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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
/x/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1996 OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from ____________________ to ____________________
Commission File Number 1-12994
THE MILLS CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 52-1802283
(State or other jurisdiction of (I.R.S. Employer
incorporate or organization) Identification No.)
1300 WILSON BOULEVARD 22209
ARLINGTON, VA (Zip Code)
(Address of principal executive office)
Registrant's telephone number, including area code: (703) 526-5000
Securities registered pursuant to Section 12(b) of the Act:
Title of each Class Name of each exchange on which registered
------------------- -----------------------------------------
COMMON STOCK, NEW YORK STOCK EXCHANGE
$0.01 PAR VALUE
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 periods that the
registrant was required to file such report(s)) and (2) has been subject to such
filing requirements for the past 90 days. Yes X No .
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10K or any amendment to this Form 10-K. / /
As of March 10, 1997, the aggregate market value of the 16,308,744
shares of Common Stock held by non-affiliates of the registrant was
$413,834,379, based upon the closing price ($25.375) on the New York Stock
Exchange composite tape on such date. (For this computation, the registrant
has excluded the market value of all shares of its Common Stock reported as
beneficially owned by executive officers and directors of the registrant and
certain other shareholders; such exclusion shall not be deemed to constitute
an admission that any such person is an "affiliate" of the registrant.) As
of March 10, 1997, there were outstanding 16,923,236 shares of Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the proxy statement for the annual shareholders meeting to be
held in 1997 are incorporated by reference into Part III.
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THE MILLS CORPORATION
ANNUAL REPORT ON FORM 10-K
DECEMBER 31, 1996
TABLE OF CONTENTS
PAGE NO.
PART I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Item 1. Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Item 2. Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . 29
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . 31
PART II. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Item 5. Market for the Registrant's Common Equity and Related
Shareholder Matters . . . . . . . . . . . . . . . . . . . . . . . 32
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . 32
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations. . . . . . . . . . . . . . . . . . . . .35
Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . 43
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure. . . . . . . . . . . . . . . . . . . . . 43
PART III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Item 10. Directors and Executive Officers of the Registrant . . . . . . . 44
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . 46
Item 12. Security Ownership of Certain Beneficial Owners and Management . 47
Item 13. Certain Relationships and Related Transactions. . . . . . . . . 47
PART IV. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Item 14. Exhibits, Financial Statements, Schedules and Reports and
Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
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PART I
ITEM 1. BUSINESS
CAUTIONARY STATEMENT
Certain matters discussed in this Form 10-K and the information
incorporated by reference herein contain "forward-looking statements" for
purposes of Section 27A of the Securities Act of 1993, as amended (the
"Securities Act") and Section 21E of the Securities Exchange Act of 1933, as
amended (the "Exchange Act") relating to, without limitation, future economic
performance, plans and objectives of management for future operations and
projections of revenue and other financial items, demographic projections and
federal income tax considerations, which can be identified by the use of
forward-looking terminology such as "may," "will," "except," "anticipate,"
"estimate," or "continue" or the negative thereof or other variations thereon
or comparable terminology. Such forward-looking statements are subject to
certain risks and uncertainties that could cause actual results to differ
materially from those described in such forward-looking statements.
THE COMPANY
The Mills Corporation (the "Company") owns, develops, redevelops, leases
and manages a portfolio currently consisting of five super-regional, value
and entertainment oriented malls (the "Mills") and 11 community shopping
centers (the "Community Centers," and, together with the Mills, the
"Properties"). The Company is a fully-integrated, self-managed real estate
investment trust (a "REIT") with approximately 900 employees as of December
31, 1996 and provides all development, redevelopment, leasing, financing
management and marketing services with respect to all Properties currently in
operation. The Mills comprise the primary focus of the Company's operations,
with approximately 7.9 million square feet of gross leasable area ("GLA") in
five states, of which approximately 900,000 square feet is owned by certain
anchor and tenants.
The Company was originally incorporated in Virginia on January 2, 1991.
In 1994, the Company was reincorporated in Delaware. On April 21, 1994, the
Company consummated an initial public offering ("IPO") of 14,380,000 shares
of its common stock, par value $.01 per share (the "Common Stock"). The net
proceeds of the IPO ($310.0 million) were used primarily to repay certain
mortgage and other indebtedness and to purchase interests in the partnerships
that owned the Properties. In connection with the IPO, the Company was
authorized to issue 20,000,000 shares of preferred stock, par value $.01 per
share (the "Preferred Stock"). As of December 31, 1996, there were no shares
of Preferred Stock outstanding. Upon completion of the IPO, the Company
became the sole general partner of The Mills Limited Partnership (the
"Operating Partnership") and currently owns 50.9% of the outstanding
partnership interests ("Units") therein. Units (other than those owned by
the Company) are exchangeable under certain circumstances for Common Stock
or, at the option of the Company, the cash equivalent thereof. As the sole
general partner of the Operating Partnership, the Company has the exclusive
power to manage and conduct the business of the Operating Partnership,
subject to certain limited exceptions. The Operating Partnership either
holds title to the Properties or directly or indirectly holds 100% of the
general and limited partnership interests in the partnerships that own the
Properties (the "Property Partnerships"), except for the Property
Partnerships that own Franklin Mills and Ontario Mills, in which the
Operating Partnership holds 77.6% (which represents 100% of the current
income and cash flow from Franklin Mills) and 50%, respectively, as of
December 31, 1996. The Operating Partnership has also formed joint ventures
to develop additional properties.
The Company conducts all of its business through the Operating
Partnership and the Operating Partnership's various subsidiaries (the
"Operating Subsidiaries"), which include: (i) Management Associates Limited
Partnership (the "Management Partnership"), which provides leasing and
management services for the Properties, and (ii) MillsServices Corp. (the
"Third-Party Services Corporation"), which provides management services to
properties in which the Operating Partnership does not own an interest and
provides development services for the Properties and new properties acquired
by the Company. The Operating Partnership owns 100% of the interests in the
Management Partnership and 99% of the non-voting preferred stock
(representing a 99% economic interest) and 5% of the voting common stock of
the Third Party Services Corporation. In addition,
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Herbert S. Miller, a director of the Company, and an affiliate of Kan Am U.S.,
Inc. ("Kan Am", which owns approximately 39.9% of the outstanding Units in
the Operating Partnership) each own .5% of the non-voting preferred stock
(representing, in the aggregate, a 1% economic interest) and 47.5% of the
voting common stock of the Third-Party Services Corporation.
BUSINESS STRATEGY
The Company intends to increase its cash flow and the value of its
portfolio through active management of its existing Properties, expansion and
remerchandising of existing Mills and the development of new Mills.
OPERATING STRATEGIES
The Company intends to pursue the following operating strategies:
MODIFY AND EXPAND EXISTING MILLS. The Company leases vacant and newly
developed space with a view towards creating the most effective tenant mix
and maximizing rental income. The Company is planning expansions of Potomac
Mills, Sawgrass Mills and Gurnee Mills and is presently in the process of
remerchandising Gurnee Mills and Franklin Mills, at an aggregate cost of
approximately $115 million over the next three years. These expansion and
remerchandising programs will result in new entertainment zones and, where
appropriate, an upgrade of the tenant mix. The Company believes that the new
entertainment zones will complement the Mills and will enhance productivity
by attracting more shoppers and extending the shopping day.
POTOMAC MILLS: The Company is planning to add an entertainment zone to
Potomac Mills. The Company anticipates that construction will begin in late 1997
for a late 1998 or early 1999 opening. In anticipation of the expansion, the
Company is upgrading the tenant mix in the corridor near the expansion and is
negotiating to lease expansion space to AMC Theatres and a variety of themed
restaurants and other entertainment oriented tenants.
SAWGRASS MILLS: In November 1995, the Company completed the Phase
II expansion of Sawgrass Mills. This expansion added approximately 136,000
square feet of GLA, which opened at 100% occupancy. The expansion cost
approximately $24 million. In the third quarter of 1998, the Company expects
to open Phase III of Sawgrass Mills to coincide with the opening of the new
Florida Panthers Sports Arena located across the ring road from Sawgrass
Mills. The Phase III expansion will consist of an approximately 270,000
square foot entertainment zone expected to be anchored by a 30-screen Cobb
Theater. The Phase III expansion, which is presently in the pre-development
stage, will be owned by a partnership formed by the Operating Partnership
(50%) and Kan Am (50%) in which Kan Am has agreed to fund 100% of the
project's initial required equity, for which Kan Am will receive a 9% annual
preferred return. Under the terms of the partnership agreement, the Company
has the right to buy out Kan Am's interest in this partnership prior to
December 30, 1999, at 120% of Kan Am's capital contributions and accumulated
preferred returns under certain terms and conditions set forth in the
partnership agreement. The Company would provide all development, management
and leasing services for the expansion, subject to the approval of Kan Am of
certain major decisions, including a sale or refinancing of the project and
the approval of the development and annual budgets. The Company would
guarantee completion of the expansion within the parameters of the approved
development budget.
GURNEE MILLS: As part of the Gurnee Mills expansion and
remerchandising initiative, the Company expects to expand Gurnee Mills by over
150,000 square feet of GLA in addition to upgrading the tenant mix. The
expansion will feature a 125,000 square foot Bass Pro Shops Outdoor World upon
which construction began in early 1997. In addition, the Company expects to open
two other anchor stores by the end of 1998. In 1996, Rainforest Cafe opened at
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Gurnee Mills. The Company has signed a lease with another themed restaurant,
Planet Hollywood, to open in 1997. In addition to these tenants, the Company
expects to add additional entertainment type uses within the existing mall
over the next two years.
FRANKLIN MILLS: The Company began its efforts to remerchandise
Franklin Mills in 1996 by upgrading its tenant mix with such tenants as Tommy
Hilfiger, Brooks Brothers and Nautica. In addition, the Company has signed
leases with DKNY, Talbots, The Gap Outlet and Polo and has obtained a
commitment from General Cinema for an 18-screen theatre on which the Company
expects to begin construction by the second quarter of 1997. The theatre will
be the cornerstone for an entertainment zone that will include at least two
other entertainment concepts, such as themed restaurants and interactive
entertainment venues.
CREATE ENTERTAINMENT ZONES. The Company intends to expand and reconfigure
its first four Mills projects to include new entertainment zones. The
entertainment zone at Ontario Mills, the Company's newest Mills, is the
prototype for future Mills entertainment zones. Such entertainment zones will
include multiplex theaters, virtual reality game rooms, educational
environmental habitats, themed restaurants and participatory retailers in which
the consumer is given the opportunity to test the products in a real-life
setting. Ontario Mills currently includes a 30-screen AMC Theatres and a Virgin
Megastore. Scheduled to open in 1997 are a Sega Gameworks, Dave & Busters and
American Wilderness Experience. Phase III of Sawgrass Mills is expected to
include a Cobb Theatre expanded from 18 to 30 screens. Franklin Mills has
received a commitment from General Cinema for an 18-screen theater. Gurnee Mills
opened a Rainforest Cafe in 1996 and plans to open a Planet Hollywood and a Bass
Pro Shops Outdoor World in 1997. The Company believes these entertainment zones
will lead to significant incremental customer traffic at the Mills, extend
consumers' shopping day and lead to the creation of additional destination
sites.
WORK WITH TENANTS TO DEVELOP NEW RETAIL CONCEPTS. The Company intends to
continue to work with existing tenants and potential tenants to develop new
retail concepts. This strategy has worked for retailers who have performed well
in traditional retail formats but wanted to develop and expand into the outlet
format. Ann Taylor, Calvin Klein, Last Call from Neiman Marcus and Saks Fifth
Avenue are examples of retailers that opened their first outlet stores in a
Mills and that later expanded their outlet format in other Mills. Ontario Mills
is the site for Bernini's first Off Rodeo Drive outlet. In addition, the Mills
also provide traditional urban retailers a growth vehicle for expanding into
non-urban markets. Examples include Virgin Megastore, which opened its first
non-urban location in Ontario Mills and Planet Hollywood, which has committed to
open at Gurnee Mills in 1997.
BUILD BRAND NAME RECOGNITION FOR THE MILLS. The Company intends to
continue to build brand name recognition for the Mills. The Company has created
brand name recognition by developing a distinctive retail environment which
offers innovative retail formats, value shopping and entertainment concepts that
attract a wide variety of tenants and consumers. The Company coordinates its
advertising programs to increase brand name recognition in its primary markets
and to attract high a volume of consumers. The Company believes that its brand
name recognition has not been duplicated within the shopping center industry in
any U.S. market.
MAINTAIN STRONG TENANT RELATIONSHIPS. The Company intends to continue to
maintain strong relationships with its existing tenants and high occupancy
rates. The success of this strategy is evidenced by both its high tenant
retention rate, with approximately 77% of expiring specialty store GLA being
renewed upon lease expiration during 1996 and by the existing Mills being 95%
leased as of December 31, 1996 (excluding Ontario Mills). One hundred and
eighty-three of the Mills' tenants have stores located in more than one Mills,
including Ontario Mills. Of the total GLA of each of the five existing Mills at
December 31, 1996 (excluding GLA owned by anchor store tenants), 77% of Gurnee
Mills, 67% of Potomac Mills, 67% of Sawgrass Mills, 62% of Ontario Mills, and
53% of Franklin Mills consist of tenants common to at least one other Mills.
The Company has generated goodwill among many retailers who commit to future
Mills projects years in advance of their completion. As of February 11, 1997,
Grapevine Mills was approximately 55% pre-leased including nine executed leases
and six lease commitments from anchor store tenants and Arizona Mills was
approximately 62% pre-leased including nine executed leases and three lease
commitments from anchor store tenants.
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ACTIVELY MARKET PROPERTIES TO CONSUMERS. The Company intends to continue
to actively market its Properties by formulating marketing plans based on
research and tailored to each specific Property. Such plans include print, radio
and television advertising, public relations, special events and the development
of tour and travel programs. The Company believes that an aggressive marketing
effort allows the Properties to maintain a loyal shopper base and attract new
consumers.
PROVIDE ACTIVE PROPERTY MANAGEMENT SERVICES. The Company intends to
continue to provide pro-active site management. The on-site property management
team controls every aspect of the day-to-day needs of the Mills including
operations, maintenance, security and merchant relations in order to enhance
productivity and profitability. Further, where desirable and possible, such
management team attempts to terminate the leases of under-performing tenants and
renegotiate existing leases to expand, relocate or assemble space for more
productive tenants.
DEVELOPMENT STRATEGIES
The Company's strategic business plan primarily consists of developing and
opening an additional five Mills over the next three years with an aggregate of
approximately 7.2 million square feet of GLA, including finishing construction
on Grapevine Mills and Arizona Mills and developing three additional Mills,
Mills City at Orange, Houston Mills and Meadowlands Mills. The Company also
intends to pursue the development of Mills-type projects in selected
metropolitan markets and has identified approximately 20 additional markets in
the U.S. that could currently support a Mills project. The Company is also
exploring the feasibility of developing additional Mills-type projects in
selected international major metropolitan markets as a long-term growth
strategy. The Company is focused on selected markets, where management believes
population growth exceeds national rates, land is relatively abundant and
development and entitlement processes are comparatively streamlined. Two
projects are currently under construction and scheduled to open in the fourth
quarter of 1997, Grapevine Mills, which will serve the Dallas/Fort Worth
metropolitan market and Arizona Mills, which will serve the Phoenix metropolitan
market. The remaining three sites under development, Mills City at Orange,
Houston Mills and Meadowlands Mills, are in the early stages of development and
are scheduled to open in 1998, 1999 and 1999, respectively.
To finance this rapid growth strategy, the Company has aligned itself with
certain joint venture partners, including Kan Am, Simon DeBartolo Group, Inc.
("Simon) and Taubman Realty Group Limited Partnership ("Taubman"), and has
reached an agreement in principle to form one or more such joint ventures with
Cambridge Shopping Centres Ltd. of Canada ("Cambridge"). Additionally, the
Company, subject to shareholder approval, is negotiating the terms of an
agreement with Kan Am whereby Kan Am will provide approximately $50 million in
preferred equity capital on what the Company believes would be attractive terms.
There can be no assurance, however, that any such agreement will be entered into
or that shareholder approval will be obtained. The Company believes that these
alliances are very beneficial to the Company for the following reasons: (1) such
joint ventures represent a clear endorsement by the Company's joint venture
partners of the Mills concept and the Company's management, and its development,
leasing and property management capabilities and (2) the joint venture partners
provide the Company with additional sources of equity and additional financial
strength and, as a result, facilitate construction and permanent financing.
Although the Company believes it is now well-positioned to develop future
projects on its own, it will continue to evaluate joint venture arrangements as
a financing alternative. In addition, the Company will develop projects with
Simon when required under the terms of the Simon Agreement. See "Simon
Agreement." In connection with these joint ventures, the Company receives fees
or reimbursements for its leasing, management, development and financing
services.
In addition to the five projects currently under development, the Company
or its joint venture partners control and are conducting due diligence on sites
in Charlotte, North Carolina, Monee, Illinois, Columbus, Ohio and San Francisco,
California, and is exploring many other locations, including Atlanta, Georgia,
Cleveland, Ohio, Baltimore, Maryland, Tampa Bay, Florida, St. Louis, Missouri
and San Diego, California. Furthermore, through its proposed alliance with
Cambridge, the Company plans on beginning development of Mills projects in
Canada. The Company is exploring Toronto, Ontario as the first site to be
developed by this future venture.
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MILLS UNDER DEVELOPMENT
<TABLE>
<CAPTION>
ACTUAL/ ESTIMATED ANCHOR
ANTICIPATED ANTICIPATED COMPANY AGGREGATE STORE
METROPOLITAN CONSTRUCTION OPENING APPROXIMATE OWNERSHIP PROJECT TENANT
NAME/LOCATION AREA SERVED START DATE DATE(1) GLA(2) --------- COST(3) COMMITMENTS
- ------------- ------------ ------------ ----------- ----------- ------- -----------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Grapevine Mills. . . . Dallas/Fort 3rd Q '96 4th Q '97 1,500,000 37.5% $203 15
Grapevine, TX Worth
Arizona Mills. . . . . Phoenix 3rd Q '96 4th Q '97 1,200,000 36.8% $183 12
Tempe, AZ
Mills City . . . . . . Los Angeles/ 2nd Q '97 4th Q '98 800,000 50.0% $167 3
at Orange Orange County
Orange, CA
Houston Mills. . . . . Houston 1998 1999 1,600,000 (4) (4) N/A(5)
Houston, TX
Meadowlands New York City/ 1998 1999 2,100,000 (4) (4) 10
Mills. . . . . . . . Northern New
Carlstadt, NJ Jersey
</TABLE>
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(1) Anticipated Construction Start Dates and Opening Dates may be subject to
adjustment as a result of factors inherent in the development
process, some of which may not be under the direct control of the Company.
(2) Approximate GLA includes space that may be owned by certain anchor store
tenants.
(3) Estimated Aggregate Project Cost as of December 31, 1996 is based on the
Company's best estimate of the underlying components, many of which may
not be under the direct control of the Company.
(4) The ownership structure and budgets for these properties have not yet been
determined.
(5) Leasing activity has not yet commenced for Houston Mills.
Following is a description of the five projects currently under development
by the Company.
GRAPEVINE MILLS-GRAPEVINE, TEXAS. Development of Grapevine Mills commenced
in the third quarter of 1996 on a 175-acre site in the City of Grapevine, Texas,
two miles north of the Dallas/Fort Worth Airport. The project is expected to
include approximately 1.5 million square feet of GLA of both retail space and
large entertainment facilities. As of February 11, 1997, Grapevine Mills was
approximately 55% pre-leased, including nine executed leases with anchor store
tenants (Off 5th-Saks Fifth Avenue, Burlington Coat Factory, Bed, Bath and
Beyond, Group USA, Rainforest Cafe, Books-A-Million, Sega Gameworks, American
Wilderness Experience and AMC Theatres) and lease commitments from an additional
six anchor store tenants for a total of approximately 661,000 square feet of GLA
and has executed leases for approximately 157,000 square feet of specialty store
space.
Grapevine Mills is being developed by a limited partnership consisting of
the Operating Partnership (37.5%), Simon (37.5%) and Kan Am (25%). The Company
is providing development, management and leasing services for the project,
subject to the approval of Simon and Kan Am for certain major decisions, such as
changes to the plan of development, the annual operating budget for the project
and any proposed sale or refinancing. Kan Am has agreed to contribute 50% of the
initial required equity capital. The Operating Partnership and Simon are
responsible for the balance of the initial required equity capital on a pro rata
basis and have agreed to guarantee any project cost overruns not funded by the
initial equity capital and construction financing. The project is expected to
cost a total of $203 million. In July 1996, the venture obtained a commitment
from NationsBank to provide $140 million of construction financing, and expects
this commitment to be increased to $155 million. The loan will have a term of
four years, subject to a one-year extension at the Company's option, and will
bear interest at a rate equal to the 30-day LIBOR ("LIBOR")
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plus 165 basis points (subject to reduction to 135 basis points if certain debt
service ratios are achieved). Development costs incurred through December 31,
1996 were approximately $34 million (net of tax increment financing).
Under the terms of the limited partnership agreement, after the tenth
anniversary of the project's opening, any partner can exercise certain buy-sell
provisions by which the offering partner can require the other partners to sell
to the offering partner their respective interests in the partnership or
alternatively, purchase the interest of the offering partner in the partnership.
ARIZONA MILLS-TEMPE, ARIZONA. Development of Arizona Mills commenced in
the third quarter of 1996 on a 115-acre site located 20 minutes from downtown
Phoenix, at the intersection of Interstate 10 and Superstition Freeway
(Highway 60). Anticipated to open in the fourth quarter of 1997, Arizona
Mills is expected to contain approximately 1.2 million square feet of GLA of
both retail space and large entertainment facilities. As of February 11,
1997, Arizona Mills was approximately 62% pre-leased, including anchor store
tenant leases with Burlington Coat Factory, Off 5th-Saks Fifth Avenue,
Oshman's, Harkins Cinema, J.C. Penney, Rainforest Cafe, Group USA, Hi-Health
and Sega Gameworks, and commitments had been obtained from an additional
three anchor store tenants for a total anchor store tenant commitment of
approximately 553,000 square feet. The Company has executed leases for
approximately 216,000 square feet of GLA for specialty stores as of February
11, 1997.
Arizona Mills is being developed by a joint venture consisting of the
Operating Partnership (36.8%), Taubman (36.8%) and Simon (26.4%). The Company is
providing construction management, property management, marketing and leasing
services for the project. Major decisions such as a sale or refinancing of the
project and approval of annual budgets require approval of all joint venture
partners. All joint venture partners are obligated to contribute required equity
capital on a pro rata basis. The project is expected to cost approximately $183
million. In January 1997, the joint venture entered into a $145 million
construction financing loan with United Bank of Switzerland. The loan has a term
of five years and bears interest at a rate equal to LIBOR plus 130 basis points
(subject to reduction to 115 basis points upon obtaining a rating of A- or
better from a nationally recognized rating agency). Development costs through
December 31, 1996 were approximately $54.7 million (net of tax increment
financing).
Under the terms of the joint venture agreement, following the fifth
anniversary of the project's opening (or, if later, the date that 90% of the
project has been leased), if the joint venture partners are unable to agree upon
certain major decisions, any joint venture partner can cause the project to be
sold pursuant to certain required procedures. Upon such a sale, the proceeds
would be distributed to the joint venture partners on a pro rata basis.
MILLS CITY AT ORANGE-ORANGE, CALIFORNIA. Mills City at Orange is proposed
for development on an approximately 85-acre site located at the intersection of
the Santa Ana Freeway (I-10), the Garden Grove Freeway and Orange Freeway
(Highway 57) in the City of Orange, California, three miles from Disneyland.
This project will be developed on the site of an existing shopping center
located in what management believes to be one of the wealthiest areas and
strongest retail markets in the country. The redeveloped Mills-type project will
consist of an approximately 800,000 square foot open air shopping center that
will feature a 30-screen AMC Theatres included in approximately 330,000 square
feet of entertainment and dining facilities in addition to upscale value-retail
stores. In addition to AMC Theatres, the Mills has obtained commitments from Off
5th-Saks Fifth Avenue and Borders Books.
The Company expects to begin demolition of the existing shopping center in
the first quarter of 1997 and to open the project in the fourth quarter of 1998.
The project is expected to cost approximately $167 million (net of tax
increment financing). Development costs through December 31, 1996 were
approximately $9 million.
The project will be owned by a partnership between the Operating
Partnership (50%) and Kan Am (50%). The Company would provide all development,
leasing and management services for the project, subject to the approval of
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Kan Am for certain major decisions, including a sale or refinancing of the
project and approval of annual budgets. The Company would guarantee completion
of the project within the parameters of an approved budget. Kan Am has committed
to fund up to $45 million (which represents 100% of the estimated equity
required for this project) after the receipt of construction loan financing in
the amount of $122 million.
Under the terms of the limited partnership agreement, following the tenth
anniversary of the project's opening, either the Operating Partnership or Kan Am
can exercise a buy-sell provision whereby the Operating Partnership, if it is
the offeror, can require Kan Am to transfer its entire interest in the
partnership or Kan Am, if it is the offeror, can require the Operating
Partnership to acquire Kan Am's entire interest in the partnership.
HOUSTON MILLS-HOUSTON, TEXAS. The Company has acquired an option to
acquire a 500-acre site located at the intersection of Katy-Fort Bend Road and
I-10 in Fort Bend and Harris Counties. The approximately 1.6 million square foot
project planned for this site will consist of a combination of specialty
retailers, cinemas and themed restaurants. The Company expects to open this
project in 1999.
MEADOWLANDS MILLS-CARLSTADT, NEW JERSEY. The Company has acquired a
mortgage interest in a 595-acre site located on the New Jersey Turnpike (I-95)
adjacent to the Meadowlands Sports Complex and approximately five miles from New
York City and has signed certain preliminary agreements with Empire Ltd., the
current owner of the site, concerning the development of Meadowlands Mills. The
approximately 2.1 million square feet project planned for this site will combine
more than 200 specialty retailers, cinemas and themed restaurants. Ogden
Entertainment, DeBartolo Entertainment and Virgin Entertainment Group have
agreed in principle to plan and jointly develop the entertainment component of
the project which will occupy approximately 600,000 square feet. On November 19,
1996, the Company announced commitments from ten anchor store tenants, including
Off 5th-Saks Fifth Avenue, The Sports Authority, Group USA, Off Rodeo Drive and
Rainforest Cafe. The Company currently expects to open the project in 1999.
The preliminary agreements with the site owner contemplate that the project
will be developed by a joint venture to be formed among the Operating
Partnership (82%), Empire Ltd. (13%) and Bennett S. Lazare, an individual
affiliated with Empire Ltd. (5%). The agreements further provide that upon
receipt of a final fill permit for the project, the site is to be conveyed to
the new joint venture, and the Operating Partnership is to contribute 75% of its
mortgage interest to the new joint venture and is to receive a credit to its
capital account in the amount of $12 million plus certain other predevelopment
costs advanced on behalf of the project. The preliminary agreements also provide
that the interests of the three joint venture partners may be diluted by as much
as 50% if an additional equity partner is admitted to the joint venture. If all
other permits required to develop the shopping center shall not have been
obtained within two years following the receipt of the final fill permit, then
the Operating Partnership shall have the right to sell the site, subject to
certain buy/sell provisions.
SIMON AGREEMENT. The Operating Partnership entered into an agreement
with Simon pursuant to which Simon and the Operating Partnership have agreed
to examine the feasibility of joint development and ownership of Mills-type
shopping centers in various metropolitan markets (the "Simon Agreement").
The Simon Agreement provides, generally, that Simon and the Operating
Partnership would hold equal interests in each joint venture entity and
contribute needed capital on a pro rata basis. Three joint ventures have
been formed as of December 31, 1996 in connection with the development of
Ontario Mills, Grapevine Mills and Arizona Mills and the parties have
announced their intention to form a new joint venture in connection with the
development of a site in Charlotte, North Carolina. The Operating
Partnership generally acts as the managing member or managing general
partner, as the case may be, of each entity. Primary responsibility for the
development, management and leasing of each joint venture project formed as
of the date hereof has been undertaken by the Operating Partnership. The
Simon Agreement restricts Simon until December 2003 from competing with the
Operating Partnership by developing or acquiring Mills-type projects, and
places additional restrictions on Simon's ability to hire employees of the
Operating Partnership or its affiliates and to acquire stock in the
9
<PAGE>
Company above certain specified levels. In addition, the Operating Partnership
has agreed that until December 2003 it will not develop a Mills-type shopping
center within certain designated metropolitan areas without affording Simon a
first right to jointly develop such project.
FINANCING STRATEGIES
The Company intends to continue to reduce its exposure to refinancing risk
and interest rate fluctuations. Prior to the Potomac Mills-Gurnee Mills
securitization (at December 1, 1996), the Company's debt portfolio consisted of
48.3% variable rate debt ($349.0 million), most of which was subject to tiered
caps, and the portfolio had a weighted average maturity of 2.5 years. Following
this refinancing (at December 31, 1996), only 10% of the Company's debt
portfolio, or $72 million, was variable rate debt, and the weighted average
maturity of the debt portfolio was extended to 4.5 years. In addition, the
Company expects to refinance the $165 million mortgage on Franklin Mills in the
first half of 1997, extending its maturity through a fixed rate securitization.
The Company has also taken steps to increase its liquidity. In October 1996, the
Company obtained a $40 million line of credit from Credit Suisse First Boston
for the purpose of funding development activities and general working capital
(the "Line of Credit") which has a variable interest rate equal to LIBOR plus
300 basis points and matures on October 31, 1998 (with an option for a one-year
extension). The Company expects to increase the size of the Line of Credit in
the second quarter of 1997. Through its refinancing efforts and the Offering,
the Company will have significantly improved its balance sheet by lowering the
Company's leverage, extending debt maturities and fixing interest rates.
Over the last two years, the Company formed joint ventures to finance the
development of certain Mills projects. The Company has established certain joint
ventures with Kan Am, Simon and Taubman and has reached an agreement in
principle to form one or more such joint ventures with Cambridge. While the
Company has utilized such joint ventures in the past, the Company may or may not
continue to use joint ventures in the future as a financing vehicle, except when
required under the terms of the Simon Agreement.
COMPETITION
There are other companies that are engaged in the development or
ownership of value retail properties that compete with the Company in seeking
tenants. This results in competition for acquisition of prime locations and
for tenants who will lease space in the value retail properties that the
Company and its competitors own or operate. The development of new
super-regional outlet malls or other value retail shopping centers with more
convenient locations or better rents may attract the Company's tenants or
cause them to seek more favorable lease terms at or prior to renewal, and may
accordingly adversely affect the business, revenues or value of the
Properties. In addition, traditional retailers may increase their competition
with value retailers for the limited pool of consumers by engaging in
marketing and selling activities similar to those of value retailers, thus
blurring the distinction between traditional retailers and value retailers.
SEASONALITY
The regional shopping center industry is seasonal in nature, with mall
tenant sales peaking in the fourth quarter due to the Christmas season. As a
result, a substantial portion of the percentage rents are not paid until the
fourth quarter. Furthermore, most new lease-up occurs towards the later part of
the year in anticipation of the holiday season and most vacancies occur toward
the beginning of the year. In addition, the majority of the temporary tenants
take occupancy in the fourth quarter. Accordingly, cash flow and occupancy
levels are generally lowest in the first quarter and highest in the fourth
quarter. This seasonality also impacts the quarter-by-quarter results of net
operating income and FFO, although this impact is largely mitigated by accruing
minimum and percentage rents on a straight line basis during the year in
accordance with GAAP.
TAX STATUS
The Company has elected to be taxed as a real estate investment trust
("REIT") under the Internal Revenue Code of 1986 (the "Code"). The Company
believes that it was organized and has operated in such a manner to qualify as a
REIT, and the Company intends to continue to operate in such a manner, but no
assurance can be given that it has operated in a manner so as to qualify, or
will operate in a manner so as to continue to qualify as a REIT. If the Company
qualifies for taxation as a REIT, the Company generally will not be subject to
Federal income tax to the extent it distributes at least 95% of its REIT taxable
income to its shareholders. If the Company fails to qualify as a REIT in any
taxable year, the Company will be subject to Federal income tax (including any
applicable alternative minimum tax) on its taxable income at regular corporate
rates. Even if the Company qualifies for taxation as a REIT, the Company may be
subject to certain state and local taxes on its income and property and to
federal income and excise taxes on its undistributed income and gains from
certain property sales. The Third-Party Services Corporation, which provides
management services to properties in which the Operating Partnership does not
own an interest and provides development services for properties which are not
100% owned by the Operating Partnership, is subject to corporate-level federal,
state and local corporate income taxes on its income.
ENVIRONMENTAL MATTERS
The Company believes that the Properties are in compliance in all material
respects with all federal, state and local ordinances and regulations regarding
hazardous or toxic substances. The Company is not aware of any environmental
condition which the Company believes would have a material adverse effect on the
Company's financial condition or results of operations (before consideration of
any potential insurance coverage). Nevertheless, it is possible that there are
material environmental liabilities of which the Company is unaware. Moreover,
no assurances can be given that (i) future laws, ordinances or regulations will
not impose any material environmental liability or (ii) the current
environmental condition of the Properties have not been or will not be affected
by tenants and occupants of the Properties, by the condition of properties in
the vicinity of the Properties or by third parties unrelated to the Company.
10
<PAGE>
Phase I environmental reports or updates thereof were completed by
independent environmental consultants on all Properties within the last four
years. These reports did not reveal any material environmental concerns except
as noted below with respect to the Western Hills Community Center. Concerns
were raised in a September 1993 Phase I report on the Mount Prospect Plaza
Community Center as to two offsite leaking underground storage tanks, but were
rated as minimal on additional investigation performed for a February 1995
update. Since Phase I environmental reports do not involve invasive procedures
such as soil sampling and underground analysis, no assurance can be given that
these reports reveal all potential environmental liabilities.
Limited quantities of asbestos containing materials ("ACMs") are present
in certain of the Properties. The ACMs found are generally non-friable
(meaning that the ACMs are not easily crumbled and thus are less likely to
release asbestos fibers into the air), in good condition and are unlikely to
be disturbed. With certain exceptions, these ACMs will be removed by the
Company in the ordinary course of renovation or reconstruction. Prior to
removal, these ACMs will be monitored and maintained by the Company in
accordance with procedures established by the Environmental Protection
Agency, the Occupational Safety and Health Administration and other
applicable governmental authorities.
The Phase I environmental assessment prepared for the Western Hills
Community Center revealed that leaking underground storage tanks were removed
from an adjacent BP service station. The site investigation BP's consultant
conducted after the removal determined that groundwater contamination
attributable to the BP site exists. The groundwater flow direction generally is
cross-gradient to the Western Hills Community Center. The Phase I report noted
that there is a potential that the southeastern corner of the Property that is
closest to the BP station may have been contaminated by the leaking tank at the
BP site. As a result, a recommended Phase II assessment of the Property was
conducted in December 1993 which did not encounter groundwater and thus found no
evidence of groundwater contamination. The Phase II assessment concluded that
although low levels of petroleum hydrocarbons were detected in the soil, those
levels were well below Ohio action levels.
UNINSURED LOSS
In February 1993, the Property Partnership that owns Sawgrass Mills
filed a lawsuit against various parties seeking damages for the repair and
replacement of the heating, ventilating and air conditioning systems (the
"HVAC") at Sawgrass Mills as a result of the excessive corrosion of HVAC
pipes. The partnership's insurance policy may not cover this loss.
Currently, the Company believes that remediation or replacement of the HVAC
systems may be phased in over several years. The partnership has established
a cash reserve of $1.5 million pursuant to the terms of the Sawgrass Mills
securitized debt financing. The reserve is pledged as additional security
for the Sawgrass Mills debt and is required to be used in its entirety by no
later than January 18, 2000 and only to fund the replacement of cooling water
piping used in the HVAC systems. In December 1996, the partnership settled
its claims for an aggregate sum of $2.8 million, the net proceeds of which
have been accrued as a reserve to fund such repair or replacement.
CORPORATE HEADQUARTERS
The Company's executive offices are located at 1300 Wilson Boulevard,
Arlington, VA 22209. The Company's telephone number is (703) 526-5000.
11
<PAGE>
ITEM 2. PROPERTIES
THE MILLS
The following tables set forth certain information relating to the Mills as
of December 31, 1996. The Company either holds title to the Properties or
directly or indirectly holds 100% of the general and limited partnership
interests in the Property Partnerships, except for the Property Partnerships
that own Franklin Mills and Ontario Mills, in which the Company holds 77.6%
(which represents 100% of the current income and cash flow from Franklin Mills)
and 50%, respectively, either directly or indirectly, of the partnership
interests.
12
<PAGE>
THE MILLS
<TABLE>
<CAPTION>
GROSS LEASABLE AREA
(SQ. FT.) PERCENT LEASED (3)
------------------------ -------------------
YEAR LAND TOTAL
COMPLETED/ AREA ANCHOR SPECIALTY TOTAL ANCHOR SPECIALTY PERCENT
PROPERTY EXPANDED (ACRES) STORES(1)(2) STORES GLA (2) STORES STORES LEASED(3)
- --------- --------- ------- ------------ --------- ------- ------ --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Potomac 1985/1986 161 1,005,942 632,921 1,638,863 100% 93% 97%
Mills 1993
Franklin 1989 170 1,155,303 606,923 1,762,226 100% 83% 93%
Mills
Sawgrass 1990 150 1,193,683 684,726 1,878,409 98% 97% 97%
Mills 1995
Gurnee 1991 233 827,872 639,742 1,467,614 94% 91% 93%
Mills
Ontario 1996 165 684,346 512,375 1,196,721(5) 95% 85% 90%
Mills
----- ---------- ---------- ---------
Totals/
Weighted
Averages 879 4,867,146 3,076,687 7,943,833 98%(7) 91%(7) 95%(7)
--- --------- --------- ---------
--- --------- --------- ---------
</TABLE>
<TABLE>
<CAPTION>
SALES PER SQ. FT.
ANNUALIZED NUMBER -----------------
BASE OF ANCHOR SPECIALTY
RENT(4) STORES ANCHOR STORE TENANTS STORES STORES
------- ------ -------------------- ------ ---------
<S> <C> <C> <C> <C> <C>
Potomac Mills $20,103,649 229 AMC Theatres, Books-A-Million, Burlington $185 $289
Coat Factory*, Daffy Dan's, Everything
Rubbermaid, IKEA, J.C. Penney Outlet,
Linen's N'Things, Marshalls, Nordstrom
Rack, Off 5th-Saks Fifth Avenue, Outlet to
the Far East, Spiegel Outlet, Syms, The
Sports Authority, TJ Maxx and Waccamaw
Pottery
Franklin 15,471,871 225 Bed, Bath & Beyond, Burlington Coat 182 254
Mills Factory,Filene's Basement, J.C. Penney
Outlet, Last Call from Neiman Marcus,
Marshalls, Nordstrom Rack, Office Max,
Pharmor*, Ports of the World**, Off 5th -
Sakes Fifth Avenue, Sams Wholesale Club*,
Spiegel Outlet, Syms and TJMaxx
Sawgrass 23,681,050 256 Beall's Outlet Store, Bed, Bath & Beyond, 329 407
Mills Books-A-Million, BrandsMart, Burlington
Coat Factory, Cobb Theatre, J.C. Penney
Outlet, Last Call from Neiman Marcus,
Loehmanns, Marshalls, Off 5th - Saks Fifth
Avenue, Rainforest Cafe, Service
Merchandise*, Spec's Outlet, Spiegel
Outlet, The Sports Authority, TJ Maxx,
Target Greatland*, VF (Vanity Fair) Outlet
Marketplace* and Waccamaw Pottery
Gurnee 15,094,795 218 Bed, Bath & Beyond, Burlington Coat 151 252
Mills Factory*, J.C. Penney Outlet, Marcus
Theater*, Marshalls, Off 5th-Saks Fifth
Avenue, Rainforest Cafe, Spiegel Outlet,
The Sports Authority, Syms, TJ Maxx, Value
City* and Waccamaw Pottery
Ontario 14,797,592 174 AMC Theatres*, Bed, Bath & Beyond, N/A(6) N/A(6)
Mills Burlington Coat Factory, Foozles, Group
USA, J.C. Penney Outlet, Marshalls, Mikasa
Factory Store, Off 5th-Saks Fifth Avenue,
Off Rodeo Drive, The Sports Authority,
TJ Maxx, Totally For Kids
----------- -----
Totals/
Weighted
Averages $89,148,957 1,102 $ 218 $ 307
----------- -----
----------- -----
</TABLE>
13
<PAGE>
- -------------------------
*Tenant owns store within the Mills
**Ground Lease
Notes:
(1) Anchor stores include all stores occupying more than 20,000 square feet.
(2) Includes 914,947 square feet of GLA owned by certain anchor store tenants
as follows: Potomac Mills-80,000 square feet of GLA; Franklin Mills-208,602
square feet of GLA; Sawgrass Mills-281,774 square feet of GLA;
Gurnee Mills-219,571 square feet of GLA, and Ontario Mills-125,000 square
feet of GLA.
(3) Percent Leased is defined as all space leased and for which rent was being
paid as of December 31, 1996, excluding tenants with leases having a term
of less than one year.
(4) Annualized base rent is the base rent payable in December 1996 multiplied
by 12.
(5) Ontario Mills, upon completion of space for eight anchor store tenants
containing approximately 500,000 square feet of GLA, will contain
approximately 1.7 million square feet of GLA, including GLA owned by
certain anchor store tenants.
(6) 1996 Sales Per Square Foot information is not available for Ontario Mills
which has not completed its initial lease-up.
(7) Excludes Ontario Mills which opened on November 14, 1996 and has not
completed its initial lease-up.
14
<PAGE>
AVERAGE ANNUAL EFFECTIVE RENT
The following table sets forth, for the past five years, certain
information regarding minimum and percentage rents for the Mills (excluding
Ontario Mills).
AVERAGE ANNUAL EFFECTIVE RENT PER SQUARE FOOT (1)
POTOMAC MILLS FRANKLIN MILLS SAWGRASS MILLS GURNEE MILLS
--------------- -------------- ---------------- -------------
1996 $ 14.00 $ 11.40 $ 16.55 $ 13.62
1995 13.30 11.33 15.66 12.89
1994 13.00 11.64 14.54 12.83
1993 11.99 12.59 15.69 13.86
1992 12.02 12.92 14.70 13.76
- --------------
(1) Average annual effective rent per square foot is based on annual minimum
rent and percentage rent dividend by average occupancy within each center.
The lease expirations, operating trends and rental rates for each Mills
individually and the Community Centers in the aggregate follow this section. The
Operating Trends and Rental Rates tables for existing Mills exclude Ontario
Mills which opened on November 14, 1996 and has not yet completed its initial
lease-up.
EXISTING MILLS LEASE EXPIRATIONS
The following table sets forth scheduled lease expirations during each of
the next ten years and thereafter of leases for stores at the existing Mills
including Ontario Mills in the aggregate, assuming that none of the tenants
exercises available renewal options. At December 31, 1996, the average remaining
lease term was 7.4 years for anchor store tenants and 4.8 years for specialty
store tenants.
<TABLE>
<CAPTION>
NUMBER OF GROSS LEASABLE AREA
TOTAL ANCHOR STORE ----------------------------- ANNUALIZED BASE RENT (1)
NUMBER OF TENANT APPROXIMATE PERCENT -----------------------------------------
LEASES LEASES LEASES GLA OF PERCENT OF AVERAGE
EXPIRING IN: EXPIRING EXPIRING (SQ. FT.) TOTAL AMOUNT TOTAL PER SQ. FT.
- ------------ -------- -------- --------- ----- ------ ----- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1997 . . . 125 1 409,657 6% $ 7,607,438 9% $18.57
1998 . . . 82 3 337,609 5% 6,044,233 7% 17.90
1999 . . . 96 6 593,676 9% 8,452,596 9% 14.24
2000 . . . 168 6 754,704 12% 13,443,086 15% 17.81
2001 . . . 236 7 1,204,207 19% 18,827,758 21% 15.63
2002 . . . 62 4 304,174 5% 4,886,336 5% 16.06
2003 . . . 51 9 619,431 10% 6,531,772 7% 10.54
2004 . . . 22 6 278,702 4% 3,293,205 4% 11.82
2005 . . . 23 3 322,136 5% 3,418,705 4% 10.61
2006 . . . 57 10 580,621 9% 8,632,942 10% 14.87
After 2006 34 15 1,021,079 16% 8,010,886 9% 7.85
</TABLE>
- --------------
(1) Annualized base rent is the base rent payable in December 1996 multiplied
by 12.
15
<PAGE>
EXISTING MILLS OPERATING TRENDS
The following table sets forth, for the last three years, certain
information regarding operating trends with respect to the existing Mills in the
aggregate.
<TABLE>
<CAPTION>
MINIMUM RENT PLUS PERCENTAGE RENTS
--------------------------------------------------------------------------
AVERAGE TOTAL STORES ANCHOR STORES SPECIALTY STORES
PERCENT ------------ ------------- ----------------
LEASED(1) TOTAL PER SQ. FT. TOTAL PER SQ. FT. TOTAL PER SQ. FT.
--------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1996. . . . . 94.1% $78,313,084 $13.97 $22,409,034 $6.80 $55,904,050 $24.21
1995. . . . . 94.7% 74,571,076 13.31 21,809,106 6.57 52,761,970 23.09
1994. . . . . 95.7% 73,471,573 12.99 21,706,046 6.56 51,765,527 22.08
</TABLE>
- -----------
(1) Average percent leased is defined as all space leased and for which rent
was being paid excluding tenants with leases having a term of less than one
year.
EXISTING MILLS RENTAL RATES
The following table sets forth, for each of the last three years, the
average base rent per leased square foot of store openings and closings during
the given year with respect to the existing Mills in the aggregate.
<TABLE>
<CAPTION>
ANCHOR STORES
------------------------------------------------------------------------------------
STORE OPENINGS STORE CLOSINGS RELEASING
DURING YEAR DURING YEAR SPREAD(1)
----------------------- ----------------------- ------------------------
AVERAGE AVERAGE
BASE RENT TOTAL BASE RENT TOTAL
PER SQ. FT. SQ. FT. PER SQ. FT. SQ. FT.
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
1996 $18.54 91,653 $12.95 74,453 $5.59 43.17%
1995 11.00 45,158 8.36 152,790 2.64 31.58%
1994 7.46 469,699 5.90 377,949 1.56 26.44%
<CAPTION>
SPECIALTY STORES
------------------------------------------------------------------------------------
STORE OPENINGS STORE CLOSINGS RELEASING
DURING YEAR DURING YEAR SPREAD(1)
----------------------- ----------------------- ------------------------
AVERAGE AVERAGE
BASE RENT TOTAL BASE RENT TOTAL
PER SQ. FT. SQ. FT. PER SQ. FT. SQ. FT.
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
1996 $22.76 290,825 $19.97 311,250 $2.79 13.97%
1995 22.71 318,320 20.38 271,597 2.33 11.43%
1994 21.41 250,602 21.34 249,068 0.07 0.33%
</TABLE>
- -----------
(1) The releasing spread is calculated as the difference between per square
foot openings and per square foot closings.
POTOMAC MILLS - WOODBRIDGE, VIRGINIA
Potomac Mills contains approximately 1.6 million square feet of GLA, of
which approximately 80,000 square feet is owned by one anchor store tenant.
Potomac Mills opened in 1985 with a total of approximately 630,000 square feet
of GLA. As a result of customer demand, Potomac Mills was expanded to
approximately 1.2 million square feet of GLA in 1986. The Phase III expansion of
Potomac Mills opened on September 30, 1993 and increased total GLA by
approximately 355,208 square feet. The Company anticipates that construction of
a new entertainment zone will begin in late 1997 with an opening in late 1998 or
early 1999. Real estate taxes paid in 1996 totaled approximately $2.5 million,
representing a tax rate of 1.6%. Potomac Mills has 17 anchors, including: IKEA,
J.C. Penney Outlet, Waccamaw Pottery, Marshalls, Spiegel Outlet, AMC Theatres,
The Sports Authority, Off 5th-Saks Fifth Avenue, TJ Maxx, Syms and Nordstrom
Rack. Potomac Mills is situated on approximately 161 acres located approximately
20 miles southwest of Washington, D.C. Potomac Mills is adjacent to Interstate
95, which serves as one of the transportation backbones of the Washington
metropolitan area. This location strategically positions Potomac Mills between
the Washington/Baltimore metropolitan market to the north and Richmond,
approximately 90 miles to the south. The Company owns 100% of Potomac Mills.
16
<PAGE>
POTOMAC MILLS LEASE EXPIRATIONS
<TABLE>
<CAPTION>
NUMBER OF GROSS LEASABLE AREA
TOTAL ANCHOR STORE --------------------------- ANNUALIZED BASE RENT(1)
NUMBER OF TENANT APPROXIMATE PERCENT ------------------------------------------
LEASES LEASES LEASES GLA OF PERCENT OF AVERAGE
EXPIRING IN: EXPIRING EXPIRING (SQ. FT.) TOTAL AMOUNT TOTAL PER SQ. FT.
- ------------- -------- -------- --------- ----- ------- ----- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1997 . . . . . 25 - 88,337 6% $ 1,731,670 9% $19.60
1998 . . . . . 33 1 115,026 8% 2,600,022 13% 22.60
1999 . . . . . 24 1 122,696 8% 2,009,180 10% 16.38
2000 . . . . . 33 1 122,303 8% 2,370,316 12% 19.38
2001 . . . . . 27 1 98,177 7% 1,928,661 10% 19.64
2002 . . . . . 14 1 57,702 4% 970,556 5% 16.82
2003 . . . . . 27 3 181,448 12% 2,637,903 13% 14.54
2004 . . . . . 8 2 123,422 8% 1,295,836 6% 10.50
2005 . . . . . 8 2 222.128 14% 1,644,682 8% 7.40
2006 . . . . . 6 2 225.995 15% 1,839,353 9% 8.14
After 2006 5 2 146,816 10% 1,075,470 5% 7.33
</TABLE>
- -----------
(1) Annualized base rent is the base rent payable in December 1996 multiplied
by 12.
POTOMAC MILLS OPERATING TRENDS
<TABLE>
<CAPTION>
MINIMUM RENT PLUS PERCENTAGE RENTS
--------------------------------------------------------------------------
AVERAGE TOTAL STORES ANCHOR STORES SPECIALTY STORES
PERCENT ---------------------------- ---------------------------- ----------------------------
LEASED(1) TOTAL PER SQ. FT. TOTAL PER SQ. FT. TOTAL PER SQ. FT.
--------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1996 . . . . 95.6% $20,865,975 $14.00 $6,142,999 $6.76 $14,722,976 $25.32
1995 . . . . 96.2% 19,905,334 13.30 5,839,132 6.57 14,066,202 23.14
1994 . . . . 98.2% 19,840,738 13.00 5,766,085 6.47 14,074,653 22.17
</TABLE>
- -----------
(1) Average percent leased is defined as all space leased and for which rent
was being paid excluding tenants with leases having a term of less than one
year.
POTOMAC MILLS BASE RENTAL RATES
<TABLE>
<CAPTION>
ANCHOR STORES
------------------------------------------------------------------------------------
STORE OPENINGS STORE CLOSINGS RELEASING
DURING YEAR DURING YEAR SPREAD(1)
----------------------- ----------------------- ------------------------
AVERAGE AVERAGE
BASE RENT TOTAL BASE RENT TOTAL
PER SQ. FT. SQ. FT. PER SQ. FT. SQ. FT.
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
1996 $11.43 33,406 $11.55 15,178 ($0.12) (1.04%)
1995 8.74 20,048 8.61 78,572 0.13 1.51%
1994 10.22 54,494 5.38 40,857 4.84 89.96%
<CAPTION>
SPECIALTY STORES
------------------------------------------------------------------------------------
STORE OPENINGS STORE CLOSINGS RELEASING
DURING YEAR DURING YEAR SPREAD(1)
----------------------- ----------------------- ------------------------
AVERAGE AVERAGE
BASE RENT TOTAL BASE RENT TOTAL
PER SQ. FT. SQ. FT. PER SQ. FT. SQ. FT.
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
1996 $23.64 83,594 $21.80 66,607 $1.84 8.44%
1995 24.91 49,135 18.89 82,912 6.02 31.87%
1994 22.06 58,200 20.82 57,859 1.24 5.96%
</TABLE>
- -----------
(1) The releasing spread is calculated as the difference between per square
foot openings and per square foot closings.
17
<PAGE>
FRANKLIN MILLS - PHILADELPHIA, PENNSYLVANIA
Franklin Mills opened in 1989 and contains approximately 1.8 million square
feet of GLA, of which approximately 209,000 square feet is owned by certain
anchor store tenants. The Company began remerchandising Franklin Mills in 1996
by upgrading its tenant mix and plans to begin construction on an entertainment
zone, including themed restaurants and interactive entertainment venues in the
first half of 1997. Real estate taxes paid in 1996 totaled approximately $3.9
million, representing a tax rate of 2.6%. Franklin Mills has 18 anchors,
including: Bed, Bath & Beyond, Filene's Basement, Last Call from Neiman Marcus,
Marshalls, Nordstrom Rack, Office Max, Off 5th-Saks Fifth Avenue, Spiegel
Outlet, Syms and TJ Maxx. Franklin Mills features, what the Company believes is,
the largest concentration of outlet retailing in the Delaware Valley. With
access from U.S. Highway 1 and the Pennsylvania Turnpike, Franklin Mills is
strategically positioned approximately 15 miles northeast of Philadelphia's
Center City and just west of Interstate 95, a major thoroughfare serving the
greater Philadelphia/Wilmington metropolitan market. The Operating Partnership
owns 77.6% of the partnership interests in the partnership that owns Franklin
Mills (which represents 100% of the current income and cash-flow from Franklin
Mills) and has signed agreements to acquire the remaining partnership interests
in April 1997, in exchange for 195,295 Units.
FRANKLIN MILLS LEASE EXPIRATIONS
<TABLE>
<CAPTION>
NUMBER OF GROSS LEASABLE AREA
TOTAL ANCHOR STORE --------------------------- ANNUALIZED BASE RENT(1)
NUMBER OF TENANT APPROXIMATE PERCENT ------------------------------------------
LEASES LEASES LEASES GLA OF PERCENT OF AVERAGE
EXPIRING IN: EXPIRING EXPIRING (SQ. FT.) TOTAL AMOUNT TOTAL PER SQ. FT.
- ------------- -------- -------- --------- ----- ------- ----- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1997 . . . . . 36 - 117,181 9% $2,108,190 14% $17.90
1998 . . . . . 11 1 54,689 4% 720,841 5% 13.18
1999 . . . . . 41 4 362,091 29% 4,082,949 26% 11.28
2000 . . . . . 28 2 206,163 16% 2,922,832 19% 14.18
2001 . . . . . 33 1 160,214 13% 2,381,264 15% 14.86
2002 . . . . . 10 1 51,400 4% 724,403 5% 14.09
2003 . . . . . 4 2 165,106 13% 886,814 6% 5.37
2004 . . . . . 4 1 54,556 4% 414,195 2% 7.59
2005 . . . . . 2 - 9,803 1% 194,996 1% 19.89
2006 . . . . . 4 1 49,443 4% 578,561 4% 11.70
After 2006 2 1 36,718 3% 456,826 3% 12.44
</TABLE>
- -----------
(1) Annualized base rent is the base rent payable in December 1996 multiplied
by 12.
FRANKLIN MILLS OPERATING TRENDS
<TABLE>
<CAPTION>
MINIMUM RENT PLUS PERCENTAGE RENTS
--------------------------------------------------------------------------
AVERAGE TOTAL STORES ANCHOR STORES SPECIALTY STORES
PERCENT ---------------------------- ---------------------------- ----------------------------
LEASED(1) TOTAL PER SQ. FT. TOTAL PER SQ. FT. TOTAL PER SQ. FT.
--------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1996. . . . . 92.0% $16,318,689 $11.40 $5,291,698 $5.67 $11,026,991 $22.16
1995. . . . . 95.5% 16,837,997 11.33 5,401,107 5.69 11,436,890 21.29
1994. . . . . 97.0% 17,565,102 11.64 5,485,679 5.78 12,079,423 21.54
</TABLE>
- -----------
(1) Average percent leased is defined as all space leased and for which rent
was being paid excluding tenants with leases having a term of less than one
year.
18
<PAGE>
FRANKLIN MILLS BASE RENTAL RATES
<TABLE>
<CAPTION>
ANCHOR STORES
------------------------------------------------------------------------------------
STORE OPENINGS STORE CLOSINGS RELEASING
DURING YEAR DURING YEAR SPREAD(1)
----------------------- ----------------------- ------------------------
AVERAGE AVERAGE
BASE RENT TOTAL BASE RENT TOTAL
PER SQ. FT. SQ. FT. PER SQ. FT. SQ. FT.
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
1996 $10.41 18,247 $10.25 20,000 $0.16 1.56%
1995 - - - - - 0.00%
1994 6.10 2,471 - - 6.10 100.00%
<CAPTION>
SPECIALTY STORES
------------------------------------------------------------------------------------
STORE OPENINGS STORE CLOSINGS RELEASING
DURING YEAR DURING YEAR SPREAD(1)
----------------------- ----------------------- ------------------------
AVERAGE AVERAGE
BASE RENT TOTAL BASE RENT TOTAL
PER SQ. FT. SQ. FT. PER SQ. FT. SQ. FT.
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
1996 $20.08 73,880 $18.61 115,416 $1.47 7.90%
1995 19.49 46,453 21.90 77,713 (2.41) (11.00%)
1994 20.74 82,255 21.80 97,245 (1.06) (4.86%)
</TABLE>
- -----------
(1) The releasing spread is calculated as difference between per square foot
openings and per square foot closings.
SAWGRASS MILLS - SUNRISE, FLORIDA
Sawgrass Mills, which opened in 1990, contains approximately 1.9 million
square feet of GLA, of which approximately 282,000 square feet is owned by
certain anchor store tenants. As a result of customer demand, Sawgrass Mills was
expanded by approximately 136,000 square feet of GLA in 1995. The Company
expects to open a Phase III expansion of Sawgrass Mills in the third quarter of
1998 consisting of an approximately 270,000 square foot entertainment zone. Real
estate taxes paid in 1996 totaled approximately $5.2 million, representing a tax
rate of 3.8%. Sawgrass Mills has 21 anchors, including: Beall's Outlet Store,
Burlington Coat Factory, Last Call from Neiman Marcus, Loehmanns, Rainforest
Cafe, Spiegel Outlet, The Sports Authority and Waccamaw Pottery. Sawgrass Mills
is located in Florida's "Gold Coast" market approximately 11 miles west of Fort
Lauderdale. The site lies adjacent to both the Sawgrass Expressway and Flamingo
Road, between Sunrise and Oakland Park Boulevards. The entire South Florida
region is linked by the road network of the Sawgrass Expressway, Interstate 75
and Interstate 595, which intersect at an interchange located less than two
miles southwest of Sawgrass Mills.
The Company owns 100% of Sawgrass Mills. The Phase III expansion will be
owned by a partnership formed by the Operating Partnership (50%) and Kan Am
(50%) in which Kan Am has agreed to fund 100% of the project's initial required
equity for which Kan Am will receive a 9% annual preferred return. Under the
terms of the partnership agreement, the Company has the right to buy out Kan Am
prior to December 31, 1999 at 120% of Kan Am's equity contributions and
accumulated preferred returns, under certain terms and conditions set forth in
the partnership agreement. The Company would provide all development, management
and leasing services for the expansion, subject to the approval of Kan Am of
certain major decisions, including a sale or refinancing of the project and the
approval of the development and annual budgets. The Company would guarantee
completion of the expansion within the parameters of the approved development
budget.
19
<PAGE>
SAWGRASS MILLS LEASE EXPIRATIONS
<TABLE>
<CAPTION>
NUMBER OF GROSS LEASABLE AREA
TOTAL ANCHOR STORE --------------------------- ANNUALIZED BASE RENT(1)
NUMBER OF TENANT APPROXIMATE PERCENT ------------------------------------------
LEASES LEASES LEASES GLA OF PERCENT OF AVERAGE
EXPIRING IN: EXPIRING EXPIRING (SQ. FT.) TOTAL AMOUNT TOTAL PER SQ. FT.
- ------------- -------- -------- --------- ----- ------- ----- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1997. . . . . 23 1 63,069 4% $ 1,325,497 6% $21.02
1998. . . . . 19 - 56,209 4% 1,297,187 5% 22.19
1999. . . . . 12 1 46,352 3% 1,008,910 4% 21.77
2000. . . . . 93 3 391,619 25% 7,427,118 31% 18.97
2001 .. . . . 52 2 295,010 19% 4,650,139 20% 15.76
2002. . . . . 11 1 46,638 3% 808,960 3% 17.35
2003. . . . . 7 1 122,393 8% 1,429,659 6% 11.68
2004. . . . . 7 3 96,340 6% 1,455,729 6% 15.11
2005. . . . . 10 1 68,718 5% 1,168,472 5% 17.00
2006. . . . . 5 2 95,966 6% 1,608,068 7% 16.76
After 2006 . 4 3 264,143 17% 1,551,311 7% 5.87
</TABLE>
(1) Annualized base rent is the base rent payable in December 1996 multiplied
by 12.
SAWGRASS MILLS OPERATING TRENDS
<TABLE>
<CAPTION>
MINIMUM RENT PLUS PERCENTAGE RENTS
--------------------------------------------------------------------------
AVERAGE TOTAL STORES ANCHOR STORES SPECIALTY STORES
PERCENT ---------------------------- ---------------------------- -------------------------
LEASED(1) TOTAL PER SQ. FT. TOTAL PER SQ. FT. TOTAL PER SQ. FT.
--------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1996. . . . . 97.6% $25,787,924 $16.55 $7,150,346 $8.03 $18,637,578 $27.90
1995. . . . . 95.3% 22,738,214 15.66 6,670,486 7.68 16,067,728 27.58
1994. . . . . 94.9% 20,889,138 14.54 6,467,454 7.56 14,421,684 24.83
</TABLE>
- -----------
(1) Average percent leased is defined as all space leased and for which rent
was being paid excluding tenants with leases having a term of less than one
year.
SAWGRASS MILLS RENTAL RATES
<TABLE>
<CAPTION>
ANCHOR STORES
------------------------------------------------------------------------------------
STORE OPENINGS STORE CLOSINGS RELEASING
DURING YEAR DURING YEAR SPREAD(1)
----------------------- ----------------------- ------------------------
AVERAGE AVERAGE
BASE RENT TOTAL BASE RENT TOTAL
PER SQ. FT. SQ. FT. PER SQ. FT. SQ. FT.
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
1996 $26.39 20,000 $14.86 39,275 $11.53 77.59%
1995 12.80 25,110 - - 12.80 100.00%
1994 7.86 307,486 6.29 251,643 1.57 24.96%
<CAPTION>
SPECIALTY STORES
------------------------------------------------------------------------------------
STORE OPENINGS STORE CLOSINGS RELEASING
DURING YEAR DURING YEAR SPREAD(1)
----------------------- ----------------------- ------------------------
AVERAGE AVERAGE
BASE RENT TOTAL BASE RENT TOTAL
PER SQ. FT. SQ. FT. PER SQ. FT. SQ. FT.
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
1996 $29.63 58,904 $22.24 57,770 $7.39 33.23%
1995 24.58 173,744 23.11 55,108 1.47 6.36%
1994 25.55 37,167 20.95 30,785 4.60 21.96%
</TABLE>
- -----------
(1) The releasing spread is calculated as the difference between per square
foot openings and per square foot closings.
20
<PAGE>
GURNEE MILLS - GURNEE, ILLINOIS
Gurnee Mills opened in 1991 and contains approximately 1.5 million square
feet of GLA, of which approximately 220,000 square feet is owned by certain
anchor store tenants. The Company began construction of an expansion of over
150,000 square feet of GLA of Gurnee Mills to add entertainment venues to the
existing mall and is also remerchandising the project which the Company expects
will upgrade the tenant mix at Gurnee Mills. Real estate taxes paid in 1996
totaled approximately $2.7 million, representing a tax rate of 2.3%. Gurnee
Mills has 14 anchors, including: J.C. Penney Outlet, Waccamaw Pottery,
Marshalls, Spiegel Outlet, Bed Bath & Beyond, The Sports Authority, Off 5th-Saks
Fifth Avenue, TJ Maxx and Syms. Gurnee Mills is located adjacent to Interstate
94, the major north/south thoroughfare linking Chicago and Milwaukee. Gurnee
Mills is clearly visible from Interstate 94 and is situated directly across from
Six Flags Great America, one of the largest amusement parks in the Midwest.
GURNEE MILLS LEASE EXPIRATIONS
<TABLE>
<CAPTION>
NUMBER OF GROSS LEASABLE AREA
TOTAL ANCHOR STORE --------------------------- ANNUALIZED BASE RENT(1)
NUMBER OF TENANT APPROXIMATE PERCENT ------------------------------------------
LEASES LEASES LEASES GLA OF PERCENT OF AVERAGE
EXPIRING IN: EXPIRING EXPIRING (SQ. FT.) TOTAL AMOUNT TOTAL PER SQ. FT.
- ------------- -------- -------- --------- ----- ------- ----- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1997 . . . . . 40 - 137,731 12% $ 2,326,453 15% $16.89
1998 . . . . . 19 1 111,685 10% 1,476,183 10% 13.22
1999 . . . . . 14 - 52,622 5% 1,089,657 7% 20.71
2000 . . . . . 12 - 29,015 3% 607,545 4% 20.94
2001 . . . . . 69 3 425,307 37% 5,336,800 35% 12.55
2002 . . . . . 13 1 97,730 9% 1,312,505 9% 13.43
2003 . . . . . 6 3 127,075 11% 1,035,220 7% 8.15
2004 . . . . . 3 - 4,384 0% 127,445 1% 29.07
2005 . . . . . 3 - 21,487 2% 410,555 3% 19.11
2006 . . . . . 6 1 27,458 2% 856,717 6% 31.20
After 2006 1 1 105,248 9% 515,715 3% 4.90
</TABLE>
- -----------
(1) Annualized base rent is the base rent payable in December 1996 multiplied
by 12.
GURNEE MILLS OPERATING TRENDS
<TABLE>
<CAPTION>
MINIMUM RENT PLUS PERCENTAGE RENTS
--------------------------------------------------------------------------
AVERAGE TOTAL STORES ANCHOR STORES SPECIALTY STORES
PERCENT ---------------------------- ---------------------------- -------------------------
LEASED(1) TOTAL PER SQ. FT. TOTAL PER SQ. FT. TOTAL PER SQ. FT.
--------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1996. . . . . 90.2% $15,340,496 $13.62 $3,823,991 $6.78 $11,516,505 $20.50
1995. . . . . 91.1% 15,089,531 12.89 3,898,381 6.36 11,191,150 20.08
1994. . . . . 92.1% 15,176,595 12.83 3,986,828 6.48 11,189,767 19.71
</TABLE>
___________
(1) Average percent leased is defined as all space leased and for which rent
was being paid excluding tenants with leases having a term of less than one
year.
21
<PAGE>
GURNEE MILLS RENTAL RATES
<TABLE>
<CAPTION>
ANCHOR STORES
------------------------------------------------------------------------------------
STORE OPENINGS STORE CLOSINGS RELEASING
DURING YEAR DURING YEAR SPREAD(1)
----------------------- ----------------------- ------------------------
AVERAGE AVERAGE
BASE RENT TOTAL BASE RENT TOTAL
PER SQ. FT. SQ. FT. PER SQ. FT. SQ. FT.
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
1996 $30.00 20,000 $ - - $30.00 100.00%
1995 - - 8.08 74,218 (8.08) (100.00%)
1994 4.90 105,248 5.00 85,449 (0.10) (2.00%)
<CAPTION>
SPECIALTY STORES
------------------------------------------------------------------------------------
STORE OPENINGS STORE CLOSINGS RELEASING
DURING YEAR DURING YEAR SPREAD(1)
----------------------- ----------------------- ------------------------
AVERAGE AVERAGE
BASE RENT TOTAL BASE RENT TOTAL
PER SQ. FT. SQ. FT. PER SQ. FT. SQ. FT.
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
1996 $19.01 74,447 $18.63 71,457 $0.38 2.04%
1995 16.95 48,988 17.79 55,864 (0.84) (4.72%)
1994 19.53 72,980 21.29 63,179 (1.76) (8.27%)
</TABLE>
- -----------
(1) The releasing spread is calculated as the difference between per square
foot openings and per square foot closings.
22
<PAGE>
ONTARIO MILLS - ONTARIO, CALIFORNIA
Ontario Mills opened on November 14, 1996 with approximately 1.2 million
square feet of GLA (including space owned by certain anchor store tenants)
comprised of approximately 700,000 square feet of anchor space and approximately
500,000 square feet of specialty store space. The Company has plans to expand
the project to a total of 1.7 million square feet at completion. Ontario Mills
currently has 14 anchors, including: Off 5th-Saks Fifth Avenue Outlet, J.C.
Penney Outlet, Burlington Coat Factory, The Sports Authority, Marshalls, Bed,
Bath & Beyond, Mikasa, Off Rodeo Drive, TJ Maxx, AMC Theatres, Virgin Megastore,
Group USA, Foozles, and Totally 4 Kids. American Wilderness Experience and
IWERKS are scheduled to open by the third quarter of 1997 and an additional
three anchors have executed leases and are scheduled to open later in 1997.
Ontario Mills is located at the intersection of Interstate 10 and Interstate 15
in the heart of the Riverside/San Bernardino area known as the "Inland Empire."
Ontario Mills serves the Los Angeles/Orange County metropolitan market.
Ontario Mills is owned by a joint venture among the Operating Partnership
(50%) and affiliates of Kan Am (25%) and Simon (25%). The Company has the
right to manage the development, property management and leasing of the
Ontario Mills project, subject to the other joint venture partners' approval
of certain major decisions, including sale or refinancing of the project and
approval of an annual budget. The joint venture partners have agreed to
contribute equally all initial required equity capital; provided, however,
that the Company and Simon have agreed to guarantee any project cost overruns
not funded by initial required equity capital and the partnership's
construction financing. At any time following the tenth anniversary of the
project's opening, either the Company, Simon or Kan Am can exercise a
buy-sell provision whereby the Company or Simon, if it is the offeror, can
require Kan Am to transfer its entire interest in the partnership or Kan Am,
if it is the offeror, can require the Company or Simon to acquire Kan Am's
entire interest in the partnership. Estimated net construction costs are
approximately $150 million. In addition to its capital contributions from its
joint venture partners, in November 1995, the joint venture entered into a
construction loan for a $110 million loan that was funded in the first half
of 1996. This loan was refinanced in February 1997 with a permanent loan of
$120 million which matures in February 2002 with two one-year extensions. The
interest rate is variable at LIBOR plus 100 basis points for the first $70
million and LIBOR plus 125 basis points for the remaining 50 million, and the
Company has the right to fix the interest rate at any time.
ONTARIO MILLS LEASE EXPIRATIONS
<TABLE>
<CAPTION>
NUMBER OF GROSS LEASABLE AREA
TOTAL ANCHOR STORE --------------------------- ANNUALIZED BASE RENT(1)
NUMBER OF TENANT APPROXIMATE PERCENT ------------------------------------------
LEASES LEASES LEASES GLA OF PERCENT OF AVERAGE
EXPIRING IN: EXPIRING EXPIRING (SQ. FT.) TOTAL AMOUNT TOTAL PER SQ. FT.
- ------------- -------- -------- --------- ----- ------- ----- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1997. . . . . 1 - 2,739 0% $ 115,628 1% $42.22
1998. . . . . - - - 0% - 0% -
1999. . . . . 5 - 9,915 1% 261,900 2% 26.41
2000. . . . . 2 - 5,604 1% 115,275 1% 20.57
2001. . . . . 55 - 225,499 23% 4,530,894 30% 20.09
2002. . . . . 14 - 50,704 5% 1,069,912 7% 21.10
2003. . . . . 7 - 23,409 3% 542,176 4% 23.16
2004. . . . . - - - 0% - 0% -
2005. . . . . - - - 0% - 0% -
2006. . . . . 36 4 181,759 19% 3,750,243 25% 20.63
After 2006 . 22 8 468,154 48% 4,411,564 30% 9.42
</TABLE>
- -----------
(1) Annualized base rent is the base rent payable in December 1996 multiplied
by 12.
23
<PAGE>
THE COMMUNITY CENTERS
The 11 Community Centers contain a total of approximately 2.2 million
square feet of GLA and are located in Florida, Georgia, Illinois, Maryland, New
Jersey, Ohio, Pennsylvania, South Carolina and Virginia. The Community Centers
are open-air shopping centers containing traditional shopping center tenants,
such as grocery, drug, video and greeting card stores, as well as a strong
concentration of national value retailers. Anchor tenants of the Community
Centers include Giant Food, Krogers, Marshalls, Safeway, TJ Maxx and Walgreens.
24
<PAGE>
<TABLE>
<CAPTION>
COMMUNITY CENTERS
GROSS LEASABLE AREA
(SQ. FT.) PERCENT LEASED (2)
YEAR LAND ------------------------ -----------------------
COMPLETED/ AREA ANCHOR SPECIALTY TOTAL ANCHOR SPECIALTY
PROPERTY EXPANDED (ACRES) STORES(1) STORES GLA STORES STORES
- ---------- ---------- ------- --------- --------- ------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
West Falls 1982 7 37,841 47,726 85,567 100% 90%
Church Outlet
Center
Butterfield 1983 9 41,933 72,736 114,669 100% 89%
Plaza
Montgomery 1983 11 36,405 80,986 117,391 100% 90%
Village
Western Hills 1983 36 314,516 134,980 449,496 100% 92%
Plaza
Crosswinds 1984 11 120,821 23,298 144,119 100% 94%
Center
Germantown 1986 20 46,756 130,341 177,097 100% 92%
Commons
Fashion 1987 13 73,258 74,692 147,950 100% 53%
Place
Gwinnett 1987 10 97,547 96,827 194,374 100% 90%
Marketfair
Mount 1987 34 172,595 125,882 298,477 100% 92%
Prospect Plaza
Coopers 1994 20 158,556 14,953 173,509 100% 100%
Crossing
Liberty 1994 36 280,173 20,965 301,138 47%(4) 26%
Plaza
--- --------- --------- ---------
Totals/ Weighted
Averages 207 1,380,401 823,386 2,203,787 89% 86%
--- --------- --------- ---------
--- --------- --------- ---------
<CAPTION>
1996
SALES PER SQ. FT.
TOTAL ANNUALIZED NUMBER -----------------------
PERCENT BASE OF ANCHOR SPECIALTY
PROPERTY LEASED RENT(3) STORES ANCHOR STORE TENANTS STORES STORES
- ---------- ------- --------- ------ -------------------------- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
West Falls 94% $788,446 18 Safeway Marketplace $ 414 $ 139
Church Outlet
Center
Butterfield 93% 1,421,526 18 Arvey Paper & Office, Kids R 153 202
Plaza Us
Montgomery 93% 1,342,826 24 Safeway Marketplace 385 214
Village
Western Hills 98% 2,648,237 46 Krogers, Marshalls, McAlpin's, 299 217
Plaza Media Play and Woolworth
Crosswinds 99% 759,573 14 Luria's, Marshalls and 127 233
Center Scotty's
Germantown 94% 2,004,861 40 Giant Food 567 155
Commons
Fashion 76% 810,630 25 Staples, Superpetz and TJ 140 136
Place Maxx
Gwinnett 95% 1,908,318 32 A&P, Marshalls and TJ Maxx 227 197
Marketfair
Mount 97% 2,128,608 37 Dominicks, Marshalls, TJ Maxx 229 164
Prospect Plaza and Walgreens
Coopers 100% 1,656,887 4 Marshalls, Pathmark and 113 129
Crossing Service Merchandise
Liberty 45% 1,488,408 5 Dick's Sporting Goods and N/A(5) N/A(5)
Plaza Service Merchandise
----------- ----
Totals/ Weighted
Averages 88% $16,958,320 263 266 184
----------- ----
----------- ----
</TABLE>
- ----------
(1) Anchor stores includes all stores occupying more than 20,000 square feet.
(2) Percent leased is defined as all space leased and for which rent was being
paid as of December 31, 1996, excluding tenants with leases having a term
of less than one year.
(3) Annualized base rent is the base rent payable in December 1996 multiplied
by 12.
(4) The low total percent leased figures for Liberty Plaza are due to the
closing of Bradlees, a 149,000 square foot anchor store tenant, in October
1996 following its bankruptcy and one vacant 15,000 square foot specialty
shop.
(5) Tenants at Liberty Plaza are not required to report sales information.
25
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF GROSS LEASABLE AREA
TOTAL ANCHOR STORE --------------------------- ANNUALIZED BASE RENT(1)
NUMBER OF TENANT APPROXIMATE PERCENT ------------------------------------------
LEASES LEASES LEASES GLA OF PERCENT OF AVERAGE
EXPIRING IN: EXPIRING EXPIRING (SQ. FT.) TOTAL AMOUNT TOTAL PER SQ. FT.
- ------------- -------- -------- --------- ----- ------- ----- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1997. . . . . 40 1 143,454 8% $ 1,785,869 11% $12.45
1998. . . . . 37 4 254.515 13% 2,318,761 14% 9.11
1999. . . . . 33 - 92,587 5% 1,355,624 8% 14.64
2000. . . . . 18 1 95,811 5% 1,088,402 6% 11.36
2001. . . . . 30 1 142,921 7% 1,645,372 10% 11.51
2002. . . . . 11 1 63,993 3% 525,754 3% 8.22
2003. . . . . 9 1 58,901 3% 653,705 4% 11.10
2004. . . . . 5 1 149,658 8% 351,452 2% 2.35
2005. . . . . 12 8 371,319 19% 2,774,688 16% 7.47
2006. . . . . 5 - 26,628 1% 413,233 2% 15.52
After 2006 . 18 10 522,501 27% 4,045,460 24% 7.74
- -----------
</TABLE>
(1) Annualized base rent is the base rent payable in December 1996 multiplied
by 12.
COMMUNITY CENTERS OPERATING TRENDS
<TABLE>
<CAPTION>
MINIMUM RENT PLUS PERCENTAGE RENTS
--------------------------------------------------------------------------
AVERAGE TOTAL STORES ANCHOR STORES SPECIALTY STORES
PERCENT ------------ ------------- ----------------
LEASED(1) TOTAL PER SQ. FT. TOTAL PER SQ. FT. TOTAL PER SQ. FT.
--------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1996. . . . . 92.5% $18,492,347 $ 9.08 $ 8,956,215 $6.74 $ 9,536,132 $13.49
1995. . . . . 90.0% 17,933,643 9.03 8,692,927 6.78 9,240,716 13.13
1994. . . . . 91.3% 16,991,532 9.30 7,470,611 7.02 9,520,921 12.49
</TABLE>
- -----------
(1) Average percent leased is defined as all space leased and for which rent
was being paid excluding tenants with leases having a term of less than one
year.
COMMUNITY CENTERS BASE RENTAL RATES
<TABLE>
<CAPTION>
ANCHOR STORES
------------------------------------------------------------------------------------
STORE OPENINGS STORE CLOSINGS RELEASING
DURING YEAR DURING YEAR SPREAD(1)
----------------------- ----------------------- ------------------------
AVERAGE AVERAGE
BASE RENT TOTAL BASE RENT TOTAL
PER SQ. FT. SQ. FT. PER SQ. FT. SQ. FT.
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
1996 $ 9.60 104,586 $8.69 176,238 $0.91 10.47%
1995 6.19 48,958 - - 6.19 100.00%
1994 - - 1.15 42,000 (1.15) (100.00%)
<CAPTION>
SPECIALTY STORES
------------------------------------------------------------------------------------
STORE OPENINGS STORE CLOSINGS RELEASING
DURING YEAR DURING YEAR SPREAD(1)
----------------------- ----------------------- ------------------------
AVERAGE AVERAGE
BASE RENT TOTAL BASE RENT TOTAL
PER SQ. FT. SQ. FT. PER SQ. FT. SQ. FT.
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
1996 $14.63 58,130 $13.03 86,072 $1.60 12.28%
1995 13.77 45,077 13.07 42,954 0.70 5.36%
1994 11.31 40,249 12.18 81,813 (0.87) (7.14%)
</TABLE>
- -----------
(1) The releasing spread is calculated as the difference between per square
foot openings and per square foot closings.
26
<PAGE>
CAPITAL EXPENDITURES
The following tables set forth certain information regarding capital
expenditures for the Mills and the Community Centers combined, the existing
Mills and the Community Centers for each of the last three years.
EXISTING MILLS AND COMMUNITY CENTERS COMBINED
<TABLE>
<CAPTION>
3-YEAR
1996 1995 1994 AVERAGE
---- ---- ---- -------
<S> <C> <C> <C> <C>
RECURRING CAPITAL EXPENDITURES
Annual . . . . . . . . . . . . . . . . . . . . . . . . . $ 328,974 $ 230,024 $ 504,039 $354,346
Per square foot (1). . . . . . . . . . . . . . . . . . . 0.04 0.03 0.07 0.05
RECURRING TENANT IMPROVEMENTS/LEASING COSTS (2)
Annual . . . . . . . . . . . . . . . . . . . . . . . . . 4,228,743(3) 2,043,279 5,750,945 4,007,656
Per square foot improved (5) . . . . . . . . . . . . . . 12.71 5.52 7.22 8.48
Per square foot (1). . . . . . . . . . . . . . . . . . . 0.52 0.25 0.77 0.51
TOTAL RECURRING COSTS
Annual . . . . . . . . . . . . . . . . . . . . . . . . . 4,557,717 2,273,303 6,254,984 4,362,001
Per square foot (1). . . . . . . . . . . . . . . . . . . 0.56 0.28 0.84 0.56
NON-RECURRING TENANT IMPROVEMENTS/LEASING COSTS(2)
Annual . . . . . . . . . . . . . . . . . . . . . . . . . 8,079,220 1,903,624(4) 5,892,942 5,291,928
Per square foot improved (6) . . . . . . . . . . . . . . 44.93 17.10 13.11 25.05
Per square foot (1). . . . . . . . . . . . . . . . . . . 0.99 0.23 0.79 0.67
</TABLE>
- -----------
(1) Includes annual costs divided by total GLA (excluding space owned by
certain anchor store tenants) of the Properties (excluding Ontario Mills).
(2) Tenant Improvements/Leasing Costs include tenant allowances and capitalized
internal leasing costs.
(3) Includes $1,487,754 incurred with respect to three significant tenants at
Potomac Mills totaling approximately 53,000 square feet of GLA.
Without these three tenants the per square foot improved and per square
foot Recurring Tenant Improvements/Leasing Costs would have totaled
$9.80 and $0.33, respectively.
(4) Sawgrass Mills Phase II expansion costs have been excluded from this
analysis.
(5) Calculated as Recurring Tenant Improvements/Leasing Costs divided by GLA of
all Recurring Store Openings (including spaces requiring no expenditures).
(6) Calculated as Non-Recurring Tenant Improvements/Leasing Costs divided by
GLA of all Non-Recurring Store Openings.
27
<PAGE>
EXISTING MILLS
<TABLE>
<CAPTION>
3-YEAR
1996 1995 1994 AVERAGE
---- ---- ---- -------
<S> <C> <C> <C> <C>
RECURRING CAPITAL EXPENDITURES
Annual . . . . . . . . . . . . . . . . . . . . . . . . . $ 246,522 $ 191,613 $ 477,664 $ 305,266
Per square foot (1). . . . . . . . . . . . . . . . . . . 0.04 0.03 0.08 0.05
RECURRING TENANT IMPROVEMENTS/LEASING COSTS (2)
Annual . . . . . . . . . . . . . . . . . . . . . . . . . 3,549,312 1,488,391 5,017,749 3,351,818
Per square foot improved (5) . . . . . . . . . . . . . . 12.94 4.85 7.39 8.39
Per square foot (1). . . . . . . . . . . . . . . . . . . 0.60 0.25 0.85 0.56
TOTAL RECURRING COSTS
Annual . . . . . . . . . . . . . . . . . . . . . . . . . 3,795,834(3) 1,680,004 5,495,413 3,657,084
Per square foot (1). . . . . . . . . . . . . . . . . . . 0.64 0.28 0.93 0.61
NON-RECURRING TENANT IMPROVEMENTS/LEASING COSTS (2)
Annual . . . . . . . . . . . . . . . . . . . . . . . . . 7,746,906 1,636,001(4) 4,651,899 4,678,269
Per square foot improved (6) . . . . . . . . . . . . . . 50.00 21.69 11.83 27.84
Per square foot (1). . . . . . . . . . . . . . . . . . . 1.30 0.27 0.79 0.79
</TABLE>
- -----------
(1) Includes annual costs divided by total GLA (excluding space owned by
certain anchor store tenants) of the existing Mills.
(2) Tenant Improvements/Leasing Costs include tenant allowances and capitalized
internal leasing costs.
(3) Includes $1,487,754 incurred with respect to three significant tenants at
Potomac Mills totaling approximately 53,000 square feet of GLA.
Without these three tenants the per square foot improved and per square
foot recurring Tenant Improvements/Leasing Costs would have totaled
$9.32 and $0.34, respectively.
(4) Sawgrass Mills Phase II expansion costs have been excluded from this
analysis.
(5) Calculated as Recurring Tenant Improvements/Leasing Costs divided by GLA of
all Recurring Store Openings (including spaces requiring no expenditures).
(6) Calculated as Non-Recurring Tenant Improvements/Leasing Costs divided by
GLA of all Non-Recurring Store Openings.
COMMUNITY CENTERS
<TABLE>
<CAPTION>
3-YEAR
1996 1995 1994 AVERAGE
---- ---- ---- -------
<S> <C> <C> <C> <C>
RECURRING CAPITAL EXPENDITURES
Annual . . . . . . . . . . . . . . . . . . . . . . . . . $ 82,452 $ 38,411 $ 26,375 $ 49,079
Per square foot (1). . . . . . . . . . . . . . . . . . . 0.04 0.02 0.02 0.02
RECURRING TENANT IMPROVEMENTS/LEASING COSTS (2)
Annual . . . . . . . . . . . . . . . . . . . . . . . . . 679,431 554,888 733,196 655,838
Per square foot improved (3) . . . . . . . . . . . . . . 15.06 9.54 6.65 10.42
Per square foot (1). . . . . . . . . . . . . . . . . . . 0.31 0.25 0.48 0.35
TOTAL RECURRING COSTS
Annual . . . . . . . . . . . . . . . . . . . . . . . . . 761,883 593,299 759,571 704,917
Per square foot . . . . . . . . . . . . . . . . . . . . 0.35 0.27 0.49 0.37
NON-RECURRING TENANT IMPROVEMENTS/LEASING COSTS (2)
Annual . . . . . . . . . . . . . . . . . . . . . . . . . 332,314 267,622 1,241,043 613,660
Per square foot improved (4) . . . . . . . . . . . . . . 13.35 7,46 22.56 14.46
Per square foot (1). . . . . . . . . . . . . . . . . . . 0.15 0.12 0.81 0.36
</TABLE>
- -----------
(1) Includes annual costs divided by total GLA (excluding space owned by
certain anchor store tenants) of the Community Centers.
(2) Tenant Improvements/Leasing Costs include tenant allowances and capitalized
internal leasing costs.
(3) Calculated as Recurring Tenant Improvements/Leasing Costs divided by GLA of
all Recurring Store Openings (including spaces requiring no expenditures).
(4) Calculated as Non-Recurring Tenant Improvements/Leasing Costs divided by
GLA of all Non-Recurring Store Openings.
28
<PAGE>
TENANTS
The following table sets forth certain information with respect to the
Company's ten largest tenants (as measured by 1996 base rent) at December 31,
1996:
PERCENT OF NUMBER
1996 PERCENT OF OF
TENANT BASE RENT TOTAL LEASED GLA STORES
- ------ --------- ---------------- ------
TJ Maxx Group (1) . . . . . . . . 4.7% 6.7% 16
J.C. Penney . . . . . . . . . . . 2.3% 4.7% 4
Spiegel Group (2) . . . . . . . . 1.8% 3.0% 4
Bed, Bath & Beyond. . . . . . . . 1.5% 2.0% 3
Melville (3). . . . . . . . . . . 1.4% 1.1% 10
Levi's. . . . . . . . . . . . . . 1.3% 0.7% 4
Waccamaw Pottery. . . . . . . . . 1.3% 3.7% 3
Service Merchandise . . . . . . . 1.2% 1.8% 3
The Sports Authority. . . . . . . 1.2% 1.4% 3
Off 5th - Saks Fifth Avenue . . . 1.1% 1.7% 4
----- ----- -----
Total . . . . . . . . . . . . . 17.8% 26.8% 54
----- ----- -----
----- ----- -----
- -----------
(1) Includes TJ Maxx, Marshalls and Hit or Miss.
(2) Includes Spiegel Outlet, Spiegel and Eddie Bauer Outlet.
(3) Includes Toy Works, Linens 'N Things, Footaction, KayBee Toys and Berman's.
INCOME PRODUCING PROPERTY - FEDERAL INCOME TAX BASIS
The following table sets forth certain information regarding federal
income tax basis and depreciation of income producing property for the Mills
(excluding Ontario Mills) as of December 31, 1996.
<TABLE>
<CAPTION>
LAND LAND IMPROVEMENTS BUILDING
---- ----------------- --------
FEDERAL TAX FEDERAL DEPRECIATION FEDERAL DEPRECIATION
BASIS TAX BASIS METHOD LIFE (YRS) TAX BASIS METHOD LIFE (YRS)
----------- ------------------------------------------ ------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Franklin
Mills $ 28,188 $ 6,084 MACRS 15 $125,098 MACRS 39
Gurnee Mills 18,573 16,653 MACRS 15 142,497 MACRS 31.5,39
Potomac 15,908 26,815 MACRS 15 110,141 MACRS 31.5,39
Mills ACRS 15,18 ACRS 15,18
Sawgrass
Mills 12,801 8,855 MACRS 15 160,795 MACRS 31.5,39
<CAPTION>
FURNITURE, FIXTURE AND EQUIPMENT
------------------------------------------
FEDERAL TAX DEPRECIATION
BASIS METHOD LIFE (YRS)
------------------------------------------
<S> <C> <C> <C>
Franklin
Mills $2,033 MACRS 5,7
Gurnee Mills 3,641 MACRS 5,7
Potomac
Mills 1,765 MACRS 5,7
Sawgrass
Mills 4,465 MACRS 5,7
</TABLE>
29
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
KRAMER LITIGATION
Mr. Richard Kramer ("Kramer") and certain of his affiliates, the AJ 1989
Trust ("A.J.") and Portals Development Associates Limited Partnership ("PDA"),
filed an action on April 27, 1994, in New York state courts against the
Operating Partnership, Herbert S. Miller ("Miller"), Kenwood Plaza Limited
Partnership ("Kenwood") and Ernst & Young LLP for various alleged breaches of
contract, breaches of fiduciary duties, fraudulent acts, and other violations of
law relating primarily to the management and subsequent acquisition of the
Properties acquired in the IPO in which Kramer and his affiliates owned an
interest. The complaint sought damages from the Operating Partnership in excess
of $4.5 million, trebled under a RICO claim. That complaint also sought a
declaratory judgment that A.J. is entitled to retain $2.9 million sent to it by
mistake upon the closing of the IPO as an offset against its claimed damages,
and a declaratory judgment, specific performance and damages against Miller
relating to his failure to sign certain guarantee affirmations and debt
modifications with respect to PDA.
On May 10, 1994, the defendants removed this case from the New York state
courts to the United States District Court for the Southern District of New
York and the plaintiffs agreed to dismiss the claims against Ernst & Young
LLP. Thereafter, the court granted the defendant's motion to dismiss certain
of the complaint's claims and gave plaintiffs leave to replead. When the
plaintiffs served their amended complaint, they added the Company as a
defendant. In late February 1996, the plaintiffs moved to amend the amended
complaint to delete the RICO claim without prejudice and to remand other
claims to the state court for adjudication. Defendants crossmoved for
summary judgment (a) on their counterclaim seeking the return of the $2.9
million mistakenly transferred to A.J. and (b) dismissing the remaining
claims against the Company and the Operating Partnership. In addition, the
defendants are asserting that the RICO claim should be dismissed only on a
with-prejudice basis. These motions are still pending. Pending the outcome
of the litigation, the Company is withholding partnership distributions that
would otherwise be payable to A.J. from Kenwood as an offset against the $2.9
million mistakenly transferred to A.J. A.J. has filed an additional claim
seeking payment of those distributions. The Company, the Operating
Partnership and Mr. Miller intend to vigorously defend against whatever
claims remain. The Company believes that it is unlikely that the ultimate
outcome of the pending proceeding would have a material adverse effect on the
Company's financial condition or results of operations.
KENWOOD LITIGATION
On June 15, 1994, ICSC Partners Limited Partnership filed in the Court of
Common Pleas, Hamilton County, Ohio a derivative action on behalf of Kenwood
Plaza Limited Partnership ("Kenwood") against Mr. Miller, Western Development
("WDC") and the Company seeking the return to Kenwood of $6.3 million paid by
Kenwood to Mr. Miller, WDC and the Company, plus $5 million in punitive damages.
The plaintiff subsequently filed an amended complaint which included a RICO
claim that, if proven, would entitle the plaintiff to recover treble damages and
attorney's fees in addition to compensatory and punitive damages. The
defendants filed counterclaims against the plaintiff seeking $5.0 million in
compensatory damages and $10.0 million in punitive damages.
In 1995, the parties to the lawsuit reached a settlement that resulted in
no financial liability for the Company and no admission of liability by the
Company. See "--Indemnity Claim." The settlement was submitted to the court
for approval and sent to the non-party limited partners. A.J, a non-party
limited partner, objected to the settlement, and, on October 13, 1995, the court
entered an order and judgment overruling the objection and approving the
settlement. A.J. appealed the order to the Court of Appeals of Arlington County,
Ohio, which affirmed the trial court's approval of the settlement. A.J. has
filed a motion asking the Supreme Court of Ohio to accept jurisdiction in this
case. This motion is pending. The Company believes that it is unlikely that
the ultimate outcome of the pending proceeding would have a material adverse
effect on the Company's financial condition or results of operations.
30
<PAGE>
HESS LITIGATION
On November 9, 1994, Gene E. Hess, a former officer of the Company whose
employment was terminated after the IPO, filed a complaint in the United
States District Court for the District of Columbia against the Company for
fraud, breach of employment contract, and breach of covenant of good faith
and fair dealing and against Mr. Miller for fraud and tortious interference
with contractual relations. In January 1997, without admitting liability,
the defendants agreed to settle the lawsuit in exchange for the issuance of
an additional 13,650 shares of Common Stock of the Company.
INDEMNITY CLAIM
The Company and the Operating Partnership have notified Mr. Miller,
Laurence Siegel, Harry Nick, Ronald Salerno and various Kan Am affiliates
(collectively, "Indemnifying Parties") that they may be liable to the Company
and the Operating Partnership due to the Kramer and Kenwood litigation under
indemnity agreements entered into at the time of the IPO. The Company and the
Operating Partnership have entered into a standstill agreement postponing a
decision on liability under the indemnity agreements in consideration for the
Indemnifying Parties creating an escrow account to fund the Company's cost of
defense. On November 1, 1995, the Operating Partnership and the Indemnifying
Parties entered into a Settlement Agreement whereby each Indemnifying Party
agreed to contribute its pro-rata share of the amounts payable under the Kenwood
Settlement, which was approved by the Court in October 1995.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
31
<PAGE>
PART II
Item 5. Market for the Registrant's Common Equity and Related Shareholder
Matters
MARKET INFORMATION
The Company's Common Stock trades on the New York Stock Exchange ("NYSE")
under the symbol "MLS". The following table sets forth the high and low closing
sale prices per share of Common Stock for the periods indicated as reported on
the NYSE and the distributions per share paid by the Company with respect to the
periods noted.
HIGH LOW DISTRIBUTIONS
---- --- -------------
1995:
First Quarter. . . . . . $19 5/8 $16 $.4725
Second Quarter . . . . . 20 4/8 15 1/2 .4725
Third Quarter. . . . . . 19 7/8 17 7/8 .4725
Fourth Quarter . . . . . 18 3/4 16 7/8 .4725
1996:. . . . . . . . . .
First Quarter. . . . . . $18 3/8 $16 5/8 $.4725
Second Quarter . . . . . 18 3/8 17 1/4 .4725
Third Quarter. . . . . . 20 5/8 17 5/8 .4725
Fourth Quarter . . . . . 24 3/8 19 4725
The last reported closing sale price on the NYSE on March 10, 1997 was
$25.375 per share. As of March 10, 1997, there were 16,923,236 shares of
Common Stock outstanding, held by 508 holders of record.
DISTRIBUTIONS
The Company has made consecutive quarterly distributions since the IPO. The
indicated annual distribution rate is $1.89 per share of Common Stock based on
the fourth quarter 1996 distribution. A portion of the Company's distribution
may represent a non-taxable return of capital and/or a capital gain dividend.
Approximately 65% of 1996 distributions of $1.89 per share of Common Stock was a
non-taxable return of capital. There were no capital gain dividends in 1996. The
Company's ability to make distributions depends on a number of factors,
including its net cash provided by operating activities, its financial
condition, capital commitments, debt repayment schedules and such other factors
as the Board of Directors deems relevant.
Holders of Common Stock are entitled to receive distributions when, as and
if declared by the Board of Directors out of any funds legally available for
that purpose. The Company, as a REIT, is required to distribute annually to its
shareholders at least 95% of its "real estate investment trust taxable income,"
which, as defined by the relevant tax statutes and regulations, is generally
equivalent to net taxable ordinary income.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected consolidated financial data for the
Company, the Operating Partnership and their subsidiaries (including the Third
Party Services Corporation) for the periods after the IPO and combined
historical financial data of the entities which owned the Properties and
conducted the operations now performed by the Operating Partnership and its
subsidiaries (the "Mills Entities") for the periods prior to the IPO. The
historical financial data should be read in conjunction with the financial
statements and notes thereto included herein and the discussion set forth in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
32
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THE MILLS CORPORATION THE MILLS ENTITIES
------------------------------------------ ------------------------------------------
FOR THE FOR THE
YEAR ENDED PERIOD PERIOD
--------------------------- APRIL 22 TO JANUARY 1 YEAR ENDED DECEMBER 31,
DECEMBER 31, DECEMBER 31, DECEMBER 31, TO APRIL 21, --------------------------
1996 1995 1994 1994 1993 1992
----------- ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA:
REVENUES:
Minimum rent $ 94,678 $ 89,839 $ 62,174 $ 25,970 $ 78,134 $ 72,846
Percentage rent 4,216 4,460 2,575 1,366 5,143 4,313
Recoveries from tenants 45,761 44,267 28,283 12,611 37,952 33,753
Other revenues 7,616 6,537 3,966 976 2,863 5,091
Fee income 3,639 3,975 2,118 914 3,103 1,843
Interest income 2,850 2,431 1,556 402 1,361 1,609
----------- ----------- ----------- ----------- ----------- ------------
158,760 151,509 100,672 42,239 128,556 119,455
EXPENSES:
Recoverable from tenants 41,308 39,299 26,002 11,578 35,184 34,388
Other operating 6,170 5,231 3,069 3,629 4,460 5,782
General and administrative 8,725 7,808 5,272 3,031 6,125 6,083
Interest expense 45,885 43,947 28,349 17,992 60,245 61,561
Depreciation and amortization 39,020 40,815 28,805 10,686 34,670 34,506
----------- ----------- ----------- ----------- ----------- ------------
141,108 137,100 91,497 46,916 140,684 142,320
Other Income (Expense) 1,073 859 (1,881) 478 565 2,589
Equity in earnings of
unconsolidated joint ventures 2,661 -- -- -- -- --
----------- ----------- ----------- ----------- ----------- ------------
Income (loss) before extraordinary
items and minority interest 21,386 15,268 7,294 (4,199) (11,563) (20,276)
Extraordinary gain (loss) on debt
extinguishment (5,301) (419) (5,414) 46 3,225 3,547
Minority interest (7,904) (7,231) (915) - - -
----------- ----------- ----------- ----------- ----------- ------------
Net income (loss) $ 8,181 $ 7,618 $ 965 $ (4,153) $ (8,338) $ (16,729)
----------- ----------- ----------- ----------- ----------- ------------
----------- ----------- ----------- ----------- ----------- ------------
Earnings Per Common and Common
Equivalent Share(1):
Income before extraordinary
items $ 0.64 $ 0.46 $ 0.22 N/A N/A N/A
Extraordinary loss on debt
extinguishments (0.16) (0.01) (0.16) N/A N/A N/A
----------- ----------- ----------- ----------- ----------- ------------
Net income per common and
common equivalent share $ 0.48 $ 0.45 $ 0.06 N/A N/A N/A
----------- ----------- ----------- ----------- ----------- ------------
----------- ----------- ----------- ----------- ----------- ------------
</TABLE>
33
<PAGE>
<TABLE>
<CAPTION>
THE MILLS CORPORATION THE MILLS ENTITIES
----------------------------------------- -----------------------------------------
FOR THE FOR THE
PERIOD PERIOD
AS OF DECEMBER 31, APRIL 22 TO JANUARY 1 AS OF DECEMBER 31,
-------------------------- DECEMBER 31, TO APRIL 21, --------------------------
1996 1995 1994 1994 1993 1992
----------- ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
OTHER DATA:
Cash flow provided by (used in):
Operating activities $ 63,262 $ 61,823 $ 34,095 $ 10,975 $ 16,347 $ (3,519)
Investing activities (67,468) (58,474) (146,613) (3,635) (43,299) 6,791
Financing activities ( 4,017) (8,856) 116,301 (2,622) 31,712 (5,233)
Funds From Operations(2) 56,250 50,030
Distributions paid per share 1.89 1.89 1.31 N/A N/A N/A
Weighted average Common and
Common Equivalent shares outstanding 17,009 16,906 16,906 N/A N/A N/A
Weighted average shares and Units
outstanding 33,341 32,964 32,964 N/A N/A N/A
PORTFOLIO DATA:
Total Owned GLA at end of period(3) 9,233 8,172 8,116 7,736 7,233
Number of Properties at end of period 16 15 15 14 14
BALANCE SHEET DATA:
Investment in real estate assets (before $ 947,621 $ 894,265 $ 855,049 $ 760,757 $ 724,823 $ 713,824
accumulated depreciation)
Total assets 862,624 853,057 853,889 749,472 731,320 771,942
Total mortgages, notes and loans 730,113 676,435 631,976 780,523 753,756 788,163
payable
Minority interest 43,975 66,839 90,466 N/A N/A N/A
Total stockholders' equity/owners' $ 45,525 $ 70,408 $ 95,295 $ (74,540) $ (68,805) $ (64,153)
(deficit)
</TABLE>
- -----------------
(1) Per share data is reflected only for the Company. Per share data is not
relevant for the historical combined financial statements of the Mills
Entities since such financial statements are a combined presentation of
partnerships and corporations. Historical operating results, including net
income, may not be comparable to future operating results because of the
historically greater leverage of the Mills Entities.
(2) The Company generally considers Funds From Operations ("FFO") a widely used
and appropriate measure of performance for an equity REIT which provides a
relevant basis for comparison among REITs. FFO as defined by NAREIT means
income (loss) before minority interest (determined in accordance with
generally accepted accounting principles, referred to herein as "GAAP"),
excluding gains (losses) from debt restructuring and sales of
property, plus real estate related depreciation and amortization and after
adjustments for unconsolidated partnerships and joint ventures. FFO is
presented to assist investors in analyzing the performance of the Company.
The Company's method of calculating FFO may be different from methods used
by other REITs and, accordingly, may not be comparable to such other REITs.
FFO (i) does not represent cash flows from operations as defined by GAAP,
(ii) is not indicative of cash available to fund all cash flow needs and
liquidity, including its ability to make distributions and (iii) should not
be considered as an alternative to net income (as determined in accordance
with GAAP) for purposes of evaluating the Company's operating performance.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations-Funds From Operations."
(3) Excludes 125,000 square feet of GLA owned by one anchor store tenant.
Includes Ontario Mills at 1.1 million square feet which, upon completion of
space for eight anchor store tenants, will contain approximately 1.6
million square feet of GLA.
34
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis of the consolidated financial condition
and results of operations should be read in conjunction with the Consolidated
and Combined Financial Statements and Notes thereto.
The following discussion is based primarily on the consolidated financial
statements of the Company for the years ended December 31, 1996 and December 31,
1995, and for the period April 22, 1994 to December 31, 1994, and the combined
financial statements of the Mills Entities for the period from January 1, 1994
to April 21, 1994. The combined financial statements of the Mills Entities
include the balance sheet data and results of operations of the management and
leasing operations of the Management Partnership, the 15 Property Partnerships
that owned the Properties and certain other affiliated entities, which were
contributed to the Operating Partnership and are now consolidated in the
Company's financial statements. The Mills Entities are considered the
predecessor to the Company, and the combined financial statements do not include
the effects of the IPO. For purposes of the discussion below, the term
"Company" is used to refer to The Mills Corporation, the Operating Partnership
and their subsidiaries, and/or their predecessor, the Mills Entities.
COMPARISON OF YEAR ENDED DECEMBER 31, 1996 TO YEAR ENDED DECEMBER 31, 1995
Income before minority interest for the year ended December 31, 1996,
increased by approximately $1.2 million (8.3%) to $16.1 million as compared to
the year ended December 31, 1995. The increase was the result of an increase in
revenues of $7.3 million (4.8%), offset by an increase in expenses of $4.0
million (2.9%), an increase in equity of earnings of unconsolidated joint
ventures of $2.7 million, and an increase in the extraordinary loss on debt
extinguishment of $4.9 million.
REVENUES. Minimum rent for the year ended December 31, 1996, increased
approximately $4.8 million (5.4%) compared to the year ended December 31, 1995.
The increase was primarily due to the expansions of Sawgrass Mills and Liberty
Plaza and higher lease renewal rates across the Properties.
Percentage rents decreased $0.2 million (5.5%) compared to the year
ended December 31, 1995, due to fixed lease escalations in 1996 shifting
revenues from percentage rents to minimum rent and to decreased sales for
certain tenants which pay percentage rents, although aggregate tenant sales
have increased over 1995.
Recoveries from tenants for the year ended December 31, 1996, increased
approximately $1.5 million (3.4%) compared to the year ended December 31, 1995.
The increase was due to the expansion of Sawgrass Mills and increases in the
recoverable expenses across the remaining Mills mainly for real estate taxes .
Other revenue for the year ended December 31, 1996, increased $1.1 million
(16.5%) compared to the year ended December 31, 1995. The increase was
primarily due to increased revenues at the Company's pushcart program and in
income from tenants who occupy space on a temporary basis.
Fee income for the year ended December 31, 1996, decreased $0.3 million
(8.5%) compared to the year ended December 31, 1995. The decrease was due
primarily to lower fees earned on the sale of third party peripheral land.
Interest income increased by approximately $0.4 million (17.2%) for the
year ended December 31, 1996, compared to the year ended December 31, 1995.
This increase was primarily due to $0.5 million of interest earned on a note
receivable from an unconsolidated joint venture.
EXPENSES. Recoverable from tenants for the year ended December 31, 1996,
increased approximately $2.0 million (5.1%) compared to the year ended December
31, 1995. The increase was due to the expansion of Sawgrass Mills and increases
across the remaining Mills primarily for real estate taxes and snow removal.
35
<PAGE>
Other operating expenses for the year ended December 31, 1996, increased
approximately $0.9 million (18.0%) compared to the year ended December 31, 1995.
This increase was primarily due to an increase in contributions to promotional
programs of $0.8 million, an increase in bad debt of $0.3 million at certain
properties, an increase of $0.3 million for the expansion of the Company's
pushcart program, and an increase of $0.1 million for other taxes at Franklin
Mills. These increases were offset by a decrease in non-recurring legal fees
of $0.7 million at Sawgrass Mills.
General and administrative expenses increased by $0.9 million (11.7%) for
the year ended December 31, 1996, compared to the year ended December 31, 1995.
The increase was due to a $0.5 million legal settlement with a former officer of
the Company and the Company's hiring additional employees in connection with
its projects under development.
Interest expense increased by approximately $1.9 million (4.4%) for the
year ended December 31, 1996, compared to the year ended December 31, 1995.
This increase was primarily due to additional debt associated with the Phase II
expansion of Sawgrass Mills which opened in November 1995, and interest expense
associated with the opening of Ontario Mills in November 1996 that was
capitalized prior to opening.
Depreciation and amortization decreased $1.8 million (4.4%) for the year
ended December 31, 1996, compared to the year ended December 31, 1995. The
decrease was due to a $1.4 million decrease in amortization of loan costs as a
result of refinancing of certain mortgage indebtedness secured by the Community
Centers and a $2.5 million decrease in depreciation relating to assets reaching
the end of their depreciable lives. The decrease is partially offset by a $1.3
million increase in depreciation related to the Sawgrass expansion and a $0.9
million acceleration of amortization of leasing costs at Liberty Plaza in 1996.
Equity in earnings of unconsolidated joint ventures increased to $2.7
million in 1996 as the Company recognized its equity in the earnings in the
Ontario Mills and Ontario Mills Residual joint ventures, which began operations
in 1996.
The extraordinary loss on debt extinguishment for the year ended December
31, 1996, increased $4.9 million compared to the year ended December 31,
1995. The 1996 loss was due principally to the write off of unamortized
deferred financing costs as a result of the refinancing of certain mortgage
indebtedness secured by the Community Centers in January 1996 and Gurnee
Mills and Potomac Mills in December 1996.
COMPARISON OF YEAR ENDED DECEMBER 31, 1995 TO YEAR ENDED DECEMBER 31, 1994
The following discussion compares the results of the Company for the year
ended December 31, 1995, to the results of the Company for the period April 22,
1994 to December 31, 1994, combined with the results of the Mills Entities for
the period January 1, 1994 to April 21, 1994. As a result of the IPO, the
Company's capital structure and leverage changed substantially. However, as the
effects of the IPO primarily impact other income and expense, such as interest
expense, the comparison of 1995 to combined 1994 results of operations provides
a reasonable basis for analysis of the results of recurring property operations.
The impact of the IPO on the analysis of other income and expense is noted
below.
Income before minority interest for the year ended December 31, 1995,
increased by approximately $17.1 million to $14.8 million compared to a loss
of $2.3 million for the year ended December 31, 1994. This increase was the
result of an increase in revenues of $8.6 million (6.0%), a decrease in
expenses of $1.3 million, an increase in other income of $2.3 million and a
decrease in extraordinary loss on debt extinguishment of $4.9 million.
REVENUES. Minimum rent for the year ended December 31, 1995, increased by
approximately $1.7 million (1.9%) compared to the year ended December 31, 1994.
This increase was partly due to contractual rent increases and lease renewals.
Additionally, the Company realized a full year of operations in 1995 of two
community centers
36
<PAGE>
acquired in 1994, resulting in a $1.2 million increase in rents. These increases
were offset by the sale of one community center in 1994, resulting in a $0.4
million decrease in rents.
Percentage rents increased $0.5 million (13.2%) compared to the year ended
December 31, 1994, due to increased tenant sales in aggregate at the Company's
properties, particularly Sawgrass Mills.
Recoveries from tenants increased approximately $3.4 million (8.3%) for the
year ended December 31, 1995, compared to the year ended December 31, 1994. This
increase was due to a full year of operations of two community centers acquired
in 1994 resulting in a $1.1 million increase, a utility income billing rate
adjustment at Franklin Mills of $0.7 million, the elimination of management
imposed caps at Gurnee Mills and Franklin Mills and overall increases in
recoverable expenses.
Fee income increased by $0.9 million (31.1%) for the year ended
December 31, 1995, primarily as a result of development and leasing fees earned
from the Ontario Mills Limited Partnership.
EXPENSES. Recoverable from tenants for the year ended December 31, 1995,
increased approximately $1.7 million (4.6%) compared to the year ended
December 31, 1994. This increase was primarily attributable to an increase in
real estate tax expense of $1.7 million at Franklin Mills due to the expiration
of a tax abatement.
Other operating expenses for the year ended December 31, 1995, decreased
approximately $1.5 million (21.9%) compared to the year ended December 31, 1994.
This decrease was primarily due to greater advertising costs in 1994 at Gurnee
Mills of $1.4 million which were funded by contributions to a promotion fund.
Typically, advertising costs are funded solely by tenant contributions.
General and administrative expenses decreased by $0.5 million (6.0%) for
the year ended December 31, 1995, primarily due to non-recurring costs incurred
in 1994 combined with cost cutting measures implemented by the Company in 1995.
Interest expense decreased by approximately $2.4 million (5.2%) for the
year ended December 31, 1995, compared to the year ended December 31, 1994. This
decrease was primarily due to lower debt balances in 1995 (and subsequent to the
IPO in 1994) as a result of the application of a substantial portion of the
proceeds of the IPO to reduce outstanding borrowings.
Depreciation and amortization expense increased $1.3 million (3.4%) for the
year ended December 31, 1995, due to the two new community centers acquired in
1994, a step-up in certain asset bases as a result of the acquisition of certain
partnership interests at the time of the IPO and other increases in deferred
assets.
Other income and expense increased approximately $2.3 million (161.2%) for
the year ended December 31, 1995, as compared to the year ended December 31,
1994. The increase was mainly due to a 1994 write-down of Western Crossing to
net realizable value of $3.4 million offset by the decrease in the gain on land
sales of $0.7 million.
Extraordinary loss on debt extinguishment decreased approximately $4.9
million in 1995 due to the paydown of debt associated with the IPO in 1994
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1996, the Company's balance of cash and cash
equivalents was $6.3 million, not including its proportionate share of cash
held in partnerships which are not consolidated. In addition to its cash
reserves, the Company had $20.3 million available under its $40.0 million
Line of Credit (see below).
FINANCING ACTIVITIES. During 1996, the Company completed various financing
and refinancing activities which extended the weighted average remaining term of
the Company's total indebtedness from 3.5 years at
37
<PAGE>
December 31, 1995 to 4.5 years at December 31, 1996, without increasing the
weighted average interest rate (7.05% at December 31, 1996).
Loans totaling $349.9 million were refinanced during 1996 with the proceeds
of new borrowings totaling $360.0 million. On January 31, 1996, the Company
obtained a $76.0 million permanent mortgage loan secured by nine of the
Community Centers to repay a $60.0 million loan maturing on March 31, 1996. The
permanent mortgage loan bears interest at a fixed rate of 7.16% and matures on
January 31, 2001. On December 17, 1996, the Company completed a $289.9 million
refinancing of the existing mortgage indebtedness on Gurnee Mills and Potomac
Mills. This refinancing was achieved through a $284 million all-investment grade
securitization with a weighted average fixed coupon of 7.02% and an anticipated
balloon repayment due in seven years. The shortfall in this refinancing was
funded through a draw on the Line of Credit.
During 1996, three credit facilities were completed with Credit Suisse
First Boston, summarized as follows (dollars in thousands):
<TABLE>
<CAPTION>
AMOUNT
OUTSTANDING
NATURE OF FACILITY MATURITY INTEREST RATE TERMS TOTAL FACILITY AT 12/31/96
- ------------------ -------- ------------- ----- -------------- -----------
<S> <C> <C> <C> <C> <C>
Line of Credit. . . . . . . . . . . . . . . . . . 10/31/98 LIBOR + 3.00% Interest Only $ 40,000 $ 19,683
Revolving Master Repurchase Agreement . . . . . . Varies LIBOR + 1.25% Interest Only 10,600 10,556
Secured Term Loan . . . . . . . . . . . . . . . . 7/31/98 LIBOR + 2.35% Interest Only 12,000 12,000
---------- ----------
$ 62,600 $ 42,239
---------- ----------
</TABLE>
The amounts available under the Line of Credit are subject to certain
performance measurements and restrictive covenants. The Company was in
compliance with the applicable covenants at December 31, 1996 and anticipates
increasing the availability in 1997 under the facility.
In October 1996, the Company filed a universal shelf registration statement
on Form S-3 for up to $250 million of common stock, preferred stock and common
stock warrants which became effective October 28, 1996. The Company filed a
Prospectus and preliminary Prospectus Supplement dated February 21, 1997 to sell
4,500,000 shares of Common Stock under the shelf registration statement. In
December 1996, the Company filed a preliminary proxy statement seeking
shareholder approval for up to $150 million of preferred equity capital from Kan
Am. In connection therewith, the Company is currently negotiating an agreement,
subject to such shareholder approval, with Kan Am to provide the Company (or the
Operating Partnership) with approximately $50 million in preferred equity
capital on terms the Company believes would be attractive. There can be no
assurance that any such agreement will be entered into or that such shareholder
approval will be obtained.
The Company had consolidated debt of approximately $730.1 million at
December 31, 1996 of which $657.9 million is fixed-rate debt and $72.2
million is variable-rate debt. Scheduled principal repayments of consolidated
indebtedness over the next four years is $254.8 million ($165.0 million of
which relates to Franklin Mills which the Company expects to refinance in
1997 and the remainder of which the Company expects to refinance or repay
with cash generated from operations, external borrowings or equity issuances),
with $475.3 million due thereafter. The Company's pro rata share of
unconsolidated joint venture debt at December 31, 1996 was $42.4 million (net
of tax increment financing).
The Company's ratio of debt-to-total market capitalization was
approximately 47.9% at December 31, 1996. If the Company's pro-rata share of
indebtedness of all unconsolidated joint venture properties were included, the
ratio of debt-to-total market capitalization would be approximately 49.3%.
DEVELOPMENT, REMERCHANDISING AND EXPANSION. The Company is involved in the
following development, remerchandising and expansion efforts:
Five Mills projects are planned to be completed in the next three years.
Grapevine Mills and Arizona Mills are expected to open in the fourth quarter of
1997. Construction loans and loan commitments, aggregating approximately $285
million (expected to increase to $300 million), equity commitments from the
Company's joint venture partners
38
<PAGE>
and the Company's remaining required equity contribution of approximately $15
million (as of December 31, 1996) are considered adequate to fund the remaining
development efforts for these projects. The Company expects to obtain its
required equity contributions from external borrowings, potential equity
issuances and/or cash flow from operating activities.
