration or earlier termination of this Agreement, Agent
shall forthwith surrender and deliver to Owner any space in the Premises
occupied by Agent and shall make delivery to Owner or to Owner's designee or
agent, at Agent's home or regional offices or at its offices at the Premises, of
the following:
(a) a final accounting, reflecting the balance of income from and
expenses of the Premises as at the date of expiration or termination of this
Agreement;
(b) any funds of Owner or tenant security or advance rent deposits,
or both, held by agent with respect to the Premises; and
(c) all Confidential Information (in whatever medium stored) and all
other records, contracts, leases, ground leases, reciprocal easement agreements,
receipts for deposits, unpaid bills, lease summaries, canceled checks, bank
statements, paid bills and all other records, papers and documents and any
microfilm and/or computer disk of any of the foregoing which relate to the
Premises and the operation, maintenance, management and leasing thereof; all
such data, information and documents being at all times the property of Owner.
In addition, Agent shall furnish all such information and take all such
action as Owner shall reasonably require to effectuate an orderly and systematic
termination of Agent's duties and activities under this Agreement.
5.9 This Agreement shall terminate at the election of Owner as to any of
the properties set forth in Exhibit A upon thirty (30) days written notice to
the Agent if such properties are sold by Owner to a non-affiliated third party
purchaser or (unless the Lender shall otherwise notify the Agent in writing)
automatically if such properties were acquired on foreclosure of a mortgage
encumbering all or a portion of the Premises. In the event such properties are
sold by Owner to a non-affiliated third party purchaser and this Agreement is
not thereby terminated by Owner, the Agent shall have the right to terminate
this Agreement as to such properties upon sixty (60) days prior written notice
which notice must be given within ninety (90) days after the date of such sale
is consummated. If such properties are sold, Agent will not be entitled to
sales commission unless the Agent has been retained by Owner pursuant to a
separate commission arrangement. This Agreement shall remain in full force and
effect as to all properties not terminated pursuant to this Section 5.9.
5.10 The provisions of this Article V shall survive the expiration or
termination of this Agreement.
ARTICLE VI
ASSIGNMENT
6.1 Agent, except for a transfer to a "Permissible Transferee", shall not
assign its rights or obligations under this Agreement, either directly or by a
transfer of shares of beneficial interest or voting control either voluntarily
or by operation of law. Any change other than to a "Permissible Transferee"
shall constitute a breach of this Agreement by Agent and Owner may terminate
this Agreement in accordance with Section 5.5 A "Permissible Transferee" shall
mean any corporation, partnership, trust or other entity, more than 50% of the
outstanding stock of which, or more than 50% interest in which, is owned or
controlled by Agent.
6.2 In the event of a sale or conveyance of any of the Premises, Owner
shall have the right to cancel or assign this Agreement and its rights and
obligations hereunder to any person or entity to whom or which Owner sells or
conveys such property or properties. Upon such assignment, Owner shall be
relieved of its obligations under this Agreement with respect to such property
or properties that accrue from and after the date of such assignment, provided
that the assignee shall assume the obligations of Owner under this Agreement and
shall agree to perform and be bound by all of the terms and provisions hereof,
effective from and after the date of such assignment and an executed copy of
such assumption agreement shall be delivered to Agent. Agent shall not be
entitled to a "termination fee" in connection with an assignment or cancellation
as set forth in this Section 6.2, but otherwise shall be entitled to collect
from Owner such fees and expenses, including termination and/or relocation
expenses of Agent's full-time employees, if any, as Agent has earned pursuant to
this Agreement prior to the date of such assignment or cancellation.
ARTICLE VII
MISCELLANEOUS
7.1 Owner's representative ("Owner's Representative"), whose name and
address is set forth in paragraph 2 of Exhibit A attached hereto, shall be the
duly authorized representative of Owner for the purpose of this Agreement. Any
statement, notice, recommendation, request, demand, consent or approval under
this Agreement shall be in writing and shall be deemed given by Owner when made
or given by Owner's Representative or any officer of Owner and delivered
personally to an officer of Agent or mailed, addressed to Agent, at his address
first above set forth. Either party may, by notice to the other, designate a
different address for the receipt of the aforementioned communications and Owner
may, by notice to Agent, from time to time, designate a different Owner's
Representative to act as such. All communications mailed by one party to
another shall be sent by first class mail, postage prepaid or Express Mail
Service, or other commercial overnight delivery service, except that notices of
default shall be sent by registered or certified mail, return receipt requested,
postage prepaid, Express Mail Service or other commercial overnight delivery
service with receipt acknowledged in writing. Communications so mailed shall be
deemed given or served on the date mailed. Notwithstanding the foregoing, any
notices, requests, consents, approvals and other communications, other than
notices of default or approvals of annual budgets, and other communications,
approvals or agreements which are required by the express terms of other
provisions of this Agreement to be in writing, may be given by telegram,
telephonic communication or orally in person. Agent and Owner shall furnish to
the other the names and telephone numbers of one or more persons who can be
reached at any time during the term of this Agreement in the event of an
emergency.
7.2 Agent shall, at its own expense, qualify to do business and obtain and
maintain such licenses as may be required for the performance by Agent of its
services.
7.3 Each provision of this Agreement is intended to be severable. If any
term or provision hereof shall be determined by a court of competent
jurisdiction to be illegal or invalid for any reason whatsoever, such provision
shall be severed from this Agreement and shall not affect the validity of the
remainder of this Agreement.
7.4 In the event either of the parties hereto shall institute any action
or proceeding against the other party relating to this Agreement, the
unsuccessful party in such action or proceeding shall reimburse the successful
party for its disbursements incurred in connection therewith and for its
reasonable attorney's fees as fixed by the court.
7.5 No consent or waiver, express or implied, by either party hereto or of
any breach or default by the other party in the performance by the other of its
obligations hereunder shall be valid unless in writing, and no such consent or
waiver shall be deemed or construed to be a consent or waiver to or of any other
breach or default in the performance by such other party of the same or any
other obligations of such party hereunder. Failure on the part of either party
to complain of any act or failure to act of the other party or to declare the
other party in default, irrespective of how long such failure continues, shall
not constitute a waiver by such party of its rights hereunder. The granting of
any consent or approval in any one instance by or on behalf of Owner shall not
be construed to waive or limit the need for such consent in any other or
subsequent instance.
7.6 The venue of any action or proceeding brought by either party against
the other arising out of this Agreement shall be in the state or federal courts
of the Commonwealth of Pennsylvania.
7.7 This Agreement may not be changed or modified except by an agreement
in writing executed by each of the parties hereto and consented to by the
Lender. This Agreement constitutes all of the understandings and agreements
between the parties in connection with the agency herein created.
7.8 This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their permitted successors and assigns, but shall not inure
to the benefit of, or be enforceable by, any other person or entity.
7.9 Nothing contained in this Agreement shall be construed as making Owner
and gent partners or joint ventures or as making either of such parties liable
for the debts or obligations of the other, except as in this Agreement is
expressly provided.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
CROWN AMERICAN CROSSROADS, LLC
(Owner)
BY: CROWN AMERICAN PROPERTIES,
L.P., ITS SOLE MEMBER,
BY: CROWN AMERICAN REALTY
TRUST,ITS SOLE GENERAL
PARTNER
By: /s/ Ronald P. Rusinak
Ronald P. Rusinak
Vice President
CROWN AMERICAN PROPERTIES, L.P.
(Agent)
BY: CROWN AMERICAN REALTY TRUST,
as sole general partner
By: /s/ Ronald P. Rusinak
Name: Ronald P. Rusinak
Title: Vice President
EXHIBIT A
1. Premises (1.1):
a. Crossroads Mall
Beckley, West Virginia.
2. Name and Address of Owner's Representative (7.1):
Frank J. Pasquerilla
Pasquerilla Plaza
Johnstown, PA 15907.
3. Limit of amount authorized for non-emergency purchases and repairs (2.1(a)
and (c)):
$50,000.00.
4. Name of Banks (2.1(g)):
PNC Bank, N.A.
5. Management Fees (4.1):
Owner agrees to pay Agent as compensation for its management services
hereunder an amount equal to 5% of the amounts set forth in Section 4.1.
Such management fee shall be payable monthly based on the income earned for
the categories described in Section 4.1, computed in accordance with GAAP.
Agent shall be entitled to receive the management fee on the pro rata
portion of percentage rents received by Owner after the termination of this
Agreement but applicable to time periods prior to the termination of this
Agreement based upon the actual number of days lapsed divided by 365.
6. Legal and Tenant Coordination Expenses:
Owner agrees to pay Agent, to defray in-house legal expenses and tenant
coordination expenses (a) with respect to each new lease and each lease
renewal of mall shops and free-standing buildings (other than a lease
renewal or extension resulting from the exercise of an option contained in
such lease), an amount equal to the Agent's actual costs of providing such
services, limited however to the annual amount which is capitalized as
tenant allowance costs under the Owner's customary accounting practices as
Agent and Owner shall mutually agree and as recorded in the Owner's audited
annual financial statements. Such fees shall be payable monthly in arrears
using estimated fees per square foot, based on the estimated annual fee;
the monthly estimated fees shall be adjusted to a final actual amount
within 90 days after the Owner's fiscal year end. Agent and Owner shall
use their best efforts to estimate the monthly fee per square foot and
shall adjust the amount periodically during the year as mutually agreed
upon.
7. Leasing and Land Sale Fees:
(i) Leasing Commission:
Agent shall be entitled to commissions for leases secured, in addition
to other fees and compensation provided in this Agreement, equal to the
Agent's actual costs of providing leasing services related to permanent
leases (those with an initial term in excess of one year), limited however
to the aggregate amount which is capitalized as lease acquisition costs
under the Owner's customary accounting practices as Agent and Owner shall
mutually agree and as recorded in the Owner's audited annual financial
statements. Such fees shall be payable monthly in arrears using estimated
fees per square foot, based on the estimated annual fee; the monthly
estimated fees shall be adjusted to a final actual amount within 90 days
after the Owner's fiscal year end. Agent and Owner shall use their best
efforts to estimate the monthly fee per square foot and shall adjust the
amount periodically during the year as mutually agreed upon.
(ii) Brokerage Commissions:
Owner and Agent acknowledge that some leasing and land sale
transactions will involve the use of an independent real estate broker or
real estate sales agent, who will be paid a commission for introducing and
bringing a prospective tenant or purchaser to the Premises. Agent may
utilize brokers in connection with carrying out its leasing and land sale
activities, and shall be reimbursed by Owner for the cost of those
Brokerage Commissions in the following circumstances:
(a) Agent was required to recognize the broker or sales agent as the
representative of the prospective tenant or purchaser and was not
allowed or permitted the opportunity to contact or negotiate with
the tenant or purchaser except through the broker or sales agent,
and this fact was disclosed to Owner.
(b) Agent disclosed to Owner the existence of the broker or sales
agent and the brokerage fee at the time the proposed leasing or
land sale transaction was submitted to Owner for approval.
Except as provided in (a) and (b) above, Agent shall assume the sole cost and
responsibility for broker commissions.
(iii) Land Sale Commission:
For services provided pursuant to Section 2.7(e), Owner shall pay the
Agent a sales commission equal to fifteen percent (15%) of the adjusted
sales price ("Sales Commission"), as compensation for overhead associated
with the services of certain employees of Agent. For purposes of the
foregoing "adjusted sales price" shall mean the gross proceeds payable to
Owner less reasonable and necessary development costs paid by Owner in
connection with the transfer. One-half (1/2) of the Sales Commission shall
be due and payable to Agent at the time a mutually binding Agreement of
Sale with respect to any Sale Property is fully-executed, with the
computation of such amount being based on the gross proceeds payable to
Owner. The balance of the Sales Commission shall be paid to Agent at the
time of closing of any such sale.
8. Excluded Services:
Notwithstanding anything to the contrary contained herein, the parties
acknowledge that it is not within the contemplation of this Agreement or
the fee structure included herein that the Agent perform any services with
respect to the following: any "due diligence" or similar efforts relating
to any financing, refinancing or sale or disposition of the Premises;
zoning compliance of the Premises; performing or supervising (including
tenant room build-outs or remodeling) any extensive alteration or
renovation to the Premises; asbestos and/or other environmental studies and
any related abatement or remediation activities for any tenant premises,
site acquisitions of additional ground for the expansion of the Premises;
reconstruction after casualty or condemnation; leasing, management, or
construction relating to any proposed or implemented expansion of the
Premises or work generally classified as "development" work in connection
with the same; renewals or renegation of leases or other agreements with
department stores if such involves substantial changes from existing
documents (including, without limitation, negotiation of new leases,
renewal leases, operating covenants, renovation provisions, expansion
rights, and like matters); or replacement of department stores tenancies.
Owner shall reimburse Agent for all such services rendered equal to the
Agent's actual costs of providing such services, limited however to the
annual amount which is capitalized as tenant allowance or construction
costs under the Owner's customary accounting practices as Agent and Owner
shall mutually agree and as recorded in the Owner's audited annual
financial statements. Such fees shall be payable monthly in arrears using
estimated based on the estimated annual fee; the monthly estimated fees
shall be adjusted to a final actual amount within 90 days after the Owner's
fiscal year end. Agent and Owner shall use their best efforts to estimate
the monthly fees and shall adjust the amount periodically during the year
as mutually agreed upon.
9. Other Requested Services:
If Owner requests Agent to provide its own personnel for non-routine
services which Agent is not obligated elsewhere in this Agreement to
perform the compensation for which is not provided for hereinabove,
unless Owner and Agent otherwise agree to an acceptable fee for such
services, Owner shall pay Agent an amount equal to two and one-half
times the actual base cost of Agent's departmental personnel, as
computed by Agent, for their time involved in performing such requested
services, plus reimbursement for any out-of-pocket costs incurred
incident to furnishing such requested services. Owner and Agent shall
agree in advance as to the hourly base cost to be applicable for the
specific services to be provided. Such amount or amounts shall be
payable to Agent monthly within ten (10) days after Owner's receipt of
Agent's statement setting for the amount payable to Agent.
EXHIBIT B
INTENTIONALLY OMITTED
EXHIBIT C
Leasing Guidelines
Agent shall use a form or forms of lease; or with respect to temporary
tenants and/or short term promotional activities, a form or forms of license
agreement, which have been prepared and submitted to Owner for Owner's prior
review and approval. Agent will negotiate and make modifications to such forms
as directed by Owner, or as necessary or appropriate with respect to the needs
of the particular transactions, utilizing methods and techniques consistent with
prevailing practices employed in management and leasing of shopping centers.
For all agreements, excepting license agreements for temporary tenants
and/or for short term promotion activities, all essential financial and
business terms and provisions of the lease or agreement, including construction
and improvements of the leasehold, shall be presented for Owner's approval.
Tenant-signed leases presented by Agent for Owner's review and execution shall
be consistent with such terms and conditions previously approved by Owner, or
with such deviations or modifications identified for Owner's review. Execution
of tenant-signed leases that are presented by Agent for Owner's signature will
acknowledge Owner's approval of the lease, its form, its terms and provisions.
No lease or other agreement shall be entered into, modified, canceled or
extended if the consent of any mortgagee or ground lessor is required unless
such consent has been obtained. Agent will notify Owner when consent is
required.
EXHIBIT 10.5 (m)
REAL ESTATE MANAGEMENT AGREEMENT
THIS REAL ESTATE MANAGEMENT AGREEMENT (this "Agreement"), made as of the
25th day of September, 1998, between WASHINGTON CROWN CENTER ASSOCIATES,
L.P., a Pennsylvania limited partnership, having its principal address at
Pasquerilla Plaza, Johnstown, Pennsylvania 15907 ("Owner"), and CROWN AMERICAN
PROPERTIES, L.P., a Delaware limited partnership, having its principal address
at Pasquerilla Plaza, Johnstown, Pennsylvania 15907 ("Agent").
W I T N E S S E T H
In consideration of the mutual covenants herein contained, and intending to
be legally bound, the parties hereto agree as follows:
ARTICLE I
APPOINTMENT AND AUTHORITY OF AGENT
1.1 Owner is the fee simple owner of the retail property identified on
Exhibit A attached hereto and made a part hereof (the "Premises"). Owner hereby
appoints Agent as the exclusive managing and renting agent for the Premises, and
hereby authorizes Agent to exercise such powers with respect to the Premises as
may be necessary for the performance of Agent's obligations under Article II,
and Agent accepts such appointment on the terms and conditions hereinafter set
forth for the term as provided in Article V. Agent shall have no right or
authority, express or implied, to commit or otherwise obligate Owner in any
manner whatsoever except to the extent specifically provided herein and agrees
that it shall not hold itself out as having authority to act on behalf of Owner
in any manner which is beyond the scope of authority granted to Agent in this
Agreement.
ARTICLE II
AGENT'S AGREEEMENT
2.1 Agent, on behalf of Owner, shall implement, or cause to be
implemented, the decisions of Owner and shall conduct the ordinary and usual
business affairs of Owner with respect to the management, operation and leasing
of the Premises as provided in this Agreement. Agent shall at all times conform
to the policies and programs established by Owner and the scope of Agent's
authority shall be limited to said policies. Agent shall act in a fiduciary
capacity with respect to the cash and cash equivalent assets of Owner which are
within the custody or control of Agent. Agent shall deal at arm's length with
all parties and shall serve Owner's interests at all times. All undertakings
incurred by Agent on behalf of Owner in accordance with this Agreement shall be
at the cost and expense of Owner unless otherwise provided for herein. Agent
agrees to use its best efforts in the management and operation of the Premises.
Agent shall perform the following duties in connection with the management and
operation of the Premises:
(a) Contract, for periods not longer than the term of Owner's
leasehold estate, in the name of Owner, for gas, electricity, water and such
other services as are currently being furnished to the Premises. Service
contracts shall be written to include a provision allowing termination by Owner
upon 30 days' notice wherever possible. All service contracts, including those
in effect at the date hereof in respect of the Premises, including the terms
thereof (with cancellation right, if any), the services provided thereunder and
the charges called for thereby, should be detailed in the annual budget package.
No such contract, other than for utilities, including water, which involves an
expenditure in excess of the amount set forth in paragraph 3 of Exhibit A
attached hereto shall hereinafter be entered into by Agent without the prior
approval of Owner. Agent shall also perform the obligations of the Owner under
any utility service agreement and any reciprocal easement agreements.
(b) Select, employ, pay, supervise, direct and discharge all
employees necessary for the proper, safe and economic operation and maintenance
of the Premises, in number and at wages in accordance with industry practices
and the annual budget, carry Worker's Compensation Insurance (and, when required
by law, compulsory Non-Occupational Disability Insurance) covering such
employees, and use reasonable care in the selection, discharge, and supervision
of such employees. Agent will keep bi-weekly time sheets which shall be
available for inspection by Owner. Agent shall prepare or cause to be prepared
and timely filed and paid, all necessary returns, forms and payments in
connection with unemployment insurance, medical and life insurance policies,
pensions, withholding and social security taxes and all other taxes relating to
said employees which are imposed on employees by any federal, state or municipal
authority. Agent shall also provide usual management services in connection
with labor relations and shall prepare, maintain and file all necessary reports
with respect to the Fair Labor Standards Act and all other required statements
and reports pertaining to employees at the Premises. Agent shall use its best
efforts to comply with all laws and regulations and collective bargaining
agreements, if any, affecting such employment. Owner shall have the right to
review and approve all collective bargaining agreements which affect the
Premises prior to their implementation or acceptance by Agent. Agent will be
and will continue throughout the term of this Agreement to be an equal
opportunity employer. All persons employed in connection with the operation and
maintenance of the Premises shall be employees of Agent or employees of
contractors approved by Owner to provide contract services to the Premises.
(c) Keep the Premises in a safe, clean, rentable and sightly
condition and make and contract for all repairs, alterations, replacements, and
installations, do all decorating and landscaping, and purchase all supplies
necessary for the proper operation and maintenance of the Premises and for the
fulfillment of Owner's obligations under any lease, operating agreement or other
agreement or compliance with all governmental and insurance requirements,
provided that, except as provided in Section 2.5 hereof, Agent shall not make
any purchase or do any work, the cost of which shall exceed the approved budget
or the amount set forth in paragraph 3 of Exhibit A attached hereto, without
obtaining in each instance the prior approval of Owner, except in circumstances
which Agent shall deem to constitute an emergency requiring immediate action for
the protection of the Premises or of tenants or other persons or to avoid the
suspension of necessary services or in order to cure any violation or other
condition which would subject Owner or Agent to any criminal penalty or any
civil fine in excess of $5,000.00. Agent shall notify Owner immediately of the
necessity for, the nature of, and the cost of, any such emergency repairs or any
action to cure any such violation or other condition. Agent shall arrange for
and supervise, on behalf of Owner, the performance of all alterations and other
work to prepare or alter space in the Premises for occupancy by tenants thereof.
If Owner shall require, Agent shall submit a list of contractors and
subcontractors performing tenant work, repairs, alterations or services at the
Premises under Agent's direction.
It is understood that Agent shall not be required to undertake the making
or supervision of extensive reconstruction of the Premises or any part thereof
except after written agreement by the parties hereto as to any additional fee to
be paid for such services.
Owner shall receive the benefit of all discounts and rebates obtainable by
Agent in its operation of the Premises. When requested by Owner, Agent agrees
to obtain competitive bids for the performance of any work at the Premises, to
furnish copies of such bids to Owner and to accept such bid as Owner may
direct.
If Agent desires to contract for repair, construction or other service
described in this paragraph (c) (other than work done at the request of a tenant
and at the tenant's sole cost and expense, hereinafter referred to as "Tenant
Work") with a party with respect to which any partner or shareholder of Agent
holds a beneficial interest, or with any subsidiary, affiliate or related
corporation in which Agent shall have a financial interest, such interest shall
be disclosed to, and approved by, Owner before such services are procured. The
cost of any such services shall likewise be at competitive rates,
notwithstanding that tenants of the Premises may be required to pay such costs.
Agent, or a general contractor working under the supervision of Agent is
authorized to make and install Tenant Work. Agent may collect from such tenant
or such general contractor, for its sole account, its charge for supervisory
overhead on all such Tenant Work. Agent shall hold Owner harmless from any
claims which may be advanced by any such tenant in connection with Tenant Work
performed by Agent or under Agent's supervision. Agent, however, shall not
require any tenant to use Agent, its subsidiary, affiliate or related
corporation as its general contractor to perform such Tenant Work.
(d) Handle promptly complaints and requests from tenants and parties
to reciprocal easement and/or operating agreements, notify Owner of any major
complaint made by any such tenant or party and notify owner promptly (together
with copies of supporting documentation) of: the receipt of any notice of
violation of any governmental requirements; any known orders or requirements of
insurers, insurance rating organizations, Board of Fire Underwriters or similar
bodies; any known defect in the Premises; any known fire or other damage to the
Premises, and, in the case of any serious fire or other serious damage to the
Premises, Agent also shall immediately provide telephone notice thereof to
Owner's General Insurance Office, so that an insurance adjuster can view the
damage before repairs are started, and complete customary loss reports in
connection with fire or other damage to the Premises.
(e) Notify Owner's General Liability Insurance carrier and Owner
promptly of any personal injury or property damage known to Agent occurring to
or claimed by any tenant or third party on or with respect to the Premises and
promptly forward to the carrier, completed insurance forms, any summons,
subpoena, or other like legal document served upon Agent relating to actual or
alleged potential liability of Owner, Agent, or the Premises, with copies to
Owner of all such documents.
(f) Advise Owner of those exceptions in leases, operating agreements
and other agreements executed on or after the date hereof in which the tenants
or parties to such agreements do not agree to hold Owner harmless with respect
to liability from any accidents.
(g) At the option of Owner, or as otherwise provided in the Loan
Documents, as hereinafter defined, receive and collect rent and all other monies
payable to Owner by all tenants and licensees in the Premises and by all other
parties including department stores under ground leases and reciprocal easement
agreements and tenants under leases of free-standing stores. In this
connection, Agent shall calculate all amounts due to Owner from such tenants,
licensees and other parties, including annual or periodic adjustments where
applicable, and shall, when appropriate, submit statements or invoices to such
tenants, licensees and parties. Agent shall deposit the same promptly in the
bank named on Exhibit A attached hereto (the "Bank") in an account with title
including a distinctive portion of Agent's name and such designation as Owner
may direct (the "Bank Account"), which account shall be used exclusively for
such funds. Owner's representative will be a signatory on all bank accounts
maintained by Agent and such representative's signature shall be required on all
checks in excess of $50,000 and for withdrawals in excess of $1,000,000 in any
month. All amounts received by Agent for or on behalf of Owner shall be and
remain the property of Owner. Checks may be drawn on the above-mentioned bank
account only for purposes authorized under this Agreement. No funds of Agent or
others shall be commingled with funds in any such bank account. Owner has the
right to control the types of cash management accounts and dictate the specifics
of said accounts with respect to disbursement and management of funds.
(h) Serve notice of default upon tenants of space in the Premises and
other parties which are in default in performing obligations under their leases,
reciprocal easement agreements or other agreements, with copies sent
simultaneously to Owner, and attempt to cause such defaults to be cured by the
defaulting tenant or other party. Agent shall, subject to Owner's consent with
respect to any tenant who occupies more than 1,000 square feet, utilizing
counsel theretofore approved by Owner, institute all necessary legal action or
proceedings for the collection of rent or other income from the Premises or the
ousting or dispossessing of tenants or other persons therefrom and all other
matters requiring legal attention. Agent agrees to use its best efforts to
collect rent and other charges from tenants in a timely manner and to pursue
Owner's legal remedies for nonpayment of same. Agent shall not terminate tenant
leases in the Premises without Owner's consent. Owner reserves the right to
designate or approve counsel and to control litigation of any character
affecting or arising out of the operation of the Premises and the settlement of
such litigation.
(i) Bond Agent and all of Agent's employees who may handle or be
responsible for monies or property of Owner with a "comprehensive 3-D" or
"Commercial Blanket" bond, in an amount of $500,000.00.
(j) Notify Owner immediately of any known fire, accident or other
casualty, condemnation proceedings, rezoning or other governmental order,
lawsuit or threat thereof involving the Premises; and the receipt of any notice
of violations relative to the leasing, use, repair and maintenance of the
Premises under governmental laws, rules, regulations, ordinances or like
provisions.
(k) If Owner so directs, make timely payment of real estate and
personal property taxes and assessments levied or assessed against the Premises
or personal property used in connection therewith and any other charge that may
become a lien against the Premises. Owner may direct that payment of such taxes
and assessments either be made to the taxing authority or to a mortgage lender
holding an escrow account for such items. Agent shall participate in Owner's
tax review program and check tax assessments and, when so requested, Agent shall
assist Owner in its efforts to reduce such taxes. Agent shall promptly furnish
Owner with copies of all assessment notices and receipt tax bills.
(l) Promptly comply with all present and future laws, ordinances,
orders, rules, regulations and requirements of all Federal, state and local
governments, courts, departments, commissions, boards and offices, any national
or local Board of Fire Underwriters or Insurance Services offices having
jurisdiction, or any other body exercising functions similar to those of any of
the foregoing ("Legal Requirements") which may be applicable to the Premises or
any part thereof or to the leasing, use, repair, operation and management
thereof, but only to the extent that such compliance is reasonably capable of
being carried out by Agent and Agent has available the necessary funds therefor
from collections or advances by Owner. Agent shall give prompt notice to Owner
of any known violation or the receipt of notice of alleged violation of such
laws and Agent shall not bear responsibility for failure of the Premises or the
operation thereof to comply with such laws unless Agent has committed gross
negligence or a willful act of omission in the performance of its obligations
under this Agreement or in the performance of any other duties owed to Owner or
third parties by Agent. As and when directed by Owner, Agent shall institute in
its name, or in the name of Owner using counsel selected by Owner, appropriate
actions or proceedings to contest any such law, ordinance, rule, regulation,
order, determination or requirement.
(m) Promote the Premises and participate as Owner's representative in
any Merchant's Associations or Promotional Organizations (collectively, the
"Promotional Organizations") established to promote the Premises.
(n) Consent to and approve tenant alteration work and installations
which are performed by tenants of space in the Premises and are provided for in
the leases of such tenants and are within such tenant's space. Agent is
authorized to approve tenant alteration work and installations not provided for
in leases if (i) such alteration work and installations are made solely at the
expense of the tenant, and (ii) such alteration work and installations do not
affect the structural integrity or facade of any building. Agent shall
periodically monitor the progress of any tenant alteration work and
installations to confirm that the work is being done in a good and workmanlike
manner and in substantial conformity with any plans and specifications approved
by Owner or Agent, and shall notify Owner of any material deficiencies or
material variations from the approved plans and specifications.
(o) Provide, upon Owner's request in accordance with the provisions
of Section 8 and Section 9 of Exhibit A, general contracting and construction
management services ("Development Services") and consultation to Owner for the
Premises, which shall include, without limitation, the management, supervision
and administration of, and provisions for services for the improvement or
expansion (and in the event of damage or condemnation, the reconstruction) of
the Premises, including advice, expertise and support of Agent provided and/or
retained and/or coordinated by home office and on-site personnel including,
without limitation, executive personnel, design and engineering personnel,
clerical personnel, legal and accounting personnel. Such personnel will perform
consultation and various functions involved with Development Services including,
without limitation, the following: design, planning, architectural,
engineering, acquisition and negotiation, negotiations with department stores
for site acquisition and operation in the Premises; permits and licenses;
preopening advertising and publicity; market research, site work; negotiations
with public authorities; attendance at public hearings; project management and
all other activities necessary to accomplish the improvement, expansion or
reconstruction of the Premises. It is understood that Development Services and
consultation with Owner may or may not involve Agent's in-house personnel; by
mutual agreement of Agent and Owner, outside professionals or other persons may
be engaged to provide Development Services and consultation with Owner, provided
that Agent agrees to require any contractor or subcontractor brought onto the
Premises to have workers' compensation and employers' liability insurance in the
necessity statutory amounts and comprehensive general liability insurance for at
least $1,000,000.00.
(p) If Owner so directs, pay when due all debt service and other
amounts due under any mortgages that encumber the Premises or any part thereof.
(q) Carry out and comply with, directly or through a third party, all
requirements on the part of Owner under all such mortgages and ground leases,
all leases of space in the Premises, all ground leases and reciprocal easement
agreements with department stores and all other agreements affecting or relating
to the Premises which are known or made known to Agent, including, without
limitation, the furnishing of all services and utilities called for therein, but
only to the extent that such requirements are at the time reasonably capable of
being carried out by Agent and Agent has available the necessary funds therefor
from collections or advances by Owner, provided that Agent shall promptly notify
Owner if Agent cannot carry out such requirement or has insufficient funds
available to do so. Agent shall notify Owner promptly of any default under any
such mortgage, lease, ground lease, reciprocal easement or other agreement on
the part of Owner, the tenant or other party thereto of which agent becomes
aware.
(r) Use reasonable efforts to comply with and require compliance with
the requirements of leases of space in the Premises, ground leases, reciprocal
easement agreements and all other agreements affecting or relating to the
Premises which are known or made known to Agent on the part of Tenants,
department stores and other parties thereto and enforce compliance with the
rules and regulations, sign criteria and like standards for the Premises adopted
by Owner from time to time.
(s) Upon request, furnish Owner with an executed copy of each lease,
lease renewal, lease amendment, service contract and other agreement entered
into on or after the date of this Agreement in connection with the operation,
management and leasing of the Premises, and use reasonable efforts to secure
from tenants and parties to reciprocal easement agreements, and furnish to
Owner, any certificates of insurance and renewals thereof required to be
furnished by the terms of their leases or agreements. All such executed copies
of leases shall be maintained in Agent's main office, with additional lease
copies together with insurance certificates also maintained at the Agent's
office at the relevant property, if any such office exists.
(t) Inspect the Premises periodically and submit reports of findings
and recommendations to Owner which shall include, without limitation,
recommendations as to required repairs, replacements or maintenance. Agent
shall keep and submit annual written reports of all material alterations made to
the Premises, no matter by whom effected.
(u) Erect barriers or chains for the purpose of blocking access to
the common areas of and buildings included in the Premises as local law may
require, or, as directed in writing by owner, in order to avoid the dedication
of the same for public use and furnish appropriate evidence of same to Owner.
Agent shall give any advance notice of the erection of such barriers or chains
which may be required under reciprocal easement agreements or ground leases with
department stores.
(v) Use its reasonable efforts to obtain from tenants of the Premises
and department stores which are parties to reciprocal easement agreements or
ground leases waivers of their insurers' rights of subrogation in respect to
policies of fire and extended coverage and other property damage insurance
carried by them in favor of Owner, Agent and any department store or tenant for
which Owner is obligated to attempt to obtain such waivers under a ground lease,
reciprocal easement agreement or space lease.
(w) Assist owner in preparing any statements required to be submitted
by Owner under the terms of mortgages, ground leases, reciprocal easement
agreements and leases.
(x) Perform its duties in renting, managing, operating and
maintaining the Premises applying prudent and reasonable business practices
which are consistent with those followed in respect of the Premises prior to the
date of this Agreement, using reasonable care and diligence in carrying out
properly and efficiently its responsibilities under this Agreement. Agent shall
maintain those portions of the common areas of the Premises which are Owners'
obligation to maintain in a clean, safe and attractive condition, use reasonable
efforts to enforce the provisions of applicable leases, ground leases and
reciprocal easement agreements so as to cause tenants and department stores to
maintain their premises and common areas, if any, in similar condition, arrange
for necessary security for the Premises and their common areas and arrange for
cleaning and snow removal for the parking areas and roadways of the Premises.
Agent shall recommend to Owner from time to time such procedures with respect to
the Premises as Agent may deem advisable for the more efficient and economic
management and operation thereof.
(y) Where leasing guidelines or any Legal Requirement (as defined in
paragraph 2.1 (m) hereof) now or hereafter in effect require that tenant
security deposits be maintained, a separate interest-bearing account for such
security deposits (the "Security Deposit Account") shall be opened by Agent at a
bank approved by Owner. The Security Deposit Account shall be maintained in the
name of Agent in accordance with the relevant lease or Legal Requirement, as the
case may be, and shall be used only for tenant security deposits. The bank
shall be informed that the funds in the Security Deposit Account are held in
trust for Owner. Agent shall have the authority to remit to tenants any
interest to which they are entitled on their security deposit, in accordance
with their leases or any Legal Requirement, but Agent shall obtain the written
approval of Owner prior to the return of such deposits or any other security
(including letters of credit) to any tenant when the amount, in any single
instance, exceed $50,000.00.
Owner recognizes and understands that Environmental Service (as hereinafter
defined) are not actions or services that Agent is required to perform under
this Agreement and Owner further recognizes and understands that Agent is not a
consultant or a contractor that performs Environmental Services. Upon Owner's
request, Agent agrees to obtain and coordinate for and on behalf of Owner, such
Environmental Services as Owner may request or require. Owner shall reimburse
Agent for its administrative costs in connection with the coordination of such
Environmental Services as provided in Exhibit A, paragraph 8 of the Agreement.
In addition, Owner shall reimburse Agent for the costs of outside professionals
retained to perform Environmental Services. Environmental Services is defined
to be those acts or actions involving the presence use, exposure, removal,
restoration, or introduction of Hazardous materials (as hereinafter defined) and
the investigation of and compliance with any and all applicable rules, laws, or
regulations of local, state or federal authorities which apply or regulate
Hazardous Materials. Hazardous Materials means any hazardous, radioactive, or
toxic substance, material or waste listed in the United States Department of
Transportation Hazardous Materials Table; or by the Environmental Protection
Agency as hazardous substances; or such substances, materials and waste which
are or become regulated under applicable local, state or federal law including
materials which are petroleum products, asbestos, polychlorinated biphenyls, or
designated as hazardous substances under the Clean Water Act; or defined
hazardous waste under the Resource Conservation and Recovery Act; or defined as
hazardous substances under the Comprehensive Environmental Response,
Compensation and Inability Act.
2.2 Agent agrees, on behalf of Owner and at Owner's expense, to procure
and continue to maintain in force a comprehensive general liability insurance
policy or polices with respect to the Premises. Such policy or policies shall
provide for coverage in the amount and with such insurers as are required of
Owner under the Loan Documents (as defined below), but in any event, not less
than ten million dollars ($10,000,000.00) combined single limit coverage per
occurrence for bodily injury and property damage. The polices shall include
coverage for contractual liabilities assumed with respect to the Premises,
including, but not limited to, the obligations created by the indemnity set
forth in Section 3.3 hereof as used in this Agreement, the term "Loan Documents"
shall refer to that certain Construction Loan Agreement (the "Loan Agreement");
Open-End Mortgage, and Security Agreement (the "Mortgage"); Open-End Note;
Assignment of Leases and Rents; Subordination, Attornment and Collateral
Assignment of Real Estate Management Agreement; Hazardous Materials Indemnity
Agreement; each dated as of September 25, 1998, from Owner to Bank United
("Lender"), and such other documents as may be executed in connection with the
loan (the "Mortgage Loan") secured by the Mortgage.
Further, at all times during the term of this Agreement, Agent shall keep
or cause to be kept insured, at Owner's cost and expense, all buildings and
improvements on the Premises against loss or damage by fire, windstorm, hail,
explosion, damage from aircraft and vehicles and smoke damage, and such other
risks as are from time to time included in "extended coverage" endorsements in
an amount sufficient to replace said improvements.
All insurance provided for in this Section 2.2 shall be effected under
valid and enforceable polices issued by insurers of recognized responsibility
and shall provide respectively, for the waiver of all rights of subrogation by
Owner or parties claiming through Owner against Agent and its agents and
employees. Owner and Agent hereby waive all rights of recovery as against the
other party hereto arising from loss or damage caused by the perils enumerated
in this Section 2.2 and agree that any policies obtained with respect to such
perils shall be endorsed accordingly, if such endorsements are available. Any
insurance required to be maintained hereunder may be taken out under a blanket
insurance policy or polices covering other properties of the insured. Any
policy required by this Section 2.2 shall provide that such policy shall not be
canceled without at least thirty (30) days' prior notice to Owner and Agent and,
in any event, shall provide that all parties insured thereby shall receive
notice no less than fifteen (15) days prior to the expiration dates of the
expiring policies.
2.3 Agent agrees to render monthly reports relating to the management and
operation of the Premises for the preceding calendar month on or before the
twenty-fifth (25th) day of each month in form as Owner and Agent will mutually
agree. Agent agrees that Owner shall have the right to require the transfer to
Owner at any time of any funds in the Bank Account considered by Owner to be in
excess of an amount reasonably required by Agent for disbursement in connection
with the Premises. Agent agrees to keep records with respect to the management
and operation of the Premises as prescribed by owner, and to retain those
records for periods specified by Owner. Owner shall have the right to inspect
such records and audit the reports required by this Section during business
hours for the life of this Agreement and thereafter during the period such
records are to be retained pursuant to this Section. In addition, Agent agrees
that such records may be examined from time to time during the period aforesaid
by any of the supervisory or regulatory authorities having jurisdiction over
Owner.
2.4 Agent shall ensure such control over accounting and financial
transactions as is reasonably required to protect Owner's assets from loss or
diminution due to gross negligence or willful misconduct on the part of Agent's
associates or employees. Losses caused by gross negligence or willful
misconduct shall be borne by Agent.
2.5 Agent shall establish and prepare, in the form authorized by Owner,
with such additional changes as may be reasonably requested by Owner, operating
and capital improvement budgets for the promotion, operation, repair and
maintenance of the Premises for each calendar year. Preliminary and final
budgets will be due 45 and 30 days, respectively, prior to commencement of the
calendar year to which they relate. Such budgets shall be prepared on both an
accrual basis showing a month-by-month projection of income and expenses and
capital expenditures. At least 30 days prior to the end of each year, Agent
shall meet with Owner to review such budgets for the subsequent year. Upon
receiving Owner's approval, Agent shall use its best efforts to comply with such
final budgets.
(a) Agent shall meet with Owner on a regular basis, not less
frequently than semi-annually and otherwise upon reasonable call by Owner, to
review the operations of the Premises, to review and, if appropriate, revise in
light of actual experience the annual operating and capital improvement budgets
theretofore approved by Owner and to consider other matters which Owner may
raise.
(b) Upon approval of the operating budget by Owner, and unless and
until revoked or revised by Owner, Agent shall have the right, without further
consent or approval by Owner to incur and pay the operating expenses set forth
in the approved operating budget, subject to paragraph 2.1(g) above.
(c) At the request of Owner from time to time Agent shall prepare and
submit to Owner (i) operating projections for the Premises for the ensuing five
(5) years, such projections to be made on a year-by-year basis and to be based
on Agent's best judgment as to the future, taking into consideration known
circumstances and circumstances Agent can reasonably anticipate are likely to
occur, and (ii) a schedule in reasonable detail of capital improvements, repairs
and replacements not provided for in the current capital improvement budget
which Agent reasonably anticipates will be required or should be made in the
foreseeable future, with Agent's opinion as to the relative priority and cost of
each thereof.
2.6 Agent shall also participate in Owner's property review programs to
the extent requested by Owner. Such review shall include asset, investment,
financial and strategy profiles in form satisfactory to Owner. Agent shall
respond, within 10 days, to Owner's management evaluation reports concerning
actions to be taken by Agent to correct or modify its management standards for
the operations, leasing or financial services provided for the Premises. If
Owner shall request that Agent's home office or regional office personnel travel
to the Premises to participate in Owner's property review programs or for any
other reason (unless such reason is for normal supervision), the reasonable cost
of meals, travel and hotel accommodations expenses incurred by such home office
personnel in connection with such travel shall be reimbursed to Agent by Owner.
Agent shall, however, bear the full cost and expenses incurred by its home
office or regional office personnel in connection with their travel to the
Premises to the extent such travel is required by the Agent for the normal
supervision of the management and leasing of the Premises.
2.7 Agent agrees to use its best efforts to have all space within the
Premises rented to desirable tenants, satisfactory to Owner, considering the
nature of the Premises, and in connection therewith:
(a) To negotiate, as the exclusive agent of Owner, all leases and
renewals of leases at the appropriate time, it being understood that all
inquiries to Owner with respect to leasing any portion of the Premises shall be
referred to Agent. Except for license agreements for temporary tenants, all
leases and renewals for lease terms in excess of one (1) year must be prepared
in accordance with Exhibit C by Agent and in accordance with the annual approved
budget and be submitted to Owner's representative for execution by Owner. Agent
is authorized to negotiate and execute license agreements prepared in accordance
with Exhibit C for temporary tenants and/or short term promotional activities.
If Agent shall receive a prospective tenant reference from a property other than
the Premises, which Agent or any subsidiary or affiliate manages, Agent shall
promptly declare its potential conflict of interest to Owner and Owner shall
determine if negotiations with such prospective tenant shall be undertaken by
Agent, Owner, or a third party approved by Owner. References of prospective
tenants, as well as their varying use requirements, shall be investigated
carefully by Agent. Agent also is authorized to negotiate and execute on
Owner's behalf lease amendments which: (i) change a Tenant's commencement date
by sixty (60) days or less (or for such longer period as is approved by Owner);
(ii) change a Tenant's permitted use by allowing the sale of such additional
items as are reasonably related to the Tenant's primary and principal use,
provided Agent has no reason to know of any lease at the center prohibiting such
use; (iii) change a tenant's marketing charge or promotional charge or
advertising obligation.
Owner acknowledges and understands that Agent manages properties for third
parties. Owner further acknowledges and understands that Agent routinely and
customarily negotiates tenant leases from multiple locations involving two or
more properties (one or more of which may be the Premises and one or more of
which may be properties owned by Agent or by others). Agent conducts such
multiple location negotiations in good faith for the benefit and interests of
Owner and other property owners, including Agent. Agent shall be entitled to
assume that such leasing practices are approved and acceptable to Owner, unless
and until Owner specifically disapproves the practice and so notifies Agent.
(b) With Owner's prior approval, to advertise the Premises or
portions thereat for rent, by means of periodicals, signs, plans, brochures and
other means appropriate to the Premises. Owner acknowledges and agrees that the
Premises may be included in brochures or other advertising media of Agent, which
may include other properties being offered for lease by Agent.
(c) In no event shall Agent engage or utilize the services of an
outside broker in connection with any lease without Owner's prior written
consent. In any case in which Owner requests or gives such consent, Agent shall
cause such broker to enter into a written agreement with Owner, on terms
reasonably satisfactory to Owner, with respect to such broker's commission and
Owner shall be responsible for the payment of such commission pursuant to the
terms of said agreement.
(d) Agent will, in each instance, negotiate for the inclusion in all
leases entered into by Owner of a provision to the effect that recourse on such
obligation shall be had only against the property to which such obligation
relates and no recourse shall be sought against Owner or any other person
holding, directly or indirectly, a beneficial interest in the property.
(e) Agent will, upon the request of Owner, undertake to find buyers
for the sale of any of the Owner's outparcels, peripheral land or such other
real estate situate upon the Premises, ("Sale Property"), and, in addition to
any other compensation provided to be paid to Agent under this Agreement, Owner
agrees to pay to Agent as compensation for its services hereunder, a fee at the
rate specified in Paragraph 7(iii) of Exhibit "A", attached hereto. In
performing its duties hereunder, Agent shall perform the following:
(i) Submit to Owner for approval, a pricing schedule on the Sale
Property;
(ii) Upon request, submit to Owner for approval, contract form(s)
to be used in the sale of the Sale Property;
(iii) Upon request, furnish Owner with a written report
regarding its progress in such sale activities;
(iv) Negotiate on behalf of Owner, the sale of the subject Sale
Property; and
(v) Provide legal services, limited to:
(a) Preparation of the Purchase and Sale Agreement;
(b) Deed and Easement(s) preparation;
(c) Preparation and submittal to Owner of the Seller's
closing statement;
(d) Preparation of closing instructions;
(e) Coordination of title work;
(f) Upon approval of Owner, retain local counsel,
whose fees will be reimbursed by Owner; and
(g) Submit to Owner, for final execution, all
documents necessary to consummate the
transaction.
Agent shall pursue these duties and obligations with diligence and in the
best interests of Owner.
2.8 Agent agrees, for itself and all persons retained or employed by Agent
in performing its services, to hold in confidence and not to use or disclose to
others any confidential or proprietary information of Owner heretofore or
hereafter disclosed to Agent ("Confidential Information"), including, but not
limited to, any data, information plans, programs, processes, costs, operations
or the names of any tenants which may come within the knowledge of Agent in the
performance of, or as a result of, its services, except where required by
judicial or administrative order, or where Owner specifically gives Agent
written authorization to disclose any of the foregoing to others or such
disclosure as is required in the direct performance of Agent's duties hereunder.
If Agent is required by a judicial or administrative order to disclose any
Confidential Information, Agent will promptly notify Owner thereof, consult with
Owner on the advisability of taking steps to resist or narrow such request and
cooperate with Owner in any attempt it may make to obtain an order or other
assurance that confidential treatment will be accorded to the Confidential
Information disclosed.
2.9 If at any time there shall be insufficient funds available to Agent
from collections to pay any obligations of Owner required to be paid under this
Agreement, Agent shall promptly notify Owner and Agent shall not be obligated to
pay such obligations unless Owner furnishes Agent with funds therefor.
2.10 Agent assumes no responsibility under this Agreement other than to
render the services called for hereunder in good faith, and Owner shall make no
claim against Agent on account of any alleged errors of judgment made in good
faith in connection with Agent's obligations hereunder and with the operation of
the Premises. Agent shall not be liable to Owner or others except by reason of
acts constituting willful misfeasance or gross negligence on the part of Agent,
and Owner agrees to indemnify, defend and hold harmless Agent and its partners
(and the shareholders, trustees and officers thereof) and employees from and
against all claims, actions, causes of action, costs and expenses (including,
but not limited to, reasonable attorney's fees) directly or indirectly arising
from the claims of any third party, except only those claims where liability
arises from acts constituting willful misfeasance or gross negligence on the
part of Agent.
ARTICLE III
OWNER'S AGREEMENTS
3.1 Owner, at its option, may pay directly all taxes, special assessments,
ground rents, insurance premiums and mortgage payments. If Owner makes such
election, Agent shall advise Owner of the due dates of such taxes assessments,
insurance premiums and mortgage payments.
3.2 Owner shall bear the cost of all premiums relating to insurance
procured by Agent for Owner pursuant to Section 2.2 hereof. Owner shall look
solely to such insurance for indemnity against any loss or damage to the
Premises and shall obtain waivers of subrogation against the Agent under such
policies if available at no additional cost to Owner.
3.3 Owner agrees to indemnify and save harmless Agent and its partners
(and the shareholders, trustees and officers thereof) and employees from and
against all claims, losses and liabilities resulting from: (i) damage to
property or injury to, or death of, persons from any cause whatsoever when Agent
is carrying out the provisions of this Agreement or acting under the direction
of Owner in or about the Premises; (ii) claims for defamation and false arrest
when Agent is carrying out the provisions of this Agreement or acting under the
direction of Owner; and (iii) claims occasioned by or in connection with or
arising out of acts or omissions, other than criminal acts, of the Agent when
Agent is carrying out the provisions of this Agreement or acting under the
direction of Owner (except in cases of Agent's misconduct or negligence), and
to defend or cause to be defended, at no expense to Agent or such persons, any
claim, action or proceeding brought against Agent or such persons or Agent and
Owner, jointly or severally, arising out of the foregoing, and to hold Agent and
such persons harmless from any judgment, loss or settlement on account thereof.
Notwithstanding the foregoing, Owner shall not be responsible for
indemnifying or defending Agent or such persons in respect of any matter, claim
or liability in respect of which Agent is obligated to indemnify Owner as
provided in the following sentence. Agent agrees to indemnify and save harmless
Owner from and against all claims, losses and liabilities resulting from injury
to, or death of, persons in or about the Premises or for deformation and false
arrest in each case caused in whole or in part by the misfeasance or negligence
of Agent, and to defend, at no expense to Owner, any claim, action or proceeding
brought against Owner or Owner and Agent, jointly or severally, arising out of
the foregoing, and to hold Owner harmless from any judgments, loss or settlement
on account thereof.
Notwithstanding the foregoing, Agent shall not be responsible for
indemnifying or defending Owner in respect of any matter, claim or liability
which is covered by any public liability insurance policies carried by Owner and
under which Agent is named as an additional insured. The indemnification
obligations of Owner and Agent under this Section 3.3 shall in each case be
conditioned upon (a) prompt notice from the other party after such party learns
of any claim or basis therefor which is covered by such indemnity, (b) such
party's not taking any steps which would bar Owner or Agent, as the case may be,
from obtaining recovery under applicable insurance policies or would prejudice
the defense of the claim in question, and (c) such party's taking of all
necessary steps which if not taken would result in Owner or Agent, as the case
may be, being barred from obtaining recovery under applicable insurance policies
or would prejudice the defense of the claim in question. The provisions of this
Section 3.3 shall survive the expiration or termination of this Agreement.
3.4 Owner shall provide such office space on the Premises as may be
necessary for Agent to properly perform its functions under this Agreement.
Agent shall not be required to pay for utilities, telephone service or rent for
the office area on the Premises occupied by Agent. Agent shall have the right
to use the fixtures, furniture, furnishings and equipment, if any, which are the
property of Owner in said office space. Owner shall also provide space on the
Premises for use as community rooms and information and service centers where
the use of such space is determined by Owner to be in the best interest of the
Premises. All income derived from the utilization and/or operation of such
community rooms and/or information or service centers shall belong to the Owner
and all expenses relating thereto shall be borne by Owner.
3.5 Except as otherwise provided in this Agreement, everything done by
Agent in the performance of its obligations under this Agreement and all
expenses incurred pursuant hereto shall be for and on behalf of Owner and for
its account. Except as otherwise provided herein, all debts and liabilities
incurred to third parties in the ordinary course of business of managing the
Premises as provided herein are and shall be obligations of Owner, and Agent
shall not be liable for any such obligations by reason of its management,
supervision or operation of the Premises for Owner.
