<PAGE>
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 10-Q
Gentlemen:
Transmitted, for the above-captioned registrant is the electronically filed
executed copy of registrant's current report on Form 10-Q for the quarter
ended March 31, 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/gd
Enclosures
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarter Commission file number 1-12278
ended March 31, 1997
URBAN SHOPPING CENTERS, INC.
(Exact name of registrant as specified in its charter)
Maryland 36-3886885
(State of incorporation) (I.R.S. Employer
Identification No.)
900 North Michigan Avenue, Suite 1500,
Chicago, Illinois 60611
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (312) 915-2000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
----- -----
The number of shares of Common Stock and Unit Voting Common Stock, $.01 par
value, outstanding on May 2, 1997 were 16,969,162 and 340,511, respectively.
<PAGE>
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 18
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 27
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
URBAN SHOPPING CENTERS, INC.
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1997 AND DECEMBER 31, 1996
(UNAUDITED)
($000's omitted, except share amounts)
ASSETS
------
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
-------------- --------------
<S> <C> <C>
Investment properties:
Land, including peripheral land parcels $ 102,559 $ 102,559
Buildings and improvements 840,043 766,847
Equipment, furniture and fixtures 3,018 2,560
Construction in progress 9,098 62,216
-------------- --------------
954,718 934,182
Accumulated depreciation (103,888) (97,558)
-------------- --------------
Investment properties, net of accumulated
depreciation 850,830 836,624
Investments in unconsolidated
partnerships 15,983 15,233
Investment in the Management Company 15,245 15,557
Cash, cash equivalents and short-term
investments 4,886 5,276
Interest, rents and other receivables 21,541 19,926
Deferred expenses and other assets 12,611 11,460
-------------- --------------
$ 921,096 $ 904,076
============== ==============
<PAGE>
URBAN SHOPPING CENTERS, INC.
CONSOLIDATED BALANCE SHEETS - CONTINUED
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
MARCH 31, DECEMBER 31,
1997 1996
-------------- --------------
Liabilities:
Mortgage notes payable $ 447,180 $ 439,886
Land sale-leaseback proceeds 75,000 75,000
Deferred lease accrual 16,837 16,252
Accounts payable and other liabilities 41,030 30,512
Investments in unconsolidated
partnerships 38,242 36,030
Commitments and contingencies
-------------- --------------
Total liabilities 618,289 597,680
Minority interest 109,491 111,733
Stockholders' equity:
Common stock, $.01 par value, authorized
140,000,000 shares, issued and
outstanding 16,969,162 shares in 1997
and 16,737,279 shares in 1996 169 167
Unit voting stock, $.01 par value,
authorized 5,000,000 shares, issued and
outstanding 340,511 shares in 1997 and
344,057 shares in 1996 4 4
Additional paid-in capital 330,179 326,495
Retained earnings (deficit) (137,036) (132,003)
-------------- --------------
Total stockholders' equity 193,316 194,663
-------------- --------------
$ 921,096 $ 904,076
============== ==============
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
URBAN SHOPPING CENTERS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED)
($000's omitted, except share amounts)
<CAPTION>
1997 1996
-------------- --------------
<S> <C> <C>
Revenues:
Shopping center revenues:
Minimum rents $ 21,474 $ 14,996
Percentage rents 968 730
Recoveries from tenants 10,312 6,790
Other 578 245
-------------- --------------
33,332 22,761
Interest income 386 422
-------------- --------------
33,718 23,183
-------------- --------------
Expenses:
Shopping center expenses 11,905 8,228
Mortgage and other interest 6,997 3,452
Ground rent 1,216 1,106
Depreciation and amortization 7,159 5,169
General and administrative 958 910
Write-off of assets 21 38
-------------- --------------
28,256 18,903
-------------- --------------
<PAGE>
URBAN SHOPPING CENTERS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS - CONTINUED
1997 1996
-------------- --------------
Operating income 5,462 4,280
Income from unconsolidated partnerships 910 288
Income (loss) from the Management Company (150) 298
-------------- --------------
Income before minority interest and
extraordinary item 6,222 4,866
Minority interest (2,400) (1,739)
-------------- --------------
Income before extraordinary item 3,822 3,127
Extraordinary item from unconsolidated
partnership (net of minority interest) (88) --
-------------- --------------
Net income $ 3,734 $ 3,127
============== ==============
Income per common and unit voting common
share:
Before extraordinary item $ .22 $ .23
Extraordinary item -- --
-------------- --------------
Net income $ .22 $ .23
============== ==============
Weighted average common and unit voting
common shares outstanding 17,218,782 13,742,259
============== ==============
Dividends declared and paid $ .5075 $ .4950
============== ==============
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
URBAN SHOPPING CENTERS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED)
($000's omitted, except share amounts)
1997 1996
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 3,734 $ 3,127
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 7,159 5,169
Write-off of assets 21 38
Provision for losses on accounts
receivable 247 312
Income from unconsolidated partnerships (910) (288)
Loss from the Management Company 150 --
Minority interest 2,400 1,739
Deferred lease accrual 585 585
Extraordinary item 88 --
Other, net (281) (124)
Other changes in assets and liabilities:
Interest, rents and other receivables (1,556) 193
Deferred expenses and other assets 41 233
Accounts payable and other liabilities 6,890 2,029
-------------- --------------
Net cash provided by operating
activities 18,568 13,013
-------------- --------------
Cash flows from investing activities:
Additions to investment properties,
net of change in related payables (18,821) (9,117)
Cash contributions to unconsolidated
partnerships and the Management Company (480) (221)
Cash distributions from unconsolidated
partnerships and the Management Company 2,798 3,528
Other, net (36) (104)
-------------- --------------
Net cash used in investing activities (16,539) (5,914)
-------------- --------------
<PAGE>
URBAN SHOPPING CENTERS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
1997 1996
-------------- --------------
Cash flows from financing activities:
Proceeds from issuance of debt,
net of issuance costs 27,316 --
Proceeds from issuance of Common Stock
under option plan 3,273 --
Repayment of debt (20,050) --
Cash distributions to common unitholders (3,702) (3,650)
Cash distributions to preferred
unitholders (490) --
Dividends paid (8,767) (6,802)
-------------- --------------
Net cash used in financing activities (2,420) (10,452)
-------------- --------------
Net decrease in cash and cash equivalents (391) (3,353)
Cash and cash equivalents at beginning
of period 5,151 7,866
-------------- --------------
Cash and cash equivalents at end of period $ 4,760 $ 4,513
============== ==============
Supplemental disclosure of cash flow
information:
Cash paid for mortgage and other interest,
net of amounts capitalized $ 6,648 $ 3,341
============== ==============
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
URBAN SHOPPING CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997 AND 1996
(UNAUDITED)
($000's omitted, except share amounts)
Readers of this quarterly report should refer to the Company's audited
financial statements for the year ended December 31, 1996, which are
incorporated by reference in the Company's 1996 annual report on Form 10-K,
as certain disclosures which would substantially duplicate those contained
in such audited financial statements have been omitted from this report.
(1) BASIS OF PRESENTATION
In the opinion of management, all adjustments (consisting solely of normal
recurring adjustments) necessary for a fair presentation of the consolidated
financial statements have been included. The results for the interim periods
ended March 31, 1997 and 1996 are not necessarily indicative of the results to
be obtained for the full fiscal year.
The accompanying consolidated financial statements include the accounts of
the Company, Urban Shopping Centers, L.P. (the "Operating Partnership") and
all controlled affiliates. The effect of all significant intercompany
balances and transactions have been eliminated in the consolidated
presentation.
The equity method of accounting has been applied in the accompanying
consolidated financial statements with respect to the Company's interest in
Water Tower Joint Venture ("Water Tower Place"), Coral-CS/LTD Associates
("Coral Square Mall"), West Dade County Associates ("Miami International
Mall"), Valencia Town Center Associates, L.P. ("Valencia Town Center"),
Citrus Park Venture and Urban Retail Properties Co. (the "Management
Company").
Certain amounts in the 1996 financial statements have been reclassified to
conform with the 1997 presentation.
Development costs, including interest and real estate taxes incurred in
connection with construction or expansion of certain investment properties,
are capitalized as a cost of the investment property and depreciated over
the estimated useful life of the related asset. During the three months
ended March 31, 1997 and 1996, the Company incurred interest of $7,964 and
$3,982, respectively, and capitalized interest of $967 and $530, respectively.
Cash and cash equivalents (which aggregated $4,760 and $5,151 at March 31,
1997 and December 31, 1996, respectively) include a treasury money market fund
which invests principally in U.S. Treasury notes and bills ($1,039 and $2,928
at March 31, 1997 and December 31, 1996, respectively). Other short-term
investments (generally with original maturities of one year or less) are
generally held to maturity and aggregated $126 and $125 at March 31, 1997 and
December 31, 1996, respectively. Cash equivalents and other short-term
investments are held at cost which approximates market.
<PAGE>
URBAN SHOPPING CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)
($000's omitted, except share amounts)
(2) ACQUISITIONS
(a) San Francisco Shopping Centre
The Company has reached an agreement in principle with an unaffiliated
third party to acquire a preferred 50% interest in San Francisco Shopping
Centre ("San Francisco Centre") for approximately $31,400 in cash.
Concurrent with the transaction, a new first mortgage loan of
approximately $73,600 will be placed on the property. The transaction is
structured so that the Company will acquire the remaining interest in the
property after approximately eight years. The Management Company will assume
leasing and management responsibilities at the property at closing. Subject
to completion of customary due diligence review and other customary closing
conditions, the acquisition is expected to close during the second quarter.
San Francisco Centre, completed in 1989, is a vertical shopping center
located in downtown San Francisco. San Francisco Centre contains
approximately 500,000 square feet of retail space and is anchored by a
312,000 square foot Nordstrom department store. The center also contains
more than 180,000 square feet of mall GLA (or approximately 80 specialty
retailers and restaurants).
(b) Copley Place
The Company has reached an agreement in principle with JMB Realty for the
purchase of a one-third equity interest in Copley Place in a transaction
valued at $42,333 to be paid through the issuance of 1,282,828 units of
partnership interest in the Operating Partnership. The remaining interest is
owned by an unaffiliated third party. The property will continue to use the
Management Company's management and leasing services. Subject to completion
of customary due diligence review and other customary closing conditions, and
subject to the approval of the Company's Board of Directors, the acquisition
is expected to close during the third quarter. Copley Place, completed in
1984, is a mixed use property containing 369,000 leasable square feet of
retail space in a two-level mall, four office towers aggregating 842,000 of
rentable square feet of office space on seven levels rising above the mall, a
three-level, 980-space, below grade parking garage and a two-level, 695-space
parking garage located adjacent to the property. The property is located in
the Back Bay section of Boston, Massachusetts. The retail area includes a
108,000 square foot Neiman Marcus store and approximately 110 specialty
retailers and an eleven-screen movie theatre.
(3) INVESTMENTS IN UNCONSOLIDATED PARTNERSHIPS
The accompanying consolidated financial statements include investments in
certain partnerships in which the Company does not own a controlling interest.
These investments are reported using the equity method. To the extent the
Company's investment basis differs from its share of the capital of an
unconsolidated partnership, such difference is amortized over the depreciable
lives of the unconsolidated partnership's investment assets. Investments in
unconsolidated partnerships consist of the following:
<PAGE>
URBAN SHOPPING CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)
($000's omitted, except share amounts)
(3) INVESTMENTS IN UNCONSOLIDATED PARTNERSHIPS (CONTINUED)
Name Property Company's Ownership
- -------------------------- ------------------------ -------------------
Water Tower Joint Venture Water Tower Place, 55% (a)
Chicago, IL
Coral-CS/LTD Associates Coral Square Mall, 50%
Coral Springs, FL
West Dade County Miami International Mall, 40% (b)
Associates Miami, FL
Valencia Town Center Valencia Town Center, 25% (c)
Associates, L.P. Valencia, CA
Citrus Park Venture Tampa, FL 50% (d)
(a) The Company owns a 55% interest in a retail property (Water Tower Place)
through its investment in Water Tower Joint Venture ("WTJV"). All major
decisions concerning the retail property require the approval of both partners
of WTJV and thus the Company does not control the partnership. On February 10,
1997, the Company refinanced the Water Tower Place $170,000 of indebtedness.
The new loan matures on February 1, 1999; however, it may be extended for two
one-year periods. Of the total $170,000, $160,000 bears interest at LIBOR
+1.125% and $10,000 bears interest at LIBOR +1.500%.
(b) Effective April 1, 1996, JMB/Miami International Associates (an
unconsolidated partnership) distributed its interest in West Dade County
Associates ("West Dade") to its partners (the Operating Partnership and two
affiliates of JMB Realty). Effective April 1, 1996, the Operating Partnership
purchased an approximate 18% interest in West Dade from one of the JMB Realty
affiliates for $9,431 in cash and the assumption of the seller's pro rata
share of all liabilities of West Dade. The remaining interests owned by the
JMB Realty affiliates were sold to the outside partner in West Dade for $5,375
in cash and the assumption of the sellers' pro rata share of all liabilities
of West Dade. Subsequent to these transactions, the Operating Partnership
owns a 40% interest in West Dade and the outside partner owns the remaining
60% interest.
(c) The outside partner has a right to all cash distributions until it has
received a return on and of its contributions to the partnership (as set forth
in the partnership agreement).
(d) On June 23, 1995, the Company acquired a 50% interest in Citrus Park
Venture (a development parcel). The Management Company currently owns the
remaining 50% interest in Citrus Park Venture, subject to a purchase option
in favor of the Company. In addition, a bond offering of $26,700 to fund the
roadwork surrounding the property was completed by the Citrus Park Community
Development District (the "CDD") during the fourth quarter of 1996. The
Operating Partnership assisted the CDD in obtaining the financing for the
roadwork by guaranteeing the irrevocable letter of credit (aggregating
$27,050) which supports the bonds.
<PAGE>
<TABLE>
URBAN SHOPPING CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)
($000's omitted, except share amounts)
(3) INVESTMENTS IN UNCONSOLIDATED PARTNERSHIPS (CONTINUED)
Summarized financial information for the unconsolidated partnerships is
presented below.
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
-------------- --------------
<S> <C> <C>
Assets:
Investment properties, net $ 292,506 $ 292,829
Other assets 27,805 29,190
-------------- --------------
Less liabilities:
Mortgage notes payable 310,680 310,800
Other liabilities 16,990 16,484
-------------- --------------
Total deficit (7,359) (5,265)
Less: Outside partners' capital 14,900 15,532
-------------- --------------
Total investments in unconsolidated
partnerships $ (22,259) $ (20,797)
============== ==============
Total investments in unconsolidated
partnerships are presented in the
accompanying consolidated balance
sheets as follows:
Assets - Investments in unconsolidated
partnerships $ 15,983 $ 15,233
Liabilities - Investments in
unconsolidated partnerships 38,242 36,030
-------------- --------------
$ (22,259) $ (20,797)
============== ==============
</TABLE>
<PAGE>
<TABLE>
URBAN SHOPPING CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)
($000's omitted, except share amounts)
(3) INVESTMENTS IN UNCONSOLIDATED PARTNERSHIPS (CONTINUED)
Summarized financial information for the unconsolidated partnerships -
continued
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------------------
1997 1996
-------------- --------------
<S> <C> <C>
Revenues:
Shopping centers $ 19,974 $ 19,521
Interest income 122 45
Expenses:
Shopping centers (9,019) (8,806)
Mortgage and other interest and ground
rent (5,959) (6,309)
Depreciation and amortization (2,777) (2,872)
-------------- --------------
Income before extraordinary item 2,341 1,579
Extraordinary item (228) --
-------------- --------------
Net income $ 2,113 $ 1,579
============== ==============
Company's share of:
Mortgage and other interest and ground
rent $ (2,534) $ (2,578)
Depreciation and amortization (1,156) (1,095)
Income before extraordinary item 910 288
============== ==============
</TABLE>
<PAGE>
<TABLE>
URBAN SHOPPING CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)
($000's omitted, except share amounts)
(4) INVESTMENT IN THE MANAGEMENT COMPANY
The Company's consolidated financial statements present its investment in
the Management Company under the equity method of accounting.
Summarized financial information for the Management Company is presented
below.
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
-------------- --------------
<S> <C> <C>
Assets:
Investments in land parcels (a) $ 35,674 $ 38,391
Cash, cash equivalents and short-term
investments 1,987 5,443
Receivables and deferred expenses 11,540 11,346
-------------- --------------
$ 49,201 $ 55,180
============== ==============
Liabilities:
Notes payable (b) $ 70,000 $ 70,000
Accounts payable and other liabilities 2,488 5,095
-------------- --------------
72,488 75,095
Owners' deficit (23,287) (19,915)
-------------- --------------
$ 49,201 $ 55,180
============== ==============
</TABLE>
<PAGE>
<TABLE>
URBAN SHOPPING CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)
($000's omitted, except share amounts)
(4) INVESTMENT IN THE MANAGEMENT COMPANY (CONTINUED)
Summarized financial information for the Management Company - continued
THREE MONTHS ENDED
MARCH 31,
----------------------------------
1997 1996
-------------- --------------
<S> <C> <C>
Revenues $ 8,762 $ 9,836
-------------- --------------
Expenses:
Management, leasing and development
services 7,459 7,827
Mortgage and other interest 1,424 1,267
Land parcels -- 251
Depreciation and amortization 104 103
-------------- --------------
8,987 9,448
Operating income (loss) (225) 388
Income tax benefit (provision) 78 (242)
-------------- --------------
Net income (loss) $ (147) $ 146
============== ==============
</TABLE>
<PAGE>
URBAN SHOPPING CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)
($000's omitted, except share amounts)
(4) INVESTMENT IN THE MANAGEMENT COMPANY (CONTINUED)
(a) Includes 50% of the outstanding mortgage loan of an affiliated joint
venture. The mortgage loan, with a 50% face value of $25,750, was acquired
for $19,312 resulting in a discount of $6,438. The loan bears interest at a
variable rate based on market interest rates (as defined) and is secured by
the affiliated joint venture's interest in a land parcel located in Chicago,
IL. Interest is recorded for financial reporting purposes when received.
Accordingly, accretion of the discount has also not been recorded.
(b) Includes $51,000 of indebtedness secured by the Management Company's
interest in certain management contracts and a guarantee secured by Penn
Square Mall Limited Partnership (a consolidated venture) which is secured
by Penn Square Mall. The $51,000 bears interest at 7.54% per annum and
matures on August 1, 2001. Also includes $9,000 of indebtedness owed to
affiliates of JMB Realty which bore no interest through the original maturity
of May 20, 1996, at which time it was extended to September 1, 2001, at an
interest rate of 7.0%. The effective interest rate on the aggregate $60,000
of indebtedness is 7.46% through September 1, 2001. The Management Company
also is indebted under a $10,000 note payable to the Company. Such note bears
interest at 12% per annum and matures on September 1, 2001.
The Management Company provides management, leasing and
development services to certain of the Company's consolidated and
unconsolidated investment properties, to affiliated entities and to third
parties. During 1995, management contracts for six of the Company's
consolidated investment properties were terminated and new management
contracts were entered into with the Operating Partnership. In connection
therewith, the Operating Partnership entered into a service agreement with
the Management Company to provide supervisory services by Management Company
personnel at 105% of the Management Company's cost thereof. In the three
months ended March 31, 1997 and 1996, the Management Company received such
reimbursements from the Operating Partnership of approximately $192 and $206,
respectively. In the three months ended March 31, 1997 and 1996, management,
leasing and development revenues of approximately $2,260 and $2,671,
respectively, resulted from services provided to affiliated entities. In
addition, the Management Company received reimbursements (at cost) of payroll
and other operating expenses from affiliated entities for activities performed
on such affiliated entities' behalf. Such reimbursements were approximately
$4,015 and $4,309 during the three months ended March 31, 1997 and 1996,
respectively. Additionally, rent expense, including building expenses, paid
by the Management Company to affiliates of JMB Realty in the three months
ended March 31, 1997 and 1996 were $195 and $223, respectively.
The Company has options to purchase certain development parcels from the
Management Company at the lower of fair market value or 110% of allocable cost
(all terms as defined) until October 2000. In addition, the sale or
development of any development parcels by the Management Company is subject to
a right of first offer in favor of the Company on the same conditions as
described above.
<PAGE>
URBAN SHOPPING CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)
($000's omitted, except share amounts)
(5) TRANSACTIONS WITH AFFILIATES (not disclosed elsewhere)
Costs and expenses for services provided by the Management Company to the
Company's investment properties, including the Company's share of
unconsolidated investment properties, were as follows:
THREE MONTHS ENDED
MARCH 31,
-----------------------
1997 1996
--------- --------
Property management and leasing services (a) $ 335 $ 342
Development services 423 278
--------- --------
$ 758 $ 620
========= ========
(a) Management Services of $448 and $352 for the three months ended March
31, 1997 and 1996, respectively, provided by the Operating Partnership to
certain consolidated investment properties have been eliminated in
consolidation.
The Company has purchase options, until October 2000, with respect to
interests in certain improved retail properties in which JMB Partners have an
interest. In addition, these interests may not be sold by JMB Partners
without first offering such interests to the Company at the lower of the
option price or the then fair market value of such property. The Company
also has options to purchase certain retail development land parcels from JMB
Partners at the lower of fair market value or 110% of allocable cost (all
terms as defined) until October 2000. In addition, the sale or development
of any development parcels by JMB Partners is subject to a right of first
offer in favor of the Company on the same conditions as described above.
The Company has recently agreed to purchase the Management Company's 50%
interest in Citrus Park Venture (a 162 acres of land for development of Citrus
Park Town Center) and JMB Partners' 100% interest in 68 acres of land adjacent
to the mall for an aggregate purchase price of $11,250 plus the reimbursement
of certain development costs. The purchase, still subject to approval by the
Company's Board of Directors, will be funded by a combination of cash and/or
the issuance of Common Stock at $32.375 per share.
(6) SUBSEQUENT EVENT
Subsequent to the end of the first quarter of 1997, the shareholders'
approved the Company's 1996 Incentive Unit Program (the "Program") which
provides for the award of up to 525,000 Incentive Units to officers and key
employees of the Company and the Management Company. Incentive Units may be
earned 25% in each of calendar years 1996 through 1999 subject to the Company
achieving annual and cumulative performance targets in its funds available for
distribution for each year. The determination of whether the performance
target for any year has been achieved is to be made not later than March 31 of
the following year (the "Determination Date"). Awards are subject to vesting
over a three-year period following the Determination Date. Awards for 525,000
Incentive Units were granted in 1996, of which 131,250 were earned for 1996
based upon achievement of the performance target and shareholder approval of
the Program.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
FINANCIAL CONDITION. Net cash flows from operating activities increased
$5.6 million in the three months ended March 31, 1997 from the three months
ended March 31, 1996. This increase was primarily attributable to an increase
in rental operations as discussed below and the receipt of prepaid rents
(included in accounts payable and other liabilities in the accompanying
consolidated balance sheets) primarily at Oakbrook Center and Old Orchard.
Net cash flows used in investing activities increased $10.6 million in the
three months ended March 31, 1997 from the three months ended March 31, 1996.
This increase was primarily attributable to an increase in additions to
investment properties due to the increase in construction activity at
Wolfchase Galleria in 1997 and a decrease in cash distributions from the
Management Company.
Net cash flows used in financing activities decreased $8.0 million in the
three months ended March 31, 1997 from the three months ended March 31, 1996.
This decrease was primarily attributable to (i) additional net fundings in
1997 from the Company's line of credit and the construction loan at Wolfchase
Galleria and (ii) the issuance of Common Stock related to the exercise of
employee stock options. These decreases were partially offset by an increase
in dividends paid as a result of the additional shares of Common Stock issued
in connection with the Company's public offering completed in December of 1996.
At March 31, 1997, the Company and its consolidated ventures had cash, cash
equivalents and short-term investments of approximately $4.9 million. Such
funds are available for working capital requirements, recurring capital
expenditures, dividends and distributions to shareholders and limited partners
of the Operating Partnership, respectively, and future acquisitions,
expansions, renovations and developments.
On March 14, 1997, the Company paid $8.8 million to shareholders as a
dividend of $.5075 per share representing its fourth quarter 1996 dividend.
On March 14, 1997, the Operating Partnership paid $3.7 million to its limited
partners as a distribution of $.5075 per Unit representing its fourth quarter
1996 distribution.
CAPITALIZATION. At March 31, 1997, the Company's debt (including the
Company's share of debt of unconsolidated partnerships and the Management
Company) totaled $643.3 million of which $562.1 million is fixed rate debt
(including debt fixed through interest rate swap agreements) and $81.2 million
is floating rate debt. On December 18, 1996, the Company acquired Old Orchard
subject to $159.8 million in property debt. On November 6, 1996, the Company
entered into an agreement with a lender for a one year $5.0 million unsecured
revolving line of credit. As of March 31, 1997, $1.6 million was outstanding
on this line of credit. On May 29, 1996, the Company executed a construction
loan commitment with a lender in the amount of $65.0 million to finance the
remaining construction costs at Wolfchase Galleria. The loan was initially
funded in May 1996 and matures on May 29, 1998; however, it may be extended
for three one-year periods. As of March 31, 1997, $41.8 million had been
funded. On July 26, 1995, the Company signed an agreement with a group of
lenders for the establishment of a $90.0 million secured, revolving line of
credit ("Line"). As of March 31, 1997, $24.3 million was outstanding. On
February 10, 1997, the Company refinanced the Water Tower Place $170.0 million
of indebtedness. The new loan matures on February 1, 1999; however, it may be
extended for two one-year periods. Of the total $170.0 million, $160.0
million bears interest at LIBOR + 1.125% and $10.0 million bears interest at
LIBOR + 1.500%. During February of 1997, the Company entered into three
separate unsecured five year interest rate swap agreements for an aggregate
<PAGE>
amount of $50.0 million in order to hedge exposure on a portion of its
floating rate indebtedness.
Although there can be no assurances, the Company believes that operating
cash flows will be sufficient to service all Company debt and anticipates
repayment or refinancing when such amounts are due in the ordinary course of
its business. At March 31, 1997, the Company's ratio of Company debt to total
market capitalization (which includes the market value of issued and
outstanding shares of capital stock of the Company and of partnership
interests in the Operating Partnership not held by the Company, plus Company
debt) was approximately 46%, as illustrated by the table at the end of
liquidity and capital resources. The debt to total market capitalization
ratio is based upon the market value of the Common Stock and indebtedness of
the Company and, accordingly, will fluctuate with changes in the value of the
Common Stock (and the issuance of additional shares of Common Stock, or other
forms of capital, if any, and the amount of outstanding indebtedness).
On November 25, 1996, the Company completed an offering of 3,000,000 shares
of Common Stock under a shelf registration declared effective by the
Securities and Exchange Commission on April 22, 1996 (for up to $200.0
million). On December 12, 1996, an overallotment option was exercised for an
additional 225,000 shares of Common Stock. Net proceeds from the sale of
these shares, after underwriter's discount, was $80.6 million. The net
proceeds after deducting transaction costs were used to fund a portion of the
December 18, 1996 acquisition of Old Orchard and to reduce outstanding
borrowings under the Company's Line. The remaining balance outstanding on the
shelf registration is $119.4 million.
The Company believes that its cash generated from property operations will
provide the necessary funds on a short-term and long-term basis for its
operating expenses, interest expenses on outstanding indebtedness and
recurring capital expenditures and all dividends to the shareholders necessary
to satisfy the REIT requirements. Sources of capital for future acquisitions,
development and non-recurring capital expenditures, such as major building
renovations and expansions, as well as for scheduled principal payments,
including balloon payments, on the outstanding indebtedness are expected to be
obtained from the following sources: (i) excess funds available for
distribution, (ii) working capital reserves, (iii) additional Company or
property financing, (iv) proceeds from the sale of assets, including
outparcels and (v) additional equity raised in the public or private markets
(including the issuance of additional Units and/or Unit Voting Stock).
Accordingly, the Company expects that it may incur additional indebtedness.
In light of current economic conditions, relative costs of debt and equity
capital, market values of properties, growth and acquisition opportunities and
other factors, the Company may consider an increase or decrease in its ratio
of Company debt to total market capitalization accordingly.
CAPITAL INVESTMENTS. On December 18, 1996, the Company acquired Old
Orchard for $78.6 million in cash prior to prorations and the issuance of
$28.0 million in preferred units in the Operating Partnership, subject to
$159.8 million of existing indebtedness. In connection with the issuance of
the preferred units, the Company issued $1.1 million in Unit Voting Stock.
Old Orchard is an open air regional shopping center located in Skokie,
Illinois. Old Orchard contains 1.7 million square feet of retail space and is
anchored by Bloomingdale's, Lord & Taylor, Marshall Field's, Nordstrom and
Saks Fifth Avenue. In addition, Old Orchard contains approximately 120 other
stores, theaters and restaurants. Old Orchard includes approximately 675,000
square feet of mall GLA and contains parking for over 7,500 vehicles and
approximately 60,000 square feet of office space.
The Company's newest super-regional mall, Wolfchase Galleria, in Memphis,
opened on February 26, 1997. The anchor tenants are Dillard's, Goldsmiths's
(a division of Federated Department Stores, Inc.), JCPenney and Sears.
Wolfchase Galleria also contains approximately 120 retailers, restaurants, a
food court, a major entertainment complex and approximately 5,450 parking
<PAGE>
spaces. Wolfchase Galleria was approximately 94% leased at opening. The
Company has also sold four outparcels at Wolfchase Galleria that add to the
mall's overall appeal to shoppers in the Memphis retail market. As of March
31, 1997, net proceeds from the sale of these outparcels totaled $4.7 million.
The Company also signed an agreement with Bed Bath and Beyond to lease a
building that the Company constructed under a build to suit lease on an
outparcel and which opened on September 3, 1996. There are approximately 29
acres of outparcel land remaining at Wolfchase Galleria for future sale or
development. Costs of $87.6 million have been incurred as of March 31, 1997,
for the acquisition and subsequent development of these land parcels, of
which $10.0 million is included in land and the remainder is included in
building and improvements and construction in progress in the accompanying
consolidated balance sheets.
The Company's next planned development project after Wolfchase Galleria is
the 1.2 million square foot Citrus Park Town Center ("Citrus Park") in Tampa,
Florida. Burdines, Dillard's, JCPenney and Sears have agreed to be anchor
stores for the project. Citrus Park has broken ground and construction is
proceeding on schedule for a opening in March of 1999. In addition, a 450,000
square foot community center opposite the regional mall, Citrus Park Plaza, is
scheduled to open in the fall of 1998. Currently, the Company owns a 50%
interest in the 163 acre development parcel. The Management Company owns the
remaining 50% interest, subject to a purchase option in favor of the Company.
The Company also has a purchase option from an affiliate of JMB Realty on 68
acres of land across the street from the regional mall which will be used for
development of the community center. In addition, a bond offering of $26.7
million to fund the roadwork surrounding the property was completed by the
Citrus Park Community Development District (the "CDD") during the fourth
quarter of 1996. The Operating Partnership assisted the CDD in obtaining the
financing for the roadwork by guaranteeing the irrevocable letter of credit
aggregating $27.1 million which supports the bonds.
Certain statements set forth herein contain forward-looking statements,
including, without limitation, statements relating to the timing and
anticipated capital expenditures of the Company's development programs.
Although the Company believes that the expectations reflected in such forward-
looking statements are based on reasonable assumptions, the actual results may
differ materially from that set forth in the forward-looking statements.
Certain factors that might cause such differences include general economic
conditions, local real estate conditions, construction delays due to the
unavailability of construction materials, weather conditions or other delays
beyond the control of the Company. Consequently, such forward-looking
statements should be regarded solely as reflections of the Company's current
operating and development plans and estimates. These plans and estimates are
subject to revision from time to time as additional information becomes
available, and actual results may differ from those indicated in the
referenced statements.
<PAGE>
<TABLE>
<CAPTION>
100% PRO RATA
BALANCE OF SHARE OF
ANNUAL MORTGAGE MORTGAGE
($000's omitted, MATURITY INTEREST NOTES OWNERSHIP NOTES
except share amounts) DATE RATE PAYABLE INTEREST PAYABLE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Consolidated Entities:
Old Orchard Sept. 2000 8.5260%(1) $ 159,506 100.0% $ 159,506
Oakbrook Center Oct. 2000 6.0751%(2) 140,000 100.0% 140,000
MainPlace Oct. 1998 5.4066% 80,000 100.0% 80,000
Operating
Partnership (3) (3) 25,850 100.0% 25,850
Wolfchase Galleria May 1998 (4) 41,824 100.0% 41,824
- --------------------------------------------------------------------------------
447,180 447,180
Unconsolidatd Entities: (5)
Water Tower Place April 1997 (6) 170,000 55.0% 93,500
Coral Square Mall Dec. 2000 7.4000% 53,300 50.0% 26,650
Miami International
Mall Dec. 2003 6.9100% 47,500 40.0% 19,000
Management Company Aug. 2001 7.5400% 51,000 95.0% 48,450
Management Company Sept. 2001 7.0000% 9,000 95.0% 8,550
- --------------------------------------------------------------------------------
330,800 196,150
- --------------------------------------------------------------------------------
Company debt $ 643,330
- --------------------------------------------------------------------------------
Convertible preferred units $ 28,000
- --------------------------------------------------------------------------------
Market value of equity
interests as of March
31, 1997, based upon
24,598,170 shares/Units
at $30 per share $ 737,945
- --------------------------------------------------------------------------------
Total market capitalization $ 1,409,275
- --------------------------------------------------------------------------------
Company debt to total market
capitalization 46%
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
(1) Mortgage consists of two notes, one with a balance of $104.7 million
which bears interest at 9.09% and a second with a balance of $54.8 million
which bears interest at 7.45%. Interest rate shown is a weighted average.
(2) Of the $140.0 million of total debt, $58.0 million is subject to a
fixed rate of 5.856% and $82.0 million is subject to a fixed rate of 6.23%.
Interest rate shown is a weighted average.
(3) Includes $24.3 million outstanding under the Company's $90.0 million
secured revolving line of credit. The line of credit, subject to lenders'
approval, may be extended for an additional one or two year period and is
subject to a floating rate of 1.42% over LIBOR. Subsequent to the end of
the first quarter of 1997, the spread on the floating rate was reduced to
.85% and the original maturity date was extended from July 31, 1998 to April
30, 2000. Also, includes $1.6 million outstanding under the Company's one-year
$5.0 million unsecured revolving line of credit bearing interest at a floating
rate (7.0% as of March 31 ,1997).
(4) The construction loan may be extended for three one-year periods and
is subject to a floating rate of 1.375% over LIBOR.
(5) Excludes Valencia Town Center as the Company is currently not entitled
to any cash distributions until the outside partner has received a return on
and of its contributions to the partnership.
(6) On February 10, 1997, the Water Tower Place indebtedness was refinanced.
The new loan matures on February 1, 1999; however, it may be extended for two
one-year periods. Of the total $170.0 million, $160.0 million bears interest
at LIBOR + 1.125% and $10.0 million bears interest at LIBOR + 1.500%.
REVIEW OF OPERATIONS
FUNDS FROM OPERATIONS. Funds from operations should not be considered as
an alternative to net income or any other GAAP measurement of performance as
an indicator of operating performance or as an alternative to cash flows from
operating, investing or financing activities as a measure of liquidity. The
chart below shows the calculation of funds from operations, based upon the
National Association of Real Estate Investment Trusts ("NAREIT") definition:
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------------------
1997 1996
-------------- --------------
<S> <C> <C>
Income before minority interest and
extraordinary item $ 6,222 $ 4,866
Plus depreciation and amortization 6,570 4,672
Plus Company's share of depreciation
and amortization from unconsolidated
partnerships and the Management Company 1,080 1,002
Less preferred unit distribution (490) --
-------------- --------------
Total funds from operations $ 13,382 $ 10,540
============== ==============
Company's share of funds from
operations (a) $ 9,385 $ 6,859
============== ==============
<FN>
(a) Based upon a weighted average of 24,552,791 and 21,115,860 common shares
and units outstanding for the three months ended March 31, 1997 and 1996,
respectively. Total common shares and units outstanding at March 31, 1997
and 1996, were 24,598,170 and 21,115,860, respectively.
</TABLE>
<PAGE>
<TABLE>
FUNDS AVAILABLE FOR DISTRIBUTION. The chart below shows the calculation of
funds available for distribution:
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------------------
1997 1996
-------------- --------------
<S> <C> <C>
Total funds from operations $ 13,382 $ 10,540
Plus non-cash effect of Oakbrook Center
straight-lined ground rent and related
interest 822 782
Plus (less) adjustment to reflect actual
cash received from the Management Company 125 (73)
Plus write-off of assets (a) 21 38
Less straight-line rent adjustment (a) (313) (178)
-------------- --------------
Total funds available for distribution $ 14,037 $ 11,109
============== ==============
Company's share of funds available for
distribution (b) $ 9,844 $ 7,230
============== ==============
<FN>
(a) Includes the Company's share of unconsolidated partnerships.
(b) Based upon a weighted average of 24,552,791 and 21,115,860 common shares
and units outstanding for the three months ended March 31, 1997 and 1996,
respectively. Total common shares and units outstanding at March 31, 1997
and 1996, were 24,598,170 and 21,115,860, respectively.
</TABLE>
<PAGE>
SALES. Aggregate sales volume at the Company's regional malls for those
mall shops and anchors that report sales have increased 22.5% to $313 million
in the three months ended March 31, 1997 from $256 million in the three months
ended March 31, 1996. Excluding Old Orchard and Wolfchase Galleria, aggregate
sales volume increased .9% in the first quarter of 1997 as compared to the
first quarter of 1996. Mall tenant sales (excluding anchors and movie
theaters) have increased 23.9% to $238 million in the three months ended
March 31, 1997 from $192 million in the same period for 1996. Excluding Old
Orchard and Wolfchase Galleria, mall tenant sales increased .5% in the first
quarter of 1997 as compared to the first quarter of 1996. Comparable reported
mall tenant sales increased .2% in the three months ended March 31, 1997
compared to the same period for 1996. Sales per square foot (excluding Old
Orchard and Wolfchase Galleria) for the rolling twelve months ended March 31,
1997 were $350 compared to $351 for the twelve months ended December 31, 1996
and $342 for the twelve months ended March 31, 1996. Sales per square foot
were calculated in accordance with the official International Council of
Shopping Centers definition.
OCCUPANCY. The mall GLA was 90.8% occupied at March 31, 1997 as compared
to 91.2% at December 31, 1996 and 89.8% at March 31, 1996. The occupancy
percentage at December 31, 1996 excludes Old Orchard, which was acquired on
December 18, 1996. The mall GLA was 92.5% leased at March 31, 1997.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THE THREE MONTHS ENDED MARCH
31, 1996
Shopping center revenues increased $10.5 million to $33.3 million in the
three months ended March 31, 1997 from $22.8 million in the three months ended
March 31, 1996. This increase was primarily attributable to the increase in
shopping center revenues at Old Orchard as a result of the Company's
acquisition on December 18, 1996 and at Wolfchase Galleria as a result of its
opening on February 26, 1997.
Shopping center expenses, including depreciation and amortization, increased
$5.7 million to $19.1 million in the three months ended March 31, 1997 from
$13.4 million in the same period for 1996. This increase was primarily
attributable to an increase in shopping center expenses, including
depreciation and amortization, at Old Orchard as a result of the Company's
acquisition on December 18, 1996 and at Wolfchase Galleria as a result of its
opening on February 26, 1997.
Mortgage and other interest increased $3.5 million to $7.0 million in the
three months ended March 31, 1997 from $3.5 million in the same period for
1996. This increase was primarily attributable to an increase in interest
expense at Old Orchard as a result of the Company's acquisition on December
18, 1996 and at Wolfchase Galleria as a result of its opening on February 26,
1997.
Income from unconsolidated partnerships increased $.6 million to $.9 million
in the three months ended March 31, 1997 from $.3 million in the same period
for 1996. This increase was primarily attributable to the purchase of an
additional approximate 18% interest in Miami International Mall on April 1,
1996 and a decrease in interest expense at Water Tower Place as a result of
the February 10, 1997 refinancing.
Income from the Management Company decreased $.5 million to a $.2 million
loss in the three months ended March 31, 1997 from $.3 million in income in
the same period for 1996. This decrease was primarily attributable to a
decrease in management fees resulting from the net decrease in management
contracts; partially offset by a decrease in income taxes as a result of the
decrease in operating income.
<PAGE>
The extraordinary item (net of minority interest) of $.1 million in 1997
resulted from the write-off of deferred expenses and loan fees related to the
repayment of debt at Water Tower Place.
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
4.1 Stock Certificate is hereby incorporated by reference to Exhibit
4.1 to the Registrant's Form 10-Q (File No. 1-12278) filed on
November 19, 1993
4.2 Indenture by and between USC Oakbrook, Inc. and Bankers Trust
Company is hereby incorporated by reference to Exhibit 4.2 to the
Registrant's Form 10-K (File No. 1-12278) filed on March 25, 1994
4.3 Mortgage Note by and between Oakbrook Urban Venture, L.P. and USC
Oakbrook, Inc. is hereby incorporated by reference to Exhibit 4.3
to the Registrant's Form 10-K (File No. 1-12278) filed on March
25, 1994
4.4 Indenture by and between Water Tower Finance, Inc., Water Tower
Joint Venture and First National Bank of Chicago is hereby
incorporated by reference to Exhibit 4.7 to the Registrant's Form
10-K (File No. 1-12278) filed on March 25, 1994
4.5 Credit Agreement among Urban Shopping Centers, L.P., Union Bank
of Switzerland (New York Branch), Morgan Guaranty Trust Company
of New York and the several Lenders is hereby incorporated by
reference to Exhibit 4.11 to the Registrant's Form 10-Q (File No.
1-12278) filed on November 9, 1995
4.6 First Amendment to Indenture by and between USC Oakbrook, Inc.
and Bankers Trust Company is hereby incorporated by reference to
Exhibit 4.11 to the Registrant's Form 10-K (File No. 1-12278)
filed on March 25, 1996
4.7 Fourth Amendment to Loan Agreement by and among ZML-Old Orchard
Limited Partnership, American National Bank and Trust Company of
Chicago, The Prudential Insurance Company of America and Mellon
Bank, N.A. is hereby incorporated by reference to Exhibit 4.7
to the Registrant's Form 10-K (File No. 1-12278) filed on March
31, 1997
4.8 Mortgage, Security Agreement, Assignment of Leases and Rents and
Fixture Filing dated as of February 10, 1997 made by LaSalle
National Trust, N.A. and Water Tower Joint Venture to and with
Lehman Brothers Holdings Inc. is hereby filed herewith
4.9 Promissory Note A dated as of February 10, 1997 by and between
Water Tower Joint Venture and Lehman Brothers Holdings Inc. is
hereby filed herewith
4.10 Promissory Note B is dated as of February 10, 1997 by and
between Water Tower Joint Venture and Lehman Brothers Holdings
Inc. is hereby filed herewith
10.1 Second Amended and Restated Agreement of Limited Partnership of
Urban Shopping Centers, L.P. is hereby incorporated by reference
to Exhibit 10.1 to the Registrant's Form 10-Q (File No. 1-12278)
filed on November 19, 1993
10.2 Corporate Services Agreement among the Registrant, Urban
Shopping Centers, L.P. and JMB Retail Properties Co. (now Urban
Retail Properties Co.) is hereby incorporated by reference to
Exhibit 10.3 to the Registrant's Form 10-Q (File No. 1-12278)
filed on November 19, 1993
<PAGE>
10.3 JMB Realty Corporation Employee Savings Plan is hereby
incorporated by reference to Exhibit 10.4 to the Registrant's
Registration Statement on Form S-11 (No. 33-64488)
10.4 Retirement Plan for Employees of Amfac, Inc. and Subsidiaries
is hereby incorporated by reference to Exhibit 10.5 to the
Registrant's Registration Statement on Form S-11 (No. 33-64488)
10.5 Urban Shopping Centers 1993 Option Plan is hereby incorporated
by reference to Exhibit 10.6 to the Registrant's Form 10-Q
(File No. 1-12278) filed on November 19, 1993
10.6 Non-Competition Agreement between JMB Realty Corporation and
the Registrant is hereby incorporated by reference to Exhibit
10.7 to the Registrant's Form 10-Q (File No. 1-12278) filed on
November 19, 1993
10.7 Non-Competition Agreement between JMB Institutional Realty
Corporation and the Registrant is hereby incorporated by
reference to Exhibit 10.8 to the Registrant's Form 10-Q (File
No. 1-12278) filed on November 19, 1993
10.8 Non-Competition Agreement between Neil G. Bluhm and the
Registrant is hereby incorporated by reference to Exhibit 10.9
to the Registrant's Form 10-Q (File No. 1-12278) filed on
November 19, 1993
10.9 Non-Competition Agreement between Judd D. Malkin and the
Registrant is hereby incorporated by reference to Exhibit 10.10
to the Registrant's Form 10-Q (File No. 1-12278) filed on
November 19, 1993
10.10 Omnibus Agreement among Urban Shopping Centers, L.P., JMB
Properties Company, JMB Retail Properties Co. (now Urban Retail
Properties Co.) and the Registrant is hereby incorporated by
reference to Exhibit 10.12 to the Registrant's Form 10-Q (File
No. 1-12278) filed on November 19, 1993
10.11 Indemnification Agreement between the Registrant and its
Directors and Officers is hereby incorporated by reference to
Exhibit 10.13 to the Registrant's Form 10-Q (File No. 1-12278)
filed on November 19, 1993
10.12 Registration Rights and Lock-Up Agreement between the Registrant
and certain Investors is hereby incorporated by reference
to Exhibit 10.14 to the Registrant's Form 10-Q (File No. 1-12278)
filed on November 19, 1993
10.13 Stockholders Agreement between Center Partners, Ltd., Urban
Investment & Development Co., Urban-Water Tower Associates,
JMB/Miami Investors, L.P., Island Holidays, Ltd., Celtic Funding
Corporation and the Registrant is hereby incorporated by
reference to Exhibit 10.15 to the Registrant's Form 10-Q (File
No. 1-12278) filed on November 19, 1993
10.14 Lease Agreement, dated December 31, 1990, by and between
Teachers' Retirement System of the State of Illinois and LaSalle
National Trust, N.A., as Trustee for Oakbrook Urban Venture, as
amended by the First Amendment to Lease Agreement and to Restated
and Amended Memorandum of Lease is hereby incorporated by
reference to Exhibit 10.16 to the Registrant's Registration
Statement on Form S-11 (No. 33-64488)
<PAGE>
10.15 Second Amendment to Lease Agreement by and between Teachers'
Retirement System of the State of Illinois and LaSalle National
Trust, N.A., as Trustee for Oakbrook Urban Venture, L.P. is
hereby incorporated by reference to Exhibit 10.17 to the
Registrant's Form 10-Q (File No. 1-12278) filed on November
19, 1993
10.16 Net Ground Rental Lease Agreement with respect to Penn Square
Mall, as amended by Amendment of Net Ground Rental Lease and as
further amended by Second Amendment of Net Ground Rental Lease
is hereby incorporated by reference to Exhibit 10.18 to the
Registrant's Registration Statement on Form S-11 (No. 33-64488)
10.17 Ground Lease by and between The Newhall Land and Farming Company
and Valencia Town Center Associates is hereby incorporated by
reference to Exhibit 10.19 to the Registrant's Registration
Statement on Form S-11 (No. 33-64488)
10.18 Restated Employment Agreement between Matthew S. Dominski and
the Registrant is hereby incorporated by reference to Exhibit
10.19 to the Registrant's Form 10-K (File No. 1-12278) filed
on March 25, 1994
10.19 Third Amendment to Lease Agreement by and between Teachers'
Retirement System of the State of Illinois and LaSalle National
Trust, N.A., as Trustee for Oakbrook Urban Venture, L.P. is
hereby incorporated by reference to Exhibit 10.20 to the
Registrant's Form 10-K (File No. 1-12278) filed on March 25, 1994
10.20 First Amendment to Second Amended and Restated Agreement of
Limited Partnership of Urban Shopping Centers, L.P. is hereby
incorporated by reference to Exhibit 10.21 to the Registrant's
Form 10-Q (File No. 1-12278) filed on August 9, 1995
10.21 First and Second Amendments to Urban Shopping Centers 1993
Option Plan are hereby incorporated by reference to Exhibit
10.22 to the Registrant's Form 10-Q (File No. 1-12278) filed
on August 9, 1995
10.22 Urban Shopping Centers 1996 Incentive Unit Program is hereby
incorporated by reference to Exhibit 10.1 to the Registrant's
Form 8-K filed on November 25, 1996
10.23 Second Amendment to Second Amended and Restated Agreement of
Limited Partnership of Urban Shopping Centers, L.P. is hereby
incorporated by reference to Exhibit 10.23 to the Registrant's
Form 10-K (File No. 1-12278) filed on March 31, 1997
10.24 Agreement for Purchase and Sale of Partnership Interest by and
between ZML-00 Associates Limited Partnership, Urban Shopping
Centers, L.P., USC Old Orchard, Inc., and H. Rigel Barber,
Gary A. Nickele and Jeffery A. Gluskin, as owner trustees of
the Old Orchard Trust, is hereby incorporated by reference to
Exhibit 10.24 to the Registrant's Form 10-K (File No. 1-12278)
filed on March 31, 1997
10.25 Amended and Restated Agreement of Limited Partnership of Old
Orchard Urban Limited Partnership by and between USC Old
Orchard, Inc. and Urban Shopping Centers, L.P. is hereby
incorporate by reference to Exhibit 10.25 to the Registrant's
Form 10-K (File No. 1-12278) filed on March 31, 1997
10.26 Third Amendment to Urban Shopping Centers 1993 Option Plan is
hereby filed herewith
<PAGE>
27.1 Financial Data Schedule
Although certain additional long-term debt instruments of the
Registrant have been excluded from Exhibit 4 above, pursuant to Rule
601(b)(4)(iii), the Registrant commits to provide copies of such
agreements to the Securities and Exchange Commission upon request.