Mills City at Orange and Houston Mills are scheduled to open in the fourth
quarter of 1998 and in 1999, respectively. Both projects will be financed
principally with external borrowings, potential preferred and other equity
contributions from Kan Am and/or the potential equity issuances. The Company
anticipates its required future equity requirements for Mills City at Orange and
Houston Mills in the aggregate may total as much as $30 million.
The Company expects to commence construction in 1998 of Meadowlands
Mills, with a targeted opening date in 1999. The Company is currently
evaluating its financing options with respect to this project, including
possibly obtaining an additional partner to provide equity.
In addition to these new Mills, the Company is planning to spend
approximately $115 million on its existing portfolio during the next three years
to complete its expansion and remerchandising programs in each of the Company's
first four Mills. It is anticipated that these projects will be financed with
external borrowings, equity contributions from Kan Am and other potential equity
issuances.
CAPITAL RESOURCES. The Company anticipates that its operating expenses,
interest expense on outstanding indebtedness, recurring capital expenditures and
distributions to stockholders in accordance with REIT requirements will be
provided by cash generated from operations, potential ancillary land sales and
borrowings under its Line of Credit.
The Company believes that it will have the capital and access to additional
capital resources sufficient to expand and develop its business in accordance
with its operating, development and financing strategies.
DISTRIBUTIONS. The Company has paid and intends to continue to pay regular
quarterly distributions to its stockholders. Distributions are payable at the
discretion of the Board of Directors and depend on a number of factors,
including net cash provided by operating activities, its financial condition,
capital commitments, debt repayment schedules and such other factors as the
Board of Directors deems relevant.
CASH FLOWS
COMPARISON OF YEAR ENDED DECEMBER 31, 1996 TO YEAR ENDED DECEMBER 31, 1995.
Net cash provided by operating activities increased $1.4 million, or 2.3%, to
$63.2 million for the year ended December 31, 1996 as compared to $61.8 million
for the year ended December 31, 1995. Net cash used in investing activities
increased $9.0 million, or 15.4%, to $67.5 million for the year ended December
31, 1996, as compared to $58.5 million for the year ended December 31, 1995,
primarily as a result of capital invested by the Company for real estate and
development assets. Net cash used in financing activities decreased
$4.8 million, or 54.6%, to $4.0 million for the year ended December 31, 1996, as
compared to $8.8 million for the year ended December 31, 1995, primarily as a
result of a decrease in net borrowings.
COMPARISON OF YEAR ENDED DECEMBER 31, 1995 TO YEAR ENDED DECEMBER 31, 1994.
Net cash provided by operating activities increased $16.8 million, or 37.2% to
$61.8 million for the year ended December 31, 1995, as compared to $45.0 million
for the year ended December 31, 1994 primarily due to increased rental revenues.
Net cash used in investing activities decreased $91.8 million, or 61.1% to
$58.4 million for the year ended December 31, 1995 as compared to $150.2 million
for the year ended December 31, 1994, primarily as a result of decreased
expenditures for real estate and development assets. Net cash provided by
financing activities decreased $122.5 million, or 107.8% to $8.8 million for the
year ended December 31, 1995 as compared to $113.7 million for the year ended
December 31, 1994, primarily due to the IPO proceeds in 1994.
39
<PAGE>
FUNDS FROM OPERATIONS
The Company generally considers Funds From Operations ("FFO") a widely used
and appropriate measure of performance for an equity REIT which provides a
relevant basis for comparison among REITs. FFO as defined by NAREIT means income
(loss) before minority interest (determined in accordance with GAAP), excluding
gains (losses) from debt restructuring and sales of property, plus real estate
related depreciation and amortization and after adjustments for unconsolidated
partnerships and joint ventures. FFO is presented to assist investors in
analyzing the performance of the Company. The Company's method of calculating
FFO may be different from methods used by other REITs and, accordingly, may not
be comparable to such other REITs. FFO (i) does not represent cash flows from
operations as defined by GAAP, (ii) is not indicative of cash available to fund
all cash flow needs and liquidity, including its ability to make distributions
and (iii) should not be considered as an alternative to net income (determined
in accordance with GAAP) for purposes of evaluating the Company's operating
performance.
FFO for the year ended December 31, 1996, increased to $56.3 million
compared to $50.0 million for the comparable period in 1995. FFO amounts were
calculated in accordance with NAREIT's definition of FFO as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------
1996 1995
---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Funds From Operations Calculation(1):
Income before extraordinary item and minority interest. . . . . . . . . . . . . . . . . . . . . . $21,386 $15,268
Adjustments:
Add: Depreciation and amortization of real estate assets. . . . . . . . . . . . . . . . . . . 33,501 34,414
Add: Write-off of development costs -- 348
Add: Adjustment for real estate depreciation and amortization of unconsolidated affiliates. . 561 --
Add: Loss on sale of furniture, fixtures and equipment. . . . . . . . . . . . . . . . . . . . 802 --
--------- ---------
Funds From Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $56,250 $50,030
--------- ---------
--------- ---------
</TABLE>
- ----------------
(1) The definition of FFO does not permit the add-back of amortization of loan
costs, including amortization relating to buydown fees and interest rate caps.
The annual amortization related to these items is not a cash expense to the
Company, although it reduces FFO. Potomac Mills and Gurnee Mills were refinanced
in December 1996 under a fixed rate securitization. Accordingly, the related
caps were sold and the amortization on such caps will not recur in 1997. The
impact of these items on the Company's historical effective interest rate and
other relevant information is detailed below (Sawgrass Mills has no interest
rate hedging instruments) (dollars in thousands):
40
<PAGE>
<TABLE>
<CAPTION>
PRIOR TO REFINANCING
---------------------
FRANKLIN MILLS POTOMAC MILLS GURNEE MILLS
-------------- ------------- ------------
<S> <C> <C> <C>
Loan amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$165,000 $136,000 $151,152
Deferred cost type. . . . . . . . . . . . . . . . . . . . . . . . . .Rate buydown (1) Rate cap (2) Rate cap (3)
Deferred amount . . . . . . . . . . . . . . . . . . . . . . . . . . .$17,500 $5,834 $4,632
Current rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.13% 6.56% 7.50%
Effective rate with amortization of cap or buydown. . . . . . . . . .9.43% 7.42% 8.52%
Amortization:
Period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.6 yrs 5 yrs 3 yrs
End date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Dec-98 Oct-99 Apr-97
Annual amortization . . . . . . . . . . . . . . . . . . . . . . . . .$3,800 $1,167 $1,544
30-day LIBOR at December 16, 1996: 5.75%
</TABLE>
(1) On April 21, 1994 (IPO date), the Company paid $17.5 million to reduce the
interest rate on this mortgage to 7.125% from 9.625% and to extend the
maturity date.
(2) On October 19, 1994, the Company paid $5.8 million for an interest rate
cap. Through October 19, 1997, LIBOR is capped at 6.00%, provided LIBOR is
below 8.00%. If LIBOR is greater than 8.00%, the LIBOR cap increases to
8.00%. From October 20, 1997 through October 19, 1999, LIBOR is capped at
8.00%.
(3) On April 21, 1994 (IPO date), the Company paid $4.6 million for an interest
rate cap. Through April 1, 1997, LIBOR is capped at 5.25%, provided LIBOR
is below 7.25%. If LIBOR is 7.25% or above, the LIBOR cap increases to
6.25%.
ECONOMIC TRENDS
Because inflation has remained relatively low during the last three years,
it has had little impact on the operation of the Mills Entities and the Company
during that period. Even in periods of higher inflation, however, tenant leases
provide, in part, a mechanism to help protect the Company. As operating costs
increase, leases permit a pass-through of the common area maintenance and other
operating costs, including real estate taxes and insurance, to the tenants.
Furthermore, most of the leases contain base rent steps and percentage rent
clauses that provide additional rent after a certain minimum sales level is
achieved. These provisions provide some protection to the Company during highly
inflationary periods.
41
<PAGE>
SUMMARY OF OUTSTANDING INDEBTEDNESS
As of December 31, 1996, the Company had outstanding indebtedness in an
aggregate amount of approximately $730.1 million (excluding its pro rata share
of unconsolidated joint venture debt) as set forth below:
<TABLE>
<CAPTION>
SECURED PROPERTY: PRINCIPAL INTEREST MATURITY
- ----------------- BALANCE RATE TYPE ANNUAL INTEREST RATE DATE
------- --------- -------------------- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Potomac
Mills/Gurnee
Mills:
Tranche A. . . . . . . $212,000 Fixed 6.905% 12/17/26 (1)
Tranche B. . . . . . . 27,000 Fixed 7.021% 12/17/26 (1)
Tranche C. . . . . . . 15,000 Fixed 7.235% 12/17/26 (1)
Tranche D. . . . . . . 30,000 Fixed 7.701% 12/17/26 (1)
Franklin Mills and
Liberty Plaza:
Mortgage Loan. . . . . 165,000 Fixed 7.125% 12/01/98
Mortgage Loan. . . . . 859 Fixed 4.000% 4/01/09
Sawgrass Mills:
Tranche A. . . . . . . 115,000 Fixed 6.450% 1/18/01
Tranche B. . . . . . . 10,000 Variable with cap 85 bp over LIBOR (6) 1/18/01
Tranche C. . . . . . . 20,000 Variable with cap 230 bp over LIBOR(6) 1/18/01
Sawgrass Mills-
Phase II . . . . . . . . 12,000 Variable 235 bp over LIBOR 7/31/98
Western Hills. . . . . . 14,949 Fixed 7.675% 1/01/99
9 Community Centers. . . 74,218 Fixed 7.160% 1/31/01
Line of Credit . . . . . 19,683 Variable 300 bp over LIBOR 10/31/98
Revolving Master
Repurchase
Agreement . . . . . 10,556 Variable 125 bp over LIBOR
Other. . . . . . . . . . 3,848 Fixed 7.0% weighted average
--------
Total . . . . . . . $730,113
--------
--------
EARLIEST DATE
ANNUAL DEBT AT WHICH DEBT
SERVICE CAN BE REPAID
------- -------------
<S> <C> <C>
Potomac
Mills/Gurnee
Mills:
Tranche A. . . . . . . $14,547 (2)
Tranche B. . . . . . . 1,896 (2)
Tranche C. . . . . . . 1,085 (2)
Tranche D. . . . . . . 2,310 (2)
Franklin Mills and
Liberty Plaza:
Mortgage Loan. . . . . 11,756 (3)
Mortgage Loan. . . . . 34 (4)
Sawgrass Mills:
Tranche A. . . . . . . 7,418 (5)
Tranche B. . . . . . . 660 (7) (5)
Tranche C. . . . . . . 1,620 (7) (5)
Sawgrass Mills-
Phase II . . . . . . . . 972 (7) (8)
Western Hills. . . . . . 1,140 (9)
9 Community Centers. . . 5,314 (10)
Line of Credit . . . . . 1,722 (7) (11)
Revolving Master
Repurchase
Agreement . . . . . 739 (7) (11)
Other. . . . . . . . . . 269 (7) (12)
-------
Total . . . . . . . $51,482
-------
-------
</TABLE>
42
<PAGE>
(1) This indebtedness is a 30 year amortizing loan with a balloon payment on
or about December 18, 2003. The maturity date of the note is December 17,
2026. Principal repayments are based on the scheduled amortization,
assuming a 7% mortgage loan interest rate, over a 30 year period ending
on December 17, 2006, of the principal amount of the mortgage loan, with
the monthly amortization payments being applied sequentially, beginning
with Tranche A, to reduce the principal balances.
(2) Optional payments of principal are not permitted prior to December 17,
1999. After such date, prepayments, in whole or in part, are permitted
upon at least 15 days notice. In addition, the Company is required to pay
a prepayment penalty equal to the greater of (i) 1% of the remaining
principal balance or (ii) a yield preservation payment. Generally, yield
preservation payments are intended to compensate the lender for the total
amount of interest it would have earned on the indebtedness but for the
repayment, less the amount of interest that the lender could earn if it
invested the repayment amount in United States Treasury obligations or
other similar securities from the date of repayment through the maturity
date of the indebtedness.
(3) Prepayable, in whole but not in part, at any time upon 30 days prior
notice to the lender. If prepaid prior to September 1, 1998 (other than
as the result of a casualty loss or condemnation), the Company is
required to pay a prepayment penalty equal to the greater of (i) 1% of
the principal balance or (ii) a yield preservation payment.
(4) Prepayable, in whole or in part, at any time upon payment of a prepayment
penalty of .05% of the outstanding principal amount.
(5) Optional prepayments of principal on Tranche A of this indebtedness are
not permitted prior to June 20, 2000 other than in connection with
certain casualty or condemnation events occurring with respect to
Sawgrass Mills. On and after such date, Tranche A may be prepaid in full,
but not in part, without any prepayment penalty. Optional prepayments of
Tranches B and C of the indebtedness may be made, in whole or in part, at
any time without any prepayment penalty, but only if payments of interest
are current with respect to each outstanding Tranche and an event of
default is not then continuing.
(6) The loan agreement provides for a cap on LIBOR at 14% for the life of the
loan. LIBOR is capped at 14% for Tranches B and C.
(7) Calculated using 30-day LIBOR at 5.75%, which was the rate at
December 16, 1996.
(8) Prepayable, in whole or in part, at any time without prepayment penalty.
(9) Optional prepayments of principal are not permitted, in whole or in part,
prior to December 31, 1996. Thereafter, this indebtedness may be prepaid,
in whole or in part, upon 30 days notice to the lender and the payment of
a prepayment penalty. The penalty percentage due on prepayment at any
time during the first six months after December 1, 1996 is 3% of the
outstanding principal amount. Thereafter, the penalty decreases by 0.5%
per six month period to a minimum of 1.5%. During the last three months
of its term, the indebtedness may be prepaid without penalty.
(10) Prepayable, in whole or in part, at any time, upon 60 days prior notice
to the lender. Only in the case of a partial prepayment is the Company
required to pay a prepayment penalty which would equal the greater of
(i) 1% of the principal balance or (ii) a yield preservation payment.
(11) Prepayable, in whole or in part, at any time without prepayment penalty.
(12) Primarily corporate debt with maturities under one year. Prepayable, in
whole or in part, at any time without prepayment penalty.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is made to the index to Financial Statements and Schedules in
Item 14.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
43
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The directors and executive officers of the Company and their positions and
offices are set forth in the following table:
<TABLE>
<CAPTION>
NAME AGE POSITIONS AND OFFICES HELD
- ---- --- --------------------------
<S> <C> <C>
Laurence C. Siegel 44 Chairman of the Board, Chief Executive Officer and Director
Peter B. McMillan 49 President, Chief Operating Officer and Director
Dietrich von Boetticher 55 Vice Chairman and Director
John M. Ingram 61 Vice Chairman and Director
Charles R. Black, Jr. 49 Director
James C. Braithwaite 56 Director
The Hon. Joseph B. Gildenhorn 67 Director
Peter A. Gordon 54 Director
Herbert S. Miller 53 Director
Harry H. Nick 55 Director
Franz von Perfall 55 Director
Robert P. Pincus 50 Director
James F. Dausch 53 Executive Vice President - Development
Howard J. Samuels 42 Executive Vice President - Leasing
Kent S. Digby 44 Executive Vice President - Management and Marketing
Judith S. Berson 53 Executive Vice President - Leasing
Thomas E. Frost 44 Senior Vice President, General Counsel and Secretary
Thomas M. Hindert 43 Senior Vice President - Planning, Pre-development and Acquisition
Steven J. Jacobsen 41 Senior Vice President - Development
Kenneth R. Parent 36 Senior Vice President and Chief Financial Officer
James P. Whitcome 50 Senior Vice President - Capital Services
Barry H. Young 55 Senior Vice President - Specialty Leasing
</TABLE>
Biographical summaries of the directors and executive officers of the
Company are included under the caption "Board of Directors" and "Executive
Officers," respectively, in the Company's proxy statement for the 1997
Annual Meeting of Shareholders and are incorporated herein by reference.
Information required by Item 405 of Regulation S-K is included under the
caption "Section 16(a) Beneficial Ownership Reporting Compliance" in the
Company's proxy statement for the 1997 Annual Meeting of Shareholders and is
incorporated herein by reference.
44
<PAGE>
CERTAIN PROCEEDINGS
Four partnerships in which Herbert S. Miller was a general partner or owned
an interest in the general partner defaulted on mortgage obligations during the
three-year period ended December 31, 1992 and the partnerships lost the
properties they owned as a result. In two of these default situations the
lender filed a foreclosure action and the partnerships deeded the properties to
the lender in full satisfaction of the indebtedness. In one such default
situation where the lender filed a foreclosure action, the partnership filed a
petition for reorganization under Chapter 11 of the federal bankruptcy laws
after the partnership was unable to secure an extension of the loan term. The
bankruptcy proceeding was dismissed when the partnership reached an agreement
with the mortgage lender to deed the property to the mortgage lender in
satisfaction of the indebtedness. With respect to the other two partnership
defaults, the lender sought a foreclosure and a deficiency judgment against Mr.
Miller and the other general partners. Mr. Miller paid his portion of these
obligations in full in December 1993.
ITEM 11. EXECUTIVE COMPENSATION
Information with respect to executive compensation is incorporated herein
by reference to the information under the captions "Compensation of Directors"
and "Executive Compensation" in the Company's proxy statement for the 1997
Annual Meeting of Shareholders.
45
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information with respect to security ownership of certain beneficial owners
and management of the Company is incorporated herein by reference to the
information under the caption "Voting Securities and Principal Holders Thereof"
in the Company's proxy statement for the 1997 Annual Meeting of Shareholders.
ITEM 13. CERTAIN TRANSACTIONS
Information with respect to certain relationships and transactions is
incorporated herein by reference to the information under the caption "Certain
Relationships and Transactions" in the Company's proxy statement for the 1997
Annual Meeting of Shareholders.
46
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS AND FORM 8-K
14(a)(1) AND (2) FINANCIAL STATEMENTS AND SCHEDULES
THE MILLS CORPORATION AND THE MILLS ENTITIES Page
----
Report of Independent Auditors F-1
Consolidated Balance Sheets F-2
Consolidated and Combined Statements of
Operations F-3
Consolidated and Combined Statements of
Stockholders' Equity F-4
Consolidated and Combined Statements of
Cash Flows F-5
Notes to Consolidated Financial Statements F-6
FINANCIAL STATEMENT SCHEDULES
Schedule III - Schedule of Consolidated Real
Estate and Accumulated Depreciation F-20
Notes to Schedule III F-21
All other schedules for which provision is made in the
applicable accounting regulations of the Securities and
Exchange Commission are not required under the related
instructions, are included in the consolidated financial
statements or are inapplicable and therefore have been
omitted.
14(a)(3) EXHIBITS
NUMBER EXHIBIT
------ -------
1.1 None
2.1 None
*3.1 Amended and Restated Certificate of Incorporation of the
Company.
**3.2 Amended and Restated Bylaws of the Company
**3.3 Limited Partnership Agreement of the Operating Partnership
(filed as part of Exhibit 10.3)
*4.1 Specimen Common Stock Certificate of Company
*4.2 Agreement dated March 15, 1994, among Richard L. Kramer, the
A.J. 1989 Trust, the Irrevocable Intervivos Trust for the
Benefit of the Kramer Children, the N Street Investment
Trust, Equity Resources Associates, Herbert S. Miller, The
Mills Corporation and The Mills Limited Partnership (filed
as Exhibit 10.19)
**4.3 Non-Affiliate Registration Rights and Lock-Up Agreement
**4.4 Affiliate Registration Rights and Lock-Up Agreement
47
<PAGE>
NUMBER EXHIBIT
------ -------
*10.1 Form of Employee Non-Compete/Employment Agreements
*10.2 1994 Executive Equity Incentive Plan
**10.3 Limited Partnership Agreement of Operating Partnership
*10.4 Option Agreement (Sunrise Residual/Parcels 4 and 5)
*10.5 Form of Noncompetition Agreement between the Company, the
Operating Partnership and each of Kan Am and the Kan Am
Partnerships
*10.6 Form of Noncompetition Agreement with Kan Am Directors
*10.7 Trust and Servicing Agreement, dated as of December 1, 1993,
among Sawgrass Finance L.L.C., as depositor, The First
National Bank of Chicago, as servicer, and State Street Bank
and Trust Company, as Trustee
*10.8 Amended and Restated Mortgage, Security Agreement,
Assignment of Lessee and Rents and Fixture filing, dated as
of December 1, 1993, by Sunrise Mills Limited Partnership,
as mortgagor, in favor of Sawgrass Finance L.L.C., as
mortgagee
*10.9 Assignment of Leases and Rents, dated as of December 1,
1993, between Sunrise Mills Limited Partnership and Sawgrass
Finance L.L.C.
*10.10 Assignment of Note, Mortgage, and Assignment of Rents
dated as of December 21, 1993, by Sawgrass Finance L.L.C.
in favor of State Street Bank & Trust Co.
*10.11 Promissory Note, dated as of November 16, 1993, by Western
Hills Associates Limited Partnership in favor of Connecticut
General Life Insurance Company
*10.12 Assignment of Rents and Leases, dated as of November 16,
1993, by Western Hills Associates Limited Partnership in
favor of Connecticut General Life Insurance Company
*10.13 Open-End Mortgage, Security Agreement and Fixture
Filing, dated as of November 16, 1993, by Western Hills
Associates Limited Partnership in favor of Connecticut
General Life Insurance Company
*10.19 Agreement dated March 15, 1994 among Richard L. Kramer, the
A.J. 1989 Trust, the Irrevocable Intervivos Trust for the
Benefit of the Kramer Children, the N Street Investment
Trust, Equity Resources Associates, Herbert S. Miller, The
Mills Corporation and The Mills Limited Partnership
*10.20 Form of Promissory Note made payable by Franklin Mills
Associates Limited Partnership to and for the benefit of
the Operating Partnership
*10.21 Form of Mortgage, Security Agreement and Assignment
of Rents and Leases by Franklin Mills Associates Limited
Partnership to and for the benefit of the Operating
Partnership
*10.22 Form of Sale of Partnership Interests Agreement (Franklin
Mills) by and between the Operating Partnership and Herbert
S. Miller, Laurence C. Siegel, Harry H. Nick, Western
Franklin Mills Corp., Kan Am USA IX Limited Partnership and
Kan Am USA X Limited Partnership
*10.23 Form of Indemnification Agreement between the Company and
each of its Directors and Executive Officers
48
<PAGE>
NUMBER EXHIBIT
------ -------
*****10.24 Construction Loan Agreement dated November 9, 1995, by and
between Ontario Mills Limited Partnership and Canadian
Imperial Bank of Commerce, Bayerische Hypotheken-Und
Wechsel-Bank Aktiengesellschaft and The Mitsubishi Bank of
Commerce
*****10.25 Construction Deed of Trust, Security Agreement, Assignment
of Leases and Rents, Fixture Filing and Financing Statement
dated as of December 26, 1995 in favor of Canadian Imperial
Bank of Commerce, Bayerische Hypotheken-Und Wechsel-Bank
Aktiengesellschaft and The Mitsubishi Bank of Commerce
*****10.26 Loan Agreement dated as of January 31, 1996 by and among
Coopers Crossing Associates (MLP) Limited Partnership,
Crosswinds Center Associates of St. Petersburg (MLP) Limited
Partnership, Echo Hills Center Associates (MLP) Limited
Partnership, Fashion Center Associates of Illinois No. 1
(MLP) Limited Partnership, Fashion Place Associates (MLP)
Limited Partnership, Germantown Development Associates (MLP)
Limited Partnership, Gwinnett Market Fair Associates (MLP)
Limited Partnership, Montgomery Village Associates (MLP)
Limited Partnership, Montgomery Village Ground (MLP) Limited
Partnership, Mount Prospect Plaza (MLP) Limited Partnership
(collectively, "The Mills Corporation, et. al."), and PFL
Life Insurance Company
*****10.27 First Amended and Restated Promissory Note dated as of
January 31, 1996, made by and among The Mills Corporation,
et al., and PFL Life Insurance Company
*****10.28 Absolute Assignment of Mortgage and Loan Documents dated
January 31, 1996 by and between CS First Boston Mortgage
Capital Corp., as assignor, and PFL Life Insurance Company,
as assignee
10.29-10.47 Intentionally Omitted
******10.48 Note dated July 30, 1996 by Sawgrass Mills Phase II
Limited Partnership in favor of CS First Boston Mortgage
Capital Corporation.
******10.49 Mortgage, Security Agreement, Assignment of Leases and Rents
and Fixture Filing dated as of July 30, 1996, between
Sawgrass Mills Phase II Limited Partnership, as Mortgagor,
and CS First Boston Mortgage Capital Corporation, as
Mortgagee.
****10.50 First Amendment to Trust and Servicing Agreement (Exhibit
10.7) dated as of June 1, 1995, among Sawgrass Finance
L.L.C., as depositor, The First National Bank of Chicago, as
servicer, and State Street Bank and Trust Company, as
trustee.
****10.51 Prepayment Premium Agreement dated as of June 1, 1995,
between The Mills Limited Partnership and State Street Bank
and Trust Company, as trustee.
49
<PAGE>
NUMBER EXHIBIT
------ -------
10.52 Second Amendment and Restated Deed of Trust, Security
Agreement, Assignment of Rents and Fixture Filing by
Potomac Mills-Phase III (MLP) Limited Partnership and
Washington Outlet Mall (MLP) Limited Partnership,
collectively, as Grantor to R. Eric Taylor, a resident
of Fairfax County, Virginia as Deed Trustee for the
benefit of CS First Boston Mortgage Capital Corp.,
as Beneficiary dated as of December 17, 1996.
10.53 Form of Assignment of Leases and Rents and Security
Deposits dated as of December 17, 1996 by Potomac Mills-
Phase III (MLP) Limited Partnership and Washington Outlet
Mall (MLP) Limited Partnership to CS First Boston Mortgage
Capital Corp.
10.54 Mortgage Security Agreement, Assignment of Rents and
Fixture Filing by Gurnee Mills (MLP) Limited Partnership
to CS First Boston Mortgage Capital Corp., as Mortgagee
dated as of December 17, 1996
10.55 Form of Assignment of Leases and Rents and Security
Deposits dated as of December 17, 1996 by Gurnee Mills (MLP)
Limited Partnership to CS First Boston Mortgage Capital
Corp. (See Exhibit 10.53)
10.56 Trust and Servicing Agreement dated as of December 17, 1996
among Potomac Gurnee Finance Corp., as Depositor, AMRESCO
Management, Inc., as Servicer, ABN AMRO Bank NY, as Fiscal
Agent and LaSalle National Bank as Trustee.
10.57 Credit Agreement dated as of October 28, 1996, among The
Mills Corporation, The Mills Limited Partnership, Sawgrass
Mills Phase II Limited Partnership, Sunrise Mills (MLP)
Limited Partnership, and CS First Boston Mortgage Capital
Corp.
10.58 General Pledge and Security Agreement, dated as of October
28, 1996 made by The Mills Limited Partnership, in favor of
CS First Boston Mortgage Capital Corp.
10.59 Intercompany Pledge and Security Agreement dated as of
October 28, 1996, made by The Mills Limited Partnership,
The Mills Corporation, Sunrise Mills (MLP) Limited
Partnership and Sawgrass Mills Phase II Limited
Partnership in favor of CS First Boston Mortgage Capital
Corp.
10.60 Assignment of Partnership Interest dated as of the 28th day
of October, 1996 from The Mills Limited Partnership,
to CS First Boston Mortgage Capital Corp.
10.61 Revolving Note dated as of October 28, 1996 from The Mills
Limited Partnership to CS First Boston Mortgage Capital
Corp. in the maximum amount of $40,000,000.
11 Statement Re: Computation of Per Share Earnings.
21.1 List of Subsidiaries of the Registrant
23 Consent of Independent Auditors
* Incorporated by reference to the Registrant's Registration Statement
on Form S-11, Registration No. 33-71524, which was declared effective
by Securities and Exchange Commission on April 14, 1994.
** Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q for the first quarter ended March 31, 1994.
*** Incorporated by reference to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1994.
**** Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q for the second quarter ended June 30, 1995.
***** Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1995
****** Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q for the third quarter ended September 30, 1996.
14(b) REPORTS ON FORM 8-K
The Company filed two reports on Form 8-K during the last
quarter of the year ended December 31, 1996.
The Company's Current Report on Form 8-K dated November 21,
1996, announced the Company's plans to refinance the
indebtedness on Potomac Mills and Gurnee Mills. The
Company's Current Report on Form 8-K dated December 17, 1996
announced the closing of the refinancing of the Potomac
Mills and Gurnee Mills indebtedness through a fixed rate
securitization.
50
<PAGE>
14(c) EXHIBITS
The list of exhibits filed with this report is set forth in
response to item 14(a)(3). The required exhibit index has
been filed with the exhibits.
14(d) FINANCIAL STATEMENTS
Schedule III - Schedule of Consolidated Real Estate and
Accumulated Depreciation
Notes to Schedule III.
51
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
The Mills Corporation
We have audited the accompanying consolidated balance sheets of The Mills
Corporation as of December 31, 1996 and 1995, and the related consolidated
statements of operations, stockholders' equity and cash flows for the years
ended December 31, 1996 and 1995 and for the period from April 22, 1994 to
December 31, 1994. We have also audited the combined statements of operations,
owners' deficit, and cash flows of the Mills Entities for the period from
January 1, 1994 to April 21, 1994. Our audits also included the financial
statement schedule listed in the Index at Item 14(a). These financial state-
ments and schedule are the responsibility of the management of The Mills
Corporation. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing stan-
dards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of The Mills Corpora-
tion as of December 31, 1996 and 1995, and the consolidated results of its
operations and its cash flows for the years ended December 31, 1996 and 1995 and
for the period from April 22, 1994 to December 31, 1994, and the combined
results of operations and cash flows of The Mills Entities for the period from
January 1, 1994 to April 21, 1994, in conformity with generally accepted
accounting principles. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements taken as
a whole, presents fairly in all material respects the information set forth
therein.
ERNST & YOUNG LLP
Washington, D.C.
February 21, 1997
F-1
<PAGE>
THE MILLS CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1995
----------------- -----------------
<S> <C> <C>
ASSETS
Income producing property:
Land and land improvements $ 164,420 $ 165,994
Building and improvements 662,469 652,706
Furniture, fixtures and equipment 22,221 21,943
Less: accumulated depreciation and amortization (179,658) (152,713)
--------- ---------
Total income producing property 669,452 687,930
Land held for investment and/or sale 3,564 3,225
Construction in progress 28,259 36,282
Investment in unconsolidated joint ventures 66,688 14,115
--------- ---------
Total real estate and development assets 767,963 741,552
Cash and cash equivalents 6,327 14,550
Restricted cash 13,215 19,354
Accounts receivable 19,165 17,274
Notes receivable 7,167 7,357
Deferred costs, net 45,655 49,596
Other assets 3,132 3,374
--------- ---------
TOTAL ASSETS $ 862,624 $ 853,057
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Deed of Trusts, notes, and loans payable $ 730,113 $ 676,435
Accounts payable and other liabilities 43,011 39,375
--------- ---------
Total liabilities 773,124 715,810
Minority interest 43,975 66,839
Stockholders' equity:
Common stock $.01 par value, authorized 100,000,000 shares,
issued and outstanding 16,907,164 and 16,905,953 shares in
1996 and 1995, respectively 169 169
Additional paid-in capital 309,813 309,813
Accumulated deficit (264,457) (239,574)
--------- ---------
Total stockholders' equity 45,525 70,408
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 862,624 $ 853,057
--------- ---------
--------- ---------
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
F-2
<PAGE>
THE MILLS CORPORATION (THE COMPANY) AND
THE MILLS ENTITIES (THE PREDECESSOR TO THE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS OF THE
COMPANY AND THE COMBINED STATEMENTS OF OPERATIONS OF THE PREDECESSOR
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THE MILLS CORPORATION THE MILLS ENTITIES
----------------------------------------------- ------------------
FOR THE PERIOD FOR THE PERIOD
YEAR ENDED YEAR ENDED FROM APRIL 22 FROM JANUARY 1
DECEMBER 31 DECEMBER 31 TO DECEMBER 31 TO APRIL 21
1996 1995 1994 1994
------------ ----------- -------------- --------------
<S> <C> <C> <C> <C>
REVENUES:
Minimum rent $ 94,678 $ 89,839 $ 62,174 $ 25,970
Percentage rents 4,216 4,460 2,575 1,366
Recoveries from tenants 45,761 44,267 28,283 12,611
Other revenues 7,616 6,537 3,966 976
Fee income 3,639 3,975 2,118 914
Interest income 2,850 2,431 1,556 402
-------- -------- -------- --------
158,760 151,509 100,672 42,239
EXPENSES:
Recoverable from tenants 41,308 39,299 26,002 11,578
Other operating 6,170 5,231 3,069 3,629
General and administrative 8,725 7,808 5,272 3,031
Interest expense 45,885 43,947 28,349 17,992
Depreciation and amortization 39,020 40,815 28,805 10,686
-------- -------- -------- --------
141,108 137,100 91,497 46,916
Other income (expense) 1,073 859 (1,881) 478
Equity in earnings of unconsolidated joint ventures 2,661 - - -
-------- -------- -------- --------
Income (loss) before extraordinary item
and minority interest 21,386 15,268 7,294 (4,199)
Extraordinary (loss) gain on debt extinguishment (5,301) (419) (5,414) 46
-------- -------- -------- --------
Income (loss) before minority interest 16,085 14,849 1,880 (4,153)
Minority interest (7,904) (7,231) (915) -
-------- -------- -------- --------
Net income (loss) $ 8,181 $ 7,618 $ 965 $ (4,153)
-------- -------- -------- --------
-------- -------- -------- --------
Income per share (Note 2)
before extraordinary items $ .64 $ .46 $ .22
-------- -------- --------
-------- -------- --------
Net income per share (Note 2) $ .48 $ .45 $ .06
-------- -------- --------
-------- -------- --------
Dividends declared per common share $ 1.89 $ 1.89 $ 1.31
-------- -------- --------
-------- -------- --------
Tax treatment of dividends (unaudited):
Ordinary income $ .66 $ .60 $ .54
-------- -------- --------
-------- -------- --------
Capital gains $ - $ .06 $ -
-------- -------- --------
-------- -------- --------
Return of capital $ 1.23 $ 1.23 $ .77
-------- -------- --------
-------- -------- --------
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
F-3
<PAGE>
THE MILLS CORPORATION (THE COMPANY) AND
THE MILLS ENTITIES (THE PREDECESSOR TO THE COMPANY)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY OF THE
COMPANY AND THE COMBINED STATEMENTS OF OWNERS' DEFICIT OF THE PREDECESSOR
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON
STOCK PAR ADDITIONAL ACCUMULATED
(SHARES) VALUE PAID-IN CAPITAL DEFICIT TOTAL
-------- ------ --------------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1993 $ $ $ (74,540) $ (74,540)
Contributions 12,658 12,658
Distributions (22,891) (22,891)
Net loss (4,153) (4,153)
------- ---- -------- --------- ---------
Balance, April 21, 1994 (88,926) (88,926)
Net proceeds from initial public offering 16,906 169 309,813 309,982
Net effect of REIT formation adjustments 6,091 6,091
Minority interest ownership in
operating partnership (110,628) (110,628)
Dividends declared (22,189) (22,189)
Net income 965 965
------- ---- -------- --------- ---------
Balance, December 31, 1994 16,906 169 309,813 (214,687) 95,295
REIT formation settlement adjustments (553) (553)
Dividends declared (31,952) (31,952)
Net income 7,618 7,618
------- ---- -------- --------- ---------
Balance, December 31, 1995 16,906 169 309,813 (239,574) 70,408
Conversion of operating partnership units 1
Change in ownership - Note 1 (596) (596)
REIT formation settlement adjustments (516) (516)
Dividends declared (31,952) (31,952)
Net income 8,181 8,181
------- ---- -------- --------- ---------
Balance, December 31, 1996 16,907 $169 $309,813 $(264,457) $ 45,525
------- ---- -------- --------- ---------
------- ---- -------- --------- ---------
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
F-4
<PAGE>
THE MILLS CORPORATION (THE COMPANY) AND
THE MILLS ENTITIES (THE PREDECESSOR TO THE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS OF THE
COMPANY AND THE COMBINED STATEMENTS OF CASH FLOWS OF THE PREDECESSOR
(IN THOUSANDS)
<TABLE>
<CAPTION>
THE MILLS CORPORATION THE MILLS ENTITIES
----------------------------------------------- ------------------
FOR THE PERIOD FOR THE PERIOD
YEAR ENDED YEAR ENDED FROM APRIL 22 FROM JANUARY 1
DECEMBER 31 DECEMBER 31 TO DECEMBER 31 TO APRIL 21
1996 1995 1994 1994
------------ ----------- -------------- --------------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Income (loss) before minority interest $ 16,085 $ 14,849 $ 1,880 $ (4,153)
Adjustments to reconcile income (loss) before minority
interest to net cash provided by operating activities:
Net accretion of note receivable (700) (700) (555) (160)
Depreciation and amortization 42,816 44,618 31,494 10,686
Provision for losses on accounts receivable 441 848 485 455
Equity in earnings of unconsolidated joint ventures (2,661) - - (478)
Net gain on sales of property (1,048) (1,709) (2,428) -
Extraordinary loss (gain) on debt extinguishment 5,301 419 5,414 (46)
Loss on disposal of property held for sale - - 3,425 -
Other changes in assets and liabilities:
(Increase) decrease in accounts receivable (2,458) (1,135) (4,684) 2,304
(Increase) decrease in notes receivable 890 1,361 229 745
(Increase) decrease in other assets 242 1,042 1,028 (2,279)
(Decrease) increase in accounts payable
and other liabilities 4,354 2,230 (2,193) 3,901
-------- -------- --------- --------
Net cash provided by operating activities 63,262 61,823 34,095 10,975
INVESTING ACTIVITIES:
Investment in real estate and development assets (56,768) (58,541) (128,410) (7,259)
Proceeds from sale of property 5,060 6,327 17,129 2,363
Deferred costs (15,760) (6,260) (35,332) 1,261
-------- -------- --------- --------
Net cash used in investing activities (67,468) (58,474) (146,613) (3,635)
FINANCING ACTIVITIES:
Proceeds from mortgages, notes and loans payable 423,029 85,233 59,471 15,526
Repayments of mortgages, notes and loans payable (369,351) (26,193) (169,198) (20,940)
Payments to terminate interest rate swap agreements - - (2,061) -
Funding (to) from affiliates - 834 (48,857) 26,580
Restricted cash 6,139 (6,434) 4,967 (4,583)
Net proceeds from common stock offering - - 309,982 -
Contributions from partners - - 2,743 3,686
Dividends (31,952) (31,952) (14,201) -
Distributions (31,882) (30,344) (26,545) (22,891)
-------- -------- --------- --------
Net cash provided by (used in) financing activities (4,017) (8,856) 116,301 (2,622)
-------- -------- --------- --------
Net increase (decrease) in cash and cash equivalents (8,223) (5,507) 3,783 4,718
Cash and cash equivalents at beginning of period 14,550 20,057 16,274 11,556
-------- -------- --------- --------
Cash and cash equivalents at end of period $ 6,327 $ 14,550 $ 20,057 $ 16,274
-------- -------- --------- --------
-------- -------- --------- --------
Supplemental disclosures of cash flow information:
Cash paid for interest, net of amounts capitalized $ 45,785 $ 43,748 $ 30,528 $ 16,027
-------- -------- --------- --------
-------- -------- --------- --------
</TABLE>
See Accompany Notes to Consolidated Financial Statements.
F-5
<PAGE>
THE MILLS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(DOLLARS IN THOUSANDS, UNLESS OTHERWISE INDICATED)
1. ORGANIZATION AND BASIS OF PRESENTATION
ORGANIZATION
The Mills Corporation (the "Company") was incorporated in Virginia on
January 2, 1991 and was reincorporated in Delaware in 1994. The Company
elected to be taxed as a real estate investment trust ("REIT") under the
Internal Revenue Code of 1986, as amended, commencing with its year ended
December 31, 1994. In connection with its re-incorporation, the Company
completed its initial public offering of 14,380,000 shares of its common
stock (the "Common Stock") on April 21, 1994 (the "Offering"). The net
proceeds of the Offering of approximately $310 million and other assets of
the Company were contributed to The Mills Limited Partnership (the "Operating
Partnership") in exchange for a 51.3% interest therein, including a 1%
interest as the sole general partner. Kan Am U.S., Inc. and certain of its
affiliates ("Kan Am"), owned directly or indirectly 41.1% of the partnership
interests ("Units") in the Operating Partnership. Also in connection with the
Offering, the Company was authorized to issue 20,000,000 shares of preferred
stock, par value $.01 per share (the "Preferred Stock"). The Board of
Directors of the Company may determine the preferences, rights and other
terms of Preferred Stock to be issued. As of December 31, 1996, there were
no shares of Preferred Stock outstanding. In January 1996, Kan Am was issued
274,777 additional Units in exchange for an approximately 6.25% interest in
Franklin Mills Associates Limited Partnership. This transaction resulted in
an increase in Kan Am's interest in the Operating Partnership to 41.6% and a
decrease in the Company's interest to 50.9%. The Operating Partnership was
formed prior to consummation of the Offering and is the successor to the
operations of the Mills Entities (the "Predecessor").
Simultaneously with the Offering, the individual property partnerships
comprising the Predecessor transferred their assets to the Operating
Partnership in exchange for Units and/or the assumption of their debt. Such
Units are exchangeable into Common Stock of the Company or cash (at the
option of the Company, as the general partner of the Operating Partnership)
equal to the fair market value of the number of shares of Common Stock into
which such Units are exchangeable. As of December 31, 1996, the Company has
reserved 16,331,306 shares of Common Stock for the exchange of such Units.
The Operating Partnership also acquired certain investors' interests in the
Mills Entities for cash and Units. Purchase accounting was applied to the
acquisition of all investor interests for which cash consideration was paid.
Contributed assets and liabilities related to interests of all Mills Entities
which received only Units and/or the assumption of debt by the Operating
Partnership have been accounted for as a reorganization of entities under
common control, and, accordingly, have been recorded at the Predecessor's
cost.
The net effect of the REIT formation adjustments and the REIT formation settle-
ment adjustments included in the accompanying statement of stockholders' equity
consists of distributions of assets or return of capital not intended for
inclusion in the REIT, conversion of debt due promoters to equity, contributions
of interest not previously included in the Mills Entities and the effects of
applying purchase accounting for acquisition of certain investors' interests in
the Mills Entities for cash and Units.
Disclosures made herein with respect to any period ended prior to April 22,
1994, are to be read as disclosures of Predecessor. All disclosures made in
reference to periods subsequent to April 21, 1994, are disclosures of the
Company.
The Company, which conducts all of its business through the Operating
Partnership, is engaged primarily in the ownership, development,
redevelopment, leasing, and management of super-regional, value and
entertainment-oriented outlet malls (the "Mills") and community shopping
centers (the "Community Centers"). As of December 31, 1996, the Operating
Partnership owns or holds an interest in the following operating properties:
F-6
<PAGE>
THE MILLS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(DOLLARS IN THOUSANDS, UNLESS OTHERWISE INDICATED)
PROPERTY NAME LOCATION
------------- --------
Franklin Mills Philadelphia, PA
Gurnee Mills Gurnee, IL (Chicago)
Potomac Mills Woodbridge, VA (Washington, DC)
Sawgrass Mills Sunrise, FL (Ft. Lauderdale)
Ontario Mills Ontario, CA (Los Angeles)
COMMUNITY CENTERS
-----------------
Butterfield Plaza Downers Grove, IL
Coopers Crossing Voorhees, NJ
Crosswinds Center St. Petersburg, FL
Fashion Place Columbia, SC
Germantown Commons Germantown, MD
Gwinnett Marketfair Duluth, GA
Liberty Plaza Philadelphia, PA
Montgomery Village Gaithersburg, MD
Mount Prospect Plaza Mount Prospect, IL
West Falls Church Outlet Center Falls Church, VA
Western Hills Plaza Cincinnati, OH
In addition to the operating properties, the Company is actively involved in the
development of a number of new Mills and sale of certain outparcels of land.
BASIS OF PRESENTATION
The accompanying consolidated financial statements of the Company include
the accounts of the Company and its subsidiaries, including its majority
owned subsidiary, the Operating Partnership. The accounts of the Operating
Partnership include the accounts of all Properties which are wholly-owned
or controlled by the Operating Partnership, as well as its wholly-owned
subsidiaries Mills Management LLC ("Mills Management") and Management
Associates Limited Partnership ("MALP"). In addition, the Operating
Partnership owns 5% of the voting common stock and 99% of the preferred
stock of the Mills Services Corporation ("MSC"), an entity formed in
connection with the Offering to provide development, management, leasing
and financing services to the Company and other entities owned by affiliates
of the Company. As a result of the Operating Partnership's ownership of 99%
of the economic interests, MSC is consolidated with the Operating
Partnership. The Company's investments in the partnerships that own Ontario
Mills, Ontario Mills Residual, Grapevine Mills, Grapevine Mills Residual,
Arizona Mills, Columbus Mills and Mills City, which represent
non-controlling ownership interests, are accounted for using the equity
method of accounting (see Note 4).
All significant intercompany transactions and balances have been eliminated in
consolidation. Minority interests represent the ownership interests in the
Operating Partnership not held by the Company.
The financial statements for the period January 1, 1994 to April 21, 1994,
reflect the results of operations of the Predecessor. Such financial
statements have been presented on a combined basis because the properties
were under common ownership and control and because the entities were the
subject of the business combination described above. All significant
intercompany transactions and accounts have been eliminated.
F-7
<PAGE>
THE MILLS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(DOLLARS IN THOUSANDS, UNLESS OTHERWISE INDICATED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INCOME PRODUCING PROPERTY
Income producing property is stated at cost. The Company adopted SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of" in 1995 whereby impairment losses will be recorded if events and
circumstances indicate that the assets might be impaired and the undiscounted
cash flows estimated to be generated by the assets are less than their carrying
amount. The adoption of SFAS No. 121 had no material effect on the financial
statements. Income producing property includes all costs related to acquisi-
tion, development, leasing and construction, including tenant improvements,
interest incurred during construction and certain direct and indirect costs of
the development department. Maintenance and repairs are charged to expense as
incurred. Depreciation expense is computed using the straight-line method over
the estimated useful lives of the assets, as follows:
Buildings and improvements 40 years
Land improvements 20 years
Furniture, fixtures and equipment 7 years
Total interest expense capitalized to real estate and development assets was
$7,171, $6,046 and $1,219 for the years ended December 31, 1996, 1995 and 1994,
respectively.
INCOME RECOGNITION
The Company, as lessor, has retained substantially all the risks and benefits of
ownership and accounts for its leases as operating leases. Minimum rent from
income producing property are recognized on a straight-line basis over the terms
of the respective leases. Percentage rents are recognized on an accrual basis.
Recoveries from tenants for real estate taxes and other operating expenses are
recognized as revenue in the period the applicable costs are incurred.
Management, leasing and development fees relating to entities not controlled by
the Company are recognized as revenue as they are earned.
DEFERRED COSTS
Deferred costs consist of loan fees and related expenses which are amortized on
a straight-line basis that approximates the interest method over the terms of
the related notes and leasing charges, including tenant construction allowances
and direct salaries and other costs incurred by the Company to obtain a lease,
which are amortized over the terms of the related leases.
Total accumulated amortization of deferred costs was $57,608 and $70,740 at
December 31, 1996 and 1995, respectively.
In connection with the 1996 refinancing of debt described in Note 5,
unamortized deferred financing costs of $6,829 and a prepayment penalty of
$600 net of the proceeds from the sale of interest rate cap agreements of
$557 and the reversal of accruals for straight-line interest expense of
$1,571 were written off and are included as extraordinary items for 1996.
Deferred financing costs of $419 associated with a line of credit that was
paid in full during 1995 were written off and included as an extraordinary
item for 1995. In connection with the Offering, deferred financing costs
aggregating $3,118, associated with debt that was retired or paid down with
the proceeds of the Offering, as well as
F-8
<PAGE>
THE MILLS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(DOLLARS IN THOUSANDS, UNLESS OTHERWISE INDICATED)
prepayment penalties of $235 and payments of $2,061 to terminate interest rate
swap agreements, were written off and are included as an extraordinary item in
the accompanying statement of operations for the period from April 22, 1994 to
December 31, 1994.
CASH AND CASH EQUIVALENTS
All highly liquid investments with an original maturity of three months or less
are considered to be cash equivalents.
RESTRICTED CASH
Restricted cash primarily consists of funds invested in cash collateral ac-
counts. The purpose of the cash collateral accounts is to hold proceeds from
certain transactions and to fund maintenance reserves, interest, taxes and
payments on debt. The cash collateral accounts are controlled by the lenders.
INCOME TAXES
Federal income taxes are not provided for because the Company believes it
qualifies as a REIT under the provisions of the Internal Revenue Code ("IRC")
and will distribute in excess of its taxable income to its shareholders. As
a REIT, the Company is required to distribute at least 95% of its taxable
income to shareholders and to meet certain other requirements. The
differences between net income available to common shareholders for financial
reporting purposes and taxable income before dividend deductions relate
primarily to temporary differences, principally real estate depreciation.
MSC, the Company's consolidated (for GAAP purposes) IRC subchapter C corporate
subsidiary, is subject to federal income taxes at the prevailing tax rates.
However, MSC has no current provision for federal taxes due to its federal net
operating loss carry forwards of approximately $15 million and $9.2 million at
December 31, 1996 and 1995, respectively.
No provision for income taxes has been made in the financial statements of the
Predecessor because the entities included in the combined financial statements
were not subject to tax.
INTEREST RATE RISK MANAGEMENT
Prior to the refinancing of the Gurnee Mills and Potomac Mills debt in December
1996 (see Note 5), the Company used interest rate cap agreements to reduce the
potential impact of increases in interest rates relating to the floating rate
portion of certain of its borrowings. In addition, in connection with the
Offering, the Company purchased an interest rate buy-down from the lender on one
of its Mills properties. These costs are deferred and amortized on a straight-
line basis that approximates the interest method over the terms of the related
notes. Upon the refinancing of the Gurnee Mills and Potomac Mills debt, the
interest rate caps were sold and the excess of the net unamortized costs were
expensed and included in the extraordinary loss on debt extinguishment (see
"Deferred Costs"). Unamortized costs related to these agreements aggregated
approximately $7,219 and $17,434 at December 31, 1996 and 1995, respectively,
and are included in deferred costs.
NET INCOME PER SHARE
Net income per share for the years ended December 31, 1996 and December 31,
1995, and for the period April 22, 1994 to December 31, 1994, is based on the
weighted average number of common shares and common equivalent shares
outstanding during such period (17,009,000 at December 31, 1996, and 16,906,000
at December 31, 1995
F-9
<PAGE>
THE MILLS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(DOLLARS IN THOUSANDS, UNLESS OTHERWISE INDICATED)
and prior). Units in the Operating Partnership (16,331,000
and 16,058,000 outstanding at December 31, 1996 and 1995, respectively) may be
exchanged for shares of common stock of the Company on a one-for-one basis in
certain circumstances (See Note 1). This exchange right has not been consid-
ered in the computation of per share data as it does not have a dilutive effect.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
RECLASSIFICATIONS
Certain previously reported amounts have been reclassified to conform with the
current year presentation.
3. NOTES RECEIVABLE
Notes receivable include $7,080 and $7,239 at December 31, 1996 and 1995,
respectively, relating to a reimbursement and annexation agreement with the
Village of Gurnee ("Village") to reimburse the owner of Gurnee Mills for the
cost of certain public improvements. The Village has executed a non-interest
bearing note for $15,000 to be paid from taxes collected from tenants of Gurnee
Mills during a ten-year period beginning one year after Gurnee Mills opened in
August 1991. In 1996, the note was amended to $17,500 to be paid over a
thirteen year period. The note was recorded in 1991 at its net present value,
based on the estimated taxes to be collected by the Village using a discount
rate of 10%. Interest income accreted was approximately $700, $700 and $715 for
the years ended December 31, 1996, 1995 and 1994, respectively. For the years
ended December 31, 1996, 1995 and 1994, collections from the Village totaled
$908, $880 and $808, respectively.
4. INVESTMENT IN UNCONSOLIDATED JOINT VENTURES
Certain Mills and Mills under development are partially owned through joint
ventures ("Joint Ventures"). The Company is also a general partner of these
Joint Ventures. The Company's interest in each Joint Venture is as follows:
Ownership %
Joint Venture as of 12/31/96
------------- --------------
Ontario Mills 50.0%
Grapevine Mills 37.5%
Arizona Mills 35.0%
Columbus Mills 75.0%
Mills City at Orange 50.0%
The Company does not control these Joint Ventures as major business decisions
require the approval of at least one other general partner. As a result, its
investments are accounted for under the equity method, where the investments are
recorded at cost and subsequently adjusted for net equity in income (loss) and
cash contributions and distributions. The Company eliminates intercompany
profits on sales of services that are capitalized by the Joint Ventures.
F-10
<PAGE>
THE MILLS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(DOLLARS IN THOUSANDS, UNLESS OTHERWISE INDICATED)
In connection with the Joint Venture agreements, the Company is committed to
providing certain levels of equity in addition to the amounts invested to date.
The Company has guaranteed repayment of $84.7 million of the Joint Venture debt
until certain debt service coverage tests are met. In addition, the Company is
contingently liable for property taxes and assessments levied against Ontario
Mills Limited Partnership by the City of Ontario Special Assessment District.
The aggregate amount of the special tax assessment is approximately $26,000 and
will be collected over a 25 year period to fund debt service on bonds issued by
the City to fund the infrastructure improvements.
Combined balance sheet and results of operations information is presented below
for all Joint Ventures at December 31, 1996 and for the year then ended:
December 31, 1996
-----------------
Assets:
Income producing assets $124,208
Construction in progress 108,854
Other 65,938
--------
$299,000
--------
--------
Liabilities and partners' equity:
Debt $ 99,021
Other liabilities 50,902
Operating Partnership's accumulated equity 41,959
Joint Venture partners' accumulated equity 107,118
--------
$299,000
--------
--------
Year Ended
December 31, 1996
-----------------
Revenues $ 3,720
Recoverable and other property expenses (1,085)
Interest expense (523)
Depreciation and amortization (1,268)
Other 5,489
--------
Net Income $ 6,333
--------
--------
Equity in earnings of unconsolidated joint ventures $ 2,661
--------
--------
The primary difference between the carrying value of the Company's investment
in unconsolidated joint ventures and the Operating Partnership's accumulated
equity noted above is due to capitalized interest on the investment balance,
capitalized development and leasing costs which are recovered by the
Operating Partnership through fees during construction and loans to the Joint
Ventures included in other liabilities above.
F-11
<PAGE>
THE MILLS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(DOLLARS IN THOUSANDS, UNLESS OTHERWISE INDICATED)
5. BORROWINGS
Deed of Trusts, notes, and loans payable, which are secured by the Company's
income producing properties, consist of the following at December 31, 1996
and 1995:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Potomac Mills/Gurnee Mills securitized bonds - principal and interest
payments based on 30 year amortization with an anticipated balloon
repayment in December 2003 and required maturity in 2026; fixed
interest rates ranging from 6.905% to 7.701% $284,000 $ -
Gurnee Mills mortgage loan - interest only payments through
maturity in November 1997; variable interest rate at LIBOR
plus 1.75% increasing to LIBOR plus 2.25% in November 1996 -
paid in full with proceeds from Potomac Mills/Gurnee Mills
securitized bonds in December 1996 - 153,949
Potomac Mills securitized bonds - interest only payments through
maturity in October 1999; variable interest rates ranging from
LIBOR + .45% to LIBOR + 2.00% - paid in full with proceeds from
Potomac Mills/Gurnee Mills securitized bonds in December 1996 - 136,000
Sawgrass Mills securitized bonds - interest only payments through
maturity in January 2001; fixed interest rate of 6.45% on $115,000;
variable interest rates on remaining amounts from LIBOR + .85% to
LIBOR + 2.30% (LIBOR was 5.7% at December 31, 1996) 145,000 145,000
Sawgrass Mills Phase II mortgage loan - interest only payments through
maturity in July 1998; variable interest rate at LIBOR plus 2.35% 12,000 -
Franklin Mills mortgage loan - interest only payments through maturity
in December 1998; fixed interest rate at 7.125% 165,000 165,000
Western Hills mortgage loan - interest only payments through maturity
in January 1999; fixed interest rates at blended rate of 7.675% 14,949 14,949
Community Centers' mortgage loan - principal and interest payments
through maturity in January 2001; fixed interest rate of 7.16% 74,218 -
Community Centers' interim mortgage loan - interest only payments
through maturity in March 1996; variable interest rate at LIBOR plus
2.35% - paid in full with proceeds from Community Centers'
mortgage loan in January 1996 - 60,000
The Mills Limited Partnership $40.0 million revolving line of credit -
interest only payments through maturity in October 1998 (with a one
year extenstion option); variable interest rate at LIBOR plus 3.00% 19,683 -
The Mills Limited Partnership revolving master repurchase agreement -
interest only payments; balance due on demand; variable interest rate
at LIBOR plus 1.25% 10,556 -
Other notes and loans payable 4,707 1,537
-------- --------
$730,113 $676,435
-------- --------
-------- --------
</TABLE>
F-12
<PAGE>
THE MILLS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(DOLLARS IN THOUSANDS, UNLESS OTHERWISE INDICATED)
Pursuant to an interest rate cap protection agreement, the LIBOR rate on the
Potomac Mills securitized bonds was capped through October 1997 at 6% if LIBOR
was less than 8% and was capped at 8% if LIBOR was greater than 8%; from October
1997 through October 1999, LIBOR is capped at 8%. This cap was sold in December
1996 in conjunction with the refinancing of Potomac Mills (see Note 2).
The additional interest due on the Gurnee Mills mortgage loan was being accrued
on a straight-line basis over the life of the loan. The Company also had an
interest rate cap agreement relating to this debt whereby the Company received a
spread payment from the swap counterparty to the extent that LIBOR exceeded
5.25%, provided LIBOR was below 7.25%. If LIBOR rose above 7.25%, then the
spread payment would be limited to the extent LIBOR exceeded 6.25%. This cap
was sold in December 1996 in conjunction with the refinancing of Gurnee Mills
(see Note 2).
The weighted average interest rate at December 31, 1996 and 1995, was 7.05%. Of
the Company's approximately $730.1 million of consolidated debt, $657.9 million
was fixed rate at December 31, 1996.
As of December 31, 1996, debt of the Joint Ventures aggregating $84.7 million
has been guaranteed by the Company.
In January 1992, in conjunction with improvements to one of the Mills, a Mills
Entity obtained from a bank a 10 year letter of credit in the amount of $30,249
which serves as a credit enhancement for bonds sold by a municipality to the
public. Proceeds from the bonds were used to reimburse the Mills Entity for the
costs of public works which amounted to approximately $21,000. This reimburse-
ment was recorded as a reduction of the costs previously capitalized to the
income producing property. The bonds are payable from ad valorem taxes levied
by the municipality against the assessed value of the real property owned
by the Partnership and real property owned
by outside parties. Funds can be drawn on the letter of credit for the purpose
of repaying principal and interest on the bonds.
The aggregate maturities of the Company's borrowings at December 31, 1996 is as
follows:
1997 $ 18,124
1998 204,881
1999 21,096
2000 10,697
2001 207,123
Thereafter 268,192
--------
$730,113
--------
--------
For the period from January 1, 1994 to April 21, 1994, debt obligations totaling
$329 were forgiven through negotiations with certain creditors. The gain on
extinguishment of debt, offset by prepayment penalties of $283 from early
payment of mortgage indebtedness, is classified as an extraordinary item in the
combined statements of operations.
6. LEASING ACTIVITIES
The Company has noncancellable leases with tenants with remaining terms ranging
from one to 25 years and requiring monthly payments of specified minimum rents.
A majority of the leases require reimbursement by the tenant of substantially
all operating expenses of the properties. In addition, many of the leases
provide for additional rental payments based on gross revenues of the tenant in
excess of specified amounts. Future minimum rental commitments to be received
under noncancellable leases for the Mills (excluding Ontario Mills) and the
Community Centers are as follows:
F-13
<PAGE>
THE MILLS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(DOLLARS IN THOUSANDS, UNLESS OTHERWISE INDICATED)
Year ending December 31
-----------------------
1997 $ 84,499
1998 77,214
1999 68,667
2000 59,529
2001 41,684
Thereafter 136,055
--------
$467,648
--------
--------
The Company has a noncancellable operating lease for its corporate headquarters
in Arlington, Virginia. The lease commenced April 1, 1996 for a term of ten
years. Minimum rental payments under this lease subsequent to December 31,
1996, are as follows:
Year ending December 31
-----------------------
1997 $ 1,100
1998 1,288
1999 1,320
2000 1,353
2001 1,480
Thereafter 6,301
-------
$12,842
-------
-------
7. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosures of estimated fair value were determined by management,
using available market information and appropriate valuation methodologies.
Considerable judgment is necessary to interpret market data and develop estimat-
ed fair value. Accordingly, the estimates presented herein are not necessarily
indicative of the amounts the Company could realize on disposition of the
financial instruments. The use of different market assumptions and/or estima-
tion methodologies could have a material effect on the estimated fair value
amounts.
Cash equivalents, rents receivable, accounts payable and accrued expenses and
other liabilities are carried at amounts which reasonably approximate their fair
values.
Fixed rate debt with an aggregate carrying value of $657,874 has an estimated
aggregate fair value of $663,000 at December 31, 1996. Estimated fair value
of fixed rate debt is based on interest rates currently available to the
Company for issuance of debt with similar terms and remaining maturities. The
estimated fair value of the Company's variable rate debt is estimated to be
approximately equal to its carrying value of $ 72,239 at December 31, 1996.
Disclosure about fair value of financial instruments is based on pertinent
information available to management at December 31, 1996. Although management
is not aware of any factors that would significantly affect the reasonable fair
value amounts, such amounts have not been comprehensively revalued for purposes
of these financial statements since December 31, 1996, and current estimates of
fair value may differ significantly from the amounts presented herein.
F-14
<PAGE>
THE MILLS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(DOLLARS IN THOUSANDS, UNLESS OTHERWISE INDICATED)
8. EMPLOYEE BENEFIT PLANS
The Company has a 401(k) defined contribution benefit plan that covers all
employees who are age 21 or older and have at least one year of service.
Contributions made by employees electing to participate in the plan under salary
reduction agreements are recorded when paid into the plan, or alternatively,
accrued if unpaid. Employer contributions are accrued and paid into the plan
periodically. Employer contributions were $282, $297, and $272 in 1996, 1995
and 1994, respectively.
9. STOCK OPTION PLAN
In connection with the Offering, the Board of Directors approved the 1994
Executive Equity Incentive Plan (which plan, as amended in September 1996, is
referred to herein as the "Plan") for the purpose of attracting and retaining
directors, executive officers and other key personnel for the Company, the
Operating Partnership and their subsidiaries. Pursuant to the Plan,
2,500,000 shares of common stock have been reserved for issuance of stock
options at a price not less than 100% of fair market value at the date of
grant and restricted stock. The options expire 10 years from the date of
grant and will contain such other terms and conditions (including, without
limitation, conditions to vesting) as may be determined by the Company's
Executive Compensation Committee.
A summary of the Company's stock option activity, and related information for
the years ended December 31 follows:
<TABLE>
<CAPTION>
1996 1995 1994
------------------------- ------------------------- -------------------------
Weighted- Weighted- Weighted-
Options Average Options Average Options Average
(000) Exercise Price (000) Exercise Price (000) Exercise Price
------- -------------- ------- -------------- ------- --------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding -
beginning of year 824 $22.28 1,079 $23.28 -0- $ -0-
Granted 858 17.73 155 18.58 1,149 23.29
Exercised -0- -0- -0- -0- -0- -0-
Forfeited (221) 22.54 (410) 23.50 (70) 23.50
----- ---- -----
Outstanding -
end of year 1,461 19.57 824 22.28 1,079 23.28
----- ---- -----
----- ---- -----
Exercisable at end
of year -0- -0- -0- -0- -0- -0-
Weighted-average fair
value of options granted
during the year $ .92 $ 1.02 N/A
</TABLE>
The range of excercise prices of options outstanding at December 31,1996 was
$17.27 to $23.50. The weighted average remaining contractual life of options
outstanding at December 31, 1996 was 8.62 years.
The Company has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25) and related Interpretations
in accounting for its employee stock options because, as discussed below, the
alternative fair value accounting provided for under FASB Statement No. 123,
"Accounting for Stock-Based Compensation," requires use of option valuation
models that were not developed for use in valuing employee stock options. Under
APB 25, because the exercise price of the Company's employee stock options
equals the market price of the underlying stock on the date of grant, no
compensation expense is recognized. In 1996, the Company adopted pursuant to
the Plan, its 1996 Long-Term Incentive Plan which granted restricted stock
and certain options to the Company's executive officers and provided that
such options would vest in 20% increments over a five-year period. Generally,
other options granted under the Plan vest 50% and 100% on the third and
fourth anniversaries, respectively, of the date of grant.
F-15
<PAGE>
THE MILLS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(DOLLARS IN THOUSANDS, UNLESS OTHERWISE INDICATED)
Pro forma information regarding net income and earnings per share is required
by Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensations" which also requires that the information be
determined as if the Company has accounted for its employee stock options
granted subsequent to December 31, 1994 under the fair value method of that
Statement. The fair value for these options was estimated at the date of
grant using a Black-Scholes option pricing model with the following
weighted-average assumptions for 1995 and 1996, respectively: risk-free
interest of 6.07% and 6.25%; expected life of the option of 4.16 years and
4.83 years; a dividend yield of 7.92%; and volatility factors of the
expected market price of the Company's common stock of .138.
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions, including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly differ-
ent from those of traded options, and because changes in the subjective input
assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. The Company's pro
forma information follows (in thousands except for earnings per share informa-
tion):
1996 1995
---- ----
Pro forma income before minority interest $15,937 $14,818
Pro forma net income per common and
common equivalent share .48 .45
Because Statement of Financial Accounting Standards No. 123 is applicable
only to options granted subsequent to December 31, 1994, its pro forma effect
will not be fully reflected until later years.
10. LEGAL MATTERS
Mr. Richard Kramer ("Kramer") and certain of his affiliates, the AJ 1989 Trust
("A.J.") and Portals Development Associates Limited Partnership ("PDA"), filed
an action on April 27, 1994, in New York state courts against the Operating
Partnership, Herbert S. Miller ("Miller"), Kenwood Plaza Limited Partnership
("Kenwood") and Ernst & Young LLP for various alleged breaches of contract,
breaches of fiduciary duties, fraudulent acts, and other violations of law
relating primarily to the management and subsequent acquisition of the Proper-
ties acquired in the IPO in which Kramer and his affiliates owned an interest.
The complaint sought damages from the Operating Partnership in excess of $4.5
million, trebled under a RICO claim. That complaint also sought a declaratory
judgment that A.J. is entitled to retain $2.9 million sent to it by mistake upon
the closing of the IPO as on offset against its claimed damages, and a declara-
tory judgment, specific performance and damages against Miller relating to his
failure to sign certain guarantee affirmations and debt modifications in regard
to PDA.
On May 10, 1994, the defendants removed this case from the New York state courts
to the United States District Court for the Southern District of New York and
the plaintiffs agreed to dismiss the claims against Ernst & Young LLP. Thereaf-
ter, the court granted the defendant's motion to dismiss certain of the com-
plaint's claims and gave plaintiffs leave to replead. When the plaintiffs
served their amended complaint, they added the Company as a defendant. In late
February 1996, the plaintiffs moved to amend the amended complaint to delete the
RICO claim without prejudice and to remand other claims to the state court for
adjudication. Defendants crossmoved for summary judgment (a) on their counter-
claim seeking the return of the $2.9 million mistakenly transferred to A.J. and
(b) dismissing the remaining claims against the Company and the Operating
Partnership. In addition, the
F-16
<PAGE>
THE MILLS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(DOLLARS IN THOUSANDS, UNLESS OTHERWISE INDICATED)
defendants are asserting that the RICO claim should be dismissed only on a with-
prejudice basis. These motions are still pending. Pending the outcome of the
litigation, the Company is withholding partnership distributions that would
otherwise be payable to A.J. from Kenwood as an offset against the $2.9 million
mistakenly transferred to A.J. A.J. has filed an additional claim seeking
payment of those distributions. The Company, the Operating Partnership and
Mr. Miller intend to vigorously defend against whatever claims remain. At this
stage of the proceeding, the Company believes that it is unlikely that the
ultimate outcome of the pending proceeding would have a material adverse effect
on the Company's financial condition or results of operations.
On June 15, 1994, ICSC Partners Limited Partnership filed in the Court of Common
Pleas, Hamilton County, Ohio a derivative action on behalf of Kenwood Plaza
Limited Partnership ("Kenwood") against Mr. Miller, Western Development ("WDC")
and the Company seeking the return to Kenwood of $6.3 million paid by Kenwood to
Mr. Miller, WDC and the Company, plus $5 million in punitive damages. The
plaintiff subsequently filed an amended complaint which included a RICO claim
that, if proven, would entitle the plaintiff to recover treble damages and
attorney's fees in addition to compensatory and punitive damages. The defen-
dants filed counterclaims against the plaintiff seeking $5.0 million in compen-
satory damages and $10.0 million in punitive damages.
In 1995, the parties to the lawsuit reached a settlement that resulted in no
financial liability for the Company and no admission of liability by the
Company. The settlement was submitted to the court for approval and sent to the
non-party limited partners. A.J, a non-party limited partner, objected to the
settlement, and, on October 13, 1995, the court entered an order and judgment
overruling the objection and approving the settlement. A.J. appealed the order
to the Court of Appeals of Arlington County, Ohio, which affirmed the trial
court's approval of the settlement. A.J. has filed a motion asking the Supreme
Court of Ohio to accept jurisdiction in this case. This motion is pending. The
Company believes that it is unlikely that the ultimate outcome of the pending
proceeding would have a material adverse effect on the Company's financial
condition or results of operations.
On November 9, 1994, Gene E. Hess, a former officer of the Company whose
employment was terminated after the IPO, filed a complaint in the United States
District Court for the District of Columbia a complaint against the Company for
fraud, breach of employment contract, and breach of covenant of good faith and
fair dealing and against Mr. Miller for fraud and tortious interference with
contractual relations. In January, 1997, without admitting liability, the
defendants agreed to settle the lawsuit in exchange for the issuance of an
additional 13,650 shares of Common Stock of the Company.
The Company is involved in other litigation incident to the operations of its
income producing properties, the outcome of which is not expected to have a
material effect on the consolidated financial position or results of operations
of the Company.
11. TRANSACTIONS WITH AFFILIATES
MSC provides management, leasing, commissioned land sales, and related services
to entities owned by partners of the Operating Partnership. Such services were
provided by the Predecessor until April 21, 1994. Fees earned for the years
ended December 31, 1996, 1995, and 1994, were $1,166, $1,588 and $1,748,
respectively.
In addition, MSC provides development and leasing services for a Joint Venture.
Fees earned during 1996 and 1995, net of amounts eliminated, were $2,473 and
$2,546, respectively.
12. SUBSEQUENT EVENTS
On February 21, 1997, the Company filed a Prospectus and Preliminary Prospectus
Supplement to issue 4,500,000 shares of Common Stock pursuant to a universal
shelf registration statement on Form S-3 filed in October 1996.
F-17
<PAGE>
THE MILLS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(DOLLARS IN THOUSANDS, UNLESS OTHERWISE INDICATED)
13. PRO FORMA INFORMATION (UNAUDITED)
The following unaudited pro forma Condensed Consolidated Statement of Operations
for 1994 is presented as if the consummation of the Offering and the other
Formation Transactions had occurred on January 1, 1994. This statement should
be read in conjunction with the financial statements and notes of the Company
and the Predecessor included in this Form 10-K. In management's opinion, all
adjustments necessary to reflect the effects of these transactions have been
made.
This unaudited pro forma Condensed Consolidated Statement of Operations does not
purport to represent what the actual results of operations of the Company would
have been assuming such transactions had been completed as set forth above, nor
do they purport to represent the results of operations for future periods.
1994
----
Rental revenues $137,921
Property operating costs (44,478)
Interest (38,660)
Other (42,575)
--------
Income before minority interests 12,208
Income allocated to minority interests 5,945
--------
Income before extraordinary items $ 6,263
--------
--------
Income before extraordinary items, per share $ .37
--------
--------
Pro forma adjustments to the statements of operations consist principally of
recognizing the effects of debt repayments and refinancing at lower rates, the
inclusion of third party investors' interests acquired, additional general and
administrative expenses of the Company and the exclusion of non recurring
charges.
14. UNAUDITED QUARTERLY RESULTS OF OPERATIONS
The following is a summary of results of operations for each of the fiscal
quarters during 1996:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- -------- ------------ -----------
<S> <C> <C> <C> <C>
Total rental revenues $36,921 $37,072 $37,438 $40,840
Income before extraordinary items
and minority interest 4,165 4,332 6,936 5,953
Income before minority interest 3,335 4,179 6,936 1,635
Net income 1,695 2,126 3,528 832
Income per share before extraordinary items 0.13 0.13 0.21 0.19
Net income per share 0.10 0.13 0.21 0.04
</TABLE>
F-18
<PAGE>
THE MILLS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(DOLLARS IN THOUSANDS, UNLESS OTHERWISE INDICATED)
The following is a summary of results of operations for each of the fiscal
quarters during 1995
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- -------- ------------ -----------
<S> <C> <C> <C> <C>
Total rental revenues $34,963 $35,452 $35,451 $39,237
Income before extraordinary items
and minority interest 2,701 2,806 3,252 6,509
Income before minority interest 2,282 2,806 3,252 6,509
Net income 1,171 1,439 1,668 3,340
Income per share before extraordinary items 0.08 0.09 0.10 0.20
Net income per share 0.07 0.09 0.10 0.20
</TABLE>
F-19
<PAGE>
THE MILLS CORPORATION
SCHEDULE III
CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION
(IN THOUSANDS)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
Cost
Capitalized
Subsequent to
Initial Cost to Company(3) Acquisition
---------------------------------------- -------------
Building, Building,
Equipment Equipment
and and Land
Description(1) Encumbrances(2) Land Improvements Improvements
-------------- --------------- ---- ------------ -------------
<S> <C> <C> <C> <C>
Mills
Potomac Mills . . . . . . . . . . . . $162,000 $ 8,486 $ $151,935
Sawgrass Mills. . . . . . . . . . . . 145,000 11,194 144,453
Sawgrass Mills Phase II . . . . . . . 12,000 2,556 21,476
Franklin Mills. . . . . . . . . . . . 165,858 15,333 153,682
Franklin Mills Residual . . . . . . . 4,779 (4,079)
Gurnee Mills. . . . . . . . . . . . . 122,000 20,449 159,589
Hunt Club . . . . . . . . . . . . . . 3,321 (3,048)
Community Centers
Montgomery Village. . . . . . . . . . 8,887 13,438
Germantown Commons. . . . . . . . . . 12,988 451 13,018
Mount Prospect Plaza. . . . . . . . . 10,644 4,560 3,740 10,868
Butterfield Plaza . . . . . . . . . . 7,715 1,604 9,452
Western Hills . . . . . . . . . . . . 14,949 2,299 3,785 14,625
Crosswinds. . . . . . . . . . . . . . 4,395 1,346 4,449 846
Gwinnett Marketfair . . . . . . . . . 11,328 6,827 2,789 7,238
Fashion Place . . . . . . . . . . . . 4,687 1,853 8,109
West Falls Church . . . . . . . . . . 4,297 839 6,602
Liberty Plaza . . . . . . . . . . . . 9,335 14,456 2,212
Coopers Crossing. . . . . . . . . . . 9,277 769 7,888 800
Construction in Process and
Development Pre-construction Costs . . 28,259
Corporate. . . . . . . . . . . . . . . . 34,088 2,769 4,673
Mainstreet Retail. . . . . . . . . . . . 484 424
-------- ------- ------- --------
Totals . . . . . . . . . . . . . . . . . $730,113 $96,001 $40,360 $744,572
-------- ------- ------- --------
-------- ------- ------- --------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Gross Amount at Which
Carried at Close of Period
---------------------------------------------
Building
Land Equipment
and and Accumulated Date Useful
Description(1) Improvements Improvements(7) Total(4)(5) Depreciation(6) Acquired Life(8)
-------------- ------------ --------------- ----------- --------------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Mills
Potomac Mills . . . . . . . . . . . . $ 41,197 $119,224 $160,421 $ 32,215 1983
Sawgrass Mills. . . . . . . . . . . . 14,018 141,629 155,647 27,612 1986
Sawgrass Mills Phase II . . . . . . . 3,588 20,444 24,032 686 1993
Franklin Mills. . . . . . . . . . . . 30,587 138,428 169,015 49,523 1986
Franklin Mills Residual . . . . . . . 700 700 1986
Gurnee Mills. . . . . . . . . . . . . 37,164 142,874 180,038 35,548 1988
Hunt Club . . . . . . . . . . . . . . 273 273 1988
Community Centers
Montgomery Village. . . . . . . . . . 5,511 7,927 13,438 2,680 1980
Germantown Commons. . . . . . . . . . 1,975 11,494 13,469 4,056 1980
Mount Prospect Plaza. . . . . . . . . 4,115 15,053 19,168 4,333 1985
Butterfield Plaza . . . . . . . . . . 2,405 8,651 11,056 2,882 1982
Western Hills . . . . . . . . . . . . 3,566 17,143 20,709 5,519 1981
Crosswinds. . . . . . . . . . . . . . 1,564 5,077 6,641 2,411 1981
Gwinnett Marketfair . . . . . . . . . 7,868 8,986 16,854 2,986 1986
Fashion Place . . . . . . . . . . . . 2,047 7,915 9,962 3,704 1985
West Falls Church . . . . . . . . . . 1,721 5,720 7,441 2,147 1987
Liberty Plaza . . . . . . . . . . . . 8,916 17,087 26,003 1,007 1994
Coopers Crossing. . . . . . . . . . . 769 8,688 9,457 603 1994
Construction in Process and
Development Pre-construction Costs . . 28,259 28,259 various
Corporate. . . . . . . . . . . . . . . . 7,442 7,442 1,532 various
Mainstreet Retail. . . . . . . . . . . . 908 908 214 1995
Totals . . . . . . . . . . . . . . . . .
-------- -------- -------- --------
$167,984 $712,949 $880,933 $179,658
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
F-20
<PAGE>
THE MILLS CORPORATION
NOTES TO SCHEDULE III
DECEMBER 31, 1996
(IN THOUSANDS)
(1) The Mills Corporation, through the Operating Partnership, owns super-
regional, value and entertainment-oriented malls ("Mills") and community
shopping centers ("Community Centers"). The geographic location of
the Mills and Community Centers are as follows:
PROPERTY NAME LOCATION
------------- --------
MILLS:
Franklin Mills. . . . . . . . . . . . . . . . . . . . . . Philadelphia, PA
Franklin Mills - Residual . . . . . . . . . . . . . . . . Philadelphia, PA
Gurnee Mills. . . . . . . . . . . . . . . . . . . . . . . . . . Gurnee, IL
Hunt Club . . . . . . . . . . . . . . . . . . . . . . . . . . . Gurnee, IL
Potomac Mills . . . . . . . . . . . . . . . . . . . . . . . Woodbridge, VA
Sawgrass Mills. . . . . . . . . . . . . . . . . . . . . . . . .Sunrise, FL
Sawgrass Mills - Phase II . . . . . . . . . . . . . . . . . . .Sunrise, FL
COMMUNITY CENTERS:
Butterfield Plaza . . . . . . . . . . . . . . . . . . . .Downers Grove, IL
Coopers Crossing. . . . . . . . . . . . . . . . . . . . . . . Voorhees, NJ
Crosswinds Center . . . . . . . . . . . . . . . . . . . St. Petersburg, FL
Fashion Place . . . . . . . . . . . . . . . . . . . . . . . . Columbia, SC
Germantown Commons. . . . . . . . . . . . . . . . . . . . . Germantown, MD
Gwinnett Marketfair . . . . . . . . . . . . . . . . . . . . . . Duluth, GA
Liberty Plaza . . . . . . . . . . . . . . . . . . . . . . Philadelphia, PA
Montgomery Village. . . . . . . . . . . . . . . . . . . . Gaithersburg, MD
Mount Prospect Plaza. . . . . . . . . . . . . . . . . . Mount Prospect, IL
West Falls Church Outlet Center . . . . . . . . . . . . . Falls Church, VA
Western Hills Plaza . . . . . . . . . . . . . . . . . . . . Cincinnati, OH
(2) See description of mortgage, notes and loans payable in Note 5 of the Notes
to Combined Financial Statements. The debt shown in regard to Hunt Club is
unsecured. Certain corporate debt does not encumber real estate and is
excluded.
(3) Initial cost of properties is cost at the end of the calendar year for the
year of acquisition.
(4) The aggregate cost of land, land held for sale, buildings, improvements,
equipment, and tenant improvement for federal income tax basis is $877,953
at December 31, 1996.
F-21
<PAGE>
THE MILLS CORPORATION
NOTES TO SCHEDULE III
DECEMBER 31, 1996
(IN THOUSANDS)
(5) Reconciliation of Real Estate and Development Assets, excluding Investment
in Partnerships
1996 1995 1994
---- ---- ----
Balance at January 1. . . . . $880,150 $855,049 $760,757
Acquisitions. . . . . . . . . 23,177 58,541 85,751
Retirements . . . . . . . . . (1,618) (3,778) (5,430)
Other . . . . . . . . . . . . (20,776) (29,662) 13,971
-------- -------- --------
Balance at December 31. . . . $880,933 $880,150 $855,049
-------- -------- --------
-------- -------- --------
(6) Reconciliation of Accumulated Depreciation
1996 1995 1994
---- ---- ----
Balance at January 1. . . . . $152,713 $126,072 $102,557
Additions charged to costs
and expenses. . . . . . . . 27,724 27,180 23,515
Removal of accumulated
depreciation. . . . . . . . (779) (539) -
-------- -------- --------
Balance at December 31. . . . $179,658 $152,713 $126,072
-------- -------- --------
-------- -------- --------
(7) In 1991, the city of Sunrise, Florida issued municipal bonds in the amount
of $24,730 and reimbursed a Partnership for costs of public works which
amounted to approximately $21,000. Costs previously capitalized to income
producing property were reduced upon reimbursement.
In 1991, a note receivable of $5,925 was recorded pursuant to reimbursement
and annexation agreements with the Village of Gurnee to reimburse the
Partnership that owns Gurnee Mills for the cost of certain public improve-
ments. The Village of Gurnee has executed a noninterest bearing note for
$15,000, amended to $17,500 in 1996, to be paid from taxes collected from
the tenants of the shopping mall during a ten-year period, amended to a
thirteen year period in 1996, beginning one year after the mall opens. The
note was recorded in 1991, based on the estimated taxes to be collected by
the Village of Gurnee from the tenants using a discount rate of 10%.
(8) Depreciation is computed based upon the following estimated lives:
Building and improvements. . . . . . . . . . . . . . . . 40 years
Land improvements. . . . . . . . . . . . . . . . . . . . 20 years
Equipment. . . . . . . . . . . . . . . . . . . . . . . . .7 years
Tenant improvements. . . Lesser of life of asset or life of lease
F-22
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, on March 12, 1997.
THE MILLS CORPORATION,
a Delaware corporation
By: /s/ Laurence C. Siegel
_____________________________
Laurence C. Siegel
Chairman of the Board of
Directors, Chief Executive
Officer and Director
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities indicated
below on March 11, 1997:
Name Title
- ---- -----
/s/ Laurence C. Siegel
___________________________ Chairman of the Board, Chief Executive Officer
Laurence C. Siegel and Director (principal executive officer)
/s/ Peter B. McMillan
___________________________ President, Chief Operating Officer and Director
Peter B. McMillan
/s/ Kenneth R. Parent
___________________________ Senior Vice President and Chief Financial Officer
Kenneth R. Parent (principal financial officer and principal
accounting officer)
/s/ Dietrich von Boetticher
___________________________ Vice Chairman and Director
Dietrich von Boetticher
/s/ John M. Ingram
___________________________ Vice Chairman and Director
John M. Ingram
52
<PAGE>
/s/ Charles R. Black, Jr.
___________________________ Director
Charles R. Black, Jr.
/s/ James C. Braithwaite
___________________________ Director
James C. Braithwaite
___________________________ Director
Harry H. Nick
/s/ Joseph B. Gildenhorn
___________________________ Director
Joseph B. Gildenhorn
___________________________ Director
Peter A. Gordon
___________________________ Director
Herbert S. Miller
/s/ Franz von Perfall
___________________________ Director
Franz von Perfall
___________________________ Director
Robert P. Pincus
53
<PAGE>
THE MILLS CORPORATION
EXHIBIT INDEX
(Pursuant to item 601 of Regulation S-K)
SEQUENTIALLY
NUMBER EXHIBIT NUMBERED PAGE
------ ------- -------------
1.1 None
2.1 None
*3.1 Amended and Restated Certificate of Incorporation
of the Company.
**3.2 Amended and Restated Bylaws of the Company
**3.3 Limited Partnership Agreement of the Operating
Partnership (filed as part of Exhibit 10.3)
*4.1 Specimen Common Stock Certificate of Company
*4.2 Agreement dated March 15, 1994, among Richard L.
Kramer, the A.J. 1989 Trust, the Irrevocable
Intervivos Trust for the Benefit of the Kramer
Children, the N Street Investment Trust, Equity
Resources Associates, Herbert S. Miler, The Mills
Corporation and The Mills Limited Partnership
(filed as Exhibit 10.19)
**4.3 Non-Affiliate Registration Rights and Lock-Up
Agreement
**4.4 Affiliate Registration Rights and Lock-Up
Agreement
*10.1 Form of Employee Non-Compete/Employment Agreements
*10.2 1994 Executive Equity Incentive Plan
**10.3 Limited Partnership Agreement of Operating
Partnership
*10.4 Option Agreement (Sunrise Residuals/Parcels 4 and 5)
*10.5 Form of Noncompetition Agreement between the
Company, the Operating Partnership and each of Kan
Am and the Kan Am Partnerships
*10.6 Form of Noncompetition Agreement with Kan Am
Directors
*10.7 Trust and Servicing Agreement, dated as of
December 1, 1993, among Sawgrass Finance L.L.C.,
as depositor, The First National Bank of Chicago,
as servicer, and State Street Bank and Trust
Company, as Trustee
*10.8 Amended and Restated Mortgage, Security Agreement,
Assignment of Lessee and Rents and Fixture filing,
dated as of December 1, 1993, by Sunrise Mills
Limited Partnership, as mortgagor, in favor of
Sawgrass Finance L.L.C., as mortgagee
*10.9 Assignment of Leases and Rents, dated as of
December 1, 1993, between Sunrise Mills Limited
Partnership and Sawgrass Finance L.L.C.
*10.10 Assignment of Note, Mortgage, and Assignment of
Rents dated as of December 21, 1993, by Sawgrass
Finance L.L.C. in favor of State Street Bank &
Trust Co.
<PAGE>
SEQUENTIALLY
NUMBER EXHIBIT NUMBERED PAGE
------ ------- -------------
*10.11 Promissory Note, dated as of November 16, 1993, by
Western Hills Associates Limited Partnership in
favor of Connecticut General Life Insurance
Company
*10.12 Assignment of Rents and Leases, dated as of
November 16, 1993, by Western Hills Associates
Limited Partnership in favor of Connecticut
General Life Insurance Company
*10.13 Open-End Mortgage, Security Agreement and Fixture
Filing, dated as of November 16, 1993, by Western
Hills Associates Limited Partnership in favor of
Connecticut General Life Insurance Company
*10.19 Agreement dated March 15, 1994 among Richard L.
Kramer, the A.J. 1989 Trust, the Irrevocable
Intervivos Trust for the Benefit of the Kramer
Children, the N Street Investment Trust, Equity
Resources Associates, Herbert S. Miller, The Mills
Corporation and The Mills Limited Partnership
*10.20 Form of Promissory Note made payable by Franklin
Mills Associates Limited Partnership to and for
the benefit of the Operating Partnership
*10.21 Form of Mortgage, Security Agreement and
Assignment of Rents and Leases by Franklin Mills
Associates Limited Partnership to and for the
benefit of the Operating Partnership
*10.22 Form of Sale of Partnership Interests Agreement
(Franklin Mills) by and between the Operating
Partnership and Herbert S. Miller, Laurence C.
Siegel, Harry H. Nick, Western Franklin Mills
Corp., Kan Am USA IX Limited Partnership and Kan
Am USA X Limited Partnership
*10.23 Form of Indemnification Agreement between the
Company and each of its Directors and Executive
Officers
*****10.24 Construction Loan Agreement dated November 9,
1995, by and between Ontario Mills Limited
Partnership and Canadian Bank of Commerce,
Bayerische Hypotheken-Und Wechsel-Bank
Aktiengesellschaft and The Mitsubishi Bank of
Commerce
*****10.25 Construction Deed of Trust, Security Agreement,
Assignment of Leases and Rents, Fixture Filing and
Financing Statement dated as of December 26, 1995
in favor of Canadian Imperial Bank of Commerce,
Bayerische Hypotheken-Und Wechsel-Bank
Aktiengesellschaft and The Mitsubishi Bank of
Commerce
<PAGE>
SEQUENTIALLY
NUMBER EXHIBIT NUMBERED PAGE
------ ------- -------------
*****10.26 Loan Agreement dated as of January 31, 1996 by and
among Coopers Crossing Associates (MLP) Limited
Partnership, Crosswinds Center Associates of St.
Petersburg (MLP) Limited Partnership, Echo Hills
Center Associates (MLP) Limited Partnership,
Fashion Center Associates of Illinois No. 1 (MLP)
Limited Partnership, Fashion Place Associates
(MLP) Limited Partnership, Germantown Development
Associates (MLP) Limited Partnership, Gwinnett
Market Fair Associates (MLP) Limited Partnership,
Montgomery Village Associates (MLP) Limited
Partnership, Montgomery Village Ground (MLP)
Limited Partnership, Mount Prospect Plaza (MLP)
Limited Partnership (collectively, "The Mills
Corporation, et. al."), and PFL Life Insurance
Company
*****10.27 First Amended and Restated Promissory Note dated
as of January 31, 1996, made by and among The
Mills Corporation, ET AL., and PFL Life Insurance
Company
*****10.28 Absolute Assignment of Mortgage and Loan Documents
dated January 31, 1996 by and between CS First
Boston Mortgage Capital Corporation as assignor
and PFL Life Insurance Company as assignee
10.29-10.47 Intentionally Omitted
******10.48 Note dated July 30, 1996 by Sawgrass Mills Phase II
Limited Partnership in favor of CS First Boston Mortgage
Capital Corporation.
******10.49 Mortgage, Security Agreement, Assignment of Leases and Rents
and Fixture Filing dated as of July 30, 1996, between
Sawgrass Mills Phase II Limited Partnership, as Mortgagor,
and CS First Boston Mortgage Capital Corporation, as
Mortgagee.
****10.50 First Amendment to Trust and Servicing Agreement
(Exhibit 10.7) dated as of June 1, 1995, among
Sawgrass Finance L.L.C., as depositor, The First
National Bank of Chicago, as servicer, and State
Street Bank and Trust Company, as trustee.
****10.51 Prepayment Premium Agreement dated as of June 1,
1995, between The Mills Limited Partnership and
State Street Bank and Trust Company, as trustee.
<PAGE>
SEQUENTIALLY
NUMBER EXHIBIT NUMBERED PAGE
------ ------- -------------
10.52 Second Amended and Restated Deed of Trust,
Security Agreement, Assignment of Rents and
Fixture Filing by Potomac Mills-Phase III (MLP)
Limited Partnership and Washington Outlet Mall
(MLP) Limited Partnership, collectively, as
Grantor to R. Eric Taylor, a resident of Fairfax
County, Virginia as Deed Trustee for the benefit
of CS First Boston Mortgage Capital Corp., as
Beneficiary dated as of December 17, 1996
10.53 Assignment of Leases and Rents and Security
Deposits dated as of December 17, 1996 by Potomac
Mills-Phase III (MLP) Limited Partnership and
Washington Outlet Mall (MLP) Limited Partnership
to CS First Boston Mortgage Capital Corp.
10.54 Mortgage, Security Agreement, Assignment of Rents
and Fixture Filing by Gurnee Mills (MLP) Limited
Partnership, as Mortgagor to CS First Boston
Mortgage Capital Corp., as Mortagee dated as of
December 17, 1996
10.55 Assignment of Leases and Rents and Security
Deposits dated as of December 17, 1996 by Gurnee
Mills (MLP) Limited Partnership to CS First Boston
Mortgage Capital Corp.
10.56 Trust and Servicing Agreement dated as of December
1, 1996 among Potomac Gurnee Finance Corp., as
Depositor, AMRESCO Management, Inc., as Servicer,
ABN AMRO Bank N.V., as Fiscal Agent and LaSalle
National Bank, as Trustee
10.57 Credit Agreement dated as of October 28, 1996, among
The Mills Corporation, The Mills Limited Partnership, Sawgrass
Mills Phase II Limited Partnership, Sunrise Mills (MLP)
Limited Partnership, and CS First Boston Mortgage Capital Corp.
10.58 General Pledge and Security Agreement, dated as of October
28, 1996 made by The Mills Limited Partnership, in favor of
CS First Boston Mortgage Capital Corp.
10.59 Intercompany Pledge and Security Agreement dated as of
October 28, 1996, made by The Mills Limited Partnership, The
Mills Corporation, Sunrise Mills (MLP) Limited Partnership
and Sawgrass Mills Phase II Limited Partnership in favor of
CS First Boston Mortgage Capital Corp.
10.60 Assignment of Partnership Interest dated as of the 28th day of
October, 1996 from The Mills Limited Partnership, to CS First
Boston Mortgage Capital Corp.
10.61 Revolving Note dated as of October 28, 1996 from The Mills
Limited Partnership, to CS First Boston Mortgage Capital Corp.
in the maximum amount of $40,000,000.
11 Statement Re: Computation of Per Share Earnings.
21.1 List of Subsidiaries of the Registrant
23 Consent of Independent Auditors
* Incorporated by reference to the Registrant's Registration Statement
on Form S-11, Registration No. 33-71524, which was declared effective
by Securities and Exchange Commission on April 14, 1994 (Commission
File No. 1-12994).
** Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q for the first quarter ended March 31, 1994 (Commission File No.
1-12994).
*** Incorporated by reference to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1994.
**** Incorporated by reference to the Registrant's Quarterly Report on
Form 10-Q for the second quarter ended June 30, 1995.
***** Incorporated by reference to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1995.
****** Incorporated by reference to the Registrant's Quarterly Report
on Form 10-Q for the third quarter ended September 30, 1996.
<PAGE>
MILLS
This Second Amended and Restated Deed of Trust is a modification of an
existing Amended and Restated Deed of Trust recorded in Deed Book 2195 at
page 713, securing a maximum principal amount of $136,000,000 on which the
applicable recordation tax has been paid, the current outstanding principal
balance of the indebtedness secured by which existing Amended and Restated
Deed of Trust is $136,000,000. Further, the collateral for the Note secured
by this Second Amended and Restated Deed of Trust is located partly within
and partly outside the Commonwealth of Virginia and, consequently, the
mortgage tax imposed by Virginia Code ss. 58.1-803 is partially exempt
pursuant to ss. 58.1-801 and ss. 58.1-803B of the Code of Virginia.
Therefore, under Virginia Code ss. 58 .1-803(C) and ss. 58.1-809, this
instrument is subject to recordation tax only as to the $26,000,000
increase in the non-exempt principal amount of the indebtedness
($162,000,000) secured hereby.
================================================================================
POTOMAC MILLS-PHASE III (MLP) LIMITED PARTNERSHIP
and WASHINGTON OUTLET MALL (MLP) LIMITED PARTNERSHIP,
collectively, as Grantor
to
R. ERIC TAYLOR, a resident of Fairfax County, Virginia
as Deed Trustee
for the benefit of
CS FIRST BOSTON MORTGAGE CAPITAL CORP.,
as Beneficiary
SECOND AMENDED AND RESTATED
DEED OF TRUST, SECURITY AGREEMENT, ASSIGNMENT OF RENTS
AND FIXTURE FILING
--------------------------
Dated: as of December 17, 1996
PREPARED BY AND UPON RECORDATION RETURN TO:
Brown & Wood LLP
One World Trade Center
57th Floor
New York, New York 10048
Attention: David J. Weinberger, Esq.
================================================================================
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INDEX
ARTICLE I: DEFINITIONS
Section 1.01. Certain Definitions................................... 6
ARTICLE II: COVENANTS, WARRANTIES
AND REPRESENTATIONS OF Grantor
Section 2.01. Payment of Debt....................................... 33
Section 2.02. Representations and Warranties of Grantor............. 33
Section 2.03. Further Acts, etc..................................... 43
Section 2.04. Recording of Deed of Trust, etc....................... 43
Section 2.05. Representations and Warranties as to the
Trust Property........................................ 44
Section 2.06. Removal of Lien....................................... 51
Section 2.07. Cost of Defending and Upholding this
Deed of TrustLien..................................... 52
Section 2.08. Use of the Trust Property............................. 52
Section 2.09. Financial Reports..................................... 52
Section 2.10. Litigation............................................ 55
ARTICLE III: INSURANCE AND CASUALTY RESTORATION
Section 3.01. Insurance Coverage.................................... 55
Section 3.02. Policy Terms.......................................... 58
Section 3.03. Assignment of Policies................................ 59
Section 3.04. Casualty Restoration.................................. 61
Section 3.05. Compliance with Insurance Requirements................ 66
Section 3.06. Event of Default During Restoration................... 67
Section 3.07. Application of Proceeds to Debt Reduction............. 67
ARTICLE IV: IMPOSITIONS
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Section 4.01. Payment of Impositions, Utilities and
Taxes, etc ........................................... 67
Section 4.02. Deduction from Value.................................. 68
Section 4.03. No Joint Assessment................................... 69
Section 4.04. Right to Contest...................................... 69
Section 4.05. No Credits on Account of the Debt..................... 70
Section 4.06. Documentary Stamps.................................... 70
ARTICLE V: CENTRAL CASH MANAGEMENT
Section 5.01. Cash Flow............................................. 70
Section 5.02. Establishment of Sub-Accounts. ...................... 71
Section 5.03. Permitted Investments................................. 72
Section 5.04. Interest on Accounts.................................. 73
Section 5.05. Monthly Funding of Sub-Accounts....................... 73
Section 5.06. Payment of Basic Carrying Costs....................... 75
Section 5.07. Debt Service Payment Sub-Account...................... 76
Section 5.08. Recurring Replacement Reserve Sub-Account ............ 76
Section 5.09. Operation and Maintenance Expense Sub-Account ........ 77
Section 5.10. Intentionally Omitted................................. 78
Section 5.11. Curtailment Reserve Sub-Account....................... 78
Section 5.12. Intentionally Omitted................................. 78
Section 5.13. Loss Proceeds......................................... 78
ARTICLE VI: CONDEMNATION
Section 6.01. Condemnation.......................................... 80
ARTICLE VII: LEASES AND RENTS
Section 7.01. Assignment............................................ 82
Section 7.02. Management of Trust Property.......................... 83
ARTICLE VIII: MAINTENANCE AND REPAIR
Section 8.01. Maintenance and Repair of the Trust
Property; Alterations; Replacement of
Equipment ............................................ 86
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ARTICLE IX: TRANSFER OR ENCUMBRANCE OF THE Trust Property
Section 9.01. Other Encumbrances.................................... 88
Section 9.02. No Transfer........................................... 88
Section 9.03. Due on Sale........................................... 88
ARTICLE X: CERTIFICATES
Section 10.01. Estoppel Certificates................................ 89
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ARTICLE XI: NOTICES
Section 11.01. Notices.............................................. 90
ARTICLE XII: INDEMNIFICATION
Section 12.01. Indemnification Covering Trust Property ............. 91
ARTICLE XIII: DEFAULTS
Section 13.01. Events of Default.................................... 92
Section 13.02. Remedies............................................. 94
Section 13.03. Payment of Debt After Default........................ 99
Section 13.04. Possession of the Trust Property..................... 99
Section 13.05. Interest After Default............................... 99
Section 13.06. Grantor's Actions After Default......................100
Section 13.07. Control by Beneficiary After Default.................100
Section 13.08. Right to Cure Defaults...............................100
Section 13.09. Late Payment Charge..................................101
Section 13.10. Recovery of Sums Required to Be Paid.................101
Section 13.11. Marshalling and Other Matters........................102
Section 13.12. Tax Reduction Proceedings............................102
Section 13.13. General Provisions Regarding Remedies................102
ARTICLE XIV: COMPLIANCE WITH REQUIREMENTS
Section 14.01. Compliance with Legal Requirements...................103
Section 14.02. Compliance with Recorded Documents; No
Future Grants........................................104
ARTICLE XV: PREPAYMENT; RELEASE
Section 15.01. Prepayment...........................................105
Section 15.02. Out-Parcel Severance.................................106
Section 15.03. Release of Trust Property............................109
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ARTICLE XVI: ENVIRONMENTAL COMPLIANCE
Section 16.01. Covenants, Representations and Warranties .......... 110
Section 16.02. Environmental Indemnification........................113
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ARTICLE XVII: ASSIGNMENTS
Section 17.01. Participations and Assignments.......................114
ARTICLE XVIII: MISCELLANEOUS
Section 18.01. Right of Entry.......................................115
Section 18.02. Cumulative Rights....................................115
Section 18.03. Liability............................................115
Section 18.04. Exhibits Incorporated................................115
Section 18.05. Severable Provisions.................................115
Section 18.06. Duplicate Originals..................................115
Section 18.07. No Oral Change.......................................115
Section 18.08. Waiver of Counterclaim, etc..........................116
Section 18.09. Headings; Construction of Documents; etc ............116
Section 18.10. Sole Discretion of Beneficiary.......................116
Section 18.11. Waiver of Notice.....................................116
Section 18.12. Covenants Run with the Land..........................116
Section 18.13. Applicable Law.......................................117
Section 18.14. Security Agreement...................................117
Section 18.15. Actions and Proceedings..............................118
Section 18.16. Usury Laws...........................................119
Section 18.17. Remedies of Grantor..................................119
Section 18.18. Offsets, Counterclaims and Defenses..................119
Section 18.19. No Merger............................................119
Section 18.20. Restoration of Rights................................120
Section 18.21. Waiver of Statute of Limitations.....................120
Section 18.22. Advances.............................................120
Section 18.23. Application of Default Rate Not a Waiver ............120
Section 18.24. Intervening Lien.....................................120
Section 18.25. No Joint Venture or Partnership......................121
Section 18.26. Time of the Essence..................................121
Section 18.27. Grantor's Obligations Absolute.......................121
Section 18.28. Publicity............................................121
Section 18.29. Surveillance and Site Inspection Fees................122
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Section 18.30. Intentionally Omitted................................122
Section 18.31. Intentionally Omitted................................122
Section 18.32. Exculpation..........................................122
Section 18.33. Certain Matters Relating to Trust Property
located in the Commonwealth of Virginia .............124
Section 18.34. Concerning the Deed Trustee..........................125
Section 18.35. Deed Trustee's Fees..................................126
Exhibit A - Legal Description of Premises
Exhibit B - Initial Sub-Account Deposits
Exhibit C - Form of Cash Flow Statement
Exhibit D - Required Engineering Work
Exhibit E - Form of Sufficiency Notice
Exhibit F - Cross-collateralized Properties
Exhibit G - Form of Direction Notice
vii
<PAGE>
THIS SECOND AMENDED AND RESTATED DEED OF TRUST, SECURITY AGREEMENT,
ASSIGNMENT OF RENTS AND FIXTURE FILING is made as of the 17 day of
December, 1996, by the party set forth on the signature page hereto as
Grantor, having the address set forth on the signature page hereto
(hereinafter referred to as "Grantor"), to R. Eric Taylor, a resident of
Fairfax County, Virginia, having an address for notice purposes only at c/o
Chicago Title Insurance Company, 1129 20th Street, N.W., Suite 300,
Washington, D.C. 20036 (hereinafter referred to as "Deed Trustee") for the
benefit of CS FIRST BOSTON MORTGAGE CAPITAL CORP. having an address at 11
Madison Avenue, New York, New York 10010 (hereinafter referred to as
"Beneficiary").
W I T N E S E T H:
WHEREAS, this Deed of Trust amends and restates in its entirety that
certain Amended and Restated Deed of Trust, Security Agreement, Assignment
of Rents and Fixtures Filing from Grantor to Deed Trustee, as trustee for
the benefit of La Salle National Bank, as Trustee and assignee of Potomoc
Mills Finance Corp., as beneficiary, dated as of October 1, 1994, and
recorded in Prince William County, Virginia at Book 2195 Page 713, which
prior deed of trust secures certain indebtedness evidenced by a Promissory
Note dated as of October 26, 1994 (the "Prior Note") in the original
principal amount of $136,000,000, having an outstanding principal balance
on the date hereof of $136,000,000;
WHEREAS, Beneficiary has authorized a loan (hereinafter referred to
as the "Loan") to the Cross-collateralized Borrowers in the maximum
principal sum of TWO HUNDRED EIGHTY-FOUR MILLION and No/100 Dollars
($284,000,000.00) (hereinafter referred to as the "Loan Amount"), which
Loan is evidenced by that certain note, dated the date hereof (hereinafter
referred to as the "Note") given by the Cross-collateralized Borrowers, as
maker, to Beneficiary, as payee, the proceeds of which will be used, in
part, to refinance the Prior Note;
WHEREAS, in consideration of the Loan, the Cross-collateralized
Borrowers have agreed to make payments in amounts sufficient to pay and
redeem, and provide for the payment and redemption of the principal of,
premium, if any, and interest on the Note when due;
<PAGE>
WHEREAS, Grantor desires by this Deed of Trust to provide for, among
other things, the issuance of the Note and for the deposit, deed and pledge
by Grantor with, and the creation of a security interest in favor of,
Beneficiary, as security for the Cross-collateralized Borrowers'
obligations to Beneficiary from time to time pursuant to the Note and the
other Loan Documents;
WHEREAS, Grantor and Beneficiary intend these recitals to be a
material part of this Deed of Trust; and
WHEREAS, all things necessary to make this Deed of Trust the valid
and legally binding obligation of Grantor in accordance with its terms, for
the uses and purposes herein set forth, have been done and performed.
NOW THEREFORE, to secure the payment of the principal of, prepayment
premium (if any) and interest on the Note and all other obligations,
liabilities or sums due or to become due under this Deed of Trust, the Note
or any other Loan Document, including, without limitation, interest on said
obligations, liabilities or sums (said principal, premium, interest and
other sums being hereinafter referred to as the "Debt"), and the
performance of all other covenants, obligations and liabilities of the
Cross-collateralized Borrowers pursuant to the Loan Documents, Grantor has
executed and delivered this Deed of Trust; and Grantor has irrevocably
granted, and by these presents and by the execution and delivery hereof
does hereby irrevocably grant, bargain, sell, alien, demise, release,
convey, assign, transfer, deed, hypothecate, pledge, set over, warrant and
confirm to Deed Trustee, as per the Premises and the Improvements, forever,
in trust with power of sale, and to Beneficiary as to the remainder of the
Trust Property, all right, title and interest of Grantor in and to all of
the following property, rights, interests and estates:
(a) the plot(s), piece(s) or parcel(s) of real property described
in Exhibit A attached hereto and made a part hereof (individually and
collectively, hereinafter referred to as the "Premises");
2
<PAGE>
(b) (i) all buildings, foundations, structures, fixtures,
additions, enlargements, extensions, modifications, repairs,
replacements and improvements of every kind or nature now or hereafter
located on the Premises (hereinafter collectively referred to as the
"Improvements"); and (ii) to the extent permitted by law, the name or
names, if any, as may now or hereafter be used for each Improvement,
and the goodwill associated therewith;
(c) all easements, rights-of-way, strips and gores of land,
streets, ways, alleys, passages, sewer rights, water, water courses,
water rights and powers, ditches, ditch rights, reservoirs and
reservoir rights, air rights and development rights, lateral support,
drainage, gas, oil and mineral rights, tenements, hereditaments and
appurtenances of any nature whatsoever, in any way belonging, relating
or pertaining to the Premises or the Improvements and the reversion and
reversions, remainder and remainders, whether existing or hereafter
acquired, and all land lying in the bed of any street, road or avenue,
opened or proposed, in front of or adjoining the Premises to the center
line thereof and any and all sidewalks, drives, curbs, passageways,
streets, spaces and alleys adjacent to or used in connection with the
Premises and/or Improvements and all the estates, rights, titles,
interests, property, possession, claim and demand whatsoever, both in
law and in equity, of Grantor of, in and to the Premises and
Improvements every part and parcel thereof, with the appurtenances
thereto;
(d) all machinery, equipment, fittings, apparatus, appliances,
furniture, furnishings, tools, fixtures (including, but not limited to,
all heating, air conditioning, ventilating, waste disposal, sprinkler and
fire and theft protection equipment, plumbing, lighting, communications
and elevator fixtures) and other property of every kind and nature
whatsoever owned by Grantor, or in which Grantor has or shall have an
interest, now or hereafter located upon, or in, and used in connection
with the Premises or the Improvements, or appurtenant thereto, and all
building equipment, materials and supplies of any nature whatsoever owned
by Grantor, or in which Grantor has or shall have an interest, now or
hereafter located upon, or
3
<PAGE>
in, and used in connection with the Premises or the Improvements or
appurtenant thereto, (hereinafter, all of the foregoing items described
in this paragraph (d) are collectively called the "Equipment"), all of
which, and any replacements, modifications, alterations and additions
thereto, to the extent permitted by applicable law, shall be deemed to
constitute fixtures (the "Fixtures"), and are part of the real estate
and security for the payment of the Debt and the performance of
Grantor's obligations. To the extent any portion of the Equipment is not
real property or Fixtures under applicable law, it shall be deemed to be
personal property, and this Deed of Trust shall constitute a security
agreement creating a security interest therein in favor of Beneficiary
under the UCC;
(e) all awards or payments, including interest thereon, which may
hereafter be made with respect to the Premises, the Improvements, the
Fixtures, or the Equipment, 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 said right), or for a change of
grade, or for any other injury to or decrease in the value of the
Premises, the Improvements or the Equipment or refunds with respect to
the payment of property taxes and assessments, and all other proceeds of
the conversion, voluntary or involuntary, of the Premises, Improvements,
Equipment, Fixtures or any other Trust Property or part thereof into
cash or liquidated claims;
(f) all leases, tenancies, licenses and other agreements affecting
the use, enjoyment or occupancy of the Premises, the Improvements, the
Fixtures, or the Equipment or any portion thereof now or hereafter
entered into, whether before or after the filing by or against
Grantor of any petition for relief under the Bankruptcy Code and all
reciprocal easement agreements, license agreements and other agreements
with Pad Owners (hereinafter collectively referred to as the "Leases"),
together with all cash or security deposits, lease termination payments,
advance rentals and payments of similar nature and guarantees or other
security held by Grantor in connection therewith to the extent of
Grantor's right or interest therein and all
4
<PAGE>
remainders, reversions and other rights and estates appurtenant thereto,
and all base, fixed, percentage or additional rents, and other rents, oil
and gas or other mineral royalties, and bonuses, issues, profits and
rebates and refunds or other payments made by any Governmental Authority
from or relating to the Premises, the Improvements, the Fixtures or the
Equipment plus all rents, common area charges and other payments, whether
paid or accruing before or after the filing by or against Grantor of any
petition for relief under the Bankruptcy Code (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;
(g) all proceeds of and any unearned premiums on any insurance
policies covering the Premises, the Improvements, the Fixtures, the Rent
or the Equipment, 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 Premises, the Improvements, the Fixtures
or the Equipment and all refunds or rebates of Impositions, and interest
paid or payable with respect thereto;
(h) all monies deposited or to be deposited in any funds or
accounts maintained or deposited with Beneficiary, or its assigns, in
connection herewith, including, without limitation, the Security Deposit
Account (to the extent permitted by law), the Rent Account, the Central
Account, the Basic Carrying Costs Sub-Account, the Debt Service Payment
Sub-Account, the Recurring Replacement Reserve Sub-Account, the
Operation and Maintenance Expense Sub-Account and the Curtailment
Reserve Sub-Account;
(i) all accounts receivable, contract rights, franchises,
interests, estate or other claims, both at law and in equity, relating
to the Premises, the Improvements, the Fixtures or the Equipment, not
included in Rents;
(j) all claims against any Person with respect to any damage to the
Premises, the Improvements, the Fixtures or Equipment, including, without
limitation, damage arising
5
<PAGE>
from any defect in or with respect to the design or construction of the
Improvements, the Fixtures or the Equipment and any damage resulting
therefrom;
(k) all deposits or other security or advance payments, including
rental payments made by or on behalf of Grantor to others, with respect
to (i) insurance policies, (ii) utility services, (iii) cleaning,
maintenance, repair or similar services, (iv) refuse removal or sewer
service, (v) parking or similar services or rights and (vi) rental of
Equipment, if any, relating to or otherwise used in the operation of the
Premises, Improvements, the Fixtures or Equipment;
(l) all intangible property relating to the Premises, the
Improvements, the Fixtures or the Equipment or its operation, including,
without limitation, trade names, trademarks, logos, building names and
goodwill;
(m) all advertising material, guaranties, warranties, building
permits, other permits, licenses, plans and specifications, shop and
working drawings, soil tests, appraisals and other documents, materials
and/or personal property of any kind now or hereafter existing in or
relating to the Premises, the Improvements, the Fixtures, and the
Equipment;
(n) all drawings, designs, plans and specifications prepared by
the architects, engineers, interior designers, landscape designers and
any other consultants or professionals for the design, development,
construction, repair and/or improvement of the Trust Property, as
amended from time to time;
(o) the right, in the name of and on behalf of Grantor, to appear
in and defend any action or proceeding brought with respect to the
Premises, the Improvements, the Fixtures or the Equipment and to
commence any action or proceeding to protect the interest of Beneficiary
in the Premises, the Improvements, the Fixtures or the Equipment; and
6
<PAGE>
(p) all proceeds of each of the foregoing.
All of the foregoing items (a) through (p), together with all of the
right, title and interest of Grantor therein, are collectively referred to
as the "Trust Property".
TO HAVE AND TO HOLD the above granted and described Trust Property
unto and to the proper use and benefit of Beneficiary, and Deed Trustee and
the successors and assigns of Beneficiary and Deed Trustee in fee simple,
forever.
IN TRUST, WITH POWER OF SALE, to secure the payment to Beneficiary of
the Debt at the time and in the manner provided for its payment in the
Note, this Deed of Trust and the other Loan Documents.
PROVIDED, ALWAYS, and these presents are upon this express condition,
if Grantor shall well and truly pay and discharge the Debt and perform and
observe the terms, covenants and conditions set forth in the Loan
Documents, then these presents and the estate hereby granted shall cease
and be void.
AND Grantor covenants with and warrants to Beneficiary that:
ARTICLE I: DEFINITIONS
Section 1.01. Certain Definitions.
For all purposes of this Deed of Trust, except as otherwise expressly
provided or unless the context clearly indicates a contrary intent:
(1) the capitalized terms defined in this Section have the
meanings assigned to them in this Section, and include the plural as
well as the singular;
(2) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP; and
7
<PAGE>
(3) the words "herein", "hereof", and "hereunder" and other words
of similar import refer to this Deed of Trust as a whole and not to any
particular Section or other subdivision.
"Affiliate" of any specified Person shall mean any other Person
directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person. For the purposes of
this definition, "control", when used with respect to any specified Person,
means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities,
by contract or otherwise; and the terms "controlling" and "controlled" have
the meanings correlative to the foregoing.
"Aggregate Debt Service Coverage" shall mean the quotient obtained by
dividing the aggregate Net Operating Income for all of the
Cross-collateralized Properties for the specified period by the aggregate
payments of interest and principal (not including the amount of principal
payable upon Maturity) due for such specified period under the Note
(determined as of the date the calculation of Aggregate Debt Service
Coverage is required or requested hereunder).
"Affected Leases" shall have the meaning set forth in Section 8.01(c)
hereof.
"Allocated Loan Amount" shall mean the Initial Allocated Loan Amount
of each Cross-collateralized Property as such amount may be adjusted from
time to time as hereinafter set forth. Upon each adjustment in the
principal portion of the Debt (each a "Total Adjustment"), whether as a
result of amortization, or prepayment or as otherwise expressly provided
herein or in any other Loan Document, each Allocated Loan Amount shall be
increased or decreased, as the case may be, by an amount equal to the
product of (i) the Total Adjustment, and (ii) a fraction, the numerator of
which is the applicable Allocated Loan Amount (prior to the adjustment in
question) and the denominator of which is the Debt prior to the adjustment
to the principal portion of the Debt which results in the recalculation of
the Allocated Loan Amount. However, when the principal portion of the Debt
is reduced as a result of Beneficiary's receipt of (i) Net Proceeds,
8
<PAGE>
the Allocated Loan Amounts for the Cross-collateralized Property with
respect to which the Net Proceeds were received shall be reduced to zero
(the amount by which such Allocated Loan Amount is reduced being referred
to as the "Foreclosed Allocated Amount") and each other Allocated Loan
Amount shall (x) if the Net Proceeds exceed the Foreclosed Allocated Amount
(such excess being referred to as the "Surplus Net Proceeds"), be decreased
by an amount equal to the product of (1) the Surplus Net Proceeds and (2) a
fraction, the numerator of which is the applicable Allocated Loan Amount
(prior to the adjustment in question) and the denominator of which is the
aggregate of all of the Allocated Loan Amounts (prior to the adjustment in
question) other than the Allocated Loan Amount applicable to the
Cross-collateralized Property with respect to which the Net Proceeds were
received (such fraction being referred to as the "Net Proceeds Adjustment
Fraction"), (y) if the Foreclosed Allocated Amount exceeds the Net Proceeds
(such excess being referred to as the "Net Proceeds Deficiency"), be
increased by an amount equal to the product of (1) the Net Proceeds
Deficiency and (2) the Net Proceeds Adjustment Fraction, or (z) if the Net
Proceeds equal the Foreclosed Allocated Amount, remain unadjusted, or (ii)
Loss Proceeds or partial prepayments, made in accordance with Section 15.01
hereof, the Allocated Loan Amount for the Cross-collateralized Property
with respect to which the Loss Proceeds or voluntary prepayments were
received shall be decreased by an amount equal to the sum of (A) with
respect to Loss Proceeds, Loss Proceeds which are applied towards the
reduction of the Debt as set forth in Article III hereof, if any, and (B)
with respect to voluntary prepayments, the amount of any such voluntary
prepayment which is applied towards the reduction of the Debt in accordance
with the provisions of the Note, if any, but in no event shall the
Allocated Loan Amount for the Cross-collateralized Property with respect to
which the Loss Proceeds or voluntary prepayments were received be reduced
to an amount less than zero (the amount by which such Allocated Loan Amount
is reduced being referred to as the "Loss Proceeds or Prepayment Allocated
Amount") and each other Allocated Loan Amount shall be decreased by an
amount equal to the product of (1) the excess of (a) the Loss Proceeds or
such partial prepayments over (b) the Loss Proceeds or Prepayment Allocated
Amount, and (2) a fraction, the numerator of which is the applicable
Allocated Loan Amount (prior to the adjustment in question) and the
denominator of
9
<PAGE>
which is the aggregate of all of the Allocated Loan Amounts (prior to the
adjustment in question) other than the Allocated Loan Amount applicable to
the Cross-collateralized Property to which such Loss Proceeds or partial
prepayments were applied.