ARTICLE IV
COMPENSATION
4.1 In addition to any other compensation provided to be paid to Agent
under this Agreement, Owner agrees to pay to Agent as compensation for its
management services hereunder, a fee at the rate specified in paragraph 5 of
Exhibit A attached hereto. Said fee shall be payable monthly no later than the
twenty-fifth (25th) day of the following month, and shall be based on the
following components of income from the preceding calendar month determined in
accordance with GAAP. It is understood that the management fee shall be
calculated upon the following items: (i) minimum rents from all permanent
tenants (anchor, mall shops, ground leases and all other tenants); (ii) Lease
buyout income; (iii) Percentage rents in lieu of minimum rents; (iv) Percentage
rents; (v) all cost recovery income (CAM, taxes, food court, security, other);
(vi) income from all temporary tenants (initial term of one year or less); (vii)
income from all promotional activity; (viii) miscellaneous mall income such as
payphone commissions, stroller rentals, etc. and (ix) bad debts expense related
to any of the above revenue items. The following items shall not be subject to
management fees: (i) business interruption insurance income; (ii) recoveries
from insurance companies for casualty and other losses; (iii) payments from
tenants for leasehold improvements and related services provided by Agent; (iv)
payments from tenants to Merchants' Associations or to Marketing Funds; (v)
tenant security deposits; (vi) straight line rental income or losses, and (vii)
operating covenant and amortization (classified as a reduction of minimum rent).
Agent shall withdraw said fee from the operating account for the Premises and
shall account for same as provided for in Section 2.3 hereof.
4.2 The following expenses or costs incurred by or on behalf of Agent in
connection with the management and leasing of the Premises shall be the sole
cost and expense of Agent and shall not be reimbursable by Owner and Agent shall
indemnify Owner for such expenses and costs:
(a) cost of gross salary and wages, payroll taxes, insurance,
worker's compensation, pension benefits and any other benefits of Agent's
employees, except that Owner will reimburse Agent for all costs of employees who
provide either full or part time services on-site at any of the Premises.
Within the category of "on-site" personnel, Agent may include the pro-rata costs
for regional personnel performing required services at the Premises on a regular
basis (but which personnel may share time working at other properties managed by
Agent); provided, however, that the costs for any employees who are based at or
work from Agent's home office shall not be included, and provided further that
the pro-rata costs for any such regional personnel are included and identified
as such within the annual operating budget as approved by Owner.
(b) general accounting and reporting services, as such services are
considered to be within the reasonable scope of Agent's responsibility to Owner;
(c) costs of forms, stationery, ledgers, supplies, equipment and
other "general overhead" items used in Agent's home office or regional offices;
(d) cost or pro rata cost of telephone and general office expenses
incurred in the Premises by Agent for the operation and management of properties
not owned by Owner;
(e) cost of all bonuses, incentive compensation, profit sharing, or
any pay advances by Agent to Agent's employees, except such costs pertaining to
employees employed by Agent in accordance with Paragraph 2.1 (b) hereof;
(f) cost attributable to losses arising from criminal acts, gross
negligence or fraud on the part of Agent or Agent's associates or employees;
(g) cost for meals, travel and hotel accommodations for Agent's home
office or regional office personnel who travel to and from the Premises, except
as provided in Section 2.6;
(h) cost of automobile purchase and/or rental, except if furnished or
approved by Owner;
(i) except as otherwise provided in Exhibit A attached hereto,
expenses incurred in connection with the leasing of the Premises, it is being
understood and agreed, however, that Agent shall be reimbursed for advertising
expenses incurred in connection with the leasing of the Premises;
(j) cost of liability or other insurance carried by Agent, except
costs incurred by Agent in satisfaction of its obligations under Section 2.2
hereof; and
(k) cost of bonds purchased pursuant to Section 2.1(i) of this
Agreement.
ARTICLE V
DURATION, TERMINATION, DEFAULT
5.1 This Agreement shall become effective on the date hereof.
5.2 Subject to earlier termination as hereinafter provided, this Agreement
shall have an initial term ending on September 1, 2008 November 1, 2003.
Thereafter, this Agreement shall continue year-to-year on the same terms and
conditions as herein contained subject to being terminated by either Agent or
Owner upon no less than six (6) months written notice. The Agent may not
terminate this Agreement except in the case of non-payment of management fees
for a period of ninety (90) days after notice of such non-payment to Owner and
Lender. In addition, Lender shall have the right to terminate (or direct Owner
to terminate, as applicable) this Agreement: (i) upon the insolvency of Agent,
(ii) the occurrence of an Event of Default (as defined in the Loan Documents),
(iii) pursuant to the provisions of the Subordination, Attornment and
Collateral Assignment of Real Estate Management Agreement.
5.3 It shall be an Event of Default under this Agreement on the part of
Agent if Agent shall default in any material respect in performing any of its
obligations under this Agreement and such default shall not be cured within 30
days after written notice thereof is given by Owner to Agent (or, if the default
in question is curable but is of such nature that it cannot reasonably be
completely cured within such 30-day period, if Agent does not promptly after
receiving such notice commence to cure such default and thereafter proceed with
reasonable diligence to complete the curing thereof within 180 days after notice
is given by Owner to Agent). If an Event of Default by Agent shall occur, Owner
shall have the right to terminate this Agreement by written notice given to
Agent, and upon the giving of such notice this Agreement and the term hereof
shall terminate without any obligation on the part of Owner to make any payments
to Agent hereunder except as hereinafter provided.
5.4 If at any time during the term of this Agreement any involuntary
petition in bankruptcy or similar proceeding shall be filed against Agent
seeking its reorganization, liquidation or appointment of a receiver, trustee or
liquidator for it or for all or substantially all of its assets, and such
petition shall not be dismissed within 90 days after the filing thereof, or if
Agent shall:
(a) apply for or consent in writing to the appointment of a receiver,
trustee or liquidator of all or substantially all of its assets;
(b) file a voluntary petition in bankruptcy or admit in writing its
inability to pay its debts as they become due;
(c) make a general assignment for the benefit of creditors;
(d) file a petition or an answer seeking reorganization or an
arrangement with creditors or take advantage of any insolvency law; or
(e) file an answer admitting the material allegations of a petition
filed against it in any bankruptcy, reorganization or insolvency proceedings;
then upon the occurrence of any such event, Owner, at its option, may terminate
this Agreement by written notice given to Agent, and upon the giving of such
notice this Agreement and the term hereof shall terminate without any obligation
on the part of Owner to make any payments to Agent hereunder except as
hereinafter provided.
5.5 Owner shall have the additional right to terminate this Agreement on
at least 10 days' written notice to Agent, if Agent without Owner's prior
written consent shall assign or attempt to assign its rights or obligations
under this Agreement or subcontract (except for normal service agreements or as
otherwise specified in this Agreement) any of the services to be performed by
Agent. Owner shall also have the right to terminate this Agreement as to any
property included within the Premises on at least 10 days' written notice to
Agent if (a) such property shall be damaged or destroyed to the extent of 25% or
more by fire or other casualty and Owner elects not to restore or repair such
property or (b) there shall be a condemnation or deed in lieu thereof of 25% or
more of such property.
5.6 Agent acknowledges and agrees that Owner shall have the right to
subordinate and/or assign this agreement in connection with the Loan Documents.
Agent further agrees to execute such further instruments as Owner or Lender
deems necessary to effectuate such subordination, provided that in the event
Lender becomes entitled to possession of the Premises, the Lender shall be
entitled, at its option, to retain Agent to manage the Premises, in which case
the Agent shall be entitled to the compensation set forth in this Agreement
during all periods in which Agent is providing services to the Premises for the
Lender. Moreover, notwithstanding anything to the contrary contained herein,
for so long as any amounts remain outstanding under the Loan Documents, (i) this
Agreement and all fees payable by Owner hereunder shall be subject to and
subordinate to any mortgage liens on the Premises established by the Loan
Documents and (ii) Agent shall comply with any and all applicable provisions of
the Loan Documents and in the event there is a conflict between the terms of
this Agreement and the terms of the Loan Documents, the Loan Documents shall
control.
5.7 Upon any termination of this Agreement pursuant to the provisions of
this Article V, Owner shall remain obligated to pay to Agent fees and other
amounts due to Agent hereunder which accrued prior to the effective date of such
termination. Nothing contained in this Section 5.7 shall be deemed to waive,
affect or impair (a) Owner's rights to seek recourse against Agent for damages
or other relief in the event of the termination of this Agreement by Owner
pursuant to Section 5.3, 5.4 or 5.5 hereof, and (b) Agent's right to seek
recourse against Owner for damages or other relief in the event of the
termination of this Agreement by Agent pursuant to Section 5.2 hereof.
5.8 Upon the expiration or earlier termination of this Agreement, Agent
shall forthwith surrender and deliver to Owner any space in the Premises
occupied by Agent and shall make delivery to Owner or to Owner's designee or
agent, at Agent's home or regional offices or at its offices at the Premises, of
the following:
(a) a final accounting, reflecting the balance of income from and
expenses of the Premises as at the date of expiration or termination of this
Agreement;
(b) any funds of Owner or tenant security or advance rent deposits,
or both, held by agent with respect to the Premises; and
(c) all Confidential Information (in whatever medium stored) and all
other records, contracts, leases, ground leases, reciprocal easement agreements,
receipts for deposits, unpaid bills, lease summaries, canceled checks, bank
statements, paid bills and all other records, papers and documents and any
microfilm and/or computer disk of any of the foregoing which relate to the
Premises and the operation, maintenance, management and leasing thereof; all
such data, information and documents being at all times the property of Owner.
In addition, Agent shall furnish all such information and take all such
action as Owner shall reasonably require to effectuate an orderly and systematic
termination of Agent's duties and activities under this Agreement.
5.9 This Agreement shall terminate at the election of Owner as to any of
the properties set forth in Exhibit A upon thirty (30) days written notice to
the Agent if such properties are sold by Owner to a non-affiliated third party
purchaser or (unless the Lender shall otherwise notify the Agent in writing)
automatically if such properties were acquired on foreclosure of a mortgage
encumbering all or a portion of the Premises. In the event such properties are
sold by Owner to a non-affiliated third party purchaser and this Agreement is
not thereby terminated by Owner, the Agent shall have the right to terminate
this Agreement as to such properties upon sixty (60) days prior written notice
which notice must be given within ninety (90) days after the date of such sale
is consummated. If such properties are sold, Agent will not be entitled to
sales commission unless the Agent has been retained by Owner pursuant to a
separate commission arrangement. This Agreement shall remain in full force and
effect as to all properties not terminated pursuant to this Section 5.9.
5.10 The provisions of this Article V shall survive the expiration or
termination of this Agreement.
ARTICLE VI
ASSIGNMENT
6.1 Agent, except for a transfer , in accordance with the provisions of
the Loan Documents, shall not assign its rights or obligations under this
Agreement, either directly or by a transfer of shares of beneficial interest or
voting control either voluntarily or by operation of law.
6.2 In the event of a sale or conveyance of any of the Premises, Owner
shall have the right to cancel or assign this Agreement and its rights and
obligations hereunder to any person or entity to whom or which Owner sells or
conveys such property or properties. Upon such assignment, Owner shall be
relieved of its obligations under this Agreement with respect to such property
or properties that accrue from and after the date of such assignment, provided
that the assignee shall assume the obligations of Owner under this Agreement and
shall agree to perform and be bound by all of the terms and provisions hereof,
effective from and after the date of such assignment and an executed copy of
such assumption agreement shall be delivered to Agent. Agent shall not be
entitled to a "termination fee" in connection with an assignment or cancellation
as set forth in this Section 6.2, but otherwise shall be entitled to collect
from Owner such fees and expenses, including termination and/or relocation
expenses of Agent's full-time employees, if any, as Agent has earned pursuant to
this Agreement prior to the date of such assignment or cancellation.
ARTICLE VII
MISCELLANEOUS
7.1 Owner's representative ("Owner's Representative"), whose name and
address is set forth in paragraph 2 of Exhibit A attached hereto, shall be the
duly authorized representative of Owner for the purpose of this Agreement. Any
statement, notice, recommendation, request, demand, consent or approval under
this Agreement shall be in writing and shall be deemed given by Owner when made
or given by Owner's Representative or any officer of Owner and delivered
personally to an officer of Agent or mailed, addressed to Agent, at his address
first above set forth. Either party may, by notice to the other, designate a
different address for the receipt of the aforementioned communications and Owner
may, by notice to Agent, from time to time, designate a different Owner's
Representative to act as such. All communications mailed by one party to
another shall be sent by first class mail, postage prepaid or Express Mail
Service, or other commercial overnight delivery service, except that notices of
default shall be sent by registered or certified mail, return receipt requested,
postage prepaid, Express Mail Service or other commercial overnight delivery
service with receipt acknowledged in writing. Communications so mailed shall be
deemed given or served on the date mailed. Notwithstanding the foregoing, any
notices, requests, consents, approvals and other communications, other than
notices of default or approvals of annual budgets, and other communications,
approvals or agreements which are required by the express terms of other
provisions of this Agreement to be in writing, may be given by telegram,
telephonic communication or orally in person. Agent and Owner shall furnish to
the other the names and telephone numbers of one or more persons who can be
reached at any time during the term of this Agreement in the event of an
emergency.
7.2 Agent shall, at its own expense, qualify to do business and obtain and
maintain such licenses as may be required for the performance by Agent of its
services.
7.3 Each provision of this Agreement is intended to be severable. If any
term or provision hereof shall be determined by a court of competent
jurisdiction to be illegal or invalid for any reason whatsoever, such provision
shall be severed from this Agreement and shall not affect the validity of the
remainder of this Agreement.
7.4 In the event either of the parties hereto shall institute any action
or proceeding against the other party relating to this Agreement, the
unsuccessful party in such action or proceeding shall reimburse the successful
party for its disbursements incurred in connection therewith and for its
reasonable attorney's fees as fixed by the court.
7.5 No consent or waiver, express or implied, by either party hereto or of
any breach or default by the other party in the performance by the other of its
obligations hereunder shall be valid unless in writing, and no such consent or
waiver shall be deemed or construed to be a consent or waiver to or of any other
breach or default in the performance by such other party of the same or any
other obligations of such party hereunder. Failure on the part of either party
to complain of any act or failure to act of the other party or to declare the
other party in default, irrespective of how long such failure continues, shall
not constitute a waiver by such party of its rights hereunder. The granting of
any consent or approval in any one instance by or on behalf of Owner shall not
be construed to waive or limit the need for such consent in any other or
subsequent instance.
7.6 The venue of any action or proceeding brought by either party against
the other arising out of this Agreement shall be in the state or federal courts
of the Commonwealth of Pennsylvania.
7.7 This Agreement may not be changed or modified except by an agreement
in writing executed by each of the parties hereto and consented to by the
Lender. This Agreement constitutes all of the understandings and agreements
between the parties in connection with the agency herein created.
7.8 This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their permitted successors and assigns, but shall not inure
to the benefit of, or be enforceable by, any other person or entity.
7.9 Nothing contained in this Agreement shall be construed as making Owner
and Agent partners or joint ventures or as making either of such parties liable
for the debts or obligations of the other, except as in this Agreement is
expressly provided.
7.10 The effective date of this Agreement shall be August 28, 1998.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
WASHINGTON CROWN CENTER
ASSOCIATES, L.P.
(Owner)
BY: WASHINGTON
CROWN CENTER ASSOCIATES, as sole
general partner
By: /s/ Ronald P. Rusinak
Name: Ronald P. Rusinak
Title: Vice President and Secretary
CROWN AMERICAN PROPERTIES, L.P.
(Agent)
BY: CROWN AMERICAN REALTY TRUST,
as sole general partner
By: /s/ Ronald P. Rusinak
Name: Ronald P. Rusinak
Title: Vice President and Secretary
EXHIBIT A
1. Premises (1.1):
a. Washington Crown Center
Washington, Pennsylvania.
2. Name and Address of Owner's Representative (7.1):
John M. Kriak
Pasquerilla Plaza
Johnstown, PA 15907.
3. Limit of amount authorized for non-emergency purchases and repairs (2.1(a)
and (c)):
$50,000.00.
4. Name of Banks (2.1(g)):
PNC Bank, N.A.
5. Management Fees (4.1):
Owner agrees to pay Agent as compensation for its management services
hereunder an amount equal to 5% of the amounts set forth in Section 4.1.
Such management fee shall be payable monthly based on the income earned for
the categories described in Section 4.1, computed in accordance with GAAP.
Agent shall be entitled to receive the management fee on the pro rata
portion of percentage rents received by Owner after the termination of this
Agreement but applicable to time periods prior to the termination of this
Agreement based upon the actual number of days lapsed divided by 365.
6. Legal and Tenant Coordination Expenses:
Owner agrees to pay Agent, to defray in-house legal expenses and tenant
coordination expenses (a) with respect to each new lease and each lease
renewal of mall shops and free-standing buildings (other than a lease
renewal or extension resulting from the exercise of an option contained in
such lease), an amount equal to the Agent's actual costs of providing such
services, limited however to the annual amount which is capitalized as
tenant allowance costs under the Owner's customary accounting practices as
Agent and Owner shall mutually agree and as recorded in the Owner's audited
annual financial statements. Such fees shall be payable monthly in arrears
using estimated fees per square foot, based on the estimated annual fee;
the monthly estimated fees shall be adjusted to a final actual amount
within 90 days after the Owner's fiscal year end. Agent and Owner shall
use their best efforts to estimate the monthly fee per square foot and
shall adjust the amount periodically during the year as mutually agreed
upon.
7. Leasing and Land Sale Fees:
(i) Leasing Commission:
Agent shall be entitled to commissions for leases secured, in addition
to other fees and compensation provided in this Agreement, equal to the
Agent's actual costs of providing leasing services related to permanent
leases (those with an initial term in excess of one year), limited however
to the aggregate amount which is capitalized as lease acquisition costs
under the Owner's customary accounting practices as Agent and Owner shall
mutually agree and as recorded in the Owner's audited annual financial
statements. Such fees shall be payable monthly in arrears using estimated
fees per square foot, based on the estimated annual fee; the monthly
estimated fees shall be adjusted to a final actual amount within 90 days
after the Owner's fiscal year end. Agent and Owner shall use their best
efforts to estimate the monthly fee per square foot and shall adjust the
amount periodically during the year as mutually agreed upon.
(ii) Brokerage Commissions:
Owner and Agent acknowledge that some leasing and land sale
transactions will involve the use of an independent real estate broker or
real estate sales agent, who will be paid a commission for introducing and
bringing a prospective tenant or purchaser to the Premises. Agent may
utilize brokers in connection with carrying out its leasing and land sale
activities, and shall be reimbursed by Owner for the cost of those
Brokerage Commissions in the following circumstances:
(a) Agent was required to recognize the broker or sales agent as the
representative of the prospective tenant or purchaser and was not
allowed or permitted the opportunity to contact or negotiate with
the tenant or purchaser except through the broker or sales agent,
and this fact was disclosed to Owner.
(b) Agent disclosed to Owner the existence of the broker or sales
agent and the brokerage fee at the time the proposed leasing or
land sale transaction was submitted to Owner for approval.
Except as provided in (a) and (b) above, Agent shall assume the sole cost and
responsibility for broker commissions.
(iii) Land Sale Commission:
For services provided pursuant to Section 2.7(e), Owner shall pay the
Agent a sales commission equal to fifteen percent (15%) of the adjusted
sales price ("Sales Commission"), as compensation for overhead associated
with the services of certain employees of Agent. For purposes of the
foregoing "adjusted sales price" shall mean the gross proceeds payable to
Owner less reasonable and necessary development costs paid by Owner in
connection with the transfer. One-half (1/2) of the Sales Commission shall
be due and payable to Agent at the time a mutually binding Agreement of
Sale with respect to any Sale Property is fully-executed, with the
computation of such amount being based on the gross proceeds payable to
Owner. The balance of the Sales Commission shall be paid to Agent at the
time of closing of any such sale.
8. Excluded Services:
Notwithstanding anything to the contrary contained herein, the parties
acknowledge that it is not within the contemplation of this Agreement or
the fee structure included herein that the Agent perform any services with
respect to the following: any "due diligence" or similar efforts relating
to any financing, refinancing or sale or disposition of the Premises;
zoning compliance of the Premises; performing or supervising (including
tenant room build-outs or remodeling) any extensive alteration or
renovation to the Premises; asbestos and/or other environmental studies and
any related abatement or remediation activities for any tenant premises,
site acquisitions of additional ground for the expansion of the Premises;
reconstruction after casualty or condemnation; leasing, management, or
construction relating to any proposed or implemented expansion of the
Premises or work generally classified as "development" work in connection
with the same; renewals or renegation of leases or other agreements with
department stores if such involves substantial changes from existing
documents (including, without limitation, negotiation of new leases,
renewal leases, operating covenants, renovation provisions, expansion
rights, and like matters); or replacement of department stores tenancies.
Owner shall reimburse Agent for all such services rendered equal to the
Agent's actual costs of providing such services, limited however to the
annual amount which is capitalized as tenant allowance or construction
costs under the Owner's customary accounting practices as Agent and Owner
shall mutually agree and as recorded in the Owner's audited annual
financial statements. Such fees shall be payable monthly in arrears using
estimated based on the estimated annual fee; the monthly estimated fees
shall be adjusted to a final actual amount within 90 days after the Owner's
fiscal year end. Agent and Owner shall use their best efforts to estimate
the monthly fees and shall adjust the amount periodically during the year
as mutually agreed upon.
9. Other Requested Services:
If Owner requests Agent to provide its own personnel for non-routine
services which Agent is not obligated elsewhere in this Agreement to
perform the compensation for which is not provided for hereinabove,
unless Owner and Agent otherwise agree to an acceptable fee for such
services, Owner shall pay Agent an amount equal to two and one-half
times the actual base cost of Agent's departmental personnel, as computed
by Agent, for their time involved in performing such requested services,
plus reimbursement for any out-of-pocket costs incurred incident to
furnishing such requested services. Owner and Agent shall agree in
advance as to the hourly base cost to be applicable for the specific
services to be provided. Such amount or amounts shall be payable to
Agent monthly within ten (10) days after Owner's receipt of Agent's
statement setting for the amount payable to Agent.
EXHIBIT B
INTENTIONALLY OMITTED
EXHIBIT C
Leasing Guidelines
Agent shall use a form or forms of lease; or with respect to temporary
tenants and/or short term promotional activities, a form or forms of license
agreement, which have been prepared and submitted to Owner for Owner's prior
review and approval. Agent will negotiate and make modifications to such forms
as directed by Owner, or as necessary or appropriate with respect to the needs
of the particular transactions, utilizing methods and techniques consistent with
prevailing practices employed in management and leasing of shopping centers.
For all agreements, excepting license agreements for temporary tenants
and/or for short term promotion activities, all essential financial and
business terms and provisions of the lease or agreement, including construction
and improvements of the leasehold, shall be presented for Owner's approval.
Tenant-signed leases presented by Agent for Owner's review and execution shall
be consistent with such terms and conditions previously approved by Owner, or
with such deviations or modifications identified for Owner's review. Execution
of tenant-signed leases that are presented by Agent for Owner's signature will
acknowledge Owner's approval of the lease, its form, its terms and provisions.
No lease or other agreement shall be entered into, modified, canceled or
extended if the consent of any mortgagee or ground lessor is required unless
such consent has been obtained. Agent will notify Owner when consent is
required.
EXHIBIT 10.9
CROWN AMERICAN WL ASSOCIATES, L.P.
and
CROWN AMERICAN FINANCING PARTNERSHIP, L.P.
(Borrower)
to
GENERAL ELECTRIC CAPITAL CORPORATION
(Lender)
AMENDED AND RESTATED PERMANENT
LOAN AGREEMENT
Dated: As of August 28, 1998
Crown American Mall Portfolio
DOCUMENT PREPARED BY:
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, NY 10038
Attention: William P. McInerney, Esq.
TABLE OF CONTENTS
Page
ARTICLE 1
CERTAIN DEFINITIONS
Section 1.1 Certain Definitions 1
ARTICLE 2
LOAN TERMS
Section 2.1 The Loan 21
Section 2.2 Interest Rate 21
Section 2.3 Terms of Payment 21
Section 2.4 Maturity 22
Section 2.5 Payments and Computations 22
Section 2.6 Intentionally Omitted 23
Section 2.7 Substitution of Properties 23
Section 2.8 Release of Option Parcels 33
Section 2.9 Release of Out-Parcels 35
Section 2.10 Release of Construction Parcels 39
Section 2.11 Additional Collateral Parcels 42
Section 2.12 Prepayment; Substitution of Collateral 45
Section 2.13 Release of Property 48
ARTICLE 3
SECURITY; RESERVES AND CASH MANAGEMENT
Section 3.1 Security; Establishment of Funds 50
Section 3.2 Pledge and Grant of Security Interest 52
Section 3.3 Disbursement of Funds 52
Section 3.4 Cash Management System 55
Section 3.5 Payments Received Under the Cash Management
Agreement 57
ARTICLE 4
CONDITIONS PRECEDENT
Section 4.1 Closing Conditions 57
ARTICLE 5
INSURANCE, CONDEMNATION, AND IMPOUNDS
Section 5.1 Insurance; Casualty and Condemnation 61
Section 5.2 Condemnation 65
Section 5.3 Restoration 66
Section 5.4 Impounds 70
ARTICLE 6
ENVIRONMENTAL MATTERS
Section 6.1 Certain Definitions 71
Section 6.2 Representations and Warranties on Environmental
Matters 72
Section 6.3 Covenants on Environmental Matters 73
Section 6.4 Allocation of Risks and Indemnity 75
Section 6.5 No Waiver 76
ARTICLE 7
LEASING MATTERS
Section 7.1 Representations and Warranties on Leases 76
Section 7.2 Standard Lease Form; Approval Rights 77
Section 7.3 Covenants 77
Section 7.4 Tenant Estoppels 78
ARTICLE 8
REPRESENTATIONS AND WARRANTIES
Section 8.1 Organization, Power and Authority 78
Section 8.2 Validity of Loan Documents 78
Section 8.3 No Conflicts 79
Section 8.4 Liabilities; Litigation 79
Section 8.5 Taxes and Assessments 80
Section 8.6 Other Agreements; Defaults 80
Section 8.7 Title 80
Section 8.8 Compliance with Law 80
Section 8.9 Location of Borrower 81
Section 8.10 ERISA 81
Section 8.11 Forfeiture 81
Section 8.12 Tax Filings 81
Section 8.13 Solvency 82
Section 8.14 Full and Accurate Disclosure 82
Section 8.15 Flood Zone 82
Section 8.16 Federal Reserve Regulations 83
Section 8.17 Insurance 83
Section 8.18 Use of Properties 83
Section 8.19 Certificate of Occupancy; Licenses 83
Section 8.20 Physical Condition 83
Section 8.21 Boundaries 83
Section 8.22 Survey 84
Section 8.23 Loan to Value 84
Section 8.24 Filing and Recording Taxes 84
Section 8.25 Single Purpose Entity/Separateness 84
Section 8.26 Management Agreement 87
Section 8.27 Investment Company Act 88
Section 8.28 Ground Lease Representations and Warranties 88
Section 8.29 Reciprocal Easement Agreements 89
ARTICLE 9
FINANCIAL REPORTING
Section 9.1 Financial Statements 90
Section 9.2 Accounting Principles 91
Section 9.3 Other Information; Access 92
Section 9.4 Format of Delivery 92
Section 9.5 Additional Financial Requirements 92
ARTICLE 10
COVENANTS
Section 10.1 Due on Sale and Encumbrance; Transfers of
Interests 94
Section 10.2 Taxes; Utility Charges 94
Section 10.3 Management 95
Section 10.4 Operation; Maintenance; Inspection 95
Section 10.5 Taxes on Security 95
Section 10.6 Legal Existence; Name, Etc. 96
Section 10.7 Further Assurances 96
Section 10.8 Estoppel Certificates 96
Section 10.9 Notice of Certain Events 96
Section 10.10 Indemnification 97
Section 10.11 Payment For Labor and Materials 97
Section 10.12 Alterations 97
Section 10.13 Handicapped Access 98
Section 10.14 Additional Retail Covenants 99
ARTICLE 11
EVENTS OF DEFAULT
Section 11.1 Payments 100
Section 11.2 Insurance 100
Section 11.3 Single Purpose Entity 100
Section 11.4 Insolvency Opinion 100
Section 11.5 Taxes 100
Section 11.6 Sale, Encumbrance, Etc. 100
Section 11.7 Representations and Warranties 100
Section 11.8 Other Encumbrances 100
Section 11.9 Involuntary Bankruptcy or Other Proceeding 101
Section 11.10 Voluntary Petitions, Etc. 101
Section 11.11 Ground Lease Rent 101
Section 11.12 Ground Lease Default 101
Section 11.13 Secured Credit Line 101
Section 11.14 Covenants 102
ARTICLE 12
REMEDIES
Section 12.1 Remedies - Insolvency Events 102
Section 12.2 Remedies - Other Events 102
Section 12.3 Lender's Right to Perform the Obligations 103
Section 12.4 Cross-Default; Cross-Collateralization;
Waiver of Marshalling of Assets 104
ARTICLE 13
LIMITATIONS ON LIABILITY
Section 13.1 Limitation on Liability 105
Section 13.2 Limitation on Liability of Officers,
Employees, Etc. 106
ARTICLE 14
SPECIAL PROVISIONS
Section 14.1 Achievements 106
Section 14.2 Permitted Transfers 107
Section 14.3 Servicer 110
Section 14.4 Securitization 110
Section 14.5 Securitization Indemnification 111
ARTICLE 15
MISCELLANEOUS
Section 15.1 Notices 113
Section 15.2 Amendments and Waivers 114
Section 15.3 Limitation on Interest 114
Section 15.4 Invalid Provisions 115
Section 15.5 Reimbursement of Expenses 115
Section 15.6 Approvals; Third Parties; Conditions 116
Section 15.7 Lender Not in Control; No Partnership 116
Section 15.8 Time of the Essence 116
Section 15.9 Successors and Assigns 116
Section 15.10 Renewal, Extension or Rearrangement 117
Section 15.11 Waivers 117
Section 15.12 Cumulative Rights; Joint and Several Liability 117
Section 15.13 Singular and Plural 117
Section 15.14 Phrases 117
Section 15.15 Schedules 117
Section 15.16 Titles of Articles, Sections and Subsections 117
Section 15.17 Promotional Material 118
Section 15.18 Brokers and Financial Advisors 118
Section 15.19 Survival 118
Section 15.20 Waiver Of Jury Trial 118
Section 15.21 Waiver of Punitive or Consequential Damages 119
Section 15.22 Governing Law 119
Section 15.23 Entire Agreement 120
Section 15.24 Counterparts 120
Section 15.25 Prior Loan 120
LIST OF SCHEDULES
SCHEDULE I WYOMING VALLEY AND LOGAN VALLEY
GROUND LEASES
SCHEDULE II UNIONTOWN GROUND LEASES
SCHEDULE III REQUIRED REPAIRS
SCHEDULE IV RELEASE AMOUNTS
SCHEDULE V RENT ROLL
SCHEDULE VI ANCHOR LEASES
SCHEDULE VII VIEWMONT MALL PLAN (LONE STAR - ORANGE)
SCHEDULE VIII SITE ASSESSMENTS
SCHEDULE IX LITIGATION
SCHEDULE X NEW RIVER VALLEY MALL PLAN (PARTHENON - ORANGE)
SCHEDULE XI NON-DEFEASANCE OPTION PARCEL PLANS (PATRICK HENRY AND
NITTANY MAY PARCELS)
SCHEDULE XII DEFEASANCE OPTION PARCEL PLANS (ORANGE)
SCHEDULE XIII OUT-PARCEL PLANS:
(DEFEASANCE OUT-PARCELS (BLUE);
NON-DEFEASANCE OUT-PARCELS (GREEN); CONSTRUCTION PARCELS
(PURPLE);
FUTURE ROAD PARCEL (PURPLE CROSS-HATCH))
SCHEDULE XIV RENOVATIONS
SCHEDULE XV ENVIRONMENTAL REPAIRS
SCHEDULE XVI OUT-PARCEL MINIMUM RELEASE AMOUNT
AMENDED AND RESTATED PERMANENT LOAN AGREEMENT
This Amended and Restated Permanent Loan Agreement (this "Agreement")
is entered into as of August 28, 1998, between GENERAL ELECTRIC CAPITAL
CORPORATION, a New York corporation, whose address is 292 Long Ridge Road,
Stamford, Connecticut 06927 ("Lender"), Crown American WL Associates, L.P. ("WL
Associates"), a Pennsylvania limited partnership whose address is Pasquerilla
Plaza, Johnstown, Pennsylvania 15901 and Crown American Financing Partnership,
L.P., a Delaware limited partnership, whose address is Pasquerilla Plaza,
Johnstown, Pennsylvania 15901 ("Financing Partnership"; WL Associates and
Financing Partnership are hereinafter collectively referred to as the
"Borrower").
W I T N E S S E T H :
WHEREAS, WL Associates and Lender were parties to that certain Interim
Loan Agreement, dated as of November 17, 1997 (the "Interim Loan Agreement");
WHEREAS, pursuant to a certain assumption agreement entered into on or
about the date hereof among and between WL Associates, Financing Partnership and
Lender, Borrower assumed the debt and all other obligations set forth in the
Interim Loan Agreement and in the loan documents executed in connection
therewith;
WHEREAS, Borrower and Lender have agreed to amend and restate the
terms of the Interim Loan Agreement in order to extend the maturity date of the
debt evidenced thereby and to modify, amend and restate all other terms and
provisions thereof in accordance with the terms and provisions of this
Agreement;
WHEREAS, Lender has agreed in the manner hereinafter set forth to lend
additional amounts to the Borrower and Borrower has agreed to secure such
additional sums with additional collateral in the manner and to the extent set
forth herein;
NOW, THEREFORE, in consideration of the premises, the mutual
covenants, agreements, representations and warranties hereinafter contained, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree that the Interim Loan Agreement is hereby amended and restated in its
entirety to read as follows:
ARTICLE 1
CERTAIN DEFINITIONS
Section 1.1 Certain Definitions. As used herein, the following terms
have the meanings indicated:
"Access Laws" has the meaning assigned in Section 10.13.
"Acquired Properties" has the meaning assigned in Section 9.5(a).
"Acquired Property Statements" has the meaning assigned in Section
9.5(a).
"Additional Collateral Acquisition Date" has the meaning assigned in
Section 2.11(c)(i).
"Additional Collateral Parcel" has the meaning assigned in
Section 2.11(a).
"Adjusted Rate" has the meaning assigned in Section 2.2.
"Adjusted Release Amount" shall mean for an Individual Property the
product of the Pro-Rata Release Amount for such Individual Property and one
hundred twenty-five percent (125%); provided, however, if Borrower elects to
exercise its option pursuant to Section 5.3(d) hereof to defease a portion of
the Loan with respect to a Casualty or Condemnation of an applicable Individual
Property, the Adjusted Release Amount for such purposes shall be deemed to be
the Pro-Rata Release Amount for such Individual Property.
"Affiliate" means (a) any corporation in which Borrower or any
partner, shareholder, director, officer, member, or manager of Borrower directly
or indirectly owns or controls more than ten percent (10%) of the beneficial
interest, (b) any partnership, joint venture or limited liability company in
which Borrower or any partner, shareholder, director, officer, member, or
manager of Borrower is a partner, joint venturer or member, (c) any trust in
which Borrower or any partner, shareholder, director, officer, member or manager
of Borrower is a trustee or beneficiary, (d) any entity of any type which is
directly or indirectly owned or controlled in an amount of ten percent (10%) or
greater by Borrower or any partner, shareholder, director, officer, member or
manager of Borrower, (e) any partner, shareholder, director, officer, member,
manager or employee of Borrower, or (f) any Borrower Party.
"Agreement" means this Amended and Restated Permanent Loan Agreement,
as amended from time to time.
"Anchor Lease(s)" means with respect to each Individual Property,
those leases set forth on Schedule VI attached hereto and any future leases
entered into by the Borrower for the space leased pursuant to the leases set
forth in Schedule VI attached hereto.
"Anchor Tenant(s)" means (a) a tenant under an Anchor Lease or (b)
with respect to a Construction Parcel, a tenant or store-owned occupant that is
of substantially the same character and type as, but not necessarily limited to,
Sears Roebuck & Co., J.C. Penney Company, Inc., The May Department Stores
Company, The Bon-Ton Stores, Wal-Mart Stores and Dillard's or a state of the art
movie theater.
"Annual Budget" means the operating budget, including all planned
capital expenditures, for all the Properties prepared by Borrower for the
applicable calendar year or other period.
"Anticipated Repayment Date" means September 10, 2008.
"Applicable Interest Rate" shall mean the Contract Rate or the
Adjusted Rate, as applicable, in effect under the terms and provisions of the
Agreement.
"Approved Annual Budget" has the meaning assigned in Section 2.5.5(a).
"Assignment of Leases and Rents" means the Assignment of Leases and
Rents (amended and restated, if applicable), executed by Borrower for the
benefit of Lender, and pertaining to leases of space in each Individual Property
and any amendments, modifications, renewals, substitutions or replacements
thereof.
"Award" has the meaning assigned in Section 5.2.
"Bankruptcy Party" has the meaning assigned in Section 11.9.
"Basic Carrying Costs" shall mean, with respect to an Individual
Property, the sum of the following costs associated with such Individual
Property for the relevant calendar year or payment period: (i) taxes and
assessments with respect to such Individual Property, (ii) Insurance Premiums
with respect to such Individual Property, (iii) if applicable, any rent due
under the Ground Lease effecting such Individual Property and (iv) maintenance
charges or other impositions.
"Black Rose Antiques Parcel" shall mean that certain Construction
Panel being operated as an antiques mall called "Black Rose Antiques" at the
Individual Property known as North Hanover Mall, located in Hanover,
Pennsylvania.
"Bon-Ton Option" means collectively those certain purchase options
granted in the following agreements: (i) with respect to the Individual Property
known as Wyoming Valley Mall located in Wilkes-Barre, Pennsylvania, that certain
Letter Agreement, dated September 30, 1994, by and between The Bon-Ton Stores,
Inc., as tenant, and the REIT, as landlord, (ii) with respect to the Individual
Property known as Lycoming Mall located in Williamsport, Pennsylvania, that
certain Second Amendment to Lease dated September 30, 1994 by and between
Financing Partnership, as landlord, and The Bon-Ton Stores, Inc. as tenant and
(iii) with respect to the Individual Property known as the West Manchester Mall
located in York, Pennsylvania, that certain Second Amendment to Lease dated
September 30, 1994 by and between Financing Partnership, as landlord, and The
Bon-Ton Stores, as tenant.
"Bonds" has the meaning assigned in Section 2.10(b)(viii).
"Borrower" has the meaning set forth in the introduction to this
Agreement.
"Borrower Party" means any guarantor (including Guarantor), any
general partner of Borrower, and any general partner in any partnership that is
a general partner of Borrower, at any level.
"Business Day" means a day other than a Saturday, a Sunday, or a legal
holiday on which national banks located in the State of New York, the
Commonwealth of Massachusetts, the Commonwealth of Pennsylvania or the State of
Texas are not open for general banking business.
"Capital Expenditures" for any period means the amount expended for
items capitalized under generally accepted accounting principles (including
expenditures for building improvements or major repairs, leasing commissions and
tenant improvements).
"Cash Expenses" means, for any period, the operating expenses for the
operation of the Properties as set forth in an Approved Annual Budget to the
extent that such expenses are actually incurred by Borrower minus any payments
into the Tax and Insurance Escrow Fund.
"Cash Management Account" has the meaning set forth in Section 3.4(b).
"Cash Management Agreement" has the meaning set forth in Section
3.4(a).
"Casualty" has the meaning assigned in Section 5.1(g).
"Casualty Consultant" has the meaning set forth in Section
5.3(b)(iii).
"Casualty Retainage" has the meaning set forth in Section 5.3(b)(iv).
"Cleanup and Removal Costs" has the meaning assigned in Section 6.2
hereof.
"Closing Date" means the date the Loan is funded by Lender.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
as it may be further amended from time to time, any successor statutes thereto,
and applicable U.S. Department of Treasury regulations issued pursuant thereto
in temporary or final form.
"Condemnation" has the meaning assigned in Section 5.2.
"Condemnation Proceeds" has the meaning assigned in Section 5.3(b).
"Construction Parcel" means collectively those certain parcels of real
property substantially delineated in the color purple on the plans attached
hereto as Schedule XIII and, if required by applicable law or an Anchor Tenant,
contiguous parking area sufficient to provide five (5.0) car spaces of
sufficient size to accommodate full standard size American built cars for each
one thousand (1,000) square feet of gross leaseable area within the Construction
Parcel.
"Construction Parcel Release Amount" means for a Construction Parcel,
the greater of (a) the appraised value of the Construction Parcel based on an
appraisal delivered to Lender (which in form and substance would be acceptable
to a prudent lender); provided, however, with respect to the Construction Parcel
occupied as of the Closing Date by Black Rose Antiques at the Individual
Property known as Hanover Mall, located in Hanover, Pennsylvania, the appraised
value shall be determined assuming a vacant anchor pad for the space occupied by
Black Rose Antiques, and (b) 100% of the net proceeds received in connection
with the sale of the Construction Parcel less Lender approved closing costs.
"Construction Parcel Transferee" has the meaning assigned in Section
2.10(b)(ii).
"Contract Rate" means Seven and Forty-Three one-hundredths percent
(7.43%).
"Control" means with respect to any Person, the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities or other beneficial interest or by contract
or otherwise.
"Credit Agreement" shall mean that certain Credit Agreement, dated as
of November 17, 1997, by and among Lender, Operating Partnership, the REIT,
Crown American Acquisition Associates I, L.P., Crown American Acquisition
Associates II, L.P., Crown American Acquisition Associates III, L.P., Crown
American Acquisition Associates IV, L.P., Crown American Acquisition Associates
V, L.P., Crown American Acquisition Associates VI, L.P., Crown American
Acquisition Associates VII, L.P., Crown American Acquisition Associates VIII,
L.P., Crown American Acquisition Associates IX, L.P. and Crown American
Acquisition Associates X, L.P., as amended by that certain First Amendment to
Credit Agreement, dated December 12, 1997 by and among such parties, that
certain Second Amendment to Credit Agreement, dated May 13, 1998, by and among
such parties and that certain Modification of Secured Credit Line Loan
Documents, dated as of the date hereof, by and among such parties.
"Credit Line Mortgage" shall mean, collectively, that certain (i) Open
End Leasehold Mortgage, Assignment of Leases and Rent, Security Agreement and
Fixture Filing, (ii) Deed to Secure Debt, Assignment of Lease and Rents and
Security Agreement and (iii) Deed of Trust, Assignment of Leases and Rents,
Security, Agreement and Fixture Filing, all dated as of November 17, 1997 given
by Operating Partnership to Lender.
"Credit Line Note" shall mean that certain Promissory Note, dated as
of November 17, 1997, in the stated principal amount of $150,000,000.00, made by
the Operating Partnership, the REIT, Crown American Acquisition Associates I,
L.P., Crown American Acquisition Associates II, L.P., Crown American Acquisition
Associates III, L.P., Crown American Acquisition Associates IV, L.P., Crown
American Acquisition Associates V, L.P., Crown American Acquisition Associates
VI, L.P., Crown American Acquisition Associates VII, L.P., Crown American
Acquisition Associates VIII, L.P., Crown American Acquisition Associates IX,
L.P. and Crown American Acquisition Associates X, L.P. in favor of Lender.
"Debt" shall mean the outstanding principal amount set forth in, and
evidenced by, this Agreement and the Note together with all interest accrued and
unpaid thereon, default interest, late charges and all other sums (including the
Yield Maintenance Premium) due to Lender in respect of the Loan under the Note,
this Agreement, the Mortgages or any other Loan Document.
"Debt Service" means the aggregate interest, fixed principal, and
other payments due under the Loan, and on any other outstanding loans approved
by Lender for the period of time for which calculated.
"Debt Service Coverage Ratio" shall mean a ratio for the twelve (12)
full calendar months preceding the applicable period in which:
(a) the numerator is the Net Operating Income for such period as set forth
in the statements required thereunder, excluding the Net Operating
Income for the Individual Property, or a portion thereof, released
from the lien of a Mortgage in connection with a Defeasance Event; and
(b) the denominator is the aggregate amount of principal and interest due
and payable on the Note or, in the event that a Defeasance Event has
occurred, the Undefeased Note.
For the purposes of this definition, the amount of principal and interest due
for the period from the date hereof until the tenth (10th) day of September,
2000 shall be equal to the payment of principal and interest that would be
required to be made in order to fully amortize the Loan over a period of twenty-
five (25) years at the Contract Rate. For informational purposes only, the Debt
Service Coverage Ratio calculated by Lender as of the date hereof is equal to
1.64 to 1.0.
"Debt Service Escrow Fund" has the meaning assigned in Section 3.1(d).
"Default Rate" means the lesser of (a) the maximum rate of interest
allowed by applicable law, and (b) five percent (5%) per annum in excess of the
Applicable Interest Rate.
"Default Yield Maintenance Premium" shall mean an amount equal to the
greater of (a) one percent (1%) of the outstanding principal amount of the Loan
to be prepaid or satisfied, as applicable, or (b) the Yield Maintenance Premium
that would be required if a Defeasance Event had occurred in an amount equal to
the outstanding principal amount of the Loan to be satisfied or prepaid, as
applicable.
"Defeasance Date" has the meaning assigned in Section 2.12(b)(i).
"Defeasance Deposit" shall mean an amount equal to the remaining
principal amount of the Note or the principal amount of the Defeased Note, as
applicable, the Yield Maintenance Premium, any costs and expenses incurred or to
be incurred in the purchase of U.S. Obligations necessary to meet the Scheduled
Defeasance Payments and any revenue, documentary stamp or intangible taxes or
any other tax or charge due in connection with the transfer of the Note or the
Defeased Note, as applicable, the creation of the Defeased Note and the
Undefeased Note, if applicable, or otherwise required to accomplish the
agreements of Sections 2.12 and 2.13 hereof.
"Defeasance Event" has the meaning assigned in Section 2.12(b).
"Defeased Note" has the meaning assigned in Section 2.12(b)(v).
"Eligible Account" shall mean a separate and identifiable account from
all other funds held by the holding institution that is either (i) an account or
accounts maintained with a federal or state-chartered depository institution or
trust company which complies with the definition of Eligible Institution or (ii)
a segregated trust account or accounts maintained with a federal or state
chartered depository institution or trust company acting in its fiduciary
capacity which, in the case of a state chartered depository institution or trust
company is subject to regulations substantially similar to 12 C.F.R. 9.10(b),
having in either case a combined capital and surplus of at least $50,000,000 and
subject to supervision or examination by federal and state authority. An
Eligible Account will not be evidenced by a certificate of deposit, passbook or
other instrument.
"Eligible Institution" shall mean either (i) The Chase Manhattan Bank
or (ii) any other depository institution or trust company acceptable to Lender,
provided that in the event a Securitization has occurred the appointment of such
entity does not result in a requalification, downgrade or withdrawal of any
ratings in effect immediately prior to such appointment for the Securities
issued in connection with a Securitization that are then outstanding; provided,
however, in either case, in the event a Securitization has occurred, the short
term unsecured debt obligations or commercial paper of which are rated by the
Rating Agencies which rate the Loan as follows: (a) at least A-1 by Standard &
Poor's Ratings Group, P-1 by Moody's Investors Service, Inc., D-1 by Duff &
Phelps Credit Rating Co. and F-1+ by Fitch IBCA Inc. in the case of accounts in
which funds are held for 30 days or less or, (b) in the case of accounts in
which funds are held for more than 30 days, the long term unsecured debt
obligations of which are rated at least "AA" by Fitch, Duff and S&P and "Aa2" by
Moody's.
"Environmental Escrow Fund" has the meaning assigned in
Section 3.1(h).
"Environmental Laws" has the meaning assigned in Section 6.1(a).
"ERISA" has the meaning assigned in Section 8.10(a).
"Event of Default" has the meaning assigned in Article 11.
"Exchange Act" has the meaning assigned in Section 14.5(a).
"Exchange Act Filing" has the meaning assigned in Section 9.5(b).
"Existing Mortgages" means those certain fee and leasehold mortgages
executed by the Operating Partnership and WL Associates in favor of Lender on or
about November 17, 1997 and encumbering the Properties known as Wyoming Valley
and Logan Valley as such mortgages are modified, amended and restated pursuant
to the provisions of this Agreement and the other Loan Documents.
"Expansion Escrow Fund" shall mean collectively the Patrick Henry
Expansion Escrow Fund and the Nittany Expansion Escrow Fund.
"Extraordinary Expenses" means an extraordinary operating expense or
capital expense not set forth in an Approved Annual Budget.
"Financing Partnership" has the meaning set forth in the introduction
to this Agreement.
"Fundamental Transaction" has the meaning assigned in Section 14.2(b).
"Funds" means the Required Repair Fund, the Replacement Escrow Fund,
the Rollover Escrow Fund, the Ground Lease Escrow Fund, the Debt Service Escrow
Fund, the Renovation Escrow Fund, the Expansion Escrow Fund and the
Environmental Escrow Fund.
"Future Road Dedication Agreement" means those certain deeds of
dedication, or similar agreements, executed from time to time by Borrower or its
predecessor in favor of the Governmental Authority having jurisdiction over the
applicable Individual Property, dedicating the real property delineated in the
color of purple with cross-hatch on the plans attached hereto as Schedule XIII
for the use of public roads.
"Future Road Parcel" means collectively those certain parcels of real
property as delineated in the color of purple with cross-hatch on the plans
attached hereto as Schedule XIII.
"GAAP" has the meaning assigned in Section 9.2.
"Governmental Authority" shall mean any court, board, agency,
commission, office or authority of any nature whatsoever for any governmental
unit (federal, state, county, district, municipal, city or otherwise) whether
now or hereafter in existence.
"Ground Lease Escrow Fund" has the meaning assigned in Section 3.1(e).
"Ground Leases" shall mean collectively the Uniontown Ground Leases
and the WL Ground Leases.
"Ground Lessor" shall mean the lessor under a Ground Lease.
"Guarantor" means Crown Investment Trust.
"Guaranty" means that certain guaranty dated the date hereof from the
Guarantor in favor of the Lender and securing payment of a portion of the Loan.
"Hazardous Materials" has the meaning assigned in Section 6.1(b).
"Hazardous Materials Indemnity Agreement" means that certain hazardous
materials indemnity agreement dated the date hereof by the Borrower and
Indemnitor in favor of Lender.
"Improvements" shall have the meaning assigned to such term in the
related Mortgage with respect to each Individual Property.
"Incidental Space" has the meaning assigned in Section 2.9(v).
"Indebtedness" means, for any Person, without duplication: (a) all
indebtedness of such Person for borrowed money, for amounts drawn under a letter
of credit, or for the deferred purchase price of property for which such Person
or its assets is liable, (b) all unfunded amounts under a loan agreement, letter
of credit, or other credit facility for which such Person would be liable, if
such amounts were advanced under the credit facility, (c) all amounts required
to be paid by such Person as a guaranteed payment to partners or a preferred or
special dividend, including any mandatory redemption of shares or interests,
(d) all indebtedness guaranteed by such Person, directly or indirectly, (e) all
obligations under leases that constitute capital leases for which such Person is
liable, and (f) all obligations of such Person under interest rate swaps, caps,
floors, collars and other interest hedge agreements, in each case whether such
Person is liable contingently or otherwise, as obligor, guarantor or otherwise,
or in respect of which obligations such Person otherwise assures a creditor
against loss.
"Indemnitor" means collectively the REIT and the Operating
Partnership.
"Independent Director" has the meaning assigned in Section 8.25(q).
"Individual Property" means each parcel of real property and the
improvements thereon owned which is encumbered by a Mortgage, together with all
rights pertaining to such property and improvements, as more particularly
described in the granting clauses of such Mortgage and referred to therein as
the "Property".
"Insolvency Opinion" has the meaning assigned in Section 8.25(s).
"Insurance Premiums" has the meaning assigned in Section 5.1(b).
"Insurance Proceeds" has the meaning assigned in Section 5.3(b).
"Insurance Trigger Event" means (a) an Event of Default exists, (b)
the Debt Service Coverage Ratio for the Properties is less than 1.30 to 1.0, (c)
Borrower defaults in its obligations to pay all Insurance Premiums when due as
required by Section 5.1 hereof, or (d) the Anticipated Repayment Date has
occurred and the Debt has not been paid in full.