(b) No reports on Form 8-K were filed during the first quarter of 1997.
<PAGE>
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, Director of Acquisitions and Chief
Accounting Officer
Date: May 8, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following person in the capacity and on
the date indicated.
ADAM S. METZ
Executive Vice President, Chief Financial
Officer, Director of Acquisitions and Chief
Accounting Officer
Date: May 8, 1997
<PAGE>
MORTGAGE, SECURITY AGREEMENT,
ASSIGNMENT OF LEASES AND RENTS
AND FIXTURE FILING
Dated as of February 10, 1997
Made by
LASALLE NATIONAL TRUST, N.A.,
successor to LASALLE NATIONAL BANK,
Trustee under Trust Agreement dated June 10, 1970
and known as Trust No. 40940,
as Mortgagor
and WATER TOWER JOINT VENTURE,
as Beneficiary
To and With
LEHMAN BROTHERS HOLDINGS INC. d/b/a LEHMAN
CAPITAL, a division of LEHMAN BROTHERS HOLDINGS INC.
as Mortgagee
--------------------------
Secured By
-------------
Property Address:
845 North Michigan Avenue
Chicago, Cook County, Illinois
P.I.N. 17-03-226-030
-----------------------------------------------
This instrument was prepared by
and after recording please return to:
James L. Gregory III
Thacher Proffitt & Wood
Two World Trade Center
New York, NY 10048
<PAGE>
TABLE OF CONTENTS
Page
----
PRELIMINARY STATEMENT -1-
1. CERTAIN DEFINITIONS -4-
Affiliate -4-
Agreement of Partnership of Beneficiary -5-
Alteration -5-
Anchor Leases -5-
Approved Control Party -5-
Architect -6-
Beneficiary -6-
Business Day -6-
Cash -6-
Cash Flow -6-
Closing Date -6-
Condominium Deed -6-
Credit Facility -6-
Debt Securities -6-
Declaration of Easements -7-
Default -7-
Default Event -7-
Default Rate -7-
D&P -7-
Eligible Collateral -7-
Employee Benefit Plan -7-
Environmental Laws -7-
Equipment -7-
ERISA -8-
Event -8-
Exculpated Persons -8-
Excusable Delay -8-
Fiscal Year -8-
General Partner -8-
Hazardous Substances -8-
Impositions -8-
Improvements -9-
Institutional Lender -9-
Insurance Requirements -9-
Investment Grade -9-
IRC -9-
Land -9-
Land Trust -9-
Lease -9-
Legal Requirements -9-
Letter of Credit -10-
Management Agreement -10-
Manager -10-
Maturity -10-
Moody's -10-
Mortgage -10-
Mortgagee -10-
Mortgagor -10-
Multiemployer Plan -10-
Officers' Certificate -11-
Operating Agreement -11-
Operating Expenses -11-
Operating Income -11-
Pension Plan -11-
Permitted Exceptions -11-
Permitted Owner -12-
Person -12-
<PAGE>
Personal Property -12-
Pre-Approved Property Manager -12-
Premises -12-
Principal -12-
Proceeds -13-
Property -13-
Rating Agencies -13-
Renewal Lease -13-
Required Rating -13-
Restoration -13-
S&P -13-
Secured Obligations -13-
Security Documents -13-
Subordinate Mortgage -13-
Surety Bond -13-
Taking -14-
Tenant -14-
Test Indebtedness -14-
Third Party Guaranty -14-
Total Loss -14-
Total Taking -14-
Trust Agreement -14-
U.S. Government Securities -14-
Urban Approved Entity -15-
2. INTENTIONALLY DELETED -15-
3. PARTICULAR COVENANTS, REPRESENTATIONS AND WARRANTIES. -15-
3.1. Validity and Issuance of the Notes; Title to the
Premises -15-
3.2. Maintenance of Validity and Recording -16-
3.3. Negative Covenants -17-
3.4. Existence and Rights -18-
3.5. Tax Escrow; Payment of Taxes and Other Claims -18-
3.6. Payment of Certain Amounts -19-
4. MAINTENANCE AND REPAIRS, SHORING -19-
5. UTILITY SERVICES -20-
6. NO CLAIMS AGAINST MORTGAGEE -20-
7. INDEMNIFICATION BY THE BENEFICIARY -20-
8. INSPECTION -22-
9. PAYMENT OF IMPOSITIONS, ETC -22-
10. COMPLIANCE WITH LEGAL AND INSURANCE REQUIREMENTS -22-
11. LIENS -24-
12. PERMITTED CONTESTS -24-
13. INSURANCE -25-
13.1. Risks to be Insured -25-
13.2. Policy Provisions -26-
13.3. Certificates -26-
13.4. Replacement Policies -27-
13.5. Reports of Independent Insurance Brokers -27-
13.6. Separate Insurance -27-
14. ALTERATIONS AND ADDITIONS, ETC. -27-
<PAGE>
15. DAMAGE, DESTRUCTION AND RESTORATION -30-
15.1. The Beneficiary to Give Notice -30-
15.2. Application of Insurance Proceeds -30-
15.3. Restoration -32-
16. TAKING OF PROPERTY -33-
16.1. The Beneficiary to Give Notice; Assignment
of Awards, etc. -33-
16.2. Partial Taking -33-
16.3. Application of Awards, etc. -34-
17. EVICTION BY PARAMOUNT TITLE -34-
18. BOOKS AND RECORDS, FINANCIAL STATEMENTS, REPORTS AND
OTHER INFORMATION -34-
18.1. Books and Records -35-
18.2. Financial Statements -35-
18.3. Additional Information -35-
18.4. Other Information -36-
19. TRANSFERS, INDEBTEDNESS AND SUBORDINATE MORTGAGES -36-
19.1. Sale of the Property; Management of the
Property -36-
19.2. Indebtedness -37-
19.3. Subordinate Mortgages -40-
19.4. Notice -40-
20. PERFORMANCE OF LEASES; APPLICATION OF RENTS -40-
21. NO ENDORSEMENT -44-
22. NO CREDIT FOR PAYMENT OF TAXES OR IMPOSITIONS -44-
23. EVENT OF DEFAULT; ACCELERATION OF NOTES -44-
24. COMPROMISE OF ACTIONS -47-
25. FORECLOSURE -47-
25.1. Foreclosure -47-
25.2. Several Parcels -48-
25.3. Waivers -48-
25.4. Recovery of Advances -49-
25.5. Sale -49-
26. MORTGAGEE AUTHORIZED TO EXECUTE INSTRUMENTS -50-
27. PURCHASE OF PROPERTY BY MORTGAGEE -50-
28. RECEIPT A SUFFICIENT DISCHARGE TO PURCHASER -50-
29. WAIVER OF MARSHALLING, APPRAISEMENT, VALUATION -50-
30. SALE SHALL BE A BAR AGAINST MORTGAGOR -50-
31. APPLICATION OF PROCEEDS OF SALE, CREDIT FACILITIES AND
ELIGIBLE COLLATERAL -51-
32. APPOINTMENT OF RECEIVER -51-
33. POSSESSION, MANAGEMENT AND INCOME -51-
34. RIGHT OF MORTGAGEE TO PERFORM MORTGAGOR'S AND BENEFICIARY'S
COVENANTS -53-
35. REMEDIES CUMULATIVE -54-
<PAGE>
36. APPLICABLE LAW -54-
37. NO WAIVER -54-
38. OBLIGATIONS ARE WITHOUT RECOURSE -54-
39. STAMP AND OTHER TAXES -57-
40. FURTHER ASSURANCES -57-
41. ESTOPPEL CERTIFICATES -57-
42. ADDITIONAL SECURITY -58-
43. FINANCING STATEMENT -58-
44. RELEASE -58-
45. CHANGES IN LAW REGARDING TAXATION -59-
46. [Intentionally omitted.] -59-
47. SEVERABILITY -59-
48. SECURITY AGREEMENT, ETC -59-
48.1. Grant of Security -59-
48.2. Financing Statements -59-
48.3. Multiple Remedies -60-
48.4. Waiver of Rights -60-
48.5. Expenses of Disposition of the Property -60-
49. EXPENSES OF MORTGAGEE -60-
50. USURY -61-
51. MISCELLANEOUS -62-
52. NON-MERGER -62-
53. ASSIGNMENT OF RENTS AND MORTGAGOR'S AND BENEFICIARY'S
INTEREST IN LEASES -62-
54. WAIVER OF TRIAL BY JURY -66-
55. CONFIDENTIALITY -66-
56. NOTICES -66-
57. INVESTMENTS -68-
58. SPECIAL PROVISIONS RELATING TO SUBDIVISION -69-
59. APPOINTMENT OF MORTGAGEE AS ATTORNEY-IN-FACT -71-
60. JOINT AND SEVERAL LIABILITY -71-
61. MORTGAGOR EXECUTING AS TRUSTEE -71-
<PAGE>
EXHIBITS
EXHIBIT A -- Legal Description of Property
EXHIBIT B -- Permitted Exceptions
EXHIBIT C -- Subordination Provisions for Permitted Subordinate
Mortgages
EXHIBIT D -- Insurance Requirements
EXHIBIT E -- Form of Assumption
<PAGE>
THIS MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF LEASES AND RENTS
AND FIXTURE FILING is dated as of February 10, 1997 and is made by and between
(i) LASALLE NATIONAL TRUST, N.A., successor to LaSalle National Bank and a
national banking association not personally but as land trustee under Trust
Agreement dated June 10, 1970 and known as Trust No. 40940 (the "Trust
Agreement"), as Mortgagor, (ii) the Beneficiary and (iii) LEHMAN BROTHERS
HOLDINGS INC. d/b/a LEHMAN CAPITAL, a division of LEHMAN BROTHERS HOLDINGS INC.
PRELIMINARY STATEMENT
WHEREAS, the Mortgagor, as the owner of the Property (as defined
below), has been directed, pursuant to a direction to execute, to execute and
deliver this Mortgage covering the Property, and hereby to mortgage, grant,
convey, transfer and assign the Property to the Mortgagee, in order to secure
the payment of the principal of, interest on, and all other amounts payable
under, the Notes and this Mortgage, and to secure the performance by the
Mortgagor and the Beneficiary of the covenants and agreements contained in
this Mortgage and the other Security Documents.
WHEREAS, the Beneficiary has duly authorized the execution and
delivery of, and has duly directed the Mortgagor to execute and deliver, this
Mortgage and has taken all actions required by law and all other actions
required therefor.
WHEREAS, Beneficiary has duly and validly authorized, executed and
delivered the Notes and taken all actions required by law and all other
actions required therefor.
WHEREAS, simultaneously with the making and delivery of the Notes
and the execution and delivery of this Mortgage, the Mortgagor shall execute
and deliver to the Mortgagee all the other Security Documents as security for
payment and performance of the Notes.
NOW, THEREFORE, in order to secure the payment by the Beneficiary of
the principal of, interest on, and all other amounts payable under, the Notes;
the payment of all amounts payable under this Mortgage and the other Security
Documents; and the performance by the Mortgagor and the Beneficiary of their
respective covenants and agreements contained in this Mortgage and the other
Security Documents (but in no event shall this Mortgage secure any amount
in excess of Five Hundred Million Dollars $500,000,000); the Beneficiary,
the Mortgagor and the Mortgagee by these presents do hereby agree as follows:
THE MORTGAGOR AND THE BENEFICIARY HEREBY MORTGAGE, GRANT, REMISE,
CONVEY, TRANSFER AND ASSIGN unto the Mortgagee, its successors and assigns
the following property (hereinafter collectively referred to as the "Property"):
I. ALL ESTATE, right, title and interest of the Mortgagor, now
owned or hereafter acquired, in and to that certain tract or parcel of real
estate situated in County of Cook, the State of Illinois, described in
Exhibit A hereto together with all rights of way or use, sidewalks, alleys and
strips or gores, rights, privileges, air rights and development rights,
servitudes, licenses, easements, hereditaments and appurtenances incident,
belonging or pertaining to such land (the "Land"); and to the extent not owned
by tenants of the Property, or any portion thereof, all the buildings,
structures, improvements and fixtures of every kind and nature now or
hereafter situated on or in the Land, together with all alterations,
extensions, additions, improvements, substitutions and replacements of any of
the foregoing (collectively, the "Improvements");
II. TOGETHER WITH all estate, right, title and interest, now owned
or hereafter acquired, of the Mortgagor or the Beneficiary or both in and to
the following property, rights and interests (subject, however, to the
Permitted Exceptions):
<PAGE>
(a) all Equipment and Personal Property of every kind and nature
now or hereafter located upon the Land;
(b) all real estate tax refunds and all awards or payments,
including interest on any of them, and the right to receive the same
which the Mortgagor or the Beneficiary may have, which may be made with
respect to the Property whether from a Taking thereof, damage to the
remainder of the Property as a result of a Taking or for any other
injury to, decrease in the value of, or other occurrence affecting the
Property;
(c) all Leases and all other agreements for, affecting or related
to the use and occupancy of the Property, now or hereafter entered into,
and the right to receive and apply the rents, incomes, issues, profits
and other economic benefits derived by the Mortgagor or the Beneficiary
from the Property to the payment of the Mortgage and the other obligations
secured by this Mortgage, together with the security deposits, and any
monies, awards, damages or other payments due or payable under the Leases
or such other agreements, and other payments or instruments delivered as
security under such Leases and agreements (the grant of such security
deposits and other payments as security being subject to application in
accordance with the express requirements of such Leases), the foregoing
being pledged to Mortgagee on a parity with the Land and Improvements and
not secondarily;
(d) all Proceeds of, and any unearned premiums or refunds of
premiums on, any insurance policies covering all or any part of the
Property, including the right to receive and apply the Proceeds of any
insurance, judgments or settlements made in lieu thereof for damage to
or the diminution of the Property in accordance with the terms of this
Mortgage;
(e) all easements, licenses and other rights under the Declaration
of Easements, the Condominium Deed and the Operating Agreement;
(f) all contract rights, general intangibles relating to design,
development, operation, management and use of the Premises, all
certificates of occupancy, zoning variances, building, use or other
permits, approvals, authorizations, licenses and consents obtained from
any governmental agency in connection with the development, use,
operation or management of the Premises, all construction, service,
engineering, consulting, management, leasing, architectural and other
similar contracts concerning the design, construction, management,
operation, occupancy and/or use of the Premises, all architectural
drawings, plans, specifications, soil tests, appraisals, engineering
reports and similar materials relating to all or any portion of the
Premises and all payment and performance bonds or warranties or
guarantees relating to the Premises, all to the extent assignable;
(g) all trademarks, trade names, corporate names, company names,
business names, fictitious business names, trade styles, service marks,
logos, other source and business identifiers, trademark registration and
applications for registration used at or relating to the Property,
including without limitation rights of Beneficiary, if any, to the name
"Water Tower Place"; all replacements, substitutions, renewals, extensions
and continuations-in-part of the items referred to above; any written
agreement granting to the Mortgagor or the Beneficiary any right to use
any trademark or trademark registration at or in connection with the
Property; and the right of the Mortgagor or the Beneficiary to sue for
past, present and future infringements of the foregoing;
(h) the right in the name and on behalf of the Mortgagor or the
Beneficiary to appear in and defend any action or proceeding brought with
respect to the Property and to commence any action or proceeding to
protect the interest of the Mortgagee in the Property;
<PAGE>
(i) any and all monies now or hereafter held by the Mortgagee,
including, without limitation, any sums deposited with the Mortgagee and
invested in accordance with Article 57 until expended or applied as
provided in this Mortgage; and
(j) any and all after-acquired right, title or interest in and to
any of the Property described in the preceding clauses.
TO HAVE AND TO HOLD as provided herein the above granted and
described Property unto and to the proper use and benefit of the Mortgagee,
and the successors and assigns of the Mortgagee, forever.
The following actions of the Mortgagee shall not affect the
liability of any person (other than a person expressly released pursuant
thereto) for payment of the indebtedness and obligations secured hereby
(collectively, the "Secured Obligations"), and shall not affect the lien
hereof upon any portion of the Property not expressly released herefrom if
the Mortgagee shall, with or without notice (a) retain or obtain a security
interest in any property to secure all or any portion of the Secured
Obligations, (b) retain or obtain the primary or secondary liability of any
party or parties with respect to all or any portion of the Secured Obligations,
(c) alter, exchange, extend, renew, modify, release or cancel for any period
(whether or not longer than their original maturity) any terms, conditions,
provisions or covenants contained in any or all of the Security Documents,
(d) release or compromise any liability of any party or parties primarily or
secondarily liable on all or any portion of the Secured Obligations,
(e) release its security interest, if any, in all or any portion of the
Property and permit any substitution or exchange for any such portion of the
Property, (f) resort to the Property conveyed by this Mortgage, or any portion
thereof, for payment of the Secured Obligations, or any portion thereof,
whether or not the Mortgagee shall have resorted to any other property
otherwise securing the Secured Obligations, or shall have proceeded
against any other party primarily or secondarily liable on the Secured
Obligations, (g) apply any of the Property or direct the order or manner
of sale thereof as the Mortgagee in its sole discretion chooses, and (h)
accept a conveyance or conveyances of all or part of the Property as partial
satisfaction of the liability secured hereby in the amount of the value of
the Property so conveyed and proceed against the balance of the Property for
the balance of the Secured Obligations after said conveyance or conveyances.
IT IS HEREBY FURTHER COVENANTED AND AGREED that the Notes, and any
replacement, renewal or extension thereof, all shall be secured by this
Mortgage.
AND, to protect the security of this Mortgage, the Mortgagor and
the Beneficiary covenant and agree with and represent and warrant to the
Mortgagee, as follows:
1. CERTAIN DEFINITIONS.
-------------------
(a) For all purposes of this Mortgage, except as otherwise
expressly provided or unless the context otherwise requires:
(1) The terms defined in this Article shall have the meanings
assigned to them in this Article and shall include the plural as well
as the singular;
(2) All accounting terms not otherwise defined herein shall have
the meanings assigned to them in accordance with generally accepted
accounting principles in the United States of America, and, except as
otherwise herein expressly provided, the term "GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES" with respect to any computation required or
permitted hereunder shall mean such accounting principles as are
<PAGE>
generally accepted in the United States of America as of the date of
such computation;
(3) The word "including" shall be construed to be followed by the
words "WITHOUT LIMITATION";
(4) Section headings are for the convenience of the reader and
shall not be considered in interpreting this Mortgage or the intent of
the parties hereto; and
(5) The words "HEREIN", "HEREOF", and "hereunder", and other words
of similar import shall refer to this Mortgage as a whole and not to any
particular Article, Section or other subdivision.
(c) As used in this Mortgage the following terms have the
following respective meanings:
AFFILIATE shall mean a Person or Persons directly or indirectly,
through one or more intermediaries, controlling, controlled by or under
common control with the Person or Persons in question. The term "control",
as used in the immediately preceding sentence, shall mean, with respect
to a Person that is a corporation, the right to exercise, directly or
indirectly, more than 50% of the voting rights attributable to the shares
of the controlled corporation and, with respect to a Person that is not a
corporation, the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of the
controlled Person.
AGREEMENT OF PARTNERSHIP OF BENEFICIARY means the Articles of General
Partnership of Water Tower Joint Venture, made as of March 6, 1985, by and
between Urban Water Tower Associates, as assigned to Urban Shopping
Centers, L.P. by that certain assignment dated as of October 14, 1993
and 835 Michigan Corp., as assigned to 835 Michigan L.P. by that certain
assignment dated as of January 1, 1994, as amended by that certain First
Amendment dated as of March 6, 1985, by that certain Third Amendment
dated as of March 16, 1989, and by that certain Fourth Amendment dated
April 27, 1992.
ALTERATION shall have the meaning stated in Article 14 hereof.
ANCHOR LEASES shall mean collectively, (a) that certain Amended and
Restated Lease dated April 28, 1975 between Mortgagor, as Landlord, and
The May Department Stores Company (successor by merger to Associated Dry
Goods Corporation), as Tenant, as amended to the date of this Mortgage,
and (b) that certain Lease dated May 9, 1975 between Mortgagor, as
Landlord, and Marshall Field & Company, as Tenant, as amended to the
date of this Mortgage and (c) any lease to a replacement anchor tenant
of the Property.
APPROVED CONTROL PARTY shall mean any one or a combination of
the following entities:
(a) A partnership, general or limited, provided that
(i) as to a general partnership, one or more Principals, acting
directly or through entities which are 100% beneficially owned by
them, have at least equal power with all other general partners to
direct and control such general partnership and (ii) as to a limited
partnership, there are no general partners of such limited
partnership other than Principals or entities which are, directly or
indirectly, 100% beneficially owned by Principals;
(b) A corporation directly or indirectly 100% owned by
one or more Principals;
<PAGE>
(c) A trust (including a group trust) 100% of the
beneficial ownership of which is vested in one or more Principals;
(d) A real estate investment trust 100% of the beneficial
ownership of which is vested in one or more Principals; and
(e) Any other entity which is directly or indirectly 100%
owned by one or more Principals and which may legally transact
business, own property and execute binding agreements under the laws
of the State of Illinois.
ARCHITECT shall mean an architect or engineer, as appropriate for
the project to be undertaken or evaluated, and with experience in the
type of project to be undertaken or evaluated, not related to the
Beneficiary or any of the Principals and, following a transfed
permitted under Section 19, not related to any party having a direct
or indirect ownership interest in the Property or the beneficial
interest in the Land Trust, duly licensed or registered in the State of
Illinois, selected at arms-length by the Beneficiary and which architect
or engineer shall practice with a reputable firm of recognized standing.
BENEFICIARY shall mean Water Tower Joint Venture, an Illinois
general partnership, and any permitted transferee of the beneficial
interest under the Land Trust in accordance with Article 19 of this
Mortgage and the beneficiary of any land trust which is the transferee
of the Property in a transfer permitted under Article 19 of this Mortgage.
In the event that the fee title to the Property shall cease to be owned
by a land trust, the term "Beneficiary" shall be deemed to refer to the
fee owner of the Property and such fee owner shall have all rights,
powers, duties and obligations granted to or imposed upon the Beneficiary
and the Mortgagor hereunder.
BUSINESS DAY shall mean any Monday, Tuesday, Wednesday, Thursday or
Friday on which banking institutions located in the State of Illinois and
banking institutions located in the State of New York are not authorized
to be closed.
CASH shall mean coin or currency of the government of the United
States of America.
CASH FLOW shall mean, for any period, the excess, if any, of
Operating Income for such period over Operating Expenses for such period.
CLOSING DATE shall mean February 10, 1997 or such other date as the
parties hereto shall mutually agree upon.
CONDOMINIUM DEED means the deed dated March 24, 1976 made by the
Mortgagor to Kelvyn H. Lawrence and recorded as Document 23432348 with
the Recorder of Deeds of Cook County, Illinois.
CREDIT FACILITY means a Letter of Credit or Surety Bond.
DEBT SECURITIES means debt obligations, other than U.S. Government
Securities, of any Person, whether evidenced by bonds, notes, debentures,
certificates, book entry deposits, certificates of deposit, commercial
paper, bankers acceptances, reinvestment letters, investment contracts,
funding agreements or other instruments, which (x) shall not be subject
to prepayment or redemption prior to maturity and (y) shall be rated not
lower than (i) Aaa by Moody's (or, if maturing within one year or less
and having a short term debt rating by Moody's, rated by Moody's not
lower than P-1) and (ii) AAA by either D&P or S&P (or, if maturing
within one year or less and having a short term debt rating by D&P or
S&P, rated in the highest short term debt rating category by either D&P
or S&P) (or the then equivalent ratings by such agencies); and bonds or
other obligations rated Aaa by Moody's and AAA by either D&P or S&P,
<PAGE>
issued by or by authority of any state of the United States, any
territory or possession of the United States, including the Commonwealth
of Puerto Rico and agencies thereof, or any political subdivision of any
of the foregoing; or any combination of the foregoing.
DECLARATION OF EASEMENTS means the Declaration of Covenants,
Conditions, Restrictions and Easements, dated as of April 27, 1992, by
the Mortgagor, as amended, modified or supplemented from time to time
as permitted hereunder.
DEFAULT shall mean any condition or event which constitutes or which,
after the giving of notice or lapse of time or both, would constitute an
Event of Default hereunder.
DEFAULT EVENT shall have the meaning stated in Section 38(b) hereof.
DEFAULT RATE shall have the meaning stated in the Notes.
D&P shall mean Duff & Phelps Credit Rating Co.
ELIGIBLE COLLATERAL shall mean U.S. Government Securities, Debt
Securities or Cash.
EMPLOYEE BENEFIT PLAN means any employee benefit plan within the
meaning of Section 3(3) of ERISA which is established, sponsored,
maintained, or contributed to on behalf of its employees by the
Beneficiary.
ENVIRONMENTAL LAWS means the Resource Conservation and Recovery Act
(42 U.S.C. 6901 et seq.), as amended by the Hazardous and Solid Waste
Amendments of 1984, the Comprehensive Environmental Response, Compensation
and Liability Act (42 U.S.C. 9601 et seq.), as amended by the Superfund
Amendments and Reauthorization Act of 1986, the Hazardous Materials
Transportation Act (49 U.S.C. 1801 et seq.), the Toxic Substances
Control Act (15 U.S.C. 2601 et seq.), Clean Air Act (42 U.S.C. 9402 et
seq.), the Clean Water Act (33 U.S.C. 1251 et seq.), the Federal
Insecticide, Fungicide and Rodenticide Act (7 U.S.C. 136 et seq.), the
Occupational Safety and Health Act (29 U.S.C. 651 et seq.), and all
applicable federal, state and local environmental laws, including
obligations under the common law, ordinances, rules and regulations, as
any of the foregoing may have been or may be from time to time amended,
supplemented or supplanted, now or hereafter existing relating to
regulation or control of hazardous or toxic substances, wastes or
environmental health and safety.
EQUIPMENT shall mean all machinery, apparatus, equipment, materials,
fittings, fixtures, chattels, articles of personal property and all other
property (real, personal or mixed), and all appurtenances and additions
thereto and betterments, renewals, substitutions and replacements thereof,
now or hereafter owned by the Mortgagor or the Beneficiary or in which the
Mortgagor or the Beneficiary has or shall require an interest (to the
extent of such interest), and now or hereafter located on, attained to or
contained in or used in connection with the Land or the Improvements, or
placed on any part thereof though not attached thereto, including all
indoor and outdoor furniture, landscaping, indoor plants, tools, screens,
awnings, shades, blinds, curtains, draperies, partitions, carpets, rugs,
furniture and furnishings, heating, lighting, plumbing, water heating,
cooking, monitoring, ventilating, air conditioning, refrigerating,
sanitation, waste removal, incinerating or compacting plants, systems,
fixtures and equipment, elevators, escalators, stoves, ranges, vacuum
systems, window washing and other cleaning systems, call systems,
sprinkler systems and other fire prevention and extinguishing apparatus
and materials, alarms, telecommunications, entertainment, recreational
or security systems and equipment, motors, machinery, pipes, ducts,
conduits, dynamos, engines, compressors, generators, boilers, stokers,
<PAGE>
furnaces, pumps, tanks, and appliances, provided, however, that the term
"Equipment" shall not include property included in Land or Improvements.
ERISA means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
EVENT OF DEFAULT shall have the meaning stated in Article 23 hereof.
EXCULPATED PERSONS shall have the meaning stated in Article 38 hereof.
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 the Mortgagor or the Beneficiary, but lack of funds
shall not be deemed a cause beyond the reasonable control of the
Mortgagor or the Beneficiary.
FISCAL YEAR shall mean the period from January 1 through December 31,
inclusive, of any calendar year.
GENERAL PARTNER shall mean the Person or Persons who from time to time
shall be so designated in accordance with the Agreement of Partnership of
the Beneficiary.
HAZARDOUS SUBSTANCES means (i) those substances included within
definitions of or identified as "hazardous substances", "hazardous
materials", or "toxic substances" in or pursuant to Environmental Laws;
(ii) those substances listed in the United States Department of
Transportation Table (40 CFR 172.101 and amendments thereto) or by the
Environmental Protection Agency (or any successor agency) as hazardous
substances (40 CFR Part 302 and amendments thereto); (iii) any material,
waste or substance which is or contains (A) petroleum, including crude oil
or any fraction thereof, natural gas, or synthetic gas usable for fuel or
any mixture thereof, (B) asbestos, (C) polychlorinated biphenyls, (D) any
substance designated as "hazardous substance" pursuant to Section 311 of
the Clean Water Act, 33 U.S.C. 1251 et seq. (33 U.S.C. 1321), or listed
pursuant to Section 307 of the Clean Water Act (33 U.S.C. 1317); (E)
flammable explosives; (F) radioactive materials; and (iv) such other
substances, materials and wastes which are or become regulated as
hazardous, toxic or "special wastes" under Environmental Laws.
IMPOSITIONS shall have the meaning stated in Article 9 hereof.
IMPROVEMENTS shall have the meaning stated in the Preliminary
Statement hereof.
INSTITUTIONAL LENDER shall mean any Person not an Affiliate of the
Beneficiary or any Principal subject to the personal jurisdiction of the
federal or state courts located in any state of the continental United
States of America (excluding Alaska) or the District of Columbia which
is a savings and loan association, a savings bank, a commercial bank or
trust company (whether acting individually or in any fiduciary capacity),
an insurance company, a religious, charitable or educational institution,
a state, municipal or private employees' welfare, pension or retirement
fund or system, an investment banking firm or any other financial
institution having, or having under management as a fiduciary, total
assets of at least $100,000,000.
INSURANCE REQUIREMENTS shall mean all terms of any insurance policy
required hereunder covering or applicable to the Property 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 any part thereof or any use
of the Property or any part thereof.
<PAGE>
INVESTMENT GRADE shall mean having a long term unsecured debt rating
not lower than Baa by Moody's and, if rated by D&P, not lower than BBB by
D&P.
IRC means the Internal Revenue Code of 1986, as amended from time
to time.
LAND shall have the meaning stated in the Preliminary Statement
hereof.
LAND TRUST shall mean that land trust created under a Trust
Agreement, dated June 10, 1970, between the Beneficiary and Mortgagor
and known as Trust No. 40940, or any land trust which is the transferee
of the Property in a transfer permitted under Article 19 of this Mortgage.
LEASE shall mean any lease, sublease, further sublease, license,
occupancy agreement or other agreement existing on the date hereof or
hereafter entered into by the Mortgagor or Beneficiary permitting the use
or enjoyment of any part of the Premises, and every modification,
amendment, or extension relating thereto, and any guaranty of a Lease.
LEGAL REQUIREMENTS shall mean all laws, statutes, codes, acts,
ordinances, orders, judgments, decrees, injunctions, rules, regulations,
permits, licenses, authorizations, directions and requirements of all
governments, departments, commissions, boards, courts, authorities,
agencies, officials and officers, of governments, federal, state, county
and municipal, ordinary or extraordinary, including the Americans With
Disabilities Act of 1990, 42 U.S.C. 12101 et seq. (the "Disabilities
Act"), and all laws pertaining to health and safety and pollution and
protection of the environment, which now or at any time hereafter may be
applicable to and enforceable against the Property or any part thereof, or
any use of the Property or any part thereof.
LETTER OF CREDIT shall mean a clean, irrevocable, unconditional
transferable letter of credit in favor of the Mortgagee and entitling the
Mortgagee to draw thereon in New York, New York, issued by a domestic bank
or the U.S. agency or branch of a foreign bank the investment rating of
which, or of a bank holding company by which it is wholly owned, at the
time such letter of credit is delivered is not less than the Required
Rating applicable thereto, or if there are no domestic banks or U.S.
agencies of a foreign bank having, or owned by a bank holding company
having, such investment rating then issuing letters of credit and if
there are no providers of surety bonds that meet the claims paying
ability rating criteria as set forth under the definition of Surety Bond,
then such letter of credit may be issued by a domestic bank, the long term
unsecured debt rating of which, or of a bank holding company by which it
is wholly owned, is the highest such rating then given to a domestic
commercial bank.
MANAGEMENT AGREEMENT shall mean the Management Agreement for the
Property between the Beneficiary and Urban Retail Properties Co. dated
as of March 1, 1995, as amended, supplemented or restated from time to
time as permitted under this Mortgage.
MANAGER shall mean Urban Retail Properties Co. or its successor
from time to time as manager of the Property in accordance with Section
19.1(i) hereof.
MATURITY Date shall have meaning set forth in the Notes.
MOODY'S shall mean Moody's Investors Service, Inc.
MORTGAGE shall mean this Mortgage, Security Agreement, Assignment
of Leases and Rents and Fixture Filing, as amended or supplemented from
time to time pursuant to the provisions hereof.
<PAGE>
MORTGAGEE shall mean Lehman Brothers Holdings Inc. d/b/a Lehman
Capital, a division of Lehman Brothers Holdings Inc. and its successors
and/or assigns.
MORTGAGOR shall mean LaSalle National Trust, N.A., successor to
LaSalle National Bank, not in its individual capacity but as land
trustee under a Trust Agreement dated June 10, 1970 and known as Trust
No. 40940, and successor trustees under the Trust Agreement for the
period during which the same shall own the Property, and following any
conveyance of the Property which is permitted by the terms of this
Mortgage, shall mean the transferee for the period during which each
transferee shall own the Property.
MULTIEMPLOYER PLAN means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA to which the Beneficiary is making or has
an obligation to make contributions.
NOTE A shall mean that certain Promissory Note A of even date
herewith executed by Beneficiary and payable to Mortgagee in the
original principal amount of $160,000,000.
NOTE B shall mean that certain Promissory Note B of even date
herewith executed by Beneficiary and payable to Mortgagee in the original
principal amount of $10,000,000.
NOTES shall mean the collective reference to Note A and Note B.
OFFICERS' CERTIFICATE shall mean a certificate delivered to the
Mortgagee and signed by a senior level officer with executive authority
with respect to the Beneficiary or either of the partners of the
Beneficiary or with executive authority with respect to the operation of
the Property and who can reasonably be expected to have knowledge with
respect to the matters set forth therein and who signs the certificate
on behalf of the person which at the time the certificate is delivered
is the Beneficiary or a general partner of the Beneficiary, which
certificate shall be subject to the provisions of Article 38 hereof,
provided that in addition to the foregoing requirements, so long as an
Urban Approved Entity owns an interest in the Property, directly or
indirectly, and Urban Retail Properties Co. is the Manager, all Officers'
Certificates shall be signed on behalf of an Urban Approved Entity.
OPERATING AGREEMENT shall mean the Water Tower Place Operating
Agreement, dated March 24, 1976, by and between the Mortgagor and 180
East Pearson Street Homeowner's Association and recorded as Document
23432351 with the Recorder of Deeds of Cook County, Illinois, as
amended by the Amendment to Water Tower Place Operating Agreement,
dated January 6, 1977, by and between the Mortgagor and 180 East Pearson
Street Homeowner's Association and recorded as Document 24894894 with the
Recorder of Deeds of Cook County, Illinois, and as further amended,
modified or supplemented from time to time as permitted hereunder.
OPERATING EXPENSES shall mean, for any period, all expenses
(excluding interest, principal and other payments in respect of
indebtedness) payable by the Beneficiary (or by the Manager for the
account of the Beneficiary) during such period in connection with the
operation of the Property, determined on an accrual basis.
OPERATING INCOME shall mean, for any period, all income received by
the Beneficiary (or by the Manager for the account of the Beneficiary)
from any Person during such period in connection with the operation of
the Property, determined on a cash basis, but without limitation of the
foregoing, excluding security deposits, proceeds of financing and any
Proceeds except that Proceeds from rental loss or business interruption
insurance shall be included in Operating Income for the period to which
such Proceeds relate.
<PAGE>
PENSION PLAN means any Employee Benefit Plan, other than a
Multiemployer Plan, which is subject to the provisions of Title IV of
ERISA or Section 412 of the IRC and which is established, sponsored,
maintained, or contributed to on behalf of employees of the Beneficiary.
PERMITTED EXCEPTIONS shall mean those matters identified in Exhibit
B hereto.
PERMITTED OWNER shall mean any one of the following:
(a) One or more Principals; or
(b) One or more Approved Control Parties; or
(c) Any combination of Principals and Approved Control
Parties; or
(d) Any entity in which any one or a combination of
Principals and Approved Control Parties is (i) in the case of
partnership, a general partner; (ii) in the case of a limited
liability company, a member with full voting privileges; and (iii)
in the case of a corporation, a shareholder with full voting
privileges, that owns and controls at least a 25% interest;
("control" meaning, 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 a person who controls, directly or indirectly, a general partner,
member or shareholder shall be deemed to "control" such partnership,
limited liability company or corporation, as applicable.)
PERSON shall mean any individual, sole proprietorship, corporation,
general partnership, limited partnership, joint venture, association,
joint stock company, bank, Massachusetts business trust, trust, estate,
unincorporated organization, government (or any agency or political
subdivision thereof) or any other form of entity.
PERSONAL PROPERTY shall have the meaning stated in Section 48.1
hereof.
PRE-APPROVED PROPERTY MANAGER shall mean (i) Heitman Properties Ltd.
or (ii) Urban Retail Properties Co.; provided that Heitman Properties Ltd.
shall only be deemed to be a "Pre-Approved Property Manager" if either
(A) a Principal (other than a Urban Approved Entity) or any other Person
(other than an individual) managed or advised by Heitman Capital Management
Corporation or one of its Affiliates then owns an interest in the Property
(directly or indirectly), or (B) Heitman Properties Ltd. has under
management, at the time of the proposed transfer, at least six regional
shopping centers comprising an aggregate of at least four million square
feet in the United States (exclusive of the Property).
PREMISES shall mean the Land, Improvements and Equipment and all
accessions and additions thereto and increases therein which constitute
a part of the Improvement or Equipment.
PRINCIPAL shall mean (i) any Urban Approved Entity, (ii) Telephone
Real Estate Equity Trust, (iii) an entity advised by Heitman Capital
Management Corporation with a net worth, exclusive of its interest in the
Property, of at least $250 million and (iv) HAC Group Trust.
PROCEEDS shall mean amounts, awards or payments payable to the
Mortgagor, the Beneficiary or the Mortgagee in respect of all or any part
of the Property in connection with the damage, destruction or Taking
thereof.
<PAGE>
PROPERTY shall have the meaning stated in the Preliminary Statement
hereof.
RATING AGENCIES shall mean D&P and Moody's.
RENEWAL LEASE shall have the meaning stated in Section 20(b) hereof.
REQUIRED RATING shall mean a long term unsecured debt rating not
lower than Investment Grade in all cases except in the case of a Credit
Facility delivered in accordance with Section 14(d) hereof, and in such
excepted cases shall mean (i) a short term debt rating by Moody's not
lower than P-1 and (ii) a short term debt rating by D&P not lower than
D&P's highest category of short term debt rating, provided that the
maturity or expiration date of the Credit Facility does not exceed three
months, and otherwise shall mean a long term debt rating by Moody's not
lower than Aa.
RESTORATION shall mean, in case of damage to or destruction or
Taking of the Premises or any part thereof, the restoration, replacement
or rebuilding of the Premises as nearly as practicable (after taking into
account the consequences of a Taking, if any) to at least its value,
utility and character (in light of commercial materials and services
then available) immediately prior to such damage, destruction or Taking,
together with such Alterations as may be made at the Beneficiary's
election in accordance with the applicable provisions of this Mortgage.
S&P means Standard and Poor's Corporation.
SECURED OBLIGATIONS shall have the meaning stated in the Preliminary
Statement hereof.
SECURITY DOCUMENTS shall mean this Mortgage, the Notes, the
financing statements executed in connection herewith and any additional
documents executed in connection herewith and therewith, including
Officer's Certificates.
SERVICER shall mean Hatfield Phillips Inc. or such other Person as
may be designated by the Mortgagee.
SUBORDINATE MORTGAGE shall mean a mortgage, deed of trust, collateral
assignment of beneficial interest in land trust or other security
instrument made to an Institutional Lender (or, with respect to
Indebtedness permitted under Section 19.2(v), to an Affiliate) on all or
any portion of the Property (or the Beneficiary's interest in the Land
Trust) which is permitted by Section 19.3 hereof (which instrument may
include a pledge of the rents from the Premises).
SURETY BOND shall mean a clean, irrevocable, unconditional surety
bond in favor of the Mortgagee and entitling the Mortgagee to draw thereon
in New York, New York, issued by a domestic insurance company the claims
paying ability rating of which at the time such surety bond is delivered is
not less than the Required Rating applicable thereto, or if there are no
insurance companies with such claims paying ability rating then issuing
surety bonds and if there are no domestic banks or U.S. agencies or
branches of a foreign bank, or bank holding companies with a subsidiary,
issuing letters of credit that meet comparable rating criteria as set
forth under the definition of Letter of Credit, then such surety bond may
be issued by a domestic insurance company the claims paying ability of
which is the highest such rating then given to a domestic insurance
company.
<PAGE>
TAKING shall mean a temporary or permanent taking by a government
or political subdivision thereof or by a governmental agency, 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 Land or any part
thereof.
TENANT shall mean any Person liable by contract or otherwise to pay
rent or a percentage of gross income, revenue or profits pursuant to a
Lease including a guarantor of a Tenant's obligations under a Lease.
TEST INDEBTEDNESS shall mean the sum of (i) the aggregate amount of
principal indebtedness then due under the Notes and (ii) the aggregate
amount of outstanding indebtedness under Sections 19.2(v) and 19.2(vi)
secured by a Subordinate Mortgage, including any accrued and unpaid
interest in respect thereof at the maximum rate provided in such mortgage.
THIRD PARTY GUARANTY shall have the meaning stated in Section 14(d)
herein.
TOTAL LOSS shall mean damage or destruction of the Property by fire
or other casualty (including earthquake) to the extent that the Mortgagor
is not required, under theDeclaration of Easements, the Condominium Deed
or any of the Leases, to apply the Proceeds to Restoration of the
Premises.