"Allocation Date" shall mean each Tuesday and Thursday in a Current
Month, unless such day is not a Business Day, in which event the Allocation
Date shall be the next Business Day thereafter.
"Appraisal" shall mean the appraisal of the Trust Property and all
supplemental reports or updates thereto previously delivered to Beneficiary
in connection with the Loan.
"Appraiser" shall mean the Person who prepared the Appraisal.
"Approved Manager Standard" shall mean the standard of business
operations, practices and procedures customarily employed by entities
having a senior executive with at least seven (7) years' experience in the
management of value oriented super-regional malls which manage not less
than 5,000,000 feet of gross leasable area, including, without limitation,
certain super-regional malls which contain more than 1,500,000 square feet
of gross leasable area.
"Approved TI Costs" shall mean costs up to an amount not to exceed
$500,000 in the aggregate per Loan Year which are actually and reasonably
incurred by Grantor for improvements required to be made by Grantor under
the terms of any Space Lease which are approved by Beneficiary, which
approval may be granted or denied in Beneficiary's sole and absolute
discretion.
"Architect" shall have the meaning set forth in Section 3.04(b)(i)
hereof.
"Assignment" shall mean the Assignment of Leases and Rents and
Security Deposits of even date herewith relating to the Trust Property
given by Grantor to Beneficiary.
"Bank" shall mean Nationsbank N.A., or any successor bank hereafter
selected by Beneficiary, subject to the approval of
10
<PAGE>
Grantor, which shall not be unreasonably withheld, delayed or conditioned.
"Bankruptcy Code" shall mean 11 U.S.C. ss.101 et seq.
"Basic Carrying Costs" shall mean the sum of the following costs
associated with the Trust Property: (a) Impositions (excluding those
Impositions which may be assessed or imposed on or constitute a lien upon
Grantor only, as opposed to the Trust Property or any part thereof or
interest therein) and (b) insurance premiums.
"Basic Carrying Costs Monthly Installment" shall mean Beneficiary's
estimate of one-twelfth (1/12th) of the annual amount for Basic Carrying
Costs. "Basic Carrying Costs Monthly Installment" shall also include, if
required by Beneficiary, a sum of money which, together with such monthly
installments, will be sufficient to make the payment of each such Basic
Carrying Cost at least thirty (30) days prior to the date initially due.
Should such Basic Carrying Costs not be ascertainable at the time any
monthly deposit is required to be made, the Basic Carrying Costs Monthly
Installment shall be determined by Beneficiary in its reasonable discretion
on the basis of the aggregate Basic Carrying Costs for the prior Fiscal
Year or month or the prior payment period for such cost. As soon as the
Basic Carrying Costs are fixed for the then current Fiscal Year, month or
period, the next ensuing Basic Carrying Costs Monthly Installment shall be
adjusted to reflect any deficiency or surplus in prior monthly payments. If
at any time during the term of the Loan Beneficiary determines that there
will be insufficient funds in the Basic Carrying Costs Sub-Account to make
payments when they become due and payable, Beneficiary shall have the right
to adjust the Basic Carrying Costs Monthly Installment such that there will
be sufficient funds to make such payments.
"Basic Carrying Costs Sub-Account" shall mean the Sub-Account of the
Central Account established pursuant to Section 5.02 hereof and maintained
pursuant to Section 5.06 hereof.
"Beneficiary" shall mean the Beneficiary named herein and its
successors or assigns.
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"Business Day" shall mean any day other than (a) a Saturday or
Sunday, or (b) a day on which banking and savings and loan institutions in
the State of New York are authorized or obligated by law or executive order
to be closed, or at any time during which the Loan is an asset of a
securitization, the cities, states and/or commonwealths used in the
comparable definition of "Business Day" in the securitization documents
which shall initially include Illinois and Georgia.
"Central Account" shall mean an Eligible Account, maintained at the
Bank, in the name of Beneficiary or its successors or assigns (as secured
party) as may be designated by Beneficiary.
"Closing Date" shall mean the date of the Note.
"Closing DSC" shall mean 1.5:1.
"Code" shall mean the Internal Revenue Code of 1986, as amended and
as it may be further amended from time to time, any successor statutes
thereto, and applicable U.S. Department of Treasury regulations issued
pursuant thereto.
"Collection Account" shall mean one or more demand deposit account(s)
designated by Beneficiary, which shall be an Eligible Account, to which
payments of Debt are transferred.
"Condemnation Proceeds" shall mean all of the proceeds in respect of
any Taking or purchase in lieu thereof.
"Contractual Obligation" shall mean, as to any Person, any provision
of any security issued by such Person or of any agreement, instrument or
undertaking to which such Person is a party or by which it or any of the
property owned by it is bound.
"CPI" shall mean "The Consumer Price Index (New Series) (Base Period
1982-84=100) (all items for all urban consumers)" issued by the Bureau of
Labor Statistics of the United States Department of Labor (the "Bureau").
If the CPI ceases to use the 1982-84 average equaling 100 as the basis of
calculation, or if a change is made in the term, components or number of
items contained in said index, or if the index is altered, modified,
converted or revised in any other way, then the index shall be
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adjusted to the figure that would have been arrived at had the change in
the manner of computing the index in effect at the date of this Deed of
Trust not been altered. If at any time during the term of this Deed of
Trust the CPI shall no longer be published by the Bureau, then any
comparable index issued by the Bureau or similar agency of the United
States issuing similar indices shall be used in lieu of the CPI.
"Cross-collateralized Borrowers" shall mean each Person which has
executed the Note secured by this Deed of Trust.
"Cross-collateralized Deed of Trust" shall mean each Deed of Trust,
deed of trust, deed to secure debt, security agreement, assignment of rents
and fixture filings as originally executed or as same may hereafter from
time to time be supplemented, amended, modified or extended by one or more
indentures supplemental thereto granted by a Cross-collateralized Borrower
to Beneficiary as security for the Note.
"Cross-collateralized Property" shall mean each parcel or parcels of
real property encumbered by a Cross-collateralized Deed of Trust as
identified on Exhibit F attached hereto and made a part hereof.
"Current Month" shall mean each Interest Accrual Period.
"Curtailment Reserve Sub-Account" shall mean the Sub-Account
established pursuant to Section 5.02 hereof and maintained pursuant to
Section 5.11 hereof for the purpose of holding certain Excess Rent.
"Debt" shall have the meaning set forth in the recitals hereto.
"Debt Service" shall mean the amount of interest and principal
payments due and payable in accordance with the Note during an applicable
period.
"Debt Service Coverage" shall mean the quotient obtained by dividing
Net Operating Income for the specified period by the sum of the aggregate
payments of interest and principal for such specified period under the Note
(determined as of the date the
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calculation of Debt Service Coverage is required or requested hereunder).
"Debt Service Payment Sub-Account" shall mean the Sub-Account of the
Central Account established pursuant to Section 5.02 hereof and maintained
pursuant to Section 5.07 hereof for the purposes of making Debt Service
payments.
"Deed of Trust" shall mean this Amended and Restated Deed of Trust as
originally executed or as it may hereafter from time to time be
supplemented, amended, modified or extended by one or more indentures
supplemental hereto.
"Deed Trustee" shall mean the Person or Persons identified in this
Deed of Trust and its or their successors and assigns.
"Default" shall mean any Event of Default or event which would
constitute an Event of Default if all requirements in connection therewith
for the giving of notice, the lapse of time, and the happening of any
further condition, event or act, had been satisfied.
"Default Rate" shall have the meaning set forth in the Note.
"Default Rate Interest" shall mean, to the extent the Default Rate
becomes applicable, interest accrued on the Note in excess of the interest
which would have accrued at the Class A Rate, the Class B Rate, the Class C
Rate, or the Class D Rate, each as defined in the Note, on (a) the
principal amount of the Loan which is outstanding from time to time and (b)
any accrued but unpaid interest (other than Default Rate Interest), if the
Default Rate was not applicable.
"Development Laws" shall mean all applicable subdivision, zoning,
environmental protection, wetlands protection, or land use laws or
ordinances, and any and all applicable rules and regulations of any
Governmental Authority promulgated thereunder or related thereto.
"Distribution Date" shall mean the twentieth (20th) day of each
calendar month or, if such twentieth (20th) day is not a
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Business Day, on the Business Day immediately after the twentieth (20th)
day of such calendar month.
"Eligible Account" shall mean a segregated account which is either
(i) an account or accounts maintained with a depository institution or
trust company the long term unsecured debt obligations of which are rated
by the Rating Agency (or the Rating Agency has confirmed in writing that
such account would not, in and of itself, result in a downgrade,
qualification or withdrawal of the then current ratings assigned to any
certificates issued in connection with a Securitization) in one of its two
highest rating categories at all times (or, in the case of the Rent Account
and the Basic Carrying Costs Sub-Account, the long term unsecured debt
obligations of which are rated at least "AA" or the equivalent by the
Rating Agency (or, if the Rating Agency has confirmed in writing that such
account would not, in and of itself, result in a downgrade, qualification
or withdrawal of the then current ratings assigned to any certificates
issued in connection with a Securitization) or, if the funds in such
account are to be held in such account for less than 30 days, the short
term obligations of which are rated by the Rating Agency (or, if not rated
by the Rating Agency, the Rating Agency has confirmed in writing that such
account would not, in and of itself, result in a downgrade, qualification
or withdrawal of the then current ratings assigned to any certificates
issued in connection with a Securitization) in its highest rating category
at all times) or (ii) a segregated trust account or accounts maintained
with a federal or state chartered depository institution or trust company
acting in its fiduciary capacity which, in the case of a state chartered
depository institution is subject to regulations substantially similar to
12 C.F.R. ss. 9.10(b), having in either case a combined capital and surplus
of at least $100,000,000 and subject to supervision or examination by
federal and state authority, or the Rating Agency has confirmed in writing
that such account would not, in and of itself, cause a downgrade,
qualification or withdrawal of the then current ratings assigned to any
certificates issued in connection with a Securitization) to the Rating
Agency, which may be an account maintained by Beneficiary or its agents or
(iii) an account in any other insured depository institution reasonably
acceptable to Beneficiary and the Rating Agency as confirmed in writing
that such account would not, in and of itself, result in
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a downgrade, qualification or withdrawal of the then current ratings of any
certificates issued in connection with a Securitization. Eligible Accounts
may bear interest. The title of each Eligible Account shall indicate that
the funds held therein are held in trust for the uses and purposes set
forth herein.
"Engineer" shall have the meaning set forth in Section 3.04(b)(i)
hereof.
"Environmental Problem" shall mean any of the following:
(a) the presence of any Hazardous Material on, in, under, or above
all or any portion of the Trust Property, which Grantor would be
required to report to a Governmental Authority;
(b) the release or threatened release of any Hazardous Material
from or onto the Trust Property which Grantor would be required to
report to a Governmental Authority;
(c) the violation or threatened violation of any Environmental
Statute with respect to the Trust Property; or
(d) the failure to obtain or to abide by the terms or conditions
of any permit or approval required under any Environmental Statute with
respect to the Trust Property.
A condition described above shall be an Environmental Problem regardless of
whether or not any Governmental Authority has taken any action in
connection with the condition and regardless of whether that condition was
in existence on or before the date hereof.
"Environmental Report" shall mean the environmental audit report for
the Trust Property and any supplements or updates thereto, previously
delivered to Beneficiary in connection with the Loan.
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"Environmental Statute" shall mean any effective, applicable or
relevant federal, state or local statute, ordinance, rule or regulation,
any judicial or administrative order (whether or not on consent) or
judgment applicable to Grantor or the Trust Property including, without
limitation, any judgment or settlement based on common law theories, and
any provisions or condition of any permit, license or other authorization
binding on Grantor relating to (a) the protection of the environment, the
safety and health of persons (including employees) or the public welfare
from actual or potential exposure (or effects of exposure) to any actual or
potential release, discharge, disposal or emission (whether past or
present) of any Hazardous Materials or (b) the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
any Hazardous Materials, including, but not limited to, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"),
as amended by the Superfund Amendments and Reauthorization Act of 1986, 42
U.S.C. ss.9601 et seq., the Solid Waste Disposal Act, as amended by the
Resource Conservation and Recovery Act of 1976, as amended by the Solid and
Hazardous Waste Amendments of 1984, 42 U.S.C. ss.6901 et seq., the Federal
Water Pollution Control Act, as amended by the Clean Water Act of 1977, 33
U.S.C. ss.1251 et seq., the Toxic Substances Control Act of 1976, 15 U.S.C.
ss.2601 et seq., the Emergency Planning and Community Right-to-Know Act of
1986, 42 U.S.C. ss.1101 et seq., the Clean Air Act of 1966, as amended, 42
U.S.C. ss.7401 et seq., the National Environmental Policy Act of 1975, 42
U.S.C. ss.4321, the Rivers and Harbours Act of 1899, 33 U.S.C. ss.401 et
seq., the Endangered Species Act of 1973, as amended, 16 U.S.C. ss.1531 et
seq., the Occupational Safety and Health Act of 1970, as amended, 29 U.S.C.
ss.651 et seq., and the Safe Drinking Water Act of 1974, as amended, 42
U.S.C. ss.300(f) et seq., and all rules, regulations and guidance documents
promulgated or published thereunder.
"Equipment" shall have the meaning set forth in granting clause (d)
of this Deed of Trust.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated
thereunder. Section references to ERISA are to ERISA, as in effect at the
date of this Deed of Trust and, as of the
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relevant date, any subsequent provisions of ERISA, amendatory thereof,
supplemental thereto or substituted therefor.
"ERISA Affiliate" shall mean any corporation or trade or business
that is a member of any group of organizations (a) described in Section
414(b) or (c) of the Code of which Grantor is a member and (b) solely for
purposes of potential liability under Section 302(c)(11) of ERISA and
Section 412(c)(11) of the Code and the lien created under Section 302(f) of
ERISA and Section 412(n) of the Code, described in Section 414(m) or (o) of
the Code of which Grantor is a member.
"Event of Default" shall have the meaning set forth in Section 13.01
hereof.
"Excess Rent" shall have the meaning set forth in Section 5.05 hereof.
"First Interest Accrual Period" shall mean the period commencing on
the Closing Date and ending on January 19, 1997.
"First Payment Date" shall mean the Payment Date in the month
following the month in which the Loan is initially funded.
"Fiscal Year" shall mean the twelve-month period commencing on
January 1 and ending on December 31 during each year of the term of this
Deed of Trust, or such other fiscal year of Grantor as Grantor may select
from time to time with the prior written consent of Beneficiary.
"Fixtures" shall have the meaning set forth in granting clause (d) of
this Deed of Trust.
"GAAP" shall mean generally accepted accounting principles in the
United States of America, as of the date of the applicable financial
report, consistently applied (except for changes in application as to which
Grantor's independent certified accountants and Beneficiary concur).
"General Partner" shall mean, if Grantor is a partnership, each
general partner of Grantor and, if applicable, each general partner of such
general partner.
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"Governmental Authority" shall mean, with respect to any Person, any
federal or State government or other political subdivision thereof and any
entity, including any regulatory or administrative authority or court,
exercising executive, legislative, judicial, regulatory or administrative
or quasi-administrative functions of or pertaining to government, and any
arbitration board or tribunal in each case, having jurisdiction over such
applicable Person or such Person's property and any stock exchange on which
shares of capital stock of such Person are listed or admitted for trading.
"Grantor" shall mean Grantor named herein and any successor to the
obligations of Grantor.
"Hazardous Material" shall mean any flammable, explosive or
radioactive materials, hazardous materials or wastes, hazardous or toxic
substances, pollutants, asbestos or any material containing asbestos, or
any other similar substance or material, in each case as defined in or
regulated by any Environmental Statutes.
"Impositions" shall mean all taxes (including, without limitation,
all real estate, ad valorem, sales (including those imposed on lease
rentals), use, single business, gross receipts, value added, intangible,
transaction, privilege or license or similar taxes), assessments
(including, without limitation, all assessments for public improvements or
benefits, whether or not commenced or completed prior to the date hereof
and whether or not commenced or completed within the term of this Deed of
Trust), ground rents, water, sewer or other rents and charges, excises,
levies, fees (including, without limitation, license, permit, inspection,
authorization and similar fees), and all other governmental charges, in
each case whether general or special, ordinary or extraordinary, or
foreseen or unforeseen, of every character in respect of the Trust Property
and/or any Rent (including all interest and penalties thereon), which at
any time prior to, during or in respect of the term hereof may be assessed
or imposed on or in respect of or be a lien upon (a) Grantor (including,
without limitation, all franchise, single business or other taxes imposed
on Grantor for the privilege of doing business in the jurisdiction in which
the Trust Property or
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any other collateral delivered or pledged to Beneficiary in connection with
the Loan is located) or Beneficiary, (b) the Trust Property or any part
thereof or any Rent therefrom or any estate, right, title or interest
therein, or (c) any occupancy, operation, use or possession of, or sales
from, or activity conducted on, or in connection with the Trust Property,
or any part thereof, or the leasing or use of the Trust Property, or any
part thereof, or the acquisition or financing of the acquisition of the
Trust Property, or any part thereof, by Grantor.
"Improvements" shall have the meaning set forth in the granting
clause (b) of this Deed of Trust.
"Independent" shall mean, when used with respect to any Person, a
Person who (a) is in fact independent, (b) does not have any direct
financial interest or any material indirect financial interest in Grantor,
or in any Affiliate of Grantor or any constituent partner, shareholder,
member or beneficiary of Grantor and (c) is not connected with Grantor or
any Affiliate of Grantor or any constituent partner, shareholder, member or
beneficiary of Grantor as an officer, employee, promoter, underwriter,
trustee, partner, director or person performing similar functions;
provided, however, that a Person shall not be deemed to be connected with
Grantor or any Affiliate of Grantor solely by reason of such Person being a
director of a Single Purpose Entity. Whenever it is herein provided that
any Independent Person's opinion or certificate shall be provided, such
opinion or certificate shall state that the Person executing the same has
read this definition and is Independent within the meaning hereof.
"Initial Allocated Loan Amount" shall mean the portion of the Loan
Amount allocated to each Cross-collateralized Property as set forth on
Exhibit F annexed hereto and made a part hereof.
"Initial Basic Carrying Costs Deposit" shall equal the amount set
forth on Exhibit B attached hereto and made a part hereof.
"Initial Central Account Deposit" shall equal the amount set forth on
Exhibit B attached hereto and made a part hereof.
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"Institutional Lender" shall mean any of the following Persons: (a)
any bank, savings and loan association, savings institution, trust company
or national banking association, acting for its own account or in a
fiduciary capacity, (b) any charitable foundation, (c) any insurance
company or pension and/or annuity company, (d) any fraternal benefit
society, (e) any pension, retirement or profit sharing trust or fund within
the meaning of Title I of ERISA or for which any bank, trust company,
national banking association or investment adviser registered under the
Investment Advisers Act of 1940, as amended, is acting as trustee or agent,
(f) any investment company or business development company, as defined in
the Investment Company Act of 1940, as amended, (g) any small business
investment company licensed under the Small Business Investment Act of
1958, as amended, (h) any broker or dealer registered under the Securities
and Exchange Act of 1934, or any investment adviser registered under the
Investment Adviser Act of 1940, as amended, (i) any government, any public
employees' pension or retirement system, or any other government agency
supervising the investment of public funds, or (j) any other entity all of
the equity owners of which are Institutional Lenders; provided that each of
said Persons shall have net assets equal to or greater than $500,000,000,
be in the business of making commercial mortgage loans, secured by
properties of like type, size and value as the Trust Property and have a
long term credit rating which is not less than BBB - (or its equivalent)
from the Rating Agency.
"Insurance Proceeds" shall mean all of the proceeds received under
the insurance policies required to be maintained by Grantor pursuant to
Article III hereof.
"Insurance Requirements" shall mean all terms of any insurance policy
required by this Deed of Trust, all requirements of the issuer of any such
policy, and all regulations and then current standards applicable to or
affecting the Trust Property or any use or condition thereof, which may, at
any time, be recommended by the Board of Fire Underwriters, if any, having
jurisdiction over the Trust Property, or such other Person exercising
similar functions.
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"Interest Accrual Period" shall mean (x) the First Interest Accrual
Period and, (y) thereafter, each period commencing on and including the
Distribution Date in the immediately preceding calendar month and ending on
and including the day immediately preceding the Distribution Date in the
calendar month in which the applicable Payment Date occurs, each of which
periods shall be treated as one-month for purposes of computing the
interest accruing during such period.
"Late Charge" shall have the meaning set forth in Section 13.09
hereof.
"Leases" shall have the meaning set forth in granting clause (f) of
this Deed of Trust.
"Legal Requirement" shall mean as to any Person, the certificate of
incorporation, by-laws, certificate of limited partnership, agreement of
limited partnership or other organization or governing documents of such
Person, and any law, statute, order, ordinance, judgement, decree,
injunction, treaty, rule or regulation (including, without limitation,
Environmental Statutes, Development Laws and Use Requirements) or
determination of an arbitrator or a court or other Governmental Authority
and all covenants, agreements, restrictions and encumbrances contained in
any instruments, in each case applicable to or binding upon such Person or
any of its property or to which such Person or any of its property is
subject.
"Loan" shall have the meaning set forth in the Recitals hereto.
"Loan Amount" shall have the meaning set forth in the Recitals hereto.
"Loan Documents" shall mean this Deed of Trust, the Note, the
Assignment, and any and all other agreements, instruments, certificates or
documents executed and delivered by Grantor or any of the
Cross-collateralized Borrowers or any Affiliate of Grantor in connection
with the Loan.
"Loan Year" shall mean each 365 day period (or 366 day period if the
month of February in a leap year is included)
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commencing on the first day each January after the Closing Date (provided,
however, that the first Loan Year shall also include the period from the
Closing Date to the end of the month in which the Closing Date occurs).
"Loss Proceeds" shall mean, collectively, all Insurance Proceeds and
all Condemnation Proceeds.
"Major Space Lease" shall mean any Space Lease of a tenant or
Affiliate of such tenant where such tenant or such Affiliate leases, in the
aggregate, 40,000 or more square feet of the Total GLA.
"Manager" shall mean the Person, other than Grantor, which manages
the Trust Property on behalf of Grantor.
"Manager Certification" shall have the meaning set forth in Section
2.09 hereof.
"Material Adverse Effect" shall mean any event or condition that has
a material adverse effect on (a) the Trust Property, (b) the business,
prospects, profits, operations or condition (financial or otherwise) of
Grantor, (c) the enforceability, validity, perfection or priority of the
lien of any Loan Document or (d) the ability of Grantor to perform any
obligations under any Loan Document.
"Maturity", when used with respect to the Note, shall mean the
Maturity Date set forth in the Note or such other date pursuant to the Note
on which the final payment of principal, and premium, if any, on which the
Note becomes due and payable as therein or herein provided, whether at
Stated Maturity or by declaration of acceleration, or otherwise.
"Maturity Date" shall mean the Maturity Date set forth in the Note.
"Merger" shall mean a merger of Potomac Mills-Phase III (MLP) Limited
Partnership and Washington Outlet Mall (MLP) Limited Partnership.
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"Monthly Debt Service Payment" shall mean a monthly payment of
principal in an amount equal to that which is required to fully amortize
the Loan based upon a thirty (30) year level amortization schedule,
together with a monthly payment of interest on the Principal Amount.
"Multiemployer Plan" shall mean a multiemployer plan defined as such
in Section 3(37) of ERISA to which contributions have been, or were
required to have been, made by Grantor or any ERISA Affiliate and which is
covered by Title IV of ERISA.
"Net Operating Income" shall mean in each Fiscal Year or portion
thereof during the term hereof, Operating Income less Operating Expenses.
"Net Proceeds" shall mean the excess of (i)(x) the purchase price (at
foreclosure or otherwise) actually received by Beneficiary with respect to
the Trust Property as a result of the exercise by Beneficiary of its
rights, powers, privileges and other remedies after the occurrence of an
Event of Default, or (y) in the event that Beneficiary (or Beneficiary's
nominee) is the purchaser at foreclosure by credit bid, then the amount of
such credit bid, in either case, over (ii) all costs and expenses,
including, without limitation, all attorneys' fees and disbursements and
any brokerage fees, if applicable, incurred by Beneficiary in connection
with the exercise of such remedies, including the sale of such Trust
Property after a foreclosure against the Trust Property.
"Note" shall have the meaning set forth in the recitals hereof.
"Notice Date" shall have the meaning set forth in Section 5.05 hereof.
"O&M Operative Period" shall mean the period of time commencing upon
the earlier to occur of (a) an Event of Default and (b) the Optional
Prepayment Date and terminating upon the earlier to occur of (i) repayment
of the Debt in full and (ii) (A) if the O&M Operative Period has commenced
as a result of an Event of Default of the types set forth in clauses (a),
(b), (c), (e), (g) (to the extent (g) applies to a representation or
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warranty given after the Closing Date), (j), (m) or (o) of Section 13.01
hereof, upon the curing of such Event of Default; provided that the O&M
Operative Period may only be terminated pursuant to this clause (b) one (1)
time during the Loan (i.e., if an Event of Default of the types set forth
in clause (ii) (A) occurs more than once during the term of the Loan, the
O&M Operative Period shall not terminate prior to the payment of the Debt
in full) or (B) if the O&M Operative Period has commenced as a result of an
Event of Default of the type set forth in clause (k) of Section 13.01
hereof, upon the curing of such Event of Default.
"Officer's Certificate" shall mean a certificate delivered to
Beneficiary by Grantor which is signed on behalf of Grantor by an
authorized representative of Grantor which states that the items set forth
in such certificate are true, accurate and complete in all respects.
"Operating Expenses" shall mean, in each Fiscal Year or portion
thereof during the term hereof, all expenses paid by Grantor (or by the
Manager on behalf of Grantor) on account of such period in connection with
the operation of the Trust Property, which shall include, without
limitation, the following expenses:
(a) expenses in connection with cleaning, repair, maintenance,
management, leasing, decoration or painting thereof, or the provision of
services to any tenant, net of any insurance proceeds or condemnation
proceeds in respect of any of the foregoing;
(b) wages, benefits, payroll taxes, uniforms, insurance costs
and all other related expenses for on-site building personnel, up to and
including the level of the on-site building manager, engaged in cleaning,
repair, maintenance, management, leasing, decoration or painting thereof or
the provision of services to any tenant;
(c) reasonable allocations of wages, benefits, payroll taxes,
insurance costs and all other related expenses for bookkeeping, accounting,
legal and other building management functions and home office expenses and
computer usage, but only
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if the amount of such allocations in the aggregate exceeds the reasonable
and customary compensation described in clause (iv) for the same or similar
services;
(d) the compensation being paid for bookkeeping, accounting,
legal and building management services for the Trust Property, and all
other items of compensation and reimbursement payable by Grantor to the
Manager, provided, however, that if such compensation actually is less than
5.0% of minimum and overage rentals from the Trust Property the amount of
such compensation shall be deemed to be 5.0% of minimum and overage rentals
from the Trust Property for purposes of determining Debt Service Coverage;
(e) the cost of all electricity, oil, gas, water, steam, heat,
ventilation, air conditioning and any other energy, telecommunications,
utility or similar items, including overtime usage, and the cost of
building and cleaning supplies;
(f) Impositions (except for real estate taxes paid directly to
any taxing authority by any tenant);
(g) premiums for liability, casualty, fidelity, business
interruption, loss of "rental value" and other insurance (which, in the
case of any policy covering multiple properties, shall be equitably
allocated to the Trust Property pro rata in proportion to the replacement
value of each of the properties covered by such policy for casualty
insurance, the respective size and experience rating of each of the
properties covered by such policy for liability insurance, and the insured
value of each of the properties covered by such policy for the other
coverages);
(h) legal, accounting, appraisal and other professional fees,
expenses and disbursements;
(i) amounts paid in consideration of any modification,
amendment, supplement, waiver, renewal, or termination of any lease;
(j) all amounts paid or expenses incurred under Property
Agreements or under any Lease, including, without
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<PAGE>
limitation, marketing and promotion fees to the extent not reimbursed or
reimbursable by tenants under any Lease; and
(k) all other amounts paid during such period in respect of
items which in accordance with generally accepted accounting principles
would be included in Grantor's annual financial statements for such period
or any other period as operating expenses of the Trust Property and are
reasonably expected by Grantor to be regularly recurring operating expenses
of the Trust Property and not separately deducted in the definition of
Operating Income.
Notwithstanding the foregoing, Operating Expenses shall not include (1) any
non-cash charge such as depreciation or amortization, (2) the principal of
and interest and premium, if any, on the Note or any other indebtedness of
Grantor, (3) income taxes or other Impositions in the nature of income
taxes, (4) any expenses (including legal, accounting and other professional
fees, expenses and disbursements) incurred in connection with the issuance
of the Note or the sale, exchange, transfer, financing or refinancing of
all or any portion of the Trust Property or in connection with the recovery
of Loss Proceeds which are applied to prepay the Debt, (5) any item of
expense which would otherwise be considered within Operating Expenses
pursuant to the provisions above but is paid directly by any tenant and (6)
capital improvement costs (including, without limitation, tenant
allowances) capitalized in accordance with GAAP and not recovered from
tenants.
"Operating Income" shall mean, in each Fiscal Year or portion thereof
during the term hereof, all revenue derived by Grantor arising from the
Trust Property including, without limitation, rental revenues (whether
denominated as basic rent, additional rent, escalation payments, electrical
payments or otherwise) and other fees and charges payable pursuant to
Leases or otherwise in connection with the Trust Property, and business
interruption, rent or other similar insurance proceeds. Operating Income
shall not include (a) Insurance Proceeds (other than proceeds of rent,
business interruption or other similar insurance allocable to the
applicable period) and Condemnation Proceeds (other than Condemnation
Proceeds arising from a temporary taking or the use and occupancy of all or
part of the
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applicable Trust Property allocable to the applicable period), or interest
accrued on such Condemnation Proceeds, (b) proceeds of any financing, (c)
proceeds of any sale, exchange or transfer of the Trust Property or any
part thereof or interest therein, (d) capital contributions or loans to
Grantor or an Affiliate of Grantor, (e) any item of income otherwise
includable in Operating Income but paid directly by any tenant to a Person
other than Grantor except for real estate taxes paid directly to any taxing
authority by any tenant, (f) any other extraordinary, non-recurring
revenues, (g) Rent paid by or on behalf of any lessee under a Space Lease
which is the subject of any proceeding or action relating to its
bankruptcy, reorganization or other arrangement pursuant to federal
bankruptcy law or any similar federal or state law or which has been
adjudicated a bankrupt or insolvent unless such Space Lease has been
affirmed by the trustee in such proceeding or action, (h) Rent paid by or
on behalf of any lessee under a Space Lease the demised premises of which
are not occupied either by such lessee or by a sublessee thereof, (i) Rent
paid by or on behalf of any lessee under a Space Lease in whole or in
partial consideration for the termination of any Space Lease in excess of
$45,000 per Fiscal Year; (j) interest income in excess of $75,000 per
Fiscal Year, (k) sales tax rebates from any Governmental Authority, or (l)
Rent paid by any Space Tenant for a period more than one month in advance
of when due.
"Operation and Maintenance Expense Monthly Installment" shall mean
with respect to each Current Month in which funds are required to be
allocated or distributed pursuant to the terms of Section 5.05(d), or if an
Event of Default has occurred and is continuing, the lesser of (a) all
amounts remaining in the Central Account after the distributions made
pursuant to clauses (a) through (c) of Section 5.05 or (b), an amount equal
to 1/12 of the higher of (i) the product of (A) 1.05 and (B) the actual
Operating Expenses (exclusive of Impositions and insurance premiums) for
the immediately preceding calendar year and (ii) the annual Operating
Expenses (exclusive of Impositions and insurance premiums) for the
immediately preceding calendar year multiplied by a fraction, the number of
which is the CPI for the month of December of the calendar year immediately
preceding the year with respect to which the determination is being made
and
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the denominator of which is the CPI for the month of December, 1996.
"Operation and Maintenance Expense Sub-Account" shall mean the
Sub-Account of the Central Account established pursuant to Section 5.02
hereof and maintained pursuant to Section 5.09 hereof relating to the
payment of Operating Expenses (exclusive of Impositions and insurance
premiums) and Approved TI Costs.
"Optional Prepayment Date" shall mean the Payment Date occurring in
December, 2003.
"Pad Owners" shall mean any owner of any fee interest in property
contiguous to or surrounded by the Trust Property who has entered into or
is subject to a reciprocal easement agreement or other agreement or
agreements with Grantor either (a) in connection with an existing or
potential improvement on such property or (b) relating to or affecting the
Trust Property.
"Payment Date" shall mean, with respect to each Interest Accrual
Period, the second (2nd) Business Day prior to the Distribution Date
occurring in the month in which such Interest Accrual Period ends.
"PBGC" shall mean the Pension Benefit Guaranty Corporation
established under ERISA, or any successor thereto.
"Permitted Debt" shall mean (i) unsecured trade and other
indebtedness incurred in the operation of the Trust Property in the
ordinary course of Grantor's business which is consistent with the Approved
Manager Standard that is paid in full within ninety (90) days of the date
upon which such indebtedness was due, (ii) subordinated obligations to
reimburse another Cross-collateralized Borrower in connection with any
amounts paid by such other Cross-collateralized Borrower in excess of the
Allocated Loan Amount of such Cross-collateralized Borrower, interest
thereon and its ratable share of any other sums due under the Loan
Documents, and (iii) if no Event of Default has occurred and is continuing,
indebtedness solely in respect of reimbursement obligations incurred in
connection with surety and appeal bonds, performance bonds, and other
obligations
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of like nature, all in the ordinary course of business in accordance with
customary industry practices and the Approved Manager Standard; provided,
however, that the aggregate of unsecured Permitted Debt of the types set
forth in clauses (i) and (iii) shall in no event exceed $5,000,000. As used
herein the term "indebtedness" shall mean (a) any liabilities and
obligations of such Person, contingent or otherwise, (i) in respect of
borrowed money (whether or not the recourse of the lender is to the whole
of the assets of such Person or only to a portion thereof), (ii) evidenced
by bonds, notes, debentures, or similar instruments, (iii) representing the
balance deferred and unpaid of the purchase price of any property or
services, except those incurred in the ordinary course of such Person's
business that would constitute ordinarily a trade payable to trade
creditors, (iv) evidenced by bankers' acceptances, (v) for the payment of
money relating to a capitalized lease obligation or sale/leaseback
obligation, or (vi) evidenced by a letter of credit or a reimbursement
obligation of such Person with respect to any letter of credit or (b) any
liabilities and obligations of others of the kind described in the
preceding clause (a) that such Person has guaranteed or that is otherwise
its legal liability or which is secured by any assets or property of such
Person including any obligations to purchase, redeem, or acquire any
capital stock or similar interests.
"Permitted Encumbrances" shall have the meaning set forth in Section
2.05(a) hereof.
"Permitted Investments" shall mean any one or more of the following
obligations or securities payable on demand or having a scheduled maturity
on or before the Business Day preceding the date upon which funds in the
Central Account are required to be drawn, and having at all times the
required ratings, if any, provided for in this definition, unless the
Rating Agency shall have confirmed in writing to Beneficiary that a lower
rating would not, in and of itself, result in a downgrade, qualification or
withdrawal of the then current ratings assigned to any certificates issued
in connection with a Securitization:
(a) obligations of, or obligations fully guaranteed as to payment
of principal and interest by, the United States of America or any agency
or instrumentality
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thereof provided such obligations are backed by the full faith and
credit of the United States of America including, without limitation,
obligations of: the U.S. Treasury (all direct or fully guaranteed
obligations), the Farmers Home Administration (certificates of
beneficial ownership), the General Services Administration
(participation certificates), the U.S. Maritime Administration
(guaranteed Title XI financing), the Small Business Administration
(guaranteed participation certificates and guaranteed pool
certificates), the U.S. Department of Housing and Urban Development
(local authority bonds) and the Washington Metropolitan Area Transit
Authority (guaranteed transit bonds); provided, however, that the
investments described in this clause must (A) have a predetermined fixed
dollar of principal due at maturity that cannot vary or change, (B) if
such investments have a variable rate of interest, such interest rate
must be tied to a single interest rate index plus a fixed spread (if
any) and must move proportionately with that index, and (C) such
investments must not be subject to liquidation prior to their maturity;
(b) intentionally omitted;
(c) obligations of the following United States of America
government sponsored agencies: Federal Home Loan Mortgage Corp. (debt
obligations), the Farm Credit System (consolidated systemwide bonds and
notes), the Federal Home Loan Banks (consolidated debt obligations), the
Federal National Mortgage Association (debt obligations), the Student
Loan Marketing Association (debt obligations), the Financing Corp. (debt
obligations), and the Resolution Funding Corp. (debt obligations);
provided, however, that the investments described in this clause must
(A) have a predetermined fixed dollar of principal due at maturity that
cannot vary or change, (B) if such investments have a variable rate of
interest, such interest rate must be tied to a single interest rate
index plus a fixed spread (if any) and must move proportionately with
that index, and (C) such investments must not be subject to liquidation
prior to their maturity;
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(d) federal funds, unsecured certificates of deposit, time
deposits, bankers' acceptances and repurchase agreements with maturities
of not more than 365 days of any bank, the short term obligations of
which are rated in the highest short term rating category by the Rating
Agency; provided, however, that the investments described in this clause
must (A) have a predetermined fixed dollar of principal due at maturity
that cannot vary or change, (B) if such investments have a variable rate
of interest, such interest rate must be tied to a single interest rate
index plus a fixed spread (if any) and must move proportionately with
that index, and (C) such investments must not be subject to liquidation
prior to their maturity;
(e) fully Federal Deposit Insurance Corporation-insured demand and
time deposits in, or certificates of deposit of, or bankers' acceptances
issued by, any bank or trust company, savings and loan association or
savings bank, the short term obligations of which are rated in the
highest short term rating category by the Rating Agency; provided,
however, that the investments described in this clause must (A) have a
predetermined fixed dollar of principal due at maturity that cannot vary
or change, (B) if such investments have a variable rate of interest,
such interest rate must be tied to a single interest rate index plus a
fixed spread (if any) and must move proportionately with that index,
and (C) such investments must not be subject to liquidation prior to
their maturity;
(f) debt obligations with maturities of not more than 365 days and
rated by the Rating Agency in its highest long-term unsecured rating
category; provided, however, that the investments described in this
clause must (A) have a predetermined fixed dollar of principal due at
maturity that cannot vary or change, (B) if such investments have a
variable rate of interest, such interest rate must be tied to a single
interest rate index plus a fixed spread (if any) and must move
proportionately with that index, and (C) such investments must not be
subject to liquidation prior to their maturity;
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(g) commercial paper (including both non-interest-bearing discount
obligations and interest-bearing obligations payable on demand or on a
specified date not more than one year after the date of issuance thereof)
with maturities of not more than 270 days and that is rated by the Rating
Agency in its highest short-term unsecured debt rating; provided, however,
that the investments described in this clause must (A) have a
predetermined fixed dollar of principal due at maturity that cannot vary
or change, (B) if such investments have a variable rate of interest, such
interest rate must be tied to a single interest rate index plus a fixed
spread (if any) and must move proportionately with that index, and (C)
such investments must not be subject to liquidation prior to their
maturity;
(h) the Federated Prime Obligation Money Market Fund (the "Fund") so
long as the Fund is rated "AAA" by the Rating Agency;
(i) any other demand, money market or time deposit, demand
obligation or any other obligation, security or investment, provided that
the Rating Agency has confirmed in writing to Beneficiary, that such
investment would not, in and of itself, result in a downgrade,
qualification or withdrawal of the then current ratings assigned to any
certificates issued in connection with a Securitization); and
(j) such other obligations as are acceptable as Permitted
Investments to the Rating Agency, as confirmed in writing to
Beneficiary,
that such obligations would not, in and of itself, result in a downgrade,
qualification or withdrawal of the then current ratings assigned to any
certificates issued in connection with a Securitization);
provided, however, that, in the judgment of Beneficiary, such instrument
continues to qualify as a "cash flow investment" pursuant to Code Section
860G(a)(6) earning a passive return in the nature of interest and that no
instrument or security shall be a Permitted Investment if (i) such
instrument or security evidences a right to receive only interest payments
or (ii) the
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right to receive principal and interest payments derived from the
underlying investment provides a yield to maturity in excess of 120% of the
yield to maturity at par of such underlying investment.
"Permitted Liens" shall mean (i) the liens of this Deed of Trust and
other Loan Documents; (ii) liens for taxes, assessments and other
governmental charges not yet due and payable or due and payable, but not
yet delinquent, or that are being contested in good faith by appropriate
proceedings in accordance with Section 4.04 hereof; (iii) deposits or
pledges to secure the payment of workmen's compensation, unemployment
insurance or other social security benefits or obligations, or to secure
the performance of trade contracts, leases, public or statutory
obligations, surety or appeal bonds or other obligations of a like general
nature incurred in the ordinary course of business and in accordance with
the Approved Manager Standard; (iv) judgment liens, landlords, mechanics',
materialmen's, warehousemen's, carriers', or other like liens arising in
the ordinary course of business securing obligations which are not overdue
for a period longer than 30 days, or which are being contested in good
faith by appropriate proceedings which are being diligently pursued in
accordance with Section 2.06 hereof; and (v) easements, rights of way,
zoning, similar restrictions, and other similar encumbrances or title
defects that, singly or in the aggregate, do not in any case detract from
the value of the Trust Property, all of which (other than the liens of the
type set forth in clauses (i) and (ii) above and Permitted Encumbrances)
are subordinate to the lien of this Deed of Trust.
"Person" shall mean any individual, corporation, limited liability
company, partnership, joint venture, estate, trust, unincorporated
association, any federal, state, county or municipal government or any
bureau, department or agency thereof and any fiduciary acting in such
capacity on behalf of any of the foregoing.
"Plan" shall mean an employee benefit or other plan established or
maintained by Grantor or any ERISA Affiliate during the five-year period
ended prior to the date of this Deed of Trust or to which Grantor or any
ERISA Affiliate makes, is obligated to make or has, within the five year
period ended prior
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to the date of this Deed of Trust, been required to make contributions
(whether or not covered by Title IV of ERISA or Section 302 of ERISA or
Section 401(a) or 412 of the Code), other than a Multiemployer Plan.
"Premises" shall have the meaning set forth in granting clause (a) of
this Deed of Trust.
"Principal Amount" shall mean the Loan Amount as such amount may be
reduced from time to time pursuant to the terms of this Deed of Trust, the
Note or the other Loan Documents.
"Principal Payments" shall mean all payments of principal made
pursuant to the terms of the Note.
"Property Agreements" shall mean all agreements, grants of easements
and/or rights-of-way, reciprocal easement agreements, permits, declarations
of covenants, conditions and restrictions, disposition and development
agreements, planned unit development agreements, management or parking
agreements, party wall agreements or other instruments affecting the Trust
Property, including, without limitation any Pad Owners, but not including
any brokerage agreements, management agreements, service contracts, Space
Leases or the Loan Documents.
"Rating Agency" shall mean Fitch Investors Services, L.P., and any
successor thereto.
"Realty" shall have the meaning set forth in Section 2.05(b) hereof.
"Recurring Replacement Expenditures" shall mean expenditures related
to capital repairs, replacements and improvements performed at the Trust
Property from time to time.
"Recurring Replacement Reserve Monthly Installment" shall mean an
amount equal to the product of 1/12 of the gross leasable area of the
Premises multiplied by the RR Multiplier set forth on Exhibit B attached
hereto and made a part hereof (the "Initial Recurring Installments") until
the end of the first (1st) Loan Year and an amount per month in each
subsequent Loan Year or portion thereof occurring prior to the Maturity
Date equal to 1/12
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of the product of (a) the gross leasable area of the Premises as of
December 1 of each year and (b) the RR Multiplier and (c) a fraction, the
numerator of which is the CPI for the month of December of the calendar
year immediately preceding the year with respect to which the determination
is being made and the denominator of which is the CPI for the month of
December, 1996, but in no event shall the Recurring Replacement Reserve
Monthly Installment as calculated above be decreased in any year.
"Recurring Replacement Reserve Sub-Account" shall mean the
Sub-Account of the Central Account established pursuant to Section 5.02
hereof and maintained pursuant to Section 5.08 hereof relating to the
payment of Recurring Replacement Expenditures.
"Rent" shall have the meaning set forth in granting clause (f) of
this Deed of Trust.
"Rent Account" shall mean an Eligible Account maintained by a bank
acceptable to Grantor and Beneficiary in the name of Beneficiary.
"Rent Roll" shall have the meaning set forth in Section 2.05 (o)
hereof.
"Required Debt Service Coverage" shall mean a Debt Service Coverage
of not less than 1.4:1.
"Required Debt Service Payment" shall mean, as of any Payment Date,
the amount of interest, including, without limitation Default Rate
Interest, and principal then due and payable pursuant to the Note, together
with any other sums due and payable thereunder, including, without
limitation, any prepayments required to be made or for which notice has
been given under this Deed of Trust and premium, if any, to be paid in
accordance therewith.
"Required Engineering Work" shall have the meaning set forth in
Section 5.02 hereof.
"Retention Amount" shall have the meaning set forth in Section
3.04(b)(vii) hereof.
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"Securities Act" shall mean the Securities Act of 1933, as the same
shall be amended from time to time.
"Securitization" shall mean a public or private offering of
securities by Potomac Gurnee Finance Corp., Merrill Lynch, Pierce, Fenner &
Smith Incorporated, Beneficiary or any of their respective Affiliates or
their respective successors and assigns which are collateralized, in whole
or in part, by this Deed of Trust.
"Security Deposit Account" shall have the meaning set forth in
Section 5.01 hereof.
"Single Purpose Entity" shall mean a corporation, partnership, joint
venture, trust or unincorporated association, which is formed or organized
solely for the purpose of holding, directly, an ownership interest in the
Trust Property and activities incidental thereto, does not engage in any
business unrelated to the Trust Property, does not have any assets other
than those related to its interest in the Trust Property or any
indebtedness other than as permitted by this Deed of Trust or the other
Loan Documents, has its own separate books and records and has its own
accounts, in each case which are separate and apart from the books and
records and accounts of any other Person, and holds itself out as being a
Person, separate and apart from any other Person and which otherwise
satisfies the criteria of the Rating Agency, as in effect on the Closing
Date, for a single purpose entity.
"Solvent" shall mean, as to any Person, that (a) the sum of the
assets of such Person, at a fair valuation, exceeds its liabilities,
including contingent liabilities, (b) such Person has sufficient capital
with which to conduct its business as presently conducted and as proposed
to be conducted and (c) such Person has not incurred indebtedness, and does
not intend to incur debts, beyond its ability to pay such indebtedness as
they mature. For purposes of this definition, "indebtedness" shall have the
meaning set forth in the definition of Permitted Debt.
"Space Leases" shall mean any Lease or sublease thereunder
(including, without limitation, any Major Space Lease) or any other
agreement providing for the use and occupancy of a portion
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of the Trust Property as the same may be amended, renewed or supplemented.
"State" shall mean any of the states which are members of the United
States of America.
"Stated Maturity", when used with respect to the Note or any
installment of interest and/or principal payment thereunder, shall mean the
date specified in the Note as the fixed date on which a payment of all or
any portion of principal and/or interest is due and payable.
"Sub-Accounts" shall have the meaning set forth in Section 5.02
hereof.
"Substantial Casualty" shall have the meaning set forth in Section
3.04 hereof.
"Substantial Taking" shall mean a Taking of such portion of the Trust
Property that (a) would leave remaining a balance of the Trust Property
which would not under then current economic conditions, applicable zoning
laws, building regulations and other applicable Legal Requirements, permit
the restoration of the Trust Property so as to constitute a complete,
rentable facility of the same sort as existed prior to the Taking, having
adequate ingress and egress to the Trust Property, (b) as a result of which
Beneficiary is not reasonably satisfied that the Debt Service Coverage for
the previous fiscal quarter, as of the last day of the first fiscal quarter
ending after substantial completion of the Work, will not be equal to or
greater than the greater of (i) the Debt Service Coverage for the fiscal
quarter immediately prior to the Taking and (ii) the Closing DSC, (c) as a
result of which more than 15% of the reasonably estimated aggregate value
of the Trust Property is affected, or (d) as a result of which Beneficiary
is not reasonably satisfied the Work can be completed prior to Maturity and
within twelve months of the Taking; provided, however, such twelve month
period may be extended at the request of Grantor provided that Grantor
delivers a letter from the Rating Agency confirming that any rating issued
in connection with a Securitization will not, as a result of such extension
be downgraded from the then current ratings thereof, qualified, or
withdrawn.
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"Taking" shall mean a condemnation or taking pursuant to the lawful
exercise of the power of eminent domain.
"Total GLA" shall mean the total gross leasable area of the Trust
Property, including all Space Leases.
"Transfer" shall mean the conveyance, assignment, sale, mortgaging,
encumbrance, pledging, hypothecation, granting of a security interest in,
granting of options with respect to, or other disposition of (directly or
indirectly, voluntarily or involuntarily, by operation of law or otherwise,
and whether or not for consideration or of record) all or any portion of
any legal or beneficial interest (a) in all or any portion of the Trust
Property; (b) in the stock or membership interest of any General Partner;
(c) in Grantor (or any trust of which Grantor is a trustee); or (d) in any
Person having a direct legal or beneficial ownership in Grantor and shall
also include, without limitation to the foregoing, the following: an
installment sales agreement wherein Grantor agrees to sell the Trust
Property or any part thereof or any interest therein for a price to be paid
in installments; an agreement by Grantor leasing all or a substantial part
of the Trust Property to one or more Persons pursuant to a single or
related transactions, or a sale, assignment or other transfer of, or the
grant of a security interest in, Grantor's right, title and interest in and
to any Leases or any Rent; any instrument subjecting the Trust Property to
a condominium regime or transferring ownership to a cooperative
corporation; and the dissolution or termination of Grantor or the merger or
consolidation of Grantor with any other Person. The Merger will not be
deemed a Transfer. Additionally (a) as long as The Mills Corporation
remains the sole general partner of the Mills Limited Partnership, a
Delaware limited partnership ("MLP") and The Mills Corporation owns at
least 35% of the limited partnership interests of MLP, the term "Transfer"
shall not apply to any conveyance, assignment, sale, mortgaging,
encumbrance, pledging, hypothecation, granting of a security interest in,
granting of options with respect to or other disposition of any limited
partnership interests in MLP and (b) the term "Transfer" shall not apply to
any conveyance, assignment, sale, mortgaging, encumbrance, pledging,
hypothecation, granting of a security
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interest in, granting of options with respect to or other disposition of
any interest in Grantor or any general partner of Grantor to a Person which
is owned one hundred percent, directly or indirectly by MLP or The Mills
Corporation. Additionally, it shall be a Transfer if MLP and/or The Mills
Corporation ceases to own 100% of Grantor either directly or indirectly.
"Treasury Constant Maturity Yield Index" shall mean the average yield
for "This Week" as reported by the Federal Reserve Board in Federal Reserve
Statistical Release H.15 (519).
"Trust Property" shall have the meaning set forth in the granting
clauses of this Deed of Trust.
"UCC" shall mean the Uniform Commercial Code as in effect in the
State in which the Trust Property is located.
"Unscheduled Payments" shall mean (a) all Loss Proceeds that Grantor
has elected or is required to apply to the repayment of the Debt pursuant
to this Deed of Trust, the Note or any other Loan Documents, (b) any funds
representing a voluntary or involuntary principal prepayment other than
scheduled Principal Payments, (c) any Net Proceeds and (d) any amounts paid
from the Curtailment Reserve Sub-Account pursuant to Section 5.11 hereof.
"Use Requirements" shall mean any and all building codes, permits,
certificates of occupancy or compliance, laws, regulations, or ordinances
(including, without limitation, health, pollution, fire protection, medical
and day-care facilities, waste product and sewage disposal regulations),
restrictions of record, easements, reciprocal easements, declarations or
other agreements affecting the use of the Trust Property or any part
thereof.
"Welfare Plan" shall mean an employee welfare benefit plan as defined
in Section 3(1) of ERISA established or maintained by Grantor or any ERISA
Affiliate or that covers any current or forms employee of Grantor or any
ERISA Affiliate.
"Work" shall have the meaning set forth in Section 3.04(a)(i) hereof.
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"Yield Maintenance Premium" shall mean the premium which shall be the
product of (a) a fraction, the numerator of which is the positive excess
(expressed as a percentage of the outstanding principal amount of the
applicable Portion (as such term is defined in the Note) before repayment),
if any, of (i) the present value of all future payments of principal and
interest on the Principal Amount, including, without limitation, any
outstanding principal amount of the Loan as of the Payment Date in June,
2003 to be made on the applicable Portion before the prepayment in
question, discounted at an interest rate per annum equal to the Treasury
Constant Maturity Yield Index published during the second full week
preceding the date on which such premium is payable for instruments having
a maturity coterminous with the Payment Date occurring in June, 2003, over
(ii) the outstanding principal amount of the applicable Portion immediately
before such prepayment, and the denominator of which is the Principal
Amount immediately prior to the prepayment, and (b) the principal amount of
the applicable Portion being prepaid; provided, however, that if there is
no Treasury Constant Maturity Yield Index for instruments having a maturity
coterminous with the Payment Date occurring in June, 2003, then the index
referred to in (1) above shall be equal to the weighted average yield to
maturity of the Treasury Constant Maturity Yield Indices with maturities
next longer and shorter than such remaining average life to the Payment
Date occurring in June, 2003, calculated by averaging (and rounding upward
to the nearest whole multiple of 1/100 of 1% per annum, if the average is
not such a multiple) the yields of the relevant Treasury Constant Maturity
Yield Indices (rounded, if necessary, to the nearest 1/100 of 1% with any
figure of 1/200 of 1% or above rounded upward).
ARTICLE II: COVENANTS, WARRANTIES
AND REPRESENTATIONS OF Grantor
Section 2.01. Payment of Debt. Grantor will pay the Debt at the time and in
the manner provided in the Note and the other Loan Documents, all in lawful
money of the United States of America in immediately available funds.
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Section 2.02. Representations and Warranties of Grantor. Grantor represents
and warrants to Beneficiary:
(a) Organization and Authority. Grantor (or, prior to the Merger,
each of the entities comprising Grantor) (i) is a general partnership,
limited partnership or corporation, as the case may be, duly organized,
validly existing and in good standing under the laws of the jurisdiction of
its formation, (ii) has all requisite power and authority and all necessary
and material licenses and permits to own and operate the Trust Property and
to carry on its business as now conducted and as presently proposed to be
conducted and (iii) is duly qualified, authorized to do business and in
good standing in the jurisdiction where the Trust Property is located and
in each other jurisdiction where the conduct of its business or the nature
of its activities makes such qualification necessary. If Grantor is a
limited partnership or general partnership, each general partner of Grantor
which is a corporation is duly organized, validly existing, and in good
standing under the laws of the jurisdiction of its incorporation.
(b) Power. Grantor and, if applicable, each General Partner has full
power and authority to execute, deliver and perform, as applicable, the
Loan Documents to which it is a party, to make the borrowings thereunder,
to execute and deliver the Note and to grant to Beneficiary a first, prior,
perfected and continuing lien on and security interest in the Trust
Property, subject only to the Permitted Encumbrances.
(c) Authorization of Borrowing. The execution, delivery and
performance of the Loan Documents to which Grantor is a party, the making
of the borrowings thereunder, the execution and delivery of the Note, the
grant of the liens on the Trust Property pursuant to the Loan Documents to
which Grantor is a party and the consummation of the Loan are within the
powers of Grantor and have been duly authorized by Grantor and, if
applicable, the General Partners, by all requisite action (and Grantor
hereby represents that no approval or action of any limited partner or
shareholder, as applicable, of Grantor is required to authorize any of the
Loan Documents to which Grantor is a party other than as have been
obtained) and will constitute the legal, valid and binding obligation of
Grantor,
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enforceable against Grantor in accordance with their terms, except as
enforcement may be stayed or limited by bankruptcy, insolvency,
reorganization, receivership, moratorium, or similar laws relating to or
affecting the enforcement of creditors' rights generally and by general
principles of equity (whether considered in proceedings at law or in
equity) and will not (i) violate any provision of its partnership agreement
or partnership certificate or certificate of incorporation or by-laws, as
applicable, or, to its knowledge, any law, judgment, order, rule or
regulation of any court, arbitration panel or other Governmental Authority,
domestic or foreign, or other Person affecting or binding upon Grantor or
the Trust Property, or (ii) violate any provision of any indenture,
agreement, mortgage, contract or other instrument to which Grantor or, if
applicable, any General Partner is a party or by which any of their
respective property, assets or revenues are bound, or be in conflict with,
result in an acceleration of any obligation or a breach of or constitute
(with notice or lapse of time or both) a default or require any payment or
prepayment under, any such indenture, agreement, mortgage, contract or
other instrument, or (iii) result in the creation or imposition of any
lien, except those in favor of Beneficiary as provided in the Loan
Documents to which it is a party.
(d) Consent. Neither Grantor nor, if applicable, any General Partner,
is required to obtain any consent, approval or authorization from, or to
file any declaration or statement with, any Governmental Authority or other
agency in connection with or as a condition to the execution, delivery or
performance of this Deed of Trust, the Note or the other Loan Documents
which has not been so obtained or filed.
(e) Interest Rate. The rate of interest paid under the Note and the
method and manner of the calculation thereof do not violate any usury or
other law or applicable Legal Requirement.
(f) Other Agreements. Grantor is not a party to nor is otherwise
bound by any agreements or instruments which, individually or in the
aggregate, are reasonably likely to have a Material Adverse Effect. Neither
Grantor nor, if applicable, any General Partner, is in violation of its
partnership agreement or corporate organizational documents, as applicable,
or other
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restriction or any agreement or instrument by which it is bound, or any
judgment, decree, writ, injunction, order or award of any arbitrator, court
or Governmental Authority, or any Legal Requirement, in each case,
applicable to Grantor or the Trust Property, except for such violations
that would not, individually or in the aggregate, have a Material Adverse
Effect.
(g) Maintenance of Existence. (i) Grantor and, if applicable, each
General Partner at all times since their formation have been duly formed
and existing and shall preserve and keep in full force and effect their
existence as a Single Purpose Entity.
(ii) Grantor and, if applicable, each General Partner, at all times
since their organization have complied, and will continue to comply, with
the provisions of its certificate and agreement of partnership or
certificate of incorporation and by-laws, as applicable, and will comply
in all material respects with the laws of its jurisdiction of organization
relating to partnerships or corporations, as applicable.
(iii) All customary formalities regarding the partnership, or
corporate existence, as applicable, of Grantor, and if, applicable, each
General Partner will be observed.
(iv) Grantor and, if applicable, each General Partner, will
maintain their respective financial statements, accounting records and
other partnership or corporate documents separate from those of any other
Person. Except as contemplated herein and in the other Loan Documents,
Grantor and, if applicable, each General Partner will not commingle,
their respective assets with those of any other Person. Grantor will
maintain, its own bank accounts, payroll and separate books of account.
(v) Grantor and, if applicable, each General Partner, will pay
their own liabilities from their own separate assets.
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(vi) Grantor and, if applicable, each General Partner will identify
themselves, in all dealings with the public, under their own names and as
separate and distinct entities. Grantor and, if applicable, each General
Partner, will not identify themselves, as being a division of any other
Person.
(vii) Grantor and, if applicable, each General Partner, are and
will continue to be, adequately capitalized in light of the nature of
their respective businesses.
(viii) Grantor (A) except as previously disclosed in writing to
Grantor, does not own and will not own any encumbered asset other than
the Trust Property, (B) is not engaged and will not engage in any
business other than the ownership, management, leasing, expanding and
operation of the Trust Property and activities incidental thereto, (C)
will not enter into any contract or agreement with any Affiliate of
Grantor or, if applicable, any Affiliate of a General Partner except
upon terms and conditions that are intrinsically fair and substantially
similar to those that would be available on an arm's-length basis with
third parties other than an Affiliate, (D) will not incur any debt,
secured or unsecured, direct or contingent (including guaranteeing any
obligation), other than the Loan and Permitted Debt (E) will not make any
loans or advances to any Person (including any Affiliate).
(ix) Grantor will not change its name or principal place of
business, except in connection with the Merger.
(x) Grantor does not have, and will not have, any subsidiaries.
(xi) Grantor will preserve and maintain its existence as a limited
partnership and all material rights, privileges, trade names and
franchises, except in connection with the Merger.
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(xii) Neither Grantor, nor, if applicable, any General Partner,
will merge or consolidate with, or sell all or substantially all of its
respective assets to any Person, or liquidate, wind up or dissolve
itself (or suffer any liquidation, winding up or dissolution), except
in connection with the Merger. Grantor will not acquire any business or
assets from, or capital stock or other ownership interest of, or be a
party to any acquisition of, any Person, except in connection with the
Merger.
(xiii) Grantor will not assume or guarantee the liabilities of its
partners or shareholders or any predecessor corporation or partnership,
each as applicable, any Affiliates, or any other Persons, except in
connection with the Merger. Grantor will not acquire obligations or
securities of its partners or shareholders or any predecessor corporation
or partnership, each as applicable, or any Affiliates, except in
connection with the Merger. Grantor will not make loans to its partners
or shareholders or any predecessor corporation or partnership, each as
applicable, or any Affiliates of any of such Persons.
(xiv) Grantor will not enter into or be a party to, any
transaction with its partners or shareholders, as applicable, or any
Affiliates of its partners except in the ordinary course of business of
Grantor on terms which are no less favorable to Grantor than would be
obtained in a comparable arm's length transaction with an unrelated third
party.
(h) No Defaults. No Default or Event of Default has occurred and is
continuing or would occur as a result of the consummation of the
transactions contemplated by the Loan Documents. Grantor is not in default
in the payment or performance of any of its Contractual Obligations in any
material respect.
(i) Governmental Consents and Approvals. Grantor and, if applicable,
each General Partner, have obtained or made all necessary (i) consents,
approvals and authorizations, and registrations and filings of or with all
Governmental Authorities
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and (ii) consents, approvals, waivers and notifications of partners,
stockholders, creditors, lessors and other nongovernmental Persons, in each
case, which are required to be obtained or made by Grantor or, if
applicable, the General Partner, in connection with the execution and
delivery of, and the performance by Grantor of its obligations under, the
Loan Documents except for such consents, approvals and authorizations,
registrations and filings, waivers and notifications the failure of which
to obtain or make would not have (i) a Material Adverse Effect, (ii)
interfere with Grantor's ability to pay its obligations in timely manner or
(iii) otherwise interfere with the benefits of the security intended to be
provided by this Deed of Trust.
(j) Investment Company Act Status. Grantor is not an "investment
company," or a company "controlled" by an "investment company," as such
terms are defined in the Investment Company Act of 1940, as amended.
(k) Compliance with Law. Grantor is in compliance in all material
respects with all Legal Requirements to which it or the Trust Property is
subject, including, without limitation, all Environmental Statutes, the
Occupational Safety and Health Act of 1970, the Americans with Disabilities
Act and ERISA. No portion or the Trust Property has been or will be
purchased, improved, fixtured, equipped or furnished with proceeds of any
illegal activity.
(l) Financial Information. All financial data that has been delivered
by Grantor to Beneficiary (i) is true, complete and correct in all material
respects, (ii) accurately represents in all material respects the financial
condition and results of operations of the Persons covered thereby as of
the date on which the same shall have been furnished, and (iii) has been
prepared in accordance with GAAP (or such other accounting basis as is
reasonably acceptable to Beneficiary) throughout the periods covered. As of
the date hereof, neither Grantor nor, if applicable, any General Partner,
has any contingent liability, liability for taxes or other unusual or
forward commitment of a material nature not reflected in such financial
statements delivered to Beneficiary; since the date of the last financial
statements delivered by Grantor to Beneficiary except as
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otherwise disclosed in such financial statements or notes thereto, there
has been no change in the assets, liabilities or financial position of
Grantor nor, if applicable, any General Partner, or in the results of
operations of Grantor which would have a Material Adverse Effect. Neither
Grantor nor, if applicable, any General Partner, has incurred any
obligation or liability, contingent or otherwise not reflected in such
financial statements which would have a Material Adverse Effect.
(m) Transaction Brokerage Fees. Grantor has not dealt with any
financial advisors, brokers, underwriters, placement agents, agents or
finders in connection with the transactions contemplated by this Deed of
Trust except for CS First Boston Mortgage Capital Corp. and Merrill Lynch,
Pierce, Fenner & Smith Incorporated and their respective Affiliates. All
brokerage fees, commissions and other expenses payable in connection with
the transactions contemplated by the Loan Documents have been paid in full
contemporaneously with the execution of the Loan Documents and the funding
of the Loan. Grantor hereby agrees to indemnify and hold Beneficiary
harmless from and against any and all claims, liabilities, costs and
expenses of any kind in any way relating to or arising from (i) a claim by
any Person that such Person acted on behalf of Grantor in connection with
the transactions contemplated herein or (ii) any breach of the foregoing
representation. The provisions of this subsection (m) shall survive the
repayment of the Debt.
(n) Federal Reserve Regulations. No part of the proceeds of the Loan
will be used for the purpose of purchasing or acquiring any "margin stock"
within the meaning of Regulations G, T, U or X of the Board of Governors of
the Federal Reserve System or for any other purpose which would be
inconsistent with such Regulations G, T, U or X or any other Regulations of
such Board of Governors, or for any purposes prohibited by Legal
Requirements or by the terms and conditions of the Loan Documents.
(o) Pending Litigation. There are no actions, suits or proceedings
pending or, to the best knowledge of Grantor, threatened against or
affecting Grantor or the Trust Property in any court or before any
Governmental Authority which
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if adversely determined either individually or collectively has or is
reasonably likely to have a Material Adverse Effect.
(p) Solvency; No Bankruptcy. Each of Grantor and, if applicable, the
General Partner, (i) is and has at all times been Solvent and will remain
Solvent immediately upon the consummation of the transactions contemplated
by the Loan Documents and (ii) is free from bankruptcy, reorganization or
arrangement proceedings or a general assignment for the benefit of
creditors and is not contemplating the filing of a petition under any state
or federal bankruptcy or insolvency laws or the liquidation of all or a
major portion of such Person's assets or property and Grantor has no
knowledge of any Person contemplating the filing of any such petition
against it or, if applicable, the General Partner. None of the transactions
contemplated hereby will be or have been made with an intent to hinder,
delay or defraud any present or future creditors of Grantor and Grantor has
received reasonably equivalent value in exchange for its obligations under
the Loan Documents. Grantor's assets do not, and immediately upon
consummation of the transaction contemplated in the Loan Documents will
not, constitute unreasonably small capital to carry out its business as
presently conducted or as proposed to be conducted. Grantor does not intend
to, nor believe that it will, incur debts and liabilities beyond its
ability to pay such debts as they may mature.
(q) Use of Proceeds. The proceeds of the Loan shall be applied by
Grantor to, inter alia, (i) satisfy certain mortgage loans presently
encumbering all or a part of the Trust Property, (ii) fund the Sub-Accounts
in accordance with Article V hereof and (iii) pay certain transaction costs
incurred by Grantor in connection with the Loan. No portion of the proceeds
of the Loan will be used for family, personal, agricultural or household
use.
(r) Tax Filings. Grantor and, if applicable, each General Partner,
have filed all federal, state and local tax returns required to be filed
and have paid or made adequate provision for the payment of all federal,
state and local taxes, charges and assessments payable by Grantor and, if
applicable, the General Partners. Grantor and, if applicable, the General
Partners, believe that their respective tax returns properly re-
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flect the income and taxes of Grantor and said General Partner, if any, for
the periods covered thereby, subject only to reasonable adjustments
required by the Internal Revenue Service or other applicable tax authority
upon audit.
(s) Not Foreign Person. Grantor is not a "foreign person" within the
meaning of ss.1445(f)(3) of the Code.
(t) ERISA. (a) The assets of Grantor are not and will not become
treated as "plan assets", whether by operation of law or under regulations
promulgated under ERISA. Each Plan and Welfare Plan, and, to the knowledge
of Grantor, each Multiemployer Plan, is in compliance in all material
respects with, and has been administered in all material respects in
compliance with, its terms and the applicable provisions of ERISA, the Code
and any other applicable Legal Requirement, and no event or condition has
occurred and is continuing as to which Grantor would be under an obligation
to furnish a report to Beneficiary under clause (b)(i) of this Section.
Other than an application for a favorable determination letter with respect
to a Plan, there are no pending issues or claims before the Internal
Revenue Service, the United States Department of Labor or any court of
competent jurisdiction related to any Plan or Welfare Plan under which
Grantor or any ERISA Affiliate, directly or indirectly (through an
indemnification agreement or otherwise), could be subject to any material
risk of liability under Section 409 or 502(i) of ERISA or Section 4975 of
the Code. No Welfare Plan provides or will provide benefits, including,
without limitation, death or medical benefits (whether or not insured) with
respect to any current or former employee of Grantor or any ERISA Affiliate
beyond his or her retirement or other termination of service other than (i)
coverage mandated by applicable law, (ii) death or disability benefits that
have been fully provided for by fully paid up insurance or (iii) severance
benefits.
(b) Grantor will furnish to Beneficiary as soon as possible,
and in any event within ten (10) days after Grantor knows or has reason to
believe that any of the events or conditions specified below with respect
to any Plan, Welfare Plan or Multiemployer Plan has occurred or exists, a
statement signed by a senior financial officer of Grantor setting forth
details
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respecting such event or condition and the action, if any, that Grantor or
its ERISA Affiliate proposes to take with respect thereto (and a copy of
any report or notice required to be filed with or given to PBGC (or any
other relevant Governmental Authority) by Grantor or an ERISA Affiliate
with respect to such event or condition, if such report or notice is
required to be filed with the PBGC or any other relevant Governmental
Authority:
(i) any reportable event, as defined in Section 4043(b) of ERISA
and the regulations issued thereunder, with respect to a Plan, as to
which PBGC has not by regulation waived the requirement of Section
4043(a) of ERISA that it be notified within thirty (30) days of the
occurrence of such event (provided that a failure to meet the minimum
funding standard of Section 412 of the Code of Section 302 of ERISA,
including, without limitation, the failure to make on or before its due
date a required installment under Section 412(m) of the Code of Section
302(e) of ERISA, shall be a reportable event regardless of the issuance
of any waivers in accordance with Section 412(d) of the Code), and any
request for a waiver under Section 412(d) of the Code for any Plan;
(ii) the distribution under Section 4041 of ERISA of a notice of
intent to terminate any Plan or any action taken by Grantor or an ERISA
Affiliate to terminate any Plan;
(iii) the institution by PBGC of proceedings under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to
administer, any Plan, or the receipt by Grantor or any ERISA Affiliate
of a notice from a Multiemployer Plan that such action has been taken by
PBGC with respect to such Multiemployer Plan;
(iv) the complete or partial withdrawal from a Multiemployer Plan
by Grantor or any ERISA Affiliate that results in liability under
Section 4201 or 4204 of ERISA (including the obligation to satisfy
secondary
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liability as a result of a purchaser default) or the receipt by
Grantor or any ERISA Affiliate of notice from a Multiemployer Plan that
it is in reorganization or insolvency pursuant to Section 4241 or 4245
of ERISA or that it intends to terminate or has terminated under Section
4041A of ERISA;
(v) the institution of a proceeding by a fiduciary of any
Multiemployer Plan against Grantor or any ERISA Affiliate to enforce
Section 515 of ERISA, which proceeding is not dismissed within thirty
(30) days;
(vi) the adoption of an amendment to any Plan that, pursuant to
Section 401(a)(29) of the Code or Section 307 of ERISA, would result in
the loss of tax-exempt status of the trust of which such Plan is a part
if Grantor or an ERISA Affiliate fails to timely provide security to the
Plan in accordance with the provisions of said Sections; or
(vii) the imposition of a lien or a security interest in
connection with a Plan.
(c) Grantor shall not knowingly engage in or permit any
transaction in connection with which Grantor or any ERISA Affiliate could
be subject to either a civil penalty or tax assessed pursuant to Section
502(i) or 502(l) of ERISA or Section 4975 of the Code, permit any Welfare
Plan to provide benefits, including without limitation, medical benefits
(whether or not insured), with respect to any current or former employee of
Grantor or any ERISA Affiliate beyond his or her retirement or other
termination of service other than (i) coverage mandated by applicable law,
(ii) death or disability benefits that have been fully provided for by paid
up insurance or otherwise or (iii) severance benefits, permit the assets of
Grantor to become "plan assets", whether by operation of law or under
regulations promulgated under ERISA or adopt, amend (except as may be
required by applicable law) or increase the amount of any benefit or amount
payable under, or permit any ERISA Affiliate to adopt, amend (except as may
be required by applicable law) or increase the amount of any benefit or
amount payable under, any employee
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benefit plan (including, without limitation, any employee welfare benefit
plan) or other plan, policy or arrangement, except in the ordinary course
of business.
(u) Labor Matters. Grantor is not a party to any collective
bargaining agreements.
(v) Private Offering. Neither Grantor nor any Person authorized to
act on its behalf (other than the initial purchasers of the Securities (as
defined below), as to which no representation is made) in connection with
any offer or sale of any securities issued in connection with a
Securitization (the "Securities") has used any form of general solicitation
or general advertising within the meaning of Rule 502(c) under the
Securities Act of 1933, as amended from time to time (the "Securities
Act"), including, but not limited to, advertisements, articles, notices or
other communications published in any newspaper, magazine or similar medium
or broadcast over television or radio, or any seminar or meeting whose
attendees have been invited by any general solicitation or general
advertising. Neither Grantor nor any Person authorized to act on its behalf
(other than the initial purchasers of the Securities, as to which no
representation is made) (i) has offered or sold directly or indirectly, the
Securities or any interest in the Securities or any other security from any
Person in any manner, (ii) has solicited any offer to buy, or (iii) has
taken any other action, in each of the cases set forth in clauses (i)
through (iii) above, that would constitute a distribution of the Securities
under the Securities Act or would render the sale of the Securities a
violation of Section 5 of the Securities Act or any state securities laws,
or would require registration pursuant to the Securities Act, or would
require qualification of any of the Loan Documents under the Trust
Indenture Act of 1939.
Section 2.03. Further Acts, etc. Grantor will, at the cost of Grantor, and
without expense to Beneficiary, do, execute, acknowledge and deliver all and
every such further acts, deeds, conveyances, mortgages, assignments, notices
of assignments, transfers and assurances as Beneficiary or Deed Trustee
shall, from time to time, reasonably require, for the better assuring,
conveying, assigning, transferring, and confirming unto Beneficiary the
property and rights hereby mortgaged, given, granted,
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bargained, sold, alienated, enfeoffed, conveyed, confirmed, pledged,
assigned and hypothecated, or which Grantor may be or may hereafter become
bound to convey or assign to Beneficiary and Deed Trustee, or for carrying
out or facilitating the performance of the terms of this Deed of Trust or
for filing, registering or recording this Deed of Trust and, on demand,
will execute and deliver and hereby authorizes Beneficiary to execute in
the name of Grantor or without the signature of Grantor to the extent
Beneficiary may lawfully do so, one or more financing statements, chattel
mortgages or comparable security instruments, to evidence more effectively
the lien hereof upon the Trust Property. Grantor grants to Beneficiary an
irrevocable power of attorney coupled with an interest for the purpose of
protecting, perfecting, preserving and realizing upon the interests granted
pursuant to this Deed of Trust (but not to increase the obligations of
Grantor beyond those which are intended to be granted in this Deed of Trust
and the other Loan Documents) and to effect the intent hereof, all as fully
and effectually as Grantor might or could do; and Grantor hereby ratifies
all that Beneficiary shall lawfully do or cause to be done by virtue hereof.
Section 2.04. Recording of Deed of Trust, etc. Grantor forthwith upon the
execution and delivery of this Deed of Trust and thereafter, from time to
time, will cause this Deed of Trust, and any security instrument creating a
lien or security interest or evidencing the lien hereof upon the Trust
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 protect the lien or
security interest hereof upon, and the interest of Beneficiary in, the Trust
Property. Grantor will pay all filing, registration or recording fees, and
all expenses incident to the preparation, execution and acknowledgment of
this Deed of Trust, any mortgage supplemental hereto, any security instrument
with respect to the Trust Property and any instrument of further assurance,
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 Deed of Trust, any mortgage supplemental hereto, any
security instrument with respect to the Trust Property or any instrument of
further assurance, except where prohibited by law to do so, in which event
Beneficiary may declare the Debt to be immediately due and payable. Grantor
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shall hold harmless and indemnify Beneficiary and Deed Trustee, and their
successors and assigns, against any liability incurred as a result of the
imposition of any tax on the making and recording of this Deed of Trust.
Section 2.05. Representations and Warranties as to the Trust Property.
Grantor represents and warrants with respect to the Trust Property as
follows:
(a) Lien Priority. This Deed of Trust is a valid and enforceable
first lien on the Trust Property, free and clear of all encumbrances and
liens having priority over the lien of this Deed of Trust, except for the
items set forth as exceptions to or subordinate matters in the title
insurance policy insuring the lien of this Deed of Trust, none of which,
individually or in the aggregate, materially interfere with the benefits of
the security intended to be provided by this Deed of Trust, materially
affect the value or marketability of the Trust Property, impair the use or
operation of the Trust Property or impair Grantor's ability to pay its
obligations in a timely manner (such items being the "Permitted
Encumbrances").
(b) Title. Grantor has, subject only to the Permitted Encumbrances,
good, insurable and marketable fee simple title to the Premises,
Improvements and Fixtures (collectively the "Realty") and to all easements
and rights benefitting the Realty and has the right, power and authority to
mortgage, give, grant, bargain, sell, alien, enfeoff, convey, confirm,
pledge, assign, and hypothecate the Trust Property. Grantor will preserve
its interest in and title to the Trust Property and will forever warrant
and defend the same to Beneficiary against any and all claims made by,
through or under Grantor and will forever warrant and defend the validity
and priority of the lien and security interest created herein against the
claims of all Persons whomsoever claiming by, through or under Grantor. The
foregoing warranty of title shall survive the foreclosure of this Deed of
Trust and shall inure to the benefit of and be enforceable by Beneficiary
in the event Beneficiary acquires title to the Trust Property pursuant to
any foreclosure. In addition, there are no outstanding options or rights of
first refusal to purchase the Trust Property or Grantor's ownership thereof.
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(c) Taxes and Impositions. All taxes and other Impositions and
governmental assessments due and owing in respect of, and affecting, the
Trust Property have been paid. Grantor has paid all Impositions which
constitute special governmental assessments in full, except for those
assessments which are permitted by applicable Legal Requirements to be paid
in installments, in which case all installments which are due and payable
have been paid in full. There are no pending, or to Grantor's best
knowledge, proposed special or other assessments for public improvements or
otherwise affecting the Trust Property, nor are there any contemplated
improvements to the Trust Property that may result in such special or other
assessments.
(d) Casualty; Flood Zone. The Realty is in good repair and free and
clear of any damage, destruction or casualty (whether or not covered by
insurance) that would materially affect the value of the Realty or the use
for which the Realty was intended. No portion of the Premises is located in
an "area of special flood hazard," as that term is defined in the
regulations of the Federal Insurance Administration, Department of Housing
and Urban Development, under the National Flood Insurance Act of 1968, as
amended (24 CFR ss.1909.1) or Grantor has obtained the flood insurance
required by Section 3.01(a)(vi) hereof. The Premises either does not lie in
a 100 year flood plain that has been identified by the Secretary of Housing
and Urban Development or any other Governmental Authority or, if it does,
Grantor has obtained the flood insurance required by Section 3.01(a)(vi)
hereof.
(e) Completion; Encroachment. All Improvements necessary for the
efficient use and operation of the Premises have been completed and none of
said Improvements lie outside the boundaries and building restriction lines
of the Premises. Except as set forth in the title insurance policy insuring
the lien of this Deed of Trust, no improvements on adjoining properties
encroach upon the Premises.
(f) Separate Lot. The Premises consist of one or more parcels, each
of which is taxed separately without regard to any other real estate and
constitutes a legally subdivided lot under all applicable Legal
Requirements (or, if not subdivided, no
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subdivision or platting of the Premises is required under applicable Legal
Requirements), and for all purposes may be mortgaged, conveyed or otherwise
dealt with as an independent parcel except as previously disclosed in
writing to Beneficiary. The Trust Property does not benefit from any tax
abatement or exemption.
(g) Use. The existence of all Improvements, the present use and
operation thereof and the access of the Premises and the Improvements to
all of the utilities and other items referred to in paragraph (k) below are
in compliance in all material respects with all Leases affecting the Trust
Property and all applicable Legal Requirements, including, without
limitation, Environmental Statutes, Development Laws and Use Requirements.
Grantor has not received any notice from any Governmental Authority
alleging any uncured violation relating to the Trust Property of any
applicable Legal Requirements the failure to cure of which is reasonably
likely to have a Material Adverse Effect.
(h) Licenses and Permits. Grantor currently holds and will continue
to hold all certificates of occupancy, licenses, registrations, permits,
consents, franchises and approvals of any Governmental Authority or any
other Person which are material for the lawful occupancy and operation of
the Realty or which are material to the ownership or operation of the Trust
Property or the conduct of Grantor's business. All such certificates of
occupancy, licenses, registrations, permits, consents, franchises and
approvals are current and in full force and effect.
(i) Environmental Matters. Grantor has received and reviewed the
Environmental Report and has no reason to believe that the Environmental
Report contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained therein or herein,
in light of the circumstances under which such statements were made, not
misleading.
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(j) Property Proceedings. Except as previously disclosed to
Beneficiary in writing, there are no actions, suits or proceedings pending
or threatened in any court or before any Governmental Authority or
arbitration board or tribunal (i) relating to (A) the zoning of the
Premises or any part thereof, (B) any certificates of occupancy, licenses,
registrations, permits, consents or approvals issued with respect to the
Trust Property or any part thereof, (C) the condemnation of the Trust
Property or any part thereof, or (D) the condemnation or relocation of any
roadways abutting the Premises required for access or the denial or
limitation of access to the Premises or any part thereof from any point of
access to the Premises, (ii) asserting that (A) any such zoning,
certificates of occupancy, licenses, registrations, permits, consents
and/or approvals do not permit the operation of any material portion of the
Realty as presently being conducted, (B) any material improvements located
on the Trust Property or any part thereof cannot be located thereon or
operated with their intended use or (C) the operation of the Trust Property
or any part thereof is in violation in any material respect of any
Environmental Statutes, Development Laws or other Legal Requirements or
Space Leases or Property Agreements or (iii) which (A) might affect the
validity or priority of any Loan Document or (B) have a Material Adverse
Effect. Grantor is not aware of any facts or circumstances which may give
rise to any actions, suits or proceedings described in the preceding
sentence.
(k) Utilities. The Premises has all necessary legal access to water,
gas and electrical supply, storm and sanitary sewerage facilities, other
required public utilities (with respect to each of the aforementioned
items, by means of either a direct connection to the source of such
utilities or through connections available on publicly dedicated roadways
directly abutting the Premises or through permanent insurable easements
benefiting the Premises), fire and police protection, parking, and means of
direct access between the Premises and public highways over recognized curb
cuts (or such access to public highways is through private roadways which
may be used for ingress and egress pursuant to permanent insurable
easements).
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(l) Mechanics' Liens. The Trust Property is free and clear of any
mechanics' liens or liens in the nature thereof, and no rights are
outstanding that under law could give rise to any such liens, any of which
liens are or may be prior to, or equal with, the lien of this Deed of
Trust, except those which are insured against by the title insurance policy
insuring the lien of this Deed of Trust.
(m) Title Insurance and Survey. Beneficiary has received a lenders'
title insurance policy insuring this Deed of Trust as a first lien on the
Trust Property subject only to Permitted Encumbrances.
(n) Insurance. The Trust Property is insured in accordance with the
requirements set forth in Article III hereof.
(o) Space Leases.
(i) Grantor has delivered a true, correct and complete schedule of
all Space Leases as of the date hereof, which accurately and completely
sets forth in all material respects, for each such Space Lease, except
for temporary license agreements for terms of less than one year, the
following (collectively, the "Rent Roll"): the name of the tenant; the
lease expiration date, extension and renewal provisions; the base rent;
and all additional rent and pass-through obligations.
(ii) Each Space Lease constitutes the legal, valid and binding
obligation of Grantor and, to the knowledge of Grantor, is enforceable
against the tenant thereof. No default exists, or with the passing of
time or the giving of notice would exist, (A) under any Major Space Lease
or (B) under any other Space Leases which would, in the aggregate, have a
Material Adverse Effect.
(iii) No tenant under any Space Lease has, as of the date hereof,
paid Rent more than thirty (30) days in advance, and the Rents under such
Space Leases have not been waived, released, or otherwise discharged or
compromised.
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(iv) Except as previously disclosed in writing to Beneficiary, all
work to be performed by Grantor under the Space Leases has been
substantially performed, all contributions which are due and payable to
be made by Grantor to the tenants thereunder have been made except for
any held-back amounts, and all other conditions precedent to each such
tenant's obligations thereunder have been satisfied.
(v) Intentionally omitted.
(vi) Each tenant under a Major Space Lease has entered into
occupancy of the demised premises to the extent required under the terms
of its Major Space Lease, and each such tenant is open and conducting
business with the public in the demised premises. To the best knowledge of
Grantor, after due inquiry, each tenant under a Lease other than a Major
Space Lease has entered into occupancy of its demised premises under its
Lease to the extent required under the terms of its Lease and each such
tenant is open and conducting business with the public in the demised
premises.
(vii) Grantor has delivered to Beneficiary true, correct and
complete copies of the Space Leases described in the Rent Roll that have
been requested by Beneficiary.
(viii) Each Space Lease is in full force and effect and the
information disclosed on the Rent Roll reflects any assignment,
modification, supplementation or amendment in any way related to a Space
Lease.
(ix) Except as previously disclosed in writing to
Beneficiary, to the best of Grantor's knowledge, each tenant under
each Space Lease is free from bankruptcy, reorganization or
arrangement proceedings or a general assignment for the benefit of
creditors.
(x) No Space Lease provides any party with the right to
obtain a lien or encumbrance upon the Trust Property superior to
the lien of this Deed of Trust.
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(p) Property Agreements.
(i) Grantor has delivered to Beneficiary true, correct and complete
copies of all Property Agreements.
(ii) No Property Agreement provides any party with the right to
obtain a lien or encumbrance upon the Trust Property superior to the
lien of this Deed of Trust.
(iii) No default exists or with the passing of time or the giving of
notice or both would exist under any Property Agreement which would,
individually or in the aggregate, have a Material Adverse Effect.
(iv) Other than late payment notices sent in the ordinary course of
business, Grantor has not received or given any written communication
which alleges that a default exists or, with the giving of notice or the
lapse of time, or both, would exist under the provisions of any Property
Agreement.
(v) No condition exists whereby Grantor or any future owner of the
Trust Property may be required to purchase any other parcel of land
which is subject to any Property Agreement or which gives any Person a
right to purchase, or right of first refusal with respect to, the
Trust Property.
(vi) To the best knowledge of Grantor, no offset or any right of
offset exists respecting continued contributions to be made by any party
to any Property Agreement except as expressly set forth therein. Except as
previously disclosed to Beneficiary in writing, no material exclusions or
restrictions on the utilization, leasing or improvement of the Trust
Property (including non-compete agreements) exists in any Property
Agreement.
(vii) All "pre-opening" requirements contained in all Property
Agreements (including, but not limited to, all off-site and on-site
construction requirements), if any, have been fulfilled, and, to the best
of Grantor's knowledge, no condition now exists whereby any party to any
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such Property Agreement could refuse to honor its obligations thereunder.
(viii) All work, if any, to be performed by Grantor under each of
the Property Agreements has been substantially performed, all
contributions to be made by Grantor to any party to such Property
Agreements have been made, and all other conditions to such party's
obligations thereunder have been satisfied.
(q) Personal Property. Grantor has delivered to Beneficiary a schedule
which is true, correct and complete in all material respects of all personal
property, if any, owned by Grantor and located upon the Trust Property or
used in connection with the use or operation of the Trust Property and
Grantor represents that it has good and marketable title to all such personal
property, free and clear of any liens, except for liens created under the Loan
Documents and liens which describe the equipment and other personal property
owned by tenants and certain chattel liens disclosed in writing to
Beneficiary.
(r) Leasing Brokerage and Management Fees. Except as previously disclosed
to Beneficiary in writing, there are no brokerage fees or commissions payable by
Grantor with respect to the leasing of space at the Trust Property and
there are no management fees payable by Grantor with respect to the management
of the Trust Property.
(s) Security Deposits. All security deposits with respect to the Trust
Property on the date hereof have been transferred to the Security Deposit
Account on the date hereof, and Grantor is in compliance with all Legal
Requirements relating to such security deposits as to which failure to comply
might, individually or in the aggregate, have a Material Adverse Effect.
(t) Loan to Value Ratio. To the best knowledge of Grantor, based on the
Appraisal (which Grantor believes to contain a reasonable assessment of the
fair market value of the Trust Property), the Initial Allocated Loan Amount
does not exceed one hundred twenty-five percent (125%) of the fair market
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value of the Trust Property. For the purposes of this clause (t), the term
"fair market value" shall not include (i) the amount of any indebtedness secured
by a lien affecting the Trust Property that is prior to, or on a parity
with, the lien of this Deed of Trust, and (ii) the value of any property that
is not"real property" within the meaning of Treas. Reg. ss.ss.1.860G-2 and
1.856-3(d).
(u) Representations Generally. The review and inquiry made on behalf of
Grantor in connection with the representations and warranties contained in
the Deed of Trust, have all been made by Persons having the requisite
expertise and knowledge to provide such representations and warranties. No
representation, warranty or statement of fact made by or on behalf of Grantor
in this Deed of Trust or in any certificate, document or schedule furnished
to Beneficiary pursuant hereto, contains any untrue statement of a material
fact or omits to state any material fact necessary to make statements
contained therein or herein not misleading (which may be to Grantor's best
knowledge where so provided herein). There are no facts presently known to
Grantor which have not been disclosed to Beneficiary which would,
individually or in the aggregate, have a Material Adverse Effect nor as far
as Grantor can foresee might, individually or in the aggregate, have a
Material Adverse Effect. All representations and warranties contained in this
Deed of Trust shall survive the closing of the Loan.
Section 2.06. Removal of Lien. (a) Grantor shall, at its expense, maintain
this Deed of Trust as a first lien on the Trust Property and shall keep the
Trust Property free and clear of all liens of any kind and nature other
than the Permitted Encumbrances. Grantor shall, within twenty (20) days
following the filing thereof, promptly discharge of record, by bond or
otherwise, any such liens and, promptly upon request by Beneficiary, shall
deliver to Beneficiary evidence reasonably satisfactory to Beneficiary of
the discharge thereof.
(b) Subject to the provisions of Section 2.06(a) hereof, Grantor shall
(i) pay, from time to time when the same shall become due, all claims and
demands of mechanics, materialmen, laborers, and others which, if unpaid, might
result in, or permit the creation of, a lien on the Trust Property or any
part thereof, or on the revenues, rents, issues, income or profits
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arising therefrom, (ii) cause to be removed of record (by payment or posting
of bond or settlement or otherwise) any mechanics', materialmens', laborers'
or other lien on the Trust Property, or any part thereof, or on the revenues,
rents, issues, income or profit arising therefrom, and (iii) in general, do
or cause to be done, without expense to Beneficiary, everything reasonably
necessary to preserve in full the lien of this Deed of Trust. If Grantor
fails to comply with the requirements of paragraph (b) of this Section 2.06,
then, upon five (5) Business Days' prior notice to Grantor, Beneficiary may,
but shall not be obligated to, pay any such lien, and Grantor shall, within
five (5) Business Days after Beneficiary's demand therefor, reimburse
Beneficiary for all sums so expended, together with interest thereon at the
Default Rate from the date advanced, all of which shall be deemed part of the
Debt. Nothing contained herein shall be deemed a consent or request of
Beneficiary, express or implied, by inference or otherwise, to the
performance of any alteration, repair or other work by any contractor,
subcontractor or laborer or the furnishing of any materials by any
materialmen in connection therewith.
(c) Notwithstanding the foregoing, Grantor may contest any lien (other
than a lien relating to non-payment of Impositions, the contest of which shall
be governed by Section 4.04 hereof) of the type set forth in subparagraph
(b)(ii) of this Section 2.06 provided that, following prior notice to
Beneficiary
(i) Grantor is contesting the validity of such lien with due diligence and in
good faith and by appropriate proceedings, without cost or expense to
Beneficiary
or any of its agents, employees, officers, or directors, (ii) Grantor shall
preclude the collection of, or other realization upon, any contested amount from
the Trust Property or any revenues from or interest in the Trust
Property, (iii) neither the Trust Property nor any part thereof nor interest
therein, shall be in any danger of being sold, forfeited or lost by reason of
such contest by Grantor, (iv) such contest by Grantor shall not affect the
ownership, use or occupancy of the Trust Property, (v) such contest by
Grantor shall not subject Beneficiary or Grantor to the risk of civil or
criminal liability (other than the civil liability of Grantor for the amount
of the lien in question), (vi) such lien is subordinate to the lien of this
Deed of Trust, (vii) Grantor has not consented to such lien,
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(viii) Grantor has given Beneficiary prompt notice of the filing of such lien
and the bonding thereof by Grantor and, upon request by Beneficiary from time to
time, notice of the status of such contest by Grantor and/or confirmation of
the continuing satisfaction of the conditions set forth in this Section 2.06(c),
(ix) Grantor shall promptly pay the obligation secured by such lien upon a
final determination of Grantor's liability therefor, and (xi) Grantor shall
deliver to Beneficiary cash, a bond or other security acceptable to
Beneficiary
equal to 125% of the contested amount pursuant to collateral arrangements
reasonably satisfactory to Beneficiary.
Section 2.07. Cost of Defending and Upholding this Deed of Trust Lien. If
any action or proceeding is commenced to which Beneficiary or Deed Trustee
is made a party relating to the Loan Documents and/or the Trust Property or
Beneficiary's or Deed Trustee's interest therein or in which it becomes
necessary to defend or uphold the lien of this Deed of Trust or any other
Loan Document, Grantor shall, on demand, reimburse Beneficiary and/or Deed
Trustee for all expenses (including, without limitation, reasonable
attorneys' fees and disbursements) incurred by Beneficiary and/or Deed
Trustee in connection therewith, and such sum, together with interest
thereon at the Default Rate from and after such demand until fully paid,
shall constitute a part of the Debt.
Section 2.08. Use of the Trust Property. Grantor will use, or cause to be
used, the Trust Property for such use as is permitted pursuant to
applicable Legal Requirements including, without limitation, under the
certificate of occupancy applicable to the Trust Property, and which is
required by the Loan Documents. Grantor shall not suffer or permit the
Trust Property or any portion thereof to be used by the public, any tenant,
or any Person not subject to a Lease, in a manner as is reasonably likely
to impair Grantor's title to the Trust Property, or in such manner as may
give rise to a claim or claims of adverse usage or adverse possession by
the public, or of implied dedication of the Trust Property or any part
thereof.
Section 2.09. Financial Reports. (a) Grantor will keep and maintain or will
cause to be kept and maintained on a fiscal year basis, in accordance with
GAAP or federal income tax basis prepared consistently with the statements
of books, records and accounts
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delivered to Beneficiary and the Rating Agency prior to the Closing Date (or
such other accounting basis reasonably acceptable to Beneficiary)
consistently applied, proper and adequate books, records and accounts
reflecting (i) all of the financial affairs of Grantor and (ii) all items of
income and expense in connection with the operation of the Trust Property or
in connection with any services, equipment or furnishings provided in
connection with the operation thereof, whether such income or expense may be
realized by Grantor or by any other Person whatsoever, excepting lessees
unrelated to and unaffiliated with Grantor who have leased from Grantor
portions of the Premises for the purpose of occupying the same. Beneficiary
shall have the right from time to time at all times during normal business
hours upon reasonable notice to examine such books, records and accounts at
the office of Grantor or other person maintaining such books, records and
accounts and to make such copies or extracts thereof as Beneficiary shall
desire. After the occurrence of an Event of Default, Grantor shall pay any
costs and expenses incurred by Beneficiary to examine Grantor's accounting
records with respect to the Trust Property, as Beneficiary shall determine to
be necessary or appropriate in the protection of Beneficiary's interest.
(b) Grantor will furnish Beneficiary annually, within one hundred
twenty (120) days following the end of each Fiscal Year of Grantor, with a
complete copy of Grantor's financial statement audited by an Independent
certified public accountant that is reasonably acceptable to Beneficiary in
accordance with GAAP or federal income tax basis prepared consistently with
the statements of books, records and accounts delivered to Beneficiary and
the Rating Agency prior to the Closing Date (or such other accounting basis
reasonably acceptable to Beneficiary) consistently applied covering (i) the
financial affairs of Grantor and (ii) the operation of the Trust Property
for such Fiscal Year and containing a statement of revenues and expenses, a
statement of assets and liabilities and a statement of Grantor's equity.
Together with Grantor's annual financial statements, Grantor shall furnish
to Beneficiary an Officer's Certificate certifying as of the date thereof
(i) that the annual financial statements accurately represent the results
of operation and financial condition of Grantor and the Trust Property all
in accordance with GAAP or federal income tax basis prepared
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consistently with the statements of books, records and accounts delivered to
Beneficiary and the Rating Agency prior to the Closing Date consistently
applied, and (ii) whether there exists an event or circumstance which
constitutes, or which upon notice or lapse of time or both would constitute,
a Default under the Note or any other Loan Document executed and delivered by
Grantor, and if such event or circumstance exists, the nature thereof, the
period of time it has existed and the action then being taken to remedy such
event or circumstance.
(c) Grantor will furnish Beneficiary monthly, within thirty (30) days
following the end of each month, with a true, complete and correct cash
flow statement all in accordance with GAAP or federal income tax basis
prepared consistently with the statements of books, records and accounts
delivered to Beneficiary and the Rating Agency prior to the Closing Date
consistently applied with respect to the Trust Property in the form
attached hereto as Exhibit C and made a part hereof, showing (i) all cash
receipts of any kind whatsoever and all cash payments and disbursements,
and (ii) year-to-date summaries of such cash receipts, payments and
disbursements together with a certification of the Manager stating that
such cash flow statement is true, complete and correct.
(d) Grantor will furnish Beneficiary monthly, within thirty (30) days
following the end of each month, with a certification of the Manager
stating that all Operating Expenses with respect to the Trust Property
which had accrued as of the last day of the month preceding the delivery of
the cash flow statement referred to in clause (c) above have been fully
paid or otherwise reserved or provided for by the Manager (any such
certification or any certification furnished by a Manager pursuant to
clause (c) above, a "Manager Certification").
(e) Grantor will furnish Beneficiary quarterly, within sixty (60)
days following the end of the first three fiscal quarters of Grantor and
within one-hundred twenty (120) days after the end of each Fiscal Year,
with a true, complete and correct rent roll for the Trust Property,
including a list of which tenants are in default under their respective
leases, dated as of the date of Beneficiary's request, identifying each
tenant, the monthly rent and additional rent, if any, payable by
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such tenant, the expiration date of such tenant's Lease, the security
deposit, if any, held by Grantor under the Lease, the space covered by the
Lease, and the arrearages for such tenant, if any, the sales per square
foot of each tenant, to the extent reported by tenants under the terms of
the Leases (which Grantor agrees to use best efforts to obtain if required
under the terms of the Leases) and such rent roll shall be accompanied by
an Officer's Certificate, dated as of the date of the delivery of such rent
roll, certifying that such rent roll is true, correct and complete in all
material respects as of its date.
(f) Grantor shall furnish to Beneficiary, within thirty (30) days
after Beneficiary's request therefor, with such further detailed
information with respect to the operation of the Trust Property and the
financial affairs of Grantor as may be reasonably requested by Beneficiary.
(g) Grantor shall cause the Manager to furnish to Beneficiary, within
thirty (30) days after the end of each month, a schedule of tenant security
deposits showing any activity in the Security Deposit Account for such
month, together with a certification of the Manager as to the balance in
such Security Deposit Account and that such tenant security deposits are
being held in accordance with all Legal Requirements.
(h) Grantor will furnish Beneficiary quarterly, within sixty (60)
days following the end of the first three fiscal quarters of Grantor and
within one hundred twenty (120) days after the end of each Fiscal Year,
with a report setting forth (i) the Net Operating Income for such fiscal
quarter and Fiscal Year-to-date, each as compared to the preceding Fiscal
Year, (ii) the average and period end occupancy rate of the Trust Property,
(iii) the Debt Service Coverage for the most recent fiscal quarter and
Fiscal Year-to-date, and each as compared to the preceding Fiscal Year,
(iv) the capital repairs, replacements and improvements performed at the
Trust Property during such fiscal quarter and Fiscal Year-to-Date and the
aggregate Recurring Replacement Expenditures made in connection therewith,
and (v) the balance contained in each of the Sub-Accounts as of the end of
such fiscal quarter (which balance Beneficiary shall provide upon Grantor's
written request therefor).
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Section 2.10. Litigation. Grantor will give prompt written notice to
Beneficiary of any litigation or governmental proceedings pending or
threatened (in writing) against Grantor which might have a Material Adverse
Effect.
ARTICLE III: INSURANCE AND CASUALTY RESTORATION
Section 3.01. Insurance Coverage. Grantor shall, at its expense, maintain
the following insurance coverages with respect to the Trust Property during
the term of this Deed of Trust:
(a) (i) Insurance against loss or damage by fire, casualty
and other hazards included in an "all-risk" extended coverage
endorsement or its equivalent, with such endorsements as
Beneficiary may from time to time reasonably require and which are
customarily required by Institutional Lenders of similar properties
similarly situated, covering the Trust Property in an amount not
less than the greater of (A) 100% of the insurable replacement
value of the Trust Property (exclusive of the Premises and footings
and foundations) and (B) such other amount as is necessary to
prevent any reduction in such policy by reason of and to prevent
Grantor, Beneficiary or any other insured thereunder from being
deemed to be a co-insurer. Not less frequently than once every
three years, Grantor, at its option, shall either (A) have the
Appraisal updated or obtain a new appraisal of the Trust Property
reasonably acceptable to Beneficiary, (B) have a valuation of the
Trust Property made by or for its insurance carrier conducted by an
appraiser experienced in valuing properties of similar type to that
of the Trust Property and reasonably acceptable to Beneficiary
which are in the geographical area in which the Trust Property is
located or (C) provide such other evidence as will, in
Beneficiary's sole judgment, enable Beneficiary to determine
whether there shall have been an increase in the insurable value of
the Trust Property and Grantor shall deliver such updated
Appraisal, new appraisal, insurance
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valuation or other evidence acceptable to Beneficiary, as the case may be,
and, if such updated Appraisal, new appraisal, insurance valuation, or
other evidence acceptable to Beneficiary reflects an increase in the
insurable value of the Trust Property, the amount of insurance
required hereunder shall be increased accordingly and Grantor shall
deliver evidence satisfactory to Beneficiary that such policy has been so
increased.
(ii) Commercial comprehensive general liability insurance
against claims for personal and bodily injury and/or death to one
or more persons or property damage, occurring on, in or about the
Trust Property (including the adjoining streets, sidewalks and
passageways therein) in such amounts as Beneficiary may from time
to time reasonably require (but in no event shall Beneficiary's
requirements be increased more frequently than once during each
twelve (12) month period) and which are customarily required by
Institutional Lenders for similar properties similarly situated,
but not less than $10,000,000.00.
(iii) Business interruption, rent loss or other similar
insurance (A) with loss payable to Beneficiary, (B) covering all
risks required to be covered by the insurance provided for in
Section 3.01(a)(i) and (C) in an amount not less than 100% of the
projected fixed or base rent plus percentage rent for the
succeeding twenty-four (24) month period unless the Rating Agency
shall have delivered confirmation that any rating issued in
connection with the Securitization will not, as a result of having
business interruption, rent loss or other similar insurance for a
shorter period, be downgraded from the then current ratings
thereof, qualified or withdrawn, based on an occupancy rate of
100%. The amount of such insurance shall be determined upon the
execution of this Deed of Trust, and not more frequently than once
each calendar year thereafter based on Grantor's reasonable
estimate of projected fixed or base rent plus percentage rent, from
the Trust Property for the next succeeding twenty-four (24) months
unless the Rating Agency shall have delivered confirmation that any
rating issued in connection with the Securitization will not, as a
result of having business interruption, rent loss or other similar
insurance for a shorter period, be downgraded from the then current
ratings thereof, qualified or withdrawn based on an
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occupancy rate of 100%. In the event the Trust Property shall be
damaged or destroyed, Grantor shall and hereby does assign to
Beneficiary all payment of claims under the policies of such insurance,
and all amounts payable thereunder, and all net amounts, shall be
collected by Beneficiary under such policies and shall be applied in
accordance with this Deed of Trust; provided, however, that nothing
herein contained shall be deemed to relieve Grantor of its obligations
to timely pay all amounts due under the Loan Documents.
(iv) War risk insurance when such insurance is obtainable
from the United States of America or any agency or instrumentality
thereof at reasonable rates (for the maximum amount of insurance
obtainable) and if requested by Beneficiary, and such insurance is
then customarily required by Institutional Lenders of similar
properties similarly situated.
(v) Insurance against loss or damages from (A) leakage of sprinkler
systems and (B) explosion of steam boilers, air conditioning equipment,
pressure vessels or similar apparatus now or hereafter installed at the
Trust Property, in such amounts as Beneficiary may from time to time
reasonably require and which are then customarily required by
Institutional Lenders of similar properties similarly situated.
(vi) Flood insurance in an amount equal to the full insurable value
of the Trust Property or the maximum amount available, whichever is
less, if the Improvements are located in an area designated by the
Secretary of Housing and Urban Development as being "an area of special
flood hazard" under the National Flood Insurance Program (i.e., having a
one percent or greater chance of flooding), and if flood insurance is
available under the National Flood Insurance Act.
(vii) Worker's compensation insurance or other similar insurance
which may be required by Governmental Authorities or Legal Requirements.
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(viii) Such other insurance as may from time to time be
required by Beneficiary and which is then customarily required by
Institutional Lenders for similar properties similarly situated,
against other insurable hazards, including, but not limited to,
malicious mischief, vandalism, windstorm or earthquake, which at
the time are commonly insured against and generally available in
the case of properties similarly situated, due regard to be given
to the size and type of the Premises, Improvements, Fixtures and
Equipment and their location, construction and use.
(b) If Grantor is a partnership, Grantor shall cause the General
Partner to maintain fidelity insurance in an amount equal to or greater
than the annual Operating Income of the Trust Property for the six (6)
month period immediately preceding the date on which the premium for such
insurance is due and payable.
(c) Grantor shall cause any Manager of the Trust Property to
maintain fidelity insurance in an amount equal to or greater than the
annual Operating Income of the Trust Property for the six (6) month
period immediately preceding the date on which the premium for such
insurance is due and payable or such lesser amount as Beneficiary shall
approve.
Section 3.02. Policy Terms. (a) All insurance required by this Article III
shall be in the form (other than with respect to Sections 3.01(a)(vi) and
(vii) above when insurance in those two sub-sections is placed with a
governmental agency or instrumentality on such agency's forms) and amount
and with deductibles as, from time to time, shall be reasonably acceptable
to Beneficiary, under valid and enforceable policies issued by financially
responsible insurers authorized to do business in the State where the Trust
Property is located, with a general policyholder's service rating of not
less than A and a financial rating of not less than XI as rated in the most
currently available Best's Insurance Reports (or the equivalent, if such
rating system shall hereafter be altered or replaced) and shall have a
claims paying ability rating of not less than "AA" from the Rating Agency
or, if not so rated by the Rating Agency, then the Rating Agency shall have
delivered confirmation that any rating issued in
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connection with the Securitization will not, as a result of the failure of
such proposed issuer to meet such standards, be downgraded from the then
current ratings thereof, qualified or withdrawn. Originals or certified
copies of all insurance policies shall be delivered to and held by
Beneficiary. All such policies (except policies for worker's compensation)
shall name Beneficiary as an additional named insured, shall provide for
loss payable to Beneficiary and shall contain (or have attached): (i)
standard "non-contributory Beneficiary" endorsement or its equivalent
relating, inter alia, to recovery by Beneficiary notwithstanding the
negligent or willful acts or omissions of Grantor; (ii) a waiver of
subrogation endorsement as to Beneficiary; (iii) an endorsement indicating
that neither Beneficiary nor Grantor shall be or be deemed to be a
co-insurer with respect to any casualty risk insured by such policies and
shall provide for a deductible per loss of an amount not more than that
which is customarily maintained by owners of similar properties similarly
situated, and (iv) a provision that such policies shall not be canceled,
terminated, denied renewal or amended, including, without limitation, any
amendment reducing the scope or limits of coverage, without at least thirty
(30) days' prior written notice to Beneficiary in each instance. Not less
than thirty (30) days prior to the expiration dates of the insurance
policies obtained pursuant to this Deed of Trust, originals or certified
copies of renewals of such policies (or certificates evidencing such
renewals) bearing notations evidencing the payment of premiums or
accompanied by other reasonable evidence of such payment (which premiums
shall not be paid by Grantor through or by any financing arrangement which
would entitle an insurer to terminate a policy) shall be delivered by
Grantor to Beneficiary. Grantor shall not carry separate insurance,
concurrent in kind or form or contributing in the event of loss, with any
insurance required under this Article III.
(b) If Grantor fails to maintain and deliver to Beneficiary the
original policies or certificates of insurance required by this Deed of
Trust, or if there are insufficient funds in the Basic Carrying Costs
Sub-Account to pay the premiums for same, Beneficiary may, at its option,
procure such insurance, and Grantor shall pay, or as the case may be,
reimburse Beneficiary for, all premiums thereon promptly, upon demand by
Beneficiary, with interest thereon at the Default Rate from the date paid
by
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Beneficiary to the date of repayment and such sum shall constitute a part of the
Debt.
(c) Grantor shall notify Beneficiary of the renewal premium of each
insurance policy and Beneficiary shall be entitled to pay such amount on
behalf of Grantor from the Basic Carrying Costs Sub-Account. With respect to
insurance policies which require periodic payments (i.e., monthly or
quarterly) of premiums, Beneficiary shall be entitled to pay such amounts
fifteen (15) days (or such lesser number of days as Beneficiary shall
determine) prior to the respective due dates of such installments.
(d) The insurance required by this Deed of Trust may, at the option of
Grantor, be effected by blanket and/or umbrella policies issued to Grantor
covering the Trust Property provided that, in each case, the policies
otherwise comply with the provisions of this Deed of Trust and allocate to
the Trust Property, from time to time (but in no event less than once a
year), the coverage specified by this Deed of Trust, without possibility of
reduction or coinsurance by reason of, or damage to, any other property (real
or personal) named therein. If the insurance required by this Deed of Trust
shall be effected by any such blanket or umbrella policies, Grantor shall
furnish to Beneficiary original policies or certified copies thereof, or an
original certificate of insurance together with reasonable access to the
original of such policy to review such policy's coverage of the Trust
Property, with schedules attached thereto showing the amount of the insurance
provided under such policies applicable to the Trust Property.
Section 3.03. Assignment of Policies. (a) Grantor hereby assigns to
Beneficiary the proceeds of all insurance (other than liability insurance)
obtained pursuant to this Deed of Trust, all of which proceeds shall be
payable to Beneficiary as collateral and further security for the payment
of the Debt and the performance of the Cross-collateralized Borrower's
obligations hereunder and under the other Loan Documents, and Grantor
hereby authorizes and directs the issuer of any such insurance to make
payment of such proceeds directly to Beneficiary. Except as otherwise
expressly provided in Section 3.04 or elsewhere in this Article III,
Beneficiary shall have the option, in its discretion, and without regard to
the adequacy of its security, to apply all or any part
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of the proceeds it may receive pursuant to this Article in such manner as
Beneficiary may elect to any one or more of the following: (i) the payment of
the Debt, whether or not then due, in any proportion or priority as
Beneficiary, in its discretion, may elect, (ii) the repair or restoration of
the Trust Property, (iii) the cure of any Default or (iv) the reimbursement
of the costs and expenses of Beneficiary incurred pursuant to the terms
hereof in connection with the recovery of the Insurance Proceeds. Nothing
herein contained shall be deemed to excuse Grantor from repairing or
maintaining the Trust Property as provided in this Deed of Trust or restoring
all damage or destruction to the Trust Property, regardless of the
sufficiency of the Insurance Proceeds, and the application or release by
Beneficiary of any Insurance Proceeds shall not cure or waive any Default or
notice of Default.
(b) In the event of the foreclosure of this Deed of Trust or any
other transfer of title or assignment of all or any part of the Trust
Property in extinguishment, in whole or in part, of the Debt, all right,
title and interest of Grantor in and to all policies of insurance required
by this Deed of Trust shall inure to the benefit of the successor in
interest to Grantor or the purchaser of the Trust Property. If, prior to
the receipt by Beneficiary of any proceeds, the Trust Property or any
portion thereof shall have been sold on foreclosure of this Deed of Trust
or by deed in lieu thereof or otherwise, or any claim under such insurance
policy arising during the term of this Deed of Trust is not paid until
after the extinguishment of the Debt, and Beneficiary shall not have
received the entire amount of the Debt outstanding at the time of such
extinguishment, whether or not a deficiency judgment on this Deed of Trust
shall have been sought or recovered or denied, then, the proceeds of any
such insurance to the extent of the amount of the Debt not so received,
shall be paid to and be the property of Beneficiary, together with interest
thereon at the Default Rate, and the reasonable attorney's fees, costs and
disbursements incurred by Beneficiary in connection with the collection of
the proceeds which shall be paid to Beneficiary and Grantor hereby assigns,
transfers and sets over to Beneficiary all of Grantor's right, title and
interest in and to such proceeds. Notwithstanding any provisions of this
Deed of Trust to the contrary, Beneficiary shall not be deemed to be a
trustee or other fiduciary with respect to its receipt of any such
proceeds, which
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may be commingled with any other monies of Beneficiary; provided, however,
that Beneficiary shall use such proceeds for the purposes and in the manner
permitted by this Deed of Trust. Any proceeds deposited with Beneficiary
shall be held by Beneficiary in an interest-bearing account, but Beneficiary
makes no representation or warranty as to the rate or amount of interest, if
any, which may accrue on such deposit and shall have no liability in
connection therewith. Interest accrued, if any, on the proceeds shall be
deemed to constitute a part of the proceeds for purposes of this Deed of
Trust. The provisions of this Section 3.03(b) shall survive the termination
of this Deed of Trust by foreclosure, deed in lieu thereof or otherwise as
consequence of the exercise of the rights and remedies of Beneficiary
hereunder after a Default.
Section 3.04. Casualty Restoration. (a) (i) In the event of any damage to
or destruction of the Trust Property, Grantor shall give prompt written
notice to Beneficiary (which notice shall set forth Grantor's good faith
estimate of the cost of repairing or restoring such damage or destruction,
or if Grantor cannot reasonably estimate the anticipated cost of
restoration, Grantor shall nonetheless give Beneficiary prompt notice of
the occurrence of such damage or destruction, and will diligently proceed
to obtain estimates to enable Grantor to quantify the anticipated cost and
time required for such restoration, whereupon Grantor shall promptly notify
Beneficiary of such good faith estimate) and, provided that restoration
does not violate any Legal Requirements, Grantor shall promptly commence
and diligently prosecute to completion the repair, restoration or
rebuilding of the Trust Property so damaged or destroyed to a condition
such that the Trust Property shall be at least equal in value to that
immediately prior to the damage to the extent practicable, in full
compliance with all Legal Requirements and the provisions of all Leases,
and in accordance with Section 3.04(b) below. Such repair, restoration or
rebuilding of the Trust Property are sometimes hereinafter collectively
referred to as the "Work".
(ii) Grantor shall not adjust, compromise or settle any claim for
Insurance Proceeds without the prior written consent of Beneficiary, which shall
not be unreasonably withheld or delayed; provided, however, that, except during
the continuance of an Event of Default, Beneficiary's consent shall not be
required with
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respect to the adjustment, compromising or settlement of any claim for Insurance
Proceeds in an amount less than $1,000,000.
(iii) Subject to Section 3.04(a)(iv), Beneficiary shall apply any
Insurance Proceeds which it may receive towards the Work in accordance with
Section 3.04(b) and the other applicable sections of this Article III.
