<PAGE>
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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-KSB
/X/ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 (fee required) for the Fiscal Year Ended December 31, 1997.
/ / Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 (no fee required) for the Transition Period from to .
COMMISSION FILE NUMBER 1-12514
AMERICAN REAL ESTATE INVESTMENT CORPORATION
(Name of small business issuer in its charter)
<TABLE>
<CAPTION>
<S> <C>
MARYLAND 84-1246585
(State or other jurisdiction (IRS Employer Identification
of incorporation or Number)
organization)
620 WEST GERMANTOWN PIKE, SUITE 200, 19462
Plymouth Meeting, Pennsylvania (Zip Code)
(Address of principal
executive offices)
</TABLE>
Issuer's Telephone Number (including Area Code): (610) 834-7950
Securities registered under Section 12(b) of the Exchange Act:
Title of each Class: Common Stock, $.001 Par Value
Name of each Exchange on which Registered: American Stock Exchange
Securities registered under Section 12(g) of the Exchange Act: NONE
Check whether the Issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act of 1934 during the past 12 months (or
for such shorter period that the Issuer was required to file such reports),
and (2) and been subject to such filing requirements for the past 90 days.
Yes /X/ No / /
Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained,
to the best of the Issuer's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. /X/
The Issuer's revenue for the year ended December 31, 1997 was approximately
$8,197,000.
The aggregate market value of the voting stock held by non-affiliates of the
Registrant as of March 25, 1998 was approximately $46,504,000.
The number of shares outstanding of each of the Issuer's common equity, as of
March 25, 1998, was 5,469,715 shares of Common Stock.
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
-----------------------
American Real Estate Investment Corporation (together with its
subsidiaries, the "Company") is a self-administered, self-managed real estate
investment trust ("REIT") engaged in the ownership, acquisition and
development of industrial and office properties. At December 31, 1997, the
Company owned a portfolio of 23 properties comprised of 10 industrial
properties, 10 office properties and 3 non-core properties comprised of a
community shopping center and 2 multifamily properties (the 3 non-core
properties are referred to herein as the "Non-Core Properties"). Since
January 1, 1998, the Company has acquired 9 industrial properties aggregating
approximately 2.1 million square feet and has sold 1 Non-Core Property. The
Company currently owns, excluding the Non-Core Properties, 29 industrial and
office properties containing an aggregate of 4.2 million square feet (the
"Properties"). The Properties are located principally in the mid-Atlantic and
Northeastern United States and are 97% leased to 60 tenants.
The Company's industrial properties consist principally of large, high
bay, warehouse and distribution facilities located in close proximity to
major interstate and regional road systems in the mid-Atlantic and
Northeastern United States. The majority of these bulk warehouse facilities
are net leased to single users. Additionally, the Company owns a variety of
single tenant and multi-tenant service, assembly, light manufacturing and
research and development facilities in suburban, mixed-use developments or
business parks.
The Company's office properties consist principally of modern mid-rise and
single-story suburban buildings, located principally in suburban office
parks, and in certain instances, mixed-use developments. Substantially all of
the office buildings are located within established and growing business
communities with convenient access to regional and interstate road systems
and highways.
The Company conducts substantially all of its activities through, and
substantially all of the Properties are held directly or indirectly by,
American Real Estate Investment, L.P. (the "Operating Partnership"). The
Company is the sole general partner of the Operating Partnership and owns, at
December 31, 1997, approximately 57.9% of the limited partnership interests
(the "OP Units") in the Operating Partnership. The remaining OP Units are
owned by limited partners of the Operating Partnership. The officers and the
directors of the Company own approximately 30% of the outstanding OP Units as
of March 27, 1997. Each OP Unit may be redeemed by the holder for one share
of Common Stock (subject to certain anti-dilution provisions), or, at the
Company's option, the cash value of one share of Common Stock. With each such
exchange, the Company's percentage interest in the Operating Partnership will
increase.
Prior to the Company's reorganization in December 1997, the Company was
engaged in the ownership and acquisition of multi-family residential
properties. Commencing in 1995, the Company began exploring the possible
sale, merger, recapitalization or restructuring of the Company and
subsequently disposed of all but two of its multi-family residential
properties. On December 12, 1997, the Company entered into a series of
transactions to transform the Company from a multi-family residential REIT
into an office and industrial REIT (the "Reorganization"). Since the
Reorganization, the Company has sold one of its multi-family residential
properties and has entered into an agreement to sell the remaining
multi-family residential property. The Reorganization involved (i) the
acquisition by the Company of 15 properties (the "McBride Portfolio")
totaling approximately 1.3 million square feet from McBride Hudson Bay, L.P.
and various entities affiliated with it (collectively, "McBride") in exchange
for approximately 4.1 million shares of Common Stock, 2.9 million OP Units,
and the assumption of $45.0 million in long-term debt, (ii) the contribution
by Jeffrey E. Kelter of a 95% non-voting equity interest in Penn Square
Properties, Inc. ("Penn Square"), a full service real estate development,
management, construction and brokerage company, in exchange for 363,636 OP
Units, and (iii) $30.0 million in cash investments, in exchange for Common
Stock and OP Units, led by Hudson Bay Partners II, L.P. ("Hudson Bay") along
with CRA Real Estate Securities ("CRA"), McBride and Robert Branson (McBride,
Penn Square, Mr. Kelter, Hudson Bay and CRA are collectively referred to
herein as the "Investor Group"). McBride, Mr. Kelter and Hudson Bay received
warrants to purchase 125,000 OP Units, 250,000 OP Units and 300,000 shares of
Common Stock, respectively, at a price of $11.00 per OP Unit or share of
Common Stock. Additionally, in conjunction with the Reorganization, the
Company acquired the right to purchase 7 additional properties (the
"Acquisition Properties"), totaling approximately 1.3 million square feet for
an aggregate cost of approximately $39 million including closing costs. The
Company acquired all 7 of the Acquisition Properties between December 12,
1997 and January 9, 1998. The Investor Group currently owns approximately 76%
of the Company's outstanding Common Stock (assuming conversion of all
outstanding OP Units to Common Stock).
The Company was originally incorporated in Delaware in 1993 and was
re-incorporated in Maryland in 1994. Since the Reorganization, the Company's
executive offices have been located at 620 West Germantown Pike, Suite 200,
Plymouth Meeting, Pennsylvania and its telephone number is 610-834-7950. The
Company also maintains regional offices in Allentown, Pennsylvania and
Franklin Lakes, New Jersey.
2
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BUSINESS OBJECTIVES AND STRATEGIES FOR GROWTH
The Company's primary business objectives are to maximize total return to
stockholders through growth in the Company's cash flow per share and to
increase the size and value of its portfolio. The Company intends to pursue
these objectives through aggressive asset and property management, acquiring
and selectively developing new properties and opportunistically reinvesting
capital currently invested in the Non-Core Properties, with a view towards
maximizing cash flow. Though the Company currently is focusing its activities
in the mid-Atlantic and Northeastern United States, no specific geographic
limits have been established.
The Company intends to accomplish its business objectives (i) through
contractual increases in rental rates from existing leases, (ii) by
maintaining and increasing occupancy levels in its properties, (iii) by
increasing rental rates through aggressive management and re-leasing of
space, (iv) by acquiring primarily new properties and portfolios in strategic
situations and locations, (v) by targeting properties which have potential
for additional growth through adaptive re-use and/or expansion and (vi) by
generating build-to-suit development opportunities, particularly by
maintaining strong landlord/tenant relationships and establishing local
market prominence.
The Company's strategy is to generate growth opportunities (i) in markets
where it has a significant local market presence through cash acquisitions of
single properties and portfolios and (ii) by entering targeted markets
through strategic transactions with dominant local partners, often through
the issuance of OP Units in tax deferred transactions. Management targets
markets which exhibit strong, stable supply and demand fundamentals yet offer
the opportunity to acquire high quality assets at discounts to replacement
cost with attractive total returns. Management believes that these
opportunities exist in primary markets which have lagged the national real
estate recovery, primary markets in which there is a misperception that the
market is dominated by a one or two significant players, and secondary
markets which offer vital alternatives to cost sensitive tenants. In
implementing its growth strategy, management does not generally aggressively
pursue transactions which involve competitive bid situations.
The Company believes that the combination of long-term net leased
warehouse/distribution facilities and suburban office properties presents a
balanced and complementary strategy for maximizing total shareholder return.
The warehouse facilities are intended to provide stable long-term cash flow
to the Company, as they generally represent established fixed income, require
low recurring capital expenditures and have modest tenant exposure. The
office portfolio provides greater internal cash flow growth opportunities
through increases in contractual rent, lease-up of existing vacancy and
operating efficiencies derived from economies of scale and management
expertise.
RECENT ACQUISITIONS
Since the Reorganization, the Company has acquired industrial properties
encompassing an aggregate of approximately 3.0 million square feet for
approximately $92.6 million, including closing costs. Set forth below is a
summary of the Company's acquisition activity since the Reorganization. All
of these properties are located in the mid-Atlantic and Northeastern United
States.
1. The Company acquired the Acquisition Properties, including the following
facilities:
- One Philips Drive, Mountain Top, PA: a 400,000 square foot
warehouse/distribution facility on 28.7 acres, 100% net leased to
Philips Electronics Corporation through 2007. The building was
originally constructed in 1991 and was expanded in 1993.
- 100 Oak Hill Road, Mountain Top, PA: a 105,000 square foot
warehouse/distribution facility on 9.8 acres, 100% net leased to Dana
Perfumes through October 2001. The building was constructed in 1996 and
has the capacity to be expanded by 30,000 square feet. The tenant has
an annual option to terminate upon the payment of certain penalties.
- 1057 Arnold Road, Reading, PA: a 219,000 square foot
warehouse/distribution facility on 29.0 acres, 100% net leased to
Premium Beverage Packers, Inc. through 2000. The building was
constructed in 1995 and has the capacity to be expanded by 80,000
square feet.
- 1091 Arnold Road, Reading, PA: a 133,055 square foot
warehouse/distribution facility on 28.0 acres, 100% net leased to
Glidden Company through 2001. The building was constructed in 1996 and
has the capacity to be expanded by 115,000 square feet.
- 1305 Goshen Road, West Chester, PA: a 90,000 square foot
warehouse/distribution facility on 10.2 acres, 100% net leased to Yves
Rocher, Inc. through 2000. The building was constructed in 1991.
- One Tabas Lane, Exton, PA: a 150,027 square foot warehouse/distribution
facility on 10.0 acres, 100% net leased to International Envelope
through 2007. The building was constructed in 1970 and renovated in
1990-1991.
- Two Tabas Lane, Exton, PA: a 150,000 square foot
warehouse/distribution facility on
3
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10.1 acres, 100% net leased to Alstrip, Inc., through 2012. The
building was originally constructed in 1970 and was renovated in 1991.
2. The Company acquired on January 8, 1998 a bulk warehouse facility at 101
Commerce Drive, Mechanicsburg, PA: a 597,100 square foot refrigerated
warehouse/distribution facility on 48.0 acres, 100% net leased to
Hershey Foods Corporation through 2012. The building was constructed
in 1991.
3. The Company acquired on March 27, 1998 a 5 building portfolio of
warehouse/distribution facilities in Liverpool, New York, containing an
aggregate of 655,500 square feet constructed on 28.0 acres. The
buildings are 100% net leased to GATX Logistics, Inc. under leases
expiring in 2001. The portfolio includes:
- 4472 Steelway Boulevard Section A-F, Liverpool, NY: constructed in
1977, the facility contains 372,500 square feet, including a 50,000
square foot cooler.
- 4472 Steelway Boulevard Section G, Liverpool, NY: constructed in 1978,
the facility contains 64,000 square feet.
- 4472 Steelway Boulevard Section H, Liverpool, NY: constructed in 1978,
the facility contains 96,000 square feet.
- 4580 Steelway Boulevard South, Liverpool, NY: consisting of 2 buildings
constructed in 1972, the facility contains 123,000 square feet.
4. The Company acquired on March 27, 1998 a 5 building, 468,309 square foot
portfolio of regional warehouse/distribution facilities in Camp Hill and
Middletown, PA. The portfolio is 88.1% occupied under leases averaging
over 6 years. The portfolio includes:
- Airport Corporate Center, 1011 AIP Drive, Middletown, PA: a 152,908
square foot warehouse/distribution facility constructed in 1991. The
building is 80% net leased to Bayard Sales (60%) and, DAS Distributors
(20%) with leases expiring in 2002 and 2000, respectively.
- Airport Corporate Center, 1001 AIP Drive, Middletown, PA: a 132,588
square foot warehouse/distribution facility constructed in 1991. The
building is 100% net leased to FDA Packaging (45%), T.P.D.C., Inc.
(31%) and Reese Products (24%) with leases expiring in 2002, 2001, and
2001, respectively.
- 2404 Gettysburg Road, Camp Hill, PA: a 124,902 square foot
warehouse/distribution facility on 10.8 acres, originally constructed
in 1993. The building is 100% leased, to Ezon, Inc. (58%) and Reckitt
& Colman Inc. (42%) with leases expiring in 2001 and 1999,
respectively.
- 2410 Gettysburg Road, Camp Hill, PA: a 33,600 square foot
warehouse/distribution facility on 3.2 acres, originally constructed
in 1952 and renovated in 1993. The building is 100% leased to Purina
Mills, Inc. through 2001.
- 2400 Gettysburg Road, Camp Hill, PA: a 24,311 square foot
warehouse/distribution facility on 1.5 acres, originally constructed
in 1952 and renovated in 1993. The building was vacated in January
1998.
The Company continues to actively seek and evaluate future acquisition
opportunities, and believes that substantial opportunities exist to build
successfully on its activity since the Reorganization.
SUBSEQUENT ACTIVITIES
On February 4, 1998, the Company signed definitive agreements to acquire
a 10 building portfolio (the "Galesi Portfolio") totaling approximately
790,000 square feet located in suburban Albany, New York for a total purchase
price of $56 million. The portfolio consists of 7 office buildings, totaling
approximately 390,503 square feet, and 3 state-of-the-art, partially
refrigerated industrial buildings totaling approximately 396,645 square feet.
The portfolio is to be contributed to the Operating Partnership by The Galesi
Group, a real estate owner and investment firm, and its partners, in exchange
for the issuance by the Company of approximately 1,362,940 OP Units and the
assumption of certain indebtedness. As part of this transaction, The Galesi
Group and Columbia Development will grant the Company additional rights and
options related to other properties, development projects and land controlled
by the seller. As part of the transaction, Francesco Galesi will be appointed
as a Director of the Company upon the closing of the transaction and will be
nominated as a
4
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Director of the Company at the next meeting of the Company's stockholders.
The closing of this transaction is subject to the receipt of certain
approvals and the satisfaction of customary closing conditions. No assurance
can be given that the Company will acquire these properties.
The Company is currently evaluating in excess of 4.0 million square feet
of individual and portfolio transactions. There can be no assurance that the
Company will pursue any of these potential acquisitions, or that, if pursued,
the Company will successfully acquire any such properties or that such
properties once acquired will perform as expected.
MANAGEMENT AND EMPLOYEES
Since the Reorganization, the Company has conducted its real estate
management services business through American Real Estate Management Inc.
(the "Management Company") (formerly Penn Square). At December 31, 1997, the
Company managed all but 3 of the Properties through the Management Company;
the Urban Farms Shopping Center, Americana Lakewood Apartments (sold by the
Company on January 9, 1998) and Quadrangles Village Apartments are managed
for the Company by unaffiliated third parties. The Company also manages,
through the Management Company, additional properties on behalf of third
parties. As of March 27, 1998, the Management Company was managing industrial
and office properties containing an aggregate of approximately 6.9 million
square feet, of which approximately 4.1 million square feet related to
Properties owned by the Company, approximately 1.9 million square feet
related to properties owned by unaffiliated third parties and approximately
865,000 square feet related to 2 properties owned by limited partnerships in
which an officer and director of the Company has general partnership
interests. Through its ownership of 100% of the preferred stock of the
Management Company, the Operating Partnership is entitled to receive 95% of
amounts paid as dividends by the Management Company.
The Company accounts for its investment in the Management Company in
accordance with the equity method of accounting because it does not control
its operations. The Company currently has 39 full-time employees, of whom 4
are employed in an executive capacity. Such persons provide services to both
the Company and the Operating Partnership. The Company believes that its
relations with its employees are satisfactory.
FINANCINGS
The Company is in the process of concluding final negotiations with a
lender group, including DLJ Capital Funding, Inc. and BankBoston, N.A., to
enter into a 3-year $100,000,000 senior secured revolving credit facility
(the "Credit Facility"). This Credit Facility will be used to fund new
acquisitions, capital improvements, new development projects and for general
working capital purposes. The Credit Facility will be recourse to the Company
and the Operating Partnership and will be secured by cross-collateralized and
cross-defaulted first mortgage liens on certain properties, either currently
owned by the Operating Partnership or to be acquired as the result of future
transactions. The interest will accrue on outstanding loans under the Credit
Facility at a variable rate per anum equal to the sum of a Eurodollar rate
plus 1.6% per anum. The availability of loans under the Credit Facility will
be limited to 65% of the aggregate purchase price or appraised value of the
respective properties securing the Credit Facility and will be subject to
certain stated debt service coverage ratios. The Credit Facility will be
subject to optional prepayments at any time and mandatory prepayments upon
the occurrence of certain conditions, and will contain financial covenants
which are standard for these types of revolving credit facilities. The Credit
Facility is subject to final negotiation of its terms, and therefore no
assurance can be given that this arrangement will be ultimately consummated,
or if consummated, that it will be based upon the terms described above.
COMPETITION
The Properties are located in the mid-Atlantic and Northeastern United
States. There are numerous other office and industrial properties and real
estate companies within the market area of each of such properties which
competes with the Company for tenants and development and acquisition
opportunities. The number of competitive properties and real estate companies
in such areas could have a material adverse effect on the Company's (i)
future operations, (ii) ability to rent its properties and the rents charged,
and (iii) development and acquisition opportunities. The Company will compete
for tenants and acquisitions with others who may have greater resources. The
Company's competitive position for tenants is strongly influenced by economic
conditions in its market areas. However, the Company believes that its
responsiveness to tenant needs will enable it to attract and maintain high
quality tenants in the markets in which the properties are located. With
respect to development and acquisition opportunities, the Company competes
with other REITs and investors in office and industrial properties seeking to
develop or acquire properties in the areas where the Company will concentrate
its activities. The Company will experience strong competition in pursuing
development and acquisition opportunities.
The Company's financial performance and its ability to make distributions
to stockholders continues to be particularly sensitive to the economic
conditions in Northern New Jersey and Eastern Pennsylvania. Like other real
estate markets, the Northern New Jersey and Eastern Pennsylvania commercial
real estate markets have experienced economic downturns in the past, and
future declines in any of these economies or real estate markets could
adversely affect the Company's operations or cash available for distribution.
The Company's revenues and the value of the Properties may be affected by a
number of factors, including the local economic climate (which may be
adversely
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impacted by business layoffs or downsizing, industry slowdowns, changing
demographics and other factors) and local real estate conditions (such as
oversupply of or reduced demand for office, industrial and other competing
commercial properties). These factors, when and if they occur in an area in
which the Properties are located, would adversely affect the Company's
ability to make distributions to its stockholders.
ENVIRONMENTAL AND OTHER REGULATORY MATTERS
Under various federal, state and local laws and regulations, an owner of
real estate is liable for the costs of removal or remediation of certain
hazardous or toxic substances on such property. Such laws often impose such
liability without regard to whether the owner knew of, or was responsible
for, the presence of such hazardous or toxic substances. The costs of
remediation or removal of such substances may be substantial, and the
presence of such substances, or the failure to promptly remediate such
substances, may adversely affect the owner's ability to sell such real estate
or to borrow using such real estate as collateral. In connection with its
ownership and operation of its properties, the Company or the Operating
Partnership, as the case may be, may be potentially liable for such costs.
All of its properties have been subject to Phase I or similar
environmental assessments, which are intended to discover information
regarding, and to evaluate the environmental condition of, the surveyed
properties and surrounding properties. The Phase I assessments included an
historical review, a public records review, a preliminary investigation of
the site and surrounding properties, screening for the presence of asbestos,
polychlorinated biphenyls ("PCBs") and underground storage tanks and the
preparation and issuance of a written report, but do not include soil
sampling or subsurface investigations. Where Phase I assessments resulted in
specific recommendations for remedial actions, the recommended action has
been taken.
The Phase I assessments have not revealed any environmental liability
that the Company believes would have a material adverse effect on the
Company's business, assets or results of operations, nor is the Company aware
of any such liability. Nevertheless, it is possible that these assessments do
not reveal all environmental liabilities or that there are material
environmental liabilities of which the Company is unaware. Moreover, no
assurance can be given that (i) future laws, ordinances or regulations will
not impose any material environmental liability or (ii) the current
environmental condition of its properties will not be affected by tenants and
occupants of its properties, by the condition of properties in the vicinity
of its properties (such as the presence of underground storage tanks) or by
third parties unrelated to the Operating Partnership or the Company.
Environmental inspections indicate that there are minor amounts of
asbestos containing materials ("ACMs") in certain of its properties,
primarily in the form of floor tiles and ceiling materials, which are
generally in good condition. The presence of such amounts of ACMs is in
compliance with current law.
The Company believes that its properties are in compliance in all
material respects with all federal, state and local ordinances and
regulations regarding hazardous or toxic substances. Neither the Company nor
the Operating Partnership has been notified by any governmental authority, or
is otherwise aware, of any material noncompliance, liability or claim
relating to hazardous or toxic substances in connection with any of its
present properties.
From time to time legislation is proposed which, if enacted, would
require installation of various items of safety equipment, such as smoke
alarms and sprinkler equipment. If such legislation should be enacted and be
applicable to its properties, the Company could be required to expend
material sums in fulfilling these requirements.
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ITEM 2. DESCRIPTION OF PROPERTY.
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SUMMARY PROPERTY TABLE
The following table sets forth certain information with respect to each
of the Properties and Non-Core Properties (excluding Americana Lakewood
Apartments which was sold by the Company on January 9, 1998) as of December
31, 1997 and includes certain information with respect to the Properties
acquired by the Company since Decemebr 31, 1997 (denoted by an asterisk) as
if such Properties were owned by the Company on December 31, 1997(1):
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<CAPTION> ANNUALIZED
% OF RENT
PORTFOLIO % OF PER
YEAR RENTABLE PORTFOLIO LEASED
BUILT/ SQUARE SQUARE % ANNUALIZED ANNUALIZED # OF SQUARE
BUILDINGS LOCATION RENOVATED FEET FEET LEASED RENT (2) RENT LEASES FOOT(3)
- ------------------------ ------------- ----------- -------- ---------- ------ ----------- -------- ------- ----------
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Office:
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40 Potash Road (4)...... Oakland, NJ 1992 60,994 1.3% 100% $1,216,377 5.1% 1 $19.94
1655 Valley Road (4).... Wayne, NJ 1989 155,700 3.4% 100% 2,307,474 9.6% 1 14.82
16-00 Route 208 (4)..... Fairlawn, NJ 1983 54,805 1.2% 64% 527,258 2.2% 17 15.03
128 Bauer Drive......... Oakland, NJ 1981 41,450 0.9% 84% 189,358 0.8% 3 5.44
22-08 Route 208......... Fairlawn, NJ 1960/68 78,253 1.7% 74% 673,514 2.8% 6 11.63
15-00 Pollitt Drive (4). Fairlawn, NJ 1970/92 18,614 0.4% 100% 162,873 0.7% 1 8.75
19-00 Pollitt Drive (4). Fairlawn, NJ 1970/84, 95 77,262 1.7% 100% 687,632 2.9% 1 8.90
95 Bauer Drive (4)...... Oakland, NJ 1974/91 6,792 0.1% 100% 88,296 0.4% 1 13.00
99 Bauer Drive (4)...... Oakland, NJ 1971 20,449 0.5% 100% 141,303 0.6% 1 6.91
88 Mary Street.......... Paterson, NJ 1976 114,000 2.5% 100% 525,000 2.2% 1 4.61
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Sub-Total Office Properties 628,319 13.8% 92.6% $6,519,085 27.2% 33 $10.38
Industrial:
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5 Thornton Road (4)..... Oakland, NJ 1973/81 151,874 3.3% 100% $ 905,169 3.8% 1 $ 5.96
2 Volvo Drive........... Rockleigh, NJ 1966/93 67,460 1.5% 100% 502,577 2.1% 1 7.45
17-01 Pollitt Drive (4). Fairlawn, NJ 1968 105,367 2.3% 71% 547,000 2.3% 2 7.31
19-05 Nevins Road (4)... Fairlawn, NJ 1955 151,700 3.3% 100% 620,930 2.6% 1 4.09
1 Philips Drive*........ Mountaintop, PA 1991/93 400,000 8.8% 100% 1,188,000 5.0% 1 2.97
100 Oak Hill Road....... Mountaintop, PA 1996 105,000 2.3% 100% 366,590 1.5% 1 3.49
1057 Arnold Road........ Reading, PA 1995 219,120 4.8% 100% 654,766 2.7% 3 2.99
1091 Arnold Road........ Reading, PA 1996 133,055 2.9% 100% 465,692 1.9% 1 3.50
1305 Goshen Parkway..... West Chester, PA 1991 90,000 2.0% 100% 503,280 2.1% 1 5.59
One Tabas Lane.......... Exton, PA 1970/91 150,027 3.3% 100% 450,084 1.9% 1 3.00
Two Tabas Lane.......... Exton, PA 1970/91 150,000 3.3% 100% 762,520 3.2% 1 5.08
101 Commerce Drive*..... Mechanicsburg, PA 1991 597,100 13.2% 100% 2,376,446 9.9% 1 3.98
4472 Steelway Boulevard* Syracuse, NY 1977/78 532,500 11.7% 100% 1,462,200 6.1% 3 2.75
4580 Steelway Boulevard* Syracuse, NY 1972 123,000 2.7% 100% 307,500 1.3% 1 2.50
1001 Airpark Drive*..... Middletown, PA 1991 132,588 2.9% 100% 454,980 1.9% 3 3.43
1011 Airpark Drive*..... Middletown, PA 1991 152,908 3.4% 80% 394,758 1.6% 2 3.23
2400 Gettysburg Road*... Camp Hill, PA 1952/93 24,311 0.5% 0% 0 0% 0 0
2404 Gettysburg Road*... Camp Hill, PA 1993 124,902 2.8% 100% 456,780 1.9% 2 3.66
2410 Gettysburg Road*... Camp Hill, PA 1952/93 33,600 0.7% 100% 109,200 0.5% 1 3.25
--------- ----- ----- ---------- ----- ---- ------
Sub-Total Industrial
Properties.............. 3,444,512 75.9% 97.5% $12,528,472 52.3% 27 $ 3.64
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Non-Core Properties:
- --------------------
Urban Farms Shopping
Center.................. Franklin Lakes, NJ 1965/82 91,008 2.0% 90% 1,129,570 4.7% 35 13.79
1255 East University
Drive (Quadrangles
Village Apartments)(5).. Tempe, AZ 1987 375,660 8.3% 97% 3,761,460 15.7% 493 10.32
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Sub-Total Non-Core
Properties.............. 466,668 10.3% 95.6% $4,891,030 20.4% 528 $10.48
--------- ----- ----- ---------- ----- ---- ------
GRAND TOTAL............. 4,539,499 100.0% 95.2% $23,938,587 100.0% 588 $ 5.27
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(1) The information provided in this Summary Property Table and throughout this
Item 2: (a) includes 101 Commerce, One Philips Drive, 4472 and 4580
Steelway Boulevard, 1001 and 1011 Airpark Drive and 2400, 2404 and 2410
Gettysburg Road, all of which were acquired between January 8, 1998 and
March 27, 1998, and (b) does not include the Americana Lakewood
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Apartments located at 12598 West Dakota Avenue, Lakewood, Colorado, which
was sold by the Company on January 9, 1998.
(2) Annualized Rent, as used throughout this Annual Report, represents the
total contractual rent under existing leases for the month ended
December 31, 1997 before any rent abatement and excluding any expense
reimbursements.
(3) Annualized Rent Per Leased Square Foot, as used throughout this Annual
Report, represents Annualized Rent, as described in Footnote (2) above,
presented on a per leased square foot basis.
(4) This property secures the Nomura debt. See "--Summary of Indebtedness."
(5) The Company entered into an agreement to sell this property on February
26, 1998. The consummation of sale is subject to the buyer's due
diligence and related approvals from the United States Department of
Housing and Urban Development ("HUD") and the lender under the bond
indenture.
SIGNIFICANT PROPERTIES
Other than Quadrangle Village Apartments, which the Company has agreed to
sell, as of December 31, 1997, the only property with a book value that
accounted for 10% or more of the Company's total assets was 1655 Valley Road,
Wayne, New Jersey. The following table sets forth certain information for
this property for the years indicated.
<TABLE>
<CAPTION>
ANNUALIZED RENT
% LEASED ANNUALIZED RENT PER SQUARE FOOT
------------- --------------- ---------------
<S> <C> <C> <C>
1993..... 100% $ 2,050,676 $ 13.20
1994..... 100% $ 3,070,404 $ 19.70
1995..... 100% $ 2,879,670 $ 18.50
1996..... 100% $ 2,307,474 $ 14.80
1997..... 100% $ 2,307,474 $ 14.80
</TABLE>
The property is occupied by a single tenant, Reckitt & Colman, Inc. and
is used for office space related to food distribution activities. The
property is subject to the Nomura debt described in "--Summary of
Indebtedness." There are no plans to make any material renovations or
improvements to this property. The property has a Federal tax basis of
approximately $10.7 million and depreciation is being taken on the property
on a straight line basis at the rate of 3.2% per year. The property has an
estimated life of 31.5 years. Real estate taxes in 1997 were $494,050, equal
to $2.41 per $100 of assessed valuation. See "--Description of
Properties--Office Properties" for additional information relating to this
property.
On January 8, 1998, the Company acquired a property located at 101
Commerce Drive in Mechanicsburg, PA which had a purchase price in excess of
10% of the company's total assets at December 31, 1997. The following table
sets forth certain information for this property for the years indicated.
<TABLE>
<CAPTION>
ANNUALIZED RENT
% LEASED ANNUALIZED RENT PER SQUARE FOOT
------------- --------------- -----------------
<S> <C> <C> <C>
1993..... 100% $ 2,933,822 $ 4.91
1994..... 100% $ 2,933,822 $ 4.91
1995..... 100% $ 2,933,822 $ 4.91
1996..... 100% $ 2,933,822 $ 4.91
1997..... 100% $ 2,788,293 $ 4.67
</TABLE>
The property is occupied by a single tenant, Hershey Foods Corporation,
and is used as a food warehouse/distribution facility. The property is
subject to the mortgage described under "--Summary of Indebtedness." There
are no plans to make any material renovations or improvements to this
property. The property has a Federal tax basis of approximately $26.2 million
and depreciation is being taken on the property on a straight line basis at
the rate of 3.2% per year. The property has an estimated useful life of 31.5
years. Real estate taxes are paid directly by the tenant under the terms of
this lease. See "--Description of Properties--Industrial Properties" for
additional information relating to this property.
DESCRIPTION OF PROPERTIES
OFFICE PROPERTIES
40 POTASH ROAD was constructed in 1992 and is located in the Oakland
Industrial Park, Oakland, New Jersey. The park is located within five miles
of each of US Route 202, US Route 208 and I-287. The building is a 3-story
office building with 60,994 square feet, a 3-bay truck service area, loading
docks, 2 elevators, ample parking spaces and is situated on 7
8
<PAGE>
acres. As of December 31, 1997, the building was 100% leased to TCI of Northern
New Jersey under a lease expiring November 10, 2012, subject to four 5-year
renewal options, and generated an Annualized Rent of $1,216,377 on a net basis.
The tenant has the right to purchase the premises during 2002 and 2012 at fair
market value.
1655 VALLEY ROAD was constructed in 1989 as an office building and is
located in the Wayne Office and Research Park, Wayne, New Jersey. The park is
located within 10 miles of each of US Route 202, US Route 208 and I-287. The
building contains 155,700 square feet and 6 elevators and is situated on 11
acres with 438 parking spaces. As of December 31, 1997, the building was 100%
leased to Reckitt & Colman Inc. under a lease expiring December 14, 2003,
subject to two 5-year renewal options, and generated an Annualized Rent of
$2,307,474 on a net basis.
16-00 Route 208 was constructed in 1983 and renovated by the Company in
1998 and is located in the Fair Lawn Industrial Park, Fair Lawn, New Jersey.
The park is located on US Route 208 and is within 5 miles of each of US Route
4 and I-80 and within 10 miles of I-287. The building is a 4-story
multi-tenanted office building with 54,805 square feet, 2 elevators, 235
parking spaces and is situated on 3.3 acres. As of December 31, 1997, the
building was 64% leased and generated Annualized Rent of $527,258. No tenant
leases more than approximately 8,500 square feet.
128 Bauer Drive was constructed in 1981 and is located in the Oakland
Industrial Park, Oakland, New Jersey. The park is located within 5 miles of
each of US Route 202, US Route 208 and I-287. The building is a one-story
office building containing 41,450 square feet and is situated on 5 acres. It
has 80 parking spaces, 4 tailgate loading docks, 2 drive-in ramps and 22'
clear ceiling heights in the warehouse. As of December 31, 1997, the building
was 84% leased and generated an Annualized Rent of $189,358. Effective July
1, 1997, the major tenants were Total Office which leases 25% of the
building, N-D Industries, which leases 34% of the building, and TCI of
Northern New Jersey, Inc., which leases approximately 25% of the building.
22-08 Route 208 was constructed in 1960 as a light industrial building,
which has since been converted to a multi-tenanted office building, and is
located in the Fair Lawn Industrial Park, Fair Lawn, New Jersey. The park is
located on US Route 208 and is within 5 miles of each of US Route 4 and I-80
and within ten miles of I-287. The building is a one-story multi-tenanted
office building containing 78,253 square feet (including a partial basement)
and is situated on 5.5 acres. It has 330 parking spaces. As of December 31,
1997, the building was 75% leased and generated an Annualized Rent of
$673,514. The major tenant is Maxell Corp. of America which leases 28% of the
building.
15-00 Pollitt Drive was constructed in 1970 and was completely renovated
in 1992 at which time all mechanical and electrical systems, windows and
entries were replaced. It is located in the Fair Lawn Industrial Park, Fair
Lawn, New Jersey. The park is located on US Route 208 and is within 5 miles
of each of US Route 4 and I-80 and within 10 miles of I-287. The building is
a one-story office building containing 18,614 square feet, 106 parking spaces
and is situated on 2.7 acres. As of December 31, 1997, the building was
leased 100% to New Jersey Bell Telephone Company under a lease expiring
February 28, 2001 and generated an Annualized Rent of $162,873 on a net basis.
19-00 Pollitt Drive was constructed in 1970 as an office building and is
located in the Fair Lawn Industrial Park, Fair Lawn, New Jersey. The park is
located on US Route 208 and is within 5 miles of each of US Route 4 and I-80
and within 10 miles of I-287. In 1984 the building was completely renovated
and in 1995 was extensively upgraded. The building is a one-story
office/computer center containing 77,262 square feet with approximately 400
parking spaces and is situated on 5.1 acres. As of December 31, 1997, the
building was 100% leased to Paid Prescriptions, Inc., and guaranteed by Merck
& Co., Inc., under a lease expiring January 31, 2006, subject to two 5-year
renewal options, and generated an Annualized Rent of $687,632 on a net basis.
95 Bauer Drive was constructed in 1974 as a two-story office building and
is located in the Oakland Industrial Park, Oakland, New Jersey. The park is
located within 5 miles of each of US Route 202, US Route 208 and I-287. In
1991, the building was retro-fitted to accommodate its current use as a day
care center. It contains 6,792 square feet, 29 parking spaces, a partial
basement and is situated on 2 acres. As of December 31, 1997, the building
was 100% leased to Greentree Learning Centers Inc. under a lease expiring
September 30, 2004, subject to one 5-year renewal option, and is guaranteed
by Children's Discovery Centers of America, Inc. and generated an Annualized
Rent of $88,296 on a net basis.
99 Bauer Drive was constructed in 1971 as an office building and is
located in the Oakland Industrial Park, Oakland, New Jersey. The park is
located within 5 miles of each of US Route 202, US Route 208 and I-287. It
contains 20,449 square feet with 75 parking spaces and is situated on 3
acres. As of December 31, 1997, the building was 100% leased to
Addison-Wesley Educational Publishers, Inc., successor to Scott, Forsman and
Company, under a lease expiring September 11, 2001 and generated an
Annualized Rent of $141,303 on a net basis. Effective April 17, 1997, the
lease was assigned to Stratton Travel, Inc. for the balance of the lease
term. Stratton Travel, Inc. executed a primary lease to commence upon
expiration of the current lease and to continue until September 11, 2006,
subject to one 5-year renewal
9
<PAGE>
option.
88 Mary Street was constructed in 1976 and is located in Paterson, New
Jersey. It is within 1/4 mile of I-80 and is adjacent to St. Joseph's
Hospital and Medical Center, which uses the building for medical offices and
residential units for the staff. The building is an eleven-story office/
residential building containing 114,000 square feet, 3 elevators and is
situated on 1 acre. The land on which the building is situated is owned by
St. Joseph's Hospital and Medical Center and is leased to the Company for $1
per year, and the Company in turn subleases the building to St. Joseph's
Hospital and Medical Center under a sublease expiring July 1, 2004. As of
December 31, 1997, the building was 100% subleased to St. Joseph's Hospital
and Medical Center and generated an Annualized Rent of $525,000 on a net
basis. The sub-tenant has the right to purchase the building at the
expiration of the sublease for $10.00.
INDUSTRIAL PROPERTIES
5 Thornton Road was constructed in 1973 as an industrial building, was
expanded in 1976, 1978 and 1981 and is located in the Oakland Industrial
Park, Oakland, New Jersey. The park is located within 5 miles of each of US
Route 202, US Route 208 and I-287. It contains 151,874 square feet with 230
parking spaces and is situated on 8.7 acres. As of December 31, 1997, the
building was 100% leased to Aramis, Inc., successor to Len-Ron Mfg. Co., and
guaranteed by Estee Lauder, Inc., under a lease expiring April 30, 2003,
subject to two 5-year renewal options, and generated an Annualized Rent of
$905,169 on a net basis. The tenant has a right of first refusal in the event
of a sale of the property to a third party unrelated to the owner.
2 Volvo Drive was constructed in 1966 and is located in the Rockleigh
Office/Research Park, Rockleigh, New Jersey. The park is located within 10
miles of each of US Route 9W, I-87 and I-287. In 1993 the office area was
completely renovated. The building is a one-story industrial building with
mezzanine containing 67,460 square feet with 173 parking spaces and is
situated on 5 acres. As of December 31, 1997, the building was 100% leased to
National Medical Care Medical Products Division, Inc. under the terms of a
lease expiring December 12, 2002, subject to two 5-year renewal options, and
generated an Annualized Rent of $502,577 on a net basis. The tenant vacated
these premises in 1997 but is continuing to pay the rent under the terms of
the lease.
17-01 Pollitt Drive was constructed in 1968 and is located in the Fair
Lawn Industrial Park, Fair Lawn, New Jersey. The park is located on US Route
208 and is within 5 miles of each of US Route 4 and I-80 and within 10 miles
of I-287. The building is a one-story multi-tenanted industrial building
containing 105,367 square feet, 255 parking spaces, 4 tailgate loading docks,
16'8" ceiling heights in the warehouse and is situated on 7.1 acres. As of
December 31, 1997, the building was 71% leased and generated an Annualized
Rent of $547,000 on a net basis. The tenants are MDA Services, Inc., which
leases 40% of the building and Symtron Systems, Inc., which leases 31% of the
building.
19-05 Nevins Road was constructed in 1955 and is located in the Fair Lawn
Industrial Park, Fair Lawn, New Jersey. The park is located on US Route 208
and is within 5 miles of each of US Route 4 and I-80, within 10 miles of
I-287 and has a railroad siding. The building is a one-story industrial
building containing 151,700 square feet with 100 parking spaces and is
situated on 8.4 acres. As of December 31, 1997, the building was 100% leased
to RoadCon Systems, Inc. under the terms of a lease expiring September 30,
2004, and generated an Annualized Rent of $620,930 on a net basis.
1 Philips Drive was constructed between 1991 and 1993 and is located in
Mountaintop, Pennsylvania, near Wilkes-Barre, Pennsylvania. The property is
within 1 to 10 miles of 4 major highways; Interstates 80, 81 and 476 and US
Route 309. The building is a 400,000 square foot, one-story warehouse/
distribution structure with 25 to 33 foot clear ceiling heights, 34 tailgate
dock doors and is situated on 28.7 acres. As of December 31, 1997, the
building was 100% leased to Philips Electronics North American Corporation
and generated Annualized Rent of $1,188,000 on a net basis. The lease expires
December 31, 2007, subject to two 5-year renewal options, and the tenant has
an option to terminate the lease effective January 1, 2003 with a termination
penalty of $1,500,000. The Company acquired this property on January 9, 1998.
100 Oak Hill Road was constructed in 1996 and is also located in
Mountaintop, Pennsylvania, near Wilkes-Barre, Pennsylvania. The property is
within 1 to 10 miles of 4 major highways; Route 309 and Interstates 80, 81
and 476. The building is a 105,000 square foot, one-story warehouse/
distribution structure with 30 foot clear ceiling heights, 8 tailgate dock
doors and is situated on 9.8 acres. As of December 31, 1997, the building was
100% leased to Dana Perfumes Corporation and generated Annualized Rent of
$366,590 on a net basis. The lease expires October 31, 2001 (subject to two
5-year renewal options). The tenant has an option to terminate the lease
effective November 1, 1998 and each year thereafter with decreasing
termination penalties of 12, 6, 6 and 3 months rent. Additionally, the tenant
has an ongoing option to purchase the property.
1057 Arnold Road was constructed in 1995 and is located in Reading,
Pennsylvania. The building is adjacent to the
10
<PAGE>
Reading Regional Airport and within 1 mile of US Routes 222 and 61. The
property is a ground leasehold interest together with the improvements built
thereon. The ground lease expires in 2029 with one 14-year renewal option. At
December 31, 1997, the Annualized Rent under the ground lease was $56,971.
The building is a 219,120 square foot one-story warehouse/distribution
structure with 30 foot clear ceiling heights, 47 tailgate dock doors and is
situated on 29 acres. As of December 31, 1997, the building was 100% leased.
The primary tenant, Premium Beverage Packers, Inc., leases 91% of the
building. The building generates aggregate Annualized Rent of $654,766 on a
net basis. The Company acquired this property on December 24, 1997.
1091 Arnold Road was constructed in 1996 and is located in Reading,
Pennsylvania. The building is adjacent to the Reading Regional Airport and
within 1 mile of US Routes 222 and 61. The property is a ground leasehold
interest together with the improvements built thereon. The ground lease
expires in 2031 with one 14-year renewal option. The Annualized Rent under
the ground lease is $34,594, the payment of which has been waived until
October 31, 1999. The building, consisting of 133,055 square feet, is a
one-story warehouse/distribution structure with 24 foot clear ceiling
heights, 16 tailgate dock doors and is situated on 28 acres. As of December
31, 1997, the building was 100% leased to The Glidden Company and generated
on Annualized Rent of $465,692 on a triple net basis. The tenant has the
right to require the lessor to expand the building by up to 100,000 square
feet with the additional rent to be negotiated in good faith or as determined
by arbitration. The Company acquired this property on December 19, 1997.
1305 Goshen Parkway was constructed in 1991 and is located in West
Chester, Pennsylvania. The building is located within 1 mile of US Route 202
and less than 10 miles from the Pennsylvania Turnpike (I-76). The building is
a 90,000 square foot, one-story warehouse/distribution structure with 18 foot
clear ceiling heights and is situated on 10.2 acres. As of December 31, 1997,
the building was 100% leased to Yves Rocher, Inc. and generated on Annualized
Rent of $503,280 on a net basis. The lease expires December 31, 2000, subject
to one 3-year renewal option, and the tenant has an option to terminate the
lease effective December 31, 1998 with a termination penalty of 1 year's rent
and additional rent. This property was purchased on December 17, 1997.
One Tabas Lane was constructed in 1970 and is located in Exton,
Pennsylvania. The building is located within 1 mile of US Route 202 and
within 10 miles of the Pennsylvania Turnpike (I-76). The building is a
150,027 square foot, one-story warehouse/distribution structure with 24 foot
clear ceiling heights. As of December 31, 1997, the building was 100% leased
to Alstrip, Inc., a subsidiary of Allegheny Ludum, and generated Annualized
Rent of $450,084 on a net basis. The lease expires in 2011 and Alstrip has an
option to terminate the lease effective August 31, 2001 and 2006 with
termination penalties of $200,000 and $100,000 respectively. The tenant has a
right of first refusal to purchase the premises. This property was purchased
on December 17, 1997.
Two Tabas Lane was constructed in 1970 and is located in Exton,
Pennsylvania. The building is located within 1 mile of US Route 202 and
within 10 miles of the Pennsylvania Turnpike (I-76). The building is a
150,000 square foot building with 24 foot ceiling heights substantially
renovated in 1991 with a 90,000 square foot air-conditioned production area,
22,000 square feet of 2 story office space and the balance is warehouse. As
of December 31, 1997, the building was 100% leased to International Envelope
Co. and generated Annualized Rent of $762,520 on a net basis. The lease
expires in 2007 and International Envelope has an option to terminate its
lease effective March 31, 2002 with a termination penalty of $1,295,592. This
property was purchased on December 17, 1997.
101 Commerce Drive was constructed in 1991 and is located in
Mechanicsburg, Pennsylvania. The building is located within 20 miles of
Harrisburg, Pennsylvania. The building is a 597,100 square foot, one-story
refrigerated warehouse/distribution center with 28 foot clear ceiling
heights, 82 tailgate dock doors and is situated on 48 acres. As of December
31, 1997, the building was 100% leased to Hershey Foods Corporation and
generated Annualized Rent of $2,376,446 on a net basis. The lease expires
December 31, 2012, subject to four 5-year renewal options. The Company
acquired this property on January 8, 1998. The purchase price of the
property, including closing costs, was $26.2 million.
4472 Steelway Boulevard consists of 3 buildings constructed in 1977
through 1978 located in suburban Syracuse, New York. The buildings are
located in close proximity to major highways such as I-90, I-81 and the New
York State Thruway. The buildings are one-story warehouse/distribution
facilities, totaling 532,500 square feet, of which 50,000 square feet is
cooler space. The buildings have clear ceiling heights ranging from 24 to 30
feet, and includes 5 rail doors and 42 truck doors with levels and closures.
As of December 31, 1997, the buildings were 100% leased by GATX Logistics,
Inc. and generated Annualized Rent of $1,462,200 on a net basis. The leases
expire May 31, 2001. The Company acquired this property on March 27, 1998.
The purchase price of the property was approximately $13.0 million including
closing costs. Included in the purchase price is 4580 Steelway Boulevard
(described below).
4580 Steelway Boulevard consists of 2 buildings constructed in 1972 and
is located in suburban Syracuse, New York. The facility is located in close
proximity to major highways such as I-90, I-81 and the New York State
Thruway. The
11
<PAGE>
buildings are one-story warehouse/ distribution facilities, totalling 123,000
square feet. The buildings have 24 foot clear ceiling heights and include 10
rail doors and 24 truck doors with levels and closures. As of December 31,
1997, the facility is 100% leased by GATX Logistics, Inc. and generated
Annualized Rent of $307,500 on a net basis. The lease expires May 31, 2001.
The Company acquired this property on March 27, 1998. The purchase price of
the property was approximately $13.0 million including closing costs.
Included in the purchase price is 4472 Steelway Boulevard (described above).
1011 Airpark Drive was constructed in 1991 and is located in Middletown,
Pennsylvania. The building is located within 20 miles of Harrisburg,
Pennsylvania. The building is a 152,908 square foot, one-story industrial
facility with 30 foot clear ceiling heights and 28 tailgate dock doors. As of
March 27, 1998, the building was 80% leased and generated Annualized Rent of
$394,758. As of March 27, 1998, the major tenants were Bayard Sales
Corporation which leases 60% of the building, and DAS Distributors which
leases approximately 20% of the building. The Company acquired this property
on March 27, 1998. The purchase price of the property was approximately $14.4
million including closing costs. Included in the purchase price are 1001
Airpark Drive and 2400, 2404 and 2410 Gettysburg Road.
1001 Airpark Drive was constructed in 1991 and is located in Middletown,
Pennsylvania. The building is located within 20 miles of Harrisburg,
Pennsylvania. The building is a 132,588 square foot one-story industrial
facility with 30 foot clear ceiling heights and 24 tailgate dock doors. As of
March 27, 1998, the building was 100% leased and generated Annualized Rent of
$454,980. As of March 27, 1998, the major tenants were T.P.D.C., Inc. which
leases 31% of the building, Reese Products which leases 23% of the building
and FDA Packaging which leases 45% of the building. The Company acquired this
property on March 27, 1998. The purchase price of the property was
approximately $14.4 million including closing costs. Included in the purchase
price are 1011 Airpark Drive and 2400, 2404 and 2410 Gettysburg Road.
2404 Gettysburg Road was constructed in 1993 and is located in Camp Hill,
Pennsylvania. The building is located within 10 miles of Harrisburg,
Pennsylvania. The building is a 124,902 square foot, one-story
warehouse/distribution facility with 30 foot clear ceiling heights and 20
tailgate dock doors. As of March 27, 1998, the building was 100% leased and
generated Annualized Rent of $456,780 on a net basis. The Company acquired
this property on March 27, 1998. The purchase price of the property was
approximately $14.4 million including closing costs. Included in the purchase
price are 1001 and 1011 Airpark Drive and 2400 and 2410 Gettysburg Road.
2410 Gettysburg Road was constructed in 1952 with an expansion in 1993
and is located in Camp Hill, Pennsylvania. The building is located within 10
miles of Harrisburg, Pennsylvania. The building is a 33,600 square foot,
one-story warehouse/distribution facility with 16 foot clear ceiling heights
and 5 tailgate dock doors. As of March 27, 1998, the building was 100% leased
and generated Annualized Rent of $109,200 on a net basis. The Company
acquired this property on March 27, 1998. The purchase price of the property
was approximately $14.4 million including closing costs. Included in the
purchase price are 1001 and 1011 Airpark Drive and 2400 and 2404 Gettysburg
Road.
2400 Gettysburg Road was constructed in 1952 with an expansion in 1993
and is located in Camp Hill, Pennsylvania. The building is located within 10
miles of Harrisburg, Pennsylvania. The building is a 24,311 square foot,
one-story warehouse/distribution facility with 17 foot clear ceiling heights
and 6 tailgate dock doors. As of March 27, 1998, the building was 100% vacant
and generated no Annualized Rent. The Company acquired this property on March
27, 1998. The purchase price of the property was approximately $14.4 million
including closing costs. Included in the purchase price are 1001 and 1011
Airpark Drive and 2404 and 2410 Gettysburg Road.
NON-CORE PROPERTIES
Urban Farms Shopping Center consists of 3 buildings constructed in stages
between 1965 and 1982 and is located in Franklin Lakes, New Jersey. It is
located within 5 miles of US Route 202, US Route 208 and I-287. The property
contains 3 buildings totaling approximately 91,008 square feet, including an
office building, a retail shopping center/office building and a gas station.
As of December 31, 1997, the property was 90% leased and generated an
Annualized Rent of approximately $1.2 million. At such time, the major
tenants were Market Basket which leases 12% of the property, Hudson United
Bank which leases 10% of the property and Clarks Hallmark which leases 7% of
the property.
1255 East University Drive was constructed in 1987 and is located in
Tempe, Arizona. Known as the Quadrangles Village Apartments, the property is
a 510 unit multifamily residential apartment complex and includes 18 studio
apartments, 246 one bedroom apartments and 246 two bedroom two bathroom
apartments. The apartments range in size from 493 to 848 square feet with a
total of 375,660 square feet or an average of approximately 736 square feet
per unit. The complex is located on approximately 17.9 acres and contains 498
covered parking spaces and 478 open parking spaces. Amenities include 3
swimming pools, of which one is heated, 2 Jacuzzi/spas, a clubhouse, a
workout/exercise
12
<PAGE>
room and barbecue grills. As of December 31, 1997 asking rental rates per
unit ranged from $555 to $745 with an average asking rental rate of
approximately $663 per unit ($.86 per square foot). The average occupancy
rate for Quadrangles Village apartments was 97% as of December 31, 1997.
Average occupancy was 94%, 95% and 92% for 1996, 1995 and 1994, respectively.
Average rental rate per square foot was $.79, $.75 and $.69 for 1996, 1995
and 1994, respectively. This property was acquired on December 2, 1994. At
December 31, 1997, the property had a Federal tax basis of approximately
$20.8 million and depreciation is being taken at the rate of 3.7% per year.
Annual property taxes were approximately $169,000 ($1.22 per $100 of assessed
valuation) at December 31, 1997. On February 26, 1998, the Company signed an
Agreement to sell Quadrangles Village Apartments for a gross selling price of
approximately $27,000,000. The consummation of this sale is subject to the
buyer's due diligence and related approvals from HUD and the lender under the
bond indenture.
PRINCIPAL TENANTS
The following table sets forth information regarding the leases with
respect to the current 10 largest tenants at the properties, based on the
Annualized Rent received from such tenants as of December 31, 1997 including
the Properties acquired after December 31, 1997 as if such Properties were
owned by the Company on December 31, 1997:
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF
TOTAL AGGREGATE AGGREGATE
REMAINING LEASED PORTFOLIO PORTFOLIO
LEASE TERM SQUARE LEASED ANNUALIZED ANNUALIZED
TENANT(1) PROPERTY IN MONTHS FEET SQUARE FEET RENT RENT
- ------------------------- ------------------------- ---------- --------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Hershey Foods Corporation 101 Commerce Drive (3)(4) 180 597,100 13.2% $ 2,376,446 9.9%
Reckitt & Colman, Inc. 1655 Valley Road 70 155,700 3.4 2,307,474 9.6
GATX Logistics, Inc. 4472/4580 Steelway Blvd. (3) 41 655,500 14.4 1,769,700 7.4
TCI of Northern NJ 40 Potash Road 177 60,994 1.3 1,216,377 5.1
Philips Lighting Co., a 1 Philips Drive (3) 118 400,000 8.8 1,188,000 4.9
Division of Philips
Electronics North
American Corp.
Len Ron Mfg. Co./Aramis 5 Thornton Road 62 151,874 3.3 905,169 3.8
International Envelope Two Tabas Lane 111 150,000 3.3 762,520 3.2
Co.
Merck-Medco 19-00 Pollitt Drive 95 77,262 1.7 687,632 2.9
Road Con Systems, Inc. 19-05 Nevins Lane 93 151,700 3.3 620,930 2.6
Premium Beverage Packers, 1057 Arnold Road 26 199,520 4.4 574,618 2.4
Inc.
--- --------- ---- ----------- ----
Total/Weighted Average(2) 98 2,599,650 57.3% $12,408,866 51.6%
--- --------- ---- ----------- ----
--- --------- ---- ----------- ----
<FN>
- ------------------------------
(1) This list is not intended to be representative of the Company's tenants
as a whole.
(2) Weighted average calculation based on total rentable square footage leased
by each tenant.
(3) These properties were acquired subsequent to December 31, 1997.
(4) This tenant did not take possession until January 1998.
</TABLE>
13
<PAGE>
LEASE EXPIRATIONS
The following table sets forth the annual lease expirations and certain
other information for leases existing at the Properties and Non-Core
Properties (other than Quadrangles Village Apartments), including information
with respect to those Properties acquired after December 31, 1997 as if such
Properties were owned by the Company on December 31, 1997 (assuming that no
tenants exercise renewal or cancellation options and that there are no tenant
bankruptcies or other tenant defaults):
<TABLE>
<CAPTION>
Square Annualized Annualized Rent
Footage of Percentage of Rent of Per Leased
Year of Lease Number of Expiring Total Leased Expiring Square Foot of
Expiration Expiring Leases Leases Square Feet Leases Leases
- -------------------- ----------------- ----------- --------------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
1998................ 13 185,867 4.5% $ 588,628 $ 3.17
1999................ 9 72,339 1.7 387,952 5.36
2000................ 16 407,873 9.8 1,894,312 4.64
2001................ 19 1,134,310 27.2 3,806,754 3.36
2002................ 16 274,855 6.6 1,572,448 5.72
2003................ 5 314,053 7.5 3,298,630 10.50
2004................ 3 272,492 6.5 1,234,226 4.53
2005................ 1 7,000 0.2 29,748 4.25
2006................ 4 102,806 2.5 919,600 8.94
2007................ 3 551,850 13.3 1,974,520 3.58
Thereafter.......... 6 840,394 20.2 4,470,309 5.32
-- ----------- ----- ---------- ---------
TOTAL............... 95 4,163,839 100.0% $20,177,127 $ 4.85
-- ----------- ----- ---------- ---------
-- ----------- ----- ---------- ---------
SUMMARY OF INDEBTEDNESS
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Amortization
December 31, 1997 Interest Maturity Period Annual
Debt Component Balance Rate Date (in years) Payment Collateral
- ------------------------------ -------------- -------- -------- ------------ -------------- --------------
(in thousands) (in thousands)
<S> <C> <C> <C> <C> <C>
Nomura Asset Capital Corp..... $ 44,910 7.71% 10/2022 25 $ 4,065 (1)
First Union................... 1,155 (2) 9/2000 N/A 90 100 Oak Hill Road
Equitable of Iowa............. 2,872 8.25 9/2000 20 309 One Tabas Lane
Equitable of Iowa............. 4,374 8.50 9/2005 20 479 Two Tabas Lane
Equitable of Iowa............. 3,351 8.50 9/2005 20 367 1305 Goshen Parkway
HUD........................... 16,251 6.35 5/2026 33 1,236 Quadrangles Village
GECC.......................... 10,088(3) (3) 4/2000 (3) 975 Americana Lakewood
Column Financial.............. 3,500 (4) 4/1998 N/A 810 1057 Arnold Road
------ ------
Total December 31, 1997....... $ 86,501 $8,331
------ ------
Column Financial.............. 1/2008 30 $ 600 1 Philips Drive(5)
Column Financial.............. 1/2008 30 1,356 101 Commerce Drive(5)
Column Financial.............. 7/1998 N/A 162 4472 Steelway Blvd (5)
4580 Steelway Blvd(5)
Column Financial.............. 7/1998 N/A 180 1001 Airpark Drive(5)
------
1011 Airpark Drive(5)
2400 Gettysburg Road(5)
2404 Gettysburg Road(5)
2410 Gettysburg Road (5)
Total ........................ $10,629
-------
-------
March 27, 1998
Debt Component Balance
- ----------------------------- --------------
(In thousands)
Nomura Asset Capital Corp..... 44,759
First Union................... 1,155
Equitable of Iowa............. 2,860
Equitable of Iowa............. 4,356
Equitable of Iowa............. 3,338
HUD........................... 16,199
GECC.......................... --
Column Financial.............. 3,500
Column Financial.............. 7,488
Column Financial.............. 16,972
Column Financial.............. 8,430
Column Financial.............. 9,350
------------
Total March 27, 1998 $118,407
------------
------------
15
<PAGE>
- ------------------------------
(1) Secured by a first lien on 10 properties (see "--Summary Property Table")
subject to certain permitted release provisions. The loan facility contains
covenants and agreements customary in such borrowings.
(2) Debt service is payable monthly at LIBOR Plus 175 basis points, interest
only. Rate as of December 31, 1997 was 7.50%. The Company has 2 one-year
renewal options which allows the extension of the maturity of this debt
through 9/2000.
(3) Debt service is payable monthly at the GECC commercial paper rate plus 245
basis points. Rate at December 31, 1997 was 8.24%. Quarterly principal
payments are required based on a stipulated percentage of Excess Cash
Flow, as defined, from Americana Lakewood Apartments. This debt was
re-paid from the proceeds of the sale of Americana Lakewood on
January 9, 1998.
(4) Debt service is payable monthly at LIBOR plus 200 basis points, interest
only. Rate as of December 31, 1997 was 7.71%. Annual payment is based on
interest payments only at 7.71% until April 2, 1998.
(5) These properties were acquired between January 8, 1998 and March 27, 1998.
(6) Debt service is payable monthly at LIBOR plus 200 basis points, interest
only. Rate as of March 27, 1998 was 7.70%. Annual payment is based on
interest payments only at 7.70% until July 1, 1998.
</TABLE>
DEPRECIATION
See "Schedule III -- Real Estate and Accumulated Depreciation" herein.
GENERAL
In the opinion of management, the Properties are adequately covered by
insurance. The Company has no plans to make any material renovations or
improvements to any of the Properties.
POLICIES WITH RESPECT TO CERTAIN ACTIVITIES
The following is a discussion of the Company's current investment and
financing policies. The Company's policies with respect to these activities
have been determined by the Directors of the Company and may be amended or
revised from time to time at the discretion of the Directors without a vote
of the stockholders of the Company.
INVESTMENT POLICIES
The Company's primary business objectives are to maximize total return to
stockholders through growth in the Company's cash flow per share and to
increase the size and value of its portfolio. The Company intends to pursue
these objectives through aggressive asset and property management, acquiring
and selectively developing new properties and opportunistically reinvesting
capital currently invested in the Non-Core Properties with a view towards
maximizing cash flow. Though the Company is currently focusing its activities
in the mid-Atlantic and Northeastern United States, no specific geographic
limitations have been established.
The Company intends to accomplish its business objectives (1) through
contractual increases in rental rates from existing leases, (ii) by
maintaining and increasing occupancy levels in its properties, (iii) by
increasing rental rates through aggressive management and re-leasing of
space, (iv) by acquiring primarily new properties and portfolios in strategic
situations and locations, (v) by targeting properties which have potential
for additional growth through adoptive re-use and/or expansion) and (vi) by
generating build-to-suit development opportunties, particuarly by maintaining
strong landlord/tenant relationships and establishing local market
prominence. The Company has not adopted any policy as to the amount or
percentage of its assets that can be invested in
16
<PAGE>
a single property. The key criterion for new investments will be that they
offer total returns likely to enhance stockholder value and the opportunity
for growth in cash flows from operating activities and asset value.
The Company may purchase or develop properties for long-term investment,
expand, renovate and improve its properties or sell any of its existing or
acquired 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 shared ownership. Equity investments
may be subject to existing mortgage financing and other indebtedness which
have priority over the equity interest of the Company.
Future investments are not limited (as to percentage of assets or
otherwise) to any geographic area or any specified type of property. The
Company may decide, under favorable economic circumstances, to develop
properties.
While the Company intends to emphasize equity real estate investments, it
may, in its discretion, invest in mortgages and other real estate interests.
Mortgage investments may include participating or convertible mortgages. The
Company's investment in mortgages may include investments as a strategy for
ultimately acquiring a property, and might also include the purchase of
non-performing loans at a discounted price. Subject to the percentage of
ownership limitations and gross income and asset tests necessary for REIT
qualification, the Company may also invest in securities of entities engaged
in real estate activities or securities of other issuers. In the future, the
Company may acquire all or substantially all of the securities or assets of
other REITs or similar entities where such investments are consistent with
the Company's investment policies. In any event, the Company does not intend
that its investments in securities will require the Company to register as an
"investment company" under the Investment Company Act of 1940, and the
Company intends to divest securities before any such registration would be
required.
FINANCING POLICIES
The Company has not adopted any policy to limit the amount or percentage
of debt the Company may incur or to maintain any maximum debt-to-Total Market
Capitalization ratio. As of December 31, 1997 and March 27, 1998 the Company
had a debt-to-Total Market Capitalization ratio of approximately 37.8% and
46.4%, respectively (based on the closing price of $19.25 and $17.88 per
share of Common Stock on December 31, 1997 and March 27, 1998 ,
respectively). "Total Market Capitalization" means the sum of the aggregate
market value of the Company's outstanding Common Stock, the carrying amount
of the minority interest and the total debt of the Company on the date
thereof. The debt-to-Total Market Capitalization ratio, which is based upon
the market value of the Company's equity and, accordingly, fluctuates with
changes in the price of the Common Stock, differs from a debt-to-book
capitalization ratio. To the extent the Company incurs or assumes
indebtedness with respect to properties in connection with pending or future
acquisitions, the Company's debt-to-Total Market Capitalization may change.
The Company believes that debt-to-Total Market Capitalization provides a more
appropriate indication of leverage for a company whose assets are primarily
operating real estate.
The Company may in the future adopt a debt policy in light of then
current economic conditions, relative costs of debt and equity capital,
market values of properties, growth and acquisition opportunities and other
factors, and may modify any debt financing policy from time to time. If the
Board of Directors determines that additional funding is required, the
Company may raise such funds through additional equity offerings (including
offers of senior securities), debt financing or retention of cash flow
(subject to provisions in the Internal Revenue Code of 1986, as amended (the
"Code") concerning taxability of undistributed REIT income), or a combination
of these methods. The Company has agreed to use all commercially reasonable
efforts to maintain a level of indebtedness at least equal to the level of
indebtedness immediately following the closing of the Reorganization and to
cause its lenders to permit McBride to guarantee such level of indebtedness.
In the event the Board of Directors determines to raise additional equity
capital, the Board of Directors has the authority, without stockholder
approval, to issue additional shares of Common Stock up to the maximum number
authorized, or other capital stock, on such terms and for such consideration
it deems appropriate, including in exchange for property. Existing
stockholders will have no preemptive right to purchase capital stock issued
in any such offerings, and any such offerings might cause a dilution of a
stockholder's investment in the Company.
To the extent that the Board of Directors determines to obtain additional
debt financing, the Company intends to do so generally through loans secured
by mortgages on its properties and lines of credit. These mortgage loans may
be recourse, non-recourse or cross-collateralized and may contain
cross-default provisions. The Company does not have a policy limiting the
number of mortgages that may be placed on any particular property or the
amount of the loans secured by such mortgages, but mortgage financing
instruments usually limit additional indebtedness on such properties.
Indebtedness incurred by the Company may be in the form of bank borrowings,
secured and unsecured, and publicly and privately placed debt instruments.
Such indebtedness may be with recourse to all or any part of the property of
the Company, or may be limited to the particular property to which the
indebtedness relates. The proceeds from any borrowings by the Company may be
used for the payment of distributions, for working capital, to refinance
existing indebtedness or to finance acquisitions of new properties or
expansions of existing or new properties.
17
<PAGE>
The Company intends to seek to acquire additional real estate assets
using shares of Common Stock to pay all or a portion of the purchase price.
The Company may also issue senior equity securities or shares of preferred
stock for this purpose. There can be no assurance that such issuances may not
be dilutive to the Company's existing stockholders. In addition, shares of
Common Stock may be issued on terms which grant the recipient the right to
require the Company to register the shares under the Securities Act of 1933,
as amended (the "Securities Act"). Sales of those shares may adversely affect
the market price of the Company's outstanding shares of Common Stock.
The Company may also acquire additional real estate assets in exchange
for OP Units. This creates the opportunity for tax deferred transactions for
the seller.
EXECUTIVE OFFICES
The Company's executive offices are located at 620 West Germantown Pike,
Suite 200, Plymouth Meeting, Pennsylvania 19462. These facilities, which
include approximately 5,900 square feet of office space, are sub-leased from
Platinum Technology, Inc., pursuant to a sub-lease expiring March 31, 2000 at
an annual rental of approximately $112,000 plus the Company's proportionate
share of costs of services and property taxes.
ITEM 3. LEGAL PROCEEDINGS.
------------------
Neither the Company nor the Properties are presently subject to any
litigation which the Company believes will result in any liability that will
be material to the Company, other than routine litigation arising in the
ordinary course of business, substantially all of which is expected to be
covered by liability insurance.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
----------------------------------------------------
During the 4th quarter of the year ended December 31, 1997, a Special
Meeting of Stockholders of the Company was held on Thursday, December 11,
1997 in which the following matters were submitted to a vote of the
stockholders of the Company in connection with the Reorganization.
1. A proposal to approve the consummation of an agreement with McBride
providing for the contribution to the Company or the Operating Partnership
of (i) interests in certain entities owning real properties, cash and
agreements to acquire office and industrial properties, and (ii) $2 million,
in exchange for Common Stock and OP Units;
2. A proposal to approve the consummation of the merger (the "Merger")
of Fair Lawn Industrial Park, Inc., a New York corporation ("FLIP"), which
was owned by certain persons associated with McBride, with and into the
Company pursuant to which the Company issued to the stockholders of FLIP
shares of Common Stock of the Company and, as a consequence of the Merger,
resulted in the adoption of Amended and Restated Articles of Incorporation
of the Company and the reconstitution of the Company's Board of Directors;
and
3. A proposal to approve the consummation of an agreement providing for
the purchase by Hudson Bay and certain other investors of a total of
1,963,635 shares of Common Stock of the Company.
The Stockholders of the Company approved all 3 matters by the following
votes in person or by proxy:
<TABLE>
<CAPTION>
VOTES CAST
-------------------------------------
<S> <C> <C> <C> <C> <C>
MATTER FOR AGAINST WITHHELD ABSTENTIONS BROKER NON-VOTES
- --------- --------- --------- --------- ------------- -----------------
1 619,767 12,750 0 2,460 5,054
2 620,667 12,750 0 2,460 4,154
3 619,467 11,750 0 2,460 6,354
</TABLE>
18
<PAGE>
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
--------------------------------------------------------
On January 26, 1994, the Company's Board of Directors declared an initial
cash dividend of $0.11 per share to each stockholder of record on February 7,
1994. As set forth below, the Company has paid a cash dividend for each
calendar quarter subsequent to its initial cash dividend.
The Company's Common Stock is traded on the American Stock Exchange
("AMEX") under the symbol REA. The high and low last sale prices as reported
by the AMEX for each calendar quarter from January 1, 1996 to December 31,
1997 and the dividends with respect to the Company's operations for each such
calendar quarter were as follows:
<TABLE>
<CAPTION>
SALES PRICE
--------------------
YEAR/QUARTER HIGH LOW DIVIDENDS
- ------------------- -------- -------- -------------
<S> <C> <C> <C>
1996:
1st Quarter....... $8 5/8 $7 7/8 $0.21125
2nd Quarter....... $9 1/4 $8 1/4 $0.2125
3rd Quarter....... $8 11/16 $7 11/16 $0.21375
4th Quarter....... $8 3/4 $7 3/4 $0.2150
1997:
1st Quarter....... $10 1/4 $8 1/2 $0.21625
2nd Quarter....... $9 15/16 $8 5/8 $0.2175
3rd Quarter....... $16 3/4 $9 5/8 $0.21875
4th Quarter....... $19 1/4 $13 7/8 $0.2200
</TABLE>
As of December 31, 1997, the Company had 93 stockholders of record and
believes that it had in excess of 1,200 beneficial holders.
The following table lists the number of shares of Common Stock of the
Company and each recipient of such shares who received shares pursuant to the
Reorganization. The Company issued these shares to such recipients without
registration under the Securities Act pursuant to the exemption from
registration provided by Section 4(2) of the Securities Act. In determining
that the issuance of Common Stock of the Company to each of such recipients
complied with Section 4(2) of the Securities Act, the Company relied on each
such recipient's declaration that it is an accredited investor as that term
is defined in the Securities Act.
<TABLE>
<CAPTION>
NAME NUMBER OF SHARES
----------------
<S> <C>
Hudson Bay Partners II, L.P....................... 1,454,545
CRA Real Estate Securities, L.P................... 454,545
Robert Branson.................................... 27,273
The Branson Family L.L.C.......................... 27,272
Urban Holdings, L.L.C............................. 882
Margaret Mary McBride Revocable
Trust UID 3/10/88,
Timothy B. McBride, Trustee.............. 202
Mary Kay McBride.................................. 101
John Nevins McBride, Article Third Testamentary
Trust "B", UWD 3/26/93, David F. and W. Peter
McBride, Trustees............................... 101
Joseph A. McBride................................. 203
</TABLE>
19
<PAGE>
<TABLE>
<S> <C>
Urban Holdings, L.L.C............................. 14,580
Francis V. McBride, Jr. Revocable Trust UID
4/22/96, Antoinette R. McBride, Trustee......... 163,528
Joan H. McBride................................... 163,528
M. Virginia DeKorte............................... 163,528
Timothy B. McBride................................ 163,528
Timothy B. and Marcia G. McBride.................. 11,364
Kathryn Kruckel................................... 130,823
Miora Murphy...................................... 130,822
J. Nevins McBride, Jr............................. 130,822
W. Peter McBride.................................. 130,822
David F. McBride.................................. 130,822
Terence A. McBride................................ 163,528
Sheila James...................................... 163,528
Michael X. McBride................................ 174,892
Mark J. McBride................................... 163,528
Evan Zucker....................................... 30,253
Evan Zucker Rabbi Trust........................... 45,434
James Mulvihill................................... 30,253
James Mulvihill Rabbi Trust....................... 38,616
Rick A. Burger.................................... 26,710
----------------
Total..................................... 4,136,033
</TABLE>
20
<PAGE>
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION.
OVERVIEW
The following discussion should be read in conjunction with the 1997 and
1996 financial statements appearing elsewhere herein.
At a special meeting of the Company's stockholders on December 11, 1997,
the Company's stockholders approved a series of transactions, as part of the
Reorganization, that effectively transferred the Company from a multi-family
residential REIT into an office and industrial REIT. The
Reorganization, which was consummated on December 12, 1997, involved the
following transactions (i) the acquisition by the Company of interests in 15
properties totaling 1.2 million square feet located in Northern New Jersey and
$8,400,000 in cash from McBride in exchange for approximately 4.1 million shares
of common stock, 2,998,867 OP Units, 125,000 OP Unit warrants with an exercise
price of $11 per OP Unit and the assumption of $45,000,000 in mortgage debt,
(ii) the contribution by Jeffrey Kelter of a non-voting equity interest in Penn
Square, a full service real estate development, management, construction and
brokerage company, in exchange for approximately 363,636 OP Units and 250,000
7-year OP Unit warrants with an exercise price of $11 per OP Unit, and (iii)
$30,000,000 in cash investments, in exchange for common stock and OP Units, led
by Hudson Bay along with CRA, McBride and Robert Branson. The Company has also
acquired 15 additional industrial properties aggregating approximately 3.0
million square feet between December 12, 1997 and March 27, 1998.
Additionally, the Company has implemented its strategy to dispose of all its
remaining multi-family properties in order to re-invest the proceeds in office
and industrial properties. Two multifamily properties and an equity interest in
another property were sold in 1997. At December 31, 1997, 2 multifamily
properties remained, 1 of these properties was sold on January 9, 1998. On
February 26, 1998, the Company signed an agreement to sell the last multi-family
property for a gross selling price of approximately $27,000,000. The
consummation of this sale is subject to the completion of the buyer's due
diligence and the receipt of certain approvals from HUD and the lender under the
bond indenture.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
Net income of the Company was $1,243,000 in 1997 as compared to $1,104,000
in 1996.
Rents and fees revenues decreased from $9,943,000 in 1996 to $7,732,000 in
1997 primarily as a result of the sale of International Apartments
("International") on December 20, 1996, the sale of Timberleaf Apartments
("Timberleaf") on February 28, 1997 and the sale of Sedona Apartments ("Sedona")
on August 29, 1997. Americana Lakewood Apartments ("Americana") and Quadrangles
Village Apartments ("Quadrangles"), the Company's 2 remaining properties as of
December 31, 1997, both experienced higher rents and fees revenues in 1997 as a
result of higher rental rates. Lower vacancies occurred at Americana in 1997,
contributing to higher rents and fees revenues. In addition, rent revenue
increased by $675,000 in 1997 as a result of the acquisition of the McBride
Portfolio and other industrial properties on December 12, 1997.
Other income increased to $465,000 in 1997 from $297,000 in 1996 primarily
as a result of interest earned on the net cash proceeds generated from sales of
various multifamily properties in 1997 and of International in December 1996.
This increase was partially offset by reductions in other income from the sale
of International, Timberleaf and Sedona.
Operating expenses increased to $11,090,000 in 1997 from $10,128,000 in
1996. This increase was the result of the following: a $217,000 increase in
general and administrative expenses from additional legal fees incurred by the
Company primarily in conjunction with the settlement of the lawsuit relating to
the Company's 50% general partner interest in Emerald Vista Associates, L.P.
("Emerald Vista"); $3,203,000 of non-recurring expenses in 1997 associated with
the buyout of employment contracts with 3 former Company officers and the
cancellation of outstanding options held by these officers and warrants held by
certain other individuals in conjunction with the transactions which were
consummated on December 12, 1997. These increases were offset by various
decreases in property operating expenses as a result of the various multifamily
property sales in 1997 and the fourth quarter of 1996. Operating expenses
increased approximately $200,000 as a result of the acquisitions which occurred
on December 12, 1997.
The $2,893,000 operating loss for 1997 is primarily the result of the
$3,203,000 expense associated with the buyout of the employment agreements and
options of the former executives of the Company. Excluding this non-recurring
expense, operating income would have increased approximately $200,000 over 1996.
21
<PAGE>
The minority interest allocation was $876,000 in 1997 as compared to
$1,364,000 in 1996. Income before the allocation to minority interest for 1997
and 1996 was $2,119,000 and $2,468,000, respectively. The proportionate decrease
in the minority interest's share of income in 1997 is primarily a result of the
$605,000 carryover preference allocated to the minority interest in 1996, which
reduced the cumulative carryover amount due to the limited partners in the
Operating Partnership to zero at December 31, 1996.
The $4,608,000 aggregate gain from property sales in 1997 was the result of
the Company's successful execution of it's decision to sell the various
multi-family assets. In 1997, the Company realized gains from the sales of
Timberleaf ($403,000) on February 28, 1997, the sale of Sedona ($3,453,000) on
August 29, 1997 and the September 26, 1997 sale of the Company's 50% general
partner interest in Emerald Vista which generated a gain of approximately
$752,000. This compares to the $1,786,000 gain realized in December 1996 related
to the sale of International apartments for a gross sales price of $3,050,000.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1997, cash and cash equivalents totaled $17,672,000 and
additional amounts aggregating $3,764,000 were available to the Company from
escrows for use in future acquisitions. As discussed above, on December 12,
1997, the Company consummated the Reorganization with the Investor Group which
resulted in a cash infusion of $30,000,000, of which $8,400,000 was provided by
McBride. This equity infusion combined with the $9,600,000 of net cash proceeds,
after debt repayment, generated from the sale of several multifamily assets in
1997, allowed the Company to consummate the acquisition of 6 industrial
properties in December 1997 which contained an aggregate of 847,000 square
feet for an aggregate purchase price of approximately $27,900,000, including
$11,773,000 of assumed debt, and to pay transaction costs related to the
Reorganization. During January 1998, the Company utilized approximately
$12,400,000 of these cash reserves and $24,500,000 of debt financing at
7.03%, a 10-year term and 30-year amortization period, to fund the
acquisition of 2 additional industrial facilities which aggregated 997,000
square feet for an aggregate purchase price of $37,400,000. On March 27,
1998, the Company acquired 7 industrial facilities aggregating approximately
1,100,000 square feet for an aggregate purchase price of $27,400,000. These
acquisitions were funded with $17,780,000 of variable rate debt (LIBOR plus
2%) and $9,620,000 in cash payments.
As of December 31, 1997, the Company had approximately $86,501,000 of
mortgage notes outstanding consisting of 8 mortgage loans which had a weighted
average interest rate of 7.59%. Approximately $4,600,000 of this debt matures in
1998. At December 31, 1997, the Company's total market capitalization was
approximately $229 million, and the Company's consolidated debt represented
approximately 37.8% of total market capitalization. As of March 27, 1998, after
the effect of the 1998 acquisitions discussed herein, the Company's total market
capitalization was approximately $255 million, and the Company's consolidated
debt represented approximately 46.4% of total market capitalization.
The Company is in the process of concluding final negotiations with a lender
group, including DLJ Capital Funding, Inc. and BankBoston, N.A., to enter into a
3-year $100,000,000 senior secured revolving credit facility. This Credit
Facility will be used to fund new acquisitions, capital improvements, new
development projects and for general working capital purposes. The Credit
Facility will be recourse to the Company and the Operating Partnership and will
be secured by cross-collateralized and cross-defaulted first mortgage liens on
certain properties, either currently owned by the Operating Partnership or to be
acquired as the result of future transactions. The interest will accrue on
outstanding loans under the Credit Facility at a variable rate per anum equal to
the sum of a Eurodollar rate plus 1.6% per anum. The availability of loans under
the Credit Facility will be limited to 65% of the aggregate purchase price or
appraised value of the respective properties securing the Credit Facility and
will be subject to certain stated debt service coverage ratios. The Credit
Facility will be subject to optional prepayments at any time and mandatory
prepayments upon the occurrence of certain conditions, and will contain
financial covenants which are standard for these types of revolving credit
facilities. The Credit Facility is subject to final negotiation of its terms,
and therefore no assurance can be given that this arrangement will be ultimately
consummated, or if consummated, that it will be based upon the terms described
above.
During 1997 and 1996, the Company paid distributions totaling $.87 and $.85
per common share, respectively, which aggregated $985,000 and $943,000. On
February 18, 1998, the Company announced a dividend of $.22 per common share for
the fourth quarter of 1997 which was paid on March 16, 1998. In addition, the
Company announced its intention to adjust the amount of its quarterly dividend
annually. Management currently anticipates that it will review its dividend
payout at the end of the second quarter of 1998, at which time, the Company will
adjust the dividend amount to better reflect: (i) the increase in earnings and
cash flow expected from recent acquisitions and (ii) capital needs associated
with future growth opportunities.
The Company expects to meet its short-term (1 year or less) liquidity needs
based on its cash flow from operations. The Company believes that its principal
short-term liquidity needs are to fund normal recurring operating expenses,
recurring capital improvements, debt service and distributions to its
stockholders and holders of OP Units.
The Company expects to meet long-term liquidity requirements including
property acquisitions, debt maturities, major
22
<PAGE>
renovations, expansions and other non-recurring capital improvements through
long-term secured and non-secured indebtedness and the issuance of additional
equity securities. Additional cash flow will be generated from the sale of 2
remaining multifamily assets in 1998, 1 of which was sold on January 9, 1998
which resulted in $4,500,000 of additional net cash proceeds available to fund
future acquisitions. As discussed above, the last remaining multi-family asset
is under agreement of sale which is subject to the completion of the buyer's due
diligence and the receipt of certain approvals from HUD and the lender under the
bond indenture. Based upon the current agreed selling price for this asset of
approximately $27,000,000, additional net cash proceeds of approximately
$10,000,000 would be available in 1998 for reinvestment in future acquisitions.
CASH FLOWS
Cash and cash equivalents were approximately $17,700,000 and $1,342,000 at
December 31, 1997 and 1996, respectively. The overall increase in cash and cash
equivalents primarily resulted from proceeds generated from the sale of
multifamily properties and the cash infusions into the Company as a result of
the Reorganization.
Net cash provided by operating activities was $2,087,000 in 1997 compared
to $2,254,000 in 1996. Operating cash flows in 1997 were positively effected
by an increase of approximately $140,000 in net income and increases in
accrued expenses. These increases in cash flow were offset by reductions in
operating cash flow as a result of the multifamily asset sales which occurred
in 1997.
Investing activities in 1997 resulted in a use of cash of $3,134,000 as
compared to net cash provided of $2,571,000 in 1996. The increase in the use of
cash in investing activities primarily resulted from an increase in capital
improvements at 1 of the multifamily properties (Sedona) in order to improve the
property prior to its sale and the increase in cash held in escrows of
$3,764,000 which resulted from the sale of Sedona in the 3rd quarter of 1997
which were not yet reinvested until the January 1998 acquisition of 101 Commerce
Drive.
Cash provided by financing activities increased by approximately $21,500,000
in 1997 over 1996 primarily as a result of the Investor Group's net investment
of $20,780,000 as part of the Reorganization. Additionally, the Company
refinanced a $4,200,000 bank installment loan outstanding at December 31, 1996
with a $5,700,000 mortgage note on January 31, 1997. This mortgage note was
later repaid from the proceeds of the sale of Sedona on August 29, 1997. A
$3,500,000 mortgage note was obtained in order to finance the acquisition of
1057 Arnold Road in December 1997. The Company incurred $694,000 of financing
costs related to the various acquisitions which were consummated in December
1997.
FUNDS FROM OPERATIONS
Funds From Operations ("FFO"), which is a commonly used measurement of the
performance of an equity REIT, as defined by the National Association of Real
Estate Investment Trusts, Inc. ("NAREIT"), is net income (computed in accordance
with generally accepted accounting principles), excluding gains (or losses) from
debt restructuring and sales of property, plus depreciation and amortization,
and after adjustments for unconsolidated partnerships and joint ventures.
Adjustments for unconsolidated partnerships and joint ventures will be
calculated to reflect funds from operations on the same basis. Management
believes the presentation of FFO is a useful disclosure as a general measurement
of its performance in the real estate industry, although the Company's FFO may
not necessarily be comparable to similarly titled measures of other REITs.
NAREIT recently clarified the application of its FFO definition and recommended
the implementation of the new application of its FFO definition no later than
for fiscal periods beginning in 1996. The Company implemented the new
application of the NAREIT FFO definition in the 1st quarter of 1996 and all
amounts shown conform to the new NAREIT definition. FFO does not represent cash
generated from operating activities in accordance with generally accepted
accounting principles and is not necessarily indicative of cash available to
fund cash needs and should not be considered as an alternative to net income as
an indicator of the Company's operating performance or as an alternative to cash
flow as a measure of liquidity.
FFO, Pro Forma FFO and cash flows and Pro Forma cash flows for the 2 years
ended December 31, 1997 and 1996 are summarized in the following table ( in
thousands, except per share data):
23
<PAGE>
<TABLE>
<CAPTION>
1997 1996
PROFORMA 1997 PRO FORMA 1996
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
Net income before minority interest....................................... 7,121 $2,119 5,634 $2,468
(Less) Plus:
Gains on sales of real estate........................................... -- (4,608) -- (1,786)
Equity in (earnings) losses from investments in partnership and
management company.................................................... 340 (404) 268 (570)
(Less) Plus:
Depreciation related to real estate..................................... 4,763 909 4,740 1,306
Termination of employment agreements and options and warrants buyout.... -- 3,203 -- --
Cash received in excess of revenue recognized on direct financing
lease................................................................. 183 -- 157 --
FFO contribution (loss) from equity investments........................... (180) 630 (108) 748
----------- ---------- ----------- ----------
Funds from Operations..................................................... $12,227 $1,849 $10,691 $2,166
----------- ---------- ----------- ----------
----------- ---------- ----------- ----------
Cash flow from operating activities....................................... 13,541 $2,087 12,390 $2,254
Cash flow from investing activities....................................... (53,028) (3,134) (49,180) 2,571
Cash flow from financing activities....................................... 49,657 17,377 47,211 (4,119)
---------- ----------
Net increase in cash...................................................... - $16,330 - $706
----------- ---------- ----------- ----------
----------- ---------- ----------- ----------
Weighted average number of common shares--basic........................... 5,363,281 1,347,297 5,242,297 1,106,379
Weighted average number of common shares--diluted......................... 9,461,426 2,404,004 9,285,546 --
</TABLE>
Pro forma FFO and Pro forma cash flow information for 1997 and 1996 as shown
above, combines the Company's historical operating results with the incremental
rental income and operating expenses of the properties acquired in 1997 and
subsequent to December 31, 1997, including adjustments for depreciation, based
upon the acquisition price associated with the property acquisitions, and
interest costs assuming the borrowings to finance the property acquisitions
had occurred at the beginning of the respective year. The above pro forma
amounts are also adjusted to reflect the impact of the multi-family property
dispositions in 1997 and 1996 as if they were disposed of as of the beginning
of the respective year.
These pro forma amounts are not necessarily indicative of what the actual
results of the Company would have been, assuming the above property acquisitions
had been consummated at the beginning of 1997 or 1996, nor do they purport to
represent the future results of the Company.
In 1997, the Company added back to FFO the $3,203,000 of costs associated
with the termination of employment agreements and options issued to certain
officers and the costs associated with the buyout of certain outstanding
warrants in order to eliminate their impact on FFO as these items are unusual
and were associated with the Reorganization and therefore will not have a
continuing impact on the Company.
The decrease in FFO from 1996 is a direct result of the Company's execution
of its disposition plan for the multifamily assets in 1997. The sales of
International (December 20, 1996), Timberleaf (February 28, 1997), Sedona
(August 29,
24
<PAGE>
1997) and its partnership interest in Emerald (September 26, 1997) all adversely
impacted FFO in 1997 as the transactions, which reorganized the Company as an
office and industrial REIT, occurred on December 12, 1997. Accordingly, reported
FFO for 1997 only includes a slight amount of the accretive effects of the
December 1997 transactions. Additionally, it is negatively impacted by the
reduced FFO from the multifamily assets which were sold throughout 1997 and the
lack of complete reinvestment of these sale proceeds in 1997 which reinvestment
occurred or will occur in the first half of 1998.
Cash flows from operating activities in 1997 did not decrease in proportion
to the decrease in FFO in 1997 as a result of the increase in certain accrued
expenses in 1997 which resulted in a source of cash flow from operating
activities. Cash flows from operating, investing and financing activities are
discussed in further detail above in "--Cash Flows."
INFLATION
The Company's leases for commercial office and industrial properties
generally require tenants to pay either their share of operating expenses,
including common area maintenance, real estate taxes and insurance or pay 100%
of these costs directly (for triple net leases), as a result, the Company's
exposure to increases in costs and operating expenses is reduced. The Company
does not anticipate that inflation will have a significant impact on its
operating results in the near future.
THE YEAR 2000 ISSUE
The Company utilizes 3rd party software in order to maintain its accounting
and property management systems. This software is either already year 2000
compliant or is scheduled to be upgraded in order to be compliant by the end of
the 3rd quarter of 1998. Based upon its review of the status of the existing
systems, management does not anticipate that the Company will incur significant
costs in 1998 in order to bring the existing systems into compliance with year
2000 requirements.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. Certain information included herein is
forward-looking, such as information set forth above in Management's Discussion
and Analysis of Financial Condition and Results of Operations. Such
forward-looking information involves important risks and uncertainties that
could cause actual future results to differ significantly form those expressed
in any forward-looking statements made by, or on behalf of, the Company or to
render the Company unable to accomplish its business objectives. These risks and
uncertainties include, but are not limited to, uncertainties relating to
economic conditions, acquisitions, development and divestitures of properties,
operational and management changes, possible rapid growth of the Company,
geographic concentrations of real estate, possible future tenant breaches of
leases, and changes in the competitive environment in which the Company and its
investors operate.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The response to this Item 7 is included as a separate section of this annual
report on Form 10-KSB. See pages F-1, et seq.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
The Company's principal independent accountant neither resigned nor was
dismissed during the 2 most recent fiscal years.
25
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE
EXCHANGE ACT.
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth, for each person who was a Director or
Executive Officer of the Company as of December 31. 1997, the class of Directors
to which such Director belongs or the title of such Executive Officer, the name
and age of such Director, and the year in which such person first became a
Director or Executive Officer of the Company:
<TABLE>
<CAPTION>
YEAR FIRST
ELECTED AS
DIRECTOR/
EXECUTIVE
NAME TITLE OFFICER AGE
- -------------------------------------------------------------------------- ---------------------- ----------- ---
<S> <C> <C> <C>
Directors Whose Terms Will Expire at the Annual Stockholders Meeting held
in 1998:
Evan Zucker............................................................. Director 1993 32
Timothy McBride......................................................... Director 1997 51
Directors Whose Terms Will Expire at the Annual Stockholders Meeting held
in 1999:
Jeffrey E. Kelter....................................................... Director 1997 43
Robert Branson.......................................................... Director 1997 49
Directors Whose Terms Will Expire at the Annual Stockholders Meeting held
in 2000:
James Mulvihill......................................................... Director 1993 33
David Lesser............................................................ Director 1997 32
David F. McBride........................................................ Director 1997 50
Executive Officers:
David F. McBride........................................................ Chairman 1997 50
Jeffrey E. Kelter....................................................... President 1997 43
Steven J. Butte......................................................... Vice President/Secretary/ 1997 38
Assistant Treasurer
Rick A. Burger.......................................................... Treasurer 1993 39
</TABLE>
Mr. Zucker was President of the Company from August 1993 until December 1997
when he was replaced by Jeffrey E. Kelter pursuant to the terms of the
Reorganization. From its inception in 1990, he has been President of Alpine Real
Estate Investments, Inc., and subsequently of Black Creek Capital, LLC, both
Denver-based real estate investment firms. At Alpine and Black Creek Capital,
LLC, Mr. Zucker's responsibilities include acquisitions and financing of all
real property purchased by the firms. From 1988 to 1990, he served as General
Partner in charge of acquisition and finance for Zucker Properties, a local
Denver real estate investment firm. In 1985, Mr. Zucker traded on The New York
Futures Exchange for his own account. Mr. Zucker graduated from Stanford
University in 1987 with a B.A. in Economics.
Timothy McBride has been the Director of Tax and Finance of McBride since
1991 and a board member of McBride and affiliated companies since 1979. A
graduate of Santa Clara University and Georgetown University Law Center with
both a law degree and a Masters of Law in Taxation, Mr. McBride was a partner in
the Washington, DC law firm of Heenan Althen & Roles where he remains Of
Counsel. In addition, Mr. McBride has served as disinterested trustee of several
non-McBride private funds since 1991. Mr. McBride also has served on Georgetown
University's Board of Regents since 1996. Mr. McBride is a member of the bars of
Washington, DC, Virginia, and New Jersey. He is a former U.S. Air Force officer
and served as an Assistant U.S. Attorney in the Department of Justice, Tax
Division. Messrs. Timothy and David McBride are first cousins.
Mr. Kelter has been President of the Company since December 1997 pursuant to
the terms of the Reorganization. He has over 17 years of experience in all
phases of commercial real estate including development, third-party management
and construction. Upon graduating from Trinity College in Hartford, Connecticut
in 1976, Mr. Kelter was employed by The Bankers Trust Corporation where he was
an assistant treasurer in the Corporate Finance division. In 1982, Mr. Kelter
was employed by Vector Properties in Tulsa, Oklahoma, where he was in charge of
the development and finance of several downtown Tulsa office building
renovations. In 1982, Mr. Kelter
26
<PAGE>
founded Penn Square Properties, Inc. in Philadelphia and has served as chief
executive officer and president. Mr. Kelter also serves on the Board of
Directors of the Central Philadelphia Development Corporation (CPDC), a
non-profit urban planning commission. He has developed, owned, managed and
leased more than 4.5 million square feet of office and warehouse projects
throughout the Pennsylvania and New Jersey markets.
Mr. Branson has been a principal of Branson & Associates, a real estate
consulting firm, since January 1997. Prior thereto, from October 1981 to
December 1996, he was a principal of Linden & Branson, a certified public
accounting firm specializing in the real estate industry. Prior to October 1981,
Mr. Branson was employed by Arthur Andersen & Co.
Mr. Mulvihill was Chairman of the Board of the Company from December 1993
until December 1997. Since 1990, Mr. Mulvihill has been actively investing in
the Denver real estate market. In 1993, he formalized his activities with the
formation of Black Creek Capital, LLC, a firm specializing in Denver real estate
investment, including residential and commercial land development, tax exempt
housing and golf course construction and ownership. Prior to November 1993, he
was, commencing in November 1992, Senior Vice President of Finance and
Acquisitions at Jerry J. Moore Investments, an owner and manager of shopping
centers in Texas. Previously, from January 1992 to November 1992, Mr. Mulvihill
was a Vice President of Chemical Bank's Real Estate Investment Banking Group,
where he managed the Real Estate Owned Distribution Group. From 1986 to January
1992, Mr. Mulvihill was an officer of Manufacturers Hanover Trust Company's Real
Estate Banking and Investment Banking Groups. Mr. Mulvihill graduated from
Stanford University in 1986 with a B.A. in Political Science.
Mr. Lesser formed Hudson Bay in May 1996 and is the President of its general
partner. Prior to founding Hudson Bay, from April 1995 until May 1996, he was
the Senior Vice President for Business Development of Crescent Real Estate
Equities Company, in charge of acquisition, finance and strategic investments.
From July 1988 until April 1995, Mr. Lesser worked for Merrill Lynch & Co. in
the Real Estate Investment Banking Division where he was a Director. Mr. Lesser
received a B.S. and M.B.A. from Cornell University.
David F. McBride has been Chairman of the Board of the Company since
December 1997 pursuant to the terms of the Reorganization. He was appointed
Secretary of the Company in January 1998. He has served as Chief Executive
Officer of McBride and affiliated family real estate, construction and
brokerage companies since 1987 and has been a director of McBride and such
enterprises since 1975. Mr. McBride has served as a Director of Midlantic
Corporation, Midlantic National Bank and various subsidiaries for thirteen
years prior to its merger with PNC Bank in 1996. Prior to 1987, he was a
partner in the law firm of Harwood Lloyd from 1981 to 1987, a partner in the
law firm of Murphy, Ellis & McBride from 1977 to 1981, and an associate in
the firm of Robinson, Wayne & Greenberg from 1973 to 1977, all located in New
Jersey. He received B.A. and J.D. degrees from Georgetown University in 1969
and 1973, respectively. He remains Of Counsel to Harwood Lloyd and is a
member of the bars of New Jersey and New York. Messrs. David and Timothy
McBride are first cousins.
Mr. Butte is a Certified Public Accountant and currently serves as a
Vice-President of the Company with primary responsibility for acquisition due
diligence and financing. Prior to joining Penn Square Properties, Inc. in 1988,
he spent 5 years in pubic accounting as a manager in the audit department of
Asher & Company, specializing in providing financial and accounting services to
companies in the real estate industry. Mr. Butte is a 1984 graduate of Villanova
University with a B.S. in Accounting and obtained a Masters in Taxation from
Villanova in 1994.
Mr. Burger is a Certified Public Accountant and has been Treasurer and Chief
Financial Officer of the Company since its inception in November 1993. Mr.
Burger was employed performing specialized consulting services in finance, audit
and acquisitions from May 1992 to November 1993. Mr. Burger was previously
employed from 1984 to 1992 by the Maddox Interests, a private equity syndication
firm. From 1981 to 1984, Mr. Burger was employed by Arthur Andersen & Co. as a
senior auditor in the real estate and financial services division. Mr. Burger
graduated in 1981 from the University of Illinois with a B.S. in Accounting.
FAMILY RELATIONSHIPS
Timothy McBride and David McBride are first cousins.
RECENT DEVELOPMENTS
In January 1998, the Board of Directors of the Company elected Timothy
McKenna as Treasurer of the Company. Mr. Burger is employed by the Company
through April 1998.
Mr. McKenna is a Certified Public Accountant and serves as Treasurer of
the Company. Mr. McKenna was previously employed as a Senior Manager in the Real
Estate Services Group of Arthur Andersen LLP's
27
<PAGE>
Philadelphia office. He has over 12 years of experience in providing consulting
and accounting services to publicly and privately-owned real estate companies,
over 11 years of his experience was obtained as an employee of Arthur Andersen
LLP. Mr. McKenna is a 1985 graduate of the University of Scranton with a B.S. in
Accounting.
Upon consummation of the acquisition of the Galesi Portfolio, Francesco
Galesi will be appointed as a Director of the Company and will be nominated
as a Director of the Company at the next meeting of the Company's
stockholders.
ITEM 10. EXECUTIVE COMPENSATION.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth, for the 3 years ended December 31, 1997, the
compensation earned by or paid to each of the Company's chief executive officers
who served in such capacity during such fiscal year, as well as each other
executive officer of the Company serving as an executive offer of the Company on
December 31, 1997 whose total annual salary and bonus for the fiscal year ended
December 31, 1997 exceeds $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
---------------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C>
NAME AND OTHER ANNUAL AWARDS OF ALL OTHER
PRINCIPAL POSITION(1) YEAR SALARY BONUS COMPENSATION OPTIONS(#) COMPENSATION
- ------------------------------ ---- -------- -------- ------------ ---------- ------------
David F. McBride
Chairman.................... 1997 $235,000 $ 70,000 $ 0 0 $ 0
Jeffrey E. Kelter
President................... 1997 $320,000 $ 0 $ 0 0 $ 0
Evan Zucker
President................... 1997 $ 71,000(2) $ 25,000 $ 0 25,000 $ 1,116,383(5)
1996 $ 75,000(3) $ 25,000 $ 0 25,000 $ 0
1995 $ 75,000 $ 25,000 $ 0 25,000 $ 0
Rick A. Burger(4)
Treasurer................... 1997 $ 85,000 $ 25,000 $ 0 20,000 $ 393,972(5)
</TABLE>
- ------------------------------
(1) Mr. Zucker resigned as President and Mr. Kelter and Mr. McBride became
Executive Officers of the Company on December 12, 1997 as part of the
Reorganization. Messrs. Kelter and McBride have executed Employment
Agreements with the Company whereby their respective annual base salary is
set at $200,000 each. See "Employment Agreements" below.
(2) Mr. Zucker's compensation of $71,000 for the year ended December 31, 1997
was paid through the issuance of 2,027 shares of Common Stock at the fair
market value on the last trading date of the quarter ended 3/31/97 and
$52,250 in cash payments.
(3) Mr. Zucker's compensation of $75,000 for the year ended December 31, 1996
was payable quarterly by issuance of shares of the Company's Common Stock at
their fair market value on the last trading date of the quarter with respect
to which payment was made. During 1996, Mr. Zucker was issued an aggregate
of 9,005 shares pursuant to the foregoing arrangement.
(4) In January 1998, Timothy McKenna was named by the Board of Directors as
Treasurer of the Company. Mr. Burger is employed by the Company through
April 1998 in a similar capacity.
(5) Evan Zucker and Rick Burger's employment agreements were terminated
effective December 12, 1997. As a result of the termination of these
agreements all outstanding options held by these individuals were cancelled.
Messrs. Zucker and Burger received 75,687 and 26,710 shares, respectively,
as payment for the termination of these agreements and the options. The
market value of these shares on December 12, 1997 was $14.75 per share. See
"Termination of Employment and Consulting Agreements" below.
OPTION GRANTS IN YEAR ENDED DECEMBER 31, 1997
The following table provides information with respect to the above named
executive officers regarding options or stock appreciation rights ("SARs")
granted to such persons during the Company's year ended December 31, 1997. All
options granted in 1997 vested 25% for each quarter in the fiscal year and had
an exercise price in excess of the market price on the date of the grant.
28
<PAGE>
OPTION/SARS GRANTS IN LAST FISCAL YEAR
(INDIVIDUAL GRANTS)
<TABLE>
<CAPTION>
PERCENT OF
NUMBER OF TOTAL OPTIONS
SECURITIES SARS GRANTED
UNDERLYING TO EMPLOYEES EXERCISE OR
OPTIONS/SARS IN FISCAL BASE PRICE EXPIRATION
NAME GRANTED(1) YEAR PER SHARE DATE
- ----------------------------------------------------------------------- ------------- ------------- ------------- -----------
<S> <C> <C> <C> <C>
David F. McBride (1)................................................... 0 0% -- --
Jeffrey E. Kelter (1).................................................. 0 0% -- --
Evan Zucker (2)........................................................ 25,000 55.5% 10.00 12/31/06
Rick A. Burger (2)..................................................... 20,000 44.5% 10.00 12/31/06
------ ------
45,000 100.00%
------ ------
------ ------
</TABLE>
- ------------------------------
(1) Excludes the 7-year warrant issued to Jeffrey Kelter and David McBride,
respectively, to purchase 250,000 and 125,000 OP Units at $11 per OP Unit in
conjunction with the Reorganization.
(2) These option grants were cancelled effective December 12, 1997. See
"Termination of Employment and Consulting Agreements" below.
During the year ended December 31, 1997, none of such executive officers
owned or exercised any stock option or SARs other than Messrs. Zucker and
Burger, whose option grants were cancelled effective December 12, 1997. See
"Termination of Employment and Consulting Agreements" below.
COMPENSATION OF DIRECTORS
During the year ended December 31, 1997, Mr. Mulvihill was paid cash
compensation at the quarterly rate of $18,750 payable quarterly commencing April
1, 1997, in addition to a $25,000 bonus earned and paid in 1997. In addition,
Mr. Mulvihill received compensation in the form of 2,027 shares of the Company's
Common Stock at a fair market value of $9.25 as of the last trading date of the
quarter (March 31, 1997) with respect to which payment was made.
In 1997, each of Messrs. Rotchford, Hardin and O'Keefe received compensation
of $3,784 which consisted of cash payments aggregating $2,785 and 108 shares of
Common Stock at a fair market value of $9.25 as of the last trading date of the
quarter (March 31, 1997) with respect to which payment was made.
Messrs. Timothy McBride, Kelter, Branson, Lesser and David McBride became
directors of the Company on December 12, 1997 and therefore did not receive any
compensation as directors for the year ended December 31, 1997.
The Company reimburses the Directors for travel expenses incurred in
connection with their activities on behalf of the Company.
EMPLOYMENT AGREEMENTS
Concurrently with the closing of the Reorganization, the Company entered
into employment agreements with each of David F. McBride and Jeffrey E. Kelter
to serve as the Chairman and President of the Company, respectively. The initial
term of each of such agreements is for 3 years with successive one-year renewal
terms thereafter until terminated. Each agreement provides for an annual base
salary of $200,000 together with such additional compensation as may be awarded
from time to time by the Company's Board of Directors and further provides that
each of Messrs. McBride and Kelter shall devote substantially all of their
working time to the Company's business activities. In the event of the death,
disability or termination of the employment without cause or the involuntary
termination of such executive's employment, the executive is entitled to receive
a lump sum payment equal to the executive's base salary plus the prior year's
bonus times the longer of 1 year or the remainder of the term of the employment
agreement. Each agreement also restricts such executive from engaging in
activities in competition with the Company in the ownership, development,
construction, management or operation of office or industrial properties (except
that Mr. McBride may continue to be a Director of certain McBride family real
estate related companies) during his term of employment and during the period
during which he serves as a Director of the Company and ending 1 year after the
later of the termination of his employment and the date he ceases to be a
Director of the Company.
TERMINATION OF EMPLOYMENT AND CONSULTING AGREEMENTS
Upon the closing of the Reorganization, the employment agreements of Messrs.
Zucker and Burger and the oral consulting agreement of Mr. Mulvihill were
terminated. The Company agreed to pay to such persons the sums of $225,000,
$85,000 and $150,000, respectively, in consideration for the termination of
such agreements. Such persons
29
<PAGE>
elected to receive such payments in the form of shares of Common Stock valued
at $11 per share. Accordingly, they received 68,869, 75,687 and 26,710
shares, respectively, in order to terminate these Agreements and cancel their
existing options, which had a fair market value of $14.75 per share on
December 12, 1997. In addition, each of Messrs. Zucker and Mulvihill executed
a non-competition agreement with the Company which agreement will continue in
effect throughout the term he is a Director of the Company and prohibits him
from engaging in activities involving the acquisition, development or
operation of office and industrial properties throughout the United States.
The aggregate amount payable to such persons was arrived at in negotiations
with the Investor Group on the basis of the terms of the employment agreements
between Messrs. Zucker and Burger and the oral consulting agreement of Mr.
Mulvihill with the Company. Messrs. Zucker's and Burger's employment agreements
provided that in the event of certain major corporate transactions, such persons
are to be paid an amount equal to twice their current base salary. The Investor
Group agreed to pay such persons an aggregate amount approximately equal to
twice their currently expected compensation from the Company. The amounts of the
aggregate sum payable to each of Messrs. Mulvihill, Zucker and Burger was
determined by discussions among such persons.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth, as of December 31, 1997, information with
respect to each person (including any "group" as that term is used in the
instructions to Item 403 of Regulation S-B) who is known to the Company to be
the beneficial owner of more than 5% of the Company's Common Stock as well as
shares of Common Stock beneficially owned by all Directors and executive
officers of the Company and all Directors and executive officers of the Company
as a group. The table also includes the number of OP Units owned, as of December
31, 1997, by such persons. Any owner of OP Units may convert its OP Units into
shares of Common Stock (the "Conversion Right"), or, at the election of the
Company, the cash equivalent thereof. As of December 31, 1997, the Company had
5,363,281 shares of Common Stock outstanding, not including 4,058,270 and
731,500 shares, respectively, reserved for issuance upon conversion of OP Units
and other outstanding options and OP Unit and Common Stock warrants.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME AND ADDRESS OF BENEFICIAL BENEFICIAL PERCENT OF OWNERSHIP OF
HOLDER OR IDENTITY OF GROUP OWNER(1) CLASS OP UNITS
- ------------------------------------------------------------------------ ------------------ ----------- ------------
<S> <C> <C> <C>
Evan Zucker............................................................. 127,685(2) 2.37% 29,391(2)
1670 Broadway--Suite 3350
Denver, CO 80202
Rick A. Burger.......................................................... 37,210(3) 0.69% 0
1670 Broadway--Suite 3550
Denver, CO 80202
Timothy McBride......................................................... 176,384(4) 3.28% 221,137(4)(5)
4939 Quebec Street Northwest
Washington, DC 20016
Jeffrey E. Kelter....................................................... 0 -- 613,636(5)(6)
40 Duck Pond Road
Glencove, NY 11542
Robert Branson.......................................................... 54,545(7) 1.02% 22,727(5)
Linden & Branson
1133 Connecticut Avenue NW
Suite 902
Washington, DC 20036
James Mulvihill......................................................... 365,627(8) 6.55% 216,402(8)
5700 Piedmont
Cherry Hills Village, CO 80111
David Lesser............................................................ 1,764,372(9) 31.10% 181,818(5)(9)
c/o Hudson Bay Partners II, L.P.
237 Park Avenue, Suite 900
New York, NY 10017
David F. McBride........................................................ 131,954(10) 2.46% 424,442(5)(10)
1000 Scioto Drive
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME AND ADDRESS OF BENEFICIAL BENEFICIAL PERCENT OF OWNERSHIP OF
HOLDER OR IDENTITY OF GROUP OWNER(1) CLASS OP UNITS
- ------------------------------------------------------------------------ ------------------ ----------- ------------
<S> <C> <C> <C>
Franklin Lakes, NJ 07417
Hudson Bay Partners II, L.P............................................. 1,754,545(9) 30.98% 181,818(5)(9)
237 Park Avenue, Suite 900
New York, NY 10017
CRA Real Estate Securities, L.P......................................... 454,545 8.48% 0
259 Radnor-Chester Road -- Suite 200
Radnor, PA 19087
All Officers and Directors as a group................................... 2,657,777 46.93% 1,709,553
</TABLE>
- ------------------------------
(1) Includes shares issuable on exercise of the Conversion Right if such right
is exercisable within 60 days of December 31, 1997.
(2) Includes 29,391 shares of Common Stock issuable on exercise of the
Conversion Right; which number includes 1,027 of such OP Units held by Mr.
Zucker's parents and siblings, as to which Mr. Zucker disclaims beneficial
ownership. Also includes 750 shares held by Mr. Zucker's parents, as to
which Mr. Zucker disclaims beneficial ownership. Includes 75,687 shares
owned by Mr. Zucker which are subject to a Lock-up Agreement until December
12, 1998, including 45,434 shares held by a Rabbi Trust of which Wells
Fargo, N.A. is the Trustee.
(3) Includes 10,000 shares of Common Stock held by Mr. Burger's father, as to
which Mr. Burger disclaims beneficial ownership. Includes 26,710 shares
which are subject to a Lock-up Agreement until December 12, 1998.
(4) Includes 11,364 shares of Common Stock held jointly by Mr. McBride and his
wife and 1,290 shares of Common Stock owned by a limited liability
corporation in which Mr. McBride has an ownership interest and 202 shares of
Common Stock owned by a trust, in the name of Mr. McBride's mother, for
which Mr. McBride is the sole trustee. OP Unit ownership includes 211,977 OP
Units beneficially owned through a limited partnership interest in McBride
and 9,160 OP Units owned by a trust, in the name of Mr. McBride's mother,
for which Mr. McBride is the sole trustee.
(5) The OP Units are subject to a Lock-up Agreement prohibiting exercise of the
Conversion Right on such OP Units until December 12, 1998.
(6) Includes a warrant to purchase 250,000 OP Units held by Mr Kelter.
(7) Includes 27,272 shares of Common Stock held by a limited liability company
in which Mr. Branson is a principal owner. OP Unit ownership includes 22,727
OP Units beneficially owned through a limited partnership interest in
McBride.
(8) Includes 76,389 OP Units and 190 shares held by Mr. Mulvihill's wife, as to
which Mr. Mulvihill disclaims any beneficial interest. Includes 128,456 and
2,194 OP Units held by Mr. Mulvihill's parents and siblings, respectively,
and 57,359 shares directly and indirectly owned by Mr. Mulvihill's parents,
as to which Mr. Mulvihill disclaims any beneficial interest. Also includes
68,869 shares owned by Mr. Mulvihill which are subject to a Lock-up
Agreement until December 12, 1998 including 38,616 shares held by a Rabbi
Trust of which Wells Fargo, N.A. is the Trustee.
(9) Includes 300,000 shares of Common Stock issuable to Hudson Bay Partners II,
L.P. upon exercise of a stock purchase warrant at an exercise price of
$11.00 per share, which expires on December 12, 2004. Mr. Lesser is
President, sole director and sole shareholder of Hudson Bay Partners, Inc.,
the general partner of Hudson Bay Partners II, L.P., and, as a result of
such affiliation, may be deemed to have shared voting and dispositive power
over the 1,754,545 shares of Common Stock owned by Hudson Bay Partners II,
L.P.; however, Mr. Lesser expressly disclaims beneficial ownership of any
Common Stock not directly owned by him. OP Unit ownership includes 181,818
OP Units beneficially owned by Hudson Bay through a limited partnership
interest in McBride; however Mr. Lesser expressly disclaims beneficial
ownership of any OP Units not directly owned by him.
(10) Includes 1,031 shares of Common Stock owned by a limited liability
corporation in which Mr. McBride has an ownership interest and 101 shares of
Common Stock owned by a trust, in the name of Mr. McBride's deceased father,
for which Mr. McBride is a trustee. Also includes a warrant to purchase
125,000 OP Units held by Mr. McBride. OP Unit ownership includes 294,572 OP
Units beneficially owned through a limited partnership interest in McBride
and 4,870 OP Units owned by a trust, in the name of Mr. McBride's deceased
father, for which Mr. McBride is the sole trustee.
31
<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
In connection with the Reorganization, the Company entered into a series of
transactions in which certain individuals who are currently executive officers,
directors and beneficial owners of more than 5% of the Common Stock (each, a "5%
Holder") had a direct or indirect material interest (as described below).
EMPLOYMENT AGREEMENTS. As part of the Reorganization, Messrs. David
McBride (Chairman, Secretary and a director of the Company) and Kelter
(President and a director of the Company) entered into employment agreements
with the Company. Messrs. Zucker (a director of the Company), Burger (an
officer of the Company) and Mulvihill (a director of the Company) agreed to
receive $225,000, $85,000 and $150,000, respectively, in consideration for
the termination of employment agreements of Messrs. Zucker and Burger and the
oral consulting arrangement of Mr. Mulvihill. See "Item 10 -- Executive
Compensation --Employment Agreements" hereto.
SPIN-OFF. As part of the Reorganization, the Company organized and
agreed to spin-off at a later date a subsidiary of the Company to enable
Messrs. Mulvihill and Zucker to pursue real estate investment opportunities
other than in the office and industrial sectors. The spin-off has not yet
been consummated.
OP UNITS AND COMMON STOCK. The Investor Group (which includes McBride (a
5% Holder), Penn Square, Kelter, Hudson Bay (a 5% Holder) and CRA (a 5%
Holder)) received in the Reorganization 3,362,503 OP Units and 7-year
warrants to purchase 300,000 shares of Common Stock at $11 per share and
375,000 OP Units at $11 per OP Unit. Mr. Lesser (a director of the Company)
is the president, sole director and sole shareholder of the general partner
of Hudson Bay. Messrs. Timothy McBride (a director of the Company) and David
McBride, and Hudson Bay, have an interest in McBride. See "Item 5 -- Market
for Common Equity and Stockholder Matters" of this Annual Report for a list
of the shares of Common Stock of the Company issued pursuant to the
Reorganization to such persons as well as certain family members and entities
related to such persons.
LEASES. The Company has leases with companies in which David McBride is
an officer, and for certain of these companies, a shareholder. The annual
aggregate base rental revenue under these leases was approximately $236,000,
of which approximately $12,000 is included in rental income in the
accompanying financial statements as these leases relate to properties
acquired in the Reorganization.
PRORATIONS AND ADJUSTMENTS. At December 31, 1997, the Company owed
approximately $200,000 to an affiliate of David McBride, related to certain
prorations and adjustments for properties acquired in the Reorganization.
MANAGEMENT COMPANY. Through the Operating Partnership's 100% ownership
of the preferred stock of the Management Company, the Operating Partnership
is entitled to receive 95% of the amounts paid as dividends by the Management
Company. The remaining amounts paid as dividends by the Management Company
are paid to the holders of common stock of the Management Company. Mr.
Kelter, Hudson Bay Partners, L.P. and McBride, own 40%, 30% and 30%,
respectively, of the common stock of the Management Company. Mr. Lesser, is
the president, sole director and sole shareholder of the general partner of
Hudson Bay Partners, L.P., and Hudson Bay. Hudson Bay (a 5% Holder) is an
affiliate of Hudson Bay Partners, L.P. Messrs. Timothy McBride and David
McBride and Hudson Bay, have an interest in McBride. The Management Company
currently manages all but 2 of the Company's properties. The Operating
Partnership advanced to the Management Company $150,000 in December 1997 to
fund working capital needs. The Operating Partnership does not currently have
a formal contract with the Management Company for property management.
The Management Company also manages 2 properties which are owned by
entities in which Mr. Kelter has a general partnership interest.
32
<PAGE>
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
<TABLE>
<CAPTION>
(A) EXHIBITS:
---------------------------------------------------------------------------------------------------------------------
<C> <S>
3(a) Certificate of Incorporation (1)
(b) Certificate of Amendment filed October 6, 1993 (1)
(c) Amended and Restated Certificate of Incorporation filed November 9, 1993 (1)
(d) Amended and Restated Certificate of Incorporation filed December 12, 1997 (1)
(e) By-laws of Registrant (1)
4(a) Specimen Certificate for Common Stock (1)
10(a) Amended and Restated Agreement of Limited Partnership of American Real Estate Investment, L.P.
(b) 1993 Omnibus Incentive Plan (1)
(c) Registration Rights Agreement (1)
(d) Employment Agreement between American Real Estate Investment, L.P. and Evan Zucker (1)
(e) Warrant Agreement between Dickinson & Co. and Registrant (1)
(f) Employment Agreement between American Real Estate Investment, L.P. and Rick A. Burger (1)
(g) Sub-Tenant Agreement dated December 1, 1993 between First Meridian Group, Inc. and Registrant (1)
(h) Loan Agreement dated as of May 1, 1993 between The Industrial Development Authority of the City of Tempe, Arizona and
Quadrangles I Limited Partnership (1)
(i) Modification of Deed of Trust, Note and Deed of Trust dated May 14, 1993 (1)
(ii) Modification Agreement dated December 1, 1994 (1)
(iii) Assignment of the Loan Agreement, the Arbitrage Regulation Agreement and the Amended and Restated Regulatory
Agreement as to Tax Exemption dated December 2, 1994 (1)
(i) Loan Agreement dated December 2, 1994 between American Quadrangles Partners, L.P., Virginia Street Associates Limited
Partnership, American Timberleaf Partners, L.P., American Real Estate Investment Corporation and D.H. Blair Holdings,
Inc. (1)
(j) Promissory Note dated December 2, 1994 in the principal amount of $3,500,000 issued to D.H. Blair Holdings, Inc. (1)
(k) Stock Purchase Warrant dated December 27, 1994 issued, on transfer, to Rosalind Davidowitz (1)
(l) Loan Agreement dated May 31, 1994 between the Operating Partnership and First Interstate Bank of Denver, N.A. (1)
(i) Promissory Note dated June 1, 1994 (1)
(ii) First Amendment dated August 31, 1995 to Loan dated May 31, 1994 between the Operating Partnership and First
Interstate Bank of Denver, N.A. (1)
(iii) Amended and Restated Promissory Note dated August 31, 1995 in the principal amount of $5,904,143 (1)
(iv) Promissory Note dated August 31, 1995 in the principal amount of $500,000 (1)
(m) Contract for Purchase and Sale of International Apartment Project (1)
(n) Adjustable Rate Note in the principal amount of $5,700,000 dated January 31, 1997 payable to GMAC Commercial Mortgage
Corporation (1)
(o) Promissory Note dated January 8, 1998 between American Sedona Partners, L.P., American Real Estate Investment
Corporation and Column Financial, Inc. in the principal amount of $17,000,000 (2)
(p) Dana Perfumes Mortgage Note dated September 11, 1997 by Fair Lawn Industrial Park, Inc. and First Union National Bank
in the principal amount of $1,155,000 (2)
(q) L&W Promissory Note dated August 4, 1995 between L&W Associates and USG Annuity & Life Company in the principal sum
of $3,525,000 (2)
(r) Northfield Business Center Promissory Note dated December 24, 1997 between McBride Properties, Inc. and Column
Financial, Inc. in the principal amount of $3,500,000 (2)
(s) One Tabas Promissory Note dated August 9, 1995 between Hough-Loew Associates, Inc. and USG Annuity & Life Company in
the principal amount of $3,025,000 (2)
(t) Phillips Promissory Note dated January 5, 1998 between McBride Properties, Inc. and Column Financial, Inc. in the
principal amount of $7,500,000 (2)
(u) Two Tabas Promissory Note dated August 9, 1995 between Hough-Loew Associates, Inc. and USG Annuity & Life Company in
the principal amount of $4,600,000 (2)
(v) Loan Agreement dated September 23, 1997 by and between FLOP/BRE, Inc., OIP/BRE, L.L.C., MBP/BRE, L.L.C., and NJA/BRE,
L.L.C., and Nomura Asset Capital Corporation (2)
(w) Master Investment Agreement dated as of August 20, 1997 by and between American Real Estate Investment Corporation
and The Parties Listed on the Signature Pages Thereto (1)
(x) Stock Purchase Agreement dated as of August 20, 1997 by and between American Real Estate Investment Corporation and
Hudson Bay Partners, L.P. (1)
(y) Management Contribution Agreement dated as of August 20, 1997 among American Real Estate Investment, L.P., American
Real Estate Investment Corporation, Jeffrey Kelter, and Penn Square Properties, Inc. (1)
</TABLE>
33
<PAGE>
<TABLE>
<C> <S>
(z) McBride Contribution Agreement between American Real Estate Investment Corporation, American Real Estate Investment,
L.P., and The Other Parties Listed on the Signature Pages of the Agreement (1)
(aa) Agreement and Plan of Merger among American Real Estate Investment Corporation and Fair Lawn Industrial Park, Inc.,
and The Other Parties Listed on the Signature Pages Thereto (1)
(ab) Agreement of Sale and Purchase and Assignment of Agreement of Sale and Purchase--101 Commerce Drive (2)
(ac) Agreement of Sale and Purchase--One and Two Tabas Lane with First, Second, Third and Fourth Amendments (2)
(ad) Agreement of Sale and Purchase--Northfield Business Center (1057 and 1091 Arnold Road) with First, Second, Third,
Fourth and Fifth Amendments (2)
(ae) Agreement of Sale and Purchase--1305 Goshen Parkway with First, Second, Third and Fourth Amendments (2)
(af) Agreement of Sale Americana Lakewood I & II and addendum (2)
(ag) Employment Agreement, dated December 12, 1997, by and between American Real Estate Investment Corporation and Jeffrey
Kelter (2)
(ah) Employment Agreement, dated December 12, 1997, by and between American Real Estate Investment Corporation and David
McBride (2)
(ai) Agreement of Sale and Purchase dated July 17, 1997, with John D. Moran Sr. with Amendment One and Assignment (2)
(aj) Warrant Agreement between American Real Estate Investment, L.P. and Jeffrey Kelter (2)
(ak) Warrant Agreement between American Real Estate Investment, L.P. and David McBride (2)
</TABLE>
21. Subsidiaries of the Registrant: The Registrant has subsidiaries carrying on
the same line of business as the Registrant as follows:
<TABLE>
<CAPTION>
STATE OF
INCORPORATION/
NAME ORGANIZATION
- --------------------------------------------------------------------------------------------- ---------------------
<S> <C>
American Real Estate Investment, L.P. Delaware
Virginia Street Associates Limited Partnership Colorado
American Emerald Partners, L.P. Delaware
American Timberleaf Partners, L.P. Delaware
American Quadrangles Partners, L.P. Delaware
American Sedona Partners, L.P. Colorado
American Emerald Corp. Delaware
American Timberleaf Corp. Delaware
American Quadrangles Corp. Delaware
American Sedona Corp. Colorado
RROP, L.L.C. New Jersey
McBride Properties New Jersey
New Jersey Associates New Jersey
UFSC, L.L.C. New Jersey
OIP/BRE, L.L.C. New Jersey
MBP/BRE, L.L.C. New Jersey
NJA/BRE, L.L.C. New Jersey
FLIP/BRE II, L.L.C. New Jersey
REA/SPC II, Inc. New Jersey
American Real Estate Management Inc. Pennsylvania
Avalanche Investment Corporation Maryland
</TABLE>
27. FINANCIAL DATA SCHEDULE
- ------------------------------
(1) Previously filed.
(2) Filed herewith.
(B) REPORTS ON FORM 8-K: A Current Report on Form 8-K dated November 12,
1997 was filed in response to Item 7 during the last quarter of the year ended
December 31, 1997.
A Current Report on Form 8-K dated December 12, 1997 was filed in response
to Items 2, 5 and 7 during the last quarter of the year ended December 31, 1997.
A Current Report on Form 8-K dated January 9, 1998 was filed on January 23,
1998 in response to Items 2 and 7 related to acquisitions which were consummated
in December 1997 and January 1998 and the closing of the
34
<PAGE>
sale of Americana Lakewood Apartments.
A Current Report on Form 8-K/A (Amendment #1) dated December 12, 1997 was
filed on February 25, 1998 related to Items 5 and 7.
(C) S-1 Report of Independent Public Accountants on Schedule
S-2 FINANCIAL STATEMENT SCHEDULE: Schedule III--Real Estate and Accumulated
Depreciation
35
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE
To the Shareholders of
American Real Estate Investment Corporation:
We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements of American Real Estate Investment Corporation
and subsidiaries included in the Form 10-K, and have issued our report thereon
dated March 10, 1998, except with respect to the matters discussed in Note 12 to
the consolidated financial statements, as to which the date is March 27, 1998.
Our audit was made for the purpose of forming an opinion on those statements
taken as a whole. The financial statement schedule referred to in Item 13 is the
responsibility of the Company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rule and is not part of
the basic financial statements. The financial statement schedule has been
subjected to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, fairly states in al material respects the
financial data required to be set forth therein in relation to the basic
financial statements taken as a whole.
/s/ ARTHUR ANDERSEN LLP
Philadelphia, Pennsylvania
March 10, 1998
S-1
<PAGE>
AMERICAN REAL ESTATE INVESTMENT CORPORATION
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION
(IN 000S)
<TABLE>
<CAPTION>
GROSS AMOUNT CARRIED
COSTS CAPITALIZED AT CLOSE OF PERIOD 12/31/97
INITIAL COSTS SUBSEQUENT TO ----------------------------
LOCATION (C) ---------------------- ACQUISITION OR BUILDING AND
BUILDING ADDRESS (CITY/STATE) ENCUMBRANCES LAND BUILDINGS COMPLETION LAND IMPROVEMENTS
- --------------------- ------------- ------------- --------- ----------- ------------------- --------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Office Properties:
40 Potash Road....... Oakland, NJ (a) $ 2,312 $ 9,742 -- $ 2,312 $ 9,742
1655 Valley Road..... Wayne, NJ (a) 4,580 19,299 -- 4,580 19,299
16-00 Route 208...... Fairlawn, NJ (a) 646 2,722 -- 646 2,722
128 Bauer Drive...... Oakland, NJ 420 1,770 -- 420 1,770
22-08 Route 208...... Fairlawn, NJ 990 4,172 -- 990 4,172
15-00 Pollitt Fairlawn, NJ
Drive.............. (a) 308 1,296 -- 308 1,296
19-00 Pollitt Fairlawn, NJ
Drive.............. (a) 1,450 6,102 -- 1,450 6,102
95 Bauer Drive....... Oakland, NJ (a) 160 674 -- 160 674
99 Bauer Drive....... Oakland, NJ (a) 276 1,163 -- 276 1,163
------------- ------------- --------- ----------- ------ --------- --------
Subtotal Office
Properties......... 11,142 46,940 11,142 46,940 58,082
------------- ------------- --------- ----------- ------ --------- --------
Industrial
Properties:
5 Thornton Road...... Oakland, NJ (a) 1,844 7,770 -- 1,844 7,770
2 Volvo Drive........ Rockleigh, NJ 994 4,189 -- 994 4,189
17-01 Pollitt Oakland, NJ
Drive.............. (a) 1,200 5,050 -- 1,200 5,050
19-05 Nevins Road.... Oakland, NJ (a) 1,200 5,050 -- 1,200 5,050
Mountaintop,
100 Oak Hill Road.... PA (b) 546 2,271 546 2,271 2,817
1057 Arnold Road..... Reading, PA (b) 1,152 4,742 -- 1,152 4,742
1091 Arnold Road..... Reading, PA 768 3,197 -- 768 3,197
1305 Goshen Westchester,
Parkway............ PA (b) 900 3,818 900 3,818 4,718
One Tabas Lane....... Exton, PA (b) 840 3,470 -- 840 3,470
Two Tabas Lane....... Exton, PA (b) 1,210 4,994 -- 1,210 4,994
------------- ------------- --------- ----------- ------ --------- --------
Subtotal
Industrial......... 10,654 44,551 10,654 44,551 55,205
------------- ------------- --------- ----------- ------ --------- --------
Non-Core Properties:
Urban Farms Shopping Franklin
Center............. Lakes, NJ 1,540 6,611 1,540 6,611
Americana Lakewood... Lakewood, CO (b) 2,297 6,020 707 2,297 6,727
Quadrangles Tempe, AZ
Village............ (b) 4,220 17,836 625 4,220 18,461
------------- ------------- --------- ----------- ------ --------- --------
Subtotal Non-Core
Properties:........ 8.057 30,467 1,332 8,057 31,799
------------- ------------- --------- ----------- ------ --------- --------
Total All
Properties:........ $ 29,853 $ 121,958 $ 1,332 $ 29,853 $ 123,290
------------- ------------- --------- ----------- ------ --------- --------
------------- ------------- --------- ----------- ------ --------- --------
<CAPTION>
ACCUMULATED YEAR DEPRECIABLE
DEPRECIATION BUILT/ LIVES
BUILDING ADDRESS TOTAL 12/31/97 RENOVATED (YEARS)
- --------------------- --------- --------------- ---------- ------------
<S> <C> <C> <C> <C>
Office Properties:
40 Potash Road....... $ 12,054 $ 12 1992 (d)
1655 Valley Road..... 23,879 23 1989 (d)
16-00 Route 208...... 3,368 3 1983 (d)
128 Bauer Drive...... 2,190 2 1981 (d)
22-08 Route 208...... 5,162 5 1960/68 (d)
15-00 Pollitt
Drive.............. 1,604 2 1970/92 (d)
19-00 Pollitt
Drive.............. 7,552 7 1970/84,95 (d)
95 Bauer Drive....... 834 1 1974/91 (d)
99 Bauer Drive....... 1,439 1 1971 (d)
--------- ------ ---------- ------------
Subtotal Office
Properties......... 58,082 56
--------- ------ ---------- ------------
Industrial
Properties:
5 Thornton Road...... 9,614 9 1973/81 (d)
2 Volvo Drive........ 5,183 5 1966/93 (d)
17-01 Pollitt
Drive.............. 6,250 6 1968 (d)
19-05 Nevins Road.... 6,250 6 1955 (d)
100 Oak Hill Road.... 2,817 3 1996 (d)
1057 Arnold Road..... 5,894 6 1995 (d)
1091 Arnold Road..... 3,965 4 1996 (d)
1305 Goshen
Parkway............ 4,718 5 1991 (d)
One Tabas Lane....... 4,310 4 1970 (d)
Two Tabas Lane....... 6,204 6 1970/91 (d)
--------- ------ ---------- ------------
Subtotal
Industrial......... 55,205 53
--------- ------ ---------- ------------
Non-Core Properties:
Urban Farms Shopping
Center............. 8,151 8 1965/82 (d)
Americana Lakewood... 9,024 1,249 1985 (d)
Quadrangles
Village............ 22,681 1,589 1987 (d)
--------- ------ ---------- ------------
Subtotal Non-Core
Properties:........ 39,856 2,846
--------- ------ ---------- ------------
Total All
Properties:........ $ 153,143 $ 2,955
--------- ------ ---------- ------------
--------- ------ ---------- ------------
</TABLE>
- ------------------------------
(a) Collateralizes the Normura mortgage notes payable.
(b) Collateralizes various mortgage notes payable.
(c) See description of encumbrances in Note 5 to Notes to Consolidated Financial
Statements.
