<PAGE>
December 19, 1997
U.S. Securities and Exchange Commission
Operations Center, Stop 0-7
6432 General Green Way
Alexandria, Virginia 22312
Re: Urban Shopping Centers, Inc.
Commission File No. 1-12278
Form 8-K
Gentlemen:
Transmitted, for the above-captioned registrant is the
electronically filed executed copy of registrant's current report
on Form 8-K/A Amendment No. 1 dated December 19, 1997.
Thank you.
Very truly yours,
URBAN SHOPPING CENTERS, INC.
By: ADAM S. METZ
Executive Vice President, Chief Financial
Officer, Director of Acquisitions and
Chief Accounting Officer
ASM/go
Enclosures
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
URBAN SHOPPING CENTERS, INC.
(Exact name of registrant as specified in its charter)
Maryland 1-12278 36-3886885
(State of incorporation) (Commission File Number) (I.R.S. Employer
Identification No.)
900 North Michigan Avenue,
Suite 1500 60611
Chicago, Illinois (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (312) 915-2000
Not Applicable
(Former name or former address, if changed since last report)
<PAGE>
The undersigned registrant hereby amends the following section of its
Report dated November 14, 1997 on Form 8-K as set forth in the pages attached
hereto:
Item 7. Financial Statements and Exhibits
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Company has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
URBAN SHOPPING CENTERS, INC.
By: ADAM S. METZ
Executive Vice President, Chief
Financial Officer, Treasurer,
Director of Acquisitions and Chief
Accounting Officer
Date: December 19, 1997
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
Listed below are the financial statements, pro forma financial
information and exhibits which are included herein:
a. Financial Statements.
Combined Statements of Operations for Fox
Valley Center and Hawthorn Center for the nine
months ended September 30, 1997 (unaudited) and
the year ended December 31, 1996 with Independent
Auditors' Report thereon
b. Pro Forma Financial Information.
Pro Forma Condensed Consolidated Balance
Sheet as of September 30, 1997 (unaudited)
Pro Forma Condensed Consolidated Statement of
Operations for the nine months ended September 30,
1997 (unaudited)
Pro Forma Condensed Consolidated Statement of
Operations for the year ended December 31, 1996
(unaudited)
c. Exhibits.
10.1 Hawthorn, L.P. Agreement of
Purchase and Sale of Partnership Interest
dated November 14, 1997
10.2 Fox Valley Mall LLC Agreement of
Purchase and Sale of Membership Interest
dated November 14, 1997
10.3 Loan Agreement dated as of November
14, 1997 between Fox Valley Mall LLC and
Lehman Brothers Holdings Inc.
10.4 Loan Agreement dated as of November
14, 1997 between Hawthorn, L.P. and Lehman
Brothers Holdings Inc.
10.5 Registration Rights Agreement
between the Company and the Investor dated
November 13, 1997
10.6 Articles Supplementary relating to
the Preferred Shares
10.7 Third Amendment to Second Amended
and Restated Agreement of Limited Partnership
of Urban Shopping Centers, L.P.
23.1 Independent Auditors' Consent
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Urban Shopping Centers, Inc.:
We have audited the accompanying Combined Statement of
Operations of Fox Valley Center (Fox Valley) and Hawthorn Center
(Hawthorn) for the year ended December 31, 1996. This Statement
is the responsibility of management. Our responsibility is to
express an opinion on the Statement based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the Statement is free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the Statement. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
presentation of the Statement. We believe that our audit
provides a reasonable basis for our opinion.
As explained in Note 1, the accompanying Statement was
prepared for the purpose of complying with the rules and
regulations of the Securities and Exchange Commission. The
presentation is not intended to be a complete presentation of Fox
Valley's and Hawthorn's revenues and expenses.
In our opinion, the Statement referred to above presents
fairly, in all material respects, certain revenues and expenses
of Fox Valley and Hawthorn for the year ended December 31, 1996,
in conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Chicago, Illinois
December 12, 1997
<PAGE>
<TABLE>
URBAN SHOPPING CENTERS, INC.
FOX VALLEY CENTER AND HAWTHORN CENTER
COMBINED STATEMENTS OF OPERATIONS (NOTE 1)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 (UNAUDITED) AND THE
YEAR ENDED DECEMBER 31, 1996
($000's omitted)
<CAPTION>
Nine Months
Ended Year
September 30, Ended
1997 December 31,
(Unaudited) 1996
-------------- --------------
<S> <C> <C>
Shopping center revenues:
Minimum rents $ 16,347 $ 22,581
Percentage rents 560 1,132
Recoveries from tenants 10,334 13,529
Other 2,463 1,589
-------------- --------------
29,704 38,831
-------------- --------------
Shopping center expenses:
Real estate taxes 2,036 2,787
Utilities 2,665 3,480
Repairs and maintenance 2,965 3,991
Advertising 555 708
Other operating 2,469 3,229
-------------- --------------
10,690 14,195
-------------- --------------
Operating income $ 19,014 $ 24,636
============== ==============
<FN>
See accompanying notes to combined statements of operations.
</TABLE>
<PAGE>
URBAN SHOPPING CENTERS, INC.
NOTES TO COMBINED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1997 (UNAUDITED) AND
YEAR ENDED DECEMBER 31, 1996
($000's omitted)
(1) BASIS OF PRESENTATION
The accompanying historical combined statements of
operations for Fox Valley Center (Fox Valley) and Hawthorn Center
(Hawthorn) are presented in conformity with Rule 3-14 of the
Securities and Exchange Commission. The statements of operations
are not representative of the actual operations for the nine
months ended September 30, 1997 and the year ended December 31,
1996, as certain revenues and expenses, which may not be
comparable to the revenues and expenses expected to be incurred
in the future operations have been excluded. Revenues and
expenses excluded consist of interest income on short-term
investments, management fees, mortgage interest, and depreciation
and amortization.
In the opinion of management, all adjustments (consisting
solely of normal recurring adjustments) necessary for a fair
presentation of the combined statements of operations have been
included. The results for the interim period ended September 30,
1997 are not necessarily indicative of the results to be obtained
for the full fiscal year.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Investment Property
Repair and maintenance expenses are charged to operations as
incurred. Significant betterments and improvements are
capitalized and depreciated over their estimated useful lives.
Revenue Recognition
Minimum rent is recognized on a straight-line basis over the
terms of the related leases.
Income Taxes
Fox Valley and Hawthorn are owned by Urban Shopping Centers,
Inc. (Urban) through Urban Shopping Centers, L.P. as of November
14, 1997. Urban operates as a real estate investment trust
(REIT) and under the provision of the Internal Revenue Code, a
REIT will generally not be subject to Federal and state income taxes.
Use of Estimates
The preparation of statements of operations in conformity
with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of revenues and expenses during the reporting periods.
Actual results could differ from those estimates.
<PAGE>
URBAN SHOPPING CENTERS, INC.
NOTES TO COMBINED STATEMENTS OF OPERATIONS - CONCLUDED
(3) LEASES
Management has determined that all leases relating to Fox
Valley and Hawthorn are properly classified as operating leases;
therefore, rental income is reported when earned. Leases with
tenants range in term from one to 30 years and generally provide
for fixed minimum rents and reimbursement of operating costs. In
addition, leases with shopping center tenants provide for
additional rent based upon percentages of tenant sales volumes.
Minimum lease payments to be received in the years 1998 to
2002, and thereafter, under the above lease agreements are
$19,814, $18,818, $17,469, $15,795, $14,238, and $41,649,
respectively.
<PAGE>
URBAN SHOPPING CENTERS, INC.
PRO FORMA FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(Unaudited)
The following unaudited pro forma condensed consolidated
financial statements for Urban Shopping Centers, Inc. (Urban)
reflect the acquisition by Urban of Fox Valley Center (Fox
Valley) and Hawthorn Center (Hawthorn). The pro forma condensed
consolidated financial statements have been prepared based upon
certain pro forma adjustments to the historical financial
statements of Urban.
The accompanying unaudited pro forma condensed consolidated
balance sheet as of September 30, 1997 has been prepared as if
Fox Valley and Hawthorn had been acquired as of the balance sheet
date.
The accompanying unaudited pro forma condensed consolidated
statements of operations for the nine months ended September 30,
1997 and for the year ended December 31, 1996 have been prepared
as if the Fox Valley and Hawthorn acquisitions had occurred as of
January 1, 1996.
The unaudited pro forma condensed consolidated financial
statements do not purport to be indicative of the results which
would actually have been obtained had the transactions described
above been completed on the dates indicated or which may be
obtained in the future. The unaudited pro forma condensed
consolidated financial statements should be read in conjunction
with the combined statements of operations for Fox Valley and
Hawthorn included herein.
<PAGE>
<TABLE>
URBAN SHOPPING CENTERS, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997
(Unaudited)
($000's omitted, except share amounts)
<CAPTION>
Pro Forma
Historical Adjustments Pro Forma
------------ ------------ ------------
<S> <C> <C> <C>
Assets
Investment properties, net
of accumulated
depreciation $ 837,417 $ 265,003 (a) $ 1,102,420
Investments in unconsolidated
partnerships and the
Management Company 122,734 122,734
Cash, cash equivalents and
short-term investments 8,371 (3,728)(b) 4,643
Interest, rents and other
receivables 19,748 19,748
Deferred expenses and other
assets 12,386 1,107 (c) 13,493
------------ ------------ ------------
$ 1,000,656 $ 262,382 $ 1,263,038
============ ============ ============
Liabilities and
Stockholders' Equity
Liabilities:
Mortgage notes payable $ 483,077 $ 163,392 (d) $ 646,469
Land sale-leaseback
proceeds 75,000 75,000
Deferred lease accrual 18,007 18,007
Accounts payable and other
liabilities 32,922 32,922
Investments in
unconsolidated
partnerships 37,856 37,856
Commitments and
contingencies
------------ ------------ ------------
Total liabilities 646,862 163,392 810,254
Minority interest 136,174 136,174
<PAGE>
URBAN SHOPPING CENTERS, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET - CONTINUED
Pro Forma
Historical Adjustments Pro Forma
------------ ------------ ------------
Stockholders' equity:
Preferred stock, $.01 par
value, 5,000,000 shares
authorized, 2,999,400
pro forma shares issued
and outstanding -- 30 (e) 30
Common stock, $.01 par
value, 140,000,000 shares
authorized, 17,247,742
historical and pro forma
shares, respectively,
issued and outstanding 172 172
Unit voting stock, $.01 par
value, 5,000,000 shares
authorized, 407,935 and
344,058 historical and pro
forma shares, issued and
outstanding 4 4
Additional paid-in capital 360,310 98,960 (f) 459,270
Retained earnings (deficit) (142,866) (142,866)
------------ ------------ ------------
Total stockholders'
equity 217,620 98,990 316,610
------------ ------------ ------------
$ 1,000,656 $ 262,382 $ 1,263,038
============ ============ ============
<FN>
See accompanying notes to pro forma financial statements.
</TABLE>
<PAGE>
<TABLE>
URBAN SHOPPING CENTERS, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(Unaudited)
($000's omitted, except share amounts)
<CAPTION>
Pro Forma
Historical Adjustments (g) Pro Forma
------------ ------------ ------------
<S> <C> <C> <C>
Revenues:
Shopping center revenues:
Minimum rents $ 68,112 $ 16,347 $ 84,459
Percentage rents 3,738 560 4,298
Recoveries from tenants 33,225 10,334 43,559
Other 2,680 2,463 5,143
------------ ------------ ------------
107,755 29,704 137,459
Interest income 1,183 1,183
------------ ------------ ------------
108,938 29,704 138,642
------------- ------------ ------------
Expenses:
Shopping center expenses 36,873 11,433 (h) 48,306
Mortgage and other
interest and ground rent 27,349 8,272 (i) 35,621
Depreciation, amortization
and write-off of assets 24,574 5,631 (j) 30,205
General and administrative 2,386 2,386
------------ ------------ ------------
91,182 25,336 116,518
------------ ------------ ------------
<PAGE>
URBAN SHOPPING CENTERS, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS - CONTINUED
Pro Forma
Historical Adjustments (g) Pro Forma
------------ ------------ ------------
Operating income 17,756 4,368 22,124
Income from unconsolidated
partnerships and the
Management Company 3,125 3,125
------------ ------------ ------------
Income before other
gains, minority
interest and
extraordinary items 20,881 4,368 25,249
Other gains 3,673 3,673
Minority interest (8,620) (1,322)(k) (9,942)
------------- ------------ ------------
Income before
extraordinary items 15,934 3,046 18,980
Dividends on preferred stock -- (4,567)(l) (4,567)
------------ ------------ ------------
Income before
extraordinary items
applicable to common
and unit voting
common stock $ 15,934 $ (1,521) $ 14,413
============ ============ ============
Income before
extraordinary items
per common and unit
voting common stock $ 0.92 $ 0.83
============ ============
Weighted average common
and unit voting common
stock outstanding 17,364,903 17,364,903
============ ============
<FN>
See accompanying notes to pro forma financial statements.
</TABLE>
<PAGE>
<TABLE>
URBAN SHOPPING CENTERS, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(Unaudited)
($000's omitted, except share amounts)
Pro Forma
Historical Adjustments (g) Pro Forma
------------ ------------ ------------
<S> <C> <C> <C>
Revenues:
Shopping center revenues:
Minimum rents $ 60,944 $ 22,581 $ 83,525
Percentage rents 4,056 1,132 5,188
Recoveries from tenants 27,659 13,529 41,188
Other 2,521 1,589 4,110
------------ ------------ ------------
95,180 38,831 134,011
Interest income 1,864 1,864
------------ ------------ ------------
97,044 38,831 135,875
------------ ------------ ------------
Expenses:
Shopping center expenses 30,924 15,166 (h) 46,090
Mortgage and other interest
and ground rent 18,666 11,029 (i) 29,695
Depreciation, amortization
and write-off of assets 21,544 7,508 (j) 29,052
General and administrative 2,650 2,650
------------ ------------ ------------
73,784 33,703 107,487
------------ ------------ ------------
<PAGE>
URBAN SHOPPING CENTERS, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS - CONTINUED
Pro Forma
Historical Adjustments (g) Pro Forma
------------ ------------ ------------
Operating income 23,260 5,128 28,388
Income from unconsolidated
partnerships and the
Management Company 4,070 4,070
------------ ------------ ------------
Income before other
gains, minority
interest and
extraordinary items 27,330 5,128 32,458
Other gains 3,372 3,372
Minority interest (10,733) (1,746)(k) (12,479)
------------ ------------ ------------
Income before
extraordinary items 19,969 3,382 23,351
Dividends on preferred stock -- (5,999)(l) (5,999)
------------ ------------ ------------
Income before
extraordinary items
applicable to common
stock and unit voting
common stock $ 19,969 $ (2,617) $ 17,352
============ ============ ============
Income before
extraordinary items
per common and unit
voting common stock $ 1.42 $ 1.23
============ ============
Weighted average common
and unit voting common
stock outstanding 14,066,243 14,066,243
============ ============
<FN>
See accompanying notes to pro forma financial statements.
</TABLE>
<PAGE>
URBAN SHOPPING CENTERS, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1997 AND THE YEAR ENDED DECEMBER 31, 1996
(Unaudited)
($000's omitted, except share amounts)
(a) The pro forma adjustment reflects Urban's acquisition of Fox
Valley and Hawthorn, including closing costs, as if it
occurred on September 30, 1997.
(b) The pro forma adjustment reflects the use of working
capital, prior to prorations, to fund, in part, the pro
forma acquisition of Fox Valley and Hawthorn.
(c) The pro forma adjustment reflects the deferred financing
costs associated with the mortgage notes payable secured in
connection with the acquisitions.
(d) The pro forma adjustment reflects the combined mortgage
notes payable financed in connection with the acquisitions.
At Fox Valley, a nine-year $85,528 secured loan was entered
into, while at Hawthorn, an eleven-year $77,864 secured loan
was entered into.
(e) The pro forma adjustment reflects the par value of 2,999,400
shares of cumulative convertible redeemable preferred stock
("Preferred Stock") issued in connection with the
acquisition of Fox Valley and Hawthorn. Quarterly dividends
on the Preferred Stock are equal to the greater of (i) $0.50
per share or (ii) the quarterly dividends then payable on
the shares of common stock. The Preferred Stock is
convertible into common stock at the option of the holder,
at a conversion price of $33.34 per share anytime after
August 1998. After six years the Preferred Stock may be
redeemed at the option of Urban for cash.
(f) The pro forma adjustment reflects the excess of net proceeds
over par value from the issuance of 2,999,400 shares of
Preferred Stock.
(g) The pro forma adjustments reflect, unless otherwise noted,
certain historical revenues and expenses for Fox Valley and Hawthorn.
(h) The pro forma adjustment includes management fees of 2.5% of
gross receipts as a result of the new management agreements
with Urban Retail Properties Co.
(i) The pro forma adjustment reflects interest expense on the
new aggregate mortgage notes payable of $163,392 at an
interest rate of 6.75%.
(j) The pro forma adjustment reflects the depreciation expense
resulting from the acquisition of Fox Valley and Hawthorn,
assuming an asset life of 30 years and buildings and
improvements of $225,252.
<PAGE>
URBAN SHOPPING CENTERS, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -
CONCLUDED
(k) The pro forma adjustment reflects the adjustment for the
operating partnership unit holders' share of pro forma
income before extraordinary items.
(l) The pro forma adjustment reflects the dividends on the
Preferred Stock at $1.5225 and $2.0000 per share
respectively, for the nine months ended September 30, 1997
and the twelve months ended December 31, 1996.
<PAGE>
HAWTHORN, L.P.
AGREEMENT OF PURCHASE AND SALE OF PARTNERSHIP INTEREST
By and Among
JMB GROUP TRUST I, an Illinois group trust,
as Seller 1,
HAWTHORN CENTER CORPORATION, an Illinois corporation,
As Seller 2,
and
URBAN SHOPPING CENTERS, L.P., an Illinois limited partnership,
as Purchaser 1, and
USC HAWTHORN, INC., a Delaware corporation,
as Purchaser 2
DATED: November 14, 1997
<PAGE>
HAWTHORN, L.P.
AGREEMENT OF PURCHASE AND SALE OF PARTNERSHIP INTEREST
THIS AGREEMENT OF PURCHASE AND SALE OF PARTNERSHIP INTEREST
is made and entered into this 14th day of November, 1997 by and
between JMB GROUP TRUST I, an Illinois group trust ("SELLER 1")
and HAWTHORN CENTER CORPORATION, an Illinois corporation ("SELLER
2"), Seller 1 and Seller 2 each having an address of c/o Heitman
Capital Management Corporation, 180 North LaSalle Street, Suite
3600, Chicago, Illinois 60601-6789, Attention: Howard J. Edelman;
facsimile number (312) 541-6738, URBAN SHOPPING CENTERS, L.P., an
Illinois limited partnership ("PURCHASER 1"), and USC HAWTHORN,
INC., a Delaware corporation ("PURCHASER 2"), Purchaser 1 and
Purchaser 2 each having an address of 900 North Michigan Avenue,
15th Floor, Chicago, Illinois 60611, Attention: Michael G.
Hillborn facsimile number (312) 915-2001. Seller 1 and Seller 2
are herein individually and collectively called "SELLER" and
Purchaser 1 and Purchaser 2 are herein individually and
collectively called "PURCHASER".
RECITALS
A. LA SALLE NATIONAL TRUST, N.A., as TRUSTEE UNDER TRUST
AGREEMENT dated March 1, 1971 And Known As TRUST NUMBER 41999, as
to Parcels 1, 2, 3, 4, and 5 (Parcels 4 and 5 being easements and
other matters benefiting the owner of Parcels 1, 2 and 3); LA
SALLE NATIONAL TRUST, N.A., as TRUSTEE UNDER TRUST AGREEMENT
dated April 27, 1978 And Known As TRUST NUMBER 54254, as to
Parcel 10; and LA SALLE NATIONAL TRUST, N.A., as TRUSTEE UNDER
TRUST AGREEMENT dated June 1, 1978 And Known As TRUST NUMBER
52472, as to Parcels 6, 7, 8, and 9 (Parcels 7, 8 and 9 being
easements and other matters benefiting the owner of Parcel 5)
(said three trusts collectively, the "TRUST") are the legal title
holders to the "Property" (as hereinafter defined) which is
legally described on EXHIBIT A attached hereto.
B. The beneficial owner of the Trust is Hawthorn, L.P., an
Illinois limited partnership (the "OWNER"). The sole partners of
Owner are "Prior Owner" (defined below) and Seller 2, the sole
owner of the entire "Seller 1 GP Interest" and "Seller 1 LP
Interest" (defined below) on the "Closing Date" (defined below)
will be Prior Owner, and the sole entity entitled to receive or
to direct a distribution of each of the entire Seller 1 GP
Interest and Seller 1 LP Interest on the Closing Date will be
Seller 1.
C. The Property is encumbered by a loan (the "LOAN")
pursuant to that certain Mortgage Agreement dated as of September
13, 1994, with an original principal indebtedness of Twenty-Five
Million Dollars ($25,000,000) as to which LASALLE NATIONAL BANK
("LNB") is trustee.
D. Owner will be on the Closing Date the beneficiary of
the Trust and as such is the beneficial owner of the Land and
Improvements, and Owner is also the owner of the other components
of the Property, which Property (including the Land and
<PAGE>
Improvements) is commonly known as the Hawthorn Shopping Center.
The Property consists of an enclosed dual-level retail shopping
mall building containing approximately 503,480 gross leasable
square feet of in-line mall shops, a theater building outlot
containing approximately 4.299 acres and a health club building
outlot containing approximately 2.285 acres, situated on
underlying parcels collectively consisting of approximately
41.061 acres. The Property is anchored by department stores
owned by Marshall Field Company ("FIELD"), Carson Pirie Scott &
Co. ("CARSON"), Sears Roebuck & Company ("SEARS") and J.C. Penney
Properties, Inc. ("PENNEY") (collectively, The "ANCHOR STORES").
Each of the Department Stores or their affiliates own their respective
parcels. The Anchor Stores and the Partnership are parties to the "REA".
The "REA" is that certain amended operating agreement captioned
"AMENDED OPERATING AGREEMENT" dated as of November 27, 1973, by
and between Envion I, a joint venture consisting of Mapco, Inc.,
a Delaware corporation and Urban Investment and Development Co.,
a Delaware corporation ("ORIGINAL DEVELOPER"), Field, Sears and
Adcor Realty Corporation, a New York corporation ("ADCOR"),
recorded as Document 1648659, in the Recorder's Office of DuPage
County, Illinois, as amended by that certain first amendment to
amended operating agreement captioned "FIRST AMENDMENT TO AMENDED
OPERATING AGREEMENT" dated as of August 27, 1975, by and between
Original Developer, Field, Sears and Adcor, recorded as Document
1731032, in the Recorder's Office of DuPage County, Illinois, as
amended by that certain second amendment to amended operating
agreement captioned "SECOND AMENDMENT TO AMENDED OPERATING
AGREEMENT" dated as of April 28, 1989, by and between
Orland/Hawthorn Partnership, an Illinois general partnership, as
successor in interest to Original Developer ("SUCCESSOR
DEVELOPER"), Field, Sears, Adcor, CPS Realty Partnership, an
Illinois general partnership, by Carson Pirie Scott & Co., a
Delaware corporation, as its general partner ("CPS"), and LaSalle
National Bank, not personally but solely as Trustee under Trust
Agreement dated April 10, 1989, and known as Trust No. 114300
("TRUST 114300"), recorded as Document 3028678, in the Recorder's
Office of DuPage County, Illinois, as amended by that certain
third amendment to amended operating agreement captioned "THIRD
AMENDMENT TO AMENDED OPERATING AGREEMENT" dated as of January 31,
1997, by and among Owner, as successor in interest to Successor
Developer, LaSalle National Bank, not personally but solely as
Trustee under Trust Agreement dated March 1, 1971, and known as
Trust No. 41999 ("TRUST 41999"), Field, Sears, Carson, as
successor in interest CPS, and Penney, recorded as Document
3991226, in the Recorder's Office of DuPage County, Illinois.
E. Each of the Anchor Stores and Owner are parties to
"Supplemental Agreements. The "Supplemental Agreements" are as
follows: (I) with respect to Field and Sears, that certain
supplemental agreement captioned "SUPPLEMENTAL AGREEMENT" (the
"FIELD & SEARS SUPPLEMENTAL AGREEMENT") dated as of November 3,
1972, by and between Original Developer, Field and Sears; (ii)
with respect to Carson, that certain supplemental agreement
captioned "CARSON PIRIE SCOTT - SUPPLEMENTAL AGREEMENT - HAWTHORN
CENTER" (the "CARSON SUPPLEMENTAL AGREEMENT") dated as of January
31, 1997, by and between Owner and CPS; (iii) with respect to
Sears, that certain supplemental agreement captioned "SEARS -
SUPPLEMENTAL AGREEMENT - HAWTHORN CENTER" (the "SEARS
SUPPLEMENTAL AGREEMENT") dated as of January 31, 1997, by and
<PAGE>
between Owner and Sears; and (iv) with respect to Penney, that
certain supplemental agreement captioned "PENNEY - SUPPLEMENTAL
AGREEMENT - HAWTHORN CENTER" (the "PENNEY SUPPLEMENTAL
AGREEMENT") dated as of June 26, 1997, by and between Developer
and J.C. Penney Properties, Inc., a Delaware corporation ("PENNEY").
Subject to and on the terms and provisions of and for the
considerations set forth in this Agreement, Seller has agreed to sell,
and Purchaser has agreed to buy, the entire interest of Seller in Owner.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. DEFINITIONS. As used in this Agreement, the following
terms have the following meanings:
CLOSING DATE. As agreed between Seller and Purchaser
but no later than November 14, 1997.
DUE DILIGENCE PERIOD. The period commencing on the
date hereof and ending on November 14, 1997.
ESCROW COMPANY. Near North National Title Corporation.
TITLE COMPANY. First American Title Insurance Company.
KNOWLEDGE OF PURCHASER. The actual current knowledge
of James Hansen, Robert Koys, Robert W. Powell, Jr., Ross B.
Glickman, Adam S. Metz, Michael G. Hilborn, Matthew Dominski and
Mindy Sherman. (The same definition shall apply when this
Agreement uses the phrase, "PURCHASER'S KNOWLEDGE," or similar phrase.)
KNOWLEDGE OF SELLER. The actual current knowledge of
Thomas C. Rogers, Howard J. Edelman, Howard B. Goldman and James
O'Brien. (The same definition shall apply when this Agreement
uses the phrase, "Seller's knowledge," or similar phrase.)
PARTNERSHIP INTEREST. The entire right, title and
interest of Prior Owner and Seller in, and claims against, Owner,
including, but not limited to, the entire interest of Prior Owner
and Seller in the profits and capital of Owner; said interest of
Prior Owner and Seller constitute 100% of all ownership interests
in Owner. The Partnership Interest is comprised of the Seller 2
GP Interest, the Seller 1 GP Interest and the Seller 1 LP
Interest, which Seller 1 GP Interest and Seller 1 LP Interest are
to be distributed at Closing to or at the direction of Seller 1.
PRIOR OWNER. Orland/Hawthorn Partnership, an Illinois
general partnership. The two general partners of Prior Owner are Seller 1
and Shopping Center Associates, a New York general partnership ("O'CONNOR").
PROPERTY. The following described property:
(1) The real property legally described on
EXHIBIT "A", together with all easements, covenants, agreements,
rights of way, rights, privileges, tenements, hereditaments,
appurtenances, gaps, gores, and other rights now or hereafter
belonging or pertaining thereto, including, but not limited to,
any development rights and air rights appurtenant thereto (collectively,
the "LAND");
<PAGE>
(2) Any land owned by Owner lying in the bed
of any street, road or avenue opened or proposed, public or
private, in front of or adjoining the Land, (all of the foregoing
being included within the term "Land");
(3) All of the buildings, structures,
fixtures, facilities, installations and other improvements of
every kind and description (other than those owned by tenants
under Leases) now or hereafter in, on, over or under the Land
(collectively, the "IMPROVEMENTS");
(4) All furniture, furnishings, fixtures,
equipment, machinery, maintenance vehicles and equipment, tools,
parts, computer hardware and other items of tangible personalty
of every kind and description situated in, on, over and under the
Premises, which is owned by Owner or leased pursuant to the
leases listed on EXHIBIT B, together with all replacements and
substitutions therefor (collectively, the "TANGIBLE PERSONAL
PROPERTY"), an itemization of which has been prepared by Seller
and is attached to this Agreement as EXHIBIT B. The foregoing includes
all that owned by Prior Owner on the date on which the beneficial
interest in the Trust was assigned to Owner.
(5) All of Owner's interest in all existing
surveys, blue prints, drawings, plans and specifications and
other documentation for or with respect to the Property or any
part thereof, including, without limitation, all materials,
plans, specifications, drawings, renderings, models, permits,
applications, bid solicitations, budgets, market or income and
expense projections, feasibility or other studies and analyses,
books and records and all other material and data generated or
produced with respect to the Property; and all available tenant
lists and data, correspondence with present and prospective
tenants, vendors, suppliers, utility companies and other third
parties, booklets, manuals and promotional and advertising
materials concerning the Property or any part thereof; equipment
maintenance records, warranty information, sales and advertising
materials and accounting information, and such other existing
books, records and documents used in connection with the
operation of the Property or any part thereof (collectively, THE
"BOOKS AND RECORDS"). The Books and Records include all of the
foregoing that was owned by Prior Owner on the date on which the
beneficial interest in the Trust was assigned to Owner, except
for internal management books and records (the same having been
retained by Prior Owner and not contributed to Owner);
(6) All leases and other agreements for the use or
occupancy of space in the Property binding upon Owner (the "LEASES");
(7) All government permits, approvals,
authorizations, licenses and franchises that have been issued or
granted to Owner and/or the Prior Owner to the extent they relate
to the operation of the Property, or the ownership, use or
occupancy of the Property (the "LICENSES"); and
(8) Subject to the provisions of Article 5,
all prepaid advertising expenses, prepaid utility charges and
deposits and other prepaid items relating to the Property (the
"PREPAID EXPENSES"), all trade names, assumed names, trademarks,
<PAGE>
copyrights and service marks with respect to the Property and all
goodwill associated therewith (the "TRADEMARKS"), and all other
intangible personal property used exclusively in connection with
or arising from the Property (the "INTANGIBLE PERSONAL
PROPERTY"), including, without limitation, contract rights and
telephone exchange numbers, but expressly excluding cash held by
Owner on the Closing Date and also expressly excluding
Miscellaneous Receivables of Owner on the Closing Date.
"MISCELLANEOUS RECEIVABLE" are receivables of Owner other than
(i) receivables owing by the Anchor Stores and (ii) receivables
owing under Leases and Service Contracts.
PURCHASER INDEMNIFIED PARTIES. Seller, Owner (as to Section
3.2(e) only) and Prior Owner and their respective partners,
trustees, beneficiaries, shareholders, members, managers,
advisors and other agents and their respective employees,
officers, directors and shareholders.
SELLER INDEMNIFIED PARTIES. Purchaser and Owner and their
respective partners, trustees, beneficiaries, shareholders,
members, managers, advisors and other agents and their respective
employees, officers, directors and shareholders.
SELLER 1 GP INTEREST. The entire right, title and interest
of each of Prior Owner (to be distributed to or at the direction
of Seller 1) and Seller 1 as a general partner, in, and claims
against, Owner, including, but not limited to, the entire interest
of each of Prior Owner and Seller 1, as a general partner, in the profits
and capital of Owner; said interest of Prior Owner and Seller 1
constitutes a .5% general partnership interest in Owner.
SELLER 1 LP INTEREST. The entire right, title and interest
of each of Prior Owner (to be distributed to or at the direction
of Seller 1) and Seller 1 as a limited partner, in, and claims
against, Owner, including, but not limited to, the entire
interest of each of Prior Owner and Seller 1, as a limited
partner, in the profits and capital of Owner; said interest of Prior
Owner and Seller 1 constitutes a 99% limited partnership interest in Owner.
SELLER 2 GP INTEREST. The entire right, title and interest
of Seller 2 as a general partner, in, and claims against, Owner,
including, but not limited to, the entire interest of Seller, as
a general partner, in the profits and capital of Owner; said interest
of Seller constitutes a .5% general partnership interest in Owner.
STRAY LIABILITIES. All obligations and liabilities of Owner
on the Closing Date, contingent or otherwise, and all claims made
at any time (whether before or after the Closing Date) asserting
an obligation or liability of Owner accruing on or before the
Closing Date, including, but not limited to, the Existing
Litigation. The foregoing Stray Liabilities do not include
obligations arising under the Swap Documents, Leases, Service
Contracts, REA, Supplemental Agreements and Permitted Exceptions
first accruing on or after the Closing Date or any express
matters for which Purchaser receives and accepts a proration
credit at Closing. Stray Liabilities include all obligations and
liabilities with respect to the Indenture dated September 13,
1994 between Owner and LaSalle National Bank, other than
obligations under Section 6.15 of the Indenture.
<PAGE>
TORT CLAIMS. All claims and causes of actions seeking
damages on account of injury to persons or damage to property
occurring at the Property. Tort Claims will be treated as
accruing prior to the Closing Date if the injury to person or
damage to property occurred prior to the Closing Date; and Tort
Claims will be treated as accruing on or after the Closing Date
if the injury to person or damage to property occurred on or
after the Closing Date.
2. SALE; AGGREGATE PURCHASE PRICE.
2.1 Subject to the terms and provisions hereof, Seller 1
agrees to sell and convey to Purchaser 1, and Purchaser 1 agrees
to purchase from Seller 1, the Seller 1 LP Interest; Seller 1
agrees to sell and convey to Purchaser 2, and Purchaser 2 agrees
to purchase from Seller 1, the Seller 1 GP Interest; and Seller 2
agrees to sell and convey to Purchaser 2, and Purchaser 2 agrees
to purchase from Seller 2, the Seller 2 GP Interest. Such
purchase and sale shall occur on the Closing Date (the "CLOSING").
2.2 The total purchase price (hereinafter called THE
"SELLER 1 LP PURCHASE PRICE") to be paid by Purchaser 1 to Seller
1 for the Seller 1 LP Interest shall be One Hundred Twenty Eight
Million Seven Hundred Thousand Dollars ($128,700,000). The total
purchase price (hereinafter called the "SELLER 1 GP PURCHASE
PRICE") to be paid by Purchaser 2 to Seller 1 for the Seller 1 GP
Interest shall be Six Hundred Fifty Thousand Dollars ($650,000).
The total purchase price (hereinafter called the "SELLER 2 GP
PURCHASE PRICE") to be paid by Purchaser 2 to Seller 2 for the
Seller 2 GP Interest shall be Six Hundred Fifty Thousand Dollars
($650,000). Accordingly, the aggregate (the "AGGREGATE PURCHASE
PRICE") of the Seller 1 LP Purchase Price, the Seller 1 GP
Purchase Price and the Seller 2 GP Purchase Price is One Hundred
Thirty Million and no/100 Dollars ($130,000,000.00). The
Aggregate Purchase Price shall be payable in the following manner:
(1) EARNEST MONEY. Purchaser shall, within three (3)
business days after the delivery of this Agreement to Seller,
deposit with the Escrow Company, as escrow agent, the amount of
Zero Dollars ($0) (hereinafter called the "EARNEST MONEY") which
Earnest Money shall be in the form of a wire transfer of
immediately available United States of America funds. The
Earnest Money shall become nonrefundable at the close of business
of the last day of the Due Diligence Period unless this Agreement
is terminated prior to the expiration of the Due Diligence
Period. The Earnest Money shall be held and disbursed by the
Escrow Company acting as escrow agent pursuant to the Earnest
Money Escrow Agreement in the form of EXHIBIT C attached hereto
which the parties and Escrow Company have executed simultaneously
with this Agreement. The Earnest Money shall be invested in a
federally issued or insured interest bearing instrument with any
interest accruing thereon being deemed part of the Earnest Money
and shall be paid to the party to which the Earnest Money is paid
pursuant to the provisions hereof. If the sale hereunder is
consummated in accordance with the terms hereof, the Earnest
Money and any interest thereon shall be applied to the Aggregate
Purchase Price to be paid by Purchaser at the Closing. In the
event of a default hereunder by Purchaser or Seller, the Earnest
Money shall be applied as provided herein.
<PAGE>
(2) CASH BALANCE. Purchaser shall pay the balance of
the Aggregate Purchase Price, subject to the prorations described
in Section 5 below, in cash (the "CASH BALANCE") by wire transfer
of immediately available United States of America funds to the
Title Company for payment to Seller, in accordance with the terms
and conditions of this Agreement no later than 11:00 am (New York
City, New York time) on the Closing Date. Said Cash Balance will
be paid on the Closing Date in two parts: the Cash Balance less
$77,364,951.61 shall be paid concurrently with the conveyance to
Purchaser of the Partnership Interest; and $77,364,951.61 shall
be paid immediately following such conveyance (the parties
acknowledge that said $77,364,951.61 represent funds to be
distributed by Owner to Purchaser from proceeds of a loan to
Owner which Purchaser is causing Owner to obtain on the Closing
Date). Notwithstanding the foregoing, Purchaser's obligations
hereunder and are not contingent upon Purchaser causing Owner to
obtain financing.
3. CONDITIONS PRECEDENT. In the event (a) any of the
conditions set forth in Sections 3.2(b), 3.3, 3.5, 3.6 or 3.7
below shall not have been fulfilled, accepted or deemed accepted
or waived as provided herein on or before the applicable dates
specified herein, Purchaser shall have the right to terminate
this Agreement by giving written notice thereof to Seller on or
before the respective dates specified herein, or (b) any of the
conditions set forth in Section 3.5 hereof shall not have been
fulfilled as provided herein on or before the applicable dates
specified herein, Seller shall have the right to terminate this
Agreement by giving written notice thereof to Purchaser on or
before the respective dates specified herein. In the event the
Agreement is terminated as provided in clause (a) or (b) above
then all Earnest Money shall be refunded to Purchaser and neither
party shall have any further rights or obligations hereunder,
except for the "Surviving Obligations" (as hereinafter defined).
3.1 SELLER'S DELIVERIES. Seller has delivered or made
available to Purchaser complete copies of the following items
which are in Seller's possession:
(1) all Leases;
(2) all Service Contracts;
(3) copies of the real estate tax bills for the
current year and two prior years, if available;
(4) any existing environmental reports, including any
Phase I environmental report;
(5) the existing owner's title policy;
(6) the existing survey (the "EXISTING SURVEY");
(7) annual operating statements for the Property for
the last three calendar years and monthly operating statements
for the months in the current year;
(8) existing plans and specifications; and
<PAGE>
(9) copies of all Lease "Proposals" (as defined in
Section 15(b)) presently outstanding.
Seller shall provide to Purchaser any documents described in
this Section 3.1 and first coming into Seller's possession or
produced by Seller after the initial delivery and continue to
provide the same during the pendency of this Agreement.
In the event this Agreement terminates for any reason,
Purchaser shall immediately return to Seller all information
delivered by Seller or Seller's agent(s) to Purchaser or
Purchaser's agent(s). The foregoing provision shall survive
termination of this Agreement.
3.2 DUE DILIGENCE. Purchaser and its representatives shall
be permitted to enter upon the Property at any reasonable time
and from time to time before the Closing Date to examine, inspect
and investigate the Property as well as all records and other
documentation provided by Seller or located at the Property
(collectively, "Due Diligence"). The Due Diligence shall be
subject to the terms, conditions and limitations set forth in
this Section 3.2.
(1) Purchaser shall have the right to enter upon the
Property for the purpose of conducting its Due Diligence provided
that in each such instance Purchaser is in full compliance with
the insurance requirements set forth in Section 3.2(e) hereof.
Purchaser shall take all necessary actions to insure that neither
it nor any of its representatives interfere with the tenants or
ongoing operations occurring at the Property. Purchaser shall
not cause or permit any mechanic's liens, materialmen's liens or
other liens to be filed against the Property as a result of its
Due Diligence.
(2) Purchaser shall have through the last day of the
Due Diligence Period in which to conduct its Due Diligence and,
in Purchaser's sole and absolute discretion, to determine whether
the Property is acceptable to Purchaser. If during the Due
Diligence Period, Purchaser becomes aware of any problem or
defect in the Property or any other aspect of the Property which
Purchaser determines, in its sole and absolute discretion, makes
the Property unsuitable to Purchaser, Purchaser may terminate
this Agreement by giving written notice of termination to Seller
on or before the last day of the Due Diligence Period. If
Purchaser does not timely give notice of termination as aforesaid,
Purchaser shall be deemed to have accepted the Property and this Agreement
shall continue in full force and effect. In the event of such termination,
the Earnest Money shall be returned to Purchaser and neither party shall
have any further obligations to the other party hereunder, except for the
Surviving Obligations.
(3) Purchaser shall have the right to conduct, at its
sole cost and expense, any inspections, studies or tests that
Purchaser deems appropriate in determining the condition of the
Property; provided, however, Purchaser is not permitted to
perform any intrusive testing, including, without limitation, a
Phase II environmental assessment or boring, without (i)
submitting to Seller the scope and inspections for such testing;
and (ii) obtaining the prior written consent of Seller.
<PAGE>
(4) Purchaser agrees and covenants with Seller not to
disclose to any third party (other than lenders, accountants,
attorneys and other professionals and consultants in connection
with the transaction contemplated herein) without Seller's prior
written consent, unless Purchaser believes in good faith that
Purchaser is obligated by law to make such disclosure, any of the
reports or any other documentation or information obtained by
Purchaser which relates to the Property or Seller in any way, all
of which shall be used by Purchaser and its agents solely in
connection with the transaction contemplated hereby. In the
event that this Agreement is terminated, Purchaser agrees that
all such information will be held in strict confidence, subject
to the disclosures that Purchaser has made (or has a right to
make) pursuant to the previous sentence. In the event that the
sale hereunder is consummated, the prohibition on the Purchaser's
disclosure of information as set forth in this Section 3.2(d)
shall be of no further force or effect. Seller shall not
disclose to any third party (other than lenders, accountants,
attorneys and other professionals in connection with the
transaction contemplated herein) the existence or terms of this
Agreement without Purchaser's prior written consent, unless
Seller believes in good faith that Seller is obligated by law to
make such disclosure.
(5) Purchaser agrees to indemnify, defend and hold the
Purchaser Indemnified Parties harmless from and against any and
all claims, losses, damages, costs and expenses (including,
without limitation, reasonable attorneys' fees and court costs)
suffered or incurred by any of the Purchaser Indemnified Parties
as a result of or in connection with any damage to property or
injury to persons or any mechanic's lien, which damage or injury
or lien arises from any activities of Purchaser (including
activities of any of Purchaser's employees, consultants,
contractors or other agents) relating to the Property; and in the
event that the Property is disturbed or altered in any way as a
result of such activities, Purchaser shall promptly restore the
Property to its condition existing prior to the commencement of
such activities which disturbed or altered the Property.
Furthermore, Purchaser agrees to maintain and cause any of its
representatives or agents conducting any Due Diligence to
maintain and have in effect workers' compensation insurance, with
statutory limits of coverage, and commercial general liability
insurance with (i) all risk coverage, (ii) waiver of subrogation,
and (iii) limits of not less than Three Million and 00/100
($3,000,000.00) for personal injury, including bodily injury and
death, and property damage. Such insurance shall name the
Purchaser Indemnified Parties and Heitman Capital Management
Corporation ("HCMC") as additional insured parties. Purchaser
shall deliver to Seller a copy of the certificate of insurance
effectuating the insurance required hereunder prior to the
commencement of such activities which certificate shall provide
that such insurance shall not be terminated or modified without
at least thirty (30) days' prior written notice to Seller.
(6) Purchaser acknowledges and agrees that it shall
have no right to review or inspect any of the following: (i)
internal memoranda, correspondence, analyses, documents or
reports prepared by or for Seller in connection with this
Agreement or in connection with the transaction contemplated by
<PAGE>
this Agreement, (ii) communications between Seller and HCMC, and
(iii) appraisals, financial assessments or other valuations of
the Property in the possession of Seller or HCMC.
(7) Sections 3.2(d) and 3.2(e) and such other
designated provisions in this Agreement shall survive Closing or any
termination of this Agreement (collectively, the "Surviving Obligations").
3.3 TITLE AND SURVEY. Purchaser has obtained, at Seller's
cost and expense, for Purchaser's review a commitment for a
standard owner's policy of title insurance along with a copy of
each instrument listed as an exception thereon (the "TITLE
COMMITMENT") on the Land and Improvements issued by the Title
Company. Purchaser has delivered a copy of the title Commitment
to Seller. During the Due Diligence Period, Purchaser shall have
the right to obtain, at its sole cost and expense, any desired
endorsements to the Title Commitment which are available, if any.
Purchaser shall obtain at Seller's expense for Purchaser's review
an update to the Existing Survey (the "UPDATED SURVEY").
Purchaser shall deliver a copy of the Updated Survey to Seller in
a timely manner. As used herein, "PERMITTED EXCEPTIONS" means
the items listed on EXHIBIT D hereof. If prior to the Closing
Date there are additional title exceptions identified by the
Title Company, then Seller shall have the right, but not the
obligation, to cure such exceptions on or before the Closing
Date. Notwithstanding the foregoing, Seller shall be obligated
to remove each exception, if: (a) it can be removed by the
payment of a liquidated sum of money or by posting a bond; or (b)
it arises as a result of any willful or voluntary act of Seller
or Prior Owner or any affiliate of Seller after the date hereof,
regardless of the cost. In addition, Seller shall remove those
title mechanics lien exceptions, if any, listed on EXHIBIT E. If
the objections are not cured by Seller by the scheduled Closing
Date, then Purchaser may as its only option, elect to either:
(i) waive such objection and consummate the transaction
contemplated by this Agreement; or (ii) terminate this Agreement,
in which event the Earnest Money shall be returned to Purchaser
and neither party shall have any further obligations to the other
party except for the Surviving Obligations.
3.4 LOAN PAYOFF. At Closing, Seller shall cause the
"Hawthorn Swap" (as defined below) to be retained by Owner, and
Owner and Purchaser shall bear the cost of unwinding the same.
Notwithstanding the foregoing, however, at the Closing, Seller
shall cause the Hawthorn Swap to be released as security for the
Loan; a condition to Purchaser's obligations under this Agreement
is that Purchaser receive evidence reasonably satisfactory to
Purchaser that the Hawthorn Swap has been released as security
for the Loan and that Owner or Purchaser can unwind the Hawthorn
Swap on the Closing Date or such later date as Purchaser elects.
As used herein, "HAWTHORN SWAP" means the swap transaction
evidenced by that certain interest rate swap transaction
Reference Number NUUS409010010000A00, with a trade date of
September 2, 1994, an effective date of September 13, 1994 and a
termination date of September 1, 2001, in the notational amount
of $25,000,000, under which the fixed payer is Owner, governed by
the ISDA Master Agreement dated September 2, 1994, between GS
Financial Products U.S., Schedule to the Master Agreement dated
as of September 2, 1994 between said parties, and the Revised
<PAGE>
Confirmation dated September 16, 1994 (collectively, the "SWAP
DOCUMENTS"). A copy of the Swap Documents is attached hereto as
EXHIBIT F. On the Closing Date, Seller shall cause Owner to
repay the Loan in full (Purchaser's only obligation in connection
therewith being the acceptance of the Hawthorn Swap being retained by
Owner). In addition, at the Closing, Seller shall cause the deeds of trust
and other security documents securing the same to be discharged
(or cause to be provided at Closing to the Title Company such
instruments and documents as the Title Company requires to insure
over said deeds of trust and security documents, with the Title
Company taking the entire risk of obtaining and recording full
releases thereof). Notwithstanding the foregoing, instead of
repaying the Loan in full on the Closing Date, Seller may instead
repay the Loan on December 1, 1997, but shall cause all liability
with respect to the Loan to be "defeased" such that, from and
after the Closing Date, Owner shall have no liability for the
Loan and all liens against the Property with respect to the Loan
are discharged; the documentation accomplishing the foregoing
shall be subject to the reasonable approval of Purchaser. The
costs of incurred in such defeasance shall be borne by Seller.
3.5 PARTNERSHIP TRANSACTION. The closing occurring under
the Withdrawal and Distribution Agreement dated November __, 1997
under which the Seller 1 LP Interest and the Seller 1 GP Interest
are each being distributed to or at the direction of Seller as a
distribution of capital by the Prior Owner.
3.6 ISSUANCE OF TITLE POLICY. On the Closing Date, the
Title Company shall issue (or irrevocably commit to issue) an
ALTA owner's title insurance policy in the form formerly known as
ALTA Form B 1970 (Rev. 10-17-70 and 10-17-84), or an equivalent
form acceptable to Purchaser, issued in the State of Illinois, in
the face amount of the Aggregate Purchase Price, which policy
shows good and marketable title to the Property to be vested of
record in the Trust (with Owner as an additional insured),
subject only to the Permitted Exceptions, and containing an
extended coverage endorsement over the so-called general or
standard exception items 1, 2, 3, 4 and 5 which are a part of the
printed form of policy, and containing the other endorsements
described on EXHIBIT G (the "TITLE POLICY").
3.7 ESTOPPELS. On or before the Closing Date, Purchaser
shall have obtained from Sears an estoppel certificate
substantially in the form attached hereto as EXHIBIT H (Purchaser
having already obtained estoppels from the other Anchors).
4. CLOSING; CONDITIONS; DELIVERIES.
4.1 TIME, PLACE AND MANNER OF CLOSING. The Closing shall
be held on the Closing Date in the offices of Altheimer & Gray,
10 South Wacker Drive, Suite 4000, Chicago, Illinois 60606, or at
any other location mutually acceptable to the parties.
4.2 CONDITION TO PARTIES' OBLIGATION TO CLOSE. In addition
to all other conditions set forth herein, the obligation of
Seller, on the one hand, and Purchaser, on the other hand, to
consummate the transaction contemplated hereunder shall be
contingent upon the following:
<PAGE>
(1) The other party's representations and warranties
contained herein shall be true and correct in all material
respects as of the date of this Agreement and the Closing Date;
(2) As of the Closing Date, the other party shall have
performed its obligations hereunder in all material respects and
all deliveries to be made at Closing have been tendered;
(3) As of the Closing Date, there shall exist no
pending action, suit or proceeding with respect to the other
party before or by any court or administrative agency which seeks
to restrain or prohibit, or to obtain damages or a discovery order
with respect to, this Agreement or the consummation of the transactions
contemplated hereby; and
(4) Simultaneously with the execution of this
Agreement, Purchaser and HCMC shall have each executed and
delivered to each other and to Seller a fully executed original
ERISA certificate in the form of EXHIBIT I attached hereto.
4.3 DELIVERIES. At Closing each party shall execute and
deliver to the other and/or Title Company the following documents
duly executed by the appropriate party or parties:
(1) Seller shall deliver or cause to be delivered to
Purchaser and/or Title Company:
(1) three assignments of the Partnership Interest
(the "ASSIGNMENTS OF PARTNERSHIP INTEREST"), one each with
respect to the Seller 1 LP Interest, the Seller 1 GP Interest and
the Seller 2 GP Interest, such assignments in the forms attached
hereto as EXHIBIT J.
(2) a non-foreign transferor certification
pursuant to Section 1445 of the Internal Revenue Code and any
similar provisions of applicable state law, in substantially the
same form as set forth on EXHIBIT K attached hereto (the "AFFIDAVIT");
(3) certified resolutions of HCMC (with respect
to Seller 1 as Seller 1's advisor) and Seller 2 certifying that
Seller 1 and Seller 2, as applicable, have the respective legal
power, right and authority to consummate the sale of the
Partnership Interest;
(4) a payoff letter in connection with the Loan;
(5) such other evidence of the authority of
Seller to consummate the transactions provided for in this
Agreement as may be reasonably requested by Purchaser (but not
including opinions of counsel);
(6) to the extent in the possession or control of
Seller, the original of all of the Leases, the REA, the
Supplemental Agreements, Service Contracts and the Partnership
Agreement, and, to the extent in the possession or control of
Seller, any and all building plans, surveys, site plans, engineering
plans and studies, utility plans, landscaping plans, development plans,
specifications, drawings and other Books and Records;
<PAGE>
(7) counterparts of the Management and
Submanagement Termination Agreements, each dated as of the
Closing Date, duly executed by Owner and Agent 2. The
"MANAGEMENT AND SUBMANAGEMENT TERMINATION AGREEMENTS" are the two
agreements in the form attached as Exhibit L, one of which is
among Owner, JMB Institutional Realty Corporation, an Illinois
corporation ("AGENT 1"), and O'Connor Management, Inc., a
Delaware corporation ("AGENT 2") (collectively, the "AGENTS"),
and the other of which is among Owner, Agents and JMB Properties
Urban Company ("MANAGER"); and
(8) certified copies of each of the trust
agreement for each Trust, showing Owner as the beneficial owner thereof.
(2) Purchaser shall deliver to Seller or Title Company:
(1) the Cash Balance, by wire transfers, as
provided in Section 2.2(b) hereof;
(2) a copy of the Management and Submanagement
Termination Agreements, executed by Manager and Agent 1;
(3) a certified resolution of Purchaser
certifying that Purchaser has the legal power, right and
authority to consummate the purchase of the Partnership Interest; and
(4) such other evidence of the authority of
Purchaser to consummate the transactions provided for in this
Agreement as may be reasonably requested by Seller (but not
including opinions of counsel).
(3) Seller or the title holder as the case may be and
Purchaser shall jointly deliver to Title Company a closing statement.
(4) Title Company shall deliver to Purchaser an
initialed mark-up of the Title Commitment (which will include
endorsements), extending the effective date to the Closing Date,
insuring the Trust as owner of the Land and Improvements (with
Owner as an additional insured), and removing all exceptions
other than Permitted Exceptions.
4.4 PERMITTED TERMINATION. So long as a party is not in
default hereunder, if any condition to such party's obligation to
proceed with the Closing hereunder has not been satisfied or
waived as of the Closing Date or such earlier date as provided
herein, such party may, in its sole discretion, terminate this
Agreement by delivering written notice to the other party before
the Closing Date (in which event the Earnest Money shall be
returned to Purchaser), or elect to close, notwithstanding the
non-satisfaction of such condition, in which event such party
shall be deemed to have waived any such condition.
50 PRORATIONS. All items of income and expense of shall be
paid, prorated or adjusted as of the close of business on the day
prior to the Closing Date (the "PRORATION DATE") in the manner
hereinafter set forth:
<PAGE>
5.1 Purchaser shall be credited with (i) the amount of (A)
all rents and (B) all expense contributions, real estate tax
contributions, and other reimbursements from tenants ("TENANT
CONTRIBUTIONS") received by Seller, Owner or Prior Owner and
attributable to any month commencing after the Closing Date and
(ii) all unapplied cash security deposits which were made by
tenants under all leases of the Property in effect as of the
Closing Date (or, as to cash security deposits held by Manager,
Seller may, instead of crediting the same to Purchaser, instruct
said manager to pay over the same to Purchaser). The term Tenant
Contributions includes all amounts paid by the Anchor Stores
under the REA and Supplemental Agreements.
5.2 All rents and Tenant Contributions for the month of
Closing shall be prorated between Purchaser and Seller based upon
their respective days of ownership of the Partnership Interest
for such month in which the Closing occurs. Neither Purchaser
nor Seller shall receive credit at Closing for any payments of
rental obligations due but not paid as of the Proration Date. At
the time of the final calculation and collection from tenants of
Tenant Contributions for 1997, whether in the nature of a
reconciliation payment or full payment, in arrears, there shall
be a reproration between Purchaser and Seller as to the Tenant
Contributions. Such reproration shall not be made on the basis
of a per diem method of allocation, but shall instead be
apportioned between Seller and Purchaser on the basis of the
relative share of actual expenses in question incurred by (i)
Prior Owner and Owner (prior to the Closing Date) and by (ii)
Owner from and after the Closing Date during the lease year in
question. Seller covenants to provide Purchaser with any
information necessary to finalize such calculation. Purchaser
covenants to cause Owner to bill tenants for amounts due from
tenants attributable to periods prior to closing and diligently
pursue collections from tenants and, as collected, to timely
deliver to Seller reproration amounts due Seller. In connection
with the foregoing:
(1) If such final calculation as to Tenant
Contributions (other than real estate tax contributions) shows
that a tenant paid an amount greater than its share of actual
expenses, Seller shall pay Purchaser, within 10 days after
demand, the Seller's pro rata share of such excess amount, which
Purchaser shall cause Owner in turn to pay or credit to the
tenant in reimbursement of such excess payment (with the
intention that Seller will be responsible for such excess to the
extent that Seller, Owner and/or Prior Owner received payments in
excess of the actual expenses paid by Seller, Owner and/or Prior
Owner on which such reimbursements are calculated). If such
final calculation as to Tenant Contributions (other than real
estate tax contributions) shows that a tenant paid an amount less
than its share of actual expenses, and if Owner, after the
Closing Date, receives from such tenant the amount of such
shortfall, then, promptly after Owner's receipt thereof, Purchaser
shall pay over to Seller the Seller's prorata share of such payment.
(2) The parties acknowledge that (i) the tenants under
Leases are paying during 1997 estimated tax payments for taxes
for the 1997 tax year, which taxes are not themselves due and
payable until 1998, and (ii) the final calculation as to Tenant
<PAGE>
Contributions for 1997 real estate taxes will not be complete
until the actual amount of the 1997 real estate taxes is known.
If such final calculation shows that a tenant paid an amount
greater than its share of actual 1997 real estate taxes, Seller
shall pay Purchaser, within 10 days after demand, the Seller's
prorata share of such excess amount, which Purchaser shall in
turn cause Owner to pay to the tenant in reimbursement of such
excess payment, or which Purchaser shall cause Owner to credit to
the tenant in reduction of such tenant's future obligations (with
the intention in either case that Seller will be responsible for
such excess to the extent that Seller, Owner and/or Prior Owner
received payments in excess of the actual real estate taxes paid
by or credited to Seller, Owner and/or Prior Owner on which such
reimbursements are calculated). If such final calculation shows
that a tenant paid an amount less than its share of actual 1997
real estate taxes, and if Owner, after the Closing Date, receives
from such tenant the amount of such shortfall, then Seller shall
be entitled to credit or payment for the same as provided in
Section 5.6 below.
5.3 Percentage rent shall be prorated between the Purchaser
and the Seller such that the Seller receives all percentage rent
in respect of sales occurring through the Closing Date and the
Purchaser receives all percentage rent in respect of sales
occurring after the Closing Date. Any break point or minimum
sales provision in any Lease shall be prorated as of the Closing
Date on a per diem basis and applied to the period before and
after the Closing in determining such percentage rent.
5.4 Any amounts received from tenants after Closing shall
be applied on a tenant by tenant basis in the following order:
(i) first on account of any amount due Owner from such tenant(s)
in respect of any period after the Closing Date; (ii) next, on
account of any amount due from such tenant for any period prior
to the Closing Date; and (iii) finally, any balance then
remaining to Owner (i.e., Seller shall have no interest therein).
If delinquent rents have not been collected by Owner and paid to
Seller within six (6) months after the Closing Date, Owner shall,
at Seller's request, assign to Seller or at Seller's direction,
to Prior Owner, the right to the pre-closing delinquency from such
tenant, in which event Seller may institute an action in damages
(but not seeking any other remedy) against such tenant to collect
such delinquency, all at the cost and expense of Seller or at
Seller's direction, Prior Owner.
5.5 Operating expenses, including, without limitation,
permits, licenses. membership dues, and any other prepaid
expenses, shall be prorated between Purchaser and Seller based
upon the actual days of their respective ownership of the Partnership
Interest utilizing the actual expenses or reasonable estimates.
5.6 Real estate taxes shall be prorated between Seller and
Purchaser based upon the actual days of ownership for the year in
which Closing occurs utilizing 100% of the most recent
ascertainable tax bill(s). Seller and Purchaser agree to
reprorate said real estate taxes upon Owner's receipt of the
actual tax bill for the tax year in question. Any amount owing
by Seller to Purchaser on account of the increase reflected in
the actual tax bill shall be due 30 days prior to the date on
<PAGE>
which Owner is required to make the tax payment reflecting such
increase; such payment by Seller to Purchaser will be reduced by
Seller's pro rata share of amounts, if any, theretofore collected
by Owner from tenants on account of such increase in the taxes
for 1997 (and as and when Owner thereafter receives payments from
tenants on account of such increase, Purchaser shall remit to
Owner Seller's pro rata share thereof, as part of the monthly
reconciliation process described below, up to the amount of the
increase already paid by Seller). Notwithstanding the foregoing,
if the actual tax bill is received prior to the first payment of
1997 taxes, Seller's payment required above as to the tax
increase shall be made 50% prior to such first installment, and
50% prior to the second installment, net of said tenant
reimbursements theretofore received on account of said increase.
After the actual tax bills are known, Purchaser shall cause Owner
promptly in accordance with Purchaser's customary practice to
bill tenants for their share thereof. Purchaser, on behalf of
Owner, shall have the exclusive right to meet with governmental
officials and to contest any reassessment. Purchaser shall pay to
Seller an amount equal to any refund of taxes applicable to any
period prior to the Closing unless under the terms of the Leases
the tenants are entitled to the benefit of such refund.
5.7 Except for utilities billed directly to Tenants,
utilities shall be prorated as of the Proration Date based upon
either meter readings on the Proration Date or the prior month's
actual invoices. Seller shall be credited with any unapplied
utility deposit in effect as of the Closing Date to the extent
such deposit is assignable.
5.8 Owner shall be responsible for and pay for (and Seller
shall not be required to reimburse Purchaser for) both: (a) the
cost of all tenant improvements, and (b) all leasing commissions
due and payable as a result of leases made pursuant to (i)
Proposals listed on Schedule 4 attached hereto, (ii) any lease
entered into after the date hereof through the date which is five
(5) days prior to the expiration of the Due Diligence Period, and
(iii) any Proposal which Purchaser approved, or is deemed to have
approved as provided in Section 15. Purchaser shall receive a
credit from Seller for the amount of all unpaid tenant allowances
and leasing commissions shown on Exhibit M.
5.9 All insurance policies and property management agreements
shall be terminated at the cost of Seller as of the Closing Date and
there shall be no proration with respect to these items.
5.10 On the Closing Date, Owner shall, at Seller's sole cost
and expense, discharge all indebtedness of Owner for borrowed money,
including all indebtedness secured by the Property (subject to Seller's
right to defease the Loan as described in Section 3.4 above); provided,
however, Purchaser shall accept the Hawthorn Swap pursuant to Section
3.4 hereof; and, provided further, as to the equipment leasing
agreements listed in Exhibit B, the monthly payments thereunder will be
pro rated and the same shall not be paid off at Closing. At the Closing,
Purchaser shall be credited with (i.e., Seller shall be charged for) any
unpaid amounts owing by Owner under Hawthorn Swap for all periods through
the Closing Date. At the Closing Date, Owner shall distribute all cash on
hand to Seller. Seller is retaining all rights under the Withdrawal and
Distribution Agreement.
<PAGE>
5.11 Seller shall be responsible for all payments due to the
Agents and Manager under the Management and Submanagement
Termination Agreements and the agreements terminated pursuant thereto.
All other items which are customarily prorated in transactions
similar to the transaction contemplated hereby and which were not
heretofore dealt with, will be prorated as of the Proration Date.
In the event any prorations or computations made under this
Section are based on estimates or prove to be incorrect, then
either party shall be entitled to an adjustment to correct the
same. Purchaser shall indemnify and hold Purchaser Indemnified
Parties harmless from and against any and all claims for which
Purchaser received credits pursuant to this Section 5. The
indemnity set forth in the immediately preceding sentence and the
covenants contained in this Section 5 shall survive Closing.
Purchaser and Seller hereby agree to reprorate all expense and
income items for which estimates were used to determine the
prorations (including, but not limited to, real estate taxes) on
May 1, 1998, with a final accounting to be completed no later than
thirty (30) days after final real estate tax bills have been issued for
the tax year 1997. On the date of each such final accounting, all sums
due from Seller to Purchaser, or Purchaser to Seller, shall be paid in
the same manner as they would have been paid as provided herein had the
final amounts been known as of the Closing Date.
5.12 Seller shall cause to be prepared and timely filed, at
Seller's cost and expense, a stub-period tax return for Owner for the
period from January 1, 1997 through the Closing Date (i.e., through
the date on which there is a termination for tax purposes of Owner by
reason of Purchaser's purchase of the Partnership Interest). Such tax
return shall make the election under 754 of the Internal Revenue Code.
60 SELLER'S REPRESENTATIONS, WARRANTIES AND COVENANTS. Seller
hereby represents, warrants and covenants as follows:
6.1 POWER. Seller has the legal power, right and authority
to enter into this Agreement and the instruments referenced
herein and to consummate the transactions contemplated hereby.
6.2 REQUISITE ACTION. All requisite action (corporate,
trust, partnership or otherwise) has been taken by Seller in
connection with entering into this Agreement and the instruments
referenced herein and the consummation of the transactions
contemplated hereby. No consent of any partner, shareholder,
member, creditor, investor, judicial or administrative body,
authority or other party is required which has not been obtained
to permit Seller to enter into this Agreement and consummate the
transaction contemplated hereby.
6.3 AUTHORITY. The individuals executing this Agreement
and the instruments referenced herein on behalf of Seller have
the legal power, right and actual authority to bind Seller to the
terms and conditions hereof and thereof. Owner is a duly formed
validly existing limited partnership. On the Closing Date, (i) the
sole partners in Owner will be Prior Owner and Seller 2, (ii) the sole
owner of the entire Seller 1 GP Interest and the entire Seller 1 LP
Interest will be Prior Owner, and (iii) the sole entity entitled to
receive a distribution of each of the entire Seller 1 GP Interest
and the entire Seller 1 LP Interest from Prior Owner will be Seller 1.
<PAGE>
6.4 VALIDITY. This Agreement and all documents required
hereby to be executed by Seller are and shall be valid, legally
binding obligations of and enforceable against Seller in
accordance with their terms.
6.5 CONFLICTS. None of the execution and delivery of this
Agreement and documents referenced herein, the incurrence of the
obligations set forth herein, the consummation of the
transactions herein contemplated or referenced herein conflicts
with or results in the material breach of any terms, conditions
or provisions of or constitutes a default under, any bond, note,
or other evidence of indebtedness or any contract, lease or other
agreements or instruments to which Seller is a party.
6.6 TITLE. On the Closing Date, (i) Prior Owner and Seller
2 will own the entire Partnership Interest, free and clear of all
claims, liens and encumbrances, (ii) Prior Owner will own the
entire Seller 1 GP Interest and the entire Seller 1 LP Interest,
free and clear of all claims, liens and encumbrances, and (iii)
Seller 1 will be solely entitled to receive a distribution of
each of the entire Seller 1 GP Interest and the entire Seller 1
LP Interest from Prior Owner, free and clear of all claims, liens
and encumbrances. On the Closing Date, Owner will own the entire
interest in the Property heretofore held by Prior Owner. On the
Closing Date, Owner will be the sole beneficiary of and have the
absolute power of direction over the Trust. On the Closing Date,
Owner will not be party to or bound by any agreements other than
the Swap Documents, Leases, Service Contracts, REA, Supplemental
Agreements and the Permitted Exceptions.
6.7 LEASES. Attached hereto as EXHIBIT N is a complete and
accurate list of all Leases, which EXHIBIT N shall be updated by
Seller prior to Closing, if necessary, by adding thereto any
Leases executed after the date of this Agreement through Closing
and all Proposals which are approved (or deemed approved) by
Purchaser as provided under Section 15 hereof.
6.8.1 SERVICE CONTRACTS. Attached hereto as EXHIBIT O
is a complete and accurate list of all service agreements
("SERVICE CONTRACTS") with respect to the Property, which EXHIBIT
O shall be updated by Seller prior to Closing, if necessary.
6.8.2 NOTICES. Neither Seller, nor, to Seller's
knowledge, Owner or Prior Owner, has received any written notice
that the Property, or any present uses and operations thereof,
are in violation of any applicable zoning, land-use, building,
fire, health and safety laws. The representations and warranties
set forth in this Section 6.8.2 shall be updated by Seller prior
to Closing, if necessary.
6.9 LITIGATION. Except as set forth on EXHIBIT P attached
hereto (the "EXISTING LITIGATION"), no litigation has been served
upon Seller, nor to Seller's knowledge has been filed, or
threatened in writing, affecting Owner or the Property. EXHIBIT
P shall be updated by Seller prior to Closing, if necessary.
6.10 ENVIRONMENTAL CONDITION. Seller has no knowledge of
any violation of Environmental Laws related to the Property or
the presence or release (other than as permitted by law) of Hazardous
<PAGE>
Materials on or from the Property except as disclosed in the environmental
reports delivered by Seller to Purchaser or made available for Purchaser's
review. The term "Environmental Laws" includes, without limitation, the
Resource Conservation and Recovery Act and the Comprehensive Environmental
Response Compensation and Liability Act ("CERCLA") and other federal laws
governing the environment as in effect on the date of this Agreement
together with their implementing regulations and guidelines as of the date
of this Agreement, and all state, regional, county, municipal and
other local laws, regulations and ordinances that are equivalent
or similar to the federal laws recited above or that purport to regulate
Hazardous Materials in effect as of the date of this Agreement. "HAZARDOUS
MATERIALS" means any substance which is (i) designated, defined, classified
or regulated as a hazardous substance, hazardous material, hazardous
waste, pollutant or contaminant under any Environmental Law, as currently
in effect as of the date of this Agreement, (ii) petroleum hydrocarbon,
including crude oil or any fraction thereof and all petroleum products,
(iii) PCBs, (iv) lead, (v) friable asbestos, (vi) flammable explosives,
(vii) infectious materials, or (viii) radioactive materials.
6.11 INDEMNITY. Seller shall indemnify and hold Seller
Indemnified Parties harmless from and against any and all claims,
actions, judgments, liabilities, liens, damages, penalties,
fines, costs and reasonable attorneys' fees, foreseen or
unforeseen, asserted against, imposed on or suffered or incurred
by Seller Indemnified Parties directly or indirectly arising out
of or in connection with any breach of the warranties,
representations and covenants set forth in this Agreement. In
addition to, and not in limitation of, said indemnity, Seller
shall indemnify and hold Seller Indemnified Parties harmless from
and against any and all claims, actions, judgments, liabilities,
liens, damages, penalties, fines, costs and reasonable attorneys'
fees, foreseen or unforeseen, asserted against, imposed on or
suffered or incurred by Seller Indemnified Parties (unless
Purchaser receives and accepts a proration credit for such items)
(i) accruing with respect to the Swap Documents, Leases, Service
Contracts, REA, Supplemental Agreements and Permitted Exceptions
prior to the Closing Date, (ii) on account of Tort Claims
"accruing prior to the Closing Date" (as such phrase is defined
in the definition of Tort Claims in Section 1 hereof), or (iii)
on account of Stray Liabilities. The warranties and
representations set forth in this Section 6 shall be deemed
remade as of Closing, and said warranties and representations as
so remade, and the indemnity obligations set forth herein shall
survive Closing, provided that any claim by a Seller Indemnified
Party based upon a misrepresentation or breach of any warranty or
representation or indemnity obligation under this Section 6 shall
be deemed waived unless Purchaser has given Seller notice of such
claim prior to the date which is the sooner to occur of the
"SELLER LIQUIDATION DATE" or 18 months after the Closing Date;
provided, however, as to the indemnity for Stray Liabilities,
such notice by Purchaser may be given at any time until the
Seller Liquidation Date (even if later than the date which is 18
months after the Closing Date). "Seller Liquidation Date" means
the later to occur of (i) 60 days after Seller gives Purchaser
written notice stating that Seller intends to liquidate and
distribute all of its remaining assets or (ii) the date which is
30 days prior to the actual date of said liquidation of Seller.
Seller shall give Purchaser at least 75 days prior written notice
of Seller's liquidation (the purpose of which is to allow Seller
<PAGE>
to have notice of claims at least 15 days prior to Seller's
liquidation). If the actual liquidation does not occur within
six (6) months after such notice is given, Seller shall give
Purchaser a new notice at least 75 days prior to Seller's liquidation.
Notwithstanding anything contained in this Agreement to the
contrary, Seller shall have no liability for breaches of any
representations, warranties and certifications (the "REPRESENTATIONS")
with respect to the Property which are made by Seller herein or in
any of the documents or instruments required to be delivered by Seller
hereunder to the extent that on the date immediately prior to the Closing
Date Purchaser knows of such breach (but the foregoing shall not
preclude Purchaser terminating this Agreement on account of such
breach, in which event the Earnest Money shall be returned to Purchaser).
6.12 UPDATE OF SCHEDULES. Prior to the Closing Date, Seller
may give written notice to Purchaser to make additions to, or
corrections to, Exhibits N (as to Leases), O (as to Service
Contracts) and P (as to litigation), and with respect to written
notices pursuant to Section 6.8.2. If Seller gives such notice,
(i) such new schedules shall be deemed to be part of this
Agreement, in lieu of the original schedules, and (ii) Purchaser
may terminate this Agreement and receive back the Earnest Money
(unless the only change is to add Service Contracts which have
been approved by Purchaser or to add additional Leases in
accordance with the Proposals listed on Exhibit Q or to add
additional Tort Claims which are fully insured).
70 PURCHASE AS-IS. EXCEPT FOR THE REPRESENTATIONS OF SELLER
EXPRESSLY SET FORTH IN SECTION 6 OF THIS AGREEMENT, PURCHASER
ACKNOWLEDGES TO AND AGREES WITH SELLER THAT, IN PURCHASING THE
PARTNERSHIP INTEREST, THE PURCHASER ACKNOWLEDGES THAT PROPERTY IS
OWNED BY OWNER IN ITS "AS-IS, WHERE IS" CONDITION "WITH ALL
FAULTS" AS OF THE CLOSING DATE AND SPECIFICALLY AND EXPRESSLY
WITHOUT ANY WARRANTIES, REPRESENTATIONS OR GUARANTEES, EITHER
EXPRESS OR IMPLIED, AS TO ITS CONDITION, FITNESS FOR ANY
PARTICULAR PURPOSE, MERCHANTABILITY, OR ANY OTHER WARRANTY OF ANY
KIND, NATURE, OR TYPE WHATSOEVER FROM OR ON BEHALF OF SELLER WITH
RESPECT TO THE PROPERTY. EXCEPT FOR THE REPRESENTATIONS OF
SELLER EXPRESSLY SET FORTH IN SECTION 6 OF THIS AGREEMENT, SELLER
SPECIFICALLY DISCLAIMS ANY WARRANTY, GUARANTY OR REPRESENTATION,
ORAL OR WRITTEN, PAST OR PRESENT, EXPRESS OR IMPLIED, CONCERNING
(A) THE VALUE, NATURE, QUALITY OR CONDITION OF THE PROPERTY,
INCLUDING, WITHOUT LIMITATION, THE WATER, STRUCTURAL INTEGRITY,
SOIL AND GEOLOGY; (B) THE INCOME TO BE DERIVED FROM THE PROPERTY;
(C) THE SUITABILITY OF THE PROPERTY FOR ANY AND ALL ACTIVITIES
AND USES WHICH PURCHASER MAY CONDUCT THEREON, INCLUDING THE
POSSIBILITIES FOR FUTURE DEVELOPMENT OF THE PROPERTY; (D) THE
COMPLIANCE OF OR BY THE PROPERTY OR ITS OPERATION WITH ANY LAWS,
RULES, ORDINANCES OR REGULATIONS OF ANY APPLICABLE GOVERNMENTAL
AUTHORITY OR BODY; (E) THE HABITABILITY, MERCHANTABILITY,
MARKETABILITY, PROFITABILITY OR FITNESS FOR A PARTICULAR PURPOSE
OF THE PROPERTY; (F) THE MANNER OR QUALITY OF THE CONSTRUCTION OR
MATERIALS, IF ANY, INCORPORATED INTO THE PROPERTY; (G) THE
MANNER, QUALITY, STATE OF REPAIR OR LACK OF REPAIR OF THE
PROPERTY; (H) THE PRESENCE OR ABSENCE OF HAZARDOUS MATERIALS AT,
ON, UNDER, OR ADJACENT TO THE PROPERTY OR ANY OTHER ENVIRONMENTAL
MATTER OR CONDITION OF THE PROPERTY; OR (I) ANY OTHER MATTER WITH
RESPECT TO THE PROPERTY. PURCHASER ACKNOWLEDGES AND AGREES THAT,
<PAGE>
EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES OF SELLER CONTAINED
IN SECTION 6 OF THIS AGREEMENT, ANY INFORMATION PROVIDED BY OR ON
BEHALF OF SELLER WITH RESPECT TO THE PROPERTY WAS OBTAINED FROM A
VARIETY OF SOURCES AND THAT SELLER HAS NOT MADE ANY INDEPENDENT
INVESTIGATION OR VERIFICATION OF SUCH INFORMATION AND MAKES NO
REPRESENTATIONS AS TO THE ACCURACY OR COMPLETENESS OF SUCH
INFORMATION. SELLER IS NOT LIABLE OR BOUND IN ANY MANNER BY ANY
ORAL OR WRITTEN STATEMENTS, REPRESENTATIONS OR INFORMATION
PERTAINING TO THE PROPERTY, OR THE OPERATION THEREOF, FURNISHED
BY ANY REAL ESTATE BROKER, AGENT, EMPLOYEE, SERVANT OR OTHER
PERSON EXCEPT FOR THE EXPRESS REPRESENTATIONS SET FORTH IN
SECTION 6 OF THIS AGREEMENT. PURCHASER FURTHER ACKNOWLEDGES AND
AGREES THAT PURCHASER IS A SOPHISTICATED AND EXPERIENCED
PURCHASER OF PROPERTIES SUCH AS THE PROPERTY AND HAS BEEN DULY
REPRESENTED BY COUNSEL IN CONNECTION WITH THE NEGOTIATION OF THIS
AGREEMENT. EXCEPT AS MAY OTHERWISE BE PROVIDED HEREIN, SELLER
HAS MADE NO AGREEMENT TO ALTER, REPAIR OR IMPROVE ANY OF THE PROPERTY.
80 PURCHASER'S REPRESENTATIONS, WARRANTIES AND COVENANTS.
Purchaser hereby represents, warrants and covenants as follows:
8.1 POWER. Purchaser has the legal power, right and
authority to enter into this Agreement and the instruments
referenced herein and to consummate the transactions contemplated hereby.
8.2 REQUISITE ACTION. All requisite action (corporate,
trust, partnership or otherwise) has been taken by Purchaser in
connection with entering into this Agreement and the instruments
referenced herein and the consummation of the transactions
contemplated hereby. No consent of any partner, shareholder,
member, creditor, investor, judicial or administrative body,
authority or other party is required which has not been obtained
to permit Purchaser to enter into this Agreement and consummate
the transaction contemplated hereby.
8.3 AUTHORITY. The individuals executing this Agreement
and the instruments referenced herein on behalf of Purchaser have
the legal power, right and actual authority to bind Purchaser to
the terms and conditions hereof and thereof.
8.4 VALIDITY. This Agreement and all documents required
hereby to be executed by Purchaser are and shall be valid,
legally binding obligations of and enforceable against Purchaser
in accordance with their terms.
8.5 CONFLICTS. Neither the execution and delivery of this
Agreement and documents referenced herein, nor the incurrence of
the obligations set forth herein, nor the consummation of the
transactions herein contemplated, nor referenced herein conflict
with or result in the material breach of any terms, conditions or
provisions of or constitute a default under, any bond, note, or
other evidence of indebtedness or any contract, lease or other
agreements or instruments to which Purchaser is a party.
8.6 INDEMNITIES. Purchaser shall indemnify and hold the
Purchaser Indemnified Parties harmless from and against any and
all claims, actions, judgments, liabilities, liens, damages,
penalties, fines, costs and reasonable attorneys' fees, foreseen
or unforeseen, asserted against, imposed on or suffered or
<PAGE>
incurred by Seller directly or indirectly arising out of or in
connection with any breach of the warranties, representations and
covenants set forth in this Agreement. In addition to, and not
in limitation of, said indemnity, Purchaser shall indemnify and
hold Seller harmless from and against any and all claims,
actions, judgments, liabilities, liens, damages, penalties,
fines, costs and reasonable attorneys' fees, foreseen or
unforeseen, asserted against, imposed on or suffered or incurred
by Seller unless Seller receives and accepts an express proration
credit for such items (i) accruing after the Closing Date with
respect to the Swap Documents, Leases, those Service Contracts
approved by Purchaser, the REA, the Supplemental Agreements and
the Permitted Exceptions, or (ii) on account of Tort Claims
"accruing on or after the Closing Date" (as such phrase is
defined in the definition of Tort Claims in Section 1 hereof).
The warranties, representations and indemnities set forth in this
Section 8 shall be deemed remade as of Closing and shall survive
Closing, and said warranties and representations as so remade,
and the indemnity obligation set forth hereinabove shall be deemed
waived unless Seller has given Purchaser written notice of any such
claim prior to the date which is 18 months from the Closing Date.
90 CLOSING COSTS. Seller shall pay the following expenses:
(a) the title insurance premium for the Title Policy at a rate
not in excess of the standard issue rates; (b) the costs to
obtain the Updated Survey; (c) one-half of all closing escrow
fees, including "New York Style" closing fees; and (d) Seller's legal
fees incurred in connection with this Agreement. Purchaser shall pay
the following expenses: (a) the costs of all so-called "extended
coverage" in connection with, or endorsements to, the Title Policy,
together with the cost of any other title insurance coverage (such as
lender's insurance policies); (b) one-half of all closing escrow fees,
including "New York Style" closing fees; (c) all costs and expenses
associated with Purchaser's financing, if any; and (d)
Purchaser's legal fees and expenses. Also, as provided elsewhere
in this Agreement, Owner shall retain the Hawthorn Swap. The
parties do not believe that any conveyance fee, documentary,
stamp or transfer tax (a "TRANSFER TAX") is owing on account of
Purchaser's acquisition of the Partnership Interest or the
distribution of each of the entire Seller 1 GP Interest and the
entire Seller 1 LP Interest from Prior Owner to, or at the
direction of, Seller 1; however, if it is ever determined or
alleged by a governmental agency that a Transfer Tax is owing on
account of such acquisition of Partnership Interest or
distribution of each of the entire Seller 1 GP Interest and the
entire Seller 1 LP Interest from Prior Owner to, or at the
direction of, Seller 1, the same shall be the responsibility of
Purchaser and not Seller, and Purchaser shall indemnify, defend and
hold Purchaser Indemnified Parties harmless therefrom. Seller shall act
reasonably in cooperating in the defense of such claim. The provisions of
this Section 9 shall survive Closing or any termination of this Agreement.
100 [Intentionally Omitted]
110 NEW YORK STYLE CLOSING. It is contemplated that the
transaction shall be closed by means of a so-called New York
Style closing, with the concurrent delivery of the documents of
title, transfer of interest, delivery of the title policy or
marked-up title commitment described in Section 4.3(d) and the
<PAGE>
payment of the Cash Balance. Seller and Purchaser shall each
provide any undertaking to the Title Company necessary to
accommodate the New York Style Closing. In no event shall
Purchaser be required to accept any "gap" risk. In no event
shall Purchaser or Owner be required to furnish any affidavits or
other indemnities to the Title Company
120 ATTORNEYS' FEES AND COSTS. In the event any suit or action
is instituted to interpret or enforce the terms of this
Agreement, or in connection with any arbitration or mediation of
any dispute, the prevailing party shall be entitled to recover
from the other party such sum as the court, arbitrator or
mediator may adjudge reasonable as such party's costs and
attorney's fees, including such costs and fees as are incurred in
any trial, on any appeal, in any bankruptcy proceeding (including
the adjudication of issues peculiar to bankruptcy law) and in any
petition for review. Each party shall also have the right to
recover its reasonable costs and attorneys' fees incurred in
collecting any sum or debt owed to it by the other party, with or
without litigation, if such sum or debt is not paid within
fifteen (15) days following written demand therefor. The
provisions of this Section 12 shall survive the Closing.