(iv) If (A) an Event of Default shall have occurred and is continuing,
(B) Beneficiary is not reasonably satisfied that the Debt Service Coverage,
after substantial completion of the Work, will be at least equal to the
Required Debt Service Coverage, (C) more than twenty-five percent (25%) of
the reasonably estimated aggregate insurable value of the Trust Property is
damaged or destroyed, (D) any Leases constituting ten percent (10%) of the
Total GLA physically affected by such destruction shall not continue in full
force and effect, or (E) Beneficiary is not reasonably satisfied the Work can
be completed by the earlier of (1) the end of the twelve (12) month period
following the damage to or destruction of the Trust Property (provided that
such twelve month period may be extended at the request of Grantor provided
that Grantor delivers a letter from the Rating Agency confirming that any
rating issued in connection with a Securitization will not, as a result of
such extension be downgraded from the then current ratings thereof,
qualified, or withdrawn, (2) the Maturity Date, and (3) the period through
which the insurance specified in Section 3.01(a)(iii) insures against
business interruption or rent loss (collectively, a "Substantial Casualty"),
Beneficiary shall have the option, in its sole discretion to apply any
Insurance Proceeds it may receive pursuant to this Deed of Trust (less any
cost to Beneficiary of recovering and paying out such proceeds incurred
pursuant to the terms hereof and not otherwise reimbursed to Beneficiary,
including, without limitation, reasonable attorneys' fees and expenses) to
the payment of the Debt, without any prepayment fee or charge of any kind,
including, without limitation, Yield Maintenance Premium, or to allow such
proceeds to be used for the Work pursuant to the terms and subject to the
conditions of Section 3.04(b) hereof and the other applicable sections of
this Article III.
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(v) In the event that Beneficiary elects or is obligated hereunder to
allow Insurance Proceeds to be used for the Work, any excess proceeds
remaining after completion of such Work shall be applied to the payment of
the Debt without any prepayment fee or charge of any kind, including, without
limitation, Yield Maintenance Premium.
(b) If any Condemnation Proceeds, in accordance with Section 6.01(a) or
any Insurance Proceeds in accordance with Section 3.04(a), are to be applied to
the repair, restoration or rebuilding of the Trust Property, then such
proceeds shall be deposited into a segregated interest-bearing bank account at
the Bank, which shall be an Eligible Account, held by Beneficiary and shall be
paid out from time to time to Grantor as the Work progresses (less any cost to
Beneficiary of recovering and paying out such proceeds, including, without
limitation, reasonable attorneys' fees and costs allocable to inspecting the
Work and the plans and specifications therefor) subject to Section 5.13 hereof
and to all of the following conditions:
(i) An architect or engineer selected by Grantor and reasonably
acceptable to Beneficiary (an "Architect" or "Engineer") or a Person
otherwise reasonably acceptable to Beneficiary, shall have delivered to
Beneficiary a certificate estimating the cost of completing the Work, and,
if the amount set forth therein is more than the sum of the amount of
Insurance Proceeds then being held by Beneficiary in connection with a
casualty and amounts agreed to be paid as part of a final settlement under
the insurance policy upon or before completion of the Work, Grantor
shall have delivered to Beneficiary (A) cash collateral in an amount equal
to such excess, (B) an unconditional, irrevocable, clean sight draft
letter of credit, in form, substance and issued by a bank reasonably
acceptable to Beneficiary, in the amount of such excess and draws on such
letter of credit shall be made by Beneficiary to make payments pursuant to
this Article III following exhaustion of the Insurance Proceeds therefore
or (C) a completion bond in form, substance and issued by a surety company
reasonably acceptable to Beneficiary.
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(ii) If the cost of the Work is reasonably estimated by an Architect
or Engineer in a certification reasonably acceptable to Beneficiary to be
equal to or exceed ten percent (10%) of the Allocated Loan Amount, such
Work shall be performed under the supervision of an Architect or Engineer,
it being understood that the plans and specifications with respect thereto
shall provide for Work so that, upon completion thereof, the Trust
Property shall be at least equal in replacement value and general utility
to the Trust Property prior to the damage or destruction.
(iii) Each request for payment shall be made on not less than
ten (10) days' prior notice to Beneficiary and shall be accompanied
by a certificate of an Architect or Engineer, or, if the Work is
not required to be supervised by an Architect or Engineer, by an
Officer's Certificate stating (A) that payment is for Work
completed in compliance with the plans and specifications, if
required under clause (ii) above, (B) that the sum requested is
required to reimburse Grantor for payments by Grantor to date, or
is due to the contractor, subcontractors, materialmen, laborers,
engineers, architects or other Persons rendering services or
materials for the Work (giving a brief description of such services
and materials), and that when added to all sums previously paid out
by Beneficiary does not exceed the value of the Work done to the
date of such certificate, (C) if the sum requested is to cover
payment relating to repair and restoration of personal property
required or relating to the Trust Property, that title to the
personal property items covered by the request for payment is
vested in Grantor (unless Grantor is lessee of such personal
property), and (D) that the Insurance Proceeds and other amounts
deposited by Grantor held by Beneficiary after such payment is more
than the estimated remaining cost to complete such Work; provided,
however, that if such certificate is given by an Architect or
Engineer, such Architect or Engineer shall certify as to clause (A)
above, and such Officer's Certificate shall certify as to the
remaining clauses above. Additionally, each request for payment
shall contain a statement signed by Grantor stating that the
requested payment is for Work satisfactorily done to date.
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(iv) Each request for payment shall be accompanied by waivers
of lien, in customary form and substance, covering that part of the
Work for which payment or reimbursement is being requested and, if
required by Beneficiary, a search prepared by a title company or
licensed abstractor, or by other evidence satisfactory to
Beneficiary that there has not been filed with respect to the Trust
Property any mechanic's or other lien or instrument for retention
of title relating to any part of the Work not discharged of record.
Additionally, as to any personal property covered by the request
for payment, Beneficiary shall be furnished with evidence of having
incurred a payment obligation therefor and such further evidence
reasonably satisfactory to assure Beneficiary that UCC filings
therefor provide a valid first lien on the personal property.
(v) Beneficiary shall have the right to inspect the Work at
all reasonable times upon reasonable prior notice and may condition
any disbursement of Insurance Proceeds upon satisfactory compliance
by Grantor with the provisions hereof. Neither the approval by
Beneficiary of any required plans and specifications for the Work
nor the inspection by Beneficiary of the Work shall make
Beneficiary responsible for the preparation of such plans and
specifications, or the compliance of such plans and specifications
of the Work, with any applicable law, regulation, ordinance,
covenant or agreement.
(vi) Insurance Proceeds shall not be disbursed more frequently than
once every thirty (30) days or at any time during which a Default exists.
(vii) Until such time as the Work has been substantially completed,
Beneficiary shall not be obligated to disburse up to ten percent (10%) of
the cost of the Work (the "Retention Amount") to Grantor. Upon
substantial completion of the Work, Grantor shall send notice thereof to
Beneficiary and, subject to the conditions of Section 3.04(b)(i)-(iv),
Beneficiary shall disburse one-half of the Retention Amount to Grantor;
provided, however, that the remaining one-half of the Retention Amount
shall be
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disbursed to Grantor when Beneficiary shall have received copies of any
and all final certificates of occupancy or other certificates, licenses
and permits required for the ownership, occupancy and operation of the
Trust Property in accordance with all Legal Requirements. Trantor
hereby covenants to diligently seek to obtain any such certificates,
licenses and permits.
(viii) Upon failure on the part of Grantor promptly to
commence the Work or to proceed diligently and continuously to
completion of the Work, which failure shall continue after notice
for thirty (30) days, Beneficiary may apply any Insurance Proceeds
or Condemnation Proceeds it then or thereafter holds to the payment
of the Debt in accordance with the provisions of the Note;
provided, however, that Beneficiary shall be entitled to apply at
any time all or any portion of the Insurance Proceeds or
Condemnation Proceeds it then holds to the extent necessary to cure
any Event of Default under this Deed of Trust, the Note or any
other Loan Document.
(c) If Grantor (i) within one hundred twenty (120) days after the
occurrence of any damage to the Trust Property or any portion thereof (or
such shorter period as may be required under any Space Lease) shall fail to
submit to Beneficiary for approval plans and specifications (if required
pursuant to Section 3.04(b)(ii) hereof) for the Work (approved by the
Architect and by all Governmental Authorities whose approval is required),
(ii) after any such plans and specifications are approved by all Governmental
Authorities, the Architect and Beneficiary, shall fail to promptly commence
such Work or (iii) shall fail to diligently prosecute such Work to
completion, then, in addition to all other rights available hereunder, at law
or in equity, Beneficiary, or any receiver of the Trust Property or any
portion thereof, upon five (5) days' prior notice to Grantor (except in the
event of emergency in which case no notice shall be required), may (but shall
have no obligation to) perform or cause to be performed such Work, and may
take such other steps as it reasonably deems advisable. Grantor hereby
waives, for Grantor, any claim, other than for gross negligence or willful
misconduct, against Beneficiary and any receiver arising out of any act or
omission of Beneficiary or such receiver pursuant
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hereto, and Beneficiary may apply all or any portion of the proceeds of
insurance (without the need to fulfill any other requirements of this
Section 3.04) to reimburse Beneficiary and such receiver, for all costs not
reimbursed to Beneficiary or such receiver upon demand together with
interest thereon at the Default Rate from the date such amounts are
advanced until the same are paid to Beneficiary or the receiver.
(d) Grantor hereby irrevocably appoints Beneficiary as its
attorney-in-fact, coupled with an interest, to collect and receive any insurance
proceeds paid with respect to any portion of the Trust Property or the
insurance policies required to be maintained hereunder, and to endorse any
checks, drafts or other instruments representing any insurance proceeds whether
payable by reason of loss thereunder or otherwise.
Section 3.05. Compliance with Insurance Requirements. Grantor promptly
shall comply with, and shall cause the Trust Property to comply with, all
Insurance Requirements, even if such compliance requires structural changes
or improvements or would result in interference with the use or enjoyment
of the Trust Property or any portion thereof provided Grantor shall have a
right to contest in good faith and with diligence such Insurance
Requirements provided (a) no Event of Default shall exist during such
contest and such contest shall not subject the Trust Property or any
portion thereof to any lien or affect the priority of the lien of this Deed
of Trust, (b) failure to comply with such Insurance Requirements will not
subject Beneficiary, Deed Trustee or any of their agents, employees,
officers or directors to any civil or criminal liability, (c) such contest
will not cause any reduction in insurance coverage, (d) such contest shall
not affect the ownership, use or occupancy of the Trust Property, (e) the
Trust Property or any part thereof or any interest therein shall not be in
any danger of being sold, forfeited or lost by reason of such contest by
Grantor, (f) Grantor has given Beneficiary prompt notice of such contest
and, upon request by Beneficiary from time to time, notice of the status of
such contest by Grantor and/or information of the continuing satisfaction
of the conditions set forth in clauses (a) through (e) of this Section
3.05, (g) upon a final determination of such contest, Grantor shall
promptly comply with the requirements thereof, and (h) prior to and during
such contest, Grantor
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shall furnish to Beneficiaey security satisfactory to Beneficiary, in its
reasonable discretion, against loss or injury by reason of such contest or
the non-compliance with such Insurance Requirement (and if such security is
cash, Beneficiary shall deposit the same in an interest-bearing account and
interest accrued thereon, if any, shall be deemed to constitute a part of
such security for purposes of this Deed of Trust, but Beneficiary (i) makes
no representation or warranty as to the rate or amount of interest, if any,
which may accrue thereon and shall have no liability in connection therewith
and (ii) shall not be deemed to be a trustee or fiduciary with respect to its
receipt of any such security and any such security may be commingled with
other monies of Beneficiary). If Grantor shall use the Trust Property or any
portion thereof in any manner which could permit the insurer to cancel any
insurance required to be provided hereunder, Grantor immediately shall obtain
a substitute policy which shall satisfy the requirements of this Deed of
Trust and which shall be effective on or prior to the date on which any such
other insurance policy shall be canceled. Grantor shall not by any action or
omission invalidate any insurance policy required to be carried hereunder
unless such policy is replaced as aforesaid, or materially increase the
premiums on any such policy above the normal premium charged for such policy.
Grantor shall cooperate with Beneficiary in obtaining for Beneficiary the
benefits of any insurance proceeds lawfully or equitably payable to
Beneficiary in connection with the transaction contemplated hereby.
Section 3.06. Event of Default During Restoration. Notwithstanding anything
to the contrary contained in this Deed of Trust including, without
limitation, the provisions of this Article 3, if, at the time of any
casualty affecting the Trust Property or any part thereof, or at any time
during any Work, or at any time that Beneficiary is holding or is entitled
to receive any proceeds of any insurance pursuant to this Deed of Trust, a
Default exists and is continuing (whether or not it constitutes an Event of
Default), Beneficiary shall then have no obligation to make such proceeds
available for Work and upon an Event of Default Beneficiary shall have the
right and option, to be exercised in its sole and absolute discretion and
election, with respect to the proceeds of any such insurance, either to
retain and apply such proceeds in reimbursement for the actual costs, fees
and expenses incurred by
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Beneficiary in accordance with the terms hereof in connection with the
adjustment of the loss and any balance toward payment of the Debt in such
priority and proportions as Beneficiary, in its sole discretion, shall deem
proper, or towards the Work, upon such terms and conditions as Beneficiary
shall determine, or to cure such Event of Default, or to any one or more of
the foregoing as Beneficiary, in its sole and absolute discretion, may
determine. If Beneficiary shall receive and retain such Insurance Proceeds,
the lien of this Deed of Trust shall be reduced only by the amount thereof
received, after reimbursement to Beneficiary of expenses of collection, and
actually applied by Beneficiary in reduction of the principal sum payable
under the Note in accordance with the Note.
Section 3.07. Application of Proceeds to Debt Reduction. (a) No damage to
the Trust Property, or any part thereof, by fire or other casualty
whatsoever, whether such damage be partial or total, shall relieve Grantor
from its liability to pay in full the Debt and to perform its obligations
under this Deed of Trust and the other Loan Documents except to the extent
any rent (business interruption) insurance is paid to Beneficiary and
applied to the Debt.
(b) If any Insurance Proceeds are applied to reduce the Debt,
Beneficiary shall apply the same in accordance with the provisions of the
Note.
ARTICLE IV: IMPOSITIONS
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Section 4.01. Payment of Impositions, Utilities and Taxes, etc. (a) Grantor
shall pay or cause to be paid all Impositions at least five (5) days prior
to the date upon which any fine, penalty, interest or cost for nonpayment
is imposed, and furnish to Beneficiary, upon request, receipted bills of
the appropriate taxing authority or other documentation reasonably
satisfactory to Beneficiary evidencing the payment thereof. If Grantor
shall fail to pay any Imposition in accordance with this Section and is not
contesting or causing a contesting of such Imposition in accordance with
Section 4.04 hereof, or if there are insufficient funds in the Basic
Carrying Costs Sub-Account to pay any Imposition, Beneficiary shall have
the right, but shall not be obligated, to pay that Imposition, and Grantor
shall repay to Beneficiary, on demand, any amount paid by Beneficiary, with
interest thereon at the Default Rate from the date of the advance thereof
to the date of repayment, and such amount shall constitute a portion of the
Debt secured by this Deed of Trust and the other Cross-collateralized Deeds
of Trust.
(b) Grantor shall, prior to the date upon which any fine, penalty,
interest or cost for the nonpayment is imposed, pay or cause to be paid all
charges for electricity, power, gas, water and other services and utilities
in connection with the Trust Property, and shall, upon request, deliver to
Beneficiary receipts or other documentation reasonably satisfactory to
Beneficiary evidencing payment thereof. If Grantor shall fail to pay any
amount required to be paid by Grantor pursuant to this Section 4.01 and is
not contesting such charges in accordance with Section 4.04 hereof,
Beneficiary shall have the right, but shall not be obligated, to pay that
amount, and Grantor will repay to Beneficiary, on demand, any amount paid
by Beneficiary with interest thereon at the Default Rate from the date of
the advance thereof to the date of repayment, and such amount shall
constitute a portion of the Debt secured by this Deed of Trust and the
other Cross-collateralized Deeds of Trust.
(c) Grantor shall pay all taxes, charges, filing, registration and
recording fees, excises and levies imposed upon Beneficiary by reason of or
in connection with its ownership of any Loan Document or any other
instrument related thereto, or resulting from the execution, delivery and
recording of, or the lien created by, or the obligation evidenced by, any
of them,
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other than income, franchise and other similar taxes imposed on Beneficiary and
shall pay all corporate stamp taxes, if any, and other taxes, required to be
paid on the Loan Documents. If Grantor shall fail to make any such payment
within ten (10) days after written notice thereof from Beneficiary,
Beneficiary
shall have the right, but shall not be obligated, to pay the amount due, and
Grantor shall reimburse Beneficiary therefor, on demand, with interest thereon
at the Default Rate from the date of the advance thereof to the date of
repayment, and such amount shall constitute a portion of the Debt secured by
this Deed of Trust and the other Cross-collateralized Deed of Trusts.
Section 4.02. Deduction from Value. In the event of the passage after the
date of this Deed of Trust of any Legal Requirement deducting from the
value of the Trust Property for the purpose of taxation, any lien thereon
or changing in any way the Legal Requirements now in force for the taxation
of this Deed of Trust, the other Cross-collateralized Deed of Trusts and/or
the Debt for federal, state or local purposes, or the manner of the
operation of any such taxes so as to adversely affect the interest of
Beneficiary, or impose any tax or other charge on any Loan Document, then
Grantor will pay such tax, with interest and penalties thereon, if any,
within the statutory period. In the event the payment of such tax or
interest and penalties by Grantor would be unlawful, or taxable to
Beneficiary or unenforceable or provide the basis for a defense of usury,
then in any such event, Beneficiary shall have the option, by written
notice of not less than thirty (30) days, to declare the Debt immediately
due and payable, with no prepayment penalty, including without limitation,
Yield Maintenance Premium.
Section 4.03. No Joint Assessment. Grantor shall not consent to or initiate
the joint assessment of the Premises or the Improvements (a) with any other
real property constituting a separate tax lot and Grantor represents and
covenants that each of the parcels comprising the Premises are and shall
remain a separate tax lot or (b) with any portion of the Trust Property
which may be deemed to constitute personal property, or any other procedure
whereby the lien of any taxes which may be levied against such personal
property shall be assessed or levied or charged to the Trust Property as a
single lien.
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Section 4.04. Right to Contest. Grantor shall have the right, after prior
notice to Beneficiary, at its sole expense, to contest by appropriate legal
proceedings diligently conducted in good faith, without cost or expense to
Beneficiary or any of its agents, employees, officers or directors, the
validity, amount or application of any Imposition or any charge described
in Section 4.01(b), provided that (a) no Default or Event of Default shall
exist during such proceedings and such contest shall not (unless Grantor
shall comply with clause (d) of this Section 4.04) subject the Trust
Property or any portion thereof to any lien or affect the priority of the
lien of this Deed of Trust, (b) failure to pay such Imposition or charge
will not subject Beneficiary, Deed Trustee or any of their agents,
employees, officers or directors to any civil or criminal liability, (c)
the contest suspends enforcement of the Imposition or charge (unless
Grantor first pays the Imposition or charge), (d) prior to and during such
contest, Grantor shall furnish to Beneficiary security satisfactory to
Beneficiary, in its reasonable discretion, against loss or injury by reason
of such contest or the non-payment of such Imposition or charge (and if
such security is cash, Beneficiary may deposit the same in an
interest-bearing account and interest accrued thereon, if any, shall be
deemed to constitute a part of such security for purposes of this Deed of
Trust, but Beneficiary (i) makes no representation or warranty as to the
rate or amount of interest, if any, which may accrue thereon and shall have
no liability in connection therewith and (ii) shall not be deemed to be a
trustee or fiduciary with respect to its receipt of any such security and
any such security may be commingled with other monies of Beneficiary), (e)
such contest shall not affect the ownership, use or occupancy of the Trust
Property, (f) the Trust Property or any part thereof or any interest
therein shall not be in any danger of being sold, forfeited or lost by
reason of such contest by Grantor, (g) Grantor has given Beneficiary notice
of the commencement of such contest and upon request by Beneficiary, from
time to time, notice of the status of such contest by Grantor and/or
confirmation of the continuing satisfaction of clauses (a) through (f) of
this Section 4.04, and (h) upon a final determination of such contest,
Grantor shall promptly comply with the requirements thereof. Upon
completion of any contest, Grantor shall immediately pay the amount due, if
any, and deliver to Beneficiary proof of the completion of the contest and
payment of the amount due, if any, following which,
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Beneficiary shall return the security, if any, deposited with Beneficiary
pursuant to clause (d) of this Section 4.04. Grantor shall not pay any
Imposition in installments unless permitted by applicable Legal Requirements,
and shall, upon the request of Beneficiary, deliver copies of all notices
relating to any Imposition or other charge covered by this Article IV to
Beneficiary.
Section 4.05. No Credits on Account of the Debt. Grantor will not claim or
demand or be entitled to any credit or credits on account of the Debt for
any part of the Impositions assessed against the Trust Property or any part
thereof and no deduction shall otherwise be made or claimed from the
taxable value of the Trust Property, or any part thereof, by reason of this
Deed of Trustor the Debt. In the event such claim, credit or deduction
shall be required by Legal Requirements, Beneficiary shall have the option,
by written notice of not less than thirty (30) days, to declare the Debt
immediately due and payable, and Grantor hereby agrees to pay such amounts
not later than thirty (30) days after such notice.
Section 4.06. Documentary Stamps. If, at any time, the United States of
America, any State or Commonwealth thereof or any subdivision of any such
State shall require revenue or other stamps to be affixed to the Note or
this Deed of Trust, or impose any other tax or charges on the same, Grantor
will pay the same, with interest and penalties thereon, if any.
ARTICLE V: CENTRAL CASH MANAGEMENT
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Section 5.01. Cash Flow. Grantor hereby acknowledges and agrees that the
Rent (which for the purposes of this Section 5.01 shall not include
security deposits from tenants under valid Leases held by Grantor and not
applied towards Rent) derived from the Trust Property and Loss Proceeds
shall be utilized (a) to fund the Basic Carrying Costs Sub-Account, (b) to
pay all amounts to become due and payable under the Note by funding the
Debt Service Payment Sub-Account, (c) to fund the Recurring Replacement
Reserve Sub-Account, (d) to fund the Operation and Maintenance Expense
Sub-Account to the extent required, and (e) to fund the Curtailment Reserve
Sub-Account, to the extent required. Grantor shall cause the Manager to
collect all security deposits from tenants under valid Leases, which shall
be held by the Manager, as agent for Grantor, in accordance with applicable
law and in a segregated demand deposit bank account at such commercial or
savings bank or banks as may be reasonably satisfactory to Beneficiary (the
"Security Deposit Account"). Grantor shall notify Beneficiary of any
security deposits held as letters of credit and, upon Beneficiary's
request, such letters of credit shall be promptly delivered to Beneficiary.
Grantor shall have no right to withdraw funds from the Security Deposit
Account; provided that, prior to the occurrence of an Event of Default,
Grantor may withdraw funds from the Security Deposit Account to refund or
apply security deposits as required by the Leases or by applicable Legal
Requirements. After the occurrence and during the continuance of an Event
of Default, all withdrawals from the Security Deposit Account must be
approved by Beneficiary. All rental payments made by tenants and other
payments constituting Rent shall be paid by check, cashiers check or money
order made payable to Beneficiary or its successors and assigns. Grantor
shall give each tenant under a Lease an irrevocable direction in the form
of Exhibit G attached hereto and made a part hereof to deliver all rental
payments made by tenants and other payments constituting Rent directly to
the bank in which the Rent Account is located. In the event that any tenant
pays any Rent directly to Manager, the Manager shall deposit such funds,
within one (1) Business Day after receipt thereof in the Rent Account. All
Rent shall be deposited into the Rent Account. Grantor shall cause the bank
in which the Rent Account is located to automatically transfer through
automatic clearing house funds or by Federal wire to the Central Account
prior to 5:00 p.m. (New York City time) on each Business
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Day all sums deposited into the Rent Account. Beneficiary may elect to change
the financial institution in which the Rent Account and/or the Central
Account shall be maintained; however, Beneficiary shall give Grantor not
fewer than five (5) Business Days' prior notice of such change and, provided,
that no Default has occurred and is continuing, such institution shall be
subject to the approval of Grantor which may not be unreasonably withheld,
delayed or conditioned. All fees and charges of the banks in which the Rent
Account and the Central Account are located shall be paid by Grantor.
Setion 5.02. Establishment of Sub-Accounts. Beneficiary has established the
Rent Account and the Central Account. The Central Account shall be under
the sole dominion and control of Beneficiary. Grantor shall have no right
of withdrawal in respect of the Rent Account or the Central Account except
as specifically provided herein. Each transfer of funds to be made
hereunder shall be made only to the extent that funds are on deposit in the
Rent Account, the Central Account or the affected Sub-Account, and
Beneficiary shall have no responsibility to make additional funds available
in the event that funds on deposit are insufficient. The Central Account
shall contain the Basic Carrying Costs Sub-Account, the Debt Service
Payment Sub-Account, the Recurring Replacement Reserve Sub-Account, the
Operation and Maintenance Expense Sub-Account (to the extent applicable),
and the Curtailment Reserve Sub-Account (to the extent applicable), each of
which accounts shall be Eligible Accounts (each a "Sub-Account" and
collectively, the "Sub-Accounts") to which certain funds shall be allocated
and from which disbursements shall be made pursuant to the terms of this
Deed of Trust. On the date hereof, Grantor has deposited from the proceeds
of the Loan the Initial Central Account Deposit in the Central Account.
Notwithstanding the foregoing, any Sub-Account which is a separate Eligible
Account shall be deemed a Sub-Account of the Central Account.
Section 5.03. Permitted Investments. Upon the written request of Grantor,
Beneficiary shall direct the Bank to invest and reinvest any balance in the
Central Account from time to time in Permitted Investments as instructed by
Grantor (which instruction may be made no more than one time per month),
provided that (a) if Grantor fails to so instruct Beneficiary, or upon the
occurrence and during the continuance of a Default, Beneficiary may direct
the
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Bank to invest and reinvest such balance in Permitted Investments as
Beneficiary shall determine in its sole discretion, (b) the maturities of
the Permitted Investments on deposit in the Central Account shall, to the
extent such dates are ascertainable, be selected and coordinated to become
due not later than the day before any disbursements from the applicable
Sub-Accounts must be made, (c) all such Permitted Investments shall be held
in the name and be under the sole dominion and control of Beneficiary, and
(d) no Permitted Investment shall be made unless Beneficiary shall retain a
perfected first priority lien in such Permitted Investment securing the
Debt and all filings and other actions necessary to ensure the validity,
perfection, and priority of such lien have been taken. It is the intention
of the parties hereto that the entire amounts deposited in the Central
Account (or as much thereof as Beneficiary may reasonably arrange to
invest) shall at all times be invested in Permitted Investments, and that
the Central Account shall be a so-called "zero balance" account. All funds
in the Central Account that are invested in a Permitted Investment are
deemed to be held in the Central Account for all purposes of this Deed of
Trustand the other Loan Documents. Beneficiary shall not have any liability
for any loss in investments of funds in the Central Account that are
invested in Permitted Investments whether Grantor or Beneficiary selected
such Permitted Investment in accordance herewith and no such loss shall
affect Grantor's obligation to fund, or liability for funding, the Central
Account and each Sub-Account, as the case may be. Grantorr agrees that
Grantor shall include all such earnings on the Central Account as income of
Grantor (and, if Grantor is a partnership or other pass-through entity, the
partners, members or beneficiaries of Grantor, as the case may be) for
federal and applicable state and local tax purposes. Grantor shall have no
right whatsoever to direct the investment of the proceeds in the Collection
Account.
Section 5.04. Interest on Accounts. All interest paid or other earnings on
the Permitted Investments of funds deposited into the Central Account made
hereunder shall be deposited into the Central Account and, until such
Sub-Account is fully funded, shall be allocated to the Sub-Account which
contained the funds with respect to which such interest was paid or other
earnings earned. All such interest and earnings, once so allocated, shall
be treated as Rent allocated to such Sub-Account. All interest paid or
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other earnings on funds deposited into the Rent Account shall be deposited into
the Rent Account and shall be treated as Rent deposited into such account as of
the day such interest and earnings are deposited therein.
Section 5.05. Monthly Funding of Sub-Accounts. Prior to 2:00 p.m. (New York
City time) on each Allocation Date during the term of the Loan, Beneficiary
shall allocate all funds in the Central Account among the Sub-Accounts as
follows and in the following priority:
(a) first, to the Basic Carrying Costs Sub-Account,
until an amount equal to the Basic Carrying Costs Monthly Installment for
such Current Month has been allocated to the Basic Carrying Costs
Sub-Account;
(b) second, to the Debt Service Payment Sub-Account,
until an amount equal to the Required Debt Service Payment for the Payment
Date occurring in such Current Month has been allocated to the Debt
Service Payment Sub-Account;
(c) third, to the Recurring Replacement Reserve
Sub-Account, until an amount equal to the sum of (x) the amount, if any,
deducted therefrom during any preceding month to pay any amounts due
pursuant to clauses (a) or (b) above, to the extent not previously
reimbursed to such Sub-Account, plus (y) an amount equal to the Recurring
Replacement Reserve Monthly Installment for such month has been allocated
to the Recurring Replacement Reserve Sub-Account;
(d) fourth, but only during the O&M Operative Period, to
the Operation and Maintenance Expense Sub-Account, until an amount equal
to the amount, if any, deducted therefrom during any preceding month to
pay any amounts due pursuant to clauses (a) or (b) above, to the extent
not previously reimbursed to such Sub-Account and then until an amount
equal to the Operation and Maintenance Expense Monthly Installment has
been allocated to such Sub-Account; and
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(e) fifth, but only during the O&M Operative Period, all
Excess Rent shall be allocated to the Curtailment Reserve Sub-Account.
Provided that (I) no Event of Default has occurred and is
continuing and (II) Beneficiary has received the Manager Certification
referred to in Section 2.09(d) hereof for the most recent period for which
the same is due, Beneficiary agrees that in each Current Month any amounts
deposited into or remaining in the Central Account after sufficient funds
have been transferred to the Central Account to fund the Sub-Accounts in
accordance with, and has allocated the amounts set forth in, clauses (a)
through (e) above with respect to the Current Month and any periods prior
thereto shall be disbursed by Beneficiary to Manager on each Allocation Date
in such Current Month unless such day is not a Business Day, in which event
distributions shall be made on the next following Business Day. The balance
of the funds distributed to Grantor after payment of all Operating Expenses
by or on behalf of Grantor may be retained by Grantor. As used herein,
"Excess Rent" means the amounts available in the Central Account (other than
any Loss Proceeds deposited in the Central Account) in any Current Month
after the allocations under clauses (a) through (d) above have been made and
after payments of all Operating Expenses for which Grantor has requested
payments in any Current Month provided Beneficiary has, in its sole and
absolute discretion, approved such requests. After the occurrence, and during
the continuance, of an Event of Default, no funds held in the Central Account
shall be distributed to Grantor, and Beneficiary shall have the right to
apply all or any portion of the funds held in such account to the Debt in
Beneficiary's sole discretion.
In the event that sufficient funds to fund all of the Sub-Accounts
pursuant to this Section 5.05 for the Payment Date in any Current Month are not
on deposit in the Central Account prior to 2:00 p.m. (New York City time) on the
Business Day immediately preceding the Payment Date (the "Notice Date") for the
then Current Month, Beneficiary shall endeavor to deliver to Grantor, via
telecopy, on or before 4:00 P.M. (New York City time) on the Notice Date a
certificate in the form set forth as Exhibit E attached hereto and made a part
hereof stating that sufficient funds have not theretofore been deposited into
the
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Central Account for allocation to the various Sub-Accounts pursuant to this
Section 5.05. Failure to give such notice shall not relieve Grantor of any
obligation to make any payment which is due on each Payment Date. If sufficient
funds are not on deposit in the Central Account to fund all of the Sub-Accounts
pursuant to Section 5.01 for the Payment Date in any Current Month, Grantor
shall be obligated to deposit immediately available United States funds (in
addition to Rent) into the Central Account, prior to such Payment Date, in the
amount of such deficiency, and failure to make such deposit shall be an Event of
Default hereunder. If, on any Payment Date, the aggregate balance in the Central
Account (excluding funds allocated to any Sub-Account other than funds allocated
to the Debt Service Payment Sub-Account or the Basic Carrying Costs Sub-Account)
is insufficient to make the payment of the Basic Carrying Costs Monthly
Installment and the Required Debt Service Payment required to be made pursuant
to clauses (a) and (b) of this Section 5.05, then an Event of Default shall
exist hereunder and Beneficiary may withdraw funds and pay such deficiency from
any Sub-Account.
In the event that Beneficiary elects to apply the proceeds of
any Sub-Account to pay any Required Debt Service Payment or to fund any
Basic Carrying Costs, Grantor shall, upon demand, repay to Beneficiary the
amount of the funds so applied to replenish such Sub-Account up to the
amount contained therein immediately prior to such application (i.e.,
including interest earned on the balance prior to withdrawal), and if
Grantor shall fail to repay such amounts within five (5) days after such
application, an Event of Default shall exist hereunder, which Event of
Default shall not be cured unless and until Grantor repays such amount or
all Sub-Accounts have been fully funded from Rent for the then applicable
Current Month and all prior months. Beneficiary may, at its sole option,
replenish such Sub-Account(s) out of available Rent in subsequent months
which Grantor would have otherwise been entitled to receive.
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Section 5.06. Payment of Basic Carrying Costs. Grantor hereby agrees to pay
all Basic Carrying Costs with respect to Grantor, the Trust Property and
any Rent derived therefrom or with respect thereto. At least ten (10)
Business Days prior to the due date of any Basic Carrying Costs, and not
more frequently than once each month, Grantor may notify Beneficiary in
writing and request that Beneficiary pay such Basic Carrying Costs on
behalf of Grantor on or prior to the due date thereof, and, provided that
no Event of Default has occurred and that there are sufficient funds
available in the Basic Carrying Costs Sub-Account, Beneficiary shall make
such payments out of the Basic Carrying Costs Sub-Account before same shall
be delinquent. Together with each such request, Grantor shall furnish
Beneficiary with bills and all other documents necessary, as reasonably
determined by Beneficiary, for the payment of the Basic Carrying Costs
which are the subject of such request. Grantor's obligation to pay (or
cause Beneficiary to pay) Basic Carrying Costs pursuant to this Deed of
Trustshall include, to the extent permitted by applicable law, Impositions
resulting from future changes in law which impose upon Beneficiary an
obligation to pay any property taxes or other Impositions or which
otherwise adversely affect Beneficiary's interests.
Provided that no Event of Default shall have occurred and is
continuing, all funds deposited into the Basic Carrying Costs Sub-Account
shall be held by Beneficiary pursuant to the provisions of this Deed of
Trustand shall be applied in payment of Basic Carrying Costs in accordance
with the terms hereof. Should an Event of Default occur and is continuing,
the proceeds on deposit in the Basic Carrying Costs Sub-Account may be
applied by Beneficiary in payment of any Basic Carrying Costs or may be
applied to the payment of the Debt or any other charges affecting all or
any portion of the Cross-collateralized Properties as Beneficiary in its
sole discretion may determine; provided, however, that no such application
shall be deemed to have been made by operation of law or otherwise until
actually made by Beneficiary as herein provided.
Section 5.07. Debt Service Payment Sub-Account. On the Business Day after
each Payment Date during the term of the Loan, Beneficiary shall transfer
to the Collection Account, from the Debt Service Payment Sub-Account, an
amount equal to the sum of (a) the Re-
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quired Debt Service Payment for such Payment Date and (b) any amounts
deposited into the Central Account that are either (i) Loss Proceeds that
Beneficiary has elected to apply to reduce the Debt in accordance with the
terms of Article III hereof or (ii) excess Loss Proceeds remaining after
the completion of any restoration required hereunder.
Section 5.08. Recurring Replacement Reserve Sub-Account. Grantor hereby
agrees to pay all Recurring Replacement Expenditures with respect to
Grantor and the Trust Property (without regard to the amount of money then
available in the Recurring Replacement Reserve Sub-Account). Provided that
Beneficiary has received written notice from Grantor at least five (5)
Business Days prior to the due date of any payment relating to Recurring
Replacement Expenditures and not more frequently than once each month, and
further provided that no Event of Default has occurred and is continuing,
that there are sufficient funds available in the Recurring Replacement
Reserve Sub-Account and Grantor shall have theretofore furnished
Beneficiary with lien waivers, copies of bills, invoices and other
reasonable documentation as may be required by Beneficiary to establish
that the Recurring Replacement Expenditures which are the subject of such
request represent amounts due for completed or partially completed capital
work and improvements performed at the Trist Property, Beneficiary shall
make such payments out of the Recurring Replacement Reserve Sub-Account.
Provided that no Event of Default shall have occurred, all
funds deposited into the Central Account relating to Recurring Replacement
Expenditures shall be held by Beneficiary pursuant to the provisions of
this Deed of Trustand shall be applied in payment of Recurring Replacement
Expenditures. Should an Event of Default occur, the proceeds on deposit in
the Recurring Replacement Reserve Sub-Account may be applied by Beneficiary
in payment of any Recurring Replacement Expenditures or may be applied to
the payment of the Debt or any other charges affecting all or any portion
of the Cross-collateralized Properties, as Beneficiary in its sole
discretion may determine; provided, however, that no such application shall
be deemed to have been made by operation of law or otherwise until actually
made by Beneficiary as herein provided.
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Section 5.09. Operation and Maintenance Expense Sub-Account. Grantor hereby
agrees to pay all Operating Expenses with respect to the Trust Property
(without regard to the amount of money then available in the Operation and
Maintenance Expense Sub-Account). All funds allocated to the Operation and
Maintenance Expense Sub-Account shall be held by Beneficiary pursuant to the
provisions of this Deed of Trust. Any sums held in the Operation and
Maintenance Expense Sub-Account shall be disbursed to Grantor within five (5)
Business Days of receipt by Beneficiary from Grantor of (a) a written request
for such disbursement which shall indicate the Operating Expenses or Approved
TI Costs (exclusive of Basic Carrying Costs) for which the required
disbursement is to pay and (b) an Officer's Certificate stating that no
Operating Expenses or Approved TI Costs with respect to the Property are more
than sixty (60) days past due; provided, however, in the event that Grantor
legitimately disputes any invoice for an Operating Expense or Approved TI
Costs, and (i) no Event of Default has occurred and is continuing hereunder,
(ii) Grantor shall have set aside adequate reserves for the payment of such
disputed sums together with all interest and late fees thereon, (iii) Grantor
has complied with all the requirements of this Deed of Trustrelating thereto,
and (iv) the contesting of such sums shall not constitute a default under any
other instrument, agreement, or document to which Grantor is a party, then
Grantor may, after certifying to Beneficiary as to items (i) through (iv)
hereof, contest such invoice. Together with each such request, Grantor shall
furnish Beneficiary with bills and all other documents necessary for the
payment of the Operating Expenses and Approved TI Costs which are the subject
of such request. Grantor may request a disbursement from the Operation and
Maintenance Expense Sub-Account no more than one (1) time per calendar month.
Should an Event of Default occur and be continuing, the proceeds on deposit
in the Operation and Maintenance Expense Sub-Account may be applied by
Beneficiary in payment of any Operating Expenses or Approved TI Costs for the
Trust Property or may be applied to the payment of the Debt or other charges
affecting all or any portion of the Trust Property as Beneficiary, in its
sole discretion, may determine; provided, however, that no such application
shall be deemed to have been made by operation of law or otherwise until
actually made by Beneficiary as herein provided. All sums, if any, remaining
in the Operation and Maintenance Expense Sub-Account after the payment of all
Operating Expenses
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and Approved TI Costs for which Grantor requests payment in the then
Current Month in accordance with the terms hereof shall be deposited into
the Curtailment Reserve Sub-Account, as set forth in Section 5.05 hereof.
Section 5.10. Intentionally Omitted.
Section 5.11. Curtailment Reserve Sub-Account. During the O&M Operative
Period Beneficiary shall allocate all Excess Rent to the Curtailment
Reserve Sub-Account in accordance with Section 5.05(e) until such time as
the Debt has been paid in full. On the Business Day after each Payment Date
during any period for which funds have been allocated to the Curtailment
Reserve Sub-Account pursuant to Section 5.05(e) hereof, Beneficiary shall
transfer to the Collection Account an amount equal to the lesser of (a) the
amount available in the Curtailment Reserve Sub-Account, and (b) the total
Debt then outstanding under the Note and the other Loan Documents.
Section 5.12. Intentionally Omitted.
Section 5.13. Loss Proceeds. In the event of a casualty to the Trust
Property, unless Beneficiary elects, or is required pursuant to Article III
hereof to make all of the Insurance Proceeds available to Grantor for
restoration, Beneficiary and Grantor shall cause all such Insurance
Proceeds to be paid by the insurer directly to the Central Account,
whereupon Beneficiary shall, after deducting Beneficiary's costs of
recovering and paying out such Insurance Proceeds, including without
limitation, reasonable attorneys' fees, apply same to reduce the Debt in
accordance with the terms of the Note; provided, however, that if
Beneficiary elects, or is deemed to have elected, or is required, to make
the Insurance Proceeds available for restoration, all Insurance Proceeds in
respect of rent loss, business interruption or similar coverage shall be
maintained in the Central Account, to be applied by Beneficiary in the same
manner as Rent received with respect to the operation of the Trust
Property; provided, further, however, that in the event that the Insurance
Proceeds of such rent loss, business interruption or similar insurance
policy are paid in a lump sum in advance, Beneficiary shall hold such
Insurance Proceeds in a segregated interest-
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bearing escrow account, which shall be an Eligible Account, shall estimate,
in Beneficiary's reasonable discretion, the number of months required for
Grantor to restore the damage caused by the casualty, shall divide the
aggregate rent loss, business interruption or similar Insurance Proceeds by
such number of months, and shall disburse from such escrow account into the
Central Account each month during the performance of such restoration such
monthly installment of said Insurance Proceeds. In the event that Insurance
Proceeds are to be applied toward restoration, Beneficiary shall hold such
funds in a segregated bank account at the Bank, which shall be an Eligible
Account, and shall disburse same in accordance with the provisions of
Section 3.04 hereof. Unless Beneficiary elects, or is required pursuant to
Section 6.01 hereof to make all of the Condemnation Proceeds available to
Grantor for restoration, Beneficiary and Grantor shall cause all such
Condemnation Proceeds to be paid to the Central Account, whereupon
Beneficiary shall, after deducting Beneficiary's costs of recovering and
paying out such Condemnation Proceeds, including without limitation,
reasonable attorneys' fees, apply same, by transferring such amounts to the
Collection Account, to reduce the Debt in accordance with the terms of the
Note; provided, however, that any Condemnation Proceeds received in
connection with a temporary Taking shall be maintained in the Central
Account, to be applied by Beneficiary in the same manner as Rent received
with respect to the operation of the Trust Property; provided, further,
however, that in the event that the Condemnation Proceeds of any such
temporary Taking are paid in a lump sum in advance, Beneficiary shall hold
such Condemnation Proceeds in a segregated interest-bearing escrow account,
which shall be an Eligible Account, shall estimate, in Beneficiary's
reasonable discretion, the number of months that the Trust Property shall
be affected by such temporary Taking, shall divide the aggregate
Condemnation Proceeds in connection with such temporary Taking by such
number of months, and shall disburse from such escrow account into the
Central Account each month during the pendency of such temporary Taking
such monthly installment of said Condemnation Proceeds. In the event that
Condemnation Proceeds are to be applied toward restoration, Beneficiary
shall hold such funds in a segregated bank account at the Bank, which shall
be an Eligible Account, and shall disburse same in accordance with the
provisions of Section 3.04 hereof. If any Loss Proceeds are received by
Grantor, such Loss Proceeds shall be received
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in trust for Beneficiary, shall be segregated from other funds of Grantor,
and shall be forthwith paid into the Central Account, or paid to
Beneficiary to hold in a segregated bank account at the Bank, in each case
to be applied or disbursed in accordance with the foregoing. Any Loss
Proceeds made available to Grantor for restoration in accordance herewith,
to the extent not used by Grantor in connection with, or to the extent they
exceed the cost of, such restoration, shall be deposited into the Central
Account, whereupon Beneficiary shall apply the same to reduce the Debt in
accordance with the terms of the Note.
ARTICLE VI: CONDEMNATION
Section 6.01. Condemnation. (a) Grantor shall notify Beneficiary promptly
of the commencement or threat of any Taking of the Trust Property or any
portion thereof. Beneficiary hereby irrevocably appointed as Grantor's
attorney-in-fact, coupled with an interest, with exclusive power to
collect, receive and retain the proceeds of any such Taking and to make any
compromise or settlement in connection with such proceedings (subject to
Grantor's reasonable approval, except after the occurrence of an Event of
Default, in which event Grantor's approval shall not be required), subject
to the provisions of this Deed of Trust; provided, however, that Grantor
may participate in any such proceedings and shall be authorized and
entitled to compromise or settle any such proceeding with respect to
Condemnation Proceeds in an amount less than five percent (5%) of the
Allocated Loan Amount of the Trust Property. Grantor shall execute and
deliver to Beneficiary any and all instruments reasonably required in
connection with any such proceeding promptly after request therefor by
Beneficiary. Except as set forth above, Grantor shall not adjust,
compromise, settle or enter into any agreement with respect to such
proceedings without the prior consent of Beneficiary. All Condemnation
Proceeds are hereby assigned to and shall be paid to Beneficiary. With
respect to Condemnation Proceeds in an amount in excess of five percent
(5%) of the Allocated Loan Amount of the Trust Property. Grantor hereby
authorizes Beneficiary to compromise, settle, collect and receive such
Condemnation Proceeds, and to give proper receipts and acquittance
therefor. Beneficiary may apply such Condemnation
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Proceeds (less any cost to Beneficiary of recovering and paying out such
proceeds, including, without limitation, reasonable attorneys' fees and
disbursements and costs allocable to inspecting any repair, restoration or
rebuilding work and the plans and specifications therefor) toward the
payment of the Debt or to allow such proceeds to be used for the Work.
(b) In the case of a Substantial Taking, the Condemnation Proceeds
shall be payable, after payment of all necessary and proper expenses
incurred in the collection of such award, to Beneficiary, to be applied
towards the payment of the Debt without any prepayment premium. If
subsequent to payment of such amount in full, Beneficiary shall receive
payment of any subsequent Condemnation Proceeds, then, such Condemnation
Proceeds shall be paid to Beneficiary. Each of the parties agrees to
execute any and all documents that may be reasonably required in order to
facilitate collection by them of such Condemnation Proceeds.
(c) In the event of a Taking which is less than a Substantial Taking,
Grantor at its sole cost and expense (whether or not the award shall have
been received or shall be sufficient for restoration), shall proceed
diligently to restore, or cause the restoration of, the remaining
Improvements not so taken, to maintain a complete, rentable, self-contained
fully operational facility of the same sort as existed prior to the Taking
in as good a condition as is reasonably possible. In the event of such a
Taking, Beneficiary shall receive the Condemnation Proceeds and shall pay
over the same:
(i) first, provided no Event of Default has occurred and is
continuing, to Grantor to the extent of any portion of the award as may
be necessary to pay the reasonable cost of restoration of the
Improvements remaining including costs of the collection, compromise or
settlement (including, without limitation, reasonable attorney fees),
and
(ii) second, to Beneficiary, to be applied towards the
payment of the Debt without any prepayment premium.
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Restoration shall be done in accordance with and subject to the
provisions of Section 3.04. Payments to Grantor as aforesaid shall be
disbursed in the manner set forth in Section 3.04(b).
If one or more Takings in the aggregate create a Substantial Taking,
then, in such event, the sections of this Article VI above applicable to
Substantial Takings shall apply.
(d) In the event Beneficiary is obligated to or elects to make
Condemnation Proceeds available for the restoration or rebuilding of the
Trust Property, such proceeds shall be disbursed in the manner and subject
to the conditions set forth in Section 3.04(b) hereof. If, in accordance
with this Article VI, any proceeds are used to reduce the Debt, they shall
be applied as Condemnation Proceeds. Grantor shall promptly execute and
deliver all instruments reasonably requested by Beneficiary for the purpose
of confirming the assignment of the Condemnation Proceeds to Beneficiary.
Application of all or any part of the Condemnation Proceeds to the Debt
shall be made in accordance with the provisions of Sections 3.06 and 3.07.
No application of the Condemnation Proceeds to the reduction of the Debt
shall have the effect of releasing the lien of this Deed of Trustuntil the
remainder of the Debt has been paid in full. In the case of any Taking,
Beneficiary, to the extent that Beneficiary has not been reimbursed by
Grantor, shall be entitled, as a first priority out of any Condemnation
Proceeds, to reimbursement for all costs, fees and expenses reasonably
incurred in the determination and collection of any Condemnation Proceeds.
All Condemnation Proceeds deposited with Beneficiary pursuant to this
Section, until expended or applied as provided herein, may be commingled
with the general funds of Beneficiary and shall constitute additional
security for the payment of the Debt and the payment and performance of
Grantor's obligations, but Beneficiary shall not be deemed a trustee or
other fiduciary with respect to its receipt of such Condemnation Proceeds
or any part thereof. All awards so deposited with Beneficiary shall be held
by Beneficiary in an Eligible Account and invested in Permitted
Investments, but Beneficiary makes no representation or warranty as to the
rate or amount of interest, if any, which may accrue on any such deposit
and shall have no liability in connection
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therewith. For purposes hereof, any reference to the award shall be deemed
to include interest, if any, which has accrued thereon.
ARTICLE VII: LEASES AND RENTS
Section 7.01. Assignment. (a) Grantor does hereby bargain, sell, assign and
set over unto Beneficiary, all of Grantor's interest in the Leases and
Rents. The assignment of Leases and Rents in this Section 7.01 is an
absolute, unconditional and present assignment from Grantor to Beneficiary
and not an assignment for security and the existence or exercise of
Grantor's revocable license to collect Rent shall not operate to
subordinate this assignment to any subsequent assignment. The exercise by
Beneficiary of any of its rights or remedies pursuant to this Section 7.01
shall not be deemed to make Beneficiary a mortgagee-in-possession. In
addition to the provisions of this Article VII, Grantor shall comply with
all terms, provisions and conditions of the Assignment.
(b) So long as there shall exist and be continuing no Event of
Default, Grantor shall have a revocable license to take all actions with
respect to all Leases and Rents, present and future, including the right to
collect and use the Rents, subject to the terms of this Deed of Trustand
the Assignment.
(c) In a separate instrument Grantor shall, as requested from time to
time by Beneficiary, assign to Beneficiary or its nominee by specific or
general assignment, any and all Leases, such assignments to be in form and
content reasonably acceptable to Beneficiary, but subject to the provisions
of Section 7.01(b) hereof. Grantor agrees to deliver to Beneficiary, within
thirty (30) days after Beneficiary's request, a true and complete copy of
every Lease and, within ten (10) days after Beneficiary's request, a
complete list of the Leases, certified by Grantor to be true, accurate and
complete and stating the demised premises, the names of the lessees, the
Rent payable under the Leases, the date to which such Rents have been paid,
the material terms of the Leases, including, without limitation, the dates
of occupancy, the dates of expiration, any Rent concessions, work
obligations or other inducements granted to the lessees thereunder, and any
renewal options.
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(d) The rights of Beneficiary contained in this Article VII, the
Assignment or any other assignment of any Lease shall not result in any
obligation or liability of Beneficiary to Grantor or any lessee under a
Lease or any party claiming through any such lessee.
(e) At any time after an Event of Default, the license granted
hereinabove may be revoked by Beneficiary, and Beneficiary or a receiver
appointed in accordance with this Deed of Trust may enter upon the Trust
Property, and collect, retain and apply the Rents toward payment of the
Debt in such priority and proportions as Beneficiary in its sole discretion
shall deem proper.
(f) In addition to the rights which Beneficiary may have herein, upon
the occurrence of any Event of Default, Beneficiary, at its option, may
require Grantor to pay monthly in advance to Beneficiary, or any receiver
appointed to collect the Rents, the fair and reasonable rental value for
the use and occupation of such part of the Trust Property as may be used
and occupied by Grantor and may require Grantor to vacate and surrender
possession of the Trust Property to Beneficiary or to such receiver and, in
default thereof, Grantor may be evicted by summary proceedings or otherwise.
Section 7.02. Management of Trust Property. (a) Grantor shall manage the
Trust Property or cause the Trust Property to be managed in a manner which
is consistent with the Approved Manager Standard. All Space Leases shall
provide for rental rates comparable to then existing market rates and terms
and conditions which constitute good and prudent business practice and are
consistent with prevailing market terms and conditions, and shall be
arm's-length transactions. Except as previously disclosed by Grantor to,
and consented to by Beneficiary, all Leases shall provide that they are
subordinate to this Deed of Trustand that the lessees thereunder attorn to
Beneficiary. Grantor shall deliver copies of all Leases, amendments,
modifications and renewals to Beneficiary.
(b) Grantor (i) shall observe and perform all of its material
obligations under the Leases pursuant to applicable Legal Requirements and
shall not do or permit to be done anything
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to impair the value of the Leases as security for the Debt; (ii) shall
promptly, upon Beneficiary's request, send copies to Beneficiary of all
notices of default which Grantor shall receive under the Leases; (iii)
shall, consistent with the Approved Manager Standard, enforce all of the
terms, covenants and conditions contained in the Leases to be observed or
performed; (iv) shall not collect any of the Rents under the Leases more
than one (1) month in advance (except that Grantor may collect in advance
such security deposits as are permitted pursuant to applicable Legal
Requirements and are commercially reasonable in the prevailing market); (v)
shall not execute any other assignment of lessor's interest in the Leases
or the Rents except as otherwise expressly permitted pursuant to this
Beneficiary; (vi) shall not cancel or terminate any of the Leases or accept
a surrender thereof in any manner inconsistent with the Approved Manager
Standard; (vii) shall not convey, transfer or suffer or permit a conveyance
or transfer of all or any part of the Premises or the Improvements or of
any interest therein so as to effect a merger of the estates and rights of,
or a termination or diminution of the obligations of, lessees thereunder;
(viii) shall notify Beneficiary of any material alteration, modification or
change in the terms of any guaranty of any Major Space Lease or
cancellation or termination of such guaranty promptly upon effectuation of
same unless altered, cancelled, modified or changed in the ordinary course
of business; (ix) shall, in accordance with the Approved Manager Standard,
make all reasonable efforts to seek lessees for space as it becomes vacant
and enter into Leases in accordance with the terms hereof; (x) shall not
materially modify, alter or amend any Major Space Lease or Property
Agreement with any Pad Owner without Beneficiary's consent, which consent
will not be unreasonably withheld or delayed; (xi) shall notify Beneficiary
promptly if any Pad Owner shall cease business operations or of the
occurrence of any event of which it becomes aware affecting a Pad Owner or
its property which might have any material effect on the Trust Property;
and (xii) shall, without limitation to any other provision hereof, execute
and deliver at the request of Beneficiary all such further assurances,
confirmations and assignments in connection with the Trust Property as are
required herein and as Beneficiary shall from time to time reasonably
require.
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(c) All security deposits of lessees, whether held in cash or any
other form, shall be treated by Grantor as trust funds, but shall not be
commingled with any other funds of Grantor and, if cash, shall be deposited
by Grantor in the Security Deposit Account. Any bond or other instrument
which Grantor is permitted to hold in lieu of cash security deposits under
applicable Legal Requirements shall be maintained in full force and effect
unless replaced by cash deposits as hereinabove described, shall be issued
by a Person reasonably satisfactory to Beneficiary, shall, if permitted
pursuant to Legal Requirements, at Beneficiary's option, name Beneficiary
as payee or mortgagee thereunder or be fully assignable to Beneficiary and
shall, in all respects, comply with applicable Legal Requirements and
otherwise be reasonably satisfactory to Beneficiary. Grantor shall, upon
request, provide Beneficiary with evidence reasonably satisfactory to
Beneficiary of Grantor's compliance with the foregoing. Following the
occurrence and during the continuance of any Event of Default, Grantor
shall, upon Beneficiary's request, if permitted by applicable Legal
Requirements, turn over the security deposits (and any interest thereon) to
Beneficiary to be held by Beneficiary in accordance with the terms of the
Leases and all Legal Requirements.
(d) If (i) the aggregate Net Operating Income of the
Cross-collateralized Properties in any Fiscal Year declines below
$27,977,167 or (ii) an Event of Default has occurred, then, if Beneficiary
determines in its reasonable discretion prior to the removal of the
existing manager that a reputable independent property manager can manage
the Trust Property at competitive rates more efficiently and with better
results than Grantor or Grantor's Manager, Beneficiary shall have the right
to appoint such reputable independent property manager selected by
Beneficiary, in Beneficiary's sole discretion, to manage the Trust
Property; provided, however, that no such approval shall be granted unless
the Rating Agency shall have delivered confirmation that any rating issued
in connection with the Securitization will not, as a result of a change of
Manager, be downgraded from the then current ratings thereof, qualified or
withdrawn.
(e) Grantor covenants and agrees with Beneficiary that (i) the Trust
Property will be managed at all times by the
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Manager pursuant to the management agreement approved by Beneficiary (the
"Management Agreement"), (ii) after Grantor has knowledge of a fifty
percent (50%) or more change in control of the ultimate beneficial
ownership of the Manager, Grantor will promptly give Beneficiary notice
thereof (a "Manager Control Notice") and (iii) the Management Agreement may
be terminated by Beneficiary at any time for cause (including, but not
limited to, Manager's negligence, willful misconduct or fraud) or at any
time following either (A) the occurrence of an Event of Default, or (B) the
receipt of a Manager Control Notice, and a substitute managing agent shall
be appointed by Grantor, subject to Beneficiary's approval, which may be
given or withheld in Beneficiary's sole discretion but which will not be
given unless, inter alia, the Rating Agency shall have delivered
confirmation that any rating issued in connection with the Securitization
will not, as a result of a change of Manager, be downgraded from the then
current ratings thereof, qualified or withdrawn. Grantor may from time to
time appoint a successor manager to manage the Trust Property with
Beneficiary's prior written consent which consent shall not be unreasonably
withheld or delayed, provided that, any such successor manager shall be a
reputable management company having a senior executive with at least seven
(7) years' experience in the management of super-regional malls, shall be
the manager of at least five (5) super-regional malls, including, without
limitation, certain complexes which contain more than 1,500,000 square feet
of gross leasable area, and shall be reasonably acceptable to Beneficiary.
Grantor further covenants and agrees that Grantor shall require the Manager
(or any successor managers) to maintain at all times during the term of the
Loan worker's compensation insurance as required by Governmental
Authorities.
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ARTICLE VIII: MAINTENANCE AND REPAIR
Section 8.01. Maintenance and Repair of the Trust Property; Alterations;
Replacement of Equipment. Grantor hereby covenants and agrees:
(a) Grantor shall not (i) desert or abandon the Trust Property, (ii)
change the use of the Trust Property or cause or permit the use or
occupancy of any part of the Trust Property to be discontinued if such
discontinuance or use change would violate any zoning or other law,
ordinance or regulation; (iii) consent to or seek any lowering of the
zoning classification, or greater zoning restriction affecting the Trust
Property; or (iv) take any steps whatsoever to convert the Trust Property,
or any portion thereof, to a condominium or cooperative form of ownership.
(b) Grantor shall, at its expense, (i) take good care of the Trust
Property including grounds generally, and utility systems and sidewalks,
roads, alleys, and curbs therein, and shall keep the same in good, safe and
insurable condition and in compliance with all applicable Legal
Requirements, (ii) promptly make all repairs to the Trust Property, above
grade and below grade, interior and exterior, structural and nonstructural,
ordinary and extraordinary, unforeseen and foreseen, and maintain the Trust
Property in a manner appropriate for the facility and (iii) not commit or
suffer to be committed any waste of the Trust Property or do or suffer to
be done anything which will increase the risk of fire or other hazard to
the Trust Property or impair the value thereof. Grantor shall keep the
sidewalks, vaults, gutters and curbs comprising, or adjacent to, the Trust
Property, clean and free from dirt, snow, ice, rubbish and obstructions.
All repairs made by Grantor shall be made with first-class materials, in a
good and workmanlike manner, shall be equal or better in quality and class
to the original work and shall comply with all applicable Legal
Requirements and Insurance Requirements. To the extent any of the above
obligations are obligations of tenants under Space Leases or Pad Owners or
other Persons under Property Agreements, Grantor may fulfill its
obligations hereunder by causing such tenants, Pad Owners or other Persons,
as the case may be, to perform their obligations thereunder. As used
herein, the terms
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"repair" and "repairs" shall be deemed to include all necessary replacements.
(c) Grantor shall not demolish, remove, construct, or, except as
otherwise expressly provided herein, restore, or alter the Trust Property
or any portion thereof nor consent to or permit any such demolition,
removal, construction, restoration, addition or alteration (each a
"Renovation") which would diminish the value of the Trust Property or
materially diminish the Total GLA without (i) Beneficiary's prior written
consent in each instance, which consent shall not be unreasonably withheld
or delayed, and (ii) a letter from the Rating Agency confirming that any
rating issued in connection with the Securitization will not, as a result
of such Renovation be downgraded from the then current ratings thereof,
qualified or withdrawn; provided, however, that, so long as the aggregate
Net Operating Income of the Cross-collateralized Properties is equal to or
greater than $27,977,167, any customary and reasonable tenant improvement
work done in accordance with the Approved Manager Standard and Grantor's
past business practices which tenant improvement work costs (in any one
Loan Year) not more than two and one-half percent (2.5%) of the Allocated
Loan Amount shall be permitted without the consent of Beneficiary or
delivery of a letter of the type set forth in (ii) above.
(d) Grantor represents and warrants to Beneficiary that (i) there are
no fixtures, machinery, apparatus, tools, equipment or articles of personal
property attached or appurtenant to, or located on, or used in connection
with the management, operation or maintenance of the Trust Property, except
for the Equipment and equipment leased by Grantor for the management,
operation or maintenance of the Trust Property in accordance with the Loan
Documents; (ii) the Equipment and the leased equipment constitutes all of
the fixtures, machinery, apparatus, tools, equipment and articles of
personal property necessary to the proper operation and maintenance of the
Trust Property; and (iii) all of the Equipment is free and clear of all
liens, except for the lien of this Deed of Trustand the Permitted
Encumbrances. All rights, title and interest of Grantor in and to all
extensions, improvements, betterment, renewals, appurtenances to, the Trust
Property hereafter acquired by, or released to, Grantor or constructed,
assembled or placed by
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Grantor in the Trust Property, and all changes and substitutions of the
security constituted thereby, shall be and, in each such case, without any
further mortgage, conveyance, assignment or other act by Beneficiary or
Grantor, shall become subject to the lien and security interest of this
Deed of Trustas fully and completely, and with the same effect, as though
now owned by Grantor and specifically described in this Deed of Trust, but
at any and all times Grantor shall execute and deliver to Beneficiary any
documents Beneficiary may reasonably deem necessary or appropriate for the
purpose of specifically subjecting the same to the lien and security
interest of this Deed of Trust.
(e) Notwithstanding the provisions of this Deed of Trustto the
contrary, Grantor shall have the right, at any time and from time to time,
to remove and dispose of Equipment which may have become obsolete or unfit
for use or which is no longer useful in the management, operation or
maintenance of the Trust Property. Grantor shall promptly replace any such
Equipment so disposed of or removed with other Equipment of equal value and
utility, free of any security interest or superior title, liens or claims;
except that, if by reason of technological or other developments,
replacement of the Equipment so removed or disposed of is not necessary or
desirable for the proper management, operation or maintenance of the Trust
Property, Grantor shall not be required to replace the same. All such
replacements or additional equipment shall be deemed to constitute
"Equipment" and shall be covered by the security interest herein granted.
ARTICLE IX: TRANSFER OR ENCUMBRANCE OF THE Trust Property
Section 9.01. Other Encumbrances. Except for Permitted Liens, Grantor shall
not further encumber or permit the further encumbrance in any manner
(whether by grant of a pledge, security interest or otherwise) of the Trust
Property or any part thereof or interest therein, including, without
limitation, of the Rents therefrom except as expressly permitted pursuant
to the terms of this Deed of Trust.
Section 9.02. No Transfer. Grantor acknowledges that Beneficiary has
examined and relied on the expertise of Grantor and, if applicable, each
General Partner, in owning and operating
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properties such as the Trust Property in agreeing to make the Loan and will
continue to rely on Grantor's ownership of the Trust Property as a means of
maintaining the value of the Trust Property as security for repayment of
the Debt and Grantor acknowledges that Beneficiary has a valid interest in
maintaining the value of the Trust Property. Grantor shall not make or
permit any Transfer without the prior written consent of Beneficiary, which
consent Beneficiary may withhold in its sole and absolute discretion and
which shall in no event be granted unless, inter alia, the Rating Agency
shall have delivered confirmation that any rating issued in connection with
the Securitization will not, as a result of the proposed Transfer, be
downgraded from the then current ratings thereof, qualified or withdrawn.
Beneficiary 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 a Transfer without Beneficiary's
consent. This provision shall apply to every Transfer regardless of whether
voluntary or not, or whether or not Beneficiary has consented to any
previous Transfer.
Section 9.03. Due on Sale. Beneficiary may declare the Debt immediately due
and payable upon any Transfer or further encumbrance in violation of this
Article IX without regard to whether any impairment of its security or any
increased risk of default hereunder can be demonstrated. This provision
shall apply to every Transfer or further encumbrance of the Trust Property
in violation of this Article IX or any part thereof or interest in the
Trust Property or in Grantor regardless of whether voluntary or not, or
whether or not Beneficiary has consented to any previous Transfer or
further encumbrance of the Trust Property or interest in Grantor.
Section 9.04. Permitted Transfer. Notwithstanding anything contained in
this Article IX, Beneficiary shall consent to a one time Transfer of an
interest in Grantor or any General Partner of Grantor that occurs by reason
of MLP or The Mills Corporation merging into or consolidating with another
Person ("Sale") provided that all of the following terms and conditions are
satisfied:
(a) No Event of Default is then continuing.
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(b) Grantor gives Beneficiary written notice of the terms of such
prospective Sale not less than sixty (60) days before the date on which
such Sale is scheduled to close and, concurrently therewith, gives
Beneficiary all such information concerning the Person with which The Mills
Corporation or MLP, as applicable, shall be merging into or consolidating
with ("Buyer") as Beneficiary would require in evaluating an initial
extension of credit to a borrower and pays to Beneficiary a non-refundable
application fee in the amount of $25,000 to cover expenses of Beneficiary
incurred in connection therewith.
(c) Grantor and the Buyer execute, without any cost or expense to
Beneficiary, new financing statements or financing statement amendments and
any additional documents reasonably requested by Beneficiary.
(d) The Rating Agency shall have delivered written confirmation that
any rating issued by the Rating Agency in connection with the
Securitization will not, as a result of the proposed Transfer, be
downgraded from the then current ratings thereof, qualified or withdrawn.
ARTICLE X: CERTIFICATES
Section 10.01. Estoppel Certificates. (a) After request by Beneficiary,
Grantor, within fifteen (15) days and at its expense, will furnish
Beneficiary with a statement, duly acknowledged and certified, setting
forth (i) the amount of the original principal amount of the Note, and the
unpaid principal amount of the Note, (ii) the rate of interest of the Note,
(iii) the date payments of interest and/or principal were last paid, (iv)
any offsets or defenses to the payment of the Debt, and if any are alleged,
the nature thereof, (v) that the Note and this Deed of Trusthave not been
modified or if modified, giving particulars of such modification and (vi)
that there has occurred and is then continuing no Default or if such
Default exists, the nature thereof, the period of time it has existed, and
the action being taken to remedy such Default.
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(b) Within fifteen (15) days after written request by Grantor,
Beneficiary shall furnish to Grantor a written statement confirming the
amount of the Debt, the maturity date of the Note, the date to which
interest has been paid, and whether any Event of Default or other Default
has occurred and is then continuing.
(c) Grantor shall use all reasonable efforts to obtain estoppels from
tenants that may be required hereunder or under the Loan Documents.
ARTICLE XI: NOTICES
Section 11.01. Notices. Any notice, demand, statement, request or consent
made hereunder shall be in writing and delivered personally or sent to the
party to whom the notice, demand or request is being made by Federal
Express or other nationally recognized overnight delivery service, as
follows and shall be deemed given when delivered personally or one (1)
Business Day after being deposited with Federal Express or such other
nationally recognized delivery service:
If to Beneficiary: To Beneficiary, at the address first
written above,
with a copy to:
Brown & Wood LLP
One World Trade Center
New York, New York 10048-0557
Attn: David J. Weinberger, Esq.
If to Grantor: To Grantor, at the address set forth on the
signature page hereto, to the attention
of the general counsel of Grantor,
If to Deed Trustee: To Deed Trustee, at the address first set forth
above,
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or such other address as either Grantor, Deed Trustee or Beneficiary shall
hereafter specify by written notice as provided herein; provided, however,
that notwithstanding any provision of this Article to the contrary, such
notice of change of address shall be deemed given only upon actual receipt
thereof.
ARTICLE XII: INDEMNIFICATION
Section 12.01. Indemnification Covering Trust Property. In addition, and
without limitation, to any other provision of this Deed of Trustor any
other Loan Document, Grantor shall protect, indemnify and save harmless
Beneficiary, Deed Trustee and their successors and assigns, and each of
their agents, employees, officers and directors, from and against all
liabilities, obligations, claims, damages, penalties, causes of action,
costs and expense (including, without limitation, reasonable attorneys'
fees and expenses, whether incurred within or outside the judicial
process), imposed upon or incurred by or asserted against Beneficiary, Deed
Trustee and their assigns, or any of their agents, employees, officers or
directors, by reason of (a) ownership of this Deed of Trust, the
Assignment, the Trust Property or any part thereof or any interest therein
or receipt of any Rents; (b) any accident, injury to or death of any person
or loss of or damage to property occurring in, on or about the Trust
Property or any part thereof or on the adjoining sidewalks, curbs, parking
areas, streets or ways; (c) any use, nonuse or condition in, on or about,
or possession, alteration, repair, operation, maintenance or management of,
the Trust Property or any part thereof or on the adjoining sidewalks,
curbs, parking areas, streets or ways; (d) any failure on the part of
Grantor to perform or comply with any of the terms of this Deed of Trustor
the Assignment; (e) performance of any labor or services or the furnishing
of any materials or other property in respect of the Trust Property or any
part thereof; (f) any claim by brokers, finders or similar Persons claiming
to be entitled to a commission in connection with any Lease or other
transaction involving the Trust Property or any part thereof; (g) any
Imposition including, without limitation, any Imposition attributable to
the execution, delivery, filing, or recording of any Loan Document, Lease
or memorandum thereof; (h) any lien or
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claim arising on or against the Trust Property or any part thereof under
any Legal Requirement or any liability asserted against Beneficiary or Deed
Trustee with respect thereto; or (i) the claims of any lessee or any Person
acting through or under any lessee or otherwise arising under or as a
consequence of any Lease. Notwithstanding the foregoing provisions of this
Section 12.01 to the contrary, Grantor shall have no obligation to
indemnify Beneficiary pursuant to this Section 12.01 for liabilities,
obligations, claims, damages, penalties, causes of action, costs and
expenses relative to the foregoing which result from Beneficiary's, and its
successors' or assigns', willful misconduct or gross negligence. Any
amounts payable to Beneficiary by reason of the application of this Section
12.01 shall constitute a part of the Debt secured by this Deed of Trust and
other Loan Documents and shall become immediately due and payable and shall
bear interest at the Default Rate applicable to the Class A Portion from
the date the liability, obligation, claim, cost or expense is sustained by
Beneficiary, as applicable, until paid. The provisions of this Section
12.01 shall survive the termination of this Deed of Trustwhether by
repayment of the Debt, foreclosure or delivery of a deed in lieu thereof,
assignment or otherwise.
ARTICLE XIII: DEFAULTS
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Section 13.01. Events of Default. The Debt shall become immediately due at
the option of Beneficiary upon any one or more of the following events
("Event of Default"):
(a) if the final payment or prepayment premium, if any, due under
the Note shall not be paid on Maturity;
(b) if any monthly payment of interest and/or principal due under
the Note (other than the sums described in (a) above) shall not be fully
paid on the date upon which the same is due and payable thereunder;
(c) if payment of any sum (other than the sums described in (a)
above or (b) above) required to be paid pursuant to the Note, this
Deed of Trustor any other Loan Document shall not be paid within five (5)
Business Days after Beneficiary delivers written notice to Grantor that
same is due and payable thereunder or hereunder;
(d) except in connection with the Merger and as otherwise permitted
herein, if Grantor or, if Grantor is a partnership, any general
partner of Grantor shall institute or cause to be instituted any
proceeding for the termination or dissolution of Grantor or any such
general partner;
(e) if the insurance policies required hereunder are not kept in
full force and effect, or if the insurance policies are not assigned and
delivered to Beneficiary as herein provided;
(f) except in connection with the Merger, if Grantor
attempts to assign its rights under this Deed of Trustor any other
Loan Document or any interest herein or therein, or if any Transfer
occurs other than in accordance with the provisions hereof;
(g) if any representation or warranty of Grantor made herein
or in any other Loan Document or in any certificate, report,
financial statement or other instrument or agreement furnished to
Beneficiary shall prove false or misleading in any material respect
as of the date made;
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(h) if Grantor or any general partner of Grantor shall make an
assignment for the benefit of creditors or shall admit in writing its
inability to pay its debts generally as they become due;
(i) if a receiver, liquidator or trustee of Grantor or any general
partner of Grantor shall be appointed or if Grantor or any of its
general partners shall be adjudicated a bankrupt or insolvent, or if any
petition for bankruptcy, reorganization or arrangement pursuant to federal
bankruptcy law, or any similar federal or state law, shall be filed by or
against, consented to, or acquiesced in by, Grantor or its general
partners or if any proceeding for the dissolution or liquidation of
Grantor or any of its general partners shall be instituted; however, if
such appointment, adjudication, petition or proceeding was involuntary and
not consented to by Grantor or its general partners, as applicable, upon
the same not being discharged, stayed or dismissed within sixty (60) days
or if Grantor or any of its general partners shall generally not be
paying its debts as they become due;
(j) if Grantor shall be in default beyond any notice or grace
period, if any, under any other Deed of Trustor deed of trust or
security agreement covering any part of the Trust Property without
regard to its priority relative to this Deed of Trust; provided,
however, this provision shall not be deemed a waiver of the
provisions of Article IX prohibiting further encumbrances affecting
the Trust Property or any other provision of this Deed of Trust;
(k) if the Trust Property becomes subject (i) to any lien which
is superior to the lien of this Deed of Trust, other than a lien for real
estate taxes and assessments not due and payable, or (ii) to any
mechanic's, materialman's or other lien which is or is asserted to be
superior to the lien of this Deed of Trust, and such lien shall remain
undischarged (by payment, bonding, or otherwise) for twenty (20) days
unless contested in accordance with the terms hereof;
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(l) if Grantor discontinues the operation of the Trust
Property or any part thereof for ten (10) days or more for reasons other
than repair or restoration arising from a casualty or condemnation;
(m) except as permitted in this Deed of Trust, any material
alteration, demolition or removal of any of the Improvements without the
prior consent of Beneficiary;
(n) if Grantor consummates a transaction which would cause this
Deed of Trustor Beneficiary's rights under this Deed of Trust, the Note
or any other Loan Document to constitute a non-exempt prohibited
transaction under ERISA or result in a violation of a state statute
regulating government plans subjecting Beneficiary to liability for a
violation of ERISA or a state statute;
(o) if an Event of Default shall occur under any of the other
Cross-collateralized Deeds of Trust; or
(p) if Grantor shall be in default under any of the other terms,
covenants or conditions of the Note (other than as set forth in (a)
through (o) above), this Deed of Trustor any other Loan Document, other
than as set forth in (a) through (o) above, for ten (10) days after
notice from Beneficiary in the case of any default which can be cured
by the payment of a sum of money, or for thirty (30) days after notice
from Beneficiary in the case of any other default or an additional
ninety (90) days if Grantor is diligently and continuously effectuating
a cure of a curable non-monetary default, other than as set forth in
(a) through (o) above.
Section 13.02. Remedies. (a) Upon the occurrence and during the continuance
of any Event of Default, Beneficiary may, in addition to any other rights
or remedies available to it hereunder or under any other Loan Document, at
law or in equity, take such action, without notice or demand, as it
reasonably deems advisable to protect and enforce its rights against
Grantor or any one or more of the Cross-collateralized Borrowers and in and
to the Trust Property or any one or more of the Cross-collateralized
Properties or any one or more of them, including, but not limited to, the
following actions, each of which may be
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pursued singly, concurrently or otherwise, at such time and in such order
as Beneficiary may determine, in its sole discretion, without impairing or
otherwise affecting any other rights and remedies of Beneficiary hereunder,
at law or in equity: (i) declare all or any portion of the unpaid Debt to
be immediately due and payable; provided, however, that upon the occurrence
of any of the events specified in Section 13.01(i), the entire Debt will be
immediately due and payable without notice or demand or any other
declaration of the amounts due and payable; or (ii) bring, or instruct Deed
Trustee to bring an action to foreclose this Deed of Trustand without
applying for a receiver for the Rents, but subject to the rights of the
tenants under the Leases, enter into or upon the Trust Property or any part
thereof, either personally or by its agents, nominees or attorneys, and
dispossess Grantor and its agents and servants therefrom, and thereupon
Beneficiary may (A) use, operate, manage, control, insure, maintain,
repair, restore and otherwise deal with all and every part of the Trust
Property and conduct the business thereat, (B) make alterations, additions,
renewals, replacements and improvements to or on the Trust Property or any
part thereof, (C) exercise all rights and powers of Grantor with respect to
the Trust Property or any part thereof, whether in the name of Grantor 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 earnings, revenues, rents, issues, profits and
other income of the Trust Property and every part thereof, and (D) apply
the receipts from the Trust Property or any part thereof to the payment of
the Debt, after deducting therefrom all expenses (including, without
limitation, reasonable attorneys' fees and disbursements) reasonably
incurred in connection with the aforesaid operations and all amounts
necessary to pay the Impositions, insurance and other charges in connection
with the Trust Property or any part thereof, as well as just and reasonable
compensation for the services of Beneficiary's third-party agents; or (iii)
have an appraisal or other valuation of the Trust Property or any part
thereof performed by an Appraiser (and Grantor covenants and agrees it
shall cooperate in causing any such valuation or appraisal to be performed)
and any cost or expense incurred by Beneficiary in connection therewith
shall constitute a portion of the Debt and be secured by this Deed of
Trustand shall be immediately due and payable to Beneficiary
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with interest, at the Default Rate, until the date of receipt by
Beneficiary; or (iv) sell, or instruct Deed Trustee to sell, the Trust
Property or institute proceedings for the complete foreclosure of this Deed
of Trust, or take such other action as may be allowed pursuant to Legal
Requirements, at law or in equity, for the enforcement of this Deed of
Trustin which case the Trust Property or any part thereof may be sold for
cash or credit in one or more parcels; or (v) with or without entry, and to
the extent permitted and pursuant to the procedures provided by applicable
Legal Requirements, institute proceedings for the partial foreclosure of
this Deed of Trust, or take such other action as may be allowed pursuant to
Legal Requirements, at law or in equity, for the enforcement of this Deed
of Trustfor the portion of the Debt then due and payable, subject to the
lien of this Deed of Trustcontinuing unimpaired and without loss of
priority so as to secure the balance of the Debt not then due; or (vi)
sell, or instruct Deed Trustee to sell, the Trust Property or any part
thereof and any or all estate, claim, demand, right, title and interest of
Grantor therein and rights of redemption thereof, pursuant to power of sale
or otherwise, at one or more sales, in whole or in parcels, in any order or
manner, at such time and place, upon such terms and after such notice
thereof as may be required or permitted by law, at the discretion of
Beneficiary, and in the event of a sale, by foreclosure or otherwise, of
less than all of the Trust Property, this Deed of Trustshall continue as a
lien on the remaining portion of the Trust Property; or (vii) institute an
action, suit or proceeding in equity for the specific performance of any
covenant, condition or agreement contained in the Loan Documents, or any of
them; or (viii) recover judgment on the Note or any guaranty either before,
during or after (or in lieu of) any proceedings for the enforcement of this
Deed of Trust; or (ix) apply, or direct Deed Trustee to apply, ex parte,
for the appointment of a custodian, trustee, receiver, liquidator or
conservator of the Trust Property or any part thereof, irrespective of the
adequacy of the security for the Debt and without regard to the solvency of
Grantor or of any Person liable for the payment of the Debt, to which
appointment Grantor does hereby consent and such receiver or other official
shall have all rights and powers permitted by applicable law and such other
rights and powers as the court making such appointment may confer, but the
appointment of such receiver or other official shall not impair or in any
manner
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prejudice the rights of Beneficiary to receive the Rent with respect to any
of the Trust Property pursuant to this Deed of Trustor the Assignment; or
(x) require, at Beneficiary's option, Grantor to pay monthly in advance to
Beneficiary, or any receiver appointed to collect the Rents, the fair and
reasonable rental value for the use and occupation of any portion of the
Trust Property occupied by Grantor and may require Grantor to vacate and
surrender possession to Beneficiary of the Trust Property or to such
receiver and Grantor may be evicted by summary proceedings or otherwise; or
(xi) without notice to Grantor (A) apply all or any portion of the cash
collateral in the Basic Carrying Costs Sub-Account, including any interest
and/or earnings therein, to carry out the obligations of Grantor under this
Deed of Trustand the other Loan Documents, to protect and preserve the
Trust Property and for any other purpose permitted under this Deed of
Trustand the other Loan Documents and/or (B) have all or any portion of
such cash collateral immediately paid to Beneficiary to be applied against
the Debt in the order and priority set forth in the Note; or (xii) pursue
any or all such other rights or remedies as Beneficiary and/or Deed Trustee
may have under applicable law or in equity; provided, however, that the
provisions of this Section 13.02(a) shall not be construed to extend or
modify any of the notice requirements or grace periods provided for
hereunder or under any of the other Loan Documents. Grantor hereby waives,
to the fullest extent permitted by Legal Requirements, any defense Grantor
might otherwise raise or have by the failure to make any tenants parties
defendant to a foreclosure proceeding and to foreclose their rights in any
proceeding instituted by Beneficiary or Deed Trustee.
(b) Any time after an Event of Default, Deed Trustee, at the request
of Beneficiary, shall sell the Trust Property or any part thereof at such
time and place in the city or county wherein the Trust Property is located
as the Deed Trustee shall deem advantageous and proper, for cash, or credit
or for other property, for immediate and future delivery, and for such
price or prices and on such terms as the Deed Trustee shall deem
advantageous and proper, and as required by the Code of Virginia and the
regulations thereunder. Prior to the sale, the Deed Trustee shall first
advertise the time, place and terms of sale at least once a week for two
(2) consecutive weeks in advance of
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the date of such sale, in a newspaper published or having general
circulation in the county or city in which the Trust Property or some
portion thereof is located. The Trust Property shall be conveyed in fee
simple by Beneficiary's deed with special warranty of title to and at the
cost of the purchaser, who shall not be liable to see to the application of
the purchase money. The proceeds or avails of any sale made under or by
virtue of this Section 13.02, together with any other sums which then may
be held by Beneficiary under this Deed of Trust, whether under the
provisions of this Section 13.02 or otherwise, shall be applied as follows:
First: To the payment of the third-party costs and expenses
reasonably incurred in connection with any such sale and to
advances, fees and expenses, including, without limitation,
reasonable fees and expenses of Beneficiary's and Deed Trustee's
legal counsel as applicable, and of any judicial proceedings
wherein the same may be made, and of all expenses, liabilities
and advances reasonably made or incurred by Beneficiary or Deed
Trustee under this Deed of Trust, together with interest as
provided herein on all such advances made by Beneficiary, and all
Impositions, except any Impositions or other charges subject to
which the Trust Property shall have been sold;
Second: To the payment of the whole amount then due, owing and
unpaid under the Note for principal and interest thereon, with
interest on such unpaid principal at the Default Rate from the date
of the occurrence of the earliest Event of Default that formed a
basis for such sale until the same is paid to be applied in the
manner set forth in Section 2.02 of the Note;
Third: To the payment of any other portion of the Debt required
to be paid by Grantor pursuant to any provision of this
Deed of Trust, the Note, or any of the other Loan Documents to be
applied in the manner set forth in Section 2.02 of the Note; and
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Fourth: The surplus, if any, to Grantor unless otherwise
required by Legal Requirements.
Beneficiary and any receiver or custodian of the Trust Property or any part
thereof shall be liable to account for only those rents, issues, proceeds
and profits actually received by it.
(c) Beneficiary and Deed Trustee, as applicable, may adjourn from
time to time any sale by it to be made under or by virtue of this Deed of
Trustby announcement at the time and place appointed for such sale or for
such adjourned sale or sales and, except as otherwise provided by any
applicable provision of Legal Requirements, Beneficiary or Deed Trustee,
without further notice or publication, may make such sale at the time and
place to which the same shall be so adjourned.
(d) Upon the completion of any sale or sales made by Beneficiary
under or by virtue of this Section 13.02, Beneficiary or Deed Trustee, or
any officer of any court empowered to do so, shall execute and deliver to
the accepted purchaser or purchasers a good and sufficient instrument, or
good and sufficient instruments, granting, conveying, assigning and
transferring all estate, right, title and interest in and to the property
and rights sold. Beneficiary is hereby irrevocably appointed the true and
lawful attorney-in-fact of Grantor (coupled with an interest), in its name
and stead, to make all necessary conveyances, assignments, transfers and
deliveries of the property and rights so sold and for that purpose
Beneficiary and/or Deed Trustee may execute all necessary instruments of
conveyance, assignment, transfer and delivery, and may substitute one or
more Persons with like power, Grantor hereby ratifying and confirming all
that its said attorney-in-fact or such substitute or substitutes shall
lawfully do by virtue hereof. Nevertheless, Grantor, if so requested by
Beneficiary, shall ratify and confirm any such sale or sales by executing
and delivering to Beneficiary, or to such purchaser or purchasers all such
instruments as may be advisable, in the sole judgement of Beneficiary, for
such purpose, and as may be designated in such request. Any such sale or
sales made under or by virtue of this Section 13.02, whether made under the
power of sale herein granted or under or by virtue of judicial proceedings
or a judgment or decree of foreclosure and sale, shall operate to divest
all the estate, right, title,
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interest, claim and demand whatsoever, whether at law or in equity, of
Grantor in and to the property and rights so sold, and shall, to the
fullest extent permitted under Legal Requirements, be a perpetual bar, both
at law and in equity against Grantor and against any and all Persons
claiming or who may claim the same, or any part thereof, from, through or
under Grantor.
(e) In the event of any sale made under or by virtue of this Section
13.02 (whether made under the power of sale herein granted or under or by
virtue of judicial proceedings or a judgment or decree of foreclosure and
sale), the entire Debt immediately thereupon shall, anything in the Loan
Documents to the contrary notwithstanding, become due and payable.
(f) Upon any sale made under or by virtue of this Section 13.02
(whether made under the power of sale herein granted or under or by virtue
of judicial proceedings or a judgment or decree of foreclosure and sale),
Beneficiary may bid for and acquire the Trust Property or any part thereof
and in lieu of paying cash therefor may make settlement for the purchase
price by crediting upon the Debt the net sales price after deducting
therefrom the expenses of the sale and the costs of the action.
(g) No recovery of any judgment by Beneficiary and no levy of an
execution under any judgment upon the Trust Property or any part thereof or
upon any other property of Grantor shall release the lien of this Deed of
Trustupon the Trust Property or any part thereof, or any liens, rights,
powers or remedies of Beneficiary hereunder, but such liens, rights, powers
and remedies of Beneficiary shall continue unimpaired until all amounts due
under the Note, this Deed of Trust and the other Loan Documents are paid in
full.
Section 13.03. Payment of Debt After Default. If following the occurrence
of any Event of Default, Grantor shall tender payment of an amount
sufficient to satisfy the Debt in whole or in part at any time prior to a
foreclosure sale of the Trust Property, and if at the time of such tender
prepayment of the principal balance of the Note is not permitted by the
Note, Grantor shall, in addition to the entire Debt, also pay to
Beneficiary a sum equal to interest which would have accrued on the
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principal balance of the Note from the date of such tender to the earlier
of (a) the Maturity Date or (b) the first day of the period during which
prepayment of the principal balance of the Note would have been permitted
together with a prepayment consideration equal to the prepayment
consideration which would have been payable as of the first day of the
period during which prepayment would have been permitted. If at the time of
such tender, prepayment of the principal balance of the Note is permitted,
such tender by Grantor shall be deemed to be a voluntary prepayment of the
principal balance of the Note, and Grantor shall, in addition to the entire
Debt, also pay to Beneficiary the applicable prepayment consideration
specified in the Note and this Deed of Trust.
Section 13.04. Possession of the Trust Property. Upon the occurrence of any
Event of Default hereunder and the acceleration of the Debt or any portion
thereof, Grantor, if an occupant of the Trust Property or any part thereof,
upon demand of Beneficiary, shall immediately surrender possession of the
Trust Property (or the portion thereof so occupied) to Beneficiary, and if
Grantor is permitted to remain in possession, the possession shall be as a
month-to-month tenant of Beneficiary and, on demand, Grantor shall pay to
Beneficiary monthly, in advance, a reasonable rental for the space so
occupied and in default thereof Grantor may be dispossessed. The covenants
herein contained may be enforced by a receiver of the Trust Property or any
part thereof. Nothing in this Section 13.04 shall be deemed to be a waiver
of the provisions of this Deed of Trust making the Transfer of the Trust
Property or any part thereof without Beneficiary's prior written consent an
Event of Default.
Section 13.05. Interest After Default. If any amount due under the Note,
this Deed of Trustor any of the other Loan Documents is not paid within any
applicable notice and grace period after same is due, whether such date is
the stated due date, any accelerated due date or any other date or at any
other time specified under any of the terms hereof or thereof, then, in
such event, interest on the amount not so paid shall accrue from and after
the date on which such amount first becomes due at the Default Rate; and
such interest shall accrue at such rate until the earlier of the cure of
all Events of Default or the payment of the entire amount due to
Beneficiary, whether or not any action shall have been taken or
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proceeding commenced to recover the same or to foreclose this Deed of
Trust. Accrued Default Rate Interest shall be due and payable at such times
specified in the Note. All unpaid and accrued interest shall be secured by
this Deed of Trustas part of the Debt. Nothing in this Section 13.05 or in
any other provision of this Deed of Trustshall constitute an extension of
the time for payment of the Debt.
Section 13.06. Grantor's Actions After Default. After the happening of any
Event of Default and immediately upon the commencement of any action, suit
or other legal proceedings by Beneficiary to obtain judgment for the Debt,
or of any other nature in aid of the enforcement of the Loan Documents,
Grantor will (a) after receipt of notice of the institution of any such
action, waive the issuance and service of process and enter its voluntary
appearance in such action, suit or proceeding, and (b) if required by
Beneficiary, consent to the appointment of a receiver or receivers of the
Trust Property or any part thereof and of all the earnings, revenues,
rents, issues, profits and income thereof.
Section 13.07. Control by Beneficiary After Default. Notwithstanding the
appointment of any custodian, receiver, liquidator or trustee of Grantor,
or of any of its property, or of the Trust Property or any part thereof, to
the extent permitted by Legal Requirements, Beneficiary shall be entitled
to obtain possession and control of all property now and hereafter covered
by this Deed of Trustand the Assignment in accordance with the terms hereof.
Section 13.08. Right to Cure Defaults. (a) Upon the occurrence of any Event
of Default, Beneficiary or its agents may, but without any obligation to do
so and without notice to or demand on Grantor and without releasing Grantor
from any obligation hereunder, make or do the same in such manner and to
such extent as Beneficiary may deem necessary to protect the security
hereof. Beneficiary and its agents are authorized to enter upon the Trust
Property or any part thereof for such purposes, or appear in, defend, or
bring any action or proceedings to protect Beneficiary's interest in the
Trust Property or any part thereof or to foreclose this Deed of Trustor
collect the Debt, and the cost and expense thereof (including reasonable
attorneys' fees to the extent permitted by law), with interest as provided
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in this Section 13.08, shall constitute a portion of the Debt and shall be
immediately due and payable to Beneficiary upon demand. All such costs and
expenses incurred by Beneficiary or its agents in remedying such Event of
Default or in appearing in, defending, or bringing any such action or
proceeding shall bear interest at the Default Rate, for the period from the
date so demanded to the date of payment to Beneficiary. All such costs and
expenses incurred by Beneficiary or its agents together with interest
thereon calculated at the above rate shall be deemed to constitute a
portion of the Debt and be secured by this Deed of Trust.
(b) If Beneficiary makes any payment or advance that Beneficiary is
authorized by this Deed of Trustto make in the place and stead of Grantor
(i) relating to the Impositions or tax liens asserted against the Trust
Property, Beneficiary may do so according to any bill, statement or
estimate procured from the appropriate public office without inquiry into
the accuracy of the bill, statement or estimate or into the validity of any
of the Impositions or the tax liens or claims thereof; (ii) relating to any
apparent or threatened adverse title, lien, claim of lien, encumbrance,
claim or charge, Beneficiary will be the sole judge of the legality or
validity of same; or (iii) relating to any other purpose authorized by this
Deed of Trustbut not enumerated in this Section 13.08, Beneficiary may do
so whenever, in its judgment and discretion, the payment or advance seems
necessary or desirable to protect the Trust Property and the full security
interest intended to be created by this Deed of Trust. In connection with
any payment or advance made pursuant to this Section 13.08, Beneficiary has
the option and is authorized, but in no event shall be obligated, to obtain
a continuation report of title prepared by a title insurance company. The
payments and the advances made by Beneficiary pursuant to this Section
13.08 and the cost and expenses of said title report will be due and
payable by Grantor on demand, together with interest at the Default Rate
applicable to the Class A Portion (as defined in the Note), and will be
secured by this Deed of Trust.
Section 13.09. Late Payment Charge. If any portion of the Debt is not paid
in full within five (5) days after the date on which it is due and payable
hereunder, Grantor shall be obligated to pay to Beneficiary an amount equal
to five percent 5% of such unpaid portion of the Debt ("Late Charge") to
defray the expense
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incurred by Beneficiary in handling and processing such delinquent payment,
and such amount shall constitute a part of the Debt, which Late Charge
shall be due and payable at the times specified in the Note.
Section 13.10. Recovery of Sums Required to Be Paid. Beneficiary 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 and payable hereunder
(after the expiration of any grace period or the giving of any notice
herein provided, if any), without regard to whether or not the balance of
the Debt shall be due, and without prejudice to the right of Beneficiary
thereafter to bring an action of foreclosure, or any other action, for a
default or defaults by Grantor existing at the time such earlier action was
commenced.
Section 13.11. Marshalling and Other Matters. Grantor hereby waives, to the
fullest extent permitted by law, the benefit of all appraisement,
valuation, stay, extension, reinstatement, redemption (both equitable and
statutory) and homestead laws now or hereafter in force and all rights of
marshalling in the event of any sale hereunder of the Trust Property or any
part thereof or any interest therein. Nothing herein or in any other Loan
Document shall be construed as requiring Beneficiary to resort to any
particular Cross-collateralized Property for the satisfaction of the Debt
in preference or priority to any other Cross-collateralized Property but
Beneficiary may seek satisfaction out of all the Cross-collateralized
Properties or any part thereof in its absolute discretion. Further, Grantor
hereby expressly waives any and all rights of redemption from sale under
any order or decree of foreclosure of this Deed of Truston behalf of
Grantor, whether equitable or statutory and on behalf of each and every
Person acquiring any interest in or title to the Trust Property or any part
thereof subsequent to the date of this Deed of Trust and on behalf of all
Persons to the fullest extent permitted by applicable law.
Section 13.12. Tax Reduction Proceedings. After an Event of Default,
Grantor shall be deemed to have appointed Beneficiary as its
attorney-in-fact to seek a reduction or reductions in the assessed
valuation of the Trust Property for real property
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tax purposes or for any other purpose and to prosecute any action or
proceeding in connection therewith. This power, being coupled with an
interest, shall be irrevocable for so long as any part of the Debt remains
unpaid and any Event of Default shall be continuing.
Section 13.13. General Provisions Regarding Remedies.
(a) Right to Terminate Proceedings. Beneficiary or Deed Trustee may
terminate or rescind any proceeding or other action brought in connection
with its exercise of the remedies provided in Section 13.02 at any time
before the conclusion thereof, as determined in Beneficiary's sole
discretion and without prejudice to Beneficiary or Deed Trustee.
(b) No Waiver or Release. The failure of Beneficiary or Deed Trustee
to exercise any right, remedy or option provided in the Loan Documents
shall not be deemed a waiver of such right, remedy or option or of any
covenant or obligation contained in the Loan Documents. No acceptance by
Beneficiary of any payment after the occurrence of an Event of Default and
no payment by Beneficiary of any payment or obligation for which Grantor is
liable hereunder shall be deemed to waive or cure any Event of Default. No
sale of all or any portion of the Trust Property, no forbearance on the
part of Beneficiary, and no extension of time for the payment of the whole
or any portion of the Debt or any other indulgence given by Beneficiary to
Grantor or any other Person, shall operate to release or in any manner
affect the interest of Beneficiary in the Trust Property or the liability
of Grantor to pay the Debt. No waiver by Beneficiary shall be effective
unless it is in writing and then only to the extent specifically stated.
(c) No Impairment; No Releases. The interests and rights of
Beneficiary under the Loan Documents shall not be impaired by any
indulgence, including (i) any renewal, extension or modification which
Beneficiary may grant with respect to any of the Debt; (ii) any surrender,
compromise, release, renewal, extension, exchange or substitution which
Beneficiary may grant with respect to the Trust Property or any portion
thereof; or (iii) any release or indulgence granted to any maker, endorser,
guarantor or surety of any of the Debt.
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(d) Effect on Judgment. No recovery of any judgment by Beneficiary
and no levy of an execution under any judgment upon any Trust Property or
any portion thereof shall affect in any manner or to any extent the lien of
the other Cross-collateralized Deeds of Trust upon the remaining
Cross-collateralized Properties or any portion thereof, or any rights,
powers or remedies of Beneficiary hereunder or thereunder. Such lien,
rights, powers and remedies of Beneficiary shall continue unimpaired as
before.
ARTICLE XIV: COMPLIANCE WITH REQUIREMENTS
Section 14.01. Compliance with Legal Requirements. (a) Grantor shall
promptly comply in all material respects with all present and future Legal
Requirements, foreseen and unforeseen, ordinary and extraordinary, whether
requiring structural or nonstructural repairs or alterations including,
without limitation, all zoning, subdivision, building, safety and
environmental protection, land use and development Legal Requirements, all
Legal Requirements which may be applicable to the curbs adjoining the Trust
Property or to the use or manner of use thereof, and all rent control, rent
stabilization and all other similar Legal Requirements relating to rents
charged and/or collected in connection with the Leases. Grantor represents
and warrants that the Trust Property is in compliance in all material
respects with all Legal Requirements as of the date hereof, no notes or
notices of violations of any Legal Requirements have been entered or
received by Grantor and there is no basis for the entering of such note or
notices.
(b) Grantor shall have the right to contest by appropriate legal
proceedings diligently conducted in good faith, without cost or expense to
Beneficiary or Deed Trustee, the validity or application of any Legal
Requirement and to suspend compliance therewith if permitted under
applicable Legal Requirements, provided (i) failure to comply therewith may
not subject Beneficiary or Deed Trustee to any civil or criminal liability,
(ii) prior to and during such contest, Grantor shall furnish to Beneficiary
security reasonably satisfactory to
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Beneficiary, in its discretion, against loss or injury by reason of such
contest or non-compliance with such Legal Requirement, (iii) no Default or
Event of Default shall exist during such proceedings and such contest shall
not otherwise violate any of the provisions of any of the Loan Documents,
(iv) such contest shall not, (unless Grantor shall comply with the
provisions of clause (ii) of this Section 14.01(b)) subject the Trust
Property to any lien or encumbrance the enforcement of which is not
suspended or otherwise affect the priority of the lien of this Deed of
Trust; (v) such contest shall not affect the ownership, use or occupancy of
the Trust Property; (vi) the Trust Property or any part thereof or any
interest therein shall not be in any danger of being sold, forfeited or
lost by reason of such contest by Grantor; (vii) Grantor shall give
Beneficiary prompt notice of the commencement of such proceedings and, upon
request by Beneficiary, notice of the status of such proceedings and/or
confirmation of the continuing satisfaction of the conditions set forth in
clauses (i)-(vi) of this Section 14.01(b); and (viii) upon a final
determination of such proceeding, Grantor shall take all steps necessary to
comply with any requirements arising therefrom.
(c) Grantor shall at all times comply in all material respects with
all applicable Legal Requirements with respect to the construction, use and
maintenance of any vaults adjacent to the Trust Property. If by reason of
the failure to pay taxes, assessments, charges, permit fees, franchise
taxes or levies of any kind or nature, the continued use of the vaults
adjacent to Trust Property or any part thereof is discontinued, Grantor
nevertheless shall, with respect to any vaults which may be necessary for
the continued use of the Trust Property, take such steps (including the
making of any payment) to insure the continued use of vaults or
replacements.
Section 14.02. Compliance with Recorded Documents; No Future Grants.
Grantor shall promptly perform and observe or cause to be performed and
observed, all of the terms, covenants and conditions of all Property
Agreements and all things necessary to preserve intact and unimpaired any
and all appurtenances or other interests or rights affecting the Trust
Property.
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ARTICLE XV: PREPAYMENT; RELEASE
Section 15.01. Prepayment. (a) Except as set forth in Section 15.01(b)
hereof, no prepayment of the Debt may be made in whole or in part.
(b) At any time subsequent to the third (3rd) anniversary of the date
hereof, Grantor may prepay the Loan, in whole or, from time to time, in
part, as of the last day of an Interest Accrual Period in accordance with
the following provisions:
(i) Beneficiary shall have received from Grantor, not less than
fifteen (15) days', nor more than ninety (90) days', prior written notice
specifying the date proposed for such prepayment and the amount which is
to be prepaid.
(ii) Grantor shall also pay to Beneficiary all interest due through
and including the last day of the Interest Accrual Period in which such
prepayment is being made, together with any and all other amounts due and
owing pursuant to the terms of the Note, this Deed of Trustor the other
Loan Documents.
(iii) In the event that, on or before the date which is six (6)
months prior to the Optional Prepayment Date, Grantor shall prepay all
or any portion of the Loan Amount, whether such prepayment is made
voluntarily or involuntarily, except where such prepayment is made as a
result of Beneficiary's determination to apply Loss Proceeds to the Debt,
Grantor shall be required to pay to Beneficiary on the date of such
prepayment, in addition to the Principal Amount or portion thereof which
is to be prepaid, a non-refundable sum equal to the greater of (i) one
percent (1%) of the Principal Amount or portion thereof which is to be
prepaid and (ii) the Yield Maintenance Premium with respect to such
prepayment. Beneficiary shall deliver notice to Grantor of the amount of
any Yield Maintenance Premium due with respect to any prepayment by
Grantor at least three (3) Business Days prior to the date of such
prepayment which
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notice shall be conclusive and binding upon Grantor absent manifest error.
(iv) Any partial prepayment shall be in a minimum amount not less
than $25,000 and shall be in whole multiples of $1,000 in excess thereof.
(v) No Event of Default shall have occurred and be continuing other
than an Event of Default which would be cured by such prepayment.
(vi) Any partial prepayment of the Principal Amount, including,
without limitation, Unscheduled Payments, shall not release or relieve
Grantor from the obligation to pay the regularly scheduled installments
of principal and interest becoming due under the Note or affect the
amount of any such regularly scheduled payments until the Debt is paid
in full.
Section 15.02. Out-Parcel Severance. Notwithstanding any other
provision of this Deed of Trustto the contrary, Grantor shall be permitted
to transfer, and Beneficiary shall release from the lien of this Deed of
Trustand the other Loan Documents, any unimproved out-parcel and one
anchor-store parcel comprising a portion of the Trust Property (either of
which is hereinafter referred to as the "Out-Parcel") secured by this Deed
of Trust, from the lien hereof, upon not less than thirty (30) nor more
than ninety (90) days' prior written notice to Beneficiary, upon
satisfaction of all of the following terms and conditions:
(a) No Default shall have occurred and be continuing and all amounts
which are then required to be deposited in the Sub-Accounts shall have been
so deposited.
(b) The Out-Parcel shall be designated by a metes and bounds
description and a survey reasonably satisfactory to Beneficiary.
(c) The following conditions shall have been satisfied, and
Beneficiary shall in addition have received an Officer's Certificate, not
less than fifteen (15) Business Days prior to the proposed transfer or
release of the Out-Parcel, stating that:
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(i) the use to which the Out-Parcel will be put, shall be
consistent with the use to which out-parcels or anchor-store parcels,
as applicable, are generally put in other first class enclosed regional
shopping centers, as reasonably determined by Grantor.
(ii) the portion of the Realty remaining subject to the lien of
this Deed of Trustafter release of the Out-Parcel (the "Remaining
Realty") will continue to be in compliance with the Approved Manager
Standard, and remain in full compliance with all Legal Requirements and
with the terms of all Space Leases and Property Agreements on the
Remaining Realty;
(iii) the proposed use of the Out-Parcel will not violate the
provisions of any Space Lease or Property Agreement affecting the
Remaining Realty. To the extent reasonably required, the permitted uses
of the Out-Parcel will be restricted of record, as reasonably agreed to
by Beneficiary, to insure that use of the Out-Parcel will not violate
the provisions of this Deed of Trustor any Space Leases or Property
Agreements;
(iv) Grantor shall have caused the Out-Parcel to be a separate
parcel of land for all subdivision, zoning, and taxing purposes;
(v) title to the Out-Parcel shall have been or shall
simultaneously be conveyed to a Person other than a Cross-collateralized
Borrower;
(vi) the disposition of the Out-Parcel shall not have a Material
Adverse Affect on the Net Operating Income;
(vii) the occupancy rate of the specialty stores (i.e. the stores
occupied by tenants which are not tenants under Major Space Leases)
located in the Remaining Realty shall be equal
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to or greater than 85% after giving effect to any proposed tenant
relocations to the Out-Parcel;
(viii) the Debt Service Coverage allocable to the Remaining Realty
shall not be less than the Closing DSC;
(ix) no tenant under any Lease has executed, or is negotiating in
contemplation of executing, a lease or other occupancy agreement with
respect to a portion of such Out-Parcel; and
(x) an amount equal to the greater of (A) all sums received by
Grantor in connection with the sale of the Out-Parcel and (B) the fair
market value of the Out-Parcel as reasonably determined by Beneficiary
is, at Grantor's discretion either (1) paid to Beneficiary to be
applied as a prepayment of the Loan in accordance with Section 15.01
hereof or (2) deposited in an Eligible Account established in the name
of Beneficiary at the bank in which the Central Account is located from
which disbursements may be made for the purpose of making improvements
to the Premises which are of a capital nature. Provided that
Beneficiary has received from Grantor at least five (5) Business Days
prior written notice, and not more frequently than once each month, and
further provided that no Event of Default has occurred, that there are
sufficient funds available in such account and that Grantor shall have
theretofore furnished Beneficiary with lien waivers, copies of bills,
invoices and other reasonable documentation as may be required by
Beneficiary to establish that the capital costs which are the subject
of such request represent amounts due for completed or partially
completed capital work and improvements performed at the Trust
Property, Beneficiary shall disburse to Grantor out of such account any
sums necessary to reimburse Grantor for such capital costs.
(xi) Grantor shall have delivered to Beneficiary an opinion letter
of counsel in form and substance acceptable to Beneficiary to the effect
that with respect to the trust in which the Loan is included as an asset
in connection with
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the Securitization, such Release shall not (i) adversely affect the
qualification as a "real estate Deed of Trustinvestment conduit" (a
"REMIC") within the meaning of Section 860D of the Code of the
portion of the Trust Fund which is intended to qualify as a REMIC (the
"Trust REMIC"), (ii) result in any tax being imposed on the Trust REMIC
under Sections 860F(a) or 860G(d) of the Code, or (iii) result in the
portion of the Trust Fund exclusive of the Trust REMIC being treated as
other than a grantor trust that is not a taxable Deed of Trustpool for
federal income tax purposes.
(d) To the extent reasonably required, an appropriate Property
Agreement shall be executed (and a copy delivered to Beneficiary) to govern
the integrated use and operation, if applicable, of the Remaining Realty
and the Out-Parcel.
(e) A title policy endorsement to the Beneficiary's lenders' title
insurance policy to the effect that the release of the Out-Parcel will not
have an adverse affect on the priority of the lien of this Deed of
Trustwith respect to the Remaining Realty.
(f) Grantor shall, at its sole cost and expense, prepare any and all
documents and instruments necessary to effect the release of the
Out-Parcel, all of which shall be subject to the reasonable approval of
Beneficiary, and Grantor shall pay all costs reasonably incurred by
Beneficiary (including, but not limited to, reasonable attorneys' fees and
disbursements, title search costs and endorsement premiums) in connection
with the review, execution and delivery of such release.
(g) All agreements and instruments to be delivered to Beneficiary
pursuant to this Section 15.02 shall be in form and substance reasonably
satisfactory to Beneficiary and its counsel and included with the Officer's
Certificate required to be delivered pursuant to clause (iii) of this
Section 15.02 shall be evidence in form and substance satisfactory to
Beneficiary supporting the statements, calculations and information
required pursuant to clauses (c)(vi), (vii) and (viii) of this Section
15.02.
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Section 15.03. Release of Trust Property. If Grantor prepays all or a
portion of the Loan pursuant to Section 15.01(b) hereof or if Beneficiary
applies Loss Proceeds from the Trust Property towards the repayment of the
Debt, Beneficiary shall, promptly upon satisfaction of all the following
terms and conditions execute, acknowledge and deliver to Grantor a release
of this Deed of Trust(a "Release") in recordable form with respect to the
Trust Property:
(a) If such prepayment is a prepayment in part, but not in whole,
Beneficiary shall have received on the date proposed for such prepayment an
amount equal to one hundred fifty percent (150%) of the Initial Allocated
Loan Amount (the "Release Price") for the released Cross-collateralized
Property.
(b) Beneficiary shall have received from Grantor evidence in form and
substance satisfactory to Beneficiary that the pro forma Aggregate Debt
Service Coverage of all Cross-collateralized Properties immediately
following the Release (not including the Cross-collateralized Property
which is to be Released) is at least equal to the greater of 2.0:1 and the
Aggregate Debt Service Coverage immediately prior to effecting such
Release, accompanied by an Officer's Certificate stating that the
statements, calculations and information comprising such evidence are true,
correct and complete in all respects.
(c) Grantor shall, at its sole expense, prepare any and all documents
and instruments necessary to effect the Release, all of which shall be
subject to the reasonable approval of Beneficiary, and Grantor shall pay
all costs reasonably incurred by Beneficiary (including, but not limited
to, reasonable attorneys' fees and disbursements, title search costs or
endorsement premiums) in connection with the review, execution and delivery
of the Release.
(d) No Event of Default has occurred and is continuing.
(e) Grantor shall have delivered to Beneficiary an opinion letter of
counsel in form and substance acceptable to Beneficiary to the effect that,
with respect to the trust in which the Loan is included as an asset in
connection with the Securitization,
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such Release shall not (i) adversely affect the qualification as a REMIC
within the meaning of Section 860D of the Code of the portion of the Trust
Fund which is intended to qualify as a REMIC (the "Trust REMIC"), (ii)
result in any tax being imposed on the Trust REMIC under Sections 860F(a)
or 860G(d) of the Code, or (iii) result in the portion of the Trust Fund
exclusive of the Trust REMIC being treated as other than a grantor trust
that is not a taxable Deed of Trustpool for federal income tax purposes.
ARTICLE XVI: ENVIRONMENTAL COMPLIANCE
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Section 16.01. Covenants, Representations and Warranties. (a) Grantor has
not, at any time, and, to Grantor's best knowledge after due inquiry and
investigation, except as set forth in the Environmental Report, no other
Person has at any time, handled, buried, stored, retained, refined,
transported, processed, manufactured, generated, produced, spilled, allowed
to seep, leak, escape or leach, or pumped, poured, emitted, emptied,
discharged, injected, dumped, transferred or otherwise disposed of or dealt
with Hazardous Materials on, to or from the Premises or any other real
property owned and/or occupied by Grantor, and Grantor does not intend to
and shall not use the Trust Property or any part thereof or any such other
real property for the purpose of handling, burying, storing, retaining,
refining, transporting, processing, manufacturing, generating, producing,
spilling, seeping, leaking, escaping, leaching, pumping, pouring, emitting,
emptying, discharging, injecting, dumping, transferring or otherwise
disposing of or dealing with Hazardous Materials, except for use and
storage for use of heating oil, cleaning fluids, pesticides and other
substances customarily used in the operation of properties that are being
used for the same purposes as the Trust Property is presently being used,
provided such use and/or storage for use is in compliance with the Legal
Requirements and does not give rise to liability under applicable Legal
Requirements or Environmental Statutes or be the basis for a lien against
the Trust Property or any part thereof. In addition, without limitation to
the foregoing provisions, Grantor represents and warrants that, to the best
of its knowledge, after due inquiry and investigation, except as previously
disclosed in writing to Beneficiary, there is no asbestos in, on, over, or
under all or any portion of the fire-proofing or any other portion of the
Trust Property.
(b) Grantor, after due inquiry and investigation, knows of no
seepage, leak, escape, leach, discharge, injection, release, emission,
spill, pumping, pouring, emptying or dumping of Hazardous Materials into
waters on, under or adjacent to the Trust Property or any part thereof or
any other real property owned and/or occupied by Grantor, or onto lands
from which such Hazardous Materials might seep, flow or drain into such
waters, except as disclosed in the Environmental Report.
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(c) Grantor shall not permit any Hazardous Materials to be handled,
buried, stored, retained, refined, transported, processed, manufactured,
generated, produced, spilled, allowed to seep, leak, escape or leach, or to
be pumped, poured, emitted, emptied, discharged, injected, dumped,
transferred or otherwise disposed of or dealt with on, under, to or from
the Trust Property or any portion thereof at any time, except for use and
storage for use of heating oil, ordinary cleaning fluids, pesticides and
other substances customarily used in the operation of properties that are
being used for the same purposes as the Trust Property is presently being
used, provided such use and/or storage for use is in compliance with Legal
Requirements and does not give rise to liability under applicable Legal
Requirements or be the basis for a lien against the Trust Property or any
part thereof.
(d) Grantor represents and warrants that no actions, suits, or
proceedings have been commenced, or are pending, or to the best knowledge
of Grantor, are threatened with respect to any Legal Requirement governing
the use, manufacture, storage, treatment, transportation, or processing of
Hazardous Materials with respect to the Trust Property or any part thereof.
Grantor has received no notice of, and, except as disclosed in the
Environmental Report, after due inquiry, has no knowledge of any fact,
condition, occurrence or circumstance which with notice or passage of time
or both would give rise to a claim under or pursuant to any Environmental
Statute pertaining to Hazardous Materials on, in, under or originating from
the Trust Property or any part thereof or any other real property owned or
occupied by Grantor or arising out of the conduct of Grantor, including,
without limitation, pursuant to any Environmental Statute.
(e) Grantor has not waived any Person's liability with regard to the
Hazardous Materials in, on, under or around the Trust Property, nor has
Grantor retained or assumed, contractually or by operation of law, any other
Person's liability relative to Hazardous Materials or any claim, action or
proceeding relating thereto.
(f) In the event that there shall be filed a lien against the Trust
Property or any part thereof pursuant to any
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Environmental Statute pertaining to Hazardous Materials, Grantor shall,
within sixty (60) days or, in the event that the applicable Governmental
Authority has commenced steps to cause the Premises or any part thereof to
be sold pursuant to the lien, within twenty (20) days, from the date that
Grantor receives notice of such lien, either (i) pay the claim and/or
remove the lien from the Trust Property, or (ii) furnish (A) a bond
satisfactory to Beneficiary in the amount of the claim out of which the
lien arises, (B) a cash deposit in the amount of the claim out of which the
lien arises, or (C) other security reasonably satisfactory to Beneficiary
in an amount sufficient to discharge the claim out of which the lien arises.
(g) Grantor represents and warrants that (i) except as disclosed in
the Environmental Report, Grantor has no knowledge of any violation of any
Environmental Statute or any Environmental Problem in connection with the
Trust Property, nor has Grantor been requested or required by any
Governmental Authority to perform any remedial activity or other responsive
action in connection with any Environmental Problem and (ii) neither the
Trust Property nor any other property owned by Grantor is included or, to
Grantor's best knowledge, after due inquiry and investigation, proposed for
inclusion on the National Priorities List issued pursuant to CERCLA by the
United States Environmental Protection Agency (the "EPA") or on the CERCLIS
list issued by the EPA and has not otherwise been identified by the EPA as
a potential CERCLA site or included or, to Grantor's knowledge, after due
inquiry and investigation, proposed for inclusion on any list or inventory
issued pursuant to any other Environmental Statute, if any, or issued by
any other Governmental Authority. Grantor covenants that Grantor will
comply with all Environmental Statutes affecting or imposed upon Grantor or
the Trust Property.
(h) Grantor covenants that it shall notify Beneficiary within three (3)
Business Days of receipt of knowledge of the presence (if such presence does
or may violate Environmental Statutes) and/or release of such Hazardous
Material and of any request for information or any inspection of the Trust
Property or any part thereof by any Governmental Authority with respect to
any Hazardous Materials and provide Beneficiary with copies of such request
and any response to any such request or
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inspection. Grantor covenants that it shall, in compliance with applicable
Legal Requirements, conduct and complete all investigations, studies,
sampling and testing (and shall provide Beneficiary with copies of any such
studies and the results of any such test within three (3) Business Days of
the receipt thereof) and all remedial, removal and other actions necessary
to clean up all Hazardous Materials in, on, over, under, from or affecting
the Trust Property or any part thereof in accordance with all such Legal
Requirements applicable to the Trust Property or any part thereof to the
reasonable satisfaction of Beneficiary.
