Securities Exchange Act of 1934 -- Form 10-Q
==============================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended to
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Commission File Number 1-12494
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CBL & Associates Properties, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 62-1545718
---------------------- -----------------
(State or other jurisdiction (IRS Employer
of incorporation or Identification
organization) No.)
One Park Place, 6148 Lee Highway, Chattanooga, TN 37421
------------------------------------------------- ---------
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code)
(423) 855-0001
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-------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
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 outstanding of each of the registrants classes of
stock, as of August 11, 1998: Common Stock, par value $.01 per share,
24,106,609 shares and 9% Series A Commulative Redeemable Preferred Stock,
par value $.01 per share, 2,875,00 shares.
CBL & ASSOCIATES PROPERTIES, INC.
INDEX
PART I FINANCIAL INFORMATION PAGE NUMBER
ITEM 1: FINANCIAL INFORMATION 3
CONSOLIDATED BALANCE SHEETS - AS OF
JUNE 30, 1998 AND DECEMBER 31, 1997 4
CONSOLIDATED STATEMENTS OF OPERATIONS -
FOR THE THREE MONTHS ENDED JUNE 30,
1998 AND 1997 AND FOR THE SIX MONTHS
ENDED JUNE 30, 1998 AND 1997 5
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30,
1998 AND 1997 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7
ITEM 2: MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 9
PART II OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS 24
ITEM 2: CHANGES IN SECURITIES 24
ITEM 3: DEFAULTS UPON SENIOR SECURITIES 24
ITEM 4: SUBMISSION OF MATTERS TO HAVE A
VOTE OF SECURITY HOLDERS 24
ITEM 5: OTHER INFORMATION 24
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K 24
SIGNATURE 25
2
<PAGE>
CBL & ASSOCIATES PROPERTIES, INC.
ITEM 1 - FINANCIAL INFORMATION
The accompanying financial statements are unaudited; however, they have
been prepared in accordance with generally accepted accounting
principles for interim financial information and in conjunction with the
rules and regulations of the Securities and Exchange Commission.
Accordingly, they do not include all of the disclosures required by
generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting
solely of normal recurring matters) necessary for a fair presentation
of the financial statements for these interim periods have been
included. The results for the interim periods ended June 30, 1998 are
not necessarily indicative of the results to be obtained for the full
fiscal year.
These financial statements should be read in conjunction with the CBL
& Associates Properties, Inc. (the "Company") December 31, 1997 audited
financial statements and notes thereto included in the Company's
Form 10-K for the year ended December 31, 1997.
3
<PAGE>
CBL & ASSOCIATES PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<S> <C> <C>
JUNE 30, DECEMBER 31,
1998 1997
----------- ------------
ASSETS
Real estate assets:
Land $209,366 $164,895
Buildings and improvements 1,243,213 1,019,283
----------- ------------
1,452,579 1,184,178
Less: Accumulated depreciation (163,550) (145,641)
----------- ------------
1,289,029 1,038,537
Developments in progress 80,219 103,787
----------- ------------
Net investment in real estate assets 1,369,248 1,142,324
Cash and cash equivalents 6,417 3,124
Cash in escrow -- 66,108
Receivables:
Tenant 14,741 12,891
Other 1,157 1,121
Notes receivable 12,205 11,678
Other assets 9,291 7,779
----------- ------------
$1,413,059 $1,245,025
=========== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Mortgage and other notes payable $841,929 $741,413
Accounts payable and accrued liabilities 25,799 41,978
----------- ------------
Total liabilities 867,728 783,391
----------- ------------
Distributions and losses in excess
of investment in unconsolidated affiliates 7,255 6,884
----------- ------------
Minority interest 128,264 123,897
----------- ------------
Commitments and contingencies
Shareholders' Equity:
Preferred stock, $.01 par value, 5,000,000
shares authorized, 2,875,000 issued in 1998,
none in 1997 29 __
Common stock, $.01 par value, 95,000,000
shares authorized, 24,081,500 and 24,063,963
shares issued and outstanding in 1998 and
1997, respectively 241 241
Excess stock, $.01 par value, 100,000,000
shares authorized, none issued __ __
Additional paid - in capital 429,834 359,541
Accumulated deficit (19,881) (28,433)
Deferred compensation (411) (496)
----------- ------------
Total shareholders' equity 409,812 330,853
----------- ------------
$1,413,059 $1,245,025
=========== ============
</TABLE>
The accompanying notes are an integral part of these balance sheets.
4
<PAGE>
CBL & ASSOCIATES PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(Unaudited)
<TABLE>
<S> <C> <C> <C> <C>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -----------------
1998 1997 1998 1997
--------- -------- -------- --------
REVENUES:
Rentals:
Minimum $37,967 $27,978 $74,020 $54,540
Percentage 1,154 531 2,829 1,907
Other 387 139 820 359
Tenant reimbursements 16,552 12,681 32,003 24,397
Management, development
andleasing fees 723 431 1,420 1,110
Interest and other 616 698 1,363 1,387
--------- -------- -------- --------
Total revenues 57,399 42,458 112,455 83,700
EXPENSES:
Property operating 9,480 7,397 18,324 14,470
Depreciation and
amortization 9,720 7,922 18,875 15,610
Real estate taxes 5,290 3,570 10,252 6,935
Maintenance and repairs 3,295 2,484 6,295 4,843
General and administrative 2,730 2,286 5,731 4,503
Interest 15,042 8,995 28,817 17,935
Other 3 15 9 42
--------- -------- -------- --------
Total expenses 45,560 32,669 88,303 64,338
Income from operations 11,839 9,789 24,152 19,362
Gain on sales of real
estate assets 581 363 2,512 3,382
Equity in earnings of
unconsolidated affiliates 431 593 1,168 1,213
Minority interest in earnings:
Operating partnership (3,604) (2,991) (7,777) (6,585)
Shopping center properties (99) (147) (308) (289)
--------- -------- -------- --------
Income before extraordinary
item 9,148 7,607 19,747 17,083
Extraordinary loss on
extinguishment of debt -- -- -- (496)
--------- -------- -------- --------
NET INCOME $9,148 $7,607 $19,747 $16,587
========= ======== ======== ========
Basic per share data:
Income before extraordinary
item $0.38 $0.32 $0.82 $0.72
NET INCOME $0.38 $0.32 $0.82 $0.70
========= ======== ======== ========
Weighted average common
shares outstanding 24,079 23,988 24,075 23,749
========= ======== ======== ========
Diluted per share data:
Income before extraordinary
item $0.38 $0.31 $0.81 $0.71
NET INCOME $0.38 $0.31 $0.81 $0.69
========= ======== ======== ========
Weighted average common
shares and dilutive
potential common shares
outstanding 24,311 24,213 24,308 24,005
========= ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE>
CBL & ASSOCIATES PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<S> <C> <C>
SIX MONTHS
ENDED JUNE 30,
----------------
1998 1997
------- -------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $19,747 $16,587
Adjustments to reconcile net income to
net cash provided by operating
activities:
Minority interest in earnings 8,085 6,874
Depreciation 15,985 14,093
Amortization 3,452 2,100
Gain on sales of real estate assets (2,512) (3,382)
Issuance of stock under incentive plan 265 104
Equity in earnings of unconsolidated
affiliates (1,168) (1,213)
Amortization of deferred compensation 222 160
Write-off of development projects 9 42
Distributions from unconsolidated
affiliates 2,182 1,218
Distributions to minority investors (8,754) (8,286)
Changes in assets and liabilities -
Tenant and other receivables (1,900) 947
Other assets (2,127) (504)
Accounts payable and accrued
expenses 624 (4,002)
------- -------
Net cash provided by
operating activities 34,110 24,738
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Construction of real estate assets
and land acquisitions, net of
payables (55,044) (64,651)
Acquisition of real estate assets (184,661 (5,716)
Capitalized interest (2,467) (3,192)
Other capital expenditures (8,485) (4,699)
Deposits in escrow 66,108 --
Proceeds from sales of real
estate assets 6,316 6,794
Additions to notes receivable (1,478) (1,789)
Payments received on notes receivable 1,234 489
Additional investments in and
advances to unconsolidated
affiliates (643) (286)
------- -------
Net cash used in investing
activities (179,120) (73,050)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from mortgage and other
notes payable 189,663 165,899
Principal payments on mortgage and
other notes payable (89,147) (172,368)
Additions to deferred finance costs (700) (901)
Proceeds from issuance of preferred
stock 70,175 --
Proceeds from issuance of common
stock 155 74,398
Proceeds from exercise of stock
options -- 533
Prepayment penalties on
extinguishment of debt -- (496)
Dividends paid (21,843) (19,414)
------- -------
Net cash provided by financing
activities 148,303 47,651
------- -------
NET CHANGE IN CASH AND CASH EQUIVALENTS 3,293 (661)
CASH AND CASH EQUIVALENTS, beginning
of period 3,124 4,298
------- -------
CASH AND CASH EQUIVALENTS, end
of period $6,417 $3,637
======= =======
Cash paid for interest, net of amounts
capitalized $27,751 $18,576
======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
6
<PAGE>
CBL & ASSOCIATES PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - UNCONSOLIDATED AFFILIATES
At June 30, 1998, the Company had investments in four partnerships and
joint ventures, all of which are reflected using the equity method of
accounting. Condensed combined results of operations for the
unconsolidated affiliates are as follows (in thousands):
<TABLE>
<S> <C> <C> <C> <C>
COMPANY'S SHARE COMPANY'S SHARE
FOR THE FOR THE
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ ----------------
1998 1997 1998 1997
------ ------ ------ ------
REVENUES $2,584 $2,612 $5,526 $5,342
------ ------ ------ ------
Depreciation and amortization 354 255 700 656
Interest expense 974 854 1,984 1,822
Other operating expenses 825 910 1,674 1,651
------ ------ ------ ------
Net income $ 431 $ 593 $1,168 $1,213
====== ====== ====== ======
</TABLE>
NOTE 2 - CONTINGENCIES
The Company is currently involved in certain litigation arising in the
ordinary course of business. In the opinion of management, the pending
litigation will not materially affect the financial statements of the
Company. Additionally, based on environmental studies completed to date
on the real estate properties, management believes any exposure related
to environmental cleanup will be immaterial to the financial position
and results of operations of the Company.
7
<PAGE>
NOTE 3 - CREDIT FACILITIES AND AGREEMENTS
The Company has credit facilities of $207.5 million of which $100.7
million is available at June 30, 1998. Outstanding amounts bear interest at
a weighted average interest rate of 94 basis points over LIBOR at June 30,
1998. The Company has swap agreements of $234 million in effect at June 30,
1998 as indicated in the table below:
<TABLE>
<S>
<C> <C> <C> <C>
Swap Amount Fixed LIBOR
(in millions) Component Expiration Date Effective Date
- --------------- ------------- --------------- --------------
$65 5.72% 01/07/2000 01/07/98
81 5.54% 02/04/2000 02/04/98
50 5.70% 06/15/2001 06/15/98
38 5.73% 06/30/2001 06/26/98
</TABLE>
There were no fees related to the swap agreements. These swap agreements
did not have a significant impact on interest expense for the three or
six months ended June 30, 1998. The Company also has agreements capping
the interest rate on $100 million of variable rate debt at a LIBOR rate
no greater than 7% in 1998 and 7.5% in 1999.
8
<PAGE>
CBL & ASSOCIATES PROPERTIES, INC.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the financial condition
and results of operations should be read in conjunction with
Company's Consolidated Financial Statements and Notes thereto.
Information included herein contains "forward-looking statements"
within the meaning of the federal securities laws. Such statements are
inherently subject to risks and uncertainties, many of which cannot be
predicted with accuracy and some of which might not even be anticipated.
Future events and actual results, financial and otherwise, may differ
materially from the events and results discussed in the forward-looking
statements. We direct you to the Company's other filings with the
Securities and Exchange Commission, including without limitation the
Company's Annual Report on Form 10-K and the "Management's Discussion
and Analysis of Financial Condition and Results of Operations"
incorporated by reference therein, for a discussion of such risks and
uncertainties.
GENERAL BACKGROUND
The Company's Consolidated Financial Statements and Notes thereto reflect
the consolidated financial results of CBL & Associates Limited Partnership
(the "Operating Partnership") which includes at June 30, 1998, the operations
of a portfolio of properties consisting of twenty regional malls, eleven
associated centers, eighty-two community centers, an office building,
joint venture investments in three regional malls and one associated
center, and income from six mortgages ("the Properties"). The Operating
Partnership also has one mall, one associated center, one power center,
and two community centers currently under construction, options to
acquire certain shopping center development sites and contingent
contracts for the purchase of certain operating properties. The
consolidated financial statements also include the accounts of CBL &
Associates Management, Inc. (the "Management Company").
The Company classifies its regional malls into two categories -
malls which have completed their initial lease-up ("Stabilized Malls")
and malls which are in their initial lease-up phase ("New Malls"). The
New Mall category is presently comprised of the redeveloped and
expanded, Westgate Mall in Spartanburg, South Carolina, Oak Hollow Mall
in High Point, North Carolina, the redeveloped Springdale Mall in
Mobile, Alabama and the recently opened Bonita Lakes Mall in Meridian,
Mississippi.
9
<PAGE>
In April 1998, the Company acquired Stroud Mall in Stroudsburg,
Pennsylvania for $38 million which was funded from the proceeds of a $33
million acquisition loan and the balance from the Company's credit
lines.
In June 1998, the Company completed a public offering of 2,875,000 shares
of 9% Series A Cumulative Redeemable Preferred Stock at a price to the public of
$25 per share. Wells Fargo & Company purchased 715,875 shares of 9% Series A
Cumulative Redeemable Preferred Stock from the Company at a price of $25 per
share. The net proceeds of $70 million were used to repay variable rate
indebtedness incurred in the Company's development and acquisition program.
In July 1998, the Company acquired Hickory Hollow Mall, Rivergate
Mall, The Courtyard at Hickory Hollow, The Village at Rivergate and
Lions Head Village all located in the metropolitan Nashville, Tennessee
area. The purchase price of $247.4 million was funded from a ten-year
fixed-rate loan in the amount of $182.7 million, 631,016 operating
partnership units in the Operating Partnership with a value of $15.3
million and the balance funded from the Company's credit lines.
RESULTS OF OPERATIONS
Operational highlights for the six months ended June 30, 1998 as
compared to June 30, 1997 are as follows:
SALES
Mall shop sales, for those tenants who have reported, in the
nineteen Stabilized Malls in the Company's portfolio increased by
5.8% on a comparable per square foot basis.
Six Months Ended June 30,
-------------------------
1998 1997
------------ ----------
Sales per square foot $113.48 $107.27
Total sales volume in the mall portfolio, including New Malls,
increased 11.4% to $480.9 million for the six months ended June
30, 1998 from $431.7 million for the six months ended June 30,
1997.
Occupancy costs as a percentage of sales was 12.6% for the six
months ended June 30, 1998 and 13.1% for the six months ended June
30, 1997 for the Stabilized Malls. Occupancy costs were 11.2%,
11.5% and 12.3% for the years ended December 31, 1997, 1996, and
1995, respectively. Occupancy costs as a percentage of sales are
generally higher in the first three quarters of the year as
compared to the fourth quarter due to the seasonality of retail
sales.
10
<PAGE>
OCCUPANCY
Occupancy for the Company's overall portfolio is as follows:
<TABLE>
<S>
<C> <C> <C>
At June 30,
----------------
1998 1997
------- -------
Stabilized malls 91.9% 89.0%
New malls 90.5% 88.7%
Associated centers* 88.8% 91.4%
Community centers 97.6% 96.6%
------- -------
Total Portfolio 94.2% 92.9%
======= =======
</TABLE>
* The Associated centers occupancy decreased
due to the acquisition of Westgate Crossing
in Spartanburg, South Carolina in August 1997
and the ongoing redevelopment of that center.
AVERAGE BASE RENT
Average base rents for the Company's three portfolio categories
were as follows:
<TABLE>
<S>
<C> <C> <C>
At June 30,
----------------
1998 1997
------- -------
Malls $19.01 $19.10
Associated centers 9.62 9.85
Community centers 8.00 7.11
</TABLE>
LEASE ROLLOVERS
On spaces previously occupied, the Company achieved the following
results from rollover leasing during the six months ended June 30,
1998, over and above the base and percentage rent paid by the
previous tenant:
<TABLE>
<S> <C> <C> <C>
Per Square Per Square
Foot Rent Foot Rent Percentage
Prior Lease(1) New Lease(2) Increase
-------------- ------------ ----------
Malls $19.81 $21.89 10.5%
Associated centers 10.23 11.60 13.4%
Community centers 7.87 8.49 7.9%
</TABLE>
(1) - Rental achieved for spaces previously occupied at
the end of the lease including percentage rent.
(2) - Average base rent over the term of the lease.
11
<PAGE>
For the six months ended June 30, 1998, malls represented 73.3% of
total revenues from the Properties; revenues from associated centers
represented 3.6%; revenues from community centers represented 21.3%; and
revenues from mortgages and the office building represented 1.8%.
Accordingly, revenues and results of operations are disproportionately
impacted by the malls' achievements. The Company's cost recovery ratio
decreased to 91.8% for the six months ended June, 30 1998 as compared
to 92.9% in 1997.
The shopping center business is somewhat seasonal in nature with
tenant sales achieving the highest levels during the fourth quarter
because of the holiday season. The malls earn most of their "temporary"
rents (rents from short-term tenants) during the holiday period. Thus,
occupancy levels and revenue production are generally the highest in the
fourth quarter of each year. Results of operations realized in any one
quarter may not be indicative of the results likely to be experienced
over the course of the entire year.
COMPARISON OF RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30,
1998 TO THE RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30,
1997
Total revenues for the three months ended June 30, 1998 increased
by $14.9 million, or 35.2%, to $57.4 million as compared to $42.5
million in 1997. Of this increase, minimum rents increased by $10.0
million, or 35.7%, to $38.0 million as compared to $28.0 million in
1997, and tenant reimbursements increased by $3.9 million, or 30.5%, to
$16.6 million in 1998 as compared to $12.7 million in 1997.
Improved occupancies and operations and increased rents in the
Company's operating portfolio generated approximately $2.1 million of
the increase in revenues. The majority of these increases were generated
at Westgate Mall in Spartanburg, South Carolina and Turtle Creek Mall
in Hattiesburg, Mississippi. New revenues of $12.8 million resulted from
operations at the thirteen new centers opened or acquired during the
past fifteen months as follows:
<TABLE>
<S> <C> <C> <C> <C>
Project Name Location Total GLA Type of Addition Opening Date
_______________________ __________________________________ _________ ________________ ________________________
Salem Crossing Virginia Beach, Virginia 289,305 New Development April, 1997
Strawbridge Marketplace Virginia Beach, Virginia 43,570 New Development August, 1997
Springhurst TowneCenter Louisville, Kentucky 798,736 New Development August, 1997/April 1998
Bonita Lakes Mall Meridian, Mississippi 631,555 New Development October, 1997
Bonita Lakes Crossing Meridian, Mississippi 110,500 New Development October, 1997/March 1998
Cortlandt Town Center Cortlandt, New York 772,451 New Development November, 1997
Chester Plaza Richmond, Virginia 10,000 New Development October, 1997
Sterling Creek Commons Portsmouth, Virginia 65,500 New Development June, 1998
Westgate Crossing Spartanburg, South Carolina 151,489 Acquisition August, 1997
</TABLE>
12
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Project Name Location Total GLA Type of Addition Opening Date
_______________________ __________________________________ _________ ________________ ________________________
Springdale Mall Mobile, Alabama 926,376 Acquisition September, 1997
Asheville Mall Asheville, North Carolina 823,916 Acquisition January, 1998
Burnsville Center Burnsville (Minneapolis),Minnesota 1,078,568 Acquisition January, 1998
Stroud Mall Stroudsburg, Pennsylvania 427,000 Acquisition April, 1998
</TABLE>
Management, leasing and development fees increased by $0.3 million
to $0.7 million in the second quarter of 1998 as compared to $0.4
million in the second quarter of 1997. This increase is primarily due
to fees earned in the Company's co-development program and increases in
management fees on managed properties. Interest and other decreased in
the second quarter of 1998 by $0.1 million, to $0.6 million from $0.7
million in 1997. This decrease is due to reductions in mortgage
note receivable balances.
Property operating expenses, including real estate taxes and
maintenance and repairs, increased in the second quarter of 1998 by $4.6
million, or 34.3%, to $18.1 million as compared to $13.5 million in the
second quarter of 1997. This increase is primarily the result of the
addition of the thirteen new centers referred to above.
Depreciation and amortization increased in the second quarter of
1998 by $1.8 million, or 22.7%, to $9.7 million as compared to $7.9
million in the second quarter of 1997. This increase is primarily the
result of the addition of the thirteen new centers referred to above.
Interest expense increased in the second quarter of 1998 by $6.0
million, or 67.2%, to $15.0 million as compared to $9.0 million in 1997.
This increase is primarily due to interest on debt related to the thirteen
new centers opened or acquired during the last fifteen months.
The gain on sales of real estate assets increased in the second
quarter of 1998 by $0.2 million, or 60.1%, to $0.6 million as compared
to $0.4 million in 1997. The outparcel sales in the second quarter of
1998 were at Sterling Creek Commons in Portsmouth, Virginia and at
Georgia Square Mall in Athens, Georgia. The sales in the second quarter
of 1997 were for out parcels at Springhurst Towne Center in Louisville,
Kentucky offset by a loss on land sold at Kingston Overlook in
Knoxville, Tennessee.
COMPARISON OF RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30,
1998 TO THE RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1997
Total revenues for the six months ended June 30, 1998 increased by
$28.8 million, or 34.4%, to $112.5 million as compared to $83.7 million
in 1997. Of this increase, minimum rents increased by $19.5 million,
or 35.7%, to $74.0 million as compared to $54.5 million in 1997, and
13
<PAGE>
tenant reimbursements increased by $7.6 million, or 31.2%, to $32.0
million in 1998 as compared to $24.4 million in 1997.
Improved occupancies, operations and increased rents in the
Company's operating portfolio generated $4.6 million of increased
revenues. The majority of these increases were generated at Westgate
Mall in Spartanburg, South Carolina and Coolsprings Galleria in
Nashville, Tennessee. New revenues of $24.2 resulted from operations
at the sixteen new centers opened or acquired during the past eighteen
months. These centers are as follows:
<TABLE>
<S> <C> <C> <C> <C>
Project Name Location Total GLA Type of Addition Opening Date
_______________________ __________________________________ _________ ________________ ________________________
Northpark Center Richmond, Virginia 61,000 New Development March, 1997
The Terrace Chattanooga, Tennessee 156,000 New Development February/March, 1997
Massard Crossing Fort Smith, Arkansas 291,000 New Development March, 1997
Salem Crossing Virginia Beach, Virginia 289,000 New Development April, 1997
Strawbridge Marketplace Virginia Beach, Virginia 44,000 New Development August, 1997
Springhurst Towne Center Louisville, Kentucky 811,000 New Development August, 1997/April 1998
Bonita Lakes Mall Meridian, Mississippi 633,000 New Development October, 1997
Bonita Lakes Crossing Meridian, Mississippi 62,300 New Development October, 1997/March 1998
Cortlandt Town Center Cortlandt, New York 772,000 New Development November, 1997
Chester Plaza Richmond, Virginia 10,000 New Development October, 1997
Sterling Creek Commons Portsmouth, Virginia 65,500 New Development June, 1998
Westgate Crossing Spartanburg, South Carolina 151,000 Acquisition August, 1997
Springdale Mall Mobile, Alabama 926,000 Acquisition September, 1997
Asheville Mall Asheville, North Carolina 817,000 Acquisition January, 1998
Burnsville Center Burnsville (Minneapolis),Minnesota 1,070,000 Acquisition January, 1998
Stroud Mall Stroudsburg, Pennsylvania 427,000 Acquisition April, 1998
</TABLE>
Management, leasing and development fees increased by $0.3 million
to $1.4 million in the first six months of 1998 as compared to $1.1
million in 1997. This increase was primarily due to fees earned in the
Company's co-development program and increases in management fees on
managed properties.
Property operating expenses, including real estate taxes and
maintenance and repairs, increased in the first six months of 1998 by
$8.6 million, or 32.9%, to $34.9 million as compared to $26.2 million
in 1997. This increase is primarily the result of the addition of the
sixteen new centers referred to above.
14
<PAGE>
Depreciation and amortization increased in the first six months of
1998 by $3.3 million, or 20.9%, to $18.9 million as compared to $15.6
million in 1997. This increase is primarily the result of the addition
of the sixteen new centers referred to above.
Interest expense increased in the first six months of 1998 by $10.9
million, or 60.7%, to $28.8 million as compared to $17.9 million in
1997. This increase is primarily the result of the addition of interest on
debt related to the sixteen new centers referred to above.
The gain on sales of real estate assets decreased for the six
months ended June 30, 1998 by $0.9 million, or 25.7%, to $2.5 million
as compared to $3.4 million in 1997. Gain on sales in the first six
months of 1998 were for outparcel sales at the Company's developments
in Springhurst Towne Center in Louisville, Kentucky and Sterling Creek
Commons in Portsmouth, Virginia. The sales in the first six months of
1997 were in connection with anchor pad and outparcel sales at our
developments in Courtlandt Town Center in Courtlandt, New York, Salem
Crossing in Virginia Beach, Virginia, and Springhurst Towne Center in
Louisville, Kentucky off-set by a loss on sale at Kingston Overlook in
Knoxville, Tennessee.
LIQUIDITY AND CAPITAL RESOURCES
The principal uses of the Company's liquidity and capital resources
have historically been for property development, acquisition, expansion and
renovation programs, and debt repayment. To maintain its qualification
as a real estate investment trust under the Internal Revenue Code, the
Company is required to distribute to its shareholders at least 95% of
its "Real Estate Investment Trust Taxable Income" as defined in the
Internal Revenue Code of 1986, as amended (the "Code").
As of August 6, 1998, the Company had $79.9 million available in
unfunded construction loans to be used for completion of construction
projects and replenishment of working capital previously used for
construction. Additionally, as of August 6, 1998, the Company had
obtained revolving credit facilities totaling $242.5 million of which
$79.1 million was available. Also, as a publicly traded company, the
Company has access to capital through both the public equity and debt
markets. The Company has filed a Shelf Registration authorizing shares
of the Company's preferred stock and common stock and warrants to
purchase shares of the Company's common stock with an aggregate public
offering price of up to $350 million, with $278 million remaining after
the Company's preferred stock offering on June 30, 1998. The Company
at this time thinks that the combination of these sources will, for the
foreseeable future, provide adequate liquidity to enable it to continue
its capital programs substantially as in the past and make distributions
to its shareholders in accordance with the Code's requirements
applicable to real estate investment trusts.
Management expects to refinance the majority of the mortgage notes
payable maturing over the next five years with replacement loans.
15
<PAGE>
The Company's policy is to maintain a conservative debt to total
market capitalization ratio in order to enhance its access to the
broadest range of capital markets, both public and private. The
Company's current capital structure includes property specific
mortgages, which are generally non-recourse, credit facilities,
preferred stock, common stock and a minority interest in the Operating
Partnership. The minority interest in the Operating Partnership
represents the 28.3% ownership interest in the Operating Partnership
held by the Company's executive, former executive, and senior officers
which may be exchanged for approximately 9.5 million shares of common
stock. Additionally, Company executive officers and directors own
approximately 1.7 million shares of the outstanding common stock of the
Company, for a combined total interest in the Operating Partnership of
approximately 33.3%. Assuming the exchange of all limited partnership
interests in the Operating Partnership for common stock, there would be
outstanding approximately 33.6 million shares of common stock with a
market value of approximately $886.4 million at June 30, 1998 (based on
the closing price of $24.25 per share on June 30, 1998). Company
executive, former executive and senior officers' ownership interests
had a market value of approximately $230.6 million at June 30, 1998.
Mortgage debt consists of debt on certain consolidated properties
as well as on three properties in which the Company owns a non-
controlling interest and are accounted for under the equity method of
accounting. At June 30, 1998, the Company's share of funded mortgage
debt on its consolidated properties adjusted for minority investors'
interests in nine properties was $819.5 million and its pro rata share
of mortgage debt on unconsolidated properties (accounted for under the
equity method) was $42.4 million for total debt obligations of $861.9
million with a weighted average interest rate of 7.36%.
The Company's total conventional fixed rate debt as of June 30,
1998 was $406.4 million with a weighted average interest rate of 8.07%
as compared to 8.17% as of June 30, 1997.
The Company's variable rate debt as of June 30, 1998 was $455.5
million with a weighted average interest rate of 6.73% as compared to
6.85% as of June 30, 1997. Through the execution of swap agreements,
the Company has fixed the interest rates on $234 million of variable
rate debt on operating properties at a weighted average interest rate
of 6.77%. Of the Company's remaining variable rate debt of $221.5
million, interest rate caps in place of $100.0 million and conventional
permanent loan commitments of $117.4 million leaving $4.1 million of
debt subject to variable rates on construction properties and no debt
subject to variable rates on operating properties. There were no fees
charged to the Company related to these swap agreements. The Company's
swap agreements in place at June 30, 1998 are as follows:
<TABLE>
<S> <C> <C> <C>
Swap Amount Fixed LIBOR
(in millions) Component Expiration Date Effective Date
- --------------- ------------ --------------- --------------
$65 5.72% 01/07/2000 01/07/98
81 5.54% 02/04/2000 02/04/98
50 5.70% 06/15/2001 06/15/98
38 5.73% 06/30/2001 06/26/98
</TABLE>
16
<PAGE>
In December 1997, the Company obtained two $100 million caps on
LIBOR-based variable rate debt, one at 7% for 1998 and one at 7.5% for
1999. There was a fee paid to obtain these caps.
In August 1998, Wells Fargo Realty Advisors Funding, Inc., the agent
for the Company's largest credit facility, increased the Company's credit
facility to $120 million from $85 million. In July 1998, the Company
extended a short term loan with Compass Bank in the amount of $12.5 million
at an interest rate of 50 basis point over LIBOR. The note matures on
September 15, 1998. The weighted average interest rate on the Company's
credit facilities is 95 basis points over LIBOR at August 6, 1998.
Based on the debt (including construction projects) and the market
value of equity described above, the Company's debt to total market
capitalization (debt plus market value equity) ratio was 49.3% at June
30, 1998.
DEVELOPMENT, EXPANSIONS AND ACQUISITIONS
In the second quarter of 1998 the Company opened in June a 65,500-
square-foot community center Sterling Creek Commons in Portsmouth, Virginia,
in April a 14,000-square-foot expansion to Hamilton Crossing in Chattanooga,
Tennessee and in May a 15,000-square-foot expansion to Girvin Plaza in
Jacksonville, Florida. A 12,000-square-foot expansion to Coolsprings
Crossing in Nashville, Tennessee is expected to open in August 1998. The
Company's other development project under construction and scheduled to
open during 1998 is Sand Lake Corners in Orlando, Florida, a 594,000-square
- -foot community center, the first phase of which will open in November 1998
with the remainder to open by April 1999. Projects scheduled to open in
1999 are Fiddler's Run in Morganton, North Carolina, a 203,000-square-foot
community center scheduled to open in March 1999 and Arbor Place Mall in
Douglasville, Georgia, a suburb of Atlanta. This 983,000-square-foot mall
is scheduled to open in October 1999 with an additional 250,000-square-feet
planned. Preliminary grading work has already begun for the construction
of an adjacent 165,000-square-foot associated center to be called The
Landing at Arbor Place. In the second quarter of 1998 the Company began
construction on an 83,000-square-foot Regal Cinema in Jacksonville, Florida
scheduled to open in the fall of 1999.
During the first quarter of 1998, the Company acquired Asheville Mall
in Asheville, North Carolina, an 820,000-square-foot mall anchored by Belk,
Dillard's, JCPenney, Montgomery Ward and Sears. The Company also acquired
Burnsville Center in Burnsville (Minneapolis), Minnesota, a 1,079,000-square
- -foot super regional mall anchored by Dayton's, JCPenney, Mervyn's and Sears.
In April 1998 the Company purchased Stroud Mall in Stroudsburg, Pennsylvania,
a 427,000-square-foot mall anchored by Sears, The Bon-Ton and JCPenney. In
July 1998 the Company acquired Hickory Hollow Mall, a 1,096,000 square foot
mall, and Rivergate Mall, a 1,074,000 square foot mall both of which are
located in the metropolitan Nashville, Tennessee area. Both malls are
anchored by Dillard's, JC Penney, Castner-Knott and Sears. The Company
17
<PAGE>
also acquired The Courtyard at Hickory Hollow, a 77,000-square-foot
associated center, The Village at Rivergate a 166,000-square-foot associated
center and Lions Head Village a 93,000 square foot community center all
located in the metropolitan Nashville, Tennessee area.
The Company has entered into standby purchase agreements with
third-party developers (the "Developers") for the construction,
development and potential ownership of two community centers in Georgia
and Texas (the "Co-Development Projects"). The Developers have utilized
these standby purchase agreements to assist in obtaining financing to
fund the construction of the Co-Development Projects. The standby
purchase agreements, which expire in 1999, are dependent upon certain
completion requirements, rental levels, the inability of the Developers
to obtain adequate permanent financing and the inability to sell the Co-
Development Project before the Company becomes obligated to fund its
equity contribution or purchase the Co-Development Project. In return
for its commitment to purchase a Co-Development Project pursuant to a
standby purchase agreement, the Company receives a fee as well as a
participation interest in either the cash flow or gains from sale on
each Co-Development Project. In addition to the standby purchase
agreements, the Company has extended credit Developer to cover pre-
development costs. The outstanding amount on standby purchase agreements
is $49.1 million and the committed amount on secured credit agreements
is $2.7 million of which $2.2 million is outstanding at June 30, 1998.
The Company has entered into a number of option agreements for the
development of future regional malls and community centers as well as
contingent contracts for the purchase of certain properties. Except
for these projects and as further described below, the Company currently
has no other capital commitments.
It is management's expectation that the Company will continue to
have access to the capital resources necessary to expand and develop its
business. Future development and acquisition activities will be
undertaken by the Company as suitable opportunities arise. Such
activities are not expected to be undertaken unless adequate sources of
financing are available and a satisfactory budget with targeted returns
on investment has been internally approved.
The Company will fund its major development, expansion and
acquisition activity with its traditional sources of construction and
permanent debt financing as well as from other debt and equity
financings, including public financings, and its credit facilities in
a manner consistent with its intention to operate with a conservative
debt to total market capitalization ratio.
OTHER CAPITAL EXPENDITURES
Management prepares an annual capital expenditure budget for each
property which is intended to provide for all necessary recurring
capital improvements. Management believes that its annual operating
reserve for maintenance and recurring capital improvements and
reimbursements from tenants will provide the necessary funding for such
requirements. The
18
<PAGE>
Company intends to distribute approximately 70% - 80% of its funds from
operations with the remaining 20% - 30% to be held as a reserve for
capital expenditures and continued growth opportunities. The Company
believes that this reserve will be sufficient to cover both tenant finish
costs associated with the renewal or replacement of current tenant leases
as their leases expire and capital expenditures which will not be
reimbursed by tenants. Major tenant finish costs for currently vacant
space are expected to be funded with working capital, operating reserves,
or the credit facilities.
For the six months ended June 30, 1998, revenue generating capital
expenditures, or tenant allowances for improvements, were $3.7 million.
These capital expenditures generate increased rents from these tenants
over the term of their leases. Revenue enhancing capital expenditures,
or remodeling and renovation costs, were $4.6 million for the six months
ended June 30, 1998. Revenue neutral capital expenditures, which are
recovered from the tenants, were $1.1 million for the six months ended
June 30, 1998.
The Company believes that the Properties are in compliance in all
material respects with all federal, state and local ordinances and
regulations regarding the handling, discharge and emission of hazardous
or toxic substances. The Company has not been notified by any
governmental authority, or is not otherwise aware, of any material
noncompliance, liability or claim relating to hazardous or toxic
substances in connection with any of its present or former properties.
The Company has not recorded in its financial statements any
material liability in connection with environmental matters.
CASH FLOWS
Cash flows provided by operating activities for the six months
ended June 30, 1998 increased by $9.4 million, or 37.9%, to $34.1
million from $24.7 million in 1997. This increase was primarily due to
the increases in net income and depreciation and amortization related
to the addition of sixteen new properties over the last eighteen
months. Cash flows used in investing activities for the six months
ended June 30, 1998 increased by $106.1 million, or 145.2%, to $179.1
million compared to $73.1 million in 1997. This increase was due
primarily to the purchase of three malls in 1998 and continuing
development of new properties as compared to 1997. Cash flows provided
by financing activities for the six months ended June 30, 1998,
increased by $100.6 million, or 211.2%, to $148.3 million compared to
$47.7 million in 1997. The increase was primarily due to increased
borrowings related to the development and acquisition program and a
decrease in the amount of debt repaid in the six months ended June 30,
1998 as compared to the same period in 1997.
19
<PAGE>
FUNDS FROM OPERATIONS
Management believes that Funds from Operations ("FFO") provides an
additional indicator of the financial performance of the Properties. FFO
is defined by the Company as net income (loss) before depreciation of real
estate assets, other non-cash items (including the write-off of development
projects not being pursued), gains or losses on sales of real estate assets
and gains or losses on investments in marketable securities. FFO also
includes the Company's share of FFO in unconsolidated properties and
excludes minority interests' share of FFO in consolidated properties.
The Company computes FFO in accordance with the National Association of
Real Estate Investments Trusts ("NAREIT") recommendation concerning finance
costs and non-real estate depreciation. Beginning with the first quarter
of 1998 the Company includes straight line rent in its FFO calculation.
However, the Company continues to exclude gains or losses on outparcel
sales, even though NAREIT permits their inclusion when calculating FFO.
Gains or losses on outparcel sales would have added $0.5 million and $2.5
million to FFO in the three months and six months ended June 30, 1998
respectively and $0.6 million and $3.4 million in the same periods in
1997, respectively. FFO for the second quarter and six months of 1997
has been restated to include straight line rents.
The use of FFO as an indicator of financial performance is influenced
not only by the operations of the Properties, but also by the capital
structure of the Operating Partnership and the Company. Accordingly,
management expects that FFO will be one of the significant factors
considered by the Board of Directors in determining the amount of cash
distributions the Operating Partnership will make to its partners
(including the REIT). FFO does not represent cash flow from operations
as defined by GAAP and is not necessarily indicative of cash available to
fund all cash flow needs and should not be considered as an alternative to
net income for purposes of evaluating the Company's operating performance
or to cash flows as a measure of liquidity.
For the three months ended June 30, 1998, FFO increased by $3.8
million, or 20.8%, to $21.9 million as compared to $18.1 million for the
same period in 1997. For the six months ended June 30, 1998, FFO increased
by $7.9 million, or 21.9%, to $43.9 million as compared to $36.0 million
for the same period in 1997. The increase in FFO for both periods was
primarily attributable to the new developments opened during 1997, the
acquisitions during 1997 and 1998 and improved operations in the existing
portfolio.
20
<PAGE>
The Company's calculation of FFO is as follows: (in thousands)
<TABLE>
<S> <C> <C> <C> <C>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -----------------
1998 1997 1998 1997
-------- -------- -------- -------
Income from operations $11,839 $9,789 $24,152 $19,362
ADD:
Depreciation & amortization from 9,720 7,922 18,875 15,610
consolidated properties
Income from operations of 431 593 1,168 1,213
unconsolidated affiliates
Depreciation & amortization from
unconsolidated affiliates 354 255 700 656
Write-off of development costs
charged to net income 3 15 9 42
SUBTRACT:
Minority investors' share of
income from operations in
nine properties (99) (147) (308) (289)
Minority investors share of
depreciation and amortization
in nine properties (227) (205) (433) (383)
Depreciation and amortization of
non-real estate assetsand
finance costs (149) (119) (278) (213)
-------- -------- -------- -------
TOTAL FUNDS FROM OPERATIONS $21,872 $18,103 $43,885 $35,998
======== ======== ======== =======
Basic per share data:
Funds from operations $0.65 $0.54 $1.31 $1.09
======== ======== ======== =======
Weighted average common
shares outstanding with
operating partnership
unitsfully converted 33,420 33,556 33,169 33,565
======== ======== ======== =======
Diluted per share data:
Funds from operations $0.65 $0.54 $1.30 $1.08
======== ======== ======== =======
Weighted average common
shares and dilutive
potential common shares
outstanding with
operating partnership
units fully converted 33,797 33,645 33,789 33,425
======== ======== ======== =======
</TABLE>
21
<PAGE>
IMPACT OF INFLATION
In the last four years, inflation has not had a significant impact
on the Company because of the relatively low inflation rate.