TOTAL TAKING shall mean a permanent Taking of the whole of the
Premises or so much of the Premises that (i) the Beneficiary reasonably
determines that, even after Restoration, the Premises could not be
operated on an economically feasible basis and (ii) the Declaration of
Easements or any of the Leases do not require such Restoration.
TRUST AGREEMENT shall have the meaning stated in the Preliminary
Statement hereof.
U.S. GOVERNMENT SECURITIES shall mean securities evidencing an
obligation to timely pay principal and interest in a full and timely
manner that are (x) direct obligations of the United States of America
for the payment of which its full faith and credit is pledged or (y)
obligations of a Person controlled or supervised by and acting as an
agency or instrumentality of and guaranteed as a full faith and credit
obligation by the United States of America, which in either case are
not subject to prepayment and are not callable or redeemable at the
option of the issuer thereof (including a depository receipt issued
by a bank (as defined in Section 3(a)(2) of the Securities Act of 1933,
as amended) as custodian with respect to any such U.S. Government
Securities or a specific payment of principal of or interest on any such
U.S. Government Securities held by such custodian for the account of the
holder of such depository receipt, provided that (except as required by
law) such custodian is not authorized to make any deduction from the
amount payable to the holder of such depository receipt from any amount
received by the custodian in respect of the securities or the specific
payment of principal of or interest on the securities evidenced by such
depository receipt).
URBAN APPROVED ENTITY shall mean Urban Shopping Centers Inc. or
Affiliates of Urban Shopping Centers Inc.
2. INTENTIONALLY DELETED.
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<PAGE>
3. PARTICULAR COVENANTS, REPRESENTATIONS AND WARRANTIES.
----------------------------------------------------
3.1. VALIDITY AND ISSUANCE OF THE NOTES; Title to the Premises.
(a) The Mortgagor covenants and agrees and represents as follows:
The Mortgagor is duly authorized under applicable law and its trust
agreement and directions thereunder from the Beneficiary to execute and
deliver this Mortgage and the other Security Documents to which the
Mortgagor is a party, and to grant, convey, transfer and assign the
Property to the Mortgagee in accordance with this Mortgage.
(b) The Beneficiary covenants and agrees and represents and
warrants as follows:
(i) The Beneficiary is duly authorized under applicable law
and its partnership agreement to execute and deliver this Mortgage and the
other Security Documents to which the Beneficiary is a party and all
partnership, corporate and governmental action, consents, authorizations
and approvals necessary therefor have been duly and effectively taken or
obtained.
(ii) At the time of execution of this Mortgage, the
Mortgagor and the Beneficiary together held good and marketable fee
simple title to the Premises, and good and marketable title to the
Personal Property (other than the Personal Property which is leased
to the Mortgagor and/or the Beneficiary by third parties, as to which
the Mortgagor or the Beneficiary holds a valid, enforceable and
unencumbered leasehold interest), subject to no liens, charges or
encumbrances other than the Permitted Exceptions (excluding, however,
Permitted Exceptions of the typedescribed in clauses (c), (d), (i) and
(j) of Exhibit B hereto for purposes of this representation and
warranty), and upon the execution by the Mortgagor and the Beneficiary
of this Mortgage, the Mortgagee shall have a valid first mortgage lien on
the Premises and a valid first priority security interest in the Personal
Property (other than that excluded above), subject to no liens, charges or
encumbrances other than the Permitted Exceptions (excluding, however,
Permitted Exceptions of the type described in clauses (c), (d), (i) and
(j) of Exhibit B hereto for purposes of this representation). The
Beneficiary represents that there is no condemnation, appropriation or
recapture proceeding pending or, to its knowledge, threatened with
respect to the Property and there are no unrecorded options to purchase
all or any part of the Property. No title insurance company, either
issuing or re-insuring any risk under, a title policy covering all or any
part of the Property, shall be a beneficiary of the representations and
warranties contained in this Mortgage.
(iii) The Beneficiary has made and shall continue to make all
required contributions to all Employee Benefit Plans. The Beneficiary has
no knowledge of any material liability which has been incurred by the
Beneficiary which remains unsatisfied for any taxes or penalties with
respect to any Employee Benefit Plan or any Multiemployer Plan, or of any
lien which has been imposed on the assets of Beneficiary pursuant to
Section 412 of the IRC or Sections 302 or 4068 of ERISA.
(iv) The leases identified in the rent roll dated as of
January 20, 1997 supplied to the Mortgagee constitute all of the Leases
as of the date of such rent roll and any leases entered into subsequent
to such date comply with the provisions of Article 20 hereof and all such
leases are in full force and effect. The information set forth in the
rent roll is true and complete in all material respects. True and correct
copies of all the Leases requested by the Mortgagee have been delivered
to the Mortgagee. The Anchor Leases (i) each expire in the year 2010
(subject to the right of the Tenant thereunder to extend the term as
provided in such Lease) and (ii) contain no provision that would entitle
<PAGE>
the Tenant thereunder to reduce the rental rate provided therein other
than with respect to an abatement in the case of a casualty or
condemnation of the Premises. Except as shown on the rent roll, (A) as
of January 20, 1997, no Tenant was in default in payment of base rent,
percentage rent or common area maintenance and real estate tax
reimbursements due under its Lease (other than for a period of one month
or less), and (B) the landlord under each of the Leases is not in material
default of any of its obligations thereunder and has not received any
written notice of a claimed default which has not been cured to the
satisfaction of the Tenant thereunder other than as described in the
tenant estoppels delivered to the Mortgagee.
(v) The Land and Improvements consist of floors one through
nine of the building located upon the Land having approximately 726,490
gross leasable square feet of retail space and approximately 94,513 gross
leasable square feet of office space and the eleventh and sections of the
tenth floors and the below-grade basement areas (including parking areas)
of said building and the "Common Areas" as defined in Section 1.8 of the
Declaration of Easements.
(vi) No change in the external configuration of the Property
or other matters shown on the Survey of the Property dated December 17,
1984 and prepared by Exzakt Survey Division, Age of Aquarius Co., have
been made subsequent to the date thereof which would affect the accuracy
of such Survey as a depiction of the current configuration of the Property
and such other matters.
3.2. MAINTENANCE OF VALIDITY AND RECORDING.
(a) The Beneficiary covenants that it will direct the Mortgagor to
and will, itself, forthwith after the execution and delivery of this Mortgage
and thereafter as necessary from time to time, cause this Mortgage and the
other Security Documents and any continuation statement or similar instrument
relating to any property subject thereto or to any property intended to be
granted, conveyed, transferred and assigned by this Mortgage to be filed,
registered and recorded in such manner and in such places as may be required
by present and future law in order to publish notice of and fully to protect
the validity thereof or the grant thereby of the property subject thereto and
the interest and rights of the Mortgagee therein. Upon the failure of the
Beneficiary to take any of the foregoing actions, or to direct the Mortgagor
to take any of the foregoing actions, each of the Mortgagor and the
Beneficiary hereby irrevocably appoints the Mortgagee as its agent and
attorney-in-fact to do so. The Beneficiary covenants that it will pay or
cause to be paid all taxes and fees incident to such filing, registration and
recording, and all expenses incident to the preparation, execution and
acknowledgment thereof, and of any instrument of further assurance, and all
federal or state stamp taxes or other charges arising out of or in connection
with the execution and delivery of such instruments.
(b) Each of Mortgagor and Beneficiary covenants that at all times
it will preserve, warrant and defend the Mortgagee's lien and the priority
thereof and rights in and to the Property against the claims of all Persons
and will maintain and preserve such lien, priority and rights.
(c) If the Beneficiary proposes to modify existing easements, rights
of way, restrictive covenants or similar agreements included in the Permitted
Exceptions or to grant additional easements, rights of way, restrictive
covenants or similar agreements affecting title to the Premises (any of the
foregoing modifications of or additional easements, rights of way, restrictive
covenants or similar agreements being referred to as a "Proposed Easement"),
including in connection with an Alteration, then at least twenty-one (21) days
prior to executing any Proposed Easement, the Beneficiary shall deliver a copy
thereof to the Mortgagee together with an Officer's Certificate confirming
that such action (i) either will benefit the Property or will not affect the
utility, operation or value of the Premises in any material adverse respect,
<PAGE>
(ii) will not cause the Premises to be in violation of any Legal Requirement
or of the Declaration of Easements, the Condominium Deed, the Operating
Agreement, any of the Leases, this Mortgage or the other Security Documents,
or any other agreement encumbering the Property or result in the loss of any
certificate of occupancy, and (iii) will not result in or permit a material
reduction or abatement of, or right of offset against, the rentals payable
under any Lease as a result thereof without a corresponding increase in the
rentals payable under another Lease. Unless, on or before the twentieth (20)
day after the Proposed Easement is so delivered to the Mortgagee, Mortgagee
advises the Beneficiary in writing that the Proposed Easement would, in
Mortgagee's sole reasonable judgment, have a material adverse effect on the
value, use or operation of the Property or on the likelihood of repayment of
the Notes, then the Mortgagee shall consent to the Proposed Easement and shall
subordinate this Mortgage thereto.
3.3. NEGATIVE COVENANTS. Each of the Mortgagor and the Beneficiary
covenants that it will not:
(a) engage, directly or indirectly, in any business other than that
arising out of entering into this Mortgage and the other Security
Documents to which the Beneficiary is a party and ownership, operation,
management, leasing and financing of the Property;
(b) partition the Property;
(c) commingle its assets with the assets of any of its affiliates;
(d) guarantee any obligation of any Person or make loans or
advances to Affiliates of the Beneficiary except as expressly permitted
by this Mortgage;
(e) incur, create or assume any indebtedness, or transfer or lease
the Property or any interest therein, or in the beneficial interest in
the Land Trust, except as permitted by Article 19 or Article 20 hereof;
(f) voluntarily file, or consent to the filing of, a petition for
bankruptcy, reorganization, assignment for the benefit of creditors or
similar proceeding with respect to either itself or any successor thereto;
(g) engage in a nonexempt prohibited transaction described in
Section 406 of ERISA or Section 4975 of the IRC; or
(h) acquire, accept or hold title to any other real property, or any
beneficial interest in any land trust, other than the Land and
Improvements and the Land Trust.
The Beneficiary represents and warrants that on the Closing Date neither it
nor the Mortgagor has any indebtedness or obligations, or holds title to any
real estate or any beneficial interest in a land trust, which would cause it
to be in violation of the foregoing covenants.
3.4. EXISTENCE AND RIGHTS. The Beneficiary covenants that it will
do or cause to be done all things necessary to preserve and keep in full force
and effect its existence and will maintain adequate capitalization (taking
into account, among other things, the market value of its assets) for its
business purposes; will pay all expenses of the Property from property of the
Beneficiary; will maintain books and records and bank accounts separate from
those of its Affiliates and will maintain a separate business office (which
may be a management office at the Premises); will at all times hold itself
out to the public as a legal entity separate and distinct from any of its
Affiliates (including in its leasing activities, in entering into any contract,
in preparing its financial statements, and in its stationery and on any signs
it posts), and will cause its Affiliates to conduct business with it on an
arm's-length basis (or, as to management and leasing, on a basis comparable
to the management and leasing arrangements at properties similar to the
<PAGE>
Premises owned by any Affiliate of the Beneficiary and managed by the Manager);
will file its own tax returns or, if part of a consolidated group, will join
in the consolidated tax return of such group as a separate member thereof; and
will cause its management to meet regularly to carry on its business.
3.5. TAX ESCROW; PAYMENT OF TAXES AND OTHER CLAIMS. The Beneficiary
shall, in order to secure the performance and discharge of the Beneficiary's
obligations under Article 9 of this Mortgage, but not in lieu of such
obligations, deposit with the Mortgagee on the first day of each calendar month
until the Secured Obligations are paid in full, deposits, in amounts set by
the Mortgagee from time to time by written notice to the Beneficiary, in order
to accumulate funds sufficient to permit the Mortgagee to pay all annual ad
valorem taxes, assessments and charges of the nature described in Article 9
at least thirty (30) days prior to the date or dates on which they shall
become delinquent. The Beneficiary shall procure and deliver to the Mortgagee
when issued all statements or bills for such obligations. Upon demand by the
Mortgagee, the Beneficiary shall deliver to Mortgagee such additional monies
as are required to satisfy any deficiencies in the amounts necessary to enable
the Mortgagee to pay such taxes, assessments and similar charges thirty (30)
days prior to the date they become delinquent. The Mortgagee shall pay such
taxes, assessments and other charges as they become due to the extent of the
funds on deposit with the Mortgagee from time to time and provided the
Beneficiary has delivered to the Mortgagee the statements or bills therefor.
In making any such payments, the Mortgagee shall be entitled to rely on any
bill issued in respect of any such taxes, assessments or charges without
inquiry into the validity, propriety or amount thereof and whether delivered
to the Mortgagee by the Beneficiary or otherwise obtained by the Mortgagee.
Any deposits received pursuant to this Section 3.5 shall be held by the
Mortgagee in a non-interest bearing trust account which shall be segregated
from any other monies held by Mortgagee. The Mortgagor and the Beneficiary
each grant to the Mortgagee a security interest in all sums deposited with
the Mortgagee pursuant to this Section 3.5 for the purpose of securing the
payment and performance of the Secured Obligations. During the continuance
of any Event of Default, all or any part of the sums on deposit with the
Mortgagee, or any amounts thereafter deposited with the Mortgagee, may be
applied to the Secured Obligations in such order and manner as the Mortgagee
may elect. Notwithstanding the foregoing, the requirement under this Section
3.5 for a tax escrow shall be waived unless and for so long as an Event of
Default shall have occurred and be continuing. Subject to the provisions of
Article 12 hereof, the Beneficiary represents and warrants that there is no
default in the payment of, and covenants that it will pay or discharge or
cause to be paid or discharged before any fine, penalty, interest or cost
may be imposed for nonpayment of, all taxes, assessments and governmental
charges levied or imposed upon it or upon its income, profits or property.
Beneficiary shall submit to Mortgagee evidence of payment of all such taxes,
assessments and other charges within thirty days of the due date thereof.
3.6. PAYMENT OF CERTAIN AMOUNTS. Subject to the provisions of
Article 38 and Article 44 hereof, the Beneficiary will cause to be duly paid
the principal of, and interest on, the Notes and all other amounts due under
the Notes at the places, at the respective times and in the manner provided
in the Notes. The Beneficiary also will cause to be duly paid all other
charges, fees or other amounts which become due under this Mortgage or the
other Security Documents.
4. MAINTENANCE AND REPAIRS, SHORING.
--------------------------------
The Beneficiary will keep, or cause to be kept, the Premises and the parking
areas, sidewalks, curbs and streets and ways located on the Land and all other
means of access to the Premises in good and clean order and condition and in
a first-class manner and, subject to Excusable Delays and the provisions set
forth in this Mortgage with respect to damage or destruction caused by fire
or other casualty or by a Taking, the Beneficiary will promptly make or cause
to be made all necessary or appropriate repairs, replacements and renewals
<PAGE>
thereof to maintain the Premises in such first-class condition, whether
interior or exterior, structural or nonstructural, ordinary or extraordinary.
All repairs and replacements shall consist of materials which are compatible
with the existing Improvements and of comparable quality to the materials
replaced and shall be installed in a good and workmanlike manner. The
Beneficiary will do or cause others to do, to the extent permitted by
applicable law, all shoring of (i) foundations and walls of any Improvements
or (ii) the ground adjacent thereto, and every other act necessary or
appropriate for the preservation and safety of the Premises by reason of or
in connection with any excavation or other building operation upon the Land
or any adjoining property, whether or not the Beneficiary or any other Person
shall, by any Legal Requirement, be required to take such action or be liable
for failure to do so. The Beneficiary will not do or permit any act or thing
which might affect the utility, value or operation of the Property or any part
thereof in any material adverse respect, or commit or permit any waste of the
Property or any part thereof.
5. UTILITY SERVICES.
----------------
Subject to the provisions of Article 12 hereof, the Beneficiary will pay or
cause to be paid when due all charges for all public or private utility
services, all public or private highway services, all public or private
communication services and all sprinkler systems and protective services at
any time rendered to or in connection with the Property or any part thereof
and which are incurred by or on behalf of the Beneficiary or the Mortgagor.
6. NO CLAIMS AGAINST MORTGAGEE.
---------------------------
Nothing contained in this Mortgage shall constitute any consent or request by
the Mortgagee, express or implied, for the performance of any labor or
services or the furnishing of any materials or other property in respect of
the Property or any part thereof, nor as giving the Beneficiary any right,
power or authority to contract for or permit the performance of any labor or
services or the furnishing of any materials or other property in such fashion
as would permit the making of any claim against the Mortgagee in respect
thereof or any claim that any lien based on the performance of such labor or
services or the furnishing of any such materials or other property is prior
to the interest of the Mortgagee under this Mortgage.
7. INDEMNIFICATION BY THE BENEFICIARY.
----------------------------------
Subject to the provisions of Article 38 hereof, the Beneficiary will protect,
indemnify and save harmless the Mortgagee from and against: all liabilities,
obligations, claims, damages, penalties, causes of action, costs and expenses
(including all reasonable attorneys' fees and expenses) imposed upon or
incurred by or asserted against the Mortgagee or the Property, by reason of
the occurrence or existence of any of the following (to the extent (i) the
insurance proceeds payable on account of the following and received by the
Mortgagee shall be inadequate, and (ii) an action is brought or written claim
is made prior to the release of this Mortgage or, as to the indemnity
contained in clause (h) of this Article 7, within 24 months after such
release if such action or claim arose from an event that occurred prior to
such release): (a) ownership or possession of the Mortgagor's, Beneficiary's
or Mortgagee's interest in the Property, or any interest therein, or receipt
of any rent or other sum therefrom, (b) any accident, injury to or death of
any Persons or loss of or damage to property occurring on or about the
Premises or any part thereof or the adjoining parking areas, sidewalks, curbs,
vaults and vault space, if any, streets or ways, (c) any use, non-use or
condition of the Premises or any part thereof or the adjoining parking areas,
sidewalks, curbs, streets or ways, including claims or penalties arising from
violation of any Legal Requirement or Insurance Requirement, as well as any
claim based on any patent or latent defect, whether or not discoverable by the
<PAGE>
Mortgagee, any claim the insurance as to which is inadequate, and any claim in
respect of any adverse environmental impact or effect, (d) any failure on the
part of the Mortgagor or the Beneficiary to perform or comply with any of the
terms of this Mortgage, the Declaration of Easements, the Condominium Deed,
the Operating Agreement, any Lease or any other Security Document to which it
is a party or any other agreement to which Mortgagor or Beneficiary is a party
or which is binding on the Property or any part thereof, (e) any performance
of any labor or services or the furnishing of any materials or other property
in respect of the Property or any part thereof, (f) any negligence or tortious
act or omission on the part of the Mortgagor or the Beneficiary or any of its
agents, contractors, servants, employees, sublessees, licensees or invitees,
(g) any contest referred to in Article 12, or (h) use, generation, storage,
release, burial, deposit, discharge, disposal or presence of Hazardous
Substances in, on, or under the Land or the Improvements in violation of
Environmental Law or the failure of the Beneficiary, the Manager or the
Mortgagor to comply with any Legal Requirement relating to Hazardous
Substances or knowingly acquiescing in a violation of such Legal Requirement
by a tenant under a Lease (in either case, whether prior to or during the
period that the Secured Obligations are outstanding and regardless of by whom
caused, whether by the Mortgagor or the Beneficiary or by any predecessor in
title or by any owner of real estate adjacent to the Land or the Improvements
or by any other Person, or any employee, agent, contractor or subcontractor of
the Mortgagor or the Beneficiary or any predecessor in title or any such
adjacent land owner or any other Person), including, with respect to this
clause (h): (i) claims of any Person (including governmental agencies) for
damages, penalties, losses, costs, fees, expenses, damages, injunctive or
other relief; (ii) response costs, clean-up costs, costs and expenses of
removal and restoration, including fees of attorneys and experts, and costs of
determining the existence of Hazardous Substances and reporting same to any
governmental agency; and (iii) any and all expenses or obligations, including
reasonable attorneys' fees, incurred at, before and after any trial or appeal
therefrom whether or not taxable as costs, including, without limitation,
reasonable attorneys' fees, witness fees, deposition costs, copying and
telephone charges and other expenses. Any amounts payable under this Section
to the Mortgagee which are not paid within ten Business Days after written
demand therefor by the Mortgagee, setting forth in reasonable detail the
amount of such demand and the basis therefor, shall bear interest from the
date of demand until paid at the Default Rate, and shall be secured by this
Mortgage. In case any action, suit or proceeding is brought against the
Mortgagee by reason of any such occurrence, the Beneficiary, upon the request
of the Mortgagee, will at the Beneficiary's expense resist and defend such
action, suit or proceeding or will cause the same to be resisted and defended
by counsel for the insurer of the liability or by counsel selected by the
Beneficiary (unless reasonably disapproved by the Mortgagee). So long as the
Beneficiary is resisting and defending such action, suit or proceeding as
provided above in a prudent and commercially reasonable manner and no
foreclosure proceeding is then pending, the Mortgagee shall be entitled to
settle such action, suit or proceeding and claim the benefit of this Article 7
with respect to such action, suit or proceeding and the Mortgagee agrees that
it will not settle any such action, suit or proceeding without the consent of
the Beneficiary, which consent shall not be unreasonably withheld or delayed,
provided that if the Beneficiary is not diligently defending such action, suit
or proceeding in a prudent and commercially reasonable manner as provided
above or if a foreclosure is pending, the Mortgagee may settle such action,
suit or proceeding and claim the benefit of this Article 7 with respect to
settlement of such action, suit or proceeding. In no event shall the
Beneficiary be obligated to protect, indemnify or save harmless the Mortgagee
with respect to losses, damages or liabilities to the extent arising out of
the Mortgagee's gross negligence or willful misconduct. The Mortgagor and
the Beneficiary hereby expressly waive and release the Mortgagee from any and
all claims for damages, liability, expense, contribution or cost recovery,
including without limitation any cost recovery claim under the Comprehensive
Environmental Response Compensation and Liability Act ("CERCLA"), 42 U.S.C.
9601 et seq., as it may be amended, or any other federal or state statute,
regulation or law, including without limitation state common law, whether such
<PAGE>
claim exists now or in the future, arising out of or in connection with the
use of or condition of the Land or the Improvements or the presence or release
of Hazardous Substances in, on or under the Property (other than with respect
to such claims, damages, liabilities or costs, to the extent arising out of
the Mortgagee's gross negligence or willful misconduct), it being understood
that all such claims, damages, liabilities, expenses and costs shall be the
sole responsibility of the Mortgagor and the Beneficiary without regard to the
absence or presence of fault on the part of the Mortgagor or the Beneficiary.
Notwithstanding anything contained in Article 38 to the contrary, as to any
action brought or claim made under clause (h) of this Article 7, Beneficiary
(but not its constituent general partners or their subpartners at any level)
shall remain liable under the indemnity provided for in clause (h) of this
Article 7 after the release of this Mortgage, with respect to such action or
claims to the extent of the value of Beneficiary's interest in the Property
and the beneficial interest in the Land Trust immediately prior to such
release and to the extent of the proceeds received by Beneficiary on account
of any subsequent disposition of such interest.
8. INSPECTION.
----------
The Mortgagee and its authorized representatives may at all reasonable times
and upon reasonable notice and accompanied by an agent of the Beneficiary
enter and examine the Property and, in connection with such entering and
examination, will use reasonable efforts not to interfere with operation of
the Property. Such Persons shall not inspect the Premises on other than a
Business Day except in the case of an emergency. Such Persons shall not have
any duty to make any such inspection and shall not have any liability or
obligation to the Mortgagor, the Beneficiary or any other Person for making
or not making any such inspection.
9. PAYMENT OF IMPOSITIONS, ETC.
---------------------------
Subject to the provisions of Article 12 relating to permitted contests, the
Beneficiary will pay, or cause to be paid, before any fine, penalty, interest
or cost may be added for such nonpayment, all real estate taxes, assessments,
fees, taxes on rents or rentals, and other governmental charges that may be
levied or assessed against the Property or any part thereof or the Mortgagor
or the Beneficiary with respect to the Property or any part thereof or rents
therefrom or which become liens upon the Property or any part thereof
(collectively, "Impositions"). Except as provided in Article 45 hereof, the
Beneficiary shall not be required to pay any income, excess profits or revenue
tax, excise tax or inheritance tax, gift tax, franchise tax, corporation tax,
capital levy, estate succession or other similar tax or charge that may be
payable by or chargeable to the Mortgagee, or any interest, fines, costs,
additions to tax or penalties in respect thereof, provided Beneficiary shall
pay any such tax which is imposed, levied or assessed in substitution for any
Impositions.
10. COMPLIANCE WITH LEGAL AND INSURANCE REQUIREMENTS, INSTRUMENTS.
-------------------------------------------------------------
(a) Subject to the provisions of Article 12 relating to permitted contests,
the Beneficiary will (i) comply, or cause compliance, with all Legal
Requirements and Insurance Requirements before the expiration of any
applicable extension or cure period whether or not compliance therewith shall
require structural changes in the Improvements or interfere with the use and
enjoyment of the Property or any part thereof, (ii) procure, maintain and
comply with, all permits, licenses and other authorizations required by Legal
Requirements to be complied with for any use then being made of the Premises
or any part thereof, and for the proper operation and maintenance of the
Improvements and the Equipment or any part thereof, provided that with
respect to the Disabilities Act, the Beneficiary will proceed in a reasonably
diligent manner to achieve compliance to the extent Beneficiary reasonably
<PAGE>
determines that compliance is required under the Disabilities Act and (iii)
comply with applicable duties or obligations under any instruments of record
at the time in force binding upon, and enforceable against, the Beneficiary or
the Property or any part thereof; provided that it shall not be a Default
hereunder if it shall be the obligation of a Tenant to comply with any Legal
Requirement, procure, maintain or comply with any such permit, license or
other authorization or comply with such duties or obligations so long as the
Beneficiary promptly after receiving actual notice of any noncompliance
commences and diligently pursues its rights against such Tenant and uses its
diligent efforts to cause such Tenant to comply with such Legal Requirement
or maintain or comply with such permit, license or other authorization or
comply with such duties or obligations within a reasonable time and the
failure to comply with the requirement in question does not subject the
Mortgagee to any of the risks described in clause (b) or (c) of Article 12
hereof and does not impair the validity of any insurance required to be
maintained by the Beneficiary under Article 13 hereof or the right to full
payment of any claims thereunder. The Beneficiary shall pay all fines,
penalties, interest and costs imposed as a result of any failure of the
Mortgagor or the Beneficiary to perform its obligations under this Article 10.
(b) Each of the Mortgagor and the Beneficiary covenants and agrees
(i) to perform punctually all material obligations and agreements to be
performed by it as lessor under any Anchor Lease (it being expressly agreed
that any obligation or agreement of the landlord which if not performed would
give an anchor tenant the right to terminate an Anchor Lease shall be deemed
material) or as a party to the Declaration of Easements, the Condominium Deed,
the Operating Agreement, the Permitted Exceptions or the Management Agreement
or any replacement management agreement, (ii) to perform punctually all
obligations and agreements to be performed by it as lessor under any Lease
other than Anchor Leases such that there will be no material and adverse
impairment of the value of the Property or the Mortgagee's interest under this
Mortgage, and (iii) to do all things necessary or appropriate in the ordinary
course of its business, to compel performance by each other party to each of
such instruments of such other party's obligations and agreements thereunder.
The Beneficiary will maintain the validity, perfection, priority and
effectiveness of this Mortgage and the other Security Documents, and will not
take any action, will not permit action to be taken by others and will not
omit to take any action, nor, except as permitted by Article 20 hereof, will
the Mortgagor or the Beneficiary give any notice, approval or consent or
exercise any rights under or in respect of any Lease or any of such other
instruments, which action, omission, notice, approval, consent or exercise of
rights would release any Tenant or other party from, or reduce any Tenant's or
any other party's obligations or liabilities under, or would result in the
termination, surrender or assignment of, or the amendment or modification of
in any material adverse respect, or would impair the validity of, any Lease,
any of such other instruments, this Mortgage or any of the other Security
Documents (other than as expressly permitted by Article 20 hereof), or would
affect the Property in any material adverse respect, without the prior written
consent of the Mortgagee, and any attempt to do any of the foregoing without
such consent shall be of no force and effect.
(c) The Beneficiary represents and warrants that it has not
received any written notice of any violation which remains uncured, and that
it has no actual knowledge of any material respect in which it or the Premises
is, on the date hereof, in violation of any Legal Requirement (including the
presence, use, storage or handling of any hazardous or toxic substance, waste
or material or oil, petroleum product or asbestos on, under, released upon or
migrating from the Property) or Insurance Requirement or of any agreement
binding upon the Mortgagor, the Beneficiary or the Property, except that
Beneficiary is not hereby representing or warranting as to compliance as of
the date hereof of the Premises with the Disabilities Act.
<PAGE>
11. LIENS.
-----
Subject to the provisions of Article 12 relating to permitted contests and
Section 19.2 relating to permitted indebtedness, the Beneficiary will not
directly or indirectly create or permit or suffer to be created or to remain,
and will discharge or promptly cause to be bonded in an amount not less than
the claim by a surety company licensed to issue such bonds in Illinois
(provided that, in the case of a claim in excess of $5 million, such surety
company shall have a long-term unsecured debt rating of not less than "Baa"
by Moody's, or, if not rated by Moody's, not less than "BBB" by S&P) or
discharged by payment, final order of a court of competent jurisdiction or
otherwise, within forty-five Business Days after receiving written notice
of the filing thereof, any mortgage, deed of trust, lien, encumbrance or
charge upon, pledge of, or conditional sale or other title retention
agreement with respect to, the Property or any part thereof or the
Beneficiary's interest in the Land Trust, other than the Permitted
Exceptions.
12. PERMITTED CONTESTS.
------------------
Anything to the contrary contained herein notwithstanding, the Mortgagor or
the Beneficiary at its expense may contest, by appropriate legal,
administrative or other proceedings conducted in good faith and with due
diligence, the amount or validity or application, in whole or in part, of any
Imposition or lien therefor or any Legal Requirement or Insurance Requirement
or charges or other amounts required to be paid pursuant to the provisions of
Article 5 hereof, or the application of any instrument of record affecting the
Property or any part thereof (other than the Security Documents) or any claim
of mechanics, materialmen, suppliers or vendors or any lien therefor, and may
withhold payment of the same pending such proceedings if permitted by law;
provided that (a) in the case of any Impositions or lien therefor or any
claims of mechanics, materialmen, suppliers or vendors or any lien therefor,
such proceedings shall suspend the collection thereof from the Mortgagor, the
Beneficiary, the Mortgagee and the Property, (b) neither the Property nor any
part thereof or interest therein would be in any danger of being sold,
forfeited or lost if the Mortgagor or the Beneficiary pays the amount or
satisfies the condition being contested, and the Mortgagor or the Beneficiary
would have the opportunity to so pay or satisfy, and Beneficiary shall pay
such amount, in the event of the Mortgagor's or the Beneficiary's failure to
prevail in the contest, (c) in the case of an Insurance Requirement, the
failure of the Mortgagor or the Beneficiary to comply therewith shall not
impair the validity of any insurance required to be maintained by the
Beneficiary under Article 13 or the right to full payment of any claims
thereunder, (d) in the case of Impositions, the Beneficiary shall pay such
Impositions in full to the taxing authority under protest, (e) in the case of
any service described in Article 5, any contest or failure to pay will not
result in a discontinuance of any such service, (f) in the case of any
instrument of record affecting the Property or any part thereof, the
contest or failure to perform under any such instrument shall not result in
the placing of any lien on the Property or any part thereof unless such lien
is bonded in an amount not less than the lien by a surety company licensed to
issue such bonds in Illinois (provided that, in the case of a claim in excess
of $5 million, such surety company shall have a long-term unsecured debt
rating of not less than "Baa" by Moody's, or, if not rated by Moody's, not
less than "BBB" by S&P), and (g) neither the failure to pay or perform any
obligation which Beneficiary is permitted to contest under this Article 12
nor an adverse determination of any such contest shall result in a material
adverse effect on the utility, value or operation of the Property.
<PAGE>
13. INSURANCE.
---------
13.1. RISKS TO BE INSURED. The Beneficiary will maintain or
cause to be maintained, with insurers authorized to issue insurance in the
State of Illinois and having an A.M. Best Company, Inc. rating of "A" or
better and financial size category of not less than X (or in the case of
earthquake insurance not less than V) and capital and policyholder surplus
of not less than $500,000,000, and a Moody's or S&P rating of any grade of A
or better, insurance coverage as described in Exhibit D hereto and shall pay
in a timely manner all Premiums due in connection therewith. Such insurance
coverage shall also comply with the requirements of Article IX of the
Declaration of Easements to the extent such requirements are more stringent
or require greater coverage than the requirements of this Article 13.
Notwithstanding anything to the contrary in this Article 13 or Exhibit D
hereto, the Persons providing insurance on the date hereof (as evidenced in
the certificates delivered pursuant to Section 13.3) shall be approved
insurers for purposes of this Mortgage and Exhibit D hereto. Additionally,
in the event any other Insurer submitted by Beneficiary to the Mortgagee for
its consent does not meet the requirements set forth above, the approval of
the Mortgagee shall not be unreasonably withheld or delayed.
Subject to the last sentence of this paragraph, the Beneficiary
shall, in order to secure the performance and discharge of the Beneficiary's
obligations under Article 13 of this Mortgage, but not in lieu of such
obligations, deposit with the Mortgagee on the first day of each calendar
month until the Secured Obligations are paid in full, a sum in an amount
determined by the Mortgagee from time to time by written notice to the
Beneficiary, in order to accumulate funds sufficient to permit the Mortgagee
to pay all premiums payable in connection with the insurance required under
said Article 13 at least thirty (30) days prior to the date or dates on which
they shall become due. Upon demand by the Mortgagee, the Beneficiary shall
deliver to the Mortgagee such additional monies as are required to satisfy
any deficiencies in the amounts necessary to enable the Mortgagee to pay such
premiums thirty (30) days prior to the date they shall become due. Any
deposits received pursuant to this Section 13.1 shall be held by the
Mortgagee in a non-interest bearing trust account which shall be segregated
from any other monies held by Mortgagee. The Mortgagor and the Beneficiary
each grant to the Mortgagee a security interest in all sums deposited with the
Mortgagee pursuant to this Section 13.1 for the purpose of securing the
payment and performance of the Secured Obligations. Upon the occurrence of any
Event of Default, all or any part of the sums on deposit with the Mortgagee,
or any amounts thereafter deposited with the Mortgagee, may be applied to the
Secured Obligations in such order and manner as the Mortgagee may elect.
Notwithstanding the foregoing, the requirement under this Section 13.1 for an
insurance escrow shall be waived unless and for so long as an Event of Default
shall have occurred and be continuing.
13.2. POLICY PROVISIONS. Each policy of insurance maintained by
the Beneficiary pursuant to Section 13.1 shall (a) except in the case of
workers' compensation insurance, name the Beneficiary as insured and name the
Mortgagor and the Mortgagee as additional insureds; (b) except in the case of
public liability insurance and workers' compensation insurance and, in the
event that no Event of Default has occurred and is continuing, rent loss
insurance, provide that all Proceeds thereunder shall be payable to the
Mortgagee pursuant to a standard first mortgagee endorsement, without
contribution, and that adjustment and settlement of any loss in excess of
$1,000,000 shall be subject to the reasonable approval of the Mortgagee; (c)
include effective waivers by the insurer of all claims for insurance premiums
against all loss payees, additional insureds and named insureds (other than
the Beneficiary) and, to the extent available at commercially reasonable rates,
all rights of subrogation against any loss payee, additional insured or named
insured; (d) permit the Mortgagee to pay the premiums and continue any
insurance upon failure of the Beneficiary to pay premiums when due, the
insolvency of the Beneficiary or the foreclosure or other transfer of the
<PAGE>
Property; (e) except in the case of public liability and workers' compensation
insurance and except to the extent that the Declaration of Easements or the
Condominium Deed provides for a contrary means of paying Proceeds, provide
that any Proceeds shall be payable to the Mortgagee (subject to the provisions
of Article 15 pursuant to which the Beneficiary is entitled to receive proceeds
of up to $1,000,000) and that the insurance shall not be impaired or
invalidated by virtue of (i) any act, failure to act, negligence of, or
violation of declarations, warranties or conditions contained in such policy
by the Beneficiary, the Mortgagor or the Mortgagee or any other named insured,
additional insured or loss payee, (ii) the occupation or use of the insured
properties for purposes more hazardous than permitted by the terms of the
policy, (iii) any foreclosure or other proceeding or notice of sale relating
to the insured properties or (iv) any change in the title to or ownership or
possession of the insured properties (provided that with respect to items
(iii) and (iv), any notice requirements of the applicable policies are
satisfied); (f) be subject to a deductible, if any, not greater than
$1,000,000; and (g) provide that if all or any part of such policy is to be
canceled or terminated, or is to expire, the insurer will forthwith give prior
notice thereof to each named insured, additional insured and loss payee and
that no cancellation, termination, expiration, reduction in amount of, or
material change (other than an increase in coverage) in, coverage thereof
shall be effective until at least ten days after receipt by each named insured,
additional insured and loss payee of written notice thereof.
13.3. CERTIFICATES. The Beneficiary will deliver to the
Mortgagee on or prior to the Closing Date certificates setting forth in
reasonable detail the material terms (including any applicable notice
requirements) of all insurance policies that the Beneficiary is required to
maintain hereunder, from the respective insurance companies that issued such
policies. Such certificates shall be accompanied by copies of the policies
and, in the case of casualty policies, an original lender's loss payable
endorsement. The Beneficiary will deliver to the Mortgagee, concurrently with
each material change in or renewal of any insurance policy covering any part
of the Premises required to be maintained by the Beneficiary hereunder, a
certificate with respect to such changed or renewed insurance policy certified
by the insurance company issuing such policy or the agent of such issuer, in
the same form and containing the same information as the certificates required
to be delivered by the Beneficiary pursuant to the first sentence of this
Section 13.3 and stating that all premiums then due thereon have been paid to
the applicable insurers and that the same are in full force and effect.
13.4. REPLACEMENT POLICIES. Not less than fifteen (15) Business
Days prior to the expiration, termination or cancellation of any insurance
policy which the Beneficiary is required to maintain hereunder, the
Beneficiary shall obtain a replacement policy (or a binding commitment for
such replacement policy), which shall be effective no later than the date
of the expiration, termination or cancellation of the previous policy, and
shall deliver to the Mortgagee (i) either the original replacement policy or
certified copies and endorsements in respect of such policy in the same form
and containing the same information as required to be delivered by the
Beneficiary pursuant to Section 13.3, or an original binder addressed to the
Mortgagee and executed by the issuer of the insurance or an agent thereof and
(ii) an Officers' Certificate confirming that such policy or bound insurance
complies with all the requirements of Section 13.1.
13.5. REPORTS OF INDEPENDENT INSURANCE BROKERS. Within thirty
(30) days following the end of each calendar year during the term of this
Mortgage, and concurrently with the delivery of each replacement policy or a
binding commitment for the same pursuant to Section 13.4, the Beneficiary will
deliver to the Mortgagee a report from a reputable and experienced insurance
broker or from the insurer setting forth the particulars as to all insurance
obtained by the Beneficiary pursuant to this Article 13, Article 14(c) hereof
and Section 58(j) of the Declaration of Easements and then in effect and
stating that all premiums then due thereon have been paid to the applicable
insurers, that the same are in full force and effect and that, in the opinion
<PAGE>
of such insurance broker or insurer, such insurance otherwise complies in all
material respects with the requirements of this Article 13, Article 14(c)
hereof and Section 58(j) of the Declaration of Easements.
13.6. SEPARATE INSURANCE. Neither the Mortgagor nor the
Beneficiary will take out separate insurance concurrent in form or
contributing in the event of loss with that required to be maintained pursuant
to this Article 13 unless and for so long as such insurance complies with
Section 13.2.
14. ALTERATIONS AND ADDITIONS, ETC.
------------------------------
(a) The Beneficiary will not make or permit any demolition, alteration,
installation, addition, improvement, decoration or new construction (an
"Alteration") to the Premises unless undertaken in accordance with the
applicable provisions of this Mortgage, the Declaration of Easements, the
Condominium Deed, the Leases and the Operating Agreement and unless (except
in the event that the Alteration is required to cure such Event of Default),
no Event of Default shall have occurred and be continuing and no Default shall
occur as a result of such action. Any Alteration (other than tenant
improvement work undertaken by a tenant) which involves an estimated cost of
more than $5,000,000 shall be conducted under the supervision of an Architect
and no such Alteration, or any Alteration (other than tenant improvement work)
as to which plans are required by any Legal Requirements and which involve an
estimated cost of more than $1,000,000, shall be undertaken until five Business
Days after there shall have been filed with the Mortgagee, for information
purposes only and not for approval by the Mortgagee, detailed plans and
specifications and cost estimates therefor, prepared and approved in writing
by such 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 Mortgagee five Business Days in advance of
any work in respect thereof, for information purposes only, together with the
written approval thereof by such Architect if an Architect is required
hereunder. In the event Beneficiary obtains "as-built" plans with respect to
any Alteration (other than tenant improvement work), and the Alteration
involves work having an estimated cost of more than $1,000,000, Beneficiary
shall promptly file a copy thereof with the Mortgagee for information
purposes only. 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 be not less than the standard of
quality of the materials currently used at the Premises and all work shall be
performed and all materials used in accordance with all applicable Legal
Requirements and Insurance Requirements. Beneficiary shall promptly and fully
pay or cause to be paid the cost of any Alteration, subject to the
Beneficiary's right to contest any amount claimed to be due in accordance with
the provisions in Article 12 of this Mortgage. If an Architect is required
hereunder, Beneficiary shall deliver an Officer's Certificate to Mortgagee (i)
stating the name of the Architect and confirming that such Architect meets the
requirements set forth in this Mortgage in the definition of Architect and (ii)
briefly describing the nature of the Alterations to be supervised by such
Architect. Unless on or before the 14th day after the Officer's Certificate
is delivered to Mortgagee, the Mortgagee advises the Beneficiary in writing
that it reasonably disapproves of the Architect as not meeting the requirements
of this Mortgage, the Architect shall be deemed acceptable.
(b) The Beneficiary may make, or cause or permit to be made,
without the prior consent of the Mortgagee, Alterations, provided that, no
less than five (5) Business Days prior to the commencement of each Alteration
(other than tenant improvement work), the cost of which exceeds $1,000,000,
Beneficiary shall deliver to Mortgagee an Officers' Certificate certifying (i)
the reasonable estimated cost of such Alteration, (ii) the source of payment
therefor, and (iii) that the Alteration, together with all contemporaneous and
planned Alterations, will not affect the utility, operation or value of the
<PAGE>
Premises in any material adverse respect. Any other Alterations shall require
the prior written consent of the Mortgagee.
(c) Builder's risk insurance (in completed value form, with, if
applicable, an endorsement for off-site storage of materials) and public
liability insurance, including bodily injury and property damage liability
and comprehensive general liability insurance in accordance with clause (b)
of Exhibit D hereto, shall be maintained or caused to be maintained by the
Beneficiary at all times during which any Alteration is in progress. The
insurance provided for in this Section 14(c) shall be in addition to the
insurance required to be maintained pursuant to clauses (a) and (b) of
Exhibit D hereto and may be effected by an appropriate endorsement, if
obtainable, upon the policy or policies of insurance referred to in Section
13.1 hereof. All insurance provided for in this Section 14(c) shall be
effected under a valid and enforceable policy or policies issued by insurers
which meet the requirements set forth in Exhibit D hereto, and, prior to the
commencement of any Alteration which is reasonably estimated by the
Beneficiary to cost more than $5,000,000, the Beneficiary will furnish to the
Mortgagee certificates in respect of such insurance in the form described in
the first sentence of Section 13.3 hereof and a report of an insurance broker
or an agent of the insurance company issuing such policy containing a
statement of the insurance effected by the Beneficiary pursuant to this
Section 14(c) and then in force and stating that the insurance then in force
complies with the covenants in this Section 14(c).
(d) If at any time, the unpaid cost of all Alterations then in
process, as reasonably estimated by an Architect (other than any Alteration
the cost of which a Tenant is obligated to pay directly or to reimburse the
Beneficiary and the Beneficiary reasonably believes that the Tenant will be
able to pay directly or to reimburse the Beneficiary, as applicable), exceeds
$5,000,000 (adjusted as described below), the Beneficiary shall furnish the
Mortgagee with a completion guaranty of Beneficiary, which is subject to the
provisions of Section 38 and which is secured by security for the payment of
such excess in the form of (x) a Credit Facility, (y) Eligible Collateral in
an amount not less than such excess or (z) provided that such unpaid costs do
not exceed $20,000,000, an unconditional completion guaranty by a third party
entity having a long term unsecured debt rating of at least Aa by Moody's or
if not rated by Moody's, "AA" by S&P, or in either case the next highest
rating category (a "Third Party Guaranty"). In each such case, the Credit
Facility, the Eligible Collateral or Third Party Guaranty shall be delivered
to the Mortgagee. The $5,000,000 amount shall be reduced on any given date
by the Architect's estimate of the cost, if work on the Alterations were to be
terminated on such date, to restore the Premises to the extent necessary so
that, as restored, there would be no material adverse effect on the utility,
operation or value of the Premises as a whole. Costs which are subject to
retainage shall be treated as unpaid. In the event that any Alteration shall
be made in conjunction with any Restoration with respect to which the
Beneficiary shall be entitled to withdraw Proceeds pursuant to Section 15.2
hereof, the amount of the Credit Facility, Third Party Guaranty or Eligible
Collateral to be furnished pursuant hereto need not exceed the aggregate cost
of such Restoration and such Alteration (as estimated by the Architect) less
the sum of the amount of any Proceeds which the Beneficiary may be entitled
to withdraw pursuant to Section 15.2 hereof and $5,000,000 (adjusted as
described above). The Architect shall deliver to the Mortgagee a schedule
setting forth the projected stages of completion of the Alterations and the
corresponding amounts equal to such completion. From time to time as
Alterations progress, the amount of any Cash or Eligible Collateral so
furnished may be withdrawn by the Beneficiary and paid or otherwise applied
by or returned to the Beneficiary in an amount equal to the amount the
Beneficiary would be entitled to so withdraw if Section 15.2 hereof were
applicable, and upon satisfaction of the conditions stated therein and any
Credit Facility so furnished may be reduced by the Beneficiary in an amount
equal to the amount the Beneficiary would be entitled to so reduce if Section
15.2 hereof were applicable and upon satisfaction of the conditions stated
therein, except that the remaining balance of such Cash or remaining Eligible
<PAGE>
Collateral shall not be reduced below a retainage for the amount in excess of
$5,000,000 in an amount that is customary in Illinois unless the conditions
set forth in the last sentence of this clause (d) are first satisfied. The
Mortgagee shall invest all Eligible Collateral in the form of Cash held
pursuant to the terms of this paragraph in accordance with Article 57 hereof.
