<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 001-12482
GLIMCHER REALTY TRUST
(Exact name of registrant as specified in its charter)
MARYLAND 31-1390518
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
20 SOUTH THIRD STREET 43215
COLUMBUS, OHIO (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (614) 621-9000
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
<S> <C>
COMMON SHARES OF BENEFICIAL INTEREST, PAR VALUE $0.01 PER SHARE NEW YORK STOCK EXCHANGE
9 1/4% SERIES B CUMULATIVE REDEEMABLE PREFERRED SHARES OF NEW YORK STOCK EXCHANGE
BENEFICIAL INTEREST, PAR VALUE $0.01 PER SHARE
</TABLE>
-------------------------------------
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (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___
As of April 28, 1999, there were 23,736,162 Common Shares of Beneficial Interest
outstanding, par value $0.01 per share.
1 of 20 pages
<PAGE> 2
GLIMCHER REALTY TRUST
FORM 10-Q
INDEX
-----
<TABLE>
<CAPTION>
PART I: FINANCIAL INFORMATION PAGE
----
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 1999 and December 31, 1998 3
Consolidated Statements of Operations for the three months ended March 31, 1999 and 1998 4
Consolidated Statements of Cash Flows for the three months ended March 31, 1999 and 1998 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 11
Item 3. Quantitative and Qualitative Disclosures About Market Risk 18
PART II: OTHER INFORMATION
Item 1. Legal Proceedings 19
Item 2. Changes in Securities 19
Item 3. Defaults Upon Senior Securities 19
Item 4. Submission of Matters to a Vote of Security Holders 19
Item 5. Other Information 19
Item 6. Exhibits and Reports on Form 8-K 19
SIGNATURES 20
</TABLE>
2
<PAGE> 3
PART 1
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GLIMCHER REALTY TRUST
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PAR VALUE AMOUNTS)
<TABLE>
<CAPTION>
ASSETS
(UNAUDITED)
MARCH 31, 1999 DECEMBER 31, 1998
-------------- -----------------
<S> <C> <C>
Investment in real estate:
Land ......................................................................... $ 171,374 $ 171,266
Buildings, improvements and equipment ........................................ 1,245,609 1,240,121
Developments in progress:
Land ...................................................................... 11,008 6,183
Developments .............................................................. 12,802 11,071
----------- -----------
1,440,793 1,428,641
Less accumulated depreciation ................................................ 146,637 137,229
----------- -----------
Net investment in real estate ............................................. 1,294,156 1,291,412
Cash and cash equivalents ...................................................... 6,387 8,949
Cash in escrow ................................................................. 12,014 11,327
Investment in and advances to unconsolidated entities .......................... 203,824 200,205
Tenant accounts receivable, net ................................................ 27,951 29,050
Deferred expenses, net ......................................................... 10,794 10,742
Prepaid and other assets ....................................................... 7,135 6,810
----------- -----------
$ 1,562,261 $ 1,558,495
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Mortgage notes payable ......................................................... $ 829,840 $ 830,795
Notes payable .................................................................. 173,200 163,000
Accounts payable and accrued expenses .......................................... 33,509 32,143
Distributions payable .......................................................... 18,207 18,126
----------- -----------
1,054,756 1,044,064
Commitments and contingencies
Minority interest in partnership ............................................... 32,524 33,356
Redeemable preferred shares:
Series A-1 and Series D convertible preferred shares of beneficial interest,
$0.01 par value, 90,000 shares issued and outstanding
as of March 31, 1999 and December 31, 1998, respectively .................. 90,000 90,000
Shareholders' equity:
Series B cumulative preferred shares of beneficial interest, $0.01 par
value, 5,118,000 shares issued and outstanding ............................ 127,950 127,950
Common shares of beneficial interest, $0.01 par value, 23,726,480
and 23,711,098 shares issued and outstanding as of March 31, 1999
and December 31, 1998, respectively ....................................... 237 237
Additional paid-in capital ................................................... 353,338 353,117
Distributions in excess of accumulated earnings .............................. (96,544) (90,229)
----------- -----------
$ 1,562,261 $ 1,558,495
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
3
<PAGE> 4
GLIMCHER REALTY TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Revenues:
Minimum rents ................................................ $ 37,796 $ 29,638
Percentage rents ............................................. 1,556 1,175
Tenant recoveries ............................................ 12,155 7,190
Other ........................................................ 2,579 1,661
-------- --------
Total revenues ............................................. 54,086 39,664
-------- --------
Operating expenses:
Real estate taxes ............................................ 5,073 3,796
Recoverable operating expenses ............................... 8,105 4,152
-------- --------
13,178 7,948
Other operating expenses ..................................... 1,227 875
-------- --------
Total operating expenses ................................... 14,405 8,823
-------- --------
Depreciation and amortization ..................................... 10,350 8,051
General and administrative ........................................ 2,687 2,138
Interest income ................................................... 231 620
Interest expense .................................................. 14,883 10,205
Equity in income (loss) of unconsolidated entities ................ (908) (188)
Minority interest in operating partnership ........................ 627 667
-------- --------
Net income ................................................. 10,457 10,212
Preferred stock dividends ......................................... 5,366 4,908
-------- --------
Net income available to common shareholders ................ $ 5,091 $ 5,304
======== ========
Earnings per share (basic and diluted) ............................ $ 0.21 $ 0.22
======== ========
Cash distributions declared per common share of beneficial interest $ 0.4808 $ 0.4808
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
4
<PAGE> 5
GLIMCHER REALTY TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income .................................................... $ 10,457 $ 10,212
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for doubtful accounts ...................... 622 536
Depreciation and amortization ........................ 10,350 8,051
Other non-cash expenses .............................. 207
Equity in (income) loss of unconsolidated entities ... 908 229
Minority interest in operating partnership ........... 627 667
Net changes in operating assets and liabilities:
Tenant accounts receivable, net ...................... 477 (1,704)
Deferred expenses, prepaid and other assets .......... 327 (644)
Accounts payable and accrued expenses ................ (1,674) (1,226)
-------- --------
Net cash provided by operating activities ......... 22,094 16,328
-------- --------
Cash flows from investing activities:
Additions to investment in real estate .................... (9,700) (7,962)
Investment in unconsolidated entities ..................... (4,527) (49,669)
(Payments to) withdrawals from cash in escrow ............. (688) 582
Additions to deferred expenses, prepaid and other assets .. (994) (1,681)
-------- --------
Net cash used in investing activities ............. (15,909) (58,730)
-------- --------
Cash flows from financing activities:
Proceeds from revolving line of credit, net ............... 10,200 51,800
Proceeds from issuance of mortgage and notes payable ...... 66,104 3,339
Principal payments on mortgage and notes payable .......... (67,059) (618)
Proceeds from issuance of shares .......................... 126 145
Cash distributions ........................................ (18,118) (14,079)
-------- --------
Net cash (used in) provided by financing activities (8,747) 40,587
-------- --------
Net change in cash and cash equivalents ............................ (2,562) (1,815)
Cash and cash equivalents, at beginning of period .................. 8,949 7,434
-------- --------
Cash and cash equivalents, at end of period ........................ $ 6,387 $ 5,619
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
5
<PAGE> 6
GLIMCHER REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1. BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts
of Glimcher Realty Trust (the "Company" or "GRT"), Glimcher Properties Limited
Partnership, (the "Operating Partnership") (88.9% owned by GRT at March 31, 1999
and December 31, 1998), six Delaware limited partnerships (Glimcher Holdings
Limited Partnership, Glimcher Centers Limited Partnership, Grand Central Limited
Partnership, Glimcher York Associates Limited Partnership, Glimcher University
Mall Limited Partnership and Montgomery Mall Associates Limited Partnership),
three Delaware limited liability companies, (Glimcher Northtown Venture, LLC,
Weberstown Mall, LLC and Glimcher Lloyd Venture, LLC) and one Ohio limited
partnership (Morgantown Mall Associates Limited Partnership), all of which are
owned directly or indirectly by GRT. The Operating Partnership has an investment
in several joint ventures and one other corporation which are accounted for
under the equity method. All significant inter-entity balances and transactions
have been eliminated.
The consolidated financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and in accordance with instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. The information furnished in the accompanying consolidated balance
sheets, statements of operations, and statements of cash flows reflect all
adjustments which are, in the opinion of management, necessary for a fair
presentation of the aforementioned financial statements for the interim periods.
Operating results for the three months ended March 31, 1999, are not necessarily
indicative of the results that may be expected for the year ending December 31,
1999.
The consolidated financial statements should be read in conjunction
with the notes to the consolidated financial statements, Management's Discussion
and Analysis of Financial Condition and Results of Operations included in GRT's
Form 10-K for the year ended December 31, 1998.
During the second quarter of 1998 the Financial Accounting Standards
Board Emerging Issues Task Force issued EITF 98-9 relating to the recognition of
contingent rental income in interim periods. Under EITF 98-9 the Company is
required to recognize percentage rents in interim periods after the contingent
sales level is exceeded rather than estimating and accruing percentage rents as
if earned ratably over the lease year. The Company adopted EITF 98-9 on a
prospective basis beginning second quarter 1998 and did not restate the first
quarter of 1998. Comparative pro forma results if the standard had been adopted
at the beginning of 1998 would have reduced net income available to common
shareholders by approximately $300,000 ($0.01 per share) for the three months
ended March 31, 1998.
Supplemental disclosure of non-cash financing and investing activities:
The Company accrued accounts payable of $6,751 and $3,439 for real
estate improvements as of March 31, 1999 and March 31, 1998, respectively.
Reclassifications
Certain reclassifications of prior period amounts have been made in the
financial statements to conform to the 1999 presentation.
6
<PAGE> 7
GLIMCHER REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2. INVESTMENT IN UNCONSOLIDATED ENTITIES
Investment in unconsolidated entities consists of preferred stock and
non-voting common stock of Glimcher Development Corporation, a 45.00% interest
in Great Plains Metro Mall, LLC, a 33.33% interest in Johnson City Venture, LLC,
a 40.00% interest in Dayton Mall Venture, LLC, a 40.00% interest in Colonial
Park Mall Limited Partnership, a 30.00% interest in Elizabeth Metro Mall, LLC, a
34.85% interest in Glimcher SuperMall Venture, LLC, a 20.00% interest in San
Mall, LLC, a 50.00% interest in Polaris Center, LLC and a 20.00% interest in
Eastland Mall, LLC.
The net income (loss) for each unconsolidated entity is allocated in
accordance with the provisions of the applicable operating agreements. The
allocation provisions in these agreements may differ from the ownership interest
held by each member under the terms of these agreements.
The summary financial information of the Company's unconsolidated
entities, accounted for using the equity method, and a summary of the Operating
Partnership's investment in and share of net income (loss) from such
unconsolidated entities are presented below:
BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, 1999 DECEMBER 31, 1998
-------------- -----------------
<S> <C> <C>
Assets:
Investment properties at cost, net ..... $694,688 $675,993
Other assets ........................... 35,570 41,701
-------- --------
$730,258 $717,694
======== ========
Liabilities and Members' Equity:
Mortgage notes payable ................. $420,024 $401,927
Accounts payable and accrued expenses .. 108,224 113,837
-------- --------
528,248 515,764
Members' equity ........................ 202,010 201,930
-------- --------
$730,258 $717,694
======== ========
Operating Partnership's share of:
Members' equity ........................ $135,578 $136,645
======== ========
RECONCILIATION OF MEMBERS' EQUITY TO COMPANY
INVESTMENT IN UNCONSOLIDATED ENTITIES:
Members' equity ........................ $135,578 $136,645
Advances and additional costs .......... 68,246 63,560
-------- --------
Investment in unconsolidated entities .. $203,824 $200,205
======== ========
</TABLE>
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31,
------------------------------------
1999 1998
---- ----
<S> <C> <C>
Total revenues ................................... $ 23,306 $ 16,062
Operating expenses ............................... (11,752) (7,052)
-------- --------
Net operating income ............................. 11,554 9,010
Depreciation and amortization .................... (4,236) (3,132)
Interest expense ................................. (7,015) (5,316)
-------- --------
Net income (loss) ................................ $ 303 $ 562
======== ========
Operating Partnership's share of net income (loss) $ (908) $ (188)
======== ========
</TABLE>
7
<PAGE> 8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
3. MORTGAGE NOTES PAYABLE AS OF MARCH 31, 1999 AND DECEMBER 31, 1998 CONSIST OF
THE FOLLOWING:
<TABLE>
<CAPTION>
CARRYING AMOUNT OF PAYMENT PAYMENT AT MATURITY
DESCRIPTION MORTGAGE NOTES PAYABLE INTEREST RATE TERMS MATURITY DATE
- ------------------------------------------------------------------------------------------------------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Glimcher Holdings L.P............ $ 25,000 $ 25,000 6.935% 6.935% (a) $25,000 Oct. 1, 2000
Glimcher Holdings L.P. - Loan A.. 40,000 6.995%
Glimcher Holdings L.P. - Loan B.. 40,000 40,000 7.505% 7.505% (a) 40,000 Feb. 1, 2003
Glimcher Centers L.P............. 76,000 76,000 7.625% 7.625% (a) 76,000 Aug. 1, 2000
Grand Central L.P................ 52,438 7.180% (b) 46,065 Feb. 1, 2009
Morgantown Mall Associates L.P... 58,064 58,214 6.890% 6.890% (b) (c) (c)
University Mall L.P.............. 70,487 70,695 7.090% 7.090% (b) (d) (d)
Northtown Mall, LLC.............. 40,000 40,000 (e) (e) (a) 40,000 Aug. 30, 2001
Montgomery Mall Associates, L.P.. 47,477 47,602 6.740% 6.740% (b) (f) (f)
Weberstown Mall, LLC ............ 11,451 11,520 8.800% 8.800% (b) Nov. 15, 2016
Glimcher Lloyd Venture, LLC...... 130,000 130,000 (g) (g) (a) 130,000 Oct. 11, 2001
Glimcher Properties L.P. Mortgage
Notes Payable:
Glimcher Properties L.P...... 50,000 50,000 7.470% 7.470% (a) 50,000 Oct. 26, 2002
Other Mortgage Notes......... 101,264 101,709 (h) (h) (b) 91,229 (i)
Other Bridge Facilities...... 73,000 89,000 (j) (j) (a) 73,000 (k)
Tax Exempt Bonds............. 19,000 19,000 6.000% 6.000% (l) Nov. 1, 2028
Construction Loans........... 35,659 32,055 (m) (m) (a) (n)
-------- --------
Total Mortgage Notes Payable..... $829,840 $830,795
======== ========
</TABLE>
(a) The loan requires monthly payments of interest only.
(b) The loan requires monthly payments of principal and interest.
(c) The loan matures in September 2028, with an optional prepayment date in
2008.
(d) The loan matures in January 2028, with an optional prepayment date in 2013.
(e) Interest rate of LIBOR (fixed at 5.662% until maturity) plus 125 basis
points (6.912% at March 31, 1999 and at December 31, 1998).
(f) The loan matures in August 2028, with an optional prepayment date in 2005.
(g) Interest rate of LIBOR (capped at 7.750% until maturity) plus 125 basis
points (6.190% at March 31, 1999 and 6.790% at December 31, 1998).
(h) Interest rates ranging from 7.375% to 9.125%.
(i) Final maturity dates ranging from June 1999 to April 2016.
(j) Interest rates ranging from LIBOR plus 160-575 basis points (6.550% -7.939%
at March 31, 1999 and 7.147%-11.375% at December 31,1998).
(k) Final maturity dates ranging from April 1999 to October 1999.
(l) The loan requires semi-annual payments of interest.
(m) Interest rates ranging from 6.865% to 6.965% at March 31, 1999 and 7.626%
at December 31, 1998.
(n) Final maturity dates ranging from October 1999 to February 2001.
All mortgage notes payable are collateralized by certain properties
owned by the respective partnerships. Certain of the loans contain financial
covenants regarding minimum net operating income and coverage ratios.
4. NOTES PAYABLE
At March 31, 1999, the Company maintained a revolving line of credit
(the "Credit Facility") of $190,000. Borrowings under the Credit Facility are
secured by 11 properties and currently bear interest at a rate equal to LIBOR
plus 170 basis points per annum (6.688% at March 31, 1999). Payments due under
the Credit Facility are guaranteed by GRT and by Glimcher Properties
Corporation, a wholly owned subsidiary of the Company.
8
<PAGE> 9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
5. EARNINGS PER SHARE
Presentation of basic EPS and diluted EPS is summarized in the table
below:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31,
-----------------------------------------------------------
1999 1998
--------------------------- ----------------------------
PER PER
INCOME SHARES SHARE INCOME SHARES SHARE
------ ------ ----- ------ ------ -----
<S> <C> <C> <C> <C> <C> <C>
BASIC EPS
Income available to common
shareholders.................... $ 5,091 23,718 $0.21 $ 5,304 23,675 $0.22
EFFECT OF DILUTIVE SECURITIES
Operating Partnership units........ 627 2,971 667 2,944
Options............................ 1 196
DILUTED EPS
Income available plus assumed -------- ------ ----- -------- ------ -----
Conversions..................... $ 5,718 26,690 $0.21 $ 5,971 26,815 $0.22
======== ====== ===== ======== ====== =====
</TABLE>
The Series A-1 and Series D convertible preferred shares of beneficial
interest include certain conversion features that could potentially dilute EPS
in the future, but were not included in the computation of diluted EPS because
to do so would have been antidilutive (based on period end share prices) for the
periods presented.
6. SHAREHOLDERS' EQUITY
The Company's Declaration of Trust authorizes the Company to issue up
to an aggregate of 100,000,000 shares of beneficial interest, consisting of
common shares or one or more series of preferred shares of beneficial interest.
The following table summarizes the change in distributions in excess of
accumulated earnings since January 1, 1999:
<TABLE>
<S> <C>
Balance, January 1, 1999......................... $ (90,229)
Distributions declared, $0.4808 per share... (11,406)
Preferred stock dividends................... (5,366)
Net income.................................. 10,457
----------
Balance, March 31, 1999.......................... $ (96,544)
==========
</TABLE>
9
<PAGE> 10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
7. SEGMENT REPORTING
Statement of Financial Accounting Standards No. 131 establishes
standards for publicly-held business enterprises to report information about
operating segments in annual financial statements and requires that these
enterprises report selected information about operating segments in interim
financial reports issued to shareholders, as summarized in the table below:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31, 1999
--------------------------------------------------------
COMMUNITY
MALLS CENTERS CORPORATE TOTAL
-------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Total revenues.................... $ 33,696 $ 20,390 $ $ 54,086
Total operating expenses.......... 10,616 3,789 14,405
-------- -------- ------ ----------
Property net operating income..... $ 23,080 $ 16,601 $ $ 39,681
======== ======== ====== ==========
Net investment in real estate..... $750,132 $539,997 $4,027 $1,294,156
======== ======== ====== ==========
</TABLE>
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31, 1998
--------------------------------------------------------
COMMUNITY
MALLS CENTERS CORPORATE TOTAL
-------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Total revenues.................... $ 20,017 $ 19,647 $ $ 39,664
Total operating expenses.......... 5,276 3,547 8,823
-------- -------- ------ ----------
Property net operating income..... $ 14,741 $ 16,100 $ $ 30,841
======== ======== ====== ==========
Net investment in real estate..... $422,446 $545,990 $3,479 $ 971,915
======== ======== ====== ==========
</TABLE>
10
<PAGE> 11
PART I
FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
The following should be read in conjunction with the unaudited
consolidated financial statements of Glimcher Realty Trust (the "Company" or
"GRT") including the respective notes thereto, all of which are included in this
Form 10-Q.