130 NOTICE. All notices, demands, deliveries and communications
(a "NOTICE") under this Agreement shall be delivered or sent by:
(i) first class, registered or certified mail, postage prepaid,
return receipt requested, (ii) nationally recognized overnight
carrier, or (iii) facsimile with original Notice sent via overnight
delivery addressed to the address of the party in question set forth
in the first paragraph of this Agreement and copies to the parties
designated below or to such other address as either party may designate
by Notice pursuant to this Section 13. Notices shall be deemed given
(x) three (3) business days after being mailed as provided in clause
(i) above, (y) one (1) business day after delivery to the overnight
carrier as provided in clause (ii) above, or (z) on the day of the
transmission of the facsimile so long as it is received in its entirety
by 5:00 pm (New York City, New York time) on such day and the original
of such Notice is received the next business day via overnight mail as
provided in clause (iii) above.
Notices to Seller, copy to: Altheimer & Gray
10 South Wacker Drive, Suite 4000
Chicago, Illinois 60606
Attn: Barry Nekritz, Esq.
Facsimile No. (312) 715-4800
Notices to Purchaser, copy to: Urban Shopping Centers Inc.
900 North Michigan Avenue
Chicago, Illinois 60611
Attn: Michael G. Hilborn, Esq.
General Counsel
Facsimile No. (312) 915-2001
With a copy to: Pircher, Nichols & Meeks
1999 Avenue of the Stars
Suite 2600
Los Angeles, California 90067
Attn: Real Estate Notices (PGN)
Facsimile No.: (310) 201-8922
<PAGE>
140 FIRE OR OTHER CASUALTY; CONDEMNATION.
14.1 If the Property or any part thereof is damaged by fire
or other casualty prior to the Closing Date which would cost in
excess of $500,000.00 to repair or takes longer than ninety (90)
days to repair (as determined by an insurance adjuster selected
by the insurance carriers), Purchaser may terminate this
Agreement by written notice to Seller given on or before Closing
Date. In the event of such termination, this Agreement shall be
of no further force and effect and, except for the Surviving
Obligations, neither party shall thereafter have any further
obligation under this Agreement, and Seller shall direct the
Escrow Company to promptly return all Earnest Money to Purchaser.
If Purchaser does not elect to terminate this Agreement or the
cost of repair is determined by said adjuster to be less than
$500,000.00, then the Closing shall take place as herein provided
without abatement of the Aggregate Purchase Price and Seller
shall assign and transfer to Owner on the Closing Date, without
warranty or recourse, all of Seller's and Prior Owner's right,
title and interest to the insurance proceeds paid or payable to
Seller or Prior Owner on account of such fire or casualty
remaining after reimbursement to Seller and Prior Owner for the
total amount of all costs and expenses incurred by Seller and
Prior Owner in connection therewith including but not limited to
making emergency repairs, securing the Property and complying
with applicable governmental requirements. Seller shall pay to
Purchaser the amount of the deductible of any of Seller's or
Prior Owner's applicable insurance policies.
14.2 If any portion of the Property is taken in eminent
domain proceedings prior to Closing, or is threatened in writing
to be taken, Purchaser may terminate this Agreement by notice to
Seller given on or before the Closing Date, and, in the event of
such termination, this Agreement shall be of no further force and
effect and, except for the Surviving Obligations, neither party
shall thereafter have any further obligation under this
Agreement, and Seller shall direct Escrow Company to promptly
return all Earnest Money to Purchaser. If Purchaser does not so
elect to terminate, then the Closing shall take place as herein
provided without abatement of the Aggregate Purchase Price, and
Seller shall deliver or assign to Purchaser on the Closing Date,
without warranty or recourse, all of Seller's right, title and
interest in and to all condemnation awards paid or payable to Seller.
150 OPERATIONS AFTER DATE OF THIS AGREEMENT. Seller covenants
and agrees with Purchaser that:
(1) after the date hereof through the Closing, Seller will
instruct Manager to, and Seller itself will (except as
specifically provided to the contrary herein):
(1) Refrain from transferring any of the Property or
creating on the Property any easements, liens, mortgages,
encumbrances, or other interests which will survive Closing or
permitting any changes to the zoning classification of the Land;
(2) Refrain from entering into or amending any
contracts, or other agreements (excluding leases) regarding the
Property (other than contracts in the ordinary and usual course
<PAGE>
of business and which are cancelable by the owner of the Property
without penalty within thirty (30) days after giving notice thereof);
(3) Continue to operate, maintain, repair, and manage the
Leases for the Property in a manner consistent with Seller's current
practices;
(4) Refrain from offering the Property for sale or
marketing the same; and
(5) Continue to offer the Property for lease in the
same manner as prior hereto pursuant to its normal course of
business and, upon request, shall keep Purchaser reasonably
informed as to the status of leasing prior to the Closing Date,
and deliver to Purchaser not less than five (5) days prior to the
expiration of the Due Diligence Period copies of all leases
entered into after the date hereof through the date which is five
(5) days prior to the expiration of the Due Diligence Period and
copies of all Proposals with respect to which no lease has been
executed and which has not expired or been withdrawn, except as
provided otherwise in Section 15(b) below.
(2) after the date which is five (5) days prior to the
expiration of the Due Diligence Period through the Closing,
Seller will instruct Manager to, and Seller itself will (except
as specifically provided to the contrary herein), refrain from
(i) amending any Leases of any portion of the Property, (ii)
canceling any of such Leases, or (iii) executing any new leases
without the prior written consent of Purchaser (which consent
shall not be unreasonably withheld). As used herein, "PROPOSAL"
shall mean a description of the economic terms of any proposed
lease or amendment along with any financial information on the
tenant in Seller's possession. Purchaser shall be deemed to have
approved all Proposals listed on EXHIBIT Q attached hereto. Seller shall
have the right to execute lease documents and lease extensions
evidencing a Proposal approved or deemed approved by Purchaser.
160 ASSIGNMENT. Purchaser shall not assign this Agreement
without Seller's prior written consent which consent may be
withheld for any reason or no reason, provided, however,
Purchaser may assign its interest in this Agreement to a limited
liability company or to a limited partnership or to another
entity in which Purchaser or Urban Shopping Centers, Inc., a
Maryland corporation, directly or indirectly, controls and owns a
majority interest. Subject to the previous sentence, this
Agreement shall apply to, inure to the benefit of and be binding
upon and enforceable against the parties hereto and their respective
successors and assigns. Seller's consent to any such assignment
shall be conditioned upon Seller's receipt of the following not
less than five (5) business days prior to the Closing Date: (i) a
duly executed express assumption of all of the duties and
obligations of Purchaser by the proposed assignee in a form
acceptable to Seller, and (ii) an ERISA certificate, in the form
attached hereto as EXHIBIT I and the content of which is
satisfactory to Seller. Any assignment by Purchaser permitted
hereunder shall relieve Purchaser from all liability hereunder,
provided, however, Purchaser shall in no event be released from
liability under Section 3.2(e) above.
<PAGE>
170 REMEDIES.
(1) IN THE EVENT THAT SELLER SHALL FAIL TO CONSUMMATE THIS
AGREEMENT AND SUCH FAILURE IS NOT A RESULT OF PURCHASER'S DEFAULT
OR A TERMINATION OF THIS AGREEMENT BY PURCHASER OR SELLER
PURSUANT TO A RIGHT TO DO SO UNDER THE PROVISIONS HEREOF,
PURCHASER, IN THE CASE WHERE SUCH FAILURE IS BASED UPON A BREACH
BY SELLER, SHALL ONLY BE ENTITLED TO SEEK AT ITS ELECTION,
EITHER: (i) THE REMEDY OF SPECIFIC PERFORMANCE, OR (ii) DAMAGES
AND RECEIVE A REFUND OF THE EARNEST MONEY. IN NO EVENT SHALL
SELLER BE LIABLE TO PURCHASER FOR ANY PUNITIVE, OR CONSEQUENTIAL
DAMAGES. IN THE CASE WHERE SUCH FAILURE IS BASED UPON AN
INVOLUNTARY BREACH BY SELLER, PURCHASER, AS ITS SOLE AND
EXCLUSIVE REMEDY, MAY TERMINATE THIS AGREEMENT AND RECEIVE A
REFUND OF THE EARNEST MONEY. IN NO EVENT SHALL PURCHASER BE
ENTITLED TO RECORD A LIS PENDENS OR NOTICE OF PENDENCY OF ACTION
AGAINST THE PROPERTY FOR ANY REASON WHATSOEVER.
(2) IN THE EVENT THAT PURCHASER SHOULD FAIL TO CONSUMMATE
THIS AGREEMENT FOR ANY REASON, EXCEPT SELLER'S DEFAULT OR THE
TERMINATION OF THIS AGREEMENT BY PURCHASER OR SELLER PURSUANT TO
A RIGHT TO DO SO UNDER THE TERMS AND PROVISIONS HEREOF, THEN
SELLER, AS ITS SOLE AND EXCLUSIVE REMEDY MAY TERMINATE THIS
AGREEMENT BY NOTIFYING PURCHASER THEREOF AND RECEIVE OR RETAIN
THE EARNEST MONEY AS LIQUIDATED DAMAGES, PROVIDED THAT THIS
PROVISION SHALL NOT LIMIT SELLER'S RIGHTS TO RECEIVE
REIMBURSEMENT FOR ATTORNEYS' FEES AND TO PURSUE AND RECOVER ON A
CLAIM WITH RESPECT TO ANY SURVIVING OBLIGATIONS. THE PARTIES
AGREE THAT SELLER WILL SUFFER DAMAGES IN THE EVENT OF PURCHASER'S
DEFAULT ON ITS OBLIGATIONS. ALTHOUGH THE AMOUNT OF SUCH DAMAGES
IS DIFFICULT OR IMPOSSIBLE TO DETERMINE, THE PARTIES AGREE THAT
THE AMOUNT OF THE EARNEST MONEY IS A REASONABLE ESTIMATE OF
SELLER'S LOSS IN THE EVENT OF PURCHASER'S DEFAULT. THUS, SELLER
SHALL ACCEPT AND RETAIN THE EARNEST MONEY AS LIQUIDATED DAMAGES
BUT NOT AS A PENALTY. EXCEPT AS OTHERWISE SET FORTH IN THIS
SECTION 17(b), SUCH LIQUIDATED DAMAGES SHALL CONSTITUTE SELLER'S
SOLE AND EXCLUSIVE REMEDY.
SELLER AND PURCHASER ACKNOWLEDGE THAT THEY HAVE READ AND
UNDERSTAND THE PROVISIONS OF THE FOREGOING LIQUIDATED DAMAGES
PROVISION AND BY THEIR SIGNATURES IMMEDIATELY BELOW AGREE TO BE
BOUND BY ITS TERMS.
SELLER: PURCHASER:
JMB GROUP TRUST I, URBAN SHOPPING CENTERS, L.P.,
an Illinois group trust an Illinois limited partnership
By: Heitman Capital Management
Corporation, an Illinois
Corporation,
Investment Manager
By:__________________________ By:____________________________
Name: Howard J. Edelman Name:__________________________
Its: Executive Vice President Its:___________________________
<PAGE>
HAWTHORN CENTER CORPORATION, USC HAWTHORN, INC.,
An Illinois corporation a Delaware corporation
By: _______________________________ By:____________________________
Name: _____________________________ Name:__________________________
Its: ______________________________ Its:___________________________
180 MISCELLANEOUS.
18.1 ENTIRE AGREEMENT. This Agreement, together with the
exhibits attached hereto, constitute the entire agreement of the
parties hereto regarding the purchase and sale of the Partnership
Interest, and all prior agreements, understandings,
representations and statements, oral or written, are hereby
merged herein. In the event of a conflict between the terms of
this Agreement and any prior written agreements, the terms of
this Agreement shall prevail. This Agreement may only be amended
or modified by an instrument in writing, signed by the party
intended to be bound thereby.
18.2 TIME. All parties hereto agree that time is of the
essence in this transaction. If the time for performance of any
obligation hereunder shall fall on a Saturday, Sunday or holiday
(national, in the State of Illinois or the state in which the
Property is located) such that the transaction contemplated
hereby cannot be performed, the time for performance shall be
extended to the next such succeeding day where performance is
possible.
18.3 COUNTERPART EXECUTION. This Agreement may be executed
in one or more counterparts, each of which shall be deemed an original.
18.4 GOVERNING LAW. THIS AGREEMENT SHALL BE DEEMED TO BE A
CONTRACT MADE UNDER THE LAWS OF THE STATE OF ILLINOIS AND FOR ALL
PURPOSES SHALL BE GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF ILLINOIS.
18.5 PUBLICITY. Seller and Purchaser hereby covenant and
agree that, at all times after the date of execution hereof and
continuing after the Closing, unless consented to in writing by
the other party, no press release or other public disclosure
concerning this transaction shall be made, and each party agrees
to use best efforts to prevent disclosure of this transaction.
18.6 RECORDATION. Purchaser shall not record this Agreement
or a memorandum or other notice thereof in any public office
without the express written consent of Seller. A breach by
Purchaser of this covenant shall constitute a material default by
Purchaser under this Agreement.
18.7 BENEFIT. This Agreement is for the benefit of
Purchaser and Seller, and except as provided in the indemnities
granted by Purchaser under Articles 5 and 9 and Sections 3.2 and
8.6 with respect to the Purchaser Indemnified Parties and except
as provided in the indemnities granted by Seller under Section
6.11 with respect to the Seller Indemnified Parties, no other
person or entity will be entitled to rely on this Agreement,
receive any benefit from it or enforce any provisions of it
against Purchaser or Seller.
<PAGE>
18.8 SECTION HEADINGS. The Section headings contained in
this Agreement are for convenience only and shall in no way
enlarge or limit the scope or meaning of the various and several
Sections hereof.
18.9 FURTHER ASSURANCES. Purchaser and Seller agree to
execute all documents and instruments reasonably required in
order to consummate the purchase and sale herein contemplated.
18.10 SEVERABILITY. If any portion of this Agreement is
held to be unenforceable by a court of competent jurisdiction,
the remainder of this Agreement shall remain in full force and effect.
18.11 WAIVER OF TRIAL BY JURY. Seller and Purchaser, to
the extent they may legally do so, hereby expressly waive any
right to trial by jury of any claim, demand, action, cause of
action, or proceeding arising under or with respect to this
Agreement, or in any way connected with, or related to, or
incidental to, the dealings of the parties hereto with respect to
this Agreement or the transactions related hereto or thereto, in
each case whether now existing or hereafter arising, and
irrespective of whether sounding in contract, tort, or otherwise.
To the extent they may legally do so, Seller and Purchaser hereby
agree that any such claim, demand, action, cause of action, or
proceeding shall be decided by a court trial without a jury and
that any party hereto may file an original counterpart or a copy
of this Section with any court as written evidence of the consent
of the other party or parties hereto to waiver of its or their
right to trial by jury.
18.12 INDEPENDENT COUNSEL. Purchaser and Seller each
acknowledges that: (a) it has been represented by independent
counsel in connection with this Agreement; (b) it has executed
this Agreement with the advice of such counsel; and (c) this
Agreement is the result of negotiations between the parties
hereto and the advice and assistance of its respective counsel.
The fact that this Agreement was prepared by a party's counsel as
a matter of convenience shall have no import or significance.
Any uncertainty or ambiguity in this Agreement shall not be
construed against a party because such party's counsel prepared
this Agreement in its final form.
18.13 GOVERNMENTAL APPROVALS. Nothing contained in this
Agreement shall be construed as authorizing Purchaser to apply
for a zoning change, variance, subdivision maps, lot line
adjustment, or other discretionary governmental act, approval or
permit with respect to the Property prior to the Closing, and
Purchaser agrees not to do so. Except as otherwise required by
law, Purchaser agrees not to submit any reports, studies or other
documents, including, without limitation, plans and specifica
tions, impact statements for water, sewage, drainage or traffic,
environmental review forms, or energy conservation checklists to
any governmental agency, or any amendment or modification to any
such instruments or documents prior to the Closing. Purchaser's
obligation to purchase the Property shall not be subject to or
conditioned upon Purchaser's obtaining any variances, zoning
amendments, subdivision maps, lot line adjustment or other
discretionary governmental act, approval or permit.
<PAGE>
18.14 NO WAIVER; JOINT AND SEVERAL LIABILITY. No
covenant, term or condition of this Agreement other than as
expressly set forth herein shall be deemed to have been waived by
Seller or Purchaser unless such waiver is in writing and executed
by Seller or Purchaser, as the case may be. The obligations of
Purchaser 1 and Purchaser 2 hereunder shall be joint and several.
The obligations of Seller 1 and Seller 2 hereunder shall be joint
and several.
18.15 DISCHARGE AND SURVIVAL. The delivery of the
Assignment of Partnership Interest by Seller, and the acceptance
thereof by Purchaser, shall be deemed to be the full performance
and discharge of every covenant and obligation on the part of
Seller to be performed hereunder except the Surviving Obligations
and Seller's obligations under Article 5, 9, 12 and 15 and
Sections 3.4 and 6.11 of this Agreement. No action shall be
commenced after the Closing on any covenant or obligation except
the Surviving Obligations and Seller's obligations under Article
5, 9, 12 and 15 and Sections 3.4 and 6.11 of this Agreement.
19. EXCULPATION OF SELLER AND RELATED PARTIES. Notwithstanding
anything to the contrary contained in this Agreement or in any
exhibits attached hereto or in any documents executed in
connection herewith (collectively, including this Agreement, said
exhibits and any such document, the "PURCHASE DOCUMENTS"), it is
expressly understood and agreed by and between the parties hereto
that: (i) the recourse of Purchaser or its successors or assigns
against Seller with respect to the alleged breach by or on the
part of Seller of any representation, warranty, covenant,
undertaking, indemnity or agreement contained in any of the
Purchase Documents (collectively, "SELLER'S UNDERTAKINGS") shall
be limited to an amount not to exceed $500,000 in the aggregate;
and (ii) no personal liability or personal responsibility of any
sort with respect to any of Seller's Undertakings or any alleged
breach thereof is assumed by, or shall at any time be asserted or
enforceable against HCMC, or against any of HCMC's or Seller's
respective shareholders, directors, officers, employees, agents,
constituent partners, members, beneficiaries, trustees or
representatives except as provided in (i) above with respect to
Seller. Notwithstanding the foregoing, the liability limits
under clause (i) shall not apply to, or be reduced by, payments
owing with respect to Section 3.4 hereof, the prorations under
Section 5 hereof, or with respect to Seller's obligations to
Seller Indemnified Parties with respect to Stray Liabilities.
20. EXCULPATION OF PURCHASER AND RELATED PARTIES.
Notwithstanding anything to the contrary contained in this
Agreement or in the Purchase Documents, it is expressly
understood and agreed by and between the parties hereto that no
personal liability or personal responsibility of any sort with
respect to the alleged breach by or on the part of Purchaser (or
its successors and assigns with respect to this Agreement) of any
representation, warranty, covenant, undertaking, indemnity or
agreement contained in any of the Purchase Documents or any
alleged breach thereof is assumed by, or shall at any time be
asserted or enforceable against any of Purchaser's (or its
successors' and assigns') shareholders, partners, directors,
officers, employees, agents, constituent partners, members,
beneficiaries, trustees or representatives.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused these
presents to be made as of the day and year first above stated.
SELLER: PURCHASER:
JMB GROUP TRUST I, URBAN SHOPPING CENTERS, L.P.,
an Illinois group trust an Illinois limited partnership
By: Heitman Capital Management By:____________________________
Corporation, an Illinois, Name:__________________________
corporation Its:___________________________
Investment Manager
By: ________________________
Howard J. Edelman USC HAWTHORN, INC.,
Executive Vice President a Delaware corporation
HAWTHORN CENTER CORPORATION, By:____________________________
An Illinois corporation Name:__________________________
Its: __________________________
By: __________________________
Name: ________________________
Its: _________________________
<PAGE>
FOX VALLEY MALL LLC
AGREEMENT OF PURCHASE AND SALE OF MEMBERSHIP INTEREST
By and Among
JMB GROUP TRUST II, an Illinois group trust,
as Seller,
and
URBAN SHOPPING CENTERS, L.P., an Illinois limited partnership,
as Purchaser 1, and
USC FOX VALLEY, INC., a Delaware corporation,
as Purchaser 2
DATED: November 14, 1997
<PAGE>
FOX VALLEY MALL LLC
AGREEMENT OF PURCHASE AND SALE OF MEMBERSHIP INTEREST
THIS AGREEMENT OF PURCHASE AND SALE OF MEMBERSHIP INTEREST
is made and entered into this 14th day of November, 1997 by and
between JMB GROUP TRUST II, an Illinois group trust ("SELLER"),
having an address of c/o Heitman Capital Management Corporation,
180 North LaSalle Street, Suite 3600, Chicago, Illinois 60601-
6789, Attention: Howard J. Edelman; facsimile number (312) 541-
6738, URBAN SHOPPING CENTERS, L.P., an Illinois limited
partnership ("PURCHASER 1"), and USC FOX VALLEY, INC., a Delaware
corporation ("PURCHASER 2"), Purchaser 1 and Purchaser 2 each
having an address of 900 North Michigan Avenue, 15th Floor,
Chicago, Illinois 60611, Attention: Michael G. Hillborn;
facsimile number (312) 915-2001. Purchaser 1 and Purchaser 2 are
herein individually and collectively called "PURCHASER".
RECITALS
A. LA SALLE NATIONAL TRUST, N.A., as SUCCESSOR TRUSTEE
UNDER TRUST AGREEMENT dated October 1, 1973 And Known As TRUST
NUMBER 47700, as to Parcels 1; 2 and 3 (Parcels 2 and 3 being
easements and other matters benefiting the owner of Parcel 1), LA
SALLE NATIONAL TRUST, N.A., as SUCCESSOR TRUSTEE UNDER TRUST
AGREEMENT dated June 30, 1978 And Known As TRUST NUMBER 52471, as
to Parcels 4, 5, 6 and 8 (Parcels 5, 6, and 8 being easements and
other matters benefiting the owner of Parcel 4); and LA SALLE
NATIONAL TRUST, N.A., as SUCCESSOR TRUSTEE UNDER TRUST AGREEMENT
dated February 28, 1979 And Known As TRUST NUMBER 52474, as to
Parcel 7 (said three trusts collectively, the "TRUST") are the
legal title holders to the "Property" (as hereinafter defined)
which is legally described on EXHIBIT A attached hereto.
B. The beneficial owner of the Trust will on the Closing
Date be Fox Valley Mall LLC, a Delaware limited liability company
(the "OWNER"). The sole member of Owner is Seller.
C. The Property is encumbered by a loan (the "LOAN")
pursuant to that certain Mortgage and Security Agreement dated as
of May 3, 1995 with an original principal indebtedness of Forty-
Seven Million Five Hundred Thousand Dollars ($47,500,000) made to
CONNECTICUT GENERAL LIFE INSURANCE COMPANY ("CIGNA").
D. Owner will be on the Closing Date the beneficiary of
the Trust and as such is the beneficial owner of the Land and
Improvements, and Owner is also the owner of the other components
of the Property, which Property (including the Land and
Improvements) is commonly known as the Fox Valley Shopping
Center. The Property consists of an enclosed dual-level retail
shopping mall building containing approximately 600,407 gross
leasable square feet of in-line mall shops, a theater building
outlot containing approximately 23,400 square feet of building
area and a health club building outlot containing approximately
15,262 square feet of building area, situated on underlying
parcels collectively consisting of approximately 48.67 acres. The
Property is anchored by department stores owned by Marshall Field
& Company, a Delaware corporation ("FIELD"), Carson Pirie Scott &
<PAGE>
Co., an Illinois corporation ("CARSON"), Sears, Roebuck & Co., a
New York corporation ("SEARS") and J.C. Penney Properties, Inc.,
a Delaware corporation ("PENNEY") (collectively, The "ANCHOR
STORES"). Each of the Anchor Stores or their affiliates own
their respective parcels. The Anchor Stores and the Partnership
are parties to the "REA". The "REA" is that certain Easement and
Operating Agreement dated as of July 28, 1975, by and between Fox
Valley Mall Venture, a joint venture ("ORIGINAL DEVELOPER"), Field, Sears,
Adcor Realty Corporation, a New York corporation ("ADCOR"), and
Penney, as recorded on September 11, 1975, as Document R75-48635,
in the Recorder's Office of DuPage County, Illinois, as amended
by that certain amendment of easement and operating agreement
captioned "AMENDMENT OF EASEMENT AND OPERATING AGREEMENT" dated
as of November 3, 1976, by and between Original Developer, Field,
Sears, Adcor, and Penney, as recorded on December 21, 1976, as
Document R76-93062, in the Recorder's Office of DuPage County,
Illinois, as amended by that certain second amendment of easement
and operating agreement captioned "SECOND AMENDMENT OF EASEMENT
AND OPERATING AGREEMENT" dated as of January 2, 1993, by and
among LaSalle National Trust, N.A., as successor trustee to
LaSalle National Bank, not personally but solely as trustee under
trust agreement dated October 1, 1973 and known as Trust No.
47700, as successor in interest to Original Developer, Field,
Sears, The May Department Stores Company, a New York corporation
as successor in interest to Adcor ("MAY"), and Penney, as
recorded on February 3, 1973, as Document R93-025339. Pursuant
to that certain Assignment and Assumption Agreement dated
February 11, 1996, by and between May and Carson, May assigned
all of its rights and interests under the REA to Carson and
Carson assumed all of May's obligations under the REA.
E. Each of the Anchor Stores and the Partnership are
parties to "SUPPLEMENTAL AGREEMENTS". The "Supplemental
Agreements" are as follows: (i) with respect to Field, that
certain amended supplemental agreement captioned "SUPPLEMENTAL
AGREEMENT" (the "FIELD SUPPLEMENTAL AGREEMENT") dated August 28,
1975, by and between Original Developer and Field; (ii) with
respect to Sears, that certain amended supplemental agreement
captioned "SUPPLEMENTAL AGREEMENT" (the "SEARS SUPPLEMENTAL
AGREEMENT") dated July 28, 1975, by and between Original
Developer and Sears; (iii) with respect to Penney, that certain
"SUPPLEMENTAL AGREEMENT" (the "PENNEY SUPPLEMENTAL AGREEMENT")
dated July 28, 1975, by and between Original Developer and
Penney; and (iv) with respect to Carson, that certain
supplemental agreement captioned "SUPPLEMENTAL AGREEMENT" (the
"CARSON SUPPLEMENTAL AGREEMENT") dated July 28, 1975, by and
between Original Developer and Carson, as successor in interest
to May, as successor in interest to Adcor.
Subject to and on the terms and provisions of and for the
considerations set forth in this Agreement, Seller has agreed to
sell, and Purchaser has agreed to buy, the entire interest of
Seller in Owner.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. DEFINITIONS. As used in this Agreement, the following terms
have the following meanings:
<PAGE>
CLOSING DATE. As agreed between Seller and Purchaser but no
later than November 14, 1997.
DUE DILIGENCE PERIOD. The period commencing on the date
hereof and ending on November 14, 1997.
ESCROW COMPANY. Near North National Title Corporation.
TITLE COMPANY. First American Title Insurance Company.
KNOWLEDGE OF PURCHASER. The actual current knowledge of
James Hansen, Robert Koys, Robert W. Powell, Jr., Ross B.
Glickman, Adam S. Metz, Michael G. Hilborn, Matthew Dominski and
Mindy Sherman. (The same definition shall apply when this
Agreement uses the phrase, "Purchaser's knowledge," or similar
phrase.)
KNOWLEDGE OF SELLER. The actual current knowledge of Thomas
C. Rogers, Howard J. Edelman, Howard B. Goldman and James
O'Brien. (The same definition shall apply when this Agreement
uses the phrase, "Seller's knowledge," or similar phrase.)
MEMBERSHIP INTEREST. The entire right, title and interest
of Seller in, and claims against, Owner, including, but not
limited to, the entire interest of Seller in the profits and
capital of Owner; said interest of Seller constitutes 100% of all
ownership interests in Owner.
PRIOR OWNER. Fox Valley/River Oaks Partnership, an Illinois
general partnership. The two general partners of Prior Owner are
Seller and Shopping Center Associates, a New York general
partnership ("O'CONNOR").
PROPERTY. The following described property:
(1) The real property legally described on EXHIBIT
"A", together with all easements, covenants, agreements, rights
of way, rights, privileges, tenements, hereditaments,
appurtenances, gaps, gores, and other rights now or hereafter
belonging or pertaining thereto, including, but not limited to,
any development rights and air rights appurtenant thereto
(collectively, the "Land");
(2) Any land owned by Owner lying in the bed of any
street, road or avenue opened or proposed, public or private, in
front of or adjoining the Land, (all of the foregoing being
included within the term "LAND");
(3) All of the buildings, structures, fixtures,
facilities, installations and other improvements of every kind
and description (other than those owned by tenants under Leases)
now or hereafter in, on, over or under the Land (collectively,
the "IMPROVEMENTS");
(4) All furniture, furnishings, fixtures, equipment,
machinery, maintenance vehicles and equipment, tools, parts,
computer hardware and other items of tangible personalty of every
kind and description situated in, on, over and under the
Premises, which is owned by Owner or leased pursuant to the
<PAGE>
leases listed on EXHIBIT B, together with all replacements and
substitutions therefor (collectively, the "TANGIBLE PERSONAL
PROPERTY"), an itemization of which has been prepared by Seller
and is attached to this Agreement as EXHIBIT B. The foregoing
includes all that owned by Prior Owner on the date on which the
beneficial interest in the Trust was assigned to Owner.
(5) All of Owner's interest in all existing surveys,
blue prints, drawings, plans and specifications and other
documentation for or with respect to the Property or any part
thereof, including, without limitation, all materials, plans,
specifications, drawings, renderings, models, permits,
applications, bid solicitations, budgets, market or income and
expense projections, feasibility or other studies and analyses,
books and records and all other material and data generated or
produced with respect to the Property; and all available tenant
lists and data, correspondence with present and prospective
tenants, vendors, suppliers, utility companies and other third
parties, booklets, manuals and promotional and advertising
materials concerning the Property or any part thereof; equipment
maintenance records, warranty information, sales and advertising
materials and accounting information, and such other existing
books, records and documents used in connection with the
operation of the Property or any part thereof (collectively, the
"BOOKS AND RECORDS"). The Books and Records include all of the
foregoing that was owned by Prior Owner on the date on which the
beneficial interest in the Trust was assigned to Owner, except
for internal management books and records (the same having been retained
by Prior Owner and not contributed to Owner);
(6) All leases and other agreements for the use or
occupancy of space in the Property binding upon Owner (the "LEASES");
(7) All government permits, approvals, authorizations,
licenses and franchises that have been issued or granted to Owner
and/or the Prior Owner to the extent they relate to the operation
of the Property, or the ownership, use or occupancy of the
Property (the "LICENSES"); and
(8) Subject to the provisions of Article 5, all
prepaid advertising expenses, prepaid utility charges and
deposits and other prepaid items relating to the Property (the
"PREPAID EXPENSES"), all trade names, assumed names, trademarks,
copyrights and service marks with respect to the Property and all
goodwill associated therewith (the "TRADEMARKS"), and all other
intangible personal property used exclusively in connection with
or arising from the Property (the "INTANGIBLE PERSONAL
PROPERTY"), including, without limitation, contract rights and
telephone exchange numbers, but expressly excluding cash held by
Owner on the Closing Date and also expressly excluding
Miscellaneous Receivables of Owner on the Closing Date.
"MISCELLANEOUS RECEIVABLE" are receivables of Owner other than
(i) receivables owing by the Anchor Stores and (ii) receivables
owing under Leases and Service Contracts.
PURCHASER INDEMNIFIED PARTIES. Seller, Owner as to Section 3.2(e) only
and Prior Owner and their respective partners, trustees, beneficiaries,
shareholders, members, managers, advisors and other agents and their
respective employees, officers, directors and shareholders.
<PAGE>
SELLER INDEMNIFIED PARTIES. Purchaser and Owner and their
respective partners, trustees, beneficiaries, shareholders,
members, managers, advisors and other agents and their respective
employees, officers, directors and shareholders.
STRAY LIABILITIES. All obligations and liabilities of Owner
on the Closing Date, contingent or otherwise, and all claims made
at any time (whether before or after the Closing Date) asserting
an obligation or liability of Owner accruing on or before the
Closing Date, including, but not limited to, the Existing
Litigation. The foregoing Stray Liabilities do not include
obligations arising under the Leases, Service Contracts, REA,
Supplemental Agreements and Permitted Exceptions first accruing
on or after the Closing Date or any express matters for which
Purchaser receives and accepts a proration credit at Closing.
TORT CLAIMS. All claims and causes of actions seeking
damages on account of injury to persons or damage to property
occurring at the Property. Tort Claims will be treated as
accruing prior to the Closing Date if the injury to person or
damage to property occurred prior to the Closing Date; and Tort
Claims will be treated as accruing on or after the Closing Date
if the injury to person or damage to property occurred on or
after the Closing Date.
2. SALE; PURCHASE PRICE; ALLOCATION OF MEMBERSHIP INTEREST.
2.1 Subject to the terms and provisions hereof, Seller
agrees to sell and convey to Purchaser, and Purchaser agrees to
purchase from Seller, the Membership Interest on the Closing Date
(the "CLOSING"). Purchaser 1 shall acquire 99%, and Purchaser 2
shall acquire 1%, of the Membership Interest.
2.2 The total purchase price (hereinafter called the
"PURCHASE PRICE") to be paid by Purchaser to Seller for the
Membership Interest shall be One Hundred Thirty Million and
no/100 Dollars ($130,000,000.00), of which Purchaser 1 shall be
responsible for 99 %, and Purchaser 2 shall be responsible for
1%. The Purchase Price shall be payable in the following manner:
(1) EARNEST MONEY. Purchaser shall, within three (3)
business days after the delivery of this Agreement to Seller,
deposit with the Escrow Company, as escrow agent, the amount of
Zero Dollars ($0) (hereinafter called the "EARNEST MONEY") which
Earnest Money shall be in the form of a wire transfer of
immediately available United States of America funds. The
Earnest Money shall become nonrefundable at the close of business
of the last day of the Due Diligence Period unless this Agreement
is terminated prior to the expiration of the Due Diligence
Period. The Earnest Money shall be held and disbursed by the
Escrow Company acting as escrow agent pursuant to the Earnest
Money Escrow Agreement in the form of EXHIBIT C attached hereto
which the parties and Escrow Company have executed simultaneously
with this Agreement. The Earnest Money shall be invested in a
federally issued or insured interest bearing instrument with any
interest accruing thereon being deemed part of the Earnest Money
and shall be paid to the party to which the Earnest Money is paid
pursuant to the provisions hereof. If the sale hereunder is
consummated in accordance with the terms hereof, the Earnest
<PAGE>
Money and any interest thereon shall be applied to the Purchase
Price to be paid by Purchaser at the Closing. In the event of a
default hereunder by Purchaser or Seller, the Earnest Money shall
be applied as provided herein.
(2) CASH BALANCE. Purchaser shall pay the balance of
the Purchase Price, subject to the prorations described in
Section 5 below and to Purchaser's payment of all "Loan Payoff
Fees" (as defined in Section 3.4 hereof), in cash (the "CASH
BALANCE") by wire transfer of immediately available United States
of America funds to the Title Company for payment to Seller, in
accordance with the terms and conditions of this Agreement no
later than 11:00 am (New York City, New York time) on the Closing
Date. Said Cash Balance will be paid on the Closing Date in two
parts: the Cash Balance less $80,632,677.76 shall be paid
concurrently with the conveyance to Purchaser of the Partnership
Interest; and $80,632,677.76 shall be paid immediately following
such conveyance (the parties acknowledge that said $80,632,677.76
represents funds to be distributed by Owner to Purchaser from
proceeds of a loan to Owner which Purchaser is causing Owner to
obtain on the Closing Date). Notwithstanding the foregoing,
Purchaser's obligations hereunder and are not contingent upon
Purchaser causing Owner to obtain financing.
3. CONDITIONS PRECEDENT. In the event (a) any of the
conditions set forth in Sections 3.2(b), 3.3, 3.5, 3.6 or 3.7
below shall not have been fulfilled, accepted or deemed accepted
or waived as provided herein on or before the applicable dates
specified herein, Purchaser shall have the right to terminate
this Agreement by giving written notice thereof to Seller on or
before the respective dates specified herein, or (b) any of the
conditions set forth in Section 3.5 hereof shall not have been
fulfilled as provided herein on or before the applicable dates
specified herein, Seller shall have the right to terminate this
Agreement by giving written notice thereof to Purchaser on or
before the respective dates specified herein. In the event the
Agreement is terminated as provided in clause (a) or (b) above
then all Earnest Money shall be refunded to Purchaser and neither
party shall have any further rights or obligations hereunder,
except for the "Surviving Obligations" (as hereinafter defined).
3.1 SELLER'S DELIVERIES. Seller has delivered or made
available to Purchaser complete copies of the following items
which are in Seller's possession:
(1) all Leases;
(2) all Service Contracts;
(3) copies of the real estate tax bills for the
current year and two prior years, if available;
(4) any existing environmental reports, including any
Phase I environmental report;
(5) the existing owner's title policy;
(6) the existing survey (the "EXISTING SURVEY");
<PAGE>
(7) annual operating statements for the Property for
the last three calendar years and monthly operating statements
for the months in the current year;
(8) existing plans and specifications; and
(9) copies of all Lease "Proposals" (as defined in
Section 15(b)) presently outstanding.
Seller shall provide to Purchaser any documents described in
this Section 3.1 and first coming into Seller's possession or
produced by Seller after the initial delivery and continue to
provide the same during the pendency of this Agreement.
In the event this Agreement terminates for any reason,
Purchaser shall immediately return to Seller all information
delivered by Seller or Seller's agent(s) to Purchaser or
Purchaser's agent(s). The foregoing provision shall survive
termination of this Agreement.
3.2 DUE DILIGENCE. Purchaser and its representatives shall
be permitted to enter upon the Property at any reasonable time
and from time to time before the Closing Date to examine, inspect
and investigate the Property as well as all records and other
documentation provided by Seller or located at the Property
(collectively, "DUE DILIGENCE"). The Due Diligence shall be
subject to the terms, conditions and limitations set forth in
this Section 3.2.
(1) Purchaser shall have the right to enter upon the
Property for the purpose of conducting its Due Diligence provided
that in each such instance Purchaser is in full compliance with
the insurance requirements set forth in Section 3.2(e) hereof.
Purchaser shall take all necessary actions to insure that neither
it nor any of its representatives interfere with the tenants or
ongoing operations occurring at the Property. Purchaser shall
not cause or permit any mechanic's liens, materialmen's liens or
other liens to be filed against the Property as a result of its
Due Diligence.
(2) Purchaser shall have through the last day of the
Due Diligence Period in which to conduct its Due Diligence and,
in Purchaser's sole and absolute discretion, to determine whether
the Property is acceptable to Purchaser. If during the Due
Diligence Period, Purchaser becomes aware of any problem or
defect in the Property or any other aspect of the Property which
Purchaser determines, in its sole and absolute discretion, makes
the Property unsuitable to Purchaser, Purchaser may terminate this
Agreement by giving written notice of termination to Seller on or
before the last day of the Due Diligence Period. If Purchaser
does not timely give notice of termination as aforesaid,
Purchaser shall be deemed to have accepted the Property and this
Agreement shall continue in full force and effect. In the event
of such termination, the Earnest Money shall be returned to
Purchaser and neither party shall have any further obligations to
the other party hereunder, except for the Surviving Obligations.
<PAGE>
(3) Purchaser shall have the right to conduct, at its
sole cost and expense, any inspections, studies or tests that
Purchaser deems appropriate in determining the condition of the
Property; provided, however, Purchaser is not permitted to
perform any intrusive testing, including, without limitation, a
Phase II environmental assessment or boring, without (i)
submitting to Seller the scope and inspections for such testing;
and (ii) obtaining the prior written consent of Seller.
(4) Purchaser agrees and covenants with Seller not to
disclose to any third party (other than lenders, accountants,
attorneys and other professionals and consultants in connection
with the transaction contemplated herein) without Seller's prior
written consent, unless Purchaser believes in good faith that
Purchaser is obligated by law to make such disclosure, any of the
reports or any other documentation or information obtained by
Purchaser which relates to the Property or Seller in any way, all
of which shall be used by Purchaser and its agents solely in
connection with the transaction contemplated hereby. In the
event that this Agreement is terminated, Purchaser agrees that
all such information will be held in strict confidence, subject
to the disclosures that Purchaser has made (or has a right to
make) pursuant to the previous sentence. In the event that the
sale hereunder is consummated, the prohibition on the Purchaser's
disclosure of information as set forth in this Section 3.2(d)
shall be of no further force or effect. Seller shall not disclose to
any third party (other than lenders, accountants, attorneys and
other professionals in connection with the transaction contemplated
herein) the existence or terms of this Agreement without Purchaser's prior
written consent, unless Seller believes in good faith that Seller is
obligated by law to make such disclosure.
(5) Purchaser agrees to indemnify, defend and hold the
Purchaser Indemnified Parties harmless from and against any and
all claims, losses, damages, costs and expenses (including,
without limitation, reasonable attorneys' fees and court costs)
suffered or incurred by any of the Purchaser Indemnified Parties
as a result of or in connection with any damage to property or
injury to persons or any mechanic's lien, which damage or injury
or lien arises from any activities of Purchaser (including
activities of any of Purchaser's employees, consultants,
contractors or other agents) relating to the Property; and in the
event that the Property is disturbed or altered in any way as a
result of such activities, Purchaser shall promptly restore the
Property to its condition existing prior to the commencement of
such activities which disturbed or altered the Property. Furthermore,
Purchaser agrees to maintain and cause any of its representatives or
agents conducting any Due Diligence to maintain and have in effect
workers' compensation insurance, with statutory limits of coverage, and
commercial general liability insurance with (i) all risk coverage,
(ii) waiver of subrogation, and (iii) limits of not less than Three
Million and 00/100 ($3,000,000.00) for personal injury, including bodily
injury and death, and property damage. Such insurance shall name the
Purchaser Indemnified Parties and Heitman Capital Management Corporation
("HCMC") as additional insured parties. Purchaser shall deliver to Seller
a copy of the certificate of insurance effectuating the insurance
required hereunder prior to the commencement of such activities which
certificate shall provide that such insurance shall not be terminated or
modified without at least thirty (30) days' prior written notice to Seller.
<PAGE>
(6) Purchaser acknowledges and agrees that it shall
have no right to review or inspect any of the following:
(i) internal memoranda, correspondence, analyses, documents or
reports prepared by or for Seller in connection with this
Agreement or in connection with the transaction contemplated by
this Agreement, (ii) communications between Seller and HCMC, and
(iii) appraisals, financial assessments or other valuations of
the Property in the possession of Seller or HCMC.
(7) Sections 3.2(d) and 3.2(e) and such other
designated provisions in this Agreement shall survive Closing or
any termination of this Agreement (collectively, the "Surviving
Obligations").
3.3 TITLE AND SURVEY. Purchaser has obtained, at Seller's
cost and expense, for Purchaser's review a commitment for a
standard owner's policy of title insurance along with a copy of
each instrument listed as an exception thereon (the "TITLE
COMMITMENT") on the Land and Improvements issued by the Title
Company. Purchaser has delivered a copy of the title Commitment
to Seller. During the Due Diligence Period, Purchaser shall have
the right to obtain, at its sole cost and expense, any desired
endorsements to the Title Commitment which are available, if any.
Purchaser shall obtain at Seller's expense for Purchaser's review
an update to the Existing Survey (the "UPDATED SURVEY").
Purchaser shall deliver a copy of the Updated Survey to Seller in
a timely manner. As used herein, "PERMITTED EXCEPTIONS" means
the items listed on EXHIBIT D hereof. If prior to the Closing
Date there are additional title exceptions identified by the
Title Company, then Seller shall have the right, but not the
obligation, to cure such exceptions on or before the Closing
Date. Notwithstanding the foregoing, Seller shall be obligated
to remove each exception, if: (a) it can be removed by the
payment of a liquidated sum of money or by posting a bond; or (b)
it arises as a result of any willful or voluntary act of Seller
or Prior Owner or any affiliate of Seller after the date hereof,
regardless of the cost. In addition, Seller shall remove those
title mechanics lien exceptions, if any, listed on EXHIBIT E. If
the objections are not cured by Seller by the scheduled Closing
Date, then Purchaser may as its only option, elect to either:
(i) waive such objection and consummate the transaction
contemplated by this Agreement; or (ii) terminate this Agreement,
in which event the Earnest Money shall be returned to Purchaser
and neither party shall have any further obligations to the other
party except for the Surviving Obligations.
3.4 LOAN PAYOFF. At Closing, Purchaser shall pay the
"Prepayment Fee" identified in, and calculated in accordance
with, the provisions of paragraph 2 of that certain promissory
note dated May 3rd, 1995, made by the Trust to the order of
CIGNA, in the original principal amount of $47,500,000, a copy of
which paragraph is attached hereto as EXHIBIT F (said Prepayment
Fee sometimes herein referred to as the "LOAN PAYOFF FEES".)
Also attached as EXHIBIT F is the loan payoff letter from CIGNA;
reflecting CIGNA's calculation of the Loan Payoff Fees; Purchaser
(through its post-Closing ownership of Owner) will have the
benefit of any reduction in the Loan Payoff Fees, including any
refund thereof by CIGNA after the Closing. The parties
acknowledge that, other than the Loan Payoff Fees, the payoff
<PAGE>
letter shows no other fees or special costs charged by CIGNA to
effectuate the payoff. On the Closing Date, Seller shall cause
Owner to repay the Loan in full (Purchaser's only obligation in
connection therewith being the Loan Payoff Fees). In addition,
at the Closing, Seller shall cause the deeds of trust and other
security documents securing the same to be discharged (or cause
to be provided at Closing to the Title Company such instruments
and documents as the Title Company requires to insure over said deeds
of trust and security documents, with the Title Company taking the
entire risk of obtaining and recording full releases thereof).
3.5 PARTNERSHIP TRANSACTION. The closing occurring under
the Withdrawal and Distribution Agreement dated November __, 1997
under which the Property is conveyed to Owner as a distribution
to Seller by the Prior Owner and a contribution by Seller to
Owner.
3.6 ISSUANCE OF TITLE POLICY. On the Closing Date, the
Title Company shall issue (or irrevocably commit to issue) an
ALTA owner's title insurance policy in the form formerly known as
ALTA Form B 1970 (Rev. 10-17-70 and 10-17-84), or an equivalent
form acceptable to Purchaser, issued in the State of Illinois, in
the face amount of the Purchase Price, which policy shows good
and marketable title to the Property to be vested of record in
Owner, subject only to the Permitted Exceptions, and containing
an extended coverage endorsement over the so-called general or
standard exception items 1, 2, 3, 4 and 5 which are a part of the
printed form of policy, and containing the other endorsements
described on EXHIBIT G (the "TITLE POLICY").
3.7 ESTOPPELS. On or before the Closing Date, Purchaser
shall have obtained from Sears an estoppel certificate
substantially in the form attached hereto as EXHIBIT H (Purchaser
having already obtained estoppels from the other Anchors).
4. CLOSING; CONDITIONS; DELIVERIES.
4.1 TIME, PLACE AND MANNER OF CLOSING. The Closing shall
be held on the Closing Date in the offices of Altheimer & Gray,
10 South Wacker Drive, Suite 4000, Chicago, Illinois 60606, or at
any other location mutually acceptable to the parties.
4.2 CONDITION TO PARTIES' OBLIGATION TO CLOSE. In addition
to all other conditions set forth herein, the obligation of
Seller, on the one hand, and Purchaser, on the other hand, to
consummate the transaction contemplated hereunder shall be
contingent upon the following:
(1) The other party's representations and warranties
contained herein shall be true and correct in all material
respects as of the date of this Agreement and the Closing Date;
(2) As of the Closing Date, the other party shall have
performed its obligations hereunder in all material respects and
all deliveries to be made at Closing have been tendered;
<PAGE>
(3) As of the Closing Date, there shall exist no
pending action, suit or proceeding with respect to the other
party before or by any court or administrative agency which seeks
to restrain or prohibit, or to obtain damages or a discovery
order with respect to, this Agreement or the consummation of the
transactions contemplated hereby; and
(4) Simultaneously with the execution of this
Agreement, Purchaser and HCMC shall have each executed and
delivered to each other and to Seller a fully executed original
ERISA certificate in the form of EXHIBIT I attached hereto.
4.3 DELIVERIES. At Closing each party shall execute and
deliver to the other and/or Title Company the following documents
duly executed by the appropriate party or parties:
(1) Seller shall deliver or cause to be delivered to
Purchaser and/or Title Company:
(i) an assignment of the Membership Interest (the
"ASSIGNMENT OF MEMBERSHIP INTEREST") in the form of EXHIBIT J
attached hereto.
(ii) a non-foreign transferor certification
pursuant to Section 1445 of the Internal Revenue Code and any
similar provisions of applicable state law, in substantially the
same form as set forth on EXHIBIT K attached hereto (the "AFFIDAVIT");
(iii) a certified resolution of HCMC (with
respect to Seller as Seller's advisor) certifying that Seller has
the legal power, right and authority to consummate the sale of
the Membership Interest;
(iv) a payoff letter in connection with the Loan;
(v) such other evidence of the authority of
Seller to consummate the transactions provided for in this
Agreement as may be reasonably requested by Purchaser (but not
including opinions of counsel);
(vi) to the extent in the possession or control of
Seller, the original of all of the Leases, the REA, the
Supplemental Agreements and Service Contracts, and, to the extent
in the possession or control of Seller, any and all building
plans, surveys, site plans, engineering plans and studies,
utility plans, landscaping plans, development plans,
specifications, drawings and other Books and Records;
(vii) counterparts of the Management and
Submanagement Termination Agreements, each dated as of the
Closing Date, duly executed by Owner and Agent 2. The
"MANAGEMENT AND SUBMANAGEMENT TERMINATION AGREEMENTS" are the two
agreements in the form attached as Exhibit L, one of which is
among Owner, JMB Institutional Realty Corporation, an Illinois
corporation ("AGENT 1"), and O'Connor Management, Inc., a
Delaware corporation ("AGENT 2") (collectively, the "AGENTS"),
and the other of which is among Owner, Agents and JMB Properties
Urban Company ("MANAGER"); and
<PAGE>
(viii) certified copies of each of the trust agreement
for each Trust, showing Owner as the beneficial owner thereof.
(2) Purchaser shall deliver to Seller or Title Company:
(i) the Cash Balance, by wire transfers, as
provided in Section 2.2(b) hereof;
(ii) a copy of the Management and Submanagement
Termination Agreements, executed by Manager and Agent 1;
(iii) a certified resolution of Purchaser
certifying that Purchaser has the legal power, right and authority
to consummate the purchase of the Membership Interest; and
(iv) such other evidence of the authority of
Purchaser to consummate the transactions provided for in this
Agreement as may be reasonably requested by Seller (but not
including opinions of counsel).
(3) Seller or the title holder as the case may be and
Purchaser shall jointly deliver to Title Company a closing statement.
(4) Title Company shall deliver to Purchaser an
initialed mark-up of the Title Commitment (which will include
endorsements), extending the effective date to the Closing Date,
insuring the Trust as owner of the Land and Improvements (with
Owner as an additional insured), and removing all exceptions
other than Permitted Exceptions.
4.4 PERMITTED TERMINATION. So long as a party is not in
default hereunder, if any condition to such party's obligation to
proceed with the Closing hereunder has not been satisfied or
waived as of the Closing Date or such earlier date as provided
herein, such party may, in its sole discretion, terminate this
Agreement by delivering written notice to the other party before
the Closing Date (in which event the Earnest Money shall be
returned to Purchaser), or elect to close, notwithstanding the
non-satisfaction of such condition, in which event such party
shall be deemed to have waived any such condition.
5. PRORATIONS. All items of income and expense of shall be
paid, prorated or adjusted as of the close of business on the day
prior to the Closing Date (the "PRORATION DATE") in the manner
hereinafter set forth:
5.1 Purchaser shall be credited with (i) the amount of (A)
all rents and (B) all expense contributions, real estate tax
contributions, and other reimbursements from tenants ("TENANT
CONTRIBUTIONS") received by Seller, Owner or Prior Owner and
attributable to any month commencing after the Closing Date and
(ii) all unapplied cash security deposits which were made by
tenants under all leases of the Property in effect as of the
Closing Date (or, as to cash security deposits held by Manager,
Seller may, instead of crediting the same to Purchaser, instruct
said manager to pay over the same to Purchaser). The term Tenant
Contributions includes all amounts paid by the Anchor Stores
under the REA and Supplemental Agreements.
<PAGE>
5.2 All rents and Tenant Contributions for the month of
Closing shall be prorated between Purchaser and Seller based upon
their respective days of ownership of the Membership Interest for
such month in which the Closing occurs. Neither Purchaser nor
Seller shall receive credit at Closing for any payments of rental
obligations due but not paid as of the Proration Date. At the
time of the final calculation and collection from tenants of
Tenant Contributions for 1997, whether in the nature of a
reconciliation payment or full payment, in arrears, there shall
be a reproration between Purchaser and Seller as to the Tenant
Contributions. Such reproration shall not be made on the basis
of a per diem method of allocation, but shall instead be
apportioned between Seller and Purchaser on the basis of the
relative share of actual expenses in question incurred by (i)
Prior Owner and Owner (prior to the Closing Date) and by (ii)
Owner from and after the Closing Date during the lease year in
question. Seller covenants to provide Purchaser with any
information necessary to finalize such calculation. Purchaser
covenants to cause Owner to bill tenants for amounts due from
tenants attributable to periods prior to closing and diligently
pursue collections from tenants and, as collected, to timely
deliver to Seller reproration amounts due Seller. In connection
with the foregoing:
(1) If such final calculation as to Tenant
Contributions (other than real estate tax contributions) shows
that a tenant paid an amount greater than its share of actual
expenses, Seller shall pay Purchaser, within 10 days after
demand, the Seller's pro rata share of such excess amount, which
Purchaser shall cause Owner in turn to pay or credit to the
tenant in reimbursement of such excess payment (with the
intention that Seller will be responsible for such excess to the
extent that Seller, Owner and/or Prior Owner received payments in
excess of the actual expenses paid by Seller, Owner
and/or Prior Owner on which such reimbursements are calculated).
If such final calculation as to Tenant Contributions (other than
real estate tax contributions) shows that a tenant paid an amount
less than its share of actual expenses, and if Owner, after the
Closing Date, receives from such tenant the amount of such
shortfall, then, promptly after Owner's receipt thereof,
Purchaser shall pay over to Seller the Seller's prorata share of
such payment.
(2) The parties acknowledge that (i) the tenants under
Leases are paying during 1997 estimated tax payments for taxes
for the 1997 tax year, which taxes are not themselves due and
payable until 1998, and (ii) the final calculation as to Tenant
Contributions for 1997 real estate taxes will not be complete
until the actual amount of the 1997 real estate taxes is known.
If such final calculation shows that a tenant paid an amount
greater than its share of actual 1997 real estate taxes, Seller
shall pay Purchaser, within 10 days after demand, the Seller's
prorata share of such excess amount, which Purchaser shall in
turn cause Owner to pay to the tenant in reimbursement of such
excess payment (or which Purchaser shall cause Owner to credit to
the tenant in reduction of such tenant's future obligations (with
the intention in either case that Seller will be responsible for
such excess to the extent that Seller, Owner and/or Prior Owner
received payments in excess of the actual real estate taxes paid
<PAGE>
by or credited to Seller, Owner and/or Prior Owner on which such
reimbursements are calculated)). If such final calculation shows
that a tenant paid an amount less than its share of actual 1997
real estate taxes, and if Owner, after the Closing Date, receives
from such tenant the amount of such shortfall, then Seller shall
be entitled to credit or payment for the same as provided in
Section 5.6 below.
5.3 Percentage rent shall be prorated between the Purchaser
and the Seller such that the Seller receives all percentage rent
in respect of sales occurring through the Closing Date and the
Purchaser receives all percentage rent in respect of sales
occurring after the Closing Date. Any break point or minimum
sales provision in any Lease shall be prorated as of the Closing
Date on a per diem basis and applied to the period before and
after the Closing in determining such percentage rent.
5.4 Any amounts received from tenants after Closing shall
be applied on a tenant by tenant basis in the following order:
(i) first on account of any amount due Owner from such tenant(s)
in respect of any period after the Closing Date; (ii) next, on
account of any amount due from such tenant for any period prior
to the Closing Date; and (iii) finally, any balance then
remaining to Owner (i.e., Seller shall have no interest therein).
If delinquent rents have not been collected by Owner and paid to
Seller within six (6) months after the Closing Date, Owner shall,
at Seller's request, assign to Seller or at Seller's direction,
to Prior Owner, the right to the pre-closing delinquency from
such tenant, in which event Seller may institute an action in
damages (but not seeking any other remedy) against such tenant to
collect such delinquency, all at the cost and expense of Seller
or at Seller's direction, Prior Owner.
5.5 Operating expenses, including, without limitation,
permits, licenses. membership dues, and any other prepaid
expenses, shall be prorated between Purchaser and Seller based
upon the actual days of their respective ownership of the
Membership Interest utilizing the actual expenses or reasonable
estimates.
5.6 Real estate taxes shall be prorated between Seller and
Purchaser based upon the actual days of ownership for the year in
which Closing occurs utilizing 100% of the most recent
ascertainable tax bill(s). Seller and Purchaser agree to reprorate
said real estate taxes upon Owner's receipt of the actual tax bill for
the tax year in question. Any amount owing by Seller to Purchaser
on account of the increase reflected in the actual tax bill shall be
due 30 days prior to the date on which Owner is required to make the
tax payment reflecting such increase; such payment by Seller to Purchaser
will be reduced by Seller's pro rata share of amounts, if any,
theretofore collected by Owner from tenants on account of such
increase in the taxes for 1997 (and as and when Owner thereafter
receives payments from tenants on account of such increase,
Purchaser shall remit to Owner Seller's pro rata share thereof,
as part of the monthly reconciliation process described below, up
to the amount of the increase already paid by Seller).
Notwithstanding the foregoing, if the actual tax bill is received
prior to the first payment of 1997 taxes, Seller's payment
required above as to the tax increase shall be made 50% prior to
<PAGE>
such first installment, and 50% prior to the second installment,
net of said tenant reimbursements theretofore received on account
of said increase. After the actual tax bills are known,
Purchaser shall cause Owner promptly in accordance with
Purchaser's customary practice to bill tenants for their share
thereof. Purchaser, on behalf of Owner, shall have the exclusive
right to meet with governmental officials and to contest any
reassessment. Purchaser shall pay to Seller an amount equal to
any refund of taxes applicable to any period prior to the Closing
unless under the terms of the Leases the tenants are entitled to
the benefit of such refund.
5.7 Except for utilities billed directly to Tenants,
utilities shall be prorated as of the Proration Date based upon
either meter readings on the Proration Date or the prior month's
actual invoices. Seller shall be credited with any unapplied
utility deposit in effect as of the Closing Date to the extent
such deposit is assignable.
5.8 Owner shall be responsible for and pay for (and Seller
shall not be required to reimburse Purchaser for) both: (a) the
cost of all tenant improvements, and (b) all leasing commissions
due and payable as a result of leases made pursuant to (i)
Proposals listed on Schedule 4 attached hereto, (ii) any lease
entered into after the date hereof through the date which is five
(5) days prior to the expiration of the Due Diligence Period, and
(iii) any Proposal which Purchaser approved, or is deemed to have
approved as provided in Section 15. Purchaser shall receive a
credit from Seller for the amount of all unpaid tenant allowances
and leasing commissions shown on Exhibit M.
5.9 All insurance policies and property management
agreements shall be terminated at the cost of Seller as of the Closing
Date and there shall be no proration with respect to these items.
5.10 On the Closing Date, Owner shall, at Seller's sole cost
and expense, discharge all indebtedness of Owner for borrowed
money, including all indebtedness secured by the Property;
provided, however, Purchaser shall pay the Loan Payoff Fees
pursuant to Section 3.4 hereof; and, provided further, as to the
equipment leasing agreements listed in Exhibit B, the monthly
payments thereunder will be pro rated and the same shall not be
paid off at Closing.. At the Closing Date, Owner shall
distribute all cash on hand to Seller. Seller is retaining all
rights under the Withdrawal and Distribution Agreement.
5.11 Seller shall be responsible for all payments due to the
Agents and Manager under the Management and Submanagement
Termination Agreements and the agreements terminated pursuant
thereto.
All other items which are customarily prorated in
transactions similar to the transaction contemplated hereby and
which were not heretofore dealt with, will be prorated as of the
Proration Date. In the event any prorations or computations made
under this Section are based on estimates or prove to be
incorrect, then either party shall be entitled to an adjustment
to correct the same. Purchaser shall indemnify and hold
Purchaser Indemnified Parties harmless from and against any and
<PAGE>
all claims for which Purchaser received credits pursuant to this
Section 5. The indemnity set forth in the immediately preceding
sentence and the covenants contained in this Section 5 shall
survive Closing. Purchaser and Seller hereby agree to reprorate
all expense and income items for which estimates were used to
determine the prorations (including, but not limited to, real
estate taxes) on May 1, 1998, with a final accounting to be
completed no later than thirty (30) days after final real estate
tax bills have been issued for the tax year 1997. On the date of
each such final accounting, all sums due from Seller to
Purchaser, or Purchaser to Seller, shall be paid in the same
manner as they would have been paid as provided herein had the
final amounts been known as of the Closing Date.
5.12 Seller shall cause to be prepared and timely filed, at
Seller's cost and expense, a stub-period tax return for Owner for
the period from the date of the formation of Owner through the
Closing Date (i.e., through the date on which there is a
termination for tax purposes of Owner by reason of Purchaser's
purchase of the Partnership Interest). Such tax return shall
make the election under 754 of the Internal Revenue Code.
60 SELLER'S REPRESENTATIONS, WARRANTIES AND COVENANTS. Seller
hereby represents, warrants and covenants as follows:
6.1 POWER. Seller has the legal power, right and authority
to enter into this Agreement and the instruments referenced
herein and to consummate the transactions contemplated hereby.
6.2 REQUISITE ACTION. All requisite action (corporate,
trust, partnership or otherwise) has been taken by Seller in
connection with entering into this Agreement and the instruments
referenced herein and the consummation of the transactions
contemplated hereby. No consent of any partner, shareholder,
member, creditor, investor, judicial or administrative body,
authority or other party is required which has not been obtained
to permit Seller to enter into this Agreement and consummate the
transaction contemplated hereby.
6.3 AUTHORITY. The individuals executing this Agreement
and the instruments referenced herein on behalf of Seller have
the legal power, right and actual authority to bind Seller to the
terms and conditions hereof and thereof. Owner is a duly formed
validly existing limited liability company. On the Closing Date,
the sole member or Owner will be Seller.
6.4 VALIDITY. This Agreement and all documents required
hereby to be executed by Seller are and shall be valid, legally
binding obligations of and enforceable against Seller in
accordance with their terms.
6.5 CONFLICTS. None of the execution and delivery of this
Agreement and documents referenced herein, the incurrence of the
obligations set forth herein, the consummation of the
transactions herein contemplated or referenced herein conflicts
with or results in the material breach of any terms, conditions
or provisions of or constitutes a default under, any bond, note,
or other evidence of indebtedness or any contract, lease or other
agreements or instruments to which Seller is a party.
<PAGE>
6.6 TITLE. On the Closing Date, Seller will own the entire
Membership Interest, free and clear of all claims, liens and
encumbrances. On the Closing Date, Owner will own the entire interest
in the Property heretofore held by Prior Owner. On the Closing Date, Owner
will be the sole beneficiary of and have the absolute power of direction
over the Trust. On the Closing Date, Owner will not be party to or bound
by any agreements other than the Leases, Service Contracts, REA,
Supplemental Agreements and the Permitted Exceptions.
6.7 LEASES. Attached hereto as EXHIBIT N is a complete and
accurate list of all Leases, which EXHIBIT N shall be updated by
Seller prior to Closing, if necessary, by adding thereto any
Leases executed after the date of this Agreement through Closing
and all Proposals which are approved (or deemed approved) by
Purchaser as provided under Section 15 hereof.
6.8 SERVICE CONTRACTS. Attached hereto as EXHIBIT O is a
complete and accurate list of all service agreements ("SERVICE
CONTRACTS") with respect to the Property, which EXHIBIT O shall
be updated by Seller prior to Closing, if necessary.
6.9 NOTICES. Neither Seller, nor, to Seller's knowledge,
Owner or Prior Owner, has received any written notice that the
Property, or any present uses and operations thereof, are in
violation of any applicable zoning, land-use, building, fire,
health and safety laws.
The representations and warranties set forth in this Section
6.9 shall be updated by Seller prior to Closing, if necessary.
6.10 LITIGATION. Except as set forth on EXHIBIT P attached
hereto (the "EXISTING LITIGATION"), no litigation has been served
upon Seller, nor to Seller's knowledge has been filed, or
threatened in writing, affecting Owner or the Property. EXHIBIT
P shall be updated by Seller prior to Closing, if necessary.
6.11 ENVIRONMENTAL CONDITION. Seller has no knowledge of
any violation of Environmental Laws related to the Property or
the presence or release (other than as permitted by law) of
Hazardous Materials on or from the Property except as disclosed
in the environmental reports delivered by Seller to Purchaser or
made available for Purchaser's review. The term "ENVIRONMENTAL
LAWS" includes, without limitation, the Resource Conservation and
Recovery Act and the Comprehensive Environmental Response
Compensation and Liability Act ("CERCLA") and other federal laws
governing the environment as in effect on the date of this
Agreement together with their implementing regulations and
guidelines as of the date of this Agreement, and all state,
regional, county, municipal and other local laws, regulations and
ordinances that are equivalent or similar to the federal laws
recited above or that purport to regulate Hazardous Materials in
effect as of the date of this Agreement. "HAZARDOUS MATERIALS"
means any substance which is (i) designated, defined, classified
or regulated as a hazardous substance, hazardous material, hazardous
waste, pollutant or contaminant under any Environmental Law, as currently
in effect as of the date of this Agreement, (ii) petroleum hydrocarbon,
including crude oil or any fraction thereof and all petroleum products,
(iii) PCBs, (iv) lead, (v) friable asbestos, (vi) flammable explosives,
(vii) infectious materials, or (viii) radioactive materials.
<PAGE>
6.12 INDEMNITY. Seller shall indemnify and hold Seller
Indemnified Parties harmless from and against any and all claims,
actions, judgments, liabilities, liens, damages, penalties,
fines, costs and reasonable attorneys' fees, foreseen or
unforeseen, asserted against, imposed on or suffered or
incurred by Seller Indemnified Parties directly or indirectly
arising out of or in connection with any breach of the
warranties, representations and covenants set forth in this
Agreement. In addition to, and not in limitation of, said
indemnity, Seller shall indemnify and hold Seller Indemnified
Parties harmless from and against any and all claims, actions,
judgments, liabilities, liens, damages, penalties, fines, costs
and reasonable attorneys' fees, foreseen or unforeseen, asserted
against, imposed on or suffered or incurred by Seller Indemnified
Parties (unless Purchaser receives and accepts a proration credit
for such items) (i) accruing with respect to the Swap Documents,
Leases, Service Contracts, REA, Supplemental Agreements and
Permitted Exceptions prior to the Closing Date, (ii) on account
of Tort Claims "accruing prior to the Closing Date" (as such
phrase is defined in the definition of Tort Claims in Section 1
hereof), or (iii) on account of Stray Liabilities. The
warranties and representations set forth in this Section 6 shall
be deemed remade as of Closing, and said warranties and
representations as so remade, and the indemnity obligations set
forth herein shall survive Closing, provided that any claim by a
Seller Indemnified Party based upon a misrepresentation or breach
of any warranty or representation or indemnity obligation under
this Section 6 shall be deemed waived unless Purchaser has given
Seller notice of such claim prior to the date which is the sooner
to occur of the "Seller Liquidation Date" or 18 months after the
Closing Date; provided, however, as to the indemnity for Stray
Liabilities, such notice by Purchaser may be given at any time
until the Seller Liquidation Date (even if later than the date
which is 18 months after the Closing Date). "SELLER LIQUIDATION
DATE" means the later to occur of (i) 60 days after Seller gives
Purchaser written notice stating that Seller intends to liquidate
and distribute all of its remaining assets or (ii) the date which
is 30 days prior to the actual date of said liquidation of
Seller. Seller shall give Purchaser at least 75 days prior
written notice of Seller's liquidation (the purpose of which is
to allow Seller to have notice of claims at least 15 days prior
to Seller's liquidation). If the actual liquidation does not
occur within six (6) months after such notice is given, Seller
shall give Purchaser a new notice at least 75 days prior to
Seller's liquidation.
Notwithstanding anything contained in this Agreement to the
contrary, Seller shall have no liability for breaches of any
representations, warranties and certifications (the
"REPRESENTATIONS") with respect to the Property which are made by
Seller herein or in any of the documents or instruments required
to be delivered by Seller hereunder to the extent that on the
date immediately prior to the Closing Date Purchaser knows of
such breach (but the foregoing shall not preclude Purchaser
terminating this Agreement on account of such breach, in which
event the Earnest Money shall be returned to Purchaser).
<PAGE>
6.13 UPDATE OF SCHEDULES. Prior to the Closing Date, Seller
may give written notice to Purchaser to make additions to, or
corrections to, Exhibits M (as to Leases), N (as to Service
Contracts) and O (as to litigation), and with respect to written
notices pursuant to Sectio 6.9. If Seller gives such notice, (i)
such new schedules shall be deemed to be part of this Agreement,
in lieu of the original schedules, and (ii) Purchaser may
terminate this Agreement and receive back the Earnest Money
(unless the only change is to add Service Contracts which have
been approved by Purchaser or to add additional Leases in
accordance with the Proposals listed on Exhibit S or to add
additional Tort Claims which are fully insured).
70 PURCHASE AS-IS. EXCEPT FOR THE REPRESENTATIONS OF SELLER
EXPRESSLY SET FORTH IN SECTION 6 OF THIS AGREEMENT, PURCHASER
ACKNOWLEDGES TO AND AGREES WITH SELLER THAT, IN PURCHASING THE
MEMBERSHIP INTEREST, THE PURCHASER ACKNOWLEDGES THAT PROPERTY IS
OWNED BY OWNER IN ITS "AS-IS, WHERE IS" CONDITION "WITH ALL
FAULTS" AS OF THE CLOSING DATE AND SPECIFICALLY AND EXPRESSLY WITHOUT
ANY WARRANTIES, REPRESENTATIONS OR GUARANTEES, EITHER EXPRESS OR IMPLIED,
AS TO ITS CONDITION, FITNESS FOR ANY PARTICULAR PURPOSE, MERCHANTABILITY,
OR ANY OTHER WARRANTY OF ANY KIND, NATURE, OR TYPE WHATSOEVER FROM OR ON
BEHALF OF SELLER WITH RESPECT TO THE PROPERTY. EXCEPT FOR THE
REPRESENTATIONS OF SELLER EXPRESSLY SET FORTH IN SECTION 6 OF THIS AGREEMENT,
SELLER SPECIFICALLY DISCLAIMS ANY WARRANTY, GUARANTY OR REPRESENTATION,
ORAL OR WRITTEN, PAST OR PRESENT, EXPRESS OR IMPLIED, CONCERNING (A) THE
VALUE, NATURE, QUALITY OR CONDITION OF THE PROPERTY, INCLUDING, WITHOUT
LIMITATION, THE WATER, STRUCTURAL INTEGRITY, SOIL AND GEOLOGY; (B) THE
INCOME TO BE DERIVED FROM THE PROPERTY; (C) THE SUITABILITY OF THE PROPERTY
FOR ANY AND ALL ACTIVITIES AND USES WHICH PURCHASER MAY CONDUCT THEREON,
INCLUDING THE POSSIBILITIES FOR FUTURE DEVELOPMENT OF THE PROPERTY; (D) THE
COMPLIANCE OF OR BY THE PROPERTY OR ITS OPERATION WITH ANY LAWS, RULES,
ORDINANCES OR REGULATIONS OF ANY APPLICABLE GOVERNMENTAL AUTHORITY OR
BODY; (E) THE HABITABILITY, MERCHANTABILITY, MARKETABILITY, PROFITABILITY
OR FITNESS FOR A PARTICULAR PURPOSE OF THE PROPERTY; (F) THE MANNER OR
QUALITY OF THE CONSTRUCTION OR MATERIALS, IF ANY, INCORPORATED INTO THE
PROPERTY; (G) THE MANNER, QUALITY, STATE OF REPAIR OR LACK OF REPAIR OF THE
PROPERTY; (H) THE PRESENCE OR ABSENCE OF HAZARDOUS MATERIALS AT, ON, UNDER,
OR ADJACENT TO THE PROPERTY OR ANY OTHER ENVIRONMENTAL MATTER OR CONDITION
OF THE PROPERTY; OR (I) ANY OTHER MATTER WITH RESPECT TO THE PROPERTY.
PURCHASER ACKNOWLEDGES AND AGREES THAT, EXCEPT FOR THE REPRESENTATIONS AND
WARRANTIES OF SELLER CONTAINED IN SECTION 6 OF THIS AGREEMENT, ANY
INFORMATION PROVIDED BY OR ON BEHALF OF SELLER WITH RESPECT TO THE
PROPERTY WAS OBTAINED FROM A VARIETY OF SOURCES AND THAT SELLER HAS NOT
MADE ANY INDEPENDENT INVESTIGATION OR VERIFICATION OF SUCH INFORMATION
AND MAKES NO REPRESENTATIONS AS TO THE ACCURACY OR COMPLETENESS OF SUCH
INFORMATION. SELLER IS NOT LIABLE OR BOUND IN ANY MANNER BY ANY ORAL OR
WRITTEN STATEMENTS, REPRESENTATIONS OR INFORMATION PERTAINING TO THE
PROPERTY, OR THE OPERATION THEREOF, FURNISHED BY ANY REAL ESTATE BROKER,
AGENT, EMPLOYEE, SERVANT OR OTHER PERSON EXCEPT FOR THE EXPRESS
REPRESENTATIONS SET FORTH IN SECTION 6 OF THIS AGREEMENT. PURCHASER
FURTHER ACKNOWLEDGES AND AGREES THAT PURCHASER IS A SOPHISTICATED
AND EXPERIENCED PURCHASER OF PROPERTIES SUCH AS THE PROPERTY AND HAS
BEEN DULY REPRESENTED BY COUNSEL IN CONNECTION WITH THE NEGOTIATION OF THIS
AGREEMENT. EXCEPT AS MAY OTHERWISE BE PROVIDED HEREIN, SELLER HAS MADE NO
AGREEMENT TO ALTER, REPAIR OR IMPROVE ANY OF THE PROPERTY.
<PAGE>
80 PURCHASER'S REPRESENTATIONS, WARRANTIES AND COVENANTS.
Purchaser hereby represents, warrants and covenants as follows:
8.1 POWER. Purchaser has the legal power, right and
authority to enter into this Agreement and the instruments referenced
herein and to consummate the transactions contemplated hereby.
8.2 REQUISITE ACTION. All requisite action (corporate,
trust, partnership or otherwise) has been taken by Purchaser in
connection with entering into this Agreement and the instruments
referenced herein and the consummation of the transactions
contemplated hereby. No consent of any partner, shareholder,
member, creditor, investor, judicial or administrative body,
authority or other party is required which has not been obtained
to permit Purchaser to enter into this Agreement and consummate
the transaction contemplated hereby.
8.3 AUTHORITY. The individuals executing this Agreement
and the instruments referenced herein on behalf of Purchaser have
the legal power, right and actual authority to bind Purchaser to
the terms and conditions hereof and thereof.
8.4 VALIDITY. This Agreement and all documents required
hereby to be executed by Purchaser are and shall be valid,
legally binding obligations of and enforceable against Purchaser
in accordance with their terms.
8.5 CONFLICTS. Neither the execution and delivery of this
Agreement and documents referenced herein, nor the incurrence of
the obligations set forth herein, nor the consummation of the
transactions herein contemplated, nor referenced herein conflict
with or result in the material breach of any terms, conditions or
provisions of or constitute a default under, any bond, note, or
other evidence of indebtedness or any contract, lease or other
agreements or instruments to which Purchaser is a party.
8.6 INDEMNITIES. Purchaser shall indemnify and hold the
Purchaser Indemnified Parties harmless from and against any and
all claims, actions, judgments, liabilities, liens, damages,
penalties, fines, costs and reasonable attorneys' fees, foreseen
or unforeseen, asserted against, imposed on or suffered or
incurred by Seller directly or indirectly arising out of or in
connection with any breach of the warranties, representations and
covenants set forth in this Agreement. In addition to, and not
in limitation of, said indemnity, Purchaser shall indemnify and
hold Seller harmless from and against any and all claims,
actions, judgments, liabilities, liens, damages, penalties,
fines, costs and reasonable attorneys' fees, foreseen or
unforeseen, asserted against, imposed on or suffered or incurred
by Seller unless Seller receives and accepts an express proration
credit for such items (i) accruing after the Closing Date with
respect to the Swap Documents, Leases, those Service Contracts
approved by Purchaser, the REA, the Supplemental Agreements and
the Permitted Exceptions, or (ii) on account of Tort Claims
"accruing on or after the Closing Date" (as such phrase is
defined in the definition of Tort Claims in Section 1 hereof).
The warranties, representations and indemnities set forth in this
Section 8 shall be deemed remade as of Closing and shall survive
Closing, and said warranties and representations as so remade,
<PAGE>
and the indemnity obligation set forth hereinabove shall be deemed waived
unless Seller has given Purchaser written notice of any such claim prior
to the date which is 18 months from the Closing Date.
90 CLOSING COSTS. Seller shall pay the following expenses:
(a) the title insurance premium for the Title Policy at a rate
not in excess of the standard issue rates; (b) the costs to
obtain the Updated Survey; (c) one-half of all closing escrow
fees, including "New York Style" closing fees; and (d) Seller's
legal fees incurred in connection with this Agreement. Purchaser
shall pay the following expenses: (a) the costs of all so-called
"extended coverage" in connection with, or endorsements to, the
Title Policy, together with the cost of any other title insurance
coverage (such as lender's insurance policies); (b) one-half of
all closing escrow fees, including "New York Style" closing fees;
(c) all costs and expenses associated with Purchaser's financing,
if any; (d) Purchaser's legal fees and expenses; and (e) the Loan
Payoff Fees. The parties do not believe that any conveyance fee,
documentary, stamp or transfer tax (a "TRANSFER TAX") is owing on
account of Purchaser's acquisition of the Membership Interest or
the contribution of the Property to Owner; however, if it is ever
determined or alleged by a governmental agency that a Transfer
Tax is owing on account of such acquisition of Membership
Interest or such contribution of Property, the same shall be the
responsibility of Purchaser and not Seller, and Purchaser shall
indemnify, defend and hold Purchaser Indemnified Parties harmless
therefrom. Seller shall act reasonably in cooperating in the
defense of such claim. The provisions of this Section 9 shall
survive Closing or any termination of this Agreement.
100 [Intentionally Omitted]
110 NEW YORK STYLE CLOSING. It is contemplated that the
transaction shall be closed by means of a so-called New York
Style closing, with the concurrent delivery of the documents of
title, transfer of interest, delivery of the title policy or
marked-up title commitment described in Section 4.3(d) and the
payment of the Cash Balance. Seller and Purchaser shall each
provide any undertaking to the Title Company necessary to
accommodate the New York Style Closing. In no event shall
Purchaser be required to accept any "gap" risk. In no event
shall Purchaser or Owner be required to furnish any affidavits or
other indemnities to the Title Company
120 ATTORNEYS' FEES AND COSTS. In the event any suit or action
is instituted to interpret or enforce the terms of this
Agreement, or in connection with any arbitration or mediation of
any dispute, the prevailing party shall be entitled to recover
from the other party such sum as the court, arbitrator or
mediator may adjudge reasonable as such party's costs and
attorney's fees, including such costs and fees as are incurred in
any trial, on any appeal, in any bankruptcy proceeding (including
the adjudication of issues peculiar to bankruptcy law) and in any
petition for review. Each party shall also have the right to
recover its reasonable costs and attorneys' fees incurred in
collecting any sum or debt owed to it by the other party, with or
without litigation, if such sum or debt is not paid within
fifteen (15) days following written demand therefor. The
provisions of this Section 12 shall survive the Closing.
<PAGE>
130 NOTICE. All notices, demands, deliveries and communications
(a "NOTICE") under this Agreement shall be delivered or sent by:
(i) first class, registered or certified mail, postage prepaid,
return receipt requested, (ii) nationally recognized overnight
carrier, or (iii) facsimile with original Notice sent via
overnight delivery addressed to the address of the party in
question set forth in the first paragraph of this Agreement and
copies to the parties designated below or to such other address
as either party may designate by Notice pursuant to this Section
13. Notices shall be deemed given (x) three (3) business days
after being mailed as provided in clause (i) above, (y) one (1)
business day after delivery to the overnight carrier as provided
in clause (ii) above, or (z) on the day of the transmission of
the facsimile so long as it is received in its entirety by 5:00
pm (New York City, New York time) on such day and the original of
such Notice is received the next business day via overnight mail
as provided in clause (iii) above.
Notices to Seller, copy to: Altheimer & Gray
10 South Wacker Drive, Suite 4000
Chicago, Illinois 60606
Attn: Barry Nekritz, Esq.
Facsimile No. (312) 715-4800
Notices to Purchaser, copy to: Urban Shopping Centers Inc.
900 North Michigan Avenue
Chicago, Illinois 60611
Attn: Michael G. Hilborn, Esq.
General Counsel
Facsimile No. (312) 915-2001
With a copy to: Pircher, Nichols & Meeks
1999 Avenue of the Stars
Suite 2600
Los Angeles, California 90067
Attn: Real Estate Notices (PGN)
Facsimile No.: (310) 201-8922
140 FIRE OR OTHER CASUALTY; CONDEMNATION.
14.1 If the Property or any part thereof is damaged by fire
or other casualty prior to the Closing Date which would cost in
excess of $500,000.00 to repair or takes longer than ninety (90)
days to repair (as determined by an insurance adjuster selected
by the insurance carriers), Purchaser may terminate this
Agreement by written notice to Seller given on or before Closing
Date. In the event of such termination, this Agreement shall be
of no further force and effect and, except for the Surviving
Obligations, neither party shall thereafter have any further
obligation under this Agreement, and Seller shall direct the
Escrow Company to promptly return all Earnest Money to Purchaser.