Substantially all tenant leases do, however, contain provisions designed
to protect the Company from the impact of inflation. Such provisions
include clauses enabling the Company to receive percentage rentals based
on tenant's gross sales, which generally increase as prices rise, and/or
escalation clauses, which generally increase rental rates during the
terms of the leases. In addition, many of the leases are for terms of
less than ten years which may enable the Company to replace existing
leases with new leases at higher base and/or percentage rentals if rents
of the existing leases are below the then-existing market rate. Most
of the leases require the tenants to pay their share of operating
expenses, including common area maintenance, real estate taxes and
insurance, thereby reducing the Company's exposure to increases in costs
and operating expenses resulting from inflation.
YEAR 2000 ISSUES
The Company has certain existing computer programs that were written
using two digits rather than four to define the applicable year. As a
result, those computer programs have time sensitive software that recognizes
a date using 00 as the year 1900 rather than the year 2000. This could
result in a system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions, send orders and invoices, or engage in similar normal business
activities.
The Company has completed a program to identify its applications that
are not year 2000 compliant. As a result of this identification program,
the Company believes that while its core accounting application is year 2000
compliant, certain of its other applications are not yet year 2000
compliant. The Company has undertaken to correct or replace all non-
compliant systems and applications. Given the information known at this
time about the Company's systems that are noncompliant and the Company's
ongoing efforts to correct or replace all non-compliant systems, Management
does not expect the year 2000 compliance of the Company's systems to have
a material effect on the Company's future liquidity or results of
operations. No assurance can be given, however, that all of the Company's
systems will be year 2000 compliant or that compliance costs or the impact
of a failure by the Company to achieve substantial year 2000 compliance
will not have a material adverse effect on the Company's future liquidity
or results of operations.
The Company has initiated communications with its significant
suppliers and tenants to determine the extent to which the Company is
vulnerable to the failure of such parties to remediate their year 2000
compliance issues. No assurance can be given, however, that the systems
of these outside parties will be made year 2000 compliant in a timely
manner or thatthe noncompliance of the systems of any of these parties
would not have a materially affect on the Company's liquidity or results
of operations.
NEW ACCOUNTING PRONOUNCEMENTS
In May 1998, the Emerging Issues Task Force ("EITF") issued EITF
98-9 "Reporting Contingent Rents" in which it reached a consensus
regarding the accounting for contingent rent in interim financial
periods. The Company already accounts for contingent rents in accordance
with EITF 98-9.
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting
for Derivative Instruments and Hedging Activities". The SFAS No. 133
establishes accounting and reporting standards requiring that every
derivative instrument (including certain derivative instruments embedded
in other contracts) be recorded in the balance sheet as either an asset
or liability measured at its fair value. The SFAS No. 133 requires that
changes in the derivative's fair value be recognized currently in
earnings unless specific hedge accounting criteria are met. Special
accounting for qualifying hedges allows a derivative's gains and losses
to offset related results on the hedged item in the income statement,
and requires that a company must formally document, designate, and
assess the effectiveness of transactions that receive hedge accounting.
SFAS No. 133 is effective for fiscal years beginning after June
15, 1999. A company may also implement SFAS No. 133 as of the
beginning of any fiscal quarter after issuance (that is, fiscal quarters
beginning June 16, 1998 and thereafter). SFAS No. 133 cannot be
applied retroactively. SFAS No. 133 must be applied to (a) derivative
instruments and (b) certain derivative instruments embedded in hybrid
contracts that were issued, acquired, or substantively modified after
December 31, 1997 (and, at the company's election, before January 1,
1998).
The Company has not yet quantified the impact of adopting SFAS
No. 133 on its financial statements and has not determined the timing
of or method of adoption of SFAS No. 133. However, the SFAS No. 133
could increase volatility in earnings and other comprehensive income.
22
<PAGE>
PART II - OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
None
ITEM 2: CHANGES IN SECURITIES
None
ITEM 3: DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4: SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS
None
ITEM 5: OTHER INFORMATION
None
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
25.2 Loan agreement between Rivergate Mall Limited
Partnership, The Village at Rivergate Limited
Partnership, Hickory Hollow Mall Limited
Partnership, and The Courtyard at Hickory Hollow
Limited Partnership and Midland Loan Services,
Inc. Dated July 1, 1998.
27 Financial Data Schedule
B. Reports on Form 8-K
The following items were reported:
Underwriting agreement for the issue of 2,875,000
shares of 9% Series A Cummulative Redeemable Preferred
Stock (Item 5) was filed on June 24, 1998.
Information on the purchase of two malls and three
community centers in Nashville Tennessee (Item 2)
was filed on June 25, 1998.
The outline from the Company's July 30, 1998
conference call with analysts and investors
regarding earnings (Item 5) was filed on
July 30, 1998.
23
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CBL & ASSOCIATES PROPERTIES, INC.
/s/ John N. Foy
--------------------------------------
John N. Foy
Executive Vice President,
Chief Financial Officer and Secretary
(Authorized Officer of the
Registrant,
Principal Financial Officer and
Principal Accounting Officer)
Date: August 14, 1998
24
<PAGE>
EXHIBIT INDEX
EXHIBIT
NO.
-------
25.2 Loan agreement between Rivergate Mall Limited
Partnership, The Village at Rivergate Limited
Partnership, Hickory Hollow Mall Limited
Partnership, and The Courtyard at Hickory Hollow
Limited Partnership and Midland Loan Services,
Inc. Dated July 1, 1998.
27 Financial Data Schedule
25
<PAGE>
INDENTURE OF MORTGAGE, DEED OF TRUST, SECURITY AGREEMENT,
FINANCING STATEMENT, FIXTURE FILING AND
ASSIGNMENT OF LEASES, RENTS AND SECURITY DEPOSITS
Dated as of July 1, 1998
from
RIVERGATE MALL LIMITED PARTNERSHIP, THE VILLAGE AT RIVERGATE
LIMITED PARTNERSHIP, HICKORY HOLLOW MALL LIMITED PARTNERSHIP
AND THE COURTYARD AT HICKORY HOLLOW LIMITED PARTNERSHIP
each having an address
c/o CBL &Associates Properties, Inc.
6148 Lee Highway, Suite 300
Chattanooga, Tennessee 37421
collectively, as Grantor
to
GEORGE THOMAS KIRK, JR.
a resident of Williamson County, Tennessee
having an address c/o
Lawyers Title Insurance Corporation
424 Church Street
Suite 200, Nashville, Tennessee 37219
as Trustee
for the benefit of
MIDLAND LOAN SERVICES, INC.
having an address at
210 West 10th Street
Kansas City, Missouri 64105
as Beneficiary
____________________________________________________________________________
Prepared and drafted by and after recording, return to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attention: Martha Feltenstein, Esq.
The Maximum Principal Indebtedness for Tennessee Recording Tax Purposes is
$182,700,000.
<PAGE>
TABLE OF CONTENTS
1. Definitions . . . . . . . . . . . . . . . . . . . . . . 9
2. Warranty. . . . . . . . . . . . . . . . . . . . . . . .30
3. Payment and Performance of Obligations Secured. . . . .32
4. Negative Covenants. . . . . . . . . . . . . . . . . . .32
5. Insurance . . . . . . . . . . . . . . . . . . . . . . .34
6. Condemnation and Insurance Proceeds . . . . . . . . . .39
7. Impositions, Liens and Other Items. . . . . . . . . . .46
8. Funds for Taxes and Insurance . . . . . . . . . . . . .48
9. License to Collect Rents. . . . . . . . . . . . . . . .50
10. Security Agreement. . . . . . . . . . . . . . . . . . .51
11. Transfers, Indebtedness and Subordinate Liens . . . . .52
12. Maintenance of Trust Estate; Alterations; Inspection;
Utilities . . . . . . . . . . . . . . . . . . . . . . .58
13. Legal Compliance. . . . . . . . . . . . . . . . . . . .61
14. Books and Records, Financial Statements, Reports and Other
Information . . . . . . . . . . . . . . . . . . . . . .62
15. Compliance with Leases and Agreements . . . . . . . . .65
16. Beneficiary's Right to Perform. . . . . . . . . . . . .67
17. Grantor's Existence; Organization and Authority . . . .67
<PAGE>
18. Protection of Security; Costs and Expenses. . . . . . .68
19. Management of the Trust Estate. . . . . . . . . . . . .69
20. Remedies. . . . . . . . . . . . . . . . . . . . . . . .70
21. Application of Proceeds . . . . . . . . . . . . . . . .77
22. CERTAIN WAIVERS . . . . . . . . . . . . . . . . . . . .78
23. Notice of Certain Occurrences . . . . . . . . . . . . .78
24. Trust Funds . . . . . . . . . . . . . . . . . . . . . .78
25. Taxation. . . . . . . . . . . . . . . . . . . . . . . .79
26. Notices . . . . . . . . . . . . . . . . . . . . . . . .79
27. No Oral Modification. . . . . . . . . . . . . . . . . .79
28. Partial Invalidity. . . . . . . . . . . . . . . . . . .80
29. Successors and Assigns. . . . . . . . . . . . . . . . .80
30. Governing Law . . . . . . . . . . . . . . . . . . . . .80
31. Certain Representations, Warranties and Covenants . . .81
32. No Waiver . . . . . . . . . . . . . . . . . . . . . . .86
33. Non-Recourse Obligations. . . . . . . . . . . . . . . .86
34. Further Assurances. . . . . . . . . . . . . . . . . . .88
35. Estoppel Certificates . . . . . . . . . . . . . . . . .88
<PAGE>
36. Intentionally Omitted . . . . . . . . . . . . . . . . .88
37. INDEMNIFICATION BY GRANTOR. . . . . . . . . . . . . . .88
38. Release of Property . . . . . . . . . . . . . . . . . .91
39. Rating Agency Monitoring. . . . . . . . . . . . . . . .92
40. Environmental Matters . . . . . . . . . . . . . . . . .92
41. Intentionally Omitted.. . . . . . . . . . . . . . . . .94
42. Counterparts. . . . . . . . . . . . . . . . . . . . . .94
43. Merger, Conversion, Consolidation or Succession to Business of
Beneficiary . . . . . . . . . . . . . . . . . . . . . .94
44. No Endorsement. . . . . . . . . . . . . . . . . . . . .95
45. Intentionally Omitted . . . . . . . . . . . . . . . . .95
46. Defeasance. . . . . . . . . . . . . . . . . . . . . . .95
47. Defeasance Collateral Account . . . . . . . . . . . . .97
48. Reserves. . . . . . . . . . . . . . . . . . . . . . . .98
49. Substitute or Successor Trustee . . . . . . . . . . . 101
50. Liability of Trustee. . . . . . . . . . . . . . . . . 102
51. Beneficiary and Trustee . . . . . . . . . . . . . . . 102
52. As to Property in Tennessee . . . . . . . . . . . . . 105
<PAGE>
53. Intentionally Omitted. . . . . . . . . . . . . . 107
54. Liability of Assignees of Beneficiary . . . . . . . . 107
55. Securitization. . . . . . . . . . . . . . . . . . . . 107
EXHIBIT A Legal Description of Properties
EXHIBIT B Environmental Reports
EXHIBIT C Subordination, Nondisturbance and Attornment
Agreement
EXHIBIT D Form of Rent Roll
EXHIBIT E Form of Sales Report
SCHEDULE 1 Allocated Loan Amounts
SCHEDULE 2 Operating Agreements
SCHEDULE 3 Deferred Maintenance Items
SCHEDULE 4 Specified Properties
<PAGE>
(1)INDENTURE OF MORTGAGE, DEED OF TRUST,
____________________
SECURITY AGREEMENT, FINANCING STATEMENT,
FIXTURE FILING AND ASSIGNMENT
OF LEASES, RENTS AND SECURITY DEPOSITS
THIS INDENTURE OF MORTGAGE, DEED OF TRUST, SECURITY
AGREEMENT, FINANCING STATEMENT, FIXTURE FILING AND ASSIGNMENT OF
LEASES, RENTS AND SECURITY DEPOSITS (herein, together with all
amendments and supplements thereto, this "Mortgage"), dated as of
July 1, 1998, is made by RIVERGATE MALL LIMITED PARTNERSHIP
("Rivergate"), THE VILLAGE AT RIVERGATE LIMITED PARTNERSHIP
("Village"), HICKORY HOLLOW MALL LIMITED PARTNERSHIP ("Hickory
Hollow") and THE COURTYARD AT HICKORY HOLLOW LIMITED PARTNERSHIP
("Courtyard"), each a Delaware limited partnership (collectively,
"Grantor"), having an address c/o CBL & Associates Properties, Inc.,
6148 Lee Highway, Suite 300, Chattanooga, Tennessee 37421, to
George Thomas Kirk, Jr., a resident of Williamson County, Tennessee,
and having an address c/o Lawyers Title insurance Company, 424
Church Street, Suite 200, Nashville, Tennessee 37219 ("Trustee"),
for the benefit of Midland Loan Services, Inc., a Delaware
corporation, having an address at 210 West 10th Street, Kansas City,
Missouri 64105, Attention: MCF Closing Department, together with
its successors and assigns, "Beneficiary"). The parties hereto
acknowledge that simultaneously herewith, Beneficiary will assign
this Mortgage to Merrill Lynch Mortgage Capital, Inc., a New York
corporation, having an address at World Financial Center, North
Tower, IBK Real Estate Department, 250 Vesey Street, New York, New
York 10281, and Connecticut General Life Insurance Company, a
Connecticut corporation, having an address at c/o CIGNA Investments,
Inc., S319, 900 Cottage Grove Road, Hartford, Connecticut 06152,
Attention: Real Estate Investment Servicing who jointly hereafter
are "Beneficiary" for the purposes of this Mortgage.
1This instrument covers property which is or may become so affixed
to real property as to become fixtures and also constitutes a
fixture filing under section 47-9-402 of the Tennessee Code Annotated.
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W I T N E S S E T H :
WHEREAS, Grantor is the record and beneficial owner of
the fee simple interests in the four Properties (as defined below),
located on and comprising the land described in Exhibit "A-1- A-4"
attached hereto (collectively, the "Land"); and
WHEREAS, Beneficiary has agreed to make loans to Grantor
in the principal amount of One Hundred Eighty-Two Million Seven
Hundred Thousand Dollars ($182,700,000) (collectively, the "Loan"),
which Loan shall be evidenced by (i) that certain Class A Mortgage
Note, of even date herewith (together with all amendments,
modifications, supplements, restatements, substitutions and
replacements thereof or thereto, the "Class A Note"), executed by
Grantor in favor of Beneficiary in the principal face amount of One
Hundred Thirty-Six Million Eight Hundred Thousand Dollars
($136,800,000), payable as specified therein, with a maturity date
of August 1, 2008 or if such date is not a Business Day, on the next
preceding Business Day (the "Maturity Date") or such earlier date as
may be required under the terms of the Class A Note; and (ii) that
certain Class B Mortgage Note, of even date herewith (together will
all amendments, modifications, supplements, restatements,
substitutions and replacements thereof or thereto, the "Class B
Note"), executed by Grantor in favor of Beneficiary in the principal
face amount of Forty-Five Million Nine Hundred Thousand Dollars
($45,900,000), payable as specified therein, with a maturity date
of the Maturity Date or such earlier date as may be required under
the terms of the Class B Note (the Class A Note and the Class B Note
being referred to herein collectively as the "Notes"); and
WHEREAS, the indebtedness evidenced by the Notes and the
other obligations of Grantor set forth in the other Loan Documents
(as defined below) shall be secured by this Mortgage and the other
Loan Documents; and
WHEREAS, Grantor and Beneficiary intend these recitals
to be a material part of this Mortgage.
NOW, THEREFORE, in consideration of the Loan to Grantor
evidenced by the Notes and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, Grantor and Beneficiary hereby agree as follows:
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TO SECURE:
(i) payment and performance of all covenants,
conditions, liabilities and obligations of Grantor to
Beneficiary contained in, and payment of the indebtedness
evidenced by, the Notes plus all interest payable thereunder;
and
(ii) payment and performance of all covenants,
conditions, liabilities and obligations contained in this
Mortgage and any extensions, renewals or modifications hereof;
and
(iii) payment and performance of all covenants,
conditions, liabilities and obligations of Grantor contained
in the Assignment of Leases, Rents and Security Deposits,
dated as of the date hereof (together with any extensions,
renewals or modifications thereof, the "Assignment of
Leases"), between Grantor, as assignor, and Beneficiary, as
assignee, and the Cash Collateral Account, Security, Pledge
and Assignment Agreement, dated as of the date hereof
(together with any extensions, renewals or modifications
thereof, the "Cash Collateral Agreement"), among Grantor, as
borrower, LaSalle National Bank, as securities intermediary,
and Beneficiary, as lender; and
(iv) payment and performance of all covenants,
conditions, liabilities and obligations of Grantor contained
in each of the other Loan Documents (as defined below); and
(v) without limiting the foregoing, payment of
all indebtedness, liabilities, and amounts from time to time
incurred by Beneficiary pursuant to the Notes, this Mortgage
or such other Loan Documents, even if the aggregate amount of
the monetary obligation outstanding at any one time exceeds
the face amount of the Notes (all of the foregoing
indebtedness, monetary liabilities and obligations set forth
in clauses (i)-(iv) above and this clause (v), collectively,
the "Indebtedness"); and
(vi) payment of the Indebtedness together with
the payment and performance of all other covenants,
conditions, liabilities and obligations described and set
forth in clauses (i)-(v) above and in this clause (vi),
collectively, the "Obligations."
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GRANTING CLAUSES
NOW, THEREFORE, THIS MORTGAGE WITNESSETH: that Grantor,
in consideration of the premises, the Indebtedness secured by the
Notes, the acceptance by Beneficiary of the trusts created hereby,
and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged (a) has mortgaged,
warranted, granted, bargained, sold, alienated, released, confirmed,
conveyed, pledged and assigned and (b) by these presents does hereby
grant and create a first priority Lien (as defined below), subject
to the Permitted Encumbrances and the provisions hereof and of the
other Loan Documents, on and security interest in, and does hereby
MORTGAGE, WARRANT, GRANT A SECURITY INTEREST IN, GRANT, BARGAIN,
SELL, ALIENATE, RELEASE, CONFIRM, CONVEY, PLEDGE, ASSIGN, TRANSFER
AND SET OVER TO TRUSTEE, IN TRUST WITH POWER OF SALE AND RIGHT OF
ENTRY AND POSSESSION, for the benefit and use of Beneficiary and its
successors and assigns forever, in the trusts created hereby all its
estate, right, title and interest now owned or hereafter acquired
in, to and under any and all the property (collectively, the "Trust
Estate") described in the following Granting Clauses:
(A) the Land;
(B) all of Grantor's right, title and interest
in and to the buildings, foundations, structures, improvements
and fixtures now or hereafter located or erected on the Land
(the "Improvements");
(C) all of Grantor's right, title and interest,
if any, in and to (i) all streets, avenues, roads, alleys,
passages, places, sidewalks, strips and gores of land and
ways, existing or proposed, public or private, adjacent to the
Land, and all reversionary rights with respect to the vacation
of said streets, avenues, roads, alleys, passages, places,
sidewalks and ways in the land lying thereunder, (ii) all air,
lateral support, drainage, oil, gas and mineral rights,
options to purchase or lease, waters, water courses and
riparian rights now or hereafter pertaining to or used in
connection with the Land and/or Improvements, (iii) all and
singular, the tenements, hereditaments, rights of way,
easements, appendages and appurtenances and
4
<PAGE>
property now or
hereafter belonging or in any way appertaining to the Land,
and (iv) all estate, right, title, claim or demand whatsoever,
either at law or in equity, in possession or expectancy, of,
in and to the Land (collectively, the "Appurtenances");
(D) all of Grantor's right, title and interest
in and to all of the machinery, appliances, apparatus,
equipment, fittings, fixtures, materials, articles of personal
property and goods of every kind and nature whatsoever, and
all additions to and renewals and replacements thereof, and
all substitutions therefor, now or hereafter affixed to,
attached to, placed upon or located upon or in the Land, or
any part thereof, and used in connection with the use,
ownership, management, maintenance, enjoyment or operation of
the Land in any present or future occupancy or use thereof and
now owned or leased or hereafter owned or leased (to the
extent permitted by the applicable Lease) by Grantor
including, but without limiting the generality of the
foregoing, all heating, lighting, laundry, cooking,
incinerating, loading, unloading and power equipment, boilers,
dynamos, stokers, engines, pipes, pumps, tanks, motors,
conduits, switchboards, plumbing, lifting, cleaning, fire
prevention, fire extinguishing, refrigerating, ventilating,
and communications apparatus, air cooling and air conditioning
apparatus, building materials and equipment, elevators,
escalators, carpeting, shades, draperies, awnings, screens,
doors and windows, blinds, stoves, ranges, refrigerators,
dishwashers, cabinets, office equipment, furniture and
furnishings, partitions, ducts and compressors (other than
equipment and personal property of tenants of the Land or the
Improvements, or any part thereof) (hereinafter collectively
called "Building Equipment"), and Grantor agrees to execute
and deliver, from time to time, such further instruments
(including, without limitation, any financing statements under
the Uniform Commercial Code of the applicable State in which a
Property is located (the "UCC")) as may be reasonably
requested by Beneficiary to confirm the lien of this Mortgage
on any Building Equipment or any Intangible;
All such right, title and interest of Grantor in and to
each of the four sets of parcels of the Land, Grantor's interest in
and to the Improvements and Building Equipment located thereon and
such other property with respect thereto described in the foregoing
Granting Clauses is herein called a "Property" and all such
Properties are herein collectively called the "Properties."
5
<PAGE>
(E) all of Grantor's right, title and interest
as lessor or licensor, as the case may be, in, to and under
all leases, underlettings, concession agreements and licenses
of the Properties, or any part thereof, now existing or
hereafter entered into by Grantor including, without
limitation, any cash and securities deposited thereunder
(collectively, the "Leases"), the grant of such cash and
securities hereunder being expressly subject to the provisions
of the applicable Leases, and all of Grantor's right, title
and interest, subject to the provisions of Section 9, in the
right to receive and collect the revenues, income, rents,
issues, profits, royalties and other benefits payable under
any of the Leases or otherwise arising from the use or
enjoyment of all or any portion of the Properties
(collectively, the "Rents");
(F) subject to the provisions of Section 6
hereof, all of Grantor's right, title and interest in and to
all proceeds, judgments, claims, compensation, awards or
payments hereafter made to Grantor for the taking, whether
permanent or temporary, by condemnation, eminent domain, or
for any conveyance made in lieu of such taking, of the whole
or any part of the Properties, including, without limitation,
all proceeds, judgments, claims, compensation awards or
payments for changes of grade of streets or any other injury
to or decrease in the value of the Properties, whether direct
or consequential, which said awards and payments are hereby
assigned to Beneficiary, who is hereby authorized to collect
and receive the proceeds thereof and to give proper receipts
and acquittances therefor, and to apply the same toward the
payment of the Indebtedness in such order as Beneficiary may
determine in accordance with the provisions of this Mortgage
without regard to the adequacy of Beneficiary's security
hereunder and notwithstanding the fact that the amount thereof
may not then be due and payable, and toward the payment of
reasonable counsel fees, costs and disbursements incurred by
Beneficiary in connection with the collection of such awards
or payments; and Grantor hereby agrees, upon request, to make,
execute and deliver any and all further assignments and other
instruments sufficient for the purpose of confirming this
assignment of said proceeds, judgments, claims, compensation
awards or payments to Beneficiary, free, clear and discharged
of any encumbrances of any kind or nature whatsoever other
than the Permitted Encumbrances;
(G) subject to the provisions of Section 6
hereof, all of Grantor's right, title and interest in and to
all unearned premiums paid under insurance policies now or
6
<PAGE>
hereafter obtained by Grantor to the extent the same insure
the Properties and any other insurance policies required to be
maintained pursuant to Section 5 hereof to the extent the same
insure the Properties including, without limitation, liability
insurance policies and Grantor's interest in and to all
proceeds of the conversion and the interest payable thereon,
voluntary or involuntary, of the Trust Estate, or any part
thereof, into cash or liquidated claims including, without
limitation, proceeds of casualty insurance, title insurance
(other than liability insurance) or any other insurance
maintained on or with respect to the Properties;
(H) all right, title and interest of Grantor in
and to all extensions, improvements, betterments, renewals,
substitutes and replacements of, and all additions and
Appurtenances to, the Properties, hereafter acquired by or
released to Grantor or constructed, assembled or placed by
Grantor on the Properties, and all conversions of the security
constituted thereby; immediately upon such acquisition,
release, construction, assembling, placement or conversion, as
the case may be, and in each such case, to the extent
permitted by law, without any further mortgage, conveyance,
assignment or other act by Grantor, any of such extensions,
improvements, betterments, renewals, substitutes and
replacements shall become subject to the Lien of this Mortgage
as fully and completely, and with the same effect, as though
now owned by Grantor and specifically described herein;
(I) all of Grantor's right, title and interest
in, to and under, to the extent the same may be encumbered or
assigned by Grantor pursuant to the terms thereof without
occurrence of a breach of default thereunder or a violation
under applicable law, and without impairment of the validity
or enforceability thereof, (i) any Operating Agreements (as
defined below) and all contracts and agreements relating to
the Properties (other than the Leases), and other documents,
books and records related to the ownership and operation of
the Properties; (ii) to the extent permitted by law, all
consents, licenses (including, to the extent permitted by law,
any licenses held by Grantor permitting the sale of liquor at
any of the Properties the transfer and/or assignment of which
is permitted by law without filing or other qualification),
warranties, guaranties, building permits and government
approvals relating to or required for the construction,
completion, occupancy and operation of the Properties; (iii)
all plans and specifications for the construction of the
Improvements, including, without limitation, installations of
curbs, sidewalks, gutters, landscaping, utility connections
7
<PAGE>
and all fixtures and equipment necessary for the construction,
operation and occupancy of the Improvements; (iv) all such
other contracts and agreements (other than the Leases) from
time to time executed by Grantor relating to the ownership,
leasing, construction, maintenance, operation, occupancy or
sale of the Properties, together with all rights of Grantor to
compel performance of the terms of such contracts and
agreements; and (v) subject to the terms of the Cash
Collateral Agreement, the Accounts (as defined below) and any
funds in such Accounts from time to time (it being understood
that at such time as Grantor shall withdraw any amounts from
any Accounts in accordance with the provisions of the Cash
Collateral Agreement, the same shall cease to constitute part
of the Trust Estate);
(J) to the extent the same may be encumbered or
assigned by Grantor pursuant to the terms thereof and to the
extent permitted by law, all of Grantor's right, title and
interest in, to and under escrows, documents, instruments, and
general intangibles, as the foregoing terms are defined in the
UCC, in any case which now or hereafter relate to, are derived
from, or are used in connection with the Properties, and all
contract rights, franchises, books, records, plans,
specifications, permits, licenses, approvals, actions and
causes of action which now or hereafter relate to, are derived
from or used in connection with the Properties or the use,
operation, maintenance, occupancy or enjoyment thereof or the
conduct of any business or activities thereon (collectively,
the property described in the foregoing paragraphs (F), (G),
(H), (I) and this paragraph (J), the "Intangibles"); and
(K) all of Grantor's right, title and interest
in all proceeds, both cash and noncash, of the foregoing which
may be sold or otherwise be disposed of pursuant to the terms
hereof.
TO HAVE AND TO HOLD THE TRUST ESTATE hereby conveyed, or
mentioned and intended so to be, whether now owned or held or
hereafter acquired, subject only to the Permitted Encumbrances, unto
Trustee (subject to the provisions of Section 51 hereof) for the
benefit and use of Beneficiary, its successors and assigns, forever,
upon the terms and conditions set forth herein.
8
<PAGE>
IN TRUST FOREVER, WITH POWER OF SALE (to the extent
permitted by applicable law), upon the terms and trusts set forth
herein and to secure the performance of, and compliance with, the
obligations, covenants and conditions of this Mortgage and the other
Loan Documents all as herein set forth.
PROVIDED ALWAYS, that if Grantor shall pay in full the
Indebtedness according to the terms of the Notes, then this Mortgage
and the estate hereby granted shall cease, terminate and become
void; provided, however, that this Mortgage and the estate hereby
granted shall be reinstated and shall be in full force and effect as
though the same had not so ceased, terminated and become void in the
event that Beneficiary shall be required in connection with
Grantor's bankruptcy or similar proceeding to return to Grantor any
payment made to Beneficiary representing all or a portion of the
Indebtedness secured hereby.
1. Definitions. Wherever used in this Mortgage, the
following terms, and the singular and plural thereof, shall have the
following meanings. All capitalized terms used but not otherwise
defined herein shall have the meanings assigned to them in the
Notes:
Accounts: Shall mean, collectively, the Operating
Accounts (as defined in the Cash Collateral Agreement), the P&I
Escrow Account (as defined in the Cash Collateral Agreement), the
Mortgage Escrow Account, the Capital Expenditure Reserve Account (as
defined in the Cash Collateral Account) and the Tenant Improvement
and Leasing Commission Reserve Account (as defined in the Cash
Collateral Agreement) and any and all of Grantor's other accounts,
general intangibles, chattel paper, cash or monies, wherever
located, whether in the form of cash or checks, and all cash
equivalents including all deposits and certificates of deposit,
instruments, whether negotiable or non-negotiable, debt notes both
certificated and uncertificated, repurchase obligations for
underlying notes of the types described herein, and commercial paper
(it being agreed that all of the foregoing must at all times qualify
as Eligible Investments (as defined in the Cash Collateral
Agreement)), (a) received in connection with the sale or other
disposition of all or any of the Properties, (b) required pursuant
to the Mortgage to be maintained by Grantor in a segregated account
in trust for the benefit of Beneficiary, or (c) held by Beneficiary,
but not any account maintained by Grantor or an Affiliate of Grantor
or general intangibles, chattel paper, cash or monies or cash
equivalents that have been disbursed to Grantor (x) in accordance
with the Cash Collateral Agreement or (y) prior to the date hereof.
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Affiliate: Shall mean, with respect to any specified
Person, any other Person directly or indirectly controlling or
controlled by or under direct or indirect common control with, or
any general partner in or managing member of, such specified Person.
For the purposes of this definition, "control" when used with
respect to any specified Person means the power to direct the
management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities or other
beneficial interest, by contract or otherwise; and the terms
"controlling" and "controlled" have the meanings correlative to the
foregoing.
Allocated Loan Amount: Shall mean the portion of the
Principal Indebtedness allocated, solely for purposes of performing
certain calculations hereunder, to each Property as set forth in
Schedule 1 annexed hereto and made a part hereof, as such amounts
shall be adjusted from time to time as hereinafter set forth. In the
case of a Total Loss in accordance with Section 6(d) where the
Proceeds are less than 125% of the Allocated Loan Amount, each
Allocated Loan Amount shall be increased by an amount equal to the
product of (a) the difference between 125% of the applicable
Allocated Loan Amount and the Proceeds, and (b) a fraction, the
numerator of which is the applicable Allocated Loan Amount (prior to
the adjustment in question) and the denominator of which is the
Principal Indebtedness prior to the adjustment to the Principal
Indebtedness resulting in the recalculation of the Allocated Loan
Amount. All calculations made pursuant to this Mortgage with
respect to an Allocated Loan Amount (including Premium or scheduled
interest payments on an Allocated Loan Amount) shall be certified to
Beneficiary by Grantor pursuant to an Officer's Certificate.
Alteration: As defined in Section 12(c) hereof.
Approved Banks: Shall mean banks or other financial
institutions which have a minimum long-term unsecured debt rating of
at least "AA", or its equivalent rating, by each of the Rating
Agencies, or if any such bank or other financial institution is not
rated by all the Rating Agencies, then a minimum long-term rating of
at least "AA" or its equivalent by two of the Rating Agencies.
Appurtenances: As defined in Granting Clause (C)
hereof.
Assignee: As defined in Section 54 hereof.
Assignment of Leases: As defined in the recitals
hereof.
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Beneficiary: As defined in the introductory paragraph
hereof.
Best: As defined in Section 5(b).
Building Equipment: As defined in Granting Clause (D)
hereof.
Business Day: Shall mean any day except a Saturday, a
Sunday or any other day on which commercial banks in the States of
New York or Tennessee, are authorized or obligated by law,
governmental decree or executive order to be closed.
Cash: Coin or currency of the government of the United
States of America.
Cash and Cash Equivalents: Shall mean any or a
combination of the following: (i) Cash, and (ii) U.S. Government
Obligations.
Cash Collateral Agreement: As defined in the recitals
hereof.
Class A Note: As defined in the recitals hereof.
Class B Note: As defined in the recitals hereof.
Closing Date: Shall mean the date the Loan and the
transactions contemplated hereby are consummated.
Code: Shall mean the Internal Revenue Code of 1986, as
amended, and any successor thereto, and any temporary or final
regulations promulgated thereunder.
Debt: Shall mean, with respect to any Person at any
time, (a) indebtedness or liability of such Person for borrowed
money whether or not evidenced by bonds, debentures, notes or other
instruments, or for the deferred purchase price of property or
services (excluding trade obligations); (b) obligations of such
Person as lessee under leases which should have been or should be,
in accordance with GAAP, recorded as capital leases; (c) current
liabilities of such Person in respect of unfunded vested benefits
under plans covered by Title IV of ERISA; (d) obligations issued
for, or liabilities incurred on the account of, such Person; (e)
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<PAGE>
obligations or liabilities of such Person arising under acceptance
facilities; (f) obligations of such Person under any guarantees or
other agreement to become secondarily liable for any obligation of
any other Person, endorsements (other than for collection or deposit
in the ordinary course of business) and other contingent obligations
to purchase, to provide funds for payment, to supply funds to invest
in any Person or otherwise to assure a creditor against loss; (g)
obligations of such Person secured by any Lien on any property of
such Person, whether or not the obligations have been assumed by
such Person; or (h) obligations of such Person under any interest
rate or currency exchange agreement.
Debt Service: Shall mean the amount of interest and
principal due and payable in accordance with the Notes during any
applicable period.
Default: Shall mean the occurrence or existence of any
event or condition which, with the giving of notice or the passage
of time, or both, would constitute an Event of Default hereunder.
Default Rate: Shall have the meaning set forth in the
Notes.
Defeasance: As defined in Section 46 hereof.
Defeasance Collateral: Shall mean Cash and/or
Defeasance Eligible Investments included in the Trust Estate as
collateral pursuant to Sections 38 and 46 hereof (including, without
limitation, all amounts then on deposit in the Defeasance Collateral
Account).
Defeasance Collateral Account: As defined in Section 47
hereof.
Defeasance Eligible Investments: Shall mean obligations
or securities not subject to prepayment, call or early redemption
which are direct obligations of, or obligations fully guaranteed as
to timely payment by, the United States of America or any agency or
instrumentality of the United States of America, or the obligations
of which are backed by the full faith and credit of the United
States of America, the ownership of which will not cause Beneficiary
to be an "investment company" under the Investment Company Act of
1940, as amended, as evidenced by an Opinion of Counsel acceptable
to Beneficiary, and which qualify under section 1.860G-2(a)(8) of the
Treasury regulations. All such obligations or securities shall
mature or be redeemable, or provide for payments of interest there-
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on, on or prior to the Business Day preceding the date such amounts
are scheduled to be paid under the Class A Note.
Direct Beneficial Owner: Shall mean such Persons who
own any direct ownership interest in Grantor.
Environmental Certificate: As defined in Section 40(b)
hereof.
Environmental Claim: Shall mean any claim, action,
cause of action, investigation or written notice by any Person
alleging potential liability (including potential liability for
investigatory costs, cleanup costs, natural resource damages,
property damages, personal injuries or penalties) arising out of,
based upon or resulting from (a) the presence, threatened presence,
release or threatened release into the environment of any Hazardous
Substances from or at the Properties, or (b) the violation, or
alleged violation, of any Environmental Law, relating to the
Properties.
Environmental Event: As defined in Section 40(b)
hereof.
Environmental Laws: Shall mean all present or future
federal, state and local laws, statutes, rules, ordinances, and
regulations relating to pollution or protection of human health or
the environment (including, without limitation, ambient air, surface
water, ground water, land surface or subsurface strata), including,
without limitation laws, statutes, rules, ordinances and regulations
relating to emissions, discharges, releases of Hazardous Substances,
or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of
Hazardous Substances including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act
of 1980, 42 U.S.C. sectionsection 9601 et seq.; the Resource Conservation
and Recovery Act of 1976, 42 U.S.C. sectionsection 6901 et seq.; the
Toxic Substance Control Act, 15 U.S.C. sectionsection 2601 et seq.; the
Water Pollution Control Act (also known as the Clean Water Act),
33 U.S.C. section 1251 et seq.; the Clean Air Act, 42 U.S.C. section
7401 et seq.; and the Hazardous Materials Transportation Act,
49 U.S.C. section 1801 et seq., as the same may be hereafter amended
or modified.
Environmental Reports: As defined in Section 40(a)
hereof.
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ERISA: Shall mean the Employee Retirement Income
Security Act of 1974, as amended from time to time, and the
regulations promulgated thereunder.