"Interest Period" shall mean with respect to a Payment Date (a) the
period commencing on the date hereof and ending on ninth (9th) day of September,
1998 for the first period hereunder, and (b) for each period thereafter, the
period commencing on the tenth (10th) day of the calendar month immediately
preceding the calendar month in which such Payment Date occurs and ending on and
including the ninth (9th) day of the calendar month in which such Payment Date
occurs.
"Interim Loan Agreement" has the meaning assigned in the recitals
hereto.
"ISRA" has the meaning assigned in Section 6.1(a).
"Joinder Party" means the REIT and the Operating Partnership, the
signatories to the Joinder hereto.
"Lease" shall mean all leases, subleases, occupancy agreements,
licenses, concessions, rental contracts and other agreements (written or oral)
now or hereafter existing relating to the use or occupancy of the Properties,
including, but not limited to, the Anchor Leases and Major Leases, together with
all guarantees, letters of credit and other credit support, modifications,
extensions and renewals thereof, whether before or after the filing by or
against Borrower of any petition of relief under 11 U.S.C. 101 et seq., and
all related security and other deposits.
"Legal Requirements" shall mean, with respect to each Individual
Property, federal, state, county, municipal and other governmental statutes,
laws, rules, orders, regulations, ordinances, judgments, decrees and injunctions
of Governmental Authorities affecting such Individual Property or any part
thereof or the construction, use, alteration or operation thereof, or any part
thereof, whether now or hereafter enacted and in force, and all permits,
licenses and authorizations and regulations relating thereto, and all covenants,
agreements, restrictions and encumbrances contained in any instruments, either
of record or known to Borrower, at any time in force affecting such Individual
Property or any part thereof, including, without limitation, any which may (i)
require repairs, modifications or alterations in or to such Individual Property
or any part thereof, or (ii) any way limit the use and enjoyment thereof.
"Liabilities" has the meaning assigned in Section 14.5(b).
"Lien" means, with respect to each Individual Property any interest,
or claim thereof, in such Individual Property securing an obligation owed to, or
a claim by, any Person other than the owner of such Individual Property, whether
such interest is based on common law, statute or contract, including the lien or
security interest arising from a deed of trust, mortgage, assignment,
encumbrance, pledge, security agreement, conditional sale or trust receipt or a
Lease, consignment, other than mechanics liens that are bonded or released
within ninety (90) days after their occurrence.
"Loan" means the loan made by Lender to Borrower under this Agreement
and all other amounts secured by the Loan Documents.
"Loan Documents" means: (a) this Agreement, (b) the Note, (c) the
Mortgage for each Individual Property, (d) the Assignment of Leases and Rents
for each Individual Property, (e) the Hazardous Materials Indemnity Agreement,
(f) Uniform Commercial Code financing statements, (g) the Manager's Consent and
Subordination of Management Agreement for each Individual Property, (h) the
Guaranty, (i) the Cash Management Agreement, (j) all other documents executed by
any Borrower Party, the REIT, or the Operating Partnership, evidencing,
securing, governing or otherwise pertaining to the Loan, including, but not
limited to, any additional mortgages, assignments of leases and rents and
guaranties, and (k) all amendments, modifications, renewals, substitutions or
replacements of any of the foregoing.
"Lone Star Option" means with respect to the Individual Property known
as Viewmont Mall located in Scranton, Pennsylvania, that certain purchase option
contained in that certain Lease Agreement, dated September 4, 1996, between
Financing Partnership, as landlord, and Lone Star Steak House and Saloon of
Pennsylvania, Inc., as tenant.
"Lycoming Bon-Ton Option" has the meaning assigned within the
definition of "Bon-Ton Option".
"Major Lease(s)" shall mean with respect to each Individual Property,
a lease that is for greater than or equal to ten thousand square feet (10,000
sq. ft.) of the gross leaseable area of such Individual Property, or greater
than or equal to ten percent (10%) of the total gross rental revenues of such
Individual Property, and shall have an initial term of not less than three (3)
years.
"Major Tenant(s)" means a tenant under a Major Lease.
"Major Trade Contract" means any Trade Contract that either (i) has a
contract or purchase price, as the case may be, whether initially or thereafter
by virtue of any modification or amendment, equal to or in excess of $250,000.00
or (ii) is for an essential trade or supply component of the Construction
Parcel; for purposes of this definition of Major Trade Contract, multiple Trade
Contracts with a single contractor or supplier, as the case may be, shall be
deemed to be one Trade Contract.
"Major Trade Contractor" means any contractor or supplier, as the case
may be, under a Major Trade Contract.
"Management Agreement" means, collectively, with respect to any
Individual Property, the management agreement, dated as of the Closing Date,
entered into by and between either WL Associates or Financing Partnership, and
the Manager pursuant to which the Manager is to provide management and other
services with respect to said Individual Property.
"Management Fee" shall mean an amount equal to five percent (5.0%) per
annum of Operating Revenues for each Individual Property.
"Manager" means the Operating Partnership in its capacity as "Manager"
under the Management Agreement, or any successor acting in such capacity.
"Market Substitute Property Option" has the meaning assigned in
Section 2.7(xx).
"Maturity Date" means the earliest of (a) September 10, 2025; (b) any
earlier date on which the entire Loan is required to be paid in full, by
acceleration or otherwise, under this Agreement or any of the other Loan
Documents; or (c) if the Loan is not subject to a Securitization on the
Anticipated Repayment Date, the Anticipated Repayment Date; provided, however,
prior to a Securitization, Lender may nevertheless at its option, upon notice to
Borrower, elect to establish the Anticipated Repayment Date as the Maturity Date
in all cases.
"May Option" shall mean collectively those certain options to purchase
granted in the following agreements: (i) with respect to the Individual Property
known as Wyoming Valley Mall located in Wilkes-Barre, Pennsylvania, that certain
Option to Purchase Agreement dated November 30, 1994 between Crown American
Realty Trust and The May Department Stores Company ("May"), recorded in Deed
Book 2513, Page 576 of Luzerne County, Pennsylvania, wherein Crown American
Realty Trust granted to May an option to purchase a certain parcel of land with
the improvements being all of Outparcel "H" as shown on the subdivision plan
entitled "Outparcel "H" Minor Subdivision" dated October 13, 1997, containing
approximately 7.89 acres of land (the "Wyoming May Option"); (ii) with respect
to the Individual Property known as Patrick Henry Mall located in Newport News,
Virginia, that certain Lease and Contract to Purchase Real Estate dated as of
April 6, 1998 between Financing Partnership and May, to be recorded in the city
of Newport News, Virginia, wherein Financing Partnership granted May an option
to purchase a certain parcel of real property as more particularly described and
shown on Schedule XI attached hereto (the "Patrick Henry May Option") and
(iii) with respect to the Individual Property known as Nittany Mall located in
State College, Pennsylvania, that certain Memorandum of Lease and Purchase
Agreement dated as of July 23, 1998 between Financing Partnership and May,
recorded in Deed Book 1022, Page 838 of Centre County, Pennsylvania, wherein
Financing Partnership granted May an option to purchase a certain parcel of real
property as more particularly described and shown on Schedule XI attached hereto
(the "Nittany May Option").
"Monthly Debt Service Payment Amount" has the meaning assigned in
Section 2.3(a).
"Mortgage" or "Mortgages" means one or more of the Mortgage,
Assignment of Leases and Rents, Security Agreement and Fixture Filing, the Deed
of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing,
the Fee and Leasehold Mortgage, Assignment of Leases and Rents, Security
Agreement and Fixture Filing, or the Leasehold Mortgage, Assignment of Leases
and Rents, Security Agreement and Fixture Filing (amended and restated as
applicable) executed by one or more of WL Associates, the Financing Partnership,
the Operating Partnership and the county of Fayette in favor of Lender, each
covering an Individual Property and any amendments, modifications, renewals,
substitutions or replacements thereof.
"Net Cash Flow After Debt Service" for any period shall mean the
amount obtained by subtracting Debt Service for such period from Net Operating
Income.
"Net Operating Income" means the amount obtained by subtracting
Operating Expenses from Operating Revenues.
"Net Proceeds" has the meaning assigned in Section 5.3(b).
"Net Proceeds Deficiency" has the meaning assigned in Section
5.3(b)(vi).
"Nittany Expansion Escrow Fund" has the meaning assigned in Section
3.1(g)(ii).
"Nittany May Option" has the meaning assigned within the definition of
"May Option".
"NJDEP" has the meaning assigned in Section 6.3 hereof.
"Non-Market Substitute Property Option" has the meaning assigned in
Section 2.7(xx).
"Note" means the Amended and Restated Promissory Note of even date, in
the stated principal amount of $465,000,000.00, executed by Borrower, and
payable to the order of Lender in evidence of the Loan as the same may hereafter
be modified, amended, restated, renewed or replaced and including any Defeased
and Undefeased Note that may exist from time to time.
"Offering Document" has the meaning assigned in Section 14.5(a).
"Offering Document Date" has the meaning assigned in Section 9.5(d).
"Operating Expenses" means all reasonable and necessary expenses of
operating the Properties in the ordinary course of business which are payable in
cash by Borrower and which are directly associated with and fairly allocable to
the Properties for the applicable period, including real estate taxes and
assessments, insurance premiums, maintenance costs, management fees and costs in
an amount no less than five percent (5%) of Operating Revenues, accounting,
legal, and other professional fees, fees relating to environmental and net cash
flow and audits, and other expenses incurred by Lender and reimbursed by
Borrower under this Agreement and the other Loan Documents, wages, salaries, and
personnel expenses, but excluding Debt Service, capital expenditures, any of the
foregoing expenses which are paid from deposits to cash reserves previously
included as Operating Expenses, any payment or expense for which Borrower was or
is to be reimbursed from proceeds of the Loan or insurance or by any third
party, and any non-cash charges such as depreciation and amortization.
Operating Expenses shall not include federal, state or local income taxes or
legal and other professional fees unrelated to the operation of the Properties.
For the purpose of computing the amount of Operating Expenses as defined above
for any period, expenses shall be recognized in the period in which they were
incurred using GAAP regardless of the period in which they were paid in cash by
the Borrower.
"Operating Partnership" means Crown American Properties, L.P.,
together with its successors and assigns.
"Operating Revenues" means all amounts receivable in cash for Borrower
from operation of the Properties or otherwise arising in respect of the
Properties which are properly allocable to the Properties for the applicable
period, including receipts from Leases and parking agreements, concession fees
and charges and other miscellaneous operating revenues, but excluding security
deposits and earnest money deposits until they are forfeited by the depositor,
advance rentals until they are earned, and proceeds from a sale or other
disposition. Operating Revenues shall not include (i) any condemnation or
insurance proceeds (other than business interruption insurance), (ii) any
proceeds resulting from the sale, exchange, transfer, financing or refinancing
of all or any part of the Properties, (iii) any rent accrued by Borrower but not
received because of any free rent provisions, step rent provisions or other
rental concessions in any Lease, (iv) any repayments received from tenants of
principal loaned or advanced to tenants by Borrower, (v) any payments due
pursuant to the terms of any Lease in connection with the cancellation or
termination of a Lease, (vi) investment income on any reserves or funds not
related to the normal operation of the Properties, including, without
limitation, funds allocated to pay for construction expenses (vii) amortization
of any payments previously made to tenants for operating covenants which
Borrower records as a reduction of revenues in its financial statements, or
(viii) any type of income that would otherwise be considered Operating Revenues
pursuant to the provisions above but is paid directly by any tenant to a person
or entity other than Borrower. For the purpose of computing the amount of
Operating Revenues as defined above for any period, revenues shall be recognized
in the period in which they were earned using GAAP regardless of the period in
which they were paid in cash to the Borrower, provided, however, that any bad
debt expense as determined in accordance with GAAP shall be deducted from
Operating Revenues.
"Option Agreements" means, collectively, the Bon-Ton Option, the May
Option, the Lone Star Option, the Parthenon Option, the Substitute Property
Option and the Future Road Dedication Agreement.
"Option Parcel" means collectively (i) with respect to the Lycoming
Bon-Ton Option, the demised premises together with contiguous parking area
sufficient to provide five (5.0) car spaces of sufficient size to accommodate
full standard size American built cars for each one thousand (1,000) square feet
of gross leaseable area within the demised premises, (ii) with respect to the
West Manchester Bon-Ton Option, the demised premises together with contiguous
parking area sufficient to provide five and four tenths (5.4) car spaces of
sufficient size to accommodate full standard size American built cars for each
one thousand (1,000) square feet of gross leaseable area within the demised
premises, (iii) with respect to the Wyoming Bon-Ton Option, the demised premises
together with contiguous parking area sufficient to provide five (5.0) car
spaces of sufficient size to accommodate full standard size American built cars
for each one thousand (1,000) square feet of gross leaseable area within the
demised premises, (iv) with respect to the Patrick Henry May Option, the real
property more particularly described on Schedule XI attached hereto; (v) with
respect to the Nittany May Option, the real property more particularly described
on Schedule XI attached hereto; (vi) with respect to the Wyoming May Option, the
real property described on Exhibit A attached thereto; (vii) with respect to the
Lone Star Option, out-parcel 4-F as more particularly delineated in the color
orange on the plan of the Individual Property known as Viewmont Mall attached
hereto as Schedule VII; (viii) with respect to the Parthenon Option,
approximately 5,200 square feet as more particularly delineated in the color
orange on the plan of the Individual Property known as New River Valley Mall
attached hereto as Schedule X; (ix) the Substitute Property Option Parcel; and
(x) the Future Road Parcel.
"Option Release Amount" means, for an Option Parcel, the greater of
(a) the appraised value of the Option Parcel based on an appraisal delivered to
Lender (which in form and substance would be acceptable to a prudent lender) and
(b) 100% of the net proceeds received in connection with the sale of the Option
Parcel to the Option Tenant less Lender approved closing costs.
"Option Tenant" means the tenant under the Option Agreements or
Parthenon Development Group, Inc. with respect to the Parthenon Option, as
applicable.
"Out-Parcel Release Amount" means for an Out-Parcel, the greater of
(a) the appraised value of the Out-Parcel based on an appraisal delivered to
Lender (which in form and substance would be acceptable to a prudent lender),
(b) 100% of the net proceeds received in connection with the sale of the Out-
Parcel less Lender approved closing costs and (c) with respect to the Out-
Parcels identified on Schedule XVI attached hereto, the corresponding amount set
forth under the heading "Value".
"Out-Parcels" means collectively those certain parcels of real
property as more particularly delineated in the colors blue and green on the
plans attached hereto as Schedule XIII.
"Parthenon Option" shall mean that certain option to purchase granted
in that certain Option Agreement, dated as of October 11, 1980, between Crown
American Corporation and Parthenon Development Group, Inc., recorded in Deed
Book 627, Page 731 of Montgomery County, Virginia, wherein Crown American
Corporation (predecessor to Financing Partnership) granted Parthenon Development
Group, Inc. an option to purchase a certain parcel of land delineated in the
color orange on the plan of the Individual Property known as New River Valley
Mall attached hereto as Schedule X.
"Patrick Henry Expansion Escrow Fund" has the meaning assigned in
Section 3.1(g)(i).
"Patrick Henry May Option" has the meaning assigned within the
definition of "May Option".
"Payment Date" means the tenth (10th) day of each calendar month
commencing on the tenth (10th) day of October, 1998.
"Permitted Encumbrances" means outstanding liens, easements,
restrictions, security interests and other exceptions to title set forth in the
policies of title insurance insuring the liens of the Mortgages, together with
the liens and security interests in favor of Lender created by the Loan
Documents and mechanics liens that are bonded or released within ninety (90)
days after their occurrence.
"Permitted Investments" shall have the meaning assigned to such term
in the Cash Management Agreement.
"Person" means any individual, corporation, partnership, joint
venture, association, joint stock company, trust, trustee, estate, limited
liability company, unincorporated organization, real estate investment trust,
government or any agency or political subdivision thereof, or any other form of
entity.
"Personalty" shall have the meaning assigned to such term in the
related Mortgage with respect to each Individual Property.
"Policies" has the meaning assigned in Section 5.1(b).
"Policy" has the meaning assigned in Section 5.1(b).
"Potential Default" means the occurrence of any event or condition
other than payments that are not yet due and payable and obligations that are
not yet required to be satisfied which, with the giving of notice, the passage
of time, or both, would constitute an Event of Default.
"Prime Rate" means the highest prime rate (or base rate) reported in
the Money Rates column or section of The Wall Street Journal, as such rate may
change from time to time, being the rate in effect for corporate loans at large
U.S. money center commercial banks (whether or not such rate has actually been
charged by any such bank). If The Wall Street Journal ceases publication of the
Prime Rate, the "Prime Rate" shall mean the prime rate (or base rate) announced
by Bankers Trust Company, New York, New York (whether or not such rate has
actually been charged by such bank). If such bank discontinues the practice of
announcing the Prime Rate, the "Prime Rate" shall mean the highest rate charged
by such bank on short-term, unsecured loans to its most creditworthy large
corporate borrowers. Any change in the Prime Rate shall be effective on the
date such change is announced by Bankers Trust Company or published in the Wall
Street Journal, as applicable.
"Properties" means, collectively, all of the Individual Properties
which are subject to the terms of this Agreement.
"Pro-Rata Release Amount" means, for an Individual Property, the
product of (a) the quotient obtained by dividing the original Release Amount for
such Individual Property by the sum of the original Release Amount for all
Properties, and (b) the outstanding principal balance of the Loan.
"Qualified Resultant Owner" has the meaning assigned in Section
14.2(c).
"Rating Agencies" means each of the following agencies who rate the
Securities issued in one or more Securitizations of which the Loan is a part:
Standard & Poor's Ratings Group, a division of McGraw-Hill, Inc., Moody's
Investors Service, Inc., Duff & Phelps Credit Rating Co. and Fitch IBCA Inc., or
any other nationally-recognized statistical rating agency which has been
approved by Lender;
"Reduction" has the meaning assigned in Section 14.2(a).
"Registration Statement" has the meaning assigned in Section 14.5(b).
"REIT" means Crown American Realty Trust, together with its successors
and assigns.
"Release Amount" means the amount set forth on Schedule IV with
respect to each Individual Property and in the event that an Individual Property
is substituted in accordance with Section 2.7 hereof, the Release Amount for the
Substitute Property shall be deemed to be the Release Amount of the Substituted
Property.
"Release Date" shall mean the earlier of (i) the date that is two (2)
years from the "startup day" within the meaning of Section 860G(a)(9) of the
Code of the last REMIC Trust which holds all or any portion of the Note, or (ii)
March 1, 2002.
"REMIC Trust" shall mean a "real estate mortgage investment conduit"
within the meaning of Section 860D of the Code that holds the Note.
"Rent" shall mean all rents, revenues, issues, profits, income and
proceeds due or to become due from tenants of the Properties, including rentals
and all other payments of any kind under the Leases for using, leasing,
licensing, possessing, operating from, rendering in, selling or otherwise
enjoying the Properties.
"Rentable Space Percentage" has the meaning assigned in Section
5.3(b)(i)(C).
"Replacement Escrow Fund" has the meaning assigned in Section 3.1(b).
"Required Repair Fund" has the meaning assigned in Section 3.1(a).
"Restoration" has the meaning assigned in Section 5.1(g)
"Retail Strip Center" means with respect to the Individual Property
known as North Hanover Mall, located in Hanover, Pennsylvania, that certain
parcel of real property delineated in the color of yellow on the plan of such
Individual Property attached hereto as Schedule XIII.
"Rollover Escrow Fund" has the meaning assigned in Section 3.1(c).
"Schedule Defeasance Payments" has the meaning assigned in Section
2.12(c).
"Securities" has the meaning assigned in Section 14.4.
"Securities Act" has the meaning assigned in Section 14.5.
"Securitization" has the meaning assigned in Section 14.4.
"Securitization Information" has the meaning assigned in Section 14.4.
"Security Agreement" has the meaning assigned in Section 2.12(e)(vi).
"Servicer" has the meaning assigned in Section 14.3.
"Severed Loan Documents" has the meaning assigned in Section 12.2(c).
"Single Purpose Entity" shall mean a Person (other than an individual,
a government or any agency or political subdivision thereof), which exists
solely for the purpose of owning the Properties, observes corporate, company or
partnership formalities, as applicable, independent of any other Person, and
which otherwise complies with the covenants set forth in Section 8.25 hereof.
"Site Assessment" means the environmental engineering reports for each
Individual Property prepared at Borrower's expense by an engineer engaged by
Borrower and approved by Lender, and in a manner satisfactory to Lender, based
upon an investigation relating to and making appropriate inquiries concerning
the existence of Hazardous Materials on or about each such Individual Property,
and the past or present discharge, disposal, release or escape of any such
substances, all consistent with ASTM Standard E1527-93 or any successor thereto
published by ASTM and good customary and commercial practice. Such reports are
listed on Schedule VIII hereto.
"SPC Party" has the meaning assigned in Section 8.25(p).
"Spill Act" has the meaning assigned in Section 6.3(e).
"Standard Statements" has the meaning assigned in Section 9.5(a).
"Substitute Property" and "Substitute Properties" have the meaning
assigned in Section 2.7.
"Substitute Property Option Parcel" each and collectively, the real
property comprising a Substitute Property, or a portion thereof, which an
applicable tenant may purchase pursuant to a Market Substitute Property Option
or a Non-Market Substitute Property Option.
"Substitute Release Amount" has the meaning assigned in Section
2.7(viii).
"Substituted Property" has the meaning assigned in Section 2.7.
"Substitution Conditions" shall mean that (a) no more than two (2)
Properties are released in any 12-month period and such Properties do not
represent in the aggregate more than twenty percent (20%) of the aggregate Net
Operating Income (for the immediately preceding 12-month period) of all of the
Properties as of the Closing Date and as of the date of substitution, and (b) no
more than six (6) properties representing no more than 40% of the initial
aggregate Release Amount of all the Properties is substituted during the term of
the Loan and (c) Borrower pays a substitution fee for each substitution in an
amount equal to .5% of the Release Amount of the Substituted Properties.
"Successor Borrower" has the meaning assigned in Section 2.13(c).
"Tax and Insurance Escrow Fund" has the meaning assigned in Section
5.4.
"Taxes" has the meaning assigned in Section 10.2.
"Threshold Amount" has the meaning assigned in Section 10.12.
"Trade Contract" means any contract or purchase order between the
Construction Parcel Transferee or the general contractor and any other Person
pursuant to which such Person agrees to provide labor, materials, equipment or
services in connection with the construction of the Construction Parcel
excluding, however, from this definition of Trade Contract, any agreements
pertaining solely to testing and engineering and other professional services.
"Transfer" has the meaning assigned in Section 14.2(a).
"Transferee" has the meaning assigned in Section 14.2(b).
"Treasury Rate" shall mean, as of the applicable date, the yield,
calculated by linear interpolation (rounded to the nearest one-thousandth of one
percent (i.e., 0.001%) of the yields of noncallable United States Treasury
obligations with terms (one longer and one shorter) most nearly approximately
seventeen (17) years from such date of determination, as determined by Lender on
the basis of Federal Reserve Statistical Release H.15-Selected Interest Rates
under the heading U.S. Governmental Security/Treasury Constant Maturities, or
other recognized source of financial market information selected by Lender.
"Trigger Event" means any of the following: (a) an Event of Default
exists, (b) the Debt Service Coverage Ratio for the Properties as of any
calendar quarter calculated on a trailing twelve (12) month basis is less than
1.30 to 1.0, or (c) the Anticipated Repayment Date has occurred and the Debt has
not been paid in full.
"Trigger Period" means the period of time after a Trigger Event;
provided, however, the Trigger Period shall cease at any time in the case of a
Trigger Event due to an insufficient Debt Service Coverage Ratio if the Debt
Service Coverage Ratio as of any calendar quarter following such Trigger Event
shall equal or exceed 1.30 to 1.0 and an Event of Default does not exist.
"Undefeased Note" has the meaning assigned in Section 2.12(b)(v).
"Underwriter Group" has the meaning assigned in Section 14.5(b).
"Uniontown Ground Leases" shall mean collectively each of the ground
leases affecting the Individual Property known as Uniontown Mall located in
Uniontown, Pennsylvania, as more particularly set forth on Schedule II.
"U.S. Obligations" shall mean direct non-callable obligations of the
United States of America.
"West Manchester Bon-Ton Option" has the meaning assigned within the
definition of "Bon-Ton Option".
"WL Associates" has the meaning set forth in the introduction to this
Agreement.
"WL General Partner" has the meaning assigned in Section 8.25(p).
"WL Ground Leases" shall mean collectively each of those ground leases
affecting the Individual Properties known as Wyoming Valley Mall, located in
Wilkes-Barre, Pennsylvania and Logan Valley Mall, located in Altoona,
Pennsylvania, as more particularly set forth on Schedule I.
"Wyoming Bon-Ton Option" has the meaning assigned within the
definition of "Bon-Ton Option".
"Wyoming May Option" has the meaning assigned within the definition of
"May Option".
"Yield Maintenance Premium" shall mean the amount (if any) which, when
added to the remaining principal amount of the Note or the principal amount of
the Defeased Note, as applicable, will be sufficient to purchase U.S.
Obligations providing the required Scheduled Defeasance Payments.
ARTICLE 2
LOAN TERMS
Section 2.1 The Loan. Upon satisfaction of all the terms and
conditions set forth in this Agreement, Lender agrees to make a loan of FOUR
HUNDRED SIXTY-FIVE MILLION AND NO/100 DOLLARS ($465,000,000.00) to the Borrower,
which shall be funded in one advance and repaid in accordance with the terms of
this Agreement and the Note. Borrower hereby agrees to accept the Loan on the
Closing Date, subject to and upon the terms and conditions set forth herein.
The Loan shall be partially guaranteed by the Guarantor in accordance with the
terms of the Guaranty.
Section 2.2 Interest Rate. From the date hereof through but not
including the Anticipated Repayment Date, the outstanding principal balance of
the Loan shall bear interest at the Contract Rate. If the Loan has not been
paid in full, from and after the Anticipated Repayment Date through and
including the Maturity Date the outstanding principal balance of the Loan shall
bear interest at a rate per annum equal to the greater of (i) the Contract Rate
plus three percent (3.0%) or (ii) the Treasury Rate as of the Anticipated
Repayment Date plus three percent (3.0%) (the "Adjusted Rate").
Section 2.3 Terms of Payment.
(a) Interest and Principal. A payment of interest only shall be due
and payable for the applicable Interest Period on the tenth (10th) day of
September 1998 (which shall be paid by Borrower on the Closing Date) and on each
Payment Date thereafter up to and including the tenth (10th) day of September,
2000 and thereafter a constant payment of Three Million Four Hundred Fifteen
Thousand One Hundred Sixty-Four and 48/100 Dollars ($3,415,164.48) (the "Monthly
Debt Service Payment Amount") shall be due and payable on the tenth (10th) day
of October, 2000 and on each Payment Date thereafter. Each of such payments
shall be applied (i) to the payment of interest computed at the Contract Rate
and (ii) the balance, if any, applied toward reduction of the principal sum.
The constant payment required hereunder is calculated using a 25 year
amortization schedule commencing on September 10, 2000.
(b) To the extent the Loan is outstanding, from and after the
Anticipated Repayment Date interest shall accrue on the unpaid principal balance
from time to time outstanding on the Loan at the Adjusted Rate. Borrower shall
continue to make payments of principal and interest in monthly installments
beginning on the Anticipated Repayment Date and on each Payment Date thereafter
up to and including the Maturity Date in an amount equal to the Monthly Debt
Service Payment Amount and, notwithstanding the following provision with respect
to Accrued Interest, the failure to make any such payment as and when due shall
constitute an Event of Default. Each Monthly Debt Service Payment Amount paid
after the Anticipated Repayment Date shall be applied to the payment of interest
computed at the Contract Rate with the remainder applied to reduce the
outstanding principal balance of the Loan in accordance with Section 2.3(a)
above. Interest accrued at the Adjusted Rate and not paid shall be deferred and
added to the Debt and shall earn interest at the Adjusted Rate to the extent
permitted by applicable law (such accrued interest is hereinafter defined as
"Accrued Interest"). In addition to such payments of principal and interest,
from and after the Anticipated Repayment Date, Borrower shall make payments for
reserves, expenses and in reduction of the outstanding principal balance of the
Loan and accrued interest in monthly installments beginning on the Anticipated
Repayment Date and on each Payment Date thereafter up to and including the
Maturity Date in accordance with the terms and provisions of Section 3.4 below.
Section 2.4 Maturity. On the Maturity Date, Borrower shall pay to
Lender all outstanding principal, accrued and unpaid interest (including Accrued
Interest, if any), default interest, late charges and any and all other amounts
due under the Loan Documents.
Section 2.5 Payments and Computations.
2.5.1 Making of Payments. Each payment by Borrower hereunder or
under the Note shall be made in funds settled through the New York Clearing
House Interbank Payments System or other funds immediately available to Lender
by 12:00 p.m., New York City time on the date such payment is due by deposit to
such account as Lender may designate by written notice to Borrower. Whenever
any payment hereunder or under the Note shall be stated to be due on a day which
is not a Business Day, such payment shall be made on the preceding Business Day.
2.5.2 Computations. Interest payable hereunder or under the Note by
Borrower shall be computed on the basis of the actual number of days elapsed and
a 360-day year.
2.5.3 Late Payment Charge. If any principal, interest or any other
sums due hereunder, under the Note or under any other Loan Document is not paid
by Borrower on the day it is due, Borrower shall pay to Lender upon demand an
amount equal to the lesser of five percent (5%) of such unpaid sum or the
maximum amount permitted by applicable law in order to defray the expense
incurred by Lender in handling and processing such delinquent payment and to
compensate Lender for the loss of the use of such delinquent payment. Any such
amount shall be secured by the Mortgages and the other Loan Documents.
2.5.4 Default Rate; Additional Payments after Default. Upon the
occurrence of an Event of Default (and until Lender has accepted a cure of any
such Event of Default), Lender shall be entitled to receive and Borrower shall
pay to Lender interest on the entire unpaid principal sum and any other amounts
due at the Default Rate. Interest at the Default Rate shall be computed from
the occurrence of the Event of Default until the actual receipt and collection
of the Debt (or that portion thereof that is then due). Interest at the Default
Rate shall be added to the Debt and shall be secured by the Mortgages. This
section, however, shall not be construed as an agreement or privilege to extend
the date of the payment of the Debt, nor as a waiver of any other right or
remedy accruing to Lender by reason of the occurrence of any Event of Default.
2.5.5 Annual Budget. (a) For the partial year period commencing on
the Anticipated Repayment Date and for each calendar year thereafter, the
Borrower shall submit to Lender an Annual Budget not later than ninety (90) days
prior to the commencement of such period or calendar year in form reasonably
satisfactory to Lender. In addition, within ninety (90) days after the
occurrence of a Trigger Event (other than the Anticipated Repayment Date), the
Borrower shall submit to Lender an Annual Budget in form reasonably satisfactory
to Lender; provided, however, such Annual Budget shall be required to include
only information from the date of the occurrence of the Trigger Event to the end
of such calendar year. Each such Annual Budget shall be subject to Lender's
written approval (each such Annual Budget as approved by Lender, an "Approved
Annual Budget"). In the event that Lender objects to a proposed Annual Budget
submitted by Borrower, Lender shall advise Borrower of such objections within
thirty (30) days after receipt thereof (and deliver to Borrower a reasonably
detailed description of such objections) and Borrower shall promptly revise such
Annual Budget and resubmit the same to Lender. Lender shall advise Borrower of
any objections to such revised Annual Budget within ten (10) days after receipt
thereof (and deliver to Borrower a reasonably detailed description of such
objections) and Borrower shall promptly revise the same in accordance with the
process described in this subsection until the Lender approves the Annual
Budget. Until such time that Lender approves a proposed Annual Budget, the most
recently Approved Annual Budget shall apply; provided that, such Approved Annual
Budget shall be adjusted to reflect actual increases in real estate taxes,
insurance premiums and utilities expenses. The Borrower will reimburse the
Lender for all third party reasonable costs and expenses that Lender actually
incurs with respect to the review of any Annual Budget.
Section 2.6 Intentionally Omitted.
Section 2.7 Substitution of Properties. Subject to the terms and
conditions set forth in this Section 2.7, Borrower may obtain a release of the
Lien of a Mortgage (and the related Loan Documents) encumbering an Individual
Property (a "Substituted Property") by substituting therefor another retail mall
property acquired by Borrower (individually, a "Substitute Property" and
collectively, the "Substitute Properties"), provided that (a) the Substitution
Conditions are satisfied, and (b) no such substitution may occur after the
Anticipated Repayment Date. In addition, any such substitution shall be
subject, in each case, to the satisfaction of the following conditions
precedent:
(i) Lender shall have received a copy of a deed conveying all of
Borrower's right, title and interest in and to the Substituted
Property to an entity other than Borrower and a letter from
Borrower countersigned by a title insurance company acknowledging
receipt of such deed and agreeing to record such deed in
the real estate records for the county or city in which the
Substituted Property is located.
(ii) If the Loan is part of a Securitization, Lender shall have
received an appraisal of the Substitute Property dated no more
than sixty (60) days prior to the substitution by an appraiser
acceptable to the Rating Agencies, indicating an appraised
value of the Substitute Property that is equal to or greater than
the appraised value of the Substituted Property determined by
Lender at the time of the encumbrance of the Substituted Property
by the related Mortgage. If the Loan is not part of a
Securitization, the fair market value of the Substitute
Property shall be equal to or greater than the Substituted
Property, such determination to be made by Lender in its
reasonable discretion (which determination may include an
appraisal reasonably satisfactory to Lender in all respects).
(iii)Lender shall receive evidence that after giving effect to
the substitution, the Debt Service Coverage Ratio for the Loan
for all of the Properties is projected to be not less than the
Debt Service Coverage Ratio for the Loan for all of the
Properties as of the Closing Date and as of the date
immediately preceding the substitution.
(iv) Intentionally Omitted.
(v) The Net Operating Income for the twelve (12) month period
immediately preceding the substitution for the Substitute
Property is equal to or greater than the Net Operating Income for
the twelve (12) month period immediately preceding the
substitution for the related Substituted Property.
(vi) Lender shall have received confirmation in writing from the
Rating Agencies to the effect that such substitution will not
result in a withdrawal, qualification or downgrade of the
respective ratings in effect immediately prior to such subs-
titution for the Securities issued in connection with the
Securitization that are then outstanding. If the Loan is not
part of a Securitization, Lender shall have consented in writing
to such substitution, which consent shall not be unreasonably
withheld, delayed or conditioned.
(vii)No Potential Default or Event of Default shall have occurred and
be continuing, other than a Potential Default or an Event of
Default with respect to the Substituted Property which shall be
cured upon the release of such Substituted Property, and
Borrower shall be in compliance in all material respects with
all terms and conditions set forth in this Agreement and in each
Loan Document on Borrower's part to be observed or performed.
Lender shall have received a certificate from Borrower con-
firming the foregoing, stating that the representations and
warranties of Borrower contained in this Agreement and the
other Loan Documents are true and correct in all material
respects on and as of the date of the substitution with respect
to Borrower, the Properties and the Substitute Property and
containing any other representations and warranties with
respect to Borrower, the Properties, the Substitute Property or
the Loan as the Rating Agencies may require, unless such
certificate would be inaccurate, such certificate to be in
form and substance satisfactory to the Rating Agencies.
(viii)Borrower shall (A) have executed, acknowledged and delivered to
Lender (I) a Mortgage, an Assignment of Leases and two UCC-1
Financing Statements withrespect to the Substitute Property,
together with a letter from Borrower countersigned by a title
insurance company acknowledging receipt of such Mortgage,
Assignment of Leases and Rents and UCC-1 Financing Statements
and agreeing to record or file, as applicable, such Mortgage,
Assignment of Leases and Rents and one of the UCC-1 Financing
Statements in the real estate records for the county in which
the Substitute Property is located and to file one of the
UCC-1 Financing Statements in the office of the Secretary of
State (or other central filing office) of the state in which the
Substitute Property is located, so as to effectively create upon
such recording and filing valid and enforceable Liens upon
the Substitute Property, of the requisite priority, in favor of
Lender (or such other trustee as may be desired under local
law), subject only to the Permitted Encumbrances and such other
Liens as are permitted pursuant to the Loan Documents and (II) a
Hazardous Materials Indemnity Agreement with respect to the
Substitute Property and (B) have caused the Guarantor and
Joinder Parties to acknowledge and confirm their respective
obligations under the Loan Documents. The Mortgage, Assignment
of Leases and Rents, UCC-1 Financing Statements and Hazardous
Materials Indemnity Agreement shall be the same in form
and substance as the counterparts of such documents executed and
delivered with respect to the related Substituted Property
subject to modifications reflecting only the Substitute Property
as the Individual Property that is the subject of such docu-
ments and such modifications reflecting the laws of the state
in which the Substitute Property is located as shall be
recommended for similar transactions by the counsel admitted to
practice in such state and delivering the opinion as to the
enforceability of such documents required pursuant to
clause (xv) below. The Mortgage encumbering the Substitute
Property shall secure all amounts evidenced by the Note,
provided that in the event that the jurisdiction in which the
Substitute Property is located imposes a mortgage recording,
intangibles or similar tax and does not permit the allocation of
indebtedness for the purpose of determining the amount of such
tax payable, the principal amount secured by such Mortgage shall
be equal to one hundred fifty percent (150%) of the amount of
the Loan allocated to the Substitute Property. The amount of
the Loan allocated to the Substitute Property (such amount being
hereinafter referred to as the "Substitute Release Amount")
shall equal the Release Amount of the related Substituted
Property.
(ix) Lender shall have received (A) to the extent available any "tie-
in" or similar endorsement to each title insurance policy
insuring the Lien of an existing Mortgage as of the date of the
substitution available with respect to the title insurance
policy insuring the Lien of the Mortgage with respect to the
Substitute Property and (B) a title insurance policy (or a
marked, signed and redated commitment to issue such title
insurance policy) insuring the Lien of the Mortgage encumber-
ing the Substitute Property, issued by the title company
that issued the title insurance policies insuring the Lien of the
existing Mortgages and dated as of the date of the substitution,
with reinsurance and direct access agreements that replace such
agreements issued in connection with the title insurance
policy insuring the Lien of the Mortgage encumbering the
Substituted Property. The title insurance policy issued with
respect to the Substitute Property shall (1) provide coverage in
the amount of the Substitute Release Amount if the "tie-in" or
similar endorsement described above is available or, if such
endorsement is not available, in an amount equal to one
hundred fifty percent (150%) of the Substitute Release Amount,
(2) insure Lender that the relevant Mortgage creates a valid
first lien on the Substitute Property encumbered thereby, free
and clear of all exceptions from coverage other than Permitted
Encumbrances and standard exceptions and exclusions from coverage
(as modified by the terms of any endorsements), (3) contain such
endorsements and affirmative coverages as are then available and
are contained in the title insurance policies insuring the Liens
of the existing Mortgages, and (4) name Lender as the insured.
Lender also shall have received copies of paid receipts or
other evidence showing that all premiums in respect of such
endorsements and title insurance policies have been paid.
(x) Intentionally omitted.
(xi) Lender shall have received a current title survey for each
Substitute Property, certified to the title company and Lender
and their successors and assigns, in the same form and having
the same content as the certification of the Survey of the
Substituted Property prepared by a professional land surveyor
licensed in the state in which the Substitute Property is located
and acceptable to the Rating Agencies in accordance with the 1992
Minimum Standard Detail Requirements for ALTA/ACSM Land Title
Surveys. Such survey shall reflect the same legal description
contained in the title insurance policy relating to such
Substitute Property and shall include, among other things, a
metes and bounds description of the real property comprising
part of such Substitute Property. The surveyor's seal shall be
affixed to each survey and each survey shall certify that no
material portion of the Improvements are located in a "one-
hundred-year flood hazard area," unless flood insurance has been
obtained in accordance with Section 5.1 hereof with respect to
the Substitute Property.
(xii)Lender shall have received valid certificates of insurance
indicating that the requirements for the policies of insurance
required for an Individual Property hereunder have been satisfied
with respect to the Substitute Property and evidence of the
payment of all premiums payable for the existing policy period.
(xiii)Lender shall have received a Phase I environmental report and,
if recommended under the Phase I environmental report, a Phase II
environmental report, which conclude that the Substitute Property
does not contain any Hazardous Materials and is not subject to
any plausible risk of contamination from any off-site
Hazardous Materials. If any such report discloses the
presence of any Hazardous Materials in violation of Environ-
mental Laws or the plausible risk of contamination from any off-
site Hazardous Materials, such report shall include an estimate
of the cost of any related remediation and Borrower shall
deposit with Lender an amount equal to one hundred and twenty-
five percent (125%) of such estimated cost, which deposit shall
constitute additional security for the Loan and shall be released
to Borrower upon the delivery to Lender of (A) an update to such
report indicating that there is no longer any Hazardous Materials
in violation of Environmental Laws on the Substitute Property
or any plausible danger of contamination from any off-site
Hazardous Materials that has not been fully remediated and (B)
paid receipts indicating that the costs of all such remediation
work have been paid.
(xiv)Borrower shall deliver or cause to be delivered to Lender (A)
updates certified by Borrower of all organizational documentation
related to Borrower and/or the formation, structure, existence,
good standing and/or qualification to do business delivered to
Lender in connection with the Closing Date; (B) good standing
certificates, certificates of qualification to do business in the
jurisdiction in which the Substitute Property is located (if re-
quired in such jurisdiction) and (C) resolutions of the Borrower
authorizing the substitution and any actions taken in connection
with such substitution.
(xv) Lender shall have received the following opinions of Borrower's
counsel: (A) an opinion or opinions of counsel admitted to
practice under the laws of the state in which the Substitute
Property is located stating that the Loan Documents delivered
with respect to the Substitute Property pursuant to clause
(viii) above are valid and enforceable in accordance with their
terms, subject to the laws applicable to creditors' rights and
equitable principles, and that Borrower is qualified to do
business and in good standing under the laws of the juris-
diction where the Substitute Property is located or that Borrower
is not required by applicable law to qualify to do business in
such jurisdiction; (B) an opinion of Reed Smith Shaw & McClay LLP
or such other counsel acceptable to, the Rating Agencies if
the Loan is part of a Securitization, or the Lender if the
Loan is not part of a Securitization, stating that the Loan
Documents delivered with respect to the Substitute Property
pursuant to clause (viii) above were duly authorized, executed
and delivered by Borrower and that the execution and delivery
of such Loan Documents and the performance by Borrower of
its obligations thereunder will not cause a material breach of,
or a default under, any agreement, document or instrument to
which Borrower is a party or to which it or its properties are
bound; (C) an opinion of counsel acceptable to, the Rating
Agencies if the Loan is part of a Securitization, or the Lender
if the Loan is not part of a Securitization, stating that sub-
jecting the Substitute Property to the Lien of the related
Mortgage and the execution and delivery of the related Loan
Documents does not and will not affect or impair the ability of
Lender to enforce its remedies under all of the Loan Documents or
to realize the benefits of the cross-collateralization provided
for thereunder; (D) an update of the Insolvency Opinion indicat-
ing that the substitution does not affect the opinions set
forth therein; (E) an opinion of counsel acceptable to, the
Rating Agencies if the Loan is part of a Securitization, or the
Lender if the Loan is not part of a Securitization, stating that
the substitution and the related transactions do not constitute a
fraudulent conveyance under applicable bankruptcy and insol-
vency laws and (F) if the Loan is part of a Securitization,
an opinion of counsel acceptable to the Rating Agencies that the
substitution does not constitute a "significant modification" of
the Loan under Section 1001 of the Code or otherwise cause a tax
to be imposed on a "prohibited transaction" by any REMIC Trust.
(xvi)Borrower shall have paid, or escrowed with Lender, all Basic
Carrying Costs relating to each of the Properties and the Sub-
stitute Property, including without limitation, (i) accrued but
unpaid insurance premiums relating to each of the Properties and
the Substitute Property, and (ii) currently due and payable
Taxes (including any in arrears) relating to each of the
Properties and the Substitute Property and (iii) currently due
and payable maintenance charges and other impositions relating
to each of the Properties and Substitute Property.
(xvii)Borrower shall have paid or reimbursed Lender for all costs and
expenses actually incurred by Lender (including, without
limitation, reasonable attorneys' fees and disbursements and
Rating Agency's fees and expenses) in connection with the sub-
stitution and Borrower shall have paid all recording
charges, filing fees, taxes or other expenses (including, without
limitation, mortgage and intangibles taxes and documentary stamp
taxes) payable in connection with the substitution. Borrower
shall have paid all costs and expenses of the Rating Agencies
actually incurred in connection with the substitution.
(xviii)Lender shall have received, to the extent available, annual
operating statements and occupancy statements for the Substitute
Property for the three most recently completed fiscal years and a
current operating statement for the Substituted Property, each
certified to Lender as being true and correct in material
respect as of the date made and a certificate from Borrower
certifying that there has been no adverse material change in the
financial condition of the Substitute Property since the date of
such operating statements.
(xix)Borrower shall have delivered to Lender estoppel certificates
from any existing tenants (A) constituting anchor tenants at the
Substitute Property, (B) leasing an entire building at the Sub-
stitute Property and (C) that, together with those described
in clauses (A) and (B), lease no less than seventy percent
(70%) of the gross leaseable area at the Substitute Property.
All such estoppel certificates shall be substantially in the form
approved by Lender in connection with the origination of the Loan
and shall indicate that (1) the subject lease is a valid and
binding obligation of the tenant thereunder, (2) there are no
defaults under such lease on the part of the landlord or tenant
thereunder, (3) the tenant thereunder has no defense or offset to
the payment of rent under such leases, (4) no rent under such
lease has been paid more than one (1) month in advance, (5)
the tenant thereunder has no option under such lease to purchase
all or any portion of the Substitute Property, other than
those tenants that have such options to purchase in accordance
with Section 2.7(b)(xx) hereof and (6) all tenant improvement
work required under such lease has been completed and the
tenant under such lease is in actual occupancy of its leased
premises. If an estoppel certificate indicates that all tenant
improvement work required under the subject lease has not yet
been completed, Borrower shall, if required by the Rating
Agencies, deliver to Lender financial statements indicating that
Borrower has adequate funds to pay all costs related to such
tenant improvement work as required under such lease.
(xx) Lender shall have received copies of all tenant leases and any
ground leases affecting the Substitute Property certified by
Borrower as being true and correct. The tenant leases shall not
contain any options to purchase any portion of the Substitute
Property, other than options similar to the options existing
on the date hereof, and either (A) options with option purchase
prices that are on, or above, market prevailing terms as of the
date of the substitution (collectively, the "Market Substitute
Property Option"), or (B) options with option purchase prices
that are below market prevailing terms as of the date of the
substitution (collectively, the "Non-Market Substitute Property
Option"), provided, however, the portion of the Substitute
Property subject to a Non-Market Substitute Property Option shall
not be included in underwriting the Substitute Property, includ-
ing, without limitation, in determining the value of
the Substitute Property, the Debt Service Coverage Ratio or the
Net Operating Income. The release of the applicable lien of the
Mortgage in connection with the exercise of either the Market
Substitute Property Option or the Non-Market Substitute
Property Option shall be subject to Section 2.8 hereof. Lender
shall have received a current rent roll of the Substitute
Property certified by Borrower as being true and correct.
(xxi)Lender shall have received subordination, nondisturbance and
attornment agreements in the form approved by Lender in con-
nection with the origination of the Loan or in a form received
from tenants in contemporaneous similar transactions with
respect to all tenants (A) constituting anchor tenants at the
Substitute Property, (B) leasing an entire building at the Sub-
stitute Property and (C) that, together with those described in
clauses (A) and (B), lease no less than seventy percent (70%) of
the gross leaseable area at the Substitute Property other than
such Leases that are, by their terms, subordinate to the
Mortgage with respect to the Substitute Property.
(xxii)Lender shall have received (A) an endorsement to the title
insurance policy insuring the Lien of the Mortgage encumbering
the Substitute Property insuring that the Substitute Property
constitutes a separate tax lot or, if such an endorsement is
not available in the state in which the Substitute Property is
located, a letter from the title insurance company issuing such
title insurance policy stating that the Substitute Policy con-
stitutes a separate tax lot or (B) a letter from the approp-
riate taxing authority or other evidence stating that
the Substitute Property constitutes a separate tax lot.
(xxiii)Lender shall have received a Physical Conditions Report with
respect to the Substitute Property stating that the Substitute
Property and its use comply in all material respects with all
applicable Legal Requirements(including, without limitation,
zoning, subdivision and building laws) and that the Substitute
Property is in good condition and repair and free of damage. If
compliance with any Legal Requirements are not addressed by the
Physical Conditions Report, such compliance shall be confirmed by
delivery to Lender of a certificate of an architect licensed
in the state in which the Substitute Property is located or a
letter from the municipality in which such Property is
located, a certificate of a surveyor that is licensed in the
state in which the Substitute Property is located (with
respect to zoning and subdivision laws), and an ALTA 3.1
zoning endorsement to the title insurance policy delivered
pursuant to clause (ix) above (with respect to zoning laws), if
available, or a subdivision endorsement to the title insurance
policy delivered pursuant to clause (ix) above (with respect to
subdivision laws), if available. If the Physical Conditions
Report recommends that any repairs be made with respect to
the Substitute Property, such Physical Conditions Report shall
either (A) include an estimate of the cost of such recommended
repairs (in which case the Borrower shall deposit with Lender an
amount equal to one hundred twenty-five percent (125%) of such
estimated cost), or (B) state the specific amounts that
need to be reserved over time in order to meet the requirements
of such replacements (in which case Borrower shall deposit such
reserves on a monthly basis). Any such deposits shall constitute
additional security for the Loan and shall be released to
Borrower upon the delivery to Lender of (1) an update to
such Physical Conditions Report or a letter from the engineer
that prepared such Physical Conditions Report indicating that the
recommended repairs were completed in good and workmanlike manner
and (2) paid receipts indicating that the costs of all such
repairs have been paid.
(xxiv)Lender shall have received a certified copy of an amendment to
the Management Agreement reflecting the deletion of the Subs-
tituted Property and the addition of the Substitute Property as a
property managed pursuant thereto and Manager shall have
executed and delivered to Lender an amendment to the Assign-
ment of Management Agreement reflecting such amendment to the
Management Agreement.
(xxv)Lender shall have received such other and further approvals,
opinions, documents (in scope similar to the Loan Documents) and
information in connection with the substitution as requested by
the Rating Agencies if the Loan is part of a Securitization,
or the Lender if the Loan is not part of a Securitization.
(xxvi)Lender shall have received copies of all material contracts and
agreements relating to the leasing and operation of the Subs-
titute Property (other than the Management Agreement) together
with a certification of Borrower attached to each such contract
or agreement certifying that the attached copy is a true and
correct copy of such contract or agreement and all amendments
thereto.
(xxvii)Borrower shall submit to Lender, not less than ten (10) days
prior to the date of such substitution, a release of Lien (and
related Loan Documents) for the Substituted Property for
execution by Lender. Such release shall be in a form
appropriate for the jurisdiction in which the Substituted
Property is located. Borrower shall deliver an Officer's
Certificate certifying that the requirements set forth in this
Section 2.7 have been satisfied.
Upon the satisfaction of the foregoing conditions precedent, Lender will release
its Lien from the Substituted Property to be released and the Substitute
Property shall be deemed to be an Individual Property for purposes of this
Agreement and the Substitute Release Amount with respect to such Substitute
Property shall be deemed to be the Release Amount with respect to such
Substitute Property for all purposes hereunder.