If Purchaser does not elect to terminate this Agreement or the
cost of repair is determined by said adjuster to be less than
$500,000.00, then the Closing shall take place as herein provided
without abatement of the Purchase Price and Seller shall assign
and transfer to Owner on the Closing Date, without warranty or
recourse, all of Seller's and Prior Owner's right, title and
interest to the insurance proceeds paid or payable to Seller or
Prior Owner on account of such fire or casualty remaining after
<PAGE>
reimbursement to Seller and Prior Owner for the total amount of
all costs and expenses incurred by Seller and Prior Owner in
connection therewith including but not limited to making
emergency repairs, securing the Property and complying with
applicable governmental requirements. Seller shall pay to
Purchaser the amount of the deductible of any of Seller's or
Prior Owner's applicable insurance policies.
14.2 If any portion of the Property is taken in eminent
domain proceedings prior to Closing, or is threatened in writing
to be taken, Purchaser may terminate this Agreement by notice to
Seller given on or before the Closing Date, and, in the event of
such termination, this Agreement shall be of no further force and
effect and, except for the Surviving Obligations, neither party
shall thereafter have any further obligation under this
Agreement, and Seller shall direct Escrow Company to promptly
return all Earnest Money to Purchaser. If Purchaser does not so
elect to terminate, then the Closing shall take place as herein
provided without abatement of the Purchase Price, and Seller
shall deliver or assign to Purchaser on the Closing Date, without
warranty or recourse, all of Seller's right, title and interest
in and to all condemnation awards paid or payable to Seller.
150 OPERATIONS AFTER DATE OF THIS AGREEMENT. Seller covenants
and agrees with Purchaser that:
(1) after the date hereof through the Closing, Seller will
instruct Manager to, and Seller itself will (except as
specifically provided to the contrary herein):
(i) Refrain from transferring any of the Property or
creating on the Property any easements, liens, mortgages,
encumbrances, or other interests which will survive Closing or
permitting any changes to the zoning classification of the Land;
(ii) Refrain from entering into or amending any
contracts, or other agreements (excluding leases) regarding the
Property (other than contracts in the ordinary and usual course
of business and which are cancelable by the owner of the Property
without penalty within thirty (30) days after giving notice thereof);
(iii) Continue to operate, maintain, repair, and
manage the Leases for the Property in a manner consistent with
Seller's current practices;
(iv) Refrain from offering the Property for sale or
marketing the same; and
(v) Continue to offer the Property for lease in the
same manner as prior hereto pursuant to its normal course of
business and, upon request, shall keep Purchaser reasonably
informed as to the status of leasing prior to the Closing Date,
and deliver to Purchaser not less than five (5) days prior to the
expiration of the Due Diligence Period copies of all leases
entered into after the date hereof through the date which is five
(5) days prior to the expiration of the Due Diligence Period and
copies of all Proposals with respect to which no lease has been
executed and which has not expired or been withdrawn, except as
provided otherwise in Section 15(b) below.
<PAGE>
(2) after the date which is five (5) days prior to the
expiration of the Due Diligence Period through the Closing,
Seller will instruct Manager to, and Seller itself will (except
as specifically provided to the contrary herein), refrain from
(i) amending any Leases of any portion of the Property, (ii)
canceling any of such Leases, or (iii) executing any new leases
without the prior written consent of Purchaser (which consent
shall not be unreasonably withheld). As used herein, "PROPOSAL"
shall mean a description of the economic terms of any proposed
lease or amendment along with any financial information on the
tenant in Seller's possession. Purchaser shall be deemed to have
approved all Proposals listed on EXHIBIT Q attached hereto. Seller
shall have the right to execute lease documents and lease extensions
evidencing a Proposal approved or deemed approved by Purchaser.
160 ASSIGNMENT. Purchaser shall not assign this Agreement
without Seller's prior written consent which consent may be
withheld for any reason or no reason, provided, however,
Purchaser may assign its interest in this Agreement to a limited
liability company or to a limited partnership or to another
entity in which Purchaser or Urban Shopping Centers, Inc., a
Maryland corporation, directly or indirectly, controls and owns a
majority interest. Subject to the previous sentence, this
Agreement shall apply to, inure to the benefit of and be binding
upon and enforceable against the parties hereto and their
respective successors and assigns. Seller's consent to any such
assignment shall be conditioned upon Seller's receipt of the
following not less than five (5) business days prior to the
Closing Date: (i) a duly executed express assumption of all of
the duties and obligations of Purchaser by the proposed assignee
in a form acceptable to Seller, and (ii) an ERISA certificate, in
the form attached hereto as EXHIBIT I and the content of which is
satisfactory to Seller. Any assignment by Purchaser permitted
hereunder shall relieve Purchaser from all liability hereunder,
provided, however, Purchaser shall in no event be released from
liability under Section 3.2(e) above.
170 REMEDIES.
(1) IN THE EVENT THAT SELLER SHALL FAIL TO CONSUMMATE THIS
AGREEMENT AND SUCH FAILURE IS NOT A RESULT OF PURCHASER'S DEFAULT
OR A TERMINATION OF THIS AGREEMENT BY PURCHASER OR SELLER
PURSUANT TO A RIGHT TO DO SO UNDER THE PROVISIONS HEREOF,
PURCHASER, IN THE CASE WHERE SUCH FAILURE IS BASED UPON A BREACH
BY SELLER, SHALL ONLY BE ENTITLED TO SEEK AT ITS ELECTION,
EITHER: (i) THE REMEDY OF SPECIFIC PERFORMANCE, OR (ii) DAMAGES
AND RECEIVE A REFUND OF THE EARNEST MONEY. IN NO EVENT SHALL
SELLER BE LIABLE TO PURCHASER FOR ANY PUNITIVE, OR CONSEQUENTIAL
DAMAGES. IN THE CASE WHERE SUCH FAILURE IS BASED UPON AN
INVOLUNTARY BREACH BY SELLER, PURCHASER, AS ITS SOLE AND
EXCLUSIVE REMEDY, MAY TERMINATE THIS AGREEMENT AND RECEIVE A
REFUND OF THE EARNEST MONEY. IN NO EVENT SHALL PURCHASER BE
ENTITLED TO RECORD A LIS PENDENS OR NOTICE OF PENDENCY OF ACTION
AGAINST THE PROPERTY FOR ANY REASON WHATSOEVER.
(2) IN THE EVENT THAT PURCHASER SHOULD FAIL TO CONSUMMATE
THIS AGREEMENT FOR ANY REASON, EXCEPT SELLER'S DEFAULT OR THE
TERMINATION OF THIS AGREEMENT BY PURCHASER OR SELLER PURSUANT TO
A RIGHT TO DO SO UNDER THE TERMS AND PROVISIONS HEREOF, THEN
<PAGE>
SELLER, AS ITS SOLE AND EXCLUSIVE REMEDY MAY TERMINATE THIS
AGREEMENT BY NOTIFYING PURCHASER THEREOF AND RECEIVE OR RETAIN
THE EARNEST MONEY AS LIQUIDATED DAMAGES, PROVIDED THAT THIS
PROVISION SHALL NOT LIMIT SELLER'S RIGHTS TO RECEIVE
REIMBURSEMENT FOR ATTORNEYS' FEES AND TO PURSUE AND RECOVER ON A
CLAIM WITH RESPECT TO ANY SURVIVING OBLIGATIONS. THE PARTIES
AGREE THAT SELLER WILL SUFFER DAMAGES IN THE EVENT OF PURCHASER'S
DEFAULT ON ITS OBLIGATIONS. ALTHOUGH THE AMOUNT OF SUCH DAMAGES
IS DIFFICULT OR IMPOSSIBLE TO DETERMINE, THE PARTIES AGREE THAT
THE AMOUNT OF THE EARNEST MONEY IS A REASONABLE ESTIMATE OF
SELLER'S LOSS IN THE EVENT OF PURCHASER'S DEFAULT. THUS, SELLER
SHALL ACCEPT AND RETAIN THE EARNEST MONEY AS LIQUIDATED DAMAGES
BUT NOT AS A PENALTY. EXCEPT AS OTHERWISE SET FORTH IN THIS
SECTION 17(b), SUCH LIQUIDATED DAMAGES SHALL CONSTITUTE SELLER'S
SOLE AND EXCLUSIVE REMEDY.
SELLER AND PURCHASER ACKNOWLEDGE THAT THEY HAVE READ AND
UNDERSTAND THE PROVISIONS OF THE FOREGOING LIQUIDATED DAMAGES PROVISION
AND BY THEIR SIGNATURES IMMEDIATELY BELOW AGREE TO BE BOUND BY ITS TERMS.
SELLER: PURCHASER:
JMB GROUP TRUST II, URBAN SHOPPING CENTERS, L.P.,
an Illinois group trust an Illinois limited partnership
By: Heitman Capital Management
Corporation, an Illinois
Corporation,
Investment Manager
By: By:
Name: Howard J. Edelman Name:
Its: Executive Vice President Its:
USC FOX VALLEY, INC.,
a Delaware corporation
By:
Name: ____________________
Its:
180 MISCELLANEOUS.
18.1 ENTIRE AGREEMENT. This Agreement, together with the
exhibits attached hereto, constitute the entire agreement of the
parties hereto regarding the purchase and sale of the Member
Interest, and all prior agreements, understandings, representations and
statements, oral or written, are hereby merged herein. In the event of
a conflict between the terms of this Agreement and any prior written
agreements, the terms of this Agreement shall prevail. This Agreement
may only be amended or modified by an instrument in writing, signed by
the party intended to be bound thereby.
18.2 TIME. All parties hereto agree that time is of the
essence in this transaction. If the time for performance of any
obligation hereunder shall fall on a Saturday, Sunday or holiday
(national, in the State of Illinois or the state in which the
Property is located) such that the transaction contemplated
hereby cannot be performed, the time for performance shall be
extended to the next such succeeding day where performance is possible.
<PAGE>
18.3 COUNTERPART EXECUTION. This Agreement may be executed
in one or more counterparts, each of which shall be deemed an original.
18.4 GOVERNING LAW. THIS AGREEMENT SHALL BE DEEMED TO BE A
CONTRACT MADE UNDER THE LAWS OF THE STATE OF ILLINOIS AND FOR ALL
PURPOSES SHALL BE GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF ILLINOIS.
18.5 PUBLICITY. Seller and Purchaser hereby covenant and
agree that, at all times after the date of execution hereof and
continuing after the Closing, unless consented to in writing by
the other party, no press release or other public disclosure
concerning this transaction shall be made, and each party agrees
to use best efforts to prevent disclosure of this transaction.
18.6 RECORDATION. Purchaser shall not record this Agreement
or a memorandum or other notice thereof in any public office
without the express written consent of Seller. A breach by
Purchaser of this covenant shall constitute a material default by
Purchaser under this Agreement.
18.7 BENEFIT. This Agreement is for the benefit of
Purchaser and Seller, and except as provided in the indemnities
granted by Purchaser under Sections 3.2 and 8.6 with respect to
the Purchaser Indemnified Parties and except as provided in the
indemnities granted by Seller under Section 6.11 with respect to
the Seller Indemnified Parties, no other person or entity will be
entitled to rely on this Agreement, receive any benefit from it
or enforce any provisions of it against Purchaser or Seller.
18.8 SECTION HEADINGS. The Section headings contained in
this Agreement are for convenience only and shall in no way
enlarge or limit the scope or meaning of the various and several
Sections hereof.
18.9 FURTHER ASSURANCES. Purchaser and Seller agree to
execute all documents and instruments reasonably required in
order to consummate the purchase and sale herein contemplated.
18.10 SEVERABILITY. If any portion of this Agreement is
held to be unenforceable by a court of competent jurisdiction,
the remainder of this Agreement shall remain in full force and effect.
18.11 WAIVER OF TRIAL BY JURY. Seller and Purchaser, to
the extent they may legally do so, hereby expressly waive any
right to trial by jury of any claim, demand, action, cause of
action, or proceeding arising under or with respect to this
Agreement, or in any way connected with, or related to, or
incidental to, the dealings of the parties hereto with respect to
this Agreement or the transactions related hereto or thereto, in
each case whether now existing or hereafter arising, and
irrespective of whether sounding in contract, tort, or otherwise.
To the extent they may legally do so, Seller and Purchaser hereby
agree that any such claim, demand, action, cause of action, or
proceeding shall be decided by a court trial without a jury and
that any party hereto may file an original counterpart or a copy
of this Section with any court as written evidence of the consent
of the other party or parties hereto to waiver of its or their
right to trial by jury.
<PAGE>
18.12 INDEPENDENT COUNSEL. Purchaser and Seller each
acknowledges that: (a) it has been represented by independent
counsel in connection with this Agreement; (b) it has executed
this Agreement with the advice of such counsel; and (c) this
Agreement is the result of negotiations between the parties hereto and
the advice and assistance of its respective counsel. The fact that
this Agreement was prepared by a party's counsel as a matter of
convenience shall have no import or significance. Any uncertainty or
ambiguity in this Agreement shall not be construed against a party
because such party's counsel prepared this Agreement in its final form.
18.13 GOVERNMENTAL APPROVALS. Nothing contained in this
Agreement shall be construed as authorizing Purchaser to apply
for a zoning change, variance, subdivision maps, lot line
adjustment, or other discretionary governmental act, approval or
permit with respect to the Property prior to the Closing, and
Purchaser agrees not to do so. Except as otherwise required by
law, Purchaser agrees not to submit any reports, studies or other
documents, including, without limitation, plans and specifica
tions, impact statements for water, sewage, drainage or traffic,
environmental review forms, or energy conservation checklists to
any governmental agency, or any amendment or modification to any
such instruments or documents prior to the Closing. Purchaser's
obligation to purchase the Property shall not be subject to or
conditioned upon Purchaser's obtaining any variances, zoning
amendments, subdivision maps, lot line adjustment or other
discretionary governmental act, approval or permit.
18.14 NO WAIVER; JOINT AND SEVERAL LIABILITY. No
covenant, term or condition of this Agreement other than as
expressly set forth herein shall be deemed to have been waived by
Seller or Purchaser unless such waiver is in writing and executed
by Seller or Purchaser, as the case may be. The obligations of
Purchaser 1 and Purchaser 2 hereunder shall be joint and several.
18.15 DISCHARGE AND SURVIVAL. The delivery of the
Assignment of Membership Interest by Seller, and the acceptance
thereof by Purchaser, shall be deemed to be the full performance
and discharge of every covenant and obligation on the part of
Seller to be performed hereunder except the Surviving Obligations
and Seller's obligations under Article 5, 9, 12 and 15, and
Sections 3.4 and 6.12 of this Agreement. No action shall be
commenced after the Closing on any covenant or obligation except
the Surviving Obligations and Seller's obligations under Article
5, 9, 12 and 15, and Sections 3.4 and 6.12 of this Agreement.
190 EXCULPATION OF SELLER AND RELATED PARTIES. Notwithstanding
anything to the contrary contained in this Agreement or in any
exhibits attached hereto or in any documents executed in
connection herewith (collectively, including this Agreement, said
exhibits and any such document, the "PURCHASE DOCUMENTS"), it is
expressly understood and agreed by and between the parties hereto
that: (i) the recourse of Purchaser or its successors or assigns
against Seller with respect to the alleged breach by or on the
part of Seller of any representation, warranty, covenant,
undertaking, indemnity or agreement contained in any of the
Purchase Documents (collectively, "SELLER'S UNDERTAKINGS") shall
be limited to an amount not to exceed $500,000 in the aggregate;
and (ii) no personal liability or personal responsibility of any
<PAGE>
sort with respect to any of Seller's Undertakings or any alleged
breach thereof is assumed by, or shall at any time be asserted or
enforceable against HCMC, or against any of HCMC's or Seller's
respective shareholders, directors, officers, employees, agents,
constituent partners, members, beneficiaries, trustees or
representatives except as provided in (i) above with respect to
Seller. Notwithstanding the foregoing, the liability limits
under clause (i) shall not apply to, or be reduced by, payments
owing with respect to the prorations under Section 5 hereof, or
with respect to Seller's obligations to Seller Indemnified
Parties with respect to Stray Liabilities.
200 EXCULPATION OF PURCHASER AND RELATED PARTIES.
Notwithstanding anything to the contrary contained in this
Agreement or in the Purchase Documents, it is expressly
understood and agreed by and between the parties hereto that no
personal liability or personal responsibility of any sort with
respect to the alleged breach by or on the part of Purchaser (or
its successors and assigns with respect to this Agreement) of any
representation, warranty, covenant, undertaking, indemnity or
agreement contained in any of the Purchase Documents or any
alleged breach thereof is assumed by, or shall at any time be
asserted or enforceable against any of Purchaser's (or its
successors' and assigns') shareholders, partners, directors,
officers, employees, agents, constituent partners, members,
beneficiaries, trustees or representatives.
IN WITNESS WHEREOF, the parties hereto have caused these
presents to be made as of the day and year first above stated.
SELLER: PURCHASER:
JMB GROUP TRUST II, URBAN SHOPPING CENTERS, L.P.,
an Illinois group trust an Illinois limited partnership
By: Heitman Capital Management By:
Corporation, an Illinois Name:
corporation, Its:
Investment Manager
By:_________________________
Howard J. Edelman USC FOX VALLEY, INC.,
Executive Vice President a Delaware corporation
By: ________________________
Name: ______________________
Its: _______________________
<PAGE>
==============================================================================
LOAN AGREEMENT
Dated as of November 14, 1997
Between
FOX VALLEY MALL LLC,
as Borrower
and
LEHMAN BROTHERS HOLDINGS INC.
DOING BUSINESS AS LEHMAN CAPITAL,
A DIVISION OF LEHMAN BROTHERS HOLDINGS INC.
as Lender
==============================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
Page
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I. DEFINITIONS; PRINCIPLES OF CONSTRUCTION 1
Section 1.1 Definitions. 1
Section 1.2 Principles of Construction 1
II. GENERAL TERMS 19
Section 2.1 Loan Commitment; Disbursement to Borrower 19
2.1.1 The Loan 19
2.1.2 Disbursement to Borrower 19
2.1.3 The Note 19
Section 2.2 Use of Proceeds 20
Section 2.3 Loan Repayment and Defeasance 20
2.3.1 Repayment 20
2.3.2 Voluntary Defeasance of the Loan 20
Section 2.4 Release of Property 21
2.4.1 Release of the Property 22
2.4.2 Successor Borrower 22
2.4.3 Release on Payment in Full 22
Section 2.5 Interest 22
2.5.1 Generally 22
2.5.2 Default Rate; Additional Payments after Default 22
Section 2.6 Payments and Computations 23
2.6.1 Making of Payments 23
2.6.2 Annual Budget; Payments After Anticipated Repayment
Date 23
2.6.3 Computations 24
2.6.4 Late Payment Charge 24
2.6.5 Payments Received in the Deposit Account 24
III. CONDITIONS PRECEDENT 24
Section 3.1 Conditions Precedent to Closing 24
IV. REPRESENTATIONS AND WARRANTIES 27
Section 4.1 Borrower Representations 27
Section 4.2 Survival of Representations 33
V. AFFIRMATIVE COVENANTS 33
Section 5.1 Borrower Covenants 33
VI. NEGATIVE COVENANTS 40
Section 6.1 Borrower's Negative Covenants 40
VII.CASUALTY; CONDEMNATION; ESCROW 42
Section 7.1 Insurance; Casualty and Condemnation 42
7.1.1 Insurance 42
7.1.2 Condemnation and Insurance Proceeds 45
Section 7.2 Required Repairs; Required Repair Funds 48
Section 7.3 Tax and Insurance Escrow Fund 48
Section 7.4 Replacements and Replacement Reserve 48
VIII.DEFAULTS 48
Section 8.1 Event of Default 48
Section 8.2 Remedies 49
Section 8.3 Remedies Cumulative 50
<PAGE>
Page
----
IX. SPECIAL PROVISIONS 51
Section 9.1 Sale of Notes and Securitization 51
Section 9.2 Securitization Indemnification 53
Section 9.3 Rating Surveillance 55
Section 9.4 Exculpation 55
Section 9.5 Achievements 56
Section 9.6 Cash Management 57
9.6.1 Lockbox Account 57
9.6.2 Cash Management Account 57
Section 9.7 Servicer 58
X. MISCELLANEOUS 58
Section 10.1 Survival 58
Section 10.2 Lender's Discretion 58
Section 10.3 Governing Law 58
Section 10.4 Modification, Waiver in Writing 59
Section 10.5 Delay Not a Waiver 59
Section 10.6 Notices 59
Section 10.7 Trial by Jury 60
Section 10.8 Headings 60
Section 10.9 Severability 60
Section 10.10 Preferences 61
Section 10.11 Waiver of Notice 61
Section 10.12 Remedies of Borrower 61
Section 10.13 Expenses; Indemnity 61
Section 10.14 Schedules Incorporated 62
Section 10.15 Offsets, Counterclaims and Defenses 62
Section 10.16 No Joint Venture or Partnership; 62
Section 10.17 Publicity 63
Section 10.18 Waiver of Marshaling of Assets; 63
Section 10.19 Waiver of Counterclaim 63
Section 10.20 Conflict; Construction of Documents; Reliance 63
Section 10.21 Brokers and Financial Advisors 64
Section 10.22 Prior Agreements 64
<PAGE>
LOAN AGREEMENT
THIS LOAN AGREEMENT, dated as of November 14, 1997 (as
amended, restated, replaced, supplemented or otherwise modified
from time to time, this "AGREEMENT"), between Lehman Brothers
Holdings Inc., doing business as Lehman Capital, a division of
Lehman Brothers Holdings Inc., having an address at Three World
Financial Center, New York, New York 10285 ("LENDER") and Fox
Valley Mall LLC, having an address at c/o Urban Shopping Centers,
Inc., 900 North Michigan Avenue, Chicago, IL 60611-1580 ("BORROWER").
All capitalized terms used herein shall have the respective
meanings set forth in Article I hereof.
W I T N E S S E T H :
- - - - - - - - - - -
WHEREAS, Borrower desires to obtain the Loan from Lender;
WHEREAS, Lender is willing to make the Loan to Borrower,
subject to and in accordance with the terms of this Agreement and
the other Loan Documents;
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 hereto hereby
covenant, agree, represent and warrant as follows:
I. DEFINITIONS; PRINCIPLES OF CONSTRUCTION
---------------------------------------
Section 1.1 DEFINITIONS
For all purposes of this Agreement, except as otherwise expressly
required or unless the context clearly indicates a contrary intent:
"ACCRUED INTEREST" shall have the meaning set forth in SECTION 2.6.2(C).
"ACQUIRED PROPERTIES" shall have the meaning set forth in SECTION 9.1.1.
"ACQUIRED PROPERTY STATEMENTS" shall have the meaning set forth in
SECTION 9.1.1.
"AFFILIATE" shall mean, in respect to any Person, (x) any
Person controlling, controlled by or under common control with,
whether by virtue of ownership or otherwise, such Person and (y)
any spouse, parent or sibling of any such Person who is a natural
person, and any ancestor or lineal descendent of such spouse,
parent or sibling.
"AFFIRMATIVE COVENANT" shall mean a promise or covenant by
any Person to perform, act, suffer, permit or consent to.
"AGREEMENT" shall mean this Loan Agreement, as the same may
be amended, restated, replaced, supplemented, or otherwise
modified from time to time.
"ALTA" shall mean American Land Title Association, or any successor
thereto.
<PAGE>
"ALTERATION" shall have the meaning set forth in SECTION 5.1(U)(III).
"ALLOCATED LOAN AMOUNT" shall mean the portion of the Loan
allocated solely for purposes of performing certain calculations
hereunder to each portion of the Property as set forth on
Schedule II hereto.
"ANNUAL BUDGET" shall mean the operating budget, including
all planned capital expenditures, for the Property prepared by
Borrower for the applicable Fiscal Year or other period.
"ANTICIPATED REPAYMENT DATE" shall mean November 10, 2006.
"APPLICABLE INTEREST RATE" shall mean (a) from the date
hereof through but not including the Anticipated Repayment Date,
the Regular Interest Rate and (b) from and after the Anticipated
Repayment Date through and including the date the Loan is paid in
full, the Matured Performing Rate.
"APPROVED BANK" shall mean a bank or other financial
institution which has a minimum long-term unsecured debt rating
of at least "A" (or its equivalent) by each of the Rating
Agencies, or if any such bank or other financial institution is
not rated by all the Rating Agencies, then a minimum long-term
rating of at least "A" (or its equivalent) by two of the Rating Agencies.
"ASSIGNMENT OF AGREEMENTS" shall mean that certain first
priority Assignment of Agreements, Permits and Contracts dated as
of the date hereof, from Borrower and the Land Trustee, as
assignor, to Lender, as assignee, assigning to Lender all of
Borrower's interest in and to all licenses, permits and contracts
necessary for the use and operation of the Property, as the same
may be amended, restated, replaced, supplemented or otherwise
modified from time to time.
"ASSIGNMENT OF LEASES" shall mean that certain first
priority Assignment of Leases and Rents, dated as of the date
hereof, from Borrower and Land Trustee, as assignor, to Lender,
as assignee, assigning to Lender all of Borrower's interest in
and to the Leases and Rents of such Property, as the same may be
amended, restated, replaced, supplemented or otherwise modified
from time to time.
"ASSIGNMENT OF MANAGEMENT AGREEMENT" shall mean that certain
Assignment of Management Agreement and Subordination of
Management Fees dated as of the date hereof, among Borrower, as
assignor, Manager, as manager, and Lender, as assignee, as the
same may be amended, restated, replaced, supplemented or
otherwise modified from time to time.
"BASIC CARRYING COSTS" shall mean the sum of the following
costs associated with the Property for the relevant Fiscal Year
or payment period: (i) real property taxes with respect to the
Property and (ii) insurance premiums with respect to the Property.
"BEST KNOWLEDGE" or "KNOWLEDGE" shall mean for the purpose
of this Agreement and the other Loan Documents the actual
knowledge of the Person in question, after having made due
inquiry. If any entity with respect to which this term would be
<PAGE>
applicable is a corporation, knowledge of such entity shall refer
to actual knowledge of its officers or directors, after having
made due inquiry. If any such entity is a partnership, knowledge
of such entity shall refer to actual knowledge of each of its
partners who participates in the management of such partnership
(directly or indirectly), after having made due inquiry. If any
such entity is a limited liability company, knowledge of such
entity shall refer to actual knowledge of its managing members,
after having made due inquiry. The knowledge of Borrower for purposes
of this definition shall also include the knowledge of Manager if it is
an Affiliate of Borrower or if not an Affiliate of Borrower, after due
inquiry of Manager.
"BORROWER" shall mean Fox Valley Mall LLC, together with its
successors and assigns.
"BUSINESS DAY" shall mean any day other than a Saturday, Sunday or
any other day on which national banks in New York, New York, the State of
Illinois and the Commonwealth of Pennsylvania are not open for business.
"CAPITAL EXPENDITURES" for any period shall mean the amount
expended for items capitalized under GAAP (including expenditures
for building improvements or major repairs, leasing commissions
and tenant improvements).
"CASH" shall mean coin or currency of the government of the
United States of America.
"CASH COLLATERAL ACCOUNT" shall have the meaning set forth
in SECTION 9.6.2(A).
"Cash Equivalents" shall mean (i) Cash or (ii) U.S. Obligations.
"CASH EXPENSES" shall mean, for any period, the operating
expenses for the operation of the Property as set forth in the
Annual Budget to the extent that such expenses are actually
incurred by Borrower.
"CASUALTY/CONDEMNATION INVOLUNTARY PREPAYMENT" shall have
the meaning set forth in SECTION 7.1.2(c).
"CLOSING DATE" shall mean the date of the funding of the Loan.
"CODE" shall mean the Internal Revenue Code of 1986, as
amended, and as it may be further amended from time to time, any
successor statutes thereto, and applicable U.S. Department of Treasury
regulations issued pursuant thereto in temporary or final form.
CONSUMER PRICE INDEX" OR "CPI" shall mean the Consumer Price
Index for All Urban Consumers (CPI-U) published by the Bureau of
Labor Statistics of the United States Department of Labor, New
York, N.Y. - Northeastern N.J. Area, All Items (1982-84 = 100),
or any successor or substitute index thereto.
"CONTROL" (and the correlative terms "CONTROLLED BY" and
"CONTROLLING") shall mean the possession, directly or indirectly,
of the power to direct or cause the direction of management and
policies of the business and affairs of the entity in question by
reason of the ownership of beneficial interests, by contract or otherwise.
<PAGE>
"DEBT" shall mean the outstanding principal amount set forth
in, and evidenced by, this Agreement and the Note together with
all interest accrued and unpaid thereon and all other sums
(including the Yield Maintenance Premium) due to Lender in
respect of the Loan under the Note, this Agreement, the Mortgage
or any other Loan Document.
"DEBT SERVICE" shall mean, with respect to any particular
period of time, scheduled principal and interest payments due
under the Note.
"DEBT SERVICE COVERAGE RATIO" shall mean a ratio for the
applicable period in which:
(a) the numerator is the Net Operating Income for
such period as set forth in the statements
required thereunder less management fees (but only
to the extent not included in the calculation of
Operating Expenses) equal to the greater of (i)
assumed management fees of three (3%) percent of
Gross Income from Operations and (ii) the actual
management fees incurred and paid by Borrower; and
(b) the denominator is the Debt Service.
"DEFAULT" shall mean the occurrence of any event hereunder
or under any other Loan Document which, but for the giving of
notice or passage of time, or both, would be an Event of Default.
"DEFAULT RATE" shall mean, with respect to the Loan, a rate
per annum equal to the lesser of (a) the maximum rate permitted by
applicable law, or (b) five percent (5%) above the Applicable Interest Rate.
"DEFEASANCE DATE" shall have the meaning set forth in SECTION 2.3.2(a)(i).
"DEFEASANCE DEPOSIT" shall mean (A), with respect to a
Defeasance Event involving a portion of the Property, an amount
equal to the aggregate of either (i) one hundred (100%) percent
of the Allocated Loan Amount for the portion of the Property to
be released on the Defeasance Date or (ii) the principal amount
of the Defeased Note, as applicable, plus, any costs and expenses
incurred or to be incurred in the purchase of U.S. Obligations
necessary to meet the Scheduled Defeasance Payments and any
revenue, documentary stamp or intangible taxes or any other tax
or charge due in connection with the transfer of the Note or the
Defeased Note, as applicable, the creation of the Defeased Note
and the Undefeased Note, if applicable, or otherwise required to
accomplish the agreements of SECTIONS 2.3 and 2.4 hereof or (B)
with respect to a Defeasance Event involving all of the Property,
an amount equal to the aggregate of either (i) the outstanding
Principal Amount of the Loan or (ii) the principal amount of the
Defeased Note, as applicable, plus any costs and expenses
incurred or to be incurred in the purchase of U.S. Obligations
necessary to meet the Scheduled Defeasance Payments and any
revenue, documentary stamp or intangible taxes or any other tax
or charge due in connection with the transfer of the Note or the
Defeased Note, as applicable, the creation of the Defeased Note
and the Undefeased Note, if applicable, or otherwise required to
accomplish the agreements of SECTIONS 2.3 and 2.4 hereof.
<PAGE>
"DEFEASANCE EVENT" shall have the meaning set forth in SECTION 2.3.2(a).
"DEFEASED NOTE" shall have the meaning set forth in SECTION 2.3.2(a)(v)
hereof.
"DISCLOSURE DOCUMENT" shall have the meaning set forth in SECTION 9.2(a).
"ELIGIBLE ACCOUNT" shall mean a separate and identifiable
account from all other funds held by the holding institution that
is either (a) an account or accounts maintained with a federal or
state-chartered depository institution or trust company which
complies with the definition of Eligible Institution or (b) a
segregated trust account or accounts maintained with a federal or
state-chartered depository institution or trust company acting in
its fiduciary capacity (which, in the case of a state-chartered
depository institution or trust company, is subject to regulations
substantially similar to Title 12 of the Code of Federal Regulations
Section 9.10(b) and has a combined capital and surplus of at least
Fifty Million and No/100 Dollars ($50,000,000) and is subject to
supervision or examination by federal and state authority. An
Eligible Account may not be evidenced by a certificate of deposit,
passbook or other instrument.
"ELIGIBLE INSTITUTION" shall mean a depository institution
or trust company the short term unsecured debt obligations or
commercial paper of which are rated at least A-1 by S&P, P-1 by
Moody's Investors Service, Inc., D-1 by Duff & Phelps Credit
Rating Co. and F-1+ by Fitch Investors Service, L.P. in the case
of accounts in which funds are held for thirty (30) days or less
(or, in the case of accounts in which funds are held for more
than thirty (30) days, the long term unsecured debt obligations
of which are rated at least "A" by Fitch Investors Service, L.P.,
Duff & Phelps Credit Rating Co. and S&P and "A" by Moody's
Investors Service, Inc.).
"ELIGIBLE INVESTMENTS" shall mean 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 such funds are required to be drawn, regardless
of whether issued by Lender, the Servicer, Trustee or any of
their respective Affiliates 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 the Servicer
that a lower rating would not, in and of itself, result in a
downgrade, qualification or withdrawal of the then current
ratings assigned to the Securities
(i) obligations of, or mutual funds which
invest solely in 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 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
<PAGE>
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 or mutual funds which invest
solely in such debentures;
(iii)obligations of, or mutual funds
which invest solely in 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 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;
<PAGE>
(iv) federal funds, unsecured certificates
of deposit, time or similar deposits,
bankers' acceptances and repurchase
agreements, with maturities of not more
than three hundred sixty-five (365) days,
of any bank, the short term obligations of
which are rated in the highest short term
rating category by each Rating Agency (or,
if such obligations are not rated by Duff &
Phelps Credit Rating Co., Moody's Investors
Service, Inc. or Fitch Investors Service,
L.P., otherwise acceptable to Duff & Phelps
Credit Rating Co., Moody's Investors
Service, Inc. or Fitch Investors Service,
L.P., as applicable, 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 the
Securities); 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;
(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 mortgage 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, if such obligations are
not rated by Duff & Phelps Credit Rating
Co., Moody's Investors Service, Inc.
or Fitch Investors Service, L.P.,
otherwise acceptable to Duff & Phelps
Credit Rating Co., Moody's Investors
Service, Inc. or Fitch Investors Service,
L.P., as applicable, 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 the
Securities); 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
<PAGE>
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 three hundred sixty-five
(365) days rated by each Rating Agency (or,
if such obligations are not rated by Duff &
Phelps Credit Rating Co., Moody's Investors
Service, Inc. or Fitch Investors Service,
L.P., otherwise acceptable to Duff & Phelps
Credit Rating Co., Moody's Investors
Service, Inc. or Fitch Investors Service,
L.P., as applicable, 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 the Securities)
in its highest long-term unsecured rating
category; 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;
(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 (1) year after the date of issuance
thereof) with maturities of not more than
three hundred sixty-five (365) days and
that is rated by each Rating Agency (or, if
such obligations are not rated by Duff &
Phelps Credit Rating Co., Moody's Investors
Service, Inc. or Fitch Investors Service,
L.P., otherwise acceptable to Duff & Phelps
Credit Rating Co., Moody's Investors
Service, Inc. or Fitch Investors Service,
L.P., as applicable, 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 the Securities)
in its highest short-term unsecured debt rating;
provided, however, that the investments
described in this clause must (A) have a
<PAGE>
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;
(viii)the Federated Prime Obligation
Money Market Fund so long as the Federated
Prime Obligation Money Market Fund is rated
by each Rating Agency as AAAm or AAAm-G
(or, if such obligations are not rated by
Duff & Phelps Credit Rating Co., Moody's
Investors Service, Inc. or Fitch Investors
Service, L.P., otherwise acceptable to Duff
& Phelps Credit Rating Co., Moody's
Investors Service, Inc. or Fitch Investors
Service, L.P., as applicable, 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 the
Securities); and
(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 the Servicer,
special servicer (if any) or Trustee, as
applicable, that such investment would not,
in and of itself, result in a downgrade,
qualification or withdrawal of the then
current ratings assigned to the Securities;
provided, however, that, in the
judgment of the Servicer, such instrument
continues to qualify as a "cash flow
investment" pursuant to Section 860G(a)(6)
of the Code earning a passive return in the
nature of interest and that no instrument
or security shall be an Eligible Investment
if (x) such instrument or security
evidences a right to receive only interest
payments, (y) the right to receive
principal and interest payments derived
from the underlying investment provides a
yield to maturity in excess of one hundred
twenty percent (120%) of the yield to
maturity at par of such underlying
investment or (z) such instrument or
security has a maturity of more than three
hundred sixty-five (365) days.
<PAGE>
"ENVIRONMENTAL INDEMNITY" shall mean that certain
Environmental Indemnity Agreement executed by Borrower in
connection with the Loan for the benefit of Lender.
"EQUIPMENT" shall have the meaning set forth in the granting
clause of the Mortgage.
"ERISA" shall have the meaning set forth in SECTION 6.1(l)(i).
"EXCUSABLE DELAY" shall mean a delay due to acts of God,
governmental restrictions, enemy actions, civil commotion, fire,
casualty, strikes, shortages of supplies or labor, work stoppages
or other causes beyond the reasonable control of Borrower, but
lack of funds shall not be deemed a cause beyond the reasonable
control of Borrower.
"EVENT OF DEFAULT" shall have the meaning set forth in SECTION 8.1(a).
"EXCHANGE ACT" shall have the meaning set forth in SECTION 9.2.(a).
"EXCHANGE ACT FILING" shall have the meaning set forth in SECTION 9.1.6.
"EXPANSION" shall have the meaning set forth in SECTION 5.1(u)(vi).
"EXTRAORDINARY EXPENSE" shall have the meaning set forth in SECTION
2.6.2(b).
"FISCAL YEAR" shall mean each twelve month period commencing
on January 1 and ending on December 31 during each year of the
term of the Loan.
"FOX VALLEY RENOVATION" shall mean the cosmetic renovation
and refurbishment of the Improvements, generally described
including, but not limited to, the following elements:
replacement of existing flooring, new drywall ceiling treatments
(at wood ceiling areas), new escalators at boutique level, new
feature elevator, infill of recessed areas at anchor courts, new
children's area, new coffee kiosk, food court renovation, new
lighting package, landscaping, customer service desk, directional
signage program, modification of existing entries and new
furnishing, fixtures and equipment package.
"GAAP" shall mean generally accepted accounting principles
in the United States of America as of the date of the applicable
financial report.
"GOVERNMENTAL AUTHORITY" shall mean any court, board,
agency, commission, office or authority of any nature whatsoever
for any governmental unit (federal, state, county, district,
municipal, city or otherwise) whether now or hereafter in existence.
"GROSS INCOME FROM OPERATIONS" shall mean with respect to a
specified period, without duplication, all income paid or to be
paid (as applicable) to Borrower (or to the Manager for the
account of Borrower) by any Person during such period in
connection with the operation of the Property (determined as
described in the final paragraph of this definition), including,
without limitation, the following:
<PAGE>
(i) all amounts payable as rent (including
percentage rent), charges for electricity, oil, gas,
water, steam, heat, ventilation, air conditioning and
any other energy, telecommunications, telephone,
utility or similar items, including overtime usage,
HVAC equipment charges, sprinkler charges, escalation
charges, license fees, maintenance fees, charges for
improvements, Impositions and other amounts payable to
Borrower (or to the Manager for the account of
Borrower) under any Lease or other agreement relating
to the Property pursuant to which space (including
storage space rentals and rentals for community hall
usage), utilities, facilities, equipment, parking
facilities or other services are furnished by Borrower
and including late charges, default interest and
temporary investment income but excluding any security
deposits received;
(ii) condemnation proceeds under a temporary
Taking to the extent that such proceeds are
compensation for lost rent;
(iii) business interruption and loss of
"rental value" insurance proceeds;
(iv) proceeds of any sale of Equipment pursuant to
Section 6.3(ii) of the Mortgage but only to the extent
that the same are of a generally recurring type; and
(v) all amounts payable under any Lease of an
anchor department store or a peripheral site at the
Property reasonably expected by the Borrower to recur
in the ordinary course of business;
provided, however, that the items of income described in
subparagraph (i) shall be reduced (x) by the average bad
debts expense for the first two calendar years preceding the
year in which the calculation of Gross Income from
Operations is made, as established annually by Borrower in
accordance with its bad debts policy and generally
acceptable accounting procedures, and (y) to the extent such
average exceeds the amount described in (x), the amount of
any receivables for tenants at the Property which are more
than ninety days old and which have been created during the
last calendar year in which such calculation of Gross Income
from Operations is made.
Notwithstanding the foregoing clauses (i)-(v), Gross Income from
Operations shall not include (A) any condemnation or insurance
proceeds (other than of the types described in clauses (ii) and
(iii) above), (B) any proceeds resulting from the sale, exchange,
transfer, financing or refinancing of all or any part of the
Property (other than of the types described in clauses (ii) and
(iv) above), (C) any rent accrued by Borrower but not received
because of any free rent provisions or other rental provisions or
other rental concessions in any Lease, (D) any repayments
received from tenants under Leases of principal loaned or
advanced to tenants under Leases by Borrower pursuant to the
terms hereof, or (E) any type of income which would otherwise be
<PAGE>
considered Gross Income from Operations pursuant to the
provisions above but is paid directly by any Tenant to a Person
other than Borrower (or the Manager on account of Borrower) in
accordance with GAAP.
"HEALTH CLUB PARCEL" shall mean that portion of the Property
described on Schedule I(B).
"IMPROVEMENTS" shall have the meaning set forth in the
granting clause of the Mortgage.
"INDEBTEDNESS" of a Person, at a particular date, means the
sum (without duplication) at such date of (a) indebtedness or
liability for borrowed money; (b) obligations evidenced by bonds,
debentures, notes, or other similar instruments; (c) obligations
for the deferred purchase price of property or services
(including trade obligations); (d) obligations under letters of
credit; (e) obligations under acceptance facilities; (f) all
guaranties, endorsements (other than for collection or deposit in
the ordinary course of business), and other contingent
obligations to purchase, to provide funds for payment, to supply
funds to invest in any Person or entity, or otherwise to assure a
creditor against loss; and (g) obligations secured by any Liens,
whether or not the obligations have been assumed.
"INDEMNIFIED LIABILITIES " shall have the meaning set forth
in SECTION 10.13(b).
"INDEPENDENT ARCHITECT" shall mean, with respect to a
particular project, an independent architect or engineer, as
appropriate for such project, selected by Borrower, licensed or
registered to practice in the state where the Property is located
and having at least five (5) years' experience in respect of the
subject matter of such project.
"INDEPENDENT DIRECTOR" shall have the meaning set forth in
SECTION 4.1(dd)(xvi).
"INSOLVENCY OPINION" shall have the meaning set forth in
SECTION 4.1(dd)(xviii).
"INSURANCE REQUIREMENTS" shall mean all terms of any
insurance Policy required hereunder covering or applicable to the
Property or Equipment or any part thereof, all requirements of
the issuer of any such Policy, and all orders, rules, regulations
and other requirements of the national board of fire underwriters
(or any other body exercising similar functions) applicable to or
affecting the Property or Equipment or any part thereof or any
use of the Property or Equipment or any part thereof.
"INTEREST PERIOD" shall mean (a) the period commencing on
the date hereof and ending on the ninth (9th) day of December,
1997 for the first period hereunder, and (b) for each period
thereafter, the period commencing on the tenth (10th) day of each
calendar month during the term of the Loan and ending on the
ninth (9th) day of the next occurring calendar month.
<PAGE>
"LEASE" shall mean any lease, sublease or subsublease,
letting, license, concession or other agreement (whether written
or oral and whether now or hereafter in effect) pursuant to which
any person is granted a possessory interest in, or right to use
or occupy all or any portion of any space in the Property, and
every modification, amendment or other agreement relating to such
lease, sublease, subsublease, or other agreement entered into in
connection with such lease, sublease, subsublease, or other
agreement and every guarantee of the performance and observance
of the covenants, conditions and agreements to be performed and
observed by the other party thereto.
"LEGAL REQUIREMENTS" shall mean, with respect to the
Property, all federal, state, county, municipal and other
governmental statutes, laws, rules, orders, regulations,
ordinances, judgments, decrees and injunctions of Governmental
Authorities affecting such Property or any part thereof or the
construction, use, alteration or operation thereof, or any part
thereof, whether now or hereafter enacted and in force, and all
permits, licenses and authorizations and regulations relating
thereto, and all covenants, agreements, restrictions and
encumbrances contained in any instruments, either of record or
known to Borrower, at any time in force affecting such Property
or any part thereof, including, without limitation, any which may
(i) require repairs, modifications or alterations in or to such
Property or any part thereof, or (ii) in any way limit the use
and enjoyment thereof.
"LEHMAN" shall have the meaning set forth in SECTION 9.2(b).
"LEHMAN GROUP" shall have the meaning set forth in SECTION 9.2(b).
"LENDER" shall mean Lehman Brothers Holdings Inc. doing
business as Lehman Capital, a division of Lehman Brothers
Holdings Inc., together with its successors and assigns.
"LETTER OF CREDIT" shall mean an irrevocable, unconditional,
transferable, clean sight draft letter in favor of Lender and entitling
Lender to draw thereon in New York, New York, based solely on a
statement purportedly executed by an officer of Lender stating
that it has the right draw thereon, and issued by a domestic
Approved Bank or the U.S. agency or branch of a foreign Approved
Bank, or if there are no domestic Approved Banks or U.S. agencies
or branches of a foreign Approved Bank then issuing letters of
credit, then such letter of credit may be issued by a domestic
bank, the long term unsecured debt rating of which is the highest
such rating then given by the Rating Agencies to a domestic
commercial bank. If at any time the bank issuing any such Letter
of Credit shall cease to be an Approved Bank, Lender shall have
the right immediately to draw down the same in full and hold the
proceeds of such draw in accordance with the applicable
provisions hereof, unless Borrower shall deliver a replacement
Letter of Credit within thirty (30) days after such bank shall
have ceased to be an Approved Bank.
"LIABILITIES" shall have the meaning set forth in SECTION 9.2(b).
"LICENSES" shall have the meaning set forth in SECTION 4.1(v).
<PAGE>
"LIEN" shall mean any mortgage, deed of trust, lien, pledge,
hypothecation, assignment, security interest, or any other
encumbrance, charge or transfer of, on or affecting the Property
or any portion thereof or Borrower, or any interest therein,
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, and mechanic's,
materialmen's and other similar liens and encumbrances.
"LOAN" shall mean the loan made by Lender to Borrower in the
original principal amount set forth in, and evidenced by, the
Note executed and delivered by Borrower and secured by the
Mortgage and the other Loan Documents executed and delivered by Borrower.
"LOAN DOCUMENTS" shall mean, collectively, this Agreement,
the Note, the Mortgage and Assignment of Leases, the Assignment
of Agreements, the Environmental Indemnity, the Assignment of
Management Agreement and any other document pertaining to the
Property as well as all other documents executed and/or delivered
in connection with the Loan.
"LOCKBOX ACCOUNT" shall have the meaning set forth in
SECTION 9.6.1(a).
"LOCKBOX EVENT" shall mean the occurrence of any one or more
of the following events: (a) an Event of Default, (b) the date
which is six (6) months after the Anticipated Repayment Date, or
(c) the Debt Service Coverage Ratio for the immediately preceding
twelve (12) full calendar month period shall be less than 1.25:1.
"LOCKOUT YIELD MAINTENANCE PREMIUM" shall mean an amount
equal to the greater of (a) one percent (1%) of the outstanding
principal amount of the Loan to be prepaid or satisfied, as
applicable, or (b) the Yield Maintenance Premium that would be
required if a Defeasance Event had occurred in an amount equal to
the outstanding principal amount of the Loan to be satisfied or
prepaid, as applicable.
"MANAGEMENT AGREEMENT" shall mean the management agreement
entered into by and between Borrower and the Manager, pursuant to
which the Manager is to provide management and other services
with respect to the Property.
"MANAGER" shall mean Urban Shopping Centers, L.P. or Urban
Retail Properties Co.
"MATERIAL ALTERATION" shall have the meaning set forth in SECTION
5.1(u)(iv).
"MATERIAL LEASE" shall have the meaning ascribed to it in
Section 3.6 of the Mortgage.
"MATURED PERFORMING RATE" shall mean a rate per annum equal
to the greater of (i) the Regular Interest Rate plus two
percentage (2%) points or (ii) the Treasury Rate plus two
percentage (2%) points.
<PAGE>
"MATURITY DATE" shall mean November 10, 2031, or such other
date on which the final payment of principal of the Note becomes
due and payable as therein provided, whether at such stated
maturity date, by declaration of acceleration, or otherwise.
"MAXIMUM FORESEEABLE CASUALTY LOSS" shall have the meaning
set forth in SECTION 7.1.1(c).
"MAXIMUM MANAGEMENT FEE" shall mean an amount not to exceed
that amount which is reasonable and customarily incurred and paid
by owners and operators of regional shopping malls in the region
in which the Property is located.
"MINIMUM DEPOSIT AMOUNT" shall have the meaning set forth in
SECTION 7.1.2.
"MONTHLY DEBT SERVICE PAYMENT AMOUNT" shall mean a monthly
payment of (i), prior to the Anticipated Repayment Date, interest
calculated on the basis of the Regular Interest Rate, and (ii),
after the Anticipated Repayment Date, interest calculated at the
Matured Performing Rate and principal calculated on the basis of
a self-amortizing loan having a term of three hundred (300) months.
"MORTGAGE" shall mean that certain first priority Mortgage,
Assignment of Leases and Rents and Security Agreement, dated the
date hereof, executed and delivered by Borrower and the Land
Trustee as security for the Loan made to Borrower and encumbering
the Property, as the same may be amended, restated, replaced,
supplemented or otherwise modified from time to time.
"MOVIE THEATRE PARCEL" shall mean that portion of the
Property described on Schedule I(C).
"NET CASH FLOW" for any period shall mean the amount
obtained by subtracting Operating Expenses and Capital
Expenditures for such period from Gross Income from Operations
for such period.
"NET CASH FLOW AFTER DEBT SERVICE" for any period shall mean
the amount obtained by subtracting Debt Service for such period
from Net Cash Flow for such period.
"NET OPERATING INCOME" means the amount obtained by
subtracting Operating Expenses from Gross Income from Operations.
"NOTE" shall mean that certain note of even date herewith,
made by Borrower and the Land Trustee in favor of Lender, as the
same may be amended, restated, replaced, supplemented or
otherwise modified from time to time, including any Defeased Note
and Undefeased Note that may exist from time to time.
"OFFERING DOCUMENT DATE" shall have the meaning set forth in SECTION
9.1.4.
"OFFERING DOCUMENT" shall have the meaning set forth in SECTION 9.1.4.
"OFFICERS' CERTIFICATE" shall mean a certificate delivered
to Lender by Borrower which is signed by an authorized senior
officer of the SPC Managing Member of Borrower.
<PAGE>
"OPERATING AGREEMENTS" shall mean those certain agreements
identified on Schedule V (including any reciprocal easement
agreements affecting the Property) as said Schedule V may be
amended, restated, replaced, supplemented or otherwise modified
from time to time.
"OPERATING EXPENSES" shall mean with respect to a specified
period, without duplication, all expenses paid or to be paid (as
applicable) by Borrower (or by the Manager for the account of
Borrower) during such period in connection with the ownership,
maintenance and operation of the Property (determined as
described in the final paragraph of this definition), including,
without limitation:
(i) costs and expenses related to tenant
improvements and leasing commissions, any other
expenditures on behalf of tenants of the Property any
Equipment and any capital expenditures; but in each
such case only to the extent not recovered from such
tenants, from insurance proceeds or condemnation
proceeds, from the proceeds of sales of Equipment
pursuant to Section 6.3(ii) of the Mortgage or from
any other Persons (unless, in each case corresponding
amounts recovered have been included in Gross Income
from Operations) and in each such case only to the
extent that the same are a generally recurring type
of expense; provided, however, that if the Borrower
finances all or part of the cost of any such items,
the amount paid or payable by the Borrower to any
creditor on account of any period in respect of such
financing (including principal, interest and any
other payments) shall be included as an Operating
Expense for such period, and the portion of the
aggregate cost of such item which is so financed
shall not be deemed to be an Operating Expense during
the period in which it is incurred except to the
extent that payments are actually made during such
period;
(ii) all payments required to be made pursuant to the
Operating Agreements;
(iii) legal, accounting, appraisal and other
professional fees and disbursements;
(iv) fees and expenses of the Lender paid by the
Borrower hereunder;
(v) expenses in connection with cleaning, repair,
maintenance, management, leasing, decoration or
painting thereof, or the provision of services to any
tenant under a Lease, net of any insurance proceeds
or condemnation proceeds in respect to any of the
foregoing;
(vi) wages, benefits, payroll taxes, uniforms,
insurance costs and all other related expenses for on-
site building personnel, up to and including the
level of the on-site property manager, engaged in
<PAGE>
cleaning, repair, maintenance, management,
leasing, decoration or painting thereof or the
provision of services to any tenant under a Lease;
(vii) reasonable allocations of wages, benefits,
payroll taxes, insurance costs and all other related
expenses for bookkeeping, accounting and other
building management functions and home office
expenses and computer usage, but only if the amount
of such allocations in the aggregate exceeds the
reasonable and customary compensation described in
clause (viii) for the same or similar services;
(viii) the compensation being paid for
bookkeeping, accounting and building management
services for the Property, and all other items of
compensation and reimbursement payable by the
Borrower to the Manager;
(ix) the cost of all electricity, oil, gas, water,
steam, heat, ventilation, air conditioning and any
other energy, telecommunications, utility or similar
items, including overtime usage, and the cost of
building and cleaning supplies;
(x) Taxes and Other Charges;
(xi) premiums for liability, casualty, fidelity,
business interruption, loss of "rental value" and
other insurance (which, in the case of any policy
covering multiple properties, shall be equitable
allocated to the Property pro rata in proportion of
the replacement value of each of the properties
covered by such policy for casualty insurance, the
respective size and experience rating of each of the
properties covered by such policy for liability
insurance, and the insured value of each of the
properties covered by such policy for the other
coverages);
(xii) amounts paid in consideration of any
modification, amendment, supplement, waiver, renewal,
or termination of any Lease; and
(xiii) all amounts paid or expenses incurred under
any Lease of an anchor department store or a
peripheral site at the Property.
Notwithstanding the foregoing, Operating Expenses shall not
include (1) depreciation or amortization, (2) the principal of
and interest and premium, if any, on the Note or any additional
indebtedness of the Borrower (except as otherwise provided in
clause (i) above), (3) income taxes or other impositions in the
nature of income taxes, (4) any expenses (including legal,
accounting and other professional fees, expenses and
disbursements) incurred in connection with the issuance of the
Note or the sale, exchange, transfer, financing or refinancing of
all or any portion of the Property or in connection with the
recovery of insurance or condemnation proceeds which are applied
<PAGE>
to prepay the Note, (5) any expenses which in accordance with
GAAP should be capitalized (other than any such expenses included
in the preceding sentence), (6) any item of expense which would
otherwise be considered within Operating Expenses pursuant to the
provisions above but is paid directly by any tenant under a
Lease, and (7) any amounts deposited into a reserve or escrow
account (until expended or paid).
"OTHER CHARGES" shall mean all ground rents, maintenance
charges, impositions other than Taxes, and any other charges,
including, without limitation, vault charges and license fees for
the use of vaults, chutes and similar areas adjoining the Property,
now or hereafter levied or assessed or imposed against the Property
or any part thereof.
"PAYMENT DATE" shall mean the tenth (10th) day of each
calendar month commencing on the tenth (10th) day of December,
1997 or, if such day is not a Business Day, the next preceding
Business Day.
"PERMITTED ENCUMBRANCES" shall mean, collectively, (a) the
Liens and security interests created by the Loan Documents, (b)
all Liens, encumbrances and other matters disclosed in the Title
Insurance Policy relating to the Property or any part thereof,
(c) Liens, if any, for Taxes imposed by any Governmental
Authority not yet due or delinquent, and (d) such other title and
survey exceptions as Lender has approved or may approve in
writing in Lender's sole discretion, which in the aggregate do
not materially adversely affect the value or use of the Property
or Borrower's ability to repay the Loan.
"PERMITTED OWNER" shall mean:
(i) one or more Sponsors; or
(ii) a partnership or limited liability company in
which any one or a combination of Sponsors is a general
partner or managing member, as the case may be, that
owns and controls, or otherwise directly or indirectly
owns and controls, at least a 25% interest.
Control means, for purposes of this definition, primary
responsibility to make or veto all material decisions with
respect to the operation, management, financing and disposition
of the specified interest, rather than a beneficial ownership
requirement, and without being compromised by the fact that
responsibility for such day-to-day operating and management
functions as are ordinarily handled by a property manager has
been delegated by such controlling Person pursuant to an
agreement in writing.
"PERSON" shall mean any individual, corporation, limited
liability company, partnership, joint venture, estate, trust,
unincorporated association, any federal, state, county or
municipal government or any bureau, department or agency thereof
and any fiduciary acting in such capacity on behalf of any of the foregoing.
<PAGE>
"PHYSICAL CONDITIONS REPORT" shall mean a report prepared by
a company satisfactory to Lender regarding the physical condition
of the Property, satisfactory in form and substance to Lender in
its sole discretion, which report shall, among other things, (i)
include a copy of a final certificate of occupancy (or its equivalent)
with respect to all Improvements on the Property, and (ii) set forth
in reasonable detail the physical conditions of the Property.
"POLICIES" shall mean the policies of insurance specified in SECTION
7.1.1(a).
"PROCEEDS" shall have the meaning set forth in SECTION 7.1.2(b).
"PROPERTY" shall mean the real property consisting of the
Health Club Parcel, the Movie Theatre Parcel and the Retail
Parcel, together with the Improvements thereon located, described
in SCHEDULE I hereto, which property is subject to the terms of
this Agreement and encumbered by the Mortgage.
"PROPERTY REQUIRED REPAIRS" shall mean the repairs described
in the report prepared by Horn, Chandler & Thomas dated April 9,
1997 regarding the Property.
"PROVIDED INFORMATION" shall have the meaning set forth in
SECTION 9.1(a)(i).
"QUALIFIED FIRE PROTECTION ENGINEER" shall mean one of the
following: (a) an engineer duly licensed in the State of Illinois
who shall either (x) have five (5) years' experience evaluating
fire and life safety systems and estimating casualty insurance
claims or (y) be certified as a qualified fire protection
engineer (or equivalent) by a professional, trade or other,
similar association of recognized standing, (b) a reputable
insurance broker having an in-house engineering and loss control
group capable of estimating casualty insurance claims, or (c) an
insurer meeting the criteria set forth in SECTION 7.1.1(b) hereof
or a qualified employee thereof, in each case selected by the
Borrower and to which Lender shall not object within five (5)
Business Days after notice by Borrower of the identity of the
proposed Qualified Fire Protection Engineer.
"QUALIFIED TRANSFEREE" shall mean (i) a pension fund,
pension trust or pension account, (ii) an insurance company which
is subject to supervision by the insurance commissioner, or a
similar official or agency, of a state of territory of the United
States (including the District of Columbia), (iii) a corporation
organized under the banking laws of the United States or any
state or territory of the United States (including the District
of Columbia) with a combined capital and surplus of at least
$100,000,000, (iv) any Person with a long-term, unsecured debt
rating from the Rating Agencies of at least investment grade, or
(v) a Person who owns or operates at least twelve (12) regional
or super-regional malls totalling at least 6,000,000 square feet;
provided that such entity is,
(a) a Person (x) (1) with a net worth, as of date no more
that 6 months prior to the date of such transfer, of at least
$500 million, and (2) who, immediately prior to such transfer,
controls real estate equity assets of at least $1 billion, or (y)
<PAGE>
if such Person is a pension fund advisor, only the condition set
forth in (x) (2) above must be satisfied, or
(b) a pension fund, pension trust or pension account that
has total assets of at least $500 million, managed by a Person
who controls at least $1 billion of real estate equity assets.
"RATING AGENCIES" shall mean each of Standard & Poor's
Ratings Group, a division of McGraw-Hill, Inc. ("S&P"), Moody's
Investors Service, Inc. ("Moody's"), Duff & Phelps Credit Rating
Co. and Fitch Investors Service, L.P., or any other nationally-
recognized statistical rating agency which has been approved by
Lender and which issues ratings of the Securities at the
request of a party to this transaction.
"RATING SURVEILLANCE CHARGE" shall have the meaning set
forth in SECTION 9.3.
"REGISTRATION STATEMENT" shall have the meaning set forth in SECTION
9.2(b).
"REGULAR INTEREST RATE" shall mean six and three-quarters
percent (6.75%).
"RELEASE DATE" shall mean the date that is the earlier of
(a) two (2) years from the "startup day" within the meaning of
Section 860G(a)(9) of the Code of the REMIC Trust or (b) three
(3) years from the Closing Date.
"REMIC TRUST" shall mean a "real estate mortgage investment
conduit" within the meaning of Section 860D of the Code that
holds the Note.
"RENT ROLL" shall mean the information regarding Leases at
the Property contained in Schedule IV.
"RENTS" shall mean all rents, rent equivalents, moneys
payable as damages or in lieu of rent or rent equivalents,
royalties (including, without limitation, all oil and gas or
other mineral royalties and bonuses), income, receivables,
receipts, revenues, deposits (including, without limitation,
security, utility and other deposits), accounts, cash, issues,
profits, charges for services rendered, and other consideration
of whatever form or nature received by or paid to or for the
account of or benefit of Borrower or its agents or employees from
any and all sources arising from or attributable to the Property,
and proceeds, if any, from business interruption or other loss of
income insurance.
"RESTORATION" shall have the meaning set forth in SECTION 7.1.2(b).
"RETAIL PARCEL" shall mean that portion of the Property
described on Schedule I(A).
"SCHEDULED DEFEASANCE PAYMENTS" shall have the meaning set
forth in SECTION 2.3.2(b).
"SECONDARY MARKET TRANSACTION" shall mean the sale or
assignment by Lender of all or a portion of its interest in the Note.
<PAGE>
"SECURITIES" shall have the meaning set forth in SECTION 9.1.
"SECURITIES ACT" shall have the meaning set forth in SECTION 9.2(a).
"SECURITIZATION" shall have the meaning set forth in SECTION 9.1.
"SECURITY AGREEMENT" shall have the meaning set forth in
SECTION 2.3.2(a)(vi).
"SERVICER" shall have the meaning set forth in SECTION 9.7.
"SERVICING AGREEMENT" shall have the meaning set forth in SECTION 9.7.
"SEVERED LOAN DOCUMENTS" shall have the meaning set forth in
SECTION 8.2(c).
"SINGLE PURPOSE ENTITY" shall mean a Person, other than an
individual, which is formed or organized solely for the purpose
of holding, directly, an ownership interest in one (1) property,
does not engage in any business unrelated to such property and
the financing thereof, does not have any assets other than those
related to its interest in the property or the financing thereof
or any indebtedness other than as permitted by this Agreement or
the other Loan Documents, has its own separate books and records
and its own account, in each case which are separate and apart
from the books and records and accounts of any other Person,
holds itself out as being a Person, separate and apart from any
other Person and otherwise satisfies the requirements of SECTION
4.1(dd).
"SPC MANAGING MEMBER" shall have the meaning set forth in
SECTION 4.1(dd)(xv).
"SPONSOR" shall mean Urban Shopping Centers, Inc. or Urban
Shopping Centers L.P.; any corporation that is directly or
indirectly majority-owned by or controlled by or under common
control with Urban Shopping Centers, Inc. or Urban Shopping
Centers L.P.; any general partnership having Urban Shopping
Centers, Inc. or Urban Shopping Centers L.P. as the general
partner(s) with at least equal power with all other general
partners to direct and control the general partnership; any
limited partnership having Urban Shopping Centers, Inc. or Urban
Shopping Centers L.P. as the general partner(s) with at least
equal power with all other general partners to direct and control
the limited partnership; any limited liability company having
Urban Shopping Centers, Inc. or Urban Shopping Centers L.P. as
the managing member with at least equal power with all other
managing members to direct and control the limited liability
company or any real estate investment trust, multi-investor
trust, foundation, common fund or investor account for investment
trust, multi-investor trust, foundation, common fund or investor
account for which Urban Shopping Centers, Inc. or Urban Shopping
Centers L.P. acts as the investment manager or advisor.
"STANDARD STATEMENT" shall have the meaning set forth in SECTION 9.1.1.
"STATE" shall mean the State of Illinois.
"SUCCESSOR BORROWER" shall have the meaning set forth in SECTION 2.4.2
<PAGE>
"SURVEY" shall mean a survey of the Property prepared by a
surveyor licensed in the State and satisfactory to Lender and the
company or companies issuing the Title Insurance Policies, and
containing a certification of such surveyor satisfactory to
Lender and which otherwise satisfies the requirements of SECTION
3.1(c)(iii).
"TAKING" shall mean a temporary or permanent taking by any
Governmental Authority as the result or in lieu or in
anticipation of the exercise of the right of condemnation or
eminent domain, of all or any part of the Property, or any
interest therein or right accruing thereto, including any right
of access thereto or any change of grade affecting the Property
or any part thereof.
"TAXES" shall mean all real estate and personal property
taxes, assessments, water rates or sewer rents, now or hereafter
levied or assessed or imposed against any of the Property or part
thereof.
"THRESHOLD AMOUNT" shall mean an amount equal to
$4,276,382.00 adjusted on the 1st day of November, 1998 and on
the 1st day of each succeeding November through and including the
November which immediately precedes the Maturity Date to reflect
increases in the CPI for the prior twelve (12) calendar months.
"TITLE INSURANCE POLICY" shall mean an ALTA mortgagee title
insurance policy in form acceptable to Lender issued and insuring
the lien of the Mortgage on the Property.
"TRANSFER" shall mean a sale, conveyance or other form of
transfer of the Property or a portion therein or of an interest
therein as described in Article 6 of the Mortgage.
"TREASURY RATE" shall mean a rate per annum equal to the
yield, as of the related determination date, calculated by linear
interpolation (rounded to the nearest one-thousandth of one
percent (i.e., 0.001%)) of the yields of noncallable United
States Treasury obligations with terms (one longer and one
shorter) most nearly approximating the period from such
determination date 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.
"TRUST" shall mean the Land Trusts owning record title to
the Property described on Schedule III hereof.
"TRUSTEE" shall mean as the Trustee under the Land Trust and
its successors and assigns.
"UCC" or "UNIFORM COMMERCIAL CODE" shall mean the Uniform
Commercial Code as in effect in the applicable State or Commonwealth.
"UNDEFEASED NOTE" shall have the meaning set forth in
SECTION 2.3.2(v) hereof.
"UNDERWRITER GROUP" shall have the meaning set forth in SECTION 9.2(b).
<PAGE>
"U.S. OBLIGATIONS" shall mean obligations or securities not
subject to prepayment, call or early redemption which are direct
obligations of, or obligations fully guaranteed as to timely
payment by, the United States of America or of any agency or
instrumentality of the United States of America, the obligations
of which are backed by the full faith and credit of the United
States of America, which qualify under 1.860G-2(a)(8) of the
Treasury regulations. All such obligations or securities shall
mature or be redeemable, or provide for payments of interest
thereon, on or prior to the Business Day preceding the date such
amounts are required to be applied under this Agreement or any of
the other Loan Documents.
"YIELD MAINTENANCE PREMIUM" shall mean the amount (if any)
which, when added to the remaining principal amount of the Note
or the principal amount of Defeased Note, as applicable, will be
sufficient to purchase U.S. Obligations providing the required
Scheduled Defeasance Payments.
Section 1.2 PRINCIPLES OF CONSTRUCTION.
--------------------------
All references to sections and schedules are to
sections and schedules in or to this Agreement unless otherwise
specified. Unless otherwise specified, the words "hereof,"
"herein" and "hereunder" and words of similar import when used in
this Agreement shall refer to this Agreement as a whole and not
to any particular provision of this Agreement. Unless otherwise
specified, all meanings attributed to defined terms herein shall
be equally applicable to both the singular and plural forms of
the terms so defined.
II. GENERAL TERMS
Section 2.1 LOAN COMMITMENT; DISBURSEMENT TO BORROWER.
-----------------------------------------
2.1.1 THE LOAN. Subject to and upon the terms and
conditions set forth herein, Lender hereby agrees to make the
Loan to Borrower on the Closing Date, in the original principal
amount of $85,527,649.00. The Loan shall mature on the Maturity Date.
Borrower hereby agrees to accept the Loan on the Closing Date, subject
to and upon the terms and conditions set forth herein.
2.1.2 DISBURSEMENT TO BORROWER. Borrower may
request and receive only one borrowing hereunder in respect of
the Loan and any amount borrowed and repaid hereunder in respect
of the Loan may not be reborrowed.
2.1.3 THE NOTE. The Loan shall be evidenced by the
Note of Borrower, in the original principal amount of the Loan.
The Note shall be entitled to the benefits of this Agreement and
shall be secured by the Mortgage, the Assignment of Leases and
the other Loan Documents.
<PAGE>
Section 2.2 USE OF PROCEEDS.
---------------
Borrower shall use the proceeds of the Loan disbursed
to it pursuant to SECTION 2.1 to pay off an existing loan on the
Property and to distribute, as set forth on the written closing
direction letter delivered by Borrower to and approved by Lender,
the balance of the proceeds of the Loan.
Section 2.3 LOAN REPAYMENT AND DEFEASANCE.
-----------------------------
2.3.1 REPAYMENT. Borrower shall repay any outstanding
principal indebtedness of the Loan in full on the Maturity Date
of the Loan, together with interest thereon to (but excluding)
the date of repayment. On the Anticipated Repayment Date, or on
any scheduled Payment Date thereafter, Borrower may, at its
option and upon thirty (30) days prior written notice to Lender
prepay in whole or in part the Debt without payment of the Yield
Maintenance Premium or any other premium or consideration. Any
such payment shall be applied to the last payments of principal
due under the Loan. If prior to the Anticipated Repayment Date
and following the occurrence and during the continuance of any
Event of Default, Borrower shall tender payment of an amount
sufficient to satisfy all or any portion of the Debt, such tender
by Borrower shall be deemed to be voluntary and Borrower shall
pay, in addition to the Debt, the Lockout Yield Maintenance Premium,
if any, that would be required if a Defeasance Event had occurred.
2.3.2 VOLUNTARY DEFEASANCE OF THE LOAN. (a) Provided
no Event of Default exists, at any time after the Release Date
and prior to the Anticipated Repayment Date, Borrower may
voluntarily defease (hereinafter, a "DEFEASANCE EVENT") all or,
subject to the provisions of SECTION 2.3.2(c), any portion of
the Loan by providing Lender with U.S. Obligations that produce
payments which replicate the Scheduled Defeasance Payments. Each
Defeasance Event by the Borrower shall be subject to the
satisfaction of the following conditions precedent:
(i) Borrower shall provide not less than thirty (30)
days prior written notice to Lender specifying a Payment
Date on which the Defeasance Event is to occur (the
"DEFEASANCE DATE"). Such notice shall indicate the
principal amount of the Loan to be defeased and whether all
or a portion of the Property is to be the subject to the
Defeasance Event and if a portion of the Property shall
identify such portion of the Property and the Allocated Loan
Amount applicable thereto;
(ii) Borrower shall pay to Lender all accrued and
unpaid interest on the principal balance of the Note to but
not including the Defeasance Date. If for any reason the
Defeasance Date is not a Payment Date, the Borrower shall
also pay interest that would have accrued on the Note
through the next Payment Date;
<PAGE>
(iii) Borrower shall pay to Lender all other sums,
not including scheduled interest or principal payments, due
under the Note, this Agreement, the Mortgage, and the other
Loan Documents;
(iv) Borrower shall pay to Lender the required
Defeasance Deposit applicable to the Defeasance Event;
(v) In the event only a portion of the Loan is the
subject of the Defeasance Event, Borrower shall prepare all
necessary documents to modify this Agreement and to amend
and restate the Note and issue two substitute notes, one
note having a principal balance equal to the defeased
portion of the original Note (the "DEFEASED NOTE") and the
other note having a principal balance equal to the
undefeased portion of the Note (the "UNDEFEASED NOTE"). The
Defeased Note and Undefeased Note shall have identical terms
as the Note except for the principal balance. A Defeased
Note cannot be the subject of any further Defeasance Event;
(vi) Borrower shall execute and deliver a security
agreement (the "SECURITY AGREEMENT"), in form and substance
satisfactory to Lender, creating a first priority lien on
the Defeasance Deposit and the U.S. Obligations purchased
with the Defeasance Deposit in accordance with this
provision of this SECTION 2.3.2;
(vii) Borrower shall deliver an opinion of counsel
for Borrower in form satisfactory to Lender in its
reasonable discretion stating, among other things, that
Borrower has legally and validly transferred and assigned
the U.S. Obligations and all obligations, rights and duties
under and to the Note or Defeased Note (as applicable) to
the Successor Borrower, that Lender has a perfected first
priority security interest in the Defeasance Deposit and the
U.S. Obligations delivered by Borrower, and that any REMIC
Trust formed pursuant to a Securitization will not fail to
maintain its status as a "real estate mortgage investment
conduit" within the meaning of Section 860D of the Code as a
result of such Defeasance Event;
(viii) Borrower shall deliver evidence in writing
from the applicable Rating Agencies to the effect that such
release will not result in a downgrading, withdrawal or
qualification of the respective ratings in effect
immediately prior to such Defeasance Event for the
Securities issued in connection with the Securitization
which are then outstanding. If required by the applicable
Rating Agencies, the Borrower shall also deliver or cause to
be delivered to Lender and the applicable Rating Agencies a
non-consolidation opinion with respect to the Successor
Borrower in form and substance satisfactory to Lender and
the applicable Rating Agencies;
(ix) Borrower shall deliver an Officers' Certificate
certifying that the requirements set forth in this SECTION
2.3.2(a) have been satisfied;
<PAGE>
(x) Borrower shall deliver a certificate of Borrower's
independent certified public accountant certifying that the
U.S. Obligations purchased with the Defeasance Deposit
generate monthly amounts equal to or greater than the
Scheduled Defeasance Payments;
(xi) Borrower shall deliver such other certificates,
documents or instruments as Lender may reasonably request; and
(xi) Borrower shall pay all costs and expenses of
Lender and the Rating Agencies incurred in connection with
the Defeasance Event, including any costs and expenses
associated with a release of the Lien of the Mortgage as
provided in SECTION 2.4 hereof as well as reasonable
attorneys' fees and expenses.
(b) In connection with each Defeasance Event, Borrower
hereby appoints Lender as its agent and attorney-in-fact for the
purpose of using the Defeasance Deposit to purchase U.S.
Obligations in Borrower's name which provide payments on or prior
to, but as close as reasonably possible to, all successive
Payment Dates after the Defeasance Date upon which interest and
principal payments are required under the Note, in the case of a
Defeasance Event for the entire outstanding principal balance of
the Loan, or the Defeased Note, in the case of a Defeasance Event
for only a portion of the outstanding principal balance of the
Loan, as applicable, and in amounts equal to the Monthly Debt
Service Payment Amount due on such dates under the Note or the
Defeased Note, as applicable, and assuming such Note or Defeased
Note is prepaid in full on the Anticipated Repayment Date (the
"SCHEDULED DEFEASANCE PAYMENTS"). Borrower, pursuant to the
Security Agreement or other appropriate document, shall authorize
and direct that the payments received from the U.S. Obligations
may be made directly to the Cash Collateral Account (unless
otherwise directed by Lender) and applied to satisfy the
obligations of Borrower under the Note or the Defeased Note, as
applicable. Any portion of the Defeasance Deposit in excess of
the amount necessary to purchase the U.S. Obligations required by
this SECTION 2.3 and satisfy Borrower's obligations under this
SECTION 2.3 and SECTION 2.4 shall be remitted to Borrower.
(c) Notwithstanding anything to the contrary
hereinbefore contained, the Retail Parcel may only be released
from the lien of the Mortgage in connection with a Defeasance
Event wherein the entire Property is released from the lien of
the Mortgage.
Section 2.4 RELEASE OF PROPERTY.
-------------------
Except as set forth in this SECTION 2.4, no repayment, prepayment
or defeasance of all or any portion of the Note shall cause, give
rise to a right to require, or otherwise result in, the release
of any Lien of any Mortgage on the Property.
2.4.1 RELEASE OF THE PROPERTY. (a) If the Borrower has
elected to defease all or a portion of the Loan and the
requirements of SECTION 2.3 and this SECTION 2.4 have been
satisfied, the Property, in the event of a Defeasance Event
<PAGE>
involving the entire outstanding amount of the Loan, or such
portion thereof applicable to the Defeasance Deposit paid to
Lender by Borrower pursuant to SECTION 2.3.2(a)(iv) in the event
of a Defeasance Event involving a portion of the Property, shall
be released from the Lien of the Mortgage and the U.S.
Obligations, pledged pursuant to the Security Agreement, shall be
the sole source of collateral securing the Note or portion
thereof applicable to the Defeasance Deposit.
(b) In connection with a Defeasance Event, Borrower
shall submit to Lender, not less than thirty (30) days prior to
the Defeasance Date, a release of Lien (and related Loan
Documents) for the Property or portion thereof applicable to the
Defeasance Event for execution by Lender. Such release shall be
in a form appropriate in the jurisdiction in which the Property
is located and satisfactory to Lender in its sole discretion. In
addition, Borrower shall provide all other documentation Lender
reasonably requires to be delivered by Borrower in connection with such
release, together with an Officers' Certificate certifying that such
documentation (i) is in compliance with all Legal Requirements, and (ii)
will effect such release in accordance with the terms of this Agreement.
2.4.2 SUCCESSOR BORROWER. In connection with any
release of a Lien under this SECTION 2.4, Borrower may, or at the
request of Lender shall, establish or designate a successor
entity (the "SUCCESSOR BORROWER") which shall be a Single Purpose
Entity approved by Lender, and Borrower shall transfer and assign
all obligations, rights and duties under and to the Note or the
Defeased Note, as applicable, together with the pledged U.S.
Obligations to such Successor Borrower. Such Successor Borrower
shall assume the obligations under the Note or the Defeased Note,
as applicable, and the Security Agreement and Borrower shall be
relieved of its obligations under such documents. The Borrower
shall pay $1,000 to any such Successor Borrower as consideration
for assuming the obligations under the Note or the Defeased Note,
as applicable, and the Security Agreement. Notwithstanding
anything in this Agreement to the contrary, no other assumption
fee shall be payable upon a transfer of the Note or the Defeased
Note, as applicable, in accordance with this SECTION 2.4, but
Borrower shall pay all costs and expenses incurred by Lender,
including Lender's attorneys' fees and expenses, incurred in
connection therewith.
2.4.3 RELEASE ON PAYMENT IN FULL. Lender shall, upon
the written request and at the expense of Borrower, upon payment
in full of all principal and interest on the Loan and all other
amounts due and payable under the Loan Documents in accordance
with the terms and provisions of the Note and this Loan
Agreement, release the Lien of the Mortgage not theretofore
released.
Section 2.5 INTEREST.
--------
2.5.1 GENERALLY. Interest on the Loan and the Note
shall accrue at the Applicable Interest Rate, and will be paid as
follows: on the tenth day of December, 1997, and on the tenth
day of each calendar month thereafter up to and including the
tenth day of October, 2031, interest will be paid in installments
<PAGE>
of the applicable Monthly Debt Service Amount; each of such
payments to be applied to the payment of interest computed at the
Applicable Interest Rate and, after the Anticipated Repayment
Date, the balance shall be applied against the outstanding
principal balance of the Loan. The principal sum together with
all accrued and unpaid interest thereon shall be due and payable
on the Maturity Date.
2.5.2 DEFAULT RATE; ADDITIONAL PAYMENTS AFTER DEFAULT.
Upon the occurrence and during the continuance of an Event of
Default, Lender shall be entitled to receive and Borrower shall
pay to Lender (a) interest on the entire unpaid principal sum and
any other amounts due at the Default Rate, and (b) on the
twentieth (20th) day of each month during which such Event of
Default shall continue, an aggregate amount equal to the Net Cash
Flow After Debt Service for the prior month, such Net Cash Flow
After Debt Service to be applied by Lender to the payment of the
Debt in such order as Lender shall determine in its sole
discretion, including, without limitation, alternating
applications thereof between interest and principal. Interest at
the Default Rate and Net Cash Flow After Debt Service shall both
be computed from the occurrence of the Event of Default until the
actual receipt and collection of the Debt (or that portion
thereof that is then due) or the cure of the Event of Default.
Interest at the Default Rate shall be added to the Debt and shall
be secured by the Mortgage. This paragraph, however, shall not
be construed as an agreement or privilege to extend the date of
the payment of the Debt, nor as a waiver of any other right or
remedy accruing to Lender by reason of the occurrence of any Event
of Default; the acceptance of any payment of Net Cash Flow After Debt
Service shall not be deemed to cure or constitute a waiver of any Event
of Default; and Lender retains its rights under this Note to accelerate and
to continue to demand payment of the Debt upon the happening of any
Event of Default, despite any payment of Net Cash Flow After Debt Service.
Section 2.6 PAYMENTS AND COMPUTATIONS.
-------------------------
2.6.1 MAKING OF PAYMENTS. Each payment by Borrower
hereunder or under the Note shall be made in funds settled
through the New York Clearing House Interbank Payments System or
other funds immediately available to Lender by 11:00 a.m., New
York City time, on the date such payment is due, to Lender by
deposit to such account as Lender may designate by written notice
to Borrower. Whenever any payment hereunder or under the Note
shall be stated to be due on a day which is not a Business Day,
such payment shall be made on the immediately preceding Business Day.
2.6.2 ANNUAL BUDGET; PAYMENTS AFTER ANTICIPATED
REPAYMENT DATE. (a) For each Fiscal Year commencing on January
1, 1998, the Borrower shall submit to Lender an Annual Budget not
later than forty five (45) days prior to the commencement of such
period or Fiscal Year in form reasonably satisfactory to Lender.
(b) In the event that, after the Anticipated Repayment
Date, the Borrower must incur an extraordinary operating expense
or capital expense in an amount in excess of $500,000 not set
forth in the Annual Budget (each an "EXTRAORDINARY EXPENSE"),
then the Borrower shall promptly deliver to Lender a reasonably
<PAGE>
detailed explanation of such proposed Extraordinary Expense for
the Lender's approval.
(c) From and after the Anticipated Repayment Date,
interest shall accrue on the unpaid principal balance from time
to time outstanding on the Note at the Matured Performing Rate.
Borrower shall make payments of principal and interest in monthly
installments beginning on the Anticipated Repayment Date and on
the tenth day of each calendar month thereafter up to and
including the Maturity Date in an amount equal to the Monthly
Debt Service Payment Amount and, notwithstanding the following
provision with respect to Accrued Interest, the failure to make
any such payment as and when due shall constitute an Event of
Default. Each Monthly Debt Service Payment Amount paid after the
Anticipated Repayment Date shall be applied to the payment of
interest computed at the Regular Interest Rate with remainder
applied to reduce the outstanding principal balance of the Note.
Interest accrued at the Matured Performing Rate and not paid
pursuant to the preceding sentence shall be deferred and added to
the Debt and shall earn interest at the Matured Performing Rate
to the extent permitted by applicable law (such accrued interest
is hereinafter defined as "Accrued Interest"). In addition to
such payments of the Monthly Debt Service Amount, from and after
the Anticipated Repayment Date, Borrower shall make payments in
reduction of the outstanding principal balance of the Loan in
monthly installments beginning on the Anticipated Repayment Date
and on the tenth day of each calendar month thereafter up to and
including the Maturity Date in accordance with the terms and
provisions of Section 9.6 below. All of the Debt, including any
Accrued Interest, shall be due and payable on the Maturity Date.