Events of Default: Shall mean the occurrence of any of
the following, each of which shall constitute an Event of Default
under this Mortgage:
(a) (i) Failure to make any payment of interest or
principal on either of the Notes when due, or (ii) failure to pay
the principal balance of either of the Notes when due; or
(b) Failure to pay any other amount payable pursuant
to this Mortgage or the Notes when due and payable in accordance
with the provisions hereof, with such failure continuing for ten
(10) days after Beneficiary delivers written notice thereof to
Grantor; or
(c) (i) Failure to keep in force the insurance
required by Section 5 of this Mortgage, or (ii) failure to comply
with any other covenants set forth in Section 5 with such failure in
this clause (ii) continuing for five (5) Business Days after
Beneficiary delivers written notice thereof to Grantor; or
(d) Any default under the terms of Section 7(b)
(subject to the terms of Section 7(c)) beyond any applicable time
periods set forth therein, with such default continuing for five (5)
days after Beneficiary delivers written notice thereof to Grantor,
or the incurrence of any Debt in violation of Section 11(c) of this
Mortgage or the occurrence of any Transfer in violation of Sections
11(a) or 11(b) (but subject to the terms of Section 11(d)) of this
Mortgage; or
(e) Any attempt by Grantor to assign its rights under
this Mortgage, except as permitted hereunder; or
(f) Any other default in the performance or payment,
or breach, of any material covenant, warranty, representation or
agreement of Grantor contained herein or in any other Loan Document
(other than a covenant, representation or agreement, a default in
the performance or payment of or the breach of which is specifically
addressed elsewhere in this definition), which default is not cured
within thirty (30) Business Days after receipt by Grantor of notice
from Beneficiary in writing of such breach. If cure of such default
(a) would require performance of an Obligation other than payment of
Indebtedness to Grantor and (b) cannot be effected within said
thirty (30) Business Day period despite Grantor's diligence in
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prosecuting such cure, then, provided Grantor commences to cure
within said thirty (30) Business Day period and diligently
prosecutes said cure to completion, subject only to Excusable
Delays, the cure period provided hereunder shall be extended to such
time as may be reasonably necessary to cure the default; provided,
however, that such extended period shall in no event exceed one
hundred twenty (120) days plus time permitted for Excusable Delays;
and provided, further, that Grantor shall provide Beneficiary with a
written report and evidence of the progress of Grantor's cure
efforts within 90 days after commencement of such one hundred twenty
(120) day cure period. Notwithstanding the foregoing sentence, the
cure period provided hereunder may be extended for one additional
one hundred twenty (120) day period, subject to Excusable Delays, if
and only if (x) such default involves breach of a covenant (as
distinct from a representation) and cure of such default would
require physical construction or remedial work, and (y) such cure
cannot with diligence be completed within the initial one hundred
twenty (120) day period. Grantor shall provide Beneficiary with an
additional written report and evidence of the progress of Grantor's
cure efforts within ninety (90) days after commencement of such
additional one hundred twenty (120) day cure period; or
(g) The entry by a court of (A) a decree or order for
relief in respect of Grantor or its General Partner in an
involuntary case or proceeding under any applicable Federal or state
bankruptcy, insolvency, reorganization or other similar law or (B) a
decree or order adjudging Grantor or its General Partner a bankrupt
or insolvent, or approving as properly filed a petition seeking
reorganization, arrangement, adjustment or composition of or in
respect of Grantor or its General Partner under any applicable
Federal or state bankruptcy, insolvency, reorganization or other
similar law, or appointing a custodian, receiver, liquidator,
assignee, trustee, sequestrator or other similar official of Grantor
or its General Partner or of any substantial part of either of their
respective property, or ordering the winding up or liquidation of
either of their respective affairs, and the continuance of any such
decree or order for relief or any such other decree or order
unstayed and in effect for a period of more than ninety (90)
consecutive days; or
(h) The commencement by Grantor or its General Partner
of a voluntary case or proceeding under any applicable Federal or
state bankruptcy, insolvency, reorganization or other similar law or
of any other case or proceeding to be adjudicated a bankrupt or
insolvent, or the consent by it to the entry of a decree or order
for relief in respect of it in an involuntary case or proceeding
under any applicable Federal or state bankruptcy, insolvency,
reorganization or other similar law or to the commencement of any
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bankruptcy or insolvency case or proceeding against it, or the
filing by Grantor or its General Partner of a petition or answer or
consent seeking reorganization or relief under any applicable
Federal or state bankruptcy, insolvency, reorganization or other
similar law, or the consent by Grantor or its General Partner to the
filing of such petition or to the appointment of or taking
possession by a custodian, receiver, liquidator, assignee, trustee,
sequestrator or similar official of Grantor or its General Partner
or of any substantial part of any of either of their respective
property, or the making by Grantor or its General Partner of an
assignment for the benefit of creditors, or the admission by Grantor
or its General Partner in writing of its inability to pay its debts
generally as they become due, or the taking of official partnership
action of Grantor or corporate action of its General Partner in
furtherance of any such action; or
(i) This Mortgage or any other Loan Document or any
Lien granted hereunder or thereunder shall, in whole or in part,
terminate, cease to be effective or cease to be a legally valid,
binding and enforceable obligation of Grantor, or any Lien securing
the Indebtedness shall, in whole or in part, cease to be a perfected
first priority Lien, subject to the Permitted Encumbrances (except
in any of the foregoing cases in accordance with the terms hereof or
under any other Loan Document).
Exculpated Parties: As defined in Section 33 hereof.
Excusable Delay: Shall mean a delay due to acts of God,
governmental restrictions, stays, judgments, orders, decrees, enemy
actions, civil commotion, fire, casualty, strikes, work stoppages,
shortages of labor or materials or other causes beyond the
reasonable control of Grantor, but lack of funds in and of itself
shall not be deemed a cause beyond the control of Grantor.
First Class: Shall mean, with respect to any Property,
a standard of operation and maintenance consistent with first tier
mall or shopping center properties comparable to and in the same
metropolitan area as the applicable Property.
GAAP: Shall mean the generally accepted accounting
principles set forth in the opinions and pronouncements of the
Accounting Principles Board and the American Institute of Certified
Public Accountants and statements and pronouncements of the
Financial Accounting Standards Board (or agencies with similar
functions of comparable stature and authority within the accounting
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profession), or in such other statements by such entity as may be in
general use by significant segments of the U.S. accounting
profession, to the extent such principles are applicable to the
facts and circumstances on the date of determination.
General Partner: Shall mean each of (i) Rivergate Mall,
Inc., the general partner of Rivergate Mall Limited Partnership,
(ii) The Village at Rivergate, Inc., the general partner of The
Village at Rivergate Limited Partnership, (iii) Hickory Hollow Mall,
Inc., the general partner of Hickory Hollow Mall Limited
Partnership, and (iv) Hickory Hollow Courtyard, Inc., the general
partner of The Courtyard at Hickory Hollow Limited Partnership.
Governmental Authority: Shall mean any Federal, state
or local government or any other political subdivision thereof
exercising executive, legislative, judicial, regulatory or
administrative functions.
Grantor: As defined in the introductory paragraph
hereof.
Hazardous Substance: Shall mean any material waste or
material substance which is:
(a) included within the definition of "hazardous
substances," "hazardous materials," "toxic substances," or "solid
waste" in or pursuant to any Environmental Law, or subject to
regulation under any Environmental Law; or
(b) listed in the United States Department of
Transportation Optional Hazardous Materials Table, 49 C.F.R.
section 172.101 enacted as of the date hereof or hereafter amended, or in
the United States Environmental Protection Agency List of Hazardous
Substances and Reportable Quantities, 40 C.F.R. Part 302, as enacted
as of the date hereof or as hereafter amended; or
(c) an explosive, radioactive, asbestos,
polychlorinated biphenyl, oil or petroleum product.
Impositions: Shall mean all taxes (including all ad
valorem, sales (including those imposed on lease rentals), use,
single business, gross receipts, value added, intangible
transaction, privilege or license or similar taxes), governmental
assessments (including all assessments for public improvements or
benefits, whether or not commenced or completed prior to the date
hereof and whether or not commenced or completed within the term of
this Mortgage), water, sewer or other rents and charges, excises,
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levies, fees (including license, permit, inspection, authorization
and similar fees), and all other governmental charges, in each case
whether general or special, ordinary or extraordinary, or foreseen
or unforeseen, of every character in respect of the Trust Estate
and/or any Rents (including all interest and penalties thereon),
which at any time prior to, during or in respect of the term hereof
may be assessed or imposed on or in respect of or be a Lien upon (a)
Grantor (including all income, franchise, single business or other
taxes imposed on Grantor for the privilege of doing business in the
jurisdiction in which the Trust Estate is located), (b) the Trust
Estate, or any other collateral delivered or pledged to Beneficiary
in connection with the Loan, or any part thereof, or any Rents
therefrom or any estate, right, title or interest therein, or (c)
any occupancy, operation, use or possession of, or sales from, or
activity conducted on, or in connection with the Trust Estate or the
leasing or use of all or any part thereof. Nothing contained in
this Mortgage shall be construed to require Grantor to pay any tax,
assessment, levy or charge imposed on (i) any tenant occupying any
portion of the Property or (ii) Beneficiary in the nature of a
franchise, capital levy, estate, inheritance, succession, income or
net revenue tax.
Improvements: As defined in Granting Clause (B) hereof.
Indebtedness: As defined in the recitals hereof.
Indemnified Environmental Parties: As defined in
Section 40(c) hereof.
Indemnified Parties: As defined in Section 37 hereof.
Independent Accountant: Shall mean Arthur Andersen LLP,
or another firm of nationally recognized, independent certified
public accountants selected by Grantor which is reasonably
acceptable to Beneficiary.
Independent Appraiser: Shall mean an independent
appraiser which is a member of the American Institute of Real Estate
Appraisers selected by Grantor and having at least five (5) years of
experience in the applicable real estate market where the applicable
Property is located in the valuation of properties of the type being
appraised.
Independent Architect: Shall mean an independent
architect, engineer or construction consultant selected by Grantor,
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licensed to practice in the State where the applicable Property is
located and having at least five (5) years of experience.
Individual Threshold Amount: Shall mean, with respect
to each Property, five percent (5%) of the Allocated Loan Amount
therefor.
Insurance Requirements: Shall mean all terms of any
insurance policy required hereunder covering or applicable to any
Property or any part thereof, all requirements of the issuer of any
such policy, and all orders, rules, regulations and other
requirements of which Grantor has notice of the national board of
fire underwriters (or any other body exercising similar functions)
applicable to or affecting any Property or any part thereof or any
use of any Property or any part thereof.
Intangibles: As defined in Granting Clause (J) hereof.
Land: As defined in the recitals hereof.
Leases: As defined in Granting Clause (E) hereof.
Legal Requirements: As defined in Section 13(a) hereof.
Letter of Credit: Shall mean an irrevocable,
unconditional, transferable, clean sight draft letter of credit in
favor of Beneficiary and entitling Beneficiary to draw thereon in
New York, New York, issued by a domestic Approved Bank or the U.S.
agency or branch of a foreign Approved Bank, or if there are no
domestic Approved Banks or U.S. agencies or branches of a foreign
Approved Bank then issuing letters of credit, then such letter of
credit may be issued by a domestic bank, the long term unsecured
debt rating of which is the highest such rating then given by the
Rating Agency to a domestic commercial bank. If at any time the
bank issuing any such Letter of Credit shall cease to be an Approved
Bank, Beneficiary shall have the right immediately to draw down the
same in full and hold the proceeds of such draw in accordance with
the applicable provisions hereof, unless Grantor shall deliver a
replacement Letter of Credit within thirty (30) days after
Beneficiary delivers written notice to Grantor that such bank shall
have ceased to be an Approved Bank.
Lien: Shall mean any mortgage, deed of trust, lien,
pledge, hypothecation, assignment, security interest, or any other
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encumbrance of, on or affecting the Trust Estate or any portion
thereof or any interest therein, including, without limitation, any
conditional sale or other title retention agreement, any financing
lease having substantially the same economic effect as any of the
foregoing, the filing of any financing statement, and mechanic's,
materialmen's and other similar liens and encumbrances.
Loan: As defined in the recitals hereof.
Loan Amount: Shall mean the aggregate Principal Amount
of the Loan, which initially shall be $182,700,000.
Loan Documents: Shall mean this Mortgage, the
Assignment of Leases, the Cash Collateral Agreement, the Notes, and
any and all other agreements, instruments or documents executed by
Grantor evidencing or securing the Loan and the transactions
contemplated hereby.
Material Adverse Effect: Shall mean any event or
condition that has a material adverse effect on (i) all of the
Properties taken as a whole, (ii) the business, prospects, profits,
operations or condition (financial or otherwise) of Grantor, or
(iii) the ability of Grantor to repay the principal and interest of
the Indebtedness as it becomes due.
Material Alteration: Shall mean any Alteration which,
when aggregated with all related Alterations constituting a single
project, involves an estimated cost exceeding the Individual
Threshold Amount with respect to Alterations (including the
Alteration in question) being undertaken at a single Property at
such time or the Threshold Amount with respect to Alterations
(including the Alteration in question) being undertaken at all the
Properties at such time, but in either event, excluding any
Alteration for which a Tenant is obligated to pay directly.
Maturity Date: As defined in the recitals hereof.
Mortgage: As defined in the recitals hereof.
Mortgage Escrow Account: As defined in Section 8(a)
hereof.
Mortgage Escrow Amounts: As defined in Section 8(a)
hereof.
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Mortgage Escrow Security: As defined in Section 8(b),48 hereof.
Net Operating Income: Shall mean, with respect to any
period, the excess of Operating Income over Operating Expenses for
such period.
Nonconsolidation Opinion: As defined in Section 11(b)
hereof.
Nondisqualification Opinion: Shall mean an opinion of
tax counsel, which shall be independent outside counsel, to the
effect that a contemplated action would not materially adversely
affect the federal income tax status of the REMIC, FASIT, trust or
other Securitization vehicle, if any, in which the Loan may be
included at the time such opinion is required.
Nondisturbance Agreement: As defined in Section 15(d)
hereof.
Notes: As defined in the recitals hereof.
Obligations: As defined in the recitals hereof.
Officer's Certificate: Shall mean a certificate
delivered to Beneficiary and signed by an officer of the General
Partner of Grantor.
Operating Agreements: Shall mean the reciprocal
easement agreements, operating agreements and similar agreements
affecting the ownership, use and operation of the Properties
included in the Permitted Encumbrances listed on Schedule 2 hereto,
as such agreements have been or may hereafter be amended, modified
or supplemented.
Operating Expenses: Shall mean, for any period, without
duplication, all expenses paid or to be paid by Grantor during such
period in connection with the operation, management, maintenance,
repair and use of the Trust Estate, determined on an accrual basis,
and, except to the extent otherwise provided in this definition, in
accordance with GAAP. Operating Expenses specifically shall include
(i) all payments required to be made pursuant to any Operating
Agreements, (ii) legal, accounting, appraisal and other professional
fees and disbursements in connection with the Notes, and (iii) fees
and expenses of Beneficiary (if any) paid by Grantor, and (iv)
management fees, whether or not actually paid, equal to 3% of annual
"base" or "fixed" Rent due under the Leases. Notwithstanding the
foregoing, Operating Expenses shall not include (1) depreciation or
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amortization, (2) income taxes or other Impositions in the nature of
income taxes, (3) any expenses (including legal, accounting and
other professional fees, expenses and disbursements) incurred in
connection with the making of the Loan or the sale, exchange,
transfer, financing or refinancing of all or any portion of the
Trust Estate or in connection with the recovery of insurance or
condemnation proceeds which are applied to prepay the Notes, (4) any
expenses which in accordance with GAAP should be capitalized, (5)
Debt Service, and (6) any item of expense which would otherwise be
considered within Operating Expenses pursuant to the provisions
above but is paid directly by any Tenant or reimbursed by the Tenant
to Grantor.
Operating Income: Shall mean, for any period without
duplication, all income of Grantor during such period from the
operation of the Trust Estate or, as applicable, a Property as
follows:
(i) all amounts payable to Grantor by any Person
as rent and other amounts under Leases, license agreements,
occupancy agreements or other agreements relating to the Trust
Estate or, as applicable, a Property (including reimbursements
and percentage rents);
(ii) rent insurance proceeds; and
(iii) all other amounts which in accordance with
GAAP are included in Grantor's annual financial statements as
operating income attributable to the Trust Estate or, as
applicable, a Property.
Notwithstanding the foregoing, Operating Income shall
not include (a) any condemnation or insurance proceeds (other than
rent insurance proceeds or condemnation proceeds with respect to a
temporary taking and, in either such case, only to the extent
allocable to the applicable reporting period), (b) any proceeds
resulting from the Transfer of all or any portion of a Property, (c)
any rent attributable to a Lease prior to the date on which the
actual payment of rent is required to commence thereunder, (d) any
item of income otherwise includable in Operating Income but paid
directly by any tenant to a Person other than Grantor, provided such
item of income is an item of expense (such as payments for utilities
paid directly to a utility company) and is otherwise excluded from
the definition of Operating Expenses pursuant to clause (6) of the
definition thereof, or (e) security deposits received from Tenants
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until forfeited. Operating Income shall be calculated on the
accrual basis of accounting and, except to the extent otherwise
provided in this definition, in accordance with GAAP.
Opinion of Counsel: Shall mean an opinion of counsel of
a nationally recognized law firm or other law firm reasonably
acceptable to Beneficiary and, at any time that the Loan is included
in any securitization transaction, the Rating Agencies, procured by
Grantor.
Permitted Debt: As defined in Section 11(c) hereof.
Permitted Encumbrances: Shall mean:
(i) Liens for Impositions not yet due and
payable or Liens arising after the date hereof which are being
contested in good faith by appropriate proceedings promptly
instituted and diligently conducted in accordance with Section
7(c) hereof;
(ii) In the case of Liens arising after the date
hereof, statutory Liens of carriers, warehousemen, mechanics,
materialmen and other similar Liens arising by operation of
law, which are incurred in the ordinary course of business for
sums not more than ninety (90) days delinquent or which are
being contested in good faith in accordance with Section 7(c);
(iii) Easements, rights-of-way, restrictions and
other similar charges or non-monetary encumbrances against
real property and other agreements not interfering in any
material respect with the use or ordinary conduct of Grantor's
business or any Property and not diminishing in any material
respect the value of the Property or Properties to which it is
attached;
(iv) Liens arising from filing UCC financing
statements regarding leases of Building Equipment;
(v) From and after the date hereof, liens and
judgments which have been or will be bonded or released of
record within thirty (30) days after Grantor has received
notice of the filing of such Lien or judgment or which are
being contested in good faith in accordance with Section 7(c)
hereof;
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(vi) Those matters set forth in the "marked-up"
commitment for Beneficiary's loan policy of title insurance
concerning the Properties issued by the Title Company;
(vii) Liens in favor of Beneficiary under this
Mortgage and the other Loan Documents;
(viii) Rights of existing and future Tenants, as
tenants only, pursuant to Leases; and
(ix) Such other title exceptions as Beneficiary
and the applicable Rating Agencies may approve in writing in
their sole discretion.
Permitted Owner: Shall mean (w) any entity as to which
a Rating Agency Confirmation is issued, (x) any affiliates (i.e.,
under common control) of CBL & Associates Properties, Inc., (y) any
pension fund with $2.5 billion of gross asset value and with at
least $1 billion in gross asset value in regional shopping centers
or any publicly traded real estate investment trust with a total
market capitalization of not less than $2 billion, or (z) any
insurance company with a long term senior unsecured debt rating of
"BBB-" or its equivalent or better.
Person: Shall mean any individual, corporation,
partnership, joint venture, estate, trust, unincorporated
association, and any federal, state, county or municipal government
or any political subdivision thereof.
Principal Amount: Shall mean the aggregate principal
amount of the Notes, as defined therein.
Principal Indebtedness: Shall mean the Principal Amount
payable by Grantor under the Notes.
Proceeds: Shall mean all of Grantor's right, title and
interest in and to all compensation, awards, proceeds, damages,
claims, insurance recoveries, causes and rights of action (whether
accrued prior to or after the date hereof) and payments which
Grantor may receive or to which Grantor may become entitled with
respect to the Trust Estate or any part thereof (other than payments
received in connection with any liability or loss of rental value or
business interruption insurance).
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Property Manager: Shall mean CBL & Associates
Management, Inc. or its Affiliates.
Properties: As defined in Granting Clause (D) hereof.
Property Release: Shall mean the release of the
Property from the lien and security interest of Beneficiary in this
Mortgage and the other Loan Documents, and the execution and
delivery by Beneficiary of any agreements reasonably requested by
Grantor to release and terminate or reconvey and reassign, to such
Grantor; provided that such release and termination or reconveyance
and reassignment shall be without recourse to Beneficiary and
without any representation and warranty (except for representations
and warranties as to (i) the due authorization of such release and
termination or reassignment, (ii) the then outstanding Principal
Indebtedness and accrued interest thereon and (iii) the fact that no
assignment, transfer or other hypothecation of the Loan and the Loan
Documents has previously been made) and Grantor shall be released
from its obligations under the Loan Documents with respect to the
Property.
Qualifying Manager: As defined in Section 19(a) hereof.
Rating Agency Confirmation: Shall mean, collectively, a
written affirmation from each of the applicable Rating Agencies that
the credit rating by such Rating Agency of the securities secured by
a pledge of the Notes immediately prior to the occurrence of the
event with respect to which such Rating Agency Confirmation is
sought will not be qualified, downgraded or withdrawn as a result of
the occurrence of such event, which affirmation may be granted or
withheld in such Rating Agency's sole and absolute discretion.
Rating Agencies: Shall mean any three (3) of the
following: Standard & Poor's Ratings Services, Duff & Phelps Credit
Rating Corp., Moody's Investors Services, Inc. and Fitch Investor
Services, L.P. or, if such corporation shall for any reason no
longer perform the functions of a securities rating agency, any
other nationally recognized statistical rating agency designated by
Beneficiary, provided, however, that at any time during which the
Loan is an asset of a Securitization, "Rating Agencies" shall mean
the rating agencies that from time to time rate the securities
issued in connection with such Securitization with respect to which
Beneficiary shall have given written notice specifying such rating
agencies to Grantor.
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Release Date: As defined in Section 38 hereof.
Renewal Lease: As defined in Section 15(b) hereof.
Rents: As defined in Granting Clause (E) hereof.
Required Opinion: Shall mean an Opinion of Counsel,
which opinion may contain, and be subject to, conditions, exceptions
and qualifications customarily included in such opinions addressed
to Beneficiary and dated as of the date of delivery to the effect
that (i) the documents that purport to assign the Defeasance
Collateral have been executed and delivered by Grantor and are
enforceable against Grantor in accordance with their respective
terms to Beneficiary, (ii) the security interest of Beneficiary for
the ratable benefit of any certificateholder, with respect to the
Defeasance Collateral, is a first priority perfected security
interest as security for payment of the Class A Note, which opinion
may contain, and be subject to, conditions, exceptions and
qualifications customarily included in such opinion, and (iii)
making the payment which accompanies such opinion would not
constitute an avoidable preference under Section 547 of the
Bankruptcy Code or under applicable state law in the event of a
filing of a petition for relief under the Bankruptcy Code or such
applicable state law by or against Grantor, as to the portion of the
Defeasance Collateral that is equal to the fair market value of the
Property being released in connection with such payment.
Securities Intermediary: As defined in the Cash
Collateral Agreement.
Securitization: As defined in Section 55 hereof.
Single Purpose Entity: Shall mean a Person, other than
an individual, which (i) is formed or organized solely for the
purpose of holding, directly, an ownership interest in the
Properties, (ii) does not engage in any business unrelated to the
Properties and the financing thereof, (iii) does not have any assets
other than those related to its interest in the Properties or the
financing thereof or any indebtedness other than as permitted by
this Mortgage or the other Loan Documents, (iv) maintains its own
separate books and records and its own accounts, in each case which
are separate and apart from the books and records and accounts of
any other Person, (v) holds itself out as being a Person, separate
and apart from any other Person, (vi) does not commingle its assets
with those of any other Person, (vii) conducts its own business in
its own name; (viii) maintains separate financial statements, (ix)
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pays its own liabilities out of its own funds, (x) observes all
partnership formalities or corporate formalities, as applicable,
(xi) maintains an arm's-length relationship with its Affiliates,
(xii) pays the salaries of its own employees and maintains a
sufficient number of employees in light of its contemplated business
operations, (xiii) except as general partner of such other Person,
does not guarantee or otherwise obligate itself with respect to the
debts of any other Person or hold out its credit as being available
to satisfy the obligations of any other Person, (xiv) does not
acquire obligations or securities of its partners, members or
shareholders, (xv) allocates fairly and reasonably shared expenses,
including, without limitation, any overhead for shared office space,
(xvi) uses separate stationery, invoices, and checks, (xvii) does
not pledge its assets for the benefit of any other Person or make
any loans or advances to any other Person, (xviii) does and will
correct any known misunderstanding regarding its separate identity,
(xix) maintains adequate capital in light of its contemplated
business operations, and (xx) has a partnership or operating agreement,
certificate of incorporation or other organizational document
which complies with the standards and requirements for a Single
Purpose Entity set by the Rating Agency as of the date hereof
applicable to a limited partnership (except that (i) the foregoing
entities may incur liabilities as permitted under the Loan Documents
(including loans between Partners in connection with the Trust
Estate) and (ii) restrictions on amendments to any organizational
documents (or, if applicable, requirements of consent of the
Independent Director of any entities shall be limited to any action
relating to such Person's bankruptcy, dissolution or status as a
single purpose entity. In addition, if such Person is a
partnership, (1) all general partners of such Person shall be Single
Purpose Entities, and (2) if such Person has more than one general
partner, then the organizational documents shall provide that such
Person shall continue (and not dissolve) for so long as a solvent
general partner exists. In addition, if such Person is a
corporation, then, at all times: (a) such Person shall have at least
one (1) Independent Director, and (2) the board of directors of such
Person may not take any action relating to such Person's bankruptcy,
dissolution or status as a single purpose entity without the unanimous
affirmative vote of 100% of the members of the board of
directors unless all of the directors, including an Independent
Director, shall have participated in such vote. In addition, if
such Person is a limited liability company, (1) the managing member
shall be a Single Purpose Entity, (2) its articles of organization,
certificate of formation and/or operating agreement, as applicable,
shall provide that such entity will dissolve only upon the
bankruptcy of the managing member, and (3) if such Person has more
than one managing member, then the organizational documents shall
provide that such Person shall continue (and not dissolve) for so
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long as a solvent managing member exists. In addition, such Person
which is formed or organized solely for the purpose of holding,
directly, the ownership interest in the Property (1) without the
unanimous consent of all of the partners, directors or members, as
applicable, has not and will not with respect to itself or to any
other single purpose entity that owns an interest in the Property in
which it has a direct or indirect legal or beneficial interest (a)
seek or consent to the appointment of a receiver, liquidator,
assignee, trustee, sequestrator, custodian or other similar official
for such Person or all or any portion of such Person's Property, or
(b) take any action that might cause such Person to become
insolvent, (2) has and will maintain its books, records, resolutions
and agreements as official records, (3) has held and will hold its
assets in its own name, (4) has and will maintain its financial
statements, accounting records and other entity documents separate
and apart from any other Person, and (5) has not and will not
identify its partners, members or shareholders, or any affiliates of
any of them as a division or part of it.
Taking: Shall mean a temporary or permanent taking by
any Governmental Authority as the result or in lieu or in
anticipation of the exercise of the right of condemnation or eminent
domain, of all or any part of the Trust Estate, or any interest
therein or right accruing thereto, including any right of access
thereto or any change of grade affecting a Property or any part
thereof.
Tax Opinion: Shall mean an Opinion of Counsel to the
effect that a contemplated action (a) will not result in any deemed
exchange pursuant to Section 1001 of the Code of the Notes; and (b)
will not adversely affect the Notes' status as indebtedness for
federal income tax purposes.
Tenant: Shall mean any Person leasing, subleasing or
otherwise occupying any portion of a Property pursuant to a Lease.
Threshold Amount: Shall mean $10,000,000.
Title Company: Shall mean Lawyers Title Insurance
Corporation.
Total Defeasance Collateral Requirement: Shall mean
with respect to a Defeasance of the Lien of this Mortgage with
respect to all of the Properties, Defeasance Collateral in an amount
sufficient to pay all principal indebtedness outstanding as of the
date of Defeasance under the Class A Note as it becomes due and
sufficient to pay scheduled interest and principal payments on the
Loan. All Defeasance Collateral must mature on or before the dates
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when such amounts are required to be applied to pay Defeasance Debt
Service Payments when due, and on or before the Maturity Date.
Total Loss: Shall mean (i) a casualty, damage or
destruction of a Property, the cost of restoration of which
(calculated in accordance with the provisions of Section 6 hereof)
would exceed fifty percent (50%) of the applicable Allocated Loan
Amount, and with respect to which Grantor is not required, under the
Leases to apply Proceeds to the restoration of such Property or (ii)
a permanent Taking of twenty-five percent (25%) or more of the gross
leasable area of a Property or so much of a Property, in either
case, such that it would be impracticable, in Beneficiary's sole
discretion, even after restoration, to operate such Property as an
economically viable whole.
Transfer: Shall mean sell, assign, convey, transfer,
pledge or otherwise dispose of, or where used as a noun, a sale,
assignment, conveyance, transfer, pledge or other disposition.
Trust Estate: As defined in the Granting Clauses
hereof.
Trustee: As defined in the recitals hereof.
Trustees: Shall mean the Trustee, all separate trustees
and co-trustees appointed pursuant to the terms hereof.
UCC: As defined in Granting Clause (D) hereof.
U.S. Government Obligations: Any direct obligations of
the United States Government, including, without limitation,
treasury bills, notes and bonds.
Work: As defined in Section 6(b) hereof.
All accounting terms not specifically defined herein
shall be construed in accordance with GAAP. When used herein, the
term "financial statements" shall include the notes and schedules
thereto. Unless otherwise specified herein or therein, all terms
defined in this Mortgage shall have the defined meanings when used
in any other Loan Document or in any certificate or other document
made or delivered pursuant thereto.
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The words "hereof," "herein" and "hereunder" and words
of similar import when used in this Mortgage shall refer to this
Mortgage as a whole and not to any particular provision of this
Mortgage, and section, schedule and exhibit references are to this
Mortgage unless otherwise specified. The words "includes" and
"including" are not limiting and mean "including without
limitation."
In the computation of periods of time from a specified
date to a later specified date, the word "from" means "from and
including;" the words "to" and "until" each mean "to but excluding,"
and the word "through" means "to and including."
References to agreements and other documents shall be
deemed to include all subsequent amendments and other modifications
thereto executed in writing by all of the parties thereto and, if
Beneficiary's consent was required for the original of any such
document, consented to by Beneficiary. All references in this
Mortgage to the plural of any document described herein shall mean
all of such documents collectively.
References to statutes or regulations are to be
construed as including all statutory and regulatory provisions
consolidating, amending, or replacing the statute or regulation.
The captions and headings of this Mortgage are for
convenience of reference only and shall not affect the construction
of this Mortgage.
REPRESENTATIONS, WARRANTIES AND COVENANTS
Grantor represents and warrants to, and covenants and
agrees with, Beneficiary as follows:
2. Warranty. (a) Grantor owns good and insurable fee
simple title to the Land and the Improvements, subject only to the
Permitted Encumbrances. This Mortgage upon its due execution and
proper recordation is and will remain a valid and enforceable (and,
with respect to all personalty (as to which security interests are
governed by the UCC), upon proper recordation and the filing of a
financing statement) perfected first Lien on and security interest
on the Land, Improvements and such personalty subject to the
Permitted Encumbrances. Grantor represents and warrants that none
of the Permitted Encumbrances other than this Mortgage will result
in a Material Adverse Effect with respect to (i) the ability of
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Grantor to perform its obligations under the Loan Documents or make
payments of principal or interest as and when due, (ii) the
marketability of title to the Trust Estate, (iii) the fair market
value of the Trust Estate, or (iv) the use or operation of the Trust
Estate as of the Closing Date and thereafter. Grantor will preserve
its fee simple title to the Trust Estate for so long as either of
the Notes remain outstanding and will warrant and defend same and
the validity and priority of the Lien hereof from and against any
and all claims whatsoever other than the Permitted Encumbrances.
(b) This Mortgage and each of the Loan Documents
executed by Grantor, is the legal, valid and binding obligation of
Grantor, enforceable against Grantor in accordance with their terms,
subject to applicable bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and other laws affecting creditor's
rights generally in effect from time to time.
(c) On the date hereof, no portion of the
Improvements at any Property has been materially damaged, destroyed
or injured by fire or other casualty which is not now fully restored
or in the process of being restored;
(d) Grantor has, and will maintain in effect at
all times until the Indebtedness and Obligations are satisfied in
full, (i) all necessary material licenses, permits, authorizations,
registrations and approvals to own, use, occupy and operate each of
the Properties as a shopping center; and (ii) full power and authority
to carry on its business at each of the Properties as currently
conducted;
(e) As of the date hereof, Grantor has not (i)
received any written notice of any Taking or threatened Taking of
any Property or any portion thereof; and (ii) not received any
written notice of any violation of any such licenses, permits,
authorizations, registrations or approvals from a governmental
authority that materially impair the value of the Property for which
such notice was given or which would affect the use or operation of
any Property in any material respect;
(f) Each Property and the Equipment located on
such Property constitutes all of the real property, equipment and
fixtures currently owned by Grantor or used in the operation of the
business located on such Property;
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(g) To Grantor's knowledge, each Property has
adequate access to public streets, roads or highways;
(h) To Grantor's knowledge, each Property
constitutes a separate tax lot, with a separate tax assessment,
independent of any other land or improvements, except as previously
disclosed to Beneficiary in writing;
(i) To Grantor's knowledge, all utility services
necessary for the operation of each Property have been connected and
are available in adequate capacities directly from utility lines and
without the need for private easements not presently existing; and
(j) Grantor is and shall remain a Single Purpose
Entity.
3. Payment and Performance of Obligations Secured.
Grantor shall promptly pay when due the principal of and interest on
the Indebtedness and all other payment Obligations secured by this
Mortgage, all in lawful money of the United States of America, and
shall further perform fully and in a timely manner all Obligations
of Grantor. All sums payable by Grantor hereunder shall be paid
without demand, counterclaim, offset, deduction (except as required
by law) or defense. Grantor waives all rights now or hereafter
conferred by statute or otherwise to any such demand, counterclaim
(other than mandatory counterclaims), setoff, deduction or defense.
4. Negative Covenants. Grantor covenants and agrees
that it shall not:
(a) incur, create or assume any indebtedness for
borrowed money or Transfer or lease the Trust Estate or any interest
therein, except as permitted under Sections 11 and 15 hereof;
(b) engage, directly or indirectly, in any
business other than that of entering into this Mortgage and the
other Loan Documents to which Grantor is a party and the ownership,
management, leasing, construction, development, operation and
maintenance of the Trust Estate for its present and related uses;
(c) make advances (other than distributions
under the Grantor's partnership agreements) or make loans to any
Persons or entities (including Affiliates of Grantor) or hold any
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investments (other than Permitted Investments, Defeasance Collateral,
money market funds, certificates of deposit, mutual funds and
other liquid securities and Cash and Cash Equivalents) under this
Mortgage;
(d) partition any Property;
(e) commingle its assets with the assets of any
of its Affiliates except in connection with the Cash Collateral
Agreement (nor has Grantor so commingled its assets since becoming a
Single Purpose Entity);
(f) guarantee any obligations of any Person or
make advances (other than distributions under Grantor's partnership
agreement) or loans to any Persons or entities (nor has Grantor
guaranteed any obligations of any Person since becoming a Single
Purpose Entity);
(g) amend, modify or supplement in any material
respect, terminate or enter into any management agreement for any of
the Properties without Beneficiary's consent not to be unreasonably
withheld, and Rating Agency Confirmation, to the extent required
hereunder; provided, however, no such consent from either
Beneficiary or a Rating Agent Confirmation shall be required in
connection with any amendment, modification or supplement that would
result in more favorable terms for Grantor under the Management
Agreement;
(h) enter into any agreement for the sale of any
asset or transfer of any interest except as may be permitted hereby;
(i) amend or modify any provision of its
organizational documents without Beneficiary's consent and Rating
Agency Confirmation, if and to the extent any such amendment or
modification shall relate to Grantor's qualification as a Single
Purpose Entity;
(j) dissolve, wind-up, terminate, liquidate,
merge with or consolidate into another Person, except as expressly
permitted pursuant to this Mortgage;
(k) engage in any activity that would subject it
to regulation under ERISA (nor has Grantor engaged in such activity
since becoming a Single Purpose Entity); or
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(l) voluntarily file or consent to the filing of
a petition for bankruptcy, insolvency, reorganization, assignment
for the benefit of creditors or similar proceeding under any Federal
or state bankruptcy, insolvency, reorganization or other similar
law, or otherwise seek any relief under any laws relating to the
relief of debts or the protection of debtors generally, without the
unanimous consent of its general partner(s), including the unanimous
consent of the directors of the corporate general partner or
shareholders, as the case may be, which at all times shall include
the consent of the Independent Director.
5. Insurance.
(a) Insurance Coverage Requirements. During the
term of this Mortgage, Grantor shall, at its sole cost and expense,
keep in full force and effect insurance coverage of the types and
minimum limits as follows during the term of this Mortgage:
(i) Property Insurance. Insurance with respect
to the Improvements and the Building Equipment against any
peril included within the classification "All Risks of
Physical Loss" with extended coverage in amounts at all times
sufficient to prevent Grantor from becoming a 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 Building
Equipment (and must provide coverage of any additional costs
associated with applicable Legal Requirements), and such
policies shall be subject only to exclusions that are standard
and customary for properties comparable to the applicable
Property and acceptable to the Rating Agency and Beneficiary.
The term "full insurable value" means the actual replacement
cost of the Improvements and the Building Equipment (without
taking into account any depreciation, and exclusive of
excavations, footings and foundations, landscaping and paving)
(but in no event less than 125% of the applicable Allocated
Loan Amount) determined annually by an insurer, a recognized
independent insurance broker or an Independent Appraiser
selected and paid by Grantor and in no event less than the
coverage required pursuant to the terms of any Lease;
provided, however, if the terms of the applicable insurance
policies expressly provide for insurance to be provided in the
amount of the actual replacement cost of the Improvements and
the Building Equipment or such policies contain a replacement
cost endorsement, no such annual determination will be
necessary;
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(ii) Liability Insurance. Comprehensive general
liability insurance, including bodily injury, death and
property damage liability, and excess and/or umbrella
liability insurance against any and all claims, including all
legal liability that could be imposed upon Beneficiary, to the
extent insurable, and all court costs and attorneys' fees and
expenses, arising out of or connected with the possession,
use, leasing, operation, maintenance or condition of each
Property in such amounts as are generally available at
commercially reasonable premiums and are generally required by
institutional lenders for properties comparable to the
Properties written on a per occurrence basis with a per
occurrence limit of not less than $5,000,000 and with an
aggregate limit of not less than $10,000,000 per Property;
(iii) Workers' Compensation Insurance. Statutory
workers' compensation insurance (to the extent the risks to be
covered thereby are not already covered by other policies of
insurance maintained by Grantor), with respect to any work by
or for Grantor performed on or about any Property;
(iv) Loss of Rental Value. Loss of "rental
value" or "business interruption" insurance in an amount
sufficient to avoid any co-insurance penalty and to provide
Proceeds which will cover the loss of profits and rents
sustained during the period of at least eighteen (18) months
following the date of casualty. Such policies of insurance
shall be subject only to exclusions that are acceptable to
Beneficiary and the Rating Agency. The term "rental value"
means the sum of (A) the total then ascertainable Rents
payable under the Leases and (B) the total ascertainable
amount of all other amounts to be received by Grantor from
third parties which are the legal obligation of Tenants,
reduced to the extent such amounts would not be received
because of Operating Expenses not incurred during a period of
non-occupancy of that portion of such Property then not being
occupied;
(v) Boiler and Machinery Insurance. To the
extent applicable, broad form boiler and machinery insurance
(without exclusion for explosion) covering all boilers or
other pressure vessels, machinery and equipment, if any,
located in, on or about each Property and insurance against
loss of occupancy or use arising from any such breakdown in
such amounts as are generally available at commercially
reasonable premiums and are generally required by
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institutional lenders for properties comparable to each
Property;
(vi) Builder's All-Risk Insurance. During any
period of repair or restoration, builder's "all risk" insurance
in an amount equal to not less than the full insurable
value of the Property against such risks (including fire and
extended coverage) and collapse of the Improvements to agreed
limits as Beneficiary may request, in form and substance
acceptable to Beneficiary.
(vii) Flood Insurance. If any Improvement on any
Property is located within an area designated as "flood prone"
(as defined under the regulations adopted under the National
Flood Insurance Act of 1968 and the Flood Disaster Protection
Act of 1973), flood insurance if available, in an amount equal
to the lesser of the Loan Amount and the maximum limit of
coverage available with respect to the Property, acceptable to
Beneficiary, but in no event greater than replacement cost,
provided, however, that if flood insurance shall be
unavailable from private carriers at commercially reasonable
premiums, flood insurance provided by the federal or state
government, if available;
(viii) Other Insurance. At Beneficiary's
reasonable request, such other insurance, including but not
limited to earthquake insurance, with respect to the Trust
Estate against loss or damage of the kinds from time to time
customarily insured against and in such amounts as are
generally available at commercially reasonable premiums and
are generally required by institutional lenders on loans of
similar amounts and secured by properties comparable to the
Properties, and, in the case of earthquake coverage, from
insurers that are generally acceptable to such institutional
lenders, but not including environmental insurance.
(b) Ratings of Insurers. Grantor will maintain
the insurance coverage described in Section 5(a) above, in all
cases, with one or more domestic primary insurers having both (x) a
claims-paying-ability rating by the Rating Agency of not less than
"AA" or its equivalent, and (y) an Alfred M. Best Company, Inc.
("Best") rating of "A" or better and a financial size category of
not less than IX. All insurers providing insurance required by this
Mortgage shall be authorized to issue insurance in the state where
the Property insured is located.
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(c) Form of Insurance Policies; Endorsements.