(i) Following (A) the occurrence of an Event of Default hereunder or
(B) if Beneficiary reasonably determines that an Environmental Problem may
exist, and without regard to whether Beneficiary shall have taken
possession of the Trust Property or a receiver has been requested or
appointed or any other right or remedy of Beneficiary has or may be
exercised hereunder or under any other Loan Document, Beneficiary shall
have the right (but no obligation) to conduct such investigations, studies,
sampling and/or testing of the Trust Property or any part thereof as
Beneficiary may, in its discretion, determine to conduct, relative to
Hazardous Materials. All costs and expenses incurred in connection
therewith including, without limitation, consultants' fees and
disbursements and laboratory fees, shall constitute a part of the Debt and
shall, upon demand by Beneficiary, be immediately due and payable and shall
bear interest at the Default Rate from the date so demanded by Beneficiary
until reimbursed.
(j) Grantor represents and warrants that, to the best of its
knowledge, except as disclosed in the Environmental Report, all paint and
painted surfaces existing within the interior or on the exterior of the
Trust Property do not contain lead or are maintained in a condition that
prevents exposure of young children to lead-based paint. To Grantor's
knowledge, there have been no claims for adverse health effects from
exposure on the Trust Property to lead-based paint or requests for the
investigation, assessment or removal of lead-based paint at the Trust
Property.
(k) Grantor represents and warrants that, except in accordance with
all applicable Environmental Statutes and as
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disclosed in the Environmental Report, to the best knowledge of Grantor,
(i) no underground treatment or storage tanks or pumps or water, gas, or
oil wells are or have been located about the Trust Property, (ii) no PCBs
or transformers, capacitors, ballasts or other equipment that contain
dielectric fluid containing PCBs are located about the Trust Property,
(iii) no insulating material containing urea formaldehyde is located about
the Trust Property and (iv) no asbestos-containing material is located
about the Trust Property.
Section 16.02. Environmental Indemnification. Grantor shall defend,
indemnify and hold harmless Beneficiary and Deed Trustee, and their
successors and assigns, and their employees, agents, officers and directors
from and against any claims, demands, penalties, fines, liabilities,
settlements, damages, costs and expenses of whatever kind or nature, known
or unknown, contingent or otherwise, whether incurred or imposed within or
outside the judicial process, including, without limitation, reasonable
attorneys' and consultants' fees and disbursements and investigations and
laboratory fees arising out of, or in any way related to any Environmental
Problem, including without limitation:
(a) the presence, disposal, escape, seepage, leakage,
spillage, discharge, emission, release or threat of release of any
Hazardous Materials in, on, over, under, from or affecting the Trust
Property or any part thereof whether or not disclosed by the
Environmental Report relative to the Trust Property;
(b) any personal injury (including wrongful death, disease or
other health condition related to or caused by, in whole or in part, any
Hazardous Materials) or property damage (real or personal) arising out of
or related to any Hazardous Materials in, on, over, under, from or
affecting the Trust Property or any part thereof whether or not
disclosed by the Environmental Report relative to the Trust Property;
(c) any action, suit or proceeding brought or threatened,
settlement reached, or order of any Governmental Authority relating to
such Hazardous Material whether or not
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disclosed by the Environmental Report relative to the Trust Property;
and/or
(d) any violation of the provisions, covenants,
representations or warranties of Section 16.01 hereof or of any Legal
Requirement which is based on or in any way related to any Hazardous
Materials in, on, over, under, from or affecting the Trust Property or
any part thereof including, without limitation, the cost of any work
performed and materials furnished in order to comply therewith whether or
not disclosed by the Environmental Report relative to the Trust
Property.
Notwithstanding the foregoing provisions of this Section 16.02 to the
contrary, Grantor shall have no obligation to indemnify Beneficiary for
liabilities, claims, damages, penalties, causes of action, costs and
expenses relative to the foregoing which result directly from Beneficiary's
willful misconduct or gross negligence. Any amounts payable to Beneficiary
by reason of the application of this Section 16.02 shall be secured by this
Deed of Trustand shall, upon demand by Beneficiary, become immediately due
and payable and shall bear interest at the Default Rate applicable to the
Class A Portion from the date so demanded by Beneficiary until paid.
This indemnification shall survive the termination of this Deed of
Trust whether by repayment of the Debt, foreclosure or deed in lieu
thereof, assignment, or otherwise. The indemnity provided for in this
Section 16.02 shall not be included in any exculpation of Grantor or its
principals from personal liability provided for in this Deed of Trustor in
any of the other Loan Documents. Nothing in this Section 16.02 shall be
deemed to deprive Beneficiary of any rights or remedies otherwise available
to Beneficiary, including, without limitation, those rights and remedies
provided elsewhere in this Deed of Trustor the other Loan Documents.
ARTICLE XVII: ASSIGNMENTS
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Section 17.01. Participations and Assignments. Beneficiary shall have the
right to assign this Deed of Trustand/or any of the Loan Documents, and to
transfer, assign or sell participations and subparticipations (including
blind or undisclosed participations and subparticipations) in the Loan
Documents and the obligations hereunder to any Person; provided, however,
that no such participation shall increase, decrease or otherwise affect
either Grantor's or Beneficiary's obligations under this Deed of Trustor
the other Loan Documents.
ARTICLE XVIII: MISCELLANEOUS
Section 18.01. Right of Entry. Beneficiary and its agents shall have the
right to enter and inspect the Trust Property or any part thereof at all
reasonable times, and, except in the event of an emergency, upon reasonable
notice and to inspect Grantor's books and records and to make abstracts and
reproductions thereof.
Section 18.02. Cumulative Rights. The rights of Beneficiary under this Deed
of Trustshall be separate, distinct and cumulative and none shall be given
effect to the exclusion of the others. No act of Beneficiary shall be
construed as an election to proceed under any one provision herein to the
exclusion of any other provision. Beneficiary shall not be limited
exclusively to the rights and remedies herein stated but shall be entitled,
subject to the terms of this Deed of Trust, to every right and remedy now
or hereafter afforded by law.
Section 18.03. Liability. If Grantor consists of more than one Person, the
obligations and liabilities of each such Person hereunder shall be joint
and several.
Section 18.04. Exhibits Incorporated. The information set forth on the
cover hereof, and the Exhibits annexed hereto, are hereby incorporated
herein as a part of this Deed of Trustwith the same effect as if set forth
in the body hereof.
Section 18.05. Severable Provisions. If any term, covenant or condition of
the Loan Documents including, without limitation, the Note or
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this Deed of Trust, is held to be invalid, illegal or unenforceable in any
respect, such Loan Document shall be construed without such provision.
Section 18.06. Duplicate Originals. This Deed of Trustmay be executed in
any number of duplicate originals and each such duplicate original shall be
deemed to constitute but one and the same instrument.
Section 18.07. No Oral Change. The terms of this Deed of Trust, together
with the terms of the Note and the other Loan Documents constitute the
entire understanding and agreement of the parties hereto and supersede all
prior agreements, understandings and negotiations between Grantor and
Beneficiary with respect to the Loan. This Deed of Trust, and any
provisions hereof, may not be modified, amended, waived, extended, changed,
discharged or terminated orally or by any act on the part of Grantor or
Beneficiary, 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 18.08. Waiver of Counterclaim, etc. Grantor HEREBY WAIVES THE RIGHT
TO ASSERT A COUNTERCLAIM, OTHER THAN A COMPULSORY COUNTERCLAIM, IN ANY
ACTION OR PROCEEDING BROUGHT AGAINST IT BY BENEFICIARY OR ITS AGENTS, AND
WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING BROUGHT BY EITHER PARTY
HERETO AGAINST THE OTHER OR IN ANY COUNTERCLAIM Grantor MAY BE PERMITTED TO
ASSERT HEREUNDER OR WHICH MAY BE ASSERTED BY BENEFICIARY OR ITS AGENTS,
AGAINST GRANTOR, OR IN ANY MATTERS WHATSOEVER ARISING OUT OF OR IN ANY WAY
CONNECTED WITH THIS Deed of TrustOR THE DEBT.
Section 18.09. Headings; Construction of Documents; etc. The table of
contents, headings and captions of various paragraphs of this Deed of
Trustare 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. Grantor acknowledges that it was represented by competent counsel
in connection with the negotiation and drafting of this Deed of Trustand
the other Loan Documents and that neither this Deed of Trustnor the other
Loan Documents shall be subject to the principle of construing the meaning
against the Person who drafted same.
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Section 18.10. Sole Discretion of Beneficiary. Whenever Beneficiary
exercises any right given to it to approve or disapprove, or any
arrangement or term is to be satisfactory to Beneficiary, the decision of
Beneficiary to approve or disapprove or to decide that arrangements or
terms are satisfactory or not satisfactory shall be in the sole discretion
of Beneficiary and shall be final and conclusive, except as may be
otherwise specifically provided herein.
Section 18.11. Waiver of Notice. Grantor shall not be entitled to any
notices of any nature whatsoever from Beneficiary except with respect to
matters for which this Deed of Trustspecifically and expressly provides for
the giving of notice by Beneficiary to Grantor and except with respect to
matters for which Grantor is not, pursuant to applicable Legal
Requirements, permitted to waive the giving of notice.
Section 18.12. Covenants Run with the Land. All of the grants, covenants,
terms, provisions and conditions herein shall run with the Premises, shall
be binding upon Grantor and shall inure to the benefit of Beneficiary,
subsequent holders of this Deed of Trustand their successors and assigns.
Without limitation to any provision hereof, the term "Grantor" shall
include and refer to the mortgagor named herein, any subsequent owner of
the Trust Property, and its respective heirs, executors, legal
representatives, successors and assigns. The representations, warranties
and agreements contained in this Deed of Trustand the other Loan Documents
are intended solely for the benefit of the parties hereto, shall confer no
rights hereunder, whether legal or equitable, in any other Person and no
other Person shall be entitled to rely thereon.
Section 18.13. Applicable Law. THIS Deed of TrustWAS NEGOTIATED IN NEW
YORK, AND MADE BY Grantor AND ACCEPTED BY BENEFICIARY IN THE STATE OF NEW
YORK, AND THE PROCEEDS OF THE NOTE WERE DISBURSED FROM NEW YORK, WHICH
STATE THE PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND
TO THE UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL RESPECTS,
INCLUDING, WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE. THIS Deed of TrustAND THE
OBLIGATIONS
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ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN
SUCH STATE AND ANY APPLICABLE LAW OF THE UNITED STATES OF AMERICA, EXCEPT
THAT AT ALL TIMES THE PROVISIONS FOR THE CREATION, PERFECTION, PRIORITY,
ENFORCEMENT AND FORECLOSURE OF THE LIENS AND SECURITY INTERESTS CREATED
HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED ACCORDING TO THE LAW OF THE
STATE IN WHICH THE Trust 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 VALIDITY AND ENFORCEABILITY OF ALL LOAN
DOCUMENTS, AND THE DEBT OR OBLIGATIONS ARISING HEREUNDER.
Section 18.14. Security Agreement. (a) (i) This Deed of Trust is both a real
property deed of trust and a "security agreement" within the meaning of the
UCC. The Trust Property includes both real and personal property and all
other rights and interests, whether tangible or intangible in nature, of
Grantor in the Trust Property. This Deed of Trust is filed as a fixture filing
and covers goods which are or are to become fixtures on the Trust Property.
Grantor by executing and delivering this Deed of Trust has granted to
Beneficiary, as security for the Debt, a security interest in the Trust
Property to the full extent that the Trust Property may be subject to the UCC
of the State in which the Trust Property is located (said portion of the
Trust Property so subject to the UCC being called in this Section 18.14 the
"Collateral"). If an Event of Default shall occur, Beneficiary, 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 UCC, including, without
limiting the generality of the foregoing, the right to take possession of the
Collateral or any part thereof, and to take such other measures as
Beneficiary may deem necessary for the care, protection and preservation of
the Collateral. Upon request or demand of Beneficiary following an Event of
Default, Grantor shall, at its expense, assemble the Collateral and make it
available to Beneficiary at a convenient place acceptable to Beneficiary.
Grantor shall pay to Beneficiary on demand any and all expenses, including
reasonable legal expenses and attorneys' fees, incurred or paid by
Beneficiary in protecting its interest in the Collateral and in enforcing its
rights hereunder with respect to the
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Collateral. Any disposition pursuant to the UCC of so much of the Collateral
as may constitute personal property shall be considered commercially
reasonable if made pursuant to a public sale which is advertised at least
twice in a newspaper in which sheriff's sales are advertised in the county
where the Premises is located. Any notice of sale, disposition or other
intended action by Beneficiary with respect to the Collateral given to
Grantor in accordance with the provisions hereof at least ten (10) days prior
to such action, shall constitute reasonable notice to Grantor. The proceeds
of any disposition of the Collateral, or any part thereof, may be applied by
Beneficiary to the payment of the Debt in such priority and proportions as
Beneficiary in its discretion shall deem proper.
(ii) The mention in a financing statement filed in the records normally
pertaining to personal property of any portion of the Trust Property shall
not derogate from or impair in any manner the intention of this Deed of
Trust. Beneficiary hereby declares that all items of Collateral are part of
the real property encumbered hereby to the fullest extent permitted by law,
regardless of whether any such item is physically attached to the
Improvements or whether serial numbers are used for the better identification
of certain items. Specifically, the mention in any such financing statement
of any items included in the Trust Property shall not be construed to alter,
impair or impugn any rights of Beneficiary as determined by this Deed of
Trust or the priority of Beneficiary's lien upon and security interest in the
Trust Property in the event that notice of Beneficiary's priority of interest
as to any portion of the Trust Property is required to be filed in accordance
with the UCC to be effective against or take priority over the interest of
any particular class of persons, including the federal government or any
subdivision or instrumentality thereof.
(b) Grantor hereby irrevocably appoints Beneficiary as its
attorney-in-fact, coupled with an interest, to file with the appropriate
public office on its behalf any financing or other statements signed only by
Beneficiary, as secured party, in connection with the Collateral covered by
this Deed of Trust.
Section 18.15. Actions and Proceedings. Beneficiary has the right to appear
in and defend any action or proceeding brought with
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respect to the Trust Property in its own name or, if required by Legal
Requirements or, if in Beneficiary's reasonable judgment, it is necessary, in
the name and on behalf of Grantor, which Beneficiary believes will adversely
affect the Trust Property or this Deed of Trust and to bring any action or
proceedings, in its name or in the name and on behalf of Grantor, which
Beneficiary, in its discretion, decides should be brought to protect its
interest in the Trust Property.
Section 18.16. Usury Laws. This Deed of Trust and the Note are subject to the
express condition, and it is the expressed intent of the parties, that at no
time shall Grantor be obligated or required to pay interest on the principal
balance due under the Note at a rate which could subject the holder of the
Note to either civil or criminal liability as a result of being in excess of
the maximum interest rate which Grantor is permitted by law to contract or
agree to pay. If by the terms of this Deed of Trust or the Note, Grantor is at
any time required or obligated to pay interest on the principal balance due
under the Note at a rate in excess of such maximum rate, such rate of
interest shall be deemed to be immediately reduced to such maximum rate and
the interest payable shall be computed at such maximum rate and all prior
interest payments in excess of such maximum rate shall be applied and shall
be deemed to have been payments in reduction of the principal balance of the
Note. No application to the principal balance of the Note pursuant to this
Section 18.16 shall give rise to any requirement to pay any prepayment
premium due hereunder, if any, including, without limitation, Yield
Maintenance Premium.
Section 18.17. Remedies of Grantor. In the event that a claim or adjudication
is made that Beneficiary has acted unreasonably or unreasonably delayed
acting in any case where by law or under the Note, this Deed of Trust or the
Loan Documents, it has an obligation to act reasonably or promptly,
Beneficiary shall not be liable for any monetary damages, and Grantor's
remedies shall be limited to injunctive relief or declaratory judgment.
Section 18.18. Offsets, Counterclaims and Defenses. Any assignee of this Deed
of Trust, the Assignment and the Note shall take the same free and clear of
all offsets, counterclaims or defenses which are unrelated to the Note, the
Assignment or this Deed of Trust which
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Grantor may otherwise have against any assignor of this Deed of Trust, the
Assignment and the Note and no such unrelated counterclaim or defense shall
be interposed or asserted by Grantor in any action or proceeding brought by
any such assignee upon this Deed of Trust, the Assignment or the Note and any
such right to interpose or assert any such unrelated offset, counterclaim or
defense in any such action or proceeding is hereby expressly waived by
Grantor.
Section 18.19. No Merger. If Grantor's and Beneficiary's estates become the
same including, without limitation, upon the delivery of a deed by Grantor in
lieu of a foreclosure sale, or upon a purchase of the Trust Property by
Beneficiary in a foreclosure sale, this Deed of Trust and the lien created
hereby shall not be destroyed or terminated by the application of the
doctrine of merger and in such event Beneficiary shall continue to have and
enjoy all of the rights and privileges of Beneficiary as to the separate
estates; and, as a consequence thereof, upon the foreclosure of the lien
created by this Deed of Trust, any Leases or subleases then existing and
created by Grantor shall not be destroyed or terminated by application of the
law of merger or as a result of such foreclosure unless Beneficiary or any
purchaser at any such foreclosure sale shall so elect. No act by or on behalf
of Beneficiary or any such purchaser shall constitute a termination of any
Lease or sublease unless Beneficiary or such purchaser shall give written
notice thereof to such lessee or sublessee.
Section 18.20. Restoration of Rights. In case Beneficiary shall have
proceeded to enforce any right under this Deed of Trust by foreclosure sale,
entry or otherwise, and such proceedings shall have been discontinued or
abandoned for any reason or shall have been determined adversely, then, in
every such case, Grantor and Beneficiary shall be restored to their former
positions and rights hereunder with respect to the Trust Property subject to
the lien hereof.
Section 18.21. Waiver of Statute of Limitations. The pleadings of any statute
of limitations as a defense to any and all obligations secured by this Deed
of Trust are hereby waived to the full extent permitted by Legal Requirements.
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Section 18.22. Advances. This Deed of Trust shall cover any and all advances
made pursuant to the Loan Documents, rearrangements and renewals of the Debt
and all extensions in the time of payment thereof, even though such advances,
extensions or renewals be evidenced by new promissory notes or other
instruments hereafter executed and irrespective of whether filed or recorded.
Likewise, the execution of this Deed of Trust shall not impair or affect any
other security which may be given to secure the payment of the Debt, and all
such additional security shall be considered as cumulative. The taking of
additional security, execution of partial releases of the security, or any
extension of time of payment of the Debt shall not diminish the force, effect
or lien of this Deed of Trust and shall not affect or impair the liability of
Grantor and shall not affect or impair the liability of any maker, surety, or
endorser for the payment of the Debt.
Section 18.23. Application of Default Rate Not a Waiver. Application of the
Default Rate shall not be deemed to constitute a waiver of any Default or
Event of Default or any rights or remedies of Beneficiary under this Deed of
Trust, any other Loan Document or applicable Legal Requirements, or a consent
to any extension of time for the payment or performance of any obligation
with respect to which the Default Rate may be invoked.
Section 18.24. Intervening Lien. To the fullest extent permitted by law, any
agreement hereafter made pursuant to this Deed of Trust shall be superior to
the rights of the holder of any intervening lien.
Section 18.25. No Joint Venture or Partnership. Grantor and Beneficiary
intend that the relationship created hereunder be solely that of Grantor and
mortgagee or borrower and lender, as the case may be. Nothing herein is
intended to create a joint venture, partnership, tenancy-in-common, or joint
tenancy relationship between Grantor and Beneficiary nor to grant Beneficiary
any interest in the Trust Property other than that of mortgagee or lender.
Section 18.26. Time of the Essence. Time shall be of the essence in the
performance of all obligations of Grantor hereunder.
Section 18.27. Grantor's Obligations Absolute. Grantor acknowledges that
Beneficiary and/or certain Affiliates of Beneficiary are engaged
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in the business of financing, owning, operating, leasing, managing, and
brokering real estate and in other business ventures which may be viewed as
adverse to or competitive with the business, prospect, profits, operations or
condition (financial or otherwise) of Grantor. Except as set forth to the
contrary in the Loan Documents, all sums payable by Grantor hereunder shall
be paid without notice or demand, counterclaim, setoff, deduction or defense
and without abatement, suspension, deferment, diminution or reduction, and
the obligations and liabilities of Grantor hereunder shall in no way be
released, discharged, or otherwise affected (except as expressly provided
herein) by reason of: (a) any damage to or destruction of or any Taking of
the Trust Property or any portion thereof or any other Cross-collateralized
Property; (b) any restriction or prevention of or interference with any use
of the Trust Property or any portion thereof or any other
Cross-collateralized Property; (c) any title defect or encumbrance or any
eviction from the Premises or any portion thereof by title paramount or
otherwise; (d) any bankruptcy proceeding relating to Trust, any General
Partner, or any guarantor or indemnitor, or any action taken with respect to
this Deed of Trust or any other Loan Document by any trustee or receiver of
Grantor or any other Cross-collateralized Borrower or any such General
Partner, guarantor or indemnitor, or by any court, in any such proceeding;
(e) any claim which Grantor has or might have against Beneficiary; (f) any
default or failure on the part of Beneficiary to perform or comply with any
of the terms hereof or of any other agreement with Grantor or any other
Cross-collateralized Borrower; or (g) any other occurrence whatsoever,
whether similar or dissimilar to the foregoing, whether or not Grantor shall
have notice or knowledge of any of the foregoing.
Section 18.28. Publicity. All promotional news releases, publicity or
advertising by Manager, Grantor or their respective Affiliates through any
media intended to reach the general public shall not refer to the Loan
Documents or the financing evidenced by the Loan Documents, or to Beneficiary
or to CS First Boston Corporation ("CSFB") without the prior written approval
of Beneficiary or CSFB, as applicable, in each instance, such approval not to
be unreasonably withheld or delayed. Beneficiary shall be authorized to
provide information relating to the Trust Property, the Loan and matters
relating thereto to rating agencies, underwriters,
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potential securities investors, auditors, regulatory authorities and to any
Persons which may be entitled to such information by operation of law.
Section 18.29. Surveillance and Site Inspection Fees. Grantor shall reimburse
Beneficiary on demand an amount equal to (a) all "surveillance fees" charged
by the Rating Agency in connection with the ongoing surveillance of the
Securitization and (b) site inspection fees incurred pursuant to the Trust
and Servicing Agreement (as defined in the Note).
Section 18.30. Intentionally Omitted.
Section 18.31. Intentionally Omitted.
Section 18.32. Exculpation. Notwithstanding anything herein or in any other
Loan Document to the contrary, except as otherwise set forth in this Section
18.32 to the contrary, Beneficiary shall not enforce the liability and
obligation of Grantor or (a) if Grantor is a partnership, its constituent
partners or any of their respective partners, (b) if Grantor is a trust, its
beneficiaries or any of their respective Partners (as hereinafter defined),
(c) if Grantor is a corporation, any of its shareholders, directors,
principals, officers or employees, or (d) if Grantor is a limited liability
company, any of its members (the Persons described in the foregoing clauses
(a)-(d), as the case may be, are hereinafter referred to as the "Partners")
to perform and observe the obligations contained in this Deed of Trust or any
of the other Loan Documents by any action or proceeding wherein a money
judgment shall be sought against Grantor or the Partners, except that
Beneficiary may bring a foreclosure action, action for specific performance,
or other appropriate action or proceeding (including, without limitation, an
action to obtain a deficiency judgment) solely for the purpose of enabling
Beneficiary to realize upon (i) Grantor's interest in the Trust Property,
(ii) the Rent to the extent (x) received by Grantor (or actually received by
its Partners) after the occurrence of an Event of Default, or (y) distributed
to Grantor (or its Partners, but only to the extent received by its Partners)
during or with respect to any period for which Beneficiary did not receive a
Manager Certification accurate in all material respects confirming and
certifying that all Operating
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Expenses with respect to the Trust Property which had accrued as of the
applicable date of such Manager Certification had been paid (or if same had
not been paid, that Manager had taken adequate reserves therefor) (all Rent
covered by clauses (x) and (y) being hereinafter referred to as the "Recourse
Distributions") and (iii) any other collateral given to Beneficiary under the
Loan Documents (collectively, the "Default Collateral"); provided, however,
that any judgment in any such action or proceeding shall be enforceable
against Grantor and the Partners only to the extent of any such Default
Collateral. The provisions of this Section shall not, however, (a) impair the
validity of the Debt evidenced by the Note or in any way affect or impair the
lien of this Deed of Trust or any of the other Loan Documents or the right of
Beneficiary to foreclose this Deed of Trust following the occurrence of an
Event of Default; (b) impair the right of Beneficiary to name Grantor as a
party defendant in any action or suit for judicial foreclosure and sale under
this Deed of Trust; (c) affect the validity or enforceability of the Note,
this Deed of Trust, or any of the other Loan Documents; (d) impair the right
of Beneficiary to obtain the appointment of a receiver; (e) impair the
enforcement of the Assignment; (f) impair the right of Beneficiary to bring
suit for a monetary judgement with respect to fraud or intentional
misrepresentation by Grantor, or any other Person in connection with this
Deed of Trust, the Note or the other Loan Documents, and the foregoing
provisions shall not modify, diminish or discharge the liability of Grantor
or the Partners with respect to same; (g) impair the right of Beneficiary to
bring suit for a monetary judgment to obtain the Recourse Distributions
received by Grantor including, without limitation, the right to bring suit
for a monetary judgement to proceed against any Partner, to the extent of any
such Recourse Distributions theretofore distributed to and received by such
Partner, and the foregoing provisions shall not modify, diminish or discharge
the liability of Grantor or the Partners with respect to same; (h) impair the
right of Beneficiary to bring suit for a monetary judgment with respect to
Grantor's misappropriation of tenant security deposits or Rent collected in
advance, and the foregoing provisions shall not modify, diminish or discharge
the liability of Grantor or the Partners with respect to same; (i) impair the
right of Beneficiary to obtain Loss Proceeds due to Beneficiary pursuant to
this Deed of Trust; (j) impair the right of Beneficiary to enforce the
provisions of Sections 12.01, 16.01 or 16.02,
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inclusive of this Deed of Trust, even after repayment in full by Grantor of
the Debt; (k) prevent or in any way hinder Beneficiary from exercising, or
constitute a defense, or counterclaim, or other basis for relief in respect
of the exercise of, any other remedy against any or all of the collateral
securing the Note as provided in the Loan Documents; (l) impair the right of
Beneficiary to bring suit for a monetary judgment with respect to any
misapplication of Loss Proceeds, and the foregoing provisions shall not
modify, diminish or discharge the liability of Grantor or the Partners with
respect to same; (m) impair the right of Beneficiary to sue for, seek or
demand a deficiency judgment against Grantor solely for the purpose of
foreclosing the Trust Property or any part thereof, or realizing upon the
Default Collateral; provided, however, that any such deficiency judgment
referred to in this clause (m) shall be enforceable against Grantor and the
Partners (but only to the extent distributed to and actually received by such
Partner) only to the extent of any of the Default Collateral; or (n) impair
the ability of Beneficiary to bring a suit for a monetary judgment or
otherwise against Grantor or the Partners (but only to extent distributed to
and actually received by such Partner), nor modify, diminish or discharge the
personal liability of Grantor or the Partners, with respect to the
indemnification set forth in Section 16.02 hereof or (o) impair the right of
Beneficiary to bring a suit for a monetary judgment in the event of the
exercise of any right or remedy under any federal, state or local forfeiture
laws resulting in the loss of the lien of this Deed of Trust, or the priority
thereof, against the Trust Property. The provisions of this Section 18.32
shall be inapplicable to Grantor if any proceeding, action, petition or
filing under the Federal Bankruptcy Reform Act of 1978, as amended, or any
similar state or federal law now or hereafter in effect relating to
bankruptcy, reorganization or insolvency, or the arrangement or adjustment of
debts, shall be filed by, consented to or acquiesced in by or with respect to
Grantor, or if Grantor shall institute any proceeding for its dissolution or
liquidation, or shall make an assignment for the benefit of creditors, in
which event Beneficiary shall have recourse against all of the assets of
Grantor including, without limitation, any right, title and interest of
Grantor in and to the Trust Property, any partnership interests in Grantor
and any Recourse Distributions received by the Partners of Grantor (but
excluding the other assets of such
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Partners to the extent Beneficiary would not have had recourse thereto other
than in accordance with the provisions of this Section 18.32). In connection
with this Section 18.32, it is agreed that a Person (or Partner), other than
Grantor, shall only be personally liable to the extent of Recourse
Distributions actually made to or received by such Person (or Partner).
Section 18.33. Certain Matters Relating to Trust Property located in the
Commonwealth of Virginia. With respect to the Trust Property which is located
in the Commonwealth of Virginia, notwithstanding anything contained herein to
the contrary:
(a) Statutory Short Form References. The following provisions of
Section 55-60 of the Code of Virginia of 1954, as amended (the "Virginia
Code") are hereby incorporated herein by reference:
Exemptions waived.
Subject to all upon default.
Renewal, extension or reinstatement permitted.
Right of anticipation reserved on the terms set forth
in the Note.
Priority in direct order of maturity.
Substitution of Virginia Trustee permitted with or
without cause pursuant to the provisions of
Section 26-49 of the Virginia Code.
(b) Out of Commonwealth Collateral. The Collateral for the Note is
located partly within and partly outside the Commonwealth of Virginia. The
current assessed value of the Trust Property located in the
Commonwealth of Virginia as carried on the real estate rolls of Prince
William County is $___________ and consequently the state Deed of Trust
tax imposed by Section 58.1-803 of the Code of Virginia is partially
exempt pursuant to Section 58.1-801 and 58.1-803B of the Code of
Virginia.
(c) Any Deed Trustee for Virginia May Act. If more than one Deed
Trustee for Virginia is appointed under this Deed of Trust, all rights
granted to and all powers conferred upon the Deed Trustee for Virginia
hereunder may be
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exercised by both or either of the Deed Trustees for Virginia.
(d) Use of Loan Proceeds. The Grantor warrants and stipulates that
the Note evidences a loan made for business or investment purposes.
Section 18.34. Concerning the Deed Trustee. Deed 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 Deed Trustee in any expense
or liability or to institute or defend any suit in respect hereof, unless
properly indemnified to Deed Trustee's reasonable satisfaction. Deed Trustee,
by acceptance of this Deed of Trust, covenants to perform and fulfill the
trusts herein created, being liable, however, only for gross negligence or
willful misconduct, and hereby waives any statutory fee and agrees to accept
reasonable compensation, in lieu thereof, for any services rendered by Deed
Trustee in accordance with the terms hereof. Deed Trustee may resign at any
time upon giving thirty (30) days' notice to Grantor and to Beneficiary.
Beneficiary may remove Deed 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 Deed Trustee, or in its sole
discretion for any reason whatsoever Beneficiary may, without notice and
without specifying any reasons therefor and without applying to any court,
select and appoint a successor trustee, by an instrument recorded wherever
this Deed of Trust is recorded, and all powers, rights, duties and authority
of Deed 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 duties of Deed Trustee hereunder unless required
by Beneficiary. The procedure provided for in this Section 18.34 for
substitution of Deed Trustee shall be in addition to and not in exclusion of
any other provisions for substitution, by law or otherwise.
Section 18.35. Deed Trustee's Fees. Grantor shall pay all costs, fees and
expenses incurred by Deed Trustee and Deed Trustee's agents and counsel in
connection with the performance by Deed Trustee of Deed Trustee's duties
hereunder, and all such costs, fees and expenses shall be secured by this
Deed of Trust.
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* * * * * *
159
<PAGE>
IN WITNESS WHEREOF, Grantor, Deed Trustee and Beneficiary have duly
executed this Deed of Trust the day and year first above written.
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Grantor's Address POTOMAC MILLS - PHASE III (MLP)
LIMITED PARTNERSHIP, a Virginia 1300
Wilson Boulevard limited partnership, Grantor
Suite 400
Arlington, Virginia 22209 By: POTOMAC MILLS L.L.C.,
- ------------------------- its general partner
By: THE MILLS LIMITED PARTNERSHIP,
Managing Member
By: THE MILLS CORPORATION,
its general partner
By: /s/ Thomas E. Frost
-----------------------------------
Thomas E. Frost
Senior Vice President
By: Washington Potomac Partners Corp.,
its general partner
By: /s/ Thomas E. Frost
-----------------------------------
Thomas E. Frost
Senior Vice President
Grantor's Address WASHINGTON OUTLET MALL (MLP)
LIMITED PARTNERSHIP, a Virginia limited
partnership
1300 Wilson Boulevard
Suite 400 By: POTOMAC MILLS L.L.C.,
Arlington, Virginia 22209 its general partner
- -------------------------
By: THE MILLS LIMITED PARTNERSHIP,
Managing Member
By: THE MILLS CORPORATION,
its general partner
By: /s/ Thomas E. Frost
-----------------------------------
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Thomas E. Frost
Senior Vice President
By: Washington Potomac Partners Corp.,
its general partner
By: /s/ Thomas E. Frost
-----------------------------------
Thomas E. Frost
Senior Vice President
Beneficiary SIGNATURE PAGE
Beneficiary:
CS FIRST BOSTON MORTGAGE
CAPITAL CORPORATION
/s/ ____________________________
Name:
Title:
TRUSTEE SIGNATURE PAGE
TRUSTEE:
/s/ R. Eric Taylor
-------------------------------
R. Eric Taylor
162
<PAGE>
STATE OF NEW YORK )
)
COUNTY OF NEW YORK)
I, Sandra B. Todd, a notary public in and for the state and county
aforesaid to do certify that Thomas E. Frost, whose name as Senior Vice
President of the Mills Corporation, general partner of The Mills Limited
Partnership, managing member of Potomac Mills, L.L.C, general partner of
Potomac Mills - Phase III (MLP) Limited Partnership, is signed to the writing
above, bearing date on the 17th day of December, 1996, have acknowledged the
same before me in the county aforesaid.
Given under my hand and official seal this 17th day of December, 1996.
My Term Expires:
SANDRA B TODD /s/ Sandra B Todd
- --------------------------------- -----------------
Notary Public State of New York Notary Public
No. 01T05016707
Qualified in Nassau County
Commission Expires August 23, 1997
<PAGE>
STATE OF NEW YORK )
)
COUNTY OF NEW YORK)
I, Sandra B. Todd, a notary public in and for the state and county
aforesaid do certify that Thomas E. Frost, whose name as Senior Vice
President of The Mills Corporation, general partner of The Mills Limited
Partnership, managing member of Potomac Mills, L.L.C, general partner of
Washington Outlet Mall (MLP) limited Partnership, is signed to the writing
above, bearing date on the 17th day of December, 1996, have acknowledged the
same before me in the county aforesaid.
Given under my hand and official seal this 17th day of December, 1996.
My Term Expires:
SANDRA B TODD /s/ Sandra B Todd
- --------------------------------- -----------------
Notary Public State of New York Notary Public
No. 01T05016707
Qualified in Nassau County
Commission Expires August 23, 1997
<PAGE>
STATE OF NEW YORK )
)
COUNTY OF NEW YORK)
I, Sandra B. Todd, a notary public in and for the state and county
aforesaid do certify that Thomas E. Frost, whose name as Senior Vice
President of Washington Potomac Partners Corp., general partner of
Washington Outlet Mall (MLP) limited Partnership, is signed to the writing
above, bearing date on the 17th day of December, 1996, have acknowledged the
same before me in the county aforesaid.
Given under my hand and official seal this 17th day of December, 1996.
My Term Expires:
SANDRA B TODD /s/ Sandra B Todd
- --------------------------------- -----------------
Notary Public State of New York Notary Public
No. 01T05016707
Qualified in Nassau County
Commission Expires August 23, 1997
<PAGE>
STATE OF NEW YORK )
)
COUNTY OF NEW YORK)
I, Sandra B. Todd, a notary public in and for the state and county
aforesaid do certify that Thomas E. Frost, whose name as Senior Vice
President of Washington Potomac Partners Corp., general partner of Potomac
Mills Phase III (MLP) Limited Partnership, is signed to the writing above,
bearing date on the 17th day of December, 1996, have acknowledged the same
before me in the county aforesaid.
Given under my hand and official seal this 17th day of December, 1996.
My Term Expires:
SANDRA B TODD /s/ Sandra B Todd
- --------------------------------- -----------------
Notary Public State of New York Notary Public
No. 01T05016707
Qualified in Nassau County
Commission Expires August 23, 1997
<PAGE>
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
I, Sandra B. Todd, a notary public in and for state and county aforesaid
do certify that Robert K. Vahradian and whose name as Vice President of CS
First Boston Mortgage Capital Corp. is signed to the writing above, bearing
date on the 17th day of December, 1996, have acknowledged the same before me
in the county aforesaid.
Given under my hand and official seal this 17th day of December, 1996.
My Term Expires:
SANDRA B TODD
- ---------------------------------
Notary Public State of New York
No. 01T05016707
Qualified in Nassau County
Commission Expires August 23, 1997
<PAGE>
DISTRICT OF COLUMBIA; to wit
The foregoing instrument was acknowledged before me this 16th day of
December, 1996 by R. Eric Taylor, Trustee.
/s/ Neal B. Herman
-----------------------------
Neal B. Herman, Notary Public
My Commission Expires on 4/30/99.
<PAGE>
EXHIBIT A
Legal Description
<PAGE>
EXHIBIT B
Initial Sub-Account Deposits
Initial Basic Carrying Costs Deposit: $ 278,289
Initial Central Account Deposit: $ 278,289
Initial Recurring Installments: $0
RR Multiplier: $.25 per
square
foot
<PAGE>
EXHIBIT C
Property:____________________________
Location:____________________________
Cash Flow Statement for Month of:____________ Year:
Current Year to
Month Date
================================================================================
OPERATING INCOME
Minimum Rent
Percentage Rent
Common Area Maintenance Recovery
Real Estate Tax Recovery
Miscellaneous Income
(Less Bad Debt)
Total Operating Revenue ________ ________
OPERATING EXPENSES
Common Area Maintenance*
Real Estate Taxes
Management Fees
Contribution to Promotion Fund
General and Administrative
Other
Total Operating Expenses
Net Operating Income
________ ________
________ ________
================================================================================
<PAGE>
Certified By:_____________________________
Name:_____________________________
Title:_____________________________
Management Company:_____________________________
*Includes Repairs and Maintenance of $______, Utilities of $_____ Insurance
of $_____.
<PAGE>
EXHIBIT D
[Intentionally Omitted]
<PAGE>
EXHIBIT E
Re: [Deed of Trust, Security Agreement, Assignment of
Rents and Fixture Filing] dated as of ________,
199__ by ____________ as Grantorr, to
________________________ as Beneficiary (the
"Deed of Trust")
Gentlemen:
This certificate is delivered in accordance with Article V of the
Deed of Trust. All capitalized terms not defined herein shall have the meanings
described to them in the Deed of Trust.
To date, the funds deposited into the Central Account are not sufficient
to fund or pay, to the extent required to be funded or paid, the Debt Service
Payment Sub-Account, the Basic Carrying Costs Sub-Account, the Operation and
Maintenance Expense Sub-Account, the Recurring Replacement Reserve Sub-Account,
and the Curtailment Reserve Sub-Account. The amount of the deficiency is
___________ Dollars ($______), and such amount must be deposited into the
Central Account prior to the next Payment Date or an Event of Default will exist
under the Deed of Trust.
_________________________, Beneficiary
By:_______________________________
Name:
Title:
<PAGE>
EXHIBIT F
Cross-collateralized Properties Initial Allocated Loan Amount
Gurnee Mills,
Gurnee, Illinois $122,000,000
Potomac Mills,
Dale City, Virginia $162,000,000
<PAGE>
-------------
Assignment of
Leases and Rents and Security Deposits
-------------
Prepared by and upon recordation,
return to:
Brown & Wood LLP
One World Trade Center
New York, New York 10048
Attention: David J. Weinberger, Esq.
<PAGE>
ASSIGNMENT OF LEASES AND RENTS AND SECURITY DEPOSITS
THIS ASSIGNMENT OF LEASES AND RENTS AND SECURITY DEPOSITS
("Assignment"), dated as of December __, 1996, by ________________________
("Assignor"), having the address set forth on the signature page hereof, to CS
First Boston Mortgage Capital Corp. ("Assignee"), having an address at 55 East
52nd Street, New York, New York 10055.
RECITALS
WHEREAS, Assignee has agreed to make a loan (the "Loan") to the
Assignor in the principal amount of $284,000,000.00, for the purpose of
acquiring or refinancing certain real property (the "Property"), more
particularly described in Exhibit A annexed hereto, and the improvement located
thereon owned by and leased by the Assignor to various tenants (hereinafter
referred to as "Lessees") and the Loan is evidenced by the Note which is to be
secured, among other things, by this Assignment.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
1. Definitions. All capitalized undefined terms used herein shall have the
respective meanings assigned thereto in either (a) deed of trust, security
agreement, assignment of rents and fixture filing, or (b) the agreement of
spreader, consolidation and modification of mortgage and note, security
agreement, assignment of rents and fixture filing, as applicable, each of
even date herewith (each hereinafter referred to as a "Mortgage") made
by Assignor to Assignee encumbering or, where applicable, conveying security
title to, the real property identified on Exhibit A hereto. <PAGE>
2. Assignment. To secure the prompt payment and performance of each
obligation secured by the Mortgage, Assignor hereby grants, assigns,
transfers, conveys and sets over to Assignee all of the Assignor's estate,
right, title, interest, claim and demand in, to and under the leases and
other agreements, whether written or oral, affecting the use, enjoyment or
occupancy of the Property and/or the Improvements located thereon, whether
now existing or hereafter arising (including any extensions, modifications or
amendments thereto, the "Leases"), including, without limitation,
(a) all claims, rights, powers, privileges, remedies, options and
other benefits of Assignor under the Leases including, without limitation,
all cash or securities now or hereafter deposited thereunder (including,
without limitation, any bond or other similar instrument obtained by
Assignor and held in lieu of any such deposits to secure such deposits)
(collectively, the "Security Deposits") to secure performance by tenants
of their obligations thereunder, whether such Security Deposits are to be
held until the expiration of the term of any Lease or applied to one or
more of the installments of rent coming due immediately prior to the
expiration of such term and all guarantees of any Leases or other rental
arrangements,
(b) any and all earnings, revenues, rents, issues, profits,
proceeds, avails and other income of and from the Mortgaged Property
(which term, for the purposes of this Assignment, shall be deemed to
include the term "Trust Property", if applicable), including, without
limitation, the Leases now due or to become due or to which Assignor may
now or shall hereafter become entitled to claim or demand including,
without limitation, the Security Deposits as and when applied by Assignor
towards the payment of rents and other payments due pursuant to the Leases
(collectively, the "Rents"),
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<PAGE>
(c) all rights of the lessor under the Lease to exercise any
election or option, to give or receive any notice, consent, waiver or
approval, or to accept any surrender of the Leased Property or any part
thereof,
(d) the right to give and receive copies of all notices and other
instruments or communications under or pursuant to the Lease,
(e) the right to take such action upon the occurrence of a default
under the Lease, including the commencement, conduct and consummation of
legal, administrative or other proceedings, as shall be permitted by the
Lease or by law, and
(f) the right to do any and all other things whatsoever which the
Assignor is or may be entitled to do under the Leases,
together with full power and authority, in the name of Assignor or otherwise,
but without any obligation to do so, and subject to the provisions of this
Assignment including, without limitation, Section 3, to demand, receive,
enforce, collect or receipt for any or all of the foregoing, to endorse or
execute any checks or other instruments or orders, to give receipts, releases
and satisfaction, and to sue, in the name of Assignor or Assignee, for all of
the Rents, to subject and subordinate at any time and from time to time, any
Lease to the security title, security interest and lien, as applicable, of the
Mortgage or any other mortgage or deed of trust affecting the Mortgaged
Property, to file any claims and, to take any action which Assignee may deem
necessary or advisable in connection therewith, Assignor irrevocably appoints
Assignee its true and lawful attorney-in-fact, coupled with an interest, at the
option of Assignee at any time and from time to time. No exercise by Assignee of
any rights of Assignor hereunder or under the other Loan Documents shall release
Assignor from its obligations under the Leases.
3. Certain Rights of Assignee. This Assignment constitutes an absolute, present
assignment and not merely an assignment for additional security. So long as no
Event of
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<PAGE>
Default has occurred and is continuing under this Assignment, all Rents shall be
paid to Assignee (or its designee) and applied in accordance with the provisions
of Article V of the Mortgage for the purposes therein set forth including,
without limitation, payments of interest and principal and any other amounts due
and payable under the Note, Mortgage or other Loan Documents.
Without limitation to any other provision hereof, upon the
occurrence and during the continuance of an Event of Default, Assignee may (but
shall have no obligation to so do), either in person, by agent or by a
court-appointed receiver, at any time without notice, regardless of the adequacy
of Assignee's security, perform all acts necessary and appropriate for the
operation and maintenance of the Mortgaged Property including, but not limited
to, the execution, cancellation or modification of Leases, the collection of all
Rents, the making of repairs to the Premises and the execution or termination of
contracts providing for the management or maintenance of the Mortgaged Property,
or any part thereof, all on such terms as are deemed best to protect the
security of this Assignment. In the event Assignee elects to seek the
appointment of a receiver for the Mortgaged Property, or any part thereof, upon
the occurrence and during the continuance of an Event of Default pursuant to
this Assignment or the other Loan Documents, Assignor hereby expressly consents
to the appointment of such receiver.
Subsequent to the occurrence and during the continuance of any Event
of Default all Rents collected may be applied as Assignee shall determine in
Assignee's discretion, including without limitation to the costs, if any, of
taking possession and control of and managing the Mortgaged Property, or any
part thereof, and collecting such amounts, including, but not limited to,
reasonable attorneys' fees, receiver's fees, premiums on receiver's bonds, costs
of repairs to the Mortgaged Property, or any part thereof, premiums on insurance
policies, taxes, assessments and other charges on the Mortgaged Property, or any
part thereof, and to the Debt in such order and priority as Assignee shall
determine. Assignee and its agents or employees or the receiver shall have
access to the books and records used in the operation and maintenance of the
Premises at reasonable times and upon reasonable notice to Assignor, and shall
be liable to
4
<PAGE>
account only for those Rents actually received. Neither Assignee nor its agents,
employees, officers or directors shall be liable to Assignor, any Person
claiming under or through Assignor or any Person having an interest in the
Leases or any other part of the Mortgaged Property by reason of Assignee's
rights or remedies hereunder or the exercise thereof provided, however, that the
foregoing provisions of this sentence shall not be deemed to alter or amend the
provisions of any indemnification of Assignee (or its agents, employees,
officers and directors) by Assignor hereunder or under the other Loan Documents.
If the Rents are not sufficient to meet the costs, if any, of taking
possession and control of and managing the Mortgaged Property, any funds
expended by Assignee for such purposes shall become a part of the Debt secured
by this Assignment. Such amounts shall be payable upon notice from Assignee to
Assignor requesting payment thereof and shall bear interest from the date of
such notice at the Default Rate until paid.
4. Representations and Warranties of Assignor. All of the representations and
warranties contained in Section __________ of the Mortgage are hereby
incorporated by reference with the same force and effect as if fully restated
herein.
5. No Mortgagee in Possession. The acceptance by Assignee of this Assignment,
with all of the rights, powers, privileges and authority so created, shall not,
prior to entry upon and taking of possession of the Mortgaged Property by
Assignee, be deemed or construed to constitute Assignee a
mortgagee-in-possession nor thereafter or at any time or in any event obligate
Assignee to appear in or defend any action or proceeding relating to the Leases,
the Rents or any other part of the Mortgaged Property, or to take any action
hereunder, or to expend any money or incur any expenses or perform or discharge
any obligation, duty or liability under the Leases, or to assume any obligation
or responsibility for any Security Deposits or other deposits delivered to
Assignor by any obligor thereunder and not assigned and delivered to Assignee,
nor shall Assignee be liable in any way for any injury or damage to Person or
property sustained by any Person in or about the Premises; and that the
5
<PAGE>
collection of said Rents and application as aforesaid and/or the entry upon
and taking possession of the Mortgaged Property or any part thereof by Assignee
or a receiver shall not cure or waive, modify or affect any Event of Default
under the Note, the Mortgage or any other Loan Document so as to
invalidate any act done pursuant to such Event of Default, and the
enforcement of such right or remedy by Assignee, once exercised, shall
continue for so long as Assignee shall elect, notwithstanding that the
collection and application aforesaid of the Rents may have cured for the time
the original Event of Default. If Assignee shall thereafter elect to
discontinue the exercise of any such right or remedy, the same or any other
right or remedy hereunder may be reasserted at any time and from time to time
following any subsequent Event of Default, whether of the same or a different
nature.
6. Certain Agreements of Assignor. Assignor hereby covenants and agrees as
follows:
(a) This Assignment shall transfer to the Assignee all of Assignor's
right, title and interest in and to the Security Deposits, provided that
Assignor shall have the right to retain the Security Deposits so long as no
Event of Default shall have occurred and provided further, that Assignee shall
have no obligation to any such tenant with respect to the Security Deposits
unless and until Assignee comes into actual possession and control thereof;
(b) Assignor shall not terminate, grant concessions in connection
with, modify or amend any Lease without the prior written consent of Assignee
except in accordance with the terms of the Mortgage;
(c) Assignor shall not collect or permit the prepayment of any Rent
more than one (1) month in advance of the date on which it becomes due under the
terms of any Lease (except that Assignor may collect or permit collection of
Security Deposits subject to and only in accordance with the terms of the
Mortgage);
6
<PAGE>
(d) Except as expressly permitted by the Mortgage, Assignor
shall not execute any further pledge or assignment of any Rent or any
interest therein or suffer or permit any such assignment to occur by
operation of law;
(e) Assignor shall faithfully perform and discharge all obligations
of the lessor under the Leases substantially in accordance with the terms
thereof, and shall give prompt written notice to Assignee of any notice of
Assignor's default received from a tenant and shall furnish Assignee with a
complete copy of said notice. Assignor shall appear in and defend any action or
proceeding arising under or in any manner connected with the Leases;
(f) Assignor shall not waive, excuse, condone, discount, set-off,
compromise or in any manner release or discharge any tenant under the Leases, of
and from any obligations, covenants, conditions and agreements by said tenant to
be kept, observed and performed, including the obligation to pay Rents
thereunder, except as permitted by the Mortgage;
(g) Nothing herein shall be construed to impose any liability or
obligation on Assignee under or with respect to the Leases. Neither this
Assignment nor any action or inaction on the part of Assignee shall, without the
prior written consent of Assignee, constitute an assumption on its part of any
obligation under the Leases; nor shall Assignee have any obligation to make any
payment to be made by Assignor under the Leases, or to present or file any
claim, or to take any other action to collect or enforce the payment of any
amounts which have been assigned to Assignee or to which it may be entitled
hereunder at any time or times. No action or inaction on the part of Assignee or
its agents, employees, officers or directors shall adversely affect or limit in
any way the rights of Assignee hereunder or under the Leases. Assignor shall
indemnify and hold Assignee and its agents, employees, officers or directors
harmless from and against any and all liabilities, losses and damages which
Assignee or its agents, employees, officers or directors may incur under the
Leases or by reason of this Assignment, and of and from any and all claims and
demands whatsoever which may be asserted against Assignee or its agents,
employees, officers or
7
<PAGE>
directors by reason of any alleged obligations to be performed or discharged by
Assignee under the Leases or this Assignment including, without limitation, any
liability under the covenant of quiet enjoyment contained in any of the Leases
in the event that any tenant shall have been joined as a party defendant in any
action to foreclose the Mortgage and shall have been barred and foreclosed
thereby of all right, title and interest and equity of redemption in the
Property or any part thereof. Should Assignee or its agents, employees, officers
or directors incur any liability, loss or damage under the Leases or under or by
reason of this Assignment, except for liability, loss or damage resulting solely
from Assignee's gross negligence or willful misconduct, Assignor shall
immediately upon demand reimburse Assignee, its agents, employees, officers or
directors for the amount thereof together with all costs and expenses and
reasonable attorneys' fees incurred by Assignee or its agents, employees,
officers or directors. All of the foregoing sums shall bear interest from the
date so demanded until paid at the Default Rate. Any Rent collected by Assignee
or its agents may be applied by Assignee in its discretion in satisfaction of
any such liability, loss, damage, claim, demand, costs, expense or fees;
(h) Each tenant under the Leases shall make its Rent payable to and
pay such Rent to Assignee (or Assignee's agent or designee) until such time as
Assignee shall, by written notice, direct otherwise. Any Rents which may be
received by Assignor hereafter relating to all or any portion of the term of any
Lease from and after the date hereof shall be promptly delivered to Assignee to
be applied pursuant to Section 3 hereof.
7. Event of Default. The occurrence of an Event of Default pursuant to the
Mortgage shall constitute an Event of Default hereunder.
8. Additional Rights and Remedies of Assignee. In addition to all other rights
and remedies provided herein, under the Loan Documents, or otherwise available
at law or in equity, if an Event of Default occurs and is continuing, Assignee
shall, in its sole discretion, have the following rights and remedies, all of
which are cumulative:
8
<PAGE>
(i) Assignee shall have the right at any time or times thereafter,
at its sole election, without notice thereof to Assignor, to enforce the terms
of the Leases, to sue for or otherwise collect the Rents, whether in Assignor's
or Assignee's name, to enter upon, take possession and manage and control the
Leases and any other part of the Mortgaged Property, with or without notice,
either in person, by agent or by court-appointed receiver, and to otherwise do
any act or incur any costs or expense as Assignee shall deem proper to protect
the security hereof, as fully and to the same extent as Assignor could do in
possession, and in such event to apply the Rents so collected to the operation
and management of the Mortgaged Property, or any part thereof, but in such order
as Assignee may deem proper, and including payment of reasonable management,
brokerage and attorneys' fees, in the name of Assignor, Assignee, a nominee of
Assignee, or in any or all of the said names;
(ii) Assignee shall have the right at any time or times, at its sole
election, without notice thereof, except such notice as may be expressly
provided in the Mortgage, if any, to Assignor, to declare all sums secured
hereby immediately due and payable and, at its option, exercise any and/or all
of the rights and remedies contained in the Note and/or the Mortgage; and
(iii) Assignee shall have the right to assign all or any portion of
Assignee's right, title and interest under this Assignment in any of the Leases
to any subsequent holder of the Note or any participating interest therein or to
any Person acquiring title to the Leases or any other portion of the Mortgaged
Property through foreclosure or otherwise. Any subsequent assignee shall have
all the rights and powers herein provided to Assignee.
9. Additional Security. Assignee may take or release other security for the
payment of the Debt, may release any party primarily or secondarily liable
therefor and may apply any other security held by it to the satisfaction of such
indebtedness, without prejudice to any of its rights under this Assignment.
Assignor shall from time to time upon request of the Assignee, specifically
assign to the Assignee, as additional security for
9
<PAGE>
the payment of the Debt, by an instrument in writing in such form as may be
reasonably approved by the Assignee, all right, title and interest of the
Assignor in and to any and all Leases now or hereafter on or affecting the
Premises, together with all security therefor and all Rents payable thereunder,
subject to the terms hereof. Assignor shall also deliver to the Assignee any
notification, financing statement or other document reasonably required by the
Assignee to perfect the assignment as to any such Lease.
10. Absolute Assignment; Release. The assignment made hereby is an absolute and
unconditional assignment of rights only, and not a delegation of duties. The
execution and delivery hereof shall not in any way impair or diminish the
obligations of Assignor under the provisions of each and every Lease nor shall
such execution and delivery cause any of the obligations contained in the Leases
to be imposed upon Assignee. The assignment contained herein and all rights
herein assigned to Assignee shall cease and terminate as to all Leases and Rents
upon the payment in full of the Debt and the release of the Mortgaged Property
from the security title, security interest and lien, as applicable, of the
Mortgage. In the event Assignee shall have in its possession any Rents or
Security Deposits after payment in full of the Debt, Assignee shall return or
cause such Rents and/or Security Deposits to be returned to Assignor in
accordance with the terms of the Mortgage. In the event that the assignment
contained herein shall so terminate, Assignee shall, upon the written request of
Assignor, deliver to Assignor a termination of this Assignment which shall be in
recordable form, together with a notice to tenants of the Premises instructing
such tenants to make all future payments of Rent to Assignor or to such other
Person as Assignor may direct.
11. Effect on Rights Under Other Documents. Nothing contained in this Assignment
and no act done or omitted by Assignee pursuant to the powers and rights granted
it hereunder shall be deemed to be a waiver by Assignee of its rights and
remedies under the Loan Documents, and this Assignment is made and accepted
without prejudice to any of the rights and remedies possessed by Assignee under
the terms of the Loan Documents. The right of Assignee to collect the Debt and
to enforce any other
10
<PAGE>
security therefor held by it may be exercised by Assignee either prior to,
simultaneously with, or subsequent to any action taken by it hereunder. This
Assignment is intended to be supplementary to and not in substitution for or
in derogation of any assignment of rents contained in the Mortgage or in
any other document.
12. Further Assurances. Assignor hereby agrees that it shall, whenever and as
often as it shall be reasonably requested to do so by Assignee, execute,
acknowledge and deliver, or cause to be executed, acknowledged, and delivered,
in form and substance reasonably acceptable to Assignee, any and all such
further conveyances, instruments, documents, approvals, consents, and memoranda
of the other documents and to do any and all other acts as may be reasonably
necessary or appropriate to effectuate the terms of this Assignment. This
Assignment or a memorandum hereof may be recorded by Assignee at any time.
13. No Waiver. A waiver by Assignee of any of its rights hereunder or under the
Leases or of a breach of any of the covenants and agreements contained herein to
be performed by Assignor shall not be construed as a waiver of such rights in
any succeeding instance or of any succeeding breach of the same or other
covenants, agreements, restrictions or conditions. No waiver by Assignee
hereunder shall be effective unless in writing.
14. Marshalling. Notwithstanding the existence of any other security interest in
the Mortgaged Property or any part thereof held by Assignee or by any other
party, Assignee shall have the right to determine the order in which any of the
Leases or any other portion of the Mortgaged Property shall be subjected to the
remedies provided herein. Assignee shall have the right to determine the order
in which any or all portions of the Debt are satisfied from the proceeds
realized upon the exercise of the remedies provided herein. Assignee and any
Person who now or hereafter acquires a security interest in any of the Leases or
any other portion of the Mortgaged Property and who has actual or constructive
notice hereof hereby waives, to the extent permitted by law, any and all right
to require the marshalling of assets in connection with the exercise of any of
the remedies permitted by applicable Legal Requirements or provided herein.
11
<PAGE>
15. Notices. All notices, demands, requests, consents, approvals or
communications required under this Assignment shall be in writing and shall be
deemed to have been properly given if delivered in accordance with the
provisions of the Mortgage at the addresses set forth in the Mortgage.
16. Counterparts. This Assignment may be executed in any number of counterparts
and shall be deemed to have become effective when and only when one or more of
such counterparts shall have been signed by or on behalf of each of the parties
hereto, although it shall not be necessary that any signed counterpart be signed
by or on behalf of each of the parties hereto, and all such counterparts shall
be deemed to constitute but one and the same instrument.
17. Governing Law; Severability. This Assignment shall be governed by and
construed under the laws of the State of New York applicable to contracts made
and performed in such State, except with respect to the provisions hereof which
relate to realizing upon the security covered by this Assignment which shall be
governed by the law of the State in which the Mortgaged 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 validity and enforceability of
the Loan Documents and the Debt and obligations thereunder. In case any of the
provisions of this Assignment shall at any time be held by a court of competent
jurisdiction to be illegal, invalid, or unenforceable for any reason, such
illegality, invalidity or unenforceability shall not affect the remaining
provisions of this Assignment, and this Assignment shall be construed and
enforced as if all such illegal, invalid or unenforceable provisions had never
been inserted herein.
18. Modification. This Assignment may not be modified or amended except by
written agreement of the parties.
19. Binding Agreement. Assignee may, from time to time, without notice to
Assignor, assign, transfer or convey this Assignment and the other Loan
Documents or all or any of its interest hereunder or under all or any of the
other Loan
12
<PAGE>
Documents and, notwithstanding any such assignment, transfer or conveyance, this
Assignment and the other Loan Documents shall remain in full force and effect.
This Assignment shall be binding upon Assignor, its successors and assigns, and
shall inure to the benefit of Assignee and its successors and assigns.
20. Trial by Jury. Assignor hereby waives the right to assert a counterclaim,
other than a compulsory counterclaim, in any action or proceeding brought
against it by Assignee or its agents and waives trial by jury in any action
or proceeding including, without limitation, any tort action, brought by
either party hereto against the other or in any counterclaim Assignor may be
permitted to assert hereunder or which may be asserted by Assignee or its
agents against Assignor or in any matters whatsoever, arising out of or in
any way connected with Assignor, this Assignment, the Note, the Mortgage
or any of the other Loan Documents.
13
<PAGE>
IN WITNESS WHEREOF, the Assignor has executed this Assignment on the
day and year first hereinabove set forth.
Address of Assignor: _________________________, Assignor
__________________________
__________________________ By: _______________________________
__________________________
By: _______________________________
Name:
Title:
14
<PAGE>
Acknowledgment
<PAGE>
EXHIBIT A
Description of Assignor's Real Property
<PAGE>
================================================================================
GURNEE MILLS (MLP) LIMITED PARTNERSHIP,
as Mortgagor
to
CS FIRST BOSTON MORTGAGE CAPITAL CORP,
as Mortgagee
MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF RENTS
AND FIXTURE FILING
--------------------------
Dated: as of December 17, 1996
PREPARED BY AND UPON RECORDATION RETURN TO:
Brown & Wood LLP
One World Trade Center
57th Floor
New York, New York 10048
Attention: David J. Weinberger, Esq.
================================================================================
<PAGE>
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INDEX
ARTICLE I: DEFINITIONS
Section 1.01. Certain Definitions......................................... 6
ARTICLE II: COVENANTS, WARRANTIES
AND REPRESENTATIONS OF MORTGAGOR
Section 2.01. Payment of Debt............................................. 33
Section 2.02. Representations and Warranties of Mortgagor................. 33
Section 2.03. Further Acts, etc........................................... 43
Section 2.04. Recording of Mortgage, etc.................................. 43
Section 2.05. Representations and Warranties as to the Mortgaged Property. 44
Section 2.06. Removal of Lien............................................. 51
Section 2.07. Cost of Defending and Upholding this Mortgage Lien.......... 52
Section 2.08. Use of the Mortgaged Property............................... 52
Section 2.09. Financial Reports........................................... 52
Section 2.10. Litigation.................................................. 55
ARTICLE III: INSURANCE AND CASUALTY RESTORATION
Section 3.01. Insurance Coverage.......................................... 55
Section 3.02. Policy Terms................................................ 58
Section 3.03. Assignment of Policies...................................... 59
Section 3.04. Casualty Restoration........................................ 61
Section 3.05. Compliance with Insurance Requirements...................... 65
Section 3.06. Event of Default During Restoration......................... 66
Section 3.07. Application of Proceeds to Debt Reduction................... 67
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ARTICLE IV: IMPOSITIONS
Section 4.01. Payment of Impositions, Utilities and Taxes, etc............ 67
Section 4.02. Deduction from Value........................................ 68
Section 4.03. No Joint Assessment......................................... 69
Section 4.04. Right to Contest............................................ 69
Section 4.05. No Credits on Account of the Debt........................... 70
Section 4.06. Documentary Stamps.......................................... 70
ARTICLE V: CENTRAL CASH MANAGEMENT
Section 5.01. Cash Flow................................................... 70
Section 5.02. Establishment of Sub-Accounts. ........................... 71
Section 5.03. Permitted Investments....................................... 72
Section 5.04. Interest on Accounts........................................ 73
Section 5.05. Monthly Funding of Sub-Accounts............................. 73
Section 5.06. Payment of Basic Carrying Costs............................. 75
Section 5.07. Debt Service Payment Sub-Account............................ 76
Section 5.08. Recurring Replacement Reserve Sub-Account................... 76
Section 5.09. Operation and Maintenance Expense Sub-Account............... 77
Section 5.10. Intentionally Omitted....................................... 78
Section 5.11. Curtailment Reserve Sub-Account............................. 78
Section 5.12. Intentionally Omitted....................................... 78
Section 5.13. Loss Proceeds............................................... 78
ARTICLE VI: CONDEMNATION
Section 6.01. Condemnation................................................ 79
ARTICLE VII: LEASES AND RENTS
Section 7.01. Assignment.................................................. 82
Section 7.02. Management of Mortgaged Property............................ 83
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ARTICLE VIII: MAINTENANCE AND REPAIR
Section 8.01. Maintenance and Repair of the Mortgaged Property;
Alterations; Replacement of Equipment........................ 85
ARTICLE IX: TRANSFER OR ENCUMBRANCE OF THE MORTGAGED PROPERTY
Section 9.01. Other Encumbrances. Except for Permitted Liens............ 88
Section 9.02. No Transfer................................................. 88
Section 9.03. Due on Sale................................................. 88
ARTICLE X: CERTIFICATES
Section 10.01. Estoppel Certificates....................................... 89
ARTICLE XI: NOTICES
Section 11.01. Notices..................................................... 90
ARTICLE XII: INDEMNIFICATION
Section 12.01. Indemnification Covering Mortgaged Property................. 90
ARTICLE XIII: DEFAULTS
Section 13.01. Events of Default........................................... 92
Section 13.02. Remedies.................................................... 94
Section 13.03. Payment of Debt After Default............................... 98
Section 13.04. Possession of the Mortgaged Property........................ 99
Section 13.05. Interest After Default...................................... 99
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Section 13.06. Mortgagor's Actions After Default........................... 100
Section 13.07. Control by Mortgagee After Default.......................... 100
Section 13.08. Right to Cure Defaults...................................... 100
Section 13.09. Late Payment Charge......................................... 101
Section 13.10. Recovery of Sums Required to Be Paid........................ 101
Section 13.11. Marshalling and Other Matters............................... 101
Section 13.12. Tax Reduction Proceedings................................... 102
Section 13.13. General Provisions Regarding Remedies....................... 102
ARTICLE XIV: COMPLIANCE WITH REQUIREMENTS
Section 14.01. Compliance with Legal Requirements.......................... 103
Section 14.02. Compliance with Recorded Documents; No Future Grants........ 104
ARTICLE XV: PREPAYMENT; RELEASE
Section 15.01. Prepayment.................................................. 104
Section 15.02. Out-Parcel Severance........................................ 105
Section 15.03. Release of Mortgaged Property............................... 108
ARTICLE XVI: ENVIRONMENTAL COMPLIANCE
Section 16.01. Covenants, Representations and Warranties................... 109
Section 16.02. Environmental Indemnification............................... 113
ARTICLE XVII: ASSIGNMENTS
Section 17.01. Participations and Assignments.............................. 114
ARTICLE XVIII: MISCELLANEOUS
Section 18.01. Right of Entry.............................................. 114
Section 18.02. Cumulative Rights........................................... 114
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Section 18.03. Liability................................................... 115
Section 18.04. Exhibits Incorporated....................................... 115
Section 18.05. Severable Provisions........................................ 115
Section 18.06. Duplicate Originals......................................... 115
Section 18.07. No Oral Change.............................................. 115
Section 18.08. Waiver of Counterclaim, etc................................. 115
Section 18.09. Headings; Construction of Documents; etc.................... 115
Section 18.10. Sole Discretion of Mortgagee................................ 116
Section 18.11. Waiver of Notice............................................ 116
Section 18.12. Covenants Run with the Land................................. 116
Section 18.13. Applicable Law.............................................. 116
Section 18.14. Security Agreement.......................................... 117
Section 18.15. Actions and Proceedings..................................... 118
Section 18.16 Usury Laws................................................... 118
Section 18.17. Remedies of Mortgagor....................................... 119
Section 18.18. Offsets, Counterclaims and Defenses......................... 119
Section 18.19. No Merger................................................... 119
Section 18.20. Restoration of Rights....................................... 119
Section 18.21. Waiver of Statute of Limitations............................ 119
Section 18.22. Advances.................................................... 120
Section 18.23. Application of Default Rate Not a Waiver.................... 120
Section 18.24. Intervening Lien............................................ 120
Section 18.25. No Joint Venture or Partnership............................. 120
Section 18.26. Time of the Essence......................................... 120
Section 18.27. Mortgagor's Obligations Absolute............................ 120
Section 18.28. Publicity................................................... 121
Section 18.29. Surveillance and Site Inspection Fees....................... 121
Section 18.30. Intentionally Omitted....................................... 121
Section 18.31. Intentionally Omitted....................................... 121
Section 18.32. Exculpation................................................. 121
Section 18.33. Certain Matters Relating to Mortgaged Property located
in the State of Illinois ................................... 124
Exhibit A - Legal Description of Premises
Exhibit B - Initial Sub-Account Deposits
Exhibit C - Form of Cash Flow Statement
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Page
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Exhibit D - Required Engineering Work
Exhibit E - Form of Sufficiency Notice
Exhibit F - Cross-collateralized Properties
Exhibit G - Form of Direction Notice
vi
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THIS MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF RENTS AND FIXTURE
FILING is made as of the 17th day of December, 1996, by the party set forth
on the signature page hereto as Mortgagor, having the address set forth on the
signature page hereto (hereinafter referred to as "Mortgagor"), to CS FIRST
BOSTON MORTGAGE CAPITAL CORP. having an address at 11 Madison Avenue,
New York, New York 10010 (hereinafter referred to as "Mortgagee").
W I T N E S S E T H:
WHEREAS, Mortgagee has authorized a loan (hereinafter referred to as the
"Loan") to the Cross-collateralized Borrowers in the maximum principal sum of
TWO HUNDRED EIGHTY-FOUR MILLION and No/100 Dollars ($284,000,000.00)
(hereinafter referred to as the "Loan Amount"), which Loan is evidenced by that
certain note, dated the date hereof (hereinafter referred to as the "Note")
given by the Cross-collateralized Borrowers, as maker, to Mortgagee, as payee;
WHEREAS, in consideration of the Loan, the Cross-collateralized Borrowers
have agreed to make payments in amounts sufficient to pay and redeem, and
provide for the payment and redemption of the principal of, premium, if any, and
interest on the Note when due;
WHEREAS, Mortgagor desires by this Mortgage to provide for, among
other things, the issuance of the Note and for the deposit, deed and pledge
by Mortgagor with, and the creation of a security interest in favor of,
Mortgagee, as security for the Cross-collateralized Borrowers' obligations
to Mortgagee from time to time pursuant to the Note and the other Loan
Documents;
WHEREAS, Mortgagor and Mortgagee intend these recitals to be a material
part of this Mortgage; and
WHEREAS, all things necessary to make this Mortgage the valid and
legally binding obligation of Mortgagor in accordance with its terms, for the
uses and purposes herein set forth, have been done and performed.
<PAGE>
NOW THEREFORE, to secure the payment of the principal of, prepayment
premium (if any) and interest on the Note and all other obligations,
liabilities or sums due or to become due under this Mortgage, the Note
or any other Loan Document, including, without limitation, interest on said
obligations, liabilities or sums (said principal, premium, interest and other
sums being hereinafter referred to as the "Debt"), and the performance of all
other covenants, obligations and liabilities of the Cross-collateralized
Borrowers pursuant to the Loan Documents, Mortgagor has executed and delivered
this Mortgage; and Mortgagor has irrevocably granted, and by these
presents and by the execution and delivery hereof does hereby irrevocably
grant, bargain, sell, alien, demise, release, convey, assign, transfer, deed,
hypothecate, pledge, set over, warrant, mortgage and confirm to Mortgagee,
forever with power of sale, all right, title and interest of Mortgagor in and
to all of the following property, rights, interests and estates:
(a) the plot(s), piece(s) or parcel(s) of real property described
in Exhibit A attached hereto and made a part hereof (individually and
collectively, hereinafter referred to as the "Premises");
(b) (i) all buildings, foundations, structures, fixtures, additions,
enlargements, extensions, modifications, repairs, replacements and
improvements of every kind or nature now or hereafter located on the
Premises (hereinafter collectively referred to as the "Improvements"); and
(ii) to the extent permitted by law, the name or names, if any, as may now
or hereafter be used for each Improvement, and the goodwill associated
therewith;
(c) all easements, rights-of-way, strips and gores of land, streets,
ways, alleys, passages, sewer rights, water, water courses, water rights
and powers, ditches, ditch rights, reservoirs and reservoir rights, air
rights and development rights, lateral support, drainage, gas, oil and
mineral rights, tenements, hereditaments and appurtenances of any nature
whatsoever, in any way belonging, relating or pertaining to the Premises
or the Improvements and the reversion and reversions, remainder and
remainders, whether existing or hereafter acquired, and all land lying in
the
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bed of any street, road or avenue, opened or proposed, in front of or
adjoining the Premises to the center line thereof and any and all
sidewalks, drives, curbs, passageways, streets, spaces and alleys adjacent
to or used in connection with the Premises and/or Improvements and all the
estates, rights, titles, interests, property, possession, claim and demand
whatsoever, both in law and in equity, of Mortgagor of, in and to the
Premises and Improvements every part and parcel thereof, with the
appurtenances thereto;
(d) all machinery, equipment, fittings, apparatus, appliances,
furniture, furnishings, tools, fixtures (including, but not limited to,
all heating, air conditioning, ventilating, waste disposal, sprinkler and
fire and theft protection equipment, plumbing, lighting, communications
and elevator fixtures) and other property of every kind and nature
whatsoever owned by Mortgagor, or in which Mortgagor has or shall have an
interest, now or hereafter located upon, or in, and used in connection
with the Premises or the Improvements, or appurtenant thereto, and all
building equipment, materials and supplies of any nature whatsoever owned
by Mortgagor, or in which Mortgagor has or shall have an interest, now or
hereafter located upon, or in, and used in connection with the Premises or
the Improvements or appurtenant thereto, (hereinafter, all of the
foregoing items described in this paragraph (d) are collectively called
the "Equipment"), all of which, and any replacements, modifications,
alterations and additions thereto, to the extent permitted by applicable
law, shall be deemed to constitute fixtures (the "Fixtures"), and are part
of the real estate and security for the payment of the Debt and the
performance of Mortgagor's obligations. To the extent any portion of the
Equipment is not real property or Fixtures under applicable law, it shall
be deemed to be personal property, and this Mortgage shall
constitute a security agreement creating a security interest therein in
favor of Mortgagee under the UCC;
(e) all awards or payments, including interest thereon, which may
hereafter be made with respect to the Premises, the Improvements, the
Fixtures, or the Equipment, whether from the exercise of the right of
eminent domain
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(including but not limited to any transfer made in lieu of or in
anticipation of the exercise of said right), or for a change of grade, or
for any other injury to or decrease in the value of the Premises, the
Improvements or the Equipment or refunds with respect to the payment of
property taxes and assessments, and all other proceeds of the conversion,
voluntary or involuntary, of the Premises, Improvements, Equipment,
Fixtures or any other Mortgaged Property or part thereof into cash or
liquidated claims;
(f) all leases, tenancies, licenses and other agreements affecting
the use, enjoyment or occupancy of the Premises, the Improvements, the
Fixtures, or the Equipment or any portion thereof now or hereafter entered
into, whether before or after the filing by or against Mortgagor of any
petition for relief under the Bankruptcy Code and all reciprocal easement
agreements, license agreements and other agreements with Pad Owners
(hereinafter collectively referred to as the "Leases"), together with all
cash or security deposits, lease termination payments, advance rentals and
payments of similar nature and guarantees or other security held by
Mortgagor in connection therewith to the extent of Mortgagor's right or
interest therein and all remainders, reversions and other rights and
estates appurtenant thereto, and all base, fixed, percentage or additional
rents, and other rents, oil and gas or other mineral royalties, and
bonuses, issues, profits and rebates and refunds or other payments made by
any Governmental Authority from or relating to the Premises, the
Improvements, the Fixtures or the Equipment plus all rents, common area
charges and other payments, whether paid or accruing before or after the
filing by or against Mortgagor of any petition for relief under the
Bankruptcy Code (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;
(g) all proceeds of and any unearned premiums on any insurance
policies covering the Premises, the Improvements, the Fixtures, the Rent
or the Equipment, including, without limitation, the right to receive and
apply the proceeds of any insurance, judgments, or settlements made in
lieu
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thereof, for damage to the Premises, the Improvements, the Fixtures or the
Equipment and all refunds or rebates of Impositions, and interest paid or
payable with respect thereto;
(h) all monies deposited or to be deposited in any funds or accounts
maintained or deposited with Mortgagee, or its assigns, in connection
herewith, including, without limitation, the Security Deposit Account (to
the extent permitted by law), the Rent Account, the Central Account, the
Basic Carrying Costs Sub-Account, the Debt Service Payment Sub-Account,
the Recurring Replacement Reserve Sub-Account, the Operation and
Maintenance Expense Sub-Account and the Curtailment Reserve Sub-Account;
(i) all accounts receivable, contract rights, franchises, interests,
estate or other claims, both at law and in equity, relating to the
Premises, the Improvements, the Fixtures or the Equipment, not included in
Rents;
(j) all claims against any Person with respect to any damage to the
Premises, the Improvements, the Fixtures or Equipment, including, without
limitation, damage arising from any defect in or with respect to the
design or construction of the Improvements, the Fixtures or the Equipment
and any damage resulting therefrom;
(k) all deposits or other security or advance payments, including
rental payments made by or on behalf of Mortgagor to others, with respect
to (i) insurance policies, (ii) utility services, (iii) cleaning,
maintenance, repair or similar services, (iv) refuse removal or sewer
service, (v) parking or similar services or rights and (vi) rental of
Equipment, if any, relating to or otherwise used in the operation of the
Premises, Improvements, the Fixtures or Equipment;
(l) all intangible property relating to the Premises, the
Improvements, the Fixtures or the Equipment or its operation, including,
without limitation, trade names, trademarks, logos, building names and
goodwill;
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(m) all advertising material, guaranties, warranties, building
permits, other permits, licenses, plans and specifications, shop and
working drawings, soil tests, appraisals and other documents, materials
and/or personal property of any kind now or hereafter existing in or
relating to the Premises, the Improvements, the Fixtures, and the
Equipment;
(n) all drawings, designs, plans and specifications prepared by the
architects, engineers, interior designers, landscape designers and any
other consultants or professionals for the design, development,
construction, repair and/or improvement of the Mortgaged Property, as
amended from time to time;
(o) the right, in the name of and on behalf of Mortgagor, to appear
in and defend any action or proceeding brought with respect to the
Premises, the Improvements, the Fixtures or the Equipment and to commence
any action or proceeding to protect the interest of Mortgagee in the
Premises, the Improvements, the Fixtures or the Equipment; and
(p) all proceeds of each of the foregoing.
All of the foregoing items (a) through (p), together with all of the
right, title and interest of Mortgagor therein, are collectively referred to as
the "Mortgaged Property".
TO HAVE AND TO HOLD the above granted and described Mortgaged Property
unto and to the proper use and benefit of Mortgagee, and the successors and
assigns of Mortgagee in fee simple, forever.
PROVIDED, ALWAYS, and these presents are upon this express condition, if
Mortgagor shall well and truly pay and discharge the Debt and perform and
observe the terms, covenants and conditions set forth in the Loan Documents,
then these presents and the estate hereby granted shall cease and be void.
AND Mortgagor covenants with and warrants to Mortgagee that:
6
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ARTICLE I: DEFINITIONS
Section 1.01. Certain Definitions.
For all purposes of this Mortgage, except as otherwise expressly
provided or unless the context clearly indicates a contrary intent:
(1) the capitalized terms defined in this Section have the meanings
assigned to them in this Section, and include the plural as well as the
singular;
(2) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP; and
(3) the words "herein", "hereof", and "hereunder" and other words of
similar import refer to this Mortgage as a whole and not to any
particular Section or other subdivision.
"Affiliate" of any specified Person shall mean any other Person directly
or indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control", when used with respect to any specified Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have the meanings correlative to
the foregoing.
"Aggregate Debt Service Coverage" shall mean the quotient obtained by
dividing the aggregate Net Operating Income for all of the Cross-collateralized
Properties for the specified period by the aggregate payments of interest and
principal (not including the amount of principal payable upon Maturity) due for
such specified period under the Note (determined as of the date the calculation
of Aggregate Debt Service Coverage is required or requested hereunder).
7
<PAGE>
"Affected Leases" shall have the meaning set forth in Section 8.01(c)
hereof.
"Allocated Loan Amount" shall mean the Initial Allocated Loan Amount of
each Cross-collateralized Property as such amount may be adjusted from time
to time as hereinafter set forth. Upon each adjustment in the principal
portion of the Debt (each a "Total Adjustment"), whether as a result of
amortization, or prepayment or as otherwise expressly provided herein or in
any other Loan Document, each Allocated Loan Amount shall be increased or
decreased, as the case may be, by an amount equal to the product of (i) the
Total Adjustment, and (ii) a fraction, the numerator of which is the
applicable Allocated Loan Amount (prior to the adjustment in question) and
the denominator of which is the Debt prior to the adjustment to the principal
portion of the Debt which results in the recalculation of the Allocated Loan
Amount. However, when the principal portion of the Debt is reduced as a
result of Mortgagee's receipt of (i) Net Proceeds, the Allocated Loan
Amounts for the Cross-collateralized Property with respect to which the Net
Proceeds were received shall be reduced to zero (the amount by which such
Allocated Loan Amount is reduced being referred to as the "Foreclosed
Allocated Amount") and each other Allocated Loan Amount shall (x) if the Net
Proceeds exceed the Foreclosed Allocated Amount (such excess being referred
to as the "Surplus Net Proceeds"), be decreased by an amount equal to the
product of (1) the Surplus Net Proceeds and (2) a fraction, the numerator of
which is the applicable Allocated Loan Amount (prior to the adjustment in
question) and the denominator of which is the aggregate of all of the
Allocated Loan Amounts (prior to the adjustment in question) other than the
Allocated Loan Amount applicable to the Cross-collateralized Property with
respect to which the Net Proceeds were received (such fraction being referred
to as the "Net Proceeds Adjustment Fraction"), (y) if the Foreclosed
Allocated Amount exceeds the Net Proceeds (such excess being referred to as
the "Net Proceeds Deficiency"), be increased by an amount equal to the
product of (1) the Net Proceeds Deficiency and (2) the Net Proceeds
Adjustment Fraction, or (z) if the Net Proceeds equal the Foreclosed
Allocated Amount, remain unadjusted, or (ii) Loss Proceeds or partial
prepayments, made in accordance with Section 15.01 hereof, the Allocated Loan
Amount for the Cross-collateralized Property with respect to which the Loss
Proceeds
8
<PAGE>
or voluntary prepayments were received shall be decreased by an amount equal
to the sum of (A) with respect to Loss Proceeds, Loss Proceeds which are
applied towards the reduction of the Debt as set forth in Article III hereof,
if any, and (B) with respect to voluntary prepayments, the amount of any such
voluntary prepayment which is applied towards the reduction of the Debt in
accordance with the provisions of the Note, if any, but in no event shall the
Allocated Loan Amount for the Cross-collateralized Property with respect to
which the Loss Proceeds or voluntary prepayments were received be reduced to
an amount less than zero (the amount by which such Allocated Loan Amount is
reduced being referred to as the "Loss Proceeds or Prepayment Allocated
Amount") and each other Allocated Loan Amount shall be decreased by an amount
equal to the product of (1) the excess of (a) the Loss Proceeds or such
partial prepayments over (b) the Loss Proceeds or Prepayment Allocated
Amount, and (2) a fraction, the numerator of which is the applicable
Allocated Loan Amount (prior to the adjustment in question) and the
denominator of which is the aggregate of all of the Allocated Loan Amounts
(prior to the adjustment in question) other than the Allocated Loan Amount
applicable to the Cross-collateralized Property to which such Loss Proceeds
or partial prepayments were applied.
"Allocation Date" shall mean each Tuesday and Thursday in a Current Month,
unless such day is not a Business Day, in which event the Allocation Date shall
be the next Business Day thereafter.
"Appraisal" shall mean the appraisal of the Mortgaged Property and all
supplemental reports or updates thereto previously delivered to Mortgagee in
connection with the Loan.
"Appraiser" shall mean the Person who prepared the Appraisal.
"Approved Manager Standard" shall mean the standard of business
operations, practices and procedures customarily employed by entities having
a senior executive with at least seven (7) years' experience in the
management of value oriented super-regional malls which manage not less than
5,000,000 feet of gross leasable area, including, without limitation, certain
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super-regional malls which contain more than 1,500,000 square feet of gross
leasable area.
"Approved TI Costs" shall mean costs up to an amount not to exceed
$500,000 in the aggregate per Loan Year which are actually and reasonably
incurred by Mortgagor for improvements required to be made by Mortgagor under
the terms of any Space Lease which are approved by Mortgagee, which approval
may be granted or denied in Mortgagee's sole and absolute discretion.
"Architect" shall have the meaning set forth in Section 3.04(b)(i) hereof.
"Assignment" shall mean the Assignment of Leases and Rents and Security
Deposits of even date herewith relating to the Mortgaged Property given by
Mortgagor to Mortgagee.
"Bank" shall mean Nationsbank N.A., or any successor bank hereafter
selected by Mortgagee, subject to the approval of Mortgagor, which shall not be
unreasonably withheld, delayed or conditioned.
"Bankruptcy Code" shall mean 11 U.S.C. ss.101 et seq.
"Basic Carrying Costs" shall mean the sum of the following costs
associated with the Mortgaged Property: (a) Impositions (excluding those
Impositions which may be assessed or imposed on or constitute a lien upon
Mortgagor only, as opposed to the Mortgaged Property or any part thereof or
interest therein) and (b) insurance premiums.
"Basic Carrying Costs Monthly Installment" shall mean Mortgagee's
estimate of one-twelfth (1/12th) of the annual amount for Basic Carrying
Costs. "Basic Carrying Costs Monthly Installment" shall also include, if
required by Mortgagee, a sum of money which, together with such monthly
installments, will be sufficient to make the payment of each such Basic
Carrying Cost at least thirty (30) days prior to the date initially due.
Should such Basic Carrying Costs not be ascertainable at the time any monthly
deposit is required to be made, the Basic Carrying Costs Monthly Installment
shall be determined by Mortgagee in its reasonable discretion on the basis
of the aggregate Basic
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Carrying Costs for the prior Fiscal Year or month or the prior payment period
for such cost. As soon as the Basic Carrying Costs are fixed for the then
current Fiscal Year, month or period, the next ensuing Basic Carrying Costs
Monthly Installment shall be adjusted to reflect any deficiency or surplus in
prior monthly payments. If at any time during the term of the Loan Mortgagee
determines that there will be insufficient funds in the Basic Carrying Costs
Sub-Account to make payments when they become due and payable, Mortgagee shall
have the right to adjust the Basic Carrying Costs Monthly Installment such that
there will be sufficient funds to make such payments.
"Basic Carrying Costs Sub-Account" shall mean the Sub-Account of the
Central Account established pursuant to Section 5.02 hereof and maintained
pursuant to Section 5.06 hereof.
"Business Day" shall mean any day other than (a) a Saturday or Sunday, or
(b) a day on which banking and savings and loan institutions in the State of New
York are authorized or obligated by law or executive order to be closed, or at
any time during which the Loan is an asset of a securitization, the cities,
states and/or commonwealths used in the comparable definition of "Business Day"
in the securitization documents which shall initially include Illinois and
Georgia.
"Central Account" shall mean an Eligible Account, maintained at the Bank,
in the name of Mortgagee or its successors or assigns (as secured party) as
be designated by Mortgagee.
"Closing Date" shall mean the date of the Note.
"Closing DSC" shall mean 1.5:1.
"Code" shall mean the Internal Revenue Code of 1986, as amended and as it
may be further amended from time to time, any successor statutes thereto, and
applicable U.S. Department of Treasury regulations issued pursuant thereto.
"Collection Account" shall mean one or more demand deposit account(s)
designated by Mortgagee, which shall be an Eligible Account, to which payments
of Debt are transferred.
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"Condemnation Proceeds" shall mean all of the proceeds in respect of any
Taking or purchase in lieu thereof.
"Contractual Obligation" shall mean, as to any Person, any provision of
any security issued by such Person or of any agreement, instrument or
undertaking to which such Person is a party or by which it or any of the
property owned by it is bound.
"CPI" shall mean "The Consumer Price Index (New Series) (Base Period
1982-84=100) (all items for all urban consumers)" issued by the Bureau of
Labor Statistics of the United States Department of Labor (the "Bureau"). If
the CPI ceases to use the 1982-84 average equaling 100 as the basis of
calculation, or if a change is made in the term, components or number of
items contained in said index, or if the index is altered, modified,
converted or revised in any other way, then the index shall be adjusted to
the figure that would have been arrived at had the change in the manner of
computing the index in effect at the date of this Mortgage not been
altered. If at any time during the term of this Mortgage the CPI shall
no longer be published by the Bureau, then any comparable index issued by the
Bureau or similar agency of the United States issuing similar indices shall
be used in lieu of the CPI.
"Cross-collateralized Borrowers" shall mean each Person which has executed
the Note secured by this Mortgage.
"Cross-collateralized Mortgage" shall mean each mortgage, deed of
trust, deed to secure debt, security agreement, assignment of rents and
fixture filings as originally executed or as same may hereafter from time to
time be supplemented, amended, modified or extended by one or more indentures
supplemental thereto granted by a Cross-collateralized Borrower to Mortgagee
as security for the Note.
"Cross-collateralized Property" shall mean each parcel or parcels of real
property encumbered by a Cross-collateralized Mortgage as identified on
Exhibit F attached hereto and made a part hereof.
"Current Month" shall mean each Interest Accrual Period.
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"Curtailment Reserve Sub-Account" shall mean the Sub-Account established
pursuant to Section 5.02 hereof and maintained pursuant to Section 5.11 hereof
for the purpose of holding certain Excess Rent.
"Debt" shall have the meaning set forth in the recitals hereto.
"Debt Service" shall mean the amount of interest and principal payments
due and payable in accordance with the Note during an applicable period.
"Debt Service Coverage" shall mean the quotient obtained by dividing Net
Operating Income for the specified period by the sum of the aggregate payments
of interest and principal for such specified period under the Note (determined
as of the date the calculation of Debt Service Coverage is required or
requested hereunder).
"Debt Service Payment Sub-Account" shall mean the Sub-Account of the
Central Account established pursuant to Section 5.02 hereof and maintained
pursuant to Section 5.07 hereof for the purposes of making Debt Service
payments.
"Default" shall mean any Event of Default or event which would constitute
an Event of Default if all requirements in connection therewith for the giving
of notice, the lapse of time, and the happening of any further condition, event
or act, had been satisfied.
"Default Rate" shall have the meaning set forth in the Note.
"Default Rate Interest" shall mean, to the extent the Default Rate becomes
applicable, interest accrued on the Note in excess of the interest which would
have accrued at the Class A Rate, the Class B Rate, the Class C Rate, or the
Class D Rate, each as defined in the Note, on (a) the principal amount of the
Loan which is outstanding from time to time and (b) any accrued but unpaid
interest (other than Default Rate Interest), if the Default Rate was not
applicable.
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"Development Laws" shall mean all applicable subdivision, zoning,
environmental protection, wetlands protection, or land use laws or ordinances,
and any and all applicable rules and regulations of any Governmental Authority
promulgated thereunder or related thereto.
"Distribution Date" shall mean the twentieth (20th) day of each calendar
month or, if such twentieth (20th) day is not a Business Day, on the Business
Day immediately after the twentieth (20th) day of such calendar month.
"Eligible Account" shall mean a segregated account which is either (i) an
account or accounts maintained with a depository institution or trust company
the long term unsecured debt obligations of which are rated by the Rating Agency
(or the Rating Agency has confirmed in writing that such account would not, in
and of itself, result in a downgrade, qualification or withdrawal of the then
current ratings assigned to any certificates issued in connection with a
Securitization) in one of its two highest rating categories at all times (or, in
the case of the Rent Account and the Basic Carrying Costs Sub-Account, the long
term unsecured debt obligations of which are rated at least "AA" or the
equivalent by the Rating Agency (or,
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the Rating Agency has confirmed in writing that such account would not, in
and of itself, result in a downgrade, qualification or withdrawal of the
then current ratings assigned to any certificates issued in connection with a
Securitization) or, if the funds in such account are to be held in such
account for less than 30 days, the short term obligations of which are rated
by the Rating Agency (or, if not rated by the Rating Agency, the Rating
Agency has confirmed in writing that such account would not, in and of
itself, result in a downgrade, qualification or withdrawal of the then
current ratings assigned to any certificates issued in connection with a
Securitization) in its highest rating category at all times) or (ii) a
segregated trust account or accounts maintained with a federal or state
chartered depository institution or trust company acting in its fiduciary
capacity which, in the case of a state chartered depository institution is
subject to regulations substantially similar to 12 C.F.R. ss. 9.10(b), having
in either case a combined capital and surplus of at least $100,000,000 and
subject to supervision or examination by federal and state authority, or the
Rating Agency has confirmed in writing that such account would not, in and of
itself, cause a downgrade, qualification or withdrawal of the then current
ratings assigned to any certificates issued in connection with a
Securitization, which may be an account maintained by Mortgagee or its
agents or (iii) an account in any other insured depository institution
reasonably acceptable to Mortgagee and the Rating Agency as confirmed in
writing that such account would not, in and of itself, result in a downgrade,
qualification or withdrawal of the then current ratings of any certificates
issued in connection with a Securitization. Eligible Accounts may bear
interest. The title of each Eligible Account shall indicate that the funds
held therein are held in trust for the uses and purposes set forth herein.
"Engineer" shall have the meaning set forth in Section 3.04(b)(i) hereof.
"Environmental Problem" shall mean any of the following:
(a) the presence of any Hazardous Material on, in, under, or above
all or any portion of the Mortgaged Property, which Mortgagor would be
required to report to a Governmental Authority;
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(b) the release or threatened release of any Hazardous Material
from or onto the Mortgaged Property which Mortgagor would be required to
report to a Governmental Authority;
(c) the violation or threatened violation of any Environmental
Statute with respect to the Mortgaged Property; or
(d) the failure to obtain or to abide by the terms or conditions of
any permit or approval required under any Environmental Statute with
respect to the Mortgaged Property.
A condition described above shall be an Environmental Problem regardless of
whether or not any Governmental Authority has taken any action in connection
with the condition and regardless of whether that condition was in existence on
or before the date hereof.
"Environmental Report" shall mean the environmental audit report for the
Mortgaged Property and any supplements or updates thereto, previously delivered
to Mortgagee in connection with the Loan.
"Environmental Statute" shall mean any effective, applicable or relevant
federal, state or local statute, ordinance, rule or regulation, any judicial or
administrative order (whether or not on consent) or judgment applicable to
Mortgagor or the Mortgaged Property including, without limitation, any judgment
or settlement based on common law theories, and any provisions or condition of
any permit, license or other authorization binding on Mortgagor relating to (a)
the protection of the environment, the safety and health of persons (including
employees) or the public welfare from actual or potential exposure (or effects
of exposure) to any actual or potential release, discharge, disposal or emission
(whether past or present) of any Hazardous Materials or (b) the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of any Hazardous Materials, including, but not limited to, the
Comprehensive Environmental Response, Compensation and Liability Act of 1980
("CERCLA"), as amended by the Superfund Amendments and
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Reauthorization Act of 1986, 42 U.S.C. ss.9601 et seq., the Solid Waste Disposal
Act, as amended by the Resource Conservation and Recovery Act of 1976, as
amended by the Solid and Hazardous Waste Amendments of 1984, 42 U.S.C. ss.6901
et seq., the Federal Water Pollution Control Act, as amended by the Clean Water
Act of 1977, 33 U.S.C. ss.1251 et seq., the Toxic Substances Control Act of
1976, 15 U.S.C. ss.2601 et seq., the Emergency Planning and Community
Right-to-Know Act of 1986, 42 U.S.C. ss.1101 et seq., the Clean Air Act of 1966,
as amended, 42 U.S.C. ss.7401 et seq., the National Environmental Policy Act of
1975, 42 U.S.C. ss.4321, the Rivers and Harbours Act of 1899, 33 U.S.C. ss.401
et seq., the Endangered Species Act of 1973, as amended, 16 U.S.C. ss.1531 et
seq., the Occupational Safety and Health Act of 1970, as amended, 29 U.S.C.
ss.651 et seq., and the Safe Drinking Water Act of 1974, as amended, 42 U.S.C.
ss.300(f) et seq., and all rules, regulations and guidance documents promulgated
or published thereunder.
"Equipment" shall have the meaning set forth in granting clause (d) of
this Mortgage.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated thereunder. Section
references to ERISA are to ERISA, as in effect at the date of this Mortgage and,
as of the relevant date, any subsequent provisions of ERISA, amendatory thereof,
supplemental thereto or substituted therefor.
"ERISA Affiliate" shall mean any corporation or trade or business that is
a member of any group of organizations (a) described in Section 414(b) or (c) of
the Code of which Mortgagor is a member and (b) solely for purposes of potential
liability under Section 302(c)(11) of ERISA and Section 412(c)(11) of the Code
and the lien created under Section 302(f) of ERISA and Section 412(n) of the
Code, described in Section 414(m) or (o) of the Code of which Mortgagor is a
member.
"Event of Default" shall have the meaning set forth in Section 13.01
hereof.
"Excess Rent" shall have the meaning set forth in Section 5.05 hereof.
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"First Interest Accrual Period" shall mean the period commencing on the
Closing Date and ending on January 19, 1997.
"First Payment Date" shall mean the Payment Date in the month following
the month in which the Loan is initially funded.
"Fiscal Year" shall mean the twelve-month period commencing on January 1
and ending on December 31 during each year of the term of this Mortgage,
or such other fiscal year of Mortgagor as Mortgagor may select from time
to time with the prior written consent of Mortgagee.
"Fixtures" shall have the meaning set forth in granting clause (d) of this
Mortgage.
"GAAP" shall mean generally accepted accounting principles in the United
States of America, as of the date of the applicable financial report,
consistently applied (except for changes in application as to which Mortgagor's
independent certified accountants and Mortgagee concur).
"General Partner" shall mean, if Mortgagor is a partnership, each general
partner of Mortgagor and, if applicable, each general partner of such general
partner.
"Governmental Authority" shall mean, with respect to any Person, any
federal or State government or other political subdivision thereof and any
entity, including any regulatory or administrative authority or court,
exercising executive, legislative, judicial, regulatory or administrative or
quasi-administrative functions of or pertaining to government, and any
arbitration board or tribunal in each case, having jurisdiction over such
applicable Person or such Person's property and any stock exchange on which
shares of capital stock of such Person are listed or admitted for trading.
"Hazardous Material" shall mean any flammable, explosive or radioactive
materials, hazardous materials or wastes, hazardous or toxic substances,
pollutants, asbestos or any material containing asbestos, or any other similar
substance or material, in each case as defined in or regulated by any
Environmental Statutes.
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"Impositions" shall mean all taxes (including, without limitation, all
real estate, ad valorem, sales (including those imposed on lease rentals),
use, single business, gross receipts, value added, intangible, transaction,
privilege or license or similar taxes), assessments (including, without
limitation, all assessments for public improvements or benefits, whether or
not commenced or completed prior to the date hereof and whether or not
commenced or completed within the term of this Mortgage), ground rents,
water, sewer or other rents and charges, excises, levies, fees (including,
without limitation, license, permit, inspection, authorization and similar
fees), and all other governmental charges, in each case whether general or
special, ordinary or extraordinary, or foreseen or unforeseen, of every
character in respect of the Mortgaged Property and/or any Rent (including all
interest and penalties thereon), which at any time prior to, during or in
respect of the term hereof may be assessed or imposed on or in respect of or
be a lien upon (a) Mortgagor (including, without limitation, all franchise,
single business or other taxes imposed on Mortgagor for the privilege of
doing business in the jurisdiction in which the Mortgaged Property or any
other collateral delivered or pledged to Mortgagee in connection with the
Loan is located) or Mortgagee, (b) the Mortgaged Property or any part thereof
or any Rent therefrom or any estate, right, title or interest therein, or (c)
any occupancy, operation, use or possession of, or sales from, or activity
conducted on, or in connection with the Mortgaged Property, or any part
thereof, or the leasing or use of the Mortgaged Property, or any part
thereof, or the acquisition or financing of the acquisition of the Mortgaged
Property, or any part thereof, by Mortgagor.
"Improvements" shall have the meaning set forth in the granting clause (b)
of this Mortgage.
"Independent" shall mean, when used with respect to any Person, a Person
who (a) is in fact independent, (b) does not have any direct financial interest
or any material indirect financial interest in Mortgagor, or in any Affiliate of
Mortgagor or any constituent partner, shareholder, member or beneficiary of
Mortgagor and (c) is not connected with Mortgagor or any Affiliate of Mortgagor
or any constituent partner, shareholder,
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member or beneficiary of Mortgagor as an officer, employee, promoter,
underwriter, trustee, partner, director or person performing similar functions;
provided, however, that a Person shall not be deemed to be connected with
Mortgagor or any Affiliate of Mortgagor solely by reason of such Person being a
director of a Single Purpose Entity. Whenever it is herein provided that any
Independent Person's opinion or certificate shall be provided, such opinion or
certificate shall state that the Person executing the same has read this
definition and is Independent within the meaning hereof.
"Initial Allocated Loan Amount" shall mean the portion of the Loan Amount
allocated to each Cross-collateralized Property as set forth on Exhibit F
annexed hereto and made a part hereof.
"Initial Basic Carrying Costs Deposit" shall equal the amount set forth on
Exhibit B attached hereto and made a part hereof.
"Initial Central Account Deposit" shall equal the amount set forth on
Exhibit B attached hereto and made a part hereof.
"Institutional Lender" shall mean any of the following Persons: (a) any
bank, savings and loan association, savings institution, trust company or
national banking association, acting for its own account or in a fiduciary
capacity, (b) any charitable foundation, (c) any insurance company or pension
and/or annuity company, (d) any fraternal benefit society, (e) any pension,
retirement or profit sharing trust or fund within the meaning of Title I of
ERISA or for which any bank, trust company, national banking association or
investment adviser registered under the Investment Advisers Act of 1940, as
amended, is acting as trustee or agent, (f) any investment company or business
development company, as defined in the Investment Company Act of 1940, as
amended, (g) any small business investment company licensed under the Small
Business Investment Act of 1958, as amended, (h) any broker or dealer registered
under the Securities and Exchange Act of 1934, or any investment adviser
registered under the Investment Adviser Act of 1940, as amended, (i) any
government, any public employees' pension or retirement system, or any other
government agency supervising the investment of public funds, or (j) any other
entity all of the
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equity owners of which are Institutional Lenders; provided that each of said
Persons shall have net assets equal to or greater than $500,000,000, be in the
business of making commercial mortgage loans, secured by properties of like
type, size and value as the Mortgaged Property and have a long term credit
rating which is not less than BBB- (or its equivalent) from the Rating Agency.
"Insurance Proceeds" shall mean all of the proceeds received under the
insurance policies required to be maintained by Mortgagor pursuant to Article
III hereof.
"Insurance Requirements" shall mean all terms of any insurance policy
required by this Mortgage, all requirements of the issuer of any such policy,
and all regulations and then current standards applicable to or affecting the
Mortgaged Property or any use or condition thereof, which may, at any time,
be recommended by the Board of Fire Underwriters, if any, having jurisdiction
over the Mortgaged Property, or such other Person exercising similar
functions.
"Interest Accrual Period" shall mean (x) the First Interest Accrual Period
and, (y) thereafter, each period commencing on and including the Distribution
Date in the immediately preceding calendar month and ending on and including the
day immediately preceding the Distribution Date in the calendar month in which
the applicable Payment Date occurs, each of which periods shall be treated as
one-month for purposes of computing the interest accruing during such period.
"Late Charge" shall have the meaning set forth in Section 13.09 hereof.
"Leases" shall have the meaning set forth in granting clause (f) of this
Mortgage.
"Legal Requirement" shall mean as to any Person, the certificate of
incorporation, by-laws, certificate of limited partnership, agreement of limited
partnership or other organization or governing documents of such Person, and any
law, statute, order, ordinance, judgement, decree, injunction, treaty, rule or
regulation (including, without limitation, Environmental
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Statutes, Development Laws and Use Requirements) or determination of an
arbitrator or a court or other Governmental Authority and all covenants,
agreements, restrictions and encumbrances contained in any instruments, in each
case applicable to or binding upon such Person or any of its property or to
which such Person or any of its property is subject.
"Loan" shall have the meaning set forth in the Recitals hereto.
"Loan Amount" shall have the meaning set forth in the Recitals hereto.
"Loan Documents" shall mean this Mortgage, the Note, the
Assignment, and any and all other agreements, instruments, certificates or
documents executed and delivered by Mortgagor or any of the
Cross-collateralized Borrowers or any Affiliate of Mortgagor in connection with
the Loan.
"Loan Year" shall mean each 365 day period (or 366 day period if the month
of February in a leap year is included) commencing on the first day each January
after the Closing Date (provided, however, that the first Loan Year shall also
include the period from the Closing Date to the end of the month in which the
Closing Date occurs).
"Loss Proceeds" shall mean, collectively, all Insurance Proceeds and all
Condemnation Proceeds.
"Major Space Lease" shall mean any Space Lease of a tenant or Affiliate of
such tenant where such tenant or such Affiliate leases, in the aggregate, 40,000
or more square feet of the Total GLA.
"Manager" shall mean the Person, other than Mortgagor, which manages the
Mortgaged Property on behalf of Mortgagor.
"Manager Certification" shall have the meaning set forth in Section 2.09
hereof.
"Material Adverse Effect" shall mean any event or condition that has a
material adverse effect on (a) the Mortgaged Property,
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(b) the business, prospects, profits, operations or condition (financial or
otherwise) of Mortgagor, (c) the enforceability, validity, perfection or
priority of the lien of any Loan Document or (d) the ability of Mortgagor to
perform any obligations under any Loan Document.
"Maturity", when used with respect to the Note, shall mean the Maturity
Date set forth in the Note or such other date pursuant to the Note on which the
final payment of principal, and premium, if any, on which the Note becomes due
and payable as therein or herein provided, whether at Stated Maturity or by
declaration of acceleration, or otherwise.
"Maturity Date" shall mean the Maturity Date set forth in the Note.
"Merger" shall mean a merger of Potomac Mills-Phase III (MLP) Limited
Partnership and Washington Outlet Mall (MLP) Limited Partnership.
"Monthly Debt Service Payment" shall mean a monthly payment of principal
in an amount equal to that which is required to fully amortize the Loan based
upon a thirty (30) year level amortization schedule, together with a monthly
payment of interest on the Principal Amount.
"Mortgage" shall mean this Mortgage as originally executed or
as it may hereafter from time to time be supplemented, amended, modified or
extended by one or more indentures supplemental hereto.
"Mortgaged Property" shall have the meaning set forth in the granting
clauses of this Mortgage.
"Mortgagee" shall mean the Mortgagee named herein and its successors
or assigns.
"Mortgagor" shall mean Mortgagor named herein and any successor to the
obligations of Mortgagor.
"Multiemployer Plan" shall mean a multiemployer plan defined as such in
Section 3(37) of ERISA to which contributions have
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been, or were required to have been, made by Mortgagor or any ERISA Affiliate
and which is covered by Title IV of ERISA.
"Net Operating Income" shall mean in each Fiscal Year or portion thereof
during the term hereof, Operating Income less Operating Expenses.
"Net Proceeds" shall mean the excess of (i)(x) the purchase price (at
foreclosure or otherwise) actually received by Mortgagee with respect to the
Mortgaged Property as a result of the exercise by Mortgagee of its rights,
powers, privileges and other remedies after the occurrence of an Event of
Default, or (y) in the event that Mortgagee (or Mortgagee's nominee) is the
purchaser at foreclosure by credit bid, then the amount of such credit bid, in
either case, over (ii) all costs and expenses, including, without limitation,
all attorneys' fees and disbursements and any brokerage fees, if applicable,
incurred by Mortgagee in connection with the exercise of such remedies,
including the sale of such Mortgaged Property after a foreclosure against the
Mortgaged Property.
"Note" shall have the meaning set forth in the recitals hereof.
"Notice Date" shall have the meaning set forth in Section 5.05 hereof.
"O&M Operative Period" shall mean the period of time commencing upon the
earlier to occur of (a) an Event of Default and (b) the Optional Prepayment Date
and terminating upon the earlier to occur of (i) repayment of the Debt in full
and (ii)(A) if the O&M Operative Period has commenced as a result of an Event of
Default of the types set forth in clauses (a), (b), (c), (e), (g) (to the extent
(g) applies to a representation or warranty given after the Closing Date), (j),
(m) or (o) of Section 13.01 hereof, upon the curing of such Event of Default;
provided that the O&M Operative Period may only be terminated pursuant to this
clause (b) one (1) time during the Loan (i.e., if an Event of Default of the
types set forth in clause (ii)(A) occurs more than once during the term of the
Loan, the O&M Operative Period shall not terminate prior to the payment of the
Debt in full) or (B) if the O&M Operative Period has commenced as a result of an
Event of
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Default of the type set forth in clause (k) of Section 13.01 hereof, upon the
curing of such Event of Default.
"Officer's Certificate" shall mean a certificate delivered to Mortgagee
by Mortgagor which is signed on behalf of Mortgagor by an authorized
representative of Mortgagor which states that the items set forth in such
certificate are true, accurate and complete in all respects.
"Operating Expenses" shall mean, in each Fiscal Year or portion thereof
during the term hereof, all expenses paid by Mortgagor (or by the Manager on
behalf of Mortgagor) on account of such period in connection with the operation
of the Mortgaged Property, which shall include, without limitation, the
following expenses:
(a) expenses in connection with cleaning, repair, maintenance,
management, leasing, decoration or painting thereof, or the provision of
services to any tenant, net of any insurance proceeds or condemnation proceeds
in respect of any of the foregoing;
(b) wages, benefits, payroll taxes, uniforms, insurance costs and
all other related expenses for on-site building personnel, up to and including
the level of the on-site building manager, engaged in cleaning, repair,
maintenance, management, leasing, decoration or painting thereof or the
provision of services to any tenant;
(c) reasonable allocations of wages, benefits, payroll taxes,
insurance costs and all other related expenses for bookkeeping, accounting,
legal and other building management functions and home office expenses and
computer usage, but only if the amount of such allocations in the aggregate
exceeds the reasonable and customary compensation described in clause (iv) for
the same or similar services;
(d) the compensation being paid for bookkeeping, accounting, legal
and building management services for the Mortgaged Property, and all other items
of compensation and reimbursement payable by Mortgagor to the Manager, provided,
however, that if such compensation actually is less than 5.0% of
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minimum and overage rentals from the Mortgaged Property the amount of such
compensation shall be deemed to be 5.0% of minimum and overage rentals from the
Mortgaged Property for purposes of determining Debt Service Coverage;
(e) the cost of all electricity, oil, gas, water, steam, heat,
ventilation, air conditioning and any other energy, telecommunications, utility
or similar items, including overtime usage, and the cost of building and
cleaning supplies;
(f) Impositions (except for real estate taxes paid directly to any
taxing authority by any tenant);
(g) premiums for liability, casualty, fidelity, business
interruption, loss of "rental value" and other insurance (which, in the case of
any policy covering multiple properties, shall be equitably allocated to the
Mortgaged Property pro rata in proportion to the replacement value of each of
the properties covered by such policy for casualty insurance, the respective
size and experience rating of each of the properties covered by such policy for
liability insurance, and the insured value of each of the properties covered by
such policy for the other coverages);
(h) legal, accounting, appraisal and other professional fees,
expenses and disbursements;
(i) amounts paid in consideration of any modification, amendment,
supplement, waiver, renewal, or termination of any lease;
(j) all amounts paid or expenses incurred under Property Agreements
or under any Lease, including, without limitation, marketing and promotion fees
to the extent not reimbursed or reimbursable by tenants under any Lease; and
(k) all other amounts paid during such period in respect of items
which in accordance with generally accepted accounting principles would be
included in Mortgagor's annual financial statements for such period or any other
period as operating expenses of the Mortgaged Property and are reasonably
expected by Mortgagor to be regularly recurring operating
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expenses of the Mortgaged Property and not separately deducted in the definition
of Operating Income.
Notwithstanding the foregoing, Operating Expenses shall not include (1) any
non-cash charge such as depreciation or amortization, (2) the principal of and
interest and premium, if any, on the Note or any other indebtedness of
Mortgagor, (3) income taxes or other Impositions in the nature of income taxes,
(4) any expenses (including legal, accounting and other professional fees,
expenses and disbursements) incurred in connection with the issuance of the Note
or the sale, exchange, transfer, financing or refinancing of all or any portion
of the Mortgaged Property or in connection with the recovery of Loss Proceeds
which are applied to prepay the Debt, (5) any item of expense which would
otherwise be considered within Operating Expenses pursuant to the provisions
above but is paid directly by any tenant and (6) capital improvement costs
(including, without limitation, tenant allowances) capitalized in accordance
with GAAP and not recovered from tenants.
"Operating Income" shall mean, in each Fiscal Year or portion thereof
during the term hereof, all revenue derived by Mortgagor arising from the
Mortgaged Property including, without limitation, rental revenues (whether
denominated as basic rent, additional rent, escalation payments, electrical
payments or otherwise) and other fees and charges payable pursuant to Leases or
otherwise in connection with the Mortgaged Property, and business interruption,
rent or other similar insurance proceeds. Operating Income shall not include (a)
Insurance Proceeds (other than proceeds of rent, business interruption or other
similar insurance allocable to the applicable period) and Condemnation Proceeds
(other than Condemnation Proceeds arising from a temporary taking or the use and
occupancy of all or part of the applicable Mortgaged Property allocable to the
applicable period), or interest accrued on such Condemnation Proceeds, (b)
proceeds of any financing, (c) proceeds of any sale, exchange or transfer of the
Mortgaged Property or any part thereof or interest therein, (d) capital
contributions or loans to Mortgagor or an Affiliate of Mortgagor, (e) any item
of income otherwise includable in Operating Income but paid directly by any
tenant to a Person other than Mortgagor except for real estate taxes paid
directly to any taxing authority by any tenant, (f) any other
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extraordinary, non-recurring revenues, (g) Rent paid by or on behalf of any
lessee under a Space Lease which is the subject of any proceeding or action
relating to its bankruptcy, reorganization or other arrangement pursuant to
federal bankruptcy law or any similar federal or state law or which has been
adjudicated a bankrupt or insolvent unless such Space Lease has been affirmed
by the trustee in such proceeding or action, (h) Rent paid by or on behalf of
any lessee under a Space Lease the demised premises of which are not occupied
either by such lessee or by a sublessee thereof, (i) Rent paid by or on
behalf of any lessee under a Space Lease in whole or in partial consideration
for the termination of any Space Lease in excess of $45,000 per Fiscal Year;
(j) interest income in excess of $75,000 per Fiscal Year, (k) sales tax
rebates from any Governmental Authority, or (l) Rent paid by any Space Tenant
for a period more than one month in advance of when due.
"Operation and Maintenance Expense Monthly Installment" shall mean with
respect to each Current Month in which funds are required to be allocated or
distributed pursuant to the terms of Section 5.05(d), or if an Event of
Default has occurred and is continuing, the lesser of (a) all amounts
remaining in the Central Account after the distributions made pursuant to
clauses (a) through (c) of Section 5.05 or (b), an amount equal to 1/12 of
the higher of (i) the product of (A) 1.05 and (B) the actual Operating
Expenses (exclusive of Impositions and insurance premiums) for the
immediately preceding calendar year and (ii) the annual Operating Expenses
(exclusive of Impositions and insurance premiums) for the immediately
preceding calendar year multiplied by a fraction, the number of which is the
CPI for the month of December of the calendar year immediately preceding the
year with respect to which the determination is being made and the
denominator of which is the CPI for the month of December, 1996.
"Operation and Maintenance Expense Sub-Account" shall mean the Sub-Account
of the Central Account established pursuant to Section 5.02 hereof and
maintained pursuant to Section 5.09 hereof relating to the payment of Operating
Expenses (exclusive of Impositions and insurance premiums) and Approved TI
Costs.
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"Optional Prepayment Date" shall mean the Payment Date occurring in
December, 2003.
"Pad Owners" shall mean any owner of any fee interest in property
contiguous to or surrounded by the Mortgaged Property who has entered into or is
subject to a reciprocal easement agreement or other agreement or agreements with
Mortgagor either (a) in connection with an existing or potential improvement on
such property or (b) relating to or affecting the Mortgaged Property.
"Payment Date" shall mean, with respect to each Interest Accrual Period,
the second (2nd) Business Day prior to the Distribution Date occurring in the
month in which such Interest Accrual Period ends.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
under ERISA, or any successor thereto.
"Permitted Debt" shall mean (i) unsecured trade and other indebtedness
incurred in the operation of the Mortgaged Property in the ordinary course of
Mortgagor's business which is consistent with the Approved Manager Standard
that is paid in full within ninety (90) days of the date upon which such
indebtedness was due, (ii) subordinated obligations to reimburse another
Cross-collateralized Borrower in connection with any amounts paid by such
other Cross-collateralized Borrower in excess of the Allocated Loan Amount of
such Cross-collateralized Borrower, interest thereon and its ratable share of
any other sums due under the Loan Documents, and (iii) if no Event of Default
has occurred and is continuing, indebtedness solely in respect of
reimbursement obligations incurred in connection with surety and appeal
bonds, performance bonds, and other obligations of like nature, all in the
ordinary course of business in accordance with customary industry practices
and the Approved Manager Standard; provided, however, that the aggregate of
unsecured Permitted Debt of the types set forth in clauses (i) and (iii)
shall in no event exceed $5,000,000. As used herein the term "indebtedness"
shall mean (a) any liabilities and obligations of such Person, contingent or
otherwise, (i) in respect of borrowed money (whether or not the recourse of
the lender is to the whole of the assets of such Person or only to a
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portion thereof), (ii) evidenced by bonds, notes, debentures, or similar
instruments, (iii) representing the balance deferred and unpaid of the purchase
price of any property or services, except those incurred in the ordinary course
of such Person's business that would constitute ordinarily a trade payable to
trade creditors, (iv) evidenced by bankers' acceptances, (v) for the payment of
money relating to a capitalized lease obligation or sale/leaseback obligation,
or (vi) evidenced by a letter of credit or a reimbursement obligation of such
Person with respect to any letter of credit or (b) any liabilities and
obligations of others of the kind described in the preceding clause (a) that
such Person has guaranteed or that is otherwise its legal liability or which is
secured by any assets or property of such Person including any obligations to
purchase, redeem, or acquire any capital stock or similar interests.