2.6.3 COMPUTATIONS. Interest payable hereunder or under
the Note by Borrower shall be computed on the basis of the actual
number of days elapsed in a 360-day year.
2.6.4 LATE PAYMENT CHARGE. If any principal, interest
or any other sums due under the Loan Documents is not paid by
Borrower on the date on which it is due, Borrower shall pay to
Lender upon demand an amount equal to the lesser of three percent
(3%) of such unpaid sum or the maximum amount permitted by
applicable law in order to defray the expense incurred by Lender
in handling and processing such delinquent payment and to
compensate Lender for the loss of the use of such delinquent
payment. Any such amount shall be secured by the Mortgage and
the other Loan Documents.
2.6.5 PAYMENTS RECEIVED IN THE DEPOSIT ACCOUNT.
Notwithstanding anything to the contrary contained in this
Agreement or the other Loan Documents, and provided no Event of
Default has occurred and is continuing, Borrower's obligations
with respect to the monthly payment of principal and interest and
amounts due for the Tax and Insurance Escrow Fund, Replacement
Reserve Fund, and any other payment reserves established pursuant
to this Agreement or any other Loan Document shall be deemed
satisfied to the extent sufficient amounts are deposited in the
Cash Collateral Account to satisfy such obligations on the dates
each such payment is required, regardless of whether any of such
amounts are so applied by Lender.
<PAGE>
III. CONDITIONS PRECEDENT
--------------------
Section 3.1 CONDITIONS PRECEDENT TO CLOSING.
-------------------------------
The obligation of Lender to make the Loan hereunder is
subject to the fulfillment by Borrower or waiver by Lender of the
following conditions precedent no later than the Closing Date:
(a) REPRESENTATIONS AND WARRANTIES; COMPLIANCE WITH
CONDITIONS. The representations and warranties of Borrower
contained in this Agreement and the other Loan Documents shall be
true and correct in all material respects on and as of the
Closing Date with the same effect as if made on and as of such
date, and no Default or an Event of Default shall have occurred
and be continuing; and Borrower shall be in compliance in all
material respects with all terms and conditions set forth in this
Agreement and in each other Loan Document on its part to be
observed or performed.
(b) LOAN AGREEMENT AND NOTE. Lender shall have
received this Agreement and the Note, in each case, duly executed
and delivered on behalf of Borrower.
(c) DELIVERY OF LOAN DOCUMENTS; TITLE INSURANCE;
REPORTS; LEASES.
(i) MORTGAGE, ASSIGNMENT OF LEASES, ASSIGNMENTS
OF AGREEMENTS. Lender shall have received from Borrower fully
executed and acknowledged counterparts of the Mortgage, the
Assignment of Leases and Assignment of the Agreements and
evidence that counterparts of the Mortgage and Assignment of
Leases have been delivered to the title company for recording, in
the reasonable judgment of Lender, so as to effectively create
upon such recording valid and enforceable Liens upon such
Property, of the requisite priority, in favor of Lender (or such
other trustee as may be required or desired under local law),
subject only to the Permitted Encumbrances and such other Liens
as are permitted pursuant to the Loan Documents; Lender shall
have also received from Borrower fully executed counterparts of
the Environmental Indemnity and the Assignment of Management Agreement.
(ii) TITLE INSURANCE. Lender shall have received
the Title Insurance Policy issued by a title company acceptable
to Lender and dated as of the Closing Date, with reinsurance and
direct access agreements acceptable to Lender. Such Title
Insurance Policy shall (A) provide coverage in amounts
satisfactory to Lender, (B) insure Lender that the Mortgage
creates a valid lien on the Property encumbered thereby of the
requisite priority, free and clear of all exceptions from
coverage other than Permitted Encumbrances and standard
exceptions and exclusions from coverage (as modified by the terms
of any endorsements), (C) contain such endorsements and
affirmative coverages as Lender may reasonably request, and (D)
name Lender and its successors and assigns, as the insured. The
Title Insurance Policy shall be assignable. Lender also shall
have received evidence that all premium in respect of such Title
Insurance Policy has been paid.
<PAGE>
(iii) SURVEY. Lender shall have received a
current title survey for the Property, certified to the title
company and Lender and their successors and assigns, in form and
content satisfactory to Lender and prepared by a professional and
properly licensed land surveyor satisfactory to Lender in
accordance with the 1992 Minimum Standard Detail Requirements for
ALTA/ACSM Land Title Surveys. The survey should meet the
classification of an "Urban Survey" and the following additional
items from the list of "Optional Survey Responsibilities and
Specifications" (Table A) should be added to each survey: 2, 3,
4, 6, 8, 9, 10, 11 and 13. Such survey shall reflect the same
legal description contained in the Title Insurance Policy
relating to the Property referred to in clause (ii) above and
shall include, among other things, a metes and bounds description
of the Property reasonably satisfactory to Lender. The
surveyor's seal shall be affixed to the survey and the surveyor
shall provide a certification for the survey in form and
substance acceptable to Lender.
(iv) INSURANCE. Lender shall have received valid
certificates of insurance for the Policies of insurance required
hereunder, satisfactory to Lender in its sole discretion, and
evidence of the payment of all premiums payable for the existing
policy period.
(v) ENVIRONMENTAL REPORT. Lender shall have
received an environmental report in respect of the Property
satisfactory to Lender.
(vi) ZONING. With respect to the Property, Lender
shall have received, at Lender's option, (i) letters or other
evidence from the appropriate municipal authorities (or other
Persons) confirming that the Property and its use complies in all
material respects with all applicable legal requirements,
including without limitation, all applicable zoning and building
laws, (ii) an ALTA 3.1 zoning endorsement for the applicable
Title Insurance Policy, or (iii) a zoning opinion letter, in
substance reasonably satisfactory to Lender.
(vii) ENCUMBRANCES. Borrower shall have taken
or caused to be taken such actions in such a manner so that
Lender has a valid and perfected Lien of the requisite priority
as of the Closing Date with respect to the Mortgage in the
Property, subject only to applicable Permitted Encumbrances and
such other Liens as are permitted pursuant to the Loan Documents,
and Lender shall have received satisfactory evidence thereof.
(d) RELATED DOCUMENTS. Each additional document not
specifically referenced herein, but relating to the transactions
contemplated herein, shall have been duly authorized, executed
and delivered by all parties thereto and Lender shall have
received and approved certified copies thereof.
(e) DELIVERY OF ORGANIZATIONAL DOCUMENTS. On or
before the Closing Date, Borrower shall deliver or cause to be
delivered to Lender copies certified by Borrower of all
organizational documentation related to Borrower and/or the
formation, structure, existence, good standing and/or
qualification to do business, as Lender may request in its sole
<PAGE>
discretion, including, without limitation, good standing
certificates, qualifications to do business in the appropriate
jurisdictions, resolutions authorizing the entering into of the
Loan and incumbency certificates as may be requested by Lender.
(f) OPINIONS OF BORROWER'S COUNSEL. Lender shall have
received opinions of Borrower's counsel (i) with respect to non-
consolidation, true sale or true contribution, and fraudulent
transfer issues, and (ii) with respect to due execution,
authority, enforceability of the Loan Documents and such other
matters as Lender may require, all such opinions in form, scope
and substance satisfactory to Lender and Lender's counsel in
their reasonable discretion.
(g) BUDGETS. Borrower shall have delivered to Lender
the Annual Budget for the current Fiscal Year.
(h) BASIC CARRYING COSTS. Borrower shall have paid
all Basic Carrying Costs relating to the Property which are in
arrears, including without limitation, (i) accrued but unpaid
insurance premiums relating to the Property, (ii) currently due
Taxes (including any in arrears) relating to the Property, and
(iii) currently due Other Charges relating to the Property, which
amounts shall be funded with proceeds of the Loan.
(i) COMPLETION OF PROCEEDINGS. All corporate and
other proceedings taken or to be taken in connection with the
transactions contemplated by this Agreement and other Loan
Documents and all documents incidental thereto shall be
satisfactory in form and substance to Lender, and Lender shall
have received all such counterpart originals or certified copies
of such documents as Lender may reasonably request.
(j) PAYMENTS. All payments, deposits or escrows
required to be made or established by Borrower under this
Agreement, the Note and the other Loan Documents on or before the
Closing Date shall have been paid.
(k) ESTOPPELS. Lender shall have received executed
tenant estoppel letters, in form and substance satisfactory to
Lender from (i) all anchor tenants, and (ii) at least 75% by
gross leaseable area of the "in line" tenants. Lender shall also
receive estoppel letters from each of the parties to the
Operating Agreements.
(l) TRANSACTION COSTS. Borrower shall have paid or
reimbursed Lender for all title insurance premiums and recording
and filing fees incurred in connection with the origination of
the Loan.
(m) MATERIAL ADVERSE CHANGE. There shall have been no
material adverse change in the financial condition or business
condition of Borrower or the Property since the date of the most
recent financial statements delivered to Lender. The income and
expenses of the Property, the occupancy leases thereof, and all
other features of the transaction shall be as represented to
Lender without material adverse change. Borrower shall not be
the subject of any bankruptcy, reorganization, or insolvency
proceeding.
<PAGE>
(n) LEASES AND RENT ROLL. Lender shall have received
(i) copies of all tenant leases, which leases shall be certified
by Borrower as true and complete for tenants occupying in excess
of 10,000 square feet, (ii) certified copies of all Operating Agreements
affecting the Property, and (iii) a current certified Rent Roll of the
Property, which shall be true and complete in all material respects and
shall be reasonably satisfactory in form and substance to Lender.
(o) SUBORDINATION AND ATTORNMENT. Intentionally Deleted.
(p) TAX LOT. Except as disclosed to Lender on
Schedule VII, Lender shall have received evidence that the
Property constitutes a separate tax lot, with a separate tax
payor identification number, which evidence shall be reasonably
satisfactory in form and substance to Lender.
(q) PHYSICAL CONDITIONS REPORT. Lender shall have
received Physical Conditions Report, which report shall be
reasonably satisfactory in form and substance to Lender.
(r) MANAGEMENT AGREEMENT. Lender shall have received
a certified copy of the Management Agreement which shall be
reasonably satisfactory in form and substance to Lender.
(s) MARKET STUDY. Lender shall have received a market
study of the Property, which shall be satisfactory in form and
substance to Lender; provided, however, satisfaction of this
condition shall not constitute a condition precedent to Closing.
(t) FINANCIAL STATEMENTS. Lender shall have received
a balance sheet for the two most recent Fiscal Years and
statements of income and statements of cash flows, if any, with
respect to the Property for the two (2) most recent Fiscal Years.
(u) FURTHER DOCUMENTS. Lender or its counsel shall
have received such other and further approvals, opinions,
documents and information as Lender or its counsel may have
reasonably requested and the form and content of all the Loan Documents.
IV. REPRESENTATIONS AND WARRANTIES
------------------------------
Section 4.1 BORROWER REPRESENTATIONS.
------------------------
Borrower represents and warrants as of the date hereof
and as of the Closing Date that:
(a) ORGANIZATION. Borrower has been duly organized
and is validly existing and in good standing with requisite power
and authority to own its properties and to transact the businesses in
which it is now engaged. Borrower is duly qualified to do business and is
in good standing in each jurisdiction where it is required to be so
qualified in connection with its properties, businesses and operations.
Borrower possesses all rights, licenses, permits and authorizations,
governmental or otherwise, necessary to entitle it to own its properties and
to transact the businesses in which it is now engaged, and the sole business
of Borrower is the ownership, management and operation of the Property.
<PAGE>
(b) PROCEEDINGS. Borrower has taken all necessary
action to authorize the execution, delivery and performance of
this Agreement and the other Loan Documents. This Agreement and
such other Loan Documents have been duly executed and delivered
by or on behalf of Borrower and constitute legal,
valid and binding obligations of Borrower enforceable against
Borrower in accordance with their respective terms, subject to
applicable bankruptcy, insolvency and similar laws affecting
rights of creditors generally, and subject, as to enforceability,
to general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law).
(c) NO CONFLICTS. The execution, delivery and
performance of this Agreement and the other Loan Documents by
Borrower will not conflict with or result in a breach of any of
the material terms or provisions of, or constitute a default
under, or result in the creation or imposition of any lien,
charge or encumbrance (other than pursuant to the Loan Documents)
upon any of the property or assets of Borrower pursuant to the
terms of any indenture, mortgage, deed of trust, loan agreement,
partnership agreement or other agreement or instrument to which
Borrower is a party or by which any of Borrower's property or
assets is subject, nor will such action result in any violation
of the provisions of any statute or any order, rule or regulation
of any court or governmental agency or body having jurisdiction
over Borrower or any of Borrower's properties or assets, and any
consent, approval, authorization, order, registration or
qualification of or with any court or any such regulatory
authority or other governmental agency or body required for the
execution, delivery and performance by Borrower of this Agreement
or any other Loan Documents has been obtained and is in full
force and effect.
(d) LITIGATION. Except as otherwise set forth on
SCHEDULE VI hereto, there are no actions, suits or proceedings at
law or in equity by or before any Governmental Authority or other
agency now pending or, to Borrower's knowledge, threatened
against or affecting Borrower or the Property, which actions,
suits or proceedings, if determined against Borrower or the
Property, might materially adversely affect the condition
(financial or otherwise) or business of Borrower or the condition
or ownership of the Property.
(e) AGREEMENTS. Borrower is not a party to any
agreement or instrument or subject to any restriction which might
materially and adversely affect Borrower or the Property, or
Borrower's business, properties or assets, operations or
condition, financial or otherwise. Borrower is not 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 Borrower or its Property are bound. Borrower has no
material financial obligation under any indenture, mortgage, deed
of trust, loan agreement or other agreement or instrument to
which the Borrower is a party or by which the Borrower or the
Property is otherwise bound, other than obligations incurred in
the ordinary course of the operation of the Property and other
than obligations under the Loan Documents.
<PAGE>
(f) TITLE. Simultaneously herewith the Land Trustee
under the Land Trust will acquire good, marketable and insurable
title in fee simple to the real property comprising the Property,
free and clear of all Liens whatsoever except the Permitted
Encumbrances, such other Liens as are permitted pursuant to the
Loan Documents and the Liens created by the Loan Documents. The
Mortgage, when properly recorded in the appropriate records,
together with any Uniform Commercial Code financing statements
required to be filed in connection therewith, will create (i) a
valid, perfected lien on the Property, subject only to Permitted
Encumbrances and the Liens created by the Loan Documents and (ii)
perfected security interests in and to, and perfected collateral
assignments of, all personalty (including the Leases), all in
accordance with the terms thereof, in each case subject only to
any applicable Permitted Encumbrances, such other Liens as are
permitted pursuant to the Loan Documents and the Liens created by
the Loan Documents. Borrower has not performed or caused to be
performed or provided any work, labor or materials which would give
rise to any, and Borrower has no knowledge of any other person making,
claims for payment for work, labor or materials affecting Property
which are or may become a lien prior to, or of equal priority with, the
Liens created by the Loan Documents.
(g) NO BANKRUPTCY FILING. Borrower is not
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 Borrower's assets or property, and
Borrower has no knowledge of any Person contemplating the filing
of any such petition against it.
(h) FULL AND ACCURATE DISCLOSURE. No statement of
fact made by Borrower in this Agreement or in any of the other
Loan Documents contains any untrue statement of a material fact
or omits to state any material fact necessary to make statements
contained herein or therein not misleading. There is no material
fact presently known to Borrower which has not been disclosed to
Lender which materially and adversely affects, nor as far as
Borrower can foresee, which would materially and adversely
affect, the Property or the business, operations or condition
(financial or otherwise) of Borrower.
(i) NO PLAN ASSETS. Borrower is not an "employee
benefit plan," as defined in Section 3(3) of ERISA, subject to
Title I of ERISA, and none of the assets of Borrower constitutes
or will constitute "plan assets" of one or more such plans within
the meaning of 29 C.F.R. Section 2510.3-101. In addition, (i)
Borrower is not a "governmental plan" within the meaning of
Section 3(32) of ERISA and (ii) to Borrower's actual knowledge,
without investigation, transactions by or with Borrower are not
subject to state statutes regulating investment of, and fiduciary
obligations with respect to, governmental plans.
(j) COMPLIANCE. To Borrower's knowledge, the Property
and the use thereof comply in all material respects with all
applicable Legal Requirements, including, without limitation,
building and zoning ordinances and codes. To 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 might materially adversely affect the
<PAGE>
condition (financial or otherwise) or business of Borrower. To
Borrower's knowledge, there has not been any act or omission
affording the federal government or any state or local government
the right of forfeiture as against any of the Property or any
part thereof or any monies paid in performance of Borrower's
obligations under any of the Loan Documents. Borrower hereby
covenants and agrees not to commit, permit or suffer to exist any
act or omission affording such right of forfeiture.
(k) FINANCIAL INFORMATION. All financial data,
including, without limitation, the statements of cash flow and
income and operating expense, that have been delivered to Lender
in respect of the Property (i) are true, complete and correct in
all material respects, (ii) accurately represent the financial
condition of the Property as of the date of such reports, and
(iii) to the extent prepared or audited by an independent
certified public accounting firm, have been prepared in
accordance with GAAP throughout the periods covered, except as
disclosed therein. Borrower does not have any contingent
liabilities, liabilities for taxes, unusual forward or long-term
commitments or unrealized or anticipated losses from any
unfavorable commitments that are known to Borrower and reasonably
likely to have a materially adverse effect on the Property or the
operation thereof as a retail shopping center, except as referred
to or reflected in said financial statements. Since the date of
such financial statements, there has been no materially adverse
change in the financial condition, operations or business of Borrower
from that set forth in said financial statements. Notwithstanding
anything to the contrary hereinbefore provided, Borrower shall not be
deemed to represent or warrant the truth, accuracy, completeness or
correctness of any financial data prepared or furnished by any prior
owner of the Property.
(l) CONDEMNATION. No Condemnation or other proceeding
has been commenced or, to Borrower's best knowledge, is
contemplated with respect to all or any portion of any of the
Property or for the relocation of roadways providing access to
the Property.
(m) FEDERAL RESERVE REGULATIONS. 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 or by the
terms and conditions of this Agreement or the other Loan
Documents.
(n) UTILITIES AND PUBLIC ACCESS. The Property has
rights of access to public ways and is served by water, sewer,
sanitary sewer and storm drain facilities adequate to service
such Property for its intended uses. All public utilities
necessary or convenient to the full use and enjoyment of each of
the Property are located either in the public right-of-way
abutting such Property (which are connected so as to serve the
Property without passing over other property) or in recorded
easements serving such Property and such easements are set forth
in the Title Insurance Policies. All roads necessary for the use
<PAGE>
of the Property for its current purposes have been completed and
dedicated to public use and accepted by all Governmental
Authorities.
(o) NOT A FOREIGN PERSON. Borrower is not a "foreign
person" within the meaning of 1445(f)(3) of the Code.
(p) SEPARATE LOTS. Except as disclosed on Schedule
VII, the Property is comprised of one (1) or more parcels which
constitutes a separate tax lot(s) and no property is part of such
tax lot other than the Property encumbered by the Mortgage.
(q) ASSESSMENTS. There are no pending or, to
Borrower's knowledge, proposed special or other assessments for
public improvements or otherwise affecting the Property, nor are
there any contemplated improvements to the Property that may
result in such special or other assessments.
(r) ENFORCEABILITY. The Loan Documents are not
subject to any right of rescission, set-off, counterclaim or
defense by Borrower, including the defense of usury, nor would
the operation of any of the terms of the Loan Documents, or the
exercise of any right thereunder, render the Loan Documents
unenforceable, and Borrower has not asserted any right of
rescission, set-off, counterclaim or defense with respect thereto.
(s) NO PRIOR ASSIGNMENT. There are no prior
assignments of the Leases or any portion of the Rents due and
payable or to become due and payable which are presently outstanding.
(t) INSURANCE. Borrower has obtained and has
delivered to Lender certificates of all insurance Policies
reflecting the insurance coverages, amounts and other
requirements set forth in this Agreement. No claims which
materially reduce coverages afforded by such Policies have been
made under any such Policy, and no Person, including Borrower,
has done, by act or omission, anything which would impair the
coverage of any such Policy.
(u) USE OF THE PROPERTY. The Property is used
exclusively for retail purposes and other appurtenant and related
uses customary for a regional shopping center.
(v) CERTIFICATE OF OCCUPANCY; LICENSES. All
certifications, permits, licenses and approvals, including
without limitation, certificates of completion and occupancy
permits required for the legal use, occupancy and operation of
the Property as a retail shopping center (collectively, the
"Licenses"), have been obtained and are in full force and effect.
The Borrower shall keep and maintain all licenses necessary for
the operation of the Property as a retail shopping center. The
use being made of the Property is in conformity with the
certificate of occupancy issued for such Property.
(w) NATURAL HAZARD ZONE. None of the Improvements on
the Property are located in an area as identified by the Federal
Emergency Management Agency as (i) an area having special flood hazards; or
(ii) identified or designated as a federally designated seismic zone.
<PAGE>
(x) PHYSICAL CONDITION. To Borrower's knowledge and
except as disclosed in the physical conditions report delivered
to Lender pursuant to SECTION 3.1 (q) hereof, the Property,
including, without limitation, all buildings, improvements,
parking facilities, sidewalks, storm drainage systems, roofs,
plumbing systems, HVAC systems, fire protection systems,
electrical systems, equipment, elevators, exterior sidings and
doors, landscaping, irrigation systems and all structural
components, are in good condition, order and repair in all
material respects; there exists no structural or other material
defects or damages in the Property, whether latent or otherwise,
and Borrower has not received notice from any insurance company
or bonding company of any defects or inadequacies in the
Property, or any part thereof, which would adversely affect the
insurability of the same or cause the imposition of extraordinary
premiums or charges thereon or of any termination or threatened
termination of any policy of insurance or bond.
(y) BOUNDARIES. Except as shown on the survey
delivered to Lender, all of the improvements which were
identified by Borrower or Sponsor as being the subject Property
lie wholly within the boundaries and building restriction lines
of the Property, and no improvements on adjoining properties
encroach upon the Property, and no easements or other
encumbrances upon the Property encroach upon any of the
improvements, so as to affect the value or marketability of the
Property except those which are insured against by title
insurance.
(z) OPERATING AGREEMENTS. The Operating Agreements are
in full force and effect and to Borrower's knowledge, there are
no material defaults thereunder by any party and there are no
conditions that, with the passage of time or the giving of
notice, or both, would constitute material defaults thereunder.
(aa) SURVEY. The Survey for the Property delivered to
Lender in connection with this Agreement does not fail to reflect
any material matter affecting any of the Property or the title
thereto.
(bb) LOAN TO VALUE. The fair market value of the
Property as of the date hereof is at least equal to eighty
percent (80%) of the original principal balance of the Loan.
(cc) FILING AND RECORDING TAXES. All transfer taxes,
deed stamps, intangible taxes or other amounts in the nature of
transfer taxes required to be paid by any Person under applicable
Legal Requirements currently in effect in connection with the
transfer of the Property to Borrower have been paid. All
mortgage, mortgage recording, stamp, intangible or other similar
tax required to be paid by any Person under applicable Legal
Requirements currently in effect in connection with the
execution, delivery, recordation, filing, registration,
perfection or enforcement of any of the Loan Documents,
including, without limitation, the Mortgage encumbering the
Property have been paid, and, under current Legal Requirements,
the Mortgage encumbering the Property are enforceable in
accordance with their respective terms by Lender (or any
subsequent holder thereof).
<PAGE>
(dd) SINGLE-PURPOSE. Borrower hereby represents and
warrants to, and covenants with, Lender that as of the date
hereof and until such time as the Debt shall be paid in full:
(i) Borrower does not own and will not own any
asset or property other than (A) the Property, and (B) incidental
personal property necessary for the ownership or operation of the Property.
(ii) Borrower will not engage in any business
other than the ownership, management and operation of the
Property and Borrower will conduct and operate its business as
presently conducted and operated.
(iii) Borrower will not enter into any
contract or agreement with any affiliate of the Borrower, any
constituent party of Borrower or any affiliate of any constituent
party, except upon terms and conditions that are intrinsically
fair and substantially similar to those that would be available
on an arms-length basis with third parties other than any such party.
(iv) Borrower has not incurred and will not incur
any Indebtedness, secured or unsecured, direct or indirect,
absolute or contingent (including guaranteeing any obligation)
other than the Debt and such other obligations permitted pursuant
to SECTION 6.5 of the Mortgage. No Indebtedness other than the
Debt may be secured (subordinate or PARI PASSU) by the Property.
(v) Borrower has not made and will not make any
loans or advances to any third party (including any affiliate or
constituent party), and shall not acquire obligations or
securities of its affiliates.
(vi) Borrower is and will remain solvent and
Borrower will pay its debts and liabilities (including, as
applicable, shared personnel and overhead expenses) from its
assets as the same shall become due.
(vii) Borrower has done or caused to be done
and will do all things necessary to observe organizational
formalities and preserve its existence, and Borrower will not,
nor will Borrower permit any constituent party to amend, modify
or otherwise change the organizational documents of Borrower or
SPC Managing Member without the prior written consent of Lender.
(viii) Borrower will maintain all of its books,
records, financial statements and bank accounts separate from
those of its affiliates and any constituent party and Borrower
will file its own tax returns. Borrower shall maintain its
books, records, resolutions and agreements as official records.
(ix) Borrower will be, and at all times will hold
itself out to the public as, a legal entity separate and distinct
from any other entity (including any affiliate of Borrower or any
constituent party of Borrower), shall correct any known
misunderstanding regarding its status as a separate entity, shall
conduct business in its own name, shall not identify itself or
any of its affiliates as a division or part of the other and
shall maintain and utilize separate stationery, invoices and checks.
<PAGE>
(x) Borrower will maintain adequate capital for
the normal obligations reasonably foreseeable in a business of
its size and character and in light of its contemplated business operations.
(xi) Neither Borrower nor any constituent party
will seek or effect the liquidation, dissolution, winding up,
liquidation, consolidation or merger, in whole or in part, of the Borrower.
(xii) Borrower will not commingle the funds
and other assets of Borrower with those of any affiliate or
constituent party or any other Person.
(xiii) Borrower has and will maintain its
assets in such a manner that it will not be costly or difficult
to segregate, ascertain or identify its individual assets from
those of any affiliate or constituent party or any other Person.
(xiv) Borrower does not and will not hold
itself out to be responsible for the debts or obligations of any
other Person.
(xv) If Borrower is a limited liability company,
each managing member is a corporation whose sole asset is its
interest in Borrower (the "SPC MANAGING MEMBER") and the SPC
Managing Member will at all times comply, and will cause Borrower
to comply, with each of the representations, warranties, and
covenants contained in this SECTION 4.1(dd) as if such
representation, warranty or covenant was made directly by the SPC
Managing Member.
(xvi) Borrower shall at all times cause there
to be at least one duly appointed member of the board of
directors (an "Independent Director") of the SPC Managing Member
reasonably satisfactory to Lender who shall not have been at the
time of such individual's appointment, and may not have been at
any time during the preceding five years (i) a shareholder of, or
an officer, director, partner or employee of, Borrower or any of
its shareholders, subsidiaries or affiliates, (ii) a customer of,
or supplier to, Borrower or any of its shareholders, subsidiaries
or affiliates, (iii) a person or other entity controlling or
under common control with any such shareholder, partner supplier
or customer, or (iv) a member of the immediate family of any such
shareholder, officer, director, partner, employee, supplier or
customer of any other director of Borrower.
(xvii) Borrower shall not cause or permit the
board of directors of the SPC Managing Member to take any action
which, under the terms of any certificate of incorporation, by-
laws or any voting trust agreement with respect to any common
stock, requires a vote of the board of directors of the SPC
Managing Member of Borrower unless at the time of such action
there shall be at least one member who is an Independent Director.
(xviii) Borrower shall conduct its business so
that the assumptions made with respect to Borrower in that
certain opinion letter dated the date hereof (the "Insolvency
Opinion") delivered by Katten Muchin & Zavis in connection with
the Loan shall be true and correct in all respects.
<PAGE>
(xix) Borrower will not permit any Affiliate
(other than Manager in connection with the discharge of its
obligations under the Management Agreement) or constituent party
independent access to its bank accounts.
(xx) Borrower shall pay the salaries of its own
employees and maintain a sufficient number of employees in light
of its contemplated business operations.
(xxi) Borrower shall compensate each of its
consultants and agents from its funds for services provided to it
and pay from its own assets all obligations of any kind incurred.
Upon the withdrawal or the disassociation of the SPC Managing
Member from Borrower, Borrower shall immediately appoint a new
member whose articles of incorporation are substantially similar
to those of the SPC Managing Member and deliver a new non-
consolidation opinion to the Rating Agency or Rating Agencies, as
applicable, with respect to the new special purpose member and
its equity owners.
(ee) NO CHANGE IN FACTS OR CIRCUMSTANCES; DISCLOSURE.
All information submitted by Borrower to Lender and in all
financial statements, rent rolls, reports, certificates and other
documents submitted by or on behalf of Borrower (excluding those
prepared or furnished by any prior owner of the Property) in
connection with the Loan or in satisfaction of the terms thereof
and all statements of fact made by Borrower in this Agreement or
in any other Loan Document, are accurate, complete and correct in
all material respects. There has been no material adverse change
in any condition, fact, circumstance or event that would make any
such information inaccurate, incomplete or otherwise misleading
in any material respect or that otherwise materially and
adversely affects or might materially and adversely affect the
Property or the business operations or the financial condition of
Borrower. To Borrower's knowledge, Borrower has disclosed to
Lender all material facts and has not failed to disclose any
material fact that could cause any representation or warranty
made herein to be materially misleading.
(ff) ILLEGAL ACTIVITY. No portion of the Property has
been or will be purchased with proceeds of any illegal activity.
(gg) RENT ROLL. The Rent Roll attached hereto as
Schedule IV is true and complete in all material respects.
(hh) ENVIRONMENTAL COMPLIANCE. To Borrower's
knowledge, no hazardous wastes or toxic substances, as defined by
applicable federal, state or local statutes, rules and
regulations, have been disposed, stored or treated by any tenant
under any Lease on or about the leased premises in violation of
any applicable law, rule or regulation, nor does Borrower have
any knowledge of any tenant's intention to use its leased
premises for any activity which, directly or indirectly, involves
the use generation, treatment, storage, disposal or transaction
of any petroleum product or any toxic or hazardous chemical,
material, substance or waste which is in violation of applicable law.
<PAGE>
(ii) TRUST. Borrower is the only beneficiary under the
Trust and no land or other property encumbered by the Mortgage is
part of the Trust property. Except with regard to Transfers
permitted by Article 6 of the Mortgage, Borrower will not give
nor will Borrower allow any other Person authority to give any
direction to Trustee with regard to the Trust or the Trust
property. Borrower shall do all acts reasonably required to
extend the term of the Trust to a date beyond the Maturity Date
and shall, upon termination of the Trust take all steps necessary
to vest title to the Trust property in Borrower subject to the
terms of the Mortgage.
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 shall survive for
so long as any amount remains owing to Lender under this
Agreement or any of the other Loan Documents by Borrower. All
representations, warranties, covenants and agreements made in
this Agreement or in the other Loan Documents by Borrower shall
be deemed to have been relied upon by Lender notwithstanding any
investigation heretofore or hereafter made by Lender or on its
behalf.
V. AFFIRMATIVE COVENANTS
---------------------
Section 5.1 BORROWER COVENANTS.
------------------
From the date hereof and until payment and performance
in full of all obligations of Borrower under the Loan Documents
or the earlier release of the Lien of all Mortgage encumbering
the Property (and all related obligations) in accordance with the
terms of this Agreement and the other Loan Documents, Borrower
hereby covenants and agrees with Lender that:
(a) EXISTENCE; COMPLIANCE WITH LEGAL REQUIREMENTS;
INSURANCE. Borrower shall do or cause to be done all things
necessary to preserve, renew and keep in full force and effect
its existence, rights, licenses, permits and franchises and
comply with all Legal Requirements applicable to it and its
Property. Borrower shall at all times maintain, preserve and
protect all franchises and trade names and preserve all the
remainder of its property used or useful in the conduct of its
business and shall keep the Property in good working order and
repair, 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
Mortgage encumbering such Property. Borrower shall keep the
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 this Agreement.
(b) TAXES AND OTHER CHARGES. Borrower shall pay all
Taxes and Other Charges now or hereafter levied or assessed or
imposed against the Property or any part thereof as the same
<PAGE>
become due and payable; provided, however, Borrower's obligation
to directly pay Taxes shall be suspended for so long as Borrower
complies with the terms and provisions of SECTION 7.3 hereof.
Borrower will deliver to Lender receipts for payment or other
evidence satisfactory to Lender that the Taxes and Other Charges
have been so paid or are not then delinquent no later than the
date on which the Taxes and/or Other Charges would otherwise be
delinquent if not paid. Borrower shall furnish to Lender
receipts for the payment of the Taxes and the Other Charges promptly
after payment of said Taxes and the Other Charges (provided,
however, that Borrower is not required to furnish such receipts
for payment of Taxes in the event that such Taxes have been paid
by Lender pursuant to SECTION 7.3 HEREOF). Borrower shall not
suffer and shall promptly cause to be paid and discharged any
lien or charge whatsoever which may be or become a lien or charge
against the Property, and shall promptly pay for all utility
services provided to the Property. After prior written notice to
Lender, Borrower, at its own expense, may contest by appropriate
legal proceeding, promptly initiated and conducted in good faith
and with due diligence, the amount or validity or application in
whole or in part of any Taxes or Other Charges, provided that (i)
no Default or Event of Default has occurred and remains uncured;
(ii) Borrower is permitted to do so under the provisions of any
mortgage or deed of trust superior in lien to the applicable
Mortgage; (iii) such proceeding shall be permitted under and be
conducted in accordance with the provisions of any other
instrument to which Borrower is subject and shall not constitute
a default thereunder and such proceeding shall be conducted in
accordance with all applicable statutes, laws and ordinances;
(iv) the Property nor any part thereof or interest therein will
be in danger of being sold, forfeited, terminated, canceled or
lost; (v) Borrower shall promptly upon final determination
thereof pay the amount of any such Taxes or Other Charges,
together with all costs, interest and penalties which may be
payable in connection therewith; (vi) such proceeding shall
suspend the collection of Taxes or Other Charges from the
Property; and (vii) Borrower shall furnish such security as may
be required in the proceeding, or as may be reasonably requested
by Lender, to insure the payment of any such Taxes or Other
Charges, together with all interest and penalties thereon.
Lender may pay over any such cash deposit or part thereof held by
Lender to the claimant entitled thereto at any time when, in the
judgment of Lender, the entitlement of such claimant is established.
(c) LITIGATION. Borrower shall give prompt written
notice to Lender of any litigation or governmental proceedings
pending or threatened against Borrower which might materially
adversely affect Borrower's condition (financial or otherwise) or
business or the Property.
(d) ACCESS TO THE PROPERTY. Borrower shall permit
agents, representatives and employees of Lender to inspect the
Property or any part thereof at reasonable hours upon reasonable
advance notice.
(e) Notice of Default. Borrower shall promptly advise
Lender of any material adverse change in Borrower's financial
condition or of the occurrence of any Default or Event of Default
of which Borrower has knowledge.
<PAGE>
(f) COOPERATE IN LEGAL PROCEEDINGS. Borrower shall
cooperate fully with Lender with respect to any proceedings
before any court, board or other Governmental Authority which may
in any way affect the rights of Lender hereunder or any rights
obtained by Lender under any of the other Loan Documents and, in
connection therewith, permit Lender, at its election, to
participate in any such proceedings.
(g) PERFORM LOAN DOCUMENTS. Borrower shall observe,
perform and satisfy all the terms, provisions, covenants and
conditions of, and shall pay when due all costs, fees and
expenses to the extent required under, the Loan Documents
executed and delivered by, or applicable to, Borrower.
(h) INSURANCE BENEFITS. Borrower shall cooperate with
Lender in obtaining for Lender the benefits of any Proceeds of
any Policies lawfully or equitably payable in connection with the
Property, and Lender shall be reimbursed for any expenses incurred in
connection therewith (including attorneys' fees and disbursements, and
the payment by Borrower of the expense of an appraisal (if necessary,
required or, in Lender's reasonable discretion appropriate under the
circumstances) on behalf of Lender in case of a fire or other
casualty affecting any of the Property or any part thereof) out
of such Proceeds.
(i) FURTHER ASSURANCES; SUPPLEMENTAL MORTGAGE
AFFIDAVITS. Borrower shall, at Borrower's sole cost and expense:
(A) furnish to Lender all instruments, documents,
boundary surveys, footing or foundation surveys, certificates,
plans and specifications, appraisals, market studies, title and
other insurance reports and agreements, and each and every other
document, certificate, agreement and instrument required to be
furnished by Borrower pursuant to the terms of the Loan Documents
or reasonably requested by Lender in connection therewith;
(B) execute and deliver to Lender such documents,
instruments, certificates, assignments and other writings, and do
such other acts necessary or desirable, to evidence, preserve
and/or protect the collateral at any time securing or intended to
secure the obligations of Borrower under the Loan Documents, as
Lender may reasonably require provided, however, such documents,
instruments, certificates, assignments and other writings and
such other acts will not change the rate of interest or change,
modify or amend any of the material business terms of the Loan
Documents; and
(C) 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 provided that such acts,
conveyances and assurance will not create new liability or
increase existing liability of or on the part of Borrower.
(j) As of the date hereof, Borrower represents that it
has paid or will cause to be paid all state, county and municipal
recording and all other taxes imposed upon the execution and
recordation of the Mortgage encumbering the Property.
<PAGE>
(k) FINANCIAL REPORTING.
(i) Borrower will keep and maintain or will cause
to be kept and maintained on a Fiscal Year basis, in accordance
with GAAP (or such other accounting basis reasonably acceptable
to Lender), proper and accurate books, records and accounts
reflecting all of the financial affairs of Borrower and all items
of income and expense in connection with the operation of the
Property. Lender shall have the right from time to time at all
times during normal business hours upon reasonable notice to
examine such books, records and accounts at the office of
Borrower or other Person maintaining such books, records and
accounts and to make such copies or extracts thereof as Lender
shall desire. After the occurrence of an Event of Default,
Borrower shall pay any reasonable costs and expenses incurred by
Lender for outside auditors to examine Borrower's accounting
records with respect to the Property, as Lender shall determine
to be necessary or appropriate in the protection of Lender's interest.
(ii) Borrower will furnish to Lender annually,
within ninety (90) days following the end of each Fiscal Year of
Borrower, a complete copy of Borrower's annual financial
statements audited by a "Big Six" accounting firm or other
independent certified public accountant acceptable to Lender in
accordance with GAAP (or such other accounting basis acceptable to
Lender) covering the Property for such Fiscal Year and containing
statements of profit and loss for the Borrower and the Property
and a balance sheet for the Property. Such statements shall set
forth the financial condition and the results of operations for
the Property for such Fiscal Year, and shall include, but not be
limited to, amounts representing annual Net Cash Flow, Net
Operating Income, Gross Income from Operations and Operating
Expenses. The annual financial statements for the Property shall
be accompanied by (i) a certificate executed by the chief
financial officer of Borrower or the SPC Managing Member of
Borrower, as applicable, stating that each such annual financial
statement presents fairly the financial condition and the results
of operations of the Property being reported upon and has been
prepared in accordance with GAAP, and (ii) an unqualified opinion
of a "Big Six" accounting firm or other independent certified
public accountant reasonably acceptable to Lender. Together with
the annual financial statements for the Property, Borrower shall
furnish to Lender an Officer's Certificate certifying as of the
date thereof whether there exists an event or circumstance which
constitutes a Default or Event of Default under the Loan
Documents executed and delivered by, or applicable to, Borrower,
and if such Default or Event of Default exists, the nature
thereof, the period of time it has existed and the action then
being taken to remedy the same.
(iii) Borrower will furnish, or cause to be
furnished, to Lender on or before forty-five (45) days after the
end of each calendar quarter the following items, accompanied by
a certificate of the chief financial officer of Borrower or the
SPC Managing Member, as applicable, stating that such items are
true, correct, accurate, and complete and fairly present the
financial condition and results of the operations of the Property
on a combined basis (subject to normal year-end adjustments) as
applicable: (i) a rent roll for the subject quarter accompanied
<PAGE>
by an Officer's Certificate with respect thereto; (ii) quarterly
and year-to-date operating statements (including Capital
Expenditures) prepared for each calendar quarter, noting Net
Operating Income, Gross Income from Operations, and Operating
Expenses, and other information necessary and sufficient to
fairly represent the financial position and results of operation
of the Property during such calendar quarter; and (iii) a
calculation reflecting the annual Debt Service Coverage Ratio for
the immediately preceding twelve (12) month period as of the last
day of such quarter accompanied by an Officer's Certificate with
respect thereto. In addition, such certificate shall also be
accompanied by a certificate of the chief financial officer of
Borrower or the SPC Managing Member of Borrower stating that the
representations and warranties of Borrower set forth in SECTION
4.1(dd)(iv) are true and correct as of the date of such
certificate and that there are no trade payables outstanding for
more than sixty (60) days.
(iv) Borrower shall furnish to Lender, within ten
(10) Business Days after request (or as soon thereafter as may be
reasonably possible), such further detailed information with
respect to the operation of the Property and the financial
affairs of Borrower as may be reasonably requested by Lender.
(l) BUSINESS AND OPERATIONS. Borrower will continue
to engage in the businesses presently conducted by it as and to
the extent the same are necessary for the ownership, maintenance,
management and operation of the Property. Borrower will qualify
to do business and will remain in good standing under the laws of
each jurisdiction as and to the extent the same are required for
the ownership, maintenance, management and operation of the Property.
(m) TITLE TO THE PROPERTY. Borrower will warrant
and defend (i) the title to the Property and the Trust and every
part thereof, subject only to Liens permitted hereunder
(including Permitted Encumbrances), and (ii) the validity and
priority of the Liens of the Mortgage and the Assignment of
Leases on the Property and the Trust, subject only to Liens
permitted hereunder (including Permitted Encumbrances), in each
case against the claims of all Persons whomsoever. Borrower
shall reimburse Lender for any losses, costs, damages or expenses
(including reasonable attorneys' fees and court costs) incurred
by Lender if an interest in the Property and the Trust, other
than as permitted hereunder, is claimed by another Person.
(n) COSTS OF ENFORCEMENT. In the event (i) that the
Mortgage encumbering the Property is foreclosed in whole or in
part or that the Mortgage is put into the hands of an attorney
for collection, suit, action or foreclosure, (ii) of the
foreclosure of any mortgage prior to or subsequent to any
Mortgage encumbering the Property in which proceeding Lender is
made a party, or (iii) of the bankruptcy, insolvency,
rehabilitation or other similar proceeding in respect of Borrower
or an assignment by Borrower for the benefit of its creditors,
Borrower, its successors or assigns, shall be chargeable with and
agrees to pay all reasonable costs of collection and defense,
including attorneys' fees in connection therewith and in connection with
any appellate proceeding or post-judgment action involved therein, which
shall be due and payable together with all required service or use taxes.
<PAGE>
(o) ESTOPPEL STATEMENT. (a) After request by Lender,
Borrower shall within ten (10) days furnish Lender with a
statement, duly acknowledged and certified, setting forth (i) the
amount of the original principal amount of the Note, (ii) the
unpaid principal amount of the Note, (iii) the Applicable
Interest Rate of the Note, (iv) the date installments of interest
and/or principal were last paid, (v) any offsets or defenses to
the payment of the Debt, if any, and (vi) that the Note, this
Agreement, the Mortgage and the other Loan Documents are valid,
legal and binding obligations and have not been modified or if
modified, giving particulars of such modification.
(b) Borrower shall deliver to Lender upon
request, tenant estoppel certificates from each tenant occupying
10,000 square feet of gross leasable area or more at the Property
in form and substance reasonably satisfactory to Lender provided
that Borrower shall not be required to deliver such certificates
more frequently than one (1) time in any calendar year.
(p) LOAN PROCEEDS. Borrower shall use the proceeds of
the Loan received by it on the Closing Date only for the purposes
set forth in SECTION 2.2.
(q) PERFORMANCE BY BORROWER. Borrower shall in a
timely manner observe, perform and fulfill each and every
covenant, term and provision of each Loan Document executed and
delivered by, or applicable to, Borrower, and shall not enter
into or otherwise suffer or permit any amendment, waiver,
supplement, termination or other modification of any Loan
Document executed and delivered by, or applicable to, Borrower
without the prior written consent of Lender.
(r) CONFIRMATION OF REPRESENTATIONS. In addition to
and not in limitation of the covenants and agreements of Borrower
contained in SECTION 7.1, Borrower shall deliver, in connection
with any Securitization, (i) one or more Officers' Certificates
certifying as to the accuracy of all representations made by
Borrower in the Loan Documents as of the date of the closing of
such Secondary Market Transaction in all relevant jurisdictions
(provided that such certificates may, to maintain the accuracy of such
representations, reflect the occurrence of any events after the
Closing), and (ii) certificates of the relevant Governmental
Authorities in all relevant jurisdictions indicating the good
standing and qualification of Borrower and its SPC Managing
Member as of the date of the Secondary Market Transaction.
(s) NO JOINT ASSESSMENT. Borrower shall not suffer,
permit or initiate the joint assessment of any Property (i) with
any other real property constituting a tax lot separate from such
Property, and (ii) with any portion of the 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 Property.
(t) LEASING MATTERS. Borrower shall comply with the
provisions of SECTION 3.6 of the Mortgage pertaining to Leases.
(u) MAINTENANCE OF MORTGAGED PROPERTY; ALTERATIONS;
INSPECTIONS; UTILITIES.
<PAGE>
(i) Borrower shall keep and maintain the Property
and every part thereof in good condition and repair, subject to
ordinary wear and tear, and, subject to Excusable Delays and the
provisions of this Agreement and the Mortgage with respect to
damage or destruction caused by casualty events or Takings, shall
not permit or commit any waste, impairment, or deterioration of
the Property in any material respect. Borrower further covenants
to do all other acts which a reasonable and prudent owner and
operator of regional shopping centers would deem reasonably
necessary to protect the security hereof and will make every
reasonable effort to complete the Required Repairs brought to
Borrower's attention in the Property Condition Report. Borrower
shall not remove or demolish any of the Improvements on the
Property except as the same may be necessary in connection with
an Alteration or a restoration in connection with a Taking or
casualty in accordance with the terms and conditions hereof.
(ii) Except as may be necessary in connection with
an Alteration permitted by this SECTION 5.1(u), Borrower shall
not make any changes or allow any material changes to be made in
the nature of the use of the Property or any part thereof, or
initiate or take any action in furtherance of any change in any
zoning or other land use classification affecting all or any
portion of the Property now or hereafter in effect and affecting
all or any portion of the Property.
(iii) Provided that no Event of Default shall
have occurred and be continuing hereunder, Borrower shall have
the right, without Lender's consent, to undertake any Expansion
or any alteration, improvement, demolition or removal of the
Property or any portion thereof (any Expansion and any such
alteration, improvement, demolition or removal performed by
Borrower, an "ALTERATION") so long as such Alteration is
undertaken in accordance with the applicable provisions of the
Mortgage and other Loan Documents, is permitted by the Operating
Agreements and the Leases and shall not either (x) materially
adversely affect the value of the Property taken as a whole or
(y) materially adversely reduce the Gross Income from Operations
from the level available immediately prior to commencement of
such Alteration (unless the amount of such reduction is secured
by Cash, Cash Equivalents or a Letter of Credit). Any Alteration
which involves an estimated cost of more than the Threshold
Amount shall be conducted under the supervision of an Independent
Architect and no such Alteration shall be undertaken until five
(5) Business Days after there shall have been filed with the
Lender, for information, purposes only and not for approval by
the Lender, detailed plans and specifications and cost estimates
therefor, prepared and approved in writing by such Independent
Architect. Such plans and specifications may be revised at any
time and from time to time provided that material revisions of
such plans and specifications are filed with the Lender, for
information purposes only, together with the written approval
thereof by such Independent Architect. All work done in
connection with any Alteration shall be performed with due
diligence in a good and workmanlike manner, all materials used in
connection with any Alteration shall not be less than the
standard of quality of the materials currently used at the Property
and all work performed and all materials used shall be in accordance
with all applicable Legal Requirements and Insurance Requirements.
<PAGE>
(iv) Notwithstanding anything to the contrary
contained in this SECTION 5.1(u) hereof, no Alteration (excluding
for the purposes of this sentence, the Fox Valley Renovation)
contracted for by the Borrower shall be performed by or on behalf
of Borrower if the cost thereof, individually or in the aggregate
with all other related Alterations, as reasonably estimated by an
Independent Architect, that are due and payable and unpaid exceed
the Threshold Amount (any such Alteration, a "MATERIAL
ALTERATION"), unless Borrower shall have delivered to Lender
security in an amount not less than the difference between such
due and payable and unpaid costs and the Threshold Amount. Prior
to commencing any Alteration (excluding for the purposes of this
sentence, the Fox Valley Renovation) which involves an estimated
cost of more than the Threshold Amount, the Rating Agencies shall
have confirmed in writing to the Lender that such Alteration will
not result in a downgrade, withdrawal or qualification of the
then-current ratings assigned to the Securities. The Threshold
Amount shall be reduced on any given date by the Independent
Architect's estimate of the cost, if work on the Alterations were
to be terminated on such date, to restore the Property to the
extent necessary so that, as restored, there would be no material
adverse effect on the value of the Property as a whole. Costs
which are subject to retainage shall be treated as due and
payable and unpaid from the date they would be due and payable
but for their characterization as subject to retainage. In the
event that any Alteration (excluding for the purposes of this
sentence, the Fox Valley Renovation) shall be made in conjunction
with any Restoration with respect to which Borrower shall be
entitled to withdraw Proceeds pursuant to SECTION 7.1.2 hereof,
the amount of the Cash and Cash Equivalents and/or Letter of
Credit to be furnished pursuant hereto need not exceed the
aggregate cost of such Restoration and such Alteration (as
estimated by the Independent Architect), less the sum of the
amount of any Proceeds which Borrower may be entitled to withdraw
pursuant to SECTION 7.1.2 hereof and the Threshold Amount
(adjusted as described above). The Independent Architect shall
deliver to Lender a schedule setting forth the projected stages
of completion of the Alteration and the corresponding amounts
equal to such completion. Any Cash which Borrower shall deliver
pursuant hereto (or the proceeds of any Cash and Cash Equivalents
and/or Letter of Credit) shall be held by Lender in the cash
collateral account established by Lender for such purpose. From
time to time as the Alteration progresses, the amount of any Cash
or Cash Equivalents so furnished may be released by Lender and
paid or otherwise applied by or returned to Borrower in an amount
equal to the amount Borrower would be entitled to so withdraw if
SECTION 7.1.2 hereof were applicable, and any Letter of Credit so
furnished may be reduced by Borrower in an amount equal to the
amount Borrower would be entitled to so reduce if SECTION 7.1.2
hereof were applicable. At any time after substantial completion
of any Alteration in respect whereof Cash and Cash Equivalents
and/or a Letter of Credit was deposited pursuant hereto, the
whole balance of any Cash so deposited with Lender and then
remaining on deposit shall be paid by Lender to Borrower, and any
Cash and Cash Equivalents and/or a Letter of Credit so deposited
or delivered shall, to the extent it has not been called upon,
reduced or theretofore released, be released by Lender to
Borrower, within ten (10) days after receipt by Lender of an
application for such withdrawal and/or release
<PAGE>
together with an Officer's Certificate, and signed also (as to
the following clause (A)) by the Independent Architect, setting
forth in substance as follows:
(A) that the Alteration in respect of which such
Cash and Cash Equivalents and/or a Letter of Credit was
deposited has been substantially completed in all material
respects in accordance with any plans and specifications
therefor previously filed with Lender under SECTION
5.1(u)(iii) hereof; and
(B) that to the knowledge of the certifying
Person all amounts which Borrower is or may become liable to
pay in respect of such Alteration through the date of the
certification have been paid in full or adequately provided
for or are being contested in accordance with SECTION 3.9(b)
of the Mortgage; and, to the extent that such are customary
and reasonably obtainable by prudent managers in the
metropolitan area where the Property is located and Borrower
is not contesting payment as aforesaid, that lien waivers
have been obtained from the general contractor and major
subcontractors performing such Alterations.
(v) Lender and any Persons authorized by Lender
may at all reasonable times and upon reasonable notice enter and
examine the Property and may inspect all work done, labor
performed and materials furnished in and about the Property
subject in all instances to the rights of tenants under Leases.
Lender shall not have any duty to make any such inspection and
shall not have any liability or obligation for making (except for
its gross negligence or willful misconduct) or not making any
such inspection.
(vi) Provided that no Event of Default shall have
occurred and be continuing hereunder, Borrower shall have the
right, without Lender's consent, to expand or reduce the size of
the Property through the addition of one or more anchor stores
and/or the addition of one or more mall or peripheral stores form
time to time (either retail or non-retail facilities) including,
without limitation, by the conversion of an existing department
store to additional mall stores, the transfer of a portion of the
Property to a department store for the construction of its store,
or the construction of a decked parking facility (an
"EXPANSION"), so long as:
(A) such Expansion (1) shall not materially
adversely affect the value of the Property, including any
anchor parcel to be conveyed to a department store, taken as
a whole, (2) shall not result in any violation of the terms
of any Operating Agreement or Lease at the Property, (3)
shall be conducted in accordance with SECTION 5.1(u)(iii)
hereof, and (4) shall not materially, adversely affect the
income of the Property;
(B) Borrower delivers an Officer's Certificate
stating that (1) such transactions and the particular plans
developed for the Expansion (x) shall not violate any
existing Material Lease or Operating Agreements, and shall
not affect the utility or operation of the Property in any
<PAGE>
material adverse respect, (2) any connection to, or
contemplated shared use of, the common area in order to
provide utilities services and access to the Expansion shall
not affect the availability or provision of utility services
to the Property in any material adverse respect, and (3) any
such transaction shall not materially reduce the rentable
square footage of the Improvements;
(C) Borrower receives written confirmation from
the Rating Agencies that the Expansion would not result in a
downgrade, qualification or withdrawal of the then-current
ratings on the Securities; and
(D) Borrower obtains an agreement from the third-
party developer, if any, conducting such Expansion which
provides that in the event the third-party developer does
not complete construction of the improvements on the
expansion parcel, Borrower will have the right, at either
Borrower's or the developer's expense as Borrower shall
elect, to enter the Expansion parcel and either complete the
improvements or demolish the uncompleted improvements with
no liability to the third-party developer; and
(E) Lender shall execute and deliver to Borrower
such instruments and agreements as are reasonably
requested of it by Borrower, at Borrower's expense, in order
to consummate any Expansion permitted hereby.
(vii) FOX VALLEY RENOVATION. Borrower shall
commence the Fox Valley Renovation not later than February 15,
1998 and shall substantially complete same not later than April
1, 1999 in a good and workmanlike manner consistent with the
quality of construction existent at the Property. The Fox Valley
Renovation shall cost Borrower not less than $7,000,000, which
Borrower will pay out of its own funds.
(viii) TRUST.
(a) Borrower hereby covenants,
that until the Loan is paid in
full, to do or take or cause to be
done or taken all acts and steps
necessary to preserve, protect and
defend the lien of the Mortgage on
the Trust and the Trust Property.
(b) Except with regard to
Transfers permitted by Article 6 of
the Mortgage, Borrower will not
direct or allow Trustee to transfer
title to the Property or the Trust
or grant any other person an
interest in, to or under the Trust
or the Property or designate any
other Person a beneficiary under
the Trust.
<PAGE>
(c) Upon termination of the Trust,
while any portion of the Loan is
unpaid, Borrower will do or take or
cause to be done or taken all acts
necessary or required to vest title
in the Trust property subject to
the lien of the Mortgage.
VI. NEGATIVE COVENANTS
------------------
Section 6.1 BORROWER'S NEGATIVE COVENANTS.
-----------------------------
From the date hereof until payment and performance in
full of all obligations of Borrower under the Loan Documents or the
earlier release of the Liens of all Mortgage encumbering the Property
in accordance with the terms of this Agreement and the other Loan Documents,
Borrower covenants and agrees with Lender that it will not do,
directly or indirectly, any of the following:
(a) OPERATION OF PROPERTY. Borrower shall not,
without the prior consent of Lender (which consent shall not be
unreasonably withheld and shall not be required if such
termination is in compliance with the Mortgage), terminate the
Management Agreement or otherwise replace the Manager (unless
such replacement Manager is a Sponsor) or enter into any other
management agreement with respect to the Property.
(b) LIENS. Borrower shall not, without the prior
written consent of Lender, create, incur, assume or suffer to
exist any Lien on any portion of the Property or the Trust or
permit any such action to be taken, except:
(i) Permitted Encumbrances;
(ii) Liens created by or permitted, pursuant to the Loan
Documents;
(iii)Liens for Taxes, or Other Charges not yet due;
(iv) The matters set forth in SECTION 6.5 of the Mortgage.
(c) DISSOLUTION. Borrower shall not (i) engage in any
dissolution, liquidation or consolidation or merger with or into
any other business entity, (ii) engage in any business activity
not related to the ownership and operation of the Property, (iii)
transfer, lease or sell, in one transaction or any combination of
transactions, the assets or all or substantially all of the
properties or assets of the Borrower except to the extent
permitted by the Loan Documents, or (iv) cause the SPC Managing
Member to (A) dissolve, wind up or liquidate or take any action,
or omit to take an action, as a result of which the SPC Managing
Member would be dissolved, wound up or liquidated in whole or in
part, or (B) amend, modify, waive or terminate the certificate of
incorporation or bylaws of the SPC Managing Member, in each case,
without obtaining the prior written consent of Lender or Lender's designee.
<PAGE>
(d) CHANGE IN BUSINESS. Borrower shall not enter into
any line of business other than the ownership and operation of
the Property, 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.
(e) DEBT CANCELLATION. Borrower shall not cancel or
otherwise forgive or release any claim or debt (other than
termination of Leases in accordance herewith) owed to Borrower by
any Person, except for adequate consideration and in the ordinary
course of Borrower's business.
(f) AFFILIATE TRANSACTIONS. Borrower shall not enter
into, or be a party to, any transaction with an Affiliate of
Borrower or any of the partners of Borrower except in the
ordinary course of business and on terms which are fully
disclosed to Lender and are no less favorable to Borrower or such
Affiliate than would be obtained in a comparable arm's-length
transaction with an unrelated third party.
(g) ZONING. Borrower shall not initiate or consent to
any zoning reclassification of any portion of the Property or seek any
variance under any existing zoning ordinance or use or permit the use of
any portion of the Property in any manner that could result in
such use becoming a non-conforming use under any zoning ordinance
or any other applicable land use law, rule or regulation, without
the prior consent of Lender.
(h) ASSETS. Borrower shall not purchase or own any
properties other than the Property and assets used in connection
with the operation and management of the Property.
(i) DEBT. Except as expressly permitted by the terms
of the Mortgage or this Agreement, Borrower shall not create,
incur or assume any debt other than the Debt.
(j) NO JOINT ASSESSMENT. Borrower shall not suffer,
permit or initiate the joint assessment of the Property (i) with
any other real property constituting a tax lot separate from the
Property, and (ii) with any portion of the 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 Property.
(k) PRINCIPAL PLACE OF BUSINESS. Borrower shall not
change its principal place of business set forth on the first
page of this Agreement without first giving Lender thirty (30)
days prior written notice.
(l) ERISA. (i) Borrower shall not engage in any
transaction which would cause any obligation, or action taken or
to be taken, hereunder (or the exercise by Lender of any of its
rights under the Note, this Agreement or the other Loan
Documents) to be a non-exempt (under a statutory or
administrative exemption) prohibited transaction under the
Employee Retirement Income Security Act of 1974, as amended ("ERISA").
<PAGE>
(ii) Borrower further covenants and agrees to
deliver to Lender such certifications or other evidence from time
to time throughout the term of the Loan, as requested by Lender
in its sole discretion, that (A) Borrower is not an "employee
benefit plan" as defined in Section 3(3) of ERISA, which is
subject to Title I of ERISA, or a "governmental plan" within the
meaning of Section 3(3) of ERISA; (B) to Borrower's actual
knowledge, without investigation, Borrower is not subject to
state statutes regulating investments and fiduciary obligations
with respect to governmental plans; and (C) one or more of the
following circumstances is true:
(1) Equity interests in Borrower are publicly
offered securities, within the meaning of 29 C.F.R. 2510.3-101(b)(2);
(2) Less than twenty-five percent (25%) of each
outstanding class of equity interests in Borrower are held
by "benefit plan investors" within the meaning of 29 C.F.R.
2510.3-101(f)(2); or
(3) Borrower qualifies as an "operating company"
or a "real estate operating company" within the meaning of
29 C.F.R. 2510.3-101(c) or (e) or an investment company
registered under The Investment Company Act of 1940.
VII. CASUALTY; CONDEMNATION
----------------------
Section 7.1 INSURANCE; CASUALTY AND CONDEMNATION.
------------------------------------
7.1.1 INSURANCE.
(a) INSURANCE COVERAGE REQUIREMENTS. Borrower shall,
at its sole cost and expense, keep in full force and effect
policies of insurance coverage (the "Policies") of the types and
minimum limits as follows during the term of the Mortgage:
(i) Property Insurance. Insurance with respect
to the Improvements and the Equipment against any peril included
within the classification "All Risks of Physical Loss" in amount
at all times sufficient to prevent the Borrower from becoming co-
insurer within the terms of the applicable Policies, but in any
event such insurance shall be maintained in an amount equal to
the full insurable value of the Improvements and the Equipment,
the term "full insurable value" to mean the actual replacement
cost of the Improvements and the Equipment (without taking into
account any depreciation, and exclusive of excavations, footing
and foundations, landscaping and paving, but inclusive of
demolition and debris removal) determined annually by an insurer,
a recognized independent insurance broker or an appraiser
selected and paid by the Borrower and in no event less than the
coverage required pursuant to the terms of any Lease; provided,
however, if the terms of the applicable insurance policies
expressly provide for insurance to be provided in the amount of
the actual replacement cost of the Improvements and the Equipment
or such Policies contain a replacement cost endorsement, no such
annual determination will be necessary;
<PAGE>
(ii) Liability Insurance. Commercial general
liability insurance, including bodily injury, death and property
damage liability, and excess liability insurance against any and
all claims, including all legal liability to the extent insurable
imposed upon the Lender and all court costs and attorneys' fees
and expenses, arising out of or connected with the possession,
use, leasing, operation, maintenance or condition of the Real
Estate for a combined single limit of not less than $15,000,000;
(iii) Workers' Compensation Insurance.
Statutory workers' compensation insurance (to the extent the
risks to be covered thereby are not already covered by other
Policies of insurance maintained by the Borrower), with respect
to any work on or about the Property;
(iv) Business Interruption. Business interruption
and/or loss of "rental value" insurance in an amount sufficient
to avoid any co-insurance penalty and to provide Proceeds which
will cover, at Borrower's option, (i) twenty-four (24) months
following the date of casualty or loss or (ii) the period of
restoration from the date of casualty or loss, the term "rental
value" to mean the sum of (A) the total Rents payable under the
Leases and (B) the total amount of all other amounts to be
received by the Borrower from third parties which are the legal
obligation of the tenants, reduced to the extent such amounts
would not be received because of Operating Expenses not incurred
during a period of non-occupancy of that portion of the Property
then not being occupied; provided, however, if the Borrower is
unable to obtain business interruption insurance in the foregoing
amount at commercially reasonable premiums, then the Borrower
will obtain business interruption insurance in an amount which is
generally required by institutional leaders for properties
comparable to the Property, but in no event in an amount less
than that sufficient to provide Proceeds which will cover a
period equal to the lesser of (x) the period of restoration from
the date of casualty or loss of (y) three hundred and sixty-five
(365) days, unless the Rating Agencies shall confirm that to
obtain less coverage will not result in a downgrade,
qualification or withdrawal of on the then current rating of the
Securities;
(v) Boiler and Machinery Insurance. Broad form
boiler and machinery insurance (without exclusion for explosion)
covering all boilers or other pressure vessels, machinery and
equipment located in, on or about the Property and insurance
against loss of occupancy or use arising from any such breakdown
in such amounts as are generally available at commercially
reasonable premiums and are generally required by institutional
lenders for properties comparable to the Property;
(vi) Flood Insurance. If all or any portion of
the Property is located within a federally designated flood
hazard zone, flood insurance if available, in such amount as
generally required by institutional lenders for similar
properties provided, however, if flood insurance shall be
unavailable from private carriers, such flood insurance may be
provided by the federal government, if available; and
<PAGE>
(vii) Other Insurance. Such other insurance
requested by Lender with respect to the Property against loss or
damage of the kinds from time to time customarily insured against
and in such amounts as are generally available at commercially
reasonable premiums and are generally required by institutional
lenders for properties comparable to the Property.
(b) (i) Property and Business Interruption Insurance.
The Borrower will maintain a portion of the insurance coverage
described in SECTION 7.1.1(a)(i) above at least equal to the
Maximum Foreseeable Casualty Loss, and the insurance coverage
described in SECTION 7.1.1(a)(iv) above, with either (x) the
insurers who insure the Improvements and Equipment on the date of
this Agreement or (y) one or more other primary insurers having
(or a syndicate of insurers through which at least 75% of the
coverage (if there are 4 or fewer members of the syndicate) or at
least 60% of the coverage (if there are 5 or more members of the
syndicate) is with carriers having), a claims-paying-ability
rating by S&P not lower than "AA" and a claims-paying ability
rating by Moody's not lower than "Aa".
(ii) Liability and Boiler and Machinery Insurance.
The Borrower will maintain a portion of the insurance coverage
described in SECTIONS 7.1.1(a)(ii) and 7.1.1 (a)(v) with either
(x) the insurers who insure the Property on the date of this
Agreement or (y) one or more other domestic primary insurers
having (or a syndicate of insurers through which at least 75% of
the coverage (if there are 4 or fewer members of the syndicate)
or at least 60% of the coverage (if there are 5 or more members
of the syndicate) is with carriers having), a claims-paying-
ability rating by S&P not lower than two categories below the
then rating of the Securities by S&P, but in either case of (x)
or (y) above, such insurers' rating shall in no event be less
than "Investment Grade" by S&P and Moody's.
(iii) Other Insurance. Borrower will maintain
a portion of the insurance coverage described in SECTION
7.1.1(a)(iii) above with either an insurer having a claims-paying-
ability rating of not less than "Investment Grade" or the
applicable state workers' compensation fund.
In each case as to a syndicate or an individual
insurer, however, if no domestic providers of such insurance are
so rated, the requirement for such rating shall be the highest
rating then given to primary insurers by S&P; provided that in
the case of an individual insurer or a syndicate failing to
satisfy the foregoing test, supplementary qualifying coverage
shall be required within ninety (90) days after the date Borrower
learns of such failure (in the case of a syndicate, only to the
extent the syndicate fails to satisfy the test); and provided
further that in the event of any loss, claims in respect of such
portion of such insurance maintained in accordance with
SECTION 7.1.1(a)(iii) above shall be payable prior to claims in
respect of the remaining portion(s) of the insurance required by
such provisions.
Notwithstanding anything to the contrary set forth
herein, all insurance required coverage shall be provided by one
or more primary insurers having an Alfred M. Best Company, Inc.
<PAGE>
rating of "A" or better and financial size category of not less
than VIII, except to the extent that insurance in force on the
date of this Agreement does not satisfy such criteria or if
otherwise approved by the Lender. Any insurance in force on the
date of this Agreement which is accepted or approved by Lender
and which is provided by a group or syndicate of insurers shall
be satisfactory so long as a sufficient number of members of the
syndicate providing the coverage satisfy the foregoing criteria
for claims-paying ability even if one or more of the insurers
comprising the group or syndicate no longer participates in the
group or syndicate. All insurers providing insurance required by
this Mortgage shall be authorized to issue insurance in the state
where the Property is located.
(c) "MAXIMUM FORESEEABLE CASUALTY LOSS" shall mean the
estimate of the Qualified Fire Protection Engineer then being
used by the Borrower in connection with its existing insurance
package of the maximum probable casualty loss which would be
suffered in respect of the Improvements and Equipment as a result
of damage caused by the perils covered by the insurance described
in SECTION 7.1.1(a)(i) hereof.
(d) Blanket Coverage. The insurance coverage required
under SECTION 7.1.1(a) may be effected under a blanket Policy or
Policies covering the Property and other property and assets not
constituting a part of the Property; provided that any such
certificates of insurance evidencing the coverage required herein
shall specify, except in the case of general liability insurance,
the portion of the total coverage of such policy that is
allocated exclusively to the Property, and any sublimits in such
blanket Policy applicable to the Property, which amounts shall
not be less than the amounts required pursuant to SECTION
7.1.1(a) and which shall in any case comply in all other respects
with the requirements of this SECTION 7.1.
(e) Form of Insurance Policies; Endorsements. All
insurance Policies shall be in such form and with such
endorsements as are comparable to the forms of and endorsements
to Borrower's insurance Policies in effect on the date hereof or
otherwise in accordance with commercially reasonable standards
applied by prudent owners of first class regional shopping
centers in the general vicinity of the Property. Certificates of
insurance with respect to all of the insurance Policies required
hereunder have been delivered to Lender (or will be so delivered
promptly after the date hereof), and originals or certified
copies of all such Policies shall be delivered to Lender when the
same are available and shall be held by Lender. All such
Policies shall name Lender as an additional insured, shall
provide that all Proceeds be payable to Lender as set forth in
SECTION 7.1 hereof, and shall contain: (i) a standard "non-
contributory mortgagee" endorsement or its equivalent relating,
inter alia, to recovery by Lender notwithstanding the negligent
or willful acts or omissions of Borrower; (ii) to the extent
available at commercially reasonable rates a waiver of
subrogation endorsement in favor of Lender; (iii) an endorsement
providing that no Policy shall be impaired or invalidated by
virtue of any act, failure to act, negligence of, or violation of
declarations, warranties or conditions contained in such Policy
by Borrower, Lender or any other named insured, additional
<PAGE>
insured or loss payee, except for the willful misconduct of
Lender knowingly in violation of the conditions of such Policy;
(iv) an endorsement providing for a deductible per loss of an
amount not more than that which is customarily
maintained by prudent owners of first class regional shopping
centers in the general vicinity of the Property, but in no event
in excess of $50,000; and (v) a provision that such Policies
shall not be canceled or terminated without at least thirty (30)
days prior written notice to Lender in each instance.
Certificates of insurance with respect to all renewal and
replacement Policies shall be delivered to Lender not less than
ten (10) days prior to the expiration date of any of the
insurance Policies required to be maintained hereunder which
certificates shall bear notations evidencing payment of
applicable premiums. Originals or certified copies of such
replacement insurance Policies shall be delivered to Lender
promptly after Borrower's receipt thereof but in any case within
sixty (60) days after the effective date thereof. If Borrower
fails to maintain insurance required by this Agreement, Lender
may procure such insurance.
(f) Compliance with Insurance Requirements. Borrower
shall comply with all Insurance Requirements and shall not bring
or keep or permit to be brought or kept any article upon any of
the Property or cause or permit any condition to exist thereon
which would be prohibited by any Insurance Requirement, or would
invalidate insurance coverage required hereunder to be maintained
by Borrower on or with respect to any part of the Property
pursuant to this SECTION 7.1.
(g) Separate Insurance. The Borrower will not take
out separate insurance contributing in the event of loss with
that required to be maintained pursuant to this SECTION 7.1
unless such insurance complies with SECTION 7.1.1(e).
7.1.2 CONDEMNATION AND INSURANCE PROCEEDS
(a) Borrower will promptly notify Lender in writing
upon obtaining knowledge of (i) the institution of any
proceedings relating to any Taking or (ii) the occurrence of any
casualty, damage or injury to the Property or Equipment or any
portion thereof the restoration of which is estimated by Borrower
in good faith to cost more than Two Million Dollars ($2,000,000).
In addition, notice of any casualty damage or loss the
restoration of which is estimated by Borrower in good faith to
cost more than Two Million Dollars ($2,000,000) shall set forth
such good faith estimate of the cost of repairing or restoring
such damage or destruction in reasonable detail if the same is
then available and, if not, as soon thereafter as it can
reasonably be provided.
(b) In the event of any Taking of or casualty or other
damage or injury to the Property, Borrower's right, title and
interest in and to all compensation, awards, proceeds, damages,
claims, insurance recoveries, causes and rights of action
(whether accrued prior to or after the date hereof) and payments
which Borrower may receive or to which Borrower may become
entitled with respect to the Property or any part thereof
(collectively, "PROCEEDS"), in connection with any such Taking
<PAGE>
(subject to the terms of the Operating Agreements and the
Leases), casualty or other damage or injury to the Property, or
any part thereof, are hereby assigned to and shall be paid to
Lender. Notwithstanding anything to the contrary set forth
herein or in the Mortgage, to the extent the Proceeds are not in
excess of Four Million Dollars ($4,000,000) (the "MINIMUM DEPOSIT
AMOUNT") (excluding, solely for purposes of such calculation,
Proceeds paid in respect of the insurance described in SECTION
7.1.1(a)(iv) then, provided that no Event of Default shall have
occurred and be continuing, Lender hereby consents to and agrees
that such Proceeds shall be paid directly to Borrower to be
applied to restoration of the Property in accordance with the
terms hereof (provided, however, unless an Event of Default shall
have occurred and be continuing, Proceeds paid in
respect of the insurance described in SECTION 7.1.1(a)(iv) shall
be paid directly to Borrower.) Promptly after the occurrence of
any damage or destruction to all or any portion of the Property
or a Taking of a portion of the Property, Borrower shall commence
and diligently prosecute to completion, subject to Excusable
Delays, the repair, restoration and rebuilding of the Property
(in the case of a Taking, to the extent it is capable of being
restored) (such repair, restoration and rebuilding are sometimes
hereinafter collectively referred to as the "RESTORATION") so
damaged, destroyed or remaining after such Taking, in full
compliance with all Legal Requirements and free and clear of any
and all Liens except the Permitted Exceptions. Borrower will, in
good faith and in a commercially reasonable manner, file and
prosecute the adjustment, compromise or settlement of any claim
for Proceeds and, subject to Borrower's right to receive the
direct payment of any Proceeds up to the Minimum Deposit Amount
and, with respect to Proceeds from a Taking, subject to the
applicable terms of the Operating Agreements and the Leases and
the provisions below, will cause the same to be collected and
paid over to Lender, to be held and applied in accordance with
the provisions of this Agreement. Borrower hereby irrevocably
authorizes Lender to file and prosecute such claim and to collect
and to make receipt for any such payment in the event Borrower
fails so to act or if an Event of Default shall have occurred and
be continuing, and in such case Lender shall be authorized to
file such claim and prosecute it with counsel satisfactory to it
at the expense of Borrower. Lender shall have the right to
approve, such approval not to be unreasonably withheld, any
settlement which might result in any Proceeds in excess of the
Minimum Deposit Amount, and Borrower will deliver or cause to be
delivered to Lender all instruments reasonably requested by
Lender to permit such approval. Borrower will pay all costs,
fees and expenses reasonably incurred by Lender (including all
reasonable attorneys' fees and expenses, the fees of insurance
experts and adjusters and reasonable costs incurred in any
litigation or arbitration) in connection with the settlement of
any claim for insurance in excess of the Minimum Deposit Amount
or Proceeds in excess of the Minimum Deposit Amount and seeking
and obtaining of any payment on account thereof in accordance
with the foregoing provisions and for any of the foregoing
expenses, regardless of whether or not the Proceeds exceed the
Minimum Deposit Amount, if any Event of Default shall have
occurred and be continuing. If any Proceeds are received by
Borrower, such Proceeds shall, until the completion of the
related Restoration, be held in trust and segregated from other
<PAGE>
funds of the Borrower to be used to pay for the cost of the
Restoration in accordance with the terms hereof, and in the event
such Proceeds are in excess of the Minimum Deposit Amount such
Proceeds shall, subject to the provisions of the Operating
Agreements and the Leases, be forthwith paid to Lender to be held
by Lender in a segregated account in trust for Borrower, in each
case to be applied or disbursed in accordance with the provisions
hereof.
(c) In the event that any Proceeds (other than
Proceeds paid with respect to the insurance described in SECTION
7.1(a)(iv) are in excess of the Minimum Deposit Amount, then all
Proceeds (other than Proceeds paid with respect to the insurance
described in Section 7.1(a)(iv) and except that Proceeds in
respect of a Taking shall be subject to the terms and conditions
of the Operating Agreements and the Leases) shall be paid over to
Lender (a "Casualty/Condemnation Involuntary Prepayment") and
shall be applied as follows: first, toward reimbursement of
Lender's reasonable costs and expenses in connection with
recovery of the Proceeds and disbursement of the proceeds (as
further described below), including, without limitation,
reasonable administrative costs and inspection fees, and then, to
the prepayment of the Indebtedness secured hereby (which prepayment shall
be made on the next Payment Date following notice to Lender of an elected
or required prepayment hereunder, which notice Borrower shall
promptly give), without prepayment premium or penalty, only if:
(i) (A) Borrower is not required to restore the Property
pursuant to any Operating Agreement or Lease, and
(B) either:
(x) the expected cost to repair
the Property would exceed the Threshold Amount
and, provided that the Taking or casualty
adversely affects leased areas of the Property,
the restoration of the Property cannot reasonably
be completed before the date of expiration of any
insurance maintained pursuant to SECTION
7.1.1(a)(iv) or any Letter of Credit or Cash or
Cash Equivalents posted with Lender in lieu of or
in addition to such insurance, which shall be
determined based on a cost estimate and schedule
for restoration prepared by an Independent
Architect and delivered to Lender, or
(y) Borrower elects not to restore the
Property, or
(ii) if such Proceeds were the result of a
Taking, then after restoration is completed, the
Proceeds have not been required to effect such
restoration, in which event prepayment shall be made to
the extent of such unneeded Proceeds.
(d) If Proceeds are not required to be applied towards
payment of a Casualty/Condemnation Involuntary Prepayment
pursuant to SECTION 7.1.2(c) above, then after prepayment of the
expenses described in clause first of SECTION 7.1.2(c), Lender
<PAGE>
shall make the Proceeds (except Proceeds paid with respect to the
insurance described in SECTION 7.1.1(a)(iv)) which it is holding
pursuant to the terms hereof available to Borrower for payment of
or reimbursement of Borrower's expenses incurred with respect to
the Restoration, upon the terms and subject to the conditions set
forth in SECTION 7.1.2(e);
(i) there shall be no continuing Event of Default
hereunder;
(ii) to the extent, if any, that the
estimated cost of the Restoration (as estimated by an
Independent Architect) shall exceed the Proceeds
available, Borrower shall (within a reasonable period
of time after receipt of such estimate, and in any
event prior to any further disbursement by Lender)
deposit with or deliver to Lender Cash and Cash
Equivalents and/or a Letter of Credit in the amounts of
such excess; and
(iii) Lender shall, within a reasonable
period of time prior to Borrower's request for initial
disbursement, be furnished with an estimate of the cost
of the Restoration accompanied by an Independent
Architect's certification as to such costs and
appropriate plans and specifications for the
Restoration to the extent that the same are required by
law or are prepared by the Borrower. The plans and
specifications shall require that the Restoration be
done in a first-class workmanlike manner substantially
equivalent to the quality and character of the original
construction of the Improvements, so that upon
completion thereof (taking into account a commercially
reasonable time to relet the affected portion of the Property),
the Property shall be at least substantially equal in value
and general utility to the Property prior to the damage
or destruction (or, in the case of a partial Taking, to
the state to which it is capable of being restored).
Borrower shall restore all Improvements such that when
they are fully restored and/or repaired that such
Improvements and their contemplated use fully comply
with all applicable Legal Requirements, including,
without limitation, zoning, environmental and building
laws, codes, ordinances and regulations.
(e) Disbursement of Proceeds shall be made from
time to time (but not more frequently than once in any month) by
Lender as the Restoration progresses upon receipt by Lender of
(i) an Officer's Certificate dated not more than thirty (30) days
prior to the application for such payment, requesting such
payment or reimbursement and setting forth the Restoration
performed which is the subject of such request, the parties which
performed such Restoration and the actual cost thereof, and also
certifying that such Restoration and materials are free and clear
of Liens other than Permitted Exceptions and (ii) an Independent
Architect's certificate certifying performance of the Restoration
together with an estimate of the cost to complete the
Restoration. No payment made prior to the final completion of
the Restoration shall exceed ninety-five percent (95%) of the
<PAGE>
value of the Restoration performed or materials furnished and
incorporated into the Improvements from time to time (except in
the case of contractors' or subcontractors' Restoration as to
which final completion has been attained), and at all times the
undisbursed balance of said Proceeds, together with all amounts
for which Cash or Cash Equivalents or a Letter of Credit
deposited or delivered pursuant to clause (ii) above, shall be at
least sufficient to pay for the cost of completion of the
Restoration, free and clear of Liens other than Permitted
Exceptions; final payment of all Proceeds remaining with Lender
shall be made upon receipt by Lender of a certification by an
Independent Architect as to the completion of the Restoration
substantially in accordance with the submitted plans and
specifications, and the filing of a notice of completion (if such
filing is required by applicable law). If the Proceeds shall be
more than the Threshold Amount, Lender shall require (i) evidence
of mechanic's lien waivers, and (ii) an endorsement to its Title
Insurance Policy insuring the continued priority of the Lien of
this Mortgage (subject to Permitted Exceptions) as to all sums
advanced hereunder, such endorsement to be paid for by Borrower.
From time to time as the Restoration progresses, the amount of
any Cash or Cash Equivalents so furnished may be withdrawn by
Borrower and paid or otherwise applied by or returned to Borrower
in an amount equal to the amount Borrower would be entitled to so
withdraw if the same were Proceeds, and any Letter of Credit so
furnished may be reduced by Borrower in an amount equal to the
amount Borrower would be entitled to reduce if the same were
Proceeds. At any time after substantial completion of any
Restoration in respect whereof Cash and Cash Equivalents and/or a
Letter of Credit was deposited pursuant hereto, the whole balance
of any Cash so deposited with Lender and then remaining on
deposit may be withdrawn by Borrower and shall be paid by Lender
to Borrower and any Cash and Cash Equivalents and/or Letter of
Credit so deposited or delivered shall, to the extent it has not
been called upon, reduced or theretofore released, be released by
Lender to Borrower, within ten (10) days after receipt by Lender
of an application for such withdrawal and/or release together
with an Officer's Certificate, and signed also (as to the
following clause (1)) by the Independent Architect, setting forth
in substance as follows:
(1) that the Restoration in respect of which such Cash
and Cash Equivalents and/or a Letter of Credit was deposited
has been substantially completed in all material respects in
accordance with any plans and specifications therefor previously
filed with Lender under SECTION 7.1.2(d) hereof; and
(2) that to the knowledge of the certifying Person all
amounts which Borrower is or may become liable to pay in
respect of such Restoration through the date of the
certification have been paid in full or adequately provided
for or are being contested in accordance with SECTION 3.9(B)
of the Mortgage; and, to the extent that such are customary
and reasonably obtainable by prudent managers in the
metropolitan area where the Property is located and Borrower
is not contesting payment in accordance with SECTION 3.9(b)
of the Mortgage, that lien waivers have been obtained from
the general contractor and major subcontractors performing
such Restoration.