(d) Depreciation is computed based on the following estimated lives: Buildings
and Improvements--35 years Tenant/Leasehold Improvements--Life of lease
(e) At December 31, 1997, the aggregate cost of land, buildings and equipment
for federal income tax reporting was $87,000,000.
S-2
<PAGE>
AMERICAN REAL ESTATE INVESTMENT CORPORATION
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION (IN 000s)
Summary of Real Estate and Accumulated Depreciation Activity:
<TABLE>
<CAPTION>
1997 1996
------------------------- ------------------------
ACCUMULATED ACCUMULATED
COST DEPRECIATION COST DEPRECIATION
---------- ------------- --------- -------------
<S> <C> <C> <C> <C>
Balance at beginning of year................................... $ 46,193 $ 3,827 $ 47,286 $ 3,004
Property acquisitions.......................................... 121,438 0 0 0
Capital improvements........................................... 1,152 0 424 0
Properties sold................................................ (15,640) (1,781) (1,517) (543)
Depreciation................................................... 0 909 0 1,366
Balance at end of year......................................... $ 153,143 $ 2,955 $ 46,193 $ 3,827
</TABLE>
S-3
<PAGE>
AMERICAN REAL ESTATE INVESTMENT CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C>
Report of Independent Public Accountants........................... F-2
Consolidated Balance Sheet as of December 31, 1997................. F-3
Consolidated Statements of Operations for the years ended
December 31, 1997 and 1996......................................... F-4
Consolidated Statements of Shareholders' Equity for the years
ended December 31, 1997 and 1996................................... F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1997 and 1996......................................... F-6
Notes to Consolidated Financial Statements......................... F-8
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of American Real Estate Investment Corporation:
We have audited the accompanying consolidated balance sheet of American Real
Estate Investment Corporation (a Maryland Corporation) and subsidiaries as of
December 31, 1997, and the related consolidated statements of operations,
shareholders' equity and cash flows for the years ending December 31,1997 and
1996. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements 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
American Real Estate Investment Corporation as of December 31, 1997, and the
consolidated results of their operations and their cash flows for the years
ending December 31, 1997 and 1996 in conformity with generally accepted
accounting principles.
/s/ Arthur Andersen LLP
Philadelphia,Pa.
March 10, 1998, (except with respect
to the matters discussed in Note 12, as to which
the date is March 27, 1998)
F-2
<PAGE>
AMERICAN REAL ESTATE INVESTMENT CORPORATION
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997
ASSETS
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT IN REAL ESTATE
Land and land improvements $ 23,336,000
Buildings and improvements 98,102,000
Assets held for sale 31,705,000
--------------
153,143,000
Less- Accumulated depreciation (2,955,000)
--------------
150,188,000
Investment in direct financing lease 1,920,000
--------------
Total investment in real estate, net 152,108,000
CASH AND CASH EQUIVALENTS 17,672,000
RESTRICTED CASH 1,243,000
CASH ESCROWS 3,764,000
ACCOUNTS RECEIVABLE 132,000
DEFERRED FINANCING COSTS ,net of accumulated
amortization of $6,000 688,000
DEFERRED LEASING COSTS 782,000
INVESTMENT IN AMERICAN REAL ESTATE MANAGEMENT INC., at
equity 4,377,000
OTHER ASSETS, net of accumulated amortization of $112,000 189,000
--------------
Total assets $ 180,955,000
--------------
--------------
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Mortgage notes payable $ 86,501,000
Accounts payable 378,000
Accrued interest payable 540,000
Accrued expenses and other liabilities 1,593,000
Security deposits 650,000
--------------
Total liabilities 89,662,000
--------------
MINORITY INTEREST 39,364,000
--------------
COMMITMENTS AND CONTINGENCIES (Note 10)
SHAREHOLDERS' EQUITY:
Common stock, $.001 par value; 65,000,000 shares
authorized; 5,363,281 shares issued
and outstanding 5,000
Warrants 685,000
Additional paid-in capital 51,726,000
Cumulative net income 3,118,000
Cumulative dividends (3,606,000)
--------------
Total shareholders' equity 51,929,000
--------------
Total liabilities and shareholders' equity $ 180,955,000
--------------
--------------
</TABLE>
The accompanying notes are an integral part of
this consolidated financial statement.
F-3
<PAGE>
AMERICAN REAL ESTATE INVESTMENT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended
December 31
-------------------------
1997 1996
-------------------------
<S> <C> <C>
REVENUE:
Rents and fees $7,732,000 $9,943,000
Other income 465,000 297,000
---------- ----------
Total revenue 8,197,000 10,240,000
---------- ----------
OPERATING EXPENSES:
Repairs and maintenance 427,000 708,000
Property taxes 376,000 417,000
Property management fees 252,000 353,000
Utilities 637,000 1,034,000
Payroll 551,000 894,000
Other property operations 869,000 944,000
General and administrative 732,000 515,000
Depreciation and amortization 909,000 1,366,000
Buyout of employment agreements, options and
warrants 3,203,000 ---
Interest expense 3,134,000 3,897,000
---------- ----------
Total operating expenses 11,090,000 10,128,000
---------- ----------
Operating (loss) income (2,893,000) 112,000
MINORITY INTEREST 876,000 1,364,000
EQUITY IN EARNINGS FROM INVESTMENTS 404,000 570,000
---------- ----------
LOSS BEFORE GAIN ON SALES OF
PROPERTY (3,365,000) (682,000)
GAIN ON SALES OF PROPERTY 4,608,000 1,786,000
---------- ----------
Net income $1,243,000 $1,104,000
========== ==========
BASIC EARNINGS PER SHARE $ .92 $ 1.00
========== ==========
DILUTED EARNINGS PER SHARE $ .88 $ 1.00
========== ==========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
F-4
<PAGE>
AMERICAN REAL ESTATE INVESTMENT CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Retained
Common Stock Additional Earnings/ Total
----------------------- Paid-in (Accumulated Shareholders
Shares Amount Warrants Capital Deficit) Equity
---------- ---------- ---------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
BALANCES, JANUARY 1, 1996 1,096,004 $ 1,000 -- $ 5,159,000 $ (906,000) $ 4,254,000
Net income -- -- -- -- 1,104,000 1,104,000
Dividends paid ($.85 per share) -- -- -- -- (943,000) (943,000)
Common stock issued for
services provided 6,176 -- -- 53,000 -- 53,000
Common stock issued to
officers and directors 19,450 -- -- 162,000 -- 162,000
---------- ---------- ---------- ----------- ---------- -----------
BALANCES, DECEMBER 31, 1996 1,121,630 $ 1,000 -- $ 5,374,000 $ (745,000) $ 4,630,000
Net income -- -- -- 1,243,000 1,243,000
Common stock issued for cash, net of
$870,000 of issuance costs 1,963,635 2,000 -- 20,728,000 __ 20,730,000
Common stock issued for
FLIP net assets 2,001,132 2,000 -- 22,010,000 -- 22,012,000
Common stock issued to
terminate employment
agreements and options 171,266 -- -- 2,536,000 -- 2,536,000
Warrants issued -- -- 685,000 -- -- 685,000
Dividends paid ($.87 per share) -- -- -- -- (985,000) (985,000)
Common stock issued to
officers and directors 9,378 -- -- 99,000 -- 99,000
Common stock issued for OP
Unit conversions 96,240 -- -- 979,000 -- 979,000
---------- ---------- ---------- ----------- ---------- -----------
BALANCES, DECEMBER 31, 1997 5,363,281 $ 5,000 $ 685,000 $51,726,000 $ (487,000) $51,929,000
========== ========== ========== =========== ========== ===========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
F-5
<PAGE>
AMERICAN REAL ESTATE INVESTMENT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended
December 31,
1997 1996
-------------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 1,243,000 $ 1,104,000
Adjustments to reconcile net income to net cash
Provided by operating activities-
Depreciation and amortization 909,000 1,366,000
Gain on sales of property (4,608,000) (1,786,000)
Buyout of employment agreements 2,536,000 --
Equity in earnings from investment
In partnership (404,000) (570,000)
Amortization of investment in partnership in
Excess of underlying equity 356,000 530,000
Common stock compensation 41,000 162,000
Minority interest allocation 876,000 1,364,000
Cash provided by (used in) --
Restricted cash (11,000) 50,000
Accounts receivable (11,000) 17,000
Other assets 314,000 45,000
Accrued interest 283,000 69,000
Accrued property taxes -- (43,000)
Accrued expenses and other liabilities 652,000 (33,000)
Security deposits (89,000) (21,000)
------------ -----------
Net cash provided by
operating activities 2,087,000 2,254,000
------------ -----------
INVESTING ACTIVITIES:
Properties acquired, net of cash acquired (17,933,000) --
Advances to American Real Estate Management, Inc. (150,000) --
Capital expenditures (1,152,000) (566,000)
Increase in cash escrows (3,764,000) --
Proceeds from sales of property, net 19,840,000 2,907,000
Partnership cash distributions received 25,000 230,000
------------ -----------
Net cash provided by
investing activities (3,134,000) 2,571,000
------------ -----------
</TABLE>
F-6
<PAGE>
AMERICAN REAL ESTATE INVESTMENT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(continued)
<TABLE>
<CAPTION>
Year Ended
December 31,
1997 1996
--------------------------
<S> <C> <C>
FINANCING ACTIVITIES:
Issuances of common stock, net of issuance costs $ 20,780,000 --
Dividends paid (985,000) (943,000)
Minority interest distributions (688,000) (675,000)
Proceeds from mortgage notes payable 9,200,000 --
Increase in deferred financing costs (694,000)
Repayment of mortgage notes payable (10,236,000) (322,000)
Repayment of other notes payable -- (83,000)
Repayment of other note payable from sale -- (2,096,000)
------------ -----------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 17,377,000 (4,119,000)
------------ -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 16,330,000 706,000
CASH AND CASH EQUIVALENTS, beginning of year 1,342,000 636,000
------------ -----------
CASH AND CASH EQUIVALENTS, end of year $ 17,672,000 $ 1,342,000
============ ===========
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid for interest $ 3,188,000 $ 3,084,000
============ ===========
SUPPLEMENTAL DISCLOSURE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES:
</TABLE>
See Notes 3 and 5 for disclosure of non-cash investing and financing activities
in 1997.
The accompanying notes are an integral part
of these consolidated financial statements.
F-7
<PAGE>
AMERICAN REAL ESTATE INVESTMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
1. Organization and Operations:
American Real Estate Investment Corporation (the "Company") is a
self-administered and self managed equity real estate investment trust
("REIT") which was organized in the state of Maryland in 1994. The Company
was previously engaged in the ownership and operation of multifamily
residential properties located in certain markets within the Southwestern
United States, including the Denver, Phoenix and San Diego metropolitan
areas. In connection with the transactions that were consummated on December
12, 1997 and discussed further in Note 3, the Company has modified it's
strategy to focus on the acquisition of industrial and office properties
located in the mid-Atlantic and Northeastern United States and has
implemented a plan of disposition of the multi-family properties.
As of December 31, 1997, as a result of the transactions discussed in Note
3, the Company owns 19 office and industrial properties located in Eastern
Pennsylvania and Northern New Jersey containing an aggregate of approximately
1,800,000 square feet which have an overall occupancy of 95 %, two multi-family
properties located in Denver and Phoenix, a community shopping center located in
Northern New Jersey and an investment in a direct financing lease related to a
property located in Northern New Jersey. The sales of various multi-family
properties in 1996, 1997 and 1998 are discussed in Note 3. Of the 22 properties
owned by the Company, 17 are indirectly or directly owned by American Real
Estate Investment, L.P. (the "Operating Partnership") and 5 are owned directly
by the Company. The Company conducts all of it's service operations, including
leasing, property management and other services through an equity investee of
the Operating Partnership, American Real Estate Management, Inc., formerly Penn
Square Properties, Inc. (the "Management Company") which was acquired as a
result of the transactions consummated on December 12, 1997.
2. Summary of Significant Accounting Policies:
Principles of Consolidation
The Company is the sole general partner of the Operating Partnership with
an ownership interest of approximately 57% at December 31, 1997. The Company is
also the sole stockholder of several other subsidiary entities. The accompanying
consolidated financial statements include the account balances of the Company,
the Operating Partnership and the Company's wholly- owned subsidiaries as of
December 31, 1997 and their operations for the years ended December 31, 1997 and
December 31, 1996 on a consolidated basis. All significant intercompany accounts
and transactions have been eliminated in consolidation.
F-8
<PAGE>
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
periods. Actual results could differ from those estimates.
Investment in Real Estate
Investment in real estate is recorded at cost and depreciated over the
estimated useful lives of the related assets. Expenditures for additions,
renewals and betterments which extend the useful life of the properties are
capitalized. Routine maintenance and repairs are charged to expense as incurred.
Furnishings and equipment are included in buildings and improvements in the
accompanying consolidated balance sheet. The estimated useful lives of the
assets are as follows:
<TABLE>
<CAPTION>
Years
----------
<S> <C>
Buildings and improvements 10-35
Land improvements 15
Furnishings and equipment 3-10
</TABLE>
The Company accounts for properties as assets held for sale when they have
committed to a formal plan of disposition. The Company reports its assets to be
disposed of at the lower of carrying value or fair value less the cost to sell
the related asset. The two remaining multi-family assets of the Company have
been shown in the accompanying balance sheet as assets held for sale. In
accordance with Financial Accounting Standard No. 121, " Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of",("SFAS No. 121") the Company has suspended depreciation charges on these
assets since August 20, 1997, the date the agreements with McBride and Hudson
Bay were executed and the disposition plans were adopted.
In accordance with SFAS No. 121, the Company assesses its assets for
impairment whenever events or changes in circumstances indicate that the
carrying amount of a respective asset that the Company expects to hold and use
may not be recoverable. In performing the review for recoverability, the Company
estimates the future cash flows expected to result from the use of the asset and
its eventual disposition. If the sum of the expected future cash flows
(undiscounted and without interest charges) is less than the carrying amount of
the asset, the Company will recognize an impairment loss. The impairment loss is
measured as the amount that the carrying value of the asset exceeds the fair
value of the asset. Estimates of fair value are based on quoted market prices in
active markets or, if quoted market prices are not available, the best
information available in the circumstances, such as the present value of
estimated expected future cash flows. Based upon Management's review, no such
provision is necessary at December 31, 1997.
F-9
<PAGE>
The Company has a $1,920,000 net investment in a lease, acquired as part of
the McBride Portfolio acquisition (Note 3), which has been accounted for as a
direct financing lease as a result of the tenant's purchase option at the end
of the lease term in 2004. At December 31, 1997, the net investment in this
lease consists of the gross investment of $3,150,000, net of unearned income
of $1,230,000. The unearned income is amortized over the lease term as annual
rent payments of $525,000 are collected in order to produce a constant
periodic rate of return on the net investment in this lease.
Equity Method Investments
The equity method of accounting is used to account for the Company's
non-controlling interest in 100% of the preferred stock of the Management
Company. The Company sold its non-controlling general partner interest in
Emerald Vista Associates, L.P. in September 1997 as discussed in Note 3.
Summarized financial information for Emerald Vista Associates, L.P. is shown in
Note 11.
Cash and Cash Equivalents and Restricted Cash
For purposes of reporting cash flows, the Company considers all highly
liquid investments purchased with an original maturity of three months or less
to be cash equivalents. Restricted cash represents security deposits from
tenants and amounts in escrow for payment of property taxes, insurance or
capital improvements, as required by the Company's lenders and amounts held by
qualified intermediaries for future deferred exchanges in accordance with
Section 1031 of the Internal Revenue Code.
Deferred Financing and Leasing Costs
Deferred financing costs are amortized on a straight-line basis over the
life of the related mortgage loans. Amortization is included in interest expense
in the accompanying statements of operations. Deferred leasing costs are
amortized on a straight-line basis over the life of the related leases.
Fair Value of Financial Instruments
Fair values of current assets and payables approximate their carrying
amount due to their short-term nature. The carrying amounts of the mortgage
notes payable at December 31, 1997 approximated their respective fair values, as
determined by using yearend interest rates and market conditions.
F-10
<PAGE>
Allocations of Income and Distributions of Cash
Effective with the December 12, 1997 amendment to the Operating
Partnership agreement, net income and losses of the Operating Partnership are
allocated to the Company and limited partners in accordance with their
respective ownership interests which were 57% and 43%, respectively, at December
31, 1997. For the periods prior to this amendment, the net income of the
Operating Partnership for each year was allocated as follows: an amount
representing 80% of the number of common shares outstanding at the end of each
calendar year (equivalent to approximately $904,000 and $897,000, respectively,
for 1997 and 1996) was allocated to the Company. Any remaining net income for
each such year was then allocated to the limited partners until the cumulative
net income allocated to the limited partners for the current and all prior years
is equal to approximately 42% of total cumulative net income since inception. In
1996, approximately $605,000 of net income, was allocated to the limited
partners in accordance with this provision. As a result of the additional
amounts allocated to minority interest during 1996, no additional amounts of
cumulative net income were allocated to the minority interest in 1997.
Thereafter, all net income was allocated to the Company and the limited partners
in accordance with their percentage interests.
Net losses of the Operating Partnership are allocated to all the partners
in proportion to their percentage interests in accordance with the terms of the
partnership agreement.
In the event of liquidation of the Operating Partnership, its assets will
be distributed in accordance with all the partners' capital accounts.
Liquidating distributions to the limited partners will be adversely affected to
the extent profits were allocated to the Company rather than the limited
partners. In certain instances in which cash distributions by the Operating
Partnership exceed its net income, distributions to holders of Common Stock may
be taxed as dividends whereas distributions to limited partners may constitute a
return of capital.
Revenue Recognition
Revenue is recognized on the accrual basis of accounting. Rental income
under leases in excess of one year in length is recognized using the straight
line method under which contractual rent increases are recognized evenly over
the lease term. Tenant reimbursements are accrued as revenue in the same period
the related expenses are incurred by the Company.
Income Taxes and Other
The Company elected to be taxed as a REIT under Sections 856 through 860
of the Internal Revenue Code and applicable Treasury Regulations, commencing
with its taxable year ended December 31, 1993. The Company believes that it is
organized and will continue to operate in such a manner as to qualify for
taxation as a REIT under the Internal Revenue Code.
F-11
<PAGE>
A REIT is generally not subject to Federal income taxes on that portion of
its ordinary income or capital gain that is currently distributed to
shareholders as the REIT provisions of the Internal Revenue Code generally allow
a REIT to deduct dividends paid to its shareholders to the extent it distributes
annually at least 95% of its taxable income and satisfies certain other
requirements.Accordingly, no provision has been made for Federal income taxes in
the accompanying consolidated financial statements. If the Company fails to
qualify as a REIT in any taxable year, the Company will be subject to Federal
income tax at regular corporate rates on its taxable income. The Company's
dividends of approximately $0.87 and $0.85 per share paid in 1997 and 1996,
respectively, were allocated to the shareholders on the following basis for 1997
and 1996, approximately $0.06 and $0.52 per share represented ordinary income
and approximately $0.81 and $0.33 per share represented return of capital and
long-term capital gain, respectively.
The Company and certain of its subsidiaries are subject to certain state
and local taxes. The provision for these taxes has been reflected in general and
administrative expense in the accompanying financial statements. The Management
Company is subject to Federal, state and local taxes on it's income as it is
organized as a "C" corporation.
There are differences in the Company's bases of assets and liabilities,
specifically relating to minority interest, between financial reporting and the
tax basis used for completion of annual Federal and state income tax returns.
The Federal tax basis of the Company's real estate at December 31, 1997 was
approximately $87,000,000.
Earnings per Share
In 1997, The Company adopted Statement of Financial Accounting Standard
No. 128, "Earnings per Share" ("SFAS No. 128"), which is effective for periods
after December 15, 1997 and requires the restatement of all prior period
earnings per share ("EPS") data presented. SFAS No. 128 established simplified
standards for computing and presenting EPS and supercedes the standards in APB
Opinion No.15, making them more comparable to international EPS standards. It
requires the dual presentation of basic and diluted EPS on the income statement
and requires a reconciliation of the numerator and denominator of basic EPS to
diluted EPS.
Reclassifications
Certain amounts in the 1996 consolidated financial statements have been
reclassified in order to present these amounts on a basis consistent with the
presentation in the 1997 consolidated financial statements.
F-12
<PAGE>
3. Significant 1997 and 1996 Transactions:
December 12, 1997 Transactions
On December 12, 1997, the Company consummated the acquisition of the
McBride Portfolio which was effected through the contribution by McBride Hudson
Bay, L.P. and various entities affiliated with it (collectively, "McBride") of
interests in certain entities owning 15 office and industrial properties located
in Northern New Jersey, the merger of Fairlawn Industrial Park, Inc. ("FLIP")
with and into the Company and $8,400,000 in cash in return for the issuance of
2,001,132 shares of Common Stock, 2,998,867 units of limited partnership
interests of the Operating Partnership ("OP Units"), representing aggregate
consideration valued at approximately $55,000,000, a seven year warrant to
acquire 125,000 OP Units at an exercise price of $11 per OP Unit and the
assumption of $45,000,000 of mortgage debt. These transactions were accounted
for in accordance with purchase accounting. In connection with these
transactions, the Company also acquired McBride's rights to acquire seven
industrial properties totaling approximately 1,200,000 square feet, which are
discussed further below. These acquisitions were consummated in December 1997
and January 1998.
The Company also acquired all of the outstanding preferred stock of the
Management Company, a full service real estate management, leasing, construction
and brokerage company located in Plymouth Meeting, Pennsylvania in consideration
for the issuance of 363,636 OP Units valued at $4,000,000, and seven year
warrants to acquire 250,000 OP Units at an exercise price of $11 per OP Unit.
This transaction was accounted for in accordance with purchase accounting.
Simultaneous with these transactions, Hudson Bay Partners II, L.P. ("Hudson
Bay"), CRA Real Estate Securities and Robert Branson, a new director of the
Company, invested an aggregate of $21,600,000 in the Company in return for the
issuance of an aggregate of 1,963,635 shares of Common Stock. Hudson Bay was
issued a seven year warrant to purchase 300,000 shares of Common Stock at an
exercise price of $11 per share. Hudson Bay is a discretionary investment fund
formed to make strategic investments in real estate and real estate related
securities.
As a result of these transactions, David F. McBride became Chairman of the
Board and a director of the Company, Jeffery E. Kelter became President and a
director of the Company, and three other individuals were elected directors of
the Company. James Mulvihill and Evan Zucker, the former Chairman and President,
respectively, will remain as directors of the Company however; their respective
consulting and employment agreements and outstanding options, along with the
employment agreement and outstanding options of Rick Burger, an officer of the
Company, were terminated on December 12, 1997. Pursuant to the terms of their
agreements with the Company, these executives elected to receive the termination
payments in the form of 171,266 shares of Common Stock. The cost of terminating
these agreements and canceling 388,700 of outstanding options to these
executives was $2,536,000, and was recorded as compensation expense upon the
consummation of the transactions.
In addition, 107,500 warrants issued to Dickenson & Co. and 175,000
warrants issued to D.H. Blair Holdings, Inc., an affiliate of a limited partner
of the Operating Partnership, in conjunction with the acquisition of Quadrangles
Village Apartments, were terminated for cash payments, which were expensed upon
the consummation of the transactions, aggregating $667,000.
F-13
<PAGE>
Other Industrial Property Acquisitions
In December 1997, the Company, through it's Operating Partnership,
acquired the following industrial properties, which were accounted for in
accordance with purchase accounting, all of which are located in Eastern
Pennsylvania:
<TABLE>
<CAPTION>
Net
Acquisition Debt Assumed Leasable
Property Location Price or Funded Square Feet
- ------------------ ----------------- -------------- ------------ -----------
<S> <C> <C> <C> <C>
One Tabas Lane Exton, PA $4,310,000 $2,878,000 150,000
Two Tabas Lane Exton, PA 6,200,000 4,382,000 150,000
1305 Goshen Road West Chester, PA 4,718,000 3,358,000 90,000
100 Oak Hill Drive Mountain Top, PA 2,816,000 1,155,000 105,000
1057 Arnold Road Reading, PA 5,894,000 3,500,000 219,000
1091 Arnold Road Reading, PA 3,965,000 --- 133,000
----------- ----------- -------
$27,903,000 $15,273,000 847,000
=========== =========== =======
</TABLE>
Sales of MultiFamily Residential Properties and Interest in Limited
Partnership
The Company sold the following during 1997:
<TABLE>
<CAPTION>
Property/Partnership
Interest Timberleaf Sedona Emerald Vista
(Transaction date) (February 28) (August 29) (September 26) Totals
- ------------------ ------------- ----------- -------------- ------
<S> <C> <C> <C> <C>
Sales price $ 9,115,000 $ 9,150,000 $ 2,000,000 $ 20,265,000
Less:
Transaction costs 16,000 406,000 3,000 425,000
Net book value of
property at sale
date 8,696,000 5,291,000 1,245,000 15,232,000
----------- ----------- ------------ ------------
Gain on sales $ 403,000 $ 3,453,000 $ 752,000 $ 4,608,000
=========== =========== ============ ============
</TABLE>
The $3,080,000 of proceeds from the Sedona sale were reinvested as part of
a deferred exchange in accordance with Section 1031 of the Internal Revenue
Code. This deferred exchange was consummated on January 9, 1998 as part of the
acquisition of 101 Commerce (Note 12). Accordingly, no taxable gain was
generated in 1997 from the Sedona sale.
On December 20, 1996, the Company sold a 150 unit multi-family residental
property known as the International Apartments located in Denver, Colorado area
for a gross selling price of $3,050,000 and recorded a gain of $1,786,000 on
this sale.
See Note 12 for the Company's pro forma of the property acquisitions and
dispositions discussed above and the for the transactions which occurred
subsequent to December 31, 1997.
F-14
<PAGE>
4. Investment in Real Estate:
At December 31, 1997, the Company owned and operated multi-family
residential, industrial, office and other properties as follows:
<TABLE>
<CAPTION>
Land and Land Buildings and Accumulated
Asset Type Improvements Improvements Total Depreciation
- ---------- ------------ ------------- ---------- ------------
<S> <C> <C> <C> <C>
Multi-family $ 6,517,000 $ 25,188,000 $ 31,705,000 $ 2,838,000
Industrial 10,654,000 44,551,000 55,205,000 53,000
Office 11,142,000 46,940,000 58,082,000 56,000
Other 1,540,000 6,611,000 8,151,000 8,000
------------ ------------ ------------ ------------
Total $ 29,853,000 $123,290,000 $153,143,000 $ 2,955,000
============ ============ ============ ============
</TABLE>
A 300 unit apartment complex known as Americana Lakewood was sold by the
Company on January 9, 1998 (Note 12 ). The Company owned a general partner
interest in Emerald Vista Associates, L.P. ("Emerald Vista") through American
Emerald Partners, L.P. Emerald Vista owned the 456 unit Emerald Pointe
multifamily residential property. In accordance with the terms of the amended
partnership agreement of Emerald Vista, American Emerald Partners, L.P. was
entitled to receive 50% of the excess cash flow available for distribution after
the payment of a 15% cumulative preferential return on its net equity
investment. The Company sold it's general partnership interest in this property
on September 26, 1997 for a gross selling price of approximately $2,000,000.
The Company owned a 450 unit multifamily residential property known as
Timberleaf apartments. This property was sold for $9,115,000 on February 28,
1997. The Company owns a 510 unit multifamily residential property known as
Quadrangles Village apartments. On February 26, 1998, an agreement of sale was
signed for this property for a selling price of approximately $27,000,000 . The
consummation of this transaction is subject to the completion of the buyer's due
diligence and approvals from HUD and the lender under the bond indenture.
The multifamily assets owned at December 31, 1997 are shown in the
accompanying balance sheet as assets held for sale in accordance with the
Company's policy discussed in Note 2.
F-15
<PAGE>
5. Mortgage Notes Payable:
The following table presents outstanding mortgage notes payable as of December
31, 1997:
<TABLE>
<CAPTION>
Balloon
Periodic Payment
Interest Maturity Payment Principal Due At
Rate Date Date Balance Maturity
-------- ----------- -------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Office / Industrial
Nomura (various
properties) 7.71% 10/01/2022 (1) $44,910,000 $ 2,919,000
One Tabas Lane 8.25% 09/01/2000 (1) 2,872,000 2,657,000
Two Tabas Lane 8.50% 09/01/2005 (1) 4,374,000 3,220,000
1305 Goshen Parkway 8.50% 09/01/2005 (1) 3,351,000 2,467,000
100 Oak Hill Drive 7.50% 09/01/2000 (3) 1,155,000 1,155,000
1057 Arnold 7.75% 04/02/1998 (2) 3,500,000 3,500,000
-----------
Weighted $60,162,000
7.84% average rate ===========
Multifamily
Americana Lakewood
Apartments 8.24% 04/30/2000 (4) $10,088,000 $10,088,000
Quadrangles Village
Apartments 6.35% 05/01/2026 (5) 16,251,000
-----------
26,339,000
-----------
Total all properties $86,501,000
===========
</TABLE>
(1) Amortizing monthly with a balloon payment at maturity.
(2) Non-amortizing. Interest is payable at a variable rate equal to 1 month
LIBOR plus 2%
(3) Non-amortizing.
(4) Non-amortizing. Interest is payable at a variable rate equal to GECC
Commercial Paper Rate plus 2.45%.
(5) Fully amortizing through maturity.
Office/Industrial Properties
As a result of the McBride transactions (Note 3), the Company assumed
an aggregate of approximately $45,000,000 for four separate mortgage notes
payable with Nomura Asset Capital Corporation which originated on September
22, 1997. These mortgage notes payable consist of four separate notes which
bear interest at a fixed rate of 7.71%. Aggregate monthly principal and
interest payments of $338,717 are due until the notes mature in October 2022.
The notes are not prepayable until after October 24, 1999, the second
anniversary of the effective date of the securitization of these notes, and
are prepayable from that time through July 11, 2007, with the payment of a
prepayment penalty. On or after July 11, 2007, the notes can be prepaid
without a prepayment penalty.
Commencing on October 11, 2007, the interest rate on these notes will
change to the greater of 12.71% or the Treasury Rate, as defined, plus 6.5% (the
"Additional Interest Rate"). To the extent Excess Cash Flow, as defined,
generated from ten of the properties acquired from McBride ("the Mortgaged
F-16
<PAGE>
Properties"), is insufficient to pay interest at the Additional Interest Rate,
the remaining interest will be deferred and accrued to the principal balance of
the notes. Beginning November 11, 2007, 100% of the Excess Cash Flow, as
defined, attributable to the Mortgaged Properties shall be paid monthly to
reduce the then outstanding principal and accrued interest, if any. These notes
are secured by a first lien on the Mortgaged Properties and contain
cross-default and cross-collateralization provisions among the three borrowing
entities which are indirectly owned by the Operating Partnership and another
entity which is owned by the Company. In addition, certain individuals
affiliated with McBride who are stockholders in the Company and limited partners
in the Operating Partnership have guaranteed $20,000,000 of the outstanding
principal at December 31, 1997.
As a condition of the mortgage notes payable, initial cash reserves of
approximately $330,000 were required to be established to fund real estate
taxes, insurance, tenant rollover costs and capital reserves. The Company is
required to continue to fund these reserves on a monthly basis. The aggregate
amount funded on a monthly basis is approximately $33,000. Funds in the tenant
rollover and capital reserves accounts are to be utilized by the Company to fund
certain capital improvements, repairs, tenant improvements and leasing
commissions related to the properties. The aggregate balance in these reserve
accounts at December 31, 1997 was approximately $330,000.
The Company has five additional mortgages outstanding which aggregate
$15,252,000 as of December 31, 1997 which were assumed or originated to fund the
acquisition of certain properties during 1997 (Note 3). These mortgages have
maturity dates ranging from 1998 through 2005. Four of the five mortgages have
fixed interest rates ranging from 7.50% to 8.50%. The other mortgage, which has
a balance of $3,500,000 at December 31, 1997, has an interest rate equal to one-
month LIBOR plus 2.0% ( 7.50 % at December 31, 1997). The fixed rate mortgages,
excluding the mortgage note related to 100 Oak Hill Drive, require prepayment
penalties upon prepayment which are equal to 1% of the balance prepaid for each
year remaining on the mortgage note until its maturity. The One Tabas, Two Tabas
and 1305 Goshen Parkway mortgages are cross-collaterlized and cross-defaulted.
Multi-family Properties
In April 1995, the Company refinanced the mortgage note payable
collateralized by Americana Lakewood Apartments with a $10,500,000 mortgage loan
from General Electric Capital Corporation ("GECC"). On March 31, 1997, the GECC
mortgage note payable was modified and the interest rate was reduced to GECC's
composite commercial paper rate plus 2.45% from the composite commercial paper
rate plus 3.75%. The mortgage note payable requires monthly interest payments
through April 2000. In addition, quarterly principal payments are required based
on a stipulated percentage of the Excess Cash Flow, as defined, from Americana
Lakewood Apartments. The note requires a balloon payment in the amount of the
outstanding principal balance on April 30, 2000 and is prepayable prior to March
1, 1998 only in the event the prepayment results from a sale of the property.
This mortgage note was prepaid without penalty on January 9, 1998 as a result of
the sale of the property.
The mortgage note payable collateralized by the Timberleaf apartments
property had a principal balance of $6,372,130 as of December 31, 1996 and bore
interest at 9.0%. The note payable required monthly principal and interest
payments of $52,300 through March 2004. The $6,363,000 outstanding balance of
this note was assumed by the buyer as a result of the sale of this property on
February 28, 1997.
F-17
<PAGE>
The mortgage note payable collateralized by the Quadrangles Village
apartments property had a principal balance of approximately $16,251,000 and
16,448,000 as of December 31, 1997 and 1996, respectively and bears interest at
6.35% under financing provided by the United States Department of Housing and
Urban Development. . The note payable requires monthly principal and interest
payments of $103,031 through May 1, 2026. The note cannot be prepaid prior to
June 2003, and thereafter contains a prepayment penalty as follows: 2% from June
2003 to May 2004; 1% from June 2004 to May 2005; 0% thereafter. Under the terms
of the existing agreement of sale for this property this debt will be assumed by
the buyer.
The installment loan collateralized by Sedona apartments had a principal
balance of approximately $4,212,000 as of December 31, 1996. This loan which
bore interest at the bank's prime rate plus 0.5% (8.75% at December 31, 1996)
was due on August 31, 1998. On January 31, 1997, this loan was refinanced by a
$5,700,000 mortgage note from GMAC Commercial Mortgage Corporation. This note
bore interest at one-month LIBOR plus 2.5%, required principal and interest
payments based on a 25 year amortization schedule and was scheduled to mature
August 1, 1998. This loan was repaid from the proceeeds of the sale of Sedona on
August 29, 1997.
Maturities of mortgage notes payable as of December 31, 1997 are as
follows:
<TABLE>
Office/Industrial Multifamily Total
------------------- ------------------- -----------------
<S> <C> <C> <C>
1998 $ 4,345,000 $ 210,000 $ 4,555,000
1999 915,000 224,000 1,139,000
2000 2,146,000 10,324,000 12,470,000
2001 1,073,000 255,000 1,328,000
2002 1,163,000 271,000 1,434,000
2003 and thereafter 50,520,000 15,055,000 65,575,000
----------- ----------- -----------
$60,162,000 $26,339,000 $86,501,000
=========== =========== ===========
</TABLE>
6. Related Party Transactions:
The Company subleases office space in Denver, Colorado from Black Creek
Capital, LLC . The lease agreement contains provisions for a monthly lease
payment of $1,346 and expires December 31, 1999. A former officer and current
director and another director of the Company are principal officers and
members of Black Creek Capital, LLC. In connection with the December 12, 1997
transactions, the Company will close this office in the second quarter of
1998 and is obligated to continue these payments through December 31,1999.
The cost of the termination of approximately $40,000 has been accrued at
December 31, 1997.
The former President and Chief Executive Officer and Treasurer of the
Company each earned a bonus of $25,000 during 1997 and 1996 for achieving the
funds from operations benchmark which was stipulated in the Company's
original prospectus dated November 3, 1993.
F-18
<PAGE>
The former President and Chief Executive Officer, and former Chairman of
the Company each received compensation on a quarterly basis in the form of
Common Stock issued by the Company. Members of the Board of Directors who are
not officers of the Company received a portion of their compensation on a
quarterly basis in the form of Common Stock issued by the Company. Total Common
Stock compensation was approximately $41,000 and $162,000 to officers and
directors of the Company for the years ended December 31, 1997 and December 31,
1996, respectively.
The Company issued Common Stock during 1996 in the amount of $52,500 at
its then current market price to an entity, of which a limited partner of the
Operating Partnership is Chief Executive Manager, in settlement of the balance
of its fee earned for securing the Company's mortgage loan with GECC which was
accrued as of December 31, 1995.
The Company has leases with companies in which the Chairman of the Board
is an officer, and for certain of these companies, a shareholder. The annual
aggregate base rental revenue under these leases is approximately $236,000., of
which approximately $12,000 is included in rental income in the accompanying
financial statements as these leases relate to properties acquired in the
December 12, 1997 transactions.
At December 31, 1997, the Company has a payable of approximately $200,000
to an affiliate of the Chairman of the Board related to certain prorated amounts
for the December 12, 1997 transactions.
Through the Operating Partnership's 100% ownership of the preferred
stock of the Management Company, the Operating Partnership is entitled to
receive 95% of the amounts paid as dividends by the Management Company. The
remaining amounts paid as dividends by the Management Company are paid to the
holders of common stock of the Management Company. Jeffery E. Kelter, Hudson
Bay Partners, L.P. and McBride own 40%, 30% and 30%, respectively, of the
common stock of the Management Company. The Management Company manages all
but two of the Company's properties. No management fees were paid to the
Management Company in 1997. The Management Company manages two properties
which are owned by entities, other than the Company, in which Mr. Keller has
a general partnership interest. In 1997, the Company advanced $150,000 to the
Management Company to fund working capital requirements.
7. Operating Leases:
The Company's properties are leased to tenants generally under operating
leases with expiration dates extending through 2015. Future minimum rentals
under noncancellable operating leases, excluding tenant reimbursements of
operating expenses and tenants with month-to-month leases aggregating
approximately $150,000 of annual rent, as of December 31, 1997 are as follows:
<TABLE>
<CAPTION>
<S> <C>
1998 12,660,000
1999 12,256,000
2000 11,301,000
2001 10,193,000
2002 9,192,000
Thereafter 34,428,000
</TABLE>
No tenant represented more than 10% of the minimum rental revenues for the year
ended December 31, 1997.
8. Stock Options, Stock Warrants and Conversion Rights:
Stock Options
The Company's 1993 Omnibus Incentive Plan (the "Plan") has authorized the
grant of compensatory awards representing 250,000 shares of Common Stock
consisting of stock options, stock awards, stock appreciation rights and other
stock-based awards to certain officers and employees. Incentive stock options,
are to be granted at not less than the fair market value of the
F-19
<PAGE>
Company's stock on the date of the grant and the term cannot exceed ten years.
The vesting period of each grant varies and is determined at the date of grant.
In 1997, the stockholders approved an increase in the amount of shares available
for issuance under this Plan to 500,000. All awards granted in 1997 and 1996,
which were cancelled in December 1997 as discussed below, vested over the year
in which they were granted. Incentive options granted to shareholders owning 10%
or more of the Common Stock cannot be at less than 110% of the fair market value
of the Company's stock on the date of the grant and the term cannot exceed ten
years.
On August 31, 1994, the Company adopted and authorized the 1994
Non-Employee Stock Option Plan (the "Non-Employee Plan") and 150,000 shares were
authorized thereunder in the form of non-qualified stock options for issuance to
certain directors or consultants. In 1997, the stockholders approved an increase
in the amount of shares available for issuance under the Non-Employee Plan to
300,000. The exercise price for each option granted under the Non-Employee Plan
cannot be less than the fair market value of the Company's Common Stock
underlying the option at the date of grant. The term of each option is ten years
and each option is exercisable upon the date of grant, provided that the option
holder remains a director, employee or consultant to the Company during the
exercise period.
In conjunction with the 1993 initial public offering, certain officers and
directors received 186,700 10-year options at an exercise price of $10.00 per
share, all of which remained outstanding as of December 31, 1996. These options
vested immediately for the former Chairman of the Board and the President and
over a two year period for the other former officer. As discussed below, these
options were cancelled as a result of the December 12, 1997 transactions.
The following tables show the activity and balances for each plan for 1997 and
1996:
<TABLE>
<CAPTION>
1997 1996
Exercise Exercise
1993 Omnibus Incentive Plan Options Price Options Price
--------------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C>
Outstanding, beginning of year 82,000 47,000
Granted 45,000 $10.00 35,000 $10.00
Exercised ----- -----
Forfeited (127,000) $10.00 -----
---------- ---------- ---------- ----------
Outstanding, end of year ----- ----- 82,000 $10.00
---------- ---------- ---------- ----------
Non-Employee Plan
-----------------
Outstanding, beginning of year 104,000 64,000
Granted 55,000 $10.00 40,000 $10.00
Exercised (5,000) $10.00 -----
Forfeited (97,500) $10.00 -----
========== ========== ========== ==========
Outstanding, end of year 56,500 $10.00 104,000 $10.00
========== ========== ========== ==========
</TABLE>
F-20
<PAGE>
Any award issued under the plans which is forfeited, expires or terminates
prior to vesting or exercise is available for future award under the plans. In
connection with the December 12, 1997 transactions, 388,700 options (including
the 186,700 of options issued in connection with the 1993 Initial Public
Offering ("IPO") in 1993) held by certain executives were cancelled, in
consideration for payments aggregating $1,423,924 which the executives elected
to receive in the form of 129,449 shares of Common Stock which were issued on
December 12, 1997 and 22,500 options awarded to certain directors in 1997 were
cancelled at no cost to the Company.
The Company accounts for its stock-based options under Accounting
Principles Board Opinion No. 25, under which no compensation expense related to
options has been recognized, as all options have been granted with an exercise
price equal to or greater than the fair value of the Company's Common Stock on
the date of grant. The Company adopted Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS No.123") for
disclosure purposes in 1996. In accordance with SFAS No. 123, the fair value of
each option grant has been estimated as of the date of grant using an option
pricing model with the following assumptions for 1997 and 1996, respectively:
7.00% dividend yield; an expected life of 10 years; expected volatility of 27%
and 20%; and a risk free interest rate of 5.74% and 6.42%. The weighted average
fair value of those shares granted in 1997 and 1996 was $1.08 and $.59 ,
respectively, per share. The weighted average remaining contractual life for the
options granted in 1997 and 1996 that were outstanding at December 31, 1997 was
7.5 years.
Using these assumptions, the fair value of the stock options granted in
1997 and 1996, which were not cancelled as a result of the December 12, 1997
transactions, was approximately $8,000 and $44,000 , respectively. Had
compensation cost been determined consistent with SFAS 123, utilizing the
assumptions detailed above, the Company's net income would have been reduced to
the following pro forma amounts:
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, December 31,
1997 1996
---------------- ----------------
<S> <C> <C>
Net income:
As reported $1,243,000 $1,104,000
Pro forma $1,238,000 $1,078,000
Basic earnings per share:
As reported $.92 $1.00
Pro forma $.92 $ .97
Diluted earnings per share:
As reported $.88 $1.00
Pro forma $.88 $ .97
</TABLE>
Warrants
In conjunction with the IPO, Dickinson & Co. received a warrant to
purchase up to 107,500 shares of Common Stock at an exercise price of $16.50 per
share at any time during the period from November 3, 1993 to November 2, 1998,
at which time the warrant expires. In conjunction with the acquisition of
Quadrangles Village apartments, D.H. Blair Holdings, Inc. received a warrant to
F-21
<PAGE>
purchase 175,000 shares of Common Stock at a price of $10.00 per share at any
time during the period from December 2, 1994 to December 2, 1999, at which time
the warrant expires. The warrant was transferred to a limited partner of the
Operating Partnership at the time the note was purchased. Both of these warrants
were terminated in connection with the December 12, 1997 transactions for cash
payments of $25,000 and $641,000, respectively.
In connection with the transactions which occurred on December 12, 1997,
300,000 Common Stock warrants were issued to Hudson Bay and 250,000 and 125,000
OP Unit warrants were issued to Jeffery Kelter and David McBride, respectively,
at an exercise price of $11 per share or OP Unit. The Common Stock and OP Unit
warrants expire on December 12, 2004 and may not be sold, transferred or
assigned before December 12, 1998. The Common Stock warrants issued to Hudson
Bay and the OP Unit warrants issued to Jeffery Kelter and David McBride were
valued as of December 12, 1997 at $685,000 and are shown in the accompanying
balance sheet as a separate component of shareholders' equity.
Conversion Rights
Pursuant to the partnership agreement, which was amended and restated on
December 12, 1997, the limited partners of the Operating Partnership received a
conversion right, which enables each limited partner to convert their interests
in the Operating Partnership into shares of Common Stock or cash, as selected by
the Company at any time on a one for one basis. Limited partners may exercise
their conversion right only once during each calendar quarter. The number of
shares relating to the conversion right remains stable irrespective of the
market price of the Company's Common Stock. The limited partners, in the
aggregate, could convert their partnership interests in the Operating
Partnership into 4,058,270 shares of Common Stock as of December 31, 1997 and
725,064 shares of Common Stock as of December 31, 1996. OP Units totaling 96,240
were converted to Common Stock in 1997 and no OP Units were converted during
1996.
9. Earnings Per Share:
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, "Earnings per Share" (SFAS No.128). SFAS No. 128 establishes
standards for computing and presenting earnings per share (EPS) and applies to
entities with publicly held Common Stock or potential Common Stock. This
statement simplifies the standards for computing EPS previously found in APB
Opinion No. 15, "Earnings per Share", and makes them comparable to international
EPS standards.
F-22
<PAGE>
The following is a reconciliation of the numerators and denominators of the
basic and diluted EPS computations.
<TABLE>
<CAPTION>
BASIC DILUTED
---------- ----------
<S> <C> <C>
Year Ended December 31, 1997
Net Income $1,243,000 $1,243,000
==========
Add: Minority interest allocation -- 876,000
----------
$2,119,000
==========
Weighted average number of shares outstanding 1,347,297 1,347,297
Stock equivalents -- 1,056,707
---------- ----------
1,347,297 2,404,004
========== ==========
Earnings per Share $ .92 $ .88
========== ==========
Year Ended December 31, 1996
Net Income $1,104,000
==========
Add: Minority interest allocation
Weighted average number of shares outstanding 1,106,379
Stock equivalents --
----------
1,106,379
==========
Earnings per Share $ 1.00
==========
The diluted EPS calculation for 1996 was not included above as the
effect of the convertible OP Units of 680,746 was anti-dilutive for 1996.
In 1997 and 1996, the Company's stock equivalents consisted of the
following:
1997 1996
---------- ----------
Options and warrants 92,973 --
Convertible OP Units 963,734 680,746
---------- ----------
1,056,707 680,746
========== ==========
</TABLE>
10. Commitments and Contingencies:
The Company and an affiliated entity were defendants in a lawsuit which
commenced in December 1995 in the Superior Court of the State of California,
County of San Diego, by Emerald Vista, Inc., Emerald Vista Associates, L.P. (the
"Partnership") and Schickler Meringoff Properties. The Partnership owned the
Emerald Pointe apartments. The plaintiffs alleged that the defendants, in
connection with an inspection of the partnership's apartment property in June
1995, breached their fiduciary duties to the plaintiffs and both negligently and
intentionally interfered with contracts of employment between the manager of the
property and certain of its employees. Plaintiffs were seeking damages,
declaratory and injunctive relief among other remedies. This litigation was
settled in 1997, as a result of the settlement the plaintiffs were given the
option to acquire the Company's interest in the
F-23
<PAGE>
Partnership for $2,000,000. This option was exercised and the partnership
interest was sold on September 26, 1997.
Beginning in November 1997, the Company is a sub-lessor under a lease for
it's Plymouth Meeting, Pennsylvania corporate offices which require monthly
rental payments of $9,300, plus its share of operating expenses, until
expiration in March 2000.
The Company entered into employment agreements with two former officers of
the Company and a consulting agreement with the former Chairman of the Board.
The employment agreements were for an initial term of three years ending in
November 1996. Employment agreements for these two officers of the Company were
extended through December 31, 1999 at specified compensation levels, including
stipulated severance packages upon termination of either agreement prior to
December 31, 1999. As discussed in Note 3, these agreements were terminated
effective December 12, 1997. Pursuant to the terms of these agreements, these
former officers elected to receive these payments in 41,817 shares of Common
Stock. Accordingly, the cost of terminating these agreements of approximately
$620,000 , based upon the December 12, 1997 market price of the Common Stock,
was expensed upon the closing of the December 12, 1997 transactions.
As a result of the December 12, 1997 transactions, two officers of the
Company were given three-year employment agreements which provide for aggregate
initial base compensation of $400,000 subject to increases as approved by the
Compensation Committee, among other incentive compensation.
11. Investment in Partnership:
During 1994, the Company acquired a 50% general partnership interest in
Emerald Vista. This general partnership interest was sold September 26, 1997
(Note 3). In accordance with the partnership agreement, the Company was entitled
to receive 50% of the excess cash flow available for distribution, as defined,
after the payment of a 15% cumulative preferential return on its net equity
investment. The Company was a co-general partner and, based on the partnership
agreement which states that the other general partner is the managing general
partner, did not control Emerald Vista. Accordingly, the Company recorded its
investment in Emerald Vista under the equity method and recorded its equity in
earnings based on its allocable share of the net income or loss from Emerald
Vista.
The Company's investment in Emerald Vista ($1,190,611 at December 31,
1996) was in excess of its share in the existing equity as of the date of its
acquisition. The Company amortized the amount of its investment in excess of its
share in the underlying equity using the straight-line method. The amortization
is recorded on a pro rata basis to interest expense and depreciation expense in
the accompanying financial statements. In 1997 and 1996, $356,000 and $530,000,
respectively, was amortized related to this excess investment.
F-24
<PAGE>
Summarized Financial Data
The following is a summary of Emerald Vista's statement of operations for
the nine-month period ended September 26,1997, the date the partnership interest
was sold, and the year ended December 31, 1996:
<TABLE>
<CAPTION>
For Nine Month
Period
Statements of Operations 1997 1996
------------------------ ----------- ------------
<S> <S> <S>
Revenues $ 2,172,000 $ 2,886,000
Operating expenses (1,368,000) (1,837,000)
Interest Expense (79,000) (111,000)
----------- ------------
Net Income $ 725,000 $ 938,000
=========== ============
</TABLE>
12. Subsequent Events:
In January 1998, the Company consummated the acquisitions of 101 Commerce
Drive, a 597,000 square foot refrigerated warehouse/distribution center located
in Mechanicsburg, PA which is net leased to Hershey Foods Corporation through
2012 for a purchase price, including closing costs, of approximately $
26,300,000 and One Philips Drive, a 400,000 square foot warehouse distribution
center located in Mountain Top, PA which is net leased to Philips Electronics
Corporation through 2007, for a purchase price, including closing costs, of
approximately $11,100,000.
On January 9, 1998, the Company consummated the sale of the Americana
Lakewood Apartments for a selling price of approximately $15,000,000. The cash
proceeds from the sale were utilized to repay the $10,000,000 mortgage note
outstanding. On February 26, 1998, the Company signed an agreement to sell
Quadrangles Village Apartments for a gross selling price of approximately
$27,000,000. The consummation of this sale is subject to the buyer's due
diligence and related approvals from HUD and the lender under the bond
indenture.
On February 4, 1998, the Company announced the signing of definitive
agreements to acquire a ten building portfolio totaling approximately 790,000
square feet located in suburban Albany, New York for a purchase price of
approximately $58,000,000 from the Galesi Group ("Galesi"). The portfolio is to
be contributed to the Operating Partnership in exchange for the issuance of
approximately 1,363,000 LP Units in the Operating Partnership and the assumption
of related indebtedness. As part of this transaction, the Company will also
enter into an operating agreement with the Galesi and Columbia Development
("Columbia") that will grant additional rights and options to the Company
related to other properties and land controlled by Galesi and Columbia. These
transactions are anticipated to be consummated in the second quarter of 1998.
On February 24, 1998, the Company announced the signing of definitive
agreements to acquire two industrial distribution complexes located in
Liverpool, New York and Harrisburg, Pennsylvania totaling approximately
1,100,000 square feet for an aggregate purchase price of approximately
$27,400,000. These transactions were consummated on March 27, 1998.
The Company announced on February 18, 1998 that it had declared a cash
dividend of $0.22 per share for the quarter ended December 31, 1997 payable on
March 16, 1998 to shareholders of record on March 2, 1998.
F-25
<PAGE>
Pro Forma Operating Results
Assuming the completion of acquisitions and dispositions discussed in Note
3 which occurred in 1997, the sale of Americana Lakewood on January 9, 1998 and
the 1998 acquisitions of 101 Commerce Drive, One Philips Drive and the
Liverpool, New York and Harrisburg, PA industrial distribution complexes,
discussed above, as of as of January 1, 1997 and 1996, pro forma operating
results are presented as follows:
<TABLE>
<CAPTION>
For Year Ended
December 31,
------------------------------
<S> <C> <C>
1997 1996
(unaudited) (unaudited)
Total revenue $ 26,327,000 $ 25,491,000
Operating income (1) 7,121,000 5,634,000
Minority interest (3,062,000) (2,479,000)
------------ ------------
+Net income 4,059,000 3,155,000
============ ============
Earnings per share
Basic .76 .60
============ ============
Diluted .75 .60
============ ============
Pro forma average number of shares
outstanding
Basic 5,363,281 5,242,297
============ ============
Diluted 9,461,426 9,285,546
============ ============
</TABLE>
(1) Net of $4,763,000 and $4,740,000 in depreciation expense in 1997 and 1996,
respectively.
The pro forma operating results combine the Company's historical operating
results with the incremental rental income and operating expenses of the
properties acquired in 1997 and subsequent to December 31, 1997, including
adjustments for depreciation, based upon the acquisition price associated with
the property acquisitions, and interest costs assuming the borrowings to finance
the property acquisitions had occurred at the beginning of the year. The above
pro forma amounts are also adjusted to reflect the impact of the multi-family
property dispositions in 1997 and 1996 as if they were disposed of as of January
1, 1996.
These pro forma amounts are not necessarily indicative of what the actual
results of the Company would have been assuming the above property acquisitions
had been consummated at the beginning of 1997 or 1996, nor do they purport to
represent the future results of the Company.
F-26
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
AMERICAN REAL ESTATE INVESTMENT CORPORATION
BY: /S/ JEFFREY E. KELTER
-----------------------------------------
Jeffrey E. Kelter, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
/s/ DAVID F. MCBRIDE Chairman of the
- ------------------------------ Board/Secretary and March 30, 1998
David F. McBride Director
/s/ JEFFREY E. KELTER President and Director
- ------------------------------ March 30, 1998
Jeffrey E. Kelter
/s/ TIMOTHY E. MCKENNA Treasurer (Principal
- ------------------------------ Financial and Accounting March 30, 1998
Timothy E. McKenna Officer)
/s/ TIMOTHY MCBRIDE Director
- ------------------------------ March 30, 1998
Timothy McBride
/s/ ROBERT BRANSON Director
- ------------------------------ March 30, 1998
Robert Branson
/s/ JAMES MULVIHILL Director
- ------------------------------ March 30, 1998
James Mulvihill
/s/ EVAN ZUCKER Director
- ------------------------------ March 30, 1998
Evan Zucker
/s/ DAVID LESSER Director
- ------------------------------ March 30, 1998
David Lesser
<PAGE>
Exhibit 10(o)
PROMISSORY NOTE
Date of Note:
- ---------------
January 8, 1998
Note Amount:
- --------------
$ 17,000,000
Maturity Date:
- ----------------
February 1, 2008
THIS PROMISSORY NOTE (this "Note") is made January 8th 1998 by
AMERICAN SEDONAPARTNERS, L.P., a Colorado limited partnership ("Borrower"),
having an address at c/o American Real Estate Investment Corporation, Plymouth
Meeting Executive Campus, 620 Germantown Pike, Suite 200, Plymouth Meeting,
Pennsylvania 19462, to and in favor of COLUMN FINANCIAL, INC., a Delaware
corporation ("Lender"), having an address at 3414 Peachtree Road, N.E., Atlanta,
Georgia 30326-1113.
FOR VALUE RECEIVED, Borrower promises to pay to the order of Lender,
without any counterclaim, setoff or deduction whatsoever, on the Maturity Date
(as hereinafter defined), at the office of Lender, or at such other place as
Lender may designate to Borrower in writing from time to time, the principal sum
of SEVENTEEN MILLION AND NO/100 DOLLARS ($ 17,000,000.00), together with
interest on so much thereof as is from time to time outstanding and unpaid, from
the date of the advance of the principal evidenced hereby, at the rate of 7.03%
per annum (the "Note Rate"), in lawful money of the United States of America,
which shall at the time of payment be legal tender in payment of all debts and
dues, public and private.
ARTICLE I - TERMS AND CONDITIONS
1.01 Payment of Principal and Interest. Said interest shall be
computed hereunder on the basis of the actual number of days elapsed in a three
hundred sixty (360) day year. In computing the number of days during which
interest accrues, the day on which funds are initially advanced shall be
included regardless of the time of day such advance is made, and the day on
which funds are repaid shall be included unless repayment is credited prior to
close of business. Payments in federal funds immediately available in the place
designated for payment received by Lender prior to 2:00 p.m. local time at said
place of payment on a day on which Lender is open for business shall be credited
prior to close of business, while other payments may, at the option of Lender,
not be credited until immediately available to Lender in federal funds in the
place designated for payment prior to 2:00 p.m. local time at said place of
payment on a day on which Lender is open for business. Such principal and
interest shall be payable, in equal consecutive monthly installments of
$113,445.15 each, beginning on the first day of the second full calendar month
following the date of this Note or month, and continuing on the first day of
each and every month (the "Payment Date") thereafter through and including
February 1, 2008 (the "Maturity Date"), at which time the entire outstanding
principal balance hereof, together with all accrued but
1
<PAGE>
unpaid interest thereon, shall be due and payable in full. Each such monthly
installment shall be applied first to the payment of accrued interest and then
to reduction of principal. If the advance of the principal amount evidenced by
this Note is made on a date other than the first day of a calendar month, then
Borrower shall pay to Lender contemporaneously with the execution hereof
interest at the foregoing interest rate for a period from the date hereof
through and including the last day of the calendar month in which this Note is
funded.
1.02 Prepayment.
(a) Borrower shall have the right and option to release the Security
Property (as hereinafter defined) from the lien of the Security Instrument (as
hereinafter defined) in accordance with the terms and conditions of Section 1.38
of the Security Instrument. If the indebtedness of this Note is declared due and
payable by Lender due to a default by Borrower, then any tender of payment of
such indebtedness must include a prepayment fee in an amount equal to the
greater of (A) two percent (2.0%) of the principal amount being prepaid, and (B)
the positive excess of (i) the present value ("Pi') of all future installments
of principal and interest due under this Note including the principal amount due
at maturity (collectively, "All Future Payments"), discounted at an interest
rate per annum equal to the Treasury Constant Maturity Yield Index published
during the second full week preceding the date on which such premium is payable
for instruments having a maturity coterminous with the remaining term of this
Note, over (ii) the principal amount of this Note outstanding immediately before
such prepayment. "Treasury Constant Maturity Yield Index" shall mean the average
yield for "This Week" as reported by the Federal Reserve Board in Federal
Reserve Statistical Release H. 15 (519). If there is no Treasury Constant
Maturity Yield Index for instruments having a maturity coterminous with the
remaining term of this Note, then the index shall be equal to the weighted
average yield to maturity of the Treasury Constant Maturity Yield Indices with
maturities next longer and shorter than such remaining average life to maturity,
calculated by averaging (and rounding upward to the nearest whole multiple of
1/100 of 1% per annum, if the average is not such a multiple) the yields of the
relevant Treasury Constant Maturity Yield indices (rounded, if necessary, to the
nearest 1/100 of 1% with any figure of 1/200 of 1% or above rounded upward). In
the event that any prepayment fee is due hereunder, Lender shall deliver to
Borrower a statement setting forth the amount and determination of the
prepayment fee, and, provided that Lender shall have in good faith applied the
formula described above, Borrower shall not have the right to challenge the
calculation or the method of calculation set forth in any such statement in the
absence of manifest error, which calculation may be made by Lender on any day
during the thirty (30) day period preceding the date of such prepayment. No
prepayment fee or premium shall be due or payable in connection with any
prepayment of the indebtedness evidenced by this Note (i) resulting from
application of insurance or condemnation proceeds as provided in the Security
Instrument at any time during the loan term or (ii) required pursuant to Section
1.25 of the Security Instrument.
(b) This Note may not be prepaid in whole or in part except
prepayments resulting from Lender applying insurance or condemnation proceeds to
reduce the outstanding principal balance of this Note as provided in the
Security Instrument or in connection with any prepayment pursuant to Section
1.25 of the Security Instrument, in which event no prepayment fee or premium
shall be due. No notice of prepayment shall be required under the circumstance
specified in the preceding sentence. No principal amount repaid may be
reborrowed. Partial payments of principal shall be applied to the unpaid
principal balance evidenced hereby but such application shall not reduce the
amount of the fixed monthly installments required to be paid pursuant to Section
1.01 above.
(c) Except as otherwise expressly provided in Section 1.02(b! above,
the prepayment fees provided in Section 1.02(a! above shall be due, to the
extent permitted by appli cable law, under any and all circumstances where this
Note is paid prior to the Maturity Date as a result of Lender's exercise of its
rights upon Borrower's default and acceleration of the maturity date of this
Note (irrespective of whether foreclosure proceedings have been commenced), and
shall be in addition to any other sums due hereunder or under any of the other
Loan Documents.
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If the indebtedness of this Note shall have been declared due and payable
by Lender pursuant to Section 1.04 hereof due to a default by Borrower, then any
tender of payment of such indebtedness must include a prepayment fee computed as
provided in Section 1.02(a) above.
1.03 Security. The indebtedness evidenced by this Note and the
obligations created hereby are secured by, among other things, (a) that certain
Mortgage and Security Agreement (the "Security Instrument") from Borrower, as
mortgagor, to Lender, as mortgagee, dated as of even date herewith, concerning
certain property located in Cumberland County, Pennsylvania, and (b) an
Assignment of Leases and Rents, dated as of even date herewith, by Borrower in
favor of Lender (the "Assignment"). The Security Instrument and the Assignment,
together with this Note, and all other agreements or documents to or of which
Lender is a party or beneficiary now or hereafter evidencing, securing,
guarantying, modifying or otherwise relating to the indebtedness evidenced
hereby, are herein referred to collectively as the "Loan Documents". All of the
terms and provisions of the Loan Documents are incorporated herein by reference.
Some of the Loan Documents are to be filed for record on or about the date
hereof in the appropriate public records.
1.04 Default. It is hereby expressly agreed that should any default
occur in the payment of principal or interest as stipulated above and such
payment is not made within five (5) days of the date such payment is due
(provided, however, that no grace period is provided for the payment of
principal and interest due on the Maturity Date), or should any other default
occur under any of the Loan Documents which is not cured within any applicable
grace or cure period, including without limitation, any sale, transfer,
conveyance or other transfer in violation of the lterms of Section 1.13 of the
Security Instrument, then a default shall exist hereunder, and in such event the
indebtedness evidenced hereby, including all sums advanced or accrued hereunder
or under any other Loan Document, and all unpaid interest accrued thereon,
shall, at the option of Lender and without notice to Borrower, at once become
due and payable and may be collected forthwith, whether or not there has been a
prior demand for payment and regardless of the stipulated date of maturity. In
the event that any payment is not received by Lender on the date when due
(subject to the applicable grace period), then in addition to any default
interest payments due hereunder, Borrower shall also pay to Lender a late charge
in an amount equal to five percent (5.0%) of the amount of such overdue payment.
So long as any default exists hereunder, regardless of whether or not there has
been an acceleration of the indebtedness evidenced hereby, and at all times
after maturity of the indebtedness evidenced hereby (whether by acceleration or
otherwise), interest shall accrue on the outstanding principal balance of this
Note at a rate per annum equal to four percent (4.0(degree)/) plus the interest
rate which would be in effect horeunder absent such default or maturity, or if
such increased rate of interest may not be collected under applicable law, then
at the maximum rate of interest, if any, which may be collected from Borrower
under applicable law (the "Default Interest Rate"), and such default interest
shall be immediately due and payable. Borrower acknowledges that it would be
extremely difficult or impracticable to determine Lender's actual damages
resulting from any late payment or default, and such late charges and default
interest are reasonable estimates of those damages and do not constitute a
penalty. The remedies of Lender in this Note or in the other Loan Documents, or
at law or in equity, shall be cumulative and concurrent, and may be pursued
singly, successively or together in Lender's discretion. Time is of the essence
of this Note. In the event this Note, or any part hereof, is collected by or
through an attorney-at-law, Borrower agrees to pay all costs of collection
including, but not limited to, reasonable attorney's fees.
1.05 Exculpation. Notwithstanding anything in the Loan Documents to
the contrary, but subject to the qualifications hereinbelow set forth, Lender
agrees that (i) Borrower shall be liable upon the indebtedness evidenced hereby
and for the other obligations arising under the Loan Documents to the full
extent (but only to the extent) of the security therefor, the same being all
properties (whether real or personal), rights, estates and interests now or at
any time hereafter securing the payment of this Note and/or the other
obligations of Borrower under the Loan Documents (collectively, the "Security
Property"), (ii) if default occurs in the timely and proper payment of all or
any part of such indebtedness evidenced hereby or in the timely and proper
performance of the other obligations of Borrower under the Loan Documents, any
judicial proceedings brought by Lender against Borrower shall be limited to the
preservation, enforcement
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and foreclosure, or any thereof, of the liens, security titles, estates,
assignments, rights and security interests now or at any time hereafter securing
the payment of this Note and/or the other obligations of Borrower under the Loan
Documents, and confirmation of any sale under power of sale, and no attachment,
execution or other writ of process shall be sought, issued or levied upon any
assets, properties or funds of Borrower other than the Security Property except
with respect to the liability described below in this section, and (iii) in the
event of a foreclosure of such liens, security titles, estates, assignments,
rights or security interests securing the payment of this Note and/or the other
obligations of Borrower under the Loan Documents, whether by judicial
proceedings or exercise of power of sale, no judgment for any deficiency upon
the indebtedness evidenced hereby shall be sought or obtained by Lender against
Borrower, except with respect to .~the liability described below in this
section; provided, however, that, notwithstanding the foregoing provisions of
this section, Borrower shall be fully and personally liable and subject to legal
action (a) for proceeds paid under any insurance policies (or paid as a result
of any other claim or cause of action against any person or entity) by reason of
damage, loss or destruction to all or any portion of the Security Property, to
the full extent of such proceeds not previously delivered to Lender, but which,
under the terms of the Loan Documents, should have been delivered to Lender, (b)
for proceeds or awards resulting from the condemnation or other taking in lieu
of condemnation of all or any portion of the Security Property, to the full
extent of such proceeds or awards not previously delivered to Lender, but which,
under the terms of the Loan Documents, should have been delivered to Lender, (c)
for all tenant security deposits or other refundable deposits paid to or held by
Borrower or any other person or entity in connection with leases of all or any
portion of the Security Property which are not applied in accordance with the
terms of the applicable lease or other agreement, (d) for rent and other
payments received from tenants under leases of all or any portion of the
Security Property paid more than one (1) Month in advance, (e) for rents,
issues, profits and revenues of all or any portion of the Security Property
received or applicable to a period after any notice of default from Lender
hereunder or under the Loan Documents in the event of any default by Borrower
hereunder or thereunder which are not either applied to the ordinary and
necessary expenses of owning and operating the Security Property or paid to
Lender, (f) for damage to the Security Property as a result of the intentional
misconduct or gross negligence of Borrower or any of its principals, officers or
general partners, or any agent or employee of any such persons, or any removal
of the Security Property in ~ violation of the terms of the Loan Documents, to
the full extent of the losses or damages incurred |~ by Lender on account of
such failure, (g) for Borrower's failure to pay any valid taxes, assessments,
mechanic's liens, materialmen's liens or other liens which could create liens on
any portion of the Security Property which would be superior to the lien or
security title of the Security Instrument or the other Loan Documents, to the
full extent of the amount claimed by any such lien claimant, (h) for all
obligations and indemnities of Borrower under the Loan Documents relating to
hazardous or toxic substances or compliance with environmental laws and
regulations to the full extent of any losses or damages (including those
resulting from diminution in value of L any Security Property) incurred by
Lender as a result of the existence of such hazardous or toxic substances or
failure to comply with environmental laws or regulations, and (i) for fraud or
material misrepresentation by Borrower or any of its principals, officers, or
general partners, any guarantor, any indemnitor or any agent, employee or other
person authorized or apparently authorized to make statements or representations
on behalf of Borrower, any principal, officer or partner of Borrower, any
guarantor or any indemnitor, to the full extent of any losses, damages and
expenses of Lender on account thereof. References herein to particular sections
of the Loan Documents shall be deemed references to such sections as affected by
other provisions of the Loan Documents relating thereto. Nothing contained in
this section shall (i) be deemed to be a release or impairment of the
indebtedness evidenced by this Note or the other obligations of Borrower under
the Loan Documents or the lien of the Loan Documents upon the Security Property,
or (ii) preclude Lender from foreclosing the Loan Documents in case of any
default or
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<PAGE>
from enforcing any of the other rights of Lender except as stated in this
sections or (iii) limit or impair in any way whatsoever the Hazardous Substances
Indemnity Agreement, dated as of even date herewith, or release, relieve,
reduce, waive or impair in any way whatsoever, any obligation of Borrower under
such Hazardous Substances Indemnity Agreement. 1.06 Defeasance. A Defeasance (as
defined in Section 1.38 of the Security Instrument) shall not constitute a
prepayment under Section 1.02 of this Note.
ARTICLE II - GENERAL CONDITIONS
2.01 No Waiver: Amendment. No failure to accelerate the debt
evidenced hereby by reason of default hereunder, acceptance of a partial or past
due payment, or indulgences granted from time to time shall be construed (i) as
a novation of this Note or as a reinstatement of the indebtedness evidenced
hereby or as a waiver of such right of acceleration or of the right of Lender
thereafter to insist upon strict compliance with the terms of this Note, or (ii)
to prevent the exercise of such right of acceleration or any other right granted
hereunder or by any applicable laws; and Borrower hereby expressly waives the
benefit of any statute or rule of law or equity
5
<PAGE>
now provided, or which may hereafter be provided, which would produce a result
contrary to or in conflict with the foregoing. No extension of the time for the
payment of this Note or any installment due hereunder, made by agreement with
any person now or hereafter liable for the payment of this Note shall operate to
release, discharge, modify, change or affect the original liability of Borrower
under this Note, either in whole or in part unless Lender agrees otherwise in t:
writing. This Note may not be changed orally, but only by an agreement in
writing signed by the party against whom enforcement of any waiver, change,
modification or discharge is sought.
2.02 Waivers. Presentment for payment, demand, protest and notice of
demand, protest and nonpayment and all other notices are hereby waived by
Borrower. Borrower hereby further waives and renounces, to the fullest extent
permitted by law, all rights to the benefits of any statute of limitations and
any moratorium, reinstatement, marshalling, forbearance, valuation, stay,
extension, redemption, appraisement, exemption and homestead now or hereafter
provided by the Constitution and laws of the United States of America and of
each state thereof, both as to itself and in and to all of its property, real
and personal, against the enforcement and collection of the obligations
evidenced by this Note or the other Loan Documents.
2.03 Limit of Validity. The provisions of this Note and of all
agreements between Borrower and Lender, whether now existing or hereafter
arising and whether written or oral, are hereby expressly limited so that in no
contingency or event whatsoever, whether by reason of demand or acceleration of
the maturity of this Note or otherwise, shall the amount paid, or agreed to be
paid ("Interest"), to Lender for the use, forbearance or retention of the money
loaned under this Note exceed the maximum amount permissible under applicable
law. If, from any circumstance whatsoever, performance or fulfillment of any
provision hereof or of any agreement between Borrower and Lender shall, at the
time performance or fulfillment of such provision shall be due, exceed the limit
for Interest prescribed by applicable law or otherwise transcend the limit of
validity prescribed by applicable law, then ipso facto the obligation to be
performed or fulfilled shall be reduced to such limit and if, from any
circumstance whatsoever, Lender shall ever receive anything of value deemed
Interest by applicable law in excess of the maximum lawful amount, an amount
equal to any excessive Interest shall be applied to the reduction of the
principal balance owing under this Note in the inverse order of its maturity
(whether or not then due) or at the option of Lender be paid over to Borrower,
and not to the payment of Interest. All Interest (including any amounts or
payments deemed to be Interest) contracted for, charged, taken, reserved, paid
or agreed to be paid to Lender shall, to the extent permitted by applicable law,
be amortized, prorated, allocated and spread throughout the full term 1,of this
Note, including any extensions or renewals hereof, until payment in full of the
principal balance of this Note so that the Interest thereof for such full period
will not exceed the maximum amount permitted by applicable law. This Section
2.03 will control all agreements between Borrower and Lender pursuant to the
Loan Documents.
2.04 Use of Funds. Borrower hereby warrants, represents and
covenants that no funds disbursed hereunder shall be used for personal, family
or household purposes.
2.05 Unconditional Payment. Borrower is and shall be obligated to
pay rincipal, interest and any and all other amounts which become payable
hereunder or under the other Loan Documents absolutely and unconditionally and
without any abatement, postponement, diminution or deduction and without any
reduction for counterclaim or setoff; provided, however that no such payment
shall waive any other rights that Borrower may have. In the event that at any
time any payment received by Lender hereunder shall be deemed by a court of
competent advert of competent
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jurisdiction to have been a voidable preference or fraudulent conveyance under
any bankruptcy, insolvency or other debtor relief law, then the obligation to
make such payment shall survive any cancellation or satisfaction of this Note or
return thereof to Borrower and shall not be discharged or satisfied with any
prior payment thereof or cancellation of this Note, but shall remain a valid and
binding obligation enforceable in accordance with the terms and provisions
hereof, and such payment shall be immediately due and payable upon demand.
2.06 Further Assurances. Borrower shall execute and acknowledge (or
cause to be executed and acknowledged) and deliver to Lender all documents, and
take all actions, reasonably required by Lender from time to time to confirm the
rights created or now or hereafter intended to be created under this Note and
the other Loan Documents, to protect the validity, priority and enforceability
of this Note and the other Loan Documents, to subject to the Loan Documents any
property of Borrower intended by the terms of any one or more of the Loan
Documents to be encumbered by the Loan Documents, or otherwise carry out the
purposes of the Loan Documents and the transactions contemplated thereunder;
provided, however, that no such further actions, assurances and confirmations
shall increase, modify or change Borrower's obligations under this Note or under
the other Loan Documents.
E.
2.07 Submission to Jurisdiction: Waiver of Jury Trial (1) BORROWER,
TO THE FULL EXTENT PERMITTED BY LAW, HEREBY KNOWINGLY, INTENTIONALLY AND
VOLUNTARILY, WITH AND UPON THE ADVICE OF COMPETENT COUNSEL, (A) SUBMITS TO
PERSONAL JURISDIC TION IN THE COMMONWEALTH OF PENNSYLVANIA OVER ANY SUIT, ACTION
OR PROCEEDING BY ANY PERSON ARISING FROM OR RELATING TO THIS NOTE, (B) AGREES
THAT ANY SUCH ACTION, SUIT OR PROCEEDING MAY BE BROUGHT IN ANY STATE OR FEDERAL
COURT OF COMPETENT JURISDICTION IN THE COMMONWEALTH OF PENNSYLVANIA, (C) SUBMITS
TO THE JURISDICTION OF SUCH COURTS, AND (D) TO THE FULLEST EXTENT PERMITTED BY
LAW, AGREES THAT BORROWER WILL NOT BRING ANY ACTION, SUIT OR PROCEEDING IN ANY
OTHER FORUM (BUT NOTHING HEREIN SHALL AFFECT THE RIGHT OF LENDER TO BRING ANY
ACTION, SUIT OR PROCEEDING IN ANY OTHER FORUM) AND BORROWER FURTHER CONSENTS AND
AGREES TO SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER LEGAL PROCESS IN ANY SUCH
SUIT, ACTION OR PROCEEDING BY REGISTERED OR CERTIFIED U.S. MAIL, POSTAGE
PREPAID, TO BORROWER AT THE ADDRESS FOR NOTICES DESCRIBED ON THE FIRST PAGE
HEREOF, AND CONSENTS AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE IN EVERY
RESPECT VALID AND EFFECTIVE SERVICE (BUT NOTHING HEREIN SHALL AFFECT THE
VALIDITY OR EFFECTIVENESS OF PROCESS SERVED IN ANY OTHER MANNER PERMITTED BY
LAW). (2) EACH OF BORROWER, LENDER, TO THE FULL EXTENT PERMITTED BY LAW, HEREBY
KNOWINGLY, INTENTIONALLY AND
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VOLUNTARILY, WITH AND UPON THE ADVICE OF COMPETENT COUNSEL, WAIVES, RELINQUISHES
AND FOREVER FORGO THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED
UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO THIS NOTE OR ANY CONDUCT, ACT OR
OMISSION OF BORROWER OR LENDER, OR ANY OF ITS RESPECTIVE DIRECTORS, OFFICERS,
PARTNERS, MEMBERS, EMPLOYEES, AGENTS OR ATTORNEYS, OR ANY OTHER PERSONS
AFFILIATED WITH LENDER, IN EACH OF THE FOREGOING CASES, WHETHER SOUNDING IN
CONTRACT, TORT OR OTHERWISE.
2.08 Miscellaneous. This Note shall be interpreted, construed and
enforced according to the laws of the State of New York. The terms and
provisions hereof shall be binding upon and inure to the benefit of Borrower and
Lender and their respective heirs, executors, legal representatives, successors,
successors-in-title and assigns, whether by voluntary action of the parties or
by operation of law. As used herein, the terms "Borrower" and "Lender" shall be
deemed to include their respective successors, successors-in-title and assigns,
whether by volun tary action of the parties or by operation of law, subject to
the limitations set forth in Section 1.05 above. Subject to the limitations set
forth in Section 1.05 above, if Borrower consists of more than one person or
entity, each shall be jointly and severally liable to perform the obligations of
Borrower under this Note. All personal pronouns used herein, whether used in the
masculine, feminine or neuter gender, shall include all other genders; the
singular shall include the plural and vice versa. Titles of articles and
sections are for convenience only and in no way define, limit, amplify or
describe the scope or intent of any provisions hereof. Capitalized terms used in
this Note and not otherwise defined herein shall have the meaning ascribed to
them in the Security Instrument or in the other Loan Documents. Time is of the
essence with respect to all provisions of this Note, the Security Instrument and
the other Loan Documents. This Note and the other Loan Documents contain the
entire agreements between the parties hereto relating to the subject matter
hereof and thereof and all prior agreements relative hereto and thereto which
are not contained herein or therein are terminated. This Note is a sealed
instrument.
2.09 Confession of Judgment. (1) THE FOLLOWING PARAGRAPH SETS FORTH
A WARRANT OF AUTHORITY FOR AN ATTORNEY TO CONFESS JUDGMENT AGAINST BORROWER IN
GRANTING THIS WARRANT OF ATTORNEY TO CONFESS JUDGMENT AGAINST THE BORROWER, THE
BORROWER HEREBY KNOWINGLY, INTENTIONALLY AND VOLUNTARILY, AND, ON THE ADVICE OF
THE SEPARATE COUNSEL OF BORROWER, UNCONDITIONALLY WAIVES ANY AND ALL RIGHTS
BORROWERHAS OR MAY HAVE TO PRIOR NOTICE AND AN OPPORTUNITY FOR HEARING UNDER THE
RESPECTIVE CONSTITUTIONS AND LAWS OF THE UNITED STATES AND THE COMMONWEALTH OF
PENNSYLVANIA. (2) BORROWER IRREVOCABLY AUTHORIZES AND EMPOWERS ANY ATTORNEY OR
THE PROTHONOTARY OR CLERK OF ANY COURT IN THE COMMONWEALTH OF PENNSYLVANIA, OR
ELSEWHERE, TO APPEAR FOR BORROWER AT ANY TIME AFTER DEFAULT UNDER THIS NOTE OR
UNDER THE LOAN DOCUMENTS IN ANY ACTIOIN BROUGHT AGAINST BORROWER ON THIS
8
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NOTE AT THE SUIT OF LENDER, AS OF ANY TERM, AND IN THAT ACTION TO CONFESS OR
ENTER JUDGMENT AGAINST BORROWER FOR THE ENTIRE UNPAID PRINCIPAL OF THIS NOTE AND
ALL OTHER SUMS DUE UNDER THIS NOTE OR THE LOAN DOCUMENTS, AND ALL INTEREST
ACCRUED ON THOSE AMOUNTS, TOGETHER WITH COSTS OF SUIT, ATTORNEY'S COMMISSION FOR
COLLECTION OF FIVE PERCENT (5%) OF THE TOTAL AMOUNT THEN DUE BY BORROWER TO
LENDER (BUT IN ANY EVENT NOT LESS THAN TEN THOUSAND DOLLARS ($10,000.00)),
TOGETHER WITH INTEREST ON ANY JUDGMENT OBTAINED BY LENDER AT THE DEFAULT
INTEREST RATE, SPECIFIED IN THE NOTE AFTER DEFAULT, INCLUDING INTEREST AT THAT
RATE FROM AND AFTER THE DATE OF ANY SHERIFF'S OR JUDICIAL SALE UNTIL ACTUAL
PAYMENT IS MADE TO LENDER OF THE FULL AMOUNT DUE LENDER; AND FOR SO DOING THIS
NOTE OR A COPY OF IT VERIFIED BY AFFIDAVIT SHALL BE A SUFFICIENT WARRANT. THE
AUTHORITY GRANTED IN THIS NOTE TO CONFESS JUDGMENT SHALL NOT BE EXHAUSTED BY ANY
EXERCISE OF IT BUT SHALL CONTINUE FROM THE TO TIME AND AT ALL TIMES UNTIL
PAYMENT IN FULL OF ALL THE AMOUNTS DUE UNDER THIS NOTE.
9
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IN WITNESS WHEREOF, the Borrower, intending to be legally bound
hereby has duly executed this Note on the day and year first written
above.
BORROWER: AMERICAN SEDONA PARTNERS, L.P.,
a Colorado limited partnership
By: American Sedona Corp.,
a Colorado corporation, its
general partner
By: /s/ Jeffrey E. Kelter
January 8, 1998
10
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Exhibit 10(p)
Obligor #
Obligation #-
MORTGAGE NOTE
$1,155,000
Philadelphia, Pennsylvania
September 1, 1997
FOR VALUE RECEIVED, the undersigned, jointly and severally, hereby
promises to pay to the order of FIRST UNION NATIONAL BANK (the "Bank"), the
principal sum of One Million One Hundred Fifty Five Thousand Dollars
($1,155,000) (the "Loan") in United States Dollars, together with interest
thereon as hereinafter provided.
1. INTEREST RATE. Interest shall be charged on the outstanding principal balance
from the date hereof until the full amount of principal due hereunder has been
paid at a rate equal to LIBOR plus one and three quarters percent (1.75%) per
annum ("LlBOR-Based Rate"), as determined by Bank prior to the commencement of
each Interest Period. Interest shall be calculated daily on the basis of the
actual number of days elapsed over a 360 day year. The LlBOR-Based Rate shall
remain in effect, subject to the provisions hereof, for the entire Interest
Period for which it is determined.
"LIBOR" means, with respect to each day during each Interest Period, the
rate (rounded to the next higher 1/100 of 1%) for U.S. dollar deposits of one
month maturity as reported on Telerate page 3750 as of 11:00 a.m., London time,
on the second London business day before the relevant Interest Period begins (or
if not so reported, then as determined by the Bank from another recognized
source or interbank quotation), adjusted for reserves by dividing that rate by
1.00 minus the LIBOR Reserve. "LIBOR Reserve" means the maximum percentage
reserve requirement (rounded to the next higher 1/100 of 1% and expressed as a
decimal) in effect for any day during the Interest Period under the Federal
Reserve Board's Regulation D for Eurocurrency liabilities as defined therein.
Notwithstanding the foregoing, if the undersigned has hedged the LlBOR-Based
Rate by entering into an interest rate swap agreement with Bank, LIBOR shall be
rounded five decimal places in accordance with the 1991 Definitions published by
the International Swaps and Derivatives Association, Inc.
"Interest Period" means, initially, the period commencing on the date
hereof and ending on the Commencement Date, and thereafter, each period
commencing on the last day of the immediately preceding Interest Period and
ending one month thereafter, but in no event after the Maturity Date; subject,
however, to the following provisions: (i) if any Interest Period would otherwise
end on a day which is not a New York business day, that Interest Period shall be
extended to the next succeeding New York business day unless the result of such
extension would be to carry such Interest Period into another calendar month, in
which event such Interest Period shall end on the immediately preceding New York
business day; and (ii) any Interest Period that begins on the last New York
business day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period)
shall end on the last New York business day of a calendar month.
2. PAYMENT OF PRINCIPAL AND INTEREST. Interest only on the outstanding principal
balance from the date hereof to October 1, 1997 (the "Commencement Date") shall
be due and payable on the Commencement Date. Thereafter, interest only on the
outstanding principal balance shall be payable in arrears on the first day of
each month. The entire unpaid principal amount hereof, together with accrued and
unpaid interest thereon and all other amounts payable hereunder shall, subject
to the Extension Option (as such term is defined below), be due and payable on
October 1, 1998 (the " Maturity Date" ) .
3. EXTENSION OPTION. The undersigned may elect to extend the Maturity Date for
two twelve (12)-month periods (each, an "Extension Option"), provided that:
(a) The undersigned shall give written notice to Bank of the
undersigned's intention to exercise each Extension Option and to extend the then
current Maturity Date at least thirty (30) days prior to the then current
Maturity Date. Each written notice of the Extension Option shall be accompanied
by the payment of a $1,000 extension fee;
(b) No event of default under the Loan Documents or event
which, with the passage of time or the giving of notice, or both, would
constitute an event of default under the Loan Documents (as such term is defined
below) shall have occurred;
(c) The lease of the Mortgaged Premises (as such term is
defined below) between the undersigned (as assignee of Moran) as landlord and
Dana Perfumes Corp. as tenant dated September 26, 1996 (the "Lease") shall be in
full force and effect or, if the Lease is not in full force and effect, within
not more than ten (10) months following the termination of the Lease, the
Mortgaged
<PAGE>
Premises shall have been fully occupied by a tenant or tenants acceptable to
Bank pursuant to a lease or leases approved by Bank, and/or Bank shall have
received evidence satisfactory to Bank that the Mortgaged Premises has been
relet to other tenant(s) acceptable to Bank pursuant to a lease or leases in
form and substance acceptable to Bank; and
(d) There shall not have been any material adverse change in
the financial or operating condition of the undersigned.
If the undersigned timely and properly exercises the Extension Option as
provided herein, the Maturity Date will be extended and deemed to be the date
that is twelve ( 12) months following the then current Maturity Date.
4. APPLICATION OF PAYMENTS. Except as otherwise specified herein, each payment
or prepayment, if any, made under this Note shall be applied to pay late
charges, accrued and unpaid interest, principal, escrows (if any), and any other
fees, costs and expenses which the undersigned is obligated to pay under this
Note, in such order as Bank may elect from time to time in its sole discretion.
5. TENDER OF PAYMENT. All payments on this Note shall be made in immediately
available lawful money of the United States by direct charge to the
undersigned's deposit account (the "Account") with Bank as specified in that
certain Authorization to Charge Account from the undersigned to Bank of even
date herewith. If there are insufficient funds in the Account at the time the
Account is debited, and the debiting creates an overdraft, Bank may charge the
undersigned an administrative fee in an amount established from time to time by
Bank. All sums payable to Bank which are due on a day on which Bank is not open
for business shall be made on the next succeeding business day and such extended
time shall be included in the computation of interest.
6. PREPAYMENT. The Loan may be prepaid in whole but not in part during the
period beginning on the date hereof and ending one hundred twenty (120) days
hereafter if accompanied by the fee referred to on Exhibit "A" attached.
Thereafter, the Loan may be prepaid without any fee, in part on the last day of
an Interest Period or in whole at any time; provided, however, that any partial
prepayments shall be in a principal amount of not less than $100,000, or
multiples thereof. Any prepayment shall include accrued and unpaid interest to
the date of prepayment on the principal amount prepaid and all other sums due
and payable hereunder.
7. SECURITY FOR THE NOTE.
7.1. This Note is executed and delivered in accordance with a commercial
transaction described in a Loan Agreement dated this date between the
undersigned and Bank (the "Loan Agreement"). As security for the payment of the
monies owing under this Note, the undersigned has delivered or has caused to be
delivered to Bank the following (each a "Loan Document" and collectively with
this Note, the Loan Agreement, and any other document, certificate or instrument
executed by the undersigned or any other obligated party in connection with the
Loan, the "Loan Documents"):
(a) a Mortgage and Security Agreement (the "Mortgage") on certain real
property and the improvements situated thereon in the Crestwood Industrial Park,
Mountaintop, Luzerne County, Pennsylvania, as more fully described in the
Mortgage (the "Mortgaged Premises");
(b) an Absolute Assignment of Leases and Rents (the "Assignment of
Leases") assigning all of the assignor's rights as lessor under all leases
affecting the Mortgaged Premises; and
(c) a security interest in the property listed below, including proceeds
and after acquired property: all fixtures, machinery, equipment, books and
records, and other personal property now owned or hereafter acquired by the
undersigned and located on or used in connection with the operation and/or
maintenance of the Mortgaged Premises.
7.2. The undersigned hereby grants to Bank a continuing security interest
in all property of the undersigned, now or hereafter in the possession of Bank
or any Affiliate (as defined below) in any capacity whatsoever, including, but
not limited to, any balance or share of any deposit, trust or agency account, as
security for the payment of this Note and any other liabilities of the
undersigned to Bank, which security interest shall be enforceable and subject to
all the provisions of this Note, as if such property were specifically pledged
hereunder.
8. ADDITIONAL PAYMENTS; LATE CHARGE: DEFAULT RATE.
8.1. Additional Payments.In addition to the payments provided for in
Section 2 above, the undersigned promises to pay on demand any additional monies
required to be paid or advanced by the undersigned or by any other party
obligated under any of the Loan Documents or paid or advanced on behalf of the
undersigned or such party by Bank pursuant to the terms of the Loan Agreement,
the Mortgage or any other Loan Document, which obligation shall be continuing
and shall survive any judgment entered with respect to this Note or a
foreclosure of the Mortgage. This Note shall evidence, and the Mortgage and
other Loan Documents shall secure the payment of, all such sums so advanced or
paid.
8.2. Late Charge. In the event that any installment of principal or
interest required to be made by the undersigned under this Note shall not be
received by Bank on or before its due date, the undersigned shall pay to Bank,
on demand, a late charge of five percent (5%) of such delinquent
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<PAGE>
payment for the purpose of defraying the expense incident to the processing of
such delinquent payment. The foregoing right is in addition to, and not in
limitation of, any other rights which Bank may have upon the undersigned's
failure to make timely payment of any amount due hereunder.
8.3. Default Rate. From and after the Maturity Date or from and after the
occurrence of an Event of Default hereunder, irrespective of any declaration of
maturity, all amounts remaining unpaid or thereafter accruing hereunder, as well
as any amounts owing under Section 8.1., shall, at Bank's option, bear interest
at a default rate of four percent (4%) per annum above the interest rate then in
effect as set forth herein (the "Default Rate"), or the highest permissible rate
under applicable usury law, whichever is less. Such default rate of interest
shall be payable upon demand, but in no event later than when scheduled interest
payments are due, and shall also be charged on the amounts owed by the
undersigned to Bank pursuant to any judgments entered in favor of Bank with
respect to this Note.
9. INDEMNIFICATION: ADDITIONAL COSTS: UNAVAILABILITY OF RATE.
9.1. Indemnification. The undersigned shall indemnify Bank against Bank's
loss or expense in employing deposits as a consequence of (i) the undersigned's
failure to make any payment when due under this Note, or (ii) any prepayment of
the Loan on a date other than the last day of an Interest Period ("Indemnified
Loss or Expense").
9.2. Additional Costs. If, at any time, a new, or a revision in any
existing law or interpretation or administration (including reversals) thereof
by any government authority, central bank or comparable agency imposes,
increases or modifies any reserve or similar requirement against assets,
deposits or credit extended by Bank, or subjects Bank to any tax, duty or other
charge (except tax on Bank's net income), and any of the foregoing increase the
cost to Bank of maintaining its commitment or reduce the amount of any sum
received or receivable by Bank under this Note, within 15 days after demand by
Bank, the undersigned agrees to pay Bank such additional amounts as will
compensate Bank for such increased costs or reductions ("Additional Costs").
9.3. Match Funding. The amount of such (i) Indemnified Loss or Expense, or
(ii) Additional Costs outlined above shall be determined, in Bank's sole
discretion, based upon the assumption that Bank funded 100% of that portion of
the Loan to which the LlBOR-Based Rate applies in the applicable London
interbank market.
9.4. Unavailability of Interest Rate. If, at any time, (i) Bank shall
determine that, by reason of circumstances affecting foreign exchange and
interbank markets generally, LIBOR deposits in the applicable amounts are not
being offered to Bank; or (ii) a new, or a revision in any existing law or
interpretation or administration (including reversals) thereof by any government
authority, central bank or comparable agency shall make it unlawful or
impossible for Bank to honor its obligations under this Note, then (A) Bank's
obligation, if any, to make or maintain a LlBOR-Based Rate Loan shall be
suspended, and (B) the applicable LlBOR-Based Rate shall, for the remainder of
the term of the Loan, immediately be converted to (x) the Prime Rate or (y) if
the undersigned has hedged the LlBOR-Based Rate by entering into an interest
rate swap agreement with Bank, the rate of interest payable to the undersigned
by Bank as the Floating Rate Payer under the terms of said swap agreement (plus
the percentage added to LIBOR above and not included in said rate of interest
payable by Bank). "Prime Rate" means the rate of interest established by Bank as
its reference rate in making loans, and is not tied to any external rate of
interest or index. The rate of interest charged under the Note following
conversion to the Prime Rate shall change automatically and immediately as of
the date of any change in the Prime Rate without notice to the undersigned.
10. EVENTS OF DEFAULT. Each of the following shall constitute an event of
default hereunder (an "Event of Default"): (a) the failure of the undersigned to
make any installment of principal or interest hereunder when due and payable; or
(b) the occurrence of any other default in any term, covenant or condition
hereunder or any Event of Default under the Loan Agreement, the Mortgage or any
other Loan Document.
11. REMEDIES. If an Event of Default exists, Bank may exercise any right, power
or remedy permitted by law or as set forth herein or in the Loan Agreement, the
Mortgage or any other Loan Document including, without limitation, the right to
declare the entire unpaid principal amount hereof and all interest accrued
hereon, and all other sums secured by the Mortgage or any other Loan Document to
be, and such principal, interest and other sums shall thereupon become,
forthwith due and payable.
12. CONFESSION OF JUDGMENT.
12.1. THE FOLLOWING PARAGRAPH SETS FORTH A WARRANT OF AUTHORITY FOR ANY
ATTORNEY TO CONFESS JUDGMENT AGAINST THE UNDERSIGNED. IN GRANTING THIS WARRANT
OF ATTORNEY TO CONFESS JUDGMENT AGAINST THE UNDERSIGNED, THE UNDERSIGNED,
FOLLOWING CONSULTATION WITH (OR DECISION NOT TO CONSULT) SEPARATE COUNSEL FOR
THE UNDERSIGNED AND WITH KNOWLEDGE OF THE LEGAL EFFECT HEREOF, HEREBY KNOWINGLY,
INTENTIONALLY, VOLUNTARILY AND UNCONDITIONALLY WAIVES ANY AND ALL RIGHTS THE
UNDERSIGNED HAS OR MAY HAVE TO PRIOR NOTICE AND AN OPPORTUNITY FOR HEARING UNDER
THE RESPECTIVE CONSTITUTIONS AND LAWS OF THE UNITED STATES OF AMERICA, THE
COMMONWEALTH OF PENNSYLVANIA, OR ELSEWHERE. IT IS SPECIFICALLY ACKNOWLEDGED BY
THE UNDERSIGNED THAT BANK HAS RELIED ON THIS WARRANT OF ATTORNEY IN RECEIVING
THIS
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NOTE AND AS AN INDUCEMENT TO GRANT FINANCIAL ACCOMMODATIONS TO THE UNDERSIGNED.
12.2. Upon and following the occurrence of an Event of Default, the
undersigned hereby jointly and severally authorizes and empowers any attorney of
any court of record or the prothonotary or clerk of any county in the
Commonwealth of Pennsylvania, or in any jurisdiction where permitted by law or
the clerk of any United States District Court, to appear for the undersigned in
any and all actions which may be brought hereunder and enter and confess
judgment against the undersigned or any of them in favor of Bank for such sums
as are due or may become due hereunder or under any other Loan Document,
together with costs of suit and actual collection costs including, without
limitation, reasonable attorneys' fees equal to five percent (5%) of the
foregoing sums then due and owing but in no event less than $20,000, with or
without declaration, without prior notice, without stay of execution and with
release of all procedural errors and the right to issue executions forthwith. If
a copy of this Note verified by affidavit of any officer of Bank shall have been
filed in such action, it shall not be necessary to file the original thereof as
a warrant of attorney, any practice or usage to the contrary notwithstanding.
The authority herein granted to confess judgment shall not be exhausted by any
single exercise thereof, but shall continue and may be exercised from time to
time as often as Bank shall find it necessary and desirable and at all times
until full payment of all amounts due hereunder and under the other Loan
Documents. Bank may confess one or more judgments in the same or different
jurisdictions for all or any part of the undersigned's obligations arising
hereunder or under any other Loan Document to which the undersigned is a party,
without regard to whether judgment has theretofore been confessed on more than
one occasion for the same obligations. In the event that any judgment confessed
against the undersigned is stricken or opened upon application by or on behalf
of the undersigned for any reason, Bank is hereby authorized and empowered to
again appear for and confess judgment against the undersigned for any part or
all of the obligations due and owing under this Note and the other Loan
Documents, as herein provided.
13. CONTINUING ENFORCEMENT OF NOTE. If, after receipt of any payment of all or
any part of this Note, Bank is compelled or agrees, for settlement purposes, to
surrender such payment to any person or entity for any reason (including,
without limitation, a determination that such payment is void or voidable as a
preference or fraudulent conveyance, an impermissible setoff, or a diversion of
trust funds), then this Note and the other Loan Documents shall continue in full
force and effect or be reinstated, as the case may be, and the undersigned shall
be liable for, and shall indemnify, defend and hold harmless Bank with respect
to the full amount so surrendered. The provisions of this Section shall survive
the cancellation or termination of this Note and shall remain effective
notwithstanding the payment of the obligations evidenced hereby, the release of
any security interest, lien or encumbrance securing this Note or any other
action which Bank may have taken in reliance upon its receipt of such payment.
Any cancellation, release or other such action shall be deemed to have been
conditioned upon any payment of the obligations evidenced hereby having become
final and irrevocable.
14. - MISCELLANEOUS.
14.1. Disclosure of Financial Information. Bank is hereby authorized to
disclose any financial or other information about the undersigned to any
regulatory body or agency having jurisdiction over Bank or to any present,
future or prospective participant or successor in interest in any loan or other
financial accommodation made by Bank to the undersigned. The information
provided may include, without limitation, amounts, terms, balances, payment
history, return item history and any financial or other information about the
undersigned. The undersigned agrees to indemnify, defend, release Bank, and hold
Bank harmless, at the undersigned's cost and expense, from and against any and
all lawsuits, claims, actions, proceedings, or suits against Bank or against the
undersigned and Bank, arising out of or relating to Bank's reporting or
disclosure of such information. Such indemnity shall survive the repayment or
other satisfaction of the obligations evidenced hereby.
14.2. Remedies Cumulative. The rights and remedies of Bank as provided
herein and in any other Loan Document shall be cumulative and concurrent, may be
pursued separately, successively or together against the undersigned or the
Mortgaged Premises or any other collateral security for payment of amounts due
hereunder, or any guarantor thereof, at the sole discretion of Bank, may be
exercised as often as occasion therefor shall arise, and shall be in addition to
any other rights or remedies conferred upon Bank at law or in equity. The
failure, at any one or more times, of Bank to exercise any such right or remedy
shall in no event be construed as a waiver or release thereof. Bank shall have
the right to take any action it deems appropriate without the necessity of
resorting to any collateral securing this Note.
14.3. Intearation. This Note and the other Loan Documents constitute the
sole agreement of the parties with respect to the transaction contemplated
hereby and supersede all oral negotiations and prior writings with respect
thereto.
14.4. Right of Setoff bv Bank. Upon the occurrence of an Event of Default,
to the extent permitted by and in addition to any other remedy provided by law,
and regardless of the adequacy of any collateral or other means of obtaining
repayment of the obligations evidenced hereby, Bank shall have the right
immediately and without notice or other act, and is specifically authorized
hereby, to setoff against any of the undersigned's obligations under this Note
any sum owed by Bank or any Affiliate in any capacity to the undersigned whether
due or not, or any property of the undersigned in the possession of Bank or any
Affiliate, even if effecting such setoff results in a loss or reduction of
interest to the undersigned or the imposition of a penalty applicable to the
early withdrawal of time deposits. Bank shall be deemed to have exercised such
right of setoff and to have made a charge
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against any such sum or property immediately upon the occurrence of the Event of
Default, even though the actual book entries may be made at some time
subsequent.
14.5. Attorneys' Fees and Expenses. If Bank retains the services of
counsel by reason of a claim of a default or an Event of Default hereunder or
under any of the other Loan Documents, or on account of any matter involving
this Note, or for examination of matters subject to Bank's approval under the
Loan Documents, all costs of suit and all reasonable attorneys' fees (and/or
allocated fees of Bank's in-house legal counsel) and such other reasonable
expenses so incurred by Bank shall forthwith, on demand, become due and payable
and shall be evidenced hereby.
14.6. No Implied Waiver. Bank shall not be deemed to have modified or
waived any of its rights or remedies hereunder unless such modification or
waiver is in writing and signed by Bank, and then only to the extent
specifically set forth therein. A waiver in one event shall not be construed as
continuing or as a waiver of or bar to such right or remedy on a subsequent
event.
14.7. Waiver. The undersigned, jointly and severally, waives demand,
notice, presentment, protest, demand for payment, notice of dishonor, notice of
protest and diligence of collection of this Note. The undersigned consents to
any and all extensions of time, renewals, waivers, or modifications that may be
granted by Bank with respect to the payment or other provisions of this Note,
and to the release of any collateral, with or without substitution. The
undersigned agrees that makers, endorsers, guarantors and sureties may be added
or released without notice and without affecting the undersigned's liability
hereunder. The liability of the undersigned shall not be affected by the failure
of Bank to perfect or otherwise obtain or maintain the priority or validity of
any security interest in any collateral. The liability of the undersigned shall
be absolute and unconditional and without regard to the liability of any other
party hereto.
14.8. No Usurious Amounts. Anything herein contained to the contrary
notwithstanding, the undersigned does not agree and shall not be obligated to
pay interest hereunder at a rate which is in excess of the maximum rate
permitted by law. If by the terms of this Note, the undersigned is at any time
required to pay interest at a rate in excess of such maximum rate, the rate of
interest under this Note shall be deemed to be immediately reduced to such
maximum legal rate and the portion of all prior interest payments in excess of
such maximum legal rate shall be applied to and shall be deemed to have been
payments in reduction of the outstanding principal balance. The undersigned
agrees that in determining whether or not any interest payable under this Note
exceeds the highest rate permitted by law, any non-principal payment, including
without limitation, late charges, shall be deemed to the extent permitted by law
to be an expense, fee, premium or penalty rather than interest.
14.9. Partial Invaliditv. The invalidity or unenforceability of any one or
more provisions of this Note shall not render any other provision invalid or
unenforceable. In lieu of any invalid or unenforceable provision, there shall be
added automatically a valid and enforceable provision as similar in terms to
such invalid or unenforceable provision as may be possible.
14.10. Binding Effect. The covenants, conditions, waivers, releases and
agreements contained in this Note shall bind, and the benefits thereof shall
inure to, the parties hereto and their respective successors and assigns;
provided, however, that this Note cannot be assigned by the undersigned without
the prior written consent of Bank, and any such assignment or attempted
assignment by the undersigned shall be void and of no effect with respect to
Bank.
14.11. Modifications. This Note may not be supplemented, extended,
modified or terminated except by an agreement in writing and signed by the party
against whom enforcement of any such waiver, change, modification or discharge
is sought.
14.12. Sales or Participations. Bank may from time to time sell or
assign, in whole or in part, or grant participations in the Loan, this Note
and/or the obligations evidenced thereby. The holder of any such sale,
assignment or participation, if the applicable agreement between Bank and such
holder so provides, shall be: (a) entitled to all of the rights, obligations and
benefits of Bank; and (b) deemed to hold and may exercise the rights of setoff
or banker's lien with respect to any and all obligations of such holder to the
undersigned, in each case as fully as though the undersigned were directly
indebted to such holder. Bank may in its discretion give notice to the
undersigned of such sale, assignment or participation; however, the failure to
give such notice shall not affect any of Bank's or such holder's rights
hereunder.
14.13. Affiliate. As used herein, "Affiliate" shall mean First Union
Corporation and any of its direct and indirect affiliates and subsidiaries.
14.14. Jurisdiction. The undersigned irrevocably appoints each and every
owner, partner and/or officer of the undersigned as its attorneys upon whom may
be served, by regular or certified mail at the address set forth below, any
notice, process or pleading in any action or proceeding against it arising out
of or in connection with this Note or any other Loan Document; and the
undersigned hereby consents that any action or proceeding against it be
commenced and maintained in any court within the Commonwealth of Pennsylvania or
in the United States District Court for any District of Pennsylvania by service
of process on any such owner, partner and/or officer; and the undersigned agrees
that the courts of the Commonwealth of Pennsylvania and the United States
District Court for any District of Pennsylvania shall have jurisdiction with
respect to the subject matter hereof and the person of the undersigned. The
undersigned agrees not to assert any defense to any action or proceeding
initiated by Bank based upon improper venue or inconvenient forum. The
undersigned
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agrees that any action brought by the undersigned shall be commenced and
maintained only in a court in the federal judicial district or county in which
Bank has its principal place of business in Pennsylvania.
14.15. Notices. All notices and communications under this Note shall be in
writing and shall be given by either (a) hand-delivery, (b) first class mail
(postage prepaid), or (c) reliable overnight commercial courier (charges
prepaid), to the addresses listed in the Loan Documents. Notice shall be deemed
to have been given and received: (i) if by hand delivery, upon delivery; (ii) if
by mail, three (3) calendar days after the date first deposited in the United
States mail; and (iii) if by overnight courier, on the date scheduled for
delivery. A party may change its address by giving written notice to the other
party as specified herein.
14.16. Governing Law. This Note shall be governed by and construed in
accordance with the substantive laws of the Commonwealth of Pennsylvania.
14.17. Waiver of Jury Trial. THE UNDERSIGNED AND BANK AGREE THAT ANY
SUIT, ACTION OR PROCEEDING, WHETHER CLAIM OR COUNTERCLAIM, BROUGHT BY BANK OR
THE UNDERSIGNED, ON OR WITH RESPECT TO THIS NOTE OR ANY OTHER LOAN DOCUMENT OR
THE DEALINGS OF THE PARTIES WITH RESPECT HERETO OR THERETO, SHALL BE TRIED ONLY
BY A COURT AND NOT BY A JURY. BANK AND THE UNDERSIGNED EACH HEREBY KNOWINGLY,
VOLUNTARILY, INTENTIONALLY AND INTELLIGENTLY, AND WITH THE ADVICE OF THEIR
RESPECTIVE COUNSEL, WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY SUCH SUIT, ACTION
OR PROCEEDING. FURTHER, THE UNDERSIGNED WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR
RECOVER, IN ANY SUCH SUIT, ACTION OR PROCEEDING, ANY SPECIAL, EXEMPLARY,
PUNITIVE, CONSEQUENTIAL OR OTHER DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL
DAMAGES. THE UNDERSIGNED ACKNOWLEDGES AND AGREES THAT THIS SECTION IS A SPECIFIC
AND MATERIAL ASPECT OF THIS NOTE AND THAT BANK WOULD NOT EXTEND CREDIT TO THE
UNDERSIGNED IF THE WAIVERS SET FORTH IN THIS SECTION WERE NOT A PART OF THIS
NOTE.
14.18. Limitation of Liabilitv. Reference is made to Section 16 of the
Mortgage for the limitation of liability of the undersigned, which Section is
incorporated as if set forth at length herein.
IN WITNESS WHEREOF, the undersigned, intending to be legally bound, has
duly executed and delivered this Note as of the day and year first above
written.
ATTEST: FAIR LAWN INDUSTRIAL PARK, INC.
By: /s/ David F. McBride Address:
Chief Executive Officer c/o Penn Square Properties, Inc.
1 South Penn Square
Philadelphia, PA 19107
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STATE OF NEW JERSEY
COUNTY OF BERGEN
On this, the 11th day of September, 1997 before me, the undersigned
officer, personally appeared David F. McBride who acknowledged himself to be the
Chief Executive Officer of Fair Lawn Industrial Park, Inc., and that he, as such
officer, being authorized to do so, executed the foregoing instrument for the
purposes therein contained by signing the name of the corporation by himself as
such officer, and desired that the same might be recorded as such.
IN WITNESS WHEREOF, I hereunto set my hand and official seal
[Notarial Seal]
My Commission Expires: May
18, 2002
My Commission Expires:
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Exhibit "A"
If the Loan is prepaid within 120 days following the date of this Note,
such prepayment shall be accompanied by a fee calculated as follows:
<TABLE>
<CAPTION>
Date of Prepayment Amount of Fee
- -------------------------------------------------------------
<S> <C>
Prepayment made on or before October 15, 1997 $6,000
Prepayment made after October 15, 1997 $4,500
and on or before November 15, 1997
Prepayment made after November 15, 1997 $3,000
and on or before December 15, 1997
Prepayment made after December 15, 1997 $1,500
and on or before January 15, 1998
</TABLE>
-8
<PAGE>
Exhibit 10(q)
L&W
PROMISSORY NOTE
$ 3,525,000.00 Augusts ~ 1995
FOR VALUE RECEIVED, the undersigned, L & W ASSOCIATES, a Pennsylvania
general partnership (hereinafter referred to as "Maker"), hereby promises to pay
to the order of USG ANNUITY & LIFE COMPANY, an Oklahoma corporation, or any
subsequent holder hereof (hereinafter referred to as "Payee"), at the office of
Payee, 604 Locust Street, Des Moines, Iowa 50309, or at such other place as
Payee may from time to time designate in writing, the principal sum of Three
Million Five Hundred Twenty-Five Thousand and No/100 Dollars ($ 3,525,000.00)
and interest thereon at eight and onehalf percent ( 8 1/2%) per annum, both
principal and interest to be paid in lawful money of the United States of
America, as follows:
(i) Interest only from and including the date of disbursement of the loan
proceeds shall be paid on September 1, 1995; and
(ii) Payments of principal and interest shall be made in one hundred
twenty (120) successive monthly installments commencing on October 1, 1995, and
on the first day of each and every calendar month thereafter up to and including
September 1, 2005, the first one hundred nineteen (119) installments thereof to
be in the amount of Thirty Thousand Five Hundred Ninety and 77/100 Dollars
($30,590.77) each, and the final installment payable on September 1, 2005
(hereinafter referred to as the Maturity Date"), to be in the full amount of
principal of this Promissory Note (the "Note"), interest and all other sums
remaining unpaid hereunder and under the Mortgage (as hereinafter defined). If a
payment date is a nonbusiness day, the installment shall be due on the next
business day.
All payments on account of the indebtedness evidenced by this Note shall
be applied: (i) first, to further advances, if any, made by the holder hereof as
provided in the Loan Documents (as hereinafter defined); (ii) next, to any Late
Charge (as hereinafter defined); (iii) next, to interest at the Default Rate (as
hereinafter defined), if applicable; (iv) next, to the Prepayment Premium (as
hereinafter defined), if applicable; (v) next, at the rate of eight and one-half
percent ( 8 1/2%) per annum on the unpaid principal balance of this Note unless
interest at the Default Rate is applicable; and (vi) lastly, any remainder to
reduce the unpaid principal of this Note. Interest shall be computed on the
basis of a 30-day month and a 360-day year.
MAKER ACKNOWLEDGES THAT THE MONTHLY INSTALLMENTS REFERRED TO ABOVE WILL
NOT AMORTIZE ALL OF THE PRINCIPAL SUM OF THE
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INDEBTEDNESS BY THE MATURITY DATE, RESULTING IN A "BALLOON PAYMENT" ON SAID DATE
OF THE ENTIRE UNPAID PRINCIPAL BALANCE OF THIS NOTE AND ACCRUED UNPAID INTEREST.
In the event any installment of principal and/or interest due hereunder,
and/or any escrow fund payment for real estate taxes, assessments, other similar
charges or insurance premiums due under the Mortgage (as hereinafter defined)
shall become overdue for a period in excess of five (5) days, Maker shall pay to
the holder hereof a late charge (hereinafter referred to as a "Late Charge") of
five ($.05) cents for each dollar so overdue in order to defray part of the cost
of collection.
In no event shall the amount of interest due or payable hereunder exceed
the maximum rate of interest allowed by applicable law, and in the event any
such payment is inadvertently paid by the Maker or inadvertently received by the
Payee, then such excess sum shall be credited as a payment of principal, unless
the Maker shall notify the Payee, in writing, that the Maker elects to have such
excess sum returned to it forthwith. It is the express intent hereof that the
Maker not pay and the Payee not receive, directly or indirectly in any manner
whatsoever, interest in excess of that which may be legally paid by the Maker
under applicable law.
Payment of this Note is secured by an Open-End Mortgage, Security
Agreement, Financing Statement and Fixture Filing (hereinbefore and hereinafter
referred to as the "Mortgage") dated of even date herewith from Maker, as
Mortgagor, to Payee, as Mortgagee, encumbering certain real estate and other
property interests situated in the County of Chester, Commonwealth of
Pennsylvania and more particularly described in the Mortgage (hereinafter
referred to as the "Premises'). This Note, the Mortgage, and all other
instruments now or hereafter evidencing or securing the loan evidenced hereby
are hereinafter sometimes collectively referred to as the "Loan Documents". The
Mortgage contains a "Due on Sale and Further Encumbrance" clause which, together
with all other terms of the Mortgage, are incorporated herein by this reference.
Payment of this Note is further secured by the "Other Security Documents"
as defined in the Cross-Collateralization Rider, which is attached to the
Mortgage as Exhibit B.
Except as expressly permitted by this paragraph, no prepayments
shall be made of the indebtedness evidenced by this Note. Maker reserves the
privilege to prepay, in full but not in part, the principal indebtedness
evidenced hereby on any installment payment date, upon ninety (90) days prior
written notice to the holder hereof and upon payment of a premium (hereinafter
referred to as the "'Prepayment Premium.) equal to the
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<PAGE>
percentage of the principal amount so prepaid in accordance with the following
table:
<TABLE>
<CAPTION>
If Prepayment Made Prepayment
----------------------------------------------
<S> <C>
Premium
During Loan Year: Percentage:
1 10%
2 9%
3 8%
4 7%
5 6%
6 5%
7 4%
8 3%
9 2%
10 and thereafter 1%
</TABLE>
For purposes of calculation of the Prepayment Premium only, a Loan Year during
the term hereof shall be a period of twelve consecutive months, the first of
which shall commence on the first day of the month following the date hereof and
each succeeding Loan Year shall commence on the anniversary of such date.
In the event Payee applies any insurance proceeds or condemnation proceeds
to the reduction of the principal indebtedness under this Note in accordance
with the terms and conditions of the Mortgage, and if, at such time, no Event of
Default (as hereinafter defined) exists hereunder or under the Mortgage at such
time, then no Prepayment Premium shall be due or payable as a result of such
application and the monthly installments due and payable hereunder shall be
adjusted to reflect the reduced principal balance.
In addition to the above, no Prepayment Premium shall be due or payable if
Maker elects to prepay, in full but not in part, the principal indebtedness
evidenced hereby at any time within ninety (90) days prior to the Maturity Date
upon at least forty-five (45) days prior written notice to the holder hereof.
If the maturity of the indebtedness evidenced hereby is accelerated by
Payee as a consequence of the occurrence of an Event of Default, or in the event
the right to foreclose the Mortgage shall otherwise accrue to Payee, the Maker
agrees that an amount equal to the Prepayment Premium shall be added to the
balance of unpaid principal and interest then outstanding, and that the
indebtedness evidenced hereby shall not be discharged except: (i) by payment of
such Prepayment Premium, together with the balance of principal and interest and
all other sums then outstanding (if the Maker tenders payment of the
indebtedness evidenced hereby prior to judicial confirmation of foreclosure
sale); or (ii) by inclusion of
3
<PAGE>
such Prepayment Premium as a part of the indebtedness evidenced hereby in any
such judicial order or judgment of foreclosure.
It is hereby expressly agreed by Maker that time is of the essence hereof
and that each of the following occurrences shall constitute a default (~Event of
Default") under this Note:
(i) The failure of the Maker to:
(a) make any payment of any installment of principal or
interest under this Note within five (5) days after the same
shall fall due, or
(b) comply with any of the other terms of this Note within
thirty (30) days after written notice of such failure has been
given by Payee to Maker or within such longer period of time
as may be reasonably necessary to cure such non-compliance if
Maker is diligently pursuing such cure and the failure is
susceptible of cure within a reasonable time.
(ii) The failure of Maker to make payment of any amount due the
holder hereof under any Loan Documents other than this Note,
on any date on which the same shall fall due (including any
applicable grace period).
(iii) The occurrence of any Event of Default under any of the Loan
Documents other than this Note.
(iv) The occurrence of an Event of Default under any of the Bother
Notes" or the Bother Security Documents" as such terms are
defined in the CrossCollateralization Rider, attached to the
Mortgage as Exhibit B.
Payee shall have the following rights, privileges, powers, options and
remedies whenever any Event of Default shall occur under this Note:
(i) The right to foreclose the Mortgage shall accrue to Payee.
(ii) The entire unpaid principal balance of, and any unpaid
interest then accrued on, this Note together with the
Prepayment Premium, shall, at the option of Payee and without
demand or notice of any kind to the Maker or any other person,
immediately become due and payable.
4
<PAGE>
(iii) From and after the date of the occurrence of any Event of
Default and continuing until such Event of Default is fully
cured or until this Note is paid in full, the Maker promises
to pay interest on the principal balance of this Note then
outstanding at the rate (hereinbefore and hereinafter referred
to as the "Default Rate") of twelve and one-half percent
(125%) per annum. The Maker agrees that such additional
interest which has accrued shall be paid at the time of and as
a condition precedent to the curing of such Event of Default.
During the existence of any such Event of Default Payee may
apply payments received on any amounts due hereunder or under
the terms of any of the Loan Documents as Payee shall
determine; and if Payee elects (notice of election being
expressly waived by the Maker), the principal remaining unpaid
with accrued interest shall at once become due and payable, as
provided above.
(iv) Payee shall have, and may exercise any and all rights, powers,
privileges, options and remedies available at law or in equity
and as provided in any of the Loan Documents.
Upon the occurrence of an Event of Default under any of the Loan
Documents, the Maker expressly agrees to pay all costs of collection and
enforcement of every kind, including without limitation, all reasonable
attorneys' fees, court costs, costs of title evidence and insurance, inspection
and appraisal costs and expenses of every kind incurred by Payee in connection
with the protection or realization of any or all of the security for this Note,
whether or not any lawsuit is filed with respect thereto. An Event of Default
under this Note shall constitute a default under each and all of the other Loan
Documents.
The rights, powers, privileges, options and remedies of Payee, as provided
in this Note, in any of the Loan Documents, or otherwise available at law or
equity shall be cumulative and concurrent, and may be pursued singly,
successively or together at the sole discretion of Payee, and may be exercised
as often as occasion therefor shall occur. No delay or discontinuance in the
exercise of any right, power, privilege, option or remedy hereunder shall be
deemed a waiver of such right, power, privilege, option or remedy, nor shall the
exercise of any right, power, privilege, option or remedy be deemed an election
of remedies or a waiver of any other right, power, privilege, option or remedy.
Without limiting the generality of the foregoing, the failure of the Payee after
the occurrence of any Event of Default to exercise Payee's
5
<PAGE>
right to declare the indebtedness remaining unmatured hereunder to be
immediately due and payable shall not constitute a waiver of such right in
connection with any future Event of Default. Acceleration of maturity, once
claimed hereunder by Payee, may, at Payee's option, be rescinded by written
acknowledgment to that effect, but the tender and acceptance of partial payment
or partial performance alone shall not, by itself, in any way affect or rescind
such acceleration.
Maker (and each guarantor hereof, if any) jointly and severally waives
presentment for payment, demand, notice of nonpayment, notice of dishonor,
protest of any dishonor, notice of protest and protest of this Note, and all
other notices in connection with the delivery,. acceptance, performance, default
or enforcement of the payment of this Note, except as otherwise provided herein,
and agrees that the liability of each of them hereunder shall be joint, several
and unconditional without regard to the liability of any other party and shall
not be in any manner affected by any indulgence, extension of time, renewal,
waiver or modification granted or consented to by Payee; and Maker (and each
guarantor hereof, if any) consents to any and all extensions of time, renewals,
waivers or modifications that may be granted by Payee with respect to the
payment or other provisions of this Note, and to the release of any collateral
given to secure the payment hereof, or any part thereof, with or without
substitution, and agrees that additional makers or guarantors may become parties
hereto without notice to any of them or affecting any of their liability
hereunder.
Payee shall not by any acts of omission or commission be deemed to waive
any rights or remedies hereunder unless such waiver is in writing and signed by
Payee, and then only to the extent specifically set forth therein; a waiver of
one event shall not be construed as continuing or as a bar to or waiver of such
right or remedy on a subsequent event.
All notices, demands and requests given hereunder by the Maker or Payee,
shall be in writing and shall be delivered either by: (i) hand delivery to the
address for notices; (ii) delivery by overnight courier service to the address
for notices; (iii) by certified mail, return receipt requested, addressed to the
address for notices by United States mail, postage prepaid.
All notices shall be deemed effective upon the earlier to occur of: (x)
the hand delivery of such notice to the address for notices; (y) one business
day after the deposit of such notice with an overnight courier service by the
time deadline for next day delivery addressed to the address for notices; or (z)
three business days after depositing the notice in the United States mail as set
forth in (iii) above.
6
<PAGE>
All notices shall be addressed to the following addresses:
Maker: L & W Associates
750 Springdale Drive
Exton, PA 19341
Attn: Jack R. Loew
With a copy to: Stephen S. Aichele, Esq.
Saul, Ewing, Remick & Saul
3800 Centre Square West
Philadelphia, PA 19102
Payee: USG Annuity & Life Company
604 Locust Street
Des Moines, Iowa 50309
Attn: Equitable Investment Services,
Inc.
Managing Director/Real Estate
With a copy to: Nyemaster, Goode, McLaughlin, Voigts,
West, Hansell & O'Brien, P.C.
1900 Hub Tower
699 Walnut Street
Des Moines, Iowa 50309
or to such other person or at such other place as any party hereto may by notice
designate as a place for service of notice.
MAKER HEREBY IRREVOCABLY AUTHORIZES AND EMPOWERS ANY ATTORNEY OR THE
PROTHONOTARY OR CLERK OF ANY COURT IN THE COMMONWEALTH OF PENNSYLVANIA, OR
ELSEWHERE, TO APPEAR FOR THE UNDERSIGNED AT ANY TIME AFTER AN EVENT OF DEFAULT
HEREUNDER IN ANY ACTION BROUGHT AGAINST MAKER, ON THIS NOTE AT TnE SUIT OF
PAYEE, WITH OR WITHOUT DECLARATION FILED, AS OF ANY TERM, AND ln~REIN TO CONFESS
AND ENTER JUDGEMENT AGAINST THE UNDERSIGNED FOR THE ENTIRE UNPAID PRINCIPAL OF
THIS NOTE AND ALL OTHER SUMS PAID BY PAYEE TO OR ON BEHALF OF THE UNDERSIGNED
PURSUANT TO THE TERMS OF THIS NOTE OR THE MORTGAGE, AND ALL INTEREST THEREON,
TOGETHER WITH COSTS OF SUIT, ATTORNEY'S FEES OF FIVE PERCENT (5%) FOR
COLLECTION; AND FOR SO DOING THIS NOTE OR A COPY HEREOF VERIFIED BY AFFIDAVIT
(WHICH SHALL INCLUDE REFERENCE TO AN EVENT OF DEFAULT WHICH HAS OCCURRED AND NOT
BEEN CURED IN ACCORDANCE WITH Tn~. TERMS OF THIS NOTE) SHALL BE A SUFFICIENT
WARRANT. NOTWITHSTANDING ANYTHING IN THIS PARAGRAPH TO one CONTRARY, NO SUCH
ACTION TO CONFESS AND ENTER JUDGMENT AGAINST MAKER WILL BE INITIATED BY PAYEE
UNTIL PAYEE HAS GIVEN MAKER AT LEAST FIVE (5) DAYS PRIOR NOTICE OF PAYEE'S
INTENTIONS. THE AUTHORITY GRANTED HEREIN TO CONFESS JUDGMENT SHALL NOT BE
EXHAUSTED UNTIL PAYMENT IN FULL OF ALL THE AMOUNTS DUE HEREUNDER.
7
<PAGE>
This Note shall be governed by and construed in accordance with the laws
of the Commonwealth of Pennsylvania.
Except as specifically otherwise set forth in subparagraphs (i) through
(viii) below and in that certain Environmental Indemnification Agreement dated
on or about this same date from Maker to Payee, no personal liability under this
Note shall be asserted or enforceable against the Maker personally or any person
interested beneficially or otherwise in the Premises, or in respect of the
making, issuance or transfer hereof, all such liability being expressly waived
by Payee (provided, the foregoing shall not affect the liability of any
guarantor of any obligations arising under a separate guaranty hereof); and
Payee accepts this Note upon the express condition that in case of the
occurrence of an Event of Default, the remedies of the Payee in its sole
discretion shall be any or all of:
(a) foreclosure of the Mortgage in accordance with the terms and
provisions set forth in the Mortgage;
(b) action against any other security at any time given to secure the
payment hereof; and
(c) action to enforce the personal liability of Maker pursuant to
subparagraphs (i) through (viii) below and pursuant to the
Environmental Idemnification Agreement.
MAKER WAIVES ANY RIGHT TO A JURY TRIAL WITH RESPECT TO ANY MATTER ARISING
OUT OF THIS NOTE.
Notwithstanding anything in this Note to the contrary, there shall at no
time be any limitation on Maker's liability for the payment to Payee of:
(i) condemnation proceeds or insurance proceeds which Maker has received
and to which the Payee is entitled pursuant to the terms of this
Note or any of the Loan Documents,
(ii) any security deposits, prepaid rent or lease termination fees, and
any rentals or income which are received by Maker after the
occurrence of an Event of Default,
(iii) all loss, damage, costs, expense and liability (including without
limitation, reasonable attorneys' fees and costs) directly or
indirectly incurred by Payee (and its directors, officers, employees
and agents) arising out of or attributable to the installation, use,
generation, manufacture, production, storage, release, threatened
release, discharge, disposal or presence of a Hazardous Substance
(as defined in the Mortgage), or
8
<PAGE>
from the presence of any underground storage tanks, in, on, under or
about the Premises, including without limitation, (a) all
foreseeable consequential damages, (b) the cost of any required or
necessary repair, cleanup or detoxification of the Premises and (c)
the preparation and implementation of any closure, remedial or other
required plans, or damages arising from the presence of any toxic or
hazardous waste or substances, or underground storage tanks, or any
other pollutants in or on the Premises,
(iv) delinquent taxes, assessments and other similar charges levied
against the Premises,
(v) all loss, damages and expenses incurred by Payee and arising from
any misrepresentation or breach of warranty of Maker, or any
certification, financial statement or other information furnished by
or on behalf of Maker to Payee to induce Payee to loan the money
evidenced by the Note which proves to have been inaccurate or false
in any respect when made, or any willful or wanton act or omission
of Maker,
(vi) all loss or expenses incurred by Payee under the Loan Documents
resulting from Maker declaring bankruptcy or seeking protection
under any provision of any federal or state bankruptcy or insolvency
law, or in the event the Premises shall be subject to the
administration or control of any bankruptcy court, trustee, referee,
or other official,
(vii) any loss, including any Prepayment Premium, cost, or expense
resulting from acceleration of the maturity of the Note due to the
application of the "due on sale or further encumbrance" provisions
contained in the Mortgage, or
(viii) any transfer or other taxes, costs and reasonable attorneys fees
incurred by Payee in connection with the enforcement of the Loan
Documents.
Width the exception of those items of liability specifically set forth in items
(i) through (viii) above, the lien of any judgment against Maker in any
proceeding instituted-on, under or in connection with this Note or the Mortgage,
or both, shall not extend to any property now or hereafter owned by Maker other
than the interest of the Maker in the Premises and the other security for the
payment of this Note.
IMPORTANT: READ BEFORE SIGNING. THE TERMS OF THIS AGREEMENT SHOULD BE READ
CAREFULLY BECAUSE ONLY THOSE TERMS IN WRITING ARE ENFORCEABLE. NO OTHER TERMS OR
ORAL PROMISES NOT CONTAINED IN THIS
9
<PAGE>
WRITTEN CONTRACT MAY BE LEGALLY ENFORCED. YOU MAY CHANGE THE TERMS OF THIS
AGREEMENT ONLY BY ANOTHER WRITTEN AGREEMENT.
Maker acknowledges receipt of a copy of this instrument at the time it was
signed.
L & W ASSOCIATES, a Pennsylvania
general partnership
By:
Hough-Loew Associates, Partner
By: /s/ Jack R. Loew
August 4, 1995
Name,:
Title:
By:
J R. Loew, Partner
10
<PAGE>
Exhibit 10 (r)
PROMISSORY NOTE
Loan No.
$3,500,000
December 24, 1997
New York, New York
FOR VALUE RECEIVED, the undersigned, McBRIDE PROPERTIES, a general
partnership ("Borrower"), jointly and severally, if more than one, promises to
pay to the order of Column Financial, Inc., a Delaware Corporation ("Lender"),
at the office of Lender at 3414 Peachtree Road, N.E., Suite 1140, Atlanta,
Georgia 30326-1 1 13, or at such other place as Lender may designate to Borrower
in writing from time to time, the principal sum of THREE MILLION FIVE HUNDRED
THOUSAND DOLLARS ($3,500,000), together with interest on so much thereof as is
from time to time outstanding and unpaid, from the date of the advance of the
principal evidenced hereby, at a fluctuating rate equal to the sum, from time to
time, of (a) the LIBOR Rate as in effect from time to time plus (b) Two Hundred
Basis Points (2.0% per annum) (the 'Note Rate"), in lawful money of the United
States of America, which shall at the time of payment be legal tender in payment
of all debts and dues, public and private.
ARTICLE I - TERMS AND
CONDITIONS
1.01 Pavment of Principal and Interest.
(a) Said interest shall be computed hereunder based on a 360-day
year and based on twelve (12) 30-day months for each full calendar month and on
the actual number of days elapsed for any partial month in which interest is
being calculated. In computing the number of days during which interest accrues,
the day on which funds are initially advanced shall be included regardless of
the time of day such advance is made, and the day on which funds are repaid
shall be included unless repayment is credited prior to close of business.
Payments in federal funds immediately available in the place designated for
payment received by Lender prior to 2:00 p.m. local time at said place of
payment shall be credited prior to close of business, while other payments may,
at the option of Lender, not be credited until immediately available to Lender
in federal funds in the place designated for payment prior to 2:00 p.m. local
time at said place of payment on a day on which Lender is open for business.
Such principal and interest shall be payable in consecutive monthly
installments, beginning on February 1, 1998 or the first business day
thereafter, and continuing on the first day of each and every month thereafter
through and including April 2, 1998 (the "Maturity Date"), at which time the
entire outstanding principal balance hereof, together with all accrued but
unpaid interest thereon, shall be due and payable in full. Each such monthly
installment shall equal the amount of interest accrued during the preceding
month as calculated by Lender, which calculation shall be final in the absence
of manifest error reported in writing within fifteen days. Each such payment
shall be applied first to the payment of accrued interest and then to reduction
of principal. Borrower shall pay to Lender contemporaneously with the execution
hereof interest at the foregoing interest rate for a period from the date hereof
through and including the last day of the calendar month in which funding
occurs.
(b) For all purposes of this Note, "Libor Rate" shall mean the U.S.