This Form 10-Q, together with other statements and information publicly
disseminated by GRT, contains certain statements which may be deemed to be
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. Such statements are based on assumptions and expectations which may
not be realized and are inherently subject to risks and uncertainties, many of
which cannot be predicted with accuracy and some of which might not even be
anticipated. Future events and actual results, financial and otherwise, may
differ from the results discussed in the forward-looking statements. Risks and
other factors that might cause differences, some of which could be material,
include, but are not limited to: the effect of economic and market conditions;
failure to consummate financing and venture arrangements; development risks,
including lack of satisfactory financing, construction and lease-up delays and
cost overruns; the level and volatility of interest rates; the financial
stability of tenants within the retail industry; the rate of revenue increases
versus expense increases; as well as other risks listed from time to time in
this Form 10-Q and in GRT's other reports filed with the Securities and Exchange
Commission.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THREE MONTHS ENDED MARCH 31, 1998
REVENUES
Total revenues increased 36.4%, or $14.4 million, for the three months
ended March 31, 1999. Of the $14.4 million increase, $13.4 million was the
result of increased revenues at the malls, $830,000 was the result of increased
revenues at the community centers, $100,000 was the result of decreased revenues
from dispositions and $310,000 was related to other revenue increases.
Minimum rents
Minimum rents increased 27.5%, or $8.2 million, for the three months
ended March 31, 1999.
<TABLE>
<CAPTION>
INCREASE (DOLLARS IN MILLIONS)
-------------------------------------------------------------
COMMUNITY PERCENT
MALLS CENTERS TOTAL TOTAL
----- ------- ----- -----
<S> <C> <C> <C> <C>
Same center.................. $ 0.6 $ 0.6 $ 1.2 4.0%
Acquisitions/Developments.... 7.1 0.0 7.1 23.8
Dispositions................. 0.0 (0.1) (0.1) (0.3)
----- ----- ----- ----
$ 7.7 $ 0.5 $ 8.2 27.5%
===== ===== ===== ====
</TABLE>
Percentage rents
Percentage rents increased $380,000 for the three months ended March
31, 1999. Of this increase, $360,000 was earned at the malls and $20,000 was
earned at the community centers.
11
<PAGE> 12
Tenant recoveries
Tenant recoveries reflect a net increase of 69.1%, or $5.0 million, for
the three months ended March 31, 1999.
<TABLE>
<CAPTION>
INCREASE (DOLLARS IN MILLIONS)
---------------------------------------------------------------
COMMUNITY PERCENT
MALLS CENTERS TOTAL TOTAL
----- ------- ----- -----
<S> <C> <C> <C> <C>
Same center.................. $ 0.6 $ 0.2 $ 0.8 11.1%
Acquisitions/Developments.... 4.2 0.0 4.2 58.0
----- ----- ----- ----
$ 4.8 $ 0.2 $ 5.0 69.1%
===== ===== ===== ====
</TABLE>
Other revenues
The $920,000 increase in other revenues is primarily the result of
increases in temporary tenant income at the malls of $690,000 and an increase of
$230,000 in management fee revenues, of which $170,000 was the result of new
joint ventures and $60,000 was due to an increase from the existing joint
ventures.
OPERATING EXPENSES
Total operating expenses increased 63.3%, or $5.6 million, for the
three months ended March 31, 1999. Recoverable operating expenses increased $5.2
million, the provision for credit losses increased $90,000 and other operating
expenses increased $270,000.
Recoverable expenses
Recoverable operating expenses increased 65.8%, or $5.2 million, for
the three months ended March 31, 1999.
<TABLE>
<CAPTION>
INCREASE (DOLLARS IN MILLIONS)
--------------------------------------------------------------
COMMUNITY PERCENT
MALLS CENTERS TOTAL TOTAL
----- ------- ----- -----
<S> <C> <C> <C> <C>
Same center.................. $ 0.7 $ 0.1 $ 0.8 10.5%
Acquisitions/Developments.... 4.4 0.0 4.4 55.3
----- ----- ----- ----
$ 5.1 $ 0.1 $ 5.2 65.8%
===== ===== ===== ====
</TABLE>
Provision for credit losses
The provision for credit losses was approximately $620,000 and
represented 1.2% of tenant revenues for the three months ended March 31, 1999,
compared to 1.3% of tenant revenues for the three months ended March 31, 1998.
Depreciation and amortization
The $2.3 million increase in depreciation and amortization consists
primarily of an increase of $1.9 million from mall acquisitions, an increase of
$370,000 in the core portfolio properties, offset with a decrease of $20,000
from the disposition of one community center in 1998.
GENERAL AND ADMINISTRATIVE
General and administrative expense was $2.7 million and represented
5.0% of total revenues for the three months ended March 31, 1999, compared to
$2.1 million and 5.4% of total revenues for the corresponding period in 1998.
The increase in expense compared to the first quarter of 1998 reflects an
increase in the number of corporate associates and additional occupancy costs as
a result of the Company's growth from acquisitions during 1998.
12
<PAGE> 13
INTEREST EXPENSE/CAPITALIZED INTEREST
Interest expense increased 45.8%, or $4.7 million, for the three months
ended March 31, 1999. The summary below identifies the increase by its various
components (dollars in thousands).
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------------------------
1999 1998 INC. (DEC.)
---- ---- ----------
<S> <C> <C> <C>
Average loan balance ............. $1,012,193 $625,565 $386,628
Average rate ..................... 7.17% 7.54% (0.37)%
Total interest ................... $ 18,144 $ 11,792 $ 6,352
Less: Capitalized interest ...... (1,708) (1,484) (224)
Add: Amortization of rate buydown 194 (194)
Other (1) ........................ (1,553) (297) (1,256)
---------- -------- --------
Interest expense ................. $ 14,883 $ 10,205 $ 4,678
========== ======== ========
</TABLE>
(1) Other consists primarily of interest costs billed to joint venture entities.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity
The Company has several active development, renovation and expansion
projects and will continue to pursue other projects in these areas.
In January 1999, the Company refinanced a maturing $40.0 million
mortgage note payable with a new $52.5 million mortgage note payable on Grand
Central Mall which matures in February 2009 and bears interest at 7.18% per
annum. The Company extinguished $16.0 in maturing short term notes during the
first quarter and refinanced a short term note payable of $10.0 million which
has a new maturity date of October 1, 1999.
Management anticipates that net cash provided by operating activities,
the funds available under its credit facility, its construction financing,
long-term mortgage debt, venture structure for acquisitions and developments,
issuance of preferred and common shares of beneficial interest and proceeds from
the sale of assets will provide sufficient capital resources to carry out the
Company's business strategy relative to the renovations, expansions and
developments discussed herein. Based upon its current debt-to-market
capitalization, the Company does not expect to pursue significant additional
acquisitions until such time as the Company has reduced the amount of
outstanding borrowings or has access to additional equity capital.
At March 31, 1999, the Company's debt-to-total-market capitalization
was 62.5%, as a result of a lower equity price for the Company's shares and an
increase in outstanding debt. The Company's intent is to maintain this ratio
between approximately 40.0% and 60.0% and the Company is working toward reducing
this ratio below 60.0% in 1999.
Net cash provided by operating activities for the three months ended
March 31, 1999, was $22.1 million versus $16.3 million for the corresponding
period of 1998. Net income adjusted for non-cash items accounted for a $3.1
million increase, while changes in operating assets and liabilities accounted
for a $2.7 million increase.
Net cash used in investing activities for the three months ended March
31, 1999, was $15.9 million, and reflects additional direct investments in real
estate assets of $9.7 million and additional indirect investments in real estate
through investments in unconsolidated entities of $4.5 million.
Net cash used in financing activities for the three months ended March
31, 1999, was $8.7 million. Cash was provided by net additional borrowings under
the credit facility of $10.2 million and issuance of mortgage notes payable of
$66.1 million. Cash was used to fund distributions of $18.1 million and
principal payments on mortgage and notes payable of $67.1 million.
13
<PAGE> 14
Expansion, Renovation and Development Activity
The Company continues to be active in its expansion, renovation and
development activities. Its business strategy is to grow the Company's assets
and cash flow available to, among other things, provide for dividend
requirements.
Expansions and Renovations
- --------------------------
The Company maintains a strategy of selective expansions and
renovations in order to improve the operating performance and the competitive
position of its existing portfolio. The Company also engages in an active
redevelopment program with the objective of attracting innovative retailers
which management believes will enhance the operating performance of the
properties.
Grand Central Mall
The Company relocated County Market to a new 63,600 square-foot
outparcel building which opened March 1999 and expects to retenant the existing
38,500 square-foot building later in 1999.
Indian Mound Mall
The Company expanded the existing Elder-Beerman store at this mall by
approximately 21,000 square feet of GLA, which increased the mall's GLA to
approximately 564,000 square feet.
The Mall at Fairfield Commons
The Company is in the process of expanding this mall with the addition
of a 75,000 square-foot Regal Cinemas on one of the mall's outparcels, which is
expected to open in the third quarter of 1999.
Developments
- ------------
Polaris Towne Center
In March 1998, the Company, in a joint venture in which it has a 50.0%
ownership interest, commenced construction of an approximately 700,000
square-foot power community center in northern Columbus, Ohio. Upon completion,
the community center will feature grocery and discount store anchors,
restaurants, big box retailers and several specialty shops. The initial anchor,
Kroger, opened in the fourth quarter of 1998, three additional tenants opened in
the first quarter of 1999 and the remainder of the space is expected to open
through the fall of 1999. The required equity for Polaris Towne Center was
contributed to the joint venture during 1998. The joint venture also has a
construction loan facility in place that is sufficient to fund the balance of
the estimated cost of the project.
Jersey Gardens
The Company, in a joint venture in which the Company has a 30.0%
ownership interest, is currently developing a 1.3 million square-foot
value-oriented fashion and entertainment megamall, ("Jersey Gardens"), located
in Elizabeth, New Jersey. Construction of the mall and related infrastructure is
underway and completion is projected for fourth quarter of 1999. The required
equity for Jersey Gardens and off-site improvements have been funded. The
Company has also arranged a construction loan facility for the project and has
met the pre-leasing requirements of such loan.
Polaris Fashion Place
In March 1998, the Company announced plans for the development of a new
super-regional mall of approximately 1.5 million square feet in northern
Columbus, Ohio. Polaris Fashion Place is expected to be a bi-level mall
featuring six anchor tenants, approximately 150 mall stores and four
restaurants, which will be located across the street from Polaris Towne Center
and is projected to open in 2001.
14
<PAGE> 15
Carson
In April 1999, the Company terminated its contingent contract to
acquire the land for a value-oriented super-regional Mall Property located in
Carson, California. The Company is currently exploring alternatives with respect
to continued participation in the development of this site.
Bolingbrook
In October 1998, the Company announced plans for the development of a
1.0 million square-foot super-regional Mall Property in the Chicago suburb of
Bolingbrook, Illinois. The Company has obtained an option to acquire a 203-acre
parcel as the site of this project, which could open in 2001.
PORTFOLIO DATA
Tenants reporting sales data in the table below for the twelve month
periods ended March 31, 1999, and 1998, represent 15.0 million square feet of
GLA, or 79.6% of the "same store" population.
<TABLE>
<CAPTION>
MALLS COMMUNITY CENTERS
-------------------------- ------------------------
PROPERTY TYPE SALES PSF % INCREASE SALES PSF %INCREASE
------------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Anchors ........................... $ 168.69 1.2% $ 244.85 4.1%
Stores ............................ $ 273.93 4.2% $ 197.94 5.1%
Total.............................. $ 218.56 2.9% $ 240.16 4.2%
</TABLE>
Portfolio occupancy statistics by property type are summarized below:
<TABLE>
<CAPTION>
OCCUPANCY (1) (2)
------------------------------------------------------------
3/31/99 12/31/98 9/30/98 6/30/98 3/31/98
------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Mall Anchors........................ 96.1% 96.3% 96.5% 97.7% 97.6%
Mall Stores......................... 82.0% 84.1% 82.5% 79.2% 79.8%
Mall Stores Comparable 12 Months.... 80.7% 82.6% 81.4% 79.8% 79.8%
Total Mall Portfolio................ 90.8% 91.8% 91.3% 91.0% 91.1%
Community Center Anchors............ 98.7% 98.7% 97.9% 97.9% 97.6%
Community Center Stores............. 89.4% 90.2% 88.1% 87.6% 85.9%
Total Community Centers............. 96.6% 96.7% 95.6% 95.5% 94.9%
Single Tenant Retail Properties..... 92.2% 92.2% 92.2% 92.2% 92.2%
Total Community Center Portfolio.... 96.1% 96.3% 95.3% 95.2% 94.6%
</TABLE>
(1) Occupancy statistics included in the above table are based on the total
Company portfolio which includes properties owned by the Company and
properties held in joint ventures.
(2) Occupied space is defined as any space where a tenant is occupying the
space and/or paying rent at the date indicated, excluding all tenants with
leases having an initial term of less than one year.
FUNDS FROM OPERATIONS
Management considers funds from operations ("FFO") to be a supplemental
measure of the Company's operating performance. FFO does not represent cash
generated from operating activities in accordance with generally accepted
accounting principles and is not necessarily indicative of cash available to
fund cash needs. FFO should not be considered as an alternative to net income,
as the primary indicator of the Company's operating performance, or as an
alternative to cash flow as a measure of liquidity. The following table
illustrates the calculation of FFO for the three months ended March 31, 1999 and
1998 (in thousands):
15
<PAGE> 16
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1999 1998
---- ----
<S> <C> <C>
Net income available to common shareholders............... $ 5,091 $ 5,304
Add back (less):
Real estate depreciation and amortization............ 9,313 7,298
GRT share of joint venture depreciation
and amortization.................................. 2,329 1,938
Minority interest in operating partnership........... 627 667
------- -------
Funds from operations..................................... $17,360 $15,207
======= =======
</TABLE>
FFO increased 14.2%, or $2.2 million, for the three months ended March
31, 1999. The increase was the result of the Company's continuous focus on its
core portfolio and the impact of its strategic acquisitions in 1998. Property
net operating income increased $8.8 million and was partially offset by an
increase in interest expense of $4.7 million, an increase in preferred stock
dividends of $460,000, a decrease in FFO from unconsolidated entities of
$330,000 and an increase in general and administrative expenses of $550,000.
ACCOUNTING PRONOUNCEMENTS
In July 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 is effective for financial
statements for fiscal quarters of fiscal years beginning after June 15, 1999.
The Company will be required to adopt SFAS No. 133 effective January 1, 2000.
SFAS No. 133 standardizes the accounting for derivative instruments by requiring
that all entities recognize them as assets and liabilities in the balance sheet
and subsequently measure them at fair market value. It also prescribes specific
accounting principles to be applied to hedging activities and hedging
transactions which are significantly different from prior accounting principles.
The Company has not yet determined the impact of SFAS No. 133.
YEAR 2000 ISSUES
The Company recognizes that Year 2000 issues may have an impact on its
business, operations and financial condition. The Company has completed an
assessment of its Year 2000 readiness with respect to all of its information
technology ("IT") systems and the reliability and condition of its non-IT
systems. The Company has obtained status updates regarding Year 2000 issues on
these systems either via contacting the manufacturers and vendors, or by
acquiring the necessary information from their websites.
The Company's IT systems generally consist of file servers, operating
systems, application programs and workstations that utilize purchased systems.
The Company has evaluated the Year 2000 compliance status of each vendor and
believes that its existing systems and planned upgrades, to be completed by
third quarter 1999, will be Year 2000 compliant. Implementation of planned
upgrades will not result in significant additional cost to the Company. The
Company does not have any mainframe/midrange computer codes to verify. The data
generated using off-the-shelf packages is being analyzed and fixed to use the
proper date format.
All of the Company's servers and workstations use Intel based
processors and the Company has used third party applications to verify these
systems. Planned upgrades and new purchases have eliminated several
non-compliant systems. The Company plans to phase-out the remaining older
computers during the second quarter 1999. The majority of the remaining issues
will be resolved via a planned upgrade to MS Office 2000 later this year. The
Company will utilize an outside consulting firm to verify its tests and validate
the correction and testing methods.
The costs incurred by the Company at the present time have been
internal costs only. The Company expects to spend no more than $30,000 for
outside consultants to give additional assurance on its IT systems. The source
of these funds will be from operations. The significant risks to the Company in
the event that Year 2000 issues are not identified and corrected include the
possibility that IT system problems could cause delays or errors in processing
financial and operations information. The Year 2000 issue has not affected any
of the Company's IT system decisions. At the present time the Company has
planned upgrades in progress that will not be delayed or accelerated due to Year
2000 issues.
16
<PAGE> 17
The Company's contingency plan recognizes that the biggest exposures
are non-IT systems which may result in Year 2000 issues. These exposures are
facility related and encompass areas such as HVAC systems, elevators, security,
lighting, telecommunications, electrical, plumbing, fire and sprinkler controls,
as well as our reliance on outside contractors for services such as security,
janitorial and exterior maintenance. At the present time, the Company has not
identified any instances where Year 2000 issues will require material costs to
repair or replace any of these systems. If failure does occur in any of these
provided services as a result of Year 2000 issues, the Company is prepared to
correct the problem with manual labor, either hired or internally which could
cause a short term limitation in the efficiency of the Company's Properties
operations.
While the Company believes its planning efforts are adequate to address
its Year 2000 concerns, there can be no guarantee that the systems of other
companies on which the Company's systems and operations rely will be converted
on a timely basis and will not have a material effect on the Company.
OTHER
The shopping center industry is seasonal in nature, particularly in the
fourth quarter during the holiday season when tenant occupancy and retail sales
are typically at their highest levels. In addition, malls achieve most of their
temporary tenant rents and percentage rents during the holiday season. As a
result of the above, earnings are generally highest in the fourth quarter of
each year.
The retail industry has experienced some difficulty, which is reflected
in sales trends and in the bankruptcies and continued restructuring of several
prominent retail organizations. Continuation of these trends could impact future
earnings performance.