<PAGE>
Section 7.2 REQUIRED REPAIRS; REQUIRED REPAIR FUNDS
---------------------------------------
Intentionally Deleted.
Section 7.3 TAX AND INSURANCE ESCROW FUND
-----------------------------
Intentionally Deleted.
Section 7.4 REPLACEMENTS AND REPLACEMENT RESERVE.
------------------------------------
Intentionally Deleted.
VIII. DEFAULTS
--------
Section 8.1 EVENT OF DEFAULT.
----------------
(a) Each of the following events shall constitute an
event of default hereunder (an "EVENT OF DEFAULT"):
(i) if any portion of the Debt is not paid when due;
(ii) if any of the Taxes or Other Charges are not
paid when the same are due and payable and such failure continues for more
than five (5) days after notice from Lender;
(iii) if the Policies are not kept in full force and
effect, or if after ten (10) days notice to Borrower, original certificates
evidencing the coverage afforded by the Policies are not delivered to Lender
upon request;
(iv) if Borrower transfers or encumbers any portion of the
Property, except as permitted by the Mortgage, without Lender's prior written
consent;
(v) if any representation or warranty made by
Borrower herein or in any other Loan Document, or in any report,
certificate, financial statement or other instrument, agreement
or document furnished to Lender shall have been false or
misleading in any material respect as of the date the
representation or warranty was made;
(vi) if Borrower shall make an assignment for the
benefit of creditors;
(vii) if a receiver, liquidator or trustee
shall be appointed for Borrower or if Borrower 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, Borrower,
or if any proceeding for the dissolution or liquidation of
Borrower shall be instituted; PROVIDED, HOWEVER, if such
appointment, adjudication, petition or proceeding was involuntary
<PAGE>
and not consented to by Borrower, upon the same not being
discharged, stayed or dismissed within sixty (60) days;
(viii) if Borrower attempts to assign its
rights under this Agreement or any of the other Loan Documents or
any interest herein or therein in contravention of the Loan Documents;
(ix) if Borrower breaches any of its respective
negative covenants contained in SECTION 6.1 or any covenant
contained in SECTION 4.1.1(dd) hereof;
(x) with respect to any term, covenant or
provision set forth herein which specifically contains a notice
requirement or grace period, if Borrower shall be in default
under such term, covenant or condition after the giving of such
notice or the expiration of such grace period;
(xi) if any of the assumptions contained in the
Insolvency Opinion, or in any other "non-consolidation" opinion
delivered to Lender in connection with the Loan, or in any other
"non-consolidation" delivered subsequent to the closing of the
Loan, is or shall become untrue in any material respect;
(xii) if Borrower shall continue to be in
Default under any of the other terms, covenants or conditions of
this Agreement not specified in subsections (i) to (xi) above,
for ten (10) days after notice to Borrower from Lender, in the
case of any Default which can be cured by the payment of a sum of
money, or for thirty (30) days after notice from Lender in the
case of any other Default; 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 Borrower in the exercise of
due diligence to cure such Default, such additional period not to
exceed one hundred twenty (120) days; or
(xiii) if there shall be default under any of
the other Loan Documents beyond any applicable cure periods
contained in such documents, whether as to Borrower or any of the
Property, or if any other such event shall occur or condition
shall exist, if the effect of such event or condition is to
accelerate the maturity of any portion of the Debt or to permit
Lender to accelerate the maturity of all or any portion of the Debt;
(b) Upon the occurrence of an Event of Default (other
than an Event of Default described in clauses (vi), (vii) or
(viii) above) and at any time thereafter the Lender may, in
addition to any other rights or remedies available to it pursuant
to this Agreement and the other Loan Documents or at law or in
equity, Lender may take such action, without notice or demand,
that Lender deems advisable to protect and enforce its rights
against Borrower and in and to all or any of the Property, including,
without limitation, declaring the Debt to be immediately due and payable,
and Lender may enforce or avail itself of any or all rights or
remedies provided in the Loan Documents against Borrower and any
or all of the Property, including, without limitation, all rights
<PAGE>
or remedies available at law or in equity; and upon any Event of
Default described in clauses (vi), (vii) or (viii) above, the
Debt and all other obligations of Borrower hereunder and under
the other Loan Documents shall immediately and automatically
become due and payable, without notice or demand, and Borrower
hereby expressly waives any such notice or demand, anything
contained herein or in any other Loan Document to the contrary
notwithstanding.
Section 8.2 REMEDIES.
--------
(a) Upon the occurrence of an Event of Default, all or
any one or more of the rights, powers, privileges and other
remedies available to Lender against Borrower under this
Agreement or any of the other Loan Documents executed and
delivered by, or applicable 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 of the Debt 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 all or any portion of the 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. Without limiting the
generality of the foregoing, Borrower agrees that if an Event of
Default is continuing (i) Lender is not subject to any "one
action" or "election of remedies" law or rule, and (ii) all liens
and other rights, remedies or privileges provided to Lender shall
remain in full force and effect until Lender has exhausted all of
its remedies against the Property and the Mortgage has been
foreclosed, sold and/or otherwise realized upon in satisfaction
of the Debt or the Debt has been paid in full.
(b) With respect to Borrower and the Property, nothing
contained herein or in any other Loan Document shall be construed
as requiring Lender to resort to the Property for the
satisfaction of any of the Debt in preference or priority, and
Lender may seek satisfaction out of the Property or any part
thereof, in its absolute discretion in respect of the Debt. In
addition, Lender shall have the right from time to time to
partially foreclose the Mortgage in any manner and for any
amounts secured by the Mortgage then due and payable as
determined by Lender in its sole discretion including, without
limitation, the following circumstances: (i) in the event
Borrower defaults beyond any applicable grace period in the
payment of one or more scheduled payments of principal and
interest, Lender may foreclose the Mortgage to recover such
delinquent payments, or (ii) in the event Lender elects to
accelerate less than the entire outstanding principal balance of
the Loan, Lender may foreclose the Mortgage to recover so much of
the principal balance of the Loan as Lender may accelerate and
such other sums secured by the Mortgage as Lender may elect.
Notwithstanding one or more partial foreclosures, the Property
<PAGE>
shall remain subject to the Mortgage to secure payment of sums
secured by the Mortgage and not previously recovered.
(c) Lender shall have the right from time to time to
sever the Note and the other Loan Documents into one or more
separate notes, mortgages and other security documents (the
"Severed Loan Documents") in such denominations as Lender shall
determine in its sole discretion for purposes of evidencing and
enforcing its rights and remedies provided hereunder. Borrower
shall execute and deliver to Lender from time to time, promptly
after the request of Lender, a severance agreement and such other
documents as Lender shall request in order to effect the
severance described in the preceding sentence, all in form and
substance reasonably satisfactory to Lender. Except as may be
required in connection with a Securitization pursuant to SECTION
9.1 hereof, (i) Borrower shall not be obligated to pay any costs
or expenses incurred in connection with the preparation,
execution, recording or filing of the Severed Loan Documents, and
(ii) the Severed Loan Documents shall not contain any
representations, warranties or covenants not contained in the
Loan Documents and any such representations and warranties
contained in the Severed Loan Documents will be given by Borrower
only as of the Closing Date.
Section 8.3 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, 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 one Default or Event of Default
with respect to Borrower shall not be construed to be a waiver of
any subsequent Default or Event of Default by Borrower or to
impair any remedy, right or power consequent thereon.
IX. SPECIAL PROVISIONS
------------------
Section 9.1 SALE OF NOTES AND SECURITIZATION.
--------------------------------
At the request of the holder of the Note and, to the
extent not already required to be provided by Borrower under this
Agreement, Borrower shall use reasonable efforts to satisfy the
market standards to which the holder of the Note customarily
adheres or which may be reasonably required in the marketplace or
by the Rating Agencies in connection with the sale of the Note or
participation therein or the first successful securitization
(such sale and/or securitization, the "SECURITIZATION") of rated
single or multi-class securities (the "Securities") secured by or
<PAGE>
evidencing ownership interests in the Note and the Mortgages,
including, without limitation, to:
(a) (i) provide, at Lender's sole
reasonable cost, such financial and other
information with respect to the Property, the
Borrower and the Manager, (ii) provide budgets
relating to the Property and (iii) to perform or
permit or cause to be performed or permitted such
site inspection, appraisals, market studies,
environmental reviews and reports (Phase I's and,
if appropriate, Phase II's), engineering reports
and other due diligence investigations of the
Property, as may be reasonably requested by the
holder of the Note or the Rating
Agencies or as may be necessary or appropriate in
connection with the Securitization (the "Provided
Information"), together, if customary, with
appropriate verification and/or consents of the
Provided Information through letters of auditors
or opinions of counsel of independent attorneys
acceptable to the Lender and the Rating Agencies;
(b) at Borrower's expense, use reasonable
efforts to cause counsel to render opinions, which
may be relied upon by the holder of the Note, the
Rating Agencies and their respective counsel,
agents and representatives, as to non-
consolidation, fraudulent conveyance, and true
sale or any other opinion customary in
securitization transactions with respect to the
Property and Borrower and Manager and its or their
respective affiliates, which counsel and opinions
shall be reasonably satisfactory to the holder of
the Note and the Rating Agencies;
(c) make updates of such representations and
warranties made as of the Closing Date with
respect to the Property, Borrower, and the Loan
Documents and make such additional representations
or warranties as of the closing date of the
Securitization which do not materially increase
the obligations of Borrower under this Agreement
or any of the other Loan Documents or materially
decrease any of Borrower's rights under this
Agreement or any of the other Loan Documents, and
which, in either event, are customarily provided
in securitization transactions and may be
reasonably requested by the holder of the Note or
the Rating Agencies and consistent with the facts
covered by such representations and warranties as
they exist on the date thereof, including the
representations and warranties made in the Loan
Documents;
(d) execute such amendments to the Loan
Documents and organizational documents as may be
requested by the holder of the Note or the Rating
Agencies or otherwise to effect the
<PAGE>
Securitization; provided, however, that the
Borrower shall not be required to modify or amend
any Loan Document if such modification or
amendment would (i) change the interest rate, the
stated maturity or the amortization of principal
set forth in the Note, or (ii) modify or amend any
other material economic term of the Loan, or
(iii) materially modify or increase any of
Borrower's obligations or liabilities under this
Agreement or any of the other Loan Documents or
materially decrease any of Borrower's rights under
this Agreement or any of the other Loan Documents; and
(e) use reasonable efforts to deliver to
Lender appropriate instruments subordinating the
Leases identified on Schedule VIII to the lien of
the Mortgage together with an agreement to attorn
to Lender from each such tenant that under a lease
which does not provide for such attornment by its
terms; provided, however, the failure of Borrower
to deliver such instruments following the exercise
of reasonable efforts to do so, shall not
constitute a default hereunder.
Except as set forth in SECTION 9.1(a)(i), all
reasonable third party costs and expenses incurred by Lender in
connection with Borrower's complying with requests made under
this SECTION 9.1 shall be paid by the Borrower.
If requested by Lender, Borrower shall provide Lender
with the following financial statements (it being understood that
Lender shall request such financial statements if it anticipates
that the principal amount of the Loan at the time of
Securitization may, or if the principal amount of the Loan at any
time during which the Loan is included in a Securitization does,
equal or exceed 20% of the aggregate principal amount of all
mortgage loans included in the Securitization), and summaries of
such financial statements if the principal amount of the Loan at
any such time equals or exceeds 10% of such aggregate principal amount:
1. As of the Closing Date, a balance sheet with respect to
the Property for the two most recent fiscal years, meeting the
requirements of SECTION 210.3-01 of Regulation S-X of the
Securities Act, and statements of income and statements of cash
flows with respect to the Property for the three most recent
fiscal years, meeting the requirements of SECTION 210.3-02 of
Regulation S-X, and, to the extent that such balance sheet is
more than 135 days old as of the Closing Date, interim financial
statements of the Property meeting the requirements of SECTION
210.3-01 and 210.3-02 of Regulation S-X (all of such financial
statements, collectively, the "STANDARD STATEMENTS") ; provided,
however, that with respect to any Properties that would be deemed
to constitute a business and not real estate under Regulation S-X
that have been acquired by the Borrower from an unaffiliated
third party (such properties, "ACQUIRED PROPERTIES"), as to which
the other conditions set forth in SECTION 210.3-05 of Regulation
S-X for provision of financial statements in accordance with such
Section have been met, in lieu of the Standard Statements
otherwise required by this paragraph, the Borrower shall instead
<PAGE>
provide the financial statements acquired by such SECTION 210.3-
05 of Regulation S-X ("ACQUIRED PROPERTY STATEMENTS").
2. Not later than 45 days after the end of each fiscal
quarter following the Closing Date, a balance sheet of the
Property as of the end of such fiscal quarter, meeting the
requirements of SECTION 210.3-01 of Regulation S-X, and
statements of income and statements of cash flows of the Property
for the period commencing following the last day of the most
recent fiscal year and ending on the date of such balance sheet
and for the corresponding period of the most recent fiscal year,
meeting the requirements of SECTION 210.3-02 of Regulation S-X
(provided, that if for such corresponding period of the most
recent fiscal year Acquired Property Statements were permitted to
be provided hereunder pursuant to paragraph 1, the Borrower shall
instead provide Acquired Property Statements for such
corresponding period). If requested by Lender, Borrower shall
also provide "summarized financial information," as defined in
SECTION 210.1-02(BB) of Regulation S-X, with respect to such
quarterly financial statements.
3. Not later than 90 days after the end of each fiscal
year following the Closing Date, a balance sheet of the Property
as of the end of such fiscal year, meeting the requirements of
SECTION 210.3-01 of Regulation S-X, and statements of income and
statements of cash flows of the Property for such fiscal year,
meeting the requirements of SECTION 210.3-02 of Regulation S-X.
If requested by Lender, Borrower shall provide summarized
financial information with respect to such annual financial
statements.
4. Upon ten (10) Business Days after notice from the
Lender in connection with the Securitization of this Loan, such
additional financial statements, such that, as of the date (each
an "OFFERING DOCUMENT DATE") of each prospectus, private
placement memorandum, offering circular or other offering
document for such Securitization (each an "OFFERING DOCUMENT"),
Borrower shall have provided Lender with all financial statements
as described in paragraph 1; provided that the fiscal year and
interim periods for which such financial statements shall be
provided shall be determined as of such Offering Document Date.
5. In the event Lender determines, in connection with a
Securitization, that the financial statements required in order
to comply with Regulation S-X or Legal Requirements are other
than as provided herein, then notwithstanding the provisions of
this Section, Lender may request, and Borrower shall promptly
provide, such combination of Acquired Property Statements and/or
Standard Statements as may be necessary for such compliance.
6. Any other or additional financial statements, or
financial, statistical or operating information, as shall be
required pursuant to Regulation S-X or other Legal Requirements
in connection with any Offering Document or any filing under or
pursuant to the Exchange Act in connection with or relating to a
Securitization (hereinafter an "EXCHANGE ACT FILING") or as shall
otherwise be reasonably requested by the Lender to meet
disclosure, rating agency or marketing requirements.
<PAGE>
All financial statements provided by Borrower hereunder
shall be prepared in accordance with generally accepted
accounting principles, and shall meet the requirements of
Regulation S-X and other applicable Legal Requirements. All
financial statements relating to a fiscal year shall be audited
by the Independent Accountants of the Borrower in accordance with
generally accepted auditing standards, Regulation S-X and all
other applicable Legal Requirements, shall be accompanied by the
manually executed report of the Independent Accountants thereon,
which report shall meet the requirements of Regulation S-X and
all other applicable Legal Requirements, and shall be further
accompanied by a manually executed written consent of the
Independent Accountants, in form and substance acceptable to
Lender, to the inclusion of such financial statements in any
Offering Document and any Exchange Act Filing and to the use of
the name of such Independent Accountants and the reference to
such Independent Accountants as "experts" in any Offering
Document and Exchange Act Filing, all of which shall be provided
at the same time as the related financial statements are required
to be provided. All other financial statements shall be
certified by the chief financial officer of the Borrower, which
certification shall state that such financial statements meet the
requirements set forth in the first sentence of this paragraph.
Section 9.2 SECURITIZATION INDEMNIFICATION.
------------------------------
(a) Borrower understands that certain of the Provided
Information may be included in disclosure documents in connection
with the Securitization, including, without limitation, a
prospectus, prospectus supplement or private placement memorandum
(each, a "DISCLOSURE DOCUMENT") and may also be included in
filings with the Securities and Exchange Commission pursuant to
the Securities Act of 1933, as amended (the "SECURITIES ACT"), or
the Securities and Exchange Act of 1934, as amended (the
"EXCHANGE ACT"), or provided or made available to investors or
prospective investors in the Securities, the Rating Agencies, and
service providers relating to the Securitization. In the event
that the Disclosure Document is required to be revised prior to
the sale of all Securities, the Borrower will cooperate with
the holder of the Note in updating the Disclosure Document by
providing all current information necessary to keep the
Disclosure Document accurate and complete in all material respects.
(b) Borrower agrees to provide in connection with each
of (i) a preliminary and a private placement memorandum or (ii) a
preliminary and final prospectus or prospectus supplement, as
applicable, an indemnification certificate (A) certifying that
Borrower has carefully examined such memorandum or prospectus, as
applicable, including without limitation, the sections entitled
"Risk Factors," "Description of the Mortgage Loans and Mortgaged
Property," "The Manager," and "The Borrower," only as they relate
to Borrower, the Loan, the Loan Documents, and the Property and
such sections relating to Borrower, the Loan, the Loan Documents,
and the Property (and any other sections reasonably related
thereto) do not contain any untrue statement of a material fact
or omit to state a material fact necessary in order to make the
statements made, in the light of the circumstances under which
they were made, not misleading, (B) indemnifying Lender (and for
<PAGE>
purposes of this SECTION 9.2, Lender hereunder shall include its
officers and directors), the affiliate of Lehman Brothers Inc.
("LEHMAN") that has filed the registration statement relating to
the securitization (the "REGISTRATION STATEMENT"), each of its
directors, each of its officers who have signed the Registration
Statement and each person or entity who controls the affiliate
within the meaning of Section 15 of the Securities Act or Section
20 of the Exchange Act (collectively, the "LEHMAN GROUP"), and
Lehman, each of its directors and each person who controls Lehman
within the meaning of Section 15 of the Securities Act and
Section 20 of the Exchange Act (collectively, the "UNDERWRITER
GROUP") for any losses, claims, damages or liabilities
(collectively, the "LIABILITIES") to which Lender, the Lehman
Group or the Underwriter Group may become subject insofar as the
Liabilities arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in
such sections or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be
stated in such sections or necessary in order to make the
statements in such sections or in light of the circumstances
under which they were made, not misleading and (C) agreeing to
reimburse Lender, the Lehman Group and the Underwriter Group for
any legal or other expenses reasonably incurred by Lender and
Lehman in connection with investigating or defending the
Liabilities; provided, however, that Borrower will be liable in
any such case under clauses (B) or (C) above only to the extent
that any such loss claim, damage or liability arises out of or is
based upon any such untrue statement or omission made therein in
reliance upon and in conformity with information furnished to
Lender by or on behalf of Borrower in connection with the
preparation of the memorandum or prospectus or in connection with
the underwriting of the debt, including, without limitation,
financial statements of Borrower, operating statements, rent
rolls, environmental site assessment reports and property
condition reports with respect to the Property (which Borrower
knew, in the normal course of owning and operating the Property
to be untrue, inaccurate or incomplete). This indemnity
agreement will be in addition to any liability which Borrower may
otherwise have.
(c) In connection with filings under the Exchange Act,
Borrower agrees to indemnify (i) Lender, the Lehman Group and the
Underwriter Group for Liabilities to which Lender, the Lehman
Group or the Underwriter Group may become subject insofar as the
Liabilities arise out of or are based upon the omission or
alleged omission to state in the Provided Information a material
fact required to be stated in the Provided Information in order
to make the statements in the Provided Information, in light of
the circumstances under which they were made not misleading and
(ii) reimburse Lender, the Lehman Group or the Underwriter Group
for any reasonable legal or other expenses reasonably incurred
by Lender, the Lehman Group or the Underwriter Group in connection
with defending or investigating the Liabilities.
(d) Promptly after receipt by an indemnified party
under this SECTION 9.2 of notice of the commencement of any
action, such indemnified party will, if a claim in respect
thereof is to be made against the indemnifying party under this
SECTION 9.2, notify the indemnifying party in writing of the
<PAGE>
commencement thereof, but the omission to so notify the
indemnifying party will not relieve the indemnifying party from
any liability which the indemnifying party may have to any
indemnified party hereunder except to the extent that failure to
notify causes prejudice to the indemnifying party. In the event
that any action is brought against any indemnified party, and its
notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled, jointly with any other
indemnifying party, to participate therein and, to the extent
that it (or they) may elect by written notice delivered to the
indemnified party promptly after receiving the aforesaid notice
from such indemnified party, to assume the defense thereof with
counsel satisfactory to such indemnified party. After notice
from the indemnifying party to such indemnified party under this
SECTION 9.2 for any legal or other expenses subsequently incurred
by such indemnified party in connection with the defense thereof
other than reasonable costs of investigation; provided, however,
if the defendants in any such action include both the indemnified
party and the indemnifying party and the indemnified party shall
have reasonably concluded that there are any legal defenses
available to it and/or other indemnified parties that are
different from or additional to those available to the
indemnifying party, the indemnified party or parties shall have
the right to select separate counsel to assert such legal
defenses and to otherwise participate in the defense of such
action on behalf of such indemnified party to parties. The
indemnifying party shall not be liable for the expenses of more
than one separate counsel unless an indemnified party shall have
reasonably concluded that there may be legal defenses available
to it that are different from or additional to those available to
another indemnified party. No indemnifying party shall, without
the written consent of the indemnified party, effect the
settlement or compromise of, or consent to the entry of any
judgment with respect to, any pending or threatened action or
claim in respect of which indemnification or contribution may be
sought hereunder unless such settlement, compromise or judgment
(i) includes an unconditional release of the indemnified party
from all liability arising out of such action or claim and (ii)
does not include any statement as to or an admission of fault,
culpability or a failure to act, by or on behalf of any
indemnified party.
(e) In order to provide for just and equitable
contribution in circumstances in which the indemnity agreement
provided for in SECTION 9.2(b) or (c) is for any reason held to
be unenforceable by an indemnified party in respect of any
losses, claims, damages or liabilities (or action in respect
thereof) referred to therein which would otherwise be
indemnifiable under SECTION 9.2(b) or (c), the indemnifying party
shall contribute to the amount paid or payable by the indemnified
party as a result of such losses, claims, damages or liabilities
(or action in respect thereof); PROVIDED, HOWEVER, that no person
guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such
fraudulent misrepresentation. In determining the amount of
contribution to which the respective parties are entitled, the
following factors shall be considered: (i) Lehman's and
Borrower's relative knowledge and access to information
<PAGE>
concerning the matter with respect to which claim was asserted;
(ii) the opportunity to correct and prevent any statement or
omission; and (iii) any other equitable considerations
appropriate in the circumstances. Lender and Borrower hereby
agree that it would not be equitable if the amount of such
contribution were determined by pro rata or per capita
allocation.
(f) The liabilities and obligations of both Borrower
and Lender under this SECTION 9.2 shall survive the termination
of this Agreement and the satisfaction and discharge of the Debt.
Section 9.3 RATING SURVEILLANCE.
-------------------
The Borrower will retain the Rating Agencies to provide
rating surveillance services on any certificates issued in a
Securitization. Such rating surveillance will be at the expense
of the Borrower in an amount determined by Lender in its
reasonable discretion prior to the occurrence of a
Securitization, not to exceed a maximum cost of $15,000 per year,
and such expense (the "RATING SURVEILLANCE CHARGE") will be paid
pursuant to the terms of the Disbursement Agreement.
Section 9.4 EXCULPATION.
-----------
Subject to the qualifications below, Lender shall not
enforce the liability and obligation of Borrower to perform and
observe the obligations contained in the Note, this Agreement,
the Mortgage or the other Loan Documents by any action or
proceeding wherein a money judgment shall be sought against
Borrower, except that Lender may bring a foreclosure action, an
action for specific performance or any other appropriate action
or proceeding to enable Lender to enforce and realize upon its
interest under the Note, this Agreement, the Mortgage and the
other Loan Documents, or in the Property, the Rents, or any other
collateral given to Lender pursuant to the Loan Documents;
PROVIDED, HOWEVER, that, except as specifically provided herein,
any judgment in any such action or proceeding shall be
enforceable against Borrower only to the extent of Borrower's
interest in the Property, in the Rents and in any other
collateral given to Lender, and Lender, by accepting the Note,
this Agreement, the Mortgage and the other Loan Documents, agrees
that it shall not sue for, seek or demand any deficiency judgment
against Borrower, Sponsor or the SPC Managing Member or other
member of Borrower in any such action or proceeding under or by
reason of or under or in connection with the Note, this
Agreement, the Mortgage or the other Loan Documents. The
provisions of this section shall not, however, (a) constitute a
waiver, release or impairment of any obligation evidenced or
secured by any of the Loan Documents; (b) impair the right of
Lender to name Borrower or the SPC Managing Member or other
member of Borrower as a party defendant in any action or suit for
foreclosure and sale under any of the Mortgage; (c) affect the
validity or enforceability of or any guaranty made in connection
with the Loan or any of the rights and remedies of the Lender
thereunder; (d) impair the right of Lender to obtain the
appointment of a receiver; (e) impair the enforcement of any of
<PAGE>
the Assignment of Leases; (f) constitute a prohibition against
Lender to seek a judgment against Borrower in order to fully
realize the security granted by the Mortgage or to commence any
other appropriate action or proceeding in order for Lender to
exercise its remedies against the Property; or (g) constitute a
waiver of the right of Lender to enforce the liability and
obligation of Borrower, by money judgment or otherwise, to the
extent of any loss, damage, cost, expense, liability, claim or
other obligation incurred by Lender (including attorneys' fees
and costs reasonably incurred) arising out of or in connection
with the following:
(i) fraud or intentional misrepresentation by Borrower or any
guarantor in connection with the Loan;
(ii) the gross negligence or willful misconduct of Borrower;
(iii)the removal or disposal of any portion of the Property after
and during the continuance of an Event of Default;
(iv) Borrower's indemnification of Lender set forth in SECTION
9.2 hereof.
Notwithstanding anything to the contrary in this
Agreement, the Note or any of the Loan Documents, (A) Lender
shall not be deemed to have waived any right which Lender may
have under Section 506(a), 506(b), 1111(b) or any other
provisions of the U.S. Bankruptcy Code to file a claim for the
full amount of the Debt secured by the Mortgage or to require
that all collateral shall continue to secure all of the Debt
owing to Lender in accordance with the Loan Documents, and (B)
the Debt shall be fully recourse to Borrower in the event that:
(i) the first full monthly payment of principal and interest
under the Note is not paid when due; (ii) Borrower fails,
following five (5) days notice, to permit on-site inspections of
the Property, or fails, following five (5) days notice, to
provide financial information, or fails to maintain its status as
a single purpose entity, or fails, following five (5) days
notice, to appoint, a new property manager upon the request of
Lender after an Event of Default, each as required by, and in
accordance with the terms and provisions of, this Loan Agreement
and the Mortgage; (iii) Borrower fails to obtain Lender's prior
written consent to any subordinate financing or other voluntary
lien encumbering the Property; (iv) Borrower fails to obtain
Lender's prior written consent to any assignment, transfer, or
conveyance of the Property or any interest therein as required by
the Mortgage except as permitted by the Mortgage; or (v)
Borrower, Sponsor or the SPC Managing Member willfully fails to
direct tenants of the Property to make payments of Rents to
Lender following a Lockbox Event.
Section 9.5 ACHIEVEMENTS.
------------
Intentionally Deleted
<PAGE>
Section 9.6 CASH MANAGEMENT.
---------------
9.6.1 LOCKBOX ACCOUNT. (a) Upon the occurrence of
a Lockbox Event, Borrower shall establish and maintain a
segregated Eligible Account (the "LOCKBOX ACCOUNT") to be held by
the Servicer in the trust for the benefit of Lender, which
Lockbox Account shall be under the sole dominion and control of
Lender. The Lockbox Account shall be entitled "Fox Valley Mall
LLC, as Borrower, and Lehman Brothers Holdings Inc., as Lender,
pursuant to Loan Agreement dated as of November 14, 1997, 1997-
Lockbox Account." Borrower hereby grants to Lender a first
priority security interest in the Lockbox Account and all
deposits at any time contained therein and the proceeds thereof
and will take all actions necessary to maintain in favor of
Lender a perfected first priority security interest in the
Lockbox Account, including, without limitation, executing and
filing UCC-1 Financing Statements and continuations thereof.
Borrower will not in any way alter or modify the Lockbox Account
and will notify Lender of the account number thereof. Lender and
Servicer shall have the sole right to make withdrawals from the
Lockbox Account and all costs and expenses for establishing and
maintaining the Lockbox Account shall be paid by Borrower.
(b) Borrower shall, or shall cause Manager to, deliver
written instructions to all tenants under Leases to deliver all
Rents payable thereunder following a Lockbox Event, directly to
the Lockbox Account. Borrower shall, and shall cause Manager to,
deposit all amounts received by Borrower or Manager constituting
Rents into the Lockbox Account promptly upon receipt.
(c) Borrower shall obtain from Account Holder its
agreement to transfer to the Cash Collateral Account in
immediately available funds by federal wire transfer all amounts
on deposit in the Lockbox Account once every other Business Day
following a Lockbox Event.
9.6.2 CASH COLLATERAL ACCOUNT. (a) Upon the
occurrence of a Lockbox Event Borrower shall establish and
maintain a segregated Eligible Account (the "CASH COLLATERAL
ACCOUNT") to be held by Servicer in trust for the benefit of
Lender, which Cash Collateral Account shall be under the sole
dominion and control of Lender. The Cash Collateral Account
shall be entitled "Fox Valley Mall LLC, as Borrower, and Lehman
Brothers Holdings Inc., as Lender, pursuant to Loan Agreement
dated as of November 14, 1997 - Cash Collateral Account."
Borrower hereby grants to Lender a first priority security
interest in the Cash Collateral Account and all deposits at any
time contained therein and the proceeds thereof and will take all
actions necessary to maintain in favor of Lender a perfected
first priority security interest in the Cash Collateral Account,
including, without limitation, executing and filing UCC-1
Financing Statements and continuations thereof. Borrower will
not in any way alter or modify the Cash Collateral Account and
will notify Lender of the account number thereof. Lender and
Servicer shall have the sole right to make withdrawals from the
Cash Collateral Account and all costs and expenses for
establishing and maintaining the Cash Collateral Account shall be
paid by Borrower.
<PAGE>
(b) Following a Lockbox Event, all funds on deposit in
the Cash Collateral Account shall be applied by Lender to the
payment of the following items in the order indicated:
(i) First, payment of the Monthly Debt Service
Payment Amount, applied first to the payment of interest computed
at the Regular Interest Rate with the remainder applied to the
reduction of the outstanding principal balance of the Note;
(ii) Second, payments for monthly Cash Expenses
incurred in accordance with the related Annual Budget pursuant to
a written request for payment submitted by Borrower to Lender
specifying the individual Cash Expenses in a form acceptable to
Lender:
(iii) Third, on or after the Anticipated
Repayment Date, payments for Extraordinary Expenses approved by
Lender, if any;
(iv) Fourth, on or after the Anticipated Repayment
Date, payments to Lender in reduction of the outstanding
principal balance of the Loan;
(v) Fifth, on or after the Anticipated Repayment
Date, payments to Lender for Accrued Interest;
(vi) Sixth, payment to the Lender of any other
amounts then due and payable under the Loan Documents; and
(vii) Lastly, payment of any excess amounts to Borrower.
(c) The insufficiency of funds on deposit in the Cash
Collateral Account shall not absolve Borrower of the obligation
to make any payments, as and when due pursuant to this Agreement
and the other Loan Documents, and such obligations shall be
separate and independent, and not conditioned on any event or
circumstance whatsoever.
Section 9.7 SERVICER.
--------
At the option of Lender, the Loan may be serviced by a
servicer/trustee (the "SERVICER") selected by Lender and Lender
may delegate all or any portion of its responsibilities under
this Agreement and the other Loan Documents to the Servicer
pursuant to a servicing agreement (the "SERVICING AGREEMENT")
between Lender and Servicer. Borrower shall be responsible for
any reasonable set-up fees or any other initial costs relating to
or arising under the Servicing Agreement, which fees and costs
shall not exceed $10,000, provided, however, that Borrower shall
not be responsible for payment of the monthly servicing fee due
to the Servicer under the Servicing Agreement.
<PAGE>
X. MISCELLANEOUS
-------------
Section 10.1 Survival.
--------
This Agreement and all covenants, agreements,
representations and warranties made herein and in the
certificates delivered pursuant hereto shall survive the making
by Lender of the Loan and the execution and delivery to Lender of
the Note, and shall continue in full force and effect so long as
all or any of the Debt is outstanding and unpaid unless a longer
period is expressly set forth herein or in the other Loan
Documents. Whenever in this Agreement any of the parties hereto
is referred to, such reference shall be deemed to include the
legal representatives, successors and assigns of such party. All
covenants, promises and agreements in this Agreement, by or on
behalf of Borrower, shall inure to the benefit of the legal
representatives, successors and assigns of Lender.
Section 10.2 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 10.3 GOVERNING LAW.
-------------
(A) THIS AGREEMENT WAS NEGOTIATED IN THE STATE OF NEW
YORK, AND MADE BY LENDER AND ACCEPTED BY BORROWER IN THE STATE OF
NEW YORK, AND THE PROCEEDS OF THE NOTE DELIVERED PURSUANT HERETO
WERE DISBURSED FROM THE STATE OF NEW YORK, WHICH STATE THE
PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND
TO THE UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL
RESPECTS, INCLUDING, WITHOUT LIMITING THE GENERALITY OF THE
FOREGOING, MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE,
THIS AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND
PERFORMED IN SUCH STATE (WITHOUT REGARD TO PRINCIPLES OF CONFLICT
LAWS) AND ANY APPLICABLE LAW OF THE UNITED STATES OF AMERICA,
EXCEPT THAT AT ALL TIMES THE PROVISIONS FOR THE CREATION,
PERFECTION, AND ENFORCEMENT OF THE LIENS AND SECURITY INTERESTS
CREATED PURSUANT HERETO AND PURSUANT TO THE OTHER LOAN DOCUMENTS
SHALL BE GOVERNED BY AND CONSTRUED ACCORDING TO THE LAW OF THE
STATE IN WHICH THE APPLICABLE INDIVIDUAL PROPERTY IS LOCATED, IT
BEING UNDERSTOOD THAT, TO THE FULLEST EXTENT PERMITTED BY THE LAW
OF SUCH STATE, THE LAW OF THE STATE OF NEW YORK SHALL GOVERN THE
CONSTRUCTION, VALIDITY AND ENFORCEABILITY OF ALL LOAN DOCUMENTS
AND ALL OF THE OBLIGATIONS ARISING HEREUNDER OR THEREUNDER. TO
THE FULLEST EXTENT PERMITTED BY LAW, BORROWER HEREBY
UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY CLAIM TO ASSERT THAT
THE LAW OF ANY OTHER JURISDICTION GOVERNS THIS AGREEMENT AND THE
<PAGE>
NOTE, AND THIS AGREEMENT AND THE NOTE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(B) ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST
LENDER OR BORROWER ARISING OUT OF OR RELATING TO THIS AGREEMENT
MAY AT LENDER'S OPTION BE INSTITUTED IN ANY FEDERAL OR STATE
COURT IN THE CITY OF NEW YORK, COUNTY OF NEW YORK, AND BORROWER
WAIVES ANY OBJECTIONS WHICH IT MAY NOW OR HEREAFTER HAVE BASED ON
VENUE AND/OR FORUM NON CONVENIENS OF ANY SUCH SUIT, ACTION OR
PROCEEDING, AND BORROWER HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION OR PROCEEDING.
BORROWER DOES HEREBY DESIGNATE AND APPOINT CT CORPORATION
SYSTEMS, 1633 BROADWAY, NEW YORK, NEW YORK 10019 AS ITS
AUTHORIZED AGENT TO ACCEPT AND ACKNOWLEDGE ON ITS BEHALF SERVICE
OF ANY AND ALL PROCESS WHICH MAY BE SERVED IN ANY SUCH SUIT,
ACTION OR PROCEEDING IN ANY FEDERAL OR STATE COURT IN NEW YORK,
NEW YORK, AND AGREES THAT SERVICE OF PROCESS UPON SAID AGENT AT
SAID ADDRESS AND WRITTEN NOTICE OF SAID SERVICE MAILED OR
DELIVERED TO BORROWER IN THE MANNER PROVIDED HEREIN SHALL BE
DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON
BORROWER, IN ANY SUCH SUIT, ACTION OR PROCEEDING IN THE STATE OF
NEW YORK. BORROWER (I) SHALL GIVE PROMPT NOTICE TO LENDER OF ANY
CHANGED ADDRESS OF ITS AUTHORIZED AGENT HEREUNDER, (II) MAY AT
ANY TIME AND FROM TIME TO TIME DESIGNATE A SUBSTITUTE AUTHORIZED
AGENT WITH AN OFFICE IN NEW YORK, NEW YORK (WHICH SUBSTITUTE
AGENT AND OFFICE SHALL BE DESIGNATED AS THE PERSON AND ADDRESS
FOR SERVICE OF PROCESS), AND (III) SHALL PROMPTLY DESIGNATE SUCH
A SUBSTITUTE IF ITS AUTHORIZED AGENT CEASES TO HAVE AN OFFICE IN
NEW YORK, NEW YORK OR IS DISSOLVED WITHOUT LEAVING A SUCCESSOR.
Section 10.4 MODIFICATION, WAIVER IN WRITING.
-------------------------------
No modification, amendment, extension, discharge,
termination or waiver of any provision of this Agreement, or of
the Note, or of any other Loan Document, nor 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 10.5 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 Note or under any other Loan
Document, or any other 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 Note or any other Loan
Document, Lender shall not be deemed to have waived any right
<PAGE>
either to require prompt payment when due of all other amounts
due under this Agreement, the Note or the other Loan Documents,
or to declare a default for failure to effect prompt payment of
any such other amount.
Section 10.6 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 or registered United States
mail, postage prepaid, or (b) expedited prepaid delivery service,
either commercial or United States Postal Service, with proof of
attempted delivery, or (c) by telecopier (with answer back
acknowledged), addressed as follows (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):
If to Lender:
Lehman Brothers Holdings Inc.,
doing business as Lehman Capital, a
division of Lehman Brothers Holding Inc.
Three World Financial Center, 12th Floor
Commercial Mortgage Surveillance Group
New York, New York 10285
Attention: Tricia Hall
Facsimile No. (212) 526-8679
with a copy to:
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, New York 10038
Attention: W. Christopher White, Esq.
Facsimile No. (212) 504-6666
If to Borrower:
Fox Valley Mall LLC
c/o Urban Shopping Centers, Inc.
900 North Michigan Avenue
Suite 1500
Chicago, IL 60611
Attention: Chief Financial Officer
Facsimile No. (312) 915-2001
with a copy to:
Urban Shopping Centers, Inc.
900 North Michigan Ave.
Suite 1500
Chicago, IL 60611
Attention: General Counsel
Facsimile No. (312) 915-2001
<PAGE>
A notice shall be deemed to have been given: in the case of hand
delivery, at the time of delivery; in the case of registered or
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.
Section 10.7 TRIAL BY JURY.
-------------
BORROWER HEREBY AGREES NOT TO ELECT A TRIAL BY JURY OF
ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL
BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR
HEREAFTER EXIST WITH REGARD TO THE LOAN DOCUMENTS, OR ANY CLAIM,
COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH.
THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND
VOLUNTARILY BY BORROWER, AND IS INTENDED TO ENCOMPASS
INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT
TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE. LENDER IS HEREBY
AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS
CONCLUSIVE EVIDENCE OF THIS WAIVER BY BORROWER.
Section 10.8 HEADINGS.
--------
The Article and/or Section headings and the Table of
Contents 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 10.9 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 10.10 PREFERENCES.
-----------
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, 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.
<PAGE>
Section 10.11 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 do not
specifically and expressly provide for the giving of notice by
Lender to Borrower.
Section 10.12 REMEDIES OF BORROWER.
--------------------
In the event that a claim or adjudication is made that
Lender or its agents have acted unreasonably or unreasonably
delayed acting in any case where by law or under this Agreement
or the other Loan Documents, Lender or such agent, as the case
may be, has an obligation to act reasonably or promptly, Borrower
agrees that neither Lender nor its agents shall be liable for any
monetary damages, and Borrower's sole remedies shall be limited
to commencing an action seeking injunctive relief or declaratory
judgment. The parties hereto agree that any action or proceeding
to determine whether Lender has acted reasonably shall be
determined by an action seeking declaratory judgment.
Section 10.13 EXPENSES; INDEMNITY.
-------------------
(a) Borrower covenants and agrees to pay, or if
Borrower fails to pay to reimburse, Lender upon receipt of
written notice from Lender for all reasonable costs and expenses
(including reasonable attorneys' fees and disbursements) incurred
by Lender in connection with (i) the preparation, negotiation,
execution and delivery of this Agreement and the other Loan
Documents and the consummation of the transactions contemplated
hereby and thereby and all the costs of furnishing all opinions
by counsel for Borrower (including without limitation any
opinions requested by Lender as to any legal matters arising
under this Agreement or the other Loan Documents with respect to
the Property); (ii) Borrower's ongoing performance of and
compliance with Borrower's respective agreements and covenants
contained in this Agreement and the other Loan Documents on its
part to be performed or complied with after the Closing Date,
including, without limitation, confirming compliance with
environmental and insurance requirements; (iii) the negotiation,
preparation, execution, delivery and administration of any
consents, amendments, waivers or other modifications to this
Agreement and the other Loan Documents and any other documents or
matters requested by Lender; (iv) securing Borrower's compliance
with any requests made pursuant to SECTION 9.1 hereof; (v) the
filing and recording fees and expenses, title insurance and
reasonable fees and expenses of counsel for providing to Lender
all required legal opinions, and other similar expenses incurred
in creating and perfecting the Liens in favor of Lender pursuant
<PAGE>
to this Agreement and the other Loan Documents; (vi) enforcing or
preserving any rights, in response to third party claims or the
prosecuting or defending of any action or proceeding or other
litigation, in each case against, under or affecting Borrower,
this Agreement, the other Loan Documents, the Property, or any
other security given for the Loan; and (vii) enforcing any
obligations of or collecting any payments due from Borrower under
this Agreement, the other Loan Documents or with respect to the
Property or in connection with any refinancing or restructuring of the
credit arrangements provided under this Agreement in the nature of a
"work-out" or of any insolvency or bankruptcy proceedings;
PROVIDED, HOWEVER, that Borrower shall not be liable for the
payment of any such costs and expenses to the extent the same
arise by reason of the gross negligence, illegal acts, fraud or
willful misconduct of Lender. Any cost and expenses due and
payable to Lender may be paid from any amounts in the Deposit Account.
(b) Borrower shall indemnify, defend and hold harmless
Lender from and against any and all other liabilities,
obligations, losses, damages, penalties, actions, judgments,
suits, claims, costs, expenses and disbursements of any kind or
nature whatsoever (including, without limitation, the reasonable
fees and disbursements of counsel for Lender in connection with
any investigative, administrative or judicial proceeding
commenced or threatened, whether or not Lender shall be
designated a party thereto), that may be imposed on, incurred by,
or asserted against Lender in any manner relating to or arising
out of (i) any breach by Borrower of its obligations under, or
any material misrepresentation by Borrower contained in, this
Agreement or the other Loan Documents, or (ii) the use or
intended use of the proceeds of the Loan (collectively, the
"Indemnified Liabilities"); PROVIDED, HOWEVER, that Borrower
shall not have any obligation to Lender hereunder to the extent
that such Indemnified Liabilities arise from the gross
negligence, illegal acts, fraud or willful misconduct of Lender.
To the extent that the undertaking to indemnify, defend and hold
harmless set forth in the preceding sentence may be unenforceable
because it violates any law or public policy, Borrower shall pay
the maximum portion that it is permitted to pay and satisfy under
applicable law to the payment and satisfaction of all Indemnified
Liabilities incurred by the Lender.
Section 10.14 SCHEDULES INCORPORATED.
----------------------
The Schedules annexed hereto are hereby incorporated
herein as a part of this Agreement with the same effect as if set
forth in the body hereof.
Section 10.15 OFFSETS, COUNTERCLAIMS AND DEFENSES.
-----------------------------------
Any assignee of Lender's interest in and to this
Agreement, the Note and the other Loan Documents shall take the
same free and clear of all offsets, counterclaims or defenses
which are unrelated to such documents which Borrower may
otherwise have against any assignor of such documents, and no
such unrelated counterclaim or defense shall be interposed or
asserted by Borrower in any action or proceeding brought by any
<PAGE>
such assignee upon such 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 10.16 NO JOINT VENTURE OR PARTNERSHIP;
NO THIRD PARTY BENEFICIARIES.
----------------------------
(a) Borrower and Lender intend that the relationships
created hereunder and under the other Loan Documents be solely
that of borrower and lender. Nothing herein or therein 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 Property other than that
of mortgagee, beneficiary or lender.
(b) This Agreement and the other Loan Documents are
solely for the benefit of Lender and the Borrower and nothing
contained in this Agreement or the other Loan Documents shall be
deemed to confer upon anyone other than the Lender and the
Borrower any right to insist upon or to enforce the performance
or observance of any of the obligations contained herein or
therein. All conditions to the obligations of Lender to make the
Loan hereunder are imposed solely and exclusively for the benefit
of Lender and no other Person shall have standing to require
satisfaction of such conditions in accordance with their terms or
be entitled to assume that Lender will refuse to make the Loan in
the absence of strict compliance with any or all thereof and no
other Person shall under any circumstances be deemed to be a
beneficiary of such conditions, any or all of which may be freely
waived in whole or in part by Lender if, in Lender's sole
discretion, Lender deems it advisable or desirable to do so.
Section 10.17 PUBLICITY.
---------
The Lender shall have the right to issue press
releases, advertisements and other promotional materials
describing the Lender's participation in the origination of the
Loan or the Loan's inclusion in any Secondary Market Transaction
effectuated by the Lender. Lender shall also be permitted to use
the Borrower or Sponsor's logo in its offering memorandum or
marketing materials; provided, however, that Borrower shall have
the opportunity to review the use of such logo in marketing
materials prior to its publication.
Section 10.18 WAIVER OF MARSHALING OF ASSETS.
------------------------------
To the fullest extent permitted by law, Borrower, for
itself and its successors and assigns, waives all rights to a
marshaling of the assets of Borrower, Borrower's partners and
others with interests in Borrower, and of the Property, or to a
sale in inverse order of alienation in the event of foreclosure
of the Mortgage, and agrees not to assert any right under any
laws pertaining to the marshaling of assets, the sale in inverse
order of alienation, homestead exemption, the administration of
estates of decedents, or any other matters whatsoever to defeat,
<PAGE>
reduce or affect the right of Lender under the Loan Documents to
a sale of the Property for the collection of the Debt without any
prior or different resort for collection or of the right of
Lender to the payment of the Debt out of the net proceeds of the
Property in preference to every other claimant whatsoever.
Section 10.19 WAIVER OF COUNTERCLAIM.
----------------------
Borrower hereby waives the right to assert a
counterclaim, other than a compulsory counterclaim, in any action
or proceeding brought against it by Lender or its agents.
Section 10.20 CONFLICT; CONSTRUCTION OF DOCUMENTS; RELIANCE.
---------------------------------------------
In the event of any conflict between the provisions of
this Loan Agreement and any of the other Loan Documents, the
provisions of this Loan Agreement shall control. The parties
hereto acknowledge that they were represented by competent
counsel in connection with the negotiation, drafting and
execution of the Loan Documents and that such Loan Documents
shall not be subject to the principle of construing their meaning
against the party which drafted same. Borrower acknowledges that, with
respect to the Loan, Borrower shall rely solely on its own judgment and
advisors in entering into the Loan without relying in any manner on any
statements, representations or recommendations of Lender or any
parent, subsidiary or affiliate of Lender. Lender shall not be
subject to any limitation whatsoever in the exercise of any
rights or remedies available to it under any of the Loan
Documents or any other agreements or instruments which govern the
Loan by virtue of the ownership by it or any parent, subsidiary
or affiliate of Lender of any equity interest any of them may
acquire in Borrower, and Borrower hereby irrevocably waives the
right to raise any defense or take any action on the basis of the
foregoing with respect to Lender's exercise of any such rights or
remedies. Borrower acknowledges that Lender engages in the
business of real estate financings and other real estate
transactions and investments which may be viewed as adverse to or
competitive with the business of the Borrower or its affiliates.
Section 10.21 BROKERS AND FINANCIAL ADVISORS.
------------------------------
Borrower hereby represents that it has dealt with no
financial advisors, brokers, underwriters, placement agents,
agents or finders in connection with the transactions
contemplated by this Agreement. Borrower hereby agrees to
indemnify, defend and hold Lender harmless from and against any
and all claims, liabilities, costs and expenses of any kind
(including Lender's attorneys' fees and expenses) in any way
relating to or arising from a claim by any Person that such
Person acted on behalf of Borrower or Lender in connection with
the transactions contemplated herein. The provisions of this
SECTION 10.21 shall survive the expiration and termination of
this Agreement and the payment of the Debt.
<PAGE>
Section 10.22 PRIOR AGREEMENTS.
----------------
This Agreement and the other Loan Documents contain the
entire agreement of the parties hereto and thereto in respect of
the transactions contemplated hereby and thereby, and all prior
agreements among or between such parties, whether oral or
written, including, without limitation, the Commitment Letter
dated September 30, 1997 between Borrower and Lender are
superseded by the terms of this Agreement and the other Loan Documents.
IN WITNESS WHEREOF, the parties hereto have caused this
Loan Agreement to be duly executed by their duly authorized
representatives, all as of the day and year first above written.
FOX VALLEY MALL LLC,
a Delaware limited liability company
By: USC FOX VALLEY, INC.
a Delaware corporation, its managing member
By:______________________________________
Name: Michael G. Hilborn
Title: Senior Vice President
LEHMAN BROTHERS HOLDINGS INC.,
DOING BUSINESS AS LEHMAN CAPITAL, A
DIVISION OF LEHMAN BROTHERS HOLDING INC.,
By:______________________________________
Name:
Title:
<PAGE>
==============================================================================
LOAN AGREEMENT
Dated as of November 14, 1997
Between
HAWTHORN, L.P.,
as Borrower
and
LEHMAN BROTHERS HOLDINGS INC.
DOING BUSINESS AS LEHMAN CAPITAL,
A DIVISION OF LEHMAN BROTHERS HOLDINGS INC.
as Lender
==============================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
I. DEFINITIONS; PRINCIPLES OF CONSTRUCTION 4
Section 1.1 Definitions. 4
Section 1.2 Principles of Construction 18
II. GENERAL TERMS 18
Section 2.1 Loan Commitment; Disbursement to Borrower 18
2.1.1 The Loan 18
2.1.2 Disbursement to Borrower 18
2.1.3 The Note 18
Section 2.2 Use of Proceeds 18
Section 2.3 Loan Repayment and Defeasance 18
2.3.1 Repayment 18
2.3.2 Voluntary Defeasance of the Loan 19
Section 2.4 Release of Property 20
2.4.1 Release of the Property 20
2.4.2 Successor Borrower 21
2.4.3 Release on Payment in Full 21
Section 2.5 Interest 21
2.5.1 Generally 21
2.5.2 Default Rate; Additional Payments after Default 21
Section 2.6 Payments and Computations 22
2.6.1 Making of Payments 22
2.6.2 Annual Budget; Payments After Anticipated Repayment
Date 22
2.6.3 Computations 22
2.6.4 Late Payment Charge 22
2.6.5 Payments Received in the Deposit Account 22
III.CONDITIONS PRECEDENT 23
Section 3.1 Conditions Precedent to Closing 23
IV. REPRESENTATIONS AND WARRANTIES 25
Section 4.1 Borrower Representations 25
Section 4.2 Survival of Representations 32
V. AFFIRMATIVE COVENANTS 32
Section 5.1 Borrower Covenants 32
VI. NEGATIVE COVENANTS 39
Section 6.1 Borrower's Negative Covenants 39
VII.CASUALTY; CONDEMNATION; ESCROWS 40
Section 7.1 Insurance; Casualty and Condemnation 40
7.1.1 Insurance 40
7.1.2 Condemnation and Insurance Proceeds 43
Section 7.2 Required Repairs; Required Repair Funds 47
Section 7.3 Tax and Insurance Escrow Fund 47
Section 7.4 Replacements and Replacement Reserve 47
VIII.DEFAULTS 47
Section 8.1 Event of Default 47
Section 8.2 Remedies 48
Section 8.3 Remedies Cumulative 49
<PAGE>
IX. SPECIAL PROVISIONS 49
Section 9.1 Sale of Notes and Securitization 49
Section 9.2 Securitization Indemnification 52
Section 9.3 Rating Surveillance 54
Section 9.4 Exculpation 55
Section 9.5 Achievements 56
Section 9.6 Cash Management 56
9.6.1 Lockbox Account 56
9.6.2 Cash Management Account 56
Section 9.7 Servicer 57
X. MISCELLANEOUS 57
Section 10.1 Survival 57
Section 10.2 Lender's Discretion 57
Section 10.3 Governing Law 57
Section 10.4 Modification, Waiver in Writing 58
Section 10.5 Delay Not a Waiver 58
Section 10.6 Notices 59
Section 10.7 Trial by Jury 60
Section 10.8 Headings 60
Section 10.9 Severability 60
Section 10.10 Preferences 60
Section 10.11 Waiver of Notice 60
Section 10.12 Remedies of Borrower 60
Section 10.13 Expenses; Indemnity 60
Section 10.14 Schedules Incorporated 61
Section 10.15 Offsets, Counterclaims and Defenses 62
Section 10.16 No Joint Venture or Partnership; 62
Section 10.17 Publicity 62
Section 10.18 Waiver of Marshaling of Assets; 62
Section 10.19 Waiver of Counterclaim 62
Section 10.20 Conflict; Construction of Documents; Reliance 63
Section 10.21 Brokers and Financial Advisors 63
Section 10.22 Prior Agreements 63
<PAGE>
LOAN AGREEMENT
THIS LOAN AGREEMENT, dated as of November 14, 1997 (as
amended, restated, replaced, supplemented or otherwise modified
from time to time, this "Agreement"), between Lehman Brothers
Holdings Inc., doing business as Lehman Capital, a division of
Lehman Brothers Holdings Inc., having an address at Three World
Financial Center, New York, New York 10285 ("Lender") and
Hawthorn, L.P., having an address at c/o Urban Shopping Centers,
Inc., 900 North Michigan Avenue, Chicago, IL 60611-1580
("Borrower").
All capitalized terms used herein shall have the respec
tive meanings set forth in Article I hereof.
W I T N E S S E T H :
- - - - - - - - - - -
WHEREAS, Borrower desires to obtain the Loan from Lender;
WHEREAS, Lender is willing to make the Loan to
Borrower, subject to and in accordance with the terms of this
Agreement and the other Loan Documents;
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 hereto hereby
covenant, agree, represent and warrant as follows:
I. DEFINITIONS; PRINCIPLES OF CONSTRUCTION
---------------------------------------
Section 1.1 DEFINITIONS.
-----------
For all purposes of this Agreement, except as otherwise
expressly required or unless the context clearly indicates a
contrary intent:
"ACCRUED INTEREST" shall have the meaning set forth in
SECTION 2.6.2(C).
"ACQUIRED PROPERTIES" shall have the meaning set forth
in SECTION 9.1.1.
"ACQUIRED PROPERTY STATEMENTS" shall have the meaning
set forth in SECTION 9.1.1.
"AFFILIATE" shall mean, in respect to any Person, (x)
any Person controlling, controlled by or under common control
with, whether by virtue of ownership or otherwise, such Person
and (y) any spouse, parent or sibling of any such Person who is a
natural person, and any ancestor or lineal descendent of such
spouse, parent or sibling.
"AFFIRMATIVE COVENANT" shall mean a promise or covenant
by any Person to perform, act, suffer, permit or consent to.
<PAGE>
"AGREEMENT" shall mean this Loan Agreement, as the same
may be amended, restated, replaced, supplemented, or otherwise
modified from time to time.
"ALTA" shall mean American Land Title Association, or
any successor thereto.
"ALTERATION" shall have the meaning set forth in
SECTION 5.1(u)(iii).
"ALLOCATED LOAN AMOUNT" shall mean the portion of the
Loan allocated solely for purposes of performing certain
calculations hereunder to each portion of the Property as set
forth on Schedule II hereto.
"ANNUAL BUDGET" shall mean the operating budget,
including all planned capital expenditures, for the Property
prepared by Borrower for the applicable Fiscal Year or other period.
"ANTICIPATED REPAYMENT DATE" shall mean November 10, 2008.
"APPLICABLE INTEREST RATE" shall mean (a) from the date
hereof through but not including the Anticipated Repayment Date,
the Regular Interest Rate and (b) from and after the Anticipated
Repayment Date through and including the date the Loan is paid in
full, the Matured Performing Rate.
"APPROVED BANK" shall mean a bank or other financial
institution which has a minimum long-term unsecured debt rating
of at least "A" (or its equivalent) by each of the Rating
Agencies, or if any such bank or other financial institution is
not rated by all the Rating Agencies, then a minimum long-term
rating of at least "A" (or its equivalent) by two of the Rating Agencies.
"ASSIGNMENT OF AGREEMENTS" shall mean that certain
first priority Assignment of Agreements, Permits and Contracts
dated as of the date hereof, from Borrower and the Land Trustee,
as assignor, to Lender, as assignee, assigning to Lender all of
Borrower's interest in and to all licenses, permits and contracts
necessary for the use and operation of the Property, as the same
may be amended, restated, replaced, supplemented or otherwise
modified from time to time.
"ASSIGNMENT of Leases" shall mean that certain first
priority Assignment of Leases and Rents, dated as of the date
hereof, from Borrower and Land Trustee, as assignor, to Lender,
as assignee, assigning to Lender all of Borrower's interest in
and to the Leases and Rents of such Property, as the same may be
amended, restated, replaced, supplemented or otherwise modified
from time to time.
"ASSIGNMENT OF MANAGEMENT AGREEMENT" shall mean that
certain Assignment of Management Agreement and Subordination of
Management Fees dated as of the date hereof, among Borrower, as
assignor, Manager, as manager, and Lender, as assignee, as the
same may be amended, restated, replaced, supplemented or
otherwise modified from time to time.
<PAGE>
"BASIC CARRYING COSTS" shall mean the sum of the
following costs associated with the Property for the relevant
Fiscal Year or payment period: (i) real property taxes with
respect to the Property and (ii) insurance premiums with respect
to the Property.
"BEST KNOWLEDGE" or "KNOWLEDGE" shall mean for the
purpose of this Agreement and the other Loan Documents the actual
knowledge of the Person in question, after having made due
inquiry. If any entity with respect to which this term would be
applicable is a corporation, knowledge of such entity shall refer
to actual knowledge of its officers or directors, after having made due
inquiry. If any such entity is a partnership, knowledge of such
entity shall refer to actual knowledge of each of its partners
who participates in the management of such partnership (directly
or indirectly), after having made due inquiry. If any such
entity is a limited liability company, knowledge of such entity
shall refer to actual knowledge of its General Partners, after
having made due inquiry. The knowledge of Borrower for purposes
of this definition shall also include the knowledge of Manager if
it is an Affiliate of Borrower or if not an Affiliate of
Borrower, after due inquiry of Manager.
"BORROWER" shall mean Hawthorn, L.P., together with its
successors and assigns.
"BUSINESS DAY" shall mean any day other than a
Saturday, Sunday or any other day on which national banks in New
York, New York, the State of Illinois and the Commonwealth of
Pennsylvania are not open for business.
"CAPITAL EXPENDITURES" for any period shall mean the
amount expended for items capitalized under GAAP (including
expenditures for building improvements or major repairs, leasing
commissions and tenant improvements).
"CASH" shall mean coin or currency of the government of
the United States of America.
"CASH COLLATERAL ACCOUNT" shall have the meaning set
forth in SECTION 9.6.2(a).
"CASH EQUIVALENTS" shall mean (i) Cash or (ii) U.S. Obligations.
"CASH EXPENSES" shall mean, for any period, the
operating expenses for the operation of the Property as set forth
in the Annual Budget to the extent that such expenses are
actually incurred by Borrower.
"CASUALTY/CONDEMNATION INVOLUNTARY PREPAYMENT" shall
have the meaning set forth in SECTION 7.1.2(c).
"CLOSING DATE" shall mean the date of the funding of the Loan.
"CODE" shall mean the Internal Revenue Code of 1986, as
amended, and as it may be further amended from time to time, any
successor statutes thereto, and applicable U.S. Department of
Treasury regulations issued pursuant thereto in temporary or
final form.
<PAGE>
"CONSUMER PRICE INDEX" OR "CPI" shall mean the
Consumer Price Index for All Urban Consumers (CPI-U) published by
the Bureau of Labor Statistics of the United States Department of
Labor, New York, N.Y. - Northeastern N.J. Area, All Items (1982-
84 = 100), or any successor or substitute index thereto.
"CONTROL" (and the correlative terms "CONTROLLED BY"
and "CONTROLLING") shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of
management and policies of the business and affairs of the entity
in question by reason of the ownership of beneficial interests,
by contract or otherwise.
"DEBT" shall mean the outstanding principal amount set
forth in, and evidenced by, this Agreement and the Note together
with all interest accrued and unpaid thereon and all other sums
(including the Yield Maintenance Premium) due to Lender in
respect of the Loan under the Note, this Agreement, the Mortgage
or any other Loan Document.
"DEBT SERVICE" shall mean, with respect to any
particular period of time, scheduled principal and interest
payments due under the Note.
"DEBT SERVICE COVERAGE RATIO" shall mean a ratio for
the applicable period in which:
(a) the numerator is the Net Operating
Income for such period as set forth in the
statements required thereunder less
management fees (but only to the extent not
included in the calculation of Operating
Expenses) equal to the greater of (i) assumed
management fees of three (3%) percent of
Gross Income from Operations and (ii) the
actual management fees incurred and paid by
Borrower; and
(b) the denominator is the Debt Service.
"DEFAULT" shall mean the occurrence of any event
hereunder or under any other Loan Document which, but for the
giving of notice or passage of time, or both, would be an Event of Default.
"DEFAULT RATE" shall mean, with respect to the Loan, a
rate per annum equal to the lesser of (a) the maximum rate
permitted by applicable law, or (b) five percent (5%) above the
Applicable Interest Rate.
"DEFEASANCE DATE" shall have the meaning set forth in
SECTION 2.3.2(a)(i).
"DEFEASANCE DEPOSIT" shall mean (A), with respect to a
Defeasance Event involving a portion of the Property, an amount
equal to the aggregate of either (i) one hundred (100%) percent
of the Allocated Loan Amount for the portion of the Property to
be released on the Defeasance Date or (ii) the principal amount
of the Defeased Note, as applicable, plus, any costs and expenses
incurred or to be incurred in the purchase of U.S. Obligations
<PAGE>
necessary to meet the Scheduled Defeasance Payments and any
revenue, documentary stamp or intangible taxes or any other tax
or charge due in connection with the transfer of the Note or the
Defeased Note, as applicable, the creation of the Defeased Note
and the Undefeased Note, if applicable, or otherwise required to
accomplish the agreements of SECTIONS 2.3 and 2.4 hereof or (B)
with respect to a Defeasance Event involving all of the Property,
an amount equal to the aggregate of either (i) the outstanding
Principal Amount of the Loan or (ii) the principal amount of the
Defeased Note, as applicable, plus any costs and expenses
incurred or to be incurred in the purchase of U.S. Obligations
necessary to meet the Scheduled Defeasance Payments and any
revenue, documentary stamp or intangible taxes or any other tax
or charge due in connection with the transfer of the Note or the
Defeased Note, as applicable, the creation of the Defeased Note
and the Undefeased Note, if applicable, or otherwise required to
accomplish the agreements of SECTIONS 2.3 and 2.4 hereof.
"DEFEASANCE EVENT" shall have the meaning set forth in
SECTION 2.3.2(a).
"DEFEASED NOTE" shall have the meaning set forth in
SECTION 2.3.2(a)(v) hereof.
"DISCLOSURE DOCUMENT" shall have the meaning set forth
in SECTION 9.2(a).
"ELIGIBLE ACCOUNT" shall mean a separate and
identifiable account from all other funds held by the holding
institution that is either (a) an account or accounts maintained
with a federal or state-chartered depository institution or trust
company which complies with the definition of Eligible
Institution or (b) a segregated trust account or accounts
maintained with a federal or state-chartered depository
institution or trust company acting in its fiduciary capacity
(which, in the case of a state-chartered depository institution
or trust company, is subject to regulations substantially similar
to Title 12 of the Code of Federal Regulations Section 9.10(b)
and has a combined capital and surplus of at least Fifty Million
and No/100 Dollars ($50,000,000) and is subject to supervision or
examination by federal and state authority. An Eligible Account
may not be evidenced by a certificate of deposit, passbook or
other instrument.
"ELIGIBLE INSTITUTION" shall mean a depository
institution or trust company the short term unsecured debt
obligations or commercial paper of which are rated at least A-1
by S&P, P-1 by Moody's Investors Service, Inc., D-1 by Duff &
Phelps Credit Rating Co. and F-1+ by Fitch Investors Service,
L.P. in the case of accounts in which funds are held for thirty
(30) days or less (or, in the case of accounts in which funds are
held for more than thirty (30) days, the long term unsecured debt
obligations of which are rated at least "A" by Fitch Investors
Service, L.P., Duff & Phelps Credit Rating Co. and S&P and "A" by
Moody's Investors Service, Inc.).
"ELIGIBLE INVESTMENTS" shall mean any one or more of
the following obligations or securities payable on demand or
having a scheduled maturity on or before the Business Day
<PAGE>
preceding the date upon which such funds are required to be
drawn, regardless of whether issued by Lender, the Servicer,
Trustee or any of their respective Affiliates 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 the Servicer that a lower rating would not, in and of
itself, result in a downgrade, qualification or withdrawal of the
then current ratings assigned to the Securities
(i) obligations of, or mutual funds which invest
solely in 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 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 or
mutual funds which invest solely in such
debentures;
(iii) obligations of, or mutual funds which
invest solely in 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 of principal due at
maturity that cannot vary or change, (B) if rated
<PAGE>
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 or similar deposits, bankers'
acceptances and repurchase agreements, with
maturities of not more than three hundred sixty-
five (365) days, of any bank, the short term
obligations of which are rated in the highest
short term rating category by each Rating Agency
(or, if such obligations are not rated by Duff &
Phelps Credit Rating Co., Moody's Investors
Service, Inc. or Fitch Investors Service, L.P.,
otherwise acceptable to Duff & Phelps Credit
Rating Co., Moody's Investors Service, Inc. or
Fitch Investors Service, L.P., as applicable, 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 the Securities); 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;
(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 mortgage 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, if such obligations are
not rated by Duff & Phelps Credit Rating Co.,
Moody's Investors Service, Inc. or Fitch Investors
Service, L.P., otherwise acceptable to Duff &
Phelps Credit Rating Co., Moody's Investors
Service, Inc. or Fitch Investors Service, L.P., as
applicable, 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
the Securities); 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
<PAGE>
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 three hundred sixty-five (365) days rated by
each Rating Agency (or, if such obligations are
not rated by Duff & Phelps Credit Rating Co.,
Moody's Investors Service, Inc. or Fitch Investors
Service, L.P., otherwise acceptable to Duff &
Phelps Credit Rating Co., Moody's Investors
Service, Inc. or Fitch Investors Service, L.P., as
applicable, 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 the Securities)
in its highest long-term unsecured rating
category; 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;
(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 (1) year after
the date of issuance thereof) with maturities of
not more than three hundred sixty-five (365) days
and that is rated by each Rating Agency (or, if
such obligations are not rated by Duff & Phelps
Credit Rating Co., Moody's Investors Service, Inc.
or Fitch Investors Service, L.P., otherwise
acceptable to Duff & Phelps Credit Rating Co.,
Moody's Investors Service, Inc. or Fitch Investors
Service, L.P., as applicable, 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
the Securities) in its highest short-term
unsecured debt rating; 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
<PAGE>
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;
(viii) the Federated Prime Obligation Money
Market Fund so long as the Federated Prime
Obligation Money Market Fund is rated by each
Rating Agency as AAAm or AAAm-G (or, if such
obligations are not rated by Duff & Phelps Credit
Rating Co., Moody's Investors Service, Inc. or
Fitch Investors Service, L.P., otherwise
acceptable to Duff & Phelps Credit Rating Co.,
Moody's Investors Service, Inc. or Fitch Investors
Service, L.P., as applicable, 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
the Securities); and
(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 the
Servicer, special servicer (if any) or Trustee, as
applicable, that such investment would not, in and
of itself, result in a downgrade, qualification or
withdrawal of the then current ratings assigned to
the Securities;
provided, however, that, in the judgment of
the Servicer, such instrument continues to qualify
as a "cash flow investment" pursuant to Section
860G(a)(6) of the Code earning a passive return in
the nature of interest and that no instrument or
security shall be an Eligible Investment if (x)
such instrument or security evidences a right to
receive only interest payments, (y) the right to
receive principal and interest payments derived
from the underlying investment provides a yield to
maturity in excess of one hundred twenty percent
(120%) of the yield to maturity at par of such
underlying investment or (z) such instrument or
security has a maturity of more than three hundred
sixty-five (365) days.
"ENVIRONMENTAL INDEMNITY" shall mean that certain
Environmental Indemnity Agreement executed by Borrower in
connection with the Loan for the benefit of Lender.
"EQUIPMENT" shall have the meaning set forth in the
granting clause of the Mortgage.
"ERISA" shall have the meaning set forth in SECTION 6.1(l)(i).
"EXCUSABLE DELAY" shall mean a delay due to acts of
God, governmental restrictions, enemy actions, civil commotion,
fire, casualty, strikes, shortages of supplies or labor, work
<PAGE>
stoppages or other causes beyond the reasonable control of
Borrower, but lack of funds shall not be deemed a cause beyond
the reasonable control of Borrower.
"EVENT OF DEFAULT" shall have the meaning set forth in SECTION
8.1(a).
"EXCHANGE ACT" shall have the meaning set forth in SECTION 9.2.(a).
"EXCHANGE ACT FILING" shall have the meaning set forth in SECTION
9.1.6.
"EXPANSION" shall have the meaning set forth in SECTION 5.1(u)(vi).
"EXTRAORDINARY EXPENSE" shall have the meaning set forth in SECTION
2.6.2(b).
"FISCAL YEAR" shall mean each twelve month period
commencing on January 1 and ending on December 31 during each
year of the term of the Loan.
"GAAP" shall mean generally accepted accounting
principles in the United States of America as of the date of the
applicable financial report.
"GOVERNMENTAL AUTHORITY" shall mean any court, board,
agency, commission, office or authority of any nature whatsoever
for any governmental unit (federal, state, county, district,
municipal, city or otherwise) whether now or hereafter in existence.
"GROSS INCOME FROM OPERATIONS" shall mean with respect
to a specified period, without duplication, all income paid or to
be paid (as applicable) to Borrower (or to the Manager for the
account of Borrower) by any Person during such period in
connection with the operation of the Property (determined as
described in the final paragraph of this definition), including,
without limitation, the following:
(i) all amounts payable as rent (including
percentage rent), charges for electricity, oil,
gas, water, steam, heat, ventilation, air
conditioning and any other energy,
telecommunications, telephone, utility or similar
items, including overtime usage, HVAC equipment
charges, sprinkler charges, escalation charges,
license fees, maintenance fees, charges for
improvements, Impositions and other amounts
payable to Borrower (or to the Manager for the
account of Borrower) under any Lease or other
agreement relating to the Property pursuant to
which space (including storage space rentals and
rentals for community hall usage), utilities,
facilities, equipment, parking facilities or other
services are furnished by Borrower and including
late charges, default interest and temporary
investment income but excluding any security
deposits received;
<PAGE>
(ii) condemnation proceeds under a temporary
Taking to the extent that such proceeds are
compensation for lost rent;
(iii) business interruption and loss of
"rental value" insurance proceeds;
(iv) proceeds of any sale of Equipment
pursuant to Section 6.3(ii) of the Mortgage but
only to the extent that the same are of a
generally recurring type; and
(v) all amounts payable under any Lease of
an anchor department store or a peripheral site at
the Property reasonably expected by the Borrower
to recur in the ordinary course of business;
provided, however, that the items of income described
in subparagraph (i) shall be reduced (x) by the average
bad debts expense for the first two calendar years
preceding the year in which the calculation of Gross
Income from Operations is made, as established annually
by Borrower in accordance with its bad debts policy and
generally acceptable accounting procedures, and (y) to
the extent such average exceeds the amount described in (x),
the amount of any receivables for tenants at the Property
which are more than ninety days old and which have been
created during the last calendar year in which such
calculation of Gross Income from Operations is made.
Notwithstanding the foregoing clauses (i)-(v), Gross Income from
Operations shall not include (A) any condemnation or insurance
proceeds (other than of the types described in clauses (ii) and
(iii) above), (B) any proceeds resulting from the sale, exchange,
transfer, financing or refinancing of all or any part of the
Property (other than of the types described in clauses (ii) and
(iv) above), (C) any rent accrued by Borrower but not received
because of any free rent provisions or other rental provisions or
other rental concessions in any Lease, (D) any repayments
received from tenants under Leases of principal loaned or
advanced to tenants under Leases by Borrower pursuant to the
terms hereof, or (E) any type of income which would otherwise be
considered Gross Income from Operations pursuant to the
provisions above but is paid directly by any Tenant to a Person
other than Borrower (or the Manager on account of Borrower) in
accordance with GAAP.
"HEALTH CLUB PARCEL" shall mean that portion of the
Property described on Schedule I(B).
"IMPROVEMENTS" shall have the meaning set forth in the
granting clause of the Mortgage.
"INDEBTEDNESS" of a Person, at a particular date, means
the sum (without duplication) at such date of (a) indebtedness or
liability for borrowed money; (b) obligations evidenced by bonds,
debentures, notes, or other similar instruments; (c) obligations
for the deferred purchase price of property or services
(including trade obligations); (d) obligations under letters of
<PAGE>
credit; (e) obligations under acceptance facilities; (f) all
guaranties, endorsements (other than for collection or deposit in
the ordinary course of business), and other contingent
obligations to purchase, to provide funds for payment, to supply
funds to invest in any Person or entity, or otherwise to assure a
creditor against loss; and (g) obligations secured by any Liens,
whether or not the obligations have been assumed.
"INDEMNIFIED LIABILITIES " shall have the meaning set
forth in SECTION 10.13(b).
"INDEPENDENT ARCHITECT" shall mean, with respect to a
particular project, an independent architect or engineer, as
appropriate for such project, selected by Borrower, licensed or
registered to practice in the state where the Property is located
and having at least five (5) years' experience in respect of the
subject matter of such project.
"INDEPENDENT DIRECTOR" shall have the meaning set forth
in SECTION 4.1(dd)(xvi).
"INSOLVENCY OPINION" shall have the meaning set forth
in SECTION 4.1(dd)(xviii).
"INSURANCE REQUIREMENTS" shall mean all terms of any
insurance Policy required hereunder covering or applicable to the
Property or Equipment or any part thereof, all requirements of
the issuer of any such Policy, and all orders, rules, regulations
and other requirements of the national board of fire underwriters
(or any other body exercising similar functions) applicable to or
affecting the Property or Equipment or any part thereof or any
use of the Property or Equipment or any part thereof.
"INTEREST PERIOD" shall mean (a) the period commencing
on the date hereof and ending on the ninth (9th) day of December,
1997 for the first period hereunder, and (b) for each period
thereafter, the period commencing on the tenth (10th) day of each
calendar month during the term of the Loan and ending on the
ninth (9th) day of the next occurring calendar month.
"LEASE" shall mean any lease, sublease or subsublease,
letting, license, concession or other agreement (whether written
or oral and whether now or hereafter in effect) pursuant to which
any person is granted a possessory interest in, or right to use
or occupy all or any portion of any space in the Property, and
every modification, amendment or other agreement relating to such
lease, sublease, subsublease, or other agreement entered into in
connection with such lease, sublease, subsublease, or other
agreement and every guarantee of the performance and observance
of the covenants, conditions and agreements to be performed and
observed by the other party thereto.
"LEGAL REQUIREMENTS" shall mean, with respect to the
Property, all federal, state, county, municipal and other
governmental statutes, laws, rules, orders, regulations,
ordinances, judgments, decrees and injunctions of Governmental
Authorities affecting such Property or any part thereof or the
construction, use, alteration or operation thereof, or any part
thereof, whether now or hereafter enacted and in force, and all
<PAGE>
permits, licenses and authorizations and regulations relating
thereto, and all covenants, agreements, restrictions and
encumbrances contained in any instruments, either of record or
known to Borrower, at any time in force affecting such Property
or any part thereof, including, without limitation, any which may
(i) require repairs, modifications or alterations in or to such
Property or any part thereof, or (ii) in any way limit the use
and enjoyment thereof.
"LEHMAN" shall have the meaning set forth in SECTION 9.2(b).
"LEHMAN GROUP" shall have the meaning set forth in
SECTION 9.2(b).
"LENDER" shall mean Lehman Brothers Holdings Inc. doing
business as Lehman Capital, a division of Lehman Brothers
Holdings Inc., together with its successors and assigns.
"LETTER OF CREDIT" shall mean an irrevocable,
unconditional, transferable, clean sight draft letter in favor of
Lender and entitling Lender to draw thereon in New York, New
York, based solely on a statement purportedly executed by an
officer of Lender stating that it has the right draw thereon, and
issued by a domestic Approved Bank or the U.S. agency or branch
of a foreign Approved Bank, or if there are no domestic Approved
Banks or U.S. agencies or branches of a foreign Approved Bank
then issuing letters of credit, then such letter of credit may be
issued by a domestic bank, the long term unsecured debt rating of
which is the highest such rating then given by the Rating
Agencies to a domestic commercial bank. If at any time the bank
issuing any such Letter of Credit shall cease to be an Approved
Bank, Lender shall have the right immediately to draw down the
same in full and hold the proceeds of such draw in accordance
with the applicable provisions hereof, unless Borrower shall
deliver a replacement Letter of Credit within thirty (30) days
after such bank shall have ceased to be an Approved Bank.
"LIABILITIES" shall have the meaning set forth in
SECTION 9.2(b).
"LICENSES" shall have the meaning set forth in SECTION 4.1(v).
"LIEN" shall mean any mortgage, deed of trust, lien,
pledge, hypothecation, assignment, security interest, or any
other encumbrance, charge or transfer of, on or affecting the
Property or any portion thereof or Borrower, or any interest
therein, 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, and mechanic's,
materialmen's and other similar liens and encumbrances.
"LOAN" shall mean the loan made by Lender to Borrower
in the original principal amount set forth in, and evidenced by,
the Note executed and delivered by Borrower and secured by the
Mortgage and the other Loan Documents executed and delivered by
Borrower.
<PAGE>
"LOAN DOCUMENTS" shall mean, collectively, this
Agreement, the Note, the Mortgage and Assignment of Leases, the
Assignment of Agreements, the Environmental Indemnity, the
Assignment of Management Agreement and any other document
pertaining to the Property as well as all other documents
executed and/or delivered in connection with the Loan.
"LOCKBOX ACCOUNT" shall have the meaning set forth in
SECTION 9.6.1(a).
"LOCKBOX EVENT" shall mean the occurrence of any one or
more of the following events: (a) an Event of Default, (b) the
date which is six (6) months after the Anticipated Repayment
Date, or (c) the Debt Service Coverage Ratio for the immediately
preceding twelve (12) full calendar month period shall be less
than 1.25:1.
"LOCKOUT YIELD MAINTENANCE PREMIUM" shall mean an
amount equal to the greater of (a) one percent (1%) of the
outstanding principal amount of the Loan to be prepaid or
satisfied, as applicable, or (b) the Yield Maintenance Premium
that would be required if a Defeasance Event had occurred in an
amount equal to the outstanding principal amount of the Loan to
be satisfied or prepaid, as applicable.
"MANAGEMENT AGREEMENT" shall mean the management
agreement entered into by and between Borrower and the Manager,
pursuant to which the Manager is to provide management and other
services with respect to the Property.
"MANAGER" shall mean Urban Shopping Centers, L.P. or
Urban Retail Properties Co.
"MATERIAL ALTERATION" shall have the meaning set forth
in SECTION 5.1(u)(iv).
"MATERIAL LEASE" shall have the meaning ascribed to it
in Section 3.6 of the Mortgage.
"MATURED PERFORMING RATE" shall mean a rate per annum
equal to the greater of (i) the Regular Interest Rate plus two
percentage (2%) points or (ii) the Treasury Rate plus two
percentage (2%) points.
"MATURITY DATE" shall mean November 10, 2033, or such
other date on which the final payment of principal of the Note
becomes due and payable as therein provided, whether at such
stated maturity date, by declaration of acceleration, or
otherwise.
"MAXIMUM FORESEEABLE CASUALTY LOSS" shall have the
meaning set forth in SECTION 7.1.1(c).
"MAXIMUM MANAGEMENT FEE" shall mean an amount not to
exceed that amount which is reasonable and customarily incurred
and paid by owners and operators of regional shopping malls in
the region in which the Property is located.
<PAGE>
"MINIMUM DEPOSIT AMOUNT" shall have the meaning set forth in
SECTION 7.1.2.
"MONTHLY DEBT SERVICE PAYMENT AMOUNT" shall mean a
monthly payment of (i), prior to the Anticipated Repayment Date,
interest calculated on the basis of the Regular Interest Rate,
and (ii), after the Anticipated Repayment Date, interest
calculated at the Matured Performing Rate and principal
calculated on the basis of a self-amortizing loan having a term
of three hundred (300) months.
"MORTGAGE" shall mean that certain first priority
Mortgage, Assignment of Leases and Rents and Security Agreement,
dated the date hereof, executed and delivered by Borrower and the
Land Trustee as security for the Loan made to Borrower and
encumbering the Property, as the same may be amended, restated,
replaced, supplemented or otherwise modified from time to time.
"NET CASH FLOW" for any period shall mean the amount
obtained by subtracting Operating Expenses and Capital
Expenditures for such period from Gross Income from Operations
for such period.
"NET CASH FLOW AFTER DEBT SERVICE" for any period shall
mean the amount obtained by subtracting Debt Service for such
period from Net Cash Flow for such period.
"NET OPERATING INCOME" means the amount obtained by
subtracting Operating Expenses from Gross Income from Operations.
"NOTE" shall mean that certain note of even date
herewith, made by Borrower and the Land Trustee in favor of
Lender, as the same may be amended, restated, replaced,
supplemented or otherwise modified from time to time, including
any Defeased Note and Undefeased Note that may exist from time to time.
"OFFERING DOCUMENT DATE" shall have the meaning set
forth in SECTION 9.1.4.