All insurance policies shall be in such form and with such
endorsements as are comparable to the forms of, and endorsements to,
Grantor's insurance policies in effect on the date hereof or
otherwise in accordance with commercially reasonable standards
applied by prudent owners of First Class properties comparable to
and in the general vicinities of the Properties. A certificate of
insurance with respect to all of the above-mentioned insurance
policies has been delivered to Beneficiary and originals or
certified copies of all such policies shall be delivered to
Beneficiary when the same are available and shall be held by
Beneficiary. Grantor shall deliver to Beneficiary annually,
simultaneously with the renewal of the insurance policies required
hereunder, an Officer's Certificate stating that the insurance
policies required to be delivered to Beneficiary pursuant to this
Section 5(c) are maintained with insurers who comply with the terms
of Section 5(b) hereof, setting forth a schedule describing all
premiums required to be paid by Grantor to maintain the policies of
insurance required under this Section 5, and stating that Grantor
has paid such premiums to the extent due and payable. All such
policies shall name Beneficiary as an additional named insured,
shall provide that all Proceeds (except with respect to Proceeds of
general liability and workers' compensation insurance) be payable to
Beneficiary as and to the extent set forth in Section 6 hereof, and
shall contain: (i) a standard "non-contributory mortgagee"
endorsement or its equivalent relating, inter alia, to recovery by
Beneficiary notwithstanding the negligent or willful acts or
omissions of Grantor; (ii) a waiver of subrogation endorsement in
favor of Beneficiary; (iii) an endorsement providing that no policy
shall be impaired or invalidated by virtue of any act, failure to
act, negligence of, or violation of declarations, warranties or
conditions contained in such policy by Grantor, Beneficiary or any
other named insured, additional insured or loss payee, except for
the willful misconduct of Beneficiary knowingly in violation of the
conditions of such policy; (iv) an endorsement providing for a
deductible per loss of an amount not more than that which is
customarily maintained by prudent owners of First Class properties
comparable to and in the general vicinities of the Properties, but
in no event in excess of $250,000, except in the case of earthquake
coverage, for all applicable Properties, for which such deductible
shall not be in excess of that generally required by institutional
lenders on loans of similar amounts secured by comparable
properties; and (v) a provision that such policies shall not be
cancelled, terminated or expired without at least thirty (30) days'
prior written notice to Beneficiary, in each instance. Certificates
of insurance with respect to all replacement policies shall be
delivered to Beneficiary not less than ten (10) Business Days prior
to the expiration date of any of the insurance policies required to
be maintained hereunder which certificates shall bear notations
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evidencing payment of applicable premiums. Originals (or certified
copies) of such replacement insurance policies shall be delivered to
Beneficiary promptly after Grantor's receipt thereof but in any case
within thirty (30) days after the effective date thereof. If
Grantor fails to maintain and deliver to Beneficiary the
certificates of insurance required by this Mortgage, upon five (5)
Business Days' prior notice to Grantor, Beneficiary may, in
accordance with the provisions of Section 8 hereof, procure such
insurance, and all costs thereof (and interest thereon at the
Default Rate) shall be added to the Indebtedness.
Beneficiary shall not, by the fact of approving,
disapproving, accepting, preventing, obtaining or failing to obtain
any insurance, incur any liability for or with respect to the amount
of insurance carried, the form or legal sufficiency of insurance
contracts, solvency of insurance companies, or payment or defense of
lawsuits, and Grantor hereby expressly assumes full responsibility
therefor and all liability, if any, with respect thereto.
(d) Compliance with Insurance Requirements.
Grantor shall comply with all Insurance Requirements and shall not
bring or keep or permit to be brought or kept any article upon any
of the Property or cause or permit any condition to exist thereon
which would be prohibited by any Insurance Requirement, or would
invalidate insurance coverage required hereunder to be maintained by
Grantor on or with respect to any part of any Property pursuant to
this Section 5. Notwithstanding anything to the contrary, it is
expressly understood and agreed that any insurance which Grantor
shall cause any Tenant to provide that shall otherwise be in
compliance with all of the terms and conditions of this Section 5
shall satisfy Grantor's obligations with respect thereto hereunder.
(e) Separate Insurance. Grantor will not take
out separate insurance contributing in the event of loss with that
required to be maintained pursuant to this Section 5 unless such
insurance complies with this Section 5.
(f) Blanket Policies. The insurance coverage
required under Section 5(a) may be effected under a blanket policy
or policies covering the Trust Estate and other properties and
assets not constituting a part of the Trust Estate; provided that
any such blanket policy shall specify, except in the case of public
liability insurance, the portion of the total coverage of such
policy that is allocated to the Trust Estate, and any sublimits in
such blanket policy applicable to the Trust Estate, which amounts
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shall not be less than the amounts required pursuant to Section 5(a)
and which shall in any case comply in all other respects with the
requirements of this Section 5. Upon Beneficiary's request which
shall not be more frequently than once for any 12-month period,
Grantor shall deliver to Beneficiary an Officer's Certificate
setting forth (i) the number of properties covered by such policy,
(ii) the location by city (if available, otherwise, county) and
state of the properties, (iii) the average square footage of the
properties (or the aggregate square footage), (iv) a brief
description of the typical construction type included in the blanket
policy and (v) such other information as Beneficiary may reasonably
request.
6. Condemnation and Insurance Proceeds.
(a) Notice of Casualty. Grantor will promptly
notify Beneficiary in writing upon obtaining knowledge of (i) the
institution of any proceedings relating to any Taking, or (ii) the
occurrence of any casualty, damage or injury to, any Property or any
portion thereof the restoration of which is estimated by Grantor in
good faith to cost more than the Individual Threshold Amount. Such
notice shall set forth such good faith estimate of the cost of
repairing or restoring such casualty, damage, injury or Taking in
reasonable detail if the same is then available and, if not, such
information shall be delivered to Beneficiary as soon thereafter as
it can reasonably be provided.
(b) Casualty and Application of Proceeds. In
the event of any Taking of or casualty or other damage or injury to
any Property, Grantor's rights, titles and interests in and to the
Proceeds, in connection with any such Taking of, or casualty or
other damage or injury to, any Property or any part thereof are
hereby assigned by Grantor to, and shall be paid to, Beneficiary.
Notwithstanding anything to the contrary set forth in this Mortgage,
however, and excluding situations involving a Total Loss and
provided no Event of Default shall have occurred and be continuing,
to the extent such Proceeds with respect to such Property do not
exceed the Individual Threshold Amount, or, if less than such
Individual Threshold Amount but when aggregated with all other then
unapplied Proceeds with respect to any Property, do not exceed the
Threshold Amount in the aggregate, such Proceeds are to be paid
directly to Grantor to be applied to restoration of the Trust Estate
in accordance with the terms hereof. Subject to the provisions of
this Section 6(b) and Sections 6(d) and 6(g) hereof (except that
Proceeds paid in respect of the insurance described in Section
5(a)(iv) shall be deposited directly into the Operating Account (as
defined in the Cash Collateral Agreement), promptly after the
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occurrence of any damage or destruction to all or any portion of
such Property or a Taking of a portion of such Property, in either
case which shall not constitute a Total Loss, Grantor shall either
cause such Property to be released from the lien of this Mortgage in
accordance with Section 38 hereof, or shall commence and diligently
prosecute to completion, subject to Excusable Delays, the repair,
restoration and rebuilding of such Property (in the case of a
partial Taking, to the extent it is capable of being restored) (such
repair, restoration and rebuilding are sometimes hereinafter
collectively referred to as the "Work") so damaged, destroyed or
remaining after such Taking in full compliance with all material
Legal Requirements and free and clear of any and all Liens except
Permitted Encumbrances; it being understood, however, that Grantor
shall not be obligated to restore such Property to the precise
condition of such Property prior to any partial Taking of, or
casualty or other damage or injury to such Property, if the Work
actually performed, if any, or failed to be performed, shall have no
material adverse effect on the value of such Property from the value
that such Property would have had if the same had been restored to
its condition immediately prior to such Taking or casualty. Grantor
will, in good faith and in a commercially reasonable manner, file
and prosecute the adjustment, compromise or settlement of any claim
for Proceeds and, subject to Grantor's right to receive the direct
payment of any Proceeds as provided above, and, with respect to
Proceeds from a Total Loss, subject to the provisions below and
subject to the applicable terms of the Leases, will cause the same
to be paid directly to Beneficiary, to be held and applied in
accordance with the provisions of this Mortgage. Except upon the
occurrence and during the continuance of an Event of Default,
Grantor may settle any insurance claim with respect to Proceeds
which does not exceed the applicable Individual Threshold Amount.
If an Event of Default shall have occurred and be continuing, or if
Grantor fails to file and/or prosecute any insurance claim for a
period of fifteen (15) Business Days following Grantor's receipt of
written notice from Beneficiary, Grantor hereby irrevocably empowers
Beneficiary, in the name of Grantor as its true and lawful attorney-
in-fact, to file and prosecute such claim (including settlement
thereof) with counsel satisfactory to Beneficiary and to collect and
to make receipt for any such payment, all at Grantor's expense
(including payment of interest at the Default Rate for any amounts
advanced by Beneficiary pursuant to this Section 6(b)). In the
event of (i) a Total Loss resulting from a casualty, damage or
destruction, if either (A) the cost to repair the Property as esti-
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mated by the Independent Architect would exceed the Individual
Threshold Amount in relation to such Property and the restoration of
the Property cannot reasonably be completed before the date which is
the later to occur of the date of expiration of any business
interruption insurance or the date of expiration of any Letter of
Credit posted in lieu thereof or in addition thereto and under such
circumstances Grantor is not required under the applicable Lease to
make Proceeds available for restoration of the Property, or (B)
Beneficiary elects not to permit Grantor to restore such Property or
(ii) a Total Loss resulting from a Taking, Grantor shall be required
to comply with the provisions of Section 6(j) below and Beneficiary
shall apply such Proceeds, first toward reimbursement of
Beneficiary's reasonable costs and expenses in connection with
recovery of the Proceeds (as further described below), including,
without limitation, reasonable administrative costs and inspection
fees, and then as required by Section 6(j) hereof. Any Proceeds
remaining after prepayment in part as set forth in Section 6(j)
hereof shall be paid to Grantor or as it may direct in writing.
Whether or not an Event of Default shall have occurred and be
continuing, Beneficiary shall have the right to approve, such
approval not to be unreasonably withheld, any settlement which might
result in any Proceeds in excess of the applicable Individual
Threshold Amount and Grantor will deliver or cause to be delivered
to Beneficiary all instruments reasonably requested by Beneficiary
to permit such approval. Grantor will pay all reasonable costs,
fees and expenses reasonably incurred by Beneficiary (including all
reasonable attorneys' fees and expenses, the reasonable fees of
insurance experts and adjusters and reasonable costs incurred in any
litigation or arbitration), and interest thereon at the Default Rate
to the extent not paid within ten (10) Business Days after delivery
of a request for reimbursement by Beneficiary, in connection with
the settlement of any claim for insurance or Taking Proceeds and
seeking and obtaining of any payment on account thereof in
accordance with the foregoing provisions. If any Proceeds are
received by Grantor and may be retained by Grantor pursuant to this
Section 6, such Proceeds shall, until the completion of the related
Work, be held in trust for Beneficiary and shall be segregated from
other funds of Grantor to be used to pay for the cost of the Work in
accordance with the terms hereof, and in the event such Proceeds
exceed the applicable Individual Threshold Amount, such Proceeds
shall be forthwith paid directly to and held by Beneficiary in a
segregated account in trust for Grantor, in each case to be applied
or disbursed in accordance with this Section 6.
(c) In the event that any Proceeds (other than
Proceeds paid with respect to the insurance described in Section
5(a)(iv)) are in excess of the Threshold Amount, then all Proceeds
(other than any portion of any Proceeds paid with respect to the
insurance described in Section 5(a)(iv) which shall be deposited
directly into the Operating Account) shall be paid over to
Beneficiary and shall be applied as follows: first, toward reim-
bursement of Beneficiary's or its agent's reasonable costs and ex-
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penses in connection with recovery of the Proceeds and disbursement
of the Proceeds (as further described below), including, without
limitation, reasonable administrative costs and inspection fees, and
then, to the prepayment of the Indebtedness secured hereby (which
prepayment shall be made on the next Payment Date occurring after an
elected or required prepayment hereunder), without prepayment premium,
yield maintenance premium or penalty only if:
(i) (A) an Event of Default shall have
occurred and be continuing and upon accelerating the Notes, or
(B) the Proceeds shall equal or exceed the
Allocated Loan Amount with respect to the applicable Property,
or
(C) a Total Loss with respect to the
applicable Property shall have occurred, or
(D) the amount of the Proceeds is equal to
or greater than the outstanding principal amount of the Notes,
or
(E) the casualty or Taking occurs on a
date which is less than one hundred eighty (180) days prior to
the Maturity Date (as defined in the Notes), or
(F) more than twenty-five percent (25%) of
the rentable area of the applicable Property shall have been
the subject of a casualty or shall have been taken, or
(G) the Work is not capable of being
completed before the earlier to occur of the date which is
three (3) months prior to the Maturity Date, and the date on
which the business interruption insurance carried by Grantor
with respect to the applicable Property shall expire, or
(H) the applicable Property is not capable
of being restored substantially to its condition prior to such
Taking or casualty as determined by the Independent Architect,
or
(ii) such Proceeds were the result of a Taking,
and after restoration is completed, there are excess Proceeds
which were not required to effect such restoration, in which
event prepayment shall be made to the extent of such unneeded
Proceeds. Any excess Proceeds shall be applied to the
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prepayment of the Indebtedness secured hereby (which
prepayment shall be made on the next Payment Date occurring
after completion of the Work, without penalty or premium).
(d) Upon the occurrence and during the
continuance of an Event of Default hereunder, or in the event that
any Proceeds are required to be paid to Beneficiary pursuant to
subparagraph (b) above, then all Proceeds while an Event of Default
exists, and any such Proceeds so required to be paid to Beneficiary
shall be paid over to Beneficiary (if not paid directly to
Beneficiary) and shall be applied first toward reimbursement of
Beneficiary's reasonable costs and expenses (plus interest thereon
at the Default Rate to the extent not paid within ten (10) Business
Days after delivery of a request for reimbursement by Beneficiary)
actually incurred in connection with recovery of the Proceeds and
disbursement of the Proceeds (as further described below), including
reasonable administrative costs and inspection fees, and then to be
applied or disbursed in accordance with this Section 6.
(e) Intentionally omitted.
(f) Upon the occurrence and during the continuance
of an Event of Default hereunder, all Proceeds shall be paid
over to Beneficiary and shall be applied first toward reimbursement
of Beneficiary's reasonable costs and expenses actually incurred in
connection with recovery of the Proceeds and disbursement of the
Proceeds (as further described below), including, without limitation,
reasonable administrative costs and inspection fees, and then,
subject to Section 6(c), to the payment or prepayment of the
Indebtedness secured hereby in accordance with Sections 20 and 21.
(g) If Proceeds are not required to be applied
towards payment of the Indebtedness pursuant to the terms hereof,
then Beneficiary shall make the Proceeds which it is holding
pursuant to the terms hereof (after payment of any reasonable
expenses actually incurred by Beneficiary in connection with the
collection thereof plus interest thereon at the Default Rate to the
extent the same are not paid within ten (10) Business Days after
request for reimbursement by Beneficiary) available to Grantor for
payment of or reimbursement of Grantor's or the applicable Tenant's
expenses incurred with respect to the Work, upon the terms and
subject to the conditions set forth below and in Section 6(h)
hereof:
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(i) at the time of loss or damage or at any time
thereafter while Grantor is holding any portion of the
Proceeds, there shall be no continuing Event of Default
hereunder;
(ii) if the estimated cost of the Work (as
estimated by the Independent Architect referred to in clause
(iii) below) shall exceed the Proceeds, Grantor shall, at its
option (within a reasonable period of time after receipt of
such estimate) either deposit with or deliver to Beneficiary
(and promptly following any such deposit or delivery, Grantor
shall provide written notice of same to the Rating Agencies if
requested by Beneficiary) (A) Cash and Cash Equivalents, (B) a
Letter or Letters of Credit in an amount equal to the
estimated cost of the Work less the Proceeds available, or (C)
such other evidence of Grantor's ability to meet such excess
costs and which is satisfactory to Beneficiary and the Rating
Agencies; and
(iii) Beneficiary shall, within a reasonable
period of time prior to request for initial disbursement, be
furnished with an estimate of the cost of the Work accompanied
by an Independent Architect's certification as to such costs
and appropriate plans and specifications for the Work. The
plans and specifications shall require that the Work be done
in a first-class workmanlike manner at least equivalent to the
quality and character of the original work in the Improvements
(provided, however, that in the case of a partial Taking, the
Property restoration shall be done to the extent reasonably
practicable after taking into account the consequences of such
partial Taking), so that upon completion thereof, the Property
shall be at least equal in value and general utility to the
Property prior to the damage or destruction; it being
understood, however, that Grantor shall not be obligated to
restore such Property to the precise condition of such
Property prior to any partial Taking of, or casualty or other
damage or injury to, such Property, if the Work actually
performed, if any, or failed to be performed, shall have no
material adverse effect on the value of such Property from the
value that such Property would have had if the same had been
restored to its condition immediately prior to such Taking or
casualty. Grantor shall restore all Improvements such that
when they are fully restored and/or repaired, such
Improvements and their contemplated use fully comply with all
applicable material Legal Requirements including zoning,
environmental and building laws, codes, ordinances and
regulations.
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(h) Disbursement of the Proceeds in Cash or Cash
Equivalents to Grantor shall be made from time to time (but not more
frequently than once in any month) by Beneficiary but only for so
long as no Event of Default shall have occurred and be continuing,
as the Work progresses upon receipt by Beneficiary of (i) an
Officer's Certificate dated not more than ten (10) days prior to the
application for such payment, requesting such payment or
reimbursement and describing the Work performed that is the subject
of such request, the parties that performed such Work and the actual
cost thereof, and also certifying that such Work and materials are
or, upon disbursement of the payment requested to the parties
entitled thereto, will be free and clear of Liens other than
Permitted Encumbrances and (ii) an Independent Architect's
certificate certifying performance of the Work together with an
estimate of the cost to complete the Work. No payment made prior to
the final completion of the Work, except for payment made to
contractors whose Work shall have been fully completed and from
which final lien waivers have been received, shall exceed ninety-
five percent (95%) of the value of the Work performed and materials
furnished and incorporated into the Improvements from time to time,
and at all times the undisbursed balance of said Proceeds together
with all amounts deposited, bonded, guaranteed or otherwise provided
for pursuant to clause 6(g)(ii) above, shall be at least sufficient
to pay for the estimated cost of completion of the Work; final
payment of all Proceeds remaining with Beneficiary shall be made
upon receipt by Beneficiary of a certification by an Independent
Architect, as to the completion of the Work substantially in
accordance with the submitted plans and specifications, final lien
releases, and the filing of a notice of completion and the
expiration of the period provided under the law of the State in
which the applicable Property is located for the filing of
mechanic's and materialmen's liens which are entitled to priority as
to other creditors, encumbrances and purchasers, as certified
pursuant to an Officer's Certificate, and delivery of a certificate
of occupancy with respect to the Work, or, if not applicable, an
Officer's Certificate to the effect that a certificate of occupancy
is not required.
(i) If, after the Work is completed and all
costs of completion have been paid, there are excess Proceeds, then
upon ten (10) days' prior written notice from Grantor to
Beneficiary, provided no Event of Default has occurred and is then
continuing, Grantor shall have the option of directing Beneficiary
to either (1) retain such Proceeds in the Tenant Improvement and
Leasing Commission Reserve Account, to be applied by Grantor toward
any other use in connection with any of the Properties upon
submission of an Officer's Certificate for request therefor, or (2)
apply such excess Proceeds with respect to the Taking of or damage
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or injury to the Trust Estate to the payment or prepayment of all or
any portion of the Indebtedness secured hereby without penalty or
premium, provided, however, that any such prepayment shall not
reduce any Allocated Loan Amount.
(j) If pursuant to clause 6(c)(i) Beneficiary
has the right to and elects to apply the Proceeds against the
Indebtedness as to the affected Property, then Grantor, in any such
instance, must prepay the Notes to the extent of the Proceeds received
up to an amount equal to 125% of the original Allocated Loan
Amount with respect to the relevant Property, and the Allocated Loan
Amounts for all other Properties shall be increased or decreased in
the manner provided in the definition of Allocated Loan Amount.
Except as otherwise provided in the first sentence of this Section
6(j), in the event that any portion of such Proceeds is applied
toward the repayment of the Indebtedness (in which event Grantor
shall not be obligated to restore pursuant to subparagraph (b)
above), Grantor shall be entitled to obtain from Beneficiary a
Property Release without representation or warranty (in the form
provided by Grantor) of the applicable Property from the Lien and
security interests created by this Mortgage and the other Loan
Documents and a release without representation or warranty (in the
form provided by Grantor) of Grantor from all liability with respect
to the other Loan Documents as they relate to the Property released
from the Lien of this Mortgage, provided that (i) no Event of Default
exists, (ii) Grantor shall comply with the provisions hereof,
and (iii) Grantor pays to Beneficiary the amount, if any, by which
one hundred twenty five percent (125%) of the Allocated Loan Amount
for such Property exceeds the Proceeds received by Beneficiary and
applied to repayment of the Indebtedness, in which case the Allocated
Loan Amount for such Property shall be reduced to zero. If any
Proceeds are applied to reduce the Indebtedness, Beneficiary shall
apply the same in accordance with the provisions of the Notes.
(k) Notwithstanding anything to the contrary
contained herein, upon the occurrence of any of the events described
in Section 6(c)(i) other than Section 6(c)(i)(A), Grantor shall have
the right to a Property Release as to the affected Property upon a
payment of 125% of the Allocated Loan Amount as to such Property,
without any premium or penalty.
7. Impositions, Liens and Other Items.
(a) Grantor shall deliver to Beneficiary
annually, no later than fifteen (15) Business Days after the first
day of each fiscal year of Grantor, and shall update as new
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information is received, a schedule describing all Impositions
payable or estimated to be payable during such fiscal year
attributable to or affecting the Trust Estate or Grantor. Subject
to Grantor's right of contest set forth in Section 7(c) hereof, and
as set forth in the next two sentences, Beneficiary on behalf of
Grantor shall pay all Impositions which are attributable to or
affect the Trust Estate or Grantor, prior to the date such
Impositions shall become delinquent or late charges may be imposed
thereon, directly to the applicable taxing authority with respect
thereto. Beneficiary shall direct the Securities Intermediary under
the Cash Collateral Agreement to pay to the taxing authority such
amounts to the extent funds in the Mortgage Escrow Account are
sufficient to pay such Impositions. If Grantor has delivered
Mortgage Escrow Security in lieu of maintaining the Mortgage Escrow
Account, Grantor shall either deposit in the Mortgage Escrow Account
not less than three (3) Business Days prior to the date the same are
due an amount sufficient to pay such Impositions, or Beneficiary
shall draw down on the Mortgage Escrow Security in such amount.
Nothing contained in this Mortgage shall be construed to require
Grantor to pay any tax, assessment, levy or charge imposed on
Beneficiary in the nature of a franchise, capital levy, estate,
inheritance, succession, income or net revenue tax.
(b) Subject to its right of contest set forth in
Section 7(c) hereof and its rights set forth in Sections 11(c) and
11(d) hereof, Grantor shall at all times keep the Trust Estate free
from all Liens (other than the Lien hereof and Permitted
Encumbrances) and shall pay when due and payable all claims and
demands of mechanics, materialmen, laborers and others which, if
unpaid, might result in or permit the creation of a Lien on the
Trust Estate or any portion thereof and shall in any event cause the
prompt, full and unconditional discharge of all Liens imposed on or
against the Trust Estate or any portion thereof within thirty (30)
days after receiving written notice of the filing (whether from
Beneficiary, the lienor or any other Person) thereof. Grantor shall
do or cause to be done, at the sole cost of Grantor, everything
reasonably necessary to fully preserve the first priority of the
Lien of this Mortgage against the Trust Estate subject to the
Permitted Encumbrances. During the continuance of an Event of
Default with respect to its Obligations as set forth in this Section
7, Beneficiary may (but shall not be obligated to) make such payment
or discharge such Lien, and Grantor shall reimburse Beneficiary on
demand for all such advances pursuant to Section 16 hereof (together
with interest thereon at the Default Rate).
(c) Nothing contained herein shall be deemed to
require Grantor to pay, or cause to be paid, any Imposition, to
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satisfy any Lien, or to comply with any Legal Requirement or
Insurance Requirement, so long as Grantor is in good faith, and by
proper legal proceedings, where appropriate, diligently contesting
the validity, amount or application thereof, provided that in each
case, at the time of the commencement of any such action or
proceeding, and during the pendency of such action or proceeding (i)
no Event of Default shall exist and be continuing hereunder, (ii)
Grantor shall keep Beneficiary apprised of the status of such
contest; (iii) if Grantor is not providing security as provided in
clause (vi) below, adequate reserves with respect thereto are
maintained on Grantor's books in accordance with GAAP or in the
Mortgage Escrow Account, (iv) such contest operates to suspend
collection or enforcement as the case may be, of the contested
Imposition or Lien and such contest is maintained and prosecuted
continuously and with diligence or the Imposition or Lien is bonded,
(v) in the case of any Insurance Requirement, the failure of Grantor
to comply therewith shall not impair the validity of any insurance
required to be maintained by Grantor under Section 5 hereof or the
right to full payment of any claims thereunder, and (vi) in the case
of Impositions and Liens in excess of $250,000 individually, or in
the aggregate, during such contest, Grantor, subject to the terms
and conditions of the applicable Lease, shall provide security in
the form required by Section 6(g)(ii) hereof in an amount equal to
125% of (A) the amount of Grantor's obligations being contested plus
(B) any additional interest, charge, or penalty arising from such
contest. Notwithstanding the foregoing, the creation of any such
reserves or the furnishing of any bond or other security, Grantor
promptly shall comply with any contested Legal Requirement or
Insurance Requirement or shall pay any contested Imposition or Lien,
and compliance therewith or payment thereof shall not be deferred,
if, at any time the Trust Estate or any portion thereof shall be, in
Beneficiary's reasonable judgment, in imminent danger of being
forfeited or lost or Beneficiary is likely to be subject to civil or
criminal damages as a result thereof. If such action or proceeding
is terminated or discontinued adversely to Grantor, Grantor shall
deliver to Beneficiary reasonable evidence of Grantor's compliance
with such contested Imposition, Lien, Legal Requirements or
Insurance Requirements, as the case may be.
8. Funds for Taxes and Insurance.
(a) Grantor shall pay into a segregated account
(the "Mortgage Escrow Account"), amounts sufficient to discharge the
obligations of Grantor under Section 5 (other than worker's
compensation insurance premiums) and Section 7(a) hereof with
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respect to real estate taxes as and when they become due (such
amounts, the "Mortgage Escrow Amounts"). As of the date hereof,
Beneficiary shall initially require payment into the Mortgage Escrow
Account of a sum equal to one-twelfth of the annual insurance
premiums for all insurance being maintained by Grantor as of the
Closing Date. During each month thereafter, Beneficiary shall
require payment with respect to the annual Mortgage Escrow Amounts
of a sum equal to one-twelfth thereof, so that as each installment
of such premiums and real estate taxes relating to the Properties
shall become due and payable, Grantor shall have paid a sum
sufficient to pay the same. If the amount of such premiums and real
estate taxes relating to the Properties has not been definitely
ascertained by Grantor at the time when any such monthly deposits
are to be paid, Beneficiary shall require payment of Mortgage Escrow
Amounts based upon the amount of such premiums and real estate taxes
relating to the Properties paid for the preceding year, subject to
adjustment as and when the amount of such premiums and Impositions
are ascertained by Grantor.
(b) At any time, Grantor may elect to replace
any Mortgage Escrow Amounts then being retained by Securities
Intermediary and satisfy its obligations under this Section 8 by
delivery of a Letter of Credit (which Letter of Credit shall be
either an "evergreen" Letter of Credit or shall not expire until a
date two months after the Maturity Date or Cash and Cash Equivalents
(any such security, "Mortgage Escrow Security") in an amount
reasonably estimated by Grantor to be one-half of the amount
sufficient (including the amount of any remaining Mortgage Escrow
Amounts) to discharge the Impositions and insurance premiums which
shall become due during the twelve (12) month period immediately
after the date of delivery of such Mortgage Escrow Security (and for
each twelve (12) month period thereafter for so long as Grantor
elects to post such security in lieu of Beneficiary's retention of
such amounts). Cash Equivalents shall have maturities corresponding
to the respective due dates of such obligations. Notwithstanding
the foregoing, it shall be a condition to Grantor's delivery of any
Mortgage Escrow Security (other than Cash) in satisfaction of its
obligations under this Section 8, that Grantor, at its expense,
execute, acknowledge and deliver or cause to be delivered to
Beneficiary such additional security agreements, financing
statements and other documents or instruments including an Opinion
of Grantor's Counsel, and take all such actions which in the
reasonable opinion of Beneficiary or its counsel may be necessary to
grant and convey to Beneficiary a perfected security interest in and
to any and all the Mortgage Escrow Security.
(c) The Mortgage Escrow Amounts shall be held by
Securities Intermediary pursuant to the Cash Collateral Agreement
(and any Mortgage Escrow Security posted in lieu thereof pursuant to
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Section 8(b) hereof shall be held by Beneficiary), and shall be
applied in accordance with the Cash Collateral Agreement to the
payment of the obligations in respect of which such Mortgage Escrow
Amounts were retained. Upon the occurrence of an Event of Default
and the acceleration of the Notes, all or any portion of such
Mortgage Escrow Amounts (or any Mortgage Escrow Security posted in
lieu thereof) may be applied to the Indebtedness in such order or
priority as Beneficiary may elect (subject to Sections 20 and 21
hereof) and Beneficiary may exercise any of its rights or remedies
with respect to same hereunder, at law or in equity. In the absence
of such acceleration, any Mortgage Escrow Amounts held by Securities
Intermediary (or Mortgage Escrow Security posted with Beneficiary)
that exceed the actual obligations for which they were retained,
shall be held and applied to the next due obligations or otherwise
applied by Beneficiary in accordance with the terms hereof. Nothing
herein contained shall be deemed to affect any right or remedy of
Beneficiary under this Mortgage or otherwise at law or in equity, to
pay any such amount and to add the amount so paid to the
Indebtedness hereby secured. Any such application of said amounts
or any portion thereof to any Indebtedness secured hereby shall not
be construed to cure or waive any Default or notice of Default
hereunder (or invalidate any act done pursuant to any such Default
or notice) until such amounts have been repaid to Beneficiary by
Grantor.
(d) Grantor shall deliver to Beneficiary all tax
bills, bond and assessment statements, statements of insurance
premiums, and statements for any obligations referred to above as
soon as the same are received by Grantor, and Beneficiary shall
cause the Securities Intermediary to disburse funds to Grantor in
order for the same to be paid when due to the extent of Mortgage
Escrow Amounts or Mortgage Escrow Security available therefor. It
is expressly acknowledged and agreed that Beneficiary shall have no
obligation whatsoever to advance from its own funds any amounts in
payment of all or any portion of such obligations.
9. License to Collect Rents. Beneficiary and Grantor
hereby confirm that Beneficiary has granted to Grantor a license to
collect and use the Rents as they become due and payable under the
Leases in accordance with the provisions of the Assignment of Leases
and the Cash Collateral Agreement, until an Event of Default has
occurred and is continuing provided that the existence of such right
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shall not operate to subordinate this assignment of Leases to any
subsequent assignment, in whole or in part by Grantor, and any such
subsequent assignment shall be subject to Beneficiary's rights under
this Mortgage. Grantor further agrees to execute and deliver such
assignments of leases as Beneficiary may from time to time
reasonably request in order to better assure, transfer and confirm
to Beneficiary the rights intended to be granted to Beneficiary with
respect thereto. In accordance with the provisions of the
Assignment of Leases, upon the occurrence and during the continuance
of an Event of Default and acceleration of the Notes (1) Grantor
agrees that Beneficiary may, but shall not be obligated to, assume
the management of the real property, and collect the Rents, applying
the same upon the Obligations and (2) Grantor hereby authorizes and
directs all tenants, purchasers or other persons occupying or
otherwise acquiring any interest in any part of the real property to
pay the Rents due under the Leases to Beneficiary upon Beneficiary's
request. In the event Beneficiary actually receives such Rents,
after an Event of Default, any application of the Rents by
Beneficiary shall not constitute a misappropriation of the Rents by
Grantor pursuant to Section 33 hereof. Beneficiary shall have and
hereby expressly reserves the right and privilege (but assumes no
obligation) to demand, collect, sue for, receive and recover the
Rents, or any part thereof, now existing or hereafter made, and
apply the same in accordance with this Mortgage, the Assignment of
Leases, and applicable law.
10. Security Agreement.
(a) Security Intended. Notwithstanding any
provision of this Mortgage to the contrary, the parties intend that
this document constitutes security for the payment and performance
of the Obligations and shall be a "mortgage" or "deed of trust"
under applicable law. If, despite that intention, a court of
competent jurisdiction determines that this document does not
qualify as a "trust deed" or "deed of trust" under applicable law,
then ab initio, this instrument shall be deemed a realty mortgage
under applicable law and shall be enforceable as a realty mortgage,
and Grantor shall be deemed a "mortgagor," Beneficiary shall be
deemed a "mortgagee," and Trustee shall have no capacity (but shall
be disregarded and all references to "Trustee" shall be deemed to
refer to the "mortgagee" to the extent not inconsistent with
interpreting this instrument as though it were a realty mortgage).
As a realty mortgage, Grantor, as mortgagor, shall be deemed to have
conveyed the Property ab initio to Beneficiary as mortgagee, such
conveyance as a security to be void upon condition that Grantor pay
and perform all its Obligations. The remedies for any violation of
the covenants, terms and conditions of the agreements herein
contained shall be as prescribed herein or by general law, or, as to
that part of the security in which a security interest may be
perfected under the UCC, by the specific statutory consequences now
or hereafter enacted and specified in the UCC, all at Beneficiary's
sole election.
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(b) Fixture Filing. This Mortgage constitutes a
financing statement and, to the extent required under UCC section9-402(f)
because portions of the Property may constitute fixtures, this
Mortgage is to be filed in the office where a mortgage for the Land
would be recorded. Beneficiary also shall be entitled to proceed
against all or portions of the Trust Estate in accordance with the
rights and remedies available under UCC section9-501(d). Grantor is, for
the purposes of this Mortgage, deemed to be the Debtor, and
Beneficiary is deemed to be the Secured Party, as those terms are
defined and used in the UCC. Grantor agrees that the Indebtedness
and Obligations secured by this Mortgage are further secured by
security interests in all of Grantor's right, title and interest in
and to fixtures, equipment, and other property covered by the UCC,
if any, which are used upon, in, or about the Trust Estate (or any
part) or which are used by Grantor or any other person in connection
with the Trust Estate. Grantor grants to Beneficiary a valid and
effectual security interest in all of Grantor's right, title and
interest in and to such personal property (but only to the extent
permitted in the case of leased personal property), together with
all replacements, additions, and proceeds. Except for Permitted
Encumbrances, Grantor agrees that, without the written consent of
Beneficiary, no other security interest will be created under the
provisions of the UCC and no lease will be entered into with respect
to any goods, fixtures, equipment, appliances, or articles of
personal property now attached to or used or to be attached to or
used in connection with the Trust Estate except as otherwise
permitted hereunder. Grantor agrees that all property of every
nature and description covered by the lien and charge of this
Mortgage together with all such property and interests covered by
this security interest are encumbered as a unit, and upon and during
the continuance of an Event of Default by Grantor, all of the Trust
Estate, at Beneficiary's option, may be foreclosed upon or sold in
the same or different proceedings or at the same or different time,
subject to the provisions of applicable law. The filing of any
financing statement relating to any such property or rights or
interests shall not be construed to diminish or alter any of
Beneficiary's rights of priorities under this Mortgage.
11. Transfers, Indebtedness and Subordinate Liens.
Unless such action is permitted by the provisions of this Section
11, Section 15, Section 38 or Section 45 hereof, Grantor will not
(i) Transfer all or any part of the Trust Estate, (ii) incur
indebtedness for borrowed money, (iii) mortgage, hypothecate or
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otherwise encumber or grant a security interest in all or any part
of the Trust Estate, (iv) permit any transfer of any interest in
Grantor (except as set forth in clause (b) of this Section 11), or
(iv) file a declaration of condominium with respect to any Property.
Grantor shall deliver to Beneficiary written notice pursuant to the
provisions of Section 26 hereof of any such Transfer permitted
pursuant to the provisions of this Section 11 or Section 15 hereof.
In connection with any Transfer or any series of
Transfers that affects (on a cumulative basis) more than 10% of the
value of the Trust Estate, a Tax Opinion and a Nondisqualification
Opinion shall be furnished to Beneficiary.
(a) Sale of the Trust Estate. (i) Provided no
Event of Default under the Loan Documents has occurred and is
continuing, Grantor may, without the consent of Beneficiary, sell
the whole of its interest in the Trust Estate provided that (A)
Grantor delivers or causes to be delivered at Grantor's sole cost
and expense a Rating Agency Confirmation, (B) the purchaser of the
Trust Estate is a Single Purpose Entity, (C) the Purchaser is a
Permitted Owner, (D) a Qualifying Manager manages the Properties,
and (E) Grantor delivers or causes to be delivered at Grantor's sole
cost and expense the required Officer's Certificate, the
Nonconsolidation Opinion and other documentation specified in
Section 11(e) hereof. Upon the satisfaction of the conditions set
forth in this Section 11(a)(i), Grantor shall be released and the
purchaser of the Trust Estate shall assume the rights and
obligations of Grantor under this Mortgage.
(ii) Grantor may transfer or dispose of Building
Equipment which is being replaced or which is no longer
necessary in connection with the operation of a Property free
from the Lien of this Mortgage provided that such transfer or
disposal will not materially adversely affect the value of the
Trust Estate taken as a whole, will not materially impair the
utility of such Property, and will not result in a reduction
or abatement of, or right of offset against, the Rents payable
under any Lease, in either case as a result thereof, and
provided that any new Building Equipment acquired by Grantor
(and not so disposed of) shall be subject to the Lien of this
Mortgage unless the same constitutes leased Building
Equipment. Beneficiary shall, from time to time, upon receipt
of an Officer's Certificate requesting the same and confirming
satisfaction of the conditions set forth above, execute a
written instrument in form reasonably satisfactory to
Beneficiary to confirm that such Building Equipment which is
to be, or has been, sold or disposed of is free from the Lien
of this Mortgage.
(b) Transfer of Interests in Grantor.