"Permitted Encumbrances" shall have the meaning set forth in Section
2.05(a) hereof.
"Permitted Investments" shall mean any one or more of the following
obligations or securities payable on demand or having a scheduled maturity on
or before the Business Day preceding the date upon which funds in the Central
Account are required to be drawn, and having at all times the required
ratings, if any, provided for in this definition, unless the Rating Agency
shall have confirmed in writing to Mortgagee that a lower rating would not,
in and of itself, result in a downgrade, qualification or withdrawal of the
then current ratings assigned to any certificates issued in connection with a
Securitization:
(a) obligations of, or obligations fully guaranteed as to payment
of principal and interest by, the United States of America or any agency
orinstrumentality thereof provided such obligations are backed by the
full faith and credit of the United States of America including, without
limitation, obligations of: the U.S. Treasury (all direct or fully
guaranteed obligations), the Farmers Home Administration (certificates of
beneficial ownership), the General Services Administration (participation
certificates), the U.S. Maritime Administration (guaranteed Title XI
financing), the Small Business Administration (guaranteed participation
certificates and guaranteed pool
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certificates), the U.S. Department of Housing and Urban Development (local
authority bonds) and the Washington Metropolitan Area Transit Authority
(guaranteed transit bonds); provided, however, that the investments
described in this clause must (A) have a predetermined fixed dollar of
principal due at maturity that cannot vary or change, (B) if such
investments have a variable rate of interest, such interest rate must be
tied to a single interest rate index plus a fixed spread (if any) and must
move proportionately with that index, and (C) such investments must not be
subject to liquidation prior to their maturity;
(b) intentionally omitted;
(c) obligations of the following United States of America government
sponsored agencies: Federal Home Loan Mortgage Corp. (debt
obligations),the Farm Credit System (consolidated systemwide bonds and
notes), the Federal Home Loan Banks (consolidated debt obligations), the
Federal National Mortgage Association (debt obligations), the
Student Loan Marketing Association (debt obligations), the Financing
Corp. (debt obligations), and the Resolution Funding Corp. (debt
obligations); provided, however, that the investments described in this
clause must (A) have a predetermined fixed dollar of principal due at
maturity that cannot vary or change, (B) if such investments have a
variable rate of interest, such interest rate must be tied to a single
interest rate index plus a fixed spread (if any) and must move
proportionately with that index, and (C) such investments must not be
subject to liquidation prior to their maturity;
(d) federal funds, unsecured certificates of deposit, time deposits,
bankers' acceptances and repurchase agreements with maturities of not more
than 365 days of any bank, the short term obligations of which are rated
in the highest short term rating category by the Rating Agency; provided,
however, that the investments described in this clause must (A) have a
predetermined fixed dollar of principal due at maturity that cannot vary
or change, (B) if such investments have a variable rate of interest, such
interest rate must be tied to a single interest rate index
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plus a fixed spread (if any) and must move proportionately with that
index, and (C) such investments must not be subject to liquidation prior
to their maturity;
(e) fully Federal Deposit Insurance Corporation-insured demand and
time deposits in, or certificates of deposit of, or bankers' acceptances
issued by, any bank or trust company, savings and loan association or
savings bank, the short term obligations of which are rated in the highest
short term rating category by the Rating Agency; provided, however, that
the investments described in this clause must (A) have a predetermined
fixed dollar of principal due at maturity that cannot vary or change, (B)
if such investments have a variable rate of interest, such interest rate
must be tied to a single interest rate index plus a fixed spread (if any)
and must move proportionately with that index, and (C) such investments
must not be subject to liquidation prior to their maturity;
(f) debt obligations with maturities of not more than 365 days and
rated by the Rating Agency in its highest long-term unsecured rating
category; provided, however, that the investments described in this clause
must (A) have a predetermined fixed dollar of principal due at maturity
that cannot vary or change, (B) if such investments have a variable rate
of interest, such interest rate must be tied to a single interest rate
index plus a fixed spread (if any) and must move proportionately with that
index, and (C) such investments must not be subject to liquidation prior
to their maturity;
(g) commercial paper (including both non-interest-bearing discount
obligations and interest-bearing obligations payable on demand or on a
specified date not more than one year after the date of issuance thereof)
with maturities of not more than 270 days and that is rated by the Rating
Agency in its highest short-term unsecured debt rating; provided, however,
that the investments described in this clause must (A) have a
predetermined fixed dollar of principal due at maturity that cannot vary
or change, (B) if such investments have a
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variable rate of interest, such interest rate must be tied to a single
interest rate index plus a fixed spread (if any) and must move
proportionately with that index, and (C) such investments must not be
subject to liquidation prior to their maturity;
(h) the Federated Prime Obligation Money Market Fund (the "Fund") so
long as the Fund is rated "AAA" by the Rating Agency;
(i) any other demand, money market or time deposit, demand
obligation or any other obligation, security or investment, provided that
the Rating Agency has confirmed in writing to Mortgagee, that such
investment would not, in and of itself, result in a downgrade,
qualification or withdrawal of the then current ratings assigned to any
certificates issued in connection with a Securitization); and
(j) such other obligations as are acceptable as Permitted
Investments to the Rating Agency, as confirmed in writing to Mortgagee,
that such obligations would not, in and of itself, result in a downgrade,
qualification or withdrawal of the then current ratings assigned to any
certificates issued in connection with a Securitization);
provided, however, that, in the judgment of Mortgagee, such instrument
continues to qualify as a "cash flow investment" pursuant to Code Section
860G(a)(6) earning a passive return in the nature of interest and that no
instrument or security shall be a Permitted Investment if (i) such instrument
or security evidences a right to receive only interest payments or (ii) the
right to receive principal and interest payments derived from the underlying
investment provides a yield to maturity in excess of 120% of the yield to
maturity at par of such underlying investment.
"Permitted Liens" shall mean (i) the liens of this Mortgage and
other Loan Documents; (ii) liens for taxes, assessments and other
governmental charges not yet due and payable or due and payable, but not yet
delinquent, or that are being contested in good faith by appropriate
proceedings in accordance with Section
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4.04 hereof; (iii) deposits or pledges to secure the payment of workmen's
compensation, unemployment insurance or other social security benefits or
obligations, or to secure the performance of trade contracts, leases, public
or statutory obligations, surety or appeal bonds or other obligations of a
like general nature incurred in the ordinary course of business and in
accordance with the Approved Manager Standard; (iv) judgment liens,
landlords, mechanics', materialmen's, warehousemen's, carriers', or other
like liens arising in the ordinary course of business securing obligations
which are not overdue for a period longer than 30 days, or which are being
contested in good faith by appropriate proceedings which are being diligently
pursued in accordance with Section 2.06 hereof; and (v) easements, rights of
way, zoning, similar restrictions, and other similar encumbrances or title
defects that, singly or in the aggregate, do not in any case detract from the
value of the Mortgaged Property, all of which (other than the liens of the
type set forth in clauses (i) and (ii) above and Permitted Encumbrances) are
subordinate to the lien of this Mortgage.
"Person" shall mean any individual, corporation, limited liability
company, partnership, joint venture, estate, trust, unincorporated association,
any federal, state, county or municipal government or any bureau, department or
agency thereof and any fiduciary acting in such capacity on behalf of any of the
foregoing.
"Plan" shall mean an employee benefit or other plan established or
maintained by Mortgagor or any ERISA Affiliate during the five-year period
ended prior to the date of this Mortgage or to which Mortgagor or any
ERISA Affiliate makes, is obligated to make or has, within the five year
period ended prior to the date of this Mortgage, been required to make
contributions (whether or not covered by Title IV of ERISA or Section 302 of
ERISA or Section 401(a) or 412 of the Code), other than a Multiemployer Plan.
"Premises" shall have the meaning set forth in granting clause (a) of this
Mortgage.
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"Principal Amount" shall mean the Loan Amount as such amount may be
reduced from time to time pursuant to the terms of this Mortgage, the
Note or the other Loan Documents.
"Principal Payments" shall mean all payments of principal made pursuant to
the terms of the Note.
"Property Agreements" shall mean all agreements, grants of easements
and/or rights-of-way, reciprocal easement agreements, permits, declarations of
covenants, conditions and restrictions, disposition and development agreements,
planned unit development agreements, management or parking agreements, party
wall agreements or other instruments affecting the Mortgaged Property,
including, without limitation any Pad Owners, but not including any brokerage
agreements, management agreements, service contracts, Space Leases or the Loan
Documents.
"Rating Agency" shall mean Fitch Investors Services, L.P., and any
successor thereto.
"Realty" shall have the meaning set forth in Section 2.05(b) hereof.
"Recurring Replacement Expenditures" shall mean expenditures related to
capital repairs, replacements and improvements performed at the Mortgaged
Property from time to time.
"Recurring Replacement Reserve Monthly Installment" shall mean an
amount equal to the product of 1/12 of the gross leasable area of the
Premises multiplied by the RR Multiplier set forth on Exhibit B attached
hereto and made a part hereof (the "Initial Recurring Installments") until
the end of the first (1st) Loan Year and an amount per month in each
subsequent Loan Year or portion thereof occurring prior to the Maturity Date
equal to 1/12 of the product of (a) the gross leasable area of the Premises
as of December 1 of each year and (b) the RR Multiplier and (c) a fraction,
the numerator of which is the CPI for the month of December of the calendar
year immediately preceding the year with respect to which the determination
is being made and the denominator of which is the CPI for the month of
December, 1996, but in no event shall the Recurring Replacement Reserve
Monthly Installment as calculated above be decreased in any year.
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"Recurring Replacement Reserve Sub-Account" shall mean the Sub-Account of
the Central Account established pursuant to Section 5.02 hereof and maintained
pursuant to Section 5.08 hereof relating to the payment of Recurring Replacement
Expenditures.
"Rent" shall have the meaning set forth in granting clause (f) of this
Mortgage.
"Rent Account" shall mean an Eligible Account maintained by a bank
acceptable to Mortgagor and Mortgagee in the name of Mortgagee.
"Rent Roll" shall have the meaning set forth in Section 2.05 (o) hereof.
"Required Debt Service Coverage" shall mean a Debt Service Coverage of not
less than 1.4:1.
"Required Debt Service Payment" shall mean, as of any Payment Date, the
amount of interest, including, without limitation Default Rate Interest, and
principal then due and payable pursuant to the Note, together with any other
sums due and payable thereunder, including, without limitation, any prepayments
required to be made or for which notice has been given under this Mortgage and
premium, if any, to be paid in accordance therewith.
"Required Engineering Work" shall have the meaning set forth in Section
5.02 hereof.
"Retention Amount" shall have the meaning set forth in Section
3.04(b)(vii) hereof.
"Securities Act" shall mean the Securities Act of 1933, as the same shall
be amended from time to time.
"Securitization" shall mean a public or private offering of securities by
Potomac Gurnee Finance Corp., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Mortgagee or any of their respective Affiliates or their
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respective successors and assigns which are collateralized, in whole or in part,
by this Mortgage.
"Security Deposit Account" shall have the meaning set forth in Section
5.01 hereof.
"Single Purpose Entity" shall mean a corporation, partnership, joint
venture, trust or unincorporated association, which is formed or organized
solely for the purpose of holding, directly, an ownership interest in the
Mortgaged Property and activities incidental thereto, does not engage in any
business unrelated to the Mortgaged Property, does not have any assets other
than those related to its interest in the Mortgaged Property or any
indebtedness other than as permitted by this Mortgage or the other Loan
Documents, has its own separate books and records and has its own accounts,
in each case which are separate and apart from the books and records and
accounts of any other Person, and holds itself out as being a Person,
separate and apart from any other Person and which otherwise satisfies the
criteria of the Rating Agency, as in effect on the Closing Date, for a single
purpose entity.
"Solvent" shall mean, as to any Person, that (a) the sum of the assets of
such Person, at a fair valuation, exceeds its liabilities, including contingent
liabilities, (b) such Person has sufficient capital with which to conduct its
business as presently conducted and as proposed to be conducted and (c) such
Person has not incurred indebtedness, and does not intend to incur debts, beyond
its ability to pay such indebtedness as they mature. For purposes of this
definition, "indebtedness" shall have the meaning set forth in the definition of
Permitted Debt.
"Space Leases" shall mean any Lease or sublease thereunder (including,
without limitation, any Major Space Lease) or any other agreement providing for
the use and occupancy of a portion of the Mortgaged Property as the same may be
amended, renewed or supplemented.
"State" shall mean any of the states which are members of the United
States of America.
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"Stated Maturity", when used with respect to the Note or any installment
of interest and/or principal payment thereunder, shall mean the date specified
in the Note as the fixed date on which a payment of all or any portion of
principal and/or interest is due and payable.
"Sub-Accounts" shall have the meaning set forth in Section 5.02 hereof.
"Substantial Casualty" shall have the meaning set forth in Section 3.04
hereof.
"Substantial Taking" shall mean a Taking of such portion of the
Mortgaged Property that (a) would leave remaining a balance of the Mortgaged
Property which would not under then current economic conditions, applicable
zoning laws, building regulations and other applicable Legal Requirements,
permit the restoration of the Mortgaged Property so as to constitute a
complete, rentable facility of the same sort as existed prior to the Taking,
having adequate ingress and egress to the Mortgaged Property, (b) as a result
of which Mortgagee is not reasonably satisfied that the Debt Service Coverage
for the previous fiscal quarter, as of the last day of the first fiscal
quarter ending after substantial completion of the Work, will not be equal to
or greater than the greater of (i) the Debt Service Coverage for the fiscal
quarter immediately prior to the Taking and (ii) the Closing DSC, (c) as a
result of which more than 15% of the reasonably estimated aggregate value of
the Mortgaged Property is affected, or (d) as a result of which Mortgagee is
not reasonably satisfied the Work can be completed prior to Maturity and
within twelve months of the Taking; provided, however, such twelve month
period may be extended at the request of Mortgagor provided that Mortgagor
delivers a letter from the Rating Agency confirming that any rating issued in
connection with a Securitization will not, as a result of such extension be
downgraded from the then current ratings thereof, qualified, or withdrawn.
"Taking" shall mean a condemnation or taking pursuant to the lawful
exercise of the power of eminent domain.
"Total GLA" shall mean the total gross leasable area of the Mortgaged
Property, including all Space Leases.
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"Transfer" shall mean the conveyance, assignment, sale, mortgaging,
encumbrance, pledging, hypothecation, granting of a security interest in,
granting of options with respect to, or other disposition of (directly or
indirectly, voluntarily or involuntarily, by operation of law or otherwise, and
whether or not for consideration or of record) all or any portion of any legal
or beneficial interest (a) in all or any portion of the Mortgaged Property; (b)
in the stock or membership interest of any General Partner; (c) in Mortgagor (or
any trust of which Mortgagor is a trustee); or (d) in any Person having a direct
legal or beneficial ownership in Mortgagor and shall also include, without
limitation to the foregoing, the following: an installment sales agreement
wherein Mortgagor agrees to sell the Mortgaged Property or any part thereof or
any interest therein for a price to be paid in installments; an agreement by
Mortgagor leasing all or a substantial part of the Mortgaged Property to one or
more Persons pursuant to a single or related transactions, or a sale, assignment
or other transfer of, or the grant of a security interest in, Mortgagor's right,
title and interest in and to any Leases or any Rent; any instrument subjecting
the Mortgaged Property to a condominium regime or transferring ownership to a
cooperative corporation; and the dissolution or termination of Mortgagor or the
merger or consolidation of Mortgagor with any other Person. The Merger will not
be deemed a Transfer. Additionally (a) as long as The Mills Corporation remains
the sole general partner of the Mills Limited Partnership, a Delaware limited
partnership ("MLP") and The Mills Corporation owns at least 35% of the limited
partnership interests of MLP, the term "Transfer" shall not apply to any
conveyance, assignment, sale, mortgaging, encumbrance, pledging, hypothecation,
granting of a security interest in, granting of options with respect to or other
disposition of any limited partnership interests in MLP and (b) the term
"Transfer" shall not apply to any conveyance, assignment, sale, mortgaging,
encumbrance, pledging, hypothecation, granting of a security interest in,
granting of options with respect to or other disposition of any interest in
Mortgagor or any general partner of Mortgagor to a Person which is owned one
hundred percent, directly or indirectly, by MLP or The Mills Corporation.
Additionally, it shall be a Transfer if MLP and/or The Mills
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Corporation ceases to own 100% of Mortgagor either directly or indirectly.
"Treasury Constant Maturity Yield Index" shall mean the average yield for
"This Week" as reported by the Federal Reserve Board in Federal Reserve
Statistical Release H.15 (519).
"UCC" shall mean the Uniform Commercial Code as in effect in the State in
which the Mortgaged Property is located.
"Unscheduled Payments" shall mean (a) all Loss Proceeds that Mortgagor
has elected or is required to apply to the repayment of the Debt pursuant to
this Mortgage, the Note or any other Loan Documents, (b) any funds
representing a voluntary or involuntary principal prepayment other than
scheduled Principal Payments, (c) any Net Proceeds and (d) any amounts paid
from the Curtailment Reserve Sub-Account pursuant to Section 5.11 hereof.
"Use Requirements" shall mean any and all building codes, permits,
certificates of occupancy or compliance, laws, regulations, or ordinances
(including, without limitation, health, pollution, fire protection, medical and
day-care facilities, waste product and sewage disposal regulations),
restrictions of record, easements, reciprocal easements, declarations or other
agreements affecting the use of the Mortgaged Property or any part thereof.
"Welfare Plan" shall mean an employee welfare benefit plan as defined in
Section 3(1) of ERISA established or maintained by Mortgagor or any ERISA
Affiliate or that covers any current or forms employee of Mortgagor or any ERISA
Affiliate.
"Work" shall have the meaning set forth in Section 3.04(a)(i) hereof.
"Yield Maintenance Premium" shall mean the premium which shall be the
product of (a) a fraction, the numerator of which is the positive excess
(expressed as a percentage of the outstanding principal amount of the applicable
Portion (as such term is defined in the Note) before repayment), if any, of (i)
the present value of all future payments of principal and interest on the
Principal Amount, including, without limitation, any outstanding
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principal amount of the Loan as of the Payment Date in June, 2003 to be made on
the applicable Portion before the prepayment in question, discounted at an
interest rate per annum equal to the Treasury Constant Maturity Yield Index
published during the second full week preceding the date on which such premium
is payable for instruments having a maturity coterminous with the Payment Date
occurring in June, 2003, over (ii) the outstanding principal amount of the
applicable Portion immediately before such prepayment, and the denominator of
which is the Principal Amount immediately prior to the prepayment, and (b) the
principal amount of the applicable Portion being prepaid; provided, however,
that if there is no Treasury Constant Maturity Yield Index for instruments
having a maturity coterminous with the Payment Date occurring in June, 2003,
then the index referred to in (1) above shall be equal to the weighted average
yield to maturity of the Treasury Constant Maturity Yield Indices with
maturities next longer and shorter than such remaining average life to the
Payment Date occurring in June, 2003, calculated by averaging (and rounding
upward to the nearest whole multiple of 1/100 of 1% per annum, if the average is
not such a multiple) the yields of the relevant Treasury Constant Maturity Yield
Indices (rounded, if necessary, to the nearest 1/100 of 1% with any figure of
1/200 of 1% or above rounded upward).
ARTICLE II: COVENANTS, WARRANTIES
AND REPRESENTATIONS OF MORTGAGOR
Section 2.01. Payment of Debt. Mortgagor will pay the Debt at the time and in
the manner provided in the Note and the other Loan Documents, all in lawful
money of the United States of America in immediately available funds.
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Section 2.02. Representations and Warranties of Mortgagor. Mortgagor
represents and warrants to Mortgagee:
(a) Organization and Authority. Mortgagor (i) is a general partnership,
limited partnership or corporation, as the case may be, duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
formation, (ii) has all requisite power and authority and all necessary and
material licenses and permits to own and operate the Mortgaged Property and to
carry on its business as now conducted and as presently proposed to be conducted
and (iii) is duly qualified, authorized to do business and in good standing in
the jurisdiction where the Mortgaged Property is located and in each other
jurisdiction where the conduct of its business or the nature of its activities
makes such qualification necessary. If Mortgagor is a limited partnership or
general partnership, each general partner of Mortgagor which is a corporation is
duly organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation.
(b) Power. Mortgagor and, if applicable, each General Partner has full
power and authority to execute, deliver and perform, as applicable, the Loan
Documents to which it is a party, to make the borrowings thereunder, to execute
and deliver the Note and to grant to Mortgagee a first, prior, perfected and
continuing lien on and security interest in the Mortgaged Property, subject only
to the Permitted Encumbrances.
(c) Authorization of Borrowing. The execution, delivery and performance of
the Loan Documents to which Mortgagor is a party, the making of the borrowings
thereunder, the execution and delivery of the Note, the grant of the liens on
the Mortgaged Property pursuant to the Loan Documents to which Mortgagor is a
party and the consummation of the Loan are within the powers of Mortgagor and
have been duly authorized by Mortgagor and, if applicable, the General Partners,
by all requisite action (and Mortgagor hereby represents that no approval or
action of any limited partner or shareholder, as applicable, of Mortgagor is
required to authorize any of the Loan Documents to which Mortgagor is a party
other than as have been obtained) and will constitute the legal, valid and
binding obligation of Mortgagor, enforceable against Mortgagor in accordance
with their terms,
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except as enforcement may be stayed or limited by bankruptcy, insolvency,
reorganization, receivership, moratorium, or similar laws relating to or
affecting the enforcement of creditors' rights generally and by general
principles of equity (whether considered in proceedings at law or in equity) and
will not (i) violate any provision of its partnership agreement or partnership
certificate or certificate of incorporation or by-laws, as applicable, or, to
its knowledge, any law, judgment, order, rule or regulation of any court,
arbitration panel or other Governmental Authority, domestic or foreign, or other
Person affecting or binding upon Mortgagor or the Mortgaged Property, or (ii)
violate any provision of any indenture, agreement, mortgage, contract or other
instrument to which Mortgagor or, if applicable, any General Partner is a party
or by which any of their respective property, assets or revenues are bound, or
be in conflict with, result in an acceleration of any obligation or a breach of
or constitute (with notice or lapse of time or both) a default or require any
payment or prepayment under, any such indenture, agreement, mortgage, contract
or other instrument, or (iii) result in the creation or imposition of any lien,
except those in favor of Mortgagee as provided in the Loan Documents to which
it is a party.
(d) Consent. Neither Mortgagor nor, if applicable, any General Partner, is
required to obtain any consent, approval or authorization from, or to file any
declaration or statement with, any Governmental Authority or other agency in
connection with or as a condition to the execution, delivery or performance of
this Mortgage, the Note or the other Loan Documents which has not been so
obtained or filed.
(e) Interest Rate. The rate of interest paid under the Note and the method
and manner of the calculation thereof do not violate any usury or other law or
applicable Legal Requirement.
(f) Other Agreements. Mortgagor is not a party to nor is otherwise bound
by any agreements or instruments which, individually or in the aggregate, are
reasonably likely to have a Material Adverse Effect. Neither Mortgagor nor, if
applicable, any General Partner, is in violation of its partnership agreement or
corporate organizational documents, as applicable, or other restriction or any
agreement or instrument by which it is bound,
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or any judgment, decree, writ, injunction, order or award of any arbitrator,
court or Governmental Authority, or any Legal Requirement, in each case,
applicable to Mortgagor or the Mortgaged Property, except for such violations
that would not, individually or in the aggregate, have a Material Adverse
Effect.
(g) Maintenance of Existence. (i) Mortgagor and, if applicable, each
General Partner at all times since their formation have been duly formed and
existing and shall preserve and keep in full force and effect their existence as
a Single Purpose Entity.
(i) Mortgagor and, if applicable, each General Partner, at all times
since their organization have complied, and will continue to comply, with
the provisions of its certificate and agreement of partnership or
certificate of incorporation and by-laws, as applicable, and will comply
in all material respects with the laws of its jurisdiction of organization
relating to partnerships or corporations, as applicable.
(ii) All customary formalities regarding the partnership, or
corporate existence, as applicable, of Mortgagor, and if, applicable, each
General Partner will be observed.
(iii) Mortgagor and, if applicable, each General Partner, will
maintain their respective financial statements, accounting records and
other partnership or corporate documents separate from those of any other
Person provided that nothing herein shall prohibit the inclusion of the
financial statements of Mortgagor in consolidated financial statements of
another Person. Except as contemplated herein and in the other Loan
Documents, Mortgagor and, if applicable, each General Partner will not
commingle, their respective assets with those of any other Person.
Mortgagor will maintain, its own bank accounts, payroll and separate books
of account.
(iv) Mortgagor and, if applicable, each General Partner, will pay
their own liabilities from their own separate assets.
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(v) Mortgagor and, if applicable, each General Partner will identify
themselves, in all dealings with the public, under their own names and as
separate and distinct entities. Mortgagor and, if applicable, each General
Partner, will not identify themselves, as being a division of any other
Person.
(vi) Mortgagor and, if applicable, each General Partner, are and
will continue to be, adequately capitalized in light of the nature of
their respective businesses.
(vii) Mortgagor (A) except as previously disclosed in writing to
Mortgagor, does not own and will not own any encumbered asset other than
the Mortgaged Property, (B) is not engaged and will not engage in any
business other than the ownership, management, leasing, expanding and
operation of the Mortgaged Property and activities incidental thereto, (C)
will not enter into any contract or agreement with any Affiliate of
Mortgagor or, if applicable, any Affiliate of a General Partner except
upon terms and conditions that are intrinsically fair and substantially
similar to those that would be available on an arm's-length basis with
third parties other than an Affiliate, (D) will not incur any debt,
secured or unsecured, direct or contingent (including guaranteeing any
obligation), other than the Loan and Permitted Debt (E) will not make any
loans or advances to any Person (including any Affiliate).
(viii) Mortgagor will not change its name or principal place of
business, except in connection with the Merger.
(ix) Mortgagor does not have, and will not have, any subsidiaries.
(x) Mortgagor will preserve and maintain its existence as a limited
partnership and all material rights, privileges, trade names and
franchises, except in connection with the Merger.
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(xi) Neither Mortgagor, nor, if applicable, any General Partner,
will merge or consolidate with, or sell all or substantially all of its
respective assets to any Person, or liquidate, wind up or dissolve itself
(or suffer any liquidation, winding up or dissolution), except in
connection with the Merger. Mortgagor will not acquire any business or
assets from, or capital stock or other ownership interest of, or be a
party to any acquisition of, any Person, except in connection with the
Merger.
(xii) Mortgagor will not assume or guarantee the liabilities of its
partners or shareholders or any predecessor corporation or partnership,
each as applicable, any Affiliates, or any other Persons, except in
connection with the Merger. Mortgagor will not acquire obligations or
securities of its partners or shareholders or any predecessor corporation
or partnership, each as applicable, or any Affiliates, except in
connection with the Merger. Mortgagor will not make loans to its partners
or shareholders or any predecessor corporation or partnership, each as
applicable, or any Affiliates of any of such Persons.
(xiii) Mortgagor will not enter into or be a party to any
transaction with its partners or shareholders, as applicable, or any
Affiliates of its partners except in the ordinary course of business of
Mortgagor on terms which are no less favorable to Mortgagor than would be
obtained in a comparable arm's length transaction with an unrelated third
party.
(h) No Defaults. No Default or Event of Default has occurred and is
continuing or would occur as a result of the consummation of the transactions
contemplated by the Loan Documents. Mortgagor is not in default in the payment
or performance of any of its Contractual Obligations in any material respect.
(i) Governmental Consents and Approvals. Mortgagor and, if applicable,
each General Partner, have obtained or made all necessary (i) consents,
approvals and authorizations, and registrations and filings of or with all
Governmental Authorities
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and (ii) consents, approvals, waivers and notifications of partners,
stockholders, creditors, lessors and other nongovernmental Persons, in each
case, which are required to be obtained or made by Mortgagor or, if applicable,
the General Partner, in connection with the execution and delivery of, and the
performance by Mortgagor of its obligations under, the Loan Documents except for
such consents, approvals and authorizations, registrations and filings, waivers
and notifications the failure of which to obtain or make would not have (i) a
Material Adverse Effect, (ii) interfere with Mortgagor's ability to pay its
obligations in timely manner or (iii) otherwise interfere with the benefits of
the security intended to be provided by this Mortgage.
(j) Investment Company Act Status. Mortgagor is not an "investment
company," or a company "controlled" by an "investment company," as such terms
are defined in the Investment Company Act of 1940, as amended.
(k) Compliance with Law. Mortgagor is in compliance in all material
respects with all Legal Requirements to which it or the Mortgaged Property is
subject, including, without limitation, all Environmental Statutes, the
Occupational Safety and Health Act of 1970, the Americans with Disabilities Act
and ERISA. No portion or the Mortgaged Property has been or will be purchased,
improved, fixtured, equipped or furnished with proceeds of any illegal activity.
(l) Financial Information. All financial data that has been delivered by
Mortgagor to Mortgagee (i) is true, complete and correct in all material
respects, (ii) accurately represents in all material respects the financial
condition and results of operations of the Persons covered thereby as of the
date on which the same shall have been furnished, and (iii) has been prepared in
accordance with GAAP (or such other accounting basis as is reasonably acceptable
to Mortgagee) throughout the periods covered. As of the date hereof, neither
Mortgagor nor, if applicable, any General Partner, has any contingent liability,
liability for taxes or other unusual or forward commitment of a material nature
not reflected in such financial statements delivered to Mortgagee; since the
date of the last financial statements delivered by Mortgagor to Mortgagee except
as
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otherwise disclosed in such financial statements or notes thereto, there has
been no change in the assets, liabilities or financial position of Mortgagor
nor, if applicable, any General Partner, or in the results of operations of
Mortgagor which would have a Material Adverse Effect. Neither Mortgagor nor, if
applicable, any General Partner, has incurred any obligation or liability,
contingent or otherwise not reflected in such financial statements which would
have a Material Adverse Effect.
(m) Transaction Brokerage Fees. Mortgagor has not dealt with any
financial advisors, brokers, underwriters, placement agents, agents or
finders in connection with the transactions contemplated by this Mortgage
except for CS First Boston Mortgage Capital Corp. and Merrill
Lynch, Pierce, Fenner & Smith Incorporated and their respective Affiliates.
All brokerage fees, commissions and other expenses payable in connection with
the transactions contemplated by the Loan Documents have been paid in full
contemporaneously with the execution of the Loan Documents and the funding of
the Loan. Mortgagor hereby agrees to indemnify and hold Mortgagee harmless
from and against any and all claims, liabilities, costs and expenses of any
kind in any way relating to or arising from (i) a claim by any Person that
such Person acted on behalf of Mortgagor in connection with the transactions
contemplated herein or (ii) any breach of the foregoing representation. The
provisions of this subsection (m) shall survive the repayment of the Debt.
(n) Federal Reserve Regulations. No part of the proceeds of the Loan will
be used for the purpose of purchasing or acquiring any "margin stock" within the
meaning of Regulations G, T, U or X of the Board of Governors of the Federal
Reserve System or for any other purpose which would be inconsistent with such
Regulations G, T, U or X or any other Regulations of such Board of Governors, or
for any purposes prohibited by Legal Requirements or by the terms and conditions
of the Loan Documents.
(o) Pending Litigation. There are no actions, suits or proceedings pending
or, to the best knowledge of Mortgagor, threatened against or affecting
Mortgagor or the Mortgaged Property in any court or before any Governmental
Authority which
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if adversely determined either individually or collectively has or is reasonably
likely to have a Material Adverse Effect.
(p) Solvency; No Bankruptcy. Each of Mortgagor and, if applicable, the
General Partner, (i) is and has at all times been Solvent and will remain
Solvent immediately upon the consummation of the transactions contemplated by
the Loan Documents and (ii) is free from bankruptcy, reorganization or
arrangement proceedings or a general assignment for the benefit of creditors and
is not contemplating the filing of a petition under any state or federal
bankruptcy or insolvency laws or the liquidation of all or a major portion of
such Person's assets or property and Mortgagor has no knowledge of any Person
contemplating the filing of any such petition against it or, if applicable, the
General Partner. None of the transactions contemplated hereby will be or have
been made with an intent to hinder, delay or defraud any present or future
creditors of Mortgagor and Mortgagor has received reasonably equivalent value in
exchange for its obligations under the Loan Documents. Mortgagor's assets do
not, and immediately upon consummation of the transaction contemplated in the
Loan Documents will not, constitute unreasonably small capital to carry out its
business as presently conducted or as proposed to be conducted. Mortgagor does
not intend to, nor believe that it will, incur debts and liabilities beyond its
ability to pay such debts as they may mature.
(q) Use of Proceeds. The proceeds of the Loan shall be applied by
Mortgagor to, inter alia, (i) satisfy certain mortgage loans presently
encumbering all or a part of the Mortgaged Property, (ii) fund the Sub-Accounts
in accordance with Article V hereof and (iii) pay certain transaction costs
incurred by Mortgagor in connection with the Loan. No portion of the proceeds of
the Loan will be used for family, personal, agricultural or household use.
(r) Tax Filings. Mortgagor and, if applicable, each General Partner, have
filed all federal, state and local tax returns required to be filed and have
paid or made adequate provision for the payment of all federal, state and local
taxes, charges and assessments payable by Mortgagor and, if applicable, the
General Partners. Mortgagor and, if applicable, the General Partners, believe
that their respective tax returns properly re-
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flect the income and taxes of Mortgagor and said General Partner, if any, for
the periods covered thereby, subject only to reasonable adjustments required by
the Internal Revenue Service or other applicable tax authority upon audit.
(s) Not Foreign Person. Mortgagor is not a "foreign person" within the
meaning ofss.1445(f)(3) of the Code.
(t) ERISA. (a) The assets of Mortgagor are not and will not become treated
as "plan assets", whether by operation of law or under regulations promulgated
under ERISA. Each Plan and Welfare Plan, and, to the knowledge of Mortgagor,
each Multiemployer Plan, is in compliance in all material respects with, and has
been administered in all material respects in compliance with, its terms and the
applicable provisions of ERISA, the Code and any other applicable Legal
Requirement, and no event or condition has occurred and is continuing as to
which Mortgagor would be under an obligation to furnish a report to Mortgagee
under clause (b)(i) of this Section. Other than an application for a favorable
determination letter with respect to a Plan, there are no pending issues or
claims before the Internal Revenue Service, the United States Department of
Labor or any court of competent jurisdiction related to any Plan or Welfare Plan
under which Mortgagor or any ERISA Affiliate, directly or indirectly (through an
indemnification agreement or otherwise), could be subject to any material risk
of liability under Section 409 or 502(i) of ERISA or Section 4975 of the Code.
No Welfare Plan provides or will provide benefits, including, without
limitation, death or medical benefits (whether or not insured) with respect to
any current or former employee of Mortgagor or any ERISA Affiliate beyond his or
her retirement or other termination of service other than (i) coverage mandated
by applicable law, (ii) death or disability benefits that have been fully
provided for by fully paid up insurance or (iii) severance benefits.
(b) Mortgagor will furnish to Mortgagee as soon as possible, and in
any event within ten (10) days after Mortgagor knows or has reason to believe
that any of the events or conditions specified below with respect to any Plan,
Welfare Plan or Multiemployer Plan has occurred or exists, a statement signed by
a senior financial officer of Mortgagor setting forth details
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respecting such event or condition and the action, if any, that Mortgagor or its
ERISA Affiliate proposes to take with respect thereto (and a copy of any report
or notice required to be filed with or given to PBGC (or any other relevant
Governmental Authority) by Mortgagor or an ERISA Affiliate with respect to such
event or condition, if such report or notice is required to be filed with the
PBGC or any other relevant Governmental Authority:
(i) any reportable event, as defined in Section 4043(b) of
ERISA and the regulations issued thereunder, with respect to a Plan,
as to which PBGC has not by regulation waived the requirement of
Section 4043(a) of ERISA that it be notified within thirty (30) days
of the occurrence of such event (provided that a failure to meet the
minimum funding standard of Section 412 of the Code of Section 302
of ERISA, including, without limitation, the failure to make on or
before its due date a required installment under Section 412(m) of
the Code of Section 302(e) of ERISA, shall be a reportable event
regardless of the issuance of any waivers in accordance with Section
412(d) of the Code), and any request for a waiver under Section
412(d) of the Code for any Plan;
(ii) the distribution under Section 4041 of ERISA of a notice
of intent to terminate any Plan or any action taken by Mortgagor or
an ERISA Affiliate to terminate any Plan;
(iii) the institution by PBGC of proceedings under Section
4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Plan, or the receipt by Mortgagor or any
ERISA Affiliate of a notice from a Multiemployer Plan that such
action has been taken by PBGC with respect to such Multiemployer
Plan;
(iv) the complete or partial withdrawal from a Multiemployer
Plan by Mortgagor or any ERISA Affiliate that results in liability
under Section 4201 or 4204 of ERISA (including the obligation to
satisfy secondary
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liability as a result of a purchaser default) or the receipt by
Mortgagor or any ERISA Affiliate of notice from a Multiemployer Plan
that it is in reorganization or insolvency pursuant to Section 4241
or 4245 of ERISA or that it intends to terminate or has terminated
under Section 4041A of ERISA;
(v) the institution of a proceeding by a fiduciary of any
Multiemployer Plan against Mortgagor or any ERISA Affiliate to
enforce Section 515 of ERISA, which proceeding is not dismissed
within thirty (30) days;
(vi) the adoption of an amendment to any Plan that, pursuant
to Section 401(a)(29) of the Code or Section 307 of ERISA, would
result in the loss of tax-exempt status of the trust of which such
Plan is a part if Mortgagor or an ERISA Affiliate fails to timely
provide security to the Plan in accordance with the provisions of
said Sections; or
(vii) the imposition of a lien or a security interest in
connection with a Plan.
(c) Mortgagor shall not knowingly engage in or permit any
transaction in connection with which Mortgagor or any ERISA Affiliate could be
subject to either a civil penalty or tax assessed pursuant to Section 502(i) or
502(l) of ERISA or Section 4975 of the Code, permit any Welfare Plan to provide
benefits, including without limitation, medical benefits (whether or not
insured), with respect to any current or former employee of Mortgagor or any
ERISA Affiliate beyond his or her retirement or other termination of service
other than (i) coverage mandated by applicable law, (ii) death or disability
benefits that have been fully provided for by paid up insurance or otherwise or
(iii) severance benefits, permit the assets of Mortgagor to become "plan
assets", whether by operation of law or under regulations promulgated under
ERISA or adopt, amend (except as may be required by applicable law) or increase
the amount of any benefit or amount payable under, or permit any ERISA Affiliate
to adopt, amend (except as may be required by applicable law) or increase the
amount of any benefit or amount payable under, any employee
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benefit plan (including, without limitation, any employee welfare benefit plan)
or other plan, policy or arrangement, except in the ordinary course of business.
(u) Labor Matters. Mortgagor is not a party to any collective bargaining
agreements.
(v) Private Offering. Neither Mortgagor nor any Person authorized to act
on its behalf (other than the initial purchasers of the Securities (as defined
below), as to which no representation is made) in connection with any offer or
sale of any securities issued in connection with a Securitization (the
"Securities") has used any form of general solicitation or general advertising
within the meaning of Rule 502(c) under the Securities Act of 1933, as amended
from time to time (the "Securities Act"), including, but not limited to,
advertisements, articles, notices or other communications published in any
newspaper, magazine or similar medium or broadcast over television or radio, or
any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising. Neither Mortgagor nor any Person authorized
to act on its behalf (other than the initial purchasers of the Securities, as to
which no representation is made) (i) has offered or sold directly or indirectly,
the Securities or any interest in the Securities or any other security from any
Person in any manner, (ii) has solicited any offer to buy, or (iii) has taken
any other action, in each of the cases set forth in clauses (i) through (iii)
above, that would constitute a distribution of the Securities under the
Securities Act or would render the sale of the Securities a violation of Section
5 of the Securities Act or any state securities laws, or would require
registration pursuant to the Securities Act, or would require qualification of
any of the Loan Documents under the Trust Indenture Act of 1939.
Section 2.03. Further Acts, etc. Mortgagor will, at the cost of Mortgagor, and
without expense to Mortgagee, do, execute, acknowledge and deliver all and
every such further acts, deeds, conveyances, mortgages, assignments, notices
of assignments, transfers and assurances as Mortgagee shall, from time to
time, reasonably require, for the better assuring, conveying, assigning,
transferring, and confirming unto Mortgagee the property and rights hereby
mortgaged, given, granted, bargained,
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sold, alienated, enfeoffed, conveyed, confirmed, pledged, assigned and
hypothecated, or which Mortgagor may be or may hereafter become bound to convey
or assign to Mortgagee, or for carrying out or facilitating the performance
of the terms of this Mortgage or for filing, registering or recording
this Mortgage and, on demand, will execute and deliver and hereby
authorizes Mortgagee to execute in the name of Mortgagor or without the
signature of Mortgagor to the extent Mortgagee may lawfully do so, one or
more financing statements, chattel mortgages or comparable security
instruments, to evidence more effectively the lien hereof upon the Mortgaged
Property. Mortgagor grants to Mortgagee an irrevocable power of attorney
coupled with an interest for the purpose of protecting, perfecting,
preserving and realizing upon the interests granted pursuant to this Mortgage
(but not to increase the obligations of Mortgagor beyond those which are
intended to be granted in this Mortgage and the other Loan Documents)
and to effect the intent hereof, all as fully and effectually as Mortgagor
might or could do; and Mortgagor hereby ratifies all that Mortgagee shall
lawfully do or cause to be done by virtue hereof.
Section 2.04. Recording of Mortgage, etc. Mortgagor forthwith upon the
execution and delivery of this Mortgage and thereafter, from time to
time, will cause this Mortgage, and any security instrument creating a
lien or security interest or evidencing the lien hereof upon the Mortgaged
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 protect the lien or
security interest hereof upon, and the interest of Mortgagee in, the Mortgaged
Property. Mortgagor will pay all filing, registration or recording fees, and
all expenses incident to the preparation, execution and acknowledgment of
this Mortgage, any mortgage supplemental hereto, any security instrument
with respect to the Mortgaged Property and any instrument of further assurance,
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 Mortgage, any mortgage supplemental hereto, any
security instrument with respect to the Mortgaged Property or any instrument of
further assurance, except where prohibited by law to do so, in which event
Mortgagee may declare the Debt to be immediately due and payable. Mortgagor
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shall hold harmless and indemnify Mortgagee, and its successors and assigns,
against any liability incurred as a result of the imposition of any tax on
the making and recording of this Mortgage.
Section 2.05. Representations and Warranties as to the Mortgaged Property.
Mortgagor represents and warrants with respect to the Mortgaged Property as
follows:
(a) Lien Priority. This Mortgage is a valid and enforceable first lien
on the Mortgaged Property, free and clear of all encumbrances and liens
having priority over the lien of this Mortgage, except for the items set
forth as exceptions to or subordinate matters in the title insurance policy
insuring the lien of this Mortgage, none of which, individually or in the
aggregate, materially interfere with the benefits of the security intended to
be provided by this Mortgage, materially affect the value or marketability of
the Mortgaged Property, impair the use or operation of the Mortgaged Property
or impair Mortgagor's ability to pay its obligations in a timely manner (such
items being the "Permitted Encumbrances").
(b) Title. Mortgagor has, subject only to the Permitted Encumbrances,
good, insurable and marketable fee simple title to the Premises, Improvements
and Fixtures (collectively the "Realty") and to all easements and rights
benefitting the Realty and has the right, power and authority to mortgage,
give, grant, bargain, sell, alien, enfeoff, convey, confirm, pledge, assign,
and hypothecate the Mortgaged Property. Mortgagor will preserve its interest
in and title to the Mortgaged Property and will forever warrant and defend
the same to Mortgagee against any and all claims made by, through or under
Mortgagor and will forever warrant and defend the validity and priority of
the lien and security interest created herein against the claims of all
Persons whomsoever claiming by, through or under Mortgagor. The foregoing
warranty of title shall survive the foreclosure of this Mortgage and shall
inure to the benefit of and be enforceable by Mortgagee in the event
Mortgagee acquires title to the Mortgaged Property pursuant to any
foreclosure. In addition, there are no outstanding options or rights of first
refusal to purchase the Mortgaged Property or Mortgagor's ownership thereof.
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(c) Taxes and Impositions. All taxes and other Impositions and
governmental assessments due and owing in respect of, and affecting, the
Mortgaged Property have been paid. Mortgagor has paid all Impositions which
constitute special governmental assessments in full, except for those
assessments which are permitted by applicable Legal Requirements to be paid in
installments, in which case all installments which are due and payable have been
paid in full. There are no pending, or to Mortgagor's best knowledge, proposed
special or other assessments for public improvements or otherwise affecting the
Mortgaged Property, nor are there any contemplated improvements to the Mortgaged
Property that may result in such special or other assessments.
(d) Casualty; Flood Zone. The Realty is in good repair and free and clear
of any damage, destruction or casualty (whether or not covered by insurance)
that would materially affect the value of the Realty or the use for which the
Realty was intended. No portion of the Premises is located in an "area of
special flood hazard," as that term is defined in the regulations of the Federal
Insurance Administration, Department of Housing and Urban Development, under the
National Flood Insurance Act of 1968, as amended (24 CFR ss.1909.1) or Mortgagor
has obtained the flood insurance required by Section 3.01(a)(vi) hereof. The
Premises either does not lie in a 100 year flood plain that has been identified
by the Secretary of Housing and Urban Development or any other Governmental
Authority or, if it does, Mortgagor has obtained the flood insurance required by
Section 3.01(a)(vi) hereof.
(e) Completion; Encroachment. All Improvements necessary for the efficient
use and operation of the Premises have been completed and none of said
Improvements lie outside the boundaries and building restriction lines of the
Premises. Except as set forth in the title insurance policy insuring the lien of
this Mortgage, no improvements on adjoining properties encroach upon the
Premises.
(f) Separate Lot. The Premises are taxed separately without regard to any
other real estate and constitute a legally subdivided lot under all applicable
Legal Requirements (or, if not subdivided, no subdivision or platting of the
Premises is
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required under applicable Legal Requirements), and for all purposes may be
mortgaged, conveyed or otherwise dealt with as an independent parcel except as
previously disclosed in writing to Mortgagee. The Mortgaged Property does not
benefit from any tax abatement or exemption.
(g) Use. The existence of all Improvements, the present use and operation
thereof and the access of the Premises and the Improvements to all of the
utilities and other items referred to in paragraph (k) below are in compliance
in all material respects with all Leases affecting the Mortgaged Property and
all applicable Legal Requirements, including, without limitation, Environmental
Statutes, Development Laws and Use Requirements. Mortgagor has not received any
notice from any Governmental Authority alleging any uncured violation relating
to the Mortgaged Property of any applicable Legal Requirements the failure to
cure of which is reasonably likely to have a Material Adverse Effect.
(h) Licenses and Permits. Mortgagor currently holds and will continue to
hold all certificates of occupancy, licenses, registrations, permits, consents,
franchises and approvals of any Governmental Authority or any other Person which
are material for the lawful occupancy and operation of the Realty or which are
material to the ownership or operation of the Mortgaged Property or the conduct
of Mortgagor's business. All such certificates of occupancy, licenses,
registrations, permits, consents, franchises and approvals are current and in
full force and effect.
(i) Environmental Matters. Mortgagor has received and reviewed the
Environmental Report and has no reason to believe that the Environmental Report
contains any untrue statement of a material fact or omits to state a material
fact necessary to make the statements contained therein or herein, in light of
the circumstances under which such statements were made, not misleading.
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(j) Property Proceedings. Except as previously disclosed to Mortgagee
in writing, there are no actions, suits or proceedings pending or threatened
in any court or before any Governmental Authority or arbitration board or
tribunal (i) relating to (A) the zoning of the Premises or any part thereof,
(B) any certificates of occupancy, licenses, registrations, permits, consents
or approvals issued with respect to the Mortgaged Property or any part thereof,
(C) the condemnation of the Mortgaged Property or any part thereof, or (D) the
condemnation or relocation of any roadways abutting the Premises required for
access or the denial or limitation of access to the Premises or any part
thereof from any point of access to the Premises, (ii) asserting that (A) any
such zoning, certificates of occupancy, licenses, registrations, permits,
consents and/or approvals do not permit the operation of any material portion
of the Realty as presently being conducted, (B) any material improvements
located on the Mortgaged Property or any part thereof cannot be located thereon
or operated with their intended use or (C) the operation of the Mortgaged
Property or any part thereof is in violation in any material respect of any
Environmental Statutes, Development Laws or other Legal Requirements or Space
Leases or Property Agreements or (iii) which (A) might affect the validity or
priority of any Loan Document or (B) have a Material Adverse Effect. Mortgagor
is not aware of any facts or circumstances which may give rise to any
actions, suits or proceedings described in the preceding sentence.
(k) Utilities. The Premises has all necessary legal access to water, gas
and electrical supply, storm and sanitary sewerage facilities, other required
public utilities (with respect to each of the aforementioned items, by means of
either a direct connection to the source of such utilities or through
connections available on publicly dedicated roadways directly abutting the
Premises or through permanent insurable easements benefiting the Premises), fire
and police protection, parking, and means of direct access between the Premises
and public highways over recognized curb cuts (or such access to public highways
is through private roadways which may be used for ingress and egress pursuant to
permanent insurable easements).
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(l) Mechanics' Liens. The Mortgaged Property is free and clear of any
mechanics' liens or liens in the nature thereof, and no rights are
outstanding that under law could give rise to any such liens, any of which
liens are or may be prior to, or equal with, the lien of this Mortgage,
except those which are insured against by the title insurance policy insuring
the lien of this Mortgage.
(m) Title Insurance and Survey. Mortgagee has received a lenders' title
insurance policy insuring this Mortgage as a first lien on the Mortgaged
Property subject only to Permitted Encumbrances.
(n) Insurance. The Mortgaged Property is insured in accordance with the
requirements set forth in Article III hereof.
(o) Space Leases.
(i) Mortgagor has delivered a true, correct and complete schedule of
all Space Leases as of the date hereof, which accurately and completely
sets forth in all material respects, for each such Space Lease, except for
temporary license agreements for terms of less than one year, the
following (collectively, the "Rent Roll"): the name of the tenant; the
lease expiration date, extension and renewal provisions; the base rent;
and all additional rent and pass-through obligations.
(ii) Each Space Lease constitutes the legal, valid and binding
obligation of Mortgagor and, to the knowledge of Mortgagor, is enforceable
against the tenant thereof. No default exists, or with the passing of time
or the giving of notice would exist, (A) under any Major Space Lease or
(B) under any other Space Leases which would, in the aggregate, have a
Material Adverse Effect.
(iii) No tenant under any Space Lease has, as of the date hereof,
paid Rent more than thirty (30) days in advance, and the Rents under such
Space Leases have not been waived, released, or otherwise discharged or
compromised.
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(iv) Except as previously disclosed in writing to Mortgagee, all
work to be performed by Mortgagor under the Space Leases has been
substantially performed, all contributions which are due and payable to be
made by Mortgagor to the tenants thereunder have been made except for any
held-back amounts, and all other conditions precedent to each such
tenant's obligations thereunder have been satisfied.
(v) Intentionally omitted.
(vi) Each tenant under a Major Space Lease has entered into
occupancy of the demised premises to the extent required under the terms
of its Major Space Lease, and each such tenant is open and conducting
business with the public in the demised premises. To the best knowledge of
Mortgagor, after due inquiry, each tenant under a Lease other than a Major
Space Lease has entered into occupancy of its demised premises under its
Lease to the extent required under the terms of its Lease and each such
tenant is open and conducting business with the public in the demised
premises.
(vii) Mortgagor has delivered to Mortgagee true, correct and
complete copies of the Space Leases described in the Rent Roll that have
been requested by Mortgagee.
(viii) Each Space Lease is in full force and effect and the
information disclosed on the Rent Roll reflects any assignment,
modification, supplementation or amendment in any way related to a Space
Lease.
(ix) Except as previously disclosed in writing to Mortgagee, to
the best of Mortgagor's knowledge, each tenant under each Space Lease is
free from bankruptcy, reorganization or arrangement proceedings or a
general assignment for the benefit of creditors.
(x) No Space Lease provides any party with the right to obtain a
lien or encumbrance upon the Mortgaged Property superior to the lien of
this Mortgage.
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(p) Property Agreements.
(i) Mortgagor has delivered to Mortgagee true, correct and complete
copies of all Property Agreements.
(ii) No Property Agreement provides any party with the right to
obtain a lien or encumbrance upon the Mortgaged Property superior to the
lien of this Mortgage.
(iii) No default exists or with the passing of time or the giving of
notice or both would exist under any Property Agreement which would,
individually or in the aggregate, have a Material Adverse Effect.
(iv) Other than late payment notices sent in the ordinary course of
business, Mortgagor has not received or given any written communication
which alleges that a default exists or, with the giving of notice or the
lapse of time, or both, would exist under the provisions of any Property
Agreement.
(v) No condition exists whereby Mortgagor or any future owner of the
Mortgaged Property may be required to purchase any other parcel of land
which is subject to any Property Agreement or which gives any Person a
right to purchase, or right of first refusal with respect to, the
Mortgaged Property.
(vi) To the best knowledge of Mortgagor, no offset or any right of
offset exists respecting continued contributions to be made by any party
to any Property Agreement except as expressly set forth therein. Except as
previously disclosed to Mortgagee in writing, no material exclusions or
restrictions on the utilization, leasing or improvement of the Mortgaged
Property (including non-compete agreements) exists in any Property
Agreement.
(vii) All "pre-opening" requirements contained in all Property
Agreements (including, but not limited to, all off-site and on-site
construction requirements), if any, have been fulfilled, and, to the best
of Mortgagor's knowledge, no condition now exists whereby any party to any
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such Property Agreement could refuse to honor its obligations thereunder.
(viii) All work, if any, to be performed by Mortgagor under each of
the Property Agreements has been substantially performed, all
contributions to be made by Mortgagor to any party to such Property
Agreements have been made, and all other conditions to such party's
obligations thereunder have been satisfied.
(q) Personal Property. Mortgagor has delivered to Mortgagee a schedule
which is true, correct and complete in all material respects of all personal
property, if any, owned by Mortgagor and located upon the Mortgaged Property or
used in connection with the use or operation of the Mortgaged Property and
Mortgagor represents that it has good and marketable title to all such personal
property, free and clear of any liens, except for liens created under the Loan
Documents and liens which describe the equipment and other personal property
owned by tenants and certain chattel liens disclosed in writing to Mortgagee.
(r) Leasing Brokerage and Management Fees. Except as previously disclosed
to Mortgagee in writing, there are no brokerage fees or commissions payable by
Mortgagor with respect to the leasing of space at the Mortgaged Property and
there are no management fees payable by Mortgagor with respect to the management
of the Mortgaged Property.
(s) Security Deposits. All security deposits with respect to the Mortgaged
Property on the date hereof have been transferred to the Security Deposit
Account on the date hereof, and Mortgagor is in compliance with all Legal
Requirements relating to such security deposits as to which failure to comply
might, individually or in the aggregate, have a Material Adverse Effect.
(t) Loan to Value Ratio. To the best knowledge of Mortgagor, based on the
Appraisal (which Mortgagor believes to contain a reasonable assessment of the
fair market value of the Mortgaged Property), the Initial Allocated Loan Amount
does not exceed one hundred twenty-five percent (125%) of the fair market
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value of the Mortgaged Property. For the purposes of this clause (t), the term
"fair market value" shall not include (i) the amount of any indebtedness
secured by a lien affecting the Mortgaged Property that is prior to, or on a
parity with, the lien of this Mortgage, and (ii) the value of any
property that is not "real property" within the meaning of Treas. Reg.
ss.ss.1.860G-2 and 1.856-3(d).
(u) Representations Generally. The review and inquiry made on behalf of
Mortgagor in connection with the representations and warranties contained in
the Mortgage, have all been made by Persons having the requisite
expertise and knowledge to provide such representations and warranties. No
representation, warranty or statement of fact made by or on behalf of Mortgagor
in this Mortgage or in any certificate, document or schedule furnished
to Mortgagee pursuant hereto, contains any untrue statement of a material
fact or omits to state any material fact necessary to make statements
contained therein or herein not misleading (which may be to Mortgagor's best
knowledge where so provided herein). There are no facts presently known to
Mortgagor which have not been disclosed to Mortgagee which would,
individually or in the aggregate, have a Material Adverse Effect nor as far
as Mortgagor can foresee might, individually or in the aggregate, have a
Material Adverse Effect. All representations and warranties contained in this
Mortgage shall survive the closing of the Loan.
Section 2.06. Removal of Lien. (a) Mortgagor shall, at its expense, maintain
this Mortgage as a first lien on the Mortgaged Property and shall keep the
Mortgaged Property free and clear of all liens of any kind and nature other
than the Permitted Encumbrances. Mortgagor shall, within twenty (20) days
following the filing thereof, promptly discharge of record, by bond or
otherwise, any such liens and, promptly upon request by Mortgagee, shall
deliver to Mortgagee evidence reasonably satisfactory to Mortgagee of the
discharge thereof.
(b) Subject to the provisions of Section 2.06(a) hereof, Mortgagor shall
(i) pay, from time to time when the same shall become due, all claims and
demands of mechanics, materialmen, laborers, and others which, if unpaid, might
result in, or permit the creation of, a lien on the Mortgaged Property or any
part thereof, or on the revenues, rents, issues, income or profits
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arising therefrom, (ii) cause to be removed of record (by payment or posting
of bond or settlement or otherwise) any mechanics', materialmens', laborers'
or other lien on the Mortgaged Property, or any part thereof, or on the
revenues, rents, issues, income or profit arising therefrom, and (iii) in
general, do or cause to be done, without expense to Mortgagee, everything
reasonably necessary to preserve in full the lien of this Mortgage. If
Mortgagor fails to comply with the requirements of paragraph (b) of this
Section 2.06, then, upon five (5) Business Days' prior notice to Mortgagor,
Mortgagee may, but shall not be obligated to, pay any such lien, and
Mortgagor shall, within five (5) Business Days after Mortgagee's demand
therefor, reimburse Mortgagee for all sums so expended, together with
interest thereon at the Default Rate from the date advanced, all of which
shall be deemed part of the Debt. Nothing contained herein shall be deemed a
consent or request of Mortgagee, express or implied, by inference or
otherwise, to the performance of any alteration, repair or other work by any
contractor, subcontractor or laborer or the furnishing of any materials by
any materialmen in connection therewith.
(c) Notwithstanding the foregoing, Mortgagor may contest any lien
(other than a lien relating to non-payment of Impositions, the contest of
which shall be governed by Section 4.04 hereof) of the type set forth in
subparagraph (b)(ii) of this Section 2.06 provided that, following prior
notice to Mortgagee (i) Mortgagor is contesting the validity of such lien
with due diligence and in good faith and by appropriate proceedings, without
cost or expense to Mortgagee or any of its agents, employees, officers, or
directors, (ii) Mortgagor shall preclude the collection of, or other
realization upon, any contested amount from the Mortgaged Property or any
revenues from or interest in the Mortgaged Property, (iii) neither the
Mortgaged Property nor any part thereof nor interest therein, shall be in any
danger of being sold, forfeited or lost by reason of such contest by
Mortgagor, (iv) such contest by Mortgagor shall not affect the ownership, use
or occupancy of the Mortgaged Property, (v) such contest by Mortgagor shall
not subject Mortgagee or Mortgagor to the risk of civil or criminal liability
(other than the civil liability of Mortgagor for the amount of the lien in
question), (vi) such lien is subordinate to the lien of this Mortgage, (vii)
Mortgagor has not consented to such lien,
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(viii) Mortgagor has given Mortgagee prompt notice of the filing of such lien
and the bonding thereof by Mortgagor and, upon request by Mortgagee from time
to time, notice of the status of such contest by Mortgagor and/or
confirmation of the continuing satisfaction of the conditions set forth in
this Section 2.06(c), (ix) Mortgagor shall promptly pay the obligation
secured by such lien upon a final determination of Mortgagor's liability
therefor, and (xi) Mortgagor shall deliver to Mortgagee cash, a bond or other
security acceptable to Mortgagee equal to 125% of the contested amount
pursuant to collateral arrangements reasonably satisfactory to Mortgagee.
Section 2.07. Cost of Defending and Upholding this Mortgage Lien. If any
action or proceeding is commenced to which Mortgagee is made a party relating
to the Loan Documents and/or the Mortgaged Property or Mortgagee's interest
therein or in which it becomes necessary to defend or uphold the lien of this
Mortgage or any other Loan Document, Mortgagor shall, on demand, reimburse
Mortgagee for all expenses (including, without limitation, reasonable
attorneys' fees and disbursements) incurred by Mortgagee in connection
therewith, and such sum, together with interest thereon at the Default Rate
from and after such demand until fully paid, shall constitute a part of the
Debt.
Section 2.08. Use of the Mortgaged Property. Mortgagor will use, or cause to
be used, the Mortgaged Property for such use as is permitted pursuant to
applicable Legal Requirements including, without limitation, under the
certificate of occupancy applicable to the Mortgaged Property, and which is
required by the Loan Documents. Mortgagor shall not suffer or permit the
Mortgaged Property or any portion thereof to be used by the public, any
tenant, or any Person not subject to a Lease, in a manner as is reasonably
likely to impair Mortgagor's title to the Mortgaged Property, or in such
manner as may give rise to a claim or claims of adverse usage or adverse
possession by the public, or of implied dedication of the Mortgaged Property
or any part thereof.
Section 2.09. Financial Reports. (a) Mortgagor will keep and maintain or will
cause to be kept and maintained on a fiscal year basis, in accordance with
GAAP or federal income tax basis prepared consistently with the statements of
books, records and accounts delivered to Mortgagee and the Rating Agency
prior to the Closing
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Date (or such other accounting basis reasonably acceptable to Mortgagee)
consistently applied, proper and adequate books, records and accounts
reflecting (i) all of the financial affairs of Mortgagor and (ii) all items
of income and expense in connection with the operation of the Mortgaged
Property or in connection with any services, equipment or furnishings
provided in connection with the operation thereof, whether such income or
expense may be realized by Mortgagor or by any other Person whatsoever,
excepting lessees unrelated to and unaffiliated with Mortgagor who have
leased from Mortgagor portions of the Premises for the purpose of occupying
the same. Mortgagee shall have the right from time to time at all times
during normal business hours upon reasonable notice to examine such books,
records and accounts at the office of Mortgagor or other person maintaining
such books, records and accounts and to make such copies or extracts thereof
as Mortgagee shall desire. After the occurrence of an Event of Default,
Mortgagor shall pay any costs and expenses incurred by Mortgagee to examine
Mortgagor's accounting records with respect to the Mortgaged Property, as
Mortgagee shall determine to be necessary or appropriate in the protection of
Mortgagee's interest.
(b) Mortgagor will furnish Mortgagee annually, within one hundred
twenty (120) days following the end of each Fiscal Year of Mortgagor, with a
complete copy of Mortgagor's financial statement audited by an Independent
certified public accountant that is reasonably acceptable to Mortgagee in
accordance with GAAP or federal income tax basis prepared consistently with
the statements of books, records and accounts
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delivered to Mortgagee and the Rating Agency prior to the Closing Date (or
such other accounting basis reasonably acceptable to Mortgagee)
consistently applied covering (i) the financial affairs of Mortgagor and (ii)
the operation of the Mortgaged Property for such Fiscal Year and containing a
statement of revenues and expenses, a statement of assets and liabilities and
a statement of Mortgagor's equity. Together with Mortgagor's annual financial
statements, Mortgagor shall furnish to Mortgagee an Officer's Certificate
certifying as of the date thereof (i) that the annual financial statements
accurately represent the results of operation and financial condition of
Mortgagor and the Mortgaged Property all in accordance with GAAP or federal
income tax basis prepared consistently with the statements of books, records
and accounts delivered to Mortgagee and the Rating Agency prior to the
Closing Date consistently applied, and (ii) whether there exists an event or
circumstance which constitutes, or which upon notice or lapse of time or both
would constitute, a Default under the Note or any other Loan Document
executed and delivered by Mortgagor, and if such event or circumstance exists,
the nature thereof, the period of time it has existed and the action then
being taken to remedy such event or circumstance.
(c) Mortgagor will furnish Mortgagee monthly, within thirty (30) days
following the end of each month, with a true, complete and correct cash flow
statement all in accordance with GAAP or federal income tax basis prepared
consistently with the statements of books, records and accounts delivered to
Mortgagee and the Rating Agency prior to the Closing Date consistently
applied with respect to the Mortgaged Property in the form attached hereto as
Exhibit C and made a part hereof, showing (i) all cash receipts of any kind
whatsoever and all cash payments and disbursements, and (ii) year-to-date
summaries of such cash receipts, payments and disbursements together with a
certification of the Manager stating that such cash flow statement is true,
complete and correct.
(d) Mortgagor will furnish Mortgagee monthly, within thirty (30) days
following the end of each month, with a certification of the Manager stating
that all Operating Expenses with respect to the Mortgaged Property which had
accrued as of the last day of the month preceding the delivery of the cash flow
statement referred to in clause (c) above have been fully paid or otherwise
reserved or provided for by the Manager (any such certification or any
certification furnished by a Manager pursuant to clause (c) above, a "Manager
Certification").
(e) Mortgagor will furnish Mortgagee quarterly, within sixty (60) days
following the end of the first three fiscal quarters of Mortgagor and within
one-hundred twenty (120) days after the end of each Fiscal Year, with a true,
complete and correct rent roll for the Mortgaged Property, including a list of
which tenants are in default under their respective leases, dated as of the
date of Mortgagee's request, identifying each tenant, the monthly rent and
additional rent, if any, payable by such tenant, the expiration date of such
tenant's Lease, the security
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deposit, if any, held by Mortgagor under the Lease, the space covered by the
Lease, and the arrearages for such tenant, if any, the sales per square foot of
each tenant, to the extent reported by tenants under the terms of the Leases
(which Mortgagor agrees to use best efforts to obtain if required under the
terms of the Leases) and such rent roll shall be accompanied by an Officer's
Certificate, dated as of the date of the delivery of such rent roll, certifying
that such rent roll is true, correct and complete in all material respects as of
its date.
(f) Mortgagor shall furnish to Mortgagee, within thirty (30) days after
Mortgagee's request therefor, with such further detailed information with
respect to the operation of the Mortgaged Property and the financial affairs of
Mortgagor as may be reasonably requested by Mortgagee.
(g) Mortgagor shall cause the Manager to furnish to Mortgagee, within
thirty (30) days after the end of each month, a schedule of tenant security
deposits showing any activity in the Security Deposit Account for such month,
together with a certification of the Manager as to the balance in such Security
Deposit Account and that such tenant security deposits are being held in
accordance with all Legal Requirements.
(h) Mortgagor will furnish Mortgagee quarterly, within sixty (60) days
following the end of the first three fiscal quarters of Mortgagor and within
one hundred twenty (120) days after the end of each Fiscal Year, with a
report setting forth (i) the Net Operating Income for such fiscal quarter and
Fiscal Year-to-date, each as compared to the preceding Fiscal Year, (ii) the
average and period end occupancy rate of the Mortgaged Property, (iii) the Debt
Service Coverage for the most recent fiscal quarter and Fiscal Year-to-date,
and each as compared to the preceding Fiscal Year, (iv) the capital repairs,
replacements and improvements performed at the Mortgaged Property during such
fiscal quarter and Fiscal Year-to-Date and the aggregate Recurring
Replacement Expenditures made in connection therewith, and (v) the balance
contained in each of the Sub-Accounts as of the end of such fiscal quarter
(which balance Mortgagee shall provide upon Mortgagor's written request
therefor).
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Section 2.10. Litigation. Mortgagor will give prompt written notice to
Mortgagee of any litigation or governmental proceedings pending or
threatened (in writing) against Mortgagor which might have a Material Adverse
Effect.
ARTICLE III: INSURANCE AND CASUALTY RESTORATION
Section 3.01. Insurance Coverage. Mortgagor shall, at its expense, maintain the
following insurance coverages with respect to the Mortgaged Property during the
term of this Mortgage:
(a) (i) Insurance against loss or damage by fire, casualty and other
hazards included in an "all-risk" extended coverage endorsement or its
equivalent, with such endorsements as Mortgagee may from time to time
reasonably require and which are customarily required by Institutional
Lenders of similar properties similarly situated, covering the Mortgaged
Property in an amount not less than the greater of (A) 100% of the
insurable replacement value of the Mortgaged Property (exclusive of the
Premises and footings and foundations) and (B) such other amount as is
necessary to prevent any reduction in such policy by reason of and to
prevent Mortgagor, Mortgagee or any other insured thereunder from being
deemed to be a co-insurer. Not less frequently than once every three
years, Mortgagor, at its option, shall either (A) have the Appraisal
updated or obtain a new appraisal of the Mortgaged Property reasonably
acceptable to Mortgagee, (B) have a valuation of the Mortgaged Property
made by or for its insurance carrier conducted by an appraiser experienced
in valuing properties of similar type to that of the Mortgaged Property
and reasonably acceptable to Mortgagee which are in the geographical
area in which the Mortgaged Property is located or (C) provide such other
evidence as will, in Mortgagee's sole judgment, enable Mortgagee to
determine whether there shall have been an increase in the insurable value
of the Mortgaged Property and Mortgagor shall deliver such updated
Appraisal, new appraisal, insurance valuation or other evidence acceptable
to Mortgagee, as the case may be, and, if such updated Appraisal, new
appraisal, insurance valuation, or other evidence acceptable to
Mortgagee
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reflects an increase in the insurable value of the Mortgaged Property, the
amount of insurance required hereunder shall be increased accordingly and
Mortgagor shall deliver evidence satisfactory to Mortgagee that such
policy has been so increased.
(ii) Commercial comprehensive general liability insurance
against claims for personal and bodily injury and/or death to one or more
persons or property damage, occurring on, in or about the Mortgaged
Property (including the adjoining streets, sidewalks and passageways
therein) in such amounts as Mortgagee may from time to time reasonably
require (but in no event shall Mortgagee's requirements be increased
more frequently than once during each twelve (12) month period) and which
are customarily required by Institutional Lenders for similar properties
similarly situated, but not less than $10,000,000.00.
(iii) Business interruption, rent loss or other similar
insurance (A) with loss payable to Mortgagee, (B) covering all risks
required to be covered by the insurance provided for in Section 3.01(a)(i)
and (C) in an amount not less than 100% of the projected fixed or base
rent plus percentage rent for the succeeding twenty-four (24) month period
unless the Rating Agency shall have delivered confirmation that any rating
issued in connection with the Securitization will not, as a result of
having business interruption, rent loss or other similar insurance for a
shorter period, be downgraded from the then current ratings thereof,
qualified or withdrawn, based on an occupancy rate of 100%. The amount of
such insurance shall be determined upon the execution of this Mortgage,
and not more frequently than once each calendar year thereafter
based on Mortgagor's reasonable estimate of projected fixed or base rent
plus percentage rent, from the Mortgaged Property for the next succeeding
twenty-four (24) months unless the Rating Agency shall have delivered
confirmation that any rating issued in connection with the Securitization
will not, as a result of having business interruption, rent loss or other
similar insurance for a shorter period, be downgraded from the then
current ratings thereof, qualified or withdrawn. In the event the
Mortgaged Property shall be damaged or destroyed,
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Mortgagor shall and hereby does assign to Mortgagee all payment of claims
under the policies of such insurance, and all amounts payable thereunder,
and all net amounts, shall be collected by Mortgagee under such policies
and shall be applied in accordance with this Mortgage; provided,
however, that nothing herein contained shall be deemed to relieve
Mortgagor of its obligations to timely pay all amounts due under the
Loan Documents.
(iv) War risk insurance when such insurance is obtainable
from the United States of America or any agency or instrumentality thereof
at reasonable rates (for the maximum amount of insurance obtainable) and
if requested by Mortgagee, and such insurance is then customarily
required by Institutional Lenders of similar properties similarly
situated.
(v) Insurance against loss or damages from (A) leakage of
sprinkler systems and (B) explosion of steam boilers, air conditioning
equipment, pressure vessels or similar apparatus now or hereafter
installed at the Mortgaged Property, in such amounts as Mortgagee may from
time to time reasonably require and which are then customarily required by
Institutional Lenders of similar properties similarly situated.
(vi) Flood insurance in an amount equal to the full insurable
value of the Mortgaged Property or the maximum amount available, whichever
is less, if the Improvements are located in an area designated by the
Secretary of Housing and Urban Development as being "an area of special
flood hazard" under the National Flood Insurance Program (i.e., having a
one percent or greater chance of flooding), and if flood insurance is
available under the National Flood Insurance Act.
(vii) Worker's compensation insurance or other similar
insurance which may be required by Governmental Authorities or Legal
Requirements.
(viii) Such other insurance as may from time to time be
required by Mortgagee and which is then customarily
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required by Institutional Lenders for similar properties similarly
situated, against other insurable hazards, including, but not limited to,
malicious mischief, vandalism, windstorm or earthquake, which at the time
are commonly insured against and generally available in the case of
properties similarly situated, due regard to be given to the size and type
of the Premises, Improvements, Fixtures and Equipment and their location,
construction and use.
(b) If Mortgagor is a partnership, Mortgagor shall cause the General
Partner to maintain fidelity insurance in an amount equal to or greater
than the annual Operating Income of the Mortgaged Property for the six (6)
month period immediately preceding the date on which the premium for such
insurance is due and payable.
(c) Mortgagor shall cause any Manager of the Mortgaged Property to
maintain fidelity insurance in an amount equal to or greater than the
annual Operating Income of the Mortgaged Property for the six (6) month
period immediately preceding the date on which the premium for such
insurance is due and payable or such lesser amount as Mortgagee shall
approve.
Section 3.02. Policy Terms. (a) All insurance required by this Article III
shall be in the form (other than with respect to Sections 3.01(a)(vi) and
(vii) above when insurance in those two sub-sections is placed with a
governmental agency or instrumentality on such agency's forms) and amount and
with deductibles as, from time to time, shall be reasonably acceptable to
Mortgagee, under valid and enforceable policies issued by financially
responsible insurers authorized to do business in the State where the Mortgaged
Property is located, with a general policyholder's service rating of not less
than A and a financial rating of not less than XI as rated in the most
currently available Best's Insurance Reports (or the equivalent, if such
rating system shall hereafter be altered or replaced) and shall have a claims
paying ability rating of not less than "AA" from the Rating Agency or, if not
so rated by the Rating Agency, then the Rating Agency shall have delivered
confirmation that any rating issued in connection with the Securitization
will not, as a result of the failure of such proposed issuer to meet such
standard, be
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downgraded from the then current ratings thereof, qualified or withdrawn.
Originals or certified copies of all insurance policies shall be delivered to
and held by Mortgagee. All such policies (except policies for worker's
compensation) shall name Mortgagee as an additional named insured, shall
provide for loss payable to Mortgagee and shall contain (or have attached):
(i) standard "non-contributory mortgagee" endorsement or its equivalent
relating, inter alia, to recovery by Mortgagee notwithstanding the
negligent or willful acts or omissions of Mortgagor; (ii) a waiver of
subrogation endorsement as to Mortgagee; (iii) an endorsement indicating
that neither Mortgagee nor Mortgagor shall be or be deemed to be a co-insurer
with respect to any casualty risk insured by such policies and shall provide
for a deductible per loss of an amount not more than that which is
customarily maintained by owners of similar properties similarly situated,
and (iv) a provision that such policies shall not be canceled, terminated,
denied renewal or amended, including, without limitation, any amendment
reducing the scope or limits of coverage, without at least thirty (30) days'
prior written notice to Mortgagee in each instance. Not less than thirty
(30) days prior to the expiration dates of the insurance policies obtained
pursuant to this Mortgage, originals or certified copies of renewals of
such policies (or certificates evidencing such renewals) bearing notations
evidencing the payment of premiums or accompanied by other reasonable
evidence of such payment (which premiums shall not be paid by Mortgagor through
or by any financing arrangement which would entitle an insurer to terminate a
policy) shall be delivered by Mortgagor to Mortgagee. Mortgagor shall not carry
separate insurance, concurrent in kind or form or contributing in the event
of loss, with any insurance required under this Article III.
(b) If Mortgagor fails to maintain and deliver to Mortgagee the
original policies or certificates of insurance required by this Mortgage,
or if there are insufficient funds in the Basic Carrying Costs
Sub-Account to pay the premiums for same, Mortgagee may, at its option,
procure such insurance, and Mortgagor shall pay, or as the case may be,
reimburse Mortgagee for, all premiums thereon promptly, upon demand by
Mortgagee, with interest thereon at the Default Rate from the date paid by
Mortgagee to the date of repayment and such sum shall constitute a part of
the Debt.
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(c) Mortgagor shall notify Mortgagee of the renewal premium of each
insurance policy and Mortgagee shall be entitled to pay such amount on
behalf of Mortgagor from the Basic Carrying Costs Sub-Account. With respect to
insurance policies which require periodic payments (i.e., monthly or
quarterly) of premiums, Mortgagee shall be entitled to pay such amounts
fifteen (15) days (or such lesser number of days as Mortgagee shall
determine) prior to the respective due dates of such installments.
(d) The insurance required by this Mortgage may, at the option of
Mortgagor, be effected by blanket and/or umbrella policies issued to Mortgagor
covering the Mortgaged Property provided that, in each case, the policies
otherwise comply with the provisions of this Mortgage and allocate to
the Mortgaged Property, from time to time (but in no event less than once a
year), the coverage specified by this Mortgage, without possibility of
reduction or coinsurance by reason of, or damage to, any other property (real
or personal) named therein. If the insurance required by this Mortgage
shall be effected by any such blanket or umbrella policies, Mortgagor shall
furnish to Mortgagee original policies or certified copies thereof, or an
original certificate of insurance together with reasonable access to the
original of such policy to review such policy's coverage of the Mortgaged
Property, with schedules attached thereto showing the amount of the insurance
provided under such policies applicable to the Mortgaged Property.
Section 3.03. Assignment of Policies. (a) Mortgagor hereby assigns to
Mortgagee the proceeds of all insurance (other than liability insurance)
obtained pursuant to this Mortgage, all of which proceeds shall be
payable to Mortgagee as collateral and further security for the payment of
the Debt and the performance of the Cross-collateralized Borrower's
obligations hereunder and under the other Loan Documents, and Mortgagor hereby
authorizes and directs the issuer of any such insurance to make payment of
such proceeds directly to Mortgagee. Except as otherwise expressly provided
in Section 3.04 or elsewhere in this Article III, Mortgagee shall have the
option, in its discretion, and without regard to the adequacy of its
security, to apply all or any part of the proceeds it may receive pursuant to
this Article in such manner as Mortgagee may elect to any one or more of
the
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following: (i) the payment of the Debt, whether or not then due, in any
proportion or priority as Mortgagee, in its discretion, may elect, (ii) the
repair or restoration of the Mortgaged Property, (iii) the cure of any Default
or (iv) the reimbursement of the costs and expenses of Mortgagee incurred
pursuant to the terms hereof in connection with the recovery of the Insurance
Proceeds. Nothing herein contained shall be deemed to excuse Mortgagor from
repairing or maintaining the Mortgaged Property as provided in this Mortgage or
restoring all damage or destruction to the Mortgaged Property, regardless of the
sufficiency of the Insurance Proceeds, and the application or release by
Mortgagee of any Insurance Proceeds shall not cure or waive any Default or
notice of Default.
(b) In the event of the foreclosure of this Mortgage or any other
transfer of title or assignment of all or any part of the Mortgaged Property in
extinguishment, in whole or in part, of the Debt, all right, title and
interest of Mortgagor in and to all policies of insurance required by this
Mortgage shall inure to the benefit of the successor in interest to Mortgagor
or the purchaser of the Mortgaged Property. If, prior to the receipt by
Mortgagee of any proceeds, the Mortgaged Property or any portion thereof shall
have been sold on foreclosure of this Mortgage or by deed in lieu
thereof or otherwise, or any claim under such insurance policy arising during
the term of this Mortgage is not paid until after the extinguishment of
the Debt, and Mortgagee shall not have received the entire amount of the
Debt outstanding at the time of such extinguishment, whether or not a
deficiency judgment on this Mortgage shall have been sought or recovered
or denied, then, the proceeds of any such insurance to the extent of the
amount of the Debt not so received, shall be paid to and be the property of
Mortgagee, together with interest thereon at the Default Rate, and the
reasonable attorney's fees, costs and disbursements incurred by Mortgagee
in connection with the collection of the proceeds which shall be paid to
Mortgagee and Mortgagor hereby assigns, transfers and sets over to
Mortgagee all of Mortgagor's right, title and interest in and to such
proceeds. Notwithstanding any provisions of this Mortgage to the
contrary, Mortgagee shall not be deemed to be a trustee or other fiduciary
with respect to its receipt of any such proceeds, which may be commingled
with any other monies of Mortgagee; provided, however, that Mortgagee
shall use such proceeds for the purposes
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and in the manner permitted by this Mortgage. Any proceeds deposited
with Mortgagee shall be held by Mortgagee in an interest-bearing account,
but Mortgagee makes no representation or warranty as to the rate or amount
of interest, if any, which may accrue on such deposit and shall have no
liability in connection therewith. Interest accrued, if any, on the proceeds
shall be deemed to constitute a part of the proceeds for purposes of this
Mortgage. The provisions of this Section 3.03(b) shall survive the
termination of this Mortgage by foreclosure, deed in lieu thereof or
otherwise as consequence of the exercise of the rights and remedies of
Mortgagee hereunder after a Default.
Section 3.04. Casualty Restoration. (a) (i) In the event of any damage to or
destruction of the Mortgaged Property, Mortgagor shall give prompt written
notice to Mortgagee (which notice shall set forth Mortgagor's good faith
estimate of the cost of repairing or restoring such damage or destruction, or
if Mortgagor cannot reasonably estimate the anticipated cost of restoration,
Mortgagor shall nonetheless give Mortgagee prompt notice of the occurrence of
such damage or destruction, and will diligently proceed to obtain estimates
to enable Mortgagor to quantify the anticipated cost and time required for
such restoration, whereupon Mortgagor shall promptly notify Mortgagee of such
good faith estimate) and, provided that restoration does not violate any
Legal Requirements, Mortgagor shall promptly commence and diligently
prosecute to completion the repair, restoration or rebuilding of the
Mortgaged Property so damaged or destroyed to a condition such that the
Mortgaged Property shall be at least equal in value to that immediately prior
to the damage to the extent practicable, in full compliance with all Legal
Requirements and the provisions of all Leases, and in accordance with Section
3.04(b) below. Such repair, restoration or rebuilding of the Mortgaged
Property are sometimes hereinafter collectively referred to as the "Work".
(ii) Mortgagor shall not adjust, compromise or settle any claim for
Insurance Proceeds without the prior written consent of Mortgagee, which shall
not be unreasonably withheld or delayed; provided, however, that, except during
the continuance of an Event of Default, Mortgagee's consent shall not be
required with respect to the adjustment, compromising or settlement of any claim
for Insurance Proceeds in an amount less than $1,000,000.
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(iii) Subject to Section 3.04(a)(iv), Mortgagee shall apply any
Insurance Proceeds which it may receive towards the Work in accordance with
Section 3.04(b) and the other applicable sections of this Article III.
(iv) If (A) an Event of Default shall have occurred and is continuing,
(B) Mortgagee is not reasonably satisfied that the Debt Service Coverage,
after substantial completion of the Work, will be at least equal to the
Required Debt Service Coverage, (C) more than twenty-five percent (25%) of
the reasonably estimated aggregate insurable value of the Mortgaged Property is
damaged or destroyed, (D) any Leases constituting ten percent (10%) of the
Total GLA physically affected by such destruction shall not continue in full
force and effect, or (E) Mortgagee is not reasonably satisfied the Work can
be completed by the earlier of (1) the end of the twelve (12) month period
following the damage to or destruction of the Mortgaged Property (provided that
such twelve month period may be extended at the request of Mortgagor provided
that Mortgagor delivers a letter from the Rating Agency confirming that an
rating issued in connection with a Securitization will not, as a result of
such extension be downgraded from the then current ratings thereof,
qualified, or withdrawn, (2) the Maturity Date, and (3) the period through
which the insurance specified in Section 3.01(a)(iii) insures against
business interruption or rent loss (collectively, a "Substantial Casualty"),
Mortgagee shall have the option, in its sole discretion to apply any
Insurance Proceeds it may receive pursuant to this Mortgage (less any
cost to Mortgagee of recovering and paying out such proceeds incurred
pursuant to the terms hereof and not otherwise reimbursed to Mortgagee,
including, without limitation, reasonable attorneys' fees and expenses) to
the payment of the Debt, without any prepayment fee or charge of any kind,
including, without limitation, Yield Maintenance Premium, or to allow such
proceeds to be used for the Work pursuant to the terms and subject to the
conditions of Section 3.04(b) hereof and the other applicable sections of
this Article III.
(v) In the event that Mortgagee elects or is obligated hereunder to
allow Insurance Proceeds to be used for the Work, any excess proceeds remaining
after completion of such
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Work shall be applied to the payment of the Debt without any prepayment fee or
charge of any kind, including, without limitation, Yield Maintenance Premium.
(b) If any Condemnation Proceeds, in accordance with Section 6.01(a) or
any Insurance Proceeds in accordance with Section 3.04(a), are to be applied to
the repair, restoration or rebuilding of the Mortgaged Property, then such
proceeds shall be deposited into a segregated interest-bearing bank account at
the Bank, which shall be an Eligible Account, held by Mortgagee and shall be
paid out from time to time to Mortgagor as the Work progresses (less any cost to
Mortgagee of recovering and paying out such proceeds, including, without
limitation, reasonable attorneys' fees and costs allocable to inspecting the
Work and the plans and specifications therefor) subject to Section 5.13 hereof
and to all of the following conditions:
(i) An architect or engineer selected by Mortgagor and reasonably
acceptable to Mortgagee (an "Architect" or "Engineer") or a Person
otherwise reasonably acceptable to Mortgagee, shall have delivered to
Mortgagee a certificate estimating the cost of completing the Work, and,
if the amount set forth therein is more than the sum of the amount of
Insurance Proceeds then being held by Mortgagee in connection with a
casualty and amounts agreed to be paid as part of a final settlement under
the insurance policy upon or before completion of the Work, Mortgagor
shall have delivered to Mortgagee (A) cash collateral in an amount equal
to such excess, (B) an unconditional, irrevocable, clean sight draft
letter of credit, in form, substance and issued by a bank reasonably
acceptable to Mortgagee, in the amount of such excess and draws on such
letter of credit shall be made by Mortgagee to make payments pursuant to
this Article III following exhaustion of the Insurance Proceeds therefore
or (C) a completion bond in form, substance and issued by a surety company
reasonably acceptable to Mortgagee.
(ii) If the cost of the Work is reasonably estimated by an Architect
or Engineer in a certification reasonably acceptable to Mortgagee to be
equal to or exceed ten percent (10%) of the Allocated Loan Amount, such
Work shall be
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performed under the supervision of an Architect or Engineer, it being
understood that the plans and specifications with respect thereto shall
provide for Work so that, upon completion thereof, the Mortgaged Property
shall be at least equal in replacement value and general utility to the
Mortgaged Property prior to the damage or destruction.
(iii) Each request for payment shall be made on not less than ten
(10) days' prior notice to Mortgagee and shall be accompanied by a
certificate of an Architect or Engineer, or, if the Work is not required
to be supervised by an Architect or Engineer, by an Officer's Certificate
stating (A) that payment is for Work completed in compliance with the
plans and specifications, if required under clause (ii) above, (B) that
the sum requested is required to reimburse Mortgagor for payments by
Mortgagor to date, or is due to the contractor, subcontractors,
materialmen, laborers, engineers, architects or other Persons rendering
services or materials for the Work (giving a brief description of such
services and materials), and that when added to all sums previously paid
out by Mortgagee does not exceed the value of the Work done to the date
of such certificate, (C) if the sum requested is to cover payment relating
to repair and restoration of personal property required or relating to the
Mortgaged Property, that title to the personal property items covered by
the request for payment is vested in Mortgagor (unless Mortgagor is lessee
of such personal property), and (D) that the Insurance Proceeds and other
amounts deposited by Mortgagor held by Mortgagee after such payment is
more than the estimated remaining cost to complete such Work; provided,
however, that if such certificate is given by an Architect or Engineer,
such Architect or Engineer shall certify as to clause (A) above, and such
Officer's Certificate shall certify as to the remaining clauses above.
Additionally, each request for payment shall contain a statement signed by
Mortgagor stating that the requested payment is for Work satisfactorily
done to date.
(iv) Each request for payment shall be accompanied by waivers of
lien, in customary form and substance, covering that part of the Work for
which payment or reimbursement is
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being requested and, if required by Mortgagee, a search prepared by a
title company or licensed abstractor, or by other evidence satisfactory to
Mortgagee that there has not been filed with respect to the Mortgaged
Property any mechanic's or other lien or instrument for retention of title
relating to any part of the Work not discharged of record. Additionally,
as to any personal property covered by the request for payment, Mortgage
shall be furnished with evidence of having incurred a payment obligation
therefor and such further evidence reasonably satisfactory to assure
Mortgagee that UCC filings therefor provide a valid first lien on the
personal property.
(v) Mortgagee shall have the right to inspect the Work at all
reasonable times upon reasonable prior notice and may condition any
disbursement of Insurance Proceeds upon satisfactory compliance by
Mortgagor with the provisions hereof. Neither the approval by Mortgagee of
any required plans and specifications for the Work nor the inspection by
Mortgagee of the Work shall make Mortgagee responsible for the
preparation of such plans and specifications, or the compliance of such
plans and specifications of the Work, with any applicable law, regulation,
ordinance, covenant or agreement.
(vi) Insurance Proceeds shall not be disbursed more frequently than
once every thirty (30) days or at any time during which a Default exists.
(vii) Until such time as the Work has been substantially completed,
Mortgagee shall not be obligated to disburse up to ten percent (10%) of
the cost of the Work (the "Retention Amount") to Mortgagor. Upon
substantial completion of the Work, Mortgagor shall send notice thereof to
Mortgagee and, subject to the conditions of Section 3.04(b)(i)-(iv),
Mortgagee shall disburse one-half of the Retention Amount to Mortgagor;
provided, however, that the remaining one-half of the Retention Amount
shall be disbursed to Mortgagor when Mortgagee shall have received copies
of any and all final certificates of occupancy or other certificates,
licenses and permits required for the ownership, occupancy and operation
of the Mortgaged Property
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in accordance with all Legal Requirements. Mortgagor hereby covenants to
diligently seek to obtain any such certificates, licenses and permits.
(viii) Upon failure on the part of Mortgagor promptly to commence
the Work or to proceed diligently and continuously to completion of the
Work, which failure shall continue after notice for thirty (30) days,
Mortgagee may apply any Insurance Proceeds or Condemnation Proceeds it
then or thereafter holds to the payment of the Debt in accordance with the
provisions of the Note; provided, however, that Mortgagee shall be
entitled to apply at any time all or any portion of the Insurance Proceeds
or Condemnation Proceeds it then holds to the extent necessary to cure any
Event of Default under this Mortgage, the Note or any other Loan
Document.
(c) If Mortgagor (i) within one hundred twenty (120) days after the
occurrence of any damage to the Mortgaged Property or any portion thereof (or
such shorter period as may be required under any Space Lease) shall fail to
submit to Mortgagee for approval plans and specifications (if required
pursuant to Section 3.04(b)(ii) hereof) for the Work (approved by the
Architect and by all Governmental Authorities whose approval is required),
(ii) after any such plans and specifications are approved by all Governmental
Authorities, the Architect and Mortgagee, shall fail to promptly commence
such Work or (iii) shall fail to diligently prosecute such Work to
completion, then, in addition to all other rights available hereunder, at law
or in equity, Mortgagee, or any receiver of the Mortgaged Property or any
portion thereof, upon five (5) days' prior notice to Mortgagor (except in the
event of emergency in which case no notice shall be required), may (but shall
have no obligation to) perform or cause to be performed such Work, and may
take such other steps as it reasonably deems advisable. Mortgagor hereby
waives, for Mortgagor, any claim, other than for gross negligence or willful
misconduct, against Mortgagee and any receiver arising out of any act or
omission of Mortgagee or such receiver pursuant hereto, and Mortgagee may
apply all or any portion of the proceeds of insurance (without the need to
fulfill any other requirements of this Section 3.04) to reimburse Mortgagee
and such
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receiver, for all costs not reimbursed to Mortgagee or such receiver upon
demand together with interest thereon at the Default Rate from the date such
amounts are advanced until the same are paid to Mortgagee or the receiver.
(d) Mortgagor hereby irrevocably appoints Mortgagee as its
attorney-in-fact, coupled with an interest, to collect and receive any
insurance proceeds paid with respect to any portion of the Mortgaged Property
or the insurance policies required to be maintained hereunder, and to endorse
any checks, drafts or other instruments representing any insurance proceeds
whether payable by reason of loss thereunder or otherwise.
Section 3.05. Compliance with Insurance Requirements. Mortgagor promptly
shall comply with, and shall cause the Mortgaged Property to comply with, all
Insurance Requirements, even if such compliance requires structural changes
or improvements or would result in interference with the use or enjoyment of
the Mortgaged Property or any portion thereof provided Mortgagor shall have a
right to contest in good faith and with diligence such Insurance Requirements
provided (a) no Event of Default shall exist during such contest and such
contest shall not subject the Mortgaged Property or any portion thereof to
any lien or affect the priority of the lien of this Mortgage, (b) failure to
comply with such Insurance Requirements will not subject Mortgagee or any of
its agents, employees, officers or directors to any civil or criminal
liability, (c) such contest will not cause any reduction in insurance
coverage, (d) such contest shall not affect the ownership, use or occupancy
of the Mortgaged Property, (e) the Mortgaged Property or any part thereof or
any interest therein shall not be in any danger of being sold, forfeited or
lost by reason of such contest by Mortgagor, (f) Mortgagor has given
Mortgagee prompt notice of such contest and, upon request by Mortgagee from
time to time, notice of the status of such contest by Mortgagor and/or
information of the continuing satisfaction of the conditions set forth in
clauses (a) through (e) of this Section 3.05, (g) upon a final determination
of such contest, Mortgagor shall promptly comply with the requirements
thereof, and (h) prior to and during such contest, Mortgagor shall furnish to
Mortgagee security satisfactory to Mortgagee, in its reasonable discretion,
against loss or injury by reason of such contest or the non-compliance with
such Insurance Requirement (and if such security is cash, Mortgagee shall
deposit the same
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in an interest-bearing account and interest accrued thereon, if any, shall be
deemed to constitute a part of such security for purposes of this Mortgage,
but Mortgagee (i) makes no representation or warranty as to the rate or
amount of interest, if any, which may accrue thereon and shall have no
liability in connection therewith and (ii) shall not be deemed to be a
trustee or fiduciary with respect to its receipt of any such security and any
such security may be commingled with other monies of Mortgagee). If Mortgagor
shall use the Mortgaged Property or any portion thereof in any manner which
could permit the insurer to cancel any insurance required to be provided
hereunder, Mortgagor immediately shall obtain a substitute policy which shall
satisfy the requirements of this Mortgage and which shall be effective on or
prior to the date on which any such other insurance policy shall be canceled.
Mortgagor shall not by any action or omission invalidate any insurance policy
required to be carried hereunder unless such policy is replaced as aforesaid,
or materially increase the premiums on any such policy above the normal
premium charged for such policy. Mortgagor shall cooperate with Mortgagee in
obtaining for Mortgagee the benefits of any insurance proceeds lawfully or
equitably payable to Mortgagee in connection with the transaction
contemplated hereby.
Section 3.06. Event of Default During Restoration. Notwithstanding anything
to the contrary contained in this Mortgage including, without limitation, the
provisions of this Article 3, if, at the time of any casualty affecting the
Mortgaged Property or any part thereof, or at any time during any Work, or at
any time that Mortgagee is holding or is entitled to receive any proceeds of
any insurance pursuant to this Mortgage, a Default exists and is continuing
(whether or not it constitutes an Event of Default), Mortgagee shall then
have no obligation to make such proceeds available for Work and upon an Event
of Default Mortgagee shall have the right and option, to be exercised in its
sole and absolute discretion and election, with respect to the proceeds of
any such insurance, either to retain and apply such proceeds in reimbursement
for the actual costs, fees and expenses incurred by Mortgagee in accordance
with the terms hereof in connection with the adjustment of the loss and any
balance toward payment of the Debt in such priority and proportions as
Mortgagee, in its sole discretion, shall deem proper, or towards the Work,
upon such terms and conditions as Mortgagee shall determine, or to cure
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such Event of Default, or to any one or more of the foregoing as Mortgagee,
in its sole and absolute discretion, may determine. If Mortgagee shall
receive and retain such Insurance Proceeds, the lien of this Mortgage shall
be reduced only by the amount thereof received, after reimbursement to
Mortgagee of expenses of collection, and actually applied by Mortgagee in
reduction of the principal sum payable under the Note in accordance with the
Note.
Section 3.07. Application of Proceeds to Debt Reduction. (a) No damage to the
Mortgaged Property, or any part thereof, by fire or other casualty
whatsoever, whether such damage be partial or total, shall relieve Mortgagor
from its liability to pay in full the Debt and to perform its obligations
under this Mortgage and the other Loan Documents except to the extent any
rent (business interruption) insurance is paid to Mortgagee and applied to
the Debt.
(b) If any Insurance Proceeds are applied to reduce the Debt, Mortgagee
shall apply the same in accordance with the provisions of the Note.
ARTICLE IV: IMPOSITIONS
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Section 4.01. Payment of Impositions, Utilities and Taxes, etc. (a) Mortgagor
shall pay or cause to be paid all Impositions at least five (5) days prior to
the date upon which any fine, penalty, interest or cost for nonpayment is
imposed, and furnish to Mortgagee, upon request, receipted bills of the
appropriate taxing authority or other documentation reasonably satisfactory
to Mortgagee evidencing the payment thereof. If Mortgagor shall fail to pay
any Imposition in accordance with this Section and is not contesting or
causing a contesting of such Imposition in accordance with Section 4.04
hereof, or if there are insufficient funds in the Basic Carrying Costs
Sub-Account to pay any Imposition, Mortgagee shall have the right, but shall
not be obligated, to pay that Imposition, and Mortgagor shall repay to
Mortgagee, on demand, any amount paid by Mortgagee, with interest thereon at
the Default Rate from the date of the advance thereof to the date of
repayment, and such amount shall constitute a portion of the Debt secured by
this Mortgage and the other Cross-collateralized Mortgages.
(b) Mortgagor shall, prior to the date upon which any fine, penalty,
interest or cost for the nonpayment is imposed, pay or cause to be paid all
charges for electricity, power, gas, water and other services and utilities
in connection with the Mortgaged Property, and shall, upon request, deliver
to Mortgagee receipts or other documentation reasonably satisfactory to
Mortgagee evidencing payment thereof. If Mortgagor shall fail to pay any
amount required to be paid by Mortgagor pursuant to this Section 4.01 and is
not contesting such charges in accordance with Section 4.04 hereof, Mortgagee
shall have the right, but shall not be obligated, to pay that amount, and
Mortgagor will repay to Mortgagee, on demand, any amount paid by Mortgagee
with interest thereon at the Default Rate from the date of the advance
thereof to the date of repayment, and such amount shall constitute a portion
of the Debt secured by this Mortgage and the other Cross-collateralized
Mortgages.
(c) Mortgagor shall pay all taxes, charges, filing, registration and
recording fees, excises and levies imposed upon Mortgagee by reason of or in
connection with its ownership of any Loan Document or any other instrument
related thereto, or resulting from the execution, delivery and recording of,
or the lien created by, or the obligation evidenced by, any of them,
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other than income, franchise and other similar taxes imposed on Mortgagee and
shall pay all corporate stamp taxes, if any, and other taxes, required to be
paid on the Loan Documents. If Mortgagor shall fail to make any such payment
within ten (10) days after written notice thereof from Mortgagee, Mortgagee
shall have the right, but shall not be obligated, to pay the amount due, and
Mortgagor shall reimburse Mortgagee therefor, on demand, with interest
thereon at the Default Rate from the date of the advance thereof to the date
of repayment, and such amount shall constitute a portion of the Debt secured
by this Mortgage and the other Cross-collateralized Mortgages.
Section 4.02. Deduction from Value. In the event of the passage after the
date of this Mortgage of any Legal Requirement deducting from the value of
the Mortgaged Property for the purpose of taxation, any lien thereon or
changing in any way the Legal Requirements now in force for the taxation of
this Mortgage, the other Cross-collateralized Mortgages and/or the Debt for
federal, state or local purposes, or the manner of the operation of any such
taxes so as to adversely affect the interest of Mortgagee, or impose any tax
or other charge on any Loan Document, then Mortgagor will pay such tax, with
interest and penalties thereon, if any, within the statutory period. In the
event the payment of such tax or interest and penalties by Mortgagor would be
unlawful, or taxable to Mortgagee or unenforceable or provide the basis for a
defense of usury, then in any such event, Mortgagee shall have the option, by
written notice of not less than thirty (30) days, to declare the Debt
immediately due and payable, with no prepayment penalty, including without
limitation, Yield Maintenance Premium.
Section 4.03. No Joint Assessment. Mortgagor shall not consent to or initiate
the joint assessment of the Premises or the Improvements (a) with any other
real property constituting a separate tax lot and Mortgagor represents and
covenants that the Premises and the Improvements are and shall remain a
separate tax lot or (b) with any portion of the Mortgaged Property which may
be deemed to constitute personal property, or any other procedure whereby the
lien of any taxes which may be levied against such personal property shall be
assessed or levied or charged to the Mortgaged Property as a single lien.
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Section 4.04. Right to Contest. Mortgagor shall have the right, after prior
notice to Mortgagee, at its sole expense, to contest by appropriate legal
proceedings diligently conducted in good faith, without cost or expense to
Mortgagee or any of its agents, employees, officers or directors, the
validity, amount or application of any Imposition or any charge described in
Section 4.01(b), provided that (a) no Default or Event of Default shall exist
during such proceedings and such contest shall not (unless Mortgagor shall
comply with clause (d) of this Section 4.04) subject the Mortgaged Property
or any portion thereof to any lien or affect the priority of the lien of this
Mortgage, (b) failure to pay such Imposition or charge will not subject
Mortgagee or any of its agents, employees, officers or directors to any civil
or criminal liability, (c) the contest suspends enforcement of the Imposition
or charge (unless Mortgagor first pays the Imposition or charge), (d) prior
to and during such contest, Mortgagor shall furnish to Mortgagee security
satisfactory to Mortgagee, in its reasonable discretion, against loss or
injury by reason of such contest or the non-payment of such Imposition or
charge (and if such security is cash, Mortgagee may deposit the same in an
interest-bearing account and interest accrued thereon, if any, shall be
deemed to constitute a part of such security for purposes of this Mortgage,
but Mortgagee (i) makes no representation or warranty as to the rate or
amount of interest, if any, which may accrue thereon and shall have no
liability in connection therewith and (ii) shall not be deemed to be a
trustee or fiduciary with respect to its receipt of any such security and any
such security may be commingled with other monies of Mortgagee), (e) such
contest shall not affect the ownership, use or occupancy of the Mortgaged
Property, (f) the Mortgaged Property or any part thereof or any interest
therein shall not be in any danger of being sold, forfeited or lost by reason
of such contest by Mortgagor, (g) Mortgagor has given Mortgagee notice of the
commencement of such contest and upon request by Mortgagee, from time to
time, notice of the status of such contest by Mortgagor and/or confirmation
of the continuing satisfaction of clauses (a) through (f) of this Section
4.04, and (h) upon a final determination of such contest, Mortgagor shall
promptly comply with the requirements thereof. Upon completion of any
contest, Mortgagor shall immediately pay the amount due, if any, and deliver
to Mortgagee proof of the completion of the contest and payment of the amount
due, if any, following which,
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Mortgagee shall return the security, if any, deposited with Mortgagee
pursuant to clause (d) of this Section 4.04. Mortgagor shall not pay any
Imposition in installments unless permitted by applicable Legal Requirements,
and shall, upon the request of Mortgagee, deliver copies of all notices
relating to any Imposition or other charge covered by this Article IV to
Mortgagee.
Section 4.05. No Credits on Account of the Debt. Mortgagor will not claim or
demand or be entitled to any credit or credits on account of the Debt for any
part of the Impositions assessed against the Mortgaged Property or any part
thereof and no deduction shall otherwise be made or claimed from the taxable
value of the Mortgaged Property, or any part thereof, by reason of this
Mortgage or the Debt. In the event such claim, credit or deduction shall be
required by Legal Requirements, Mortgagee shall have the option, by written
notice of not less than thirty (30) days, to declare the Debt immediately due
and payable, and Mortgagor hereby agrees to pay such amounts not later than
thirty (30) days after such notice.
Section 4.06. Documentary Stamps. If, at any time, the United States of
America, any State or Commonwealth thereof or any subdivision of any such
State shall require revenue or other stamps to be affixed to the Note or this
Mortgage, or impose any other tax or charges on the same, Mortgagor will pay
the same, with interest and penalties thereon, if any.
ARTICLE V: CENTRAL CASH MANAGEMENT
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Section 5.01. Cash Flow. Mortgagor hereby acknowledges and agrees that the
Rent (which for the purposes of this Section 5.01 shall not include security
deposits from tenants under valid Leases held by Mortgagor and not applied
towards Rent) derived from the Mortgaged Property and Loss Proceeds shall be
utilized (a) to fund the Basic Carrying Costs Sub-Account, (b) to pay all
amounts to become due and payable under the Note by funding the Debt Service
Payment Sub-Account, (c) to fund the Recurring Replacement Reserve
Sub-Account, (d) to fund the Operation and Maintenance Expense Sub-Account to
the extent required, and (e) to fund the Curtailment Reserve Sub-Account, to
the extent required. Mortgagor shall cause the Manager to collect all
security deposits from tenants under valid Leases, which shall be held by the
Manager, as agent for Mortgagor, in accordance with applicable law and in a
segregated demand deposit bank account at such commercial or savings bank or
banks as may be reasonably satisfactory to Mortgagee (the "Security Deposit
Account"). Mortgagor shall notify Mortgagee of any security deposits held as
letters of credit and, upon Mortgagee's request, such letters of credit shall
be promptly delivered to Mortgagee. Mortgagor shall have no right to withdraw
funds from the Security Deposit Account; provided that, prior to the
occurrence of an Event of Default, Mortgagor may withdraw funds from the
Security Deposit Account to refund or apply security deposits as required by
the Leases or by applicable Legal Requirements. After the occurrence and
during the continuance of an Event of Default, all withdrawals from the
Security Deposit Account must be approved by Mortgagee. All rental payments
made by tenants and other payments constituting Rent shall be paid by check,
cashiers check or money order made payable to Mortgagee or its successors and
assigns. Mortgagor shall give each tenant under a Lease an irrevocable
direction in the form of Exhibit G attached hereto and made a part hereof to
deliver all rental payments made by tenants and other payments constituting
Rent directly to the bank in which the Rent Account is located. In the event
that any tenant pays any Rent directly to Manager, the Manager shall deposit
such funds, within one (1) Business Day after receipt thereof in the Rent
Account. All Rent shall be deposited into the Rent Account. Mortgagor shall
cause the bank in which the Rent Account is located to automatically transfer
through automatic clearing house funds or by Federal wire to the Central
Account prior to 5:00 p.m. (New York City time) on each Business
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Day all sums deposited into the Rent Account. Mortgagee may elect to change
the financial institution in which the Rent Account and/or the Central
Account shall be maintained; however, Mortgagee shall give Mortgagor not
fewer than five (5) Business Days' prior notice of such change and, provided,
that no Default has occurred and is continuing, such institution shall be
subject to the approval of Mortgagor which may not be unreasonably withheld,
delayed or conditioned. All fees and charges of the banks in which the Rent
Account and the Central Account are located shall be paid by Mortgagor.
Section 5.02. Establishment of Sub-Accounts. Mortgagee has established the
Rent Account and the Central Account. The Central Account shall be under the
sole dominion and control of Mortgagee. Mortgagor shall have no right of
withdrawal in respect of the Rent Account or the Central Account except as
specifically provided herein. Each transfer of funds to be made hereunder
shall be made only to the extent that funds are on deposit in the Rent
Account, the Central Account or the affected Sub-Account, and Mortgagee shall
have no responsibility to make additional funds available in the event that
funds on deposit are insufficient. The Central Account shall contain the
Basic Carrying Costs Sub-Account, the Debt Service Payment Sub-Account, the
Recurring Replacement Reserve Sub-Account, the Operation and Maintenance
Expense Sub-Account (to the extent applicable), and the Curtailment Reserve
Sub-Account (to the extent applicable), each of which accounts shall be
Eligible Accounts (each a "Sub-Account" and collectively, the "Sub-Accounts")
to which certain funds shall be allocated and from which disbursements shall
be made pursuant to the terms of this Mortgage. On the date hereof, Mortgagor
has deposited from the proceeds of the Loan the Initial Central Account
Deposit in the Central Account. Notwithstanding the foregoing, any
Sub-Account which is a separate Eligible Account shall be deemed a
Sub-Account of the Central Account.
Section 5.03. Permitted Investments. Upon the written request of Mortgagor,
Mortgagee shall direct the Bank to invest and reinvest any balance in the
Central Account from time to time in Permitted Investments as instructed by
Mortgagor (which instruction may be made no more than one time per month),
provided that (a) if Mortgagor fails to so instruct Mortgagee, or upon the
occurrence and during the continuance of a Default, Mortgagee may direct the
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Bank to invest and reinvest such balance in Permitted Investments as
Mortgagee shall determine in its sole discretion, (b) the maturities of the
Permitted Investments on deposit in the Central Account shall, to the extent
such dates are ascertainable, be selected and coordinated to become due not
later than the day before any disbursements from the applicable Sub-Accounts
must be made, (c) all such Permitted Investments shall be held in the name
and be under the sole dominion and control of Mortgagee, and (d) no Permitted
Investment shall be made unless Mortgagee shall retain a perfected first
priority lien in such Permitted Investment securing the Debt and all filings
and other actions necessary to ensure the validity, perfection, and priority
of such lien have been taken. It is the intention of the parties hereto that
the entire amounts deposited in the Central Account (or as much thereof as
Mortgagee may reasonably arrange to invest) shall at all times be invested in
Permitted Investments, and that the Central Account shall be a so-called
"zero balance" account. All funds in the Central Account that are invested in
a Permitted Investment are deemed to be held in the Central Account for all
purposes of this Mortgage and the other Loan Documents. Mortgagee shall not
have any liability for any loss in investments of funds in the Central
Account that are invested in Permitted Investments whether Mortgagor or
Mortgagee selected such Permitted Investment in accordance herewith and no
such loss shall affect Mortgagor's obligation to fund, or liability for
funding, the Central Account and each Sub-Account, as the case may be.
Mortgagor agrees that Mortgagor shall include all such earnings on the
Central Account as income of Mortgagor (and, if Mortgagor is a partnership or
other pass-through entity, the partners, members or beneficiaries of
Mortgagor, as the case may be) for federal and applicable state and local tax
purposes. Mortgagor shall have no right whatsoever to direct the investment
of the proceeds in the Collection Account.
Section 5.04. Interest on Accounts. All interest paid or other earnings on
the Permitted Investments of funds deposited into the Central Account made
hereunder shall be deposited into the Central Account and, until such
Sub-Account is fully funded, shall be allocated to the Sub-Account which
contained the funds with respect to which such interest was paid or other
earnings earned. All such interest and earnings, once so allocated, shall be
treated as Rent allocated to such Sub-Account. All interest paid or
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other earnings on funds deposited into the Rent Account shall be deposited into
the Rent Account and shall be treated as Rent deposited into such account as of
the day such interest and earnings are deposited therein.
Section 5.05. Monthly Funding of Sub-Accounts. Prior to 2:00 p.m. (New York
City time) on each Allocation Date during the term of the Loan, Mortgagee
shall allocate all funds in the Central Account among the Sub-Accounts as
follows and in the following priority:
(a) first, to the Basic Carrying Costs Sub-Account, until an amount
equal to the Basic Carrying Costs Monthly Installment for such Current
Month has been allocated to the Basic Carrying Costs Sub-Account;
(b) second, to the Debt Service Payment Sub-Account, until an amount
equal to the Required Debt Service Payment for the Payment Date occurring
in such Current Month has been allocated to the Debt Service Payment
Sub-Account;
(c) third, to the Recurring Replacement Reserve Sub-Account, until
an amount equal to the sum of (x) the amount, if any, deducted therefrom
during any preceding month to pay any amounts due pursuant to clauses (a)
or (b) above, to the extent not previously reimbursed to such Sub-Account,
plus (y) an amount equal to the Recurring Replacement Reserve Monthly
Installment for such month has been allocated to the Recurring Replacement
Reserve Sub-Account;
(d) fourth, but only during the O&M Operative Period, to the
Operation and Maintenance Expense Sub-Account, until an amount equal to
the amount, if any, deducted therefrom during any preceding month to pay
any amounts due pursuant to clauses (a) or (b) above, to the extent not
previously reimbursed to such Sub-Account and then until an amount equal
to the Operation and Maintenance Expense Monthly Installment has been
allocated to such Sub-Account; and
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(e) fifth, but only during the O&M Operative Period, all Excess Rent
shall be allocated to the Curtailment Reserve Sub-Account.
Provided that (I) no Event of Default has occurred and is
continuing and (II) Mortgagee has received the Manager Certification
referred to in Section 2.09(d) hereof for the most recent period for which
the same is due, Mortgagee agrees that in each Current Month any amounts
deposited into or remaining in the Central Account after sufficient funds
have been transferred to the Central Account to fund the Sub-Accounts in
accordance with, and has allocated the amounts set forth in, clauses (a)
through (e) above with respect to the Current Month and any periods prior
thereto shall be disbursed by Mortgagee to Manager on each Allocation Date
in such Current Month unless such day is not a Business Day, in which event
distributions shall be made on the next following Business Day. The balance
of the funds distributed to Mortgagor after payment of all Operating Expenses
by or on behalf of Mortgagor may be retained by Mortgagor. As used herein,
"Excess Rent" means the amounts available in the Central Account (other than
any Loss Proceeds deposited in the Central Account) in any Current Month
after the allocations under clauses (a) through (d) above have been made and
after payments of all Operating Expenses for which Mortgagor has requested
payments in any Current Month provided Mortgagee has, in its sole and
absolute discretion, approved such requests. After the occurrence, and during
the continuance, of an Event of Default, no funds held in the Central Account
shall be distributed to Mortgagor, and Mortgagee shall have the right to
apply all or any portion of the funds held in such account to the Debt in
Mortgagee's sole discretion.
In the event that sufficient funds to fund all of the
Sub-Accounts pursuant to this Section 5.05 for the Payment Date in any
Current Month are not on deposit in the Central Account prior to 2:00 p.m.
(New York City time) on the Business Day immediately preceding the Payment
Date (the "Notice Date") for the then Current Month, Mortgagee shall
endeavor to deliver to Mortgagor, via telecopy, on or before 4:00 P.M. (New
York City time) on the Notice Date a certificate in the form set forth as
Exhibit E attached hereto and made a part hereof stating that sufficient
funds have not theretofore been deposited into the
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Central Account for allocation to the various Sub-Accounts pursuant to this
Section 5.05. Failure to give such notice shall not relieve Mortgagor of any
obligation to make any payment which is due on each Payment Date. If
sufficient funds are not on deposit in the Central Account to fund all of the
Sub-Accounts pursuant to Section 5.01 for the Payment Date in any Current
Month, Mortgagor shall be obligated to deposit immediately available United
States funds (in addition to Rent) into the Central Account, prior to such
Payment Date, in the amount of such deficiency, and failure to make such
deposit shall be an Event of Default hereunder. If, on any Payment Date, the
aggregate balance in the Central Account (excluding funds allocated to any
Sub-Account other than funds allocated to the Debt Service Payment
Sub-Account or the Basic Carrying Costs Sub-Account) is insufficient to make
the payment of the Basic Carrying Costs Monthly Installment and the Required
Debt Service Payment required to be made pursuant to clauses (a) and (b) of
this Section 5.05, then an Event of Default shall exist hereunder and
Mortgagee may withdraw funds and pay such deficiency from any Sub-Account.
In the event that Mortgagee elects to apply the proceeds of any
Sub-Account to pay any Required Debt Service Payment or to fund any Basic
Carrying Costs, Mortgagor shall, upon demand, repay to Mortgagee the amount
of the funds so applied to replenish such Sub-Account up to the amount
contained therein immediately prior to such application (i.e., including
interest earned on the balance prior to withdrawal), and if Mortgagor shall
fail to repay such amounts within five (5) days after such application, an
Event of Default shall exist hereunder, which Event of Default shall not be
cured unless and until Mortgagor repays such amount or all Sub-Accounts have
been fully funded from Rent for the then applicable Current Month and all
prior months. Mortgagee may, at its sole option, replenish such
Sub-Account(s) out of available Rent in subsequent months which Mortgagor would
have otherwise been entitled to receive.
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Section 5.06. Payment of Basic Carrying Costs. Mortgagor hereby agrees to pay
all Basic Carrying Costs with respect to Mortgagor, the Mortgaged Property
and any Rent derived therefrom or with respect thereto. At least ten (10)
Business Days prior to the due date of any Basic Carrying Costs, and not more
frequently than once each month, Mortgagor may notify Mortgagee in writing
and request that Mortgagee pay such Basic Carrying Costs on behalf of
Mortgagor on or prior to the due date thereof, and, provided that no Event of
Default has occurred and that there are sufficient funds available in the
Basic Carrying Costs Sub-Account, Mortgagee shall make such payments out of
the Basic Carrying Costs Sub-Account before same shall be delinquent.