Dollar rate (rounded upward to the nearest one-sixteenth of one percent) listed
on page 3750 (i.e., the Libor page) of the Telerate News Services titled
"BRITISH BANKER ASSOCIATION INTEREST SETTLEMENT RATES" for a designated maturity
of one (1) month determined as of 1 1:00 a.m. London Time on the second (2nd)
full Eurodollar Business Day next preceding the first day of each month with
respect to which interest is payable under the Loan (unless such date is not a
Business Day in which event the next succeeding Eurodollar Business Day which is
also a Business Day will be used). If the Telerate News Services (a) publishes
more than one ( I ) such Libor Rate, the average of such rates shall apply, or
(b) ceases to publish the Libor Rate, then the Libor Rate shall be determined
from such substitute financial reporting service as Lender in its discretion
<PAGE>
shall determine. The term "EURODOLLAR BUSINESS DAY", shall mean any day on which
banks in the City of London are generally open for interbank or foreign exchange
transactions.
1.02 Prepayment.
(a) This Note may be prepaid in whole but not in part at any time,
provided (i) written notice of such prepayment is received by Lender not more
than sixty (60) days and not less than ten (10) days prior to the date of such
prepayment, and (ii) such prepayment is received on the first day of a calendar
month (or, if such prepayment is not received on the first day of a calendar
month, interest is paid through the last day of such calendar month) and is
accompanied by all interest accrued hereunder and all other sums due hereunder
or under the other Loan Documents.
(b) Partial prepayments of this Note shall not be permitted, except
partial prepayments resulting from Lender applying insurance or condemnation
proceeds to reduce the outstanding principal balance of this Note as provided in
the Security Instrument, in which event no prepayment fee or premium shall be
due. No notice of prepayment shall be required under the circumstance specified
in the preceding sentence. No principal amount repaid may be reborrowed. Partial
payments of principal shall be applied to the unpaid principal balance evidenced
hereby but such application shall not reduce the amount of the monthly
installments required to be paid pursuant to Section 1.01 above.
1.03 Security. The indebtedness evidenced by this Note and the obligations
created hereby are secured by that certain Mortgage and Security Agreement (the
"Security Instrument") from Borrower to Lender, dated as of even date herewith,
concerning property located in Berks County, Pennsylvania. The Security
Instrument together with this Note and all other documents to or of which Lender
is a party or beneficiary now or hereafter evidencing, securing, guarantying,
modifying or otherwise relating to the indebtedness evidenced hereby, are herein
referred to collectively as the "Loan Documents". All of the terms and
provisions of the Loan Documents are incorporated herein by reference. Some of
the Loan Documents are to be filed for record on or about the date hereof in the
appropriate public records.
1.04 Default. It is hereby expressly agreed that should any default occur
in the payment of principal or interest as stipulated above and such payment is
not made within five (5) days of the date such payment is due (provided that no
grace period is provided for the payment of principal and interest due on the
Maturity Date), or should any other default occur under any of the Loan
Documents which is not cured within any applicable grace or cure period, then a
default shall exist hereunder, and in such event the indebtedness evidenced
hereby, including all sums advanced or accrued hereunder or under any other Loan
Document, and all unpaid interest accrued thereon, shall, at the option of
Lender and without notice to Borrower, at once become due and payable and may be
collected forthwith, whether or not there has been a prior demand for payment
and regardless of the stipulated date of maturity. In the event that any payment
is not received by Lender on the date when due (subject to the applicable grace
period), then in addition to any default interest payments due hereunder,
Borrower shall also pay to Lender a late charge in an amount equal to five
percent (5.0%) of the amount of such overdue payment. So long as any default
exists hereunder, regardless of whether or not there has been an acceleration of
the indebtedness evidenced hereby, and at all times after maturity of the
indebtedness evidenced hereby (whether by acceleration or otherwise), interest
shall accrue on the outstanding principal balance of this Note at a rate per
annum equal to four percent (4.0%) plus the interest rate which would be in
effect hereunder absent such default or maturity, or if such increased rate of
interest may not be collected under applicable law, then at the maximum rate of
interest, if any, which may be collected from Borrower under applicable law (the
"Default Interest Rate"), and such
2
<PAGE>
default interest shall be immediately due and payable. Borrower acknowledges
that it would be extremely difficult or impracticable to determine Lender's
actual damages resulting from any late payment or default, and such late charges
and default interest are reasonable estimates of those damages and do not
constitute a penalty. The remedies of Lender in this Note or in the Loan
Documents, or at law or in equity, shall be cumulative and concurrent, and may
be pursued singly, successively or together in Lender's discretion. Time is of
the essence of this Note. In the event this Note, or any part hereof, is
collected by or through an attorney-at-law, Borrower agrees to pay all costs of
collection including, but not limited to, reasonable attorney's fees.
1.05 Exculpation. Notwithstanding anything in the Loan Documents to the
contrary, but subject to the qualifications hereinbelow set forth, Lender agrees
that (i) Borrower shall be liable upon the indebtedness evidenced hereby and for
the other obligations arising under the Loan Documents to the full extent (but
only to the extent) of the security therefor, the same being all properties
(whether real or personal), rights, estates and interests now or at any time
hereafter securing the payment of this Note and/or the other obligations of
Borrower under the Loan Documents (collectively, the "Security Property"), (ii)
if default occurs in the timely and proper payment of all or any part of such
indebtedness evidenced hereby or in the timely and proper performance of the
other obligations of Borrower under the Loan Documents, any judicial proceedings
brought by Lender against Borrower shall be limited to the preservation,
enforcement and foreclosure, or any thereof, of the liens, security titles,
estates, assignments, rights and security interests now or at any time hereafter
securing the payment of this Note and/or the other obligations of Borrower under
the Loan Documents, and confirmation of any sale under power of sale, and no
attachment, execution or other writ of process shall be sought, issued or levied
upon any assets, properties or funds of Borrower other than the Security
Property except with respect to the liability described below in this section,
and (iii) in the event of a foreclosure of such liens, security titles, estates,
assignments, rights or security interests securing the payment of this Note
and/or the other obligations of Borrower under the Loan Documents, whether by
judicial proceedings or exercise of power of sale, no judgment for any
deficiency upon the indebtedness evidenced hereby shall be sought or obtained by
Lender against Borrower, except with respect to the liability described below in
this section; provided, however, that, notwithstanding the foregoing provisions
of this section, Borrower shall be fully and personally liable and subject to
legal action (a) for proceeds paid under any insurance policies (or paid as a
result of any other claim or cause of action against any person or entity) by
reason of damage, loss or destruction to all or any portion of the Security
Property, to the full extent of such proceeds not previously delivered to
Lender, but which, under the terms of the Loan Documents, should have been
delivered to Lender, (b) for proceeds or awards resulting from the condemnation
or other taking in lieu of condemnation of all or any portion of the Security
Property, or any of them. to the full extent of such proceeds or awards not
previously delivered to Lender, but which, under the terms of the Loan
Documents, should have been delivered to Lender, (c) for all tenant security
deposits or other refundable deposits paid to or held by Borrower or any other
person or entity in connection with leases of all or any portion of the Security
Property which are not applied in accordance with the terms of the applicable
lease or other agreement, (d) for rent and other payments received from tenants
under leases of all or any portion of the Security Property paid more than one
month in advance, (e) for rents, issues, profits and revenues of all or any
portion of the Security Property received or applicable to a period after any
notice of default from Lender hereunder or under the Loan Documents in the event
of any default by Borrower hereunder or thereunder which are not either applied
to the ordinary and necessary expenses of owning and operating the Security
Property or paid to Lender, (f) for damage to the Security Property as a result
of the intentional misconduct or gross negligence of Borrower or any of its
principals, officers or general partners, or any agent or employee of any such
persons, or any removal of the Security Property in violation of the terms of
the Loan Documents, to the full extent of the losses or damages incurred by
Lender on account of such failure, (g) for failure to pay any valid taxes,
assessments, mechanic's liens, materialmen's liens or other liens which could
create liens on any portion of the Security Property which would be superior to
the lien or security title of the Security Instrument or the other Loan
Documents, to the
3
<PAGE>
full extent of the amount claimed by any such lien claimant, (h) for all
obligations and indemnities of Borrower under the Loan Documents relating to
hazardous or toxic substances or compliance with environmental laws and
regulations to the full extent of any losses or damages (including those
resulting from diminution in value of any Security Property) incurred by Lender
as a result of the existence of such hazardous or toxic substances or failure to
comply with environmental laws or regulations, (i) for fraud or material
misrepresentation by Borrower or any of its principals, officers, or general
partners, any guarantor, any indemnitor or any agent, employee or other person
authorized or apparently authorized to make statements or representations on
behalf of Borrower, any principal, officer or partner of Borrower, any guarantor
or any indemnitor, to the full extent of any losses, damages and expenses of
Lender on account thereof, and (j) for any breach of the covenants in the
Security Instrument relating to the Ground Leases or relating to further
assurances and delivery of additional security documentation, in each case to
the full extent of any losses, damages and expenses of Lender on account
thereof. References herein to particular sections of the Loan Documents shall be
deemed references to such sections as affected by other provisions of the Loan
Documents relating thereto. Nothing contained in this section shall (i) be
deemed to be a release or impairment of the indebtedness evidenced by this Note
or the other obligations of Borrower under the Loan Documents or the lien of the
Loan Documents upon the Security Property, or (ii) preclude Lender from
foreclosing the Loan Documents in case of any default or from enforcing any of
the other rights of Lender except as stated in this section, or (iii) limit or
impair in any way whatsoever the Indemnity Agreement of even date executed and
delivered in connection with the indebtedness evidenced by this Note or release,
relieve, reduce, waive or impair in any way whatsoever, any obligation of any
party to such Indemnity Agreement.
ARTICLE II- GENERAL CONDITIONS
2.01 No Waiver: Amendment. No failure to accelerate the debt evidenced
hereby by reason of default hereunder, acceptance of a partial or past due
payment, or indulgences granted from time to time shall be construed (i) as a
novation of this Note or as a reinstatement of the indebtedness evidenced hereby
or as a waiver of such right of acceleration or of the right of Lender
thereafter to insist upon strict compliance with the terms of this Note. or (ii)
to prevent the exercise of such right of acceleration or any other right granted
hereunder or by any applicable laws; and Borrower hereby expressly waives the
benefit of any statute or rule of law or equity now provided, or which may
hereafter be provided, which would produce a result contrary to or in conflict
with the foregoing. No extension of the time for the payment of this Note or any
installment due hereunder, made by agreement with any person now or hereafter
liable for the payment of this Note shall operate to release, discharge, modify,
change or affect the original liability of Borrower under this Note, either in
whole or in part unless Lender agrees otherwise in writing. This Note may not be
changed orally, but only by an agreement in writing signed by the party against
whom enforcement of any waiver, change, modification or discharge is sought.
2.02 Waivers. Presentment for payment, demand, protest and notice of
demand, protest and nonpayment and all other notices are hereby waived by
Borrower. Borrower hereby further waives and renounces, to the fullest extent
permitted by law, all rights to the benefits of any statute of limitations and
any moratorium, reinstatement, marshalling, forbearance, valuation, stay,
extension, redemption, appraisement, exemption and homestead now or hereafter
provided by the Constitution and laws of the United States of America and of
each state thereof, both as to itself and in and to all of its property, real
and personal, against the enforcement and collection of the obligations
evidenced by this Note or the other Loan Documents.
4
<PAGE>
2.03 Limit of Validity. provisions of this Note and of all agreements
between Borrower and Lender, whether now or existing or hereafter arising and
whether written or oral, are hereby expressly limited so that in no contingency
or event whatsoever, whether by reason of demand or acceleration of the maturity
of this Note or otherwise, shall the amount paid, or agreed to be paid
("Interest"), to Lender for the use, forbearance or retention of the money
loaned under this Note exceed the maximum amount permissible under applicable
law. If, from any circumstance whatsoever, performance or fulfillment of any
provision hereof or of any agreement between Borrower and Lender shall, at the
time performance or fulfillment of such provision shall be due, exceed the limit
for Interest prescribed by law or otherwise transcend the limit of validity
prescribed by applicable law, then ipso facto the obligation to be performed or
fulfilled shall be reduced to such limit and if, from any circumstance
whatsoever, Lender shall ever receive anything of value deemed Interest by
applicable law in excess of the maximum lawful amount, an amount equal to any
excessive Interest shall be applied to the reduction of the principal balance
owing under this Note in the inverse order of its maturity (whether or not then
due) or at the option of Lender be paid over to Borrower, and not to the payment
of Interest. All Interest (including any amounts or payments deemed to be
Interest) paid or agreed to be paid to Lender shall, to the extent permitted by
applicable law, be amortized, prorated, allocated and spread throughout the full
period until payment in full of the principal balance of this Note so that the
Interest thereof for such full period will not exceed the maximum amount
permitted by applicable law. This Section 2.03 will control all agreements
between Borrower and Lender.
2.04 Use of Funds. Borrower hereby warrants, represents and covenants that
no funds disbursed hereunder shall be used for personal, family or household
purposes.
2.05 Unconditional Payment. Borrower is and shall be obligated to pay
principal, interest and any and all other amounts which become payable hereunder
or under the other Loan Documents absolutely and unconditionally and without any
abatement, postponement, diminution or deduction and without any reduction for
counterclaim or setoff. In the event that at any time any payment received by
Lender hereunder shall be deemed by a court of competent jurisdiction to have
been a voidable preference or fraudulent conveyance under any bankruptcy,
insolvency or other debtor relief law, then the obligation to make such payment
shall survive any cancellation or satisfaction of this Note or return thereof to
Borrower and shall not be discharged or satisfied with any prior payment thereof
or cancellation of this Note, but shall remain a valid and binding obligation
enforceable in accordance with the terms and provisions hereof, and such payment
shall be immediately due and payable upon demand.
2.06 Miscellaneous. This Note shall be interpreted, construed and enforced
according to the laws of the State of New York. The terms and provisions hereof
shall be binding upon and inure to the benefit of Borrower and Lender and their
respective heirs, executors, legal representatives, successors,
successors-in-title and assigns, whether by voluntary action of the parties or
by operation of law. As used herein, the terms "Borrower" and "Lender" shall be
deemed to include their respective heirs, executors, legal representatives,
successors, successors-in-title and assigns, whether by voluntary action of the
parties or by operation of law. If Borrower consists of more than one person or
entity, each shall be jointly and severally liable to perform the obligations of
Borrower under this Note. All personal pronouns used herein, whether used in the
masculine, feminine or neuter gender, shall include all other genders; the
singular shall include the plural and vice versa. Titles of articles and
sections are for convenience only and in no way define, limit, amplify or
describe the scope or intent of any provisions hereof. Time is of the essence
with respect to all provisions of this Note. This Note and the other Loan
Documents contain the entire agreements between the parties hereto relating to
the subject matter hereof and thereof and all prior agreements relative hereto
and thereto which are not contained herein or therein are terminated.
2.07 Confession of Judgment. FOR THE PURPOSE OF OBTAINING POSSESSION OF
THE SECURITY PROPERTY IN THE EVENT OF ANY DEFAULT HEREUNDER OR UNDER THE
5
<PAGE>
SECURITY INSTRUMENT, BORROWER HEREBY AUTHORIZES AND EMPOWERS ANY ATTORNEY OF ANY
COURT OF RECORD IN THE COMMONWEALTH OF PENNSYLVANIA OR ELSEWHERE, AS ATTORNEY
FOR BORROWER AND ALL PERSONS CLAIMING UNDER OR THROUGH BORROWER, TO APPEAR FOR
AND CONFESS JUDGMENT IN EJECTMENT AGAINST BORROWER, AND AGAINST ALL PERSONS
CLAIMING UNDER OR THROUGH BORROWER, IN FAVOR OF LENDER, FOR RECOVERY BY LENDER
OF POSSESSION OF THE SECURITY PROPERTY, FOR WHICH THIS NOTE, OR A COPY THEREOF
VERIFIED BY AFFIDAVIT, SHALL BE A SUFFICIENT WARRANT; AND THEREUPON A WRIT OF
POSSESSION MAY IMMEDIATELY ISSUE FOR POSSESSION OF THE SECURITY PROPERTY,
WITHOUT ANY PRIOR WRIT OR PROCEEDING WHATSOEVER AND WITHOUT ANY STAY OF
EXECUTION. IF FOR ANY REASON AFTER SUCH ACTION HAS BEEN COMMENCED IT SHALL BE
DISCONTINUED, OR POSSESSION OF THE SECURITY PROPERTY SHALL REMAIN IN OR BE
RESTORED TO BORROWER, LENDER SHALL HAVE THE RIGHT FOR THE SAME DEFAULT OR ANY
SUBSEQUENT DEFAULT TO BRING ONE OR MORE FURTHER AMICABLE ACTIONS AS ABOVE
PROVIDED TO RECOVER POSSESSION OF THE SECURITY PROPERTY. LENDER MAY CONFESS
JUDGMENT IN EJECTMENT AS PROVIDED HEREIN BEFORE OR AFTER THE INSTITUTION OF
PROCEEDINGS TO FORECLOSE THE SECURITY INSTRUMENT OR TO ENFORCE THIS NOTE, OR
AFTER ENTRY OF JUDGMENT THEREIN OR ON THIS NOTE, OR AFTER A SHERIFF'S SALE OR
JUDICIAL SALE OR OTHER FORECLOSURE SALE OF THE SECURITY PROPERTY IN WHICH LENDER
IS THE SUCCESSFUL BIDDER, IT BEING THE UNDERSTANDING OF THE PARTIES THAT THE
AUTHORIZATION TO PURSUE SUCH PROCEEDINGS FOR OBTAINING POSSESSION AND CONFESSION
OF JUDGMENT THEREIN IS AN ESSENTIAL PART OF THE REMEDIES FOR ENFORCEMENT OF THE
MORTGAGE AND THIS NOTE, AND SHALL SURVIVE ANY EXECUTION SALE TO LENDER.
6
<PAGE>
IN WITNESS WHEREOF, Borrower has executed this Note under seal as of the
date first above written.
BORROWER:
McBRIDE PROPERTIES,
a general partnership
By: AMERICAN REAL ESTATE
INVESTMENT CORPORATION, a
general partner
/s/ Stephen J. Butte
December 24, 1997
Stephen J. Butte,
/Vice President
By: AMERICAN REAL ESTATE
INVESTMENT, L.P., a
general partner
By: AMERICAN REAL ESTATE
INVESTMENT CORPORATION, a
general partner
By: /s/ Stephen J. Butte
December 24, 1997
/Stephen J. Butte
Vice President
[Acknowledgments]
<PAGE>
STATE OF PENNSYLVANIA :
: SS
COUNTY OF PHILADELPHIA :
ON THIS, this 24th day of December,1997, before me, a Notary Public for
the Commonwealth of Pennsylvania, the undersigned Officer, personally
appeared Stephen J. Butte, Vice President of American Real Estate
Investment Corporation, a general partner of McBride Properties, a
general partnership, and American Real Estate Investment L.P., a general
partner of McBride Properties, a general partnership, known to me
(satisfactorily proven) to be the persons whose name is subscribed to
the within instrument, and acknowledged that he executed the same for
the purposes therein contained.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
Notary Public
[ILLEGIBLE] SEAL
Leonard A Shatz, Notary Public
[ILLEGIBLE] in Two Bucks County
My Commision Expires March 27, 2000
<PAGE>
EXHIBIT "A"
ALL THAT CERTAIN tract or parcel of land situate in the Township of Bern, County
of Berks, Commonwealth of Pennsylvania. at the southeast corner of the
intersection of Leisz's Bridge Road and Township Route No T-560, Van Reed Road,
and the northeast corner of the intersection of Township Route No. T-560, Van
Reed Road and Arnold Road as shown on the Final Plan of Northfield Business
Center, Reading Municipal Airport Industrial Park, Phase I, shown on an As-Built
ALTA Survey prepared by Fry Surveying, Inc dated 10/10/97, being more fully
bounded and described as follows, to wit
BEGINNING at a point on the southern right of way line of Leisz's Bridge Road at
its intersection with the eastern right-of-way line of Township Route No. T-560,
Van Reed Road being the Northwestemmost corner of the herein described tract;
thence along the same the eight following courses and distances; 1) on a line
curving to the right with a radius of 5,689.65 feet, a central angle of 0
degrees 50 minutes 2 seconds, and a chord bearing of South sixty-one degrees
forty-three minutes twenty-one seconds East a distance of eighty-two and
eighty-one hundredths feet to a point; 2) South sixty-one degrees eighteen
minutes twenty seconds East a distance of seven hundred fifty-five and nineteen
hundredths feet to a point; 3) on a line curving to the right with a radius of
5,689.65 feet, a central angle of 1 degrees 46 minutes and a chord bearing of
South sixty degrees twenty-five minutes twenty seconds East a distance of one
hundred seventy-five and forty-three hundredths feet to a point; 4) South
fifty-nine degrees thirty-two minutes twenty seconds East a distance of forty
one and seventy hundredths feet to a point; 5) on a line curving to the left
with a radius of 5,769.65 feet, a central angle of 2 degrees 48 minutes and a
chord bearing of South sixty degrees fifty-six minutes twenty seconds East a
distance of two hundred eighty-one and ninety-three hundredths feet to a point;
6) South sixty-two degrees twenty minutes twenty seconds East a distance of two
hundred thirty-nine and fifty-four hundredths feet to a point; 7) on a line
curving to the left with a radius of 518.34 feet, a central angle of 25 degrees
54 minutes and a chord bearing of South seventy-five degrees seventeen minutes
twenty seconds East a distance of two hundred thirty-two and thirty-two
hundredths feet to a point; 8) South eighty-eight degrees fourteen minutes
twenty seconds East a distance of one hundred thirty-six and fifty-nine
hundredths feet to a point; thence along Lot ~ the two following courses and
distances: 1) South one degree forty-five minutes forty seconds West a distance
of one hundred sixty-six and fifty-five hundredths feet to a point; 2) South
thirty degrees two minutes twenty-eight seconds East a distance of two hundred
fifty-two and ninety-seven hundredths feet to a point on the northern
right-of-way line of Arnold Road, thence along the same the twelve following
courses and distances: 1) on a line curving to the left with a radius of 330.00
feet, a central angle of 10 degrees 48 minutes 38 seconds, and a chord bearing
of South fifty-four degrees thirty-three minutes thirteen seconds West a
distance of sixty-two and
Page 1 of 2
<PAGE>
EXHIBIT "A"
seventeen hundredths feet to a point, 2) South forty-nine degrees eight minutes
fortyfour seconds West a distance of one hundred four and twenty-three
hundredths feet to a point; 3) on a line curving to the right with a radius of
270.00 feet, a central angle of 71 degrees 31 minutes 45 seconds, and a chord
bearing of South eighty-four degrees fifty-four minutes forty-seven seconds West
a distance of three hundred fifteen and sixty-one hundredths feet to a point; 4)
North fifty-nine degrees nineteen minutes twenty-one seconds West a distance of
three hundred forty-nine and fifty-six hundredths feet to a point; 5) on a line
curving to the left with a radius of 1,080.00 feet, a central angle of 31
degrees 6 minutes 5 seconds, and a chord bearing of North seventy-four degrees
fifty-two minutes twenty-three seconds West a distance of five hundred
seventy-nine and eight hundredths feet to a point; 6) South eighty-nine degrees
thirty-four minutes thirty-four seconds West a distance of twenty-five and
thirty-one hundredths feet to a point; 7) on a line curving to the right with a
radius of 295.00 feet, a central angle of 29 degrees 5 minutes 33 seconds and a
chord bearing of North seventy-five degrees fifty-two minutes thirty-nine
seconds West a distance of one hundred forty-eight and nineteen hundredths feet
to a point; 8) North sixty-one degrees nineteen minutes fifty-three seconds West
a distance of two hundred ninety and thirty-seven hundredths feet to a point: 9)
on a line curving to the right with a radius of 970.00 feet, a central angle of
4 degrees 52 minutes 50 seconds, and a chord bearing of North fitty-eight
degrees fifty-three minutes twenty-eight seconds West a distance of eighty-two
and sixty hundredths feet to a point; 10) North fifty-six degrees twenty-seven
minutes three seconds West a distance of three hundred three and forty-seven
hundredths feet to a point; 11) North fifty-nine degrees fifty-two minutes
forty-eight seconds West a distance of two hundred eleven and fifty-six
hundredths feet to a point, 12) on a line curving to the right with a radius of
22.00 feet, a central angle of 95 degrees 50 minutes 17 seconds, and a chord
bearing of North eleven degrees fifty-seven minutes forty seconds West a
distance of thirty-two and sixty-six hundredths feet to a point on the eastern
right-of-way line of Township Route No. T-560, Van Reed Road; thence along the
same the two following courses and distances: 1) North thirty-five degrees
fifty-seven minutes twenty-nine seconds East a distance of five hundred
ninety-one and fifty-five hundredths feet to a point; 2) on a line curving to
the right with a radius of 22.00 feet, a central angle of 81 degrees 54 minutes
09 seconds, and a chord bearing North seventy-six degrees fifty-four minutes
thirty-three seconds East a distance of twenty-eight and eighty-four hundredths
feet to the place of beginning.
CONTAINING in area twenty-nine and three hundredths (29.03) acres.
Tax Parcel NO. 4398-11-56-9055-858
Page 2 of 2
<PAGE>
Exhibit 10 (s)
One Tabas Lane
PROMISSORY NOTE
$ 3,025,000.00 August '9, 1995
FOR VALUE RECEIVED, the undersigned, Hough-Loew Associates, Inc. a
Pennsylvania corporation (hereinafter referred to as ~Maker"), hereby promises
to pay to the order of USG ANNUITY - LIFE COMPANY, an Oklahoma corporation, or
any subsequent holder hereof (hereinafter referred to as "Payee")' at the office
of Payee, 604 Locust Street, Des Moines, Iowa 50309, or at such other place as
Payee may from time to time designate in writing, the principal sum of Three
Million Twenty-Five Thousand and No/100 Dollars ($3,025,000.00) and interest
thereon at eight and one-fourth percent ( 8 1/4~) per annum, both principal and
interest to be paid in lawful money of the United States of America, as follows:
(i) Interest only from and including the date of disbursement of the loan
proceeds shall be paid on September 1, 1995; and
(ii) Payments of principal and interest shall be made in sixty (60)
successive monthly installments commencing on October 1, 1995, and on the first
day of each and every calendar month thereafter up to and including September 1,
2000, the first fifty-nine installments to be in the amount of Twenty-Five
Thousand Seven Hundred Seventy-four and 99/100 Dollars ($25,774.99) each, and
the final installment payable on September 1, 2000 (hereinafter referred to as
the "Maturity Date"), to be in the full amount of principal of this Promissory
Note (the ~Note"), interest and all other sums remaining unpaid hereunder and
under the Mortgage (as hereinafter defined). If a payment date is a non-business
day, the installment shall be due on the next business day.
All payments on account of the indebtedness evidenced by this Note shall
be applied: (i) first, to further advances, if any, made by the holder hereof as
provided in the Loan Documents (as hereinafter defined); (ii) next, to any Late
Charge (as hereinafter defined); (iii) next, to interest at the Default Rate (as
hereinafter defined), if applicable; (iv) next, to the Prepayment Premium (as
hereinafter defined), if applicable; (v) next, at the rate of eight and one-
fourth percent (8 1/4%) per annum on the unpaid principal balance of this Note
unless interest at the Default Rate is applicable; and (vi) lastly, any
remainder to reduce the unpaid principal of this Note. Interest shall be
computed on the basis of a 30-day month and a 360-day year.
<PAGE>
MAKER ACKNOWLEDGES THAT THE MONTHLY INSTALLMENTS REFERRED TO ABOVE WILL
NOT AMORTIZE ALL OF THE PRINCIPAL SUM OF THE INDEBTEDNESS BY THE MATURITY DATE,
RESULTING IN A " BALLOON PAYMENT." ON SAID DATE OF THE ENTIRE UNPAID PRINCIPAL
BALANCE OF THIS NOTE AND ACCRUED UNPAID INTEREST.
In the event any installment of principal and/or interest due hereunder,
and/or any escrow fund payment for real estate taxes, assessments, other similar
charges or insurance premiums due under the Mortgage (as hereinafter defined)
shall become overdue for a period in excess of five (5) days, Maker shall pay to
the holder hereof a late charge (hereinafter referred to as a "Late Charge") of
five ($.05) cents for each dollar so overdue in order to defray part of the cost
of collection.
In no event shall the amount of interest due or payable hereunder exceed
the maximum rate of interest allowed by applicable law, and in the event any
such payment is inadvertently paid by the Maker or inadvertently received by the
Payee, then such excess sum shall be credited as a payment of principal, unless
the Maker shall notify the Payee, in writing, that the Maker elects to have such
excess sum returned to it forthwith. It is the express intent hereof that the
Maker not pay and the Payee not receive, directly or indirectly in any manner
whatsoever, interest in excess of that which may be legally paid by the Maker
under applicable law.
Payment of this Note is secured by an Open-End Mortgage, Security
Agreement, Financing Statement and Fixture Filing (hereinbefore and hereinafter
referred to as the UMortgage") dated of even date herewith from Maker, as
Mortgagor, to Payee, as Mortgagee, encumbering certain real estate and other
property interests situated in the County of Chester, Commonwealth of
Pennsylvania and more particularly described in the Mortgage (hereinafter
referred to as the UPremises"). This Note, the Mortgage, and all other
instruments now or hereafter evidencing or securing the loan evidenced hereby
are hereinafter sometimes collectively referred to as the ULoan Documents". The
Mortgage contains a "Due on Sale and Further Encumbrance" clause which, together
with all other terms of the Mortgage, are incorporated herein by this reference.
Payment of this Note is further secured by the HOther Security Documents"
as defined in the Cross-Collateralization Rider, which is attached to the
Mortgage as Exhibit B.
Except as expressly permitted by this paragraph, no prepayments shall be
made of the indebtedness evidenced by
-2-
<PAGE>
this Note. Maker reserves the privilege to prepay, in full but not in part, the
principal indebtedness evidenced hereby on any installment payment date, upon
ninety (90) days prior written notice to the holder hereof and upon payment of a
premium (hereinafter referred to as the prepayment Premium.) equal to the
percentage of the principal amount so prepaid in accordance with the following
table:
<TABLE>
<CAPTION>
If Prepayment Made Prepayment Premium
-----------------------------------------------------------
During Loan Year: Percentage:
-----------------------------------------------------------
<S> <C>
1 5%
2 4%
3 3%
4 2%
5 1%
</TABLE>
For purposes of calculation of the Prepayment Premium only, a Loan Year during
the term hereof shall be a period of twelve consecutive months, the first of
which shall commence on the first day of the month following the date hereof and
each succeeding Loan Year shall commence on the anniversary of such date.
In the event Payee applies any insurance proceeds or condemnation proceeds
to the reduction of the principal indebtedness under this Note in accordance
with the terms and conditions of the Mortgage, and if, at such time, no Event of
Default (as hereinafter defined) exists hereunder or under the Mortgage at such
time, then no Prepayment Premium shall be due or payable as a result of such
application and the monthly installments due and payable hereunder shall be
adjusted to reflect the reduced principal balance.
In addition to the above, no Prepayment Premium shall be due or payable if
Maker elects to prepay, in full but not in part, the principal indebtedness
evidenced hereby at any time within ninety (90) days prior to the Maturity Date
upon at least forty-five (45) days prior written notice to the holder hereof.
If the maturity of the indebtedness evidenced hereby is accelerated by
Payee as a consequence of the occurrence of an Event of Default, or in the event
the right to foreclose the Mortgage shall otherwise accrue to Payee, the Maker
agrees that an amount equal to the Prepayment Premium shall be added to the
balance of unpaid principal and interest then outstanding, and that the
indebtedness evidenced hereby shall not be discharged except: (i) by payment of
such Prepayment Premium, together with the balance of principal and interest and
all other sums then outstanding (if the Maker tenders payment of the
indebtedness evidenced hereby prior to judicial confirmation of foreclosure
sale); or (ii) by
3
<PAGE>
inclusion of such Prepayment Premium as a part of the
indebtedness evidenced hereby in any such judicial order or judgment of
foreclosure.
It is hereby expressly agreed by Maker that time is of the essence hereof
and that each of the following occurrences shall constitute a default ("Event of
Default") under this Note:
(i) The failure of the Maker to:
(a) make any payment of any installment of principal or
interest under this Note within five (5) days after the same
shall fall due, or
(b) comply with any of the other terms of this Note within
thirty (30) days after written notice of such failure has been
given by Payee to Maker or within such longer period of time
as may be reasonably necessary to cure such non-compliance if
Maker is diligently pursuing such cure and the failure is
susceptible of cure within a reasonable time.
(ii) The failure of Maker to make payment of any amount due the
holder hereof under any Loan Documents other than this Note,
on any date on which the same shall fall due (including any
applicable grace period).
(iii) The occurrence of any Event of Default under any of the Loan
Documents other than this Note.
(iv) The occurrence of an Event of Default under any of the "Other
Notes" or the "Other Security Documents" as such terms are
defined in the CrossCollateralization Rider, attached to the
Mortgage as Exhibit B.
Payee shall have the following rights, privileges, powers, options and
remedies whenever any Event of Default shall occur under this Note:
(i) The right to foreclose the Mortgage shall accrue to Payee.
(ii) The entire unpaid principal balance of, and any unpaid
interest then accrued on, this Note together with the
Prepayment Premium, shall, at the option of Payee and without
demand or notice of any kind to the Maker or any other person,
immediately become due and payable.
(iii) From and after the date of the occurrence of any Event of
Default and continuing until such Event
4
<PAGE>
of Default is fully cured or until this Note is paid in full,
the Maker promises to pay interest on the principal balance of
this Note then outstanding at the rate (hereinbefore and
hereinafter referred to as the "Default Rate") of twelve and
one-fourth percent (12 1/4%) per annum. The Maker agrees that
such additional interest which has accrued shall be paid at
the time of and as a condition precedent to the curing of such
Event of Default. During the existence of any such Event of
Default Payee may apply payments received on any amounts due
hereunder or under the terms of any of the Loan Documents as
Payee shall determine; and if Payee elects (notice of election
being expressly waived by the Maker), the principal remaining
unpaid with accrued interest shall at once become due and
payable, as provided above.
(iv) Payee shall have, and may exercise any and all rights, powers,
privileges, options and remedies available at law or in equity
and as provided in any of the Loan Documents.
Upon the occurrence of an Event of Default under any of the Loan
Documents, the Maker expressly agrees to pay all costs of collection and
enforcement of every kind, including without limitation, all reasonable
attorneys' fees, court costs, costs of title evidence and insurance, inspection
and appraisal costs and expenses of every kind incurred by Payee in connection
with the protection or realization of any or all of the security for this Note,
whether or not any lawsuit is filed with respect thereto. An Event of Default
under this Note shall constitute a default under each and all of the other Loan
Documents.
The rights, powers, privileges, options and remedies of Payee, as provided
in this Note, in any of the Loan Documents, or otherwise available at law or
equity shall be cumulative and concurrent, and may be pursued singly,
successively or together at the sole discretion of Payee, and may be exercised
as often as occasion therefor shall occur. No delay or discontinuance in the
exercise of any right, power, privilege, option or remedy hereunder shall be
deemed a waiver of such right, power, privilege, option or remedy, nor shall the
exercise of any right, power, privilege, option or remedy be deemed an election
of remedies or a waiver of any other right, power, privilege, option or remedy.
Without limiting the generality of the foregoing, the failure of the Payee after
the occurrence of any Event of Default to exercise Payee's right to declare the
indebtedness remaining unmatured hereunder to be immediately due and payable
shall not constitute a waiver of
5
<PAGE>
such right in connection with any future Event of Default. Acceleration of
maturity, once claimed hereunder by Payee, may, at Payee's option, be rescinded
by written acknowledgment to that effect, but the tender and acceptance of
partial payment or partial performance alone shall not, by itself, in any way
affect or rescind such acceleration.
Maker (and each guarantor hereof, if any) jointly and severally waives
presentment for payment, demand, notice of nonpayment, notice of dishonor,
protest of any dishonor, notice of protest and protest of this Note, and all
other notices in connection with the delivery, acceptance, performance, default
or enforcement of the payment of this Note, except as otherwise provided herein,
and agrees that the liability of each of them hereunder shall be joint, several
and unconditional without regard to the liability of any other party and shall
not be in any manner affected by any indulgence, extension of time, renewal,
waiver or modification granted or consented to by Payee; and Maker (and each
guarantor hereof, if any) consents to any and all extensions of time, renewals,
waivers or modifications that may be granted by Payee with respect to the
payment or other provisions of this Note, and to the release of any collateral
given to secure the payment hereof, or any part thereof, with or without
substitution, and agrees that additional makers or guarantors may become parties
hereto without notice to any of them or affecting any of their liability
hereunder.
Payee shall not by any acts of omission or commission be deemed to waive
any rights or remedies hereunder unless such waiver is in writing and signed by
Payee, and then only to the extent specifically set forth therein; a waiver of
one event shall not be construed as continuing or as a bar to or waiver of such
right or remedy on a subsequent event.
All notices, demands and requests given hereunder by the Maker or Payee,
shall be in writing and shall be delivered either by: (i) hand delivery to the
address for notices; (ii) delivery by overnight courier service to the address
for notices; (iii) by certified mail, return receipt requested, addressed to the
address for notices by United States mail, postage prepaid.
All notices shall be deemed effective upon the earlier to occur of: (x)
the hand delivery of such notice to the address for notices; (y) one business
day after the deposit of such notice with an overnight courier service by the
time deadline for next day delivery addressed to the address for notices; or (z)
three business days after depositing the notice in the United States mail as set
forth in (iii) above.
All notices shall be addressed to the following addresses:
6
<PAGE>
Maker: Hough-Loew Associates, Inc.
750 Springdale Drive
Exton, PA 19341
Attn: Jack R. Loew
With a copy to: Stephen S. Aichele, Esq.
Saul, Ewing, Remick & Saul
3800 Centre Square West
Philadelphia, PA 19102
Payee: USG Annuity & Life Company
604 Locust Street
Des Moines, Iowa 50309
Attn: Equitable Investment Services,
Inc.
Managing Director/Real Estate
With a copy to: Nyemaster, Goode, McLaughlin, Voigts,
West, Hansell & O'Brien, P.C.
1900 Hub Tower
699 Walnut Street
Des Moines, Iowa 50309
or to such other person or at such other place as any party hereto may by notice
designate as a place for service of notice.
MATER HEREBY IRREVOCABLY AUTHORIZES AND EMPOWERS ANY ATTORNEY OR THE
PROTHONOTARY OR STORK OF ANY COURT IN THE COMMONWEALTH OF PENNSYLVANIA, OR
ELSEWHERE, TO APPEAR FOR THE UNDERSIGNED AT ANY TIME AFTER AN EVENT OF DEFAULT
HEREUNDER IN ANY ACTION BROUGHT AGAINST MAKER, ON THIS NOTE AT THE SUIT OF
PAYEE, WITH OR WITHOUT DECLARATION FILED, AS OF ANY TERM, AND ~n~REIN TO CONFESS
AND ENTER JUDGEMENT AGAINST THE UNDERSIGNED FOR THE ENTIRE UNPAID PRINCIPAL OF
THIS NOTE AND ALL OTHER SUMS PAID BY PAYEE TO OR ON BERATED OF THE UNDERSIGNED
PURSUANT TO THE TERMS OF THIS NOTE OR THE MORTGAGE, AND ALL INTEREST THEREON,
TOGETHER WITH COSTS OF SUIT, ATTORNEY'S FEES OF FIVE PERCENT (5%) FOR
COLLECTION; AND FOR SO DOING THIS NOTE OR A COPY HEREOF VERIFIED BY AFFIDAVIT
(WHICH SHALL INCLUDE REFERENCE TO AN EVENT OF DEFAULT WHICH HAS OCCURRED AND NOT
BEEN CURED IN ACCORDANCE WITH THE TERMS OF THIS NOTE) SHALL BE A SUFFICIENT
WARRANT. NOTWITHSTANDING ANYTHING IN THIS PARAGRAPH TO THE-CONTRARY, NO SUCH
ACTION TO CONFESS AND ENTER JUDGMENT AGAINST MAKER WILL BE INITIATED BY PAYEE
UNTIL PAYEE HAS GIVEN MAKER AT LEAST FIVE (5) DAYS PRIOR NOTICE OF PAYEE'S
INTENTIONS. THE AUTHORITY GRANTED HEREIN TO CONFESS JUDGMENT SHALL NOT BE
EXHAUSTED UNTIL PAYMENT IN FULL OF ALL THE AMOUNTS DUE HEREUNDER.
This Note shall be governed by and construed in accordance with the laws
of the Commonwealth of Pennsylvania.
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Except as specifically otherwise set forth in subparagraphs (i) through
(viii) below and in that certain Environmental Indemnification Agreement dated
on or about this same date from Maker to Payee, no personal liability under this
Note shall be asserted or enforceable against the Maker personally or any person
interested beneficially or otherwise in the Premises, or in respect of the
making, issuance or transfer hereof, all such liability being expressly waived
by Payee (provided, the foregoing shall not affect the liability of any
guarantor of any obligations arising under a separate guaranty hereof); and
Payee accepts this Note upon the express condition that in case of the
occurrence of an Event of Default, the remedies of the Payee in its sole
discretion shall be any or all of:
(a) foreclosure of the Mortgage in accordance with the terms and
provisions set forth in the Mortgage;
(b) action against any other security at any time given to secure the
payment hereof; and
(c) action to enforce the personal liability of Maker pursuant to
subparagraphs (i) through (viii) below and pursuant to the
Environmental Indemnification Agreement.
MAKER WAIVES ANY RIGHT TO A JURY TRIAL WITH RESPECT TO ANY MATTER ARISING
OUT OF THIS NOTE.
Notwithstanding anything in this Note to the contrary, there shall at no
time be any limitation on Maker's liability for the payment to Payee of:
(i) condemnation proceeds or insurance proceeds which Maker has received
and to which the Payee is entitled pursuant to the terms of this
Note or any of the Loan Documents,
(ii) any security deposits, prepaid rent or lease termination fees, and
any rentals or income which are received by Maker after the
occurrence of an Event of Default,
(iii) all loss, damage, costs, expense and liability ~ ~ (including
without limitation, reasonable attorneys' fees and costs) directly
or indirectly incurred by Payee (and its directors, officers,
employees and agents) arising out of or attributable to the
installation, use, generation, manufacture, production, storage,
release, threatened release, discharge, disposal or presence of a
Hazardous Substance (as defined in the Mortgage), or from the
presence of any underground storage tanks, in, on, under or about
the Premises, including without
8
<PAGE>
limitation, (a) all foreseeable consequential damages, (b) the cost
of any required or necessary repair, cleanup or detoxification of
the Premises and (c) the preparation and implementation of any
closure, remedial or other required plans, or damages arising from
the presence of any toxic or hazardous waste or substances, or
underground storage tanks, or any other pollutants in or on the
Premises,
(iv) delinquent taxes, assessments and other similar charges levied
against the Premises,
(v) all loss, damages and expenses incurred by Payee and arising from
any misrepresentation or breach of warranty of Maker, or any
certification, financial statement or other information furnished by
or on behalf of Maker to Payee to induce Payee to loan the money
evidenced by the Note which proves to have been inaccurate or false
in any respect when made, or any willful or wanton act or omission
of Maker,
(vi) all loss or expenses incurred by Payee under the Loan Documents
resulting from Maker declaring bankruptcy or seeking protection
under any provision of any federal or state bankruptcy or insolvency
law, or in the event the Premises shall be subject to the
administration or control of any bankruptcy court, trustee, referee,
or other official,
(vii) any loss, including any Prepayment Premium, cost, or expense
resulting from acceleration of the maturity of the Note due to the
application of the due on sale or further encumbrance U provisions
contained in the Mortgage, or
(viii) any transfer or other taxes, costs and reasonable attorneys fees
incurred by Payee in connection with the enforcement of the Loan
Documents.
With the exception of those items of liability specifically set forth in items
(i) through (viii) above, the lien of any judgment against Maker in any
proceeding instituted on, under or in connection with this Note or the Mortgage,
or both, shall not extend to any property now or hereafter owned by Maker other
than the interest of the Maker in the Premises and the other security for the
payment of this Note.
IMPORTANT: READ BEFORE SIGNING. THE TERMS OF THIS AGREEMENT SHOULD BE READ
CAREFULLY BECAUSE ONLY THOSE TERMS IN WRITING ARE ENFORCEABLE. NO OTHER TERMS OR
ORAL PROMISES NOT CONTAINED IN THIS WRITTEN CONTRACT MAY BE LEGALLY ENFORCED.
YOU MAY CHANGE THE TERMS OF THIS AGREEMENT ONLY BY ANOTHER WRITTEN AGREEMENT.
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<PAGE>
Maker acknowledges receipt of a copy of this instrument at the time it was
signed.
HOUGH-LOEW A,SSOCIATES, INC.
By:/s/ Jack R. Loew
August 4, 1995
Names.
Title:
10
<PAGE>
Exhibit 10 (t)
Loan No. WLD540061
PROMISSORY NOTE
- ------------------
Date of Note:
- ------------------
January 9th 1998
Note Amount: $ 7,500,000
- --------------
Maturity Date: February l, 2008
- --------------
THIS PROMISSORY NOTE (this "Note") is made January 5, 1998 by
MCBRIDE PROPERTIES, a New Jersey partnership ("Borrower"), having an address c/o
American Real Estate Investment Corporation, Plymouth Meeting Executive Campus,
620 Germantown Pike, Suite 200, Plymouth Meeting, Pennsylvania 19462, to and in
favor of COLUMN FINANCIAL, INC., a Delaware corporation ("Lender"), having an
address at 3414 Peachtree Road, N.E., Atlanta, Georgia 30326-1113.
FOR VALUE RECEIVED, Borrower promises to pay to the order of Lender,
without any counterclaim, setoff or deduction whatsoever, on the Maturity Date
(as hereinafter defined), at the office of Lender, or at such other place as
Lender may designate to Borrower in writing from time to time, the principal sum
of SEVEN MILLION FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($ 7,500,000.00),
together with interest on so much thereof as is from time to time outstanding
and unpaid, from the date of the advance of the principal evidenced hereby, at
the rate of 7.03% per annum (the "Note Rate"), in lawful money of the United
States of America, which shall at the time of payment be legal tender in payment
of all debts and dues, public and private.
ARTICLE I - TERMS AND CONDITIONS
1.01 Payment of Principal and Interest. Said interest shall be
computed hereunder on the basis of the actual number of days elapsed in a three
hundred sixty (360) day year. In computing the number of days during which
interest accrues, the day on which funds are initially advanced shall be
included regardless of the time of day such advance is made, and the day on
which funds are repaid shall be included unless repayment is credited prior to
close of business. Payments in federal funds immediately available in the place
designated for payment received by Lender prior to 2:00 p.m. local time at said
place of payment shall be credited prior to close of business, while other
payments may, at the option of Lender, not be credited until immediately
available to Lender in federal funds in the place designated for payment prior
to 2:00 p.m. local time at said place of payment on a day on which Lender is
open for business. Such principal and interest shall be payable, in equal
consecutive monthly installments of $50,048.89 each, beginning on (x) the first
day of the second full calendar month following the date of this Note or (y) the
first day of the first full calendar month following the date hereof in the
event the advance of the principal amount evidenced by this Note is the first
day of a calendar month, and
<PAGE>
continuing on the first day of each and every month (the "Payment Date")
thereafter through and including February 1, 2008 (the "Maturity Date"), at
which time the entire outstanding principal balance hereof, together with all
accrued but unpaid interest thereon, shall be due and payable in full. Each such
monthly installment shall be applied first to the payment of accrued interest
and then to reduction of principal. If the advance of the principal amount
evidenced by this Note is made on a date other than the first day of a calendar
month, then Borrower shall pay to Lender contemporaneously with the execution
hereof interest at the foregoing interest rate for a period from the date hereof
through and including the last day of the calendar month in which this Note 102
Prepayment.
(a) Borrower shall have the right and option to release the
Security Property (as hereinafter defined) from the lien of the Security
Instrument (as hereinafter defined) in accordance with the terms and conditions
of Section 1.38 of the Security Instrument. If the indebtedness of this Note is
declared due and payable by Lender due to a default by Borrower, then any tender
of payment of such indebtedness must include a prepayment fee in an amount equal
to the greater of (A) two percent (2.0%) of the principal amount being prepaid,
and (B) the positive excess of (i) the present value ("PV") of all future
installments of principal and interest due under this Note including the
principal amount due at maturity (collectively, "All Future Payments"),
discounted at an interest rate per annum equal to the Treasury Constant Maturity
Yield Index published during the second full week preceding the date on which
such premium is payable for instruments having a maturity coterminous with the
remaining term of this Note, over (ii) the principal amount of this Note
outstanding immediately before such prepayment. "Treasury Constant Maturity
Yield Index" shall mean the average yield for "This Week" as reported by the
Federal Reserve Board in Federal Reserve Statistical Release H. 15 (519). If
there is no Treasury Constant Maturity Yield Index for instruments having a
maturity coterminous with the remaining term of this Note, then the index shall
be equal to the weighted average yield to maturity of the Treasury Constant
Maturity Yield Indices with maturities next longer and shorter than such
remaining average life to maturity, calculated by averaging (and rounding upward
to the nearest whole multiple of 1/100 of 1% per annum, if the average is not
such a multiple) the yields of the relevant Treasury Constant Maturity Yield
indices (rounded, if necessary, to the nearest 1/100 of 1% with any figure of
1/200 of 1% or above rounded upward). In the event that any prepayment fee is
due hereunder, Lender shall deliver to Borrower a statement setting forth the
amount and determination of the prepayment fee, and, provided that Lender shall
have in good faith applied the formula described above, Borrower shall not have
the right to challenge the calculation or the method of calculation set forth in
any such statement in the absence of manifest error, which calculation may be
made by Lender on any day during the thirty (30) day period preceding the date
of such prepayment. No prepayment fee or premium shall be due or payable in
connection with any prepayment of the indebtedness evidenced by this Note (i)
resulting from application of insurance or condemnation proceeds as provided in
the Security Instrument at any time during the loan term or (ii) required
pursuant to Section 1.25 of the Security Instrument.
(b) This Note may not be prepaid in whole or in part except
prepayments resulting from Lender applying insurance or condemnation proceeds to
reduce the outstanding principal balance of this Note as provided in the
Security Instrument or in connection with any
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<PAGE>
prepayment pursuant to Section 1.25 of the Security Instrument, in which event
no prepayment fee or premium shall be due. No notice of prepayment shall be
required under the circumstance specified in the preceding sentence. No
principal amount repaid may be reborrowed. Partial payments of principal shall
be applied to the unpaid principal balance evidenced hereby but such application
shall not reduce the amount of the fixed monthly instaliments required to be
paid pursuant to Section 1.01 above.
(c) Except as otherwise expressly provided in Section 1.02(b)
above, the prepayment fees provided in Section 1.02(a) above shall be due, to
the extent permitted by applicable law, under any and all circumstances where
this Note is paid prior to the Maturity Date as a result of Lender's exercise of
its rights upon Borrower's default and acceleration of the maturity date of this
Note (irrespective of whether foreclosure proceedings have been commenced), and
shall be in addition to any other sums due hereunder or under any of the other
Loan Documents. If the indebtedness of this Note shall have been declared due
and payable by Lender pursuant to Section 1.04 hereof due to a default by
Borrower, then any tender of payment of such indebtedness must include a
prepayment fee computed as provided in Section 1.02(a) above.
1.03 Security. The indebtedness evidenced by this Note and the
obligations created hereby are secured by, among other things, (a) that certain
Mortgage and Security Agreement (the "Security Instrument") from Borrower, as
mortgagor, to Lender, as mortgagee, dated as of even date herewith, concerning
certain property located in Cumberland County, Pennsylvania, and (b) an
Assignment of Leases and Rents, dated as of even date herewith, by Borrower in
favor of Lender (the "Assignment"). The Security Instrument and the Assignment,
together with this Note, and all other agreements or documents to or of which
Lender is a party or beneficiary now or hereafter evidencing, securing,
guarantying, modifying or otherwise relating to the indebtedness evidenced
hereby, are herein referred to collectively as the "Loan Documents". All of the
terms and provisions of the Loan Documents are incorporated herein by reference.
Some of the Loan Documents are to be filed for record on or about the date
hereof in the appropriate public records.
1.04 Default. It is hereby expressly agreed that should any default
occur in the payment of principal or interest as stipulated above and such
payment is not made within five (5) days of the date such payment is due
(provided, however, that no grace period is provided for the payment of
principal and interest due on the Maturity Date), or should any other default
occur under any of the Loan Documents which is not cured within any applicable
grace or cure period, including without limitation, any sale, transfer,
conveyance or other violation of the terms of Section 1.13 of the Security
Instrument, then a default shall exist hereunder, and in such event the
indebtedness evidenced hereby, including all sums advanced or accrued hereunder
or under any other Loan Document, and all unpaid interest accrued thereon,
shall, at the option of Lender and without notice to Borrower, at once become
due and payable and may be collected forthwith, whether or not there has been a
prior demand for payment and regardless of the stipulated date of maturity. In
the event that any payment is not received by Lender on the date when due
(subject to the applicable grace period), then in addition to any default
interest payments due hereunder, Borrower shall also pay to Lender a late charge
in an amount equal to five percent (5.0%) of the amount of such overdue payment.
So long as any default exists hereunder, regardless of whether
3
<PAGE>
or not there has been an acceleration of the indebtedness evidenced hereby, and
at all times after maturity of the indebtedness evidenced hereby (whether by
acceleration or otherwise), interest shall accrue on the outstanding principal
balance of this Note at a rate per anrrum equal to four percent (4.0%) plus the
interest rate which would be in effect hereunder absent such default or
maturity, or if such increased rate of interest may not be collected under
applicable law, then at the maximum rate of interest, if any, which may be
collected from Burrower under applicable law (the "Default Interest Rate"), and
such default interest shall be immediately due and payable. Borrower
acknowledges that it would be extremely difficult or impracticable to determine
Lender's actual damages resulting from any late payment or default, and such
late charges and default interest are reasonable estimates of those damages and
do not constitute a penalty. The remedies of Lender in this Note or in the other
Loan Documents, or at law or in equity, shall be cumulative and concurrent, and
may be pursued singly, successively or together in Lender's discretion. Time is
of the essence of this Note. In the event this Note, or any part hereof, is
collected by or through an attorney-at-law, Borrower agrees to pay all costs of
collection including, but not limited to, reasonable attorney's fees.
1.05 Exculpation. Notwithstanding anything in the Loan Documents to
the contrary, but subject to the qualifications hereinbelow set forth, Lender
agrees that (i) Borrower shall be liable upon the indebtedness evidenced hereby
and for the other obligations arising under the Loan Documents to the full
extent (but only to the extent) of the security therefor, the same being all
properties (whether real or personal), rights, estates and interests now or at
any time hereafter securing the payment of this Note and/or the other
obligations of Borrower under the Loan Documents (collectively, the "Security
Property"), (ii) if default occurs in the timely and proper payment of all or
any part of such indebtedness evidenced hereby or in the timely and proper
performance of the other obligations of Borrower under the Loan Documents, any
judicial proceedings brought by Lender against Borrower shall be limited to the
preservation, enforcement and foreclosure, or any thereof, of the liens,
security titles, estates, assignments, rights and security interests now or at
any time hereafter securing the payment of this Note and/or the other
obligations of Borrower under the Loan Documents, and confirmation of any sale
under power of sale, and no attachment, execution or other writ of process shall
be sought, issued or levied upon any assets, properties or funds of Borrower
other than the Security Property except with respect to the liability described
below in this section, and (iii) in the event of a foreclosure of such liens,
security titles, estates, assignments, rights or security interests securing the
payment of this Note and/or the other obligations of Borrower under the Loan
Documents, whether by judicial proceedings or exercise of power of sale, no
judgment for any deficiency upon the indebtedness evidenced hereby shall be
sought or obtained by Lender against Borrower, except with respect to the
liability described below in this section; provided, however, that,
notwithstanding the foregoing provisions of this section, Borrower shall be
fully and personally liable and subject to legal action (a) for proceeds paid
under any insurance policies (or paid as a result of any other claim or cause of
action against any person or entity) by reason of damage, loss or destruction to
all or any portion of the Security Property, to the full extent of such proceeds
not previously delivered to Lender, but which, under the terms of the Loan
Documents, should have been delivered to Lender, (b) for proceeds or awards
resulting from the condemnation or other taking in lieu of condemnation of all
or any portion of the Security Property, to the full extent of such proceeds or
awards not previously delivered to Lender, but which, under the terms of the
Loan
4
<PAGE>
Documents, should have been delivered to Lender, (c) for all tenant security
deposits or other refundable deposits paid to or held by Borrower or any other
person or entity in connection with leases of all or any portion of the Security
Property which are not applied in accordance with the terms of the applicable
lease or other agreement, (d) for rent and other payments received from tenants
under leases of all or any portion of the Security Property paid more than one
(1) month Ain advance, (e) for rents, issues, profits and revenues of all or any
portion of the Security Property received or applicable to a period after any
notice of default from Lender hereunder or under the Loan Documents in the event
of any default by Borrower hereunder or thereunder which are not either applied
to the ordinary and necessary expenses of owning and operating the Security
Property or paid to Lender, (f) for damage to the Security Property as a result
of the intentional misconduct or gross negligence of Borrower or any of its
principals, officers or general partners, Ior any agent or employee of any such
persons, or any removal of the Security Property in violation of the terms of
the Loan Documents, to the full extent of the losses or damages incurred by
Lender on account of such failure, (g) for Borrower's failure to pay any valid
taxes, assessments, mechanic's liens, materialmen's liens or other liens which
could create liens on any portion of the Security Property which would be
superior to the lien or security title of the Security Instrument or the other
Loan Documents, to the full extent of the amount claimed by any such lien
claimant, (h) for all obligations and indemnities of Borrower under the Loan
Documents relating to hazardous or toxic substances or compliance with
environmental laws and regulations to the full extent of any losses or damages
(including those resulting from diminution in value of any Security Property)
incurred by Lender as a result of the existence of such hazardous or toxic
substances or failure to comply with environmental laws or regulations, and (i)
for fraud or material misrepresentation by Borrower or any of its principals,
officers, or general partners, any guarantor, any indemnitor or any agent,
employee or other person authorized or apparently Authorized to make statements
or representations on behalf of Borrower, any principal, officer or partner of
Borrower, any guarantor or any indemnitor, to the full extent of any losses,
damages and expenses of Lender on account thereof. References herein to
particular sections of the Loan Documents shall be deemed references to such
sections as affected by other provisions of the Loan Documents relating thereto.
Nothing contained in this section shall (i) be deemed to be a release or
impairment of the indebtedness evidenced by this Note or the other obligations
of Borrower under the Loan Documents or the lien of the Loan Documents upon the
Security Property, or (ii) preclude Lender from foreclosing the Loan Documents
in case of any default or from enforcing any of the other rights of Lender
except as stated in this section, or (iii) limit or impair in any way whatsoever
the Hazardous Substances Indemnity Agreement, dated as of even date herewith, or
release, relieve, reduce, waive or impair in any way whatsoever, any obligation
of Borrower under such Hazardous Substances Indemnity Agreement. Anything in
this Section 1.05 or any of the other Loan Documents to the contrary
notwithstanding, on December 31, 2004, the indebtedness evidenced hereby shall
be guaranteed on a full recourse basis by American Real Estate Investment
Corporation ("American") pursuant to a guaranty (i) which is satisfactory in
form and substance to Lender and (ii) as to which Lender has received an opinion
from counsel for American (which shall be satisfactory to Lender) which
addresses the enforceability of such guaranty and such other matters Lender
shall specify and which opinion is satisfactory in form and substance to Lender.
5
<PAGE>
1.06 Defeasance. A Defeasance (as defined in Section 1.38 of the
Security Instrument) shall not constitute a prepayment under Section 1.02 of
this Note.
ARTICLE II - GENERAL CONDITIONS
2.01 No Waiver: Amendment. No failure to accelerate the debt
evidenced hereby by reason of default hereunder, acceptance of a partial or past
due payment, or indulgences granted from time to time shall be construed (i) as
a novation of this Note or as a reinstatement of the indebtedness evidenced
hereby or as a waiver of such right of acceleration or of the right of Lender
thereafter to insist upon strict compliance with the terms of this Note, or (ii)
to prevent the exercise of such right of acceleration or any other right granted
hereunder or by any applicable laws; and Borrower hereby expressly waives the
benefit of any statute or rule of law or equity now provided, or which may
hereafter be provided, which would produce a result contrary to or in conflict
with the foregoing. No extension of the time for the payment of this Note or any
installment due hereunder, made by agreement with any person now or hereafter
liable for the payment of this Note shall operate to release, discharge, modify,
change or affect the original liability of Borrower under this Note, either in
whole or in part unless Lender agrees otherwise in writing. This Note may not be
changed orally, but only by an agreement in writing signed by the party against
whom enforcement of any waiver, change, modification or discharge is sought.
2.02 Waivers. Presentment for payment, demand, protest and notice of
demand, protest and nonpayment and all other notices are hereby waived by
Borrower. Borrower hereby further waives and renounces, to the fullest extent
permitted by law, all rights to the benefits of any statute of limitations and
any moratorium, reinstatement, marshalling, forbearance, valuation, stay,
extension, redemption, appraisement, exemption and homestead now or hereafter
provided by the Constitution and laws of the United States of America and of
each state thereof, both as to itself and in and to all of its property, real
and personal, against the enforcement and collection of the obligations
evidenced by this Note or the other Loan Documents.
2.03 Limit of Validity. The provisions of this Note and of all
agreements between Borrower and Lender, whether now existing or hereafter
arising and whether written or oral, are hereby expressly limited so that in no
contingency or event whatsoever, whether by reason of demand or acceleration of
the maturity of this Note or otherwise, shall the amount paid, or agreed to be
paid ("Interest"), to Lender for the use, forbearance or retention of the money
loaned under this Note exceed the maximum amount permissible under applicable
law. If, from any circumstance whatsoever, performance or fulfillment of any
provision hereof or of any agreement between Borrower and Lender shall, at the
time performance or fulfillment of such provision shall be due, exceed the limit
for Interest prescribed by applicable law or otherwise transcend the limit of
validity prescribed by applicable law, then ipso facto the obligation to be
performed or fulfilled shall be reduced to such limit and if, from any
circumstance whatsoever, Lender shall ever receive anything of value deemed
Interest by applicable law in excess of the maximum lawful amount, an amount
equal to any excessive Interest shall be applied to the reduction of the
principal balance owing under this Note in the inverse order of its maturity
(whether or not then due) or at the option of Lender be paid over to Borrower,
and not to the payment of Interest. All Interest (including any amounts or
payments deemed to be Interest)
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<PAGE>
contracted for, charged, taken, reserved, paid or agreed to be paid to Lender
shall, to the extent permitted by applicable law, be amortized, prorated,
allocated and spread throughout the full term of this Note, including any
extensions or renewals hereof, until payment full of the principal balance of
this Note so that the Interest thereof for such full period will not exceed the
maximum amount permitted by applicable law. This Section 2.03 will control all
agreements between Borrower and Lender pursuant to the Loan Documents.
2.04 Use of Funds. Borrower hereby warrants, represents and
covenants that no funds disbursed hereunder shall be used for personal, family
or household purposes.
2.05 Unconditional Payment. Borrower is and shall be obligated to
pay principal, interest and any and all other amounts which become payable
hereunder or under the other Loan Documents absolutely and unconditionally and
without any abatement, postponement, diminution or deduction and without any
reduction for counterclaim or setoff; provided, however, that no such payment
shall waive any other rights that Borrower may have. In the event that at any
time any payment received by Lender hereunder shall be deemed by a court of
competent jurisdiction to have been a voidable preference or fraudulent
conveyance under any bankruptcy, insolvency or other debtor relief law, then the
obligation to make such payment shall survive any cancellation or satisfaction
of this Note or return thereof to Borrower and shall not be discharged or
satisfied with any prior payment thereof or cancellation of this Note, but shall
remain a valid and binding obligation enforceable in accordance with the terms
and provisions hereof, and such payment shall be immediately due and payable
upon demand.
2.06 Further Assurances. Borrower shall execute and acknowledge (or
cause to be executed and acknowledged) and deliver to Lender all documents, and
take all actions, reasonably required by Lender from time to time to confirm the
rights created or now or hereafter intended to be created under this Note and
the other Loan Documents, to protect the validity, priority and enforceability
of this Note and the other Loan Documents, to subject to the Loan Documents any
property of Borrower intended by the terms of any one or more of the Loan
Documents to be encumbered by the Loan Documents, or otherwise carry out the
purposes of the Loan Documents and the transactions contemplated thereunder;
provided, however, that no such further actions, assurances and confirmations
shall increase, modify or change Borrower's obliga- tions under this Note or
under the other Loan Documents.
2.07 Submission to Jurisdiction: Waiver of Jury Trial (1) BORROWER,
TO THE FULL EXTENT PERMITTED BY LAW, HEREBY KNOWINGLY, INTENTIONALLY AND
VOLUNTARILY, WITH AND UPON THE ADVICE OF COMPETENT COUNSEL, (A) SUBMITS TO
PERSONAL JURISDICTION IN THE COMMONWEALTH OF PENNSYLVANIA OVER ANY SUIT, ACTION
OR PROCEEDING BY ANY PERSON ARISING FROM OR RELATING TO THIS NOTE, (B) AGREES
THAT ANY SUCH ACTION, SUIT OR PROCEEDING MAY BE BROUGHT IN ANY STATE OR FEDERAL
COURT OF COMPETENT JURISDICTION IN THE COMMONWEALTH OF PENNSYLVANIA, (C) SUBMITS
TO THE JURISDICTION OF SUCH COURTS, AND (D) TO THE FULLEST EXTENT PERMITTED BY
LAW, AGREES THAT BORROWER WILL NOT BRING ANY ACTION, SUIT OR PROCEEDING
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IN ANY OTHER FORUM (BUT NOTHING HEREIN SHALL AFFECT THE RIGHT OF LENDER TO BRING
ANY ACTION, SUIT OR PROCEEDING IN ANY OTHER FORUM) AND BORROWER FURTHER CONSENTS
AND AGREES TO SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER LEGAL PROCESS IN ANY
SUCH SUIT, ACTION OR PROCEEDING BY REGISTERED OR CERTIFIED U.S. MAIL, POSTAGE
PREPAID, TO BORROWER AT THE ADDRESS FOR NOTICES DESCRIBED ON THE FIRST PAGE
HEREOF, AND CONSENTS AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE IN EVERY
RESPECT VALID AND EFFECTIVE SERVICE (BUT NOTHING HEREIN SHALL AFFECT THE
VALIDITY OR EFFECTIVENESS OF PROCESS SERVED IN ANY OTHER MANNER PERMITTED BY
LAW). (2) BORROWER, AND BY ITS ACCEPTANCE HEREOF, LENDER, TO THE FULL EXTENT
PERMITTED BY LAW, HEREBY KNOWINGLY, INTENTIONALLY AND VOLUNTARILY, WITH AND UPON
THE ADVICE OF COMPETENT COUNSEL, WAIVE, RELINQUISH AND FOREVER FORGO THE RIGHT
TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN
ANY WAY RELATING TO THIS NOTE OR ANY CONDUCT, ACT OR OMISSION OF LENDER, OR ANY
OF ITS DIRECTORS, OFFICERS, PARTNERS, MEMBERS, EMPLOYEES, AGENTS OR ATTORNEYS,
OR ANY OTHER PERSONS AFFILIATED WITH LENDER, IN EACH OF THE FOREGOING CASES,
WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE.
2.08 Miscellaneous. This Note shall be interpreted, construed and
enforced according to the laws of the State of New York. The terms and
provisions hereof shall be binding upon and inure to the benefit of Borrower and
Lender and their respective heirs, executors, legal Irepresentatives,
successors, successors-in-title and assigns, whether by voluntary action of the
parties or by operation of law. As used herein, the terms "Borrower" and
"Lender" shall be deemed to include their respective successors,
successors-in-title and assigns, whether by voluntary action of the parties or
by operation of law, subject to the limitations set forth in Section 1.05 above.
Subject to the limitations set forth in Section 1.05 above, if Borrower consists
of more than one person or entity, each shall be jointly and severally liable to
perform the obligations of Borrower under this Note. All personal pronouns used
herein, whether used in the masculine, feminine or neuter gender, shall include
all other genders; the singular shall include the plural and vice versa. Titles
of articles and sections are for convenience only and in no way define, limit,
amplify or describe the scope or intent of any provisions hereof. Capitalized
terms used in this Note and not otherwise defined herein shall have the meaning
ascribed to them in the Security Instrument or in the other Loan Documents. Time
is of the essence with respect to all provisions of this Note, the Security
Instrument and the other Loan Documents. This Note and the other Loan Documents
contain the entire agreements between the parties hereto relating to the subject
matter hereof and thereof and all prior agreements relative hereto and thereto
which are not contained herein or therein are terminated. This Note is a sealed
instrument.
2.09 Confession of Judgment. (1) THE FOLLOWING PARAGRAPH SETS FORTH
A WARRANT OF AUTHORITY FOR AN ATTORNEY TO CONFESS JUDGMENT AGAINST BORROWER
8
<PAGE>
IN GRANTING THIS WARRANT OF ATTORNEY TO CONFESS JUDGMENT AGAINST THE BORROWER,
THE BORROWER HEREBY KNOWINGLY, IN AND VOLUNTARILY, AND, ON THE ADVICE OF THE
SEPARATE COUNSEL OF BORROWER, UNCONDITIONALLY WAIVES ANY AND ALL RIGHTS BORROWER
HAS OR MAY HAVE TO PRIOR NOTICE AND AN OPPORTUNITY FOR HEARING UNDER THE
RESPECTIVE CONSTITUTIONS AND LAWS OF THE UNITED STATES AND THE COMMONWEALTH OF
PENNSYLVANIA.
(2) BORROWER IRREVOCABLY AUTHORIZES AND EMPOWERS ANY ATTORNEY OR THE
PROTHONOTARY OR CLERK OF ANY COURT IN THE COMMONWEALTH OF PENNSYLVANIA, OR
ELSEWHERE, TO APPEAR FOR BORROWER AT ANY TIME AFTER DEFAULT UNDER THIS NOTE OR
UNDER THE LOAN DOCUMENTS IN ANY ACTIOIN BROUGHT AGAINST BORROWER ON THIS NOTE AT
THE SUIT OF LENDER, AS OF ANY TERM, AND IN THAT ACTION TO CONFESS OR ENTER
JUDGMENT AGAINST BORROWER FOR THE ENTIRE UNPAID PRINCIPAL OF THIS NOTE AND ALL
OTHER SUMS DUE UNDER THIS NOTE OR THE LOAN DOCUMENTS, AND ALL INTEREST ACCRUED
ON THOSE AMOUNTS, TOGETHER WITH COSTS OF SUIT, ATTORNEY'S COMMISSION FOR
COLLECTION OF FIVE PERCENT (5%) OF THE TOTAL AMOUNT THEN DUE BY BORROWER TO
LENDER (BUT IN ANY EVENT NOT LESS THAN TEN THOUSAND DOLLARS
($ 10,000.00)), TOGETHER WITH INTEREST ON ANY JUDGMENT OBTAINED BY
LENDER AT THE DEFAULT INTEREST RATE, SPECIFIED IN THE NOTE AFTER DEFAULT,
INCLUDING INTEREST AT THAT RATE FROM AND AFTER THE DATE OF ANY SHERIFF'S OR
JUDICIAL SALE UNTIL ACTUAL PAYMENT IS MADE TO LENDER OF THE FULL AMOUNT DUE
LENDER; AND FOR SO DOING THIS NOTE OR A COPY OF IT VERIFIED BY AFFIDAVIT SHALL
BE A SUFFICIENT WARRANT. THE AUTHORITY GRANTED IN THIS NOTE TO CONFESS JUDGMENT
SHALL NOT BE EXHAUSTED BY ANY EXERCISE OF IT BUT SHALL CONTINUE FROM TIME TO
TIME AND AT ALL TIMES UNTIL PAYMENT IN FULL OF ALL THE AMOUNTS DUE UNDER THIS
NOTE.
9
<PAGE>
IN WITNESS WHEREOF, the Borrower, intending to be legally bound hereby,
has duly executed this Note on the day and year first written above.
BORROWER: MCBRIDE PROPERTIES, a New Jersey general
partnership
By: American Real Estate Investment
Corporation, its managing general
partner
By: /s/ Jeffrey E. Kelter
January 9, 1998
10
<PAGE>
STATE OF NEW YORK
COUNTY OF NEW YORK
On this 9th day of January, 1998, before me, a notary public in and for the
state and county aforesaid, personally appeared Jeffrey E. Kelter, to me
personally known, who being by me duly sworn did say that he is the - -
President of American Real Estate Investment Corporation, the general partner of
McBride Properties, that the foregoing instrument was signed on behalf of said
corporation, as managing general partner of McBride Properties by authority of
its Board of Directors; and that said Jeffrey E. Kelter,as such officer,
acknowledged the execution of the foregoing instrument to be the voluntary act
and deed of said corporation, as managing general partner of McBride Properties,
by it and by him.
Notary Public
ROBERT D. VOGEL
Notary Public, State of New York
~No. 01VO50S3588
Oualifled in New York County
Commission Expires [ILLEGIBLE] 18, 1999
11
<PAGE>
IN WITNESS WHEREOF, the Lender, intending to be legally bound hereby, has
duly executed this Note on the day and year first written above.
LENDER: COLUMN FINANCIAL, INC.,
By:
Name:
Title:Assistant Vice President
12
<PAGE>
STATE OF GEORGIA
COUNTY OF FULTON
On this 9th day of January, 1998, before me, a notary public in and for the
state and county aforesaid, personally appeared Linda Keller, to me personally
known, who being by me duly sworn did say that she is the Asdsistant Vice
President of Column Financial, Inc. that the foregoing instrument was signed on
behalf of said corporation, by authority of its Board of Directors; and that
said Linda Keller, as such officer, acknowledged the execution of the foregoing
instrument to be the voluntary act and deed of said corporation, by it and by
her.
Notary Public
Notary Public, Gwinnett County,
Georgia
13
<PAGE>
Exhibit 10 (u)
Two Tabas Lane @
PROMISSORY
NOTE
$4,600,000.00 August 4th, 1995
FOR VALUE RECEIVED, the undersigned, Hough-Loew Associates, Inc. a
Pennsylvania corporation (hereinafter referred to as "Maker"), hereby promises
to pay to the order of USG ANNUITY & LIFE COMPANY, an Oklahoma corporation, or
any subsequent holder hereof (hereinafter referred to as "Payee"), at the office
of Payee, 604 Locust Street, Des Moines, Iowa 50309, or at such other place as
Payee may from time to time designate in writing, the principal sum of Four
Million Six Hundred Thousand and No/100 Dollars ($4,600,000.00) and interest
thereon at eight and one-half percent (8 1/2%) per annum, both principal and
interest to be paid in lawful money of the United States of America, as follows:
(i) Interest only from and including the date of disbursement of the loan
proceeds shall be paid on September 1, 1995; and
(ii) Payments of principal and interest shall be made in one hundred
twenty (120) successive monthly installments commencing on October 3, 1995, and
on the first day of each and every calendar month thereafter up to and including
September 1, 2005, the first one hundred nineteen installments to be in the
amount of ThirtyNine Thousand Nine Hundred Nineteen and 87/100 Dollars
($39,919.87) each, and the final installment payable on September 1, 2005
(hereinafter referred to as the "Maturity Date"), to be in the full amount of
principal of this Promissory Note (the "Note"), interest and all other sums
remaining unpaid hereunder and under the Mortgage (as hereinafter defined). If a
payment date is a nonbusiness day, the installment shall be due on the next
business day.
All payments on account of the indebtedness evidenced by this Note shall
be applied: (i) first, to further advances, if any, made by the holder hereof as
provided in the Loan Documents (as hereinafter defined); (ii) next, to any Late
Charge (as hereinafter defined); (iii) next, to interest at the Default Rate (as
hereinafter defined), if applicable; (iv) next, to the Prepayment Premium (as
hereinafter defined), if applicable; (v) next, at the rate of eight and one-half
percent (8 1/2%) per annum on the unpaid principal balance of this Note unless
interest at the Default Rate is applicable; and (vi) lastly, any remainder to
reduce the unpaid principal of this Note. Interest shall be computed on the
basis of a 30-day month and a 360-day year.
MAKER ACKNOWLEDGES THAT THE MONTHLY INSTALLMENTS REFERRED TO ABOVE WILL
NOT AMORTIZE ALL OF THE PRINCIPAL SUM OF THE
<PAGE>
INDEBTEDNESS BY THE MATURITY DATE, RESULTING IN A "BALLOON PAYMENT" ON SAID DATE
OF THE ENTIRE UNPAID PRINCIPAL BALANCE OF THIS NOTE AND ACCRUED UNPAID INTEREST.
In the event any installment of principal and/or interest due hereunder,
and/or any escrow fund payment for real estate taxes, assessments, other similar
charges or insurance premiums due under the Mortgage (as hereinafter defined)
shall become overdue for a period in excess of five (5) days, Maker shall pay to
the holder hereof a late charge (hereinafter referred to as a "Late Charge") of
five ($.05) cents for each dollar so overdue in order to defray part of the cost
of collection.
In no event shall the amount of interest due or payable hereunder exceed
the maximum rate of interest allowed by applicable law, and in the event any
such payment is inadvertently paid by the Maker or inadvertently received by the
Payee, then such excess sum shall be credited as a payment of principal, unless
the Maker shall notify the Payee, in writing, that the Maker elects to have such
excess sum returned to it forthwith. It is the express intent hereof that the
Maker not pay and the Payee not receive, directly or indirectly in any manner
whatsoever, interest in excess of that which may be legally paid by the Maker
under applicable law.
Payment of this Note is secured by an Open-End Mortgage, Security
Agreement, Financing Statement and Fixture Filing (hereinbefore and hereinafter
referred to as the "Mortgage") dated of even date herewith from Maker, as
Mortgagor, to Payee, as Mortgagee, encumbering certain real estate and other
property interests situated in the County of Chester, Commonwealth of
Pennsylvania and more particularly described in the Mortgage (hereinafter
referred to as the ~Premises"). This Note, the Mortgage, and all other
instruments now or hereafter evidencing or securing the loan evidenced hereby
are hereinafter sometimes collectively referred to as the "Loan Documents". The
Mortgage contains a "Due on Sale and Further Encumbrance" clause which, together
with all other terms of the Mortgage, are incorporated herein by this reference.
Payment of this Note is further secured by the "Other Security Documents"
as defined in the Cross-Collateralization Rider, which is attached to the
Mortgage as Exhibit B.
Except as expressly permitted by this paragraph, no prepayments shall be
made of the indebtedness evidenced by this Note. Maker reserves the privilege to
prepay, in full but not in part, the principal indebtedness evidenced hereby on
any installment payment date, upon ninety (90) days prior written notice to the
holder hereof and upon payment of a premium (hereinafter referred to as the
'Prepayment Premium") equal to the
2
<PAGE>
percentage of the principal amount so prepaid in accordance with the following
table:
<TABLE>
<CAPTION>
If Prepayment Made Prepayment Premium
-------------------------------------------------------
During Loan Year: Percentage:
----------------
<S> <C>
1 10%
2 9%
3 8%
4 7%
5 6%
6 5%
7 4%
8 3%
9 2%
10 1%
</TABLE>
For purposes of calculation of the Prepayment Premium only, a Loan Year during
the term hereof shall be a period of twelve consecutive months, the first of
which shall commence on the first day of the month following the date hereof and
each succeeding Loan Year shall commence on the anniversary of such date.
In the event Payee applies any insurance proceeds or condemnation proceeds
to the reduction of the principal indebtedness under this Note in accordance
with the terms and conditions of the Mortgage, and if, at such time, no Event of
Default (as hereinafter defined) exists hereunder or under the Mortgage at such
time, then no Prepayment Premium shall be due or payable as a result of such
application and the monthly installments due and payable hereunder shall be
adjusted to reflect the reduced principal balance.
In addition to the above, no Prepayment Premium shall be due or payable if
Maker elects to prepay, in full but not in part, the principal indebtedness
evidenced hereby at any time within ninety (90) days prior to the Maturity Date
upon at least forty-five (45) days prior written notice to the holder hereof.
If the maturity of the indebtedness evidenced hereby is accelerated by
Payee as a consequence of the occurrence of an Event of- Default, or in the
event the right to foreclose the Mortgage shall otherwise accrue to Payee, the
Maker agrees that an amount equal to the Prepayment Premium shall be added to
the balance of unpaid principal and interest then outstanding, and that the
indebtedness evidenced hereby shall not be discharged except: (i) by payment of
such Prepayment Premium, together with the balance of principal and interest and
all other sums then outstanding (if the Maker tenders payment of the
indebtedness evidenced hereby prior to judicial confirmation of foreclosure
sale); or (ii) by inclusion of
3
<PAGE>
such Prepayment Premium as a part of the indebtedness evidenced hereby in any
such judicial order or judgment of foreclosure.
It is hereby expressly agreed by Maker that time is of the essence hereof
and that each of the following occurrences shall constitute a default ("Event of
Default") under this Note:
(i) The failure of the Maker to:
(a) make any payment of any installment of principal or
interest under this Note within five (5) days after the same
shall fall due, or
(b) comply with any of the other terms of this Note within
thirty (30) days after written notice of such failure has been
given by Payee to Maker or within such longer period of time
as may be reasonably necessary to cure such non-compliance if
Maker is diligently pursuing such cure and the failure is
susceptible of cure within a reasonable time.
(ii) The failure of Maker to make payment of any amount due the
holder hereof under any Loan Documents other than this Note,
on any date on which the same shall fall due (including any
applicable grace period).
(iii) The occurrence of any Event of Default under any of the Loan
Documents other than this Note.
(iv) The occurrence of an Event of Default under any of the "Other
Notes" or the "Other Security Documents I as such terms are
defined in the CrossCollateralization Rider, attached to the
Mortgage as Exhibit B.
Payee shall have the following rights, privileges, powers, options and
remedies whenever any Event of Default shall occur under this Note:
(i) The right to foreclose the Mortgage shall accrue to Payee.
(ii) The entire unpaid principal balance of, and any unpaid
interest then accrued on, this Note together with the
Prepayment Premium, shall, at the option of Payee and without
demand or notice of any kind to the Maker or any other person,
immediately become due and payable.
4
<PAGE>
(iii) From and after the date of the occurrence of any Event of
Default and continuing until such Event of Default is fully
cured or until this Note is paid in full, the Maker promises
to pay interest on the principal balance of this Note then
outstanding at the rate (hereinbefore and hereinafter referred
to as the "Default Rate") of twelve and one-half percent (12
1/2~) per annum. The Maker agrees that such additional
interest which has accrued shall be paid at the time of and as
a condition precedent to the curing of such Event of Default.
During the existence of any such Event of Default Payee may
apply payments received on any amounts due hereunder or under
the terms of any of the Loan Documents as Payee shall
determine; and if Payee elects (notice of election being
expressly waived by the Maker), the principal remaining unpaid
with accrued interest shall at once become due and payable, as
provided above.
(iv) Payee shall have, and may exercise any and all rights, powers,
privileges, options and remedies available at law or in equity
and as provided in any of the Loan Documents.
Upon the occurrence of an Event of Default under any of the Loan
Documents, the Maker expressly agrees to pay all costs of collection and
enforcement of every kind, including without limitation, all reasonable
attorneys' fees, court costs, costs of title evidence and insurance, inspection
and appraisal costs and expenses of every kind incurred by Payee in connection
with the protection or realization of any or all of the security for this Note,
whether or not any lawsuit is filed with respect thereto. An Event of Default
under this Note shall constitute a default under each and all of the other Loan
Documents.
The rights, powers, privileges, options and remedies of Payee, as provided
in this Note, in any of the Loan Documents, or otherwise available at law or
equity shall be cumulative and concurrent, and may be pursued singly,
successively or together at the-sole discretion of Payee, and may be exercised
as often as occasion therefor shall occur. No delay or discontinuance in the
exercise of any right, power, privilege, option or remedy hereunder shall be
deemed a waiver of such right, power, privilege, option or remedy, nor shall the
exercise of any right, power, privilege, option or remedy be deemed an election
of remedies or a waiver of any other right, power, privilege, option or remedy.
Without limiting the generality of the foregoing, the failure of the Payee after
the occurrence of any Event of Default to exercise Payee's
5
<PAGE>
right to declare the indebtedness remaining unmatured hereunder to be
immediately due and payable shall not constitute a waiver of such right in
connection with any future Event of Default. Acceleration of maturity, once
claimed hereunder by Payee, may, at Payee's option, be rescinded by written
acknowledgment to that effect, but the tender and acceptance of partial payment
or partial performance alone shall not, by itself, in any way affect or rescind
such acceleration.
Maker (and each guarantor hereof, if any) jointly and severally waives
presentment for payment, demand, notice of nonpayment, notice of dishonor,
protest of any dishonor, notice of protest and protest of this Note, and all
other notices in connection with the delivery, acceptance, performance, default
or enforcement of the payment of this Note, except as otherwise provided herein,
and agrees that the liability of each of them hereunder shall be joint, several
and unconditional without regard to the liability of any other party and shall
not be in any manner affected by any indulgence, extension of time, renewal,
waiver or modification granted or consented to by Payee; and Maker (and each
guarantor hereof, if any) consents to any and all extensions of time, renewals,
waivers or modifications that may be granted by Payee with respect to the
payment or other provisions of this Note, and to the release of any collateral
given to secure the payment hereof, or any part thereof, with or without
substitution, and agrees that additional makers or guarantors may become parties
hereto without notice to any of them or affecting any of their liability
hereunder.
Payee shall not by any acts of omission or commission be deemed to waive
any rights or remedies hereunder unless such waiver is in writing and signed by
Payee, and then only to the extent specifically set forth therein; a waiver of
one event shall not be construed as continuing or as a bar to or waiver of such
right or remedy on a subsequent event.
All notices, demands and requests given hereunder by the Maker or Payee,
shall be in writing and shall be delivered either by: (i) hand delivery to the
address for notices; (ii) delivery by overnight courier service to the address
for notices; (iii) by certified mail, return receipt requested, addressed to the
address for-notices by United States mail, postage prepaid.
All notices shall be deemed effective upon the earlier to occur of: (x)
the hand delivery of such notice to the address for notices; (y) one business
day after the deposit of such notice with an overnight courier service by the
time deadline for next day delivery addressed to the address for notices; or (z)
three business days after depositing the notice in the United States mail as set
forth in (iii) above.
6
<PAGE>
All notices shall be addressed to the following addresses:
Maker: Hough-Loew Associates, Inc.
750 Springdale Drive
Exton, PA 19341
Attn: Jack R. Loew
With a copy to: Stephen S. Aichele, Esq.
Saul, Ewing, Remick & Saul
3800 Centre Square West
Philadelphia, PA 19102
Payee: USG Annuity & Life Company
604 Locust Street
Des Moines, Iowa 50309
Attn: Equitable Investment Services,
Inc.
Managing Director/Real Estate
With a copy to: Nyomaster, Goode, McLaughlin, Voigts,
West, Hansell & O'Brien, P.C.
1900 Hub Tower
699 Walnut Street
Des Moines, Iowa 50309
or to such other person or at such other place as any party hereto may by notice
designate as a place for service of notice.
MARER HEREBY IRREVOCABLY AUTHORIZES AND EMPOWERS ANY ATTORNEY OR THE
PROTHONOTARY OR CLERK OF ANY COURT IN THE COMMONWEALTH OF PENNSYLVANIA, OR
ELSEWHERE, TO APPEAR FOR THE UNDERSIGNED AT ANY TIME AFTER AN EVENT OF DEFAULT
HEREUNDER IN ANY ACTION BROUGHT AGAINST MARER, ON THIS NOTE AT THE SUIT OF
PAYEE, WITH OR WITHOUT DECLARATION FILED, AS OF ANY TERM, AND THEREIN TO CONFESS
AND ENTER JUDGEMENT AGAINST Ten UNDERSIGNED FOR THE ENTIRE UNPAID PRINCIPAL OF
THIS NOTE AND ALL OTHER SUMS PAID BY PAYEE TO OR ON BEHALF OF THE UNDERSIGNED
PURSUANT TO THE TERMS OF THIS NOTE OR THE MORTGAGE, AND ALL INTEREST THEREON,
TOGETHER WITH COSTS OF SUIT, ATTORNEY'S FEES OF FIVE PERCENT (5%) FOR
COLLECTION; AND FOR SO DOING THIS NOTE OR A COPY HEREOF VERIFIED BY AFFIDAVIT
(WHICH SHALL INCLUDE REFERENCE TO AN EVENT OF DEFAULT WHICH HAS OCCURRED AND NOT
BEEN CURED IN ACCORDANCE WITH THE TERMS OF THIS NOTE) SHALL BE A SUFFICIENT
WARRANT. NOTWITHSTANDING ANYTHING IN THIS PARAGRAPH TO THE CONTRARY, NO SUCH
ACTION TO CONFESS AND ENTER JUDGMENT AGAINST MARER WILL BE INITIATED BY PAYEE
UNTIL PAYEE HAS GIVEN MARER AT LEAST FIVE (5) DAYS PRIOR NOTICE OF PAYEE'S
INTENTIONS. THE AUTHORITY GRANTED HEREIN TO CONFESS JUDGMENT SHALL NOT BE
EXHAUSTED UNTIL PAYMENT IN FULL OF ALL THE AMOUNTS DUE HEREUNDER.
7
<PAGE>
This Note shall be governed by and construed in accordance with the laws
of the Commonwealth of Pennsylvania.
Except as specifically otherwise set forth in subparagraphs (i) through
(viii) below and in that certain Environmental Indemnification Agreement dated
on or about this same date from Maker to Payee, no personal liability under this
Note shall be asserted or enforceable against the Maker personally or any person
interested beneficially or otherwise in the Premises, or in respect of the
making, issuance or transfer hereof, all such liability being expressly waived
by Payee (provided, the foregoing shall not affect the liability of any
guarantor of any obligations arising under a separate guaranty hereof); and
Payee accepts this Note upon the express condition that in case of the
occurrence of an Event of Default, the remedies of the Payee in its sole
discretion shall be any or all of:
(a) foreclosure of the Mortgage in accordance with the terms and
provisions set forth in the Mortgage;
(b) action against any other security at any time given to secure the
payment hereof; and
(c) action to enforce the personal liability of Maker pursuant to
subparagraphs (i) through (viii) below and pursuant to the
Environmental Indemnification Agreement.
MAKER WAIVES ANY RIGHT TO A JURY TRIAL WITH RESPECT TO ANY MATTER ARISING
OUT OF THIS NOTE.
Notwithstanding anything in this Note to the contrary, there shall at no
time be any limitation on Maker's liability for the payment to Payee of:
(i) condemnation proceeds or insurance proceeds which Maker has received
and to which the Payee is entitled pursuant to the terms of this
Note or any of the Loan Documents,
(ii) any security deposits, prepaid rent or lease termination fees, and
any rentals or income which are received by Maker after the
occurrence of an Event of Default,
(iii) all loss, damage, costs, expense and liability (including without
limitation, reasonable attorneys' fees and costs) directly or
indirectly incurred by Payee (and its directors, officers, employees
and agents) arising out of or attributable to the installation, use,
generation, manufacture, production, storage, release, threatened
release, discharge, disposal or presence of a Hazardous Substance
(as defined in the Mortgage), or
8
<PAGE>
from the presence of any underground storage tanks, in, on, under or
about the Premises, including without limitation, (a) all
foreseeable consequential damages, (b) the cost of any required or
necessary repair, cleanup or detoxification of the Premises and (c)
the preparation and implementation of any closure, remedial or other
required plans, or damages arising from the presence of any toxic or
hazardous waste or substances, or underground storage tanks, or any
other pollutants in or on the Premises,
(iv) delinquent taxes, assessments and other similar charges levied
against the Premises,
(v) all loss, damages and expenses incurred by Payee and arising from
any misrepresentation or breach of warranty of Maker, or any
certification, financial statement or other information furnished by
or on behalf of Maker to Payee to induce Payee to loan the.money
evidenced by the Note which proves to have been inaccurate or false
in any respect when made, or any willful or wanton act or omission
of Maker,
(vi) all loss or expenses incurred by Payee under the Loan Documents
resulting from Maker declaring bankruptcy or seeking protection
under any provision of any federal or state bankruptcy or insolvency
law, or in the event the Premises shall be subject to the
administration or control of any bankruptcy court, trustee, referee,
or other official,
(vii) any loss, including any Prepayment Premium, cost, or expense
resulting from acceleration of the maturity of the Note due to the
application of the "due on sale or further encumbrance' provisions
contained in the Mortgage, or
(viii) any transfer or other taxes, costs and reasonable attorneys fees
incurred by Payee in connection with the enforcement of the Loan
Documents.
With the exception of those items of liability specifically set forth in items
(i) through (viii) above, the lien of any judgment against Maker in any
proceeding instituted on, under or in connection with this Note or the Mortgage,
or both, shall not extend to any property now or hereafter owned by Maker other
than the interest of the Maker in the Premises and the other security for the
payment of this Note.
IMPORTANT: READ BEFORE SIGNING. THE TERMS OF THIS AGREEMENT SHOULD BE READ
CAREFULLY BECAUSE ONLY THOSE TERMS IN WRITING ARE ENFORCEABLE. NO O~n~R TERMS OR
ORAL PROMISES NOT CONTAINED IN THIS
9
<PAGE>
WRITTEN CONTRACT MAY BE LEGALLY ENFORCED. YOU MAY CHANGE Tn~ TERMS OF THIS
AGREEMENT ours BY ANOTHER WRITTEN AGREEMENT.
Maker acknowledges receipt of a copy of this instrument at the time it was
signed.
HOUGH-LOEW ASSOC,IATES, INC.
By: /s/ Jack R. Loew
August 4, 1995
Name
Title:
10
<PAGE>
Exhibit 10 (v)
LOAN AGREEMENT
Dated as of September 22, 1997
by and among
FLIP/BRE, INC.,
OIP/BRE, L.L.C.,
MBP/BRE, L.L.C.
and
NJA/BRE, L.L.C,
as Borrower
and
NOMURA ASSET CAPITAL CORPORATION
as Lender
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I CERTAIN DEFINITIONS...............................................2
Section 1.1. Definitions..............................................2
ARTICLE II GENERAL TERMS...................................................39
Section 2.1. Amount of the Loan; Fees................................39
Section 2.2. Use of Proceeds.........................................39
Section 2.3. Security for the Loan...................................39
Section 2.4. Borrower's Notes........................................40
Section 2.5. Principal and Interest..................................40
Section 2.6. Voluntary Prepayment and Defeasance.....................42
Section 2.7. Mandatory Prepayment and Defeasance.....................42
Section 2.8. Application of Payments.................................43
Section 2.9. Method and Place of Payment.............................44
Section 2.10. Taxes...................................................44
Section 2.11. Release of Collateral...................................44
Section 2.12. Cash Management.........................................46
Section 2.13. Security Agreement......................................59
Section 2.14. Supplemental Mortgage Affidavits........................65
Section 2.15. Securitization..........................................65
ARTICLE III CONDITIONS PRECEDENT...........................................68
Section 3.1. Conditions Precedent to Effectiveness
and Disbursement of the Loan............................68
Section 3.2. Satisfaction of Conditions..............................74
Section 3.3. Form of Loan Documents and Related Matters..............74
ARTICLE IV REPRESENTATIONS AND WARRANTIES..................................74
Section 4.1. Borrower Representations................................74
Section 4.2. Survival of Representations.............................87
Section 4.3. Borrower's Knowledge....................................87
ARTICLE V AFFIRMATIVE COVENANTS............................................87
Section 5.1. Borrower Covenants......................................87
ARTICLE VI NEGATIVE COVENANTS.............................................103
Section 6.1. Borrower Negative Covenants............................103
ARTICLE VII................................................................107
</TABLE>
i
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<TABLE>
<CAPTION>
<S> <C>
Section 7.1. Event of Default.......................................107
Section 7.2. Remedies...............................................111
Section 7.3. Remedies Cumulative....................................112
ARTICLE VIII MISCELLANEOUS................................................112
Section 8.1. Survival...............................................112
Section 8.2. Lender's Discretion....................................114
Section 8.3. Governing Law..........................................114
Section 8.4. Modification, Waiver in Writing........................115
Section 8.5. Delay Not a Waiver.....................................115
Section 8.6. Notices................................................115
SECTION 8.7. TRIAL BY JURY..........................................116
Section 8.8. Headings...............................................116
Section 8.9. Assignment.............................................117
Section 8.10. Severability...........................................117
Section 8.11. Preferences............................................117
Section 8.12. Waiver of Notice.......................................118
Section 8.13. [INTENTIONALLY OMITTED]................................118
Section 8.14. Exculpation............................................118
Section 8.15. Exhibits Incorporated..................................120
Section 8.16. Offsets, Counterclaims and Defenses....................120
Section 8.17. No Joint Venture or Partnership; Mutual
Representation.........................................121
Section 8.18. Waiver of Marshalling of Assets Defense................121
Section 8.19. Waiver of Counterclaim.................................121
Section 8.20. Conflict; Construction of Documents....................121
Section 8.21. Brokers and Financial Advisors.........................122
Section 8.22. Counterparts...........................................122
Section 8.23. Estoppel Certificates..................................122
Section 8.24. Payment of Expenses....................................122
Section 8.25. Bankruptcy Waiver......................................123
Section 8.26. Indemnification........................................124
Section 8.27. Entire Agreement.......................................125
Section 8.28. Cross Collateralization................................125
Section 8.29. Confidentiality........................................126
Section 8.30. Defeasance.............................................126
Section 8.31. Permitted Restructuring................................129
Section 8.32. Substitution of Individual Properties..................131
Section 8.33. Purchase Option Obligations............................132
</TABLE>
ii
<PAGE>
Exhibits
A - Allocated Loan Amounts and Debt Service Coverage Ratios
B - Assignment of Agreements (Form)
C - Assignment of Leases and Rents (Form)
D - Engineering Reports
E - Environmental Reports
F - Individual Properties and Owners
G - Manager's Consent and Subordination of Management Agreement (Form)
H - Mortgage, Assignment of Rents, Security Agreement and Fixture
Financing Statement (Form)
I - Promissory Note (Form)
J - Tenant Letter (Form)
K - Collection Account Agreement (Form)
L - Required Debt Service Payment Certificate (Form)
M - Cash Collateral Account Agreement (Form)
N - Non-consolidation Opinion of Shaw, Pittman, Potts & Trowbridge
(Form)
O - Financing Statements
P - Borrower's Estoppel Certificate (Form)
Q - Opinion of Shaw, Pittman, Potts & Trowbridge
R - Opinion of Connell, Foley & Geiser (New Jersey)
S - Lien Search Reports
T - Officer's Certificate (Form)
U - Second Assignment of Agreements (Form)
V - Second Assignment of Leases and Rents (Form)
W - Second Mortgage, Assignment of Rents, Security Agreement and
Fixture Financing Statement (Form)
X - Tenant Estoppel Certificate (Form)
Y - Non-Disturbance, Subordination and Attornment Agreement (Form)
Z - Certificate of Incorporation for NEW FLIP (Form)
AA - Certificate of Incorporation for NEW MM (Form)
Schedules
1 - Initial Capital Requirements and Capital Reserve Amounts
2 - Exceptions to Representations and Warranties
3 - Certain Leases for which Tenant Estoppel Certificates and
Non-Disturbance, Subordination and Attornment Agreements are
Required
4 - Deferred Maintenance Items
5 - Tenants' Option to Purchase and Rights of First Refusal
iii
<PAGE>
6 - Environmental Operation & Maintenance Obligations and Reserve
Requirements
7 - Deliveries Upon Substitution of Property
8 - Rollover Leases
iv
<PAGE>
LOAN AGREEMENT
THIS LOAN AGREEMENT, made as of September 22, 1997, is by and among
NOMURA ASSET CAPITAL CORPORATION, a Delaware corporation, having an address at 2
World Financial Center, Building B, New York, New York 10281-1198 ("Lender") and
FLIP/BRE, INC., a New Jersey corporation ("FLIP"), OIP/BRE, L.L.C., a New Jersey
limited liability company ("OIP"), MBP/BRE, L.L.C., a New Jersey limited
liability company ("MBP"), and NJA/BRE, L.L.C., a New Jersey limited liability
company ("NJA"; FLIP, OIP, MBP and NJA, collectively, "Borrower"), each having
an address c/o McBride Enterprises, Inc., 808 High Mountain Road, P.O. Box 549,
Franklin Lakes, New Jersey, 07417.
RECITALS
WHEREAS, Borrower desires to obtain a loan (the "Loan") from Lender
in the amount of $45,000,000 (the "Loan Amount");
WHEREAS, Lender is unwilling to make the Loan unless Borrower joins
in the execution and delivery of this Agreement, the Notes and the other Loan
Documents (all of the foregoing capitalized terms as hereinafter defined) which
shall establish the terms and conditions of the Loan;
WHEREAS, Borrower and Lender contemplate that Lender's interest in
and to the Loan may be assigned by Lender to Trustee for the benefit of
Certificateholders in connection with the Securitization (all of the foregoing
capitalized terms as hereinafter defined); and
WHEREAS, Borrower has agreed to establish certain accounts and to
grant to Lender a security interest therein upon the terms and conditions of the
security agreement set forth in Section 2.13;
NOW, THEREFORE, in consideration of the making of the Loan by Lender
and the covenants, agreements, representations and warranties set forth in this
Agreement, the parties hereby covenant, agree, represent and warrant as follows:
<PAGE>
2
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1. Definitions. For all purposes of this Agreement:
(1) the capitalized terms defined in this Article I have the
meanings assigned to them in this Article I, and include the plural as well as
the singular;
(2) all accounting terms have the meanings assigned to them in
accordance with generally accepted accounting principles in effect on the date
hereof;
(3) the words "herein", "hereof", and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
Article, Section or other subdivision; and
(4) the following terms have the following meanings:
"Account Collateral" has the meaning provided in Section 2.13(a).
"Accounts" means, with respect to each Borrower, such Borrower's
rights to payment for goods sold or leased or for services rendered arising from
the operation of such Borrower's Individual Property or Individual Properties,
as the case may be, and not evidenced by an Instrument, including, without
limitation, all accounts and accounts receivable arising from the operation of
such Individual Property or the Individual Properties, as the case may be, now
existing or hereafter coming into existence, and all Proceeds thereof. In
addition to the foregoing, the term "Accounts" shall include the meaning such
term has in the New Jersey Uniform Commercial Code, to the extent of a
Borrower's interest therein.
"Accrued Interest" has the meaning provided in Section 2.5(b).
"Additional Interest Rate" means the difference between the Revised
Interest Rate and interest at 7.71% per annum.
"Affiliate" of any specified Person means any other Person
controlling or controlled by or under common control with
<PAGE>
3
such specified Person. For the purposes of this definition, "control" when used
with respect to any specified Person means the power to direct the management
and policies of such Person, directly or indirectly, whether through the
ownership of voting securities or other beneficial interests, by contract or
otherwise; and the terms "controlling" and "controlled" have the meanings
correlative to the foregoing.
"Affiliate Lease" has the meaning provided in Section 4.1(S)(ix).
"Agreement" means this Loan Agreement, as the same may from time to
time hereafter be modified, supplemented or amended.
"Allocated Loan Amount" means the portion of the Loan Amount
allocated to each Individual Property as set forth in Exhibit A attached hereto,
as such amounts shall be adjusted from time to time as hereinafter set forth.
Upon each adjustment in the amount of Principal Indebtedness due to a regular
monthly payment of principal pursuant to Section 2.5(a), each Allocated Loan
Amount shall be decreased by an amount equal to the product of (i) the amount of
such principal payment and (ii) a fraction, the numerator of which is the
applicable Allocated Loan Amount (prior to the adjustment in question) and the
denominator of which is the total of all Allocated Loan Amounts prior to the
adjustment to the Principal Indebtedness resulting in the recalculation of the
Allocated Loan Amount. When the Principal Indebtedness is reduced as a result of
Lender's receipt of Net Proceeds or Loss Proceeds with respect to a Taking or
casualty affecting 100% of an Individual Property, the Allocated Loan Amount for
the Individual Property with respect to which the Net Proceeds or Loss Proceeds
were received shall be reduced to zero (such Allocated Loan Amount prior to
being so reduced being referred to as the "Withdrawn Allocated Amount"), and
each other Allocated Loan Amount shall (i) if the Withdrawn Allocated Amount
exceeds the Net Proceeds or Loss Proceeds (such excess being referred to as the
"Proceeds Deficiency"), be increased by an amount equal to the product of (1)
the Proceeds Deficiency and (2) a fraction, the numerator of which is the
applicable Allocated Loan Amount (prior to the adjustment in question) and the
denominator of which is the aggregate of all of the Allocated Loan Amounts other
than the Withdrawn Allocated Amount or (ii) if the Net Proceeds or Loss Proceeds
are greater than or equal to the Withdrawn Allocated Amount, remain unadjusted.
<PAGE>
4
"Annual Budget" has the meaning provided in Section 5.1(Q)(vii).
"Approved Annual Budget" has the meaning provided in Section
5.1(Q)(vii).
"Assignment of Agreements" means, with respect to an Individual
Property, a first priority Assignment of Management Agreement and Agreements
Affecting Real Estate, in the form attached hereto as Exhibit B, dated as of the
Closing Date, from the relevant Borrower, as assignor, to Lender, as assignee,
collaterally assigning to Lender (to the extent set forth in the Assignment of
Agreements) such Borrower's interest in and to all contracts between such
Borrower and third parties in connection with the management and operation of
the Individual Property, including, without limitation, the Management
Agreement, any agreements with design professionals, all agreements, allocations
and rights with all utility services affecting the Individual Property and all
development agreements and Permits, as the same may hereafter from time to time
be supplemented, amended, modified or extended by one or more written agreements
supplemental thereto, and "Assignments of Agreements" means all such instruments
collectively.
"Assignment of Leases" means, with respect to an Individual
Property, a first priority Assignment of Leases and Rents, in the form attached
hereto as Exhibit C, dated as of the Closing Date, from the relevant Borrower,
as assignor, to Lender, as assignee, collaterally assigning to Lender such
Borrower's interest in and to the Leases and the Rents with respect to such
Individual Property, as the same may hereafter from time to time be
supplemented, amended, modified or extended by one or more agreements
supplemental thereto, and "Assignments of Leases" means all such instruments
collectively.
"Basic Carrying Costs" means the following costs with respect to the
Mortgaged Property: (i) real property taxes and assessments applicable to the
Individual Properties (excluding taxes which tenants are required by their
Leases to pay directly to the taxing authority, unless Lender or Servicer
determines, in its reasonable discretion, that said tenants will be unable to
make such payments on a timely basis) and (ii) insurance premiums for policies
of insurance required to be maintained by Borrower pursuant to this Agreement or
the other Loan Documents.
"Basic Carrying Costs Monthly Installment" means Lender's good faith
estimate of 1/12th of the annual amount of
<PAGE>
5
Basic Carrying Costs, calculated so that a sum sufficient to pay any Basic
Carrying Cost shall be in the Basic Carrying Costs Sub-Account at least 30 days
prior to the due date thereof. Should the Basic Carrying Costs for the current
Fiscal Year or payment period not be ascertainable at the time a monthly deposit
is required to be made, the Basic Carrying Costs Monthly Installment shall be
Lender's good faith estimate based on 1/12th of the aggregate Basic Carrying
Costs for the prior Fiscal Year or payment period with reasonable adjustments
which estimate shall not exceed 10% of such prior amount unless based on actual
bills. As soon as the Basic Carrying Costs are fixed for the current Fiscal Year
or period, the next ensuing Basic Carrying Costs Monthly Installment shall be
adjusted to reflect any deficiency or surplus in prior Basic Carrying Costs
Monthly Installments.
"Basic Carrying Costs Sub-Account" means the Sub-Account of the Cash
Collateral Account or the Servicer Account, as the case may be, established and
maintained pursuant to Section 2.12 relating to the payment of Basic Carrying
Costs.
"Borrower" has the meaning provided in the first paragraph of this
Agreement.
"Business Day" means any day other than (i) a Saturday or a Sunday,
and (ii) a day on which federally insured depository institutions in (x) New
York, (y) a state in which Servicer, the Property Collection Account Bank, the
Cash Collateral Account Bank or the Servicer Account Bank is located or (z) the
state in which the Corporate Trust Office is located are authorized or obligated
by law, governmental decree or executive order to be closed.
"Capital Costs" means costs incurred by Borrower in connection with
capital expenditures, tenant improvements and lease commissions with respect to
the Mortgaged Property.
"Capital Reserve Amount" means $120,482 per annum, which is the sum
of the amounts specified for each Individual Property in the Capital Reserve
Amount column on Schedule 1 attached hereto.
"Capital Reserve Monthly Installment" means an amount equal to
1/12th of the Capital Reserve Amount.
"Capital Reserve Sub-Account" means the Sub-Account of the Cash
Collateral Account or the Servicer Account, as the case
<PAGE>
6
may be, established and maintained pursuant to Section 2.12 relating to the
payment of Capital Costs and Environmental Operation & Maintenance
Obligations.
"Cash Collateral Account" has the meaning provided in Section
2.12(b).
"Cash Collateral Account Bank" means a bank or any successor bank,
selected by Lender in accordance with the terms hereof and reasonably acceptable
to Borrower, at which the Cash Collateral Account will be maintained.
"CC Account Agreement" has the meaning provided in Section 2.13(c).
"Central Cash Management Period" means any one of the following
periods: (i) on or before the Optional Prepayment Date, a period commencing upon
an Event of Default (the "Trigger Event of Default") and ending on (A) if the
Trigger Event of Default is cured (as determined by Lender in its sole
discretion) within 30 days from the occurrence thereof, the first anniversary of
the date of the occurrence of the Trigger Event of Default or (B) if the Trigger
Event of Default is not cured (as determined by Lender in its sole discretion)
within 30 days from the occurrence thereof, the first anniversary of the date on
which the Trigger Event of Default is cured (as determined by Lender in its
absolute discretion), provided, however, that no other Default or Event of
Default then exists and the Debt Service Coverage Ratio for the Individual
Properties as a whole is at least 1.30, and if both such conditions are not then
satisfied, the period shall end on the first date thereafter on which both such
conditions are satisfied; (ii) on or before the Optional Prepayment Date, the
period commencing upon Lender's receipt of notice of the agreed upon Purchase
Option Purchase Price and ending on the date Borrower satisfies the Purchase
Option Obligations (as determined by Lender in its reasonable discretion); and
(iii) the period commencing on the Optional Prepayment Date and continuing until
the Loan has been paid in full.
"Certificate" means any security issued in connection with the
Securitization.
"Certificateholder" means the Person in whose name a Certificate is
registered.
"Closing Date" means September 24, 1997.
<PAGE>
7
"Code" means the Internal Revenue Code of 1986, as amended, and as
it may be further amended from time to time and any successor statutes thereto
and applicable U.S. Department of Treasury regulations issued pursuant thereto
in temporary or final form.
"Collateral" means, collectively, the Land, Improvements, Equipment,
Rents, Accounts, General Intangibles, Instruments, Inventory, Money, Permits (to
the full extent assignable) and all Proceeds, all whether now owned or hereafter
acquired and all other property which is or hereafter may become subject to a
Lien in favor of Lender as security for the Loan.
"Collateral Security Instrument" means any right, document or
instrument, other than a Mortgage or a Second Mortgage, given as security for
the Loan (including, without limitation, the Assignments of Leases, the Second
Assignments of Leases, the Assignments of Agreements, the Second Assignments of
Agreements and the Manager's Subordination), as same may be supplemented,
amended, extended or modified from time to time.
"Collection Account Agreement" has the meaning provided in Section
2.12(b).
"Collection Period" means, with respect to any Payment Date, the
period commencing on and including the eleventh day of the calendar month
preceding the calendar month in which such Payment Date occurs and ending on and
including the tenth day of the calendar month in which such Payment Date occurs.
If the Closing Date shall occur prior to the tenth day of a calendar month, the
first Collection Period shall commence on and include the Closing Date and end
on and include the tenth day of the calendar month in which the Closing Date
occurs. If the Closing Date shall occur after the tenth day of a calendar month,
the first Collection Period shall commence on the Closing Date and end on and
include the tenth day of the calendar month following the month in which the
Closing Date occurs. If the Closing Date shall occur on the tenth day of a
calendar month, the first Collection Period shall consist of a one day period
consisting of the Closing Date. No Collection Period shall extend beyond the
Maturity Date.
"Condemnation Proceeds" has the meaning provided in Section 2.12(h).
"Contingent Obligation" means any obligation of a Borrower
guaranteeing any indebtedness, leases, dividends or
<PAGE>
8
other obligations ("primary obligations") of any other Person (the "primary
obligor") in any manner, whether directly or indirectly, including, without
limitation, any obligation of such Borrower, whether or not contingent, (i) to
purchase any such primary obligation or any property constituting direct or
indirect security therefor, (ii) to advance or supply funds (x) for the purchase
or payment of any such primary obligation or (y) to maintain working capital or
equity capital of the primary obligor, (iii) to purchase property, securities or
services primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment of such primary
obligation or (iv) otherwise to assure or hold harmless the owner of such
primary obligation against loss in respect thereof, except indemnities required
by any title insurance company in connection with the issuance of the Title
Insurance Policies. The amount of any Contingent Obligation shall be deemed to
be an amount equal to the stated or determinable amount of the primary
obligation in respect of which such Contingent Obligation is made (taking into
account the non-recourse or limited recourse nature of such Contingent
Obligation, if applicable) or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof (assuming such Borrower is
required to perform thereunder) as determined by Lender in good faith (taking
into account the non-recourse or limited recourse nature of such Contingent
Obligation, if applicable).
"Corporate Trust Office" means the principal office of the Trustee
at which at any particular time its corporate trust business shall be
principally administered.
"Debt Service" means, for any period, the principal, if any, and
interest payments that would be due and payable in accordance with the Notes and
this Agreement during such period.
"Debt Service Coverage Ratio" means, on any calculation date, (and
calculated either for an Individual Property or for the Individual Properties as
a whole) the quotient obtained by dividing Net Cash Flow for the 12-month period
ending on the last day of the month preceding such calculation date by the
Imputed Debt Service for such period. All calculations of Debt Service Coverage
Ratios shall be made by Borrower, subject to verification by Lender and an
accounting firm reasonably acceptable to Lender (any "Big Six" accounting firm
being deemed acceptable to Lender). The Debt Service Coverage Ratios for the
Individual Properties as of the Closing Date are set forth on Exhibit A attached
hereto.
<PAGE>
9
"Debt Service Payment Sub-Account" means the Sub-Account of the Cash
Collateral Account or the Servicer Account, as the case may be, established and
maintained pursuant to Section 2.12 relating to the payment of Debt Service.
"Default" means the occurrence of any event which, but for the
giving of notice or the passage of time, or both, would be an Event of Default.
"Default Collateral" has the meaning provided in Section 8.14.
"Default Rate" means (a) during the period prior to but not
including the Optional Prepayment Date, the per annum interest rate equal to the
lesser of (i) the Maximum Amount and (ii) the Interest Rate plus 4% and (b)
during the period after and including the Optional Prepayment Date, the per
annum interest rate equal to the lesser of (i) the Maximum Amount and (ii) the
Revised Interest Rate plus 4%.
"Defaulting Tenant" means, as at any date of determination, any
tenant that (i) has filed a bankruptcy petition or has had a bankruptcy petition
filed against it unless such tenant has accepted its Lease, or (ii) is in
default for two or more monthly payments of base rent required to be paid by it
under its Lease.
"Defeasance Date" has the meaning provided in Section 8.30(a)(i).
"Defeasance Deposit" means an amount equal to the total cost
incurred or to be incurred in the purchase by a Borrower of U.S. Obligations
necessary to meet the Scheduled Defeasance Payments.
"Eligible Account" means an account that is: (i) an account
maintained with a federal or state chartered depository institution or trust
company, whose (x) commercial paper, short-term debt obligations or other
short-term deposits are rated as at least A-1 by each Rating Agency, if the
deposits in such account are to be held in such account for 30 days or less or
(y) long-term unsecured debt obligations are rated by each Rating Agency as at
least AA-, if the deposits in such account are to be held in such account for
more than 30 days, (ii) a segregated trust account maintained with the trust
department of a federal or state chartered depository institution or trust
<PAGE>
10
company acting in its fiduciary capacity which institution or trust company is
subject to regulations regarding fiduciary funds on deposit substantially
similar to 12 C.F.R. ss. 9.10(b), or (iii) an account otherwise acceptable to
each Rating Agency, as confirmed in writing that such account would not, in and
of itself, result in a downgrade, qualification or withdrawal of the then
current ratings assigned to any of the Certificates.
"Engineer" means (i) an engineer who prepared an Engineering Report
described on Exhibit D attached hereto or (ii) any reputable Independent
engineer licensed as such in the applicable state.
"Engineering Reports" means the property condition reports with
respect to each Individual Property delivered to Lender in connection with the
Loan, as described on Exhibit D attached hereto, and any amendments or
supplements thereto delivered to Lender.
"Environmental Claim" means any written request for information by a
Governmental Authority, or any written notice, notification, claim,
administrative, regulatory or judicial action, suit, judgment, demand or other
written communication by any Person or Governmental Authority alleging or
asserting liability with respect to a Borrower or any Individual Property,
whether for damages, contribution, indemnification, cost recovery, compensation,
injunctive relief, investigatory, response, remedial or cleanup costs, damages
to natural resources, personal injuries, fines or penalties arising out of,
based on or resulting from (i) the presence, Use or Release into the environment
of any Hazardous Substance originating at or from, or otherwise affecting, an
Individual Property, (ii) any fact, circumstance, condition or occurrence
forming the basis of any violation, or alleged violation, of any Environmental
Law by a Borrower or otherwise affecting an Individual Property or (iii) any
alleged injury or threat of injury to health, safety or the environment by a
Borrower or otherwise affecting an Individual Property.
"Environmental Laws" means any and all applicable federal, state,
local and foreign laws, rules or regulations, any judicial or administrative
orders, decrees or judgments thereunder, and any permits, approvals, licenses,
registrations, filings and authorizations, in each case as in effect as of the
date hereof and as amended from time to time, relating to the protection of
human health or the environment, or the Release or threatened Release of
Hazardous Substances into the indoor or
<PAGE>
11
outdoor environment including, without limitation, ambient air, soil, surface
water, ground water, wetlands, land or subsurface strata or otherwise relating
to the Use of Hazardous Substances.
"Environmental Operation & Maintenance Obligations" means the
obligations of Borrower described on Schedule 6 attached hereto.
"Environmental Operation & Maintenance Reserve" means $13,687.50,
which is the sum of the amounts specified on Schedule 6 attached hereto
necessary to complete the Environmental Operation & Maintenance Obligations for
the Individual Properties as described on Schedule 6 attached hereto.
"Environmental Reports" means the environmental audit reports with
respect to each Individual Property delivered to Lender in connection with the
Loan, as described on Exhibit E attached hereto, and any amendments or
supplements thereto delivered to Lender.
"Equipment" means, with respect to each Borrower, all fixtures,
appliances, machinery, furniture, furnishings, decorations, tools and supplies
now owned or hereafter acquired by such Borrower and located upon the Land or
the Improvements owned by such Borrower and used in connection with the present
or future operation and occupancy of such Land and Improvements, including, but
not limited to, all carpeting, telephones, cash registers, computers, lamps,
glassware, any building equipment, including, but not limited to, all heating,
lighting, incinerating, waste removal and power equipment, engines, pipes,
tanks, motors, conduits, switchboards, security and alarm systems, plumbing,
lifting, cleaning, fire prevention, fire extinguishing, refrigeration,
ventilating and communications apparatus, air cooling and air conditioning
apparatus, escalators, elevators, ducts and compressors, materials and supplies,
and all other machinery, apparatus, equipment, fixtures and fittings now owned
or hereafter acquired by such Borrower, any portion thereof or any appurtenances
thereto, together with all additions, replacements, parts, fittings, accessions,
attachments, accessories, modifications and alterations of any of the foregoing
to the extent relating to such Borrower's Individual Property, located upon such
Borrower's Land or Improvements and used in connection with the present or
future operation and occupancy of such Land and Improvements, provided, however,
that, with respect to any items which are leased and not owned by such Borrower,
the Equipment
<PAGE>
12
shall include the leasehold interest only of such Borrower, together with any
options to purchase any of said items and any additional or greater rights with
respect to such items which such Borrower may hereafter acquire.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, and the regulations promulgated thereunder.
Section references to ERISA are to ERISA, as in effect at the date of this
Agreement and, as of the relevant date, any subsequent provisions of ERISA,
amendatory thereof, supplemental thereto or substituted therefor.
"ERISA Affiliate" means any corporation or trade or business that is
a member of any group of organizations (i) described in Section 414(b) or (c) of
the Code of which any Borrower is a member and (ii) solely for purposes of
potential liability under Section 302(c)(11) of ERISA and Section 412(c)(11) of
the Code and the lien created under Section 302(f) of ERISA and Section 412(n)
of the Code, described in Section 414(m) or (o) of the Code of which any
Borrower is a member.
"Event of Default" has the meaning provided in Section 7.1.
"Excess Cash Flow" has the meaning provided in Section 2.12(g).
"Fiscal Year" means the 12-month period ending on December 31st of
each year or such other fiscal year of Borrower as Borrower may select from time
to time with the prior consent of Lender (which consent shall not be
unreasonably withheld), provided, however, that each Borrower shall have the
same fiscal year.
"FLIP" has the meaning provided in the first paragraph of this
Agreement.
"FLIP S CORP" means Fair Lawn Industrial Park, Inc., a New York
subchapter "S" corporation, the owner of 100% of the issued and outstanding
stock of FLIP.
"GAAP" means generally accepted accounting principles in the United
States of America as of the date of the applicable financial report.
"General Intangibles" means, with respect to each Borrower, all
intangible personal property of such Borrower
<PAGE>
13
arising out of or directly relating to such Borrower's Individual Properties
(other than Accounts, Rents, Instruments, Inventory, Money and Permits),
including, without limitation, things in action, settlements, judgments,
contract rights, rights to performance (including, without limitation, rights
under warranties), refunds of real estate taxes and assessments and other rights
to payment of Money, copyrights, trademarks and patents now existing or
hereafter in existence. In addition to the foregoing, the term "General
Intangibles" shall include the meaning such term has in the New Jersey Uniform
Commercial Code, to the extent of a Borrower's rights therein.
"Governmental Authority" means any national or federal government,
any state, regional, local or other political subdivision thereof with
jurisdiction and any Person with jurisdiction exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.
"Guaranty" means that certain Guaranty in favor of Lender, dated as
of the date hereof, executed and delivered by each Guarantor, as the same may
hereafter be supplemented, amended, modified or extended by one or more written
agreements supplemental thereto.
"Guarantor" means each of Francis V. McBride, Jr. Revocable Trust,
under Instrument dated April 22, 1996, Antoinette R. McBride, trustee, and Joan
H. McBride, Mary V. Dekorte, Timothy B. McBride, Kathryn M. Kruckel, Moira
McBride Murphy, J. Nevins McBride, Jr., W. Peter McBride, Terence A. McBride,
Sheila James, Michael X. McBride, Mark J. McBride and David F. McBride.
"Guarantors" means all such individuals and trust collectively.
"Hazardous Substance" means, collectively, (i) any petroleum or
petroleum products or waste oils, explosives, radioactive materials, asbestos,
urea formaldehyde foam insulation, polychlorinated biphenyls ("PCBs"), lead in
drinking water, and lead-based paint, the presence, generation, use,
transportation, storage or disposal of which (x) is regulated or could lead to
liability under any Environmental Law or (y) is subject to notice or reporting
requirements under any Environmental Law, (ii) any chemicals or other materials
or substances which are now or hereafter become defined as or included in the
definition of "hazardous substances," "hazardous wastes," "hazardous materials,"
"extremely hazardous wastes," "restricted hazardous wastes," "toxic substances,"
"toxic
<PAGE>
14
pollutants," "contaminants," "pollutants" or words of similar import under any
Environmental Law and (iii) any other chemical or any other material or
substance, exposure to which is now or hereafter prohibited, limited or
regulated under any Environmental Law.
"Impositions" means all taxes (including, without limitation, all ad
valorem, sales (including those imposed on lease rentals), use, single business,
gross receipts, value added, intangible transaction privilege, privilege,
license or similar taxes), assessments (including, without limitation, to the
extent not discharged prior to the date hereof, all assessments for public
improvements or benefits, whether or not commenced or completed within the term
of the Related Mortgages), ground rents, water, sewer or other rents and
charges, excises, levies, fees (including, without limitation, license, permit,
inspection, authorization and similar fees), and all other governmental charges,
in each case whether general or special, ordinary or extraordinary, foreseen or
unforeseen, of every character in respect of an Individual Property, or any
Rents and Accounts related thereto, (including all interest and penalties
thereon), which at any time prior to, during or in respect of the term hereof
may be assessed or imposed on or in respect of or be a lien upon (i) a Borrower
(including, without limitation, all income, franchise, single business or other
taxes imposed on such Borrower for the privilege of doing business in the
jurisdiction in which such Individual Property, or any other collateral
delivered or pledged to Lender in connection with the Loan, is located) or
Lender, (ii) an Individual Property, or any other collateral delivered or
pledged to Lender in connection with the Loan, or any part thereof or any Rents
therefrom or any estate, right, title or interest therein, or (iii) any
occupancy, operation, use or possession of, or sales from, or activity conducted
on, or in connection with such Individual Property or the leasing or use of such
Individual Property or any part thereof, or the acquisition or financing of the
acquisition of such Individual Property by a Borrower. Nothing contained in this
Agreement shall be construed to require a Borrower to pay any tax, assessment,
levy or charge imposed on Lender, Servicer or any Certificateholder in the
nature of a franchise, capital levy, estate, inheritance, succession, income or
net revenue tax.
"Improvements" means, with respect to each Individual Property, all
improvements owned by a Borrower and now or hereafter situated, placed or
constructed upon the Land, including all buildings, structures and improvements
of every
<PAGE>
15
nature whatsoever now or hereafter situated, placed or constructed upon the
Land, including, but not limited to, any and all office buildings, hotels,
storage facilities, shopping centers, apartment buildings, houses, power plants,
garages, carports, warehouses, utility sheds, workrooms, swimming pools, tennis
courts, sidewalks, parking areas, drives, retaining walls, fences, gates,
grating, terracing and other improvements and appurtenances thereto, and any and
all additions, alterations and betterments now or hereafter situated, placed or
constructed upon the Land or any part thereof, and to the extent of a Borrower's
interest therein, all gas and electric fixtures, radiators, heaters, engines and
machinery, boilers, ranges, elevators and motors, plumbing and heating fixtures,
carpeting and other floor coverings, water heaters, awnings and storm sashes,
and cleaning apparatus which are or shall be attached to the Land or said
buildings, structures or improvements.
"Imputed Debt Service" means for any period (and calculated either
for an Individual Property based on its Allocated Loan Amount or for the
Individual Properties as a whole based on the Principal Indebtedness then
outstanding) the aggregate amount of principal and interest payments (excluding
for purposes of such calculations for the Individual Properties, as a whole, any
Scheduled Defeasance Payments) that would be due and payable during the
applicable period calculated using a debt constant of 9.23% per annum.
"Indebtedness" means the Principal Indebtedness, together with all
accrued and unpaid interest thereon and all other obligations and liabilities
due or to become due to Lender pursuant hereto, under the Notes or in accordance
with any of the other Loan Documents, and all other amounts, sums and expenses
payable to Lender hereunder or pursuant to the Notes or any of the other Loan
Documents.
"Indemnified Parties" has the meaning provided in Section 8.26.
"Independent" means, when used with respect to any Person, a Person
who (i) does not have any direct financial interest or any material indirect
financial interest in a Borrower or in any Affiliate of a Borrower, and (ii) is
not connected with a Borrower or any Affiliate of a Borrower as an officer,
employee, promoter, underwriter, trustee, partner, member, shareholder, director
or person performing similar functions, provided, however, that the same
individual may serve
<PAGE>
16
as the Independent director of both MM and FLIP (or NEW MM and NEW FLIP), if he
or she otherwise qualifies as Independent.
"Individual Property" means the Land, the Improvements and the
Equipment (to the extent same shall be deemed to be fixtures) encumbered by the
Related Mortgages. All of the "Individual Properties" collectively comprise the
Mortgaged Property. The Individual Properties are described on Exhibit F
attached hereto.
"Initial Capital Requirement" means $42,125, which is the sum of the
amounts specified in the Engineering Reports as being necessary to complete the
deferred maintenance and items identified therein and on Schedule 4 attached
hereto (as adjusted by Lender), as specified for each Individual Property on
Schedule 1 attached hereto.
"Initial Lease Reserve Deposit" means $150,000.
"Instruments" means, with respect to each Borrower, all instruments,
chattel paper, documents or other writing obtained by such Borrower from or in
connection with the operation of such Borrower's Individual Properties
evidencing a right to the payment of Money, including, without limitation, all
notes, drafts, acceptances, documents of title, and policies and certificates of
insurance, including, but not limited to, liability, hazard, rental and credit
insurance, guarantees and securities, now or hereafter received by such Borrower
or in which such Borrower has or acquires an interest pertaining to the
foregoing. In addition to the foregoing, "Instruments" shall include the meaning
such term has in the New Jersey Uniform Commercial Code, to the extent of a
Borrower's rights therein.
"Insurance Proceeds" has the meaning provided in Section 2.12(h).
"Insurance Requirements" means all material terms of any insurance
policy required pursuant to this Agreement or a Mortgage or Second Mortgage and
all material regulations and then current standards applicable to or affecting
the applicable Individual Property or any part thereof or any use or condition
thereof, which may, at any time, be recommended by the Board of Fire
Underwriters, if any, having jurisdiction over such Individual Property, or such
other body exercising similar functions.
<PAGE>
17
"Interim Servicing Agreement" means an Interim Servicing Agreement
entered into by and between Lender and Servicer with respect to the servicing of
the Loan, as the same may be amended from time to time.
"Inventory" means, with respect to each Borrower, all goods now
owned or hereafter acquired by such Borrower intended for sale or lease, or to
be furnished under contracts of service by such Borrower in connection with such
Borrower's Individual Properties, including, without limitation, all inventories
of food, beverages and other comestibles held by such Borrower for sale or use
at or from such Borrower's Individual Properties, and all other such goods,
wares, merchandise and materials and supplies of every nature held by such
Borrower for sale to or for consumption by tenants or guests of such Borrower's
Individual Properties and others, and all such other goods returned to or
repossessed by such Borrower. In addition to the foregoing, the term "Inventory"
shall include the meaning such term has in the New Jersey Uniform Commercial
Code, to the extent of a Borrower's interest therein.
"Land" has the meaning provided in the Mortgages and the Second
Mortgages.
"Lease Reserve Amount" means $163,000 per annum, which is the
aggregate reserve amount specified for the Rollover Leases on Schedule 8
attached hereto, as adjusted from time to time pursuant to Section 2.12(f)(iv).
"Lease Reserve Monthly Installment" means an amount equal to 1/12th
of the Lease Reserve Amount.
"Lease Reserve Sub-Account" means the Sub-Account of the Cash
Collateral Account or the Servicer Account, as the case may be, established and
maintained pursuant to Section 2.12 relating to the payment of Rollover Lease
Costs.
"Leases" means, with respect to each Borrower, all leases and other
agreements or arrangements with or assumed by such Borrower as landlord
affecting the use or occupancy of all or any portion of such Borrower's
Individual Properties now in effect or hereafter entered into (including,
without limitation, lettings, subleases, licenses, concessions, tenancies and
other occupancy agreements with or assumed by such Borrower as landlord covering
or encumbering all or any portion of such Borrower's Individual Properties),
together with any guarantees, supplements, amendments, modifications, extensions
and renewals
<PAGE>
18
of the same, and all additional remainders, reversions and other rights and
estates appurtenant thereto.
"Legal Requirements" means all governmental statutes, laws, rules,
orders, regulations, ordinances, judgments, decrees and injunctions of
Governmental Authorities affecting either an applicable Individual Property or
any part thereof or the construction, use, alteration or operation thereof, or
any part thereof, enacted and in force as of the relevant date, 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 a 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) in any way limit the use and enjoyment thereof.
"Lender" has the meaning provided in the first paragraph of this
Agreement.
"Lien" means any mortgage, deed of trust, lien (statutory or other),
pledge, hypothecation, assignment, preference, priority, security interest or
any other encumbrance or charge on or affecting an Individual Property or any
portion thereof or a Borrower, or any interest in a Borrower, including, without
limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing, the filing of any financing statement or similar instrument under the
Uniform Commercial Code or comparable law of any other jurisdiction, domestic or
foreign, and mechanic's, materialmen's and other similar liens and encumbrances.
"Loan" has the meaning provided in the Recitals hereto.
"Loan Amount" has the meaning provided in the Recitals hereto.
"Loan Documents" means this Agreement, the Notes, the Mortgages, the
Second Mortgages, the Assignments of Leases, the Second Assignments of Leases,
the Assignments of Agreements, the Second Assignments of Agreements, the
Manager's Subordination, the Guaranty and all other agreements, instruments,
certificates and documents delivered by a Borrower or any Affiliate to evidence
or secure the Loan.
<PAGE>
19
"Loss Proceeds" has the meaning provided in Section 2.12(h).
"Losses" has the meaning provided in Section 8.26.