INFLATION
Inflation has remained relatively low during the past three years and
has had a minimal impact on the Company's Properties. Many tenants' leases
contain provisions designed to lessen the impact of inflation. Such provisions
include clauses enabling the Company to receive percentage rentals based on
tenants' 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 10 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. Substantially all of the leases, other than those for
anchors, require the tenants to pay a proportionate share of common area
maintenance, real estate taxes and insurance, thereby reducing the Company's
exposure to increases in costs and operating expenses resulting from inflation.
Inflation may, however, have a negative impact on some of the Company's
other operating items. Interest expense and general and administrative expenses
may be adversely affected by inflation as these specified costs could increase
at a rate higher than rents. Also, for tenant leases with stated rent increases,
inflation may have a negative effect as the stated rent increases in these
leases could be lower than the increase in inflation at any given time.
17
<PAGE> 18
PART I
FINANCIAL INFORMATION
ITEM 3. QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The following table presents descriptions of the financial instruments
and derivative instruments that are held by the Company at March 31, 1999, and
which are sensitive to changes in interest rates. The Company enters into
derivative financial instrument transactions in order to manage or reduce market
risk. Under interest-rate swaps, the Company agrees with other parties to
exchange, at specified intervals, the difference between fixed-rate and floating
rate interest amounts calculated by reference to an agreed notional principal
amount. The Company does not enter into derivative financial instrument
transactions for speculative purposes.
For the liabilities, the table represents principal calendar year cash
flows that exist by maturity date and the related average interest rate. For the
interest rate derivatives, the table presents the notional amounts and expected
interest rates that exist by contractual dates. The notional amount is used to
calculate the contractual payments to be exchanged under the contract. The
variable rates are estimated based upon the 30-day forward LIBOR rate which at
March 31, 1999 was 4.988%.
In August 1998, the Company entered into a three-year interest-rate
swap agreement which fixed LIBOR at 5.662% per annum on a notional amount of
$40,000. In September 1998, the Company also entered into a three-year interest
rate protection agreement on $130,000 of borrowings in which the obligor agreed
to reimburse the Company as a result of an increase in LIBOR above 7.750% per
annum. Both of these agreements have been reflected in the table below.
All amounts are reflected in thousands:
<TABLE>
<CAPTION>
FAIR
1999 2000 2001 2002 2003 THEREAFTER TOTAL VALUE
---- ---- ---- ---- ---- ---------- ----- -----
LIABILITIES:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed rate.............. $ 37,177 $133,524 $ 66,533 $58,784 $43,726 $251,437 $591,181 $586,181
Average interest rate... 7.160% 7.124% 7.054% 7.172% 7.109% 6.631% 7.366%
Variable rate........... $278,255 $133,604 $411,859 $411,859
Average interest rate... 6.878% 6.288% 6.688%
INTEREST RATE DERIVATIVES:
Notional amount......... $170,000 $170,000 $170,000 $170,000 $ (230)
Average pay rate........ 5.147% 5.147% 5.147% 5.147%
Average receive rate.... 4.988% 4.988% 4.988% 4.988%
</TABLE>
18
<PAGE> 19
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 MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.86 Deed of Trust and security agreement by Grand Central
Limited Partnership for the benefit of Lehman Brothers
Holdings Inc. dated as of January 21, 1999.
10.87 Promissory Note dated as of January 21, 1999, issued by
Grand Central Limited Partnership in the amount of
fifty two million five hundred thousand dollars
($52,500,000).
27.1 Financial Data Schedule (filed for EDGAR filing
purposes only).
(b) Reports on Form 8-K
During its fiscal quarter ended March 31, 1999, the Company
filed a Report on Form 8-K with the Securities and Exchange
Commission on March 12, 1999, in connection with the Board of
Trustees' decision on March 9, 1999, to adopt a Preferred
Share Purchase Plan.
19
<PAGE> 20
SIGNATURES
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.
GLIMCHER REALTY TRUST
<TABLE>
<S> <C>
May 12, 1999 /s/ Herbert Glimcher
- ----------------- -----------------------------------------------------
(Date) Herbert Glimcher, Chairman of the Board, President
Chief Executive Officer (Principle Executive Officer)
and Trustee
May 12, 1999 /s/ William G. Cornely
- ----------------- -----------------------------------------------------
(Date) William G. Cornely, Executive Vice President
Chief Operating Officer & Chief Financial Officer
</TABLE>
20
<PAGE> 1
Exhibit 10.86
GRAND CENTRAL LIMITED PARTNERSHIP,
a Delaware limited partnership, as grantor
(Borrower)
to
MARY CLARE EROS and JAMES I. MANION, as trustee
(Trustee)
for the benefit of
LEHMAN BROTHERS HOLDINGS INC., D/B/A LEHMAN CAPITAL, A DIVISION OF
LEHMAN BROTHERS HOLDINGS INC., as beneficiary
(Lender)
--------------------------
DEED OF TRUST AND
SECURITY AGREEMENT
--------------------------
Dated: As of January 21, 1999
Location: Grand Central Mall
Parkersburg, West Virginia
PREPARED BY AND UPON
RECORDATION RETURN TO:
Paul A. Keenan, Esq.
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, New York 10038
<PAGE> 2
DEED OF TRUST AND SECURITY AGREEMENT
THIS DEED OF TRUST AND SECURITY AGREEMENT (this "SECURITY
INSTRUMENT") is made as of this 21st day of January, 1999, by GRAND CENTRAL
LIMITED PARTNERSHIP, a Delaware limited partnership, having its principal place
of business at 20 South Third Street, Columbus, Ohio 43215, as grantor
("BORROWER") to MARY CLARE EROS and JAMES I. MANION, each a resident of
Jefferson County, West Virginia, having an address at P.O. Box 1068, 300
Foxcroft Avenue, Martinsburg, West Virginia 25401, as trustee ("TRUSTEE"), for
the benefit of LEHMAN BROTHERS HOLDINGS INC., a Delaware corporation, d/b/a
LEHMAN CAPITAL, A DIVISION OF LEHMAN BROTHERS HOLDINGS INC., having an address
at Three World Financial Center, New York, New York 10285, as beneficiary
("LENDER").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, this Security Instrument is given to secure a loan
(the "LOAN") in the principal sum of FIFTY-TWO MILLION FIVE HUNDRED THOUSAND AND
NO/100 DOLLARS ($52,500,000) advanced pursuant to that certain Loan Agreement
dated as of the date hereof between Borrower and Lender (as the same may be
amended, restated, replaced, supplemented or otherwise modified from time to
time, the "LOAN AGREEMENT") and evidenced by that certain Promissory Note dated
the date hereof made by Borrower to Lender having a maturity date of February 1,
2029 (such Note, together with all extensions, renewals, replacements,
restatements or modifications thereof being hereinafter referred to as the
"NOTE"); and
WHEREAS, Borrower desires to secure the payment of the Debt
(as defined in the Loan Agreement) and the performance of all of its obligations
under the Note, the Loan Agreement and the other Loan Documents; and
WHEREAS, this Security Instrument is given pursuant to the
Loan Agreement, and payment, fulfillment, and performance by Borrower of its
obligations thereunder and under the other Loan Documents are secured hereby,
and each and every term and provision of the Loan Agreement and the Note,
including the rights, remedies, obligations, covenants, conditions,
agreements, indemnities, representations and warranties of the parties
therein, are hereby incorporated by reference herein as though set forth in
full and shall be considered a part of this Security Instrument (the Loan
Agreement, the Note, this Security Instrument, that certain Assignment of
Leases and Rents of even date herewith made by Borrower in favor of Lender
(the "ASSIGNMENT OF LEASES") and all other documents evidencing or securing
the Debt are hereinafter referred to collectively as the "LOAN DOCUMENTS").
NOW THEREFORE, in consideration of the making of the Loan by
Lender and the covenants, agreements, representations and warranties set forth
in this Security Instrument:
-1-
<PAGE> 3
Article 1 - GRANTS OF SECURITY
Section 1.1 PROPERTY CONVEYED. Borrower does hereby
irrevocably grant, bargain, sell, pledge, assign, warrant, transfer and convey
to Trustee and its successors and assigns, in trust, with Power of Sale for the
benefit of Lender as beneficiary in trust, the following property, rights,
interests and estates now owned, or hereafter acquired by Borrower
(collectively, the "PROPERTY"):
(a) LAND. The real property described in Exhibit A
attached hereto and made a part hereof (the "LAND");
(b) ADDITIONAL LAND. All additional lands, estates
and development rights hereafter acquired by Borrower for use
in connection with the Land and the development of the Land
and all additional lands and estates therein which may, from
time to time, by supplemental mortgage or otherwise be
expressly made subject to the lien of this Security
Instrument;
(c) IMPROVEMENTS. The buildings, structures,
fixtures, additions, enlargements, extensions, modifications,
repairs, replacements and improvements now or hereafter
erected or located on the Land (collectively, the
"IMPROVEMENTS");
(d) EASEMENTS. All easements, rights-of-way or use,
rights, strips and gores of land, streets, ways, alleys,
passages, sewer rights, water, water courses, water rights and
powers, air rights and development rights, and all estates,
rights, titles, interests, privileges, liberties, servitudes,
tenements, hereditaments and appurtenances of any nature
whatsoever, in any way now or hereafter belonging, relating or
pertaining to the Land and the Improvements and the reversion
and reversions, remainder and remainders, and all land lying
in the bed of any street, road or avenue, opened or proposed,
in front of or adjoining the Land, to the center line thereof
and all the estates, rights, titles, interests, dower and
rights of dower, curtesy and rights of curtesy, property,
possession, claim and demand whatsoever, both at law and in
equity, of Borrower of, in and to the Land and the
Improvements and every part and parcel thereof, with the
appurtenances thereto;
(e) EQUIPMENT. All "equipment," as such term is
defined in Article 9 of the Uniform Commercial Code, now owned
or hereafter acquired by Borrower, which is used at or in
connection with the Improvements or the Land or is located
thereon or therein (including, but not limited to, all
machinery, equipment, furnishings, and electronic
data-processing and other office equipment now owned or
hereafter acquired by Borrower and any and all additions,
substitutions and replacements of any of the foregoing),
together with all attachments, components, parts, equipment
and accessories installed thereon or affixed thereto
(collectively, the "EQUIPMENT"). Notwithstanding the
-2-
<PAGE> 4
foregoing, Equipment shall not include any property belonging
to tenants under leases except to the extent that Borrower
shall have any right or interest therein;
(f) FIXTURES. All Equipment now owned, or the
ownership of which is hereafter acquired, by Borrower which is
so related to the Land and Improvements forming part of the
Property that it is deemed fixtures or real property under the
law of the particular state in which the Equipment is located,
including, without limitation, all building or construction
materials intended for construction, reconstruction,
alteration or repair of or installation on the Property,
construction equipment, appliances, machinery, plant
equipment, fittings, apparatuses, fixtures and other items now
or hereafter attached to, installed in or used in connection
with (temporarily or permanently) any of the Improvements or
the Land, including, but not limited to, engines, devices for
the operation of pumps, pipes, plumbing, cleaning, call and
sprinkler systems, fire extinguishing apparatuses and
equipment, heating, ventilating, plumbing, laundry,
incinerating, electrical, air conditioning and air cooling
equipment and systems, gas and electric machinery,
appurtenances and equipment, pollution control equipment,
security systems, disposals, dishwashers, refrigerators and
ranges, recreational equipment and facilities of all kinds,
and water, gas, electrical, storm and sanitary sewer
facilities, utility lines and equipment (whether owned
individually or jointly with others, and, if owned jointly, to
the extent of Borrower's interest therein) and all other
utilities whether or not situated in easements, all water
tanks, water supply, water power sites, fuel stations, fuel
tanks, fuel supply, and all other structures, together with
all accessions, appurtenances, additions, replacements,
betterments and substitutions for any of the foregoing and the
proceeds thereof (collectively, the "FIXTURES").
Notwithstanding the foregoing, "Fixtures" shall not include
any property which tenants are entitled to remove pursuant to
leases except to the extent that Borrower shall have any right
or interest therein;
(g) PERSONAL PROPERTY. All furniture, furnishings,
objects of art, machinery, goods, tools, supplies, appliances,
general intangibles, contract rights, accounts, accounts
receivable, franchises, licenses, certificates and permits,
and all other personal property of any kind or character
whatsoever (as defined in and subject to the provisions of the
Uniform Commercial Code as hereinafter defined), other than
Fixtures, which are now or hereafter owned by Borrower and
which are located within or about the Land and the
Improvements, together with all accessories, replacements and
substitutions thereto or therefor and the proceeds thereof
(collectively, the "PERSONAL PROPERTY"), and the right, title
and interest of Borrower in and to any of the Personal
Property which may be subject to any security interests, as
defined in the Uniform Commercial Code, as adopted and enacted
by the state or states where any of the Property is located
(the "UNIFORM COMMERCIAL CODE"), superior in lien to the lien
of this Security Instrument and all proceeds and products of
the above;
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(h) LEASES AND RENTS. All leases and other agreements
affecting the use, enjoyment or occupancy of the Land and the
Improvements heretofore or hereafter entered into, whether
before or after the filing by or against Borrower of any
petition for relief under 11 U.S.C. ss.101 et seq., as the
same may be amended from time to time (the "BANKRUPTCY CODE")
(collectively, the "LEASES") and all right, title and interest
of Borrower, its successors and assigns therein and
thereunder, including, without limitation, cash or securities
deposited thereunder to secure the performance by the lessees
of their obligations thereunder and all rents, additional
rents, revenues, issues and profits (including all oil and gas
or other mineral royalties and bonuses) from the Land and the
Improvements whether paid or accruing before or after the
filing by or against Borrower of any petition for relief under
the Bankruptcy Code (collectively, the "RENTS") and all
proceeds from the sale or other disposition of the Leases and
the right to receive and apply the Rents to the payment of the
Debt;
(i) CONDEMNATION AWARDS. All awards or payments,
including interest thereon, which may heretofore and hereafter
be made with respect to the Property, whether from the
exercise of the right of eminent domain (including but not
limited to any transfer made in lieu of or in anticipation of
the exercise of the right), or for a change of grade, or for
any other injury to or decrease in the value of the Property;
(j) INSURANCE PROCEEDS. All proceeds in respect of
the Property under any insurance policies covering the
Property, including, without limitation, the right to receive
and apply the proceeds of any insurance, judgments, or
settlements made in lieu thereof, for damage to the Property;
(k) TAX CERTIORARI. All refunds, rebates or credits
in connection with reduction in real estate taxes and
assessments charged against the Property as a result of tax
certiorari or any applications or proceedings for reduction;
(l) CONVERSION. All proceeds of the conversion,
voluntary or involuntary, of any of the foregoing including,
without limitation, proceeds of insurance and condemnation
awards, into cash or liquidation claims;
(m) RIGHTS. The right, in the name and on behalf of
Borrower, to appear in and defend any action or proceeding
brought with respect to the Property and to commence any
action or proceeding to protect the interest of Lender in the
Property;
(n) AGREEMENTS. All agreements, contracts,
certificates, instruments, franchises, permits, licenses,
plans, specifications and other documents, now or hereafter
entered into, and all rights therein and thereto, respecting
or pertaining to the use, occupation, construction, management
or operation of the
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<PAGE> 6
Land and any part thereof and any Improvements or respecting
any business or activity conducted on the Land and any part
thereof and all right, title and interest of Borrower therein
and thereunder, including, without limitation, the right, upon
the happening of any default hereunder, to receive and collect
any sums payable to Borrower thereunder;
(o) TRADEMARKS. All tradenames, trademarks,
servicemarks, logos, copyrights, goodwill, books and records
and all other general intangibles relating to or used in
connection with the operation of the Property;
(p) OTHER RIGHTS. Any and all other rights of
Borrower in and to the items set forth in Subsections (a)
through (o) above.
AND without limiting any of the other provisions of this
Security Instrument, to the extent permitted by applicable law, Borrower
expressly grants to Trustee, as secured party, a security interest in the
portion of the Property which is or may be subject to the provisions of the
Uniform Commercial Code which are applicable to secured transactions; it being
understood and agreed that the Improvements and Fixtures are part and parcel of
the Land (the Land, the Improvements and the Fixtures collectively referred to
as the "REAL Property") appropriated to the use thereof and, whether affixed or
annexed to the Real Property or not, shall for the purposes of this Security
Instrument be deemed conclusively to be real estate and conveyed hereby.
Section 1.2 ASSIGNMENT OF RENTS. Borrower hereby absolutely
and unconditionally assigns to Lender and Trustee all of Borrower's right, title
and interest in and to all current and future Leases and Rents; it being
intended by Borrower that this assignment constitutes a present, absolute
assignment and not an assignment for additional security only. Nevertheless,
subject to the terms of the Assignment of Leases and Section 7.1(h) of this
Security Instrument, Lender grants to Borrower a revocable license to collect,
receive, use and enjoy the Rents. Borrower shall hold the Rents, or a portion
thereof sufficient to discharge all current sums due on the Debt, for use in the
payment of such sums.
Section 1.3 SECURITY AGREEMENT. This Security Instrument is
both a real property deed of trust and a "security agreement" within the meaning
of the Uniform Commercial Code. The Property includes both real and personal
property and all other rights and interests, whether tangible or intangible in
nature, of Borrower in the Property. By executing and delivering this Security
Instrument, Borrower hereby grants to Lender, as security for the Obligations
(hereinafter defined), a security interest in the Fixtures, the Equipment and
the Personal Property to the full extent that the Fixtures, the Equipment and
the Personal Property may be subject to the Uniform Commercial Code (said
portion of the Property so subject to the Uniform Commercial Code being called
the "COLLATERAL"). If an Event of Default shall occur and be continuing, Lender,
in addition to any other rights and remedies which it may have, shall have and
may exercise immediately and without demand, any and all rights and remedies
granted to a secured party upon default under the Uniform Commercial Code,
including, without limiting the generality of the foregoing, the right to take
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<PAGE> 7
possession of the Collateral or any part thereof, and to take such other
measures as Lender may deem necessary for the care, protection and preservation
of the Collateral. Upon request or demand of Lender after the occurrence and
during the continuance of an Event of Default, Borrower shall, at its expense,
assemble the Collateral and make it available to Lender at a convenient place
(at the Land if tangible property) reasonably acceptable to Lender. Borrower
shall pay to Lender on demand any and all expenses, including reasonable legal
expenses and attorneys' fees, incurred or paid by Lender in protecting its
interest in the Collateral and in enforcing its rights hereunder with respect to
the Collateral after the occurrence and during the continuance of an Event of
Default. Any notice of sale, disposition or other intended action by Lender with
respect to the Collateral sent to Borrower in accordance with the provisions
hereof at least ten (10) business days prior to such action, shall, except as
otherwise provided by applicable law, constitute reasonable notice to Borrower.
The proceeds of any disposition of the Collateral, or any part thereof, may,
except as otherwise required by applicable law, be applied by Lender to the
payment of the Debt in such priority and proportions as Lender in its discretion
shall deem proper. Borrower's (Debtor's) principal place of business is as set
forth on page one hereof and the address of Lender (Secured Party) is as set
forth on page one hereof.