At any time after substantial completion in all material respects of any
Alteration in respect whereof a Credit Facility or Eligible Collateral was
deposited, or Third Party Guaranty issued, pursuant hereto, the whole balance
of any Cash so deposited with the Mortgagee and then remaining on deposit may
be withdrawn by the Beneficiary and shall be paid by the Mortgagee to the
Beneficiary, and any Credit Facility or Eligible Collateral so deposited, or
Third Party Guaranty issued, shall, to the extent it has not been called upon,
reduced or theretofore released, be released by the Mortgagee to the
Beneficiary, within ten (10) days after receipt by the Mortgagee of an
application for such withdrawal and/or release together with an Officers'
Certificate, and signed also (as to clause (1), (3) and (4) of this Section)
by the Architect, setting forth in substance as follows:
(1) that the Alteration or Alterations in respect of which such
Credit Facility or Eligible Collateral was deposited, or Third Party
Guaranty issued, has been substantially completed in all material
respects in accordance with any plans and specifications therefor
previously filed with the Mortgagee under Section 14(a) hereof;
(2) that to the best knowledge of the certifying Person all amounts
which the Beneficiary is or may become liable to pay in respect of such
Alteration or Alterations have been paid in full or adequately provided
for or are being contested in accordance with Article 12 hereof and, that
lien waivers have been obtained from the general contractor and major
subcontractors performing such Alterations;
(3) that to the best knowledge of the certifying Person such
Alteration will not cause the Premises to be in violation of any Legal
Requirement or Insurance Requirement, or result in the loss of any
certificate of occupancy;
(4) that to the best knowledge of the certifying Person the
Property, after giving effect to such Alteration, can be used for the
purpose for which it was intended; and
(5) that to the best knowledge of the certifying Person no Default
or Event of Default has occurred and is continuing.
15. DAMAGE, DESTRUCTION AND RESTORATION.
-----------------------------------
15.1. THE BENEFICIARY TO GIVE NOTICE. In case of any damage to
or destruction of the Premises or any part thereof for any reason (which shall
include earthquake for all purposes under this Mortgage), the Restoration of
which is reasonably estimated to cost more than $500,000, the Beneficiary will
promptly give written notice thereof to the Mortgagee, generally describing
the nature and extent of such damage or destruction.
15.2. APPLICATION OF INSURANCE PROCEEDS. If no Event of Default
or a Default of any monetary obligation under the Notes shall have occurred
and be continuing the Mortgagee consents to the direct payment to the
Beneficiary of Proceeds up to $1,000,000 paid on account of any damage to or
destruction of the Premises (other than Proceeds paid in respect of the
insurance described in clause (d) of Exhibit D hereto), subject to the
interest of the Mortgagee therein under this Mortgage and the provisions
hereof, provided, however, that if an Event of Default or a Default of any
monetary obligation under the Notes occurs and is continuing, all such
Proceeds shall, subject to the terms and conditions of the Declaration of
Easements and the Condominium Deed, be held by Mortgagee during the
<PAGE>
continuance of such Event of Default or Default in accordance with the next
paragraph hereof.
Subject to the terms and conditions of the Declaration of Easements
and the Condominium Deed providing for the manner of application of Proceeds
payable on account of any damage to or destruction of all or any part of the
Premises, the Beneficiary hereby irrevocably assigns to the Mortgagee, as
additional security, all such Proceeds and agrees to the payment to the
Mortgagee of all such Proceeds in excess of $1,000,000 to be held and
invested by the Mortgagee as the Beneficiary shall direct in accordance with
Article 57 hereof, until applied by the Mortgagee in accordance with the terms
hereof. The Beneficiary and the Mortgagee each shall hold all Proceeds
received by it pursuant to this Section (which shall not apply to any Proceeds
payable under public liability insurance and workers' compensation insurance)
in trust to be applied first, to the extent required under the Declaration of
Easements, the Condominium Deed or this Mortgage, to the cost of Restoration
in accordance with the provisions of the Declaration of Easements or the
Condominium Deed or, if such provisions do not apply, of this Mortgage (except
that Proceeds paid in respect of the insurance described in clause (d) of
Exhibit D hereto shall be applied to payment of Operating Expenses and amounts
due under the Notes otherwise secured hereby). The earnings, if any, which
accrue from investment of any Proceeds paid to the Mortgagee shall be held by
the Mortgagee and applied to pay, first, any expenses incurred by the
Mortgagee in investing such Proceeds and second, so long as (i) the amount of
Proceeds is greater than the cost of the restoration or repair reasonably
estimated by Mortgagee, and (ii) no Event of Default or Default in the payment
of any monetary obligation under the Notes shall have occurred and be
continuing, the amounts required by the Beneficiary to pay income taxes on
such earnings as and when due. To the extent that this Mortgage provides for
Proceeds to be held by the Mortgagee and applied to a Restoration (including
Restoration resulting from a Taking as provided in Section 16.2), such
Proceeds shall be paid by the Mortgagee to the Beneficiary at any time or
from time to time, as such Restoration progresses, either to pay or to
reimburse the Beneficiary for expenditures made or then required to be made
for Restoration, including payments to contractors, subcontractors,
materialmen, suppliers, attorneys, engineers, architects or other Persons who
have rendered services or furnished materials for such Restoration, subject
to and reflecting customary retentions pending completion of the work, and all
other costs and expenses actually incurred by the Beneficiary in connection
with such Restoration, upon the receipt by the Mortgagee of an Officers'
Certificate dated not more than 30 days prior to the application for such
withdrawal, requesting such payment or reimbursement and setting forth the
work performed which is the subject of the application, the parties which
performed the work and the actual coat thereof and an Architect's certificate
certifying performance of such work. The Beneficiary will, in good faith and
with due diligence, file and prosecute the Beneficiary's claim for any such
Proceeds and, subject to the provisions of the first paragraph of this Section
15.2 relating to the direct payment to the Beneficiary of any Proceeds up to
$1,000,000, will cause the same to be collected and paid over to the
Mortgagee, to be held and applied in accordance with the provisions of this
Mortgage. Each of the Mortgagor and the Beneficiary hereby irrevocably
authorizes and empowers the Mortgagee, in the name of the Beneficiary as its
true and lawful attorney-in-fact, to file and prosecute such claim and to
collect and to make receipt for any such payment, and, if but only if the
Beneficiary fails so to act or if an Event of Default or Default of any
monetary obligation under the Notes shall have occurred and be continuing,
then in such case the Mortgagee may file such claim and prosecute it with
counsel satisfactory to it at the expense of the Beneficiary. The Mortgagee
may participate in any proceedings or negotiations which might result in any
Proceeds in excess of $5,000,000 and all proceedings or negotiations if an
Event of Default then exists, and the Beneficiary will deliver or cause to be
delivered to the Mortgagee all instruments reasonably requested by it to
permit such participation. The Beneficiary will pay all costs, fees and
expenses reasonably incurred by the Mortgagee (including all reasonable
attorneys' fees and expenses, the fees of insurance experts and adjusters and
<PAGE>
the reasonable costs incurred in any litigation or arbitration) in connection
with any damage or destruction to the Premises and seeking and obtaining any
payment on account thereof.
If at any time and from time to time after the claim for Proceeds
on account of any casualty or taking has been finally settled, the cost of
Restoration as estimated by the Architect exceeds the Proceeds remaining and
available for application to such Restoration, the Beneficiary will, within
ten (10) days of written demand therefor from Mortgagee, deposit with
Mortgagee cash or Debt Securities issued in the name of Mortgagee and with
maturities of less than 90 days and which will be available, as needed, to
pay costs of Restoration (or with the then Depositary under the Declaration of
Easement, if not the Mortgagee with evidence of such deposit concurrently
furnished to Mortgagee) the amount of such excess, which deposit when
received shall be applied to the costs of Restoration prior to any further
disbursement of Proceeds. Failure of Beneficiary to deposit such excess as
required above shall be an Event of Default hereunder, but shall not relieve
Mortgagee from its obligation to disburse Proceeds as Depositary under the
Declaration of Easements.
The Mortgagee shall hold any Proceeds held by the Mortgagee pursuant
to this Section 15.2 or Section 16.3 as the "Depositary" under the Declaration
of Easements and shall apply such Proceeds only in accordance with the terms
and conditions of the Declaration of Easements. Notwithstanding the foregoing,
the Mortgagee may refuse to serve as Depositary or may resign as Depositary
provided that any Proceeds it then holds are transferred to a successor
Depositary in accordance with the provisions of the Declaration of Easements.
15.3. RESTORATION. In the event that the damage or destruction
does not constitute a Total Loss, the Beneficiary shall be obligated, at its
expense (whether or not the Proceeds are sufficient for such purpose), to
effect the Restoration of the Premises in accordance with the provisions of
the Declaration of Easements, the Condominium Deed, the Mortgage and the
Leases, subject to Excusable Delays (with respect to compliance with this
Mortgage), and shall use all or a portion of such Proceeds to the extent
required, and the Mortgagee shall make such Proceeds avail able to the
Beneficiary (all such Proceeds to be held by the Beneficiary in trust, to be
applied first to the payment of all costs incurred to effect the Restoration),
for Restoration in accordance with the provisions of the Declaration of
Easements, the Condominium Deed, this Mortgage and the Leases. If the
Beneficiary will be restoring the Property under this Mortgage, the
Beneficiary shall cause the Architect to prepare both a cost estimate and
schedule for Restoration of the Premises and to provide such estimate and
schedule to the Mortgagee and the Beneficiary. In the event of a Total Loss,
Beneficiary shall apply the Proceeds to the prepayment in full of the Notes
and all other sums secured hereby. In the event the Beneficiary is required
to apply the Proceeds to prepay the Notes in full, any Proceeds remaining
after such prepayment and the payment of all other sums secured hereby shall
be paid to the Beneficiary or as it may direct in writing. In the event that
the Proceeds are insufficient to prepay the Notes in full and to pay all other
sums secured hereby, after the Beneficiary is required to so apply the
Proceeds, the Beneficiary shall, subject to the provisions of Article 38
hereof, pay immediately the amount of such insufficiency to the Mortgagee
until such amount is satisfied. In the event the Beneficiary is obligated to
effect Restoration of the Premises, the Beneficiary shall promptly commence
and complete the Restoration of the Premises in accordance with the provisions
of this Mortgage, the Declaration of Easements and the Condominium Deed,
subject to Excusable Delays (with respect to this Mortgage), and any Proceeds
remaining after completion of such Restoration and delivery of the Officers'
Certificate required under Section 14(d) hereof shall be paid to the
Beneficiary (or the party entitled thereto under the Declaration of Easements
or the Condominium Deed) or as it may direct in writing unless there is an
Event of Default continuing, in which case such remaining Proceeds shall be
paid to the Mortgagee.
<PAGE>
16. TAKING OF PROPERTY.
------------------
16.1. THE BENEFICIARY TO GIVE NOTICE; ASSIGNMENT OF AWARDS, ETC.
In case of a Taking of all or any part of the Premises, or the commencement of
any proceedings or negotiations which might result in any such Taking, the
Beneficiary will promptly give written notice thereof to the Mortgagee,
generally describing the nature and extent of such Taking or the nature of
such proceedings or negotiations and the nature and extent of the Taking which
might result therefrom. As additional security, the Mortgagor and the
Beneficiary hereby irrevocably assign, transfer and set over to the Mortgagee,
subject to the provisions of this Mortgage and of the Declaration of Easements,
all rights of the Mortgagor or the Beneficiary to any Proceeds on account of
any Taking, subject to the provisions of this Mortgage with respect to the use
and application of any such Proceeds and provided that in the case of an
amount of such Proceeds which is not more than $1,000,000, if no Event of
Default or a Default of any monetary obligation under the Notes shall have
occurred and be continuing, the Beneficiary shall have the right to receive
direct payment of such Proceeds, to be held and applied to the Restoration in
accordance with the provisions of this Mortgage and the Declaration of
Easements (all such Proceeds to be held by the Beneficiary in trust, to be
applied first to the payment of all costs incurred to effect the Restoration).
If the amount of Proceeds is reasonably estimated by the Beneficiary to exceed
$5,000,000 or if an Event of Default then exists, the settlement of any such
proceeding and the amount of Proceeds payable in respect thereof shall be
subject to the reasonable approval of the Mortgagee; provided that no such
approval shall be required if the Proceeds shall be sufficient to prepay in
full the Notes and all other sums secured hereby and the Beneficiary has
elected (and is permitted under the Declaration of Easements and the Leases)
to do so. The Beneficiary will in good faith and with due diligence, subject
to Excusable Delays, file and prosecute the Mortgagor's or Beneficiary's
claim for any such Proceeds and, subject to the provisions of the second
sentence of this Section 16.1, will cause the same to be collected and paid
over to the Mortgagee, to be held and applied in accordance with the
provisions of this Mortgage. The Mortgagor and the Beneficiary hereby
irrevocably authorize and empower the Mortgagee, in the name of the Mortgagor
or the Beneficiary as its true and lawful attorney-in-fact, to file and
prosecute such claim and to collect and to make receipt for any such award
or payment, and, if, but only if, the Beneficiary fails so to act or if an
Event of Default or a Default of any monetary obligation under the Notes shall
have occurred and be continuing, then in such case the Mortgagee may file such
claim and prosecute it with counsel satisfactory to it at the expense of the
Beneficiary. The Mortgagee may participate in any proceedings or negotiations
which might result in any Taking which may result in an award in excess of
$5,000,000, and the Beneficiary will deliver or cause to be delivered to the
Mortgagee all instruments reasonably requested by it to permit such
participation. The Beneficiary will pay all costs, fees and expenses
reasonably incurred by the Mortgagee (including all reasonable attorneys'
fees and expenses, the fees of insurance experts and adjusters and the
reasonable costs incurred in any litigation or arbitration) in connection with
any Taking and seeking and obtaining any award or payment on account thereof.
16.2. PARTIAL TAKING. In case of a Taking of the Property other
than a Total Taking, the Beneficiary shall be obligated, at its expense
(whether or not the Proceeds shall be sufficient for such purpose, but subject
to the provisions of Article 38 hereof) to effect Restoration of the Premises
in accordance with the provisions of the Declaration of Easements, the Leases
and this Mortgage, subject to Excusable Delays (with respect to compliance
with this Mortgage).
16.3. APPLICATION OF AWARDS, ETC. All Proceeds received by or
payable to the Mortgagee on account of a Taking shall be held and invested by
the Mortgagee, subject to the provisions of the Declaration of Easements and
the Condominium Deed, until applied by the Mortgagee as follows:
<PAGE>
(a) All Proceeds (excluding the Proceeds on account of a Taking for
temporary use) other than Proceeds received on account of a Total Taking
shall be applied to the Restoration of the Premises as if such Proceeds
were Proceeds of a casualty to be applied pursuant to Section 15.2, and
after the completion of the Restoration of the Premises, any balance of
the Proceeds remaining (excluding the proceeds on account of a Taking for
temporary use or proceeds which are not in respect of a diminution in
value of the Premises) shall be applied as a partial prepayment of the
Notes and all other sums secured hereby.
(b) All Proceeds received on account of a Total Taking of the
Property shall be applied to the prepayment in full to the extent that
the Proceeds are sufficient therefor, of the Notes and all other sums
secured hereby, and the balance, if any, shall be paid over and assigned
to the Beneficiary (or the party entitled thereto under the Declaration
of Easements) or as it may direct in writing. In the event that the
Beneficiary is required under this Section 16.3(b) to prepay the Notes
and the Proceeds are insufficient to prepay the Notes in full, the
Beneficiary shall be obligated, subject to the provisions of Article 38
hereof, to pay immediately the amount of such insufficiency to the
Mortgagee.
17. EVICTION BY PARAMOUNT TITLE.
---------------------------
The Beneficiary, within two Business Days of obtaining knowledge of the
pendency of any proceedings for the eviction of the Mortgagor or the
Beneficiary from the Premises or any part thereof by paramount title or
otherwise questioning the Mortgagor's or Beneficiary's title to the Property
or any part thereof as warranted in this Mortgage, or of any condition which
might reasonably be expected to give rise to any such proceedings, shall
notify the Mortgagee thereof. The Mortgagee may participate in such
proceedings, and the Beneficiary will deliver or cause to be delivered to the
Mortgagee all instruments reasonably requested by the Mortgagee to permit such
participation. In any such proceeding the Mortgagee may be represented by
counsel reasonably satisfactory to it at the reasonable expense of the
Beneficiary. The Beneficiary will pay all costs, fees and expenses reasonably
incurred by the Mortgagee (including all reasonable attorneys' fees and
expenses, the fees of insurance experts and adjusters and the reasonable
costs incurred in any litigation or arbitration) in connection with any such
proceeding and seeking and obtaining any award or payment on account thereof.
18. BOOKS AND RECORDS, FINANCIAL STATEMENTS, REPORTS AND OTHER
----------------------------------------------------------
INFORMATION.
-----------
18.1. BOOKS AND RECORDS. The Beneficiary will keep proper books
of record and account, in which accurate and complete entries shall be made of
all dealings or transactions of or in relation to the Property and the
business and affairs of the Beneficiary relating to the Property. The Mortgagee
and its authorized representatives shall have the right from time to time to
designate an agent to examine, at reasonable times and upon reasonable notice,
the books and records of the Mortgagor and the Beneficiary relating to the
ownership and operation of the Property, including the Land Trust records.
18.2. FINANCIAL STATEMENTS. (a) Not later than ninety (90) days
after each December 31 after the date hereof and for the year then ended, the
Beneficiary will deliver to the Mortgagee and the Servicer an audited
balance sheet and financial statement of income and expenses and sources and
uses of funds relating to the Property for such year, all in reasonable detail
as to the sources and character thereof and stating in comparative form the
figures for the previous year. Such annual financial statements for each year
shall be certified by the certified public accountant which prepared such
statements and which is reasonably acceptable to the Mortgagee and shall be
<PAGE>
accompanied by an Officers' Certificate certifying that such statements are
true and correct, and that the officer signing such certificate has obtained
no knowledge of any Default or, if so, specifying each such Default and the
nature and status thereof and what action the Beneficiary is taking and
proposes to take with respect thereto. Any of the six largest national
accounting firms shall be acceptable to Mortgagee.
(b) Not later than sixty (60) days after the end of each fiscal
quarter of the Beneficiary (except the fourth fiscal quarter of each fiscal
year), the Beneficiary will deliver to the Mortgagee and the Servicer an
unaudited balance sheet and financial statement of income and expenses
relating to the Property for such quarter and for the fiscal year to date, all
in reasonable detail as to the sources and character thereof. Such unaudited
financial statements and the audited statements delivered pursuant to Section
18.2(a) shall be accompanied by an Officers' Certificate certifying that (i)
such statements are true and correct, (ii) the officer signing such
certificate has obtained no knowledge of a Default or, if so, specifying each
such Default and the nature and status thereof and what action the Beneficiary
is taking and proposes to take with respect thereto, and (iii) to such
Officer's knowledge, no contests permitted under Section 12 are then pending,
or, if so, specifying each such contest and the status thereof, and what
action the Beneficiary is taking and proposes to take with respect thereto.
18.3. ADDITIONAL INFORMATION. The Beneficiary will deliver to
the Mortgagee (i) within thirty days following the end of the Beneficiary's
fiscal year, an Officers' Certificate certifying an annual rent roll, dated
as of such fiscal year end, in respect of the Property, (ii) within 30 days
of a request by the Mortgagee or the Servicer given to the Beneficiary in
writing, an Officer's Certificate certifying a rent roll dated as of a recent
date, provided, however, that the Mortgagee and the Servicer shall not
together make more than three such requests each calendar year, (iii) written
notice in the event of any (a) material change in an insurance policy or
coverage, (b) material tort or other material actions against the Mortgagor,
the Beneficiary or the Property or any part thereof not covered by insurance,
(c) a Default under this Mortgage at such time as Beneficiary has obtained
notice or knowledge thereof, (d) casualty to the Property, the cost of
Restoration of which is reasonably estimated to be more than $500,000, (e)
change in the Manager or the Beneficiary or interests in the Beneficiary or
(f) material dispute with any national tenant or any other Tenant under a
Lease of 5,000 rentable square feet or more or with any Person with respect
to the Declaration of Easements, Condominium Deed or Operating Agreement, and
(iv) a copy of any notice received by the Beneficiary or its agent from any
environmental authority having jurisdiction over the Property, any notice of
aviolation of the Disabilities Act, or any other notice from a governmental
authority regarding a condition that requires the expenditure of $500,000 or
more, in each case with respect to the Property.
18.4. OTHER INFORMATION. The Beneficiary will, at any and all
times, within a reasonable time after written request by the Mortgagee,
furnish or cause to be furnished to the Mortgagee, in such manner and in such
detail as may be reasonably requested by the Mortgagee, additional information
with respect to the Property.
19. TRANSFERS, INDEBTEDNESS AND SUBORDINATE MORTGAGES.
-------------------------------------------------
Unless such action is permitted by the provisions of this Article 19 or the
provisions of Article 20 hereof, neither the Mortgagor nor the Beneficiary
will (i) sell, assign, convey, transfer or otherwise dispose of legal or
beneficial interests in all or any part of the Property or the beneficial
interest in Land Trust, (ii) incur indebtedness, (iii) mortgage, hypothecate
or otherwise encumber or grant a security interest in all or any part of the
Property (or such beneficial interest), (iv) sell, assign, convey, transfer,
mortgage, encumber, grant a security interest in, or otherwise dispose of any
direct or indirect interest in the Beneficiary (unless, after giving effect to
<PAGE>
such transfer, a Permitted Owner beneficially owns, directly or indirectly,
the Property in accordance with Section 19.1), or (v) file a declaration of
condominium with respect to the Property or issue a notice of intent thereof.
19.1. SALE OF THE PROPERTY; MANAGEMENT OF THE PROPERTY. (i)
Neither the Mortgagor nor the Beneficiary shall voluntarily sell, assign,
convey, transfer or otherwise dispose of, all or any part of its interest
in all or any part of the Property or the beneficial interest in Land Trust
(other than Personal Property or Equipment leased to the Beneficiary or the
Mortgagor by third parties) unless after giving effect to the proposed
transaction,
(a) the Beneficiary, if the fee title to the Land and Improvements
is owned by a land trust, or the Mortgagor, if such fee title is not
owned by a land trust, is a single purpose entity which at the time of
such transfer will be in compliance with the covenants contained in
Sections 3.3 and 3.4 hereof and which has assumed in writing (subject
to the terms of Article 38 hereof) and agreed to comply with all the
terms, covenants and conditions set forth in this Mortgage, expressly
including the covenants contained in Sections 3.3 and 3.4 hereof;
(b) the Property shall be beneficially owned, directly or
indirectly, by a Permitted Owner, provided that in the case of a
Permitted Owner which is an entity described in paragraph (a) of the
definition of "Approved Control Party" in Article 2 hereof, at least 25%
of the beneficial ownership of the Property shall be owned, directly or
indirectly, by one or more Principals and/or entities described in
paragraphs (b), (c), (d) and (e) of the definition of "Approved Control
Party"; and
(c) no Event of Default shall have occurred and be continuing;
provided further that any transferee of the beneficial interest in the Land
Trust, any beneficiary of a transferee Land Trust and any transferee of fee
title to the Land and Improvements if the fee title to the Land and
Improvements is not owned by land trust shall execute an assumption in the
form of Exhibit E hereto, subject to the provisions of Article 38 hereof, of
the obligations of the Beneficiary under this Mortgage.
In the event of any transfer of any portion of the Property or the
beneficial interest in the Land Trust, if the Beneficiary is obtaining for
the transferee thereof a title insurance policy, Beneficiary shall obtain and
deliver to Mortgagee within ten (10) days following the consummation of such
transaction a current dated endorsement of Mortgagee's title insurance policy
showing no material adverse change therein, provided, however, that (i) the
Beneficiary shall only be required to obtain such endorsement for the
Mortgagee if the cost thereof is de minimis and (ii) the failure to obtain
such endorsement shall in no way invalidate or be a condition to such transfer.
Notwithstanding the preceding paragraph or any other provision of
this Mortgage, Beneficiary shall cause the Property to be at all times managed
by a Pre-Approved Property Manager or another management company approved by
the Mortgagee, which approval shall not be unreasonably withheld or delayed.
(ii) The Beneficiary also may transfer or dispose of or direct the
Mortgagor to transfer or dispose of Equipment and fixtures which are being
replaced or which is no longer necessary in connection with the operation of
the Premises free from the interest of the Mortgagee under this Mortgage,
provided that such transfer or disposal will not adversely affect the value
of the Property, will not materially impair the utility or operation of the
Premises, will not result in a default by landlord, or reduction or abatement
of, or right of offset against, the rentals payable under any Lease, and will
not materially impair Mortgagor's ability to perform its obligations under the
Declaration of Easements, Condominium Deed, Operating Agreement or any Lease,
and provided that any new Equipment acquired by the Mortgagor or the
<PAGE>
Beneficiary (and not so disposed of) or fixtures shall be subject to the
interest of the Mortgagee under this Mortgage unless leased to Mortgagor or
Beneficiary. If the original cost or value of equipment or fixtures
transferred or disposed of pursuant to this subsection is greater than
$1,000,000, then, in advance of such transfer or disposal, the Beneficiary
shall deliver to the Mortgagee an Officers' Certificate to the effect that
such transfer or disposal complies with the provisions of the Mortgage.
The Mortgagee shall, from time to time, upon receipt of an Officers'
Certificate requesting the same and confirming satisfaction of the conditions
set forth above, execute a written instrument in form satisfactory to it to
confirm that such Equipment or fixtures which are to be, or have been, sold
or disposed of is free from the interest of the Mortgagee under this Mortgage.
19.2. INDEBTEDNESS. Neither the Mortgagor nor the Beneficiary
will incur, create or assume any indebtedness or incur any liabilities without
the consent of the Mortgagee; provided, however, that if no Default or Event of
Default shall have occurred and be continuing, the Beneficiary may, without
the consent of the Mortgagee, incur, create or assume the following
indebtedness:
(i) the Notes and the other obligations, indebtedness and
liabilities secured by this Mortgage or set forth in any other Security
Document;
(ii) amounts, not secured by the Property or any part thereof,
payable by or on behalf of the Mortgagor or the Beneficiary for or in
respect of the operation of the Property in the ordinary course of
operating Beneficiary's business, including amounts payable by or on
behalf of the Mortgagor or the Beneficiary to suppliers, contractors,
mechanics, vendors, materialmen or other persons providing property or
services to the Mortgagor or the Beneficiary or to the Premises, or in
connection with the ownership, management, operation, leasing, cleaning,
maintenance, repair, replacement, improvement, alteration or restoration
thereof incurred in the ordinary course of operating Beneficiary's
business;
(iii) amounts, not secured by the Property or any part thereof,
payable or reimbursable to any Tenant on account of work performed at the
Premises by such Tenant or for costs incurred by such Tenant in connection
with its occupancy of space in the Premises; and
(iv) indebtedness, not secured by Property or any part thereof,
to Tenants to finance leasehold improvements or other costs incurred by a
Tenant in connection with its occupancy of its space as long as the
agreement evidencing and securing the repayment of any such loan is
pursuant to a Lease which otherwise complies with the provisions of
Article 20;
(v) indebtedness of the Beneficiary to one or more Affiliates
of the Beneficiary, either unsecured or secured by Subordinate Mortgages:
(A) which provides that payment of any amounts in respect
of such indebtedness shall be made only to the extent that Cash Flow
is available to pay such amounts after the payment of all amounts
then due and payable on all other indebtedness of the Beneficiary and
the Mortgagor (subject, however, to accrual of unpaid amounts) in
respect of indebtedness permitted under this clause (v) and further
provides that any amounts paid in violation of this clause (A) shall
be held in trust by the payee thereof for the benefit of Mortgagee
and disgorged to Mortgagee upon demand;
(B) which prohibits such Affiliate from exercising any
remedies, including accelerating any indebtedness and commencing
any action (including the filing of a bankruptcy petition or
similar proceeding) against the Beneficiary, Mortgagor or all or
<PAGE>
any part of the Property for collection of interest, principal or
other charges while any Security is outstanding and prohibits such
Affiliate from filing a claim in a bankruptcy or similar proceeding
commenced by Mortgagor, Beneficiary or, in whole or in part, by one
or more Affiliates of Beneficiary and requires that such Affiliate
shall vote against any plan presented in such proceeding which would
alter the terms of the Notes or the Security Documents (provided
that such Affiliate may file a claim in a bankruptcy or similar
proceeding commenced by an independent Person);
(C) which otherwise is on terms comparable to those which
would be negotiated at arm's length by unaffiliated parties;
(D) which is incurred for the purpose of funding expenses
of improvements to, or Equipment for, the Premises permitted under
this Mortgage and is so used;
(E) which does not, together with the amount of the Test
Indebtedness at the time of the incurrence of such indebtedness,
exceed the lesser of $230 million and 75% of the fair market value
of the Property, based on an appraisal or appraisal update prepared
by Cushman & Wakefield or any other MAI appraiser selected by the
Beneficiary (unless reasonably disapproved by the Mortgagee), in
form reasonably acceptable to Mortgagee, and dated as of a date not
more than six (6) months prior to the incurrence of such
indebtedness; and
(F) will be satisfied (or released, to the extent that
Cash Flow is not available to satisfy such indebtedness) prior to
or upon any transfer of the Property to an entity which is not an
Affiliate of the Person holding such indebtedness;
(vi) indebtedness to a Person other than an Affiliate or
Beneficiary relating solely to financing of tenant improvement or leasing
costs (provided any leasing costs payable to Affiliates shall not be in
<PAGE>
excess of market rates) for leases which comply with the provisions of
Article 20, and costs associated with such indebtedness,
(A) which does not exceed $5 million in the aggregate;
(B) the proceeds of which are not distributed to the
Beneficiary or any General Partner except as reimbursement for
monies expended by the Beneficiary or such General Partner to fund
such tenant improvements or leasing costs; and
(C) the terms of which shall require that such
indebtedness be repaid from excess Cash Flow prior to any
distributions to the Beneficiary or any General Partner (other than
for income taxes) and prior to the payment of any interest on or
principal of indebtedness incurred under Section 19.2(v).
Notwithstanding that Beneficiary is permitted to incur, create or assume the
foregoing indebtedness without the consent of the Mortgagee, in connection
with any indebtedness of the kind or nature described in clause (v) or (vi)
above, Beneficiary shall, no less than ten Business Days prior to the date
Beneficiary proposes to incur, create or assume any of such indebtedness,
deliver to the Mortgagee (A) an Officer's Certificate certifying to the
Mortgagee the obligee of such indebtedness, whether or not such obligee is an
Affiliate, the use of the proceeds of such indebtedness, and such other
information as may be reasonably necessary, and in sufficient detail, for
Mortgagee to determine that such indebtedness is of the kind or nature
described in clause (v) or (vi) above and that the conditions stated in the
applicable clause have been or will be satisfied, (B) true, correct and
complete copies of the instrument or instruments evidencing and securing such
indebtedness and (C) the instruments executed by the obligee of such
indebtedness satisfying the requirements of clause (vi) of Exhibit C, attached
hereto.
19.3. SUBORDINATE MORTGAGES. (a) The Beneficiary shall not (i)
create or permit the creation of any lien on the Property (or any part
thereof) by a mortgage, deed of trust or other security instrument or (ii)
grant any assignment (collateral or otherwise) of its beneficial interest
under the Land Trust for the purpose of securing any indebtedness, including
any reimbursement obligation of the Beneficiary in respect of a Credit
Facility delivered hereunder, except for indebtedness described in Sections
19.2(v) or (vi). Any such permissible Subordinate Mortgage must include
provisions substantially in the form of the provisions set forth in Exhibit C
(modified as appropriate to apply to such obligation) and shall provide that
the subordinate mortgagee will take no action to terminate any Lease.
(b) No financing permitted under Section 19.2 (vi) shall bear
interest payable at a floating rate unless such indebtedness also provides
that such rate cannot exceed a fixed maximum rate of eighteen percent (18%)
or unless arrangements shall have been made, by interest rate swap with a
counterpart having the following long term unsecured debt ratings: (i) not
lower than AA by D&P and (ii) not lower than Aa by Moody's (or the then
equivalent rating by such agencies) or otherwise, such that the effective
interest rate to the Beneficiary cannot exceed such fixed maximum rate. An
interest rate swap will satisfy the foregoing sentence only if in a form which
complies with the then current edition of the Code of Standard Wording,
Assumptions and Provisions for Swaps of the International Swap Dealers
Association, Inc. with such additional or different provisions as shall be
required in order to satisfy the Rating Tests and if counsel to the swap
counterparty has delivered an opinion to the Mortgagee that the swap is legal,
valid, binding and enforceable in accordance with its terms, subject to such
exceptions as are reasonably customary and appropriate, in the judgment of
such counsel, under the circumstances.
19.4. NOTICE. Not less than five Business Days prior to the
closing of any transaction subject to the provisions of Article 19, the
<PAGE>
Beneficiary shall deliver to the Mortgagee an Officers' Certificate describing
the proposed transaction and stating that such transaction is permitted by this
Article 19, together with any documents upon which such Officers' Certificate
is based, including all existing and proposed contracts, conveyancing
instruments, evidences of indebtedness and security documents. In addition,
the Beneficiary shall provide the Mortgagee with copies of executed deeds,
assignments of partnership interests in the Beneficiary, mortgages or other
similar closing documents within ten days after such closing.
20. PERFORMANCE OF LEASES; APPLICATION OF RENTS.
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(a) The Beneficiary shall timely perform and observe or cause to be performed
or observed all the material terms, covenants and conditions required to be
performed and observed by the Mortgagor under the Leases, such that there will
be no material and adverse impairment of the value of the Property or the
Mortgagee's interest under this Mortgage. The Beneficiary will promptly
deliver to the Mortgagee a copy of any notice from any Tenant under any Lease
claiming that the lessor is materially in default in the performance or
observance of any of the terms, covenants or conditions thereof to be
performed or observed by the lessor.
(b) The Beneficiary shall, or shall cause the Manager to, manage
and operate the Premises in a reasonably prudent manner and shall not enter
into any Lease after the date hereof which would, evaluated alone or in
conjunction with any then existing Leases, result in any material impairment
of the fair market value, as of the date such Lease is executed by the
Mortgagor, of the Property. The Beneficiary shall not enter and shall not
direct the Mortgagor to enter into any Lease or any material modification of
an existing Lease (such a modification a "Material Modification") unless such
Lease or Material Modification is in compliance with the provisions of this
Article 20 and the other applicable provisions of this Mortgage, if any in
which case Beneficiary shall have the right to enter into such Lease or
Material Modification or cause such Lease or Material Modification to be
executed on its behalf. Within ten (10) Business Days following execution
thereof, the Beneficiary shall deliver to the Mortgagee a certified copy of
each Lease of 5,000 rentable square feet or more or a Material Modification
thereof and, within ten (10) Business Days following a written request by the
Mortgagee, a copy of any other Lease or Material Modification entered into by
the Beneficiary. All Leases delivered in connection with the preceding
sentence shall be accompanied by an Officers' Certificate stating that such
Lease or Material Modification was entered into in compliance with the
provisions of this Mortgage. Each Lease entered into after the date hereof
(including the renewal or extension on or after the date hereof of any lease
entered into prior to the date hereof if the rent payable during such renewal
or extension, or a formula to compute such rent, is not provided for in such
Lease, such a renewal or extension a "Renewal Lease") and each Material
Modification shall (i) provide for rent and all other material items
thereunder to be payable in amounts at least equal to the fair market rental
value (taking into account the type and quality of the tenant), as of the date
such Lease is executed by the Mortgagor, of the space covered by such Lease or
Renewal Lease for the term thereof, including any renewal options, (ii) be
negotiated at arm's length, (iii) not grant the Tenant an ownership interest
in the Beneficiary or the Property and (iv) either be on the Beneficiary's
standard form lease with such changes as the Beneficiary shall make in the
ordinary course of its business or on the form lease customarily used by such
Tenant with such changes thereto as shall be made in the ordinary course of
business.
(c) Notwithstanding anything to the contrary in Section 20(b) and
20(d), the Beneficiary may not enter into any new Anchor Lease or any material
modification of an existing Anchor Lease or terminate any Anchor Lease unless
the Beneficiary shall, at least twenty-one (21) days prior to entering into
such new Anchor Lease, modification or termination, distribute a copy thereof
to the Mortgagee. If, on or before the twenty-first (21st) day after the
<PAGE>
proposed Anchor Lease, modification or termination is so delivered to the
Mortgagee, Mortgagee advises the Beneficiary in writing that the proposed
Anchor Lease, modification or termination would, in Mortgagee's sole
reasonable judgment, have a material adverse effect on the value, use or
operation of the Property or on the likelihood of repayment of the Notes,
then the Beneficiary shall not enter into such proposed Anchor Lease,
modification or termination.
(d) (i) The Beneficiary may direct Mortgagor to terminate or
permit the termination of any Lease of space or accept surrender of all or any
portion of the space demised under the Lease or acquire any Lease or reduce
the rentals reserved under or shorten the term of any Lease so long as such
action(taking into account the planned alternative uses of the space) does
not, when taken together with all terminations, surrenders and reductions
(net of the effect of new Leases) during the preceding twelve-month period,
materially and adversely affect the value of the Property or the likelihood
of repayment of the Notes (it being agreed that termination of the Lease of a
Tenant which is in default in the payment of rent or performance of any other
material obligation, after any applicable notices and cure periods, shall be
considered for the benefit of the Property) and the Beneficiary shall promptly
deliver an Officer's Certificate to the Mortgagee stating that such
termination was entered into compliance with this Mortgage.
(ii) The provisions of this clause (d) shall not apply to
Anchor Leases as to which the terms of clause (c) above shall be controlling.
(e) The Beneficiary shall not direct the Mortgagor to enter into
any lease with an Affiliate of the Beneficiary or any of the Principals,
unless (a) the space is for the use and occupancy of one or more of such
Affiliates, and (b) the material terms of such Lease comply with the
requirements set forth in Section 20(b) hereof; provided, however, that a
reasonable amount of office space not in excess of 5,000 net leasable square
feet can be provided to the Manager for the purpose of management of the
Property at less than fair market rental or at no rental, at the Beneficiary's
discretion. The Beneficiary shall have the right, subject to the provisions of
this Mortgage, to direct the Mortgagor to acquire Leases by way of assignment,
surrender, acquisition or further sublease. The Beneficiary shall not modify
the Management Agreement in any respect which would have a materially adverse
effect on the operation of, or the Cash Flow generated by, or the value of,
the Premises without the prior approval of the Mortgagee.
(f) The Beneficiary shall not receive or collect, or permit the
receipt or collection of, any rental or other payments under any Lease more
than one (1) month in advance of the respective period in respect of which
they are to accrue, except that (i) in connection with the execution and
delivery of any Lease or of any amendment to any Lease, rental payments
thereunder may be collected and received in advance in an amount not in
excess of one (1) month's rent and a security deposit may be required
thereunder (provided that such deposits are maintained in accordance with
applicable law and in accordance with Article 53 hereof), and (ii) the
Beneficiary may receive and collect escalation, percentage rent and other
charges in accordance with the terms of each Lease.
(g) Subject to the terms of any non-disturbance and attornment
agreement which the Mortgagee may provide to any Tenant pursuant to this
Mortgage, and notwithstanding Section 20(b)(iv) to the contrary, the
Beneficiary shall not and shall not direct the Mortgagor to enter into any
Lease after the date hereof that does not contain terms substantially to the
effect as follows:
This Lease and all rights of Tenant hereunder are subject and
subordinate to any first mortgage or first mortgages, blanket or
otherwise, which do now or may hereafter affect the real property of
which the Premises form a part and to any and all renewals,
modifications, consolidations, replacements and extensions thereof. It is
<PAGE>
the intention of the parties that this provision be self-operative and
that no further instrument shall be required to effect such subordination
of this Lease. Tenant shall, however, upon demand at any time or times
execute, acknowledge and deliver to Landlord without expense to Landlord,
any and all instruments that may be necessary or proper to subordinate
this Lease and all rights of Tenant hereunder to any such first mortgage
or mortgages or to confirm or evidence such subordination. Tenant
covenants and agrees, in the event any proceedings are brought for the
foreclosure of any such first mortgage, to attorn, without any
deductions or set-offs whatsoever, to the purchaser upon any such
foreclosure sale if so requested to do by such purchaser, and to
recognize such purchaser as the Landlord under this Lease, provided that
the liability of the holder of such first mortgage or of such purchaser
under this Lease (a) shall exist only with respect to the period such
holder or purchaser shall own title to the Building and shall not
survive the transfer of such title, and (b) shall be limited to the
interest of such holder or purchaser in the Building and such holder
or purchaser shall not be personally liable for any obligations of
Landlord under this Lease. Tenant agrees to execute and deliver at
any time and from time to time, upon the request of Landlord or of any
holder of such first mortgage or of such purchaser, any instrument which,
in the sole judgment of such requesting party, may be necessary or
appropriate in any such foreclosure proceeding or otherwise to evidence
such attornment and limitation of liability. Tenant hereby irrevocably
appoints Landlord and the holder of such mortgage, or either of them, the
attorney-in-fact of Tenant to execute and deliver any such instrument for
and on behalf of Tenant. Tenant further waives the provisions of any
statute or rule of law, now or hereafter in effect, which may give or
purport to give Tenant any right or election to terminate or otherwise
adversely affect this Lease, or the obligations of Tenant hereunder
in the event any such foreclosure proceeding is brought, prosecuted
or completed.
Tenant and Landlord further agree that if so requested by the holder
of any such first mortgage, this Lease shall be made superior to any such
first mortgage and that they will execute such documents as may be required
by such holder to effect the superiority of this Lease to first mortgage.
Tenant and Landlord further agree that this Lease shall not be subordinate
to any liens junior to any first mortgage or mortgages (hereinafter called
a "Junior Mortgage"), it being further understood that in the event any
first mortgage or mortgages become subordinate to any other mortgage or
mortgages which constitute a first lien on the Property, then from and
after the date of subordination, this Lease and all rights of Tenant
hereunder are and shall be superior to any such Junior Mortgage.
In the event of any act or omission by Landlord under this Lease
which would give Tenant the right to terminate this Lease or to claim a
partial or total eviction, Tenant shall not exercise any such right
until it has given written notice (by United States certified or
registered mail, postage prepaid) of such act or omission to the then
holder of the first mortgage lien on the Center or the Building (whose
name and address Landlord agrees will be furnished to Tenant in each
instance upon Tenant's written request) and until such holder shall,
following the giving of such notice, have failed with reasonable
diligence to commence and to pursue reasonable action to remedy
such act or
omission.
(h) Upon receipt by the Mortgagee of a written request from the
Beneficiary therefor, the Mortgagee shall execute and deliver to the Tenant
under any Lease, provided that such Tenant or its parent company is a
national tenant or the parent of a national chain of tenants (that is a
national chain (excluding franchises) of 100 or more stores) made in
accordance with the provisions of this Article 20, a non-disturbance and
attornment agreement in Mortgagee's customary form for the Premises (provided
<PAGE>
that such non-disturbance and attornment agreement shall expressly negate the
obligation of Mortgagee to make capital advances under such Lease for tenant
inducements but shall give the right to the tenant to terminate the lease if
such tenant inducements are not paid) if required by such Lease and specified
in such request, provided that such request is accompanied by (A) an Officer's
Certificate stating that such Lease complies in all respects with this
Mortgage, including specifically this Article 20 and (B) an estoppel
certificate executed by such Tenant in form and substance acceptable to
Mortgagee. Consent to any other request for a non-disturbance and attornment
agreement shall not be unreasonably denied or delayed. In no event shall
Mortgagee be required to give a non-disturbance and attornment agreement to
an Affiliate of the Beneficiary or the Manager.
(i) Beneficiary shall cause any security deposit paid by any Tenant
under any Lease to be held and applied in accordance with such Lease, provided
that during the continuance of an Event of Default, Beneficiary shall
forthwith deliver to Mortgagee upon demand, (i) all security deposits under
Leases then in existence which have not, pursuant to the Leases, been applied
to any cost or expense permitted thereunder and (ii) any advance rental,
escalation, or percentage rent payment theretofore received by Beneficiary
and relating to any period after occurrence of such Event of Default.
(j) Following an Event of Default and for so long as an Event of
Default shall be continuing, Beneficiary shall cause all rents, issues,
income, profits or moneys derived by Beneficiary or Mortgagor from the
operation of the Property to be used solely to pay Operating Expenses
and capital expenditures incurred in the ordinary course of business
and amounts secured by this Mortgage.
21. NO ENDORSEMENT.
--------------
The Mortgagee shall not become or be considered to be an endorser, co-maker
or co-obligor on the Notes or on any obligation of the Mortgagor or the
Beneficiary secured by this Mortgage.