Section 2.8 Release of Option Parcels. At any time after the date
hereof, Borrower may obtain the release of an Option Parcel from the lien of the
applicable Mortgage, provided that such release is made in accordance with the
Option Agreements and shall only be granted if the following conditions have
been met or satisfied:
(i) Borrower shall (A) with respect to the Option Parcel pay
Lender a processing fee equal to the lesser of $5,000.00 or
fifty one-hundredths percent (0.50%) of the Option Release
Amount and (B) reimburse Lender for any reasonable costs and
expenses it actually incurs arising from the transfer of the
Option Parcel and any release of the Option Parcel from the
lien of the applicable Mortgage (including, without
limitation, attorneys fees and expenses);
(ii) Intentionally Omitted;
(iii) Each applicable municipal authority exercising
jurisdiction over the Option Parcel shall have approved, or
shall be prepared to approve, as part of its standard
approval process, a lot-split ordinance or other applicable
action under local law dividing the Option Parcel from the
remainder of the applicable Individual Property and
assigning separate tax identification numbers to each;
(iv) Upon the release of the Option Parcel and after the
completion of the standard approval process for tax lot-
splits by the applicable municipal authority exercising
jurisdiction over the Option Parcel, no part of the
remaining applicable Individual Property shall be part of a
tax lot affecting any portion of the Option Parcel;
(v) Lender shall have received appropriate title endorsements to
the title policies issued in connection with the Loan
confirming the priority of the lien of the Mortgage on the
remaining portion of the Individual Property;
(vi) All requirements under all laws, statutes, rules and
regulations (including, without limitation, all zoning and
subdivision laws, setback requirements, sideline
requirements, parking ratio requirements, use requirements,
building and fire code requirements, environmental
requirements and wetlands requirements) applicable to the
Individual Property necessary to accomplish the lot split
shall have been fulfilled, and all necessary variances, if
any, shall have been obtained, and evidence thereof has been
delivered to the Lender which in form and substance is
appropriate for the jurisdiction in which the Individual
Property is located;
(vii) As a result of the lot split, the remaining Individual
Property and the Option Parcel each considered alone will
not be in violation of any then applicable law, statute,
rule or regulation (including, without limitation, all
zoning and subdivision laws, setback requirements, sideline
requirements, parking ratio requirements, use requirements,
building and fire code requirements, environmental
requirements and wetland requirements) and all necessary
variances, if any, shall have been obtained and evidence
thereof has been delivered to the Lender which in form and
substance is appropriate for the jurisdiction in which the
Individual Property is located;
(viii) The Lender shall receive evidence that the Option
Parcel is transferred to a Person who is not an Affiliate of
Borrower and that the single purpose nature and bankruptcy
remoteness of Borrower and its shareholders or partners
following such release are in accordance with the standards
of the Rating Agencies (which requirement may include a
legal non-consolidation opinion) in form and substance
typical for similar transaction;
(ix) Appropriate reciprocal easement agreements for the benefit
and burden of the remaining Individual Property and the
Option Parcel regarding the use of common facilities of such
parcels, including, but not limited to, roadways, parking
areas, utilities and community facilities by the occupants
of the remaining Individual Property and the Option Parcel,
in a form and substance that would be acceptable to a
prudent lender, shall be declared and recorded. In
addition, all operating covenants, if any, of the Option
Tenants remain in full force and effect after such release;
(x) Borrower shall execute such documents and instruments and
obtain such opinions of counsel as are typical for similar
transactions;
(xi) With respect to the Option Parcels identified on Schedules
VII, X, and XII hereof and the Substitute Property Option
Parcel in connection with a Market Substitute Property
Option, Borrower shall deliver to Lender an appraisal of the
Option Parcel dated no more than sixty (60) days prior to
the release, which would be acceptable to a prudent lender
in form and scope;
(xii) With respect to the Option Parcels identified on
Schedules VII, X and XII hereof and the Substitute Property
Option Parcel in connection with a Market Substitute
Property Option, the release shall be deemed a Defeasance
Event and a principal balance of the Loan shall be partially
defeased in an amount equal to the Option Release Amount of
the Option Parcel and Borrower shall increase the Defeasance
Deposit as necessary to defease a portion of the Loan equal
to such amount; provided, however, if such release occurs on
or after the Anticipated Repayment Date, the release shall
not be deemed a Defeasance Event and Borrower shall prepay
the Loan in an amount equal to the Option Release Amount.
Any Defeasance Event or release pursuant to this subsection
shall be completed in accordance with Sections 2.12 and 2.13
hereof.
(xiii) With respect to a Substitute Property Option Parcel,
(A) if a Securitization has not occurred, the Borrower shall
obtain the written consent of Lender, which consent shall
not be unreasonably withheld, delayed or conditioned and (B)
if a Securitization has occurred and such release occurs
prior to the Release Date, Borrower shall deliver to Lender
an appraisal of the Substitute Property Option Parcel, which
would be acceptable to a prudent lender in form and scope
and indicating that the value of (I) the Substitute Property
as of the date of the substitution minus the value of the
Substitute Property Option Parcel, plus (II) the value of
the remaining Individual Properties as of the date of their
encumbrance by the related Mortgage, or in the case of a
Substitute Property, as of the substitution date, satisfies
the loan-to-value test applicable to any REMIC Trust holding
the Loan.
Notwithstanding the fact that Lender has executed (i) that certain Covenant to
Release, dated the date hereof, with respect to the Patrick Henry May Option and
(ii) that certain Covenant to Release, dated the date hereof, with respect to
the Nittany May Option, Borrower must satisfy all of the requirements, as
applicable, of this Section 2.8 in connection with such release.
Section 2.9 Release of Out-Parcels. At any time after the date
hereof, but prior to the Anticipated Repayment Date, Borrower may obtain a
release of an Out-Parcel from the lien of the applicable Mortgage upon sixty
(60) days prior written notice, provided that such release shall only be granted
if the following conditions have been met or satisfied:
(i) Borrower shall (A) pay Lender a processing fee equal to the
lesser of $5,000.00 or fifty one-hundredths percent (0.50%)
of the Out-Parcel Release Amount and (B) reimburse Lender
for any reasonable costs and expenses it actually incurs
arising from the transfer of the Out-Parcel and any release
of the Out-Parcel from the lien of the applicable Mortgage
(including, without limitation, reasonable attorneys fees
and expenses);
(ii) At the time Borrower requests such release and at the time
such release is granted there is no Event of Default
continuing;
(iii) The intended use of such Out-Parcel shall be for income
producing activities and consistent with the use to which
out-parcels and expansion parcels are generally used in
first class retail shopping malls located in area of such
Out-Parcel and with respect to the Out-Parcels delineated in
the color of green on the plans attached hereto as Schedule
XIII, the intended use of the Out-Parcels will not have a
material adverse effect on the occupancy at the Individual
Property;
(iv) Upon the release of the Out-Parcel and after the completion
of the standard approval process for tax lot-splits by the
applicable municipal authority exercising jurisdiction over
the Out-Parcel, no part of the remaining Individual Property
shall be part of a tax lot affecting any portion of the Out-
Parcel;
(v) Each applicable municipal authority exercising jurisdiction
over the Out-Parcel shall have approved, or shall be
prepared to approve, as part of its standard approval
process, a lot-split ordinance or other applicable action
under local law dividing the Out-Parcel from the remainder
of the Individual Property and assigning separate tax
identification numbers to each. A metes and bounds
description of the Out-Parcel shall have been delivered to
Lender along with an ALTA survey meeting the requirements of
this Agreement depicting the Out-Parcel;
(vi) All requirements under all laws, statutes, rules and
regulations (including, without limitation, all zoning and
subdivision laws, setback requirements, sideline
requirements, parking ratio requirements, use requirements,
building and fire code requirements, environmental
requirements and wetlands requirements) applicable to the
Individual Property necessary to accomplish the lot split
shall have been fulfilled, and all necessary variances, if
any, shall have been obtained, and evidence thereof has been
delivered to the Lender which in form and substance is
appropriate for the jurisdiction in which the Individual
Property is located;
(vii) As a result of the lot split, the remaining Individual
Property and the Out-Parcel each considered alone will not
be in violation of any then applicable law, statute, rule or
regulation (including, without limitation, all zoning and
subdivision laws, setback requirements, sideline
requirements, parking ratio requirements, use requirements,
building and fire code requirements, environmental
requirements and wetland requirements) and all necessary
variances, if any, shall have been obtained and evidence
thereof has been delivered to the Lender which in form and
substance is appropriate for the jurisdiction in which the
Individual Property is located;
(viii) The Lender shall receive evidence that the Out-Parcel
has been transferred to a Person who is not an Affiliate of
Borrower, and that single purpose nature and bankruptcy
remoteness of Borrower and its shareholders or partners
following such transfer are in accordance with the standards
of the Rating Agencies (which requirement may include a
legal non-consolidation opinion acceptable to Lender);
(ix) Appropriate reciprocal easement agreements for the benefit
and burden of the remaining Individual Property and the Out-
Parcel regarding the use of common facilities of such
parcels, including, but not limited to, roadways, parking
areas, utilities and community facilities by the occupants
of the remaining Individual Property and the Out-Parcel, in
a form and substance that would be acceptable to a prudent
lender, shall be declared and recorded. The remaining
Individual Property and the Out-Parcel shall be in
compliance with all applicable covenants under any Anchor
Leases and Major Leases (including, but not limited to,
parking requirements and parking ratios), and all easements
and property agreements contained in the Permitted
Encumbrances for such Individual Property;
(x) Lender shall receive evidence that the occupancy rate of the
remaining Individual Property (excluding from gross
leaseable area the space available for "kiosks") shall be
equal to or greater than 90% (including Anchor Leases, but
excluding space occupied by tenants on a month-to-month
Lease or tenants leasing "kiosk" space);
(xi) Lender shall receive evidence that the Debt Service Coverage
Ratio as of the date of the Out-Parcel release allocable to
the remaining Individual Property shall not be less than the
Debt Service Coverage Ratio for the Individual Property as
of (A) with respect to the Out-Parcels delineated in the
color of blue on Schedule XIII attached hereto, (I) the
Closing Date and (II) the date immediately preceding the Out
Parcel release and (B) with respect to the Out-Parcels
delineated in the color of green on Schedule XIII attached
hereto, the Closing Date; provided, however, if Borrower
does not satisfy such requirements, Borrower shall have the
right after the Release Date to defease a portion of the
Loan in accordance with Section 2.12 hereof in order to
satisfy the requirements of this Section 2.9(xi);
(xii) No tenant under any Lease whose own, or whose parent's,
long-term unsecured debt rating is rated at least "BBB" or
"Baa2" or the equivalent by a Rating Agency has executed, or
is negotiating in contemplation of executing, a Lease with
respect to a portion of such Out-Parcel (unless such tenant
is replaced by a tenant whose own, or whose parent's, rating
is equal or better);
(xiii) Title policy endorsements have been delivered to the
effect that the release of the Out-Parcel will not have an
adverse affect on the priority of the lien of the Mortgage
on the remaining portion of the Individual Property;
(xiv) Borrower has delivered an officer's certificate to the
effect that the conditions in subsection (i) - (xiii) have
occurred;
(xv) If prior to a Securitization, approval of such release by
the Lender, which approval shall not be unreasonably
withheld, conditioned or delayed. If a Securitization has
occurred, receipt of written confirmation from the Rating
Agencies that the Securities issued in such a Securitization
shall not be qualified, withdrawn or downgraded as a result
of such release;
(xvi) Borrower shall execute such documents and instruments
and obtain such opinions of counsel as are typical for
similar transactions, including, if a Securitization shall
have occurred, an opinion that the release of the Out-Parcel
will not be a "significant modification" of this Loan within
the meaning of Section 1.1001-3 of the regulations of the
United States Department of the Treasury;
(xvii) Intentionally Omitted;
(xviii) Borrower shall deliver evidence to Lender that the
release of the Out-Parcel will not materially adversely
affect the Net Operating Income of the Individual Property
or access to the Individual Property and that the release
does not violate any loan-to-value tests applicable to any
REMIC Trust holding the Loan;
(xix) With respect of the Out-Parcels delineated in the color
of blue on Schedule XIII attached hereto, such release shall
be deemed a Defeasance Event and a principal balance of the
Loan shall be partially defeased in an amount equal to the
Out-Parcel Release Amount and Borrower shall increase the
Defeasance Deposit as necessary to defease a portion of the
Loan equal to such amount. Any Defeasance Event pursuant to
this subsection shall be completed in accordance with
Sections 2.12 and 2.13 hereof; and
(xx) With respect to the Out-Parcels delineated in the color
green on Schedule XIII attached hereto, for which such
release shall not be deemed a Defeasance Event, Borrower
shall deposit into the Rollover Escrow Fund an amount equal
to the Out-Parcel Release Amount of the Option Parcel, which
shall be disbursed in accordance with Section 3.3 hereof.
Section 2.10 Release of Construction Parcels. At any time after the
date hereof, but prior to the Anticipated Prepayment Date, Borrower may obtain a
release of a Construction Parcel from the lien of the applicable Mortgage upon
sixty (60) days prior written notice, provided that such release shall only be
granted if (a) the conditions listed in Section 2.9(ii) through and including
Section 2.9(xviii), other than those contained in Section 2.9(viii), (x), (xi),
(xii) and (xiv), are satisfied as if the Out-Parcel referenced to therein was
the Construction Parcel and (b) the following additional conditions have been
satisfied:
(i) Borrower shall (A) pay Lender a processing fee equal to
fifty one-hundredths percent (0.50%) of the Construction
Parcel Release Amount and (B) reimburse Lender for any
reasonable costs and expenses it actually incurs arising
from the transfer of the Construction Parcel and any release
of the Construction Parcel from the lien of the applicable
Mortgage (including, without limitation, reasonable
attorneys fees and expenses);
(ii) The Lender shall receive evidence reasonably satisfactory to
it that the single purpose nature and bankruptcy remoteness
of Borrower and its shareholders or partners following such
release are in accordance with the standards of the Rating
Agencies (which requirement may include a legal non-
consolidation opinion in form and substance typical for
similar transactions);
(iii) Lender shall receive evidence that the transferee of
the Construction Parcel (the "Construction Parcel
Transferee") has entered into valid and duly executed
leases, or the Construction Parcel Transferee has entered
into an agreement with Borrower to occupy the space, which
are arm's length transactions at the then prevailing market
rates in the area where the applicable Individual Property
is located, with respect to the Construction Parcel for (A)
all leaseable space identified for Anchor Tenants at the
Construction Parcel and (B) 50% of all gross leaseable
space, if any, of the Construction Parcel not leased to such
Anchor Tenant, provided that such requirement shall be
deemed satisfied if the only gross leaseable space not
leased to Anchor Tenants is Incidental Space;
(iv) No Anchor Tenant of the remaining Individual Property has
executed, or is negotiating in contemplation of executing, a
Lease with respect to the Construction Parcel, or a portion
thereof, unless an Anchor Tenant (as defined in clause (b)
in the definition of "Anchor Tenant", but excluding a movie
theater) has occupied the space previously occupied by the
original Anchor Tenant or has executed a Lease with the
Borrower for such space, which has a term of ten (10) years
or greater, is an arm's length transaction on the then
prevailing market terms and has no conditions to occupancy
by the new Anchor Tenant other than Borrower's delivery of
the space. All leaseable space designated for Anchor
Tenants with respect to the remaining Individual Property is
occupied by Anchor Tenants;
(v) If the Construction Parcel includes leaseable space for
tenants other than Anchor Tenants, the aggregate occupancy
rate of the remaining Individual Property (excluding gross
leaseable space available for "kiosks" and Anchor Tenants),
based on the tenants remaining in possession and tenants
that have duly executed Leases shall be equal to or greater
than 90% (excluding Anchor Leases, tenants on a month-to-
month Lease or tenants leasing "kiosk" space); provided,
however, such occupancy rate shall not be required to be met
if the Construction Parcel contains 10,000 sq. ft. or less
of leaseable space for tenants other than Anchor Tenants and
such space is included in the Construction Parcel because it
is architecturally necessary or incidental to creating a
passage from the remaining Individual Property to the Anchor
Tenant of the Construction Parcel (the "Incidental Space").
(vi) Borrower shall deposit into the Rollover Escrow Fund an
amount equal to the Construction Parcel Release Amount of
the Construction Parcel, which shall be disbursed in
accordance with Section 3.3 hereof; provided, however, such
disbursement from the Rollover Escrow Fund shall only be
made for tenant improvement and leasing commissions with
respect to the Individual Property that is subject to the
Construction Parcel release and with respect to the
Construction Parcel Release Amount received in connection
with the release of the Black Rose Antiques Parcel, such
funds shall first be disbursed for the costs of renovation
and/or expansion of the Retail Strip Center;
(vii) If the Construction Parcel Transferee is an Affiliate
of Borrower, the Construction Parcel Transferee shall be a
limited partnership and the Borrower shall cause the holder
of the partnership interests in the Construction Parcel
Transferee to pledge such partnership interests to Lender as
additional security for the Loan;
(viii) If the Construction Parcel Transferee is an Affiliate
of Borrower, the Borrower or the Construction Parcel
Transferee shall deliver to Lender a payment bond and a
performance bond in the form of AIA Document A312, with dual
obligee riders naming Lender as co-obligee (as its interest
may appear), or in such other form as would be acceptable to
a prudent Lender (collectively, the "Bonds"), with respect
to (A) the general contractor of the Construction Parcel and
(B) a Major Trade Contractor of the Construction Parcel;
(ix) If the Construction Parcel Transferee is not an Affiliate of
Borrower, the Borrower shall either (A) deliver, or cause
the Construction Parcel Transferee to deliver, the Bonds, or
(B) not be entitled to withdraw any funds from the Rollover
Escrow Fund with respect to the Individual Property that is
subject to the Construction Parcel Release until a final
certificate of occupancy with respect to the Construction
Parcel has been issued by the appropriate Governmental
Authority;
(x) Borrower shall deliver evidence to Lender that the release
of the Construction Parcel will not materially adversely
affect the existence of the applicable Individual Property
as a first-class regional shopping mall;
(xi) If an Affiliate of Borrower is the general contractor or a
contractor of the Construction Parcel, such Person shall not
receive fees in connection with the performance of such
function greater than the then market prevailing rates for
such services;
(xii) With respect to the Black Rose Antiques Parcels,
Borrower shall (A) renovate and/or expand the Retail Strip
Center, including but not limited to acquiring additional
real property pursuant to Section 2.11 hereof, in order to
(I) relocate the operation of the Black Rose Antiques Parcel
to space at the Retail Strip Center that is sufficient in
size to accommodate the operation of the Black Rose Antiques
Parcel as of the Closing Date and (II) maintain the income
of the Retail Strip Center without giving effect to the
income generated by the operation of "Black Rose Antiques"
at the Retail Strip Center, (B) deliver to Lender
confirmation in writing from the Rating Agencies to the
effect that such release will not result in a withdrawal,
qualification or downgrade of the respective ratings in
effect immediately prior to such release for the Securities
issued in connection with the Securitization that are then
outstanding, or if the Loan is not part of a Securitization,
obtain the written consent of Lender to such release, which
consent shall not be unreasonably withheld, delayed or
conditioned and (C) deliver to Lender evidence that (I) the
operation of the Black Rose Antiques Parcel has been in
operation at the Retail Strip Center for at least ninety
(90) days and (II) Borrower or a third party has executed a
master lease with a third party with respect to the space
required to be occupied by the operation of the Black Rose
Antiques Parcel, which shall be for a term of one (1) year
or greater and for rent equal to or greater than the rent
received by Borrower from the vendors at, or operators of,
the Black Rose Antiques Parcel immediately preceding the
release; and
(xiii) Borrower shall deliver an officer's certificate stating
that the following conditions have been satisfied: (A)
Section 2.9(ii) through and including 2.9(xiii), other than
Section 2.9(x), (xi) and (xii), and (B) this Section 2.10.
Section 2.11 Additional Collateral Parcels. (a) At any time and from
time to time prior to the Anticipated Repayment Date, Borrower may, subject to
the conditions set forth in this Section 2.11, acquire one or more unimproved
parcels which are adjacent to existing Individual Properties (an "Additional
Collateral Parcel"). From and after the acquisition of an Additional Collateral
Parcel by Borrower in accordance herewith, such Additional Collateral Parcel
shall thereafter be deemed part of the Individual Property to which it is
adjacent. In the event of the acquisition by Borrower of an Additional
Collateral Parcel, the Note shall remain in full force and effect, and the
Mortgage encumbering the applicable Individual Property shall be amended and
restated such that the lien thereof is spread to encumber the Additional
Collateral Parcel, as well as the Individual Property, as security for the Note.
(b) In order to qualify as an Additional Collateral Parcel, the real
property must, at the time it is acquired by Borrower:
(i) be a real property as to which Borrower will hold
indefeasible fee title free and clear of any Lien except for Permitted
Encumbrances and easements, restrictive covenants and other title exceptions
which do not have a material adverse effect on the value of such real property
for use as a shopping center;
(ii) not be subject to any remediation plan with respect to
Hazardous Materials and be otherwise free and clear of Hazardous Materials in
violation of Environmental Laws as shall be demonstrated in an environmental
report issued by a recognized environmental consultant acceptable to Lender at
Borrower's expense, all as certified by such consultant;
(iii) be permitted to be used as part of a shopping center
under all applicable Legal Requirements, as shall be demonstrated by any one or
more of the following necessary to demonstrate such compliance (to the extent
applicable within the jurisdiction within which the applicable Additional
Collateral Parcel is located): a letter from the municipality in which the
parcel is located and/or an ALTA 3.1 zoning endorsement to the title insurance
policy delivered pursuant to Section 2.11(c)(vi)(C) hereof;
(iv) be a separate tax lot after the completion of the standard
approval process for tax lot-splits by the applicable municipal authority
exercising jurisdiction over the Additional Collateral Parcel, as shall be
demonstrated (to the extent applicable within the jurisdiction within which the
applicable Additional Collateral Parcel is located) by an endorsement to the
title insurance policy delivered pursuant to Section 2.11(c)(vi)(C) hereof, a
letter from the title company issuing such title insurance policy or a letter
from the appropriate taxing authority; and
(v) be subject to insurance coverage as required pursuant to
this Agreement and the other Loan Documents, as shall be demonstrated by valid
certificates of insurance indicating that the requirements for the policies of
insurance required for an Individual Property under the Loan Documents have been
satisfied with respect to the Additional Collateral Parcel and evidence of the
payment of all Insurance Premiums payable for the then current policy period.
(c) In addition to the conditions set forth in Section 2.11(b) above,
the acquisition of any Additional Collateral Parcel by Borrower pursuant to this
Section 2.11 shall be subject to the following requirements, all of which, if
applicable, shall be satisfied at Borrower's expense:
(i) receipt by Lender of written notice thereof from Borrower at
least fifteen (15) days before the date of the proposed acquisition (the
"Additional Collateral Acquisition Date") together with (A) written evidence
that the real property proposed to be an Additional Collateral Parcel complies
with Section 2.11(b) hereof as required pursuant thereto and (B) such other
information, including financial information, as Lender or, if a Securitization
has occurred, the Rating Agencies, may request;
(ii) no Event of Default shall have occurred and be continuing;
(iii) the representations and warranties set forth in this
Agreement and the Loan Documents with respect to the Individual Property, shall
be true and correct as to the proposed Additional Collateral Parcel on the
Additional Collateral Acquisition Date;
(iv) delivery to Lender of an Officer's Certificate certifying
that all requirements to the acquisition of the Additional Collateral Parcel
pursuant to this Section 2.11 have been satisfied;
(v) delivery to Lender of originals of the following in form and
substance appropriate for the jurisdiction in which the Additional Collateral
Parcel is located:
(A) an amended and restated Mortgage as required pursuant to
Section 2.11(a) hereof, duly executed and acknowledged by Borrower;
(B) an endorsement to the title insurance policy insuring that
the Mortgage creates a valid first lien on Borrower's fee title in the
Additional Collateral Parcel subject to the Permitted Encumbrances; and
(C) a current as-built land title survey and a certificate from
a professional licensed land surveyor with respect to the Additional
Collateral Parcel, certified to the title company issuing the title
insurance policy and Lender as being prepared in accordance with the 1992
Minimum Standard Detail Requirements for ALTA/ACSM Land Title Surveys and
in scope and substance similar to the surveys delivered to Lender on the
Closing Date with respect to the Properties; and
(vi) if a Securitization shall have occurred, delivery of
evidence in writing from the Rating Agencies to the effect that such acquisition
of the Additional Collateral Parcel will not result in a withdrawal,
qualification or downgrade of the respective ratings in effect immediately prior
to such acquisition for the Securities issued in connection with the
Securitization that are then outstanding or, if a Securitization shall not have
occurred, Lender shall have consented in writing to such acquisition.
(vii) payment by Borrower of all reasonable costs and
expenses actually incurred in connection with such acquisition by Borrower of an
Additional Collateral Parcel (including, without limitation, reimbursement of
Lender's reasonable costs, title premiums, mortgage recording taxes, if any,
transfer taxes, if any, recording fees, Rating Agency's fees and expenses and
reasonable attorneys' fees and disbursements actually incurred).
Section 2.12 Prepayment; Substitution of Collateral.
(a) Prepayment. Borrower shall repay any outstanding principal
indebtedness of the Loan in full on the Maturity Date, together with interest
thereon to (but excluding) the date of repayment. Borrower shall have no right
to prepay all or any portion of the Loan prior to the Anticipated Repayment Date
other than as set forth in this Section 2.12 and in connection with a prepayment
pursuant to Section 5.3(c) hereof. On any scheduled Payment Date occurring on
July 10, 2008, August 10, 2008 or September 10, 2008 or any Payment Date
thereafter, Borrower may, at its option and upon thirty (30) days' prior written
notice from Borrower to Lender, prepay in whole or in part the Debt without
payment of any premium. Any such payment shall be applied to the last payments
of principal due under the Loan. Each voluntary prepayment (including a
prepayment pursuant to Section 5.3(c) hereof) shall be made on a scheduled
payment date and include all accrued and unpaid interest up to but not including
such scheduled payment date or, if not paid on a scheduled payment date, include
interest that would have accrued on such prepayment through the next regularly
scheduled payment date. If prior to the Anticipated Repayment Date and
following the occurrence of any Event of Default, Borrower shall tender payment
(including a prepayment pursuant to Section 5.3(c) hereof) of an amount
sufficient to satisfy all or any portion of the Debt, such tender by Borrower
shall be deemed to be voluntary and may be accepted or rejected by Lender in its
sole discretion. If Lender accepts such tender prior to the Release Date,
Borrower shall pay, in addition to the Debt, the Default Yield Maintenance
Premium. If Lender accepts such tender after the Release Date, the Borrower
shall pay, in addition to the debt, an amount equal to the Yield Maintenance
Premium, if any, that would be required under Section 2.12 hereof if a
Defeasance Event has occurred.
(b) Voluntary Defeasance of the Loan. Provided no Event of Default
exists, at any time after the Release Date and prior to the Anticipated
Repayment Date Borrower may voluntarily defease all or any portion of the Loan
by providing Lender with U.S. Obligations that produce payments which replicate
the Scheduled Defeasance Payments (hereinafter, a "Defeasance Event"); provided,
however, a Defeasance Event may occur for a portion of the Loan in connection
with either the release of an Option Parcel pursuant to Section 2.8 hereof or a
release of an Out-Parcel pursuant to Section 2.9 hereof, on any date after the
date hereof. Each Defeasance Event by the Borrower shall be subject to the
satisfaction of the following conditions precedent:
(i) Borrower shall provide not less than thirty (30) days prior
written notice to Lender specifying a regularly scheduled
payment date (the "Defeasance Date") on which the Defeasance
Event is to occur. Such notice shall indicate the
anticipated principal amount of the Note to be defeased;
(ii) Borrower shall pay to Lender all accrued and unpaid interest
on the principal balance of the Note to but not including
the Defeasance Date. If for any reason the Defeasance Date
is not a regularly scheduled payment date, the Borrower
shall also pay interest that would have accrued on the Note
through the next regularly scheduled payment date;
(iii) Borrower shall pay to Lender all other sums, not
including scheduled interest or principal payments, due
under the Note, this Agreement, the Mortgages, and the other
Loan Documents;
(iv) Borrower shall pay to Lender the required Defeasance Deposit
for the Defeasance Event;
(v) Other than with respect to a Defeasance Event that occurs
prior to the Release Date in connection with the release of
an Option Parcel pursuant to Section 2.8 hereof or the
release of an Out-Parcel pursuant to Section 2.9 hereof, in
the event only a portion of the Loan is the subject of the
Defeasance Event, Borrower shall prepare all necessary
documents to amend and restate the Note and issue two
substitute notes, one note having a principal balance equal
to the defeased portion of the original Note (the "Defeased
Note") and the other note having a principal balance equal
to the undefeased portion of the Note (the "Undefeased
Note"). The Defeased Note and Undefeased Note shall have
identical terms as the Note except for the principal
balance. A Defeased Note cannot be the subject of any
further Defeasance Event;
(vi) Borrower shall execute and deliver a security agreement, in
form and substance reasonably satisfactory to Lender,
creating a first priority lien on the Defeasance Deposit and
the U.S. Obligations purchased with the Defeasance Deposit
in accordance with this provision of this Section 2.12 (the
"Security Agreement");
(vii) Borrower shall deliver an opinion of counsel for
Borrower in form satisfactory to Lender in its reasonable
discretion stating, among other things, that Borrower has
legally and validly transferred and assigned the U.S.
Obligations and all obligations, rights and duties under and
to the Note or Defeased Note (as applicable) to the
Successor Borrower, that Lender has a perfected first
priority security interest in the Defeasance Deposit and the
U.S. Obligations delivered by Borrower, and that any REMIC
Trust formed pursuant to a Securitization will not fail to
maintain its status as a "real estate mortgage investment
conduit" within the meaning of Section 860D of the Code as a
result of such Defeasance Event;
(viii) Borrower shall deliver evidence in writing from the
applicable Rating Agencies to the effect that such release
will not result in a downgrading, withdrawal or
qualification of the respective ratings in effect
immediately prior to such Defeasance Event for the
Securities issued in connection with the Securitization
which are then outstanding. If required by the Rating
Agencies, the Borrower shall also deliver or cause to be
delivered a non-consolidation opinion with respect to the
Successor Borrower in form and substance reasonably
satisfactory to Lender and the applicable Rating Agencies;
(ix) Borrower shall deliver an officer's certificate certifying
that the requirements set forth in this Section 2.12(b) have
been satisfied in all material respects;
(x) Borrower shall deliver a certificate of an independent
certified public accountant reasonably acceptable to Lender
certifying that the U.S. Obligations purchased with the
Defeasance Deposit generate monthly amounts equal to or
greater than the required scheduled Defeasance Payments;
(xi) Borrower shall deliver such other certificates, documents or
instruments as Lender may reasonably request; and
(xii) Borrower shall pay all reasonable costs and expenses of
Lender actually incurred in connection with the Defeasance
Event, including any costs and expenses associated with a
release of a Lien of a Mortgage as provided in Section 2.13
hereof as well as reasonable attorneys' fees and expenses
and Rating Agency's fees and expenses.
(c) In connection with each Defeasance Event, Borrower hereby
appoints Lender as its agent and attorney-in-fact for the purpose of using the
Defeasance Deposit to purchase U.S. Obligations which provide payments on or
prior to, but as close as possible to, all successive scheduled payment dates
after the Defeasance Date upon which interest and principal payments are
required under the Note, in the case of a Defeasance Event for the entire
outstanding principal balance of the Loan, or the Defeased Note, in the case of
a Defeasance Event for only a portion of the outstanding principal balance of
the Loan, as applicable, and in amounts equal to the scheduled payments due on
such dates under the Note or the Defeased Note, as applicable, (including
without limitation scheduled payments of principal, interest, servicing fees (if
any), any rating surveillance charge and any other amounts due under the Loan
Documents on such dates) and assuming such Note or Defeased Note is prepaid in
full on the Anticipated Repayment Date (the "Scheduled Defeasance Payments").
Borrower or Successor Borrower, pursuant to the Security Agreement or other
appropriate document, shall authorize and direct that the payments received from
the U.S. Obligations may be made directly to the Cash Management Account (unless
otherwise directed by Lender) and applied to satisfy the obligations of Borrower
or Successor Borrower under the Note or the Defeased Note, as applicable. Any
portion of the Defeasance Deposit in excess of the amount necessary to purchase
the U.S. Obligations required by this Section 2.12 and satisfy Borrower's
obligations under this Section 2.12 and Section 2.13 shall be remitted to
Borrower.
Section 2.13 Release of Property. Except as set forth in this
Section 2.13, no repayment, prepayment or defeasance of all or any portion of
the Note shall cause, give rise to a right to require, or otherwise result in,
the release of a Lien of a Mortgage on an Individual Property.
(a) Release of All the Properties. (i) If the Borrower has elected
to defease the entire Note and the requirements of Section 2.12 have been
satisfied in all material respects, all of the Properties shall be released from
the Lien of the Mortgages and the U.S. Obligations, pledged pursuant to the
Security Agreement, shall be the sole source of collateral securing the Note.
(ii) In connection with the release of the Liens, the Borrower
shall submit to Lender, not less than ten (10) days prior to
the Defeasance Date, a release of Lien (and related Loan
Documents) for each Individual Property (other than those
expressly stated to survive including those set forth in the
Hazardous Materials Indemnity Agreement) for execution by
Lender. Such release shall be in a form appropriate in each
jurisdiction in which an Individual Property is located and
satisfactory to Lender in its sole discretion. In addition,
Borrower shall provide all other documentation Lender
reasonably requires to be delivered by Borrower in
connection with such release, together with an officer's
certificate certifying that such documentation (A) is in
compliance with all Legal Requirements, and (B) will effect
such releases in accordance with the terms of this
Agreement.
(b) Release of Individual Properties. Borrower on one or more
occasions may obtain the individual release of an Individual Property from the
Lien of the Mortgage thereon (and related Loan Documents) and the release of
Borrower's obligations under the Loan Documents with respect to such Individual
Property (other than those expressly stated to survive including those set forth
in the Hazardous Materials Indemnity Agreement), upon satisfaction of each of
the following conditions:
(i) The principal balance of the Defeased Note shall equal or
exceed the Adjusted Release Amount for the applicable
Individual Property; provided, however, if the outstanding
principal balance of the Undefeased Note (prior to giving
effect to the related Defeasance Event) is less than the
Adjusted Release Amount for the Individual Property to be
released, the Defeased Note shall be in an amount equal to
the outstanding principal balance of such Undefeased Note.
(ii) The requirements of Section 2.12(b) (including Section
2.12(b)(viii)) have been satisfied.
(iii) The Individual Property is transferred from the
Borrower to another Person and such Person is not the
general partner or managing member of Borrower.
(iv) Borrower shall submit to Lender, not less than ten (10) days
prior to the date of such release, a release of Lien (and
related Loan Documents) for such Individual Property for
execution by Lender. Such release shall be in a form
appropriate in each jurisdiction in which the Individual
Property is located. In addition, Borrower shall provide
all other documentation Lender reasonably requires to be
delivered by Borrower in connection with such release,
together with an officer's certificate certifying that such
documentation (i) is in compliance with all Legal
Requirements, (ii) will effect such release in accordance
with the terms of this Agreement, and (iii) will not
materially impair or otherwise materially adversely affect
the Liens, security interests and other rights of Lender
under the Loan Documents not being released (or as to the
parties to the Loan Documents and Properties subject to the
Loan Documents not being released).
(v) After giving effect to such release, the Debt Service
Coverage Ratio for all of the Properties then remaining
subject to the Lien of the Mortgages shall be equal to the
greater of (i) the Debt Service Coverage Ratio for the
twelve (12) full calendar months immediately preceding the
Closing Date, and (ii) the Debt Service Coverage Ratio for
all of the then remaining Properties (including the
Individual Property to be released) for the twelve (12) full
calendar months immediately preceding the release of the
Individual Property.
(c) Successor Borrower. In connection with any release of a Lien
under this Section 2.13, other than in connection with a release prior to the
Release Date of an Option Parcel pursuant to Section 2.8 hereof or an Out-Parcel
pursuant to Section 2.9 hereof, Borrower may, or at the request of Lender shall,
establish or designate a successor entity (the "Successor Borrower") which shall
be a single purpose bankruptcy remote entity approved by Lender, and Borrower
shall transfer and assign all obligations, rights and duties under and to the
Note or the Defeased Note, as applicable, together with the pledged U.S.
Obligations to such Successor Borrower; provided, however, the Borrower shall
not be required to establish such Successor Borrower in connection with the
release of an Option Parcel pursuant to Section 2.8 hereof or an Out-Parcel
pursuant to Section 2.9 hereof if the amount of the Loan defeased pursuant to
the exercise of the releases permitted under such sections is less than
$10,000,000.00 in the aggregate. Such Successor Borrower shall assume the
obligations under the Note or the Defeased Note, as applicable, and the Security
Agreement and Borrower shall be relieved of its obligations under such
documents. The Borrower shall pay $1,000 to any such Successor Borrower as
consideration for assuming the obligations under the Note or the Defeased Note,
as applicable, and the Security Agreement. Notwithstanding anything in this
Agreement to the contrary, no other assumption fee shall be payable upon a
transfer of the Note or the Defeased Note, as applicable, in accordance with
this Section 2.13, but Borrower shall pay all reasonable costs and expenses
actually incurred by Lender, including Lender's attorneys' fees and expenses,
incurred in connection therewith.
ARTICLE 3
SECURITY; RESERVES AND CASH MANAGEMENT
Section 3.1 Security; Establishment of Funds. The Loan shall be
evidenced by the Note of Borrower, in the original principal amount of the Loan.
The Loan shall be secured by the Mortgages creating a first lien on the
Properties, the Assignment of Leases and Rents and the other Loan Documents. As
further security for the Loan, Borrower agrees to establish the following
reserves with Lender, to be held by Lender as security for the Loan:
(a) Required Repair Fund. On the date hereof, Borrower shall deposit
with Lender the amount of Two Million Four Hundred Thousand and No/100 Dollars
($2,400,000.00) (the "Required Repair Fund") to perform the required repairs as
forth on Schedule III annexed hereto (which repairs shall be completed by no
later than twelve (12) months from the date hereof);
(b) Replacement Escrow Fund. On each Payment Date from the date
hereof, Borrower shall deposit into a reserve account with Lender (the
"Replacement Escrow Fund") an amount equal to one-twelfth (1/12) of Two Million
Seventy-Six Thousand and No/100 Dollars ($2,076,000.00).
(c) Rollover Escrow Fund. Borrower shall from time to time deposit
funds with Lender as required pursuant to Sections 2.9(xx) and 2.10(vi), which
funds shall be held by Lender for tenant improvement and leasing commission
obligations incurred with respect to the Properties following the date hereof
(the "Rollover Escrow Fund").
(d) Debt Service Escrow Fund. Borrower shall deposit with Lender an
amount equal to one payment of the Monthly Debt Service Payment (assuming a
twenty-five (25) year amortization) which shall be held by Lender as a debt
service reserve; provided, however, if an Event of Default does not exist and a
Defeasance Event occurs in connection with the release of the lien of an
applicable Mortgage with respect to the space occupied by an Anchor Tenant or an
Individual Property, the Debt Service Escrow Fund shall be reduced by an amount
equal to the Debt Service Escrow Fund as of the Closing Date multiplied by the
ratio of (i) the principal balance of the portion of the Loan being defeased and
(ii) the original principal balance of the Loan. If at any time the Debt
Service Escrow Fund is used by Lender to cover shortfalls in the Monthly Debt
Service Payments, Borrower shall promptly deposit in such escrow fund an amount
so that the escrow fund shall at all times have an amount equal to one Monthly
Debt Service Payment (the "Debt Service Escrow Fund").
(e) Ground Lease Escrow Fund. Borrower shall establish and maintain
an escrow fund with Lender for payments due under the Ground Lease into which
Borrower shall deposit (i) on the date hereof, an amount equal to Twenty-Eight
Thousand Eight Hundred Eighty-Eight and No/100 Dollars ($28,888.00) and (ii) on
each Payment Date, an amount equal to one-twelfth (1/12) of the aggregate amount
of all rent and any and all other charges that were due and payable by Borrower
under the Ground Lease for the full calendar year preceding such Payment Date
(the "Ground Lease Escrow Fund"); provided, however, in the event that the
Ground Lease Escrow Fund is not sufficient to pay all sums payable pursuant to
the Ground Lease at least ten (10) Business Days prior to the dates due,
Borrower shall upon notice from Lender immediately deposit into the Ground Lease
Escrow Fund such additional funds necessary to make such payments. The Ground
Lease Escrow Fund is for the purpose of paying all sums due under the Ground
Lease and is hereby pledged to Lender as additional security for the Debt.
(f) Renovation Escrow Fund. On the date hereof, Borrower shall
deposit with Lender the amount of One Million Seven Hundred Fifty Thousand and
No/100 Dollars ($1,750,000.00) (the "Renovation Escrow Fund") which shall be
held by Lender for renovations, upgrades and tenant improvements to the
Properties (including those disclosed in the estoppel certificates received from
tenants in connection with the closing of the Loan) in accordance with Schedule
XIV attached hereto, other than those repairs (i) identified on Schedule III
attached hereto, (ii) performed in connection with the Expansion Escrow Fund and
(iii) deemed by Lender, in its reasonable discretion, to be an expense
reimbursable from the Replacement Escrow Fund or Rollover Escrow Fund.
(g) Expansion Escrow Fund. On the date hereof, Borrower shall
deposit with Lender (i) the amount of Five Million Three Hundred Seventy-Five
Thousand and No/100 Dollars ($5,375,000.00), which shall be held by Lender for
expansion of the improvements located on the Individual Property known as
Patrick Henry Mall (the "Patrick Henry Expansion Escrow Fund") in accordance
with Schedule XIV attached hereto and (ii) the amount of Three Million Three
Hundred Twenty-Five Thousand and No/100 Dollars ($3,325,000.00), which shall be
held by Lender for expansion of the improvements located on the Individual
Property known as Nittany Mall (the "Nittany Expansion Escrow Fund") in
accordance with Schedule XIV attached hereto.
(h) Environmental Escrow Fund. On the date hereof, Borrower shall
deposit with Lender (i) the amount of One Hundred Twenty-Five Thousand and
No/100 Dollars ($125,000.00), to perform the environmental repairs for the
Individual Property known as Wyoming Valley Mall, as set forth on Schedule XV
attached hereto, (ii) the amount of One Hundred Thirty-Seven Thousand Five
Hundred and No/100 Dollars ($137,500.00), to perform the environmental repairs
for the Individual Property known as Viewmont Mall, as set forth on Schedule XV
attached hereto, (iii) the amount of Eighty-One Thousand Two Hundred Fifty and
No/100 Dollars ($81,250.00), to perform the environmental repairs for the
Individual Property known as Francis Scott Key Mall, as set forth on Schedule XV
attached hereto, and (iv) the amount of Thirty-Two Thousand Five Hundred and
No/100 Dollars ($32,500.00), to perform the environmental repairs for the
Individual Property known as Phillipsburg Mall, as set forth on Schedule XV
attached hereto. All such environmental repairs shall be completed by no later
than the dates set forth on Schedule XV attached hereto. All deposits required
pursuant to this Section 3.1(h) shall hereinafter collectively be referred to as
the "Environmental Escrow Fund".
Notwithstanding anything to the contrary contained herein, on or after
the Anticipated Repayment Date, Lender may reassess on an annual basis and in a
reasonable manner its estimate of the amount necessary for the Funds (other than
the Ground Lease Escrow Fund which may be reassessed prior to the Anticipated
Repayment Date) from time to time and may accordingly adjust the monthly amounts
required to be deposited into the Funds upon providing Borrower with
documentation supporting such reasonable adjustment thirty (30) days prior to
such adjustment. If Borrower reasonably determines, upon its review of such
documentation, that any such adjustment is not supported by such documentation,
Lender shall provide Borrower with additional documentation. Borrower shall
reimburse Lender for all third party reasonable costs and expenses that Lender
actually incurs in connection with the reassessment of the amount necessary for
the Funds, including, without limitation, reasonable attorneys' fees and
expenses.
Section 3.2 Pledge and Grant of Security Interest. Borrower hereby
pledges to Lender, and grants a security interest in, any and all monies now or
hereafter deposited in the Funds as additional security for the payment of the
Loan. Borrower shall not, without obtaining the prior written consent of
Lender, further pledge, assign or grant any security interest in the Funds or
permit any lien or encumbrance to attached thereto, or any levy to be made
thereon, or any UCC-1 Financing Statements (except those naming Lender as the
secured party) to be filed with respect thereto. The Funds shall be held in
Lender's name and invested in Permitted Investments in accordance with the terms
and conditions of the Cash Management Agreement. All investment earnings on the
Funds shall be added to and become part of the Funds and shall be for the
benefit of Borrower, subject to Lender's rights pursuant to this Agreement.
Lender shall not be responsible for any losses resulting from the investment of
the Funds or for obtaining any specific level or percentage of earnings on such
investment. Upon the occurrence of an Event of Default, Lender may apply any
sums then present in the Funds to the payment of the Loan in any order in its
sole discretion. Until expended or applied as above provided, the Funds shall
constitute additional security for the Loan.
Section 3.3 Disbursement of Funds. Lender shall make disbursements
from the Funds as requested by Borrower in accordance with the provisions of
this Section 3.3, within [ten (10)] days of such request, and approved by Lender
provided (a) no Event of Default has occurred and is continuing, (b) no material
adverse change has occurred in the financial condition or business condition of
the Borrower or the Properties, and (c) Borrower has satisfied the conditions of
this Section 3.3. Lender may require an inspection of any Individual Property
prior to any disbursement from the Funds, for the applicable Individual
Property, pursuant to this Section 3.3; provided, however, that so long as no
Event of Default exists, Borrower's obligation to bear the expense of such
inspection shall be limited to two (2) times in any calendar year for each
Individual Property. All costs and expenses incurred by Lender in the
disbursement of any of the Funds shall be paid by Borrower promptly upon demand.
Within thirty (30) days after the end of each calendar month, Lender shall
furnish to Borrower a detailed statement stating the balance of all amounts on
deposit in the Funds and all interest earned thereon. Interest earned on
Permitted Investments of the Funds shall be remitted to Borrower every six (6)
months upon written request by Borrower to Lender.
(a) Required Repair Fund, Replacement Escrow Fund and Renovation
Escrow Fund. Disbursement from the Required Repair Fund, the Replacement Escrow
Fund and the Renovation Escrow Fund may be requested on a monthly basis in
increments of no less than $10,000.00 upon written request by Borrower and
delivery to Lender of (i) a certificate from Borrower (A) stating that all
repairs and replacements at the applicable Individual Property to be funded by
the requested disbursement have been completed in good and workmanlike manner
and in accordance with all applicable federal, state and local laws, rules and
regulations, (B) identifying each Person that supplied materials or labor in
connection with such work performed at such Individual Property to be funded by
the requested disbursement, and (C) stating that each such Person has been paid
in full or will be paid in full upon such disbursement, (ii) copies of paid
invoices for any individual invoice in excess of $75,000.00 or any invoices in
excess of $5,000.00 from the same vendor with respect to the same construction
project which exceed $75,000.00 in the aggregate, and (iii) lien waivers and
releases from all parties furnishing services in connection with the requested
payment, if the amount of such service is in excess of $75,000.00 or the
services from the same vendor in excess of $5,000.00 for the same construction
project exceed $75,000.00 in the aggregate. At Lender's option, Lender may
require an inspection report for the applicable Individual Property verifying
the completion of the repairs or replacements for which the disbursement is
sought if such disbursement is in excess of $350,000.00. In the case of amounts
on deposit in the Renovation Escrow Fund, Borrower shall be entitled to
reallocate any undisbursed amounts between those amounts designated within the
Renovation Escrow Fund for specified renovations listed on Schedule XIV attached
hereto and unspecified future renovations. In the event that the funds in the
Required Repair Fund designated on Schedule III attached hereto for the
"Resolution of floor subsidence at West Manchester Bon-Ton and ADA issues with
respect to the Logan Valley Sears estoppel" are not disbursed within two (2)
years after the Closing Date, such funds shall become part of the Replacement
Escrow Fund.
(b) Rollover Escrow Fund. Disbursement from the Rollover Escrow Fund
may be requested on a monthly basis in increments of no less than $10,000.00
upon written request by Borrower and delivery to Lender of (i) a copy of the
duly executed Lease for which such disbursement is being requested, (ii) a
certificate of occupancy issued by the appropriate Governmental Authority for
the space leased pursuant to such Lease, which certificate shall be in full
force and effect as of the date of such disbursement, (iii) copies of payment
vouchers or paid invoices for any invoice (other than those solely for
materials) or cash allowance paid directly to the tenants in excess of
$75,000.00, and (iv) lien waivers and releases from all parties furnishing
services in connection with the requested payment, if the amount of such service
is in excess of $75,000.00. At Lender's option, Lender may require an
inspection report for the applicable Individual Property verifying the
completion of the tenant improvements for which the disbursement is sought if
such disbursement is in excess of (A) $350,000.00 for tenant improvements
constructed by Borrower, and (B) $500,000.00 for cash allowances paid directly
to the tenants.
(c) Expansion Escrow Fund. Disbursement from the Expansion Escrow
Fund may be requested on a monthly basis in increments of no less than
$10,000.00 upon written request by Borrower and, delivery to Lender of (i) in
connection with disbursement requests, other than for tenant improvements or
allowances: (A) a certificate from Borrower (I) stating that all Capital
Expenditures at the applicable Individual Property to be funded by the requested
disbursement have been completed in good and workmanlike manner and in
accordance with all applicable federal, state and local laws, rules and
regulations, and if such requested disbursement is for the entire Expansion
Escrow Fund, such certificate from Borrower should contain, in addition to the
items required herein, a statement that all contemplated and required
construction is complete and final, (II) identifying each Person that supplied
materials or labor in connection with such work performed at such Individual
Property to be funded by the requested disbursement, and (III) stating that each
such Person has been paid in full or will be paid in full upon such
disbursement, (B) copies of paid invoices for any invoice in excess of
$75,000.00, (C) lien waivers and releases from all parties furnishing services
in connection with the requested payment, if the amount of such service is in
excess of $75,000.00, and (D) an inspection report, at Lender's option, for the
applicable Individual Property verifying the completion of all contemplated and
required construction if the requested disbursement is for the entire Expansion
Escrow Fund; and (ii) in connection with tenant improvements and allowances:
(A) a copy of the duly executed Lease for which such disbursement is being
requested, (B) a certificate of occupancy issued by the appropriate Governmental
Authority for the space leased pursuant to such Lease, which certificate shall
be in full force and effect as of the date of such disbursement, (C) copies of
payment vouchers or paid invoices, including those for legal fees and
promotional expenses, for any invoice (other than those for materials) or cash
allowance for tenant improvements constructed by Borrower in excess of
$75,000.00, (D) lien waivers and releases from all parties furnishing services
in connection with the requested payment, if the amount of such service is in
excess of $75,000.00, and (E) an inspection report, at Lender's option, for the
applicable Individual Property verifying the completion of the repairs or
replacements for which the disbursement is sought if such disbursement is in
excess of $500,000.00. Requests for disbursement for reimbursement of the
interest and overhead expenses associated with the cost of construction shall be
calculated so as to represent the percentage of the completion of the total
costs of construction as has been completed as of the date of such request for
disbursement.
(d) Environmental Escrow Fund. Disbursement from the Environmental
Escrow Fund may be requested on a monthly basis in increments of no less than
$10,000.00 upon written request by Borrower and, delivery to Lender of (i) a
certificate from Borrower (A) stating that all environmental repairs at the
applicable Individual Property to be funded by the requested disbursement have
been completed in good and workmanlike manner and in accordance with all
applicable federal, state and local laws, rules and regulations, (B) identifying
each Person that supplied materials or labor in connection with such work
performed at such Individual Property to be funded by the requested
disbursement, and (C) stating that each such Person has been paid in full or
will be paid in full upon such disbursement, (ii) copies of paid invoices for
any individual invoice in excess of $75,000.00, and (iii) lien waivers and
releases from all parties furnishing services in connection with the requested
payment, if the amount of such service is in excess of $75,000.00. At Lender's
option, Lender may require an inspection report for the applicable Individual
Property to be prepared by an independent environmental consultant, acceptable
to Lender, verifying the completion of the environmental repairs for which the
disbursement is sought.
Section 3.4 Cash Management System.
(a) On or before the date hereof, the Borrower shall enter into a
cash management agreement among Borrower, Lender, Manager and one or more
certain financial institutions (together with any modifications or amendments
thereof, are hereinafter collectively referred to as the "Cash Management
Agreement"), which shall provide, among other things, that all Operating
Revenues and other sums collected from, or arising with respect to, the
Properties be deposited in accordance with the Cash Management Agreement and
that such amounts shall be disbursed in accordance with this Section 3.4. The
Borrower shall pay all costs and expenses required under the Cash Management
Agreement. Until expended or applied, amounts held pursuant to the Cash
Management Agreement shall constitute additional security for the Debt.