Section 1.4 FIXTURE FILING. Certain of the Property is or will
become "fixtures" (as that term is defined in the Uniform Commercial Code) on
the Land, described or referred to in this Security Instrument, and this
Security Instrument, upon being filed for record in the real estate records of
the city or county wherein such fixtures are situated, shall operate also as a
financing statement naming Borrower as the Debtor and Lender as the Secured
Party filed as a fixture filing in accordance with the applicable provisions of
said Uniform Commercial Code upon such of the Property that is or may become
fixtures.
Section 1.5 PLEDGES OF MONIES HELD. Borrower hereby pledges to
Lender any and all monies now or hereafter held by Lender or on behalf of
Lender, including, without limitation, any sums deposited in the Lockbox
Account, the Reserve Funds and Net Proceeds, as additional security for the
Obligations until expended or applied as provided in this Security Instrument.
CONDITIONS TO GRANT
TO HAVE AND TO HOLD the above granted and described Property
unto and to the use and benefit of Trustee and its successors and assigns,
forever;
IN TRUST, WITH POWER OF SALE, to secure payment to Lender of
the Obligations at the time and in the manner provided for its payment in the
Note and in this Security Instrument.
PROVIDED, HOWEVER, these presents are upon the express
condition that, if Borrower shall well and truly pay to Lender the Debt at the
time and in the manner provided in the Note, the Loan Agreement and this
Security Instrument, shall well and truly perform the Other Obligations as set
forth in this Security Instrument and shall well and truly abide by and comply
with each and every covenant and condition set forth herein and in the Note, the
Loan
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<PAGE> 8
Agreement and the other Loan Documents, these presents and the estate hereby
granted shall cease, terminate and be void; provided, however, that Borrower's
obligation to indemnify and hold harmless Lender pursuant to the provisions
hereof shall survive any such payment or release.
Article 2 - DEBT AND OBLIGATIONS SECURED
Section 2.1 DEBT. This Security Instrument and the grants,
assignments and transfers made in Article 1 are given for the purpose of
securing the Debt which by its definition (as set forth in Section 17.7 hereof)
includes, but is not limited to, the obligations of Borrower to pay to Lender
the principal and interest owing pursuant to the terms and conditions of the
Note.
Section 2.2 OTHER OBLIGATIONS. This Security Instrument and
the grants, assignments and transfers made in Article 1 are also given for the
purpose of securing the following (the "OTHER OBLIGATIONS"):
(a) the performance of all other obligations of Borrower
contained herein;
(b) the performance of each obligation of Borrower contained
in the Loan Agreement and any other Loan Document; and
(c) the performance of each obligation of Borrower contained
in any renewal, extension, amendment, modification, consolidation,
change of, or substitution or replacement for, all or any part of the
Note, the Loan Agreement or any other Loan Document.
A copy of each of the Loan Documents is available for review during regular
business hours at the office of Lender at the address first set forth above.
Section 2.3 DEBT AND OTHER OBLIGATIONS. Borrower's obligations
for the payment of the Debt and the performance of the Other Obligations may
sometimes be referred to collectively herein as the "OBLIGATIONS."
Article 3 - BORROWER COVENANTS
Borrower covenants and agrees that:
Section 3.1 PAYMENT OF DEBT. Borrower will pay the Debt at the
time and in the manner provided in the Loan Agreement, the Note and this
Security Instrument.
Section 3.2 INCORPORATION BY REFERENCE. All the covenants,
conditions and agreements contained in (a) the Loan Agreement, (b) the Note and
(c) all and any of the other Loan Documents, are hereby made a part of this
Security Instrument to the same extent and with the same force as if fully set
forth herein.
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<PAGE> 9
Section 3.3 INSURANCE. Borrower shall obtain and maintain, or
cause to be maintained, in full force and effect at all times insurance with
respect to Borrower and the Property as required pursuant to the Loan Agreement.
Section 3.4 MAINTENANCE OF PROPERTY. Borrower shall cause the
Property to be maintained in a good and safe condition and repair. The
Improvements, the Fixtures, the Equipment and the Personal Property shall not be
removed, demolished or materially altered (except for normal replacement of the
Fixtures, the Equipment or the Personal Property, tenant finish and
refurbishment of the Improvements) without the consent of Lender. Borrower shall
promptly repair, replace or rebuild any part of the Property which may be
destroyed by any casualty, or become damaged, worn or dilapidated and shall
complete and pay for any structure at any time in the process of construction or
repair on the Land.
Section 3.5 WASTE. Borrower shall not commit or suffer any
waste of the Property or make any change in the use of the Property which will
in any way materially increase the risk of fire or other hazard arising out of
the operation of the Property, or take any action that might invalidate or allow
the cancellation of any Policy, or do or permit to be done thereon anything that
may in any way materially impair the value of the Property or the security of
this Security Instrument. Borrower will not, without the prior written consent
of Lender, permit any drilling or exploration for or extraction, removal, or
production of any minerals from the surface or the subsurface of the Land,
regardless of the depth thereof or the method of mining or extraction thereof.
Section 3.6 PAYMENT FOR LABOR AND MATERIALS. (a) Borrower will
promptly pay when due all bills and costs for labor, materials, and specifically
fabricated materials ("LABOR AND MATERIAL COSTS") incurred in connection with
the Property and never permit to exist beyond the due date thereof in respect of
the Property or any part thereof any lien or security interest, even though
inferior to the liens and the security interests hereof, and in any event never
permit to be created or exist in respect of the Property or any part thereof any
other or additional lien or security interest other than the liens or security
interests hereof except for the Permitted Encumbrances.
(b) After prior written notice to Lender, Borrower, at its own
expense, may contest by appropriate legal proceeding, promptly initiated and
conducted in good faith and with due diligence, the amount or validity or
application in whole or in part of any of the Labor and Material Costs, provided
that (i) no Event of Default has occurred and is continuing under the Loan
Agreement, the Note, this Security Instrument or any of the other Loan
Documents, (ii) Borrower is permitted to do so under the provisions of any other
mortgage, deed of trust or deed to secure debt affecting the Property, (iii)
such proceeding shall suspend the collection of the Labor and Material Costs
from Borrower and from the Property or Borrower shall have paid all of the Labor
and Material Costs under protest, (iv) such proceeding shall be permitted under
and be conducted in accordance with the provisions of any other instrument to
which Borrower is subject and shall not constitute a default thereunder, (v)
neither the Property nor any part thereof or interest therein will be in danger
of being sold, forfeited, terminated, canceled or lost, and (vi) Borrower shall
have furnished the security as
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<PAGE> 10
may be required in the proceeding, or as may be reasonably requested by Lender
to insure the payment of any contested Labor and Material Costs, together with
all interest and penalties thereon.
Section 3.7 PERFORMANCE OF OTHER AGREEMENTS. Borrower shall
observe and perform each and every term, covenant and provision to be observed
or performed by Borrower pursuant to the Loan Agreement, any other Loan Document
and any other agreement or recorded instrument affecting or pertaining to the
Property and any amendments, modifications or changes thereto.
Section 3.8 CHANGE OF NAME, IDENTITY OR STRUCTURE. Borrower
shall not change Borrower's name, identity (including its trade name or names)
or, if not an individual, Borrower's corporate, partnership or other structure
without notifying Lender of such change in writing at least thirty (30) days
prior to the effective date of such change and, in the case of a change in
Borrower's structure, without first obtaining the prior written consent of
Lender. Borrower shall execute and deliver to Lender, prior to or
contemporaneously with the effective date of any such change, any financing
statement or financing statement change required by Lender to establish or
maintain the validity, perfection and priority of the security interest granted
herein. At the request of Lender, Borrower shall execute a certificate in form
satisfactory to Lender listing the trade names under which Borrower intends to
operate the Property, and representing and warranting that Borrower does
business under no other trade name with respect to the Property.
Article 4 - OBLIGATIONS AND RELIANCES
Section 4.1 RELATIONSHIP OF BORROWER AND LENDER. The
relationship between Borrower and Lender is solely that of debtor and creditor,
and Lender has no fiduciary or other special relationship with Borrower, and no
term or condition of any of the Loan Agreement, the Note, this Security
Instrument and the other Loan Documents shall be construed so as to deem the
relationship between Borrower and Lender to be other than that of debtor and
creditor.
Section 4.2 NO RELIANCE ON LENDER. The general partners,
members, principals and (if Borrower is a trust) beneficial owners of Borrower
are experienced in the ownership and operation of properties similar to the
Property, and Borrower and Lender are relying solely upon such expertise and
business plan in connection with the ownership and operation of the Property.
Borrower is not relying on Lender's expertise, business acumen or advice in
connection with the Property.
Section 4.3 NO LENDER OBLIGATIONS. (a) Notwithstanding the
provisions of Subsections 1.1(h) and (n) or Section 1.2, Lender is not
undertaking the performance of (i) any obligations under the Leases; or (ii) any
obligations with respect to such agreements, contracts, certificates,
instruments, franchises, permits, trademarks, licenses and other documents.
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<PAGE> 11
(b) By accepting or approving anything required to be
observed, performed or fulfilled or to be given to Lender pursuant to this
Security Instrument, the Loan Agreement, the Note or the other Loan Documents,
including, without limitation, any officer's certificate, balance sheet,
statement of profit and loss or other financial statement, survey, appraisal, or
insurance policy, Lender shall not be deemed to have warranted, consented to, or
affirmed the sufficiency, the legality or effectiveness of same, and such
acceptance or approval thereof shall not constitute any warranty or affirmation
with respect thereto by Lender.
Section 4.4 RELIANCE. Borrower recognizes and acknowledges
that in accepting the Loan Agreement, the Note, this Security Instrument and the
other Loan Documents, Lender is expressly and primarily relying on the truth and
accuracy of the warranties and representations set forth in Section 4.1 of the
Loan Agreement without any obligation to investigate the Property and
notwithstanding any investigation of the Property by Lender; that such reliance
existed on the part of Lender prior to the date hereof, that the warranties and
representations are a material inducement to Lender in making the Loan; and that
Lender would not be willing to make the Loan and accept this Security Instrument
in the absence of the warranties and representations as set forth in Section 4.1
of the Loan Agreement.
Article 5 - FURTHER ASSURANCES
Section 5.1 RECORDING OF SECURITY INSTRUMENT, ETC. Borrower
forthwith upon the execution and delivery of this Security Instrument and
thereafter, from time to time, will cause this Security Instrument and any of
the other Loan Documents creating a lien or security interest or evidencing the
lien hereof upon the Property and each instrument of further assurance to be
filed, registered or recorded in such manner and in such places as may be
required by any present or future law in order to publish notice of and fully to
protect and perfect the lien or security interest hereof upon, and the interest
of Lender in, the Property. Borrower will pay all taxes, filing, registration or
recording fees, and all expenses incident to the preparation, execution,
acknowledgment and/or recording of the Note, this Security Instrument, the other
Loan Documents, any note, deed of trust or mortgage supplemental hereto, any
security instrument with respect to the Property and any instrument of further
assurance, and any modification or amendment of the foregoing documents, and all
federal, state, county and municipal taxes, duties, imposts, assessments and
charges arising out of or in connection with the execution and delivery of this
Security Instrument, any deed of trust or mortgage supplemental hereto, any
security instrument with respect to the Property or any instrument of further
assurance, and any modification or amendment of the foregoing documents, except
where prohibited by law so to do.
Section 5.2 FURTHER ACTS, ETC. Borrower will, at the cost of
Borrower, and without expense to Lender, do, execute, acknowledge and deliver
all and every such further acts, deeds, conveyances, deeds of trust,
assignments, notices of assignments, transfers and assurances as Lender shall,
from time to time, reasonably require, for the better assuring, conveying,
assigning, transferring, and confirming unto Lender and Trustee the property and
rights hereby deeded, granted, bargained, sold, conveyed, confirmed, pledged,
assigned,
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warranted and transferred or intended now or hereafter so to be, or which
Borrower may be or may hereafter become bound to convey or assign to Trustee or
Lender, or for carrying out the intention or facilitating the performance of the
terms of this Security Instrument or for filing, registering or recording this
Security Instrument, or for complying with all Legal Requirements. Borrower, on
demand, will execute and deliver, and in the event it shall fail to so execute
and deliver, hereby authorizes Lender to execute in the name of Borrower or
without the signature of Borrower to the extent Lender may lawfully do so, one
or more financing statements to evidence more effectively the security interest
of Lender in the Property. Borrower grants to Lender an irrevocable power of
attorney coupled with an interest for the purpose of exercising and perfecting
any and all rights and remedies available to Lender at law and in equity,
including without limitation such rights and remedies available to Lender
pursuant to this Section 5.2. Nothing contained in this Section 5.2 shall be
deemed to create an obligation on the part of Borrower to pay any costs and
expenses incurred by Lender in connection with the Securitization or other sale
or transfer of the Loan.
Section 5.3 CHANGES IN TAX, DEBT, CREDIT AND DOCUMENTARY STAMP
LAWS. (a) If any law is enacted or adopted or amended after the date of this
Security Instrument which deducts the Debt from the value of the Property for
the purpose of taxation or which imposes a tax, either directly or indirectly,
on the Debt or Lender's interest in the Property, Borrower will pay the tax,
with interest and penalties thereon, if any. If Lender is advised by counsel
chosen by it that the payment of tax by Borrower would be unlawful or taxable to
Lender or unenforceable or provide the basis for a defense of usury then Lender
shall have the option by written notice of not less than one hundred twenty
(120) days to declare the Debt immediately due and payable.
(b) Borrower will not claim or demand or be entitled to any
credit or credits on account of the Debt for any part of the Taxes or Other
Charges assessed against the Property, or any part thereof, and no deduction
shall otherwise be made or claimed from the assessed value of the Property, or
any part thereof, for real estate tax purposes by reason of this Security
Instrument or the Debt. If such claim, credit or deduction shall be required by
law, Lender shall have the option, by written notice of not less than one
hundred twenty (120) days, to declare the Debt immediately due and payable.
(c) If at any time the United States of America, any State
thereof or any subdivision of any such State shall require revenue or other
stamps to be affixed to the Note, this Security Instrument, or any of the other
Loan Documents or impose any other tax or charge on the same, Borrower will pay
for the same, with interest and penalties thereon, if any.
Section 5.4 SPLITTING OF DEED OF TRUST. This Security
Instrument and the Note shall, at any time until the same shall be fully paid
and satisfied, at the sole election of Lender, be split or divided into two or
more notes and two or more security instruments, each of which shall cover all
or a portion of the Property to be more particularly described therein. To that
end, Borrower, upon written request of Lender, shall execute, acknowledge and
deliver, or cause to be executed, acknowledged and delivered by the then owner
of the
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Property, to Lender and/or its designee or designees substitute notes and
security instruments in such principal amounts, aggregating not more than the
then unpaid principal amount of this Security Instrument, and containing terms,
provisions and clauses similar to those contained herein and in the Note, and
such other documents and instruments as may be required by Lender.
Section 5.5 REPLACEMENT DOCUMENTS. Upon receipt of an
affidavit of an officer of Lender as to the loss, theft, destruction or
mutilation of the Note or any other Loan Document which is not of public record,
and, in the case of any such mutilation, upon surrender and cancellation of such
Note or other Loan Document, Borrower will issue, in lieu thereof, a replacement
Note or other Loan Document, dated the date of such lost, stolen, destroyed or
mutilated Note or other Loan Document in the same principal amount thereof and
otherwise of like tenor.
Article 6 - DUE ON SALE/ENCUMBRANCE
Section 6.1 LENDER RELIANCE. Borrower acknowledges that Lender
has examined and relied on the experience of Borrower and its general partners,
members, principals and (if Borrower is a trust) beneficial owners in owning and
operating properties such as the Property in agreeing to make the Loan, and will
continue to rely on Borrower's ownership of the Property as a means of
maintaining the value of the Property as security for repayment of the Debt and
the performance of the Other Obligations. Borrower acknowledges that Lender has
a valid interest in maintaining the value of the Property so as to ensure that,
should Borrower default in the repayment of the Debt or the performance of the
Other Obligations, Lender can recover the Debt by a sale of the Property.
Section 6.2 NO SALE/ENCUMBRANCE. Borrower agrees that Borrower
shall not, without the prior written consent of Lender, sell, convey, mortgage,
grant, bargain, encumber, pledge, assign, or otherwise transfer the Property or
any part thereof or permit the Property or any part thereof to be sold,
conveyed, mortgaged, granted, bargained, encumbered, pledged, assigned, or
otherwise transferred, unless Lender shall consent thereto in accordance with
Section 6.4 hereof.
Section 6.3 SALE/ENCUMBRANCE DEFINED. A sale, conveyance,
mortgage, grant, bargain, encumbrance, pledge, assignment, or transfer within
the meaning of this Article 6 shall be deemed to include, but not be limited to,
(a) an installment sales agreement wherein Borrower agrees to sell the Property
or any part thereof for a price to be paid in installments; (b) an agreement by
Borrower leasing all or a substantial part of the Property for other than actual
occupancy by a space tenant thereunder or a sale, assignment or other transfer
of, or the grant of a security interest in, Borrower's right, title and interest
in and to any Leases or any Rents; (c) the voluntary or involuntary sale,
conveyance, transfer or pledge of the stock of the general partner of Borrower
(or the stock of any corporation directly or indirectly controlling such general
partner by operation of law or otherwise) or the creation or issuance of new
stock by which an aggregate of more than ten percent (10%) of such general
partner's stock shall be vested in a party or parties who are not now
stockholders; (d) the
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voluntary or involuntary sale, conveyance, transfer or pledge of any general or
limited partnership interest in Borrower; (e) if Borrower, any general partner
of Borrower, any guarantor or any indemnitor is a limited liability company, the
change, removal or resignation of a member or managing member or the transfer or
pledge of the interest of any member or managing member or any profits or
proceeds relating to such interest; or (f) any other transfer prohibited by the
terms of the Loan Agreement.
Section 6.4 LENDER'S RIGHTS. Lender reserves the right to
condition the consent required hereunder upon (a) a modification of the terms
hereof and of the Loan Agreement, the Note or the other Loan Documents; (b) an
assumption of the Loan Agreement, the Note, this Security Instrument and the
other Loan Documents as so modified by the proposed transferee, subject to the
provisions of Section 9.4 of the Loan Agreement; (c) payment of all of Lender's
reasonable expenses incurred in connection with such transfer; (d) the
confirmation in writing by the applicable Rating Agencies that the proposed
transfer will not, in and of itself, result in a downgrade, qualification or
withdrawal of the initial, or, if higher, then current ratings assigned in
connection with any Securitization; (e) the delivery of a nonconsolidation
opinion reflecting the proposed transfer satisfactory in form and substance to
Lender; (f) the proposed transferee's continued compliance with the
representations and covenants set forth in Section 4.1.30 and 5.2.14 of the Loan
Agreement; (g) the delivery of evidence satisfactory to Lender that the single
purpose nature and bankruptcy remoteness of Borrower, its shareholders, partners
or members, as the case may be, following such transfers are in accordance with
the standards of the Rating Agencies, or (h) such other conditions as Lender
shall determine in its reasonable discretion to be in the interest of Lender,
including, without limitation, the creditworthiness, reputation and
qualifications of the transferee with respect to the Loan and the Property.