"Management Agreement" means, with respect to an Individual
Property, the Management Agreement entered into between the Manager and a
Borrower, respectively, pertaining to the management of such Individual Property
and in the form attached to the Manager's Subordination or such other form as
may be approved by Lender in Lender's reasonable discretion, and "Management
Agreements" means all such agreements collectively.
"Manager" means McBride Enterprises, Inc., or any permitted
successor or assignee, as manager of an Individual Property or all of the
Individual Properties, as the case may be.
"Manager's Subordination" means, with respect to each Borrower, the
Manager's Consent and Subordination of Management Agreement in the form attached
hereto as Exhibit G, dated as of the Closing Date, executed by the Manager for
the Individual Properties owned by such Borrower, such Borrower and Lender.
"Material Adverse Effect" means a material adverse effect upon (i)
the business or the financial position or results of operation of a Borrower,
(ii) the ability of a Borrower to perform, or of Lender to enforce, any of the
Loan Documents or (iii) the value of (x) the Collateral taken as a whole or (y)
any Individual Property.
"Material Contract" means any contract relating to an Individual
Property which is not cancelable on 30 days' notice without penalty and which
requires payment of more than $20,000 per month.
"Maturity Date" means October 11, 2022, or such earlier date
resulting from acceleration.
"Maximum Amount" means the maximum rate of interest designated by
applicable Legal Requirements.
"MBP" has the meaning provided in the first paragraph of this
Agreement.
"MEI" means McBride Enterprises, Inc., a New Jersey corporation.
<PAGE>
20
"MM" means REA/SPC, Inc., a New Jersey corporation, the managing
member of each of OIP, MBP and NJA.
"Money" means, with respect to each Borrower, all of such Borrower's
rights, now or hereafter acquired, in moneys, cash, rights to deposit or savings
accounts, credit card receipts or other items of legal tender obtained from or
for use in connection with the operation of such Borrower's Individual
Properties.
"Mortgage" means, with respect to an Individual Property, a first
priority Mortgage, Assignment of Rents, Security Agreement and Fixture Financing
Statement, dated as of the Closing Date, granted by a Borrower to Lender (in
substantially the form attached hereto as Exhibit H) with respect to such
Individual Property as security for such Borrower's Note, as the same may
hereafter from time to time be supplemented, amended, modified or extended by
one or more written agreements supplemental thereto, but shall exclude any such
instrument released by Lender pursuant to Section 2.11, and "Mortgages" means
all such instruments collectively.
"Mortgaged Property" means all the Individual Properties encumbered
by the Mortgages and Second Mortgages then outstanding.
"Multiemployer Plan" means a multiemployer plan defined as such in
Section 3(37) of ERISA to which contributions have been made by a Borrower or
any ERISA Affiliate and which is covered by Title IV of ERISA.
"NACC" has the meaning provided in Section 8.9.
"Net Cash Flow" means for any trailing 12 calendar month period (and
calculated either for an Individual Property or for the Individual Properties as
a whole) the excess, if any, of Operating Income for such period over Operating
Expenses for such period, subject to adjustment as follows: (i) addition (to the
extent not already included) shall be made for income derived or to be derived
from signed Leases with credit rated tenants in place as of the date of the
calculation for which such tenants are in occupancy but were not in occupancy
during the entire covered period, such addition to be equal to an annualization
of base rent for all such credit rated tenants less the actual rent paid by such
tenants for the covered period; (ii) deduction shall be made for income derived
from
<PAGE>
21
Leases in effect during some or all of the covered period but terminated as of
the date of the calculation (except to the extent any related Lease termination
payment is then in the Rent Payment Sub-Account); (iii) adjustment (as
reasonably determined by Lender, which may include a complete deduction) shall
be made for income derived from temporary or month-to-month tenants; (iv)
deduction shall be made for income derived from a Defaulting Tenant for the
period for which such calculation is being made; (v) the Capital Reserve Amount
shall be deducted (to the extent such amount has not been included in Operating
Expenses); (vi) to the extent such costs have not been included in Operating
Expenses, deduction shall be made for management fees equal to the greater of
(x) actual management fees paid pursuant to the Management Agreements and (y) 4%
of Operating Income; (vii) a normalized allowance for lease rollovers (based on
an examination of the existing rent rolls and current market leasing conditions,
including costs for downtime, tenant improvements and leasing commissions) shall
be included; (viii) a vacancy allowance equal to the greater of (x) the market
vacancy rate if actual vacancy is less than market and (y) 7.5% if actual
vacancy is less than 7.5% shall be included; (ix) deduction shall be made to
mark any above market leases to market rent; (x) adjustment shall be made for
any rent adjustments or cancellation options contained in the Leases; (xi)
deduction shall be made for non-recurring items of Operating Income; and (xii)
any other items that Lender determines may have an impact on Net Cash Flow. Net
Cash Flow shall be determined in a manner consistent with the method used by
Lender to determine Net Cash Flow for purposes of underwriting and closing the
Loan.
"Net Proceeds" means (i) either (x) the purchase price (at
foreclosure or otherwise) actually received by Lender from a third party
purchaser with respect to one or more Individual Properties as a result of the
exercise by Lender of its rights, powers, privileges and other remedies after
the occurrence of an Event of Default or (y) in the event that Lender is the
purchaser at foreclosure of one or more of such Individual Properties, the fair
market value of such Individual Properties, as determined by Lender in good
faith, or, at Borrower's request and expense, an appraiser, in either case less
(ii) all reasonable costs and expenses, including, without limitation, all
attorneys' fees and disbursements and any closing costs, brokerage fees,
sheriff's or marshall's commissions or the like, if applicable, incurred by
Lender in connection with the exercise of such remedies; provided, however, that
such costs and expenses shall not be deducted to the extent such amounts
<PAGE>
22
previously have been added to the Indebtedness in accordance with the terms of
the Mortgages and the Second Mortgages or applicable law.
"NEW FLIP" means a newly formed corporation that will be a
Single-Purpose Entity and a qualified subsidiary of the REIT.
"NEW MM" means a newly formed corporation that will be a
Single-Purpose Entity and 100% owned by the REIT.
"NJA" has the meaning provided in the first paragraph of this
Agreement.
"Notes" means and refers to the promissory notes, each in the form
attached hereto as Exhibit I, dated the Closing Date, made by each Borrower to
Lender pursuant to this Agreement, as such notes may be modified, amended,
supplemented, extended or consolidated, and any note(s) issued in exchange
therefor or in replacement thereof.
"Officer's Certificate" means a certificate delivered to Lender by a
Borrower which is signed by an authorized officer of a Borrower or an authorized
officer of the managing member of a Borrower, as the case may be.
"OIP" has the meaning provided in the first paragraph of this
Agreement.
"Operating Expense Sub-Account" means the Sub-Account of the Cash
Collateral Account established and maintained pursuant to Section 2.12 relating
to the payment of Operating Expenses during a Central Cash Management Period.
"Operating Expenses" means, for any period, all expenditures by
Borrower required to be expensed under GAAP during such period in connection
with the ownership, operation, maintenance, repair or leasing of the Individual
Properties (or of an Individual Property), including, without limitation:
(i) expenses in connection with the cleaning, repair and maintenance
of the Individual Properties (or of an Individual Property);
(ii) wages, benefits, payroll taxes, uniforms, insurance costs and
all other related expenses for employees of Borrower or any Affiliate
engaged in the
<PAGE>
23
repair, operation and maintenance of the Individual Properties (or of an
Individual Property);
(iii) any management fees and expenses incurred with respect to the
Individual Properties (or of an Individual Property);
(iv) the cost of all electricity, oil, gas, water, steam, heat,
ventilation, air conditioning and any other energy, utility or similar
item and overtime services;
(v) the cost of cleaning supplies;
(vi) Impositions (other than income taxes);
(vii) business interruption, liability, casualty and fidelity
insurance premiums (which, in the case of any policies covering more than
one Individual Property, shall be allocated among the Individual
Properties pro rata in proportion to the insured value of the Individual
Properties covered by such policies);
(viii) legal, accounting and other professional fees and expenses
incurred in connection with the ownership and operation of the Individual
Properties (or of an Individual Property) including, without limitation,
collection costs and expenses;
(ix) costs and expenses of security and security systems provided to
and/or installed and maintained with respect to the Individual Properties
(or an Individual Property);
(x) trash removal and exterminating costs and expenses;
(xi) advertising and marketing costs;
(xii) costs of environmental audits and monitoring, environmental
remediation work or any other expenses incurred with respect to compliance
with Environmental Laws; and
(xiii) all other ongoing expenses which in accordance with GAAP
should be included in Borrower's annual financial statements as operating
expenses of the Individual Properties (or of an Individual Property).
<PAGE>
24
Notwithstanding the foregoing, Operating Expenses described in more than one
category listed above shall only be counted once and Operating Expenses shall
not include (v) any operating expense otherwise includable in Operating Expenses
but paid directly by a Person other than Borrower, (w) any Capital Costs, (x)
depreciation, amortization and other non-cash charges, (y) any extraordinary
items not normally considered an operating expense in accordance with GAAP or
(z) Debt Service and other payments in connection with the Indebtedness.
Operating Expenses shall be calculated on the accrual basis of accounting and in
accordance with GAAP.
"Operating Income" means, for any period, all regular ongoing income
of Borrower during such period from the Permitted Investments or the operation
of the Individual Properties (or of an Individual Property), including, without
limitation:
(i) all amounts payable to Borrower by any Person as Rent relating
to the Individual Properties (or an Individual Property);
(ii) business interruption proceeds; and
(iii) all other amounts which in accordance with GAAP are included
in Borrower's annual financial statements as operating income or expense
reductions of the Individual Properties (or of an Individual Property).
Notwithstanding the foregoing, Operating Income shall not include (v) any
condemnation or insurance proceeds (other than business interruption proceeds or
condemnation proceeds with respect to a temporary taking and, in either such
case, only to the extent allocable to such period or other applicable reporting
period), (w) any proceeds resulting from the sale, exchange, transfer, financing
or refinancing of all or any portion of one or more Individual Properties, (x)
any Rent attributable to a Lease prior to the date on which the actual payment
of Rent is required to be made thereunder or any Lease termination payment,
provided, however, that funds released from the Rent Payment Sub-Account shall
be included in Operating Income when released from the Rent Payment Sub-Account,
(y) any item of income otherwise includable in Operating Income but paid
directly to a Person other than Borrower, the Manager or the Property Collection
Account Bank (unless thereafter deposited in the Property Collection Accounts)
or (z) security deposits received from tenants until forfeited. Operating Income
shall
<PAGE>
25
be calculated on the accrual basis of accounting and in accordance with GAAP.
"Operating Partnership" means American Real Estate Investment, L.P.,
a Delaware limited partnership, having the REIT as its sole general partner.
"Optional Prepayment Date" means October 11, 2007.
"Other Borrowings" means, with respect to a Borrower, without
duplication (but not including the Indebtedness or any deferred fees payable in
connection with the Transactions) (i) all indebtedness of such Borrower for
borrowed money or for the deferred purchase price of property or services, (ii)
all indebtedness of such Borrower evidenced by a note, bond, debenture or
similar instrument, (iii) the face amount of all letters of credit issued for
the account of such Borrower and, without duplication, all unreimbursed amounts
drawn thereunder, (iv) all indebtedness of such Borrower secured by a Lien on
any property owned by such Borrower whether or not such indebtedness has been
assumed and (v) all Contingent Obligations of such Borrower.
"Payment Date" means, for each month, the eleventh day of such
month; provided, however, that for the purposes of calculating payments
hereunder, but not for the purposes of calculating Collection Periods, if the
eleventh day of a given month shall not be a Business Day, then the Payment Date
for such month shall be the next Business Day to occur. The first Payment Date
shall be October 11, 1997.
"PBGC" means the Pension Benefit Guaranty Corporation established
under ERISA, or any successor thereto.
"PCBs" has the meaning provided in the definition of "Hazardous
Substances".
"Permits" means, with respect to an Individual Property, all
licenses, permits, allocations, authorizations, approvals and certificates
obtained by or in the name of, or assigned to, a Borrower and used in connection
with the ownership, operation, use or occupancy of such Individual Property,
including, without limitation, building permits, business licenses, state health
department licenses, food service licenses, liquor licenses, licenses to conduct
business and all such other permits, licenses and rights, obtained by or in the
name of, or assigned to, such Borrower from any
<PAGE>
26
Governmental Authority or private Person concerning ownership, operation, use or
occupancy of such Individual Property.
"Permitted Encumbrances" means, with respect to an Individual
Property, collectively, (i) the Lien created by the Related Mortgages or the
other Loan Documents of record, (ii) all Liens and other matters disclosed in
the Title Insurance Policy concerning such Individual Property or any part
thereof, (iii) Liens, if any, for Impositions imposed by any Governmental
Authority not yet due or delinquent or being contested in good faith and by
appropriate proceedings in accordance with Section 2.06(b) of the Mortgages or
Second Mortgages or other Liens being so contested, (iv) any mechanics' and
materialmen's Liens deleted from the exceptions to, or affirmatively insured
against collection with respect to, the Individual Property under the applicable
Title Insurance Policy, any mechanics' and materialmen's Liens relating to work
done by a tenant and any mechanics' and materialmen's Liens being contested in
good faith and by appropriate proceedings in accordance with Section 2.06(b) of
the Mortgages or Second Mortgages, (v) without limiting the foregoing, any and
all governmental, public utility and private restrictions, covenants,
reservations, easements, licenses or other agreements of an immaterial nature
which may hereafter be granted by a Borrower and which do not affect materially
and adversely (x) the marketability of title to such Borrower's Individual
Property, (y) the fair market value thereof or (z) the use or operation thereof
as of the Closing Date, (vi) rights of existing and future tenants, as tenants
only pursuant to Leases and (vii) those certain options and rights set forth on
Schedule 5 hereto.
"Permitted Investments" means any one or more of the following
obligations or securities payable on demand or having a scheduled maturity on or
before the Business Day preceding the date upon which the funds in the Cash
Collateral Account are required to be drawn, and having at all times the
required ratings, if any, provided for in this definition, unless each Rating
Agency shall have confirmed in writing to Lender that a lower rating would not,
in and of itself, result in a downgrade, qualification or withdrawal of the then
current ratings assigned to any of the Certificates:
(i) obligations of, or obligations fully guaranteed as to payment of
principal and interest by, the United States or any agency or
instrumentality thereof provided such obligations are backed by the full
faith and credit of
<PAGE>
27
the United States of America including, without limitation, obligations
of: the U.S. Treasury (all direct or fully guaranteed obligations), the
Farmers Home Administration (certificates of beneficial ownership), the
General Services Administration (participation certificates), the U.S.
Maritime Administration (guaranteed Title XI financing), the Small
Business Administration (guaranteed participation certificates and
guaranteed pool certificates), the U.S. Department of Housing and Urban
Development (local authority bonds) and the Washington Metropolitan Area
Transit Authority (guaranteed transit bonds); provided, however, that the
investments described in this clause must (A) have a predetermined fixed
dollar of principal due at maturity that cannot vary or change, (B) if
rated by S&P, must not have an "r" highlighter affixed to their rating,
(C) if such investments have a variable rate of interest, such interest
rate must be tied to a single interest rate index plus a fixed spread (if
any) and must move proportionately with that index, and (D) such
investments must not be subject to liquidation prior to their maturity;
(ii) Federal Housing Administration debentures;
(iii) obligations of the following United States government
sponsored agencies: Federal Home Loan Mortgage Corp. (debt obligations),
the Farm Credit System (consolidated systemwide bonds and notes), the
Federal Home Loan Banks (consolidated debt obligations), the Federal
National Mortgage Association (debt obligations), the Student Loan
Marketing Association (debt obligations), the Financing Corp. (debt
obligations), and the Resolution Funding Corp. (debt obligations);
provided, however, that the investments described in this clause must (A)
have a predetermined fixed dollar amount of principal due at maturity that
cannot vary or change, (B) if rated by S&P, must not have an "r"
highlighter affixed to their rating, (C) if such investments have a
variable rate of interest, such interest rate must be tied to a single
interest rate index plus a fixed spread (if any) and must move
proportionately with that index, and (D) such investments must not be
subject to liquidation prior to their maturity;
(iv) federal funds, unsecured certificates of deposit, time
deposits, bankers' acceptances and repurchase agreements with maturities
of not more than 365 days of any bank, the short term obligations of which
are rated in the
<PAGE>
28
highest short term rating category by each Rating Agency (or otherwise
acceptable to each Rating Agency as confirmed in writing that such
investment would not, in and of itself, result in a downgrade,
qualification or withdrawal of the then current ratings assigned to any of
the Certificates); provided, however, that the investments described in
this clause must (A) have a predetermined fixed dollar amount of principal
due at maturity that cannot vary or change, (B) if rated by S&P, must not
have an "r" highlighter affixed to their rating, (C) if such investments
have a variable rate of interest, such interest rate must be tied to a
single interest rate index plus a fixed spread (if any) and must move
proportionately with that index, and (D) such investments must not be
subject to liquidation prior to their maturity;
(v) fully Federal Deposit Insurance Corporation-insured demand and
time deposits in, or certificates of deposit of, or bankers' acceptances
issued by, any bank or trust company, savings and loan association or
savings bank, the short term obligations of which are rated in the highest
short term rating category by each Rating Agency (or otherwise acceptable
to each Rating Agency as confirmed in writing that such investment would
not, in and of itself, result in a downgrade, qualification or withdrawal
of the then current ratings assigned to any of the Certificates);
provided, however, that the investments described in this clause must (A)
have a predetermined fixed dollar amount of principal due at maturity that
cannot vary or change, (B) if rated by S&P, must not have an "r"
highlighter affixed to their rating, (C) if such investments have a
variable rate of interest, such interest rate must be tied to a single
interest rate index plus a fixed spread (if any) and must move
proportionately with that index, and (D) such investments must not be
subject to liquidation prior to their maturity;
(vi) debt obligations with maturities of not more than 365 days and
rated by each Rating Agency (or otherwise acceptable to each Rating Agency
as confirmed in writing that such investment would not, in and of itself,
result in a downgrade, qualification or withdrawal of the then current
ratings assigned to any of the Certificates) in its highest long-term
unsecured rating category; provided, however, that the investments
described in this clause must (A) have a predetermined fixed dollar amount
of principal due at maturity that cannot vary or change, (B) if rated by
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S&P, must not have an "r" highlighter affixed to their rating, (C) if such
investments have a variable rate of interest, such interest rate must be
tied to a single interest rate index plus a fixed spread (if any) and must
move proportionately with that index, and (D) such investments must not be
subject to liquidation prior to their maturity;
(vii) commercial paper (including both non-interest-bearing discount
obligations and interest-bearing obligations payable on demand or on a
specified date not more than one year after the date of issuance thereof)
with maturities of not more than 365 days and that is rated by each Rating
Agency (or otherwise acceptable to each Rating Agency as confirmed in
writing that such investment would not, in and of itself, result in a
downgrade, qualification or withdrawal of the then current ratings
assigned to any of the Certificates) in its highest short-term unsecured
debt rating; provided, however, that the investments described in this
clause must (A) have a predetermined fixed dollar amount of principal due
at maturity that cannot vary or change, (B) if rated by S&P, must not have
an "r" highlighter affixed to their rating, (C) if such investments have a
variable rate of interest, such interest rate must be tied to a single
interest rate index plus a fixed spread (if any) and must move
proportionately with that index, and (D) such investments must not be
subject to liquidation prior to their maturity; and
(viii) the Federated Prime Obligation Money Market Fund (the "Fund")
so long as the Fund is rated "AAAm" or "AAAm-G" by S&P, or the equivalent
by each other Rating Agency (or otherwise acceptable to each Rating Agency
as confirmed in writing that such investment would not, in and of itself,
result in a downgrade, qualification or withdrawal of the then current
ratings assigned to any of the Certificates);
(ix) any other demand, money market or time deposit, demand
obligation or any other obligation, security or investment, provided that
each Rating Agency has confirmed in writing to Lender, that such
investment would not, in and of itself, result in a downgrade,
qualification or withdrawal of the then current ratings assigned to any of
the Certificates; and
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30
(x) such other obligations as are acceptable as Permitted
Investments to each Rating Agency, as confirmed in writing to Lender, that
such obligations would not, in and of itself, result in a downgrade,
qualification or withdrawal of the then current ratings assigned to any of
the Certificates;
provided, however, that, in the reasonable judgment of Lender, such instrument
continues to qualify as a "cash flow investment" within the meaning of Code
Section 860G(a)(6) earning a passive return in the nature of interest and
provided further that no instrument or security shall be a Permitted Investment
if (i) such instrument or security evidences a right to receive only interest
payments or (ii) the right to receive principal and interest payments derived
from the underlying investment provides a yield to maturity in excess of 120% of
the yield to maturity at par of such underlying investment.
"Person" means any individual, corporation, partnership, joint
venture, limited liability company, estate, trust, unincorporated association or
any other entity, any federal, state, county or municipal government or any
bureau, department or agency thereof and any fiduciary acting in such capacity
on behalf of any of the foregoing.
"Plan" means an employee benefit or other plan established or
maintained by any Borrower or any ERISA Affiliate and that is covered by Title
IV of ERISA, other than a Multiemployer Plan.
"Principal Indebtedness" means the Loan Amount, initially, as
adjusted by each increase or decrease in the principal amount of the Loan
outstanding, whether as a result of prepayment or otherwise.
"Proceeds" means all of a Borrower's rights, now or hereafter
acquired, in all proceeds, Rents, profits, products, Accounts, chattel paper,
deposit accounts, Instruments, Equipment, Inventory, consumer goods, farm
products, documents, General Intangibles and other proceeds whether cash or
non-cash, movable or immovable, tangible or intangible (including Insurance
Proceeds and Condemnation Proceeds) from the Collateral, including, without
limitation, those from the sale, exchange, transfer, collection, loss, damage,
disposition, substitution or replacement of any of the Collateral and all
income, gain, credit, distributions and similar items from or with respect to
the Collateral. In addition to the foregoing,
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31
"Proceeds" shall also include the meaning as such term has in the New Jersey
Uniform Commercial Code, to the extent of a Borrower's interest therein.
"Proceeds Deficiency" has the meaning provided in the definition of
"Allocated Loan Amount".
"Property Collection Accounts" has the meaning provided in Section
2.12(a).
"Property Collection Account Bank" means the bank holding the
Property Collection Accounts and any successor bank hereafter selected by
Borrower and approved by Lender (such approval not to be unreasonably withheld,
delayed or conditioned) in accordance with the terms hereof.
"Purchase Option" means that certain purchase option granted to a
tenant of the Individual Property known as 40 Potash Road, Oakland, New Jersey,
as further described in item (1) on Schedule 5 hereto.
"Purchase Option Closing" has the meaning provided in Section 8.33.
"Purchase Option Obligations" has the meaning provided in Section
8.33(d).
"Purchase Option Proceeds" has the meaning provided in Section
8.33(b).
"Purchase Option Property" has the meaning provided in Section 8.33.
"Purchase Option Purchase Price" has the meaning provided in Section
8.33(a).
"Purchase Option Sub-Account" has the meaning provided in Section
8.33(a).
"Rating Agencies" means any one or more of the following rating
agencies engaged by Lender, or its designee, to rate the Certificates: Fitch
Investors Service, L.P., Moody's Investors Service, Inc., Duff & Phelps Credit
Rating Co. and Standard & Poor's Ratings Services or any successor thereto.
"Recourse Distributions" has the meaning provided in Section 8.14.
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32
"Reimbursement Agreement" means that certain Reimbursement
Agreement, dated as of the date hereof, among FLIP, OIP, MBP and NJA, as
reasonably approved by Lender, as the same may hereafter be supplemented,
amended, modified or extended by one or more written agreements supplemental
thereto, as reasonably approved by Lender.
"REIT" means American Real Estate Investment Corporation, a Maryland
corporation and a publicly traded qualified real estate investment trust.
"Related Mortgages" means, with respect to a particular Individual
Property, the Mortgage and Second Mortgage encumbering such Individual Property.
"Release" means any release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the indoor or outdoor environment, including, without limitation, the movement
of Hazardous Substances through ambient air, soil, surface water, ground water,
wetlands, land or subsurface strata.
"Release Price" has the meaning provided in Section 2.7(a).
"Remedial Work" has the meaning provided in Section 5.1(D)(i).
"REMIC" means "real estate mortgage investment conduit" for federal
income tax purposes.
"REMIC Trust" means a trust fund created in connection with the
Securitization for which a REMIC election is made under the Code.
"Rent Payment Sub-Account" means the Sub-Account of the Cash
Collateral Account or the Servicer Account, as the case may be, established and
maintained pursuant to Section 2.12 relating to certain payments made with
respect to Leases.
"Rents" means, with respect to each Individual Property, all rents
(whether denoted as base rent, advance rent, minimum rent, percentage rent,
additional rent, reimbursements or otherwise), issues, income, royalties,
profits, revenues, proceeds, bonuses, deposits (whether denoted as security
deposits or otherwise), termination fees, rejection damages,
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33
buy-out fees and any other fees made or to be made in lieu of rent to Borrower,
any award made hereafter to a Borrower in any court proceeding involving any
tenant, lessee, licensee or concessionaire under any of the Leases in any
bankruptcy, insolvency or reorganization proceedings in any state or federal
court, and all other payments, rights and benefits of whatever nature from time
to time due to a Borrower under the Leases, including, without limitation, (i)
rights to payment earned under the Leases, (ii) any payments or rights to
payment with respect to facilities (including, but not limited to office,
retail, storage, conference, dining, bar and parking facilities) in any way
contained within or associated with such Individual Property, and (iii) all
other income, consideration, issues, accounts, profits or benefits of any nature
arising from the possession, use and operation of such Individual Property.
"Required Debt Service Payment" has the meaning provided in
Section 2.12(f).
"Revised Interest Rate" means the per annum rate equal to the
greater of (i) 12.71% and (ii) the Treasury Rate on the Optional Prepayment Date
plus 6.5%.
"Rollover Leases" means the Leases identified on Schedule 8 attached
hereto, each of which is scheduled to expire in 2003.
"Rollover Lease Costs" means costs incurred by Borrower in
connection with releasing the space covered by the Rollover Leases, including,
without limitation, lease commissions and tenant improvement costs, provided,
however, that the term of any new Lease or extension of the existing Lease for
such space must extend for at least five years beyond the scheduled expiration
date set forth on Schedule 8.
"RROP" means RROP, L.L.C., a New Jersey limited liability company,
the holder of a 99% interest as a non-managing member of OIP.
"Scheduled Defeasance Payments" means:
(a) with respect to a defeasance of the Loan in whole pursuant to
Section 2.6, payments on or prior to, but as close as possible to, (i)
each scheduled Payment Date, after the Defeasance Date and through and
including the Payment Date immediately preceding the Optional Prepayment
Date, upon which interest and principal payments are
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34
required under this Agreement and in amounts equal to the scheduled
payments due on such dates under this Agreement and (ii) the Optional
Prepayment Date, of the Principal Indebtedness and any accrued and unpaid
interest thereon;
(b) with respect to any defeasance of the Loan in part pursuant to
Section 2.6, payments on or prior to, but as close as possible to, (i)
each scheduled Payment Date, after the Defeasance Date through and
including the Payment Date immediately preceding the Optional Prepayment
Date, of a proportionate share (based on the percentage of outstanding
principal prior to the defeasance represented by the amount of principal
defeased) of the monthly installments of principal and interest as
provided in Section 2.5(a) and (ii) the Optional Prepayment Date, of the
unpaid portion of the amount of the principal so defeased and any accrued
and unpaid interest thereon; or
(c) with respect to any defeasance of a portion of the Loan pursuant
to Section 2.7(a) or Section 8.33, payments on or prior to, but as close
as possible to, (i) each scheduled Payment Date, after the Defeasance Date
through and including the Payment Date immediately preceding the Optional
Prepayment Date, of a proportionate share (based on the percentage of
outstanding principal prior to the defeasance represented by the Release
Price) of the monthly installments of principal and interest as provided
in Section 2.5(a) and (ii) the Optional Prepayment Date, of the unpaid
portion of the Release Price and any accrued and unpaid interest thereon.
"Second Assignment of Agreements" means, with respect to an
Individual Property, an Assignment of Management Agreement and Agreements
Affecting Real Estate in the form attached hereto as Exhibit U, dated as of the
Closing Date, from the relevant Borrower, as assignor, to Lender, as assignee,
collaterally assigning to Lender (to the extent set forth in the Second
Assignment of Agreements) such Borrower's interest in and to all contracts made
between such Borrower and third parties in connection with the management and
operation of the Individual Property, including, without limitation, the
Management Agreement, any agreements with design professionals, all agreements,
allocations and rights with all utility services affecting the Individual
Property and all development agreements and Permits, as the same may hereafter
from time to time be supplemented, amended, modified or extended by one or more
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35
written agreements supplemental thereto, and "Second Assignments of Agreements"
means all such instruments collectively.
"Second Assignment of Leases" means, with respect to an Individual
Property, an Assignment of Leases and Rents in the form attached hereto as
Exhibit V, dated as of the Closing Date, from the relevant Borrower, as
assignor, to Lender, as assignee, collaterally assigning to Lender such
Borrower's interest in and to Leases and Rents with respect to such Individual
Property, as the same may hereafter from time to time be supplemented, amended,
modified or extended by one or more written agreements supplemental thereto, and
"Second Assignments of Leases" means all such instruments collectively.
"Second Mortgage" means, with respect to an Individual Property, a
Mortgage, Assignment of Rents, Security Agreement and Fixture Financing
Statement, in the form attached hereto as Exhibit W, dated as of the Closing
Date, granted by the relevant Borrower to Lender with respect to such Individual
Property as security for the portion of the Loan evidenced by the other
Borrowers' Notes, as the same may hereafter from time to time be supplemented,
amended, modified or extended by one or more written agreements supplemental
thereto, but shall exclude any such instrument released by Lender pursuant to
Section 2.11 and "Second Mortgages" means all such instruments collectively.
"Securitization" has the meaning provided in Section 2.15.
"Securitization Closing Date" means the date on which the
Securitization is effected.
"Securitization Expense Reserve Amount" means $140,000.
"Securitization Expense Sub-Account" means the Sub-Account of the
Servicer Account established and maintained pursuant to Section 2.12 relating to
the payment of Lender's reasonable third party fees and expenses in connection
with the Securitization.
"Security Agreement" has the meaning provided in Section
8.30(a)(vii)(A).
"Security Deposit Account" has the meaning provided in Section
2.12(a).
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36
"Senior McBrides" means, collectively, Margaret Mary McBride
Revocable Trust A, under Instrument dated March 10, 1982, Timothy B. McBride,
trustee; Mary K. McBride; John Nevins McBride, Article Third, Testamentary Trust
"B," under Instrument dated March 26, 1993 (DOD May 12, 1993), David F. McBride
and W. Peter McBride, Trustees; and Joseph A. McBride.
"Servicer" means any Person appointed as servicer in connection with
the Securitization or such Person's successor as servicer.
"Servicer Account" has the meaning provided in Section 2.12(f).
"Servicer Account Bank" means a bank, or any successor bank,
selected by Lender or Servicer in accordance with the terms hereof and
reasonably acceptable to Borrower, at which the Servicer Account will be
maintained.
"Single-Purpose Entity" means a Person, other than an individual,
which (i) is formed or organized solely for the purpose of holding, directly or
indirectly, an ownership interest in the Mortgaged Property, (ii) does not
engage in any business unrelated to the Mortgaged Property, (iii) does not have
any assets other than those related to its interest in the Mortgaged Property or
any indebtedness other than as permitted by this Agreement, the Mortgages, the
Second Mortgages or the other Loan Documents, (iv) has its own separate books
and records and, except for the centralized accounts contemplated by Article II,
has its own accounts, in each case which are separate and apart from the books
and records and accounts of any other Person, (v) if a corporation, at all times
from and after the date of this Agreement, has an Independent director
reasonably acceptable to Lender, (vi) except for the centralized accounts
contemplated by Article II, does not commingle its assets with the assets of any
other Person, (vii), except as contemplated in the Loan Documents and the
Reimbursement Agreement, does not guarantee the obligations of any other Person
and (viii) holds itself out as being a Person separate and apart from any other
Person.
"Sub-Account" has the meaning provided in Section 2.12(c).
"Substitute Property" has the meaning provided in Section 8.32.
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37
"Substitution Closing Date" has the meaning provided in Section
8.32.
"Substitution Documents" has the meaning provided in Section 8.32.
"Survey" means a certified title survey of an Individual Property
prepared by a registered Independent surveyor reasonably satisfactory to Lender
and the company issuing the Title Insurance Policy for that Individual Property.
"Taking" means a taking or voluntary conveyance during the term
hereof of all or part of an Individual Property, or any interest therein or
right accruing thereto or use thereof, as the result of, or in settlement of,
any condemnation or other eminent domain proceeding by any Governmental
Authority affecting an Individual Property or any portion thereof.
"Tax Fair Market Value" means the fair market value of an Individual
Property, and (x) shall not include the value of any personal property or other
property that is not an "interest in real property" within the meaning of
Treasury Regulation ss.ss.1.860G-2 and 1.856-3(c), and (y) shall be reduced by
the "adjusted issue price" (within the meaning of Code ss. 1272(a)(4)) of any
indebtedness, other than the Loan, secured by a Lien affecting the Individual
Property, which Liens is prior to or on a parity with the Liens created under
the Related Mortgages.
"Tenant Letter" has the meaning provided in Section 2.12(a).
"Tenant Purchaser" has the meaning provided in Section 8.33.
"Title Insurance Policies" means the loan policies of title
insurance issued by Stewart Title Guaranty Company with respect to each
Individual Property and insuring the first priority lien in favor of Lender
created by the Mortgage and insuring the lien in favor of Lender created by the
Second Mortgage, subject only to the Permitted Encumbrances for that Individual
Property and containing such endorsements and affirmative assurances as Lender
shall reasonably require.
"Transaction Costs" means the structuring fee payable to Lender as
described in Section 2.1 and, subject to the limitations set forth in Sections
2.15 and 8.24, all other costs
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38
and expenses paid or payable by Borrower relating to the Transactions.
"Transactions" means each of the transactions contemplated by the
Loan Documents.
"Transfer" means any transfer, sale, assignment or conveyance of
an Individual Property.
"Treasury Rate" means the yield calculated by linear interpolation
(rounded to three decimal places) of the yields of United States Treasury
Constant Maturities with terms (one longer and one shorter) most nearly
approximating that of noncallable United States Treasury obligations having
maturities as close as possible to the Maturity Date, as determined by Lender on
the basis of Federal Reserve Statistical Release H.15 -- Selected Interest Rates
under the heading U.S. Governmental Security/ Treasury Constant Maturities, or
other recognized source of financial market information selected by Lender.
"Treasury Regulations" means the U.S. Department of Treasury
regulations issued pursuant to the Code in temporary or final form.
"Trigger Event of Default" has the meaning provided in the
definition of "Central Cash Management Period".
"Trustee" means any Person appointed as trustee in connection with
the Securitization or its successor in interest.
"UCC Searches" has the meaning provided in Section 3.1(F).
"UH" means Urban Holdings, L.L.C., a New Jersey limited liability
company.
"Use" means, with respect to any Hazardous Substance, the
generation, manufacture, processing, distribution, handling, use, treatment,
recycling or storage of such Hazardous Substance or transportation to or from
the property of such Person of such Hazardous Substance.
"U.S. Obligations" means non-callable direct obligations of, or
obligations fully guaranteed as to payment of principal and interest by, the
United States of America or any agency or instrumentality thereof provided that
such obligations
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39
are backed by the full faith and credit of the United States of America.
"U.S. Obligations Deliveries" has the meaning provided in Section
5.1(P).
"Withdrawn Allocated Amount" has the meaning provided in the
definition of "Allocated Loan Amount".
ARTICLE II
GENERAL TERMS
Section 2.1. Amount of the Loan; Fees. On the Closing Date, subject
to the terms and conditions of this Agreement, Lender shall lend to Borrower the
Loan Amount. After any Principal Indebtedness is repaid, Lender shall have no
obligation to re-advance the amount repaid. Borrower shall pay to Lender on the
Closing Date a nonrefundable structuring fee in an amount equal to $225,000.
Lender acknowledges receipt of other fees and amounts payable prior to the date
hereof by Borrower to Lender.
Section 2.2. Use of Proceeds. Proceeds of the Loan shall be used for
the following purposes: (a) to repay all existing indebtedness on the Mortgaged
Property, and all related costs and expenses of such repayment, (b) to fund the
Capital Reserve Sub-Account of the Servicer Account in the amount of the Initial
Capital Requirement and the Environmental Operation & Maintenance Reserve, to
fund the initial deposit to the Basic Carrying Costs Sub-Account of the Servicer
Account, to fund the Lease Reserve Sub-Account of the Servicer Account in the
amount of the Initial Lease Reserve Deposit and to fund the Securitization
Expense Sub-Account in the amount of the Securitization Expense Reserve Amount
and (c) to pay to the structuring fee to Lender described in Section 2.1 and to
pay or reimburse all other Transaction Costs payable by Borrower. Any proceeds
in excess of the amounts described in clauses (a), (b) and (c) may be used by
Borrower for any lawful purpose.
Section 2.3. Security for the Loan. The Notes and Borrower's
obligations hereunder and under the other Loan Documents shall be secured by (a)
the Mortgages and the Second Mortgages, (b) the Assignments of Leases and the
Second Assignments of Leases, (c) the Assignments of Agreements and the Second
Assignments of Agreements, (d) the Guaranty and (e) the
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40
security interests and Liens granted in this Agreement and in the other Loan
Documents.
Section 2.4. Borrower's Notes.
(a) Borrower's obligation to pay the principal of and interest on
the Loan shall be evidenced by the Notes, duly executed and delivered by FLIP,
OIP, MBP and NJA. The Notes shall be payable as to principal and interest as
specified in this Agreement, with a final maturity on the Maturity Date. All
outstanding Indebtedness shall be paid by Borrower on the Maturity Date.
(b) Lender is hereby authorized, at its option, (i) to endorse on a
schedule attached to each Note (or on a continuation of such schedule attached
to each Note and made a part thereof) an appropriate notation evidencing the
date and amount of each payment of principal and interest, and/or (ii) to record
the Allocated Loan Amounts and such payments in its books and records. Such
schedule and/or such books and records, as the case may be, shall, absent
manifest error, constitute prima facie evidence of the accuracy of the
information contained therein.
Section 2.5. Principal and Interest.
(a) On the Payment Date on October 11, 1997 a payment of interest
only on the Notes shall be made for the first Collection Period, calculated at a
rate of 7.71% per annum and computed on the actual number of days elapsed, based
on a 360-day year (i.e., interest for each day during which any part of the Loan
is outstanding shall be computed at said rate divided by 360). Commencing with
the Payment Date on November 11, 1997, and on each and every Payment Date
thereafter, the principal of and interest on the Notes shall be payable in equal
monthly installments of $338,717.07, which payment is based on an interest rate
of 7.71% and a 300-month amortization schedule. For each Collection Period,
interest at a rate of 7.71% per annum shall be computed on the actual number of
days elapsed, based on a 360-day year (i.e., interest for each day during which
any part of the Loan is outstanding shall be computed at said rate divided by
360) and the remaining amount of the monthly installment shall be applied to
principal. Upon a prepayment pursuant to Section 2.7(b) or 2.12(i), the amount
of the monthly installment will be reduced proportionately (based on the
percentage of outstanding principal prior to the prepayment represented by the
amount of principal prepaid).
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(b) Commencing on the Optional Prepayment Date, in addition to the
interest described in Section 2.5(a), interest shall also accrue on the
Principal Indebtedness at the Additional Interest Rate and on the Accrued
Interest, if any, at the Revised Interest Rate. Commencing on November 11, 2007,
and on each and every Payment Date thereafter, in addition to the payments
described in Section 2.5(a), 100% of the amount of Excess Cash Flow attributable
to the Mortgaged Properties for the calendar month preceding the calendar month
in which such Payment Date occurs shall be applied, first, to the Principal
Indebtedness until reduced to zero, second, to currently accruing interest
described in the prior sentence of this Section 2.5(b), and, third, to the
Accrued Interest, if any. To the extent Excess Cash Flow is insufficient to pay
the interest payments described in the first sentence of this Section 2.5(b) on
any Payment Date, such interest shall be deferred and added to any interest
previously deferred pursuant to this sentence and remaining unpaid (the "Accrued
Interest"). Amounts payable pursuant to this Section 2.5(b) shall not be
included in determinations of Required Debt Service Payments, nor shall failure
to pay interest or Accrued Interest pursuant to this Section 2.5(b) constitute
an Event of Default or give rise to interest at the Default Rate or late payment
premiums.
(c) The entire outstanding principal balance of the Loan (including,
without limitation, any Accrued Interest), together with all accrued but unpaid
interest thereon, shall be due and payable to Lender on the Maturity Date. In
addition, if, prior to the Optional Prepayment Date, the Loan has been
accelerated based on an Event of Default described in Section 7.1(i), (iii),
(iv), or (v) or an Event of Default arising from a Borrower's fraud or willful
misconduct, there shall also be due and payable to Lender on the Maturity Date
an amount equal to the excess, if any, of (i) the amount of a Defeasance Deposit
for the purchase of U.S. Obligations necessary to meet the Scheduled Defeasance
Payments described in clause (a) of the definition of "Scheduled Defeasance
Payments" over (ii) the Principal Indebtedness.
(d) During the continuance of an Event of Default, the entire
outstanding principal balance of the Loan will bear interest at the Default
Rate. In addition, a late payment premium of five percent of any principal or
interest payment not paid on the Payment Date therefor shall be due with any
such late payment.
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Section 2.6. Voluntary Prepayment and Defeasance. Except in
connection with the Purchase Option as set forth in Section 8.33, the Loan may
not be prepaid or defeased in whole or in part during the period commencing on
the Closing Date through and including the second anniversary of the
Securitization Closing Date. After the second anniversary of the Securitization
Closing Date, and prior to the Optional Prepayment Date, Borrower may
voluntarily defease the Loan in whole as provided in Section 8.30. On or after
July 11, 2007, Borrower may voluntarily prepay the Loan in whole, without
defeasance, premium or penalty, on any Payment Date. On or after the Optional
Prepayment Date, Borrower may voluntarily prepay the Loan in part, without
defeasance, premium or penalty, on any Payment Date. The Loan may also be
prepaid or defeased as described in Section 2.7 and Section 8.33.
Section 2.7. Mandatory Prepayment and Defeasance.
(a) Except as set forth in Sections 8.32 and 8.33, Borrower may
Transfer any Individual Property only at any time after the second anniversary
of the Securitization Closing Date; provided, however, that (i) no Event of
Default shall have occurred and be continuing, (ii) the Debt Service Coverage
Ratio of the remaining Individual Properties (considered as a whole) immediately
after the Transfer would not be less than the greater of (x) the Debt Service
Coverage Ratio of all Individual Properties (including the Individual Property
to be transferred) (considered as a whole) calculated immediately prior to the
Transfer or (y) the Debt Service Coverage Ratio of all Individual Properties
(including the Individual Property to be transferred) (considered as a whole) in
effect on the Closing Date, (iii) Lender shall have received an Officer's
Certificate certifying that the Principal Indebtedness, after deducting the
Release Price, will not, on the related Defeasance Date, exceed 125% of the sum
of the Tax Fair Market Values of the remaining Individual Properties as of the
Securitization Closing Date, (iv) Lender shall have received from Borrower
financial statements, calculations and other backup information with respect to
the matters in clauses (ii) and (iii) above, all in form and substance
reasonably satisfactory to Lender and accompanied by an Officer's Certificate
stating that such statements, calculations and information are true, correct and
complete in all material respects, and (v) upon the date of the consummation of
any such Transfer (which must be the Defeasance Date), Borrower shall defease a
principal portion of the Loan in an amount equal to 125% of the Allocated Loan
Amount for such Individual Property (the "Release Price") pursuant to
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43
Section 8.30. If Borrower satisfies all of the conditions set forth above other
than the condition contained in clause (ii), Borrower shall have the right to
satisfy such condition by increasing the Release Price by the amount required
for such condition to be satisfied. On or after the Optional Prepayment Date,
the conditions of this Section 2.7(a) shall apply to a Transfer of any
Individual Property, except that clause (v) will be modified as follows: "(v)
upon the date of the consummation of any such Transfer (which must be a Payment
Date), Borrower shall prepay a principal portion of the Loan in an amount equal
to 125% of the Allocated Loan Amount for such Individual Property (the "Release
Price"), without premium or penalty, and pay an amount equal to the product of
(x) the Accrued Interest and (y) a percentage equal to the Release Price divided
by the Principal Indebtedness."
(b) If Borrower is required by Lender under the provisions of a
Mortgage or a Second Mortgage to prepay the Loan or any portion thereof in the
event of damage, destruction or a Taking of an Individual Property, Lender or
Servicer shall prepay a portion of the Loan by advancing the Loss Proceeds from
the Cash Collateral Account and applying such Loss Proceeds to (i) principal up
to the Release Price for such Individual Property and (ii) either (x) interest
on such principal amount to the immediately succeeding Payment Date or (y)
accrued interest on such principal amount, if such payment is made on a Payment
Date. Any Loss Proceeds remaining after such application shall be released to
Borrower.
(c) Upon prepayment of the Loan in full, Borrower shall pay to
Lender, in addition to the amounts specified in Section 2.6 or this Section 2.7,
as applicable, any other amounts then due and payable to Lender pursuant to the
Loan Documents. All prepayments made pursuant to Section 2.6 or this Section 2.7
shall be applied in accordance with the provisions of Section 2.8.
Section 2.8. Application of Payments. All proceeds (including any
Net Proceeds) of any repayment, including prepayments, of the Loan shall be
applied to pay: first, any reasonable out-of-pocket costs and expenses of Lender
(including the fees and charges of the Cash Collateral Account Bank and/or the
Servicer Account Bank) with respect to such repayment; second, any currently
accruing interest then payable with respect to the Loan or the portion thereof
being repaid (excluding any interest at the Additional Interest Rate or the
Revised Interest Rate); third, the outstanding principal amount
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44
of the Loan or the portion thereof being repaid; fourth, currently accruing
interest at the Additional Interest Rate or the Revised Interest Rate then
payable; fifth, Accrued Interest; and sixth, any other amounts due and owing
under the Loan Documents. Such payments shall be applied pro rata to the Notes,
except that if the payment being applied has been made with respect to a
particular Individual Property (such as payment of a Release Price or Loss
Proceeds), such payment shall be applied to the Note secured by the Mortgage on
such Individual Property. Any partial prepayment of principal made pursuant to
Section 2.5(b) shall be applied to principal payments thereafter required in the
inverse order of their maturity and the payments described in Section 2.5(a)
shall not be changed. After and during the continuance of an Event of Default,
proceeds may be applied in any order in the sole discretion of Lender.
Section 2.9. Method and Place of Payment.
(a) Except as otherwise specifically provided herein, all payments
and prepayments under this Agreement and the Notes shall be made to Lender not
later than 12:00 noon, New York City time, on the date when due and shall be
made in lawful money of the United States of America in federal or other
immediately available funds to an account specified to Borrower by Lender in
writing, and any funds received by Lender after such time shall, for all
purposes hereof, be deemed to have been paid on the next succeeding Business
Day.
(b) All payments made by Borrower hereunder, or by Borrower under
the other Loan Documents, shall be made irrespective of, and without any
deduction for, any set-offs or counterclaims.
Section 2.10. Taxes. All payments made by Borrower under this
Agreement shall be made free and clear of, and without deduction or withholding
for or on account of, any present or future income, stamp or other taxes,
levies, imposts, duties, charges, fees, deductions or withholdings, now or
hereafter imposed, levied, collected, withheld or assessed by any Governmental
Authority (other than taxes imposed on the income of Lender).
Section 2.11. Release of Collateral.
(a) Notwithstanding any other provision of this Agreement or any
other Loan Document, upon a prepayment with
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45
respect to any Individual Property as described in Section 2.03(d) of the
Mortgages and the Second Mortgages or Section 2.12(i), a defeasance or
prepayment with respect to any Individual Property as described in Section
2.7(a), a substitution of Individual Properties as described in Section 8.32 or
upon the defeasance or substitution in accordance with Section 8.33 with respect
to the Purchase Option Property, Lender shall, simultaneously with such payment
or Purchase Option Closing, (i) release the Liens of the Related Mortgages and
the related Assignment of Leases, Second Assignment of Leases, Assignment of
Agreements, Second Assignment of Agreements and UCC-1 financing statements and
any other Liens in favor of Lender relating to such Individual Property and (ii)
release to Borrower any portion of the Sub-Accounts relating to such Individual
Property, except that in the event a Central Cash Management Period has been
instituted and not terminated pursuant to Section 8.33, all funds in the
Sub-Accounts relating to the released Purchase Option Property will be
transferred to the Purchase Option Sub-Account. Lender shall cooperate with
Borrower to make release documents available through escrow or other
arrangements reasonably satisfactory to Lender that do not delay release of its
Liens.
(b) If, in connection with a Taking or casualty, Lender receives
Loss Proceeds with respect to any Individual Property in an amount equal to or
exceeding the sum of the Allocated Loan Amount for such Individual Property and
accrued and unpaid interest thereon and applies such Loss Proceeds to reduce the
Indebtedness in accordance with Section 2.7(b), or, if the Loss Proceeds are
less than such sum, but the Loss Proceeds together with a cash payment to Lender
from Borrower equal the sum of the Allocated Loan Amount for such Individual
Property and accrued and unpaid interest thereon, Lender shall simultaneously
with such application release the Liens of the Related Mortgages and related
Assignment of Leases, Second Assignment of Leases, Assignment of Agreements,
Second Assignment of Agreements and UCC-1 financing statements and any other
Liens in favor of Lender relating to such Individual Property and shall release
to Borrower any portion of the Sub-Accounts relating to such Individual
Property.
(c) Upon repayment of the Loan and all other amounts due hereunder
and under the Loan Documents in full in accordance with the terms hereof and
thereof or defeasance of the Loan in whole as described in Section 8.30, Lender
shall release its Liens with respect to all Collateral, provided, however, that
Lender shall have no obligation to release any Lien with respect
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46
to Collateral on or prior to the second anniversary of the Securitization
Closing Date except as provided in Section 2.03(d) of the Mortgages and the
Second Mortgages, Section 2.11(b), Section 2.12(i), Section 8.32 or Section
8.33. Lender shall cooperate with Borrower to make release documents available
through escrow or other arrangements reasonably satisfactory to
Lender that do not delay release of its Liens.
Section 2.12. Cash Management.
(a) Property Collection and Security Deposit Accounts. Borrower
hereby acknowledges and agrees that all of the Rents (other than security
deposits from tenants), Money and Proceeds received from Accounts derived from
the Individual Properties shall be utilized to pay Basic Carrying Costs, Debt
Service, Capital Costs, Rollover Lease Costs, Operating Expenses, Purchase
Option Obligations (if any) and for other purposes, including without
limitation, dividends or distributions. Each Borrower shall open and maintain at
the Property Collection Account Bank a demand deposit account (each, a "Property
Collection Account"). Borrower shall open and maintain at the Property
Collection Account an additional demand deposit account that is fully segregated
and distinct from the Property Collection Accounts (the "Security Deposit
Account"). The Security Deposit Account may, at Borrower's option, have
sub-accounts for each of the Individual Properties so as to distinguish the
security deposits for each Individual Property. Each of the Property Collection
Accounts shall be assigned a separate and unique identification number by the
Property Collection Account Bank and shall be opened and maintained,
respectively, in the names: (i) "Nomura Asset Capital Corporation as Mortgagee
of FLIP/BRE, Inc.", (ii) "Nomura Asset Capital Corporation as Mortgagee of
OIP/BRE, L.L.C.", (iii) "Nomura Asset Capital Corporation as Mortgagee of
MBP/BRE, L.L.C.", and (iv) "Nomura Asset Capital Corporation as Mortgagee of
NJA/BRE, L.L.C.". The Security Deposit Account shall be assigned a separate and
unique identification number by the Property Collection Account Bank and shall
be opened and maintained in the name "Nomura Asset Capital Corporation as
Mortgagee of FLIP/BRE, INC., OIP/BRE, L.L.C., MBP/BRE, L.L.C. and NJA/BRE,
L.L.C.". Borrower shall notify all current and future tenants to pay Rent to the
appropriate Property Collection Account by delivering to each tenant a notice
(the "Tenant Letter") in substantially the form attached hereto as Exhibit J.
All payments constituting Rent (other than security deposits from tenants) or
made with respect to Accounts received by Borrower or a Manager shall be
endorsed and deposited within
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47
one Business Day after the day received directly into the appropriate Property
Collection Account. All security deposits shall be paid to the Manager who shall
collect all security deposits and shall endorse all checks and deposit all such
funds within one Business Day after the day received directly into the Security
Deposit Account. Borrower shall notify Lender of any security deposits held as
letters of credit and, upon Lender's request, such letters of credit shall be
delivered to Lender or its designee. Borrower may designate a new financial
institution to serve as the Property Collection Account Bank hereunder as
provided in Section 2.13(l). Borrower shall have no right of withdrawal from the
Property Collection Accounts or the Security Deposit Account except that, prior
to the Property Collection Account Bank's receipt of notice of the occurrence of
an Event of Default from Lender or Servicer (given at the request of Lender on
Lender's behalf), Borrower may withdraw funds from the Security Deposit Account
as permitted pursuant to the Collection Account Agreement. If Borrower receives
funds from the Security Deposit Account or from letters of credit or other
instruments held in lieu of cash security deposits, then, except as provided in
the Collection Account Agreement with respect to funds to be refunded to
tenants, such funds shall be deposited in the appropriate Property Collection
Account within one Business Day after receipt.
(b) Cash Collateral Account. Pursuant to the Collection Account
Agreement executed by the Property Collection Account Bank (the "Collection
Account Agreement") in substantially the form attached hereto as Exhibit K, the
Property Collection Account Bank has agreed to transfer on a daily basis all
funds deposited in the Property Collection Accounts to accounts designated by
Borrower in the Collection Account Agreement, unless the Property Collection
Account Bank has received notice from Lender or Servicer of the commencement of
a Central Cash Management Period, after which the Property Collection Account
Bank has agreed to transfer on a daily basis all funds deposited in the Property
Collection Accounts to an account with the Cash Collateral Account Bank, as
designated by Lender or Servicer in such notice (the "Cash Collateral Account"),
until receipt of a notice from Lender or Servicer that the Central Cash
Management Period has ended. Lender may elect to change the financial
institution at which the Cash Collateral Account shall be maintained; provided,
however, that Lender shall give Borrower and the Property Collection Account
Bank not fewer than 30 days' prior notice of each change and the financial
institution to which the Cash Collateral Account may be transferred shall be
subject to Borrower's reasonable
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48
approval. The Cash Collateral Account shall at all times be an Eligible Account.
Upon the commencement of a Central Cash Management Period, Borrower shall
cooperate with Lender to establish, and hereby appoints Lender its
attorney-in-fact for the purpose of establishing, the Cash Collateral Account in
the name of Lender, and the Cash Collateral Account shall be under the sole
dominion and control of Lender and Servicer, acting on Lender's behalf. Borrower
shall have no right of withdrawal in respect of the Cash Collateral Account.
(c) Establishment of Sub-Accounts. The Cash Collateral Account and
the Servicer Account shall each contain the Basic Carrying Costs Sub-Account,
the Debt Service Payment Sub-Account, the Capital Reserve Sub-Account, the Lease
Reserve Sub-Account and the Rent Payment Sub-Account. The Servicer Account shall
contain the Securitization Expense Sub-Account, and the Cash Collateral Account
shall contain the Operating Expense Sub-Account and, if and when required
pursuant to Section 8.33, the Purchase Option Sub-Account. Each of the accounts
described in this paragraph (c) (individually, a "Sub-Account" and collectively,
the "Sub-Accounts") shall be either a separate Eligible Account to which certain
funds shall be allocated and from which disbursements shall be made pursuant to
the terms of this Agreement or a ledger entry under the Cash Collateral Account
or the Servicer Account, as the case may be.
(d) Permitted Investments. Upon the request of Borrower which
request may be made one time per month, Lender shall direct the Cash Collateral
Account Bank or the Servicer Account Bank, as applicable, to invest and reinvest
any balance in the Cash Collateral Account or the Servicer Account,
respectively, from time to time in Permitted Investments as instructed by
Borrower; provided, however, that (i) if Borrower fails to so instruct Lender,
or upon the occurrence of an Event of Default, Lender or Servicer, on Lender's
behalf, may direct the Cash Collateral Account Bank or the Servicer Account
Bank, as applicable, to invest and reinvest such balance in Permitted
Investments as Lender or Servicer, on Lender's behalf, shall determine in its
sole discretion, (ii) the maturities of the Permitted Investments on deposit in
the Cash Collateral Account or the Servicer Account shall, to the extent such
dates are ascertainable, be selected and coordinated to become due not later
than the day before any disbursements from the applicable Sub-Accounts must be
made, (iii) all such Permitted Investments shall be held in the name and be
under the sole dominion and control of Lender or its designee, and (iv) no
Permitted Investment shall be made unless Lender or its designee shall
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49
retain a perfected first priority Lien in such Permitted Investment securing the
Indebtedness and all filings and other actions necessary to ensure the validity,
perfection, and priority of such Lien have been taken. It is the intention of
the parties hereto that the entire amount deposited in the Cash Collateral
Account and the Servicer Account (or as much thereof as Lender or Servicer, on
Lender's behalf, may reasonably arrange to invest) shall at all times be
invested in Permitted Investments, and that the Cash Collateral Account and the
Servicer Account shall each be a so-called "zero balance" account. All funds in
the Cash Collateral Account or the Servicer Account that are invested in a
Permitted Investment are deemed to be held in the Cash Collateral Account or the
Servicer Account for all purposes of this Agreement and the other Loan
Documents. Except as provided in Section 2.13(g), neither Lender nor any of its
agents, including Servicer, shall have any liability for any loss in investments
of funds in the Cash Collateral Account or the Servicer Account that are
invested in Permitted Investments (unless invested contrary to Borrower's
request prior to an Event of Default) and no such loss shall affect Borrower's
obligation to fund, or liability for funding, the Cash Collateral Account, the
Servicer Account and each Sub-Account, as the case may be. Borrower agrees that
Borrower shall include all such earnings on the Cash Collateral Account and the
Servicer Account as income of Borrower for federal and applicable state tax
purposes.
(e) Interest on Accounts. All interest paid or other earnings on the
Permitted Investments made hereunder shall be for the benefit of Borrower and
shall be deposited into the Cash Collateral Account or the Servicer Account, as
the case may be, and shall be subject to allocation and distribution like any
other monies deposited therein.
(f) The Servicer Account; Payment of Debt Service, Basic Carrying
Costs, Capital Costs and Rollover Lease Costs. On or before each Payment Date
during the term of the Loan, Lender or Servicer shall deliver to Borrower
written notice of the Debt Service, excluding any Scheduled Defeasance Payments
pursuant to Section 8.30 (the "Required Debt Service Payment"), the Basic
Carrying Costs Monthly Installment, the Capital Reserve Monthly Installment and
the Lease Reserve Monthly Installment, payable to Lender on the Payment Date in
the next calendar month. On each Payment Date in the term of the Loan that is
not during a Central Cash Management Period, Borrower shall pay to Lender the
Required Debt Service Payment, the Basic Carrying Costs Monthly Installment, the
Capital Reserve Monthly
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50
Installment and the Lease Reserve Monthly Installment by transferring such funds
by wire transfer to an account with the Servicer Account Bank (the "Servicer
Account") as designated by Lender or Servicer in the foregoing written notice,
at or before 11:00 a.m., New York City time, on such Payment Date and failure to
make such payment by such time shall be an Event of Default hereunder. Prior to
the Securitization, the Servicer Account shall be maintained with Lender. Upon
the Securitization and thereafter, Lender may elect to change the financial
institution at which the Servicer Account shall be maintained with reasonable
prior to notice to Borrower. Upon such election, Lender, Servicer, Borrower and
the Servicer Account Bank shall enter into a letter agreement reasonably
satisfactory to all parties, whereby Servicer and the Servicer Account Bank
acknowledge and agree to the terms of this Agreement as it relates to the
Servicer Account and the application of funds maintained therein.
Notwithstanding the foregoing, if Borrower has paid to Lender for deposit in the
Basic Carrying Costs Sub-Account of the Servicer Account an amount equal to
one-fourth of the Basic Carrying Costs for the next twelve month period,
Borrower shall not be required to pay Basic Carrying Costs Monthly Installments,
provided, however, that Lender shall not be obligated to pay Basic Carrying
Costs pursuant to paragraph (i) of this Section 2.12(f) if Borrower is not
making such monthly payments.
(i) Payment of Basic Carrying Costs. At least ten Business Days
prior to the date that payment of any Basic Carrying Cost would become
delinquent or any fine, penalty, interest or cost attaches thereto and not
more frequently than once each month with respect to each such Basic
Carrying Cost, Borrower shall notify Lender and Servicer in writing and
request that Lender or Servicer pay such Basic Carrying Cost on behalf of
Borrower on or prior to such date or inform Lender and Servicer that
Borrower is contesting such Basic Carrying Cost in accordance with Section
2.06(b) of the Related Mortgages. Together with each such notice, Borrower
shall furnish Lender and Servicer with copies of bills and other
documentation as may be reasonably required by Lender or Servicer to
establish that such Basic Carrying Cost is then due or is being properly
contested pursuant to Section 2.06(b) of the Related Mortgages. Unless
such Basic Carrying Cost is being so contested, Lender or Servicer shall
make such payments on behalf of Borrower out of the Basic Carrying Costs
Sub-Account before same shall be delinquent and before any fine, penalty,
interest or cost attaches
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51
thereto, to the extent that there are funds available in the Basic
Carrying Costs Sub-Account, and Lender and Servicer have received
appropriate documentation to establish the amount(s) due and the
delinquency, penalty, interest and due date(s). Borrower may pay Basic
Carrying Costs directly and request reimbursement therefor from the Basic
Carrying Costs Sub-Account upon presentation of evidence of payment
reasonably satisfactory to Lender or Servicer. Lender shall have no
obligation to make such payments if the Basic Carrying Costs Sub-Account
is not being funded on a monthly basis with the Basic Carrying Costs
Monthly Installment.
(ii) Payment of Debt Service. At or before 12:00 noon, New York City
time, on each Payment Date during the term of the Loan, Lender shall
transfer from the Debt Service Payment Sub-Account to its account an
amount equal to the Required Debt Service Payment for such Payment Date
or, if Servicer has been appointed, Servicer shall transfer from the Debt
Service Payment Sub-Account an amount equal to the Required Debt Service
Payment for such Payment Date to the account of Servicer established under
the Interim Servicing Agreement or, if after the Securitization Closing
Date, under any pooling and servicing agreement executed in connection
with the Securitization. Borrower shall be deemed to have timely made the
Required Debt Service Payment pursuant to Section 2.9 (and no Default Rate
interest or late payment premium shall be imposed thereon and there shall
be no Event of Default under Section 7.1(i)) regardless of the time
Servicer makes such transfer as long as sufficient funds are then on
deposit in the Debt Service Payment Sub-Account.
(iii) Payment of Capital Costs. Not more frequently than once each
Collection Period and provided that no Event of Default has occurred and
is continuing, upon Borrower's written request Lender or Servicer shall
transfer funds to Borrower then allocated to the Capital Reserve
Sub-Account for payment of Capital Costs and Environmental Operation &
Maintenance Obligations. Together with each such request, Borrower shall
furnish Lender and Servicer with an Officer's Certificate detailing the
work performed, certifying the completion thereof in a good and
workmanlike manner (and with respect to the Environmental Operation &
Maintenance Obligations, in accordance with the related Environmental
Reports) and certifying that the attached invoices relate to the work
performed and have been paid or
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52
will be paid from the funds transferred pursuant to such request. In
addition, Borrower will submit such other documentation as may be
reasonably required by Lender or Servicer to establish that such Capital
Costs or Environmental Operation & Maintenance Obligations are then due,
which may include photographs of the completed work, partial lien releases
with respect to the payments last made and contingent lien releases (if
customary in the relevant jurisdiction) with respect to the payments to be
made with the funds to be transferred to Borrower. Upon completion of any
deferred maintenance items covered by the Initial Capital Requirement,
Borrower may request return of the full amount reserved for such items as
set forth on Schedule 4, to the extent not previously released to
Borrower, and upon completion of all deferred maintenance items covered by
the Initial Capital Requirement, Borrower may request return of any
portion of the Initial Capital Requirement not previously released to
Borrower. Any excess amounts not so requested by Borrower shall remain in
the Capital Reserve Sub-Account and be available for the payment of other
Capital Costs. Upon completion of any Environmental Operation &
Maintenance Obligations item covered by the Environmental Operation &
Maintenance Reserve, Borrower may request return of the full amount
reserved for such item as set forth on Schedule 6, to the extent not
previously released to Borrower, and upon completion of all such items
covered by such reserve, Borrower may request return of any portion of the
Environmental Operation & Maintenance Reserve not previously released to
Borrower. Any excess amounts not so requested by Borrower shall remain in
the Capital Reserve Sub-Account and be available for the payment of other
Capital Costs.
(iv) Payment of Rollover Lease Costs. Not more frequently than once
each Collection Period and provided that no Event of Default has occurred
and is continuing, upon Borrower's written request, Lender or Servicer
shall transfer funds to Borrower then allocated to the Lease Reserve
Sub-Account for payment of Rollover Lease Costs. Together with each such
request, Borrower shall furnish Lender and Servicer with an Officer's
Certificate detailing the expenses incurred and, in connection with tenant
improvements, detailing the work performed and certifying the completion
thereof in a good workmanlike manner and certifying that the attached
invoices relate to the payment requested and, if applicable, the work
performed, and that
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53
the attached invoices have been paid or will be paid from the funds
transferred pursuant to such request. In addition, Borrower will submit
such other documentation as may be reasonably required by Lender or
Servicer to establish that such Rollover Lease Costs are then due, which
may include photographs of the completed work, partial lien releases with
respect to the payments last made and contingent lien releases (if
customary in the relevant jurisdiction) with respect to payments to be
made with the funds to be transferred to Borrower. Upon releasing the
entire space covered by the applicable Rollover Lease pursuant to
fully-executed Leases, the terms of which have commenced and will extend
at least five years beyond the scheduled expiration date set forth on
Schedule 8 and are otherwise in accordance with the terms of the Loan
Documents, (i) no further deposits to the Lease Reserve Sub-Account shall
be required with respect to such Rollover Lease (and the Lease Reserve
Amount and Lease Reserve Monthly Installment shall be adjusted
accordingly) and (ii) Borrower may request return of the full amount
reserved for such Rollover Lease as set forth on Schedule 8 to the extent
not previously released to Borrower. Upon so releasing the space covered
by all of the Rollover Leases, Borrower may request return of any amounts
then held in the Lease Reserve Sub-Account not previously released to
Borrower.
(g) Monthly Funding of Sub-Accounts During a Central Cash Management
Period. Upon the commencement of a Central Cash Management Period, Lender or
Servicer shall cause all amounts then in the Servicer Account (and any
Sub-Accounts thereof) to be transferred to the Cash Collateral Account (and
respective Sub-Accounts thereof). During each Collection Period (or part
thereof) in a Central Cash Management Period, funds in the Property Collection
Accounts shall be transferred to the Cash Collateral Account pursuant to the
Collection Account Agreement, and Lender or Servicer shall allocate all funds
then on deposit in the Cash Collateral Account among the Sub-Accounts thereof as
follows and in the following priority:
(i) first, to the Basic Carrying Costs Sub-Account, until an amount
equal to the Basic Carrying Costs Monthly Installment for the Collection
Period has been allocated to the Basic Carrying Costs Sub-Account and
amounts required to pay the Basic Carrying Costs due, if any, in the next
succeeding Collection Period are being held in the Basic Carrying Costs
Sub-Account;
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54
(ii) second, to the Debt Service Payment Sub-Account, until an
amount equal to the Required Debt Service Payment for the Payment Date
occurring immediately after such Collection Period has been allocated to
the Debt Service Payment Sub-Account;
(iii) third, to the Capital Reserve Sub-Account, until an amount
equal to the Capital Reserve Monthly Installment for the Collection Period
has been allocated to the Capital Reserve Sub-Account; and
(iv) fourth, until all of the space covered by the Rollover Leases
has been released pursuant to fully-executed Leases the terms of which
have commenced and will extend at least five years beyond the scheduled
expiration date set forth on Schedule 8 and otherwise in accordance with
the terms of the Loan Documents, to the Lease Reserve Sub-Account, until
an amount equal to the Lease Reserve Monthly Installment for the
Collection Period has been allocated to the Lease Reserve Sub-Account.
Not later than three Business Days before each Payment Date during a
Central Cash Management Period, Lender or Servicer shall deliver to Borrower a
certificate in the form attached hereto as Exhibit L, setting forth (i) the
Required Debt Service Payment for such Payment Date and (ii) whether sufficient
funds exist in the Cash Collateral Account to fund the Basic Carrying Costs
Sub-Account, the Debt Service Payment Sub-Account, the Capital Reserve
Sub-Account and the Lease Reserve Sub-Account in the required amounts. If any
such certificate states that the funds then allocated to the Sub-Accounts are
less than the amount of funds which are required to be on deposit therein on
such Payment Date, Borrower shall be obligated to deposit funds (in addition to
Rents, Money and Proceeds received from Accounts) into the Cash Collateral
Account in the amount of such deficiency, and failure to make such deposit by
11:00 a.m., New York City time, on such Payment Date shall be an Event of
Default hereunder.
Payments shall be made from the Sub-Accounts of the Cash Collateral
Account as provided in paragraphs (i) - (iv) of Section 2.12(f).
Prior to the Optional Prepayment Date, provided that (i) no Event of
Default has occurred and is continuing, (ii) Lender has received all financial
information described in
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55
Section 5.1(Q) for the most recent periods for which the same are due and (iii)
there are no outstanding Purchase Option Obligations, Lender agrees that in each
Collection Period any amounts deposited into or remaining in the Cash Collateral
Account after the minimum amounts set forth in clauses (i), (ii), (iii) and (iv)
above have been allocated with respect to the Collection Period and any periods
prior thereto shall be disbursed by wire transfer to Borrower as set forth in
the CC Account Agreement and that Lender or Servicer will notify the Property
Collection Account Bank to stop the transfer of funds to the Cash Collateral
Account for the remainder of such Collection Period and instead transfer such
funds to Borrower as provided in the Collection Account Agreement. Borrower
shall use any funds distributed to Borrower (or to Manager) from the Cash
Collateral Account or the Property Collection Accounts first to pay all
Operating Expenses and then for any purpose, including, without limitation,
dividends or other distributions. If there are outstanding Purchase Option
Obligations, any amounts deposited into or remaining in the Cash Collateral
Account in each Collection Period after Lender or Servicer has (x) allocated
minimum amounts as hereinabove provided, and (y) allocated to the Operating
Expense Sub-Account amounts required to pay any Operating Expenses approved by
Lender, Servicer or Trustee, shall be allocated to the Purchase Option
Sub-Account to satisfy outstanding Purchase Option Obligations. If an Event of
Default has occurred and as long as it is continuing, if so elected by Lender,
Servicer or Trustee, any amounts deposited into or remaining in the Cash
Collateral Account in each Collection Period after Lender or Servicer has (x)
allocated minimum amounts as hereinabove provided, and (y) allocated to the
Operating Expense Sub-Account amounts required to pay any Operating Expenses
approved by Lender, Servicer or Trustee, shall be for the account of Lender and
may be withdrawn by Lender to be applied to amortize the principal amount of the
Loan or to satisfy any outstanding Purchase Option Obligations, in Lender's sole
discretion.
From and after the Optional Prepayment Date, in each Collection
Period, all funds in the Property Collection Accounts shall be transferred to
the Cash Collateral Account and applied by Lender or Servicer as follows: (x)
first, to the allocation to the Sub-Accounts of the minimum amounts set forth in
clauses (i), (ii), (iii) and (iv), (y) then, amounts required to pay Operating
Expenses and Capital Costs (other than Capital Costs to be paid from funds in
the Capital Reserve Sub-Account) in the Collection Period (as set forth for such
period in the Approved Annual Budget or as otherwise requested by Borrower and
approved
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56
by Lender in its sole discretion) shall be allocated to the Operating Expense
Sub-Account and disbursed to Borrower, not more than once each Collection
Period, to be used by Borrower to pay such Operating Expenses and Capital Costs
and (z) then, to the payment of any outstanding Purchase Option Obligations. All
other amounts transferred to the Cash Collateral Account in such Collection
Period shall constitute "Excess Cash Flow" for such month and shall be applied
to the payment of principal and interest as provided in Section 2.5(b) on the
Payment Date in the next Collection Period.
Upon the termination of a Central Cash Management Period, Lender or
Servicer shall cause all amounts then in the Cash Collateral Account (and any
Sub-Accounts thereof) to be transferred to the Servicer Account (and respective
Sub-Accounts thereof).
(h) Loss Proceeds. In the event of a casualty or Taking with respect
to an Individual Property and unless pursuant to the Related Mortgages the
proceeds, net of Borrower's reasonable collection costs reasonably approved by
Lender, received under any insurance policy required to be maintained by
Borrower ("Insurance Proceeds") or the proceeds, net of Borrower's reasonable
collection costs reasonably approved by Lender, in respect of any Taking
("Condemnation Proceeds"), as the case may be, are to be made available to
Borrower for restoration, Lender and Borrower shall cause all such Insurance
Proceeds or Condemnation Proceeds (collectively, "Loss Proceeds") to be paid
directly to the Servicer Account or, if during a Central Cash Management Period,
to the Cash Collateral Account whereupon Lender or Servicer, as the case may be,
shall apply same to reduce the Indebtedness in accordance with Section 2.7(b).
If Lender agrees or is required pursuant to the provisions hereof or of the
Related Mortgages to make Loss Proceeds available for restoration, (i) all
Insurance Proceeds received in respect of business interruption coverage and
(ii) any Condemnation Proceeds received in connection with a temporary Taking
shall be maintained in the Servicer Account or the Cash Collateral Account, as
applicable, to be applied by Lender in the same manner as Rent received from
Manager with respect to the operation of such Individual Property; provided,
further, that in the event that the Insurance Proceeds of any such business
interruption insurance policy or Condemnation Proceeds of such temporary Taking
are paid in a lump sum in advance, Lender shall hold such Insurance Proceeds or
Condemnation Proceeds in a segregated interest-bearing escrow account at the
Cash Collateral Account Bank or the Servicer
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57
Account Bank, shall estimate, in Lender's reasonable discretion, the number of
months required for Borrower to restore the damage caused by the casualty to
such Individual Property or that such Individual Property will be affected by
such temporary Taking, as the case may be, shall divide the aggregate business
interruption Insurance Proceeds or Condemnation Proceeds in connection with such
temporary Taking by such number of months, and shall disburse from such escrow
account into the Servicer Account or the Cash Collateral Account, as applicable,
each month during the performance of such restoration or pendency of such
temporary Taking such monthly installment of said Insurance Proceeds or
Condemnation Proceeds. In the event that Insurance Proceeds or Condemnation
Proceeds are to be applied toward restoration, Lender shall hold such funds in a
segregated interest-bearing escrow account at the Cash Collateral Account Bank
or the Servicer Account Bank and shall disburse same in accordance with the
provisions of the Related Mortgages. If any Loss Proceeds are received by
Borrower, such Loss Proceeds shall be received in trust for Lender, shall be
segregated from other funds of Borrower, and shall be forthwith paid to the
Servicer Account or the Cash Collateral Account, as applicable, or paid to
Lender to hold in a segregated interest-bearing escrow account, in each case to
be applied or disbursed in accordance with the foregoing, except as provided to
the contrary in Sections 2.05(e) and 2.12(c) of the Related Mortgages. Any Loss
Proceeds made available to Borrower for restoration in accordance herewith, to
the extent not used by Borrower in connection with, or to the extent they exceed
the cost of such restoration, shall be deposited into the Cash Collateral
Account or the Servicer Account, as applicable, whereupon Lender or Servicer, as
the case may be, shall apply the same to reduce the Indebtedness in accordance
with Section 2.7(b). Notwithstanding anything to the contrary herein or in any
Mortgage or Second Mortgage, Loss Proceeds will not be made available to
Borrower for restoration unless Borrower furnishes Lender with an opinion of
outside counsel reasonably acceptable to Lender that any REMIC formed pursuant
to the Securitization will not fail to maintain its REMIC status for federal
income tax purposes as a result of making the Loss Proceeds available to
Borrower for restoration.
(i) Payment of Basic Carrying Costs. Except to the extent that
Lender is obligated to pay Basic Carrying Costs from the Basic Carrying Costs
Sub-Account pursuant to the terms of Section 2.12(f)(i), Borrower shall pay all
Basic Carrying Costs with respect to Borrower and each Individual Property in
accordance with the provisions of the Related Mortgages,
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58
subject, however, to Borrower's rights to contest payment of same in accordance
with the Related Mortgages. Borrower's obligation to pay (or cause Lender to
pay) Basic Carrying Costs pursuant to this Agreement shall include, to the
extent permitted by applicable law, Impositions resulting from the passage of
any state, federal, municipal or other governmental law, order, rule or
regulation subsequent to the date hereof, in any manner changing or modifying
the laws now in force governing the taxation of mortgages, security agreements
or deeds of trust or debts secured thereby or the manner of collecting such
taxes so as to materially adversely affect Lender with respect to any Mortgage
or Second Mortgage. (If, in the reasonable opinion of Lender, any such state,
federal, municipal or other governmental law, order, rule or regulation
prohibits Borrower from making, in any form or method, such payment or would
materially penalize Lender if Borrower makes such payment or if, in the
reasonable opinion of Lender, the making of such payment might result in the
imposition of interest beyond the Maximum Amount, Borrower shall prepay a
portion of the Loan equal to the Allocated Loan Amount with respect to the
affected Individual Property, such prepayment to be applied to the Allocated
Loan Amount for such Individual Property together with (x) interest thereon to
the immediately succeeding Payment Date or (y) accrued interest thereon, if such
prepayment is made on a Payment Date. Such prepayment shall be made on the date
that is 120 days after such change in law, and failure to pay such amounts on
the date due shall be an Event of Default.) All funds deposited in the Servicer
Account or the Cash Collateral Account relating to the Basic Carrying Costs
shall be held by Lender pursuant to the provisions of this Agreement and shall
be applied in payment of the foregoing charges when and as payable, provided
that no Event of Default shall have occurred and be continuing. Should an Event
of Default occur, the proceeds on deposit in the Basic Carrying Costs
Sub-Account of the Servicer Account shall be transferred to the Basic Carrying
Costs Sub-Account of the Cash Collateral Account and may be applied by Lender in
payment of any Basic Carrying Costs for all or any portion of the Mortgaged
Property as Lender in its sole discretion may determine; provided, however, that
after the Securitization Closing Date Lender shall not apply the proceeds of the
Basic Carrying Costs Sub-Account of the Servicer Account or the Cash Collateral
Account to such Basic Carrying Costs in the event of a shortfall unless Lender
receives notice from Servicer or becomes aware that Servicer shall not be
advancing such shortfall pursuant to the terms of its pooling and servicing
agreement; and provided, further, that no such application shall be deemed to
have been
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made by operation of law or otherwise until actually made by Lender as herein
provided.
(j) Rent Payment Sub Account. All lease termination payments and
Rents prepaid more than 30 days in advance shall be deposited in the Rent
Payment Sub-Account of the Servicer Account or, if during a Central Cash
Management Period, of the Cash Collateral Account, within three Business Days
after receipt thereof. Funds shall be disbursed from the Rent Payment
Sub-Account (i) to the applicable Debt Service Payment Sub- Account for payment
of Debt Service, but not in any month in an amount in excess of the scheduled
monthly payment under the terminated Lease or the Lease with respect to which
Rent was prepaid, as the case may be, or (ii) if such funds are Lease
termination payments, to Borrower for expenses incurred in connection with the
releasing of the space covered by such terminated Lease, including tenant
improvement costs and lease commissions upon Borrower's written request
accompanied by copies of bills and such other documentation as may be reasonably
required by Lender and Servicer to establish that such costs have been incurred
and payment thereof is due. After space covered by a terminated Lease is
released to a third party (as evidenced by delivery of a fully executed copy of
the new Lease with a third party), any unused portion of the Lease termination
payment relating to such space shall be disbursed to Borrower.
(k) The Banks' Reliance. The Cash Collateral Account Bank and the
Servicer Account Bank may rely and shall be protected in acting or refraining
from acting upon any written notice, instruction or request furnished to it
hereunder and believed by it to be genuine and to have been signed or presented
by the proper party or parties. The Cash Collateral Account Bank and the
Servicer Account Bank may rely on notice from Lender or Servicer, on Lender's
behalf, as to the occurrence of an Event of Default.
Section 2.13. Security Agreement. (a) Pledge of Accounts. To secure
the full and punctual payment and performance of all of the Indebtedness,
Borrower hereby sells, assigns, conveys, pledges and transfers to Lender (and
after the Securitization Closing Date to Lender or its assigns on behalf of the
Certificateholders), and grants to Lender (and after the Securitization Closing
Date to Lender or its assigns on behalf of the Certificateholders) a first and
continuing security interest in and to, the following property, whether now
owned or
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existing or hereafter acquired or arising and regardless of where located
(collectively, the "Account Collateral"):
(i) all of Borrower's right, title and interest in the Property
Collection Accounts and the Servicer Account and all Money, if any, from
time to time deposited or held in the Property Collection Accounts and the
Servicer Account;
(ii) all of Borrower's right, title and interest in the Security
Deposit Account and all Money, if any, from time to time deposited or held
in the Security Deposit Account;
(iii) all of Borrower's right, title and interest in the Cash
Collateral Account and the Servicer Account and all Money and Permitted
Investments, if any, from time to time deposited or held in the Cash
Collateral Account and the Servicer Account;
(iv) all interest, dividends, Money, Instruments and other property
from time to time received, receivable or otherwise payable in respect of,
or in exchange for, any of the foregoing (provided, however, that amounts
transferred to Borrower's account pursuant to Section 2.12(b) or (g) shall
not be subject to any continuing lien or security interest in favor of
Lender); and
(v) to the extent not covered by clause (i), (ii), (iii) or (iv)
above, all proceeds (as defined under the Uniform Commercial Code of the
applicable jurisdiction) of any or all of the foregoing (provided,
however, that amounts transferred to Borrower's account pursuant to
Section 2.12(b) or (g) shall not be subject to any continuing lien or
security interest in favor of Lender).
(b) Representations and Covenants. Borrower represents and covenants
that (i) all Rents, Money and Proceeds received from Accounts (other than tenant
security deposits and other than funds received by Borrower or Manager from the
Property Collection Accounts, the Servicer Account or the Cash Collateral
Account) shall be deposited into the Property Collection Accounts; (ii) there
are no other accounts currently maintained and used by Borrower or any Manager
for the collection of Rents or Money received from Accounts; (iii) as long as
any portion of the Indebtedness is outstanding, Borrower shall not open (nor
permit Manager to open) any other account
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61
for the collection of Rents, Money or Proceeds received from Accounts, other
than Borrower's account at the Collection Account Bank, as referenced in Section
2.12(b), and such replacement Property Collection Accounts as may be established
pursuant to Section 2.13(l); (iv) all security deposits posted by tenants shall
be deposited in the Security Deposit Account; (v) there are no other accounts
currently maintained and used by Borrower or any Manager for the collection and
management of such security deposits; and (vi) as long as any portion of the
Indebtedness is outstanding, Borrower shall not open (nor permit Manager to
open) any other account for the collection and management of such security
deposits, other than such replacement Security Deposit Accounts as may be
established pursuant to Section 2.13(l). The Property Collection Accounts and
the Security Deposit Account shall be subject to such applicable laws, and such
applicable regulations of the Board of Governors of the Federal Reserve System
and of any other banking authority or Governmental Authority, as may now or
hereafter be in effect, and to the rules, regulations and procedures of the
Property Collection Account Bank relating to demand deposit accounts from time
to time in effect.
(c) Instructions and Agreements. Borrower, the Property Collection
Account Bank and Lender have entered into a Collection Account Agreement. Upon
the commencement of a Central Cash Management Period, Borrower, Lender and the
Cash Collateral Account Bank shall execute and deliver that certain Cash
Collateral Account Agreement dated as of the date hereof (the "CC Account
Agreement"), the form of which is attached hereto as Exhibit M. Borrower agrees
that prior to the payment in full of the Indebtedness, the CC Account Agreement
shall be irrevocable by Borrower without the prior written consent of Lender.
The Cash Collateral Account shall be subject to such applicable laws, and such
applicable regulations of the Board of Governors of the Federal Reserve System
and of any other banking authority or Governmental Authority, as may now or
hereafter be in effect and the rules, regulations and procedures of the Cash
Collateral Account Bank relating to demand deposit accounts from time to time in
effect. All statements relating to the Cash Collateral Account shall be issued
by the Cash Collateral Account Bank as provided in the CC Account Agreement.
(d) Financing Statements; Further Assurances. Borrower has executed
and delivered to Lender for filing a financing statement or statements in
connection with the Account Collateral in the form required to properly perfect
Lender's security interest in the Account Collateral to the extent that
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62
it may be perfected by such a filing. Borrower agrees that at any time and from
time to time, at the expense of Borrower, Borrower shall promptly execute and
deliver all further instruments, and take all further action, that Lender may
reasonably request, in order to perfect and protect the pledge and security
interest granted or purported to be granted hereby, or to enable Lender to
exercise and enforce Lender's rights and remedies hereunder, with respect to any
Account Collateral.
(e) Transfers and Other Liens. Borrower agrees that it will not sell
or otherwise dispose of any of the Account Collateral other than pursuant to the
terms hereof, or create or permit to exist any Lien upon or with respect to all
or any of the Account Collateral, except for the Lien granted to Lender under
this Agreement.
(f) Servicer's Right to Perform. If Borrower fails to perform any
covenant or obligation contained in this Agreement and such failure shall
continue for a period of five Business Days after Borrower's receipt of written
notice thereof from Servicer (or, if such covenant or obligation cannot be cured
by the payment of money, Borrower has not commenced curing such failure within
such period), Servicer may, but shall have no obligation to, itself perform, or
cause performance of, such covenant or obligation, and the reasonable expenses
of Servicer incurred in connection therewith shall be payable by Borrower to
Servicer upon demand. Notwithstanding the foregoing, Servicer shall have no
obligation to send notice to Borrower of any such failure unless directed to do
so by Lender.
(g) Lender's and Servicer's Reasonable Care. Beyond the exercise of
reasonable care in the custody and preservation thereof, neither Lender nor
Servicer shall have any duty as to any Account Collateral or any income thereon
in its possession or control or in the possession or control of any agents for,
or of Lender or Servicer, or the preservation of rights against any Person or
otherwise with respect thereto. Each of Lender and Servicer shall be deemed to
have exercised reasonable care in the custody and preservation of the Account
Collateral in its possession if the Account Collateral is accorded treatment
substantially equal to that which such Person accords its own property, it being
understood that neither Lender nor Servicer shall be liable or responsible for
(i) any loss or damage to any of the Account Collateral, or for any diminution
in value thereof from a loss of, or delay in Lender's or Servicer's
acknowledging receipt of, any wire transfer from the Property Collection Account
Bank or (ii) any loss, damage or diminution
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63
in value by reason of the act or omission of Servicer or Lender, or Servicer's
or Lender's agents, employees or bailees, except to the extent that such loss or
damage or diminution in value results from such Person's gross negligence or
willful misconduct or the gross negligence or willful misconduct of any such
agent, employee or bailee of such Person.
(h) Remedies. The rights and remedies provided in this Section 2.13
are cumulative and may be exercised independently or concurrently, and are not
exclusive of any other right or remedy provided at law or in equity. No failure
to exercise or delay by Servicer or Lender in exercising any right or remedy
hereunder or under the Loan Documents shall impair or prohibit the exercise of
any such rights or remedies in the future or be deemed to constitute a waiver or
limitation of any such right or remedy or acquiescence therein.
(i) No Waiver. Every right and remedy granted to Lender or Servicer
under this Section 2.13 or by law may be exercised by Lender or Servicer at any
time and from time to time, and as often as Lender or Servicer may deem it
expedient. Any and all of Lender's rights with respect to the pledge and
security interest granted hereunder shall continue unimpaired, and Borrower
shall be and remain obligated in accordance with the terms hereof,
notwithstanding (i) any proceeding of Borrower under the United States
Bankruptcy Code or any bankruptcy, insolvency or reorganization laws or statutes
of any state, (ii) the release or substitution of Account Collateral at any
time, or of any rights or interests therein or (iii) any delay, extension of
time, renewal, compromise or other indulgence granted by Lender or Servicer in
the event of any Default with respect to the Account Collateral or otherwise
hereunder. No delay or extension of time by Lender in exercising any power of
sale, option or other right or remedy hereunder, and no notice or demand which
may be given to or made upon Borrower by Lender or Servicer, shall constitute a
waiver thereof, or limit, impair or prejudice Lender's or Servicer's right,
without notice or demand, to take any action against Borrower or to exercise any
other power of sale, option or any other right or remedy.
(j) Lender and Servicer Appointed Attorney-In-Fact. Borrower hereby
irrevocably constitutes and appoints Lender and Servicer as Borrower's true and
lawful attorney-in-fact, with full power of substitution, at any time after the
occurrence and during the continuation of an Event of Default, to execute,
acknowledge and deliver any instruments and to exercise and enforce every right,
power, remedy, option and privilege of
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64
Borrower with respect to the Account Collateral, and do in the name, place and
stead of Borrower, all such acts, things and deeds for and on behalf of and in
the name of Borrower with respect to the Account Collateral, which Borrower
could or might do or which Lender may deem necessary or desirable to more fully
vest in Lender and Servicer the rights and remedies provided for herein with
respect to the Account Collateral and to accomplish the purposes of this
Agreement including, but not limited to, the execution and delivery of the CC
Account Agreement and any documents necessary to establish the Cash Collateral
Account. The foregoing powers of attorney are irrevocable for the term of the
Loan and coupled with an interest.
(k) Continuing Security Interest; Termination. This Section 2.13
shall create a continuing pledge of and security interest in the Account
Collateral and shall remain in full force and effect until the Account
Collateral is released in connection with a payment or defeasance in full of the
Indebtedness. Upon payment or defeasance in full of the Indebtedness, Borrower
shall be entitled to the return, upon its request and at its expense, of such of
the Account Collateral as shall not have been sold or otherwise applied pursuant
to the terms hereof. Portions of the Account Collateral may be released from
time to time as provided in Section 2.11(a). Lender shall execute such
instruments and documents as may be reasonably requested by Borrower to evidence
such termination and the release of the pledge and lien hereof, provided,
however, that Borrower shall pay on demand all of Lender's reasonable expenses
in connection therewith.
(l) Replacement of the Property Collection Account Bank. As long as
no Event of Default shall have occurred and be continuing, Borrower shall have
the right at any time to designate a successor Property Collection Account Bank
to hold the Property Collection Accounts or Security Deposit Account upon 30
days' prior written notice to Lender and Servicer, and Lender's or Servicer's
(on Lender's behalf) approval of the successor, which approval shall not be
unreasonably withheld or delayed. In the event that the rating of long-term
unsecured debt obligations of the Property Collection Account Bank issued by a
Rating Agency is withdrawn or reduced to a rating of BBB or lower, Borrower
shall be obligated to promptly select a new Property Collection Account Bank
and, upon approval of such selection by Lender or Servicer (on Lender's behalf),
to establish and maintain the Property Collection Accounts and the Security
Deposit Account previously held at such Property Collection Account Bank at said
successor. No such designation
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65
shall become effective until Borrower has delivered to Lender and Servicer a
Collection Account Agreement executed by Borrower and such successor Property
Collection Account Bank and such financing statements as may be necessary or
appropriate have been prepared, executed and delivered to a filing agency.
(m) Reliance. Each of Lender and Servicer may rely and shall be
protected in acting or refraining from acting upon any written notice,
instruction or request furnished to it hereunder and reasonably believed by it
to be genuine and to have been signed or presented by the proper party or
parties. Servicer may rely on notice from Lender as to the occurrence of an
Event of Default.
Section 2.14. Supplemental Mortgage Affidavits. The Lien created by
each Mortgage is intended to encumber the Individual Property described therein
to the full extent of all the relevant Borrower's obligations under such
Borrower's Note. The Lien created by each Second Mortgage is intended to
encumber the Individual Property described therein to the full extent of the
excess of the Indebtedness over the amount secured by the relevant Mortgage. As
of the Closing Date, Borrower has paid, or arranged for timely payment of, all
state, county and municipal recording and all other taxes imposed upon the
execution and recordation of the Mortgages and the Second Mortgages in the
applicable states. If at any time Lender determines, based on applicable law,
that Lender is not being afforded the maximum amount of security available from
any Individual Property as a direct, or indirect, result of applicable taxes not
having been paid with respect to the Related Mortgages, Borrower agrees that
Borrower will execute, acknowledge and deliver to Lender, immediately upon
Lender's request, supplemental affidavits increasing the amount of Indebtedness
for which all applicable taxes have been paid to an amount determined by Lender
to be equal to the lesser of (a) the greater of the fair market value of such
Individual Property (i) as of the Closing Date and (ii) as of the date such
supplemental affidavits are to be delivered to Lender, and (b) the amount of the
Indebtedness, and Borrower shall, on demand, pay any such additional taxes.
Section 2.15. Securitization. Borrower hereby acknowledges that
Lender, any of its Affiliates, its successors or assigns, may securitize the
Loan through the issuance of the Certificates, which will be rated by the Rating
Agencies (the "Securitization"). Borrower agrees that it will use its
commercially reasonable efforts to cooperate fully with Lender
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66
and the Rating Agencies in connection with the Securitization, including, but
not limited to, by (a) entering into nonmaterial amendments to the Loan
Documents that do not materially adversely affect Borrower's rights or
obligations thereunder, to the extent required by the Rating Agencies or
otherwise in connection with the Securitization; (b) assisting in the
preparation of offering documents describing the Loan and the Securitization in
a manner that satisfies the requirements of applicable federal and state
securities laws, by (i) providing such information with respect to Borrower, its
Affiliates, the Individual Properties (or the management thereof) or the Loan as
may be reasonably requested in connection therewith and (ii) acting reasonably
and promptly in connection with its review and approval of the portions of the
offering documents pertaining to Borrower, its Affiliates, the Individual
Properties (or the management thereof) or the Loan; (c) causing to be rendered
an opinion letter in substantially the form attached hereto as Exhibit N
(subject to changes in law or fact after the date hereof and further subject to
changes requested by the Rating Agencies (to the extent such changes are
consistent with applicable law or facts)) and an opinion letter from Connell,
Foley & Geiser to Borrower stating that the assignment of the Loan and the Loan
Documents to Trustee is enforceable; (d) representing that as of the
Securitization Closing Date (i) the Principal Indebtedness does not exceed 125%
of the Tax Fair Market Value of the Mortgaged Property and (ii) the fair market
value of any personal property or other property that is part of the Mortgaged
Property that is not "qualifying real property" within the meaning of Treasury
Regulation ss.1.593-11(b) does not exceed the excess, if any, of the Tax Fair
Market Value of the Mortgaged Property over the Principal Indebtedness, and
providing Lender with any supporting materials reasonably requested by Lender;
and (e) at reasonable times and upon reasonable notice, showing potential
Certificateholders the Individual Properties. Borrower agrees to reimburse its
pro rata share (based on the percentage of the aggregate loan amount included in
the Securitization represented by the principal amount of the Loan) of
reasonable third party fees and expenses in connection with the Securitization,
including, but not limited to, reasonable legal fees and disbursements,
third-party due diligence expenses, Rating Agency fees and expenses, the costs
of providing appraisals, environmental reports and engineering reports as
required by the Rating Agencies, and any servicing, Trustee or special servicing
fees and expenses, provided, however, that the third party fees and expenses to
be reimbursed by Borrower shall not exceed the Securitization Expense Reserve
Amount. In connection with the
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Securitization, Lender intends to use the Engineering Reports, the Environmental
Reports and other third party reports, updated as necessary due to the age of
such reports, to the extent permitted by the Rating Agencies. On the Closing
Date, proceeds of the Loan in an amount equal to the Securitization Expense
Reserve Amount shall be deposited into the Securitization Expense Sub-Account.
Within 90 days from the Securitization Closing Date, Lender shall provide
Borrower with an itemized bill of the third party fees and expenses for which it
seeks reimbursement from Borrower. Within 10 days from its receipt of such bill,
Borrower shall have the right to request in writing to Lender an adjustment of
such bill, which adjustment Lender may grant in its reasonable discretion based
on the nature of this Loan and the costs associated with other loans in the
Securitization. Within 30 days from the delivery of such bill (or within 30 days
from the delivery of the adjusted bill, as the case may be) to Borrower, the
funds in the Securitization Expense Sub-Account shall be applied to reimburse
Lender for such expenses, with any remaining funds in the Securitization Expense
Sub-Account to be returned to Borrower on the next Payment Date. On or prior to
the Securitization Closing Date, Borrower and MEI shall execute and deliver to
Lender an instrument (in form and substance reasonably satisfactory to Lender,
Borrower and MEI) indemnifying and holding Lender and its controlling Persons
and Affiliates harmless against all costs, expenses and damages incurred by
Lender and its controlling Persons and Affiliates (including, without
limitation, all liabilities under all applicable federal and state securities
laws) as a direct result of any untrue statement of a material fact contained in
such offering documents based on information provided in writing by Borrower,
MEI or their counsel which describes Borrower, MEI, their respective Affiliates,
the Individual Properties (and the management thereof) or any aspect of the
Loan, or as a result of any untrue statement of material fact in any of the
financial statements of Borrower, MEI or their respective Affiliates
incorporated into the offering documents or the failure to include in such
financial statements or in such offering documents any material fact relating to
Borrower, MEI, their respective Affiliates, the Individual Properties (and the
management thereof) and any aspect of the Loan necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading; provided, however, that Borrower shall have had an opportunity
to review and shall have approved in writing the relevant portions of the
offering documents pertaining to Borrower, MEI, their respective Affiliates, the
Individual Properties (or the
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management thereof) or the Loan; and provided, further, that Borrower shall have
no such obligation with respect to information unrelated to Borrower, MEI, their
respective Affiliates, the Individual Properties (and the management thereof) or
the Loan. Borrower and MEI shall not indemnify Lender for any liability, loss,
cost or expense incurred as a result of the inclusion of any erroneous or
misleading information in the offering documents, or the omission of material
information from the offering documents, pertaining to Borrower, MEI, their
respective Affiliates, the Individual Properties (and the management thereof) or
any aspect of the Loan, unless Borrower, MEI or their counsel shall have
previously approved in writing such portions of the offering documents. Borrower
and MEI shall not indemnify Lender for any liability, loss, cost or expense
incurred as a result of the inclusion of any erroneous or misleading information
in the offering documents, or the omission of material information from the
offering documents, unrelated to Borrower, MEI, their respective Affiliates, the
Individual Properties (and the management thereof) or any aspect of the Loan. On
or prior to the Securitization Closing Date, Lender shall execute and deliver to
Borrower an instrument (in form and substance reasonably satisfactory to Lender
and Borrower) indemnifying and holding Borrower and its Affiliates harmless
against all costs, expenses and damages (other than consequential damages and
costs and expenses specifically agreed by Borrower to be borne by it) incurred
by them (including, without limitation, all liabilities under all applicable
federal and state securities laws) caused by and directly relating to such
offering or the Securitization; provided, however, that such indemnification
shall not apply if any such costs, expenses or damages arise out of or are based
upon an untrue statement of a material fact or an omission to state a material
fact in such offering documents or in Borrower's, MEI's or their Affiliates'
financial statements for which Borrower is providing indemnification as provided
above.
ARTICLE III
CONDITIONS PRECEDENT
Section 3.1. Conditions Precedent to Effectiveness and Disbursement
of the Loan. The following conditions shall have been satisfied (or waived in
accordance with Section 8.4) as of the Closing Date unless Lender requires in
writing that any such conditions be performed after the Closing Date:
(A) Loan Documents.
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(i) Loan Agreement. Borrower shall have executed and delivered this
Agreement to Lender.
(ii) Notes. Each of FLIP, OIP, MBP and NJA shall have executed and
delivered to Lender its Note.
(iii) Mortgages. Each of FLIP, OIP, MBP and NJA shall have executed
and delivered the Mortgages and the Second Mortgages with respect to its
Individual Properties to Lender and the Mortgages and the Second Mortgages
shall have been filed of record in the appropriate filing offices in each
of the jurisdictions in which the Individual Properties are located or
irrevocably delivered to a title agent for such recordation.
(iv) Assignments of Agreements. Each of FLIP, OIP, MBP and NJA shall
have executed and delivered the Assignments of Agreements and the Second
Assignments of Agreements with respect to its Individual Properties to
Lender and such documents shall have been filed of record in the
appropriate filing offices in each of the jurisdictions in which such
Individual Properties are located or irrevocably delivered to a title
agent for such recordation.
(v) Assignments of Leases. Each of FLIP, OIP, MBP and NJA shall have
executed and delivered the Assignments of Leases and the Second
Assignments of Leases with respect to its Individual Properties to Lender
and the Assignments of Leases and the Second Assignments of Leases shall
have been filed of record in the appropriate filing offices in each of the
jurisdictions in which such Individual Properties are located or
irrevocably delivered to a title agent for such recordation.
(vi) [INTENTIONALLY OMITTED]
(vii) Collection Account Agreement. Borrower and the Collection
Account Bank shall have executed the Collection Account Agreement and
delivered to Lender a copy thereof.
(viii) Financing Statements. Each of FLIP, OIP, MBP and NJA shall
have executed and delivered all financing statements specified on Exhibit
O attached hereto to Lender and such financing statements shall have been
filed of record in the appropriate filing offices in each of the
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70
jurisdictions in which its Individual Properties are located and all other
appropriate jurisdictions or irrevocably delivered to a title agent for
such filing.
(ix) Manager's Subordinations. The Manager and FLIP, OIP, MBP and
NJA shall have executed and delivered to Lender the Manager's
Subordinations.
(x) Borrower's Estoppel Certificates. Each of FLIP, OIP, MBP and NJA
shall have executed and delivered to Lender an estoppel certificate with
respect to its respective Management Agreements in substantially the form
of Exhibit P attached hereto.
(xi) [INTENTIONALLY OMITTED].
(xii) Tenant Letters. Each Borrower shall have executed and mailed
Tenant Letters to each of its tenants and delivered to Lender a copy
thereof.
(xiii) Reimbursement Agreement; Guaranty. Borrower shall have
executed and delivered the Reimbursement Agreement and shall have caused
each Guarantor to execute and deliver to Lender the Guaranty.
(B) Opinions of Counsel. Lender shall have received from Shaw,
Pittman, Potts & Trowbridge, special counsel to Borrower, its legal opinion in
the form attached hereto as Exhibit Q; and from Connell, Foley & Geiser, special
New Jersey counsel to Borrower, its legal opinion in the form attached hereto as
Exhibit R. Each of such legal opinions will be addressed to Lender and dated the
Closing Date. Borrower hereby instructs such counsel to deliver to Lender such
opinions addressed to Lender.
(C) Entity Documents. Lender shall have received with respect to (i)
each of OIP, MBP and NJA (x) its certificate of formation, as amended, modified
or supplemented to the Closing Date, certified to be true, correct and complete
by the appropriate Secretary of State as of a date not more than fifteen days
prior to the Closing Date, (y) its operating agreement certified by MM to be
true, correct and complete as of the Closing Date and (z) a good standing
certificate from the Secretary of State for the State of New Jersey, dated a
date not more than fifteen days prior to the Closing Date, (ii) FLIP (x) its
certificate of incorporation, as amended, modified or supplemented to the
Closing Date, certified to be true, correct
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71
and complete by the appropriate Secretary of State as of a date not more than
fifteen days prior to the Closing Date and (y) a good standing certificate from
the Secretary of State for the State of New Jersey, dated a date not more than
fifteen days prior to the Closing Date, and (iii) MM (x) its certificate of
incorporation, as amended, modified or supplemented to the Closing Date,
certified to be true, correct and complete by the Secretary of State for the
State of New Jersey as of a date not more than fifteen days prior to the Closing
Date and (y) a good standing certificate from the Secretary of State for the
State of New Jersey, dated a date not more than fifteen days prior to the
Closing Date.
(D) Certified Resolutions, Etc. Lender shall have received a
certificate of the secretary or assistant secretary of each of MM and FLIP dated
the Closing Date, certifying (i) the names and true signatures of its incumbent
officers authorized to sign the applicable Loan Documents, (ii) its by-laws as
in effect on the Closing Date, (iii) the resolutions of its board of directors
approving and authorizing the execution, delivery and performance of all Loan
Documents executed by it, and (iv) that there have been no changes in its
certificate of incorporation since the date of the most recent certification
thereof by the appropriate Secretary of State.
(E) Insurance. Lender shall have received certificates of insurance
demonstrating insurance coverage in respect of each of the Individual Properties
of types, in amounts, with insurers and otherwise in compliance with the terms,
provisions and conditions set forth in the Related Mortgages. Such certificates
shall indicate that Lender is named in all liability policies as an additional
insured as its interest may appear and shall contain a loss payee endorsement in
favor of Lender with respect to the property policies required to be maintained
under the Mortgages and the Second Mortgages. All insurance policies required to
be maintained hereunder shall be maintained throughout the term of this
Agreement in the types and amounts required under the Mortgages and the Second
Mortgages.
(F) Lien Search Reports. Lender shall have received satisfactory
(i.e., showing no Liens other than Permitted Encumbrances) reports of UCC
(collectively, the "UCC Searches"), tax lien, judgment and litigation searches
conducted by a search firm acceptable to Lender with respect to the Collateral,
FLIP, OIP, MBP and NJA and the Person(s) identified on Exhibit S
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72
attached hereto, such searches to be conducted in each of the locations set
forth on Exhibit S attached hereto.
(G) Title Insurance Policies. Lender shall have received commitments
(in form and substance satisfactory to Lender) to issue the Title Insurance
Policies.
(H) Financial Statements; Budgets; Operating Reports. Lender shall
have received (i) the audited consolidated financial statements of the
Individual Properties for the fiscal years ending December 31, 1995 and December
31, 1996, (ii) unaudited consolidated financial statements of the Individual
Properties for the twelve month period ending August 31, 1997, (iii) 1997
operating budgets for the Individual Properties, and (iv) historical operating
reports for the Individual Properties for the three calendar years prior to the
Closing Date (verified by a certified public accounting firm acceptable to
Lender in its reasonable discretion (any "Big Six" accounting firm being deemed
acceptable to Lender)). All audited financial statements must have been prepared
by a certified public accounting firm acceptable to Lender in its reasonable
discretion.
(I) Environmental Matters. Lender shall have received Environmental
Reports, reasonably acceptable to Lender, with respect to each of the Individual
Properties, such Environmental Reports to be conducted by Independent
environmental engineers acceptable to Lender.
(J) Consents, Licenses, Approvals, Etc. Lender shall have received
copies of all consents, licenses and approvals, if any, required in connection
with the execution, delivery and performance by Borrower, and the validity and
enforceability, of the Loan Documents, and such consents, licenses and approvals
shall be in full force and effect.
(K) Additional Matters. Lender shall have received such other
Permits, certificates (including certificates of occupancy for each Individual
Property), opinions, documents and instruments (including zoning endorsements to
the Title Insurance Policies satisfactory to Lender or, if unavailable, letters
from the appropriate Governmental Authorities regarding the zoning of each
Individual Property, evidence that utility services are available for each
Individual Property and that each Individual Property is subject to separate tax
assessment) relating to the Loan as may have been reasonably requested by
Lender, and all corporate and other resolutions or consents, all
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73
other documents (including, without limitation, all documents referred to herein
and not appearing as exhibits hereto) and all legal matters in connection with
the Loan shall be reasonably satisfactory in form and substance to Lender.
(L) Representations and Warranties. The representations and
warranties herein and in the other Loan Documents shall be true and correct in
all material respects on the Closing Date both before and after giving effect to
the making of the Loan.
(M) No Default or Event of Default. No Default or Event of Default
shall have occurred and be continuing on the Closing Date either before or after
giving effect to the making of the Loan.
(N) No Injunction. No law or regulation shall have been adopted, no
order, judgment or decree of any Governmental Authority shall have been issued,
and no litigation shall be pending or threatened, which in the good faith
judgment of Lender would enjoin, prohibit or restrain, or impose or result in
the imposition of any material adverse condition upon, the making or repayment
of the Loan or the consummation of the Transactions.
(O) Surveys. Lender shall have received a Survey with respect to
each Individual Property.
(P) Engineering Reports. Lender shall have received the Engineering
Reports reasonably acceptable to Lender, with respect to the Individual
Properties, such Engineering Reports to be prepared by Independent Engineers
acceptable to Lender.
(Q) Contracts and Permits. Each of FLIP, OIP, MBP and NJA shall have
delivered to Lender a copy of each Material Contract and Permit affecting its
Individual Properties.
(R) Management Agreements. Lender shall have received the Management
Agreements.
(S) Transaction Costs. Borrower shall have paid (or agreed to pay at
closing from the proceeds of the Loan) all Transaction Costs for which bills
have been submitted.
(T) Leases; Tenant Estoppels; Non-Disturbance Agreements. Borrower
shall have delivered rent rolls with respect to each of the Individual
Properties dated as of
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74
September 1, 1997 and certified as true and correct, a copy of any standard form
Lease and copies of all Leases. Borrower shall have also delivered (i) an
original executed tenant estoppel certificate in substantially the form attached
hereto as Exhibit X with respect to each Lease specified on Schedule 3 attached
hereto and 70% of all other Leases, which tenant estoppel certificates shall
disclose no defaults or other conditions not previously disclosed to Lender
which, in Lender's reasonable opinion, have or may have a material adverse
effect on the Net Cash Flow for the affected Individual Property and (ii) an
original executed Non-Disturbance, Attornment and Subordination Agreement in
substantially the form attached hereto as Exhibit Y with respect to each Lease
specified on Schedule 3 attached hereto and 70% of all other Leases.
(U) Appraisals. Lender shall have received MAI appraisals (prepared
in compliance with FIRREA) with respect to the Individual Properties prepared by
Independent firms acceptable to Lender.
Section 3.2. Satisfaction of Conditions. Upon execution and delivery
of this Agreement by Lender, all of the conditions required to be satisfied
under this Article III in connection with the making of the Loan shall be deemed
to have been satisfied or waived in accordance with Section 8.4, unless Lender
requires in writing that any such conditions be performed after the Closing
Date.
Section 3.3. Form of Loan Documents and Related Matters. The Notes
and all of the certificates, agreements, legal opinions and other documents and
papers referred to in this Article III, unless otherwise specified, shall be
delivered to Lender, and shall be satisfactory in form and substance to Lender
in its reasonable discretion (unless the form thereof is prescribed herein).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.1. Borrower Representations. Subject to the
exceptions set forth in Schedule 2 attached hereto, Borrower represents and
warrants as of the Closing Date that:
(A) Organization. Each of OIP, MBP and NJA (i) is a duly formed and
validly existing limited liability company in good standing under the laws of
the State of New Jersey, (ii)
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75
has the requisite power and authority to own its properties (including, without
limitation, its portion of the Mortgaged Property) and to carry on its business
as now being conducted, and (iii) has the requisite power to execute and
deliver, and perform its obligations under, this Agreement, its respective Note,
the Mortgages, the Second Mortgages and all of the other Loan Documents to which
it is a party. FLIP (i) is a duly organized and validly existing corporation in
good standing under the laws of the State of New Jersey, (ii) has the requisite
corporate power and authority to carry on its business as now being conducted,
and (iii) has the requisite corporate power to execute and deliver this
Agreement, its respective Note, the Mortgages, the Second Mortgages and all of
the other Loan Documents to which FLIP is a party. MM (i) is a duly organized
and validly existing corporation in good standing under the laws of the State of
New Jersey, (ii) has the requisite corporate power and authority to carry on its
business as now being conducted, and (iii) has the requisite corporate power to
execute and deliver on behalf of OIP, MBP and NJA this Agreement, their
respective Notes, the Mortgages, the Second Mortgages and all of the other Loan
Documents to which OIP, MBP or NJA is a party.
(B) Authorization. The execution and delivery by each of FLIP, OIP,
MBP and NJA of this Agreement, its respective Note, the Mortgages, the Second
Mortgages and each of the other Loan Documents, each of FLIP's, OIP's, MBP's and
NJA's performance of its respective obligations hereunder and thereunder and the
creation of the security interests and liens provided for in this Agreement and
the other Loan Documents (i) have been duly authorized by all requisite
corporate or company action, as the case may be, on the part of each of FLIP,
OIP, MBP and NJA, (ii) will not violate any provision of any Legal Requirements,
any order of any court or other Governmental Authority, the respective operating
agreements or certificate of incorporation or by-laws, as the case may be, of or
any indenture or material agreement or other instrument to which any of FLIP,
OIP, MBP and NJA is a party or by which any such entity is bound, and (iii) will
not be in conflict with, result in a breach of, or constitute (with due notice
or lapse of time or both) a default under, or result in the creation or
imposition of any Lien of any nature whatsoever upon any of the property or
assets of any of FLIP, OIP, MBP and NJA pursuant to, any such indenture or
material agreement or instrument. Other than those obtained or filed on or prior
to the Closing Date, none of FLIP, OIP, MBP and NJA is required to obtain any
consent, approval or authorization from, or to file any declaration or statement
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76
with, any Governmental Authority or other agency in connection with or as a
condition to the execution, delivery or performance of this Agreement, its
respective Note, the Mortgages, the Second Mortgages or the other Loan
Documents.
(C) Litigation. Except for claims that are fully covered by valid
policies of insurance held by FLIP, OIP, MBP and NJA, there are no actions,
suits or proceedings at law or in equity by or before any Governmental Authority
or other agency now pending and served or, to the knowledge of FLIP, OIP, MBP
and NJA, threatened against FLIP, OIP, MBP or NJA or any of their respective
Individual Properties, which actions, suits or proceedings, if determined
against FLIP, OIP, MBP or NJA or any of their respective Individual Properties,
might result in a Material Adverse Effect.
(D) Agreements. To the best of Borrower's knowledge, none of FLIP,
OIP, MBP and NJA is a party to any agreement or instrument or subject to any
restriction which is reasonably likely to have a Material Adverse Effect. To the
best of Borrower's knowledge, none of FLIP, OIP, MBP and NJA is in default in
any material respect in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any agreement or instrument to
which it is a party or by which it or any of its Individual Property is bound,
except to the extent that such default is not reasonably likely to have a
Material Adverse Effect.
(E) Title to the Mortgaged Property. Each of FLIP, OIP, MBP and NJA
owns good, marketable and insurable fee simple title to its Individual
Properties, free and clear of all Liens, other than the Permitted Encumbrances
applicable to that Individual Property. Except as set forth on Schedule 5, there
are no outstanding options to purchase or rights of first refusal for the
purchase of all or any portion of any Individual Property.
(F) No Bankruptcy Filing. None of FLIP, OIP, MBP and NJA is
contemplating either the filing of a petition by it under any state or federal
bankruptcy or insolvency laws or the liquidation of all or a major portion of
its assets or property, and none of FLIP, OIP, MBP and NJA has knowledge of any
Person contemplating the filing of any such petition against it.
(G) Full and Accurate Disclosure. No statement of fact made by or on
behalf of Borrower in this Agreement or in any of the other Loan Documents
contains any untrue statement of
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77
a material fact or omits to state 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 materially adversely
affects, nor as far as Borrower can foresee, might materially adversely affect,
any Individual Property or the business, operations or condition (financial or
otherwise) of Borrower.
(H) Location of Chief Executive Offices. The location of Borrower's
principal place of business and chief executive office is 808 High Mountain
Road, P.O. Box 549, Franklin Lakes, New Jersey 07417.
(I) Compliance. Except for matters set forth in the Engineering
Reports described on Exhibit D attached hereto and in the "Summary" sections of
the Environmental Reports described on Exhibit E attached hereto and except for
matters described in Section 4.1(P) (as to which the provisions of Section
4.1(P) shall apply), to the best of Borrower's knowledge, Borrower, each
Individual Property and Borrower's use thereof and operations thereat comply in
all material respects with all applicable Legal Requirements, including, without
limitation, building and zoning ordinances and codes, and all applicable
Insurance Requirements. To the best of Borrower's knowledge, Borrower is not in
default or violation of any order, writ, injunction, decree or demand of any
Governmental Authority, the violation of which is reasonably likely to have a
Material Adverse Effect.
(J) Use of Proceeds; Margin Regulations. Borrower will use the
proceeds of the Loan for the purposes described in Section 2.2. No part of the
proceeds of the Loan will be used for the purpose of purchasing or acquiring any
"margin stock" within the meaning of Regulation U of the Board of Governors of
the Federal Reserve System or for any other purpose which would be inconsistent
with such Regulation U or any other Regulations of such Board of Governors, or
for any purposes prohibited by Legal Requirements.
(K) Financial Information. All historical financial data concerning
Borrower or the Individual Properties that has been delivered by Borrower to
Lender is true, complete and correct in all material respects. Since the
delivery of such data, except as otherwise disclosed in writing to Lender, there
has been no material adverse change in the financial position of any of FLIP,
OIP, MBP and NJA or Individual Properties, or in the results of operations of
the Individual Properties.
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Borrower has not incurred any obligation or liability, contingent or otherwise,
not reflected in such financial data which might adversely affect its business
operations or any Individual Property.
(L) Condemnation. No Taking has been commenced or, to Borrower's
knowledge, is contemplated with respect to all or any portion of any Individual
Property or for the relocation of roadways providing access to any Individual
Property.
(M) Other Debt. Except for the debt to be repaid from the proceeds
of the Loan or as permitted pursuant to Section 6.1(C), Borrower has not
borrowed or received other debt financing whether unsecured or secured by any
Individual Property or any part thereof.
(N) ERISA. Each Plan, and, to the knowledge of Borrower, each
Multiemployer Plan, is in compliance in all material respects with, and has been
administered in all material respects in compliance with, its terms and the
applicable provisions of ERISA, the Code and any other federal or state law, and
no event or condition has occurred and is continuing as to which Borrower would
be under an obligation to furnish a report to Lender under Section 5.1(S)(i).
(O) Utilities and Public Access. Each Individual Property has
adequate rights of access to public ways and is served by adequate water, sewer,
sanitary sewer and storm drain facilities. Except as otherwise disclosed by the
Surveys, and except as set forth on Schedule 2 hereto, to the best of Borrower's
knowledge, all public utilities necessary to the continued use and enjoyment of
each Individual Property as presently used and enjoyed are located in the public
right-of-way abutting the premises, and all such utilities are connected so as
to serve such Individual Property without passing over other property. All roads
necessary for the full utilization of each Individual Property for its current
purpose have been completed and dedicated to public use and accepted by all
Governmental Authorities or are the subject of access easements for the benefit
of the Individual Property.
(P) Environmental Compliance. Except for matters set forth in the
"Summary" sections of the Environmental Reports described on Exhibit E attached
hereto (true, correct and complete copies of which have been provided to Lender
by Borrower):
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(i) To the best of Borrower's knowledge, Borrower is in compliance
with all applicable Environmental Laws, which compliance includes, but is
not limited to, the possession by Borrower of all environmental, health
and safety permits, licenses and other governmental authorizations
required in connection with the ownership and operation of the Individual
Property under all Environmental Laws, except where the failure to comply
with such laws is not reasonably likely to result in a Material Adverse
Effect.
(ii) There is no Environmental Claim pending or, to the best of
Borrower's knowledge, threatened with respect to the Individual Properties
and (x) no penalties arising under Environmental Laws have been assessed
against Borrower, Borrower's immediate predecessor-in-interest to the
Individual Properties or, to Borrower's knowledge, any other Person with
respect to the Individual Properties whose liability for any Environmental
Claim Borrower has or may have retained or assumed either contractually or
by operation of law, and (y) to the best of Borrower's knowledge, no
investigation or review is pending or, to the knowledge of Borrower,
threatened by any Governmental Authority, citizens group, employee or
other Person, in each case, with respect to any alleged failure by
Borrower or the Individual Property to have any environmental, health or
safety permit, license or other authorization required under, or to
otherwise comply with, any Environmental Law or with respect to any
alleged liability of Borrower for any Use or Release of any Hazardous
Substances.
(iii) To the best of Borrower's knowledge, except as set forth in
the Environmental Reports, there have been and are no past or present
Releases of any Hazardous Substance that are reasonably likely to form the
basis of any Environmental Claim against Borrower or against any Person
whose liability for any Environmental Claim Borrower has or may have
retained or assumed either contractually or by operation of law.
(iv) To the best of Borrower's knowledge, except as set forth in the
Environmental and/or Engineering Reports, there is not present at, on, in
or under the Individual Property, PCB-containing equipment, asbestos or
asbestos containing materials, underground storage tanks or surface
impoundments for Hazardous Substances, lead in drinking
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water (except in concentrations that comply with all Environmental Laws),
or lead-based paint.
(v) To Borrower's knowledge, no Governmental Authority has been
taking or is in the process of taking any action that could subject the
Individual Property to Liens under any Environmental Law.
(vi) There have been no environmental investigations, studies,
audits, reviews or other analyses conducted by or that are in the
possession of Borrower in relation to an Individual Property which have
not been provided to Lender.
(Q) Solvency. None of the transactions contemplated hereby will be
or have been made with an actual intent to hinder, delay or defraud any present
or future creditors of FLIP, OIP, MBP or NJA and, giving effect to the
transactions contemplated hereby, the fair saleable value of a Borrower's assets
exceeds and will, immediately following the making of the Loan, exceed such
Borrower's total liabilities, including, without limitation, subordinated,
unliquidated, disputed and contingent liabilities. Each Borrower has received
reasonably equivalent value in exchange for its obligations under the Loan
Documents. The fair saleable value of a Borrower's assets is and will,
immediately following the making of the Loan, be greater than such Borrower's
probable liabilities, including the maximum amount of its contingent liabilities
on its debts as such debts become absolute and matured. Each 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. No Borrower intends to, nor believes that it will, incur debts
and liabilities (including, without limitation, Contingent Obligations and other
commitments) beyond its ability to pay such debts as they mature (taking into
account the timing and amounts to be payable on or in respect of obligations of
such Borrower).
(R) Not Foreign Person. Borrower is not a "foreign person" within
the meaning of Section 1445(f)(3) of the Code.
(S) Single-Purpose Entity. (To the extent provisions of this Section
4.1(S) are agreements with respect to matters from and after the Closing Date,
such provisions shall be covenants for the purposes of the default, remedies and
limitation on recourse provisions of this Agreement.)
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(i) Each of OIP, MBP and NJA at all times since its formation has
been, and will continue to be, a duly formed and existing New Jersey
limited liability company and a Single-Purpose Entity. FLIP at all times
since its formation has been, and will continue to be, a duly formed and
existing New Jersey corporation and a Single-Purpose Entity. MM at all
times since its formation has been and will continue to be, a duly formed
and existing New Jersey corporation and a Single-Purpose Entity.
(ii) Each of OIP, MBP and NJA at all times since its formation has
complied, and will continue to comply, with the provisions of its
operating agreement and the laws of the State of New Jersey relating to
limited liability companies. FLIP at all times since its formation has
complied, and will continue to comply, with the provisions of its
certificate of incorporation and its by-laws and the laws of the State of
New Jersey relating to corporations. MM at all times since its formation
has complied, and will continue to comply, with the provisions of its
certificate of incorporation and its by-laws and the laws of the State of
New Jersey relating to corporations.
(iii) All customary formalities regarding the corporate existence of
each Borrower and MM have been observed at all times since its formation
and will continue to be observed.
(iv) Each Borrower and MM has at all times since its formation
accurately maintained, and will continue to accurately maintain, its
financial statements, accounting records and other corporate documents
separate from those of its shareholders, members, Affiliates of its
shareholders or members and any other Person, provided, however, that
financial statements for a Borrower may be maintained and prepared on a
consolidated basis with the financial statements of the other Borrowers
provided that each Borrower is identified therein as a separate entity.
Except for the centralized accounts described in Article II, neither any
Borrower nor MM has at any time since its formation commingled, and
neither any Borrower nor MM will commingle, its assets with those of its
shareholders, members, any Affiliates of its shareholders or members, or
any other Person. Except for the centralized accounts described in Article
II, each Borrower and MM has at all times since its formation accurately
maintained, and will continue to accurately maintain, its own bank
accounts and separate books of account.
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(v) Each Borrower and MM has at all times since its formation paid,
and will continue to pay, its own liabilities from its own separate
assets.
(vi) Each Borrower and MM has at all times since its formation
identified itself, and will continue to identify itself, in all dealings
with the public, under its own name and as a separate and distinct entity.
Neither any Borrower nor MM has at any time since its formation identified
itself, and neither any Borrower nor MM will identify itself, as being a
division or a part of any other entity. Neither any Borrower nor MM has at
any time since its formation identified, and neither any Borrower nor MM
will identify its shareholders, members or any Affiliates of its
shareholders or members, as being a division or part of it.
(vii) Each Borrower and MM have been at all times since their
formation and will continue to be adequately capitalized in light of the
nature of their then current business.
(viii) Neither any Borrower nor MM has at any time since its
formation assumed or guaranteed, and neither any Borrower nor MM will
assume or guarantee, the liabilities of its shareholders, members, any
Affiliates of its shareholders or members, or any other Persons, except
for liabilities relating to such Borrower's Individual Properties and
except as permitted by or pursuant to this Agreement. Neither any Borrower
nor MM has at any time since its formation acquired, and neither any
Borrower nor MM will acquire, obligations or securities of its
shareholders or members, or any Affiliates of its shareholders or members.
Neither any Borrower nor MM has at any time since its formation made, and
neither any Borrower nor MM will make, loans to its shareholders or
members, or any Affiliates of its shareholders or members.
(ix) Neither any Borrower nor MM has at any time since its formation
entered into and neither any Borrower nor MM has been a party to, and,
neither any Borrower nor MM will enter into or be a party to, any
transaction with its shareholders or members or any Affiliates of its
shareholders or members except (x) for the Management Agreements and the
Lease Agreement between MBP, as landlord, and Mesco, an Affiliate, as
tenant, relating to
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the Individual Property known as 1600 Route 208, Fair Lawn, New Jersey
(the "Affiliate Lease"), and (y) in the ordinary course of business of any
Borrower or MM, as the case may be, on terms which are no less favorable
to such Borrower or MM, as the case may be, than would be obtained in a
comparable arm's length transaction with an unrelated third party.
(T) No Joint Assessment; Separate Lots. Each Individual Property 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. No Individual
Property is benefitting from a tax abatement.
(U) Assessments. Except as disclosed in the Title Insurance
Policies, there are no pending or, to the knowledge of Borrower, proposed
special or other assessments for public improvements or otherwise affecting any
Individual Property, nor, to the knowledge of Borrower, are there any
contemplated improvements to any Individual Property that may result in such
special or other assessments.
(V) Mortgage and Other Liens. Each Mortgage, when properly recorded,
creates a valid and enforceable first mortgage Lien on the Individual Property
described therein, as security for the repayment of the portion of the
Indebtedness evidenced by the Note made by the owner of such Individual
Property, subject only to the Permitted Encumbrances applicable to such
Individual Property. Each Second Mortgage, when properly recorded, creates a
valid and enforceable second mortgage Lien on the Individual Property described
therein, as security for the repayment of the portion of the Indebtedness
evidenced by the Notes made by each Borrower other than the owner of such
Individual Property, subject only to the Permitted Encumbrances applicable to
such Individual Property. Each Collateral Security Instrument establishes and
creates a valid, subsisting and enforceable Lien on and a security interest in,
or claim to, the rights and property described therein. All property covered by
any Collateral Security Instrument is subject to a Uniform Commercial Code
financing statement filed and/or recorded, as appropriate, (or irrevocably
delivered to a title agent for such recordation or filing) in all places
necessary to perfect a valid first priority lien with respect to the rights and
property that are the subject of such Collateral Security Instrument to the
extent governed by the Uniform Commercial Code. All continuations and any
assignments of any
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such financing statements will be timely filed or refiled, as appropriate, in
the appropriate recording offices.
(W) Enforceability. The Notes, each Mortgage, each Second Mortgage
and each other Loan Document executed by a Borrower in connection herewith,
including, without limitation, any Collateral Security Instrument, are the
legal, valid and binding obligations of Borrower, or each Borrower,
respectively, as the case may be, enforceable against Borrower or each Borrower,
respectively, as the case may be, in accordance with their terms, subject to
bankruptcy, insolvency and other limitations on creditors' rights generally and
to equitable principles and the other matters described in the opinions
delivered pursuant to Section 3.1(B). The Notes, each such Mortgage, each such
Second Mortgage and the other Loan Documents executed by any Borrower are, as of
the date hereof, not subject to any right of rescission, set-off, counterclaim
or defense by Borrower, including the defense of usury, nor will the operation
of any of the terms of the Notes, each such Mortgage, each such Second Mortgage
and other Loan Documents executed by Borrower, or the exercise of any right
thereunder, render the Mortgages or the Second Mortgages unenforceable against
any Borrower, in whole or in part, or subject to any right of rescission,
set-off, counterclaim or defense by any Borrower, including the defense of
usury, and Borrower has asserted any right of rescission, set-off, counterclaim
or defense with respect thereto.
(X) Permitted Encumbrances. Except for the items set forth on
Schedule 5 hereto, to the best of Borrower's knowledge, the Permitted
Encumbrances (other than those described in clauses (i) and (ii) of the
definition of Permitted Encumbrances) do not cause a Material Adverse Effect.
(Y) No Prior Assignment. As of the date hereof, (i) Lender is the
assignee of Borrower's interest under the Leases and (ii) there are no prior
assignments of the Leases or any portion of the Rent due and payable or to
become due and payable which are presently outstanding.
(Z) No Defaults. No Event of Default or, to the best of Borrower's
knowledge, Default exists under or with respect to any Loan Document.
(AA) Labor Matters. Borrower does not have any employees. Borrower
is not a party to any collective bargaining agreements.
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(BB) Use of Facilities. Each Individual Property is used exclusively
for general office and/or industrial purposes and uses ancillary thereto
(including parking).
(CC) Permits; Certificate of Occupancy. Each Borrower has obtained
(directly or by assignment from its respective predecessor-in-interest) all
Permits necessary to use and operate its Individual Properties for the use
described in Section 4.1(BB). The use being made of each Individual Property is
in conformity in all material respects with the certificate of occupancy and/or
Permits for such Individual Property and any other restrictions, covenants or
conditions affecting such Individual Property.
(DD) Flood Zone. Except as shown on the Surveys, none of the
Individual Properties is located in a flood hazard area as defined by the
Federal Insurance Administration.
(EE) Physical Condition. To the best of Borrower's knowledge, each
Individual Property is free of structural defects and all building systems
contained therein are in good working order in all material respects subject to
ordinary wear and tear, except as disclosed in the Engineering Reports described
on Exhibit D.
(FF) Structure. MM is the managing member of each of OIP, MBP and
NJA. Each of OIP, MBP and NJA has only one other member. FLIP S CORP owns 100%
of FLIP. UH owns 96% and the Senior McBrides own 4%of MM. The Guarantors,
collectively, own 100% of UH. The Guarantors, collectively, own, directly or
indirectly, 100% of the other member of each of MBP and NJA. The Guarantors,
collectively, own 100% of FLIP S CORP. The Guarantors and the Senior McBrides,
collectively, own, directly or indirectly, 100% of RROP.
(GG) Security Deposits. All security deposits with respect to the
Individual Properties on the date hereof shall be transferred to the Security
Deposit Accounts within 5 Business Days from the date hereof, and each Borrower
is in compliance with all Legal Requirements relating to such security deposits.
(HH) Intellectual Property. All material trademarks, tradenames and
servicemarks that a Borrower owns or has pending, or under which it is licensed,
are in good standing and uncontested. There is no right under any trademark,
tradename or servicemark necessary to the business of a Borrower as presently
conducted or
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as a Borrower contemplates conducting its business. To the best of each
Borrower's knowledge, such Borrower has not infringed, is not infringing, and
has not received notice of infringement with respect to asserted trademarks,
tradenames and servicemarks of others. To each Borrower's knowledge, there is no
infringement by others of material trademarks, tradenames and servicemarks of
Borrower.
(II) Investment Company Act; Public Utility Holding Company Act. No
Borrower is (i) an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended, (ii) a "holding company" or a "subsidiary company" of a "holding
company" or an "affiliate" of either a "holding company" or a "subsidiary
company" within the meaning of the Public Utility Holding Company Act of 1935,
as amended, or (iii) subject to any other federal or state law or regulation
which purports to restrict or regulate its ability to borrow money.
(JJ) Tax Fair Market Value. As of the Closing Date, (i) the Tax Fair
Market Value of each Individual Property is equal to or greater than the
Allocated Loan Amount for such Individual Property and (ii) the Tax Fair Market
Value of the Mortgaged Property is equal to or exceeds the Principal
Indebtedness.