"OFFERING DOCUMENT" shall have the meaning set forth in
SECTION 9.1.4.
"OFFICERS' CERTIFICATE" shall mean a certificate
delivered to Lender by Borrower which is signed by an authorized
senior officer of the SPC General Partner of Borrower.
"OPERATING AGREEMENTS" shall mean those certain
agreements identified on Schedule V (including any reciprocal
easement agreements affecting the Property) as said Schedule V
may be amended, restated, replaced, supplemented or otherwise
modified from time to time.
"OPERATING EXPENSES" shall mean with respect to a
specified period, without duplication, all expenses paid or to be
paid (as applicable) by Borrower (or by the Manager for the
account of Borrower) during such period in connection with the
ownership, maintenance and operation of the Property (determined
as described in the final paragraph of this definition),
including, without limitation:
<PAGE>
(i) costs and expenses related to tenant
improvements and leasing commissions, any other
expenditures on behalf of tenants of the Property
any Equipment and any capital expenditures; but in
each such case only to the extent not recovered
from such tenants, from insurance proceeds or
condemnation proceeds, from the proceeds of sales
of Equipment pursuant to Section 6.3(ii) of the
Mortgage or from any other Persons (unless, in
each case corresponding amounts recovered have
been included in Gross Income from Operations) and
in each such case only to the extent that the same
are a generally recurring type of expense;
provided, however, that if the Borrower finances
all or part of the cost of any such items, the
amount paid or payable by the Borrower to any
creditor on account of any period in respect of
such financing (including principal, interest and
any other payments) shall be included as an
Operating Expense for such period, and the portion
of the aggregate cost of such item which is so
financed shall not be deemed to be an Operating
Expense during the period in which it is incurred
except to the extent that payments are actually
made during such period;
(ii) all payments required to be made pursuant to
the Operating Agreements;
(iii) legal, accounting, appraisal and other
professional fees and disbursements;
(iv) fees and expenses of the Lender paid by the
Borrower hereunder;
(v) expenses in connection with cleaning, repair,
maintenance, management, leasing, decoration or
painting thereof, or the provision of services to
any tenant under a Lease, net of any insurance
proceeds or condemnation proceeds in respect to
any of the foregoing;
(vi) wages, benefits, payroll taxes, uniforms,
insurance costs and all other related expenses for
on-site building personnel, up to and including
the level of the on-site property manager, engaged
in cleaning, repair, maintenance, management,
leasing, decoration or painting thereof or the
provision of services to any tenant under a Lease;
(vii) reasonable allocations of wages,
benefits, payroll taxes, insurance costs and all
other related expenses for bookkeeping, accounting
and other building management functions and home
office expenses and computer usage, but only if
the amount of such allocations in the aggregate
exceeds the reasonable and customary compensation
described in clause (viii) for the same or similar
services;
<PAGE>
(viii) the compensation being paid for
bookkeeping, accounting and building management
services for the Property, and all other items of
compensation and reimbursement payable by the
Borrower to the Manager;
(ix) the cost of all electricity, oil, gas, water,
steam, heat, ventilation, air conditioning and any
other energy, telecommunications, utility or
similar items, including overtime usage, and the
cost of building and cleaning supplies;
(x) Taxes and Other Charges;
(xi) premiums for liability, casualty, fidelity,
business interruption, loss of "rental value" and
other insurance (which, in the case of any policy
covering multiple properties, shall be equitable
allocated to the Property pro rata in proportion
of the replacement value of each of the properties
covered by such policy for casualty insurance, the
respective size and experience rating of each of
the properties covered by such policy for
liability insurance, and the insured value of each
of the properties covered by such policy for the
other coverages);
(xii) amounts paid in consideration of any
modification, amendment, supplement, waiver,
renewal, or termination of any Lease; and
(xiii) all amounts paid or expenses incurred
under any Lease of an anchor department store or a
peripheral site at the Property.
Notwithstanding the foregoing, Operating Expenses shall not
include (1) depreciation or amortization, (2) the principal of
and interest and premium, if any, on the Note or any additional
indebtedness of the Borrower (except as otherwise provided in
clause (i) above), (3) income taxes or other impositions in the
nature of income taxes, (4) any expenses (including legal,
accounting and other professional fees, expenses and
disbursements) incurred in connection with the issuance of the
Note or the sale, exchange, transfer, financing or refinancing of
all or any portion of the Property or in connection with the
recovery of insurance or condemnation proceeds which are applied
to prepay the Note, (5) any expenses which in accordance with
GAAP should be capitalized (other than any such expenses included
in the preceding sentence), (6) any item of expense which would
otherwise be considered within Operating Expenses pursuant to the
provisions above but is paid directly by any tenant under a
Lease, and (7) any amounts deposited into a reserve or escrow
account (until expended or paid).
"OTHER CHARGES" shall mean all ground rents,
maintenance charges, impositions other than Taxes, and any other
charges, including, without limitation, vault charges and license
fees for the use of vaults, chutes and similar areas adjoining
<PAGE>
the Property, now or hereafter levied or assessed or imposed
against the Property or any part thereof.
"PAYMENT DATE" shall mean the tenth (10th) day of each
calendar month commencing on the tenth (10th) day of December,
1997 or, if such day is not a Business Day, the next preceding
Business Day.
"PERMITTED ENCUMBRANCES" shall mean, collectively, (a)
the Liens and security interests created by the Loan Documents,
(b) all Liens, encumbrances and other matters disclosed in the
Title Insurance Policy relating to the Property or any part
thereof, (c) Liens, if any, for Taxes imposed by any Governmental
Authority not yet due or delinquent, and (d) such other title and
survey exceptions as Lender has approved or may approve in
writing in Lender's sole discretion, which in the aggregate do
not materially adversely affect the value or use of the Property
or Borrower's ability to repay the Loan.
"PERMITTED OWNER" shall mean:
(i) one or more Sponsors; or
(ii) a partnership or limited liability company in
which any one or a combination of Sponsors is a
general partner or managing member, as the case
may be, that owns and controls, or otherwise
directly or indirectly owns and controls, at least
a 25% interest.
Control means, for purposes of this definition, primary
responsibility to make or veto all material decisions with
respect to the operation, management, financing and disposition
of the specified interest, rather than a beneficial ownership
requirement, and without being compromised by the fact that
responsibility for such day-to-day operating and management
functions as are ordinarily handled by a property manager has
been delegated by such controlling Person pursuant to an
agreement in writing.
"PERSON" shall mean any individual, corporation,
limited liability company, partnership, joint venture, estate,
trust, unincorporated association, any federal, state, county or
municipal government or any bureau, department or agency thereof
and any fiduciary acting in such capacity on behalf of any of the
foregoing.
"PHYSICAL CONDITIONS REPORT" shall mean a report
prepared by a company satisfactory to Lender regarding the
physical condition of the Property, satisfactory in form and
substance to Lender in its sole discretion, which report shall,
among other things, (i) include a copy of a final certificate of
occupancy (or its equivalent) with respect to all Improvements on
the Property, and (ii) set forth in reasonable detail the
physical conditions of the Property.
"POLICIES" shall mean the policies of insurance
specified in SECTION 7.1.1(a).
<PAGE>
"PROCEEDS" shall have the meaning set forth in SECTION 7.1.2(b).
"PROPERTY" shall mean the real property consisting of
the Health Club Parcel and the Retail Parcel, together with the
Improvements thereon located, described in SCHEDULE I hereto,
which property is subject to the terms of this Agreement and
encumbered by the Mortgage.
"PROPERTY REQUIRED REPAIRS" shall mean the repairs
described in the report prepared by AQUIRREcorporation dated
April 28, 1997 regarding the Property.
"PROVIDED INFORMATION" shall have the meaning set forth
in SECTION 9.1(a)(i).
"QUALIFIED FIRE PROTECTION ENGINEER" shall mean one of
the following: (a) an engineer duly licensed in the State of
Illinois who shall either (x) have five (5) years' experience
evaluating fire and life safety systems and estimating casualty
insurance claims or (y) be certified as a qualified fire
protection engineer (or equivalent) by a professional, trade or
other, similar association of recognized standing, (b) a
reputable insurance broker having an in-house engineering and
loss control group capable of estimating casualty insurance
claims, or (c) an insurer meeting the criteria set forth in
SECTION 7.1.1(b) hereof or a qualified employee thereof, in each
case selected by the Borrower and to which Lender shall not
object within five (5) Business Days after notice by Borrower of
the identity of the proposed Qualified Fire Protection Engineer.
"QUALIFIED TRANSFEREE" shall mean (i) a pension fund,
pension trust or pension account, (ii) an insurance company which
is subject to supervision by the insurance commissioner, or a
similar official or agency, of a state of territory of the United
States (including the District of Columbia), (iii) a corporation
organized under the banking laws of the United States or any
state or territory of the United States (including the District
of Columbia) with a combined capital and surplus of at least
$100,000,000, (iv) any Person with a long-term, unsecured debt
rating from the Rating Agencies of at least investment grade, or
(v) a Person who owns or operates at least twelve (12) regional
or super-regional malls totalling at least 6,000,000 square feet;
provided that such entity is,
(a) a Person (x) (1) with a net worth, as of date no
more that 6 months prior to the date of such transfer, of at
least $500 million, and (2) who, immediately prior to such
transfer, controls real estate equity assets of at least $1
billion, or (y) if such Person is a pension fund advisor, only
the condition set forth in (x) (2) above must be satisfied, or
(b) a pension fund, pension trust or pension account
that has total assets of at least $500 million, managed by a
Person who controls at least $1 billion of real estate equity assets.
"RATING AGENCIES" shall mean each of Standard & Poor's
Ratings Group, a division of McGraw-Hill, Inc. ("S&P"), Moody's
Investors Service, Inc. ("Moody's"), Duff & Phelps Credit Rating
Co. and Fitch Investors Service, L.P., or any other nationally-
<PAGE>
recognized statistical rating agency which has been approved by
Lender and which issues ratings of the Securities at the request
of a party to this transaction.
"RATING SURVEILLANCE CHARGE" shall have the meaning set
forth in SECTION 9.3.
"REGISTRATION STATEMENT" shall have the meaning set
forth in SECTION 9.2(b).
"REGULAR INTEREST RATE" shall mean six and three-
quarters percent (6.75%).
"RELEASE DATE" shall mean the date that is the earlier
of (a) two (2) years from the "startup day" within the meaning of
Section 860G(a)(9) of the Code of the REMIC Trust or (b) three
(3) years from the Closing Date.
"REMIC TRUST" shall mean a "real estate mortgage
investment conduit" within the meaning of Section 860D of the
Code that holds the Note.
"RENT ROLL" shall mean the information regarding Leases
at the Property contained in Schedule IV.
"RENTS" shall mean all rents, rent equivalents, moneys
payable as damages or in lieu of rent or rent equivalents,
royalties (including, without limitation, all oil and gas or
other mineral royalties and bonuses), income, receivables,
receipts, revenues, deposits (including, without limitation,
security, utility and other deposits), accounts, cash, issues,
profits, charges for services rendered, and other consideration
of whatever form or nature received by or paid to or for the
account of or benefit of Borrower or its agents or employees from
any and all sources arising from or attributable to the Property,
and proceeds, if any, from business interruption or other loss of
income insurance.
"RESTORATION" shall have the meaning set forth in
SECTION 7.1.2(b).
"RETAIL PARCEL" shall mean that portion of the Property
described on Schedule I(A).
"SCHEDULED DEFEASANCE PAYMENTS" shall have the meaning
set forth in SECTION 2.3.2(b).
"SECONDARY MARKET TRANSACTION" shall mean the sale or
assignment by Lender of all or a portion of its interest in the Note.
"SECURITIES" shall have the meaning set forth in SECTION 9.1.
"SECURITIES ACT" shall have the meaning set forth in SECTION 9.2(a).
"SECURITIZATION" shall have the meaning set forth in SECTION 9.1.
"SECURITY AGREEMENT" shall have the meaning set forth
in SECTION 2.3.2(a)(vi).
"SERVICER" shall have the meaning set forth in SECTION 9.7.
<PAGE>
"SERVICING AGREEMENT" shall have the meaning set forth
in SECTION 9.7.
"SEVERED LOAN DOCUMENTS" shall have the meaning set
forth in SECTION 8.2(c).
"SINGLE PURPOSE ENTITY" shall mean a Person, other than
an individual, which is formed or organized solely for the
purpose of holding, directly, an ownership interest in one (1)
property, does not engage in any business unrelated to such
property and the financing thereof, does not have any assets
other than those related to its interest in the property or the
financing thereof or any indebtedness other than as permitted by
this Agreement or the other Loan Documents, has its own separate
books and records and its own account, in each case which are
separate and apart from the books and records and accounts of any
other Person, holds itself out as being a Person, separate and
apart from any other Person and otherwise satisfies the
requirements of SECTION 4.1(dd).
"SPC GENERAL PARTNER" shall have the meaning set forth
in SECTION 4.1(dd)(xv).
"SPONSOR" shall mean Urban Shopping Centers, Inc. or
Urban Shopping Centers L.P.; any corporation that is directly or
indirectly majority-owned by or controlled by or under common control with
Urban Shopping Centers, Inc. or Urban Shopping Centers L.P.; any general
partnership having Urban Shopping Centers, Inc. or Urban Shopping
Centers L.P. as the general partner(s) with at least equal power
with all other general partners to direct and control the general
partnership; any limited partnership having Urban Shopping
Centers, Inc. or Urban Shopping Centers L.P. as the general
partner(s) with at least equal power with all other general
partners to direct and control the limited partnership; any
limited liability company having Urban Shopping Centers, Inc. or
Urban Shopping Centers L.P. as the managing member with at least
equal power with all other managing members to direct and control
the limited liability company or any real estate investment
trust, multi-investor trust, foundation, common fund or investor
account for investment trust, multi-investor trust, foundation,
common fund or investor account for which Urban Shopping Centers,
Inc. or Urban Shopping Centers L.P. acts as the investment
manager or advisor.
"STANDARD STATEMENT" shall have the meaning set forth
in SECTION 9.1.1.
"STATE" shall mean the State of Illinois.
"SUCCESSOR BORROWER" shall have the meaning set forth
in SECTION 2.4.2
"SURVEY" shall mean a survey of the Property prepared
by a surveyor licensed in the State and satisfactory to Lender
and the company or companies issuing the Title Insurance
Policies, and containing a certification of such surveyor
satisfactory to Lender and which otherwise satisfies the
requirements of SECTION 3.1(c)(iii).
<PAGE>
"TAKING" shall mean a temporary or permanent taking by
any Governmental Authority as the result or in lieu or in
anticipation of the exercise of the right of condemnation or
eminent domain, of all or any part of the Property, or any
interest therein or right accruing thereto, including any right
of access thereto or any change of grade affecting the Property
or any part thereof.
"TAXES" shall mean all real estate and personal
property taxes, assessments, water rates or sewer rents, now or
hereafter levied or assessed or imposed against any of the
Property or part thereof.
"THRESHOLD AMOUNT" shall mean an amount equal to
$3,893,194.00 adjusted on the 1st day of November, 1998 and on
the 1st day of each succeeding November through and including the
November which immediately precedes the Maturity Date to reflect
increases in the CPI for the prior twelve (12) calendar months.
"TITLE INSURANCE POLICY" shall mean an ALTA mortgagee
title insurance policy in form acceptable to Lender issued and
insuring the lien of the Mortgage on the Property.
"TRANSFER" shall mean a sale, conveyance or other form
of transfer of the Property or a portion therein or of an
interest therein as described in Article 6 of the Mortgage.
"TREASURY RATE" shall mean a rate per annum equal to
the yield, as of the related determination date, calculated by
linear interpolation (rounded to the nearest one-thousandth of
one percent (i.e., 0.001%)) of the yields of noncallable United
States Treasury obligations with terms (one longer and one
shorter) most nearly approximating the period from such determination
date 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.
"TRUST" shall mean the Land Trusts owning record title
to the Property described on Schedule III hereof.
"TRUSTEE" shall mean as the Trustee under the Land
Trust and its successors and assigns.
"UCC" or "UNIFORM COMMERCIAL CODE" shall mean the
Uniform Commercial Code as in effect in the applicable State or
Commonwealth.
"UNDEFEASED NOTE" shall have the meaning set forth in
SECTION 2.3.2(v) hereof.
"UNDERWRITER GROUP" shall have the meaning set forth in
SECTION 9.2(b).
"U.S. OBLIGATIONS" shall mean obligations or securities
not subject to prepayment, call or early redemption which are
direct obligations of, or obligations fully guaranteed as to
timely payment by, the United States of America or of any agency
<PAGE>
or instrumentality of the United States of America, the
obligations of which are backed by the full faith and credit of
the United States of America, which qualify under 1.860G-
2(a)(8) of the Treasury regulations. All such obligations or
securities shall mature or be redeemable, or provide for payments
of interest thereon, on or prior to the Business Day preceding
the date such amounts are required to be applied under this
Agreement or any of the other Loan Documents.
"YIELD MAINTENANCE PREMIUM" shall mean the amount (if
any) which, when added to the remaining principal amount of the
Note or the principal amount of Defeased Note, as applicable,
will be sufficient to purchase U.S. Obligations providing the
required Scheduled Defeasance Payments.
Section 1.2 PRINCIPLES OF CONSTRUCTION.
--------------------------
All references to sections and schedules are to
sections and schedules in or to this Agreement unless otherwise
specified. Unless otherwise specified, the words "hereof,"
"herein" and "hereunder" and words of similar import when used in
this Agreement shall refer to this Agreement as a whole and not
to any particular provision of this Agreement. Unless otherwise
specified, all meanings attributed to defined terms herein shall
be equally applicable to both the singular and plural forms of
the terms so defined.
II. GENERAL TERMS
-------------
Section 2.1 LOAN COMMITMENT; DISBURSEMENT TO BORROWER.
-----------------------------------------
2.1.1 THE LOAN. Subject to and upon the terms and
conditions set forth herein, Lender hereby agrees to make the
Loan to Borrower on the Closing Date, in the original principal
amount of $77,863,877. The Loan shall mature on the Maturity
Date. Borrower hereby agrees to accept the Loan on the Closing
Date, subject to and upon the terms and conditions set forth
herein.
2.1.2 DISBURSEMENT TO BORROWER. Borrower may
request and receive only one borrowing hereunder in respect of
the Loan and any amount borrowed and repaid hereunder in respect
of the Loan may not be reborrowed.
2.1.3 THE NOTE. The Loan shall be evidenced by the
Note of Borrower, in the original principal amount of the Loan.
The Note shall be entitled to the benefits of this Agreement and
shall be secured by the Mortgage, the Assignment of Leases and
the other Loan Documents.
Section 2.2 USE OF PROCEEDS.
---------------
Borrower shall use the proceeds of the Loan disbursed
to it pursuant to Section 2.1 to pay off an existing loan on the
Property and to distribute, as set forth on the written closing
<PAGE>
direction letter delivered by Borrower to and approved by Lender,
the balance of the proceeds of the Loan.
Section 2.3 LOAN REPAYMENT AND DEFEASANCE.
-----------------------------
2.3.1 REPAYMENT. Borrower shall repay any
outstanding principal indebtedness of the Loan in full on the
Maturity Date of the Loan, together with interest thereon to (but
excluding) the date of repayment. On the Anticipated Repayment
Date, or on any scheduled Payment Date thereafter, Borrower may,
at its option and upon thirty (30) days prior written notice to
Lender prepay in whole or in part the Debt without payment of the
Yield Maintenance Premium or any other premium or consideration.
Any such payment shall be applied to the last payments of
principal due under the Loan. If prior to the Anticipated
Repayment Date and following the occurrence and during the
continuance of any Event of Default, Borrower shall tender
payment of an amount sufficient to satisfy all or any portion of
the Debt, such tender by Borrower shall be deemed to be voluntary
and Borrower shall pay, in addition to the Debt, the Lockout
Yield Maintenance Premium, if any, that would be required if a
Defeasance Event had occurred.
2.3.2 VOLUNTARY DEFEASANCE OF THE LOAN. (a)
Provided no Event of Default exists, at any time after the
Release Date and prior to the Anticipated Repayment Date,
Borrower may voluntarily defease (hereinafter, a "DEFEASANCE
EVENT") all or, subject to the provisions of SECTION 2.3.2(c),
any portion of the Loan by providing Lender with U.S. Obligations
that produce payments which replicate the Scheduled Defeasance
Payments. Each Defeasance Event by the Borrower shall be subject
to the satisfaction of the following conditions precedent:
(i) Borrower shall provide not less than thirty (30)
days prior written notice to Lender specifying a Payment
Date on which the Defeasance Event is to occur (the
"Defeasance Date"). Such notice shall indicate the
principal amount of the Loan to be defeased and whether all
or a portion of the Property is to be the subject to the
Defeasance Event and if a portion of the Property shall
identify such portion of the Property and the Allocated Loan
Amount applicable thereto;
(ii) Borrower shall pay to Lender all accrued and
unpaid interest on the principal balance of the Note to but
not including the Defeasance Date. If for any reason the
Defeasance Date is not a Payment Date, the Borrower shall
also pay interest that would have accrued on the Note
through the next Payment Date;
(iii) Borrower shall pay to Lender all other sums,
not including scheduled interest or principal payments, due
under the Note, this Agreement, the Mortgage, and the other
Loan Documents;
(iv) Borrower shall pay to Lender the required
Defeasance Deposit applicable to the Defeasance Event;
<PAGE>
(v) In the event only a portion of the Loan is the
subject of the Defeasance Event, Borrower shall prepare all
necessary documents to modify this Agreement and to amend
and restate the Note and issue two substitute notes, one
note having a principal balance equal to the defeased
portion of the original Note (the "DEFEASED NOTE") and the
other note having a principal balance equal to the
undefeased portion of the Note (the "UNDEFEASED NOTE"). The
Defeased Note and Undefeased Note shall have identical terms
as the Note except for the principal balance. A Defeased
Note cannot be the subject of any further Defeasance Event;
(vi) Borrower shall execute and deliver a security
agreement (the "SECURITY AGREEMENT"), in form and substance
satisfactory to Lender, creating a first priority lien on
the Defeasance Deposit and the U.S. Obligations purchased
with the Defeasance Deposit in accordance with this
provision of this SECTION 2.3.2;
(vii) Borrower shall deliver an opinion of counsel
for Borrower in form satisfactory to Lender in its
reasonable discretion stating, among other things, that
Borrower has legally and validly transferred and assigned
the U.S. Obligations and all obligations, rights and duties
under and to the Note or Defeased Note (as applicable) to
the Successor Borrower, that Lender has a perfected first
priority security interest in the Defeasance Deposit and the
U.S. Obligations delivered by Borrower, and that any REMIC
Trust formed pursuant to a Securitization will not fail to
maintain its status as a "real estate mortgage investment
conduit" within the meaning of Section 860D of the Code as a
result of such Defeasance Event;
(viii) Borrower shall deliver evidence in writing
from the applicable Rating Agencies to the effect that such
release will not result in a downgrading, withdrawal or
qualification of the respective ratings in effect
immediately prior to such Defeasance Event for the
Securities issued in connection with the Securitization
which are then outstanding. If required by the applicable
Rating Agencies, the Borrower shall also deliver or cause to
be delivered to Lender and the applicable Rating Agencies a
non-consolidation opinion with respect to the Successor
Borrower in form and substance satisfactory to Lender and
the applicable Rating Agencies;
(ix) Borrower shall deliver an Officers' Certificate
certifying that the requirements set forth in this SECTION
2.3.2(a) have been satisfied;
(x) Borrower shall deliver a certificate of Borrower's
independent certified public accountant certifying that the
U.S. Obligations purchased with the Defeasance Deposit
generate monthly amounts equal to or greater than the
Scheduled Defeasance Payments;
(xi) Borrower shall deliver such other certificates,
documents or instruments as Lender may reasonably request; and
<PAGE>
(xi) Borrower shall pay all costs and expenses of
Lender and the Rating Agencies incurred in connection with
the Defeasance Event, including any costs and expenses
associated with a release of the Lien of the Mortgage as
provided in SECTION 2.4 hereof as well as reasonable
attorneys' fees and expenses.
(b) In connection with each Defeasance Event, Borrower
hereby appoints Lender as its agent and attorney-in-fact for the
purpose of using the Defeasance Deposit to purchase U.S.
Obligations in Borrower's name which provide payments on or prior
to, but as close as reasonably possible to, all successive
Payment Dates after the Defeasance Date upon which interest and
principal payments are required under the Note, in the case of a
Defeasance Event for the entire outstanding principal balance of
the Loan, or the Defeased Note, in the case of a Defeasance Event
for only a portion of the outstanding principal balance of the
Loan, as applicable, and in amounts equal to the Monthly Debt
Service Payment Amount due on such dates under the Note or the
Defeased Note, as applicable, and assuming such Note or Defeased
Note is prepaid in full on the Anticipated Repayment Date (the
"SCHEDULED DEFEASANCE PAYMENTS"). Borrower, pursuant to the
Security Agreement or other appropriate document, shall authorize
and direct that the payments received from the U.S. Obligations
may be made directly to the Cash Collateral Account (unless
otherwise directed by Lender) and applied to satisfy the
obligations of Borrower under the Note or the Defeased Note, as
applicable. Any portion of the Defeasance Deposit in excess of
the amount necessary to purchase the U.S. Obligations required by
this SECTION 2.3 and satisfy Borrower's obligations under this
SECTION 2.3 and SECTION 2.4 shall be remitted to Borrower.
(c) Notwithstanding anything to the contrary
hereinbefore contained, the Retail Parcel may only be released
from the lien of the Mortgage in connection with a Defeasance
Event wherein the entire Property is released from the lien of
the Mortgage.
Section 2.4 RELEASE OF PROPERTY.
-------------------
Except as set forth in this SECTION 2.4, no repayment,
prepayment or defeasance of all or any portion of the Note shall
cause, give rise to a right to require, or otherwise result in,
the release of any Lien of any Mortgage on the Property.
2.4.1 RELEASE OF THE PROPERTY. (a) If the
Borrower has elected to defease all or a portion of the Loan and
the requirements of SECTION 2.3 and this SECTION 2.4 have been
satisfied, the Property, in the event of a Defeasance Event
including the entire outstanding amount of the Loan, or such
portion thereof applicable to the Defeasance Deposit paid to
Lender by Borrower pursuant to SECTION 2.3.2(a)(iv) in the event
of a Defeasance Event involving a portion of the Property, shall
be released from the Lien of the Mortgage and the U.S.
Obligations, pledged pursuant to the Security Agreement, shall be
the sole source of collateral securing the Note or portion
thereof applicable to the Defeasance Deposit.
<PAGE>
(b) In connection with a Defeasance Event, Borrower
shall submit to Lender, not less than thirty (30) days prior to
the Defeasance Date, a release of Lien (and related Loan
Documents) for the Property or portion thereof applicable to the
Defeasance Event for execution by Lender. Such release shall be
in a form appropriate in the jurisdiction in which the Property
is located and satisfactory to Lender in its sole discretion. In
addition, Borrower shall provide all other documentation Lender
reasonably requires to be delivered by Borrower in connection with such
release, together with an Officers' Certificate certifying that such
documentation (i) is in compliance with all Legal Requirements, and (ii)
will effect such release in accordance with the terms of this Agreement.
2.4.2 SUCCESSOR BORROWER. In connection with any
release of a Lien under this SECTION 2.4, Borrower may, or at the
request of Lender shall, establish or designate a successor
entity (the "SUCCESSOR BORROWER") which shall be a Single Purpose
Entity approved by Lender, and Borrower shall transfer and assign
all obligations, rights and duties under and to the Note or the
Defeased Note, as applicable, together with the pledged U.S.
Obligations to such Successor Borrower. Such Successor Borrower
shall assume the obligations under the Note or the Defeased Note,
as applicable, and the Security Agreement and Borrower shall be
relieved of its obligations under such documents. The Borrower
shall pay $1,000 to any such Successor Borrower as consideration
for assuming the obligations under the Note or the Defeased Note,
as applicable, and the Security Agreement. Notwithstanding
anything in this Agreement to the contrary, no other assumption
fee shall be payable upon a transfer of the Note or the Defeased
Note, as applicable, in accordance with this SECTION 2.4, but
Borrower shall pay all costs and expenses incurred by Lender,
including Lender's attorneys' fees and expenses, incurred in
connection therewith.
2.4.3 RELEASE ON PAYMENT IN FULL. Lender shall,
upon the written request and at the expense of Borrower, upon
payment in full of all principal and interest on the Loan and all
other amounts due and payable under the Loan Documents in
accordance with the terms and provisions of the Note and this
Loan Agreement, release the Lien of the Mortgage not theretofore released.
Section 2.5 INTEREST.
--------
2.5.1 GENERALLY. Interest on the Loan and the Note
shall accrue at the Applicable Interest Rate, and will be paid as
follows: on the tenth day of December, 1997, and on the tenth
day of each calendar month thereafter up to and including the
tenth day of October, 2033, interest will be paid in installments
of the applicable Monthly Debt Service Amount; each of such
payments to be applied to the payment of interest computed at the
Applicable Interest Rate and, after the Anticipated Repayment
Date, the balance shall be applied against the outstanding
principal balance of the Loan. The principal sum together with
all accrued and unpaid interest thereon shall be due and payable
on the Maturity Date.
2.5.2 DEFAULT RATE; ADDITIONAL PAYMENTS AFTER
DEFAULT. Upon the occurrence and during the continuance of an
<PAGE>
Event of Default, Lender shall be entitled to receive and
Borrower shall pay to Lender (a) interest on the entire unpaid
principal sum and any other amounts due at the Default Rate, and
(b) on the twentieth (20th) day of each month during which such
Event of Default shall continue, an aggregate amount equal to the
Net Cash Flow After Debt Service for the prior month, such Net
Cash Flow After Debt Service to be applied by Lender to the
payment of the Debt in such order as Lender shall determine in
its sole discretion, including, without limitation, alternating
applications thereof between interest and principal. Interest at
the Default Rate and Net Cash Flow After Debt Service shall both
be computed from the occurrence of the Event of Default until the
actual receipt and collection of the Debt (or that portion
thereof that is then due) or the cure of the Event of Default.
Interest at the Default Rate shall be added to the Debt and shall
be secured by the Mortgage. This paragraph, however, shall not
be construed as an agreement or privilege to extend the date of
the payment of the Debt, nor as a waiver of any other right or remedy
accruing to Lender by reason of the occurrence of any Event of Default;
the acceptance of any payment of Net Cash Flow After Debt Service shall
not be deemed to cure or constitute a waiver of any Event of Default; and
Lender retains its rights under this Note to accelerate and to
continue to demand payment of the Debt upon the happening of any
Event of Default, despite any payment of Net Cash Flow After Debt
Service.
Section 2.6 PAYMENTS AND COMPUTATIONS.
-------------------------
2.6.1 MAKING OF PAYMENTS. Each payment by Borrower
hereunder or under the Note shall be made in funds settled
through the New York Clearing House Interbank Payments System or
other funds immediately available to Lender by 11:00 a.m., New
York City time, on the date such payment is due, to Lender by
deposit to such account as Lender may designate by written notice
to Borrower. Whenever any payment hereunder or under the Note
shall be stated to be due on a day which is not a Business Day,
such payment shall be made on the immediately preceding Business Day.
2.6.2 ANNUAL BUDGET; PAYMENTS AFTER ANTICIPATED
REPAYMENT DATE. (a) For each Fiscal Year commencing on January
1, 1998, the Borrower shall submit to Lender an Annual Budget not
later than forty five (45) days prior to the commencement of such
period or Fiscal Year in form reasonably satisfactory to Lender.
(b) In the event that, after the Anticipated Repayment
Date, the Borrower must incur an extraordinary operating expense
or capital expense in an amount in excess of $500,000 not set
forth in the Annual Budget (each an "EXTRAORDINARY EXPENSE"),
then the Borrower shall promptly deliver to Lender a reasonably
detailed explanation of such proposed Extraordinary Expense for
the Lender's approval.
(c) From and after the Anticipated Repayment Date,
interest shall accrue on the unpaid principal balance from time
to time outstanding on the Note at the Matured Performing Rate.
Borrower shall make payments of principal and interest in monthly
installments beginning on the Anticipated Repayment Date and on
the tenth day of each calendar month thereafter up to and
<PAGE>
including the Maturity Date in an amount equal to the Monthly
Debt Service Payment Amount and, notwithstanding the following
provision with respect to Accrued Interest, the failure to make
any such payment as and when due shall constitute an Event of
Default. Each Monthly Debt Service Payment Amount paid after the
Anticipated Repayment Date shall be applied to the payment of
interest computed at the Regular Interest Rate with remainder
applied to reduce the outstanding principal balance of the Note.
Interest accrued at the Matured Performing Rate and not paid
pursuant to the preceding sentence shall be deferred and added to
the Debt and shall earn interest at the Matured Performing Rate
to the extent permitted by applicable law (such accrued interest
is hereinafter defined as "ACCRUED INTEREST"). In addition to
such payments of the Monthly Debt Service Amount, from and after
the Anticipated Repayment Date, Borrower shall make payments in
reduction of the outstanding principal balance of the Loan in
monthly installments beginning on the Anticipated Repayment Date
and on the tenth day of each calendar month thereafter up to and
including the Maturity Date in accordance with the terms and
provisions of Section 9.6 below. All of the Debt, including any
Accrued Interest, shall be due and payable on the Maturity Date.
2.6.3 COMPUTATIONS. Interest payable hereunder or
under the Note by Borrower shall be computed on the basis of the
actual number of days elapsed in a 360-day year.
2.6.4 LATE PAYMENT CHARGE. If any principal,
interest or any other sums due under the Loan Documents is not
paid by Borrower on the date on which it is due, Borrower shall
pay to Lender upon demand an amount equal to the lesser of three
percent (3%) of such unpaid sum or the maximum amount permitted
by applicable law in order to defray the expense incurred by
Lender in handling and processing such delinquent payment and to
compensate Lender for the loss of the use of such delinquent
payment. Any such amount shall be secured by the Mortgage and
the other Loan Documents.
2.6.5 PAYMENTS RECEIVED IN THE DEPOSIT ACCOUNT.
Notwithstanding anything to the contrary contained in this
Agreement or the other Loan Documents, and provided no Event of
Default has occurred and is continuing, Borrower's obligations
with respect to the monthly payment of principal and interest and
amounts due for the Tax and Insurance Escrow Fund, Replacement
Reserve Fund, and any other payment reserves established pursuant
to this Agreement or any other Loan Document shall be deemed
satisfied to the extent sufficient amounts are deposited in the
Cash Collateral Account to satisfy such obligations on the dates
each such payment is required, regardless of whether any of such
amounts are so applied by Lender.
III. CONDITIONS PRECEDENT
--------------------
Section 3.1 CONDITIONS PRECEDENT TO CLOSING.
-------------------------------
The obligation of Lender to make the Loan hereunder is
subject to the fulfillment by Borrower or waiver by Lender of the
following conditions precedent no later than the Closing Date:
<PAGE>
(a) REPRESENTATIONS AND WARRANTIES; COMPLIANCE WITH
CONDITIONS. The representations and warranties of Borrower
contained in this Agreement and the other Loan Documents shall be
true and correct in all material respects on and as of the
Closing Date with the same effect as if made on and as of such
date, and no Default or an Event of Default shall have occurred
and be continuing; and Borrower shall be in compliance in all
material respects with all terms and conditions set forth in this
Agreement and in each other Loan Document on its part to be
observed or performed.
(b) LOAN AGREEMENT AND NOTE. Lender shall have
received this Agreement and the Note, in each case, duly executed
and delivered on behalf of Borrower.
(c) DELIVERY OF LOAN DOCUMENTS; TITLE INSURANCE;
REPORTS; LEASES.
(i) MORTGAGE, ASSIGNMENT OF LEASES, ASSIGNMENTS
OF AGREEMENTS. Lender shall have received from Borrower fully
executed and acknowledged counterparts of the Mortgage, the
Assignment of Leases and Assignment of the Agreements and
evidence that counterparts of the Mortgage and Assignment of
Leases have been delivered to the title company for recording, in
the reasonable judgment of Lender, so as to effectively create
upon such recording valid and enforceable Liens upon such
Property, of the requisite priority, in favor of Lender (or such
other trustee as may be required or desired under local law),
subject only to the Permitted Encumbrances and such other Liens
as are permitted pursuant to the Loan Documents; Lender shall
have also received from Borrower fully executed counterparts of
the Environmental Indemnity and the Assignment of Management
Agreement.
(ii) TITLE INSURANCE. Lender shall have received
the Title Insurance Policy issued by a title company acceptable
to Lender and dated as of the Closing Date, with reinsurance and
direct access agreements acceptable to Lender. Such Title
Insurance Policy shall (A) provide coverage in amounts
satisfactory to Lender, (B) insure Lender that the Mortgage
creates a valid lien on the Property encumbered thereby of the
requisite priority, free and clear of all exceptions from
coverage other than Permitted Encumbrances and standard
exceptions and exclusions from coverage (as modified by the terms
of any endorsements), (C) contain such endorsements and
affirmative coverages as Lender may reasonably request, and (D)
name Lender and its successors and assigns, as the insured. The
Title Insurance Policy shall be assignable. Lender also shall
have received evidence that all premium in respect of such Title
Insurance Policy has been paid.
(iii) SURVEY. Lender shall have received a
current title survey for the Property, certified to the title
company and Lender and their successors and assigns, in form and
content satisfactory to Lender and prepared by a professional and
properly licensed land surveyor satisfactory to Lender in
accordance with the 1992 Minimum Standard Detail Requirements for
ALTA/ACSM Land Title Surveys. The survey should meet the
classification of an "Urban Survey" and the following additional
<PAGE>
items from the list of "Optional Survey Responsibilities and
Specifications" (Table A) should be added to each survey: 2, 3,
4, 6, 8, 9, 10, 11 and 13. Such survey shall reflect the same
legal description contained in the Title Insurance Policy
relating to the Property referred to in clause (ii) above and
shall include, among other things, a metes and bounds description
of the Property reasonably satisfactory to Lender. The
surveyor's seal shall be affixed to the survey and the surveyor
shall provide a certification for the survey in form and
substance acceptable to Lender.
(iv) INSURANCE. Lender shall have received valid
certificates of insurance for the Policies of insurance required
hereunder, satisfactory to Lender in its sole discretion, and
evidence of the payment of all premiums payable for the existing
policy period.
(v) ENVIRONMENTAL REPORT. Lender shall have
received an environmental report in respect of the Property
satisfactory to Lender.
(vi) ZONING. With respect to the Property, Lender
shall have received, at Lender's option, (i) letters or other
evidence from the appropriate municipal authorities (or other
Persons) confirming that the Property and its use complies in all
material respects with all applicable legal requirements,
including without limitation, all applicable zoning and building
laws, (ii) an ALTA 3.1 zoning endorsement for the applicable
Title Insurance Policy, or (iii) a zoning opinion letter, in
substance reasonably satisfactory to Lender.
(vii) ENCUMBRANCES. Borrower shall have taken
or caused to be taken such actions in such a manner so that
Lender has a valid and perfected Lien of the requisite priority
as of the Closing Date with respect to the Mortgage in the
Property, subject only to applicable Permitted Encumbrances and
such other Liens as are permitted pursuant to the Loan Documents,
and Lender shall have received satisfactory evidence thereof.
(d) RELATED DOCUMENTS. Each additional document not
specifically referenced herein, but relating to the transactions
contemplated herein, shall have been duly authorized, executed
and delivered by all parties thereto and Lender shall have
received and approved certified copies thereof.
(e) DELIVERY OF ORGANIZATIONAL DOCUMENTS. On or
before the Closing Date, Borrower shall deliver or cause to be
delivered to Lender copies certified by Borrower of all
organizational documentation related to Borrower and/or the
formation, structure, existence, good standing and/or
qualification to do business, as Lender may request in its sole
discretion, including, without limitation, good standing
certificates, qualifications to do business in the appropriate
jurisdictions, resolutions authorizing the entering into of the
Loan and incumbency certificates as may be requested by Lender.
(f) OPINIONS OF BORROWER'S COUNSEL. Lender shall have
received opinions of Borrower's counsel (i) with respect to non-
consolidation, true sale or true contribution, and fraudulent
<PAGE>
transfer issues, and (ii) with respect to due execution,
authority, enforceability of the Loan Documents and such other
matters as Lender may require, all such opinions in form, scope
and substance satisfactory to Lender and Lender's counsel in
their reasonable discretion.
(g) BUDGETS. Borrower shall have delivered to Lender
the Annual Budget for the current Fiscal Year.
(h) BASIC CARRYING COSTS. Borrower shall have paid
all Basic Carrying Costs relating to the Property which are in
arrears, including without limitation, (i) accrued but unpaid
insurance premiums relating to the Property, (ii) currently due
Taxes (including any in arrears) relating to the Property, and
(iii) currently due Other Charges relating to the Property, which
amounts shall be funded with proceeds of the Loan.
(i) COMPLETION OF PROCEEDINGS. All corporate and
other proceedings taken or to be taken in connection with the
transactions contemplated by this Agreement and other Loan
Documents and all documents incidental thereto shall be
satisfactory in form and substance to Lender, and Lender shall
have received all such counterpart originals or certified copies
of such documents as Lender may reasonably request.
(j) PAYMENTS. All payments, deposits or escrows
required to be made or established by Borrower under this
Agreement, the Note and the other Loan Documents on or before the
Closing Date shall have been paid.
(k) ESTOPPELS. Lender shall have received executed
tenant estoppel letters, in form and substance satisfactory to
Lender from (i) all anchor tenants, and (ii) at least 75% by
gross leaseable area of the "in line" tenants. Lender shall also
receive estoppel letters from each of the parties to the
Operating Agreements.
(l) TRANSACTION COSTS. Borrower shall have paid or
reimbursed Lender for all title insurance premiums and recording
and filing fees incurred in connection with the origination of
the Loan.
(m) MATERIAL ADVERSE CHANGE. There shall have been no
material adverse change in the financial condition or business
condition of Borrower or the Property since the date of the most
recent financial statements delivered to Lender. The income and
expenses of the Property, the occupancy leases thereof, and all
other features of the transaction shall be as represented to
Lender without material adverse change. Borrower shall not be
the subject of any bankruptcy, reorganization, or insolvency
proceeding.
(n) LEASES AND RENT ROLL. Lender shall have received
(i) copies of all tenant leases, which leases shall be certified
by Borrower as true and complete for tenants occupying in excess
of 10,000 square feet, (ii) certified copies of all Operating Agreements
affecting the Property, and (iii) a current certified Rent Roll of the
Property, which shall be true and complete in all material respects and
shall be reasonably satisfactory in form and substance to Lender.
<PAGE>
(o) SUBORDINATION AND ATTORNMENT. Intentionally Deleted.
(p) TAX LOT. Except as disclosed to Lender on
Schedule VII, Lender shall have received evidence that the
Property constitutes a separate tax lot, with a separate tax
payor identification number, which evidence shall be reasonably
satisfactory in form and substance to Lender.
(q) PHYSICAL CONDITIONS REPORT. Lender shall have
received Physical Conditions Report, which report shall be
reasonably satisfactory in form and substance to Lender.
(r) MANAGEMENT AGREEMENT. Lender shall have received
a certified copy of the Management Agreement which shall be
reasonably satisfactory in form and substance to Lender.
(s) MARKET STUDY. Lender shall have received a market
study of the Property, which shall be satisfactory in form and
substance to Lender; provided, however, satisfaction of this
condition shall not constitute a condition precedent to Closing.
(t) FINANCIAL STATEMENTS. Lender shall have received
a balance sheet for the two most recent Fiscal Years and
statements of income and statements of cash flows, if any, with
respect to the Property for the three (3) most recent Fiscal Years.
(u) FURTHER DOCUMENTS. Lender or its counsel shall
have received such other and further approvals, opinions,
documents and information as Lender or its counsel may have
reasonably requested and the form and content of all the Loan Documents.
IV. REPRESENTATIONS AND WARRANTIES
------------------------------
Section 4.1 BORROWER REPRESENTATIONS.
------------------------
Borrower represents and warrants as of the date hereof
and as of the Closing Date that:
(a) ORGANIZATION. Borrower has been duly organized
and is validly existing and in good standing with requisite power
and authority to own its properties and to transact the
businesses in which it is now engaged. Borrower is duly
qualified to do business and is in good standing in each
jurisdiction where it is required to be so qualified in
connection with its properties, businesses and operations.
Borrower possesses all rights, licenses, permits and
authorizations, governmental or otherwise, necessary to entitle
it to own its properties and to transact the businesses in which
it is now engaged, and the sole business of Borrower is the
ownership, management and operation of the Property.
(b) PROCEEDINGS. Borrower has taken all necessary
action to authorize the execution, delivery and performance of
this Agreement and the other Loan Documents. This Agreement and
such other Loan Documents have been duly executed and delivered
by or on behalf of Borrower and constitute legal,
<PAGE>
valid and binding obligations of Borrower enforceable against
Borrower in accordance with their respective terms, subject to
applicable bankruptcy, insolvency and similar laws affecting
rights of creditors generally, and subject, as to enforceability,
to general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law).
(c) NO CONFLICTS. The execution, delivery and
performance of this Agreement and the other Loan Documents by
Borrower will not conflict with or result in a breach of any of
the material terms or provisions of, or constitute a default
under, or result in the creation or imposition of any lien,
charge or encumbrance (other than pursuant to the Loan Documents)
upon any of the property or assets of Borrower pursuant to the
terms of any indenture, mortgage, deed of trust, loan agreement,
partnership agreement or other agreement or instrument to which
Borrower is a party or by which any of Borrower's property or
assets is subject, nor will such action result in any violation
of the provisions of any statute or any order, rule or regulation
of any court or governmental agency or body having jurisdiction
over Borrower or any of Borrower's properties or assets, and any
consent, approval, authorization, order, registration or
qualification of or with any court or any such regulatory
authority or other governmental agency or body required for the
execution, delivery and performance by Borrower of this Agreement
or any other Loan Documents has been obtained and is in full
force and effect.
(d) LITIGATION. Except as otherwise set forth on
SCHEDULE VI hereto, there are no actions, suits or proceedings at
law or in equity by or before any Governmental Authority or other
agency now pending or, to Borrower's knowledge, threatened
against or affecting Borrower or the Property, which actions,
suits or proceedings, if determined against Borrower or the
Property, might materially adversely affect the condition
(financial or otherwise) or business of Borrower or the condition
or ownership of the Property.
(e) AGREEMENTS. Borrower is not a party to any
agreement or instrument or subject to any restriction which might
materially and adversely affect Borrower or the Property, or
Borrower's business, properties or assets, operations or
condition, financial or otherwise. Borrower is not 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 Borrower or its Property are bound. Borrower has no
material financial obligation under any indenture, mortgage, deed
of trust, loan agreement or other agreement or instrument to
which the Borrower is a party or by which the Borrower or the
Property is otherwise bound, other than obligations incurred in
the ordinary course of the operation of the Property and other
than obligations under the Loan Documents.
(f) TITLE. Simultaneously herewith the Land Trustee
under the Land Trust will acquire good, marketable and insurable
title in fee simple to the real property comprising the Property,
free and clear of all Liens whatsoever except the Permitted
Encumbrances, such other Liens as are permitted pursuant to the
<PAGE>
Loan Documents and the Liens created by the Loan Documents. The
Mortgage, when properly recorded in the appropriate records,
together with any Uniform Commercial Code financing statements
required to be filed in connection therewith, will create (i) a
valid, perfected lien on the Property, subject only to Permitted
Encumbrances and the Liens created by the Loan Documents and (ii)
perfected security interests in and to, and perfected collateral
assignments of, all personalty (including the Leases), all in
accordance with the terms thereof, in each case subject only to
any applicable Permitted Encumbrances, such other Liens as are
permitted pursuant to the Loan Documents and the Liens created by
the Loan Documents. Borrower has not performed or caused to be performed
or provided any work, labor or materials which would give rise to any,
and Borrower has no knowledge of any other person making, claims for payment
for work, labor or materials affecting Property which are or may
become a lien prior to, or of equal priority with, the Liens
created by the Loan Documents.
(g) NO BANKRUPTCY FILING. Borrower is not
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 Borrower's assets or property, and
Borrower has no knowledge of any Person contemplating the filing
of any such petition against it.
(h) FULL AND ACCURATE DISCLOSURE. No statement of
fact made by Borrower in this Agreement or in any of the other
Loan Documents contains any untrue statement of a material fact
or omits to state any material fact necessary to make statements
contained herein or therein not misleading. There is no material
fact presently known to Borrower which has not been disclosed to
Lender which materially and adversely affects, nor as far as
Borrower can foresee, which would materially and adversely
affect, the Property or the business, operations or condition
(financial or otherwise) of Borrower.
(i) NO PLAN ASSETS. Borrower is not an "employee
benefit plan," as defined in Section 3(3) of ERISA, subject to
Title I of ERISA, and none of the assets of Borrower constitutes
or will constitute "plan assets" of one or more such plans within
the meaning of 29 C.F.R. Section 2510.3-101. In addition, (i)
Borrower is not a "governmental plan" within the meaning of
Section 3(32) of ERISA and (ii) to Borrower's actual knowledge,
without investigation, transactions by or with Borrower are not
subject to state statutes regulating investment of, and fiduciary
obligations with respect to, governmental plans.
(j) COMPLIANCE. To Borrower's knowledge, the Property
and the use thereof comply in all material respects with all
applicable Legal Requirements, including, without limitation,
building and zoning ordinances and codes. To 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 might materially adversely affect the
condition (financial or otherwise) or business of Borrower. To
Borrower's knowledge, there has not been any act or omission
affording the federal government or any state or local government
the right of forfeiture as against any of the Property or any
part thereof or any monies paid in performance of Borrower's
<PAGE>
obligations under any of the Loan Documents. Borrower hereby
covenants and agrees not to commit, permit or suffer to exist any
act or omission affording such right of forfeiture.
(k) FINANCIAL INFORMATION. All financial data,
including, without limitation, the statements of cash flow and
income and operating expense, that have been delivered to Lender
in respect of the Property (i) are true, complete and correct in
all material respects, (ii) accurately represent the financial
condition of the Property as of the date of such reports, and
(iii) to the extent prepared or audited by an independent
certified public accounting firm, have been prepared in
accordance with GAAP throughout the periods covered, except as
disclosed therein. Borrower does not have any contingent
liabilities, liabilities for taxes, unusual forward or long-term
commitments or unrealized or anticipated losses from any
unfavorable commitments that are known to Borrower and reasonably
likely to have a materially adverse effect on the Property or the
operation thereof as a retail shopping center, except as referred to or
reflected in said financial statements. Since the date of such financial
statements, there has been no materially adverse change in the financial
condition, operations or business of Borrower from that set forth in said
financial statements. Notwithstanding anything to the contrary
hereinbefore provided, Borrower shall not be deemed to represent
or warrant the truth, accuracy, completeness or correctness of
any financial data prepared or furnished by any prior owner of
the Property.
(l) CONDEMNATION. No Condemnation or other proceeding
has been commenced or, to Borrower's best knowledge, is
contemplated with respect to all or any portion of any of the
Property or for the relocation of roadways providing access to
the Property.
(m) FEDERAL RESERVE REGULATIONS. 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 or by the
terms and conditions of this Agreement or the other Loan
Documents.
(n) UTILITIES AND PUBLIC ACCESS. The Property has
rights of access to public ways and is served by water, sewer,
sanitary sewer and storm drain facilities adequate to service
such Property for its intended uses. All public utilities
necessary or convenient to the full use and enjoyment of each of
the Property are located either in the public right-of-way
abutting such Property (which are connected so as to serve the
Property without passing over other property) or in recorded
easements serving such Property and such easements are set forth
in the Title Insurance Policies. All roads necessary for the use
of the Property for its current purposes have been completed and
dedicated to public use and accepted by all Governmental
Authorities.
<PAGE>
(o) NOT A FOREIGN PERSON. Borrower is not a "foreign
person" within the meaning of 1445(f)(3) of the Code.
(p) SEPARATE LOTS. Except as disclosed on Schedule
VII, the Property is comprised of one (1) or more parcels which
constitutes a separate tax lot(s) and no property is part of such
tax lot other than the Property encumbered by the Mortgage.
(q) ASSESSMENTS. There are no pending or, to
Borrower's knowledge, proposed special or other assessments for
public improvements or otherwise affecting the Property, nor are
there any contemplated improvements to the Property that may
result in such special or other assessments.
(r) ENFORCEABILITY. The Loan Documents are not
subject to any right of rescission, set-off, counterclaim or
defense by Borrower, including the defense of usury, nor would
the operation of any of the terms of the Loan Documents, or the
exercise of any right thereunder, render the Loan Documents
unenforceable, and Borrower has not asserted any right of
rescission, set-off, counterclaim or defense with respect thereto.
(s) NO PRIOR ASSIGNMENT. There are no prior
assignments of the Leases or any portion of the Rents due and
payable or to become due and payable which are presently outstanding.
(t) INSURANCE. Borrower has obtained and has
delivered to Lender certificates of all insurance Policies
reflecting the insurance coverages, amounts and other
requirements set forth in this Agreement. No claims which
materially reduce coverages afforded by such Policies have been
made under any such Policy, and no Person, including Borrower,
has done, by act or omission, anything which would impair the
coverage of any such Policy.
(u) USE OF THE PROPERTY. The Property is used
exclusively for retail purposes and other appurtenant and related
uses customary for a regional shopping center.
(v) CERTIFICATE OF OCCUPANCY; LICENSES. All
certifications, permits, licenses and approvals, including
without limitation, certificates of completion and occupancy
permits required for the legal use, occupancy and operation of
the Property as a retail shopping center (collectively, the
"Licenses"), have been obtained and are in full force and effect.
The Borrower shall keep and maintain all licenses necessary for
the operation of the Property as a retail shopping center. The
use being made of the Property is in conformity with the
certificate of occupancy issued for such Property.
(w) NATURAL HAZARD ZONE. None of the Improvements on
the Property are located in an area as identified by the Federal
Emergency Management Agency as (i) an area having special flood
hazards; or (ii) identified or designated as a federally
designated seismic zone.
(x) PHYSICAL CONDITION. To Borrower's knowledge and
except as disclosed in the physical conditions report delivered
to Lender pursuant to SECTION 3.1 (q) hereof, the Property,
<PAGE>
including, without limitation, all buildings, improvements,
parking facilities, sidewalks, storm drainage systems, roofs,
plumbing systems, HVAC systems, fire protection systems,
electrical systems, equipment, elevators, exterior sidings and
doors, landscaping, irrigation systems and all structural
components, are in good condition, order and repair in all
material respects; there exists no structural or other material
defects or damages in the Property, whether latent or otherwise,
and Borrower has not received notice from any insurance company
or bonding company of any defects or inadequacies in the
Property, or any part thereof, which would adversely affect the
insurability of the same or cause the imposition of extraordinary
premiums or charges thereon or of any termination or threatened
termination of any policy of insurance or bond.
(y) BOUNDARIES. Except as shown on the survey
delivered to Lender, all of the improvements which were
identified by Borrower or Sponsor as being the subject Property
lie wholly within the boundaries and building restriction lines
of the Property, and no improvements on adjoining properties
encroach upon the Property, and no easements or other
encumbrances upon the Property encroach upon any of the
improvements, so as to affect the value or marketability of the
Property except those which are insured against by title
insurance.
(z) OPERATING AGREEMENTS. The Operating Agreements
are in full force and effect and to Borrower's knowledge, there
are no material defaults thereunder by any party and there are no
conditions that, with the passage of time or the giving of
notice, or both, would constitute material defaults thereunder.
(aa) SURVEY. The Survey for the Property delivered to
Lender in connection with this Agreement does not fail to reflect
any material matter affecting any of the Property or the title thereto.
(bb) LOAN TO VALUE. The fair market value of the
Property as of the date hereof is at least equal to eighty
percent (80%) of the original principal balance of the Loan.
(cc) FILING AND RECORDING TAXES. All transfer taxes,
deed stamps, intangible taxes or other amounts in the nature of
transfer taxes required to be paid by any Person under applicable
Legal Requirements currently in effect in connection with the
transfer of the Property to Borrower have been paid. All
mortgage, mortgage recording, stamp, intangible or other similar
tax required to be paid by any Person under applicable Legal
Requirements currently in effect in connection with the
execution, delivery, recordation, filing, registration,
perfection or enforcement of any of the Loan Documents,
including, without limitation, the Mortgage encumbering the
Property have been paid, and, under current Legal Requirements,
the Mortgage encumbering the Property are enforceable in
accordance with their respective terms by Lender (or any
subsequent holder thereof).
(dd) SINGLE-PURPOSE. Borrower hereby represents and
warrants to, and covenants with, Lender that as of the date
hereof and until such time as the Debt shall be paid in full:
<PAGE>
(i) Borrower does not own and will not own any
asset or property other than (A) the Property, and (B) incidental
personal property necessary for the ownership or operation of the Property.
(ii) Borrower will not engage in any business
other than the ownership, management and operation of the
Property and Borrower will conduct and operate its business as
presently conducted and operated.
(iii) Borrower will not enter into any
contract or agreement with any affiliate of the Borrower, any
constituent party of Borrower or any affiliate of any constituent
party, except upon terms and conditions that are intrinsically
fair and substantially similar to those that would be available
on an arms-length basis with third parties other than any such party.
(iv) Borrower has not incurred and will not incur
any Indebtedness, secured or unsecured, direct or indirect,
absolute or contingent (including guaranteeing any obligation)
other than the Debt and such other obligations permitted pursuant
to SECTION 6.5 of the Mortgage. No Indebtedness other than the
Debt may be secured (subordinate or PARI PASSU) by the Property.
(v) Borrower has not made and will not make any
loans or advances to any third party (including any affiliate or
constituent party), and shall not acquire obligations or
securities of its affiliates.
(vi) Borrower is and will remain solvent and
Borrower will pay its debts and liabilities (including, as
applicable, shared personnel and overhead expenses) from its
assets as the same shall become due.
(vii) Borrower has done or caused to be done
and will do all things necessary to observe organizational
formalities and preserve its existence, and Borrower will not,
nor will Borrower permit any constituent party to amend, modify
or otherwise change the organizational documents of Borrower or
SPC General Partner without the prior written consent of Lender.
(viii) Borrower will maintain all of its books,
records, financial statements and bank accounts separate from
those of its affiliates and any constituent party and Borrower
will file its own tax returns. Borrower shall maintain its
books, records, resolutions and agreements as official records.
(ix) Borrower will be, and at all times will hold
itself out to the public as, a legal entity separate and distinct
from any other entity (including any affiliate of Borrower or any
constituent party of Borrower), shall correct any known
misunderstanding regarding its status as a separate entity, shall
conduct business in its own name, shall not identify itself or
any of its affiliates as a division or part of the other and
shall maintain and utilize separate stationery, invoices and checks.
(x) Borrower will maintain adequate capital for
the normal obligations reasonably foreseeable in a business of
its size and character and in light of its contemplated business
operations.
<PAGE>
(xi) Neither Borrower nor any constituent party
will seek or effect the liquidation, dissolution, winding up,
liquidation, consolidation or merger, in whole or in part, of the Borrower.
(xii) Borrower will not commingle the funds
and other assets of Borrower with those of any affiliate or
constituent party or any other Person.
(xiii) Borrower has and will maintain its assets
in such a manner that it will not be costly or difficult to
segregate, ascertain or identify its individual assets from those
of any affiliate or constituent party or any other Person.
(xiv) Borrower does not and will not hold
itself out to be responsible for the debts or obligations of any
other Person.
(xv) If Borrower is a limited partnership, each
general partner is a corporation whose sole asset is its interest
in Borrower (the "SPC GENERAL PARTNER") and the SPC General
Partner will at all times comply, and will cause Borrower to
comply, with each of the representations, warranties, and
covenants contained in this SECTION 4.1(dd) as if such
representation, warranty or covenant was made directly by the SPC
General Partner.
(xvi) Borrower shall at all times cause there
to be at least one duly appointed member of the board of
directors (AN "INDEPENDENT DIRECTOR") of the SPC General Partner
reasonably satisfactory to Lender who shall not have been at the
time of such individual's appointment, and may not have been at
any time during the preceding five years (i) a shareholder of, or
an officer, director, partner or employee of, Borrower or any of
its shareholders, subsidiaries or affiliates, (ii) a customer of,
or supplier to, Borrower or any of its shareholders, subsidiaries
or affiliates, (iii) a person or other entity controlling or
under common control with any such shareholder, partner supplier
or customer, or (iv) a member of the immediate family of any such
shareholder, officer, director, partner, employee, supplier or
customer of any other director of Borrower.
(xvii) Borrower shall not cause or permit the
board of directors of the SPC General Partner to take any action
which, under the terms of any certificate of incorporation, by-
laws or any voting trust agreement with respect to any common
stock, requires a vote of the board of directors of the SPC
General Partner of Borrower unless at the time of such action
there shall be at least one member who is an Independent Director.
(xviii) Borrower shall conduct its business so
that the assumptions made with respect to Borrower in that
certain opinion letter dated the date hereof (the "INSOLVENCY
OPINION") delivered by Katten Muchin & Zavis in connection with
the Loan shall be true and correct in all respects.
(xix) Borrower will not permit any Affiliate
(other than Manager in connection with the discharge of its
obligations under the Management Agreement) or constituent party
independent access to its bank accounts.
<PAGE>
(xx) Borrower shall pay the salaries of its own
employees and maintain a sufficient number of employees in light
of its contemplated business operations.
(xxi) Borrower shall compensate each of its
consultants and agents from its funds for services provided to it
and pay from its own assets all obligations of any kind incurred.
Upon the withdrawal or the disassociation of the SPC General
Partner from Borrower, Borrower shall immediately appoint a new
general partner whose partnership agreement is substantially
similar to those of the SPC General Partner and deliver a new non-
consolidation opinion to the Rating Agency or Rating Agencies, as
applicable, with respect to the new special purpose general
partner and its equity owners.
(ee) NO CHANGE IN FACTS OR CIRCUMSTANCES; DISCLOSURE.
All information submitted by Borrower to Lender and in all
financial statements, rent rolls, reports, certificates and other
documents submitted by or on behalf of Borrower (excluding those
prepared or furnished by any prior owner of the Property) in
connection with the Loan or in satisfaction of the terms thereof
and all statements of fact made by Borrower in this Agreement or
in any other Loan Document, are accurate, complete and correct in
all material respects. There has been no material adverse change
in any condition, fact, circumstance or event that would make any
such information inaccurate, incomplete or otherwise misleading
in any material respect or that otherwise materially and
adversely affects or might materially and adversely affect the
Property or the business operations or the financial condition of
Borrower. To Borrower's knowledge, Borrower has disclosed to
Lender all material facts and has not failed to disclose any
material fact that could cause any representation or warranty
made herein to be materially misleading.
(ff) ILLEGAL ACTIVITY. No portion of the Property has
been or will be purchased with proceeds of any illegal activity.
(gg) RENT ROLL. The Rent Roll attached hereto as
Schedule IV is true and complete in all material respects.
(hh) ENVIRONMENTAL COMPLIANCE. To Borrower's
knowledge, no hazardous wastes or toxic substances, as defined by
applicable federal, state or local statutes, rules and
regulations, have been disposed, stored or treated by any tenant
under any Lease on or about the leased premises in violation of
any applicable law, rule or regulation, nor does Borrower have
any knowledge of any tenant's intention to use its leased
premises for any activity which, directly or indirectly, involves
the use generation, treatment, storage, disposal or transaction
of any petroleum product or any toxic or hazardous chemical,
material, substance or waste in violation of any applicable law.
(ii) TRUST. Borrower is the only beneficiary under the
Trust and no land or other property encumbered by the Mortgage is
part of the Trust property. Except with regard to Transfers
permitted by Article 6 of the Mortgage, Borrower will not give
nor will Borrower allow any other Person authority to give any
direction to Trustee with regard to the Trust or the Trust
property. Borrower shall do all acts reasonably required to
<PAGE>
extend the term of the Trust to a date beyond the Maturity Date
and shall, upon termination of the Trust take all steps necessary
to vest title to the Trust property in Borrower subject to the
terms of the Mortgage.
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 shall survive for
so long as any amount remains owing to Lender under this
Agreement or any of the other Loan Documents by Borrower. All
representations, warranties, covenants and agreements made in
this Agreement or in the other Loan Documents by Borrower shall
be deemed to have been relied upon by Lender notwithstanding any
investigation heretofore or hereafter made by Lender or on its behalf.
V. AFFIRMATIVE COVENANTS
---------------------
Section 5.1 BORROWER COVENANTS.
------------------
From the date hereof and until payment and performance
in full of all obligations of Borrower under the Loan Documents
or the earlier release of the Lien of all Mortgage encumbering
the Property (and all related obligations) in accordance with the
terms of this Agreement and the other Loan Documents, Borrower
hereby covenants and agrees with Lender that:
(a) EXISTENCE; COMPLIANCE WITH LEGAL REQUIREMENTS;
INSURANCE. Borrower shall do or cause to be done all things
necessary to preserve, renew and keep in full force and effect
its existence, rights, licenses, permits and franchises and
comply with all Legal Requirements applicable to it and its
Property. Borrower shall at all times maintain, preserve and
protect all franchises and trade names and preserve all the
remainder of its property used or useful in the conduct of its
business and shall keep the Property in good working order and
repair, 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
Mortgage encumbering such Property. Borrower shall keep the
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
this Agreement.
(b) TAXES AND OTHER CHARGES. Borrower shall pay all
Taxes and Other Charges now or hereafter levied or assessed or
imposed against the Property or any part thereof as the same
become due and payable; provided, however, Borrower's obligation
to directly pay Taxes shall be suspended for so long as Borrower
complies with the terms and provisions of SECTION 7.3 hereof.
Borrower will deliver to Lender receipts for payment or other
evidence satisfactory to Lender that the Taxes and Other Charges
have been so paid or are not then delinquent no later than the
date on which the Taxes and/or Other Charges would otherwise be
<PAGE>
delinquent if not paid. Borrower shall furnish to Lender
receipts for the payment of the Taxes and the Other Charges promptly
after payment of said Taxes and the Other Charges (provided,
however, that Borrower is not required to furnish such receipts
for payment of Taxes in the event that such Taxes have been paid
by Lender pursuant to SECTION 7.3 HEREOF). Borrower shall not
suffer and shall promptly cause to be paid and discharged any
lien or charge whatsoever which may be or become a lien or charge
against the Property, and shall promptly pay for all utility
services provided to the Property. After prior written notice to
Lender, Borrower, at its own expense, may contest by appropriate
legal proceeding, promptly initiated and conducted in good faith
and with due diligence, the amount or validity or application in
whole or in part of any Taxes or Other Charges, provided that
(i) no Default or Event of Default has occurred and remains
uncured; (ii) Borrower is permitted to do so under the provisions
of any mortgage or deed of trust superior in lien to the
applicable Mortgage; (iii) such proceeding shall be permitted
under and be conducted in accordance with the provisions of any
other instrument to which Borrower is subject and shall not
constitute a default thereunder and such proceeding shall be
conducted in accordance with all applicable statutes, laws and
ordinances; (iv) the Property nor any part thereof or interest
therein will be in danger of being sold, forfeited, terminated,
canceled or lost; (v) Borrower shall promptly upon final
determination thereof pay the amount of any such Taxes or Other
Charges, together with all costs, interest and penalties which
may be payable in connection therewith; (vi) such proceeding
shall suspend the collection of Taxes or Other Charges from the
Property; and (vii) Borrower shall furnish such security as may
be required in the proceeding, or as may be reasonably requested
by Lender, to insure the payment of any such Taxes or Other
Charges, together with all interest and penalties thereon.
Lender may pay over any such cash deposit or part thereof held by
Lender to the claimant entitled thereto at any time when, in the
judgment of Lender, the entitlement of such claimant is established.
(c) LITIGATION. Borrower shall give prompt written
notice to Lender of any litigation or governmental proceedings
pending or threatened against Borrower which might materially
adversely affect Borrower's condition (financial or otherwise) or
business or the Property.
(d) ACCESS TO THE PROPERTY. Borrower shall permit
agents, representatives and employees of Lender to inspect the
Property or any part thereof at reasonable hours upon reasonable
advance notice.
(e) NOTICE OF DEFAULT. Borrower shall promptly advise
Lender of any material adverse change in Borrower's financial
condition or of the occurrence of any Default or Event of Default
of which Borrower has knowledge.
(f) COOPERATE IN LEGAL PROCEEDINGS. Borrower shall
cooperate fully with Lender with respect to any proceedings
before any court, board or other Governmental Authority which may
in any way affect the rights of Lender hereunder or any rights
obtained by Lender under any of the other Loan Documents and, in
<PAGE>
connection therewith, permit Lender, at its election, to
participate in any such proceedings.
(g) PERFORM LOAN DOCUMENTS. Borrower shall observe,
perform and satisfy all the terms, provisions, covenants and
conditions of, and shall pay when due all costs, fees and
expenses to the extent required under, the Loan Documents
executed and delivered by, or applicable to, Borrower.
(h) INSURANCE BENEFITS. Borrower shall cooperate with
Lender in obtaining for Lender the benefits of any Proceeds of
any Policies lawfully or equitably payable in connection with the
Property, and Lender shall be reimbursed for any expenses
incurred in connection therewith (including
attorneys' fees and disbursements, and the payment by Borrower of
the expense of an appraisal (if necessary, required or, in
Lender's reasonable discretion appropriate under the
circumstances) on behalf of Lender in case of a fire or other
casualty affecting any of the Property or any part thereof) out
of such Proceeds.
(i) FURTHER ASSURANCES; SUPPLEMENTAL MORTGAGE
AFFIDAVITS. Borrower shall, at Borrower's sole cost and expense:
(A) furnish to Lender all instruments, documents,
boundary surveys, footing or foundation surveys, certificates,
plans and specifications, appraisals, market studies, title and
other insurance reports and agreements, and each and every other
document, certificate, agreement and instrument required to be
furnished by Borrower pursuant to the terms of the Loan Documents
or reasonably requested by Lender in connection therewith;
(B) execute and deliver to Lender such documents,
instruments, certificates, assignments and other writings, and do
such other acts necessary or desirable, to evidence, preserve
and/or protect the collateral at any time securing or intended to
secure the obligations of Borrower under the Loan Documents, as
Lender may reasonably require provided, however, such documents,
instruments, certificates, assignments and other writings and
such other acts will not change the rate of interest or change, modify or
amend any of the material business terms of the Loan Documents; and
(C) 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 provided that such acts,
conveyances and assurance will not create new liability or
increase existing liability of or on the part of Borrower.
(j) As of the date hereof, Borrower represents that it
has paid or will cause to be paid all state, county and municipal
recording and all other taxes imposed upon the execution and
recordation of the Mortgage encumbering the Property.
(k) FINANCIAL REPORTING.
(i) Borrower will keep and maintain or will cause
to be kept and maintained on a Fiscal Year basis, in accordance
<PAGE>
with GAAP (or such other accounting basis reasonably acceptable
to Lender), proper and accurate books, records and accounts
reflecting all of the financial affairs of Borrower and all items
of income and expense in connection with the operation of the
Property. Lender shall have the right from time to time at all
times during normal business hours upon reasonable notice to
examine such books, records and accounts at the office of
Borrower or other Person maintaining such books, records and
accounts and to make such copies or extracts thereof as Lender
shall desire. After the occurrence of an Event of Default,
Borrower shall pay any reasonable costs and expenses incurred by
Lender for outside auditors to examine Borrower's accounting
records with respect to the Property, as Lender shall determine
to be necessary or appropriate in the protection of Lender's interest.
(ii) Borrower will furnish to Lender annually,
within ninety (90) days following the end of each Fiscal Year of
Borrower, a complete copy of Borrower's annual financial
statements audited by a "Big Six" accounting firm or other
independent certified public accountant acceptable to Lender in
accordance with GAAP (or such other accounting basis acceptable to
Lender) covering the Property for such Fiscal Year and containing
statements of profit and loss for the Borrower and the Property
and a balance sheet for the Property. Such statements shall set
forth the financial condition and the results of operations for
the Property for such Fiscal Year, and shall include, but not be
limited to, amounts representing annual Net Cash Flow, Net
Operating Income, Gross Income from Operations and Operating
Expenses. The annual financial statements for the Property shall
be accompanied by (i) a certificate executed by the chief
financial officer of Borrower or the SPC General Partner of
Borrower, as applicable, stating that each such annual financial
statement presents fairly the financial condition and the results
of operations of the Property being reported upon and has been
prepared in accordance with GAAP, and (ii) an unqualified opinion
of a "Big Six" accounting firm or other independent certified
public accountant reasonably acceptable to Lender. Together with
the annual financial statements for the Property, Borrower shall
furnish to Lender an Officer's Certificate certifying as of the
date thereof whether there exists an event or circumstance which
constitutes a Default or Event of Default under the Loan
Documents executed and delivered by, or applicable to, Borrower,
and if such Default or Event of Default exists, the nature
thereof, the period of time it has existed and the action then
being taken to remedy the same.
(iii) Borrower will furnish, or cause to be
furnished, to Lender on or before forty-five (45) days after the
end of each calendar quarter the following items, accompanied by
a certificate of the chief financial officer of Borrower or the
SPC General Partner, as applicable, stating that such items are
true, correct, accurate, and complete and fairly present the
financial condition and results of the operations of the Property
on a combined basis (subject to normal year-end adjustments) as
applicable: (i) a rent roll for the subject quarter accompanied
by an Officer's Certificate with respect thereto; (ii) quarterly
and year-to-date operating statements (including Capital
Expenditures) prepared for each calendar quarter, noting Net
Operating Income, Gross Income from Operations, and Operating
<PAGE>
Expenses, and other information necessary and sufficient to
fairly represent the financial position and results of operation
of the Property during such calendar quarter; and (iii) a
calculation reflecting the annual Debt Service Coverage Ratio for
the immediately preceding twelve (12) month period as of the last
day of such quarter accompanied by an Officer's Certificate with
respect thereto. In addition, such certificate shall also be
accompanied by a certificate of the chief financial officer of
Borrower or the SPC General Partner of Borrower stating that the
representations and warranties of Borrower set forth in SECTION
4.1(dd)(iv) are true and correct as of the date of such
certificate and that there are no trade payables outstanding for
more than sixty (60) days.
(iv) Borrower shall furnish to Lender, within ten
(10) Business Days after request (or as soon thereafter as may be
reasonably possible), such further detailed information with
respect to the operation of the Property and the financial
affairs of Borrower as may be reasonably requested by Lender.
(l) BUSINESS AND OPERATIONS. Borrower will continue
to engage in the businesses presently conducted by it as and to
the extent the same are necessary for the ownership, maintenance,
management and operation of the Property. Borrower will qualify
to do business and will remain in good standing under the laws of
each jurisdiction as and to the extent the same are required for
the ownership, maintenance, management and operation of the Property.
(m) TITLE TO THE PROPERTY. Borrower will warrant and
defend (i) the title to the Property and the Trust and every part
thereof, subject only to Liens permitted hereunder (including
Permitted Encumbrances), and (ii) the validity and priority of
the Liens of the Mortgage and the Assignment of Leases on the
Property and the Trust, subject only to Liens permitted hereunder
(including Permitted Encumbrances), in each case against the
claims of all Persons whomsoever. Borrower shall reimburse
Lender for any losses, costs, damages or expenses (including
reasonable attorneys' fees and court costs) incurred by Lender if
an interest in the Property and the Trust, other than as
permitted hereunder, is claimed by another Person.
(n) COSTS OF ENFORCEMENT. In the event (i) that the
Mortgage encumbering the Property is foreclosed in whole or in
part or that the Mortgage is put into the hands of an attorney
for collection, suit, action or foreclosure, (ii) of the
foreclosure of any mortgage prior to or subsequent to any
Mortgage encumbering the Property in which proceeding Lender is
made a party, or (iii) of the bankruptcy, insolvency,
rehabilitation or other similar proceeding in respect of Borrower
or an assignment by Borrower for the benefit of its creditors,
Borrower, its successors or assigns, shall be chargeable with and
agrees to pay all reasonable costs of collection and defense,
including attorneys' fees in connection therewith and in
connection with any appellate proceeding or post-judgment action
involved therein, which shall be due and payable together with
all required service or use taxes.
<PAGE>
(o) ESTOPPEL STATEMENT. (a) After request by Lender,
Borrower shall within ten (10) days furnish Lender with a
statement, duly acknowledged and certified, setting forth (i) the
amount of the original principal amount of the Note, (ii) the
unpaid principal amount of the Note, (iii) the Applicable
Interest Rate of the Note, (iv) the date installments of interest
and/or principal were last paid, (v) any offsets or defenses to
the payment of the Debt, if any, and (vi) that the Note, this
Agreement, the Mortgage and the other Loan Documents are valid,
legal and binding obligations and have not been modified or if
modified, giving particulars of such modification.
(b) Borrower shall deliver to Lender upon
request, tenant estoppel certificates from each tenant occupying
10,000 square feet of gross leasable area or more at the Property
in form and substance reasonably satisfactory to Lender provided
that Borrower shall not be required to deliver such certificates
more frequently than one (1) time in any calendar year.
(p) LOAN PROCEEDS. Borrower shall use the proceeds of
the Loan received by it on the Closing Date only for the purposes
set forth in SECTION 2.2.
(q) PERFORMANCE BY BORROWER. Borrower shall in a
timely manner observe, perform and fulfill each and every
covenant, term and provision of each Loan Document executed and
delivered by, or applicable to, Borrower, and shall not enter
into or otherwise suffer or permit any amendment, waiver,
supplement, termination or other modification of any Loan
Document executed and delivered by, or applicable to, Borrower
without the prior written consent of Lender.
(r) CONFIRMATION OF REPRESENTATIONS. In addition to
and not in limitation of the covenants and agreements of Borrower
contained in SECTION 7.1, Borrower shall deliver, in connection
with any Securitization, (i) one or more Officers' Certificates
certifying as to the accuracy of all representations made by
Borrower in the Loan Documents as of the date of the closing of
such Secondary Market Transaction in all relevant jurisdictions
(provided that such certificates may, to maintain the accuracy of such
representations, reflect the occurrence of any events after the
Closing), and (ii) certificates of the relevant Governmental
Authorities in all relevant jurisdictions indicating the good
standing and qualification of Borrower and its SPC General
Partner as of the date of the Secondary Market Transaction.
(s) NO JOINT ASSESSMENT. Borrower shall not suffer,
permit or initiate the joint assessment of any Property (i) with
any other real property constituting a tax lot separate from such
Property, and (ii) with any portion of the 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 Property.
(t) LEASING MATTERS. Borrower shall comply with the
provisions of SECTION 3.6 of the Mortgage pertaining to Leases.
(u) MAINTENANCE OF MORTGAGED PROPERTY; ALTERATIONS;
INSPECTIONS; UTILITIES.
<PAGE>
(i) Borrower shall keep and maintain the Property
and every part thereof in good condition and repair, subject to
ordinary wear and tear, and, subject to Excusable Delays and the
provisions of this Agreement and the Mortgage with respect to
damage or destruction caused by casualty events or Takings, shall
not permit or commit any waste, impairment, or deterioration of
the Property in any material respect. Borrower further covenants
to do all other acts which a reasonable and prudent owner and
operator of regional shopping centers would deem reasonably
necessary to protect the security hereof and will make every
reasonable effort to complete the Required Repairs brought to
Borrower's attention in the Property Condition Report. Borrower
shall not remove or demolish any of the Improvements on the
Property except as the same may be necessary in connection with
an Alteration or a restoration in connection with a Taking or
casualty in accordance with the terms and conditions hereof.
(ii) Except as may be necessary in connection with
an Alteration permitted by this SECTION 5.1(u), Borrower shall
not make any changes or allow any material changes to be made in
the nature of the use of the Property or any part thereof, or
initiate or take any action in furtherance of any change in any
zoning or other land use classification affecting all or any
portion of the Property now or hereafter in effect and affecting
all or any portion of the Property.
(iii) Provided that no Event of Default shall
have occurred and be continuing hereunder, Borrower shall have
the right, without Lender's consent, to undertake any Expansion
or any alteration, improvement, demolition or removal of the
Property or any portion thereof (any Expansion and any such
alteration, improvement, demolition or removal performed by
Borrower, an "ALTERATION") so long as such Alteration is
undertaken in accordance with the applicable provisions of the
Mortgage and other Loan Documents, is permitted by the Operating
Agreements and the Leases and shall not either (x) materially
adversely affect the value of the Property taken as a whole or
(y) materially adversely reduce the Gross Income from Operations
from the level available immediately prior to commencement of
such Alteration (unless the amount of such reduction is secured
by Cash, Cash Equivalents or a Letter of Credit). Any Alteration
which involves an estimated cost of more than the Threshold
Amount shall be conducted under the supervision of an Independent
Architect and no such Alteration shall be undertaken until five
(5) Business Days after there shall have been filed with the
Lender, for information, purposes only and not for approval by
the Lender, detailed plans and specifications and cost estimates
therefor, prepared and approved in writing by such Independent
Architect. Such plans and specifications may be revised at any
time and from time to time provided that material revisions of
such plans and specifications are filed with the Lender, for
information purposes only, together with the written approval
thereof by such Independent Architect. All work done in connection
with any Alteration shall be performed with due diligence in a good
and workmanlike manner, all materials used in connection with any
Alteration shall not be less than the standard of quality of the materials
currently used at the Property and all work performed and all materials
used shall be in accordance with all applicable Legal Requirements and
Insurance Requirements.