(b) In accordance with the terms of the Cash Management Agreement,
the Borrower shall establish and maintain one or more segregated Eligible
Accounts (collectively the "Cash Management Account") to be held by Servicer in
trust for the benefit of Lender. The Cash Management Account shall be entitled
"General Electric Capital Corporation, as Lender, pursuant to Loan Agreement,
dated as of August 28, 1998 - Cash Management Account." Borrower hereby grants
to Lender a first priority security interest in the Cash Management Account and
all deposits at any time contained therein and the proceeds thereof and will
take all actions necessary to maintain in favor of Lender a perfected first
priority security interest in the Cash Management Account, including, without
limitation, executing and filing UCC-1 Financing Statements and continuations
thereof. After the execution of the Cash Management Agreement, Borrower shall,
or shall cause Manager to deliver written instructions to all tenants under
Leases to deliver all Rents payable thereunder directly to the Cash Management
Account. In addition, within forty-five (45) days of the date hereof, Borrower
shall, and shall cause Manager to, deposit all amounts received by Borrower or
Manager constituting Rents into the Cash Management Account promptly upon
receipt. On every other Business Day during a Trigger Period, all funds on
deposit in the Cash Management Account shall be transferred to an Eligible
Account, established and maintained by Lender at a financial institution
designated by Lender in its sole discretion. Upon a Trigger Event and during a
Trigger Period, Lender and Servicer shall (i) have the sole right to make
withdrawals from the Cash Management Account, (ii) upon receipt of satisfactory
evidence from Borrower or Manager, promptly remit to Borrower any amounts paid
as rental payments directly to the Cash Management Account by tenants pursuant
to leases that do not relate to the use or occupancy of any of the Properties,
and (iii) apply all funds on deposit in the Cash Management Account in
accordance with Sections 3.4(c) or 3.4(d) hereof, as applicable. Upon a Trigger
Event and during a Trigger Period, Borrower will not in any way alter or modify
the Cash Management Account. Prior to a Trigger Event, the Borrower shall have
the right to withdraw funds from the Cash Management Account in its discretion.
(c) On each Payment Date during a Trigger Period (other than a
Trigger Period caused by the occurrence of an Event of Default), all funds on
deposit in the Cash Management Account shall be transferred to an account,
established and maintained by Lender at a financial institution designated by
Lender in its sole discretion, and applied by Lender to the payment of the
following items in the order indicated:
(i) First, payments to the Ground Lease Escrow Fund in
accordance with the terms and conditions of Section 3.1(e);
(ii) Second, payments to the Tax and Insurance Escrow Fund in
accordance with the terms and conditions of Section 5.4
hereof;
(iii) Third, payment of the Monthly Debt Service Payment
Amount, applied first to the payment of interest computed at
the Contract Interest Rate with the remainder applied to the
reduction of the outstanding principal balance of the Loan;
(iv) Fourth, payments to the Rollover Escrow Fund, Replacement
Escrow Fund, and the Debt Service Escrow Fund, in accordance
with the terms and conditions hereof;
(v) Fifth, payment to the Lender of any other amounts then due
and payable under the Loan Documents (other than Accrued
Interest);
(vi) Sixth, on or after the Anticipated Repayment Date, payments
for monthly Cash Expenses incurred in accordance with the
related Approved Annual Budget pursuant to a written request
for payment submitted by Borrower to Lender specifying the
individual Cash Expenses in a form acceptable to Lender;
(vii) Seventh, on or after the Anticipated Repayment Date,
payments for Extraordinary Expenses approved by Lender, if
any;
(viii) Eighth, on or after the Anticipated Repayment Date,
payments to Lender in reduction of the outstanding principal
balance of the Loan;
(ix) Ninth, on or after the Anticipated Repayment Date, payments
to Lender for Accrued Interest; and
(x) Lastly, payment of any excess amounts to Borrower.
(d) All funds on deposit in the Cash Management Account during a
Trigger Period caused by an Event of Default may be applied by Lender to the
Debt and the Property operating expenses in such order and priority as Lender
shall determine.
(e) The insufficiency of funds on deposit in the Cash Management
Account shall not absolve Borrower of the obligation to make any payments, as
and when due pursuant to this Agreement and the other Loan Documents, and such
obligations shall be separate and independent, and not conditioned on any event
or circumstance whatsoever.
Section 3.5 Payments Received Under the Cash Management Agreement.
Notwithstanding anything to the contrary contained in this Agreement or the
other Loan Documents, and provided no Event of Default has occurred and is
continuing, Borrower's obligations during a Trigger Period with respect to the
monthly payment of principal and interest and amounts due for the Tax and
Insurance Escrow Fund, Required Repair Fund, Replacement Escrow Fund, Rollover
Escrow Fund, and any other payment reserves established pursuant to this
Agreement or any other Loan Document shall be deemed satisfied (a) if a Trigger
Event has occurred and Lender has sole dominion and control of the funds in the
Cash Management Account and (b) sufficient amounts are deposited in the Cash
Management Account to satisfy such obligations on the dates each such payment is
required, regardless of whether any of such amounts are so applied by Lender.
Lender hereby covenants to apply the Funds in accordance with the terms and
provisions of the Loan Documents.
ARTICLE 4
CONDITIONS PRECEDENT
Section 4.1 Closing Conditions. The obligation of Lender to make the
Loan hereunder is subject to the fulfillment by Borrower or waiver by Lender of
the following conditions precedent no later than the Closing Date:
(a) Representations and Warranties; Compliance with Conditions. The
representations and warranties of Borrower contained in this Agreement and the
other Loan Documents shall be true and correct in all material respects on and
as of the Closing Date with the same effect as if made on and as of such date,
and no Potential Default or an Event of Default shall have occurred and be
continuing; and Borrower shall be in compliance in all material respects with
all terms and conditions set forth in this Agreement and in each other Loan
Document on its part to be observed or performed.
(b) Loan Agreement and Note. Lender shall have received an original
of this Agreement, the Note and the Guaranty, in each case, duly executed and
delivered on behalf of Borrower and Guarantor, as applicable.
(c) Delivery of Loan Documents; Title Insurance; Reports; Leases.
(i) Mortgage, Assignment of Leases, Assignment of Agreements.
Lender shall have received from Borrower fully executed and acknowledged
counterparts of the Mortgages and the Assignments of Leases and Rents relating
to each of the Properties and evidence that counterparts of the Mortgages and
Assignments of Leases and Rents have been delivered to the title company for
recording, in the reasonable judgment of Lender, so as to effectively create
upon such recording valid and enforceable Liens upon such Properties, of the
requisite priority, in favor of Lender (or such other trustee as may be required
or desired under local law), subject only to the Permitted Encumbrances and such
other Liens as are permitted pursuant to the Loan Documents. Lender shall have
also received from Borrower fully executed counterparts of the other Loan
Documents.
(ii) Title Insurance. Lender shall have received title insurance
policies issued by a title company acceptable to Lender and dated as of the
Closing Date, with reinsurance and direct access agreements acceptable to
Lender. Such title insurance policies shall (A) provide coverage in amounts
satisfactory to Lender, (B) insure Lender that the relevant Mortgage creates a
valid lien on the Individual Property encumbered thereby of the requisite
priority, free and clear of all exceptions from coverage other than Permitted
Encumbrances and standard exceptions and exclusions from coverage (as modified
by the terms of any endorsements), (C) contain such endorsements and affirmative
coverages as are available in the states in which the Properties are located and
as Lender may reasonably request, and (D) name Lender as the insured. The title
insurance policies shall be assignable. Lender also shall have received
evidence that all premiums in respect of such title insurance policies have been
paid.
(iii) Survey. Lender shall have received a current title
survey for each Individual Property, certified to the title company and Lender
and their successors and assigns, in form and content satisfactory to Lender and
prepared by a professional and properly licensed land surveyor satisfactory to
Lender in accordance the 1992 Minimum Standard Detail Requirements for ALTA/ACSM
Land Title Surveys. The survey should meet the classification of an "Urban
Survey" and the following additional items from the list of "Optional Survey
Responsibilities and Specifications" (Table A) should be added to each survey:
2, 3, 4, 6, 7, 8, 9, 10, 11 and 13. Such survey shall reflect the same legal
description contained in the title insurance policies relating to such
Individual Property referred to in clause (ii) above and shall include, among
other things, a metes and bounds description of the real property comprising
part of such Individual Property compatible with the Survey. The surveyor's
seal shall be affixed to each survey and the surveyor shall provide a
certification for each survey in form and substance acceptable to Lender.
(iv) Insurance. Lender shall have received valid certificates of
insurance for the policies of insurance required hereunder, satisfactory to
Lender in its sole discretion, and evidence of the payment of all premiums
payable for the existing policy period.
(v) Environmental Reports. Lender shall have received an
environmental report in respect of each Individual Property, in each case
satisfactory to Lender.
(vi) Zoning. With respect to each Individual Property, Lender
shall have received, at Lender's option, (i) letters or other evidence
satisfactory to Lender with respect to each Individual Property from the
appropriate municipal authorities (or other Persons) concerning applicable
zoning and building laws, or (ii) an ALTA 3.1 zoning endorsement for the
applicable title insurance policy (if available).
(vii) Encumbrances. Borrower shall have taken or caused to
be taken such actions in such a manner so that Lender has a valid and perfected
Lien of the requisite priority as of the Closing Date with respect to the
Mortgage in each Individual Property, subject only to applicable Permitted
Encumbrances and such other Liens as are permitted pursuant to the Loan
Documents, and Lender shall have received satisfactory evidence thereof.
(d) Related Documents. Each additional document not specifically
referenced herein, but relating to the transactions contemplated herein, shall
have been duly authorized, executed and delivered by all parties thereto and
Lender shall have received and approved certified copies thereof.
(e) Delivery of Organizational Documents. On or before the Closing
Date, Borrower shall deliver or cause to be delivered to Lender (i) copies
certified by Borrower of all organizational documentation related to Borrower
and/or the formation, structure, existence, good standing and/or qualification
to do business, as Lender may request in its sole discretion, including, without
limitation, good standing certificates, qualifications to do business in the
appropriate jurisdictions, resolutions authorizing the entering into of the Loan
and incumbency certificates as may be requested by Lender.
(f) Opinions of Borrower's Counsel. Lender shall have received
opinions of Borrower's counsel (i) with respect to non-consolidation and (ii)
with respect to due execution, authority, enforceability of the Loan Documents
and such other matters as Lender may require, all such opinions in form, scope
and substance satisfactory to Lender and Lender's counsel in their sole
discretion.
(g) Completion of Proceedings. All corporate and other proceedings
taken or to be taken in connection with the transactions contemplated by this
Agreement and other Loan Documents and all documents incidental thereto shall be
satisfactory in form and substance to Lender, and Lender shall have received all
such counterpart originals or certified copies of such documents as Lender may
reasonably request.
(h) Payments. All payments, deposits or escrows required to be made
or established by Borrower under this Agreement, the Note and the other Loan
Documents on or before the Closing Date shall have been paid.
(i) Tenant Estoppels. Lender shall have received an executed tenant
estoppel letter, which shall be in form and substance satisfactory to Lender,
from all Anchor Tenants and seventy percent (70%) of all other lessees under
Leases listed on the rent rolls attached as Schedule V hereto; provided,
however, Borrower shall use reasonable efforts to obtain executed tenant
estoppels in form and substance reasonably satisfactory to lender within thirty
(30) days after the Closing Date from all such lessees that did not deliver
tenant estoppel letters prior to the Closing Date.
(j) Intentionally Omitted.
(k) Basic Carrying Costs. Borrower shall have paid all Basic
Carrying Costs relating to each Individual Property that are in arrears.
(l) Transaction Costs. Borrower shall have paid or reimbursed Lender
for all title insurance premiums and recording and filing fees incurred in
connection with the origination of the Loan.
(m) Material Adverse Change. There shall have been no material
adverse change in the financial condition or business condition of Borrower or
the Properties since the date of the most recent financial statements delivered
to Lender. The income and expenses of the Properties, the occupancy Leases
thereof, and all other features of the transaction shall be as represented to
Lender without material adverse change. Neither Borrower nor the SPC Party
shall be the subject of any bankruptcy, reorganization, or insolvency
proceeding.
(n) Leases and Rent Roll. Lender shall have received copies of all
Leases, certified copies of any Leases as requested by Lender and certified
copies of all Ground Leases affecting the Properties. Lender shall have
received a current certified rent roll of the Properties, reasonably
satisfactory in form and substance to Lender.
(o) Subordination and Attornment. Lender shall have received
appropriate instruments acceptable to Lender subordinating the Leases designated
by Lender to the applicable Mortgage or evidence that such Lease is subordinate
by its terms. Lender shall have received an agreement to attorn to Lender
satisfactory to Lender from any tenant under a Lease that does not provide for
such attornment by its terms.
(p) Tax Lot. Lender shall have received evidence that each
Individual Property constitutes one or more separate tax lots without such tax
lots containing any property other than the Individual Property, which evidence
shall be reasonably satisfactory in form and substance to Lender.
(q) Physical Conditions Reports. Lender shall have received Physical
Conditions Reports with respect to each Individual Property, which reports shall
be reasonably satisfactory in form and substance to Lender.
(r) Management Agreement. Lender shall have received a certified
copy of the Management Agreement with respect to each Individual Property which
shall be satisfactory in form and substance to Lender.
(s) Appraisal. Lender shall have received an appraisal of each
Individual Property, which shall be reasonably satisfactory in form and
substance to Lender.
(t) Financial Statements. Lender shall have received a balance sheet
with respect to each Individual Property for the two most recent calendar years
and statements of income and statements of cash flows with respect to each
Individual Property for the three most recent calendar years.
(u) Further Documents. Lender or its counsel shall have received
such other and further approvals, opinions, documents and information as Lender
or its counsel may have reasonably requested.
ARTICLE 5
INSURANCE, CONDEMNATION, AND IMPOUNDS
Section 5.1 Insurance; Casualty and Condemnation.
(a) Borrower shall obtain and maintain, or cause to be maintained,
insurance for Borrower and each of the Individual Properties (unless otherwise
expressly stated herein) providing at least the following coverages:
(i) comprehensive all risk insurance on the Improvements and the
Personalty, in each case (A) in an amount equal to one hundred percent (100%) of
the "Full Replacement Cost," which for purposes of this Agreement shall mean
actual replacement value (exclusive of costs of excavations, foundations,
underground utilities and footings) with a waiver of depreciation, but the
amount shall in no event be less than the outstanding principal balance of the
Loan; (B) containing an agreed amount endorsement with respect to the
Improvements and Personalty waiving all co-insurance provisions; (C) providing
for no deductible in excess of Seventy-Five Thousand and No/100 Dollars
($75,000.00) for all such insurance coverage; and (D) containing an "Ordinance
or Law Coverage" or "Enforcement" endorsement if any of the Improvements or the
use of the Individual Property shall at any time constitute legal non-conforming
structures or uses. In addition, Borrower shall obtain: (y) if any portion of
the Improvements is currently or at any time in the future located in a
federally designated "special flood hazard area", flood hazard insurance in an
amount equal to the lesser of (1) the outstanding principal balance of the Note
or (2) the maximum amount of such insurance available under the National Flood
Insurance Act of 1968, the Flood Disaster Protection Act of 1973 or the National
Flood Insurance Reform Act of 1994, as each may be amended or such greater
amount as Lender shall require; and (z) earthquake insurance in amounts and in
form and substance satisfactory to Lender in the event the Individual Property
is located in an area with a high degree of seismic activity, provided that the
insurance pursuant to clauses (y) and (z) hereof shall be on terms consistent
with the comprehensive all risk insurance policy required under this subsection
(i);
(ii) commercial general liability insurance against claims for
personal injury, bodily injury, death or property damage occurring upon, in or
about the Individual Property, such insurance (A) to contain minimum per limits
per occurrence of One Million and No/100 Dollars ($1,000,000.00) and Two Million
and No/100 Dollars ($2,000,000.00) in the aggregate for any policy year; (B) to
continue at not less than the aforesaid limits until required to be changed by
Lender in writing by reason of changed economic conditions making such
protection inadequate; and (C) to cover at least the following hazards: (1)
premises and operations; (2) products and completed operations on an "if any"
basis; (3) independent contractors; (4) blanket contractual liability for all
legal contracts; and (5) contractual liability covering the indemnities
contained in the Mortgages to the extent the same is available;
(iii) business income insurance (A) with loss payable to
Lender; (B) covering all risks required to be covered by the insurance provided
for in subsection (i) above; (C) containing an extended period of indemnity
endorsement which provides that after the physical loss to the Improvements and
Personalty has been repaired, the continued loss of income will be insured until
such income either returns to the same level it was at prior to the loss, or the
expiration of twelve (12) months from the date that the Property is repaired or
replaced and operations are resumed, whichever first occurs; and (D) in an
amount equal to one hundred percent (100%) of the projected gross income (less
any non-continuing expenses) from the Individual Property for the period
required to restore or repair such Individual Property. The amount of such
business income insurance shall be determined prior to the date hereof and at
least once each year thereafter based on Borrower's reasonable estimate of the
gross income from the Property for the succeeding twenty-four (24) month period.
All proceeds payable to Lender pursuant to this subsection shall be held by
Lender and shall be applied to the obligations secured by the Loan Documents
from time to time due and payable hereunder and under the Note; provided,
however, that nothing herein contained shall be deemed to relieve Borrower of
its obligations to pay the obligations secured by the Loan Documents on the
respective dates of payment provided for in the Note and the other Loan
Documents except to the extent such amounts are actually paid out of the
proceeds of such business income insurance;
(iv) at all times during which structural construction, repairs
or alterations are being made with respect to the Improvements, and only if the
Individual Property coverage form does not otherwise apply, (A) owner's
contingent or protective liability insurance covering claims not covered by or
under the terms or provisions of the above mentioned commercial general
liability insurance policy; and (B) the insurance provided for in subsection (i)
above written in a so-called builder's risk completed value form (1) on a non-
reporting basis, (2) against all risks insured against pursuant to subsection
(i) above, (3) including permission to occupy the Individual Property, and (4)
with an agreed amount endorsement waiving co-insurance provisions;
(v) workers' compensation, subject to the statutory limits of
the state in which the Individual Property is located, and employer's liability
insurance with a limit of at least One Million and No/100 Dollars
($1,000,000.00) per accident and per disease per employee, and One Million and
No/100 Dollars ($1,000,000.00) for disease aggregate in respect of any work or
operations on or about the Individual Property, or in connection with the
Individual Property or its operation (if applicable);
(vi) comprehensive boiler and machinery insurance, if applicable,
in amounts as shall be reasonably required by Lender on terms consistent with
the commercial property insurance policy required under subsection (i) above;
(vii) motor vehicle liability coverage for all owned and non-
owned vehicles, including rented and leased vehicles, containing minimum limits
per occurrence of One Million and No/100 Dollars ($1,000,000.00);
(viii) umbrella liability insurance (including additional
coverage for (v) and (vii) above) in an amount not less than Ninety-Five Million
and No/100 Dollars ($95,000,000.00) per occurrence on terms consistent with the
commercial general liability insurance policy required under subsection (ii)
above;
(ix) Intentionally Omitted;
(x) insurance for the acts of officers, trustees and directors
of the Borrower in an amount not less than Ten Million and No/100 Dollars
($10,000,000.00) with a deductible not greater than Five Hundred Thousand and
no/100 Dollars ($500,000.00);
(xi) insurance against employee dishonesty, in an aggregate
amount of Five Million and No/100 Dollars ($5,000,000.00) with a deductible not
greater than Two Hundred and Fifty Thousand and No/100 Dollars ($250,000.00);
and
(xii) upon sixty (60) days' written notice, such other
reasonable insurance and in such reasonable amounts as Lender from time to time
may reasonably request against such other insurable hazards which at the time
are commonly insured against for property similar to the Individual Property
located in or around the region in which the Individual Property is located.
(b) All insurance provided for in Section 5.1(a) shall be obtained
under valid and enforceable policies (collectively, the "Policies" or in the
singular, the "Policy"), and shall be subject to the approval of Lender as to
insurance companies, amounts, deductibles, loss payees and insureds. The
Policies shall be issued by financially sound and responsible insurance
companies authorized to do business in the state in which the Property is
located and having (i) a claims paying ability rating of "AA" or better by
Standard and Poor's and (ii) an insurance financial strength rating of "Aa2" by
Moody's Investors Service, Inc.; provided, however, if as of the Closing Date
any insurance does not satisfy such rating required by Moody's Investors
Service, Inc., any subsequent insurance after the expiration of the current
insurance shall satisfy such requirements. The Policies described in Section
5.1 shall designate Lender as a loss payee. Not less than ten (10) days prior
to the expiration dates of the Policies theretofore furnished to Lender,
certificates of insurance evidencing the Policies accompanied by evidence
satisfactory to Lender of payment of the premiums due thereunder (the "Insurance
Premiums"), shall be delivered by Borrower to Lender.
(c) Any blanket insurance Policy shall specifically allocate to the
Individual Property the amount of coverage from time to time required hereunder
and shall otherwise provide the same protection as would a separate Policy
insuring only the Individual Property in compliance with the provisions of
Section 5.1(a), including an acknowledgment that the payment of such allocation
shall continue such Policy as to the Individual Property notwithstanding any
other payment of premiums.
(d) All Policies of insurance provided for or contemplated by Section
5.1(a), except for the Policy referenced in Section 5.1(a)(v), shall name
Borrower as the insured and Lender as the additional insured, as its interests
may appear, and in the case of property damage, boiler and machinery, flood and
earthquake insurance, shall contain a so-called New York standard non-
contributing mortgagee clause in favor of Lender providing that the loss
thereunder shall be payable to Lender.
(e) All Policies of insurance provided for in Section 5.1(a) shall
contain clauses or endorsements to the effect that:
(i) no act or negligence of Borrower, or anyone acting for
Borrower, or of any tenant or other occupant, or failure to comply with the
provisions of any Policy, which might otherwise result in a forfeiture of the
insurance or any part thereof, shall in any way affect the validity or
enforceability of the insurance insofar as Lender is concerned;
(ii) the Policy shall not be materially changed (other than to
increase the coverage provided thereby) or canceled without at least thirty (30)
days' written notice to Lender and any other party named therein as an
additional insured;
(iii) each Policy shall provide that the issuers thereof
shall give written notice to Lender if the Policy has not been renewed fifteen
(15) days prior to its expiration; and
(iv) Lender shall not be liable for any Insurance Premiums
thereon or subject to any assessments thereunder.
(f) If at any time Lender is not in receipt of written evidence that
all insurance required hereunder is in full force and effect, Lender shall have
the right, upon notice to Borrower, to take such action as Lender deems
necessary to protect its interest in the Individual Property, including, without
limitation, the obtaining of such insurance coverage as Lender in its sole
discretion deems appropriate and all premiums incurred by Lender in connection
with such action or in obtaining such insurance and keeping it in effect shall
be paid by Borrower to Lender upon demand and until paid shall be secured by the
Mortgages and shall bear interest at the Default Rate.
(g) If the Individual Property shall be damaged or destroyed, in
whole or in part, by fire or other casualty (a "Casualty"), Borrower shall give
prompt notice of such damage to Lender and shall promptly commence and
diligently prosecute the completion of the repair and restoration of the
Individual Property as nearly as possible to the condition the Individual
Property was in immediately prior to such fire or other casualty, with such
alterations as may be reasonably approved by Lender (a "Restoration") and
otherwise in accordance with Section 5.1. Borrower shall pay all costs of such
Restoration whether or not such costs are covered by insurance. Lender may, but
shall not be obligated to make proof of loss if not made promptly by Borrower.
(h) In the event of foreclosure of the Mortgage with respect to the
Individual Property, or other transfer of title to the Individual Property in
extinguishment in whole or in part of the Debt all right, title and interest of
Borrower in and to the Policies that are not blanket Policies then in force
concerning the Individual Property and all proceeds payable thereunder shall
thereupon vest in the purchaser at such foreclosure or Lender or other
transferee in the event of such other transfer of title.
Section 5.2 Condemnation. Borrower shall promptly give Lender notice
of the actual or threatened commencement of any condemnation or eminent domain
proceeding (a "Condemnation") affecting any portion of the Individual Properties
and shall deliver to Lender copies of any and all papers served in connection
with such proceedings. Lender may participate in any such proceedings and
Borrower shall deliver to Lender all instruments required to permit
participation in such proceedings. Borrower shall, at its expense, diligently
prosecute any such proceedings, and shall consult with Lender, its attorneys and
experts, and cooperate with them in the carrying on or defense of any such
proceedings. Lender is hereby irrevocably appointed as Borrower's attorney-in-
fact, coupled with an interest, with exclusive power to collect, receive and
retain any Award and to make any compromise or settlement in connection with any
such Condemnation. Borrower shall reimburse Lender for all reasonable third
party costs and expenses that Lender actually incurs in connection with any
Condemnation, including, without limitation, reasonable attorneys' fee and
expenses. Notwithstanding any taking by any public or quasi-public authority
through eminent domain or otherwise (including but not limited to any transfer
made in lieu of or in anticipation of the exercise of such taking), Borrower
shall continue to pay the Debt at the time and in the manner provided for its
payment in the Note and in this Agreement and the Debt shall not be reduced
until any award or payment therefor (an "Award") shall have been actually
received and applied by Lender, after the deduction of expenses of collection,
to the reduction or discharge of the Debt. Lender shall not be limited to the
interest paid on the Award by the condemning authority but shall be entitled to
receive out of the award interest at the rate or rates provided herein or in the
Note. If an Individual Property or any portion thereof is taken by a condemning
authority, Borrower shall promptly commence and diligently prosecute the
Restoration of the Property and otherwise comply with the provisions of Section
5.3. If an Individual Property is sold, through foreclosure or otherwise, prior
to the receipt by Lender of the Award, Lender shall have the right, whether or
not a deficiency judgment on the Note shall have been sought, recovered or
denied, to receive the Award, or a portion thereof sufficient to pay the Debt.
Section 5.3 Restoration. The following provisions shall apply in
connection with the Restoration of any Individual Property:
(a) If the Net Proceeds shall be less than One Million and No/100
Dollars ($1,000,000.00) and the costs of completing the Restoration shall be
less than One Million and No/100 Dollars ($1,000,000.00), the Net Proceeds will
be disbursed by Lender to Borrower upon receipt, provided that all of the
conditions set forth in Section 5.3(b)(i) are met and Borrower delivers to
Lender a written undertaking to expeditiously commence and to satisfactorily
complete with due diligence the Restoration in accordance with the terms of this
Agreement.
(b) If the Net Proceeds are equal to or greater than One Million and
No/100 Dollars ($1,000,000.00) or the costs of completing the Restoration is
equal to or greater than One Million and No/100 Dollars ($1,000,000.00) Lender
shall make the Net Proceeds available for the Restoration in accordance with the
provisions of this Section 5.3. The term "Net Proceeds" for purposes of this
Section 5.3 shall mean: (i) the net amount of all insurance proceeds received
by Lender pursuant to Section 5.1 (a)(i), (iv) and (vi) as a result of such
damage or destruction, after deduction of its reasonable costs and expenses
(including, but not limited to, reasonable counsel fees), if any, in collecting
same ("Insurance Proceeds"), or (ii) the net amount of the Award, after
deduction of its reasonable costs and expenses (including, but not limited to,
reasonable counsel fees), if any, in collecting same ("Condemnation Proceeds"),
whichever the case may be.
(i) The Net Proceeds shall be made available to Borrower for
Restoration provided that each of the following conditions are met:
(A) no Event of Default shall have occurred and be
continuing and no Anchor Lease shall be canceled or terminated
due to such casualty or condemnation unless a replacement tenant
or tenants reasonably acceptable to Lender have executed a Lease
or Leases in form and substance reasonably acceptable to Lender
with respect to the space occupied by such terminated or canceled
Anchor Tenant;
(B) (1) in the event the Net Proceeds are Insurance
Proceeds, less than twenty-five percent (25%) of the total floor
area of the Improvements of the Individual Property has been
damaged, destroyed or rendered unusable as a result of such fire
or other casualty or (2) in the event the Net Proceeds are
Condemnation Proceeds, less than ten percent (10%) of the land
constituting the Individual Property that is taken, and such land
is located along the perimeter or periphery of the Individual
Property, and no material portion of the Improvements is located
in such land;
(C) Leases demising in the aggregate a percentage amount
equal to or greater than the Rentable Space Percentage of the
total rentable space in the Individual Property which has been
demised under executed and delivered Leases in effect as of the
date of the occurrence of such fire or other casualty or taking,
whichever the case may be, shall remain in full force and effect
during and after the completion of the Restoration,
notwithstanding the occurrence of any such fire or other casualty
or taking, whichever the case may be. The term "Rentable Space
Percentage" shall mean (1) in the event the Net Proceeds are
Insurance Proceeds, a percentage amount equal to eighty percent
(80%) (provided such percentage includes the continuance of each
of the Anchor Leases for the applicable Individual Property) of
the occupancy that existed at the time of such casualty or
condemnation and (2) in the event the Net Proceeds are
Condemnation Proceeds, a percentage amount equal to eighty
percent (80%) (provided such percentage includes the continuance
of each of the Anchor Leases for the applicable Individual
Property) of the occupancy that existed at the time of such
casualty or condemnation;
(D) Borrower shall commence the process of Restoration as
soon as reasonably practicable (but in no event later than sixty
(60) days after such damage or destruction or taking, whichever
the case may be, occurs) and shall diligently pursue the same to
satisfactory completion;
(E) Lender shall be satisfied that any operating deficits,
including all scheduled payments of principal and interest under
the Note, which will be incurred with respect to the Individual
Property as a result of the occurrence of any such fire or other
casualty or taking, whichever the case may be, will be covered
out of (1) the Net Proceeds, (2) the insurance coverage referred
to in Section 5.1(a)(iii), if applicable, or (3) by other funds
of Borrower;
(F) Lender shall be satisfied that the Restoration will be
completed on or before the earliest to occur of (1) expiration of
the business income insurance required to be maintained pursuant
to Section 5.1(a)(iii) hereof, (2) the earliest date required for
such completion under the terms of any Anchor Lease, (3) such
time as may be required under applicable zoning law, ordinance,
rule or regulation in order to repair and restore the Property to
the condition it was in immediately prior to such fire or other
casualty or to as nearly as possible the condition it was in
immediately prior to such taking, as applicable or (4) the
expiration of the insurance coverage referred to in Section
5.1(a)(iii);
(G) the Individual Property and the use thereof after the
Restoration will be in compliance with and permitted under all
applicable zoning laws, ordinances, rules and regulations and all
necessary operating or reciprocal easement agreements for the
operation and maintenance of the Property are, or remain, in
effect;
(H) the Restoration shall be done and completed by Borrower
in an expeditious and diligent fashion and in compliance with all
applicable governmental laws, rules and regulations (including,
without limitation, all applicable environmental laws); and
(I) such fire or other casualty or taking, as applicable,
does not result in the material loss of access to the Individual
Property or the related Improvements.
(ii) The Net Proceeds shall be held by Lender in an interest-
bearing account and, until disbursed in accordance with the provisions
of this Section 5.3(b), shall constitute additional security for the
Debt and other obligations under the Loan Documents. The Net Proceeds
shall be disbursed by Lender to, or as directed by, Borrower from time
to time during the course of the Restoration, upon receipt of evidence
satisfactory to Lender that (A) all materials installed and work and
labor performed (except to the extent that they are to be paid for out
of the requested disbursement) in connection with the Restoration have
been paid for in full, and (B) there exist no notices of pendency,
stop orders, mechanic's or materialman's liens or any other liens or
encumbrances of any nature whatsoever on the Individual Property
arising out of the Restoration which have not either been fully bonded
to the satisfaction of Lender and discharged of record or in the
alternative fully insured to the satisfaction of Lender by the title
company issuing the title insurance policy.
(iii) All plans and specifications required in connection
with the Restoration shall be subject to prior review and acceptance
in all respects by Lender and by an independent consulting engineer
selected by Lender and reasonably acceptable to Borrower (the
"Casualty Consultant"); provided, however, if such plans and
specifications are not approved or disapproved by Lender within thirty
(30) days of receipt, such plans and specifications shall be deemed
approved by Lender. Lender shall have the use of the plans and
specifications and all permits, licenses and approvals required or
obtained in connection with the Restoration. The identity of the
contractors, subcontractors and materialmen engaged in the
Restoration, as well as the contracts under which they have been
engaged, shall be subject to prior review and acceptance by Lender and
the Casualty Consultant. All costs and expenses incurred by Lender in
connection with making the Net Proceeds available for the Restoration
including, without limitation, reasonable counsel fees and
disbursements and the Casualty Consultant's fees, shall be paid by
Borrower.
(iv) In no event shall Lender be obligated to make disbursements
of the Net Proceeds in excess of an amount equal to the costs actually
incurred from time to time for work in place as part of the
Restoration, as certified by the Casualty Consultant, minus the
Casualty Retainage. The term "Casualty Retainage" shall mean an
amount equal to ten percent (10%), or such lesser amount as is
customary commercial practice in the location of the Individual
Property, of the costs actually incurred for work in place as part of
the Restoration, as certified by the Casualty Consultant, until the
Restoration has been completed. The Casualty Retainage shall in no
event, and notwithstanding anything to the contrary set forth above in
this Section 5.1(b), be less than the amount actually held back by
Borrower from contractors, subcontractors and materialmen engaged in
the Restoration. The Casualty Retainage shall not be released until
the Casualty Consultant certifies to Lender that the Restoration has
been completed in accordance with the provisions of this Section
5.1(b) and that all approvals necessary for the re-occupancy and use
of the Individual Property have been obtained from all appropriate
governmental and quasi-governmental authorities, and Lender receives
evidence satisfactory to Lender that the costs of the Restoration have
been paid in full or will be paid in full out of the Casualty
Retainage; provided, however, that Lender will release the portion of
the Casualty Retainage being held with respect to any contractor,
subcontractor or materialman engaged in the Restoration as of the date
upon which the Casualty Consultant certifies to Lender that the
contractor, subcontractor or materialman has satisfactorily completed
all work and has supplied all materials in accordance with the
provisions of the contractor's, subcontractor's or materialman's
contract, the contractor, subcontractor or materialman delivers the
lien waivers and evidence of payment in full of all sums due to the
contractor, subcontractor or materialman as may be reasonably
requested by Lender or by the title company issuing the title
insurance policy, and Lender receives an endorsement to the title
insurance policy insuring the continued priority of the lien of the
related Mortgage and evidence of payment of any premium payable for
such endorsement. If required by Lender, the release of any such
portion of the Casualty Retainage shall be approved by the surety
company, if any, which has issued a payment or performance bond with
respect to the contractor, subcontractor or materialman.
(v) Lender shall not be obligated to make disbursements of the
Net Proceeds more frequently than once every calendar month.
(vi) If at any time the Net Proceeds or the undisbursed balance
thereof shall not, in the reasonable opinion of Lender in consultation
with the Casualty Consultant, be sufficient to pay in full the balance
of the costs which are estimated by the Casualty Consultant to be
incurred in connection with the completion of the Restoration,
Borrower shall deposit the deficiency (the "Net Proceeds Deficiency")
with Lender before any further disbursement of the Net Proceeds shall
be made. The Net Proceeds Deficiency deposited with Lender shall be
held by Lender and shall be disbursed for costs actually incurred in
connection with the Restoration on the same conditions applicable to
the disbursement of the Net Proceeds, and until so disbursed pursuant
to this Section 5.1(b) shall constitute additional security for the
Debt and other obligations under the Loan Documents.
(vii) The excess, if any, of the Net Proceeds and the
remaining balance, if any, of the Net Proceeds Deficiency deposited
with Lender after the Casualty Consultant certifies to Lender that the
Restoration has been completed in accordance with the provisions of
this Section 5.1(b), and the receipt by Lender of evidence
satisfactory to Lender that all costs incurred in connection with the
Restoration have been paid in full, shall be remitted by Lender to
Borrower, provided no Event of Default shall have occurred and shall
be continuing under the Note, this Loan Agreement or any of the Other
Loan Documents.
(c) All Net Proceeds not required (i) to be made available for the
Restoration or (ii) to be returned to Borrower as excess Net Proceeds pursuant
to Section 5.3.(b)(vii) may be retained and applied by Lender toward the payment
of the Debt whether or not then due and payable in such order, priority and
proportions as Lender in its sole discretion shall deem proper, or, at the
discretion of Lender, the same may be paid, either in whole or in part, to
Borrower for such purposes as Lender shall designate, in its discretion.
Subject to Section 2.12(a) hereof, any such application to the Debt shall be
without any prepayment consideration. Borrower shall reimburse Lender for all
reasonable third party costs and expenses that Lender actually incurs in
connection with any Casualty, including, without limitation, reasonable
attorneys' fee and expenses.
(d) In the event of a Casualty or Condemnation after the Release Date
of fifty percent (50%) or greater of the gross leaseable area of an Individual
Property and provided that no Event of Default exists, Borrower shall be
permitted, prior to the commencement of material reconstruction of the
Improvements on such Individual Property, to remit to Lender, in addition to any
Net Proceeds or Award, as applicable, received by Lender in connection with a
Casualty or Condemnation, additional proceeds sufficient to defease, in
accordance with Section 2.12 hereof, a portion of the Loan in order to obtain
the release of the lien of the Mortgage with respect to the applicable
Individual Property pursuant to Section 2.13 hereof, provided that in the event
a Securitization has occurred, the Lender has received written confirmation from
the Rating Agencies that such defeasance will not result in qualification,
downgrade or withdrawal of any ratings in effect immediately prior to such
appointment for the Securities issued in connection with a Securitization that
are then outstanding.
Section 5.4 Impounds. Borrower shall deposit with Lender on each
Payment Date (a) one-twelfth (1/12th) of the Taxes that Lender estimates will be
payable during the next ensuing twelve (12) months in order to accumulate with
Lender sufficient funds to pay all such Taxes at least thirty (30) days prior to
their respective due dates, and (b) if an Insurance Trigger Event has occurred
and is continuing, one-twelfth of the Insurance Premiums that Lender estimates
will be payable for the renewal of the coverage afforded by the insurance
policies required by Lender upon the expiration thereof in order to accumulate
with Lender sufficient funds to pay all such Insurance Premiums at least
thirty (30) days prior to expiration (said amounts in (a) and (b) above
hereinafter called the "Tax and Insurance Escrow Fund"). At or before the
advance of the Loan, Borrower shall deposit with Lender a sum of money which
together with the monthly installments will be sufficient to make the payment of
Taxes thirty (30) days prior to the date any delinquency or penalty becomes due
with respect to such payment. Deposits shall be made on the basis of Lender's
estimate from time to time of the charges for the current year (after giving
effect to any reassessment or, at Lender's election, on the basis of the charges
for the prior year, with adjustments when the charges are fixed for the then
current year). All funds so deposited shall be held in Lender's name and
invested in Permitted Investment in accordance with the terms and conditions of
the Cash Management Agreement. All earnings on the funds shall be added to and
become part of the funds and shall be for the benefit of Borrower, subject to
Lender's rights pursuant to this Agreement. Lender shall not be responsible for
any losses resulting from the investment of the funds or for obtaining any
specific level or percentage of earnings on such investment. Borrower hereby
grants to Lender a security interest in all funds so deposited with Lender for
the purpose of securing the Loan. While an Event of Default exists, the funds
deposited may be applied in payment of the charges for which such funds have
been deposited, or to the payment of the Loan or any other charges affecting the
security of Lender, as Lender may elect, but no such application shall be deemed
to have been made by operation of law or otherwise until actually made by
Lender. Borrower shall furnish Lender with bills for the charges for which such
deposits are required at least thirty (30) days prior to the date on which the
charges first become payable. If at any time the amount on deposit with Lender,
together with amounts to be deposited by Borrower before such charges are
payable, is insufficient to pay such charges, Borrower shall deposit any
deficiency with Lender immediately upon demand. Lender shall pay such charges
when the amount on deposit with Lender is sufficient to pay such charges and
Lender has received a bill for such charges.
ARTICLE 6
ENVIRONMENTAL MATTERS
Section 6.1 Certain Definitions. As used herein, the following terms
have the meanings indicated:
(a) "Environmental Laws" Any applicable federal, State of Maryland,
State of New Jersey, Commonwealth of Pennsylvania, Commonwealth of Virginia,
State of West Virginia, local or other domestic governmental authority, statute,
ordinance, code, order, decree, law, rule or regulation applicable to any of the
Properties and pertaining to or imposing liability or standards of conduct
concerning environmental regulation, contamination or clean-up including,
without limitation, the Comprehensive Environmental Response Compensation and
Liability Act, as amended, the Resource Conservation and Recovery Act, as
amended, the Emergency Planning and Community Right-to-Know Act of 1986, as
amended, the Hazardous Materials Transportation Act, as amended, the Solid Waste
Disposal Act, as amended, the Clean Water Act, as amended, the Clean Air Act, as
amended, the Toxic Substances Control Act, as amended, the Safe Drinking Water
Act, as amended, the Occupational Safety and Health Act, as amended, the New
Jersey Industrial Site Recovery Act, as amended ("ISRA"), the New Jersey Spill
Compensation and Control Act, as amended, the New Jersey Underground Storage of
Hazardous Substances Act, as amended, the New Jersey Water Pollution Control
Act, as amended, The Pennsylvania Land Recycling and Environmental Remediation
Standards Act of 1995, any State of Maryland, State of New Jersey, Commonwealth
of Pennsylvania, Commonwealth of Virginia or State of West Virginia super lien
and environmental clean-up statute and all regulations adopted in respect of the
foregoing laws whether presently in force or coming into being and/or
effectiveness hereafter.
(b) "Hazardous Materials" means (i) petroleum or chemical products,
whether in liquid, solid, or gaseous form, or any fraction or by-product
thereof, (ii) asbestos or asbestos-containing materials, (iii) tremolite,
anthlophylite, actinolite or polychlorinated biphenyls, (iv) radon gas, (v) any
explosive or radioactive substances, (vi) lead or lead-based paint,
(vii) formaldehyde insulation, or (viii) any other substance, material, waste or
mixture which is or shall be listed, defined, or otherwise determined by any
federal, State of Maryland, State of New Jersey, Commonwealth of Pennsylvania,
Commonwealth of Virginia or State of West Virginia governmental authority to be
hazardous, toxic or otherwise regulated, controlled or giving rise to liability
under any Environmental Laws.
Section 6.2 Representations and Warranties on Environmental Matters.
To Borrower's knowledge, except as set forth in the Site Assessment delivered in
connection with the origination of the Loan, (a) no Hazardous Material is now or
was formerly used, stored, generated, manufactured, installed, treated,
discharged, disposed of or otherwise present at or about any Individual Property
or any property adjacent to any Individual Property (except for cleaning and
other products currently used by Borrower, Manager or any tenants thereunder in
connection with the routine maintenance or repair of an Individual Property or
sold or used in the ordinary course of business each in full compliance with
Environmental Laws) and no Hazardous Material was removed or transported from
any Individual Property other than as disclosed to Lender in writing, (b) all
permits, licenses, approvals and filings required by Environmental Laws have
been obtained, and the use, operation and condition of any Individual Property
does not, and did not previously, violate any Environmental Laws, (c) no civil,
criminal or administrative action, suit, claim, hearing, investigation or
proceeding has been brought or been threatened which are still pending, nor have
any material settlements been reached by or with any parties or any Liens
imposed in connection with any Individual Property concerning Hazardous
Materials or noncompliance with Environmental Laws nor have any written notices
concerning violations of Environmental Laws been received from any Person in
connection with any assets or activities of Borrower including, without
limitation, in any manner relating to the Properties, (d) no underground storage
tanks exist on any part of any Individual Property other than as disclosed in
the Site Assessment, (e) no Hazardous Materials are present in, on or under any
nearby real property which could migrate to or otherwise affect any Individual
Property, (f) no Individual Property is located within a "freshwater wetlands"
or a "transition area," each as defined by N.J.S.A. 13:9B-3, and is subject to
the terms of the New Jersey Freshwater Wetlands Protection Act, as amended,
N.J.S.A. 13:9B-1 et seq., or the rules and regulations promulgated thereunder,
and (g) no Lien has been attached to any revenues, to an Individual Property or
to any other real or personal property owned by Borrower as a result of the
Chief Executive of the New Jersey Spill Compensation Fund expending monies from
said fund to pay for direct or indirect "Cleanup and Removal Costs" as such term
is defined in N.J.S.A. 58:11-23.11b(d) (hereinafter, "Cleanup and Removal
Costs"), arising from an intentional or unintentional action or omission of
Borrower or any previous owner and/or operator of said real property, including,
but not limited to, an Individual Property, resulting in the releasing,
spilling, leaking, pumping, pouring, emitting, emptying or dumping of Hazardous
Materials either: (1) into the waters of the State of New Jersey; (2) onto the
lands of the State of New Jersey; or (3) into waters outside the jurisdiction of
the State of New Jersey when damage may result in the lands, waters, fish,
shellfish, wildlife, biota, air and other natural resources owned, managed, held
in trust or otherwise controlled by, and within the jurisdiction of, the State
of New Jersey.
Section 6.3 Covenants on Environmental Matters.
(a) Borrower shall (i) comply in all material respects with
applicable Environmental Laws; (ii) notify Lender immediately upon Borrower's
discovery of any spill, discharge, release or presence of any Hazardous Material
at, upon, under, within, contiguous to or otherwise affecting any Individual
Property; (iii) promptly remove and/or remediate such Hazardous Materials as
required by and in full compliance with Environmental Laws; and (iv) promptly
forward to Lender copies of all orders, notices, permits, applications or other
communications and reports received by Borrower in connection with any spill,
discharge, release or the presence of any Hazardous Material or any other
matters relating to the Environmental Laws or any similar laws or regulations,
as they may affect any Individual Property or Borrower.
(b) Borrower shall not cause, shall prohibit any other Person within
the control of Borrower from causing, and shall use prudent, commercially
reasonable efforts to prohibit other Persons (including tenants) from
(i) causing any spill, discharge or release, or the use, storage, generation,
manufacture, installation, or disposal, of any Hazardous Materials at, upon,
under, within or about any Individual Property or the transportation of any
Hazardous Materials to or from any Individual Property (except for cleaning and
other products used in connection with routine maintenance or repair of any
Individual Property or sold or used in the ordinary course of business in full
compliance with Environmental Laws), (ii) installing any underground storage
tanks at any Individual Property, provided that Borrower shall be permitted with
the consent of Lender, which shall not be unreasonably withheld or delayed, to
replace underground storage tanks with new underground storage tanks if such
replacement is performed in accordance with all Environmental Laws,
(iii) conducting any activity that requires a permit or other authorization
under Environmental Laws prior to obtaining the same, or (iv) conducting on the
Individual Property known as the Phillipsburg Mall, any activity which
constitutes an Industrial Establishment (as such term is defined in ISRA)
without the prior written consent of Lender, excluding current tenants, to the
extent such current tenants may be carrying on activities subject to ISRA, and
in the event that the provisions of ISRA become applicable to the Individual
Property known as the Phillipsburg Mall subsequent to the date hereof, Borrower
shall give prompt written notice thereof to Lender and shall take immediate
requisite action to insure full compliance therewith. Borrower shall deliver to
Lender copies of all correspondence, notices and submissions that it sends to or
receives from the New Jersey Department of Environmental Protection in
connection with such ISRA compliance and Borrower's obligation to comply with
ISRA shall, notwithstanding its general applicability, also specifically apply
to sale, transfer, closure or termination of operations associated with any
foreclosure action, including, without limitation, a foreclosure action brought
with respect to the Mortgage.
(c) Borrower shall provide to Lender, at Borrower's expense promptly
upon the written request of Lender from time to time, a Site Assessment or, if
required by Lender, an update to any existing Site Assessment, to assess the
presence or absence of any Hazardous Materials and the potential costs in
connection with abatement, cleanup or removal of any Hazardous Materials found
on, under, at or within any Individual Property to the extent such abatement,
clean-up or removal is required by applicable Environmental Law. Borrower shall
pay the cost of no more than one such Site Assessment or update in any twelve
(12)-month period, unless Lender's request for an additional Site Assessment or
updated assessment is based on information provided under Section 6.3(a), a
reasonable suspicion of Hazardous Materials at or near any Individual Property,
a breach of representations under Section 6.2, or an Event of Default, in which
case any such Site Assessment or update shall be at Borrower's expense.
(d) If Borrower is presently an owner or operator of a "Major
Facility" in the State of New Jersey (as defined under the Spill Act), or if
Borrower ever becomes such an owner or operator, then Borrower shall furnish to
the Department of Environmental Protection of the State of New Jersey ("NJDEP")
all of the information required by N.J.S.A. 58:10-23.11d and so long as Borrower
shall own or operate any real property located in the State of New Jersey that
is used as a "Major Facility", Borrower shall duly file with the Director of the
Division of Taxation in the New Jersey Department of Treasury, a tax report or
return or shall pay or make provision for the payment when due of any tax
pursuant to N.J.S.A. 58:10-23.11h. Borrower agrees that, if requested by
Lender, Borrower shall include in all Leases language acceptable to Lender
requiring the tenants thereunder to comply with the provisions of this
Section 6.3.
(e) If there shall be filed a Lien against an Individual Property by
the NJDEP, or other Governmental Authority, (i) pursuant to and in accordance
with the provisions of the Spill Compensation and Control Act (N.J.S.A. 58:10-
23.11) (the "Spill Act"), as the result of the Chief Executive of the New Jersey
Spill Compensation Fund having expended monies from said fund to pay for damages
and/or Cleanup and Removal Costs arising from an intentional or unintentional
action or omission of Borrower, resulting in the releasing, spilling, pumping,
pouring, emitting, emptying or dumping of Hazardous Materials into waters of the
State of New Jersey or onto lands from which it might flow or drain into said
waters, or (ii) pursuant to and in accordance with the provisions of ISRA, or
(iii) pursuant to and in accordance with any other of the Environmental Laws,
then Borrower shall, within thirty (30) days after the date that Borrower has
given notice that the Lien has been placed against an Individual Property or
within such shorter period of time if the State of New Jersey has commenced
steps to cause an Individual Property to be sold pursuant to the Lien, either
(A) pay the claim and remove the Lien from the Individual Property; or (B)
furnish (1) a bond satisfactory to Lender and its title issuer in the amount of
the claim out of which the Lien arises, (2) a cash deposit in the amount of the
claim out of which the Lien arises, or (3) other security reasonably
satisfactory to Lender in an amount sufficient to discharge the Lien.
Section 6.4 Allocation of Risks and Indemnity. As between Borrower,
Lender and Indemnitor, all risk of loss associated with non-compliance with
Environmental Laws, or with the presence of any Hazardous Material at, upon,
within, contiguous to or otherwise affecting any Individual Property, shall lie
solely with Borrower and Indemnitor except as otherwise provided herein.
Accordingly, Borrower and Indemnitor shall bear all risks and costs associated
with any loss (including any loss in value attributable to Hazardous Materials),
damage or liability therefrom, including all costs of removal of Hazardous
Materials or other remediation required by Environmental Law. Borrower shall
indemnify, defend and hold Lender and its shareholders, directors, officers,
employees and agents harmless from and against all loss, liabilities, damages,
claims, costs and expenses (including reasonable costs of defense and consultant
fees, investigation and laboratory fees, court costs, and other litigation
expenses) arising out of or associated, in any way, with (a) the non-compliance
with applicable Environmental Laws, or (b) the existence of Hazardous Materials
in, on, or about any Individual Property, (c) any personal injury (including
wrongful death) or property damage (real or personal) arising out of or related
to Hazardous Materials in, on or about any Individual Property; (d) any lawsuit
brought or threatened, settlement reached, or government order relating to
Hazardous Materials in, on or about the Properties, (e) a breach of any
representation, warranty or covenant contained in this Article 6, whether based
in contract, tort, implied or express warranty, strict liability, criminal or
civil statute or common law, or (f) the imposition of any environmental Lien
encumbering any Individual Property; provided, however, Borrower shall not be
liable under such indemnification to the extent such loss, liability, damage,
claim, cost or expense results solely from Lender's gross negligence or willful
misconduct. Borrower's obligations under this Section 6.4 shall arise upon the
discovery of the presence of any Hazardous Materials, whether or not the
Environmental Protection Agency, any other federal agency authorized to enforce
Environmental Laws or any governmental authority has taken or threatened any
action in connection with the presence of any Hazardous Material, and whether or
not the existence of any such Hazardous Material or potential liability on
account thereof is disclosed in a Site Assessment and shall continue
notwithstanding the repayment of the Loan or any transfer or sale of any right,
title and interest in any Individual Property (by foreclosure, deed in lieu of
foreclosure or otherwise) except as otherwise provided herein. Notwithstanding
the foregoing, the Borrower shall have no obligation to indemnify Lender, and
the indemnification provisions set forth in this Section 6.4 shall not apply to
any release or presence of Hazardous Materials which Borrower can establish
either (i) occurred solely after the payment of the Debt in full and
satisfaction of all of Borrower's obligations under the Loan Document and
transfer of the Properties resulting from a foreclosure or deed in lieu of
foreclosure accepted by Lender and was not caused by Borrower or an Affiliate
thereof, or (ii) occurred solely from Lender's knowing and willful instruction
to Borrower to take an action that Lender knew would cause an immediate release
of Hazardous Substances or which violated an applicable Environmental Law.