Lender shall not be required to demonstrate any actual impairment of its
security or any increased risk of default hereunder in order to declare the Debt
immediately due and payable upon Borrower's sale, conveyance, mortgage, grant,
bargain, encumbrance, pledge, assignment, or transfer of the Property without
Lender's consent. This provision shall apply to every sale, conveyance,
mortgage, grant, bargain, encumbrance, pledge, assignment, or transfer of the
Property regardless of whether voluntary or not, or whether or not Lender has
consented to any previous sale, conveyance, mortgage, grant, bargain,
encumbrance, pledge, assignment, or transfer of the Property.
Article 7 - RIGHTS AND REMEDIES UPON DEFAULT
Section 7.1 REMEDIES. Upon the occurrence and during the
continuance of any Event of Default, Borrower agrees that Lender or Trustee, or
both, may take such action, without notice or demand, as it deems advisable to
protect and enforce its rights against Borrower and in and to the Property,
including, but not limited to, the following actions, each of which may be
pursued concurrently or otherwise, at such time and in such order as Lender or
Trustee may determine, in their sole discretion, without impairing or otherwise
affecting the other rights and remedies of Lender or Trustee:
(a) declare the entire unpaid Debt to be immediately due and
payable;
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(b) institute proceedings, judicial or otherwise, for the
complete foreclosure of this Security Instrument under any applicable
provision of law, in which case the Property or any interest therein
may be sold for cash or upon credit in one or more parcels or in
several interests or portions and in any order or manner;
(c) with or without entry, to the extent permitted and
pursuant to the procedures provided by applicable law, institute
proceedings for the partial foreclosure of this Security Instrument for
the portion of the Debt then due and payable, subject to the continuing
lien and security interest of this Security Instrument for the balance
of the Debt not then due, unimpaired and without loss of priority;
(d) sell for cash or upon credit the Property or any part
thereof and all estate, claim, demand, right, title and interest of
Borrower therein and rights of redemption thereof, pursuant to power of
sale or otherwise, at one or more sales, as an entity or in parcels, at
such time and place, upon such terms and after such notice thereof, all
as may be required or permitted by law; and, without limiting the
foregoing:
(i) In connection with any sale or sales hereunder,
Lender or the Trustee shall be entitled to elect to treat any
of the Property which consists of a right in action or which
is property that can be severed from the Real Property covered
hereby or any improvements without causing structural damage
thereto as if the same were personal property, and dispose of
the same in accordance with applicable law, separate and apart
from the sale of Real Property. Where the Property consists of
Real Property, Personal Property, Equipment or Fixtures,
whether or not such Personal Property or Equipment is located
on or within the Real Property, Lender and/or the Trustee
shall be entitled to elect to exercise its rights and remedies
against any or all of the Real Property, Personal Property,
Equipment and Fixtures in such order and manner as is now or
hereafter permitted by applicable law;
(ii) Lender and/or the Trustee shall be entitled to
elect to proceed against any or all of the Real Property,
Personal Property, Equipment and Fixtures in any manner
permitted under applicable law; and if Lender and/or the
Trustee so elects pursuant to applicable law, the power of
sale herein granted shall be exercisable with respect to all
or any of the Real Property, Personal Property, Equipment and
Fixtures covered hereby, as designated by Lender and/or the
Trustee and Trustee is hereby authorized and empowered to
conduct any such sale of any Real Property, Personal Property,
Equipment and Fixtures in accordance with the procedures
applicable to Real Property;
(iii) Should Lender and/or the Trustee elect to sell
any portion of the Property which is Real Property or which is
Personal Property, Equipment or Fixtures that the Lender
and/or the Trustee has elected under applicable law to sell
together with Real Property in accordance with the laws
governing a sale of
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<PAGE> 16
Real Property, Lender and/or the Trustee shall give such
notice of Event of Default, if any, and election to sell as
may then be required by law. Thereafter, upon the expiration
of such time and the giving of such notice of sale as may then
be required by law, and without the necessity of any demand on
Borrower, Lender and/or the Trustee at the time and place
specified in the notice of sale, shall sell such Real Property
or part thereof at public auction to the highest bidder for
cash in lawful money of the United States. Lender or the
Trustee may from time to time postpone any sale hereunder by
public announcement thereof at the time and place noticed
therefor;
(iv) If the Property consists of several lots,
parcels or items of property, Lender or the Trustee shall,
subject to applicable law, (A) designate the order in which
such lots, parcels or items shall be offered for sale or sold,
or (B) elect to sell such lots, parcels or items through a
single sale, or through two or more successive sales, or in
any other manner Lender or the Trustee designates. Any Person,
other than the Trustee, including Borrower or Lender, may
purchase at any sale hereunder. Should Lender or the Trustee
desire that more than one sale or other disposition of the
Property be conducted, Lender or the Trustee shall, subject to
applicable law, cause such sales or dispositions to be
conducted simultaneously, or successively, on the same day, or
at such different days or times and in such order as Lender or
the Trustee may designate, and no such sale shall terminate or
otherwise affect the lien of this Security Instrument on any
part of the Property not sold until all the Debt has been paid
in full. In the event Lender or the Trustee elects to dispose
of the Property through more than one sale, except as
otherwise provided by applicable law, Borrower agrees to pay
the costs and expenses of each such sale and of any judicial
proceedings wherein such sale may be made;
(e) institute an action, suit or proceeding in equity for the
specific performance of any covenant, condition or agreement contained
herein, in the Note, the Loan Agreement or in the other Loan Documents;
(f) recover judgment on the Note either before, during or
after any proceedings for the enforcement of this Security Instrument
or the other Loan Documents;
(g) apply for the appointment of a receiver, trustee,
liquidator or conservator of the Property, without notice and without
regard for the adequacy of the security for the Debt and without regard
for the solvency of Borrower, any guarantor, indemnitor with respect to
the Loan or of any Person, liable for the payment of the Debt;
(h) the license granted to Borrower under SECTION 1.2 hereof
shall automatically be revoked and Lender may enter into or upon the
Property, either personally or by its agents, nominees or attorneys and
dispossess Borrower and its
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<PAGE> 17
agents and servants therefrom, without liability for trespass, damages
or otherwise and exclude Borrower and its agents or servants wholly
therefrom, and take possession of all books, records and accounts
relating thereto and Borrower agrees to surrender possession of the
Property and of such books, records and accounts to Lender upon demand,
and thereupon Lender may (i) use, operate, manage, control, insure,
maintain, repair, restore and otherwise deal with all and every part of
the Property and conduct the business thereat; (ii) complete any
construction on the Property in such manner and form as Lender deems
advisable; (iii) make alterations, additions, renewals, replacements
and improvements to or on the Property; (iv) exercise all rights and
powers of Borrower with respect to the Property, whether in the name of
Borrower or otherwise, including, without limitation, the right to
make, cancel, enforce or modify Leases, obtain and evict tenants, and
demand, sue for, collect and receive all Rents of the Property and
every part thereof; (v) require Borrower to pay monthly in advance to
Lender, or any receiver appointed to collect the Rents, the fair and
reasonable rental value for the use and occupation of such part of the
Property as may be occupied by Borrower; (vi) require Borrower to
vacate and surrender possession of the Property to Lender or to such
receiver and, in default thereof, Borrower may be evicted by summary
proceedings or otherwise; and (vii) apply the receipts from the
Property to the payment of the Debt, in such order, priority and
proportions as Lender shall deem appropriate in its sole discretion
after deducting therefrom all expenses (including reasonable attorneys'
fees) incurred in connection with the aforesaid operations and all
amounts necessary to pay the Taxes, Other Charges, insurance and other
expenses in connection with the Property, as well as just and
reasonable compensation for the services of Lender, its counsel, agents
and employees;
(i) exercise any and all rights and remedies granted to a
secured party upon default under the Uniform Commercial Code,
including, without limiting the generality of the foregoing: (i) the
right to take possession of the Fixtures, the Equipment, the Personal
Property or any part thereof, and to take such other measures as Lender
may deem necessary for the care, protection and preservation of the
Fixtures, the Equipment, the Personal Property, and (ii) request
Borrower at its expense to assemble the Fixtures, the Equipment, the
Personal Property and make it available to Lender at a convenient place
acceptable to Lender. Any notice of sale, disposition or other intended
action by Lender with respect to the Fixtures, the Equipment, the
Personal Property sent to Borrower in accordance with the provisions
hereof at least ten (10) days prior to such action, shall constitute
commercially reasonable notice to Borrower;
(j) apply any sums then deposited or held in escrow or
otherwise by or on behalf of Lender in accordance with the terms of the
Loan Agreement, this Security Instrument or any other Loan Document to
the payment of the following items in any order in its uncontrolled
discretion:
(i) Taxes and Other Charges;
(ii) Insurance Premiums;
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<PAGE> 18
(iii) Interest on the unpaid principal balance of the
Note;
(iv) Amortization of the unpaid principal balance
of the Note;
(v) All other sums payable pursuant to the Note,
the Loan Agreement, this Security Instrument
and the other Loan Documents, including
without limitation advances made by Lender
pursuant to the terms of this Security
Instrument;
(k) pursue such other remedies as Lender may have under
applicable law; or
(1) apply the undisbursed balance of any Net Proceeds
Deficiency deposit, together with interest thereon, to the payment of
the Debt in such order, priority and proportions as Lender shall deem
to be appropriate in its discretion.
In the event of a sale, by foreclosure, power of sale or otherwise, of less than
all of Property, this Security Instrument shall continue as a lien and security
interest on the remaining portion of the Property unimpaired and without loss of
priority.
Section 7.2 APPLICATION OF PROCEEDS. The purchase money,
proceeds and avails of any disposition of the Property, and or any part thereof,
or any other sums collected by Lender pursuant to the Note, this Security
Instrument or the other Loan Documents, may be applied by Lender to the payment
of the Debt in such priority and proportions as Lender in its discretion shall
deem proper, to the extent consistent with law.
Section 7.3 RIGHT TO CURE DEFAULTS. Upon the occurrence and
during the continuance of any Event of Default, Lender may remedy such Event of
Default in such manner and to such extent as Lender may deem necessary to
protect the security hereof, but without any obligation to do so and without
notice to or demand on Borrower, and without releasing Borrower from any
obligation hereunder. Lender is authorized to enter upon action or proceeding to
the Property for such purposes, or appear in, defend, or bring any action or
proceeding to protect its interest in the Property or to foreclose this Security
Instrument or collect the Debt, and the cost and expense thereof (including
reasonable attorneys' fees to the extent permitted by law), with interest as
provided in this Section 7.3, shall constitute a portion of the Debt and shall
be due and payable to Lender upon demand. All such costs and expenses incurred
by Lender in remedying such Event of Default or such failed payment or act or in
appearing in, defending, or bringing any such action or proceeding shall bear
interest at the Default Rate, for the period after notice from Lender that such
cost or expense was incurred to the date of payment to Lender. All such costs
and expenses incurred by Lender together with interest thereon calculated at the
Default Rate shall be deemed to constitute a portion of the Debt and be secured
by this Security Instrument and the other Loan Documents and shall be
immediately due and payable upon demand by Lender therefor.
Section 7.4 ACTIONS AND PROCEEDINGS. Lender or Trustee has the
right to appear in and defend any action or proceeding brought with respect to
the Property and to
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<PAGE> 19
bring any action or proceeding, in the name and on behalf of Borrower, which
Lender, in its discretion, decides should be brought to protect its interest in
the Property.
Section 7.5 RECOVERY OF SUMS REQUIRED TO BE PAID. Lender shall
have the right from time to time to take action to recover any sum or sums which
constitute a part of the Debt as the same become due, without regard to whether
or not the balance of the Debt shall be due, and without prejudice to the right
of Lender or Trustee thereafter to bring an action of foreclosure, or any other
action, for a default or defaults by Borrower existing at the time such earlier
action was commenced.
Section 7.6 EXAMINATION OF BOOKS AND RECORDS. At reasonable
times and upon reasonable notice, Lender, its agents, accountants and attorneys
shall have the right to examine the records, books, management and other papers
of Borrower which reflect upon their financial condition, at the Property or at
any office regularly maintained by Borrower where the books and records are
located. Lender and its agents shall have the right to make copies and extracts
from the foregoing records and other papers. In addition, at reasonable times
and upon reasonable notice, Lender, its agents, accountants and attorneys shall
have the right to examine and audit the books and records of Borrower pertaining
to the income, expenses and operation of the Property during reasonable business
hours at any office of Borrower where the books and records are located. This
Section 7.6 shall apply throughout the term of the Note and without regard to
whether an Event of Default has occurred or is continuing.
Section 7.7 OTHER RIGHTS, ETC. (a) The failure of Lender or
Trustee to insist upon strict performance of any term hereof shall not be deemed
to be a waiver of any term of this Security Instrument. Borrower shall not be
relieved of Borrower's obligations hereunder by reason of (i) the failure of
Lender or Trustee to comply with any request of Borrower or any guarantor or
indemnitor with respect to the Loan to take any action to foreclose this
Security Instrument or otherwise enforce any of the provisions hereof or of the
Note or the other Loan Documents, (ii) the release, regardless of consideration,
of the whole or any part of the Property, or of any person liable for the Debt
or any portion thereof, or (iii) any agreement or stipulation by Lender
extending the time of payment or otherwise modifying or supplementing the terms
of the Note, this Security Instrument or the other Loan Documents.
(b) It is agreed that the risk of loss or damage to the
Property is on Borrower, and Lender shall have no liability whatsoever for
decline in value of the Property, for failure to maintain the Policies, or for
failure to determine whether insurance in force is adequate as to the amount of
risks insured. Possession by Lender shall not be deemed an election of judicial
relief, if any such possession is requested or obtained, with respect to any
Property or collateral not in Lender's possession.
(c) Lender may resort for the payment of the Debt to any other
security held by Lender in such order and manner as Lender, in its discretion,
may elect. Lender or Trustee may take action to recover the Debt, or any portion
thereof, or to enforce any covenant hereof without prejudice to the right of
Lender or Trustee thereafter to foreclose this
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<PAGE> 20
Security Instrument. The rights of Lender or Trustee under this Security
Instrument shall be separate, distinct and cumulative and none shall be given
effect to the exclusion of the others. No act of Lender or Trustee shall be
construed as an election to proceed under any one provision herein to the
exclusion of any other provision. Neither Lender nor Trustee shall be limited
exclusively to the rights and remedies herein stated but shall be entitled to
every right and remedy now or hereafter afforded at law or in equity.
Section 7.8 RIGHT TO RELEASE ANY PORTION OF THE PROPERTY.
Lender may release any portion of the Property for such consideration as Lender
may require without, as to the remainder of the Property, in any way impairing
or affecting the lien or priority of this Security Instrument, or improving the
position of any subordinate lienholder with respect thereto, except to the
extent that the obligations hereunder shall have been reduced by the actual
monetary consideration, if any, received by Lender for such release, and may
accept by assignment, pledge or otherwise any other property in place thereof as
Lender may require without being accountable for so doing to any other
lienholder. This Security Instrument shall continue as a lien and security
interest in the remaining portion of the Property.
Section 7.9 VIOLATION OF LAWS. If the Property is not in
material compliance with Legal Requirements, Lender may impose additional
requirements upon Borrower in connection herewith including, without limitation,
monetary reserves or financial equivalents.
Section 7.10 RECOURSE AND CHOICE OF REMEDIES. Notwithstanding
any other provision of this Security Instrument or the Loan Agreement,
including, without limitation, Section 9.4 of the Loan Agreement, Lender and
other Indemnified Parties (as hereinafter defined) are entitled to enforce the
obligations of Borrower, any guarantor and indemnitor contained in Sections 9.2,
9.3 and 9.4 herein and Section 9.2 of the Loan Agreement without first resorting
to or exhausting any security or collateral and without first having recourse to
the Note or any of the Property, through foreclosure, exercise of a power of
sale or acceptance of a deed in lieu of foreclosure or otherwise, and in the
event Lender commences a foreclosure action against the Property, or otherwise
causes Trustee to exercise the power of sale pursuant to this Security
Instrument, Lender is entitled to pursue a deficiency judgment with respect to
such obligations against Borrower and any guarantor or indemnitor with respect
to the Loan. The provisions of Sections 9.2, 9.3 and 9.4 herein and Section 9.2
of the Loan Agreement are exceptions to any non-recourse or exculpation
provisions in the Loan Agreement, the Note, this Security Instrument or the
other Loan Documents, and Borrower and any guarantor or indemnitor with respect
to the Loan are fully and personally liable for the obligations pursuant to
Sections 9.2, 9.3 and 9.4 herein and Section 9.2 of the Loan Agreement. The
liability of Borrower and any guarantor or indemnitor with respect to the Loan
pursuant to Sections 9.2, 9.3 and 9.4
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<PAGE> 21
herein and Section 9.2 of the Loan Agreement is not limited to the original
principal amount of the Note. Notwithstanding the foregoing, nothing herein
shall inhibit or prevent Lender or Trustee from foreclosing or exercising a
power of sale pursuant to this Security Instrument or exercising any other
rights and remedies pursuant to the Loan Agreement, the Note, this Security
Instrument and the other Loan Documents, whether simultaneously with foreclosure
proceedings or in any other sequence. A separate action or actions may be
brought and prosecuted against Borrower pursuant to Sections 9.2, 9.3 and 9.4
herein and Section 9.2 of the Loan Agreement, whether or not action is brought
against any other Person or whether or not any other Person is joined in the
action or actions. In addition, Lender shall have the right but not the
obligation to join and participate in, as a party if it so elects, any
administrative or judicial proceedings or actions initiated in connection with
any matter addressed in Article 8 or Section 9.4 herein.
Section 7.11 RIGHT OF ENTRY. Upon reasonable notice to
Borrower, Lender and its agents shall have the right to enter and inspect the
Property at all reasonable times.
Article 8 - ENVIRONMENTAL HAZARDS
Section 8.1 ENVIRONMENTAL REPRESENTATIONS AND WARRANTIES.