Notwithstanding anything contained herein to the contrary,
Beneficiary's consent shall not be required with respect to
Transfers of direct or indirect beneficial interests in Grantor
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provided that (i) after giving effect to such Transfer, either (A)
in the case of a Transfer or Transfers which result in a 49% or
greater change in beneficial ownership of Grantor to a single
beneficial owner, or any transfer of the interest of the General
Partner, a Rating Agency Confirmation is delivered to Beneficiary
and clauses (B)(1) through (B)(4) hereof are satisfied, or (B) in
all other cases, (1) Grantor remains a Single Purpose Entity, (2)
Grantor is controlled by a Permitted Owner, (3) any transferee of
such (x) direct interest in Grantor if such transferee is to own any
general partnership or managing member interest in Grantor or (y)
indirect interest in Grantor if such transferee is to own any
general partnership interest in the entity which owns any general
partnership interest or managing member in the Grantor, shall be a
Single Purpose Entity and (4) a Qualifying Manager manages the
Properties, and (ii) no Event of Default has occurred and is
continuing. If 10% or more of direct beneficial interests in
Grantor are Transferred or if any Transfer shall result in a Person
or a group of Affiliates acquiring more than a 49% interest or shall
result in any transfer of the General Partner's interest, as set
forth above, Grantor shall deliver or cause to be delivered to the
Rating Agencies and Beneficiary (x) an Opinion of Counsel addressed
to the Rating Agencies and Beneficiary and dated as of the date of
the Transfer to the effect that in a properly presented case, a
bankruptcy court in a case involving such transferee, or any
Affiliate thereof, would not disregard the corporate or partnership
forms of such entity, their Affiliates and/or their partners, as the
case may be, so as to consolidate the assets and liabilities of such
entity or entities and/or their Affiliates with those of Grantor or
their respective general partners (a "Nonconsolidation Opinion"),
and (y) an Officer's Certificate certifying that such Transfer is
not an Event of Default. Nothing herein shall be deemed (x) to
require Beneficiary's consent for a Transfer of indirect interests
in Grantor or (y) to require a Rating Agency Confirmation if the
result thereof is not (x) a 49% or greater change in ownership
interest of Grantor or (y) a transfer of a direct general
partnership or direct managing member interest in Grantor. Nothing
contained herein is intended to prohibit, require Beneficiary's
consent of or require a Rating Agency Confirmation of any Transfer
of a direct or indirect interest in Grantor to (i) a directly or
indirectly wholly-owned Affiliate of CBL & Associates Properties,
Inc. provided that such Affiliate shall be a Single Purpose Entity,
if such Affiliate is to own (x) any general partnership or managing
member interest in Grantor or (y) any general partnership or
managing member interest in the entity which owns any general
partnership or managing member interest in Grantor, (ii) any Person
that is controlled (as defined in the definition of Affiliate)
directly or indirectly by CBL & Associates Properties, Inc. or any
direct or indirect Affiliate thereof, or (iii) secured Debt
permitted pursuant to Section 11(c)(iv) hereof.
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(c) Indebtedness. Grantor shall not incur,
create or assume any Debt or incur any liabilities without the
consent of Beneficiary; provided, however, that if no Event of
Default shall have occurred and be continuing, Grantor may, without
the consent of Beneficiary, incur, create or assume any or all of
the following indebtedness (collectively, "Permitted Debt"):
(i) the Notes and the other obligations,
indebtedness and liabilities specifically provided for in any
Loan Document and secured by this Mortgage and the other Loan
Documents;
(ii) except as permitted hereunder, amounts, not
secured by Liens on the Trust Estate (other than liens being
properly contested in accordance with the provisions of this
Mortgage), payable by or on behalf of Grantor for or in
respect of the operation of the Trust Estate in the ordinary
course of operating Grantor's business, provided that (but
subject to the terms of the next sentence) each such amount
shall be paid within ninety (90) days following the date on
which each such amount was incurred. Nothing contained herein
shall be deemed to require Grantor to pay any amount, so long
as Grantor is in good faith, and by proper legal proceedings,
diligently contesting the validity, amount or application
thereof, provided that in each case, at the time of the
commencement of any such action or proceeding, and during the
pendency of such action or proceeding (i) no Event of Default
shall exist and be continuing hereunder, (ii) adequate
reserves with respect thereto are maintained on the books of
Grantor in accordance with GAAP (as determined by the
Independent Accountant), and (iii) such contest operates to
suspend collection or enforcement, as the case may be, of the
contested amount and such contest is maintained and prosecuted
continuously and with diligence. Notwithstanding anything set
forth herein, in no event shall Grantor be permitted under
this provision to enter into a note or other instrument for
borrowed money.
(iii) amounts, not secured by Liens on the Trust
Estate (other than liens being properly contested in
accordance with the provisions of this Mortgage), payable or
reimbursable to any Tenant on account of work performed at a
Property by such Tenant or for costs incurred by such Tenant
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in connection with its occupancy of space in the Property,
including for tenant improvements (provided, however, that
notwithstanding the foregoing, in no event shall Grantor be
permitted under this provision to enter into a note or other
instrument for borrowed money).
(d) Additional Permitted Transfers.
Notwithstanding the above provisions of this Section 11, Grantor
may, without the consent of Beneficiary, (i) make immaterial
transfers of portions of a Property to Governmental Authorities for
dedication or public use (subject to the provisions of Section 6
hereof) or, portions of such Property to third parties, including
owners of outparcels, or other properties for the purpose of
erecting and operating additional structures whose use is integrated
with the use of such Property, (ii) grant easements, restrictions,
covenants, reservations and rights of way in the ordinary course of
business for access, water and sewer lines, telephone and telegraph
lines, electric lines or other utilities or for other similar
purposes or amend the Operating Agreements, (iii) transfer or
ground lease to a compatible user (by conveyance, ground lease or
otherwise) one or more non-income producing pads consisting of
undeveloped land which may not be located immediately adjacent to
the applicable Improvement (together with parking ancillary thereto,
as well as reasonable and/or customary easements in connection
therewith), and (iv) transfer or ground lease to a retail or other
compatible user (by conveyance, ground lease or otherwise) one or
more pads subject to existing leases, subject, however, to Rating
Agency Confirmation, provided that no such transfer, conveyance or
encumbrance set forth in the foregoing clauses (i), (ii), (iii), and
(iv) shall materially impair the utility and operation of the
applicable Property or materially adversely affect the value of the
applicable Property taken as a whole. In addition, it shall be a
condition to any transfer set forth in clauses (iii), or (iv) that
Grantor shall deliver to Beneficiary and the Rating Agencies an
Opinion of Counsel that the applicable Property has been subdivided
(to the extent required by law) and that the Property, after any
such transfer, shall be in compliance with all laws, Leases, and
Operating Agreements and that such transfer shall not cause an Event
of Default to occur. If Grantor shall receive any net proceeds in
connection with any such transfer or other conveyance, Grantor shall
have the right to use any such proceeds in connection with any
Alterations performed in connection with, or required as a result
of, such conveyance. Except as provided below with respect to any
Taking, the amount of any net proceeds received by Grantor in excess
of the cost of such Alterations shall be deposited in the Tenant
Improvement and Leasing Commission Reserve Account (which amounts
shall be in addition to, and not in lieu of, amounts otherwise
required to be deposited pursuant to Section 48 hereof, and shall be
available to Grantor for use in performing any further Alterations
or with respect to the Properties. Any amounts held in such account
shall be invested in accordance with Section 3(m) of the Cash
Collateral Agreement. Any amounts received by Grantor pursuant to
clause (v) shall be paid to Beneficiary upon no less than thirty
(30) days notice for application in prepayment of the Notes in
accordance with Section 5 thereof, together with any applicable
prepayment premium. In connection with any transfer, conveyance or
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encumbrance permitted pursuant to this Section 11(d), Beneficiary
shall execute and deliver any instrument reasonably necessary or
appropriate, in the case of the transfers referred to in clauses
(i), (iii) and (iv) above, to release the portion of a Property
affected by such Taking or such transfer from the Lien of this
Mortgage or, in the case of clause (ii) above, to subordinate the
Lien of this Mortgage to such easements, restrictions, covenants,
reservations and rights of way or other similar grants by receipt by
Beneficiary of:
(i) a copy of the instrument of transfer; and
(ii) an Officer's Certificate stating (x) with
respect to any Transfer, the consideration, if any, being paid
for the Transfer and (y) that such Transfer does not
materially impair the utility and operation of the affected
Property or materially reduce its value.
In addition, in the case of a release pursuant to clauses (iii) and
(iv) above, Grantor shall deliver to Beneficiary a
Nondisqualification Opinion.
All Taking Proceeds shall be applied in accordance with
the provisions of Section 6 hereof.
(e) Not less than fifteen (15) Business Days
prior to the closing of any transaction subject to the provisions of
this Section 11 or of any transfer of a ten percent (10%) direct or
indirect beneficial interest in Grantor or of any transfer that
shall result in a Person acquiring a greater than 49% interest in
Grantor or of any transfer that shall result in a Person that had a
greater than 49% interest in Grantor having less than a 49% interest
in Grantor, Grantor shall deliver to Beneficiary and the Rating
Agencies (i) an Officer's Certificate describing the proposed
transaction and stating that such transaction is permitted by this
Section 11, together with any appraisal or other documents upon
which such Officer's Certificate is based, and (ii) a
Nonconsolidation Opinion. In addition, Grantor shall provide
Beneficiary and the Rating Agencies with copies of executed deeds,
assignments of Direct Beneficial Owner interests in Grantor,
mortgages or other similar closing documents within ten (10) days
after such closing.
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(f) Notwithstanding anything to the contrary
contained herein, any partner or member of Grantor may obtain
loan(s) secured by its interest in Grantor, provided that any
foreclosure of such security or other transfers shall be subject to
the provisions hereof.
(g) As used in this Section 11, "Grantor" shall
mean each of Rivergate, Village, Hickory Hollow and Courtyard
individually.
12. Maintenance of Trust Estate; Alterations;
Inspection; Utilities.
(a) Maintenance of Trust Estate. Grantor shall
keep and maintain the Trust Estate and every part thereof in good
condition and repair, subject to ordinary wear and tear, and,
subject to Excusable Delays and the provisions of this Mortgage with
respect to damage or destruction caused by casualty events or
Takings, shall not permit or commit any waste, impairment, or
deterioration of any portion of the Trust Estate in any material
respect. Grantor further covenants to do all other acts which from
the character or use of the Trust Estate may be reasonably necessary
to protect the security hereof, the specific enumerations herein not
excluding the general. Grantor shall not remove or demolish any
Improvement on any Property except as the same may be necessary in
connection with an Alteration or a restoration in connection with a
Taking or casualty in accordance with the terms and conditions
hereof.
(b) No Changes in Use. Except as may be
necessary in connection with an Alteration permitted by Section
12(c) hereof, Grantor shall not make any changes or allow any
changes to be made in the nature of the use of any Property or any
part thereof or initiate or take any action in furtherance of any
change in any zoning or other land use classification affecting all
or any portion of a Property.
(c) Conditions to Alteration. Provided that no
Event of Default shall have occurred and be continuing hereunder,
Grantor shall have the right, without Beneficiary's consent, to
undertake any alteration, improvement, demolition or removal of any
Property or any portion thereof (any such alteration, improvement,
demolition or removal, an "Alteration") so long as (i) Grantor
provides Beneficiary with prior written notice of any Material
Alteration, and (ii) any Alteration is undertaken in accordance with
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the applicable provisions of this Mortgage and the other Loan
Documents, is not prohibited by any relevant Operating Agreements
and the Leases and shall not upon completion (giving credit to rent
and other charges attributable to Leases executed upon such
completion) materially adversely (A) affect the value of such
Property taken as a whole or (B) reduce the Net Operating Income for
such Property from the level available immediately prior to
commencement of such Alteration. Any Material Alteration with
respect to any one Property shall be conducted under the supervision
of an Independent Architect and no such Material Alteration shall be
undertaken until five (5) Business Days after there shall have been
filed with Beneficiary, for information purposes only and not for
approval by Beneficiary, detailed plans and specifications and cost
estimates therefor, prepared by such Independent Architect, as well
as an Officer's Certificate stating that such Alteration will
involve an estimated cost of more than (I) the Individual Threshold
Amount with respect to Alterations being undertaken at a single
Property at such time, or (II) the Threshold Amount for Alterations
at all the Properties. Such plans and specifications may be revised
at any time and from time to time by such Independent Architect
provided that material revisions of such plans and specifications
are filed with Beneficiary, 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 not be less than the standard
of quality of the materials currently used at such Property and all
materials used shall be in accordance with all applicable material
Legal Requirements and Insurance Requirements.
(d) Costs of Alteration. Notwithstanding
anything to the contrary contained in Section 12(c) hereof, no
Material Alteration nor any Alteration which when aggregated with
all other Alterations (other than Material Alterations) then being
undertaken by Grantor (exclusive of Alterations being directly paid
for by Tenants) at the Properties exceeds the Threshold Amount,
shall be performed by or on behalf of Grantor unless Grantor shall
have delivered to Beneficiary Cash and Cash Equivalents and/or a
Letter of Credit as security in an amount not less than the
estimated cost (exclusive of costs to be funded from amounts held in
any Account) of the Material Alteration or the Alterations in excess
of the Threshold Amount (as set forth in the Independent Architect's
written estimate referred to above). In addition to payment or
reimbursement from time to time of Grantor's expenses incurred in
connection with any Material Alteration or any such Alteration, the
amount of such security shall be reduced on any given date to the
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Independent Architect's written estimate of the cost to complete the
Material Alterations or the Alterations (including any retainages),
free and clear of Liens, other than Permitted Encumbrances. Costs
which are subject to retainage (which in no event shall be less than
5%) shall be treated as due and payable and unpaid from the date
they would be due and payable but for their characterization as
subject to retainage. In the event that any Material Alteration or
Alteration shall be made in conjunction with any restoration with
respect to which Grantor shall be entitled to withdraw Proceeds
pursuant to Sections 6(g) and 6(h) hereof, the amount of the Cash
and Cash Equivalents and/or Letter of Credit to be furnished
pursuant hereto need not exceed the aggregate cost of such
restoration and such Material Alteration or Alteration (as estimated
by the Independent Architect), less the sum of the amount of any
Proceeds which Grantor may be entitled to withdraw pursuant to
Sections 6(g) and 6(h) hereof and which are held by Beneficiary in
accordance with Section 6 hereof. Payment or reimbursement of
Grantor's expenses incurred with respect to any Material Alteration
or any such Alteration shall be accomplished upon the terms and
conditions specified in Sections 6(g) through 6(h) hereof. At any
time after substantial completion of any Material Alteration or any
such Alteration in respect whereof Cash and Cash Equivalents and/or
a Letter of Credit was deposited pursuant hereto, the whole balance
of any Cash and Cash Equivalents so deposited by Beneficiary and
then remaining on deposit (together with earnings thereon), as well
as all retainages, may be withdrawn by Grantor and shall be paid by
Beneficiary to Grantor, and any other Cash and Cash Equivalents
and/or a Letter of Credit so deposited or delivered shall, to the
extent it has not been called upon, reduced or theretofore released,
be released to Grantor, within ten (10) days after receipt by
Beneficiary of an application for such withdrawal and/or release
together with an Officer's Certificate, and signed also (as to the
following clause (i)) by the Independent Architect, setting forth in
substance as follows:
(i) that the Material Alteration or Alteration
in respect of which such Cash and Cash Equivalents and/or a
Letter of Credit was deposited has been substantially
completed in all material respects in accordance with any
plans and specifications therefor previously filed with
Beneficiary under Section 12(c) hereof and that, if
applicable, a certificate of occupancy has been issued with
respect to such Material Alteration or Alteration by the
relevant Governmental Authority(ies) or, if not applicable,
that a certificate of occupancy is not required; and
(ii) that to the knowledge of the certifying
Person all amounts which Grantor is or may become liable to
pay in respect of such Material Alteration or Alteration
through the date of the certification have been paid in full
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or adequately provided for or are being contested in
accordance with Section 7(c) hereof and that lien waivers have
been obtained from the general contractor and major
subcontractors performing such Material Alterations or
Alterations (or such waivers are not customary and reasonably
obtainable by prudent managers in the area where such Property
is located).
(e) Right to Inspect. Beneficiary and any
Persons authorized by it may at all reasonable times and upon
reasonable notice and during reasonable hours enter and examine such
Property and may inspect all work done, labor performed and
materials furnished in and about such Property subject in all
instances to the rights of Tenants under Leases. Beneficiary shall
have no duty to make any such inspection and shall have no liability
or obligation for making (except for its gross negligence or willful
misconduct) or not making any such inspection.
13. Legal Compliance. (a) Grantor and the Trust
Estate and the use thereof materially comply with all Legal
Requirements (as defined below). Grantor represents and warrants
that, as of the date hereof, it has not received notice of any
violation of any Legal Requirement that remains outstanding.
Subject to Grantor's right to contest pursuant to Section 7(c) or
Section 11(c)(ii) hereof, Grantor shall comply in all material
respects with all present and future laws, statutes, codes, ordinances,
orders, judgments, decrees, injunctions, rules, regulations
and requirements, and irrespective of the nature of the work to be
done, of every Governmental Authority including, without limitation,
Environmental Laws, consumer protection laws and all covenants,
restrictions and conditions now or hereafter of record which may be
applicable to it or to any Property and the Building Equipment
thereon, or to the use, manner of use, occupancy, possession,
operation, maintenance, alteration, repair or reconstruction of any
Property and the Building Equipment thereon including, without
limitation, building and zoning codes and ordinances (collectively,
the "Legal Requirements"), except where the failure is not
reasonably likely to have a Material Adverse Effect.
(b) Grantor currently holds all certificates of
occupancy, licenses, registrations, permits, consents, franchises
and approvals of any Governmental Authority which are necessary for
Grantor's ownership and operation of the Properties or which are
necessary for the conduct of Grantor's business thereon. All such
certificates of occupancy, licenses, registrations, permits,
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consents, franchises and approvals are current and will be kept
current and in full force and effect, except where the failure is
not reasonably likely to have a Material Adverse Effect.
14. Books and Records, Financial Statements, Reports
and Other Information.
(a) Books and Records. Grantor will keep and
maintain on a fiscal year basis proper books and records separate
from any other Person, in which accurate and complete entries shall
be made of all dealings or transactions of or in relation to the
Note, the Trust Estate and the business and affairs of Grantor
relating to the Trust Estate, in accordance with GAAP. Beneficiary
and its authorized representatives at its cost and expense shall
have the right at reasonable times and upon reasonable notice to
examine the books and records of Grantor relating to the operation
of the Trust Estate and to make such copies or extracts thereof as
Beneficiary may reasonably require.
(b) Financial Statements.
(i) Quarterly Reports. Not later than forty-
five (45) days following the end of each calendar quarter
(other than the fourth (4th) quarter of any calendar year),
Grantor will deliver to Beneficiary (with a copy to the Rating
Agencies) unaudited financial statements, internally prepared,
in accordance with GAAP, consistently applied, including a
balance sheet as of the end of such quarter, and a statement
of revenues and expenses through the end of such quarter, a
statement of Net Operating Income for such quarter, and, only
upon the request of either the Rating Agencies or Beneficiary,
a statement of profits and losses as to each Property. Such
statements for each quarter shall be accompanied by an
Officer's Certificate certifying to the best of the signer's
knowledge, (A) that such statements fairly represent the
financial condition and results of operations of Grantor in
accordance with GAAP consistently applied, (B) that as of the
date of such Officer's Certificate, no Default exists under
this Mortgage, the Notes or any other Loan Document or, if so,
specifying the nature and status of each such Default and the
action then being taken by Grantor or proposed to be taken to
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remedy such Default, and (C) that as of the date of each
Officer's Certificate, no litigation exists involving Grantor
or the Trust Estate in which the amount involved is $500,000
or more, or, if so, specifying such litigation and the actions
being taking in relation thereto in accordance with Section 23
hereof. Such financial statements shall contain such other
information as shall be reasonably requested by Beneficiary
for purposes of calculations to be made by Beneficiary
pursuant to the terms hereof.
(ii) Annual Reports. Not later than ninety (90)
days after the end of each fiscal year of Grantor's
operations, Grantor will deliver to Beneficiary (with a copy
to the Rating Agencies) audited financial statements certified
by an Independent Accountant in accordance with GAAP
consistently applied, including a balance sheet as of the end
of such year, a statement of Net Operating Income for the year
and for the fourth quarter thereof and a statement of revenues
and expenses for such year, and stating in comparative form
the figures for the previous fiscal year, as well as the
supplemental schedule of net income or loss presenting the net
income or loss for each Property and occupancy statistics for
each Property. Such annual financial statements shall also be
accompanied by an Officer's Certificate in the form required
pursuant to Section 14(b)(i) hereof.
(c) Leasing Reports. (i) Not later than forty-
five (45) days after the end of each fiscal quarter of Grantor's
operations, Grantor will deliver to Beneficiary (with a copy to the
Rating Agencies) a true and complete rent roll for each Property
substantially in the form attached hereto as Exhibit D (and
aggregating the occupancy rate with respect to all the Properties),
dated as of the last month of such fiscal quarter, showing the
percentage of gross leasable area of each Property (and in the
aggregate) leased as of the last day of the preceding calendar
quarter, the percentage of lease roll-overs for each Property (and
in the aggregate) for the preceding calendar quarter, a summary of
new lease signings (including tenant name, square footage occupied
and designation of the tenant's operations as national, regional or
local) and lease terminations for the preceding calendar quarter,
the current annual rent for each Property, the expiration date of
each lease, the various options, if any, available to the tenant
with respect to renewal (including the amount of the rent in the
event of renewal), whether to Grantor's knowledge any portion of the
Property has been sublet, and if it has, the name of the subtenant,
and such rent roll shall be accompanied by an Officer's Certificate
certifying that such rent roll is true, correct and complete in all
respects as of its date and stating whether Grantor, within the past
three months, has issued a notice of default with respect to any
Lease which has not been cured and the nature of such default.
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(ii) Not later than sixty (60) days after the end
of each calendar year, Grantor shall deliver to Beneficiary a
written report containing the following information: (1) the
percentage of Leases which expired pursuant to scheduled
expiration dates during the preceding calendar year, (2) a
list of Leases which are triple net leases and a list of
Leases which are not triple net leases, (3) a summary of each
Lease signed during the preceding calendar year, including
tenant name, net rentable or gross leasable square feet
demised, and a designation as to whether the applicable
Tenant's operations are national, regional or local, (4) a
list of Leases which were terminated during the preceding
calendar year, (5) a summary of renewal options available
under each Lease (which summary shall specify the rental
amounts due during any such renewal period), (6) whether any
Tenant has sublet any portion of its premises, and the names
of any such subtenants, and (7) whether any portion of any
Property is vacant. The foregoing report shall be accompanied
by an Officer's Certificate of Grantor or by an Officer's
Certificate of Grantor delivering said report certifying that
such report is true, correct and complete in all material
respects.
(d) Capital Expenditures Summaries. Grantor
shall, within forty-five (45) days after the end of each calendar
year during the term of each of the Notes, deliver to Beneficiary
and the Rating Agencies an annual summary of any and all capital
expenditures made at each Property during the prior twelve (12)
month period.
(e) Budget and Sales Report. Not later than the
last day of each calender year, Grantor shall deliver to Beneficiary
an operating budget for each Property for the next calender year in
a form reasonably acceptable to Beneficiary, such budget to include
a full year projection of property revenues, operating expenses,
capital expenditures and tenant improvements, together with a retail
sales report to the extent available for each Tenant for the
preceding calender year, such sales report to be in the form of
Exhibit E attached hereto.
(f) Other Information. Grantor will, reasonably
promptly after written request by Beneficiary or the Rating Agency,
furnish or cause to be furnished to Beneficiary, in such manner and
in such detail as may be reasonably requested by Beneficiary, such
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reasonable additional information as may be reasonably requested by
Beneficiary with respect to the Trust Estate.
15. Compliance with Leases and Agreements.
(a) Leases and Operating Agreements. The Leases
and the Operating Agreements, if any, are in full force and effect.
Grantor has neither given to, nor received any notice of default
from, any party to any of the Operating Agreements, if any, or any
Lease which remains uncured. To the best of Grantor's knowledge,
except as set forth in estoppel certificates delivered to
Beneficiary and the Rating Agency prior to the date hereof, no
events or circumstances exist which with or without the giving of
notice, the passage of time or both, may constitute a default under
any of the Operating Agreements or the Leases on the part of
Grantor, or party thereunder. Grantor has complied with and
performed all of its material construction, improvement and
alteration obligations with respect to each Property required under
the Operating Agreements and the Leases. Grantor will promptly
after receipt thereof deliver to Beneficiary a copy of any notice
received with respect to the Operating Agreements and the Leases,
claiming that Grantor is in default in the performance or observance
of any of the material terms, covenants or conditions of any of the
Operating Agreements or the Leases.
(b) New Leases. Grantor may, at all times,
lease to any Person space within each Property in a manner
consistent with other First Class properties comparable to the
applicable Property and then current market conditions existing in
the applicable market area in which such Property is located, and
otherwise in accordance with 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 or other method to compute such rent, is not provided for in
such Lease (such a renewal or extension a "Renewal Lease")) (A)
shall provide for payment of rent and all other material amounts
payable thereunder at rates at least equal to the fair market rental
value (taking into account the type and creditworthiness of the
tenant, the length of tenancy, free rent periods and all other
concessions to be granted to the tenant by the landlord thereunder,
and the location and size of the unit so rented), as of the date
such Lease is executed by Grantor, of the space covered by such
Lease or Renewal Lease for the term thereof, including any renewal
options, and (B) shall not contain any provision whereby the rent
payable thereunder would be based, in whole or in part, upon the net
income or profits derived by any Person from the Property (provided,
however, that it may contain a provision in which a portion of rent
may be payable based on a percentage of gross income), and (C)
shall not prevent Proceeds from being held and disbursed by
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Beneficiary in accordance with the terms hereof, and (D) shall not
entitle any tenant to receive and retain Proceeds except those that
may be specifically awarded to it in condemnation proceedings
because of the Taking of its trade fixtures and its leasehold
improvements which have not become part of the realty and such
business loss as tenant may specifically and separately establish.
Grantor may not, without the consent of Beneficiary, which consent
shall not be unreasonably withheld or delayed, amend, modify or
waive the provisions of any Lease or terminate, reduce rents under
or shorten the term of any Lease (x) in any manner which would have
a material adverse effect on the applicable Property taken as a
whole, or (y) affecting 10,000 or more rentable square feet.
Failure by Beneficiary to approve or disapprove within seven (7)
Business Days shall be deemed an approval by Beneficiary.
(c) No Default Under Leases. Grantor shall (i)
promptly perform and observe all of the material terms, covenants
and conditions required to be performed and observed by Grantor
under the Leases and the Operating Agreements, if the failure to
perform or observe the same would materially and adversely affect
the value of any Property; (ii) exercise, within fifteen (15)
Business Days after a written request by Beneficiary, any right to
request from the Tenant under any Lease or the party to any
Operating Agreement a certificate with respect to the status thereof
to the extent such right is permitted in such Lease or Operating
Agreement; and (iii) not collect any of the Rents under the Leases
more than one (1) month in advance (except that Grantor may collect
such security deposits as are permitted by Legal Requirements and
are commercially reasonable in the prevailing market and collect
other charges in accordance with the terms of each Lease).
(d) Subordination and Non-Disturbance. All
Leases entered into by Grantor after the date hereof, if any, shall
be subject and subordinate to this Mortgage; provided that,
Beneficiary shall enter into, and, if required by applicable law to
provide constructive notice, record in the county where the subject
Property is located, a subordination, attornment and non-disturbance
agreement, in form and substance substantially similar to the form
attached hereto as Exhibit "C" or such other form reasonably
provided or requested by Tenant (a "Nondisturbance Agreement"), with
any Tenant entering into a Lease after the date hereof or, within
ten (10) Business Days after written request therefor by Grantor,
with any other Tenant under any Lease or prospective Lease (other
than a Lease to an Affiliate of Grantor) existing on the date hereof
or made or to be made in accordance with the provisions of this
Section 15, provided that, with respect to any Lease entered into
after the date hereof, such request is accompanied by an Officer's
Certificate stating that such Lease complies in all respects with
this Section 15. All reasonable costs and expenses of Beneficiary
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in connection with the negotiation, preparation, execution and
delivery of any Nondisturbance Agreement including, without
limitation, reasonable attorneys' fees and disbursements shall be
paid by Grantor. Beneficiary shall enter into a Nondisturbance
Agreement or an agreement in any other form reasonably requested by
such Tenant, provided that the same does not materially increase the
obligations or liabilities of Beneficiary from what the same would
have been under the form of Nondisturbance Agreement attached
hereto.
16. Beneficiary's Right to Perform. Upon the
occurrence and during the continuance of an Event of Default with
respect to the performance of any of the Obligations contained
herein, Beneficiary may with at least ten (10) days prior notice to
Grantor (such notice not to be required in the event of an
emergency), without waiving or releasing Grantor from any Obligation
or Default under this Mortgage, but shall not be obligated to, at
any time perform the same, and the cost thereof, with interest at
the Default Rate from the date of payment by Beneficiary to the date
such amount is paid by Grantor, shall immediately be due from
Grantor to Beneficiary and the same shall be secured by this
Mortgage and shall be a Lien on the Trust Estate prior to any right,
title to, interest in or claim upon the Trust Estate attaching
subsequent to the Lien of this Mortgage (subject to the provisions
of Section 11(d) hereof). No payment or advance of money by
Beneficiary under this Section 16 shall be deemed or construed to
cure Grantor's Default or waive any right or remedy of Beneficiary
hereunder.
17. Grantor's Existence; Organization and Authority.
For so long as the Indebtedness remains outstanding, Grantor shall
do all things necessary to preserve and keep in full force and
effect its existence, rights and privileges as a limited partnership
and its right to own property or transact business in all states in
which the Properties are located. For so long as Grantor has been a
Special Purpose Entity and for so long as any portion of the
Indebtedness shall remain outstanding, Grantor shall do all things
necessary to continue to be, a Single Purpose Entity, and shall
prevent any general partner of Grantor from amending such general
partner's articles of incorporation or bylaws, or other formation
documents, in any manner that would enable such general partner to
expand Grantor's business purposes beyond those specified in such
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documents as of the date hereof. Grantor hereby represents and
warrants that each entity comprising Grantor (i) is a duly organized
and validly existing limited partnership under the laws of the State
of its formation, (ii) has the power and authority to own its
properties and to carry on its business as now being conducted and
as proposed to be conducted and is qualified to do business in all
States in which the Properties are located, and (iii) has the
requisite power to execute and deliver and perform its obligations
under this Mortgage, each of the Notes and each of the other Loan
Documents. The execution and delivery by Grantor of this Mortgage,
the Notes and each of the other Loan Documents to be executed by
Grantor, Grantor's performance of its respective obligations
thereunder and the creation of the security interest and Liens
provided for in this Mortgage have been duly authorized by all
requisite action on the part of Grantor, and will not violate in any
material respect any Legal Requirement, any order of any court or
other Governmental Authority, Grantor's certificate of limited
partnership or partnership agreement or any material indenture,
agreement or other instrument to which Grantor is a party, or by
which Grantor is bound; and will not conflict with, result in a
breach of, or constitute (with due notice or lapse of time or both)
a default under any of the foregoing, or result in the creation or
imposition of any Lien, of any nature whatsoever, upon any of the
property or assets of Grantor except the Liens created hereunder.
Grantor is not required to obtain any consent, approval or
authorization from or to file any declaration or statement with, any
Governmental Authority in connection with or as a condition to the
execution, delivery or performance of this Mortgage, the Notes or
the other Loan Documents by Grantor other than those which have
already been obtained or filed. Grantor further represents and
warrants that it is and, so long as any portion of the Indebtedness
shall remain outstanding, shall do all things necessary to continue
to be, a Single-Purpose Entity.
18. Protection of Security; Costs and Expenses.
Grantor shall appear in and defend any action or proceeding of which
it has notice purporting to affect the security hereof or the rights
or powers of Beneficiary or Trustee hereunder and shall pay all
costs and expenses, including, without limitation, cost of evidence
of title and reasonable attorneys' fees and disbursements, in any
such action or proceeding, and in any suit brought by Beneficiary to
foreclose this Mortgage or to enforce or establish any other rights
or remedies of Beneficiary hereunder upon the occurrence and during
the continuance of an Event of Default. If an Event of Default
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occurs under this Mortgage, or if any action or proceeding is
commenced in which it becomes necessary to defend or uphold the Lien
or priority of this Mortgage or which adversely affects Beneficiary
or Beneficiary's interest in the Trust Estate or any part thereof,
including, but not limited to, eminent domain, enforcement of, or
proceedings of any nature whatsoever under any Legal Requirement
affecting the Trust Estate or involving Grantor's bankruptcy,
insolvency, arrangement, reorganization or other form of debtor
relief, then Beneficiary, upon reasonable notice to Grantor, may,
but without obligation to do so and without releasing Grantor from
any obligation hereunder, make such appearances, disburse such
reasonable sums and take such action as Beneficiary reasonably deems
necessary or appropriate to protect Beneficiary's interest in the
Trust Estate, including, but not limited to, disbursement of
reasonable attorneys' fees, entry upon the Trust Estate to make
repairs or take other action to protect the security hereof, and
payment, purchase, contest or compromise of any encumbrance, charge
or lien which in the reasonable judgment of Beneficiary appears to
be prior or superior hereto; provided, however, that the foregoing
shall be subject to Grantor's rights to contest under Section 7(c)
hereof and Beneficiary shall not pay or discharge any lien,
encumbrance or charge being contested by Grantor in accordance with
Section 7(c) hereof. Grantor further agrees to pay all reasonable
costs and expenses of Beneficiary or Trustee including reasonable
attorneys' fees and disbursements incurred by Beneficiary or Trustee
in connection with (a) the negotiation, preparation, execution,
delivery and performance of this Mortgage, the Notes and the other
Loan Documents, and (b) the performance of its obligations and
exercise of its rights under this Mortgage, the Notes, and the other
Loan Documents during the continuance of an Event of Default, other
than in connection with the Securitization. All of the costs,
expenses and amounts set forth in this Section 18 shall be payable
by Grantor, on demand and, together with interest thereon at the
Default Rate, if the same are not paid within ten (10) Business Days
after demand therefor by Beneficiary (or Trustee), until the date of
repayment by Grantor, shall be deemed to be Indebtedness hereunder
and shall be a Lien on the Trust Estate prior to any right, title,
interest or claim upon the Trust Estate (subject to the provisions
of Section 11(d) hereof). Nothing contained in this Section 18
shall be construed to require Beneficiary to incur any expense, make
any appearance, or take any other action.
19. Management of the Trust Estate.
(a) For purposes hereof, a "Qualifying Manager"
shall mean any property manager with management experience of at
least ten (10) years at properties that are comparable to the
Property. Grantor shall notify Beneficiary and the Rating Agencies
in writing (and shall deliver a copy of the proposed management
agreement) of any entity proposed to be designated as a Qualifying
Manager of all or any of the Properties no less than 30 days before
such Qualifying Manager begins to manage such Property(ies) and
shall obtain prior to any appointment of a Qualifying Manager a
Rating Agency Confirmation.
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(b) It is acknowledged and agreed that a
Qualifying Manager may be retained at Beneficiary's direction at any
time following the occurrence and during the continuance of an Event
of Default and acceleration of the Notes, subject to the terms of
the Management Agreement.
(c) Upon the retention of a Qualifying Manager,
Beneficiary shall have the right to approve (which approval shall
not be unreasonably withheld or delayed) any new management
agreement with such Qualifying Manager. Grantor shall provide a
copy of such new management agreement to the Rating Agency.
20. Remedies. Upon the occurrence and during the
continuation of an Event of Default, Beneficiary may take such
actions against Grantor, subject to Section 33 hereof, and/or
against Trust Estate or any portion thereof as Beneficiary
determines is necessary to protect and enforce its rights hereunder,
without notice or demand except as set forth below or as required
under applicable law. Any such actions taken by Beneficiary shall
be cumulative and concurrent and may be pursued independently,
singly, successively, together or otherwise, at such time and in
such order as Beneficiary may determine in its sole discretion, to
the fullest extent permitted by law, without impairing or otherwise
affecting the other rights and remedies of Beneficiary permitted by
law, equity or contract or as set forth herein or in the other Loan
Documents. Beneficiary's determination of appropriate action may be
based on an appropriate real estate or other consultant and/or
counsel, and Beneficiary may rely conclusively on such advice.
Grantor shall pay such consultant's and attorney's fees and expenses
incurred by Beneficiary pursuant to this Section 20. Such actions
may include, without limitation, the following:
(a) Acceleration. Subject to any applicable
provisions of the Notes and the other Loan Documents, Beneficiary
may declare all or any portion of the unpaid principal balance under
either or both of the Notes, together with all accrued and unpaid
interest thereon, and all other unpaid Indebtedness, to be
immediately due and payable.
(b) Entry. Subject to the provisions and restrictions
of applicable law, Beneficiary, personally, or by its agents or
attorneys, at Beneficiary's election, may enter into and upon all or
any part of the Trust Estate (including any Property and any part
thereof), and may exclude Grantor, its agents and servants therefrom
(but such entry shall be subject to any Nondisturbance Agreements
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then in effect); and Beneficiary, having and holding the same, may
use, operate, manage and control the Trust Estate or any part
thereof and conduct the business thereof, either personally or by
its superintendents, managers, agents, servants, attorneys or
receiver. Upon every such entry, Beneficiary may, at the reasonable
expense of the Trust Estate and/or Grantor, from time to time,
either by purchase, repair or construction, maintain and restore the
Trust Estate or any part thereof, and may insure and reinsure the
same in such amount and in such manner as may seem to them to be
advisable. Similarly, from time to time, Beneficiary may, at the
expense of Grantor (which amounts may be disbursed by Beneficiary
from the Trust Estate on behalf of Grantor), make all necessary or
proper repairs, renewals, replacements, alterations, additions,
betterments and improvements to and on the Trust Estate or any part
thereof as it may seem advisable. Beneficiary or its designee shall
also have the right to manage and operate the Trust Estate or any
part thereof and to carry on the business thereof and exercise all
rights and powers of Grantor with respect thereto, either in the
name of Grantor or otherwise, as may seem to them to be advisable.
In confirmation of the grant made in Granting Clause (E) hereof, in
the case of the occurrence and continuation of an Event of Default
(and upon acceleration of the Notes) and subject to the provisions
of the Management Agreement, Beneficiary shall be entitled to
collect and receive all earnings, revenues, rents, issues, profits
and income of the Trust Estate or any part thereof (i.e., the
"Rents") to be applied in the order of priorities and amounts as
shall be provided for in Section 21 hereof. Beneficiary shall be
liable to account only for rents, issues and profits and other
proceeds actually received by Beneficiary. All actions which may be
taken by Beneficiary pursuant to this Section 20(b) may be taken by
the Jurisdictional Trustee, upon the direction of Beneficiary.
Beneficiary or the Jurisdictional Trustee, as applicable, shall be
liable to account only for rents, issues and profits and other
proceeds actually received by Beneficiary or the Jurisdictional
Trustee.
(c) Foreclosure. Prior to taking title to any
Property (whether by foreclosure, deed in lieu or otherwise),
Beneficiary shall obtain, in each instance, at Grantor's reasonable
expense a new phase I environmental report with respect to each
Property, and such additional environmental studies as may be
recommended in such phase I reports.
(i) Beneficiary, with or without entry,
personally or by its agents or attorneys, insofar as
applicable, and in addition to any and every other remedy, may
(i) sell or instruct the Trustee, to sell, to the extent
permitted by law and pursuant to the power of sale granted
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herein, all and singular the Trust Estate, and all estate,
right, title and interest, claim and demand therein, and right
of redemption thereof, at one or more sales, as an entirety or
in parcels, and at such times and places as required or
permitted by law and as are customary in any county or parish
in which a Property is located and upon such terms as Beneficiary
may fix and specify in the notice of sale to be given to
Grantor (and on such other notice published or otherwise given
as provided by law), or as may be required by law; (ii)
institute (or instruct the Trustee to institute) proceedings
for the complete or partial foreclosure of this Mortgage under
the provisions of the laws of the jurisdiction or jurisdictions
in which the Trust Estate or any part thereof is
located, or under any other applicable provision of law; or
(iii) take all steps to protect and enforce the rights of
Beneficiary, whether by action, suit or proceeding in equity
or at law (for the specific performance of any covenant,
condition or agreement contained in this Mortgage, or in aid
of the execution of any power herein granted, or for any
foreclosure hereunder, or for the enforcement of any other
appropriate legal or equitable remedy), or otherwise, as
Beneficiary, being advised by counsel and its financial advisor,
shall deem most advisable to protect and enforce any of
their rights or duties hereunder.
(ii) Beneficiary (or the Trustee, as
applicable), may conduct any number of sales from time to
time. The power of sale shall not be exhausted by any one or
more such sales as to any part of the Trust Estate remaining
unsold, but shall continue unimpaired until the entire Trust
Estate shall have been sold.
(iii) With respect to any Property, this
Mortgage is made upon any statutory conditions of the State in
which such Property is located, and, for any breach thereof or
any breach of the terms of this Mortgage, Beneficiary shall
have the statutory power of sale, if any, provided for by the
laws of such State.