Borrower shall have the burden of proving the foregoing. Additionally, if any
Hazardous Materials affect or threaten to affect the Properties, Lender may (but
shall not be obligated to) give such notices and take such actions as it deems
necessary or advisable at the expense of the Borrower in order to abate the
discharge of any Hazardous Materials or remove the Hazardous Materials if
Borrower has failed to promptly and diligently take such action after notice
from Lender. Any reasonable amounts actually incurred by and payable to Lender
by reason of the application of this Section 6.4 shall become immediately due
and payable upon receipt of written notice by Borrower and shall bear interest
at the Default Rate from the date such notice is received by Borrower until
paid. The obligations and liabilities of Borrower under this Section 6.4 shall
survive any termination, satisfaction, assignment, entry of a judgment of
foreclosure or delivery of a deed in lieu of foreclosure except as otherwise
provided herein.
Section 6.5 No Waiver. Notwithstanding any provision in this
Article 4 or elsewhere in the Loan Documents, or any rights or remedies granted
by the Loan Documents, Lender does not waive and expressly reserves all rights
and benefits now or hereafter accruing to Lender under the "security interest"
or "secured creditor" exception under applicable Environmental Laws, as the same
may be amended. No action taken by Lender pursuant to the Loan Documents shall
be deemed or construed to be a waiver or relinquishment of any such rights or
benefits under the "security interest exception."
ARTICLE 7
LEASING MATTERS
Section 7.1 Representations and Warranties on Leases. Borrower
represents and warrants to Lender with respect to the Leases for each Individual
Property that, to the best of Borrower's knowledge, after due inquiry and
investigation: (a) the rent roll delivered to Lender is true, complete and
correct, and the Leases are valid and in and full force and effect; (b) the
Leases (including amendments) are in writing, and there are no oral agreements
with respect thereto; (c) the copies of the Leases delivered to Lender are true
and complete; (d) except as set forth in the estoppels delivered on or prior to
the Closing Date neither the landlord nor any tenant is in material default
under any of the Leases; (e) Borrower has no knowledge of any notice of
termination or default with respect to any Lease; (f) Borrower has not assigned
or pledged pursuant to a presently effective assignment any of the Leases, the
rents or any interests therein except to Lender; (g) other than in connection
with the Option Agreements, no tenant or other party has an option or offer, to
purchase all or any portion of the Individual Property; (h) no tenant has the
right to terminate its Lease prior to expiration of the stated term of such
Lease, except as set forth in the Leases provided to Lender; (i) no tenant has
prepaid more than one month's rent in advance (except for bona fide security
deposits not in excess of an amount equal to two month's rent); and (j) no
tenant under any Lease has any right or option for additional space, except as
set forth in the Leases provided to Lender.
Section 7.2 Standard Lease Form; Approval Rights. All Leases shall
in all respects be approved by Lender; provided, however, if such Leases are not
approved or disapproved by Lender within thirty (30) days of receipt, such
Leases shall be deemed approved by Lender. Each Lease form shall provide that
(a) the Lease is subordinate to the applicable Mortgage and (b) the tenant shall
attorn to Lender. To the extent required by applicable law, Borrower shall hold
all tenant security deposits in a segregated account and shall not commingle any
such funds with any other funds of Borrower. Within thirty (30) days after
Lender's request, Borrower shall furnish to Lender a statement of all tenant
security deposits, and copies of all Leases not previously delivered to Lender,
certified by Borrower as being true and correct. Notwithstanding anything
contained in the Loan Documents, Lender's approval shall not be required for
future Leases or Lease extensions if the following conditions are satisfied:
(i) there exists no Event of Default; (ii) the Lease is on the standard Lease
form approved by Lender with no modifications that individually or in the
aggregate materially impair landlord's or Lender's rights or materially increase
the obligations of landlord or Lender; (iii) the Lease does not conflict with
any restrictive covenant affecting the Individual Property or any other Lease
for space in the Individual Property; (iv) the Lease is not a Major Lease or
Anchor Lease; (v) the Lease provides for rental rates comparable to existing
local market rates and shall be an arms-length transaction and does not contain
any options for renewal or expansion by the tenant thereunder at rental rates
which are either below comparable market levels or less than the rental rates
paid by the tenant during the initial lease term; (vi) the Lease shall be to a
tenant which is reasonably experienced and creditworthy; and (vii) the Lease
shall comply in all material respects with the other requirements of this
section. Borrower shall reimburse Lender for all third party reasonable costs
and expenses that Lender actually incurs in connection with the approval or
rejection of any Major Leases or Anchor Leases, including, without limitation,
reasonable attorneys' fees and expenses.
Section 7.3 Covenants. Borrower (a) shall perform in all material
respects the obligations which Borrower is required to perform under the Lease
provided, however, Borrower shall not be required to comply with any
restrictions contained in the Leases with respect to the use of the Properties
if (i) such restriction is contained in a Lease pursuant to which the sole
remedy of the tenant thereunder is the non-payment, or reduction, of rent or
termination of the Lease, and the Lease is not an Anchor Lease, Major Lease or a
Lease with a tenant who, with its Affiliates, own, manage or operate one hundred
and fifty (150) or greater stores within the continental United States;
(b) shall enforce the material obligations to be performed by the tenants;
(c) shall promptly furnish to Lender any notice of default or termination
received by Borrower under any Major Lease or Anchor Lease, and any notice of
default or termination given by Borrower to any Major Tenant or Anchor Tenant;
(d) shall not collect any rents for more than thirty (30) days in advance of the
time when the same shall become due, except for bona fide security deposits not
in excess of an amount equal to two months rent; (e) shall not enter into any
ground lease or master lease of any part of the Properties without Lender's
prior written consent, which consent shall not be unreasonably withheld, delayed
or conditioned; (f) shall not further assign or encumber any Lease; (g) shall
not, except with Lender's prior written consent, cancel or accept surrender or
termination of any Major Lease or Anchor Lease except in accordance with such
Major Lease or Anchor Lease, provided that Borrower gives Lender written notice
thirty (30) days prior to such cancellation, surrender or termination; and (h)
shall not, except with Lender's prior written consent, modify or amend any Major
Lease or Anchor Lease and shall not modify or amend any other Lease other than
in the ordinary course of business, consistent with prudent property management
practices and not materially adversely affecting the economic terms of such
Lease, and (i) with respect to retail property, any Lease termination or
cancellation fees shall be paid to Lender and held in the Rollover Escrow Fund.
Any action in violation of clauses (e), (f), (g), and (h) of this Section 7.3
shall be void at the election of Lender.
Section 7.4 Tenant Estoppels. At Lender's request, Borrower shall
use best efforts to obtain and furnish to Lender, written estoppels in form and
substance reasonably satisfactory to Lender, executed by tenants under Leases in
the Properties and confirming the term, rent, and other provisions and matters
relating to the Leases. Borrower shall reimburse Lender for all third party
reasonable costs and expenses that Lender actually incurs in connection with the
review of any tenant estoppels, including, without limitation, reasonable
attorneys' fees and expenses.
ARTICLE 8
REPRESENTATIONS AND WARRANTIES
Borrower represents, warrants and covenants to Lender that:
Section 8.1 Organization, Power and Authority. Borrower and each
Borrower Party (a) is duly organized, validly existing and in good standing
under the laws of the state of its formation or existence, (b) is in compliance
with all legal requirements applicable to doing business in each state or
commonwealth in which an Individual Property is located, and (c) has the
necessary governmental approvals to own and operate the Properties and conduct
the business now conducted or to be conducted thereon. Borrower has the full
power, authority and right to execute, deliver and perform its obligations
pursuant to this Loan Agreement and the other Loan Documents, and to mortgage
the Properties pursuant to the terms of the Mortgages and to keep and observe
all of the terms of this Loan Agreement and the other Loan Documents on
Borrower's part to be performed. Borrower is not a "foreign person" within the
meaning of 1445(f)(3) of the Code. Financing Partnership is in compliance
with all applicable legal requirements with respect to conversion from a general
partnership to a limited partnership.
Section 8.2 Validity of Loan Documents. The execution, delivery and
performance by Borrower and each Borrower Party of the Loan Documents: (a) are
duly authorized and do not require the consent or approval of any other party or
governmental authority which has not been obtained; and (b) will not violate any
law or result in the imposition of any lien, charge or encumbrance upon the
assets of any such party, except as contemplated by the Loan Documents. The
Loan Documents constitute the legal, valid and binding obligations of Borrower
and each Borrower Party, enforceable in accordance with their respective terms,
subject to applicable bankruptcy, insolvency, or similar laws generally
affecting the enforcement of creditors' rights.
Section 8.3 No Conflicts. The execution, delivery and performance of
this Agreement and the other Loan Documents by Borrower will not conflict with
or result in a breach of any of the terms or provisions of, or constitute a
default under, or result in the creation or imposition of any lien, charge or
encumbrance (other than pursuant to the Loan Documents) upon any of the property
or assets of Borrower pursuant to the terms of any indenture, mortgage, deed of
trust, loan agreement, partnership agreement or other agreement or instrument to
which Borrower is a party or by which any of Borrower's property or assets is
subject, nor will such action result in any violation of the provisions of any
statute or any order, rule or regulation of any court or governmental agency or
body having jurisdiction over Borrower or any of Borrower's properties or
assets, and any consent, approval, authorization, order, registration or
qualification of or with any court or any such regulatory authority or other
governmental agency or body required for the execution, delivery and performance
by Borrower of this Agreement or any other Loan Documents has been obtained and
is in full force and effect.
Section 8.4 Liabilities; Litigation.
(a) All financial data, including, without limitation, the statements
of cash flow and income and operating expense, that have been delivered by
Borrower and each Borrower Party are (i) are true, complete and correct in all
material respects when delivered, (ii) accurately represent the financial
condition of the Properties as of the date of such reports, and (iii) to the
extent prepared or audited by an independent certified public accounting firm,
have been prepared in accordance with generally accepted accounting principals
throughout the periods covered, except as disclosed therein. Borrower does not
have any contingent liabilities, liabilities for taxes, unusual forward or long-
term commitments or unrealized or anticipated losses from any unfavorable
commitments that are known to Borrower and reasonably likely to have a
materially adverse effect on the Properties or the operation thereof as retail
shopping malls, except as referred to or reflected in said financial statements.
Since the date of the financial statements, there has been no materially adverse
change in the financial condition, operations or business of Borrower from that
set forth in said financial statements. To the best of Borrower's knowledge and
except as set forth on Schedule IX hereto, there is no litigation,
administrative proceeding, investigation or other legal action (including any
proceeding under any state or federal bankruptcy or insolvency law) pending or,
to the knowledge of Borrower, threatened, against the Properties, Borrower or
any Borrower Party which if adversely determined could have a material adverse
effect on such party, the Properties or the Loan. The insurance policies
required to be maintained hereunder are sufficient to pay any reasonably
foreseeable liabilities, other than punitive damages, arising from, including,
without limitation, the costs and expenses of defending against, any litigation
pending, or to the Borrower's knowledge, threatened against the Properties,
Borrower or any Borrower Party.
(b) Neither Borrower nor any Borrower Party is contemplating either
the filing of a petition by it under state or federal bankruptcy or insolvency
laws or the liquidation of all or a major portion of its assets or property, and
neither Borrower nor any Borrower Party has knowledge of any Person
contemplating the filing of any such petition against it.
Section 8.5 Taxes and Assessments. Each of the Properties is
comprised of one or more parcels, each of which constitutes a separate tax lot
and none of which constitutes a portion of any other tax lot. There are no
pending or, to Borrower's best knowledge, proposed, special or other assessments
for public improvements or otherwise affecting the Properties, nor are there any
presently contemplated improvements to the Properties that may result in such
special assessments.
Section 8.6 Other Agreements; Defaults. Neither Borrower nor any
Borrower Party is a party to any agreement or instrument or subject to any court
order, injunction, permit, or restriction which might materially adversely
affect any of the Properties, the business, operations, or condition (financial
or otherwise) of Borrower or any Borrower Party or the conversion of Financing
Partnership from a general partnership into a limited partnership. To the best
of Borrower's knowledge, neither Borrower nor any Borrower Party is in violation
of any agreement which violation would have a material adverse effect on any of
the Properties, Borrower, or any Borrower Party or Borrower's or any Borrower
Party's business, properties, or assets, operations or condition, financial or
otherwise.
Section 8.7 Title. Borrower has good, marketable and insurable fee
or leasehold title, as applicable, to the Properties, free and clear of all
Liens whatsoever except the Permitted Encumbrances, such other Liens as are
permitted pursuant to the Loan Documents and the Liens created by the Loan
Documents. Upon recordation in the appropriate offices, each Mortgage shall
create (i) a valid, perfected lien on the applicable Individual Property,
subject only to Permitted Encumbrances and the Liens created by the Loan
Documents and (ii) perfected security interests in and to, and perfected
collateral assignments of, all personalty (including the Leases), all in
accordance with the terms thereof, in each case subject only to any applicable
Permitted Encumbrances, such other Liens as are permitted pursuant to the Loan
Documents and the Liens created by the Loan Documents. To the best of
Borrower's knowledge, there are no claims for payment for work, labor or
materials affecting any of Borrower's Properties which are or may become a lien
prior to, or of equal priority with, the liens created by the Loan Documents.
None of the Permitted Encumbrances, individually or in the aggregate, materially
interfere with the benefits of the security intended to be provided by the
Mortgages and this Loan Agreement, materially and adversely affect the value of
any Individual Property, impair the use or operations of any Individual Property
or impair Borrower's ability to pay its obligations in a timely manner.
Section 8.8 Compliance with Law.
(a) Borrower and each Borrower Party have all requisite licenses,
permits, franchises, qualifications, certificates of occupancy or other
governmental authorizations to own, lease and operate each of the Properties and
carry on its business, and each of the Properties is in compliance with all
applicable legal requirements and is free of structural defects, and all
building systems contained therein are in good working order, subject to
ordinary wear and tear. Each of the Properties does not constitute, in whole or
in part, a legally non-conforming use under applicable legal requirements;
(b) No condemnation has been commenced or, to Borrower's knowledge,
is contemplated with respect to all or any portion of the Properties or for the
relocation of roadways providing access to the Properties; and
(c) Each of the Properties has rights of access to public ways and is
served by adequate water, sewer, sanitary sewer and storm drain facilities.
Except as may be shown on the applicable survey, all public utilities necessary
or convenient to the full use and enjoyment of the Properties are located in the
public right-of-way abutting each of the Properties, and all such utilities are
connected so as to serve the Properties without passing over other property,
except to the extent such other property is subject to a perpetual easement for
such utility benefiting each of the Properties. All roads necessary for the
full utilization of each of the Properties for its current purpose have been
completed and dedicated to public use and accepted by all governmental
authorities.
Section 8.9 Location of Borrower. Borrower's principal place of
business and chief executive offices are located at the address stated in
Section 15.1.
Section 8.10 ERISA.
(a) As of the date hereof and throughout the term of the Loan, (i)
Borrower is not and will not be an "employee benefit plan" as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), which is subject to Title I of ERISA, and (ii) the assets of Borrower
do not and will not constitute "plan assets" of one or more such plans for
purposes of Title I of ERISA; and
(b) As of the date hereof and throughout the term of the Loan (i)
Borrower is not and will not be a "governmental plan" within the meaning of
Section 3(32) of ERISA and (ii) transactions by or with Borrower are not and
will not be subject to state statutes applicable to Borrower regulating
investments of and fiduciary obligations with respect to governmental plans.
Section 8.11 Forfeiture. To the best of Borrower's knowledge, there
has not been and shall never be committed by Borrower or any other person in
occupancy of or involved with the operation or use of the Properties any act or
omission affording the federal government or any state or local government the
right of forfeiture as against the Properties or any part thereof or any monies
paid in performance of Borrower's obligations under any of the Loan Documents.
Borrower hereby covenants and agrees not to commit, permit or suffer to exist
any act or omission affording such right of forfeiture.
Section 8.12 Tax Filings. Borrower and each Borrower Party have
filed (or have obtained effective extensions for filing) all federal, state and
local tax returns required to be filed and have paid or made adequate provision
for the payment of all federal, state and local taxes, charges and assessments
payable by Borrower and each Borrower Party, respectively. Borrower and each
Borrower Party believe that their respective tax returns properly reflect the
income and taxes of Borrower and each Borrower Party, respectively, for the
periods covered thereby, subject only to reasonable adjustments required by the
Internal Revenue Service or other applicable tax authority upon audit.
Section 8.13 Solvency. The Borrower (a) has not entered into the
transaction or any Loan Document with the actual intent to hinder, delay, or
defraud any creditor and (b) received reasonably equivalent value in exchange
for its obligations under the Loan Documents. Giving effect to the Loan, the
fair saleable value of Borrower's assets exceeds and will, immediately following
the making of the Loan, exceed Borrower's total liabilities, including, without
limitation, subordinated, unliquidated, disputed and contingent liabilities.
The fair saleable value of Borrower's assets is and will, immediately following
the making of the Loan, be greater than Borrower's probable liabilities,
including the maximum amount of its contingent liabilities on its debts as such
debts become absolute and matured. Borrower's assets do not and, immediately
following the making of the Loan will not, constitute unreasonably small capital
to carry out its business as conducted or as proposed to be conducted. Borrower
does not intend to, and does not believe that it will, incur Indebtedness and
liabilities (including contingent liabilities and other commitments) beyond its
ability to pay such Indebtedness as they mature (taking into account the timing
and amounts of cash to be received by Borrower and the amounts to be payable on
or in respect of obligations of Borrower). Except as expressly disclosed to
Lender in writing, no petition in bankruptcy has been filed against Borrower,
Indemnitor, any guarantor or any Borrower Party in the last seven (7) years, and
neither Borrower, Indemnitor, any guarantor or any Borrower Party in the last
seven (7) years has ever made an assignment for the benefit of creditors or
taken advantage of any insolvency act for the benefit of debtors.
Section 8.14 Full and Accurate Disclosure. All information submitted
by Borrower or any Borrower Party to Lender in connection with the Loan or in
satisfaction of the terms thereof and all statements of fact made by Borrower or
any Borrower Party in this Agreement or in any other Loan Document, are
accurate, complete and correct in all material respects as of the date submitted
or made. No statement of fact made by or on behalf of Borrower or any Borrower
Party in this Agreement or in any of the other Loan Documents contains, as of
the date submitted or made, any untrue statement of a material fact or omits to
state, as of the date submitted or made, any material fact necessary to make
statements contained herein or therein not misleading. There is no fact
presently known to Borrower which has not been disclosed to Lender which
adversely affects, nor as far as Borrower can foresee, might adversely affect,
the Properties or the business, operations or condition (financial or otherwise)
of Borrower or any Borrower Party.
Section 8.15 Flood Zone. No portion of the improvements comprising
each of the Properties is located in an area identified by the Secretary of
Housing and Urban Development or any successor thereto as an area having special
flood hazards pursuant to the National Flood Insurance Act of 1968, the Flood
Disaster Protection Act of 1973 or the National Flood Insurance Act of 1994, as
amended, or any successor law, or, if located within any such area, Borrower has
obtained and will maintain the insurance prescribed in Section 5.1 hereof.
Section 8.16 Federal Reserve Regulations. No part of the proceeds of
the Loan will be used for the purpose of purchasing or acquiring any "margin
stock" in a manner that violates in any respect Regulation U of the Board of
Governors of the Federal Reserve System or for any other purpose which would be
inconsistent with such Regulation U or any other Regulations of such Board of
Governors, or for any purposes prohibited by Legal Requirements or by the terms
and conditions of this Agreement or the other Loan Documents.
Section 8.17 Insurance. Borrower has obtained and has delivered to
Lender all insurance policies reflecting the insurance coverages, amounts and
other requirements set forth in this Agreement. No claims have been made under
any such Policy, and no Person, including Borrower, has done, by act or
omission, anything which would impair the coverage of any such policy.
Section 8.18 Use of Properties. Each of the Individual Properties is
used primarily for retail purposes and other appurtenant and related uses.
Section 8.19 Certificate of Occupancy; Licenses . All
certifications, permits, licenses and approvals, including without limitation,
certificates of completion and occupancy permits required for the legal use,
occupancy and operation of each of the Individual Properties as a retail
shopping mall (collectively, the "Licenses"), have been obtained and are in full
force and effect. The Borrower shall keep and maintain all licenses necessary
for the operation of each of the Individual Properties as a retail shopping
center. The use being made of each Individual Property is in conformity with
the certificate of occupancy issued for such Individual Property.
Section 8.20 Physical Condition . Each of the Individual Properties,
including, without limitation, all buildings, improvements, parking facilities,
sidewalks, storm drainage systems, roofs, plumbing systems, HVAC systems, fire
protection systems, electrical systems, equipment, elevators, exterior sidings
and doors, landscaping, irrigation systems and all structural components, are in
good condition, order and repair in all material respects, except for repairs
and maintenance to be performed utilizing the Required Repair Funds. To the
best of Borrower's knowledge, there exists no structural or other material
defects or damages in any of the Individual Properties, whether latent or
otherwise, and Borrower has not received notice from any insurance company or
bonding company of any defects or inadequacies in any of the Individual
Properties, or any part thereof, which would materially and adversely affect the
insurability of the same or cause the imposition of extraordinary premiums or
charges thereon or of any termination or threatened termination of any policy of
insurance or bond.
Section 8.21 Boundaries . Except as may be shown on the applicable
survey, all of the improvements which were included in determining the appraised
value of each Individual Property lie wholly within the boundaries and building
restriction lines of such Individual Property, and no improvements on adjoining
properties encroach upon such Individual Property, and no easements or other
encumbrances upon the applicable Individual Property encroach upon any of the
improvements, so as to affect the value or marketability of the applicable
Individual Property except those which are insured against by title insurance.
Section 8.22 Survey . The Survey for each of the Individual
Properties delivered to Lender in connection with this Agreement has been
prepared in accordance with the provisions of Section 4.1(c)(iii) hereof, and,
to the best of Borrower's knowledge, does not fail to reflect any material
matter affecting any of the Properties or the title thereto.
Section 8.23 Loan to Value . The Loan is secured by interests in
real property having a fair market value as of the date hereof at least equal to
eighty percent (80%) of the original principal balance of the Loan.
Section 8.24 Filing and Recording Taxes . All transfer taxes, deed
stamps, intangible taxes or other amounts in the nature of transfer taxes
required to be paid by any Person under applicable Legal Requirements currently
in effect in connection with the transfer of the Properties to Borrower have
been paid. All mortgage, mortgage recording, stamp, intangible or other similar
tax required to be paid by any Person under applicable Legal Requirements
currently in effect in connection with the execution, delivery, recordation,
filing, registration, perfection or enforcement of any of the Loan Documents,
including, without limitation, the Mortgage encumbering the Properties has been
paid, and, under current Legal Requirements, the Mortgages encumbering the
Properties are enforceable in accordance with their respective terms by Lender
(or any subsequent holder thereof), except as such enforcement may be limited by
bankruptcy, insolvency, reorganization moratorium or other laws relating to or
affecting creditors' rights generally, and by general principles of equity
(regardless of whether such enforcement is considered in a proceeding in equity
or at law).
Section 8.25 Single Purpose Entity/Separateness. Borrower
represents, warrants and covenants as follows:
(a) The purpose for which the Borrower is organized shall be limited
solely to (A) owning, holding, selling, leasing, transferring, exchanging,
operating and managing the Properties, (B) entering into this Agreement with the
Lender, (C) refinancing the Properties in connection with a permitted repayment
of the Loan and (D) transacting any and all lawful business for which a Borrower
may be organized under its constitutive law that is incident, necessary and
appropriate to accomplish the foregoing.
(b) Borrower does not own and will not own any asset or property
other than (i) its interest in the Properties, and (ii) incidental personal
property necessary for and used or to be used in connection with the ownership
or operation of the Properties.
(c) Borrower will not engage in any business other than the
ownership, management and operation of the Properties.
(d) Borrower will not enter into any contract or agreement with any
Affiliate of the Borrower, any constituent party of Borrower, any guarantor or
any Affiliate of any constituent party or any guarantor, except upon terms and
conditions that are intrinsically fair, commercially reasonable and
substantially similar to those that would be available on an arms-length basis
with third parties not affiliated with the Borrower or its constituent party.
(e) Borrower has not incurred and will not incur any Indebtedness
other than (i) the Loan, (ii) trade and operational debt incurred in the
ordinary course of business with trade creditors and in amounts as are normal
and reasonable under the circumstances, provided such debt is not evidenced by a
note, is paid within sixty (60) days of the date billed and such debt does not
exceed five percent (5%) of the outstanding principal balance of the Loan at any
one time, and (iii) Indebtedness incurred in the financing of equipment and
other personal property used on the Properties provided that there shall not be
greater than Seven Million Five Hundred Thousand ($7,500,000.00) in "capital
lease obligations" as defined by GAAP with respect to the Properties, in the
aggregate. No Indebtedness other than the Loan may be secured (subordinate or
pari passu) by the Properties.
(f) Borrower has not made and will not make any loans or advances to
any entity or person (including any Affiliate or constituent party, any
guarantor or any affiliate of any constituent party or guarantor), and shall not
acquire obligations or securities of its affiliates or any constituent party.
(g) Borrower is and will remain solvent and Borrower will pay its
debts and liabilities (including, as applicable, shared personnel and overhead
expenses) from its assets as the same shall become due.
(h) Borrower has done or caused to be done and will do all things
necessary to observe organizational formalities and preserve its existence, and
Borrower will not, nor will Borrower permit any constituent party or any
guarantor to amend, modify or otherwise change the partnership certificate,
partnership agreement, articles of incorporation and bylaws, operating
agreement, trust or other organizational documents of Borrower or such
constituent party or guarantor without the prior written consent of Lender.
(i) Borrower will maintain all of its books, records, financial
statements and bank accounts separate from those of its Affiliates and any
constituent party. Borrower's assets will not be listed as assets on the
financial statement of any other entity, except as required by GAAP, provided,
however, that any such consolidated financial statement shall contain a note
indicating that the separate assets and liabilities of the Borrower are neither
available to pay the debts of the consolidated entity nor constitute obligations
of the consolidated entity. Borrower will file its own tax returns and will not
file a consolidated federal income tax return with any other corporation.
Borrower shall maintain its books, records, resolutions and agreements as
official records.
(j) Borrower will be, and at all times will hold itself out to the
public as, a legal entity separate and distinct from any other entity (including
any Affiliate of Borrower, any constituent party of Borrower, any guarantor or
any Affiliate of any constituent party or guarantor), shall correct any known
misunderstanding regarding its status as a separate entity, shall conduct
business in its own name, shall not identify itself or any of its Affiliates as
a division or part of the other and shall maintain and utilize separate
stationery, invoices and checks.
(k) Borrower will maintain adequate capital for the normal
obligations reasonably foreseeable in a business of its size and character and
in light of its contemplated business operations.
(l) Neither Borrower nor any constituent party will seek the
dissolution, winding up, liquidation, consolidation or merger in whole or in
part, or the sale of material assets of the Borrower.
(m) Borrower will not commingle the funds of Borrower with those of
any Affiliate or constituent party, any guarantor, or any Affiliate of any
constituent party or guarantor, or any other person, and will not participate in
any cash management system with any such party.
(n) Borrower will not commingle its assets with those of any other
person or entity and will hold all of its assets in its own name;
(o) Borrower will not guarantee or become obligated for the debts of
any other entity or person and does not and will not hold itself out as being
responsible for the debts or obligations of any other person.
(p) The general partner of WL Associates (the "WL General Partner")
is a business trust duly formed under the laws of the State of Delaware whose
sole asset is its interest in WL Associates. The general partner of Financing
Partnership is a corporation formed under the laws of the State of Delaware
whose sole assets are its interest in Financing Partnership ("Financing General
Partner"; WL General Partner and Financing General Partner are collectively the
"SPC Party"). The SPC Party will at all times comply, and will cause Borrower
to comply, with each of the representations, warranties, and covenants contained
in this Section 8.25 as if such representation, warranty or covenant was made
directly by the SPC Party, other than the requirement of the SPC Party to file
separate tax returns pursuant to Section 8.25(i).
(q) WL Associates and Financing Partnership, respectively, shall at
all times cause there to be at least two duly appointed trustees or directors
(an "Independent Director") of the WL General Partner and Financing General
Partner, respectively, that is selected by Borrower and reasonably satisfactory
to Lender who shall not have been at the time of such individual's appointment
or at any time thereafter, and may not have been at any time during the
preceding five years (i) a shareholder of, or an officer, director, partner,
beneficiary or employee of, Borrower or any of its shareholders, subsidiaries or
affiliates, (ii) a customer of, or supplier to, Borrower or any of its
shareholders, subsidiaries or affiliates, (iii) a person or other entity
controlling or under common control with any such shareholder, partner,
beneficiary, supplier or customer, (iv) a member of the immediate family of any
such shareholder, officer, director, partner, beneficiary, employee, supplier or
customer of Borrower; or (v) an employee, director, or officer of the Lender or
any of its Affiliates. As used herein, the term "control" means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a person or entity, whether through ownership of
voting securities, by contract or otherwise.
(r) WL Associates shall not cause or permit the trustees of WL
General Partner to take any action which, under the terms of any certificate of
trust, trust agreement or by-laws requires the vote of the trustees of WL
General Partner unless at the time of such action there shall be at least two
trustees who are Independent Directors. Financing Partnership shall not cause
or permit the directors of Financing General Partner to take any action which,
under the certificate of incorporation or by-laws requires the vote of the
directors unless at the time of such action there shall be at least two
directors who are Independent Directors.
(s) Borrower shall conduct its business so that the assumptions made
with respect to Borrower in that certain opinion letter pertaining to
substantive consolidation (the "Insolvency Opinion") delivered by Reed Smith
Shaw & McClay LLP in connection with the Loan shall be true and correct in all
respects.
(t) Borrower shall allocate fairly and reasonably any overhead
expenses that are shared with an affiliate, including paying for office space
and services performed by any employee of an affiliate.
(u) The stationery, invoices, and checks utilized by Borrower or
utilized to collect its funds or pay its expenses shall bear its own name and
shall not bear the name of any other entity unless such entity is clearly
designated as being Borrower's agent.
(v) Borrower shall not pledge its assets for the benefit of any other
person or entity, other than with respect to the Loan.
(w) Borrower shall correct any known misunderstanding regarding its
separate identity.
(x) Borrower shall not identify itself as a division of any other
person or entity.
(y) Borrower shall pay the salaries of its own employees from its own
funds.
(z) Borrower shall maintain a sufficient number of employees in light
of its contemplated business operations.
Section 8.26 Management Agreement. The Management Agreement,
pursuant to which Manager operates the Properties is in full force and effect
and there is no default or violation by any party thereunder. The fee due under
the Management Agreement, and the terms and provisions of the Management
Agreement, are subordinate to this Agreement and the applicable Mortgage and the
Manager shall attorn to Lender. Borrower shall not terminate, cancel, modify,
renew or extend the Management Agreement, or enter into any agreement relating
to the management or operation of the Properties with Manager or any other party
without the express written consent of Lender, which consent shall not be
unreasonably withheld. If at any time Lender consents to the appointment of a
new manager, such new manager and Borrower shall, as a condition of Lender's
consent, execute a Manager's Consent and Subordination of Management Agreement
in the form then used by Lender. In addition, Lender's consent to a new manager
may be conditioned upon Borrower delivering evidence in writing from the
applicable Rating Agencies to the effect that such new manager will not result
in a downgrade, withdrawal or qualification of the respective ratings then in
effect for any Securities issued in connection with a Securitization. Borrower
shall reimburse Lender for all reasonable costs and expenses that Lender
actually incurs in connection with the appointment of a new manager, including,
without limitation, reasonable attorneys' fees and expenses.
Section 8.27 Investment Company Act. The Borrower is not (a) an
"investment company" or a company "controlled" by an "investment company,"
within the meaning of the Investment Company Act of 1940, as amended; (b) a
"holding company" or a "subsidiary company" of a "holding company" or an
"affiliate" of either a "holding company" or a "subsidiary company" within the
mean of the Public Utility Holding Company Act of 1935, as amended; or (c)
subject to any other federal or state law or regulation which purports to
restrict or regulate its ability to borrow money.
Section 8.28 Ground Lease Representations and Warranties. Borrower
hereby represents and warrants to Lender the following with respect to each
Ground Lease:
(a) Recording; Modification. A memorandum of the Ground Lease (but
not every amendment pertaining to the Ground Lease) has been duly recorded, the
Ground Lease permits the interest of the Borrower to be encumbered by a mortgage
or the Ground Lessor has approved and consented to the encumbrance of the
applicable Individual Property by the Mortgage and there have not been
amendments or modifications to the terms of the Ground Lease since recordation
of the memorandum of ground lease pertaining thereto, with the exception of
written instruments which have been recorded. The Ground Lease may not be
canceled, terminated, surrendered or amended without the prior written consent
of Lender.
(b) No Liens. Except for the Permitted Encumbrances, the Borrower's
interest in the Ground Lease is not subject to any liens or encumbrances
superior to, or of equal priority with, the applicable Mortgage other than the
Ground Lessor's related fee interest.
(c) Ground Lease Assignable. The Borrower's interest in the Ground
Lease is assignable to the Lender upon notice to, but without the consent of,
the Ground Lessor (or, if any such consent is required, it has been obtained
prior to the Closing Date). The Ground Lease is further assignable by Lender,
its successors and assigns without Ground Lessor's consent.
(d) Default. As of the date hereof, the Ground Lease is in full
force and effect and no default has occurred under the Ground Lease and there is
no existing condition which, but for the passage of time or the giving of
notice, could result in a default under the terms of the Ground Lease.
(e) Notice. The Ground Lease requires the Ground Lessor to give
notice of any default by the Borrower to the Lender. The Ground Lease, or an
estoppel letter received by the Lender from Ground Lessor, further provides that
notice of termination given under the Ground Lease is not effective against he
Lender unless a copy of the notice has been delivered to the Lender in the
manner described in the Ground Lease.
(f) Cure. The Lender is permitted the opportunity (including, where
necessary, additional time to gain possession of the interest of the Borrower
under the Ground Lease) to cure any default under the Ground Lease, which is
curable after the receipt of notice of any of the default before the Landlord
thereunder may terminate the Ground Lease.
(g) Term. Other than those Ground Leases in which the Lender has
been granted a mortgage, deed of trust, or other security instrument with
respect to the fee interest on the real property underlying such Ground Leases,
the Ground Leases have a term which extends not less than ten (10) years beyond
the Maturity Date.
(h) New Lease. The Ground Lease requires the Ground Lessor to enter
into a new lease upon termination of the Ground Lease for any reason, including
rejection of the Ground Lease in a bankruptcy proceeding.
(i) Insurance Proceeds. Under the terms of this Agreement, the
Ground Lease and the applicable Mortgage, taken together, any related insurance
and condemnation proceeds will be applied either to the repair or restoration of
all or part of the applicable Individual Property, with the Lender having the
right, subject to the provisions contained herein, to hold and disburse the
proceeds as the repair or restoration progresses, or to the payment of the
outstanding principal balance of the Loan together with any accrued interest
thereon.
(j) Subleasing. The Ground Lease does not impose any restrictions on
subleasing other than the Uniontown Ground Lease with the County of Fayette
which requires the ground lessee to remain liable upon subleasing.
Section 8.29 Reciprocal Easement Agreements. To Borrower's
knowledge, the reciprocal easement agreements, declaration of easements or other
similar agreements effecting any Individual Property are in full force and
effect and there is no default or violation by any party thereunder.
ARTICLE 9
FINANCIAL REPORTING
Section 9.1 Financial Statements
(a) Obligations of Borrower. (i) Borrower will keep and maintain or
will cause to be kept and maintained, in accordance with GAAP proper and
accurate books, records and accounts reflecting all of the financial affairs of
Borrower and all items of income and expense in connection with the operation on
an individual basis of each of the Individual Properties. Lender shall have the
right from time to time at all times during normal business hours to examine
such books, records and accounts at the office of Borrower or other Person
maintaining such books, records and accounts and to make such copies or extracts
thereof as Lender shall desire. After the occurrence of an Event of Default,
Borrower shall pay any costs and expenses incurred by Lender to examine
Borrower's accounting records with respect to the Properties, as Lender shall
determine to be necessary or appropriate in the protection of Lender's interest.
(b) Monthly Reports. Within forty-five (45) days after the end of
each calendar month, Borrower shall furnish to Lender with respect to each
Individual Property a detailed operating statement (showing monthly activity and
year-to-date) stating Operating Revenues, Operating Expenses and Net Operating
Income for the calendar month just ended, a rent roll for the subject month and
other documentation supporting the information disclosed in the most recent
financial statements.
(c) Quarterly Reports. Within forty-five (45) days after the end of
each calendar quarter, Borrower shall furnish to Lender with respect to each
Individual Property a detailed operating statement (showing quarterly activity
and year-to-date) stating Operating Revenues, Operating Expenses, Net Operating
Income and Capital Expenditures for the calendar quarter just ended, an
occupancy statement for the subject quarter and as requested by Lender a written
statement setting forth any material variance from the Approved Annual Budget if
such Approved Annual Budget is required hereunder to be delivered to Lender.
Borrower's quarterly statements shall be accompanied by (i) if an Approved
Annual Budget exists, a comparison of the budgeted income and expenses and the
actual income and expenses for the prior calendar quarter, and (ii) a
certificate executed by the chief financial officer or chief accounting officer
of Borrower stating that each such quarterly statement presents fairly the
financial condition and the results of operations of the Borrower and the
Properties being reported upon and has been prepared in accordance with this
Agreement.
(d) Annual Reports. Each Borrower will furnish to Lender annually,
within ninety (90) days following the end of each calendar year, a complete copy
of its annual financial statements as well as the annual financial statements of
the REIT and Operating Partnership, which financial statements of the REIT and
Operating Partnership shall be consolidated. Each such statement shall be
prepared in accordance with GAAP and audited by a "Big Six" accounting firm or
other independent certified public accountants acceptable to Lender, whose audit
report thereon, unqualified as to scope, shall be included. Such audited
financial statements shall include a balance sheet, and statements of income and
of cash flows for the year, together with footnotes and with respect to each
Individual Borrower supplementary combining balance sheets and combining
statements of Net Operating Income which shall include the balance sheet and
statements of Net Operating Income of each Individual Property. The audited
financial statements of each Borrower shall be accompanied by the following
items which shall be certified by the chief financial officer or chief
accounting officer of each Borrower, as applicable: (i) if an Approved Annual
Budget exists, a comparison of the actual income and expenses for the year by
Individual Property with the budgeted income and expenses and the prior year
actual income expenses, and (ii) a reconciliation of the income statement to the
annual amounts of Operating Income, Operating Expenses, Net Operating Income and
Capital Expenditures for each Individual Property. In addition, such financial
statements shall also be accompanied by a certificate of the chief financial
officer or chief accounting officer of Borrower stating that the representations
and warranties of Borrower set forth in Section 8.25 are true and correct as of
the date of such certificate and that there are no trade payables outstanding
for more than sixty (60) days past their stated (contractual) due dates.
(e) Certification; Supporting Documentation. Each such financial
statement shall be in scope and detail satisfactory to Lender and the monthly
and quarterly statements shall be certified by the chief financial officer or
chief accounting officer of Borrower, the REIT and the Operating Partnership, as
applicable.
(f) Additional Reports. Borrower shall deliver to Lender as soon as
reasonably available but in no event later than thirty (30) days after such
items become available to Borrower in final form:
(i) copies of any final engineering or environmental reports
prepared for Borrower with respect to an Individual Property;
(ii) a copy of any notice received by Borrower from any
environmental authority having jurisdiction over an Individual
Property with respect to a condition existing or alleged to exist or
emanate from or at an Individual Property;
(iii) a summary report containing each of the following with
respect to the Properties for the most recently completed calendar
year: (A) aggregate sales by tenants under Leases or other occupants
of an Individual Property (actual and on a comparable store basis),
(B) rent per square foot payable by each tenant and (C) aggregate
occupancy of an Individual Property by anchor space and in-line store
space as of December 31x; and
(iv) if requested by Lender, a summary report listing only
tenants and square footage occupied by such tenants.
Section 9.2 Accounting Principles . All financial statements shall
be prepared in accordance with generally accepted accounting principles in the
United States of America as in effect on the date so indicated ("GAAP") or such
other accounting basis reasonably acceptable for Lender.
Section 9.3 Other Information; Access. Borrower shall deliver to
Lender such additional information regarding Borrower, its subsidiaries, its
business, any Borrower Party, and any of the Properties within thirty (30) days
after Lender's written request therefor. Borrower shall, upon prior written
notice, permit Lender to examine such records, books and papers of Borrower
which reflect upon its financial condition and the income and expenses of each
of the Properties; such examination to occur in Johnstown, Pennsylvania if
impractical or overly expensive to be conducted elsewhere.
Section 9.4 Format of Delivery. Any reports, statements or other
information required to be delivered under this Agreement shall be delivered (a)
in paper form and (b) if requested by Lender and within the capabilities of
Borrower's data systems without change or modification thereto, in electronic
form, or on diskette, and prepared using Microsoft Word for Windows or
WordPerfect for Windows files (which files may be prepared using a spreadsheet
program and saved as word processing files). The Borrower agrees that all
financial information delivered pursuant to this Article IX may be released on
an ongoing basis to investors, prospective investors and other parties
(including, without limitation, Rating Agencies) with respect to any
Securitization; provided, however, Borrower may request a list of such investors
or prospective investors who have been delivered such financial information.
Section 9.5 Additional Financial Requirements. If requested by Lender
and required in connection with a Securitization or any other Exchange Act or
Securities Act filing, Borrower shall provide Lender with the following
financial statements (it being understood that Lender shall request such
financial statements if it anticipates that the principal amount of the Loan at
the time of Securitization may or if the principal amount of the Loan at any
time during which the Loan is included in a Securitization does, equal or exceed
20% of the aggregate principal amount of all mortgage loans included in the
Securitization) and summaries of such financial statements if the principal
amount of the Loan at any such time equals or exceeds 10% of such aggregate
principal amount:
(a) If a Securitization has occurred in which the Securities are sold
in a public offering, a balance sheet with respect to the Properties on a
combined basis for the two most recent fiscal years, meeting the requirements of
Section 210.3-01 of Regulation S-X of the Securities Act and statements of
income and statements of cash flows with respect to the Properties on a combined
basis for the three most recent fiscal years, meeting the requirements of
Section 210.3-02 of Regulation S-X, and, to the extent that such balance sheet
is more than 135 days old as of the date of the document in which such financial
statements are included, interim financial statements of the Properties meeting
the requirements of Section 210.3-01 and 210.3-02 of Regulation S-X (all of such
financial statements, collectively, the "Standard Statements"); provided,
however, that with respect to any Properties (other than Properties that are
hotels, nursing homes, or other properties that would be deemed to constitute a
business and not real estate under Regulation S-X or other Legal Requirements)
that have been acquired by the Borrower from an unaffiliated third party (such
Properties, "Acquired Properties"), as to which the other conditions set forth
in Section 210.3.14 of Regulation S-X for provision of financial statements in
accordance with such Section have been met, in lieu of the Standard Statements
otherwise required by this section, the Borrower shall instead provide the
financial statements required by such Section 210.3-14 of Regulation S-X
("Acquired Property Statements").
(b) If a Securitization has occurred in which the Securities are sold
in a public offering, not later than forty-five (45) days after the end of each
fiscal quarter following the Closing Date, a balance sheet of the Properties on
a combined basis as of the end of such fiscal quarter, meeting the requirements
of Section 210.3-01 of Regulation S-X, and statements of income and statements
of cash flows of the Properties on a combined basis for the period commencing
following the last day of the most recent fiscal year and ending on the date of
such balance sheet and for the corresponding period of the most recent fiscal
year, meeting the requirements of Section 210.3-02 of Regulation S-X (provided,
that if for such corresponding period of the most recent fiscal year Acquired
Property Statements were permitted to be provided hereunder pursuant to
subsection (a) above, the Borrower shall instead provide Acquired Property
Statements for such corresponding period). If requested by Lender, Borrower
shall also provide "summarized financial information," as defined in Section
210.1-02(bb) of Regulation S-X, with respect to such quarterly financial
statements.
(c) If a Securitization has occurred in which the Securities are sold
in a public offering, not later than 75 days after the end of each fiscal year
following the Closing Date, a balance sheet of the Properties on a combined
basis as of the end of such fiscal year, meeting the requirements of Section
210.3-01 of Regulation S-X, and statements of income and statements of cash
flows of the Properties on a combined basis for such fiscal year, meeting the
requirements of Section 210.3-02 of Regulation S-X. If requested by Lender,
Borrower shall provide summarized financial information with respect to such
annual financial statements.
(d) Upon ten business days notice from the Lender in connection with
the Securitization of this Loan, such additional financial statements, such
that, as of the date (each an "Offering Document Date") of each Disclosure
Document, Borrower shall have provided Lender with all financial statements as
described in subsection (a) above; provided that the fiscal year and interim
periods for which such financial statements shall be provided shall be
determined as of such Offering Document Date.
(e) In the event Lender determines, in connection with a
Securitization, that the financial statements required in order to comply with
Regulation S-X or other Legal Requirements are other than as provided herein,
then notwithstanding the provisions of this subsection, Lender may request, and
Borrower shall promptly provide, such combination of Acquired Property Statement
and/or Standard Statements as may be necessary for such compliance.
(f) Any other or additional financial statements, or financial,
statistical or operating information, as shall be required pursuant to
Regulation S-X or other Legal Requirements in connection with any Disclosure
Document or any filing under or pursuant to the Exchange Act in connection with
or relating to a Securitization (hereinafter an "Exchange Act Filing") or as
shall otherwise be reasonably requested by the Lender to meet disclosure, rating
agency or marketing requirements.
(g) All financial statements provided by Borrower hereunder shall be
prepared in accordance with GAAP, and shall meet the requirements of Regulation
S-X and other applicable Legal Requirements. All financial statements relating
to a fiscal year shall be audited by independent accountants of the Borrower
acceptable to Lender in accordance with Regulation S-X and all other applicable
Legal Requirements, shall be accompanied by the manually executed report of the
independent accountants thereon, which report shall meet the requirements of
Regulation S-X and all other applicable Legal Requirements, and shall be further
accompanied by a manually executed written consent of the independent
accountants, in form and substance acceptable to Lender, to the inclusion of
such financial statements in any Disclosure Document and any Exchange Act Filing
and to the use of the name of such independent accountants and the reference to
such independent accountants as "experts" in any Disclosure Document and
Exchange Act Filing, all of which shall be provided at the same time as the
related financial statements are required to be provided. All other financial
statements shall be certified by the chief financial officer or administrative
member of the Borrower, which certification shall state that such financial
statements meet the requirements set forth in the first sentence of this
subsection (g).
ARTICLE 10
COVENANTS
Borrower covenants and agrees with Lender as follows:
Section 10.1 Due on Sale and Encumbrance; Transfers of Interests.
Subject to the provisions of Section 14.2 hereof and except as otherwise
permitted under Sections 2.8, 2.9, 2.10 and 7.2 hereof, without the prior
written consent of Lender, neither Borrower nor any other Person having an
ownership or beneficial interest in Borrower shall sell, transfer, convey,
mortgage, pledge, or assign any interest in any of the Properties or any part
thereof or further encumber, alienate, grant a Lien or grant any other interest
in any of the Properties or any part thereof, whether voluntarily or
involuntarily, in violation of the covenants and conditions set forth in the
Loan Documents.
Section 10.2 Taxes; Utility Charges. Borrower shall pay before any
fine, penalty, interest or cost may be added thereto, and shall not enter into
any agreement to defer, any real estate taxes and assessments, franchise taxes
and charges, and other governmental charges (the "Taxes") that may become a Lien
upon any of the Properties or become payable during the term of the Loan;
provided, however; Borrower may contest the validity of Taxes so long as (a)
Borrower notifies Lender that it intends to contest such Taxes, (b) Borrower
provides Lender with an indemnity, bond or other security satisfactory to Lender
assuring the discharge of Borrower's obligations for such Taxes, including
interest and penalties, (c) Borrower is diligently contesting the same by
appropriate legal proceedings in good faith and at its own expense and concludes
such contest prior to the tenth (10th) day preceding the earlier to occur of the
Maturity Date or the date on which the Individual Property is scheduled to be
sold for non-payment, (d) Borrower promptly upon final determination thereof
pays the amount of any such Taxes, together with all costs, interest and
penalties which may be payable in connection therewith; and (e) notwithstanding
the foregoing, Borrower shall immediately upon request of Lender pay any such
Taxes notwithstanding such contest if, in the opinion of Lender, any Individual
Property or any part thereof or interest therein may be in danger of being sold,
forfeited, foreclosed, terminated, canceled or lost. Lender may pay over any
cash deposit or part thereof to the claimant entitled thereto at any time when,
in the judgment of Lender, the entitlement of such claimant is established.
Borrower's compliance with Section 5.4 of this Agreement relating to impounds
for Taxes shall, with respect to payment of such Taxes, be deemed compliance
with this Section 10.2. Borrower shall not suffer or permit the joint
assessment of any of the Properties with any other real property constituting a
separate tax lot or with any other real or personal property. Borrower shall
promptly pay for all utility services provided to each of the Properties.
Section 10.3 Management. The Manager shall hold and maintain all
necessary licenses, certifications and permits required by law. Borrower shall
fully perform all of its covenants, agreements and obligations under the
Management Agreement.
Section 10.4 Operation; Maintenance; Inspection. Borrower shall
observe and comply with all legal requirements applicable to the ownership, use
and operation of each of the Properties; provided, however, Borrower may contest
the observance of and compliance with such legal requirements so long as
(a) Borrower notifies Lender that it intends to contest such requirements,
(b) Borrower is diligently contesting the same by appropriate legal proceedings
in good faith and at its own expense and concludes such contest prior to the
tenth (10th) day preceding the Maturity Date, and (c) Borrower shall immediately
terminate such contest if, in the opinion of Lender, any Individual Property or
any part thereof or interest therein may be in danger of being sold, forfeited,
foreclosed, terminated, canceled or lost. Borrower shall maintain each of the
Properties in good condition and promptly repair any damage or casualty,
reasonable wear and tear excepted. Borrower shall fully perform all of its
covenants, agreements and obligations under any reciprocal easement agreement,
declaration of easement or similar agreement effecting any Individual Property.
Borrower shall permit Lender and its agents, representatives and employees, upon
reasonable prior notice to Borrower, to inspect any of the Properties and
conduct such environmental and engineering studies as Lender may require,
provided such inspections and studies do not materially interfere with the use
and operation of the Properties.
Section 10.5 Taxes on Security. Borrower shall pay all taxes,
charges, filing, registration and recording fees, excises and levies payable
with respect to the Note or the Liens created or secured by the Loan Documents,
other than income, franchise and doing business taxes imposed on Lender. If
there shall be enacted any law (a) deducting the Loan from the value of any of
the Properties for the purpose of taxation, (b) affecting any Lien on the
Properties, or (c) changing existing laws of taxation of mortgages, deeds of
trust, security deeds, or debts secured by real property, or changing the manner
of collecting any such taxes, Borrower shall promptly pay to Lender, on demand,
all taxes, costs and charges for which Lender is or may be liable as a result
thereof; however, if such payment would be prohibited by law or would render the
Loan usurious, then instead of collecting such payment, Lender may declare all
amounts owing under the Loan Documents to be immediately due and payable.