22. NO CREDIT FOR PAYMENT OF TAXES OR IMPOSITIONS.
---------------------------------------------
Neither the Mortgagor nor the Beneficiary shall be entitled to any credit
against the principal of or interest payable on the Notes, and neither the
Mortgagor nor the Beneficiary shall be entitled to any credit against any
other amounts which may become payable under the terms thereof or hereof,
by reason of the payment of any tax on the Property or any part thereof
or by reason of the payment of any other Imposition or other amount required
to be paid hereunder.
23. EVENT OF DEFAULT; ACCELERATION OF NOTES.
---------------------------------------
If one or more of the following events ("Event of Default") shall occur:
(a) with respect to the Notes, default in the payment of any
instalment of interest on any Note when such instalment becomes due
and payable, and continuance of such default for a period of more
than five (5) Business Days; or
(b) with respect to the Notes, default in the payment of the
principal of any Note at the Maturity Date; or
(c) default in the payment of any other amounts due and payable
hereunder, which continues for a period of thirty (30) days after
written notice from the Mortgagee that such amount is due; or
<PAGE>
(d) an "Event of Default" as defined in any Security Document
(the terms and provisions of which are incorporated herein by this
reference); or
(e) any insurance required to be maintained in respect of the
Premises pursuant to Article 13 hereof shall be cancelled, terminated or
expire (and replacement insurance or a binder for such replacement
insurance complying with the provisions of Article 13 hereof has not
been effected prior to such event) or any such insurance shall be
amended or modified so as not to comply with Article 13 hereof; or
(f) the Beneficiary or Mortgagor shall directly or indirectly, or
make or permit to occur a violation of the covenants contained in Section
3.3 (other than Section 3.3(g)) hereof, Section 3.4 hereof, or Article 11
hereof (subject to the provisions of Article 12 hereof), or any sale,
assignment, conveyance, transfer, mortgage, pledge, encumbrance or other
disposition in violation of Article 19 hereof, or incur any indebtedness
not permitted by Article 19 hereof, or any Lease (including a modification
or termination of an existing lease) in violation of Article 20, or the
commencement of an Alteration in violation of Article 14, or the failure
to insure under Article 13, Section 14(c) or the Declaration of
Easements; or
(g) failure to have the Property managed in accordance with the last
grammatical paragraph of Section 19.1(i), which failure continues for a
period of thirty (30) days after written notice by Mortgagee that such
failure constitutes a default hereunder; or
(h) the Beneficiary or Mortgagor shall fail to perform or comply
with any of the covenants of this Mortgage (other than those terms and
conditions referred to in clauses (a), (b), (c), (d), (e), (f) and (g)
above, and (i), (j), (k) and (l) below), or the Beneficiary or any
partner of the Beneficiary shall breach any representation or warranty
made by it in any Security Document, and in any such case, such failure
or breach shall continue for more than thirty (30) Business Days after
written notice thereof by the Mortgagee to the Beneficiary; provided
that in the case of any such failure (other than a failure to comply
with the last grammatical paragraph of Section 19.1(i)) that is
susceptible of cure but that cannot with diligence be cured within such
thirty (30) Business Day period, if the Mortgagor or the Beneficiary
shall promptly have commenced to cure the same and shall thereafter
prosecute the curing thereof with diligence, the period within which
such failure may be cured shall be extended for such further period as
shall be reasonably necessary for the curing thereof with diligence,
provided that such extended period shall not exceed one hundred eighty
(180) days unless cure cannot with diligence reasonably be achieved
within such one hundred eighty (180) days, in which event such period
shall be extended as necessary for up to an additional one hundred
eighty (180) days (and provided that cure of any breach of
representation or warranty, and that cure of any failure to make a
delivery, subsequent to the date as of which the representation or
warranty was made or applies or such delivery was required shall, if
effected within the applicable cure period, constitute cure of such
breach, or with respect to such delivery shall constitute cure of the
failure to make the delivery, provided such failure or breach has not
had a material adverse effect on the interest of the Mortgagee hereunder
or a material adverse effect on the operation, utility or value of the
Premises, for all purposes under this Mortgage and provided further
that, in the case of a failure to comply with the covenant in Section
3.3(g), such total extended period (beyond the original 30-day cure
period) shall in no event exceed sixty (60) days; or
(i) default by the Mortgagor or Beneficiary under a Subordinate
Mortgage and such default shall not be cured under any applicable notice
or cure period and the mortgagee thereunder shall have accelerated the
<PAGE>
same or commenced any action or proceeding to collect the same or
commenced foreclosure or other proceedings in connection therewith or
taken a deed in lieu of foreclosure; or
(j) the Beneficiary or Mortgagor shall (i) be generally not paying
its debts as they become due, (ii) file, or consent by answer or
otherwise to the filing against it of, a petition for relief or
reorganization or arrangement or any other petition in bankruptcy, for
liquidation (in connection with a bankruptcy or insolvency proceeding)
or to take advantage of any bankruptcy or insolvency law of any
jurisdiction, (iii) make a general assignment for the benefit of its
creditors, (iv) consent to the appointment of a custodian, receiver,
trustee or other officer with similar powers of itself or of any
material part of the Property, (v) be adjudicated insolvent or be
liquidated (in connection with a bankruptcy or insolvency proceeding)
or (vi) take partnership or other action for the purpose of any of
the foregoing; or
(k) a court or governmental authority of competent jurisdiction
shall enter an order appointing a custodian, receiver, trustee or other
officer with similar powers with respect to the Beneficiary or
Mortgagor, or with respect to the Property, or if an order for relief
shall be entered in any case or proceeding for liquidation or
reorganization or otherwise to take advantage of any bankruptcy or
insolvency law of any jurisdiction, or ordering the dissolution,
winding-up or liquidation (in connection with a bankruptcy or
insolvency proceeding) of the Beneficiary or Mortgagor, or if
any petition for any such relief shall be filed against the Beneficiary
or Mortgagor, and such order or petition shall not be dismissed within
90 days; or
(l) the Mortgagor or the Beneficiary shall commit a fraudulent act
with respect to the Mortgagee or shall intentionally misrepresent to the
Mortgagee a material fact, whether herein or in any Security Document;
then, in any such event, the Mortgagee, at its option, may declare all amounts
due under the Notes and all other amounts secured by this Mortgage to be
immediately due and payable and, to the extent permitted by applicable law,
the Mortgagee may exercise the other remedies provided for herein for an
Event of Default; (provided, however, that if an Event of Default described
in clause (j) or (k) occurs, then all principal and interest under the Notes
and all other Secured Obligations shall, at Mortgagee's option, automatically
be and become due and payable immediately without any action whatsoever on the
part of the Mortgagee) which amounts shall thereafter bear interest at the
Default Rate and, to the extent permitted by applicable law, the Mortgagee
may exercise such other remedies.
Notwithstanding anything to the contrary contained herein or in the
Security Documents, the Beneficiary shall not be in default with respect to
any monetary obligation under the Notes or hereunder or become obligated for
the payment of any additional interest so long as all such amounts are paid
to the Mortgagee in collectable funds on the date the same are due and
payable and are received by the Mortgagee before 11:00 a.m. New York, New
York time on such date. Payments received after such time shall be deemed
received on the next succeeding Business Day.
24. COMPROMISE OF ACTIONS.
---------------------
Any action, suit or proceeding brought by the Mortgagee pursuant to this
Mortgage or otherwise and any claim made by the Mortgagee under this Mortgage
or otherwise may be compromised, withdrawn or otherwise dealt with by the
Mortgagee without notice to or the approval of the Beneficiary or Mortgagor.
<PAGE>
25. FORECLOSURE.
-----------
25.1. FORECLOSURE. If any Event of Default shall have occurred
and the Notes shall have been declared due and payable, the Mortgagee may at
any time proceed, at law or in equity or otherwise, to enforce the payment of
the Notes in accordance with the terms hereof and thereof, and
(a) to institute an action to foreclose its interest under and the
lien of this Mortgage against the Property in one proceeding or against
portions of the Property in a series of separate proceedings, and to have
the same sold under the judgment or decree of a court of competent
jurisdiction or proceed to take any of such actions; or
(b) take such other action at law or in equity for the enforcement
of this Mortgage and the realization on the security or any other
security herein or elsewhere provided for, as the law may allow, and may
proceed therein to final judgment and execution for the entire unpaid
balance of the principal debt, together with all other sums payable by
Beneficiary or Mortgagor in accordance with the provisions of the Notes
and this Mortgage, and all sums which may have been advanced by the
Mortgagee for taxes, water or sewer rents, charges or claims, payment
on prior liens, insurance or repairs to the Property, all costs of suit,
together with interest thereon at such interest rate as may be awarded
in any judgment obtained by the Mortgagee, as the case may be, from and
after the date of any foreclosure sale until actual payment is made to
the Mortgagee of the full amount due the Mortgagee, and attorneys' fees
through and including all appellate levels.
Without limitation of the foregoing, if an Event of Default shall have
occurred, as an alternative to the right of foreclosure for the full
indebtedness evidenced by the Notes and the interest accrued thereon and
any other Secured Obligations, after acceleration thereof, Mortgagee
shall have the right to institute partial foreclosure proceedings with
respect to the portion of Secured Obligations so in default, as if under
a full foreclosure, and without declaring all of Secured Obligations to
be immediately due and payable (such proceedings being referred to
herein as "partial foreclosure"), and provided that, if Mortgagee has not
elected to accelerate all of Secured Obligations and a foreclosure sale
is made because of default in payment of only a part of Secured
Obligations, such sale may be made subject to the continuing lien of
this Mortgage for the unmatured part of Secured Obligations. Any sale
pursuant to a partial foreclosure, if so made, shall not in any manner
affect the unmatured portion of Secured Obligations, but as to such
unmatured portion, this Mortgage and the lien thereof shall remain in
full force and effect just as though no foreclosure sale had been made.
Notwithstanding the filing of any partial foreclosure or entry of a
decree of sale therein, Mortgagee may elect, at any time prior to a
foreclosure sale pursuant to such decree, to discontinue such partial
foreclosure and to accelerate Secured Obligations by reason of any Event
of Default upon which such partial foreclosure was predicated or by
reason of any other Events of Default and proceed with full foreclosure
proceedings. Mortgagee may proceed with one or more partial foreclosures
without exhausting its right to proceed with a full or partial foreclosure
sale for any unmatured portion of Secured Obligations, it being the
purpose to permit, from time to time a partial foreclosure sale for any
matured portion of Secured Obligations without exhausting the power to
foreclose and to sell the Property pursuant to any partial foreclosure
in respect of any other portion of Secured Obligations, whether matured
at the time or subsequently maturing, and without exhausting at any time
the right of acceleration and the right to proceed with a full
foreclosure.
Before taking title to the Property, the Mortgagee may
determine, at Beneficiary's expense, whether any environmental hazards
<PAGE>
exist at the Property in respect of which the Mortgagee would become
liable by taking title, which determination may include the performance
of an environmental audit of the Property. In addition, at any time
following an Event of Default, Mortgagee may conduct a financial audit,
at Beneficiary's expense, of Beneficiary's books and records pertaining to
the Premises. Beneficiary shall provide Mortgagee and its agents and
contractors with reasonable access to the Premises and Beneficiary's
records with respect thereto in order to conduct any such environmental or
financial audit.
25.2. SEVERAL PARCELS. If an Event of Default has occurred and
is continuing and the Notes shall have been declared due and payable, the
Mortgagee shall have the right to sell the Property in whole or in part and
in such parcels and order as he may determine, and the right of sale hereunder
shall not be exhausted by one or more sales, but successive sales may be had
until all of the Property has been legally sold. In the event any sale
hereunder is not completed or is defective in the opinion of the Mortgagee
such sale shall not exhaust the power of sale hereunder, and the Mortgagee shall
have the right to cause a subsequent sale or sales.
25.3. WAIVERS. It shall not be necessary for the Mortgagee to
have actual or constructive possession of any part of the Property in order
to pass the title to and the right of possession of said property, and the
title to and the right of possession of said property shall pass to the
purchaser or purchasers thereof at any sale hereunder as fully as if the same
actually had been present and delivered. To the fullest extent allowed by
applicable law, likewise, on foreclosure of this Mortgage whether by power of
sale herein contained or otherwise, the Mortgagor, the Beneficiary or any
person claiming any part of the Property by, through or under the Mortgagor
or the Beneficiary shall not be entitled to direct the order of sale or to a
marshalling of assets or a sale in inverse order of alienation. The recitals
and statements of fact contained in any notice or in any conveyance to the
purchaser or purchasers at any sale hereunder shall be prima facie evidence
of the truth of such facts, and all prerequisites and requirements necessary
to the validity of any such sale shall be presumed to have been performed. In
the event of a foreclosure under the powers granted by this Mortgage, to the
extent that the Mortgagor or the Beneficiary is in possession of the Premises,
the Mortgagor or the Beneficiary, as the case may be, shall be deemed a tenant
at will of the purchaser at such foreclosure sale and shall be liable for a
reasonable rental for the use of the Premises; and if the Mortgagor or the
Beneficiary refuses to surrender possession of the Premises upon demand, the
purchaser shall be entitled to obtain a writ of assistance or to institute and
maintain the statutory action of forcible entry and detainer and procure a
writ of possession thereunder, and the Mortgagor and the Beneficiary expressly
waive all damages sustained by reason thereof and the Beneficiary agrees to
pay to the purchaser the costs and expenses (including all attorneys' fees
and expenses) of such action and writ.
25.4. RECOVERY OF ADVANCES. Subject to the provisions of
Article 35, the Mortgagee shall have the right, from time to time, to bring
an appropriate action to recover any sums required to be paid by the
Beneficiary or the Mortgagor under the terms of this Mortgage and/or the
Notes as they become due, without regard to whether the principal
indebtedness evidenced by the Notes or any other sums secured by this
Mortgage shall be due, and without prejudice to the right of the Mortgagee
thereafter to bring an action of foreclosure, or any other action, for any
default by the Mortgagor or the Beneficiary existing at the time the earlier
action was commenced.
25.5. SALE. Upon the completion of any sale or sales made by the
Mortgagee by virtue of this Article 25, the Mortgagee or any officer of any
court empowered to do so, shall execute and deliver to the accepted purchaser
or purchasers, good and sufficient instrument or instruments (subject to the
provisions of Section 38 hereof), conveying, assigning and transferring all
estate, right, title and interest in and to the property and rights sold. In
<PAGE>
such event, the Mortgagee is hereby irrevocably appointed the true and lawful
attorney of each of the Mortgagor and Beneficiary, in its name and stead, to
make all the necessary conveyances, assignments, transfers and deliveries of
any part of the Property and rights so sold, and for that purpose the
Mortgagee may execute all necessary instruments of conveyance, assignment and
transfer and may substitute one or more persons with like power, the Mortgagor
and the Beneficiary hereby ratifying and confirming all that said attorney or
such substitute or substitutes shall lawfully do by virtue hereof.
Nevertheless, the Beneficiary and Mortgagor, if so requested by the Mortgagee,
shall, and Beneficiary shall direct Mortgagor to, ratify and confirm any such
sale or sales by executing and delivering to the Mortgagee or to such
purchaser or purchasers all such instruments as may be advisable, in the
judgment of the Mortgagee, for the purpose and as may be designated in such
request (subject, however, to the provisions of Section 38 hereof). Any such
sale or sales made by virtue of this Article 25 shall operate to divest all
the estate, right, title, interest, claim and demand whatsoever, whether at
law or in equity, of the Mortgagor and the Beneficiary in and to the
properties, interests and rights so sold, and shall be a perpetual bar both
at law and in equity against the Mortgagor and the Beneficiary, and against
any and all persons claiming or who may claim the same, or any part thereof
from, through or under the Mortgagor or the Beneficiary.
26. MORTGAGEE AUTHORIZED TO EXECUTE INSTRUMENTS.
-------------------------------------------
Each of the Mortgagor and the Beneficiary irrevocably appoints (which
appointment is coupled with an interest) the Mortgagee the true and lawful
attorney-in-fact of each of the Mortgagor and the Beneficiary, in its name
and stead and on its behalf, for the purpose of effectuating any sale,
assignment, transfer or delivery for the enforcement of this Mortgage after
the occurrence and during the continuance of an Event of Default hereunder,
to execute and deliver all such deeds, assignments, bills of sale and other
instruments (without recourse, warranty or representation of any kind) as the
Mortgagee may consider necessary or appropriate, with full power of
substitution, the Mortgagor and the Beneficiary hereby ratifying and
confirming all that such attorneys or any substitutes shall lawfully do by
virtue hereof. Nevertheless, if so requested by the Mortgagee or any
purchaser, the Mortgagor and the Beneficiary shall ratify and confirm and the
Beneficiary shall direct the Mortgagor to ratify and confirm any such sale,
assignment, transfer or delivery by executing and delivering to the Mortgagee
or such purchaser all deeds, assignments, bills of sale, releases and other
proper instruments (which in each case shall be without recourse to or
representation or warranty by the Mortgagor or the Beneficiary) to effect such
ratification and confirmation as may be designated in any such request.
27. PURCHASE OF PROPERTY BY MORTGAGEE.
---------------------------------
The Mortgagee, any Holder individually (provided the Mortgagee is not bidding
at the sale), or any nominee of any of them may be a purchaser of the Property
or of any part thereof or of any interest therein at any sale thereof, and may
apply to the purchase price all or any part of the indebtedness secured hereby
in lieu of payment in cash of the amount of such indebtedness applied. Any
such purchaser shall, upon any such purchase, acquire good title to the
properties so purchased, free of the lien of this Mortgage and free of all
rights of redemption in the Mortgagor or the Beneficiary.
28. RECEIPT A SUFFICIENT DISCHARGE TO PURCHASER.
-------------------------------------------
Upon any sale of the Property after the Notes are due and payable, whether at
maturity, by declaration of acceleration or by automatic acceleration after
an Event of Default or otherwise, the receipt of the officer making the sale
under judicial proceedings or of the Mortgagee shall, to the full extent
<PAGE>
legally permitted, be sufficient discharge to the purchaser for the purchase
money, and such purchaser shall not be obligated to see to the application
thereof.
29. WAIVER OF MARSHALLING, APPRAISEMENT, VALUATION.
----------------------------------------------
Each of the Mortgagor and the Beneficiary hereby waive all rights, legal and
equitable, it may now or hereafter have to require marshalling of asset or to
require upon foreclosure sales of assets in a particular order. Each successor
and assign of Mortgagor, including a holder of a lien subordinate to the lien
created hereby (without implying that Mortgagor or the Beneficiary has, except
as expressly provided herein, a right to grant an interest in, or a
subordinate lien on, the Property), by acceptance of its interest or lien
agrees that it shall be bound by the above waiver, as if it gave the waiver
itself. The Mortgagor and the Beneficiary also hereby waive, to the full
extent it may lawfully do so, the benefit of all laws providing for rights of
appraisement, valuation, stay or extension or of redemption from or after
foreclosure now or hereafter in force. The foregoing waiver of the right of
redemption is made pursuant to 735 ILCS 5/15-1601.
30. SALE SHALL BE A BAR AGAINST MORTGAGOR.
-------------------------------------
Any sale of the Property in connection with the exercise of remedies under
this Mortgage after the Notes are due and payable, whether at maturity, by
declaration of acceleration or by automatic acceleration after an Event of
Default or otherwise, shall, to the full extent legally permitted, forever be
a perpetual bar against the Mortgagor's or the Beneficiary's asserting any
claim to title to the Property.
31. APPLICATION OF PROCEEDS OF SALE, CREDIT FACILITIES AND
------------------------------------------------------
ELIGIBLE COLLATERAL.
-------------------
The proceeds of any sale of the Property or any part thereof or any interest
therein, together with any other monies at the time held by the Mortgagee,
including, without limitation, any sums deposited with the Mortgagee and
invested in accordance with Article 57, at the time held by the Mortgagee
as part of the Property, after the Notes become due and payable, whether at
maturity, by declaration of acceleration or by automatic acceleration after
an Event of Default or otherwise, shall be applied to pay:
First: the reasonable costs and expenses (including reasonable
attorneys' fees and expenses) of the Mortgagee in enforcing the
rights of the Mortgagee with respect to the Notes or under this
Mortgage or the other Security Documents, including the expenses
described in Article 33 and Article 49 hereof;
Second: the reasonable costs and expenses (including reasonable
attorneys' fees and expenses) of the sale of the Property, and of
ny receiver of the Property or any part thereof appointed pursuant
to Article 32 hereof, and any Impositions other than Impositions
subject to which the Property shall have been sold;
Third: all amounts of interest on, and the principal of, Note B
(whether at maturity or on a date fixed for prepayment or by
declaration of acceleration or by automatic acceleration after an
Event of Default or otherwise) and then any other amounts payable
under the Note B;
Fourth: all amounts of interest on, and the principal of, Note A
(whether at maturity or on a date fixed for prepayment or by
<PAGE>
declaration of acceleration or by automatic acceleration after an
Event of Default or otherwise) and then any other amounts payable
under the Note A;
Fifth: the balance, if any, to the Persons lawfully entitled to such
amounts;
or, to the extent permitted by law, in such other order and manner as
Mortgagee may determine.
32. APPOINTMENT OF RECEIVER.
-----------------------
If an Event of Default shall have occurred and be continuing, the Mortgagee
shall, to the fullest extent permitted by law, as a matter of right, be
entitled to the appointment of a receiver for all or any part of the Property,
whether such receivership be incidental to a proposed sale of the Property or
otherwise, and the Mortgagor and the Beneficiary hereby consent to the
appointment of such receiver and will not oppose any such appointment.
33. POSSESSION, MANAGEMENT AND INCOME.
---------------------------------
If an Event of Default shall have occurred and be continuing, the Mortgagee,
with such notice, if any, to the Mortgagor or the Beneficiary as required by
law or as the Mortgagee considers appropriate in the circumstances, and
subject to the rights of Tenants and the provisions of applicable law, may
immediately enter upon and take possession of the Premises by self-help,
summary proceedings, ejectment or otherwise, and may remove the Mortgagor,
the Beneficiary and all other Persons and any and all property therefrom, and
may hold, operate and manage the same and receive all earnings, income,
rents, issues and proceeds accruing with respect thereto. The Mortgagee
shall be under no liability for or by reason of any such taking of
possession, entry, removal or holding, operation or management, except (i) for
its gross negligence or willful misconduct or (ii) to the extent required by
applicable law, and except that any amounts so received by the Mortgagee shall
be applied to pay:
First: the reasonable costs and expenses (including reasonable
attorneys' fees and expenses) of so entering upon taking possession
of, holding, operating and managing the Premises or any part
thereof, and any Impositions or other taxes, assessments or charges
which shall have priority that is superior to the record priority of
this Mortgage, which the Mortgagee may consider it necessary or
desirable to pay;
Second: all amounts of interest on, and then principal of, Note B
(whether at maturity or on a date fixed for prepayment or by
declaration of acceleration or by automatic acceleration after an
Event of Default or otherwise) and then any other amounts payable
under the Note B; and
Third: all amounts of interest on, and then principal of, Note A
(whether at maturity or on a date fixed for prepayment or by
declaration of acceleration or by automatic acceleration after an
Event of Default or otherwise) and then any other amount payable
under the Note A; and
Fourth: the balance, if any, to the Persons lawfully entitled to
such amounts if all conditions to the release of this Mortgage
specified in Article 44 hereof shall have been fulfilled, but if
any such condition shall not have been fulfilled, to be held by the
Mortgagee and thereafter applied to any future payments required to
be made in accordance with subdivisions First, Second and Third
above;
<PAGE>
or, to the extent permitted by law, in such order and manner as Mortgagee may
determine.
At the request of the Mortgagee, the Beneficiary and Mortgagor
shall, and Beneficiary shall direct the Mortgagor to, promptly execute and
deliver to the Mortgagee such deeds, instruments of assignment and other
documents as the Mortgagee may deem necessary or advisable to enable the
Mortgagee or any agent or representative designated by the Mortgagee, at such
time or times and place or places as the Mortgagee may reasonably specify, to
obtain possession of all or any portion or portions of the Property to which
the Mortgagee shall at the time be entitled hereunder, subject to the rights
of Tenants.
If the Mortgagor or the Beneficiary shall fail for any reason to
execute and deliver such instrument or document after such request by the
Mortgagee, the Mortgagee, to the fullest extent permitted by law, may (i)
obtain a judgment conferring on the Mortgagee the right to immediate
possession and requiring the Mortgagor or the Beneficiary to execute and
deliver such instruments and documents to the Mortgagee, which entry of
judgment the Beneficiary, to the extent it may lawfully do so, hereby
specifically consents to and (ii) pursue the Property wherever it
may be found and to the extent lawfully permitted, take possession of and
remove the same, subject to the rights of Tenants.
Upon every such taking of possession, the Mortgagee may, from time
to time, at the expense of the Beneficiary and such expenses to constitute
additional indebtedness secured by this Mortgage, make all such expenditures
for maintenance, insurance, repairs, replacements, alterations, additions and
improvements to and of the Premises, as it may deem proper. In such case, the
Mortgagee, to the fullest extent permitted by law, shall have the right to
manage, control, use, operate, store, lease or otherwise deal with the
Property and to carry on the business and exercise all the rights and powers
of the Mortgagor and the Beneficiary relating to the Property, as the
Mortgagee shall deem best, including the right to enter into any and all such
agreements with respect to the management, cleaning, control, use, operation,
storage, leasing of or otherwise dealing with the Property, or any part
thereof, as the Mortgagee may determine; and, to the fullest extent permitted
by law, the Mortgagee shall be entitled to collect and receive all tolls,
rents, revenues, issues, income, products and profits of the Property and
every part thereof, without prejudice, however, to the right of the Mortgagee
under any provision of this Mortgage to collect and receive all cash held by,
or required to be deposited with, the Mortgagee hereunder. Such tolls, rents,
revenues, issues, income, products and profit shall be applied to pay the
expenses of the management, control, use, operation, storage, leasing of or
otherwise dealing with the Premises and of conducting the business thereof,
and of all maintenance, repairs, replacements, alterations, additions and
improvements, and to make all payments which the Mortgagee may be required
or may elect to make, if any, for Impositions, or other taxes, assessments,
insurance or other proper charges upon the Premises or any part thereof
(including the employment of engineers and accountants to examine, inspect and
make reports), and all other payments which the Mortgagee may be required or
authorized to make under any provision of this Mortgage, as well as just and
reasonable compensation for the services of the Mortgagee, and all persons
properly engaged or employed by the Mortgagee.
34. RIGHT OF MORTGAGEE TO PERFORM MORTGAGOR'S AND BENEFICIARY'S
-----------------------------------------------------------
COVENANTS.
---------
If the Mortgagor or the Beneficiary shall fail to make any payment or perform
any act required to be made or performed hereunder, the Mortgagee, upon notice
to the Beneficiary and upon the expiration of any applicable cure period
provided in Article 23 (except in cases of emergency that threaten bodily
injury, material damage to property, or material impairment of the security
<PAGE>
provided by this Mortgage and the other Security Documents, in which case the
Mortgagee will allow such notice and cure period, if any, as Mortgagee deems
reasonable under the circumstances) and subject to the Beneficiary's right of
contest under Article 12 hereof, but without waiving or releasing any
obligation, Default or Event of Default, may (but shall be under no obligation
to) at any time thereafter make such payment or perform such act for the
account and at the expense of the Beneficiary, and, to the extent permitted by
applicable law, may enter upon the Premises for such purpose and take all such
action thereon as, in the judgment of the Mortgagee, may be necessary or
appropriate therefor, subject to the rights of Tenants. All sums so paid by
the Mortgagee and all reasonable costs and expenses (including all attorneys'
fees and expenses) so incurred, together with interest thereon at the Default
Rate from the date of payment by the Mortgagee until paid, shall constitute
additional indebtedness secured by this Mortgage and, subject to the
provisions of Article 38 hereof, shall be paid by the Beneficiary to the
Mortgagee upon demand therefor.
35. REMEDIES CUMULATIVE.
-------------------
Subject to the provisions of Article 38 hereof, to the extent permitted under
applicable law each right, power and remedy of the Mortgagee provided for in
this Mortgage or now or hereafter existing at law or in equity or by statute
or otherwise shall be cumulative and concurrent and shall be in addition to
every other right, power or remedy provided for in this Mortgage or now or
hereafter existing at law or in equity or by statute (including the Illinois
Uniform Commercial Code) or otherwise, and the exercise or beginning of the
exercise by the Mortgagee of any one or more of the rights, powers or remedies
provided for in this Mortgage or now or hereafter existing at law or in equity
or by statute or otherwise shall not preclude the simultaneous or later
exercise by the Mortgagee, to the extent permitted by law, of any or all of
such other rights, powers or remedies.
36. APPLICABLE LAW.
--------------
All rights, powers and remedies provided herein may be exercised only to the
extent that the exercise thereof, including those which do not require the
giving of notice, does not violate any applicable law, and are intended to be
limited to the extent necessary so that they will not render this Mortgage
invalid, unenforceable or not entitled to be recorded, registered or filed
under any applicable law. All waivers, consents, confessions and releases
provided for in this Mortgage are effective only to the extent permitted by
applicable law. THIS MORTGAGE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF ILLINOIS.
37. NO WAIVER.
---------
No failure by the Mortgagee to insist upon the strict performance of any term
hereof or to exercise any right, power or remedy consequent upon a breach
thereof shall constitute a waiver of any such term or of any such breach. No
waiver of any breach shall affect or alter this Mortgage, which shall continue
in full force and effect, or shall affect or alter the rights of the Mortgagee
with respect to any other then existing or subsequent breach. None of the
Beneficiary, the Mortgagor or any other person now or hereafter obligated for
payment of all or any part of the sums now or hereafter secured by this
Mortgage shall be relieved of such obligation by reason of the failure of the
Mortgagee to comply with any request of the Mortgagor, the Beneficiary or of
any other person so obligated, to take action to foreclose on this Mortgage or
otherwise to enforce any provisions of this Mortgage or the Notes or by
reason of the release, regardless of consideration, of all or any part of the
security held for the indebtedness secured by this Mortgage, or by reason of
any agreement or stipulation between any subsequent owner of the Property and
the Mortgagee extending the time of payment or modifying the terms of the
<PAGE>
Mortgage or the Notes without first having obtained the consent of the
Mortgagor, the Beneficiary or such other persons; and in the latter event the
Mortgagor, the Beneficiary and all such other persons shall continue to be
liable to make payments according to the terms of any such extension or
modification agreement, unless expressly released and discharged in writing by
the Mortgagee.
38. OBLIGATIONS ARE WITHOUT RECOURSE.
--------------------------------
(a) Anything contained in this Mortgage or in the Notes or the other Security
Documents to the contrary notwithstanding (except for the liability as
specifically provided below of the Exculpated Persons (as defined below)),
in any claim, demand or action arising under this Mortgage, the other Security
Documents or the Notes, the Mortgagee's recourse for the satisfaction of the
indebtedness due under the Notes and for the payment and performance of all
of the obligations and liabilities of the Mortgagor and the Beneficiary under
this Mortgage or the other Security Documents shall be limited solely to the
Mortgagor's and the Beneficiary's interest in the Property, and none of the
Mortgagor, the Beneficiary or any Principal, nor any of its or their
respective successors or assigns, nor any partner (general or limited, or a
subpartner at any level), principal, tenant-in- common, officer, director,
trustee, beneficiary, shareholder, controlling person, employee, agent or
Affiliate of the Mortgagor, the Beneficiary (or any constituent partner or
subpartner thereof) or any Principal, or any of their respective successors
and assigns (collectively, "Exculpated Persons") shall be liable in any other
respect for (i) the payment of the principal of, or interest on, the Notes, or
(ii) the payment of any other amount due under the Notes, this Mortgage or the
other Security Documents, or (iii) for damages for the breach of or any costs
or expenses associated with the performance of any of the covenants,
obligations, representations and warranties or indemnifications contained
herein or in the Notes or the other Security Documents. The Mortgagee agrees
that (except as expressly set forth below), in the event it pursues any
remedies available to it hereunder or under the Notes or the other Security
Documents, the Mortgagee shall not have recourse to the Exculpated Persons for
any deficiency, loss or claim for damages resulting therefrom, and none of the
property or assets of any of the Exculpated Persons other than the Property or
the beneficial interest in the Land Trust shall be subject to levy, execution,
garnishment, attachment, foreclosure or other enforcement procedure for the
satisfaction of the remedies of the Mortgagee hereunder, under the Notes or
under the Other Security Documents, but nothing contained herein shall (x)
constitute a waiver of any indebtedness evidenced by the Notes or secured by
this Mortgage or the other Security Documents, or (y) be taken to prevent
recourse to, or the enforcement of remedies against, the Property in respect
of any and all liabilities, obligations and undertakings contained herein or
in the Notes. In addition, (1) each document which is executed by Mortgagor,
Beneficiary and/or any Exculpated Person pursuant to or in connection with
this Mortgage, the Notes and/or the Security Documents shall either expressly
incorporate, or shall be deemed to incorporate, the non-recourse provisions
contained in this Article 38, and (2) Mortgagee shall have no authority under
this Mortgage to act on behalf of Mortgagor and/or Beneficiary in any manner
that would give rise to recourse liability against any Exculpated Person.
(b) The foregoing limitation of the Mortgagee's recourse shall not
apply to any of the following prior to the payment in full of the Notes and
all other Secured Obligations:
(i) the application of any Proceeds received by the
Beneficiary or Mortgagor after a casualty or a Taking in a manner other
than that required by the terms of this Mortgage (including, by reference
in Article 15, the terms of the Declaration of Easements and the
Condominium Deed); provided, however, that the Mortgagee's recourse shall
be limited to the amount of such misapplied Proceeds;
<PAGE>
(ii) simultaneously with the occurrence and during the
continuance of a "Default Event" (hereinafter defined), the application
by the Beneficiary or Mortgagor of the rentals under any Lease or of any
security deposit under any Lease or of any other issues, income, profits
or monies derived by Mortgagor or Beneficiary from the operation of the
Property (including, without limitation, lease termination payments made
by Tenants which, as to an Anchor Lease terminated in violation of the
terms of this Mortgage, shall include any lease termination payment made
by the tenant thereunder, whether before, upon or after the effective
date of termination of such Anchor Lease) (collectively "Issues") in a
manner other than that required by the terms of Section 20(j) of this
Mortgage following and during the continuance of an Event of Default
as if such Default Event were an Event of Default (except that prior to
the occurrence of an actual Event of Default debt service under a
Subordinate Mortgage may be paid), provided, however, that the
Mortgagee's recourse shall be limited to the amount of such misapplied
Issues; or
(iii) the commission of a fraudulent act or the making of an
intentional misrepresentation by the Beneficiary, provided, however, that
the Mortgagee's recourse shall be limited to the damages sustained by the
Mortgagee by virtue of such fraudulent act or intentional
misrepresentation.
As used herein, a "Default Event" shall mean (1) an Event of Default, (2) a
Default under Section 23(a) which ultimately fails to be waived or cured
before the expiration of the applicable cure period, (3) a Default under
Section 23(b) hereof, or (4) any other Default (a "Non-Debt Service
Default") of which Mortgagor and Beneficiary have been given written notice
by Mortgagee.
(c) Notwithstanding the exceptions to this nonrecourse provision
set forth in clause (b) above, (x) the Mortgagee shall not have any recourse
with respect to any claim, demand or action arising under the Notes, this
Mortgage or the other Security Documents to, except as expressly provided
otherwise hereafter, any partner of any partnership, which partner is an
individual or a trust for the benefit of an individual or members of a family
or a limited partner of such partnership, or any assets of such individual
partner, trust or limited partner, and (y) without limitation of the recourse
to Beneficiary, recourse to the partners of the Beneficiary shall be several
(and not joint) and shall be limited as to such partner to the amount of
misapplied Issues or misapplied Proceeds received by such partner or the
amount of damages caused by such partner's fraud or intentional
misrepresentation.
(d) Additionally, notwithstanding anything contained in sub-clause
(b)(ii) above, Mortgagee shall not have any recourse with respect to any
claim, demand or action arising under the Notes, this Mortgage or the other
Security Documents to any Exculpated Person for Issues distributed to such
Exculpated Person after notice of and during the continuance of a Non-Debt
Service Default if and only if (A) such Non-Debt Service Default is not a
Default described in Section 23(c) hereof or a Non-Debt Service Default which
can be cured by the mere payment of money (unless in each case such Non-Debt
Service Default is ultimately waived or cured before the expiration of the
applicable cure period), and (B) either (x) such Non-Debt Service Default
does not mature into an Event of Default, or (y) whether or not such Non-Debt
Service Default matures into an Event of Default, during the applicable cure
period (i) the Beneficiary is diligently pursuing the curing of such Non-Debt
Service Default, (ii) Beneficiary pays all Operating Expenses of the Property
(including making adequate provision for the payment of Impositions) and the
costs of all capital expenditures incurred by it and pays debt service on the
Notes and any Subordinate Mortgage, and (iii) Beneficiary creates adequate
reserves for the reasonably foreseeable remaining costs, from time to time, of
curing such Non-Debt Service Default and delivers to Mortgagee, within 30 days
of Beneficiary's receipt of the notice of Default, an Officers' Certificate
<PAGE>
stating the amount of the reserve and the basis therefor, it being expressly
agreed that having satisfied the aforesaid requirements, Beneficiary shall be
permitted to distribute any excess Issues to its partners during the
applicable cure period and that whether or not such Non-Debt Service Default
is cured or the reserves set aside for the curing therefor are, in fact,
adequate, neither Beneficiary nor any other Exculpated Person shall be liable
for Issues distributed to the partners of Beneficiary in accordance with the
foregoing.
(e) In the event that the Mortgagee brings a suit against an
Exculpated Person on the basis of one of the exceptions set forth in clause
(b) above and obtains a judgment therefor, such Exculpated Person shall pay
the enforcement costs of such action, including reasonable fees of attorneys.
For purposes of this Article 38, each and every reference to
"Mortgagee" (including the possessory thereof) shall mean Mortgagee, its
successors and assigns, and all persons and/or entities whose rights under
this document arise by, through or under Mortgagee, its successors and/or
assigns.
39. STAMP AND OTHER TAXES.
---------------------
Subject to the provisions of Article 12 relating to permitted contests, the
Beneficiary will pay any United States documentary stamp taxes, with interest
and fines and penalties, if any, and any (i) municipality of Chicago, (ii)
Cook County, Illinois or (iii) the State of Illinois mortgage recording taxes,
with interest and fines and penalties, if any, that may hereafter be levied,
imposed or assessed under or upon or by reason of this Mortgage or any
instrument or transaction affecting or relating to either thereof. In the
event of the Beneficiary's default thereof, the Mortgagee may advance the same
and the amount so advanced shall be due and payable by the Beneficiary to the
Mortgagee within ten days after demand therefor, together with interest
thereon at the Default Rate.
40. FURTHER ASSURANCES.
------------------
The Beneficiary and the Mortgagor, at the Beneficiary's own expense, will, and
will direct the Mortgagor to, execute, acknowledge and deliver all such
instruments, cause such instruments to be recorded, registered or filed, and
take all such actions as the Mortgagee from time to time reasonably may
request or as may be reasonably necessary or proper for the better assuring to
the Mortgagee of the properties and rights now or hereafter subject to the
lien hereof or intended so to be and to effectuate or perfect, or to continue
and preserve the obligations under the Notes, this Mortgage or any other
Security Documents, and to continue and preserve the lien of this Mortgage
as a lien upon the Property, whether now owned or hereafter acquired by
Mortgagor or Beneficiary. Upon any failure by Mortgagor or Beneficiary to do
so, Mortgagee may take all such actions and make, execute, record, register,
file any and all such instruments, for and in the name of Mortgagor and/or
Beneficiary, and Mortgagor and Beneficiary hereby irrevocably appoint
Mortgagee the agent and attorney-in-fact of both or either one of them to do
so.
41. ESTOPPEL CERTIFICATES.
---------------------
The Beneficiary and the Mortgagor will, from time to time, upon twenty days'
prior written request by the Mortgagee, execute, acknowledge and deliver to
Mortgagee, an Officers' Certificate from the Beneficiary or a statement from
the Mortgagor, as the case may be, stating that this Mortgage is unmodified
and in full force and effect (or, if there have been modifications, that this
Mortgage is in full force and effect as modified and setting forth such
modifications) and stating the interest accrued to date on the principal
<PAGE>
amount of the Notes and either stating that, to the best knowledge of the
signer of such certificate and based on no independent investigation, no
Default or Event of Default exists hereunder or, if any Default or Event of
Default shall exist hereunder, specifying each Default or Event of Default of
which the Mortgagee has actual knowledge. Mortgagee will, from time to time,
upon twenty (20) days prior written request from Beneficiary, execute,
acknowledge and deliver to Beneficiary a statement setting forth (i) the
amount of the outstanding principal balances of the Notes and the amount of
interest accrued, but unpaid, thereon, as of the date of such certificate and
(ii) whether or not the Mortgagee has issued any notice of the occurrence of
a Default or Event of Default to Mortgagor or Beneficiary or has received any
notice of a Default or Event of Default from any Holder.
42. ADDITIONAL SECURITY.
-------------------
Without notice to or consent of the Mortgagor or the Beneficiary and without
impairment of the lien and rights created by this Mortgage, the Mortgagee may
accept (but, except as otherwise provided in this Mortgage, the Mortgagor and
the Beneficiary shall not be obligated to furnish) from the Mortgagor or the
Beneficiary or from any other Person or Persons, additional security for the
Notes. Neither the giving of this Mortgage nor the acceptance of any such
additional security shall prevent the Mortgagee from resorting, first, to such
additional security, and, second, to the security created by this Mortgage
without affecting the Mortgagee's interest under this Mortgage, subject,
however, to the provisions of Article 35 of this Mortgage, or vice versa.
43. FINANCING STATEMENT.
-------------------
This Mortgage shall be deemed to be and may be enforced from time to time as
a Mortgage, Chattel Mortgage, Assignment, Contract, Security Agreement,
Financing Statement, or Lien on Machinery Situated on Realty, and from time
to time as any one or more thereof, and shall constitute a "fixture filing"
for the purposes of Article 9 of the Illinois Uniform Commercial Code.
44. RELEASE.
-------
If the Beneficiary shall pay or cause to be paid the principal of and interest
on the Notes in full at maturity or earlier as permitted in accordance with
the terms thereof and all other sums payable to the Mortgagee hereunder by the
Beneficiary or Mortgagor or secured hereby or by the other Security Documents,
then this Mortgage and all the other Security Documents shall be discharged
and satisfied or assigned (to the Beneficiary or to any other Person at the
Beneficiary's direction), at the Beneficiary's option, without recourse and
without warranty, at the expense of the Beneficiary upon its written request.
Concurrently with such release and satisfaction or assignment of this Mortgage
and all the other Security Documents, the Mortgagee will return to the
Beneficiary all title and other insurance policies relating to the Property
and, on the written request and at the expense of the Beneficiary, will
execute and deliver such proper instruments of release (including appropriate
UCC-3 termination statements) as may reasonably be requested by the
Beneficiary to evidence such release and satisfaction or assignment, and any
such instrument, when duly executed by the Mortgagee and duly recorded in the
places where this Mortgage and each other Security Document is recorded, shall
conclusively evidence the release and satisfaction or assignment of this
Mortgage and the other Security Documents. Notwithstanding the foregoing, the
provisions of clause (h) of Article 7 hereof shall survive such discharge and
satisfaction or assignment, for the benefit of the Mortgagee for the period
and to the extent provided in said Article 7.
<PAGE>
45. CHANGES IN LAW REGARDING TAXATION.
---------------------------------
In the event of the passage, after the date of this Mortgage, of any law of
the State of Illinois changing in any way the laws for the taxation of
mortgages or debts secured by mortgages for state or local purposes or the
manner of the collection of any such taxes, and imposing a tax, either
directly or indirectly, on this Mortgage or the Notes and resulting in an
increase in the taxes or other charges imposed on or incurred by the Mortgagee
by reason of such change in law, the Mortgagee may, at its option, upon 60
days' notice, declare the Notes to be due and payable; provided, however, that
the Mortgagee shall not make such declaration and this Mortgage shall remain
in effect if, notwithstanding said law, (i) (x) the Beneficiary may lawfully
pay such taxes on behalf of the Mortgagee and waive all claims for
reimbursement thereof or (y) the Beneficiary and the Mortgagee may lawfully,
and do, enter into an enforceable agreement obligating the Beneficiary (on a
recourse basis) to pay to the Mortgagee an amount equal to any increase in
taxation or charges imposed on or incurred by the Mortgagee by reason of such
change in law and waive all claims against Mortgagee in respect thereof (which
amounts shall be secured by this Mortgage and which agreement shall thereupon
become part of this Mortgage, but not subject to Article 38) , and (ii) the
Beneficiary does in fact pay such taxes or such increases in taxation or
charges, as applicable; provided, however, that this Article 45 shall not
apply to any taxes which may arise in connection with the ownership or transfer
of the Notes or which may be imposed generally upon the income of the Mortgagee.
46. [Intentionally omitted.]
47. SEVERABILITY.
------------
In case any one or more of the provisions contained in this Mortgage or in
the Notes shall be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein and therein shall not in any way be affected or impaired thereby.
48. SECURITY AGREEMENT, ETC.
-----------------------
48.1. GRANT OF SECURITY. This Mortgage is a security agreement
within the meaning of the Uniform Commercial Code of Illinois with respect to
all portions of the Property which constitute personal property (the "Personal
Property"), and is also a mortgage as to those portions of the Property that
are classified as real property. The Mortgagor and the Beneficiary hereby
grant to the Mortgagee a security interest in and to the Personal Property to
secure the payment of the Notes. Any completely executed counterpart of this
instrument may be filed as a mortgage on real property or fixtures, or as a
security agreement or financing statement or as both. The address of the
Mortgagor and the Beneficiary, as debtors, and the address of the Mortgagee,
as secured party, are shown in Article 56 of this Mortgage.