<PAGE>
(iv) Notwithstanding anything to the contrary
contained in this SECTION 5.1(u) hereof, no Alteration contracted
for by the Borrower shall be performed by or on behalf of
Borrower if the cost thereof, individually or in the aggregate
with all other related Alterations, as reasonably estimated by an
Independent Architect, that are due and payable and unpaid exceed
the Threshold Amount (any such Alteration, a "MATERIAL
ALTERATION"), unless Borrower shall have delivered to Lender
security in an amount not less than the difference between such
due and payable and unpaid costs and the Threshold Amount. Prior
to commencing any Alteration which involves an estimated cost of
more than the Threshold Amount, the Rating Agencies shall have
confirmed in writing to the Lender that such Alteration will not
result in a downgrade, withdrawal or qualification of the then-
current ratings assigned to the Securities. The Threshold Amount
shall be reduced on any given date by the Independent Architect's
estimate of the cost, if work on the Alterations were to be
terminated on such date, to restore the Property to the extent
necessary so that, as restored, there would be no material
adverse effect on the value of the Property as a whole. Costs
which are subject to retainage shall be treated as due and
payable and unpaid from the date they would be due and payable
but for their characterization as subject to retainage. In the
event that any Alteration shall be made in conjunction with any
Restoration with respect to which Borrower shall be entitled to
withdraw Proceeds pursuant to SECTION 7.1.2 hereof, the amount of
the Cash and Cash Equivalents and/or Letter of Credit to be
furnished pursuant hereto need not exceed the aggregate cost of
such Restoration and such Alteration (as estimated by the
Independent Architect), less the sum of the amount of any
Proceeds which Borrower may be entitled to withdraw pursuant to
SECTION 7.1.2 hereof and the Threshold Amount (adjusted as
described above). The Independent Architect shall deliver to
Lender a schedule setting forth the projected stages of
completion of the Alteration and the corresponding amounts equal
to such completion. Any Cash which Borrower shall deliver
pursuant hereto (or the proceeds of any Cash and Cash Equivalents
and/or Letter of Credit) shall be held by Lender in the cash
collateral account established by Lender for such purpose. From
time to time as the Alteration progresses, the amount of any Cash
or Cash Equivalents so furnished may be released by Lender and
paid or otherwise applied by or returned to Borrower in an amount
equal to the amount Borrower would be entitled to so withdraw if
SECTION 7.1.2 hereof were applicable, and any Letter of Credit so
furnished may be reduced by Borrower in an amount equal to the
amount Borrower would be entitled to so reduce if SECTION 7.1.2
hereof were applicable. At any time after substantial completion
of any Alteration in respect whereof Cash and Cash Equivalents
and/or a Letter of Credit was deposited pursuant hereto, the
whole balance of any Cash so deposited with Lender and then
remaining on deposit shall be paid by Lender to Borrower, and any
Cash and Cash Equivalents and/or a Letter of Credit so deposited
or delivered shall, to the extent it has not been called upon,
reduced or theretofore released, be released by Lender to
Borrower, within ten (10) days after receipt by Lender of an
application for such withdrawal and/or release together with an
Officer's Certificate, and signed also (as to the following
clause (A)) by the Independent Architect, setting forth in
substance as follows:
<PAGE>
(A) that the Alteration in respect of which such
Cash and Cash Equivalents and/or a Letter of Credit was
deposited has been substantially completed in all material
respects in accordance with any plans and specifications
therefor previously filed with Lender under SECTION
5.1(u)(iii) hereof; and
(B) that to the knowledge of the certifying
Person all amounts which Borrower is or may become liable to
pay in respect of such Alteration through the date of the
certification have been paid in full or adequately provided
for or are being contested in accordance with SECTION 3.9(b)
of the Mortgage; and, to the extent that such are customary
and reasonably obtainable by prudent managers in the
metropolitan area where the Property is located and Borrower
is not contesting payment as aforesaid, that lien waivers
have been obtained from the general contractor and major
subcontractors performing such Alterations.
(v) Lender and any Persons authorized by Lender
may at all reasonable times and upon reasonable notice enter and
examine the Property and may inspect all work done, labor
performed and materials furnished in and about the Property
subject in all instances to the rights of tenants under Leases.
Lender shall not have any duty to make any such inspection and
shall not have any liability or obligation for making (except for
its gross negligence or willful misconduct) or not making any
such inspection.
(vi) Provided that no Event of Default shall have
occurred and be continuing hereunder, Borrower shall have the
right, without Lender's consent, to expand or reduce the size of
the Property through the addition of one or more anchor stores
and/or the addition of one or more mall or peripheral stores form
time to time (either retail or non-retail facilities) including,
without limitation, by the conversion of an existing department
store to additional mall stores, the transfer of a portion of the
Property to a department store for the construction of its store,
or the construction of a decked parking facility (an
"EXPANSION"), so long as:
(A) such Expansion (1) shall not materially
adversely affect the value of the Property, including any
anchor parcel to be conveyed to a department store, taken as
a whole, (2) shall not result in any violation of the terms
of any Operating Agreement or Lease at the Property, (3)
shall be conducted in accordance with SECTION 5.1(u)(iii)
hereof, and (4) shall not materially, adversely affect the
income of the Property;
(B) Borrower delivers an Officer's Certificate
stating that (1) such transactions and the particular plans
developed for the Expansion (x) shall not violate any
existing Material Lease or Operating Agreements, and shall
not affect the utility or operation of the Property in any
material adverse respect, (2) any connection to, or
contemplated shared use of, the common area in order to
provide utilities services and access to the Expansion shall
not affect the availability or provision of utility services
<PAGE>
to the Property in any material adverse respect, and (3) any
such transaction shall not materially reduce the rentable
square footage of the Improvements;
(C) Borrower receives written confirmation from
the Rating Agencies that the Expansion would not result in a
downgrade, qualification or withdrawal of the then-current
ratings on the Securities; and
(D) Borrower obtains an agreement from the third-
party developer, if any, conducting such Expansion which
provides that in the event the third-party developer does
not complete construction of the improvements on the
expansion parcel, Borrower will have the right, at either
Borrower's or the developer's expense as Borrower shall
elect, to enter the Expansion parcel and either complete the
improvements or demolish the uncompleted improvements with
no liability to the third-party developer; and
(E) Lender shall execute and deliver to Borrower
such instruments and agreements as are reasonably
requested of it by Borrower, at Borrower's expense, in
order to consummate any Expansion permitted hereby.
(vii) TAX LOT REAPPORTIONMENT. Borrower shall
diligently prosecute to completion the tax lot reapportionment
described on Schedule VII.
(viii) TRUST.
(a) Borrower hereby covenants, that until
the Loan is paid in full, to do or take or
cause to be done or taken all acts and steps
necessary to preserve, protect and defend the
lien of the Mortgage on the Trust and the
Trust Property.
(b) Except with regard to Transfers
permitted by Article 6 of the Mortgage,
Borrower will not direct or allow Trustee to
transfer title to the Property or the Trust
or grant any other person an interest in, to
or under the Trust or the Property or
designate any other Person a beneficiary
under the Trust.
(c) Upon termination of the Trust, while any
portion of the Loan is unpaid, Borrower will
do or take or cause to be done or taken all
acts necessary or required to vest title in
the Trust property subject to the lien of the
Mortgage.
<PAGE>
VI. NEGATIVE COVENANTS
------------------
Section 6.1 BORROWER'S NEGATIVE COVENANTS.
-----------------------------
From the date hereof until payment and performance in
full of all obligations of Borrower under the Loan Documents or
the earlier release of the Liens of all Mortgage encumbering the
Property in accordance with the terms of this Agreement and the
other Loan Documents, Borrower covenants and agrees with Lender
that it will not do, directly or indirectly, any of the following:
(a) OPERATION OF PROPERTY. Borrower shall not,
without the prior consent of Lender (which consent shall not be
unreasonably withheld and shall not be required if such
termination is in compliance with the Mortgage), terminate the
Management Agreement or otherwise replace the Manager (unless
such replacement Manager is a Sponsor) or enter into any other
management agreement with respect to the Property.
(b) LIENS. Borrower shall not, without the prior
written consent of Lender, create, incur, assume or suffer to
exist any Lien on any portion of the Property or the Trust or
permit any such action to be taken, except:
(i) Permitted Encumbrances;
(ii) Liens created by or permitted, pursuant to the Loan
Documents;
(iii) Liens for Taxes, or Other Charges not yet due;
(iv) The matters set forth in SECTION 6.5 of the Mortgage.
(c) DISSOLUTION. Borrower shall not (i) engage in any
dissolution, liquidation or consolidation or merger with or into
any other business entity, (ii) engage in any business activity
not related to the ownership and operation of the Property, (iii)
transfer, lease or sell, in one transaction or any combination of
transactions, the assets or all or substantially all of the
properties or assets of the Borrower except to the extent
permitted by the Loan Documents, or (iv) cause the SPC General
Partner to (A) dissolve, wind up or liquidate or take any action,
or omit to take an action, as a result of which the SPC General
Partner would be dissolved, wound up or liquidated in whole or in
part, or (B) amend, modify, waive or terminate the certificate of
incorporation or bylaws of the SPC General Partner, in each case,
without obtaining the prior written consent of Lender or Lender's designee.
(d) CHANGE IN BUSINESS. Borrower shall not enter into
any line of business other than the ownership and operation of
the Property, 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.
<PAGE>
(e) DEBT CANCELLATION. Borrower shall not cancel or
otherwise forgive or release any claim or debt (other than
termination of Leases in accordance herewith) owed to Borrower by
any Person, except for adequate consideration and in the ordinary
course of Borrower's business.
(f) AFFILIATE TRANSACTIONS. Borrower shall not enter
into, or be a party to, any transaction with an Affiliate of
Borrower or any of the partners of Borrower except in the
ordinary course of business and on terms which are fully
disclosed to Lender and are no less favorable to Borrower or such
Affiliate than would be obtained in a comparable arm's-length
transaction with an unrelated third party.
(g) ZONING. Borrower shall not initiate or consent to
any zoning reclassification of any portion of the Property or
seek any variance under any existing zoning ordinance or use or
permit the use of any portion of the Property in any manner that
could result in such use becoming a non-conforming use under any
zoning ordinance or any other applicable land use law, rule or
regulation, without the prior consent of Lender.
(h) ASSETS. Borrower shall not purchase or own any
properties other than the Property and assets used in connection
with the operation and management of the Property.
(i) DEBT. Except as expressly permitted by the terms
of the Mortgage or this Agreement, Borrower shall not create,
incur or assume any debt other than the Debt.
(j) NO JOINT ASSESSMENT. Borrower shall not suffer,
permit or initiate the joint assessment of the Property (i) with
any other real property constituting a tax lot separate from the
Property, and (ii) with any portion of the 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
Property.
(k) PRINCIPAL PLACE OF BUSINESS. Borrower shall not
change its principal place of business set forth on the first
page of this Agreement without first giving Lender thirty (30)
days prior written notice.
(l) ERISA. (i) Borrower shall not engage in any
transaction which would cause any obligation, or action taken or
to be taken, hereunder (or the exercise by Lender of any of its
rights under the Note, this Agreement or the other Loan
Documents) to be a non-exempt (under a statutory or
administrative exemption) prohibited transaction under the
Employee Retirement Income Security Act of 1974, as amended ("ERISA").
(ii) Borrower further covenants and agrees to
deliver to Lender such certifications or other evidence from time
to time throughout the term of the Loan, as requested by Lender
in its sole discretion, that (A) Borrower is not an "employee
benefit plan" as defined in Section 3(3) of ERISA, which is
subject to Title I of ERISA, or a "governmental plan" within the
meaning of Section 3(3) of ERISA; (B) to Borrower's actual
<PAGE>
knowledge, without investigation, Borrower is not subject to
state statutes regulating investments and fiduciary obligations
with respect to governmental plans; and (C) one or more of the
following circumstances is true:
(1) Equity interests in Borrower are publicly
offered securities, within the meaning of 29 C.F.R.
2510.3-101(b)(2);
(2) Less than twenty-five percent (25%) of each
outstanding class of equity interests in Borrower are
held by "benefit plan investors" within the meaning of
29 C.F.R. 2510.3-101(f)(2); or
(3) Borrower qualifies as an "operating company"
or a "real estate operating company" within the meaning
of 29 C.F.R. 2510.3-101(c) or (e) or an investment
company registered under The Investment Company Act of
1940.
VII. CASUALTY; CONDEMNATION
----------------------
Section 7.1 INSURANCE; CASUALTY AND CONDEMNATION.
------------------------------------
7.1.1 INSURANCE.
(a) INSURANCE COVERAGE REQUIREMENTS. Borrower shall,
at its sole cost and expense, keep in full force and effect
policies of insurance coverage (the "Policies") of the types and
minimum limits as follows during the term of the Mortgage:
(i) PROPERTY INSURANCE. Insurance with respect
to the Improvements and the Equipment against any peril included
within the classification "All Risks of Physical Loss" in amount
at all times sufficient to prevent the Borrower from becoming
co-insurer within the terms of the applicable Policies, but in
any event such insurance shall be maintained in an amount equal
to the full insurable value of the Improvements and the
Equipment, the term "full insurable value" to mean the actual
replacement cost of the Improvements and the Equipment (without
taking into account any depreciation, and exclusive of
excavations, footing and foundations, landscaping and paving, but
inclusive of demolition and debris removal) determined annually
by an insurer, a recognized independent insurance broker or an
appraiser selected and paid by the Borrower and in no event less
than the coverage required pursuant to the terms of any Lease;
provided, however, if the terms of the applicable insurance
policies expressly provide for insurance to be provided in the
amount of the actual replacement cost of the Improvements and the
Equipment or such Policies contain a replacement cost
endorsement, no such annual determination will be necessary;
(ii) LIABILITY INSURANCE. Commercial general
liability insurance, including bodily injury, death and property
damage liability, and excess liability insurance against any and
all claims, including all legal liability to the extent insurable
imposed upon the Lender and all court costs and attorneys' fees
<PAGE>
and expenses, arising out of or connected with the possession,
use, leasing, operation, maintenance or condition of the Real
Estate for a combined single limit of not less than $15,000,000;
(iii) WORKERS' COMPENSATION INSURANCE.
Statutory workers' compensation insurance (to the extent the
risks to be covered thereby are not already covered by other
Policies of insurance maintained by the Borrower), with respect
to any work on or about the Property;
(iv) BUSINESS INTERRUPTION. Business interruption
and/or loss of "rental value" insurance in an amount sufficient
to avoid any co-insurance penalty and to provide Proceeds which
will cover, at Borrower's option, (i) twenty-four (24) months
following the date of casualty or loss or (ii) the period of
restoration from the date of casualty or loss, the term "rental
value" to mean the sum of (A) the total Rents payable under the
Leases and (B) the total amount of all other amounts to be
received by the Borrower from third parties which are the legal
obligation of the tenants, reduced to the extent such amounts
would not be received because of Operating Expenses not incurred
during a period of non-occupancy of that portion of the Property
then not being occupied; provided, however, if the Borrower is
unable to obtain business interruption insurance in the foregoing
amount at commercially reasonable premiums, then the Borrower
will obtain business interruption insurance in an amount which is
generally required by institutional leaders for properties
comparable to the Property, but in no event in an amount less
than that sufficient to provide Proceeds which will cover a
period equal to the lesser of (x) the period of restoration from
the date of casualty or loss of (y) three hundred and sixty-five
(365) days, unless the Rating Agencies shall confirm that to
obtain less coverage will not result in a downgrade,
qualification or withdrawal of on the then current rating of the Securities;
(v) BOILER AND MACHINERY INSURANCE. Broad form
boiler and machinery insurance (without exclusion for explosion)
covering all boilers or other pressure vessels, machinery and
equipment located in, on or about the Property and insurance
against loss of occupancy or use arising from any such breakdown
in such amounts as are generally available at commercially
reasonable premiums and are generally required by institutional
lenders for properties comparable to the Property;
(vi) FLOOD INSURANCE. If all or any portion of
the Property is located within a federally designated flood
hazard zone, flood insurance if available, in such amount as
generally required by institutional lenders for similar
properties provided, however, if flood insurance shall be
unavailable from private carriers, such flood insurance may be
provided by the federal government, if available; and
(vii) OTHER INSURANCE. Such other insurance
requested by Lender with respect to the Property against loss or
damage of the kinds from time to time customarily insured against
and in such amounts as are generally available at commercially
reasonable premiums and are generally required by institutional
lenders for properties comparable to the Property.
<PAGE>
(b) (i) PROPERTY AND BUSINESS INTERRUPTION INSURANCE.
The Borrower will maintain a portion of the insurance coverage
described in SECTION 7.1.1(a)(i) above at least equal to the
Maximum Foreseeable Casualty Loss, and the insurance coverage
described in SECTION 7.1.1(a)(iv) above, with either (x) the
insurers who insure the Improvements and Equipment on the date of
this Agreement or (y) one or more other primary insurers having
(or a syndicate of insurers through which at least 75% of the
coverage (if there are 4 or fewer members of the syndicate) or at
least 60% of the coverage (if there are 5 or more members of the
syndicate) is with carriers having), a claims-paying-ability
rating by S&P not lower than "AA" and a claims-paying ability
rating by Moody's not lower than "Aa".
(ii) LIABILITY AND BOILER AND MACHINERY INSURANCE.
The Borrower will maintain a portion of the insurance coverage
described in SECTIONS 7.1.1(a)(ii) and 7.1.1 (a)(v) with either
(x) the insurers who insure the Property on the date of this
Agreement or (y) one or more other domestic primary insurers
having (or a syndicate of insurers through which at least 75% of
the coverage (if there are 4 or fewer members of the syndicate)
or at least 60% of the coverage (if there are 5 or more members
of the syndicate) is with carriers having), a claims-paying-
ability rating by S&P not lower than two categories below the
then rating of the Securities by S&P, but in either case of (x)
or (y) above, such insurers' rating shall in no event be less
than "Investment Grade" by S&P and Moody's.
(iii) OTHER INSURANCE. Borrower will maintain
a portion of the insurance coverage described in SECTION
7.1.1(a)(iii) above with either an insurer having a claims-paying-
ability rating of not less than "Investment Grade" or the
applicable state workers' compensation fund.
In each case as to a syndicate or an individual
insurer, however, if no domestic providers of such insurance are
so rated, the requirement for such rating shall be the highest
rating then given to primary insurers by S&P; provided that in
the case of an individual insurer or a syndicate failing to
satisfy the foregoing test, supplementary qualifying coverage
shall be required within ninety (90) days after the date Borrower
learns of such failure (in the case of a syndicate, only to the
extent the syndicate fails to satisfy the test); and provided
further that in the event of any loss, claims in respect of such
portion of such insurance maintained in accordance with SECTION
7.1.1(a)(iii) above shall be payable prior to claims in respect
of the remaining portion(s) of the insurance required by such
provisions.
Notwithstanding anything to the contrary set forth
herein, all insurance required coverage shall be provided by one
or more primary insurers having an Alfred M. Best Company, Inc.
rating of "A" or better and financial size category of not less
than VIII, except to the extent that insurance in force on the
date of this Agreement does not satisfy such criteria or if
otherwise approved by the Lender. Any insurance in force on the
date of this Agreement which is accepted or approved by Lender
and which is provided by a group or syndicate of insurers shall
be satisfactory so long as a sufficient number of members of the
<PAGE>
syndicate providing the coverage satisfy the foregoing criteria
for claims-paying ability even if one or more of the insurers
comprising the group or syndicate no longer participates in the
group or syndicate. All insurers providing insurance required by
this Mortgage shall be authorized to issue insurance in the state
where the Property is located.
(c) "MAXIMUM FORESEEABLE CASUALTY LOSS" shall mean the
estimate of the Qualified Fire Protection Engineer then being
used by the Borrower in connection with its existing insurance
package of the maximum probable casualty loss which would be
suffered in respect of the Improvements and Equipment as a result
of damage caused by the perils covered by the insurance described
in SECTION 7.1.1(a)(i) hereof.
(d) BLANKET COVERAGE. The insurance coverage required
under SECTION 7.1.1(a) may be effected under a blanket Policy or
Policies covering the Property and other property and assets not
constituting a part of the Property; provided that any such
certificates of insurance evidencing the coverage required herein
shall specify, except in the case of general liability insurance,
the portion of the total coverage of such policy that is
allocated exclusively to the Property, and any sublimits in such
blanket Policy applicable to the Property, which amounts shall
not be less than the amounts required pursuant to SECTION
7.1.1(a) and which shall in any case comply in all other respects
with the requirements of this SECTION 7.1.
(e) FORM OF INSURANCE POLICIES; ENDORSEMENTS. All
insurance Policies shall be in such form and with such
endorsements as are comparable to the forms of and endorsements
to Borrower's insurance Policies in effect on the date hereof or
otherwise in accordance with commercially reasonable standards
applied by prudent owners of first class regional shopping
centers in the general vicinity of the Property. Certificates of
insurance with respect to all of the insurance Policies required
hereunder have been delivered to Lender (or will be so delivered
promptly after the date hereof), and originals or certified
copies of all such Policies shall be delivered to Lender when the
same are available and shall be held by Lender. All such
Policies shall name Lender as an additional insured, shall
provide that all Proceeds be payable to Lender as set forth in
SECTION 7.1 hereof, and shall contain: (i) a standard "non-
contributory mortgagee" endorsement or its equivalent relating,
inter alia, to recovery by Lender notwithstanding the negligent
or willful acts or omissions of Borrower; (ii) to the extent
available at commercially reasonable rates a waiver of
subrogation endorsement in favor of Lender; (iii) an endorsement
providing that no Policy shall be impaired or invalidated by
virtue of any act, failure to act, negligence of, or violation of
declarations, warranties or conditions contained in such Policy
by Borrower, Lender or any other named insured, additional
insured or loss payee, except for the willful misconduct of
Lender knowingly in violation of the conditions of such Policy;
(iv) an endorsement providing for a deductible per loss of an
amount not more than that which is customarily maintained by
prudent owners of first class regional shopping centers in the
general vicinity of the Property, but in no event in excess of
$50,000; and (v) a provision that such Policies shall not be
<PAGE>
canceled or terminated without at least thirty (30) days prior
written notice to Lender in each instance. Certificates of
insurance with respect to all renewal and replacement Policies
shall be delivered to Lender not less than ten (10) days prior to
the expiration date of any of the insurance Policies required to
be maintained hereunder which certificates shall bear notations evidencing
payment of applicable premiums. Originals or certified copies of such
replacement insurance Policies shall be delivered to Lender
promptly after Borrower's receipt thereof but in any case within
sixty (60) days after the effective date thereof. If Borrower
fails to maintain insurance required by this Agreement, Lender
may procure such insurance.
(f) COMPLIANCE WITH INSURANCE REQUIREMENTS. Borrower
shall comply with all Insurance Requirements and shall not bring
or keep or permit to be brought or kept any article upon any of
the Property or cause or permit any condition to exist thereon
which would be prohibited by any Insurance Requirement, or would
invalidate insurance coverage required hereunder to be maintained
by Borrower on or with respect to any part of the Property
pursuant to this SECTION 7.1.
(g) Separate Insurance. The Borrower will not take
out separate insurance contributing in the event of loss with
that required to be maintained pursuant to this SECTION 7.1
unless such insurance complies with SECTION 7.1.1(e).
7.1.2 CONDEMNATION AND INSURANCE PROCEEDS
-----------------------------------
(a) Borrower will promptly notify Lender in writing
upon obtaining knowledge of (i) the institution of any
proceedings relating to any Taking or (ii) the occurrence of any
casualty, damage or injury to the Property or Equipment or any
portion thereof the restoration of which is estimated by Borrower
in good faith to cost more than Two Million Dollars ($2,000,000).
In addition, notice of any casualty damage or loss the
restoration of which is estimated by Borrower in good faith to
cost more than Two Million Dollars ($2,000,000) shall set forth
such good faith estimate of the cost of repairing or restoring
such damage or destruction in reasonable detail if the same is
then available and, if not, as soon thereafter as it can
reasonably be provided.
(b) In the event of any Taking of or casualty or other
damage or injury to the Property, Borrower's right, title and
interest in and to all compensation, awards, proceeds, damages,
claims, insurance recoveries, causes and rights of action
(whether accrued prior to or after the date hereof) and payments
which Borrower may receive or to which Borrower may become
entitled with respect to the Property or any part thereof
(collectively, "PROCEEDS"), in connection with any such Taking
(subject to the terms of the Operating Agreements and the
Leases), casualty or other damage or injury to the Property, or
any part thereof, are hereby assigned to and shall be paid to
Lender. Notwithstanding anything to the contrary set forth
herein or in the Mortgage, to the extent the Proceeds are not in
excess of Four Million Dollars ($4,000,000) (the "MINIMUM DEPOSIT
AMOUNT") (excluding, solely for purposes of such calculation,
<PAGE>
Proceeds paid in respect of the insurance described in SECTION
7.1.1(a)(iv) then, provided that no Event of Default shall have
occurred and be continuing, Lender hereby consents to and agrees
that such Proceeds shall be paid directly to Borrower to be
applied to restoration of the Property in accordance with the
terms hereof (provided, however, unless an Event of Default shall
have occurred and be continuing, Proceeds paid in respect of the
insurance described in SECTION 7.1.1(a)(iv) shall be paid
directly to Borrower.) Promptly after the occurrence of any
damage or destruction to all or any portion of the Property or a
Taking of a portion of the Property, Borrower shall commence and
diligently prosecute to completion, subject to Excusable Delays,
the repair, restoration and rebuilding of the Property (in the
case of a Taking, to the extent it is capable of being restored)
(such repair, restoration and rebuilding are sometimes hereinafter
collectively referred to as the "Restoration") so damaged,
destroyed or remaining after such Taking, in full compliance with
all Legal Requirements and free and clear of any and all Liens
except the Permitted Exceptions. Borrower will, in good faith
and in a commercially reasonable manner, file and prosecute the
adjustment, compromise or settlement of any claim for Proceeds
and, subject to Borrower's right to receive the direct payment of
any Proceeds up to the Minimum Deposit Amount and, with respect
to Proceeds from a Taking, subject to the applicable terms of the
Operating Agreements and the Leases and the provisions below,
will cause the same to be collected and paid over to Lender, to
be held and applied in accordance with the provisions of this
Agreement. Borrower hereby irrevocably authorizes Lender to file
and prosecute such claim and to collect and to make receipt for
any such payment in the event Borrower fails so to act or if an
Event of Default shall have occurred and be continuing, and in
such case Lender shall be authorized to file such claim and
prosecute it with counsel satisfactory to it at the expense of
Borrower. Lender shall have the right to approve, such approval
not to be unreasonably withheld, any settlement which might
result in any Proceeds in excess of the Minimum Deposit Amount,
and Borrower will deliver or cause to be delivered to Lender all
instruments reasonably requested by Lender to permit such
approval. Borrower will pay all costs, fees and expenses
reasonably incurred by Lender (including all reasonable
attorneys' fees and expenses, the fees of insurance experts and
adjusters and reasonable costs incurred in any litigation or
arbitration) in connection with the settlement of any claim for
insurance in excess of the Minimum Deposit Amount or Proceeds in
excess of the Minimum Deposit Amount and seeking and obtaining of
any payment on account thereof in accordance with the foregoing
provisions and for any of the foregoing expenses, regardless of
whether or not the Proceeds exceed the Minimum Deposit Amount, if
any Event of Default shall have occurred and be continuing. If
any Proceeds are received by Borrower, such Proceeds shall, until
the completion of the related Restoration, be held in trust and
segregated from other funds of the Borrower to be used to pay for
the cost of the Restoration in accordance with the terms hereof,
and in the event such Proceeds are in excess of the Minimum
Deposit Amount such Proceeds shall, subject to the provisions of
the Operating Agreements and the Leases, be forthwith paid to
Lender to be held by Lender in a segregated account in trust for
Borrower, in each case to be applied or disbursed in accordance
with the provisions hereof.
<PAGE>
(c) In the event that any Proceeds (other than
Proceeds paid with respect to the insurance described in SECTION
7.1(a)(iv) are in excess of the Minimum Deposit Amount, then all
Proceeds (other than Proceeds paid with respect to the insurance
described in SECTION 7.1(a)(iv) and except that Proceeds in
respect of a Taking shall be subject to the terms and conditions
of the Operating Agreements and the Leases) shall be paid over to
Lender (a "CASUALTY/CONDEMNATION INVOLUNTARY PREPAYMENT") and
shall be applied as follows: first, toward reimbursement of
Lender's reasonable costs and expenses in connection with
recovery of the Proceeds and disbursement of the proceeds (as
further described below), including, without limitation,
reasonable administrative costs and inspection fees, and then, to
the prepayment of the Indebtedness secured hereby (which
prepayment shall be made on the next Payment Date following
notice to Lender of an elected or required prepayment hereunder,
which notice Borrower shall promptly give), without prepayment
premium or penalty, only if:
(i) (A) Borrower is not required to restore the
Property pursuant to any Operating Agreement or Lease, and
(B) either:
(x) the expected cost to repair the
Property would exceed the Threshold Amount and,
provided that the Taking or casualty adversely affects
leased areas of the Property, the restoration of the
Property cannot reasonably be completed before the date
of expiration of any insurance maintained pursuant to
SECTION 7.1.1(a)(iv) or any Letter of Credit or Cash or
Cash Equivalents posted with Lender in lieu of or in
addition to such insurance, which shall be determined
based on a cost estimate and schedule for restoration
prepared by an Independent Architect and delivered to
Lender, or
(y) Borrower elects not to restore the Property, or
(ii) if such Proceeds were the result of a Taking,
then after restoration is completed, the Proceeds have not
been required to effect such restoration, in which event
prepayment shall be made to the extent of such unneeded
Proceeds.
(d) If Proceeds are not required to be applied towards
payment of a Casualty/Condemnation Involuntary Prepayment
pursuant to SECTION 7.1.2(c) above, then after prepayment of the
expenses described in clause first of SECTION 7.1.2(c), Lender
shall make the Proceeds (except Proceeds paid with respect to the
insurance described in SECTION 7.1.1(a)(iv)) which it is holding
pursuant to the terms hereof available to Borrower for payment of
or reimbursement of Borrower's expenses incurred with respect to
the Restoration, upon the terms and subject to the conditions set
forth in SECTION 7.1.2(e);
(i) there shall be no continuing Event of Default hereunder;
<PAGE>
(ii) to the extent, if any, that the estimated
cost of the Restoration (as estimated by an Independent
Architect) shall exceed the Proceeds available, Borrower
shall (within a reasonable period of time after receipt of
such estimate, and in any event prior to any further
disbursement by Lender) deposit with or deliver to Lender
Cash and Cash Equivalents and/or a Letter of Credit in the
amounts of such excess; and
(iii) Lender shall, within a reasonable period
of time prior to Borrower's request for initial
disbursement, be furnished with an estimate of the cost of
the Restoration accompanied by an Independent Architect's
certification as to such costs and appropriate plans and
specifications for the Restoration to the extent that the
same are required by law or are prepared by the Borrower.
The plans and specifications shall require that the
Restoration be done in a first-class workmanlike manner
substantially equivalent to the quality and character of the
original construction of the Improvements, so that upon
completion thereof (taking into account a commercially
reasonable time to relet the affected portion of the
Property), the Property shall be at least substantially
equal in value and general utility to the Property prior to
the damage or destruction (or, in the case of a partial
Taking, to the state to which it is capable of being
restored). Borrower shall restore all Improvements such
that when they are fully restored and/or repaired that such
Improvements and their contemplated use fully comply with
all applicable Legal Requirements, including, without
limitation, zoning, environmental and building laws, codes,
ordinances and regulations.
(e) Disbursement of Proceeds shall be made from time
to time (but not more frequently than once in any month) by
Lender as the Restoration progresses upon receipt by Lender of
(i) an Officer's Certificate dated not more than thirty (30) days
prior to the application for such payment, requesting such
payment or reimbursement and setting forth the Restoration
performed which is the subject of such request, the parties which
performed such Restoration and the actual cost thereof, and also
certifying that such Restoration and materials are free and clear
of Liens other than Permitted Exceptions and (ii) an Independent
Architect's certificate certifying performance of the Restoration
together with an estimate of the cost to complete the
Restoration. No payment made prior to the final completion of
the Restoration shall exceed ninety-five percent (95%) of the
value of the Restoration performed or materials furnished and
incorporated into the Improvements from time to time (except in
the case of contractors' or subcontractors' Restoration as to
which final completion has been attained), and at all times the
undisbursed balance of said Proceeds, together with all amounts
for which Cash or Cash Equivalents or a Letter of Credit
deposited or delivered pursuant to clause (ii) above, shall be at
least sufficient to pay for the cost of completion of the
Restoration, free and clear of Liens other than Permitted
Exceptions; final payment of all Proceeds remaining with Lender
shall be made upon receipt by Lender of a certification by an
Independent Architect as to the completion of the Restoration
<PAGE>
substantially in accordance with the submitted plans and
specifications, and the filing of a notice of completion (if such
filing is required by applicable law). If the Proceeds shall be
more than the Threshold Amount, Lender shall require (i) evidence
of mechanic's lien waivers, and (ii) an endorsement to its Title
Insurance Policy insuring the continued priority of the Lien of
this Mortgage (subject to Permitted Exceptions) as to all sums
advanced hereunder, such endorsement to be paid for by Borrower.
From time to time as the Restoration progresses, the amount of
any Cash or Cash Equivalents so furnished may be withdrawn by
Borrower and paid or otherwise applied by or returned to Borrower
in an amount equal to the amount Borrower would be entitled to so
withdraw if the same were Proceeds, and any Letter of Credit so
furnished may be reduced by Borrower in an amount equal to the
amount Borrower would be entitled to reduce if the same were
Proceeds. At any time after substantial completion of any
Restoration in respect whereof Cash and Cash Equivalents and/or a
Letter of Credit was deposited pursuant hereto, the whole balance
of any Cash so deposited with Lender and then remaining on
deposit may be withdrawn by Borrower and shall be paid by Lender
to Borrower and any Cash and Cash Equivalents and/or Letter of
Credit so deposited or delivered shall, to the extent it has not
been called upon, reduced or theretofore released, be released by
Lender to Borrower, within ten (10) days after receipt by Lender
of an application for such withdrawal and/or release together
with an Officer's Certificate, and signed also (as to the
following clause (1)) by the Independent Architect, setting forth
in substance as follows:
(1) that the Restoration in respect of which such
Cash and Cash Equivalents and/or a Letter of Credit was
deposited has been substantially completed in all material
respects in accordance with any plans and specifications
therefor previously filed with Lender under SECTION 7.1.2(d)
hereof; and
(2) that to the knowledge of the certifying
Person all amounts which Borrower is or may become liable to
pay in respect of such Restoration through the date of the
certification have been paid in full or adequately provided
for or are being contested in accordance with SECTION 3.9(b)
of the Mortgage; and, to the extent that such are customary
and reasonably obtainable by prudent managers in the metropolitan
area where the Property is located and Borrower is not
contesting payment in accordance with SECTION 3.9(b) of the
Mortgage, that lien waivers have been obtained from the
general contractor and major subcontractors performing such
Restoration.
<PAGE>
Section 7.2 REQUIRED REPAIRS; REQUIRED REPAIR FUNDS
---------------------------------------
Intentionally Deleted.
Section 7.3 Tax and Insurance Escrow Fund
-----------------------------
Intentionally Deleted.
Section 7.4 REPLACEMENTS AND REPLACEMENT RESERVE.
------------------------------------
Intentionally Deleted.
VIII. DEFAULTS
--------
Section 8.1 EVENT OF DEFAULT.
----------------
(a) Each of the following events shall constitute an
event of default hereunder (an "EVENT OF DEFAULT"):
(i) if any portion of the Debt is not paid when due;
(ii) if any of the Taxes or Other Charges are not
paid when the same are due and payable and such failure continues
for more than five (5) days after notice from Lender;
(iii) if the Policies are not kept in full
force and effect, or if after ten (10) days notice to Borrower,
original certificates evidencing the coverage afforded by the
Policies are not delivered to Lender upon request;
(iv) if Borrower transfers or encumbers any
portion of the Property, except as permitted by the Mortgage,
without Lender's prior written consent;
(v) if any representation or warranty made by
Borrower herein or in any other Loan Document, or in any report,
certificate, financial statement or other instrument, agreement
or document furnished to Lender shall have been false or
misleading in any material respect as of the date the
representation or warranty was made;
(vi) if Borrower shall make an assignment for the
benefit of creditors;
(vii) if a receiver, liquidator or trustee
shall be appointed for Borrower or if Borrower 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, Borrower,
or if any proceeding for the dissolution or liquidation of
Borrower shall be instituted; PROVIDED, HOWEVER, if such
appointment, adjudication, petition or proceeding
was involuntary and not consented to by Borrower, upon the same
not being discharged, stayed or dismissed within sixty (60) days;
(viii) if Borrower attempts to assign its
rights under this Agreement or any of the other Loan Documents or
any interest herein or therein in contravention of the Loan
Documents;
(ix) if Borrower breaches any of its respective
negative covenants contained in SECTION 6.1 or any covenant
contained in SECTION 4.1.1(dd) hereof;
<PAGE>
(x) with respect to any term, covenant or
provision set forth herein which specifically contains a notice
requirement or grace period, if Borrower shall be in default
under such term, covenant or condition after the giving of such
notice or the expiration of such grace period;
(xi) if any of the assumptions contained in the
Insolvency Opinion, or in any other "non-consolidation" opinion
delivered to Lender in connection with the Loan, or in any other
"non-consolidation" delivered subsequent to the closing of the
Loan, is or shall become untrue in any material respect;
(xii) if Borrower shall continue to be in
Default under any of the other terms, covenants or conditions of
this Agreement not specified in subsections (i) to (xi) above,
for ten (10) days after notice to Borrower from Lender, in the
case of any Default which can be cured by the payment of a sum of
money, or for thirty (30) days after notice from Lender in the
case of any other Default; 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 Borrower in the exercise of
due diligence to cure such Default, such additional period not to
exceed one hundred twenty (120) days; or
(xiii) if there shall be default under any of
the other Loan Documents beyond any applicable cure periods
contained in such documents, whether as to Borrower or any of the
Property, or if any other such event shall occur or condition
shall exist, if the effect of such event or condition is to
accelerate the maturity of any portion of the Debt or to permit
Lender to accelerate the maturity of all or any portion of the Debt;
(b) Upon the occurrence of an Event of Default (other
than an Event of Default described in clauses (vi), (vii) or
(viii) above) and at any time thereafter the Lender may, in
addition to any other rights or remedies available to it pursuant
to this Agreement and the other Loan Documents or at law or in
equity, Lender may take such action, without notice or demand,
that Lender deems advisable to protect and enforce its rights
against Borrower and in and to all or any of the Property,
including, without limitation, declaring the Debt to be
immediately due and payable, and Lender may enforce or avail
itself of any or all rights or remedies provided in the Loan
Documents against Borrower and any or all of the Property,
including, without limitation, all rights or remedies available
at law or in equity; and upon any Event of Default described in
clauses (vi), (vii) or (viii) above, the Debt and all other
obligations of Borrower hereunder and under the other Loan
Documents shall immediately and automatically become due and
payable, without notice or demand, and Borrower hereby expressly
waives any such notice or demand, anything contained herein or in
any other Loan Document to the contrary notwithstanding.
<PAGE>
Section 8.2 REMEDIES.
--------
(a) Upon the occurrence of an Event of Default, all or
any one or more of the rights, powers, privileges and other
remedies available to Lender against Borrower under this
Agreement or any of the other Loan Documents executed and
delivered by, or applicable 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 of the Debt 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 all or any portion of the 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. Without limiting the
generality of the foregoing, Borrower agrees that if an Event of
Default is continuing (i) Lender is not subject to any "one
action" or "election of remedies" law or rule, and (ii) all liens
and other rights, remedies or privileges provided to Lender shall
remain in full force and effect until Lender has exhausted all of
its remedies against the Property and the Mortgage has been
foreclosed, sold and/or otherwise realized upon in satisfaction
of the Debt or the Debt has been paid in full.
(b) With respect to Borrower and the Property, nothing
contained herein or in any other Loan Document shall be construed
as requiring Lender to resort to the Property for the
satisfaction of any of the Debt in preference or priority, and
Lender may seek satisfaction out of the Property or any part
thereof, in its absolute discretion in respect of the Debt. In
addition, Lender shall have the right from time to time to
partially foreclose the Mortgage in any manner and for any
amounts secured by the Mortgage then due and payable as
determined by Lender in its sole discretion including, without
limitation, the following circumstances: (i) in the event
Borrower defaults beyond any applicable grace period in the
payment of one or more scheduled payments of principal and
interest, Lender may foreclose the Mortgage to recover such
delinquent payments, or (ii) in the event Lender elects to
accelerate less than the entire outstanding principal balance of
the Loan, Lender may foreclose the Mortgage to recover so much of
the principal balance of the Loan as Lender may accelerate and
such other sums secured by the Mortgage as Lender may elect.
Notwithstanding one or more partial foreclosures, the Property
shall remain subject to the Mortgage to secure payment of sums
secured by the Mortgage and not previously recovered.
(c) Lender shall have the right from time to time to
sever the Note and the other Loan Documents into one or more
separate notes, mortgages and other security documents (the
"SEVERED LOAN DOCUMENTS") in such denominations as Lender shall
determine in its sole discretion for purposes of evidencing and
enforcing its rights and remedies provided hereunder. Borrower
<PAGE>
shall execute and deliver to Lender from time to time, promptly
after the request of Lender, a severance agreement and such other
documents as Lender shall request in order to effect the
severance described in the preceding sentence, all in form and
substance reasonably satisfactory to Lender. Except as may be
required in connection with a Securitization pursuant to SECTION
9.1 hereof, (i) Borrower shall not be obligated to pay any costs
or expenses incurred in connection with the preparation,
execution, recording or filing of the Severed Loan Documents, and
(ii) the Severed Loan Documents shall not contain any representations,
warranties or covenants not contained in the Loan Documents and any such
representations and warranties contained in the Severed Loan Documents will
be given by Borrower only as of the Closing Date.
Section 8.3 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, 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 one Default or Event of Default
with respect to Borrower shall not be construed to be a waiver of
any subsequent Default or Event of Default by Borrower or to
impair any remedy, right or power consequent thereon.
IX. SPECIAL PROVISIONS
------------------
Section 9.1 SALE OF NOTES AND SECURITIZATION.
--------------------------------
At the request of the holder of the Note and, to the
extent not already required to be provided by Borrower under this
Agreement, Borrower shall use reasonable efforts to satisfy the
market standards to which the holder of the Note customarily
adheres or which may be reasonably required in the marketplace or
by the Rating Agencies in connection with the sale of the Note or
participation therein or the first successful securitization
(such sale and/or securitization, the "SECURITIZATION") of rated
single or multi-class securities (the "SECURITIES") secured by or
evidencing ownership interests in the Note and the Mortgages,
including, without limitation, to:
(a) (i) provide, at Lender's sole reasonable
cost, such financial and other information with
respect to the Property, the Borrower and the
Manager, (ii) provide budgets relating to the
Property and (iii) to perform or permit or cause
to be performed or permitted such site inspection,
appraisals, market studies, environmental reviews
<PAGE>
and reports (Phase I's and, if appropriate,
Phase II's), engineering reports and other due
diligence investigations of the Property, as may
be reasonably requested by the holder of the Note
or the Rating Agencies or as may be necessary or
appropriate in connection with the Securitization
(the "PROVIDED INFORMATION"), together, if
customary, with appropriate verification and/or
consents of the Provided Information through
letters of auditors or opinions of counsel of
independent attorneys acceptable to the Lender and
the Rating Agencies;
(b) at Borrower's expense, use reasonable efforts
to cause counsel to render opinions, which may be
relied upon by the holder of the Note, the Rating
Agencies and their respective counsel, agents and
representatives, as to non-consolidation,
fraudulent conveyance, and true sale or any other
opinion customary in securitization transactions
with respect to the Property and Borrower and
Manager and its or their respective affiliates,
which counsel and opinions shall be reasonably
satisfactory to the holder of the Note and the
Rating Agencies;
(c) make updates of such representations and
warranties made as of the Closing Date with
respect to the Property, Borrower, and the Loan
Documents and make such additional representations
or warranties as of the closing date of the
Securitization which do not materially increase
the obligations of Borrower under this Agreement
or any of the other Loan Documents or materially
decrease any of Borrower's rights under this
Agreement or any of the other Loan Documents, and
which, in either event, are customarily provided
in securitization transactions and may be
reasonably requested by the holder of the Note or
the Rating Agencies and consistent with the facts
covered by such representations and warranties as
they exist on the date thereof, including the
representations and warranties made in the Loan
Documents;
(d) execute such amendments to the Loan Documents
and organizational documents as may be requested
by the holder of the Note or the Rating Agencies
or otherwise to effect the Securitization;
provided, however, that the Borrower shall not be
required to modify or amend any Loan Document if
such modification or amendment would (i) change
the interest rate, the stated maturity or the
amortization of principal set forth in the Note,
or (ii) modify or amend any other material
economic term of the Loan, or (iii) materially
modify or increase any of Borrower's obligations
or liabilities under this Agreement or any of the
other Loan Documents or materially decrease any of
<PAGE>
Borrower's rights under this Agreement or any of
the other Loan Documents; and
(e) use reasonable efforts to deliver to Lender
appropriate instruments subordinating the Leases
identified on Schedule VIII to the lien of the
Mortgage together with an agreement to attorn to
Lender from each such tenant that under a lease
which does not provide for such attornment by its
terms; provided, however, the failure of Borrower
to deliver such instruments following the exercise
of reasonable efforts to do so, shall not
constitute a default hereunder.
Except as set forth in SECTION 9.1(a)(i), all
reasonable third party costs and expenses incurred by Lender in
connection with Borrower's complying with requests made under
this SECTION 9.1 shall be paid by the Borrower.
If requested by Lender, Borrower shall provide Lender
with the following financial statements (it being understood that
Lender shall request such financial statements if it anticipates
that the principal amount of the Loan at the time of
Securitization may, or if the principal amount of the Loan at any
time during which the Loan is included in a Securitization does,
equal or exceed 20% of the aggregate principal amount of all
mortgage loans included in the Securitization), and summaries of such
financial statements if the principal amount of the Loan at any such time
equals or exceeds 10% of such aggregate principal amount:
1. As of the Closing Date, a balance sheet with respect to
the Property for the two most recent fiscal years, meeting the
requirements of SECTION 210.3-01 of Regulation S-X of the
Securities Act, and statements of income and statements of cash
flows with respect to the Property for the three most recent
fiscal years, meeting the requirements of SECTION 210.3-02 of
Regulation S-X, and, to the extent that such balance sheet is
more than 135 days old as of the Closing Date, interim financial
statements of the Property meeting the requirements of SECTION
210.3-01 and 210.3-02 of Regulation S-X (all of such financial
statements, collectively, the "STANDARD STATEMENTS") ; provided,
however, that with respect to any Properties that would be deemed
to constitute a business and not real estate under Regulation S-X
that have been acquired by the Borrower from an unaffiliated
third party (such properties, "ACQUIRED PROPERTIES"), as to which
the other conditions set forth in SECTION 210.3-05 of Regulation
S-X for provision of financial statements in accordance with such
Section have been met, in lieu of the Standard Statements
otherwise required by this paragraph, the Borrower shall instead
provide the financial statements acquired by such SECTION 210.3-
05 of Regulation S-X ("ACQUIRED PROPERTY STATEMENTS").
2. Not later than 45 days after the end of each fiscal
quarter following the Closing Date, a balance sheet of the
Property as of the end of such fiscal quarter, meeting the
requirements of SECTION 210.3-01 of Regulation S-X, and
statements of income and statements of cash flows of the Property
for the period commencing following the last day of the most
recent fiscal year and ending on the date of such balance sheet
<PAGE>
and for the corresponding period of the most recent fiscal year,
meeting the requirements of SECTION 210.3-02 of Regulation S-X
(provided, that if for such corresponding period of the most
recent fiscal year Acquired Property Statements were permitted to
be provided hereunder pursuant to paragraph 1, the Borrower shall
instead provide Acquired Property Statements for such
corresponding period). If requested by Lender, Borrower shall
also provide "summarized financial information," as defined in
SECTION 210.1-02(bb) of Regulation S-X, with respect to such
quarterly financial statements.
3. Not later than 90 days after the end of each fiscal
year following the Closing Date, a balance sheet of the Property
as of the end of such fiscal year, meeting the requirements of
SECTION 210.3-01 of Regulation S-X, and statements of income and
statements of cash flows of the Property for such fiscal year,
meeting the requirements of SECTION 210.3-02 of Regulation S-X.
If requested by Lender, Borrower shall provide summarized
financial information with respect to such annual financial statements.
4. Upon ten (10) Business Days after notice from the
Lender in connection with the Securitization of this Loan, such
additional financial statements, such that, as of the date (each
an "OFFERING DOCUMENT DATE") of each prospectus, private
placement memorandum, offering circular or other offering
document for such Securitization (each an "OFFERING DOCUMENT"),
Borrower shall have provided Lender with all financial statements
as described in paragraph 1; provided that the fiscal year and
interim periods for which such financial statements shall be
provided shall be determined as of such Offering Document Date.
5. In the event Lender determines, in connection with a
Securitization, that the financial statements required in order
to comply with Regulation S-X or Legal Requirements are other
than as provided herein, then notwithstanding the provisions of this
Section, Lender may request, and Borrower shall promptly provide, such
combination of Acquired Property Statements and/or Standard Statements
as may be necessary for such compliance.
6. Any other or additional financial statements, or
financial, statistical or operating information, as shall be
required pursuant to Regulation S-X or other Legal Requirements
in connection with any Offering Document or any filing under or
pursuant to the Exchange Act in connection with or relating to a
Securitization (hereinafter an "EXCHANGE ACT FILING") or as shall
otherwise be reasonably requested by the Lender to meet
disclosure, rating agency or marketing requirements.
All financial statements provided by Borrower hereunder
shall be prepared in accordance with generally accepted
accounting principles, and shall meet the requirements of
Regulation S-X and other applicable Legal Requirements. All
financial statements relating to a fiscal year shall be audited
by the Independent Accountants of the Borrower in accordance with
generally accepted auditing standards, Regulation S-X and all
other applicable Legal Requirements, shall be accompanied by the
manually executed report of the Independent Accountants thereon,
which report shall meet the requirements of Regulation S-X and
all other applicable Legal Requirements, and shall be further
<PAGE>
accompanied by a manually executed written consent of the
Independent Accountants, in form and substance acceptable to
Lender, to the inclusion of such financial statements in any
Offering Document and any Exchange Act Filing and to the use of
the name of such Independent Accountants and the reference to
such Independent Accountants as "experts" in any Offering
Document and Exchange Act Filing, all of which shall be provided
at the same time as the related financial statements are required
to be provided. All other financial statements shall be
certified by the chief financial officer of the Borrower, which
certification shall state that such financial statements meet the
requirements set forth in the first sentence of this paragraph.
Section 9.2 SECURITIZATION INDEMNIFICATION.
------------------------------
(a) Borrower understands that certain of the Provided
Information may be included in disclosure documents in connection
with the Securitization, including, without limitation, a
prospectus, prospectus supplement or private placement memorandum
(each, a "DISCLOSURE DOCUMENT") and may also be included in
filings with the Securities and Exchange Commission pursuant to
the Securities Act of 1933, as amended (the "SECURITIES ACT"), or
the Securities and Exchange Act of 1934, as amended (the
"EXCHANGE ACT"), or provided or made available to investors or
prospective investors in the Securities, the Rating Agencies, and
service providers relating to the Securitization. In the event
that the Disclosure Document is required to be revised prior to
the sale of all Securities, the Borrower will cooperate with the
holder of the Note in updating the Disclosure Document by
providing all current information necessary to keep the
Disclosure Document accurate and complete in all material respects.
(b) Borrower agrees to provide in connection with each
of (i) a preliminary and a private placement memorandum or (ii) a
preliminary and final prospectus or prospectus supplement, as
applicable, an indemnification certificate (A) certifying that
Borrower has carefully examined such memorandum or prospectus, as
applicable, including without limitation, the sections entitled
"Risk Factors," "Description of the Mortgage Loans and Mortgaged
Property," "The Manager," and "The Borrower," only as they relate
to Borrower, the Loan, the Loan Documents, and the Property and
such sections relating to Borrower, the Loan, the Loan Documents,
and the Property (and any other sections reasonably related
thereto) do not contain any untrue statement of a material
fact or omit to state a material fact necessary in
order to make the statements made, in the light of the
circumstances under which they were made, not misleading, (B)
indemnifying Lender (and for purposes of this SECTION 9.2, Lender
hereunder shall include its officers and directors), the
affiliate of Lehman Brothers Inc. ("LEHMAN") that has filed the
registration statement relating to the securitization (the
"REGISTRATION STATEMENT"), each of its directors, each of its
officers who have signed the Registration Statement and each
person or entity who controls the affiliate within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange
Act (collectively, the "LEHMAN GROUP"), and Lehman, each of its
directors and each person who controls Lehman within the meaning
of Section 15 of the Securities Act and Section 20 of the
<PAGE>
Exchange Act (collectively, the "UNDERWRITER GROUP") for any
losses, claims, damages or liabilities (collectively, the
"LIABILITIES") to which Lender, the Lehman Group or the
Underwriter Group may become subject insofar as the Liabilities
arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in such sections
or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated
in such sections or necessary in order to make the statements in
such sections or in light of the circumstances under which they
were made, not misleading and (C) agreeing to reimburse Lender,
the Lehman Group and the Underwriter Group for any legal or other
expenses reasonably incurred by Lender and Lehman in connection
with investigating or defending the Liabilities; provided,
however, that Borrower will be liable in any such case under
clauses (B) or (C) above only to the extent that any such loss
claim, damage or liability arises out of or is based upon any
such untrue statement or omission made therein in reliance upon
and in conformity with information furnished to Lender by or on
behalf of Borrower in connection with the preparation of the
memorandum or prospectus or in connection with the underwriting
of the debt, including, without limitation, financial statements
of Borrower, operating statements, rent rolls, environmental site
assessment reports and property condition reports with respect to
the Property (which Borrower knew, in the normal course of owning
and operating the Property to be untrue, inaccurate or
incomplete). This indemnity agreement will be in addition to any
liability which Borrower may otherwise have.
(c) In connection with filings under the Exchange Act,
Borrower agrees to indemnify (i) Lender, the Lehman Group and the
Underwriter Group for Liabilities to which Lender, the Lehman
Group or the Underwriter Group may become subject insofar as the
Liabilities arise out of or are based upon the omission or
alleged omission to state in the Provided Information a material
fact required to be stated in the Provided Information in order
to make the statements in the Provided Information, in light of
the circumstances under which they were made not misleading and
(ii) reimburse Lender, the Lehman Group or the Underwriter Group
for any reasonable legal or other expenses reasonably incurred by
Lender, the Lehman Group or the Underwriter Group in connection
with defending or investigating the Liabilities.
(d) Promptly after receipt by an indemnified party
under this SECTION 9.2 of notice of the commencement of any
action, such indemnified party will, if a claim in respect
thereof is to be made against the indemnifying party under this
SECTION 9.2, notify the indemnifying party in writing of the
commencement thereof, but the omission to so notify the
indemnifying party will not relieve the indemnifying party from
any liability which the indemnifying party may have to any
indemnified party hereunder except to the extent that failure to
notify causes prejudice to the indemnifying party. In the event
that any action is brought against any indemnified party, and its
notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled, jointly with any other
indemnifying party, to participate therein and, to the extent
that it (or they) may elect by written notice delivered to the
indemnified party promptly after receiving the aforesaid notice
<PAGE>
from such indemnified party, to assume the defense thereof with
counsel satisfactory to such indemnified party. After notice
from the indemnifying party to such indemnified party under this
SECTION 9.2 for any legal or other expenses subsequently incurred
by such indemnified party in connection with the defense thereof
other than reasonable costs of investigation; provided, however,
if the defendants in any such action include both the indemnified
party and the indemnifying party and the indemnified party shall
have reasonably concluded that there are any legal defenses
available to it and/or other indemnified parties that are
different from or additional to those available to the
indemnifying party, the indemnified party or parties shall have
the right to select separate counsel to assert such legal
defenses and to otherwise participate in the defense of such
action on behalf of such indemnified party to parties. The
indemnifying party shall not be liable for the expenses of more
than one separate counsel unless an indemnified party shall have
reasonably concluded that there may be legal defenses available
to it that are different from or additional to those available to
another indemnified party. No indemnifying party shall, without
the written consent of the indemnified party, effect the
settlement or compromise of, or consent to the entry of any
judgment with respect to, any pending or threatened action or
claim in respect of which indemnification or contribution may be
sought hereunder unless such settlement, compromise or judgment
(i) includes an unconditional release of the indemnified party
from all liability arising out of such action or claim and (ii)
does not include any statement as to or an admission of fault,
culpability or a failure to act, by or on behalf of any
indemnified party.
(e) In order to provide for just and equitable
contribution in circumstances in which the indemnity agreement
provided for in SECTION 9.2(b) or (c) is for any reason held to
be unenforceable by an indemnified party in respect of any
losses, claims, damages or liabilities (or action in respect
thereof) referred to therein which would otherwise be
indemnifiable under SECTION 9.2(b) or (c), the indemnifying party
shall contribute to the amount paid or payable by the indemnified
party as a result of such losses, claims, damages or liabilities
(or action in respect thereof); PROVIDED, HOWEVER, that no person
guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such
fraudulent misrepresentation. In determining the amount of
contribution to which the respective parties are entitled, the
following factors shall be considered: (i) Lehman's and
Borrower's relative knowledge and access to information
concerning the matter with respect to which claim was asserted;
(ii) the opportunity to correct and prevent any statement or
omission; and (iii) any other equitable considerations
appropriate in the circumstances. Lender and Borrower hereby
agree that it would not be equitable if the amount of such
contribution were determined by pro rata or per capita allocation.
(f) The liabilities and obligations of both Borrower
and Lender under this SECTION 9.2 shall survive the termination
of this Agreement and the satisfaction and discharge of the Debt.
<PAGE>
Section 9.3 RATING SURVEILLANCE.
-------------------
The Borrower will retain the Rating Agencies to provide
rating surveillance services on any certificates issued in a
Securitization. Such rating surveillance will be at the expense
of the Borrower in an amount determined by Lender in its
reasonable discretion prior to the occurrence of a
Securitization, not to exceed a maximum cost of $15,000 per year,
and such expense (the "RATING SURVEILLANCE CHARGE") will be paid
pursuant to the terms of the Disbursement Agreement.
Section 9.4 EXCULPATION.
-----------
Subject to the qualifications below, Lender shall not
enforce the liability and obligation of Borrower to perform and
observe the obligations contained in the Note, this Agreement,
the Mortgage or the other Loan Documents by any action or
proceeding wherein a money judgment shall be sought against
Borrower, except that Lender may bring a foreclosure action, an
action for specific performance or any other appropriate action
or proceeding to enable Lender to enforce and realize upon its
interest under the Note, this Agreement, the Mortgage and the
other Loan Documents, or in the Property, the Rents, or any other
collateral given to Lender pursuant to the Loan Documents;
PROVIDED, HOWEVER, that, except as specifically provided herein,
any judgment in any such action or proceeding shall be
enforceable against Borrower only to the extent of Borrower's
interest in the Property, in the Rents and in any other
collateral given to Lender, and Lender, by accepting the Note,
this Agreement, the Mortgage and the other Loan Documents, agrees
that it shall not sue for, seek or demand any deficiency judgment
against Borrower, Sponsor or the SPC General Partner or other
general partner of Borrower in any such action or proceeding
under or by reason of or under or in connection with the Note,
this Agreement, the Mortgage or the other Loan Documents. The
provisions of this section shall not, however, (a) constitute a
waiver, release or impairment of any obligation evidenced or
secured by any of the Loan Documents; (b) impair the right of
Lender to name Borrower or the SPC General Partner or other
general partner of Borrower as a party defendant in any action or
suit for foreclosure and sale under any of the Mortgage; (c)
affect the validity or enforceability of or any guaranty made in
connection with the Loan or any of the rights and remedies of the
Lender thereunder; (d) impair the right of Lender to obtain the
appointment of a receiver; (e) impair the enforcement of any of
the Assignment of Leases; (f) constitute a prohibition against
Lender to seek a judgment against Borrower in order to fully
realize the security granted by the Mortgage or to commence any
other appropriate action or proceeding in order for Lender to
exercise its remedies against the Property; or (g) constitute a
waiver of the right of Lender to enforce the liability and
obligation of Borrower, by money judgment or otherwise, to the
extent of any loss, damage, cost, expense, liability, claim or
other obligation incurred by Lender (including attorneys' fees
and costs reasonably incurred) arising out of or in connection
with the following:
<PAGE>
(i) fraud or intentional misrepresentation by Borrower or
any guarantor in connection with the Loan;
(ii) the gross negligence or willful misconduct of Borrower;
(iii) the removal or disposal of any portion of the Property
after and during the continuance of an Event of
Default;
(iv) Borrower's indemnification of Lender set forth in
SECTION 9.2 hereof.
Notwithstanding anything to the contrary in this
Agreement, the Note or any of the Loan Documents, (A) Lender shall not
be deemed to have waived any right which Lender may have under Section
506(a), 506(b), 1111(b) or any other provisions of the U.S. Bankruptcy
Code to file a claim for the full amount of the Debt secured by the
Mortgage or to require that all collateral shall continue to secure all of
the Debt owing to Lender in accordance with the Loan Documents,
and (B) the Debt shall be fully recourse to Borrower in the event
that: (i) the first full monthly payment of principal and
interest under the Note is not paid when due; (ii) Borrower
fails, following five (5) days notice, to permit on-site
inspections of the Property, or fails, following five (5) days
notice, to provide financial information, or fails to maintain
its status as a single purpose entity, or fails, following five
(5) days notice, to appoint, a new property manager upon the
request of Lender after an Event of Default, each as required by,
and in accordance with the terms and provisions of, this Loan
Agreement and the Mortgage; (iii) Borrower fails to obtain
Lender's prior written consent to any subordinate financing or
other voluntary lien encumbering the Property; (iv) Borrower
fails to obtain Lender's prior written consent to any assignment,
transfer, or conveyance of the Property or any interest therein
as required by the Mortgage except as permitted by the Mortgage;
or (v) Borrower, Sponsor or the SPC General Partner willfully
fails to direct tenants of the Property to make payments of Rents
to Lender following a Lockbox Event.
Section 9.5 ACHIEVEMENTS.
------------
Intentionally Deleted
Section 9.6 CASH MANAGEMENT.
---------------
9.6.1 LOCKBOX ACCOUNT. (a) Upon the occurrence of
a Lockbox Event, Borrower shall establish and maintain a
segregated Eligible Account (the "LOCKBOX ACCOUNT") to be held by
the Servicer in the trust for the benefit of Lender, which
Lockbox Account shall be under the sole dominion and control of
Lender. The Lockbox Account shall be entitled "Hawthorn, L.P.,
as Borrower, and Lehman Brothers Holdings Inc., as Lender,
pursuant to Loan Agreement dated as of November 14, 1997-Lockbox
Account." Borrower hereby grants to Lender a first priority
security interest in the Lockbox Account and all deposits at any
time contained therein and the proceeds thereof and will take all
actions necessary to maintain in favor of Lender a perfected
<PAGE>
first priority security interest in the Lockbox Account,
including, without limitation, executing and filing UCC-1
Financing Statements and continuations thereof. Borrower will
not in any way alter or modify the Lockbox Account and will
notify Lender of the account number thereof. Lender and Servicer
shall have the sole right to make withdrawals from the Lockbox
Account and all costs and expenses for establishing and
maintaining the Lockbox Account shall be paid by Borrower.
(b) Borrower shall, or shall cause Manager to, deliver
written instructions to all tenants under Leases to deliver all
Rents payable thereunder following a Lockbox Event, directly to
the Lockbox Account. Borrower shall, and shall cause Manager to,
deposit all amounts received by Borrower or Manager constituting
Rents into the Lockbox Account promptly upon receipt.
(c) Borrower shall obtain from Account Holder its
agreement to transfer to the Cash Collateral Account in
immediately available funds by federal wire transfer all amounts
on deposit in the Lockbox Account once every other Business Day
following a Lockbox Event.
9.6.2 CASH COLLATERAL ACCOUNT. (a) Upon the occurrence of a
Lockbox Event Borrower shall establish and maintain a segregated
Eligible Account (the "CASH COLLATERAL ACCOUNT") to be held by
Servicer in trust for the benefit of Lender, which Cash
Collateral Account shall be under the sole dominion and control
of Lender. The Cash Collateral Account shall be entitled
"Hawthorn, L.P., as Borrower, and Lehman Brothers Holdings Inc.,
as Lender, pursuant to Loan Agreement dated as of November 14,
1997 - Cash Collateral Account." Borrower hereby grants to
Lender a first priority security interest in the Cash Collateral
Account and all deposits at any time contained therein and the
proceeds thereof and will take all actions necessary to maintain
in favor of Lender a perfected first priority security interest
in the Cash Collateral Account, including, without limitation,
executing and filing UCC-1 Financing Statements and continuations
thereof. Borrower will not in any way alter or modify the Cash
Collateral Account and will notify Lender of the account number
thereof. Lender and Servicer shall have the sole right to make
withdrawals from the Cash Collateral Account and all costs and
expenses for establishing and maintaining the Cash Collateral
Account shall be paid by Borrower.
(b) Following a Lockbox Event, all funds on deposit in
the Cash Collateral Account shall be applied by Lender to the
payment of the following items in the order indicated:
(i) First, payment of the Monthly Debt Service
Payment Amount, applied first to the payment of interest computed
at the Regular Interest Rate with the remainder applied to the
reduction of the outstanding principal balance of the Note;
(ii) Second, payments for monthly Cash Expenses
incurred in accordance with the related Annual Budget pursuant to
a written request for payment submitted by Borrower to Lender
specifying the individual Cash Expenses in a form acceptable to Lender:
<PAGE>
(iii) Third, on or after the Anticipated
Repayment Date, payments for Extraordinary Expenses approved by
Lender, if any;
(iv) Fourth, on or after the Anticipated Repayment
Date, payments to Lender in reduction of the outstanding
principal balance of the Loan;
(v) Fifth, on or after the Anticipated Repayment
Date, payments to Lender for Accrued Interest;
(vi) Sixth, payment to the Lender of any other
amounts then due and payable under the Loan Documents; and
(vii) Lastly, payment of any excess amounts to Borrower.
(c) The insufficiency of funds on deposit in the Cash
Collateral Account shall not absolve Borrower of the obligation
to make any payments, as and when due pursuant to this Agreement
and the other Loan Documents, and such obligations shall be
separate and independent, and not conditioned on any event or
circumstance whatsoever.
Section 9.7 SERVICER.
--------
At the option of Lender, the Loan may be serviced by a
servicer/trustee (the "SERVICER") selected by Lender and Lender
may delegate all or any portion of its responsibilities under
this Agreement and the other Loan Documents to the Servicer
pursuant to a servicing agreement (the "SERVICING AGREEMENT")
between Lender and Servicer. Borrower shall be responsible for
any reasonable set-up fees or any other initial costs relating to
or arising under the Servicing Agreement, which fees and costs
shall not exceed $10,000, provided, however, that Borrower shall
not be responsible for payment of the monthly servicing fee due
to the Servicer under the Servicing Agreement.
X. MISCELLANEOUS
-------------
Section 10.1 SURVIVAL.
--------
This Agreement and all covenants, agreements,
representations and warranties made herein and in the
certificates delivered pursuant hereto shall survive the making
by Lender of the Loan and the execution and delivery to Lender of
the Note, and shall continue in full force and effect so long as
all or any of the Debt is outstanding and unpaid unless a longer
period is expressly set forth herein or in the other Loan
Documents. Whenever in this Agreement any of the parties hereto
is referred to, such reference shall be deemed to include the
legal representatives, successors and assigns of such party. All
covenants, promises and agreements in this Agreement, by or on
behalf of Borrower, shall inure to the benefit of the legal
representatives, successors and assigns of Lender.
<PAGE>
Section 10.2 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 10.3 GOVERNING LAW.
-------------
(A) THIS AGREEMENT WAS NEGOTIATED IN THE STATE OF NEW
YORK, AND MADE BY LENDER AND ACCEPTED BY BORROWER IN THE STATE OF
NEW YORK, AND THE PROCEEDS OF THE NOTE DELIVERED PURSUANT HERETO
WERE DISBURSED FROM THE STATE OF NEW YORK, WHICH STATE THE
PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND
TO THE UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL
RESPECTS, INCLUDING, WITHOUT LIMITING THE GENERALITY OF THE
FOREGOING, MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE,
THIS AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN
SUCH STATE (WITHOUT REGARD TO PRINCIPLES OF CONFLICT LAWS) AND
ANY APPLICABLE LAW OF THE UNITED STATES OF AMERICA, EXCEPT THAT
AT ALL TIMES THE PROVISIONS FOR THE CREATION, PERFECTION, AND
ENFORCEMENT OF THE LIENS AND SECURITY INTERESTS CREATED PURSUANT
HERETO AND PURSUANT TO THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED
BY AND CONSTRUED ACCORDING TO THE LAW OF THE STATE IN WHICH THE
APPLICABLE INDIVIDUAL PROPERTY IS LOCATED, IT BEING UNDERSTOOD
THAT, TO THE FULLEST EXTENT PERMITTED BY THE LAW OF SUCH STATE,
THE LAW OF THE STATE OF NEW YORK SHALL GOVERN THE CONSTRUCTION,
VALIDITY AND ENFORCEABILITY OF ALL LOAN DOCUMENTS AND ALL OF THE
OBLIGATIONS ARISING HEREUNDER OR THEREUNDER. TO THE FULLEST
EXTENT PERMITTED BY LAW, BORROWER HEREBY UNCONDITIONALLY AND
IRREVOCABLY WAIVES ANY CLAIM TO ASSERT THAT THE LAW OF ANY OTHER
JURISDICTION GOVERNS THIS AGREEMENT AND THE NOTE, AND THIS AGREEMENT
AND THE NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK.
(B) ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST
LENDER OR BORROWER ARISING OUT OF OR RELATING TO THIS AGREEMENT
MAY AT LENDER'S OPTION BE INSTITUTED IN ANY FEDERAL OR STATE
COURT IN THE CITY OF NEW YORK, COUNTY OF NEW YORK, AND BORROWER
WAIVES ANY OBJECTIONS WHICH IT MAY NOW OR HEREAFTER HAVE BASED ON
VENUE AND/OR FORUM NON CONVENIENS OF ANY SUCH SUIT, ACTION OR
PROCEEDING, AND BORROWER HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION OR PROCEEDING.
BORROWER DOES HEREBY DESIGNATE AND APPOINT CT CORPORATION
SYSTEMS, 1633 BROADWAY, NEW YORK, NEW YORK 10019 AS ITS
AUTHORIZED AGENT TO ACCEPT AND ACKNOWLEDGE ON ITS BEHALF SERVICE
OF ANY AND ALL PROCESS WHICH MAY BE SERVED IN ANY SUCH SUIT,
ACTION OR PROCEEDING IN ANY FEDERAL OR STATE COURT IN NEW YORK,
NEW YORK, AND AGREES THAT SERVICE OF PROCESS UPON SAID AGENT AT
SAID ADDRESS AND WRITTEN NOTICE OF SAID SERVICE MAILED OR
DELIVERED TO BORROWER IN THE MANNER PROVIDED HEREIN SHALL BE
DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON
<PAGE>
BORROWER, IN ANY SUCH SUIT, ACTION OR PROCEEDING IN THE STATE OF
NEW YORK. BORROWER (I) SHALL GIVE PROMPT NOTICE TO LENDER OF ANY
CHANGED ADDRESS OF ITS AUTHORIZED AGENT HEREUNDER, (II) MAY AT
ANY TIME AND FROM TIME TO TIME DESIGNATE A SUBSTITUTE AUTHORIZED
AGENT WITH AN OFFICE IN NEW YORK, NEW YORK (WHICH SUBSTITUTE
AGENT AND OFFICE SHALL BE DESIGNATED AS THE PERSON AND ADDRESS
FOR SERVICE OF PROCESS), AND (III) SHALL PROMPTLY DESIGNATE SUCH
A SUBSTITUTE IF ITS AUTHORIZED AGENT CEASES TO HAVE AN OFFICE IN
NEW YORK, NEW YORK OR IS DISSOLVED WITHOUT LEAVING A SUCCESSOR.
Section 10.4 MODIFICATION, WAIVER IN WRITING.
-------------------------------
No modification, amendment, extension, discharge,
termination or waiver of any provision of this Agreement, or of
the Note, or of any other Loan Document, nor 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 10.5 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 Note or under any other Loan
Document, or any other 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 Note 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 Note or the other Loan Documents, or to declare a default for
failure to effect prompt payment of any such other amount.
Section 10.6 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 or registered United States
mail, postage prepaid, or (b) expedited prepaid delivery service,
either commercial or United States Postal Service, with proof of
attempted delivery, or (c) by telecopier (with answer back
acknowledged), addressed as follows (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):
<PAGE>
If to Lender:
Lehman Brothers Holdings Inc.,
doing business as Lehman Capital, a
division of Lehman Brothers Holding Inc.
Three World Financial Center, 12th Floor
Commercial Mortgage Surveillance Group
New York, New York 10285
Attention: Tricia Hall
Facsimile No. (212) 526-8679
with a copy to:
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, New York 10038
Attention: W. Christopher White, Esq.
Facsimile No. (212) 504-6666
If to Borrower:
Hawthorn, L.P.
c/o Urban Shopping Centers, Inc.
900 North Michigan Avenue
Suite 1500
Chicago, IL 60611
Attention: Chief Financial Officer
Facsimile No. (312) 915-2001
with a copy to:
Urban Shopping Centers, Inc.
900 North Michigan Ave.
Suite 1500
Chicago, IL 60611
Attention: General Counsel
Facsimile No. (312) 915-2001
A notice shall be deemed to have been given: in the case of hand
delivery, at the time of delivery; in the case of registered or
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.
Section 10.7 TRIAL BY JURY.
-------------
BORROWER HEREBY AGREES NOT TO ELECT A TRIAL BY JURY OF
ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL
BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR
HEREAFTER EXIST WITH REGARD TO THE LOAN DOCUMENTS, OR ANY CLAIM,
COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH.
THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND
VOLUNTARILY BY BORROWER, AND IS INTENDED TO ENCOMPASS
INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT
TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE. LENDER IS HEREBY
AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS
CONCLUSIVE EVIDENCE OF THIS WAIVER BY BORROWER.
<PAGE>
Section 10.8 HEADINGS.
--------
The Article and/or Section headings and the Table of
Contents 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 10.9 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 10.10 PREFERENCES.
-----------
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, 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 10.11 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 do not
specifically and expressly provide for the giving of notice by
Lender to Borrower.
Section 10.12 REMEDIES OF BORROWER.
--------------------
In the event that a claim or adjudication is made that
Lender or its agents have acted unreasonably or unreasonably
delayed acting in any case where by law or under this Agreement
or the other Loan Documents, Lender or such agent, as the case
may be, has an obligation to act reasonably or promptly, Borrower
<PAGE>
agrees that neither Lender nor its agents shall be liable for any
monetary damages, and Borrower's sole remedies shall be limited
to commencing an action seeking injunctive relief or declaratory
judgment. The parties hereto agree that any action or proceeding
to determine whether Lender has acted reasonably shall be
determined by an action seeking declaratory judgment.
Section 10.13 EXPENSES; INDEMNITY.
-------------------
(a) Borrower covenants and agrees to pay, or if
Borrower fails to pay to reimburse, Lender upon receipt of
written notice from Lender for all reasonable costs and expenses
(including reasonable attorneys' fees and disbursements) incurred
by Lender in connection with (i) the preparation, negotiation,
execution and delivery of this Agreement and the other Loan
Documents and the consummation of the transactions contemplated
hereby and thereby and all the costs of furnishing all opinions
by counsel for Borrower (including without limitation any
opinions requested by Lender as to any legal matters arising
under this Agreement or the other Loan Documents with respect to
the Property); (ii) Borrower's ongoing performance of and
compliance with Borrower's respective agreements and covenants
contained in this Agreement and the other Loan Documents on its
part to be performed or complied with after the Closing Date,
including, without limitation, confirming compliance with
environmental and insurance requirements; (iii) the negotiation,
preparation, execution, delivery and administration of any
consents, amendments, waivers or other modifications to this
Agreement and the other Loan Documents and any other documents or
matters requested by Lender; (iv) securing Borrower's compliance
with any requests made pursuant to SECTION 9.1 hereof; (v) the
filing and recording fees and expenses, title insurance and
reasonable fees and expenses of counsel for providing to Lender
all required legal opinions, and other similar expenses incurred
in creating and perfecting the Liens in favor of Lender pursuant
to this Agreement and the other Loan Documents; (vi) enforcing or
preserving any rights, in response to third party claims or the
prosecuting or defending of any action or proceeding or other
litigation, in each case against, under or affecting Borrower,
this Agreement, the other Loan Documents, the Property, or any
other security given for the Loan; and (vii) enforcing any
obligations of or collecting any payments due from Borrower under
this Agreement, the other Loan Documents or with respect to the
Property or in connection with any refinancing or restructuring
of the credit arrangements provided under this Agreement in the
nature of a "work-out" or of any insolvency or bankruptcy
proceedings; PROVIDED, HOWEVER, that Borrower shall not be liable
for the payment of any such costs and expenses to the extent the
same arise by reason of the gross negligence, illegal acts, fraud
or willful misconduct of Lender. Any cost and expenses due and
payable to Lender may be paid from any amounts in the Deposit
Account.
(b) Borrower shall indemnify, defend and hold harmless
Lender from and against any and all other liabilities,
obligations, losses, damages, penalties, actions, judgments,
suits, claims, costs, expenses and disbursements of any kind or
nature whatsoever (including, without limitation, the reasonable
<PAGE>
fees and disbursements of counsel for Lender in connection with
any investigative, administrative or judicial proceeding commenced or
threatened, whether or not Lender shall be designated a party
thereto), that may be imposed on, incurred by, or asserted
against Lender in any manner relating to or arising out of (i)
any breach by Borrower of its obligations under, or any material
misrepresentation by Borrower contained in, this Agreement or the
other Loan Documents, or (ii) the use or intended use of the
proceeds of the Loan (collectively, the "INDEMNIFIED
LIABILITIES"); PROVIDED, HOWEVER, that Borrower shall not have
any obligation to Lender hereunder to the extent that such
Indemnified Liabilities arise from the gross negligence, illegal
acts, fraud or willful misconduct of Lender. To the extent that
the undertaking to indemnify, defend and hold harmless set forth
in the preceding sentence may be unenforceable because it
violates any law or public policy, Borrower shall pay the
maximum portion that it is permitted to pay and satisfy under
applicable law to the payment and satisfaction of all Indemnified
Liabilities incurred by the Lender.
Section 10.14 SCHEDULES INCORPORATED.
----------------------
The Schedules annexed hereto are hereby incorporated
herein as a part of this Agreement with the same effect as if set
forth in the body hereof.
Section 10.15 OFFSETS, COUNTERCLAIMS AND DEFENSES.
-----------------------------------
Any assignee of Lender's interest in and to this
Agreement, the Note and the other Loan Documents shall take the
same free and clear of all offsets, counterclaims or defenses
which are unrelated to such documents which Borrower may
otherwise have against any assignor of such 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 such 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 10.16 NO JOINT VENTURE OR PARTNERSHIP;
NO THIRD PARTY BENEFICIARIES.
----------------------------
(a) Borrower and Lender intend that the relationships
created hereunder and under the other Loan Documents be solely
that of borrower and lender. Nothing herein or therein 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 Property other than that
of mortgagee, beneficiary or lender.
(b) This Agreement and the other Loan Documents are
solely for the benefit of Lender and the Borrower and nothing
contained in this Agreement or the other Loan Documents shall be
deemed to confer upon anyone other than the Lender and the
Borrower any right to insist upon or to enforce the performance
or observance of any of the obligations contained herein or
<PAGE>
therein. All conditions to the obligations of Lender to make the
Loan hereunder are imposed solely and exclusively for the benefit
of Lender and no other Person shall have standing to require
satisfaction of such conditions in accordance with their terms or
be entitled to assume that Lender will refuse to make the Loan in
the absence of strict compliance with any or all thereof and no
other Person shall under any circumstances be deemed to be a
beneficiary of such conditions, any or all of which may be freely
waived in whole or in part by Lender if, in Lender's sole
discretion, Lender deems it advisable or desirable to do so.
Section 10.17 PUBLICITY.
---------
The Lender shall have the right to issue press
releases, advertisements and other promotional materials
describing the Lender's participation in the origination of the
Loan or the Loan's inclusion in any Secondary Market Transaction
effectuated by the Lender. Lender shall also be permitted to use
the Borrower or Sponsor's logo in its offering memorandum or
marketing materials; provided, however, that Borrower shall have
the opportunity to review the use of such logo in marketing
materials prior to its publication.
Section 10.18 WAIVER OF MARSHALING OF ASSETS.
------------------------------
To the fullest extent permitted by law, Borrower, for
itself and its successors and assigns, waives all rights to a
marshaling of the assets of Borrower, Borrower's partners and
others with interests in Borrower, and of the Property, or to a
sale in inverse order of alienation in the event of foreclosure
of the Mortgage, and agrees not to assert any right under any
laws pertaining to the marshaling of assets, the sale in inverse
order of alienation, homestead exemption, the administration of
estates of decedents, or any other matters whatsoever to defeat,
reduce or affect the right of Lender under the Loan Documents to
a sale of the Property for the collection of the Debt without any
prior or different resort for collection or of the right of
Lender to the payment of the Debt out of the net proceeds of the
Property in preference to every other claimant whatsoever.
Section 10.19 WAIVER OF COUNTERCLAIM.
----------------------
Borrower hereby waives the right to assert a
counterclaim, other than a compulsory counterclaim, in any action
or proceeding brought against it by Lender or its agents.
Section 10.20 CONFLICT; CONSTRUCTION OF DOCUMENTS; RELIANCE.
---------------------------------------------
In the event of any conflict between the provisions of
this Loan Agreement and any of the other Loan Documents, the
provisions of this Loan Agreement shall control. The parties
hereto acknowledge that they were represented by competent
counsel in connection with the negotiation, drafting and
execution of the Loan Documents and that such Loan Documents
shall not be subject to the principle of construing their meaning
<PAGE>
against the party which drafted same. Borrower acknowledges
that, with respect to the Loan, Borrower shall rely solely on its
own judgment and advisors in entering into the Loan without
relying in any manner on any statements, representations or
recommendations of Lender or any parent, subsidiary or affiliate
of Lender. Lender shall not be subject to any limitation
whatsoever in the exercise of any rights or remedies available to
it under any of the Loan Documents or any other agreements or
instruments which govern the Loan by virtue of the ownership by
it or any parent, subsidiary or affiliate of Lender of any equity
interest any of them may acquire in Borrower, and Borrower hereby
irrevocably waives the right to raise any defense or take any
action on the basis of the foregoing with respect to Lender's
exercise of any such rights or remedies. Borrower acknowledges that
Lender engages in the business of real estate financings and other
real estate transactions and investments which may be viewed as
adverse to or competitive with the business of the Borrower or its
affiliates.
Section 10.21 BROKERS AND FINANCIAL ADVISORS.
------------------------------
Borrower hereby represents that it has dealt with no
financial advisors, brokers, underwriters, placement agents,
agents or finders in connection with the transactions
contemplated by this Agreement. Borrower hereby agrees to
indemnify, defend and hold Lender harmless from and against any
and all claims, liabilities, costs and expenses of any kind
(including Lender's attorneys' fees and expenses) in any way
relating to or arising from a claim by any Person that such
Person acted on behalf of Borrower or Lender in connection with
the transactions contemplated herein. The provisions of this
SECTION 10.21 shall survive the expiration and termination of
this Agreement and the payment of the Debt.
Section 10.22 PRIOR AGREEMENTS.
----------------
This Agreement and the other Loan Documents contain the
entire agreement of the parties hereto and thereto in respect of
the transactions contemplated hereby and thereby, and all prior
agreements among or between such parties, whether oral or
written, including, without limitation, the Commitment Letter
dated September 30, 1997 between Borrower and Lender are
superseded by the terms of this Agreement and the other Loan Documents.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Loan
Agreement to be duly executed by their duly authorized
representatives, all as of the day and year first above written.
HAWTHORN, L.P.,
an Illinois limited partnership
By: USC HAWTHORN, INC.
a Delaware Corporation,
its general partner
By:________________________________
Name: Michael G. Hilborn
Title: Senior Vice President
LEHMAN BROTHERS HOLDINGS INC.,
DOING BUSINESS AS LEHMAN CAPITAL, A
DIVISION OF LEHMAN BROTHERS HOLDING INC.,
By:________________________________
Name:
Title:
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement") is entered into
as of the 13th day of November, 1997 by and between Urban Shopping Centers,
Inc., a Maryland corporation (the "Company"), and Security Capital Preferred
Growth Incorporated, a Maryland corporation (the "Investor").