Based upon an environmental assessment of the Property and information that
Borrower knows after due inquiry of the Manager, and except as otherwise
disclosed by that certain Environmental Site Assessment of the Property
delivered to Lender (such report is referred to below as the "ENVIRONMENTAL
REPORT"), (a) there are no Hazardous Substances (defined below) or underground
storage tanks in, on, or under the Property, except those that are both (i) in
compliance with Environmental Laws (defined below) and with permits issued
pursuant thereto and (ii) fully disclosed to Lender in writing pursuant the
Environmental Report; (b) there are no past, present or threatened Releases
(defined below) of Hazardous Substances in, on, under or from the Property which
has not been fully remediated in accordance with Environmental Law; (c) there is
no threat of any Release of Hazardous Substances migrating to the Property; (d)
there is no past or present non-compliance with Environmental Laws, or with
permits issued pursuant thereto, in connection with the Property which has not
been fully remediated in accordance with Environmental Law; (e) Borrower does
not know of, and has not received, any written or oral notice or other
communication from any Person (including but not limited to a governmental
entity) relating to Hazardous Substances or Remediation (defined below) thereof,
of possible liability of any Person pursuant to any Environmental Law, other
environmental conditions in connection with the Property, or any actual or
potential administrative or judicial proceedings in connection with any of the
foregoing; and (f) Borrower has truthfully and fully provided to Lender, in
writing, any and all information relating to conditions in, on, under or from
the Property that is known to Borrower and that is contained in Borrower's files
and records, including but not limited to any reports relating to Hazardous
Substances in, on, under or from the Property and/or to the environmental
condition of the Property.
"ENVIRONMENTAL LAW" means any present and future federal,
state and local laws, statutes, ordinances, rules, regulations and the like, as
well as common law, relating to protection of human health or the environment,
relating to Hazardous Substances, relating to liability for or costs of
Remediation or prevention of Releases of Hazardous Substances or relating to
liability for or costs of other actual or threatened danger to human health or
the environment. Environmental Law includes, but is not limited to, the
following statutes, as amended, any successor thereto, and any regulations
promulgated pursuant thereto, and any state or local statutes, ordinances,
rules, regulations and the like addressing similar issues: the Comprehensive
Environmental Response, Compensation and Liability Act; the Emergency
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Planning and Community Right-to-Know Act; the Hazardous Substances
Transportation Act; the Resource Conservation and Recovery Act (including but
not limited to Subtitle I relating to underground storage tanks); the Solid
Waste Disposal Act; the Clean Water Act; the Clean Air Act; the Toxic Substances
Control Act; the Safe Drinking Water Act; the Occupational Safety and Health
Act; the Federal Water Pollution Control Act; the Federal Insecticide, Fungicide
and Rodenticide Act; the Endangered Species Act; the National Environmental
Policy Act; and the River and Harbors Appropriation Act. Environmental Law also
includes, but is not limited to, any present and future federal, state and local
laws, statutes, ordinances, rules, regulations and the like, as well as common
law: conditioning transfer of property upon a negative declaration or other
approval of a governmental authority of the environmental condition of the
Property; requiring notification or disclosure of Releases of Hazardous
Substances or other environmental condition of the Property to any governmental
authority or other Person, whether or not in connection with transfer of title
to or interest in property; imposing conditions or requirements in connection
with permits or other authorization for lawful activity; relating to nuisance,
trespass or other causes of action related to the Property; and relating to
wrongful death, personal injury, or property or other damage in connection with
any physical condition or use of the Property.
"HAZARDOUS SUBSTANCES" include but are not limited to any and
all substances (whether solid, liquid or gas) defined, listed, or otherwise
classified as pollutants, hazardous wastes, hazardous substances, hazardous
materials, extremely hazardous wastes, or words of similar meaning or regulatory
effect under any present or future Environmental Laws or that may have a
negative impact on human health or the environment, including but not limited to
petroleum and petroleum products, asbestos and asbestos-containing materials,
polychlorinated biphenyls, lead, radon, radioactive materials, flammables and
explosives, but excluding substances of kinds and in amounts ordinarily and
customarily used or stored in similar properties for the purpose of cleaning or
other maintenance or operations and otherwise in compliance with all
Environmental Laws.
"RELEASE" of any Hazardous Substance includes but is not
limited to any release, deposit, discharge, emission, leaking, spilling,
seeping, migrating, injecting, pumping, pouring, emptying, escaping, dumping,
disposing or other movement of Hazardous Substances.
"REMEDIATION" includes but is not limited to any response,
remedial, removal, or corrective action, any activity to cleanup, detoxify,
decontaminate, contain or otherwise remediate any Hazardous Substance, any
actions to prevent, cure or mitigate any Release of any Hazardous Substance, any
action to comply with any Environmental Laws or with any permits issued pursuant
thereto, any inspection, investigation, study, monitoring, assessment, audit,
sampling and testing, laboratory or other analysis, or evaluation relating to
any Hazardous Substances or to anything referred to in Article 8.
Section 8.2. ENVIRONMENTAL COVENANTS. Borrower covenants and
agrees that: (a) all uses and operations on or of the Property, whether by
Borrower or any other Person, shall be in compliance with all Environmental Laws
and permits issued pursuant
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thereto; (b) there shall be no Releases of Hazardous Substances in, on, under or
from the Property; (c) there shall be no Hazardous Substances in, on, or under
the Property, except those that are both (i) in compliance with all
Environmental Laws and with permits issued pursuant thereto and (ii) fully
disclosed to Lender in writing; (d) Borrower shall keep the Property free and
clear of all liens and other encumbrances imposed pursuant to any Environmental
Law, whether due to any act or omission of Borrower or any other Person (the
"ENVIRONMENTAL LIENS"); (e) Borrower shall, at its sole cost and expense, fully
and expeditiously cooperate in all activities pursuant to SECTION 8.3 below,
including but not limited to providing all relevant information and making
knowledgeable persons available for interviews; (f) Borrower shall, at its sole
cost and expense, perform any environmental site assessment or other
investigation of environmental conditions in connection with the Property,
pursuant to any reasonable written request of Lender made in the event that
Lender has reason to believe that an environmental hazard exists on the Property
(including but not limited to sampling, testing and analysis of soil, water,
air, building materials and other materials and substances whether solid, liquid
or gas), and share with Lender the reports and other results thereof, and Lender
and other Indemnified Parties shall be entitled to rely on such reports and
other results thereof; (g) Borrower shall, at its sole cost and expense, comply
with all reasonable written requests of Lender made in the event that Lender has
reason to believe that an environmental hazard exists on the Property (i)
reasonably effectuate Remediation of any condition (including but not limited to
a Release of a Hazardous Substance) in, on, under or from the Property; (ii)
comply with any Environmental Law; (iii) comply with any directive from any
governmental authority; and (iv) take any other reasonable action necessary or
appropriate for protection of human health or the environment; (h) Borrower
shall not do or allow any tenant or other user of the Property to do any act
that materially increases the dangers to human health or the environment, poses
an unreasonable risk of harm to any Person (whether on or off the Property),
impairs or may impair the value of the Property, is contrary to any requirement
of any insurer, constitutes a public or private nuisance, constitutes waste, or
violates any covenant, condition, agreement or easement applicable to the
Property; and (i) Borrower shall immediately notify Lender in writing of (A) any
presence or Releases or threatened Releases of Hazardous Substances in, on,
under, from or migrating towards the Property; (B) any non-compliance with any
Environmental Laws related in any way to the Property; (C) any actual or
potential Environmental Lien; (D) any required or proposed Remediation of
environmental conditions relating to the Property; and (E) any written or oral
notice or other communication of which Borrower becomes aware from any source
whatsoever (including but not limited to a governmental entity) relating in any
way to Hazardous Substances or Remediation thereof, possible liability of any
Person pursuant to any Environmental Law, other environmental conditions in
connection with the Property, or any actual or potential administrative or
judicial proceedings in connection with anything referred to in this Article 8.
Section 8.3 LENDER'S RIGHTS. In the event that Lender has
reason to believe that an environmental hazard exists on the Property, upon
reasonable notice from Lender, Borrower shall, at Borrower's expense, promptly
cause an engineer or consultant satisfactory to Lender to conduct any
environmental assessment or audit (the scope of which shall be determined in
Lender's sole and absolute discretion) and take any samples of soil, groundwater
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<PAGE> 24
or other water, air, or building materials or any other invasive testing
requested by Lender and promptly deliver the results of any such assessment,
audit, sampling or other testing; provided, however, if such results are not
delivered to Lender within a reasonable period, upon reasonable notice to
Borrower, Lender and any other Person designated by Lender, including but not
limited to any receiver, any representative of a governmental entity, and any
environmental consultant, shall have the right, but not the obligation, to enter
upon the Property at all reasonable times to assess any and all aspects of the
environmental condition of the Property and its use, including but not limited
to conducting any environmental assessment or audit (the scope of which shall be
determined in Lender's sole and absolute discretion) and taking samples of soil,
groundwater or other water, air, or building materials, and reasonably
conducting other invasive testing. Borrower shall cooperate with and provide
access to Lender and any such Person designated by Lender.
Article 9 - INDEMNIFICATION
Section 9.1 GENERAL INDEMNIFICATION. Borrower shall, at its
sole cost and expense, protect, defend, indemnify, release and hold harmless the
Indemnified Parties from and against any and all claims, suits, liabilities
(including, without limitation, strict liabilities), actions, proceedings,
obligations, debts, damages, losses, costs, expenses, diminutions in value,
fines, penalties, charges, fees, expenses, judgments, awards, amounts paid in
settlement, punitive damages, foreseeable and unforeseeable consequential
damages, of whatever kind or nature (including but not limited to reasonable
attorneys' fees and other costs of defense) (collectively, the "LOSSES") imposed
upon or incurred by or asserted against any Indemnified Parties and directly or
indirectly arising out of or in any way relating to any one or more of the
following: (a) ownership of this Security Instrument, the Property or any
interest therein or receipt of any Rents; (b) any amendment to, or restructuring
of, the Debt, and the Note, the Loan Agreement, this Security Instrument, or any
other Loan Documents; (c) any and all lawful action that may be taken by Lender
in connection with the enforcement of the provisions of this Security Instrument
or the Loan Agreement or the Note or any of the other Loan Documents, whether or
not suit is filed in connection with same, or in connection with Borrower, any
guarantor or indemnitor and/or any partner, joint venturer or shareholder
thereof becoming a party to a voluntary or involuntary federal or state
bankruptcy, insolvency or similar proceeding; (d) any accident, injury to or
death of persons or loss of or damage to property occurring in, on or about the
Property or any part thereof or on the adjoining sidewalks, curbs, adjacent
property or adjacent parking areas, streets or ways; (e) any use, nonuse or
condition in, on or about the Property or any part thereof or on the adjoining
sidewalks, curbs, adjacent property or adjacent parking areas, streets or ways;
(f) any failure on the part of Borrower to perform or be in compliance with any
of the terms of this Security Instrument; (g) performance of any labor or
services or the furnishing of any materials or other property in respect of the
Property or any part thereof; (h) the failure of any person to file timely with
the Internal Revenue Service an accurate Form 1099-B, Statement for Recipients
of Proceeds from Real Estate, Broker and Barter Exchange Transactions, which may
be required in connection with this Security Instrument, or to supply a copy
thereof in a timely fashion to the recipient of the proceeds of the transaction
in connection with which this
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<PAGE> 25
Security Instrument is made; (i) any failure of the Property to be in compliance
with any Legal Requirements; (j) the enforcement by any Indemnified Party of the
provisions of this Article 9; (k) any and all claims and demands whatsoever
which may be asserted against Lender by reason of any alleged obligations or
undertakings on its part to perform or discharge any of the terms, covenants, or
agreements contained in any Lease; (1) the payment of any commission, charge or
brokerage fee to anyone claiming through Borrower which may be payable in
connection with the funding of the Loan; or (m) any misrepresentation made by
Borrower in this Security Instrument or any other Loan Document. Notwithstanding
the foregoing, Borrower shall not be liable to the Indemnified Parties under
this SECTION 9.1 for any Losses to which the Indemnified Parties may become
subject to the extent such Losses arise by reason of the gross negligence,
illegal acts, fraud or willful misconduct of the Indemnified Parties. Any
amounts payable to Lender by reason of the application of this SECTION 9.1 shall
become immediately due and payable and shall bear interest at the Default Rate
from the date loss or damage is sustained by Lender until paid. For purposes of
this Article 9, the term "INDEMNIFIED PARTIES" means Lender and any Person who
is or will have been involved in the origination of the Loan, any Person who is
or will have been involved in the servicing of the Loan secured hereby, any
Person in whose name the encumbrance created by this Security Instrument is or
will have been recorded, persons and entities who may hold or acquire or will
have held a full or partial interest in the Loan secured hereby (including, but
not limited to, investors or prospective investors in the Securities, as well as
custodians, trustees and other fiduciaries who hold or have held a full or
partial interest in the Loan secured hereby for the benefit of third parties) as
well as the respective directors, officers, shareholders, partners, employees,
agents, servants, representatives, contractors, subcontractors, affiliates,
subsidiaries, participants, successors and assigns of any and all of the
foregoing (including but not limited to any other Person who holds or acquires
or will have held a participation or other full or partial interest in the Loan,
whether during the term of the Loan or as a part of or following a foreclosure
of the Loan and including, but not limited to, any successors by merger,
consolidation or acquisition of all or a substantial portion of Lender's assets
and business).
Section 9.2 MORTGAGE AND/OR INTANGIBLE TAX. Borrower shall, at
its sole cost and expense, protect, defend, indemnify, release and hold harmless
the Indemnified Parties from and against any and all Losses imposed upon or
incurred by or asserted against any Indemnified Parties and directly or
indirectly arising out of or in any way relating to any tax on the making and/or
recording of this Security Instrument, the Note or any of the other Loan
Documents, but excluding any income, franchise or other similar taxes.
Section 9.3 ERISA INDEMNIFICATION. Borrower shall, at its sole
cost and expense, protect, defend, indemnify, release and hold harmless the
Indemnified Parties from and against any and all Losses (including, without
limitation, reasonable attorneys' fees and costs incurred in the investigation,
defense, and settlement of Losses incurred in correcting any prohibited
transaction or in the sale of a prohibited loan, and in obtaining any individual
prohibited transaction exemption under ERISA that may be required, in Lender's
sole discretion) that Lender may incur, directly or indirectly, as a result of a
default under Sections 4.1.9 or 5.2.12 of the Loan Agreement.
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Section 9.4 ENVIRONMENTAL INDEMNIFICATION. Borrower shall, at
its sole cost and expense, protect, defend, indemnify, release and hold harmless
the Indemnified Parties from and against any and all Losses and costs of
Remediation (whether or not performed voluntarily), engineers' fees,
environmental consultants' fees, and costs of investigation (including but not
limited to sampling, testing, and analysis of soil, water, air, building
materials and other materials and substances whether solid, liquid or gas)
imposed upon or incurred by or asserted against any Indemnified Parties, and
directly or indirectly arising out of or in any way relating to any one or more
of the following: (a) any presence of any Hazardous Substances in, on, above, or
under the Property; (b) any past, present or threatened Release of Hazardous
Substances in, on, above, under or from the Property; (c) any activity by
Borrower, any Person affiliated with Borrower or any tenant or other user of the
Property in connection with any actual, proposed or threatened use, treatment,
storage, holding, existence, disposition or other Release, generation,
production, manufacturing, processing, refining, control, management, abatement,
removal, handling, transfer or transportation to or from the Property of any
Hazardous Substances at any tine located in, under, on or above the Property;
(d) any activity by Borrower, any Person affiliated with Borrower or any tenant
or other user of the Property in connection with any actual or proposed
Remediation of any Hazardous Substances at any time located in, under, on or
above the Property, whether or not such Remediation is voluntary or pursuant to
court or administrative order, including but not limited to any removal,
remedial or corrective action; (e) any past or present non-compliance or
violations of any Environmental Laws (or permits issued pursuant to any
Environmental Law) in connection with the Property or operations thereon,
including but not limited to any failure by Borrower, any Affiliate of Borrower
or any tenant or other user of the Property to comply with any order of any
Governmental Authority in connection with any Environmental Laws; (f) the
imposition, recording or filing of any Environmental Lien encumbering the
Property; (g) any administrative processes or proceedings or judicial
proceedings in any way connected with any matter addressed in Article 8 and this
SECTION 9.4; (h) any past, present or threatened injury to, destruction of or
loss of natural resources in any way connected with the Property, including but
not limited to costs to investigate and assess such injury, destruction or loss;
(i) any acts of Borrower or other users of the Property in arranging for
disposal or treatment, or arranging with a transporter for transport for
disposal or treatment, of Hazardous Substances owned or possessed by such
Borrower or other users, at any facility or incineration vessel owned or
operated by another Person and containing such or any similar Hazardous
Substance; (j) any acts of Borrower or other users of the Property, in accepting
any Hazardous Substances for transport to disposal or treatment facilities,
incineration vessels or sites selected by Borrower or such other users, from
which there is a Release, or a threatened Release of any Hazardous Substance
which causes the incurrence of costs for Remediation; (k) any personal injury,
wrongful death, or property damage arising under any statutory or common law or
tort law theory, including but not limited to damages assessed for the
maintenance of a private or public nuisance or for the conducting of an
abnormally dangerous activity on or near the Property; and (1) any
misrepresentation or inaccuracy in any representation or warranty or material
breach or failure to perform any covenants or other obligations pursuant to
Article 8. Notwithstanding the foregoing, Borrower shall not be liable under
this SECTION 9.4 for any Losses or costs of Remediation to which the Indemnified
Parties may become subject to the extent such Losses or
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costs of Remediation arise by reason of the gross negligence, illegal acts,
fraud of willful misconduct of the Indemnified Parties. This indemnity shall
survive any termination, satisfaction or foreclosure of this Security
Instrument, subject to the provisions of SECTION 10.5.
Section 9.5 DUTY TO DEFEND; ATTORNEYS' FEES AND OTHER FEES AND
EXPENSES. Upon written request by any Indemnified Party, Borrower shall defend
such Indemnified Party (if requested by any Indemnified Party, in the name of
the Indemnified Party) by attorneys and other professionals approved by the
Indemnified Parties. Notwithstanding the foregoing, if the defendants in any
such claim or proceeding include both Borrower and any Indemnified Party and
Borrower and such 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 Borrower, such Indemnified
Party 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, provided that no compromise or settlement shall be
entered without Borrower's consent, which consent shall not be unreasonably
withheld. Upon demand, Borrower shall pay or, in the sole and absolute
discretion of the Indemnified Parties, reimburse, the Indemnified Parties for
the payment of reasonable fees and disbursements of attorneys, engineers,
environmental consultants, laboratories and other professionals in connection
therewith.
Article 10 - WAIVERS
Section 10.1 WAIVER OF COUNTERCLAIM. To the extent permitted
by applicable law, Borrower hereby waives the right to assert a counterclaim,
other than a mandatory or compulsory counterclaim, in any action or proceeding
brought against it by Lender arising out of or in any way connected with this
Security Instrument, the Loan Agreement, the Note, any of the other Loan
Documents, or the Obligations.
Section 10.2 MARSHALLING AND OTHER MATTERS. To the extent
permitted by applicable law, Borrower hereby waives, to the extent permitted by
law, the benefit of all appraisement, valuation, stay, extension, reinstatement
and redemption laws now or hereafter in force and all rights of marshalling in
the event of any sale hereunder of the Property or any part thereof or any
interest therein. Further, Borrower hereby expressly waives any and all rights
of redemption from sale under any order or decree of foreclosure of this
Security Instrument on behalf of Borrower, and on behalf of each and every
person acquiring any interest in or title to the Property subsequent to the date
of this Security Instrument and on behalf of all persons to the extent permitted
by applicable law.