48.2. FINANCING STATEMENTS. The Beneficiary shall cause all
financing and continuation statements and other instruments with respect to
the Personal Property at all times to be kept recorded, filed or registered
in such manner and in such places as may be required by law fully to evidence,
perfect and secure the interests of the Mortgagee in the Personal Property,
and shall pay all filing fees in connection therewith. The Beneficiary hereby
appoints the Mortgagee as its attorney-in-fact to perform the obligations of
the Beneficiary under this Section 48.2 in the event it fails to do so.
48.3. MULTIPLE REMEDIES. If an Event of Default shall have
occurred and be continuing, the Mortgagee shall have the option of proceeding,
to the extent permitted under applicable law, as to both real and personal
property in accordance with its rights and remedies in respect of the real
property, as an alternative to proceeding in accordance with the default
<PAGE>
provisions of the Uniform Commercial Code; and the Mortgages may exercise any
and all of the other rights of a secured party under such Uniform Commercial
Code.
48.4. WAIVER OF RIGHTS. To the extent permitted under applicable
law, the Beneficiary waives all rights of redemption after foreclosure and all
other rights and remedies of a debtor thereunder and all formalities
prescribed by law relative to the sale or disposition of the Personal Property
after the occurrence and during the continuance of an Event of Default
hereunder and to all other rights and remedies of the Beneficiary with respect
thereto. In exercising its right to take possession of the Personal Property
upon the occurrence and during the continuance of an Event of Default
hereunder, the Mortgagee, personally or by its agents or attorneys, and
subject to the rights of any Tenant, may enter upon any part of the Premises
without being guilty of trespass or any wrongdoing, and without liability for
damages thereby occasioned except for its gross negligence or willful
misconduct. To the extent any notice of sale or other disposition of the
Personal Property is required and cannot be waived, in the event the
Mortgagee elects to proceed with respect to the Personal Property separately
from the real property, the Mortgagee shall give at least ten (10) Business
Days' notice of the sale of the Personal Property, subject, however, to the
provisions of Article 35 hereof in each case. All recitals in any instrument
of assignment or any other instrument executed by the Mortgagee incident to
any sale, transfer, assignment, lease or other disposition or utilization of
the Personal Property or any part thereof shall be full proof of the matter
stated therein and no other proof shall be required to establish full legal
propriety of the sale or other action taken by the Mortgagee or of any fact or
condition incident thereto, all of which shall be deemed conclusively to have
been performed or to have occurred.
48.5. EXPENSES OF DISPOSITION OF THE PROPERTY. The Beneficiary
shall reimburse the Mortgagee, within thirty Business Days after demand, for
all reasonable expenses of retaking, holding, preparing for sale, lease or
other use or disposition, selling, leasing or otherwise using or disposing of
the Personal Property which are incurred or paid by each of them, including
all reasonable attorneys' fees and expenses, and all such expenses shall be
added to the Beneficiary's obligations to the Mortgagee and shall be secured
hereby.
49. EXPENSES OF MORTGAGEE.
---------------------
(a) If any action, suit or other proceeding affecting the Property
or any part thereof be commenced, in which action, suit or proceeding the
Mortgagee is made a party or participates or in which the right to use the
Property or any part thereof is threatened, or in which it becomes necessary
in the reasonable judgment of the Mortgagee to defend or uphold the interest
of the Mortgagee under this Mortgage (including any action, suit or proceeding
to establish or uphold the compliance of the Improvements with any Legal
Requirement), then all amounts reasonably paid or incurred by the Mortgagee
for the expense of any such action, suit or other proceeding or to protect
its rights therein (whether or not it is made or becomes a party thereto) or
otherwise to enforce or defend the rights and lien created by this Mortgage
(including all reasonable attorneys' fees and expenses), shall be paid by the
Beneficiary upon demand and, if not paid within thirty days of the giving of
such demand, shall bear interest at the Default Rate from the date of the
payment or incurring thereof, and any such amount and the interest thereon
shall be deemed to be indebtedness secured hereby, provided such right of
payment in the case of any enforcement of the rights of the Mortgagee under
this Mortgage shall only arise in the case where an Event of Default shall
have occurred and be continuing. In addition, any other amount advanced by the
Mortgagee after the date hereof in accordance with the terms of this Mortgage
will bear interest at the Default Rate from the date of payment. All other
reasonable amounts paid, advanced or incurred by the Mortgagee after the
occurrence and during the continuance of an Event of Default in order to
<PAGE>
secure and protect the interest of the Mortgagee under this Mortgage or the
other Security Documents and any other amounts advanced by the Mortgagee
after the date hereof in accordance with the terms of this Mortgage, together
with interest thereon at the Default Rate, shall be indebtedness secured
hereby.
(b) Subject to the provisions of Article 38, in the event this
Mortgage or the Notes are placed in the hands of counsel for collection of
any amount payable hereunder or thereunder or for the enforcement of any of
the provisions hereof or thereof and if an Event of Default shall have
occurred and shall then be continuing, the Beneficiary agrees to pay all
reasonable costs (including attorneys' fees) associated therewith incurred by
the Mortgagee, either with or without the institution of an action, suit or
other proceeding, in addition to all costs, disbursements and allowances
provided by law, all such costs to be paid upon demand, together with interest
thereon at the Default Rate from the date of incurring thereof, and the same
shall be deemed to be part of the indebtedness secured hereby.
50. USURY.
-----
The Beneficiary and the Mortgagee intend to conform strictly to applicable
laws regarding usury. The Mortgagor, the Beneficiary and the Mortgagee hereby
stipulate and agree that none of the terms and provisions contained in the
Notes or this Mortgage shall ever be construed to create a contract to pay
for the use, forbearance, or detention of money an amount in excess of the
maximum nonusurious amount allowed by applicable law. If the Notes or this
Mortgage or the transactions contemplated by any of them would be otherwise
usurious under applicable law, then notwithstanding anything to the contrary
in any or all of the Notes or this Mortgage, the Mortgagor, the Beneficiary
and the Mortgagee hereby agree as follows: (i) for any applicable period of
time specified by any applicable law, interest under the Security Documents
shall never exceed the maximum nonusurious amount allowed by such law; and
(ii) if the Notes shall be accelerated in whole or in part for any reason, or
if any required or permitted prepayment occurs hereunder, then for any
applicable period of time specified by any applicable law, interest shall
never include more than the maximum non unurious amount allowed by each such
law, and in either such case any excess interest (if any) otherwise provided
for under any or all of the Security Documents shall automatically be applied
by the Mortgagee in the following order: (1) to interest properly charged
under the Notes and this Mortgage; (2) to principal properly charged under
the Notes and this Mortgage; (3) if all sums due under (l) and (2) have been
or would thereby be paid in full, all other interest on the Notes shall be
cancelled automatically as of and through the date of such acceleration or
prepayment; and (4) if any such excess interest has been received by the
Mortgagee, it shall be refunded by the Mortgagee to the Beneficiary. The
Beneficiary shall never be required to pay unearned interest under the Notes
and this Mortgage or to pay interest under any or all of the Security
Documents in an amount in excess of the maximum nonusurious amount allowed by
applicable law, and the provisions of this Article 50 shall control over all
other provisions of any Security Document which may be in apparent conflict
herewith.
51. MISCELLANEOUS.
-------------
This Mortgage may be discharged or terminated only by an instrument in writing
signed by the party against which enforcement of such discharge or termination
is sought. In the event any time period or any date provided in this Mortgage
ends or falls on a day other than a Business Day, then such time period shall
be deemed to end and such date shall be deemed to fall on the next succeeding
Business Day, and performance herein may be made on such Business Day, with
the same force and effect as if made on such preceding day. Subject to Article
38 hereof, this Mortgage shall be binding upon the Mortgagor and the
Beneficiary and each of the Persons constituting the Mortgagor and the
<PAGE>
Beneficiary and their respective successors and permitted assigns and all
Persons claiming under or through the Mortgagor or any such successors or
permitted assigns, and shall inure to the benefit of and be enforceable by
the Mortgagee and its successors and assigns. This Mortgage may be executed
in any number of counterparts, each of which shall be an original, but all of
which together shall constitute one and the same instrument.
52. NON-MERGER.
----------
It is the intention and agreement of the Beneficiary, the Mortgagor and the
Mortgagee that there shall be no merger of any leasehold estate in the
Premises with the fee interest in the Premises or any other estate or
interest in the Premises, and there shall be no merger of this Mortgage and
any estate in the Premises, by reason of the fact that the same Person may
own or hold (a) any leasehold estate in the Premises, and/or (b) this
Mortgage, and/or (c) the fee interest in the Premises or any other estate or
interest in the Premises.
53. ASSIGNMENT OF RENTS AND MORTGAGOR'S AND BENEFICIARY'S INTEREST
--------------------------------------------------------------
IN LEASES.
---------
(a) During the term hereof, each of the Mortgagor and the
Beneficiary presently hereby irrevocably grants, sells, assigns, conveys,
transfers and sets over to the Mortgagee, subject to the terms and conditions
hereof, any and all existing Leases and any other Leases which may hereafter
be entered into, and any modifications, renewals or extensions thereof, and
all right, title and interest of the Mortgagor or the Beneficiary thereunder,
including all claim, right and demand as lessor to receive, collect and retain
all rents and all other amounts due thereunder, or under any modification,
renewals or extensions thereof, including:
(i) the immediate and continuing right to receive and
collect all amounts payable by all Tenants or other parties pursuant to
the Leases (or payable by any Persons under any guarantees of any
obligations under the Leases), including (A) all rents, income, revenues,
issues, profits, insurance proceeds, condemnation awards and other
payments, tenders and security payable to or receivable by the Mortgagor
or the Beneficiary under the Leases, (B) all damages or other amounts
payable in the event of any expiration or termination of any Lease
pursuant to the term thereof, by operation of law or otherwise, (C) any
indemnification against, or reimbursement for, sums paid and costs and
expenses incurred by the Mortgagor or the Beneficiary under any Lease,
or otherwise, (D) any award in the event of the bankruptcy of any Tenant
or guarantor of a Lease, and (E) all security deposits, other security
instruments, other deposits or payments or prepayments with respect to
any such Leases;
(ii) all claims, rights, powers, privileges and remedies of
the Mortgagor or the Beneficiary, whether provided for in any Lease or
arising by statute or at law or in equity or otherwise, consequent on
any failure on the part of any Tenant to perform or comply with any term
of any Lease;
(iii) all right to take all action upon the happening of a
default under any Lease as shall be permitted by any Lease or by law,
including, without limitation, the commencement, conduct and
consummation of proceedings at law or in equity; and
(iv) the full power and authority, in the name of the
Mortgagor, the Beneficiary or otherwise, to enforce, collect, receive and
receipt for any and all of the foregoing and to do any and all other acts
<PAGE>
and things whatsoever which the Mortgagor, the Beneficiary or any
landlord is or may be entitled to do under any Lease;
which assignment shall be absolute and constitute a present assignment of the
foregoing subject to the license granted to Beneficiary under clause (c) below.
(b) Any funds received by the Mortgagee under this Article 53 shall
be held by the Mortgagee for application to payment of the Secured Obligations
and Operating Expenses and capital expenditures relating to the Property in
such order and manner as Mortgagee shall elect. Without limitation of the
foregoing, the expenses and capital expenditures relating to the Property may
include taxes, insurance, assessments, management fees, usual and customary
commissions to real estate brokers for leasing real estate, and the
reasonable expenses and fees of all attorneys, agents and employees engaged
in connection with the exercise of the rights and powers granted to Mortgagee
hereunder. Mortgagee's obligations as to funds collected pursuant to this
Article 53 shall be discharged by application of such funds to any of the
purposes specified in this subsection (b). The collection of said funds and
the application thereof as aforesaid shall not cure or waive any Event of
Default or waive, modify or affect any notice of Event of Default or
invalidate any act done pursuant to such notice.
(c) (i) So long as no Event of Default shall have occurred and be
continuing, the beneficiary shall have a license, which may be performed by
the Manager, to collect and receive from the Tenants and the parties to the
Declaration of Easement, the Condominium Deed and the Operating Agreement,
rent and all other sums payable under the Leases, the Declaration of
Easement, the Condominium Deed and the Operating Agreement, and all Proceeds
paid in respect of the insurance described in clause (d) of Exhibit D hereto,
to enforce the obligations of Tenants under the Leases and such other parties
under the Declaration of Easement, the Condominium Deed and the Operating
Agreement and to exercise all the rights and remedies of the landlord under
the Leases, and of the Mortgagor and the Beneficiary under the Declaration
of Easements, the Condominium Deed and the Operating Agreement, subject in
each case, however, to compliance with the provisions of this Mortgage.
(ii) If any Event of Default shall have occurred and be continuing,
the license granted in Section 53(c)(i) hereof shall immediately cease and
terminate, with or without any action or proceeding or the intervention of a
receiver appointed by a court, all of the collateral granted, sold, assigned,
conveyed, transferred and set over to Mortgagee in Section 53(a) above shall
belong exclusively to the Mortgagee, and, without limitation of any of the
foregoing, the Mortgagee or an agent appointed by the Mortgagee may, to the
fullest extent permitted by the Leases, do any or all of the following:
(A) exercise any of the Mortgagor's or the Beneficiary's rights
under the Leases;
(B) enforce the Leases;
(C) demand, collect, sue for, attach, levy, recover, receive,
compromise and adjust, and make, execute and deliver receipts and
releases for all rents or other payments that may then be or may
thereafter become due, owing or payable with respect to the Leases;
(D) demand that any sums held by the Beneficiary with respect to
any Lease (including any security deposits, other deposits or
prepayments) be immediately remitted to the Mortgagee; and
(E) generally, do, execute and perform any other act, deed, matter
or thing whatsoever that ought to be done, executed and performed in and
about or with respect to the Leases, as fully as allowed or authorized by
this Article 53.
<PAGE>
(d) The Mortgagor and the Beneficiary hereby irrevocably authorize
and direct each Tenant, upon receipt of notice from the Mortgagee that an
Event of Default has occurred and is continuing, to pay directly to, or as
directed by, the Mortgagee, all rents, issues and profits accruing or due
under such Tenant's Lease from and after the receipt of such notice. The
Mortgagor and the Beneficiary agree that any Tenant shall have the right
to rely upon the notice from the Mortgagee and shall pay such rents, issues
and profits to or as directed by the Mortgagee without any obligation to
inquire into the actual existence of any Event of Default claimed by the
Mortgagee, and notwithstanding any notice from or contrary claim by the
Mortgagor or the Beneficiary, and the Mortgagor or the Beneficiary shall have
no right or claim for any rents, issues or profits so paid to the Mortgagee.
Such rents, issues and profits shall continue to be paid to the Mortgagee
unless and until the Event of Default which gave rise to the termination of
the Beneficiary's license under Section 53(c)(i) is, and any intervening
Events of Default have been, cured to the satisfaction of the Mortgagee (so
long as none of the Notes, if any, shall then be due and payable, whether at
maturity, by declaration of acceleration or otherwise, and such acceleration
has not been rescinded). Upon satisfaction of all of the conditions contained
in the immediately preceding sentence, the Mortgagee shall direct each Tenant
by written notice to resume the payment of all rents, issues or profits
accruing or due under its respective Lease in accordance with the provisions
of Section 53(c) hereof from and after receipt of such notice from the
Mortgagee.
(e) Except for any termination of any Lease or any amendment,
modification or waiver of the provisions of any Lease expressly permitted by
the provisions thereof or of Article 20 hereof, the Mortgagor or the
Beneficiary at its expense will prudently enforce in all material respects
each of the Leases in accordance with their terms. Neither this Mortgage
nor any action or inaction on the part of the Mortgagee shall release (i)
any Tenant from its Lease, (ii) any guarantor of any Lease or (iii) the
Mortgagor or the Beneficiary, from any of their respective obligations under
the Leases or constitute an assumption of any such obligation on the part of
the Mortgagee. No action or failure to act on the part of the Mortgagor or
the Beneficiary shall adversely affect or limit the rights of the Mortgagee
under this Mortgage or, through this Mortgage, under the Leases.
(f) During the term hereof, all rights, powers and privileges of
Mortgagee herein set forth are coupled with an interest and are irrevocable,
subject to the terms and conditions hereof, and the Mortgagor will not and
the Beneficiary will not, and will not direct the Mortgagor to, take or
permit any action under any Lease or otherwise which is inconsistent with
this Mortgage or any of the terms hereof and any such action inconsistent
herewith or therewith shall, to the fullest extent permitted by law, be
void. Any further assignment of any rents, issues, or profits from the
Property shall to the fullest extent permitted by law be void except as
permitted by Section 19.3 of this Mortgage. To the fullest extent
permitted by applicable law, the Mortgagor and the Beneficiary hereby
waive any requirement that the Mortgagee commence any foreclosure proceeding
with respect to any or all of the Property prior to enforcement of any
remedies pursuant to this Article 53, including the right to commence and
prosecute an action to appoint a receiver for rents and all other amounts due
under any Leases. The Mortgagor will and the Beneficiary will, from time to
time, upon request of the Mortgagee, direct the Mortgagor to execute on a
non-recourse basis all instruments and further assurances and all
supplemental instruments and take all such action as the Mortgagee from time
to time may reasonably request in order to perfect, preserve and protect the
interests, intended to be assigned to the Mortgagee hereby.
(g) The assignment granted by this Article 53 may be modified,
amended, discharged or waived only by an agreement in writing signed by the
party against whom enforcement of any such modification, amendment, discharge
or waiver is sought. Subject to Article 38 hereof, the covenants of this
Article 53 shall run with the land and bind the Mortgagor, the Beneficiary,
<PAGE>
the successors and permitted assigns of the Mortgagor, the successors and
permitted assigns of the Beneficiary, and all present and subsequent
encumbrances, Tenants of any of the Premises, and shall bind and inure to the
benefit of the Mortgagee, its successors and permitted assigns.
(h) Each of the Mortgagor and the Beneficiary hereby agrees that it
shall not, unilaterally or by agreement, subordinate, amend, modify, extend,
discharge, terminate, surrender, waive or otherwise change any term of any
Lease in any manner other than as permitted by this Mortgage and Beneficiary
agrees that it shall not direct the Mortgagor to take any such action which
would have the foregoing effect. If any Lease shall be amended as permitted
hereby, such Lease shall continue to be subject to the provisions hereof
without the necessity of any further act by any of the parties hereto.
(i) The assignment contained in this Article 53 shall not be deemed
to impose upon the Mortgagee any of the obligations or duties of the Mortgagor
or the Beneficiary under any of the Leases, including without limitation the
covenant of quiet enjoyment contained in any Lease in the event that any
Tenant shall have been joined as a party defendant in any action to foreclose
this Mortgage.
54. WAIVER OF TRIAL BY JURY.
-----------------------
To the extent permitted under applicable law, the Mortgagor and
the Beneficiary hereby waive and shall waive trial by jury in any
action or proceeding brought by, or any counterclaim asserted by
the Mortgagee which action, proceeding or counterclaim in any way
arises out of or is connected with this Mortgage.
<PAGE>
55. CONFIDENTIALITY.
---------------
The Mortgagee agrees to use all reasonable efforts to keep confidential all
financial statements and other information obtained by Mortgagee from the
Beneficiary pursuant to this Mortgage which has been stamped confidential, and
to not disclose such information to any other Person except (i) to the extent
required by any law, regulation or court order, or, to the extent requested by
any governmental authority or the NAIC or like private or governmental entity
or association, (ii) to its attorneys, accountants and other representatives
to the extent such Persons require such information in their representation of
Mortgagee, (iii) to prospective purchasers of the Notes or securities secured
by the Notes to the extent necessary to permit resales of the Notes or
securities secured by the Notes under Rule 144A of the Securities Act or
otherwise, (iv) to the Rating Agencies, as may be required by such Rating
Agencies, including in connection with their review of Mortgagee or its
Affiliates, (v) to the officers, directors and employees of any of the
foregoing (provided they agree to be bound by the confidentiality
restrictions hereof), or (vi) to the extent that such information
is obtained or obtainable from another source on a non-confidential basis or
is public when received by the Mortgagee or becomes public thereafter due to
the action or omission of any party other than the Mortgagee.
56. NOTICES.
-------
Any notice, direction, request, consent, election, waiver or demand which by
any provision of this Mortgage is required or permitted to be given may be
served by telecopier (with a confirmation copy sent by certified or registered
mail, return receipt requested, or by overnight courier) to any party hereto
<PAGE>
or by an overnight national courier service or, except for requests for
consent, approval, waiver or the like which shall be served by telecopier or
overnight national courier service, as aforesaid, may be given or served by
certified or registered mail, in each case return receipt requested, postage
prepaid, if to the Mortgagor or to the Beneficiary addressed separately to
each of them (regardless of which one is the party to be notified) at the
following addresses:
If to the Mortgagor:
LaSalle National Trust, N.A., as Successor
Trustee to LaSalle National Bank, as
Trustee under Trust No. 40940
135 South LaSalle Street
Chicago, Illinois 60603
Attention: Land Trust Department
Telecopier No.: (312) 904-2202
If to the Beneficiary:
Water Tower Joint Venture
c/o Urban Shopping Centers Inc.
900 North Michigan Avenue, 15th Floor
Chicago, Illinois 60611-1575
Attention: Chief Financial Officer
Telecopier No.: (312) 915-2001
with a copy to:
Urban Shopping Centers Inc.
900 North Michigan Avenue, 15th Floor
Chicago, Illinois 60611-1575
Attention: General Counsel
Telecopier No.: (312) 915-2001
and to:
835 Michigan L.P.
c/o Heitman Capital Management Corporation
180 N. LaSalle Street, Suite 3600
Chicago, Illinois 60601
Attention: Chief Legal Officer
Telecopier No.: (312) 541-6738
If to the Mortgagee:
Lehman Brothers Holdings Inc.
Three World Financial Center
New York, New York 10285
Attention: Michael J. DeMarco
Telecopier No.: (212) 526-3746
with a copy to:
Thacher Proffitt & Wood
Two World Trade Center
New York, New York 10048
Attention: Mitchell G. Williams, Esq.
Telecopier No.: (212) 912-7751
or at such other address in the continental United States as any of them may
designate in accordance with the provisions hereof. Unless information is
sent to the Mortgagee for its approval and such approval is obtained or is
deemed to have been obtained by express provision in this Mortgage, the
<PAGE>
Mortgagee shall not be deemed to have approved the contents of such
information or the waiver of any rights of the Mortgagee hereunder.
57. INVESTMENTS.
-----------
The Mortgagee shall invest any amounts held under this Mortgage in the form
of Cash, pending their application to the purposes herein provided in one of
the following investments:
(a) (i) U.S. Government Securities and (ii)
mutual funds organized under the Investment Company Act
of 1940 rate in D&P's highest rating category, if rated
by D&P, and rate A2 or P-1 by Moody's;
(b) certificates of deposit or other interest-
bearing obligations of the Mortgagee or another bank or
trust company which is a member in good standing of the
Federal Reserve System having a combined capital,
surplus and undivided profits of not less than
$100,000,000, provided that the Mortgagee or such other
bank or trust company has a short term unsecured debt
rating of not less than P-1 by Moody's and, if rated by
D&P, not less than Duff-1, and the investments shall
mature or be redeemable upon the option of the holders
thereof on or prior to the earlier of (x) three months
from the date of their purchase or (y) the Business Day
preceding the date such amounts are required to be
applied under this Mortgage;
(c) bonds or other obligations having a short
term unsecured debt rating of not less than P-1 by
Moody's issued by or by authority of any state of the
United States, any territory or possession of the
United States, including the Commonwealth of Puerto
Rico and agencies thereof, or any political subdivision
of any of the foregoing;
(d) repurchase agreements issued by an entity
rated not less than P-1 by Moody's, and, if rated by
D&P, not less than Duff-1 which are secured by U.S.
Government Securities maturing on or prior to the
earlier of (x) one month from the date the repurchase
agreement is entered into or (y) the Business Day
preceding the date such amounts are required to be
applied under this Mortgage;
(e) short term promissory notes rated not less
than P-1 by Moody's maturing or to be redeemable upon
the option of the holders thereof on or prior to the
earlier of (x) one month from the date of their
purchase or (y) the Business Day preceding the date
such amounts are required to be applied under this
Mortgage;
which investment, so long as no Event of Default has occurred and is
continuing hereunder, shall be upon the written direction of the Beneficiary.
Unless otherwise directed by the Beneficiary, the Mortgagee shall invest any
amounts held pending their application to the purposes herein provided in
investments, to the extent such investments are available, first: to those
investments permitted in clause (a)(ii) above, second: to those investments
permitted in clause (e) above, third: to those investments permitted in clause
(b) above, and fourth: to those investments permitted in clause (c) above.
The Mortgagee shall not make any investment requiring a payment above par for
an obligation if the obligation may be prepaid at the option of the issuer
<PAGE>
thereof prior to its maturity and shall not purchase an interest-only strip
security which is prepayable or callable at the option of the issuer. Any
such investments (other than under clause (b), (d) or (e) above) shall mature
or be redeemable (without penalty) upon the option of the holder thereof on or
prior to the earlier of (x) three months from the date of their purchase or
(y) the Business Day preceding the day before the date such amounts are
required to be applied under this Mortgage. The Mortgagee shall not be
responsible for its inability to invest funds received after 11:00 a.m. New
York, New York time. After application to the purposes for which any amounts
invested pursuant to this Article 57 are held and so long as no Event of
Default has occurred and is continuing hereunder, any investment income earned
from such investments shall be paid to the Beneficiary upon its written
directions.
58. SPECIAL PROVISIONS RELATING TO SUBDIVISION.
------------------------------------------
(a) The Mortgagor covenants and agrees that it shall, and the
Beneficiary covenants and agrees that it shall cause the Mortgagor to, fully
and faithfully perform, observe and comply with, the Declaration of Easements,
the Operating Agreement and the Condominium Deed. The Mortgagor and
Beneficiary shall enforce in the ordinary course of business all material
obligations of the owner of the hotel property under the Declaration of
Easements and shall not waive the performance thereof if the same would limit
or otherwise affect in any material adverse respect the value of the Property
and if Mortgagor and Beneficiary fail to do so and an Event of Default is
continuing hereunder, Mortgagee may do so, as the Mortgagor's and
Beneficiary's attorney-in-fact.
(b) Neither the Mortgagor nor the Beneficiary shall terminate,
amend or otherwise modify the Declaration of Easements, the Operating
Agreement or the Condominium Deed in any manner which would impair their
validity or would limit or otherwise affect in any material adverse respect
any material rights of the Mortgagor or the Beneficiary thereunder or the
value of the Property or the likelihood of repayment of the Notes. At least
twenty-one (21) days prior to executing any proposed amendment or
modification to the Declaration of Easements, the Operating Agreement or
Condominium Deed (a "Proposed Modification"), the Beneficiary shall deliver a
copy thereof to the Mortgagee. If, on or before the twentieth (20th) day
after the Proposed Modification is so delivered to the Mortgagee, the
Mortgagee advises the Beneficiary in writing that the Proposed Modification
would, in its sole reasonable judgment, have a material adverse effect on the
value, use and operation of the Property or the likelihood of repayment of the
Notes, alter the obligations of the parties thereunder in a way materially
adverse to the owner of the Property or would materially adversely change the
standards of insurance coverage or the depositary provisions of the
Declaration of Easements relating to the depositary appointed to hold
casualty or condemnation proceeds, then the Beneficiary shall not enter into
the Proposed Modification.
(c) The Mortgagor and the Beneficiary shall provide the Mortgagee
with copies of all notices of default or requesting arbitration of any dispute
sent by or to the Mortgagor or the Beneficiary under the Declaration of
Easements, Condominium Deed or Operating Agreement, and of any notice or
demand that the Mortgagor or the Beneficiary restore the Premises, received
by either of them under or pursuant to the Declaration of Easements, the
Operating Agreement or the Condominium Deed in each case within five (5)
Business Days after receipt thereof.
(d) The Beneficiary shall pay any amounts due and payable by the
Mortgagor under the Declaration of Easements, the Condominium Deeds, or the
Operating Agreement before the same would become delinquent and before any
fine, penalty, late charge, interest or other charge may be added for
nonpayment.
(e) Whenever and as often as the Mortgagor or the Beneficiary
shall fail to perform, promptly and fully, at the sole cost and expense of
the Mortgagor or the Beneficiary, any covenant, condition, promise or
obligation on the part of either of them, under and pursuant to the
Declaration of Easements, the Condominium Deed or the Operating Agreement,
the Mortgagee may, if an Event of Default shall have occurred and be
continuing, at its sole option, enter upon the Premises and perform, or cause
to be performed, such work, labor, services, acts or things, and take such
other steps and do such other acts it may deem advisable to cure such failure.
(f) Neither the Mortgagor nor the Beneficiary shall accept any
prepayments of any amounts due under the Declaration of Easements, Operating
Agreement or Condominium Deed other than payments for operating services paid
not more than thirty (30) days in advance of the due date thereof.
(g) The Beneficiary warrants and represents that neither the
Mortgagor nor the Beneficiary is in default under the Declaration of
Easements, Operating Agreement or Condominium Deed and that no circumstance
exists which, with the giving of notice or passage of time or both, would
constitute a default under any such instrument.
(h) Neither the Mortgagor nor the Beneficiary will agree to any
reallocation of costs under Section 6.7 of the Declaration of Easements,
without the prior written consent of the Mortgagee, which shall not be
unreasonably withheld or delayed.
(i) The Mortgagee shall be entitled, at its sole option (and at
the Mortgagee's sole expense if not otherwise named in such proceeding), to
participate as a party in any arbitration or other dispute resolution
proceeding undertaken under or with respect to the Declaration of Easements,
Condominium Deed or Operating Agreement if the outcome of such arbitration or
dispute resolution proceeding might materially adversely affect the value,
utility or operation of the Property or the duties or obligations of the
Mortgagor or the Beneficiary under the Declaration of Easements, Condominium
Deed or Operating Agreement.
(j) The Mortgagor shall obtain and keep or cause to be obtained and
kept in full force and effect, the insurance described in Section 9.1(A)(ii)
of the Declaration of Easements, shall cause the Mortgagee to be named as a
loss payee on such insurance and shall promptly furnish Mortgagee with copies
certified by the issuer thereof or its agent. Such policies (and all renewals
thereof) shall comply with the provisions of Section 13.2 of this Mortgage.
(k) No less than five (5) Business Days prior to the delivery by
Mortgagor or Beneficiary of a consent to the Owner of the Hotel Property (as
defined in the Declaration of Easements) under Article XX of the Declaration
of Easements with respect to structural alterations of the Hotel Property or
major alterations of the HVAC, plumbing, electrical or other utility systems
serving the Hotel Property, or a consent to a proposed material change of use
of the Hotel Property, Beneficiary shall deliver to Mortgagee, for
informational purposes only, an Officer's Certificate describing the proposed
alterations or change of use, and certifying that the proposed alterations or
change of use, as the case may be, will not (i) have a material adverse effect
on the utility, operation or value of the Premises, (ii) materially interfere
with, or make materially more burdensome, the performance of Mortgagor's and
Beneficiary's obligations under the Declaration of Easements or (iii) violate
any rights of the condominium owners under the Condominium Deed or the
Operating Agreement, and that the Hotel Owner has complied with the provisions
of Section 20.1(a), (b) and (c) of the Declaration of Easements.
59. APPOINTMENT OF MORTGAGEE AS ATTORNEY-IN-FACT.
--------------------------------------------
Whenever Mortgagee has been appointed as attorney-in-fact in this Mortgage,
by either Mortgagor or Beneficiary, such appointment shall be deemed to be
<PAGE>
irrevocable, with power of substitution, and shall confer upon Mortgagee a
power coupled with an interest.
60. JOINT AND SEVERAL LIABILITY.
---------------------------
Subject to Article 38 hereof, the liability of Mortgagor and Beneficiary as
to covenants, representations and warranties made herein by Mortgagor and
Beneficiary jointly shall be joint and several.
61. MORTGAGOR EXECUTING AS TRUSTEE.
------------------------------
Any reference herein to assets of the Mortgagor refer solely to the assets of
the Mortgagor held pursuant to the Trust Agreement and related to the Property
and this Mortgage is executed by LaSalle National Trust, N.A., not personally
but solely as the land trustee in the exercise of the power and authority
conferred upon and vested in it as such. All the terms, provisions,
stipulations, covenants, agreements, representations and conditions to be
performed by the Mortgagor are undertaken by it solely as the land trustee and
not individually and all statements herein made on information and belief and
are to be construed accordingly; and no personal liability shall be asserted
or be enforceable against the land trustee.
<PAGE>
IN WITNESS WHEREOF, the Mortgagor and the Beneficiary have caused
this Mortgage to be duly executed and delivered as of the date first above
written.
LASALLE NATIONAL TRUST, N.A., successor to LaSalle
National Bank, as Mortgagor
By:
--------------------------------------------------
Name:
Title:
WATER TOWER JOINT VENTURE, as Beneficiary, an Illinois
general partnership
By: 835 MICHIGAN L.P., an Illinois limited
partnership, as General Partner of Water Tower
Joint Venture
By: 835 MICHIGAN CORP., an Illinois
corporation, as General Partner of 835
Michigan L.P.
By:
-------------------------------------
Name: Stuart C. Katz
Title: Vice President
By: URBAN SHOPPING CENTERS, L.P., an Illinois limited
partnership, as General Partner of Water Tower
Joint Venture
By: URBAN SHOPPING CENTERS INC., a Maryland
corporation as General Partner of Urban
Shopping Centers, L.P.
By:
-------------------------------------
Name: Michael G. Hilborn
Title: Senior Vice President
<PAGE>
STATE OF ILLINOIS )
) ss.:
COUNTY OF COOK )
On this _________ day of February, 1997, before me, the undersigned,
a Notary Public in and for said State, duly commissioned and sworn, personally
appeared ________________, known to me (or proved to me on the basis of
satisfactory evidence) to be a ______________________ of LaSalle National
Trust, N.A., a national banking association, which executed the within
instrument and known to me to be the person who executed the within instrument
on behalf of said corporation, and such person acknowledged to me that he
executed said instrument as his free and voluntary act and the free and
voluntary act of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
Signature
---------------------------------
(Seal)
<PAGE>
STATE OF ILLINOIS )
) ss.:
COUNTY OF COOK )
On this ____________ day of February, 1997, before me, the
undersigned, a Notary Public in and for said State, duly commissioned and
sworn, personally appeared Michael G. Hilborn, known to me (or proved to me
on the basis of satisfactory evidence) to be a Senior Vice President of Urban
Shopping Centers Inc., a Maryland corporation, a general partner of Urban
Shopping Centers, L.P., an Illinois limited partnership which is a general
partner of Water Tower Joint Venture, an Illinois general partnership, which
executed the within instrument and known to me to be the person who executed
the within instrument, and such person acknowledged to me that he executed
said instrument as his free and voluntary act and the free and voluntary
act of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
Signature
---------------------------------
(Seal)
<PAGE>
STATE OF ILLINOIS )
) ss.:
COUNTY OF COOK )
On this _____________ day of February, 1997, before me, the
undersigned, a Notary Public in and for said State, duly commissioned and
sworn, personally appeared Stuart C. Katz, known to me (or proved to me on
the basis of satisfactory evidence) to be a Vice President of 835 Michigan
Corp., an Illinois corporation, a general partner of 835 Michigan L.P., an
Illinois limited partnership which is a general partner of Water Tower Joint
Venture, an Illinois general partnership, which executed the within instrument
and known to me to be the person who executed the within instrument on behalf
of said corporation, and such person acknowledged to me that he executed said
instrument as his free and voluntary act and the free and voluntary act of
said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
Signature
---------------------------------------
(Seal)
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION OF PROPERTY
-----------------------------
PARCEL 1:
LOT 1, IN MARBAN RESUBDIVISION OF A PART OF BLOCK 20 IN CANAL TRUSTEE'S
SUBDIVISION OF THE SOUTH FRACTIONAL 1/4 OF SECTION 3, TOWNSHIP 39 NORTH, RANGE
14, EAST OF THE THIRD PRINCIPAL MERIDIAN, IN COOK COUNTY, ILLINOIS, ACCORDING
TO THE PLAT THEREOF RECORDED DECEMBER 30, 1975 AS DOCUMENT NUMBER 23339677 AND
FILED WITH THE REGISTRAR OF TITLES ON DECEMBER 30, 1975 AS DOCUMENT NUMBER
LR2848886.
PARCEL 2:
EASEMENTS FOR THE BENEFIT OF PARCEL 1 AS RESERVED IN DEED FROM LASALLE
NATIONAL BANK, AS TRUSTEE UNDER TRUST AGREEMENT DATED JUNE 10, 1970 AND KNOWN
AS TRUST NUMBER 40940, TO KELVYN H. LAWRENCE, DATED MARCH 24, 1976, AND
RECORDED MARCH 29, 1976 AS DOCUMENT NUMBER 23432348 AND FILED WITH THE
REGISTRAR OF TITLES ON MARCH 29, 1976 AS DOCUMENT NUMBER LR2861198.
PARCEL 3:
EASEMENTS FOR THE BENEFIT OF PARCEL 1 AS DESCRIBED BY THE DECLARATION OF
COVENANTS, CONDITIONS, RESTRICTIONS AND EASEMENTS ENTERED INTO AS OF APRIL 27,
1992, RECORDED MAY 1, 1992, AS DOCUMENT NUMBER 92299492 BY LASALLE NATIONAL
BANK, AS TRUSTEE UNDER TRUST AGREEMENT DATED JUNE 10, 1970 AND KNOWN AS TRUST
NUMBER 40940 OVER, UPON AND ACROSS THE FOLLOWING:
LOTS 2 AND 3, AND LOTS 19 THROUGH 29, BOTH INCLUSIVE, IN MARBAN RESUBDIVISION,
BEING A SUBDIVISION OF A PART OF BLOCK 30 IN CANAL TRUSTEES' SUBDIVISION OF
THE SOUTH FRACTIONAL 1/4 OF SECTION 3, TOWNSHIP 39 NORTH, RANGE 14 EAST OF THE
THIRD PRINCIPAL MERIDIAN, IN COOK COUNTY, ILLINOIS.
<PAGE>
EXHIBIT B
PERMITTED EXCEPTIONS
--------------------
(a) the right reserved to or vested in any municipality or public
authority to condemn, appropriate, recapture or designate a purchaser of the
Property or any part thereof or interest therein or under zoning laws and use
regulations;
(b) any (i) liens for Impositions and any other taxes, assessments or
charges, (ii) liens of mechanics, materialmen, suppliers, vendors or other
Persons for work or services performed or materials furnished in connection
with the Property and (iii) liens or charges arising from the imposition of
any Legal Requirement, in each case which are not due and payable in
accordance with the terms of this Mortgage or the amount, validity or
application of which is being contested at the time by appropriate legal,
administrative or other proceedings which shall operate to prevent the
collection thereof or other realization thereon and the sale or forfeiture of
the Property or any interest therein to satisfy the same, provided that the
Beneficiary shall have complied with Section 12 dealing with the contest of
any Imposition, lien, tax, assessment, charge or Legal Requirement;
(c) the lien hereof and any rights granted hereby or thereby;
(d) any Subordinate Mortgage or any other mortgage given in accordance
with Section 19.2 of the Mortgage (the rights of the holders of which shall be
expressly subject and subordinate to the lien hereof and the rights of the
Mortgagee under this Mortgage in accordance with the subordination provisions
set forth in Exhibit C);
(e) the Condominium Deed, the Operating Agreement and the Declaration of
Easements;
(f) the state of facts shown on the survey of the Property by Exzakt
Survey Co., Inc. dated December 17, 1984;
(g) covenants, restrictions, easements and other matters set forth in
the mortgage title insurance policy issued to the Mortgagee on the date
hereof;
(h) rights of Tenants under any Leases existing on the date hereof or
entered into in accordance with the provisions of this Mortgage, and any
memoranda of any of them;
(i) judgments or awards which have been in force for less than the
applicable appeal period so long as execution is not levied thereunder or in
respect of which the Beneficiary at the time shall be prosecuting an appeal or
proceedings for review in good faith and in respect of which a stay of
execution shall have been obtained pending such appeal or review, or which
are fully covered by insurance (except to the extent of usual and customary
deductibles); and
(j) modified or additional easements, rights of way, restrictive
covenants or similar agreements allowed by Section 3.2(c) of this Mortgage.
<PAGE>
EXHIBIT C
SUBORDINATION PROVISIONS FOR PERMITTED
SUBORDINATE MORTGAGES
-------------------------------------
Each Subordinate Mortgage shall provide that so long as this
Mortgage (and any refinancing of this Mortgage in any amount, including an
amount in excess of the amount secured by this Mortgage) remains unreleased
and unsatisfied of record:
(i) the lien of each Subordinate Mortgage and all of the
rights of the holder thereof shall be expressly subordinate to this
Mortgage and the other Security Documents as the same may be modified or
extended from time to time (and any refinancing of this Mortgage), in all
respects and circumstances, and no payment shall be made pursuant to the
terms of such Subordinate Mortgage while there exists a Default in the
payment of any monetary obligation or an Event of Default hereunder or
under any refinancing of this Mortgage, and any payment so made while a
Default in the payment of any monetary obligation or an Event of Default
exists hereunder or under any refinancing of this Mortgage shall be
received in trust by the holder(s) of such Subordinate Mortgage for, and
shall be paid immediately by such holder(s) to, the Mortgagee;
(ii) the mortgagor and mortgagee under such Subordinate
Mortgage expressly waive any equitable rights to marshalling of assets
or proration of security interest and any rights of redemption, which
waiver by its terms shall be binding on all transferees;
(iii) the mortgagee under such Subordinate Mortgage shall not
acquire any lien or security interest, by subrogation or otherwise,
equal to or prior in right to the interest under the lien of this
Mortgage or any other Security Documents or of any refinancing of this
Mortgage on any portion of the Property;
(iv) the mortgagee under such Subordinate Mortgage shall
furnish the Mortgagee simultaneously with a copy of any notice of any
default given to the mortgagor thereunder or with prompt notice of any
default under a Subordinate Mortgage which does not provide for notices
of default, and shall furnish the Mortgagee with ten Business Days' prior
written notice before exercising any remedies in the event of a default
thereunder with respect to the Property provided in the Subordinate
Mortgage;
(v) the Subordinate Mortgage shall provide that the lien
thereof shall be subordinate to all Leases and that the mortgagee under
such Subordinate Mortgage, by acceptance thereof, thereby elects, and
agrees for the benefit of the Mortgagee, (a) to make every Lease superior
to the lien of such Subordinate Mortgage, (b) to execute, deliver and
record any and all instruments necessary to effect such election and
subordination of the Subordinate Mortgage and (e) not to name any Tenant
under any Lease in any proceeding for the foreclosure of such Subordinate
Mortgage;
(vi) the mortgagee under such Subordinate Mortgage, upon the
request and at the expense of the Mortgagor or the Beneficiary shall
execute, acknowledge and deliver to the Mortgagee (and any holder of a
refinancing mortgage) such instruments as the Mortgagee (and any holder
of a refinancing mortgage) may reasonably request for the better assuring
to the Mortgagee (and the holder of a refinancing mortgage) of the
benefits of these subordination provisions; and
(vii) with respect only to a Subordinate Mortgage securing
indebtedness permitted in accordance with Section 19.2(vi) hereof, none
of the terms, covenants and conditions under such Subordinate Mortgage
<PAGE>
shall be less favorable in any material respect to the Mortgagor than the
terms, covenants and conditions of this Mortgage provided that (x) the
stated interest rate on the obligation secured by such Subordinate
Mortgage may be higher than the stated interest rate on the Notes and
(y) the repayment terms of such Subordinate Mortgage shall require that
the principal amount of such obligation be repaid from excess Cash Flow
prior to any distributions to the Beneficiary or any General Partner
(other than for income taxes) and prior to the payment of interest on or
principal of indebtedness incurred under Section 19.2(v).
Each Subordinate Mortgage may state, however, that the subordination
provisions in such mortgage shall not impair any recourse obligations of the
mortgagor under such mortgage or any recourse guarantee of such mortgagor's
obligations under any note or other instrument evidencing the indebtedness
secured by such mortgage, provided, however, that the terms of any guarantee
by a General Partner or other Affiliate of the Beneficiary shall, in the
opinion of an independent counsel, not give rise to the risk that either the
Mortgagor or Beneficiary will be substantively consolidated with any entity.
<PAGE>
EXHIBIT D
INSURANCE REQUIREMENTS
----------------------
(a) Insurance with respect to the Improvements and the Equipment
against any peril included within the classification "All Risks of Physical
Loss" with extended coverage in amounts at all times sufficient to prevent the
Mortgagor 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, footings and foundations, landscaping and
paving) determined annually by an insurer, a recognized independent insurance
broker or an appraiser selected and paid by the Beneficiary (unless reasonably
disapproved by the Mortgagee) and in no event less than the coverage required
pursuant to the Condominium Deed or the Declaration of Easements;
(b) Comprehensive general liability insurance, including bodily
injury, death and property damage liability, and umbrella liability insurance
against any and all claims, including all legal liability to the extent
insurable imposed upon the Mortgagee and all court costs and attorneys' fees
and expenses, arising out of or connected with the possession, use, leasing,
operating, maintenance or condition of the Property in such amounts as are
generally available at reasonable premiums and are generally required by
institutional lenders for properties comparable to the Property and in no
event less than the coverage required pursuant to the Condominium Deed or
the Declaration of Easements;
(c) 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 Mortgagor), with respect to any work on or about
the Property;
(d) Business interruption and/or loss of "rental value" insurance
in an amount sufficient to avoid any co-insurance penalty and to provide
Proceeds for a period not less than two year of loss, the term "rental value"
to mean the sum of (A) the total rentals-payable under the Leases and (B) the
total amount of all other amounts to be received by the Mortgagor, the
Beneficiary or third parties which are the legal obligation of the Tenants,
reduced to the extent such amounts would not be received because of expenses
not incurred during a period of non- occupancy of that portion of the Property
then not being occupied;
(e) 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 reasonable premiums and are generally required by
institutional lenders for properties comparable to the Property;
(f) If the Property is located within a federally designated flood
hazard zone, flood insurance if generally available at reasonable premiums and
in such amount as generally required by institutional lenders for similar
properties (provided, however, that if Beneficiary believes that it in no
longer obligated to maintain flood insurance pursuant to this provision, the
Beneficiary shall notify the Mortgagee of such circumstance and Mortgagee shall
have the opportunity to contest by appropriate legal or mutually agreeable
arbitration proceedings whether or not the Beneficiary's obligation remains
in effect in light of the criteria set forth in this provision); and
<PAGE>
(g) Such other insurance 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 reasonable premiums and are
generally required by institutional lenders for properties comparable to the
Property.