(d) Specific Performance. Beneficiary, in its sole
and absolute discretion, or the Trustee, at Beneficiary's election,
may institute an action, suit or proceeding at law or in equity for
the specific performance of any covenant, condition or agreement
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contained herein or in the Notes or any other Loan Document, or in
aid of the execution of any power granted hereunder or for the
enforcement of any other appropriate legal or equitable remedy.
(e) Enforcement of Notes. Subject to Section 33
hereof and to the extent permitted under the provisions of
applicable law, Beneficiary or the Trustee, at Beneficiary's
election, may recover judgment on the Notes (or any portion of the
Indebtedness evidenced thereby), either before, during or after any
proceedings for the foreclosure (or partial foreclosure) or
enforcement of this Mortgage.
(f) Sale of Trust Estate; Application of Proceeds.
(i) Beneficiary (or the Trustee, if
applicable), may postpone any sale of all or any part of the
Trust Estate to be made under or by virtue of this Section 20
by public announcement at the time and place of such sale, or
by publication, if required by law, and, from time to time,
thereafter, may further postpone such sale by public
announcement made at the time of sale fixed by the preceding
postponement.
(ii) Upon the completion of any sale made
by Beneficiary or the Trustee under or by virtue of this
Section 20, Beneficiary shall execute and deliver to the
accepted purchaser or purchasers a good and sufficient deed or
deeds or other appropriate instruments, conveying, assigning
and transferring all its estate, right, title and interest in
and to the property and rights so sold. Beneficiary or the
Trustee, as applicable, is hereby appointed the true and
lawful irrevocable attorney-in-fact of Grantor in its name and
stead or in the name of Beneficiary to make all necessary
conveyances, assignments, transfers and deliveries of the
property and rights so sold, and, for that purpose, Beneficiary
or the Trustee, as applicable, may execute all necessary
deeds and other instruments of assignment and transfer, and
may substitute one or more persons with like power, Grantor
hereby ratifying and confirming all that such attorney or
attorneys or such substitute or substitutes shall lawfully do
by virtue hereof. Grantor shall, nevertheless, if so
requested in writing by Beneficiary, ratify and confirm any
such sale or sales by executing and delivering to Beneficiary
or to such purchaser or purchasers all such instruments as may
be advisable, in the judgment of Beneficiary, for such
purposes and as may be designated in such request. Any such
sale or sales made under or by virtue of this Section 20 shall
operate to divest all the estate, right, title, interest,
claim and demand, whether at law or in equity, of Grantor in
and to the property and rights so sold, and shall be a
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perpetual bar, at law and in equity, against Grantor, its
successors and assigns and any Person claiming through or
under Grantor and its successors and assigns.
(iii) The receipt of Beneficiary or the
Trustee, as applicable, for the purchase money paid as a
result of any such sale shall be a sufficient discharge
therefor to any purchaser of the property or rights, or any
part thereof, so sold. No such purchaser, after paying such
purchase money and receiving such receipt, shall be bound to
see to the application of such purchase money upon or for any
trust or purpose of this Mortgage, or shall be answerable, in
any manner, for any loss, misapplication or non-application of
any such purchase money or any part thereof, nor shall any
such purchaser be bound to inquire as to the authorization,
necessity, expediency or regularity of such sale.
(iv) Upon any sale made under or by virtue
of this Section 20, Beneficiary may bid for and acquire the
Trust Estate or any part thereof and, in lieu of paying cash
therefor, may make settlement for the purchase price by
crediting upon the Notes secured by this Mortgage the net
proceeds of sale, after deducting therefrom the expense of the
sale and the costs of the action and any other sums which
Beneficiary is authorized to deduct under this Mortgage. The
person making such sale shall accept such settlement without
requiring the production of the Notes or this Mortgage, and
without such production there shall be deemed credited to the
Indebtedness and Obligations under this Mortgage the net
proceeds of such sale. Beneficiary, upon acquiring the Trust
Estate or any part thereof, shall be entitled to own, hold,
lease, rent, operate, manage or sell the same in any manner
permitted by applicable laws.
(g) Voluntary Appearance; Receivers. After the
happening, and during the continuance of, any Event of Default, and
immediately upon commencement of (i) any action, suit or other legal
proceeding by Beneficiary to obtain judgment for the principal and
interest on the Notes and any other sums required to be paid
pursuant to this Mortgage, or (ii) any action, suit or other legal
proceeding by Beneficiary of any other nature in aid of the
enforcement of the Loan Documents or any of them, Grantor will (a)
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enter their voluntary appearance in such action, suit or proceeding,
and (b) if required by Beneficiary, consent to the appointment of
one or more receivers of the Trust Estate and of the earnings,
revenues, rents, issues, profits and income thereof. After the
happening of any Event of Default, or upon the filing of a bill in
equity to foreclose this Mortgage or to enforce the specific
performance hereof or in aid thereof, or upon the commencement of any
other judicial proceeding to enforce any right of Beneficiary,
Beneficiary shall be entitled, as a matter of right, if it shall so
elect, without notice to any other party and without regard to the
adequacy of the security of the Trust Estate, forthwith, either
before or after declaring the principal and interest on the Notes to
be due and payable, to the appointment of such a receiver or
receivers. Any receiver or receivers so appointed shall have such
powers as a court or courts shall confer, which may include, without
limitation, any or all of the powers which Beneficiary is authorized
to exercise by the provisions of this Section 20, and shall have the
right to incur such obligations and to issue such certificates
therefor as the court shall authorize. Notwithstanding the
foregoing, during the continuance of an Event of Default and upon
the acceleration of the Notes, Beneficiary as a matter of right may
appoint or secure the appointment of a receiver, trustee, liquidator
or similar official of the Trust Estate or any portion thereof, and
Grantor hereby irrevocably consents and agrees to such appointment,
without notice to Grantor and without regard to the value of the
Trust Estate or adequacy of the security for the Indebtedness and
without regard to the solvency of the Grantor or any other Person
liable for the payment of the Indebtedness, and such receiver or
other official shall have all rights and powers permitted by
applicable law and such other rights and powers as the court making
such appointment may confer, but the appointment of such receiver or
other official shall not impair or in any manner prejudice the
rights of Beneficiary to receive the Rents with respect to any of
the Trust Estate pursuant to this Mortgage, the Assignment of Leases
or the Cash Collateral Agreement.
(h) UCC Remedies. Beneficiary may exercise any or all
of the remedies granted to a secured party under the UCC,
specifically including, without limitation, the right to recover the
attorneys' fees and other expenses incurred by Beneficiary in the
enforcement of this Mortgage or in connection with Grantor's
redemption of the Improvements or Building Equipment. Beneficiary
may exercise its rights under this Mortgage independently of any
other collateral or guaranty that Grantor may have granted or
provided to Beneficiary in order to secure payment and performance
of the Obligations, and Beneficiary shall be under no obligation or
duty to foreclose or levy upon any other collateral given by Grantor
to secure any Obligation or to proceed against any guarantor before
enforcing its rights under this Mortgage.
(i) Leases. Beneficiary may, at its option, before any
proceeding for the foreclosure (or partial foreclosure) or
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enforcement of this Mortgage, treat any Lease which is subordinate
by its terms to the Lien of this Mortgage, as either subordinate or
superior to the Lien of this Mortgage.
(j) Other Rights. Beneficiary may pursue against
Grantor any other rights and remedies of Beneficiary permitted by
law, equity or contract or as set forth herein or in the other Loan
Documents.
(k) Retention of Possession. Notwithstanding the
appointment of any receiver, liquidator or trustee of Grantor, or any
of its property, or of the Trust Estate or any part thereof,
Beneficiary or the Trustee, as applicable, to the extent permitted
by law, shall be entitled to retain possession and control of all
property now or hereafter granted to or held by Beneficiary or the
Trustee, as applicable, under this Mortgage.
(l) Suits by Beneficiary. All rights of action under
this Mortgage may be enforced by Beneficiary without the possession
of the Notes and without the production thereof or this Mortgage at
any trial or other proceeding relative thereto. Subject to Section
33 hereof, any such suit or proceeding instituted by Beneficiary
shall be brought in the name of Beneficiary and any recovery of
judgment shall be subject to the rights of Beneficiary.
(m) Remedies Cumulative. Subject to Section 33
hereof, no remedy herein conferred upon or reserved to Beneficiary
shall exclude any other remedy, and each such remedy shall be
cumulative and in addition to every other remedy given hereunder or
now or hereafter existing at law or in equity. No delay or omission
of Beneficiary to exercise any right or power accruing upon any
Event of Default shall impair any such right or power, or shall be
construed to be a waiver of any such Event of Default or an
acquiescence therein. Every power and remedy given to Beneficiary
by this Mortgage to the Trustee and/or Beneficiary may be exercised
from time to time and as often as the Trustee (at Beneficiary's
discretion) and Beneficiary and each of them may deem expedient.
Nothing in this Mortgage shall affect Grantor's obligations to pay
the principal of, and interest on, the Notes in the manner and at
the time and place expressed in the Notes.
(n) Waiver of Rights. Grantor agrees that, to the
fullest extent permitted by law, it will not at any time, (1) insist
upon, plead or claim or take any benefit or advantage of any stay,
extension or moratorium law, wherever enacted, now or at any time
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hereafter in force, which may affect the covenants and terms of
performance of this Mortgage, (2) claim, take or insist upon any
benefit or advantage of any law, now or at any time hereafter in
force, providing for valuation or appraisal of the Trust Estate, or
any part thereof, prior to any sale or sales thereof which may be
made pursuant to any provision herein contained, or pursuant to the
decree, judgment or order of any court of competent jurisdiction, or
(3) after any such sale or sales, claim or exercise any right, under
any statute heretofore or hereafter enacted by the United States of
America, any State thereof or otherwise, to redeem the property and
rights sold pursuant to such sale or sales or any part hereof.
Grantor hereby expressly waives all benefits and advantages of such
laws, and covenants, to the fullest extent permitted by law, not to
hinder, delay or impede the execution of any power herein granted or
delegated to Beneficiary or the Trustees, but will suffer and permit
the execution of every power as though no such laws had been made or
enacted. Grantor for itself and all who may claim through or under
it, waives, to the extent it lawfully may do so, any and all
homestead rights and, any and all rights to reinstatement, any and
all right to have the property comprising the Trust Estate marshaled
upon any foreclosure of the Lien hereof or to have the mortgaged
property hereunder and the property covered by any other mortgage,
deed to secure debt or deed.
21. Application of Proceeds.
(a) Sale Proceeds. The proceeds of any sale or
foreclosure of the Trust Estate or any portion thereof shall be
applied to the following in the following order of priority the
payment of: (i) the costs and expenses of the foreclosure
proceedings with respect to such Property (including reasonable
counsel fees and disbursements actually incurred and advertising
costs and expenses), liabilities and advances made or incurred under
this Mortgage, and reasonable receivers' and trustees' fees and
commissions and fees and expenses incurred by Beneficiary, together
with interest at the Default Rate to the extent payable, (ii) any
other sums advanced by Beneficiary (or any advancing agent on its
behalf) in accordance with the terms hereof and not repaid to it by
Grantor, together with interest at the Default Rate to the extent
payable, (iii) all sums due under the Notes in the order of priority
set forth therein, and (iv) any surplus to Grantor or other party
legally entitled thereto.
(b) Other Proceeds. All Proceeds or other amounts
collected by Beneficiary and applied to pay interest or principal of
the Notes or other amounts due on this Mortgage following an Event
of Default and acceleration of the Notes shall be applied (1) first,
to reimburse any expenses related to such collection and (2)
thereafter, as provided in Section 21(a) hereof. If the Notes have
not been
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accelerated, any amount available to make payments or
applied in lieu of such payments thereon shall be applied (1) first,
to interest due or overdue on the Notes, (2) then, to principal due
or overdue on the Notes, and (3) thereafter, to Grantor.
22. CERTAIN WAIVERS. TO INDUCE BENEFICIARY TO
CONSUMMATE THE TRANSACTIONS CONTEMPLATED BY THE NOTES AND THIS
MORTGAGE, AND FOR OTHER GOOD AND VALUABLE CONSIDERATION, THE RECEIPT
AND SUFFICIENCY OF WHICH ARE HEREBY ACKNOWLEDGED, GRANTOR EXPRESSLY
AND IRREVOCABLY HEREBY WAIVES THE FOLLOWING RIGHTS, IN ADDITION TO
AND NOT IN DEROGATION OF ALL OTHER WAIVERS CONTAINED IN THE NOTES,
THIS MORTGAGE AND THE OTHER LOAN DOCUMENTS:
(A) WAIVER OF RIGHT TO TRIAL BY JURY. GRANTOR HEREBY
WAIVES AND SHALL WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING
BROUGHT BY, OR COUNTERCLAIM ASSERTED BY BENEFICIARY WHICH ACTION,
PROCEEDING OR COUNTERCLAIM ARISES OUT OF OR IS CONNECTED WITH THIS
MORTGAGE, THE NOTES OR ANY OTHER LOAN DOCUMENTS.
23. Notice of Certain Occurrences. In addition to all
other notices required to be given by Grantor hereunder, Grantor
shall give notice to Beneficiary and the Rating Agencies promptly
upon the occurrence of: (a) any Default or Event of Default; (b)
any litigation or proceeding affecting Grantor or the Trust Estate
or any part thereof in which the amount involved is Five Hundred
Thousand Dollars ($500,000) or more and not covered by insurance or
in which injunctive or similar relief is sought and likely to be
obtained; (c) a material adverse change in the business, operations,
property or financial condition of Grantor or the Trust Estate; and
(d) together with the quarterly financial statements required to be
delivered hereunder, a list of all litigation and proceedings
affecting Grantor or the Trust Estate or any part thereof in which
the amount involved is Five Hundred Thousand Dollars ($500,000) or
more, whether or not covered by insurance and whether or not relief
is being sought.
24. Trust Funds. To the extent required by applicable
law, all security deposits paid under the Leases shall be treated as
trust funds and not commingled with any other funds of Grantor.
Within ten (10) days after request by Beneficiary, Grantor shall
furnish Beneficiary with satisfactory evidence of
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compliance with this Section 24, together with a statement of all
security deposits by Tenants under the Leases, which statement
shall be certified by Grantor.
25. Taxation. In the event a law is passed after the
date hereof of the United States or of any state in which a Property
is located either (a) changing in any way the laws for the taxation
of mortgages or debts secured thereby for federal, state or local
purposes, or the manner of collection of any such taxes, or (b)
imposing a tax, either directly or indirectly, on mortgages or debts
secured thereby, in each case other than income taxes, franchise
taxes, or withholding taxes, that materially adversely affects
Beneficiary's economic benefits with respect to the Loan,
Beneficiary shall have the right to declare the Notes due on a date
to be specified by not less than thirty (30) days' written notice to
be given to Grantor unless within such thirty (30) day period
Grantor shall assume as an obligation hereunder the payment of any
tax so imposed until full payment of the Notes provided such
assumption shall be permitted by law.
26. Notices. Any notice, election, request or demand
which by any provision of this Mortgage is required or permitted to
be given or served hereunder shall be in writing and shall be given
or served by hand delivery against receipt, by any nationally
recognized overnight courier service providing evidence of the date
of delivery or by certified mail return receipt requested, postage
prepaid, addressed to Grantor at: c/o CBL & Associates Properties,
Inc. 6148 Lee Highway, Suite 300, Chattanooga, Tennessee 37421,
Attention: John N. Foy, with a copy to Willkie Farr & Gallagher, 787
Seventh Avenue, New York, New York 10019-6099, Attention: Christine
Kim, Esq.; if to Trustee at: Lawyers Title Insurance Corporation at
424 Church Street, Suite 200, Nashville, Tennessee 37219, Attention:
George Thomas Kirk, Jr.; if to Beneficiary, to the address for
Beneficiary set forth in the introductory paragraph of this
Mortgage, with a copy to Skadden, Arps, Slate, Meagher & Flom LLP,
919 Third Avenue, New York, New York 10022, Attention: Martha
Feltenstein, Esq., or at such other address as shall be designated
from time to time by Grantor, Trustee or Beneficiary by notice given
in accordance with the provisions of this Section 26. Any such
notice or demand given hereunder shall be effective upon receipt.
All notices, elections, requests and demands required or permitted
under this Mortgage shall be in the English language.
27. No Oral Modification. This Mortgage may not be
waived, altered, amended, modified, changed, discharged or
terminated orally but only by a written agreement signed by the
party against which enforcement is sought.
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28. Partial Invalidity. In the event any one or more
of the provisions contained in this Mortgage shall for any reason be
held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any
other provision hereof, but each shall be construed as if such
invalid, illegal or unenforceable provision had never been included
hereunder.
29. Successors and Assigns. All covenants of Grantor
contained in this Mortgage are imposed solely and exclusively for
the benefit of Grantor or Beneficiary (as applicable) and its
successors and assigns, and no other Person shall have standing to
require compliance with such covenants or be deemed, under any
circumstances, to be a beneficiary of such covenants, any or all of
which may be freely waived in whole or in part by Beneficiary at any
time if in its sole discretion it deems it advisable to do so. All
such covenants of Grantor and Beneficiary shall run with the land
and bind Grantor or Beneficiary (as applicable), its successors and
assigns (and each of them) and all subsequent owners, encumbrancers
and Tenants of the Trust Estate, and shall inure to the benefit of
Beneficiary, its successors and assigns.
30. Governing Law. This Mortgage and the obligations
arising hereunder shall be governed by and construed in accordance
with, the laws of the State of New York applicable to contracts made
and performed in the State of New York and any applicable laws of
the United States of America except that at all times the provisions
for the creation, perfection and enforcement of the Liens and
security interest created pursuant to this Mortgage with respect to
any Property and pursuant to the Assignment of Leases shall be
governed by the laws of the State in which such Property is located.
Whenever possible, each provision of this Mortgage shall be inter-
preted in such a manner as to be effective and valid under
applicable law, but if any provision of this Mortgage shall be
prohibited by, or invalid under, applicable law, such provision
shall be ineffective to the extent of such prohibition or invalidity
without invalidating the remaining provisions of this Mortgage.
Nothing contained in this Mortgage or in any Loan Document shall
require either Grantor to pay or Beneficiary to accept any sum in
any amount which would, under applicable law, subject Beneficiary,
or any Trustee to penalty or adversely affect the enforceability of
this Mortgage. In the event that the payment of any sum due
hereunder or under any Loan Document would have such result under
applicable law, then, ipso facto, the obligation of Grantor to make
such payments shall be reduced to the highest sum then permitted
under applicable law and appropriate adjustment shall be made by
Grantor and Beneficiary.
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31. Certain Representations, Warranties and Covenants.
(a) Recording Fees, Taxes, Etc. Grantor hereby
agrees to take all such further reasonable actions, and to pay all
taxes, recording fees, charges, costs and other expenses including,
without limitation, reasonable attorneys' and professional fees and
disbursements which are currently or in the future shall be imposed,
and which may be required or necessary to establish, preserve,
protect or enforce the Lien of this Mortgage, other than any such
actions or such taxes, recording fees, charges, costs and other
expenses resulting from or in connection with any Securitization.
(b) No Offsets. Grantor warrants, covenants and
represents to Beneficiary that there exists no cause of action at
law or in equity that would constitute any offset, counterclaim or
deduction against the Indebtedness or Obligations.
(c) Full and Accurate Disclosure. To the best
of Grantor's knowledge, no statement of fact made by or on behalf of
Grantor in this Mortgage or in any of the other Loan Documents
contains any untrue statement of a material fact or omits to state
any material fact necessary to make statements contained herein or
therein not misleading as of the date made. There is no fact
presently known to Grantor which has not been disclosed which
materially adversely affects, nor as far as Grantor can foresee,
might materially adversely affect, the business, operations or
condition (financial or otherwise) of Grantor taken as a whole.
(d) Tax Filings. Grantor has filed all federal,
state and local tax returns required to be filed prior to the date
hereof and has paid or made adequate provision for the payment of
all federal, state and local taxes, charges and assessments shown to
be due from Grantor on such tax returns.
(e) No Litigation. No litigation is pending or,
to Grantor's best knowledge, threatened against Grantor which, if
determined adversely to Grantor, would have a Material Adverse
Effect on any Property or the security created hereby and no Taking
has been commenced or, to Grantor's best knowledge, is contemplated
with respect to all or any portion of the Trust Estate or for the
relocation of roadways providing access to the Trust Estate.
Grantor has delivered to Beneficiary a certificate setting forth all
litigation affecting Grantor or any Property.
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(f) Solvency. Giving effect to the transactions
contemplated by this Mortgage and the other Loan Documents, the fair
saleable value of Grantor's assets exceeds and will, immediately
following the execution and delivery of this Mortgage and the other
Loan Documents, exceed Grantor's liabilities, including
subordinated, unliquidated, disputed or contingent liabilities.
Grantor's assets do not and, immediately following the issuance and
sale of the Notes and the consummation of the other transactions
contemplated to take place simultaneously therewith will not,
constitute unreasonably insufficient capital to carry out its
business as conducted or as proposed to be conducted. Grantor does
not intend to, and does not believe that it will, incur debts and
liabilities (including, without limitation, contingent liabilities)
beyond its ability to pay such debts as they mature (taking into
account the timing and amounts to be payable on or in respect of
obligations of Grantor).
(g) ERISA. Grantor is not an "employee benefit
plan" (within the meaning of Section 3(3) of ERISA) to which ERISA
applies and Grantor's assets do not constitute plan assets. No
actions, suits or claims under any laws and regulations promulgated
pursuant to ERISA are pending or, to Grantor's knowledge, threatened
against Grantor. Grantor has no knowledge of any material liability
incurred by Grantor 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
Grantor's assets pursuant to Section 412 of the Code or Sections 302
or 4068 of ERISA.
(h) Claims. No claims, actions, suits,
proceedings or investigations whether judicial or otherwise are
pending or, to the best knowledge of Grantor, threatened against
Grantor before any domestic or foreign court or administrative,
arbitral, governmental or regulatory authority or agency which, if
determined adversely to Grantor, would have a material adverse
effect on the security created hereby. Grantor has delivered to
Beneficiary a certificate setting forth all claims pending against
Grantor.
(i) Liens. To Grantor's best knowledge, no
Lien, other than Permitted Encumbrances, which remains outstanding
as of the date hereof, including, without limitation, any tax lien,
has been levied against the Trust Estate.
(j) Outstanding Liabilities. No outstanding
liabilities of Grantor exist as of the date hereof which,
individually or in the aggregate, would have a material adverse
effect on the security created hereby or would materially
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adversely affect the condition (financial or otherwise) of Grantor.
Grantor has delivered to Beneficiary a certificate setting forth all
liabilities of Grantor more than ninety (90) days past due.
(k) Creditors' Claims. To Grantor's best
knowledge, no claim of any creditor of Grantor would have a material
adverse effect on the security created hereby or would materially
adversely affect the condition (financial or otherwise) of Grantor.
Grantor has delivered to Beneficiary a certificate setting forth all
such claims of creditors of Grantor.
(l) Intentionally omitted.
(m) Contingent Liabilities. Grantor does not
have any known material contingent liabilities.
(n) No Other Debt. Grantor has not borrowed or
received debt financing (other than financing evidenced by the Notes
and otherwise permitted hereunder) that has not been heretofore
repaid in full.
(o) Fraudulent Conveyance. Grantor represents
and warrants as follows: (i) it has not entered into this Mortgage
or the other Loan Documents or the transactions contemplated hereby
or thereby with the actual intent to hinder, delay, or defraud any
creditor, and (ii) it has received reasonably equivalent value in
exchange for its obligations under this Mortgage and the other Loan
Documents. The fair saleable value of the assets of Grantor is and
will, immediately following the execution and delivery of this
Mortgage and the other Loan Documents, be greater than Grantor's
probable liabilities, including the maximum amount of the contingent
liabilities of Grantor or their debts as such debts become absolute
and matured. The assets of Grantor do not and, immediately follow-
ing the execution and delivery of this Mortgage and the other Loan
Documents will not, constitute unreasonably small capital to carry
out the business of Grantor as conducted or as proposed to be
conducted. Grantor does not intend to, and does not believe that it
will, incur debts and liabilities (including, without limitation,
contingent liabilities and other commitments) beyond its ability to
pay such debts as they mature (taking into account the timing and
amounts to be payable on or in respect of obligations of Grantor).
(p) Access/Utilities. To the knowledge of
Grantor, (i) the Properties have adequate rights of access to public
ways and is served by
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adequate water, sewer, sanitary sewer and storm drain facilities,
(ii) all public utilities necessary to the continued use and enjoyment
of each Property as presently used and enjoyed are located in the
public right-of-way abutting the applicable Property, and all such
utilities are connected so as to serve the applicable Property without
passing over other property, and (iii) all roads necessary for the full
utilization of each Property for its current purpose have been
completed and dedicated to public use and accepted by all governmental
authorities or are the subject of access easements for the benefit of
the applicable Property.
(q) Special Assessments. To the knowledge of
the Grantor, except to the extent set forth on Schedule 4, there are
no pending or, to the knowledge of Grantor, proposed special or
other assessments for public improvements or otherwise affecting any
Property, nor are there any contemplated improvements to any
Property that may result in such special or other assessments.
(r) Flood Zone. To the knowledge of the
Grantor, none of the Properties are located in a flood hazard area
as defined by the Federal Insurance Administration.
(s) Separate Business; Corporate Formalities.
(i) Grantor shall maintain its own deposit
account or accounts, separate from those of any Affiliate,
with commercial banking institutions. The funds of Grantor
will not be diverted to any other Person or for other than
business uses of Grantor, nor will such funds be commingled
with the funds of any other Affiliate;
(ii) To the extent that Grantor shares the same
officers or other employees as any of its partners or
Affiliates, the salaries of and the expenses related to
providing benefits to such officers and other employees shall
be fairly allocated among such entities, and each such entity
shall bear its fair share of the salary and benefit costs
associated with all such common officers and employees;
(iii) To the extent that Grantor jointly contracts
with any of its partners or Affiliates to do business with
vendors or service providers or to share overhead expenses,
the costs incurred in so doing shall be allocated fairly among
such entities, and each such entity shall bear its fair share
of such costs. To the extent that Grantor contracts or does
business
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with vendors or service providers where the goods and
services provided are partially for the benefit of any other
Person, the costs incurred in so doing shall be fairly
allocated to or among such entities for whose benefit the
goods and services are provided, and each such entity shall
bear its fair share of such costs. All material transactions
between Grantor and any of its Affiliates shall be only on an
arm's length basis.
(iv) To the extent that Grantor and any of its
constituent partners or Affiliates have offices in the same
location, there shall be a fair and appropriate allocation of
overhead costs among them, and each such entity shall bear its
fair share of such expenses.
(v) Grantor shall conduct its affairs strictly
in accordance with its organizational documents, and observe
all necessary, appropriate and customary partnership
formalities, including, but not limited to, obtaining any and
all partners' consents necessary to authorize actions taken or
to be taken, and maintaining accurate and separate books,
records and accounts, including, but not limited to, payroll
and intercompany transaction accounts.
(vi) The Grantor and the General Partner shall
each, at all times, maintain their respective existence as a
Single Purpose Entity.
(t) Director Consents. The General Partner of
Grantor shall obtain the consent of all its directors to (i) file a
bankruptcy or insolvency petition or otherwise institute insolvency
proceedings or to authorize Grantor to do so, (ii) dissolve,
liquidate, consolidate, merge or sell all or substantially all of
Grantor's assets (provided, that no such consent from the
Independent Director shall be required in connection with the sale
of the Property pursuant to Section 11(a) hereof), (iii) engage in
any other business activity, or (iv) amend its organizational
documents with respect to clauses (i), (ii) or (iii).
(u) No Default. As of the date hereof, Grantor
is not in material default under the terms and provisions of any
Operating Agreement or any Material Lease.
(v) Collateral As Entirety of Property. Each
Property and the personalty located thereon constitutes all of the
real property, equipment
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and fixtures currently owned by Grantor or currently used in the
operation of the business located on such Property.
(w) Intentionally omitted.
(x) Estoppels. Grantor shall use commercially
reasonable efforts to obtain within sixty (60) days after the date
hereof from each of J.C. Penney Properties, Inc., J.C. Penney
Company, Inc., Mercantile Properties, Inc., and The Castner-Knott
Dry Goods Co. (collectively, the "Estoppel Tenants"), either (i)
written confirmation that Beneficiary may rely on the estoppel
certificate relating to any Operating Agreement to which such
Estoppel Tenant is a party which was provided by such Estoppel
Tenant to Grantor prior to the date hereof, or (ii) an estoppel
certificate from such Estoppel Tenant for the benefit of Beneficiary
and Grantor in substantially the same form as previously provided by
such Estoppel Tenant to Grantor in relation to each Operating
Agreement to which such Estoppel Tenant is a party; provided
however, that failure to obtain such written confirmation or
certificate within the period specified above shall not constitute a
default hereunder.
(y) Title Insurance. Grantor shall cause to be
delivered to Beneficiary a mortgagee's title insurance policy,
issued by the Title Company, for each Property in an amount not less
than 125% of the Allocated Loan Amount, which title insurance policy
shall be dated as of the date hereof, and shall insure that this
Mortgage is a valid first priority lien on the Land and
Improvements, subject only to Permitted Encumbrances, standard
exceptions contained in the current ALTA printed form policy issued
by the Title Company, and any other matter consented to by
Beneficiary.
32. No Waiver. No failure by Beneficiary 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 right, power or remedy 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 Beneficiary with respect to any other
then existing or subsequent breach.
33. Non-Recourse Obligations. Notwithstanding
anything in this Mortgage (whether or not a specific reference to
this Section 33 is made) the Notes or the other Loan Documents, no
personal liability shall be asserted or enforceable
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against, and Beneficiary (and its successors and assigns) shall not
have any recourse to any assets of, (i) Grantor, (ii) any Affiliate
of Grantor, (iii) any Person owning directly or indirectly, any legal
or beneficial interest in Grantor or any Affiliate of Grantor, or
(iv) any partner, principal, officer, controlling person,
beneficiary, trustee, advisor, shareholder, employee, agent,
Affiliate or director of any Persons described in clauses (i)
through (iii) above and their successors and assigns (Persons
described in clauses (i) through (iv) collectively, the "Exculpated
Parties") by Beneficiary or Trustee in respect of the Obligations,
this Mortgage, the Notes or any other Loan Document, or the making,
issuance or transfer thereof, all such liability, if any, being
expressly waived by Beneficiary, Trustee, and each successive holder
of any Notes and this Mortgage shall accept the Notes and this
Mortgage upon the express condition of this provision and limitation
that in the case of the occurrence and continuance of an Event of
Default, Beneficiary's remedies in its sole discretion shall be any
or all of the following; provided that there shall be no personal or
deficiency money judgment sought or entered against any Exculpated
Party and such remedies shall be limited to the following rights
against the Trust Estate:
(i) Foreclosure of the lien of this Mortgage in
accordance with the terms and provisions set forth in this
Mortgage;
(ii) Action against any other security at any
time given to secure the payment of the Notes and under the
other Loan Documents; and
(iii) Exercise of any other remedy set forth in
this Mortgage or any other Loan Document.
The lien of any judgment against Grantor and any
proceeding instituted on, under or in connection with the Notes or
this Mortgage, or both, shall not extend to any property now or
hereafter owned by Grantor or any Exculpated Party other than the
Net Operating Income from, and the ownership interest of Grantor in,
the Trust Estate and the other security given to Beneficiary for the
payment of the Notes or this Mortgage.
Notwithstanding anything in this Mortgage to the
contrary, there shall at no time be any limitation on Grantor's (but
this provision shall not apply to any Other Exculpated Parties
directly or derivatively) liability for the payment to Beneficiary
of: (1) condemnation proceeds or insurance proceeds which Grantor
has received and to which Beneficiary is entitled pursuant to the
terms of this
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Mortgage or any of the Loan Documents to the extent the same have
not been applied toward payment of sums due under the Notes or under
this Mortgage, or used for the repair or replacement of the Trust
Estate pursuant to this Mortgage, or (2) all loss, damage and
expense as incurred by Beneficiary and arising from any fraud, or
intentional misrepresentation of Grantor, (3) any misappropriation
of Rents or security deposits by Grantor or any Affiliate of Grantor
or (4) the indemnification set forth in Section 40(c) hereof.
34. Further Assurances. Grantor, at its own expense,
will execute, acknowledge and deliver all such reasonable further
acts, documents or instruments including security agreements on any
building equipment included or to be included in the Trust Estate
and a separate assignment of each Lease and take all such actions as
Beneficiary from time to time may reasonably request to better
assure, transfer and confirm unto Beneficiary the rights now or
hereafter intended to be granted to Beneficiary under this Mortgage
or the other Loan Documents. Grantor shall notify Beneficiary no
less than thirty (30) days prior to a change of address.
35. Estoppel Certificates. Grantor and Beneficiary
each will, from time to time, upon twenty (20) days' prior written
request by the other party, execute, acknowledge and deliver to the
requesting party, in the case of a request to Beneficiary, a
certificate signed by an authorized officer or officers and in the
case of a request to Grantor, an Officer's Certificate, 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 amount of accrued and unpaid interest and the
outstanding principal amount of the Notes. The estoppel certificate
from Beneficiary shall also state either that, to Grantor's best
knowledge and based on no independent investigation, no Default
exists hereunder or, if any Event of Default shall exist hereunder,
specify any Event of Default of which Grantor has actual knowledge
and the steps being taken to cure such Event of Default.
36. Intentionally Omitted.
37. INDEMNIFICATION BY GRANTOR.
SUBJECT TO THE PROVISIONS OF SECTION 33 HEREOF,
GRANTOR WILL PROTECT, INDEMNIFY AND SAVE HARMLESS BENEFICIARY, AND
ALL OFFICERS, DIRECTORS, STOCKHOLDERS, PARTNERS, EMPLOYEES,
SUCCESSORS AND ASSIGNS THEREOF
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(COLLECTIVELY, THE "INDEMNIFIED PARTIES") FROM AND AGAINST ALL
LIABILITIES, OBLIGATIONS, CLAIMS, DAMAGES, PENALTIES, CAUSES OF
ACTION, COSTS AND EXPENSES (INCLUDING ALL REASONABLE ATTORNEYS'
FEES AND EXPENSES ACTUALLY INCURRED) IMPOSED UPON OR INCURRED BY
OR ASSERTED AGAINST THE INDEMNIFIED PARTIES OR THE TRUST ESTATE OR
ANY PART OF ITS INTEREST THEREIN, BY REASON OF THE OCCURRENCE OR
EXISTENCE OF ANY OF THE FOLLOWING (TO THE EXTENT INSURANCE PROCEEDS
PAYABLE ON ACCOUNT OF THE FOLLOWING SHALL BE INADEQUATE; IT BEING
UNDERSTOOD THAT IN NO EVENT WILL THE INDEMNIFIED PARTIES BE REQUIRED
TO ACTUALLY PAY OR INCUR ANY COSTS OR EXPENSES AS A CONDITION TO
THE EFFECTIVENESS OF THE FOREGOING INDEMNITY) PRIOR TO (I) THE
ACCEPTANCE BY BENEFICIARY OF A DEED-IN-LIEU OR ASSIGNMENT-IN-LIEU
OF FORECLOSURE WITH RESPECT TO THE APPLICABLE PROPERTY OR
ACQUISITION OF THE PROPERTY BY BENEFICIARY BY OTHER MEANS, OR (II)
THE INDEMNIFIED PARTIES OR OTHER PURCHASER TAKING POSSESSION OR
CONTROL OF THE APPLICABLE PROPERTY, UNLESS CAUSED SOLELY BY THE
ACTUAL WILLFUL MISCONDUCT OR GROSS NEGLIGENCE OF THE INDEMNIFIED
PARTIES (OTHER THAN SUCH WILLFUL MISCONDUCT OR GROSS NEGLIGENCE
IMPUTED TO THE INDEMNIFIED PARTIES BECAUSE OF THEIR INTEREST IN
THE TRUST ESTATE): (1) OWNERSHIP OF GRANTOR'S INTEREST IN THE
TRUST ESTATE, OR ANY INTEREST THEREIN, OR RECEIPT OF ANY RENTS OR
OTHER SUM THEREFROM, (2) ANY ACCIDENT, INJURY TO OR DEATH OF ANY
PERSONS OR LOSS OF OR DAMAGE TO PROPERTY OCCURRING ON OR ABOUT THE
TRUST ESTATE OR ANY APPURTENANCES THERETO, (3) ANY DESIGN,
CONSTRUCTION, OPERATION, REPAIR, MAINTENANCE, USE, NON-USE OR
CONDITION OF THE TRUST ESTATE OR APPURTENANCES THERETO, 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 BENEFICIARY, ANY
CLAIM THE INSURANCE AS TO WHICH IS INADEQUATE, AND ANY ENVIRONMENTAL
CLAIM, (4) ANY DEFAULT BY GRANTOR UNDER THIS MORTGAGE OR ANY OF THE
OTHER LOAN DOCUMENTS OR ANY FAILURE ON THE PART OF GRANTOR TO
PERFORM OR COMPLY WITH ANY OF THE MATERIAL TERMS OF ANY LEASE OR
OPERATING AGREEMENT WITHIN THE APPLICABLE NOTICE OR GRACE PERIODS,
(5) ANY PERFORMANCE OF ANY LABOR OR SERVICES OR THE FURNISHING OF
ANY MATERIALS OR OTHER PROPERTY IN RESPECT OF THE TRUST ESTATE OR
ANY PART THEREOF, (6) ANY NEGLIGENCE OR TORTIOUS ACT OR OMISSION ON
THE PART OF GRANTOR OR ANY OF ITS AGENTS, CONTRACTORS, SERVANTS,
EMPLOYEES, SUBLESSEES, LICENSES OR INVITEES, (7) ANY CONTEST
REFERRED TO IN SECTION 7(C) HEREOF, (8) ANY OBLIGATION OR
UNDERTAKING RELATING TO THE PERFORMANCE OR DISCHARGE OF ANY OF THE
TERMS, COVENANTS AND CONDITIONS OF THE LANDLORD CONTAINED IN THE
LEASES OR (9) THE PRESENCE AT, IN OR UNDER ANY PROPERTY OR THE
IMPROVEMENTS THEREON OF ANY HAZARDOUS SUBSTANCE IN VIOLATION OF ANY
LEGAL REQUIREMENT. NOTWITHSTANDING ANYTHING TO THE CONTRARY
CONTAINED HEREIN, GRANTOR SHALL HAVE NO OBLIGATION TO PROTECT,
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INDEMNIFY AND SAVE HARMLESS ANY INDEMNIFIED PARTY IN CONNECTION WITH
THE RELEASE OF ANY HAZARDOUS SUBSTANCE AT, IN OR UNDER THE PROPERTY
BY ANY INDEMNIFIED PARTY. ANY AMOUNTS THE INDEMNIFIED PARTIES ARE
LEGALLY ENTITLED TO RECEIVE UNDER THIS SECTION 37 WHICH ARE NOT PAID
WITHIN TEN (10) BUSINESS DAYS AFTER WRITTEN DEMAND THEREFOR BY THE
INDEMNIFIED PARTIES OR BENEFICIARY, SETTING FORTH IN REASONABLE
DETAIL THE AMOUNT OF SUCH DEMAND AND THE BASIS THEREFOR, SHALL BEAR
INTEREST FROM THE DATE OF DEMAND AT THE DEFAULT RATE, AND SHALL,
TOGETHER WITH SUCH INTEREST, BE PART OF THE INDEBTEDNESS AND SECURED
BY THIS MORTGAGE. IN CASE ANY ACTION, SUIT OR PROCEEDING IS BROUGHT
AGAINST THE INDEMNIFIED PARTIES BY REASON OF ANY SUCH OCCURRENCE,
GRANTOR SHALL AT GRANTOR'S EXPENSE RESIST AND DEFEND SUCH ACTION,
SUIT OR PROCEEDING OR WILL CAUSE THE SAME TO BE RESISTED AND
DEFENDED BY COUNSEL AT GRANTOR'S REASONABLE EXPENSE FOR THE INSURER
OF THE LIABILITY OR BY COUNSEL DESIGNATED BY GRANTOR (UNLESS
REASONABLY DISAPPROVED BY BENEFICIARY PROMPTLY AFTER BENEFICIARY HAS
BEEN NOTIFIED OF SUCH COUNSEL); PROVIDED, HOWEVER, THAT NOTHING
HEREIN SHALL COMPROMISE THE RIGHT OF BENEFICIARY (OR ANY INDEMNIFIED
PARTY) TO APPOINT ITS OWN COUNSEL AT GRANTOR'S EXPENSE FOR ITS
DEFENSE WITH RESPECT TO ANY ACTION WHICH IN ITS REASONABLE OPINION
PRESENTS A CONFLICT OR POTENTIAL CONFLICT BETWEEN BENEFICIARY AND
GRANTOR THAT WOULD MAKE SUCH SEPARATE REPRESENTATION ADVISABLE;
PROVIDED FURTHER THAT IF BENEFICIARY SHALL HAVE APPOINTED SEPARATE
COUNSEL PURSUANT TO THE FOREGOING, GRANTOR SHALL NOT BE RESPONSIBLE
FOR THE EXPENSE OF ADDITIONAL SEPARATE COUNSEL OF ANY INDEMNIFIED
PARTY UNLESS IN THE REASONABLE OPINION OF BENEFICIARY A CONFLICT OR
POTENTIAL CONFLICT EXISTS BETWEEN SUCH INDEMNIFIED PARTY AND
BENEFICIARY. SO LONG AS GRANTOR IS RESISTING AND DEFENDING SUCH
ACTION, SUIT OR PROCEEDING AS PROVIDED ABOVE IN A PRUDENT AND
COMMERCIALLY REASONABLE MANNER, BENEFICIARY AND THE INDEMNIFIED
PARTIES SHALL NOT BE ENTITLED TO SETTLE SUCH ACTION, SUIT OR
PROCEEDING AND CLAIM THE BENEFIT OF THIS SECTION 37 WITH RESPECT TO
SUCH ACTION, SUIT OR PROCEEDING AND BENEFICIARY AGREES THAT IT WILL
NOT SETTLE ANY SUCH ACTION, SUIT OR PROCEEDING WITHOUT THE CONSENT
OF GRANTOR; PROVIDED, HOWEVER, THAT IF BENEFICIARY REASONABLY
DETERMINES THAT GRANTOR IS NOT DILIGENTLY DEFENDING SUCH ACTION,
SUIT OR PROCEEDING IN A PRUDENT AND COMMERCIALLY REASONABLE MANNER
AS PROVIDED ABOVE, AND HAS PROVIDED GRANTOR WITH THIRTY (30) DAYS'
PRIOR WRITTEN NOTICE, OR SHORTER PERIOD IF MANDATED BY THE
REQUIREMENTS OF APPLICABLE LAW, AND OPPORTUNITY TO CORRECT SUCH
DETERMINATION, BENEFICIARY MAY SETTLE SUCH ACTION, SUIT OR
PROCEEDING SUBJECT ONLY TO GRANTOR'S CONSENT WHICH SHALL NOT BE
UNREASONABLY WITHHELD OR DELAYED, AND CLAIM THE BENEFIT OF THIS
SECTION 37 WITH RESPECT TO SETTLEMENT OF SUCH ACTION, SUIT OR
PROCEEDING. ANY INDEMNIFIED PARTY WILL GIVE GRANTOR PROMPT NOTICE
AFTER SUCH INDEMNIFIED PARTY OBTAINS ACTUAL
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KNOWLEDGE OF ANY POTENTIAL CLAIM BY SUCH INDEMNIFIED PARTY FOR
INDEMNIFICATION HEREUNDER.