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Section 4.2. Survival of Representations. Borrower agrees that all
of the representations and warranties of Borrower set forth in Section 4.1 and
elsewhere in this Agreement and in the other Loan Documents are made as of the
Closing Date (except as expressly otherwise provided) and shall survive the
delivery of the Notes and making of the Loan and continue for as long as any
amount remains owing to Lender under this Agreement, the Notes or any of the
other Loan Documents; provided, however, that the representations and warranties
set forth in Section 4.1(P) shall survive for a period of two years following
the repayment in full of the Loan and all other sums owing under this Agreement
and the other Loan Documents, provided, however, that if, at any time during the
term of the Loan (including upon maturity), an Event of Default occurred
(whether or not cured) or Lender exercised any of its rights or remedies with
respect the operation, control, management, physical condition, maintenance or
inspection of the Individual Properties or similar matters, the representations
and warranties set forth in Section 4.1(P) shall survive in perpetuity. All
representations, warranties, covenants and agreements made in this Agreement or
in the other Loan Documents shall be deemed to have been relied upon by Lender
notwithstanding any investigation heretofore or hereafter made by Lender or on
its behalf.
Section 4.3. Borrower's Knowledge. Any representation or warranty in
this Agreement or in the other Loan Documents made "to the best of Borrower's
knowledge" or "to the knowledge of Borrower" is made after due inquiry by any of
Timothy B. McBride, David F. McBride, Michael X. McBride or Peter Meyer and
includes the actual knowledge of any of Timothy B. McBride, David F. McBride,
Michael X. McBride or Peter Meyer.
ARTICLE V
AFFIRMATIVE COVENANTS
Section 5.1. Borrower Covenants. Borrower covenants and agrees that,
from the date hereof and until payment in full of the Indebtedness (or, with
respect to a particular Individual Property, the earlier release of its Related
Mortgages):
(A) Existence; Compliance with Legal Requirements; Insurance. Each
Borrower shall do or cause to be done all things necessary to preserve, renew
and keep in full force and effect its existence as a limited liability company
or a corporation, as the case may be, rights, licenses, Permits and
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franchises necessary for the conduct of its business and comply in all material
respects with all Legal Requirements and Insurance Requirements applicable to it
and each Individual Property owned by it. Each Borrower shall at all times
maintain, preserve and protect all franchises and tradenames and preserve all
the remainder of its property necessary for the continued conduct of its
business and keep each Individual Property owned by it in good repair, working
order and condition, except for reasonable wear and use, and from time to time
make, or cause to be made, all reasonably necessary repairs, renewals,
replacements, betterments and improvements thereto, all as more fully provided
in the Mortgages and the Second Mortgages. Borrower shall keep each Individual
Property insured at all times, by financially sound and reputable insurers, to
such extent and against such risks, and maintain liability and such other
insurance, as is more fully provided in the Mortgages and the Second Mortgages.
Notwithstanding anything contained in the Mortgages and the Second Mortgages, in
each case, however, if no providers of such insurance are rated as required in
the Mortgages and the Second Mortgages, the requirement for such rating shall be
that rating by the Rating Agencies, as confirmed by the Rating Agencies in
writing, which will not result in a downgrade, qualification or withdrawal of
the then current ratings of any class of the Certificates. Upon Borrower's
receipt of notice designating Servicer, Borrower shall cause all certificates of
liability insurance to be revised to include Servicer as an additional insured
as its interest may appear.
(B) Impositions and Other Claims. Borrower shall pay and discharge
or cause to be paid and discharged all Impositions, as well as all lawful claims
for labor, materials and supplies or otherwise, which could become a Lien, all
as more fully provided in, and subject to any rights to contest contained in,
the Mortgages and the Second Mortgages.
(C) Litigation. Each Borrower shall give prompt written notice to
Lender of any litigation or governmental proceedings pending or threatened (in
writing) against such Borrower or the Mortgaged Property which is reasonably
likely to have a Material Adverse Effect.
(D) Environmental Remediation.
(i) If any investigation, delineation, site monitoring, cleanup,
removal, restoration or other remedial work of any kind or nature is
required pursuant to an order
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or directive of any Governmental Authority or, except to the extent set
forth in the last sentence of this clause (i), under any applicable
Environmental Law (collectively, the "Remedial Work"), because of or in
connection with the current or future presence, suspected presence,
Release or threatened Release of a Hazardous Substance relating to an
Individual Property or any portion thereof, Borrower shall promptly
commence and diligently prosecute to completion all such Remedial Work. In
all events, such Remedial Work shall be commenced within 30 days after any
demand therefor by Lender or such shorter period as may be required under
any applicable Environmental Law or by any Governmental Authority;
provided, however, that Borrower shall not be required to commence such
Remedial Work within the above specified time periods: (x) if prevented
from doing so by any Governmental Authority, (y) if commencing such
Remedial Work within such time periods would result in Borrower or such
Remedial Work violating any Environmental Law or (z) if Borrower, at its
expense and after prior notice to Lender, is contesting by appropriate
legal, administrative or other proceedings conducted in good faith and
with due diligence the need to perform Remedial Work, as long as (1)
Borrower is permitted by the applicable Environmental Laws to delay
performance of the Remedial Work pending such proceedings, (2) neither the
Individual Property nor any part thereof or interest therein will be sold,
forfeited or lost if Borrower performs the Remedial Work being contested,
and Borrower would have the opportunity to do so, in the event of
Borrower's failure to prevail in the contest, (3) Lender would not, by
virtue of such permitted contest, be exposed to any material risk of any
civil liability for which Borrower has not furnished additional security
as provided in clause (4) below, or to any risk of criminal liability, and
neither the Individual Property nor any interest therein would be subject
to the imposition of any lien for which Borrower has not furnished
additional security as provided in clause (4) below, as a result of the
failure to perform such Remedial Work and (4) Borrower shall have
furnished to Lender additional security in respect of the Remedial Work
being contested and the loss or damage that may result from Borrower's
failure to prevail in such contest in such amount as may be reasonably
requested by Lender. Notwithstanding the foregoing, with respect only to
those certain issues disclosed in the Environmental Reports received by
Lender on or before the date of this Agreement for the Individual
Properties located in Fair Lawn, New Jersey, which issues relate to
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the nearby property on the E.P.A.'s National Priority List, Borrower's
obligation to perform Remedial Work under this clause (i) shall arise only
if any such Remedial Work is required to be performed or paid for by
Borrower pursuant to an order or directive of any Governmental Authority,
and only to the extent and within the time periods set forth in such order
or directive or subsequent orders or directives, provided, however, that
Borrower shall at all times provide Lender with any notices or information
relating to such Individual Properties as required hereunder, whether from
or prepared by a Governmental Authority or other Person.
(ii) If requested by Lender, all Remedial Work under clause (i)
above shall be performed by contractors, and under the supervision of a
consulting Engineer, each approved in advance by Lender which approval
will not be unreasonably withheld or delayed. All costs and expenses
reasonably incurred in connection with such Remedial Work shall be paid by
Borrower. If Borrower does not timely commence and diligently prosecute to
completion the Remedial Work, unless Borrower is contesting the need to
perform such Remedial Work in accordance with clause (i) above, Lender may
(but shall not be obligated to), upon 30 days prior written notice to
Borrower of its intention to do so, cause such Remedial Work to be
performed. In such event, Borrower shall pay or reimburse Lender on demand
for all expenses (including reasonable consultants' and attorneys' fees
and disbursements, but excluding internal overhead, administrative and
similar costs of Lender) reasonably relating to or incurred by Lender in
connection with monitoring, reviewing or performing any Remedial Work in
accordance herewith, together with interest thereon at the Default Rate
from the date of demand by Lender.
(iii) Borrower shall not commence any Remedial Work under clause (i)
above, nor enter into any settlement agreement, consent decree or other
compromise relating to any Hazardous Substances or Environmental Laws
which is reasonably likely to have a Material Adverse Effect without the
prior written consent of Lender, which consent shall not be unreasonably
withheld, conditioned or delayed. Notwithstanding the foregoing, if the
presence, Release or threatened Release of Hazardous Substances relating
to any Individual Property poses an immediate threat to the health, safety
or welfare of any Person or the environment, or is of such a nature that
an immediate response is necessary, or if Remedial Work is required by the
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applicable Governmental Authority to be commenced immediately, or if
Borrower could incur penalties or fines if it failed to commence and
complete Remedial Work immediately, Borrower may commence and complete all
necessary Remedial Work. In such events, Borrower shall notify Lender as
soon as practicable and, in any event, within three Business Days, of any
action taken.
(E) Environmental Matters; Inspection.
(i) Borrower shall not authorize a Hazardous Substance to be present
on or under or to emanate from an Individual Property, or migrate from
adjoining property controlled by Borrower onto or into an Individual
Property, except under conditions permitted by applicable Environmental
Laws and conditions not reasonably likely to give rise to Remedial Work,
and in the event that such Hazardous Substances are present on, under or
emanate from an Individual Property, or migrate onto or into an Individual
Property, if required pursuant to Section 5.1(D), Borrower shall cause the
removal or remediation of such Hazardous Substances, in accordance with
Section 5.1(D) of this Agreement and Environmental Laws. Subject to
Section 5.1(D) hereof, Borrower shall use commercially reasonable efforts
to prevent other Persons, and to seek the remediation by other Persons of,
any migration of Hazardous Substances (of which Borrower has knowledge)
onto or into any Individual Property from any adjoining property.
(ii) Upon reasonable prior written notice and subject to the rights
of tenants under Leases, Lender or Lender's agents shall have the right at
all reasonable times to enter upon and inspect all or any portion of any
Individual Property, provided that such inspections shall not unreasonably
interfere with the operation or the tenants, occupants or guests of such
Individual Property. If Lender suspects that Remedial Work may be
required, Lender may select a consulting Engineer to conduct and prepare
reports of such inspections. Borrower shall be given a reasonable
opportunity to review any reports, data and other documents or materials
reviewed or prepared by the Engineer, and to submit comments and suggested
revisions or rebuttals to same. The inspection rights granted to Lender in
this Section 5.1(E) shall be in addition to, and not in limitation of, any
other inspection rights granted to Lender in this Agreement, and shall
expressly include the
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right (if Lender suspects that Remedial Work may be required) to conduct
soil borings, establish ground water monitoring wells and conduct other
customary environmental tests, samplings, assessments and audits.
(iii) Borrower agrees to bear and shall pay or reimburse Lender on
demand for all sums advanced and expenses incurred (including reasonable
consultants' and attorneys' fees and disbursements, but excluding internal
overhead, administrative and similar costs of Lender) reasonably relating
to, or incurred by Lender in connection with, the inspections and reports
described in this Section 5.1(E) (to the extent such inspections and
reports relate to any Individual Property) in the following situations:
(x) If Lender has reasonable grounds to believe, at the time
any such inspection is ordered, that there exists an occurrence or
condition that could lead to an Environmental Claim;
(y) If any such inspection reveals an occurrence or condition
that could lead to an Environmental Claim; or
(z) If an Event of Default with respect to any Individual
Property exists at the time any such inspection is ordered, and such
Event of Default relates to any representation, covenant or other
obligation pertaining to Hazardous Substances, Environmental Laws or
any other environmental matter.
(F) Environmental Notices. Borrower shall promptly provide notice to
Lender of:
(i) any Environmental Claim asserted by any Governmental Authority
with respect to any Hazardous Substance relating to any Individual
Property, which could reasonably be expected to impair the value of
Lender's security interests hereunder or have a Material Adverse Effect;
(ii) any proceeding, investigation or inquiry commenced or
threatened in writing by any Governmental Authority, against Borrower,
with respect to the presence, suspected presence, Release or threatened
Release of Hazardous Substances relating to any property not owned by
Borrower, including, without limitation, proceedings under
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the Comprehensive Environmental Response, Compensation, and Liability Act,
as amended, 42 U.S.C. ss. 9601, et seq., which could reasonably be
expected to impair materially the value of Lender's security interests
hereunder or have a Material Adverse Effect;
(iii) all Environmental Claims asserted or threatened against
Borrower, against any other party occupying any Individual Property or any
portion thereof which become known to Borrower or against such Individual
Property, which could reasonably be expected to impair the value of
Lender's security interests hereunder or have a Material Adverse Effect;
(iv) the discovery by Borrower of any occurrence or condition on any
Individual Property or on any real property adjoining or in the vicinity
of such Individual Property which could reasonably be expected to lead to
an Environmental Claim against Borrower or Lender which such Environmental
Claim is reasonably likely to have a Material Adverse Effect; and
(v) the commencement or completion of any Remedial Work.
(G) Copies of Notices. Borrower shall transmit to Lender copies of
any citations, orders, notices or other written communications received from any
Person and any notices, reports or other written communications submitted to any
Governmental Authority with respect to the matters described in Section 5.1(F).
(H) Environmental Claims. Lender and/or, to the extent authorized by
Lender, Trustee and/or Servicer, may join and participate in, as a party if
Lender so determines, any legal or administrative proceeding or action
concerning a Individual Property or any portion thereof under any Environmental
Law, if, in Lender's reasonable judgment, the interests of Lender, Trustee or
Servicer will not be adequately protected by Borrower. Borrower agrees to bear
and shall pay or reimburse Lender, Trustee and/or Servicer, on demand for all
reasonable sums advanced and expenses (including reasonable consultants' and
attorneys' fees and disbursements, but excluding internal overhead,
administrative and similar costs of Lender, Trustee and Servicer) incurred by
Lender, Trustee and/or Servicer, in connection with any such action or
proceeding.
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(I) Environmental Indemnification. Borrower agrees to indemnify,
reimburse, defend, and hold harmless Lender, Trustee and Servicer for, from, and
against all demands, claims, actions or causes of action, assessments, losses,
damages, liabilities, costs and expenses, including, without limitation,
interest, penalties, reasonable attorneys' fees, disbursements and expenses, and
reasonable consultants' fees, disbursements and expenses (but excluding internal
overhead, administrative and similar costs of Lender, Trustee and Servicer),
asserted against, resulting to, imposed on, or incurred by Lender, Trustee and
Servicer, directly or indirectly, in connection with any of the following,
except to the extent same are directly caused by (x) Lender's, Trustee's or
Servicer's gross negligence, bad faith or willful misconduct or a breach by
Lender, Trustee or Servicer of any of its or their obligations under the Loan
Documents or (y) actions taken or omitted to be taken by Lender, Trustee or
Servicer after any such party becomes a mortgagee in possession or otherwise
takes possession or control of the affected Individual Property following an
Event of Default or acquires title to the affected Individual Property through
foreclosure, deed in lieu of foreclosure or otherwise (it being Borrower's
burden to prove such causation):
(i) events, circumstances, or conditions which are alleged to, or
do, form the basis for an Environmental Claim;
(ii) any Environmental Claim against any Person whose liability for
such Environmental Claim Borrower has or may have assumed or retained
either contractually or by operation of law; or
(iii) the breach of any representation, warranty or covenant set
forth in Section 4.1(P) and Sections 5.1(D) through 5.1(I), inclusive.
The indemnity provided in this Section 5.1(I) shall not be included
in any exculpation of Borrower from recourse liability provided in this
Agreement or in any of the other Loan Documents. Nothing in this Section 5.1(I)
shall be deemed to deprive Lender of any rights or remedies provided to it
elsewhere in this Agreement or the other Loan Documents or otherwise available
to it under law.
(J) Access to Individual Properties. Borrower shall permit agents,
representatives and employees of Lender to inspect each Individual Property or
any part thereof at such
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reasonable times as may be requested by Lender upon reasonable advance notice,
subject, however, to the rights of the tenants, occupants and guests of the
Individual Property.
(K) Notice of Default. Borrower shall promptly advise Lender of any
material adverse change in Borrower's condition, financial or otherwise, or of
the occurrence of any Event of Default, or of the occurrence of any Default of
which Borrower has knowledge.
(L) Cooperate in Legal Proceedings. Except with respect to any claim
by Borrower against Lender, Borrower shall cooperate fully with Lender with
respect to any proceedings before any Governmental Authority which may in any
way affect the rights of Lender hereunder or any rights obtained by Lender under
any of the Loan Documents and, in connection therewith, not prohibit Lender, at
its election, from participating in any such proceedings.
(M) Perform Loan Documents. Borrower shall observe, perform and
satisfy all the terms, provisions, covenants and conditions required to be
observed, performed or satisfied by it, and shall pay when due all costs, fees
and expenses required to be paid by it, under the Loan Documents executed and
delivered by Borrower.
(N) Insurance Benefits. Borrower shall cooperate with Lender in
obtaining for Lender the benefits of any Insurance Proceeds lawfully or
equitably payable to Lender in connection with each Individual Property, and
Lender shall be reimbursed for any expenses reasonably incurred in connection
therewith (including attorneys' fees and disbursements and the payment by
Borrower of the expense of an appraisal on behalf of Lender in case of a fire or
other casualty affecting such Individual Property or any part thereof, but
excluding internal overhead, administrative and similar costs of Lender) out of
such Insurance Proceeds, all as more specifically provided in the Mortgages and
the Second Mortgages.
(O) Further Assurances. Borrower shall, at Borrower's sole cost and
expense:
(i) upon Lender's request therefor given in connection with the
Securitization or from time to time, pay for (a) reports of UCC, tax lien,
judgment and litigation searches with respect to Borrower and (b) searches
of title to each Individual Property, each
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such search to be conducted by search firms designated by Lender in each
of the locations designated by Lender;
(ii) furnish to Lender all instruments, documents, boundary surveys,
footing or foundation surveys, certificates, plans and specifications,
appraisals, title and other insurance reports and agreements, and each and
every other document, certificate, agreement and instrument required to be
furnished pursuant to the terms of the Loan Documents;
(iii) execute and deliver to Lender such documents, instruments,
certificates, assignments and other writings, and do such other acts
necessary, to evidence, preserve and/or protect the Collateral at any time
securing or intended to secure the Notes, as Lender may reasonably
require; and
(iv) do and execute all and such further lawful and reasonable acts,
conveyances and assurances for the better and more effective carrying out
of the intents and purposes of this Agreement and the other Loan
Documents, as Lender shall reasonably require from time to time but
without materially adversely affecting Borrower's rights or obligations
hereunder or thereunder.
(P) Management of Mortgaged Property. Each of the Individual
Properties will be managed at all times by a Manager pursuant to a Management
Agreement until terminated as herein provided. Pursuant to the Manager's
Subordinations, the Manager has agreed that each Management Agreement is subject
and subordinate in all respects to the Lien of the Related Mortgages. Each
Management Agreement may be terminated by Lender upon 30 days' prior written
notice to the relevant Borrower and Manager (i) upon the occurrence and during
the continuance of an Event of Default, or (ii) if the Debt Service Coverage
Ratio for the Individual Properties as a whole shall fall below 1.15 as of the
last day of a calendar quarter, and, upon such termination, Lender may appoint a
replacement manager or managers. Notwithstanding the foregoing, (A) during the
period prior to and including the second anniversary of the Securitization
Closing Date, Borrower shall have the right, within five Business Days after
notice from Lender of its intention to terminate one or more of the Management
Agreements pursuant to clause (ii), to deposit with Lender or Servicer the
following items (for the purposes of this paragraph, the "U.S. Obligations
Deliveries"): (1) U.S. Obligations the payments from which will increase the
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Debt Service Coverage Ratio to 1.15 when recalculated with an adjustment to
Operating Income to include as income the payments to be made from the U.S.
Obligations for the next succeeding 12 month period, (2) a security agreement,
in form and substance reasonably satisfactory to Lender, creating a first
priority lien on the U.S. Obligations, and (3) an opinion of counsel for
Borrower in form satisfactory to Lender stating, among other things, that Lender
has a first priority perfected security interest in the U.S. Obligations; (B)
during the period after but not including the second anniversary of the
Securitization Closing Date and before but not including the Optional Prepayment
Date, Borrower shall have the right, within five Business Days after notice from
Lender of its intention to terminate one or more of the Management Agreements
pursuant to clause (ii), to notify Lender in writing of Borrower's election to
defease a portion of the Loan in accordance with Section 8.30 in an amount
sufficient to increase the Debt Service Coverage Ratio to 1.15; and (C) on and
after the Optional Prepayment Date, Borrower shall have the right, within five
Business Days after notice from Lender of its intention to terminate one or more
of the Management Agreements pursuant to clause (ii), to notify Lender of
Borrower's intention to prepay the Loan in accordance with Section 2.6 on the
next Payment Date in an amount sufficient to increase the Debt Service Coverage
Ratio to 1.15, and Lender shall not so terminate the Management Agreement(s) if
Borrower so delivers the U.S. Obligations Deliveries or so defeases or prepays a
portion of the Loan. Income produced from the U.S. Obligations delivered
pursuant to clause (A) shall be deposited into the Cash Collateral Account or
the Servicer Account, as the case may be, to be applied and disbursed in
accordance with Section 2.12. Borrower may from time to time appoint one or more
successor managers to manage the Individual Properties or any of the Individual
Properties with Lender's prior written consent, which consent shall not be
unreasonably withheld, conditioned or delayed. If Lender does not respond to a
request for such consent within ten Business Days after such request is deemed
given pursuant to Section 8.6, Borrower may send a second request for such
consent which shall be marked "SECOND REQUEST". If Lender does not respond to
such second request within three Business Days after it is deemed given pursuant
to Section 8.6, Lender shall be deemed to have approved such request, if the
successor manager satisfies the requirements set forth in clauses (i) through
(iv) below and its experience has been managing at least 500,000 square feet of
the specified property types in New York, New Jersey and/or Pennsylvania.
Notwithstanding the foregoing, any successor property manager selected hereunder
by Lender or Borrower to
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serve as a Manager (including upon the consummation of the transactions
described in Section 8.31) shall (i) if the transactions described in Section
8.31 have occurred, manage the Individual Properties subject to such guidelines
as may be necessary to maintain the status of the REIT as a qualified real
estate investment trust, (ii) be a reputable management company having (or its
primary personnel having) at least seven years' experience in the management of
general office and/or industrial properties, as the case may be, and be
obligated to manage the Individual Property in accordance with standards at
least equal to those then in effect with respect to the Manager being replaced,
and, in any event, in accordance with then existing standards of service,
operation and conduct exhibited by other comparable property managers in the
general vicinity of the Individual Property, (iii) enter into a Management
Agreement, including terms that are standard in the applicable market and
providing for management fees that do not exceed then market rates, and a
Manager's Subordination and (iv) if after the Securitization Closing Date, (x)
have qualifications such that the then current ratings of no class of the
Certificates would be downgraded or withdrawn by the Rating Agencies upon such
an appointment and (y) be reasonably acceptable to Servicer. Provided the
preceding conditions are met, Lender hereby consents to the appointment of the
Operating Partnership, or an Affiliate thereof, as successor manager in
connection with the transactions described in Section 8.31. Borrower further
covenants and agrees that each Manager (including any successor property manager
serving as Manager) shall at all times during the term of the Loan maintain
worker's compensation insurance as required by Governmental Authorities.
Notwithstanding anything contained herein to the contrary, without Lender's
prior written consent, which consent shall not be unreasonably withheld,
conditioned or delayed, Borrower shall not agree to a renewal of any Management
Agreement with a Manager otherwise acceptable hereunder if such renewal period
would extend beyond the Optional Prepayment Date.
(Q) Financial Reporting.
(i) Borrower shall keep and maintain or shall cause to be kept and
maintained on a Fiscal Year basis, in accordance with GAAP (or such other
accounting basis reasonably acceptable to Lender) consistently applied,
books, records and accounts reflecting in reasonable detail all of the
financial affairs of Borrower and all items of income and expense in
connection with the operation of each Individual Property and in
connection with any services,
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equipment or furnishings provided in connection with the operation of each
Individual Property. Lender shall have the right from time to time at all
times during normal business hours upon reasonable prior written notice to
Borrower to examine such books, records and accounts at the office of
Borrower or other Person maintaining such books, records and accounts and
to make such copies or extracts thereof as Lender shall desire. After the
occurrence of an Event of Default with respect to Borrower or any
Individual Property, Borrower shall pay any reasonable costs and expenses
incurred by Lender to examine Borrower's accounting records with respect
to such Individual Property, as Lender shall reasonably determine to be
necessary or appropriate in the protection of Lender's interest.
(ii) Borrower shall furnish to Lender annually, within 90 days
following the end of each Fiscal Year, a complete copy of Borrower's
operating and financial statements audited by a certified public
accounting firm reasonably acceptable to Lender (any "Big Six" accounting
firm being deemed acceptable to Lender) in accordance with GAAP
consistently applied, covering Borrower's financial position and results
of operations, including consolidated and consolidating balance sheets for
each Individual Property, for such Fiscal Year and containing a statement
of revenues and expenses, a statement of assets and liabilities, a
statement of Borrower's equity, a calculation of Net Cash Flow and an
exhibit detailing capitalized expenses for such Fiscal Year. 30 days
before each delivery required by this clause (ii), Borrower shall deliver
unaudited copies of the same to Lender. Audited statements for the
Individual Properties may be prepared on a combined basis provided such
statements are accompanied by a procedures report acceptable to Lender
demonstrating that the unaudited property level statements on the
Individual properties tie to the combined audited statements.
Together with Borrower's annual financial statements, Borrower shall
furnish to Lender an Officer's Certificate certifying as of the date
thereof (x) whether there exists an Event of Default or, to Borrower's
knowledge, Default, and if such Event of Default or Default exists, the
nature thereof, the period of time it has existed and the action then
being taken to remedy same and (y) with the unaudited annual financial
statements only, that the annual financial
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statements present fairly in all material respects the results of
operations and financial condition of Borrower.
(iii) [INTENTIONALLY OMITTED].
(iv) Borrower shall furnish to Lender, within 30 days following the
end of each month (starting with said report for the month of October
1997), (x) property operating statements (prepared on an accrual basis and
including a schedule showing actual cash receipts and expenditures and a
calculation of Net Cash Flow) for each Individual Property, (y) certified
updated occupancy reports and rent rolls in forms reasonably acceptable to
Lender and (z) an Officer's Certificate in substantially the form attached
hereto as Exhibit T.
(v) Borrower shall furnish to Lender, within 15 Business Days after
request, such further information with respect to the operation of any
Individual Property and the financial affairs of Borrower as may be
reasonably requested by Lender, including all business plans prepared for
Borrower in the ordinary course.
(vi) Borrower shall furnish to Lender, within 15 Business Days after
request, such further information regarding any Plan or Multiemployer Plan
and any reports or other information required to be filed under ERISA as
may be reasonably requested by Lender.
(vii) If the Loan is not repaid on the Optional Prepayment Date, for
the period from November 1, 2007 through December 31, 2007 and for each
Fiscal Year thereafter, Borrower shall submit to Lender for Lender's
written approval an annual budget (an "Annual Budget") for each of the
Individual Properties not later than (x) November 1, 2007 with respect to
the first such Annual Budget and (y) 30 days prior to the commencement of
each Fiscal Year thereafter, in form and substance satisfactory to Lender
setting forth in reasonable detail budgeted monthly amounts for Operating
Income, Operating Expenses, Capital Costs and Excess Cash Flow for such
Individual Properties. Each Annual Budget shall contain, among other
things, limitations on management fees, third party service fees, and
other expenses as Borrower may reasonably determine. If Lender objects to
the proposed Annual Budget submitted by Borrower, Lender shall advise
Borrower of such objections within 15 Business Days after receipt thereof
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(and deliver to Borrower a reasonably detailed description of such
objection) 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 Business Days after
receipt thereof (and deliver to Borrower a reasonably detailed description
of such objection) and Borrower shall promptly revise the same in
accordance with the process described in this sentence until Lender
approves an Annual Budget. Each such Annual Budget approved by Lender in
accordance with the terms hereof shall be referred to herein as an
"Approved Annual Budget". Until such time that Lender approves a proposed
Annual Budget, the most recent Approved Annual Budget, if any, shall apply
or, in the case of the period beginning on November 1, 2007, Operating
Expenses and Capital Costs shall not exceed the amounts actually spent in
the same month of the prior Fiscal Year, provided, however, that such
Approved Annual Budget shall be adjusted to reflect actual increases in
Basic Carrying Costs.
(viii) After the Securitization Closing Date, Borrower shall also
furnish to the Rating Agencies a copy of each report, statement and other
information provided to Lender under this Section 5.1(Q).
(R) Conduct of Business. Borrower shall cause the operation of each
Individual Property to be conducted at all times in a manner consistent with at
least the level of operation of such Individual Property as of the date hereof,
including, without limitation, the following:
(i) to maintain or cause to be maintained the standard of operations
at each Individual Property at all times at a level necessary to insure a
level of quality for the Individual Properties consistent with similar
properties in the same competitive market;
(ii) to operate or cause to be operated each Individual Property in
a prudent manner in compliance in all material respects with applicable
Legal Requirements and Insurance Requirements relating thereto and cause
all licenses, Permits and any other agreements necessary for the continued
use and operation of each Individual Property to remain in effect; and
(iii) to maintain or cause to be maintained sufficient Inventory and
Equipment of types and quantities at each
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Individual Property to enable Borrower or Manager to operate such
Individual Property.
(S) ERISA. Borrower shall deliver to Lender as soon as possible, and
in any event within ten days after Borrower knows or has reason to believe that
any of the events or conditions specified below with respect to any Plan or
Multiemployer Plan has occurred or exists, a statement signed by a senior
financial officer of Borrower setting forth details respecting such event or
condition and the action, if any, that Borrower or its ERISA Affiliate proposes
to take with respect thereto (and a copy of any report or notice required to be
filed with or given to PBGC by Borrower or an ERISA Affiliate with respect to
such event or condition):
(i) any reportable event, as defined in Section 4043(c) of ERISA and
the regulations issued thereunder, with respect to a Plan, as to which
PBGC has not by regulation waived the requirement of Section 4043(a) of
ERISA that it be notified within 30 days of the occurrence of such event
(provided that a failure to meet the minimum funding standard of Section
412 of the Code or Section 302 of ERISA, including, without limitation,
the failure to make on or before its due date a required installment under
Section 412(m) of the Code or Section 302(e) of ERISA, shall be a
reportable event regardless of the issuance of any waivers in accordance
with Section 412(d) of the Code); and any request for a waiver under
Section 412(d) of the Code for any Plan;
(ii) the distribution under Section 4041 of ERISA of a notice of
intent to terminate any Plan or any action taken by Borrower or an ERISA
Affiliate to terminate any Plan;
(iii) the institution by PBGC of proceedings under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to
administer, any Plan, or the receipt by Borrower or any ERISA Affiliate of
a notice from a Multiemployer Plan that such action has been taken by PBGC
with respect to such Multiemployer Plan;
(iv) the complete or partial withdrawal from a Multiemployer Plan by
Borrower or any ERISA Affiliate that results in liability under Section
4201 or 4204 of ERISA (including the obligation to satisfy secondary
liability as a result of a purchaser default) or the receipt by Borrower
or any ERISA Affiliate of notice from a Multiemployer Plan
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that it is in reorganization or insolvency pursuant to Section 4241 or
4245 of ERISA or that it intends to terminate or has terminated under
Section 4041A of ERISA;
(v) the institution of a proceeding by a fiduciary of any
Multiemployer Plan against Borrower or any ERISA Affiliate to enforce
Section 515 of ERISA, which proceeding is not dismissed within 30 days;
(vi) the adoption of an amendment to any Plan that, pursuant to
Section 401(a)(29) of the Code or Section 307 of ERISA, would result in
the loss of tax-exempt status of the trust of which such Plan is a part if
Borrower or an ERISA Affiliate fails to timely provide security to the
Plan in accordance with the provisions of said Sections; and
(vii) the imposition of a lien or a security interest in connection
with a Plan.
(T) Deferred Maintenance. On or before the first anniversary of the
date hereof, Borrower shall use good faith efforts and due diligence to complete
the repairs listed on Schedule 4 attached hereto in accordance with the
Engineering Reports, being the deferred maintenance items for which the Initial
Capital Requirement was established.
(U) Environmental Operation & Maintenance Obligations. Borrower
shall satisfy the Environmental Operation & Maintenance Obligations in
accordance with the Environmental Reports and within the times specified on
Schedule 6 attached hereto, being the Environmental Operation & Maintenance
Obligations for which the Environmental Operation & Maintenance
Reserve was established.
ARTICLE VI
NEGATIVE COVENANTS
Section 6.1. Borrower Negative Covenants. Borrower covenants and
agrees that, until payment in full of the Indebtedness (or, with respect to any
particular Individual Property, the earlier release of the Related Mortgages),
it will not do or permit, directly or indirectly, any of the following unless
Lender consents thereto in writing:
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(A) Liens on the Mortgaged Property. Incur, create, assume, become
or be liable in any manner with respect to, or permit to exist, any Lien with
respect to any Individual Property, except: (i) Liens in favor of Lender and
(ii) the Permitted Encumbrances.
(B) Transfer; Pledge. Except as expressly permitted by or pursuant
to this Agreement or the Related Mortgages including, without limitation,
Section 8.31, allow any Transfer to occur, terminate the Management Agreements,
or enter into a management contract with respect to any Individual Property.
Membership interests or stock in a Borrower may be transferred, subject to the
provisions of Section 6.1(N) relating to the admission of members, with the
consent of Lender, which consent will not be unreasonably withheld, provided,
however, that any transfer of a managing member's interest in a Borrower or 50%
or more of the membership interests in a Borrower shall require (i) delivery of
an opinion by Borrower's counsel satisfactory to Lender and its counsel that
such transfer will not affect the tax status of the REMIC Trust, and (ii) if
such transfer occurs after the Securitization Closing Date, confirmation in
writing from each Rating Agency that such Transfer will not result in a
downgrade, qualification or withdrawal of the then current ratings assigned to
any class of the Certificates. In addition, all of the Mortgaged Property may be
transferred to a Single-Purpose Entity and the Loan may be assumed by such
transferee, if (i) such transferee assumes the Loan and all of Borrower's
obligations under the Loan Documents pursuant to documentation acceptable to the
Rating Agencies and Lender, (ii) transferee's counsel (who must be satisfactory
to Lender and the Rating Agencies) delivers an opinion satisfactory to Lender
and the Rating Agencies that such transfer will not affect the status of the
REMIC Trust and covering such other matters, such as formation, authorization
and enforceability, relating to the assumption of the Loan as Lender and the
Rating Agencies may request, (iii) each Rating Agency confirms in writing that
the transfer and assumption will not result in a downgrade, qualification or
withdrawal of the then current ratings assigned to any class of Certificates,
and (iv) all expenses incurred by Lender, the Rating Agencies and Servicer in
connection with such transfer are paid by Borrower or transferee, such payment
not to exceed .5% of the Principal Indebtedness. No member in OIP, MBP or NJA
and no shareholder in FLIP shall pledge or otherwise encumber its membership
interest in OIP, MBP or NJA or its stock in FLIP, respectively, to secure any
financing or indebtedness.
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(C) Other Borrowings. Incur, create, assume, become or be liable in
any manner with respect to Other Borrowings, except (i) as set forth in the
Reimbursement Agreement, provided all payments to be made thereunder are subject
and subordinate, in all respects, to the payments and obligations required to be
made by Borrower hereunder and in any other Loan Document, and (ii) that a
Borrower may incur unsecured indebtedness for Capital Costs with respect to an
Individual Property, provided, however, that the aggregate amount of
indebtedness for Capital Costs shall not at any time exceed 10% of the initial
Allocated Loan Amount for such Individual Property.
(D) Dissolution. Except as permitted pursuant to Section 8.31,
dissolve, terminate, liquidate, merge with or consolidate into another Person.
(E) Change In Business. Cease to be a Single-Purpose Entity, or make
any material change in the scope or nature of its business objectives, purposes
or operations, or undertake or participate in activities other than the
continuance of its present business.
(F) Debt Cancellation. Cancel or otherwise forgive or release any
material claim or debt owed to a Borrower by any Person, except for adequate
consideration or in the ordinary course of such Borrower's business.
(G) Affiliate Transactions. Enter into, or be a party to, any
transaction with an Affiliate of a Borrower, except (x) for the Management
Agreements, the Affiliate Lease and the Reimbursement Agreement and (y) in the
ordinary course of business and on terms which are no less favorable to such
Borrower or such Affiliate than would be obtained in a comparable arm's length
transaction with an unrelated third party, and, if the amount to be paid to the
Affiliate pursuant to the transaction or series of related transactions is
greater than $50,000, are fully disclosed to Lender in advance.
(H) Creation of Easements. Create, or permit any Individual Property
or any part thereof to become subject to, any easement, license or restrictive
covenant, other than a Permitted Encumbrance. Lender agrees that it will join in
and subordinate the Liens of the Mortgages and Second Mortgages to any easement,
license or restrictive covenant (i) which arises after the date hereof and (ii)
that Lender, in Lender's reasonable discretion, deems to constitute a Permitted
Encumbrance.
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(I) Misapplication of Funds. Distribute any Rents, Money or Proceeds
received from Accounts in violation of the provisions of Section 2.12, fail to
deliver any security deposit to Manager for deposit into the Security Deposit
Accounts, fail to deposit in the Property Collection Accounts any Rents, Money
or Proceeds received by a Borrower or Manager from any source other than the
Property Collection Accounts or the Cash Collateral Account or misappropriate
any security deposit or portion thereof.
(J) Certain Restrictions. Enter into any agreement which expressly
restricts the ability of any Borrower to enter into amendments, modifications or
waivers of any of the Loan Documents.
(K) Assignment of Licenses and Permits. Assign or transfer any of
its interest in any Permits pertaining to any Individual Property, or assign,
transfer or remove or permit any other Person to assign, transfer or remove any
records pertaining to any Individual Property (except for removal of records (i)
in the ordinary course of business or (ii) pursuant to court order or Legal
Requirements) without Lender's prior written consent, which consent may be
granted or refused in Lender's sole discretion.
(L) Place of Business. Change its chief executive office or its
principal place of business without giving Lender at least 30 days' prior
written notice thereof and promptly providing Lender such information as Lender
may reasonably request in connection therewith.
(M) Leases. (i) Enter into, amend or cancel Leases, except as
permitted by or pursuant to the Mortgages and the Assignments of Leases; and
(ii) notwithstanding the foregoing clause (i) or anything contained to the
contrary in the Mortgages or the Assignments of Leases and except in connection
with a tenant default, without the prior written consent of Lender, terminate,
reduce rents under or shorten the term of any Lease unless such action (taking
into account the planned alternative use of the affected space) does not
materially adversely affect the value of any Individual Property.
(N) Admission of Members. Except as permitted pursuant to Section
8.31, admit any Person as a member of OIP, MBP or NJA, unless (i) if such Person
is admitted as a managing member (w) such Person is a Single-Purpose Entity, (x)
such Person confirms to Lender in writing the representations and covenants
contained in Section 4.1(S) with respect to itself,
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(y) prior to such Person's admission as a managing member, a non-consolidation
opinion in form and substance acceptable to the Rating Agencies is delivered to
Lender and the Rating Agencies, and (z) if such admission occurs after the
Securitization Closing Date, each Rating Agency confirms in writing that such
Person's admission as a managing member will not result in a downgrade,
qualification or withdrawal of the then current ratings assigned to any class of
Certificates and (ii) if such Person is admitted as a non-managing member of
Borrower owning in the aggregate 49% or more of the membership interests in
Borrower, (x) prior to such Person's admission as a non-managing member, a
non-consolidation opinion in form and substance acceptable to the Rating
Agencies is delivered to Lender and the Rating Agencies and (y) if such
admission occurs after the Securitization Closing Date, each Rating Agency
confirms in writing that such Person's admission as a non-managing member will
not result in a downgrade, qualification or withdrawal of the then current
ratings assigned to any class of Certificates.
(O) Joint Assessments; Separate Lots. Suffer, permit or initiate the
joint assessment of any Individual Property (i) with any other real property
constituting a separate tax lot, and (ii) with any portion of the Individual
Property which may be deemed to constitute personal property, or any other
procedure whereby the lien of any taxes which may be levied against such
personal property shall be assessed or levied or charged to the Individual
Property as a single lien.
ARTICLE VII
DEFAULTS
Section 7.1. Event of Default. The occurrence of one or more of
the following events shall be an "Event of Default" hereunder:
(i) if on any Payment Date (x) the Required Debt Service Payment is
not made by Borrower or (y) during a Central Cash Management Period the
funds in the Debt Service Payment Sub-Account of the Cash Collateral
Account are insufficient to pay the Required Debt Service Payment due on
such Payment Date;
(ii) if Borrower fails to pay the outstanding Indebtedness on the
Maturity Date;
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(iii) if on the date that is ten Business Days prior to the date any
payment of a Basic Carrying Cost would become delinquent or on which any
interest, penalties or fines would be imposed, (x) such Basic Carrying
Cost is not paid by Borrower or (y) the funds in the Basic Carrying Costs
Sub-Account of either the Cash Collateral Account or the Servicer Account,
together with any funds in the Cash Collateral Account not allocated to
another Sub-Account of the Cash Collateral Account, are insufficient to
make such payment;
(iv) the occurrence of the event identified in Section 2.12(f),
2.12(g) or 2.12(i) as constituting an "Event of Default";
(v) if Borrower fails to pay any other amount payable pursuant to
this Agreement or any other Loan Document when due and payable in
accordance with the provisions hereof or thereof, as the case may be, and
such failure continues for 15 days after Lender delivers written notice
thereof to Borrower;
(vi) if any representation or warranty made by Borrower, MM, Manager
or MEI herein or in any other Loan Document, or in any report,
certificate, financial statement or other Instrument, agreement or
document furnished by Borrower in connection with this Agreement, the
Notes or any other Loan Document executed and delivered by a Borrower,
shall be false in any material respect as of the date such representation
or warranty was made;
(vii) if a Borrower or MM makes an assignment for the benefit of
creditors;
(viii) if a receiver, liquidator or trustee shall be appointed for a
Borrower or MM or if a Borrower or MM shall be adjudicated a bankrupt or
insolvent, or if any petition for bankruptcy, reorganization or
arrangement pursuant to federal bankruptcy law, or any similar federal or
state law, shall be filed by or against, consented to, or acquiesced in
by, a Borrower or MM or if any proceeding for the dissolution or
liquidation of a Borrower or MM shall be instituted; provided, however,
that if such appointment, adjudication, petition or proceeding was
involuntary and not consented to by a Borrower or MM, as the case may be,
upon the same not being discharged, stayed or dismissed
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within 60 days, or if a Borrower or MM shall generally not be paying its
debts as they become due;
(ix) if (x) a Borrower attempts to delegate its obligations or
assign its rights under this Agreement, any of the other Loan Documents or
any interest herein or therein, or (y) if any provision of Section 6.1(B)
or Section 6.1(C) is violated;
(x) (i) if any provision of (A) a Borrower's operating agreement or
certificate of incorporation and by-laws, as the case may be, or (B) the
certificate of incorporation or the by-laws of MM, affecting the purpose
for which such entity is formed is amended or modified in any material
respect which may adversely affect Lender or Servicer, or (ii) if a
Borrower or MM or any of their members or stockholders, respectively, (A)
fails to perform or enforce the provisions of Sections 3.1, 4.2, 7.3.C,
7.9.D, 11.1.D, 12.1, 13.1, 13.2.E, 14.1.C or Article 16 of a Borrower's
operating agreement or the 3rd, 6th, 7th, 8th, 9th, 10th or 11th articles
of a Borrower's certificate of incorporation, as the case may be, or the
3rd, 6th, 7th, 8th, 9th, 10th or 11th articles of MM's certificate of
incorporation or amends or modifies any such provisions without Lender's
consent or (B) fails to perform or enforce any other provisions of such
organizational documents such that Lender or Servicer may be materially
adversely affected or (C) attempts to dissolve a Borrower or MM, or (iii)
if a Borrower or MM breaches any of its representations, warranties or
covenants set forth in Section 4.1(S) or 6.1(E);
(xi) if an Event of Default as defined or described in the Notes,
the Mortgages, the Second Mortgages or any other Loan Document occurs,
whether as to a Borrower or any of its Individual Property or all or any
portion of the Mortgaged Property;
(xii) if a Borrower shall continue to be in Default under any of the
other terms, covenants or conditions of this Agreement, its respective
Note, the Mortgages, the Second Mortgages or the other Loan Documents, for
15 days after notice to such Borrower from Lender or its successors or
assigns, in the case of any Default which can be cured by the payment of a
sum of money (other than Events of Default pursuant to clauses (i), (ii),
(iii) and (iv) above as to which no grace period is applicable), or for 30
days
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after notice from Lender or its successors or assigns, in the case of any
other Default (unless otherwise provided herein or in such other Loan
Document); provided, however, that if such non-monetary Default is
susceptible of cure but cannot reasonably be cured within such 30 day
period and provided further that Borrower shall have commenced to cure
such Default within such 30 day period and thereafter diligently and
expeditiously proceeds to cure the same, such 30 day period shall be
extended for such time as is reasonably necessary for a Borrower in the
exercise of due diligence to cure such Default, but in no event shall such
period exceed 120 days after the original notice from Lender;
(xiii) if an event or condition specified in Section 5.1(S) shall
occur or exist with respect to any Plan or Multiemployer Plan and, as a
result of such event or condition, together with all other such events or
conditions, a Borrower or any ERISA Affiliate shall incur or in the
opinion of Lender shall be reasonably likely to incur a liability to a
Plan, a Multiemployer Plan or PBGC (or any combination of the foregoing)
which would constitute, in the determination of Lender, a Material Adverse
Effect; or
(xiv) if the representation made in connection with the
Securitization that the Principal Indebtedness does not exceed 125% of the
Tax Fair Market Value of the Mortgaged Property shall be false as of the
Securitization Closing Date, unless (x) REMIC status of any REMIC formed
in connection with the Securitization is maintained or regained due to
corrective actions taken by Borrower within any applicable cure period
under the Code or otherwise, and (y) Borrower furnishes Lender with an
opinion of outside counsel reasonably acceptable to Lender stating that
each REMIC Trust is a valid REMIC for federal income tax purposes;
then, upon the occurrence of any such Event of Default and at any time
thereafter, Lender or its successors or assigns, may, in addition to any other
rights or remedies available to it pursuant to this Agreement, the Notes, the
Mortgages, the Second Mortgages and the other Loan Documents, or at law or in
equity, take such action, without notice or demand, as Lender or its successors
or assigns, deems advisable to protect and enforce its rights against Borrower
and in and to all or any portion of the Mortgaged Property, including, without
limitation, declaring
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the entire Indebtedness to be immediately due and payable by written notice to
Borrower and may enforce or avail itself of any or all rights or remedies
provided in the Loan Documents against Borrower and/or the Mortgaged Property,
including, without limitation, all rights or remedies available at law or in
equity.
Section 7.2. Remedies. (a) Upon the occurrence of an Event of
Default, all or any one or more of the rights, powers and other remedies
available to Lender against Borrower under this Agreement, the Notes, the
Mortgages, the Second Mortgages or any of the other Loan Documents executed by
or with respect to Borrower, or at law or in equity may be exercised by Lender
at any time and from time to time, whether or not all or any portion of the
Indebtedness shall be declared due and payable, and whether or not Lender shall
have commenced any foreclosure proceeding or other action for the enforcement of
its rights and remedies under any of the Loan Documents with respect to any
Individual Property or all or any portion of the Mortgaged Property. Any such
actions taken by Lender shall be cumulative and concurrent and may be pursued
independently, singly, successively, together or otherwise, at such time and in
such order as Lender may determine in its sole discretion, to the fullest extent
permitted by law, without impairing or otherwise affecting the other rights and
remedies of Lender permitted by law, equity or contract or as set forth herein
or in the other Loan Documents.
(b) In the event of the foreclosure or other action by Lender to
enforce its remedies in connection with one or more of the Individual Properties
or all or any portion of the Mortgaged Property, whether such foreclosure sale
(or other remedy) yields Net Proceeds in an amount less than, equal to or more
than the Allocated Loan Amount of such Individual Property or Mortgaged
Property, Lender shall apply all Net Proceeds received to repay the Indebtedness
in accordance with Section 2.8, Allocated Loan Amounts shall be adjusted (or not
adjusted) in accordance with the definition of "Allocated Loan Amount", the
Indebtedness shall be reduced to the extent of such Net Proceeds and the
remaining portion of the Indebtedness shall remain outstanding and secured by
the Mortgages, the Second Mortgages and the other Loan Documents, it being
understood and agreed by Borrower that, subject to Section 8.14, Borrower is
liable for the repayment of all the Indebtedness and that any "excess"
foreclosure proceeds are part of the cross-collateralized and cross-defaulted
security granted to Lender pursuant to the Mortgages and the Second Mortgages,
provided,
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however, that any Note shall be deemed to have been accelerated only to the
extent of the Net Proceeds actually received by Lender with respect to any
Individual Property and applied in reduction of the Indebtedness evidenced by
such Note in accordance with the provisions of the Note, after payment by
Borrower of all transaction costs and expenses and costs of enforcement.
Section 7.3. Remedies Cumulative. The rights, powers and remedies of
Lender under this Agreement shall be cumulative and not exclusive of any other
right, power or remedy which Lender may have against Borrower pursuant to this
Agreement or the other Loan Documents executed by or with respect to Borrower,
or existing at law or in equity or otherwise. Lender's rights, powers and
remedies may be pursued singly, concurrently or otherwise, at such time and in
such order as Lender may determine in Lender's sole discretion. No delay or
omission to exercise any remedy, right or power accruing upon an Event of
Default shall impair any such remedy, right or power or shall be construed as a
waiver thereof, but any such remedy, right or power may be exercised from time
to time and as often as may be deemed expedient. A waiver of any Default or
Event of Default shall not be construed to be a waiver of any subsequent Default
or Event of Default or to impair any remedy, right or power consequent thereon.
Notwithstanding any other provision of this Agreement, Lender reserves the right
to seek a deficiency judgment or preserve a deficiency claim, in connection with
the foreclosure of a Mortgage or Second Mortgage on an Individual Property,
solely to the extent necessary to foreclose on other parts of the Mortgaged
Property.
ARTICLE VIII
MISCELLANEOUS
Section 8.1. Survival. This Agreement and all covenants, agreements,
representations and warranties made herein and in the certificates delivered
pursuant hereto shall survive the execution and delivery of this Agreement, the
making by Lender of the Loan and the execution and delivery by each Borrower to
Lender of the Notes, and shall continue in full force and effect as long as any
portion of the Indebtedness is outstanding and unpaid; provided, however, that
upon a prepayment with respect to a particular Individual Property as described
in Section 2.7(a) and upon satisfaction of the other conditions set forth in
Section 2.11, Borrower shall be released of all liability under this Agreement
(other than any liability
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with respect to environmental matters arising under Section 4.1(P) or 5.1(D) -
(I), inclusive, hereof), the Related Mortgages, the applicable Assignments of
Lease, and the other Loan Documents insofar as they concern such Individual
Property. Whenever in this Agreement any of the parties hereto is referred to,
such reference shall be deemed to include the successors and assigns of such
party. All covenants, promises and agreements in this Agreement contained, by or
on behalf of Borrower, shall inure to the benefit of the respective successors
and assigns of Lender. Nothing in this Agreement or in any other Loan Document,
express or implied, shall give to any Person other than the parties and the
holder(s) of the Notes, the Mortgages, the Second Mortgages and the other Loan
Documents, and their legal representatives, successors and assigns, any benefit
or any legal or equitable right, remedy or claim hereunder.
Section 8.2. Lender's Discretion. Whenever pursuant to this
Agreement, Lender exercises any right given to it to approve or disapprove, or
any arrangement or term is to be satisfactory to Lender, the decision of Lender
to approve or disapprove or to decide whether arrangements or terms are
satisfactory or not satisfactory shall (except as is otherwise specifically
herein provided) be in the sole discretion of Lender and shall be final and
conclusive.
Section 8.3. Governing Law. (a) This Agreement was negotiated in New
York, and made by Lender and accepted by Borrower in the State of New York, and
the proceeds of the Notes were disbursed from New York, which State the parties
agree has a substantial relationship to the parties and to the underlying
transaction embodied hereby, and in all respects, including, without limitation,
matters of construction, validity and performance, this Agreement and the
obligations arising hereunder shall be governed by, and construed in accordance
with, the laws of the State of New York applicable to contracts made and
performed in such State and any applicable law of the United States of America.
To the fullest extent permitted by law, Borrower hereby unconditionally and
irrevocably waives any claim to assert that the law of any other jurisdiction
governs this Agreement and the Notes, and this Agreement and the Notes shall be
governed by and construed in accordance with the laws of the State of New York
pursuant to ss. 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
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shall be instituted in any federal or state court in New York, New York,
pursuant to ss. 5-1402 of the New York General Obligations Law, or in any
federal or state court in the jurisdiction in which any Individual Property is
located, and Borrower waives any objection which it may now or hereafter have to
the laying of venue of any such suit, action or proceeding, and Borrower hereby
irrevocably submits to the jurisdiction of any such court in any suit, action or
proceeding. Borrower does hereby designate and appoint CT Corporation System,
1633 Broadway, New York, New York 10019, as its authorized agent to accept and
acknowledge on its behalf service of any and all process which may be served in
any such suit, action or proceeding in any such federal or state court, and
agrees that service of process upon said agent at said address (or at such other
office as may be designated by Borrower from time to time in accordance with the
terms hereof) with a copy to Borrower at c/o McBride Enterprises, Inc., 808 High
Mountain Road, P.O. Box 549, Franklin Lakes, New Jersey 07417, Attention: David
F. McBride, and written notice of said service of Borrower mailed or delivered
to Borrower in the manner provided in Section 8.6 shall be deemed in every
respect effective service of process upon Borrower, in any such suit, action or
proceeding. Borrower (i) shall give prompt notice to Lender of any changed
address of its authorized agent hereunder, (ii) may at any time and from time to
time designate a substitute authorized agent (whose office shall be designated
as the address for service of process), and (iii) shall promptly designate such
a substitute if its authorized agent is dissolved without leaving a successor.
Section 8.4. Modification, Waiver in Writing. No modification,
amendment, extension, discharge, termination or waiver of any provision of this
Agreement, the Notes or any other Loan Document, or consent to any departure by
Borrower therefrom, shall in any event be effective unless the same shall be in
a writing signed by the party against whom enforcement is sought, and then such
waiver or consent shall be effective only in the specific instance, and for the
purpose, for which given. Except as otherwise expressly provided herein, no
notice to or demand on Borrower shall entitle Borrower to any other or future
notice or demand in the same, similar or other circumstances.
Section 8.5. Delay Not a Waiver. Neither any failure nor any delay
on the part of Lender in insisting upon strict performance of any term,
condition, covenant or agreement, or exercising any right, power, remedy or
privilege hereunder, or under the Notes, or of any other Loan Document, or any
other
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instrument given as security therefor, shall operate as or constitute a waiver
thereof, nor shall a single or partial exercise thereof preclude any other
future exercise, or the exercise of any other right, power, remedy or privilege.
In particular, and not by way of limitation, by accepting payment after the due
date of any amount payable under this Agreement, the Notes or any other Loan
Document, Lender shall not be deemed to have waived any right either to require
prompt payment when due of all other amounts due under this Agreement, the Notes
or the other Loan Documents, or to declare a default for failure to effect
prompt payment of any such other amount.
Section 8.6. Notices. All notices, consents, approvals and requests
required or permitted hereunder or under any other Loan Document shall be given
in writing and shall be effective for all purposes if hand delivered or sent by
(a) certified United States mail, postage prepaid, or (b) expedited prepaid
delivery service, either commercial or United States Postal Service, with proof
of attempted delivery, addressed if to Lender at its address set forth on the
first page hereof, Attention: Sheryl McAfee, if to Servicer at such address
designated for Servicer upon its appointment, and if to Borrower c/o McBride
Enterprises, Inc. at Borrower's address set forth on the first page hereof,
Attention: David F. McBride, or at such other address and Person as shall be
designated from time to time by any party hereto, as the case may be, in a
written notice to the other parties hereto in the manner provided for in this
Section 8.6. A copy of all notices, consents, approvals and requests directed to
Lender shall be delivered to Milbank, Tweed, Hadley & McCloy, 1 Chase Manhattan
Plaza, New York, New York 10005, Attention: Barbara J. Briggs, Esq. and copies
of all notices, consents, approvals and requests directed to Borrower (other
than statements setting forth the monthly amount payable under the Notes) shall
be delivered to each of: Shaw, Pittman, Potts & Trowbridge, 2300 N Street, N.W.,
Washington, D.C., 20037, Attention: Wendelin White, Esq., and Connell, Foley &
Geiser, 85 Livingston Avenue, Roseland, New Jersey 07068, Attention: Michael X.
McBride, Esq. A notice shall be deemed to have been given: in the case of hand
delivery, at the time of delivery; in the case of certified mail, when delivered
or the first attempted delivery on a Business Day; or in the case of expedited
prepaid delivery and telecopy, upon the first attempted delivery on a Business
Day. A party receiving a notice which does not comply with the technical
requirements for notice under this Section 8.6 may elect to waive any
deficiencies and treat the notice as having been properly given.
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SECTION 8.7. TRIAL BY JURY. LENDER AND EACH BORROWER, TO THE FULLEST
EXTENT THAT THEY MAY LAWFULLY DO SO, WAIVE TRIAL BY JURY IN ANY ACTION OR
PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY TORT ACTION, BROUGHT BY ANY PARTY
HERETO WITH RESPECT TO THIS AGREEMENT, THE NOTES OR THE OTHER LOAN DOCUMENTS.
LENDER AND EACH BORROWER AGREE THAT THE OTHER PARTIES HERETO MAY FILE A COPY OF
THIS WAIVER WITH ANY COURT AS WRITTEN EVIDENCE OF EACH OF THEIR KNOWING,
VOLUNTARY AND BARGAINED AGREEMENT IRREVOCABLY TO WAIVE THEIR RIGHT TO TRIAL BY
JURY, AND THAT, TO THE FULLEST EXTENT THAT THEY MAY LAWFULLY DO SO, ANY DISPUTE
OR CONTROVERSY WHATSOEVER BETWEEN A BORROWER AND LENDER SHALL INSTEAD BE TRIED
IN A COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.
Section 8.8. Headings. The Article and Section headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
Section 8.9. Assignment. Lender shall have the right to sell,
transfer, assign or securitize this Agreement and/or any of the other Loan
Documents and the obligations hereunder or thereunder to any Person. The parties
hereto acknowledge that Lender expects to sell, transfer and assign this
Agreement, the Notes, the Mortgages, the Second Mortgages and the other Loan
Documents to Trustee in connection with a Securitization. All references to
"Lender" hereunder shall be deemed to include the assigns of Lender, and the
parties hereto acknowledge that actions taken by Lender hereunder may be taken
(x) by Servicer on Lender's behalf (to the extent provided in the Interim
Servicing Agreement) or (y) after the Securitization Closing Date, by Servicer,
on behalf of Trustee, pursuant to any pooling and servicing agreement executed
in connection with the Securitization. Following the assignment of this
Agreement, the Notes, the Mortgages, the Second Mortgages and the other Loan
Documents by Nomura Asset Capital Corporation ("NACC") in connection with the
Securitization, in addition to providing notices to Lender's assignee in
accordance with instruments received from such assignee, Borrower shall continue
to send copies of all notices and other communications (including, without
limitation, reports under Section 5.1(Q)) to NACC at the address set forth in
Section 8.6 or to such other address as may be designated by NACC pursuant to
Section 8.6. Borrower shall not be entitled to assign its rights hereunder,
except as provided in Section 8.31.
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Section 8.10. Severability. Wherever possible, each provision of
this Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be prohibited
by or invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
Section 8.11. Preferences. Lender shall have no obligation to
marshal any assets in favor of any Borrower or any other party or against or in
payment of any or all of the obligations of Borrower pursuant to this Agreement,
the Notes or any other Loan Document. Lender shall have the continuing and
exclusive right to apply or reverse and reapply any and all payments by Borrower
to any portion of the obligations of Borrower hereunder. To the extent Borrower
makes a payment or payments to Lender for Borrower's benefit, which payment or
proceeds or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside or required to be repaid to a trustee,
receiver or any other party under any bankruptcy law, state or federal law,
common law or equitable cause, then, to the extent of such payment or proceeds
received, the obligations hereunder or part thereof intended to be satisfied
shall be revived and continue in full force and effect, as if such payment or
proceeds had not been received by Lender.
Section 8.12. Waiver of Notice. Borrower shall not be entitled to
any notices of any nature whatsoever from Lender except with respect to matters
for which this Agreement or the other Loan Documents specifically and expressly
provide for the giving of notice by Lender to Borrower and except with respect
to matters for which Borrower is not, pursuant to applicable Legal Requirements,
permitted to waive the giving of notice. Borrower hereby expressly waives the
right to receive any notice from Lender with respect to any matter for which
this Agreement or the other Loan Documents does not specifically and expressly
provide for the giving of notice by Lender to Borrower.
Section 8.13. [INTENTIONALLY OMITTED]
Section 8.14. Exculpation. Notwithstanding anything herein or in any
other Loan Document to the contrary, except as otherwise set forth in this
Section 8.14 to the contrary, Lender shall not enforce the liability and
obligation of any Borrower (or of a Borrower's members or shareholders, if and
to the
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extent such liability or obligation exists or arises) to perform and observe the
obligations contained in this Agreement, the Notes, the Mortgages, the Second
Mortgages or any of the other Loan Documents executed and delivered by a
Borrower by any action or proceeding wherein a money judgment shall be sought
against a Borrower or its members or shareholders, except that Lender may bring
a foreclosure action, action for specific performance or other appropriate
action or proceeding (including, without limitation, to obtain a deficiency
judgment) against a Borrower solely for the purpose of enabling Lender to
realize upon (i) a Borrower's interest in the Mortgaged Property, (ii) the Rents
and Accounts arising from the Individual Properties to the extent received by a
Borrower or a Manager after the occurrence of an Event of Default and not
deposited in the applicable Property Collection Account pursuant to Section
2.12(a) (all such Rents and Accounts, the "Recourse Distributions") and (iii)
any other collateral given to Lender under the Loan Documents ((i), (ii) and
(iii), collectively, the "Default Collateral"); provided, however, that any
judgment in any such action or proceeding shall be enforceable against Borrower
only to the extent of any such Default Collateral. The provisions of this
Section 8.14 shall not, however, (a) impair the validity of the Indebtedness
evidenced by the Notes or in any way affect or impair the Liens of the
Mortgages, the Second Mortgages or any of the other Loan Documents or the right
of Lender to foreclose the Mortgages or the Second Mortgages following an Event
of Default; (b) impair the right of Lender to name a Borrower as a party
defendant in any action or suit for judicial foreclosure and sale under any of
the Mortgages or the Second Mortgages; (c) affect the validity or enforceability
of the Notes, the Mortgages, the Second Mortgages or the other Loan Documents
subject to the limitations of this Section 8.14; (d) impair the right of Lender
to obtain the appointment of a receiver; (e) impair the enforcement of the
Assignments of Leases, the Second Assignments to Leases, the Assignments of
Agreements, the Second Assignments of Agreements or the Manager's Subordinations
(subject to the nonrecourse provisions thereof); (f) impair the right of Lender
to bring suit for actual (but not consequential) damages, losses and costs
resulting from (i) fraud, (ii) intentional misrepresentation, (iii) physical
waste or removal of the Mortgaged Properties or any portion thereof other than
as permitted pursuant to the Loan Documents or (iv) disposal of the Mortgaged
Properties or any portion thereof other than as permitted pursuant to the Loan
Documents, in each case by a Borrower, MM, Manager, MEI or any of their
respective Affiliates in connection with this Agreement, the Notes, the
Mortgages, the Second Mortgages or the
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other Loan Documents; (g) impair the right of Lender to obtain the Recourse
Distributions received by a Borrower, including, without limitation, the right
to proceed against a Borrower's members or shareholders to the extent any
Recourse Distributions have actually theretofore been distributed to a
Borrower's members or shareholders; (h) impair the right of Lender to bring suit
with respect to a Borrower's misappropriation of security deposits or Rents
collected more than one month in advance; (i) impair the right of Lender to
obtain Insurance Proceeds or Condemnation Proceeds due to Lender pursuant to the
Mortgages or the Second Mortgages; (j) impair the right of Lender to enforce the
provisions of Section 4.1(P) or 5.1(D)-(I) even after repayment in full of the
Indebtedness; (k) prevent or in any way hinder Lender from exercising, or
constitute a defense, or counterclaim, or other basis for relief in respect of
the exercise of, any other remedy against any or all of the Collateral as
provided in the Loan Documents; (l) impair the right of Lender to bring suit
with respect to any misapplication of any funds; (m) impair the right of Lender
to sue for, seek or demand a deficiency judgment against a Borrower (but not a
Borrower's members or shareholders) solely for the purpose of foreclosing the
Mortgaged Property or any part thereof, or realizing upon the Default
Collateral; provided, however, that any such deficiency judgment referred to in
this clause (m) shall be enforceable against a Borrower only to the extent of
any of the Default Collateral; or (n) impair the right of Lender to enforce the
Guaranty. The provisions of this Section 8.14 shall be inapplicable to a
Borrower if any petition for bankruptcy, reorganization or arrangement pursuant
to federal or state law shall be filed by, consented to or acquiesced in by or
with respect to such Borrower, or if a Borrower shall institute any proceeding
for the dissolution or liquidation of itself, or if a Borrower shall make an
assignment for the benefit of creditors, in which event Lender shall have
recourse against all of the assets of such Borrower and the interests in such
Borrower owned by, and the Recourse Distributions received by, such Borrower's
members or shareholders (but excluding all other assets of such Borrower's
members or shareholders). Notwithstanding the foregoing, in the event an
Individual Property is released from the lien created by the Related Mortgages,
Borrower shall be released in all respects from any further liability with
respect to the Loan other than any further liability for certain kinds of
environmental matters arising under Section 4.1(P) or 5.1(D) - (I) as the same
applies to such Individual Property.
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Section 8.15. Exhibits Incorporated. The information set forth on
the cover, heading and recitals hereof, and the Exhibits attached hereto, are
hereby incorporated herein as a part of this Agreement with the same effect as
if set forth in the body hereof.
Section 8.16. Offsets, Counterclaims and Defenses. Any assignee of
Lender's interest in and to this Agreement, the Notes, the Mortgages, the Second
Mortgages and the other Loan Documents shall take the same free and clear of all
offsets, counterclaims or defenses which are unrelated to this Agreement, the
Notes, the Mortgages, the Second Mortgages and the other Loan Documents which
Borrower may otherwise have against any assignor of this Agreement, the Notes,
the Mortgages, the Second Mortgages and the other Loan Documents, and no such
unrelated counterclaim or defense shall be interposed or asserted by Borrower in
any action or proceeding brought by any such assignee upon this Agreement, the
Notes, the Mortgages, the Second Mortgages and other Loan Documents and any such
right to interpose or assert any such unrelated offset, counterclaim or defense
in any such action or proceeding is hereby expressly waived by Borrower.
Section 8.17. No Joint Venture or Partnership; Mutual
Representation. Borrower and Lender intend that the relationship created
hereunder be solely that of borrower and lender. Nothing herein is intended to
create a joint venture, partnership, tenancy-in-common, or joint tenancy
relationship between Borrower and Lender nor to grant Lender any interest in the
Mortgaged Property other than that of mortgagee or lender. Lender and Borrower
hereby represent to the other that the transaction contemplated hereby is not
being entered into as part of an agreed upon arrangement to subsequently
collateralize the Loan with non real estate collateral (i.e., in lieu of the
Individual Properties which are being encumbered by the Related Mortgages).
Section 8.18. Waiver of Marshalling of Assets Defense. To the
fullest extent Borrower may legally do so, Borrower waives all rights to a
marshalling of the assets of Borrower and Persons with interests in Borrower,
and of the Mortgaged Property, or to a sale in inverse order of alienation in
the event of foreclosure of the interests hereby created, and agrees not to
assert any right under any laws pertaining to the marshalling of assets, the
sale in inverse order of alienation, homestead exemption, the administration of
estates of decedents, or any other matters whatsoever to defeat, reduce or
affect the
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right of Lender under the Loan Documents to a sale of the Individual Property
for the collection of the Indebtedness without any prior or different resort for
collection, or the right of Lender to the payment of the Indebtedness out of the
Net Proceeds of the Individual Property in preference to every other claimant
whatsoever.
Section 8.19. Waiver of Counterclaim. Borrower hereby waives the
right to assert a counterclaim, other than compulsory counterclaim, in any
action or proceeding brought against it by Lender or its agents, including,
without limitation, Servicer.
Section 8.20. Conflict; Construction of Documents. In the event of
any conflict between the provisions of this Agreement and the provisions of the
Notes, the Mortgages, the Second Mortgages or any of the other Loan Documents,
the provisions of this Agreement shall prevail. The parties hereto acknowledge
that they were represented by counsel in connection with the negotiation and
drafting of the Loan Documents and that the Loan Documents shall not be subject
to the principle of construing their meaning against the party which drafted
same.
Section 8.21. Brokers and Financial Advisors. Borrower and Lender
hereby represent that they have dealt with no financial advisors, brokers,
underwriters, placement agents, agents or finders in connection with the
transactions contemplated by this Agreement. Borrower and Lender hereby agree to
indemnify and hold each other and Servicer harmless from and against any and all
claims, liabilities, costs and expenses of any kind in any way relating to or
arising from a claim by any Person that such Person acted on behalf of the
indemnifying party in connection with the transactions contemplated herein. The
provisions of this Section 8.21 shall survive the expiration and termination of
this Agreement and the repayment of the Indebtedness.
Section 8.22. Counterparts. This Agreement may be executed in
any number of counterparts, each of which when so executed and delivered
shall be an original, but all of which shall together constitute one and the
same instrument.
Section 8.23. Estoppel Certificates. Borrower and Lender each hereby
agree at any time and from time to time upon not less than 15 days prior written
notice by Borrower or Lender to execute, acknowledge and deliver to the party
specified in such notice, a statement, in writing, certifying that this
Agreement is unmodified and in full force and effect (or if
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there have been modifications, that the same, as modified, is in full force and
effect and stating the modifications hereto), and stating whether or not, to the
knowledge of such certifying party, any Default or Event of Default has occurred
and is then continuing, and, if so, specifying each such Default or Event of
Default; provided, however, that it shall be a condition precedent to Lender's
obligation to deliver the statement pursuant to this Section 8.23, that Lender
shall have received, together with Borrower's request for such statement, an
Officer's Certificate stating that no Event of Default or, to Borrower's
knowledge, Default exists as of the date of such certificate (or specifying such
Default or Event of Default).
Section 8.24. Payment of Expenses. Borrower shall, whether or not
the Transactions are consummated, pay all of the following Transaction Costs on
demand: (a) reasonable out-of-pocket costs and expenses of Lender in connection
with (i) the negotiation, preparation, execution and delivery of the Loan
Documents and the documents and instruments referred to therein, (ii) the
creation, perfection or protection of Lender's Liens in the Collateral
(including, without limitation, fees and expenses for title and lien searches
and filing and recording fees, third party due diligence expenses, accounting
firm fees, costs of the Environmental Reports (and an environmental consultant),
the Engineering Reports and the appraisals), (iii) the negotiation, preparation,
execution and delivery of any amendment, waiver or consent relating to any of
the Loan Documents, and (iv) the preservation of rights under and enforcement of
the Loan Documents and the documents and instruments referred to therein,
including any restructuring or rescheduling of the Indebtedness, (b) the
reasonable fees, expenses and disbursements of counsel to Lender in connection
with all of the foregoing, and (c) in connection with the Securitization only,
reasonable fees, expenses and disbursements of counsel to Servicer and to
Trustee in connection with their review of the Loan Documents and any de minimis
expenses of Servicer and Trustee. Transaction Costs (inclusive of the foregoing)
relating to the Securitization are subject to the limitation set forth in
Section 2.15.
Section 8.25. Bankruptcy Waiver. Borrower hereby agrees that, in
consideration of the recitals and mutual covenants contained herein, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, in the event Borrower shall (i) file with any bankruptcy
court of competent jurisdiction or be the subject of any petition under Title 11
of the U.S. Code, as amended, (ii) be the subject of any order for relief issued
under Title 11 of the U.S. Code, as
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amended, (iii) file or be the subject of any petition seeking any
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief under any present or future law relating to bankruptcy,
insolvency or other relief of debtors, (iv) have sought or consented to or
acquiesced in the appointment of any trustee, receiver, conservator or
liquidator or (v) be the subject of any order, judgment or decree entered by any
court of competent jurisdiction approving a petition filed against such party
for any reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any present or future federal or state act
or law relating to bankruptcy, insolvency or other relief for debtors, the
automatic stay provided by the Federal Bankruptcy Code shall be modified and
annulled as to Lender, so as to permit Lender to exercise any and all of its
remedies, upon request of Lender made on notice to Borrower and any other party
in interest but without the need of further proof or hearing. Neither Borrower
nor any Affiliate of Borrower shall contest the enforceability of this Section
8.25.
Section 8.26. Indemnification. MEI and Borrower shall indemnify,
defend and hold harmless Lender, and each of its Affiliates, directors,
officers, employees, attorneys, agents (including, without limitation,
Servicer), successors and assigns (the "Indemnified Parties"), from and against
all damages (excluding consequential damages), liabilities, claims, actions,
penalties and fines (collectively and severally, "Losses") which may be imposed
upon, asserted against or incurred or paid by any of them resulting from the
claims of any third party relating to or arising out of (i) the Mortgaged
Property or any of the Loan Documents, (ii) any act performed or omitted to be
performed by any Indemnified Party under any of the Loan Documents or (iii) any
transaction arising out of or in any way connected with the Mortgaged Property
or any of the Loan Documents, except for Losses caused by (x) the gross
negligence, bad faith or willful misconduct of any Indemnified Party or a breach
by any Indemnified Party of its obligations under the Loan Documents (as
established by a final, non-appealable judicial determination) or (y) actions
taken or omitted to be taken by any Indemnified Party after such Indemnified
Party becomes a mortgagee in possession or otherwise takes possession or control
of an Individual Property following an Event of Default or acquires title to an
Individual Property through foreclosure, deed in lieu of foreclosure or
otherwise, and periodically reimburse each Indemnified Party on demand for any
expenses (including the reasonable attorneys' fees and disbursements) reasonably
incurred in connection with the
<PAGE>
124
investigation of, preparation for or defense of any actual or threatened claim,
action or proceeding arising therefrom (including any such costs of responding
to discovery requests or subpoenas), regardless of whether Lender or such other
Indemnified Party is a party thereto. It shall be MEI's and Borrower's burden to
prove that any Loss is caused by the gross negligence, bad faith or willful
misconduct or actions or failure to act of an Indemnified Party or a breach by
any Indemnified Party of its obligations under the Loan Documents. The
indemnification provided by Borrower and MEI in this Section 8.26 is not
intended to cover the matters covered by Borrower's indemnifications described
in Section 2.15 or Section 5.1(I) and shall not in any way alter, increase or
decrease the Borrower's indemnification obligations pursuant to Section 2.15 or
Section 5.1(I). With reference to the provisions set forth above in this Section
8.26 for payment by Borrower and MEI of reasonable attorneys' fees incurred by
the Indemnified Parties in any action or claim brought by a third party,
Borrower and MEI shall diligently defend such Indemnified Party and diligently
conduct such defense, and, provided MEI and Borrower demonstrates to the
reasonable satisfaction of the applicable Indemnified Party its ability to pay
for any settlement amount agreed to by MEI or Borrower, MEI or Borrower may
settle any such action or claim or consent to an entry of any judgment related
thereto without the prior written consent of any Indemnified Party to the extent
such judgment or claim is for the payment of money. If the Indemnified Party
desires to engage separate counsel, it may do so at its own expense; provided,
however, that such limitation on the obligation of MEI and Borrower to pay the
fees of separate counsel for such Indemnified Party shall not apply if such
Indemnified Party has retained such separate counsel because of a reasonable
belief (based upon reasonable inquiry) that MEI and Borrower are not diligently
defending it and/or not diligently conducting the defense and so notifies MEI
and Borrower. The Loan shall not be considered to have been paid in full unless
all obligations of MEI and Borrower under this Section 8.26 shall have been
fully performed (except for contingent indemnification obligations for which no
claim has actually been made pursuant to this Agreement). This Section 8.26
shall survive repayment in full of the Loan.
Section 8.27. Entire Agreement. This Agreement, together with the
Exhibits and Schedules hereto and the other Loan Documents, constitutes the
entire agreement among the parties hereto with respect to the subject matter
contained in
<PAGE>
125
this Agreement, the Exhibits and Schedules hereto and the other Loan Documents.
Section 8.28. Cross Collateralization. Without limitation of any
other right or remedy provided to Lender in this Agreement or any of the other
Loan Documents, each Borrower covenants and agrees that upon the occurrence of
an Event of Default, (i) Lender shall have the right to pursue all of its rights
and remedies in one proceeding, or separately and independently in separate
proceedings which it, as Lender, in its sole and absolute discretion, shall
determine from time to time, (ii) Lender is not required to either marshall
assets, sell Collateral in any inverse order of alienation, or be subjected to
any "one action" or "election of remedies" law or rule, (iii) the exercise by
Lender of any remedies against any Collateral will not impede Lender from
subsequently or simultaneously exercising remedies against any other Collateral,
(iv) all Liens and other rights, remedies and privileges provided to Lender in
this Agreement and in the other Loan Documents or otherwise shall remain in full
force and effect until Lender has exhausted all of its remedies against the
Collateral and all Collateral has been foreclosed, sold and/or otherwise
realized upon in satisfaction of the Loan and (v) its Individual Properties
shall be security for the performance of all obligations hereunder and under the
other Loan Documents.
Section 8.29. Confidentiality. Borrower shall keep, and shall cause
its Affiliates, partners, members, shareholders, employees, legal counsel and
other advisors to keep, the terms of this Agreement, the Loan and the other Loan
Documents strictly confidential and will not, directly or indirectly, disclose
such terms without Lender's prior written consent, unless required to make such
disclosure by law or in connection with the REIT's public reporting requirements
or as so advised by counsel or auditors or recommended by the REIT's board of
directors, if such material would customarily be disclosed in connection with
such public reporting. Borrower shall endeavor to deliver all press releases
relating to the terms of this Agreement, the Loan, the other Loan Documents and
the Manager's Subordinations to Lender for its review at least 24 hours prior to
releasing such items. Lender shall have the right to issue press releases,
advertisements and other promotional materials describing Lender's origination
of the Loan or a Securitization.
Section 8.30. Defeasance. (a) In the event a Borrower exercises its
option to defease the Loan pursuant to Section 2.6 or is obligated to make a
mandatory defeasance pursuant to
<PAGE>
126
Section 2.7(a) or Section 8.33, such Borrower shall defease the Loan in
compliance with the following conditions precedent:
(i) the delivery by such Borrower of not less than 30 days' prior
written notice to Lender specifying a regularly scheduled Payment Date
(the "Defeasance Date") on which the Defeasance Deposit is to be made and
the principal amount to be defeased;
(ii) the payment to Lender of all scheduled interest and principal
payments due and unpaid on the Defeasance Date;
(iii) with respect to defeasance of the Loan in whole pursuant to
Section 2.6 only, the payment to Lender of all other sums due under the
applicable Note, the Mortgages, the Second Mortgages and the other Loan
Documents;
(iv) with respect to defeasance of the Loan pursuant to Section
2.7(a) or Section 8.33 only, payment of all other amounts due under the
Related Mortgages;
(v) the payment to Lender of the Defeasance Deposit on the
Defeasance Date;
(vi) with respect to defeasance of the Loan in whole pursuant to
Section 2.6 after a Securitization, the defeasance shall be in connection
with a Transfer of all of the Individual Properties or any other customary
commercial transaction, and not as part of an arrangement to collateralize
the REMIC Trust with obligations that are not real estate mortgages;
(vii) the delivery to Lender of:
(A) 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 on behalf of
Borrower with the Defeasance Deposit in accordance with this
provision of this Section 8.30 (the "Security Agreement");
(B) with respect to defeasance of the Loan in whole pursuant
to Section 2.6 only, releases for each of the Individual Properties
from the Liens of the Related Mortgages, the Assignments of Leases,
the Second Assignment of Leases, the Assignments of
<PAGE>
127
Agreements, the Second Assignment of Agreements and UCC-1 financing
statements (for execution by Lender) in forms appropriate for the
jurisdiction in which each Individual Property is located;
(C) with respect to defeasance of the Loan pursuant to Section
2.7(a) or Section 8.33(b) only, the releases described in Section
2.11(a) (for execution by Lender) in forms appropriate for the
jurisdiction in which the applicable Individual Property is located;
(D) an Officer's Certificate certifying that the requirements
set forth in this Section 8.30 have been satisfied;
(E) an opinion of counsel for Borrower in form reasonably
satisfactory to Lender stating, among other things, that Lender has
a perfected security interest in the Defeasance Deposit and a first
priority perfected security interest in the U.S. Obligations
purchased by Lender on behalf of Borrower;
(F) a certificate from an accounting firm reasonably
acceptable to Lender (any "Big Six" accounting firm being deemed
acceptable to Lender) certifying that the U.S. Obligations
constituting the Defeasance Deposit meet the criteria set forth in
the definition of "U.S. Obligations" in Article I hereof, and that
the Defeasance Deposit is in an amount sufficient to purchase the
U.S. Obligations and to make the Scheduled Defeasance Payments in a
timely manner; and
(G) such other certificates, documents or instruments as
Lender may reasonably request, including, without limitation, an
opinion of counsel for Borrower in form reasonably satisfactory to
Lender stating that such defeasance shall not affect the REMIC
status of the REMIC Trust, and any other certificates, documents or
instruments reasonably required in connection with a Securitization;
and
(viii) Lender shall have received confirmation in writing from the
applicable Rating Agencies that such defeasance will not result in a
qualification, withdrawal or downgrading of the ratings in effect
immediately prior
<PAGE>
128
to such defeasance for any of the Certificates which are then outstanding.
In connection with the conditions set forth above, 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
Scheduled Defeasance Payments, and Lender shall upon receipt of the
Defeasance Deposit purchase such U.S. Obligations on behalf of Borrower.
Borrower, pursuant to the Security Agreement or other appropriate
document, shall authorize and direct that the payments received from the
U.S. Obligations shall be made directly to Lender and applied to satisfy
the obligations of Borrower under the Notes.
(b) With respect to defeasance of the Loan in whole pursuant to
Section 2.6 or Section 8.33(b), upon compliance with the requirements of
Section 8.30(a), (i) the Mortgaged Property shall be released from the
liens of the Related Mortgages, the Assignments of Leases, the Second
Assignment of Leases, the Assignments of Agreements, the Second Assignment
of Agreements and the UCC-1 financing statements and (ii) the pledged U.S.
Obligations shall be the sole source of collateral securing the Notes.
With respect to a defeasance to prepay the Loan pursuant to Section 2.7(a)
or Section 8.33(b), upon compliance with the requirements of Section
8.30(a) the applicable Individual Property or Properties shall be released
pursuant to Section 2.11(a).
(c) Any portion of the Defeasance Deposit in excess of the amount
necessary to purchase the U.S. Obligation required by Section 8.30(a) or
to satisfy the other requirements of Section 8.30(a) shall be remitted to
Borrower.
(d) Borrower shall have the right to assign to a Single-Purpose
Entity acceptable to Lender, and such assignee shall have the obligation
to assume, the obligations under the Loan Documents relating to the
principal amount so defeased.
Section 8.31. Permitted Restructuring. Notwithstanding the
provisions of Sections 6.1(B) and 6.1(N), the following restructuring relating
to Borrower shall not constitute a Default or Event of Default under this
Agreement:
<PAGE>
129
(a) the merger of FLIP S CORP into the REIT, and in connection
therewith, the merger of FLIP into NEW FLIP;
(b) the transfer by MM of all of its 1% interests as managing member
in each of OIP, MBP and NJA to NEW MM; and
(c) the transfer by the non-managing member of each of NJA, MBP and
OIP of its respective 99% membership interest in NJA, MBP and OIP to the
Operating Partnership,
provided, however, that the following conditions are satisfied:
(i) the transfers and mergers described in this Section 8.31 occur
substantially simultaneously;
(ii) Lender shall have received a copy of the certificate of
incorporation for NEW FLIP substantially in the form attached hereto as Exhibit
Z, certified by the Secretary of State for the State of New Jersey;
(iii) Lender shall have received a copy of the certificate of
incorporation for NEW MM substantially in the form attached hereto as Exhibit
AA, certified by the Secretary of State for the State of New Jersey;
(iv) Lender shall have received certificates of good standing for
each of NEW FLIP and NEW MM from the Secretary of State for the State of New
Jersey;
(v) NEW FLIP shall have executed and delivered to Lender, and, to
the extent reasonably required by Lender, recorded or filed in the appropriate
jurisdictions, all agreements and instruments reasonably required by Lender to
reflect NEW FLIP's assumption of the due and punctual performance and observance
of each covenant and condition of this Agreement, the Note made by FLIP and all
other Loan Documents to which FLIP is a party;
(vi) Lender shall have received an opinion of counsel reasonably
acceptable to Lender to the effect that all such agreements or instruments by
NEW FLIP effecting such assumptions are enforceable in accordance with their
terms;
(vii) Lender shall have received such endorsements to, or
replacements of, its Title Insurance Policies, as Lender shall reasonably
determine to be necessary;
<PAGE>
130
(viii) Lender shall have received amendments to the certificates of
formation (certified by the Secretary of State of New Jersey) and the operating
agreements of OIP, MBP and NJA, reflecting the change in ownership of the 1%
managing member therein from MM to NEW MM and the change in ownership of the 99%
interest of the respective non-managing member to the Operating Partnership;
(ix) Lender shall have received from Borrower's counsel reasonably
acceptable to Lender a non-consolidation opinion substantially in the form
attached hereto as Exhibit N (subject to (a) changes in law or fact after the
date hereof, (b) changes requested by the Rating Agencies (to the extent such
changes are consistent with applicable law or facts) and (c) customary due
diligence), after giving effect to the transfers and mergers contemplated by
this Section 8.31, in form and substance reasonably acceptable to Lender; and
(x) Borrower shall pay all reasonable expenses incurred by Lender in
connection with such transaction, provided, however, that such payment shall not
exceed .5% of the Principal Indebtedness.
Section 8.32. Substitution of Individual Properties. Borrower shall
have the right, at any time and from time to time, to obtain the release of one
or more Individual Properties from the Liens relating to this Loan upon the
substitution therefor of real estate of similar quality (a "Substitute
Property"), upon satisfaction of the following conditions:
(i) no Event of Default shall have occurred and be continuing;
(ii) the Allocated Loan Amounts of the Individual Properties so
released may not exceed, in the aggregate, $11,250,000;
(iii) the representations and warranties set forth in this
Agreement, the Loan Documents and any documents executed in connection with the
release and substitution (the "Substitution Documents") shall be true and
correct in all material respects as to the Substitute Property on the date such
release and substitution takes place (the "Substitution Closing Date");
(iv) the Debt Service Coverage Ratio of the remaining Individual
Properties (considered as a whole) after such release
<PAGE>
131
and substitution (including the Substitute Property) would not be less than the
greater of (x) the Debt Service Coverage Ratio for all Individual Properties
(including the Individual Property to be released) (considered as a whole)
calculated immediately prior to the release and substitution or (y) the Debt
Service Coverage Ratio of all Individual Properties (including the Individual
Property to be released) (considered as a whole) in effect on the Closing Date;
(v) Borrower shall deliver to Lender and the Rating Agencies (at the
addresses provided by Lender at Borrower's request) a written request for such
release and substitution at least 30 days prior to the proposed Substitution
Closing Date and shall submit with such request (1) the items described in Part
A of Schedule 7 attached hereto and (2) such other information, including,
without limitation, financial information, as the Rating Agencies may request;
(vi) the Rating Agencies shall have confirmed in writing, which
confirmation may be granted or withheld in the Rating Agencies' sole and
absolute discretion, that such release and substitution will not result in a
downgrade, qualification or withdrawal of the then current ratings assigned to
any class of the Certificates;
(vii) the Rating Agencies shall have received opinions satisfactory
to each of them that such release and substitution will not affect the status of
the REMIC Trust and covering such other matters, such as authorization and
enforceability, relating to the release and substitution as the Rating Agencies
may request;
(viii) on or before the Substitution Closing Date, Borrower shall
have executed and delivered to Lender documents and certificates set forth in
Part B of Schedule 7 attached hereto;
(ix) all reasonable expenses incurred by Lender, the Rating Agencies
and the Servicer in connection with such release and substitution are paid by
Borrower; and
(x) Borrower shall represent and warrant to Lender in writing that
as of the Substitution Closing Date, (i) the Tax Fair Market Value of each
Individual Property, including the Substitute Property and excluding the
Individual Property to be released), is equal to or greater than the Allocated
Loan Amount for such Individual Property and (ii) the Tax Fair Market Value
<PAGE>
132
of the Mortgaged Property, after giving effect to the substitution, is equal to
or exceeds the Principal Indebtedness.
Within 30 days after satisfaction of the conditions set forth in
clause (v) above, subject to the satisfaction of the other conditions contained
in this Section 8.32, Lender and Borrower shall cooperate with each other and
use reasonable efforts to close such transaction.
Section 8.33. Purchase Option Obligations. Notwithstanding anything
to the contrary contained herein or in the other Loan Documents, subject to the
satisfaction by Borrower of the terms and conditions contained in (i) paragraph
(a) of this Section 8.33 and (ii) either paragraph (b), (c) or (d) of this
Section 8.33, Borrower shall be permitted to transfer all, and not less than
all, of the Individual Property affected by the Purchase Option noted in item
(1) of Schedule 5 (the "Purchase Option Property") to the tenant (the "Tenant
Purchaser") upon exercise by such tenant of the Purchase Option. The Transfer of
the Purchase Option Property (the "Purchase Option Closing") shall be made in
accordance with the terms of the Purchase Option and the terms hereof.
(a) Notices; Reserves; Central Cash Management. Within ten Business Days
of Borrower's receipt of notice of the Tenant Purchaser's election to exercise
the Purchase Option, Borrower shall notify Lender of such election. Borrower
shall notify Lender again within ten Business Days after Borrower and the Tenant
Purchaser have agreed, pursuant to the related lease, upon the purchase price to
be paid for the Purchase Option Property (the "Purchase Option Purchase Price"),
which notice shall state the Purchase Option Purchase Price. Upon Lender's
receipt of such notice of the Purchase Option Purchase Price, if the Purchase
Option Purchase Price is less than 105% of the Defeasance Deposit required to
defease a portion of the Loan equal to the Release Price of the Purchase Option
Property (as reasonably determined by Lender), a Central Cash Management Period
shall commence. During such Central Cash Management Period, any funds remaining
in the Cash Collateral Account after allocation of the minimum amounts pursuant
to clauses (i), (ii), (iii) and (iv) of Section 2.12(g) and after allocation to
the Operating Expense Sub-Account as required under Section 2.12(g), shall be
funded into a reserve sub-account (the "Purchase Option Sub-Account"). Any costs
of Lender in connection with the Purchase Option Closing not covered by funds as
set forth in paragraphs (b), (c), and (d) below, shall be paid by Borrower upon
demand.
<PAGE>
133
(b) Defeasance. On the date of the Purchase Option Closing (which must be
the Defeasance Date), Borrower may elect to defease a principal portion of the
Loan in an amount equal to the Release Price for the Purchase Option Property
pursuant to Section 8.30. Upon such defeasance, Lender shall release the Liens
of the Related Mortgages and other Loan Documents with respect to the Purchase
Option Property as set forth in Section 2.11 and the Central Cash Management
Period, if triggered by the agreement of the Tenant Purchaser and Borrower upon
the Purchase Option Purchase Price, shall be terminated. Upon such defeasance,
any funds in the Purchase Option Sub-Account and funds in other Sub-Accounts
relating to the Purchase Option Property shall (i) first, be released to Lender
and applied to Lender's costs in connection with the Purchase Option, to the
extent not previously paid by Borrower and (ii) second, released to Borrower.
(c) Substitute Property. Borrower may elect to substitute property for the
Purchase Option Property. If Borrower so elects, Borrower shall:
(i) at least 30 days prior to the Purchase Option Closing, identify a
Substitute Property and deliver to Lender all requests, documents and other
items specified in Section 8.32(v); and
(ii) on the date of the Purchase Option Closing, satisfy all other terms
and conditions of Section 8.32 and cause a Substitute Property to be substituted
for the Purchase Option Property.
Upon such substitution, Lender shall release the Liens of the Related Mortgages
and other Loan Documents with respect to the Purchase Option Property as set
forth in Section 2.11 and the Central Cash Management Period, if triggered by
the agreement of the Tenant Purchaser and Borrower upon the Purchase Option
Purchase Price, shall be terminated. Upon such substitution, any funds in the
Purchase Option Sub-Account and funds in other Sub-Accounts relating to the
Purchase Option Property shall (i) first, be released to Lender and applied to
Lender's costs in connection with the Purchase Option, to the extent not
previously paid by Borrower, and (ii) second, released to Borrower.
(d) Purchase Option Sub-Account; Defeasance. If Borrower fails to defease
the Loan pursuant to paragraph (b) of this
<PAGE>
134
Section 8.33 or to substitute the Purchase Option Property with a Substitute
Property in accordance with paragraph (c) of this Section 8.33, such failure
shall not constitute a Default or Event of Default hereunder, provided, however,
that (i) the price paid by Tenant Purchaser to acquire the Purchase Option
Property shall be deposited into the Purchase Option Sub-Account; (ii)
simultaneously with the deposit described in clause (i), (x) Lender shall
release the Liens of the Related Mortgages and other Loan Documents with respect
to the Purchase Option Property as set forth in Section 2.11 and (y) all amounts
in Sub-Accounts relating to the Purchase Option Property shall be transferred to
the Purchase Option Sub-Account; and (iii) the Central Cash Management Period
triggered by the agreement of the Tenant Purchaser and Borrower upon the
Purchase Option Purchase Price shall continue, or, if not so triggered, a
Central Cash Management Period shall immediately commence and continue, until
the amount of the funds deposited in the Purchase Option Sub-Account (after
payment of Lender's costs) is sufficient to defease a portion of the Loan equal
to the Release Price of the Purchase Option Property, at which time Lender shall
use such funds to defease such portion of the Loan pursuant to Section 8.30.
"Purchase Option Obligations" shall mean any one of the following: (1)
Borrower's defeasance obligation under paragraph (b) of this Section 8.33; (2)
Borrower's substitution obligation under paragraph (c) of this Section 8.33, and
(3) defeasance of the Loan as provided in paragraph (d) of this Section 8.33.
Any election made by Borrower under paragraphs (b) or (c) of this Section 8.33
shall be made in writing at least 30 days prior to the Purchase Option closing.
Upon Lender's receipt of written confirmation from Borrower and the Tenant
Purchaser that the parties have agreed not to consummate the Purchase Option
Closing, the Central Cash Management Period triggered by the agreement of the
Tenant Purchaser and Borrower upon the Purchase Option Purchase Price, if any,
shall terminate. The provisions of this Section 8.33 will apply to any
subsequent exercise by Tenant Purchaser of the Purchase Option.
<PAGE>
135
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their duly authorized representatives, all as of the day and
year first above written.
LENDER:
NOMURA ASSET CAPITAL CORPORATION,
a Delaware corporation
By:/s/ Robert A. Treleven
---------------------------------
Name: Robert A. Treleven
Title: Vice President
BORROWER:
FLIP/BRE, INC.,
a New Jersey corporation
By:/s/ David F. McBride
---------------------------------
Name: David F. McBride
Title: President
OIP/BRE, L.L.C., a New Jersey limited
liability company
By: REA/SPC, INC., a New Jersey
corporation, its Managing Member
By: /s/ David F. McBride
---------------------------------
Name: David F. McBride
Title: President
MBP/BRE, L.L.C., a New Jersey limited
liability company
By: REA/SPC, INC., a New Jersey
corporation, its Managing Member
<PAGE>
136
By:/s/ David F. McBride
---------------------------------
Name: David F. McBride
Title: President
[signatures continued on next page]
<PAGE>
137
NJA/BRE, L.L.C., a New Jersey limited
liability company
By: REA/SPC, INC., a New Jersey
corporation, its Managing Member
By: /s/ David F. McBride
---------------------------------
Name: David F. McBride
Title: President
To confirm its agreement with the provisions of
Sections 2.15 and 8.26, MEI joins in the execution
of this Agreement:
MCBRIDE ENTERPRISES, INC.,
a New Jersey corporation
By: /s/ David F. McBride
---------------------------------
Name: David F. McBride
Title: President
<PAGE>
Exhibit A
ALLOCATED LOAN AMOUNTS AND DEBT SERVICE COVERAGE RATIOS
Allocated Debt Service
Individual Property Loan Amount Coverage Ratios
------------------- ----------- ---------------
1. 40 Potash Road
Oakland, New Jersey $ 7,947,000 68%
2. 1655 Valley Road
Wayne, New Jersey $ 15,304,000 68%
3. 5 Thornton Road
Oakland, New Jersey $ 6,302,000 68%
4. 15-00 Pollitt Drive
Fair Lawn, New Jersey $ 994,000 68%
5. 19-00 Pollitt Drive
Fair Lawn, New Jersey $ 5,042,000 68%
6. 17-01 Pollitt Drive
Fair Lawn, New Jersey $ 2,608,000 68%
7. 95 Bauer Drive
Oakland, New Jersey $ 577,000 68%
8. 99 Bauer Drive
Oakland, New Jersey $ 890,000 68%
9. 19-05 Nevins Road
Fair Lawn, New Jersey $ 3,972,000 68%
10. 1600 Route 208
Fair Lawn, New Jersey $ 1,364,000 68%
===============
TOTAL: $ 45,000,000
The Debt Service Coverage Ratio for the Individual Properties
(considered as a whole) as of the Closing Date is 1.30.
<PAGE>
Exhibit D
ENGINEERING REPORTS
Individual Property Engineering Report
------------------- ------------------
1. 40 Potash Road Report prepared by EMG,
Oakland, New Jersey dated August 21, 1997
2. 1655 Valley Road Report prepared by EMG,
Wayne, New Jersey dated August 21, 1997
3. 5 Thornton Road Report prepared by EMG,
Oakland, New Jersey dated August 21, 1997
4. 15-00 Pollitt Drive Report prepared by EMG,
Fair Lawn, New Jersey dated August 20, 1997
5. 19-00 Pollitt Drive Report prepared by EMG,
Fair Lawn, New Jersey dated August 20, 1997
6. 17-01 Pollitt Drive Report prepared byEMG,
Fair Lawn, New Jersey dated August 21, 1997
7. 95 Bauer Drive Report prepared by EMG,
Oakland, New Jersey dated August 21, 1997
8. 99 Bauer Drive Report prepared by EMG,
Oakland, New Jersey dated August 21, 1997
9. 19-05 Nevins Road Report prepared by EMG,
Fair Lawn, New Jersey dated August 21, 1997
10. 1600 Route 208 Report prepared by EMG,
Fair Lawn, New Jersey dated August 21, 1997
<PAGE>
Exhibit E
ENVIRONMENTAL REPORTS
Individual Property Environmental Report
------------------- --------------------
1. 40 Potash Road Report prepared by EMG,
Oakland, New Jersey dated August 21, 1997
2. 1655 Valley Road Report prepared by EMG,
Wayne, New Jersey dated August 21, 1997
3. 5 Thornton Road Report prepared by EMG,
Oakland, New Jersey dated August 20, 1997
4. 15-00 Pollitt Drive Report prepared by EMG,
Fair Lawn, New Jersey dated August 21, 1997
5. 19-00 Pollitt Drive Report prepared by EMG,
Fair Lawn, New Jersey dated August 21, 1997
6. 17-01 Pollitt Drive Report prepared by EMG,
Fair Lawn, New Jersey dated August 21, 1997
7. 95 Bauer Drive Report prepared by EMG,
Oakland, New Jersey dated August 19, 1997
8. 99 Bauer Drive Report prepared by EMG,
Oakland, New Jersey dated August 20, 1997
9. 19-05 Nevins Road Report prepared by EMG,
Fair Lawn, New Jersey dated August 21, 1997 and
revised September 10, 1997
10. 1600 Route 208 Report prepared by EMG,
Fair Lawn, New Jersey dated August 21, 1997 and
revised September 10, 1997
<PAGE>
Exhibit F
INDIVIDUAL PROPERTIES AND OWNERS
Individual
Property Owner
-------- -----
1. 40 Potash Road MBP
Oakland, New Jersey
2. 1655 Valley Road MBP
Wayne, New Jersey
3. 1600 Route 208 MBP
Fair Lawn, New Jersey
4. 5 Thornton Road NJA
Oakland, New Jersey
5. 15-00 Pollitt Drive FLIP
Fair Lawn, New Jersey
6. 19-00 Pollitt Drive FLIP
Fair Lawn, New Jersey
7. 17-01 Pollitt Drive FLIP
Fair Lawn, New Jersey
8. 19-05 Nevins Road FLIP
Fair Lawn, New Jersey
9. 95 Bauer Drive OIP
Oakland, New Jersey
10. 99 Bauer Drive OIP
Oakland, New Jersey
<PAGE>
Exhibit L
REQUIRED DEBT SERVICE PAYMENT CERTIFICATE
FLIP/BRE, INC., OIP/BRE, L.L.C.,
MBP/BRE, L.L.C. and NJA/BRE, L.L.C.
c/o McBride Enterprises, Inc.
808 High Mountain Road
P.O. Box 549
Franklin Lakes, New Jersey 07417
Re: Loan Agreement (the "Loan Agreement"), dated as of
September 22, 1997, among FLIP/BRE, INC., OIP/BRE, L.L.C.,
MBP/BRE, L.L.C. and NJA/BRE, L.L.C, collectively, as
borrower, and Nomura Asset Capital Corporation ("Lender")
Ladies and Gentlemen:
This certificate is delivered in accordance with Section 2.12(g) of
the Loan Agreement. All capitalized terms not defined herein shall have the
meanings ascribed to them in the Loan Agreement.
Lender hereby certifies that the Required Debt Service Payment due
on ____________, 19__ is _________________________ Dollars ($__________), and to
date, the funds deposited into the Cash Collateral Account which have been
allocated to the Debt Service Payment Sub-Account [are] [are not] sufficient to
make such payment. In addition, the funds deposited into the Cash Collateral
Account which have been allocated to (x) the Basic Carrying Costs Sub-Account
[are][are not] sufficient to constitute the Basic Carrying Costs Monthly
Installment for the month, (y) the Capital Reserve Sub-Account [are][are not]
sufficient to constitute the Capital Reserve Monthly Installment for the month
and (z) the Lease Reserve Sub-Account [are] [are not] sufficient to constitute
the Lease Reserve Monthly Installment for the month. [The amount of the
deficiency or deficiencies is, in total, _________________________ Dollars
($_____________) and such amount should be deposited into the Cash Collateral
Account by 12:00 noon on (the applicable Payment Date)].
NOMURA ASSET CAPITAL CORPORATION(1)
- ----------
(1) or insert signature block for Servicer
<PAGE>
2
By:_____________________________
Name:
Title:
<PAGE>
EXHIBIT O
FINANCING STATEMENTS
I. Property Financing Statements
(relevant Borrower as debtor and Lender as secured party on all)
For each Individual Property file first and second priority financing
statements with:
1. New Jersey Secretary of State
2. County where Individual Property located
3. Secretary of State/County of Borrower's Principal Place of Business
(if differs from 1 and 2)
II. Accounts Financing Statements
(relevant Borrower as debtor and Lender as secured party on both)
1. Secretary of State/County of Borrower's Principal Place of Business
2. Secretary of State/County where Accounts located (if differs from 1)
<PAGE>
EXHIBIT S
LIEN SEARCH REPORTS
Each Borrower and each Borrower's predecessor-in-interest to the Individual
Properties:
I. Uniform Commercial Code Searches
A. State Level:
1. New Jersey Secretary of State
2. Secretary of State of Principal Place of Business
3. Secretary of State of State of Formation
B. County Level:
1. Each County where Individual Properties are located
2. County of Principal Place of Business
II. Tax Searches
A. State Level:
1. New Jersey Secretary of State
B. Federal
III. Suit/Judgment Searches
A. U.S. District Court:
1. New Jersey
2. State of Principal Place of Business
3. State of Formation
B. County Level:
1. Each County where Individual Properties are located
2. County of Principal Place of Business
<PAGE>
Exhibit T
OFFICER'S CERTIFICATE
Nomura Asset Capital Corporation
2 World Financial Center
Building B
New York, New York 10281-1198
Attention: Sheryl McAfee
RE: Loan Agreement dated as of September 22, 1997 (together with
amendments, if any, the "Loan Agreement") among Nomura Asset Capital
Corporation, as Lender, and FLIP/BRE, INC., OIP/BRE, L.L.C.,
MBP/BRE, L.L.C. and NJA/BRE, L.L.C., collectively, as Borrower
(collectively, "Borrower")
The undersigned officer of REA/SPC, INC., the managing member of each of
OIP/BRE, L.L.C., MBP/BRE, L.L.C. and NJA/BRE, L.L.C., and the undersigned
officer of FLIP/BRE, INC., do hereby certify on behalf of Borrower that for the
quarterly financial period ending _____________________:
1. No Event of Default or, to the best knowledge of Borrower, Default has
occurred or exists except ____________________.
2. The monthly financial information, occupancy reports and rent rolls
delivered herewith are true, correct and complete.
3. All Operating Expenses and other expenses that had accrued as of the last
day of the period have been fully paid or otherwise reserved or provided
for.
4. Capitalized terms not defined herein shall have the meanings given to such
terms in the Loan Agreement.
Very truly yours,
-------------------------------
Name:
Title:
-------------------------------
Name:
Title:
<PAGE>
2
Dated this ____ day of ___________, ____.
<PAGE>
Schedule 1
INITIAL CAPITAL REQUIREMENTS AND CAPITAL RESERVE AMOUNTS
<TABLE>
<CAPTION>
Initial Capital Capital Reserve
Individual Property Requirement(2) Amount
- ------------------- --------------- ---------------
<S> <C> <C>
1. 40 Potash Road $ 0 $ 9,149
Oakland, New Jersey
2. 1655 Valley Road
Wayne, New Jersey $ 0 $ 23,355
3. 5 Thornton Road
Oakland, New Jersey $ 0 $ 22,781
4. 15-00 Pollitt Drive
Fair Lawn, New Jersey $ 0 $ 2,840
5. 19-00 Pollitt Drive
Fair Lawn, New Jersey $ 0 $ 11,589
6. 17-01 Pollitt Drive
Fair Lawn, New Jersey $ 0 $ 15,805
7. 95 Bauer Drive
Oakland, New Jersey $ 2,625 $ 1,019
8. 99 Bauer Drive
Oakland, New Jersey $ 0 $ 3,067
9. 19-05 Nevins Road
Fair Lawn, New Jersey $ 14,500 $ 22,755
10. 1600 Route 208
Fair Lawn, New Jersey $ 25,000 $ 8,121
==========
TOTALS: $ 42,125 $ 120,482
</TABLE>
- ----------
(2) See Schedule 4 for the intended use of these amounts.
<PAGE>
Schedule 2
EXCEPTIONS TO REPRESENTATIONS AND WARRANTIES
All section and exhibit references used in this Schedule 2 are to sections and
exhibits in the Loan Agreement unless otherwise specified.
1. Section 4.1(O). Four properties are serviced by a septic system: (a) 95
Bauer Drive; (b) 99 Bauer Drive; (c) 5 Thornton Road; and (d) 40 Potash
Road. The latter two have a Cycle-Let system in conjunction with the
septic system. In addition, by way of easement, at 1655 Valley Road, storm
water drainage and a sanitary sewer cross over adjacent properties to
regional detention basins and sanitary sewer systems owned and operated by
the municipality.
2. Section 4.1(X). Except as provided in Schedule 5.
<PAGE>
Schedule 3
CERTAIN LEASES FOR WHICH TENANT ESTOPPEL CERTIFICATES
AND NON-DISTURBANCE, SUBORDINATION AND ATTORNMENT AGREEMENTS
ARE REQUIRED
<TABLE>
<CAPTION>
<S> <C>
1. 17-01 Pollitt Drive, Fair Lawn, New Jersey: Symtron Systems, Inc., tenant
under lease agreement dated as of July, 1, 1994, as amended and assigned;
2. 17-01 Pollitt Drive, Fair Lawn, New Jersey: MDA Services, Inc., tenant
under lease agreement dated as of July 1, 1994, as amended and assigned;
3. 5 Thornton Road, Oakland, New Jersey: Aramis, Inc., tenant under lease
agreement dated as of July, 18, 1973 as amended and assigned and lease
agreement dated as of July, 1, 1977, as amended and assigned;
4. 40 Potash Road, Oakland, New Jersey: TCI of Northern New Jersey, Inc.,
tenant under lease agreement dated as of April 3, 1990, as amended and
assigned;
5. 15-00 Pollitt Drive, Fair Lawn, New Jersey: New Jersey Bell Telephone
Company, tenant under lease agreement dated as of December 10, 1970, as
amended and assigned;
6. 19-00 Pollitt Drive, Fair Lawn, New Jersey: Paid Prescriptions, Inc.,
tenant under lease agreement dated as of January 31, 1996, as amended and
assigned;
7. 95 Bauer Drive, Oakland, New Jersey: Greentree Learning Centers, Inc.,
tenant under lease agreement dated as of March 28, 1991, as amended and
assigned;
8. 19-05 Nevins Road, Fair Lawn, New Jersey: Road-Con Systems, Inc., tenant
under lease agreement dated as of June 14, 1989, as amended and assigned;
9. 1655 Valley Road, Wayne, New Jersey: Reckitt & Colman, Inc., tenant under
lease agreement dated as of May 5, 1987, as amended and assigned;
10. 99 Bauer Drive, Oakland, New Jersey: Addison-Wesley Publishers (successor
in interest to Scott, Foresman and Company), tenant under lease agreement
dated as of October 11, 1965, as amended and assigned; and
</TABLE>
<PAGE>
3
<TABLE>
<CAPTION>
<S> <C>
11. 99 Bauer Drive, Oakland, New Jersey: Stratton Travel, Inc., tenant under
lease agreement dated as of October 11, 1965, as amended and assigned.
</TABLE>
<PAGE>
Schedule 4
DEFERRED MAINTENANCE ITEMS
<TABLE>
<CAPTION>
Property Item Amount
-------- ---- ------
<S> <C> <C> <C>
1. 1600 Route 208 ADA Compliance as per EMG $25,000.00
Fair Lawn, New Jersey Report
2. 19-05 Nevins Road ADA Compliance as per EMG $ 8,250.00
Fair Lawn, New Jersey Report
Foundation Work as per EMG $ 6,250.00
Report
3. 95 Bauer Drive ADA Compliance as per EMG $ 1,000.00
Oakland, New Jersey Report
Entrance work as per EMG $ 1,250.00
Report
Plumbing work as per EMG $ 375.00
Report
Total $42,125.00
</TABLE>
<PAGE>
Schedule 5
TENANTS' OPTIONS TO PURCHASE AND
RIGHTS OF FIRST REFUSAL
1. 40 Potash Road, Oakland, New Jersey: Purchase Option granted to TCI of
Northern New Jersey, Inc., as tenant, pursuant to Sections 47 & 48 of
lease agreement dated April 3, 1990, as amended or assigned, providing
tenant with an option to purchase the premises during the 10th year
(around or about April 2002) or 20th year (around or about April 2012) of
the initial term, at fair market value pursuant to certain closing terms
and conditions contained in the lease.
2. 5 Thornton Road, Oakland, New Jersey: Rights of First Refusal granted to
Aramis Inc., as tenant, pursuant to Section 29 of Agreement of Lease dated
July 18, 1973, as amended or assigned, and Section 29 of Agreement of
Lease dated July 1, 1977, as amended or assigned.
<PAGE>
SCHEDULE 6
ENVIRONMENTAL OPERATION & MAINTENANCE
OBLIGATIONS AND RESERVE REQUIREMENTS
<TABLE>
<CAPTION>
Reserve
Property Item Obligation Amount
-------- ---- ---------- ------
<S> <C> <C> <C> <C>
1. 40 Potash Avenue Above Ground Tanks Construct Secondary Containment (2) $1,875.00
Oakland, New Jersey
2. 1655 Valley Road Former Lab Space/RCRIS De-List Individual Property $0
Wayne, New Jersey
3. 1600 Route 208 Asbestos as per EMG Report Establish O&M Plan (1) $562.50
Fair Lawn, New Jersey
4. 19-05 Nevins Road Asbestos, Lead paint Establish O&M Plan (1) $562.50
Fair Lawn, New Jersey Battery Storage Tenant to properly store $0
5. 5 Thornton Road Asbestos as per EMG Report Establish O&M Plan (1) $562.50
Oakland, New Jersey
6. 15-00 Pollitt Drive Asbestos as per EMG Report Establish O&M Plan (1) $562.50
Fair Lawn, New Jersey
7. 19-05 Pollitt Drive Asbestos as per EMG Report Establish O&M Plan (1) $562.50
Fair Lawn, New Jersey
8. 17-01 Pollitt Drive FairLawn, New Post Excavation Sampling Sample as per EMG Report (3) $6,250.00
Jersey Asbestos as per EMG Report Establish O&M Plan (1) $375.00
Former Tenant RCRIS De-List Individual Property $0
9. 95 Bauer Drive Former spill site Obtain N.F.A. Letter (4) $0
Oakland, New Jersey Asbestos, Lead paint Establish O&M Plan. (1) $562.50
Lead in water Re-Test (3) $1,250.00
10. 99 Bauer Drive Former spill site Obtain N.F.A. Letter (4) $0
Oakland, New Jersey Asbestos, Lead paint Establish O&M Plan (1) $562.50
Total $13,687.50
</TABLE>
Note 1 O&M Plans are to be established within 3 months of the Closing Date.
Note 2 Construction of secondary containment is to be completed within 6 months
of the Closing Date.
Note 3 Sampling and testing is to be completed within one month from the
Closing Date. If levels are found to be higher than regulatory standard
minimums, remediation
<PAGE>
2
must be initiated within one week of receiving results in accordance
with this Agreement.
Note 4 Items that require inquiries to the regulatory agency must be diligently
pursued and completed within 10 months following the Closing Date.
<PAGE>
Schedule 7
DELIVERIES UPON SUBSTITUTION OF PROPERTY
All capitalized terms used in this Schedule 7 shall have the meanings ascribed
to such term in the Loan Agreement to which this Schedule 7 is attached and all
section references are to sections in the Loan Agreement unless otherwise
specified.
Part A
1. Lien Search Reports. Lender shall have received satisfactory (i.e.,
showing no Liens other than Permitted Encumbrances (excluding clause (ii)
thereof)) reports of UCC (collectively, the "UCC Searches"), tax lien,
judgment and litigation searches with respect to the Substitute Property
conducted by a reputable search firm with respect to the Collateral, each
Borrower and the predecessor in interest for the Substitute Property, such
searches to be conducted in each of the locations set forth on Exhibit S
attached to the Loan Agreement.
2. Title Insurance Policy. Lender shall have received a commitment to issue a
loan policy of insurance issued by a nationally recognized reputable title
company, capable of retaining a primary liability of $30,000,000, with
respect to the Substitute Property and insuring the first priority lien in
favor of Lender created by the Mortgage and insuring the second priority
lien of Lender created by the Second Mortgage, subject only to the
Permitted Encumbrances (excluding clause (ii) thereof) and meeting the
requirements attached hereto as Schedule 7-A (the "Substitute Title
Insurance Policy").
3. Financial Statements; Budgets; Operating Reports. Lender shall have
received (i) audited financial statements of the Substitute Property for
the two fiscal years prior to the Substitution Closing Date, (ii)
unaudited financial statements of the Substitute Property for the twelve
month period ending on the last day of the month prior to the Substitution
Closing Date, (iii) an operating budget for the Substitute Property for
the year in which the Substitution Closing Date takes place, and (iv)
historical operating
<PAGE>
2
reports for the Substitute Property for the three calendar years prior to
the substitution verified by a "Big Six" accounting firm. All audited
financial statements must have been prepared by a "Big Six" accounting
firm.
4. Environmental Matters. Lender shall have received a Phase I environmental
report issued by a recognized environmental consultant at Borrower's
expense, and, if recommended under the Phase I environmental report, a
Phase II environmental report, which concludes that the Substitute
Property does not contain any Hazardous Substance except for nominal
amounts of such Hazardous Substance commonly incorporated in or used in
the operation of properties similar to the Substitute Property (in either
case in compliance with all Environmental Laws) and is not subject to any
risk of contamination from any off-site Hazardous Substance. If any such
report discloses the presence of any Hazardous Substance or the material
risk of contamination from any off-site Hazardous Substance, 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-ten
percent (110%) 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 Substance on the Substitute Property
except for nominal amounts of such Hazardous Substances commonly
incorporated in or used in the operation of properties similar to the
Substitute Property (in either case in compliance with all Environmental
Laws) or any material risk of contamination from any off-site Hazardous
Substance that has not been fully remediated and (B) paid receipts
indicating that the costs of all such remediation work have been paid.
5. Additional Matters. Lender shall have received such other Permits,
certificates (including certificates of occupancy for the Substitute
Property), opinions, documents and instruments (including zoning
endorsements to the Title Insurance Policies or, if unavailable, an
opinion of counsel or letters from the appropriate Governmental
Authorities regarding the zoning of the Substitute Property and evidence
that utility services are available for the Substitute Property, and that
the Substitute Property is subject to separate tax assessment) relating to
the Loan as may have been required by Lender in connection with the
advance of the Loan Amount, and all corporate and other resolutions or
consents, all other documents (including, without limitation,
<PAGE>
3
all documents referred to herein and not appearing as exhibits hereto) and
all legal matters as may have been required by Lender in connection with
advance of the Loan Amount.
6. Surveys. Lender shall have received a Survey with respect to the
Substitute Property which meets the requirements attached hereto as
Schedule 7-B.
7. Engineering Reports. Lender shall have received the Engineering Report
with respect to the Substitute Property, such Engineering Report to be
prepared by an Independent Engineer. The Engineering Report must state
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 material damage or waste. If
compliance with any Legal Requirements is not addressed by the Engineering
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, a letter from the municipality in which such
Substitute 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), an ALTA 3.1 zoning endorsement to
the Substitute Title Insurance Policy delivered pursuant to clause (2)
above (with respect to zoning laws) or a subdivision endorsement to the
Substitute Title Insurance Policy delivered pursuant to clause (2) above
(with respect to subdivision laws). If the Engineering Report recommends
that any repairs be made with respect to the Substitute Property, such
Engineering Report shall include an estimate of the cost of such
recommended repairs and Borrower shall deposit with Lender an amount equal
to one hundred ten percent (110%) of such estimated cost, which deposit
shall constitute additional security for the Loan, shall be deposited in
the Capital Reserve Sub-Account and shall be treated as an Initial Capital
Requirement and shall be released to Borrower in accordance with Section
2.12(f)(iii).
8. Contracts and Permits. The Lender shall have received a copy of each
Material Contract and Permit affecting the Substitute Property.
<PAGE>
4
9. Management Agreement. Lender shall have received the Management Agreement
with respect to the Substitute Property.
10. Leases; Tenant Estoppels; Non-Disturbance Agreements. Borrower shall have
delivered a rent roll with respect to the Substitute Property dated as of
the first day of the month in which the documents are delivered to Lender
pursuant to Section 8.32(v) and certified as true and correct, a copy of
any standard form Lease and copies of all Leases. Borrower shall have also
delivered with respect to each Lease (i) an original executed tenant
estoppel certificate in substantially the form attached to the Loan
Agreement as Exhibit Y, which tenant estoppel certificates shall disclose
no defaults or other conditions which have or may have a material adverse
effect on the Net Cash Flow for the Substitute Property and (ii) an
original executed Non-Disturbance, Attornment and Subordination Agreement
in substantially the form attached to the Loan Agreement as Exhibit Z.
11. Appraisals. Lender shall have received a MAI appraisal (prepared in
compliance with FIRREA) with respect to the Substitute Property prepared
by a reputable Independent firm.
12. Conveying Deed. Lender shall have received a certified copy of a deed
conveying to the relevant Borrower all right, title and interest in and to
the Substitute Property and a letter from a title insurance company
acknowledging receipt of such deed and agreeing to record such deed in the
real estate records for the county in which the Substitute Property is
located.
13. Release. Lender shall have received a release of Lien (and related Loan
Documents) for the Individual Property to be released for execution by
Lender. Such release shall be in a form appropriate for the jurisdiction
in which the Individual Property being released is located.
Part B
1. Mortgages. The relevant Borrower shall have executed and delivered the
Mortgage and the Second Mortgage with respect to the Substitute Property
to Lender and such Mortgage and such Second Mortgage shall have been filed
of record in the appropriate filing office(s) in the jurisdiction in which
the
<PAGE>
5
Substitute Property is located or irrevocably delivered to a title agent
for such recordation.
2. Assignment of Agreements. The relevant Borrower shall have executed and
delivered the Assignment of Agreements and the Second Assignment of
Agreements with respect to the Substitute Property to Lender and such
documents shall have been filed of record in the appropriate filing
office(s) in the jurisdiction in which the Substitute Property is located
or irrevocably delivered to a title agent for such recordation.
3. Assignment of Leases. The relevant Borrower shall have executed and
delivered the Assignment of Leases and the Second Assignment of Leases
with respect to the Substitute Property to Lender and the Assignment of
Leases and the Second Assignment of Leases shall have been filed of record
in the appropriate filing office(s) in the jurisdiction in which the
Substitute Property is located or irrevocably delivered to a title agent
for such recordation.
4. Financing Statements. The relevant Borrower shall have executed and
delivered all financing statements specified in Section I of Exhibit O
attached to the Loan Agreement to Lender and such financing statements
shall have been filed of record in the appropriate filing office(s) in the
jurisdiction in which the Substitute Property is located and all other
appropriate jurisdictions or irrevocably delivered to a title agent for
such filing.
5. Amendment to the Loan Documents. The Borrower shall have executed and
delivered amendments to any Loan Documents necessary to reflect the
release and substitution and to effect the cross-default and
cross-collateralization of all Loan Documents.
6. Manager's Subordination. The Manager and the relevant Borrower shall have
executed and delivered to Lender the Manager's Subordination.
7. Borrower's Estoppel Certificates. The relevant Borrower shall have
executed and delivered to Lender an estoppel certificate with respect to
its respective Management Agreement in substantially the form of Exhibit P
attached to the Loan Agreement.
<PAGE>
6
8. Tenant Letters. The relevant Borrower shall have executed and mailed
Tenant Letters to each of its tenants with respect to the Substitute
Property and delivered to Lender a copy thereof.
9. Entity Documents. Lender shall have received with respect to (i) the
relevant Borrower, if such Borrower is an limited liability company (x)
its certificate of formation, as amended, modified or supplemented to the
Substitution Closing Date, certified to be true, correct and complete by
the Secretary of State of the State of New Jersey as of a date not more
than fifteen (15) days prior to the Substitution Closing Date, (y) its
operating agreement certified by MM to be true, correct and complete as of
the Substitution Closing Date and (z) a good standing certificate from the
Secretary of State for the State of New Jersey, dated a date not more than
fifteen (15) days prior to the Substitution Closing Date, (ii) the
relevant Borrower, if such Borrower is a corporation (x) its certificate
of incorporation, as amended, modified or supplemented to the Substitution
Closing Date, certified to be true, correct and complete by the Secretary
of State for the State of New Jersey as of a date not more than fifteen
(15) days prior to the Substitution Closing Date and (y) a good standing
certificate from the Secretary of State for the State of New Jersey, dated
a date not more than fifteen (15) days prior to the Substitution Closing
Date, and (iii) MM (x) its certificate of incorporation, as amended,
modified or supplemented to the Substitution Closing Date, certified to be
true, correct and complete by the Secretary of State for the State of New
Jersey as of a date not more than fifteen (15) days prior to the
Substitution Closing Date and (y) a good standing certificate from the
Secretary of State for the State of New Jersey, each to be dated a date
not more than fifteen (15) days prior to the Substitution Closing Date. If
the Substitute Property is located in a State other than New Jersey, the
relevant Borrower and MM shall each deliver a certificate of good standing
and authorization to transact business from such State, dated a date not
more than fifteen (15) days prior to the Substitution Closing Date.
10. Certified Resolutions, Etc. Lender shall have received a certificate of
the secretary or assistant secretary of each of MM and the relevant
Borrower which owns the Substitute Property, if such Borrower is a
corporation, dated the Closing Date, certifying (i) the names and true
signatures of its incumbent officers authorized to
<PAGE>
7
sign the applicable Substitution Documents, (ii) its by-laws as in effect
on the Substitution Closing Date and (iii) the resolutions of its board of
directors approving and authorizing the execution, delivery and
performance of all Substitution Documents executed by it.
11. Insurance. Lender shall have received certificates of insurance
demonstrating insurance coverage in respect of the Substitute Property of
types, in amounts, with insurers and otherwise in compliance with the
terms, provisions and conditions set forth in the Related Mortgages. Such
certificates shall indicate that Lender and Servicer are named in all
liability policies as additional insureds as their interests may appear
and shall contain a loss payee endorsement in favor of Lender with respect
to the property policies required to be maintained under the Mortgage and
the Second Mortgage. All insurance policies required to be maintained
hereunder shall be maintained throughout the term of this Agreement in the
types and amounts required under the Mortgage and the Second Mortgage.
12. Consents, Licenses, Approvals, Etc. Lender shall have received copies of
all consents, licenses and approvals, if any, required in connection with
the execution, delivery and performance by Borrower, and the validity and
enforceability, of the Substitution Documents, and such consents, licenses
and approvals shall be in full force and effect.
<PAGE>
SCHEDULE 7-A
Title Requirements
1. Form of Policies.
The policies should be in American Land Title Association, extended
coverage, Lender's Fee Policy Form 1970 (Rev. 10-17-84).
2. Insured.
["____________, a _____________________ as trustee, and its successors
and/or assigns"]
3. Endorsements.
The policies should contain the following endorsements, if available:
(a) Comprehensive (See Exhibit 1)
(b) Access CLTA Form 103.7 (See
Exhibit 2)
(c) Zoning 3.1 ALTA Form 3.1 (See
Exhibit 3)
(d) Subdivision (See Exhibit 4)
(e) Tax Parcel (See Exhibit 5)
(f) Contiguity CLTA Form 116.4
(if applicable)
(g) Address CLTA Form 116 (See
Exhibit 7)
(h) Survey CLTA Form 116.1 (See
Exhibit 8)
(i) Source of Title (See Exhibit 9)
(j) Doing Business (See Exhibit 10)
(k) Variable Rate (See Exhibit 11)
(l) Tax Deed (See Exhibit 12)
<PAGE>
(if applicable)
(m) Usury (See Exhibit 13)
(n) Tie-In (See Exhibit 14)
(o) First Loss (See Exhibit 15)
4. Pre-printed Exceptions.
All pre-printed exceptions must be omitted.
5. Real Estate Taxes.
Any tax exception in Schedule B should be as follows: "Real property
taxes for the current tax year and subsequent years, not yet due and
payable."
6. Tenancies.
Any exceptions for leases or tenancies should be as follows: "Rights
of ____________, as tenant only, pursuant to a recorded (Memorandum
of) Lease dated ___________ between ______________, as Landlord and
______________, as Tenant, dated ___________, recorded on
_______________ in Book __________, Page _____."
7. Flood Zone.
We require proof that each property is not in a flood zone as
established by the Federal Emergency Management Agency. This
information can be provided to us by flood zone certifications.
8. Reinsurance.
At closing, the title company may be required to provide ALTA form
9/24/94 Reinsurance Agreements or commitment letters to issue same
from companies with limits of liability as may have been required by
Lender in connection with advance of the Loan Amount.
<PAGE>
EXHIBIT 1
COMPREHENSIVE ENDORSEMENT
Attached to Policy No. ______
Issued By
______ TITLE INSURANCE COMPANY
The Company insures the owner of the indebtedness secured by the insured
mortgage against loss or damage sustained by reason of:
1. Any incorrectness in the assurance that, at Date of Policy:
(a) There are no covenants, conditions or restrictions under which the lien
of the mortgage referred to in Schedule A can be divested, subordinated or
extinguished, or its validity, priority or enforceability impaired.
(b) Unless expressly excepted in Schedule B:
(1) There are no present violations on the land of any enforceable
covenants, conditions or restrictions, nor do any existing
improvements on the land violate any building setback lines shown on a
plat of subdivision recorded or filed in the public records.
(2) Any instrument referred to in Schedule B as containing covenants,
conditions or restrictions on the land does not, in addition, (i)
establish an easement on the land; (ii) provide a lien for liquidated
damages; (iii) provide for a private charge or assessment; (iv)
provide for an option to purchase, a right of first refusal or the
prior approval of a future purchaser or occupant.
(3) There is no encroachment of existing improvements located on the
land onto adjoining land, nor any encroachment onto the land of
existing improvements located on adjoining land.
(4) There is no encroachment of existing improvements located on the
land onto that portion of the land subject to any easement excepted in
Schedule B.
(5) There are no notices of violation of covenants, conditions and
restrictions relating to environmental protection recorded or filed in
the public records.
<PAGE>
2
2. Any future violation on the land of any existing covenants, conditions or
restrictions occurring prior to the acquisition of title to the estate or
interest in the land by the Insured, provided the violation results in:
(a) Invalidity, loss of priority, or unenforceability of the lien of the
insured mortgage; or
(b) loss of title to the estate or interest in the land if the Insured
shall acquire title in satisfaction of the indebtedness secured by the
insured mortgage.
3. Damage to existing improvements, including lawns, shrubbery or trees:
(a) which are located on or encroach upon that portion of the land subject
to any easement excepted in Schedule B, which damage results from the
exercise of the right to maintain the easement for the purpose for which it
was granted or reserved;
(b) resulting from the future exercise of any right to use the surface of
the land for the extraction or development of minerals excepted from the
description of the land or excepted in Schedule B.
4. Any final court order or judgment requiring the removal from any land
adjoining the land of any encroachment excepted in Schedule B.
5. Any final court order or judgment denying the right to maintain any existing
improvements on the land because of any violation of covenants, conditions or
restrictions or building setback lines shown on a plat of subdivision recorded
or filed in the public records.
CLTA Form 100.2 (Rev. 3/27/92)
ALTA Form 9 (Restrictions, Encroachments, Minerals)
<PAGE>
EXHIBIT 2
ACCESS ENDORSEMENT
Attached to Policy No. ______
Issued By
______ TITLE INSURANCE COMPANY
The Company hereby assures the Insured that said land abuts upon a
physically open street known as ____________________ which has been completed,
dedicated and accepted by the City of ____________________ for use as an open
public street and the owner of the land has vehicular and pedestrian access
thereto.
<PAGE>
EXHIBIT 3
ZONING ENDORSEMENT
Attached to Policy No. ______
Issued By
______ TITLE INSURANCE COMPANY
1. The Company insures the Insured against loss or damage sustained by reason
of any incorrectness in the assurance that, at Date of Policy:
(a) According to applicable zoning ordinances and amendments thereto,
the land is classified Zone ___.
(b) The following use or uses are allowed under that classification
subject to compliance with any conditions, restrictions, or
requirements contained in the zoning ordinances and amendments
thereto, including but not limited to the securing of necessary
consents or authorizations as a prerequisite to the use or uses:
-------------------
2. The Company further insures against loss or damage arising from a final
decree of a court of competent jurisdiction
(a) prohibiting the use of the land, with any structure presently
located thereon, as specified in paragraph 1(b); or
(b) requiring the removal or alteration of any structure
on the basis that, at Date of Policy, the ordinances and amendments
thereto have been violated with respect to any of the following matters:
(i) Area, width or depth of the land as a building site for the
structures:
(ii) Floor space area of the structures;
(iii) Setback of the structures from the property lines of the land;
(iv) Height of the structure; or
<PAGE>
2
(v) Number of Parking Spaces.
There shall be no liability under this endorsement based on the invalidity of
the ordinances and amendments thereto until after a final decree of a court of
competent jurisdiction adjudicating the invalidity, the effect of which is to
prohibit the use or uses.
Loss or damage as to the matters insured against by this endorsement shall not
include loss or damage sustained or incurred by reason of the refusal of any
person to purchase, lease or lend money on the estate or interest covered by
this policy.
This endorsement is made a part of the policy and is subject to all of the terms
and provisions thereof and of any prior endorsements thereto. Except to the
extent expressly stated, it neither modifies any of the terms and provisions of
the policy and any prior endorsements, nor does it extend the effective date of
the policy and any prior endorsements, nor does it increase the face amount
thereof.
CLTA Form 123.2 (Rev. 3-13-87)
(ALTA Endorsement - Form 3.1 (6-1-87))
Zoning -- completed structure
<PAGE>
EXHIBIT 4
SUBDIVISION ENDORSEMENT
Attached to Policy No. ______
Issued By
______ TITLE INSURANCE COMPANY
Notwithstanding any of the provisions, terms, conditions, limitations,
stipulations, exceptions and exclusions contained in or arising under the Policy
or any endorsement thereto, the Company hereby insures the Insured against loss
or damage resulting from any violation of any Subdivision Requirement (as
defined below), including, without limitation, any violation of the Subdivision
Requirements caused by the present owner's or its predecessors' acquisition of
the land, the size and configuration of the land, or the present uses of the
land. "Subdivision Requirements" refers to any laws, ordinances, resolutions,
regulations or rules relating to or governing (i) subdivisions, (ii) separation
of ownership of any parcel or parcels of which the land is or was a part or
(iii) any change in the area or dimensions of any parcel or parcels of which the
land is or was a part.