<PAGE>
EXHIBIT E
ASSUMPTION
----------
THE UNDERSIGNED, _______________, has acquired the "Property" which
is the subject of that certain "MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF
LEASES AND RENTS AND FIXTURE FILING" (the "Mortgage"), dated as of
_____________, 1992, executed by LaSalle National Trust, N.A., a national
banking association not personally but as trustee (under Trust Agreement dated
June 10, 1970 and known as Trust No. 409401, as Mortgagor, and Water Tower
Joint Venture, as Beneficiary, to Lehman Brothers Holdings Inc. d/b/a Lehman
Capital, a division of Lehman Brothers Holdings Inc., as Mortgagee, said
Mortgage constituting a first lien encumbrance on certain real and personal
property constituting a part of the property commonly known as Water Tower
Place, Chicago, Illinois.
In accordance with the requirements of Section 19.1 of the Mortgage,
the undersigned hereby assumes all of the duties and obligations and covenants
of the Beneficiary under or pursuant to the Mortgage including those in
Sections 3.3 and 3.4, subject, however, to the provisions of Article 38 of the
Mortgage.
IN WITNESS WHEREOF, the undersigned has executed this Assumption as
of the ________ day of _______________ , 19__.
-------------------------------------------
By:
----------------------------------------
Name:
Title:
[ADD APPROPRIATE FORM OF ACKNOWLEDGEMENT]
<PAGE>
PROMISSORY NOTE A
$160,000,000 New York, New York
February 10, 1997
FOR VALUE RECEIVED WATER TOWER JOINT VENTURE, an Illinois general
partnership, as maker, having its principal place of business at 900 North
Michigan Avenue, Chicago, Illinois 60611 ("Borrower"), hereby promises to pay
to the order of LEHMAN BROTHERS HOLDINGS INC., a Delaware corporation, d/b/a
LEHMAN CAPITAL, A DIVISION OF LEHMAN BROTHERS HOLDINGS INC., as lender, having
an address at Three World Financial Center, New York, New York 10281
("Mortgagee"), or at such other place as the holder hereof may from time to
time designate in writing, the principal sum of One Hundred Sixty Million and
00/100 Dollars ($160,000,000), or so much thereof as is advanced pursuant to
the terms of this Note, in lawful money of the United States of America with
interest thereon to be computed from the date of this Note at the Applicable
Interest Rate (defined below), and to be paid in installments as set forth
herein. Capitalized terms not otherwise defined herein shall have the
meanings ascribed to them in the Mortgage (defined below).
ARTICLE 1. PAYMENT TERMS
Borrower shall make a payment of $554,166.67 on March 1, 1997 and an
Adjusted Monthly Payment (hereinafter defined) on April 1, 1997, and on the
first day of each calendar month thereafter up to and including the month
immediately preceding the month in which the Maturity Date (hereinafter
defined) occurs, or any extension thereof as set forth herein, each of the
payments to be applied to the payment of interest computed at the Applicable
Interest Rate and the outstanding balance of the principal sum and all accrued
and unpaid interest thereon shall be due and payable on the Maturity Date (or
any extension thereof as set forth herein). Interest on the advanced and
outstanding principal sum of this Note shall be calculated on the basis of a
three hundred sixty (360) day year based on twelve (12) thirty (30) day months
except that interest due and payable for a period of less than a full month
shall be calculated by multiplying the actual number of days elapsed in such
period by a daily rate based on said 360-day year, unless such calculation
would result in a usurious rate, in which case interest shall be calculated
on the per annum basis of a year of 365 or 366 days, as the case may be.
The term "Maturity Date" shall mean February 1, 1999. Borrower
shall be entitled to two (2) one year extensions of the Maturity Date provided
(a) no Event of Default (defined herein) shall have occurred and be continuing
on the Maturity Date (or any extension thereof as set forth herein),
(b) Borrower shall pay to Mortgagee a fee prior to each extension equal to
.1% of the sum of the outstanding principal balance of this Note on the
Maturity Date (or any extension thereof as set forth herein) and (c) Borrower
shall deliver written notice requesting an extension to Mortgagee at least
thirty (30) days prior to the Maturity Date (or any extension thereof as set
forth herein).
ARTICLE 2. INTEREST
For purposes of this Note, the following terms shall have the
following meanings:
The term "Adjusted Monthly Payment" shall mean a payment, sufficient
to pay interest on the then outstanding principal balance of this Note at the
Applicable Interest Rate then in effect. The Adjusted Monthly Payment shall
be calculated as of each Adjustment Date based on the Applicable Interest Rate
in effect on such date and payable in arrears for each Interest Period.
<PAGE>
The term "Adjustment Date" shall mean two London Banking Days prior
to the first day of an Interest Period.
The term "Applicable Interest Rate" shall mean the lesser of (a)
(i) from the date of this Note through and including February 28, 1997, an
interest rate equal to 6.5625% per annum and (ii) from and including
March 1, 1997 through and including the Maturity Date or any extension thereof
as set forth herein, an interest rate equal to LIBOR plus the Increment and
(b) the Highest Lawful Rate.
The term "Financial Reporting Date" shall mean the date which is
sixty (60) days after the end of each fiscal quarter of Borrower, except for
Borrower's fourth fiscal quarter, in which case the term shall mean the date
which is ninety (90) days after the end of such quarter.
The term "GAAP" shall mean United States generally accepted
accounting principles on the date hereof and as in effect from time to time
during the term of this Note.
The term "Highest Lawful Rate" as used herein shall mean, with
respect to the Mortgagee, the maximum nonusurious interest rate, that at any
time or from time to time may be contracted for, taken, reserved, charged or
received on the Debt (defined below) under laws applicable to the Mortgagee
that are presently in effect or, to the extent allowed by law, under such
applicable laws that may hereafter be in effect and that allow a higher
maximum nonusurious interest rate than applicable laws now allow.
The term "Increment" shall mean, for any Interest Period, 1.125%
per annum, except during an Increment Adjustment Period, in which case
"Increment" shall mean 1% per annum.
The term "Increment Adjustment Event" shall mean that Mortgagee
shall have determined, following receipt of an Increment Adjustment Request,
that the NOI/Debt Index is equal to or exceeds .13.
The term "Increment Adjustment Period" shall mean a period beginning
the sixth (6th) Business Day following a Request Date (defined herein) to, but
not including, the sixth (6th) Business Day following a Recalculation Date
(defined herein). For purposes of this definition only, (i) the term "Request
Date" shall mean only those Request Dates following which Lender determines
an Increment Adjustment Event has occurred and no Event of Default has
occurred and is continuing as of the date the Increment Adjustment Period is
set to begin and (ii) the term "Recalculation Date" shall mean only those
Recalculation Dates following which Lender determines an Increment Adjustment
Event is not in effect.
The term "Increment Adjustment Request" shall mean a written notice
from Borrower to Mortgagee requesting a determination of the NOI/Debt Index by
Mortgagee, accompanied by such financial documentation as is necessary to
determine the NOI/Debt Index.
The term "Interest Period" shall mean each one month calendar
period beginning March 1997.
The term "LIBOR" shall mean, for an Interest Period, (a) the LIBOR
Index Rate, if such rate is available and (b) if the LIBOR Index Rate cannot
be determined, the average rate of interest per annum (rounded upwards, if
necessary, to nearest 1/100 of 1%) at which deposits in U.S. Dollars in
immediately available funds are offered at 11:00 a.m. on the first day of
such Interest Period by major banks in the interbank eurodollar market for
delivery on the first day of such Interest Period and for a one month period
in an amount equal to the sum of the then outstanding principal amounts of
this Note and the Other Note (defined herein). Each determination of LIBOR
made by Mortgagee shall be final and conclusive absent manifest error.
<PAGE>
The term "LIBOR Index Rate" shall mean, for any Interest Period,
the rate per annum (rounded upwards, if necessary, to the next higher one
hundred-thousandth of a percentage point) for deposits in U.S. Dollars for
a one month period approximately corresponding to the sum of the then
outstanding principal amounts of this Note and the Other Note, which appears
on the Telerate Page 3750 as of 11:00 a.m. (London, England time) on the
Adjustment Date.
The term "London Banking Date" shall mean a day on which dealings
in deposits in United States dollars are transacted in the London interbank
market.
The term "Net Operating Income" shall mean, with respect to the
Property (defined below), Rents less Operating Expenses.
The term "NOI/Debt Index" shall mean, for each applicable period, a
fraction, the numerator of which shall be Net Operating Income for such
period, and the denominator of which shall be the sum of the outstanding
principal balance of this Note and the Other Note at the time the calculation
of NOI/Debt Index is made for such period.
The term "Operating Expenses" shall mean, with respect to the
Property, for the two full fiscal quarters of Borrower occurring immediately
prior to the determination of Net Operating Income, to be calculated on an
annualized basis (and shall include the pro rata portion for such period of
all such expenses attributable to, but not paid during, such period), all
expenses to be paid or payable, as determined on an accrual basis in
accordance with GAAP by Borrower, including without limitation: (i) expenses
for cleaning, repair, maintenance, decoration and painting of the Property
(including, without limitation, parking lots and roadways), net of any
insurance proceeds in respect of any of the foregoing; (ii) wages
(including overtime payments), benefits, payroll taxes and all other
related expenses for Borrower's on-site personnel, up to and including
(but not above) the level of the on-site manager, engaged in the repair,
operation and maintenance of the Property and service to tenants and on-site
personnel engaged in audit and accounting functions performed by Borrower;
(iii) management fees pursuant to the Management Agreement; (iv) the cost
of all electricity, oil, gas, water, steam, heat, ventilation, air conditioning
and any other energy, utility or similar item and the cost of building and
cleaning supplies; (v) rent, liability, casualty and fidelity, liability,
worker's compensation and other insurance premiums; (vi) legal, accounting and
other professional fees and expenses; (vii) the cost of all equipment to be
used in the ordinary course of business, which is not capitalized in accordance
with GAAP; (viii) real estate, personal property and other taxes; (ix)
advertising and other marketing costs and expenses; (x) casualty losses to the
extent not reimbursed by an independent third party; and (xi) all other amounts
paid during such period in respect of items which in accordance with generally
accepted accounting principles would be included in the Borrower's annual
financial statements for such period or any other period as operating expenses
of the Property and are reasonably expected by the Borrower to be regularly
recurring operating expenses of the Property and not separately deducted in
the definition of Net Operating Income.
Notwithstanding the foregoing, Operating Expenses shall not include
(i) depreciation or amortization or any other non-cash item of expense, (ii)
interest, principal, fees, costs and expense reimbursements of the loan
evidenced by this Note and the Other Note but not in exercising any of
Borrower's rights under this Note, the Other Note, the Mortgage or the Other
Security Documents; (iii) income taxes, (iv) any expenses (including legal,
accounting and other professional fees, expenses and disbursements) incurred
in connection with and allocable to the issuance of the Notes 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 any of the Notes; (v) the cost of
leasehold improvements and tenant improvements, leasing commissions, any other
<PAGE>
expenditures on behalf of tenants under Leases (except to the extent, and only
to the extent, that reimbursement from tenants under Leases for such items is
included in Net Operating Income), any Equipment (except to the extent, and
only to the extent that the proceeds from the sale of the Equipment being
replaced thereby are included in Net Operating Income) and any capital
expenditures; (vi) any item of expense which otherwise would be considered
within Operating Expenses pursuant to the provisions above but is paid
directly by tenants under any Lease; (vii) amounts paid in consideration of
any modification, amendment, supplement, waiver, renewal, or termination of
any Lease; (viii) all amounts paid or expense incurred under any Lease of an
anchor department store; (ix) fees and expenses of the Mortgagee (if any) paid
by the Borrower pursuant to the Mortgage; and (x) any expenditure which is
properly treatable as a capital item under GAAP.
The term "calculated on an annualized basis", as used in this
definition, shall mean determining Operating Expenses for two full fiscal
quarters of Borrower in accordance with this definition and multiplying such
figure by two (2).
The term "Rents" shall mean, with respect to the Property, for the
two full fiscal quarters of Borrower occurring immediately prior to the
determination of Net Operating Income, all income, rents, additional rents,
revenues, issues and profits (including all oil and gas or other mineral
royalties and bonuses) and all pass-throughs and tenants' required
contributions for taxes, maintenance costs, tenant improvements, leasing
commissions, capital expenditures and other items from the Leases affecting
the Property, including any rent loss or business interruption insurance
proceeds, to be calculated on an annualized basis and determined on an
accrual basis in accordance with GAAP.
Notwithstanding the foregoing, Rents shall not include (i) any
condemnation or insurance proceeds (excluding rent or business interruption
insurance proceeds), (ii) any proceeds resulting from the sale, exchange,
transfer, financing or refinancing of all or any portion of the Property,
(iii) amounts received from tenants as security deposits unless applied in
accordance with the terms of a Lease, (iv) interest income and (v) any type
of income otherwise included in Net Operating Income but paid directly by any
tenant to a Person other than Borrower or its agents or representatives.
The term "calculated on an annualized basis", as used in this
definition, shall mean determining the Rents for two full fiscal quarters of
Borrower in accordance with this definition and multiplying such figure by
two (2).
The term "Telerate Page 3750" means the display page so designated
on the Dow Jones Telerate Service or such other page as may replace page 3750
on that service for the purpose of displaying London interbank offered rates
of major banks for United States dollar deposits or, if there is no such
replacement, such other service or services as may be nominated by the British
Bankers Association from time to time for the purpose of displaying London
interbank offered rates.
Borrower shall not make an Increment Adjustment Request more
frequently than once per fiscal quarter. Upon receipt of an Increment
Adjustment Request, Mortgagee shall calculate the NOI/Debt Index in its
reasonable discretion, and Borrower shall deliver such additional financial
documentation as Mortgagee may reasonably request in order to make its
determination. Mortgagee shall within five (5) Business Days of the later of
its receipt of the Increment Adjustment Request or any further financial
documentation reasonably required by Mortgagee (the "Request Date") notify
Borrower of its determination of the NOI/Debt Index and whether an Increment
Adjustment has occurred.
<PAGE>
If Mortgagee determines that an Increment Adjustment Event has
occurred, Mortgagee shall thereafter recalculate the NOI/Debt Index in its
reasonable discretion on a quarterly basis in conjunction with Borrower's
delivery to Lender of quarterly (or, in the case of the fourth quarter of
Borrower's fiscal year, annual) financial documentation in accordance with
Section 18 of the Mortgage and Borrower shall deliver such additional
financial documentation as Mortgagee may reasonably request in order to make
its determination. Mortgagee shall within five (5) Business Days of the later
of Mortgagee's receipt of quarterly financial documentation in accordance with
Section 18 of the Mortgage or its receipt of any further financial
documentation reasonably required by Mortgagee (the "Recalculation Date")
notify Borrower whether it has determined that the NOI/Debt Index is less
than .13 and therefore an Increment Adjustment Event is no longer in effect.
Notwithstanding anything in this Note to the contrary, in the event
Mortgagee determines the NOI/Debt Index after the fifth (5th) Business Day
following a Request Date or Recalculation Date, as the case may be, a
determination resulting in a change in the Increment shall relate back to the
sixth (6th) Business Day following the Request Date or Recalculation Date, as
the case may be, provided, however, that if Borrower fails to deliver
quarterly financial documentation in accordance with Section 18 of the
Mortgage by the Financial Reporting Date and Mortgagee subsequently
determines that the Increment Adjustment Event is no longer in effect, the
change in the Increment shall relate back to such Financial Reporting Date.
ARTICLE 3. DEFAULT AND ACCELERATION
(a) The whole of the principal sum of this Note, (b) the whole of
the principal sum of the Other Note, (c) accrued and unpaid interest, default
interest, late charges and other sums, as provided in this Note, the Other
Note, the Mortgage or the Other Security Documents (defined below), (d) all
other monies agreed or provided to be paid by Borrower in this Note, the
Other Note, the Mortgage or the Other Security Documents, (e) all sums
advanced by the Mortgagee pursuant to the Mortgage to protect and preserve the
Property and the lien and the security interest created thereby, and (f) all
sums advanced and costs and expenses incurred by Mortgagee pursuant to the
Mortgage or the Other Security Documents in connection with the Debt (defined
below) or any part thereof, any renewal, extension, or change of or
substitution for the Debt or any part thereof, or the acquisition or
perfection of the security therefor, whether made or incurred at the request
of Borrower or Mortgagee (all the sums referred to in (a) through (f) above
shall collectively be referred to as the "Debt") shall without notice become
immediately due and payable at the option of Mortgagee upon an Event of
Default.
ARTICLE 4. DEFAULT INTEREST
Borrower does hereby agree that upon the occurrence of an Event of
Default, Mortgagee shall be entitled to receive and Borrower shall pay
interest on the entire unpaid principal sum at a rate (the "Default Rate")
equal to (i) the Applicable Interest Rate plus three percent (3%) or (ii) the
Highest Lawful Rate, whichever is lower. The Default Rate shall be computed
from the occurrence of the Event of Default until the earlier of the date upon
which the Event of Default is cured or the date upon which the Debt is paid in
full. Interest calculated at the Default Rate shall be added to the Debt, and
shall be deemed secured by the Mortgage. This clause, 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 Mortgagee
by reason of the occurrence of any Event of Default.
<PAGE>
ARTICLE 5. PREPAYMENT
The principal balance of this Note may be prepaid, in whole or in
part, upon: (i) not less than 10 days prior written notice (the "Prepayment
Notice") to Mortgagee specifying the scheduled payment date on which
prepayment is to be made (the "Prepayment Date"); (ii) payment of all accrued
and unpaid interest on the outstanding principal balance of this Note being
prepaid to and including the Prepayment Date; and (iii) payment of all other
sums then due under this Note, the Other Note, the Mortgage and the Other
Security Documents. Borrower shall be permitted to revoke a Prepayment
Notice by delivering written notice of such revocation at any time prior to
the Prepayment Date. In addition to the foregoing right to prepay this Note
in full, Borrower shall have the right to purchase this Note upon the terms
and conditions set forth in this Article 5, provided, however, that Borrower
shall be further required to purchase the Other Note simultaneously with the
purchase of this Note.
Mortgagee shall not be obligated to accept any prepayment of the
principal balance of this Note unless it is accompanied by all sums due in
connection therewith.
Notwithstanding the first paragraph of this Article 5, Mortgagee
shall apply all prepayments of principal otherwise satisfying the conditions
of this Article 5 towards the reduction of the principal balance and any other
sums owing under the Other Note prior to applying the balance of such
prepayment, if any, to the reduction of principal and any other sums owing
under this Note.
ARTICLE 6. SECURITY
This Note is secured by the Mortgage and the Other Security Documents
(defined below). The term "Mortgage" as used in this Note shall mean that
certain Mortgage, Assignment of Leases and Rents and Fixture Filing dated the
date hereof given by LASALLE NATIONAL TRUST, N.A., successor to LaSalle
National Bank and a national banking association not personally but as land
trustee under Trust Agreement dated June 10, 1970 and known as Trust No. 40940
("Mortgagor") and Borrower to and with Mortgagee covering certain premises
located in Cook County, State of Illinois, and other property, as more
particularly described therein (collectively, the "Property") and intended
to be duly recorded in said County. The Mortgage also secures a certain
Promissory Note B made by Borrower and given to Mortgagee in the original
principal amount of $10,000,000 (the "Other Note"). The term "Other Security
Documents" as used in this Note shall mean all and any of the documents other
than this Note and the Mortgage now or hereafter executed by Borrower and/or
others and by or in favor of Mortgagee, which wholly or partially secure or
guarantee payment of this Note, including, without limitation, the Other Note.
Whenever used, the singular number shall include the plural, the plural number
shall include the singular, and the words "Mortgagee" and "Borrower" shall
include their respective successors, assigns, heirs, executors and
administrators.
All of the terms, covenants and conditions contained in the Mortgage
and the Other Security Documents (other than the Other Note) are hereby made
part of this Note to the same extent and with the same force as if they were
fully set forth herein.
ARTICLE 7. SAVINGS CLAUSE
This Note is subject to the express condition that at no time shall
Borrower be obligated or required to pay interest on the principal balance due
hereunder at a rate which could subject Mortgagee to either civil or criminal
liability as a result of being in excess of the Highest Lawful Rate. If by
the terms of this Note, Borrower is at any time required or obligated to pay
interest on the principal balance due hereunder at a rate in excess of the
Highest Lawful Rate, the Applicable Interest Rate or the Default Rate, as the
<PAGE>
case may be, shall be deemed to be immediately reduced to the Highest Lawful
Rate and all previous payments in excess of the Highest Lawful Rate shall be
deemed to have been payments in reduction of principal and not on account of
the interest due hereunder. All sums paid or agreed to be paid to Mortgagee
for the use, forbearance, or detention of the Debt, shall, to the extent
permitted by applicable law, be amortized, prorated, allocated, and spread
throughout the full stated term of the Note until payment in full so that the
rate or amount of interest on account of the Debt does not exceed the Highest
Lawful Rate from time to time in effect and applicable to the Debt for so long
as the Debt is outstanding.
ARTICLE 8. INTENTIONALLY DELETED
ARTICLE 9. NO ORAL CHANGE
This Note may not be modified, amended, waived, extended, changed,
discharged or terminated orally or by any act or failure to act on the part of
Borrower or Mortgagee, but only by an agreement in writing signed by the party
against whom enforcement of any modification, amendment, waiver, extension,
change, discharge or termination is sought.
ARTICLE 10. WAIVERS
Borrower and all others who may become liable for the payment of all
or any part of the Debt do hereby severally waive presentment and demand for
payment, notice of dishonor, notice of intention to accelerate, notice of
acceleration, protest and notice of protest and non-payment and all other
notices of any kind, other than as expressly provided herein, in the Mortgage
or the Other Security Documents. No release of any security for the Debt or
extension of time for payment of this Note or any installment hereof, and no
alteration, amendment or waiver of any provision of this Note, the Mortgage
or the Other Security Documents made by agreement between Mortgagee or any
other person or party shall release, modify, amend, waive, extend, change,
discharge, terminate or affect the liability of Borrower, and any other person
or entity who may become liable for the payment of all or any part of the
Debt, under this Note, the Mortgage or the Other Security Documents. No
notice to or demand on Borrower shall be deemed to be a waiver of the
obligation of Borrower or of the right of Mortgagee to take further action
without further notice or demand as provided for in this Note, the Mortgage
or the Other Security Documents. If Borrower is a partnership, the agreements
herein contained shall remain in force and applicable, notwithstanding any
changes in the individuals comprising the partnership, and the term
"Borrower," as used herein, shall include any alternate or successor
partnership, but any predecessor partnership and their partners shall not
thereby be released from any liability. If Borrower is a corporation, the
agreements contained herein shall remain in full force and applicable
notwithstanding any changes in the shareholders comprising, or the officers
and directors relating to, the corporation, and the term "Borrower" as used
herein, shall include any alternative or successor corporation, but any
predecessor corporation shall not be relieved of liability hereunder. Nothing
in the foregoing sentence shall be construed as a consent to, or a waiver of,
any prohibition or restriction on transfers of interests in such partnership
which may be set forth in the Mortgage or any Other Security Document.
ARTICLE 11. TRANSFER
Neither this Note nor any beneficial interest therein may be
acquired by or transferred to any Person (a "Prohibited Transferee") if a
financing provided by such Person to Borrower in connection with the
acquisition or improvement of the Property would meet the criteria of Section
514(c)(9)(B)(v) of the IRC or if such Person is a "party-in-interest" (as
defined in Section 3(14) of ERISA) or a disqualified person under Section 4975
of the IRC as to any of the U.S. pension funds which are beneficial owners of
Borrower or if such Person is identified under clause (j) below. Without
limiting the generality of the foregoing, neither the Note nor any beneficial
<PAGE>
interest in the Note may be acquired by or transferred to any of the following
Persons, each of whom shall be conclusively presumed to constitute a
Prohibited Transferee of the Note or a beneficial interest in the Note:
(a) ANY EMPLOYEE BENEFIT PLANS (EACH, A "PLAN") INCLUDED IN,
WITHIN, OR UNDER THE CONTROL OF THE FOLLOWING, provided,
however, that a plan shall not be a "Plan" if it no longer
owns any interest in Borrower, whether direct or indirect:
(i) Telephone Real Estate Equity Trust;
(ii) Bell South Master Pension Trust;
(iii) AT&T Master Pension Trust;
(iv) HAC Group Trust;
(v) Pension Plans of Air Products and Chemicals, Inc.
and its subsidiaries;
(vi) Chicago Policemen's Annuity & Benefit Fund;
(vii) Chris-Craft Industries, Inc., Profit Sharing Plan;
(viii) Chris-Craft Industries, Inc., Salaried Employees'
Pension Plan;
(ix) Illinois State Board of Investment;
(x) Kentucky Retirement Systems;
(xi) Minnesota State Board of Investment;
(xii) Pedersen & Houpt, P.C., Employee Profit Sharing
Trust;
(xiii) Vulcan Materials Company, Defined Benefit Pension
Plans
(xiv) successors of the entities described in (i) through
(xiii), above; and
(xv) each employee benefit plan which owns an interest in
the Borrower, any successor or assign thereof, or in
the Property, other than the entities described in
(i) - (xiv) above;
(b) ANY OF THE FOLLOWING "PREDECESSORS":
(i) Water Tower Associates I, an Illinois general
partnership;
(ii) Mafco, Inc., a Delaware corporation;
(iii) Urban Investment & Development Co., a Delaware
corporation;
(iv) Marshall Field & Company, a Delaware corporation;
(v) Marban Joint Venture, an Illinois general
partnership;
(vi) AETNA Life & Casualty Company, a Connecticut
corporation;
(vii) AETNA Life Insurance Company, a Connecticut
corporation;
(viii) JMB Realty Corporation, a Delaware corporation;
(ix) Orchard Associates, an Illinois general partnership;
(x) Batus, Inc., a Delaware corporation;
(xi) any Person who is treated as the seller of any
property owned by Borrower;
(xii) successors of the entities described in (i) through
(xi), above; and
(xiii) any Person who bears a relationship to any party
described in (i) through (xii) above which is
described in Sections 267(b) or 707(b) of the IRC;
(c) ANY EMPLOYER ANY OF WHOSE EMPLOYEES ARE COVERED BY A "PLAN" (AN
"EMPLOYER");
(d) ANY OWNER, DIRECT OR INDIRECT, OF FIFTY PERCENT (50%) OR MORE OF:
(i) THE COMBINED VOTING POWER OF ALL CLASSES OF STOCK
ENTITLED TO VOTE OR THE TOTAL VALUE OF SHARES OF
ALL CLASSES OF STOCK OF A CORPORATION, OR
(ii) THE CAPITAL INTEREST OR THE PROFIT INTEREST OF A
PARTNERSHIP, OR
<PAGE>
(iii) THE BENEFICIAL INTEREST OF A TRUST OR
UNINCORPORATED ENTERPRISE, OR
(iv) THE CAPITAL INTEREST OR THE PROFIT INTEREST OF A
LIMITED LIABILITY COMPANY,
WHICH IS EITHER:
a) AN EMPLOYER, OR
b) AN EMPLOYEE ORGANIZATION ANY OF WHOSE MEMBERS ARE
COVERED BY A "PLAN" (AN "EMPLOYEE ORGANIZATION");
(e) ANY CORPORATION, PARTNERSHIP, TRUST OR ESTATE OR LIMITED LIABILITY
COMPANY OF WHICH (OR IN WHICH) FIFTY PERCENT (50%) OR MORE OF:
(i) THE COMBINED VOTING POWER OF ALL CLASSES OF
STOCK ENTITLED TO VOTE OR THE TOTAL VALUE OF
SHARES OF ALL CLASSES OF STOCK OF SUCH CORPORATION,
(ii) THE CAPITAL INTEREST OR THE PROFIT INTEREST OF SUCH
PARTNERSHIP,
(iii) THE BENEFICIAL INTEREST OF SUCH TRUST OR ESTATE, OR
(iv) THE CAPITAL INTEREST OR THE PROFIT INTEREST OF SUCH
LIMITED LIABILITY COMPANY,
IS OWNED DIRECTLY OR INDIRECTLY, OR HELD BY:
A) A FIDUCIARY, COUNSEL OR EMPLOYEE OF A "PLAN",
B) A PERSON OR ENTITY PROVIDING SERVICES TO A
"PLAN",
C) AN EMPLOYER,
D) AN EMPLOYEE ORGANIZATION, OR
E) A PERSON DESCRIBED IN CLAUSE (d) ABOVE;
(f) ANY PERSON DESCRIBED IN SUBCLAUSE (A), (B) OR (D) OF CLAUSE (e);
(g) A MEMBER OF A FAMILY (INCLUDING ANY SPOUSE, ANCESTOR, LINEAL
DESCENDANT AND SPOUSE OF A LINEAL DESCENDANT) OF ANY INDIVIDUAL
DESCRIBED IN SUBCLAUSE (A), (B), (C) OR (E) OF CLAUSE (e) ABOVE;
(h) AN EMPLOYEE, OFFICER, DIRECTOR (OR AN INDIVIDUAL HAVING POWERS OR
RESPONSIBILITIES SIMILAR TO THOSE OF OFFICERS OR DIRECTORS) OR A
TEN PERCENT (10%) OR MORE SHAREHOLDER DIRECTLY OR INDIRECTLY OF ANY
EMPLOYEE ORGANIZATION OR OF ANY PERSON DESCRIBED IN CLAUSE (c),
(d) OR (e) OR SUBCLAUSE (B) OF CLAUSE (e) ABOVE;
(i) A TEN PERCENT (10%) OR MORE (IN CAPITAL OR PROFITS)
PARTNER OR JOINT VENTURER OF AN EMPLOYEE
ORGANIZATION OR A PERSON DESCRIBED IN CLAUSE (c),
(d) OR (e);
(j) ANY PERSON:
(i) IF SUCH PERSON OR ANY "AFFILIATE" OF SUCH PERSON
(WITHIN THE MEANING OF SECTION V(c) OF PROHIBITED
TRANSACTION CLASS EXEMPTION 84-14 ISSUED BY THE
UNITED STATES DEPARTMENT OF LABOR (THE "QPAM
EXEMPTION")) HAS ON THE DATE OF SUCH ACQUISITION OR
TRANSFER, OR HAS EXERCISED DURING THE IMMEDIATELY
PRECEDING ONE YEAR, THE AUTHORITY TO
A) "APPOINT OR TERMINATE", WITHIN THE MEANING OF
THE QPAM EXEMPTION, HEITMAN CAPITAL MANAGEMENT
CORPORATION ("HEITMAN") OR ANY SUCCESSOR AS A
MANAGER OF ANY OF THE ASSETS OF ANY "PLAN"
DESCRIBED IN CLAUSE (A) (i) - (xv), OR
B) NEGOTIATE THE TERMS OF A MANAGEMENT AGREEMENT
WITH HEITMAN OR ANY SUCCESSOR ON BEHALF OF ANY
PLAN DESCRIBED IN CLAUSE (A) (i) - (xv), OR
(ii) IF SUCH PERSON IS "RELATED" TO HEITMAN (WITHIN THE
MEANING OF SECTION (V)(h) OF THE QPAM EXEMPTION).
<PAGE>
ANY PURPORTED TRANSFER IN CONTRAVENTION OF THE FOREGOING SHALL BE
NULL AND VOID AB INITIO.
NOTWITHSTANDING THE FOREGOING, THIS NOTE MAY BE ACQUIRED BY OR
TRANSFERRED TO TELEPHONE REAL ESTATE EQUITY TRUST AND/OR HAC GROUP TRUST IF,
PRIOR TO ANY SUCH TRANSFER, THE APPLICABLE TRANSFEREE DELIVERS TO MORTGAGEE
AND BORROWER A CERTIFICATE STATING THAT SUCH TRANSFER WILL NOT IN AND OF
ITSELF CONSTITUTE A "NON-EXEMPT PROHIBITED TRANSACTION" WITHIN THE MEANING
OF SECTION 4975 OF THE IRC OR SECTIONS 406 THROUGH 408 OF ERISA.
Upon the transfer of this Note in accordance with the terms set
forth in this Article 11, Mortgagee may deliver all the collateral mortgaged,
granted, pledged or assigned pursuant to the Mortgage and the Other Security
Documents, or any part thereof, to the transferee who shall thereupon become
vested with all the rights herein or under applicable law given to Mortgagee
with respect thereto. Mortgagee shall retain all rights hereby given to it
with respect to any liabilities and the collateral not so transferred.
ARTICLE 12. WAIVER OF TRIAL BY JURY
BORROWER HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE
RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM, WHETHER IN
CONTRACT, TORT OR OTHERWISE, RELATING DIRECTLY OR INDIRECTLY TO THE LOAN
EVIDENCED BY THIS NOTE, THE APPLICATION FOR THE LOAN EVIDENCED BY THIS NOTE,
THIS NOTE, THE MORTGAGE OR THE OTHER SECURITY DOCUMENTS OR ANY ACTS OR
OMISSIONS OF MORTGAGEE, ITS OFFICERS, EMPLOYEES, DIRECTORS OR AGENTS IN
CONNECTION THEREWITH.
ARTICLE 13. EXCULPATION
(a) Anything contained in this Note, in the Mortgage or the Other
Security Documents to the contrary notwithstanding (except for the liability
as specifically provided below of the Exculpated Persons), in any claim,
demand or action arising under this Note, the Mortgage or the Other Security
Documents, the Mortgagee's recourse for the satisfaction of the indebtedness
due under this Note and for the payment and performance of all of the
obligations and liabilities of the Mortgagor and the Borrower under the
Mortgage or the Other Security Documents shall be limited solely to the
Mortgagor's and the Borrower's interest in the Property, and none of the
Mortgagor, the Borrower or any Principal, nor any of its or their respective
successors or assigns, nor any partner (general or limited, or a subpartner
at any level), principal, tenant-in-common, officer, director, trustee,
beneficiary, shareholder, controlling person, employee, agent or Affiliate of
the Mortgagor, the Borrower (or any constituent partner or subpartner thereof)
or any Principal, or any of their respective successors and assigns
(collectively, "Exculpated Persons") shall be liable in any other respect for
(i) the payment of the principal of, or interest on or premium, if any, on
this Note, or (ii) the payment of any other amount due under this Note, the
Mortgage or the Other Security Documents, or (iii) for damages for the breach
of or any costs or expenses associated with the performance of any of the
covenants, obligations, representations and warranties or indemnifications
contained herein or in this Note or the Other Security Documents. The
Mortgagee agrees that (except as expressly set forth below), in the event it
pursues any remedies available to it hereunder or under this Note or the Other
Security Documents, the Mortgagee shall not have recourse to the Exculpated
Persons for any deficiency, loss or claim for damages resulting therefrom,
and none of the property or assets of any of the Exculpated Persons other
than the Property or the beneficial interest in the Land Trust shall be
subject to levy, execution, garnishment, attachment, foreclosure or other
enforcement procedure for the satisfaction of the remedies of the Mortgagee
hereunder, under this Note or under the Other Security Documents, but nothing
contained herein shall (x) constitute a waiver of any indebtedness evidenced
by this Note or secured by the Mortgage or the Other Security Documents, or
(y) be taken to prevent recourse to, or the enforcement of remedies against,
the Property in respect of any and all liabilities, obligations and
<PAGE>
undertakings contained herein or in this Note. In addition, (1) each document
which is executed by Mortgagor, Borrower and/or any Exculpated Person pursuant
to or in connection with this Note, the Mortgage and/or the Other Security
Documents shall either expressly incorporate, or shall be deemed to
incorporate, the non-recourse provisions contained in this Article 13, and
(2) Mortgagee shall have no authority under this Note or the Mortgage to act
on behalf of Mortgagor and/or Borrower in any manner that would give rise
to recourse liability against any Exculpated Person.
(b) The foregoing limitation of the Mortgagee's recourse shall not
apply to any of the following prior to the payment in full of this Note and
all other Secured Obligations:
(i) the application of any Proceeds received by the Borrower
or Mortgagor after a casualty or a Taking in a manner other than that
required by the terms of the Mortgage (including, by reference in
Article 15 of the Mortgage, the terms of the Declaration of
Easements and the Condominium Deed); provided, however, that the
Mortgagee's recourse shall be limited to the amount of such
misapplied Proceeds;
(ii) simultaneously with the occurrence and during the
continuance of a "Default Event" (hereinafter defined), the
application by the Borrower or Mortgagor of the rentals under any
Lease or of any security deposit under any Lease or of any other
issues, income, profits or monies derived by Mortgagor or Borrower
from the operation of the Property (including, without limitation,
lease termination payments made by Tenants which, as to an Anchor
Lease terminated in violation of the terms of the Mortgage, shall
include any lease termination payment made by the tenant
thereunder, whether before, upon or after the effective date of
termination of such Anchor Lease) (collectively "Issues") in a
manner other than that required by the terms of Section 20(j) of
the Mortgage following and during the continuance of an Event of
Default as if such Default Event were an Event of Default (except
that prior to the occurrence of an actual Event of Default debt
service under a Subordinate Mortgage may be paid), provided,
however, that the Mortgagee's recourse shall be limited to the
amount of such misapplied Issues; or
(iii) the commission of a fraudulent act or the making of an
intentional misrepresentation by the Borrower, provided, however,
that the Mortgagee's recourse shall be limited to the damages
sustained by the Mortgagee by virtue of such fraudulent act or
intentional misrepresentation.
As used herein, a "Default Event" shall mean (1) an Event of Default, (2) a
Default under Section 23(a) which ultimately fails to be waived or cured
before the expiration of the applicable cure period, (3) a Default under
Section 23(b) of the Mortgage, or (4) any other Default (a "Non-Debt Service
Default") of which Mortgagor and Borrower have been given written notice by
Mortgagee.
(c) Notwithstanding the exceptions to this nonrecourse provision
set forth in clause (b) above, (x) the Mortgagee shall not have any recourse
with respect to any claim, demand or action arising under this Note, the
Mortgage or the Other Security Documents to, except as expressly provided
otherwise hereafter, any partner of any partnership, which partner is an
individual or a trust for the benefit of an individual or members of a family
or a limited partner of such partnership, or any assets of such individual
partner, trust or limited partner, and (y) without limitation of the recourse
to Borrower, recourse to the partners of the Borrower shall be several (and
not joint) and shall be limited as to such partner to the amount of misapplied
Issues or misapplied Proceeds received by such partner or the amount of
damages caused by such partner's fraud or intentional misrepresentation.
<PAGE>
(d) Additionally, notwithstanding anything contained in sub-clause
(b)(ii) above, Mortgagee shall not have any recourse with respect to any claim,
demand or action arising under this Note, the Mortgage or the Other Security
Documents to any Exculpated Person for Issues distributed to such Exculpated
Person after notice of and during the continuance of a Non-Debt Service
Default if and only if (A) such Non-Debt Service Default is not a Default
described in Section 23(c) of the Mortgage or a Non-Debt Service Default which
can be cured by the mere payment of money (unless in each case such Non-Debt
Service Default is ultimately waived or cured before the expiration of the
applicable cure period), and (B) either (x) such Non-Debt Service Default does
not mature into an Event of Default, or (y) whether or not such Non-Debt
Service Default matures into an Event of Default, during the applicable cure
period (i) the Borrower is diligently pursuing the curing of such Non-Debt
Service Default, (ii) Borrower pays all Operating Expenses of the Property
(including making adequate provision for the payment of Impositions) and the
costs of all capital expenditures incurred by it and pays debt service on
this Note, the Other Note and any Subordinate Mortgage, and (iii) Borrower
creates adequate reserves for the reasonably foreseeable remaining costs,
from time to time, of curing such Non-Debt Service Default and delivers to
Mortgagee, within 30 days of Borrower's receipt of the notice of Default, an
Officers' Certificate stating the amount of the reserve and the basis
therefor, it being expressly agreed that having satisfied the aforesaid
requirements, Borrower shall be permitted to distribute any excess Issues to
its partners during the applicable cure period and that whether or not such
Non-Debt Service Default is cured or the reserves set aside for the curing
therefor are, in fact, adequate, neither Borrower nor any other Exculpated
Person shall be liable for Issues distributed to the partners of Borrower in
accordance with the foregoing.
(e) In the event that the Mortgagee brings a suit against an
Exculpated Person on the basis of one of the exceptions set forth in clause
(b) above and obtains a judgment therefor, such Exculpated Person shall pay
the enforcement costs of such action, including reasonable fees of attorneys.
For purposes of this Article 13, each and every reference to
"Mortgagee" (including the possessory thereof) shall mean Mortgagee, its
successors and assigns, and all persons and/or entities whose rights under
this document arise by, through or under Mortgagee, its successors and/or
assigns.
ARTICLE 14. AUTHORITY
Borrower (and the undersigned representative of Borrower, if any)
represents that Borrower has full power, authority and legal right to execute
and deliver this Note, the Mortgage and the Other Security Documents and that
this Note, the Mortgage and the Other Security Documents constitute valid and
binding obligations of Borrower.
ARTICLE 15. APPLICABLE LAW
This Note shall be governed, construed, applied and enforced in
accordance with the laws of the state in which the Property is located and the
applicable laws of the United States of America.
ARTICLE 16. SERVICE OF PROCESS
(a) Borrower irrevocably consents to service of process by
registered or certified mail, postage prepaid, to it at its address given in
or pursuant to the first paragraph hereof.
(b) With respect to any claim or action arising hereunder or under
the Mortgage or the Other Security Documents, Borrower (a) irrevocably submits
to the nonexclusive jurisdiction of the courts of the State in which the
Property is located, the State of New York and the United States District
Court located in the Borough of Manhattan in New York, New York and the county
<PAGE>
in which the Property is located, and appellate courts from any thereof, and
(b) irrevocably waives any objection which it may have at any time to the
laying on venue of any suit, action or proceeding arising out of or relating
to this Note brought in any such court, irrevocably waives any claim that any
such suit, action or proceeding brought in any such court has been brought in
an inconvenient forum.
ARTICLE 17. COUNSEL FEES
In the event that it should become necessary to employ counsel to
collect the Debt or to foreclose the security therefor, Borrower also agrees
to pay all reasonable fees and expenses of Mortgagee, including, without
limitation, reasonable attorney's fees for the services of such counsel
whether or not suit be brought.
ARTICLE 18. JOINT AND SEVERAL LIABILITY
If at any time Borrower consists of more than one person or party, the
obligations and liabilities of each person or party shall be joint and several.
ARTICLE 19. NOTICES
All notices or other written communications hereunder shall be given
in accordance with the terms of Article 56 of the Mortgage.
[NO FURTHER TEXT ON THIS PAGE]
<PAGE>
IN WITNESS WHEREOF, Borrower has duly executed this
Note as of the day and year first above written.
WATER TOWER JOINT
VENTURE, an Illinois general partnership
By: 835 MICHIGAN L.P., an Illinois
limited partnership, as General Partner
of Water Tower Joint Venture
By: 835 MICHIGAN CORP., an Illinois
corporation, as General Partner of
835 Michigan L.P.
By:
------------------------
Name: Stuart C. Katz
Title: Vice President
By: URBAN SHOPPING CENTERS, L.P.
an Illinois limited partnership,
as General Partner of Water
Tower Joint Venture
By: URBAN SHOPPING CENTERS INC.,
a Maryland corporation
as General Partner of Urban
Shopping Centers, L.P.
By:
------------------------
Name: Michael G. Hilborn
Title: Senior Vice President
<PAGE>
STATE OF ILLINOIS )
) ss.:
COUNTY OF COOK )
On this _________ day of February, 1997, before me, the undersigned,
a Notary Public in and for said State, duly commissioned and sworn, personally
appeared Michael G. Hilborn, known to me (or proved to me on the basis of
satisfactory evidence) to be a Senior Vice President of Urban Shopping
Centers Inc., a Maryland corporation, a general partner of Urban Shopping
Centers, L.P., an Illinois limited partnership which is a general partner of
Water Tower Joint Venture, an Illinois general partnership, which executed
the within instrument and known to me to be the person who executed the
within instrument on behalf of said corporation, and such person acknowledged
to me that he executed said instrument as his free and voluntary act and the
free and voluntary act of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
Signature
----------------------------------
(Seal)
<PAGE>
STATE OF ILLINOIS )
) ss.:
COUNTY OF COOK )
On this ___________ day of February, 1997, before me, the
undersigned, a Notary Public in and for said State, duly commissioned and
sworn, personally appeared Stuart C. Katz, known to me (or proved to me on
the basis of satisfactory evidence) to be a Vice President of 835 Michigan
Corp., an Illinois corporation, a general partner of 835 Michigan L.P., an
Illinois limited partnership which is a general partner of Water Tower Joint
Venture, an Illinois general partnership, which executed the within
instrument and known to me to be the person who executed the within
instrument on behalf of said corporation, and such person acknowledged to me
that he executed said instrument as his free and voluntary act and the free
and voluntary act of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
Signature
-----------------------------------------
(Seal)
<PAGE>
PROMISSORY NOTE B
$10,000,000 New York, New York
February 10, 1997
FOR VALUE RECEIVED WATER TOWER JOINT VENTURE, an Illinois
general partnership, as maker, having its principal place of business
at 900 North Michigan Avenue, Chicago, Illinois 60611 ("Borrower"), hereby
promises to pay to the order of LEHMAN BROTHERS HOLDINGS INC., a Delaware
corporation, d/b/a LEHMAN CAPITAL, A DIVISION OF LEHMAN BROTHERS HOLDINGS
INC., as lender, having an address at Three World Financial Center, New
York, New York 10281 ("Mortgagee"), or at such other place as the holder
hereof may from time to time designate in writing, the principal sum of
Ten Million and 00/100 Dollars ($10,000,000), or so much thereof as is
advanced pursuant to the terms of this Note, in lawful money of the
United States of America with interest thereon to be computed from the
date of this Note at the Applicable Interest Rate (defined below), and
to be paid in installments as set forth herein. Capitalized terms not
otherwise defined herein shall have the meanings ascribed to them in the
Mortgage (defined below).