38. Release of Property. (a) If Grantor shall pay or
cause to be paid, the principal of and interest on the Notes in full
at maturity or as permitted in accordance with the terms thereof and
all other Indebtedness payable to Beneficiary hereunder by Grantor
or secured hereby or by the other Loan Documents and all of the
payment Obligations shall have been performed, then this Mortgage
and all the other Loan Documents shall be discharged and satisfied
or assigned (to Grantor or to any other Person at Grantor's
direction and without representation or warranty by, or recourse to,
Beneficiary), at Grantor's option, without warranty (except that
Beneficiary shall be deemed to have represented that such release
and termination or reassignment has been duly authorized and that it
has not assigned or encumbered this Mortgage or the other Loan
Documents), at the expense of Grantor upon its written request.
Concurrently with such release and satisfaction or assignment of
this Mortgage and all the other Loan Documents, Beneficiary will
return to Grantor the Notes and all insurance policies relating to
the Trust Estate which may be held by Beneficiary, any amounts held
in escrow pursuant to this Mortgage or the Cash Collateral
Agreement, if applicable, or otherwise, and any part of the Trust
Estate or other Collateral that may be in its possession and, on the
written request and at the expense of Grantor, will execute and
deliver such instruments of conveyance, assignment and release
(including appropriate UCC-3 termination or assignment statements)
prepared by Grantor and as may reasonably be requested by Grantor to
evidence such release and satisfaction, or assignment, and any such
instrument, when duly executed by Beneficiary and, if appropriate,
duly recorded by Grantor in the places where this Mortgage and each
other Loan Document is recorded, shall conclusively evidence the
release and satisfaction or assignment of this Mortgage and the
other Loan Documents.
(b) Grantor shall be entitled to have all of the
Properties released from the lien of this Mortgage, from and after
the earlier of (i) the third anniversary of the Loan Closing, (ii)
the second anniversary of any Securitization of the Loan, and (iii)
at any time if defeasance is not prohibited under the vehicle
utilized in connection with the Securitization, by prepaying the
Class B Note, and, provided that all of the conditions set forth in
Section 46 have been satisfied. Upon or after the satisfaction of
all conditions provided for herein in Sections 46 and 47,
Beneficiary shall effectuate the following: the security interest
of Beneficiary in this Mortgage and other Loan Documents shall be
released from the Lien of this Mortgage and Beneficiary will execute
and deliver any agreements reason-
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ably requested by Grantor to release and terminate or reassign, at
Grantor's option, this Mortgage and all other Loan Documents;
provided, that such release and termination or reassignment shall
be without recourse to Beneficiary (except as contemplated hereby)
and without any representation or warranty except that Beneficiary
shall be deemed to have represented that such release and termination
or reassignment has been duly authorized and that it has not assigned
or encumbered this Mortgage or the other Loan Documents (except as
contemplated hereby) and Beneficiary shall return the originals of
any Loan Documents to Grantor and all amounts in any Accounts, all
as more particularly described in Section 38(a) above.
39. Rating Agency Monitoring. Until the Obligations
are paid in full, Grantor shall provide the Rating Agencies with all
financial reports required hereunder and such other information as
it shall reasonably request, including copies of any notices
delivered to and received from Beneficiary hereunder, to enable it
to continuously monitor the creditworthiness of Grantor and to
permit an annual surveillance of the implied credit rating of
certain securities secured by a pledge of the Note; provided, that
Beneficiary shall pay all Rating Agencies monitoring fees and notify
Grantor with the names and addresses of such Rating Agencies.
40. Environmental Matters.
(a) Representations. Grantor hereby represents
and warrants that except as set forth in the reports listed on
Exhibit B hereto (the "Environmental Reports"), (i) Grantor has not
knowingly engaged in or knowingly permitted any operations or
activities upon, or any use or occupancy of any Property, or any
portion thereof, for the purpose of or in any way involving the
handling, manufacture, treatment, storage, use, generation, release,
discharge, refining, dumping or disposal of any Hazardous Substances
on, under, in or about the Property, or transported any Hazardous
Substances to, from or across the Property, except in all cases in
material compliance with Environmental Requirements and only in the
course of legitimate business operations at the Property; (ii) to
Grantor's knowledge, no tenant, occupant or user of any Property,
nor any other person, has during Grantor's ownership of such
Property, engaged in or permitted any operations or activities upon,
or any use or occupancy of the Property, or any portion thereof, for
the purpose of or in any material way involving the handling,
manufacture, treatment, storage, use, generation, release,
discharge, refining, dumping or disposal of any Hazardous Substances
on, in or
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about the Property, or transported any Hazardous
Substances to, from or across the Property, except in all cases in
material compliance with Environmental Laws and only in the course
of legitimate business operations at the Property; (iii) to
Grantor's knowledge, no Hazardous Substances are presently
constructed, deposited, stored, or otherwise located on, under, in
or about any Property except in material compliance with
Environmental Laws; (iv) to Grantor's knowledge, no Hazardous
Substances have migrated from any Property upon or beneath other
properties which would reasonably be expected to result in material
liability for Grantor; and (v) to Grantor's knowledge, no Hazardous
Substances have migrated or threaten to migrate from other
properties upon, about or beneath any Property which would
reasonably be expected to result in material liability for Grantor.
(b) Covenants. Subject to Grantor's right to
contest under Section 7(c) hereof, Grantor covenants and agrees with
Beneficiary that it shall comply with all Environmental Laws in all
material respects, except where the failure is not reasonably likely
to have a Material Adverse Effect. If at any time during the
continuance of the Lien of this Mortgage, a Governmental Authority
having jurisdiction over the Trust Estate requires remedial action
to correct the presence of Hazardous Materials in or under any
Property (an "Environmental Event"), Grantor shall deliver prompt
notice of the occurrence of such Environmental Event to Beneficiary.
Within (30) thirty days after Grantor has knowledge of the
occurrence of an Environmental Event, Grantor shall deliver to
Beneficiary an Officer's Certificate (an "Environmental
Certificate") explaining the Environmental Event in reasonable
detail and setting forth the proposed remedial action, if any.
(C) ENVIRONMENTAL INDEMNIFICATION. SUBJECT TO
THE PROVISIONS OF SECTION 33 HEREOF, GRANTOR SHALL PROTECT,
INDEMNIFY, SAVE, DEFEND, AND HOLD HARMLESS BENEFICIARY AND ALL
OFFICERS, DIRECTORS, STOCKHOLDERS, PARTNERS, EMPLOYEES, SUCCESSORS
AND ASSIGNS THEREOF (COLLECTIVELY, THE "INDEMNIFIED ENVIRONMENTAL
PARTIES") FROM AND AGAINST ANY AND ALL LIABILITY, LOSS, DAMAGE,
ACTIONS, CAUSES OF ACTION, COSTS OR EXPENSES WHATSOEVER (INCLUDING
REASONABLE ATTORNEYS' FEES AND EXPENSES) AND ANY AND ALL CLAIMS,
SUITS AND JUDGMENTS WHICH ANY INDEMNIFIED ENVIRONMENTAL PARTY MAY
SUFFER, AS A RESULT OF OR WITH RESPECT TO: (A) ANY ENVIRONMENTAL
CLAIM RELATING TO OR ARISING FROM SUCH PROPERTY; (B) THE VIOLATION
OF ANY ENVIRONMENTAL LAW IN CONNECTION WITH SUCH PROPERTY; (C) ANY
RELEASE, SPILL, OR THE PRESENCE OF ANY HAZARDOUS SUBSTANCES ON SUCH
PROPERTY; AND (D) THE PRESENCE IN, ON, OR THE RELEASE, FROM, SUCH
PROPERTY OF ANY HAZARDOUS SUBSTANCES, WHETHER OR NOT SUCH CONDITION
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WAS KNOWN OR UNKNOWN TO GRANTOR PROVIDED THAT, IN EACH CASE, GRANTOR
MAY BE RELIEVED OF ITS OBLIGATION UNDER THIS SUBSECTION IF ANY OF
THE MATTERS REFERRED TO IN CLAUSES (A) THROUGH (D) ABOVE DID NOT
OCCUR (BUT NEED NOT HAVE BEEN DISCOVERED) PRIOR TO (1) THE
FORECLOSURE OF THIS MORTGAGE WITH RESPECT TO SUCH PROPERTY, OR
OTHERWISE TAKING TITLE TO THE PROPERTY, (2) THE DELIVERY BY GRANTOR
TO BENEFICIARY OF A DEED-IN-LIEU FORECLOSURE WITH RESPECT TO SUCH
PROPERTY, OR (3) BENEFICIARY'S TAKING POSSESSION AND CONTROL OF SUCH
PROPERTY AFTER THE OCCURRENCE OF AN EVENT OF DEFAULT HEREUNDER. IF
ANY SUCH ACTION OR OTHER PROCEEDING SHALL BE BROUGHT AGAINST
BENEFICIARY, UPON WRITTEN NOTICE FROM GRANTOR TO BENEFICIARY (GIVEN
WITHIN TEN (10) DAYS FOLLOWING BENEFICIARY'S NOTICE OR KNOWLEDGE TO
GRANTOR OF SUCH ACTION OR PROCEEDING), GRANTOR SHALL BE ENTITLED TO
ASSUME THE DEFENSE THEREOF, AT GRANTOR'S EXPENSE, WITH COUNSEL
REASONABLY ACCEPTABLE TO BENEFICIARY; PROVIDED, HOWEVER, BENEFICIARY
MAY, AT ITS OWN EXPENSE, RETAIN SEPARATE COUNSEL TO PARTICIPATE IN
SUCH DEFENSE, BUT SUCH PARTICIPATION SHALL NOT BE DEEMED TO GIVE
BENEFICIARY A RIGHT TO CONTROL SUCH DEFENSE, WHICH RIGHT GRANTOR
EXPRESSLY RETAINS. NOTWITHSTANDING THE FOREGOING, EACH INDEMNIFIED
ENVIRONMENTAL PARTY SHALL HAVE THE RIGHT TO EMPLOY SEPARATE COUNSEL
AT GRANTOR'S EXPENSE IF, IN THE REASONABLE OPINION OF LEGAL COUNSEL,
A CONFLICT OR POTENTIAL CONFLICT EXISTS BETWEEN THE INDEMNIFIED
ENVIRONMENTAL PARTY AND GRANTOR THAT WOULD MAKE SUCH SEPARATE
REPRESENTATION NECESSARY. GRANTOR SHALL HAVE NO OBLIGATION TO
INDEMNIFY AN INDEMNIFIED ENVIRONMENTAL PARTY FOR DAMAGE OR LOSS
RESULTING (I) FROM SUCH INDEMNIFIED ENVIRONMENTAL PARTY'S NEGLIGENCE
OR MISCONDUCT OR (II) ANY OTHER INDEMNIFIED PARTY'S NEGLIGENCE OR
MISCONDUCT.
41. Intentionally Omitted.
42. Counterparts. This Mortgage may be executed in
one or more counterparts, each of which shall be deemed to be an
original, and all of which together shall constitute one and the
same instrument.
43. Merger, Conversion, Consolidation or Succession to
Business of Beneficiary. Any corporation into which Beneficiary may
be merged or converted or with which it may be consolidated, or any
corporation resulting from any merger, conversion or consolidation
to which Beneficiary shall be a party, or any corporation succeeding
to all or substantially all the corporate trust business of
Beneficiary, shall be the successor of Beneficiary hereunder,
without the execution or filing of any paper or any further act on
the part of any of the parties hereto. Beneficiary shall provide
the Rating Agency with written notice of any merger or
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conversion to
be undertaken pursuant to this Section 43 no less than 30 days prior
to such merger or conversion.
44. No Endorsement. Beneficiary shall not become or
be considered to be an endorser, co-maker or co-obligor on any Note
or on any obligation of Grantor secured by this Mortgage or
otherwise.
45. Intentionally Omitted.
46. Defeasance.
(a) With respect to a release of the Lien of this
Mortgage with respect to all of the Properties pursuant to Section
38(b) hereof other than in connection with a total repayment on the
Maturity Date (the "Defeasance"), the Grantor shall deposit
Defeasance Collateral in accordance with subsection (B) below to the
Defeasance Collateral Account. In no event shall the deliverance of
Defeasance Collateral cause the Grantor to be released from its
obligations to make payments of principal and interest on the Notes.
(b) The Defeasance shall be permitted at such
time as all of the following events shall have occurred:
(i) the Defeasance Collateral Account shall
have been established pursuant to Section 47 hereof and all
amounts of principal and interest due on the Class B Note have
been prepaid in accordance with the terms of the Class B Note;
(ii) if the Mortgage Loan is held by a
REMIC, a period of more than two years shall have elapsed
since the date on which the Mortgage Loan is deposited into
such REMIC;
(iii) Grantor shall have delivered or
caused to have been delivered to Beneficiary the Defeasance
Collateral for deposit into the Defeasance Collateral Account
such that it will satisfy the Total Defeasance Collateral
Requirement at the time of delivery and all such Defeasance
Collateral, if in registered form, shall be registered in the
name of Beneficiary or its nominee (and, if registered in
nominee name endorsed to Beneficiary or in blank) and, if
issued in book-entry form, the name of Beneficiary or its
nominee shall appear as the owner of such securities on
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the books of the Federal Reserve Bank or other party maintaining
such book-entry system;
(iv) Grantor shall have granted or caused
to have been granted to Beneficiary a valid perfected first
priority security interest in the Defeasance Collateral and
all proceeds thereof;
(v) Grantor shall have delivered or caused
to be delivered to Beneficiary an Officers' Certificate, dated
as of the date of such delivery (x) that sets forth the
aggregate face amount or unpaid principal amount, interest
rate and maturity of all such Defeasance Collateral, a copy of
the transaction journal, if any, or such other notification,
if any, published by or on behalf of the Federal Reserve Bank
or other party maintaining a book-entry system advising that
Beneficiary or its nominee is the owner of such securities
issued in book-entry form, and (y) to the following effect
that states that:
(A) Grantor owns the Defeasance Collateral
being delivered to Beneficiary free and clear of
any and all Liens, security interests or other
encumbrances, and has not assigned any interest or
participation therein (or, if any such interest or
participation has been assigned, it has been
released), and Grantor has full power and authority
to pledge such Defeasance Collateral to Beneficiary;
(B) such Defeasance Collateral consists
solely of Defeasance Eligible Investments;
(C) such Defeasance Collateral satisfies the
Total Defeasance Collateral Requirement, determined
as of the date of delivery;
(D) the Defeasance contemplated hereby will
not give rise to an Event of Default other than
such Events of Default that are no longer
applicable as a result of the Property Release;
and
(E) the information set forth in the schedule
attached to such Officers' Certificate is correct
and complete as of the
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date of delivery (such schedule, which shall be
attached to and form a part of such Officers'
Certificate, shall demonstrate satisfaction of
the requirement set forth in clause (C) above,
in a form reasonably acceptable to Beneficiary);
(vi) Grantor shall have delivered or caused
to be delivered to Beneficiary (A) the Required Opinion with
respect to Beneficiary's interest in such Defeasance Collateral,
(B) a Tax Opinion in relation to the Class A Note, (C) if
the Mortgage Loan at such time is included in a REMIC, a
Nondisqualification Opinion, and (D) an additional Opinion of
Counsel, to the effect that Beneficiary will not be required
to be registered under the Investment Company Act as a result
of such Defeasance and an Opinion of Counsel that Beneficiary
has been granted a perfected security interest in the
Defeasance Collateral subject to customary exceptions and
assumptions; and
(vii) Grantor shall have delivered or
caused to be delivered to Beneficiary such other documents and
certificates as Beneficiary may reasonably request in
connection with demonstrating that Grantor has satisfied the
provisions of this Section 46(b).
(c) For purposes of determining whether sufficient
amounts are on deposit in the Defeasance Collateral Account,
there shall be included only payments of principal and predetermined
and certain income thereon (determined without regard to any
reinvestment of such amounts) that will occur on a stated date for a
stated payment on or before the dates when such amounts may be
required to be applied to pay the principal and interest when due on
the Class A Note through and including the Maturity Date together
with the outstanding principal balance of the Class A Note as of the
Maturity Date.
47. Defeasance Collateral Account.
(a) On or before the date on which Grantor
delivers Defeasance Collateral to Beneficiary pursuant to Section 6
or 46 hereof, Grantor shall open at any Approved Bank or Banks at
the time and acting as custodian for Beneficiary, a defeasance
collateral account (the "Defeasance Collateral Account") which shall
at all times be an Eligible Account (as defined in the Cash Collateral
Agreement), in which Grantor shall grant to Beneficiary or reconfirm
the grant to Beneficiary of a security interest as part of the Trust
Estate hereunder. Should
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Grantor open the Defeasance Collateral Account at a bank or banks
other than an Approved Bank, such Defeasance Collateral Account must
be maintained as a segregated trust account. The Defeasance Collateral
Account shall contain (i) all Defeasance Collateral delivered by
Grantor pursuant to Sections 38, 46 and 47 hereof, (ii) all payments
received on Defeasance Collateral held in the Defeasance Collateral
Account and (iii) all income or other gains from investment of moneys
or other property deposited in the Defeasance Collateral Account,
provided, however, that (x) any sums earned on any Defeasance
Collateral, which sums were not included in the determination of the
Total Defeasance Collateral, shall be paid monthly by Beneficiary
into the Cash Collateral Account to be held in accordance with the
Cash Collateral Agreement, and (y) any sums earned on any Defeasance
Collateral representing the difference between the assumed interest
on the Note at the Default Rate and the lesser, if applicable, of the
actual interest on the Note for the quarter prior to the preceding Due
Date shall be paid quarterly to the Cash Collateral Account. All such
amounts, including all income from the investment or reinvestment
thereof, shall be held by Beneficiary as part of the Trust Estate,
subject to withdrawal by Beneficiary for the purposes set forth in
this Section 47. Grantor shall be the owner of the Defeasance
Collateral Account and shall report all income accrued on Defeasance
Collateral for federal, state and local income tax purposes in its
income tax return.
(b) Beneficiary shall withdraw, draw on or
collect and apply the amounts that are on deposit in the Defeasance
Collateral Account to pay when due the principal and all
installments of interest and principal on the Class A Note and other
amounts due under the Loan Documents.
(c) Funds and other property in the Defeasance
Collateral Account shall not be commingled with any other monies or
property of Grantor or any Affiliate of Grantor.
(d) Beneficiary shall not in any way be held
liable by reason of any insufficiency in the Defeasance Collateral
Account.
48. Reserves. (a) On the first day of the month
after the Closing date and on the first day of every month
thereafter, Beneficiary will instruct Securities Intermediary to
withdraw from the Operating Accounts and deposit into the Tenant
Improvement and Leasing Commission Reserve Account an annual amount,
payable in monthly installments, equal to $100,000 per month (such
funds, together with all investment income earned thereon, are
referred to
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herein as the "Monthly Tenant Improvement and Leasing Commission
Reserve Amount"). Securities Intermediary shall withdraw such funds
until an amount equal to One Million Two Hundred Thousand Dollars
($1,200,000) for the Properties shall have been deposited in
the Tenant Improvement and Leasing Commission Reserve Account, and,
upon disbursement, shall replenish the Tenant Improvement and
Leasing Commission Reserve Amounts by withdrawal from the Operating
Accounts on the first day of the month as set forth above. All
interest earned on the Tenant Improvement and Leasing Commission
Reserve Account shall be for the benefit of Grantor and shall be
disbursed in accordance with the provisions of the Cash Collateral
Agreement. Portions of the Tenant Improvement and Leasing
Commission Reserve Account shall be disbursed by Securities
Intermediary to Grantor pursuant to instructions from Beneficiary
not more frequently than once per month, provided no Event of
Default shall have occurred and be continuing, upon delivery by
Grantor to Beneficiary of an Officer's Certificate stating that
Grantor has incurred costs associated with tenant improvements and
leasing commissions pursuant to invoices attached thereto. Within
five (5) Business Days of receipt of such certification, Beneficiary
shall instruct Securities Intermediary to disburse to Grantor an
amount equal to that requested by Grantor.
(b) At any time, Grantor may elect to replace any
Monthly Tenant Improvement and Leasing Commission Reserve Amount
then being retained by Securities Intermediary and satisfy its
obligations under this Section 48 by delivery of a Letter of Credit
(which Letter of Credit shall be either an "evergreen" Letter of
Credit or shall not expire until a date two months after the
Maturity Date or Cash and Cash Equivalents (any such security,
"Tenant Improvement and Leasing Commission Security") in an amount
equal to the amount required to be deposited pursuant to Section
48(a) to discharge the tenant improvement and leasing commissions
which shall become due during the twelve (12) month period
immediately after the date of delivery of such Tenant Improvement
and Leasing Commission Security (and for each twelve (12) month
period thereafter for so long as Grantor elects to post such
security in lieu of Beneficiary's retention of such amounts). Cash
Equivalents shall have maturities corresponding to the respective
due dates of such obligations. Notwithstanding the foregoing, it
shall be a condition to Grantor's delivery of any Tenant Improvement
and Leasing Commission Security (other than Cash) in satisfaction of
its obligations under this Section 48, that Grantor, at its expense,
execute, acknowledge and deliver or cause to be delivered to
Beneficiary such additional security agreements, financing
statements and other documents or instruments including an Opinion
of Grantor's Counsel, and take all
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such actions which in the reasonable opinion of Beneficiary or its
counsel may be necessary to grant and convey to Beneficiary a
perfected security interest in and to any and all the Tenant
Improvement and Leasing Commission Security.
(c) Any Tenant Improvement and Leasing Commission
Security shall be held by Beneficiary, and shall be applied in
accordance with the Cash Collateral Agreement to the payment of the
obligations in respect of which such Tenant Improvement and Leasing
Commission Security was retained. If Grantor has delivered Tenant
Improvement and Leasing Commission Security in lieu of maintaining
the Tenant Improvement and Leasing Commission Reserve Account,
Grantor shall either deposit in the Tenant Improvement and Leasing
Commission Reserve Account not less than three (3) Business Days
prior to the date the same are due an amount equal to the Monthly
Tenant Improvement and Leasing Commission Reserve Amount, or
Beneficiary shall draw down on the Tenant Improvement and Leasing
Commission Security in such amount.
(d) On the Closing Date, a portion of the Loan in the
amount of $110,000 will be deposited into the Capital Expenditure
Reserve Account (as defined in the Cash Collateral Agreement) held
by Securities Intermediary for Beneficiary. On the first day of the
month after the Closing Date and on the first day of every month
thereafter, Beneficiary will instruct Securities Intermediary to
withdraw from the Cash Collateral Account and deposit into the
Capital Expenditure Reserve Account, a sum equal to $100,000 (such
funds, together with all investment income earned thereon, are
referred to herein as the "Capital Expenditure Reserve Amount")
until an amount equal to $2,400,000 shall have been deposited and,
upon disbursement, shall replenish the Capital Expenditures Account
by withdrawal from the Operating Accounts on the first day of the
month as set forth above. Portions of the Capital Expenditure
Reserve Account shall be disbursed by Securities Intermediary to
Grantor pursuant to instructions from Beneficiary not more
frequently than once per month, provided no Event of Default shall
have occurred and be continuing, upon delivery by Grantor to
Beneficiary of an Officer's Certificate stating that Grantor has
incurred costs associated with capital improvements, alterations,
tenant improvements and leasing commissions pursuant to invoices
attached thereto, other than those set forth on Schedule 3. Within
five (5) Business Days of receipt of such certification, Beneficiary
shall instruct Securities Intermediary to disburse to Grantor an
amount equal to the sum requested by Grantor.
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49. Substitute or Successor Trustee. Trustee may
resign by an instrument in writing addressed to Beneficiary, or
Trustee may be removed at any time with or without cause by
Beneficiary. In case of death, resignation, removal or
disqualification of Trustee or if for any reason Beneficiary shall
deem it desirable to appoint a substitute or successor trustee to
act instead of the herein named trustee or any substitute or
successor trustee, then Beneficiary shall have the right and is
hereby authorized and empowered to appoint a successor trustee, or a
substitute trustee, without other formality than appointment and
designation in writing executed and acknowledged by Beneficiary and,
if required by applicable law to provide constructive notice,
recorded in the county or counties where the Properties are located,
and the authority hereby conferred shall extend to the appointment
of other successor and substitute trustees successively until the
indebtedness secured hereby has been paid in full or until the
Properties are sold hereunder. In the event the indebtedness
secured hereby is owned by more than one person or entity, the
holder or holders of not less than a majority in the amount of such
indebtedness shall have the right and authority to make the
appointment of a successor or substitute trustee provided for in the
preceding sentence. Such appointment and designation by Beneficiary
or by the holder or holders of not less than a majority of the
indebtedness secured hereby shall be full evidence of the right and
authority to make the same and of all facts therein recited. If
Beneficiary is a corporation or a nationally chartered bank and such
appointment is executed in its behalf by an officer of such
corporation or nationally chartered bank, such appointment shall be
conclusively presumed to be executed with authority and shall be
valid and sufficient without proof of any action by the board of
directors or any superior officer of the corporation. Upon the
making of any such appointment and designation, all of the estate
and title of Trustee in the Properties shall vest in the named
successor or substitute trustee and he shall thereupon succeed to
and shall hold, possess and execute all the rights, powers,
privileges, immunities and duties herein conferred upon Trustee; but
nevertheless, upon the written request of Beneficiary or of the
successor or substitute trustee, Trustee ceasing to act shall
execute and deliver an instrument transferring to such successor or
substitute trustee all of the estate and title in the Properties of
Trustee so ceasing to act, together with all rights, powers,
privileges, immunities and duties herein conferred upon Trustee, and
shall duly assign, transfer and deliver any of the properties and
monies held by said Trustee hereunder to said successor or
substitute trustee. All references herein to Trustee shall be
deemed to refer to Trustee (including any successor or substitute
appointed and designated as herein provided) from time to time
acting hereunder. Grantor hereby ratifies and con-
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firms any and all acts which the herein named Trustee or his
successor or successors, substitute or substitutes, in this trust,
shall do lawfully by virtue hereof.
50. Liability of Trustee. Trustee shall not be liable
for any error of judgment or act done by Trustee in good faith, or
be otherwise responsible or accountable under any circumstances
whatsoever, except for Trustee's gross negligence or willful
misconduct. Trustee shall have the right to rely on any instrument,
document or signature authorizing or supporting any action taken or
proposed to be taken by him hereunder, believed by him in good faith
to be genuine. All monies received by Trustee shall, until used or
applied as herein provided, be held in trust for the purposes for
which they were received, and shall be segregated from all other
monies, and Trustee shall be under no liability for interest on any
monies received by him hereunder. Grantor will reimburse Trustee
for, and indemnify and save him harmless against, any and all
liability and expenses which may be incurred by him in the
performance of his duties hereunder.
51. Beneficiary and Trustee.
(a) The Trustees accept the trusts hereby created and
agree to perform the duties herein required of them upon the terms
and conditions hereof.
The duties and obligations of the Trustees in respect of
this Mortgage shall be as set forth in this Section 51.
(i) Except upon the occurrence and during
the continuance of an Event of Default actually known to
Beneficiary:
(A) The Trustees shall undertake to perform
such duties and obligations and only such duties and obligations
as are specifically set forth in this Mortgage and the other
Loan Documents or as otherwise directed by a letter of
direction from Beneficiary, and no implied covenants or
obligations shall be read into this Mortgage or the other Loan
Documents against the Trustees; and
(B) In the absence of bad faith, the
Trustees may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed therein,
upon certificates or opinions furnished to the Trustees and
conforming to the requirements of this Mortgage and the other
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Loan Documents; but in the case of any such certificates or
opinions which by any provision hereof or thereof are
specifically required to be furnished to Beneficiary, the
Trustees shall be under a duty to examine the same to
determine whether or not they conform to the requirements of
this Mortgage and the other Loan Documents.
(ii) In case an Event of Default known to
Beneficiary has occurred and is continuing, the Trustees shall
exercise the rights and powers vested in the Trustees by this
Mortgage and the other Loan Documents with reasonable care.
(iii) No provision of this Mortgage shall be
construed to relieve the Trustees from liability for their own
negligence or willful misconduct, except that:
(A) Section 51(a) hereof shall not be construed
to limit the effect of Section 51(b) hereof;
(B) The Trustees shall not be liable for any
error of judgment made in good faith by an officer of the
Trustees, unless it shall be proved that the Trustees were
negligent in ascertaining the pertinent facts; and
(C) The Trustees shall not be liable with
respect to any action taken or omitted to be taken in good faith
in accordance with the direction of Beneficiary relating to the
time, method and place of conducting any proceeding for any
remedy available to the Trustees, or exercising any trust or
power conferred upon the Trustees under this Mortgage.
(iv) Whether or not therein expressly so
provided, every provision of this Mortgage relating to the
conduct or affecting the liability of or affording protection
to the Trustees shall be subject to the provisions of this
Section 51(b).
(v) No provision of this Mortgage shall require
the Trustees to expend or risk their own funds or otherwise incur
any personal financial liability in the performance of any of
their duties hereunder, or in the exercise of any of their rights
or powers, if they shall have reasonable
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grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably
assured to them.
(b) Intentionally Omitted.
(c) Grantor covenants and agrees:
(i) to reimburse each of Beneficiary
(subject to Section 18) and the Trustees upon request for all
reasonable out of pocket expenses, disbursements and advances
incurred or made by it or them in accordance with any
provision of this Mortgage (including reasonable expenses and
disbursements of counsel), except any such expense, disbursement
or advance as may be attributable to its negligence or bad
faith; and
(ii) to indemnify the Trustees for, and to
hold each harmless against, any loss, liability or expense
incurred without negligence, willful misconduct or bad faith
on its part, arising out of or in connection with the
acceptance or administration of the trust or trusts hereunder
or the enforcement of remedies hereunder including the costs
and expenses of defending against any claim or liability in
connection with the exercise or performance of any of the
powers or duties hereunder or thereunder (except any liability
incurred by Trustee and the Trustee with negligence, willful
misconduct or bad faith on its or their part).
The obligations of Grantor under this Section 51(c) to compensate or
indemnify the Trustees and to pay or reimburse the Trustees for
expenses, disbursements and advances shall constitute additional
Indebtedness hereunder and shall survive the satisfaction and
discharge of this Mortgage. When the Trustees or Beneficiary incur
expenses or render services after an occurrence of an Event of
Default hereunder, the expenses and compensation for services are
intended to constitute expenses of administration under any
bankruptcy law.
(d) Intentionally Omitted.
(e) Intentionally Omitted.
(f) Grantor and Beneficiary intend that the
relationship created under this Mortgage be solely that of mortgagor
and mortgagee. Nothing herein is
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intended to create a joint venture, partnership, tenancy-in-common
or joint tenancy relationship between Grantor and Beneficiary.
52. As to Property in Tennessee. Notwithstanding
anything to the contrary elsewhere in this Mortgage, as to any
property of the Trust Estate located in the State of Tennessee (the
"Tennessee Property"):
(a) This Mortgage shall be deemed to be and shall be
construed as a deed of trust, enforceable in accordance with the
applicable laws of the State of Tennessee, as well as an Indenture
of Mortgage, Security Agreement, Financing Statement, Fixture Filing
and Assignment of Leases and Rents and reference throughout this
instrument to this "Mortgage" shall mean, as appropriate, this "Deed
of Trust, Indenture of Mortgage, Security Agreement, Financing
Statement, Fixture Filing and Assignment of Leases and Rents" and
this "Deed of Trust" in its capacity as a Tennessee deed of trust.
Nothing herein set forth shall limit the right of the Trustee to
foreclosure this Deed of Trust as a deed of trust under Tennessee
law, at the option of Beneficiary.
(b) The Tennessee Property shall be deemed to be, and
hereby is, conveyed and transferred in trust only to the Trustee for
the Tennessee Property. Grantor does hereby MORTGAGE, WARRANT,
GRANT A SECURITY INTEREST IN, GRANT, BARGAIN, SELL, ALIENATE,
RELEASE, CONFIRM, CONVEY, PLEDGE, ASSIGN, TRANSFER AND SET OVER to
the Trustee, IN TRUST WITH POWER OF SALE AND RIGHT OF ENTRY AND
POSSESSION, the Tennessee Property, TO HAVE AND TO HOLD the same
for the use and benefit of Beneficiary upon the terms and conditions
set forth herein.
(c) Intentionally Omitted.
(d) Other references to the "Beneficiary" in this
Deed of Trust shall be interpreted to be references to Beneficiary,
the Trustee, or both, as the context may require in light of the
intent of the parties that this Deed of Trust, at Beneficiary's
option, be construed as a Tennessee deed of trust. However, nothing
herein is intended to limit the rights or powers of Beneficiary as
set forth in this Deed of Trust, except only to the extent necessary
to accomplish the purpose stated above.
(e) The Trustee may be removed and a successor
trustee appointed by Beneficiary in accordance with Tennessee law.
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(f) Upon the occurrence of an Event of Default, the
Trustee, at the request of Beneficiary, shall sell the Tennessee
Property or any part thereof at one or more public sales before the
main door of the courthouse in the county in which the Land is
located, to the highest bidder for cash, and in bar of the equity of
redemption, the statutory right of redemption at any time codified
in T.C.A. section 66-8-101 et seq., or elsewhere, homestead, dower, and
all other statutory rights of redemption and any and all other
rights and exemptions of every kind, all of which are hereby waived,
in order to pay the Indebtedness, and all expenses of sale and of
all proceedings in connection therewith, including reasonable
attorneys' fees, after advertising the time, place, and terms of
sale at least three (3) different times in some newspaper published
in the county in which the Land is located, the first of which
publications shall be at least twenty-one (21) days previous to said
sale. At any such public sale, the Trustee may execute and deliver
to the purchaser a conveyance of the Tennessee Property or any part
thereof in fee simple. In the event of any sale under this Deed of
Trust by virtue of the exercise of the powers herein granted, or
pursuant to any order in any judicial proceeding or otherwise, the
Tennessee Property may be sold in its entirety or in separate
parcels and in such manner or order as Beneficiary in its sole
discretion may elect, and if Beneficiary so elects, Trustee may sell
the personal property covered by this Deed of Trust at one or more
separate sales in any manner permitted by the Uniform Commercial
Code of the State of Tennessee, and one or more exercises of the
powers herein granted shall not extinguish or exhaust such powers,
until the entire Tennessee Property is sole or the Indebtedness is
paid in full. If the Indebtedness is now or hereafter further
secured by any chattel mortgages, pledges, contracts of guaranty,
assignments of lease, or other security instruments, Beneficiary at
its option may exhaust the remedies granted under any of said
security instruments either concurrently or independently, and in
such order as Beneficiary may determine.
Said sale may be adjourned by the Trustee, or his/her
agent or successors, and reset at a later date without additional
publication, provided that an announcement to that effect be made at
the scheduled place of sale at the time and on the date the sale is
originally set.
(g) In case of a sale by the Trustee enforcing the
provisions hereof, the Grantor waives and surrenders all right and
equity of redemption, statutory right of redemption, or repurchase
of said land and premises and all other related exemptions. THIS
WAIVER IS GIVEN AS AN EXPRESS WAIVER OF THE RIGHTS AFFORDED BY
T.C.A. section 66-8-101(3), AS AMENDED, AND
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ANY OTHER STATUTORY RIGHTS OF REDEMPTION AND IS INTENDED TO WAIVE
ALL RIGHTS OF THE GRANTOR EXPRESSED THEREIN.
(h) In addition, to its other functions, this Deed of
Trust shall constitute a security agreement and financing statement.
For such purpose, the Grantor is deemed to be the debtor and
Beneficiary is deemed to be the secured party, as those terms are
used in the Tennessee Uniform Commercial Code; and their respective
addresses are set forth herein. References in the Granting Clauses
and in Section 10(b) hereof to numbered sections of the Uniform
Commercial Code shall be deemed to refer to the corresponding
sections of the Tennessee UCC being T.C.A. section 47-9-313, T.C.A.
section 47-9-402 and T.C.A. section 44-9-501.
(i) Section 10(b) is amended by deleting the words
"fixtures, equipment, and other property" appearing approximately in
the eleventh (11th) line thereof and substituting therefor the
following:
"(i) that portion of the Trust Estate which constitutes
personal property and (ii) all fixtures, equipment and
other property that is".
53. Intentionally Omitted.
54. Liability of Assignees of Beneficiary. No
assignee of Beneficiary which is the trustee in a Securitization of
the Loan (an "Assignee") shall have any personal liability, directly
or indirectly, under or in connection with this Mortgage or any
amendment or amendments hereto made at any time or times, heretofore
or hereafter, any liability being limited to the assets pledged as
security pursuant to this Mortgage and Grantor hereby forever and
irrevocably waives and releases any and all such personal liability.