<PAGE>
EXHIBIT 5
TAX PARCEL ENDORSEMENT
Attached to Policy No. ______
Issued By
______ TITLE INSURANCE COMPANY
The Company hereby insures the Insured against loss or damage by reason of
any inaccuracy in the following assurance:
the land referred to as Parcel _______ in Schedule A herein is
completely covered by tax identification No. ________; Parcel
_________ is completely covered by tax identification No. __________
and said tax identification numbers do not include any other land.
<PAGE>
EXHIBIT 6
CONTIGUITY ENDORSEMENT
Attached to Policy No. ______
Issued By
______ TITLE INSURANCE COMPANY
The Company assures the Insured that the land described in Schedule A
herein as Parcel ____ and Parcel ____ are contiguous to each other along the
_________________ boundary of Parcel ____ and the ______________________
boundary of Parcel ____ and, when taken together, constitute one parcel of land
with no intervening strips, gaps or gores.
The Company hereby insures the Insured against loss which said Insured
shall sustain in the event that the assurance herein shall prove to be
incorrect.
<PAGE>
EXHIBIT 7
ADDRESS ENDORSEMENT
Attached to Policy No. ______
Issued By
______ TITLE INSURANCE COMPANY
The Company assures the Insured that at the date of this policy
there is located on said land a ___________________________________________
known as __________________________________________________________ (street
address) and that the survey described in said policy shows the correct location
and dimensions of said land according to those records which under the recording
laws impart constructive notice as to said land.
The Company hereby insures the Insured against loss which said
Insured shall sustain in the event that the assurance herein shall prove to be
incorrect.
The total liability of the Company under said policy and any
endorsements therein shall not exceed, in the aggregate, the face amount of said
policy and costs which the Company is obligated under the conditions and
stipulations thereof to pay.
This endorsement is made a part of said policy and is subject to the
schedules, conditions and stipulations therein, except as modified by the
provisions hereof.
CLTA Form 116 (Revised 2-20-61)
ALTA - Lender
<PAGE>
EXHIBIT 8
SURVEY ENDORSEMENT
Attached to Policy No. ______
Issued By
______ TITLE INSURANCE COMPANY
The Company assures the Insured that the land which is described on
Schedule A attached hereto and made a part hereof is the same as that delineated
on the plat of a survey made by __________________________ on _________________,
19__, last revised _________________, 19__, designated Job No. ___________.
The Company hereby insures said Assured against loss which said
Assured shall sustain in the event that the assurance herein shall prove to be
incorrect.
The total liability of the Company under said policy and any
endorsements therein shall not exceed, in the aggregate, the face amount of said
policy and costs which the Company is obligated under the conditions and
stipulations thereof to pay.
This endorsement is made a part of said policy and is subject to the
schedules, conditions and stipulations therein except as modified by the
provisions hereof.
CLTA Form 116.1 (Revised 2-20-61)
<PAGE>
EXHIBIT 9
SOURCE DEED ENDORSEMENT
Attached to Policy No. ______
Issued By
______ TITLE INSURANCE COMPANY
The Company hereby insures the Insured that the land conveyed to
_____________________ by that certain deed from _______________ dated
________________ recorded on _____________ in Liber/Book/Volume ______, page
_____ is the same land described in Schedule A hereto.
<PAGE>
EXHIBIT 10
DOING BUSINESS ENDORSEMENT
Attached to Policy No. ______
Issued By
______ TITLE INSURANCE COMPANY
The Company hereby insures the Insured against loss or damage which the Insured
shall sustain by reason of the entry of any court order or judgment which
constitutes a final determination holding that the mortgage referred to in
Schedule A is unenforceable as a result of the Insured's failure to "qualify to
do business" within the State of ___________ as that phrase is defined with
respect to the laws of the State of ___________ applicable to the regulation of
foreign entities.
The total liability of the Company under said policy, commitment or binder and
under this and any prior endorsements thereto shall not exceed, in the
aggregate, the amount of liability stated on the face of said policy, commitment
or binder, as the same may be specifically amended in dollar amount by this or
any prior endorsements, and the costs which the Company is obligated to pay
under the Conditions and Stipulations of the policy.
This endorsement is made a part of said policy, commitment or binder and is
subject to all the terms, and provisions thereof, except as modified by the
provisions hereof.
Nothing herein contained shall be construed as extending or changing the
effective date of the aforesaid policy, commitment or binder unless otherwise
expressly stated.
IN WITNESS WHEREOF, the Company has caused this Endorsement to be signed and
sealed as of the day of , 19 , to be valid when countersigned by an authorized
officer or agent of the Company, all in accordance with its By-Laws.
<PAGE>
EXHIBIT 11
VARIABLE RATE ENDORSEMENT
Attached to Policy No. ______
Issued By
______ TITLE INSURANCE COMPANY
The Company hereby insures against loss or damage by reason of:
1. The invalidity or unenforceability of the lien of the insured mortgage
resulting from the provisions contained in the Credit/Loan Agreement which
provide for changes in the rate of interest.
2. Loss of priority of the lien of the insured mortgage as security for the
unpaid principal balance of the loan, together with the interest as
changed in accordance with provisions contained in the Credit/Loan
Agreement, which loss of priority is caused by said changes in the rate of
interest.
"Changes in the rate of interest", as used in this endorsement, shall mean only
those changes in the rate of interest calculated pursuant to the formula
contained in the Credit/Loan Agreement at Date of Policy. "Credit/Loan
Agreement", as used in this endorsement, means that certain Credit/Loan
Agreement which is secured by the insured mortgage.
This endorsement does not insure against loss or damage based upon (a) usury, or
(b) any consumer credit protection or truth in lending law.
This endorsement is made a part of the policy and is subject to all of the terms
and provisions thereof and of any prior endorsements thereto, except that the
insurance afforded by this endorsement is not subject to paragraph 3(d) of the
Exclusions From Coverage. Except to the extent expressly stated, it neither
modifies any of the terms and provisions of the policy and any prior
endorsements, nor does it increase the face amount thereof.
<PAGE>
EXHIBIT 12
TAX DEED WIPING OUT EASEMENT ENDORSEMENT
Attached to Policy No. ______
Issued By
______ TITLE INSURANCE COMPANY
The Company insures the Insured against loss or damage which the
Insured may sustain due to the entry of any final judgment extinguishing the
easement described in Schedule A as parcel ________________, or denying or
limiting the use thereof by reason of the issuance of a tax deed for nonpayment
of any general tax or special assessment levied against the land.
<PAGE>
EXHIBIT 13
USURY ENDORSEMENT
Attached to Policy No. ______
Issued By
______ TITLE INSURANCE COMPANY
The Company hereby insures the Insured against loss or damage not exceeding the
Amount of Insurance stated in Schedule A which the Insured shall sustain by
reason of the entry of any court order or judgment which constitutes a final
determination and adjudges that the lien of the mortgage referred to in Schedule
A is invalid or unenforceable as to the principal and/or interest due on the
note or notes secured thereby, said interest being computed in accordance with
provisions of the Credit/Loan Agreement, on the ground that the loan evidenced
by the note or notes secured thereby is usurious. As used in this endorsement,
the "Credit/Loan Agreement" means that certain Credit/Loan Agreement which is
secured by the insured mortgage.
The insurance against usury risks afforded by this endorsement and its effect on
the title insurance under the policy to which it is attached shall survive the
satisfaction of the mortgage or trust deed, the lien of which is thus insured.
<PAGE>
EXHIBIT 14
TIE-IN ENDORSEMENT
Attached to Policy No. ______
Issued By
______ TITLE INSURANCE COMPANY
The following policies are issued in conjunction with one another:
[List all policies here.]
Notwithstanding the provision of Section 7(a)(i) of the Conditions and
Stipulations of this policy, the amount of insurance available to cover the
Company's liability for loss or damage under this policy at the time of payment
of loss hereunder shall be the aggregate of the amount of insurance under this
policy and the other policies identified above. At no time shall the amount of
insurance under this policy and the other policies identified above exceed in
the aggregate $______________. All payments made by the Company under this
policy or any of the other policies identified above, except those payments
which would not reduce the amount of insurance under the Conditions and
Stipulations of the policies, shall reduce the aggregate amount of insurance pro
tanto.
This endorsement is made a part of the policy and is subject to all of the
terms and provisions thereof and of any prior endorsements thereto. Except to
the extent expressly stated, it neither modifies any of the terms and provisions
of the policy and any prior endorsements, nor does it extend the effective date
of the policy and any prior endorsements, nor does it increase the face amount
thereof.
[Witness clause optional]
__________________ Title Insurance Company
<PAGE>
EXHIBIT 15
FIRST LOSS ENDORSEMENT
Attached to Policy No. ______
Issued By
______ TITLE INSURANCE COMPANY
In the event a defect, lien or encumbrance or other matter insured against
by this policy creates a loss as determined by this policy, the amount for which
the Company shall be liable shall be determined without requiring maturity of
the indebtedness by acceleration or otherwise and without requiring the Insured
to pursue its remedies against any other collateral securing the indebtedness
which is also secured by the insured mortgage.
<PAGE>
SCHEDULE 7-B
Survey Requirements
Each survey shall (i) be a current "as-built" metes and bounds survey of the
land covered by the title policy, including easements which benefit such land,
(ii) be made in accordance with the "Minimum Standard Detail Requirements for
ALTA/ACSM Land Title Surveys" jointly established and adopted by ALTA and ACSM
in 1992 and meet the accuracy requirements of an "Urban" survey as defined
therein, (iii) be prepared by a surveyor, and be in form, scope and substance,
as may have been required by Lender in connection with advance of the Loan
Amount, (iv) contain Optional Survey Requirements 1, 2, 3, 6, 7(a), 7(b), 7(c),
8, 9, 10, 11 and 13 as specified on Table A to Exhibit 16 hereto, and (v)
contain a certification substantially in the form attached hereto as Exhibit 17.
In addition, the surveyor should list all Schedule B exceptions and plot all
easements cited in the title commitment, or note that they are not applicable to
the subject property, or are not plottable.
<PAGE>
EXHIBIT 16
ALTA/ACSM REQUIREMENTS
(See attached)
<PAGE>
EXHIBIT 17
SURVEY CERTIFICATION
The undersigned hereby certifies to Nomura Asset Capital Corporation, and
its successors and/or assigns, Stewart Title Insurance Company, and
_________________________________, that (s)he is a duly registered land surveyor
of the State of __________, that the survey reflected by this plat was actually
made upon the ground on _______________, 19__, that the attached plat of survey
is made at least in accordance with the minimum standards established by the
State of __________ for surveyors and with the "Minimum Standard Detail
Requirements for ALTA/ACSM Land Title Surveys" jointly established and adopted
by ALTA and ACSM in 1992 and meets the accuracy requirements of an "Urban"
survey as defined therein and includes Items 1, 2, 3, and shows the size and
location of Items 6, 7(a), 7(b), 7(c), 8, 9, 10, 11 and 13 (appearing from a
careful physical inspection of the Premises, as hereinafter defined) of Table A
thereof; that said survey correctly shows the location of all buildings,
structures and other improvements situated on the ______ acre tract known as
_________________________________________________(street address) (the
"Premises") shown thereon; that the Premises is a separate tax lot; and that
said Premises is a separately subdivided tract; that all utilities for the
operation of the Premises are available at the lot lines, enter said tract
through adjoining public streets and do not run through or under any buildings
or improvements; that there are no violations of zoning ordinances, restrictions
or other rules or regulations with reference to the location of all buildings,
structures and improvements situated on the Premises and the number and
configuration of parking spaces; and that, except as shown, there are no visible
or recorded easements or rights of way across said Premises; that there are no
other easement or rights of way of which the undersigned has been advised; no
encroachments onto adjoining premises, streets or alleys by any buildings,
structures or other improvements, except as shown, and no encroachments onto
said Premises by buildings, structures or other improvements situated on
adjoining premises; that said Premises do not lie within any flood hazard areas;
and that all roads, streets and highways shown therein are completed and
dedicated public streets and have been accepted for public maintenance; that the
Premises has access to a dedicated public street or streets known as
<PAGE>
2
______________________________________.
<PAGE>
Schedule 8
ROLLOVER LEASES
================================================================================
Individual Scheduled
Property Lease Expiration
- --------------------------------------------------------------------------------
1. 1655 Valley Road, May 5, 1987/ May 5, 2003
Wayne, New Jersey Reckitt & Colman, Inc. (tenant has right to
renew for two (2)
additional five (5) year
terms)
- --------------------------------------------------------------------------------
2. 5 Thornton Road, July 18, 1973 April 30, 2003
Oakland, New Jersey and July 1, 1977/ (tenant has right to
Aramis, Inc. renew for two (2)
additional five (5) year
terms)
================================================================================
The following apply to the Leases described in items (1) and (2) above, in the
aggregate:
Initial Lease Reserve Deposit: $ 150,000
Annual Lease Reserve Amount: $ 163,000
=========
Total at End of 5 Years: $ 965,000
<PAGE>
Exhibit 10 (ab)
AGREEMENT OF SALE AND PURCHASE
THIS AGREEMENT is made as of the __ day of December, 1997, by and
between CUMBERLAND VALLEY ASSOCIATES, a Pennsylvania general partnership
(?Seller?) and PENN SQUARE PROPERTIES, INC., a Pennsylvania corporation, or its
assignee or nominee (?Buyer?).
W I T N E S S E T H :
1. Agreement to Sell and Purchase. Seller agrees to sell to Buyer,
and Buyer agrees to purchase from Seller, subject to all of the terms and
conditions of this Agreement, the property situate in the Township of Silver
Spring, Cumberland County, Commonwealth of Pennsylvania, consisting of
the following:
(a) That certain tract of land more fully described by metes
and bounds on Exhibit A to this Agreement, together with all buildings and
improvements thereon and appurtenances thereto, and together with all rights,
title and interest of Seller in and to any land lying in the bed of any street,
opened or proposed, abutting such tract of land, and all right, title and
interest of Seller in and to any unpaid award for the taking by eminent domain
of any part of the aforesaid tract of land or for damage to such tract of land
by reason of a change of grade of any street (collectively, the "Real
Property").
(b) All fixtures, equipment, supplies, and other personal
property attached or appurtenant to, or located in or on, or used in connection
with the Real Property, which are not owned by tenants of the Real Property, and
together with all intangible personal property used in the ownership, operation
or maintenance of the Real Property, including without limitation, the items set
forth on Exhibit B to this Agreement (collectively, the "Personal Property").
Notwithstanding the foregoing, the racks and racking system and appurtenances
thereto now located within the building are not included in the Personal
Property.
(c) The Real Property and the Personal Property are sometimes
collectively referred to as the "Property".
2. Purchase Price.
The purchase price (the "Purchase Price") for the Property,
subject to adjustments as provided in this Agreement, shall be the sum of
Twenty-five Million Five Hundred Thousand Dollars ($25,500,000), and shall be
paid as follows:
<PAGE>
(a) One Hundred Thousand Dollars ($100,000) shall be paid by
Buyer?s check drawn to the order of First American Title Insurance Company
(?Title Company?) within two (2) business days after the expiration of the
Inspection Period. As used in this Agreement, the term ?Deposit? shall mean the
aforesaid sum of One Hundred Thousand Dollars ($100,000) plus all interest which
has accrued thereon. The Deposit shall be held by the Title Company in an
interest bearing account pending consummation of this Agreement.
(b) The balance of the Purchase Price shall be paid at Closing
by wire transfer of immediate funds to an account of Seller (which account shall
be designated by written notice from Seller to Buyer no later than two (2)
business days prior to the Closing Date).
3. Disposition of Deposit; Defaults.
(a) The Deposit shall be held in escrow and disbursed by Title
Company in accordance with the terms of this Agreement. If Closing is completed,
the Title Company shall pay the Deposit to Seller on account of the Purchase
Price.
(b) (i) If Buyer, without the right to do so and in default of
its obligations under this Agreement fails to complete Closing, the Deposit
shall be paid to Seller as liquidated damages and not as a penalty. Buyer and
Seller acknowledge that the damages which may be incurred by Seller in the event
of Buyer's default are difficult to quantify as of the date of this Agreement;
the Deposit represents the parties' reasonable estimate of Seller's probable
future damages in the event of Buyer's default; and that the Deposit represents
fair and reasonable compensation to Seller in the event of Buyer's default. The
right of Seller to be paid the Deposit shall be Seller's exclusive and sole
remedy, and Seller waives any right to recover the balance of the Purchase
Price, or any part thereof, and the right to pursue any other remedy permitted
by law or in equity against Buyer.
(ii) If Seller, without the right to do so and in
default of its obligations under this Agreement fails to complete Closing or
otherwise defaults under or breaches this Agreement, Buyer shall have the right
to be paid the Deposit, which right shall be in addition to all other rights and
remedies of Buyer under this Agreement, at law or in equity. Notwithstanding the
foregoing, if Seller defaults on its obligations under this Agreement, Buyer?s
remedies are limited, at Buyer?s option, to (i) bringing an action against
Seller for specific performance, including reasonable attorney?s fees and other
costs incurred in connection with bring such action, or (ii) bringing an action
for reasonable payments to third parties as expenses incurred by Buyer under
this Agreement, such as legal fees, engineering fees, and permit and application
fees, or (iii) if the default by Seller is as the result of fraud or willful
misconduct by Seller, bringing an action against Seller for any remedy available
to Buyer at law or in equity.
(c) In the event of a dispute between the parties with respect
to the Deposit, the Title Company may deposit the Deposit with a court of proper
jurisdiction and
2
<PAGE>
commence an interpleader action. Upon notifying Seller and Buyer of the
commencement of such action, the Title Company shall be released of all
liability with respect to the Deposit, except to the extent of accounting for
any monies previously delivered by the Title Company out of escrow. The Title
Company shall not be liable to either Seller or Buyer other than for the
performance of its duties under this Agreement, its negligence or intentional
wrongdoing.
4. Closing.
The closing of this transaction ("Closing") shall be concluded
by the escrow delivery by each of Seller and Buyer of all of the Closing
documents to the Title Company with disbursements being made by the Title
Company by wire transfer of immediate funds. Closing shall commence at 10:00
a.m. on Thursday, January 8, 1998 (the "Closing Date").
5. Condition of Title.
(a) Title to the Property shall be good and marketable and
free and clear of all liens, restrictions, easements, encumbrances, leases,
tenancies and other title objections, except for the New Lease and the Permitted
Encumbrances; and shall be insurable as such at ordinary rates by the Title
Company pursuant to an ALTA Owner's Policy of Title Insurance, 1970 Form B,
amended October 17, 1970 and October 17, 1984. The premium for the Owner's
Policy of Title Insurance will be paid by Buyer.
(b) If Seller is unable to convey title to the Real Property
to Buyer at Closing in accordance with the requirements of this Agreement, Buyer
shall have the options (i) of taking such title as Seller is able to convey with
abatement of the Purchase Price in the amount (fixed or ascertainable) of any
Monetary Liens or (ii) of terminating this Agreement. Notwithstanding the
foregoing, if title to the Property is not as described in Section 5(a) by
reason an encumbrance or other title objection arising after the date of the
Title Commitment and which objection is the result of any act or omission within
the control of Seller, Buyer shall also be entitled to pursue all other remedies
available to Buyer at law or in equity.
(c) Buyer shall obtain from the Title Company a commitment for
Title Insurance (?Title Commitment?) with respect to the Property. Within five
days after Buyer?s receipt of the Title Commitment and a new as-built survey of
Property, Buyer shall give to Seller notice (?Exception Notice?) of any
exceptions to the title set forth in the Title Commitment which are not
acceptable to Buyer (?Unacceptable Exceptions?). Buyer agrees that the New Lease
shall not be an Unacceptable Exception. Seller shall, within ten days from the
date of Seller?s receipt of the Exception
3
<PAGE>
Notice, deliver to Buyer an endorsement to the Title Commitment issued by the
Title Company stating which, if any, Unacceptable Exceptions the Title Company
has removed from the Title Commitment; and if the Title Company has not issued
an endorsement to the Title Commitment removing all of the Unacceptable
Exceptions from the Title Commitment within ten days from the date of Seller?s
receipt of the Exception Notice, then Buyer shall have the right to terminate
this Agreement. If Buyer does not terminate this Agreement pursuant to the
provisions of this subsection 5(c), then the exceptions remaining on Schedule B,
Section 2 of the Title Commitment which are not liens securing repayment of
monetary sums (?Monetary Liens?) shall be the ?Permitted Encumbrances?. Seller
agrees fully to pay all Monetary Liens and cause all Monetary Liens to be
released and satisfied of record prior to the completion of Closing.
6. Possession.
Possession of the Property shall be given to Buyer at Closing,
subject only to the rights of the Tenant under New Lease, by delivery of
Seller's special warranty deed duly executed and acknowledged by Seller and in
proper form for recording (the "Deed"). If Buyer causes a survey of the Real
Property to be made, then at Buyer's option the description of the Real Property
contained in the Deed shall be based upon that survey; provided, however,
Seller?s warranty of title in the Deed shall apply only to the description of
the Real Property contained in the deed into the Seller so long as Seller has
not subdivided the Real Property or otherwise changed the boundaries of the Real
Property from the date on which the Seller acquired title to the Real Property.
7. Apportionments; Transfer Taxes; Security Deposits.
(a) Water and sewer rentals shall be apportioned pro rata
between Seller and Buyer on a per diem basis as of the Closing Date; provided,
however, that there shall be no apportionment between Buyer and Seller at
Closing with respect to utility charges paid by the Tenant directly to utility
companies pursuant to the New Lease. Real estate taxes on the Real Property are
paid directly by the Tenant under the Existing Lease and the Tenant shall
continue to be required to pay real estate taxes on the Real Property under the
New Lease. Seller agrees to cause the Tenant to have paid all real estate taxes
which are due under the terms of the Existing Lease or the New Lease as of the
Closing Date and Buyer shall be responsible for insuring that the Tenant pays
real estate taxes due for the next calendar or fiscal year, as appropriate,
under the New Lease. At Closing, minimum rent paid by the Tenant under the New
Lease for the month in which Closing occurs shall be apportioned between Seller
and Buyer.
(b) At Closing, Buyer shall pay all realty transfer taxes
imposed by the Commonwealth of Pennsylvania and all other governmental
authorities upon: (i) the New Lease (and/or the Memorandum thereof) and (ii) the
Deed and the conveyance of the Real Property from Seller to Buyer, after credit
for the realty transfer tax paid for the execution, delivery and/or recording of
the New Lease (and/or the Memorandum thereof).
(c) At closing, Seller shall obtain, or shall cause the Tenant
to obtain, readings of all utility meters for utilities provided to the
Property; and Seller shall pay (or shall cause the Tenant to pay) all charges
based upon such readings.
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8. Representations and Warranties of Seller. Seller makes the
following representations and warranties to Buyer, which representations and
warranties are true and correct as of the date of this Agreement, and shall be
true and correct at and as of the Closing Date as though made both at and as of
the date of this Agreement and at and as of the Closing Date:
(a) The only lease or other agreement currently in effect with
respect to the rights of use and occupancy of the Property is the Lease
Agreement dated April 16, 1990 between Seller, as Landlord and Hershey Chocolate
U.S.A., a division of Hershey Foods Corporation, as tenant (?Existing Lease?);
as of January 1, 1998: (i) Seller shall enter into an agreement with Hershey
Chocolate U.S.A., a division of Hershey Foods Corporation, pursuant to which the
Existing Lease shall terminate and pursuant to which each of Seller and Hershey
Chocolate U.S.A., a division of Hershey Foods Corporation, shall settle and pay
to each other any and all amounts due and payable pursuant to the Existing
Lease; and (ii) Seller and Hershey Foods Corporation, a Delaware corporation
("Tenant"), shall enter into the Lease Agreement in the form attached hereto as
Exhibit ?C? (?New Lease?), effective as of January 1, 1998; and (iii) Seller
shall convey to Tenant all of Seller?s rights, title and interest in and to the
racks and racking system and appurtenances thereto now located within the
building. The Agreement specified in clause (i) above and the New Lease
specified in clause (ii) shall be conditioned upon the completion of Closing
pursuant to this Agreement; and shall provide that in the event Closing does not
occur, the Existing Lease shall remain in full force and effect and the New
Lease shall be null and void.
(b) Subject to the provisions of subparagraph 8(a), above, the
Existing Lease is valid and existing and in full force and effect; the Tenant is
in actual possession of the Property; and neither the Tenant nor the Seller is
in default of its respective obligations under the Existing Lease.
(c) The copy of the Existing Lease previously delivered by
Seller to Buyer is a true and complete copy of the Existing Lease; the Existing
Lease has not been amended, modified, or supplemented; and the Tenant does not
have any right to extend or renew the terms of the Existing Lease except as
expressly set forth in the Existing Lease.
(d) The Tenant has not asserted any claim which could
adversely affect the right of the landlord to collect base, minimum or fixed
rental or additional rental from the Tenant; and no notice of default or breach
on the part of landlord under the Existing Lease has been received by Seller
from the Tenant which has not been cured.
(e) All construction, painting, repairs, alterations,
improvements and other work required to be performed by the landlord under the
Existing Lease, and all of the other obligations of the landlord required to be
performed under the Existing Lease as of the Closing Date, have been completed
fully performed and paid for in full by Seller.
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(f) The rents and other payments set forth in the Existing
Lease are the actual rents, income and charges presently being collected by
Seller under the Existing Lease; and all minimum rent payable under the Existing
Lease is payable monthly in advance.
(g) Except as set forth in the Existing Lease, the Tenant is
not entitled to any concession, allowance, rebate or refund; and the allowances,
if any, specified in the Existing Lease have been fully recovered by the Tenant
thereunder.
(h) The Tenant has not prepaid any base rental, minimum
rental, fixed rental or additional rental or other charges for more than the
current month under its Existing Lease.
(i) Neither the Existing Lease nor the rental or other amounts
payable under the Existing Lease has been assigned, pledged or encumbered other
than to the holder of any existing mortgage on the Property as collateral
security, which collateral assignment and existing mortgage shall be released
and satisfied as of the Closing Date.
(j) A security deposit has been paid by under the Existing
Lease, which security deposit shall be returned by the Seller to the tenant
under the Existing Lease contemporaneously with, or promptly after, the
completion of Closing.
(k) Seller shall pay and fully satisfy, on or prior to the
Closing Date, all brokerage or leasing commissions or other compensation which
are or will become due and payable to any party (?Lease Broker?) with respect to
or on account of the Existing Lease and/or New Lease, or any extension or
renewal of the Existing Lease and/or New Lease, or the termination of the
Existing Lease and/or New Lease, or any other actions by the Tenant under the
Existing Lease and/or New Lease; and Buyer shall not be responsible to the Lease
Broker for any brokerage or leasing commissions or other compensation with
respect to or on account of the Existing Lease and/or New Lease, or any
extensions or renewals thereof, the termination of the Existing Lease and/or New
Lease, or any other actions by the Tenant under the Existing Lease or with
respect to the New Lease.
(l) Except for the option held by the Tenant pursuant to the
Existing Lease to acquire title to the Property under the terms of the Existing
Lease (which option shall terminate with the termination of the Existing Lease),
the Tenant does not have any right or option to acquire to the Property or any
portion thereof.
(m) Seller has not received any notice ("Defect Notice") from
any insurance company which has issued a policy with respect to the Property or
from any board of fire underwriters (or other body exercising similar functions)
claiming any defects or deficiencies in the Property or suggesting or requesting
the performance of any repairs, alterations or other work to the Property.
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(n) As of the Closing Date there shall be no management,
service, equipment, supply, security, maintenance, construction, concession or
other agreements with respect to or affecting the Property, except for any
agreements under which only the Tenant is bound.
(o) No employee of Seller who performs services at or in
connection with the Property is covered by an employment agreement or union
contract; no demand has been made upon Seller for recognition of a union or
collective bargaining agent for the employees of Seller at the Property; and
none of the employment arrangements with respect to Seller?s employees will be
binding upon Buyer or any subsequent owner of the Property after Closing.
(p) There are no outstanding uncured notices of any violation
(?Violation?) of any applicable law, ordinance, code, rule, order, regulation or
requirement of any governmental authority with respect to the Property
(including, without limitation, any environmental law or regulation)(all herein
called ?Laws?).
(q) To the actual knowledge of Seller, Exhibit D sets forth
the fire and extended coverage insurance policy ("Policy") maintained by tenant
under the Existing Lease; and to the actual knowledge of Seller, the tenant has
not received any notice from the insurance company which issued the Policy
indicating that the Policy will not be renewed or will be renewed at a higher
premium than is presently payable therefor.
(r) There is no action, suit or proceeding pending or, to the
actual knowledge of Seller, threatened against or affecting Seller or the
Property or any portion thereof or the Existing Lease or New Lease or relating
to or arising out of the ownership, management or operation of the Property, in
any court or before or by any federal, state, county or municipal department,
commission, board, bureau or agency or other governmental instrumentality.
(s) Seller has not received any notice of any condemnation
proceeding or other proceedings in the nature of eminent domain ("Taking") in
connection with the Property, and to Seller's knowledge no Taking has been
threatened.
(t) All of the books, records, information, data and other
items supplied by Seller to Buyer with respect to Seller or the Property are
true, complete and correct in all material respects.
(u) To the best of Seller?s actual knowledge: there is no
presently existing Violation at the Property of any Law; no contamination is
present at the Property; and no underground storage tanks, asbestos or PCBs are
present at the Property.
9. Time. In computing the number of days for purposes of this
Agreement, all days shall be counted, including Saturdays, Sundays and holidays;
provided, however, that if
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the final day of any time period provided in this Agreement shall end on a
Saturday, Sunday or legal holiday, then the final day shall extend to 5:00 p.m.
of the next full business day. For the purposes of this Section, the term
"holiday" shall mean a day other than a Saturday or Sunday on which banks in the
state in which the Real Property is located are or may elect to be closed.
10. Operations Prior to Closing. Between the date of the execution
of this Agreement and Closing:
(a) Seller shall, at its expense: perform all of its
obligations under the Existing Lease and the New Lease and cure all notices of
any Violations and/or Defect Notices issued prior to Closing.
(b) Seller shall not enter into any agreement to modify, amend
or otherwise alter any of the terms or provisions of the Existing Lease (except
as expressly provided above) or the New Lease; and (except for the New Lease)
Seller shall not enter into a new lease or other agreement with respect to the
use or occupancy of the Property, without prior written approval of Buyer.
(c) Seller shall perform all acts, and shall make all
payments, necessary to cause the representations and warranties of Seller in
this Agreement to be true and correct.
(d) (i) Buyer, its attorneys, accountants, architects,
engineers and other representatives shall be afforded access to the Property and
to all books, records and files relating thereto from time to time prior to
Closing for the purposes of inspections, preparation of plans, taking of
measurements, making of surveys, making of appraisals, and generally for the
ascertainment of the condition of the Property, including but not limited to the
physical and financial condition of the Property; and there shall be furnished
to Buyer all plans and specifications, engineering reports, feasibility studies,
operating statements, governmental permits and approvals, contracts, leases,
surveys, title information and other documentation concerning the Property in
the possession of Seller and/or Seller's management agent for the Property.
(ii) Buyer agrees to indemnify, defend and reimburse Seller
for all costs, expenses (including, without limitation, attorney?s fees,
consultant and expert fees and court costs) loss and liabilities suffered or
incurred by Seller as the result of any bodily injuries to persons or properties
caused by Buyer?s entry upon the Property prior to Closing pursuant to the
provisions of this Section 10(d). Buyer?s obligations pursuant to this
subparagraph 10(d)(ii) shall survive any termination of this Agreement as a
separately enforceable covenant.
(e) Promptly after receipt thereof by Seller, Seller shall
deliver to Buyer the following:
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(i) a copy of any notice of default given or received
under the Existing Lease; or the New Lease
(ii) a copy of any tax bill, notice or statement of
value, or notice of change in a tax rate affecting or relating to the Property;
(iii) a copy of any notice of an actual or alleged
Violation; and
(iv) a copy of any notice of Taking.
(f) Seller shall permit Buyer to negotiate with the Tenant any
changes or modifications to the New Lease; provided, however, that Buyer shall
have no obligation to agree or consent to any such changes. Seller agrees to use
its best efforts to assist Buyer in obtaining the agreement of the Tenant to the
terms and provisions of the New Lease and to cause the Tenant to execute the New
Lease as of January 1, 1998.
(g) Seller shall deliver for execution by the Tenant a
Subordination, Nondisturbance and Attornment Agreement (?SNDA?) in the form
attached to the New Lease for the benefit of any proposed mortgagee to provide
financing to Buyer in connection with Buyer?s acquisition of the Property; and
Seller agrees to use its best efforts to assist Buyer in obtaining the executed
SNDA from the Tenant.
(h) Seller shall deliver for execution by the Tenant a written
certification which shall be prepared by Buyer?s counsel (utilizing the form
attached to this Agreement as Exhibit E, (but modified and supplemented by
Buyer?s counsel to reflect the terms and provisions of the New Lease) (such
certification being herein called the ?Tenant Estoppel Certificate?), and Seller
shall obtain the executed Tenant Estoppel Certificate from the Tenant. Seller
shall deliver to Buyer a copy of the executed Tenant Estoppel Certificate
obtained by Seller, promptly after Seller?s receipt thereof.
11. Survival. The representations and warranties of Seller set forth
in Section 8 shall survive Closing for a period of 24 months from the Closing
Date and thereafter if a notice of breach is given to Seller with such
24-monthly period. The obligations of Seller and Buyer pursuant to Sections
7,10, 16, 17 and 20 of this Agreement shall survive Closing without limit.
Except as otherwise provided in the preceding two sentences, the agreements of
Seller and Buyer set forth in this Agreement shall not survive Closing and shall
merge into the delivery of the Deed at Closing.
12. Casualty.
(a) If at any time prior to the Closing Date any portion of
the Property is destroyed or damaged as a result of fire or any other casualty
("Casualty"), Seller shall
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promptly give written notice ("Casualty Notice") thereof to Buyer. If the
Property is the subject of a Casualty, Buyer shall have the right, at its sole
option, of terminating this Agreement unless, (i) the cost fully to repair or
restore such damage is less than Twenty-Five Thousand Dollars ($25,000) and
sufficient insurance proceeds are available fully to restore such damage, and
(ii) the insurance company issuing the Policy has confirmed in writing prior to
the end of such thirty (30) day period that such Casualty is covered by the
Policy and that no defense to payment of the claim exists, and (iii) such
Casualty will not result in the Tenant terminating, or not paying rent under,
the New Lease or asserting a right to terminate, or not pay rent under, the New
Lease, and (iv) any loan commitment obtained by Buyer for financing to acquire
the Property is not canceled or suspended as a result of such Casualty. If Buyer
does not terminate this Agreement, the proceeds of any insurance with respect to
the Property paid between the date of this Agreement and the Closing Date shall
(subject to the provisions of the New Lease) be paid to Buyer at the time of
Closing and all unpaid claims and rights in connection with losses to the
Property shall (subject to the provisions of the New Lease) be assigned to Buyer
at Closing without in any manner affecting the Purchase Price.
(b) If the Property is the subject of a Casualty, but Buyer
does not have the right to terminate this Agreement pursuant to the provisions
of Section 12(a) (or Buyer does not exercise such right), then Seller shall
enforce the obligations of the Tenant under the New Lease to repair the damage
to the Property caused by such Casualty. Except for the obligation of Seller to
enforce the obligations of the Tenant pursuant to the provisions of the
preceding sentence, Seller shall have no obligation to repair any Casualty
damage in the event Buyer does not elect to terminate this Agreement pursuant to
the provisions of Section 12(a), and in such event, Buyer shall accept the
Property at Closing as damaged or destroyed by the Casualty.
13. Eminent Domain. If at any time prior to the Closing Date: a
Taking affects all or any part of the Property, or if any proceeding for a
Taking is commenced, or if notice of the contemplated commencement of a Taking
is given, Seller shall promptly give written notice ("Taking Notice") thereof to
Buyer. Buyer shall have the right, at its sole option, of terminating this
Agreement by written notice to Seller. If Buyer does not terminate this
Agreement, the Purchase Price shall be reduced by the total of any awards or
damages received by Seller and Seller shall, at Closing, assign to Buyer all of
Seller's right, title and interest in and to any awards or damages to which
Seller may have become entitled or may thereafter be entitled by reason of any
exercise of the power of eminent domain or condemnation with respect to or for
the Taking of the Property or any portion thereof.
14. Conditions of Buyer's Obligations.
(a) Conditions. The obligations of Buyer under this Agreement
are subject to the satisfaction at the time of Closing of each of the following
conditions (any one of which may be waived in whole or in part in writing by
Buyer at or prior to Closing):
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(i) all of the representations and warranties by Seller
set forth in this Agreement shall be true and correct in all material respects;
(ii) no representation or warranty by Seller contained
in this Agreement shall contain any materially untrue statement or shall omit a
material fact necessary to make the statement of fact therein recited not
misleading;
(iii) Seller shall have performed all covenants,
agreements and conditions required by this Agreement to be performed by Seller
prior to or as of the Closing Date; and
(iv) Buyer shall have received the executed Tenant
Estoppel Certificate, New Lease and SNDA.
(b) Failure of Condition. In the event any of the conditions
set forth in Section 14(a) are not satisfied as of the Closing Date, Buyer shall
have the right (in addition to all other rights and remedies available to Buyer
under this Agreement), at Buyer's sole option, to (i) terminate this Agreement
or (ii) complete Closing notwithstanding the unsatisfied condition.
(c) Inspection Contingency.
(i) Buyer shall, during the period ("Inspection Period")
from November 3, 1997 until December 17, 1997, have the opportunity to examine
the Property, the Tenant Lease, the Policy, the Permitted Encumbrances, any
items to be delivered by Seller to Buyer, and to conduct such other inspections
as Buyer, in its discretion, may elect.
(ii) Seller acknowledges that Buyer may commission,
prior to Closing, at Buyer's sole cost and expense, an investigation of without
limitation: compliance with environmental laws, the presence of contaminants on,
over, under, migrating from or affecting the Property.
(iii) Seller will cooperate with Buyer and Buyer's
agents in Buyer's investigation, including without limitation: (A) complying
with requests for information and records; (B) warranting that responses to such
requests are true and complete; (C) assisting Buyer in obtaining governmental
agency or other records and upon Buyer's request communicating directly with any
governmental agencies; and (D) granting Buyer access to the Property including,
without limitation, access for collecting surface or subsurface samples of soil,
vegetation or water, or samples from buildings and other improvements located on
the Property, including samples from walls, floors, ceilings, plenums, paved
areas and other areas the taking of which samples may necessitate some damage to
the buildings, other improvements, and installing groundwater monitoring wells.
Seller will not be required to incur any out-of-pocket expenses in connection
with its cooperation pursuant to this Section 14(c)(iii) and in the event that
this Agreement terminates without Closing, Buyer shall repair any damage to the
Property resulting from Buyer?s inspection activities pursuant to this
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Section 14(c)(iii), at Buyer?s cost. The Buyer?s obligations pursuant to the
preceding sentence shall survive a termination of this Agreement as a separately
enforceable covenant.
(iv) Buyer shall have the right, at Buyer?s sole option,
to terminate this Agreement (for any reason whatsoever) on or prior to the
second business day to occur after the date on which the Inspection Period ends.
(d) Notwithstanding any provision to the contrary set forth
elsewhere in this Agreement, if Seller defaults on its obligations under this
Agreement, Buyer?s remedies are limited, at Buyer?s option, to (i) bringing an
action against Seller for specific performance, including reasonable attorney?s
fees and other costs incurred in connection with bringing such action, or (ii)
bringing an action for reasonable payments to third parties as expenses incurred
by Buyer under this Agreement, such as legal fees, engineering fees and permit
and application fees, or (iii) if the breach by Seller is a result of fraud or
willful misconduct by the Seller, bringing an action against Seller for any
remedy available to Buyer at law or in equity.
15. Items to be Delivered at Closing.
(a) By Seller. At Closing, Seller shall deliver to Buyer the
following:
(i) Deed. The Deed.
(ii) Bill of Sale. A Bill of Sale for the Personal
Property.
(iii) Assignment of Lease; An Assignment in the form of
Exhibit G of the New Lease, duly executed and acknowledged by Seller and in
proper form for recording, assigning to Buyer all of the lessor?s and Seller?s
rights, title and interest in the New Lease, together with an original executed
counterpart of the New lease and a letter, duly executed by Seller, in form
satisfactory to Buyer addressed to the Tenant informing the Tenant of the
assignment of the New Lease to Buyer.
(iv) Certificates, Etc. An assignment, duly executed and
acknowledged by Seller, of (and delivery to Buyer of originals or copies of):
all certificates of occupancy and all other licenses, permits, authorizations,
consents, certificates and approvals for the Property; all fees, escrow and/or
security funds, deposits and other sums heretofore paid to any governmental
authority in connection with the Property; all certificates issued by the local
Board of Fire Underwriters (or other body exercising similar functions); all
plans, specifications and project manuals for the Property; and all guarantees,
bonds and warranties with respect to the Property (together with original
counterparts of such instruments).
(v) Tenant Estoppel Certificates. At least one
counterpart of the Tenant Estoppel Certificate and SNDA, duly executed and
acknowledged by the Tenant.
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(vi) Resolutions; Title Company Affidavits, Etc. Such
resolutions and certificates as the Title Company shall require to evidence the
due authorization of the execution and performance of this Agreement and the
documents to be delivered pursuant hereto; and all affidavits, indemnities and
other agreements required by the Title Company to permit it to issue to Buyer
the Owner's Policy of Title Insurance required pursuant to Section 5(a).
(vii) Conveyance of Awards. All proper instruments for
the conveyance of the awards referred to in Sections 1(a) and 13.
(viii) Other Documents. Any other documents required to
be delivered by Seller pursuant to any other provisions of this Agreement.
(b) By Buyer. At Closing, Buyer shall deliver to Seller the
following:
(i) Purchase Price. The portion of the Purchase Price
payable pursuant to Section 2(b).
(ii) Assumption Agreements. An assumption agreement, in
the form of Exhibit G of the New Lease, duly executed and acknowledged by Buyer
and in proper form for recording.
(iii) Other Documents. Any other document required to be
delivered by Buyer pursuant to any other provisions of this Agreement.
16. Reports. For the period of time commencing on the date of this
Agreement and continuing through the first anniversary of the Closing Date, and
without limitation of the other document production otherwise required of Seller
hereunder, Seller shall, from time to time, upon reasonable advance written
notice from Buyer, provide to Buyer and its representatives: (i) access to all
financial and other information pertaining to the period of Seller?s ownership
and operation of the Property, which information is relevant and reasonably
necessary, in the opinion of Buyer?s outside, third party accountants
("Accountants") to enable Buyer and its Accountants to prepare financial
statements in compliance with any and all of (a) Rule 3-05 or Rule 3-14 of
Regulation S-X of the Securities and Exchange Commission (the "Commission"), as
applicable to Buyer; (b) any other rule issued by the Commission and applicable
to Buyer; and (c) any registration statement, report or disclosure statement
filed with the Commission by, or on behalf of Buyer; and (ii) a representation
letter, in form specified by, or otherwise satisfactory to the Accountants,
signed by the individual(s) responsible for Seller?s financial reporting, as
prescribed by generally accepted auditing standards promulgated by the Auditing
Standards Division of the American Institute of Certified Public Accountants,
which
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representation letter may be required by the Accountants in order to render an
opinion concerning Seller?s financial statements.
17. Brokerage. Buyer represents and warrants to Seller that Buyer
has dealt with no broker, finder or other intermediary in connection with this
sale other than Commercial-Industrial Realty Company (the ?Broker?), Seller
agrees to pay all brokerage commissions due to the Broker, if any.
18. No Other Representations. Buyer acknowledges that neither Seller
nor anyone acting, or purporting to act, on behalf of Seller, has, except as
expressly set forth in this Agreement, made any representation or warranty with
respect to the Property.
19. Assignability. Buyer shall have the right to assign this
Agreement and its rights hereunder to any entity controlled by Penn Square
Properties, Inc., controlling Penn Square Properties, Inc., or affiliated with
Penn Square Properties, Inc., or to any other party to whom Seller consents
(which consent Seller agrees not unreasonably to withhold or delay); and any
assignee of Buyer shall be entitled to exercise all of the rights and powers of
Buyer hereunder.
20. FIRPTA.
(a) Section 1445 of the Internal Revenue Code of 1986, as
amended (the "Code") provides that a transferee of a United States real property
interest must withhold tax if the transferor is a foreign person. To inform
Buyer that withholding of tax is not required upon the disposition by Seller of
a United States real property interest, the undersigned parties executing this
Agreement on behalf of Seller hereby certify the following on behalf of Seller:
(i) Seller is not a foreign corporation, foreign
partnership, foreign trust, or foreign estate (as those terms are defined in the
Code and Income Tax Regulations);
(ii) Seller's U.S. employer identification number is
25-1629233; and
(iii) Seller's office address is: 1333 Georgetown
Circle, Carlisle, PA 17013-3579
Seller, and the parties executing this Agreement on behalf of Seller, understand
that this certification may be disclosed to the Internal Revenue Service by
Buyer and that any false statement made here could be punished by fine,
imprisonment, or both. Under penalties of perjury, the undersigned parties
executing this Agreement on behalf of Seller declare that they have examined
this certification and to the best of their knowledge and belief, it is true,
correct
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and complete; and they further declare that they have authority to sign this
document on behalf of Seller.
(b) Seller, and the parties executing this Agreement on behalf
of Seller, shall deliver to Buyer at Closing, a restatement of the above
certifications of Seller and of the parties executing this Agreement on behalf
of Seller in the form attached to this Agreement as Exhibit H.
21. Notices.
(a) All notices, demands, requests or other communications
from each party to the other required or permitted under the term of this
Agreement shall be in writing and, unless and until otherwise specified in a
written notice by the party to whom notice is intended to be given, shall be
sent to the parties at the following respective addresses:
if intended for Seller:
Cumberland Valley Associates
c/o Delbert Hawbaker
1333 Georgetown Circle
Carlisle, PA 17013-3579
Fax: 717-258-8425
with a copy to:
James K. Adams, II
5021 East Trindle Road
Mechanicsburg, PA 17055
Fax: 717-697-6734
if intended for Buyer:
The Widener Building, Suite 200
One South Penn Square
Philadelphia, PA 19107
Attention: Jeffrey E. Kelter
Fax No.: (215) 972-0819
Notices may be given on behalf of any party by its legal counsel.
(b) Each such notice, demand, request or other communication
shall be given (i) against a written receipt of delivery, or (ii) by registered
or certified mail of the United States Postal Service, return receipt requested,
postage prepaid, or (iii) by a nationally recognized overnight courier service
for next business day delivery, or (iv) via telecopier or facsimile
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transmission to the facsimile number listed above, provided, however, that if
such communication is given via telecopier or facsimile transmission, an
original counterpart of such communication shall concurrently be sent in either
the manner specified in clause (i) or (iii) above.
(c) Each such notice, demand, request or other communication
shall be deemed to have been given upon the earliest of (i) actual receipt or
refusal by the addressee, or (ii) deposit thereof at any main or branch United
States post office if sent in accordance with section (b)(ii) above or (iii)
deposit thereof with the courier if sent pursuant to section (b)(iii) above.
22. Miscellaneous.
(a) Captions. The captions in this Agreement are inserted for
convenience of reference only; they form no part of this Agreement and shall not
affect its interpretation.
(b) Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of the parties and their respective
successors and assigns.
(c) Entire Agreement; Governing Law. This Agreement contains
the entire understanding of the parties with respect to the subject matter
hereof, supersedes all prior or other negotiations, representations,
understandings and agreements of, by or among the parties, express or implied,
oral or written, which are fully merged herein. The express terms of this
Agreement control and supersede any course of performance and/or customary
practice inconsistent with any such terms. Any agreement hereafter made shall be
ineffective to change, modify, discharge or effect an abandonment of this
Agreement unless such agreement is in writing and signed by the party against
whom enforcement of such change, modification, discharge or abandonment is
sought. This Agreement shall be governed by and construed under the laws of the
Commonwealth of Pennsylvania.
(d) Provisions Separable. The provisions of this Agreement are
independent of and separable from each other, and no provision shall be affected
or rendered invalid or unenforceable by virtue of the fact that for any reason
any other provision may be invalid or unenforceable in whole or in part.
(e) Waiver of Tender of Deed and Purchase Monies. The tender
of an executed Deed by Seller and the tender by Buyer of the portion of the
Purchase Price payable at Closing are mutually waived, but nothing in this
Agreement shall be construed as a waiver of Seller's obligation to deliver the
Deed and/or of the concurrent obligation of Buyer to pay the portion of the
Purchase Price payable at Closing.
(f) Gender, etc. Words used in this Agreement, regardless of
the number and gender specifically used, shall be deemed and construed to
include any other
16
<PAGE>
number, singular or plural, and any other gender, masculine, feminine or neuter,
as the context indicates is appropriate.
(g) Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original as against any
party whose signature appears thereon, and all of which shall together
constitute one and the same instrument. This Agreement shall be binding when one
or more counterparts hereof, individually or taken together, shall bear the
signatures of all of the parties reflected on this Agreement as the signatories.
(h) Exhibits. All exhibits attached to this Agreement are
incorporated by reference into and made a part of this Agreement.
(i) No Waiver. Neither the failure nor any delay on the part
of either party to this Agreement to exercise any right, remedy, power or
privilege under this Agreement shall operate as a waiver thereof, nor shall any
single or partial exercise of any right, remedy, power or privilege preclude any
other or further exercise of the same or of any other right, remedy, power or
privilege, nor shall any waiver of any right, remedy, power or privilege with
respect to any occurrence be construed as a waiver of any such right, remedy,
power or privilege with respect to any other occurrence. No waiver shall be
effective unless it is in writing and is signed by the party asserted to have
granted such waiver.
(j) Interpretation. No provision of this Agreement is to be
interpreted for or against either party because that party or that party's legal
representative or counsel drafted such provision.
(k) Attorney's Fees. In connection with any litigation arising
out of this Agreement, the prevailing party shall be entitled to recover all
costs incurred, including reasonable attorney's fees. However, the provisions of
this Section are expressly subject to the limitation on Buyer's liability
specified in Section 3.
(l) Buyer's Exercise of Right to Terminate. If Buyer desires
to terminate this Agreement pursuant to any of the provisions of this Agreement,
Buyer shall do so by giving written notice of termination to Seller. Upon any
such termination, the Deposit shall be paid to Buyer (and each of Seller and
Buyer shall deliver written instructions to the Title Company to pay the Deposit
to Buyer); and except as otherwise expressly provided in this Agreement, this
Agreement shall be and become null and void and neither party shall have any
further rights or obligations under this Agreement. Notwithstanding the
foregoing, if, within five (5) days after Buyer shall have given written notice
of termination of this Agreement to Seller pursuant to the provisions of this
subsection 22(l) Seller shall have given written notice to the Title Company and
to Buyer that Seller disputes Buyer?s right to have the Deposit returned to
Buyer, the disposition of the Deposit shall be governed by the provisions of
Section 3(c) above.
17
<PAGE>
(m) No Recording. Neither Buyer nor Seller shall record this
Agreement or a Memorandum of this Agreement; and a recordation of this Agreement
by Buyer shall be considered a default by Buyer under this Agreement.
Notwithstanding the foregoing, neither party shall be precluded from filing this
Agreement in any action to enforce its rights under this Agreement.
IN WITNESS WHEREOF, intending to be legally bound, the parties have
executed this Agreement as a sealed instrument as of the day and year first
above written.
Witness: SELLER:
CUMBERLAND VALLEY ASSOCIATES
By: /s/ James K. Adams
------------------------------
James K. Adams, Partner
By: /s/ James K. Adams II
------------------------------
James K. Adams, II, Partner
By: /s/ Kathy Adams Purcell
------------------------------
Kathy Adams Purcell, Partner
By: /s/ Delbert L. Hawbaker
------------------------------
Delbert L. Hawbaker, Partner
BUYER:
PENN SQUARE PROPERTIES, INC.
By: /s/ Jeffrey E. Kelter
------------------------------
President
18
<PAGE>
EXHIBIT A
Legal Description of a Tract of Land
For
Cumberland Valley Associates
Silver Spring Township, Cumberland County
Pennsylvania
Beginning at a point, said point being located and referenced from the
centerline intersection of the Carlisle Pike, U.S. Route 11 and Commerce Drive,
the proposed access road to the tract of land, the following three courses:
1) On the centerline of Commerce Drive south 22' 51' 30" east, a
distance of 219.30' to a point;
2) On the same in a southern direction on the arc of a curve curving to
the left having a radius of 1,000.00' and an arc length of 305.31'
to a point;
3) On the same south 40E 21' 04" east, a distance of 327.09' to a point
on the property line of Wood's Drive Associates;
Thence along the property line of Wood's Drive Associates north 49E 38'
56" east, a distance of 787.00' to a point at land N/C of Albert L. and Virginia
M. Gaskin; thence along same south 32E 57' 09" east, a distance of 151.09' to an
existing iron pin; thence along same south 02E 18' 51" west, a distance of
118.00' to an existing iron pin; thence along same north 82E 28' 21" east, a
distance of 350.28' to an existing iron pin; thence along same south 04E 46' 00"
east, a distance of 284.20' to an existing iron pin; thence along same north 84E
32' 50" east, a distance of 498.58' to an existing iron pin; at land of Lot #3
of the final subdivision plan of Teal Road as recorded in Plan Book 55, Page 31;
thence along Lot #3 south 12E 45' 02" east, a distance of 50.41' to a point;
thence along same and Lot #2 of the same final subdivision plan south 84E 32'
50" west, a distance of 501.73' to a fence post; thence along Lot #2 and Lot #1
of the same final subdivision plans south 04E 33' 23" east, a distance of
1,003.66' to a fence post at land N/C of Martha C. Eppley and Janet F. Bucher;
thence along said land of Martha C. Eppley and Janet F. Bucher north 62E 44' 31"
west, a distance of 561.00' to an existing iron pin; thence along same south 47E
46' 04" west, a distance of 1,070.50' to a point; thence along same 44E 20' 30"
west, a distance of 1,033.50' to an existing iron pin on the southern row line
of Commerce Drive; thence along the southern row line of Commerce Drive north
49E 38' 56" east; a distance of 1,151.94' to a point, the point of beginning.
<PAGE>
Said lot contains 48.01 acres. Revised 4/23/90
<PAGE>
EXHIBIT B
LIST OF PERSONAL PROPERTY
(1) All architectural, mechanical, engineering and other plans and
specifications relating to the Property.
(2) All percolation, and other soil, topographical, and traffic studies
and tests relating to the Property.
(3) All trademarks, logos and other marks, trade or business names, and
all intangible personal property relating to the ownership, development, use,
operation, leases and management of the Property.
(4) All right, title, and interest of Seller in and to all transferrable
or assignable warranties, representations, guarantees, contract rights, and
miscellaneous rights, if any, with respect to the Property.
(5) All books, records, and documents of Seller relating to the Property
and Tenant Leases, including without limitation all computer software, programs,
tapes and disks relating to the Property and Tenant Leases.
(6) All ranges, micro-wave ovens, refrigerators, freezers,
refrigeration/freezer units, dishwashers, clothes washing machines and dryers,
and all other appliances, and all hookups for any of the foregoing or for cable
television.
(7) All heating, ventilating and air conditioning equipment and other
machinery, whether portable units or fixtures.
(8) All wall-to-wall carpeting, screens and garbage disposals, whether
personalty or fixtures.
(9) All certificates of occupancy and all other licenses, permits,
authorizations, consents, certificates and approvals issued by any governmental
authority having jurisdiction over the Property, and all certificates, if any,
issued by the local board of fire underwriters (or other body exercising similar
functions).
Notwithstanding the foregoing, the Personal Property does not include the
racks and rack system and any appurtenances thereto now located within the
building.
<PAGE>
EXHIBIT C
New Lease is attached on following pages.
<PAGE>
EXHIBIT D
INSURANCE POLICIES
<PAGE>
EXHIBIT E
TENANT ESTOPPEL CERTIFICATE
[Buyer] and its assignee
Re: Building, [address] (the "Building")
Gentlemen:
The undersigned ("Tenant") certifies and agrees as follows:
1. It is the tenant of the Building known as __________ under the Lease
dated January 1, 1998 (the "Lease"). The Lease has not been supplemented,
modified or amended, and there do not exist any other agreements concerning the
demised premises between the landlord under the Lease and Tenant. A true and
correct copy of the Lease is attached hereto.
2. The Lease is in full force and effect.
3. The term of the Lease commenced on January 1, 1998 and expires
December 31, 2013. Tenant has no right to renew or extend the term of the Lease
except as expressly set forth in the Lease.
4. The current monthly installment of minimum annual rent is $_____. No
rent has been paid more than thirty (30) days in advance of its due date. All
rent and other sums payable under the Lease have been paid through ________,
19__.
5. Tenant is not entitled to any free rent, rental rebates or other
concessions under the Lease.
6. Tenant has no claim of offset under the Lease or otherwise against
rent or other charges due or to become due under the Lease.
7. Tenant has been in possession of the Building and remaining premises
demised pursuant to the Lease prior to the commencement of the term of the
Lease. Consequently, Tenant acknowledges and agrees that Tenant is fully
familiar with the condition of the Building and premises (including, without
limitation, the status of utilities, access, building permits, compliance with
laws, environmental matters, survey matters, and any and all governmental
licenses and
<PAGE>
approvals which pertain or may pertain to the condition of the Building and the
remaining premises or the development or operation thereof); and all matters
pertaining to the quality or manner of construction, maintenance or repair of
the Building and remaining improvements on the premises; and Tenant has accepted
and does hereby accept the Building and remaining improvements on the premises
in its ?as is? and ?where is? condition, and acknowledges and agrees that all
improvements or other work required by the terms of the Lease to be performed by
the Landlord have been completed; and Tenant agrees and acknowledges that the
Landlord has not made (and that Tenant has not relied upon) any agreement,
understanding, condition, warranty or representation as to the condition of the
Building and remaining premises, as to the permitted uses of the Building and
remaining premises, as to the income or expense in connection with the Building
or remaining premises, as to the compliance of the Building and remaining
premises with any laws, ordinances or governmental regulations, or as to any
other matter in connection with the Building and remaining premises.
8. Tenant has accepted possession of the premises demised under the
Lease; all improvements or other work required by the terms of the Lease to be
performed by the landlord have been completed.
9. The landlord is not in default under the Lease, and no event has
occurred which with the giving of notice or passage of time, or both,
constitutes a default by the landlord under the Lease.
10. Tenant is not in default under the Lease, and no event has occurred
which with the giving of notice or passage of time, or both, constitutes a
default by Tenant under the Lease.
11. Tenant has not assigned the Lease or any interest therein or subleased
any portion of the demised premises.
12. No security deposit was paid under the Lease.
13. Tenant dealt with no real estate broker or intermediary in connection
with the Lease or any prior lease of the Building.
This Certificate shall inure to the benefit of you, your heirs, legal
representatives, successors and assigns, and shall be binding upon Tenant and
Tenant's heirs, legal representatives, successors and assigns.
If any statement in this certificate shall become untrue, Tenant shall
immediately give to you written notice of such occurrence.
3
<PAGE>
By executing this Certificate, the signatory represents that he/she is
duly authorized to execute this Certificate on behalf of Tenant and legally bind
Tenant.
TENANT:
By:
-----------------------------
Name:
Title:
Dated: _____________, 19__
4
<PAGE>
EXHIBIT F
FIRPTA AFFIDAVIT
Form for Entity Transferor
Section 1445 of the Internal Revenue Code provides that a transferee of a
U.S. real property interest must withhold tax if the transferor is a foreign
person. To inform the transferee that withholding of tax is not required upon
the disposition of a U.S. real property interest by _________________
(Transferor), the undersigned hereby certifies the following on behalf of
Transferor:
1. Transferor is not a foreign corporation, foreign partnership, foreign
trust, or foreign estate (as those terms are defined in the Internal Revenue
Code and Income Tax Regulations);
2. Transferor's U.S. taxpayer identification number is _________; and
3. Transferor's office address is:
________________
________________
________________.
Transferor understands that the above information may be disclosed to the
Internal Revenue Service by the transferee and that any false statement
contained herein could be punished by fine, imprisonment, or both.
Under penalties of perjury, I declare that I have examined this instrument
and to the best of my knowledge and belief it is true, correct, and complete,
and I further declare that I have authority to sign this document on behalf of
Transferor.
- ------------------- -------------------------
Name:
Title:
Dated: ___________________
<PAGE>
EXHIBIT G
ASSIGNMENT AND ASSUMPTION OF TENANT LEASES
THIS ASSIGNMENT made this __ day of ____, 19__, by and between
______________, a ________________________ having an office at
____________________________________ ("Assignor") and ________________, a
________________________ having an office at _________________________________
("Assignee").
RECITALS
A. Pursuant to a certain Agreement of Sale and Purchase dated as of
________, 19__ (the "Agreement of Sale"), Assignor has agreed to sell to
Assignee, upon the terms, provisions and conditions set forth therein, certain
property (hereinafter "Property") located in _________________ on land described
on Exhibit A attached to and made a part of this Assignment, all as more
particularly described in the Agreement of Sale.
B. In connection with the sale and purchase of the Property, Assignor
desires to assign to Assignee all tenant leases encumbering the Property and
Assignee desires to accept said assignment and assume the obligations of
Assignor under said leases upon the terms, covenants and conditions set forth in
this instrument.
NOW, THEREFORE, in consideration of the purchase price paid by Assignee to
Assignor for the Property, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Assignor and Assignee
covenant and agree as follows:
1. Assignment Assignor hereby assigns, transfers and sets over unto
Assignee all of Assignor's and the lessor's right, title and interest in and to
(a) the leases set forth on Exhibit B attached to and made a part of this
Assignment and any other lease, license or right of occupancy affecting the
Property, together with all amendments, extensions, renewals and other
modifications thereto (the "Tenant Leases"), (b) rents, additional rents, escrow
or security or other tenant deposits, fees, income, charges, and profits now or
hereafter arising thereunder, and (c) any guarantees of any Tenant Leases, to
have and to hold the same unto Assignee, its successors and assigns.
2. Right to Assign. Assignor represents and warrants that Assignor has
title to and full right to assign the Tenant Leases, and any and all rents,
income and profits and claims arising thereunder, and any guarantees of any
Tenant Leases.
<PAGE>
3. Assumption. Assignee accepts said assignment and assumes all
obligations on the part of the lessor under the Tenant Leases first arising or
accruing on or after the date of this Assignment.
4. Indemnification by Assignor. Assignor shall indemnify, defend and hold
Assignee harmless from and against any claim, demand, cause of action, charge,
judgment, damage, liability, cost or expense (including, without limitation,
reasonable attorney's fees and legal costs) (a) arising out of the Tenant Leases
in connection with events occurring prior to the date of this Assignment, or (b)
arising out of any claim by any tenant arising prior to the date of this
Assignment with respect to any escrow or security or other tenant deposit but
only to the extent of the amount of such deposit and interest thereon payable to
a tenant not transferred by Assignor to Assignee, or (c) arising out of any
claim by any broker, finder or other intermediary for any leasing or brokerage
commission or other compensation in connection with any Tenant Lease.
5. Indemnification by Assignee. Assignee shall indemnify, defend and hold
Assignor harmless from and against any claim, demand, cause of action, charge,
judgment, damage, liability, cost or expense (including, without limitation,
reasonable attorneys' fees and legal costs) (a) arising out of the Tenant Leases
in connection with events occurring on or after the date of this Assignment
(exclusive, however, of events described in clause (c) of Paragraph 4) or (b)
arising out of any claim by any tenant arising on or after the date of this
Assignment with respect to its escrow or security or other tenant deposit but
only to the extent of the amount of such deposit and interest thereon
transferred by Assignor to Assignee and not returned to such tenant by Assignee.
6. Binding Effect. This Assignment shall be binding upon and inure to the
benefit of Assignor and Assignee and their respective heirs, personal
representatives, successors and assigns.
7. Limited Power of Attorney. Assignor hereby appoints Assignee its
attorney-in-fact for the limited purpose of receiving and endorsing any checks
or other payments of rent, income or profits tendered to Assignee pursuant to
the terms of the Leases or guarantees if any checks are made payable to the
order of Assignor. Assignor ratifies any such endorsement made pursuant to this
limited power of attorney. This limited power of attorney is coupled with an
interest and is irrevocable.
IN WITNESS WHEREOF, intending to be legally bound, the parties have caused
this instrument to be executed by their duly authorized representatives on the
day and year first above written.
ASSIGNOR:
ASSIGNEE:
ASSIGNMENT OF AGREEMENT OF SALE
3
<PAGE>
THIS ASSIGNMENT is made as of the 8th day of January, 1998 by and
between PENN SQUARE PROPERTIES, INC., a Pennsylvania corporation ("Assignor") to
AMERICAN SEDONA PARTNERS, L.P., a Colorado limited partnership ("Assignee").
W I T N E S S E T H
Cumberland Valley Associates, as Seller, has entered into an
Agreement of Sale and Purchase dated as of the __________ day of December, 1997
with Assignor, as Buyer (the "Agreement of Sale"). Assignor desires to assign
all of its rights under the Agreement of Sale unto Assignee; and Assignee
desires to acquire all of Assignor?s rights under the Agreement of Sale.
NOW, THEREFORE, Assignor, intending legally to be bound hereby,
agrees as follows:
1. Assignor does hereby assign, transfer and set over unto Assignee all of
Assignor?s rights, title and interest in, to and under the Agreement of Sale.
2. This Assignment shall be binding upon Assignor, its successors and assigns
and shall inure to the benefit of Assignee, its successors and assigns.
3. This Assignment shall be governed by the laws of the Commonwealth of
Pennsylvania.
IN WITNESS WHEREOF, Assignor has executed this Assignment as of the
day and year first above written.
PENN SQUARE PROPERTIES, INC.
By: /s/ Stephen J. Butte
-------------------------------------
Vice President
4
<PAGE>
Exhibit 10(ac)
ASSIGNMENT OF AGREEMENT OF SALE AND PURCHASE
THIS ASSIGNMENT OF AGREEMENT OF SALE AND PURCHASE (this "Agreement") is
made as of the _____ day of October, 1997 by and between PENN SQUARE PROPERTIES,
INC., a Pennsylvania Corporation, Assignor, and McBRIDE PROPERTIES, a New Jersey
General Partnership, Assignee.
WITNESSETH
WHEREAS, pursuant to a certain Agreement of Sale and Purchase dated August
19, 1997 (the "Agreement of Sale"), Assignor, as Buyer, agreed to purchase from
Hough/Loew Associates, Inc., a Pennsylvania Corporation, as Seller, all that
certain tract of land (the "Land") containing _____ acres, which is described in
Exhibit "A" attached hereto and made a part hereof, together with all buildings
and improvements thereon and appurtenances thereto (the "Improvements"),
together with all fixtures, equipment, supplies and other personal property
attached or appurtenant to or located in or on or used in connection with the
Land or Improvements (the "Personal Property") (the Land, Improvements and
Personal Property hereinafter collectively referred to as the "Property"); and
WHEREAS, a copy of the Agreement of Sale is attached hereto as
Exhibit "A" and made a part hereof; and
WHEREAS, pursuant to a certain First Amendment to Agreement of Sale and
Purchase dated September 3, 1997, Hough/Loew Associates, Inc. and Assignor
agreed to certain modifications to the Agreement of Sale (the "First
Amendment"); and
WHEREAS, the First Amendment is attached hereto as Exhibit "C" and made
a part hereof; and
WHEREAS, pursuant to a certain Second Amendment to Agreement of Sale and
Purchase dated as of October 15, 1997, Hough/Loew Associates, Inc. and Assignor
agreed to certain additional modifications to the Agreement of Sale (the "Second
Amendment"); and
WHEREAS, the Second Amendment is attached hereto as Exhibit "D" and
made a part hereof; and
WHEREAS, Assignor desires to assign and convey, and Assignee desires to
assume and obtain, all of Assignor's right, title and interest in and to the
Agreement of Sale, the First Amendment, the Second Amendment and all subsequent
amendments to the Agreement of Sale; and
WHEREAS, the parties desire to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing Recitals and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereby agree as follows:
1. RECITALS INCORPORATED. The foregoing Recitals are hereby expressly
incorporated into this Agreement as if set forth at length herein.
2. ASSIGNMENT. Assignor hereby assigns and conveys, and Assignee hereby
assumes and accepts, all of Assignor's right, title and interest in and to the
Agreement of Sale, the First Amendment, Second Amendment and all subsequent
amendments to the Agreement of Sale in consideration of the sum of $1.00.
3. GOVERNING LAW. This Agreement shall be governed by and construed under
the laws of the State of New Jersey.
4. BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of Assignor and Assignee and their respective successors and assigns.
<PAGE>
5. COUNTERPART AND FACSIMILE. This Agreement may be executed via facsimile
in any number of counterparts, each of which shall be deemed an original, but
such counterparts shall together constitute both one and the same.
6. CONSENT OF HOUGH/LOEW ASSOCIATES, INC. Hough/Loew Associates, Inc., a
Pennsylvania Corporation, executes this Agreement to confirm and ratify its
consent to the assignment of Assignor's right, title and interest in and to the
Agreement of Sale, First Amendment, Second Amendment and all subsequent
amendments to the Agreement of Sale to Assignee.
IN WITNESS WHEREOF, the parties have caused this Assignment of Agreement
of Sale and Purchase to be executed by their duly authorized representatives on
the day and year first above written.
WITNESS PENN SQUARE PROPERTIES, INC.,
a Pennsylvania Corporation
By:______________________ By: /s/ Jeffrey E. Kelter
Name: JEFFREY KELTER
Title: President
<PAGE>
McBRIDE PROPERTIES,
a New Jersey General Partnership
BY: J POOL ASSOCIATES, L.P.,
a New Jersey Limited
Liability Partnership,
Managing General Partner
BY: URBAN HOLDINGS, LLC,
a New Jersey Limited
Liability Company,
its General Partner
By:______________________ By: /s/ David F. McBride
Name: DAVID F. McBRIDE
Title: Member/Co-Manager
HOUGH/LOEW ASSOCIATES, INC.,
a Pennsylvania Corporation
By: By:/s/ Jack R. Loew
------------------------- -----------------------
Name: Name: Jack R. Loew
Title: Title: President
<PAGE>
Exhibit 10(ac)
FIRST AMENDMENT TO AGREEMENT OF SALE AND PURCHASE
THIS FIRST AMENDMENT TO AGREEMENT OF SALE AND PURCHASE is made as of
the __ day of September, 1997, by and between HOUGH/LOEW ASSOCIATES, INC., a
Pennsylvania Corporation ("Seller") and PENN SQUARE PROPERTIES, INC., a
Pennsylvania Corporation, or its assignee or nominee ("Buyer").
W I T N E S S E T H:
Seller and Buyer have entered into an Agreement of Sale and Purchase
dated August 19, 1997 with respect to certain property situate in the Township
of West Whiteland, Chester County, Pennsylvania (the "Agreement of Sale").
Terms which have a defined meaning in the Agreement of Sale shall
have the same meaning when used in this Agreement.
Seller and Buyer desire to enter into this Agreement to amend
certain provisions in the Agreement of Sale.
NOW, THEREFORE, Seller and Buyer, each intending legally to be bound
hereby agree as follows:
1. Section 4 of the Agreement of Sale is revised by changing the Closing Date
from "October 31, 1997" to "November 14, 1997."
2. Section 14(c) of the Agreement of Sale is amended to provide that the
Inspection Period shall terminate on October 17, 1997.
3. Except as modified by the terms and provisions of this First Amendment, the
Agreement of Sale shall remain in full force and effect in accordance with its
terms and provisions.
<PAGE>
IN WITNESS WHEREOF, Seller and Buyer have executed this First
Amendment as of the day and year first above written.
SELLER:
HOUGH/LOEW ASSOCIATES, INC.
By: /s/ Jack R. Loew
Jack R. Loew, President
BUYER:
PENN SQUARE PROPERTIES, INC.
By: /s/ Jeffrey E. Kelter
President
2
<PAGE>
Exhibit 10(ac)
SECOND AMENDMENT TO AGREEMENT OF SALE AND PURCHASE
THIS SECOND AMENDMENT TO AGREEMENT OF SALE AND PURCHASE is made as
of the 15th day of October, 1997, by and between HOUGH/LOEW ASSOCIATES, INC., a
Pennsylvania Corporation ("Seller") and PENN SQUARE PROPERTIES, INC., a
Pennsylvania Corporation, or its assignee or nominee ("Buyer").
W I T N E S S E T H:
Seller and Buyer have entered into an Agreement of Sale and Purchase
dated August 19, 1997, as amended, with respect to certain property situate in
the Township of West Whiteland, Chester County, Pennsylvania (the "Agreement of
Sale").
Terms which have a defined meaning in the Agreement of Sale shall
have the same meaning when used in this Agreement.
Seller and Buyer desire to enter into this Agreement to amend
certain provisions in the Agreement of Sale.
NOW, THEREFORE, Seller and Buyer, each intending legally to be bound
hereby agree as follows:
1. Section 14(c) of the Agreement of Sale is amended to provide that the
Inspection Period shall terminate on October 24, 1997.
2. Except as modified by the terms and provisions of this Second Amendment, the
Agreement of Sale shall remain in full force and effect in accordance with its
terms and provisions.
IN WITNESS WHEREOF, Seller and Buyer have executed this Second
Amendment as of the day and year first above written.
SELLER:
HOUGH/LOEW ASSOCIATES, INC.
By: /s/ Jack R. Loew
Jack R. Loew, President
BUYER:
PENN SQUARE PROPERTIES, INC.
By: /s/ Jeffrey E. Kelter
President
<PAGE>
Exhibit 10(ac)
THIRD AMENDMENT TO AGREEMENT OF SALE AND PURCHASE
THIS THIRD AMENDMENT TO AGREEMENT OF SALE AND PURCHASE is made as of
the __ day of October, 1997, by and between HOUGH/LOEW ASSOCIATES, INC., a
Pennsylvania Corporation ("Seller") and PENN SQUARE PROPERTIES, INC., a
Pennsylvania Corporation, or its assignee or nominee ("Buyer").
W I T N E S S E T H:
Seller and Buyer have entered into an Agreement of Sale and Purchase
dated August 19, 1997 with respect to certain property situate in the Township
of West Whiteland, Chester County, Pennsylvania (the "Agreement of Sale").
Terms which have a defined meaning in the Agreement of Sale shall
have the same meaning when used in this Agreement.
Seller and Buyer desire to enter into this Agreement to amend
certain provisions in the Agreement of Sale.
NOW, THEREFORE, Seller and Buyer, each intending legally to be bound
hereby agree as follows:
1. Section 4 of the Agreement of Sale is revised by changing the Closing Date
from "November 14, 1997" to "November 21, 1997."
2. Section 14(c) of the Agreement of Sale is amended to provide that the
Inspection Period shall terminate on October 29, 1997.
3. Paragraph 14(a) of the Agreement of Sale is amended to add, as an additional
condition to the obligations of Buyer, the delivery to Buyer of an Option
Agreement granting to Buyer the option to purchase the lot or piece of ground
situate in East Goshen Township, Chester County, Pennsylvania described
according to the Subdivision Plan of Goshen Corporate Park/West made by Edward
B. Walsh & Associates, Inc. dated 11/27/89 and last revised 3/15/90, being
Parcel 3 as shown on said Plan, and containing 8.9545 acres, more or less, and
being part of Parcel No. 53-3-1. The Option Agreement shall be in a form
reasonably acceptable to Buyer. Buyer agrees that the form of Option Agreement
heretofore submitted by Buyer to Seller is acceptable to Buyer. If Buyer does
not complete Closing under the Agreement of Sale by reason of a failure of the
condition stated in this Paragraph 3, then Buyer shall also terminate the "Other
Agreement" between Buyer and L&W Associates.
<PAGE>
Exhibit 10(ac)
4. Except as modified by the terms and provisions of this Third Amendment, the
Agreement of Sale shall remain in full force and effect in accordance with its
terms and provisions.
IN WITNESS WHEREOF, Seller and Buyer have executed this Third
Amendment as of the day and year first above written.
SELLER:
HOUGH/LOEW ASSOCIATES, INC.
By: /s/ Jack R. Loew
Jack R. Loew, President
BUYER:
PENN SQUARE PROPERTIES, INC.
By: /s/ Jeffrey E. Kelter
President
<PAGE>
Exhibit 10(ac)
FOURTH AMENDMENT TO AGREEMENT OF SALE AND PURCHASE
THIS FOURTH AMENDMENT TO AGREEMENT OF SALE AND PURCHASE is made as
of the 21st day of November, 1997, by and between HOUGH/LOEW ASSOCIATES, INC., a
Pennsylvania Corporation ("Seller") and MCBRIDE PROPERTIES, a New Jersey General
Partnership, or its assignee or nominee ("Buyer").
W I T N E S S E T H:
Seller and Penn Square Properties, Inc. have entered into an
Agreement of Sale and Purchase dated August 19, 1997 with respect to certain
property situate in the Township of West Whiteland, Chester County,
Pennsylvania (the "Agreement of Sale"). The rights of Penn Square
Properties, Inc. under the Agreement of Sale have been assigned to Buyer.
Terms which have a defined meaning in the Agreement of Sale shall
have the same meaning when used in this Agreement.
Seller and Buyer desire to enter into this Agreement to amend
certain provisions in the Agreement of Sale.
NOW, THEREFORE, Seller and Buyer, each intending legally to be bound
hereby agree as follows:
1. Section 4 of the Agreement of Sale is revised by changing the Closing Date to
"December 15, 1997."
2. Buyer acknowledges that: the exceptions on Schedule B-Section II of the Title
Commitments which are not Monetary Liens are Permitted Encumbrances; Buyer has
no actual knowledge that the conditions set forth in subparagraphs 14(a)(i) and
(ii) of the Agreement of Sale are not satisfied as of the date of this Fourth
Amendment; and Buyer has received the executed Tenant Estoppel Certificates and
they are satisfactory to Buyer.
3. Except as modified by the terms and provisions of this Fourth Amendment, the
Agreement of Sale shall remain in full force and effect in accordance with its
terms and provisions.
<PAGE>
IN WITNESS WHEREOF, Seller and Buyer have executed this Fourth
Amendment as of the day and year first above written.
SELLER:
HOUGH/LOEW ASSOCIATES, INC.
By: /s/ Jack R. Loew
---------------------------
Jack R. Loew, President
BUYER:
MCBRIDE PROPERTIES
By: J. Pool Associates, L.P., a New Jersey
Limited Liability Partnership, Managing
General Partner
By: Urban Holdings, LLC, a New Jersey
Limited Liability Company, its
General Partner
By: /s/ David F. McBride
---------------------------
David F. McBride,
Member/Co-Manager
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Exhibit 10 (ad)
AGREEMENT OF SALE AND PURCHASE
THIS AGREEMENT is made as of the _____ day of August, 1997, by and
between GROUP THREE PROPERTIES, INC., a Pennsylvania corporation ("Seller") and
PENN SQUARE PROPERTIES, INC., a Pennsylvania corporation, or its assignee or
nominee ("Buyer").
W I T N E S S E T H :
1. Agreement to Sell and Purchase. Seller agrees to sell to Buyer,
and Buyer agrees to purchase from Seller, subject to all of the terms and
conditions of this Agreement, the property situate in the Township of Bern,
Berks County, Commonwealth of Pennsylvania, consisting of the following:
(a) The Leasehold Estates in and to the Land; together with
all buildings and improvements ("Buildings") on the Land; together with all
appurtenances thereto; together with all rights, title and interest of Seller in
and to any lands lying in the bed of any street, opened or proposed, abutting
the Land; and together with all right, title and interest of Seller in and to
any unpaid award for the taking by eminent domain of any part of the Land and/or
Buildings. The "Land" shall mean those certain tracts of land more fully
described by metes and bounds on Exhibit A to this Agreement. The "Leasehold
Estates" shall mean the leasehold estates and rights granted, conveyed and
created pursuant to the Ground Leases. The "Ground Leases" shall mean: (i) that
certain Lease Agreement dated the 15th day of October, 1994, between The Reading
Regional Airport Authority, a municipal authority of the Commonwealth of
Pennsylvania (the "Authority") and Seller; and (ii) that certain Ground Lease
dated July 1, 1996 between the Authority and Seller. The Leasehold Estates, the
Buildings, and all of the other rights described above in this Section 1(a) are
herein collectively called the "Real Property". It is expressly understood and
agreed that the "Real Property" does not include fee simple title to the Land,
which fee simple title is owned by the Lessor under the Ground Leases.
<PAGE>
Exhibit 10 (ad)
(b) All fixtures, equipment, supplies, and other personal
property attached or appurtenant to, or located in or on, or used in connection
with the Real Property, which are not owned by the Tenant (as defined in
subparagraph 8(a) below; it being understood and agreed that the "Tenant" is a
collective reference to the subtenants under the Tenant Leases), and together
with all intangible personal property used in the ownership, operation or
maintenance of the Real Property, including without limitation, the items set
forth on Exhibit B to this Agreement (collectively, the "Personal Property").
(c) The Real Property and the Personal Property are sometimes
collectively referred to as the "Property".
2. Purchase Price. The purchase price (the "Purchase Price") for the
Property, subject to adjustments as provided in this Agreement, shall be the sum
of Nine Million Six Hundred Thousand Dollars ($9,600,000), and shall be paid as
follows:
(a) Two Hundred Thousand Dollars ($200,000) shall be paid by
Buyer's check drawn to the order of First American Title Insurance Company
("Title Company") within two (2) business days after the expiration of the
Inspection Period. The term "Deposit" shall mean the aforesaid sum of Two
Hundred Thousand Dollars ($200,000) plus all interest which has accrued thereon.
The Deposit shall be held by the Title Company in an interest bearing account
pending consummation of this Agreement.
(b) The balance of the Purchase Price shall be paid at Closing
by wire transfer of immediate funds to an account of Seller (which account shall
be designated by written notice from Seller to Buyer no later than two (2)
business days prior to the Closing Date).
3. Disposition of Deposit; Defaults.
(a) The Deposit shall be held in escrow and disbursed by Title
Company in accordance with the terms of this Agreement. If Closing is completed,
the Title Company shall pay the Deposit to Seller on account of the Purchase
Price.
<PAGE>
(b) (i) If Buyer, without the right to do so and in default of
its obligations under this Agreement fails to complete Closing, the Deposit
shall be paid to Seller as liquidated damages and not as a penalty. Buyer and
Seller acknowledge that the damages which may be incurred by Seller in the event
of Buyer's default are difficult to quantify as of the date of this Agreement;
the Deposit represents the parties' reasonable estimate of Seller's probable
future damages in the event of Buyer's default; and that the Deposit represents
fair and reasonable compensation to Seller in the event of Buyer's default. The
right of Seller to be paid the Deposit shall be Seller's exclusive and sole
remedy, and Seller waives any right to recover the balance of the Purchase
Price, or any part thereof, and the right to pursue any other remedy permitted
by law or in equity against Buyer.
(ii) If Seller, without the right to do so and in
default of its obligations under this Agreement fails to complete Closing, Buyer
shall have the right to be paid the Deposit, which right shall be in addition to
all other rights and remedies of Buyer under this Agreement, at law or in
equity, including without limitation the right to specific performance and
injunctive relief.
(c) In the event of a dispute between the parties with respect
to the Deposit, the Title Company may deposit the Deposit with the Court of
Common Pleas of Berks County, Pennsylvania, and commence an interpleader action.
Upon notifying Seller and Buyer of the commencement of such action, the Title
Company shall be released of all liability with respect to the Deposit, except
to the extent of accounting for any monies previously delivered by the Title
Company out of escrow. The Title Company shall not be liable to either Seller or
Buyer other than for the performance of its duties under this Agreement, its
negligence or intentional wrongdoing.
4. Closing.
The closing of this transaction ("Closing") shall take place
at the offices of Wolf, Block, Schorr and Solis-Cohen, Twelfth Floor Packard
Building, 15th and Chestnut Streets, Philadelphia, Pennsylvania 19102. Closing
shall commence at 10:00 a.m. on October 31, 1997, or on such earlier date as
Buyer
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shall designate by at least five (5) days prior written notice to Seller (the
"Closing Date").
5. Condition of Title.
(a) Title to the Property shall be good and marketable and
free and clear of all liens, restrictions, easements, encumbrances, leases,
tenancies and other title objections, except for the Ground Leases, the Tenant
Leases and the Permitted Encumbrances; and shall be insurable as such at
ordinary rates by the Title Company pursuant to an ALTA Leasehold Policy of
Title Insurance, 1970 Form B, amended October 17, 1970 and October 17, 1984. The
premium for the Leasehold Policy of Title Insurance will be paid by Buyer.
Anything to the contrary in this paragraph notwithstanding, Buyer will accept
title with the following exceptions set forth on Penn Title Insurance Company
Policies Nos. 79929-R and 81289-R: as to Policy 79929-R, exceptions 1, 2, 4, 5,
6, 7, 8, 10, 11, 12, 13, 14, 15 (limited to 1997 taxes), 16, 18 and 19; and as
to Policy 81289-R, exceptions 1, 2, 4, 5, 6, 7, 8, 9, 10, 12, 13, 14, 15 and 16.
(b) If Seller is unable to convey title to the Property to
Buyer at Closing in accordance with the requirements of this Agreement, Buyer
shall have the options (i) of taking such title as Seller is able to convey with
abatement of the Purchase Price in the amount (fixed or ascertainable) of any
existing Monetary Liens or (ii) of terminating this Agreement. Notwithstanding
the foregoing, if title to the Property is not as described in Section 5(a) by
reason of any willful act by Seller, Buyer shall also be entitled to pursue all
other remedies available to Buyer at law or in equity.
(c) Buyer shall obtain from the Title Company a commitment for
Title Insurance ("Title Commitment") with respect to the Property prepared by
and at the cost of Buyer. Within five days after Buyer's receipt of the Title
Commitment and a new as-built survey of Property prepared by and at the cost of
Buyer, Buyer shall give to Seller notice ("Exception Notice") of any exceptions
to the title set forth in the Title Commitment which are not acceptable to Buyer
("Unacceptable Exceptions"). Buyer agrees that the Tenant Leases and the Ground
Leases shall not be Unacceptable Exceptions. Seller shall, within ten days from
the date of Seller's receipt of the Exception Notice, deliver to Buyer an
endorsement to the Title
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<PAGE>
Commitment issued by the Title Company stating which, if any, Unacceptable
Exceptions the Title Company has removed from the Title Commitment; and if the
Title Company has not issued an endorsement to the Title Commitment removing all
of the Unacceptable Exceptions from the Title Commitment within ten days from
the date of Seller's receipt of the Exception Notice, then Buyer shall have the
right to terminate this Agreement. If Buyer does not terminate this Agreement
pursuant to the provisions of this subsection 5(c), then the exceptions
remaining on Schedule B, Section 2 of the Title Commitment which are not liens
securing repayment of monetary sums ("Monetary Liens") shall be the "Permitted
Encumbrances". Seller agrees fully to pay all Monetary Liens and cause all
Monetary Liens to be released and satisfied of record prior to the completion of
Closing.
6. Possession.
Possession of the Property shall be given to Buyer at Closing,
subject only to the rights of the Tenant under Tenant Leases, by delivery of
Seller's general warranty Assignment of the Ground Leases duly executed and
acknowledged by Seller and in proper form for recording (the "Assignment"). The
Assignment shall expressly provide, inter alia, that Seller is released by the
Authority from liability under the Ground Leases and personal guaranties of
Frederick L. Snyder and Lyle Covert Beyer/Snyder.
7. Apportionments; Transfer Taxes; Security Deposits.
(a) (i) Real estate taxes on the Real Property; water and
sewer rentals; Base Rent paid in advance under the Ground Leases and Additional
Rent payable in arrears under the Ground Leases; and base, minimum and/or fixed
rental, additional rental and other sums paid by the Tenant to the Seller prior
to Closing under the Tenant Leases shall be apportioned pro rata between Seller
and Buyer on a per diem basis as of the Closing Date; provided, however, that
there shall be no apportionment between Buyer and Seller at Closing with respect
to utility charges paid by the Tenant directly to utility companies pursuant to
the Tenant Leases.
(ii) If the Closing Date is not the first day of a calendar
month and if as of the Closing Date the Tenant has not paid the monthly
installment of base, minimum and/or fixed rental ("Delinquent Installment") due
under its Tenant
5
<PAGE>
Leases with respect to the month in which Closing occurs, then at Closing Buyer
shall receive a credit against the Purchase Price in an amount equal to the
portion of the Delinquent Installment applicable to the period of time from and
after the Closing Date and through the balance of the applicable month; and upon
Buyer's receipt of the Delinquent Installment from Tenant, Buyer shall pay the
full amount thereof to Seller.
(b) Each of Buyer and Seller shall pay one-half (1/2) of all
realty transfer taxes, if any, imposed by the Commonwealth of Pennsylvania and
all other governmental authorities upon the Deed and the conveyance of the Real
Property from Seller to Buyer.
(c) At Closing, Seller shall deliver to Buyer a certified
check in the amount of the Security Deposits paid under the Tenant Leases, and
all interest which has (or was required to) accrued thereon. The delivery of
such check shall not affect the amount of the Purchase Price.
8. Representations and Warranties of Seller. Seller makes the
following representations and warranties to Buyer, which representations and
warranties are true and correct as of the date of this Agreement, and shall be
true and correct at and as of the Closing Date as though made both at and as of
the date of this Agreement and at and as of the Closing Date:
(a) The only leases and other agreements with respect to the
use and occupancy of the Property (herein collectively called the "Tenant
Leases"; and the tenants under each Tenant Leases being herein collectively
called the "Tenant") in effect are set forth on the Chart attached hereto as
Schedule 1.
(b) The Tenant Leases are valid and existing and in full force
and effect; the Tenant is in actual possession of the Property; and neither the
Tenant nor the Seller is in default of its respective obligations under the
Tenant Leases.
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<PAGE>
(c) The copies of the Tenant Leases previously delivered by
Seller to Buyer are true and complete copies of the Tenant Leases; the Tenant
Leases have not been amended, modified, or supplemented; and the Tenant does not
have any right to extend or renew the term of the Tenant Leases except as
expressly set forth in the Tenant Leases.
(d) The Tenant has not asserted any claim which could
adversely affect the right of the landlord to collect base, minimum or fixed
rental or additional rental from the Tenant; and no notice of default or breach
on the part of landlord under the Tenant Leases has been received by Seller from
the Tenant which has not been cured.
(e) Except as otherwise expressly listed on Schedule 2 hereto,
all construction, painting, repairs, alterations, improvements and other work
required to be performed by the landlord under the Tenant Leases, and all of the
other obligations of the landlord required to be performed under the Tenant
Leases as of the Closing Date, have been completed fully performed and paid for
in full by Seller.
(f) The term of the Tenant Leases commenced and will end on
the dates specified in the Chart attached hereto as Schedule 1.
(g) The rents and other payments set forth in the Tenant
Leases are the actual rents, income and charges presently being collected by
Seller under the Tenant Leases; and all minimum rent payable under the Tenant
Leases is payable monthly in advance.
(h) Except as set forth in the Tenant Leases, the Tenant is
not entitled to any concession, allowance, rebate or refund; and the allowances,
if any, specified in the Tenant Leases have been fully recovered by the Tenant
thereunder.
(i) The Tenant has not prepaid any base rental, minimum
rental, fixed rental or additional rental or other charges for more than the
current month under the Tenant Leases.
(j) Neither the Tenant Leases nor the rental or other amounts
payable under the Tenant Leases has been assigned,
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<PAGE>
pledged or encumbered, except to Seller's lenders, which assignments will be
terminated at Closing.
(k) No security deposit has been paid by the Tenant under the
Tenant Leases, except as set forth on the Chart attached hereto as Schedule 1.
(l) No brokerage or leasing commissions or other compensation
is or will be due and payable to any party with respect to or on account of the
Tenant Leases or any extensions or renewals thereof or any other actions by the
Tenant thereunder.
(m) Except as expressly set forth in the Tenant Leases, the
Tenant does not have any right or option to acquire to the Property or any
portion thereof.
(n) Seller has not received any written notice ("Defect
Notice") from any insurance company which has issued a policy with respect to
the Property or from any board of fire underwriters (or other body exercising
similar functions) claiming any defects or deficiencies in the Property or
suggesting or requesting the performance of any repairs, alterations or other
work to the Property.
(o) As of the Closing Date there shall be no management,
service, equipment, supply, security, maintenance, construction, concession or
other agreements with respect to or affecting the Property, except for any
agreements under which only the Tenant is bound.
(p) No employee of Seller who performs services at or in
connection with the Property is covered by an employment agreement or union
contract; no demand has been made upon Seller for recognition of a union or
collective bargaining agent for the employees of Seller at the Property; and
none of the employment arrangements with respect to Seller's employees will be
binding upon Buyer or any subsequent owner of the Property after Closing.
(q) Except as otherwise set forth on Schedule 3, there are no
outstanding uncured written notices received by Seller of any violation
("Violation") of any applicable law, ordinance, code, rule, order, regulation or
requirement of any governmental authority with respect to the Property.
8
<PAGE>
(r) Exhibit D sets forth the only fire and extended coverage
insurance policies ("Policy") maintained by Seller with respect to the Property;
the Policy is in full force and effect and all premiums due thereunder has been
paid; and neither Seller nor (to Seller's knowledge) any Tenant has received any
notice from the insurance companies which issued the Policy, indicating that the
Policy will not be renewed or will be renewed at a higher premium than is
presently payable therefor.
(s) There is no action, suit or proceeding pending or, to the
knowledge of Seller, threatened against or affecting Seller or the Property or
any portion thereof or the Tenant Leases or relating to or arising out of the
ownership, management or operation of the Property, in any court or before or by
any federal, state, county or municipal department, commission, board, bureau or
agency or other governmental instrumentality.
(t) Seller has not received any notice of any condemnation
proceeding or other proceedings in the nature of eminent domain ("Taking") in
connection with the Property, and to Seller's knowledge no Taking has been
threatened.
(u) All of the books, records, information, data and other
items supplied by Seller to Buyer with respect to Seller or the Property are
true, complete and correct in all material respects.
(v) To the best of Seller's knowledge: there is no presently
existing violation at the Property of any environmental law or regulation; no
contamination is present at the Property; and no underground storage tanks,
asbestos or PCBs are present at the Property.
9
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(w) The copies of the Ground Leases attached hereto as Exhibit
C are true and complete copies thereof, and the same have not been amended,
modified or supplemented; the Landlord under the Ground Leases is the Authority;
the Ground Leases are in full force and effect; no default or breach exists
under the Ground Leases on the part of the Authority and/or on the part of the
Seller, and no event or omission has occurred which with the giving of notice or
lapse of time, or both, would constitute a default or breach under the Ground
Leases on the part of the Authority or on the part of the Seller; there are no
other agreements between the Seller and the Authority nor between the Seller and
any prior owners of the Real Property which have not been fully rescinded and
rendered null and void; the Base Rent payable under each of the Ground Leases is
at the following rates: years 1-5 - $________; years 6-10 - $_______; years
11-15 - $_______; years 16-20 - $_______; and the Base Rent abatement specified
in Section 3.1(b) of the Ground Lease dated July 1, 1996 remains in effect and
has not ended and the contingencies described in clauses (ii) and (iii) of
Section 3.1(b) of the Ground Lease dated July 1, 1996 have not occurred.
9. Time. In computing the number of days for purposes of this
Agreement, all days shall be counted, including Saturdays, Sundays and holidays;
provided, however, that if the final day of any time period provided in this
Agreement shall end on a Saturday, Sunday or legal holiday, then the final day
shall extend to 5:00 p.m. of the next full business day. For the purposes of
this Section 9, the term "holiday" shall mean a day other than a Saturday or
Sunday on which banks in the state in which the Real Property is located are or
may elect to be closed.
10. Operations Prior to Closing. Between the date of the execution
of this Agreement and Closing:
(a) Seller shall, at its expense: perform all of its
obligations under the Tenant Leases and the Ground Leases; and cure all notices
of any Violations and/or Defect Notices issued prior to Closing.
(b) Seller shall not enter into any agreement to modify, amend
or otherwise alter any of the terms or provisions of the Tenant Leases or the
Ground Leases; and Seller shall not enter into a new lease or other agreement
with respect to the use
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or occupancy of the Property, without prior written approval of Buyer.
(c) Omitted intentionally.
(d) (i) Buyer, its attorneys, accountants, architects,
engineers and other representatives shall be afforded access to the Property and
to all books, records and files relating thereto from time to time prior to
Closing for the purposes of inspections, preparation of plans, taking of
measurements, making of surveys, making of appraisals, and generally for the
ascertainment of the condition of the Property, including but not limited to the
physical and financial condition of the Property; and there shall be furnished
to Buyer all plans and specifications, engineering reports, feasibility studies,
operating statements, governmental permits and approvals, contracts, leases,
surveys, title information and other documentation concerning the Property in
the possession of Seller and/or Seller's management agent for the Property.
(ii) Buyer agrees to indemnify, defend and reimburse Seller
for all costs, expenses (including, without limitation, attorney's fees,
consultant and expert fees and court costs) loss and liabilities suffered or
incurred by Seller as the result of any bodily injuries to persons or properties
caused by Buyer's entry upon the Property prior to Closing pursuant to the
provisions of this Section 10(d).
(e) Promptly after receipt thereof by Seller, Seller shall
deliver to Buyer the following:
(i) a copy of any notice of default given or received
under the Tenant Leases;
(ii) a copy of any tax bill, notice or statement of
value, or notice of change in a tax rate affecting or relating to the Property;
(iii) a copy of any notice of an actual or alleged
Violation;
(iv) a copy of any notice of Taking; and
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(v) a copy of any notice given or received under the
Ground Leases.
(f) Seller shall deliver for execution by the Tenant a written
certification which shall be prepared by Buyer's counsel (utilizing the form
attached to this Agreement as Exhibit E, but modified and supplemented by
Buyer's counsel to reflect the terms and provisions of the Tenant Leases) (each
such certification being herein called a "Tenant Estoppel Certificate"); and
Seller shall obtain an executed Tenant Estoppel Certificate (dated no more than
twenty (20) days prior to the Closing Date) from the Tenant. Seller shall
deliver to Buyer a copy of the executed Tenant Estoppel Certificate obtained by
Seller, promptly after Seller's receipt thereof.
(g) Seller shall deliver for execution by the Tenant a
Subordination, Non-Disturbance and Attornment Agreement (SNDA) in the form
reasonably required by Buyer's lenders, if any; and Seller shall obtain an
executed SNDA from the Tenant. Seller shall deliver to Buyer a copy of the
executed SNDA delivered to Seller promptly after receiving such SNDA.
(h) Seller shall deliver for execution by the Authority a
written certification which shall be prepared by Buyer's counsel (utilizing the
form attached to this Agreement as Exhibit F, but modified and supplemented by
Buyer's counsel to reflect the terms and provisions of the Ground Leases and the
representations and warranties of Seller set forth in Section 8) ("Authority
Estoppel Certificate"); and shall obtain an executed Authority Estoppel
Certificate (dated no more than twenty (20) days prior to the Closing Date) from
the Authority. Seller shall deliver to Buyer a copy of the executed Authority
Estoppel Certificate delivered to Seller promptly after receiving such Authority
Estoppel Certificate. Seller shall pay all costs, fees, charges and expenses
imposed by the Authority for the issuance of the Authority Estoppel Certificate
and for the granting of the consent by the Authority of the assignment of the
Ground Leases to Buyer.
11. Survival. The representations and warranties of Seller set forth
in Section 8(e)(j)(l)(n)(o)(p)(q)(s)(t)(u) and (v) shall survive Closing for a
period of 12 months from Closing and thereafter if a notice of breach is given
to Seller with such 12-monthly period. The obligations of Seller and Buyer
pursuant
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to Sections 16,17 and 20 of this Agreement shall survive Closing without limit.
Except as otherwise provided in the preceding two sentences, the agreements of
Seller and Buyer set forth in this Agreement shall not survive Closing and shall
merge into the delivery of the Assignment at Closing.
12. Casualty.
(a) Seller shall maintain the Policy in effect until Closing,
and shall deliver to Buyer, within ten (10) days after the date of this
Agreement, an endorsement to the Policy evidencing that the Policy is in effect,
that the Policy will not be canceled or materially modified without at least
thirty (30) days prior written notice to Buyer, and that Buyer has been added to
the Policy as an additional insured party, as its interests may appear. If
Closing is not completed under this Agreement, Buyer agrees to deliver to
Seller, upon request, a written direction to the insurance company directing
that Buyer's name as an additional insured party be deleted therefrom. If
Closing is completed under this Agreement, Seller shall be entitled to all
rebates and refunds of any prepaid premiums under the Policy.
(b) If at any time prior to the completion of Closing any
portion of the Property is destroyed or damaged as a result of fire or any other
casualty ("Casualty"), Seller shall promptly give written notice ("Casualty
Notice") thereof to Buyer. If the Property is the subject of a Casualty, Buyer
shall have the right, at its sole option, of terminating this Agreement unless,
(i) the cost fully to repair or restore such damage is less than Twenty-Five
Thousand Dollars ($25,000) and sufficient insurance proceeds are available fully
to restore such damage, and (ii) the insurance company issuing the Policy has
confirmed in writing prior to the end of such thirty (30) day period that such
Casualty is covered by the Policy and that no defense to payment of the claim
exists, and (iii) such Casualty will not result in the Tenant or the Authority
terminating the Tenant Leases or the Ground Leases or asserting a right to
terminate the Tenant Leases or the Ground Leases, and (iv) any loan commitment
obtained by Buyer for financing to acquire the Property is not canceled or
suspended as a result of such Casualty. In the event that insurance proceeds are
not available, Seller shall have the right, but not the obligation, at its own
expense, to provide the funds to restore and shall receive from Buyer, upon
recovery from the carrier, the funds so expended. If Buyer does not terminate
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this Agreement, the proceeds of any insurance with respect to the Property paid
between the date of this Agreement and the Closing Date shall be paid to Buyer
at the time of Closing and all unpaid claims and rights in connection with
losses to the Property shall be assigned to Buyer at Closing without in any
manner affecting the Purchase Price.
(c) If the Property is the subject of a Casualty, but Buyer
does not have the right to terminate this Agreement pursuant to the provisions
of Section 12(b) (or Buyer does not exercise such right), then Seller shall
promptly cause all temporary repairs to be made to the Property as shall be
required to prevent further deterioration and damage to the Property; provided,
however, that any such repairs shall first be approved by Buyer. Seller shall
have the right to be reimbursed from the proceeds of any insurance with respect
to the Property whenever said insurance proceeds are received by the Buyer for
the cost of all such repairs made pursuant to this Section 12(c). Except for the
obligation of Seller to repair the Property set forth in this Section 12(c),
Seller shall have no other obligation to repair any Casualty damage in the event
Buyer does not elect to terminate this Agreement pursuant to the provisions of
Section 12(b), and in such event, Buyer shall accept the Property at Closing as
damaged or destroyed by the Casualty.
13. Eminent Domain. If at any time prior to the completion of
Closing: a Taking affects all or any part of the Property, or if any proceeding
for a Taking is commenced, or if notice of the contemplated commencement of a
Taking is given, Seller shall promptly give written notice thereof to Buyer, and
Buyer shall have the right, at its sole option, of terminating this Agreement by
written notice to Seller. If Buyer does not terminate this Agreement, the
Purchase Price shall be reduced by the total of any awards or damages received
by Seller and Seller shall, at Closing, assign to Buyer all of Seller's right,
title and interest in and to any awards or damages to which Seller may have
become entitled or may thereafter be entitled by reason of any exercise of the
power of eminent domain or condemnation with respect to or for the Taking of the
Property or any portion thereof.
14. Conditions of Buyer's Obligations.
14
<PAGE>
(a) The obligations of Buyer under this Agreement are subject
to the satisfaction at the time of Closing of each of the following conditions
(any one of which may be waived in whole or in part in writing by Buyer at or
prior to Closing):
(i) all of the representations and warranties by Seller
set forth in this Agreement shall be true and correct in all material respects;
(ii) no representation or warranty by Seller contained
in this Agreement shall contain any materially untrue statement or shall omit a
material fact necessary to make the statement of fact therein recited not
misleading;
(iii) Seller shall have performed all covenants,
agreements and conditions required by this Agreement to be performed by Seller
prior to or as of the Closing Date; and
(iv) Buyer shall have received the executed Tenant
Estoppel Certificate, SNDA and Authority Estoppel Certificate.
(b) Failure of Condition. In the event any of the conditions
set forth in Section 14(a) are not satisfied as of the Closing Date, Buyer shall
have the right (in addition to all other rights and remedies available to Buyer
under this Agreement, at law or equity), at Buyer's sole option, to (i)
terminate this Agreement or (ii) complete Closing notwithstanding the
unsatisfied condition.
(c) Inspection Contingency.
(i) Buyer shall, during the period ("Inspection Period")
from the date of this Agreement to the date occurring forty-five (45) days after
the date of this Agreement, have the opportunity to examine the Property, the
Ground Leases, the Tenant Leases, the Policy, the Permitted Encumbrances, any
items to be delivered by Seller to Buyer, and to conduct such other inspections
of the Property as Buyer, in its discretion, may elect.
(ii) Seller acknowledges that Buyer may commission,
prior to Closing, at Buyer's sole cost and expense, an investigation (without
limitation) of: compliance with
15
<PAGE>
environmental laws, the presence of contaminants on, over, under, migrating from
or affecting the Property.
(iii) Seller will cooperate with Buyer and Buyer's
agents in Buyer's investigation, including without limitation: (A) complying
with requests for information and records; (B) warranting that responses to such
requests are true and complete; (C) assisting Buyer in obtaining governmental
agency or other records and upon Buyer's request communicating directly with any
governmental agencies; and (D) granting Buyer access to the Property including,
without limitation, access for collecting surface or subsurface samples of soil,
vegetation or water, or samples from buildings and other improvements located on
the Property, including samples from walls, floors, ceilings, plenums, paved
areas and other areas the taking of which samples may necessitate some damage to
the buildings, which damage shall be repaired by Buyer, at Buyer's sole cost and
expense, other improvements, and installing groundwater monitoring wells.
(iv) Buyer shall have the right, at Buyer's sole option,
to terminate this Agreement (for any reason whatsoever) on or prior to the
second business day to occur after the date on which the Inspection Period ends.
15. Items to be Delivered at Closing.
(a) By Seller. At Closing, Seller shall deliver to Buyer
the following:
(i) Assignment. The Assignment of the Ground Leases,
duly executed and acknowledged by Seller and in proper form for recording,
together with original executed copies of the Ground Leases.
(ii) Bill of Sale. A Bill of Sale for the Personal
Property, duly executed and acknowledged by Seller and in proper form for
recording .
(iii) Assignments of Leases. An assignment in the form
of Exhibit G of the Tenant Leases, duly executed and acknowledged by Seller and
in proper form for recording, together with an original executed copy of the
Tenant Leases and a letter, duly executed by Seller, in form satisfactory to
Buyer addressed to the tenant.
16
<PAGE>
(iv) Certificates, Etc. An assignment, duly executed and
acknowledged by Seller, of (and delivery to Buyer of originals or copies of)
(all of the following now in the possession of Seller): all certificates of
occupancy and all other licenses, permits, authorizations, consents,
certificates and approvals for the Property; all fees, escrow and/or security
funds; all certificates issued by the local Board of Fire Underwriters (or other
body exercising similar functions); all plans, specifications and project
manuals for the Property; all guarantees, bonds and warranties with respect to
the Property (together with original counterparts of such instruments); and all
keys to the Property.
(v) Tenant Estoppel Certificates. An original executed
counterpart of the Tenant Estoppel Certificate and the SNDA.
(vi) Authority Estoppel Certificate. An original
executed counterpart of the Authority Estoppel Certificate.
(vii) Resolutions; Title Company Affidavits. Such
resolutions and certificates as the Title Company shall require to evidence the
due authorization of the execution and performance of this Agreement and the
documents to be delivered pursuant hereto; and all affidavits, indemnities and
other agreements required by the Title Company to permit it to issue to Buyer
the Leasehold Policy of Title Insurance required pursuant to Section 5(a).
(viii) Statements. A statement, certified by Seller (and
accompanied with all relevant back-up documentation) setting forth all
information reasonably necessary or reasonably required to permit Buyer to
calculate and collect after Closing all payments of additional rent and other
charges due under the Tenant Leases and to permit Buyer to calculate and pay
after Closing all payments due under the Ground Leases.
(ix) Conveyance of Awards. All proper instruments for
the conveyance of the awards referred to in Sections 1(a) and 13.
17
<PAGE>
(x) Other Documents. Any other documents required to be
delivered by Seller pursuant to any other provisions of this Agreement.
(b) By Buyer. At Closing, Buyer shall deliver to Seller the
following:
(i) Purchase Price. The portion of the Purchase Price
payable pursuant to Section 2(b).
(ii) Assumption Agreements. An assumption agreement, in
the form of Exhibit G of the Tenant Leases, duly executed and acknowledged by
Buyer and in proper form for recording.
(iii) Other Documents. Any other document required to be
delivered by Buyer pursuant to any other provisions of this Agreement.
16. Reports. For the period of time commencing on the date of this
Agreement and continuing through the first anniversary of the Closing Date, and
without limitation of the other document production otherwise required of Seller
under this Agreement, Seller shall, from time to time, upon reasonable advance
written notice from Buyer, provide to Buyer and its representatives: (i) access
to all financial and other information pertaining to the period of Seller's
ownership and operation of the Property, which information is relevant and
reasonably necessary, in the opinion of Buyer's outside, third party accountants
("Accountants") to enable Buyer and its Accountants to prepare financial
statements in compliance with any and all of (a) Rule 3-05 or Rule 3-14 of
Regulation S-X of the Securities and Exchange Commission (the "Commission"), as
applicable to Buyer; (b) any other rule issued by the Commission and applicable
to Buyer; and (c) any registration statement, report or disclosure statement
filed with the Commission by, or on behalf of Buyer; and (ii) a representation
letter, in form specified by, or otherwise satisfactory to the Accountants,
signed by the individual(s) responsible for Seller's financial reporting, as
prescribed by generally accepted auditing standards promulgated by the Auditing
Standards Division of the American Institute of Certified Public Accountants,
which representation
18
<PAGE>
letter may be required by the Accountants in order to render an opinion
concerning Seller's financial statements.
17. Brokerage.
(a) Buyer represents and warrants to Seller that Buyer has
dealt with no broker, finder or other intermediary in connection with this sale;
and Buyer agrees to indemnify, defend and save and hold harmless Seller of and
from any and all cost, loss or expense incurred by Seller as the result of a
breach by Buyer of its representations and warranties set forth in this Section
17.
(b) Seller represents and warrants to Buyer that Seller has
dealt with no broker, finder or other intermediary in connection with this sale;
and Seller agrees to indemnify, defend and save and hold harmless Buyer of and
from any and all costs, loss or expense incurred by Buyer as the result of a
breach by Seller of its representations and warranties set forth in this Section
17.
18. No Other Representations. Buyer acknowledges that neither Seller
nor anyone acting, or purporting to act, on behalf of Seller, has, except as
expressly set forth in this Agreement, made any representation or warranty with
respect to the Property.
19. Assignability. Buyer shall have the right to assign this
Agreement and its rights hereunder; and any assignee of Buyer shall be entitled
to exercise all of the rights and powers of Buyer hereunder at Closing.
20. FIRPTA.
(a) Section 1445 of the Internal Revenue Code of 1986, as
amended (the "Code") provides that a transferee of a United States real property
interest must withhold tax if the transferor is a foreign person. To inform
Buyer that withholding of tax is not required upon the disposition by Seller of
a United States real property interest, the undersigned parties executing this
Agreement on behalf of Seller hereby certify the following on behalf of Seller:
19
<PAGE>
(i) Seller is not a foreign corporation, foreign
partnership, foreign trust, or foreign estate (as those terms are defined in the
Code and Income Tax Regulations);
(ii) Seller's U.S. employer identification number is
_______________; and
(iii) Seller's office address is: 4641 Pottsville Pike,
Suite E, Reading, PA 19605.
Seller, and the parties executing this Agreement on behalf of Seller, understand
that this certification may be disclosed to the Internal Revenue Service by
Buyer and that any false statement made here could be punished by fine,
imprisonment, or both. Under penalties of perjury, the undersigned parties
executing this Agreement on behalf of Seller declare that they have examined
this certification and to the best of their knowledge and belief, it is true,
correct and complete; and they further declare that they have authority to sign
this document on behalf of Seller.
(b) Seller, and the parties executing this Agreement on behalf
of Seller, shall deliver to Buyer at Closing, a restatement of the above
certifications of Seller and of the parties executing this Agreement on behalf
of Seller in the form attached to this Agreement as Exhibit H.
21. Notices.
(a) All notices, demands, requests or other communications
from each party to the other required or permitted under the term of this
Agreement shall be in writing and, unless and until otherwise specified in a
written notice by the party to whom notice is intended to be given, shall be
sent to the parties at the following respective addresses:
if intended for Seller:
Group Three Properties, Inc.
Cross Roads Corporate Center
4641 Pottsville Pike, Suite E
Reading, PA 19605
Fax No.: 610-926-4924
20
<PAGE>
if intended for Buyer:
The Widener Building, Suite 200
One South Penn Square
Philadelphia, PA 19107
Attention: Jeffrey E. Kelter
Fax No.: (215) 972-0819
Notices may be given on behalf of any party by its legal counsel.
(b) Each such notice, demand, request or other communication
shall be given (i) against a written receipt of delivery, or (ii) by registered
or certified mail of the United States Postal Service, return receipt requested,
postage prepaid, or (iii) by a nationally recognized overnight courier service
for next business day delivery, or (iv) via telecopier or facsimile transmission
to the facsimile number listed above, provided, however, that if such
communication is given via telecopier or facsimile transmission, an original
counterpart of such communication shall concurrently be sent in either the
manner specified in clause (i) or (iii) above.
(c) Each such notice, demand, request or other communication
shall be deemed to have been given upon the earliest of (i) actual receipt or
refusal by the addressee, or (ii) deposit thereof at any main or branch United
States post office if sent in accordance with section (b)(ii) above or (iii)
deposit thereof with the courier if sent pursuant to section (b)(iii) above.
22. Miscellaneous.
(a) Captions. The captions in this Agreement are inserted for
convenience of reference only; they form no part of this Agreement and shall not
affect its interpretation.
(b) Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of the parties and their respective
successors and assigns.
(c) Entire Agreement; Governing Law. This Agreement contains
the entire understanding of the parties with respect to the subject matter
hereof, supersedes all prior or other negotiations, representations,
understandings and
21
<PAGE>
agreements of, by or among the parties, express or implied, oral or written,
which are fully merged herein. The express terms of this Agreement control and
supersede any course of performance and/or customary practice inconsistent with
any such terms. Any agreement hereafter made shall be ineffective to change,
modify, discharge or effect an abandonment of this Agreement unless such
agreement is in writing and signed by the party against whom enforcement of such
change, modification, discharge or abandonment is sought. This Agreement shall
be governed by and construed under the laws of the Commonwealth of Pennsylvania.
(d) Provisions Separable. The provisions of this Agreement are
independent of and separable from each other, and no provision shall be affected
or rendered invalid or unenforceable by virtue of the fact that for any reason
any other provision may be invalid or unenforceable in whole or in part.
(e) Waiver of Tender of Assignment and Purchase Monies. The
tender of an executed Assignment by Seller and the tender by Buyer of the
portion of the Purchase Price payable at Closing are mutually waived, but
nothing in this Agreement shall be construed as a waiver of Seller's obligation
to deliver the Assignment and/or of the concurrent obligation of Buyer to pay
the portion of the Purchase Price payable at Closing.
(f) Gender, etc. Words used in this Agreement, regardless of
the number and gender specifically used, shall be deemed and construed to
include any other number, singular or plural, and any other gender, masculine,
feminine or neuter, as the context indicates is appropriate.
(g) Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original as against any
party whose signature appears thereon, and all of which shall together
constitute one and the same instrument. This Agreement shall be binding when one
or more counterparts hereof, individually or taken together, shall bear the
signatures of all of the parties reflected on this Agreement as the signatories.
(h) Exhibits. All exhibits attached to this Agreement are
incorporated by reference into and made a part of this Agreement.
22
<PAGE>
(i) No Waiver. Neither the failure nor any delay on the part
of either party to this Agreement to exercise any right, remedy, power or
privilege under this Agreement shall operate as a waiver thereof, nor shall any
single or partial exercise of any right, remedy, power or privilege preclude any
other or further exercise of the same or of any other right, remedy, power or
privilege, nor shall any waiver of any right, remedy, power or privilege with
respect to any occurrence be construed as a waiver of any such right, remedy,
power or privilege with respect to any other occurrence. No waiver shall be
effective unless it is in writing and is signed by the party asserted to have
granted such waiver.
(j) Interpretation. No provision of this Agreement is to be
interpreted for or against either party because that party or that party's legal
representative or counsel drafted such provision.
(k) Attorney's Fees. In connection with any litigation arising
out of this Agreement, the prevailing party shall be entitled to recover all
costs incurred, including reasonable attorney's fees.
(l) Buyer's Exercise of Right to Terminate. If Buyer desires
to terminate this Agreement pursuant to any of the provisions of this Agreement,
Buyer shall do so by giving written notice of termination to Seller. Upon any
such termination, the Deposit shall be paid to Buyer (and each of Seller and
Buyer shall deliver written instructions to the Title Company to pay the Deposit
to Buyer); and except as otherwise expressly provided in this Agreement, this
Agreement shall be and become null and void and neither party shall have any
further rights or obligations under this Agreement.
23
<PAGE>
IN WITNESS WHEREOF, intending to be legally bound, the parties have
executed this Agreement as a sealed instrument as of the day and year first
above written.
Witness: SELLER
GROUP THREE PROPERTIES, INC.
By: /s/ Frederick Snyder
-------------------------------
President August 13, 1997
BUYER
PENN SQUARE PROPERTIES, INC.
By: /s/ Jeffrey E. Kelter
-------------------------------
President August 13, 1997
24
<PAGE>
SCHEDULE 1
Tenant Leases
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Ending Date
Date of Commencement of
Date of Lease Amendments Name of Tenant Date of Term Term
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Premium Beverage
Packers, Inc.
- -------------------------------------------------------------------------------
Galeo & Hults, Inc.
- -------------------------------------------------------------------------------
R. L. Johnson Company
- -------------------------------------------------------------------------------
The Glidden Company
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
(To be completed by Seller within 5 days after the date of this
agreement of Sale)
<PAGE>
SCHEDULE 2
LIST OF CONSTRUCTION ITEMS REQUIRED
TO BE PERFORMED BY LANDLORD AFTER CLOSING
PURSUANT TO SECTION 8(e)
(To be completed by Seller within 5 days after the date of this
agreement of Sale)
<PAGE>
SCHEDULE 3
LIST OF EXISTING VIOLATION NOTICES
PURSUANT TO SECTION 8(q)
(To be completed by Seller within 5 days after the date of this
agreement of Sale)
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION OF THE LAND
<PAGE>
EXHIBIT B
LIST OF PERSONAL PROPERTY
(1) All architectural, mechanical, engineering and other plans and
specifications relating to the Property.
(2) All percolation, and other soil, topographical, and traffic
studies and tests relating to the Property.
(3) All trademarks, logos and other marks, trade or business names,
and all intangible personal property relating to the ownership, development,
use, operation, leases and management of the Property.
(4) All right, title, and interest of Seller in and to all
transferrable or assignable warranties, representations, guarantees, contract
rights, and miscellaneous rights, if any, with respect to the Property.
(5) All books, records, and documents of Seller relating to the
Property and Tenant Leases, including without limitation all computer software,
programs, tapes and disks relating to the Property and Tenant Leases.
(6) All ranges, micro-wave ovens, refrigerators, freezers,
refrigeration/freezer units, dishwashers, clothes washing machines and dryers,
and all other appliances, and all hookups for any of the foregoing or for cable
television.
(7) All heating, ventilating and air conditioning equipment and
other machinery, whether portable units or fixtures.
(8) All wall-to-wall carpeting, screens and garbage disposals,
whether personalty or fixtures.
(9) All certificates of occupancy and all other licenses, permits,
authorizations, consents, certificates and approvals issued by any governmental
authority having jurisdiction over the Property, and all certificates, if any,
<PAGE>
issued by the local board of fire underwriters (or other body exercising similar
functions).
<PAGE>
EXHIBIT C
GROUND LEASES
<PAGE>
EXHIBIT D
INSURANCE POLICIES
(To be completed by Seller within 5 days after the date of this
agreement of Sale)
<PAGE>
EXHIBIT E
TENANT ESTOPPEL CERTIFICATE
[Buyer] and its assignee
Re: ________ Building,
[address]
(the "Building")
Gentlemen:
The undersigned ("Tenant") certifies and agrees as follows:
1. It is the tenant of a portion of the Building known as Suite No.
_____ under the lease dated ______, 19__ (the "Lease"). The Lease has not been
supplemented, modified or amended, and there do not exist any other agreements
concerning the demised premises between the landlord under the Lease and Tenant,
except as set forth below:
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
2. The Lease is in full force and effect, and prior to ______, 19__,
the Lease will not be terminated or modified by Tenant without your prior
written consent.
3. The term of the Lease commenced _______, 19__ and expires
_______, 19__. Tenant has no right to renew or extend the term of the Lease
except as set forth below:
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
<PAGE>
4. The current monthly installment of minimum annual rent is
$________. No rent has been paid more than thirty (30) days in advance of its
due date. All rent and other sums payable under the Lease have been paid through
______________, 19__.
5. Tenant is not entitled to any free rent, rental rebates or other
concessions under the Lease which have not been exhausted, except _____________
_________________________________________.
6. Tenant has no claim of offset under the Lease or otherwise
against rent or other charges due or to become due under the Lease.
7. Tenant has accepted possession of the premises demised under the
Lease; all improvements or other work required by the terms of the Lease to be
performed by the landlord have been completed; the rentable area of the demised
premises is ______ square feet.
8. The landlord is not in default under the Lease, and no event has
occurred which with the giving of notice or passage of time, or both,
constitutes a default by the landlord under the Lease.
9. Tenant is not in default under the Lease, and no event has
occurred which with the giving of notice or passage of time, or both,
constitutes a default by Tenant under the Lease.
10. Tenant has not assigned the Lease or any interest therein or
subleased any portion of the demised premises.
12. The amount of the security deposit held by the landlord under
the Lease is $_____________.
This Certificate shall inure to the benefit of you, your heirs,
legal representatives, successors and assigns, and shall be binding upon Tenant
and Tenant's heirs, legal representatives, successors and assigns.
If any statement in this certificate shall become untrue, Tenant
shall immediately give to you written notice of such occurrence.
<PAGE>
By executing this Certificate, the signatory represents that he/she
is duly authorized to execute this Certificate on behalf of Tenant and legally
bind Tenant.
TENANT:
By: _________________________________
Name:
Title:
Dated: _______________________, 19__
3
<PAGE>
EXHIBIT F
A written statement addressed to Buyer from the Authority dated as
of a date no more than ten (10) days prior to the Closing Date, setting forth:
(1) the last date to which Base Rent and Additional Rent have
been paid,
(2) the nature and amount of the moneys then on deposit with
the Authority for the payment of taxes and insurance premiums,
(3) consent by the Authority to the assignment of the Ground
Leases to Buyer and confirmation that such conveyance will not constitute an
event of default under the Ground Leases, and that Seller is released of its
obligations under the Ground Leases, and confirmation that the Buyer has or will
personally assume the obligations under the Ground Leases,
(4) confirmation by the Authority that the representations and
warranties of Seller in Section 8(w) are true and correct, and
(6) confirmation by the Authority that no act, omission or
occurrence after Closing by or in connection with Seller or by or in connection
with any party who has heretofore guaranteed the obligations under the Ground
Leases nor any default under any such guarantee will constitute a default under
the Ground Leases.
<PAGE>
EXHIBIT G
ASSIGNMENT AND ASSUMPTION OF TENANT LEASES
THIS ASSIGNMENT made this ___ day of _______________, 19__, by and
between _____________________________, a ___________________________ having an
office at ___________________________________________________ ("Assignor") and
_____________________________, a __________________________ having an office at
_____________________________________________ ("Assignee").
RECITALS
A. Pursuant to a certain Agreement of Sale and Purchase dated as of
____________, 19__ (the "Agreement of Sale"), Assignor has agreed to sell to
Assignee, upon the terms, provisions and conditions set forth therein, certain
property (hereinafter "Property") located in ___________________________________
on land described on Exhibit A attached to and made a part of this Assignment,
all as more particularly described in the Agreement of Sale.
B. In connection with the sale and purchase of the Property,
Assignor desires to assign to Assignee all tenant leases encumbering the
Property and Assignee desires to accept said assignment and assume the
obligations of Assignor under said leases upon the terms, covenants and
conditions set forth in this instrument.
NOW, THEREFORE, in consideration of the purchase price paid by
Assignee to Assignor for the Property, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Assignor and Assignee covenant and agree as follows:
1. Assignment Assignor hereby assigns, transfers and sets over unto
Assignee all of Assignor's right, title and interest in and to (a) the leases
set forth on Exhibit B attached to and made a part of this Assignment and any
other lease,
<PAGE>
license or right of occupancy affecting the Property, together with all
amendments, extensions, renewals and other modifications thereto (the "Tenant
Leases"), (b) rents, additional rents, fees not to include the traffic impact
fee previously posted by the Seller, and charges now or hereafter arising
thereunder, and (c) any guarantees of any Tenant Leases, to have and to hold the
same unto Assignee, its successors and assigns.
2. Right to Assign. Assignor represents and warrants that Assignor
has title to and full right to assign the Tenant Leases, and any and all rents,
income and profits and claims arising thereunder, and any guarantees of any
Tenant Leases.
3. Assumption. Assignee accepts said assignment and assumes all
obligations on the part of the lessor under the Tenant Leases first arising or
accruing on or after the date of this Assignment.
4. Indemnification by Assignor. Assignor shall indemnify, defend and
hold Assignee harmless from and against any claim, demand, cause of action,
charge, judgment, damage, liability, cost or expense (including, without
limitation, reasonable attorney's fees and legal costs) (a) arising out of the
Tenant Leases in connection with events occurring prior to the date of this
Assignment, or (b) arising out of any claim by any broker, finder or other
intermediary for any leasing or brokerage commission or other compensation in
connection with any Tenant Lease.
5. Indemnification by Assignee. Assignee shall indemnify, defend and
hold Assignor harmless from and against any claim, demand, cause of action,
charge, judgment, damage, liability, cost or expense (including, without
limitation, reasonable attorneys' fees and legal costs) (a) arising out of the
Tenant Leases in connection with events occurring on or after the date of this
Assignment (exclusive, however, of events described in clause (c) of Paragraph
4) or (b) arising out of any claim by any tenant arising on or after the date of
this Assignment with respect to its escrow or security or other tenant deposit
but only to the extent of the amount of such deposit and interest thereon
transferred by Assignor to Assignee and not returned to such tenant by Assignee.
<PAGE>
6. Binding Effect. This Assignment shall be binding upon and inure
to the benefit of Assignor and Assignee and their respective heirs, personal
representatives, successors and assigns.
3
<PAGE>
IN WITNESS WHEREOF, intending to be legally bound, the parties have
caused this instrument to be executed by their duly authorized representatives
on the day and year first above written.
ASSIGNOR:
ASSIGNEE:
ADD NOTARY AFFIDAVITS
4
<PAGE>
EXHIBIT H
FIRPTA AFFIDAVIT
Form for Entity Transferor
Section 1445 of the Internal Revenue Code provides that a transferee
of a U.S. real property interest must withhold tax if the transferor is a
foreign person. To inform the transferee that withholding of tax is not required
upon the disposition of a U.S. real property interest by _________________
(Transferor), the undersigned hereby certifies the following on behalf of
Transferor:
1. Transferor is not a foreign corporation, foreign partnership,
foreign trust, or foreign estate (as those terms are defined in the Internal
Revenue Code and Income Tax Regulations);
2. Transferor's U.S. taxpayer identification number is ; and
3. Transferor's office address is:
___________________________________
___________________________________
____________________________________.
Transferor understands that the above information may be disclosed to the
Internal Revenue Service by the transferee and that any false statement
contained herein could be punished by fine, imprisonment, or both.
Under penalties of perjury, I declare that I have examined this
instrument and to the best of my knowledge and belief it is true, correct, and
complete, and I further declare that I have authority to sign this document on
behalf of Transferor.
- --------------------------------- ------------------------------------
Name:
Title:
<PAGE>
Dated: _____________________________
<PAGE>
Exhibit 10(ad) Amend. 1
FIRST AMENDMENT TO AGREEMENT OF SALE AND PURCHASE
THIS FIRST AMENDMENT TO AGREEMENT OF SALE AND PURCHASE is made as of
the 23rd day of September, 1997 by and between GROUP THREE PROPERTIES, INC., a
Pennsylvania corporation ("Seller") and PENN SQUARE PROPERTIES, INC., a
Pennsylvania corporation, or its assignee or nominee ("Buyer").
W I T N E S S E T H:
Seller and Buyer are parties to an Agreement of Sale and Purchase
dated the 13th day of August, 1997 with respect to certain real property situate
in the Township of Bern, Berks County, Commonwealth of Pennsylvania (the
"Agreement of Sale").
Terms which are defined in the Agreement of Sale shall have the same
meaning when used in this First Amendment.
Seller and Buyer desire to enter into this Agreement to extend the
expiration date of the Inspection Period.
NOW, THEREFORE, Seller and Buyer, each intending legally to bound
hereby, agree as follows:
1. Section 14(c)(i) of the Agreement of Sale is amended to provide that the
Inspection Period shall end on October 10, 1997.
2. Except as modified by the provisions of this First Amendment, the Agreement
of Sale shall remain in effect in accordance with its terms and provision.
IN WITNESS WHEREOF, the Seller and Buyer have executed this First
Amendment as of the day and year first above written.
SELLER:
GROUP THREE PROPERTIES, INC.
By: /s/ Frederick Snyder
------------------------------------
President Sept. 23, 1997
BUYER:
PENN SQUARE PROPERTIES, INC.
By: /s/ Jeffrey E. Kelter
------------------------------------
President September 23, 1997
<PAGE>
Exhibit 10 (ad) Amend. 2
SECOND AMENDMENT TO AGREEMENT OF SALE AND PURCHASE
THIS SECOND AMENDMENT TO AGREEMENT OF SALE AND PURCHASE is made as
of the 10th day of October, 1997 by and between GROUP THREE PROPERTIES, INC., a
Pennsylvania corporation ("Seller") and PENN SQUARE PROPERTIES, INC., a
Pennsylvania corporation, or its assignee or nominee ("Buyer").
W I T N E S S E T H:
Seller and Buyer are parties to an Agreement of Sale and Purchase
dated the 13th day of August, 1997, as amended, with respect to certain real
property situate in the Township of Bern, Berks County, Commonwealth of
Pennsylvania (the "Agreement of Sale").
Terms which are defined in the Agreement of Sale shall have the same
meaning when used in this First Amendment.
Seller and Buyer desire to enter into this Agreement to extend the
expiration date of the Inspection Period.
NOW, THEREFORE, Seller and Buyer, each intending legally to bound
hereby, agree as follows:
1. The Agreement of Sale is amended to provide that the Closing Date shall be
December 1, 1997 and the Inspection Period shall end on October 20, 1997.
2. Except as modified by the provisions of this Second Amendment, the Agreement
of Sale shall remain in effect in accordance with its terms and provision.
IN WITNESS WHEREOF, the Seller and Buyer have executed this Second
Amendment as of the day and year first above written.
SELLER:
GROUP THREE PROPERTIES, INC.
By: /s/ Frederic Snyder,
------------------------------------
President October 10, 1997
BUYER:
PENN SQUARE PROPERTIES, INC.
By: /s/ Jeffrey E. Kelter,
------------------------------------
President October 10, 1997
<PAGE>
Exhibit 10 (ad) Amend. 3
THIRD AMENDMENT TO AGREEMENT OF SALE AND PURCHASE
THIS THIRD AMENDMENT TO AGREEMENT OF SALE AND PURCHASE is made as of
the 22nd day of October, 1997 by and between GROUP THREE PROPERTIES, INC., a
Pennsylvania corporation ("Seller") and PENN SQUARE PROPERTIES, INC., a
Pennsylvania corporation, or its assignee or nominee ("Buyer").
W I T N E S S E T H:
Seller and Buyer are parties to an Agreement of Sale and Purchase
dated the 13th day of August, 1997, as amended, with respect to certain real
property situate in the Township of Bern, Berks County, Commonwealth of
Pennsylvania (the "Agreement of Sale").
Terms which are defined in the Agreement of Sale shall have the same
meaning when used in this Third Amendment.
NOW, THEREFORE, Seller and Buyer, each intending legally to bound
hereby, agree as follows:
1. The Agreement of Sale is amended to provide that the Inspection Period shall
end on Wednesday, October 29, 1997.
2. Except as modified by the provisions of this Second Amendment, the Agreement
of Sale shall remain in effect in accordance with its terms and provision.
IN WITNESS WHEREOF, the Seller and Buyer have executed this Third
Amendment as of the day and year first above written.
SELLER:
GROUP THREE PROPERTIES, INC.
By: /s/ Frederic Snyder
------------------------------------
President October 22, 1997
BUYER:
PENN SQUARE PROPERTIES, INC.