Section 10.6 Legal Existence; Name, Etc. Borrower and each SPC Party
shall preserve and keep in full force and effect its entity status, franchises,
rights and privileges under the laws of the state of its formation, and all
qualifications, licenses and permits applicable to the ownership, use and
operation of the Properties. Subject to Section 14.2, neither Borrower nor any
general partner or managing member of Borrower shall wind up, liquidate,
dissolve, reorganize, merge, or consolidate with or into, or convey, sell,
assign, transfer, lease, or otherwise dispose of all or substantially all of its
assets, or acquire all or substantially all of the assets of the business of any
Person. Subject to Section 14.2, Borrower shall not change its name, identity,
or organizational structure, or the location of its chief executive office or
principal place of business unless Borrower (a) shall have obtained the prior
written consent of Lender to such change (which consent shall not be
unreasonably withheld, conditioned or delayed), and (b) shall have taken all
actions necessary or requested by Lender to file or amend any financing
statement or continuation statement to assure perfection and continuation of
perfection of security interests under the Loan Documents.
Section 10.7 Further Assurances. Borrower shall promptly (a) cure
any defects in the execution and delivery of the Loan Documents, and (b) execute
and deliver, or cause to be executed and delivered, all such other documents,
agreements and instruments as Lender may reasonably request to further evidence
and more fully describe the collateral for the Loan, to correct any omissions in
the Loan Documents, to perfect, protect or preserve any liens created under any
of the Loan Documents, or to make any recordings, file any notices, or obtain
any consents, as may be necessary to carry out the terms and requirements
hereof. Borrower grants Lender an irrevocable power of attorney coupled with an
interest for the purpose of exercising and perfecting any and all rights and
remedies available to Lender under the Loan Documents, at law and in equity,
including without limitation such rights and remedies available to Lender
pursuant to this Section 10.7.
Section 10.8 Estoppel Certificates. Borrower, within ten (10) days
after request, shall furnish to Lender a written statement, duly acknowledged,
setting forth to the best of Borrower's knowledge the amount due on the Loan,
the terms of payment of the Loan, the date to which interest has been paid,
whether any offsets or defenses exist against the Loan and, if any are alleged
to exist, the nature thereof in detail, and such other matters as Lender
reasonably may request.
Section 10.9 Notice of Certain Events. Borrower shall promptly
notify Lender of (a) any or Event of Default, together with a detailed statement
of the steps being taken to cure such or Event of Default; (b) any notice of
default received by Borrower under other obligations relating to any of the
Properties or otherwise material to Borrower's business; and (c) any threatened
or pending legal, judicial or regulatory proceedings, including any dispute
between Borrower and any governmental authority, affecting Borrower or the
Properties which, if adversely determined, would have a material adverse effect
on Borrower's ability to perform its obligations hereunder.
Section 10.10 Indemnification. Borrower shall protect, defend,
indemnify and save harmless Lender its shareholders, directors, officers,
employees and agents from and against all liabilities, obligations, claims,
damages, penalties, causes of action, costs and expenses (including without
limitation reasonable attorneys' fees and expenses), imposed upon or incurred by
or asserted against Lender (other than due to Lender's gross negligence or
willful misconduct) by reason of (a) ownership of the Mortgages, the Properties
or any interest therein or receipt of any rents; (b) any accident, injury to or
death of persons or loss of or damage to property occurring in, on or about any
of the Properties or any part thereof or on the adjoining sidewalks, curbs,
adjacent property or adjacent parking areas, streets or ways; (c) any use,
nonuse or condition in, on or about any of the Properties or any part thereof or
on the adjoining sidewalks, curbs, adjacent property or adjacent parking areas,
streets or ways; (d) performance of any labor or services or the furnishing of
any materials or other property in respect of any of the Properties or any part
thereof; and (e) the failure of Borrower to file timely with the Internal
Revenue Service an accurate Form 1099-B, Statement for Recipients of Proceeds
from Real Estate, Broker and Barter Exchange Transactions, which may be required
in connection with this Agreement, or to supply a copy thereof in a timely
fashion to the recipient of the proceeds of the transaction in connection with
which this Agreement is made. Any amounts payable to Lender by reason of the
application of this section shall become immediately due and payable and shall
bear interest at the Default Rate from the date loss or damage is sustained by
Lender until paid.
Section 10.11 Payment For Labor and Materials. Borrower will
promptly pay when due all bills and costs for labor, materials, and specifically
fabricated materials incurred in connection with any Individual Property and
never permit to exist beyond the due date thereof in respect of any Individual
Property or any part thereof any lien or security interest, even though inferior
to the liens and the security interest hereof, and in any event never permit to
be created or exist in respect of any Individual Property or any part thereof
any other or additional lien or security interest other than the liens or
security interests hereof, except for the Permitted Encumbrances.
Section 10.12 Alterations. Borrower shall obtain Lender's prior
written consent, which consent shall not be unreasonably withheld or delayed to
any alterations to any Improvements on any Individual Property that may have a
material adverse effect on Borrower's financial condition, the use, operation or
value of any Individual Property or the Net Operating Income with respect to the
Individual Property, other than (a) tenant improvement work performed pursuant
to the terms of any Lease executed before the date hereof, (b) tenant
improvement work performed pursuant to the terms and provisions of a Lease and
not materially adversely affecting any structural component of any Improvements,
any utility or HVAC system contained in any Improvements or the exterior of any
building constituting a part of any Improvements, or (c) alterations performed
in connection with the restoration of the Individual Property after the
occurrence of a casualty or condemnation in accordance with the terms and
provisions of this Agreement. Other than with respect to a casualty or
condemnation, if the total unpaid amounts due and payable with respect to
alterations to the Improvements (other than such amounts to be paid or
reimbursed by tenants under the Leases) for and Individual Property shall at any
time exceed five percent (5%) of the Release Amount for such Individual Property
(the "Threshold Amount"), Borrower shall promptly deliver to Lender as security
for the payment of such amounts and as additional security for Borrower's
obligations under the Loan Documents any of the following: (1) cash, (2) U.S.
Obligations, (3) other securities having a rating acceptable to Lender and that
the applicable Rating Agencies have confirmed in writing will not, in and of
itself, result in a downgrade, withdrawal or qualification of the initial, or,
if higher, then current ratings assigned in connection with any Securitization,
or (4) a completion bond or irrevocable letter of credit (payable on sight draft
only) issued by a financial institution having a rating, by Standard & Poor's
Ratings Group of not less than A-1+, and by Moody's Investors Service, Inc. of
not less than A-1, if the term of such bond or letter of credit is no longer
than three (3) months or, if such term is in excess of three (3) months, issued
by a financial institution having a rating that is acceptable to Lender and that
the applicable Rating Agencies have confirmed in writing will not, in and of
itself, result in a downgrade, withdrawal or qualification of the initial, or,
if higher, then current ratings assigned in connection with any Securitization.
Such security shall be in an amount equal to the excess of the total unpaid
amounts with respect to alterations to the Improvements on the applicable
Individual Property (other than such amounts to be paid or reimbursed by tenants
under the Leases) over the Threshold Amount and may be reduced from time to time
by the cost estimated by Lender to terminate any of the alterations and restore
the applicable Individual Property to the extent necessary to prevent any
material adverse effect on the use, operation or value of the applicable
Individual Property or the Net Operating Income with respect to the Individual
Property. Borrower shall reimburse Lender for all reasonable third party costs
and expenses that Lender actually incurs in connection with any alterations
pursuant to this Section 10.12, including, without limitation, reasonable
attorneys' fee and expenses.
Section 10.13 Handicapped Access.
(a) Borrower agrees that the Properties shall at all times comply in
all material respects to the extent applicable with the requirements of the
Americans with Disabilities Act of 1990, the Fair Housing Amendments Act of
1988, all state and local laws and ordinances related to handicapped access and
all rules, regulations, and orders issued pursuant thereto including, without
limitation, the Americans with Disabilities Act Accessibility Guidelines for
Buildings and Facilities (collectively, "Access Laws").
(b) Notwithstanding any provisions set forth herein or in any other
document regarding Lender's approval of alterations of the Properties, Borrower
shall not alter the Properties in any manner which would increase Borrower's
responsibilities for compliance with the applicable Access Laws without the
prior written approval of Lender. The foregoing shall apply to tenant
improvements constructed by Borrower or by any of its tenants. Lender may
condition any such approval upon receipt of a certificate of Access Law
compliance from an architect, engineer, or other person acceptable to Lender.
(c) Borrower agrees to give prompt notice to Lender of the receipt by
Borrower of any complaints related to violation of any Access Laws and of the
commencement of any proceedings or investigations which relate to compliance
with applicable Access Laws.
Section 10.14 Additional Retail Covenants. Borrower further
covenants and agrees with Lender as follows:
(a) Borrower shall cause the retail property located on the
Individual Property to be operated pursuant to the Management Agreement.
(b) Borrower shall:
(i) promptly perform and/or observe all of the covenants and
agreements required to be performed and observed by it under the Management
Agreement and do all things necessary to preserve and to keep unimpaired its
material rights thereunder;
(ii) promptly notify Lender of any default under the Management
Agreement of which it is aware; and
(iii) promptly enforce the performance and observance of all
of the covenants and agreements required to be performed and/or observed by the
manager under the Management Agreement.
(c) Borrower shall not, without Lender's prior consent:
(i) surrender, terminate or cancel the Management Agreement;
(ii) reduce or consent to the reduction of the term of the
Management Agreement;
(iii) increase or consent to the increase of the amount of
any charges under the Management Agreement; or
(iv) otherwise modify, change, supplement, alter or amend, or
waive or release any of its rights and remedies under the Management Agreement
in any material respect.
(d) Borrower will enter into and cause the Manager to enter into an
assignment and subordination of such Management Agreement in form satisfactory
to Lender, assigning and subordinating the manager's interest in the Individual
Property and all fees and other rights of the Manager pursuant to such
Management Agreement to the rights of Lender.
ARTICLE 11
EVENTS OF DEFAULT
Each of the following shall constitute a default (each, an "Event of
Default") under the Loan:
Section 11.1 Payments. Borrower's failure to pay any regularly
scheduled installment of principal, interest or other amount due under the Loan
Documents on the day it is due, or Borrower's failure to pay the Loan at the
Maturity Date, whether by acceleration or otherwise.
Section 11.2 Insurance. Borrower's failure to maintain in full force
and effect the insurance required under Section 5.1 of this Agreement, unless
Borrower has deposited with Lender pursuant to Section 5.4 hereof sufficient
amounts to make such payments.
Section 11.3 Single Purpose Entity. If Borrower breaches any of its
covenants contained in Section 8.25 hereof and does not cure such breach within
ten (10) days after written notice by Lender to Borrower.
Section 11.4 Insolvency Opinion. If any of the assumptions contained
in the Insolvency Opinion, or in any other "non-consolidation" opinion delivered
to Lender in connection with the Loan, or in any other "non-consolidation"
delivered subsequent to the closing of the Loan, is or shall become untrue in
any material respect.
Section 11.5 Taxes. If any of the Taxes are not paid when the same
are due and payable prior to incurring any penalty, unless Borrower contests the
validity of Taxes in accordance with Section 10.2 hereof or Borrower has
deposited with Lender pursuant to Section 5.4 hereof a sufficient amount of
funds to pay such Taxes when due and payable prior to incurring any penalty.
Section 11.6 Sale, Encumbrance, Etc. The sale, transfer, conveyance,
pledge, mortgage or assignment of any part or all of an Individual Property, or
any interest therein, or of any interest in Borrower, in violation of the Loan
Documents.
Section 11.7 Representations and Warranties. Any representation or
warranty made in any Loan Document proves to be untrue in any material respect
when made or deemed made provided, however, no Event of Default shall arise
under this Section 11.7 if (a) the facts which give rise to the incorrect
representation or warranty are capable of being cured by Borrower and (b) such
underlying facts are cured by Borrower within fifteen (15) days of notice given
to Borrower by Lender of the existence of such incorrect representation or
warranty.
Section 11.8 Other Encumbrances. Any default under any document or
instrument, other than the Loan Documents, evidencing or creating a Lien on an
Individual Property or any part thereof.
Section 11.9 Involuntary Bankruptcy or Other Proceeding.
Commencement of an involuntary case or other proceeding against Borrower, any
Borrower Party or any other Person having an ownership or security interest in
the Individual Property (each, a "Bankruptcy Party") which seeks liquidation,
reorganization or other relief with respect to it or its debts or other
liabilities under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeks the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any of its property, and such
involuntary case or other proceeding shall remain undismissed or unstayed for a
period of ninety (90) days; or an order for relief against a Bankruptcy Party
shall be entered in any such case under the Federal Bankruptcy Code.
Section 11.10 Voluntary Petitions, Etc. Commencement by a Bankruptcy
Party of a voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its debts or other
liabilities under any bankruptcy, insolvency or other similar law or seeking the
appointment of a trustee, receiver, liquidator, custodian or other similar
official for it or any of its property, or consent by a Bankruptcy Party to any
such relief or to the appointment of or taking possession by any such official
in an involuntary case or other proceeding commenced against it, or the making
by a Bankruptcy Party of a general assignment for the benefit of creditors, or
the failure by a Bankruptcy Party, or the admission by a Bankruptcy Party in
writing of its inability, to pay its debts generally as they become due, or any
action by a Bankruptcy Party to authorize or effect any of the foregoing;
Section 11.11 Ground Lease Rent. If Borrower shall fail in the
payment of any rent, additional rent or other charge mentioned in or made
payable by any Ground Lease as and when such rent or other charge is payable,
unless Borrower has deposited with Lender pursuant to Section 3.1(e) hereof a
sufficient amount of funds to pay such amounts prior to their due dates.
Section 11.12 Ground Lease Default. If there shall occur any "Event
of Default" by Borrower, as tenant under any Ground Lease, in the observance or
performance of any term, covenant or condition of a Ground Lease on the part of
Borrower, to be observed or performed, and said default is not cured prior to
the expiration of any applicable grace period therein provided, or if any one or
more of the events referred to in a Ground Lease shall occur which would cause
the Ground Lease to terminate without notice or action by the landlord under the
applicable Ground Lease or which would entitle the Ground Lessor to terminate
the Ground Lease and the term thereof by giving notice to Borrower, as tenant
thereunder, or if the leasehold estate created by any Ground Lease shall be
surrendered or any Ground Lease shall be terminated or canceled for any reason
or under any circumstances whatsoever, or if any of the terms, covenants or
conditions of any Ground Lease shall in any manner be modified, changed,
supplemented, altered, or amended without the consent of Lender.
Section 11.13 Secured Credit Line . If prior to a Securitization,
there shall occur any default by the REIT, the Operating Partnership or any
other borrower in the observance or performance of any term, covenant or
condition of the Credit Agreement to be observed or performed beyond the
expiration of any applicable grace and/or notice period required thereunder.
Section 11.14 Covenants. Borrower's failure to perform or observe
any of the agreements and covenants contained in this Agreement or in any of the
other Loan Documents and not specified above in Sections 11.1 to 11.13, and the
continuance of such failure for ten (10) days after written notice by Lender to
Borrower; however, subject to any shorter period for curing any failure by
Borrower as expressly specified in any of the other Loan Documents, Borrower
shall have an additional ninety (90) days to cure such failure if (a) such
failure does not involve the failure to make payments on a monetary obligation;
(b) such failure cannot reasonably be cured within ten (10) days; (c) Borrower
is diligently undertaking to cure such default, and (d) Borrower has provided
Lender with security reasonably satisfactory to Lender against any interruption
of payment or impairment of collateral as a result of such continuing failure.
ARTICLE 12
REMEDIES
Section 12.1 Remedies - Insolvency Events. Upon the occurrence of
any Event of Default described in Section 11.9 or 11.10, all amounts due under
the Loan Documents immediately shall become due and payable, all without written
notice and without presentment, demand, protest, notice of protest or dishonor,
notice of intent to accelerate the maturity thereof, notice of acceleration of
the maturity thereof, or any other notice of default of any kind, all of which
are hereby expressly waived by Borrower.
Section 12.2 Remedies - Other Events.
(a) Except as set forth in Section 12.1 above, while any Event of
Default exists, Lender may (i) declare the entire Loan to be immediately due and
payable without presentment, demand, protest, notice of protest or dishonor,
notice of intent to accelerate the maturity thereof, notice of acceleration of
the maturity thereof, or other notice of default of any kind, all of which are
hereby expressly waived by Borrower, and (ii) exercise all rights and remedies
therefor under the Loan Documents and at law or in equity.
(b) With respect to Borrower and the Properties, nothing contained
herein or in any other Loan Document shall be construed as requiring Lender to
resort to any Individual Property for the satisfaction of any of the Debt in
preference or priority to any other Individual Property, and Lender may seek
satisfaction out of all of the Properties or any part thereof, in its absolute
discretion in respect of the Debt. In addition, Lender shall have the right
from time to time to partially foreclose the Mortgages in any manner permitted
by law and for any amounts secured by the Mortgages then due and payable as
determined by Lender in its sole discretion including, without limitation, the
following circumstances: (i) in the event Borrower defaults beyond any
applicable grace period in the payment of one or more scheduled payments of
principal and interest, Lender may foreclose the Mortgages against one or more
of the Individual Properties to recover such delinquent payments, or (ii) in the
event Lender elects to accelerate less than the entire outstanding principal
balance of the Loan, Lender may foreclose the Mortgages against one or more of
the Individual Properties to recover so much of the principal balance of the
Loan as Lender may accelerate and such other sums secured by the Mortgage as
Lender may elect. Notwithstanding one or more partial foreclosures, the
Properties shall remain subject to the Mortgages to secure payment of sums
secured by the Mortgages and not previously recovered.
(c) Lender shall have the right from time to time to sever the Note
and the other Loan Documents into one or more separate notes, mortgages and
other security documents in such denominations as Lender shall determine in its
sole discretion (the "Severed Loan Documents") for purposes of evidencing and
enforcing its rights and remedies provided hereunder (or effectuating more than
one Securitization as provided in Section 14.4(d) hereof). Borrower shall
execute and deliver to Lender from time to time, promptly after the request of
Lender, a severance agreement and such other documents as Lender shall
reasonably request in order to effect the severance described in the preceding
sentence, all in form and substance reasonably satisfactory to Lender. Borrower
hereby absolutely and irrevocably appoints Lender as its true and lawful
attorney, coupled with an interest, in its name and stead to make and execute
all documents necessary or desirable to effect the aforesaid severance, Borrower
ratifying all that its said attorney shall do by virtue thereof in compliance
with this Section 12.2(c); provided, however, Lender shall not make or execute
any such documents under such power until three (3) Business Days after notice
has been given to Borrower by Lender of Lender's intent to exercise its rights
under such power. Borrower shall not be obligated to pay any costs or expenses
incurred in connection with the preparation, execution, recording or filing of
the Severed Loan Documents (other than those set forth in Section 14.4(e) and
the Severed Loan Documents shall not change the interest rate, the term of the
Loan or any other material economic term of the Loan Documents and shall not
contain any representations, warranties or covenants not contained in the Loan
Documents and any such representations and warranties contained in the Severed
Loan Documents will be given by Borrower only as of the Closing Date.
Section 12.3 Lender's Right to Perform the Obligations. If Borrower
shall fail, refuse or neglect to make any payment or perform any act required by
the Loan Documents, then while any Event of Default exists, and without notice
to or demand upon Borrower and without waiving or releasing any other right,
remedy or recourse Lender may have because of such Event of Default, Lender may
(but shall not be obligated to) make such payment or perform such act for the
account of and at the expense of Borrower, and shall have the right to enter
upon the applicable Individual Property for such purpose and to take all such
action thereon and with respect to the applicable Individual Property as it may
deem necessary or appropriate. If Lender shall elect to pay any sum due with
reference to the applicable Individual Property, Lender may do so in reliance on
any bill, statement or assessment procured from the appropriate governmental
authority or other issuer thereof without inquiring into the accuracy or
validity thereof. Similarly, in making any payments to protect the security
intended to be created by the Loan Documents, Lender shall not be bound to
inquire into the validity of any apparent or threatened adverse title, lien,
encumbrance, claim or charge before making an advance for the purpose of
preventing or removing the same. Borrower shall indemnify Lender for all
losses, expenses, damages, claims and causes of action, including reasonable
attorneys' fees, incurred or accruing by reason of any acts performed by Lender
pursuant to the provisions of this Section 12.3. All sums paid by Lender
pursuant to this Section 12.3, and all other sums expended by Lender to which it
shall be entitled to be indemnified, together with interest thereon at the
Default Rate from the date of such payment or expenditure until paid, shall
constitute additions to the Loan, shall be secured by the Loan Documents and
shall be paid by Borrower to Lender promptly upon demand.
Section 12.4 Cross-Default; Cross-Collateralization; Waiver of
Marshalling of Assets.
(a) The Borrower acknowledges that Lender has made the Loan to the
Borrower upon the security of its collective interest in the Properties and in
reliance upon the aggregate of the Properties taken together being of greater
value as collateral security than the sum of the Properties taken separately.
The Borrower agrees that each Mortgage with respect to each Individual Property
is and will be cross-collateralized and cross-defaulted with the Mortgage with
respect to each other Individual Property so that (i) an Event of Default under
any Mortgage shall constitute an Event of Default with respect to each
Individual Property secured by the Mortgages; (ii) an Event of Default under the
Note or this Loan Agreement shall constitute an Event of Default under each
Mortgage with respect to each Individual Property; and (iii) the Mortgages shall
constitute security for the Note as if a single blanket lien were placed on all
of the Individual Properties as security for the Note.
(b) To the fullest extent permitted by law, Borrower, for itself and
its successors and assigns, waives all rights to a marshalling of the assets of
Borrower, Borrower's partners and others with interests in Borrower, and of the
Properties, or to a sale in inverse order of alienation in the event of
foreclosure of the Mortgages, and agrees not to assert any right under any laws
pertaining to the marshalling of assets, the sale in inverse order of
alienation, homestead exemption, the administration of estates of decedents, or
any other matters whatsoever to defeat, reduce or affect the right of Lender
under the Loan Documents to a sale of the Properties for the collection of the
Debt without any prior or different resort for collection or of the right of
Lender to the payment of the Debt out of the net proceeds of the Properties in
preference to every other claimant whatsoever. In addition, Borrower, for
itself and its successors and assigns, waives in the event of foreclosure of the
Mortgages, any equitable right otherwise available to the Borrower which would
require the separate sale of the Properties or require Lender to exhaust its
remedies against any Individual Property or any combination of the Properties
before proceeding against any other Individual Property or combination of
Properties; and further in the event of such foreclosure the Borrower does
hereby expressly consents to and authorizes, at the option of the Lender, the
foreclosure and sale either separately or together of any combination of the
Properties.
(c) The Borrower acknowledges and agrees that the Individual
Properties at Wyoming Valley and Logan Valley are subject to a mortgage securing
the Credit Line Note and Credit Line Loan Agreement and the properties subject
to the Credit Line Mortgage are also securing a portion of the Debt in the
amount previously evidenced by the Interim Loan Agreement. Until a
Securitization occurs, (i) an Event of Default under the Credit Line Note and
Credit Line Loan Agreement shall constitute an event of default under this
Agreement and (ii) an Event of Default under the Note or this Agreement shall
constitute an event of default under the Credit Line Note and Credit Line Loan
Agreement.
(d) Upon the occurrence of a Securitization, the mortgages recorded
at Wyoming Valley and Logan Valley securing the Credit Line Note and Credit
Agreement and the mortgages securing this Loan and recorded against the
properties securing the Credit Line Note and Credit Agreement will no longer be
cross-collateralized or cross-defaulted with each other. Borrower hereby agrees
to execute such additional documents as reasonably required by Lender to
effectuate such un-crossing of the loans and shall pay all reasonable costs
actually incurred by Lender in connection therewith, including, but not limited
to reasonable attorneys' fees. To the fullest extent permitted by law,
Borrower, for itself and its successors and assigns, waives all rights to a
marshalling of the assets of Borrower, Borrower's partners and others with
interests in Borrower, and of the properties and agrees not to assert any right
under any laws pertaining to the marshalling of assets.
(e) Notwithstanding anything to the contrary contained herein, Lender
shall not release the mortgages recorded at Wyoming Valley and Logan Valley
securing the Credit Line Note and Credit Agreement (other than (i) a release of
an Option Parcel pursuant to Section 2.8 hereof, (ii) a release of an Out-Parcel
pursuant to Section 2.9 hereof, (iii) a release of a Construction Parcel
pursuant to Section 2.10 hereof and (iv) a prepayment pursuant to Section 5.3(c)
hereof), during such time as such mortgages are cross-collateralized and cross-
defaulted with the mortgages securing this Loan and recorded against the
properties securing the Credit Line Note and Credit Agreement unless each such
mortgages have been released or will be simultaneously released.
ARTICLE 13
LIMITATIONS ON LIABILITY
Section 13.1 Limitation on Liability. Except as provided below,
Borrower's liability for amounts due under the Loan Documents will be
enforceable only against the Borrower's interest in the Properties and in the
other property subject to the liens and security interests granted by the
Mortgages and other Loan Documents and Lender may not enforce any judgment
obtained under the Loan Documents against any other assets of the Borrower.
Notwithstanding the foregoing limitation, Borrower shall be personally liable to
Lender for any deficiency, loss or damage suffered by Lender because of:
(a) Borrower's commission of a criminal act, (b) the failure to comply with
provisions of the Loan Documents prohibiting the sale, transfer or encumbrance
of an Individual Property, or any direct or indirect ownership interest in
Borrower; (c) the misapplication by Borrower or any Borrower Party of any funds
derived from an Individual Property, including security deposits, insurance
proceeds and condemnation awards; (d) the fraud or material misrepresentation by
Borrower or any Borrower Party now or hereafter made in or in connection with
the Loan Documents or the Loan including any statements or certificates
delivered under the Loan Documents; (e) Borrower's collection of rents more than
one month in advance or entering into or modifying Leases, or receipt of monies
by Borrower or any Borrower Party in connection with the modification of any
Leases, in violation of this Agreement or any of the other Loan Documents;
(f) Borrower's failure to apply proceeds of rents or any other payments in
respect of the Leases and other income of an Individual Property to the costs of
maintenance and operation of an Individual Property and to the payment of taxes,
lien claims, insurance premiums, Debt Service and other amounts due under the
Loan Documents; (g) Borrower's interference without the right to do so with
Lender's exercise of rights under the Assignment of Leases and Rents;
(h) Borrower's failure to maintain insurance as required by this Agreement or to
pay any taxes or assessments affecting an Individual Property; (i) damage or
destruction to an Individual Property caused by the acts or omissions of
Borrower, its agents, employees, or contractors; (j) Borrower's obligations with
respect to environmental matters under Article 6; and (k) any brokerage
commission or finder's fees claimed in connection with the transactions
contemplated by the Loan Documents unless claiming by, through or under someone
other than the Borrower, and Lender may enforce any judgment obtained with
respect to such personal liability of Borrower against any assets of Borrower
without regard to the limitation expressed in the immediately preceding
sentence.
Notwithstanding anything to the contrary in this Agreement, the Note
or any of the Loan Documents, (i) Lender shall not be deemed to have waived any
right which Lender may have under Section 506(a), 506(b), 1111(b) or any other
provisions of the U.S. Bankruptcy Code to file a claim for the full amount of
the Debt secured by the Mortgages or to require that all collateral shall
continue to secure all of the Debt owing to Lender in accordance with the Loan
Documents, and (ii) the Debt shall be fully recourse to Borrower in the event
that: (A) there is a default under Sections 11.9 or 11.10 hereof; (B) Borrower
fails to obtain Lender's prior written consent to any subordinate financing or
other voluntary lien encumbering any Individual Property; or (C) Borrower fails
to obtain Lender's prior written consent to any assignment, transfer, or
conveyance of any Individual Property or any interest therein as required by the
Loan Documents.
Section 13.2 Limitation on Liability of Officers, Employees, Etc.
Any obligation or liability whatsoever of Lender which may arise at any time
under this Agreement or any other Loan Document shall be satisfied, if at all,
out of the Lender's assets only. No obligation or liability of either Borrower
or Lender shall be personally binding upon, nor shall resort for the enforcement
thereof be had to, the property of any of such party's shareholders, directors,
officers, employees or agents, regardless of whether such obligation or
liability is in the nature of contract, tort or otherwise.
ARTICLE 14
SPECIAL PROVISIONS
Section 14.1 Achievements. The Borrower, upon the request of Lender,
shall terminate the Manager, without penalty or fee, if at any time during the
Loan (a) the Net Operating Income, as of the last day of any calendar quarter,
based on the immediately preceding twelve (12) month period ending with such
calendar quarter, is less than 80% of Net Operating Income at the time of Loan
closing, (b) the Manager shall become insolvent or a debtor in any bankruptcy or
insolvency proceeding, (c) there exists an Event of Default or (d) the
Anticipated Repayment Date occurs and the Debt remains outstanding. At such
time as the Manager may be removed, a replacement manager, acceptable to Lender
in its sole discretion and confirmed by the Rating Agencies in writing that such
replacement manager will not result in a downgrading, withdrawal or
qualification of the respective ratings in effect immediately prior to such
replacement for the Securities issued in connection with the Securitization
which are then outstanding, shall assume management of the Properties and shall
receive a property management fee not to exceed then current market rates.
Section 14.2 Permitted Transfers.
(a) Notwithstanding anything to the contrary contained in Section
10.1 hereof or in the Mortgages, the Lender's consent shall not be required for
any of the following sales, transfers, assignments, pledges, conveyances or
encumbrances so long as Lender has received payment in full of all its actual
expenses incurred in connection therewith: (i) with respect to the REIT, (A)
any transfer, sale, pledge (including the exercise thereof), encumbrance,
assignment or conveyance (collectively, a "Transfer") of all or any portion of
any shares of beneficial interests of the REIT, and (B) issuance of additional
shares of beneficial interest in the REIT, even if such issuance results in a
reduction of the partnership interest of the REIT in the Operating Partnership
(a "Reduction") so long as the REIT continues to own greater than 50% of the
voting interest in the Operating Partnership; (ii) with respect to the Operating
Partnership, any Transfer (A) to an Affiliate or to any Person owned or
controlled by Frank Pasquerilla or Mark Pasquerilla or to any Person in
connection with an acquisition of such Person, by merger, share exchange or
otherwise, directly or indirectly, by the REIT, shall be permissible without the
prior written consent of the Lender so long as no Event of Default has occurred
and is continuing, and (B) to any other Person shall be permissible with the
prior written consent of Lender which consent shall not be unreasonably withheld
so long as no Event of Default has occurred and is continuing if (x) with
respect to any Transfer of limited partnership interests in the Operating
Partnership, after giving effect to such Transfer or series of Transfers the
REIT owns more than 50% of the voting interest in the Operating Partnership, (y)
with respect to the issuance of additional limited partnership units or other
securities, even if such issuance results in a Reduction, the REIT continues to
own more than 50% of the voting interest in the Operating Partnership; and (z)
the transaction is a Fundamental Transaction; and (iii) with respect to
Borrower, any Transfer of the limited partnership interest therein to the REIT,
or Affiliate thereof, provided that a non-consolidation opinion has been
delivered that is acceptable to Lender and the Rating Agencies; and provided,
further, that Borrower continues to be owned by the same respective ultimate
owners. Notwithstanding the provisions of clause 14.2(a)(ii)(A) to the contrary
and subject to the remaining terms of this Section 14.2, with respect to the
Operating Partnership, a Transfer to an Affiliate, the Borrower, the REIT, or to
any Person owned or Controlled by Frank Pasquerilla or Mark Pasquerilla shall be
permitted following the occurrence and continuance of an Event of Default so
long as such Transfer does not exceed 6.5% of the ownership interest in the
Operating Partnership in the aggregate and is made in connection with the
exercise of management share options in the ordinary course of the Operating
Partnership's business.
(b) As used herein, the term "Fundamental Transaction" shall mean any
acquisition by, merger with or consolidation with or into, or sale of
substantially all of its assets to, an entity ("Transferee") if:
(i) Transferee owns, directly or indirectly, substantially
all the assets which the Operating Partnership owned immediately prior
to the effective date of such merger, consolidation or sale;
(ii) Transferee agrees in writing to assume all obligations
of the Operating Partnership under the Loan Documents to which the
Operating Partnership is a party;
(iii) Intentionally Omitted;
(iv) Transferee has executive officers reasonably acceptable
to Lender;
(v) Lender has received confirmation in writing that such
Transferee is not subject to on-going criminal or bankruptcy
proceedings;
(vi) Transferee is a Qualified Resultant Owner (hereinafter
defined) and, if a Securitization has occurred, the Servicer has
received written confirmation from the Rating Agencies that such
Transfer will not result in qualification, downgrade or withdrawal of
the then current ratings assigned to the Securities;
(vii) The property manager after such transaction is
either the Operating Partnership or an Affiliate or is a prominent
nationally recognized professional management company which at the
time of its engagement as manager shall be the property manager for at
least 10 regional malls containing at least six million aggregate
leaseable square feet (inclusive of anchor stores but exclusive of the
Properties) and, if a Securitization has occurred, the Servicer has
received written confirmation from the Rating Agencies that such
manager will not result in qualification, downgrade or withdrawal of
the then current ratings assigned to the Securities;
(viii) The Properties will be owned by one or more
special purpose bankruptcy remote entities and a non-consolidation
opinion acceptable to Lender and the Rating Agencies has been
delivered;
(ix) 60 days' notice to Lender has been given; and
(x) Borrowers shall remain owned by the same ultimate
owners, respectively, and the owner of the fee interest in the
Individual Properties known as Logan Valley Mall located in Altoona,
Pennsylvania and Wyoming Valley Mall located in Wilkes-Barre,
Pennsylvania shall be the Operating Partnership.
(c) As used herein, a "Qualified Resultant Owner" means any one or
more of the following persons who own, individually or collectively, at least a
51% beneficial interest in and control of the Transferee: a person that (A) is
or is controlled by either a pension fund, pension fund advisor, an insurance
company, a national money center (with total assets of at least $45 billion), or
a person who's long-term unsecured debt is rated at least investment grade by
each of the Rating Agencies, (B) has a current net worth of at least
$250,000,000 and total real estate assets of at least $500,000,000, in each case
exclusive of the Properties (or in the case of a pension fund advisor, controls
$1 billion in real estate assets), and (C) controls (exclusive of the
Properties) at least 10 regional malls containing in the aggregate at least
6,000,000 square feet of leaseable space.
(d) Lender's consent to the sale or transfer of an Individual
Property will not be unreasonably withheld if such sale occurs in connection
with the sale of all other Properties encumbered by the Mortgages and after
consideration of all relevant factors, provided that:
(i) no Event of Default or event which with the giving of notice
or the passage of time would constitute an Event of Default
shall have occurred and remain uncured;
(ii) the proposed transferee ("Transferee") shall be a reputable
entity or person of good character, creditworthy, with
sufficient financial worth considering the obligations
assumed and undertaken, as evidenced by financial statements
and other information reasonably requested by Lender;
(iii)the Transferee and its property manager shall have
sufficient experience in the ownership and management of
properties similar to the Property, and Lender shall be
provided with reasonable evidence thereof (and Lender
reserves the right to approve the Transferee without
approving the substitution of the property manager);
(iv) Lender shall have confirmations in writing from the Rating
Agencies to the effect that such transfer will not result in
a re-qualification, downgrade or withdrawal of any rating
initially assigned or to be assigned in a Securitization;
(v) Lender shall have received evidence satisfactory to it
(which shall include a legal non-consolidation opinion
acceptable to Lender) that the single purpose nature and
bankruptcy remoteness of Borrower its shareholders,
partners, or members, as the case may be, following such
transfers are in accordance with the standards of the Rating
Agencies;
(vi) the Transferee shall have executed and delivered to Lender
an assumption agreement in form and substance reasonably
acceptable to Lender, evidencing such Transferee's agreement
to abide and be bound by the terms of the Note, the
Mortgages and the other Loan Documents, together with such
legal opinions and title insurance endorsements as may be
reasonably requested by Lender; and
(vii) Lender shall have received reimbursement of all costs
and expenses incurred by Lender in connection with such
assumption (including reasonable attorney's fees and costs)
and in addition an assumption fee equal to one percent (1%)
of the then unpaid principal balance of the Note which will
be credited toward the payment of such costs and expenses.
Section 14.3 Servicer. At the option of Lender, the Loan may be
serviced by a Servicer/Trustee ("Servicer") selected by Lender. Lender may
delegate all or any portion of its responsibilities under this Agreement and the
other Loan Documents to the Servicer pursuant to a servicing agreement
("Servicing Agreement") between Lender and Servicer provided that Borrower shall
not be separately charged for any servicing fees.
Section 14.4 Securitization
At the request of the holder of the Note and, to the extent not
already required to be provided by Borrower under this Agreement, Borrower shall
use commercially reasonable efforts to satisfy the market standards to which the
holder of the Note customarily adheres or which may be reasonably required in
the marketplace or by the Rating Agencies in connection with the sale of all or
a portion of the Note, the participation therein or in one or more successful
securitizations of rated single or multi-class securities (the "Securities")
secured by or evidencing ownership interests in the Note and the Mortgages (such
sale, participation and/or securitization, a "Securitization"), including,
without limitation, to:
(a) (i) provide such financial and other information with
respect to the Properties, the Borrower and the Manager,
(ii) provide budgets relating to the Properties, and
(iii) perform or permit or cause to be performed or permitted
such site inspection, appraisals, market studies,
environmental reviews and reports (Phase I's and, if
appropriate, Phase II's), engineering reports and other due
diligence investigations of the Properties, as may be
reasonably requested by the holder of the Note or the Rating
Agencies or as may be necessary or appropriate in connection
with the Securitization (the "Securitization Information"),
together, if customary, with appropriate verification and/or
consents of the Securitization Information through letters
of auditors or opinions of counsel of independent attorneys
acceptable to the Lender and the Rating Agencies;
(b) cause counsel to render opinions, which may be relied upon by the
holder of the Note, the Rating Agencies and their respective counsel, agents and
representatives, as to non-consolidation, fraudulent conveyance, and true sale
or any other opinion customary in securitization transactions with respect to
the Properties and Borrower and its affiliates, which counsel and opinions shall
be reasonably satisfactory to the holder of the Note and the Rating Agencies;
(c) make such representations and warranties as of the closing date
of the Securitization with respect to the Properties, Borrower, and the Loan
Documents as are customarily provided in securitization transactions and as may
be reasonably requested by the holder of the Note or the Rating Agencies and
consistent with the facts covered by such representations and warranties as they
exist on the date thereof, including the representations and warranties made in
the Loan Documents; and
(d) execute such amendments to the Loan Documents (including the
execution and delivery of Severed Loan Documents for purposes of Lender
effectuating more than one Securitization of the Loan) and organizational
documents as may be requested by the holder of the Note or the Rating Agencies
or otherwise to effect a Securitization; provided, however, that the Borrower
shall not be required to modify or amend any Loan Document if such modification
or amendment would (i) change the interest rate, the stated maturity or the
amortization of principal of the Loan, or (ii) modify or amend any other
material economic term of the Loan or increase the liability of any Borrower or
Joinder Party.
(e) All third party costs and expenses incurred by Lender in
connection with Borrower's complying with requests made under this Section 14.4
shall be paid by the Lender, other than Borrower's attorneys' and accountants'
costs and expenses which shall be paid by Borrower. Lender and Borrower shall
pay their respective internal costs and expenses in connection with Borrower's
complying with the requests made pursuant to this Section 14.4.
Section 14.5 Securitization Indemnification.
(a) Borrower understands that certain of the Securitization
Information and the financial reports relating to the Properties may be included
in disclosure documents in connection with the Securitization, including,
without limitation, a private placement memorandum (an "Offering Document") and
may be provided or made available to investors or prospective investors in the
Securities, the Rating Agencies, and service providers relating to the
Securitization. In the event that the Offering Document is required to be
revised prior to the sale of all Securities, the Borrower will cooperate with
the holder of the Note in updating the Offering Document by providing all
current information reasonably necessary to keep the Offering Document accurate
and complete in all material respects.
(b) Borrower, the REIT and the Operating Partnership (the
"Indemnifying Parties") each agree to provide in connection with the final
private placement memorandum an indemnification certificate (A) certifying that
Borrower has carefully examined such memorandum and the sections and exhibits
therein that describe the Properties, the Borrower and the Manager and such
sections and exhibits do not contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements made, in
the light of the circumstances under which they were made, not misleading, (B)
indemnifying Lender and each person or entity who controls the Lender within the
meaning of Section 15 of the Securities Act of 1933, as amended (the "Securities
Act") or Section 20 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") (collectively, the "Lender Group"), and each placement agent
placing the Securities (each a "Placement Agent"), each person who controls each
Placement Agent within the meaning of Section 15 of the Securities Act and
Section 20 of the Exchange Act (collectively, the "Underwriter Group", and
together with the Lender Group, the "Indemnified Parties") for any losses,
claims, damages or liabilities (the "Liabilities") to which the Indemnified
Parties may become subject insofar as the Liabilities arise out of or are based
upon any untrue statement of any material fact contained in such sections or
arise out of or are based upon the omission to state therein a material fact
required to be stated in such sections or necessary in order to make the
statements in such sections or in light of the circumstances under which they
were made, not misleading (regardless of whether such information is also
included in or is derived from an Unrelated Third Party Report (as defined
below)) and (C) agreeing to reimburse the Indemnified Parties for any legal or
other expenses reasonably incurred by the Indemnified Parties in connection with
investigating or defending the Liabilities; provided, however, the Indemnifying
Parties shall not be liable for any information contained in any third party
reports prepared by parties not engaged by an Indemnifying Party (an "Unrelated
Third-Party Provider," and such report, an "Unrelated Third-Party Report")
unless such information is based on written information delivered by an
Indemnifying Party or its representatives to the Third-Party Provider. This
indemnity agreement will be in addition to any other liability which Borrower
may otherwise have.
(c) Reserved.
(d) Promptly after receipt by an Indemnified Party under this Section
14.5 of notice of the commencement of any action, such Indemnified Party will,
if a claim in respect thereof is to be made against the Indemnifying Party under
this Section 14.5, notify the Indemnifying Party in writing of the commencement
thereof, but the omission to so notify the Indemnifying Party will not relieve
the Indemnifying Party from any liability which the Indemnifying Party may have
to any Indemnified Party hereunder except to the extent that failure to notify
causes prejudice to the Indemnifying Party. In the event that any action is
brought against any Indemnified Party, and it notifies the Indemnifying Party of
the commencement thereof, the Indemnifying Party will be entitled, jointly with
any other Indemnifying Party, to participate therein and, to the extent that it
(or they) may elect by written notice delivered to the Indemnified Party
promptly after receiving the aforesaid notice from such Indemnified Party, to
assume the defense thereof with counsel satisfactory to such Indemnified Party.
After notice from the Indemnifying Party to such Indemnified Party under this
Section 14.5, the Indemnifying Party shall be responsible for any legal or other
expenses subsequently incurred by such Indemnified Party in connection with the
defense thereof other than reasonable costs of investigation; provided, however,
if the defendants in any such action include both the Indemnified Party and the
Indemnifying Party and the Indemnified Party shall have reasonably concluded
that there are any legal defenses available to it and/or other indemnified
parties that are different from or additional to those available to the
Indemnifying Party, the Indemnified Party or parties shall have the right to
select separate counsel to assert such legal defenses and to otherwise
participate in the defense of such action on behalf of such Indemnified Party or
parties. The Indemnifying Party shall not be liable for the expenses of more
than one separate counsel unless an Indemnified Party shall have reasonably
concluded that there may be legal defenses available to it that are different
from or additional to those available to another Indemnified Party.
(e) In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement provided for in Section 14.5(b)
or (c) is for any reason held to be unenforceable by an Indemnified Party in
respect of any losses, claims, damages or liabilities (or action in respect
thereof) referred to therein which would otherwise be indemnifiable under
Section 14.5(b) or (c), the Indemnifying Parties shall contribute to the amount
paid or payable by the Indemnified Party as a result of such losses, claims,
damages or liabilities (or action in respect thereof); provided, however, that
no person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. In determining the
amount of contribution to which the respective parties are entitled, the
following factors shall be considered: (i) Lender's and Indemnifying Parties'
relative knowledge and access to information concerning the matter with respect
to which claim was asserted; (ii) the opportunity to correct and prevent any
statement or omission; and (iii) any other equitable considerations appropriate
in the circumstances. Lender and Indemnifying Parties agree that it would not
be equitable if the amount of such contribution were determined by pro rata or
per capita allocation.
(f) The liabilities and obligations of the Indemnifying Parties and
Lender under this Section 14.5 shall survive the termination of this Agreement
and the satisfaction and discharge of the Debt.
ARTICLE 15
MISCELLANEOUS
Section 15.1 Notices. Any notice required or permitted to be given
under this Agreement shall be in writing and shall be mailed by certified mail,
postage prepaid, return receipt requested, or sent by overnight air courier
service, or personally delivered to a representative of the receiving party, or
sent by telecopy (provided an identical notice is also sent simultaneously by
mail, overnight courier, or personal delivery as otherwise provided in this
Section 15.1). All such communications shall be mailed, sent or delivered,
addressed to the party for whom it is intended at its address set forth below.
If to Borrower: Crown American Financing Partnership, L.P.
Crown American WL Associates, L.P.
Pasquerilla Plaza
Johnstown, Pennsylvania 15901
Attention: Chief Financial Officer
Telecopy: (814) 535-9336
If to Lender: c/o GE Capital Loan Services, Inc.
363 N. Sam Houston Parkway East
Suite 200
Houston, Texas 77060
Attention: Legal Department
Telecopy: 281-405-7415
Any communication so addressed and mailed shall be deemed to be given on the
earliest of (a) when actually delivered, (b) on the first Business Day after
deposit with an overnight air courier service, or (c) on the third Business Day
after deposit in the United States mail, postage prepaid, in each case to the
address of the intended addressee, and any communication so delivered in person
shall be deemed to be given when receipted for by, or actually received by
Lender or Borrower, as the case may be. If given by telecopy, a notice shall be
deemed given and received when the telecopy is transmitted to the party's
telecopy number specified above confirmation of complete receipt is received by
the transmitting party during normal business hours or on the next Business Day
if not confirmed during normal business hours. Either party may designate a
change of address by written notice to the other by giving at least ten (10)
days prior written notice of such change of address.
Section 15.2 Amendments and Waivers. No amendment or waiver of any
provision of the Loan Documents shall be effective unless in writing and signed
by the party against whom enforcement is sought.
Section 15.3 Limitation on Interest. It is the intention of the
parties hereto to conform strictly to applicable usury laws. Accordingly, all
agreements between Borrower and Lender with respect to the Loan are hereby
expressly limited so that in no event, whether by reason of acceleration of
maturity or otherwise, shall the amount paid or agreed to be paid to Lender or
charged by Lender for the use, forbearance or detention of the money to be lent
hereunder or otherwise, exceed the maximum amount allowed by law. If the Loan
would be usurious under applicable law (including the laws of the State of New
York, any state or commonwealth in which an Individual Property is located and
the laws of the United States of America), then, notwithstanding anything to the
contrary in the Loan Documents: (a) the aggregate of all consideration which
constitutes interest under applicable law that is contracted for, taken,
reserved, charged or received under the Loan Documents shall under no
circumstances exceed the maximum amount of interest allowed by applicable law,
and any excess shall be credited on the Note by the holder thereof; and (b) if
maturity is accelerated by reason of an election by Lender, or in the event of
any prepayment, then any consideration which constitutes interest may never
include more than the maximum amount allowed by applicable law. In such case,
excess interest, if any, provided for in the Loan Documents or otherwise, to the
extent permitted by applicable law, shall be amortized, prorated, allocated and
spread from the date of advance until payment in full so that the actual rate of
interest is uniform through the term hereof. If such amortization, proration,
allocation and spreading is not permitted under applicable law, then such excess
interest shall be canceled automatically as of the date of such acceleration or
prepayment and, if theretofore paid, shall be credited on the Note. The terms
and provisions of this Section 15.3 shall control and supersede every other
provision of the Loan Documents. The Loan Documents are contracts made under
and shall be construed in accordance with and governed by the provisions of
Section 15.22 hereof, except that if at any time the laws of the United States
of America permit Lender to contract for, take, reserve, charge or receive a
higher rate of interest than is allowed by the laws of any state or commonwealth
(whether such federal laws directly so provide or refer to the law of any
state), then such federal laws shall to such extent govern as to the rate of
interest which Lender may contract for, take, reserve, charge or receive under
the Loan Documents.
Section 15.4 Invalid Provisions. If any provision of any Loan
Document is held to be illegal, invalid or unenforceable, such provision shall
be fully severable; the Loan Documents shall be construed and enforced as if
such illegal, invalid or unenforceable provision had never comprised a part
thereof; the remaining provisions thereof shall remain in full effect and shall
not be affected by the illegal, invalid, or unenforceable provision or by its
severance therefrom; and in lieu of such illegal, invalid or unenforceable
provision there shall be added automatically as a part of such Loan Document a
provision as similar in terms to such illegal, invalid or unenforceable
provision as may be possible to be legal, valid and enforceable.
Section 15.5 Reimbursement of Expenses. Except as provided in
Section 14.4(e) hereof, Borrower shall pay all reasonable expenses actually
incurred by Lender in connection with the Loan, including fees and expenses of
Lender's attorneys, environmental, engineering and other consultants, and fees,
charges or taxes for the recording or filing of Loan Documents. Borrower shall
pay all expenses of Lender in connection with the administration of the Loan,
including audit costs, inspection fees, settlement of condemnation and casualty
awards, and premiums for title insurance and endorsements thereto, provided,
however, Borrower shall not be separately charged for any servicing fees.
Borrower shall, upon request, promptly reimburse Lender for all amounts
expended, advanced or incurred by Lender to collect the Note, or to enforce the
rights of Lender under this Agreement or any other Loan Document, or to defend
or assert the rights and claims of Lender under the Loan Documents or with
respect to the Individual Property (by litigation or other proceedings), which
amounts will include all court costs, reasonable attorneys' fees and expenses,
fees of auditors and accountants, and investigation expenses as may be actually
incurred by Lender in connection with any such matters (whether or not
litigation is instituted), together with interest at the Default Rate on each
such amount from the date of disbursement until the date of reimbursement to
Lender, all of which shall constitute part of the Loan and shall be secured by
the Loan Documents.
Section 15.6 Approvals; Third Parties; Conditions. All approval
rights retained or exercised by Lender with respect to Leases, contracts, plans,
studies and other matters are solely to facilitate Lender's credit underwriting,
and shall not be deemed or construed as a determination that Lender has passed
on the adequacy thereof for any other purpose. This Agreement is for the sole
and exclusive use of Lender and Borrower and may not be enforced, nor relied
upon, by any Person other than Lender and Borrower. All conditions of the
obligations of Lender hereunder, including the obligation to make advances, are
imposed solely and exclusively for the benefit of Lender, its successors and
assigns, and no other Person shall have standing to require satisfaction of such
conditions or be entitled to assume that Lender will refuse to make advances in
the absence of strict compliance with any or all of such conditions, and no
other Person shall, under any circumstances, be deemed to be a beneficiary of
such conditions, any and all of which may be freely waived in whole or in part
by Lender at any time in Lender's sole discretion.
Section 15.7 Lender Not in Control; No Partnership. None of the
covenants or other provisions contained in this Agreement shall, or shall be
deemed to, give Lender the right or power to exercise control over the affairs
or management of Borrower, the power of Lender being limited to the rights to
exercise the remedies referred to in the Loan Documents. The relationship
between Borrower and Lender is, and at all times shall remain, solely that of
debtor and creditor. No covenant or provision of the Loan Documents is
intended, nor shall it be deemed or construed, to create a partnership, joint
venture, agency or common interest in profits or income between Lender and
Borrower or to create an equity in the Individual Property in Lender. Lender
neither undertakes nor assumes any responsibility or duty to Borrower or to any
other person with respect to the Individual Property or the Loan, except as
expressly provided in the Loan Documents; and notwithstanding any other
provision of the Loan Documents: (a) Lender is not, and shall not be construed
as, a partner, joint venturer, alter ego, manager, controlling person or other
business associate or participant of any kind of Borrower or its stockholders,
members, or partners and Lender does not intend to ever assume such status;
(b) Lender shall in no event be liable for any debts, expenses or losses
incurred or sustained by Borrower; and (c) Lender shall not be deemed
responsible for or a participant in any acts, omissions or decisions of Borrower
or its stockholders, members, or partners. Lender and Borrower disclaim any
intention to create any partnership, joint venture, agency or common interest in
profits or income between Lender and Borrower, or to create an equity in the
Individual Property in Lender, or any sharing of liabilities, losses, costs or
expenses.