ARTICLE 1. PAYMENT TERMS
Borrower shall make a payment of $36,614.58 on March 1, 1997 and
an Adjusted Monthly Payment (hereinafter defined) on April 1, 1997, and
on the first day of each calendar month thereafter up to and including
the month immediately preceding the month in which the Maturity Date
(hereinafter defined) occurs, or any extension thereof as set forth
herein, each of the payments to be applied to the payment of interest
computed at the Applicable Interest Rate and the outstanding balance of
the principal sum and all accrued and unpaid interest thereon shall be
due and payable on the Maturity Date (or any extension thereof as set
forth herein). Interest on the advanced and outstanding principal sum
of this Note shall be calculated on the basis of a three hundred sixty
(360) day year based on twelve (12) thirty (30) day months except that
interest due and payable for a period of less than a full month shall be
calculated by multiplying the actual number of days elapsed in such
period by a daily rate based on said 360-day year, unless such
calculation would result in a usurious rate, in which case interest
shall be calculated on the per annum basis of a year of 365 or 366 days,
as the case may be.
The term "Maturity Date" shall mean February 1, 1999. Borrower
shall be entitled to two (2) one year extensions of the Maturity Date
provided (a) no Event of Default (defined herein) shall have occurred
and be continuing on the Maturity Date (or any extension thereof as set
forth herein), (b) Borrower shall pay to Mortgagee a fee prior to each
extension equal to .1% of the sum of the outstanding principal balance of
this Note on the Maturity Date (or any extension thereof as set forth
herein) and (c) Borrower shall deliver written notice requesting an
extension to Mortgagee at least thirty (30) days prior to the Maturity
Date (or any extension thereof as set forth herein).
ARTICLE 2. INTEREST
For purposes of this Note, the following terms shall have the
following meanings:
The term "Adjusted Monthly Payment" shall mean a payment,
sufficient to pay interest on the then outstanding principal balance of
this Note at the Applicable Interest Rate then in effect. The Adjusted
Monthly Payment shall be calculated as of each Adjustment Date based on
the Applicable Interest Rate in effect on such date and payable in
arrears for each Interest Period.
<PAGE>
The term "Adjustment Date" shall mean two London Banking Days
prior to the first day of an Interest Period.
The term "Applicable Interest Rate" shall mean the lesser of
(a) (i) from the date of this Note through and including February 28,
1997, an interest rate equal to 6.9375% per annum and (ii) from and
including March 1, 1997 through and including the Maturity Date or any
extension thereof as set forth herein, an interest rate equal to LIBOR
plus the Increment and (b) the Highest Lawful Rate.
The term "Financial Reporting Date" shall mean the date which
is sixty (60) days after the end of each fiscal quarter of Borrower,
except for Borrower's fourth fiscal quarter, in which case the term
shall mean the date which is ninety (90) days after the end of such quarter.
The term "GAAP" shall mean United States generally accepted
accounting principles on the date hereof and as in effect from time to
time during the term of this Note.
The term "Highest Lawful Rate" as used herein shall mean, with
respect to the Mortgagee, the maximum nonusurious interest rate, that
at any time or from time to time may be contracted for, taken, reserved,
charged or received on the Debt (defined below) under laws applicable
to the Mortgagee that are presently in effect or, to the extent allowed
by law, under such applicable laws that may hereafter be in effect and
that allow a higher maximum nonusurious interest rate than applicable
laws now allow.
The term "Increment" shall mean, for any Interest Period,
1.50% per annum, except during an Increment Adjustment Period, in which
case "Increment" shall mean 1.375% per annum.
The term "Increment Adjustment Event" shall mean that Mortgagee
shall have determined, following receipt of an Increment Adjustment Request,
that the NOI/Debt Index is equal to or exceeds .13.
The term "Increment Adjustment Period" shall mean a period
beginning the sixth (6th) Business Day following a Request Date (defined
herein) to, but not including, the sixth (6th) Business Day following a
Recalculation Date (defined herein). For purposes of this definition only,
(i) the term "Request Date" shall mean only those Request Dates following
which Lender determines an Increment Adjustment Event has occurred and
no Event of Default has occurred and is continuing as of the date the
Increment Adjustment Period is set to begin and (ii) the term
"Recalculation Date" shall mean only those Recalculation Dates following
which Lender determines an Increment Adjustment Event is not in effect.
The term "Increment Adjustment Request" shall mean a written
notice from Borrower to Mortgagee requesting a determination of the
NOI/Debt Index by Mortgagee, accompanied by such financial documentation
as is necessary to determine the NOI/Debt Index.
The term "Interest Period" shall mean each one month calendar
period beginning March 1997.
The term "LIBOR" shall mean, for an Interest Period, (a) the
LIBOR Index Rate, if such rate is available and (b) if the LIBOR Index
Rate cannot be determined, the average rate of interest per annum
(rounded upwards, if necessary, to nearest 1/100 of 1%) at which
deposits in U.S. Dollars in immediately available funds are offered
at 11:00 a.m. on the first day of such Interest Period by major banks
in the interbank eurodollar market for delivery on the first day of
such Interest Period and for a one month period in an amount
<PAGE>
equal to the sum of the then outstanding principal amounts of this Note
and the Other Note (defined herein). Each determination of LIBOR made
by Mortgagee shall be final and conclusive absent manifest error.
The term "LIBOR Index Rate" shall mean, for any Interest
Period, the rate per annum (rounded upwards, if necessary, to the next
higher one hundred-thousandth of a percentage point) for deposits in
U.S. Dollars for a one month period approximately corresponding to the
sum of the then outstanding principal amounts of this Note and the
Other Note, which appears on the Telerate Page 3750 as of 11:00 a.m.
(London, England time) on the Adjustment Date.
The term "London Banking Date" shall mean a day on which
dealings in deposits in United States dollars are transacted in the London
interbank market.
The term "Net Operating Income" shall mean, with respect to
the Property (defined below), Rents less Operating Expenses.
The term "NOI/Debt Index" shall mean, for each applicable period,
a fraction, the numerator of which shall be Net Operating Income for such
period, and the denominator of which shall be the sum of the outstanding
principal balance of this Note and the Other Note at the time the
calculation of NOI/Debt Index is made for such period.
The term "Operating Expenses" shall mean, with respect to the
Property, for the two full fiscal quarters of Borrower occurring immediately
prior to the determination of Net Operating Income, to be calculated on
an annualized basis (and shall include the pro rata portion for such
period of all such expenses attributable to, but not paid during, such
period), all expenses to be paid or payable, as determined on an accrual
basis in accordance with GAAP by Borrower, including without limitation:
(i) expenses for cleaning, repair, maintenance, decoration and painting
of the Property (including, without limitation, parking lots and roadways),
net of any insurance proceeds in respect of any of the foregoing; (ii) wages
(including overtime payments), benefits, payroll taxes and all other
related expenses for Borrower's on-site personnel, up to and including
(but not above) the level of the on-site manager, engaged in the repair,
operation and maintenance of the Property and service to tenants and
on-site personnel engaged in audit and accounting functions performed
by Borrower; (iii) management fees pursuant to the Management Agreement;
(iv) the cost of all electricity, oil, gas, water, steam, heat,
ventilation, air conditioning and any other energy, utility or similar
item and the cost of building and cleaning supplies; (v) rent, liability,
casualty and fidelity, liability, worker's compensation and other
insurance premiums; (vi) legal, accounting and other professional fees
and expenses; (vii) the cost of all equipment to be used in the ordinary
course of business, which is not capitalized in accordance with GAAP;
(viii) real estate, personal property and other taxes; (ix) advertising
and other marketing costs and expenses; (x) casualty losses to the
extent not reimbursed by an independent third party; and (xi) all other
amounts paid during such period in respect of items which in accordance
with generally accepted accounting principles would be included in the
Borrower's annual financial statements for such period or any other period
as operating expenses of the Property and are reasonably expected by the
Borrower to be regularly recurring operating expenses of the Property and
not separately deducted in the definition of Net Operating Income.
Notwithstanding the foregoing, Operating Expenses shall not
include (i) depreciation or amortization or any other non-cash item of
expense, (ii) interest, principal, fees, costs and expense reimbursements
of the loan evidenced by this Note and the Other Note but not in exercising
any of Borrower's rights under this Note, the Other Note, the Mortgage or
the Other Security Documents;
<PAGE>
(iii) income taxes, (iv) any expenses (including legal, accounting and
other professional fees, expenses and disbursements) incurred in
connection with and allocable to the issuance of the Notes 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 any of the Notes;
(v) the cost of leasehold improvements and tenant improvements, leasing
commissions, any other expenditures on behalf of tenants under Leases
(except to the extent, and only to the extent, that reimbursement from
tenants under Leases for such items is included in Net Operating Income),
any Equipment (except to the extent, and only to the extent that the
proceeds from the sale of the Equipment being replaced thereby are
included in Net Operating Income) and any capital expenditures; (vi) any
item of expense which otherwise would be considered within Operating
Expenses pursuant to the provisions above but is paid directly by tenants
under any Lease; (vii) amounts paid in consideration of any modification,
amendment, supplement, waiver, renewal, or termination of any Lease;
(viii) all amounts paid or expense incurred under any Lease of an anchor
department store; (ix) fees and expenses of the Mortgagee (if any) paid
by the Borrower pursuant to the Mortgage; and (x) any expenditure which
is properly treatable as a capital item under GAAP.
The term "calculated on an annualized basis", as used in this
definition, shall mean determining Operating Expenses for two full fiscal
quarters of Borrower in accordance with this definition and multiplying
such figure by two (2).
The term "Rents" shall mean, with respect to the Property, for
the two full fiscal quarters of Borrower occurring immediately prior to
the determination of Net Operating Income, all income, rents, additional
rents, revenues, issues and profits (including all oil and gas or other
mineral royalties and bonuses) and all pass-throughs and tenants' required
contributions for taxes, maintenance costs, tenant improvements, leasing
commissions, capital expenditures and other items from the Leases affecting
the Property, including any rent loss or business interruption insurance
proceeds, to be calculated on an annualized basis and determined on an
accrual basis in accordance with GAAP.
Notwithstanding the foregoing, Rents shall not include (i) any
condemnation or insurance proceeds (excluding rent or business interruption
insurance proceeds), (ii) any proceeds resulting from the sale, exchange,
transfer, financing or refinancing of all or any portion of the Property,
(iii) amounts received from tenants as security deposits unless applied in
accordance with the terms of a Lease, (iv) interest income and (v) any type
of income otherwise included in Net Operating Income but paid directly by
any tenant to a Person other than Borrower or its agents or representatives.
The term "calculated on an annualized basis", as used in this
definition, shall mean determining the Rents for two full fiscal quarters
of Borrower in accordance with this definition and multiplying such figure
by two (2).
The term "Telerate Page 3750" means the display page so designated
on the Dow Jones Telerate Service or such other page as may replace page 3750
on that service for the purpose of displaying London interbank offered rates
of major banks for United States dollar deposits or, if there is no such
replacement, such other service or services as may be nominated by the British
Bankers Association from time to time for the purpose of displaying London
interbank offered rates.
Borrower shall not make an Increment Adjustment Request more
frequently than once per fiscal quarter. Upon receipt of an Increment
Adjustment Request, Mortgagee shall calculate the NOI/Debt Index in its
reasonable discretion, and Borrower shall deliver such additional financial
documentation as Mortgagee may reasonably request in order to make its
<PAGE>
determination. Mortgagee shall within five (5) Business Days of the later of
its receipt of the Increment Adjustment Request or any further financial
documentation reasonably required by Mortgagee (the "Request Date") notify
Borrower of its determination of the NOI/Debt Index and whether an
Increment Adjustment has occurred.
If Mortgagee determines that an Increment Adjustment Event has
occurred, Mortgagee shall thereafter recalculate the NOI/Debt Index in
its reasonable discretion on a quarterly basis in conjunction with Borrower's
delivery to Lender of quarterly (or, in the case of the fourth quarter of
Borrower's fiscal year, annual) financial documentation in accordance with
Section 18 of the Mortgage and Borrower shall deliver such additional
financial documentation as Mortgagee may reasonably request in order to make
its determination. Mortgagee shall within five (5) Business Days of the later
of Mortgagee's receipt of quarterly financial documentation in accordance
with Section 18 of the Mortgage or its receipt of any further financial
documentation reasonably required by Mortgagee (the "Recalculation Date")
notify Borrower whether it has determined that the NOI/Debt Index is less
than .13 and therefore an Increment Adjustment Event is no longer in effect.
Notwithstanding anything in this Note to the contrary, in the
event Mortgagee determines the NOI/Debt Index after the fifth (5th) Business
Day following a Request Date or Recalculation Date, as the case may be, a
determination resulting in a change in the Increment shall relate back to
the sixth (6th) Business Day following the Request Date or Recalculation
Date, as the case may be, provided, however, that if Borrower fails to
deliver quarterly financial documentation in accordance with Section 18 of
the Mortgage by the Financial Reporting Date and Mortgagee subsequently
determines that the Increment Adjustment Event is no longer in effect, the
change in the Increment shall relate back to such Financial Reporting Date.
ARTICLE 3. DEFAULT AND ACCELERATION
(a) The whole of the principal sum of this Note, (b) the
whole of the principal sum of the Other Note, (c) accrued and unpaid
interest, default interest, late charges and other sums, as provided in
this Note, the Other Note, the Mortgage or the Other Security Documents
(defined below), (d) all other monies agreed or provided to be paid by
Borrower in this Note, the Other Note, the Mortgage or the Other Security
Documents, (e) all sums advanced by the Mortgagee pursuant to the Mortgage
to protect and preserve the Property and the lien and the security interest
created thereby, and (f) all sums advanced and costs and expenses incurred
by Mortgagee pursuant to the Mortgage or the Other Security Documents in
connection with the Debt (defined below) or any part thereof, any renewal,
extension, or change of or substitution for the Debt or any part thereof, or
the acquisition or perfection of the security therefor, whether made or
incurred at the request of Borrower or Mortgagee (all the sums referred to
in (a) through (f) above shall collectively be referred to as the "Debt")
shall without notice become immediately due and payable at the option of
Mortgagee upon an Event of Default.
ARTICLE 4. DEFAULT INTEREST
Borrower does hereby agree that upon the occurrence of an Event
of Default, Mortgagee shall be entitled to receive and Borrower shall pay
interest on the entire unpaid principal sum at a rate (the "Default Rate")
equal to (i) the Applicable Interest Rate plus three percent (3%) or (ii) the
Highest Lawful Rate, whichever is lower. The Default Rate shall be computed
from the occurrence of the Event of Default until the earlier of the date
upon which the Event of Default is cured or the date upon which the Debt is
paid in full. Interest calculated at the Default Rate shall be added to the
Debt, and shall be deemed secured by the Mortgage. This clause, however,
shall not be construed as an
<PAGE>
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 Mortgagee by reason
of the occurrence of any Event of Default.
ARTICLE 5. PREPAYMENT
The principal balance of this Note may be prepaid, in whole or in
part, upon: (i) not less than 10 days prior written notice (the "Prepayment
Notice") to Mortgagee specifying the scheduled payment date on which
prepayment is to be made (the "Prepayment Date"); (ii) payment of all
accrued and unpaid interest on the outstanding principal balance of this
Note being prepaid to and including the Prepayment Date; and (iii) payment
of all other sums then due under this Note, the Other Note, the Mortgage and
the Other Security Documents. Borrower shall be permitted to revoke a
Prepayment Notice by delivering written notice of such revocation at any time
prior to the Prepayment Date. In addition to the foregoing right to prepay
this Note in full, Borrower shall have the right to purchase this Note upon
the terms and conditions set forth in this Article 5, provided, however, that
Borrower shall be further required to purchase the Other Note simultaneously
with the purchase of this Note.
Mortgagee shall not be obligated to accept any prepayment of the
principal balance of this Note unless it is accompanied by all sums due in
connection therewith.
Notwithstanding the first paragraph of this Article 5, Mortgagee
shall apply all prepayments of principal otherwise satisfying the conditions
of this Article 5 towards the reduction of the principal balance and any other
sums owing under this Note prior to applying the balance of such prepayment,
if any, to the reduction of principal and any other sums owing under the Other
Note.
ARTICLE 6. SECURITY
This Note is secured by the Mortgage and the Other Security
Documents (defined below). The term "Mortgage" as used in this Note shall
mean that certain Mortgage, Assignment of Leases and Rents and Fixture
Filing dated the date hereof given by LASALLE NATIONAL TRUST, N.A.,
successor to LaSalle National Bank and a national banking association not
personally but as land trustee under Trust Agreement dated June 10, 1970
and known as Trust No. 40940 ("Mortgagor") and Borrower to and with
Mortgagee covering certain premises located in Cook County, State of
Illinois, and other property, as more particularly described therein
(collectively, the "Property") and intended to be duly recorded in said
County. The Mortgage also secures a certain Promissory Note A made by
Borrower and given to Mortgagee in the original principal amount of
$160,000,000 (the "Other Note"). The term "Other Security Documents" as
used in this Note shall mean all and any of the documents other than this
Note and the Mortgage now or hereafter executed by Borrower and/or others
and by or in favor of Mortgagee, which wholly or partially secure or
guarantee payment of this Note, including, without limitation, the Other
Note. Whenever used, the singular number shall include the plural, the
plural number shall include the singular, and the words "Mortgagee" and
"Borrower" shall include their respective successors, assigns, heirs,
executors and administrators.
All of the terms, covenants and conditions contained in the
Mortgage and the Other Security Documents (other than the Other Note) are
hereby made part of this Note to the same extent and with the same force as
if they were fully set forth herein.
<PAGE>
ARTICLE 7. SAVINGS CLAUSE
This Note is subject to the express condition that at no time
shall Borrower be obligated or required to pay interest on the principal
balance due hereunder at a rate which could subject Mortgagee to either
civil or criminal liability as a result of being in excess of the Highest
Lawful Rate. If by the terms of this Note, Borrower is at any time
required or obligated to pay interest on the principal balance due
hereunder at a rate in excess of the Highest Lawful Rate, the Applicable
Interest Rate or the Default Rate, as the case may be, shall be deemed to
be immediately reduced to the Highest Lawful Rate and all previous payments
in excess of the Highest Lawful Rate shall be deemed to have been payments
in reduction of principal and not on account of the interest due hereunder.
All sums paid or agreed to be paid to Mortgagee for the use, forbearance,
or detention of the Debt, shall, to the extent permitted by applicable law,
be amortized, prorated, allocated, and spread throughout the full stated
term of the Note until payment in full so that the rate or amount of
interest on account of the Debt does not exceed the Highest Lawful Rate
from time to time in effect and applicable to the Debt for so long as the
Debt is outstanding.
ARTICLE 8. INTENTIONALLY DELETED
ARTICLE 9. NO ORAL CHANGE
This Note may not be modified, amended, waived, extended, changed,
discharged or terminated orally or by any act or failure to act on the
part of Borrower or Mortgagee, but only by an agreement in writing signed
by the party against whom enforcement of any modification, amendment, waiver,
extension, change, discharge or termination is sought.
ARTICLE 10. WAIVERS
Borrower and all others who may become liable for the payment of
all or any part of the Debt do hereby severally waive presentment and demand
for payment, notice of dishonor, notice of intention to accelerate, notice of
acceleration, protest and notice of protest and non-payment and all other
notices of any kind, other than as expressly provided herein, in the Mortgage
or the Other Security Documents. No release of any security for the Debt or
extension of time for payment of this Note or any installment hereof, and no
alteration, amendment or waiver of any provision of this Note, the Mortgage
or the Other Security Documents made by agreement between Mortgagee or any
other person or party shall release, modify, amend, waive, extend, change,
discharge, terminate or affect the liability of Borrower, and any other
person or entity who may become liable for the payment of all or any part of
the Debt, under this Note, the Mortgage or the Other Security Documents. No
notice to or demand on Borrower shall be deemed to be a waiver of the
obligation of Borrower or of the right of Mortgagee to take further action
without further notice or demand as provided for in this Note, the Mortgage
or the Other Security Documents. If Borrower is a partnership, the agreements
herein contained shall remain in force and applicable, notwithstanding any
changes in the individuals comprising the partnership, and the term
"Borrower," as used herein, shall include any alternate or successor
partnership, but any predecessor partnership and their partners shall not
thereby be released from any liability. If Borrower is a corporation, the
agreements contained herein shall remain in full force and applicable
notwithstanding any changes in the shareholders comprising, or the officers
and directors relating to, the corporation, and the term "Borrower" as used
herein, shall include any alternative or successor corporation, but any
predecessor corporation shall not be relieved of liability hereunder. Nothing
in the foregoing sentence shall be construed as a consent to, or a waiver of,
any prohibition or restriction on transfers of interests in such partnership
which may be set forth in the Mortgage or any Other Security Document.
<PAGE>
ARTICLE 11. TRANSFER
Neither this Note nor any beneficial interest therein may be
acquired by or transferred to any Person (a "Prohibited Transferee") if a
financing provided by such Person to Borrower in connection with the
acquisition or improvement of the Property would meet the criteria of Section
514(c)(9)(B)(v) of the IRC or if such Person is a "party-in-interest" (as
defined in Section 3(14) of ERISA) or a disqualified person under Section
4975 of the IRC as to any of the U.S. pension funds which are beneficial
owners of Borrower or if such Person is identified under clause (j) below.
Without limiting the generality of the foregoing, neither the Note nor any
beneficial interest in the Note may be acquired by or transferred to any of
the following Persons, each of whom shall be conclusively presumed to
constitute a Prohibited Transferee of the Note or a beneficial interest in
the Note:
(a) ANY EMPLOYEE BENEFIT PLANS (EACH, A "PLAN") INCLUDED IN, WITHIN, OR
UNDER THE CONTROL OF THE FOLLOWING, provided, however, that a plan
shall not be a "Plan" if it no longer owns any interest in Borrower,
whether direct or indirect:
(i) Telephone Real Estate Equity Trust;
(ii) Bell South Master Pension Trust;
(iii) AT&T Master Pension Trust;
(iv) HAC Group Trust;
(v) Pension Plans of Air Products and Chemicals, Inc.
and its subsidiaries;
(vi) Chicago Policemen's Annuity & Benefit Fund;
(vii) Chris-Craft Industries, Inc., Profit Sharing Plan;
(viii) Chris-Craft Industries, Inc., Salaried Employees'
Pension Plan;
(ix) Illinois State Board of Investment;
(x) Kentucky Retirement Systems;
(xi) Minnesota State Board of Investment;
(xii) Pedersen & Houpt, P.C., Employee Profit Sharing Trust;
(xiii) Vulcan Materials Company, Defined Benefit Pension Plans
(xiv) successors of the entities described in (i) through
(xiii), above; and
(xv) each employee benefit plan which owns an interest in the
Borrower, any successor or assign thereof, or in the
Property, other than the entities described in
(i) - (xiv) above;
(b) ANY OF THE FOLLOWING "PREDECESSORS":
(i) Water Tower Associates I, an Illinois general
partnership;
(ii) Mafco, Inc., a Delaware corporation;
(iii) Urban Investment & Development Co., a Delaware
corporation;
(iv) Marshall Field & Company, a Delaware corporation;
(v) Marban Joint Venture, an Illinois generalpartnership;
(vi) AETNA Life & Casualty Company, a Connecticut corporation;
(vii) AETNA Life Insurance Company, a Connecticut corporation;
(viii) JMB Realty Corporation, a Delaware corporation;
(ix) Orchard Associates, an Illinois general partnership;
(x) Batus, Inc., a Delaware corporation;
(xi) any Person who is treated as the seller of any property
owned by Borrower;
(xii) successors of the entities described in (i) through
(xi), above; and
(xiii) any Person who bears a relationship to any party
described in (i) through (xii) above which is described
in Sections 267(b) or 707(b) of the IRC;
(c) ANY EMPLOYER ANY OF WHOSE EMPLOYEES ARE COVERED BY A "PLAN" (AN
"EMPLOYER");
<PAGE>
(d) ANY OWNER, DIRECT OR INDIRECT, OF FIFTY PERCENT (50%) OR MORE OF:
(i) THE COMBINED VOTING POWER OF ALL CLASSES OF STOCK
ENTITLED TO VOTE OR THE TOTAL VALUE OF SHARES OF ALL
CLASSES OF STOCK OF A CORPORATION, OR
(ii) THE CAPITAL INTEREST OR THE PROFIT INTEREST OF A
PARTNERSHIP, OR
(iii) THE BENEFICIAL INTEREST OF A TRUST OR UNINCORPORATED
ENTERPRISE, OR
(iv) THE CAPITAL INTEREST OR THE PROFIT INTEREST OF A
LIMITED LIABILITY COMPANY,
WHICH IS EITHER:
a) AN EMPLOYER, OR
b) AN EMPLOYEE ORGANIZATION ANY OF WHOSE MEMBERS ARE COVERED BY
A "PLAN" (AN "EMPLOYEE ORGANIZATION");
(e) ANY CORPORATION, PARTNERSHIP, TRUST OR ESTATE OR LIMITED LIABILITY
COMPANY OF WHICH (OR IN WHICH) FIFTY PERCENT (50%) OR MORE OF:
(i) THE COMBINED VOTING POWER OF ALL CLASSES OF STOCK
ENTITLED TO VOTE OR THE TOTAL VALUE OF SHARES OF ALL
CLASSES OF STOCK OF SUCH CORPORATION,
(ii) THE CAPITAL INTEREST OR THE PROFIT INTEREST OF SUCH
PARTNERSHIP,
(iii) THE BENEFICIAL INTEREST OF SUCH TRUST OR ESTATE, OR
(iv) THE CAPITAL INTEREST OR THE PROFIT INTEREST OF SUCH
LIMITED LIABILITY COMPANY,
IS OWNED DIRECTLY OR INDIRECTLY, OR HELD BY:
A) A FIDUCIARY, COUNSEL OR EMPLOYEE OF A "PLAN",
B) A PERSON OR ENTITY PROVIDING SERVICES TO A "PLAN",
C) AN EMPLOYER,
D) AN EMPLOYEE ORGANIZATION, OR
E) A PERSON DESCRIBED IN CLAUSE (d) ABOVE;
(f) ANY PERSON DESCRIBED IN SUBCLAUSE (A), (B) OR (D) OF CLAUSE (e);
(g) A MEMBER OF A FAMILY (INCLUDING ANY SPOUSE, ANCESTOR, LINEAL
DESCENDANT AND SPOUSE OF A LINEAL DESCENDANT) OF ANY
INDIVIDUAL DESCRIBED IN SUBCLAUSE (A), (B), (C) OR (E) OF CLAUSE
(e) ABOVE;
(h) AN EMPLOYEE, OFFICER, DIRECTOR (OR AN INDIVIDUAL HAVING POWERS OR
RESPONSIBILITIES SIMILAR TO THOSE OF OFFICERS OR DIRECTORS) OR A
TEN PERCENT (10%) OR MORE SHAREHOLDER DIRECTLY OR INDIRECTLY OF ANY
EMPLOYEE ORGANIZATION OR OF ANY PERSON DESCRIBED IN CLAUSE (c), (d)
OR (e) OR SUBCLAUSE (B) OF CLAUSE (e) ABOVE;
(i) A TEN PERCENT (10%) OR MORE (IN CAPITAL OR PROFITS)
PARTNER OR JOINT VENTURER OF AN EMPLOYEE ORGANIZATION
OR A PERSON DESCRIBED IN CLAUSE (c), (d) OR (e);
(j) ANY PERSON:
(i) IF SUCH PERSON OR ANY "AFFILIATE" OF SUCH PERSON
(WITHIN THE MEANING OF SECTION V(c) OF PROHIBITED
TRANSACTION CLASS EXEMPTION 84-14 ISSUED BY THE UNITED
STATES DEPARTMENT OF LABOR (THE "QPAM EXEMPTION")) HAS
ON THE DATE OF SUCH ACQUISITION OR TRANSFER, OR HAS
EXERCISED DURING THE IMMEDIATELY PRECEDING ONE YEAR,
THE AUTHORITY TO
<PAGE>
A) "APPOINT OR TERMINATE", WITHIN THE MEANING OF THE
QPAM EXEMPTION, HEITMAN CAPITAL MANAGEMENT
CORPORATION ("HEITMAN") OR ANY SUCCESSOR AS A
MANAGER OF ANY OF THE ASSETS OF ANY "PLAN"
DESCRIBED IN CLAUSE (A) (i) - (xv), OR
B) NEGOTIATE THE TERMS OF A MANAGEMENT AGREEMENT WITH
HEITMAN OR ANY SUCCESSOR ON BEHALF OF ANY PLAN
DESCRIBED IN CLAUSE (A) (i) - (xv), OR
(ii) IF SUCH PERSON IS "RELATED" TO HEITMAN (WITHIN THE
MEANING OF SECTION (V)(h) OF THE QPAM EXEMPTION).
ANY PURPORTED TRANSFER IN CONTRAVENTION OF THE FOREGOING SHALL BE NULL
AND VOID AB INITIO.
NOTWITHSTANDING THE FOREGOING, THIS NOTE MAY BE ACQUIRED BY OR
TRANSFERRED TO TELEPHONE REAL ESTATE EQUITY TRUST AND/OR HAC GROUP TRUST IF,
PRIOR TO ANY SUCH TRANSFER, THE APPLICABLE TRANSFEREE DELIVERS TO MORTGAGEE
AND BORROWER A CERTIFICATE STATING THAT SUCH TRANSFER WILL NOT IN AND OF
ITSELF CONSTITUTE A "NON-EXEMPT PROHIBITED TRANSACTION" WITHIN THE MEANING
OF SECTION 4975 OF THE IRC OR SECTIONS 406 THROUGH 408 OF ERISA.
Upon the transfer of this Note in accordance with the terms set
forth in this Article 11, Mortgagee may deliver all the collateral mortgaged,
granted, pledged or assigned pursuant to the Mortgage and the Other Security
Documents, or any part thereof, to the transferee who shall thereupon become
vested with all the rights herein or under applicable law given to Mortgagee
with respect thereto. Mortgagee shall retain all rights hereby given to it
with respect to any liabilities and the collateral not so transferred.
ARTICLE 12. WAIVER OF TRIAL BY JURY
BORROWER HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW,
THE RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM,
WHETHER IN CONTRACT, TORT OR OTHERWISE, RELATING DIRECTLY OR INDIRECTLY TO
THE LOAN EVIDENCED BY THIS NOTE, THE APPLICATION FOR THE LOAN EVIDENCED BY
THIS NOTE, THIS NOTE, THE MORTGAGE OR THE OTHER SECURITY DOCUMENTS OR ANY
ACTS OR OMISSIONS OF MORTGAGEE, ITS OFFICERS, EMPLOYEES, DIRECTORS OR AGENTS
IN CONNECTION THEREWITH.
ARTICLE 13. EXCULPATION
(a) Anything contained in this Note, in the Mortgage or the Other
Security Documents to the contrary notwithstanding (except for the liability
as specifically provided below of the Exculpated Persons), in any claim,
demand or action arising under this Note, the Mortgage or the Other Security
Documents, the Mortgagee's recourse for the satisfaction of the indebtedness
due under this Note and for the payment and performance of all of the
obligations and liabilities of the Mortgagor and the Borrower under the
Mortgage or the Other Security Documents shall be limited solely to the
Mortgagor's and the Borrower's interest in the Property, and none of the
Mortgagor, the Borrower or any Principal, nor any of its or their respective
successors or assigns, nor any partner (general or limited, or a subpartner
at any level), principal, tenant-in-common, officer, director, trustee,
beneficiary, shareholder, controlling person, employee, agent or Affiliate
of the Mortgagor, the Borrower (or any constituent partner or subpartner
thereof) or any Principal, or any of their respective successors and assigns
(collectively, "Exculpated Persons") shall be liable in any other respect for
(i) the payment of the principal of, or interest on or premium, if any, on
this Note, or (ii) the payment of any other amount due under this Note, the
Mortgage or the Other Security Documents, or (iii) for damages for the breach
of or any costs or expenses associated with the performance of any of the
covenants, obligations, representations and warranties or indemnifications
contained herein or in this Note or the Other Security Documents. The
Mortgagee agrees that (except as expressly set forth below), in the event it
<PAGE>
pursues any remedies available to it hereunder or under this Note or the
Other Security Documents, the Mortgagee shall not have recourse to the
Exculpated Persons for any deficiency, loss or claim for damages resulting
therefrom, and none of the property or assets of any of the Exculpated
Persons other than the Property or the beneficial interest in the Land Trust
shall be subject to levy, execution, garnishment, attachment, foreclosure or
other enforcement procedure for the satisfaction of the remedies of the
Mortgagee hereunder, under this Note or under the Other Security Documents,
but nothing contained herein shall (x) constitute a waiver of any
indebtedness evidenced by this Note or secured by the Mortgage or the Other
Security Documents, or (y) be taken to prevent recourse to, or the
enforcement of remedies against, the Property in respect of any and all
liabilities, obligations and undertakings contained herein or in this Note.
In addition, (1) each document which is executed by Mortgagor, Borrower
and/or any Exculpated Person pursuant to or in connection with this Note,
the Mortgage and/or the Other Security Documents shall either expressly
incorporate, or shall be deemed to incorporate, the non-recourse provisions
contained in this Article 13, and (2) Mortgagee shall have no authority
under this Note or the Mortgage to act on behalf of Mortgagor and/or Borrower
in any manner that would give rise to recourse liability against any
Exculpated Person.
(b) The foregoing limitation of the Mortgagee's recourse shall not
apply to any of the following prior to the payment in full of this Note and
all other Secured Obligations:
(i) the application of any Proceeds received by the Borrower
or Mortgagor after a casualty or a Taking in a manner other than
that required by the terms of the Mortgage (including, by reference
in Article 15 of the Mortgage, the terms of the Declaration of
Easements and the Condominium Deed); provided, however, that the
Mortgagee's recourse shall be limited to the amount of such
misapplied Proceeds;
(ii) simultaneously with the occurrence and during the
continuance of a "Default Event" (hereinafter defined), the
application by the Borrower or Mortgagor of the rentals under any
Lease or of any security deposit under any Lease or of any other
issues, income, profits or monies derived by Mortgagor or Borrower
from the operation of the Property (including, without limitation,
lease termination payments made by Tenants which, as to an Anchor
Lease terminated in violation of the terms of the Mortgage, shall
include any lease termination payment made by the tenant thereunder,
whether before, upon or after the effective date of termination of
such Anchor Lease) (collectively "Issues") in a manner other than
that required by the terms of Section 20(j) of the Mortgage
following and during the continuance of an Event of Default as if
such Default Event were an Event of Default (except that prior to
the occurrence of an actual Event of Default debt service under a
Subordinate Mortgage may be paid), provided, however, that the
Mortgagee's recourse shall be limited to the amount of such
misapplied Issues; or
(iii) the commission of a fraudulent act or the making of an
intentional misrepresentation by the Borrower, provided, however,
that the Mortgagee's recourse shall be limited to the damages
sustained by the Mortgagee by virtue of such fraudulent act or
intentional misrepresentation.
As used herein, a "Default Event" shall mean (1) an Event of Default, (2) a
Default under Section 23(a) which ultimately fails to be waived or cured
before the expiration of the applicable cure period, (3) a Default under
Section 23(b) of the Mortgage, or (4) any other Default (a "Non-Debt Service
Default") of which Mortgagor and Borrower have been given written notice by
Mortgagee.
<PAGE>
(c) Notwithstanding the exceptions to this nonrecourse provision
set forth in clause (b) above, (x) the Mortgagee shall not have any recourse
with respect to any claim, demand or action arising under this Note, the
Mortgage or the Other Security Documents to, except as expressly provided
otherwise hereafter, any partner of any partnership, which partner is an
individual or a trust for the benefit of an individual or members of a family
or a limited partner of such partnership, or any assets of such individual
partner, trust or limited partner, and (y) without limitation of the recourse
to Borrower, recourse to the partners of the Borrower shall be several (and
not joint) and shall be limited as to such partner to the amount of misapplied
Issues or misapplied Proceeds received by such partner or the amount of
damages caused by such partner's fraud or intentional misrepresentation.
(d) Additionally, notwithstanding anything contained in sub-clause
(b)(ii) above, Mortgagee shall not have any recourse with respect to any
claim, demand or action arising under this Note, the Mortgage or the Other
Security Documents to any Exculpated Person for Issues distributed to such
Exculpated Person after notice of and during the continuance of a Non-Debt
Service Default if and only if (A) such Non-Debt Service Default is not a
Default described in Section 23(c) of the Mortgage or a Non-Debt Service
Default which can be cured by the mere payment of money (unless in each
case such Non-Debt Service Default is ultimately waived or cured before
the expiration of the applicable cure period), and (B) either (x) such
Non-Debt Service Default does not mature into an Event of Default, or
(y) whether or not such Non-Debt Service Default matures into an Event of
Default, during the applicable cure period (i) the Borrower is diligently
pursuing the curing of such Non-Debt Service Default, (ii) Borrower pays all
Operating Expenses of the Property (including making adequate provision for
the payment of Impositions) and the costs of all capital expenditures
incurred by it and pays debt service on this Note, the Other Note and any
Subordinate Mortgage, and (iii) Borrower creates adequate reserves for the
reasonably foreseeable remaining costs, from time to time, of curing such
Non-Debt Service Default and delivers to Mortgagee, within 30 days of
Borrower's receipt of the notice of Default, an Officers' Certificate stating
the amount of the reserve and the basis therefor, it being expressly agreed
that having satisfied the aforesaid requirements, Borrower shall be permitted
to distribute any excess Issues to its partners during the applicable cure
period and that whether or not such Non-Debt Service Default is cured or the
reserves set aside for the curing therefor are, in fact, adequate, neither
Borrower nor any other Exculpated Person shall be liable for Issues
distributed to the partners of Borrower in accordance with the foregoing.
(e) In the event that the Mortgagee brings a suit against an
Exculpated Person on the basis of one of the exceptions set forth in clause
(b) above and obtains a judgment therefor, such Exculpated Person shall pay
the enforcement costs of such action, including reasonable fees of attorneys.
For purposes of this Article 13, each and every reference to
"Mortgagee" (including the possessory thereof) shall mean Mortgagee, its
successors and assigns, and all persons and/or entities whose rights under
this document arise by, through or under Mortgagee, its successors and/or
assigns.
ARTICLE 14. AUTHORITY
Borrower (and the undersigned representative of Borrower, if any)
represents that Borrower has full power, authority and legal right to execute
and deliver this Note, the Mortgage and the Other Security Documents and that
this Note, the Mortgage and the Other Security Documents constitute valid and
binding obligations of Borrower.
<PAGE>
ARTICLE 15. APPLICABLE LAW
This Note shall be governed, construed, applied and enforced in
accordance with the laws of the state in which the Property is located and
the applicable laws of the United States of America.
ARTICLE 16. SERVICE OF PROCESS
(a) Borrower irrevocably consents to service of process by
registered or certified mail, postage prepaid, to it at its address given
in or pursuant to the first paragraph hereof.
(b) With respect to any claim or action arising hereunder or under
the Mortgage or the Other Security Documents, Borrower (a) irrevocably
submits to the nonexclusive jurisdiction of the courts of the State in which
the Property is located, the State of New York and the United States District
Court located in the Borough of Manhattan in New York, New York and the county
in which the Property is located, and appellate courts from any thereof, and
(b) irrevocably waives any objection which it may have at any time to the
laying on venue of any suit, action or proceeding arising out of or
relating to this Note brought in any such court, irrevocably waives any
claim that any such suit, action or proceeding brought in any such court
has been brought in an inconvenient forum.
ARTICLE 17. COUNSEL FEES
In the event that it should become necessary to employ counsel to
collect the Debt or to foreclose the security therefor, Borrower also agrees
to pay all reasonable fees and expenses of Mortgagee, including, without
limitation, reasonable attorney's fees for the services of such counsel
whether or not suit be brought.
ARTICLE 18. JOINT AND SEVERAL LIABILITY
If at any time Borrower consists of more than one person or party, the
obligations and liabilities of each person or party shall be joint and several.
ARTICLE 19. NOTICES
All notices or other written communications hereunder shall be given
in accordance with the terms of Article 56 of the Mortgage.
[NO FURTHER TEXT ON THIS PAGE]
<PAGE>
IN WITNESS WHEREOF, Borrower has duly executed this Note as of the
day and year first above written.
WATER TOWER JOINT VENTURE, an Illinois general
partnership
By: 835 MICHIGAN L.P., an Illinois
limited partnership, as General Partner
of Water Tower Joint Venture
By: 835 MICHIGAN CORP., an Illinois
corporation, as General Partner of
835 Michigan L.P.
By:
------------------------
Name: Stuart C. Katz
Title: Vice President
By: URBAN SHOPPING CENTERS, L.P.
an Illinois limited partnership,
as General Partner of Water
Tower Joint Venture
By: URBAN SHOPPING CENTERS INC.,
a Maryland corporation
as General Partner of Urban
Shopping Centers, L.P.
By:
------------------------
Name: Michael G. Hilborn
Title: Senior Vice President
<PAGE>
STATE OF ILLINOIS )
) ss.:
COUNTY OF COOK )
On this _________ day of February, 1997, before me, the
undersigned, a Notary Public in and for said State, duly
commissioned and sworn, personally appeared Michael G. Hilborn,
known to me (or proved to me on the basis of satisfactory
evidence) to be a Senior Vice President of Urban Shopping Centers
Inc., a Maryland corporation, a general partner of Urban Shopping
Centers, L.P., an Illinois limited partnership which is a general
partner of Water Tower Joint Venture, an Illinois general
partnership, which executed the within instrument and known to me
to be the person who executed the within instrument on behalf of
said corporation, and such person acknowledged to me that he
executed said instrument as his free and voluntary act and the
free and voluntary act of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed
my official seal the day and year in this certificate first above
written.
Signature
----------------------------------
(Seal)
<PAGE>
STATE OF ILLINOIS )
) ss.:
COUNTY OF COOK )
On this _________ day of February, 1997, before me, the
undersigned, a Notary Public in and for said State, duly
commissioned and sworn, personally appeared Stuart C. Katz, known
to me (or proved to me on the basis of satisfactory evidence) to
be a Vice President of 835 Michigan Corp., an Illinois
corporation, a general partner of 835 Michigan L.P., an Illinois
limited partnership which is a general partner of Water Tower
Joint Venture, an Illinois general partnership, which executed
the within instrument and known to me to be the person who
executed the within instrument on behalf of said corporation, and
such person acknowledged to me that he executed said instrument
as his free and voluntary act and the free and voluntary act of
said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and
affixed my official seal the day and year in this certificate
first above written.
Signature
-----------------------------------------
(Seal)
<PAGE>
THIRD AMENDMENT
TO
URBAN SHOPPING CENTERS
1993 OPTION PLAN
A. BACKGROUND. Urban Shopping Centers, Inc. (the
"Reit"), a Maryland corporation, is the general partner of Urban
Shopping Centers, L.P. (the "Partnership"), an Illinois limited
partnership. The Partnership owns a 99 percent interest in Penn
Square Mall Limited Partnership ("PSMLP"). PSMLP owns all of the
preferred stock of Urban Retail Properties Co. (the "Management
Company"), a Delaware corporation. The REIT, the Partnership and
the Management Company have adopted the Urban Shopping Centers
1993 Option Plan (the "Plan"), effective as of September 30,
1993. The Board of Directors of the REIT has approved and
authorized the execution of this Third Amendment to the Plan (the
"Amendment").
B. AMENDMENT. Section 6.7 (a) (ii) of the Plan is
hereby amended in its entirety to read as follows:
"(ii) Payment to the Employer of the full
purchase price for the shares or Units being
purchased made in cash or by certified bank
check or by promissory note at a market rate
of interest payable not later than thirty
days after the date of such note."
Effective as of the 24th day of February, 1997.
URBAN SHOPPING CENTERS, INC.
By:
-------------------------------
Senior Vice President
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S FINANCIAL STATEMENTS INCLUDED IN ITS REPORT ON FORM 10-Q FOR
THE THREE MONTHS ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS INCLUDED IN SUCH REPORT.
</LEGEND>
<CIK> 0000907077
<NAME> URBAN SHOPPING CENTERS, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 4,886
<SECURITIES> 0
<RECEIVABLES> 21,541
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 26,427
<PP&E> 954,718
<DEPRECIATION> (103,888)
<TOTAL-ASSETS> 921,096
<CURRENT-LIABILITIES> 41,030
<BONDS> 447,180
0
0
<COMMON> 169
<OTHER-SE> 193,147
<TOTAL-LIABILITY-AND-EQUITY> 921,096
<SALES> 33,332
<TOTAL-REVENUES> 33,718
<CGS> 0
<TOTAL-COSTS> 19,064
<OTHER-EXPENSES> 2,195
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,997
<INCOME-PRETAX> 5,462
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,822
<DISCONTINUED> 0
<EXTRAORDINARY> (88)
<CHANGES> 0
<NET-INCOME> 3,734
<EPS-PRIMARY> .22
<EPS-DILUTED> .22
</TABLE>