WHEREAS, pursuant to that certain Preferred Share Purchase Agreement,
dated as of November 5, 1997 (the "Purchase Agreement"), by and among the
Company, Urban Shopping Centers, L.P., an Illinois limited partnership, and
the Investor, the Investor has agreed to purchase 2,999,400 shares of Series
A Cumulative Convertible Redeemable Preferred Stock, par value $.01 per share,
of the Company (the "Preferred Stock"), all of which Preferred Stock may be
converted into shares of the Company's common stock, par value $.01 per share
(the "Common Stock"), pursuant to the terms of such Preferred Stock; and
WHEREAS, in connection with the Purchase Agreement, the Company has
agreed to register for sale by the Investor and certain transferees, the
shares of Common Stock issued or issuable upon conversion of shares of
Preferred Stock (collectively, the "Registrable Shares"); and
WHEREAS, the parties hereto desire to enter into this Agreement to
evidence the foregoing agreement of the Company and the mutual covenants of
the parties relating thereto.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants, agreements and warranties herein contained and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
0. CERTAIN DEFINITIONS. In this Agreement, the following terms shall have
the following respective meanings:
"Accredited Investor" shall have the meaning set forth in Rule 501
under the Securities Act.
"Affiliate" shall mean, when used with respect to any Person,
another Person which directly, or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with
the Person specified.
"Commission" shall mean the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission thereunder, all as
the same are in effect at the relevant time.
"Holders" shall mean (a) the Investor and (b) each Person holding
Registrable Shares as a result of a transfer or assignment to that Person of
Registrable Shares other than pursuant to an effective registration statement
or Rule 144.
"Person" shall mean an individual, corporation, partnership,
limited liability company, estate, trust, association, private foundation,
joint stock company or other entity.
<PAGE>
"Register," "Registered" and "Registration" refer to a registration
effected by preparing and filing a registration statement in compliance with
the Securities Act providing for the sale by the Holders of Registrable Shares
in accordance with the method or methods of distribution designated by the
Holders, and the declaration or ordering of the effectiveness of such
registration statement by the Commission.
"Registration Expenses" shall mean all out-of-pocket expenses
(excluding Selling Expenses) incurred by the Company in complying with
Section 2, including, without limitation, the following: (a) all registration,
filing and listing fees; (b) fees and expenses of compliance with federal and
state securities or real estate syndication laws (including, without
limitation, reasonable fees and disbursements of counsel in connection with
state securities and real estate syndication qualifications of the
Registrable Shares under the laws of such jurisdictions as the Holders may
reasonably designate); (c) printing (including, without limitation, expenses
of printing or engraving certificates for the Registrable Shares in a form
eligible for deposit with The Depository Trust Company and otherwise meeting
the requirements of any securities exchange on which they are listed and of
printing registration statements and prospectuses), messenger, telephone,
shipping and delivery expenses; (d) fees and disbursements of counsel for the
Company; (e) fees and disbursements of all independent public accountants of
the Company (including, without limitation, the expenses of any annual or
special audit and "cold comfort" letters required by the managing underwriter);
(f) fees and expenses incurred in connection with the listing of the
Registrable Shares on each securities exchange on which securities of the same
class are then listed; and (g) fees and expenses associated with any filing
with the National Association of Securities Dealers, Inc. required to be made
in connection with the registration statement.
"Rule 144" shall mean Rule 144 under the Securities Act.
"Securities Act" shall mean the Securities Act of 1933, as amended,
and the rules and regulations of the Commission thereunder, all as the same
are in effect at the relevant time.
"Selling Expenses" shall mean all underwriting discounts, selling
commissions and stock transfer taxes applicable to any sale of Registrable
Shares and, if neither the Company nor any Person not a Holder shall include
securities within the subject Registration, shall include all travel and
other expenses of members of the management of the Company and its affiliates
in connection with the matters described in SECTION 6 (and if the Company or
any such Person shall so include securities, Selling Expenses shall include
a pro rata portion of such travel and other expenses).
1. REGISTRATION.
() Upon receipt of a written request (a "Registration Request")
delivered not earlier than nine months from the date hereof from Holders
holding at least 50% of the shares of Preferred Stock and Registrable Shares
then outstanding, the Company shall, as soon as practicable but not later than
30 days after its receipt of such Registration Request, prepare and file with
the Commission a registration statement for the purpose of effecting a
Registration of the sale of Registrable Shares by the Holders thereof; shall
use its best efforts to effect such Registration as soon as practicable but
not later than 90 days after its receipt of such Registration Request
(including, without limitation, the execution of an undertaking to file post-
effective amendments and appropriate qualification under applicable state
securities and real estate syndication laws); and shall keep such Registration
<PAGE>
continuously effective until the earlier of (i) the third anniversary of the
date hereof, (ii) the date on which all Registrable Shares have been sold
pursuant to such registration statement or Rule 144 and (iii) the date on
which all of the Registrable Shares may be sold in accordance with Rule
144(k); PROVIDED, HOWEVER, that the Company shall not be obligated to take any
action to effect any such Registration, qualification or compliance pursuant
to this Section 2 in any particular jurisdiction in which the Company would be
required to execute a general consent to service of process in effecting such
Registration, qualification or compliance unless the Company is already
subject to service in such jurisdiction.
Notwithstanding the foregoing, the Company shall have the right (the
"Suspension Right") to defer such filing (or suspend sales under any filed
registration statement or defer the updating of any filed registration
statement and suspend sales thereunder) for two periods of not more than 60
days each during each calendar year, if the Company furnishes to the Holders a
certificate signed by the President or any other executive officer or any
director of the Company stating that, in the good faith judgment of the
Company, it would be detrimental to the Company and its shareholders to file
such registration statement or amendment thereto at such time (or to continue
sales under a filed registration statement) and therefore the Company has
elected to defer the filing of such registration statement (or to suspend
sales under a filed registration statement).
(a) The Company shall promptly notify the Holders of the occurrence
of the following events:
() when any registration statement relating to the Registrable
Shares or post-effective amendment thereto filed with the Commission has
become effective;
(i) the issuance by the Commission of any stop order
suspending the effectiveness of any registration statement relating to the
Registrable Shares;
(ii) the suspension of an effective registration statement by
the Company in accordance with the last paragraph of Section 2(a);
(iii) the Company's receipt of any notification of the
suspension of the qualification of any Registrable Shares covered by a
registration statement for sale in any jurisdiction; and
(iv) the existence of any event, fact or circumstance which
results in a registration statement or prospectus relating to Registrable
Shares or any document incorporated therein by reference containing an untrue
statement of a material fact or omitting to state a material fact required to
be stated therein or necessary to make the statements therein not misleading
during the distribution of securities.
The Company agrees to use its reasonable best efforts to obtain the
withdrawal of any order suspending the effectiveness of any such registration
statement or any state qualification as promptly as possible.
(b) The Company shall provide to the Holders, at no cost to the
Holders, a copy of the registration statement and any amendment thereto used
to effect the Registration of the Registrable Shares, each prospectus
contained in such registration statement or post-effective amendment and any
amendment or supplement thereto and such other documents as the requesting
Holders may reasonably request in order to facilitate the disposition of the
<PAGE>
Registrable Shares covered by such registration statement. The Company
consents to the use of each such prospectus and any supplement thereto by the
Holders in connection with the offering and sale of the Registrable Shares
covered by such registration statement or any amendment thereto. The Company
shall also file a sufficient number of copies of the prospectus and any post-
effective amendment or supplement thereto with the New York Stock Exchange
(or, if the Common Stock is no longer listed thereon, with such other
securities exchange or market on which the Common Stock is then listed) so as
to enable the Holders to have the benefits of the prospectus delivery
provisions of Rule 153 under the Securities Act.
(c) The Company agrees to use its best efforts to cause the
Registrable Shares covered by a registration statement to be registered with
or approved by such state securities authorities as may be necessary to
enable the Holders to consummate the disposition of such shares pursuant to
the plan of distribution set forth in the registration statement.
(d) Subject to the Company's Suspension Right, if any event, fact
or circumstance exists requiring an amendment to a registration statement
relating to the Registrable Shares or supplement to a prospectus relating to
the Registrable Shares, immediately upon becoming aware thereof the Company
agrees to notify the Holders and prepare and furnish to the Holders a post-
effective amendment to the registration statement or supplement to the
prospectus or any document incorporated therein by reference or file any other
required document so that, as thereafter delivered to the purchasers of the
Registrable Shares, the prospectus will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading.
(e) The Company agrees to use its reasonable best efforts
(including the payment of any listing fees) to obtain the listing of all
Registrable Shares covered by the registration statement on each securities
exchange on which securities of the same class are then listed.
(f) The Company agrees to use its best efforts to comply with the
Securities Act and the Exchange Act and, as soon as reasonably practicable
following the end of any fiscal year during which a registration statement
effecting a Registration of the Registrable Shares was effective, to make
available to its security holders an earning statement satisfying the
provisions of Section 11(a) of the Securities Act.
(g) The Company agrees to cooperate with the selling Holders to
facilitate the timely preparation and delivery of certificates representing
Registrable Shares to be sold pursuant to a Registration and not bearing any
Securities Act legend; and enable certificates for such Registrable Shares to
be issued for such numbers of shares and registered in such names as the
Holders may reasonably request at least two business days prior to any sale of
Registrable Shares.
2. EXPENSES OF REGISTRATION. The Company shall pay all Registration Expenses
incurred in connection with the Registration, qualification or compliance
pursuant to Section 2. All Selling Expenses incurred in connection with the
sale of Registrable Shares by any of the Holders shall be borne by the Holder
selling such Registrable Shares. Each Holder shall pay the expenses of its own
counsel.
<PAGE>
3. INDEMNIFICATION.
() The Company shall indemnify each Holder, each Holder's officers and
directors, and each person controlling such Holder within the meaning of
Section 15 of the Securities Act, against all expenses, claims, losses,
damages and liabilities (including reasonable legal expenses), arising out of
or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any registration statement or prospectus relating to the
Registrable Shares, or any amendment or supplement thereto, or based on any
omission (or alleged omission) to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading;
PROVIDED, HOWEVER, that the Company shall not be liable in any such case to
the extent that any such claim, loss, damage or liability arises out of or is
based on any untrue statement or omission or alleged untrue statement or
omission made in reliance upon and in conformity with information furnished
in writing to the Company by such Holder for inclusion therein.
(a) Each Holder shall indemnify the Company, each of its directors and
officers, each underwriter, if any, of the Company's securities covered by
such registration statement, and each person who controls the Company or such
underwriter within the meaning of Section 15 of the Securities Act, each other
Holder with Registrable Shares covered by such registration statement, and
each officer, director and controlling person of each such other Holder,
against all expenses, claims, losses, damages and liabilities (including
reasonable legal fees and expenses) arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in any
registration statement or prospectus, or any amendment or supplement thereto,
or based on any omission (or alleged omission) to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent,
that such untrue statement (or alleged untrue statement) or omission (or
alleged omission) is made in such registration statement or prospectus in
reliance upon and in conformity with information furnished in writing to the
Company or such underwriter by such Holder for inclusion therein.
(b) Each party entitled to indemnification under this Section 4 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified
Party has actual knowledge of any claim as to which indemnity may be sought,
but the omission to so notify the Indemnifying Party shall not relieve it
from any liability which it may have to the Indemnified Party pursuant to the
provisions of this Section 4 except to the extent of the actual damages
suffered by such delay in notification. The Indemnifying Party shall assume
the defense of such action, including the employment of counsel to be chosen
by the Indemnifying Party to be reasonably satisfactory to the Indemnified
Party, and payment of expenses. The Indemnified Party shall have the right to
employ its own counsel in any such case, but the legal fees and expenses of
such counsel shall be at the expense of the Indemnified Party, unless the
employment of such counsel was authorized in writing by the Indemnifying Party
in connection with the defense of such action, or the Indemnifying Party did
not employ counsel to take charge of the defense of such action or the
Indemnified Party reasonably concluded that there may be defenses available
to it or them which are different from or additional to those available to the
Indemnifying Party (in which case the Indemnifying Party shall not have the
right to direct the defense of such action on behalf of the Indemnified Party),
in any of which events such fees and expenses shall be borne by the
Indemnifying Party. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent
to the entry of any judgment or enter into any settlement which does not
<PAGE>
include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in respect
of such claim or litigation.
(c) If the indemnification provided for in this Section 4 is unavailable
to a party which would have been an Indemnified Party under this Section 4 in
respect of any expenses, claims, losses, damages and liabilities referred to
herein, then each party which would have been an Indemnifying Party hereunder
shall, in lieu of indemnifying such Indemnified Party, contribute to the
amount paid or payable by such Indemnified Party as a result of such expenses,
claims, losses, damages and liabilities in such proportion as is appropriate
to reflect the relative fault of the Indemnifying Party on the one hand and
such Indemnified Party on the other in connection with the statement or
omission which resulted in such expenses, claims, losses, damages and
liabilities, as well as any other relevant equitable considerations. The
relative fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Indemnifying Party or such Indemnified Party and the parties'
relative intent, knowledge, access to information and opportunity to correct
or prevent such statement or omission. The Company and each holder of
Registrable Shares agrees that it would not be just and equitable if
contribution pursuant to this Section were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to above in this Section 4(d).
(d) No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation.
(e) In no event shall any Holder be liable for any expenses, claims,
losses, damages or liabilities pursuant to this Section 4 in excess of the
net proceeds to such Holder of any Registrable Shares sold by such Holder.
4. INFORMATION TO BE FURNISHED BY HOLDERS. Each Holder shall furnish to the
Company such information as the Company may reasonably request and as is
required in connection with the Registration and related proceedings referred
to in Section 2. If any Holder fails to provide the Company with such
information within two weeks of the Company's request, the Company's
obligations under Section 2 with respect to such Holder or the Registrable
Shares owned by such Holder shall be suspended until such Holder provides such
information.
5. UNDERTAKING TO PARTICIPATE IN UNDERWRITING. If the Holders of at least
$50 million of the Registrable Securities propose to sell Registrable
Securities in an underwritten public offering, the Company shall make
available members of the management of the Company and its affiliates for
reasonable assistance in selling efforts relating to such offering, to the
extent customary for a public offering (including, without limitation, to the
extent customary, senior management attendance at due diligence meetings with
underwriters and their counsel and road shows) and shall enter into
underwriting agreements containing usual and customary terms and conditions
reasonably acceptable to the Company for such types of offerings.
<PAGE>
6. RULE 144 SALES.
The Company covenants that it shall file the reports required to be
filed by the Company under the Exchange Act, so as to enable any Holder to
sell Registrable Shares pursuant to Rule 144.
In connection with any sale, transfer or other disposition by any Holder
of any Registrable Shares pursuant to Rule 144, the Company shall cooperate
with such Holder to facilitate the timely preparation and delivery of
certificates representing Registrable Shares to be sold and not bearing any
Securities Act legend, and enable certificates for such Registrable Shares to
be for such number of shares and registered in such names as the selling
Holder may reasonably request at least two business days prior to any sale of
Registrable Shares.
7. MISCELLANEOUS.
() GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Maryland, without giving effect to
the conflict of law provisions thereof.
(a) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof.
(b) AMENDMENT. No amendment, supplement, modification, waiver or
termination of this Agreement shall be binding unless executed in writing by
the party sought to be bound thereby.
(c) NOTICES, ETC. Unless otherwise provided herein, any notice, required
or permitted under this Agreement shall be given in writing, and shall be
deemed effectively given (a) upon personal delivery to the party to be
notified, (b) on the fifth business day after deposit with the United States
Post Office, by registered or certified mail, postage prepaid, (c) on the next
business day after dispatch via nationally recognized overnight courier or (d)
upon confirmation of transmission by facsimile, all addressed to the party to
be notified. Notices shall be addressed as follows: (i) if to an Investor, at
such Investor's address or fax number set forth below its signature hereto,
or at such other address or fax number as such Investor furnished to the
Company in writing, or (ii) if to any assignee or transferee of an Investor,
at such address or fax number as such assignee or transferee furnished to the
Company in writing, or (iii) if to the Company, at the address of its
principal executive offices and addressed to the attention of the President,
or at such other address or fax number as the Company furnished to the Investor
or any assignee or transferee. Any notice or other communication required to
be given hereunder to a Holder in connection with a registration may instead
be given to the designated representative of such Holder.
(d) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(e) SEVERABILITY. If one or more provisions of this Agreement are held
to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of this Agreement shall be interpreted as
if such provision were so excluded and shall be enforceable in accordance with
its terms.
<PAGE>
(f) TITLES AND SUBTITLES. The title and subtitles used in this Agreement
are used for convenience only and are not to be considered in construing or
interpreting this Agreement.
(g) SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding on the respective successors and assigns of the parties hereto.
(h) REMEDIES. The Company and the Investor acknowledge that there would
be no adequate remedy at law if any party fails to perform any of its
obligations hereunder, and accordingly agree that the Company and each Holder,
in addition to any other remedy to which it may be entitled at law or in
equity, shall be entitled to compel specific performance of the obligations
of another party under this Agreement in accordance with the terms and
conditions of this Agreement in any court of the United States or any State
thereof having jurisdiction.
(i) ATTORNEYS' FEES. If the Company or any Holder brings an action to
enforce its rights under this Agreement, the prevailing party in the action
shall be entitled to recover its costs and expenses, including, without
limitation, reasonable attorneys' fees, incurred in connection with such
action, including any appeal of such action.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
URBAN SHOPPING CENTERS, INC.
By: /s/ Michael Hilborn
-------------------
Michael Hilborn
Senior Vice President
SECURITY CAPITAL PREFERRED
GROWTH INCORPORATED
By: /s/ David Rosenbaum
--------------------
Name: David Rosenbaum
-----------------
Title: Vice President
-----------------
<PAGE>
URBAN SHOPPING CENTERS, INC.
ARTICLES SUPPLEMENTARY
SERIES A CUMULATIVE CONVERTIBLE REDEEMABLE PREFERRED STOCK
Urban Shopping Centers, Inc., a Maryland corporation (hereinafter
called the "Corporation"), hereby certifies to the Department of Assessments
and Taxation of the State of Maryland that:
FIRST: The Board of Directors of the Corporation has classified and
designated 2,999,400 unissued shares of series preferred stock, par value
$.01 per share, of the Corporation as shares of Series A Cumulative
Convertible Redeemable Preferred Stock ("Series A Preferred Stock"), with
the preferences, rights, voting powers, restrictions, limitations as to
dividends, qualifications and terms and conditions of redemption thereof as
follows, which upon any restatement of the Company's charter (the "Charter")
shall be made part of Article Fifth thereof, with any necessary or appropriate
changes to the enumeration or lettering of sections or subsections hereof:
SECTION 1. NUMBER OF SHARES AND DESIGNATION. The Series A Preferred
Stock shall be designated as "Series A Cumulative Convertible Redeemable
Preferred Stock" and the authorized number of shares of Series A Preferred
Stock constituting such series shall be 2,999,400, which number may be
decreased from time to time by the Board pursuant to Section 6 upon
reacquisition thereof in any manner, or by retirement thereof.
SECTION 2. DEFINITIONS. For purposes of the Series A Preferred
Stock, the following terms shall have the meanings indicated:
"Act" shall mean the Securities Act of 1933, as amended.
"Affiliate" shall mean, with respect to any Person, a Person which
directly, or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, the Person specified.
"Base Common Stock Dividend" shall have the meaning set forth in
paragraph (a) of Section 9.
"Board" shall mean the Board of Directors of the Corporation or any
committee authorized by such Board of Directors to perform any of its
responsibilities with respect to the Series A Preferred Stock.
"Business Day" shall mean any day other than a Saturday, Sunday or
a day on which state or federally chartered banking institutions in Chicago,
Illinois are not required to be open.
"Call Date" shall have the meaning set forth in Section 5(b).
"Common Stock" shall mean the common stock, par value $.01 per share,
of the Corporation or the Corporation's capital stock into which the
outstanding Common Stock is reclassified.
"Conversion Price" shall mean the conversion price per share of
Common Stock for which each share of Series A Preferred Stock is convertible,
as such Conversion Price may be adjusted pursuant to Section 7(d). The initial
Conversion Price shall be $33.34 (equivalent to an initial conversion rate of
one share of Common Stock for each share of Series A Preferred Stock).
<PAGE>
"Current Market Price" of publicly traded shares of Common Stock or
any other class or series of capital stock or other security of the
Corporation or of any similar security of any other issuer for any day shall
mean the closing price, regular way on such day, or, if no sale takes place on
such day, the average of the reported closing bid and asked prices regular
way on such day, in either case as reported on the principal national
securities exchange on which such securities are listed or admitted for
trading, or, if such security is not quoted on any national securities
exchange, on the National Market of the National Association of Securities
Dealers, Inc. Automated Quotation System ("NASDAQ") or, if such security is
not quoted on the NASDAQ National Market, the average of the closing bid and
asked prices on such day in the over-the-counter market as reported by NASDAQ
or, if bid and asked prices for such security on such day are not reported
through NASDAQ, the average of the bid and asked prices on such day as
furnished by any New York Stock Exchange or National Association of
Securities Dealers, Inc. member firm regularly making a market in such
security selected for such purpose by the Chief Executive Officer of the
Corporation or the Board or if any class or series of securities is not
publicly traded, the fair value of the shares of such class or series as
determined reasonably and in good faith by the Board.
"Distribution" shall have the meaning set forth in paragraph (iii)
of Section 7(d).
"Dividend Payment Date" shall mean, with respect to any Dividend
Period, (a) the date that cash dividends are paid on the Common Stock with
respect to such Dividend Period or (b) if such dividends have not been paid
on the Common Stock by 9:00 a.m., New York City time, on the 70th day from
and including the last day of such Dividend Period, then on such day; provided,
further, that if any Dividend Payment Date falls on any day other than a
Business Day, the dividend payment payable on such Dividend Payment Date shall
be paid on the Business Day immediately following such Dividend Payment Date.
"Dividend Periods" shall mean the Initial Dividend Period and each
subsequent quarterly dividend period commencing on and including January 1,
April 1, July 1 and October 1 of each year and ending on and including the day
preceding the first day of the next succeeding Dividend Period, other than the
Dividend Period during which any Series A Preferred Stock is redeemed pursuant
to Section 5, which shall end on and include the Call Date with respect to the
Series A Preferred Stock being redeemed.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Fair Market Value" shall mean the average of the daily Current
Market Prices of a share of Common Stock during five consecutive Trading Days
selected by the Corporation commencing not more than twenty Trading Days
before, and ending not later than, the earlier of the day in question and the
day before the "ex" date with respect to the issuance or distribution requiring
such computation. The term "`ex' date," when used with respect to any
issuance or distribution, means the first day on which the Common Stock trades
regular way, without the right to receive such issuance or distribution, on
the exchange or in the market, as the case may be, used to determine that
day's Current Market Price.
"Issue Date" shall mean November 13, 1997.
"Initial Dividend Period" shall mean the period commencing on and
including the Issue Date and ending on and including December 31, 1997.
<PAGE>
"Junior Stock" shall have the meaning set forth in Section 8(c).
"NYSE" shall mean the New York Stock Exchange, Inc.
"Parity Stock" shall have the meaning set forth in Section 8(b).
"Person" shall mean any individual, firm, partnership, corporation
or other entity, including any successor (by merger or otherwise) of such
entity.
"Senior Stock" shall have the meaning set forth in Section 8(a).
"Set apart for payment" shall be deemed to include, without any
action other than the following, the recording by the Corporation in its
accounting ledgers of any accounting or bookkeeping entry which indicates,
pursuant to a declaration of dividends or other distribution by the Board,
the allocation of funds to be so paid on any series or class of capital stock
of the Corporation; provided, however, that if any funds for any class or
series of Junior Stock or any class or series of Parity Stock are placed in a
separate account of the Corporation or delivered to a disbursing, paying or
other similar agent, then "set apart for payment" with respect to the Series A
Preferred Stock shall mean placing such funds in a separate account or
delivering such funds to a disbursing, paying or other similar agent.
"Trading Day" shall mean, with respect to any securities, any day
on which such securities are traded on the principal national securities
exchange on which such securities are listed or admitted for trading or, if
such securities are not listed or admitted for trading on any national
securities exchange, the NASDAQ National Market or, if such securities are not
listed or admitted for trading on the NASDAQ National Market, any Business Day.
"Transaction" shall have the meaning set forth in Section 7(e).
"Transfer Agent" means such transfer agent as may be designated by
the Board or its designee as the transfer agent for the Series A Preferred
Stock; provided that, if the Corporation has not designated a transfer agent,
then the Corporation shall act as the transfer agent for the Series A
Preferred Stock.
"Voting Preferred Stock" shall have the meaning set forth in
Section 9.
SECTION 3. DIVIDENDS.
(a) The holders of Series A Preferred Stock shall be
entitled to receive, when, as and if authorized and declared by
the Board out of funds legally available for that purpose,
cumulative dividends payable in cash in an amount per share equal
to the greater of (i) the base dividend of $0.50 per quarter (the
"Base Rate") or (ii) the cash dividends declared on the number of
shares of Common Stock, or portion thereof, into which a share of
Series A Preferred Stock would then be convertible, without
regard to any time restrictions on the convertibility of the
Series A Preferred Stock. The amount referred to in clause (ii)
of this paragraph (a) with respect to each succeeding Dividend
Period shall be determined as of the applicable Dividend Payment
Date by multiplying the number of shares of Common Stock, or
portion thereof calculated to the fourth decimal point, into
which a share of Series A Preferred Stock would then be
<PAGE>
convertible (without regard to any time restrictions on the
convertibility of the Series A Preferred Stock) at the
opening of business on such Dividend Payment Date (based on the
Conversion Price then in effect) by the aggregate cash dividends
payable or paid for such Dividend Period in respect of a share of
Common Stock outstanding as of the record date for the dividend
payable on the Common Stock for such Dividend Period. If (A) the
Corporation pays a cash dividend on the Common Stock after the
Dividend Payment Date for the corresponding Dividend Period and
(B) the dividend on the Series A Preferred Stock for such
Dividend Period calculated pursuant to clause (ii) of this
paragraph (a), taking into account the Common Stock dividend
referenced in clause (A), exceeds the dividend previously
declared on the Series A Preferred Stock for such Dividend
Period, the Corporation shall pay an additional dividend to the
holders of the Series A Preferred Stock on the date that the
Common Stock dividend referenced in clause (A) is paid, in an
amount equal to the difference between the dividend calculated
pursuant to clause (B) and the dividends previously declared on
the Series A Preferred Stock with respect to such Dividend
Period. Such dividends shall be cumulative from the Issue Date,
whether or not in any Dividend Period or Periods such dividends
are declared or there are funds of the Corporation legally
available for the payment of such dividends, and shall be payable
quarterly in arrears on the Dividend Payment Dates, commencing on
the first Dividend Payment Date after the Issue Date. Each such
dividend shall be payable in arrears to the holders of record of
the Series A Preferred Stock, as they appear on the stock records
of the Corporation at the close of business on such record date
as is fixed by the Board which shall be not more than 60 days
prior to the corresponding Dividend Payment Date and, within such
60-day period, shall be the same date as the record date for the
regular quarterly dividend payable on the Common Stock for such
Dividend Period (or, if there is no such record date for the
Common Stock, then such date as the Board may fix). Accumulated,
accrued and unpaid dividends for any past Dividend Periods may be
authorized or declared and paid at any time, without reference to
any regular Dividend Payment Date, to holders of record on such
record date as may be fixed by the Board which shall be not more
than 45 days prior to the corresponding payment date.
(b) The amount of dividends payable per share of
Series A Preferred Stock for the Initial Dividend Period, or any
other period shorter than a full Dividend Period, shall be
computed ratably on the basis of a 360-day year of twelve 30-day
months. Holders of Series A Preferred Stock shall not be entitled
to any dividends, whether payable in cash, property or stock, in
excess of cumulative dividends as herein provided on the Series A
Preferred Stock. No interest, or sum of money in lieu of
interest, shall be payable in respect of any dividend payment or
payments on the Series A Preferred Stock which may be in arrears.
(c) So long as any of the Series A Preferred Stock is
outstanding, except as described in the immediately following
sentence, no dividends shall be declared or paid or set apart for
payment by the Corporation and no other distribution of cash or
other property shall be declared or made directly or indirectly
by the Corporation with respect to any class or series of Parity
Stock for any period unless all accumulated, accrued and unpaid
<PAGE>
dividends have been or contemporaneously are declared and paid or
declared and a sum sufficient for the payment thereof set apart
for payment for all past Dividend Periods with respect to the
Series A Preferred Stock. When dividends are not paid in full or
a sum sufficient for such payment is not set apart for payment as
provided above, all dividends declared on the Series A Preferred
Stock and all dividends declared on any other class or series of
Parity Stock shall be declared ratably in proportion to the
respective amounts of dividends accumulated, accrued and unpaid
on the Series A Preferred Stock and on such Parity Stock.
(d) So long as any of the Series A Preferred Stock is
outstanding, no dividends (other than dividends or distributions
paid in, or options, warrants or rights to subscribe for or
purchase, Junior Stock) shall be declared or paid or set apart
for payment by the Corporation and no other distribution of cash
or other property shall be declared or made directly or
indirectly by the Corporation with respect to any class or series
of Junior Stock, nor shall any Junior Stock be redeemed,
purchased or otherwise acquired (other than a redemption,
purchase or other acquisition of Common Stock made for purposes
of an employee incentive or benefit plan of the Corporation or
any subsidiary) for any consideration (or any moneys be paid to
or made available for a sinking fund for the redemption of any
Junior Stock) directly or indirectly by the Corporation (except
by conversion into or exchange for Junior Stock), nor shall any
other cash or other property otherwise be paid or distributed to
or for the benefit of any holder of Junior Stock in respect
thereof directly or indirectly by the Corporation unless in each
case (i) all dividends (including all accumulated, accrued and
unpaid dividends) have been or contemporaneously are declared and
paid or declared and a sum sufficient for the payment thereof set
apart for payment for all past Dividend Periods with respect to
the Series A Preferred Stock and all past dividend periods with
respect to any Parity Stock and (ii) a sum sufficient for the
payment thereof has been or contemporaneously is paid or set
apart for payment of the dividend for the current Dividend Period
with respect to the Series A Preferred Stock and the current
dividend period with respect to any Parity Stock.
SECTION 4. LIQUIDATION PREFERENCE.
(a) Upon any liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, before any
payment or distribution of the assets of the Corporation (whether
capital or surplus) shall be made to or set apart for the holders
of Junior Stock, the holders of Series A Preferred Stock shall be
entitled to receive $33.34 per share of Series A Preferred Stock
(the "Liquidation Preference"), plus an amount equal to all
dividends (whether or not earned or declared) accumulated,
accrued and unpaid thereon to the date of final distribution to
such holders, if any; but such holders shall not be entitled to
any further payment. Until the holders of the Series A Preferred
Stock have been paid the Liquidation Preference in full, plus an
amount equal to all dividends (whether or not earned or declared)
accumulated, accrued and unpaid thereon to the date of final
distribution to such holders, no payment shall be made to any
holder of Junior Stock upon any liquidation, dissolution or
winding up of the Corporation. If, upon any liquidation,
<PAGE>
dissolution or winding up of the Corporation, the assets of the
Corporation, or the proceeds thereof, distributable among the
holders of Series A Preferred Stock are insufficient to pay in
full such preferential amount and liquidating payments on any
other class or series of Parity Stock, then such assets, or the
proceeds thereof, shall be distributed among the holders of
Series A Preferred Stock and any such other Parity Stock ratably
in proportion to the respective amounts which would be payable on
such Series A Preferred Stock and any such other Parity Stock if
all amounts payable thereon were paid in full.
(b) Upon any liquidation, dissolution or winding up of
the Corporation, after payment has been made in full to the
holders of Series A Preferred Stock and any Parity Stock as
provided in this Section 4, any other series or class of Junior
Stock shall, subject to the respective terms thereof, be entitled
to receive any and all assets remaining to be paid or
distributed, and the holders of the Series A Preferred Stock and
any Parity Stock shall not be entitled to share therein.
(c) For purposes of this Section 4, (i) a
consolidation or merger of the Corporation with or into one or
more corporations, (ii) a sale or transfer of all or
substantially all of the Corporation's assets or (iii) a
statutory share exchange shall not be deemed to be a liquidation,
dissolution or winding up, voluntary or involuntary, of the
Corporation.
SECTION 5. REDEMPTION AT THE OPTION OF THE CORPORATION.
(a) Subject to Section 11.3, Series A Preferred Stock
shall not be redeemable by the Corporation prior to the sixth
anniversary of the Issue Date; PROVIDED, HOWEVER, that if at any
time fewer than 299,940 shares of Series A Preferred Stock remain
outstanding, the Corporation may redeem all such shares at any
time in the manner provided in this Section 5. On and after the
sixth anniversary of the Issue Date, the Corporation, at its
option, may redeem Series A Preferred Stock, in whole at any time
or in part from time to time, at a redemption price payable in
cash equal to the Liquidation Preference, plus all accrued and
unpaid dividends to the Call Date.
(b) Series A Preferred Stock shall be redeemed by the
Corporation on the date specified in the notice to holders
required under Section 5(d) (the "Call Date"). The Call Date
shall be selected by the Corporation, shall be specified in the
notice of redemption and shall be not less than 30 days nor more
than 60 days after the date notice of redemption is sent by the
Corporation.
(c) Unless all dividends (including all accumulated,
accrued and unpaid dividends) have been or contemporaneously are
declared and paid or declared and a sum sufficient for the
payment thereof set apart for payment for all past Dividend
Periods with respect to the Series A Preferred Stock and all past
dividend periods with respect to any Parity Stock, no shares of
Series A Preferred Stock may be redeemed unless all outstanding
shares of Series A Preferred Stock are simultaneously redeemed
and neither the Corporation nor any affiliate of the Corporation
<PAGE>
may purchase or acquire shares of Series A Preferred Stock,
except pursuant to a purchase or exchange offer made on the same
terms to all holders of shares of Series A Preferred Stock.
(d) If the Corporation redeems shares of Series A
Preferred Stock pursuant to Section 5(a), notice of such
redemption shall be given to each holder of record of shares to
be redeemed. Such notice shall be provided by first class mail,
postage prepaid, at such holder's address as it appears on the
stock records of the Corporation. Neither the failure to mail any
notice required by this paragraph (d), nor any defect therein or
in the mailing thereof to any particular holder, shall affect the
sufficiency of the notice or the validity of the proceedings for
redemption with respect to any other holders. Any notice which
was mailed in the manner herein provided shall be conclusively
presumed to have been duly given on the date mailed whether or
not the holder receives the notice. Each such notice shall state,
as appropriate: (i) the Call Date; (ii) the number of shares of
Series A Preferred Stock to be redeemed and, if fewer than all
shares held by such holder are to redeemed, the number of shares
to be redeemed from such holder; (iii) the place or places at
which certificates representing such shares are to be surrendered
for cash; and (iv) the then-current Conversion Price. If the
Corporation has mailed notice of the redemption of any shares of
Series A Preferred Stock as provided above, then from and after
the Call Date (unless the Corporation fails to make available the
amount of cash necessary to effect such redemption), (A) except
as otherwise provided herein, dividends shall cease to accumulate
or accrue on the shares called for redemption (except that, in
the case of a Call Date which falls after a dividend record date
and prior to the related Dividend Payment Date, holders of Series A
Preferred Stock on the dividend record date shall be entitled on
such Dividend Payment Date to receive the dividend payable on
such shares), (B) such shares shall no longer be deemed to be
outstanding and (C) all rights of the holders thereof as holders
of Series A Preferred Stock shall cease (except the rights to
receive the cash payable upon such redemption, without interest
thereon, upon surrender and endorsement of their certificates if
so required and to receive any dividends payable thereon). The
Corporation's obligation to make available the redemption price
in accordance with the preceding sentence shall be deemed
fulfilled if, on or before the Call Date, the Corporation
deposits with a bank or trust company (which may be an affiliate
of the Corporation) that has, or is an affiliate of a bank or
trust company that has, capital and surplus of at least
$50,000,000, such amount of cash as is necessary for such
redemption, in trust, with irrevocable instructions that such
cash be applied to the redemption of the shares called for
redemption. No interest shall accrue for the benefit of the
holders of shares of Series A Preferred Stock to be redeemed on
any cash so set aside by the Corporation. Subject to applicable
escheat laws, any such cash unclaimed at the end of two years
from the Call Date shall revert to the general funds of the
Corporation, after which reversion the holders of shares of
Series A Preferred Stock so called for redemption shall look only
to the general funds of the Corporation for the payment of such
cash.
<PAGE>
As promptly as practicable after the surrender in
accordance with such notice of the certificates representing any
shares of Series A Preferred Stock to be redeemed (properly
endorsed or assigned for transfer, if the Corporation so requires
and the notice so states), such certificates shall be exchanged
for cash (without interest thereon) for which such shares have
been redeemed in accordance with such notice. If fewer than all
outstanding shares of Series A Preferred Stock are to be
redeemed, the shares to be redeemed shall be selected by the
Corporation from outstanding shares of Series A Preferred Stock
not previously called for redemption by lot or, with respect to
the number of shares of Series A Preferred Stock held of record
by each holder of such shares, pro rata (as nearly as may be) or
by any other method as may be determined by the Board in its
discretion to be equitable. If fewer than all shares of Series A
Preferred Stock represented by any certificate are redeemed, then
a new certificate representing the unredeemed shares shall be
issued without cost to the holder thereof.
SECTION 6. STATUS OF REACQUIRED STOCK. All shares of
Series A Preferred Stock which are issued and reacquired in any
manner by the Corporation (including shares of Series A Preferred
Stock which are surrendered for conversion into Common Stock)
shall be returned to the status of authorized but unissued shares
of Series A Preferred Stock.
SECTION 7. CONVERSION. At any time on or after the day
which is 270 days after the Issue Date, holders of shares of
Series A Preferred Stock shall have the right to convert all or a
portion of such shares into shares of Common Stock, as follows:
(a) Subject to and upon compliance with the provisions
of this Section 7, a holder of shares of Series A Preferred Stock
shall have the right, at such holder's option, at any time on or
after the day which is 270 days after the Issue Date, to convert
such shares, in whole or in part, into the number of fully paid
and non-assessable shares of authorized but previously unissued
shares of Common Stock per each share of Series A Preferred Stock
obtained by dividing the Liquidation Preference (excluding any
accumulated, accrued and unpaid dividends) per share of Series A
Preferred Stock by the Conversion Price (as in effect at the time
and on the date specified in the last paragraph of Section 7(b)) and by
surrendering such shares to be converted, such surrender to be
made in the manner provided in Section 7(b); provided, however,
that the right to convert shares of Series A Preferred Stock
called for redemption pursuant to Section 5 shall terminate at
the close of business on the Call Date fixed for such redemption,
unless the Corporation defaults in making payment of cash payable
upon such redemption under Section 5.
(b) In order to exercise the conversion right, the
holder of each share of Series A Preferred Stock to be converted
shall surrender the certificate representing such share, duly
endorsed or assigned to the Corporation or in blank, at the
office of the Transfer Agent, accompanied by written notice to
the Corporation that such holder elects to convert such share of
Series A Preferred Stock. Unless the shares of Common Stock
issuable on conversion are to be issued in the same name as the
name in which such share of Series A Preferred Stock is
<PAGE>
registered, each share surrendered for conversion shall be
accompanied by instruments of transfer, in form satisfactory to
the Corporation, duly executed by the holder or such holder's
duly authorized attorney and an amount sufficient to pay any
transfer or similar tax (or evidence reasonably satisfactory to
the Corporation demonstrating that such taxes have been paid).
Holders of shares of Series A Preferred Stock at the
close of business on a dividend payment record date shall be
entitled to receive the dividend payable on such shares on the
corresponding Dividend Payment Date notwithstanding the
conversion thereof following such dividend payment record date
and prior to such Dividend Payment Date. Except as provided
above, the Corporation shall make no payment or allowance for
unpaid dividends, whether or not in arrears, on converted shares
or for dividends on the shares of Common Stock issued upon such
conversion.
As promptly as practicable after the surrender of
certificates for shares of Series A Preferred Stock as provided
above, the Corporation shall issue and deliver at such office to
such holder, or send on such holder's written order, a
certificate or certificates for the number of full shares of
Common Stock issuable upon conversion of such shares of Series A
Preferred Stock in accordance with the provisions of this Section
7, and any fractional interest in respect of a share of Common
Stock arising upon such conversion shall be settled as provided
in Section 7(c).
Each conversion shall be deemed to have been effected
immediately prior to the close of business on the date on which
the certificates for shares of Series A Preferred Stock have been
surrendered and such notice has been received by the Corporation
as provided above, and the Person or Persons in whose name or
names any certificate or certificates for shares of Common Stock
are issuable upon such conversion shall be deemed to have become
the holder or holders of record of the shares represented thereby
at such time on such date and such conversion shall be at the
Conversion Price in effect at such time on such date unless the
stock transfer books of the Corporation are closed on such date,
in which event such Person or Persons shall be deemed to have
become such holder or holders of record at the close of business
on the next succeeding day on which such stock transfer books are
open, but such conversion shall be at the Conversion Price in
effect on the date on which such shares were surrendered and such
notice was received by the Corporation. If the dividend payment
record dates for the Series A Preferred Stock and Common Stock do
not coincide, and the preceding sentence does not operate to
ensure that a holder of shares of Series A Preferred Stock whose
shares are converted into Common Stock does not receive dividends
on both the shares of Series A Preferred Stock and the Common
Stock into which such shares are converted for the same Dividend Period,
then notwithstanding anything herein to the contrary, it is the intent, and
the Transfer Agent is authorized to ensure, that no conversion after
the earlier of such record dates will be accepted until after the
later of such record dates.
<PAGE>
(c) No fractional shares of Common Stock or scrip
representing fractions of a share of Common Stock shall be issued
upon conversion of Series A Preferred Stock. Instead of any
fractional interest in a share of Common Stock which would
otherwise be deliverable upon conversion of a share of Series A
Preferred Stock, the Corporation shall pay to the holder of such
share an amount in cash based upon the Current Market Price of
the Common Stock on the Trading Day immediately preceding the
date of conversion. If more than one share is surrendered for
conversion at one time by the same holder, the number of full
shares of Common Stock issuable upon conversion thereof shall be
computed on the basis of the aggregate number of shares of Series
A Preferred Stock so surrendered.
(d) The Conversion Price shall be adjusted from time
to time as follows:
(i) If the Corporation after the Issue Date (A)
pays a dividend or makes a distribution on its capital stock in
shares of Common Stock, (B) subdivides its outstanding Common
Stock into a greater number of shares, (C) combines its
outstanding Common Stock into a smaller number of shares or (D)
issues any shares of capital stock by reclassification of its
outstanding Common Stock, the Conversion Price in effect at the
opening of business on the day following the date fixed for the
determination of stockholders entitled to receive such dividend
or distribution or at the opening of business on the day
following the day on which such subdivision, combination or
reclassification becomes effective, as the case may be, shall be
adjusted so that the holder of any share of Series A Preferred
Stock thereafter surrendered for conversion shall be entitled to
receive the number of shares of Common Stock (or fraction of a
share of Common Stock) which such holder would have owned or been
entitled to receive after the happening of any of the events
described above if such share of Series A Preferred Stock had
been converted immediately prior to the record date in the case
of a dividend or distribution or the effective date in the case
of a subdivision, combination or reclassification. An adjustment
made pursuant to this paragraph (i) shall become effective
immediately after the opening of business on the day next
following the record date (except as provided in Section 7(h)) in
the case of a dividend or distribution and shall become effective
immediately after the opening of business on the day next
following the effective date in the case of a subdivision,
combination or reclassification.
(ii) If the Corporation after the Issue Date
issues rights, options or warrants to all holders of Common Stock
entitling them (for a period expiring within 45 days after the
record date described below) to subscribe for or purchase Common
Stock at a price per share less than 95% (100% if a stand-by
underwriter is used which charges the Corporation a commission)
of the Fair Market Value per share of the Common Stock on the
record date for the determination of stockholders entitled to
receive such rights, options or warrants, then the Conversion
Price in effect at the opening of business on the day next
following such record date shall be adjusted to equal the price
determined by multiplying (A) the Conversion Price in effect
immediately prior to the opening of business on the day following
<PAGE>
the date fixed for such determination by (B) a fraction, the
numerator of which shall be the sum of (1) the number of shares
of Common Stock outstanding on the close of business on the date
fixed for such determination and (2) the number of shares which
could be purchased at 95% (100% if a stand-by underwriter is used which
charges the Corporation a commission) of such Fair Market Value from the
aggregate proceeds to the Corporation from the exercise of such rights,
options or warrants for Common Stock, and the denominator of which shall
be the sum of (3) the number of shares of Common Stock outstanding on the
close of business on the date fixed for such determination and
(4) the number of additional shares of Common Stock offered for
subscription or purchase pursuant to such rights, options or
warrants. Such adjustment shall become effective immediately
after the opening of business on the day next following such
record date (except as provided in Section 7(h)). In determining
whether any rights, options or warrants entitle the holders of
Common Stock to subscribe for or purchase Common Stock at less
than 95% (100% if a stand-by underwriter is used which charges
the Corporation a commission) of such Fair Market Value, there
shall be taken into account any consideration received by the
Corporation upon issuance and upon exercise of such rights,
options or warrants, the value of such consideration, if other
than cash, to be determined in good faith by the Board.
(iii) If the Corporation after the Issue Date
makes a distribution on its Common Stock other than in cash or
Common Stock (including any distribution in securities (other
than rights, options or warrants referred to in paragraph (ii) of
Section 7(d)) (each of the foregoing being referred to herein as
a "distribution"), then the Conversion Price in effect at the
opening of business on the day next following the record date for
determination of stockholders entitled to receive such
distribution shall be adjusted to equal the price determined by
multiplying (A) the Conversion Price in effect immediately prior
to the opening of business on the day following the record date
by (B) a fraction, the numerator of which shall be the difference
between (1) the number of shares of Common Stock outstanding on
the close of business on the record date and (2) the number of
shares determined by dividing (x) the aggregate value of the
property being distributed by (y) the Fair Market Value per share
of Common Stock on the record date, and the denominator of which
shall be the number of shares of Common Stock outstanding on the
close of business on the record date. Such adjustment shall
become effective immediately after the opening of business on the
day next following such record date (except as provided below).
The value of the property being distributed shall be determined
in good faith by the Board; provided, however, that, if the
property being distributed is a publicly traded security, its
value shall be calculated in accordance with the procedure for
calculating the Fair Market Value of a share of Common Stock
(calculated for a period of five consecutive Trading Days
commencing on the twentieth Trading Day after the distribution).
Neither the issuance by the Corporation of rights, options or
warrants to subscribe for or purchase securities of the
Corporation nor the exercise thereof shall be deemed a
distribution under this paragraph (iii).
<PAGE>
(iv) If the Corporation after the Issue Date acquires,
pursuant to an issuer or self tender offer, all or any portion of the
outstanding Common Stock and such tender offer involves the payment of
consideration per share of Common Stock having a fair market value (as
determined in good faith by the Board), at the last time (the "Expiration
Time") tenders may be made pursuant to such offer, which exceeds the
Current Market Price per share of Common Stock on the Trading Day next
succeeding the Expiration Time, then the Conversion Price in
effect on the opening of business on the Trading Day next
succeeding the Expiration Time shall be adjusted to equal the
price determined by multiplying (A) the Conversion Price in
effect immediately prior to the Expiration Time by (B) a
fraction, the numerator of which shall be (1) the number of
shares of Common Stock outstanding (including the shares acquired
in the tender offer (the "Acquired Shares")) immediately prior to
the Expiration Time, multiplied by (2) the Current Market Price
per share of Common Stock on the Trading Day next succeeding the Expiration
Time, and the denominator of which shall be the sum of (3) the fair market
value (determined as provided above) of the aggregate consideration paid to
acquire the Acquired Shares and (4) the product of (x) the number of
shares of Common Stock outstanding (less any Acquired Shares) at
the Expiration Time, multiplied by (y) the Current Market Price
per share of Common Stock on the Trading Day next succeeding the
Expiration Time.
(v) No adjustment to the Conversion Price shall
be required unless such adjustment would require a cumulative
increase or decrease of at least 1% in such price; provided,
however, that any adjustments which by reason of this paragraph
(v) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment until made; and
provided, further, that any adjustment shall be required and made
in accordance with the provisions of this Section 7 (other than
this paragraph (v)) not later than such time as may be required
in order to preserve the tax-free nature of a distribution to the
holders of Common Stock. Notwithstanding any other provisions of
this Section 7, the Corporation shall not be required to make any
adjustment to the Conversion Price for the issuance of (A) any
Common Stock pursuant to any plan providing for the reinvestment
of dividends or interest payable on securities of the Corporation
and the investment of optional amounts in Common Stock under such
plan or (B) any options, rights or Common Stock pursuant to any
stock option, stock purchase or other stock-based plan maintained
by the Corporation. All calculations under this Section 7 shall
be made to the nearest cent (with $0.005 being rounded upward) or
to the nearest one-tenth of a share (with 0.05 of a share being
rounded upward), as the case may be. Anything in this Section
7(d) to the contrary notwithstanding, the Corporation shall be
entitled, to the extent permitted by law, to make such reductions
in the Conversion Price, in addition to those required by this
Section 7(d), as it in its discretion determines to be advisable
in order that any stock dividends, subdivision of shares,
reclassification or combination of shares, distribution of rights
or warrants to purchase stock or securities, or a distribution of
other assets (other than cash dividends) hereafter made by the
Corporation to its stockholders are not taxable, or if that is
not possible, to diminish any income taxes which are otherwise
payable because of such event.
<PAGE>
(e) If the Corporation is a party to any transaction
(including without limitation a merger, consolidation, statutory
share exchange, issuer or self tender offer for at least one-
third of the shares of Common Stock outstanding, a sale of all or
substantially all of the Corporation's assets or a
recapitalization of the Common Stock, but excluding any
transaction as to which paragraph (i) of Section 7(d) applies)
(each of the foregoing being referred to herein as a
"Transaction"), in each case as a result of which shares of
Common Stock are converted into the right to receive stock,
securities or other property (including cash or any combination
thereof), each share of Series A Preferred Stock which is not
converted into the right to receive stock, securities or other
property in connection with such Transaction shall thereupon be
convertible into the kind and amount of shares of stock,
securities and other property (including cash or any combination
thereof) receivable upon such consummation by a holder of that
number of shares of Common Stock into which one share of Series A
Preferred Stock was convertible immediately prior to such
Transaction (without giving effect to any Conversion Price
adjustment pursuant to paragraph (iv) of Section 7(d)). The
Corporation shall not be a party to any Transaction unless the
terms of such Transaction are consistent with the provisions of
this Section 7(e), and it shall not consent or agree to the
occurrence of any Transaction until the Corporation has entered
into an agreement with the successor or purchasing entity, as the
case may be, for the benefit of the holders of the Series A
Preferred Stock which contains provisions enabling the holders of
the Series A Preferred Stock which remain outstanding after such Transaction
to convert into the consideration received by holders of Common
Stock at the Conversion Price in effect immediately prior to such
Transaction. The provisions of this Section 7(e) shall similarly
apply to successive Transactions.
(f) If:
(i) the Corporation declares a dividend (or any
other distribution) on the Common Stock (other than cash
dividends and cash distributions); or
(ii) the Corporation authorizes the granting to
all holders of the Common Stock of rights or warrants to
subscribe for or purchase any shares of any class or series of
capital stock or any other rights or warrants; or
(iii) there is any reclassification of the
outstanding Common Stock or any consolidation or merger to which
the Corporation is a party and for which approval of any
stockholders of the Corporation is required, or a statutory share
exchange, or an issuer or self tender offer for at least one-
third of the outstanding shares of Common Stock (or an amendment
thereto changing the maximum number of shares sought or the
amount or type of consideration being offered therefor has been
adopted), or the sale or transfer of all or substantially all of
the assets of the Corporation as an entirety; or
(iv) there occurs the voluntary or involuntary
liquidation, dissolution or winding up of the Corporation,
then the Corporation shall cause to be filed with the Transfer
<PAGE>
Agent and shall cause to be mailed to each holder of shares of
Series A Preferred Stock at such holder's address as shown on the
stock records of the Corporation, as promptly as possible, a
notice stating (A) the record date for the payment of such
dividend, distribution or rights or warrants, or, if a record
date is not established, the date as of which the holders of
Common Stock of record to be entitled to such dividend,
distribution or rights or warrants are to be determined or (B)
the date on which such reclassification, consolidation, merger,
statutory share exchange, sale, transfer, liquidation,
dissolution or winding up is expected to become effective, and
the date as of which it is expected that holders of Common Stock
of record shall be entitled to exchange their shares of Common
Stock for securities or other property, if any, deliverable upon
such reclassification, consolidation, merger, statutory share
exchange, sale, transfer, liquidation, dissolution or winding up
or (C) the date on which such tender offer commenced, the date on
which such tender offer is scheduled to expire unless extended,
the consideration offered and the other material terms thereof
(or the material terms of any amendment thereto). Failure to give
or receive such notice or any defect therein shall not affect the
legality or validity of the proceedings described in this Section 7.
(g) Whenever the Conversion Price is adjusted as
herein provided, the Corporation shall promptly file with the
Transfer Agent an officer's certificate setting forth the
Conversion Price after such adjustment and setting forth a brief
statement of the facts requiring such adjustment which
certificate shall be conclusive evidence of the correctness of
such adjustment absent manifest error. Promptly after delivery of
such certificate, the Corporation shall prepare a notice of such
adjustment of the Conversion Price setting forth the adjusted
Conversion Price and the date such adjustment becomes effective
and shall mail such notice of such adjustment of the Conversion Price
to each holder of shares of Series A Preferred Stock at such holder's last
address as shown on the stock records of the Corporation.
(h) In any case in which Section 7(d) provides that an
adjustment shall become effective on the day next following the
record date for an event, the Corporation may defer until the
occurrence of such event (i) issuing to the holder of any share
of Series A Preferred Stock converted after such record date and
before the occurrence of such event the additional Common Stock
issuable upon such conversion by reason of the adjustment
required by such event over and above the Common Stock issuable
upon such conversion before giving effect to such adjustment and
(ii) paying to such holder any amount of cash in lieu of any
fraction pursuant to Section 7(c).
(i) There shall be no adjustment of the Conversion
Price in case of the issuance of any capital stock of the
Corporation in a reorganization, acquisition or other similar
transaction except as specifically set forth in this Section 7.
(j) If the Corporation takes any action affecting the
Common Stock, other than action described in this Section 7,
which in the opinion of the Board would materially and adversely
affect the conversion rights of the holders of Series A Preferred
Stock, the Conversion Price for the Series A Preferred Stock may
<PAGE>
be adjusted, to the extent permitted by law, in such manner, if
any, and at such time as the Board, in its sole discretion, may
determine to be equitable under the circumstances.
(k) The Corporation shall at all times reserve and
keep available, free from preemptive rights, out of its
authorized but unissued shares of Common Stock solely for the
purpose of effecting conversion of the Series A Preferred Stock,
the full number of shares of Common Stock deliverable upon
conversion of all outstanding shares of Series A Preferred Stock
not theretofore converted into Common Stock. For purposes of this
Section 7(k), the number of shares of Common Stock which are
deliverable upon conversion of all outstanding shares of Series A
Preferred Stock shall be computed as if at the time of
computation all such outstanding shares were held by a single
holder (and without regard to the Ownership Limit set forth in
the Charter of the Corporation).
The Corporation covenants that any shares of Common
Stock issued upon conversion of the shares of Series A Preferred
Stock shall be validly issued, fully paid and nonassessable.
The Corporation shall use its best efforts to list the
shares of Common Stock required to be delivered upon conversion
of the shares of Series A Preferred Stock, prior to such
delivery, on each national securities exchange, if any, on which
the outstanding shares of Common Stock are listed at the time of
such delivery.
(l) The Corporation shall pay any and all documentary
stamp or similar issue or transfer taxes payable in respect of
the issuance or delivery of Common Stock or other securities or
property on conversion or redemption of Series A Preferred Stock
pursuant hereto; provided, however, that the Corporation shall
not be required to pay any tax which may be payable in respect of
any transfer involved in the issuance or delivery of Common Stock
or other securities or property in a name other than that of the
holder of the Series A Preferred Stock to be converted or
redeemed, and no such issuance or delivery shall be made unless
and until the Person requesting such issuance or delivery has
paid to the Corporation the amount of any such tax or established, to
the reasonable satisfaction of the Corporation, that such tax has been paid.
(m) In addition to any other adjustment required
hereby, to the extent permitted by law, the Corporation from time
to time may decrease the Conversion Price by any amount,
permanently or for a period of at least twenty Business Days, if
the decrease is irrevocable during the period.
(n) Notwithstanding anything to the contrary contained
in this Section 7, conversion of Series A Preferred Stock
pursuant to this Section 7 shall be permitted only to the extent
that such conversion would not result in a violation of the
Ownership Limit (as defined in the Charter), after taking into
account any waiver of such limitation granted to any holder of
Series A Preferred Stock.
SECTION 8. RANKING. Any class or series of capital stock
of the Corporation shall be deemed to rank:
<PAGE>
(a) senior to the Series A Preferred Stock, as to the
payment of dividends and as to the distribution of assets upon
liquidation, dissolution or winding up, if the holders of such
class or series are entitled to the receipt of dividends or
amounts distributable upon liquidation, dissolution or winding
up, as the case may be, in preference or priority to the holders
of Series A Preferred Stock ("Senior Stock");
(b) on a parity with the Series A Preferred Stock, as
to the payment of dividends and as to the distribution of assets
upon liquidation, dissolution or winding up, whether or not the
dividend rates, dividend payment dates or redemption or
liquidation prices per share thereof are different from those of
the Series A Preferred Stock, if the holders of such class or
series and the Series A Preferred Stock are entitled to the
receipt of dividends and amounts distributable upon liquidation,
dissolution or winding up in proportion to their respective
amounts of accrued and unpaid dividends per share or liquidation
preferences, without preference or priority one over the other
("Parity Stock"); and
(c) junior to the Series A Preferred Stock, as to the
payment of dividends or as to the distribution of assets upon
liquidation, dissolution or winding up, if such class or series
is Common Stock or if the holders of Series A Preferred Stock are
entitled to the receipt of dividends or amounts distributable
upon liquidation, dissolution or winding up, as the case may be,
in preference or priority to the holders of shares of such class
or series ("Junior Stock").
SECTION 9. VOTING.
(a) If and whenever (i) four quarterly dividends
(whether or not consecutive) payable on the Series A Preferred
Stock or any series or class of Parity Stock are in arrears
(which shall, with respect to any such quarterly dividend, mean
that any such dividend has not been paid in full), whether or not
earned or declared, (ii) for four consecutive quarterly dividend
periods, the Corporation fails to pay dividends on the Common
Stock in an amount per share at least equal to $0.50 per share
(subject to adjustment consistent with any adjustment of the
Conversion Price pursuant to Section 7(d)) (the "Base Common
Stock Dividend") or (iii) the Corporation fails to satisfy the
test set forth in Section 12(a), then the number of directors
then constituting the Board shall be increased by two (or by
three if the number of directors then constituting the Board is
more than 11 (without including any directors elected pursuant to
this Section 9(a) or similar types of provisions with respect to
Voting Preferred Stock (as defined below)) if not already increased by
reason of similar types of provisions with respect to Voting Preferred
Stock (as defined below)) and the holders of Series A Preferred Stock,
together with the holders of every other series or class of Parity Stock
(any other such series, the "Voting Preferred Stock"), voting as a single
class regardless of series, shall be entitled to elect the additional
directors to serve on the Board at any annual meeting of
stockholders or a special meeting held in lieu thereof, or at a
special meeting of the holders of the Series A Preferred Stock
and the Voting Preferred Stock called as hereinafter provided.
Whenever (A) in the case of an arrearage in dividends described
<PAGE>
in clause (i), all dividends in arrears on the Series A Preferred
Stock and the Voting Preferred Stock then outstanding have been
paid and a sum sufficient for the payment thereof has been set
apart for payment of the dividend for the current dividend for
two consecutive quarterly dividend periods, (B) in the case of an
arrearage in dividends described in clause (ii), the Corporation
makes a quarterly dividend payment on the Common Stock in an
amount per share equal to or exceeding the Base Common Stock
Dividend for two consecutive quarterly dividend periods, or (C)
in the case of a failure described in clause (iii), the
Corporation satisfies the test set forth in Section 12(a) for two
consecutive fiscal quarters, then the right of the holders of the
Series A Preferred Stock and the Voting Preferred Stock to elect
such additional directors shall cease (but subject always to the
same provision for the vesting of such voting rights in the case
of any similar future arrearages), and the terms of office of all
Persons elected as directors by the holders of the Series A
Preferred Stock and the Voting Preferred Stock shall forthwith
terminate and the number of directors constituting the Board
shall be reduced accordingly. At any time after such voting power
have been so vested in the holders of Series A Preferred Stock
and the Voting Preferred Stock, if applicable, the Secretary of
the Corporation may, and upon the written request of any holder
of Series A Preferred Stock (addressed to the Secretary at the
principal office of the Corporation) shall, call a special
meeting of the holders of the Series A Preferred Stock and of the
Voting Preferred Stock for the election of the two directors to
be elected by them as herein provided, such call to be made by
notice similar to that provided in the Bylaws of the Corporation
for a special meeting of the stockholders or as required by law.
If any such special meeting required to be called as above
provided shall not be called by the Secretary within 20 days
after receipt of any such request, then any holder of Series A
Preferred Stock may call such meeting, upon the notice above
provided, and for that purpose shall have access to the stock
records of the Corporation. The directors elected at such special
meeting shall hold office until the next annual meeting of the
stockholders or special meeting held in lieu thereof if such
office has not previously terminated as provided above. If any
vacancy occurs among the directors elected by the holders of the
Series A Preferred Stock and the Voting Preferred Stock, a
successor shall be elected by the Board, upon the nomination of
the then-remaining director elected by the holders of the Series
A Preferred Stock and the Voting Preferred Stock or the successor
of such remaining director, to serve until the next annual
meeting of the stockholders or special meeting held in lieu
thereof if such office has not previously terminated as provided
above.
(b) So long as any Series A Preferred Stock is
outstanding, in addition to any other vote or consent of
stockholders required by law or by the Charter of the
Corporation, the affirmative vote of at least two-thirds of the
votes entitled to be cast by the holders of the Series A
Preferred Stock, given in person or by proxy, either in writing
without a meeting or by vote at any meeting called for the
purpose, shall be necessary for effecting or validating:
<PAGE>
(i) Any amendment, alteration or repeal of any of
the provisions of these Articles Supplementary, the Charter or
the By-Laws of the Corporation which materially and adversely
affects the voting powers, rights or preferences of the holders
of the Series A Preferred Stock; provided, however, that the
amendment of the provisions of the Charter so as to authorize or
create, or to increase the authorized amount of, any Junior Stock
or any class of Parity Stock shall not be deemed to materially
adversely affect the voting powers, rights or preferences of the
holders of Series A Preferred Stock; or
(ii) The authorization, reclassification or
creation of, the increase in the authorized amount of, or the
issuance of, any class of Senior Stock or any security
convertible into any class of Senior Stock (whether or not such
class of Senior Stock is currently authorized); PROVIDED,
HOWEVER, that no such vote of the holders of Series A Preferred
Stock shall be required if, at or prior to the time when such
amendment, alteration or repeal is to take effect, or when the
issuance of any such Senior Stock or convertible security is to
be made, as the case may be, provision is made for the redemption
of all shares of Series A Preferred Stock at the time
outstanding.
For purposes of the foregoing provisions and all other
voting rights under these Articles Supplementary, each share of
Series A Preferred Stock shall have one vote per share, except
that when any other class or series of preferred stock shall have
the right to vote with the Series A Preferred Stock as a single
class on any matter, then the Series A Preferred Stock and such
other class or series shall have with respect to such matters one
vote per $100 of stated liquidation preference. Except as
otherwise required by applicable law or as set forth herein, the
Series A Preferred Stock shall not have any relative,
participating, optional or other special voting rights and powers
other than as set forth herein, and the consent of the holders
thereof shall not be required for the taking of any corporate
action.
SECTION 10. RECORD HOLDERS. The Corporation and the
Transfer Agent may deem and treat the record holder of any share
of Series A Preferred Stock as the true and lawful owner thereof
for all purposes, and neither the Corporation nor the Transfer
Agent shall be affected by any notice to the contrary.
SECTION 11. OWNERSHIP RESTRICTIONS. The Series A
Preferred Stock shall be subject to the restrictions and
limitations set forth in Article Seventh of the Charter.
SECTION 12. FIXED CHARGE COVERAGE.
(a) So long as any of the shares of Series A Preferred
Stock are outstanding, if the Company or any subsidiary of the
Company shall issue any preferred securities of such entity or
incur any additional indebtedness for borrowed money and
immediately following such issuance or incurrence and after
giving effect to such issuance or incurrence and the application
of the net proceeds therefrom, the Company's ratio of aggregate
Consolidated EBITDA to aggregate Consolidated Fixed Charges for
<PAGE>
the four fiscal quarters immediately preceding such issuance
would be less than 1.5 to 1.0, the holders of the Series A
Preferred Stock shall have the rights provided in SECTION 9(A),
unless the holders of at least two-thirds of the shares of the Series A
Preferred Stock then outstanding consent to such issuance or incurrence.
(b) "Consolidated EBITDA" for any period shall mean
the consolidated net income of the Company (before minority
interest, extraordinary items and other gains and losses) as
reported in the Company's financial statements filed with the
Securities and Exchange Commission increased by the sum of the
following (without duplication):
(i) all income and state franchise taxes paid or
accrued according to generally accepted accounting principles
("GAAP") for such period (other than income taxes attributable to
extraordinary, unusual or non-recurring gains or losses except to
the extent that such gains were not included in Consolidated
EBITDA);
(ii) all interest expense paid or accrued in
accordance with GAAP for such period (including financing fees
and amortization of deferred financing fees and amortization of
original issue discount);
(iii) depreciation and depletion reflected in
such reported net income;
(iv) amortization reflected in such reported net
income including, without limitation, amortization of capitalized
debt issuance costs (only to the extent that such amounts have
not been previously included in the amount of Consolidated EBITDA
pursuant to clause (ii) above), goodwill, other intangibles and
management fees;
(v) the non-cash portion of ground rent payable
by the Company pursuant to that certain Lease dated as of
December 31, 1990 between the Company and Teachers' Retirement
System of the State of Illinois, as amended, to the extent
deducted from consolidated net income; and
(vi) any other non-cash charges or discretionary
prepayment penalties, to the extent deducted from consolidated
net income (including, but not limited to, income allocated to
minority interests).
(c) "Consolidated Fixed Charges" for any period means the sum of:
(i) all interest expense paid or accrued in
accordance with GAAP for such period (including financing fees
and amortization of deferred financing fees and amortization of
original issue discount but excluding non-cash interest expense
on deferred ground rent);
(ii) preferred stock dividend requirements for
such period, whether or not declared or paid; and
(iii) regularly scheduled amortization of principal
during such period (other than any balloon payments at maturity).
<PAGE>
SECTION 13. SINKING FUND. The Series A Preferred Stock
shall not be entitled to the benefit of any retirement or sinking
fund.
SECOND: The Series A Preferred Stock has been classified
and designated by the Board under the authority contained in
Article Fifth of the Charter.
THIRD: These Articles Supplementary have been approved by
the Board in the manner and by the vote required by law.
FOURTH: The undersigned President acknowledges these
Articles Supplementary to be the act of the Corporation and, as
to all other matters or facts required to be verified under oath,
acknowledges that to the best of his knowledge, information and
belief, these matters and facts are true in all material respects
and that this statement is made under the penalties for perjury.
IN WITNESS WHEREOF, the Corporation has caused these
Articles Supplementary to be signed in its name and on its behalf
by its President and attested to by its Secretary on this 12th
day of November, 1997.
URBAN SHOPPING CENTERS, INC.
By: /s/ Matthew S. Dominski
---------------------------------
Matthew S. Dominski
President
ATTEST:
/s/ Michael Hilborn
- ------------------------------
Michael Hilborn
Secretary
<PAGE>
THIRD AMENDMENT
TO
SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF
URBAN SHOPPING CENTERS, L.P.
This Third Amendment (this "Amendment") to the Second Amended and
Restated Agreement of Limited Partnership, dated as of October 14, 1993 (as
amended through the date hereof, the "Partnership Agreement"), of Urban
Shopping Centers, L.P., an Illinois limited partnership (the "Partnership"),
is made as of the 13th day of November, 1997 by Urban Shopping Centers, Inc.,
a Maryland corporation, as general partner (the "General Partner"), pursuant
to the authority contained in Section 14.1.2.3 of the Partnership Agreement.
WHEREAS, the Partnership is an Illinois limited partnership existing
under the Illinois Revised Uniform Limited Partnership Act (the "Act")
pursuant to the Partnership Agreement;
WHEREAS, the General Partner is issuing Series A Preferred Shares (as
defined in the amendment set forth in Section 1 below);
WHEREAS, the General Partner will contribute the net proceeds of the
issuance of the Series A Preferred Shares as a Capital Contribution to the
Partnership;
WHEREAS, Section 4.2.2 of the Partnership Agreement provides as follows:
"The Partnership also may from time to time issue to the General Partner
additional Partnership Units or other Partnership Interests in one or more
classes, or one or more series of any of such classes, with such designations,
preferences and relative, participating, optional or other special rights,
powers and duties, including rights, powers and duties senior to Limited
Partnership Interests, all as shall be determined by the General Partner,
subject to Illinois law, including, without limitation, with respect to (a)
the allocations of items of Partnership income, gain, loss, deduction and
credit to each such class or series of Partnership Interests; (b) the right
of each such class or series of Partnership Interests to share in Partnership
distributions; and (c) the rights of each such class or series of Partnership
Interests upon dissolution and liquidation of the Partnership; provided that
(x) the additional Partnership Interests are issued in connection with an
issuance of shares of the General Partner, which shares have designations,
preferences and other rights, all such that the economic interests are
substantially similar to the designations, preferences and other rights of the
additional Partnership Interests issued to the General Partner in accordance
with this Section 4.2.2, and (y) the General Partner shall make a Capital
Contribution to the Partnership in an amount equal to the proceeds raised in
connection with the issuance of such shares of the General Partner."
WHEREAS, Section 14.1.2.3 of the Partnership Agreement provides that the
General Partner shall have the power, without the consent of the Limited
Partners, to amend the Partnership Agreement "to set forth the rights, powers,
duties, and preferences of the holders of any additional Partnership
Interests issued pursuant to Section 4.2.2 of the Partnership Agreement; and
WHEREAS, the General Partner desires to amend the Partnership Agreement
to set forth the rights, powers, duties, and preferences of the General
Partner as the holder of certain Partnership Interests, and the Partnership
Units corresponding thereto, issued pursuant to Section 4.2.2 of the
Partnership Agreement.
<PAGE>
NOW, THEREFORE, pursuant to the authority contained in Section 14.1.2.3
of the Partnership Agreement, the General Partner hereby amends the
Partnership Agreement as follows:
I. AMENDMENT. Effective at (and subject to the occurrence of) the
Effective Time (as defined in Section 2 below), Section 4.2 of the Partnership
Agreement is hereby amended by adding the following new subsection 4.2.7 at
the end of such Section:
"4.2.7 PARTNERSHIP INTERESTS AND UNITS IN CONNECTION WITH
SERIES A CUMULATIVE CONVERTIBLE REDEEMABLE PREFERRED STOCK.
4.2.7.1 Pursuant to the provisions of, and upon the Capital
Contribution called for by, Section 4.2.2, there are hereby from time to time
issued to the General Partner additional Partnership Interests and,
corresponding thereto, a number of Partnership Units (the "SERIES A PREFERRED
UNITS") equal to the number of shares of Series A Cumulative Convertible
Redeemable Preferred Stock of the General Partner, as classified and
designated by Articles Supplementary (the "ARTICLES SUPPLEMENTARY") filed with
the Maryland State Department of Assessments and Taxation on November 13, 1997
(the "SERIES A PREFERRED SHARES"), from time to time outstanding. The Series
A Preferred Units shall have such designations, preferences and relative,
participating, optional or other special rights, powers and duties, including
rights, powers and duties senior to Limited Partnership Interests, as further
provided in Section 4.2.7.2 and Section 4.2.7.3) below and as shall be
determined by the General Partner, subject to Illinois law, including, without
limitation, with respect to (a) the allocations of items of Partnership
income, gain, loss, deduction and credit, (b) the right to share in Partnership
distributions, and (c) the rights upon dissolution and liquidation of the
Partnership, all such that the economic interests represented by the Series A
Preferred Units are substantially similar to the designations, preferences and
other rights of the Series A Preferred Shares. To the extent necessary to
give effect to the preceding sentence, (i) the Series A Preferred Units shall
have preference over other Partnership Units with respect to distributions of
Available Cash as provided in clause (i) of Section 5.1, and (ii) the General
Partner shall, with respect to the Series A Preferred Units, have priority
over other Partners and Assignees as to profits, losses and distributions as
authorized by Section 8.4; PROVIDED, HOWEVER, that nothing contained in this
Amendment shall be deemed to modify the preferences, rights, powers and
duties of the Class B Units as set forth in the Second Amendment to the
Partnership Agreement, dated as of December 18, 1996.
4.2.7.2 The General Partner shall be entitled to receive
preferential distributions on the Series A Preferred Units corresponding to
the dividends to which holders of the Series A Preferred Shares are entitled.
As set forth in the Articles Supplementary, the dividends to which holders of
Series A Preferred Shares are entitled are as follows (capitalized terms used
in the following subsections (a) through (d) and not defined in this Amendment
are used as defined in the Articles Supplementary):
(a) The holders of Series A Preferred Stock shall be entitled
to receive, when, as and if authorized and declared by the Board out of funds
legally available for that purpose, cumulative dividends payable in cash in an
amount per share equal to the greater of (i) the base dividend of $0.50 per
quarter (the "Base Rate") or (ii) the cash dividends declared on the number of
shares of Common Stock, or portion thereof, into which a share of Series A
Preferred Stock would then be convertible, without regard to any time
restrictions on the convertibility of the Series A Preferred Stock. The amount
referred to in clause (ii) of this paragraph (a) with respect to each
<PAGE>
succeeding Dividend Period shall be determined as of the applicable Dividend
Payment Date by multiplying the number of shares of Common Stock, or portion
thereof calculated to the fourth decimal point, into which a share of Series A
Preferred Stock would then be convertible (without regard to any time
restrictions on the convertibility of the Series A Preferred Stock) at the
opening of business on such Dividend Payment Date (based on the Conversion
Price then in effect) by the aggregate cash dividends payable or paid for such
Dividend Period in respect of a share of Common Stock outstanding as of the
record date for the dividend payable on the Common Stock for such Dividend
Period. If (A) the Corporation pays a cash dividend on the Common Stock after
the Dividend Payment Date for the corresponding Dividend Period and (B) the
dividend on the Series A Preferred Stock for such Dividend Period calculated
pursuant to clause (ii) of this paragraph (a), taking into account the Common
Stock dividend referenced in clause (A), exceeds the dividend previously
declared on the Series A Preferred Stock for such Dividend Period, the
Corporation shall pay an additional dividend to the holders of the Series A
Preferred Stock on the date that the Common Stock dividend referenced in
clause (A) is paid, in an amount equal to the difference between the dividend
calculated pursuant to clause (B) and the dividends previously declared on the
Series A Preferred Stock with respect to such Dividend Period. Such dividends
shall be cumulative from the Issue Date, whether or not in any Dividend Period
or Periods such dividends are declared or there are funds of the Corporation
legally available for the payment of such dividends, and shall be payable
quarterly in arrears on the Dividend Payment Dates, commencing on the first
Dividend Payment Date after the Issue Date. Each such dividend shall be
payable in arrears to the holders of record of the Series A Preferred Stock,
as they appear on the stock records of the Corporation at the close of
business on such record date as is fixed by the Board which shall be not more
than 60 days prior to the corresponding Dividend Payment Date and, within such
60-day period, shall be the same date as the record date for the regular
quarterly dividend payable on the Common Stock for such Dividend Period (or,
if there is no such record date for the Common Stock, then such date as the
Board may fix). Accumulated, accrued and unpaid dividends for any past
Dividend Periods may be authorized or declared and paid at any time, without
reference to any regular Dividend Payment Date, to holders of record on such
record date as may be fixed by the Board which shall be not more than 45 days
prior to the corresponding payment date.
(b) The amount of dividends payable per share of Series A
Preferred Stock for the Initial Dividend Period, or any other period shorter
than a full Dividend Period, shall be computed ratably on the basis of a 360-
day year of twelve 30-day months. Holders of Series A Preferred Stock shall
not be entitled to any dividends, whether payable in cash, property or stock,
in excess of cumulative dividends as herein provided on the Series A Preferred
Stock. No interest, or sum of money in lieu of interest, shall be payable in
respect of any dividend payment or payments on the Series A Preferred Stock
which may be in arrears.
(c) So long as any of the Series A Preferred Stock is
outstanding, except as described in the immediately following sentence, no
dividends shall be declared or paid or set apart for payment by the
Corporation and no other distribution of cash or other property shall be
declared or made directly or indirectly by the Corporation with respect to
any class or series of Parity Stock for any period unless all accumulated,
accrued and unpaid dividends have been or contemporaneously are declared and
paid or declared and a sum sufficient for the payment thereof set apart for
payment for all past Dividend Periods with respect to the Series A Preferred
Stock. When dividends are not paid in full or a sum sufficient for such
payment is not set apart for payment as provided above, all dividends declared
<PAGE>
on the Series A Preferred Stock and all dividends declared on any other class
or series of Parity Stock shall be declared ratably in proportion to the
respective amounts of dividends accumulated, accrued and unpaid on the Series
A Preferred Stock and on such Parity Stock.
(d) So long as any of the Series A Preferred Stock is
outstanding, no dividends (other than dividends or distributions paid in, or
options, warrants or rights to subscribe for or purchase, Junior Stock) shall
be declared or paid or set apart for payment by the Corporation and no other
distribution of cash or other property shall be declared or made directly or
indirectly by the Corporation with respect to any class or series of Junior
Stock, nor shall any Junior Stock be redeemed, purchased or otherwise acquired
(other than a redemption, purchase or other acquisition of Common Stock made
for purposes of an employee incentive or benefit plan of the Corporation or
any subsidiary) for any consideration (or any moneys be paid to or made
available for a sinking fund for the redemption of any Junior Stock) directly
or indirectly by the Corporation (except by conversion into or exchange for
Junior Stock), nor shall any other cash or other property otherwise be paid or
distributed to or for the benefit of any holder of Junior Stock in respect
thereof directly or indirectly by the Corporation unless in each case (i) all
dividends (including all accumulated, accrued and unpaid dividends) have been
or contemporaneously are declared and paid or declared and a sum sufficient
for the payment thereof set apart for payment for all past Dividend Periods
with respect to the Series A Preferred Stock and all past dividend periods
with respect to any Parity Stock and (ii) a sum sufficient for the payment
thereof has been or contemporaneously is paid or set apart for payment of the
dividend for the current Dividend Period with respect to the Series A
Preferred Stock and the current dividend period with respect to any Parity
Stock.
4.2.7.3 Upon any liquidation, dissolution or winding up of the
Partnership, whether voluntary or involuntary, the General Partner shall be
entitled to receive preferential distributions with respect to the Series A
Preferred Units corresponding to the liquidation preference to which holders
of the Series A Preferred Shares are entitled upon any liquidation,
dissolution or winding up of the General Partner. As set forth in the
Articles Supplementary, the liquidation preference to which holders of Series
A Preferred Shares are entitled is as follows (capitalized terms used in the
following subsections (a) and (b) and not defined in this Amendment are used
as defined in the Articles Supplementary.):
(a) Upon any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, before any payment or
distribution of the assets of the Corporation (whether capital or surplus)
shall be made to or set apart for the holders of Junior Stock, the holders of
Series A Preferred Stock shall be entitled to receive $33.34 per share of
Series A Preferred Stock (the "Liquidation Preference"), plus an amount equal
to all dividends (whether or not earned or declared) accumulated, accrued and
unpaid thereon to the date of final distribution to such holders, if any; but
such holders shall not be entitled to any further payment. Until the holders
of the Series A Preferred Stock have been paid the Liquidation Preference in
full, plus an amount equal to all dividends (whether or not earned or declared)
accumulated, accrued and unpaid thereon to the date of final distribution to
such holders, no payment shall be made to any holder of Junior Stock upon any
liquidation, dissolution or winding up of the Corporation. If, upon any
liquidation, dissolution or winding up of the Corporation, the assets of the
Corporation, or the proceeds thereof, distributable among the holders of
Series A Preferred Stock are insufficient to pay in full such preferential
amount and liquidating payments on any other class or series of Parity Stock,
<PAGE>
then such assets, or the proceeds thereof, shall be distributed among the
holders of Series A Preferred Stock and any such other Parity Stock ratably
in proportion to the respective amounts which would be payable on such Series
A Preferred Stock and any such other Parity Stock if all amounts payable
thereon were paid in full.
(b) Upon any liquidation, dissolution or winding up of the
Corporation, after payment has been made in full to the holders of Series A
Preferred Stock and any Parity Stock as provided in this Section 4.2.7.3, any
other series or class of Junior Stock shall, subject to the respective terms
thereof, be entitled to receive any and all assets remaining to be paid or
distributed, and the holders of the Series A Preferred Stock and any Parity
Stock shall not be entitled to share therein.
(c) For purposes of this Section 4.2.7.3, (i) a consolidation
or merger of the Corporation with or into one or more corporations, (ii) a
sale or transfer of all or substantially all of the Corporation's assets or
(iii) a statutory share exchange shall not be deemed to be a liquidation,
dissolution or winding up, voluntary or involuntary, of the Corporation.
2. EFFECTIVENESS. The amendment set forth in Section 1 shall become
effective at the time of the first issuance of Series A Preferred Shares (the
"Effective Time").
3. CONTINUING EFFECTIVENESS. As herein amended, the Partnership
Agreement shall remain in full force and effect and is hereby ratified and
confirmed in all respects.
4. GOVERNING LAW. This Amendment shall be governed by the internal laws
of the State of Illinois.
5. DEFINED TERMS. Capitalized terms used and not defined herein are
used as defined in the Partnership Agreement.
IN WITNESS WHEREOF, the undersigned, the General Partner of the
Partnership, has executed this Amendment to the Partnership Agreement as of
the date written above.
URBAN SHOPPING CENTERS, INC.
By: /s/ Michael Hilborn
----------------------------------
Michael Hilborn
Senior Vice President
<PAGE>
ACCOUNTANTS' CONSENT
--------------------
The Board of Directors and Shareholders
Urban Shopping Centers, Inc.:
We consent to incorporation by reference in the registration
statements No. 333-35909 (Form S-8), No. 333-86778 (Form S-8),
No. 333-96388 (Form S-8)and No. 333-35911 (Form S-3) of Urban
Shopping Centers, Inc. of our report dated December 12, 1997,
relating to the Combined Statement of Operations of Fox Valley
Center and Hawthorn Center for the year ended December 31, 1996,
which report appears in the December 19, 1997, Form 8-K/A
Amendment No. 1 of Urban Shopping Centers, Inc.
KPMG PEAT MARWICK LLP
Chicago, Illinois
December 19, 1997