By: /s/ Jeffrey E. Kelter
------------------------------------
President October 22, 1997
<PAGE>
Exhibit 10(ad) Amend 5
FIFTH AMENDMENT TO AGREEMENT OF SALE AND PURCHASE
THIS FIFTH AMENDMENT TO AGREEMENT OF SALE AND PURCHASE is made as of
the __ day of December, 1997 by and between GROUP THREE PROPERTIES, INC., a
Pennsylvania corporation ("Seller") and MCBRIDE PROPERTIES, a New Jersey general
partnership ("Buyer").
W I T N E S S E T H:
Seller and Penn Square Properties, Inc. are parties to an Agreement
of Sale and Purchase dated the 13th day of August, 1997, as amended, with
respect to certain real properties situate in the Township in Bern, Berks
County, Commonwealth of Pennsylvania (the "Agreement of Sale").
All of the buyer?s rights, title and interest in an to the Agreement
of Sale have been assigned to Buyer.
Terms which are defined in the Agreement of Sale shall have the same
meaning when used in this Fifth Amendment.
NOW, THEREFORE, Buyer and Seller, each intending to be legally to be
bound hereby, agree as follows:
1. Paragraph 2 of the Agreement of Sale is amended and restated to provide as
follows:
"2. Purchase Price. The purchase price (the "Purchase
Price") for the Property, subject to adjustments as
provided in this Agreement, shall be the following sums
allocated as follows, which shall be paid as follows:
(a) (i) The sum of Five Million Seven Hundred and
Sixty Thousand Dollars ($5,760,000) with respect the
<PAGE>
Exhibit 10(ad) Amend 5
Ground Lease dated October 15,
1994 (1057 Arnold Road).
(ii) The sum of Three Million Eight Hundred
and Forty Thousand Dollars ($3,840,000) with respect the
Ground Lease dated July 1, 1996 (1091 Arnold Road).
(b) (i) One Hundred Thousand Dollars ($100,000)
shall be paid by Buyer?s check drawn to the order of the
Title Company within two (2) business days after the
expiration of the Inspection Period. The $100,000 sum
referred to in the preceding sentence shall be deemed to
be the Deposit with respect to the Ground Lease dated
October 15, 1994 (1057 Arnold Road).
(ii) One Hundred Thousand Dollars ($100,000)
shall be paid by Buyer?s check drawn to the order of
First American Title Insurance Company ("Title Company")
within two (2) business days after the expiration of the
Inspection Period. The $100,000 sum referred to in the
preceding sentence shall be deemed to be the Deposit
with respect to the Ground Lease dated July 1, 1996
(1091 Arnold Road).
(iii) The term "Deposit" shall mean the
aforesaid respective sums of $100,000 each, plus all
interest which has accrued thereon. The Deposit shall be
held by the Title Company in an interest-bearing account
pending consummation of this Agreement.
<PAGE>
(c) The balance of the Purchase of the Purchase
Price shall be paid at Closing by wire transfer of
immediate funds to the account of Seller (which account
shall be designated by written notice from Seller to
Buyer no later than two (2) business days prior to the
Closing Date."
2. Paragraph 4 of the Agreement of Sale is amended to provide that Closing for
the Ground Lease dated July 1, 1996 shall be held on December 19, 1997 and that
Closing for the Ground Lease dated October 15, 1994 shall be held on December
29, 1997.
3. Except as modified by the provisions of this Fifth Amendment, the Agreement
of Sale shall remain in full force and effect in accordance with its terms and
provisions.
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<PAGE>
IN WITNESS WHEREOF, the Seller and Buyer have executed this Fifth
Amendment as of the day and year first above written.
SELLER:
GROUP THREE PROPERTIES, INC.
By: /s/ Frederic Snyder
--------------------------
President
BUYER:
MCBRIDE PROPERTIES
By: American Real Estate Investment, L.P., a
General Partner
By: American Real Estate Investment
Corporation - General Partner
By: /s/ Stephen J. Butte
Stephen J. Butte, Vice-President
4
<PAGE>
Exhibit 10 (ae)
AGREEMENT OF SALE AND PURCHASE
THIS AGREEMENT is made as of the 19th day of August, 1997, by and
between L&W ASSOCIATES, a Pennsylvania general partnership ("Seller") and PENN
SQUARE PROPERTIES, INC., a Pennsylvania corporation, or its assignee or nominee
("Buyer").
W I T N E S S E T H :
1. Agreement to Sell and Purchase. Seller agrees to sell to Buyer,
and Buyer agrees to purchase from Seller, subject to all of the terms and
conditions of this Agreement, the property situate in the Township of East
Goshen, Chester County, Commonwealth of Pennsylvania, consisting of the
following:
(a) That certain tract of land more fully described by metes
and bounds on Exhibit A to this Agreement, together with all buildings and
improvements thereon and appurtenances thereto, and together with all rights,
title and interest of Seller in and to any land lying in the bed of any street,
opened or proposed, abutting such tract of land, and all right, title and
interest of Seller in and to any unpaid award for the taking by eminent domain
of any part of the aforesaid tract of land or for damage to such tract of land
by reason of a change of grade of any street (collectively, the "Real
Property").
(b) All fixtures, equipment, supplies, and other personal
property attached or appurtenant to, or located in or on, or used in connection
with the Real Property, which are not owned by tenants of the Real Property, and
together with all intangible personal property used in the ownership, operation
or maintenance of the Real Property, including without limitation, the items set
forth on Exhibit B to this Agreement (collectively, the "Personal Property").
<PAGE>
(c) The Real Property and the Personal Property are sometimes
collectively referred to as the "Property".
2. Purchase Price.
(a) The purchase price (the "Purchase Price") for the
Property, subject to adjustments as provided in this Agreement, shall be the sum
of Six Million Six Hundred Thousand Dollars ($6,600,000), and shall be paid as
follows:
(i) Fifty Thousand Dollars ($50,000) shall be paid by
Buyer?s check drawn to the order of First American Title Insurance Company
(?Title Company?) within two (2) business days after the expiration of the
Inspection Period. As used in this Agreement, the term ?Deposit? shall mean the
aforesaid sum of Fifty Thousand Dollars plus all interest which has accrued
thereon. The Deposit shall be held by the Title Company in an interest bearing
account pending consummation of this Agreement.
(ii) The next portion of the Purchase Price shall be
paid at Closing by Buyer?s acceptance of title to the Real Property encumbered
by the lien of the Existing Mortgage. Buyer shall receive a credit against the
Purchase Price at Closing in an amount equal to the then current unpaid
principal balance of the Existing Mortgage.
(iii) The balance of the Purchase Price shall be paid at
Closing by wire transfer of immediate funds to an account of Seller (which
account shall be designated by written notice from Seller to Buyer no later than
two (2) business days prior to the Closing Date).
(b) Buyer agrees to accept title to the Real Property at
Closing encumbered by the lien of the Mortgage dated August 4, 1995 in the
original principal sum of Three Million Five Hundred Twenty-five Thousand
Dollars ($3,525,000) to USG Annuity & Life Company (said Mortgage being herein
called the "Existing Mortgage". A copy of the Existing Mortgage is attached to
this Agreement as Exhibit C-1. Buyer also agrees that the grantee of the Real
Property shall assume the obligations of Seller and of Jack Loew (subject to the
non-recourse provisions
<PAGE>
therein) pursuant to the Existing Mortgage, Existing Note and the other loan
documents. A copy of the Note which is secured by the Existing Mortgage (the
"Existing Note") is attached to this Agreement as Exhibit C-2.
3. Disposition of Deposit; Defaults.
(a) The Deposit shall be held in escrow and disbursed by Title
Company in accordance with the terms of this Agreement. If Closing is completed,
the Title Company shall pay the Deposit to Seller on account of the Purchase
Price.
(b) (i) If Buyer, without the right to do so and in default of
its obligations under this Agreement fails to complete Closing, the Deposit
shall be paid to Seller as liquidated damages and not as a penalty. Buyer and
Seller acknowledge that the damages which may be incurred by Seller in the event
of Buyer's default are difficult to quantify as of the date of this Agreement;
the Deposit represents the parties' reasonable estimate of Seller's probable
future damages in the event of Buyer's default; and that the Deposit represents
fair and reasonable compensation to Seller in the event of Buyer's default.
Except as otherwise expressly provided in this Agreement, the right of Seller to
be paid the Deposit shall be Seller's exclusive and sole remedy, and Seller
waives any right to recover the balance of the Purchase Price, or any part
thereof, and the right to pursue any other remedy permitted by law or in equity
against Buyer.
(ii) If Seller, without the right to do so and in
default of its obligations under this Agreement fails to complete Closing or
otherwise defaults under or breaches this Agreement, Buyer shall have the right
either (i) to be paid the Deposit or (ii) to obtain specific performance and
injunctive relief
(c) In the event of a dispute between the parties with respect
to the Deposit, the Title Company may deposit the Deposit with a court of proper
jurisdiction and commence an interpleader action. Upon notifying Seller and
Buyer of the commencement of such action, the Title Company shall be released of
all liability with respect to the Deposit, except to the extent of accounting
for any monies previously delivered by the Title Company out of escrow. The
Title Company shall not be
3
<PAGE>
liable to either Seller or Buyer other than for the performance of its duties
under this Agreement, its negligence or intentional wrongdoing.
4. Closing.
The closing of this transaction ("Closing") shall take place
at the offices of Wolf, Block, Schorr and Solis-Cohen, Twelfth Floor Packard
Building, 15th and Chestnut Streets, Philadelphia, Pennsylvania 19102. Closing
shall commence at 10:00 a.m. on October 31, 1997, or on such earlier date as
Buyer shall designate by at least five (5) days prior written notice to Seller
(the "Closing Date").
5. Condition of Title.
(a) Title to the Property shall be good and marketable and
free and clear of all liens, restrictions, easements, encumbrances, leases,
tenancies and other title objections, except for the lien of the Existing
Mortgage, the Tenant Lease and the Permitted Encumbrances; and shall be
insurable as such at ordinary rates by the Title Company pursuant to an ALTA
Owner's Policy of Title Insurance, 1970 Form B, amended October 17, 1970 and
October 17, 1984. The premium for the Owner's Policy of Title Insurance will be
paid by Buyer.
(b) If Seller is unable to convey title to the Real Property
to Buyer at Closing in accordance with the requirements of this Agreement, Buyer
shall have the options (i) of taking such title as Seller is able to convey with
abatement of the Purchase Price in the amount (fixed or ascertainable) of any
Monetary Liens or (ii) of terminating this Agreement. Notwithstanding the
foregoing, if title to the Property is not as described in Section 5(a) by
reason of any willful act or omission by Seller, Buyer shall also be entitled to
pursue all other remedies available to Buyer at law or in equity.
(c) Buyer shall, on or prior to the expiration of the
Inspection Period: (i) obtain from the Title Company a commitment for Title
Insurance ("Title Commitment") with respect to the Property; (ii) if desired by
Buyer, obtain a new as-built survey of the Property; and (iii) give to Seller
notice ("Exception Notice") of any exceptions to the Title set forth in the
Title Commitment which are not acceptable to Buyer
4
<PAGE>
("Unacceptable Exceptions"). Buyer agrees that the Tenant Lease and the lien of
the Existing Mortgage shall not be Unacceptable Exceptions. Seller shall, within
ten days from the date of Seller?s receipt of the Exception Notice, deliver to
Buyer an endorsement to the Title Commitment issued by the Title Company stating
which, if any, Unacceptable Exceptions the Title Company has removed from the
Title Commitment; and if the Title Company has not issued an endorsement to the
Title Commitment removing all of the Unacceptable Exceptions from the Title
Commitment within ten days from the date of Seller?s receipt of the Exception
Notice, then Buyer shall have the right to terminate this Agreement. If Buyer
does not terminate this Agreement pursuant to the provisions of this subsection
5(c), then the exceptions remaining on Schedule B, Section 2 of the Title
Commitment which are not liens (excluding, however, the lien of the Existing
Mortgage) securing repayment of monetary sums (?Monetary Liens?) shall be the
?Permitted Encumbrances?. Seller agrees fully to pay all Monetary Liens and
cause all Monetary Liens to be released and satisfied of record prior to the
completion of Closing.
6. Possession.
Possession of the Property shall be given to Buyer at Closing,
subject only to the rights of the Tenant under Tenant Lease, by delivery of
Seller's special warranty deed duly executed and acknowledged by Seller and in
proper form for recording (the "Deed"). If Buyer causes a survey of the Real
Property to be made, then at Buyer's option the description of the Real Property
contained in the Deed shall be based upon that survey.
7. Apportionments; Transfer Taxes; Security Deposits.
(a) (i) Real estate taxes (on the basis of the actual fiscal
years for which such taxes are assessed) on the Real Property; water and sewer
rentals; and base, minimum and/or fixed rental, additional rental and other sums
paid by the Tenant to the Seller prior to Closing under the Tenant Lease shall
be apportioned pro rata between Seller and Buyer on a per diem basis as of the
Closing Date; provided, however, that there shall be no apportionment between
Buyer and Seller at Closing with respect to utility charges paid by the Tenant
directly to utility companies pursuant to the Tenant Lease.
5
<PAGE>
(ii) (A) If the Closing Date is not the first day of a
calendar month and if as of the Closing Date the Tenant has not paid the monthly
installment of base, minimum and/or fixed rental (?Delinquent Installment?) due
under its Tenant Lease with respect to the month in which Closing occurs, then
at Closing Buyer shall receive a credit against the Purchase Price in an amount
equal to the portion of the Delinquent Installment applicable to the period of
time from and after the Closing Date and through the balance of the applicable
month; and upon Buyer?s receipt of the Delinquent Installment from Tenant, Buyer
shall pay the full amount thereof to Seller.
(B) If as of the Closing Date, the Tenant is in
default (the amount in default being herein called "Prior Delinquency") in the
payment of any monthly installment of base, minimum and/or fixed rent with
respect to any month prior to the month in which Closing occurs or is otherwise
in default with respect to the payment of additional rent applicable periods
prior to the Closing Date, then any amounts collected by Buyer after Closing
which are in addition to the monthly installments of base, minimum and/or fixed
rent then currently due and/or additional rental then currently due shall be
paid by Buyer to Seller on account of the Prior Delinquency.
(b) At Closing, each of Buyer and Seller shall pay one-half
(?) of all realty transfer taxes imposed by the Commonwealth of Pennsylvania and
all other governmental authorities upon the Deed and the conveyance of the Real
Property from Seller to Buyer.
(c) At Closing, Buyer shall receive a credit against the
Purchase Price in the amount of the Security Deposit paid under the Tenant
Lease, if any, and all interest which has (or was required to) accrued thereon.
(d) (i) Interest under the Existing Note is payable monthly in
arrears. Therefore, the interest portion of the monthly payment to be made to
the holder of the Existing Note on the Closing Date, if Closing occurs on the
first day of a calendar month, or to be made on the first day of the first
calendar month after the Closing Date, if Closing does not occur on the first
day of a month, shall be apportioned on a per diem basis for the monthly period
preceding such payment, and Buyer
6
<PAGE>
shall be given a credit at Closing against the Purchase Price for the portion of
such interest payment attributable to the period occurring prior to the Closing
Date.
(ii) If, on the Closing Date, the holder of the Existing
Note is holding in escrow, monthly installments theretofore paid to such holder
by Seller on account of real estate taxes and/or insurance premiums, and if such
monthly installments are not returned to Seller at Closing, then Buyer shall
reimburse Seller, at Closing for the amount thereof; and Seller shall, at
Closing, assign to Buyer all of Seller?s rights, title and interest therein.
8. Representations and Warranties of Seller. Seller makes the
following representations and warranties to Buyer, which representations and
warranties are true and correct as of the date of this Agreement, and shall be
true and correct at and as of the Closing Date as though made both at and as of
the date of this Agreement and at and as of the Closing Date:
(a) The only leases or other agreements (herein called the
?Tenant Lease?; and the tenant under the Tenant Lease is herein called ?Tenant?)
with respect to rights of use and occupancy of the Property in effect is as set
forth on the Chart attached hereto as Schedule 1.
(b) The Tenant Lease is valid and existing and in full force
and effect; the Tenant is in actual possession of the Property; and neither the
Tenant nor the Seller is in default of its respective obligations under the
Tenant Lease.
(c) The copies of the Tenant Lease previously delivered by
Seller to Buyer and initialed by Seller and Buyer for identification are true
and complete copies of the Tenant Lease; the Tenant Lease has not been amended,
modified, or supplemented; and the Tenant does not have any right to extend or
renew the terms of the Tenant Lease except as expressly set forth in the Tenant
Lease.
(d) The Tenant has not asserted any claim which could
adversely affect the right of the landlord to collect base, minimum or fixed
rental or additional rental from the Tenant; and no notice of default or breach
on the part of landlord under the
7
<PAGE>
Tenant Lease has been received by Seller from the Tenant which has not been
cured.
(e) All construction, painting, repairs, alterations,
improvements and other work required to be performed by the landlord under the
Tenant Lease, and all of the other obligations of the landlord required to be
performed under the Tenant Lease as of the Closing Date, have been completed
fully performed and paid for in full by Seller.
(f) The terms of the Tenant Lease commenced and will end on
the dates specified in the Charts attached hereto as Schedule 1.
(g) The rents and other payments set forth in the Tenant Lease
is the actual rents, income and charges presently being collected by Seller
under the Tenant Lease; and all minimum rent payable under the Tenant Lease is
payable monthly in advance.
(h) Except as set forth in the Tenant Lease, the Tenant is not
entitled to any concession, allowance, rebate or refund; and the allowances, if
any, specified in the Tenant Lease have been fully recovered by the Tenant
thereunder.
(i) The Tenant has not prepaid any base rental, minimum
rental, fixed rental or additional rental or other charges for more than the
current month under its Tenant Lease.
(j) Neither the Tenant Lease nor the rental or other amounts
payable under the Tenant Lease has been assigned, pledged or encumbered other
than to the holder of Existing Mortgage as collateral security.
(k) No security deposit has been paid by the Tenant under the
Tenant Lease, except as set forth on the Charts attached hereto as Schedule 1.
(l) The Chart attached hereto as Schedule 2 sets forth the
only brokerage or leasing commissions or other compensation which are or will be
due and payable to any party (?Lease Broker?) with respect to or on account of
the Tenant Lease or any extensions or renewals thereof or any other actions by
the Tenant thereunder; the copies of the agreements between
8
<PAGE>
Seller and the Lease Broker delivered by Seller to Buyer are true and complete
and there are no other such agreements; Seller shall fully pay (and shall
provide to Buyer at Closing evidence of such payment) all installments on
account of the existing leasing commissions due or payable with respect to any
rental due or payable in connection with any period prior to the Closing Date
and/or otherwise due and payable prior to the Closing Date; and Buyer shall, at
Closing, accept the assignment of the Tenant Lease subject to the obligation to
pay all of the existing leasing commissions to the Lease Broker with respect to
periods occurring from and after the Closing Date. Pursuant to the preceding
sentence, there shall be an apportionment at Closing of prepaid or accrued
leasing commissions.
(m) Except as expressly set forth in the Tenant Lease, the
Tenant does not have any right or option to acquire to the Property or any
portion thereof.
(n) Seller has not received any written notice ("Defect
Notice") from any insurance company which has issued a policy with respect to
the Property or from any board of fire underwriters (or other body exercising
similar functions) claiming any defects or deficiencies in the Property or
suggesting or requesting the performance of any repairs, alterations or other
work to the Property.
(o) As of the Closing Date there shall be no management,
service, equipment, supply, security, maintenance, construction, concession or
other agreements with respect to or affecting the Property, except for any
agreements under which only the Tenant is bound.
(p) No employee of Seller who performs services at or in
connection with the Property is covered by an employment agreement or union
contract; no demand has been made upon Seller for recognition of a union or
collective bargaining agent for the employees of Seller at the Property; and
none of the employment arrangements with respect to Seller?s employees will be
binding upon Buyer or any subsequent owner of the Property after Closing.
(q) There are no outstanding uncured written notices received
by Seller of any violation (?Violation?) of any applicable law, ordinance, code,
rule, order, regulation or
9
<PAGE>
requirement of any governmental authority with respect to the Property.
(r) Exhibit D sets forth the only fire and extended coverage
insurance policies ("Policy") maintained by Seller with respect to the Property;
the Policy is in full force and effect and all premiums due thereunder has been
paid; and neither Seller nor (to Seller?s knowledge) any of the Tenant have
received any notice from the insurance companies which issued the Policy,
indicating that the Policy will not be renewed or will be renewed at a higher
premium than is presently payable therefor.
(s) There is no action, suit or proceeding pending or, to the
knowledge of Seller, threatened against or affecting Seller or the Property or
any portion thereof or the Tenant Lease or relating to or arising out of the
ownership, management or operation of the Property, in any court or before or by
any federal, state, county or municipal department, commission, board, bureau or
agency or other governmental instrumentality.
(t) Seller has not received any notice of any condemnation
proceeding or other proceedings in the nature of eminent domain ("Taking") in
connection with the Property, and to Seller's knowledge no Taking has been
threatened.
(u) All of the books, records, information, data and other
items supplied by Seller to Buyer with respect to Seller or the Property are
true, complete and correct in all material respects.
(v) To the best of Seller?s actual knowledge: there is no
presently existing Violation at the Property of any environmental law or
regulation; no contamination is present at the Property; and no underground
storage tanks, asbestos or PCBs are present at the Property.
10
<PAGE>
(w) The copy of the Existing Mortgage attached as Exhibit C-1
to this Agreement, the copy of the Existing Note attached as Exhibit C-2, and
the copies of (the following documents being herein called "Additional Loan
Documents") the Commitment Letter, the Assignment of Rents and Leases, the
Security Agreement, the set of UCC-1 financing Statements, the Limited Guaranty,
the Subordination of Management to Mortgage, attached hereto as Exhibit C-3, are
all true and complete copies thereof, and the same have not been further
amended, modified or supplemented; the holder of the Existing Note and the
Existing Mortgage is USG Annuity & Life Company; the Existing Mortgage and the
Existing Note are in full force and effect; no default or breach exists under
the Existing Mortgage or the Existing Note, and no event or omission has
occurred which with the giving of notice or lapse of time, or both, would
constitute a default or breach under the Existing Mortgage or the Existing Note;
and there are no other agreements between Seller or any prior owners of the
Property and the holder of the Existing Mortgage which have not been fully
rescinded and rendered null and void.
(x) The unpaid principal sum of the Existing Note as of August
1, 1997 (after payment by Seller of the installment of principal and interest on
August 1, 1997) was $3,385,100; and the amounts prepaid by Seller to the holder
of the Existing Note on the property known as 1305 Goshen Parkway on account of
1997-1998 real estate taxes and on account of insurance premiums are $100,642,
being the full amounts, if any, required by the terms of the Existing Mortgage.
9. Tax-Free Exchange. Buyer shall cooperate with Seller in
effecting an exchange described in Section 1031 of the Internal Revenue Code
("Tax Free Exchange"), provided, that: (a) the Tax Free Exchange shall not
impose upon Buyer additional financial or legal obligations in addition to those
set forth elsewhere in this Agreement; (b) Buyer shall have no obligation to
take title to any exchange property; (c) Seller shall indemnify, defend and save
and hold Buyer harmless of and from all expenses, liabilities, claims, losses or
actions as a result of Buyer's participation in the Tax Free Exchange; (d) Buyer
shall have no obligation to modify any of the provisions of this Agreement to
effect the Tax Free Exchange; (e) any Agreement of Sale to be entered into by
Buyer for an exchange property shall provide that any liability of Buyer
thereunder shall be limited
11
<PAGE>
and restricted in enforcement to any deposit monies paid by Buyer; and (f)
Seller shall provide to Buyer any deposit monies required under any Agreement of
Sale for an exchange property.
10. Operations Prior to Closing. Between the date of the execution
of this Agreement and Closing:
(a) Seller shall, at its expense: perform all of the
obligations under the Tenant Lease and the Existing Mortgage, the Existing Note
and the Additional Loan Documents; and cure all notices of any Violations and/or
Defect Notices issued prior to Closing.
(b) Seller shall not enter into any agreement to modify, amend
or otherwise alter any of the terms or provisions of the Tenant Lease; and
Seller shall not enter into a new lease or other agreement with respect to the
use or occupancy of the Property, without prior written approval of Buyer.
(c) Seller shall perform all acts, and shall make all
payments, necessary to cause the representations and warranties of Seller in
this Agreement to be true and correct.
(d) (i) Buyer, its attorneys, accountants, architects,
engineers and other representatives shall be afforded access to the Property and
to all books, records and files relating thereto from time to time prior to
Closing for the purposes of inspections, preparation of plans, taking of
measurements, making of surveys, making of appraisals, and generally for the
ascertainment of the condition of the Property, including but not limited to the
physical and financial condition of the Property; and there shall be furnished
to Buyer all plans and specifications, engineering reports, feasibility studies,
operating statements, governmental permits and approvals, contracts, leases,
surveys, title information and other documentation concerning the Property in
the possession of Seller and/or Seller's management agent for the Property.
(ii) Buyer agrees to indemnify, defend and reimburse Seller
for all costs, expenses (including, without limitation, attorney?s fees,
consultant and expert fees and court costs) loss and liabilities suffered or
incurred by Seller as the result of any bodily injuries to persons or properties
caused by
12
<PAGE>
Buyer?s entry upon the Property prior to Closing pursuant to the provisions of
this Section 10(d).
(e) Promptly after receipt thereof by Seller, Seller shall
deliver to Buyer the following:
(i) a copy of any notice of default given or received
under the Tenant Lease;
(ii) a copy of any tax bill, notice or statement of
value, or notice of change in a tax rate affecting or relating to the Property;
(iii) a copy of any notice of an actual or alleged
Violation;
(iv) a copy of any notice of Taking; and
(v) a copy of any notice given or received under the
Existing Mortgage and/or under the Existing Note and/or under the Additional
Loan Documents.
(f) Seller shall deliver for execution by the Tenant a written
certification which shall be prepared by Buyer?s counsel (utilizing the form
attached to this Agreement as Exhibit E, but modified and supplemented by
Buyer?s counsel to reflect the terms and provisions of the Tenant Lease and to
incorporate confirmation of any of the representations and warranties of Seller
in Section 8 with respect to the Tenant Lease) (each such certification being
herein called a ?Tenant Estoppel Certificate?); and Seller shall obtain an
executed Tenant Estoppel Certificate (dated no more than twenty (20) days prior
to the Closing Date) from the Tenant. Seller shall deliver to Buyer a copy of
the executed Tenant Estoppel Certificate obtained by Seller, promptly after
Seller?s receipt thereof.
(g) Seller shall complete and deliver for execution by the
holder of the Existing Mortgage a written certification in the form of Exhibit F
(?Mortgagee Estoppel Certificate?); and shall obtain an executed Mortgagee
Estoppel Certificate (dated no more than twenty (20) days prior to the Closing
Date) from the holder of the Existing Mortgage. As
13
<PAGE>
provided on Exhibit F, the Mortgagee Estoppel Certificate shall provide, inter
alia, that Seller and Jack Loew are released from all liability under the
Existing Mortgage, Existing Note and the other Loan Documents. Seller shall
deliver to Buyer a copy of the executed Mortgagee Estoppel Certificate delivered
to Seller promptly after receiving such Mortgagee Estoppel Certificate. Buyer
shall pay, at Closing, the one percent (1%) assumption fee charged by the holder
of the Existing Mortgage to permit Buyer to take title to the real Property
encumbered by the lien of the Existing Mortgage; and Seller shall pay all other
costs, fees, charges and expenses imposed by the holder of the Existing Mortgage
for the issuance of the Mortgagee Estoppel Certificate.
11. Survival. The representations and warranties of Seller set forth
in Section 8 shall survive Closing for a period of 9 months from Closing and
thereafter if a notice of breach is given to Seller with such 9-month period.
The obligations of Seller and Buyer pursuant to Sections 7, 9, 10(d)(ii), 16, 17
and 20 of this Agreement shall survive Closing without limit. Except as
otherwise provided in the preceding two sentences, the agreements of Seller and
Buyer set forth in this Agreement shall not survive Closing and shall merge into
the delivery of the Deed at Closing.
12. Casualty.
(a) Seller shall maintain the Policy in effect until the time
of Closing.
(b) If at any time prior to the Closing Date any portion of
the Property is destroyed or damaged as a result of fire or any other casualty
("Casualty"), Seller shall promptly give written notice ("Casualty Notice")
thereof to Buyer. If the Property is the subject of a Casualty and if the damage
or destruction resulting from the Casualty is not fully repaired and restored
prior to Closing by Seller (at Seller?s sole cost and expense and in a manner
which is reasonably acceptable to Buyer), Buyer shall have the right, at its
sole option, of terminating this Agreement unless, (i) the cost fully to repair
or restore such damage is less than Twenty-Five Thousand Dollars ($25,000) and
sufficient insurance proceeds are available fully to restore such damage, and
(ii) the insurance company issuing the Policy has confirmed in writing prior to
the end of such thirty (30) day period that such Casualty is covered by the
Policy and that no
14
<PAGE>
defense to payment of the claim exists, and (iii) such Casualty will not result
in the Tenant terminating the Tenant Lease or asserting a right to terminate any
of the Tenant Lease, and (iv) any loan commitment obtained by Buyer for
financing to acquire the Property is not canceled or suspended as a result of
such Casualty. If Buyer does not terminate this Agreement, the proceeds of any
insurance with respect to the Property paid between the date of this Agreement
and the Closing Date shall be paid to Buyer at the time of Closing and all
unpaid claims and rights in connection with losses to the Property shall be
assigned to Buyer at Closing without in any manner affecting the Purchase Price.
(c) If the Property is the subject of a Casualty, but Buyer
does not have the right to terminate this Agreement pursuant to the provisions
of Section 12(b) (or Buyer does not exercise such right), then Seller shall
promptly cause all temporary repairs to be made to the Property as shall be
required to prevent further deterioration and damage to the Property; provided,
however, that any such repairs shall first be approved by Buyer. Seller shall
have the right to be reimbursed from the proceeds of any insurance with respect
to the Property paid between the date of this Agreement and the Closing Date for
the cost of all such repairs made pursuant to this Section 12(c). Except for the
obligation of Seller to repair the Property set forth in this Section 12(c),
Seller shall have no other obligation to repair any Casualty damage in the event
Buyer does not elect to terminate this Agreement pursuant to the provisions of
Section 12(b), and in such event, Buyer shall accept the Property at Closing as
damaged or destroyed by the Casualty.
13. Eminent Domain. If at any time prior to the Closing Date: a
Taking affects all or any part of the Property, or if any proceeding for a
Taking is commenced, or if notice of the contemplated commencement of a Taking
is given, Seller shall promptly give written notice ("Taking Notice") thereof to
Buyer. Buyer shall have the right, at its sole option, of terminating this
Agreement by written notice to Seller. If Buyer does not terminate this
Agreement, the Purchase Price shall be reduced by the total of any awards or
damages received by Seller and Seller shall, at Closing, assign to Buyer all of
Seller's right, title and interest in and to any awards or damages to which
Seller may have become entitled or may thereafter be entitled by reason of
15
<PAGE>
any exercise of the power of eminent domain or condemnation with respect to or
for the Taking of the Property or any portion thereof.
14. Conditions of Buyer's Obligations.
(a) The obligations of Buyer under this Agreement are subject
to the satisfaction at the time of Closing of each of the following conditions
(any one of which may be waived in whole or in part in writing by Buyer at or
prior to Closing):
(i) all of the representations and warranties by Seller
set forth in this Agreement shall be true and correct in all material respects;
(ii) no representation or warranty by Seller contained
in this Agreement shall contain any materially untrue statement or shall omit a
material fact necessary to make the statement of fact therein recited not
misleading;
(iii) Seller shall have performed all covenants,
agreements and conditions required by this Agreement to be performed by Seller
prior to or as of the Closing Date; and
(iv) Buyer shall have received the executed Tenant
Estoppel Certificate and Mortgagee Estoppel Certificate.
(b) Failure of Condition. In the event any of the conditions
set forth in Section 14(a) are not satisfied as of the Closing Date, Buyer shall
have the right, at Buyer's sole option, to (i) terminate this Agreement or (ii)
complete Closing notwithstanding the unsatisfied condition.
(c) Inspection Contingency.
(i) Buyer shall, during the period ("Inspection Period")
from the date of this Agreement to the date occurring forty-five (45) days
thereafter, have the opportunity to examine the Property, the Tenant Lease, the
Policy, the Permitted Encumbrances, any items to be delivered by Seller to
Buyer, and to conduct such other inspections as Buyer, in its discretion, may
elect.
16
<PAGE>
(ii) Seller acknowledges that Buyer may commission,
prior to Closing, at Buyer's sole cost and expense, an investigation of without
limitation: compliance with environmental laws, the presence of contaminants on,
over, under, migrating from or affecting the Property.
(iii) Seller will cooperate with Buyer and Buyer's
agents in Buyer's investigation, including without limitation: (A) complying
with requests for information and records; (B) warranting that responses to such
requests are true and complete; (C) assisting Buyer in obtaining governmental
agency or other records and upon Buyer's request communicating directly with any
governmental agencies; and (D) granting Buyer access to the Property including,
without limitation, access for collecting surface or subsurface samples of soil,
vegetation or water, or samples from buildings and other improvements located on
the Property, including samples from walls, floors, ceilings, plenums, paved
areas and other areas the taking of which samples may necessitate some damage to
the buildings, other improvements, and installing groundwater monitoring wells.
(iv) Buyer shall have the right, at Buyer?s sole option,
to terminate this Agreement (for any reason whatsoever) on or prior to the
second business day to occur after the date on which the Inspection Period ends.
(v) Unless and until Closing is completed, Buyer shall
maintain the results of all environmental tests performed on Buyer?s behalf in a
confidential manner; provided, however, that the obligations of Buyer pursuant
to this subparagraph 14(c)(v) shall not limit or prohibit the right of Buyer to
disclose such tests and/or results to: the Title Company; Buyer?s attorneys,
accountants and other professional representatives; any party providing
financing or equity funds to Buyer; any assignee of Buyer?s rights under this
Agreement; or any partner or joint venturer of Buyer or any party performing due
diligence testing on behalf of Buyer.
(vi) If Buyer terminates this Agreement pursuant to the
provisions of this Section 14(c), then Buyer shall deliver to Seller copies of
any then completed surveys, title commitments and/or environmental surveys with
respect to the Property obtained by Buyer.
17
<PAGE>
15. Items to be Delivered at Closing.
(a) By Seller. At Closing, Seller shall deliver to Buyer the
following:
(i) Deed. The Deed.
(ii) Bill of Sale. A Bill of Sale for the Personal
Property, duly executed and acknowledged by Seller in proper form for recording.
(iii) Assignments of Leases. An Assignment in the form
of Exhibit G of the Tenant Lease, duly executed and acknowledged by Seller and
in proper form for recording, assigning to Buyer or Buyer's assignee all of the
lessor's and Seller's rights, title and interest in the Tenant Lease, subject
only to the prior collateral assignment of the Tenant Lease to the holder of the
Existing Mortgage as provided therein, together with an original executed copy
of the Tenant Lease and a letter, duly executed by Seller, in form satisfactory
to Buyer addressed to the tenant.
(iv) Certificates, Etc. An assignment, duly executed and
acknowledged by Seller, of (and delivery to Buyer of originals or copies of):
all certificates of occupancy and all other licenses, permits, authorizations,
consents, certificates and approvals for the Property; all fees, escrow and/or
security funds, deposits and other sums heretofore paid to any governmental
authority in connection with the Property; all certificates issued by the local
Board of Fire Underwriters (or other body exercising similar functions); all
plans, specifications and project manuals for the Property; all guarantees,
bonds and warranties with respect to the Property (together with original
counterparts of such instruments); and all keys to the Property.
(v) Tenant Estoppel Certificates. An original
counterpart of the Tenant Estoppel Certificate.
(vi) Mortgagee Estoppel Certificate. An original
counterpart of the Mortgagee Estoppel Certificate.
18
<PAGE>
(vii) Resolutions; Title Company Affidavits, Etc. Such
resolutions and certificates as the Title Company shall require to evidence the
due authorization of the execution and performance of this Agreement and the
documents to be delivered pursuant hereto; and all affidavits, indemnities and
other agreements required by the Title Company to permit it to issue to Buyer
the Owner's Policy of Title Insurance required pursuant to Section 5(a).
(viii) Statements. A statement, certified by Seller (and
accompanied with all relevant back-up documentation) setting forth all
information reasonably necessary or reasonably required to permit Buyer to
calculate and collect after Closing all payments of additional rent and other
charges due under the Tenant Lease.
(ix) Conveyance of Awards. All proper instruments for
the conveyance of the awards referred to in Sections 1(a) and 13.
(x) Other Documents. Any other documents required to be
delivered by Seller pursuant to any other provisions of this Agreement.
(b) By Buyer. At Closing, Buyer shall deliver to Seller the
following:
(i) Purchase Price. The portion of the Purchase Price
payable pursuant to Section 2(a)(iii).
(ii) Assumption Agreements. An assumption agreement, in
the form of Exhibit G of the Tenant Lease, duly executed and acknowledged by
Buyer and in proper form for recording.
(iii) Other Documents. Any other document required to be
delivered by Buyer pursuant to any other provisions of this Agreement.
(c) Preparation of Documents. Buyer shall prepare the
documents referred to in subparagraphs 15(a)(i), (ii) (iii), (iv), (v) and (vi);
and Seller shall prepare the documents referred to in subparagraphs 15(a)(vii)
and (viii).
19
<PAGE>
16. Reports. For the period of time commencing on the date of this
Agreement and continuing through the first anniversary of the Closing Date, and
without limitation of the other document production otherwise required of Seller
hereunder, Seller shall, from time to time, upon reasonable advance written
notice from Buyer, provide to Buyer and its representatives: (i) access to all
financial and other information pertaining to the period of Seller?s ownership
and operation of the Property, which information is relevant and reasonably
necessary, in the opinion of Buyer?s outside, third party accountants
("Accountants") to enable Buyer and its Accountants to prepare financial
statements in compliance with any and all of (a) Rule 3-05 or Rule 3-14 of
Regulation S-X of the Securities and Exchange Commission (the "Commission"), as
applicable to Buyer; (b) any other rule issued by the Commission and applicable
to Buyer; and (c) any registration statement, report or disclosure statement
filed with the Commission by, or on behalf of Buyer; and (ii) a representation
letter, in form specified by, or otherwise satisfactory to the Accountants,
signed by the individual(s) responsible for Seller?s financial reporting, as
prescribed by generally accepted auditing standards promulgated by the Auditing
Standards Division of the American Institute of Certified Public Accountants,
which representation letter may be required by the Accountants in order to
render an opinion concerning Seller?s financial statements.
17. Brokerage. Buyer represents and warrants to Seller that Buyer
has dealt with no broker, finder or other intermediary in connection with this
sale other than Fidelity Commercial Real Estate Alliance, Inc. (the ?Broker?),
Seller agrees to pay all brokerage commissions due to the Broker.
18. No Other Representations. Buyer acknowledges that neither Seller
nor anyone acting, or purporting to act, on behalf of Seller, has, except as
expressly set forth in this Agreement, made any representation or warranty with
respect to the Property. Without in any manner limiting the generality of the
foregoing, Buyer acknowledges and agrees that Buyer and its representatives have
(or shall prior to the expiration of the Inspection Period have) inspected the
Property and are (or shall become) familiar with the condition thereof; and that
Buyer is purchasing the Property in its present "as is" and "where is" condition
as the result of Buyer?s inspections and investigations and not in reliance on
any representation or warranty made by Seller, or any
20
<PAGE>
agent or employee of Seller, except as expressly provided in this Agreement.
19. Assignability. Buyer shall have the right to assign this
Agreement and its rights hereunder; and any assignee of Buyer shall be entitled
to exercise all of the rights and powers of Buyer hereunder.
20. FIRPTA.
(a) Section 1445 of the Internal Revenue Code of 1986, as
amended (the "Code") provides that a transferee of a United States real property
interest must withhold tax if the transferor is a foreign person. To inform
Buyer that withholding of tax is not required upon the disposition by Seller of
a United States real property interest, the undersigned parties executing this
Agreement on behalf of Seller hereby certify the following on behalf of Seller:
(i) Seller is not a foreign corporation, foreign
partnership, foreign trust, or foreign estate (as those terms are defined in the
Code and Income Tax Regulations);
(ii) Seller's U.S. employer identification number is
23-2606815; and
(iii) Seller's office address is: 55 Country Club Drive,
Suite 200, Downingtown, PA 19335-3062
Seller, and the parties executing this Agreement on behalf of Seller, understand
that this certification may be disclosed to the Internal Revenue Service by
Buyer and that any false statement made here could be punished by fine,
imprisonment, or both. Under penalties of perjury, the undersigned parties
executing this Agreement on behalf of Seller declare that they have examined
this certification and to the best of their knowledge and belief, it is true,
correct and complete; and they further declare that they have authority to sign
this document on behalf of Seller.
(b) Seller, and the parties executing this Agreement on behalf
of Seller, shall deliver to Buyer at Closing, a restatement of the above
certifications of Seller and of the
21
<PAGE>
parties executing this Agreement on behalf of Seller in the form attached to
this Agreement as Exhibit H.
21. Notices.
(a) All notices, demands, requests or other communications
from each party to the other required or permitted under the term of this
Agreement shall be in writing and, unless and until otherwise specified in a
written notice by the party to whom notice is intended to be given, shall be
sent to the parties at the following respective addresses:
if intended for Seller:
c/o J.Loew & Associates, Inc.
55 Country Club Drive
Suite 200
Downingtown, PA 19335-3062
Fax No.: 610-873-7560
if intended for Buyer:
The Widener Building, Suite 200
One South Penn Square
Philadelphia, PA 19107
Attention: Jeffrey E. Kelter
Fax No.: (215) 972-0819
Notices may be given on behalf of any party by its legal counsel.
(b) Each such notice, demand, request or other communication
shall be given (i) against a written receipt of delivery, or (ii) by registered
or certified mail of the United States Postal Service, return receipt requested,
postage prepaid, or (iii) by a nationally recognized overnight courier service
for next business day delivery, or (iv) via telecopier or facsimile transmission
to the facsimile number listed above, provided, however, that if such
communication is given via telecopier or facsimile transmission, an original
counterpart of such communication shall concurrently be sent in either the
manner specified in clause (i) or (iii) above.
22
<PAGE>
(c) Each such notice, demand, request or other communication
shall be deemed to have been given upon the earliest of (i) actual receipt or
refusal by the addressee, or (ii) deposit thereof at any main or branch United
States post office if sent in accordance with section (b)(ii) above or (iii)
deposit thereof with the courier if sent pursuant to section (b)(iii) above.
23
<PAGE>
22. Miscellaneous.
(a) Captions. The captions in this Agreement are inserted for
convenience of reference only; they form no part of this Agreement and shall not
affect its interpretation.
(b) Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of the parties and their respective
successors and assigns.
(c) Entire Agreement; Governing Law. This Agreement contains
the entire understanding of the parties with respect to the subject matter
hereof, supersedes all prior or other negotiations, representations,
understandings and agreements of, by or among the parties, express or implied,
oral or written, which are fully merged herein. The express terms of this
Agreement control and supersede any course of performance and/or customary
practice inconsistent with any such terms. Any agreement hereafter made shall be
ineffective to change, modify, discharge or effect an abandonment of this
Agreement unless such agreement is in writing and signed by the party against
whom enforcement of such change, modification, discharge or abandonment is
sought. This Agreement shall be governed by and construed under the laws of the
Commonwealth of Pennsylvania.
(d) Provisions Separable. The provisions of this Agreement are
independent of and separable from each other, and no provision shall be affected
or rendered invalid or unenforceable by virtue of the fact that for any reason
any other provision may be invalid or unenforceable in whole or in part.
(e) Waiver of Tender of Deed and Purchase Monies. The tender
of an executed Deed by Seller and the tender by Buyer of the portion of the
Purchase Price payable at Closing are mutually waived, but nothing in this
Agreement shall be construed as a waiver of Seller's obligation to deliver the
Deed and/or of the concurrent obligation of Buyer to pay the portion of the
Purchase Price payable at Closing.
(f) Gender, etc. Words used in this Agreement, regardless of
the number and gender specifically used, shall be deemed and construed to
include any other number, singular or
24
<PAGE>
plural, and any other gender, masculine, feminine or neuter, as the context
indicates is appropriate.
(g) Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original as against any
party whose signature appears thereon, and all of which shall together
constitute one and the same instrument. This Agreement shall be binding when one
or more counterparts hereof, individually or taken together, shall bear the
signatures of all of the parties reflected on this Agreement as the signatories.
(h) Exhibits. All exhibits attached to this Agreement are
incorporated by reference into and made a part of this Agreement.
(i) No Waiver. Neither the failure nor any delay on the part
of either party to this Agreement to exercise any right, remedy, power or
privilege under this Agreement shall operate as a waiver thereof, nor shall any
single or partial exercise of any right, remedy, power or privilege preclude any
other or further exercise of the same or of any other right, remedy, power or
privilege, nor shall any waiver of any right, remedy, power or privilege with
respect to any occurrence be construed as a waiver of any such right, remedy,
power or privilege with respect to any other occurrence. No waiver shall be
effective unless it is in writing and is signed by the party asserted to have
granted such waiver.
(j) Interpretation. No provision of this Agreement is to be
interpreted for or against either party because that party or that party's legal
representative or counsel drafted such provision.
(k) Time. In computing the number of days for purposes of this
Agreement, all days shall be counted, including Saturdays, Sundays and holidays;
provided, however, that if the final day of any time period provided in this
Agreement shall end on a Saturday, Sunday or legal holiday, then the final day
shall extend to 5:00 p.m. of the next full business day. For the purposes of
this Section, the term "holiday" shall mean a day other than a Saturday or
Sunday on which banks in the state in which the Real Property is located are or
may elect to be closed.
25
<PAGE>
(l) Attorney's Fees. In connection with any litigation arising
out of this Agreement, the prevailing party shall be entitled to recover all
costs incurred, including reasonable attorney's fees. However, the provisions of
this Section 22(l) are expressly subject to the limitation on Buyer?s liability
specified in Section 3 and in no event shall the obligations of Seller pursuant
to this Section 22(l) exceed, in the aggregate, the sum of Fifty Thousand
Dollars ($50,000).
(m) Buyer's Exercise of Right to Terminate. If Buyer desires
to terminate this Agreement pursuant to any of the provisions of this Agreement,
Buyer shall do so by giving written notice of termination to Seller. Upon any
such termination, the Deposit shall be paid to Buyer (and each of Seller and
Buyer shall deliver written instructions to the Title Company to pay the Deposit
to Buyer); and except as otherwise expressly provided in this Agreement, this
Agreement shall be and become null and void and neither party shall have any
further rights or obligations under this Agreement.
23. Other Agreement. Simultaneously with the execution of this
Agreement, Buyer is entering into an Agreement of Sale with Hough Loew
Associates, Inc., as Seller, pursuant to which Buyer is agreeing to purchase
from Hough/Loew Associates, Inc. two certain parcels of land situate in the
Township of West Whiteland, Chester County, Pennsylvania (the "Other
Agreement"). If for any reason, other than a default by Buyer of its obligations
to complete Closing under the Other Agreement, Closing is not completed under
the Other Agreement, Buyer shall have the right to terminate this Agreement by
written notice to Seller; if for any reason other than a default by Seller of
its obligations to complete Closing under the other Agreement, Closing is not
completed under the Other Agreement, Seller shall have the right to terminate
this Agreement by written notice to Buyer; and if either Buyer or Seller
terminates this Agreement pursuant to this Section 23, the Deposit shall be paid
to Buyer (and each of Seller and Buyer shall deliver written instructions to the
Title Company to pay the Deposit to Buyer); and except as otherwise expressly
provided in this Agreement, this Agreement shall be and become null and void and
neither party shall have any further rights or obligations under this Agreement.
26
<PAGE>
IN WITNESS WHEREOF, intending to be legally bound, the parties have
executed this Agreement as a sealed instrument as of the day and year first
above written.
Witness: SELLER
L&W ASSOCIATES
By: /s/ Jack R. Loew
-------------------------------
August 19, 1997
General Partner
BUYER
PENN SQUARE PROPERTIES, INC.
By: /s/ Jeffrey E. Kelter
----------------------------------
August 19, 1997
President
27
<PAGE>
SCHEDULE 1
TENANT LEASE
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Commencement Ending Date
Date of Lease Date of Amendments Name of Tenant Date of Term of Term
- ------------- ------------------ -------------- ------------ -----------
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
Yves Rocher, Inc.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
SCHEDULE 2
BROKERAGE COMMISSIONS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Name of Broker Amount of Commission
-------------- --------------------
<S> <C>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION OF REAL PROPERTY
<PAGE>
EXHIBIT B
LIST OF PERSONAL PROPERTY
(1) All architectural, mechanical, engineering and other plans and
specifications relating to the Property.
(2) All percolation, and other soil, topographical, and traffic
studies and tests relating to the Property.
(3) All trademarks, logos and other marks, trade or business names,
and all intangible personal property relating to the ownership, development,
use, operation, leases and management of the Property.
(4) All right, title, and interest of Seller in and to all
transferrable or assignable warranties, representations, guarantees, contract
rights, and miscellaneous rights, if any, with respect to the Property.
(5) All books, records, and documents of Seller relating to the
Property and Tenant Leases, including without limitation all computer software,
programs, tapes and disks relating to the Property and Tenant Leases.
(6) All ranges, micro-wave ovens, refrigerators, freezers,
refrigeration/freezer units, dishwashers, clothes washing machines and dryers,
and all other appliances, and all hookups for any of the foregoing or for cable
television.
(7) All heating, ventilating and air conditioning equipment and
other machinery, whether portable units or fixtures.
(8) All wall-to-wall carpeting, screens and garbage disposals,
whether personalty or fixtures.
(9) All certificates of occupancy and all other licenses, permits,
authorizations, consents, certificates and approvals issued by any governmental
authority having jurisdiction over the Property, and all certificates, if any,
<PAGE>
issued by the local board of fire underwriters (or other body exercising similar
functions).
<PAGE>
` EXHIBIT C-1
EXISTING MORTGAGE
[Copy of Existing Mortgage to be attached]
<PAGE>
EXHIBIT C-2
EXISTING NOTE
[Copy of Existing Note to be attached]
<PAGE>
EXHIBIT C-3
[Copies of Additional Loan Documents to be attached]
<PAGE>
EXHIBIT D
INSURANCE POLICIES
<PAGE>
EXHIBIT E
TENANT ESTOPPEL CERTIFICATE
[Buyer] and its assignee
Re: ______ Building,
[address]
(the "Building")
Gentlemen:
The undersigned ("Tenant") certifies and agrees as follows:
1. It is the tenant of a portion of the Building known as Suite No.
__ under the lease dated ___________, 19__ (the "Lease"). The Lease has not been
supplemented, modified or amended, and there do not exist any other agreements
concerning the demised premises between the landlord under the Lease and Tenant,
except as set forth below:
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
2. The Lease is in full force and effect, and prior to ___________,
19__, the Lease will not be terminated or modified by Tenant without your prior
written consent.
3. The term of the Lease commenced __________, 19__ and expires
___________, 19__. Tenant has no right to renew or extend the term of the Lease
except as set forth below:
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
<PAGE>
4. The current monthly installment of minimum annual rent is
$______________. No rent has been paid more than thirty (30) days in advance of
its due date. All rent and other sums payable under the Lease have been paid
through ____________, 19__.
5. Tenant is not entitled to any free rent, rental rebates or other
concessions under the Lease which have not been exhausted, except ______________
___________________________________________________________________.
6. Tenant has no claim of offset under the Lease or otherwise
against rent or other charges due or to become due under the Lease.
7. Tenant has accepted possession of the premises demised under the
Lease; all improvements or other work required by the terms of the Lease to be
performed by the landlord have been completed; the rentable area of the demised
premises is __ square feet.
8. The landlord is not in default under the Lease, and no event has
occurred which with the giving of notice or passage of time, or both,
constitutes a default by the landlord under the Lease.
9. Tenant is not in default under the Lease, and no event has
occurred which with the giving of notice or passage of time, or both,
constitutes a default by Tenant under the Lease.
10. Tenant has not assigned the Lease or any interest therein or
subleased any portion of the demised premises.
12. The amount of the security deposit held by the landlord under
the Lease is $_________________.
This Certificate shall inure to the benefit of you, your heirs,
legal representatives, successors and assigns, and shall be binding upon Tenant
and Tenant's heirs, legal representatives, successors and assigns.
If any statement in this certificate shall become untrue, Tenant
shall immediately give to you written notice of such occurrence.
<PAGE>
By executing this Certificate, the signatory represents
3
<PAGE>
that he/she is duly authorized to execute this Certificate on behalf of Tenant
and legally bind Tenant.
TENANT:
By:
---------------------------------
Name:
Title:
Dated: ____________________, 19__
4
<PAGE>
EXHIBIT F
A written statement addressed to Buyer from the holder of the
Existing Mortgage and the Existing Note dated as of a date no more than ten (10)
days prior to the Closing Date, setting forth:
(1) the unpaid principal balance of the Existing Note as of
such date,
(2) the last date to which principal and interest have been
paid,
(3) the nature and amount of the moneys then on deposit with
such holder for the payment of taxes and insurance premiums,
(4) consent by the holder to the conveyance of the Property
and assignment of the Tenant Lease to Buyer and confirmation that such
conveyance will not cause an acceleration of the debt evidenced by the Existing
Note nor constitute an event of default under the Existing Mortgage or the
Existing Note, and confirmation that the Buyer has not personally assumed any of
the obligations under the Existing Note and Existing Mortgage; and confirmation
that Seller and Jack Loew are released from all liability under the Existing
Mortgage, Existing Note and Other Loan Documents,
(5) confirmation by the holder that the representations and
warranties of Seller in Section 8(w) and Section 8(x) are true and correct, and
(6) confirmation by the holder that no act, omission or
occurrence after Closing by or in connection with Seller or by or in connection
with any party who has heretofore guaranteed payment of the Existing Mortgage
and Existing Note nor any default under any such guarantee will constitute a
default under the Existing Mortgage and/or the Existing Note.
<PAGE>
EXHIBIT G
ASSIGNMENT AND ASSUMPTION OF TENANT LEASES
THIS ASSIGNMENT made this __ day of ____, 19__, by and between
______________, a ________________________ having an office at
____________________________________ ("Assignor") and ________________, a
________________________ having an office at _________________________________
("Assignee").
RECITALS
A. Pursuant to a certain Agreement of Sale and Purchase dated as of
_________, 19__ (the "Agreement of Sale"), Assignor has agreed to sell to
Assignee, upon the terms, provisions and conditions set forth therein, certain
property (hereinafter "Property") located in ___________________________________
________________________________________ on land described on Exhibit A attached
to and made a part of this Assignment, all as more particularly described in the
Agreement of Sale.
B. In connection with the sale and purchase of the Property,
Assignor desires to assign to Assignee all tenant leases encumbering the
Property and Assignee desires to accept said assignment and assume the
obligations of Assignor under said leases upon the terms, covenants and
conditions set forth in this instrument.
NOW, THEREFORE, in consideration of the purchase price paid by
Assignee to Assignor for the Property, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Assignor and Assignee covenant and agree as follows:
1. Assignment Assignor hereby assigns, transfers and sets over unto
Assignee all of Assignor's and the lessor's right, title and interest in and to
(a) the leases set forth on Exhibit
<PAGE>
B attached to and made a part of this Assignment and any other lease, license or
right of occupancy affecting the Property, together with all amendments,
extensions, renewals and other modifications thereto (the "Tenant Leases"), (b)
rents, additional rents, escrow or security or other tenant deposits, fees,
income, charges, and profits now or hereafter arising thereunder, and (c) any
guarantees of any Tenant Leases, to have and to hold the same unto Assignee, its
successors and assigns.
2. Right to Assign. Assignor represents and warrants that Assignor
has title to and full right to assign the Tenant Leases, and any and all rents,
income and profits and claims arising thereunder, and any guarantees of any
Tenant Leases.
3. Assumption. Assignee accepts said assignment and assumes all
obligations on the part of the lessor under the Tenant Leases first arising or
accruing on or after the date of this Assignment.
4. Indemnification by Assignor. Assignor shall indemnify, defend
and hold Assignee harmless from and against any claim, demand, cause of action,
charge, judgment, damage, liability, cost or expense (including, without
limitation, reasonable attorney's fees and legal costs) (a) arising out of the
Tenant Leases in connection with events occurring prior to the date of this
Assignment, or (b) arising out of any claim by any tenant arising prior to the
date of this Assignment with respect to any escrow or security or other tenant
deposit but only to the extent of the amount of such deposit and interest
thereon payable to a tenant not transferred by Assignor to Assignee, or (c)
arising out of any claim by any broker, finder or other intermediary for any
leasing or brokerage commission or other compensation in connection with any
Tenant Lease.
5. Indemnification by Assignee. Assignee shall indemnify, defend
and hold Assignor harmless from and against any claim, demand, cause of action,
charge, judgment, damage, liability, cost or expense (including, without
limitation, reasonable attorneys' fees and legal costs) (a) arising out of the
Tenant Leases in connection with events occurring on or after the date of this
Assignment (exclusive, however, of events described in clause (c) of Paragraph
4) or (b) arising out of any claim by any tenant arising on or after the date of
this Assignment with respect to its escrow or security or other tenant deposit
but only to the extent of the amount of such deposit and
<PAGE>
interest thereon transferred by Assignor to Assignee and not returned to such
tenant by Assignee.
6. Binding Effect. This Assignment shall be binding upon and inure
to the benefit of Assignor and Assignee and their respective heirs, personal
representatives, successors and assigns.
7. Limited Power of Attorney. Assignor hereby appoints Assignee its
attorney-in-fact for the limited purpose of receiving and endorsing any checks
or other payments of rent, income or profits tendered to Assignee pursuant to
the terms of the Leases or guarantees if any checks are made payable to the
order of Assignor. Assignor ratifies any such endorsement made pursuant to this
limited power of attorney. This limited power of attorney is coupled with an
interest and is irrevocable.
IN WITNESS WHEREOF, intending to be legally bound, the parties have
caused this instrument to be executed by their duly authorized representatives
on the day and year first above written.
ASSIGNOR:
ASSIGNEE:
ADD NOTARY AFFIDAVITS
3
<PAGE>
EXHIBIT H
FIRPTA AFFIDAVIT
Form for Entity Transferor
Section 1445 of the Internal Revenue Code provides that a transferee
of a U.S. real property interest must withhold tax if the transferor is a
foreign person. To inform the transferee that withholding of tax is not required
upon the disposition of a U.S. real property interest by _________________
(Transferor), the undersigned hereby certifies the following on behalf of
Transferor:
1. Transferor is not a foreign corporation, foreign partnership,
foreign trust, or foreign estate (as those terms are defined in the Internal
Revenue Code and Income Tax Regulations);
2. Transferor's U.S. taxpayer identification number is
___________________; and
3. Transferor's office address is:
_____________________________
_____________________________
_____________________________.
Transferor understands that the above information may be disclosed to the
Internal Revenue Service by the transferee and that any false statement
contained herein could be punished by fine, imprisonment, or both.
Under penalties of perjury, I declare that I have examined this
instrument and to the best of my knowledge and belief it is true, correct, and
complete, and I further declare that I have authority to sign this document on
behalf of Transferor.
- -------------------------------- ------------------------------------
Name:
Title:
<PAGE>
Dated: __________________________
<PAGE>
Exhibit 10(ae) Amend 1
FIRST AMENDMENT TO AGREEMENT OF SALE AND PURCHASE
THIS FIRST AMENDMENT TO AGREEMENT OF SALE AND PURCHASE is made as of
the __ day of September, 1997, by and between L&W ASSOCIATES, a Pennsylvania
General Partnership ("Seller") and PENN SQUARE PROPERTIES, INC., a Pennsylvania
Corporation, or its assignee or nominee ("Buyer").
W I T N E S S E T H:
Seller and Buyer have entered into an Agreement of Sale and Purchase
dated August 19, 1997 with respect to certain property situate in the Township
of East Goshen, Chester County, Pennsylvania (the "Agreement of Sale").
Terms which have a defined meaning in the Agreement of Sale shall
have the same meaning when used in this Agreement.
Seller and Buyer desire to enter into this Agreement to amend
certain provisions in the Agreement of Sale.
NOW, THEREFORE, Seller and Buyer, each intending legally to be bound
hereby agree as follows:
1. Section 4 of the Agreement of Sale is revised by changing the Closing Date
from "October 31, 1997" to "November 14, 1997."
2. Section 14(c) of the Agreement of Sale is amended to provide that the
Inspection Period shall terminate on October 17, 1997.
3. Except as modified by the terms and provisions of this First Amendment, the
Agreement of Sale shall remain in full force and effect in accordance with its
terms and provisions.
<PAGE>
IN WITNESS WHEREOF, Seller and Buyer have executed this First
Amendment as of the day and year first above written.
SELLER:
L&W ASSOCIATES
By: Hough/Loew Associates, Inc. -
General Partner
By: /s/ Jack R. Loew
September 30, 1997
Jack R. Loew, President
BUYER:
PENN SQUARE PROPERTIES, INC.
By: /s/ Jeffrey E. Kelter
September 30, 1997
President
2
<PAGE>
Exhibit 10(ae) Amend 2
SECOND AMENDMENT TO AGREEMENT OF SALE AND PURCHASE
THIS SECOND AMENDMENT TO AGREEMENT OF SALE AND PURCHASE is made as
of the 15th day of October, 1997, by and between L&W ASSOCIATES, a Pennsylvania
General Partnership ("Seller") and PENN SQUARE PROPERTIES, INC., a Pennsylvania
Corporation, or its assignee or nominee ("Buyer").
W I T N E S S E T H:
Seller and Buyer have entered into an Agreement of Sale and Purchase
dated August 19, 1997, as amended, with respect to certain property situate in
the Township of East Goshen, Chester County, Pennsylvania (the "Agreement of
Sale").
Terms which have a defined meaning in the Agreement of Sale shall
have the same meaning when used in this Agreement.
Seller and Buyer desire to enter into this Agreement to amend
certain provisions in the Agreement of Sale.
NOW, THEREFORE, Seller and Buyer, each intending legally to be bound
hereby agree as follows:
1. Section 14(c) of the Agreement of Sale is amended to provide that the
Inspection Period shall terminate on October 24, 1997.
2. Except as modified by the terms and provisions of this Second Amendment, the
Agreement of Sale shall remain in full force and effect in accordance with its
terms and provisions.
IN WITNESS WHEREOF, Seller and Buyer have executed this Second
Amendment as of the day and year first above written.
SELLER:
L&W ASSOCIATES
By: Hough/Loew Associates, Inc. -
General Partner
By: /s/ Jack R. Loew
October 15, 1997
Jack R. Loew, President
BUYER:
PENN SQUARE PROPERTIES, INC.
By: /s/ Jeffrey E. Kelter
October 15, 1997
President
<PAGE>
Exhibit 10(ae) Amend 3
THIRD AMENDMENT TO AGREEMENT OF SALE AND PURCHASE
THIS THIRD AMENDMENT TO AGREEMENT OF SALE AND PURCHASE is made as of
the __ day of October, 1997, by and between L&W ASSOCIATES, a Pennsylvania
General Partnership ("Seller") and PENN SQUARE PROPERTIES, INC., a Pennsylvania
Corporation, or its assignee or nominee ("Buyer").
W I T N E S S E T H:
Seller and Buyer have entered into an Agreement of Sale and Purchase
dated August 19, 1997 with respect to certain properties situate in the Township
of East Goshen, Chester County, Pennsylvania (the "Agreement of Sale").
Terms which have a defined meaning in the Agreement of Sale shall
have the same meaning when used in this Agreement.
Seller and Buyer desire to enter into this Agreement to amend
certain provisions in the Agreement of Sale.
NOW, THEREFORE, Seller and Buyer, each intending legally to be bound
hereby agree as follows:
1. Section 4 of the Agreement of Sale is revised by changing the Closing Date
from "November 14, 1997" to "November 21, 1997."
2. Section 14(c) of the Agreement of Sale is amended to provide that the
Inspection Period shall terminate on October 29, 1997.
3. Paragraph 14(a) of the Agreement of Sale is amended to add, as an additional
condition to the obligations of Buyer, the delivery to Buyer of an Option
Agreement granting to Buyer the option to purchase the lot or piece of ground
situate in East Goshen Township, Chester County, Pennsylvania described
according to the Subdivision Plan of Goshen Corporate Park/West made by Edward
B. Walsh & Associates, Inc. dated 11/27/89 and last revised 3/15/90, being
Parcel 3 as shown on said Plan, and containing 8.9545 acres, more or less, and
being part of Parcel No. 53-3-1. The Option Agreement shall be in a form
reasonably acceptable to Buyer. Buyer agrees that the form of Option Agreement
heretofore submitted by Buyer to Seller is acceptable to Buyer. If Buyer does
not complete Closing under the Agreement of Sale by reason of a failure of the
condition stated in this Paragraph 3, then Buyer shall also terminate the "Other
Agreement" between Buyer and Hough/Loew Associates, Inc.
1
<PAGE>
4. Except as modified by the terms and provisions of this Third Amendment, the
Agreement of Sale shall remain in full force and effect in accordance with its
terms and provisions.
IN WITNESS WHEREOF, Seller and Buyer have executed this Third
Amendment as of the day and year first above written.
SELLER:
L&W ASSOCIATES
By: Hough/Loew Associates, Inc. -
General Partner
By: /s/ Jack R. Loew
Jack R. Loew, President
BUYER:
PENN SQUARE PROPERTIES, INC.
By: /s/ Jeffrey E. Kelter
President
2
<PAGE>
Exhibit 10(ae) Amend. 4
FOURTH AMENDMENT TO AGREEMENT OF SALE AND PURCHASE
THIS FOURTH AMENDMENT TO AGREEMENT OF SALE AND PURCHASE is made as
of the 21st day of November, 1997, by and between L&W ASSOCIATES, a Pennsylvania
General Partnership ("Seller") and MCBRIDE PROPERTIES, a New Jersey General
Partnership, or its assignee or nominee ("Buyer").
W I T N E S S E T H:
Seller and Penn Square Properties, Inc. have entered into an
Agreement of Sale and Purchase dated August 19, 1997 with respect to certain
properties situate in the Township of East Goshen, Chester County,
Pennsylvania (the "Agreement of Sale"). The rights of Penn Square
Properties, Inc. under the Agreement of Sale have been assigned to Buyer.
Terms which have a defined meaning in the Agreement of Sale shall
have the same meaning when used in this Agreement.
Seller and Buyer desire to enter into this Agreement to amend
certain provisions in the Agreement of Sale.
NOW, THEREFORE, Seller and Buyer, each intending legally to be bound
hereby agree as follows:
1. Section 4 of the Agreement of Sale is revised by changing the Closing Date to
"December 15, 1997."
2. Paragraph 3 of the Third Amendment to the Agreement of Sale is hereby deleted
therefrom and the following is added to the Agreement of Sale as Section 24:
"24. Yves Rocher Expansion.
(a) If pursuant to Paragraph 36 of the Tenant
Lease, the Landlord under the Tenant Lease becomes
obligated to construct a building on the Adjacent Land
(as defined in the Tenant Lease) and to lease the
building to the Tenant, Seller shall cause good and
marketable fee simple tile to the
<PAGE>
Adjacent Land to be conveyed to Buyer upon the following
terms:
(i) Title to the Adjacent Land shall be
free and clear of all liens and encumbrances, except for
the Permitted Encumbrances.
(ii) Buyer and Seller shall each pay
one-half of all realty transfer taxes on the conveyance
of the Adjacent Land.
(iii) The purchase price to be paid by
Buyer for the Adjacent Land shall be the product of
$133,000 times the number of acres in the Adjacent Land.
(iv) Real estate taxes and water and sewer
charges shall be apportioned between the Seller and
Buyer at the
Closing.
(v) The Closing shall be held on such
date as shall be designated by at least ten (10) days
prior written notice from Buyer to Seller and shall be
held at the office of Wolf, Block, Schorr and
Solis-Cohen, 9th Floor Packard Building, 111 S. 15th
Street, Philadelphia, PA 19102.
(vi) Vacant possession of the Adjacent
Land shall be delivered to Buyer at Closing.
<PAGE>
(b) Seller shall indemnify, defend and save and
hold harmless Buyer of and from any and all loss, cost,
expense or liability incurred by Buyer which results
from a default by Seller of its obligations under this
Paragraph 24.
(c) The obligations of Seller pursuant to this
Paragraph 24 shall survive
Closing.
3. Buyer acknowledges that: the exceptions on Schedule B-Section II of the Title
Commitments which are not Monetary Liens are Permitted Encumbrances; Buyer has
no actual knowledge that the conditions set forth in subparagraphs 14(a)(i) and
(ii) of the Agreement of Sale are not satisfied as of the date of this Fourth
Amendment; and Buyer has received the executed Tenant Estoppel Certificates and
they are satisfactory to Buyer.
4. Except as modified by the terms and provisions of this Fourth Amendment, the
Agreement of Sale shall remain in full force and effect in accordance with its
terms and provisions.
IN WITNESS WHEREOF, Seller and Buyer have executed this Fourth
Amendment as of the day and year first above written.
SELLER:
L&W ASSOCIATES
By: Hough/Loew Associates, Inc. - General
Partner
By: /s/ Jack R. Loew
Jack R. Loew, President
BUYER:
MCBRIDE PROPERTIES
By: J. Pool Associates, L.P., a New Jersey
Limited Liability Partnership, Managing
General Partner
3
<PAGE>
By: Urban Holdings, LLC, a New Jersey
Limited Liability Company, its
General Partner
By: /s/ David F. McBride
David F. McBride,
Member/Co-Manager
The undersigned, Jack R. Loew, executes this Fourth Amendment for
the purpose of setting forth his agreement to guarantee and be surety for the
performance of the obligations of Seller pursuant to the provisions of Section
24 of the Agreement of Sale (as set forth in Paragraph 2 above of this Fourth
Amendment); and at Closing, Jack R. Loew shall execute a separate Guaranty and
Surety Agreement to set forth the provisions of this paragraph. The obligations
of Jack R. Loew pursuant to this paragraph shall survive Closing.
/s/ Jack R. Loew
Jack R. Loew
4
<PAGE>
EX-10.(af)
Hendricks & Partners
- ---------------------------------------------------
The printed portions of this form
have been approved
by the Colorado Real Estate Commission. (CBS2-7-96)
- ---------------------------------------------------
THIS FORM HAS IMPORTANT LEGAL CONSEQUENCES AND THE PARTIES SHOULD CONSULT LEGAL
AND TAX OR OTHER COUNSEL BEFORE SIGNING.
COMMERCIAL
CONTRACT TO BUY AND SELL REAL ESTATE
November 20, 1997
1. PARTIES AND PROPERTY.
Skyline Rentals, Ltd., A Colorado limited partnership
buyer(s) [Buyer], agrees to buy, and the undersigned seller(s) [Seller] agrees
to sell, on the terms and conditions set forth in this contract, the following
described real estate in the County of Jefferson, Colorado to wit:
Americana Lakewood I Legal Description:
Lots 1 and 2, and Tracts, B, E, F, G and H, Americana-Lakewood, excepting
therefrom, that portion of Lot 1 and Tract B as conveyed to the City of Lakewood
in County of Jefferson, State of Colorado.
known as No.: 12598 W. Dakota Avenue, Lakewood, CO
together with all interest of Seller in vacated streets and alleys adjacent
thereto, all easements and other appurtenances thereto, all improvements thereon
and all attached fixtures thereon, except as herein excluded (collectively, the
Property).
2. INCLUSIONS/EXCLUSIONS. The purchase price includes the following items (a)
if attached to the Property on the date of this contract: lighting,
heating, plumbing, ventilating, and air conditioning fixtures, TV
antennas, water softeners, smoke/fire/burglar alarms, security devices,
inside telephone wiring and connecting blocks/jacks, plants, mirrors,
floor coverings, intercom systems, built-in kitchen appliances, sprinkler
systems and controls; (b) if on the Property whether attached or not on
the date of this contract: storm windows, storm doors, window and porch
shades, awnings, blinds, screens, curtain rods, drapery rods, all keys and
(c) All personal property owned by the Seller presently located on the
Property used in the operation or maintenance of the Property in its "as
is" condition.
The above described included items (Inclusions) are to be conveyed to Buyer by
Seller by bill of sale at the closing, free and clear of all taxes, liens and
encumbrances, except as provided in Section 12. The following attached fixtures
are excluded from this sale:
none.
3. PURCHASE PRICE AND TERMS. The purchase price shall be $15,066,000, payable
in U.S. dollars by Buyer as follows: (Complete the applicable terms
below.)
(a) Earnest Money
$62,000 in the form of a check, as earnest money deposit and part payment of the
purchase price, payable to and held by North American Title Company , in its
trust account on behalf of both Seller and Buyer. Broker is authorized to
deliver the earnest money deposit to the closing agent, if any, at or before
closing. Said earnest money check shall be deposited pursuant to Section 21 (o).
The balance of $15,004,000 (purchase price less earnest money) shall be paid as
follows:
(b) Cash at Closing
$3,004,000, plus closing costs, to be paid by Buyer at closing in funds which
comply with all applicable Colorado laws, which include cash, electronic
transfer funds, certified check, savings and loan teller's check, and cashier's
check (Good Funds). Subject to the provisions of Section 4, if the existing loan
balance at the time of closing shall be different from the loan balance in
Section 3, the adjustment shall be made in Good Funds at closing or paid as
follows:
to Buyer.
(c) New Loan
$12,000,000 by Buyer obtaining a new loan. This loan will be secured by a 1st
deed of trust on Americana Lakewood I only.
The loan shall be amortized over a period of 20 years at approximately
$98,884.32 per month including principal and interest not to exceed 7.8% per
annum, plus, if required by Buyer's lender, a monthly deposit of 1/12 of the
estimated annual real estate taxes, property insurance premium, and mortgage
insurance premium. If the loan is an adjustable interest rate or graduated
payment loan, the monthly payments and interest rate initially shall not exceed
the figures set forth above.
Loan discount points, if any, shall be paid to lender at closing and shall not
exceed 1% of the total loan amount. Notwithstanding the loan's interest rate,
all loan discount points shall be paid by Buyer.
Buyer shall timely pay a loan origination fee not to exceed 1.0% of the loan
amount and Buyer's loan costs.
(d) Assumption
$5,945,000 by Buyer's assuming and agreeing to pay an existing HUD loan in this
approximate amount, presently payable at $44,328 per month principal, interest
presently at 8.625%% per annum, and including an additional escrow for the
following as indicated:
|X| real estate taxes, |X| property insurance premium, |X| mortgage insurance
premium, and N/A. Buyer agrees to pay a loan transfer fee not to exceed 1% of
loan balance. At the time of assumption, the new interest rate shall not exceed
8.625% per annum and the new monthly payment shall not exceed $44,328 principal
and interest, plus the additional escrow, as identified herein if any.
Seller |X| shall be released from liability on said loan. If applicable,
compliance with the requirements for release from liability shall be evidenced
by delivery at closing of an appropriate letter from lender. Cost payable for
release of liability shall be paid by Seller in an amount not to exceed $5,000.
No. CBS2-7-96 Page 1 of 6
Initials:_____________
<PAGE>
4. FINANCING CONDITIONS AND OBLIGATIONS.
(a) Loan Application(s). If Buyer is to pay all or part of the purchase
price as set forth in Section 3 by obtaining a new loan or if an existing
loan is not to be released at closing. Buyer, if required by such lender,
shall make written application within 14 calendar days from acceptance of
this contract. Buyer shall cooperate with Seller and lender to obtain loan
approval, diligently and timely pursue same in good faith, execute all
documents and furnish all information and documents required by the
lender, and, subject to Section 3, timely pay the costs of obtaining such
loan or lender consent.
(b) Loan Approval. If Buyer is to pay all or part of the purchase price by
obtaining a new loan as specified in Section 3, this contract is
conditional upon lender's approval of the new loan on or before December
24, 1997. If not so approved by said date, this contract shall terminate.
If approved by such date, Buyer shall have no financing contingency with
respect to the acquisition of a new loan under this contract.
(c) Existing HUD Loan Review. If an existing loan is not to be released at
closing, Seller shall provide copies of the loan documents (including
note, deed of trust, modifications) to Buyer within five (5) calendar days
from acceptance of this contract. This contract is conditional upon
Buyer's review and approval of the provisions of such loan documents.
Buyer consents to the provisions of such loan documents if no written
objection is received by Seller from Buyer within ten (10) calendar days
from Buyer's receipt of such documents. If the lender's approval of a
transfer of the Property is required, this contract is conditional upon
Buyer's obtaining such approval without change in the terms of such loan,
except as set forth in Section 3. If lender's approval is not obtained on
or before December 24, 1997, this contract shall terminate, provided that
if Buyer has diligently and timely pursued such approval but has not
obtained approval of the lender as of December 24, 1997, and all other
contingencies have been either satisfied or waived by Buyer, then Buyer
may continue to timely and diligently pursue lender's approval through the
date of closing rather than terminate this contract, it being understood
that the Buyer must acknowledge satisfaction of all other contingencies
under this contract by December 24, 1997. The closing date stated in
paragraph 11 of this contract may be delayed for only the HUD contingency
stated in this paragraph 4(c), but in no event shall closing be extended
beyond January 26, 1998, even if the HUD loan contingency is not
satisfied, it being understood that the closing shall occur no later than
January 26, 1998 or this contract shall terminate. If Seller is to be
released from liability under such existing loan and Buyer does not obtain
such compliance as set forth in Section 3, this contract may be terminated
at Seller's option.
(d) Assumption Balance. If Buyer is to pay all or part of the purchase
price by assuming an existing loan and if the actual principal balance of
the existing loan at the date of closing is less than the amount
identified upon Buyer's review under Section 4(c) and the amount of cash
required from Buyer at closing is increased by more than $25,000, then
Buyer may terminate this contract effective upon receipt by Seller of
Buyer's written notice of termination.
6. COST OF APPRAISAL. Cost of any appraisal to be obtained after the date of
this contract shall be timely paid by Buyer.
7. NOT ASSIGNABLE. This contract shall not be assignable by Buyer without
Seller's prior written consent., except as provided in Section 21 (n).
Except as so restricted, this contract shall inure to the benefit of and
be binding upon the heirs, personal representatives, successors and
assigns of the parties.
8. EVIDENCE OF TITLE. Seller shall furnish to Buyer, at Seller's expense,
either a current commitment for owner's title insurance policy in an
amount equal to the purchase price on or before 10 CDMEC (Title Deadline).
Buyer requires of Seller that copies of instruments listed in the schedule
of exceptions (Exceptions) in the title insurance commitment also be
furnished to Buyer at Seller's expense. This requirement shall pertain
only to instruments shown of record in the office of the clerk and
recorder of the designated county or counties. The title insurance
commitment, together with any copies or abstracts of instruments furnished
pursuant to this Section 8, constitute the title documents (Title
Documents). Seller will pay the premium at closing and have the title
insurance policy delivered to Buyer as soon as practicable after closing.
Said commitment shall provide for owner's extended coverage. Buyer shall
pay the cost of any endorsements requested by Buyer.
9. TITLE.
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(a) Title Review. Buyer shall have the right to inspect the Title
Documents. Written notice by Buyer of unmerchantability of title or of any
other unsatisfactory title condition shown by the Title Documents or
abstract shall be signed by or on behalf of Buyer and given to Seller on
or before 15 calendar days after Title Deadline, or within five (5)
calendar days after receipt by Buyer of any Title Document(s) or
endorsement(s) adding new Exception(s) to the title commitment, together
with a copy of the Title Document adding new Exception(s) to title. If
Seller does not receive Buyer's notice by the date(s) specified above,
Buyer accepts the condition of title as disclosed by the Title Documents
as satisfactory.
(b) Matters Not Shown by the Public Records. Pursuant to Section 21 (f),
on or before the Title Deadline set forth in Section 8, Seller shall make
available to Buyer true copies of all lease(s) and survey(s) in Seller's
possession pertaining to the Property all easements, liens or other title
matters not shown by the public records of which Seller has actual
knowledge. Buyer shall have the right to inspect the Property to determine
if any third party(s) has any right in the Property not shown by the
public records (such as an unrecorded easement, unrecorded lease, or
boundary line discrepancy). Written notice of any unsatisfactory
condition(s) disclosed by Seller or revealed by such inspection shall be
signed by or on behalf of Buyer and given to Seller on or before 15
calendar days after the Title Deadline. If Seller does not receive Buyer's
notice by said date, Buyer accepts title subject to such rights, if any,
of third parties of which Buyer has actual knowledge.
(c) Special Taxing Districts. SPECIAL TAXING DISTRICTS MAY BE SUBJECT TO
GENERAL OBLIGATION INDEBTEDNESS THAT IS PAID BY REVENUES PRODUCED FROM
ANNUAL TAX LEVIES ON THE TAXABLE PROPERTY WITHIN SUCH DISTRICTS. PROPERTY
OWNERS IN SUCH DISTRICTS MAY BE PLACED AT RISK FOR INCREASED MILL LEVIES
AND EXCESSIVE TAX BURDENS TO SUPPORT THE SERVICING OF SUCH DEBT WHERE
CIRCUMSTANCES ARISE RESULTING IN THE INABILITY OF SUCH A DISTRICT TO
DISCHARGE SUCH INDEBTEDNESS WITHOUT SUCH AN INCREASE IN MILL LEVIES. BUYER
SHOULD INVESTIGATE THE DEBT FINANCING REQUIREMENTS OF THE AUTHORIZED
GENERAL OBLIGATION INDEBTEDNESS OF SUCH DISTRICTS, EXISTING MILL LEVIES OF
SUCH DISTRICT SERVICING SUCH INDEBTEDNESS, AND THE POTENTIAL FOR AN
INCREASE IN SUCH MILL LEVIES.
In the event the Property is located within a special taxing
district and Buyer desires to terminate this contract as a result, if
written notice is given to Seller on or before the date set forth in
subsection 9(b), this contract shall then terminate. If Seller does not
receive Buyer's notice by the date specified above, Buyer accepts the
effect of the Property's inclusion in such special taxing district(s) and
waives the right to so terminate.
(d) Right to Cure. If Seller receives notice of unmerchantability of title
or any other unsatisfactory title condition(s) as provided in subsection
(a) or (b) above, Seller shall, subject to Section 21(w), use reasonable
effort to correct said unsatisfactory title condition(s) prior to the date
of closing. If Seller fails to correct said unsatisfactory title
condition(s) on or before the date of closing, this contract shall then
terminate, provided, however, Buyer may, by written notice received by
Seller, on or before closing, waive objection to said unsatisfactory title
condition(s). Such termination shall be Buyer's sole and exclusive remedy
under this Section (9d).
10. INSPECTION. Buyer or any designee, shall have the right to have
inspection(s) of the physical condition of the Property and Inclusions, at
Buyer's expense. If written notice of any unsatisfactory condition, in
Buyer's discretion, signed by or on behalf of Buyer, is not received by
Seller 25 CDMEC (Objection Deadline), the physical condition of the
Property and Inclusions shall be deemed to be satisfactory to Buyer. If
such notice is received by Seller as set forth above, and if Buyer and
Seller have not agreed, in writing, to a settlement thereof 30 CDMEC
(Resolution Deadline), this contract shall terminate three (3) calendar
days following the Resolution Deadline; unless, within the three (3)
calendar days, Seller receives written notice from Buyer waiving objection
to any unsatisfactory condition. Buyer is responsible for and shall pay
for any damage which occurs to the Property and Inclusions as a result of
such inspection.
11. DATE OF CLOSING. The date of closing shall be as of January 9, 1998. The
hour and place of closing shall be designated by mutual agreement.
12. TRANSFER OF TITLE. Subject to tender or payment at closing as required
herein and compliance by Buyer with the other terms and provisions hereof,
Seller shall execute and deliver a good and sufficient special warranty
deed to Buyer, on closing, conveying the Property free and clear of all
taxes except the general taxes for the year of closing, and except those
matters excepted by Buyer pursuant to Section 9 above and the loan to be
assumed by Buyer pursuant to Section 3(d).
Title shall be conveyed free and clear of all liens except (i)
distribution utility easements (including cable TV), (ii) those matters
reflected by the Title Documents accepted by Buyer in accordance with
subsection 9(a), (iii) those rights, if any, of third parties in the
Property not shown by the public records in accordance with subsection
9(b), (iv) inclusion of the Property within any special taxing district,
and (v) subject to building and zoning regulations.
13. PAYMENTS OF ENCUMBRANCES. Any encumbrance required to be paid shall be
paid at or before closing from the proceeds of this transaction or from
any other source.
14. CLOSING COSTS, DOCUMENTS AND SERVICES. Buyer and Seller shall pay, in Good
Funds, their respective closing costs and all other items required to be
paid at closing, except as otherwise provided herein. Buyer and Seller
shall sign and complete all customary or required documents at or before
closing. Fees for real estate closing services shall not exceed $500.00
and shall be paid at closing by Buyer and Seller equally. The local
transfer tax of 0% of the purchase price shall be paid at closing by N/A.
Any sales and use tax that may accrue because of this transaction shall be
paid when due by Buyer.
15. PRORATIONS. General taxes for the year of closing, based on the taxes for
the calendar year immediately preceding closing, water and sewer charges,
owner's association dues, and interest on continuing loan(s), if any, and
other similar items shall be prorated to date of closing as a final
settlement.
(a) Costs and expenses of operation prior to closing shall be paid by
Seller and those after closing by the Buyer. Any bills, invoices or
statements received by Buyer following the closing for items payable by
Seller shall be forwarded to Seller by the 10th day of the month following
receipt by Buyer. If bills cover a period both before and after closing,
Buyer shall pay the same and invoice Seller for Seller's share.
(b) Rents collected by Seller for the month of closing shall be prorated
at closing. Uncollected rents and other sums payable under the Leases
which have accrued prior to the Closing Date ("Delinquent Rents") shall
not be prorated at the Closing. If, after the Closing Date, Buyer receives
any rents from the tenant under any Lease at a time when there are
uncollected Delinquent Rents owing pursuant to such Lease, then such
collections (net of the reasonable costs of collection and inclusive of
reasonable attorney's fees) shall first be applied to rents and other sums
payable pursuant to the Lease for the month, prior to when Closing occurs,
next for rents and other sums due for the month of closing, and then to
months after the month of Closing. Buyer shall remit to Seller any amounts
owed for Delinquent Rents on or before the 10th day of the month following
the month of collection, and Buyer shall promptly remit the balance, if
any, to Seller to the extent any Delinquent Rent remains unpaid to Seller
with respect to such Lease.
16. POSSESSION. Possession of the Property shall be delivered to Buyer as
follows: Date of closing
No. CBS2-7-96 Page 3 of 6
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subject to the following lease(s) or tenancy(s): Those in effect at time
of closing.
If Seller, after closing, fails to deliver possession on the date herein
specified, Seller shall be subject to eviction and shall be additionally
liable to Buyer for payment of $5000.00 per day from the date of agreed
possession until possession is delivered.
17. CONDITION OF AND DAMAGE TO PROPERTY. Except as otherwise provided in this
contract, the Property and Inclusions shall be delivered in the condition
existing as of the date of this contract, ordinary wear and tear excepted.
In the event the Property shall be damaged by fire or other casualty prior
to time of closing, in an amount of not more than ten percent of the total
purchase price, Seller shall be obligated to repair the same before the
date of closing, and the closing may be extended so that Seller can
complete such repairs. In the event such damage is not repaired within
said time or if the damages exceed such sum, this contract may be
terminated at the option of Buyer. Should Buyer elect to carry out this
contract despite such damage, Buyer shall be entitled to credit for all
the insurance proceeds resulting from such damage to the Property and
Inclusions, not exceeding, however, the total purchase price. Should any
Inclusion(s) or service(s) fail or be damaged between the date of this
contract and the date of closing or the date of possession, whichever
shall be earlier, then Seller may (i) shall be liable for the repair or
replacement of such Inclusion(s) or service(s) with a unit of similar
size, age and quality, (ii) give to Buyer at closing or an equivalent
credit, less any insurance proceeds received by Buyer covering such repair
or replacement., or (iii) provide written notice to Buyer that Buyer may,
within 5 days after such notice, terminate this contract or accept the
Inclusions, "As-Is" with no change in the purchase price.
18. TIME OF ESSENCE/REMEDIES. Time is of the essence hereof. If any note or
check received as earnest money hereunder or any other payment due
hereunder is not paid, honored or tendered when due, or if any other
obligation hereunder is not performed or waived as herein provided, there
shall be the following remedies:
(a) IF BUYER IS IN DEFAULT: (Check one box only.)
|X| (2) Liquidated Damages. All payments and things of value
received hereunder shall be forfeited by Buyer and retained on
behalf of Seller and both parties shall thereafter be released
from all obligations hereunder. It is agreed that such
payments and things of value are LIQUIDATED DAMAGES and
(except as provided in subsection (c)) are SELLER'S SOLE AND
ONLY REMEDY for Buyer's failure to perform the obligations of
this contract. Seller expressly waives the remedies of
specific performance and additional damages.
(b) IF SELLER IS IN DEFAULT: As Buyer's sole and exclusive remedies for
Seller's defaults, Buyer may either (i) elect to treat this contract as
canceled, in which case all payments and things of value received
hereunder shall be returned and Buyer may sue for its actual (but not
consequential, indirect or punitive) damages as a result of Seller's
breach in an amount not to exceed $100,000, or (ii) may elect to treat
this contract as being in full force and effect and Buyer shall have the
right to specific performance, but not damages.
(c) COSTS AND EXPENSES. Anything to the contrary herein notwithstanding,
in the event of any arbitration or litigation arising out of this
contract, the arbitrator or court shall award to the prevailing party all
reasonable costs and expenses, including attorney fees.
19. EARNEST MONEY DISPUTE. Notwithstanding any termination of this contract,
Buyer and Seller agree that, in the event of any controversy regarding the
earnest money and things of value held by broker or closing agent, unless
mutual written instructions are received by the holder of the earnest
money and things of value, broker or closing agent shall not be required
to take any action but may await any proceeding, or at broker's or closing
agent's option and sole discretion, may interplead all parties and deposit
any moneys or things of value into a court of competent jurisdiction and
shall recover court costs and reasonable attorneys fees.
21. ADDITIONAL PROVISIONS: (The language of these additional provisions has
not been approved by the Colorado Real Estate Commission.)
(a) See attached addendum for Additional Provisions.
22. RECOMMENDATION OF LEGAL COUNSEL. By signing this document, Buyer and
Seller acknowledge that the Selling Company or the Listing Company has
advised that this document has important legal consequences and has
recommended the examination of title and consultation with legal and tax
or other counsel before signing this contract.
23. TERMINATION. In the event this contract is terminated, all payments and
things of value received hereunder shall be returned and the parties shall
be relieved of all obligations hereunder, subject to Section 19.
24. SELLING COMPANY BROKER RELATIONSHIP. The selling broker, Hendricks &
Partners LLC and its salespersons have been engaged as a Transaction
Broker. Selling Company has previously disclosed in writing to the Buyer
that different relationships are available which include buyer agency,
seller agency, subagency, or transaction-broker.
27. MODIFICATION OF THIS CONTRACT. No subsequent modification or any of the
terms of this contract shall be valid, binding upon the parties, or
enforceable unless made in writing and signed by the parties.
No. CBS2-7-96 Page 4 of 6
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and when each party has executed a copy thereof, such copies taken
together shall be deemed to be a full and complete contract between the
parties.
Skyline Rentals Ltd., a Colorado limited partnership
By: Skyline Realty Inc., a Colorado Corporation, General Partner
Buyer: /s/ James A. Billings Date: _______________________________
James A. Billings, President Date of Buyer's Signature
Buyer's Address: 143 Union Boulevard, Suite 550
Lakewood, CO 80228
Buyer's Telephone: 986-1500
AMERICANA LAKEWOOD I
Virginia Street Associates Limited Partnership
By: American Real Estate Investment L.P., a Delaware limited partnership
By: American Real Estate Investment Corporation, a Maryland Corporation,
General Partner
Seller: By: /s/ Evan Zucker Address: 1670 Broadway, #3350
---------------- Denver, CO 80202
Telephone: (303) 869-4700
Date: December 31, 1997
================================================================================
The undersigned Broker(s) acknowledges receipt of the earnest money deposit
specified in section 3. and Selling Company confirms its Broker Relationship as
set forth in Section 24.
Selling Company:
HENDRICKS & PARTNERS, L.L.C.
Address: 1050 Seventeenth Street, Suite 1930
Denver, CO 80265
Telephone: 303-607-9001
Fax: 303-607-9024
By: --------------------------------- Date: ____________________________
Charles B. Sweeney
Listing Company:
HENDRICKS & PARTNERS, L.L.C.
Address: 1050 Seventeenth Street, Suite 1930
Denver, CO 80265
Telephone: 303-607-9001
Fax: 303-607-9024
By: --------------------------------- Date: ____________________________
Charles B. Sweeney
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Note: Closing Instructions should be signed at the time this contract is signed.
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Exhibit 10(af) Addendum
ADDENDUM
To that certain Commercial Contract to Buy and Sell Real Estate dated November
12, 1997 by and between Skyline Rentals Ltd., a Colorado limited partnership as
Buyer, and For Americana Lakewood I, Virginia Street Associates Limited
Partnership and For Americana Lakewood II, Americana Development Associates,
L.P. as Seller, concerning certain real property located at 12598 W. Dakota
Avenue, Lakewood, CO. If any provision in the printed form of said contract is
inconsistent with any provision contained herein, then and in that event this
Addendum shall control.
21. ADDITIONAL PROVISIONS
(a) Inspection.
(i) Section 10 shall be amended by the addition of the following language: The
term "inspection" shall include but not be limited to an inspection of the
roof, walls, structural integrity of the Property, an inspection of the
Inclusions, and a determination of the existence or nonexistence of
asbestos and urea formaldehyde insulation, lead-based paint, PCB
transformers, radon gas, hazardous or toxic substances, and/or under
ground storage tanks in or on the Property; provided that Buyer will not
disturb, penetrate or alter the physical condition, structure, roof or
Property or Inclusions, without Seller's prior written consent (which may
be given or withheld in Seller's sole discretion). The Buyer shall not
permit any mechanic's or materialmen's liens to be filed against the
Property and hereby indemnifies and holds the Seller harmless from and
against any liability, damage, injury, expense or cost which may be
incurred by the Seller in connection with Buyer's entry upon or inspection
of the Premises, including, but not limited to, any mechanic's or
materialmen's liens which may be filed against the Property as a result of
the provisions of this contract. This indemnity shall specifically include
attorneys' fees and any costs incurred by the Seller to enforce this
indemnity.
(ii) Buyer's inspection shall be at its sole cost and expenses and shall be
made only during regular business hours, after reasonable notice to Seller
and without disturbing Seller's use of the Property or the tenants located
there in. The indemnity set forth in this Section is in addition to, and
not limited by, Seller's remedies set forth in Section 18, and shall
survive the termination of this contract.
(iii) Seller and Buyer shall cooperate during the inspection so as to minimize
disruption of Seller's operation and management of the Property and
tenants' occupancy of individual apartments. Buyer shall provide Seller
with 96 hours notice of desired time of inspection so Seller can provide
48 hours advance notice as required by existing leases. Seller's
representatives shall accompany Buyer's representatives during inspection
of apartments.
(b) Hazardous material/ADA Disclosure. Buyer acknowledges that various
materials, substances, or wastes utilized in the construction of any
improvements situated on the Property may contain materials that may have been
or may be in the future determined to be toxic, hazardous, pollutants or
undesirable, including, but not limited to, asbestos, radon and lead
(collectively, "Hazardous Materials"), and may need to be specifically treated
or removed. In addition, the land ("Land") upon which the Property is situated,
may have been contaminated by Hazardous Materials or subjected to underground or
above-ground storage tanks or may have been contaminated by other sources. Buyer
further acknowledges that the Property may be subject to the Americans With
Disabilities Act ("ADA"), a federal law, which requires, among other matters,
that tenants and/or owners of "public accommodations" remove barriers in order
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This Addendum has not been approved by the Colorado Real Estate Commission. It
was prepared by legal counsel for use by Hendricks & Partners L.L.C.
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to make the Property accessible to disabled persons and provide auxiliary aids
and services for hearing, vision or speech impaired persons.
Buyer acknowledges that Hendricks & Partners L.L.C. and its employees and agents
do not possess the expertise and are not qualified to determine whether or not
the Property is affected by Hazardous Materials and that Hendricks & Partners
L.L.C. recommends that all future owners and tenants with respect to the
Property and the Land seek the advice of knowledgeable legal counsel, architects
and other consultants in connection with determining the existence or
nonexistence of Hazardous Materials and complying with the requirements of the
ADA. Buyer acknowledges that Hendricks & Partners L.L.C. has not made an
investigation or determination with respect to the matters set forth above and
Buyer agrees to hold Hendricks & Partners L.L.C. harmless from and against any
liability, damage, expense or cost which may be incurred by the parties in
connection with the matters set forth herein.
INTENTIONALLY OMITTED
(d) CONVEYANCE "AS IS" AND WITHOUT WARRANTIES. BUYER UNDERSTANDS AND AGREES THAT
IT IS PURCHASING THE PROPERTY, THE INCLUSIONS AND ANY OTHER PERSONAL PROPERTY TO
BE TRANSFERRED TO BUYER IN AN "AS-IS" CONDITION AND THAT SELLER MAKES NO
WARRANTIES, REPRESENTATIONS, OR GUARANTIES, EITHER EXPRESS OR IMPLIED, OF ANY
KIND, NATURE, OR TYPE WHATSOEVER. BUYER HAS NOT RELIED (AND WILL NOT RELY) ON
ANY VERBAL OR WRITTEN STATEMENT, PROMISE, WARRANTY, OR REPRESENTATION OF SELLER
OR ANYONE ACTING FOR OR ON BEHALF OF SELLER NOR ON ANY PARTICULAR SKILL,
KNOWLEDGE, OR EXPERTISE OF SELLER OR ANYONE ACTING FOR OR BEHALF OF SELLER,
EXCEPT FOR ANY WRITTEN REPRESENTATION EXPRESSLY SET FORTH IN THIS CONTRACT.
BUYER WILL ACQUIRE THE PROPERTY, THE INCLUSIONS AND ANY OTHER PERSONAL PROPERTY
IN AN "AS-IS" AND "WITH ALL FAULTS" CONDITION AND STATE OF REPAIR, WAIVING ANY
CLAIM BASED ON APPARENT OR LATENT DEFECTS OR DEFICIENCIES, WHETHER NOW OR
HEREAFTER EXISTING. BUYER DOES HEREBY WAIVE, AND SELLER DOES HEREBY DISCLAIM,
ALL REPRESENTATIONS AND WARRANTIES, EXPRESS OR IMPLIED, OF ANY KIND, NATURE, OR
TYPE WHATSOEVER WITH RESPECT TO THE PROPERTY, THE INCLUSIONS OR ANY OTHER
PERSONAL PROPERTY INCLUDING, BY WAY OF DESCRIPTION BUT NOT LIMITATION, THOSE OF
CONDITION, MERCHANTABILITY, TENANTABILITY, HABITABILITY, SUITABILITY, FITNESS
FOR A PARTICULAR PURPOSE OR USE, OR THE PRESENCE OF HAZARDOUS MATERIALS AND
BUYER RELEASES SELLER FROM ANY CLAIM, CAUSE OF ACTION, OR OTHER ASSERTION OF
RIGHT WITH REGARD THERETO.
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This Addendum has not been approved by the Colorado Real Estate Commission. It
was prepared by legal counsel for use by Hendricks & Partners L.L.C.
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(e) Governmental Notices. Seller represents that as of this date no written
notices, have been received from the Department of Health and Hospitals or from
any local, country, state or federal governmental agency requiring corrective
measures to the Property, and that it has no actual knowledge of any such verbal
notices. If any such notices are received prior to closing, Seller agrees to
disclose the same, in writing, to Buyer and Hendricks & Partners L.L.C.
immediately upon receipt thereof. Upon the receipt of any notice, Seller shall
have the option, in Seller's sole discretion, and for a period of thirty (30)
calendar days in which to correct and cure the defect. The closing shall take
place five (5) calendar days after said 30-calendar-day period expires, unless
such date falls on a Saturday, Sunday or Federal or State holiday, in which
event the closing shall take place on the next business day following such
Saturday, Sunday or Federal or State holiday or on the date of closing as set
forth in the contract, whichever is later. However, in the event the defect is
not cured within said thirty (30) calendar-day period this contract shall
terminate at Buyer's option and Buyer's sole remedy. If Buyer is not satisfied
with Seller's cure of any defects and written notice thereof is received by
Hendricks & Partners L.L.C. within two (2) calendar days after said
30-calendar-day period expires, this contract shall terminate as Buyer's sole
remedy. If said written notice is not received by Hendricks & Partners L.L.C.
within the time period specified above, the provisions of this paragraph shall
be waived, Buyer will accept such defect As-Is, and this contract shall remain
in full force and effect.
(f) Contingency. The closing of this contract is contingent upon Buyer's
examination and approval of the following property documents in Seller's
possession which, to Seller's actual knowledge, Seller represents have been
prepared, kept or maintained by Seller in the ordinary regular course of
business.
(i) A current rent roll listing the name of the tenant, apartment number,
amount of rent, amount of security deposit, date to which the apartment
is leased and any inducements the tenant received for leasing the
apartment;
(ii) Copies of all leases or contracts between tenants and Seller;
(iii) Copies of material contracts affecting the Property including but not
limited to insurance policies and service contracts (trash removal,
etc.);
(iv) Statements of income and expenses prepared by AIMCO and/ or its
predecessor for the calendar year 1995 and 1996 and statements for 1997
year-to-date, which, to Seller's actual knowledge, are not materially
inaccurate.
(v) A written inventory of personal property owned by the Seller and copies
of accompanying warranties located on the Property and used in connection
with the Property;
(vi) Existing survey;
(vii) Plans and specifications, if available;
(viii) Copies of environmental or engineering studies, if any;
(x) Copies of existing loan documents.
(xi) Copies of inspections, reports, studies or other documents in Seller's
possession or control relating to Americans with Disabilities Act (ADA)
requirements,
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This Addendum has not been approved by the Colorado Real Estate Commission. It
was prepared by legal counsel for use by Hendricks & Partners L.L.C.
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Initials
<PAGE>
recommendations, compliance, non-compliance, notices, or other documents
relating to ADA.
Excluding leases, Seller shall provide Buyer with copies of the above documents
in Seller's possession within 3 CDMEC.
Seller shall make available to Buyer for Buyer's review and copying copies of
the foregoing documents, in Seller's possession, within three (3) CDMEC. If
Buyer is not satisfied with the results of said examination and written notice
thereof has not been received by Seller on or before twenty-two (22) CDMEC, this
contingency shall be waived and the contract shall remain in full force and
effect. If Buyer is dissatisfied with any matter, the provisions set forth in
Section 10 shall apply for resolution or termination.
(g) Survey On or before 25 days after CDMEC, Seller shall furnish to Buyer, at
Seller's expense, a current monumented or pinned Improvement Survey Plat
("Survey") prepared by a land surveyor licensed in the State of Colorado. The
Survey shall be certified to Seller, Buyer, and Hendricks & Partners, L.L.C. and
the title insurance company and performed on the Property and shall show thereon
the correct legal description; acreage and square footage; location of all
fences, hedges or walls on or within two (2) feet of all sides of all boundaries
of the Property; all boundary line dimensions; the dimension and location of all
improvements; any and all ditches, easements, rights-of-way, and adjacent
roadways, if any; and the location of all visible utilities on the Property and
all underground utilities for which there is visible surface evidence. The
Survey shall reflect all exceptions to title (where applicable) as reflected on
the title commitment and shall disclose that a physical inspection on the
Property revealed no improvements situated upon or adjacent to the Property are
the subject of any encroachments, and that no easements or rights-of-way have
been physically violated in any respect. In the event the items reflected in the
Survey are not in conformance with the provisions of this paragraph and written
notice of Buyer's objections is received by Hendricks & Partners, L.L.C. within
five (5) calendar days from the date of receipt of said Survey by Buyer, Seller
shall have a period of five (5) calendar days from the date of receipt of said
notice in which to cure any such defects pursuant to the provisions of Sections
9(d) and 21(w). In the event such defects are not cured within said five (5)
calendar-day period, this contract shall terminate at Buyer's option and sole
remedy. If said written notice of Buyer's objections to the Survey is not
received by Seller or if Buyer elects to waive the objections to the Survey, the
Survey shall be accepted and this contract shall remain in full force and
effect.
(h) Management and Maintenance. Seller agrees to manage and maintain the
improvements on the Property from and after the date of mutual execution of this
contract to the closing date in the ordinary course of its business, to commit
no waste or nuisance and not to knowingly violate any zoning ordinance or
building permit. Seller agrees that all insurance shall be kept in effect by the
Seller until the closing date. Subject to casualty, Seller further agrees to
maintain the Property in good repair and in the existing condition, ordinary
wear and tear excepted as of this date and not to remove any personal property
from the Property. Seller further agrees to assign to Buyer on the closing date
all existing (and assignable) contractors' or manufacturers' warranties on the
Property, if any.
(i) Tenant Notification/Security Deposits. All security and other deposits of or
by tenants in connection with leases or otherwise shall be transferred to Buyer.
On the date of closing, Seller shall notify the tenants who then occupy any
portion of the Property stating that Seller's interest in the Property will
terminate by virtue of the sale of the Property as of the date of closing and
that all security deposits made by each of the tenants will be transferred to
Buyer and giving the name and address of Buyer. At the time of closing, Seller
shall furnish evidence of said notices to be given, render a complete accounting
of all security deposits, and transfer all security deposits to Buyer. At the
closing, Buyer will assume all liability to tenants with respect to such
security deposits.
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(j) Leases Modification. Seller shall not amend, alter, modify, extend or cancel
any of the existing leases on the Property nor shall Seller enter into any new
leases affecting the Property, except in the ordinary course of business and
consistent with past practices, without the prior written consent of Buyer,
which consent shall not be unreasonably withheld or delayed.
(k) Notice Provision. Notices shall be given to:
Buyer:
Skyline Rentals, Ltd.
Attn.: James A. Billings
143 Union Boulevard, Suite 550
Lakewood, CO 80228
Telephone No. 303-986-1500
Facsimile No. 303-989-8073
With copy to:
Robert G. Pierce
Richard H. Pierce
Butler, Landrum and Pierce
Attorneys for Skyline Rentals, Ltd.
720 Kipling, Suite 201
Lakewood, CO 80215
Telephone No. 303-232-3888
Facsimile No. 303-232-3892
Seller:
Evan Zucker
Virginia Street Associates Limited Partnership
Americana Development Associates, L.P.
1670 Broadway, #3350
Denver, CO 80202
Telephone No. 303-869-4700
Facsimile No. 303-869-4602
With copy to:
Gary M. Reiff
410 17th St., 22nd Floor
Denver, CO 80202
Telephone No. 303-534-6335
Facsimile No. 303-623-1956
All notices, demands and requests required to be given by either party to the
other shall be in writing and shall either be hand delivered, transmitted by
facsimile, or sent by certified or registered mail, return receipt requested,
postage prepaid, addressed to the parties at the addresses set forth herein or
at such other addresses as the parties may designate in writing delivered
pursuant to this provision. Any notice when given as provided herein shall be
deemed to have been delivered when personally served or transmitted by facsimile
(with confirmation), or two (2) calendar days subsequent to the date that said
notice was deposited with the United States Postal Service.
(l) Calendar Days. In the event any date called for herein falls on a Saturday,
Sunday or Federal or State holiday, said date shall be extended to the next
business day following such Saturday, Sunday or Federal or State holiday.
(m) CDMEC. As used in this contract, the term "CDMEC" shall be defined as
calendar days from mutual execution of this contract.
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(n) Assignment. Buyer may assign this contract to any Affiliate without the
consent of Seller, provided Buyer gives Seller written notice thereof within 2
calendar days after such assignment and the assignee assumes all of Buyer's
obligations hereunder. As used herein, "Affiliate" means any entity which is
controlled by, under common control with, or controls Buyer. As used herein,
"control" or "controlled" means the ability to direct the management and
decisions of the entity and the right to vote more than 50% of the equity
interests of the entity.
(o) Earnest Money/Loan Assumption. Earnest money deposited pursuant to Paragraph
3 (a) shall be delivered to North American Title when this contract has been
fully executed by all parties. Earnest money shall be deposited by North
American Title in an interest bearing FDIC insured account and all interest
shall be credited to Buyer.
(p) Management and Service Contracts. Except for the Automatic Laundry Lease and
the TVMAX Telecommunications Contract, Management Agreements and Service
Contracts in effect shall be terminated by Seller no later than 30 days after
the date of closing unless Buyer elects to continue the same by the Title
Deadline.
(q) Pending Actions. To Seller's actual knowledge, there are no actions pending
or threatened against Seller or the Property, except as noted.
(r) Survival. All representations, covenants and conditions shall survive
closing for a period of one year.
(s) Work Orders. To Seller's actual knowledge, there are no material work orders
outstanding except as have been disclosed to Buyer pursuant to Section 21(f). If
there are any such work orders outstanding, Seller shall make payment of amounts
due in connection therewith for work occurring prior to closing.
(t) Notice of Default. In the event any party to this contract shall claim any
other party to be in default of the terms and conditions of this contract or any
other documents executed and delivered pursuant thereto, any covenant to be
performed therein, or payment of any amount due thereunder, the party claiming
default shall give notice to all other parties in writing stating in reasonable
detail the default alleged to have occurred. Said notice shall be delivered to
all other parties pursuant to Section 21(k). The party alleged to be in default
shall have a period of ten (10) days after delivery of said notice (but not
extending beyond the closing date, set forth in paragraph 11) within which to
cure or correct such default, and in the event the same shall be so cured or
corrected, then this contract shall continue in full force and effect. In the
event the party alleged to be in default shall not cure or correct such default
or shall not advise the party claiming default in writing as to the reasons the
party alleged to be in default does not believe such default exists, the parties
not in default shall have remedies set forth in Section 18.
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(v) Buyer Disclosure. Seller acknowledges having been advised by Hendricks &
Partners that Skyline Realty, Inc., a principal in the buying entity is a
licensed real estate broker in the State of Colorado, and will not be
participating in the commission to be paid by Seller, and Seller has no
objection thereto. Both Buyer and Seller represent and warrant to the other
that, other than Hendricks & Partners, neither has engaged any broker or other
agent or finder in this matter, and shall indemnify and hold harmless the other
for any breach of this representation, including for any costs, expenses,
liabilities and reasonable attorneys' fees resulting therefrom.
(w). Liens. Supplementing Section 9(d), the parties agree that, in using
reasonable efforts to correct any unsatisfactory title condition, Seller will
not be required to spend any money except as necessary to pay the amount of (i)
any liens for ordinary real estate taxes due for any period before the year of
closing, (ii) installment payments accrued pursuant to any special assessment
for any period before the date of closing, (iii) any mechanics' liens for work
or materials, provided those liens are not imposed as a result of any inspection
or other activities of Buyer or its employees, agents, contractors, consultants
or representatives, and (iv) any liens securing indebtedness owing by Seller to
any private third party (except the loan to be assumed by Buyer pursuant to
Section 3(d)).
(x) Actual Knowledge of Seller. For purposes of this contract, the "Actual
Knowledge of Seller", "Actual Knowledge" or any variation thereof, means and is
limited to the actual knowledge of Evan Zucker and Rick Burger, and will not
include any notice or knowledge that may be imputed to either of them or
constructively attributed to either of them, nor will the use of the phrase
imply that any special inquiry or investigation has been undertaken by either of
them with respect to the matter to which the phrase applies. Neither Mr. Zucker
nor Mr. Burger will have any personal liability under this contract with respect
to any liability or obligation of Seller.
(y) Assumption of Contracts and Leases. At closing, and from and after the
closing, Buyer shall assume all Seller's rights and obligations under (i) all
leases with tenants, and (ii) all Management Agreements, Service Contracts and
other agreements not terminated pursuant to Section 21(p), including the
Automatic Laundry Lease and TVMAX Telecommunications Contract (provided that
Buyer shall be liable under such Management Agreements, Service Contracts and
other agreements which are terminated for a period not to exceed 30 days after
the date of closing).
(z) Severable Obligations. Buyer acknowledges and agrees that (i) it will be
purchasing Americana Lakewood I from Virginia Street Associates Limited
Partnership ("Virginia") and Americana Lakewood II from Americana Development
Associates, L.P. ("ADALP"), (ii) the obligations of each of Virginia and ADALP
under this contract are several, and not joint, and (iii) Buyer cannot terminate
this contract with respect to either Americana Lakewood I or Americana Lakewood
II without terminating this contract with respect to the entire Property, it
being the express intent of the parties that Buyer must acquire both, and not
one, of such parcels. If Buyer is required, as a condition to assuming the loan
referenced in Section 3(d), to have a separate contract to acquire Americana
Lakewood II, then the Buyer and Seller will re-enter this contract to have
separate contracts with respect to Americana Lakewood I and Americana Lakewood
II on the same terms and conditions as set for herein, except solely with
respect to the allocation of the Purchase Price to the two contracts.
(aa) No Recording. Neither this contract nor any memorandum of it may be
recorded. If Buyer breaches this provision, Seller may declare Buyer in default
and pursue all remedies provided for default in this contract or available at
law or equity.
(ab) 1031 Exchange. Buyer, at the request of Seller, agrees to cooperate with
Seller or any constituent partners, members or shareholders of Seller who may
dispose of
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any of the Property in a tax deferred exchange pursuant to Section 1031 of the
Internal Revenue Code of 1986, as amended (the "Code"). Such cooperation shall
be limited to execution of standard and customary documentation to comply with
the exchange provisions under the Code and allowing a distribution or partial
distribution in kind of any or all of the Property from Seller to one or more
entities or partners, members or shareholders of Seller, including, but not
limited to, a reorganization of Seller, and a transfer of a portion of the
Property by deed or deeds from the Seller to entities, partners, members, or
shareholders of Seller to Buyer in accordance with Seller's obligations under
this contract. In order to implement such exchange, Seller may, upon notice to
Buyer, assign its rights, but not its obligations under the contract to a third
party designated by Seller, to act as a qualified intermediary (as such phrase
is defined in the applicable Internal Revenue Service regulations). In no event,
however, shall Buyer incur any additional expense or liability as a result of
such exchange or as a result of Seller's acquisition of any other property or
properties. In no event shall Buyer be required to take title or convey any real
or personal property other than the Property.
(ac) Facsimile signatures shall be valid and binding on all parties. Original
signed copies shall be forwarded to all signed parties as soon as feasible
following signing.
(ad) Seller reserves the right, by December 24, 1997, to grant appropriate
easements over the Property to TVMAX Telecommunications consistent with TVMAX's
existing and reasonably anticipated use of the Property, and any such easements
will be added to the Buyer's title policy.
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Exhibit 10(ag)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT, dated as of December 12, 1997, by and
between American Real Estate Investment Corporation, a Maryland corporation (the
"Company") and Jeffrey Kelter ("Executive"), recites and provides as
follows:
W I T N E S S E T H:
WHEREAS, the Company is a self-administered Maryland corporation,
which owns, acquires, develops and leases office and industrial properties;
WHEREAS, the Company desires to employ Executive to devote a
significant portion of his time (as hereinafter defined) to the business of the
Company, including, without limitation, the operation and management of the
Company and the Properties, and to serve as the President of the Company; and
WHEREAS, Executive desires to be so employed on the terms and
subject to the conditions hereinafter stated.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants, promises
and obligations of the parties provided for in this Agreement, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
A. DEFINITIONS.
For purposes of this Agreement, the following terms shall have the
following meanings (applicable to both the singular and plural forms of the
terms defined):
1. "Acquisition of Office or Industrial Property" means engaging in
the activity of soliciting, seeking to acquire, obtaining an option or first
right of refusal to acquire, or acquiring, any interest in an Office or
Industrial Property or in real property planned for development as an Office or
Industrial Property.
2. "Affiliate" means (i) any person directly or indirectly
controlling, controlled by, or under common control with such other person, (ii)
any executive officer, director, trustee or general partner of such other
person, and (iii) any legal entity for which such person acts as an executive
officer, director, trustee or general partner. The term "person" means and
includes any natural person, corporation, partnership, association, limited
liability company or any other legal entity.
3. "Closing Date" means December 12, 1997.
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4. "Competitive Activity" means engaging in directly, through an
Affiliate, or being employed by any entity undertaking, or otherwise undertaking
to do any of the following: (i) Acquisition of Office or Industrial Property,
(ii) Office or Industrial Property Ownership or Leasing, (iii) Office or
Industrial Property Construction, (iv) Office or Industrial Property
Entitlements, (v) Speculation, or (vi) Office or Industrial Property Management
and Operation.
5. "Employment Term" means the Initial Term, as herein defined, and
the successive annual renewals of this Agreement until terminated. The initial
term of Executive's employment hereunder (the "Initial Term") shall be for a
period of three years, commencing on the Closing Date and continuing until the
third anniversary of the Closing Date, unless terminated earlier as provided
herein. After the third anniversary of the Closing Date, the term shall be
automatically renewed for successive one year periods unless otherwise
terminated as provided herein.
6. "Good Reason" shall mean the occurrence, without Executive's
express written consent, of any one or more of the following events:
(a) the removal or suspension from office without cause of
Executive or failure without cause to elect or appoint Executive as
President of the Company throughout the Employment Term;
(b) any substantial alteration, including any material
diminution, in the nature or status of Executive's responsibilities as
President, which substantial alteration is not remedied or cured forthwith
following Executive's notification to the Company;
(c) the assignment of any duties which are in any significant
respect inconsistent with Executive's status as President of the Company,
which inconsistent assignment is not remedied or cured forthwith following
Executive's notification to the Company; and
(d) the failure of Executive for any reason other than cause
to be a member of the Board of Directors of the Company.
7. "Independent Director" shall mean a member of the Board of
Directors of the Company who is defined as an "Independent Director" in the
Amended and Restated Articles of Incorporation of the Company, as filed with the
Securities and Exchange Commission, as amended.
8. "Involuntary Termination" means the breach by the Company of any
material provision of this Agreement and such breach continues for a period of
14 days after the Independent Directors on the Company's Board of Directors
receive written notice of such breach.
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9. "Noncompetition Period" means the period beginning the later of
the date of the termination of the Employment Term, for whatever reason, and the
date on which Executive ceases to be a member of the Board of Directors of the
Company and ending one year from the date of termination.
10. "Office or Industrial Property" means any Property that is used
in whole or in part for office or industrial space or office or industrial
related purposes, whether in fee or leasehold, together with all improvements
and fixtures now or hereafter located thereon, all rights, privileges and
easements appurtenant thereto, and all tangible and intangible personal property
used in connection therewith.
11. "Office or Industrial Property Construction" means the
construction, renovation or repair of improvements on an Office or Industrial
Property by Executive or an Affiliate of Executive.
12. "Office or Industrial Property Entitlements" means engaging in
the process by which a person with an interest in an Office or Industrial
Property obtains necessary or desirable governmental approvals, licenses,
permits, entitlements or agreements for the commencement of Office or Industrial
Property Construction.
13. "Office or Industrial Property Management and Operation" means
engaging in directly or through an Affiliate, or being employed by any entity
undertaking, or otherwise undertaking the day-to-day management and operation of
an Office or Industrial Property, whether pursuant to a master lease, management
agreement or any other arrangement.
14. "Property" means any real property or any interest therein.
15. "Speculation" means engaging in the activity of soliciting,
seeking to acquire, obtaining an option or a first right of refusal to acquire,
or acquiring, any interest in a Office or Industrial Property with the intention
at any time of acquiring (or obtaining an option or a first right of refusal to
acquire) or holding an Office or Industrial Property for subsequent sale or
other transfer to any person for purposes of Competitive Activity.
16. "Termination Without Cause" means the termination of Executive's
employment (i) by the Company for any reason other than Termination With Cause,
(ii) by the Executive for Good Reason, or (iii) by Executive's Voluntary
Termination.
17. "Termination With Cause" means the termination of Executive's
employment by act of the Board of Directors for any of the following reasons:
(a) any material breach of this Agreement, consisting of any
repeated gross or willful refusal, failure or neglect by Executive in
connection with the performance of his duties and fulfillment of his
obligations under this Agreement;
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(b) conduct by Executive that would result in material injury
to the reputation of the Company if he were retained in his position with
the Company, including conviction of a felony under the laws of the United
States or any State thereof, or of an equivalent crime under the laws of
any other jurisdiction, bankruptcy, insolvency or general assignment for
the benefit of his creditors;
(c) any failure to comply substantially with any written
rules, regulations, policies or procedures of the Company, if such
non-compliance could be expected to have a material and adverse effect on
the Company's business and which has not been cured after reasonable
notice; or
(d) any willful failure to comply with the Company's internal
policies regarding insider trading or insider dealing which has not been
cured after reasonable notice.
18. "Voluntary Termination" means Executive's voluntary termination
of his employment hereunder (which does not include termination for Good
Reason), which may be effected by Executive's giving the Company's Board of
Directors 60 days' written notice of Executive's desire to terminate his
employment.
B. THE EMPLOYMENT RELATIONSHIP.
1. Employment. The Company shall employ Executive, and Executive
agrees to be so employed, in the capacity of President of the Company to serve
for the Employment Term, subject to earlier termination as herein provided.
2. Services. Executive shall devote a significant portion of his
time, attention and effort to the Company's affairs. Specifically, Executive
shall have senior management authority and responsibility with respect to the
day-to-day operations and long-term management of the Company and its Office and
Industrial Properties, as well as implementation of the growth strategy of the
Company, consistent with directions from the Company's Board of Directors.
Executive shall have full authority and responsibility, subject to the general
direction, approval and control of the Company's Board of Directors for
formulating policies and administering the Company and its Properties. He shall
have the authority to hire and fire non-executive Company personnel, to retain
consultants when he deems necessary to implement the Company's policies, to
execute contracts on behalf of the Company in the ordinary course of business
and to negotiate for and cause the Company to acquire new Properties at the
direction of the Board of Directors of the Company. As used herein, "a
significant portion of his time, attention and effort" shall mean substantially
all of Executive's working time devoted to business activities.
3. Compensation. (a) The Company initially shall pay Executive for
his services an annual base salary of $200,000, subject to any increases in base
compensation as approved by the Compensation Committee of the Company's Board of
Directors (the "Compensation Committee").
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(b) Executive shall be entitled to full and complete participation
in the Company's Salary Reduction and Other Elective Simplified Employee
Pension-Individual Retirement Account Contribution Agreement as documented on
Form 5305A-SEP.
(c) In addition, the Company may from time to time pay Executive
such compensation or benefits as the Compensation Committee of the Board of
Directors may, in its discretion, award to Executive under any compensation,
bonus, stock purchase, stock option, profits sharing or other employee benefit
plan that may hereafter be adopted (any such compensation is referred to as
"Incentive Compensation"). Executive's Incentive Compensation will be consistent
with executive Incentive Compensation paid to executives in comparable positions
at other real estate investment trusts in the Company's peer group. In the event
of a Termination Without Cause, to the extent that Executive has options which
have not vested at such time and which would have vested at the next option
vesting date but for such termination ("Current Unvested Options"), then an
amount of Current Unvested Options will vest upon such termination equal to the
following: the total Current Unvested Options multiplied by a fraction of which
the numerator equals the number of days elapsed from the previous option vesting
date up to and including the date of termination and the denominator equals the
total number of days between option vesting dates.
4. Benefits. The Company agrees to provide Executive with the
following benefits during the Term of this Agreement:
(a) Vacation. Executive shall be entitled each year to a paid
vacation in accordance with the practices of the Company as constituted by
the Board of Directors of the Company.
(b) Employee Benefits. Executive shall be entitled to all
rights, benefits and privileges to which other management level employees
of the Company are entitled, including, but not limited to, any
retirement, pension, profitsharing, insurance, hospital or other plans
which may now be in effect or which may hereafter be adopted by the
Company.
5. Expenses. The Company recognizes that Executive will have to
incur certain out-of-pocket expenses, including, but not limited to, travel
expenses, related to his services and the Company's business, and the Company
agrees to reimburse Executive for all reasonable expenses necessarily incurred
by him in the performance of his duties upon presentation of a voucher or
documentation indicating the amount and business purposes of any such expenses.
6. Termination in Case of Death or Disability. In case of
Executive's death or permanent disability (defined as complete physical or
mental inability, confirmed by a licensed physician, to perform substantially
all of the services described herein that continues for a period of 180
consecutive days), the Company may elect to terminate Executive pursuant to the
terms of
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Section B, Paragraph 8 hereof.
7. Termination With Cause; Voluntary Termination. The Company may
terminate this Agreement upon a determination that an event has occurred within
the definition of Termination With Cause; provided, however, in the case of a
Termination With Cause based upon clauses (a) or (b) of such definition, the
Company shall provide Executive written notice of such grounds for termination,
and Executive shall have a period of 14 days to cure such cause to the
reasonable satisfaction of the Company's Board of Directors. If Executive shall
suffer Termination With Cause or shall cease being an employee of the Company on
account of a Voluntary Termination, then Executive shall not be entitled to any
compensation after the effective date of such Voluntary Termination or
Termination With Cause (except compensation accrued but unpaid on the date of
such event). Any continued rights and benefits Executive may have under employee
benefit plans and programs of the Company upon such a termination, if any, shall
be determined in accordance with the terms of such plans and programs; provided,
however, that Executive, including his immediate family, shall be able to
continue to participate in the Company's medical/health insurance or coverage
program with the same level of benefits as he was entitled to receive
immediately prior to the time of termination, for up to 18 months following
termination, but Executive shall bear all costs of such medical/health insurance
or coverage.
8. Death or Disability; Termination Without Cause; or Involuntary
Termination. If Executive shall suffer a death, disability, Involuntary
Termination or a Termination Without Cause, then the Company shall pay Executive
cash compensation in a lump sum equal to (x) Executive's base salary (based on
Executive's base salary at the time of such death, disability or termination)
plus the prior year's bonus, times (y) the longer of one year or the remainder
of the Employment Term; and the Company shall continue to provide, for the
longer of one year or the remainder of the Employment Term, Executive (or his
family in the case of his death) with the level of health/medical insurance or
coverage provided to Executive at the time of such death, disability or
termination. Any continued rights and benefits that Executive, or Executive's
estate or other legal representatives, may have under employee benefit plans and
programs of the Company upon such death, disability or termination shall be
determined in accordance with the terms and provisions of such plans and
programs.
9. Indemnification. The Company agrees that for the Employment Term,
provisions of the Company's bylaws regarding indemnification and advancement of
expenses of officers and directors shall not be amended to adversely effect
Executive nor shall the Company's articles of incorporation be amended to
adversely effect Executive's rights with respect to limitation of liability,
indemnification or advancement of expenses.
C. AGREEMENT NOT TO COMPETE
Except as explicitly provided herein, Executive agrees, for the
entire Employment Term and Noncompetition Period, to the following covenants,
effective within the United States:
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1. Competitive Activity Restriction. Executive, personally or
through any Affiliate of Executive, shall not conduct any Competitive Activity
other than through the Company, unless a majority of the Company's Board of
Directors, which majority must include a majority of the Independent Directors,
have determined that such Competitive Activity will not have a material adverse
effect on the business or operations of the Company. Notwithstanding any other
provision of this Agreement, Executive agrees that, during the time he is
employed by the Company, Executive shall present to the Company all
opportunities that arise to engage in Competitive Activities.
2. No Beneficial Ownership. Executive shall not beneficially own
directly or indirectly any beneficial interest in any entity engaged in any
Competitive Activity other than the Company, except for any interest in a
company traded on a nationally recognized public securities exchange (including
The Nasdaq National Market), provided such interest does not exceed 5% of the
outstanding capital stock of such company.
3. Loans. Executive shall not directly or indirectly make any loan
to, or hold any note evidencing a loan from, any entity engaged in any
Competitive Activity.
4. Competitive Entity. Executive shall not be a director or trustee,
officer, or employee of, or consultant to (whether for compensation or not) any
entity engaged in any Competitive Activity.
5. Notification to Independent Directors. If Executive or any
Affiliate of Executive desires to engage in any Competitive Activity, Executive
shall describe fully the proposed activity in a written notice (the "Disclosure
Notice") to the Company and the Independent Directors. A Disclosure Notice shall
only pertain to a specific proposed project and the referenced proposed project
shall be described therein with specificity as to timing, location, scope and
the extent of Executive's involvement, financially and in terms of his time
commitment. A Disclosure Notice may not request approval for any conceptual or
non-project specific activity or for any activity that is prohibited by this
Agreement.
6. No Solicitation. Notwithstanding any other provision of this
Agreement, for a period of one year after the Noncompetition Period, Executive
shall not directly or indirectly (i) solicit any existing client of the Company
or any potential client of the Company whom the Company was actively soliciting
during the time of Executive's directorship, (ii) hire, solicit or otherwise
encourage any employee or independent contractor of the Company to leave the
employment of, or terminate any contractual relationship with, the Company or
(iii) otherwise interfere with, disrupt or attempt to disrupt the relationships,
contractual or otherwise, between the Company and its employees or independent
contractors or solicit or encourage any employee or independent contractor of
the Company to engage in any Competitive Activity.
7. Competitive Activity with JP Morgan. Executive will not engage in
any Competitive Activity with, for, through or on behalf of JP Morgan Investment
Management or any affiliate thereof for a period of five years from the later of
the date of the termination of the
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Employment Term, for whatever reason, and the date on which Executive ceases to
be a member of the Board of Directors of the Company.
D. MISCELLANEOUS PROVISIONS.
1. Notices. All notices or deliveries authorized or required
pursuant to this Agreement shall be deemed to have been given when in writing
and when (i) deposited in the U.S. mail, certified, return receipt requested,
postage prepaid, or (ii) otherwise delivered by hand or by overnight delivery,
against written receipt, by a common carrier or commercial courier or delivery
service addressed to the parties at the following addresses or to such other
addresses as either may designate in writing to the other party:
To the Company: American Real Estate Investment Corporation
Plymouth Meeting Executive Campus
620 W. Germantown Pike, Suite 200
Plymouth Meeting, PA 19462
Telephone: (601) 834-7950
Facsimile: (610) 834-9560
To Executive: Jeffrey Kelter
40 Duck Pond Road
Glen Cove, NY 11542
Telephone: (516) 671-9365
2. Entire Agreement. This Agreement contains the entire
understanding between the parties hereto with respect to the subject matter
hereof and shall not be modified in any manner except by written instrument
signed by or on behalf of the parties hereto. This Agreement shall be binding
upon and inure to the benefit of the heirs, successors and assigns of the
parties hereto.
3. Applicable Law. This Agreement shall be governed and construed in
accordance with the laws of the State of New York.
4. Assignment. Executive acknowledges that his services are unique
and personal. Executive may not assign his rights or delegate his duties or
obligations under this Agreement except (a) his rights to compensation and
benefits hereunder may be transferred by will or operation of law and (b) his
rights under employee benefit plans or programs described in Section B,
Paragraph 4(b) may be assigned or transferred in accordance with the terms of
such plans or programs, or regular practices thereunder. Executive's rights and
obligations under this Agreement shall inure to the benefit of and shall be
binding upon Executive's heirs and personal representatives.
5. Titles and Headings. Titles and headings to sections and
paragraphs in this Agreement are inserted for the convenience of reference only
and are not intended to be a part of
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or to affect the meaning or interpretation of this Agreement.
6. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
7. Amendments. No amendment, modification or supplement to this
Agreement shall be binding on any of the parties hereto unless it is in writing
and signed by the parties in interest at the time of the modification, and
further provided any such modification is approved by a majority of the
Independent Directors.
8. No Third-Party Beneficiaries. This Agreement is solely for the
benefit of the parties to this Agreement and should not be deemed to confer upon
third parties any remedy, claim, liability, reimbursement, claims or action or
other right in excess of those existing without reference to this Agreement.
9. Maximum Legal Enforceability; Time of Essence. Any provision of
this Agreement which is prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof. Any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. Without prejudice
to any rights or remedies otherwise available to any party to this Agreement,
each party hereto acknowledges that damages would not be an adequate remedy for
any breach of the provisions of this Agreement and agrees that the obligations
of the parties hereunder shall be specifically enforceable. Time shall be of the
essence as to each and every provision of this Agreement.
10. Specific Performance. Executive acknowledges that the
obligations undertaken by him pursuant to this Agreement are unique and that the
Company will not have an adequate remedy at law if he shall fail to perform any
of his obligations hereunder, and Executive therefore confirms that the
Company's right to specific performance of the terms of this Agreement is
essential to protect the rights, interest and goodwill of the Company.
Accordingly, in addition to any other remedies that the Company may have at law
or in equity, the Company shall have the right to have all obligations,
covenants, agreements and other provisions of this Agreement specifically
performed by Executive, and the Company shall have the right to obtain
preliminary and permanent injunctive relief to secure specific performance and
to prevent a breach or contemplated breach of this Agreement by Executive.
Executive acknowledges that the Company will have the right to have the
provisions of this Agreement enforced in any court of competent jurisdiction, it
being agreed that any breach or threatened breach of this Agreement would cause
irreparable injury to the Company and its business and that money damages would
not provide an adequate remedy to the Company.