Section 10.3 WAIVER OF NOTICE. To the extent permitted by
applicable law, Borrower shall not be entitled to any notices of any nature
whatsoever from Lender or Trustee except with respect to matters for which this
Security Instrument or the Loan Documents specifically and expressly provide for
the giving of notice by Lender or Trustee to Borrower and except with respect to
matters for which Lender or Trustee is required by applicable law to give
notice, and Borrower hereby expressly waives the right to receive any notice
from
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Lender or Trustee with respect to any matter for which this Security Instrument
does not specifically and expressly provide for the giving of notice by Lender
or Trustee to Borrower.
Section 10.4 WAIVER OF STATUTE OF LIMITATIONS. To the extent
permitted by applicable law, Borrower hereby expressly waives and releases to
the fullest extent permitted by law, the pleading of any statute of limitations
as a defense to payment of the Debt or performance of its Other Obligations.
Section 10.5 SURVIVAL. The indemnifications made pursuant to
SECTIONS 9.3 AND 9.4 herein and the representations and warranties, covenants,
and other obligations arising under Article 8, shall continue indefinitely in
full force and effect and shall survive and shall in no way be impaired by: any
satisfaction, release or other termination of this Security Instrument, any
assignment or other transfer of all or any portion of this Security Instrument
or Lender's interest in the Property (but, in such case, shall benefit both
Indemnified Parties and any assignee or transferee), any exercise of Lender's
rights and remedies pursuant hereto including but not limited to foreclosure or
acceptance of a deed in lieu of foreclosure, any exercise of any rights and
remedies pursuant to the Loan Agreement, the Note or any of the other Loan
Documents, any transfer of all or any portion of the Property (whether by
Borrower or by Lender following foreclosure or acceptance of a deed in lieu of
foreclosure or at any other time), any amendment to this Security Instrument,
the Loan Agreement, the Note or the other Loan Documents, and any act or
omission that might otherwise be construed as a release or discharge of Borrower
from the obligations pursuant hereto. Notwithstanding anything to the contrary
contained in this Security Instrument or the other Loan Documents, Borrower
shall not have any obligations or liabilities under the indemnification under
SECTION 9.4 herein or other indemnifications with respect to Hazardous
Substances contained in the other Loan Documents with respect to those
obligations and liabilities that Borrower can prove arose solely from Hazardous
Substances that (i) were not present on or a threat to the Property prior to the
date that Lender or its nominee acquired title to the Property, whether by
foreclosure, exercise by power of sale, acceptance of a deed-in-lieu of
foreclosure or otherwise and (ii) were not the result of any act or negligence
of Borrower or any of Borrower's affiliates, agents or contractors.
Article 11 - EXCULPATION
The provisions of Section 9.4 of the Loan Agreement are hereby
incorporated by reference into this Security Instrument to the same extent and
with the same force as if fully set forth herein.
Article 12 - NOTICES
All notices or other written communications hereunder shall be
delivered in accordance with Section 10.6 of the Loan Agreement.
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Article 13 - APPLICABLE LAW
Section 13.1 GOVERNING LAW. (A) THIS SECURITY INSTRUMENT WAS
NEGOTIATED IN THE STATE OF NEW YORK, AND MADE BY BORROWER AND ACCEPTED BY LENDER
IN THE STATE OF NEW YORK, AND THE PROCEEDS OF THE NOTE SECURED HEREBY WERE
DISBURSED FROM THE STATE OF NEW YORK, WHICH STATE THE PARTIES AGREE HAS A
SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND TO THE UNDERLYING TRANSACTION
EMBODIED HEREBY, AND IN ALL RESPECTS, INCLUDING, WITHOUT LIMITING THE GENERALITY
OF THE FOREGOING, MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS
SECURITY INSTRUMENT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE
TO CONTRACTS MADE AND PERFORMED IN SUCH STATE (WITHOUT REGARD TO PRINCIPLES OF
CONFLICT LAWS) AND ANY APPLICABLE LAW OF THE UNITED STATES OF AMERICA, EXCEPT
THAT AT ALL TIMES THE PROVISIONS FOR THE CREATION, PERFECTION, AND ENFORCEMENT
OF THE LIENS AND SECURITY INTERESTS CREATED PURSUANT HERETO AND PURSUANT TO THE
OTHER LOAN DOCUMENTS WITH RESPECT TO THE PROPERTY SHALL BE GOVERNED BY AND
CONSTRUED ACCORDING TO THE LAW OF THE STATE IN WHICH THE PROPERTY IS LOCATED, IT
BEING UNDERSTOOD THAT, TO THE FULLEST EXTENT PERMITTED BY THE LAW OF SUCH STATE,
THE LAW OF THE STATE OF NEW YORK SHALL GOVERN THE CONSTRUCTION, VALIDITY AND
ENFORCEABILITY OF ALL LOAN DOCUMENTS AND ALL OF THE OBLIGATIONS ARISING
HEREUNDER OR THEREUNDER. TO THE FULLEST EXTENT PERMITTED BY LAW, BORROWER HEREBY
UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY CLAIM TO ASSERT THAT THE LAW OF ANY
OTHER JURISDICTION GOVERNS THIS SECURITY INSTRUMENT AND THE OR THE OTHER LOAN
DOCUMENTS, AND THIS SECURITY INSTRUMENT AND THE OTHER LOAN DOCUMENTS SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
PURSUANT TO SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.
(B) ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST LENDER OR
BORROWER ARISING OUT OF OR RELATING TO THIS SECURITY INSTRUMENT MAY AT LENDER'S
OPTION BE INSTITUTED IN ANY FEDERAL OR STATE COURT IN THE CITY OF NEW YORK,
COUNTY OF NEW YORK, PURSUANT TO SECTION 5-1402 OF THE NEW YORK GENERAL
OBLIGATIONS LAW, AND BORROWER WAIVES ANY OBJECTIONS WHICH IT MAY NOW OR
HEREAFTER HAVE BASED ON VENUE AND/OR FORUM NON CONVENIENS OF ANY SUCH SUIT,
ACTION OR PROCEEDING, AND BORROWER HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION OR PROCEEDING. BORROWER DOES
HEREBY DESIGNATE AND APPOINT
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<PAGE> 30
CT CORPORATION SYSTEM, INC.
1633 BROADWAY, 23RD FLOOR
NEW YORK, NEW YORK 10019
ATTENTION: SERVICE OF PROCESS DEPARTMENT
AS ITS AUTHORIZED AGENT TO ACCEPT AND ACKNOWLEDGE ON ITS BEHALF SERVICE OF ANY
AND ALL PROCESS WHICH MAY BE SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING IN
ANY FEDERAL OR STATE COURT IN NEW YORK, NEW YORK, AND AGREES THAT SERVICE OF
PROCESS UPON SAID AGENT AT SAID ADDRESS AND WRITTEN NOTICE OF SAID SERVICE
MAILED OR DELIVERED TO BORROWER IN THE MANNER PROVIDED HEREIN SHALL BE DEEMED IN
EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON BORROWER IN ANY SUCH SUIT,
ACTION OR PROCEEDING IN THE STATE OF NEW YORK. BORROWER (I) SHALL GIVE PROMPT
NOTICE TO LENDER OF ANY CHANGED ADDRESS OF ITS AUTHORIZED AGENT HEREUNDER, (II)
MAY AT ANY TIME AND FROM TIME TO TIME DESIGNATE A SUBSTITUTE AUTHORIZED AGENT
WITH AN OFFICE IN NEW YORK, NEW YORK (WHICH SUBSTITUTE AGENT AND OFFICE SHALL BE
DESIGNATED AS THE PERSON AND ADDRESS FOR SERVICE OF PROCESS), AND (III) SHALL
PROMPTLY DESIGNATE SUCH A SUBSTITUTE IF ITS AUTHORIZED AGENT CEASES TO HAVE AN
OFFICE IN NEW YORK, NEW YORK OR IS DISSOLVED WITHOUT LEAVING A SUCCESSOR.
Section 13.2 USURY LAWS. Notwithstanding anything to the
contrary, (a) all agreements and communications between Borrower and Lender are
hereby and shall automatically be limited so that, after taking into account all
amounts deemed interest, the interest contracted for, charged or received by
Lender shall never exceed the maximum lawful rate or amount, (b) in calculating
whether any interest exceeds the lawful maximum, all such interest shall be
amortized, prorated, allocated and spread over the full amount and term of all
principal indebtedness of Borrower to Lender, and (c) if through any contingency
or event, Lender receives or is deemed to receive interest in excess of the
lawful maximum, any such excess shall be deemed to have been applied toward
payment of the principal of any and all then outstanding indebtedness of
Borrower to Lender, or if there is no such indebtedness, shall immediately be
returned to Borrower.
Section 13.3 PROVISIONS SUBJECT TO APPLICABLE LAW. All rights,
powers and remedies provided in this Security Instrument may be exercised only
to the extent that the exercise thereof does not violate any applicable
provisions of law and are intended to be limited to the extent necessary so that
they will not render this Security Instrument invalid, unenforceable or not
entitled to be recorded, registered or filed under the provisions of any
applicable law. If any term of this Security Instrument or any application
thereof shall be invalid or unenforceable, the remainder of this Security
Instrument and any other application of the term shall not be affected thereby.
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Article 14 - DEFINITIONS
All capitalized terms not defined herein shall have the
respective meanings set forth in the Loan Agreement. Unless the context clearly
indicates a contrary intent or unless otherwise specifically provided herein,
words used in this Security Instrument may be used interchangeably in singular
or plural form and the word "BORROWER" shall mean "each Borrower and any
subsequent owner or owners of the Property or any part thereof or any interest
therein," the word "LENDER" shall mean "Lender and any subsequent holder of the
Note," the word "NOTE" shall mean "the Note and any other evidence of
indebtedness secured by this Security Instrument," the word "PROPERTY" shall
include any portion of the Property and any interest therein, and the phrases
"ATTORNEYS' FEES", "LEGAL FEES" and "COUNSEL FEES" shall include any and all
attorneys', paralegal and law clerk fees and disbursements, including, but not
limited to, fees and disbursements at the pre-trial, trial and appellate levels
incurred or paid by Lender in protecting its interest in the Property, the
Leases and the Rents and enforcing its rights hereunder.
Article 15 - MISCELLANEOUS PROVISIONS
Section 15.1 NO ORAL CHANGE. This Security Instrument, and any
provisions hereof, may not be modified, amended, waived, extended, changed,
discharged or terminated orally or by any act or failure to act on the part of
Borrower or Lender, but only by an agreement in writing signed by the party
against whom enforcement of any modification, amendment, waiver, extension,
change, discharge or termination is sought.
Section 15.2 SUCCESSORS AND ASSIGNS. This Security Instrument
shall be binding upon and inure to the benefit of Borrower and Lender and their
respective successors and assigns forever.
Section 15.3 INAPPLICABLE PROVISIONS. If any term, covenant or
condition of the Loan Agreement, the Note or this Security Instrument is held to
be invalid, illegal or unenforceable in any respect, the Loan Agreement, the
Note and this Security Instrument shall be construed without such provision.
Section 15.4 HEADINGS, ETC. The headings and captions of
various Sections of this Security Instrument are for convenience of reference
only and are not to be construed as defining or limiting, in any way, the scope
or intent of the provisions hereof.
Section 15.5 NUMBER AND GENDER. Whenever the context may
require, any pronouns used herein shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns and pronouns shall
include the plural and vice versa.
Section 15.6 SUBROGATION. If any or all of the proceeds of the
Note have been used to extinguish, extend or renew any indebtedness heretofore
existing against the Property, then, to the extent of the funds so used, Lender
shall be subrogated to all of the rights, claims, liens, titles, and interests
existing against the Property heretofore held by, or in
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favor of, the holder of such indebtedness and such former rights, claims, liens,
titles, and interests, if any, are not waived but rather are continued in full
force and effect in favor of Lender and are merged with the lien and security
interest created herein as cumulative security for the repayment of the Debt,
the performance and discharge of Borrower's obligations hereunder, under the
Loan Agreement, the Note and the other Loan Documents and the performance and
discharge of the Other Obligations.
Section 15.7 ENTIRE AGREEMENT. The Note, the Loan Agreement,
this Security Instrument and the other Loan Documents constitute the entire
understanding and agreement between Borrower and Lender with respect to the
transactions arising in connection with the Debt and supersede all prior written
or oral understandings and agreements between Borrower and Lender with respect
thereto. Borrower hereby acknowledges that, except as incorporated in writing in
the Note, the Loan Agreement, this Security Instrument and the other Loan
Documents, there are not, and were not, and no persons are or were authorized by
Lender to make, any representations, understandings, stipulations, agreements or
promises, oral or written, with respect to the transaction which is the subject
of the Note, the Loan Agreement, this Security Instrument and the other Loan
Documents.
Section 15.8 LIMITATION ON LENDER'S RESPONSIBILITY. No
provision of this Security Instrument shall operate to place any obligation or
liability for the control, care, management or repair of the Property upon
Lender, nor shall it operate to make Lender responsible or liable for any waste
committed on the Property by the tenants or any other Person, or for any
dangerous or defective condition of the Property, or for any negligence in the
management, upkeep, repair or control of the Property resulting in loss or
injury or death to any tenant, licensee, employee or stranger. Nothing herein
contained shall be construed as constituting Lender a "mortgagee in possession."
Article 16 - DEED OF TRUST PROVISIONS
Section 16.1 CONCERNING THE TRUSTEE. Trustee shall be under no
duty to take any action hereunder except as expressly required hereunder or by
law, or to perform any act which would involve Trustee in any expense or
liability or to institute or defend any suit in respect hereof, unless properly
indemnified to Trustee's reasonable satisfaction. Trustee, by acceptance of this
Security Instrument, covenants to perform and fulfill the trusts herein created,
being liable, however, only for willful negligence or misconduct, and hereby
waives any statutory fee and agrees to accept reasonable compensation, in lieu
thereof, for any services rendered by Trustee in accordance with the terms
hereof. Trustee may resign at any time upon giving thirty (30) days' notice to
Borrower and to Lender. Lender may remove Trustee at any time or from time to
time and select a successor trustee. In the event of the death, removal,
resignation, refusal to act, or inability to act of Trustee, or in its sole
discretion for any reason whatsoever Lender may, without notice and without
specifying any reason therefor and without applying to any court, select and
appoint a successor trustee, by an instrument recorded wherever this Security
Instrument is recorded and all powers, rights, duties and authority of Trustee,
as aforesaid, shall thereupon become vested in such successor. Such substitute
trustee shall not be required to give bond for the faithful performance of the
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duties of Trustee hereunder unless required by Lender. The procedure provided
for in this paragraph for substitution of Trustee shall be in addition to and
not in exclusion of any other provisions for substitution, by law or otherwise.
Section 16.2 TRUSTEE'S FEES. Borrower shall pay all reasonable
costs, fees and expenses incurred by Trustee and Trustee's agents and counsel in
connection with the performance by Trustee of Trustee's duties hereunder and all
such costs, fees and expenses shall be secured by this Security Instrument.
Section 16.3 CERTAIN RIGHTS. With the approval of Lender,
Trustee shall have the right to take any and all of the following actions: (i)
to select, employ, and advise with counsel (who may be, but need not be, counsel
for Lender) upon any matters arising hereunder, including the preparation,
execution, and interpretation of the Loan Agreement, the Note, this Security
Instrument or the other Loan Documents, and shall be fully protected in relying
as to legal matters on the advice of counsel, (ii) to execute any of the trusts
and powers hereof and to perform any duty hereunder either directly or through
his agents or attorneys, (iii) to select and employ, in and about the execution
of his duties hereunder, suitable accountants, engineers and other experts,
agents and attorneys-in-fact, either corporate or individual, not regularly in
the employ of Trustee, and Trustee shall not be answerable for any act, default,
negligence, or misconduct of any such accountant, engineer or other expert,
agent or attorney-in-fact, if selected with reasonable care, or 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 bad faith, and (iv) any and all other lawful action as Lender may
instruct Trustee to take to protect or enforce Lender's rights hereunder.
Trustee shall not be personally liable in case of entry by Trustee, or anyone
entering by virtue of the powers herein granted to Trustee, upon the Property
for debts contracted for or liability or damages incurred in the management or
operation of the Property. Trustee shall have the right to rely on any
instrument, document, or signature authorizing or supporting an action taken or
proposed to be taken by Trustee hereunder, believed by Trustee in good faith to
be genuine. Trustee shall be entitled to reimbursement for actual expenses
incurred by Trustee in the performance of Trustee's duties hereunder and to
reasonable compensation for such of Trustee's services hereunder as shall be
rendered.
Section 16.4 RETENTION OF MONEY. All moneys received by
Trustee shall, until used or applied as herein provided, be held in trust for
the purposes for which they were received, but need not be segregated in any
manner from any other moneys (except to the extent required by applicable law)
and Trustee shall be under no liability for interest on any moneys received by
Trustee hereunder.
Section 16.5 PERFECTION OF APPOINTMENT. Should any deed,
conveyance, or instrument of any nature be required from Borrower by any Trustee
or substitute trustee to more fully and certainly vest in and confirm to the
Trustee or substitute trustee such estates rights, powers, and duties, then,
upon request by the Trustee or substitute trustee, any and all such deeds,
conveyances and instruments shall be made, executed, acknowledged, and delivered
and shall be caused to be recorded and/or filed by Borrower.
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Section 16.6 SUCCESSION INSTRUMENTS. Any substitute trustee
appointed pursuant to any of the provisions hereof shall, without any further
act, deed, or conveyance, become vested with all the estates, properties,
rights, powers, and trusts of its or his predecessor in the rights hereunder
with like effect as if originally named as Trustee herein; but nevertheless,
upon the written request of Lender or of the substitute trustee, the Trustee
ceasing to act shall execute and deliver any instrument transferring to such
substitute trustee, upon the trusts herein expressed, all the estates,
properties, rights, powers, and trusts of the Trustee so ceasing to act, and
shall duly assign, transfer and deliver any of the property and moneys held by
such Trustee to the substitute trustee so appointed in the Trustee's place.
Article 17 - STATE-SPECIFIC PROVISIONS
Section 17.1 PRINCIPLES OF CONSTRUCTION. In the event of any
inconsistencies between the terms and conditions of this Article 17 and the
other terms and conditions of this Security Instrument, the terms and conditions
of this Article 17 shall control and be binding.