Together with each such request, Mortgagor shall furnish Mortgagee with bills
and all other documents necessary, as reasonably determined by Mortgagee, for
the payment of the Basic Carrying Costs which are the subject of such
request. Mortgagor's obligation to pay (or cause Mortgagee to pay) Basic
Carrying Costs pursuant to this Mortgage shall include, to the extent
permitted by applicable law, Impositions resulting from future changes in law
which impose upon Mortgagee an obligation to pay any property taxes or other
Impositions or which otherwise adversely affect Mortgagee's interests.
Provided that no Event of Default shall have occurred and is
continuing, all funds deposited into the Basic Carrying Costs Sub-Account
shall be held by Mortgagee pursuant to the provisions of this Mortgage
and shall be applied in payment of Basic Carrying Costs in accordance with
the terms hereof. Should an Event of Default occur and is continuing, the
proceeds on deposit in the Basic Carrying Costs Sub-Account may be applied by
Mortgagee in payment of any Basic Carrying Costs or may be applied to the
payment of the Debt or any other charges affecting all or any portion of the
Cross-collateralized Properties as Mortgagee in its sole discretion may
determine; provided, however, that no such application shall be deemed to
have been made by operation of law or otherwise until actually made by
Mortgagee as herein provided.
Section 5.07. Debt Service Payment Sub-Account. On the Business Day after
each Payment Date during the term of the Loan, Mortgagee shall transfer to
the Collection Account, from the Debt Service Payment Sub-Account, an amount
equal to the sum of (a) the Re-
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quired Debt Service Payment for such Payment Date and (b) any amounts
deposited into the Central Account that are either (i) Loss Proceeds that
Mortgagee has elected to apply to reduce the Debt in accordance with the
terms of Article III hereof or (ii) excess Loss Proceeds remaining after the
completion of any restoration required hereunder.
Section 5.08. Recurring Replacement Reserve Sub-Account. Mortgagor hereby
agrees to pay all Recurring Replacement Expenditures with respect to Mortgagor
and the Mortgaged Property (without regard to the amount of money then
available in the Recurring Replacement Reserve Sub-Account). Provided that
Mortgagee has received written notice from Mortgagor at least five (5)
Business Days prior to the due date of any payment relating to Recurring
Replacement Expenditures and not more frequently than once each month, and
further provided that no Event of Default has occurred and is continuing,
that there are sufficient funds available in the Recurring Replacement
Reserve Sub-Account and Mortgagor shall have theretofore furnished Mortgagee
with lien waivers, copies of bills, invoices and other reasonable
documentation as may be required by Mortgagee to establish that the
Recurring Replacement Expenditures which are the subject of such request
represent amounts due for completed or partially completed capital work and
improvements performed at the Mortgaged Property, Mortgagee shall make such
payments out of the Recurring Replacement Reserve Sub-Account.
Provided that no Event of Default shall have occurred, all funds
deposited into the Central Account relating to Recurring Replacement
Expenditures shall be held by Mortgagee pursuant to the provisions of this
Mortgage and shall be applied in payment of Recurring Replacement
Expenditures. Should an Event of Default occur, the proceeds on deposit in
the Recurring Replacement Reserve Sub-Account may be applied by Mortgagee
in payment of any Recurring Replacement Expenditures or may be applied to the
payment of the Debt or any other charges affecting all or any portion of the
Cross-collateralized Properties, as Mortgagee in its sole discretion may
determine; provided, however, that no such application shall be deemed to
have been made by operation of law or otherwise until actually made by
Mortgagee as herein provided.
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Section 5.09. Operation and Maintenance Expense Sub-Account. Mortgagor hereby
agrees to pay all Operating Expenses with respect to the Mortgaged Property
(without regard to the amount of money then available in the Operation and
Maintenance Expense Sub-Account). All funds allocated to the Operation and
Maintenance Expense Sub-Account shall be held by Mortgagee pursuant to the
provisions of this Mortgage. Any sums held in the Operation and Maintenance
Expense Sub-Account shall be disbursed to Mortgagor within five (5) Business
Days of receipt by Mortgagee from Mortgagor of (a) a written request for such
disbursement which shall indicate the Operating Expenses or Approved TI Costs
(exclusive of Basic Carrying Costs) for which the required disbursement is to
pay and (b) an Officer's Certificate stating that no Operating Expenses or
Approved TI Costs with respect to the Property are more than sixty (60) days
past due; provided, however, in the event that Mortgagor legitimately
disputes any invoice for an Operating Expense or Approved TI Costs, and (i)
no Event of Default has occurred and is continuing hereunder, (ii) Mortgagor
shall have set aside adequate reserves for the payment of such disputed sums
together with all interest and late fees thereon, (iii) Mortgagor has
complied with all the requirements of this Mortgage relating thereto, and
(iv) the contesting of such sums shall not constitute a default under any
other instrument, agreement, or document to which Mortgagor is a party, then
Mortgagor may, after certifying to Mortgagee as to items (i) through (iv)
hereof, contest such invoice. Together with each such request, Mortgagor
shall furnish Mortgagee with bills and all other documents necessary for the
payment of the Operating Expenses and Approved TI Costs which are the subject
of such request. Mortgagor may request a disbursement from the Operation and
Maintenance Expense Sub-Account no more than one (1) time per calendar month.
Should an Event of Default occur and be continuing, the proceeds on deposit
in the Operation and Maintenance Expense Sub-Account may be applied by
Mortgagee in payment of any Operating Expenses or Approved TI Costs for the
Mortgaged Property or may be applied to the payment of the Debt or other
charges affecting all or any portion of the Mortgaged Property as Mortgagee,
in its sole discretion, may determine; provided, however, that no such
application shall be deemed to have been made by operation of law or
otherwise until actually made by Mortgagee as herein provided. All sums, if
any, remaining in the Operation and Maintenance Expense Sub-Account after the
payment of all Operating Expenses
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and Approved TI Costs for which Mortgagor requests payment in the then Current
Month in accordance with the terms hereof shall be deposited into the
Curtailment Reserve Sub-Account, as set forth in Section 5.05 hereof.
Section 5.10. Intentionally Omitted.
Section 5.11. Curtailment Reserve Sub-Account. During the O&M Operative
Period Mortgagee shall allocate all Excess Rent to the Curtailment Reserve
Sub-Account in accordance with Section 5.05(e) until such time as the Debt
has been paid in full. On the Business Day after each Payment Date during any
period for which funds have been allocated to the Curtailment Reserve
Sub-Account pursuant to Section 5.05(e) hereof, Mortgagee shall transfer to
the Collection Account an amount equal to the lesser of (a) the amount
available in the Curtailment Reserve Sub-Account, and (b) the total Debt then
outstanding under the Note and the other Loan Documents.
Section 5.12. Intentionally Omitted.
Section 5.13. Loss Proceeds. In the event of a casualty to the Mortgaged
Property, unless Mortgagee elects, or is required pursuant to Article III
hereof to make all of the Insurance Proceeds available to Mortgagor for
restoration, Mortgagee and Mortgagor shall cause all such Insurance Proceeds
to be paid by the insurer directly to the Central Account, whereupon
Mortgagee shall, after deducting Mortgagee's costs of recovering and
paying out such Insurance Proceeds, including without limitation, reasonable
attorneys' fees, apply same to reduce the Debt in accordance with the terms
of the Note; provided, however, that if Mortgagee elects, or is deemed to
have elected, or is required, to make the Insurance Proceeds available for
restoration, all Insurance Proceeds in respect of rent loss, business
interruption or similar coverage shall be maintained in the Central Account,
to be applied by Mortgagee in the same manner as Rent received with respect
to the operation of the Mortgaged Property; provided, further, however, that in
the event that the Insurance Proceeds of such rent loss, business
interruption or similar insurance policy are paid in a lump sum in advance,
Mortgagee shall hold such Insurance Proceeds in a segregated interest-
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bearing escrow account, which shall be an Eligible Account, shall estimate,
in Mortgagee's reasonable discretion, the number of months required for
Mortgagor to restore the damage caused by the casualty, shall divide the
aggregate rent loss, business interruption or similar Insurance Proceeds by
such number of months, and shall disburse from such escrow account into the
Central Account each month during the performance of such restoration such
monthly installment of said Insurance Proceeds. In the event that Insurance
Proceeds are to be applied toward restoration, Mortgagee shall hold such
funds in a segregated bank account at the Bank, which shall be an Eligible
Account, and shall disburse same in accordance with the provisions of Section
3.04 hereof. Unless Mortgagee elects, or is required pursuant to Section
6.01 hereof to make all of the Condemnation Proceeds available to Mortgagor for
restoration, Mortgagee and Mortgagor shall cause all such Condemnation
Proceeds to be paid to the Central Account, whereupon Mortgagee shall,
after deducting Mortgagee's costs of recovering and paying out such
Condemnation Proceeds, including without limitation, reasonable attorneys'
fees, apply same, by transferring such amounts to the Collection Account, to
reduce the Debt in accordance with the terms of the Note; provided, however,
that any Condemnation Proceeds received in connection with a temporary Taking
shall be maintained in the Central Account, to be applied by Mortgagee in
the same manner as Rent received with respect to the operation of the Mortgaged
Property; provided, further, however, that in the event that the Condemnation
Proceeds of any such temporary Taking are paid in a lump sum in advance,
Mortgagee shall hold such Condemnation Proceeds in a segregated
interest-bearing escrow account, which shall be an Eligible Account, shall
estimate, in Mortgagee's reasonable discretion, the number of months that
the Mortgaged Property shall be affected by such temporary Taking, shall divide
the aggregate Condemnation Proceeds in connection with such temporary Taking
by such number of months, and shall disburse from such escrow account into
the Central Account each month during the pendency of such temporary Taking
such monthly installment of said Condemnation Proceeds. In the event that
Condemnation Proceeds are to be applied toward restoration, Mortgagee shall
hold such funds in a segregated bank account at the Bank, which shall be an
Eligible Account, and shall disburse same in accordance with the provisions
of Section 3.04 hereof. If any Loss Proceeds are received by Mortgagor, such
Loss Proceeds shall be received
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in trust for Mortgagee, shall be segregated from other funds of Mortgagor,
and shall be forthwith paid into the Central Account, or paid to Mortgagee
to hold in a segregated bank account at the Bank, in each case to be applied
or disbursed in accordance with the foregoing. Any Loss Proceeds made
available to Mortgagor for restoration in accordance herewith, to the extent
not used by Mortgagor in connection with, or to the extent they exceed the cost
of, such restoration, shall be deposited into the Central Account, whereupon
Mortgagee shall apply the same to reduce the Debt in accordance with the
terms of the Note.
ARTICLE VI: CONDEMNATION
Section 6.01. Condemnation. (a) Mortgagor shall notify Mortgagee promptly of
the commencement or threat of any Taking of the Mortgaged Property or any
portion thereof. Mortgagee is hereby irrevocably appointed as Mortgagor's
attorney-in-fact, coupled with an interest, with exclusive power to collect,
receive and retain the proceeds of any such Taking and to make any compromise
or settlement in connection with such proceedings (subject to Mortgagor's
reasonable approval, except after the occurrence of an Event of Default, in
which event Mortgagor's approval shall not be required), subject to the
provisions of this Mortgage; provided, however, that Mortgagor may
participate in any such proceedings and shall be authorized and entitled to
compromise or settle any such proceeding with respect to Condemnation
Proceeds in an amount less than five percent (5%) of the Allocated Loan
Amount of the Mortgaged Property. Mortgagor shall execute and deliver to
Mortgagee any and all instruments reasonably required in connection with any
such proceeding promptly after request therefor by Mortgagee. Except as set
forth above, Mortgagor shall not adjust, compromise, settle or enter into any
agreement with respect to such proceedings without the prior consent of
Mortgagee. All Condemnation Proceeds are hereby assigned to and shall be paid
to Mortgagee. With respect to Condemnation Proceeds in an amount in excess of
five percent (5%) of the Allocated Loan Amount of the Mortgaged Property,
Mortgagor hereby authorizes Mortgagee to compromise, settle, collect and
receive such Condemnation Proceeds, and to give proper receipts and
acquittance therefor. Mortgagee may apply such Condemnation
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Proceeds (less any cost to Mortgagee of recovering and paying out such
proceeds, including, without limitation, reasonable attorneys' fees and
disbursements and costs allocable to inspecting any repair, restoration or
rebuilding work and the plans and specifications therefor) toward the payment
of the Debt or to allow such proceeds to be used for the Work.
(b) In the case of a Substantial Taking, the Condemnation Proceeds
shall be payable, after payment of all necessary and proper expenses incurred
in the collection of such award, to Mortgagee, to be applied towards the
payment of the Debt without any prepayment premium. If subsequent to payment
of such amount in full, Mortgagee shall receive payment of any subsequent
Condemnation Proceeds, then, such Condemnation Proceeds shall be paid to
Mortgagee. Each of the parties agrees to execute any and all documents that
may be reasonably required in order to facilitate collection by them of such
Condemnation Proceeds.
(c) In the event of a Taking which is less than a Substantial Taking,
Mortgagor at its sole cost and expense (whether or not the award shall have
been received or shall be sufficient for restoration), shall proceed
diligently to restore, or cause the restoration of, the remaining
Improvements not so taken, to maintain a complete, rentable, self-contained
fully operational facility of the same sort as existed prior to the Taking in
as good a condition as is reasonably possible. In the event of such a Taking,
Mortgagee shall receive the Condemnation Proceeds and shall pay over the
same:
(i) first, provided no Event of Default has occurred and is
continuing, to Mortgagor to the extent of any portion of the award as may
be necessary to pay the reasonable cost of restoration of the Improvements
remaining including costs of the collection, compromise or settlement
(including, without limitation, reasonable attorney fees), and
(ii) second, to Mortgagee, to be applied towards the payment
of the Debt without any prepayment premium.
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Restoration shall be done in accordance with and subject to the provisions
of Section 3.04. Payments to Mortgagor as aforesaid shall be disbursed in the
manner set forth in Section 3.04(b).
If one or more Takings in the aggregate create a Substantial Taking, then,
in such event, the sections of this Article VI above applicable to Substantial
Takings shall apply.
(d) In the event Mortgagee is obligated to or elects to make
Condemnation Proceeds available for the restoration or rebuilding of the
Mortgaged Property, such proceeds shall be disbursed in the manner and subject
to the conditions set forth in Section 3.04(b) hereof. If, in accordance with
this Article VI, any proceeds are used to reduce the Debt, they shall be
applied as Condemnation Proceeds. Mortgagor shall promptly execute and deliver
all instruments reasonably requested by Mortgagee for the purpose of
confirming the assignment of the Condemnation Proceeds to Mortgagee.
Application of all or any part of the Condemnation Proceeds to the Debt shall
be made in accordance with the provisions of Sections 3.06 and 3.07. No
application of the Condemnation Proceeds to the reduction of the Debt shall
have the effect of releasing the lien of this Mortgage until the
remainder of the Debt has been paid in full. In the case of any Taking,
Mortgagee, to the extent that Mortgagee has not been reimbursed by
Mortgagor, shall be entitled, as a first priority out of any Condemnation
Proceeds, to reimbursement for all costs, fees and expenses reasonably
incurred in the determination and collection of any Condemnation Proceeds.
All Condemnation Proceeds deposited with Mortgagee pursuant to this
Section, until expended or applied as provided herein, may be commingled with
the general funds of Mortgagee and shall constitute additional security for
the payment of the Debt and the payment and performance of Mortgagor's
obligations, but Mortgagee shall not be deemed a trustee or other fiduciary
with respect to its receipt of such Condemnation Proceeds or any part
thereof. All awards so deposited with Mortgagee shall be held by
Mortgagee in an Eligible Account and invested in Permitted Investments, but
Mortgagee makes no representation or warranty as to the rate or amount of
interest, if any, which may accrue on any such deposit and shall have no
liability in connection
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therewith. For purposes hereof, any reference to the award shall be deemed to
include interest, if any, which has accrued thereon.
ARTICLE VII: LEASES AND RENTS
Section 7.01. Assignment. (a) Mortgagor does hereby bargain, sell, assign and
set over unto Mortgagee, all of Mortgagor's interest in the Leases and Rents.
The assignment of Leases and Rents in this Section 7.01 is an absolute,
unconditional and present assignment from Mortgagor to Mortgagee and not an
assignment for security and the existence or exercise of Mortgagor's revocable
license to collect Rent shall not operate to subordinate this assignment to
any subsequent assignment. The exercise by Mortgagee of any of its rights
or remedies pursuant to this Section 7.01 shall not be deemed to make
Mortgagee a mortgagee-in-possession. In addition to the provisions of this
Article VII, Mortgagor shall comply with all terms, provisions and conditions
of the Assignment.
(b) So long as there shall exist and be continuing no Event of Default,
Mortgagor shall have a revocable license to take all actions with respect to all
Leases and Rents, present and future, including the right to collect and use the
Rents, subject to the terms of this Mortgage and the Assignment.
(c) In a separate instrument Mortgagor shall, as requested from time to
time by Mortgagee, assign to Mortgagee or its nominee by specific or general
assignment, any and all Leases, such assignments to be in form and content
reasonably acceptable to Mortgagee, but subject to the provisions of Section
7.01(b) hereof. Mortgagor agrees to deliver to Mortgagee, within thirty (30)
days after Mortgagee's request, a true and complete copy of every Lease and,
within ten (10) days after Mortgagee's request, a complete list of the Leases,
certified by Mortgagor to be true, accurate and complete and stating the demised
premises, the names of the lessees, the Rent payable under the Leases, the date
to which such Rents have been paid, the material terms of the Leases, including,
without limitation, the dates of occupancy, the dates of expiration, any Rent
concessions, work obligations or other inducements granted to the lessees
thereunder, and any renewal options.
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(d) The rights of Mortgagee contained in this Article VII, the
Assignment or any other assignment of any Lease shall not result in any
obligation or liability of Mortgagee to Mortgagor or any lessee under a Lease
or any party claiming through any such lessee.
(e) At any time after an Event of Default, the license granted
hereinabove may be revoked by Mortgagee, and Mortgagee or a receiver
appointed in accordance with this Mortgage may enter upon the Mortgaged
Property, and collect, retain and apply the Rents toward payment of the Debt
in such priority and proportions as Mortgagee in its sole discretion shall
deem proper.
(f) In addition to the rights which Mortgagee may have herein, upon
the occurrence of any Event of Default, Mortgagee, at its option, may
require Mortgagor to pay monthly in advance to Mortgagee, or any receiver
appointed to collect the Rents, the fair and reasonable rental value for the
use and occupation of such part of the Mortgaged Property as may be used and
occupied by Mortgagor and may require Mortgagor to vacate and surrender
possession of the Mortgaged Property to Mortgagee or to such receiver and, in
default thereof, Mortgagor may be evicted by summary proceedings or otherwise.
Section 7.02. Management of Mortgaged Property. (a) Mortgagor shall manage the
Mortgaged Property or cause the Mortgaged Property to be managed in a manner
which is consistent with the Approved Manager Standard. All Space Leases
shall provide for rental rates comparable to then existing market rates and
terms and conditions which constitute good and prudent business practice and
are consistent with prevailing market terms and conditions, and shall be
arm's-length transactions. Except as previously disclosed by Mortgagor to, and
consented to by Mortgagee, all Leases shall provide that they are
subordinate to this Mortgage and that the lessees thereunder attorn to
Mortgagee. Mortgagor shall deliver copies of all Leases, amendments,
modifications and renewals to Mortgagee.
(b) Mortgagor (i) shall observe and perform all of its material
obligations under the Leases pursuant to applicable Legal Requirements and
shall not do or permit to be done anything
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to impair the value of the Leases as security for the Debt; (ii) shall
promptly, upon Mortgagee's request, send copies to Mortgagee of all
notices of default which Mortgagor shall receive under the Leases; (iii) shall,
consistent with the Approved Manager Standard, enforce all of the terms,
covenants and conditions contained in the Leases to be observed or performed;
(iv) shall not collect any of the Rents under the Leases more than one (1)
month in advance (except that Mortgagor may collect in advance such security
deposits as are permitted pursuant to applicable Legal Requirements and are
commercially reasonable in the prevailing market); (v) shall not execute any
other assignment of lessor's interest in the Leases or the Rents except as
otherwise expressly permitted pursuant to this Mortgage; (vi) shall not
cancel or terminate any of the Leases or accept a surrender thereof in any
manner inconsistent with the Approved Manager Standard; (vii) shall not
convey, transfer or suffer or permit a conveyance or transfer of all or any
part of the Premises or the Improvements or of any interest therein so as to
effect a merger of the estates and rights of, or a termination or diminution
of the obligations of, lessees thereunder; (viii) shall notify Mortgagee of
any material alteration, modification or change in the terms of any guaranty
of any Major Space Lease or cancellation or termination of such guaranty
promptly upon effectuation of same unless altered, cancelled, modified or
changed in the ordinary course of business; (ix) shall, in accordance with
the Approved Manager Standard, make all reasonable efforts to seek lessees
for space as it becomes vacant and enter into Leases in accordance with the
terms hereof; (x) shall not materially modify, alter or amend any Major Space
Lease or Property Agreement with any Pad Owner without Mortgagee's consent,
which consent will not be unreasonably withheld or delayed; (xi) shall notify
Mortgagee promptly if any Pad Owner shall cease business operations or of
the occurrence of any event of which it becomes aware affecting a Pad Owner
or its property which might have any material effect on the Mortgaged Property;
and (xii) shall, without limitation to any other provision hereof, execute
and deliver at the request of Mortgagee all such further assurances,
confirmations and assignments in connection with the Mortgaged Property as are
required herein and as Mortgagee shall from time to time reasonably require.
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(c) All security deposits of lessees, whether held in cash or any other
form, shall be treated by Mortgagor as trust funds, but shall not be commingled
with any other funds of Mortgagor and, if cash, shall be deposited by Mortgagor
in the Security Deposit Account. Any bond or other instrument which Mortgagor
is permitted to hold in lieu of cash security deposits under applicable Legal
Requirements shall be maintained in full force and effect unless replaced by
cash deposits as hereinabove described, shall be issued by a Person
reasonably satisfactory to Mortgagee, shall, if permitted pursuant to Legal
Requirements, at Mortgagee's option, name Mortgagee as payee or mortgagee
thereunder or be fully assignable to Mortgagee and shall, in all respects,
comply with applicable Legal Requirements and otherwise be reasonably
satisfactory to Mortgagee. Mortgagor shall, upon request, provide Mortgagee
with evidence reasonably satisfactory to Mortgagee of Mortgagor's compliance
with the foregoing. Following the occurrence and during the continuance of
any Event of Default, Mortgagor shall, upon Mortgagee's request, if permitted
by applicable Legal Requirements, turn over the security deposits (and any
interest thereon) to Mortgagee to be held by Mortgagee in accordance with
the terms of the Leases and all Legal Requirements.
(d) If (i) the aggregate Net Operating Income of the
Cross-collateralized Properties in any Fiscal Year declines below $27,977,167
or (ii) an Event of Default has occurred, then, if Mortgagee determines in
its reasonable discretion prior to the removal of the existing manager that a
reputable independent property manager can manage the Mortgaged Property at
competitive rates more efficiently and with better results than Mortgagor or
Mortgagor's Manager, Mortgagee shall have the right to appoint such reputable
independent property manager selected by Mortgagee, in Mortgagee's sole
discretion, to manage the Mortgaged Property; provided, however, that no such
approval shall be granted unless the Rating Agency shall have delivered
confirmation that any rating issued in connection with the Securitization
will not, as a result of a change of Manager, be downgraded from the then
current ratings thereof, qualified or withdrawn.
(e) Mortgagor covenants and agrees with Mortgagee that (i) the Mortgaged
Property will be managed at all times by the
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Manager pursuant to the management agreement approved by Mortgagee (the
"Management Agreement"), (ii) after Mortgagor has knowledge of a fifty percent
(50%) or more change in control of the ultimate beneficial ownership of the
Manager, Mortgagor will promptly give Mortgagee notice thereof (a "Manager
Control Notice") and (iii) the Management Agreement may be terminated by
Mortgagee at any time for cause (including, but not limited to, Manager's
negligence, willful misconduct or fraud) or at any time following either (A)
the occurrence of an Event of Default, or (B) the receipt of a Manager
Control Notice, and a substitute managing agent shall be appointed by
Mortgagor, subject to Mortgagee's approval, which may be given or withheld in
Mortgagee's sole discretion but which will not be given unless, inter alia,
the Rating Agency shall have delivered confirmation that any rating issued in
connection with the Securitization will not, as a result of a change of
Manager, be downgraded from the then current ratings thereof, qualified or
withdrawn. Mortgagor may from time to time appoint a successor manager to
manage the Mortgaged Property with Mortgagee's prior written consent which
consent shall not be unreasonably withheld or delayed, provided that, any
such successor manager shall be a reputable management company having a
senior executive with at least seven (7) years' experience in the management
of super-regional malls, shall be the manager of at least five (5)
super-regional malls, including, without limitation, certain complexes which
contain more than 1,500,000 square feet of gross leasable area, and shall be
reasonably acceptable to Mortgagee. Mortgagor further covenants and agrees
that Mortgagor shall require the Manager (or any successor managers) to
maintain at all times during the term of the Loan worker's compensation
insurance as required by Governmental Authorities.
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ARTICLE VIII: MAINTENANCE AND REPAIR
Section 8.01. Maintenance and Repair of the Mortgaged Property; Alterations;
Replacement of Equipment. Mortgagor hereby covenants and agrees:
(a) Mortgagor shall not (i) desert or abandon the Mortgaged Property, (ii)
change the use of the Mortgaged Property or cause or permit the use or occupancy
of any part of the Mortgaged Property to be discontinued if such discontinuance
or use change would violate any zoning or other law, ordinance or regulation;
(iii) consent to or seek any lowering of the zoning classification, or greater
zoning restriction affecting the Mortgaged Property; or (iv) take any steps
whatsoever to convert the Mortgaged Property, or any portion thereof, to a
condominium or cooperative form of ownership.
(b) Mortgagor shall, at its expense, (i) take good care of the Mortgaged
Property including grounds generally, and utility systems and sidewalks, roads,
alleys, and curbs therein, and shall keep the same in good, safe and insurable
condition and in compliance with all applicable Legal Requirements, (ii)
promptly make all repairs to the Mortgaged Property, above grade and below
grade, interior and exterior, structural and nonstructural, ordinary and
extraordinary, unforeseen and foreseen, and maintain the Mortgaged Property in a
manner appropriate for the facility and (iii) not commit or suffer to be
committed any waste of the Mortgaged Property or do or suffer to be done
anything which will increase the risk of fire or other hazard to the Mortgaged
Property or impair the value thereof. Mortgagor shall keep the sidewalks,
vaults, gutters and curbs comprising, or adjacent to, the Mortgaged Property,
clean and free from dirt, snow, ice, rubbish and obstructions. All repairs made
by Mortgagor shall be made with first-class materials, in a good and workmanlike
manner, shall be equal or better in quality and class to the original work and
shall comply with all applicable Legal Requirements and Insurance Requirements.
To the extent any of the above obligations are obligations of tenants under
Space Leases or Pad Owners or other Persons under Property Agreements, Mortgagor
may fulfill its obligations hereunder by causing such tenants, Pad Owners or
other Persons, as the case may be, to perform their obligations thereunder. As
used herein, the terms
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"repair" and "repairs" shall be deemed to include all necessary replacements.
(c) Mortgagor shall not demolish, remove, construct, or, except as
otherwise expressly provided herein, restore, or alter the Mortgaged Property
or any portion thereof nor consent to or permit any such demolition, removal,
construction, restoration, addition or alteration (each a "Renovation") which
would diminish the value of the Mortgaged Property or materially diminish the
Total GLA without (i) Mortgagee's prior written consent in each instance,
which consent shall not be unreasonably withheld or delayed, and (ii) a
letter from the Rating Agency confirming that any rating issued in connection
with the Securitization will not, as a result of such Renovation be
downgraded from the then current ratings thereof, qualified or withdrawn;
provided, however, that, so long as the aggregate Net Operating Income of the
Cross-collateralized Properties is equal to or greater than $27,977,167, any
customary and reasonable tenant improvement work done in accordance with the
Approved Manager Standard and Mortgagor's past business practices which tenant
improvement work costs (in any one Loan Year) not more than two and one-half
percent (2.5%) of the Allocated Loan Amount shall be permitted without the
consent of Mortgagee or delivery of a letter of the type set forth in (ii)
above.
(d) Mortgagor represents and warrants to Mortgagee that (i) there are
no fixtures, machinery, apparatus, tools, equipment or articles of personal
property attached or appurtenant to, or located on, or used in connection
with the management, operation or maintenance of the Mortgaged Property, except
for the Equipment and equipment leased by Mortgagor for the management,
operation or maintenance of the Mortgaged Property in accordance with the Loan
Documents; (ii) the Equipment and the leased equipment constitutes all of the
fixtures, machinery, apparatus, tools, equipment and articles of personal
property necessary to the proper operation and maintenance of the Mortgaged
Property; and (iii) all of the Equipment is free and clear of all liens,
except for the lien of this Mortgage and the Permitted Encumbrances. All
rights, title and interest of Mortgagor in and to all extensions, improvements,
betterment, renewals, appurtenances to, the Mortgaged Property hereafter
acquired by, or released to, Mortgagor or constructed, assembled or placed by
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Mortgagor in the Mortgaged Property, and all changes and substitutions of the
security constituted thereby, shall be and, in each such case, without any
further mortgage, conveyance, assignment or other act by Mortgagee or
Mortgagor, shall become subject to the lien and security interest of this
Mortgage as fully and completely, and with the same effect, as though now
owned by Mortgagor and specifically described in this Mortgage, but at any
and all times Mortgagor shall execute and deliver to Mortgagee any documents
Mortgagee may reasonably deem necessary or appropriate for the purpose of
specifically subjecting the same to the lien and security interest of this
Mortgage.
(e) Notwithstanding the provisions of this Mortgage to the contrary,
Mortgagor shall have the right, at any time and from time to time, to remove and
dispose of Equipment which may have become obsolete or unfit for use or which is
no longer useful in the management, operation or maintenance of the Mortgaged
Property. Mortgagor shall promptly replace any such Equipment so disposed of or
removed with other Equipment of equal value and utility, free of any security
interest or superior title, liens or claims; except that, if by reason of
technological or other developments, replacement of the Equipment so removed or
disposed of is not necessary or desirable for the proper management, operation
or maintenance of the Mortgaged Property, Mortgagor shall not be required to
replace the same. All such replacements or additional equipment shall be deemed
to constitute "Equipment" and shall be covered by the security interest herein
granted.
ARTICLE IX: TRANSFER OR ENCUMBRANCE OF THE MORTGAGED PROPERTY
Section 9.01. Other Encumbrances. Except for Permitted Liens, Mortgagor shall
not further encumber or permit the further encumbrance in any manner (whether
by grant of a pledge, security interest or otherwise) of the Mortgaged Property
or any part thereof or interest therein, including, without limitation, of
the Rents therefrom except as expressly permitted pursuant to the terms of
this Mortgage.
Section 9.02. No Transfer. Mortgagor acknowledges that Mortgagee has examined
and relied on the expertise of Mortgagor and, if applicable, each General
Partner, in owning and operating
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properties such as the Mortgaged Property in agreeing to make the Loan and
will continue to rely on Mortgagor's ownership of the Mortgaged Property as a
means of maintaining the value of the Mortgaged Property as security for
repayment of the Debt and Mortgagor acknowledges that Mortgagee has a valid
interest in maintaining the value of the Mortgaged Property. Mortgagor shall
not make or permit any Transfer without the prior written consent of
Mortgagee, which consent Mortgagee may withhold in its sole and absolute
discretion and which shall in no event be granted unless, inter alia, the
Rating Agency shall have delivered confirmation that any rating issued in
connection with the Securitization will not, as a result of the proposed
Transfer, be downgraded from the then current ratings thereof, qualified or
withdrawn. Mortgagee 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 a Transfer without
Mortgagee's consent. This provision shall apply to every Transfer regardless
of whether voluntary or not, or whether or not Mortgagee has consented to any
previous Transfer.
Section 9.03. Due on Sale. Mortgagee may declare the Debt immediately due
and payable upon any Transfer or further encumbrance in violation of this
Article IX without regard to whether any impairment of its security or any
increased risk of default hereunder can be demonstrated. This provision shall
apply to every Transfer or further encumbrance of the Mortgaged Property in
violation of this Article IX or any part thereof or interest in the Mortgaged
Property or in Mortgagor regardless of whether voluntary or not, or whether or
not Mortgagee has consented to any previous Transfer or further
encumbrance of the Mortgaged Property or interest in Mortgagor.
Section 9.04. Permitted Transfer. Notwithstanding anything contained in this
Article IX, Mortgagee shall consent to a one time Transfer of an interest in
Mortgagor or any General Partner of Mortgagor that occurs by reason of MLP or
The Mills Corporation merging into or consolidating with another Person
("Sale") provided that all of the following terms and conditions are
satisfied:
(a) No Event of Default is then continuing.
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(b) Mortgagor gives Mortgagee written notice of the terms of such
prospective Sale not less than sixty (60) days before the date on which such
Sale is scheduled to close and, concurrently therewith, gives Mortgagee all
such information concerning the Person with which The Mills Corporation or
MLP, as applicable, shall be merging into or consolidating with ("Buyer") as
Mortgagee would require in evaluating an initial extension of credit to a
borrower and pays to Mortgagee a non-refundable application fee in the
amount of $25,000 to cover expenses of Mortgagee incurred in connection
therewith.
(c) Mortgagor and the Buyer execute, without any cost or expense to
Mortgagee, new financing statements or financing statement amendments and
any additional documents reasonably requested by Mortgagee.
(d) The Rating Agency shall have delivered written confirmation that any
rating issued by the Rating Agency in connection with the Securitization will
not, as a result of the proposed Transfer, be downgraded from the then current
ratings thereof, qualified or withdrawn.
ARTICLE X: CERTIFICATES
Section 10.01. Estoppel Certificates. (a) After request by Mortgagee,
Mortgagor, within fifteen (15) days and at its expense, will furnish
Mortgagee with a statement, duly acknowledged and certified, setting forth
(i) the amount of the original principal amount of the Note, and the unpaid
principal amount of the Note, (ii) the rate of interest of the Note, (iii)
the date payments of interest and/or principal were last paid, (iv) any
offsets or defenses to the payment of the Debt, and if any are alleged, the
nature thereof, (v) that the Note and this Mortgage have not been
modified or if modified, giving particulars of such modification and (vi)
that there has occurred and is then continuing no Default or if such Default
exists, the nature thereof, the period of time it has existed, and the action
being taken to remedy such Default.
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(b) Within fifteen (15) days after written request by Mortgagor,
Mortgagee shall furnish to Mortgagor a written statement confirming the
amount of the Debt, the maturity date of the Note, the date to which interest
has been paid, and whether any Event of Default or other Default has occurred
and is then continuing.
(c) Mortgagor shall use all reasonable efforts to obtain estoppels from
tenants that may be required hereunder or under the Loan Documents.
ARTICLE XI: NOTICES
Section 11.01. Notices. Any notice, demand, statement, request or consent
made hereunder shall be in writing and delivered personally or sent to the
party to whom the notice, demand or request is being made by Federal Express
or other nationally recognized overnight delivery service, as follows and
shall be deemed given when delivered personally or one (1) Business Day after
being deposited with Federal Express or such other nationally recognized
delivery service:
If to Mortgagee: To Mortgagee, at the address first
written above,
with a copy to:
Brown & Wood LLP
One World Trade Center
New York, New York 10048-0557
Attn: David J. Weinberger, Esq.
If to Mortgagor: To Mortgagor, at the address set forth
on the signature page hereto, to the
attention of the general counsel of
Mortgagor,
or such other address as either Mortgagor or Mortgagee shall hereafter specify
by written notice as provided herein; provided, however, that notwithstanding
any provision of this Article to
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the contrary, such notice of change of address shall be deemed given only upon
actual receipt thereof.
ARTICLE XII: INDEMNIFICATION
Section 12.01. Indemnification Covering Mortgaged Property. In addition, and
without limitation, to any other provision of this Mortgage or any other
Loan Document, Mortgagor shall protect, indemnify and save harmless Mortgagee
and its successors and assigns, and each of their agents, employees, officers
and directors, from and against all liabilities, obligations, claims,
damages, penalties, causes of action, costs and expense (including, without
limitation, reasonable attorneys' fees and expenses, whether incurred within
or outside the judicial process), imposed upon or incurred by or asserted
against Mortgagee and its assigns, or any of their agents, employees,
officers or directors, by reason of (a) ownership of this Mortgage, the
Assignment, the Mortgaged Property or any part thereof or any interest therein
or receipt of any Rents; (b) any accident, injury to or death of any person or
loss of or damage to property occurring in, on or about the Mortgaged Property
or any part thereof or on the adjoining sidewalks, curbs, parking areas,
streets or ways; (c) any use, nonuse or condition in, on or about, or
possession, alteration, repair, operation, maintenance or management of, the
Mortgaged Property or any part thereof or on the adjoining sidewalks, curbs,
parking areas, streets or ways; (d) any failure on the part of Mortgagor to
perform or comply with any of the terms of this Mortgage or the Assignment;
(e) performance of any labor or services or the furnishing of any materials or
other property in respect of the Mortgaged Property or any part thereof; (f)
any claim by brokers, finders or similar Persons claiming to be entitled to a
commission in connection with any Lease or other transaction involving the
Mortgaged Property or any part thereof; (g) any Imposition including, without
limitation, any Imposition attributable to the execution, delivery, filing,
or recording of any Loan Document, Lease or memorandum thereof; (h) any lien
or claim arising on or against the Mortgaged Property or any part thereof
under any Legal Requirement or any liability asserted against Mortgagee
with respect thereto; or (i) the claims of any lessee or any Person acting
through or under any lessee or
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otherwise arising under or as a consequence of any Lease. Notwithstanding the
foregoing provisions of this Section 12.01 to the contrary, Mortgagor shall
have no obligation to indemnify Mortgagee pursuant to this Section 12.01
for liabilities, obligations, claims, damages, penalties, causes of action,
costs and expenses relative to the foregoing which result from Mortgagee's,
and its successors' or assigns', willful misconduct or gross negligence. Any
amounts payable to Mortgagee by reason of the application of this Section
12.01 shall constitute a part of the Debt secured by this Mortgage and
other Loan Documents and shall become immediately due and payable and shall
bear interest at the Default Rate applicable to the Class A Portion from the
date the liability, obligation, claim, cost or expense is sustained by
Mortgagee, as applicable, until paid. The provisions of this Section 12.01
shall survive the termination of this Mortgage whether by repayment of
the Debt, foreclosure or delivery of a deed in lieu thereof, assignment or
otherwise.
ARTICLE XIII: DEFAULTS
Section 13.01. Events of Default. The Debt shall become immediately due at
the option of Mortgagee upon any one or more of the following events
("Event of Default"):
(a) if the final payment or prepayment premium, if any, due under
the Note shall not be paid on Maturity;
(b) if any monthly payment of interest and/or principal due under
the Note (other than the sums described in (a) above) shall not be fully
paid on the date upon which the same is due and payable thereunder;
(c) if payment of any sum (other than the sums described in (a)
above or (b) above) required to be paid pursuant to the Note, this
Mortgage or any other Loan Document shall not be paid within five (5)
Business Days after Mortgagee delivers written notice to Mortgagor that
same is due and payable thereunder or hereunder;
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(d) except in connection with the Merger and as otherwise permitted
herein, if Mortgagor or, if Mortgagor is a partnership, any general
partner of Mortgagor shall institute or cause to be instituted any
proceeding for the termination or dissolution of Mortgagor or any such
general partner;
(e) if the insurance policies required hereunder are not kept in
full force and effect, or if the insurance policies are not assigned and
delivered to Mortgagee as herein provided;
(f) except in connection with the Merger, if Mortgagor attempts to
assign its rights under this Mortgage or any other Loan Document or
any interest herein or therein, or if any Transfer occurs other than in
accordance with the provisions hereof;
(g) if any representation or warranty of Mortgagor made herein or in
any other Loan Document or in any certificate, report, financial statement
or other instrument or agreement furnished to Mortgagee shall prove
false or misleading in any material respect as of the date made;
(h) if Mortgagor or any general partner of Mortgagor shall make an
assignment for the benefit of creditors or shall admit in writing its
inability to pay its debts generally as they become due;
(i) if a receiver, liquidator or trustee of Mortgagor or any general
partner of Mortgagor shall be appointed or if Mortgagor or any of its
general partners shall be adjudicated a bankrupt or insolvent, or if any
petition for bankruptcy, reorganization or arrangement pursuant to federal
bankruptcy law, or any similar federal or state law, shall be filed by or
against, consented to, or acquiesced in by, Mortgagor or its general
partners or if any proceeding for the dissolution or liquidation of
Mortgagor or any of its general partners shall be instituted; however, if
such appointment, adjudication, petition or proceeding was involuntary and
not consented to by Mortgagor or its general partners, as applicable, upon
the same not being discharged,
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stayed or dismissed within sixty (60) days or if Mortgagor or any of its
general partners shall generally not be paying its debts as they become
due;
(j) if Mortgagor shall be in default beyond any notice or grace
period, if any, under any other mortgage or deed of trust or security
agreement covering any part of the Mortgaged Property without regard to
its priority relative to this Mortgage; provided, however, this
provision shall not be deemed a waiver of the provisions of Article IX
prohibiting further encumbrances affecting the Mortgaged Property or any
other provision of this Mortgage;
(k) if the Mortgaged Property becomes subject (i) to any lien which
is superior to the lien of this Mortgage, other than a lien for real
estate taxes and assessments not due and payable, or (ii) to any
mechanic's, materialman's or other lien which is or is asserted to be
superior to the lien of this Mortgage, and such lien shall remain
undischarged (by payment, bonding, or otherwise) for twenty (20) days
unless contested in accordance with the terms hereof;
(l) if Mortgagor discontinues the operation of the Mortgaged
Property or any part thereof for ten (10) days or more for reasons other
than repair or restoration arising from a casualty or condemnation;
(m) except as permitted in this Mortgage, any material
alteration, demolition or removal of any of the Improvements without the
prior consent of Mortgagee;
(n) if Mortgagor consummates a transaction which would cause this
Mortgage or Mortgagee's rights under this Mortgage, the Note
or any other Loan Document to constitute a non-exempt prohibited
transaction under ERISA or result in a violation of a state statute
regulating government plans subjecting Mortgagee to liability for a
violation of ERISA or a state statute;
(o) if an Event of Default shall occur under any of the other
Cross-collateralized Mortgages; or
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(p) if Mortgagor shall be in default under any of the other terms,
covenants or conditions of the Note (other than as set forth in (a)
through (o) above), this Mortgage or any other Loan Document, other
than as set forth in (a) through (o) above, for ten (10) days after
notice from Mortgagee in the case of any default which can be cured by
the payment of a sum of money, or for thirty (30) days after notice from
Mortgagee in the case of any other default or an additional ninety (90)
days if Mortgagor is diligently and continuously effectuating a cure of a
curable non-monetary default, other than as set forth in (a) through (o)
above.
Section 13.02. Remedies. (a) Upon the occurrence and during the continuance
of any Event of Default, Mortgagee may, in addition to any other rights or
remedies available to it hereunder or under any other Loan Document, at law
or in equity, take such action, without notice or demand, as it reasonably
deems advisable to protect and enforce its rights against Mortgagor or any one
or more of the Cross-collateralized Borrowers and in and to the Mortgaged
Property or any one or more of the Cross-collateralized Properties or any one
or more of them, including, but not limited to, the following actions, each
of which may be pursued singly, concurrently or otherwise, at such time and
in such order as Mortgagee may determine, in its sole discretion, without
impairing or otherwise affecting any other rights and remedies of Mortgagee
hereunder, at law or in equity: (i) declare all or any portion of the unpaid
Debt to be immediately due and payable; provided, however, that upon the
occurrence of any of the events specified in Section 13.01(i), the entire
Debt will be immediately due and payable without notice or demand or any
other declaration of the amounts due and payable; or (ii) bring an action to
foreclose this Mortgage and without applying for a receiver for the
Rents, but subject to the rights of the tenants under the Leases, enter into
or upon the Mortgaged Property or any part thereof, either personally or by its
agents, nominees or attorneys, and dispossess Mortgagor and its agents and
servants therefrom, and thereupon Mortgagee may (A) use, operate, manage,
control, insure, maintain, repair, restore and otherwise deal with all and
every part of the Mortgaged Property and conduct the business thereat, (B) make
alterations, additions, renewals, replacements and improvements to or on the
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Mortgaged Property or any part thereof, (C) exercise all rights and powers of
Mortgagor with respect to the Mortgaged Property or any part thereof, whether
in the name of Mortgagor 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 earnings, revenues, rents,
issues, profits and other income of the Mortgaged Property and every part
thereof, and (D) apply the receipts from the Mortgaged Property or any part
thereof to the payment of the Debt, after deducting therefrom all expenses
(including, without limitation, reasonable attorneys' fees and disbursements)
reasonably incurred in connection with the aforesaid operations and all
amounts necessary to pay the Impositions, insurance and other charges in
connection with the Mortgaged Property or any part thereof, as well as just
and reasonable compensation for the services of Mortgagee's third-party
agents; or (iii) have an appraisal or other valuation of the Mortgaged
Property or any part thereof performed by an Appraiser (and Mortgagor
covenants and agrees it shall cooperate in causing any such valuation or
appraisal to be performed) and any cost or expense incurred by Mortgagee in
connection therewith shall constitute a portion of the Debt and be secured by
this Mortgage and shall be immediately due and payable to Mortgagee with
interest, at the Default Rate, until the date of receipt by Mortgagee; or
(iv) sell the Mortgaged Property or institute proceedings for the complete
foreclosure of this Mortgage, or take such other action as may be allowed
pursuant to Legal Requirements, at law or in equity, for the enforcement of
this Mortgage in which case the Mortgaged Property or any part thereof may be
sold for cash or credit in one or more parcels; or (v) with or without entry,
and to the extent permitted and pursuant to the procedures provided by
applicable Legal Requirements, institute proceedings for the partial
foreclosure of this Mortgage, or take such other action as may be allowed
pursuant to Legal Requirements, at law or in equity, for the enforcement of
this Mortgage for the portion of the Debt then due and payable, subject to
the lien of this Mortgage continuing unimpaired and without loss of priority
so as to secure the balance of the Debt not then due; or (vi) sell the
Mortgaged Property or any part thereof and any or all estate, claim, demand,
right, title and interest of Mortgagor therein and rights of redemption
thereof, pursuant to power of sale or otherwise, at one or more sales, in
whole or in parcels, in any order or
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manner, at such time and place, upon such terms and after such notice thereof
as may be required or permitted by law, at the discretion of Mortgagee, and
in the event of a sale, by foreclosure or otherwise, of less than all of the
Mortgaged Property, this Mortgage shall continue as a lien on the
remaining portion of the Mortgaged Property; or (vii) institute an action, suit
or proceeding in equity for the specific performance of any covenant,
condition or agreement contained in the Loan Documents, or any of them; or
(viii) recover judgment on the Note or any guaranty either before, during or
after (or in lieu of) any proceedings for the enforcement of this Mortgage;
or (ix) apply, ex parte, for the appointment of a custodian, trustee,
receiver, liquidator or conservator of the Mortgaged Property or any part
thereof, irrespective of the adequacy of the security for the Debt and
without regard to the solvency of Mortgagor or of any Person liable for the
payment of the Debt, to which appointment Mortgagor does hereby consent and
such receiver or other official shall have all rights and powers permitted by
applicable law and such other rights and powers as the court making such
appointment may confer, but the appointment of such receiver or other
official shall not impair or in any manner prejudice the rights of
Mortgagee to receive the Rent with respect to any of the Mortgaged Property
pursuant to this Mortgage or the Assignment; or (x) require, at
Mortgagee's option, Mortgagor to pay monthly in advance to Mortgagee, or
any receiver appointed to collect the Rents, the fair and reasonable rental
value for the use and occupation of any portion of the Mortgaged Property
occupied by Mortgagor and may require Mortgagor to vacate and surrender
possession to Mortgagee of the Mortgaged Property or to such receiver and
Mortgagor may be evicted by summary proceedings or otherwise; or (xi) without
notice to Mortgagor (A) apply all or any portion of the cash collateral in the
Basic Carrying Costs Sub-Account, including any interest and/or earnings
therein, to carry out the obligations of Mortgagor under this Mortgage and
the other Loan Documents, to protect and preserve the Mortgaged Property and
for any other purpose permitted under this Mortgage and the other Loan
Documents and/or (B) have all or any portion of such cash collateral
immediately paid to Mortgagee to be applied against the Debt in the order
and priority set forth in the Note; or (xii) pursue any or all such other
rights or remedies as Mortgagee may have under applicable law or in equity;
provided, however, that the provisions of this Section 13.02(a)
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shall not be construed to extend or modify any of the notice requirements or
grace periods provided for hereunder or under any of the other Loan Documents.
Mortgagor hereby waives, to the fullest extent permitted by Legal Requirements,
any defense Mortgagor might otherwise raise or have by the failure to make any
tenants parties defendant to a foreclosure proceeding and to foreclose their
rights in any proceeding instituted by Mortgagee.
(b) Any time after an Event of Default Mortgagee shall have the power
to sell the Mortgaged Property or any part thereof at public auction, in such
manner, at such time and place, upon such terms and conditions, and upon such
public notice as Mortgagee may deem best for the interest of Mortgagee,
or as may be required or permitted by applicable law, consisting of
advertisement in a newspaper of general circulation in the jurisdiction and
for such period as applicable law may require and at such other times and by
such other methods, if any, as may be required by law to convey the Mortgaged
Property in fee simple by Mortgagee's deed with special warranty of title
to and at the cost of the purchaser, who shall not be liable to see to the
application of the purchase money. The proceeds or avails of any sale made
under or by virtue of this Section 13.02, together with any other sums which
then may be held by Mortgagee under this Mortgage, whether under the
provisions of this Section 13.02 or otherwise, shall be applied as follows:
First: To the payment of the third-party costs and expenses
reasonably incurred in connection with any such sale and to
advances, fees and expenses, including, without limitation,
reasonable fees and expenses of Mortgagee's legal counsel as
applicable, and of any judicial proceedings wherein the same may be
made, and of all expenses, liabilities and advances reasonably made
or incurred by Mortgagee under this Mortgage, together with
interest as provided herein on all such advances made by
Mortgagee, and all Impositions, except any Impositions or other
charges subject to which the Mortgaged Property shall have been
sold;
Second: To the payment of the whole amount then due, owing and
unpaid under the Note for principal and
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interest thereon, with interest on such unpaid principal at the
Default Rate from the date of the occurrence of the earliest Event
of Default that formed a basis for such sale until the same is paid
to be applied in the manner set forth in Section 2.02 of the Note;
Third: To the payment of any other portion of the Debt required to
be paid by Mortgagor pursuant to any provision of this Mortgage,
the Note, or any of the other Loan Documents to be applied
in the manner set forth in Section 2.02 of the Note; and
Fourth: The surplus, if any, to Mortgagor unless otherwise required
by Legal Requirements.
Mortgagee and any receiver or custodian of the Mortgaged Property or any part
thereof shall be liable to account for only those rents, issues, proceeds and
profits actually received by it.
(c) Mortgagee may adjourn from time to time any sale by it to be made
under or by virtue of this Mortgage by announcement at the time and
place appointed for such sale or for such adjourned sale or sales and, except
as otherwise provided by any applicable provision of Legal Requirements,
Mortgagee, without further notice or publication, may make such sale at the
time and place to which the same shall be so adjourned.
(d) Upon the completion of any sale or sales made by Mortgagee under
or by virtue of this Section 13.02, Mortgagee, or any officer of any court
empowered to do so, shall execute and deliver to the accepted purchaser or
purchasers a good and sufficient instrument, or good and sufficient
instruments, granting, conveying, assigning and transferring all estate,
right, title and interest in and to the property and rights sold. Mortgagee
is hereby irrevocably appointed the true and lawful attorney-in-fact of
Mortgagor (coupled with an interest), in its name and stead, to make all
necessary conveyances, assignments, transfers and deliveries of the property
and rights so sold and for that purpose Mortgagee may execute all necessary
instruments of conveyance, assignment, transfer and delivery, and may
substitute one or more Persons with like power, Mortgagor hereby
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ratifying and confirming all that its said attorney-in-fact or such substitute
or substitutes shall lawfully do by virtue hereof. Nevertheless, Mortgagor, if
so requested by Mortgagee, shall ratify and confirm any such sale or sales by
executing and delivering to Mortgagee, or to such purchaser or purchasers all
such instruments as may be advisable, in the sole judgement of Mortgagee, for
such purpose, and as may be designated in such request. Any such sale or sales
made under or by virtue of this Section 13.02, whether made under the power of
sale herein granted or under or by virtue of judicial proceedings or a judgment
or decree of foreclosure and sale, shall operate to divest all the estate,
right, title, interest, claim and demand whatsoever, whether at law or in
equity, of Mortgagor in and to the property and rights so sold, and shall, to
the fullest extent permitted under Legal Requirements, be a perpetual bar, both
at law and in equity against Mortgagor and against any and all Persons claiming
or who may claim the same, or any part thereof, from, through or under
Mortgagor.
(e) In the event of any sale made under or by virtue of this Section 13.02
(whether made under the power of sale herein granted or under or by virtue of
judicial proceedings or a judgment or decree of foreclosure and sale), the
entire Debt immediately thereupon shall, anything in the Loan Documents to the
contrary notwithstanding, become due and payable.
(f) Upon any sale made under or by virtue of this Section 13.02
(whether made under the power of sale herein granted or under or by virtue of
judicial proceedings or a judgment or decree of foreclosure and sale),
Mortgagee may bid for and acquire the Mortgaged Property or any part thereof
and in lieu of paying cash therefor may make settlement for the purchase
price by crediting upon the Debt the net sales price after deducting
therefrom the expenses of the sale and the costs of the action.
(g) No recovery of any judgment by Mortgagee and no levy of an
execution under any judgment upon the Mortgaged Property or any part thereof or
upon any other property of Mortgagor shall release the lien of this Mortgage
upon the Mortgaged Property or any part thereof, or any liens, rights,
powers or remedies of Mortgagee hereunder, but such liens, rights, powers
and remedies of Mortgagee shall continue unimpaired until all amounts due
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under the Note, this Mortgage and the other Loan Documents are paid in
full.
Section 13.03. Payment of Debt After Default. If following the occurrence of
any Event of Default, Mortgagor shall tender payment of an amount sufficient to
satisfy the Debt in whole or in part at any time prior to a foreclosure sale
of the Mortgaged Property, and if at the time of such tender prepayment of the
principal balance of the Note is not permitted by the Note, Mortgagor shall, in
addition to the entire Debt, also pay to Mortgagee a sum equal to interest
which would have accrued on the principal balance of the Note from the date
of such tender to the earlier of (a) the Maturity Date or (b) the first day
of the period during which prepayment of the principal balance of the Note
would have been permitted together with a prepayment consideration equal to
the prepayment consideration which would have been payable as of the first
day of the period during which prepayment would have been permitted. If at
the time of such tender, prepayment of the principal balance of the Note is
permitted, such tender by Mortgagor shall be deemed to be a voluntary
prepayment of the principal balance of the Note, and Mortgagor shall, in
addition to the entire Debt, also pay to Mortgagee the applicable
prepayment consideration specified in the Note and this Mortgage.
Section 13.04. Possession of the Mortgaged Property. Upon the occurrence of
any Event of Default hereunder and the acceleration of the Debt or any portion
thereof, Mortgagor, if an occupant of the Mortgaged Property or any part
thereof, upon demand of Mortgagee, shall immediately surrender possession of
the Mortgaged Property (or the portion thereof so occupied) to Mortgagee, and
if Mortgagor is permitted to remain in possession, the possession shall be as
a month-to-month tenant of Mortgagee and, on demand, Mortgagor shall pay to
Mortgagee monthly, in advance, a reasonable rental for the space so occupied
and in default thereof Mortgagor may be dispossessed. The covenants herein
contained may be enforced by a receiver of the Mortgaged Property or any part
thereof. Nothing in this Section 13.04 shall be deemed to be a waiver of the
provisions of this Mortgage making the Transfer of the Mortgaged Property or
any part thereof without Mortgagee's prior written consent an Event of Default.
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Section 13.05. Interest After Default. If any amount due under the Note, this
Mortgage or any of the other Loan Documents is not paid within any
applicable notice and grace period after same is due, whether such date is
the stated due date, any accelerated due date or any other date or at any
other time specified under any of the terms hereof or thereof, then, in such
event, interest on the amount not so paid shall accrue from and after the
date on which such amount first becomes due at the Default Rate; and such
interest shall accrue at such rate until the earlier of the cure of all
Events of Default or the payment of the entire amount due to Mortgagee,
whether or not any action shall have been taken or proceeding commenced to
recover the same or to foreclose this Mortgage. Accrued Default Rate
Interest shall be due and payable at such times specified in the Note. All
unpaid and accrued interest shall be secured by this Mortgage as part of
the Debt. Nothing in this Section 13.05 or in any other provision of this
Mortgage shall constitute an extension of the time for payment of the
Debt.
Section 13.06. Mortgagor's Actions After Default. After the happening of any
Event of Default and immediately upon the commencement of any action, suit or
other legal proceedings by Mortgagee to obtain judgment for the Debt, or of
any other nature in aid of the enforcement of the Loan Documents, Mortgagor
will (a) after receipt of notice of the institution of any such action, waive
the issuance and service of process and enter its voluntary appearance in
such action, suit or proceeding, and (b) if required by Mortgagee, consent
to the appointment of a receiver or receivers of the Mortgaged Property or any
part thereof and of all the earnings, revenues, rents, issues, profits and
income thereof.
Section 13.07. Control by Mortgagee After Default. Notwithstanding the
appointment of any custodian, receiver, liquidator or trustee of Mortgagor, or
of any of its property, or of the Mortgaged Property or any part thereof, to
the extent permitted by Legal Requirements, Mortgagee shall be entitled to
obtain possession and control of all property now and hereafter covered by
this Mortgage and the Assignment in accordance with the terms hereof.
Section 13.08. Right to Cure Defaults. (a) Upon the occurrence of any Event
of Default, Mortgagee or its agents may, but without any
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obligation to do so and without notice to or demand on Mortgagor and without
releasing Mortgagor from any obligation hereunder, make or do the same in such
manner and to such extent as Mortgagee may deem necessary to protect the
security hereof. Mortgagee and its agents are authorized to enter upon the
Mortgaged Property or any part thereof for such purposes, or appear in, defend,
or bring any action or proceedings to protect Mortgagee's interest in the
Mortgaged Property or any part thereof or to foreclose this Mortgage 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
13.08, shall constitute a portion of the Debt and shall be immediately due and
payable to Mortgagee upon demand. All such costs and expenses incurred by
Mortgagee or its agents in remedying such Event of Default or in appearing in,
defending, or bringing any such action or proceeding shall bear interest at the
Default Rate, for the period from the date so demanded to the date of payment to
Mortgagee. All such costs and expenses incurred by Mortgagee or its agents
together with interest thereon calculated at the above rate shall be deemed to
constitute a portion of the Debt and be secured by this Mortgage.
(b) If Mortgagee makes any payment or advance that Mortgagee is
authorized by this Mortgage to make in the place and stead of Mortgagor
(i) relating to the Impositions or tax liens asserted against the Mortgaged
Property, Mortgagee may do so according to any bill, statement or estimate
procured from the appropriate public office without inquiry into the accuracy
of the bill, statement or estimate or into the validity of any of the
Impositions or the tax liens or claims thereof; (ii) relating to any apparent
or threatened adverse title, lien, claim of lien, encumbrance, claim or
charge, Mortgagee will be the sole judge of the legality or validity of
same; or (iii) relating to any other purpose authorized by this Mortgage
but not enumerated in this Section 13.08, Mortgagee may do so whenever, in
its judgment and discretion, the payment or advance seems necessary or
desirable to protect the Mortgaged Property and the full security interest
intended to be created by this Mortgage. In connection with any payment
or advance made pursuant to this Section 13.08, Mortgagee has the option
and is authorized, but in no event shall be obligated, to obtain a
continuation report of title prepared by a title insurance company. The
payments and the advances made by
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Mortgagee pursuant to this Section 13.08 and the cost and expenses of said
title report will be due and payable by Mortgagor on demand, together with
interest at the Default Rate applicable to the Class A Portion (as defined in
the Note), and will be secured by this Mortgage.
Section 13.09. Late Payment Charge. If any portion of the Debt is not paid in
full within five (5) days after the date on which it is due and payable
hereunder, Mortgagor shall be obligated to pay to Mortgagee an amount equal
to five percent 5% of such unpaid portion of the Debt ("Late Charge") to
defray the expense incurred by Mortgagee in handling and processing such
delinquent payment, and such amount shall constitute a part of the Debt,
which Late Charge shall be due and payable at the times specified in the Note.
Section 13.10. Recovery of Sums Required to Be Paid. Mortgagee 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 and payable hereunder
(after the expiration of any grace period or the giving of any notice herein
provided, if any), without regard to whether or not the balance of the Debt
shall be due, and without prejudice to the right of Mortgagee thereafter to
bring an action of foreclosure, or any other action, for a default or
defaults by Mortgagor existing at the time such earlier action was commenced.
Section 13.11. Marshalling and Other Matters. Mortgagor hereby waives, to the
fullest extent permitted by law, the benefit of all appraisement, valuation,
stay, extension, reinstatement, redemption (both equitable and statutory) and
homestead laws now or hereafter in force and all rights of marshalling in the
event of any sale hereunder of the Mortgaged Property or any part thereof or
any interest therein. Nothing herein or in any other Loan Document shall be
construed as requiring Mortgagee to resort to any particular
Cross-collateralized Property for the satisfaction of the Debt in preference
or priority to any other Cross-collateralized Property but Mortgagee may seek
satisfaction out of all the Cross-collateralized Properties or any part
thereof in its absolute discretion. Further, Mortgagor hereby expressly waives
any and all rights of redemption from sale under
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any order or decree of foreclosure of this Mortgage on behalf of
Mortgagor, whether equitable or statutory and on behalf of each and every
Person acquiring any interest in or title to the Mortgaged Property or any part
thereof subsequent to the date of this Mortgage and on behalf of all
Persons to the fullest extent permitted by applicable law.
Section 13.12. Tax Reduction Proceedings. After an Event of Default, Mortgagor
shall be deemed to have appointed Mortgagee as its attorney-in-fact to seek a
reduction or reductions in the assessed valuation of the Mortgaged Property
for real property tax purposes or for any other purpose and to prosecute any
action or proceeding in connection therewith. This power, being coupled with
an interest, shall be irrevocable for so long as any part of the Debt remains
unpaid and any Event of Default shall be continuing.
Section 13.13. General Provisions Regarding Remedies.
(a) Right to Terminate Proceedings. Mortgagee may terminate or
rescind any proceeding or other action brought in connection with its
exercise of the remedies provided in Section 13.02 at any time before the
conclusion thereof, as determined in Mortgagee's sole discretion and
without prejudice to Mortgagee.
(b) No Waiver or Release. The failure of Mortgagee to exercise any
right, remedy or option provided in the Loan Documents shall not be deemed a
waiver of such right, remedy or option or of any covenant or obligation
contained in the Loan Documents. No acceptance by Mortgagee of any payment
after the occurrence of an Event of Default and no payment by Mortgagee of any
payment or obligation for which Mortgagor is liable hereunder shall be deemed
to waive or cure any Event of Default. No sale of all or any portion of the
Mortgaged Property, no forbearance on the part of Mortgagee, and no extension
of time for the payment of the whole or any portion of the Debt or any other
indulgence given by Mortgagee to Mortgagor or any other Person, shall operate
to release or in any manner affect the interest of Mortgagee in the Mortgaged
Property or the liability of Mortgagor to pay the Debt. No waiver by Mortgagee
shall be effective unless it is in writing and then only to the extent
specifically stated.
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(c) No Impairment; No Releases. The interests and rights of Mortgagee
under the Loan Documents shall not be impaired by any indulgence, including
(i) any renewal, extension or modification which Mortgagee may grant with
respect to any of the Debt; (ii) any surrender, compromise, release, renewal,
extension, exchange or substitution which Mortgagee may grant with respect
to the Mortgaged Property or any portion thereof; or (iii) any release or
indulgence granted to any maker, endorser, guarantor or surety of any of the
Debt.
(d) Effect on Judgment. No recovery of any judgment by Mortgagee and no
levy of an execution under any judgment upon any Mortgaged Property or any
portion thereof shall affect in any manner or to any extent the lien of the
other Cross-collateralized Mortgages upon the remaining Cross-collateralized
Properties or any portion thereof, or any rights, powers or remedies of
Mortgagee hereunder or thereunder. Such lien, rights, powers and remedies of
Mortgagee shall continue unimpaired as before.
ARTICLE XIV: COMPLIANCE WITH REQUIREMENTS
Section 14.01. Compliance with Legal Requirements. (a) Mortgagor shall promptly
comply in all material respects with all present and future Legal
Requirements, foreseen and unforeseen, ordinary and extraordinary, whether
requiring structural or nonstructural repairs or alterations including,
without limitation, all zoning, subdivision, building, safety and
environmental protection, land use and development Legal Requirements, all
Legal Requirements which may be applicable to the curbs adjoining the Mortgaged
Property or to the use or manner of use thereof, and all rent control, rent
stabilization and all other similar Legal Requirements relating to rents
charged and/or collected in connection with the Leases. Mortgagor represents
and warrants that the Mortgaged Property is in compliance in all material
respects with all Legal Requirements as of the date hereof, no notes or
notices of violations of any Legal Requirements have been entered or received
by Mortgagor and there is no basis for the entering of such note or notices.
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(b) Mortgagor shall have the right to contest by appropriate legal
proceedings diligently conducted in good faith, without cost or expense to
Mortgagee, the validity or application of any Legal Requirement and to suspend
compliance therewith if permitted under applicable Legal Requirements,
provided (i) failure to comply therewith may not subject Mortgagee to any
civil or criminal liability, (ii) prior to and during such contest, Mortgagor
shall furnish to Mortgagee security reasonably satisfactory to Mortgagee, in
its discretion, against loss or injury by reason of such contest or
non-compliance with such Legal Requirement, (iii) no Default or Event of
Default shall exist during such proceedings and such contest shall not
otherwise violate any of the provisions of any of the Loan Documents, (iv)
such contest shall not, (unless Mortgagor shall comply with the provisions of
clause (ii) of this Section 14.01(b)) subject the Mortgaged Property to any
lien or encumbrance the enforcement of which is not suspended or otherwise
affect the priority of the lien of this Mortgage; (v) such contest shall not
affect the ownership, use or occupancy of the Mortgaged Property; (vi) the
Mortgaged Property or any part thereof or any interest therein shall not be in
any danger of being sold, forfeited or lost by reason of such contest by
Mortgagor; (vii) Mortgagor shall give Mortgagee prompt notice of the
commencement of such proceedings and, upon request by Mortgagee, notice of the
status of such proceedings and/or confirmation of the continuing satisfaction
of the conditions set forth in clauses (i)-(vi) of this Section 14.01(b); and
(viii) upon a final determination of such proceeding, Mortgagor shall take all
steps necessary to comply with any requirements arising therefrom.
(c) Mortgagor shall at all times comply in all material respects with
all applicable Legal Requirements with respect to the construction, use and
maintenance of any vaults adjacent to the Mortgaged Property. If by reason of
the failure to pay taxes, assessments, charges, permit fees, franchise taxes
or levies of any kind or nature, the continued use of the vaults adjacent to
Mortgaged Property or any part thereof is discontinued, Mortgagor nevertheless
shall, with respect to any vaults which may be necessary for the continued use
of the
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Mortgaged Property, take such steps (including the making of any payment) to
insure the continued use of vaults or replacements.
Section 14.02. Compliance with Recorded Documents; No Future Grants. Mortgagor
shall promptly perform and observe or cause to be performed and observed, all
of the terms, covenants and conditions of all Property Agreements and all
things necessary to preserve intact and unimpaired any and all appurtenances
or other interests or rights affecting the Mortgaged Property.
ARTICLE XV: PREPAYMENT; RELEASE
Section 15.01. Prepayment. (a) Except as set forth in Section 15.01(b) hereof,
no prepayment of the Debt may be made in whole or in part.
(b) At any time subsequent to the third (3rd) anniversary of the date
hereof, Mortgagor may prepay the Loan, in whole or, from time to time, in part,
as of the last day of an Interest Accrual Period in accordance with the
following provisions:
(i) Mortgagee shall have received from Mortgagor, not less than
fifteen (15) days', nor more than ninety (90) days', prior written notice
specifying the date proposed for such prepayment and the amount which is
to be prepaid.
(ii) Mortgagor shall also pay to Mortgagee all interest due through
and including the last day of the Interest Accrual Period in which such
prepayment is being made, together with any and all other amounts due and
owing pursuant to the terms of the Note, this Mortgage or the other
Loan Documents.
(iii) In the event that, on or before the date which is six (6)
months prior to the Optional Prepayment Date, Mortgagor shall prepay all
or any portion of the Loan Amount, whether such prepayment is made
voluntarily or involuntarily, except where such prepayment is made as a
result of Mortgagee's determination to apply Loss Proceeds
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to the Debt, Mortgagor shall be required to pay to Mortgagee on the date
of such prepayment, in addition to the Principal Amount or portion thereof
which is to be prepaid, a non-refundable sum equal to the greater of (i)
one percent (1%) of the Principal Amount or portion thereof which is to be
prepaid and (ii) the Yield Maintenance Premium with respect to such
prepayment. Mortgagee shall deliver notice to Mortgagor of the amount of
any Yield Maintenance Premium due with respect to any prepayment by
Mortgagor at least three (3) Business Days prior to the date of such
prepayment which notice shall be conclusive and binding upon Mortgagor
absent manifest error.
(iv) Any partial prepayment shall be in a minimum amount not less
than $25,000 and shall be in whole multiples of $1,000 in excess thereof.
(v) No Event of Default shall have occurred and be continuing other
than an Event of Default which would be cured by such prepayment.
(vi) Any partial prepayment of the Principal Amount, including,
without limitation, Unscheduled Payments, shall not release or relieve
Mortgagor from the obligation to pay the regularly scheduled installments
of principal and interest becoming due under the Note or affect the amount
of any such regularly scheduled payments until the Debt is paid in full.
Section 15.02. Out-Parcel Severance. Notwithstanding any other
provision of this Mortgage to the contrary, Mortgagor shall be permitted
to transfer, and Mortgagee shall release from the lien of this Mortgage
and the other Loan Documents, any unimproved out-parcel and one
anchor-store parcel comprising a portion of the Mortgaged Property (either of
which is hereinafter referred to as the "Out-Parcel") secured by this Mortgage,
from the lien hereof, upon not less than thirty (30) nor more than
ninety (90) days' prior written notice to Mortgagee, upon satisfaction of
all of the following terms and conditions:
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(a) No Default shall have occurred and be continuing and all amounts which
are then required to be deposited in the Sub-Accounts shall have been so
deposited.
(b) The Out-Parcel shall be designated by a metes and bounds description
and a survey reasonably satisfactory to Mortgagee.
(c) The following conditions shall have been satisfied, and Mortgagee
shall in addition have received an Officer's Certificate, not less than fifteen
(15) Business Days prior to the proposed transfer or release of the Out-Parcel,
stating that:
(i) the use to which the Out-Parcel will be put, shall be consistent
with the use to which out-parcels or anchor-store parcels, as applicable,
are generally put in other first class enclosed regional shopping centers,
as reasonably determined by Mortgagor.
(ii) the portion of the Realty remaining subject to the lien of this
Mortgage after release of the Out-Parcel (the "Remaining Realty")
will continue to be in compliance with the Approved Manager Standard, and
remain in full compliance with all Legal Requirements and with the terms
of all Space Leases and Property Agreements on the Remaining Realty;
(iii) the proposed use of the Out-Parcel will not violate the
provisions of any Space Lease or Property Agreement affecting the
Remaining Realty. To the extent reasonably required, the permitted uses
of the Out-Parcel will be restricted of record, as reasonably agreed to
by Mortgagee, to insure that use of the Out-Parcel will not violate the
provisions of this Mortgage or any Space Leases or Property
Agreements;
(iv) Mortgagor shall have caused the Out-Parcel to be a separate
parcel of land for all subdivision, zoning, and taxing purposes;
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(v) title to the Out-Parcel shall have been or shall
simultaneously be conveyed to a Person other than a Cross-collateralized
Borrower;
(vi) the disposition of the Out-Parcel shall not have a Material
Adverse Affect on the Net Operating Income;
(vii) the occupancy rate of the specialty stores (i.e., the stores
occupied by tenants which are not tenants under Major Space Leases)
located in the Remaining Realty shall be equal to or greater than 85%
after giving effect to any proposed tenant relocations to the Out-Parcel;
(viii) the Debt Service Coverage allocable to the Remaining Realty
shall not be less than the Closing DSC;
(ix) no tenant under any Lease has executed, or is negotiating in
contemplation of executing, a lease or other occupancy agreement with
respect to a portion of such Out-Parcel; and
(x) an amount equal to the greater of (A) all sums received by
Mortgagor in connection with the sale of the Out-Parcel and (B) the fair
market value of the Out-Parcel as reasonably determined by Mortgagee is,
at Mortgagor's discretion either (1) paid to Mortgagee to be applied as a
prepayment of the Loan in accordance with Section 15.01 hereof or (2)
deposited in an Eligible Account established in the name of Mortgagee at
the bank in which the Central Account is located from which disbursements
may be made for the purpose of making improvements to the Premises which
are of a capital nature. Provided that Mortgagee has received from
Mortgagor at least five (5) Business Days prior written notice, and not
more frequently than once each month, and further provided that no Event
of Default has occurred, that there are sufficient funds available in such
account and that Mortgagor shall have theretofore furnished Mortgagee with
lien waivers, copies of bills, invoices and other reasonable documentation
as may be required by Mortgagee to
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establish that the capital costs which are the subject of such request
represent amounts due for completed or partially completed capital work
and improvements performed at the Mortgaged Property, Mortgagee shall
disburse to Mortgagor out of such account any sums necessary to reimburse
Mortgagor for such capital costs.
(xi) Mortgagor shall have delivered to Mortgagee an opinion letter
of counsel in form and substance acceptable to Mortgagee to the effect
that, with respect to the trust in which the Loan is included as an asset
in connection with the Securitization, such Release shall not (i)
adversely affect the qualification as a "real estate mortgage investment
conduit" (a "REMIC") within the meaning of Section 860D of the Code of the
portion of the Trust Fund which is intended to qualify as a REMIC (the
"Trust REMIC"), (ii) result in any tax being imposed on the Trust REMIC
under Sections 860F(a) or 860G(d) of the Code, or (iii) result in the
portion of the Trust Fund exclusive of the Trust REMIC being treated as
other than a grantor trust that is not a taxable mortgage pool for federal
income tax purposes.
(d) To the extent reasonably required, an appropriate Property Agreement
shall be executed (and a copy delivered to Mortgagee) to govern the integrated
use and operation, if applicable, of the Remaining Realty and the Out-Parcel.
(e) A title policy endorsement to the Mortgagee's lenders' title
insurance policy to the effect that the release of the Out-Parcel will not
have an adverse affect on the priority of the lien of this Mortgage with
respect to the Remaining Realty.
(f) Mortgagor shall, at its sole cost and expense, prepare any and all
documents and instruments necessary to effect the release of the Out-Parcel,
all of which shall be subject to the reasonable approval of Mortgagee, and
Mortgagor shall pay all costs reasonably incurred by Mortgagee (including,
but not limited to, reasonable attorneys' fees and disbursements, title
search costs and endorsement premiums) in connection with the review,
execution and delivery of such release.
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(g) All agreements and instruments to be delivered to Mortgagee
pursuant to this Section 15.02 shall be in form and substance reasonably
satisfactory to Mortgagee and its counsel and included with the Officer's
Certificate required to be delivered pursuant to clause (iii) of this Section
15.02 shall be evidence in form and substance satisfactory to Mortgagee
supporting the statements, calculations and information required pursuant to
clauses (c)(vi), (vii) and (viii) of this Section 15.02.
Section 15.03. Release of Mortgaged Property. If Mortgagor prepays all
or a portion of the Loan pursuant to Section 15.01(b) hereof or if Mortgagee
applies Loss Proceeds from the Mortgaged Property towards the repayment of the
Debt, Mortgagee shall, promptly upon satisfaction of all the following terms
and conditions execute, acknowledge and deliver to Mortgagor a release of this
Mortgage (a "Release") in recordable form with respect to the Mortgaged
Property:
(a) If such prepayment is a prepayment in part, but not in whole,
Mortgagee shall have received on the date proposed for such prepayment an
amount equal to one hundred fifty percent (150%) of the Initial Allocated
Loan Amount (the "Release Price") for the released Cross-collateralized
Property.
(b) Mortgagee shall have received from Mortgagor evidence in form and
substance satisfactory to Mortgagee that the pro forma Aggregate Debt Service
Coverage of all Cross-collateralized Properties immediately following the
Release (not including the Cross-collateralized Property which is to be
Released) is at least equal to the greater of 2.0:1 and the Aggregate Debt
Service Coverage immediately prior to effecting such Release, accompanied by an
Officer's Certificate stating that the statements, calculations and information
comprising such evidence are true, correct and complete in all respects.
(c) Mortgagor shall, at its sole expense, prepare any and all documents
and instruments necessary to effect the Release, all of which shall be subject
to the reasonable approval of Mortgagee, and Mortgagor shall pay all costs
reasonably incurred by Mortgagee (including, but not limited to, reasonable
attorneys' fees and disbursements, title search costs or
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endorsement premiums) in connection with the review, execution and
delivery of the Release.
(d) No Event of Default has occurred and is continuing.
(e) Mortgagor shall have delivered to Mortgagee an opinion letter of
counsel in form and substance acceptable to Mortgagee to the effect that, with
respect to the trust in which the Loan is included as an asset in connection
with the Securitization, such Release shall not (i) adversely affect the
qualification as a REMIC within the meaning of Section 860D of the Code of the
portion of the Trust Fund which is intended to qualify as a REMIC (the "Trust
REMIC"), (ii) result in any tax being imposed on the Trust REMIC under Sections
860F(a) or 860G(d) of the Code, or (iii) result in the portion of the Trust Fund
exclusive of the Trust REMIC being treated as other than a grantor trust that is
not a taxable mortgage pool for federal income tax purposes.
ARTICLE XVI: ENVIRONMENTAL COMPLIANCE
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Section 16.01. Covenants, Representations and Warranties. (a) Mortgagor has
not, at any time, and, to Mortgagor's best knowledge after due inquiry and
investigation, except as set forth in the Environmental Report, no other
Person has at any time, handled, buried, stored, retained, refined,
transported, processed, manufactured, generated, produced, spilled, allowed to
seep, leak, escape or leach, or pumped, poured, emitted, emptied, discharged,
injected, dumped, transferred or otherwise disposed of or dealt with Hazardous
Materials on, to or from the Premises or any other real property owned and/or
occupied by Mortgagor, and Mortgagor does not intend to and shall not use the
Mortgaged Property or any part thereof or any such other real property for the
purpose of handling, burying, storing, retaining, refining, transporting,
processing, manufacturing, generating, producing, spilling, seeping, leaking,
escaping, leaching, pumping, pouring, emitting, emptying, discharging,
injecting, dumping, transferring or otherwise disposing of or dealing with
Hazardous Materials, except for use and storage for use of heating oil,
cleaning fluids, pesticides and other substances customarily used in the
operation of properties that are being used for the same purposes as the
Mortgaged Property is presently being used, provided such use and/or storage
for use is in compliance with the Legal Requirements and does not give rise to
liability under applicable Legal Requirements or Environmental Statutes or be
the basis for a lien against the Mortgaged Property or any part thereof. In
addition, without limitation to the foregoing provisions, Mortgagor represents
and warrants that, to the best of its knowledge, after due inquiry and
investigation, except as previously disclosed in writing to Mortgagee, there
is no asbestos in, on, over, or under all or any portion of the fire-proofing
or any other portion of the Mortgaged Property.
(b) Mortgagor, after due inquiry and investigation, knows of no seepage,
leak, escape, leach, discharge, injection, release, emission, spill, pumping,
pouring, emptying or dumping of Hazardous Materials into waters on, under or
adjacent to the Mortgaged Property or any part thereof or any other real
property owned and/or occupied by Mortgagor, or onto lands from which such
Hazardous Materials might seep, flow or drain into such waters, except as
disclosed in the Environmental Report.
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(c) Mortgagor shall not permit any Hazardous Materials to be handled,
buried, stored, retained, refined, transported, processed, manufactured,
generated, produced, spilled, allowed to seep, leak, escape or leach, or to be
pumped, poured, emitted, emptied, discharged, injected, dumped, transferred or
otherwise disposed of or dealt with on, under, to or from the Mortgaged Property
or any portion thereof at any time, except for use and storage for use of
heating oil, ordinary cleaning fluids, pesticides and other substances
customarily used in the operation of properties that are being used for the same
purposes as the Mortgaged Property is presently being used, provided such use
and/or storage for use is in compliance with Legal Requirements and does not
give rise to liability under applicable Legal Requirements or be the basis for a
lien against the Mortgaged Property or any part thereof.
(d) Mortgagor represents and warrants that no actions, suits, or
proceedings have been commenced, or are pending, or to the best knowledge of
Mortgagor, are threatened with respect to any Legal Requirement governing the
use, manufacture, storage, treatment, transportation, or processing of Hazardous
Materials with respect to the Mortgaged Property or any part thereof. Mortgagor
has received no notice of, and, except as disclosed in the Environmental Report,
after due inquiry, has no knowledge of any fact, condition, occurrence or
circumstance which with notice or passage of time or both would give rise to a
claim under or pursuant to any Environmental Statute pertaining to Hazardous
Materials on, in, under or originating from the Mortgaged Property or any part
thereof or any other real property owned or occupied by Mortgagor or arising out
of the conduct of Mortgagor, including, without limitation, pursuant to any
Environmental Statute.
(e) Mortgagor has not waived any Person's liability with regard to the
Hazardous Materials in, on, under or around the Mortgaged Property, nor has
Mortgagor retained or assumed, contractually or by operation of law, any other
Person's liability relative to Hazardous Materials or any claim, action or
proceeding relating thereto.
(f) In the event that there shall be filed a lien against the Mortgaged
Property or any part thereof pursuant to any
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Environmental Statute pertaining to Hazardous Materials, Mortgagor shall,
within sixty (60) days or, in the event that the applicable Governmental
Authority has commenced steps to cause the Premises or any part thereof to be
sold pursuant to the lien, within twenty (20) days, from the date that
Mortgagor receives notice of such lien, either (i) pay the claim and/or remove
the lien from the Mortgaged Property, or (ii) furnish (A) a bond satisfactory
to Mortgagee in the amount of the claim out of which the lien arises, (B) a
cash deposit in the amount of the claim out of which the lien arises, or (C)
other security reasonably satisfactory to Mortgagee in an amount sufficient
to discharge the claim out of which the lien arises.
(g) Mortgagor represents and warrants that (i) except as disclosed in
the Environmental Report, Mortgagor has no knowledge of any violation of any
Environmental Statute or any Environmental Problem in connection with the
Mortgaged Property, nor has Mortgagor been requested or required by any
Governmental Authority to perform any remedial activity or other responsive
action in connection with any Environmental Problem and (ii) neither the
Mortgaged Property nor any other property owned by Mortgagor is included or,
to Mortgagor's best knowledge, after due inquiry and investigation, proposed
for inclusion on the National Priorities List issued pursuant to CERCLA by the
United States Environmental Protection Agency (the "EPA") or on the CERCLIS
list issued by the EPA and has not otherwise been identified by the EPA as a
potential CERCLA site or included or, to Mortgagor's knowledge, after due
inquiry and investigation, proposed for inclusion on any list or inventory
issued pursuant to any other Environmental Statute, if any, or issued by any
other Governmental Authority. Mortgagor covenants that Mortgagor will comply
with all Environmental Statutes affecting or imposed upon Mortgagor or the
Mortgaged Property.
(h) Mortgagor covenants that it shall notify Mortgagee within three (3)
Business Days of receipt of knowledge of the presence (if such presence does
or may violate Environmental Statutes) and/or release of such Hazardous
Material and of any request for information or any inspection of the Mortgaged
Property or any part thereof by any Governmental Authority with respect to
any Hazardous Materials and provide Mortgagee with copies of such request
and any response to any such request or
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inspection. Mortgagor covenants that it shall, in compliance with applicable
Legal Requirements, conduct and complete all investigations, studies,
sampling and testing (and shall provide Mortgagee with copies of any such
studies and the results of any such test within three(3) Business Days of the
receipt thereof) and all remedial, removal and other actions necessary to
clean up all Hazardous Materials in, on, over, under, from or affecting the
Mortgaged Property or any part thereof in accordance with all such Legal
Requirements applicable to the Mortgaged Property or any part thereof to the
reasonable satisfaction of Mortgagee.
(i) Following (A) the occurrence of an Event of Default hereunder or
(B) if Mortgagee reasonably determines that an Environmental Problem may
exist, and without regard to whether Mortgagee shall have taken possession
of the Mortgaged Property or a receiver has been requested or appointed or
any other right or remedy of Mortgagee has or may be exercised hereunder or
under any other Loan Document, Mortgagee shall have the right (but no
obligation) to conduct such investigations, studies, sampling and/or testing
of the Mortgaged Property or any part thereof as Mortgagee may, in its
discretion, determine to conduct, relative to Hazardous Materials. All costs
and expenses incurred in connection therewith including, without limitation,
consultants' fees and disbursements and laboratory fees, shall constitute a
part of the Debt and shall, upon demand by Mortgagee, be immediately due
and payable and shall bear interest at the Default Rate from the date so
demanded by Mortgagee until reimbursed.
(j) Mortgagor represents and warrants that, to the best of its knowledge,
except as disclosed in the Environmental Report, all paint and painted
surfaces existing within the interior or on the exterior of the Mortgaged
Property do not contain lead or are maintained in a condition that prevents
exposure of young children to lead-based paint. To Mortgagor's knowledge, there
have been no claims for adverse health effects from exposure on the Mortgaged
Property to lead-based paint or requests for the investigation, assessment or
removal of lead-based paint at the Mortgaged Property.
(k) Mortgagor represents and warrants that, except in accordance with all
applicable Environmental Statutes and as
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disclosed in the Environmental Report, to the best knowledge of Mortgagor, (i)
no underground treatment or storage tanks or pumps or water, gas, or oil
wells are or have been located about the Mortgaged Property, (ii) no PCBs or
transformers, capacitors, ballasts or other equipment that contain dielectric
fluid containing PCBs are located about the Mortgaged Property, (iii) no
insulating material containing urea formaldehyde is located about the
Mortgaged Property and (iv) no asbestos-containing material is located about
the Mortgaged Property.
Section 16.02. Environmental Indemnification. Mortgagor shall defend, indemnify
and hold harmless Mortgagee, and its successors and assigns, and its
employees, agents, officers and directors from and against any claims,
demands, penalties, fines, liabilities, settlements, damages, costs and
expenses of whatever kind or nature, known or unknown, contingent or
otherwise, whether incurred or imposed within or outside the judicial
process, including, without limitation, reasonable attorneys' and
consultants' fees and disbursements and investigations and laboratory fees
arising out of, or in any way related to any Environmental Problem, including
without limitation:
(a) the presence, disposal, escape, seepage, leakage, spillage,
discharge, emission, release or threat of release of any Hazardous
Materials in, on, over, under, from or affecting the Mortgaged Property or
any part thereof whether or not disclosed by the Environmental Report
relative to the Mortgaged Property;
(b) any personal injury (including wrongful death, disease or other
health condition related to or caused by, in whole or in part, any
Hazardous Materials) or property damage (real or personal) arising out of
or related to any Hazardous Materials in, on, over, under, from or
affecting the Mortgaged Property or any part thereof whether or not
disclosed by the Environmental Report relative to the Mortgaged Property;
(c) any action, suit or proceeding brought or threatened, settlement
reached, or order of any Governmental Authority relating to such Hazardous
Material whether or not
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disclosed by the Environmental Report relative to the Mortgaged Property; and/or
(d) any violation of the provisions, covenants, representations or
warranties of Section 16.01 hereof or of any Legal Requirement which is
based on or in any way related to any Hazardous Materials in, on, over,
under, from or affecting the Mortgaged Property or any part thereof
including, without limitation, the cost of any work performed and
materials furnished in order to comply therewith whether or not disclosed
by the Environmental Report relative to the Mortgaged Property.
Notwithstanding the foregoing provisions of this Section 16.02 to the
contrary, Mortgagor shall have no obligation to indemnify Mortgagee for
liabilities, claims, damages, penalties, causes of action, costs and expenses
relative to the foregoing which result directly from Mortgagee's willful
misconduct or gross negligence. Any amounts payable to Mortgagee by reason of
the application of this Section 16.02 shall be secured by this Mortgage and
shall, upon demand by Mortgagee, become immediately due and payable and shall
bear interest at the Default Rate applicable to the Class A Portion from the
date so demanded by Mortgagee until paid.
This indemnification shall survive the termination of this Mortgage
whether by repayment of the Debt, foreclosure or deed in lieu thereof,
assignment, or otherwise. The indemnity provided for in this Section 16.02
shall not be included in any exculpation of Mortgagor or its principals from
personal liability provided for in this Mortgage or in any of the other
Loan Documents. Nothing in this Section 16.02 shall be deemed to deprive
Mortgagee of any rights or remedies otherwise available to Mortgagee,
including, without limitation, those rights and remedies provided elsewhere
in this Mortgage or the other Loan Documents.
ARTICLE XVII: ASSIGNMENTS
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Section 17.01. Participations and Assignments. Mortgagee shall have the
right to assign this Mortgage and/or any of the Loan Documents, and to
transfer, assign or sell participations and subparticipations (including
blind or undisclosed participations and subparticipations) in the Loan
Documents and the obligations hereunder to any Person; provided, however,
that no such participation shall increase, decrease or otherwise affect
either Mortgagor's or Mortgagee's obligations under this Mortgage or the
other Loan Documents.
ARTICLE XVIII: MISCELLANEOUS
Section 18.01. Right of Entry. Mortgagee and its agents shall have the
right to enter and inspect the Mortgaged Property or any part thereof at all
reasonable times, and, except in the event of an emergency, upon reasonable
notice and to inspect Mortgagor's books and records and to make abstracts and
reproductions thereof.
Section 18.02. Cumulative Rights. The rights of Mortgagee under this Mortgage
shall be separate, distinct and cumulative and none shall be given
effect to the exclusion of the others. No act of Mortgagee shall be
construed as an election to proceed under any one provision herein to the
exclusion of any other provision. Mortgagee shall not be limited
exclusively to the rights and remedies herein stated but shall be entitled,
subject to the terms of this Mortgage, to every right and remedy now or
hereafter afforded by law.
Section 18.03. Liability. If Mortgagor consists of more than one Person, the
obligations and liabilities of each such Person hereunder shall be joint and
several.
Section 18.04. Exhibits Incorporated. The information set forth on the cover
hereof, and the Exhibits annexed hereto, are hereby incorporated herein as a
part of this Mortgage with the same effect as if set forth in the body
hereof.
Section 18.05. Severable Provisions. If any term, covenant or condition of
the Loan Documents including, without limitation, the Note or
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this Mortgage, is held to be invalid, illegal or unenforceable in any
respect, such Loan Document shall be construed without such provision.
Section 18.06. Duplicate Originals. This Mortgage may be executed in any
number of duplicate originals and each such duplicate original shall be
deemed to constitute but one and the same instrument.
Section 18.07. No Oral Change. The terms of this Mortgage, together with
the terms of the Note and the other Loan Documents constitute the entire
understanding and agreement of the parties hereto and supersede all prior
agreements, understandings and negotiations between Mortgagor and Mortgagee
with respect to the Loan. This Mortgage, and any provisions hereof, may
not be modified, amended, waived, extended, changed, discharged or terminated
orally or by any act on the part of Mortgagor or Mortgagee, but only by an
agreement in writing signed by the 'party against whom enforcement of any
modification, amendment, waiver, extension, change, discharge or termination
is sought.
Section 18.08. Waiver of Counterclaim, etc. MORTGAGOR HEREBY WAIVES THE RIGHT
TO ASSERT A COUNTERCLAIM, OTHER THAN A COMPULSORY COUNTERCLAIM, IN ANY ACTION
OR PROCEEDING BROUGHT AGAINST IT BY MORTGAGEE OR ITS AGENTS, AND WAIVES TRIAL
BY JURY IN ANY ACTION OR PROCEEDING BROUGHT BY EITHER PARTY HERETO AGAINST
THE OTHER OR IN ANY COUNTERCLAIM MORTGAGOR MAY BE PERMITTED TO ASSERT
HEREUNDER OR WHICH MAY BE ASSERTED BY MORTGAGEE OR ITS AGENTS, AGAINST
MORTGAGOR, OR IN ANY MATTERS WHATSOEVER ARISING OUT OF OR IN ANY WAY
CONNECTED WITH THIS MORTGAGE OR THE DEBT.
Section 18.09. Headings; Construction of Documents; etc. The table of
contents, headings and captions of various paragraphs of this Mortgage
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.
Mortgagor acknowledges that it was represented by competent counsel in
connection with the negotiation and drafting of this Mortgage and the
other Loan Documents and that neither this Mortgage nor the other Loan
Documents shall be subject to the principle of construing the meaning against
the Person who drafted same.
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Section 18.10. Sole Discretion of Mortgagee. Whenever Mortgagee
exercises any right given to it to approve or disapprove, or any arrangement
or term is to be satisfactory to Mortgagee, the decision of Mortgagee to
approve or disapprove or to decide that arrangements or terms are
satisfactory or not satisfactory shall be in the sole discretion of
Mortgagee and shall be final and conclusive, except as may be otherwise
specifically provided herein.
Section 18.11. Waiver of Notice. Mortgagor shall not be entitled to any notices
of any nature whatsoever from Mortgagee except with respect to matters for
which this Mortgage specifically and expressly provides for the giving
of notice by Mortgagee to Mortgagor and except with respect to matters for
which Mortgagor is not, pursuant to applicable Legal Requirements, permitted to
waive the giving of notice.
Section 18.12. Covenants Run with the Land. All of the grants, covenants,
terms, provisions and conditions herein shall run with the Premises, shall be
binding upon Mortgagor and shall inure to the benefit of Mortgagee,
subsequent holders of this Mortgage and their successors and assigns.
Without limitation to any provision hereof, the term "Mortgagor" shall include
and refer to the mortgagor named herein, any subsequent owner of the Mortgaged
Property, and its respective heirs, executors, legal representatives,
successors and assigns. The representations, warranties and agreements
contained in this Mortgage and the other Loan Documents are intended
solely for the benefit of the parties hereto, shall confer no rights
hereunder, whether legal or equitable, in any other Person and no other
Person shall be entitled to rely thereon.
Section 18.13. Applicable Law. THIS MORTGAGE WAS NEGOTIATED IN NEW YORK,
AND MADE BY MORTGAGOR AND ACCEPTED BY MORTGAGEE IN THE STATE OF NEW YORK, AND
THE PROCEEDS OF THE NOTE WERE DISBURSED FROM NEW YORK, WHICH STATE THE
PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND TO THE
UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL RESPECTS, INCLUDING,
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE. THIS MORTGAGE AND THE OBLIGATIONS
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ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN
SUCH STATE AND ANY APPLICABLE LAW OF THE UNITED STATES OF AMERICA, EXCEPT
THAT AT ALL TIMES THE PROVISIONS FOR THE CREATION, PERFECTION, PRIORITY,
ENFORCEMENT AND FORECLOSURE OF THE LIENS AND SECURITY INTERESTS CREATED
HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED ACCORDING TO THE LAW OF THE
STATE IN WHICH THE MORTGAGED 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 VALIDITY AND ENFORCEABILITY OF ALL LOAN
DOCUMENTS, AND THE DEBT OR OBLIGATIONS ARISING HEREUNDER.
Section 18.14. Security Agreement. (a) (i) This Mortgage is both a real
property mortgage and a "security agreement" within the meaning of the UCC.
The Mortgaged Property includes both real and personal property and all other
rights and interests, whether tangible or intangible in nature, of Mortgagor
in the Mortgaged Property. This Mortgage is filed as a fixture filing and
covers goods which are or are to become fixtures on the Mortgaged Property.
Mortgagor by executing and delivering this Mortgage has granted to Mortgagee,
as security for the Debt, a security interest in the Mortgaged Property to the
full extent that the Mortgaged Property may be subject to the UCC of the State
in which the Mortgaged Property is located (said portion of the Mortgaged
Property so subject to the UCC being called in this Section 18.14 the
"Collateral"). If an Event of Default shall occur, Mortgagee, 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 UCC, including, without limiting the
generality of the foregoing, the right to take possession of the Collateral or
any part thereof, and to take such other measures as Mortgagee may deem
necessary for the care, protection and preservation of the Collateral. Upon
request or demand of Mortgagee following an Event of Default, Mortgagor shall,
at its expense, assemble the Collateral and make it available to Mortgagee at
a convenient place acceptable to Mortgagee. Mortgagor shall pay to Mortgagee
on demand any and all expenses, including reasonable legal expenses and
attorneys' fees, incurred or paid by Mortgagee in protecting its interest in
the Collateral and in enforcing its rights hereunder with respect to the
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Collateral. Any disposition pursuant to the UCC of so much of the Collateral as
may constitute personal property shall be considered commercially reasonable if
made pursuant to a public sale which is advertised at least twice in a newspaper
in which sheriff's sales are advertised in the county where the Premises is
located. Any notice of sale, disposition or other intended action by Mortgagee
with respect to the Collateral given to Mortgagor in accordance with the
provisions hereof at least ten (10) days prior to such action, shall constitute
reasonable notice to Mortgagor. The proceeds of any disposition of the
Collateral, or any part thereof, may be applied by Mortgagee to the payment of
the Debt in such priority and proportions as Mortgagee in its discretion shall
deem proper.
(ii) The mention in a financing statement filed in the records normally
pertaining to personal property of any portion of the Mortgaged Property shall
not derogate from or impair in any manner the intention of this Mortgage.
Mortgagee hereby declares that all items of Collateral are part of the real
property encumbered hereby to the fullest extent permitted by law, regardless of
whether any such item is physically attached to the Improvements or whether
serial numbers are used for the better identification of certain items.
Specifically, the mention in any such financing statement of any items included
in the Mortgaged Property shall not be construed to alter, impair or impugn any
rights of Mortgagee as determined by this Mortgage or the priority of
Mortgagee's lien upon and security interest in the Mortgaged Property in the
event that notice of Mortgagee's priority of interest as to any portion of the
Mortgaged Property is required to be filed in accordance with the UCC to be
effective against or take priority over the interest of any particular class of
persons, including the federal government or any subdivision or instrumentality
thereof.
(b) Mortgagor hereby irrevocably appoints Mortgagee as its
attorney-in-fact, coupled with an interest, to file with the appropriate
public office on its behalf any financing or other statements signed only by
Mortgagee, as secured party, in connection with the Collateral covered by
this Mortgage.
Section 18.15. Actions and Proceedings. Mortgagee has the right to appear
in and defend any action or proceeding brought with
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respect to the Mortgaged Property in its own name or, if required by Legal
Requirements or, if in Mortgagee's reasonable judgment, it is necessary, in
the name and on behalf of Mortgagor, which Mortgagee believes will adversely
affect the Mortgaged Property or this Mortgage and to bring any action or
proceedings, in its name or in the name and on behalf of Mortgagor, which
Mortgagee, in its discretion, decides should be brought to protect its
interest in the Mortgaged Property.
Section 18.16. Usury Laws. This Mortgage and the Note are subject to the
express condition, and it is the expressed intent of the parties, that at no
time shall Mortgagor be obligated or required to pay interest on the principal
balance due under the Note at a rate which could subject the holder of the
Note to either civil or criminal liability as a result of being in excess of
the maximum interest rate which Mortgagor is permitted by law to contract or
agree to pay. If by the terms of this Mortgage or the Note, Mortgagor is
at any time required or obligated to pay interest on the principal balance
due under the Note at a rate in excess of such maximum rate, such rate of
interest shall be deemed to be immediately reduced to such maximum rate and
the interest payable shall be computed at such maximum rate and all prior
interest payments in excess of such maximum rate shall be applied and shall
be deemed to have been payments in reduction of the principal balance of the
Note. No application to the principal balance of the Note pursuant to this
Section 18.16 shall give rise to any requirement to pay any prepayment
premium due hereunder, if any, including, without limitation, Yield
Maintenance Premium.
Section 18.17. Remedies of Mortgagor. In the event that a claim or adjudication
is made that Mortgagee has acted unreasonably or unreasonably delayed
acting in any case where by law or under the Note, this Mortgage or the
Loan Documents, it has an obligation to act reasonably or promptly,
Mortgagee shall not be liable for any monetary damages, and Mortgagor's
remedies shall be limited to injunctive relief or declaratory judgment.
Section 18.18. Offsets, Counterclaims and Defenses. Any assignee of this
Mortgage, the Assignment and the Note shall take the same free and clear of
all offsets, counterclaims or defenses which are unrelated to the Note, the
Assignment or this Mortgage which
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Mortgagor may otherwise have against any assignor of this Mortgage, the
Assignment and the Note and no such unrelated counterclaim or defense shall
be interposed or asserted by Mortgagor in any action or proceeding brought by
any such assignee upon this Mortgage, the Assignment or the Note and any
such right to interpose or assert any such unrelated offset, counterclaim or
defense in any such action or proceeding is hereby expressly waived by
Mortgagor.
Section 18.19. No Merger. If Mortgagor's and Mortgagee's estates become the
same including, without limitation, upon the delivery of a deed by Mortgagor in
lieu of a foreclosure sale, or upon a purchase of the Mortgaged Property by
Mortgagee in a foreclosure sale, this Mortgage and the lien created
hereby shall not be destroyed or terminated by the application of the
doctrine of merger and in such event Mortgagee shall continue to have and
enjoy all of the rights and privileges of Mortgagee as to the separate
estates; and, as a consequence thereof, upon the foreclosure of the lien
created by this Mortgage, any Leases or subleases then existing and
created by Mortgagor shall not be destroyed or terminated by application of the
law of merger or as a result of such foreclosure unless Mortgagee or any
purchaser at any such foreclosure sale shall so elect. No act by or on behalf
of Mortgagee or any such purchaser shall constitute a termination of any
Lease or sublease unless Mortgagee or such purchaser shall give written
notice thereof to such lessee or sublessee.
Section 18.20. Restoration of Rights. In case Mortgagee shall have proceeded
to enforce any right under this Mortgage by foreclosure sale, entry or
otherwise, and such proceedings shall have been discontinued or abandoned for
any reason or shall have been determined adversely, then, in every such case,
Mortgagor and Mortgagee shall be restored to their former positions and rights
hereunder with respect to the Mortgaged Property subject to the lien hereof.
Section 18.21. Waiver of Statute of Limitations. The pleadings of any statute
of limitations as a defense to any and all obligations secured by this
Mortgage are hereby waived to the full extent permitted by Legal Requirements.
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Section 18.22. Advances. This Mortgage shall cover any and all advances
made pursuant to the Loan Documents, rearrangements and renewals of the Debt
and all extensions in the time of payment thereof, even though such advances,
extensions or renewals be evidenced by new promissory notes or other
instruments hereafter executed and irrespective of whether filed or recorded.
Likewise, the execution of this Mortgage shall not impair or affect any
other security which may be given to secure the payment of the Debt, and all
such additional security shall be considered as cumulative. The taking of
additional security, execution of partial releases of the security, or any
extension of time of payment of the Debt shall not diminish the force, effect
or lien of this Mortgage and shall not affect or impair the liability of
Mortgagor and shall not affect or impair the liability of any maker, surety, or
endorser for the payment of the Debt.
Section 18.23. Application of Default Rate Not a Waiver. Application of the
Default Rate shall not be deemed to constitute a waiver of any Default or
Event of Default or any rights or remedies of Mortgagee under this Mortgage,
any other Loan Document or applicable Legal Requirements, or a consent
to any extension of time for the payment or performance of any obligation
with respect to which the Default Rate may be invoked.
Section 18.24. Intervening Lien. To the fullest extent permitted by law, any
agreement hereafter made pursuant to this Mortgage shall be superior to
the rights of the holder of any intervening lien.
Section 18.25. No Joint Venture or Partnership. Mortgagor and Mortgagee
intend that the relationship created hereunder be solely that of mortgagor
and mortgagee or borrower and lender, as the case may be. Nothing herein is
intended to create a joint venture, partnership, tenancy-in-common, or joint
tenancy relationship between Mortgagor and Mortgagee nor to grant Mortgagee
any interest in the Mortgaged Property other than that of mortgagee or lender.
Section 18.26. Time of the Essence. Time shall be of the essence in the
performance of all obligations of Mortgagor hereunder.
Section 18.27. Mortgagor's Obligations Absolute. Mortgagor acknowledges that
Mortgagee and/or certain Affiliates of Mortgagee are engaged
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in the business of financing, owning, operating, leasing, managing, and
brokering real estate and in other business ventures which may be viewed as
adverse to or competitive with the business, prospect, profits, operations or
condition (financial or otherwise) of Mortgagor. Except as set forth to the
contrary in the Loan Documents, all sums payable by Mortgagor hereunder shall
be paid without notice or demand, counterclaim, setoff, deduction or defense
and without abatement, suspension, deferment, diminution or reduction, and
the obligations and liabilities of Mortgagor hereunder shall in no way be
released, discharged, or otherwise affected (except as expressly provided
herein) by reason of: (a) any damage to or destruction of or any Taking of
the Mortgaged Property or any portion thereof or any other
Cross-collateralized Property; (b) any restriction or prevention of or
interference with any use of the Mortgaged Property or any portion thereof or
any other Cross-collateralized Property; (c) any title defect or encumbrance
or any eviction from the Premises or any portion thereof by title paramount
or otherwise; (d) any bankruptcy proceeding relating to Mortgagor, any General
Partner, or any guarantor or indemnitor, or any action taken with respect to
this Mortgage or any other Loan Document by any trustee or receiver of
Mortgagor or any other Cross-collateralized Borrower or any such General
Partner, guarantor or indemnitor, or by any court, in any such proceeding;
(e) any claim which Mortgagor has or might have against Mortgagee; (f) any
default or failure on the part of Mortgagee to perform or comply with any
of the terms hereof or of any other agreement with Mortgagor or any other
Cross-collateralized Borrower; or (g) any other occurrence whatsoever,
whether similar or dissimilar to the foregoing, whether or not Mortgagor shall
have notice or knowledge of any of the foregoing.
Section 18.28. Publicity. All promotional news releases, publicity or
advertising by Manager, Mortgagor or their respective Affiliates through any
media intended to reach the general public shall not refer to the Loan
Documents or the financing evidenced by the Loan Documents, or to Mortgagee
or to CS First Boston Corporation ("CSFB") without the prior written approval
of Mortgagee or CSFB, as applicable, in each instance, such approval not to
be unreasonably withheld or delayed. Mortgagee shall be authorized to
provide information relating to the Mortgaged Property, the Loan and matters
relating thereto to rating agencies,
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underwriters, potential securities investors, auditors, regulatory authorities
and to any Persons which may be entitled to such information by operation of
law.
Section 18.29. Surveillance and Site Inspection Fees. Mortgagor shall reimburse
Mortgagee on demand an amount equal to (a) all "surveillance fees" charged
by the Rating Agency in connection with the ongoing surveillance of the
Securitization and (b) site inspection fees incurred pursuant to the Trust
and Servicing Agreement (as defined in the Note).
Section 18.30. Intentionally Omitted.
Section 18.31. Intentionally Omitted.
Section 18.32. Exculpation. Notwithstanding anything herein or in any other
Loan Document to the contrary, except as otherwise set forth in this Section
18.32 to the contrary, Mortgagee shall not enforce the liability and
obligation of Mortgagor or (a) if Mortgagor is a partnership, its constituent
partners or any of their respective partners, (b) if Mortgagor is a trust, its
beneficiaries or any of their respective Partners (as hereinafter defined),
(c) if Mortgagor is a corporation, any of its shareholders, directors,
principals, officers or employees, or (d) if Mortgagor is a limited liability
company, any of its members (the Persons described in the foregoing clauses
(a)-(d), as the case may be, are hereinafter referred to as the "Partners")
to perform and observe the obligations contained in this Mortgage or any
of the other Loan Documents by any action or proceeding wherein a money
judgment shall be sought against Mortgagor or the Partners, except that
Mortgagee may bring a foreclosure action, action for specific performance,
or other appropriate action or proceeding (including, without limitation, an
action to obtain a deficiency judgment) solely for the purpose of enabling
Mortgagee to realize upon (i) Mortgagor's interest in the Mortgaged Property,
(ii) the Rent to the extent (x) received by Mortgagor (or actually received by
its Partners) after the occurrence of an Event of Default, or (y) distributed
to Mortgagor (or its Partners, but only to the extent received by its Partners)
during or with respect to any period for which Mortgagee did not receive a
Manager Certification accurate in all material respects confirming and
certifying that all Operating
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Expenses with respect to the Mortgaged Property which had accrued as of the
applicable date of such Manager Certification had been paid (or if same had
not been paid, that Manager had taken adequate reserves therefor) (all Rent
covered by clauses (x) and (y) being hereinafter referred to as the "Recourse
Distributions") and (iii) any other collateral given to Mortgagee under the
Loan Documents (collectively, the "Default Collateral"); provided, however,
that any judgment in any such action or proceeding shall be enforceable
against Mortgagor and the Partners only to the extent of any such Default
Collateral. The provisions of this Section shall not, however, (a) impair the
validity of the Debt evidenced by the Note or in any way affect or impair the
lien of this Mortgage or any of the other Loan Documents or the right of
Mortgagee to foreclose this Mortgage following the occurrence of an
Event of Default; (b) impair the right of Mortgagee to name Mortgagor as a
party defendant in any action or suit for judicial foreclosure and sale under
this Mortgage; (c) affect the validity or enforceability of the Note,
this Mortgage, or any of the other Loan Documents; (d) impair the right
of Mortgagee to obtain the appointment of a receiver; (e) impair the
enforcement of the Assignment; (f) impair the right of Mortgagee to bring
suit for a monetary judgement with respect to fraud or intentional
misrepresentation by Mortgagor, or any other Person in connection with this
Mortgage, the Note or the other Loan Documents, and the foregoing
provisions shall not modify, diminish or discharge the liability of Mortgagor
or the Partners with respect to same; (g) impair the right of Mortgagee to
bring suit for a monetary judgment to obtain the Recourse Distributions
received by Mortgagor including, without limitation, the right to bring suit
for a monetary judgement to proceed against any Partner, to the extent of any
such Recourse Distributions theretofore distributed to and received by such
Partner, and the foregoing provisions shall not modify, diminish or discharge
the liability of Mortgagor or the Partners with respect to same; (h) impair the
right of Mortgagee to bring suit for a monetary judgment with respect to
Mortgagor's misappropriation of tenant security deposits or Rent collected in
advance, and the foregoing provisions shall not modify, diminish or discharge
the liability of Mortgagor or the Partners with respect to same; (i) impair the
right of Mortgagee to obtain Loss Proceeds due to Mortgagee pursuant to
this Mortgage; (j) impair the right of Mortgagee to enforce the
provisions of Sections 12.01, 16.01 or 16.02,
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inclusive of this Mortgage, even after repayment in full by Mortgagor of the
Debt; (k) prevent or in any way hinder Mortgagee from exercising, or
constitute a defense, or counterclaim, or other basis for relief in respect of
the exercise of, any other remedy against any or all of the collateral
securing the Note as provided in the Loan Documents; (l) impair the right of
Mortgagee to bring suit for a monetary judgment with respect to any
misapplication of Loss Proceeds, and the foregoing provisions shall not
modify, diminish or discharge the liability of Mortgagor or the Partners with
respect to same; (m) impair the right of Mortgagee to sue for, seek or demand
a deficiency judgment against Mortgagor solely for the purpose of foreclosing
the Mortgaged Property or any part thereof, or realizing upon the Default
Collateral; provided, however, that any such deficiency judgment referred to
in this clause (m) shall be enforceable against Mortgagor and the Partners
(but only to the extent distributed to and actually received by such Partner)
only to the extent of any of the Default Collateral; or (n) impair the ability
of Mortgagee to bring a suit for a monetary judgment or otherwise against
Mortgagor or the Partners (but only to extent distributed to and actually
received by such Partner), nor modify, diminish or discharge the personal
liability of Mortgagor or the Partners, with respect to the indemnification
set forth in Section 16.02 hereof or (o) impair the right of Mortgagee to
bring a suit for a monetary judgment in the event of the exercise of any right
or remedy under any federal, state or local forfeiture laws resulting in the
loss of the lien of this Mortgage, or the priority thereof, against the
Mortgaged Property. The provisions of this Section 18.32 shall be inapplicable
to Mortgagor if any proceeding, action, petition or filing under the Federal
Bankruptcy Reform Act of 1978, as amended, or any similar state or federal law
now or hereafter in effect relating to bankruptcy, reorganization or
insolvency, or the arrangement or adjustment of debts, shall be filed by,
consented to or acquiesced in by or with respect to Mortgagor, or if Mortgagor
shall institute any proceeding for its dissolution or liquidation, or shall
make an assignment for the benefit of creditors, in which event Mortgagee
shall have recourse against all of the assets of Mortgagor including, without
limitation, any right, title and interest of Mortgagor in and to the Mortgaged
Property, any partnership interests in Mortgagor and any Recourse
Distributions received by the Partners of Mortgagor (but excluding the other
assets of such
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Partners to the extent Mortgagee would not have had recourse thereto other
than in accordance with the provisions of this Section 18.32). In connection
with this Section 18.32, it is agreed that a Person (or Partner), other than
Mortgagor, shall only be personally liable to the extent of Recourse
Distributions actually made to or received by such Person (or Partner).
Section 18.33. Certain Matters Relating to Mortgaged Property located in the
State of Illinois. With respect to the Mortgaged Property which is located in
the State of Illinois, notwithstanding anything contained herein to the
contrary:
(a) COMPLIANCE WITH ILLINOIS MORTGAGE FORECLOSURE LAW.
(i) If any provision in this Mortgage is determined to be
inconsistent with any provision of the Illinois Mortgage
Foreclosure Law (735 ILCS 5/15-1101 et seq. (1992 State Bar
Edition)) (the "IMFL"), the provisions of the IMFL shall take
precedence over the provisions of this Mortgage, but shall not
invalidate or render unenforceable any other provisions of
this Mortgage that can be construed in a manner consistent
with the IMFL.
(ii) If any provision of this Mortgage shall grant to
Mortgagee any rights or remedies upon an Event of Default
which are more limited than the rights that would otherwise be
vested in Mortgagee under the IMFL in the absence of such
provision, Mortgagee shall be vested with the rights granted
in the IMFL to the full extent permitted by law.
(iii) Without limiting the generality of the foregoing, all
expenses incurred by Mortgagee to the extent reimbursable
under Sections 15-1510 and 15-1512 of the IMFL, whether
incurred before or after any decree or
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judgment of foreclosure, and whether enumerated in this
Mortgage, shall be added to the indebtedness secured by this
Mortgage or by the judgment of foreclosure.
(iv) Without limiting the generality of the foregoing, this
Mortgage also secures all future advances made pursuant to the
terms of this Mortgage or the other Loan Documents made after
this Mortgage is recorded, including but not limited to all
monies so advanced by Mortgagee in accordance with the terms
of this Mortgage to (A) preserve or restore the Mortgaged
Property, (B) preserve the lien of this Mortgage or the
priority thereof or (C) enforce this Mortgage, and, to the
full extent permitted by Subsection (b)(5) of Section 15-1302
of the IMFL or other law, shall be a lien from the time this
Mortgage is recorded.
(b) WAIVER OF STATUTORY RIGHTS. Mortgagor acknowledges that the
transaction of which this Mortgage is a part is a transaction which
does not include either agricultural real estate (as defined in Section
15-1201 of the IMFL), or residential real estate (as defined in Section
15-1219 of the IMFL), and to the full extent permitted by law,
voluntarily and knowingly waives Mortgagor's rights to reinstatement and
redemption as allowed under Section 15-1601(b) of the IMFL, and to the
full extent permitted by law, the benefits of all present and future
valuation, appraisement, homestead, exemption, stay, redemption and
moratorium laws under any state or federal law.
(c) FIXTURE FILING. THIS INSTRUMENT IS EFFECTIVE AND SHALL BE EFFECTIVE AS
A FINANCING STATEMENT FILED AS A FIXTURE FILING WITH RESPECT TO ALL GOODS
WHICH ARE OR ARE TO BECOME FIXTURES INCLUDED WITHIN THE MORTGAGED PROPERTY
AND IS TO BE FILED FOR RECORD OR REGISTERED IN THE REAL ESTATE RECORDS OF
THE COUNTY IN WHICH THE
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PREMISES IS LOCATED. THE ADDRESS OF MORTGAGEE [SECURED PARTY] AND THE
MAILING ADDRESS OF MORTGAGOR [DEBTOR] ARE SET FORTH WITHIN. A PHOTOGRAPHIC
OR OTHER REPRODUCTION OF THIS INSTRUMENT OR ANY FINANCING STATEMENT
RELATING TO THIS INSTRUMENT SHALL BE SUFFICIENT AS A FINANCING STATEMENT.
(d) FUTURE ADVANCES. Mortgagee has bound itself and by the acceptance
hereof does hereby bind itself to make advances pursuant to and subject to
the terms of Mortgagee's commitment letter dated December 1, 1994 (as
such terms are further embodied in the Loan Agreement of even date
herewith), and the parties hereby acknowledge and intend that all such
advances, including future advances whenever hereafter made, shall be a
lien from the time this Mortgage is recorded, as provided in Section
15-1302(b)(1) of the IMFL.
(e) MAXIMUM AMOUNT SECURED. Mortgagor and Mortgagee intend that this
Mortgage shall secure not only sums advanced as of the date hereof
but also all advances provided for in the Loan Documents; provided however
that the maximum amount secured by this Mortgage shall in no event
exceed Five Hundred Million Dollars ($500,000,000).