In addition, no Assignee shall have at any time or times hereafter
any personal liability, directly or indirectly, under or in
connection with or secured by any agreement, lease, instrument,
encumbrance, claim or right affecting or relating to the Properties
or to which the Properties are now or hereafter subject. The
limitation of liability provided in this Section 54 is (i) in
addition to, and not in limitation of, any limitation of liability
applicable to the assignee provided by law or by any other contract,
agreement or instrument, and (ii) shall not apply to any Assignee's
negligence or willful misconduct (including any tortious act).
55. Securitization.
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(a) Sale of Note and Securitization. At the request
of Beneficiary and, to the extent not already required to be
provided by Grantor under this Mortgage, Grantor shall use
reasonable efforts to satisfy the requirements of the Rating
Agencies in connection with either (x) the sale of the Notes or
participation therein or (y) the first successful securitization
(such sale and/or securitization, the "Securitization") of rated
single or multi-class securities (the "Securities") secured by or
evidencing ownership interests in the Notes and this Mortgage,
including:
(i) subject to the terms of the Operating
Agreements, provide such financial and other information with
respect to the Property, Grantor and its Affiliates, the Manager (to
the extent available) and any Tenants (to the extent available) of
the Properties, (ii) provide business plans and budgets relating to
the Properties and (iii) permit such site inspection, appraisals,
market studies, environmental reviews and reports (Phase I's and, if
appropriate, Phase II's), engineering reports and other due
diligence investigations of the Properties, as may be reasonably
requested by Beneficiary or the Rating Agencies or as may be
necessary or appropriate in connection with the Securitization (the
"Provided Information"); provided, however, that no General Partner
nor any constituent partner of Grantor nor any principal, Affiliate
of Grantor or any other related Person shall be required to make any
representations, warranties or covenants in connection with the
Securitization, nor shall such Persons be liable for any
representations, warranties or covenants made by Grantor and;
further provided, that any such environmental reviews and reports
and engineering reports shall be performed by reputable engineers
that are licensed to practice in Tennessee and approved by Grantor;
(ii) cause counsel to render opinions of (x) with
respect to the Properties and Grantor, a 10b-5 Opinion, which
counsel and opinions shall be reasonably satisfactory to Beneficiary
and the Rating Agencies; for the purposes hereof, the "10b-5
Opinion" shall mean an opinion or other written assurance of counsel
reasonably acceptable to Beneficiary regarding the absence of any
misstatement of a material fact, or the omission to state a material
fact in the Disclosure Document provided by Grantor to Beneficiary
in connection with the origination of the Loan and (y) a non-
consolidation opinion in substantially the same form as such opinion
delivered on the Closing Date. The 10b-5 Opinion shall be delivered
within fifteen (15) Business Days of the request therefor made by
the holder of the Notes; provided that the final draft of the
Disclosure Document (as hereinafter defined) has been received by
Grantor prior to the commencement of such fifteen (15) Business Day
period.
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(iii) make such representations and warranties
consistent to those made by Grantor in this Mortgage as of the
closing date of the Securitization subject to necessary updates with
respect to the Properties, Grantor, and the Loan Documents and as
may be reasonably requested by the Beneficiary or the Rating
Agencies; and
(iv) execute such amendments to the Loan
Documents and Grantor's organizational documents, as may be
requested by the Rating Agencies in order to achieve the required
rating to effect the Securitization, provided, that nothing
contained in this subsection (iv) shall result in any adverse
economic or other adverse impact on Grantor (as determined by
Grantor in its reasonable discretion), and Beneficiary shall
reimburse Grantor within thirty (30) days after written demand
therefor for any out-of-pocket expenses incurred by Grantor as a
result of or in connection with any attempted or successful
Securitization, except that Grantor shall bear the fees and
expenses of counsel in connection with a one-time delivery of the
opinions referenced in Section 55(a)(ii).
(b) Cooperation with Rating Agencies. In the event
this Loan becomes an asset of a Securitization underwritten by
Beneficiary or any of its Affiliates, Grantor shall use its
reasonable efforts to cooperate to (i) gather any environmental
information required by the Rating Agencies in connection with such
a Securitization, (ii) at Beneficiary's request, meet with
representatives of such Rating Agencies to discuss the business and
operations of the Trust Estate, and (iii) cooperate with the
reasonable requests of the Rating Agencies in connection with the
foregoing; provided, that Beneficiary shall pay within 30 days after
written demand therefor all out-of-pocket expenses incurred by
Grantor in connection with compliance with the foregoing.
(c) Securitization Financial Statements. Grantor
covenants and agrees that, upon Beneficiary's written request
therefor in connection with a Securitization in which this Mortgage
is to be included as an asset, Grantor shall, at Grantor's sole cost
and expense, deliver audited financial statements and related
documentation prepared in compliance with Section 14 hereof by an
independent certified public accountant that satisfy applicable
federal securities law requirements for use in a Public Registration
Statement (which may include up to three (3) years of historical
audited financial statements). A "Public Registration Statement"
shall mean a registration statement meeting the requirements of
Section 5 of the Securities Act of 1933, as amended (the "Securities
Act"). Notwithstanding
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anything contained in this subsection (c), Beneficiary shall
reimburse Grantor within 30 days after written demand therefor for
all costs relating to the delivery of financial statements and
related documentation prepared in connection with this subsection
(c) which are in excess of the costs of financial statements and
related documentation which Grantor would otherwise incur pursuant
to Section 14 hereof.
(d) Securitization Indemnification. (i) Grantor
understands that certain of the Provided Information and the
information required to be delivered by Grantor hereunder (the
"Required Records") may be included in disclosure documents in
connection with the Securitization, including a preliminary and
final prospectus or preliminary and final private placement memorandum
(each, a "Disclosure Document") and may also be included in
filings with the Securities Act, or the Securities and Exchange Act
of 1934, as amended (the "Exchange Act"), or provided or made
available to investors or prospective investors in the Securities,
the Rating Agencies, and service providers relating to the
Securitization. In the event that the Disclosure Document is
required to be revised prior to the sale of all Securities, Grantor
will cooperate with Beneficiary in updating the Provided Information
or Required Records for inclusion or summary in the Disclosure
Document by providing all current information pertaining to Grantor
and the Property necessary to keep the Disclosure Document accurate
and complete in all material respects with respect to such matters.
(ii) In connection with any Disclosure Documents,
Grantor subject to Section 33 agrees to provide an indemnification
certificate:
(A) certifying that Grantor has carefully
examined those portions of such Disclosure Document,
pertaining to Grantor, the Properties and the Loan
including applicable portions of the sections entitled
"Special Considerations", "Description of the Mortgages",
"Description of the Mortgage Loans and Mortgaged
Property", "The Manager", "The Grantor", and such
sections (and any other sections reasonably requested
and pertaining to Grantor, the Property or the Loan) do
not contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make
the statements made, in the light of the circumstances
under which they were made, not misleading;
(B) indemnifying Beneficiary and the Affiliates
of Merrill Lynch, Pierce, Feiner & Smith Incorporated
("MLPFS"), that have
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filed the registration statement relating to the
Securitization (the "Registration Statement") or, as
applicable, that have distributed the offering memorandum
with respect to the Securitization (the "Offering
Memorandum"), each of their respective directors, each
of their respective officers who have signed the
Registration Statement or Offering Memorandum and each
person or entity who controls MLPFS within the meaning
of Section 15 of the Securities Act or Section 20 of the
Exchange Act (collectively, the "MLPFS Group") for any
losses, claims, damages or liabilities (the "Liabilities")
to which Beneficiary or the MLPFS Group may become subject
insofar as the Liabilities arise out of or are based upon
any untrue statement or alleged untrue statement of any
material fact contained in the applicable portions of such
sections describing Grantor, the Property or the Loan that
are furnished to Beneficiary in writing by Grantor in
connection with the preparation of such portions of the
Disclosure Documents, or arise out of or are based upon
the omission or alleged omission to state in such portions
a material fact required to be stated in the applicable
portions of such sections or necessary in order to make
the statements in the applicable portions of such sections
or in light of the circumstances under which they were
made, not misleading; and
(C) agreeing to reimburse Beneficiary and MLPFS
for any legal or other expenses reasonably incurred by
Beneficiary and MLPFS in connection with investigating
or defending the Liabilities pursuant to Section
55(d)(iv).
(D) Grantor's Liability under this Section 55
(including, clauses (B) and (C) above) shall be limited
to Liabilities which Beneficiary or the MLPFS Group
incurs arising out of or based upon any such untrue
statement or omission made (in such applicable portions
of the Disclosure Documents described in clause (B)
above) in the Disclosure Documents in reliance upon and
in conformity with information furnished to Beneficiary
in writing by Grantor in connection with the preparation
of those portions of the Disclosure Documents pertaining
to Grantor, the Property or the Loan.
(iii) Intentionally Omitted.
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(iv) Promptly after receipt by an indemnified party
under this Section 55 of notice of the commencement of any action,
such indemnified party will, if a claim in respect thereof is to be
made against the indemnifying party under this Section 55, notify
the indemnifying party in writing of the commencement thereof, but
the omission to so notify the indemnifying party will not relieve
the indemnifying party from any liability which the indemnifying
party may have to any indemnified party hereunder except to the
extent that failure to notify causes prejudice to the indemnifying
party. In the event that any action is brought against any
indemnified party, and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled,
jointly with any other indemnifying party, to participate therein
and, to the extent that it may elect by written notice delivered to
the indemnified party promptly after receiving the aforesaid notice
from such indemnified party, to assume the defense thereof with
counsel reasonably satisfactory to such indemnified party. After
notice from the indemnifying party to such indemnified party under
this Section 55 the indemnifying party will not reimburse the
indemnified party for any legal or other expenses subsequently
incurred by such indemnified party in connection with the defense
thereof; provided, however, if the defendants in any such action
include both the indemnified party and the indemnifying party and
the indemnified party shall have reasonably concluded that there are
any legal defenses available to it and/or other indemnified parties
that are different from or additional to those available to the
indemnifying party, the indemnified party or parties shall have the
right to select separate counsel to assert such legal defenses and
to otherwise participate in the defense of such action on behalf of
such indemnified party or parties. The indemnifying party shall
not be liable for the expenses of more than one separate counsel
unless an indemnified party shall have reasonably concluded that
there may be legal defenses available to it that are different from
or additional to those available to another indemnified party. Any
indemnification of the MLPFS Group pursuant to this Section 55(d)
shall be subject to Grantor having had a reasonable opportunity to
review and comment upon the relevant portions of any such Disclosure
Document or filing under the Exchange Act. Grantor shall act
promptly in connection with its review of and comment on the
relevant portions of such documents or filings. The indemnified
party shall cause its counsel to maintain accurate billing records
for fees and disbursements for which such indemnified party is
seeking reimbursement hereunder and shall submit copies of such
detailed billing records to substantiate that such counsel's fees
and disbursements are solely related to the defense of a claim for
which the indemnifying party is required hereunder to indemnify such
indemnified party. Grantor shall have no obligation to indemnify
the MLPFS Group (including Beneficiary) for any Liabilities incurred
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as a result of (i) MLPFS Group's computational error or (ii) the
inclusion of any erroneous or misleading information in any
Disclosure Document, provided that Grantor or its counsel shall have
previously indicated to the Person preparing such Disclosure
Document or its counsel the erroneous or misleading nature of such
information or the omission of material information, as the case may
be.
Notwithstanding the foregoing, Beneficiary and MLPFS
acknowledge that any disclosure of information relating to the
Properties shall be subject to the limitations and approvals as set
forth in the Operating Agreements without limitation regarding the
periods of review.
(v) In order to provide for just and equitable
contribution in circumstances in which the indemnity agreement provided
for in this Section 55 is for any reason held to be unenforceable by
an indemnified party in respect of any Liabilities (or action in
respect thereof) referred to therein which would otherwise be
indemnifiable under this Section 55, the indemnifying party shall
contribute to the amount paid or payable by the indemnified party as
a result of such losses, claims, damages or liabilities (or action
in respect thereof); provided, however, that no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. In
determining the amount of contribution to which the respective
parties are entitled, the following factors shall be considered:
(i) the MLPFS Group's (including Beneficiary's) and Grantor's
relative knowledge and access to information concerning the matter
with respect to which claim was asserted; (ii) the opportunity to
correct and prevent any statement or omission; and (iii) any other
equitable considerations appropriate in the circumstances.
Beneficiary shall and shall cause its Affiliates, including, MLPFS,
(i) to effect any sales of the Notes in the secondary market or any
Securitization in compliance with all applicable laws and
regulations in each jurisdiction in which any of them offers, sells
or delivers the Notes or securities in connection with any
Securitization, and (ii) not to sell securities issued in connection
therewith to any "employee benefit plan" (as defined in Section 3(3)
of ERISA), which is subject to Title I of ERISA, or any "plan" (as
defined in Section 4975(e)(1) of the Code) which is subject to
Section 4975 of the Code, or to any entity which would be purchasing
such securities with the assets of any such employee benefit plan or
plans unless such sale, and the holding of such securities by such
employee benefit plan or plans would be exempt from the prohibited
transaction provisions of ERISA and Section 4975 of the Code.
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(e) Certain Limitations. Notwithstanding anything to
the contrary contained herein, Grantor shall have no obligation to
act as a depositor with respect to the Loan or an issuer or
registrant with respect to the securities issued in any
Securitization. Nothing contained in the previous sentence shall
prohibit Beneficiary from including the Loan in a privately-offered
Securitization, in which the Loan represents 40% or more of the
assets being securitized, provided that Lender complies with the
provisions of this paragraph (e).
(f) Reimbursement of Fees. Beneficiary shall pay or
reimburse Grantor for any and all fees, costs and expenses relating
to any Securitization , including, fees to the Rating Agencies and
all third party costs (e.g., fees and expenses of any trustee or
servicer and its counsel and underwriter's counsel and accountants)
other than those fees, costs and expenses which are otherwise
expressly the obligation of Grantor under this Mortgage. Whether or
not any Securitization closes, Beneficiary shall at the direction of
Grantor pay directly or reimburse Grantor for any reasonable out-of-
pocket costs incurred by Grantor in connection with each such
Securitization(including reasonable fees and disbursements of
accountants and counsel) which are not otherwise required to be in-
curred pursuant to the Loan Documents in connection with the Loan
rather than pursuant to this Section 55, other than any costs in-
curred in connection with the delivery by Grantor of a one-time 10b-
5 opinion relating to the Property, Grantor or the Loan, or a one-
time non-consolidation opinion as set forth in Section 54(a)(ii).
In addition, Beneficiary shall not be liable for reimbursement of
any costs incurred by Grantor as a result of Grantor's election to
restructure its ownership structure in connection with any
Securitization.
(g) Retention of Servicer. Beneficiary reserves the
right to retain a servicer at no cost to Grantor to act as its agent
hereunder with such powers as are specifically delegated to the
servicer by Beneficiary, whether pursuant to the terms of this
Mortgage, the Cash Collateral Agreement or otherwise, together with
such other powers as are reasonably incidental thereto.
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IN WITNESS WHEREOF, this Mortgage has been duly executed
by Grantor on the date first hereinabove written.
"GRANTOR"
Signed and acknowledged in RIVERGATE MALL LIMITED
the presence of: PARTNERSHIP, a Delaware limited
partnership
/s/ Baron Bond By: Rivergate Mall, Inc.
----------------------------
Print Name: Baron Bond
/s/ Erin Markott By: /s/ Stephen D. Lebovitz
---------------------------- --------------------------
Print Name: Erin Markott Name: Stephen D. Lebovitz
Title: Executive Vice President
"GRANTOR"
Signed and acknowledged in THE VILLAGE AT RIVERGATE
the presence of: LIMITED PARTNERSHIP, a Delaware
limited partnership
By: The Village at Rivergate, Inc.
/s/ Baron Bond
---------------------------
Print Name: Baron Bond
/s/ Erin Markott
--------------------------- By: /s/ Stephen D. Lebovitz
Print Name: Erin Markott ----------------------------
Name: Stephen D. Lebovitz
Title: Executive Vice President
<PAGE> "GRANTOR"
Signed and acknowledged in HICKORY HOLLOW MALL LIMITED
the presence of: PARTNERSHIP, a Delaware limited
partnership
/s/ Baron Bond By: Hickory Hollow Mall, Inc.
----------------------------
Print Name: Baron Bond
/s/ Erin Markott By: /s/ Stephen D. Lebovitz
---------------------------- --------------------------
Print Name: Erin Markott Name: Stephen D. Lebovitz
Title: Executive Vice President
"GRANTOR"
Signed and acknowledged in THE COURTYARD AT HICKORY HOLLOW
the presence of: LIMITED PARTNERSHIP, a Delaware
limited partnership
By: Hickory Hollow Courtyard, Inc.
/s/ Baron Bond
---------------------------
Print Name: Baron Bond
/s/ Erin Markott
--------------------------- By: /s/ Stephen D. Lebovitz
Print Name: Erin Markott ----------------------------
Name: Stephen D. Lebovitz
Title: Executive Vice President
<PAGE>
STATE OF NEW YORK )
) ss.
COUNTY OF__ New York___ )
On this __30th__ day of __June__, 1998, before me, the
undersigned Notary Public in and for said County and State appeared
__Stephen D. Lebovitz___, personally known to me and, upon oath,
did depose and say that he resides at __c/o 6148 Lee Highway, Suite 300,
Chattanooga, TN 37421___, that he is the __Executive Vice___President
of Rivergate Mall, Inc., a Delaware corporation (the "Corporation"),
the general partner of Rivergate Mall Limited Partnership, a Delaware
limited partnership, and that as such officer, being duly authorized
to do so pursuant to its by-laws or a resolution of its board of
directors, executed and acknowledged the foregoing instrument on
behalf of the Corporation for the purposes therein contained, by
signing the name of the Corporation on behalf of the Corporation by
himself as such officer as his free and voluntary act and deed and
the free and voluntary act and deed of said Corporation in its
capacity as general partner, in its capacity as general partner.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ Janine Howard
--------------------------
Notary Public
NOTARIAL SEAL My Commission Expires:
January 20, 2000
-------------------------------
<PAGE>
STATE OF NEW YORK )
) ss.
COUNTY OF__ New York___ )
On this __30th__ day of __June__, 1998, before me, the
undersigned Notary Public in and for said County and State appeared
__Stephen D. Lebovitz___, personally known to me and, upon oath,
did depose and say that he resides at __c/o 6148 Lee Highway, Suite 300,
Chattanooga, TN 37421___, that he is the __Executive Vice___President
of The Village at Rivergate, Inc., a Delaware corporation (the
"Corporation"), the general partner of The Village at Rivergate
Limited Partnership, a Delaware limited partnership, and that as
such officer, being duly authorized to do so pursuant to its by-laws
or a resolution of its board of directors, executed and acknowledged
the foregoing instrument on behalf of the Corporation for the purposes
therein contained, by signing the name of the Corporation on behalf of
the Corporation by himself as such officer as his free and voluntary
act and deed and the free and voluntary act and deed of said
Corporation in its capacity as general partner, in its capacity as
general partner.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ Janine Howard
--------------------------
Notary Public
NOTARIAL SEAL My Commission Expires:
January 20, 2000
-------------------------------
<PAGE>
STATE OF NEW YORK )
) ss.
COUNTY OF__ New York___ )
On this __30th__ day of __June__, 1998, before me, the
undersigned Notary Public in and for said County and State appeared
__Stephen D. Lebovitz___, personally known to me and, upon oath,
did depose and say that he resides at __c/o 6148 Lee Highway, Suite 300,
Chattanooga, TN 37421___, that he is the __Executive Vice___President
of Hickory Hollow Mall, Inc., a Delaware corporation (the "Corporation"),
the general partner of Hickory Hollow Mall Limited Partnership, a
Delaware limited partnership, and that as such officer, being duly
authorized to do so pursuant to its by-laws or a resolution of its board
of directors, executed and acknowledged the foregoing instrument on
behalf of the Corporation for the purposes therein contained, by
signing the name of the Corporation on behalf of the Corporation by
himself as such officer as his free and voluntary act and deed and
the free and voluntary act and deed of said Corporation in its
capacity as general partner, in its capacity as general partner.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ Janine Howard
--------------------------
Notary Public
NOTARIAL SEAL My Commission Expires:
January 20, 2000
-------------------------------
<PAGE>
STATE OF NEW YORK )
) ss.
COUNTY OF__ New York___ )
On this __30th__ day of __June__, 1998, before me, the
undersigned Notary Public in and for said County and State appeared
__Stephen D. Lebovitz___, personally known to me and, upon oath,
did depose and say that he resides at __c/o 6148 Lee Highway, Suite 300,
Chattanooga, TN 37421___, that he is the __Executive Vice___President
of Hickory Hollow Courtyard, Inc., a Delaware corporation (the
"Corporation"), the general partner of The Courtyard at Hickory
Hollow Limited Partnership, a Delaware limited partnership, and that
as such officer, being duly authorized to do so pursuant to its by-laws
or a resolution of its board of directors, executed and acknowledged
the foregoing instrument on behalf of the Corporation for the purposes
therein contained, by signing the name of the Corporation on behalf of
the Corporation by himself as such officer as his free and voluntary
act and deed and the free and voluntary act and deed of said
Corporation in its capacity as general partner, in its capacity as
general partner.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ Janine Howard
--------------------------
Notary Public
NOTARIAL SEAL My Commission Expires:
January 20, 2000
-------------------------------
<PAGE>
EXHIBIT A1-A4
Legal Description of Properties
<PAGE>
EXHIBIT B
Environmental Reports
The following reports dated June 5, 1998 made by Centrum Engineers:
1. Property Condition Assessment - Rivergate Mall.
2. Property Condition Assessment - Village at Rivergate.
3. Property Condition Assessment - Hickory Hollow Mall.
4. Property Condition Assessment - Courtyard at Hickory Hollow.
5. Phase I Environmental Site Assessment - Village at Rivergate.
6. Phase I Environmental Site Assessment - Courtyard at Hickory Hollow.
7. Phase I Environmental Site Assessment - Hickory Hollow Mall.
8. Phase I Environmental Site Assessment - Rivergate Mall.
<PAGE>
EXHIBIT C
SUBORDINATION, NONDISTURBANCE
AND ATTORNMENT AGREEMENT
This Agreement is entered into as of ____________,
[199__], by and between ___________________, a _________________
("Tenant"), and ("Trustee").
W I T N E S S E T H:
A. __________ ("Landlord") has executed and delivered a
Class A Mortgage Note, dated as of ______, 1998 and a Class B
Mortgage Note dated as of ____________, 1998 (collectively the
"Note").
B. The Note is held by the Trustee and is secured in
part by an Indenture of Mortgage, Deed of Trust, Security Agreement,
Financing Statement, Fixture Filing and Assignment of Leases, Rents
and Security Deposits dated as of ______, 1998, among Landlord, as
grantor, Lawyers Title Insurance Corporation, as trustee, and
Trustee, as beneficiary (as amended or modified, the "Mortgage"),
which Mortgage is recorded at Book __, Page __ of the Official
Records of ________ County, ________, and covers certain real property
which is commonly known as in , ________ (the
"Project") and more particularly described on Exhibit A attached
hereto and made a part hereof.
C. Tenant is entering into a lease with Landlord, dated
____________, 19__, pursuant to which Tenant will let certain
premises at the Project (the "Lease").
D. Pursuant to Article [ ] of the Lease, Tenant is
required to enter into this Agreement, and upon execution by Trustee
and Tenant, the Tenant's leasehold interest in the Project will be
subordinate to the interest of Trustee under the Mortgage.
NOW THEREFORE, the parties hereto mutually agree as
follows:
1. Subordination. The Lease shall be subject and
subordinate in all respects to the Mortgage, and to any and all
advances to be made thereunder and all renewals, modifications,
consolidations, replacements and extensions thereof.
C-1
<PAGE>
2. Nondisturbance. So long as Tenant pays all rents
and other charges as specified in the Lease and is not otherwise in
default of any of its obligations and covenants pursuant to the
Lease beyond any applicable grace periods thereunder, Trustee agrees
for itself and its successors in interest and for any purchaser of
the Project upon a foreclosure of the Mortgage, that Tenant's
possession of the premises as described in the Lease and Tenant's
other rights under the Lease will not be disturbed during the term
of the Lease, as said term may be extended pursuant to the terms of
the Lease or said premises may be expanded as specified in the
Lease, and that the successor in interest to the rights and
obligations of the Landlord under the Lease will abide by the
provisions of the Lease, notwithstanding any other provisions in the
Mortgage. For purposes of this paragraph, a foreclosure shall include
a sheriff's or trustee's sale under the power of sale contained in the
Mortgage and any other transfer of the Landlord's interest in the
Project under peril of foreclosure, including without limitation the
generality of the foregoing, an assignment or sale in lieu of
foreclosure.
3. Attornment. Subject (i) to Landlord's successor in
interest's full compliance with the conditions relating to
nondisturbance as set forth in Section 2 above and (ii) to the
performance by the same of all obligations of the Landlord under the
Lease with respect to obligations arising and accrued from and after
the date that said successor in interest acquires its interest in
the Project, Tenant agrees to attorn to, accept and recognize said
successor in interest as the landlord under the Lease for the then
remaining balance of the term of the Lease, and any extensions
thereof as made pursuant to the Lease. Tenant agrees to execute and
deliver, at any time and from time to time, upon the request of
Trustee or the purchaser at any foreclosure sale or any other
successor to Landlord, as the case may be, any reasonable instrument
which may be necessary or appropriate to such successor landlord to
evidence such attornment.
4. Notwithstanding anything to the contrary contained
herein or in the Lease, it is specifically understood and agreed
that Trustee or any receiver, purchaser or successor landlord shall
not be:
(a) liable for any act, omission, negligence or default
of any prior landlord; provided, however, that such successor
landlord shall be liable and responsible for the performance of all
covenants and obligations of landlord under the Lease from and after
the date that it takes title to the Project; or
C-2
<PAGE>
(b) subject to any offsets, claims or defenses which
Tenant might have against any prior landlord except those permitted
under the Mortgage; or
(c) bound by any rent or additional rent which is pay-
able on a monthly basis and which Tenant might have paid for more
than one (1) month in advance to any prior landlord.
Notwithstanding the foregoing, Tenant reserves its rights to any and
all claims or causes of action against such prior landlord for prior
losses or damages and against the successor landlord for all losses
or damages arising from and after the date that such successor
landlord takes title to the Project.
5. Successors. The obligations and rights of the par-
ties pursuant to this Agreement shall bind and inure to the benefit
of the successors, assigns, heirs and legal representatives of the
respective parties.
C-3
<PAGE>
IN WITNESS WHEREOF, the parties have executed and deliv-
ered this Agreement in _____________, ____________ County,
, as of the date set forth above.
TRUSTEE:
_____________________,
as Trustee
By:____________________
[TENANT]:
By:
___________________
<PAGE>
EXHIBIT D
FORM OF RENT ROLL
<PAGE>
EXHIBIT E
FORM OF SALES REPORT
<PAGE>
SCHEDULE 1
Allocated Loan Amounts
Property Allocated Loan Amount
Hickory Hollow Mall $96,517,364
Rivergate Mall $78,004,722
Courtyard at Hickory Hollow $ 4,493,360
Village at Rivergate $ 3,684,555
<PAGE>
SCHEDULE 2
Operating Agreements
A. Hickory Hollow Mall:
1. Deed of Declaration dated November 24, 1976, executed by
Hickory Hollow Associates, a joint venture comprised of
Hickory Hollow Mall, Inc. and Intereal Company; as amended by
First Amendment to Deed of Declaration dated as of January 24,
1978, executed by Hickory Hollow Associates, Sears, Roebuck
And Co., Alstores Realty Corporation, The Cain-Sloan Company,
Mercantile Properties, Inc., The Castner-Knott Dry Goods Co.,
and Intereal Company; as further amended by Second Amendment
to Deed of Declaration dated as of August 1, 1978, executed by
Hickory Hollow Associates, Sears, Roebuck And Co., Alstores
Realty Corporation, The Cain-Sloan Company, Mercantile
Properties, Inc., The Castner-Knott Dry Goods Co., and
Intereal Company; and as further amended by Third Amendment to
Deed of Declaration dated as of May 21, 1991, executed by
Nashland Associates, Sears, Roebuck And Co., Dillard
Department Stores, Inc., Cain-Sloan, Inc., Mercantile
Properties, Inc., the Castner-Knott Dry Goods Co., J.C. Penney
Properties, Inc., J.C. Penney Company, Inc., with consent
pages attached thereto.
2. Operating Agreement dated as of December 17, 1976 executed by
Hickory Hollow Associates, Sears, Roebuck And Co., Alstores
Realty Corporation, The Cain-Sloan Company, Mercantile
Properties, Inc., and The Castner-Knott Dry Goods Co.; as
amended by First Amendment to Operating Agreement dated as of
August 1, 1978 executed by Hickory Hollow Associates, Sears,
Roebuck And Co., Alstores Realty Corporation, The Cain-Sloan
Company, Mercantile Properties, Inc., The Castner-Knott Dry
Goods Co., J.C. Penney Properties, Inc., J.C. Penney Company,
Inc., and Intereal Company; as further amended by Second
Amendment to Operating Agreement dated of May 21, 1991,
executed by Nashland Associates, Sears, Roebuck And Co.,
Dillard Department Stores, Inc., Cain-Sloan Inc., Mercantile
Properties, Inc., The Castner-Knott Dry Goods Co., J.C. Penney
Properties, Inc., J.C. Penney Company, Inc., with consent
pages attached thereto.
<PAGE>
3. Supplemental Operating Agreement dated December 17, 1976,
executed by Hickory Hollow Associates and Sears, Roebuck And
Co.; as amended by First Amendment to Supplemental Operating
Agreement dated August 1, 1978, executed by Hickory Hollow
Associates and Sears, Roebuck And Co.
4. Supplemental Operating Agreement dated December 17, 1976,
executed by Hickory Hollow Associates, Alstores Realty
Corporation and The Cain-Sloan Company; as amended by First
Amendment to Supplemental Operating Agreement dated August 1,
1978, executed by Hickory Hollow Associates, Alstores Realty
Corporation and The Cain-Sloan Company.
5. Supplemental Operating Agreement dated August 1, 1978,
executed by Hickory Hollow Associates, J.C. Penney Properties,
Inc. and J.C. Penney Company, Inc.
6. Supplemental Operating Agreement dated December 17, 1976,
executed by Hickory Hollow Associates, Mercantile Properties,
Inc., and The Castner-Knott Dry Goods Co.; as amended by First
Amendment to Supplemental Operating Agreement dated August 1,
1978, executed by Hickory Hollow Associates, Mercantile
Properties, Inc., and The Castner-Knott Dry Goods Co.
B. Rivergate Mall:
1. Operating Agreement dated December 10, 1969, among Rivergate
Associates - a joint venture comprised of Rivergate Mall,
Inc. and Tennessee JV Corporation - J.C. Penney Company,
Inc., Alstores Realty Corporation, Cain-Sloan Company, and The
Castner-Knott Dry Goods Co.; as amended by Amendment of Deed
of Declaration and First Amendment of Operating Agreement
dated December 22, 1970 among Rivergate Associates, J.C.
Penney Properties, Inc., Alstores Realty Corporation, Cain-
Sloan Company, and The Castner-Knott Dry Goods Co.; as further
assigned by an Assumption Agreement dated July 10, 1972,
between J.C. Penney Properties, Inc. and Goodpenney
Properties, Inc.; as further amended by a Term Agreement dated
April 20, 1972, among Rivergate Associates, J.C. Penney
Company, Inc., Alstores Realty Corporation, Cain-Sloan
Company, and The Castner-Knott Dry Goods Co.; as amended by
Second Amendment to Operating Agreement and Memorandum of
Operating Agreement, among Rivergate Associates, J.C. Penney
Properties, Inc., Alstores Realty Corpo-
<PAGE>
ration, The Cain-Sloan Company, and The Castner-Knott Dry Goods
Co.; and as amended by Third Amendment of Operating Agreement
dated March 10, 1987, among Nashland Associates, J.C. Penney
Company, Inc., Alstores Realty Corporation, The Cain-Sloan
Company, and The Castner-Knott Dry Goods Co.
2. Reciprocal Easement Agreement dated March 12, 1980, between
Dayton-Hudson Corporation d/b/a Target Stores and Rivergate
Associates; as amended by First Amendment to Reciprocal
Easement Agreement dated March 10, 1987, executed by Nashland
Associates and Dayton-Hudson Corporation d/b/a Target Stores.
3. Deed of Declaration dated December 15, 1969, executed by
Rivergate Associates; as amended by Amendment of Deed of
Declaration and First Amendment of Operating Agreement dated
December 22, 1970, executed by Rivergate Associates, J.C.
Penney Properties, Inc., Alstores Realty Corporation, Cain-
Sloan Company, and The Castner-Knott Dry Goods Co.; by Second
Amendment to Deed of Declaration dated February 1, 1977,
executed by Rivergate Associates, Schnitzer-Penn Investment
Co., Schnitzer-Goodpenn Properties, Corporate Property
Investors, Howard Phipps and The Castner-Knott Dry Goods Co.;
by Third Amendment to Deed of Declaration dated November 1,
1977, executed by Rivergate Associates, Schnitzer-Penn
Investment Co., Schnitzer-Goodpenn Properties, Corporate
Property Investors, Howard Phipps, and The Castner-Knott Dry
Goods Co.; and by Fourth Amendment to Deed of Declaration
dated March 10, 1987, executed by Nashland Associates, J.C.
Penney Company, Inc., Alstores Realty Corporation, The Cain-
Sloan Company, and The Castner-Knott Dry Goods Co..
C. Courtyard at Hickory Hollow:
1. Deed of Declaration dated November 24, 1976, executed by
Hickory Hollow Associates; as amended by First Amendment to
Deed of Declaration dated as of January 24, 1978, executed by
Hickory Hollow Associates, Sears, Roebuck And Co., Alstores
Realty Corporation, The Cain-Sloan Company, Mercantile
Properties, Inc., The Castner-Knott Dry Goods Co., and
Intereal Company; as further amended by Second Amendment to
Deed of Declaration dated as of August 1, 1978, executed by
Hickory Hollow Associates, Sears, Roebuck And Co., Alstores
Realty Corporation, The
<PAGE>
Cain-Sloan Company, Mercantile Properties, Inc., The Castner-
Knott Dry Goods Co., and Intereal Company; and as further amended
by Third Amendment to Deed of Declaration dated as of May 21,
1991, executed by Nashland Associates, Sears, Roebuck And Co.,
Dillard Department Stores, Inc., Cain-Sloan, Inc., Mercantile
Properties, Inc., the Castner-Knott Dry Goods Co., J.C. Penney
Properties, Inc., and J.C. Penney Company, Inc., with consent
pages attached thereto.
2. Declaration of Protective Covenants for Hickory Hollow dated
March 10, 1977, executed by Hickory Hollow Associates; as
amended by Amendment to Declaration of Protective Covenants
for Hickory Hollow dated July 28, 1977, executed by Hickory
Hollow Associates; as further amended by Second Amendment to
Declaration of Protective Covenants for Hickory Hollow dated
September 8, 1978, executed by Hickory Hollow Associates; as
further amended by Restated and Amended Declaration of
Protective Covenants for Hickory Hollow dated May 11, 1979,
executed by Hickory Hollow Associates; as further amended by
Amendment to Restated and Amended Declaration of Protective
Covenants for Hickory Hollow dated September 4, 1981, executed
by Hickory Hollow Associates; as further amended by Second
Amendment to Restated and Amended Declaration of Protective
Covenants for Hickory Hollow dated October 15, 1982, executed
by Hickory Hollow Associates; as further amended by Third
Amendment to Restated and Amended Declaration of Protective
Covenants for Hickory Hollow dated February 15, 1983, executed
by Hickory Hollow Associates; as further amended by Fourth
Amendment to Restated and Amended Declaration of Protective
Covenants for Hickory Hollow dated July 14, 1983, executed by
Hickory Hollow Associates; and as further amended by Agreement
dated as of June 7, 1984, executed by Hickory Hollow
Associates and Nashland Associates.
D. Village at Rivergate
1. Operating Agreement dated December 10, 1969, among Rivergate
Associates - a joint venture comprised of Rivergate Mall,
Inc. and Tennessee JV Corporation - J.C. Penney Company,
Inc., Alstores Realty Corporation, Cain-Sloan Company, and The
Castner-Knott Dry Goods Co.; as amended by Amendment of Deed
of Declaration and First Amendment of Operating Agreement
dated December 22, 1970 among Rivergate Associates, J.C.
Penney Properties, Inc., Alstores Realty Corporation, Cain-
Sloan Com-
<PAGE>
pany, and The Castner-Knott Dry Goods Co.; as further
assigned by an Assumption Agreement dated July 10, 1972,
between J.C. Penney Properties, Inc. and Goodpenney
Properties, Inc.; as further amended by a Term Agreement dated
April 20, 1972, among Rivergate Associates, J.C. Penney
Company, Inc., Alstores Realty Corporation, Cain-Sloan
Company, and The Castner-Knott Dry Goods Co.; as amended by
Second Amendment to Operating Agreement and Memorandum of
Operating Agreement, among Rivergate Associates, J.C. Penney
Properties, Inc., Alstores Realty Corporation, The Cain-Sloan
Company, and The Castner-Knott Dry Goods Co.; and as amended
by Third Amendment of Operating Agreement dated March 10,
1987, among Nashland Associates, J.C. Penney Company, Inc.,
Alstores Realty Corporation, The Cain-Sloan Company, and The
Castner-Knott Dry Goods Co.
2. Reciprocal Easement Agreement dated March 12, 1980, between
Dayton-Hudson Corporation d/b/a Target Stores and Rivergate
Associates, as amended by First Amendment to Reciprocal
Easement Agreement dated March 10, 1987, executed by Nashland
Associates and Dayton-Hudson Corporation d/b/a Target Stores.
3. Deed of Declaration dated December 15, 1969, executed by
Rivergate Associates; as amended by Amendment of Deed of
Declaration and First Amendment of Operating Agreement dated
December 22, 1970, executed by Rivergate Associates, J.C.
Penney Properties, Inc., Alstores Realty Corporation, Cain-
Sloan Company, and The Castner-Knott Dry Goods Co.; by Second
Amendment to Deed of Declaration dated February 1, 1977,
executed by Rivergate Associates, Schnitzer-Penn Investment
Co., Schnitzer-Goodpenn Properties, Corporate Property
Investors, Howard Phipps and The Castner-Knott Dry Goods Co.;
by Third Amendment to Deed of Declaration dated November 1,
1977, executed by Rivergate Associates, Schnitzer-Penn
Investment Co., Schnitzer-Goodpenn Properties, Corporate
Property Investors, Howard Phipps, and The Castner-Knott Dry
Goods Co.; and by Fourth Amendment to Deed of Declaration
dated March 10, 1987, executed by Nashland Associates, J.C.
Penney Company, Inc., Alstores Realty Corporation, The Cain-
Sloan Company, and The Castner-Knott Dry Goods Co..
<PAGE>
SCHEDULE 3
Deferred Maintenance Items
Not applicable.
<PAGE>
SCHEDULE 4
Special Assessments
None.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet at June 30, 1998 (unaudited) and the
Consolidated Statement of Operations for the six months ended
June 30, 1997 (unaudited) and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-1-1998
<PERIOD-END> JUN-30-1998
<CASH> 6,417
<SECURITIES> 0
<RECEIVABLES> 15,898
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 163,550
<TOTAL-ASSETS> 1,413,059
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
29
<COMMON> 241
<OTHER-SE> 409,542
<TOTAL-LIABILITY-AND-EQUITY> 1,413,059
<SALES> 0
<TOTAL-REVENUES> 112,455
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 59,486
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28,817
<INCOME-PRETAX> 19,747
<INCOME-TAX> 0
<INCOME-CONTINUING> 19,747
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,747
<EPS-PRIMARY> .82
<EPS-DILUTED> .81