Section 17.2 CONDITIONS TO GRANT. The two paragraphs beginning
with "TO HAVE AND TO HOLD" commencing on page 6 hereof are hereby deleted in
their entirety and replaced with the following:
TO HAVE AND TO HOLD the Property unto Trustee and its
successors in the trust forever; and Borrower does hereby covenant to and with
Trustee and Lender, (the beneficial owner and holder of the promissory Note
secured by this Security Instrument) that Borrower will warrant generally the
Property, and will further warrant that it has the right to convey the Property
to Trustee;
IN TRUST NEVERTHELESS WITH POWER OF SALE to secure the payment
of (i) the Note, and to secure also any and all extensions, modifications and
renewals of the Note, or any part thereof, however changed in form, manner or
amount, (ii) all other sums which are a part of the Debt, at any time and from
time to time arising hereunder or under the Loan Agreement or under the other
Loan Documents, and (iii) all other indebtedness or other obligations of
Borrower to Lender at any time and from time to time arising hereunder or under
the Loan Agreement or under the other Loan Documents, and (iv) all other
Obligations not otherwise specified in this paragraph.
Section 17.3 PROCEEDS OF SALE. The proceeds of any sale made
under of and by virtue of Section 1.3 of this Security Instrument shall be
applied first, to the costs and expenses of executing this trust, including an
amount equal to Trustee's fees and expenses (including reasonable attorneys'
fees), to Trustee, or to the one so acting, as his or their commission
hereunder; second to Lender and Trustee all moneys which they or any of them may
have paid for taxes, assessments or other governmental charges or fees,
insurance, repairs, court costs, and all other costs and expenses incurred or
paid under the provisions of this Security Instrument, together with interest
thereon at the Default Rate from the date of payment; third to Lender the full
amount due and unpaid on the Note and the Debt hereby
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<PAGE> 35
secured, together with all interest accrued thereon to date of payment; and
fourth, the balance, if any, to Borrower, its successors or assigns, if
permitted by law, upon delivery of and surrender to the purchaser or purchasers
of possession of the Property less the expense, if any, of obtaining such
possession. This instrument shall, with respect to all items of personal
property and fixtures subject to the lien hereof, be deemed to grant a security
interest to the Lender under the Uniform Commercial Code of West Virginia. In
the event of the occurrence of any Event of Default, in addition to the rights,
remedies and powers hereinabove set forth, Lender and Trustee shall have as to
any and all fixtures and personal property covered by this Security Instrument,
all rights, remedies and powers of a secured party under the Uniform Commercial
Code of West Virginia. This instrument is to be filed for record in the real
estate records of the county in which the property is located, so as to serve as
a fixture filing pursuant to W. Va. Code section 46-9-402.
Section 17.4 NOTICE OF SALE. Notice of sale and any other
notice required by law to be served upon Borrower may be served upon Borrower by
mail addressed as set forth in the first paragraph hereof, or such other address
given to the Lender or its agent or assignee in writing by Borrower subsequent
to the execution and delivery of this Security Instrument. Borrower covenants
and agrees to and does hereby waive personal service and the posting of any
notice of sale under this Security Instrument at the courthouse. Any notice of
other Liens which may be given to Lender pursuant to W. VA. CODE section 38-1-4,
shall be effective upon the receipt of such notice, in writing, through the
regular United States Mail, postage prepaid, addressed to Lender at its address
set forth on page one of this Security Instrument.
Section 17.5 EXPENSES OF TRUSTEE. In the event that
foreclosure proceedings are instituted hereunder but are not completed, Trustee
shall be reimbursed for all costs and expenses incurred by Trustee in commencing
such proceedings, and, in addition, shall be entitled to, and paid a commission
of Trustee's fees and expenses (including reasonable attorneys' fees); and all
costs and expenses so incurred by Trustee, and such commission, together with
interest thereon until paid at the Default Rate, shall be payable by Borrower on
demand, and shall be and become a part of the Debt and shall be collectible as
such.
Section 17.6 ACTS OF TRUSTEE. Either Trustee, or the survivor
thereof, may act in the execution of this trust, and in the event either Trustee
shall act alone, the authority and power of the Trustee so acting shall be as
full and complete as if the powers and authority granted to Trustees herein
jointly had been granted to such Trustee alone; and either or both Trustees is
hereby authorized to act by agent or attorney in the execution of this trust. It
shall not be necessary for any Trustee to be present in person at any
foreclosure sale hereunder.
Section 17.7 DEFINITION OF DEBT. As used herein, the term
"Debt" shall mean the outstanding principal amount set forth in, and evidenced
by, the Loan Agreement and the Note together with all interest accrued and
unpaid thereon and all other sums (including the Yield Maintenance Premium) due
to Lender in respect of the Loan under the Note, the Loan Agreement, this
Security Instrument or any other Loan Document.
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<PAGE> 36
Section 17.8 LOAN DOCUMENTS. Each of the Loan Documents is
available for review during regular business hours at the office of Lender at
the address set forth on page one of this Security Instrument.
The Maturity Date of the Loan is February 1, 2029.
Section 17.9 WEST VIRGINIA FORECLOSURE. In addition to the
provision of Article 7 hereinabove, the following provision shall be applicable:
(a) Trustee shall, at the request of Lender, proceed to sell
the Property as described hereinabove and a copy of a notice of foreclosure,
sale shall be served on Borrower by certified mail, return receipt requested,
directed to the address set forth in Article 17.4 hereof or such other address
given to Lender in writing. Such notice to Borrower shall be deemed complete
when such notice is mailed to the aforesaid address, notwithstanding the fact
that such mail may be returned as refused or undeliverable. A copy of such
notice shall be served by certified mail, at least twenty (20) days prior to the
sale, upon any subordinate lien holder who has previously notified Lender by
certified mail of the existence of a subordinate lien. The address to which such
notice to Lender shall be mailed is set forth on page one hereof.
(b) Borrower hereby waives personal service of notice of any
sale made hereunder, upon Borrower, its devisees, agents, successors or assigns,
and also waives the posting of notice of sale at the courthouse.
(c) Unless otherwise specified by the Lender, all such
foreclosure sales shall be for cash in hand on day of sale. Upon the terms of
such sale being complied with, Trustee shall, by quitclaim deed, convey to, and
at the cost of, the purchaser or purchasers the interest of Borrower in the
property so sold.
(d) Lender may from time to time, for any reason or for no
reason, substitute another Trustee or Trustees, corporations or persons, in
place of any Trustees herein named. Upon each such appointment, the substituted
Trustee or Trustees shall be vested with all the rights, titles, interests,
powers, duties and trusts conferred upon the Trustees herein named. Each
appointment and substitution shall be evidenced by an instrument in writing,
executed and acknowledged by Lender, which when recorded in the office of the
Clerk of the County Commission of the County where the Property is located,
shall be conclusive proof of the proper substitution and appointment and notice
to all parties in interest.
(e) No failure of Lender or Trustee to exercise any right or
remedy constitutes a waiver of any right or privilege herein given to them, and
a waiver by Lender or Trustee of the right to exercise any option as to any
breach or default does not constitute a waiver of the same option, or any other
option herein contained, as to another or any continuing or subsequent breach or
default.
[NO FURTHER TEXT ON THIS PAGE]
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<PAGE> 37
IN WITNESS WHEREOF, THIS SECURITY INSTRUMENT has been executed
by Borrower as of the day and year first above written.
GRAND CENTRAL LIMITED PARTNERSHIP,
a Delaware limited partnership
By: GLIMCHER GRAND CENTRAL, INC.,
a Delaware corporation, its sole general
partner
/s/ George A. Schmidt
By:________________________________
Name: George A. Schmidt
Title: Senior Vice President
<PAGE> 38
ACKNOWLEDGMENT
STATE OF NEW YORK,
COUNTY OF NEW YORK, to wit:
The foregoing instrument was acknowledged before me this 21st
day of January, 1999 by George A. Schmidt, the Senior Vice President of Glimcher
Grand Central, Inc., a Delaware corporation, for and on behalf of said
corporation in its capacity as the sole general partner of GRAND CENTRAL LIMITED
PARTNERSHIP, a Delaware limited partnership, for and on behalf of said limited
partnership.
My Commission expires: 1-30-2000.
-------------------------------------
/s/ Carolee J. Oertel
-------------------------------------
Notary Public
[SEAL]
THIS INSTRUMENT WAS PREPARED BY:
Paul A. Keenan, Esq.
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, New York 10038
<PAGE> 39
EXHIBIT A
---------
Legal Description
-----------------
<PAGE> 1
Exhibit 10.87
PROMISSORY NOTE
$52,500,000 New York, New York
As of January 21, 1999
FOR VALUE RECEIVED GRAND CENTRAL LIMITED PARTNERSHIP, a
Delaware limited partnership, as maker, having its principal place of business
at 20 South Third Street, Columbus, Ohio 43215 ("BORROWER"), hereby
unconditionally promises to pay to the order of LEHMAN BROTHERS HOLDINGS INC., a
Delaware corporation, d/b/a LEHMAN CAPITAL, A DIVISION OF LEHMAN BROTHERS
HOLDINGS INC., as lender, having an address at Three World Financial Center, New
York, New York 10285 ("LENDER"), or at such other place as the holder hereof may
from time to time designate in writing, the principal sum of FIFTY TWO MILLION
FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($52,500,000), in lawful money of the
United States of America with interest thereon to be computed from the date of
this Note at the Applicable Interest Rate, and to be paid in accordance with the
terms of this Note and that certain Loan Agreement of even date herewith between
Borrower and Lender (the "LOAN AGREEMENT"). All capitalized terms not defined
herein shall have the respective meanings set forth in the Loan Agreement.
ARTICLE 1: PAYMENT TERMS
Borrower agrees to pay the principal sum of this Note and
interest on the unpaid principal sum of this Note from time to time outstanding
at the rates and at the times specified in Article 2 of the Loan Agreement and
the outstanding balance of the principal sum of this Note and all accrued and
unpaid interest thereon shall be due and payable on the Maturity Date.
ARTICLE 2: DEFAULT AND ACCELERATION
The Debt shall without notice become immediately due and
payable at the option of Lender if any payment required in this Note is not paid
on or prior to the date when due or if not paid on the Maturity Date or on the
happening of any other Event of Default.
ARTICLE 3: LOAN DOCUMENTS
This Note is secured by the Mortgage and the other Loan
Documents. All of the terms, covenants and conditions contained in the Loan
Agreement, the Mortgage and the other Loan Documents are hereby made part of
this Note to the same extent and with the same force as if they were fully set
forth herein. In the event of a conflict or inconsistency between the terms of
this Note and the Loan Agreement, the terms and provisions of the Loan Agreement
shall govern.
<PAGE> 2
ARTICLE 4: SAVINGS CLAUSE
Notwithstanding anything to the contrary, (a) all agreements
and communications between Borrower and Lender are hereby and shall
automatically be limited so that, after taking into account all amounts deemed
interest, the interest contracted for, charged or received by Lender shall never
exceed the maximum lawful rate or amount, (b) in calculating whether any
interest exceeds the lawful maximum, all such interest shall be amortized,
prorated, allocated and spread over the full amount and term of all principal
indebtedness of Borrower to Lender, and (c) if through any contingency or event,
Lender receives or is deemed to receive interest in excess of the lawful
maximum, any such excess shall be deemed to have been applied toward payment of
the principal of any and all then outstanding indebtedness of Borrower to
Lender, or if there is no such indebtedness, shall immediately be returned to
Borrower.
ARTICLE 5: NO ORAL CHANGE
This Note may not be modified, amended, waived, extended,
changed, discharged or terminated orally or by any act or failure to act on the
part of Borrower or Lender, but only by an agreement in writing signed by the
party against whom enforcement of any modification, amendment, waiver,
extension, change, discharge or termination is sought.
ARTICLE 6: WAIVERS
Borrower and all others who may become liable for the payment
of all or any part of the Debt do hereby severally waive presentment and demand
for payment, notice of dishonor, notice of intention to accelerate, notice of
acceleration, protest and notice of protest and non-payment and all other
notices of any kind. No release of any security for the Debt or extension of
time for payment of this Note or any installment hereof, and no alteration,
amendment or waiver of any provision of this Note, the Loan Agreement or the
other Loan Documents made by agreement between Lender or any other Person shall
release, modify, amend, waive, extend, change, discharge, terminate or affect
the liability of Borrower, and any other Person who may become liable for the
payment of all or any part of the Debt, under this Note, the Loan Agreement or
the other Loan Documents. No notice to or demand on Borrower shall be deemed to
be a waiver of the obligation of Borrower or of the right of Lender to take
further action without further notice or demand as provided for in this Note,
the Loan Agreement or the other Loan Documents. If Borrower is a partnership,
the agreements herein contained shall remain in force and applicable,
notwithstanding any changes in the individuals comprising the partnership, and
the term "Borrower," as used herein, shall include any alternate or successor
partnership, but any predecessor partnership and their partners shall not
thereby be released from any liability. If Borrower is a corporation, the
agreements contained herein shall remain in full force and applicable
notwithstanding any changes in the shareholders comprising, or the officers and
directors relating to, the corporation, and the term "Borrower" as used herein,
shall include any alternative or successor corporation, but any predecessor
corporation shall not be relieved of liability hereunder. (Nothing in the
foregoing sentence shall be construed as a consent to, or a waiver
-2-
<PAGE> 3
of, any prohibition or restriction on transfers of interests in such partnership
which may be set forth in the Loan Agreement, the Mortgage or any other Loan
Document.)
ARTICLE 7: TRANSFER
Upon the transfer of this Note, Borrower hereby waiving notice
of any such transfer, Lender may deliver all the collateral mortgaged, granted,
pledged or assigned pursuant to the Loan Documents, or any part thereof, to the
transferee who shall thereupon become vested with all the rights herein or under
applicable law given to Lender with respect thereto, and Lender shall thereafter
forever be relieved and fully discharged from any liability or responsibility in
the matter; but Lender shall retain all rights hereby given to it with respect
to any liabilities and the collateral not so transferred.
ARTICLE 8: EXCULPATION
The provisions of Section 9.4 of the Loan Agreement are hereby
incorporated by reference into this Note to the same extent and with the same
force as if fully set forth herein.
ARTICLE 9: GOVERNING LAW
(A) THIS NOTE WAS NEGOTIATED IN THE STATE OF NEW YORK, AND
MADE BY BORROWER AND ACCEPTED BY LENDER IN THE STATE OF NEW YORK, AND THE
PROCEEDS OF THIS NOTE WERE DISBURSED FROM THE STATE OF NEW YORK, WHICH STATE THE
PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND TO THE
UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL RESPECTS, INCLUDING, WITHOUT
LIMITING THE GENERALITY OF THE FOREGOING, MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE, THIS NOTE AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE (WITHOUT REGARD TO
PRINCIPLES OF CONFLICT LAWS) AND ANY APPLICABLE LAW OF THE UNITED STATES OF
AMERICA. TO THE FULLEST EXTENT PERMITTED BY LAW, BORROWER HEREBY UNCONDITIONALLY
AND IRREVOCABLY WAIVES ANY CLAIM TO ASSERT THAT THE LAW OF ANY OTHER
JURISDICTION GOVERNS THIS NOTE AND THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK PURSUANT TO SECTION 5-1401
OF THE NEW YORK GENERAL OBLIGATIONS LAW.
(B) ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST LENDER OR
BORROWER ARISING OUT OF OR RELATING TO THIS NOTE MAY AT LENDER'S OPTION BE
INSTITUTED IN ANY FEDERAL OR STATE COURT IN THE CITY OF NEW YORK, COUNTY OF NEW
YORK, PURSUANT TO SECTION 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW, AND
BORROWER
-3-
<PAGE> 4
WAIVES ANY OBJECTIONS WHICH IT MAY NOW OR HEREAFTER HAVE BASED ON VENUE AND/OR
FORUM NON CONVENIENS OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND BORROWER HEREBY
IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION OR
PROCEEDING. BORROWER DOES HEREBY DESIGNATE AND APPOINT:
CT CORPORATION SYSTEM, INC.
1633 BROADWAY, 23RD FLOOR
NEW YORK, NEW YORK 10019
ATTENTION: SERVICE OF PROCESS DEPARTMENT
AS ITS AUTHORIZED AGENT TO ACCEPT AND ACKNOWLEDGE ON ITS BEHALF SERVICE OF ANY
AND ALL PROCESS WHICH MAY BE SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING IN
ANY FEDERAL OR STATE COURT IN NEW YORK, NEW YORK, AND AGREES THAT SERVICE OF
PROCESS UPON SAID AGENT AT SAID ADDRESS AND WRITTEN NOTICE OF SAID SERVICE
MAILED OR DELIVERED TO BORROWER IN THE MANNER PROVIDED HEREIN SHALL BE DEEMED IN
EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON BORROWER IN ANY SUCH SUIT,
ACTION OR PROCEEDING IN THE STATE OF NEW YORK. BORROWER (I) SHALL GIVE PROMPT
NOTICE TO LENDER OF ANY CHANGED ADDRESS OF ITS AUTHORIZED AGENT HEREUNDER, (II)
MAY AT ANY TIME AND FROM TIME TO TIME DESIGNATE A SUBSTITUTE AUTHORIZED AGENT
WITH AN OFFICE IN NEW YORK, NEW YORK (WHICH SUBSTITUTE AGENT AND OFFICE SHALL BE
DESIGNATED AS THE PERSON AND ADDRESS FOR SERVICE OF PROCESS), AND (III) SHALL
PROMPTLY DESIGNATE SUCH A SUBSTITUTE IF ITS AUTHORIZED AGENT CEASES TO HAVE AN
OFFICE IN NEW YORK, NEW YORK OR IS DISSOLVED WITHOUT LEAVING A SUCCESSOR.
ARTICLE 10: NOTICES
All notices or other written communications hereunder shall be
delivered in accordance with Section 10.6 of the Loan Agreement.
[NO FURTHER TEXT ON THIS PAGE]
-4-
<PAGE> 5
IN WITNESS WHEREOF, Borrower has duly executed this Note as of
the day and year first above written.
GRAND CENTRAL LIMITED PARTNERSHIP,
a Delaware limited partnership
By: GLIMCHER GRAND CENTRAL, INC.,
a Delaware corporation, its sole general
partner
/s/ George A. Schmidt
By:_______________________________
Name: George A. Schmidt
Title: Senior Vice President
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 6,387
<SECURITIES> 0
<RECEIVABLES> 27,951
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,440,739
<DEPRECIATION> 146,637
<TOTAL-ASSETS> 1,562,261
<CURRENT-LIABILITIES> 0
<BONDS> 1,003,040
90,000
127,950
<COMMON> 237
<OTHER-SE> 256,794
<TOTAL-LIABILITY-AND-EQUITY> 1,562,261
<SALES> 0
<TOTAL-REVENUES> 54,086
<CGS> 0
<TOTAL-COSTS> 14,405
<OTHER-EXPENSES> 13,037
<LOSS-PROVISION> 622
<INTEREST-EXPENSE> 14,883
<INCOME-PRETAX> 10,457
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,457
<EPS-PRIMARY> .21
<EPS-DILUTED> .21
</TABLE>