Section 15.8 Time of the Essence. Time is of the essence with
respect to this Agreement.
Section 15.9 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of Lender and Borrower and their respective
successors and assigns of Lender and Borrower, provided that neither Borrower
nor any other Borrower Party shall, without the prior written consent of Lender,
assign any rights, duties or obligations hereunder. Notwithstanding the
preceding sentence, Lender shall not assign the Loan to a competitor of the
Borrower that is primarily engaged in owning, leasing or operating retail
shopping malls; or (b) assign, make a whole loan sale or sell a participation
interest in the Loan to any Person that does not enter into a standstill
agreement reasonably satisfactory to Borrower prohibiting a hostile takeover of
the REIT; provided, however, Lender or any successor or assign, or any purchaser
of the Securities, shall not in any way be restricted in its sale of any
Securities issued in connection with a Securitization.
Section 15.10 Renewal, Extension or Rearrangement. All provisions of
the Loan Documents shall apply with equal effect to each and all promissory
notes and amendments thereof hereinafter executed which in whole or in part
represent a renewal, extension, increase or rearrangement of the Loan.
Section 15.11 Waivers. No course of dealing on the part of Lender,
its officers, employees, consultants or agents, nor any failure or delay by
Lender with respect to exercising any right, power or privilege of Lender under
any of the Loan Documents, shall operate as a subsequent waiver thereof.
Section 15.12 Cumulative Rights; Joint and Several Liability. Rights
and remedies of Lender under the Loan Documents shall be cumulative, and the
exercise or partial exercise of any such right or remedy shall not preclude the
exercise of any other right or remedy. If more than one person or entity has
executed this Agreement as "Borrower," the obligations of all such persons or
entities hereunder shall be joint and several.
Section 15.13 Singular and Plural. Words used in this Agreement and
the other Loan Documents 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 and the other Loan Documents shall apply to such
words when used in the plural where the context so permits and vice versa.
Section 15.14 Phrases. When used in this Agreement and the other
Loan Documents, the phrase "including" shall mean "including, but not limited
to."
Section 15.15 Schedules. The schedules attached to this Agreement
are incorporated herein and shall be considered a part of this Agreement for the
purposes stated herein.
Section 15.16 Titles of Articles, Sections and Subsections. All
titles or headings to articles, sections, subsections or other divisions of this
Agreement and the other Loan Documents or the schedules hereto and thereto are
only for the convenience of the parties and shall not be construed to have any
effect or meaning with respect to the other content of such articles, sections,
subsections or other divisions, such other content being controlling as to the
agreement between the parties hereto.
Section 15.17 Promotional Material. Each party hereunder shall have
the right to review and approve all references to it or them, as applicable,
and/or the Loan contained in any press release or public documents prepared by
or on behalf of the other party, except with respect to filings required to be
made with any Governmental Authority. Notwithstanding the preceding sentence,
Lender shall be permitted, without the consent of Borrower, to issue press
releases, advertisements, other promotional material, disclosure materials and
other information with respect to the Loan in connection with the Securitization
of the Loan. All references to Lender contained in any press release,
advertisement or promotional material issued by Borrower shall be approved in
writing by Lender in advance of issuance.
Section 15.18 Brokers and Financial Advisors. Borrower hereby
represents that it has dealt with no financial advisors, brokers, underwriters,
placement agents, agents or finders in connection with the transactions
contemplated by this Agreement other than Carey, Brumbaugh, Starman, Phillips &
Associates. Borrower and Lender hereby agree to indemnify and hold the other
harmless from and against any and all claims, liabilities, costs and expenses of
any kind in any way relating to or arising from a claim by any other Person that
such Person acted on behalf of the indemnifying party in connection with the
transactions contemplated herein. Borrower acknowledges that Carey, Brumbaugh,
Starman, Phillips & Associates has entered into a subservicing agreement with
respect to the Loan and that Carey, Brumbaugh, Starman, Phillips & Associates
may receive a fee from Lender in connection therewith. The provisions of this
Section 15.18 shall survive the expiration and termination of this Agreement and
the payment of the Debt.
Section 15.19 Survival. All of the representations, warranties,
covenants, and indemnities hereunder (including environmental matters under
Article 6), and under the indemnification provisions of the other Loan Documents
shall survive the repayment in full of the Loan and the release of the liens
evidencing or securing the Loan, and shall survive the transfer (by sale,
foreclosure, conveyance in lieu of foreclosure or otherwise) of any or all
right, title and interest in and to the Individual Property to any party,
whether or not an Affiliate of Borrower except as otherwise provided herein.
SECTION 15.20 WAIVER OF JURY TRIAL. BORROWER AND LENDER EACH HEREBY
AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND
EACH WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT
SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THE LOAN DOCUMENTS, OR ANY CLAIM,
COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH. THIS WAIVER OF
RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY BORROWER AND
LENDER, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE
AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE. BORROWER AND
LENDER ARE EACH HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY
PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY BORROWER.
Section 15.21 Waiver of Punitive or Consequential Damages. Neither
Lender nor Borrower shall be responsible or liable to the other or to any other
Person for any punitive, exemplary or consequential damages which may be alleged
as a result of the Loan or the transaction contemplated hereby, including any
breach or other default by any party hereto.
Section 15.22 Governing Law.
(A) THIS AGREEMENT WAS NEGOTIATED IN THE STATE OF NEW YORK, AND MADE
BY LENDER AND ACCEPTED BY BORROWER IN THE STATE OF NEW YORK, AND THE PROCEEDS OF
THE NOTE DELIVERED PURSUANT HERETO WERE DISBURSED FROM 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,
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE, THIS AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE (WITHOUT
REGARD TO PRINCIPLES OF CONFLICT LAWS) AND ANY APPLICABLE LAW OF THE UNITED
STATES OF AMERICA, EXCEPT THAT AT ALL TIMES THE PROVISIONS FOR THE CREATION,
PERFECTION, AND ENFORCEMENT OF THE LIENS AND SECURITY INTERESTS CREATED PURSUANT
HERETO AND PURSUANT TO THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY AND
CONSTRUED ACCORDING TO THE LAW OF THE STATE IN WHICH THE APPLICABLE INDIVIDUAL
PROPERTY IS LOCATED, IT BEING UNDERSTOOD THAT, TO THE FULLEST EXTENT PERMITTED
BY THE LAW OF SUCH STATE, THE LAW OF THE STATE OF NEW YORK SHALL GOVERN THE
CONSTRUCTION, VALIDITY AND ENFORCEABILITY OF ALL LOAN DOCUMENTS AND ALL OF THE
OBLIGATIONS ARISING HEREUNDER OR THEREUNDER. TO THE FULLEST EXTENT PERMITTED BY
LAW, BORROWER HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY CLAIM TO ASSERT
THAT THE LAW OF ANY OTHER JURISDICTION GOVERNS THIS AGREEMENT AND THE NOTE, AND
THIS AGREEMENT AND THE NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK PURSUANT TO SECTION 5-1401 OF THE NEW
YORK GENERAL OBLIGATIONS LAW.
(B) ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST LENDER OR BORROWER
ARISING OUT OF OR RELATING TO THIS AGREEMENT MAY AT LENDER'S OPTION BE
INSTITUTED IN ANY FEDERAL OR STATE COURT IN THE CITY OF NEW YORK, COUNTY OF NEW
YORK PURSUANT TO SECTION 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW, AND
BORROWER WAIVES ANY OBJECTIONS WHICH IT MAY NOW OR HEREAFTER HAVE BASED ON VENUE
AND/OR FORUM NON CONVENIENS OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND BORROWER
HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUIT,
ACTION OR PROCEEDING. BORROWER DOES HEREBY DESIGNATE AND APPOINT CT CORPORATION
SYSTEM, 1633 BROADWAY, NEW YORK, NEW YORK 10019 AS ITS AUTHORIZED AGENT TO
ACCEPT AND ACKNOWLEDGE ON ITS BEHALF SERVICE OF ANY AND ALL PROCESS WHICH MAY BE
SERVED IN ANY SUCH SUIT, ACTION OR 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 MAILED OR DELIVERED TO BORROWER IN
THE MANNER PROVIDED HEREIN SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF
PROCESS UPON BORROWER, IN ANY SUCH SUIT, ACTION OR PROCEEDING IN THE STATE OF
NEW YORK. BORROWER (I) SHALL GIVE PROMPT NOTICE TO LENDER OF ANY CHANGED
ADDRESS OF ITS AUTHORIZED AGENT HEREUNDER, (II) MAY AT ANY TIME AND FROM TIME TO
TIME DESIGNATE A SUBSTITUTE AUTHORIZED AGENT WITH AN OFFICE IN NEW YORK, NEW
YORK (WHICH SUBSTITUTE AGENT AND OFFICE SHALL BE DESIGNATED AS THE PERSON AND
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.
Section 15.23 Entire Agreement. This Agreement and the other Loan
Documents embody the entire agreement and understanding between Lender and
Borrower and supersede all prior agreements and understandings between such
parties relating to the subject matter hereof and thereof (including the Interim
Loan Agreement, as amended and restated herein). Accordingly, the Loan
Documents 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.
Section 15.24 Counterparts. This Agreement may be executed in
multiple counterparts, each of which shall constitute an original, but all of
which shall constitute one document.
Section 15.25 Prior Loan . This Agreement and the other Loan
Documents modify, renew and restate in their entirety the outstanding
indebtedness evidenced by the Interim Loan Agreement and the other documents
executed in connection therewith. The parties hereto and thereto in respect of
the transactions contemplated hereby and thereby, and all prior agreements,
including all documents executed in connection with the Interim Loan Agreement,
among or between such parties, whether oral or written, are modified, superseded
and restated by the terms of this Agreement and the other Loan Documents.
EXECUTED as of the date first written above.
LENDER:
GENERAL ELECTRIC CAPITAL CORPORATION,
a New York corporation
By: /s/ Daniel Vinson
Name: Daniel Vinson
Title: Authorized Signatory
BORROWER:
CROWN AMERICAN WL ASSOCIATES, L.P., a
Pennsylvania limited partnership
By: Crown American WL Associates, a Delaware
business trust, its sole general partner
By: /s/ John M. Kriak
Name: John M. Kriak
Title: Executive Vice President
CROWN AMERICAN FINANCING PARTNERSHIP,
L.P., a Delaware limited partnership
By: Crown American Financing Corporation, a Delaware
corporation, its sole general partner
By: /s/ John M. Kriak
Name: John M. Kriak
Title: Executive Vice President
JOINDER
By executing this Joinder (the "Joinder"), the undersigned ("Joinder
Parties") jointly and severally guaranty (a) the performance by Borrower of all
obligations and liabilities for which Borrower is personally liable under
Section 13.1 of this Agreement and (b) the payment of any portion of the Debt
that is not received by Lender when due pursuant to the Loan Document because
such payment is held to be a preference or fraudulent conveyance under
bankruptcy laws. This Joinder is a guaranty of full and complete payment and
performance and not of collectability.
1. Waivers. To the fullest extent permitted by applicable law, each
Joinder Party waives all rights and defenses of sureties, guarantors,
accommodation parties and/or co-makers and agrees that its obligations under
this Joinder shall be primary, absolute and unconditional, and that its
obligations under this Joinder shall be unaffected by any of such rights or
defenses, including:
(a) the unenforceability of any Loan Document against Borrower and/or
any guarantor or other Joinder Party;
(b) any release or other action or inaction taken by Lender with
respect to the collateral, the Loan, Borrower, any guarantor and/or other
Joinder Party, whether or not the same may impair or destroy any subrogation
rights of any Joinder Party, or constitute a legal or equitable discharge of any
surety or indemnitor;
(c) the existence of any collateral or other security for the Loan,
and any requirement that Lender pursue any of such collateral or other security,
or pursue any remedies it may have against Borrower, any guarantor and/or any
other Joinder Party;
(d) any requirement that Lender provide notice to or obtain a Joinder
Party's consent to any modification, increase, extension or other amendment of
the Loan, including the guaranteed obligations;
(e) any right of subrogation (until payment in full of the Loan,
including the guaranteed obligations, and the expiration of any applicable
preference period and statute of limitations for fraudulent conveyance claims);
(f) any defense based on any statute of limitations;
(g) any payment by Borrower to Lender if such payment is held to be a
preference or fraudulent conveyance under bankruptcy laws or Lender is otherwise
required to refund such payment to Borrower or any other party; and
(h) any voluntary or involuntary bankruptcy, receivership,
insolvency, reorganization or similar proceeding affecting Borrower or any of
its assets.
2. Agreements. Each Joinder Party further represents, warrants and
agrees that:
(a) The obligations under this Joinder are enforceable against each
such party and are not subject to any defenses, offsets or counterclaims;
(b) The provisions of this Joinder are for the benefit of Lender and
its successors and assigns;
(c) Lender shall have the right to (i) renew, modify, extend or
accelerate the Loan, (ii) pursue some or all of its remedies against Borrower,
any guarantor or any Joinder Party, (iii) add, release or substitute any
collateral for the Loan or party obligated thereunder, and (iv) release
Borrower, any guarantor or any Joinder Party from liability, all without notice
to or consent of any Joinder Party (or other Joinder Party) and without
affecting the obligations of any Joinder Party (or other Joinder Party)
hereunder;
(d) Each Joinder Party covenants and agrees to furnish to Lender,
within ninety (90) days after the end of each calendar year of such Joinder
Party, a current (as of the end of such calendar year) balance sheet of such
Joinder Party, in scope and detail satisfactory to Lender, certified by the
chief financial representative of such Joinder Party and, if required by Lender,
prepared on a review basis and certified by an independent public accountant
satisfactory to Lender; and
(e) To the maximum extent permitted by law, each Joinder Party hereby
knowingly, voluntarily and intentionally waives the right to a trial by jury in
respect of any litigation based hereon. This waiver is a material inducement to
Lender to enter into this Agreement.
3. Securitization. In each connection with a Securitization, each
Joinder Party hereby agrees to execute the indemnification certificate
referenced in Section 14.5.
This Joinder shall be governed by the laws of the State of New York.
Executed as of August 28, 1998.
JOINDER PARTIES: CROWN AMERICAN REALTY TRUST, a
Maryland real estate investment trust
By: /s/ John M. Kriak
Name: John M. Kriak
Title: Executive Vice President
CROWN AMERICAN PROPERTIES, L.P., a
Delaware limited partnership
By:Crown American Realty Trust, a Maryland real
estate investment trust, its sole general
partner
By: /s/ John M. Kriak
Name: John M. Kriak
Title: Executive Vice President
EXHIBIT 21
CROWN AMERICAN REALTY TRUST
LIST OF SUBISIDIARIES AS OF DECEMBER 31, 1998
Following are the subsidiaries of Crown American Realty Trust and of Crown
American Properties, L.P. as of December 31, 1998 together with their ownership
interests as of that date.
Crown American Realty Trust:
Subsidiary: Ownership Interest
Crown American Properties, L.P. 72.47% common interest
100.00% preferred interest
Crown American Financing Corporation 100.00%
Crown Lycoming Service Associates 100.00%
Crown American WL Associates 100.00%
Washington Crown Center Associates 100.00%
Crown American Lewistown Associates (formerly 100.00%
Crown Wyoming Associates)
Crown American Acquisition Associates I 100.00%
Crown American Acquisition Associates II 100.00%
Crown American Acquisition Associates III 100.00%
Crown American Acquisition Associates IV 100.00%
Crown American Acquisition Associates V 100.00%
Crown American Acquisition Associates VI 100.00%
Crown American Acquisition Associates VII 100.00%
Crown American Acquisition Associates VIII 100.00%
Crown American Acquisition Associates IX 100.00%
Crown American Acquisition Associates X 100.00%
Crown American Properties, L.P.
Subsidiary Ownership Interest
Crown American Financing Partnership 99.5% *
Crown American WL Associates, L.P. 99.5% *
Washington Crown Center Associates, L.P. 99.5% *
Crown American Lewistown Associates, L.P. 99.5% *
formerly Crown Wyoming Associates, L.P.)
Crown American Crossroads, LLC 100.0%
Crown American Crossroads II, LLC 100.0%
Crown American Acquisition Associates I, L.P. 99.5% *
Crown American Acquisition Associates II, L.P. 99.5% *
Crown American Acquisition Associates III, L.P. 99.5% *
Crown American Acquisition Associates IV, L.P. 99.5% *
Crown American Acquisition Associates V, L.P. 99.5% *
Crown American Acquisition Associates VI, L.P. 99.5% *
Crown American Acquisition Associates VII, L.P. 99.5% *
Crown American Acquisition Associates VIII, L.P. 99.5% *
Crown American Acquisition Associates IX, L.P. 99.5% *
Crown American Acquisition Associates X, L.P. 99.5% *
* The remaining 0.5% interest in each of these entities is held by Crown
American Realty Trust or by one of its wholly-owned subsidiaries.
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our report dated February 19, 1999, included in this Crown American
Realty Trust's Form 10-K for the year ended December 31, 1998, into Crown
American Realty Trust's previously filed registration statements on Form S-3
dated August 18, 1994, as amended effective November 13, 1998, Form S-3 dated
May 4, 1995 and Form S-3 dated June 27, 1997, and to all references to our Firm
included in this Form 10-K.
/s/ ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
March 8, 1999
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that Clifford A. Barton, Trustee of
Crown American Realty Trust (the "Company") whose signature appears below
constitutes and appoints Terry L. Stevens and Ronald P. Rusinak, and each of
them, his true and lawful attorney-in-fact and agent, with full power of
substitution and revocation, for him and in his name, place and stead, in any
and all capacities, to sign the Company's Annual Report on Form 10-K for the
year ended December 31, 1998, and to file same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitute or substitutes, may lawfully do or cause to be done by
virtue thereof.
February 24, 1999 /s/ Clifford A. Barton
Date (Name) Clifford A. Barton
Title: Trustee
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that Donald F. Mazziotti, Trustee of
Crown American Realty Trust (the "Company") whose signature appears below
constitutes and appoints Terry L. Stevens and Ronald P. Rusinak, and each of
them, his true and lawful attorney-in-fact and agent, with full power of
substitution and revocation, for him and in his name, place and stead, in any
and all capacities, to sign the Company's Annual Report on Form 10-K for the
year ended December 31, 1998, and to file same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitute or substitutes, may lawfully do or cause to be done by
virtue thereof.
February 24, 1999 /s/ Donald F. Mazziotti
Date (Name) Donald F. Mazziotti
Title: Trustee
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that Zachary L. Solomon, Trustee of
Crown American Realty Trust (the "Company") whose signature appears below
constitutes and appoints Terry L. Stevens and Ronald P. Rusinak, and each of
them, his true and lawful attorney-in-fact and agent, with full power of
substitution and revocation, for him and in his name, place and stead, in any
and all capacities, to sign the Company's Annual Report on Form 10-K for the
year ended December 31, 1998, and to file same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitute or substitutes, may lawfully do or cause to be done by
virtue thereof.
February 24, 1999 /s/ Zachary L. Solomon
Date (Name) Zachary L. Solomon
Title: Trustee
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that Peter J. Siris, Trustee of Crown
American Realty Trust (the "Company") whose signature appears below constitutes
and appoints Terry L. Stevens and Ronald P. Rusinak, and each of them, his true
and lawful attorney-in-fact and agent, with full power of substitution and
revocation, for him and in his name, place and stead, in any and all capacities,
to sign the Company's Annual Report on Form 10-K for the year ended December 31,
1998, and to file same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent full power and authority to do and perform each
and every act and thing requisite and necessary to be done, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent, or his substitute or
substitutes, may lawfully do or cause to be done by virtue thereof.
February 24, 1999 /s/ Peter J. Siris
Date (Name) Peter J. Siris
Title: Trustee
EXHIBIT 99 (a)
NEWS FROM:
C R O W N A M E R I C A N R E A L T Y T R U S T
CONTACT: Media: Christine Menna 814-536-9520
Investors: Frank Pasquerilla 814-535-9347
Mark Pasquerilla 814-535-9364
Internet: http://www.crownam.com
IMMEDIATE RELEASE: Thursday, February 25, 1999
CROWN AMERICAN REALTY TRUST REPORTS
1998 FFO PER SHARE UP 3 PERCENT
MAJOR TURNING POINT FOR CROWN WITH FIRST
YEAR-OVER-YEAR FFO GROWTH SINCE 1994
TRANSFORMED CORE PORTFOLIO PROVIDES PLATFORM FOR ACCELERATING GROWTH IN 1999
REGULAR DIVIDENDS DECLARED ON COMMON AND PREFERRED SHARES
Johnstown, Pa. - Crown American Realty Trust (NYSE:CWN), a real estate
investment trust, today announced financial results and operating information
for the fourth quarter and for the year ended December 31, 1998. The Board of
Trustees also declared regular quarterly dividends on its common and senior
preferred shares.
_______________________________
"Nineteen ninety-eight marked an important turning-point for the Company,"
stated Crown American Realty Trust Vice Chairman and President, Mark E.
Pasquerilla. "Funds from Operations ("FFO") per share grew 3 percent in 1998 to
$1.18 per share, our first year-over-year improvement since 1994. We have made
dramatic progress in the last few years in re-tenanting and renovating our mall
properties. We have replaced second rate anchors with dominant national
retailers such as The May Department Stores Company. We have significantly
upgraded our mall shop tenants with the GAP, Disney, Intimate Brands, The
Limited, and many others."
This transformation is evident by:
Mall shop occupancy ended the year at 82 percent, up from 79 percent a year
ago.
Comparable mall shop sales are $242 per square foot, up 6 percent in 1998,
and well ahead of the industry growth rate of 2.8 percent as reported by
the ICSC (International Council of Shopping Centers).
Average mall shop base rents in the portfolio increased for the 21st
consecutive quarter to $17.54 per square foot.
Leasing results set another record in 1998, after a record-setting 1997,
with $25.5 million annualized base rent from signed new and renewal mall
shop, theater and freestanding tenant leases, up 44 percent from 1997.
Leases out-for-signature, the "leasing pipeline," were up 73 percent in the
same period.
Total revenues for 1998 were up $15.7 million to $146.7 million, or a 12
percent increase from 1997. In addition to growing revenues and FFO contribution
from existing malls, the recently acquired properties contributed $10.8 million
of the total increase in 1998 revenues. For the fourth quarter, FFO per share
was $0.36, unchanged from the fourth quarter of 1997, and ahead of consensus
analyst estimates for the quarter.
Pasquerilla continued, "We are pleased, but not satisfied, with the
continuing growth of revenues and FFO from our properties in 1998. As we
reported earlier this week, in addition to focusing on revenue growth, we are
also committed to managing the cost side of the business. We announced steps to
streamline and restructure certain corporate office functions that will reduce
costs and also result in an eight percent work-force reduction at our corporate
office. We will record a non-FFO restructuring charge in the first quarter of
1999 to provide for severance and related costs.
"We established a solid platform for growth for 1999 and beyond. Our major
debt refinancing in 1998 substantially eliminated refinancing risk and reduced
our variable rate debt. This refinancing was completed through GE Capital Real
Estate and is another component of our strategic alliance announced in late
1997. The quality of the portfolio and resultant earnings stream will continue
to improve with three additional May Company department stores opening in 1999.
Our goal is to have high-single to low-double digit growth in FFO per share.
For 1999, much of this growth is already in-place from the 1998 record leasing
year, from the full-year impact of the three acquisitions made in 1998, and from
the full-year impact of the Patrick Henry Mall expansion that opened in November
1998. The Crown management team, which collectively has a 36 percent ownership
interest in the Company, is firmly committed to FFO growth. We believe that the
transformation of the properties and the resultant revenue growth, together with
strong cost controls, will continue to benefit 1999 and beyond."
Dividend Information
The Board of Trustees declared regular quarterly dividends of $.20 per
common share and $1.375 per senior preferred share. Both dividends are payable
March 19, 1999 to shareholders of record on March 8, 1999.
Financial Information - Twelve Months
For the year ended December 31, 1998, FFO before allocations to minority
interest and preferred dividends was $56.6 million, up $8.0 million, or 16.4
percent, from 1997. FFO allocable to common shares was $31.2 million or $1.18
per common share, compared to $31.2 million, or $1.15 per common share, in 1997.
Average shares and partnership units outstanding during 1998 were 36.3 million
compared to 36.7 million in 1997. FFO contributed from existing mall operations
(before interest, general and administrative costs, and cash flow support) was
up $3.2 million, or $0.088 per share. FFO contributed by the recently acquired
properties, net of financing costs, was $2.2 million, or $0.060 per share.
These increases were partially offset by: $4.2 million, or $0.115 per share,
full year impact of the preferred shares dividends (net of amount allocated to
acquired properties); and $0.6 million higher general and administrative
expenses, or $0.015 per share, due mostly to higher costs in our leasing and
acquisition departments. After allocations to acquired properties, interest
expense was down by $0.2 million, or $0.005 per share.
Total 1998 revenues were $146.7 million compared to $131.0 million in 1997.
Of the total increase, $4.9 million came from existing properties and $10.8
million from recently acquired properties. At the existing properties, minimum
and percentage rents were up $5.5 million reflecting the strong leasing results
in 1997 and 1998. This was offset by $0.3 million in lower tenant recovery
income, and $0.4 million lower temporary and seasonal leasing, as more in-line
space was being used by permanent tenants and not available for temporary
leasing.
For the full year the Company had income of $7.2 million before
extraordinary items, cumulative effect of accounting changes, and minority
interest, up from $2.6 million in 1997. The Company incurred a $22.5 million
extraordinary loss on early extinguishment of debt in the third quarter from the
$465 million mortgage loan refinancing. A $1.7 million negative adjustment from
the cumulative effect of a change in the method of accounting for percentage
rents was recorded effective at the beginning of 1998. After these items and
allocations to minority interest, the Company had a net loss of $8.6 million.
After deducting preferred dividends, total net loss allocable to common
shareholders was $22.4 million, or $0.85 per share of which $0.62 relates to the
extraordinary loss from early debt extinguishment and $0.05 per share relates to
the change in accounting method.
Financial Information - Fourth Quarter
For the quarter ended December 31, 1998, Funds from Operations (FFO) before
allocations to minority interest and preferred dividends was $16.5 million, up
from $16.3 million in 1997. FFO allocable to common shares was $9.5 million, or
$0.36 per common share, compared with $9.5 million, or $0.36 per common share,
for the fourth quarter of 1997. From the existing properties, base and
percentage rents were up $1.5 million, but this was offset by lower net recovery
income compared to 1997 and by lower temporary leasing. Fourth quarter 1997
mall operating costs net of recovery income was boosted from positive year-end
adjustments to interim CAM income estimates; in 1998 such year-end adjustments
were slightly negative resulting in a $1.1 million negative quarter-to-quarter
comparison. Temporary leasing was down due to more in-line space used for
permanent tenants. The recently acquired properties contributed $0.7 million to
fourth quarter FFO after financing costs. Net interest costs and preferred
dividends after allocations to the acquired properties were up $0.6 million in
the quarter due mainly to higher borrowing levels and slightly lower interest
income and capitalized interest.
Total revenues for the fourth quarter were $41.2 million, as compared to
$38.4 for the fourth quarter of 1997. For the fourth quarter of 1998, the
Company achieved net income of $4.0 million. After deducting preferred
dividends, there was $0.6 million net income allocable to common shares, or
$0.02 per share. This compares to $0.1 million net income allocable to common
shares, or $0.01 per share, in the fourth quarter of 1997.
Operating Information
During the fourth quarter of 1998, leases for 188,000 square feet of mall
shops were signed representing $3.9 million in annualized base rental
income. This compares to 143,000 square feet for $3.3 million during the
same period in 1997. A total of 96 leases were signed, which included 51
renewals and 45 new leases.
Also during the fourth quarter of 1998, leases for 53,000 square feet for
theater and freestanding tenants were signed representing $0.7 million in
annualized base rental income.
For the full year 1998, leases for 1,208,000 square feet of mall shops were
signed representing $23.5 million in annualized base rental income, 57
percent higher than 1997. A total of 569 leases were signed, including 288
renewals and 281 new leases. Average rent per square foot for 1998 was
$19.43, which includes $20.56 per square foot for new space and $18.37 per
square foot for renewals.
For the full year 1998, the Company signed leases on 181,000 square feet
for theater and freestanding tenants, representing $2.0 million in
annualized base rental income.
The average base rent of the portfolio as of December 31, 1998 was $17.54
per square foot. This is a 4.3 percent increase from $16.82 per square
foot as of December 31, 1997, and the 21st consecutive quarter that average
base rent has increased.
Overall, mall shop occupancy was 82 percent at December 31, 1998, up from
79 percent at December 31, 1997. The improvement in occupancy resulted
from increased new tenant leasing and from 28 percent fewer tenant closings
in 1998.
Mall shop comparable sales for 1998 were $242 per square foot. This is a
six percent increase over the $228 per square foot reported for 1997 and
considerably higher than the 2.8 percent increase for the country as
reported by the International Council of Shopping Centers (ICSC).
Occupancy costs, that is, base rent, percentage rent and expense recoveries
as a percentage of mall shop sales at all properties, were 10.3 percent as
of December 31, 1998, as compared to 10.4 percent as of December 31, 1997.
Seasonal and promotional leasing income for the full year 1998 amounted to
$9.7 million, as compared to $9.3 million in 1997.
Expansions/Renovation Projects
In November, work on a major expansion at Patrick Henry Mall (Newport News,
Va.) was completed. A new 140,000 square foot May Department Stores
Company unit (Hecht's) opened. Dillard's also completed an expansion and
renovation at their location and approximately 29,000 square feet of new
mall shop space opened.
Construction is continuing at Washington Crown Center (formerly Franklin
Mall, Washington, Pa.). This project includes the addition of a new
140,000 square foot May Company department store (Kaufmann's), a new multi-
screen theater, a relocation of the food court and a complete mall
renovation. A Fall 1999 completion is expected.
At Valley Mall (Hagerstown, Md.) work is continuing on a mall expansion
that is to include a new, 120,000 square foot May Company department store
(Hecht's), a 16 screen R/C Theatres complex, a new Gardenside Cafe food
court and additional mall shop space. The project is scheduled for a Fall
1999 completion.
In November, Wal-Mart more than doubled its size at Martinsburg Mall
(Martinsburg, WV). The existing 90,000 square foot store opened as a
204,000 square foot Wal-Mart super-center.
Construction is nearing completion at Nittany Mall (State College, Pa.)
where The May Department Stores Company is building a 95,000 square foot
Kaufmann's department store that will open in March 1999. The project also
included relocating the Sears Auto Center.
In August 1998 a new Regal 13 screen multi-plex cinema opened at the West
Manchester Mall (York, PA). In December 1998 a new Cinemark 14 screen
multi-plex cinema opened at Oak Ridge Mall (Oak Ridge, TN). Both theaters
feature stadium-style seating.
Financings
In December Moody's Investors Services upgraded their rating on the
Company's senior preferred shares from "caa" to "b3". Their release stated
that the changes reflected the Company's strengthened financial
fundamentals, its improved tenant mix, and the better overall quality of
its property portfolio.
In the fourth quarter GE Capital Real Estate agreed to fund up to $26
million of expansion costs occurring at the Company's Valley Mall. The
construction funding will be handled through the existing $100 million
acquisition line of credit with GECRE, with interest at Libor plus 3.0
percent. The Company and GECRE are currently finalizing the loan
documents; no draws have occurred to date and the Company has funded costs
to date from cash flows and the general credit line.
As previously announced on August 31, 1998 the Company completed a $465
million ten-year mortgage loan refinancing with GE Capital Real Estate.
The new loan is secured by cross-collateralized mortgages on fifteen of the
Company's regional malls. The loan bears a stated interest rate of 7.43
percent and is payable monthly, interest only during the first two years,
and then amortizing during the last eight years based on a 25 year
amortization schedule. While the all-in interest cost is lower that the
debt that was refinanced, the increase in overall debt levels after the
refinancing will offset the lower all-in rate.
___________________________________________________
Crown American Realty Trust through various affiliates and subsidiaries
owns, acquires, operates and develops regional shopping malls in Pennsylvania,
Maryland, West Virginia, Virginia, New Jersey, North Carolina, Tennessee and
Georgia. The current portfolio includes 27 enclosed regional malls and one
shopping center aggregating 16 million square feet of gross leasable area.
This news release contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. Such statements are
based on assumptions and expectations, which may not be realized and are
inherently subject to risks and uncertainties, many of which cannot be
predicted with accuracy. Future events and actual results, financial and
otherwise, may differ from the results discussed in the forward-looking
statements. Risk and other factors that might cause differences, some
of which could be material, include, but are not limited to, economic and credit
market conditions, the ability to refinance maturing indebtedness, the impact of
competition, consumer buying trends, financing and development risks,
construction and lease-up delays, cost overruns, the level and volatility of
interest rates, the rate of revenue increases versus expense increases and
financial stability of tenants within the retail industry, as well as other
risks listed from time to time in the Company's reports filed with the
Securities and Exchange Commission or otherwise publicly disseminated by the
Company.
A copy of the Company's Supplemental Financial and Operational Information
Package is available by calling Investor Relations at 1-800-860-2011.
- 30 -
EXHIBIT 99 (b)
<TABLE>
<CAPTION>
SUPPLEMENTAL FINANCIAL AND OPERATIONAL INFORMATION PACKAGE
CROWN AMERICAN REALTY TRUST
FOURTH QUARTER 1998
OTHER FINANCIAL AND OPERATING DATA
(unaudited)
Three Months Ended Year Ended
December 31, December 31,
1998 vs. 1997 1998 vs. 1997
(in thousands, except per share data)
FINANCIAL AND ANALYTICAL DATA:
<S> <C> <C> <C> <C>
$Per $Per
Total FFO - Incr (decr) - 1998 $000 Share $000 Share
compared to 1997:
Base and percentage rents from $ 1,552 $ 0.043 $ 5,412 $ 0.149
anchors and mall shops
Temporary and promotional leasing (239) (0.007) (399) (0.011)
income
Mall operating costs, net of tenant (1,052) (0.029) (2,112) (0.058)
recovery income
Utility and misc. mall income, (202) (0.006) 64 0.002
equity in joint venture
Straight line rental income (36) (0.001) 224 0.006
Core mall operations--same 23 (0.000) 3,189 0.088
properties
Impact of Valley, Jacksonville,
Crossroads, and Lewistown
before allocation of interest and 2,387 0.066 8,058 0.222
preferred dividends
Core mall operations - all 2,410 0.066 11,247 0.310
properties
Property admin. and general & 55 0.002 (552) (0.015)
admin. expenses
Cash flow support earned (133) (0.004) 51 0.001
Interest expense, including for (2,277) (0.063) (2,754) (0.076)
acquisitions
Gain on sale of outparcel land 193 0.005 159 0.004
Lease buyout income and other (70) (0.002) (171) (0.005)
items, net
Impact on per share amount from - (0.002) - 0.011
changes in the number of common
shares and units outstanding
Change before pref'd div's and 178 0.002 7,980 0.230
minority interest
Increase in preferred dividends 1 - (7,104) (0.196)
Allocation to minority interest in (165) - (843) -
Operating Partnership
Rounding to whole cents 0 (0.002) - (0.004)
Change in FFO allocable to common $ 14 $ 0.000 $ 33 $ 0.030
shareholders
Three Months Ended Year Ended
December 31, December 31,
1998 1997 1998 1997
Funds from Operations ($000 except
per share data):
Net income (loss) $ 4,008 $ 3,536 $ (8,639) $ 1,907
Adjustments:
Minority Interest in Operating (208) 11 (8,363) (1,644)
Partnership
Depreciation and amortization - 11,189 10,163 42,992 39,682
real estate
Operating covenant amortization 657 657 2,630 2,630
Cash flow support amounts 858 991 3,784 3,733
Cumulative effect of a change in - - 1,703 -
accounting method
Extraordinary loss on early - 968 22,512 2,331
extinguishment of debt
FFO before allocations to minority 16,504 16,326 56,619 48,639
interest and pref'd shares
Allocation to preferred (3,437) (3,438) (13,750) (6,646)
shareholders (preferred dividends)
Allocation to minority interest in (3,531) (3,366) (11,653) (10,810)
Operating Partnership
FFO allocable to common shares $ 9,536 $ 9,522 $ 31,216 $ 31,183
FFO per common share $ 0.36 $ 0.36 $ 1.18 $ 1.15
Average shares outstanding during 26,207 26,519 26,393 27,228
the period
Shares outstanding at period end 26,207 26,475 26,207 26,475
Avg. partnership units and shares 36,164 35,958 36,317 36,667
outstanding during period
Partnership units and shares 36,164 35,914 36,164 35,914
outstanding at period end
Components of Minimum Rents:
Anchor - contractual or base rents $ 6,004 $ 5,575 $ 23,527 $ 22,213
Mall shops - contractual or base 17,750 14,849 67,195 57,251
rents
Mall shops - percentage rent in 1,075 866 2,908 2,397
lieu of fixed base rent
Straight line rental income 181 152 564 89
Ground lease - contractual or base 499 414 1,949 1,542
rents
Lease buyout income - - 8 182
Operating covenant amortization (657) (657) (2,630) (2,630)
Total minimum rents $ 24,852 $ 21,199 $ 93,521 $ 81,044
Components of Percentage (Overage)
Rents:
Anchors $ 1,723 $ 1,437 $ 3,899 $ 3,454
Mall shops and ground leases 1,079 1,209 3,292 3,090
$ 2,802 $ 2,646 $ 7,191 $ 6,544
</TABLE>
<TABLE>
<CAPTION>
SUPPLEMENTAL FINANCIAL AND OPERATIONAL INFORMATION PACKAGE
CROWN AMERICAN REALTY TRUST
FOURTH QUARTER 1998
OTHER FINANCIAL AND OPERATING DATA
(unaudited)
Three Months Ended Year Ended
December 31, December 31,
1998 1997 1998 1997
(in thousands, except as noted)
<S> <C> <C> <C> <C>
EBITDA: earnings (including gain
on sale of outparcel land)
before interest, taxes, all
depreciation and amortization
and extraordinary items $ 28,160 $ 25,657 $ 98,499 $ 88,028
Debt and Interest:
Fixed rate debt at period end $ 598,960 $ 400,054 $ 598,960 $400,054
Variable rate debt at period end 71,011 141,659 71,011 141,659
Total debt at period end $ 669,971 $ 541,713 $ 669,971 $541,713
Weighted avg. interest rate on 7.7% 7.7% 7.6% 7.7%
fixed rate debt for the period
Weighted avg. interest rate on 7.6% 7.7% 7.5% 7.9%
variable rate debt for the period
Total interest expense for period $ 12,476 $ 10,199 $ 45,417 $ 42,663
Amort. of deferred debt cost for 349 813 2,743 3,311
period (incl. in interest exp)
Capitalized interest costs during 380 481 2,192 2,463
period
Capital Expenditures Incurred:
Allowances for mall shop tenants $ 5,633 $ 90 $ 17,149 $ 3,063
Allowances for anchor tenants 1,072 3,901 1,644 8,615
Leasing costs and commissions 329 246 4,193 2,398
Expansions and major renovations * 8,315 7,833 41,706 25,076
Acquisition of operating properties 475 31,981 65,448 31,981
All other capital expenditures 43 479 1,573 1,724
(included in Other Assets)
Total Capital Expenditures during $ 15,867 $ 44,530 $ 131,713 $ 72,857
the period
*1998 data includes approximately
$11 million in deposits to
expansion construction and related
escrows under the new GECC mortgage loan.
OPERATING DATA:
Mall shop GLA at period end 5,734 5,539
sq. ft.)
Occupancy percentage at period end 82% 79%
Comp. Store Mall shop sales - 12 $ 241.82 $ 228.17
months (per sq. ft.)
Mall shop occupancy cost percentage 10.3% 10.4%
at period end
Average mall shop base rent at $ 17.54 $ 16.82
period end (per sq. ft.)
Mall shop leasing for the period:
New leases - sq. feet (000) 73 90 585 372
New leases - $ per sq. ft. $ 23.44 $ 25.33 $ 20.56 $ 22.47
Number of new leases signed 45 50 281 201
Renewal leases - sq. feet (000) 115 53 623 376
Renewal leases - $ per sq. ft. $ 19.09 $ 19.46 $ 18.37 $ 17.52
Number of renewal leases signed. 51 24 288 170
Tenant Allowances for leases signed
during the period:
First Generation Space - per $ 30.29 $ 16.40 $ 23.39 $ 32.09
sq. ft.
Second Generation Space - per $ 10.64 $ 13.52 $ 12.09 $ 7.89
sq. ft.
Leases Signed during the period by:
First Generation Space - 18 20 55 95
sq. ft. (000)
Second Generation Space - 170 123 1,153 653
sq. ft. (000)
Theater and free-standing leasing
for the period:
New leases- sq. ft. (000) 53 120 181 340
New leases-$ per sq. ft. $ 13.00 $ 4.31 $ 10.99 $ 8.06
Tenant allowances - $ per sq. ft. $ 65.00 $ 3.90 $ 40.09 $ 20.37
</TABLE>
<TABLE>
<CAPTION>
SUPPLEMENTAL FINANCIAL AND OPERATIONAL INFORMATION PACKAGE
CROWN AMERICAN REALTY TRUST
TOP 25 REVENUE-GENERATING TENANTS
LISTED IN ORDER OF SQUARE FEET OCCUPIED
FOR THE YEAR ENDED DECEMBER 31, 1998
PERCENT OF NUMBER OF TOTAL
TOTAL OPEN STORES SQ FT
TENANT NOTES REVENUES OF STORES OCCUPIED
<S> <C> <C> <C> <C>
Sears, Roebuck & Co. 5.8% 21 2,124,755
J C Penney Inc. (1) 4.3% 27 1,855,567
The Bon-Ton 3.3% 17 1,182,922
May Department Stores Co. (2) 1.0% 10 1,226,146
Wal-Mart Stores 1.2% 3 405,465
Value City Department 1.2% 5 372,713
Stores
The Limited Stores Inc. (3) 3.9% 48 352,907
K-Mart Corporation 1.0% 3 259,517
Venator Group (4) 3.5% 75 220,036
Charming Shops 1.4% 21 179,584
Shoe Show Of Rocky Mt. 1.6% 25 115,161
Inc.
Hallmark-Owned Stores 1.7% 29 104,070
Intimate Brands, Inc. (5) 1.9% 32 102,557
Deb Shops, Inc. 1.0% 16 99,316
Camelot, Inc. (6) 1.7% 28 99,210
Consolidated Stores (7) 1.5% 25 80,467
Payless Shoesource Inc. 1.2% 24 79,002
Walden Book Co., Inc. 1.5% 21 75,146
Tandy Corporation (8) 0.9% 27 67,488
Moray Inc. (9) 0.9% 17 64,553
The Finish Line, Inc. 0.9% 13 61,984
The Gap 1.0% 11 52,683
General Nutrition Inc. 0.8% 25 37,892
Regis Stores 0.7% 31 34,516
Sterling Jewelers (10) 0.9% 17 20,511
TOTALS 44.8% 9,274,168
Notes:
(1) Includes 20 J.C. Penney department stores and 7 Eckerd stores.
(2) May Company owns 7 of their current 10 stores. Accordingly, the percentage
of revenue attributable to May Company is relatively less than the amount
of space occupied.
(3) Includes Limited Express, Lane Bryant, Lerner Shops, The Limited (core
division), and Structures.
(4) Includes Woolworth, Afterthoughts, Kinney, Footlocker, Lady Footlocker,
Champs, and Northern Reflections.
(5) Spun off by the Limited. Includes Victoria's Secrets and Bath & Body.
(6) Recently aquired the Wall stores will merge with Trans World Entertainment
(NYSE TWMC) in early 1999.
(7) Includes Kay-Bee Toys which it recently purchased from Melville Realty Co.
(8) Operates as Radio Shack.
(9) Operates as B. Moss.
(10) Operates as Kay Jewelers, Belden Jewelers and Shaw Jewelers.
</TABLE>
<TABLE>
<CAPTION>
SUPPLEMENTAL FINANCIAL AND OPERATIONAL INFORMATION PACKAGE
CROWN AMERICAN REALTY TRUST
Consolidated Statements of Operations
Three Months Ended Year Ended
December 31, December 31,
1998 1997 1998 1997
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Rental operations:
Revenues:
Minimum rent $ 24,852 $ 21,199 $ 93,521 $ 81,044
Percentage rent 2,802 2,646 7,191 6,544
Property operating cost 8,188 9,029 32,570 30,513
recoveries
Temporary and promotional 4,551 4,437 9,661 9,312
leasing
Net utility income 767 792 2,991 2,806
Miscellaneous income 65 291 814 775
Net 41,225 38,394 146,748 130,994
Property operating costs:
Recoverable operating costs 11,318 10,931 43,755 39,467
Property administrative costs 805 823 2,533 2,349
Other operating costs 616 582 2,262 1,963
Depreciation and amortization 10,877 9,781 41,712 38,311
Net 23,616 22,117 90,262 82,090
Net 17,609 16,277 56,486 48,904
Other expenses:
General and administrative 1,609 1,646 5,066 4,698
Interest 12,476 10,199 45,417 42,663
Net 14,085 11,845 50,483 47,361
Net 3,524 4,432 6,003 1,543
Property sales, disposals and
adjustments:
Gain on sale of outparcel land 276 83 1,210 1,051
Income (loss) before extraordinary 3,800 4,515 7,213 2,594
items, minority interest, and
cumulative effect of a change in
accounting method
Extraordinary loss on early - (968) (22,512) (2,331)
extinguishment of debt
Cumulative effect on prior - - (1,703) -
years (to December 31, 1997)
of a change in accounting method
Income (loss) before minority 3,800 3,547 (17,002) 263
interest
Minority interest in (income) 208 (11) 8,363 1,644
loss of Operating Partnership
Net income (loss) 4,008 3,536 (8,639) 1,907
Dividends on preferred shares (3,437) (3,438) (13,750) (6,646)
Net income (loss) applicable
to common shareholders $ 571 $ 98 $(22,389) $ (4,739)
Per common share information:
Basic and Diluted EPS:
Income (loss) before
extraordinary item and
cumulative effect of a
change in accounting method $ 0.02 $ 0.03 $ (0.18) $ (0.11)
Extraordinary item - (0.02) (0.62) (0.06)
Cumulative effect on prior - - (0.05) -
years of a change in accounting
method
Net income (loss) $ 0.02 $ 0.01 $ (0.85) $ (0.17)
Weighted average shares 26,207 26,519 26,393 27,228
outstanding (000)
FFO per share $ 0.36 $ 0.36 $ 1.18 $ 1.15
</TABLE>
<TABLE>
<CAPTION>
SUPPLEMENTAL FINANCIAL AND OPERATIONAL INFORMATION PACKAGE
CROWN AMERICAN REALTY TRUST
Consolidated Balance Sheets
(in thousands, except share and per share data)
December 31,
1998 1997
Assets
<S> <C> <C>
Income-producing properties:
Land $ 145,226 $ 132,055
Buildings and improvements 946,654 852,674
Deferred leasing and other charges 42,469 39,912
Net 1,134,349 1,024,641
Accumulated depreciation and amortization (347,649) (315,125)
Net 786,700 709,516
Investment in joint venture 5,799 5,808
Cash and cash equivalents, non-restricted 13,512 9,472
Restricted cash and escrow deposits 15,005 14,237
Tenant and other receivables 17,430 16,986
Deferred charges and other assets 30,842 29,930
Net $ 869,288 $ 785,949
Liabilities and Shareholders' Equity
Debt on income-producing properties $ 669,971 $ 541,713
Accounts payable and other liabilities 38,076 29,132
Net 708,047 570,845
Minority interest in Operating Partnership 11,724 25,334
Commitments and contingencies
Shareholders' equity:
Non-redeemable senior preferred shares, 11%
cumulative, $.01 par value, 2,500,000 shares
issued and outstanding 25 25
Common shares, par value $.01 per share,
120,000,000 shares authorized, 27,741,542 and
27,727,212 shares issued at December 31, 1998
and 1997, respectively 277 277
Additional paid-in capital 314,252 308,571
Accumulated deficit (150,385) (106,881)
Net 164,169 201,992
Less common shares held in treasury at cost;
1,534,398 and 1,251,898 shares at December 31,
1998 and 1997, respectively. (14,652) (12,222)
Net 149,517 189,770
Net $ 869,288 $ 785,949
</TABLE>
<TABLE>
<CAPTION>
SUPPLEMENTAL FINANCIAL AND OPERATIONAL INFORMATION PACKAGE
CROWN AMERICAN REALTY TRUST
Consolidated Statements of Cash Flows
Year Ended December 31,
1998 1997
(in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (8,639) $ 1,907
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Minority interest in Operating Partnership (8,363) (1,644)
Equity earnings in joint venture (360) (528)
Depreciation and amortization 48,411 45,886
Extraordinary loss on early extinguishment of debt 22,512 2,331
Cumulative effect of a change in accounting method 1,703 -
Net changes in:
Tenant and other receivables (2,147) 520
Restricted cash and escrow deposits (768) (11,013)
Deferred charges and other assets (9,393) 3,156
Accounts payable and other liabilities 11,878 (1,868)
Net cash provided by operating activities 54,834 38,747
Cash flows from investing activities:
Investment in income properties and related escrow (64,223) (39,152)
deposits
Acquisition of enclosed malls, net of debt assumed (46,720) (31,981)
Proceeds from sale of Middletown Mall 8,148 -
Distributions from joint venture - 150
Net cash (used in) investing activities (102,795) (70,983)
Cash flows from financing activities:
Net proceeds from issuance of senior preferred shares - 118,671
Net proceeds from exercise of stock options and 117 921
dividend reinvestment plan
Proceeds from issuance of debt, net of issuance cost 576,257 231,723
Cost of issuance of debt (6,806) (4,774)
Debt repayments (476,108) (265,002)
Dividends and distributions paid on common shares and (29,063) (29,287)
partnership units
Dividends paid on senior preferred shares (13,750) (5,921)
Purchase of common shares held in treasury (2,430) (12,222)
Cash flow support payments 3,784 853
Net cash provided by financing activities 52,001 34,962
Net (decrease) increase in cash and cash equivalents 4,040 2,726
Cash and cash equivalents, beginning of period 9,472 6,746
Cash and cash equivalents, end of period $ 13,512 $ 9,472
Interest paid (net of capitalized amounts) $ 42,674 $ 39,351
Interest capitalized $ 2,192 $ 2,463
Non-cash financing activities:
Cash flow support credited to minority interest and
paid-in capital that was prefunded in 1995. $ - $ 1,889
Issuance of partnership units related to Middletown
Mall and Greater Lewistown acquisitions $ 4,479 $ -
Assumption of debt related to Greater Lewistown and
Crossroads acquisitions $ 14,718 $ -
Preferred dividends accrued, but unpaid as of period $ - $ 725
end
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 13,512
<SECURITIES> 0
<RECEIVABLES> 17,430
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,134,349
<DEPRECIATION> 347,649
<TOTAL-ASSETS> 869,288
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
25
<COMMON> 277
<OTHER-SE> 149,215
<TOTAL-LIABILITY-AND-EQUITY> 869,288
<SALES> 0
<TOTAL-REVENUES> 146,748
<CGS> 0
<TOTAL-COSTS> 90,262
<OTHER-EXPENSES> 5,066
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 45,417
<INCOME-PRETAX> 7,213
<INCOME-TAX> 0
<INCOME-CONTINUING> 7,213
<DISCONTINUED> 0
<EXTRAORDINARY> (22,512)
<CHANGES> (1,703)
<NET-INCOME> (8,639)
<EPS-PRIMARY> (.85)
<EPS-DILUTED> (.85)
</TABLE>