11. Operations of Affiliated Parties. Executive agrees that he will
refrain from authorizing any Affiliate to perform any activities that would be
prohibited by the terms of this
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Agreement if they were performed by him. Notwithstanding anything to the
contrary contained in this Agreement, Executive shall not be required by the
terms of this Agreement to violate any fiduciary duty existing on the date
hereof that he owes to a third party.
12. Further Assurances. The parties to this Agreement will execute
and deliver or cause the execution and delivery of such further instruments and
documents and will take such other actions as any other party to the Agreement
may reasonably request in order to effectuate the purpose of this Agreement and
to carry out the terms hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first written above.
JEFFREY KELTER
/s/ Jeffrey E. Kelter
--------------------------------------------
December 12, 1997
AMERICAN REAL ESTATE INVESTMENT
CORPORATION
By:
-----------------------------------------
Name:
Title:
10
<PAGE>
Exhibit 10(ah)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT, dated as of December 12, 1997, by and
between American Real Estate Investment Corporation, a Maryland corporation (the
"Company") and David F. McBride ("Executive"), recites and provides as
follows:
W I T N E S S E T H:
WHEREAS, the Company is a self-administered Maryland corporation,
which owns, acquires, develops and leases office and industrial properties;
WHEREAS, the Company desires to employ Executive to devote a
significant portion of his time (as hereinafter defined) to the business of the
Company, including, without limitation, the operation and management of the
Company and the Properties, and to serve as the Chairman of the Board of the
Company; and
WHEREAS, Executive desires to be so employed on the terms and
subject to the conditions hereinafter stated.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants, promises
and obligations of the parties provided for in this Agreement, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
A. DEFINITIONS.
For purposes of this Agreement, the following terms shall have the
following meanings (applicable to both the singular and plural forms of the
terms defined):
1. "Acquisition of Office or Industrial Property" means engaging in
the activity of soliciting, seeking to acquire, obtaining an option or first
right of refusal to acquire, or acquiring, any interest in an Office or
Industrial Property or in real property planned for development as an Office or
Industrial Property.
2. "Affiliate" means (i) any person directly or indirectly
controlling, controlled by, or under common control with such other person, (ii)
any executive officer, director, trustee or general partner of such other
person, and (iii) any legal entity for which such person acts as an executive
officer, director, trustee or general partner. The term "person" means and
includes any natural person, corporation, partnership, association, limited
liability company or any other legal entity.
3. "Closing Date" means December 12, 1997.
<PAGE>
4. "Competitive Activity" means engaging in directly, through an
Affiliate, or being employed by any entity undertaking, or otherwise undertaking
to do any of the following: (i) Acquisition of Office or Industrial Property,
(ii) Office or Industrial Property Ownership or Leasing, (iii) Office or
Industrial Property Construction, (iv) Office or Industrial Property
Entitlements, (v) Speculation, or (vi) Office or Industrial Property Management
and Operation.
5. "Employment Term" means the Initial Term, as herein defined, and
the successive annual renewals of this Agreement until terminated. The initial
term of Executive's employment hereunder (the "Initial Term") shall be for a
period of three years, commencing on the Closing Date and continuing until the
third anniversary of the Closing Date, unless terminated earlier as provided
herein. After the third anniversary of the Closing Date, the term shall be
automatically renewed for successive one year periods unless otherwise
terminated as provided herein.
6. "Good Reason" shall mean the occurrence, without Executive's
express written consent, of any one or more of the following events:
(a) the removal or suspension from office without cause of
Executive or failure without cause to elect or appoint Executive as
Chairman of the Board of the Company throughout the Employment Term;
(b) any substantial alteration, including any material
diminution, in the nature or status of Executive's responsibilities as
Chairman of the Board, which substantial alteration is not remedied or
cured forthwith following Executive's notification to the Company;
(c) the assignment of any duties which are in any significant
respect inconsistent with Executive's status as Chairman of the Board of
the Company, which inconsistent assignment is not remedied or cured
forthwith following Executive's notification to the Company; and
(d) the failure of Executive for any reason other than cause
to be a member of the Board of Directors of the Company.
7. "Independent Director" shall mean a member of the Board of
Directors of the Company who is defined as an "Independent Director" in the
Amended and Restated Articles of Incorporation of the Company, as filed with the
Securities and Exchange Commission, as amended.
8. "Involuntary Termination" means the breach by the Company of any
material provision of this Agreement and such breach continues for a period of
14 days after the Independent Directors on the Company's Board of Directors
receive written notice of such breach.
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<PAGE>
9. "Noncompetition Period" means the period beginning the later of
the date of the termination of the Employment Term, for whatever reason, and the
date on which Executive ceases to be a member of the Board of Directors of the
Company and ending one year from the date of termination.
10. "Office or Industrial Property" means any Property that is used
in whole or in part for office or industrial space or office or industrial
related purposes, whether in fee or leasehold, together with all improvements
and fixtures now or hereafter located thereon, all rights, privileges and
easements appurtenant thereto, and all tangible and intangible personal property
used in connection therewith.
11. "Office or Industrial Property Construction" means the
construction, renovation or repair of improvements on an Office or Industrial
Property by Executive or an Affiliate of Executive.
12. "Office or Industrial Property Entitlements" means engaging in
the process by which a person with an interest in an Office or Industrial
Property obtains necessary or desirable governmental approvals, licenses,
permits, entitlements or agreements for the commencement of Office or Industrial
Property Construction.
13. "Office or Industrial Property Management and Operation" means
engaging in directly or through an Affiliate, or being employed by any entity
undertaking, or otherwise undertaking the day-to-day management and operation of
an Office or Industrial Property, whether pursuant to a master lease, management
agreement or any other arrangement.
14. "Property" means any real property or any interest therein.
15. "Speculation" means engaging in the activity of soliciting,
seeking to acquire, obtaining an option or a first right of refusal to acquire,
or acquiring, any interest in a Office or Industrial Property with the intention
at any time of acquiring (or obtaining an option or a first right of refusal to
acquire) or holding an Office or Industrial Property for subsequent sale or
other transfer to any person for purposes of Competitive Activity.
16. "Termination Without Cause" means the termination of Executive's
employment (i) by the Company for any reason other than Termination With Cause,
(ii) by the Executive for Good Reason, or (iii) by Executive's Voluntary
Termination.
17. "Termination With Cause" means the termination of Executive's
employment by act of the Board of Directors for any of the following reasons:
(a) any material breach of this Agreement, consisting of any
repeated gross or willful refusal, failure or neglect by Executive in
connection with the performance of his duties and fulfillment of his
obligations under this Agreement;
3
<PAGE>
(b) conduct by Executive that would result in material injury
to the reputation of the Company if he were retained in his position with
the Company, including conviction of a felony under the laws of the United
States or any State thereof, or of an equivalent crime under the laws of
any other jurisdiction, bankruptcy, insolvency or general assignment for
the benefit of his creditors;
(c) any failure to comply substantially with any written
rules, regulations, policies or procedures of the Company, if such
non-compliance could be expected to have a material and adverse effect on
the Company's business and which has not been cured after reasonable
notice; or
(d) any willful failure to comply with the Company's internal
policies regarding insider trading or insider dealing which has not been
cured after reasonable notice.
18. "Voluntary Termination" means Executive's voluntary termination
of his employment hereunder (which does not include termination for Good
Reason), which may be effected by Executive's giving the Company's Board of
Directors 60 days' written notice of Executive's desire to terminate his
employment.
B. THE EMPLOYMENT RELATIONSHIP.
1. Employment. The Company shall employ Executive, and Executive
agrees to be so employed, in the capacity of Chairman of the Board of the
Company to serve for the Employment Term, subject to earlier termination as
herein provided.
2. Services. Executive shall devote a significant portion of his
time, attention and effort to the Company's affairs. Specifically, Executive
shall have management authority and responsibility with respect to the long-term
management of the Company and its Office and Industrial Properties, as well as
implementation of the growth strategy of the Company, consistent with directions
from the Company's Board of Directors. Executive shall have full authority and
responsibility, subject to the general direction, approval and control of the
Company's Board of Directors for formulating policies and administering the
Company and its Properties. He shall have the authority to hire and fire
non-executive Company personnel, to retain consultants when he deems necessary
to implement the Company's policies, to execute contracts on behalf of the
Company in the ordinary course of business and to negotiate for and cause the
Company to acquire new Properties at the direction of the Board of Directors of
the Company. As used herein, "a significant portion of his time, attention and
effort" shall mean substantially all of Executive's working time devoted to
business activities. Notwithstanding the foregoing, (i) Executive is a director
of certain other McBride family real estate-related companies and he may
continue to be a director of such companies; and (ii) Executive may spend a
portion of his time (which time will not interfere with his duties under this
Agreement) on the sale, management and/or leasing of certain currently-owned
McBride land and properties which
4
<PAGE>
are not owned by the Company.
3. Compensation. (a) The Company initially shall pay Executive for
his services an annual base salary of $200,000, subject to any increases in base
compensation as approved by the Compensation Committee of the Company's Board of
Directors (the "Compensation Committee").
(b) Executive shall be entitled to full and complete participation
in the Company's Salary Reduction and Other Elective Simplified Employee
Pension-Individual Retirement Account Contribution Agreement as documented on
Form 5305A-SEP.
(c) In addition, the Company may from time to time pay Executive
such compensation or benefits as the Compensation Committee of the Board of
Directors may, in its discretion, award to Executive under any compensation,
bonus, stock purchase, stock option, profits sharing or other employee benefit
plan that may hereafter be adopted (any such compensation is referred to as
"Incentive Compensation"). Executive's Incentive Compensation will be consistent
with executive Incentive Compensation paid to executives in comparable positions
at other real estate investment trusts in the Company's peer group. In the event
of a Termination Without Cause, to the extent that Executive has options which
have not vested at such time and which would have vested at the next option
vesting date but for such termination ("Current Unvested Options"), then an
amount of Current Unvested Options will vest upon such termination equal to the
following: the total Current Unvested Options multiplied by a fraction of which
the numerator equals the number of days elapsed from the previous option vesting
date up to and including the date of termination and the denominator equals the
total number of days between option vesting dates.
4. Benefits. The Company agrees to provide Executive with the
following benefits during the Term of this Agreement:
(a) Vacation. Executive shall be entitled each year to a paid
vacation in accordance with the practices of the Company as constituted by
the Board of Directors of the Company.
(b) Employee Benefits. Executive shall be entitled to all
rights, benefits and privileges to which other management level employees
of the Company are entitled, including, but not limited to, any
retirement, pension, profitsharing, insurance, hospital or other plans
which may now be in effect or which may hereafter be adopted by the
Company.
5. Expenses. The Company recognizes that Executive will have to
incur certain out-of-pocket expenses, including, but not limited to, travel
expenses, related to his services and the Company's business, and the Company
agrees to reimburse Executive for all reasonable expenses necessarily incurred
by him in the performance of his duties upon presentation of a voucher or
documentation indicating the amount and business purposes of any
5
<PAGE>
such expenses.
6. Termination in Case of Death or Disability. In case of
Executive's death or permanent disability (defined as complete physical or
mental inability, confirmed by a licensed physician, to perform substantially
all of the services described herein that continues for a period of 180
consecutive days), the Company may elect to terminate Executive pursuant to the
terms of Section B, Paragraph 8 hereof.
7. Termination With Cause; Voluntary Termination. The Company may
terminate this Agreement upon a determination that an event has occurred within
the definition of Termination With Cause; provided, however, in the case of a
Termination With Cause based upon clauses (a) or (b) of such definition, the
Company shall provide Executive written notice of such grounds for termination,
and Executive shall have a period of 14 days to cure such cause to the
reasonable satisfaction of the Company's Board of Directors. If Executive shall
suffer Termination With Cause or shall cease being an employee of the Company on
account of a Voluntary Termination, then Executive shall not be entitled to any
compensation after the effective date of such Voluntary Termination or
Termination With Cause (except compensation accrued but unpaid on the date of
such event). Any continued rights and benefits Executive may have under employee
benefit plans and programs of the Company upon such a termination, if any, shall
be determined in accordance with the terms of such plans and programs; provided,
however, that Executive, including his immediate family, shall be able to
continue to participate in the Company's medical/health insurance or coverage
program with the same level of benefits as he was entitled to receive
immediately prior to the time of termination, for up to 18 months following
termination, but Executive shall bear all costs of such medical/health insurance
or coverage.
8. Death or Disability; Termination Without Cause; or Involuntary
Termination. If Executive shall suffer a death, disability, Involuntary
Termination or a Termination Without Cause, then the Company shall pay Executive
cash compensation in a lump sum equal to (x) Executive's base salary (based on
Executive's base salary at the time of such death, disability or termination)
plus the prior year's bonus, times (y) the longer of one year or the remainder
of the Employment Term; and the Company shall continue to provide, for the
longer of one year or the remainder of the Employment Term, Executive (or his
family in the case of his death) with the level of health/medical insurance or
coverage provided to Executive at the time of such death, disability or
termination. Any continued rights and benefits that Executive, or Executive's
estate or other legal representatives, may have under employee benefit plans and
programs of the Company upon such death, disability or termination shall be
determined in accordance with the terms and provisions of such plans and
programs.
9. Indemnification. The Company agrees that for the Employment Term,
provisions of the Company's bylaws regarding indemnification and advancement of
expenses of officers and directors shall not be amended to adversely effect
Executive nor shall the Company's articles of incorporation be amended to
adversely effect Executive's rights with respect to limitation of liability,
indemnification or advancement of expenses.
6
<PAGE>
7
<PAGE>
C. AGREEMENT NOT TO COMPETE
Except as explicitly provided herein, Executive agrees, for the
entire Employment Term and Noncompetition Period, to the following covenants,
effective within the United States:
1. Competitive Activity Restriction. Executive, personally or
through any Affiliate of Executive, shall not conduct any Competitive Activity
other than through the Company (and through those companies described in Section
B.2), unless a majority of the Company's Board of Directors, which majority must
include a majority of the Independent Directors, have determined that such
Competitive Activity will not have a material adverse effect on the business or
operations of the Company. Notwithstanding any other provision of this
Agreement, Executive agrees that, during the time he is employed by the Company,
Executive shall present to the Company all opportunities that arise to engage in
Competitive Activities.
2. No Beneficial Ownership. Executive shall not beneficially own
directly or indirectly any beneficial interest in any entity engaged in any
Competitive Activity other than the Company (and those companies described in
Section B.2), except for any interest in a company traded on a nationally
recognized public securities exchange (including The Nasdaq National Market),
provided such interest does not exceed 5% of the outstanding capital stock of
such company.
3. Loans. Executive shall not directly or indirectly make any loan
to, or hold any note evidencing a loan from, any entity engaged in any
Competitive Activity.
4. Competitive Entity. Executive shall not be a director or trustee,
officer, or employee of, or consultant to (whether for compensation or not) any
entity engaged in any Competitive Activity, other than those described in
Section B.2.
5. Notification to Independent Directors. If Executive or any
Affiliate of Executive desires to engage in any Competitive Activity, Executive
shall describe fully the proposed activity in a written notice (the "Disclosure
Notice") to the Company and the Independent Directors. A Disclosure Notice shall
only pertain to a specific proposed project and the referenced proposed project
shall be described therein with specificity as to timing, location, scope and
the extent of Executive's involvement, financially and in terms of his time
commitment. A Disclosure Notice may not request approval for any conceptual or
non-project specific activity or for any activity that is prohibited by this
Agreement.
6. No Solicitation. Notwithstanding any other provision of this
Agreement, for a period of one year after the Noncompetition Period, Executive
shall not directly or indirectly (i) solicit any existing client of the Company
or any potential client of the Company whom the Company was actively soliciting
during the time of Executive's directorship, (ii) hire, solicit or otherwise
encourage any employee or independent contractor of the Company to leave the
employment of, or terminate any contractual relationship with, the Company or
(iii) otherwise interfere with, disrupt or attempt to disrupt the relationships,
contractual or otherwise,
8
<PAGE>
between the Company and its employees or independent contractors or solicit or
encourage any employee or independent contractor of the Company to engage in any
Competitive Activity.
D. MISCELLANEOUS PROVISIONS.
1. Notices. All notices or deliveries authorized or required
pursuant to this Agreement shall be deemed to have been given when in writing
and when (i) deposited in the U.S. mail, certified, return receipt requested,
postage prepaid, or (ii) otherwise delivered by hand or by overnight delivery,
against written receipt, by a common carrier or commercial courier or delivery
service addressed to the parties at the following addresses or to such other
addresses as either may designate in writing to the other party:
To the Company: American Real Estate Investment Corporation
Plymouth Meeting Executive Campus
620 W. Germantown Pike, Suite 200
Plymouth Meeting, PA 19462
Telephone: (601) 834-7950
Facsimile: (610) 834-9560
To Executive: David F. McBride
1000 Scioto Drive
Franklin Lakes NJ 07417
Telephone: (201) 891-1223
2. Entire Agreement. This Agreement contains the entire
understanding between the parties hereto with respect to the subject matter
hereof and shall not be modified in any manner except by written instrument
signed by or on behalf of the parties hereto. This Agreement shall be binding
upon and inure to the benefit of the heirs, successors and assigns of the
parties hereto.
3. Applicable Law. This Agreement shall be governed and construed in
accordance with the laws of the State of New York.
4. Assignment. Executive acknowledges that his services are unique
and personal. Executive may not assign his rights or delegate his duties or
obligations under this Agreement except (a) his rights to compensation and
benefits hereunder may be transferred by will or operation of law and (b) his
rights under employee benefit plans or programs described in Section B,
Paragraph 4(b) may be assigned or transferred in accordance with the terms of
such plans or programs, or regular practices thereunder. Executive's rights and
obligations under this Agreement shall inure to the benefit of and shall be
binding upon Executive's heirs and personal representatives.
5. Titles and Headings. Titles and headings to sections and
paragraphs in this Agreement are inserted for the convenience of reference only
and are not intended to be a part of
9
<PAGE>
or to affect the meaning or interpretation of this Agreement.
6. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
7. Amendments. No amendment, modification or supplement to this
Agreement shall be binding on any of the parties hereto unless it is in writing
and signed by the parties in interest at the time of the modification, and
further provided any such modification is approved by a majority of the
Independent Directors.
8. No Third-Party Beneficiaries. This Agreement is solely for the
benefit of the parties to this Agreement and should not be deemed to confer upon
third parties any remedy, claim, liability, reimbursement, claims or action or
other right in excess of those existing without reference to this Agreement.
9. Maximum Legal Enforceability; Time of Essence. Any provision of
this Agreement which is prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof. Any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. Without prejudice
to any rights or remedies otherwise available to any party to this Agreement,
each party hereto acknowledges that damages would not be an adequate remedy for
any breach of the provisions of this Agreement and agrees that the obligations
of the parties hereunder shall be specifically enforceable. Time shall be of the
essence as to each and every provision of this Agreement.
10. Specific Performance. Executive acknowledges that the
obligations undertaken by him pursuant to this Agreement are unique and that the
Company will not have an adequate remedy at law if he shall fail to perform any
of his obligations hereunder, and Executive therefore confirms that the
Company's right to specific performance of the terms of this Agreement is
essential to protect the rights, interest and goodwill of the Company.
Accordingly, in addition to any other remedies that the Company may have at law
or in equity, the Company shall have the right to have all obligations,
covenants, agreements and other provisions of this Agreement specifically
performed by Executive, and the Company shall have the right to obtain
preliminary and permanent injunctive relief to secure specific performance and
to prevent a breach or contemplated breach of this Agreement by Executive.
Executive acknowledges that the Company will have the right to have the
provisions of this Agreement enforced in any court of competent jurisdiction, it
being agreed that any breach or threatened breach of this Agreement would cause
irreparable injury to the Company and its business and that money damages would
not provide an adequate remedy to the Company.
11. Operations of Affiliated Parties. Executive agrees that he will
refrain from authorizing any Affiliate to perform any activities that would be
prohibited by the terms of this
10
<PAGE>
Agreement if they were performed by him. Notwithstanding anything to the
contrary contained in this Agreement, Executive shall not be required by the
terms of this Agreement to violate any fiduciary duty existing on the date
hereof that he owes to a third party.
12. Further Assurances. The parties to this Agreement will execute
and deliver or cause the execution and delivery of such further instruments and
documents and will take such other actions as any other party to the Agreement
may reasonably request in order to effectuate the purpose of this Agreement and
to carry out the terms hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first written above.
DAVID F. MCBRIDE
/s/ David F. McBride
--------------------------------------
December 12, 1997
AMERICAN REAL ESTATE INVESTMENT
CORPORATION
By:
-----------------------------------
Name:
Title:
11
<PAGE>
Exhibit 10 (ai)
AGREEMENT OF SALE AND PURCHASE
THIS AGREEMENT is made as of the 2nd day of July, 1997 between JOHN
D. MORAN, SR., an individual, t/a/d/b/a MORAN INDUSTRIES ("Seller") and PENN
SQUARE PROPERTIES, INC., a Pennsylvania corporation, ("Buyer)".
W I T N E S S E T H :
1. Agreement to Sell and Purchase. Seller agrees to sell to Buyer, and Buyer
agrees to purchase from Seller, subject to the terms and conditions of this
Agreement, certain property located in the Township of Wright, County of
Luzerne, Commonwealth of Pennsylvania, consisting of the following:
(a) Real Property. All that certain tract of land ("Land")
containing 13.15 acres which is described as "Parcel 2" in Schedule A(3) of that
certain Loan Policy of Title Insurance, Policy Number 554-943245, issued by
Commonwealth Land Title Insurance Company, Date of Policy: September 17, 1996;
together with all improvements thereon, including, without limitation, a
building containing approximately 105,000 square feet of enclosed ground floor
area; together with all appurtenances thereto (including, without limitation,
all easements, rights-of-way, water rights, mineral rights (to the extent owned
by Seller) , timber rights, development rights, privileges, licenses and other
rights and benefits belonging to, running with the owner of, or in any way
relating to the Land); and together with all rights, title and interest of
Seller in and to all land lying in the bed of any street, opened or proposed,
abutting the Land and all right, title and interest of Seller in an to any
unpaid award for the taking by eminent domain of any part of the Land or for
damages to the Land by reason of a change of grade of any street (all of the
property, rights and privileges described in this Section 1(a) herein being
collectively called the "Real Property").
(b) Personal Property. All fixtures, equipment and other
personal property attached or appurtenant to the Real Property; all furniture,
supplies, and other unattached items of personal property located in or on, or
used in connection with, the Real Property which are not owned by the Tenant (as
defined below); and all intangible personal property used in the ownership,
operation or maintenance of the Real Property, which is not owned by the Tenant
(all of the foregoing items of property being herein collectively called
"Personal Property").
<PAGE>
(c) Property. The Real Property and the Personal Property are
sometimes collectively called "Property".
2. Purchase Price. The purchase price (the "Purchase Price") for the Property,
subject to adjustments as provided in this Agreement, shall be Two Million Seven
Hundred Thirty Thousand Dollars ($2,730,000), and shall be paid as follows:
(a) Fifty Thousand Dollars ($50,000) (such sum, plus all
interest which accrues thereon, being herein called "the Deposit") shall be paid
by Buyer to First American Title Insurance Company ("Title Company") on or prior
to the third business day to occur after the date on which the Inspection Period
(as defined below) ends. The Title Company shall provide written notice to
Seller and Seller's counsel upon receipt of the Deposit. The Deposit shall be
held by the Title Company in one or more federally-insured money market accounts
acceptable to both Seller and Buyer, or in short-term United States Government
obligations having a maturity date which is not later than the Closing Date (as
defined below). Interest earned on the Deposit is, as stated above, deemed part
of the Deposit and therefore shall be paid to the party entitled to the Deposit
as elsewhere provided in this Agreement.
(b) The balance of the Purchase Price shall be paid at Closing
by wire transfer of immediately available funds.
3. Disposition of Deposit; Defaults.
(a) The Deposit shall be held in escrow and disbursed by the
Title Company in accordance with the terms of this Agreement.
(b) If Buyer, without the right to do so and in default of its
obligations under this Agreement fails to complete Closing, Seller shall have
the right to be paid the Deposit as liquidated damages and not as a penalty.
Buyer and Seller acknowledge that the damages which may be incurred by Seller in
the event of Buyer's default are difficult to quantify as of the date of this
Agreement; the Deposit represents the parties' reasonable estimate of Seller's
probable future damages in the event of Buyer's default; and that the Deposit
represents fair and reasonable compensation to Seller in the event of Buyer's
default. The right of Seller to be paid the Deposit shall be Seller's exclusive
and sole remedy, and Seller waives any right to recover the balance of the
Purchase Price, or any part thereof, and the right to pursue any other remedy
permitted by law or in equity against Buyer.
(c) If Seller, without the right to do so and in default of
its obligations under this Agreement fails to complete Closing or otherwise
defaults under or breaches this Agreement, Buyer shall have the right to be paid
the Deposit, which right shall be in addition to all other rights and remedies
of Buyer under this Agreement, at law or in equity, including without limitation
the right to specific performance and injunctive relief.
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(d) If Closing is completed hereunder, the Title Company shall
pay the Deposit to Seller on account of the Purchase Price.
(e) Notwithstanding anything contained in this Section 3, if
either party terminates this Agreement as a result of the other's default or
pursuant to the exercise of any right of termination conferred by this
Agreement, the Title Company shall not disburse the Deposit until the earlier to
occur of: (i) receipt by the Title Company of written instructions from Seller
and Buyer or (ii) entry of a final adjudication determining which party is
entitled to receive the Deposit, as applicable, at which time the Deposit shall
be distributed in accordance with such written instructions or adjudication. In
the event of a dispute between the parties with respect to the Deposit, the
Title Company may deposit the Deposit with a court of proper jurisdiction in the
City of Philadelphia, Pennsylvania and commence an interpleader action. Upon
notifying Seller and Buyer of the commencement of such action, the Title Company
shall be released of all liability with respect to the Deposit, except to the
extent of accounting for any monies previously delivered by the Title Company
out of escrow. The Title Company shall not be liable to either Seller or Buyer
other than for the performance of its duties under this Agreement, its gross
negligence or intentional wrongdoing. Seller and Buyer agree that any state or
federal court in the City of Philadelphia, Pennsylvania shall be the court of
proper jurisdiction with respect to any dispute concerning the disposition of
the Deposit.
4. Closing. The closing of this transaction ("Closing") shall take place at the
offices of Wolf, Block, Schorr and Solis-Cohen, Twelfth Floor Packard Building,
15th and Chestnut Streets, Philadelphia, Pennsylvania 19102. Closing shall
commence at 10:00 a.m. on October 31, 1997 or such earlier date as shall be
designated by written notice from Buyer to Seller. (the "Closing Date").
5. Condition of Title.
(a) Title to the Property shall be good and marketable and
free and clear of all liens, restrictions, easements, encumbrances, leases,
tenancies and other title objections, except for the Tenant Lease (as defined
below) and the Permitted Encumbrances (as defined below), and shall be insurable
as such and as provided in this Agreement at ordinary rates by the Title Company
pursuant to an ALTA Owner's Policy of Title Insurance, 1970 Form B, amended
October 17, 1970 and October 17, 1984 (the "Owner's Policy of Title Insurance").
The Owner's Policy of Title Insurance shall also contain endorsements insuring
that (A) the covenants, conditions and restrictions included in the Permitted
Encumbrances have not been violated and that a future violation thereof will not
cause a forfeiture or reversion of title, (B) all portions of the Land are
contiguous to each other without any strips or gores between and constitute a
single, contiguous tract, and (C) the Land has direct access to Oak Hill Road
which is a publicly dedicated street owned and maintained by the proper
governmental authority. The premium (at ordinary rates) for the Owner's Policy
of Title Insurance and such endorsements will be paid by Buyer.
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(b) If Seller is unable to convey title to the Property to
Buyer at Closing in accordance with the requirements of this Agreement, Buyer
shall have the options (i) of taking such title as Seller is able to convey with
abatement of the Purchase Price in the amount (fixed or ascertainable) of any
mortgages or other monetary liens on the Real Property, or (ii) of terminating
Buyer's obligations under this Agreement and being repaid the Deposit; and
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upon payment to Buyer of the Deposit, this Agreement shall be null and void and
neither party shall have any obligations hereunder. If Buyer terminates this
Agreement pursuant to this Section 5(b), Seller and Buyer shall immediately
deliver to the Title Company written instructions to pay the Deposit to Buyer.
(c) Promptly after execution of this Agreement, Buyer shall
order a Commitment For Title Insurance ("Title Commitment")from the Title
Company with respect to the Real Property . After receipt of the full Title
Commitment and a new survey of the Land (which new survey shall be obtained by
Buyer, at Buyer's sole cost and expense), Buyer shall give to Seller notice
("Exception Notice") of any exceptions to title set forth in the Title
Commitment which are not acceptable to Buyer ("Unacceptable Exceptions"). Seller
shall, within ten (10) days from the date of Seller's receipt of Exception
Notice, deliver to Buyer an endorsement to the Title Commitment issued by the
Title Company stating which, if any, Unacceptable Exceptions the Title Company
has removed from the Title Commitment; and if the Title Company has not issued
an endorsement to the Title Commitment removing all of the Unacceptable
Exceptions from the Title Commitment within ten (10) days from the date of
Seller's receipt of the Exception Notice, then Buyer shall thereafter have the
right to terminate this Agreement by notice to Seller If Buyer terminates this
Agreement pursuant to the provisions of the preceding sentence, there shall be
no further liability or obligations on the part of Buyer or Seller under this
Agreement and Seller shall cause the Title Company to return to Buyer the
Deposit and all interest accrued thereon. If Buyer does not terminate this
Agreement pursuant to the provisions of this subparagraph 4(c), then the
exceptions remaining on Schedule B, Section 2 of the Title Commitment which are
not liens securing repayment of monetary sums ("Liens") shall be the "Permitted
Encumbrances". Seller agrees fully to pay all Liens and cause all Liens to be
released and satisfied of record prior to the completion of Closing.
6. Possession. Possession of the Property shall be given to Buyer at Closing,
subject only to the right of occupancy of the Tenant under the Tenant Lease by
delivery of Seller's special warranty deed (the "Deed") and bill of sale (the
"Bill of Sale"), duly executed and acknowledged by Seller and in proper form for
recording. If Buyer causes a survey to the Real Property to be made, then at
Buyer's option the description of the Real Property contained in the Deed shall
be based upon that survey.
7. Apportionments; Transfer Taxes
(a)(i) Real estate taxes (on the basis of the actual fiscal
years for which such taxes are assessed) on the Real Property; personal property
taxes on the Personal Property; minimum water and sewer rentals; Base Rent and
Additional Rent and other sums paid by the Tenant to the Seller prior to Closing
under the Tenant Lease; payments due under the Service Agreements (as defined
below) which are to be assigned to Buyer, if any, shall be apportioned pro rata
between Seller and Buyer on a per diem basis as of the Closing Date; provided,
however, that there shall be no apportionment between Buyer and Seller at
Closing with respect to real estate taxes, utility charges and other sums paid
by the Tenant to the taxing
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authorities, utility companies or other third parties pursuant to the Tenant
Lease for a period or periods of time from and after the Closing Date.
(ii) If the Closing Date is not the first day of a
calendar month and if as of the Closing Date the Tenant has not paid the monthly
installment of Base Rent ("Delinquent Installment") due under the Tenant Lease
with respect to the month in which Closing occurs, then at Closing Buyer shall
receive a credit against the Purchase Price in an amount equal to the portion of
the Delinquent Installment applicable to the period of time from and after the
Closing Date and through the balance of the applicable month; and upon Buyer's
receipt of the Delinquent Installment from Tenant, Buyer shall pay the full
amount thereof to Seller.
(iii) If, at Closing, the Property is affected by an
assessment which is payable in installments of which the first installment is
then a charge or lien, or has been paid, then all unpaid installments of such
assessments, including those which are to become due and payable after Closing,
shall be deemed to be due and payable and to be a lien upon the Property and
shall be paid and discharged by Seller at Closing.
(b) Each of Seller and Buyer shall, at Closing, pay one-half
(1/2) of all realty transfer taxes imposed upon the Deed and/or the conveyance
of the Real Property from Seller to Buyer.
8. Representations and Warranties of Seller. Seller, to induce Buyer to enter
into this Agreement and to complete Closing, makes the following representations
and warranties to Buyer, which representations and warranties are true and
correct as of the date of this Agreement, and shall be true and correct at and
as of the Closing Date in all respects as though such representations and
warranties were made both at and as of the date of this Agreement, and at and as
of the Closing Date.
(a) The only lease or other agreement with respect to rights
of use and occupancy of the Property in effect is the Lease Agreement dated
September 26, 1996, between Seller as Landlord, and Dana Perfumes Corp., a New
York corporation ("Tenant"), as Tenant, as amended by an Addendum to Lease
Agreement dated December 11, 1996, between Seller and Tenant (the "Tenant
Lease").
(b) The Tenant Lease is valid and existing and in full force
and effect; the Tenant is in actual possession of the Property; and neither the
Tenant nor the Seller is in default of its respective obligations under the
Tenant Lease.
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(c) The copy of the Tenant Lease previously delivered by
Seller to Buyer and initialed by Seller and Buyer for identification is a true
and complete copy of the Tenant Lease; the Tenant Lease has not been amended,
modified, or supplemented; and the Tenant does not have any right to extend or
renew the Initial Term except as expressly set forth in the Tenant Lease.
(d) The Tenant has not asserted any claim which could
adversely affect the right of the landlord to collect Base Rent or Additional
Rent from the Tenant; and no notice of default or breach on the part of landlord
under the Tenant Lease has been received by Seller from the Tenant which has not
been cured.
(e) Except as provided in the next sentence, all construction,
painting, repairs, alterations, improvements and other work required to be
performed by the landlord under the Tenant Lease (including without limitation
the additional construction referred to in Section 5 of the Tenant Lease), and
all of the other obligations of the landlord required to be performed under the
Tenant Lease as of the Closing Date, have been fully performed and paid for in
full by Seller. The following items are required to be completed by Seller; and
Seller agrees to complete such items (at Seller's sole cost and expense) prior
to Closing in accordance with the requirements of the Tenant Lease and the
provisions of all applicable laws and regulations and in a good and workmanlike
manner: install top coat of paving on the main parking lot; install gravel in
the trailer parking lot; install 2 light poles; and hydroseed lawn areas.
(f) The current term of the Tenant Lease commenced on November
1, 1996, and will expire on October 30, 2001; the Tenant commenced the payment
of rent on November 1, 1996; the current annual minimum fixed rent payable by
Tenant under the Tenant Lease is $365,454; the square footage of the floor area
demised under the Tenant Lease is 105,000 sq. ft. of ground floor area plus a
mezzanine area; the Real Property is in an industrial zoning classification in
which Tenant's use or uses as permitted under the Tenant Lease are permitted;
Seller has heretofore completed in accordance with the requirements of the
Tenant Lease, the mezzanine space described in the Addendum to Lease Agreement,
and Tenant has accepted and is occupying said mezzanine; and Tenant has not
heretofore exercised its option to renew the Tenant Lease, pursuant to Paragraph
14 of the Tenant Lease nor its option to purchase the Premises pursuant to
Paragraph 15 of the Tenant Lease..
(g) The rents and other payments set forth in subsection 8(f)
above and in the Tenant Lease are the actual rents, income and charges presently
being collected by Seller under the Tenant Lease; all minimum rent payable under
the Tenant Lease is payable monthly in advance and there are no restrictions
upon the amount of rent which may be charged or collected under the Tenant Lease
nor upon tenants to whom space can be leased in the Property by virtue of rent
control laws, ordinances, or regulations, or by virtue of existing agreements or
regulations.
(h) Except as set forth in the Tenant Lease, the Tenant is not
entitled to any concession, allowance, rebate or refund.
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(i) The Tenant has not prepaid any rent or other charges for
more than the current month under the Tenant Lease.
(j) No security deposit has been paid by the Tenant under the
Tenant Lease.
(k) No brokerage or leasing commissions or other compensation
is or will be due or payable to any party with respect to or on account of the
Tenant Lease or any extensions or renewals thereof or any other actions by
Tenant thereunder.
(l) Except as expressly set forth in Paragraph 15 of the
Tenant Lease, the Tenant does not have any right or option to acquire the
Property or any portion thereof; and there are no outstanding agreements with
any other party granting any right or creating any obligation to acquire the
Property or any portion thereof or any interest therein.
(m) Seller has not received any notice ("Defect Notice") from
any insurance company which has issued a policy with respect to the Property or
from any board of fire underwriters (or other body exercising similar functions)
claiming any defects or deficiencies in the Property or suggesting or requesting
the performance of any repairs, alterations or other work to the Property.
(n) There are no management, service, equipment, supply,
security, maintenance, construction, concession or other agreements with respect
to or affecting the Property, except for any agreements under which only the
Tenant is bound and except for the agreements listed on Exhibit A to this
Agreement (collectively, the "Service Agreements"); Seller is not in default
under the Service Agreements; each of the Service Agreements designated on
Exhibit A to be assigned to Buyer at Closing is assignable by Seller and will
not be invalidated, violated or otherwise adversely affected by the assignment
thereof or by the transfer of the Property to Buyer; the copies of the Service
Agreements previously delivered by Seller to Buyer and initialed by Seller and
Buyer for identification are true and complete copies of such Service Agreements
and the same have not been amended, modified or supplemented; and each of the
Service Agreements designated on Exhibit A to be terminated shall be terminated
by Seller at or prior to Closing and all sums due thereunder paid in full by
Seller.
(o) No persons are employed by Seller in connection with the
management, operation or maintenance of the Property; and no employment
arrangements with respect to employees at the Property will be binding on Buyer
after Closing.
(p) All buildings and improvements (including all roads,
parking areas, curbs, sidewalks, sewers and other utilities) included within the
Property have been completed and installed in accordance with the plans and
specifications therefor approved by the governmental authorities having
jurisdiction; no municipal or other governmental improvements affecting the
Property are in the course of construction or installation, and no such
improvement
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has been ordered to be made; all street paving, curbing, sanitary sewers, storm
sewers and other municipal or other governmental improvements which have been
constructed or installed have been paid for and will not hereafter be assessed,
and all assessments heretofore made have been paid in full; and there are no
private contractual obligations relating to the installation of or connection to
any sanitary sewers or storm sewers.
(q) All permanent certificates of occupancy and all other
licenses, permits, authorizations, consents, certificates and approvals required
by all governmental authorities having jurisdiction and the requisite
certificates of the local board of fire underwriters (or other body exercising
similar functions) have been issued for the Property, have been paid for, are in
full force and effect, are assignable by Seller, and will not be invalidated,
violated or otherwise adversely affected by the assignment thereof or by the
transfer of the Property to Buyer.
(r) The current zoning classification of the Real Property
under the Zoning Code of Wright Township is I-1 and the construction, operation
and use of the buildings and other improvements constituting the Real Property
do not violate any zoning, subdivision, building or similar law, ordinance,
order, regulation or recorded plat or any certificate of occupancy issued for
the Property; no zoning variances, special exceptions or zoning board of
adjustment certificates were issued for the construction of the Property or for
its present use; and the buildings and improvements on the Real Property are not
non-conforming uses or structures.
(s) No portion of the Property and no method of operation of
the Property is in violation ("Violation") of any applicable law, ordinance,
code, rule, order, regulation or requirement of any governmental authority, the
requirements of any local board of fire underwriters (or other body exercising
similar functions), and there are no presently outstanding and uncured notices
of Violations.
(t) Seller has no knowledge of any defective condition,
structural or otherwise, with respect to the Property; and to Seller's knowledge
the heating, ventilating and air conditioning, plumbing, sprinkler, electrical
and drainage systems, roofs, and all other fixtures, equipment and systems at or
serving the Property are in good condition, repair and working order.
(u) Exhibit B to this Agreement sets forth the only fire and
extended coverage insurance policies ("Policy") maintained by Tenant with
respect to the Property; the Policy is in full force and effect and all premiums
due thereunder have been paid; and neither Seller nor (to Seller's knowledge)
Tenant has received any notice from the insurance companies which issued the
Policy, indicating that the Policy will not be renewed or will be renewed at a
higher premium than is presently payable therefor.
(v) There is no action, suit or proceeding pending or, to the
knowledge of Seller, threatened against or affecting Seller or the Property or
any portion thereof or the
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Tenant Lease or relating to or arising out of the ownership, management or
operation of the Property, in any court or before or by any federal, state,
county or municipal department, commission, board, bureau or agency or other
governmental instrumentality. Seller has informed Buyer that Seller was
contacted by a representative of the County Engineer concerning run off water
that was collecting in County maintained land adjacent to Crestwood Drive, and
Seller asserted that this is not Seller's responsibility and that no further
contacts were made to Seller in this regard. Buyer agrees that the matters in
the preceding sentence are not a breach of Seller's representations and
warranties herein.
(w) All real estate taxes currently due and payable with
respect to the Property have been paid; the Property constitutes a separate tax
parcel and is separately assessed for real estate tax purposes; there is no
proceeding pending for the adjustment of the assessed valuation of all or any
portion of the Property; the Property has been assessed and real estate taxes
have been paid on the basis of the value of all improvements as completed; and
there is no abatement, reduction or deferral in effect with respect to all or
any portion of the real estate taxes or assessments applicable to the Property.
(x) No portion of the Property is located within an area
designated as a flood hazard area or an area which will require the purchase of
flood insurance for the obtaining of any federally insured or federally related
loan; no portion of the Real Property is located in any area constituting a
"wetland".
(y) Water, sanitary sewer, storm sewer, drainage, electric,
telephone, gas, and other public utility systems and lines serve the Property
with capacity and in a manner adequate for the present use of the Property and
are directly connected to the lines and/or other facilities of the respective
public authorities or utility companies providing such services or accepting
such discharge, either adjacent to the Real Property or through easements or
rights of way appurtenant to and forming a part of the Real Property; such
easements or rights-of-way have been fully granted, and all charges therefore
have been fully paid by Seller and all charges for the aforesaid utility systems
and the connection of the Real Property to such systems, including without
limitation connection fees, "tie-in" charges and other charges now or hereafter
to become due and payable, have been fully paid by Seller; and the water and
sanitary sewer service described above is supplied by public authority.
(z) Seller has not received any notice of any condemnation
proceeding or other proceedings in the nature of eminent domain ("Taking") in
connection with the Property, and to Seller's knowledge no Taking has been
threatened.
(aa) The Real Property has direct access to Oak Hill Road; and
Oak Hill Road is a public street owned and maintained by the applicable
municipal authority.
(bb) All of the books, records, information, data and other
items supplied by Seller to Buyer are true, complete and correct in all material
respects, and fairly and accurately presented the results of operations of the
Property.
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9. Operations Prior to Closing. Between the date of this Agreement and Closing:
(a) Seller shall, at its expense: perform all of its
obligations under the Tenant Lease and shall use its best efforts to cause the
Tenant to perform all of its obligations under the Tenant Lease; and cure (or
cause the Tenant to cure) all notices of any Violations and/or Defect Notices
issued prior to Closing .
(b) Seller shall not enter into any agreement to modify, amend
or otherwise alter any of the terms or provisions of the Tenant Lease or any of
the Service Agreements; and Seller shall not enter into an new lease or other
agreement with respect to the use or occupancy of the Property and/or the
maintenance thereof, without the prior written consent of Buyer.
(c) Seller shall perform all acts, and shall make all
payments, necessary to cause the representations and warranties of Seller in
Section 8 of this Agreement to be true and correct.
(d) (i) Buyer, its attorneys, accountants, architects,
engineers and other representatives shall be afforded access to the Property and
to all books, records and files relating thereto from time to time prior to
Closing for the purposes of inspections, preparation of plans, taking of
measurements, making of surveys, making of appraisals, and generally for the
ascertainment of the condition of the Property, including but not limited to the
physical and financial condition of the Property; and there shall be furnished
to Buyer all plans and specifications, engineering reports, feasibility studies,
operating statements, governmental permits and approvals, contracts, leases,
surveys, title information and other documentation concerning the Property in
the possession of Seller and/or Seller's management agent for the Property.
(ii) Buyer, its attorneys, accountants and other
representatives, shall be permitted to make and are authorized to make any
searches of governmental records as they deem necessary with respect to the
Property; and Seller agrees fully to cooperate with Buyer and its attorneys and
other representatives in this regard and to issue any consents or authorizations
required therefor.
(iii) Buyer agrees to indemnify, defend and reimburse
Seller for all costs, expenses (including, without limitation, attorney's fees,
consultant and expert fees and court costs) loss and liabilities suffered or
incurred by Seller as the result of any injuries to persons or properties caused
by Buyer's entry upon the Property prior to Closing pursuant to the provisions
of this Section 9(d) and Section 14(b)(ii)(D) below. The obligations of Buyer
pursuant to this Section 9(d)(iii) shall survive Closing and/or any termination
of this Agreement.
(e) Promptly after receipt thereof by Seller, Seller shall
deliver to Buyer the following:
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(i) a copy of any notice of default given or received
under the Tenant Lease or the Service Agreements;
(ii) a copy of any tax bill, notice or statement of
value, or notice of change in a tax rate affecting or relating to the Property;
(iii) a copy of any notice of an actual or alleged
Violation; and
(iv) a copy of any notice of Taking.
(f) Seller shall complete and deliver for execution by Tenant
a written certification in the form of Exhibit C to this Agreement ("Tenant
Estoppel Certificate"); and shall obtain an executed Tenant Estoppel Certificate
(dated no more than ten (10) days prior to the Closing Date) from Tenant. Seller
shall deliver to Buyer a copy of the executed Tenant Estoppel Certificate
delivered to Seller promptly after receiving such certificate.
(g) Seller shall deliver for execution by Tenant a
Subordination, Non-Disturbance and Attornment agreement in the form required by
Buyer's lender ("SNDA"); and Seller shall obtain an executed SNDA from Tenant.
Seller shall deliver to Buyer a copy of the executed SNDA delivered to Seller
promptly after receiving such SNDA.
10. Environmental Matters.
(a) Seller represents and warrants to Buyer that to the best
of Seller's knowledge:
(i) The Property and all activities and conditions at
the Property are in compliance with all applicable federal, state and local
environmental statutes, ordinances, regulations, orders and requirements of
common law, including without limitation: those relating to the construction,
operation, maintenance or repair of any improvements or equipment; the
discharge, emission or release of any item or substance to the air, soil,
surface water or ground water; the discharge of any dredge or fill material to a
wetland or other water of the United States; the storage, treatment, disposal or
handling of any Contaminant; or the construction, operation, maintenance or
repair of aboveground or underground storage tanks (collectively, "Environmental
Laws").
(ii) No item or substance ("Contaminant") that may
require remediation under any Environmental Law is present on, over or under or
is migrating from the Property.
(iii) Neither Seller, nor, to Seller's actual knowledge,
Tenant or any other party has generated, stored, treated, disposed of,
discharged, released, emitted or
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otherwise handled any Contaminant on, over, under, from or in any manner
affecting the Property or any premises adjacent to the Property. For the
purposes of this subsection (iv) only, "Contaminant" shall not include office
equipment, fuel and other similar products contained in vehicles and cleaning
solutions and other maintenance materials that are customarily used or stored
incidental to and are reasonably necessary for the operation or maintenance of
the Property.
(iv) Neither the Property nor any adjacent premises, is
listed or proposed for listing on the National Priorities List established
pursuant to Section 105(8)(B) of CERCLA, 42 U.S.C. ss.9605(8)(B), or on any
other hazardous site list promulgated by any federal, state or local government
or governmental agency.
(v) No underground or above ground storage tanks are
present at the Property.
(vi) Seller has provided Buyer with copies of all: (A)
permits, licenses, certificates, registrations, approvals, and any amendments
thereto required for the Property pursuant to or necessary for compliance with
Environmental Laws; (B) applications, reports or other materials submitted to
any governmental agency in connection with any Environmental Law; (C) records or
manifests required to be maintained pursuant to Environmental Laws or which are
relevant to the issue of compliance with Environmental Laws; (D) correspondence,
notices of violation, summonses, orders, administrative, civil or criminal
complaints, requests for information or other documents received by Seller or
its agents pertaining to compliance with Environmental Laws or the generation,
storage, treatment, handling, discharge, emission, release or migration of any
Contaminant on, over, under, from or affecting the Property; and (E) records and
analyses of any environmental tests pertaining to the Property, including
without limitation the results of any air, water or soil analyses or tank
integrity testing, which are in the possession of Seller for the Property or the
existence of which is known to Seller. Notwithstanding the foregoing provisions
of this subparagraph 10(a)(vi), the provisions set forth above in this
subparagraph 10(a)(vi) are limited to those items in Seller's actual possession.
(vii) No civil, criminal or administrative proceeding is
pending or threatened relating to Environmental Laws or Contaminants on, over,
under, from or affecting the Property; neither Seller nor Tenant has received
any notice of violation or potential liability regarding the Property or
activities thereon relating to Environmental Law or Contaminants on, over,
under, from or affecting the Property and Seller has no reason to believe such
notices will be received and has no reason to know of circumstances that would
give rise to such notices or proceedings in the future; neither Seller nor
Tenant has entered into any consent order, consent decree, administrative order,
judicial order or settlement relating to Environmental Laws or Contaminants on,
over, under, migrating from or affecting the Property.
(b) Seller will assist Buyer in giving notice to applicable
government agencies and in transferring or reissuing to Buyer any permit,
license, certificate, registration or
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other approval necessary to continue operations at the Property, or in obtaining
for Buyer any new permit, license, certificate, registration or approval
required of Buyer under any Environmental Law.
(c) Seller agrees to indemnify, hold harmless, defend and
reimburse Buyer for, and release Buyer from, all cost, expense, loss and
liability (including without limitation common law and statutory liability)
suffered by Buyer from or in connection with any of the following: (i) Seller's
breach of any of the provisions in this Section 10; (ii) compliance with
Environmental Laws incurred on account of the status of or conditions existing
at the Property before Closing; (iii) studying or remedying contamination or
suspected contamination of the Property by any Contaminant, which contamination
existed before Closing; (iv) costs incurred due to any investigation of the
Property or any cleanup, removal, remediation or any restoration required by a
federal, state or local governmental agency or political subdivision or court;
arising out of the condition of the Property before Closing; and (v) claims,
sums paid for settlement of claims, damages, fines, penalties, judgments or
other sanctions incurred, arising out of, relating to or on account of any
Environmental Laws or the presence of any Contaminants (including but not
limited to any personal injury or property damage relating thereto) arising out
of the condition of the Property before Closing.
(e) None of the remedies described in this Section 10 shall
exclude or limit Buyer's common law rights of recovery, contribution or other
legal redress, or Buyer's right to obtain statutory relief, including but not
limited to a cost recovery action under CERCLA or other federal, state or local
statutes providing for similar remedies and the right to specific performance.
11. Casualty.
(a) Seller shall maintain (or cause the Tenant to maintain)
the Policy in effect until the time of Closing, and shall cause the Tenant to
deliver to Buyer, within ten (10 ) days after the date of this Agreement, an
endorsement to the Policy issued by the insurance company issuing the Policy
evidencing that the Policy is in effect, and that the Policy will not be
canceled or materially modified without at least thirty (30) days prior written
notice to Buyer.
(b) If at any time prior to the Closing Date any portion of
the Property is destroyed or damaged as a result of fire or any other casualty
("Casualty"), Seller shall promptly give written notice ("Casualty Notice")
thereof to Buyer. If the Property is the subject of a Casualty, Buyer shall have
the right, at its sole option, of terminating this Agreement (by written notice
to Seller and the Title Company given within thirty (30) days after receipt of
the Casualty Notice from Seller) unless, (i) the cost fully to repair or restore
such damage is less than Twenty Five Thousand Dollars ($25,000) and sufficient
insurance proceeds are available fully to restore such damage, and (ii) the
insurance company issuing the Policy has confirmed in writing prior to the end
of such thirty (30) day period that such Casualty is covered by the Policy and
that no defense to payment of the claim exists, and (iii) such Casualty will not
result in the Tenant terminating the Tenant Lease or asserting a right to
terminate the Tenant Lease, and (iv) any loan
14
<PAGE>
commitment obtained by Buyer for financing to acquire the Property is not
canceled or suspended as a result of such Casualty. If a Casualty Notice is
given to Buyer less than thirty (30) days prior to Closing, at Buyer's option
Closing shall be postponed to a date not earlier than thirty (30) days after
Buyer's receipt of the Casualty Notice. If Buyer terminates this Agreement
pursuant to this Section 11(b), Seller and Buyer shall forthwith deliver to the
Title Company written instructions to pay the Deposit to Buyer. If Buyer does
not terminate this Agreement, the proceeds of any insurance with respect to the
Property paid between the date of this Agreement and the Closing Date together
with an amount equal to Seller's deductible under the Policy, shall be paid to
Buyer at the time of Closing and all unpaid claims and rights in connection with
losses to the Property shall be assigned to Buyer at Closing without in any
manner affecting the Purchase Price.
(c) If the Property is the subject of a Casualty, but Buyer
does not have the right to terminate this Agreement pursuant to the provisions
of Section 11(b) above (or Buyer does not exercise such right), then Seller
shall promptly cause all temporary repairs to be made to the Property as shall
be required to prevent further deterioration and damage to the Property;
provided, however, that any such repairs shall first be approved by Buyer.
Seller shall have the right to be reimbursed from the proceeds of any insurance
with respect to the Property paid between the date of this Agreement and the
Closing Date for the cost of all such repairs made pursuant to this Section
11(c). Except for the obligation of Seller to repair the Property set forth in
this Section 11(c), Seller shall have no other obligation to repair any Casualty
damage in the event Buyer does not elect to terminate this Agreement pursuant to
the provisions of Section 11(b), and in such event, Buyer shall accept the
Property at Closing as damaged or destroyed by the Casualty and Buyer shall have
the right to enter the Real Property prior to Closing for the purpose of
performing such repairs thereto as are reasonably necessary to protect the
Property against further damage prior to the Closing Date.
(d) At Closing, Seller shall assign to Buyer all of Seller's
rights, title and interest in, to and under the Policy maintained by the Tenant
under the Tenant Lease; and Seller shall deliver to Buyer the Policy and an
endorsement to the Policy reflecting that Buyer has become the insured party
thereunder.
12. Eminent Domain. If at any time prior to the Closing Date: a Taking affects
all or any part of the Property, or if any proceeding for a Taking is commenced,
or if notice of the contemplated commencement of a Taking is given, Seller shall
promptly give written notice ("Taking Notice") thereof to Buyer. Buyer shall
have the right, at its sole option, of terminating this Agreement by written
notice to Seller within thirty (30) days after receipt by Buyer of the Taking
Notice. If a Taking Notice is given to Buyer less than thirty (30) days prior to
Closing, at Buyer's option Closing shall be postponed to a date not earlier than
thirty (30) days after Buyer's receipt of the Taking Notice. If Buyer terminates
this Agreement pursuant to this Section 12, Seller and Buyer shall forthwith
deliver to the Title Company written instructions to pay the Deposit to Buyer.
If Buyer does not terminate this Agreement, the Purchase Price shall be reduced
by the total of any awards or damages received by Seller and Seller shall, at
Closing, be deemed to have assigned to Buyer all of Seller's right, title and
interest in and to any awards or
15
<PAGE>
damages to which Seller may have become entitled or may thereafter be entitled
by reason of any exercise of the power of eminent domain or condemnation with
respect to or for the Taking of the Property or any portion thereof.
13. Conditions of Buyer's Obligations.
(a) The obligations of Buyer under this Agreement are subject
to the satisfaction at the time of Closing of each of the following conditions
(any one of which may be waived in whole or in part in writing by Buyer at or
prior to Closing):
(i) all of the representations and warranties by Seller
set forth in this Agreement shall be true and correct;
(ii) no representation or warranty by Seller contained
in this Agreement shall contain any untrue statement or shall omit a material
fact necessary to make the statement of fact therein recited not misleading;
(iii) Seller shall have performed all covenants,
agreements and conditions required by this Agreement to be performed by Seller
prior to or as of the Closing Date;
(iv) there shall have been no material adverse change in
the financial condition of Seller or Tenant during the period from the date of
this Agreement to the Closing Date; and
(v) Buyer shall have received the executed Tenant
Estoppel Certificate and SNDA from the Tenant under the Tenant Lease.
(b) In the event any of the conditions set forth in Section
13(a) are not satisfied as of the Closing Date, Buyer shall have the right (in
addition to all other rights and remedies available to Buyer under this
Agreement, at law or equity), at Buyer's sole option (by written notice to
Seller) to (i) terminate Buyer's obligations under this Agreement, or (ii)
complete Closing notwithstanding the unsatisfied condition, or (iii) if such
condition is not fulfilled by reason of Seller's intentional act or omission and
can be remedied by the payment of an ascertainable sum, Buyer may complete
Closing and deduct such sum from the Purchase Price.
14. Inspection Period.
16
<PAGE>
(a) Buyer shall, during the period ("Inspection Period") which
shall commence as of the date of this Agreement and which shall end on the first
business day to occur 45 days after the date of this Agreement, have the
opportunity to examine the Property, the Tenant Lease, the Service Agreements,
the Policy, the Permitted Encumbrances and any items to be delivered by Seller
to Buyer, and to conduct such other inspections of the Property (including,
without limitation, environmental surveys and inspections and engineering
surveys and inspections) as Buyer, in its discretion, may elect.
(b) (i) Seller acknowledges that Buyer may commission, prior
to Closing, at Buyer's sole cost and expense, an investigation of (without
limitation): compliance with Environmental Laws, the presence of Contaminants
on, over, under, migrating from or affecting the Property including without
limitation in connection with the use and operation of any Personal Property,
and the presence of conditions that may affect Buyer's intended use.
(ii) Seller will cooperate with Buyer and Buyer's agents
in Buyer's investigation, including without limitation: (A) complying with
requests for information and records; (B) warranting that responses to such
requests are true and complete; (C) assisting Buyer in obtaining governmental
agency or other records and upon Buyer's request communicating directly with any
governmental agencies; (D) granting Buyer access to the Property including,
without limitation, access for collecting surface or subsurface samples of soil,
vegetation or water, or samples from buildings and other improvements and
Personal Property located on the Property, including samples from walls, floors,
ceilings, plenums, paved areas and other areas the taking of which samples may
necessitate some damage to the buildings, other improvements or the Personal
Property, and installing groundwater monitoring wells; and (E) delivery to Buyer
any communications, letters, inquiries or notices received by Seller from any
regulatory body dealing with environmental matters, water quality, air quality,
life safety and OSHA and with all reports which may have been prepared within
the past five years addressing the presence of PCB emissions, asbestos or other
hazardous materials or waste. Buyer's investigations shall in no way limit or
otherwise affect Seller's representations and warranties under this Agreement.
(c) Buyer shall have the right, at Buyer's sole option, to
elect to terminate this Agreement (for any reason whatsoever) by giving notice
of such termination to Seller on or prior to the second business day to occur
after the date on which the Inspection Period ends. If Buyer terminates this
Agreement pursuant to this Section 14(c), Seller and Buyer shall forthwith
deliver to the Title Company written instructions to pay the Deposit to Buyer;
and this Agreement shall be null and void and neither party shall have any
further obligations under this Agreement.
15. Items to be Delivered at Closing.
(a) At Closing, Seller shall deliver to Buyer the following:
17
<PAGE>
(i) The Deed.
(ii) The Bill of Sale.
(iii) Assignments in the form of Exhibits D and E,
respectively, of the Tenant Lease and the Service Agreements designated on
Exhibit A to be assigned to Buyer, duly executed and acknowledged by Seller and
in proper form for recording, assigning to Buyer all of the lessor's and
Seller's rights, title and interest in the Tenant Lease and such Service
Agreements, together with all correspondence between Seller and the Tenant, an
original executed copy of the Tenant Lease and each such Service Agreement and a
letter, duly executed by Seller, in form satisfactory to Buyer addressed to
Tenant and other parties under the Service Agreements informing it of the
assignments. Seller shall also deliver to Buyer at Closing evidence of Seller's
termination of those Service Agreements not assigned to Buyer and payment of all
sums owing to the parties to such Service Agreements.
(iv) An assignment, duly executed and acknowledged by
Seller, of (and delivery to Buyer of originals or copies of): all permanent
certificates of occupancy and all other licenses, permits, authorizations,
consents, certificates and approvals required by all governmental authorities
having jurisdiction over the Property; all fees, escrow and/or security funds,
deposits and other sums heretofore paid by Seller to any governmental authority
in connection with the Property; all certificates issued by the local Board of
Fire Underwriters (or other body exercising similar functions); all plans,
specifications and project manuals for the Property in Seller's possession; and
all guarantees, bonds and warranties with respect to the Property (together with
original counterparts of such instruments).
(v) An original counterpart of the Tenant Estoppel
Certificate and the SNDA.
(vi) Such resolutions and certificates as the Title
Company shall require to evidence the due authorization of the execution and
performance of this Agreement and the documents to be delivered pursuant hereto;
and all affidavits, indemnities and other agreements required by the Title
Company to permit it to issue to Buyer the Owner's Policy of Title Insurance
required pursuant to Section 5(a).
(vii) A statement, certified by Seller (and accompanied
with all relevant back-up documentation ) setting forth all information
necessary or required to permit Buyer to calculate and collect after Closing all
payments of additional rent and other charges due under the Tenant Lease. (viii)
All proper instruments for the conveyance of the awards referred to in Sections
1(a) and 12.
(ix) Duplicate copies of all books, records and
operating reports in Seller's possession which are necessary to insure
continuity of operation of the Property.
18
<PAGE>
(x) Any other documents required to be delivered by
Seller pursuant to any other provisions of this Agreement.
(b) At Closing, Buyer shall deliver to Seller the following:
(i) The portion of the Purchase Price payable pursuant
to Section 2(b).
(ii) Assumption agreements, in the form of Exhibits D
and E respectively, of the Tenant Leases and of the Service Agreements
designated on Exhibit A to be assigned to Buyer, duly executed and acknowledged
by Buyer and in proper form for recording.
(iii) Any other document required to be delivered by
Buyer pursuant to any other provisions of this Agreement.
16. Indemnity by Seller.
(a) Seller agrees to indemnify, defend and hold harmless Buyer
from and against, and to reimburse Buyer with respect to, any and all claims,
demands, causes of action, losses, damages, liabilities, costs and expenses
(including without limitation reasonable attorney's fees and court costs)
asserted against or incurred by Buyer by reason of or arising out of (i) a
breach of any representation or warranty of Seller as set forth in this
Agreement, and (ii) the failure of Seller to perform any obligation required by
this Agreement to be performed by it.
(b) Subject to the provisions of subparagraph 3(b) above,
Buyer agrees to indemnify, defend and hold harmless Seller from and against, and
to reimburse Seller with respect to, any and all claims, demands, causes of
action, losses, damages, liabilities, costs and expenses (including without
limitation, reasonable attorney's fees and court costs) asserted against or
incurred by Seller by reason of or arising out of (i) a breach of any
representation or warranty of Buyer set forth in this Agreement, and (ii) the
failure of Buyer to perform any obligation required by this Agreement to be
performed by it.
(c) Notwithstanding any provision of this Agreement to the
contrary, it is understood and agreed that the remedy of indemnity pursuant to
this Section 16 and Buyer's remedies at law may be inadequate in the case of any
breach by Seller of its representations, warranties and obligations under this
Agreement, and Seller agrees that Buyer shall be entitled to equitable relief
and the remedy of specific enforcement with respect thereto.
17. Brokerage. Each of Seller and Buyer represents and warrants to the other
that it has dealt with no broker, finder or other intermediary in connection
with this sale. In reliance upon the representation and warranty of Buyer set
forth in the preceding sentence, Seller agrees
19
<PAGE>
to pay all brokerage commissions due to broker, finder or other intermediary
claiming a commission in connection with this sale.
18. No Other Representations. Buyer acknowledges that neither Seller nor anyone
acting, or purporting to act, on behalf of Seller, has, except as expressly set
forth in this Agreement, made any representation or warranty with respect to the
Property.
19. Successors and Assigns. This Agreement shall be binding upon, and shall
inure to the benefit of, the parties hereto and their respective successors and
assigns.
20. FIRPTA.
(a) Section 1445 of the Internal Revenue Code of 1986, as
amended (the "Code") provides that a transferee of a United States real property
interest must withhold tax if the transferor is a foreign person. To inform
Buyer that withholding of tax is not required upon the disposition by Seller of
a United States real property interest, the undersigned parties executing this
Agreement on behalf of Seller hereby certify the following on behalf of Seller:
(i) Seller is not a foreign corporation, foreign
partnership, foreign trust, or foreign estate (as those terms are defined in the
Code and Income Tax Regulations);
(ii) Seller's U.S. employer identification number is ;
and
(iii) Seller's office address is:
639 South Main Street
Wilkes-Barre, PA 18702
Seller, and the parties executing this Agreement on behalf of Seller, understand
that this certification may be disclosed to the Internal Revenue Service by
Buyer and that any false statement made here could be punished by fine,
imprisonment, or both. Under penalties of perjury, the undersigned parties
executing this Agreement on behalf of Seller declare that they have examined
this certification and to the best of their knowledge and belief, it is true,
correct and complete; and they further declare that they have authority to sign
this document on behalf of Seller.
(b) Seller, and the parties executing this Agreement on behalf
of Seller, shall deliver to Buyer at Closing, a restatement of the above
certifications of Seller and of the parties executing this Agreement on behalf
of Seller in the form attached to this Agreement as Exhibit F.
21. Notices.
20
<PAGE>
(a) All notices, demands, requests or other communications
from each party to the other required or permitted under the terms of this
Agreement shall be in writing and, unless and until otherwise specified in a
written notice by the party to whom notice is intended to be given, shall be
sent to the parties at the following respective addresses:
if intended for Buyer:
The Widener Building, Suite 200
One South Penn Square
Philadelphia, PA 19107
Attention: Jeffrey E. Kelter
Fax: 215-972-0819
if intended for Seller:
c/o Guaranty Bank
639 South Main Street
Wilkes-Barre, PA 18702
Fax: _____________
Notices may be given on behalf of any party by its legal counsel.
(b) Each such notice, demand, request or other communication
shall be given (i) against a written receipt of delivery, or (ii) by registered
or certified mail of the United States Postal Service, return receipt requested,
postage prepaid, or (iii) by a nationally recognized overnight courier service
for next business day delivery, or (iv) via telecopier or facsimile transmission
to the facsimile number listed above, provided, however, that if such
communication is given via telecopier or facsimile transmission, an original
counterpart of such communication shall concurrently be sent in either the
manner specified in clause (i) or (iii) above.
(c) Each such notice, demand, request or other communication
shall be deemed to have been given upon the earliest of (i) actual receipt or
refusal by the addressee, or (ii) deposit thereof at any main or branch United
States post office if sent in accordance with section (b)(ii) above or (iii)
deposit thereof with the courier if sent pursuant to section (b)(iii) above.
22. Miscellaneous.
(a) Captions. The captions in this Agreement are inserted for
convenience of reference only; they form no part of this Agreement and shall not
affect its interpretation.
21
<PAGE>
(b) Entire Agreement; Governing Law. This Agreement contains
the entire understanding of the parties with respect to the subject matter
hereof, supersedes all prior or other negotiations, representations,
understandings and agreements (including, without limitation, the letter of
intent between Seller and Buyer dated February 4, 1997) among the parties,
express or implied, oral or written, which are fully merged herein. The express
terms of this Agreement control and supersede any course of performance and/or
customary practice inconsistent with any such terms. Any agreement hereafter
made shall be ineffective to change, modify, discharge or effect an abandonment
of this Agreement unless such agreement is in writing and signed by the party
against whom enforcement of such change, modification, discharge or abandonment
is sought. This Agreement shall be governed by and construed under the laws of
the Commonwealth of Pennsylvania.
(c) Provisions Separable. The provisions of this Agreement are
independent of and separable from each other, and no provision shall be affected
or rendered invalid or unenforceable by virtue of the fact that for any reason
any other provision may be invalid or unenforceable in whole or in part.
(d) Waiver of Tender of Deed and Purchase Monies. The tender
of an executed Deed by Seller and the tender by Buyer of the Purchase Price are
mutually waived, but nothing in this Agreement shall be construed as a waiver of
Seller's obligation to deliver the Deed and/or of the concurrent obligation of
Buyer to pay the portion of the Purchase Price payable at Closing.
(e) Gender, etc. Words used in this Agreement, regardless of
the number and gender specifically used, shall be deemed and construed to
include any other number, singular or plural, and any other gender, masculine,
feminine or neuter, as the context indicates is appropriate.
(f) Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original as against any
party whose signature appears thereon, and all of which shall together
constitute one and the same instrument. This Agreement shall be binding when one
or more counterparts hereof, individually or taken together, shall bear the
signatures of all of the parties reflected on this Agreement as the signatories.
(g) Exhibits. All exhibits attached to this Agreement are
incorporated by reference into and made a part of this Agreement.
(h) No Waiver. Neither the failure nor any delay on the part
of either party to this Agreement to exercise any right, remedy, power or
privilege under this Agreement shall operate as a waiver thereof, nor shall any
single or partial exercise of any right, remedy, power or privilege preclude any
other or further exercise of the same or of any other right, remedy, power or
privilege, nor shall any waiver of any right, remedy, power or privilege with
respect to any occurrence be construed as a waiver of any such right, remedy,
power or privilege with respect to any other occurrence. No waiver shall be
effective unless it is in writing and is signed by the party asserted to have
granted such waiver.
22
<PAGE>
(i) Interpretation. No provision of this Agreement is to be
interpreted for or against either party because that party or that party's legal
representative or counsel drafted such provision.
(j) Time. Time is of the essence of this Agreement. In
computing the number of days for purposes of this Agreement, all days shall be
counted, including Saturdays, Sundays and holidays; provided, however, that if
the final day of any time period provided in this Agreement shall end on a
Saturday, Sunday or legal holiday, then the final day shall extend to 5:00 p.m.
of the next full business day. For the purposes of this Section, the term
"holiday" shall mean a day other than a Saturday or Sunday on which banks in the
Commonwealth of Pennsylvania are or may elect to be closed.
(k) Attorney's Fees. In connection with any litigation arising
out of this Agreement, the prevailing party shall be entitled to recover all
costs incurred, including reasonable attorney's fees. However, the provisions of
this Section are expressly subject to the limitation on Buyer's liability
specified in Section 3.
(l) Terms Defined in Tenant Lease. Terms used in this
Agreement of Sale with initial capitalization which are defined in the Tenant
Lease shall have the meaning in this Agreement of Sale as are ascribed to them
in the Tenant Lease.
(m) Buyer's Exercise of Right to Terminate. If Buyer desires
to terminate its obligations under this Agreement pursuant to any of the
provisions hereof, Buyer shall do so by delivering written notice of termination
to Seller, with a copy to the Title Company. Upon any such termination, or upon
termination of this Agreement pursuant to Section 14(c), the Deposit and all
interest earned thereon shall be paid to Buyer, and except as otherwise
expressly provided herein, this Agreement shall be and become null and void and
neither party shall have any further rights or obligations under this Agreement.
(n) Survival. All of the agreements, representations and
warranties of Seller and Buyer under this Agreement shall survive Closing and
delivery of the Deed.
IN WITNESS WHEREOF, intending to be legally bound, the parties have
executed this Agreement as a sealed instrument as of the day and year first
above written.
Witness: SELLER:
(Seal)
JOHN D. MORAN, SR.
BUYER:
PENN SQUARE PROPERTIES, INC.
By: /s/ Jeffrey E. Kelter
-------------------------
President
23
<PAGE>
EXHIBIT A
SERVICE AGREEMENTS
<TABLE>
<CAPTION>
To Be
Date Parties Services Assigned Terminated
---- ------- -------- -------- ----------
<S> <C> <C> <C> <C>
NONE
</TABLE>
<PAGE>
EXHIBIT B
FIRE AND EXTENDED COVERAGE INSURANCE POLICY
<PAGE>
EXHIBIT C
TENANT ESTOPPEL CERTIFICATE
DANA PERFUMES CORP.
_________________________________
_________________________________
Dated ______, 1997
Penn Square Properties, Inc.
Widener Building, Suite 200
One South Penn Square
Philadelphia, PA 19107
[Add here the Buyer's mortgagee as additional addressee]
Re: _________________________________
Dear Ladies and Gentlemen:
Dana Perfumes Corp., a New York corporation ("Tenant") hereby
certifies and agrees as follows:
1. Tenant is the Tenant of the Premises under that certain Lease Agreement dated
September 26, 1996, by and between John D. Moran, Sr. t/a/d/b/a Moran
Industries, as Landlord and Tenant as Tenant, as amended by an Addendum to Lease
Agreement dated December 11, 1996 (the "Lease"). Terms which have a defined
meaning in the Lease shall have the same meaning when used in this letter.
2. The Lease is valid and existing and in full force and effect; Tenant is in
actual possession of the entire of the Premises; Tenant is not in default of any
of its obligations under the Lease and no event has occurred which, with the
giving of notice and expiration of a cure period, will result in a default by
the Tenant under the Lease; and Landlord is not in default of any of its
obligations under the Lease and no event has occurred which, with the giving of
notice and the expiration of a cure period, will result in a default by Landlord
under the Lease.
3. The copy of the Lease attached to this letter is a true and complete copy of
the Lease; the Lease has not been amended, modified or supplemented; the Tenant
does not have any right to extend or renew the Initial Term except as expressly
set forth in the Lease; and there do
<PAGE>
not exist any other agreements concerning the Premises between Landlord (or any
other party which now or previously had an interest in the Premises) and Tenant.
4. Tenant has not asserted any claim which could adversely affect the right of
the Landlord to collect rent or additional rent from Tenant; Tenant has no claim
or offset under the Lease or otherwise against rent or additional rent or other
charges due or to become due under the Lease; and no notice of default or breach
on the part of the Landlord under the Lease has been given by Tenant, which has
not been cured.
5. All construction, painting, repairs, alterations, improvements and other work
required to be performed by the Landlord under the Lease (including, without
limitation, the improvements required to be constructed and installed by
Landlord pursuant to the provisions of Section 5 of the Lease and the Addendum
to Lease Agreement), and all other obligations of the Landlord required to be
performed under the Lease, have been fully performed by the Landlord and
accepted by the Tenant as of the date of this letter.
6. The current term of the Lease commenced on November 1, 1996, and will expire
on October 31, 2001; Tenant has no right to renew or extend the Lease term
except as follows: one 5-year renewal option; Tenant commenced the payment of
rent on November 1, 1996; the current annual base or fixed rent payable by
Tenant under the Lease $392,840; and no rent under the Lease has been or will be
paid more than thirty days in advance of its due date.
7. The rents and other payments set forth in Section 6 above and in the Lease
are the actual rents, income and charges presently being paid by Tenant under
the Lease.
8. Except as expressly set forth in the Lease, Tenant is not entitled to any
concession, allowance, rebate or refund.
9. Tenant has not prepaid any rent, additional rent or other charges pursuant to
the Lease for more than the current month; and the last payment of a monthly
installment of rent was paid by Tenant on _______, 1997.
10. Tenant has not paid any security deposit under the Lease.
11. Tenant did not deal with any real estate broker or other intermediary in
connection with the negotiation and/or execution of the Lease; and no real
estate broker or other intermediary introduced the Premises to Tenant for lease.
12. Tenant has no option or right of first refusal to purchase the Premises or
any part thereof or option or right of first refusal to continue to lease the
Premises after the expiration of the term, except for the renewal option
referred to in Section 6 above.
<PAGE>
13. Tenant has not assigned the Lease or any interest therein nor sublet all or
any portion of the Premises.
14. Tenant agrees that it will not enter into any agreement with Landlord to
terminate, modify or otherwise amend the Lease without your prior written
consent prior to _______, 1997.
15. Tenant is not the subject of a bankruptcy, insolvency or other similar
proceeding , or any order to cease operating its current business; Tenant is not
insolvent; and Tenant has not admitted in writing its inability to pay Base
Rent, Additional Rent or other sums due under the Lease, as they become due and
payable.
16. The Tenant does not have the right to remove from the Premises any of the
currently attached heating, ventilating, air conditioning mechanical, electrical
and other systems located within the building on the Premises.
17. Tenant has received no notice by any governmental authority or person
claiming a violation of, or requiring compliance with any federal, state or
local statute, ordinance, rule, regulation or other requirement of law for
environmental contamination at the Premises and no hazardous, toxic, or
polluting substance or waste has been generated, treated, manufactured, stored
or refined, used, handled, transported, released, spilled, disposed of or
deposited in, on or under the Premises in violation of any applicable law,
regulation or statute.
This Certificate shall enure to your benefit and the benefit of your
successors and assign; and shall be binding upon Tenant and Tenant's successors
and assigns.
Tenant acknowledges that you will be relying upon this Certificate
in making your determination to acquire the Premises and/or to advance funds for
the acquisition of the Premises. Tenant agrees to execute any further variations
of this Certificate reasonably required by you or by any lender providing
financing to you for the acquisition of the Premises; and to cause any such
other document to run to the benefit of any such lender.
DANA PERFUMES CORP.
By:
---------------------------
President
<PAGE>
EXHIBIT D
ASSIGNMENT AND ASSUMPTION OF TENANT LEASE
THIS ASSIGNMENT made this __ day of ____, 19__, by and between
______________, a ________________________ having an office at
____________________________________ ("Assignor") and ________________, a
________________________ having an office at _________________________________
("Assignee").
RECITALS
A. Pursuant to a certain Agreement of Sale and Purchase dated as of
July 2, 1997 (the "Agreement of Sale"), Assignor has agreed to sell to Assignee,
upon the terms, provisions and conditions set forth therein, certain property
(hereinafter "Property") located in _____________________________ on land
described on Exhibit A attached to and made a part of this Assignment, all as
more particularly described in the Agreement of Sale.
B. In connection with the sale and purchase of the Property,
Assignor desires to assign to Assignee a tenant lease encumbering the Property
and Assignee desires to accept said assignment and assume the obligations of
Assignor under said lease upon the terms, covenants and conditions set forth in
this instrument.
NOW, THEREFORE, in consideration of the purchase price paid by
Assignee to Assignor for the Property, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Assignor and Assignee covenant and agree as follows:
1. Assignment Assignor hereby assigns, transfers and sets over unto
Assignee all of Assignor's and the lessor's right, title and interest in and to
(a) the lease between assignor, as Landlord, and Dana Perfumes Corp. ("Tenant"),
as Tenant set forth on Exhibit B attached to and made a part of this Assignment,
together with all amendments, extensions, renewals and other modifications
thereto (the "Tenant Lease"), (b) rents, additional rents, escrow or security or
other tenant deposits, fees, income, charges, and profits now or hereafter
arising under the Tenant Lease.
2. Right to Assign. Assignor represents and warrants that Assignor
has title to and full right to assign the Tenant Lease, and any and all rents,
income and profits and claims arising under, the Tenant Lease.
<PAGE>
3. Assumption. Assignee accepts said assignment and assumes all
obligations on the part of the lessor under the Tenant Lease first arising or
accruing on or after the date of this Assignment.
4. Indemnification by Assignor. Assignor shall indemnify, defend
and hold Assignee harmless from and against any claim, demand, cause of action,
charge, judgment, damage, liability, cost or expense (including, without
limitation, reasonable attorney's fees and legal costs) (a) arising out of the
Tenant Lease in connection with events occurring prior to the date of this
Assignment, or (b) arising out of any claim by the Tenant arising prior to the
date of this Assignment with respect to any escrow or security or other tenant
deposit but only to the extent of the amount of such deposit and interest
thereon payable to a tenant not transferred by Assignor to Assignee, or (c)
arising out of any claim by any broker, finder or other intermediary for any
leasing or brokerage commission or other compensation in connection with the
Tenant Lease.
5. Indemnification by Assignee. Assignee shall indemnify, defend
and hold Assignor harmless from and against any claim, demand, cause of action,
charge, judgment, damage, liability, cost or expense (including, without
limitation, reasonable attorneys' fees and legal costs) (a) arising out of the
Tenant Lease in connection with events occurring on or after the date of this
Assignment (exclusive, however, of events described in clause (c) of Paragraph
4) or (b) arising out of any claim by the Tenant arising on or after the date of
this Assignment with respect to its escrow or security or other tenant deposit
but only to the extent of the amount of such deposit and interest thereon
transferred by Assignor to Assignee and not returned to such tenant by Assignee.
6. Binding Effect. This Assignment shall be binding upon and inure
to the benefit of Assignor and Assignee and their respective successors and
assigns.
7. Limited Power of Attorney. Assignor hereby appoints Assignee its
attorney-in-fact for the limited purpose of receiving and endorsing any checks
or other payments of rent, income or profits tendered to Assignee pursuant to
the terms of the Lease if any checks are made payable to the order of Assignor.
Assignor ratifies any such endorsement made pursuant to this limited power of
attorney. This limited power of attorney is coupled with an interest and is
irrevocable.
IN WITNESS WHEREOF, intending to be legally bound, the parties have
caused this instrument to be executed by their duly authorized representatives
on the day and year first above written.
ASSIGNOR:
ASSIGNEE:
2
<PAGE>
ADD NOTARY AFFIDAVITS
3
<PAGE>
EXHIBIT E
ASSIGNMENT AND ASSUMPTION OF SERVICE AGREEMENTS
THIS ASSIGNMENT made this __ day of _________, 19__, by and between
______________, a ________________________ having an office at
____________________________________ ("Assignor") and ________________, a
________________________ having an office at _________________________________
("Assignee").
RECITALS
A. Pursuant to a certain Agreement of Sale and Purchase dated as of
May , 1996 (the "Agreement of Sale"), Assignor has agreed to sell to Assignee,
upon the terms, provisions and conditions set forth therein, certain property
(hereinafter "Property") located in __________________________________________,
all as more particularly described in the Agreement of Sale.
B. In connection with the sale and purchase of the Property,
Assignor desires to assign to Assignee all of Assignor's right, title and
interest in and to those agreements set forth on Exhibit A attached to and made
a part of this Assignment (the "Service Agreements") and Assignee desires to
accept said assignment and assume the obligations of Assignor under the Service
Agreements upon the terms, covenants and conditions set forth in this
instrument.
NOW, THEREFORE, in consideration of the purchase price paid by
Assignor to Assignee for the Property and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, Assignor and
Assignee covenant and agree as follows:
1. Assignment. Assignor hereby assigns, transfers and sets over to
Assignee all of Assignor's right, title and interest in and to the Service
Agreements. Assignor agrees to pay and perform all terms, covenants, conditions,
agreements and obligations to be kept and performed under the Service Agreements
to the date of this Assignment, together with such other obligations of Assignor
concerning the Service Agreements set forth in the Agreement of Sale.
2. Right to Assign. Assignor represents and warrants that Assignor
has title to and full right to assign the Service Agreements.
3. Assumption. Assignee accepts said assignment and assumes all
obligations of Assignor under the Service Agreements first arising or accruing
on or after the date of this Assignment.
<PAGE>
4. Indemnification by Assignor. Assignor shall indemnify, defend
and hold Assignee harmless from and against any claim, demand, cause of action,
charge, judgment, damage, liability, cost or expense (including, without
limitation, reasonable attorneys' fees and legal costs) (a) arising out of the
Service Agreements in connection with events occurring prior to the date of this
Assignment or (b) any service contract, amendment, extension or modification
thereof which is not assumed by Assignee pursuant to this instrument.
5. Indemnification by Assignee. Assignee shall indemnify, defend
and hold Assignor harmless from and against any claim, demand, cause of action,
charge, judgment, damage, liability, cost or expense (including, without
limitation, reasonable attorneys' fees and legal costs) arising out of the
Service Agreements in connection with events occurring on or after the date of
this Assignment.
6. Binding Effect. This Assignment shall be binding upon and inure
to the benefit of Assignor and Assignee and their respective heirs, personal
representatives, successors and assigns.
IN WITNESS WHEREOF, intending to be legally bound, Assignor and
Assignee have caused this instrument to be executed by their duly authorized
representatives on the day and year first above written.
ASSIGNOR:
ASSIGNEE:
2
<PAGE>
EXHIBIT F
FIRPTA AFFIDAVIT
Form for Entity Transferor
Section 1445 of the Internal Revenue Code provides that a transferee
of a U.S. real property interest must withhold tax if the transferor is a
foreign person. To inform the transferee that withholding of tax is not required
upon the disposition of a U.S. real property interest by _________________
(Transferor), the undersigned hereby certifies the following on behalf of
Transferor:
1. Transferor is not a foreign corporation, foreign partnership,
foreign trust, or foreign estate (as those terms are defined in the Internal
Revenue Code and Income Tax Regulations);
2. Transferor's U.S. taxpayer identification number is ________; and
3. Transferor's office address is:
_________________________
_________________________
_________________________.
Transferor understands that the above information may be disclosed to the
Internal Revenue Service by the transferee and that any false statement
contained herein could be punished by fine, imprisonment, or both.
Under penalties of perjury, I declare that I have examined this
instrument and to the best of my knowledge and belief it is true, correct, and
complete, and I further declare that I have authority to sign this document on
behalf of Transferor.
---------------------------------
Name:
Title:
Dated: _____________
<PAGE>
Exhibit 10(ai) Amend 1
August __, 1997
John D. Moran, Sr.
d/b/a Moran Industries
c/o Guaranty Bank
639 S. Maine Street
Wilkes Barre, PA 18702
Re: Premises Wright Township, Luzerne County,
Commonwealth of Pennsylvania ("Dana Building)
Gentlemen:
Reference is made to the Agreement of Sale and Purchase dated as
of the 17th day of July, 1997 between John D. Moran, Sr., t/a/d/b/a Moran
Industries ("Seller") and Penn Square Properties, Inc. ("Penn Square") for
the building leased to Dana Perfumes Corp. (the "Dana Agreement of Sale").
Terms which have a defined meaning in the in the Dana Agreement of
Sale shall have the same meaning when used in this letter agreement.
This letter agreement will confirm the following agreements between
us:
1. The Closing Date under the Dana Agreement of Sale shall be September 15,
1997.
2. If the Buyer defaults under its obligations to complete Closing under the
Dana Agreement of Sale, the Buyer shall be deemed also to have defaulted under
its obligation to complete Closing under the Agreement of Sale and Purchase
dated April 21, 1996 between Seller and Penn Square, as amended by a Letter
Agreement dated June 17, 1997, and as assigned by Penn Square to Fair Lawn
Industrial Park, Inc. for the building leased to Phillips Electronics North
America Corporation.
3. The parties intend that this Letter Agreement shall amend the Dana Agreement
of Sale. Except as modified by the terms of this Letter Agreement, the Dana
Agreement of Sale shall remain in full force and effect in accordance with its
respective terms and provisions. The terms and provisions of the Dana Agreement
of Sale are incorporated herein by reference.
<PAGE>
John D. Moran, Sr.
d/b/a Moran Industries
August __, 1997
Page 2
Kindly sign a copy of this letter at the place designated below to
indicate your agreement to the terms and provisions hereof:
Very truly yours,
PENN SQUARE PROPERTIES, INC.
By: /s/ Jeffrey E. Kelter
--------------------------
President
APPROVED AND AGREED TO:
/s/ John D. Moran, Sr. (SEAL)
John D. Moran, Sr.
<PAGE>
Exhibit 10(aj)
NEITHER THIS WARRANT NOR THE UNITS OF LIMITED PARTNERSHIP INTEREST
ISSUABLE ON EXERCISE OF THIS WARRANT MAY BE TRANSFERRED EXCEPT IN A
TRANSACTION REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR WHICH IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THAT ACT.
VOID AFTER 5:00 P.M., NEW YORK TIME, ON DECEMBER 12, 2004
No. W-001 250,000 UNITS
WARRANT TO PURCHASE UNITS
OF
LIMITED PARTNERSHIP INTEREST
OF
AMERICAN REAL ESTATE INVESTMENT, L.P
This certifies that Jeffrey Kelter, or registered assigns, (the "Warrant
Holder") is entitled to purchase from American Real Estate Investment, L.P. (the
"Operating Partnership"), a Delaware limited partnership, at any time before
5:00 P.M., New York City time, on the Expiration Date described in paragraph
1.01(e), the number of units of limited partnership interest in the Operating
Partnership ("OP Units") stated above at the Exercise Price described in Section
1.01(d). The Exercise Price and the number and nature of the Warrant Units (as
defined below) which may be purchased on exercise of this Warrant are subject to
adjustment as provided in Article III.
ARTICLE I
Definitions
Section 1.01. A. The term "Business Day" means a day other than a
Saturday, Sunday or other day on which banks in the State of New York are
authorized by law to remain closed.
(b) The term "Common Stock" means the Company's shares of common
stock, par value $.001 per share.
<PAGE>
(c) The term "Company" means American Real Estate Investment
Corporation, the sole general partner of the Operating Partnership.
(d) The term "Exercise Price" means $11.00 per unit, as that price
may be adjusted from time to time as provided in Article III.
(e) The term "Expiration Date" means December 12, 2004.
(f) The term "General Partner" means the Company.
(g) The term "Partnership Agreement" means the Amended and Restated
Agreement of Limited Partnership of the Operating Partnership, as may be amended
from time to time.
(h) The term "Warrant Holder" means the person or entity named above
or any person or entity in whose name this Warrant is registered on the books of
the Operating Partnership.
(i) The term "Warrants" means this Warrant and all warrants of like
tenor, together evidencing the right to purchase a total of 250,000 OP Units.
(j) The term "Warrant Units" means the OP Units or other securities
deliverable upon exercise of the Warrants.
ARTICLE II
Duration and Exercise of Warrant
Section 2.01. This Warrant may be exercised at any time before 5:00 P.M.,
New York City time, on the Expiration Date. Each exercise of this Warrant must
be as to at least 5,000 Warrant Units (or such lesser number of Warrant Units as
is all the Warrant Units which may be purchased by exercising this Warrant). If
this Warrant is not exercised at or before 5:00 P.M., New York City time, on the
Expiration Date, it will become void and neither the Warrant Holder nor any
other person will have any rights under this Warrant.
Section 2.02. (a) To exercise this Warrant in whole or in part, the
Warrant Holder must surrender this Warrant, with the subscription form (the
"Subscription Form") on it duly executed, to the Operating Partnership at its
principal office accompanied by a certified or official bank check payable to
the order of the Operating Partnership in an amount equal to the Exercise Price
for the Warrant Units as to which this Warrant is being exercised.
(b) When the Operating Partnership receives this Warrant with the
Subscription Form duly executed and accompanied by (1) payment of the full
Exercise Price for
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<PAGE>
the Warrant Units as to which this Warrant is being exercised and (2) if the
issuance of the Warrant Units has not been registered under the Securities Act
of 1933, as amended, (the "Securities Act") a statement that the Warrant Holder
will be acquiring the Warrant Units for investment and not with a view to their
resale or distribution (or other evidence reasonably satisfactory to the
Operating Partnership that the issuance of the Warrant Units to the Warrant
Holder will be exempt from the registration requirements of the Securities Act),
except in accordance with the registration requirements under the Securities
Act, the Operating Partnership will amend the books and records of the Operating
Partnership and prepare an amendment to its Partnership Agreement (including
Exhibit A thereto) to reflect the issuance of OP Units (and other securities, if
any) as to which this Warrant is being exercised.
(c) If the Warrant Holder exercises this Warrant with respect to
fewer than all the Warrant Units to which it relates, the Operating Partnership
will execute a new Warrant for the balance of the Warrant Units that may be
purchased upon exercise of this Warrant and deliver that new Warrant to the
Warrant Holder.
(d) The Operating Partnership will pay any issuance, transfer or
similar taxes which may be payable in respect of the issuance of Warrant Units
or in respect of the issuance of a new Warrant if this Warrant is exercised as
to fewer than all the Warrant Units to which it relates. The Operating
Partnership will not, however, be required to pay any transfer tax which becomes
payable because Warrant Units or a new Warrant are to be registered in a name
other than that of the Warrant Holder, and the Operating Partnership will not be
required to issue any Warrant Units or to issue a new Warrant registered in a
name other than that of the Warrant Holder until the Operating Partnership
receives either evidence that any applicable transfer taxes have been paid or
funds with which to pay those taxes.
(e) If when the Warrant Holder delivers the Subscription Form, the
Warrant Holder notifies the Operating Partnership that the Warrant Holder
believes the purchase of the Warrant Units as to which this Warrant is being
exercised must be preceded by a notification under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 (the "HSR Act"), or if upon receiving the
Subscription Form the Operating Partnership notifies the Warrant Holder that the
Operating Partnership believes such a notification is required, (i) unless the
Warrant Holder and the Operating Partnership subsequently agree that
notification under the HSR Act is not required, the Warrant Holder and the
Operating Partnership each will, as promptly as practicable, make the filing it
is required (or that one of the parties believes it is required) to make under
the HSR Act with regard to the issuance of the Warrant Units as to which this
Warrant is being exercised, and each of them will take all reasonable steps
within its control (including providing information to the Federal Trade
Commission and the Department of Justice) to cause the waiting periods required
by the HSR Act to be terminated or to expire as promptly as practicable, (ii)
the Warrant Holder and the Operating Partnership will cooperate in all other
respects to assist the other of them in making its filing under the HSR Act,
(iii) the Operating Partnership will not issue the Warrant Units as to which
this Warrant is exercised until the waiting periods under the HSR Act are
terminated or expire, and (iv) if the waiting periods under the HSR Act are not
terminated or do not expire within 60 days after the Warrant Holder delivers the
Subscription
3
<PAGE>
Form to the Operating Partnership, the Warrant Holder will have the option to
rescind the exercise of this Warrant at any time between the expiration of the
60 day period and the day the waiting periods under the HSR Act are terminated
or expire, in which case the Operating Partnership will promptly return to the
Warrant Holder the amount the Warrant Holder had paid to the Operating
Partnership as the Exercise Price of this Warrant, without interest.
ARTICLE III
Adjustment of Warrant Securities
and Warrant Price
Section 3.01. The Exercise Price and the OP Units or other securities
issuable on exercise of this Warrant are subject to adjustment as follows:
(a) If, after the date the Warrants are first issued, the Operating
Partnership (i) makes a distribution on the OP Units, (ii) subdivides the
outstanding OP Units into a greater number of units, or (iii) combines the
outstanding OP Units into a lesser number of units, in each such case, the
Exercise Price in effect at the record date for the distribution or the
effective date of the subdivision or combination will be adjusted so that upon
exercise of this Warrant after the record date or effective date with respect to
a specified number of Warrant Units, the Warrant Holder will receive the number
and kind of units which the Warrant Holder would have owned if the Warrant
Holder had exercised this Warrant with respect to that number of Warrant Units
immediately before the first of those events and retained all the units and
other securities which the Warrant Holder received as a result of each of those
events.
4
<PAGE>
(b) If, after the date the Warrants are first issued, the Operating
Partnership fixes a record date for the issuance (or issues without fixing a
record date) to the holders of OP Units of rights, options or warrants to
subscribe for or purchase OP Units, or securities which are convertible into or
exchangeable for OP Units, at an exercise, conversion or exchange price per unit
less than the Exercise Price in effect on the record date (or on the date of
issuance, if there is no record date), the Exercise Price will be adjusted by
multiplying the Exercise Price in effect immediately prior to that record date
(or issuance date) by a fraction, (i) the numerator of which will be equal to
the sum of (A) the number of OP Units outstanding on that record date (or
issuance date) plus (B) the number of OP Units which the aggregate exercise,
conversion or exchange price would purchase at that Exercise Price, and (ii) the
denominator of which is the number of OP Units outstanding on that record date
(or issuance date) plus the number of additional OP Units which the Operating
Partnership would be required to issue upon exercise, conversion or exchange of
all the rights, options, warrants or convertible or exchangeable securities.
Each adjustment will become effective at the close of business on the record
date for issuance of the rights, options, warrants or convertible or
exchangeable securities (or the date of issuance, if there is no record date).
For the purposes of this paragraph 3.01(b), the exercise, conversion or exchange
price of rights, options, warrants or convertible or exchangeable securities
will include any consideration the holders of the OP Units are required to pay
in order to receive the rights, options, warrants or convertible or exchangeable
securities, as well as any consideration the holders are required to pay upon
exercise, conversion or exchange (other than surrender of the securities being
exercised, converted or exchanged). If the right to exercise any rights, options
or warrants, or to convert or exchange any convertible or exchangeable
securities, the issuance of which results in an adjustment under this paragraph
3.01(b), expires in whole or in part without being exercised, when that occurs,
the Exercise Price will be readjusted as though the rights, options, warrants or
convertible or exchangeable securities which were not exercised, converted or
exchanged had not been issued. However, no readjustment will affect any exercise
of this Warrant which takes place before the readjustment.
(c) If, after the date Warrants are first issued, the Operating
Partnership distributes to the holders of OP Units any cash (other than a
regular quarterly cash distribution), evidences of indebtedness or other assets
(other than distributions to which paragraph 3.01(a) applies), in each such
case, the Exercise Price will be adjusted by subtracting from the Exercise Price
in effect immediately prior to the record date for the determination of
unitholders entitled to receive the distribution the value of the cash,
evidences of indebtedness or other assets to be distributed with respect to an
OP Unit. Each adjustment under this paragraph will be effective at the close of
business on the record date for the determination of unitholders entitled to
receive the distribution which results in the adjustment. The value of evidences
of indebtedness or other assets will be their fair market value as determined in
good faith by the Board of Directors of the General Partner.
(d) If, after the Warrants are first issued, there is a
reclassification or change of outstanding OP Units (other than a change as a
result of a subdivision or combination to which paragraph 3.01(a) applies) or a
merger or consolidation of the Operating Partnership with any other entity that
results in a reclassification, change, conversion, exchange or cancellation of
5
<PAGE>
outstanding OP Units, or a sale or transfer of all or substantially all the
assets of the Operating Partnership and distribution of all or a portion of the
proceeds of that sale or transfer, upon any subsequent exercise of this Warrant
as to a specified number of Warrant Units, the Warrant Holder will be entitled
to receive the kind and amount of securities, cash and other property which the
Warrant Holder would have received if the Warrant Holder had exercised this
Warrant as to that number of Warrant Units immediately before the first of those
events and had retained all the securities, cash and other assets received as a
result of these events.
(e) If all or part of the consideration for, or payable on exercise,
conversion or exchange of, any OP Units, rights, options, warrants or
convertible or exchangeable securities is other than cash, for the purposes of
this Section 3.01, the non-cash consideration will be valued at its fair market
value as determined in good faith by the Board of Directors of the General
Partner.
(f) If the exercise price of any rights, options or warrants, or the
conversion or exchange price of any convertible or exchangeable securities, is
changed, on the day the change becomes effective, the Operating Partnership will
be treated for the purposes of the Warrants as having (i) cancelled the
outstanding rights, options, warrants or convertible or exchangeable securities
which were exercisable, convertible or exchangeable at the prior price and (ii)
issued new rights, options, warrants or convertible or exchangeable securities
which are exercisable, convertible or exchangeable at the new price.
(g) No adjustment in the Exercise Price will be required if the
adjustment is less than $.01 per Warrant Unit. However, any adjustments which
are not made because of this paragraph 3.01(g) will be carried forward and taken
into account in any subsequent adjustments. All calculations under this Section
3.01 will be made to the nearest cent or to the nearest whole unit, as the case
may be.
(h) Upon each adjustment of the Exercise Price under in this Section
3.01, the number of Warrant Units which will be issued upon exercise of this
Warrant will be adjusted so that (i) if this Warrant is exercised in full, the
Warrant Holder will receive (A) the number of Warrant Units the Warrant Holder
would receive by exercising this Warrant in full immediately before the
adjustment, times (B) the Exercise Price in effect immediately before the
adjustment, divided by (C) the Exercise Price in effect after the adjustment,
and (ii) if this Warrant is exercised only in part, the Warrant Holder will
receive the fraction of the number of Warrant Units the Warrant Holder would
have received if it had exercised this Warrant in full of which the numerator is
the number of Warrant Units as to which this Warrant is exercised and the
denominator is the total number of Warrant Units issuable on exercise of this
Warrant.
(i) If any adjustment in the Exercise Price or in the number of
units or type of securities to be issued upon exercise of this Warrant becomes
effective as of a record date for a specified event, and this Warrant is
exercised between that record date and the date the event occurs, the Operating
Partnership may elect to defer, until the event occurs, issuing to the Warrant
Holder the OP Units or other securities to which the Warrant Holder is entitled
solely by
6
<PAGE>
reason of that event. However, if the Operating Partnership does that, when this
Warrant is exercised, the Operating Partnership will deliver to the Warrant
Holder a due bill or other instrument evidencing the Warrant Holder's right to
receive the additional units or other securities upon occurrence of the event.
Section 3.02. Whenever the Warrant Price or the Warrant Units are adjusted
as provided in this Article, the Operating Partnership will send to the Warrant
Holder a certificate signed by its principal accounting officer setting forth
the adjusted Warrant Price, the adjusted number of Warrant Units and the date
the adjustment became effective, and containing a brief description of the
events which caused the adjustment.
Section 3.03. If at any time after the Warrants are first issued:
(a) the Operating Partnership declares a distribution on the OP
Units, other than a regular quarterly distribution payable in cash; or
(b) the Operating Partnership authorizes the granting to the holders
of OP Units of rights to subscribe for or purchase any units of any class or any
other securities; or
(c) there is any reclassification of the OP Units (other than a
subdivision or combination of the outstanding OP Units), or any consolidation or
merger to which the Operating Partnership is a party and for which approval of
the holders of the OP Units is required, or a sale or transfer of all or
substantially all the assets of the Operating Partnership; or
(d) there is a voluntary or involuntary dissolution, liquidation or
winding up of the Operating Partnership;
in each case, the Operating Partnership will mail to the Warrant Holder at least
20 days before the applicable record date a notice stating (i) the record date
for the distribution or rights, or, if there will not be a record date, the date
as of which the holders of record of OP Units who will be entitled to the
distribution or rights will be determined, or (ii) the date on which the
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding up is expected to become effective, and the date as of
which it is expected the holders of record of OP Units who will be entitled to
receive securities or other property with respect to their OP Units as a result
of the reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding up will be determined. Failure to give any notice or any
defect in the notice will not affect the validity of the action which should
have been the subject of the notice.
Section 3.04. The form of Warrant need not be changed because of any
change in the Warrant Price or in the number of Warrant Units which may be
purchased by exercising Warrants and Warrants issued after the change may state
the same Warrant Price and the same number of Warrant Units as are stated in
Warrants issued before the change. However, the Operating Partnership may at any
time make any change in the form of Warrant that it deems appropriate to reflect
a change in the Warrant Price or in the Warrant Units which may be
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<PAGE>
purchased by exercising Warrants (provided the change in the form of Warrant
does not otherwise affect the substance of the Warrant), and any Warrant issued
after the form of Warrant is changed may be in the changed form.
ARTICLE IV
Other Provisions Relating to
Rights of Warrant Holder
Section 4.01. The Warrant Holder will not, as such, be entitled to vote,
to receive distributions or to have any other of the rights of a limited partner
of the Operating Partnership, except that after this Warrant is exercised in
accordance with the terms of this Warrant the persons in whose names the Warrant
Units purchased through exercise of this Warrant are to be issued will be deemed
to become the holders of record of those Warrant Units for all purposes even if
certificates representing those Warrant Units are not issued.
Section 4.02. All OP Units issued on exercise of this Warrant will, when
they are issued, be validly issued, fully paid, nonassessable and free of
preemptive rights.
Section 4.03. The Operating Partnership will not be required to issue any
fraction of a unit upon exercise of this Warrant. In any case in which the
Warrant Holder would, except for the provisions of this Section 4.03, be
entitled to receive a fraction of a unit upon exercise of this Warrant, the
Operating Partnership will, upon exercise of this Warrant, issue the maximum
number of whole units it is required to issue, and the Operating Partnership
will pay the Warrant Holder cash in lieu of the fraction of a unit based upon
the last sale price (or if there is none, the mean of the high bid and low asked
prices) of the OP Units for which such fraction of a unit would be exchangeable
on the day this Warrant is exercised.
Section 4.04. The Operating Partnership will maintain a Warrant Register
in which the name and address of each registered holder of Warrants will be
recorded.
Section 4.05. Notices or other communications to the Warrant Holder will
be deemed given by the Operating Partnership on the day on which they are
delivered to the Warrant Holder, or on the third Business Day after the day on
which they are sent by first class mail addressed to the Warrant Holder at the
Warrant Holder's last known address shown on the Warrant Register maintained by
the Operating Partnership.
Section 4.06. Prior to due presentment for registration of transfer of
this Warrant, the Operating Partnership may treat the Warrant Holder as the
absolute owner of this Warrant for all purposes, including for the purpose of
determining the persons entitled to exercise this Warrant, despite any notice to
the contrary.
ARTICLE V
8
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Transfer of Warrants
Section 5.01. This Warrant may not be sold, transferred, assigned, or
hypothecated until one year after December 12, 1997, except that this Warrant or
such OP Units or other securities may be transferred, in whole or in part, prior
to such time to (i) one or more officers or partners of the Warrant Holder (or
officers or partners of any such partner); (ii) a successor to the Warrant
Holder (or the officers or partners of such a successor); (iii) a purchaser of
substantially all the assets of the Warrant Holder; or (iv) any other person who
becomes the owner of this Warrant by operation of law. At no time will this
Warrant be transferred except in a transaction registered under the Securities
Act or which is exempt from the registration requirements of that Act.
Section 5.02. Upon surrender of this Warrant to the Operating Partnership
at its principal office with the Form of Assignment (or another instrument of
assignment) duly executed and accompanied by (i) evidence that any transfer tax
has been paid, or funds sufficient to pay any transfer tax, and (ii) evidence
reasonably satisfactory to the Operating Partnership that the proposed
assignment will not violate Section 5.01, the Operating Partnership will,
without charge, execute and deliver a new Warrant registered in the name of the
assignee named in the Form of Assignment (or other instrument of assignment) and
will promptly cancel this Warrant. This Warrant may be divided or combined with
other Warrants by surrender of this Warrant and any other Warrants with which it
is to be combined at the principal office of the Operating Partnership together
with a written notice, signed by the Warrant Holder, specifying the names and
denominations in which new Warrants are to be issued.
Section 5.03. Upon receipt by the Operating Partnership of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
this Warrant, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, or (in the case of mutilation) upon surrender of
this Warrant, the Operating Partnership will execute and deliver a new Warrant
relating to the same number of Warrant Units as this Warrant and the lost,
stolen, destroyed or mutilated Warrant will become void. Any new Warrant
executed and delivered in accordance with this Section 5.03 will constitute an
additional contractual obligation of the Operating Partnership, and will be
valid and enforceable whether or not the Warrant which was believed to have been
lost, stolen or destroyed is subsequently presented for exercise.
ARTICLE VI
Registration Under the Securities Act
Section 6.01. Upon conversion of Warrant Units to Common Stock (pursuant
to the Partnership Agreement), the Warrant Holder will have registration rights
with respect to such Common Stock pursuant to the Partnership Agreement.
9
<PAGE>
ARTICLE VII
Other Matters
Section 7.01. The provisions of this Warrant will bind, and inure to the
benefit of, the Operating Partnership and its successors and assigns.
Section 7.02. (a) Any notice or other communication to the Operating
Partnership relating to this Warrant will be deemed given on the day when it is
delivered or sent by facsimile transmission (with a confirmation copy sent by
mail), or on the third Business Day after the day on which it is sent by
first-class mail, to the Operating Partnership at the following address (or such
other address as may be specified by the Operating Partnership after the date of
this Warrant):
American Real Estate Investment, L.P.
Plymouth Meeting Executive Campus
620 W. Germantown Pike, Suite 200
Plymouth Meeting, PA 19462
Telephone: (601) 834-7950
Facsimile: (610) 834-9560
(b) Any notice or other communication to the Warrant Holder will be
deemed given when and as provided in Section 4.05.
Section 7.03. This Warrant will be governed by, and construed under, the
laws of the State of New York relating to contracts made and to be performed in
that state.
Section 7.04. The Article headings in this Warrant are for convenience
only, are not part of this Warrant and are not intended to affect the meaning or
interpretation of any of the terms of this Warrant.
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<PAGE>
IN WITNESS WHEREOF, this Warrant has been executed by the Operating
Partnership on the 12th day of December, 1997.
AMERICAN REAL ESTATE INVESTMENT, L.P.
By: American Real Estate Investment Corporation,
its General Partner
By:
----------------------------------------
Name:
Title:
11
<PAGE>
FORM OF ASSIGNMENT
(To Be Signed Only Upon Assignment)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
the attached Warrant to __________________________________ to the extent of the
right to purchase _________________ Warrant Units, and the undersigned appoints
___________________________, with full power of substitution, to transfer that
Warrant, with respect to the right to purchase that number of Warrant Units, on
the books of American Real Estate Investment, L.P.
Dated: ___________, ____
----------------------------------------------------
(Signature must conform to the name of the
Warrant Holder specified on the face of the Warrant)
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<PAGE>
SUBSCRIPTION FORM
To: American Real Estate Investment, L.P.
The undersigned irrevocably elects to purchase _______________ Warrant
Units by exercising the Warrant to which this form is attached and tenders
payment of the full Exercise Price with respect to those Warrant Units. The
undersigned requests that the certificates representing the Warrant Units as to
which the Warrant is being exercised be registered as follows:
Name:
Social Security or Employer Identification Number:
Address:
Deliver to:
Address:
|_| (Check if applicable) The undersigned will be acquiring the
Warrant Units as to which this Warrant is being exercised for investment and not
with a view to their resale or distribution.
If the Warrant Units as to which the Warrant is being exercised are
fewer than all the Warrant Units to which the Warrant relates, please issue a
new Warrant for the balance of the Warrant Units registered in the name of the
undersigned and deliver it to the undersigned at the following address:
Address:
Date: Signature
------------------------ --------------------------------------
(Signature must conform to the name
of the Warrant Holder specified on
the face of the Warrant)
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<PAGE>
Exhibit 10(ak)
NEITHER THIS WARRANT NOR THE UNITS OF LIMITED PARTNERSHIP INTEREST
ISSUABLE ON EXERCISE OF THIS WARRANT MAY BE TRANSFERRED EXCEPT IN A
TRANSACTION REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR WHICH IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THAT ACT.
VOID AFTER 5:00 P.M., NEW YORK TIME, ON DECEMBER 12, 2004
No. W-002 125,000 UNITS
WARRANT TO PURCHASE UNITS
OF
LIMITED PARTNERSHIP INTEREST
OF
AMERICAN REAL ESTATE INVESTMENT, L.P
This certifies that David McBride, or registered assigns, (the "Warrant
Holder") is entitled to purchase from American Real Estate Investment, L.P. (the
"Operating Partnership"), a Delaware limited partnership, at any time before
5:00 P.M., New York City time, on the Expiration Date described in paragraph
1.01(e), the number of units of limited partnership interest in the Operating
Partnership ("OP Units") stated above at the Exercise Price described in Section
1.01(d). The Exercise Price and the number and nature of the Warrant Units (as
defined below) which may be purchased on exercise of this Warrant are subject to
adjustment as provided in Article III.
ARTICLE I
Definitions
Section 1.01. A. The term "Business Day" means a day other than a
Saturday, Sunday or other day on which banks in the State of New York are
authorized by law to remain closed.
(b) The term "Common Stock" means the Company's shares of common
stock, par value $.001 per share.
<PAGE>
(c) The term "Company" means American Real Estate Investment
Corporation, the sole general partner of the Operating Partnership.
(d) The term "Exercise Price" means $11.00 per unit, as that price
may be adjusted from time to time as provided in Article III.
(e) The term "Expiration Date" means December 12, 2004.
(f) The term "General Partner" means the Company.
(g) The term "Partnership Agreement" means the Amended and Restated
Agreement of Limited Partnership of the Operating Partnership, as may be amended
from time to time.
(h) The term "Warrant Holder" means the person or entity named above
or any person or entity in whose name this Warrant is registered on the books of
the Operating Partnership.
(i) The term "Warrants" means this Warrant and all warrants of like
tenor, together evidencing the right to purchase a total of 125,000 OP Units.
(j) The term "Warrant Units" means the OP Units or other securities
deliverable upon exercise of the Warrants.
ARTICLE II
Duration and Exercise of Warrant
Section 2.01. This Warrant may be exercised at any time before 5:00 P.M.,
New York City time, on the Expiration Date. Each exercise of this Warrant must
be as to at least 5,000 Warrant Units (or such lesser number of Warrant Units as
is all the Warrant Units which may be purchased by exercising this Warrant). If
this Warrant is not exercised at or before 5:00 P.M., New York City time, on the
Expiration Date, it will become void and neither the Warrant Holder nor any
other person will have any rights under this Warrant.
Section 2.02. (a) To exercise this Warrant in whole or in part, the
Warrant Holder must surrender this Warrant, with the subscription form (the
"Subscription Form") on it duly executed, to the Operating Partnership at its
principal office accompanied by a certified or official bank check payable to
the order of the Operating Partnership in an amount equal to the Exercise Price
for the Warrant Units as to which this Warrant is being exercised.
(b) When the Operating Partnership receives this Warrant with the
Subscription Form duly executed and accompanied by (1) payment of the full
Exercise Price for
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<PAGE>
the Warrant Units as to which this Warrant is being exercised and (2) if the
issuance of the Warrant Units has not been registered under the Securities Act
of 1933, as amended, (the "Securities Act") a statement that the Warrant Holder
will be acquiring the Warrant Units for investment and not with a view to their
resale or distribution (or other evidence reasonably satisfactory to the
Operating Partnership that the issuance of the Warrant Units to the Warrant
Holder will be exempt from the registration requirements of the Securities Act),
except in accordance with the registration requirements under the Securities
Act, the Operating Partnership will amend the books and records of the Operating
Partnership and prepare an amendment to its Partnership Agreement (including
Exhibit A thereto) to reflect the issuance of OP Units (and other securities, if
any) as to which this Warrant is being exercised.
(c) If the Warrant Holder exercises this Warrant with respect to
fewer than all the Warrant Units to which it relates, the Operating Partnership
will execute a new Warrant for the balance of the Warrant Units that may be
purchased upon exercise of this Warrant and deliver that new Warrant to the
Warrant Holder.
(d) The Operating Partnership will pay any issuance, transfer or
similar taxes which may be payable in respect of the issuance of Warrant Units
or in respect of the issuance of a new Warrant if this Warrant is exercised as
to fewer than all the Warrant Units to which it relates. The Operating
Partnership will not, however, be required to pay any transfer tax which becomes
payable because Warrant Units or a new Warrant are to be registered in a name
other than that of the Warrant Holder, and the Operating Partnership will not be
required to issue any Warrant Units or to issue a new Warrant registered in a
name other than that of the Warrant Holder until the Operating Partnership
receives either evidence that any applicable transfer taxes have been paid or
funds with which to pay those taxes.
(e) If when the Warrant Holder delivers the Subscription Form, the
Warrant Holder notifies the Operating Partnership that the Warrant Holder
believes the purchase of the Warrant Units as to which this Warrant is being
exercised must be preceded by a notification under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 (the "HSR Act"), or if upon receiving the
Subscription Form the Operating Partnership notifies the Warrant Holder that the
Operating Partnership believes such a notification is required, (i) unless the
Warrant Holder and the Operating Partnership subsequently agree that
notification under the HSR Act is not required, the Warrant Holder and the
Operating Partnership each will, as promptly as practicable, make the filing it
is required (or that one of the parties believes it is required) to make under
the HSR Act with regard to the issuance of the Warrant Units as to which this
Warrant is being exercised, and each of them will take all reasonable steps
within its control (including providing information to the Federal Trade
Commission and the Department of Justice) to cause the waiting periods required
by the HSR Act to be terminated or to expire as promptly as practicable, (ii)
the Warrant Holder and the Operating Partnership will cooperate in all other
respects to assist the other of them in making its filing under the HSR Act,
(iii) the Operating Partnership will not issue the Warrant Units as to which
this Warrant is exercised until the waiting periods under the HSR Act are
terminated or expire, and (iv) if the waiting periods under the HSR Act are not
terminated or do not expire within 60 days after the Warrant Holder delivers the
Subscription
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<PAGE>
Form to the Operating Partnership, the Warrant Holder will have the option to
rescind the exercise of this Warrant at any time between the expiration of the
60 day period and the day the waiting periods under the HSR Act are terminated
or expire, in which case the Operating Partnership will promptly return to the
Warrant Holder the amount the Warrant Holder had paid to the Operating
Partnership as the Exercise Price of this Warrant, without interest.
ARTICLE III
Adjustment of Warrant Securities
and Warrant Price
Section 3.01. The Exercise Price and the OP Units or other securities
issuable on exercise of this Warrant are subject to adjustment as follows:
(a) If, after the date the Warrants are first issued, the Operating
Partnership (i) makes a distribution on the OP Units, (ii) subdivides the
outstanding OP Units into a greater number of units, or (iii) combines the
outstanding OP Units into a lesser number of units, in each such case, the
Exercise Price in effect at the record date for the distribution or the
effective date of the subdivision or combination will be adjusted so that upon
exercise of this Warrant after the record date or effective date with respect to
a specified number of Warrant Units, the Warrant Holder will receive the number
and kind of units which the Warrant Holder would have owned if the Warrant
Holder had exercised this Warrant with respect to that number of Warrant Units
immediately before the first of those events and retained all the units and
other securities which the Warrant Holder received as a result of each of those
events.
4
<PAGE>
(b) If, after the date the Warrants are first issued, the Operating
Partnership fixes a record date for the issuance (or issues without fixing a
record date) to the holders of OP Units of rights, options or warrants to
subscribe for or purchase OP Units, or securities which are convertible into or
exchangeable for OP Units, at an exercise, conversion or exchange price per unit
less than the Exercise Price in effect on the record date (or on the date of
issuance, if there is no record date), the Exercise Price will be adjusted by
multiplying the Exercise Price in effect immediately prior to that record date
(or issuance date) by a fraction, (i) the numerator of which will be equal to
the sum of (A) the number of OP Units outstanding on that record date (or
issuance date) plus (B) the number of OP Units which the aggregate exercise,
conversion or exchange price would purchase at that Exercise Price, and (ii) the
denominator of which is the number of OP Units outstanding on that record date
(or issuance date) plus the number of additional OP Units which the Operating
Partnership would be required to issue upon exercise, conversion or exchange of
all the rights, options, warrants or convertible or exchangeable securities.
Each adjustment will become effective at the close of business on the record
date for issuance of the rights, options, warrants or convertible or
exchangeable securities (or the date of issuance, if there is no record date).
For the purposes of this paragraph 3.01(b), the exercise, conversion or exchange
price of rights, options, warrants or convertible or exchangeable securities
will include any consideration the holders of the OP Units are required to pay
in order to receive the rights, options, warrants or convertible or exchangeable
securities, as well as any consideration the holders are required to pay upon
exercise, conversion or exchange (other than surrender of the securities being
exercised, converted or exchanged). If the right to exercise any rights, options
or warrants, or to convert or exchange any convertible or exchangeable
securities, the issuance of which results in an adjustment under this paragraph
3.01(b), expires in whole or in part without being exercised, when that occurs,
the Exercise Price will be readjusted as though the rights, options, warrants or
convertible or exchangeable securities which were not exercised, converted or
exchanged had not been issued. However, no readjustment will affect any exercise
of this Warrant which takes place before the readjustment.
(c) If, after the date Warrants are first issued, the Operating
Partnership distributes to the holders of OP Units any cash (other than a
regular quarterly cash distribution), evidences of indebtedness or other assets
(other than distributions to which paragraph 3.01(a) applies), in each such
case, the Exercise Price will be adjusted by subtracting from the Exercise Price
in effect immediately prior to the record date for the determination of
unitholders entitled to receive the distribution the value of the cash,
evidences of indebtedness or other assets to be distributed with respect to an
OP Unit. Each adjustment under this paragraph will be effective at the close of
business on the record date for the determination of unitholders entitled to
receive the distribution which results in the adjustment. The value of evidences
of indebtedness or other assets will be their fair market value as determined in
good faith by the Board of Directors of the General Partner.
(d) If, after the Warrants are first issued, there is a
reclassification or change of outstanding OP Units (other than a change as a
result of a subdivision or combination to which paragraph 3.01(a) applies) or a
merger or consolidation of the Operating Partnership with any other entity that
results in a reclassification, change, conversion, exchange or cancellation of
5
<PAGE>
outstanding OP Units, or a sale or transfer of all or substantially all the
assets of the Operating Partnership and distribution of all or a portion of the
proceeds of that sale or transfer, upon any subsequent exercise of this Warrant
as to a specified number of Warrant Units, the Warrant Holder will be entitled
to receive the kind and amount of securities, cash and other property which the
Warrant Holder would have received if the Warrant Holder had exercised this
Warrant as to that number of Warrant Units immediately before the first of those
events and had retained all the securities, cash and other assets received as a
result of these events.
(e) If all or part of the consideration for, or payable on exercise,
conversion or exchange of, any OP Units, rights, options, warrants or
convertible or exchangeable securities is other than cash, for the purposes of
this Section 3.01, the non-cash consideration will be valued at its fair market
value as determined in good faith by the Board of Directors of the General
Partner.
(f) If the exercise price of any rights, options or warrants, or the
conversion or exchange price of any convertible or exchangeable securities, is
changed, on the day the change becomes effective, the Operating Partnership will
be treated for the purposes of the Warrants as having (i) cancelled the
outstanding rights, options, warrants or convertible or exchangeable securities
which were exercisable, convertible or exchangeable at the prior price and (ii)
issued new rights, options, warrants or convertible or exchangeable securities
which are exercisable, convertible or exchangeable at the new price.
(g) No adjustment in the Exercise Price will be required if the
adjustment is less than $.01 per Warrant Unit. However, any adjustments which
are not made because of this paragraph 3.01(g) will be carried forward and taken
into account in any subsequent adjustments. All calculations under this Section
3.01 will be made to the nearest cent or to the nearest whole unit, as the case
may be.
(h) Upon each adjustment of the Exercise Price under in this Section
3.01, the number of Warrant Units which will be issued upon exercise of this
Warrant will be adjusted so that (i) if this Warrant is exercised in full, the
Warrant Holder will receive (A) the number of Warrant Units the Warrant Holder
would receive by exercising this Warrant in full immediately before the
adjustment, times (B) the Exercise Price in effect immediately before the
adjustment, divided by (C) the Exercise Price in effect after the adjustment,
and (ii) if this Warrant is exercised only in part, the Warrant Holder will
receive the fraction of the number of Warrant Units the Warrant Holder would
have received if it had exercised this Warrant in full of which the numerator is
the number of Warrant Units as to which this Warrant is exercised and the
denominator is the total number of Warrant Units issuable on exercise of this
Warrant.
(i) If any adjustment in the Exercise Price or in the number of
units or type of securities to be issued upon exercise of this Warrant becomes
effective as of a record date for a specified event, and this Warrant is
exercised between that record date and the date the event occurs, the Operating
Partnership may elect to defer, until the event occurs, issuing to the Warrant
Holder the OP Units or other securities to which the Warrant Holder is entitled
solely by
6
<PAGE>
reason of that event. However, if the Operating Partnership does that, when this
Warrant is exercised, the Operating Partnership will deliver to the Warrant
Holder a due bill or other instrument evidencing the Warrant Holder's right to
receive the additional units or other securities upon occurrence of the event.
Section 3.02. Whenever the Warrant Price or the Warrant Units are adjusted
as provided in this Article, the Operating Partnership will send to the Warrant
Holder a certificate signed by its principal accounting officer setting forth
the adjusted Warrant Price, the adjusted number of Warrant Units and the date
the adjustment became effective, and containing a brief description of the
events which caused the adjustment.
Section 3.03. If at any time after the Warrants are first issued:
(a) the Operating Partnership declares a distribution on the OP
Units, other than a regular quarterly distribution payable in cash; or
(b) the Operating Partnership authorizes the granting to the holders
of OP Units of rights to subscribe for or purchase any units of any class or any
other securities; or
(c) there is any reclassification of the OP Units (other than a
subdivision or combination of the outstanding OP Units), or any consolidation or
merger to which the Operating Partnership is a party and for which approval of
the holders of the OP Units is required, or a sale or transfer of all or
substantially all the assets of the Operating Partnership; or
(d) there is a voluntary or involuntary dissolution, liquidation or
winding up of the Operating Partnership;
in each case, the Operating Partnership will mail to the Warrant Holder at least
20 days before the applicable record date a notice stating (i) the record date
for the distribution or rights, or, if there will not be a record date, the date
as of which the holders of record of OP Units who will be entitled to the
distribution or rights will be determined, or (ii) the date on which the
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding up is expected to become effective, and the date as of
which it is expected the holders of record of OP Units who will be entitled to
receive securities or other property with respect to their OP Units as a result
of the reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding up will be determined. Failure to give any notice or any
defect in the notice will not affect the validity of the action which should
have been the subject of the notice.
Section 3.04. The form of Warrant need not be changed because of any
change in the Warrant Price or in the number of Warrant Units which may be
purchased by exercising Warrants and Warrants issued after the change may state
the same Warrant Price and the same number of Warrant Units as are stated in
Warrants issued before the change. However, the Operating Partnership may at any
time make any change in the form of Warrant that it deems appropriate to reflect
a change in the Warrant Price or in the Warrant Units which may be
7
<PAGE>
purchased by exercising Warrants (provided the change in the form of Warrant
does not otherwise affect the substance of the Warrant), and any Warrant issued
after the form of Warrant is changed may be in the changed form.
ARTICLE IV
Other Provisions Relating to
Rights of Warrant Holder
Section 4.01. The Warrant Holder will not, as such, be entitled to vote,
to receive distributions or to have any other of the rights of a limited partner
of the Operating Partnership, except that after this Warrant is exercised in
accordance with the terms of this Warrant the persons in whose names the Warrant
Units purchased through exercise of this Warrant are to be issued will be deemed
to become the holders of record of those Warrant Units for all purposes even if
certificates representing those Warrant Units are not issued.
Section 4.02. All OP Units issued on exercise of this Warrant will, when
they are issued, be validly issued, fully paid, nonassessable and free of
preemptive rights.
Section 4.03. The Operating Partnership will not be required to issue any
fraction of a unit upon exercise of this Warrant. In any case in which the
Warrant Holder would, except for the provisions of this Section 4.03, be
entitled to receive a fraction of a unit upon exercise of this Warrant, the
Operating Partnership will, upon exercise of this Warrant, issue the maximum
number of whole units it is required to issue, and the Operating Partnership
will pay the Warrant Holder cash in lieu of the fraction of a unit based upon
the last sale price (or if there is none, the mean of the high bid and low asked
prices) of the OP Units for which such fraction of a unit would be exchangeable
on the day this Warrant is exercised.
Section 4.04. The Operating Partnership will maintain a Warrant Register
in which the name and address of each registered holder of Warrants will be
recorded.
Section 4.05. Notices or other communications to the Warrant Holder will
be deemed given by the Operating Partnership on the day on which they are
delivered to the Warrant Holder, or on the third Business Day after the day on
which they are sent by first class mail addressed to the Warrant Holder at the
Warrant Holder's last known address shown on the Warrant Register maintained by
the Operating Partnership.
Section 4.06. Prior to due presentment for registration of transfer of
this Warrant, the Operating Partnership may treat the Warrant Holder as the
absolute owner of this Warrant for all purposes, including for the purpose of
determining the persons entitled to exercise this Warrant, despite any notice to
the contrary.
ARTICLE V
8
<PAGE>
Transfer of Warrants
Section 5.01. This Warrant may not be sold, transferred, assigned, or
hypothecated until one year after December 12, 1997, except that this Warrant or
such OP Units or other securities may be transferred, in whole or in part, prior
to such time to (i) one or more officers or partners of the Warrant Holder (or
officers or partners of any such partner); (ii) a successor to the Warrant
Holder (or the officers or partners of such a successor); (iii) a purchaser of
substantially all the assets of the Warrant Holder; or (iv) any other person who
becomes the owner of this Warrant by operation of law. At no time will this
Warrant be transferred except in a transaction registered under the Securities
Act or which is exempt from the registration requirements of that Act.
Section 5.02. Upon surrender of this Warrant to the Operating Partnership
at its principal office with the Form of Assignment (or another instrument of
assignment) duly executed and accompanied by (i) evidence that any transfer tax
has been paid, or funds sufficient to pay any transfer tax, and (ii) evidence
reasonably satisfactory to the Operating Partnership that the proposed
assignment will not violate Section 5.01, the Operating Partnership will,
without charge, execute and deliver a new Warrant registered in the name of the
assignee named in the Form of Assignment (or other instrument of assignment) and
will promptly cancel this Warrant. This Warrant may be divided or combined with
other Warrants by surrender of this Warrant and any other Warrants with which it
is to be combined at the principal office of the Operating Partnership together
with a written notice, signed by the Warrant Holder, specifying the names and
denominations in which new Warrants are to be issued.
Section 5.03. Upon receipt by the Operating Partnership of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
this Warrant, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, or (in the case of mutilation) upon surrender of
this Warrant, the Operating Partnership will execute and deliver a new Warrant
relating to the same number of Warrant Units as this Warrant and the lost,
stolen, destroyed or mutilated Warrant will become void. Any new Warrant
executed and delivered in accordance with this Section 5.03 will constitute an
additional contractual obligation of the Operating Partnership, and will be
valid and enforceable whether or not the Warrant which was believed to have been
lost, stolen or destroyed is subsequently presented for exercise.
ARTICLE VI
Registration Under the Securities Act
Section 6.01. Upon conversion of Warrant Units to Common Stock (pursuant
to the Partnership Agreement), the Warrant Holder will have registration rights
with respect to such Common Stock pursuant to the Partnership Agreement.
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<PAGE>
ARTICLE VII
Other Matters
Section 7.01. The provisions of this Warrant will bind, and inure to the
benefit of, the Operating Partnership and its successors and assigns.
Section 7.02. (a) Any notice or other communication to the Operating
Partnership relating to this Warrant will be deemed given on the day when it is
delivered or sent by facsimile transmission (with a confirmation copy sent by
mail), or on the third Business Day after the day on which it is sent by
first-class mail, to the Operating Partnership at the following address (or such
other address as may be specified by the Operating Partnership after the date of
this Warrant):
American Real Estate Investment, L.P.
Plymouth Meeting Executive Campus
620 W. Germantown Pike, Suite 200
Plymouth Meeting, PA 19462
Telephone: (601) 834-7950
Facsimile: (610) 834-9560
(b) Any notice or other communication to the Warrant Holder will be
deemed given when and as provided in Section 4.05.
Section 7.03. This Warrant will be governed by, and construed under, the
laws of the State of New York relating to contracts made and to be performed in
that state.
Section 7.04. The Article headings in this Warrant are for convenience
only, are not part of this Warrant and are not intended to affect the meaning or
interpretation of any of the terms of this Warrant.
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<PAGE>
IN WITNESS WHEREOF, this Warrant has been executed by the Operating
Partnership on the 12th day of December, 1997.
AMERICAN REAL ESTATE INVESTMENT, L.P.
By: American Real Estate Investment Corporation,
its General Partner
By:_____________________________________
Name:
Title:
11
<PAGE>
FORM OF ASSIGNMENT
(To Be Signed Only Upon Assignment)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
the attached Warrant to __________________________________ to the extent of the
right to purchase _________________ Warrant Units, and the undersigned appoints
___________________________, with full power of substitution, to transfer that
Warrant, with respect to the right to purchase that number of Warrant Units, on
the books of American Real Estate Investment, L.P.
Dated: ___________, ____
_________________________________________________
(Signature must conform to the name of the Warrant
Holder specified on the face of the Warrant)
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SUBSCRIPTION FORM
To: American Real Estate Investment, L.P.
The undersigned irrevocably elects to purchase _______________ Warrant
Units by exercising the Warrant to which this form is attached and tenders
payment of the full Exercise Price with respect to those Warrant Units. The
undersigned requests that the certificates representing the Warrant Units as to
which the Warrant is being exercised be registered as follows:
Name:
Social Security or Employer Identification Number:
Address:
Deliver to:
Address:
|_| (Check if applicable) The undersigned will be acquiring the
Warrant Units as to which this Warrant is being exercised for investment and not
with a view to their resale or distribution.
If the Warrant Units as to which the Warrant is being exercised are
fewer than all the Warrant Units to which the Warrant relates, please issue a
new Warrant for the balance of the Warrant Units registered in the name of the
undersigned and deliver it to the undersigned at the following address:
Address:
Date: __________________ Signature _____________________________________
(Signature must conform to the name
of the Warrant Holder specified on
the face of the Warrant)
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
December 31, 1997 financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 17,672
<SECURITIES> 0
<RECEIVABLES> 13,135
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 30,807
<PP&E> 153,143
<DEPRECIATION> 2,955
<TOTAL-ASSETS> 180,995
<CURRENT-LIABILITIES> 42,566
<BONDS> 86,501
0
0
<COMMON> 5
<OTHER-SE> 51,923
<TOTAL-LIABILITY-AND-EQUITY> 180,995
<SALES> 8,197
<TOTAL-REVENUES> 8,197
<CGS> 5,225
<TOTAL-COSTS> 5,225<F3>
<OTHER-EXPENSES> 3,203<F2>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,134
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 4,608<F1>
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,243
<EPS-PRIMARY> .92
<EPS-DILUTED> .88
<FN>
<F1>Represents gains from sale of property.
<F2>Expense associated with termination of employment agreement.
<F3>Includes minority interest share and earnings from equity investors.
</FN>
</TABLE>