(f) BUSINESS LOAN. Mortgagor represents and agrees that the obligations
secured hereby constitute a business loan within the purview of such
paragraph 1(c) of Section 4 of the Illinois Interest Act, 815 ILCS 205/1
et seq. (1992 State Bar Edition) (or any substitute, amended or
replacement statutes) transacted solely for the purpose of carrying on or
acquiring the business of Mortgagor, and also constitutes a loan secured
by a mortgage which comes within the purview of subparagraph 1(l) of said
Section.
(g) ILLINOIS RESPONSIBLE PROPERTY TRANSFER ACT. Mortgagor represents that
the Premises do not constitute "Real Property" as defined in the Illinois
Responsible Property Transfer Act of 1988, 765 ILCS 90/1 et seq. (1992
State Bar Edition) ("IRPTA") and, therefore, the IRPTA disclosure
requirements do not apply to this Mortgage.
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* * * * * *
159
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IN WITNESS WHEREOF, Mortgagor has duly executed this Mortgage the day
and year first above written.
Mortgagor's Address; GURNEE MILLS (MLP)
LIMITED PARTNERSHIP,
an Illinois limited
1300 Wilson Boulevard partnership, Mortgagor
Suite 400
Arlington, Virginia 22209
By: Gurnee Mills II L.L.C.,
its general partner
By: The Mills Limited
Partnership, its
managing member
By: The Mills Corporation,
its general partner
By: /s/ Thomas E. Frost
____________________________
Name: Thomas E. Frost
Title: Senior Vice
President
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STATE OF NEW YORK )
)
COUNTY OF NEW YORK )
I, Sandra B. Todd, a notary public in and for the state and county
aforesaid do certify that Thomas E. Frost, whose name as Senior Vice
President of The Mills Corporation, general partner of The Mills Limited
Partnership, managing member of Gurnee Mills II L.L.C., general partner of
Gurnee Mills (MLP) Limited Partnership, is signed to the writing above,
bearing date on the 17th day of December, 1996, have acknowledged the same
before me in the county aforesaid.
Given under my hand and official seal this 17th day of December, 1996.
My Term Expires:
Sandra B. Todd
Notary Public State of New York /s/ Sandra B. Todd
No 01T05016707 Notary Public
Qualified in Nassau County
Commission Expires August 23, 1997
161
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EXHIBIT A
Legal Description
LEGAL DESCRIPTION
PARCEL 1A: Lot 2 in Block "A", Lot 11 Block "C", Lot 2 in Block "E" in
Gurnee Mills, Being a subdivision of part of Sections 8, 9 and 16, Township
45 North, Range 11 East, of the Third Principle Meridian, according to the
Plat thereof recorded July 25, 1990 as Document 2928223 {See Tab 2, Vol I},
in Lake County, Illinois.
PARCEL 1B: Lot 1 (Except parcel 1 in First Resubdivision of Lot 1 in Block
"M" of Gurnee Mills, according to the Plat thereof recorded August 29, 1990
as Document 2938772 {See Tab 3, Vol I}), and (Except Lots 1 and 2 in Block
"M" in Second Resubdivision of Block "M" and First Resubdivision of Block "D"
and "E" in Gurnee Mills, according to the Plat thereof recorded March 27,
1992 as Document 3134293 {See Tab 4, Vol I}), and (Except Lot 1 in Third
Resubdivision of Lot 1 in Block "M" of Gurnee Mills, according to the Plat
thereof recorded July 7, 1993 as Document 3361150 {See Tab 5, Vol I}), and
also (Except Lot 1 in Fourth Resubdivision of Lot 1 in Block "M" of Gurnee
Mills, according to the Plat thereof recorded July 7, 1993 as Document
3361759 {See Tab 6, Vol I}); and Lot 2 (Except that part described as
follows: Beginning at the Northwest corner of Lot 3 in Block "B" in Gurnee
Mills; thence North 87deg. 26' 14" East along the North line of Lot 3, a
distance of 189.33 feet to the Northeast corner thereof; thence North 83deg.
30' 00" East along the North line of Lot 4 in Block "B" in said Gurnee Mills,
a distance of 32.16 feet to an angle point therein; thence Northeasterly
along a curved line having a radius of 491.40 feet, and arc length of 71.88
feet, and a chord length of 71.81 feet bearing North 79deg. 18' 35" East to a
point of reverse curvature; thence Southeasterly along a curved line concave
to the Southwest having a radius of 29.00 feet, an arc length of 45.89 feet,
and a chord length of 41.25 feet bearing South 59deg. 32' 42" East to a point
of tangency; thence Northwesterly along a curved line concave to the
Southwest having a radius of 776.20 feet, an arc length of 112.55 feet, and a
chord length of 112.45 feet bearing North 18deg. 21' 49" West to a point of
tangency; thence Southwesterly along a curved line concave to the Northwest
having a radius of 29.00 feet, an arc length of 49.88 feet, and a chord
length of 43.95 feet bearing South 26DEG. 45' 31" West to a point of compound
curvature; thence Southwesterly along a curved line concave to the Northwest
having a radius of 441.40 feet, an arc length of 57.52 feet, and a chord
length of 57.48 feet bearing South
continued...
<PAGE>
LEGAL DESCRIPTION, CONTINUED...
PARCEL 1B, CONTINUED...
79DEG. 45' 58" West to a point of tangency; thence South 83DEG. 30' 00" West,
a distance of 221.04 feet to a point; thence South 06deg. 30' 00" East, a
distance of 37.00 feet to the Point of Beginning, in Block "M" in Gurnee
Mills, being a Subdivision of Part of Sections 8,9 and 16, Township 45 North,
Range 11 East, of the Third Principal Meridian, according to the Plat thereof
recorded July 25, 1990 as Document 2928223 {See Tab 2, Vol I}, in Lake
County, Illinois.
PARCEL 1C: Lots 4 and 7, in block "D"; and lots 1 and 3 in block "E"; in the
Second Resubdivision of Block "M" and First Resubdivision of Blocks "D" and
"E" of Gurnee Mills together with parts of the South 1/2 of Section 9 and the
North 1/2 of Section 16 in Township 45 North, Range 11 East, of the Third
Principal Meridian, according to the Plat thereof recorded March 27, 1992 as
Document 3134293 {See Tab 4, Vol I}, in Lake County, Illinois.
PARCEL 1D: Lot 1 and 2 in Block "M" in the Second Resubdivision of Block "M"
and First Resubdivision of Blocks "D" and "E" in Gurnee Mills Subdivision,
together with parts of the South 1/2 of Section 9 and the North 1/2 of
Section 16 in Township 45 North Range 11 East, of the Third Principal
Meridian, according to the Plat thereof recorded March 27, 1992 as Document
3134293 {See Tab 4, Vol I}, in Lake County, Illinois.
PARCEL 2: Easement for vehicular and pedestrian access, ingress and
egress, and common utilities for the benefit of Parcels 1A through 1D, both
inclusive, as contained in the Gurnee Mills Master Declaration of Easements,
Covenants, Conditions and Restrictions dated January 22, 1990 and recorded
January 26, 1990 as Document 2873087 {See Tab 7, Vol I}, as amended in
Documents 3078170 {See Tab 8, Vol I}, 3078171 {See Tab 9, Vol I}, and 3146113
{See Tab 10, Vol I}, and as further amended from time to time, in Lake
County, Illinois.
continued...
<PAGE>
EXHIBIT B
Initial Sub-Account Deposits
Initial Basic Carrying Costs Deposit: $957,864
Initial Central Account Deposit: $957,864
Initial Recurring Installments: $0
RR Multiplier: $ .20 per square foot
<PAGE>
EXHIBIT C
Property:____________________________
Location:____________________________
Cash Flow Statement for Month of:____________ Year:
Current Year to
Month Date
================================================================================
OPERATING INCOME
Minimum Rent
Percentage Rent
Common Area Maintenance Recovery
Real Estate Tax Recovery
Miscellaneous Income
(Less Bad Debt)
Total Operating Revenue ________ ________
OPERATING EXPENSES
Common Area Maintenance*
Real Estate Taxes
Management Fees
Contribution to Promotion Fund
General and Administrative
Other
Total Operating Expenses ________ ________
Net Operating Income ________ ________
================================================================================
Certified By:_____________________________
Name:_____________________________
Title:_____________________________
Management Company:_____________________________
*Includes Repairs and Maintenance of $____________, Utilities of $______________
and Insurance of $______________.
<PAGE>
EXHIBIT D
[INTENTIONALLY OMITTED]
<PAGE>
EXHIBIT E
Re: [Mortgage, Security Agreement,
Assignment of Rents and Fixture Filing]
dated as of ________, 199__ by
____________ as Mortgagor, to
________________________ as Mortgagee
(the "Mortgage")
Gentlemen:
This certificate is delivered in accordance with Article V of the
Mortgage. All capitalized terms not defined herein shall have the meanings
described to them in the Mortgage.
To date, the funds deposited into the Central Account are not sufficient
to fund or pay, to the extent required to be funded or paid, the Debt Service
Payment Sub-Account, the Basic Carrying Costs Sub-Account, the Operation and
Maintenance Expense Sub-Account, the Recurring Replacement Reserve Sub-Account,
and the Curtailment Reserve Sub-Account. The amount of the deficiency is
___________ Dollars ($______), and such amount must be deposited into the
Central Account prior to the next Payment Date or an Event of Default will exist
under the Mortgage.
_________________________, Mortgagee
By:_______________________________
Name:
Title:
<PAGE>
EXHIBIT F
Initial Allocated
Cross-collateralized Properties Loan Amount
------------------------------- -----------------
Gurnee Mills,
Gurnee Illinois $122,000,000
Potomac Mills,
Dale City, Virginia $162,000,000
<PAGE>
EXHIBIT G
FORM OF DIRECTION NOTICE
[Letterhead of Landlord]
[Name and Address of Tenant]
Re: _________________ Unit No.________
Dear Tenant:
You are hereby directed to make all future payments of rent and other sums
due to Landlord under the Lease payable as follows:
Payable To: [as currently being paid]
Address: ____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
Please take particular care in making the check payable only to the
above-mentioned names because only checks made payable to the referenced names
will be credited against sums due by you to landlord. Until otherwise advised in
writing by Landlord and the above mentioned bank (or its successor), you should
continue to make your payments for rent and other sums as directed by the terms
of this letter.
Thank you in advance for your cooperation with this change in payment
procedures.
By:___________________________
<PAGE>
POTOMAC GURNEE FINANCE CORP.
Depositor
AMRESCO MANAGEMENT, INC.
Servicer
ABN AMRO BANK N.V.
Fiscal Agent
and
LASALLE NATIONAL BANK
Trustee
TRUST AND SERVICING AGREEMENT
Dated as of December 1, 1996
Commercial Mortgage Pass-Through Certificates
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE ONE
DEFINITIONS
Section 1.01. Definitions................................................. 1
Section 1.02. Calculations................................................ 30
Section 1.03. Interpretation.............................................. 31
ARTICLE TWO
DECLARATION OF TRUST FUND;
ORIGINAL ISSUANCE OF CERTIFICATES
Section 2.01. Creation and Declaration of Trust Fund;
Conveyance of Mortgage Loan......................... 32
Section 2.02. Acceptance by Trustee....................................... 36
Section 2.03. Representations and Warranties of the
Servicer and the Depositor............................... 38
ARTICLE THREE
ADMINISTRATION AND SERVICING OF THE MORTGAGE LOAN
Section 3.01. Servicer to Act as Servicer................................. 44
Section 3.02. Sub-Servicing Agreements.................................... 45
Section 3.03. Collection of Certain Mortgage Loan
Payments................................................. 46
Section 3.04. Establishment of the Central Account,
the Servicer Collection Account,
the Certificate Account, the Rent Accounts
and the Default Interest Account......................... 47
Section 3.05. Collection of Impositions, etc.;
Escrow Account........................................... 54
Section 3.06. Maintenance of Insurance and Errors
and Omissions and Fidelity Coverage...................... 55
Section 3.07. "Due-on-Sale" Clauses; Assumption
i
<PAGE>
PAGE
----
Agreements............................................... 57
Section 3.08. Realization Upon Mortgaged Properties....................... 58
Section 3.09. Trustee to Cooperate; Release of Items
in Mortgage File.................................... 61
Section 3.10. Title and Management of Foreclosed Property................. 61
Section 3.11. Sale of Foreclosed Properties............................... 63
Section 3.12. Servicing Compensation...................................... 64
Section 3.13. Reports to the Trustee; Central
Account Statements....................................... 65
Section 3.14. Annual Statement as to Compliance........................... 67
Section 3.15. Annual Independent Public Accountants'
Servicing Report......................................... 67
Section 3.16. Access to Certain Documentation Regarding
the Mortgage Loan................................... 68
Section 3.17. Inspections................................................. 68
Section 3.18. Advances.................................................... 68
Section 3.19. Reports of Foreclosures of Mortgaged
Property................................................. 72
Section 3.20. Realization on Collateral Security
Instruments.............................................. 72
Section 3.21. Preparation of Tax Returns and
Other Reports............................................ 73
Section 3.22. Administration of the Mortgage Loan.................... 74
Section 3.23. [Intentionally left blank].................................. 74
Section 3.24. Appointment of Special Servicer............................. 74
Section 3.25. Advance Procedures.......................................... 75
ARTICLE FOUR
PAYMENTS AND STATEMENTS TO CERTIFICATEHOLDERS
Section 4.01. Distributions............................................... 77
Section 4.02. Statements to Certificateholders............................ 81
Section 4.03. Reports by each Mortgagors.................................. 84
ARTICLE FIVE
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PAGE
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THE CERTIFICATES
Section 5.01. The Certificates............................................ 85
Section 5.02. Registration of Transfer and Exchange
of Certificates.......................................... 88
Section 5.03. Mutilated, Destroyed, Lost or Stolen
Certificates............................................. 93
Section 5.04. Persons Deemed Owners....................................... 93
Section 5.05. Maintenance of Office or Agency............................. 93
Section 5.06. Appointment of Paying Agent................................. 94
Section 5.07. Definitive Certificates..................................... 94
Section 5.08. Access to List of Certificateholders'
Names and Addresses...................................... 95
Section 5.09. Notices to Depository....................................... 96
Section 5.10. Certificates Owned by the Mortgagors
and Depositor Deemed Not Outstanding..................... 96
ARTICLE SIX
THE DEPOSITOR AND THE SERVICER
Section 6.01. Liabilities of the Depositor and
the Servicer............................................. 97
Section 6.02. Merger or Consolidation of the
Depositor or the Servicer................................ 97
Section 6.03. Limitation on Liability of the Depositor,
the Servicer and Others.................................. 97
Section 6.04. Servicer Not to Resign......................................100
Section 6.05. Rights of the Depositor in Respect of
the Servicer.............................................100
ARTICLE SEVEN
DEFAULT
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PAGE
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Section 7.01. Events of Default...........................................102
Section 7.02. Remedies of Trustee......................................105
Section 7.03. Directions by Certificateholders and
Duties of Trustee During Event of Default................106
Section 7.04. Trustee to Act; Appointment of Successor.................106
Section 7.05. Notification to Certificateholders.......................108
Section 7.06. Waiver of Past Events of Default.........................108
Section 7.07. Action upon Certain Failures of the
Servicer and upon the Occurrence of
an Event of Default......................................108
Section 7.08. Limitations on Suits by Certificateholders...............109
Section 7.09. Unconditional Right of Certificateholders
to Receive Distributions and to Institute
Certain Suits............................................109
ARTICLE EIGHT
CONCERNING THE TRUSTEE AND FISCAL AGENT
Section 8.01. Duties of Trustee...........................................111
Section 8.02. Certain Matters Affecting Trustee and
Fiscal Agent.............................................113
Section 8.03. Trustee and Fiscal Agent Not Liable for
Certificates or the Mortgage Loan...................116
Section 8.04. Trustee or Fiscal Agent May Own
Certificates.............................................118
Section 8.05. Trustee's Fees and Expenses.................................118
Section 8.06. Eligibility Requirements for Trustee
and Successor Fiscal Agent...............................119
Section 8.07. Resignation and Removal of Trustee
and Fiscal Agent.........................................119
Section 8.08. Successor Trustee and Fiscal Agent..........................121
Section 8.09. Merger or Consolidation of Trustee and
of Fiscal Agent..........................................122
Section 8.10. Appointment of Co-Trustee or Separate
Trustee; Appointment of Fiscal Agent.....................122
Section 8.11. Appointment of Authenticating Agent.........................124
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PAGE
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Section 8.12. Fiscal Agent Appointed; Concerning
the Fiscal Agent.........................................125
ARTICLE NINE
TERMINATION
Section 9.01. Termination.................................................127
Section 9.02. Additional Termination Requirements.........................128
Section 9.03. Trusts Irrevocable..........................................129
ARTICLE TEN
REMIC ADMINISTRATION
Section 10.01. REMIC Administration.......................................130
Section 10.02. Foreclosed Property........................................133
Section 10.03. Modifications of Mortgage Loan........................135
Section 10.04. Prohibited Transactions and Activities.....................136
Section 10.05. Indemnification with Respect to Certain
Taxes and Loss of REMIC Status..........................136
Section 10.06. Grantor Trust Reporting....................................137
ARTICLE ELEVEN
MISCELLANEOUS PROVISIONS
Section 11.01. Amendment..................................................138
Section 11.02. Recordation of Agreement...................................139
Section 11.03. Governing Law...........................................140
Section 11.04. Notices.................................................140
Section 11.05. Notices to the Rating Agency...............................140
Section 11.06. Streit Act.................................................141
Section 11.07. Severability of Provisions.................................142
Section 11.08. Limitation on Rights of Certificateholders.................142
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PAGE
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Section 11.09. Certificates Nonassessable and Fully Paid..................143
Section 11.10. Reproduction of Documents..................................143
Section 11.11. No Partnership.............................................143
Section 11.12. Actions of Certificateholders..............................143
Section 11.13. Successors and Assigns.....................................144
Section 11.14. Officer's Certificates and Opinions
of Counsel; Statements to Be Contained
Therein.................................................144
Section 11.15. Counterparts...............................................145
Section 11.16. Rule 144A Information......................................145
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PAGE
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EXHIBITS
Exhibit A - Form of Class A Certificate
Exhibit B - Form of Class B Certificate
Exhibit C - Form of Class C Certificate
Exhibit D - Form of Class D Certificate
Exhibit E - Form of Class R Certificate
Exhibit F - Form of Representation Letter
Exhibit G - Form of Class R Affidavit
Exhibit H - Form of Class R Transferee's Letter
Exhibit I - Form of Trust Receipt
Exhibit J - [Intentionally left blank]
Exhibit K - Servicer's Report to the Trustee
Exhibit L - Schedule of Required Insurance Policies
<PAGE>
THIS TRUST AND SERVICING AGREEMENT (the "Agreement"), dated as of
December 1, 1996, among Potomac Gurnee Finance Corp., in its capacity as
depositor of the Mortgage Loan (the "Depositor"), AMRESCO Management,
Inc., as servicer (the "Servicer"), LaSalle National Bank, as trustee (the
"Trustee"), and ABN AMRO Bank N.V., as fiscal agent (the "Fiscal Agent"),
W I T N E S S E T H:
In consideration of the mutual agreements herein contained, the
parties hereto agree as follows:
ARTICLE ONE
DEFINITIONS
Section 1.01. Definitions. Whenever used in this Agreement, the
following words and phrases, unless the context otherwise requires, shall have
the following meanings, and such meanings shall be equally applicable to the
singular and plural forms of such terms, as the context may require. Capitalized
terms used but not defined herein shall have the meanings assigned such terms in
the applicable Mortgage:
A Component: With respect to the Mortgage Note, that portion
of the principal balance thereof corresponding to the Certificate Principal
Balance of the Class A Certificates. The portion of the Closing Date Mortgage
Loan Principal Balance allocable to the A Component is $212,000,000.
Accepted Servicing Practices: As defined in Section 3.01.
Acquisition Date: The date upon which, under the Code (and in
particular the REMIC Provisions and Section 856(e) of the Code) the Trust REMIC
is deemed to have acquired a Mortgaged Property.
Additional Interest: As to any Class of Certificates and any
Distribution Date after the month in which the Balloon
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Anticipated Repayment Date falls, interest accrued at a rate of 2% (200 basis
points) per annum on the Certificate Principal Balance of such Class during the
Interest Accrual Period related to such Distribution Date, which interest shall
be in addition to, and shall not include, any interest calculable at the related
Certificate Interest Rate or any Default Rate Interest.
Additional Interest Shortfall: On any Distribution Date with respect
to any Class of Regular Certificates, the amount, if any, by which the amount of
Additional Interest accruing on the Certificate Principal Balance of such Class
during the related Interest Accrual Period exceeds the amount distributed on
such Class in respect of such Additional Interest on such Distribution Date.
Adjusted Certificate Rate: As to any Class of Certificates, the per
annum rate equal to the sum of the related Certificate Interest Rate and 2% (200
basis points) per annum.
Adjusted Component Rate: As to any Component, the per annum rate
equal to the sum of the related Component Rate and 2% (200 basis points) per
annum.
Adjusted NOI: As "Net Operating Income" is defined in each
Mortgage.
Advance: A P&I Advance or a Carrying Costs Advance, as applicable.
Advance Rate: A per annum rate equal to the sum of (i) the rate of
interest reported as the prime rate in the Money Rates section of The Wall
Street Journal and (ii) 1% (100 basis points) per annum.
Affiliate: With respect to any specified Person, any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract, relation to
individuals or otherwise, and the terms
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"controlling" and "controlled" have meanings correlative to the foregoing.
Aggregate Certificate Principal Balance: The aggregate of the
Certificate Principal Balances at any time of determination.
Agreement: This Trust and Servicing Agreement and all amendments and
supplements hereto.
Allocated Loan Amount: As defined in each Mortgage.
ALTA: American Land Title Association, or any successor thereto.
Applicable State Law: For purposes of Article Ten and Section 3.21,
(a) the law of the State of New York, (b) the law of the State of Illinois, (c)
the tax law of the Commonwealth of Virginia and (d) any other state law whose
applicability shall have been brought to the attention of the Trustee by either
(i) an opinion of counsel delivered to it, or (ii) written notice from the
appropriate taxing authority as to the applicability of such state law.
Appraisal Reduction Amount: With respect to P&I Advance Appraisals
performed with respect to both Mortgaged Properties pursuant to Section 3.18,
the amount, if any, by which (a) the sum, as of the Distribution Date
immediately succeeding the date of determination referred to in the fifth
sentence of Section 3.18(f), of (i) the Aggregate Certificate Principal Balance
prior to any distributions made on such Distribution Date, (ii) the aggregate of
the Unpaid Interest Shortfall Amounts for all Classes of Regular Certificates,
(iii) all accrued fees then owed and unpaid to the Servicer, the Trustee, the
Fiscal Agent and the Special Servicer, and any additional unpaid Trust Fund
expenses in respect of the Mortgage Loan, (iv) all unreimbursed Advances
(together with interest thereon at the Advance Rate) made by or on behalf of the
Servicer, the Fiscal Agent or the Trustee and (v) all currently due and unpaid
real estate taxes and assessments and insurance premiums in respect of the
Mortgaged Properties exceeds (b) an amount equal to 90% of
3
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the appraised value (net of any prior liens) of both Mortgaged Properties as
determined by such P&I Advance Appraisals.
Appraiser: An Independent nationally recognized MAI appraisal firm
reasonably acceptable to the Servicer, with at least ten years' experience in
providing appraisals for super-regional mall properties.
Assignment of Collateral Security Instruments: With respect to
the Mortgage Loan, an instrument or instruments duly executed and in a
form suitable for recordation or filing, assigning to the Trustee any
Collateral Security Instruments securing the Mortgage Note, legally
sufficient under the law of the jurisdiction governing the valid perfection
of security interests in the rights and property that are the subject of such
Collateral Security Instruments to vest in the Trustee a valid perfected
first priority security interest in such rights and property subject to such
Collateral Security Instruments.
Assignment of Gurnee Mortgage: The Assignment of Mortgage
dated the Closing Date from the Depositor to the Trustee pursuant to
which the Depositor assigns its right, title and interest in the Gurnee Mills
Mortgage to the Trustee.
Assignment of Leases and Rents and Security Deposits: With
respect to each of the Mortgages, the Assignment of Leases and Rents and
Security Deposits dated as of the Closing Date from the related Mortgagor, as
assignor, to CS First Boston Mortgage Capital Corp., as assignee, with
respect to the related Mortgaged Property assigning to CS First Boston Mortgage
Capital Corp. such Mortgagor's interest in the Leases and the Rents (each as
defined in the related Mortgage) and other amounts payable thereunder as
additional security for the payment of the Mortgage Loan as the same may
be supplemented, modified or extended.
Assignment of Potomac Mortgage: The Assignment of Deed of Trust
dated the Closing Date from the Depositor to the Trustee pursuant to
which the Depositor assigns its right, title and interest in the Potomac
Mills Mortgage to the Trustee.
Authenticating Agent: Any authenticating agent appointed pursuant
to Section 8.11.
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Available Distribution Amount: As to any Distribution Date, the
sum of (i) the amount received as payments on the Mortgage Note on the
related Payment Date (other than any Default Rate Interest), (ii) net
collections from any foreclosed Mortgaged Property and net liquidation
proceeds from any liquidated Mortgaged Property, in each case received by the
Servicer on or prior to such Payment Date and (iii) any P&I Advance made by
the Servicer, the Trustee or the Fiscal Agent with respect to such
Distribution Date, less funds described in (i), (ii) and (iii) used to (A)
reimburse Advances, plus interest thereon, and (B) pay fees and other amounts
due or reimbursable from such funds, to the Servicer, the Trustee, the Fiscal
Agent, the Special Servicer and any other Person (as applicable) specified in
this Agreement.
B Component: With respect to the Mortgage Note, that portion
of the principal balance thereof corresponding to the Certificate Principal
Balance of the Class B Certificates. The portion of the Closing Date Deed of
Trust Loan Principal Balance allocable to the B Component is $27,000,000.
Balloon Anticipated Repayment Date: December 18, 2003.
Basic Carrying Costs: With respect to each Mortgage, the sum of
the following costs associated with the related Mortgaged Property (computed
on a monthly basis): (i) all Impositions (excluding those Impositions that
may be assessed or imposed on or constitute a lien upon a Mortgagor only, as
opposed to any Mortgaged Property or any part thereof or interest therein),
(ii) insurance premiums for Required Insurance Policies, (iii) all costs and
expenses identified as costs or expenses of the Trust Fund under the terms of
this Agreement and all other costs and expenses reimbursable to the Trustee,
the Fiscal Agent, the Servicer and any Special Servicer pursuant to this
Agreement and (iv) the costs and expenses of the Servicer (including, without
limitation, reasonable attorneys' fees and expenses) incurred in connection
with a release of either or both Mortgaged Properties from the lien of the
related Mortgage. In no event shall Basic Carrying Costs include the
Servicing Fee, the Special Servicing Fee, the Liquidation Fee, the
Modification Fee or the Trustee Fee.
5
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Basic Carrying Costs Sub-Account: That certain Sub- Account
established and maintained as a separate Eligible Account and a part of the
Central Account pursuant to each Mortgage for the purposes described therein.
Beneficial Owner: With respect to any Book-Entry Certificate, the
Person who is the beneficial owner thereof as reflected on the books of the
Depository, or on the books of a Person maintaining an account with the
Depository (directly or as an indirect participant, in accordance with the
rules of the Depository), as the case may be.
Book-Entry Certificate: Any of the Regular Certificates,
beneficial ownership and transfers of which shall be evidenced by, and made
through, book entries by the Depository, as described in Section 5.01.
Business Day: Any day other than (i) a Saturday or a Sunday or
(ii) a day on which federally insured depository institutions in the states
of New York, Virginia, Georgia or Illinois or the state in which the
Corporate Trust Office is located are authorized or obligated by law,
governmental decree or executive order to be closed.
C Component: With respect to the Mortgage Note, that portion of
the principal balance thereof corresponding to the Certificate Principal
Balance of the Class C Certificates. The portion of the Closing Date Deed of
Trust Loan Principal Balance allocable to the C Component is $15,000,000.
Carrying Costs Advance: As to any Distribution Date, all
customary, reasonable and necessary "out of pocket" costs and expenses
incurred by the Servicer during the related Interest Accrual Period in the
performance of its servicing obligations, including, but not limited to, the
costs and expenses incurred in connection with (i) the preservation,
restoration and protection of any Mortgaged Property, (ii) the payment of
Basic Carrying Costs if unpaid by the Mortgagors and any other amounts
necessary to preserve the priority of the liens created by the Mortgages
(iii) any enforcement or judicial proceedings, including foreclosures and
including, but not limited to the court costs,
6
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attorneys' fees and expenses, costs for third-party experts, including
environmental and engineering consultants and (iv) the management and
liquidation of a Mortgaged Property if such Mortgaged Property is acquired by
the Trustee, or the Servicer in the name of the Trustee, in full or partial
satisfaction of the Mortgage Loan. In no event shall the term Carrying Costs
Advance include (a) any loss due to an Uninsured Cause, (b) any amounts
required to cure a failure of a Mortgaged Property to comply with any
applicable environmental law, or to investigate, test, monitor, contain,
clean up or remedy an environmental condition present at a Mortgaged Property
or (c) any amounts to pay the cost of capital improvements to a Mortgaged
Property other than those to preserve, restore and protect such Mortgaged
Property.
Central Account: The separate Eligible Account established and
maintained by the Servicer at the Mortgagors' expense pursuant to Section
3.04(a), entitled "Central Account -AMRESCO Management, Inc., as Servicer, in
trust for Potomac Mills-Phase III (MLP) Limited Partnership, Washington
Outlet Mall (MLP) Limited Partnership and Gurnee Mills (MLP) Limited
Partnership, as pledgors to LaSalle National Bank, as Trustee for the benefit
of the holders of Potomac Gurnee Finance Corp. Commercial Mortgage
Pass-Through Certificates" pursuant to the Mortgages. The Central Account
(including all Sub-Accounts therein) shall, for federal income tax purposes,
be beneficially owned by the Mortgagors, which shall be taxed on all
reinvestment income and gain thereon. The Central Account shall not be an
asset of the Trust Fund or the Trust REMIC, but the Trust Fund shall have a
security interest in funds from time to time on deposit therein.
CERCLA: The Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended.
Certificate: Any one of the Class A Certificates, the Class B
Certificates, the Class C Certificates, the Class D Certificates or the Class
R Certificates.
Certificate Account: The separate Eligible Account established
and maintained by the Trustee, pursuant to Section 3.04(c), which account
shall be entitled "Certificate Account -LaSalle National Bank, as Trustee for
the benefit of the holders
7
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of Potomac Gurnee Finance Corp. Commercial Mortgage Pass-Through
Certificates." Funds in the Certificate Account shall be held in trust for
the Certificateholders for the uses and purposes set forth in this Agreement.
The Certificate Account shall be an asset of the Trust Fund and the Trust
REMIC.
Certificate Interest Rate: The Class A Certificate Interest Rate,
the Class B Certificate Interest Rate, the Class C Certificate Interest Rate
or the Class D Certificate Interest Rate, as the case may be, each of which
shall be calculated on the basis of a 360-day year of twelve 30-day months.
Certificate Interest Shortfall: As to any Distribution Date and
any Class of Regular Certificates, the amount, if any, by which the amount of
interest accrued on the Certificate Principal Balance of such Class during
the related Interest Accrual Period at the Certificate Interest Rate for such
Class exceeds the amount distributed on such Class in respect of such
interest on such Distribution Date. The term "Certificate Interest Shortfall"
will not include any unpaid Default Rate Interest or Additional Interest.
Certificate Principal Balance: As of any date of determination,
the Class A Certificate Principal Balance, the Class B Certificate Principal
Balance, the Class C Certificate Principal Balance or the Class D Certificate
Principal Balance, as the case may be.
Certificate Register and Certificate Registrar: The register
maintained pursuant to and the registrar provided for in Section 5.02.
Certificateholder or Holder: The Person in whose name a
Certificate is registered in the Certificate Register, except that, solely
for the purposes of taking any action under Article Eight or giving any
consent, waiver, request or demand pursuant to this Agreement, (i) any
Certificate registered in the name of the Depositor, the Manager or the
Mortgagors, or any of their respective Affiliates, shall be deemed not to be
outstanding and the Percentage Interest evidenced thereby shall not be taken
into account in determining whether the requisite amount of Percentage
Interests necessary to take any such action or effect any such
8
<PAGE>
consent, waiver, request or demand has been obtained and (ii) any Certificate
registered in the name of the Servicer or registered in the name of any
Person known to a Responsible Officer to be a Sub-Servicer, or any of their
respective Affiliates shall be deemed not to be outstanding and the
Percentage Interest evidenced thereby shall not be taken into account in
determining whether the requisite amount of Percentage Interests necessary to
take any such action or effect any such consent, waiver, request or demand
has been obtained, if such action, consent, waiver, request or demand
concerns matters hereunder affecting the interests of the Servicer in such
capacity. The Trustee and the Certificate Registrar may obtain and
conclusively rely upon a certificate of the Depositor, the Manager, the
Servicer, the Mortgagors or any Sub-Servicer to determine whether a
Certificate is registered in the name of an Affiliate of any of them.
Class: Each group of Certificates whose form is identical except
for variations in Percentage Interest and registration, such groups being
denominated as Class A, Class B, Class C, Class D and Class R.
Class A Certificate: Any one of the Certificates executed and
authenticated by or on behalf of the Trustee in substantially the form set
forth in Exhibit A hereto.
Class A Certificate Interest Rate: A rate of 6.8870% per annum.
Class A Certificate Principal Balance: As of any date of
determination, the Original Class A Certificate Principal Balance less the
sum of all amounts distributed to Holders of Class A Certificates on previous
Distribution Dates and allocable to principal.
Class A Percentage: With respect to any Distribution Date, a
fraction, the numerator of which is the Class A Certificate Principal Balance
on the day preceding such Distribution Date and the denominator of which is
the Aggregate Certificate Principal Balance on such date.
9
<PAGE>
Class B Certificate: Any one of the Certificates executed and
authenticated by or on behalf of the Trustee in substantially the form set
forth in Exhibit B hereto.
Class B Certificate Interest Rate: A rate of 7.0030% per annum.
Class B Certificate Principal Balance: As of any date of
determination, the Original Class B Certificate Principal Balance less all
amounts distributed to Holders of Class B Certificates on previous
Distribution Dates and allocable to principal.
Class B Percentage: With respect to any Distribution Date, a
fraction, the numerator of which is the Class B Certificate Principal Balance
on the day preceding such Distribution Date and the denominator of which is
the Aggregate Certificate Principal Balance on such date.
Class C Certificate: Any one of the Certificates executed and
authenticated by or on behalf of the Trustee in substantially the form set
forth in Exhibit C hereto.
Class C Certificate Interest Rate: A rate of 7.2170% per annum.
Class C Certificate Principal Balance: As of any date of
determination, the Original Class C Certificate Principal Balance less the
sum of all amounts distributed to Holders of Class C Certificates on previous
Distribution Dates and allocable to principal.
Class C Percentage: With respect to any Distribution Date, a
fraction, the numerator of which is the Class C Certificate Principal Balance
on the day preceding such Distribution Date and the denominator of which is
the Aggregate Certificate Principal Balance on such date.
Class D Certificate: Any one of the Certificates executed and
authenticated by or on behalf of the Trustee in substantially the form set
forth in Exhibit D hereto.
10
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Class D Certificate Interest Rate: A rate of 7.6830% per annum.
Class D Certificate Principal Balance: As of any date of
determination, the Original Class D Certificate Principal Balance less all
amounts distributed to Holders of Class D Certificates on previous
Distribution Dates and allocable to principal.
Class D Percentage: With respect to any Distribution Date, a
fraction, the numerator of which is the Class D Certificate Principal Balance
on the day preceding such Distribution Date and the denominator of which is
the Aggregate Certificate Principal Balance on such date.
Class R Certificate: Any one of the Certificates executed and
authenticated by or on behalf of the Trustee in substantially the form set
forth in Exhibit E hereto. The Class R Certificates have no Certificate
Interest Rate or principal balance. For purposes of this Agreement, each
beneficial owner of a Percentage Interest in a Class R Certificate registered
in accordance with Section 5.02 shall be deemed to hold (and shall be
entitled to receive upon request) a separate Class R Certificate as the owner
of a specified Percentage Interest therein.
Closing Date: December 17, 1996.
Closing Date Fractional Interest: As to each Class of Regular
Certificates, a fraction whose numerator is the Certificate Principal Balance
of such Class as of the Closing Date and whose denominator is the aggregate
Certificate Principal Balance of all Classes of Regular Certificates as of
the Closing Date.
Closing Date Mortgage Loan Principal Balance: The original
principal balance of the Mortgage Loan on the Closing Date, which is
$284,000,000.
Code: The Internal Revenue Code of 1986, as amended, and as it
may be further amended from time to time, any successor statutes thereto, and
applicable U.S. Department of Treasury
11
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regulations issued pursuant thereto in temporary or final form and proposed
regulations thereunder, to the extent that, by reason of their proposed
effective date, such proposed regulations would apply to the Trust Fund.
Collateral Security Instruments: Any right, document or
instrument, other than the Mortgages, given as security for the Mortgage
Note (including, without limitation, the Mortgage Assignments, the
Assignments of Leases and Rents and Security Deposits, each other Loan
Document (other than the Mortgages) and UCC-1 and UCC-3 financing statements
or equivalent documents with evidence of their filing and the Assignments of
Leases and Rents and Security Deposits or equivalent document), together with
any rider, addendum or amendment thereto, as amended from time to time.
Component: That portion of the principal balance of the Deed of
Trust Note corresponding to the Certificate Principal Balance of a particular
Class of Regular Certificates. The Components corresponding to the
Certificate Principal Balance of each of the Class A, Class B, Class C and
Class D Certificates are sometimes referred to herein as the A Component, the
B Component, the C Component and the D Component, respectively. As used in
the plural, the A Component, the B Component, the C Component and the D
Component, collectively.
Component Rate: As to any Component, the initial per annum rate
at which interest accrues on such Component without giving effect to any
increase that reflects Default Rate Interest or Additional Interest accruing
thereon, as specified in the Mortgage Note.
Condemnation Proceeds: As to any Mortgaged Property, all of the
proceeds in respect of any Taking or purchase in lieu thereof.
Control Person: With respect to any Person, any other Person that
controls such Person within the meaning of the Securities Act or the Exchange
Act.
Corporate Trust Office: The principal office of the Trustee at
which at any particular time its corporate trust
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business shall be principally administered, which office at the date of the
execution of this instrument is located at LaSalle National Bank, 135 South
LaSalle Street, Chicago, Suite 1740, Illinois 60674-4107 Attention: Asset
Backed Securities Trust Services Group-Potomac Gurnee Certificates.
CS First Boston: CS First Boston Corporation, or its successor in
interest.
Curtailment Reserve Sub-Account: That certain SubAccount
established and maintained as a separate Eligible Account and a part of the
Central Account pursuant to each Mortgage for the purpose of holding
certain payments of principal on the Mortgage Loan.
D Component: With respect to the Mortgage Note, that portion
of the principal balance thereof corresponding to the Certificate Principal
Balance of the Class D Certificates. The portion of the Closing Date Deed of
Trust Loan Principal Balance allocable to the D Component is $30,000,000.
Debt Service Coverage: As defined in each Mortgage.
Debt Service Payment Sub-Account: That certain Sub- Account
established and maintained as a separate Eligible Account and a part of the
Central Account pursuant to each Mortgage for the purpose of holding
payments of debt service on the Mortgage Loan.
Default Interest Account: The separate Eligible Account
established and maintained by the Trustee, pursuant to Section 3.04(d), which
account shall be entitled "Default Interest Account -- LaSalle National Bank,
as Trustee for the benefit of the holders of Potomac Gurnee Finance Corp.
Commercial Mortgage Pass-Through Certificates." Funds in the Default
Interest Account shall be held in trust for the Certificateholders for the
uses and purposes set forth in this Agreement. The Default Interest Account
shall be an asset of the Trust Fund, but shall not be an asset of the Trust
REMIC.
Default Interest Distribution Amount: As to any Distribution
Date, the amount of Default Rate Interest, if any,
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paid on the Mortgage Loan on the related Payment Date less all amounts
thereof applied by the Servicer to the repayment of interest on P&I Advances.
Default Rate Interest in excess of amounts thereof applied by the Servicer to
the repayment of interest on P&I Advances will not be due and payable under
the Mortgage Note until the Mortgage Loan Principal Balance has
been reduced to zero and all other amounts due under the Mortgage Note
(other than Late Charges) have been paid.
Default Rate: As to each Component, the related Component Rate
plus four percent (4%) per annum or, after the Balloon Anticipated Repayment
Date, the related Adjusted Component Rate plus four percent (4%) per annum.
Default Rate Interest: For any period of determination, that
portion of interest on each Component equal to the difference between (i)
interest accrued on such Component during such period at the Default Rate and
(ii) interest accrued on the Mortgage Loan during such period at the
Component Rate (or, for any portion of such period falling after the Balloon
Anticipated Repayment Date, the Adjusted Component Rate) for such Component.
Definitive Certificates: As defined in Section 5.01.
Depositor: Potomac Gurnee Finance Corp., a Delaware corporation,
or any successor thereto.
Depository: The Depository Trust Company or a successor appointed
by the Trustee. Any successor to the Depository shall be an organization
registered as a "clearing agency" pursuant to Section 17A of the Securities
Exchange Act of 1934, as amended, and the regulations of the Securities and
Exchange Commission thereunder.
Depository Participant: A Person for whom, from time to time, the
Depository effects book-entry transfers and pledges of securities deposited
with the Depository.
Directly Operate: With respect to any Foreclosed Property, the
furnishing or rendering of services to the tenants thereof, the management or
operation of such Foreclosed Property,
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the holding of such Foreclosed Property primarily for sale, the performance
of any construction work thereon or any use of such Foreclosed Property in a
trade or business conducted by the Trust Fund, in each case other than
through an Independent Contractor; provided, however, that the Trust Fund (or
the Servicer on behalf of the Trust Fund) shall not be considered to Directly
Operate a Foreclosed Property solely because the Trust Fund (or the Servicer
on behalf of the Trust Fund) establishes rental terms, chooses tenants,
enters into or renews leases, deals with taxes and insurance, or makes
decisions as to repairs or capital expenditures with respect to such
Foreclosed Property.
Disqualified Organization: Either (i) the United States, (ii) any
State or political subdivision thereof, (iii) any foreign government, (iv)
any international organization, (v) any agency or instrumentality of any of
the foregoing, (vi) any tax-exempt organization (other than a cooperative
described in Section 521 of the Code) that is exempt from the tax imposed by
Chapter 1 of the Code unless such organization is subject to the tax imposed
by Section 511 of the Code, (vii) any organization described in Section
1381(a)(2)(C) of the Code, (viii) any other entity designated as a
Disqualified Organization by relevant legislation amending the REMIC
Provisions and in effect at or proposed to be effective as of the time of the
determination, or (ix) any other entity designated by the Trustee based upon
an Opinion of Counsel to the effect that any transfer of a Class R
Certificate to such person may cause the Trust REMIC to fail to qualify as a
REMIC at any time that the Certificates are outstanding. In addition, a
corporation will not be treated as an instrumentality of the United States or
of any state or political subdivision thereof if all of its activities are
subject to the tax imposed by Chapter 1 of the Code and, except in the case
of FHLMC, a majority of its board of directors is not selected by such
governmental unit. The terms "United States," "State" and "international
organization" shall have the meanings set forth in Section 7701 of the Code.
Distribution Date: The 20th day of each calendar month, beginning
in January 1997 or, if such 20th day is not a Business Day, the next
succeeding Business Day with the same force and effect as if actions to be
taken thereon were taken as of such 20th day.
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Eligible Account: A segregated account that is either (i) an
account or accounts maintained with a depository institution or trust company
the long-term unsecured debt obligations of which are rated by the Rating
Agency (or the Rating Agency has confirmed in writing that such account would
not, in and of itself, result in a downgrade, qualification or withdrawal of
the then current ratings assigned to any Class of Regular Certificates) in
one of its two highest rating categories at all times or, if the funds in
such account are to be held in such account for less than 30 days, the
short-term obligations of which are rated by the Rating Agency (or, if not
rated by the Rating Agency, the Rating Agency has confirmed in writing that
such account would not, in and of itself, result in a downgrade,
qualification or withdrawal of the then current ratings assigned to any Class
of Regular Certificates) in its highest rating category at all times or (ii)
a segregated trust account or accounts maintained with a federal or state
chartered depository institution or trust company acting in its fiduciary
capacity that, in the case of a state chartered depository institution is
subject to regulations substantially similar to 12 C.F.R. ss. 9.10(b), having
in either case a combined capital and surplus of at least $100,000,000 and
subject to supervision or examination by federal and state authority, or the
Rating Agency has confirmed in writing that such account would not, in and of
itself, cause a downgrade, qualification or withdrawal of the then current
ratings assigned to any Class of Regular Certificates) to the Rating Agency
or (iii) an account in any other insured depository institution reasonably
acceptable to the Trustee and as to which the Rating Agency has confirmed in
writing that such account would not, in and of itself, cause a downgrade,
qualification or withdrawal of the then current ratings assigned to any Class
of Regular Certificates. Eligible Accounts may bear interest. The title of
each Eligible Account shall indicate that the funds held therein are held in
trust for the uses and purposes set forth herein.
Environmental Law: Any and all present and future federal, state
and local laws, rules or regulations, any judicial or administrative orders,
decrees or judgments thereunder, and any permits, approvals, licenses,
registrations, filings and authorizations, in each case as now or hereafter
in effect,
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relating to the environment, human health or safety, or the Release or
threatened Release of Hazardous Materials into the indoor or outdoor
environment including, without limitation, ambient air, soil, surface water,
ground water, wetlands, land or subsurface strata or otherwise relating to
the Release of Hazardous Materials.
Environmental Report: As to each Mortgaged Property, the
environmental audit report or reports with respect to such Mortgaged Property
prepared and delivered to the Depositor in connection with the related Deed
of Trust.
ERISA: The Employee Retirement Income Security Act of 1974, as
amended.
Escrow Account: An account established and maintained by the
Servicer as provided in Section 3.05 hereof.
Event of Default: As defined in Section 7.01.
Excess Cash Flow Amount: As to any Distribution Date, the amount
available in the Central Account (other than Loss Proceeds) on the related
Payment Date reduced by the Required Debt Service Payment, and further
reduced by the amounts, if any, to be allocated to the Basic Carrying Costs
Monthly Installment (as defined in each Mortgage), the Recurring
Replacement Reserve Monthly Installment (as defined in each Mortgage)
and the Operation and Maintenance Expense Monthly Installment (as defined in
each Mortgage).
Exchange Act: The Securities Exchange Act of 1934, as amended.
FDIC: Federal Deposit Insurance Corporation, or any successor
thereto.
FHA: The Federal Housing Administration, or any successor thereto.
FHLMC: Federal Home Loan Mortgage Corporation, or any successor
thereto.
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Final Distribution Date: The Distribution Date on which the final
distribution in respect of the Certificates will be made pursuant to Section
9.01.
Final Scheduled Certificate Distribution Date: With respect to
each Class of Certificates, December 21, 2026.
Fiscal Agent: ABN AMRO Bank N.V., a Netherlands banking
corporation.
Fiscal Year: As to each Mortgagor, the 12-month period commencing
on January 1 and ending on December 31 during each year of the term of each
Mortgage, or such other fiscal year of the related Mortgagor as such
Mortgagor may select from time to time with the prior written consent of the
Servicer. For the calendar year in which the Closing Date occurred, each
Mortgagor's Fiscal Year shall be deemed to have commenced on the Closing Date
and shall end on December 31, 1996.
FNMA: Federal National Mortgage Association, or any successor
thereto.
Foreclosed Property: Any Mortgaged Property acquired by the Trust
Fund by foreclosure or acceptance of a deed in lieu of foreclosure or
otherwise, or with respect to which an Acquisition Date has occurred.
Grantor Trust: The portion of the Trust Fund consisting of
Default Rate Interest and the Default Interest Account.
Grantor Trust Provisions. Subpart E, Part 1 of Subchapter J,
Chapter 1 of Subtitle A of the Code.
Gurnee Mills Mortgage: The Mortgage, Security Agreement,
Assignment of Leases and Rents, and Fixture Filing relating to the Gurnee
Mills Mortgaged Property, dated as of the Closing Date, between the Gurnee
Mills Mortgagor, as mortgagor, and CS First Boston Mortgage Capital Corp., as
mortgagee, as amended, supplemented or otherwise modified from time to time.
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Gurnee Mills Mortgaged Property: The "Mortgaged Property", as such
term is defined in the Gurnee Mills Mortgage.
Gurnee Mills Mortgagor: Gurnee Mills (MLP) Limited Partnership, an
Illinois limited partnership, one of the obligors on the Mortgage Note.
Hazardous Material: As defined in each Mortgage.
Impositions: As defined in each Mortgage.
Independent: With respect to any specified Person, a Person that
(a) does not have any direct financial interest or any material indirect
financial interest in the Depositor, the Manager, either Mortgagor or the
Servicer or in any of their respective Affiliates in excess of 5% of the
outstanding capital shares of any such Person and (b) is not connected with
the Manager, either Mortgagor, the Depositor or the Servicer or any of their
respective Affiliates as an officer, employee, promoter, underwriter,
trustee, partner, director or person performing similar functions. Whenever
it is provided that any Independent Person's opinion or certificate shall be
furnished, such opinion or certificate shall state that the signer thereof
has read this definition and that such signer is Independent within the
meaning hereof.
Independent Contractor: Either (i) any Person (other than the
Servicer) that would be an "independent contractor" with respect to the Trust
Fund within the meaning of Section 856(d)(3) of the Code if the Trust Fund
were a real estate investment trust (except that the ownership test set forth
in that Section shall be considered to be met by any Person that owns,
directly or indirectly, 35% or more of any Class of Regular Certificates),
provided that the Trust Fund does not receive or derive any income from such
Person and the relationship between such Person and the Trust Fund is at
arm's length, all within the meaning of Treasury Regulation Section
1.856-4(b)(5), or (ii) any other Person (including the Servicer) with regard
to which the Trustee has received an Opinion of Counsel (which Opinion of
Counsel shall be at no expense to the Trustee or the Trust Fund) to the
effect that the taking of any action in respect of any Foreclosed Property by
such Person, subject to any conditions therein
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specified, that is otherwise herein contemplated to be taken by an
Independent Contractor will not cause such Foreclosed Property to cease to
qualify as "foreclosure property" within the meaning of Section 860G(a)(8) of
the Code (determined without regard to the exception applicable for purposes
of Section 860D(a) of the Code) or cause any income realized in respect of
such Foreclosed Property to fail to qualify as Rents from Real Property.
Initial Purchasers: CS First Boston and Merrill Lynch.
Insurance Proceeds: As to any Mortgaged Property, all of the
proceeds received under the insurance policies required to be maintained by
the related Mortgagor pursuant to the related Mortgage.
Insured Expenses: Expenses covered by any insurance policy.
Interest Accrual Period: With respect to a Distribution Date, the
period commencing on and including the prior Distribution Date (or, in the
case of the first Distribution Date, the Closing Date) and ending on and
including the day immediately preceding such Distribution Date. Each Interest
Accrual Period (other than the initial Interest Accrual Period, which shall
be deemed to consist of 33 days) shall be treated as one 30-day month for
purposes of accrual of interest.
Interested Person: As of any date of determination, either a
Mortgagor, the Manager, any Successor Manager, the Depositor, the Servicer, any
Holder of a Certificate or, in each such case, any of their respective
Affiliates.
IRS: The Internal Revenue Service.
Late Charges: As defined in Section 13.09 of each Mortgage.
Lien: Any mortgage, deed of trust, lien, pledge, hypothecation,
assignment, security interest, or any other encumbrance, charge or transfer
of, on or affecting a Mortgaged Property or any portion thereof or the related
Mortgagor, or any interest therein, including, without limitation, any
conditional
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sale or other title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, the filing of
any financing statement, and mechanic's, materialman's and other similar liens
and encumbrances.
Liquidated Mortgaged Property: Any Mortgaged Property (including any
Foreclosed Property) that has been liquidated and as to which the Servicer has
determined that all amounts that it expects to recover from or on account of
such liquidated Mortgaged Property have been recovered.
Liquidation Expenses: Reasonable and customary expenses (other than
Insured Expenses) incurred by the Servicer or the Trustee in connection with the
liquidation of any Mortgaged Property or the sale or other disposition of the
Mortgage Loan, such expenses to include, without limitation, legal fees and
expenses, appraisal fees, Environmental Reports, receivership fees, brokerage
fees, trustee fees, and co-trustee fees (if any) fees and expenses in connection
with the maintenance and preservation of such Mortgaged Property, any
unreimbursed amount expended by the Servicer pursuant to Section 3.06(a) or 3.10
(to the extent such amount is reimbursable under such Sections) and any
unreimbursed expenditures for Basic Carrying Costs or for property restoration
or preservation relating to such Mortgaged Property. Liquidation Expenses shall
not include any previously incurred expenses that have been previously
reimbursed to the Servicer or that were netted against income from any
Foreclosed Property and were considered in the calculation of the amount of REO
Proceeds pursuant to the definition thereof.
Liquidation Fee: As defined in Section 3.12(a).
Liquidation Proceeds: Cash received by the Servicer in connection
with the liquidation of a Mortgaged Property or the sale or disposition of the
Mortgage Loan whether through judicial foreclosure, sale or otherwise,
other than amounts required to be paid to the related Mortgagor pursuant to law
or the terms of the related Mortgage.
Loan Documents: The Mortgage Note, the Mortgages, the
Assignments of Leases and Rents and Security Deposits and all
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other agreements, instruments, certificates and documents delivered by or on
behalf of the Mortgagors or any of their respective Affiliates to evidence or
secure the Mortgage Loan or otherwise in satisfaction of the
requirements of the Mortgages or the other documents identified above.
Loss Proceeds: Collectively, all Insurance Proceeds and all
Condemnation Proceeds.
Management Fee: As to any Mortgaged Property that has become a
Foreclosed Property, a fee payable out of the Trust Fund to the Successor
Manager for managing such property while it is owned by the Trust Fund, which
shall be reasonable and customary in the market in which such Mortgaged Property
is located.
Manager: Management Associates Limited Partnership, a Delaware
limited partnership, or any other entity then serving as manager of the
Mortgaged Properties as permitted under the Mortgages.
Merrill Lynch: Merrill Lynch, Pierce, Fenner & Smith Incorporated,
or its successor in interest.
Modification Fee: As defined in Section 3.03.
Monthly Payment: With respect to any Distribution Date, the
payment of interest (excluding Default Rate Interest and Additional Interest)
and scheduled principal due on the Mortgage Loan on the related Payment
Date, in accordance with the terms of the Mortgage Note.
Monthly Statement: As defined in Section 4.02.
Mortgage: The Gurnee Mills Mortgage or the Potomac
Mills Mortgage, as the case may be. As used in the plural, both the
Gurnee Mills Mortgage and the Potomac Mills Mortgage.
Mortgage Assignment: The Assignment of Potomac Mortgage
or the Assignment of Gurnee Mortgage, as the case may be.
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Mortgage File: The documents listed in Section 2.01
pertaining to the Mortgage Loan and any additional documents required to
be added to the Mortgage File pursuant to this Agreement.
Mortgage Insurance Proceeds: Insurance Proceeds as defined
in each Mortgage.
Mortgage Loan: The mortgage loan obtained by the Mortgagors
and evidenced by the Mortgage Note, the Mortgages, the other Loan
Documents and related documents transferred and assigned to the Trustee
pursuant to Section 2.01.
Mortgage Loan Event of Default: As to either Mortgage,
an "Event of Default" as defined therein.
Mortgage Loan Principal Balance: As to any date of
determination, the Closing Date Mortgage Loan Principal Balance less the
sum of (i) the aggregate amount of the principal portion of all Monthly
Payments received on or prior to the Payment Date immediately preceding such
date of determination and (ii) all Unscheduled Payments allocable to
principal and received by the Servicer through such Payment Date and applied
to reduce the principal balance of the Mortgage Loan in accordance with
the terms of the Loan Documents.
Mortgage Note or Note: The original executed promissory
note, dated the Closing Date, evidencing, in the aggregate, the indebtedness
of the Mortgagors under the Mortgage Loan.
Mortgage Note Allonge: The allonge to the Mortgage Note
containing the endorsement thereof by the Depositor to the Trustee.
Mortgaged Property: Either the Gurnee Mills Mortgaged Property or
the Potomac Mills Mortgaged Property, as the case may be.
Mortgagor: Either the Gurnee Mills Mortgagor or the Potomac Mills
Mortgagor, as the case may be.
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Net Operating Income or NOI: As "Net Operating Income" is defined in
each Mortgage.
Net Proceeds: With respect to any Mortgaged Property that has
become a Liquidated Mortgaged Property, or with respect to the sale or
disposition of the Mortgage Loan, the excess of Liquidation Proceeds over
Liquidation Expenses.
New Lease: Any lease of Foreclosed Property entered into by the
Servicer in the name of the Trustee on behalf of the Trust Fund, including any
lease renewed, modified or extended by the Servicer in the name of the Trustee
on behalf of the Trust Fund if the Trust Fund has the right to renegotiate the
terms of such lease.
Nondisqualification Opinion: An opinion of Independent counsel,
prepared at the expense of the Person seeking a contemplated action (or, if
such action is for the benefit of the Certificateholders and this Agreement
does not provide that such opinion is to be at the expense of a Person other
than the Trust Fund, then at the Trust Fund's expense, payable from the
Certificate Account), that such action will not cause (i) the Trust REMIC to
fail to qualify as a REMIC, (ii) the Grantor Trust to be treated as a taxable
mortgage pool (under Section 7701(i) of the Code) or (iii) a "prohibited
transaction" tax or "prohibited contribution" tax to be imposed on the Trust
REMIC, at any time that any Certificates are outstanding.
Nonrecoverable Advance: Any portion of an Advance previously made
or proposed to be made which, in the case of an Advance previously made, has
not been previously reimbursed to the Servicer, the Trustee or the Fiscal
Agent, as applicable, and which in the good faith business judgment of the
Servicer, the Trustee or the Fiscal Agent, as applicable, taking into account
amounts that may be collected or realized on the Mortgaged Properties prior
to final liquidation and Liquidation Proceeds, will not, or, in the case of a
proposed Advance, would not, be ultimately recoverable (together with
interest thereon at the Advance Rate) from subsequent payments or collections
(including Loss Proceeds or Net Proceeds) with respect to the Mortgage
Loan and the Mortgaged Properties. An Advance shall be conclusively deemed to
be nonrecoverable to the extent such Advance, together
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with all unreimbursed Advances and all accrued but unpaid interest thereon,
exceeds the excess of the fair market value of the Mortgaged Properties, as
determined by an appraisal as provided in Section 3.18, over the principal
balance of the Mortgage Loan. Any determination by the Servicer, the
Trustee or the Fiscal Agent, as applicable, not to make an Advance because it
would, in its good faith judgment, constitute a Nonrecoverable Advance shall
be accompanied by an Officer's Certificate described in and delivered
pursuant to Section 3.18(d). In determining whether an Advance will be
recoverable, the Servicer shall take into account amounts that may be
realized from Loss Proceeds and Net Proceeds on all of the Mortgaged
Properties. The Servicer's good faith determination as to the recoverability
of an Advance shall be conclusive and binding on the Certificateholders and
the Trustee.
Offering Circular: The Confidential Offering Circular dated
December 11, 1996 relating to the Regular Certificates.
Officer's Certificate: With respect to the Depositor or the
Mortgagors, a certificate signed by the Manager, or by the Chairman of the
Board, the Vice Chairman of the Board, the President, a Vice President, the
Treasurer, the Secretary, the Assistant Treasurer or an Assistant Secretary of
the Depositor or by a general partner of the Mortgagors and delivered to the
Trustee. With respect to the Servicer, a certificate signed by a Servicing
Officer and delivered to the Trustee or, if such certificate is delivered for
the purpose of identifying persons who shall be deemed as Servicing Officers
under this Agreement, signed by a Vice President, the Treasurer, the Secretary,
an Assistant Treasurer or an Assistant Secretary of the Servicer. With respect
to the Trustee, a certificate signed by a Responsible Officer and delivered to
the Depositor. With respect to the Fiscal Agent, a certificate signed by an
officer of the Fiscal Agent and delivered to the Trustee.
Operating Expenses: With respect to each Mortgaged Property, as
defined in the applicable Mortgage.
Operating Income: With respect to each Mortgaged Property, as
defined in the applicable Mortgage.
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Opinion of Counsel: A written opinion of counsel acceptable to the
Trustee and to any other party hereto to whom such opinion is to be delivered
pursuant to the applicable terms of this Agreement, who may be counsel for the
Servicer, the Mortgagors, the Manager or the Depositor, as the case may be,
except that any Nondisqualification Opinion or any opinion of counsel relating
to the qualification of the Trust REMIC as a REMIC, compliance with the REMIC
Provisions, or qualification of the Grantor Trust must be an opinion of counsel
that is Independent.
Original Class A Certificate Principal Balance: $212,000,000.
Original Class B Certificate Principal Balance: $27,000,000.
Original Class C Certificate Principal Balance: $15,000,000.
Original Class D Certificate Principal Balance: $30,000,000.
P&I Advance: With respect to any Distribution Date and any Class of
Regular Certificates, an advance made by the Servicer, the Trustee or the Fiscal
Agent, as applicable, of then-delinquent interest at the applicable Component
Rate, and of due and unpaid scheduled principal, with respect to the Component
corresponding to such Class.
P&I Advance Appraisal: An appraisal that is an Original Appraisal, a
Second Appraisal or a Third Appraisal, as defined in Section 3.18(f).
Paying Agent: The paying agent appointed pursuant to Section 5.06.
If no such paying agent has been appointed or if such paying agent has been so
appointed but the Trustee shall have terminated such appointment, then the
Trustee shall be the Paying Agent.
Payment Date: With respect to each Interest Accrual Period, the
second Business Day preceding the Distribution Date
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occurring in the month in which such Interest Accrual Period ends.
Percentage Interest: As to any Certificate, the percentage interest
evidenced thereby in distributions required to be made with respect to the
related Class. With respect to any Regular Certificate, the Percentage Interest
thereof is derived by dividing the denomination of such Certificate by the
aggregate denominations of all Certificates of the same Class as such
Certificate. With respect to any Class R Certificate, the Percentage Interest is
set forth on the face thereof.
Permitted Encumbrances: As defined in each Mortgage.
Permitted Investments: Any one or more of the following obligations
or securities payable on demand or having a scheduled maturity (x) in the case
of the Central Account and the Servicer Collection Account, no later than the
Business Day preceding the date upon which funds in such account are required to
be withdrawn and (y) in the case of the Certificate Account and the Default
Interest Account, no later than the Business Day preceding each Distribution
Date, and in each case having at all times the required ratings, if any,
provided for in this definition, unless the Rating Agency shall have confirmed
in writing to the Trustee that a lower rating would not, in and of itself,
result in a downgrade, qualification or withdrawal of the then current ratings
assigned to any Class of Regular Certificates:
(i) obligations of, or obligations fully guaranteed as to payment of
principal and interest by, the United States of America or any agency or
instrumentality thereof provided such obligations are backed by the full
faith and credit of the United States of America including, without
limitation, obligations of: the U.S. Treasury (all direct or fully
guaranteed obligations), the Farmers Home Administration (certificates of
beneficial ownership), the General Services Administration (participation
certificates), the U.S. Maritime Administration (guaranteed Title XI
financing), the Small Business Administration (guaranteed participation
certificates and guaranteed pool certificates), the U.S. Department of
Housing and Urban
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Development (local authority bonds) and the Washington Metropolitan Area
Transit Authority (guaranteed transit bonds); provided, however, that the
investments described in this clause must (A) have a predetermined fixed
dollar of principal due at maturity that cannot vary or change, (B) if
such investments have a variable rate of interest, such interest rate must
be tied to a single interest rate index plus a fixed spread (if any) and
must move proportionately with that index, and (C) such investments must
not be subject to liquidation prior to their maturity;
(ii) obligations of the following United States of America
government sponsored agencies: Federal Home Loan Mortgage Corp. (debt
obligations), the Farm Credit System (consolidated systemwide bonds and
notes), the Federal Home Loan Banks (consolidated debt obligations), the
Federal National Mortgage Association (debt obligations), the Student Loan
Marketing Association (debt obligations), the Financing Corp. (debt
obligations), and the Resolution Funding Corp. (debt obligations);
provided, however, that the investments described in this clause must (A)
have a predetermined fixed dollar of principal due at maturity that cannot
vary or change, (B) if such investments have a variable rate of interest,
such interest rate must be tied to a single interest rate index plus a
fixed spread (if any) and must move proportionately with that index, and
(C) such investments must not be subject to liquidation prior to their
maturity;
(iii) federal funds, unsecured certificates of deposit, time
deposits, bankers' acceptances and repurchase agreements with maturities
of not more than 365 days of any bank, the short term obligations of which
are rated in the highest short term rating category by the Rating Agency;
provided, however, that the investments described in this clause must (A)
have a predetermined fixed dollar of principal due at maturity that cannot
vary or change, (B) if such investments have a variable rate of interest,
such interest rate must be tied to a single interest rate index plus a
fixed spread (if any) and must move proportionately with that index, and
(C) such investments must not be subject to liquidation prior to their
maturity;
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(iv) fully Federal Deposit Insurance Corporationinsured demand
and time deposits in, or certificates of deposit of, or bankers'
acceptances issued by, any bank or trust company, savings and loan
association or savings bank, the short term obligations of which are rated
in the highest short term rating category by the Rating Agency; provided,
however, that the investments described in this clause must (A) have a
predetermined fixed dollar of principal due at maturity that cannot vary
or change, (B) if such investments have a variable rate of interest, such
interest rate must be tied to a single interest rate index plus a fixed
spread (if any) and must move proportionately with that index, and (C)
such investments must not be subject to liquidation prior to their
maturity;
(v) debt obligations with maturities of not more than 365 days
and rated by the Rating Agency in its highest long-term unsecured rating
category (or, if not rated by the Rating Agency, the Rating Agency has
confirmed in writing that such investment would not, in and of itself,
result in a downgrade, qualification or withdrawal of the then current
ratings assigned to any Class of Regular Certificates); provided, however,
that the investments described in this clause must (A) have a
predetermined fixed dollar of principal due at maturity that cannot vary
or change, (B) if such investments have a variable rate of interest, such
interest rate must be tied to a single interest rate index plus a fixed
spread (if any) and must move proportionately with that index, and (C)
such investments must not be subject to liquidation prior to their
maturity;
(vi) commercial paper (including both non-interest-bearing
discount obligations and interest-bearing obligations payable on demand or
on a specified date not more than one year after the date of issuance
thereof) with maturities of not more than 270 days and that is rated by
the Rating Agency in its highest short-term unsecured debt rating;
provided, however, that the investments described in this clause must (A)
have a
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predetermined fixed dollar of principal due at maturity that cannot vary
or change, (B) if such investments have a variable rate of interest, such
interest rate must be tied to a single interest rate index plus a fixed
spread (if any) and must move proportionately with that index, and (C)
such investments must not be subject to liquidation prior to their
maturity;
(vii) the Federated Prime Obligation Money Market Fund (the "Fund")
so long as the Fund is rated "AAA" by the Rating Agency;
(viii) any other demand, money market or time deposit, demand
obligation or any other obligation, security or investment, provided that
the Rating Agency has confirmed in writing to the Trustee, that such
investment would not, in and of itself, result in a downgrade,
qualification or withdrawal of the then current ratings assigned to any
Class of Regular Certificates); and
(ix) such other obligations as would not, in and of themselves,
result in a downgrade, qualification or withdrawal of the then current
ratings assigned to any Class of Regular Certificates, as confirmed in
writing by the Rating Agency to the Servicer and the Trustee;
provided, however, that, in the judgment of the party directing such investment,
such instrument continues to qualify as a "cash flow investment" pursuant to
Code Section 860G(a)(6) earning a passive return in the nature of interest and
that no instrument or security shall be a Permitted Investment if (i) such
instrument or security evidences a right to receive only interest payments or
(ii) the right to receive principal and interest payments derived from the
underlying investment provides a yield to maturity in excess of 120% of the
yield to maturity at par of such underlying investment.
Person: Any individual, limited liability company, corporation,
partnership, joint venture, association, bank, joint-stock company, trust,
unincorporated organization or government, or any agency or political
subdivision thereof.
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Potomac Mills Mortgage: The Deed of Trust, Security Agreement,
Assignment of Leases and Rents, and Fixture Filing relating to the Potomac Mills
Mortgaged Property, dated as of the Closing Date, among the Potomac Mills
Mortgagor, as grantor, R. Eric Taylor, as deed of trust trustee, and CS First
Boston Mortgage Capital Corp., as beneficiary, as amended, supplemented or
otherwise modified from time to time.
Potomac Mills Mortgaged Property: The "Mortgaged Property", as such
term is defined in the Potomac Mills Mortgage.
Potomac Mills Mortgagor: Collectively, Potomac Mills-Phase III
(MLP) Limited Partnership and Washington Outlet Mall (MLP) Limited Partnership.
Prepayment Premium: With respect to each Mortgage, the
Prepayment Premium specified therein.
Principal Prepayment: Any payment of principal by the Mortgagor or
other recovery of principal on the Mortgage Loan that is received or
recovered in advance of its scheduled Payment Date and is applied to reduce
the Mortgage Loan Principal Balance in advance of its scheduled Payment
Date, excluding any such payment or recovery resulting from the application
of Loss Proceeds or Net Proceeds.
Rating Agency: Fitch Investors Service, L.P. or its successor in
interest.
Record Date: As to any Distribution Date, the close of business on
the last Business Day of the calendar month immediately preceding the month in
which such Distribution Date occurs.
Regular Certificate: Any Class A, Class B, Class C or Class D
Certificate.
Release: Any release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration
into the indoor or outdoor environment, including, without limitation, the
movement of Hazardous
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Materials through ambient air, soil, surface water, ground water, wetlands,
land or subsurface strata.
REMIC: A "real estate mortgage investment conduit" within the
meaning of Section 860D of the Code.
REMIC Provisions: Provisions of the federal income tax law
relating to REMICs, which appear at Sections 860A through 860G of Subchapter
M of Chapter 1 of the Code, and related provisions and regulations and
rulings promulgated thereunder, as the foregoing may be in effect from time
to time and including any proposed legislation or regulation which, as
proposed, would apply to the Trust REMIC.
Rent Account: The separate Eligible Account established and
maintained by the Servicer at each Mortgagor's expense pursuant to Section
3.04(e) for each Mortgaged Property, entitled "Rent Account -- AMRESCO
Management, Inc., as Servicer, in trust for [Mortgagor], as pledgor to LaSalle
National Bank, as Trustee for the benefit of the holders of Potomac Gurnee
Finance Corp. Commercial Mortgage Pass-Through Certificates" pursuant to
the Mortgages. Each Rent Account shall for federal income tax purposes be
beneficially owned by the related Mortgagor which shall be taxed on all
reinvestment income and gain thereon. The Rent Accounts shall not be assets
of the Trust Fund or the Trust REMIC, but the Trust Fund shall have a
security interest in funds from time to time on deposit therein.
Rents from Real Property: With respect to any Foreclosed Property,
gross income of the character described in Section 856(d) of the Code.
REO Proceeds: Proceeds, net of any related costs and expenses
(including attorneys' fees) related to a Foreclosed Property received in
respect thereof (including, without limitation, proceeds from the rental of
such Foreclosed Property) prior to the final liquidation of such Foreclosed
Property.
Required Debt Service Payment: As to any Distribution Date, the
amount of interest and scheduled principal then due (or past due) and payable
pursuant to the Mortgage Note on the related Payment Date, together with
any other sums due and
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payable thereunder, including, without limitation, any optional prepayments for
which notice has been given under the Mortgages, and any Prepayment Premiums to
be paid in accordance therewith.
Required Insurance Policy: As to any Mortgaged Property, any
insurance policy that is required to be maintained from time to time under
each Mortgage or any other Loan Document, this Agreement or any related
Sub-Servicing Agreement in respect of such Mortgaged Property which shall, as
of the Closing Date, be those insurance policies identified in Exhibit L
hereto.
Responsible Officer: When used with respect to the Trustee, any
officer assigned to the Asset-Backed Securities Trust Services Group, including
any Vice President, any Senior Trust Officer, any Trust Officer, any Assistant
Trust Officer, any Secretary or any Assistant Secretary, in each case having
direct responsibility for the administration of this Agreement.
Scheduled Loan Maturity Date: The date on which the final payment
of principal of, and premium, if any, on the Mortgage Note becomes due
and payable as provided in the Mortgage Note, which date is December 17,
2026.
Securities Act: The Securities Act of 1933, as amended.
Servicer: AMRESCO Management, Inc., a Texas corporation, or its
successor in interest, or if any successor servicer is appointed as herein
provided, such successor servicer.
Servicer Advance Date: With respect to each Distribution Date, the
Business Day immediately preceding such Distribution Date.
Servicer Collection Account: The separate Eligible Account
established and maintained by the Servicer at the expense of the Trust Fund
pursuant to Section 3.04(b), entitled "Servicer Collection Account -- AMRESCO
Management, Inc., as Servicer, in trust for LaSalle National Bank, as Trustee
for the benefit of the holders of Potomac Gurnee Finance Corp. Commercial
Mortgage Pass-Through Certificates." Funds in the Servicer Collection
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Account shall be held in trust for the Trustee for the benefit of the
Certificateholders for the uses and purposes set forth in this Agreement. The
Servicer Collection Account shall be an asset of the Trust Fund and the Trust
REMIC.
Servicing Fee: As to any Distribution Date, the product of (i)
one-twelfth of the Servicing Fee Rate multiplied by (ii) the Mortgage Loan
Principal Balance as of the beginning of the related Interest Accrual Period.
Servicing Fee Rate: 0.0175% per annum.
Servicing Officer: Any officer of the Servicer involved in, or
responsible for, the administration and servicing of the Mortgage Loan
whose name and specimen signature appear on a list of servicing officers
furnished to the Trustee on the Closing Date by the Servicer in the form of
an Officer's Certificate, as such list may be amended from time to time.
Special Servicer: As defined in Section 3.24.
Special Servicing Fee: As defined in Section 3.24.
Startup Day: As defined in Section 10.01(c).
Sub-Account: Any one of the sub-accounts established as a separate
Eligible Account and a part of the Central Account created pursuant to each
Mortgage.
Sub-Servicer: Any Person with whom the Servicer has entered into a
Sub-Servicing Agreement and who satisfies the requirements set forth therein and
herein.
Sub-Servicing Agreement: The written contract between the
Servicer and any Sub-Servicer relating to servicing and/or the administration
of the Mortgage Loan as provided in Section 3.02, in such form as is
approved by the Servicer provided that the sub-servicing of the Mortgage
Loan pursuant to the terms of such Sub-Servicing Agreement will not result in
a downgrade, qualification or withdrawal of the rating then assigned to the
Regular Certificates by the Rating Agency as confirmed by it in writing to
the Trustee.
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Successor Manager: Any Independent Contractor selected or retained
by the Servicer, in the name of and on behalf of the Trustee, to serve as
Manager of the Foreclosed Property.
Tax Matters Person: The person designated as the "tax matters
person" of the Trust REMIC pursuant to Treasury Regulations Section 1.860F-4(d).
Taking: A condemnation or taking pursuant to the lawful exercise of
the power of eminent domain.
Title Company: On the Closing Date, Chicago Title Insurance Company,
and thereafter, any title insurance company selected by the Mortgagors and
acceptable to the Servicer or its successor.
Title Insurance Policy: The ALTA form mortgagee title insurance
policy or policies issued with respect to each Mortgaged Property and insuring
the first priority mortgage lien in favor of the Depositor pursuant to the
related Mortgage, subject only to encumbrances permitted pursuant to
such Mortgage and containing such endorsements and affirmative
assurances as are required by the Loan Documents.
Trustee: LaSalle National Bank, a national banking association, or
its successor in interest, or if any successor trustee is appointed as herein
provided, such successor trustee.
Trustee Fee: As set forth in a certain letter agreement, dated
November 6, 1996 between the Servicer and the Trustee.
Trust Fund: The corpus of the trust created by this Agreement,
consisting of the assets referred to in Section 2.01, including the Deed of
Trust Loan, all payments on or collections in respect of the Mortgage
Loan due on or after the Closing Date, all Net Proceeds and Loss Proceeds
received after the Closing Date, such amounts as shall from time to time be
held in the Servicer Collection Account, Certificate Account, and the Default
Interest Account, all rights under the Mortgages, the Collateral
Security Instruments and the other Loan Documents assigned to the
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Trustee, the insurance policies for which the Trustee is beneficiary or loss
payee, if any, relating to the Mortgaged Properties, any Foreclosed Property,
and proceeds of all of the foregoing. Neither the Rent Accounts nor the Central
Account (or any Sub-Account thereof), nor any funds on deposit therein, are part
of the Trust Fund or the Trust REMIC.
Trust REMIC: The segregated pool of assets in the Trust Fund
designated as a REMIC pursuant to Section 10.01(b) hereof.
Uninsured Cause: Any cause of damage to property subject to a
Mortgage such that the complete restoration of such property is not fully
reimbursable (but without regard to any applicable deductible provisions) by any
insurance policy required to be maintained with respect thereto, and any
uninsured losses arising from a defect in title to the related Mortgaged
Property.
Unpaid Additional Interest Shortfall: As to any Distribution Date
and any Class of Regular Certificates, the sum of (i) the amount, if any, by
which the aggregate of the Additional Interest Shortfalls for such Class for
prior Distribution Dates exceeds the aggregate of the amounts distributed on
prior Distribution Dates to Holders of Certificates of such Class in respect of
such Additional Interest Shortfalls pursuant to Section 4.01 and (ii) accrued
interest at the applicable Adjusted Certificate Interest Rate for such Class on
the amount in clause (i).
Unscheduled Payment: Any and all of the following: (a) all Loss
Proceeds that the Mortgagors have elected or are required to apply to the
repayment of the indebtedness under the Mortgages, the Mortgage Note and the
other Loan Documents pursuant to the terms of such documents, (b) any funds
representing Voluntary Prepayments or involuntary principal prepayments other
than scheduled principal payments made pursuant to the terms of the Deed of
Trust Note, (c) any Net Proceeds and (d) any amounts paid from the
Curtailment Reserve Sub-Account pursuant to Section 5.11 of each Deed of
Trust.
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Voluntary Prepayment: A voluntary prepayment of principal made on
the Mortgage Note pursuant to one or both of the Mortgages.
Voluntary Prepayment Amount: As to any Distribution Date, the amount
deposited in the Certificate Account pursuant to Section 3.04(c) in respect of
any Voluntary Prepayments made on the related Payment Date.
Voluntary Prepayment Premium Amount: As to any Distribution Date,
the aggregate amount, if any, of Prepayment Premiums deposited in the
Certificate Account pursuant to Section 3.04(c) in connection with Voluntary
Prepayments made on the related Payment Date.
Voting Rights: With respect to any provisions hereof providing for
the action, consent or approval of the Holders of all Certificates evidencing
specified Voting Rights in the Trust Fund, voting rights that are to be
allocated to the Holders of each Class of the Regular Certificates in proportion
to the ratio obtained by dividing the Certificate Principal Balance of such
Class by the Aggregate Certificate Principal Balance. Each Holder of Regular
Certificates of a particular Class will have Voting Rights equal to the product
of the Voting Rights to which such Class is collectively entitled and the ratio
obtained by dividing the principal balance of such Certificates held by the
Certificateholder by the Certificate Principal Balance of such Class.
Section 1.02. Calculations. All calculations of interest hereunder
that are made in respect of each Component and each Class of Certificates shall
be made with respect to each Interest Accrual Period and calculated on the basis
of a 360-day year consisting of twelve 30-day months (with each Interest Accrual
Period other than the initial Interest Accrual Period representing one such
30-day month) and shall be carried out to seven decimal places, rounded up. All
dollar amounts calculated hereunder shall be rounded to the nearest cent.
Section 1.03. Interpretation. (a) Whenever the Agreement refers to a
Distribution Date and a "related" Interest Accrual Period or Payment Date, such
reference shall be to the
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Interest Accrual Period or Payment Date, as applicable, immediately preceding
such Distribution Date.
(b) As used herein and in any certificate or other document made or
delivered pursuant hereto or thereto, accounting terms not defined in Section
1.01 shall have the respective meanings given to them under generally accepted
accounting principles or regulatory accounting principles, as applicable.
(c) The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and Section and
Exhibit references contained in this Agreement are references to Sections and
Exhibits in or to this Agreement unless otherwise specified.
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ARTICLE TWO
DECLARATION OF TRUST FUND;
ORIGINAL ISSUANCE OF CERTIFICATES
Section 2.01. Creation and Declaration of Trust Fund; Conveyance
of Mortgage Loan. The Depositor hereby irrevocably sells, transfers,
assigns, delivers, sets over and otherwise conveys or causes to be conveyed
to the Trustee for the benefit of Certificateholders, without recourse, the
Depositor's right, title and interest, whether now owned or hereafter
acquired, now existing or hereafter arising, wherever located, in and to (i)
the Mortgage Loan, the Mortgage Note, each Mortgage and all
other Trust Fund property, (ii) all property that secures payment of the Deed
of Trust Loan, including all reserves created and required to be maintained
under the terms of each Mortgage, all property that has been acquired by
foreclosure, deed-in-lieu of foreclosure or otherwise, and the Depositor's
interest as pledgee in all funds in the Rent Accounts and the Central Account
(including all Sub-Accounts thereof), (iii) all accounts and funds
established by the Servicer and the Trustee pursuant hereto, including the
Servicer Collection Account, the Certificate Account and the Default Interest
Account and all amounts deposited therein pursuant to the applicable
provisions of this Agreement, (iv) any insurance policies obtained with
respect to the Mortgage Loan, (v) all of the Depositor's right and title
and interest in each Mortgage to the extent such Mortgage relates
to representations and warranties made by the related Mortgagor in respect of
such Mortgage and any remedies provided thereunder for any breach of
such representation and warranties and (vi) all proceeds of the conversion,
voluntary or involuntary, of any of the foregoing into cash, instruments,
securities or other property, including without limitation all amounts from
time to time held in and credited to the Servicer Collection Account, the
Certificate Account and the Default Interest Account, whether in the form of
cash or invested in instruments, securities or other property, to have and to
hold, in trust, and the Trustee declares that, subject to the review provided
for in Section 2.02, it has received the documents specified in clauses (a)
through (m) below and shall hold the Trust Fund as the Trustee, in trust, for
the benefit and use of the Holders of the Certificates and for the purposes
and subject
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to the terms and conditions set forth in this Agreement, and, concurrently with
such receipt, the Trustee has caused to be executed, authenticated and delivered
to or upon the order of the Depositor, in exchange for the Trust Fund,
Certificates in the authorized denominations evidencing the entire ownership of
the Trust Fund.
In connection with such transfer and assignment, the Depositor does
hereby deliver to, and deposit with, the Trustee (with copies to the Servicer),
the following documents or instruments with respect to the Mortgage Loan:
(a) the original Mortgage Note, together with the Deed of
Trust Note Allonge evidencing the endorsement by the Depositor without
recourse to the order of the Trustee, with all intervening endorsements that
show a complete chain of endorsement from CS First Boston Mortgage Capital
Corp., as originator of the Mortgage Loan to the Depositor.
(b) each original Mortgage, in form suitable for recording;
(c) a Mortgage Assignment of each original Mortgage, in
form suitable for recording, from the Depositor to the Trustee, together with
all interim assignments of such Mortgage;
(d) each original Assignment of Leases and Rents and Security
Deposits, in form suitable for recording;
(e) an assignment of each original Assignment of Leases and Rents
and Security Deposits, in form suitable for recording, from the Depositor to the
Trustee, together with all interim assignments of such Assignment of Leases and
Rents and Security Deposits;
(f) originals of all other Collateral Security Instruments, which,
to the extent applicable, shall be in form suitable for recording;
(g) originals of the Assignments of Collateral Security Instruments
from the Depositor in favor of the Trustee,
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in form suitable for recording or filing in all applicable jurisdictions,
together with all related interim assignments;
(h) all Required Insurance Policies or certificates issued by the
insurers thereof showing such insurance to be in effect on the Closing Date,
together with proof of payment of premiums relating thereto (which may
consist of such policies or certificates);
(i) the original Title Insurance Policies, or in the event such
original Title Insurance Policies are unavailable, "marked-up" title reports
which insure title as of the Closing Date and the lender's recording
instructions, with the originals to be delivered by the Depositor as soon as
available;
(j) the original surveys referred to in the above-referenced
Title Insurance Policies made in connection with origination of the Deed of
Trust Loan;
(k) a copy of the original engineer's report with respect to the
improvements on the Mortgaged Properties obtained in connection with
origination of the Mortgage Loan;
(l) the original Environmental Reports in respect of the Mortgaged
Properties made in connection with origination of the Mortgage Loan; and
(m) as to each Mortgage, copies of each UCC-1 financing
statement showing the related Grantor as debtor and CS First Boston Mortgage
Capital Corp. as secured party, each with evidence of filing thereon,
together with a copy of each UCC-3 financing statement showing a complete
chain of assignment from the secured party named in such UCC-1 financing
statement to the Trustee. If in connection with the Mortgage Loan the
Depositor cannot deliver any such financing statement(s) with evidence of
filing thereon because such financing statement(s) has not yet been returned
by the public filing office where such financing statement(s) has been
submitted for filing, then the Depositor shall deliver or cause to be
delivered a photocopy of such financing statement(s) together with an
Officer's Certificate stating that such financing statement(s) has been
dispatched to the appropriate public filing office for filing.
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The Mortgages, Mortgage Assignments, Assignments of Leases
and Rents and Security Deposits, UCC-1 financing statements, other Collateral
Security Instruments and Assignments of Collateral Security Instruments to be
filed in the appropriate filing offices or record depositories shall be
delivered by the Depositor to the Title Company for filing on or before the
Closing Date, with instructions to complete all such filings promptly and
return all such recorded documents, or other evidences of filing issued by
the applicable governmental offices, to the Trustee. The Depositor shall
monitor the status of such filings and use its best efforts to cause the
Title Company to comply with all filing instructions. Delivery of such
instruments to the Title Company shall constitute delivery to the Trustee for
purposes of this Section 2.01. The Depositor shall deliver or cause to be
delivered to the Trustee a duplicate original of each Mortgage, Deed of
Trust Assignment, Assignment of Leases and Rents and Security Deposits, UCC-1
financing statement, each other Collateral Security Instrument and
Assignments of Collateral Security Instruments. Any party hereto shall
promptly deliver or cause to be delivered to the Trustee such original
Mortgages, Mortgage Assignments, Assignments of Leases and Rents and
Security Deposits, UCC-1 financing statements, other Collateral Security
Instruments and Assignments of Collateral Security Instruments with evidence
of recording indicated thereon upon receipt thereof by such party from the
public recording official.
The Trustee shall hold legal title to the Mortgage Loan as
trustee for the benefit of the Certificateholders.
The Trustee shall be the secured party under the Collateral
Security Instruments for the benefit of the Certificateholders. The Servicer
shall file such continuation statements or other instruments as may be
necessary to maintain the perfection of the security interests granted by the
Collateral Security Instruments.
The ownership of the Mortgage Note, the Mortgages and the
contents of the Mortgage File is vested in the Trustee for the benefit
of the Certificateholders. The Depositor and the Servicer agree to take no
action inconsistent with the Trustee's
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ownership of the Mortgage Loan and to promptly indicate to all inquiring
parties that the Mortgage Loan has been sold and to claim no ownership
interest in the Mortgage Loan or any other property, interests or rights
assigned to the Trustee pursuant to the first sentence of this Section 2.01.
It is the express intent of the Depositor that the conveyance by
the Depositor to the Trustee as provided for in this Section 2.01 be, and be
construed as, a sale by the Depositor to the Trustee for the benefit of the
Certificateholders. Further, it is not intended that such conveyance be
deemed to be a pledge of the Trust Fund by the Depositor to the Trustee to
secure a loan or other obligation of the Depositor. However, in the event
that the Trust Fund is held to be property of the Depositor, or if for any
reason this Agreement is held or deemed to create a security interest, then
it is intended that the Depositor hereby grants, and shall be deemed to have
granted, to the Trustee for the benefit of the Certificateholders a first
priority security interest, in all the Depositor's right, title and interest
in and to the Trust Fund and (a) this Agreement shall be a security agreement
within the meaning of Articles 8 and 9 of the New York, Illinois and Virginia
Uniform Commercial Codes and the Uniform Commercial Code of any other
applicable jurisdiction to secure the Certificates; (b) each of the
conveyances provided for in this Section 2.01 is hereby a grant by the
Depositor to the Trustee for the benefit of the Certificateholders of a first
priority security interest in all of the Depositor's right, title and
interest, whether now owned or hereafter acquired, now existing or hereafter
arising, wherever located, in and to (i) the Mortgage Loan, the Deed of
Trust Note, each Mortgage and all other Trust Fund property, (ii) all
property that secures payment of the Mortgage Loan, including all
reserves created and required to be maintained under the terms of each
Mortgage, and all property that has been acquired by foreclosure,
deed-in-lieu of foreclosure or otherwise, and the Depositor's interest as
pledgee in all funds in the Rent Accounts and the Central Account (including
all Sub-Accounts thereof), (iii) all accounts and funds established by the
Servicer and the Trustee pursuant hereto, including the Servicer Collection
Account, the Certificate Account and the Default Interest Account and all
amounts deposited therein pursuant to the applicable provisions of this
Agreement, (iv) any insurance policies
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obtained with respect to the Mortgage Loan, (v) all of the Depositor's
right and title and interest in each Mortgage to the extent such Mortgage
relates to representations and warranties made by the related Grantor
in respect of such Mortgage and any remedies provided thereunder for any
breach of such representation and warranties and (vi) all proceeds of the
conversion, voluntary or involuntary, of any of the foregoing into cash,
instruments, securities or other property, including without limitation all
amounts from time to time held in and credited to the Servicer Collection
Account, the Certificate Account and the Default Interest Account, whether in
the form of cash or invested in instruments, securities or other property;
(c) the possession by the Trustee, or any agent of the Trustee, of the Deed
of Trust Note or such other items of property as constitute instruments,
money, negotiable documents or chattel paper is a "possession by the secured
party", or possession by a purchaser or a person designated by such secured
party, for purposes of perfecting the security interest pursuant to the
Uniform Commercial Code (including, without limitation, Sections 9-305, 8-313
or 8-321 thereof); and (d) notifications to persons holding such property,
and acknowledgments, receipts or confirmations from persons holding such
property, shall be deemed notifications to, or acknowledgments, receipts or
confirmations from, financial intermediaries, bailees or agents (as
applicable) of the Trustee for the purpose of perfecting such security
interest under applicable law. Each of the Depositor, the Servicer and the
Trustee shall, to the extent consistent with this Agreement and within its
power, take such actions as may be necessary to ensure that, if this
Agreement were deemed to create a security interest in the Mortgage
Loan, such security interest would be deemed to be a perfected security
interest of first priority under applicable law. The Servicer shall prepare
and file any UCC continuation statements necessary to continue the security
interest as a perfected first priority security interest.
If the conveyance referred to in the first sentence of the preceding
paragraph is deemed to be a loan and the trust created by this Agreement
terminates prior to the satisfaction of the claims of any Person holding any
Certificates, the security interest created hereby shall continue in full force
and effect and the Trustee shall be deemed to be the collateral agent for
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the benefit of such Person, and all proceeds shall be distributed as herein
provided.
Section 2.02. Acceptance by Trustee. (a) The Trustee shall, upon
actual receipt and subject to the provisions of Section 2.01 and the review
procedures provided for in Section 2.02(b), (i) acknowledge receipt in
writing of the Mortgage File and (ii) hold such documents and any other
documents constituting a part of the Mortgage File in trust and subject
to the conditions herein set forth, for the use and benefit of all present
and future Certificateholders and the Servicer. The Trustee has no actual
knowledge of any adverse claims, liens or encumbrances on any of the assets
to be so delivered, including without limitation, federal tax liens or liens
arising under ERISA. The Trustee may remove the Trust Fund from New York
without need of approval or consent of any person, court or party.
(b) The Trustee agrees, for the benefit of the
Certificateholders, to review the Mortgage File within 45 days (or with
respect to each document that is not delivered on the Closing Date because of
the delay at the recording office, within the later of such 45 days or seven
days after the delivery thereof to the Trustee) after the Closing Date to
ascertain that all required documents have been executed and received and
that such documents relate to the Mortgage Loan, and in so doing the
Trustee may rely on the purported due execution and genuineness of any such
document and on the purported genuineness of any signature thereon. The
Trustee shall have no responsibility for reviewing any document included in
the Mortgage File except as expressly set forth in this Section 2.02(b).
The Trustee shall be under no duty or obligation to inspect, review or
examine any such documents, instruments or certificates to determine
independently that they are genuine, enforceable, legally sufficient or
appropriate for the represented purpose, whether the text of any assignment
or endorsement is in proper or recordable form (except to determine whether
such assignment or endorsement conforms to the requirements of Section
2.01(a)), whether any document has been filed or recorded (or is required to
be filed or recorded) in accordance with the requirements of any applicable
jurisdiction, or to independently determine that any document has actually
been filed or recorded in the
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appropriate office or that any document is other than what it purports to be
on its face. The Trustee shall be under no obligation to review the
Mortgages, this Agreement or any other Loan Document or any Sub-Servicing
Agreement to determine whether any Required Insurance Policies have been
delivered or whether the Title Insurance Policy has the characteristics
specified in the definition thereof. If the Trustee finds any document
constituting a part of the Mortgage File not to have been executed or
received or to be unrelated to the Mortgage Loan or to be otherwise
missing or defective (that is, mutilated, damaged, defaced, containing
blanks, incomplete, improperly dated, clearly forged or otherwise physically
altered) in any material respect, the Trustee shall, as part of its review
conducted pursuant to the first sentence of this Section 2.02(b), notify the
Servicer, the Depositor and the Rating Agency of such fact. In addition, the
Trustee shall notify the Servicer, the Depositor and the Rating Agency if, in
the examination of the Mortgage File as specified in this Section
2.02(b) or through any other means, a Responsible Officer of the Trustee
obtains notice or knowledge (i) of any adverse claim, lien or encumbrance,
(ii) that the Mortgage Note is overdue or has been dishonored, (iii) of
evidence on the face of the Mortgage Note or the Deed of Trust of any
security interest or other right or interest therein, or (iv) of any defense
against or claim to the Mortgage Note by any party. The Depositor shall
promptly correct or cure such omission or defect within 60 days from the date
it is notified of such omission or defect to the extent the same was caused
by any act or omission of the Depositor or the Mortgagors. To the extent the
omission or defect was caused by any act or omission of a Grantor, the
Servicer shall enforce such Grantor's obligations under Section 2.03 of the
related Mortgage.
Section 2.03. Representations and Warranties of the Servicer and
the Depositor. (a) The Servicer hereby represents and warrants to the other
parties hereto, and for the benefit of each Certificateholder, that, as of
the date hereof:
(i) the Servicer is duly organized, validly existing and in good
standing under the laws of the State of Texas, with full corporate power
and authority to own its property, to carry out its business as presently
conducted and to enter into and perform its obligations under this
Agreement;
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the Servicer is either exempt under applicable law from effecting
any such authorization or qualification or is duly authorized and
qualified to transact any and all business contemplated by this
Agreement in any state in which a Mortgaged Property is located or in
any state in which, acting as Servicer, the Servicer is otherwise
required under applicable law to effect such qualification and, in
any event, is in compliance with the doing business laws of any
such state, to the extent necessary to ensure the enforceability of
the Mortgage Loan and the servicing of the Mortgage Loan,
and to perform its obligations, in accordance with the terms of
this Agreement;
(ii) the Servicer has the full power and authority to service
the Mortgage Loan, and to execute, deliver and perform, and to
enter into and consummate the transactions contemplated by, this
Agreement and has duly authorized by all necessary corporate action
on the part of the Servicer the execution, delivery and performance
of this Agreement; and this Agreement, assuming the due
authorization, execution and delivery thereof by the other parties
hereto, constitutes a legal, valid and binding obligation of the
Servicer, enforceable against the Servicer in accordance with its
terms, subject to applicable bankruptcy, reorganization,
insolvency, moratorium and other laws of general applicability
relating to or affecting the enforcement of creditors' rights
generally, and to general principles of equity (regardless of
whether enforcement of such remedies is considered in a proceeding
in equity or at law);
(iii) the execution and delivery of this Agreement by the
Servicer, the servicing of the Mortgage Loan by the Servicer,
the consummation by the Servicer of any other of the transactions
herein contemplated, and the fulfillment of or compliance with the
terms hereof, by the Servicer are in the ordinary course of
business of the Servicer and will not (1) result in a breach of any
term or provision of the charter or by-laws of the Servicer or (2)
materially conflict with, result in a material breach, violation or
acceleration of, or result in a material default under, the terms
of any other material agreement or instrument to which
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the Servicer is a party or by which it may be bound, or any law,
governmental rule, regulation, or judgment, decree or order
applicable to the Servicer of any court, regulatory body,
administrative agency or governmental body having jurisdiction over
the Servicer, and the Servicer is not a party to, bound by, or in
breach or violation of any material indenture or other material
agreement or instrument, or subject to or in violation of any
statute, order or regulation of any court, regulatory body,
administrative agency or governmental body having jurisdiction over
it, which, in any such case, materially and adversely affects, or,
to the Servicer's knowledge may in the future materially and
adversely affect, (A) the ability of the Servicer to perform its
obligations under this Agreement or (B) the business, operations,
financial condition, properties or assets of the Servicer taken as
a whole;
(iv) the Servicer is an approved conventional seller/servicer
for FNMA or FHLMC in good standing;
(v) there are no actions, suits or proceedings pending or, to
the best of the Servicer's knowledge, threatened against or
affecting the Servicer that would materially and adversely affect
the enforceability of this Agreement or the ability of the Servicer
to service the Mortgage Loan or to perform any of its other
obligations hereunder in accordance with the terms hereof;
(vi) no certificate of an officer delivered to the Depositor or the
Trustee and prepared by the Servicer pursuant to this Agreement contains
any untrue statement or material error; and
(vii) no consent, approval, authorization or order of any court or
governmental agency or body is required for the execution, delivery and
performance by the Servicer of, or compliance by the Servicer with, this
Agreement or the consummation of the transactions contemplated hereby, or
if any such consent, approval, authorization or order is required, the
Servicer has obtained the same.
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The representations and warranties of the Servicer set forth in
this Section 2.03(a) shall survive the transfer and assignment of the Mortgage
Loan to the Trustee. Upon discovery by the Trustee or any Servicing
Officer of the Servicer of a breach of any representation or warranty of
Servicer in this Section 2.03(a), the party discovering such a breach shall
promptly notify the other parties hereto and the Rating Agency. Within 60
days of the earlier of discovery by the Servicer or receipt of notice by the
Servicer of the breach of any representation or warranty of the Servicer set
forth in this Section 2.03(a), the Servicer shall cure such breach in all
material respects. The Servicer shall indemnify the Depositor and the Trustee
and hold them harmless against any loss, damages, penalties, fines,
forfeitures, legal fees and related costs, judgments, and other costs and
expenses resulting from any claim, demand, loss, defense or assertion based
on or grounded upon, or resulting from, a breach of the Servicer's
representations and warranties contained in this Section 2.03(a). Except as
set forth in Article Seven hereof, it is understood and agreed that the
enforcement of the obligation of the Servicer set forth in this Section
2.03(a) to indemnify the Depositor and the Trustee as provided in this
Section 2.03(a) constitutes the sole remedy of the Depositor and the Trustee
respecting a breach by the Servicer of the representations and warranties in
this Section 2.03(a). Such right of indemnification shall survive any
termination, resignation or removal of the Trustee as trustee, or the
Servicer as servicer hereunder, and any termination of this Agreement.
(b) The Depositor hereby represents and warrants to the other
parties hereto that, as of the date hereof:
(i) the Depositor is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, with full
power and authority to own its property, to carry on its business as
presently conducted, to enter into and perform its obligations under this
Agreement, and to create the trust pursuant hereto;
(ii) the Depositor has duly authorized by all necessary corporate
action on the part of the Depositor the execution, delivery and
performance of this Agreement; and this
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Agreement, assuming the due authorization, execution and delivery
thereof by the other parties hereto, constitutes a legal, valid and
binding obligation of the Depositor, enforceable against the
Depositor in accordance with its terms, subject to applicable
bankruptcy, reorganization, insolvency, moratorium and other laws
of general applicability relating to or affecting the enforcement
of creditors rights generally, and to general principles of equity
(regardless of whether enforcement of such remedies is considered
in a proceeding in equity or at law);
(iii) the execution and delivery of this Agreement by the
Depositor and the consummation by the Depositor of the transactions
herein contemplated, and the fulfillment of or compliance with the
terms hereof, will not (1) result in a material breach of any term
or provision of the charter or by-laws of the Depositor or (2)
materially conflict with, result in a material breach, violation or
acceleration of, or result in a material default under, the terms
of any other material agreement or instrument to which the
Depositor is a party or by which it may be bound, or any law,
governmental rule, regulation, or judgment, decree or order
applicable to the Depositor of any court, regulatory body,
administrative agency or governmental body having jurisdiction over
the Depositor, and the Depositor is not a party to, bound by, or in
breach or violation of any material indenture or other material
agreement or instrument, or subject to or in violation of any
statute, order or regulation of any court, regulatory body,
administrative agency or governmental body having jurisdiction over
it, which materially and adversely affects, or, to the Depositor's
knowledge would in the future materially and adversely affect, (A)
the ability of the Depositor to perform its obligations under this
Agreement or (B) the business, operations, financial condition,
properties or assets of the Depositor taken as a whole;
(iv) there are no actions, suits or proceedings pending or, to
the Depositor's knowledge, threatened, against or affecting the
Depositor that would materially and adversely affect the execution,
delivery or enforceability of this
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Agreement, the transfer of the Mortgage Loan or the ability of the
Depositor to perform any of its other obligations hereunder in accordance
with the terms hereof;
(v) no certificate of an officer or statement furnished in
writing or written report delivered to the Servicer or the Trustee
and prepared by the Depositor pursuant to this Agreement contains
any untrue statement of a material fact or omits to state a
material fact necessary to make the information, certificate,
statement or report not misleading;
(vi) no consent, approval, authorization or order of any court
or governmental agency or body is required for the execution,
delivery and performance by the Depositor of, or compliance by the
Depositor with, this Agreement or the consummation of the
transactions contemplated hereby, or if any such consent, approval,
authorization or order is required, the Depositor has obtained the
same;
(vii) the Depositor has the full corporate power, authority and
legal right to sell, assign and transfer the Mortgage Loan,
and is transferring the Mortgage Loan, to the Trustee as
designee free and clear of any and all liens, pledges, charges or
security interests of any nature encumbering the Mortgage Loan
which were created by it or which to its knowledge were created; and
(viii) immediately prior to the consummation of the transactions
contemplated in this Agreement, the Depositor had good title to and
was the sole owner of the Mortgage Loan free and clear of any
and all adverse claims, charges or security interests (including
liens arising under the federal tax laws or the Employee Retirement
Income Security Act of 1974, as amended) created by the Depositor.
The representations and warranties of the Depositor set forth in
this Section 2.03(b) shall survive the transfer and assignment of the Mortgage
Loan to the Trustee. Upon discovery by the Servicer or any Responsible
Officer of the Trustee of the breach of any representation or warranty of the
Depositor herein which adversely affects the interests of the
Certificateholders
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in the Mortgage Loan, the party discovering such breach shall promptly
notify the other parties hereto and the Rating Agency. If within 60 days
after delivery of such notice to the Depositor, the Depositor shall not have
caused such breach to be cured in all material respects, the Servicer, on
behalf of the Trustee, shall prosecute any legal action as may, in its
judgment, be necessary to protect the interest of the Trust Fund in
connection therewith. The Servicer shall be indemnified by the Trust Fund for
any costs and expenses incurred by it relating thereto only to the extent
such costs and expenses (including attorneys' fees) are not paid by the
Depositor as a result of such legal action, and except to the extent such
costs and expenses result from negligence or willful misconduct of the
Servicer. Any action by the Trustee, or by the Servicer on behalf of the
Trustee, against the Depositor pursuant to this Section 2.03(b) shall
constitute the sole recourse to the Trustee and the Certificateholders
against the Depositor in respect of such breach of representation or warranty.
(c) Upon discovery by any of the Depositor, the Servicer or any
Responsible Officer of the Trustee of a breach of any of the representations,
warranties and covenants of a Grantor in the related Mortgage that
materially and adversely affects the value of the Mortgage Loan or the
interests of the Certificateholders in the Mortgage Loan, the party
discovering such breach shall give prompt written notice to the other parties
hereto, the related Grantor and the Rating Agency. If within the period
prescribed in the related Mortgage, such Grantor shall not have cured
such breach in all material respects, the Servicer on behalf of the Trustee
shall prosecute any legal action as may, in its judgment, be necessary to
protect the interest of the Trust Fund in connection therewith. The Servicer
shall be indemnified by the Trust Fund for any costs and expenses incurred by
it relating to actions taken by it in the preceding sentences only to the
extent such costs and expenses (including attorneys' fees) are not paid by
the Mortgagors as a result of such legal action.
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ARTICLE THREE
ADMINISTRATION AND SERVICING OF THE MORTGAGE LOAN
Section 3.01. Servicer to Act as Servicer. For and on behalf of
the Trustee and the Certificateholders, the Servicer shall service and
administer the Mortgage Loan (including the monitoring of the Grantor's
compliance with the terms of each Mortgage, as set forth in Section 3.22
hereof) on behalf of the Trustee and in the best interests and for the
benefit of the Certificateholders (as determined by the Servicer in its
reasonable judgment) in accordance with the terms of this Agreement and the
Mortgage Loan and, to the extent consistent with such terms, in
accordance with prudent commercial mortgage loan servicing standards and
procedures generally accepted in the commercial mortgage banking industry and
generally in a manner consistent with the servicing of similar loans serviced
by the Servicer or an affiliate in its own portfolio and with a view to the
maximization of timely recovery of principal of and interest on the Mortgage
Loan but without regard to:
(i) any relationship that the Servicer, any Sub-Servicer or any
Affiliate of the Servicer or any Sub-Servicer may have with the Grantor
or any Affiliate of the Grantor, or with the Manager or any Affiliate
thereof;
(ii) the ownership of any Certificate by the Servicer or any
Affiliate of the Servicer;
(iii) the Servicer's obligations to make Advances or to incur
servicing expenses with respect to the Mortgage Loan; or
(iv) the Servicer's right to receive compensation for its services
hereunder or with respect to any particular transaction.
Subject to the above-described servicing standards (hereinafter referred to
as "Accepted Servicing Practices") and the terms of this Agreement and of the
Mortgage Loan, the Servicer shall have full power and authority, acting
alone and/or through one or more Sub-Servicers as provided in Section 3.02,
to do or cause to be
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done any and all things in connection with such servicing and administration
that it may deem necessary or desirable; provided, however, that the Servicer
shall take no action that is materially inconsistent with or materially
prejudices the interest of the Trustee or the Certificateholders in the
Mortgage Loan or the rights and interest of the Depositor, the Trustee and
the Certificateholders under this Agreement. The Servicer shall service and
administer the Mortgage Loan in accordance with applicable state and federal
law. Subject to Section 3.09, at the written request of the Servicer,
accompanied by the form of powers or other documents being requested, the
Trustee shall furnish to the Servicer and any Sub-Servicer any powers of
attorney and other documents necessary or appropriate to enable the Servicer
and any Sub-Servicer to carry out their respective servicing and
administrative duties hereunder, and the Trustee shall not be held
responsible for any acts by either the Servicer or any Sub-Servicer in their
respective uses of any such powers of attorney or other document. The
Servicer shall indemnify the Trustee and hold it harmless against any loss,
damages, penalties, fines, forfeitures, legal fees and related costs,
judgments and other costs and expenses resulting from any claim, demand,
loss, defense or assertion based on or grounded on, or resulting from the
willful misfeasance, bad faith or negligence of the Servicer with respect to
actions taken by it pursuant to any such powers of attorney or other document.
Section 3.02. Sub-Servicing Agreements. (a) The Servicer, at its
own expense without a right of reimbursement under this Agreement or
otherwise, may enter into Sub-Servicing Agreements (provided such agreements
would not result in a downgrade, qualification or withdrawal of the
then-current rating on the Regular Certificates, as evidenced by a letter to
such effect from the Rating Agency delivered to the Trustee prior to entering
into any Sub-Servicing Agreement and provided such agreements require the
Sub-Servicer to comply with all of the conditions of this Agreement) with
Sub-Servicers for the servicing and administration of all or a part of the
Mortgaged Properties. References in this Agreement to actions taken or to be
taken, and limitations on actions permitted to be taken, by the Servicer in
servicing the Mortgaged Properties include actions taken or to be taken by a
Sub-Servicer on behalf of the Servicer. Each Sub-Servicer shall be (i)
authorized to transact
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business in the State of Illinois and the Commonwealth of Virginia if and to
the extent required by applicable law to enable the Sub-Servicer to perform
its obligations hereunder and under the applicable Sub-Servicing Agreement
and (ii) qualified to service mortgage loans in accordance with FHA, FHLMC or
FNMA servicing standards. Each Sub-Servicing Agreement will be upon such
terms and conditions as are not inconsistent with this Agreement and as the
Servicer and the Sub-Servicer have agreed; provided, that any such agreement
shall, at the option of the Trustee, terminate in the event the Trustee
succeeds to the rights of the Servicer hereunder. The Servicer shall remain
solely responsible for the payment of all fees and expenses payable to any
such Sub-Servicer and such fees and expenses shall not be an expense of the
Trust Fund. For purposes of this Agreement, the Servicer shall be deemed to
have received any payment when the Sub-Servicer receives such payment. The
Servicer shall notify the Trustee and the Depositor in writing promptly upon
the appointment of any Sub-Servicer.
(b) As part of its servicing activities hereunder, the Servicer,
for the benefit of the Trustee and the Certificateholders, shall enforce the
obligations of each Sub-Servicer under the related Sub-Servicing Agreement,
including, without limitation, the obligation to make Advances in respect of
delinquent payments as required by the related Sub-Servicing Agreement. Such
enforcement, including, without limitation, the legal prosecution of claims,
termination of Sub-Servicing Agreements and the pursuit of other appropriate
remedies, shall be in such form and carried out to such an extent and at such
time as the Servicer, in its good faith business judgment, would require were
it the owner of the Mortgage Loan. The Servicer shall pay the costs of
such enforcement at its own expense and shall be reimbursed therefor only (i)
from a general recovery resulting from such enforcement only to the extent,
if any, that such recovery exceeds all amounts due in respect of the Mortgage
Loan or (ii) from a specific recovery of costs, expenses or attorneys'
fees against the party against whom such enforcement is directed.
(c) Notwithstanding any Sub-Servicing Agreement, any of the
provisions of this Agreement relating to agreements or arrangements between the
Servicer and a Sub-Servicer or reference
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to actions taken through a Sub-Servicer or otherwise, the Servicer shall
remain obligated and liable to the Trustee and Certificateholders for
servicing and administering the Mortgage Loan in accordance with the
provisions of Section 3.01 without diminution of such obligation or liability
by virtue of such Sub-Servicing Agreement or arrangements or by virtue of
indemnification from a Sub-Servicer and to the same extent and under the same
terms and conditions as if the Servicer alone were servicing and
administering the Mortgage Loan.
Section 3.03. Collection of Certain Mortgage Loan Payments.
Continuously from the date hereof until the principal of and interest on the
Mortgage Loan and all other amounts thereunder are paid in full, the
Servicer shall use its best efforts to collect all payments called for under
the terms and provisions of the Mortgage Loan and shall follow such
collection procedures as it follows with respect to commercial mortgage loans
held in its own portfolio that are comparable to the Mortgage Loan, to
the extent such procedures shall be consistent with this Agreement and the
terms of the Mortgage Loan and in accordance with Accepted Servicing
Practices. In the event that a payment default with respect to the Mortgage
Loan has occurred, if the Servicer determines that a modification,
waiver or amendment of the terms of the Mortgage Loan is reasonably
likely to produce a greater recovery on a present value basis than
liquidation of the Mortgaged Properties, then the Servicer may, but is not
required to, agree to a modification, waiver or amendment of any of the terms
of the Mortgage Loan; provided, however, that the Servicer shall not
consent to any modification with respect to the Mortgage Loan that would
change the Component Rate (including the Default Rate, as defined in the
Mortgage Note) on any Component (except that the Servicer in its sole
discretion may waive or reduce the Mortgagors' obligation to pay Additional
Interest on the Mortgage Note, provided that the Servicer has obtained a
Nondisqualification Opinion with respect to any such waiver or reduction),
change the amortization requirement, extend the maturity date of the Mortgage
Loan beyond the Scheduled Loan Maturity Date (except to the extent
provided, if at all, in the applicable Mortgage), forgive any principal
thereof or interest thereon or (except as expressly provided in each Mortgage)
modify the applicable Grantor's obligations to fund the Sub-Accounts,
unless the Servicer has notified the
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Trustee and the Certificateholders of such proposed modification, such
modification has been approved by 100% of the Certificateholders affected by
such modification or amendment and the Servicer has obtained a
Nondisqualification Opinion with respect to such modification or amendment.
In connection with any Mortgage Loan modification that is described in
the preceding sentence, following a Mortgage Loan Event of Default, the
Servicer shall be entitled to receive a fee (a "Modification Fee") equal to
the product of (i) the principal balance of the Mortgage Loan as of the
immediately preceding Distribution Date and (ii) 0.25%.
Section 3.04. Establishment of the Central Account, the Servicer
Collection Account, the Certificate Account, the Rent Accounts and the
Default Interest Account. (a)(i) On or before the Closing Date, the Servicer
shall establish the Central Account pursuant to the Mortgages. The Servicer
shall make deposits to and withdrawals from the Central Account in accordance
with each Mortgage. The Central Account shall relate solely to the
Certificates issued by the Trust Fund hereunder, and funds in the Central
Account shall not be commingled with any other moneys. The Servicer shall
take all required action to assure that the Trustee shall have the right to
withdraw funds from such account if the Servicer shall fail to make a timely
withdrawal required pursuant to the terms of this Agreement. The Servicer
shall notify the Trustee and the Depositor in writing of the location and
account number of the Central Account and shall not change such location or
account number until prior written notice of the new location or account
number has been delivered to the Trustee and the Depositor. Neither the
Central Account (or any Sub-Account thereof) nor any funds on deposit therein
shall be part of the Trust Fund or the Trust REMIC. The rights of the Trustee
under the Loan Documents with respect to funds on deposit in the Central
Account shall not be part of the Trust REMIC but shall be part of the Trust
Fund.
(ii) Funds in the Central Account shall be invested by the
Servicer in Permitted Investments in accordance with the provisions of each
Mortgage. Any fees charged for cash management services by the
institution where the Central Account is maintained will be paid by each
Grantor pursuant to the related Mortgage.
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(iii) To the extent the Servicer receives any funds described in
clauses (A) through (D) below, after receipt thereof, the Servicer shall
deposit such amounts into the Central Account and allocate them to the Debt
Service Payment Sub-Account (x) on the Business Day following receipt (in the
case of items (A), (B) and (C) below), or (y) in the case of item (D) below
or unscheduled remittances of principal or interest, on the Business Day
following identification of the proper application of such amounts:
(A) amounts received from a Grantor to be applied to
payments on account of principal, including Principal Prepayments and the
principal component of Monthly Payments, on the Mortgage Loan;
(B) amounts received from a Grantor to be applied to
payments on account of interest on the Mortgage Loan;
(C) all Loss Proceeds (other than proceeds required to be
applied to the restoration of a Mortgaged Property or released to the
related Grantor in accordance with the related Mortgage); and
(D) amounts received from a Grantor to be applied to
Prepayment Premiums.
(iv) The Servicer may at any time withdraw from the Central Account
the following amounts for the following purposes (except that the Servicer may
withdraw such amounts from funds already allocated to a Sub-Account (other than
the Debt Service Payment Sub-Account or the Curtailment Reserve Sub-Account) to
the extent, but only to the extent, any of such following amounts constitutes a
Nonrecoverable Advance and may in no event withdraw any such amounts from the
Basic Carrying Costs Sub-Account):
(A) to reimburse the Fiscal Agent, the Trustee and itself, in
that order, for any Advance made by any of them that has not previously
been reimbursed to them, including any Advance previously made that the
Person that
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made such Advance determines to be a Nonrecoverable Advance, plus
interest thereon accrued at the Advance Rate;
(B) to reimburse itself for expenses advanced pursuant
to this Agreement that are reimbursable from payments by either
Grantor, including, but not limited to, insurance premiums,
appraisal fees and collection fees previously due and unpaid, plus
interest on each of the foregoing amounts accrued at the Advance
Rate;
(C) to reimburse the Fiscal Agent, the Trustee and
itself, in that order, for any amounts reimbursable pursuant to the
terms of the Mortgage Loan and not previously reimbursed
pursuant to subsection (A) or (B) above, including interest at the
Advance Rate;
(D) in the event that a Special Servicer has been
appointed hereunder, to pay to the Special Servicer the Special
Servicing Fee;
(E) to pay itself any Servicing Fee (other than the
Servicing Fee for the current month) previously due and unpaid,
plus interest thereon accrued at the Advance Rate; and
(F) to pay itself or the Special Servicer, as the case
may be, any Modification Fees and Liquidation Fees owed to such
Person.
(v) On each Payment Date with respect to the amounts set forth in
clauses (a)(v)(A), (a)(v)(B) and (a)(v)(C) below, and on the Business Day
prior to the related Distribution Date with respect to all other amounts set
forth below in this clause (a)(v), the Servicer shall withdraw from the
Central Account, in the following order of priority, the following amounts
for the following purposes (provided that no amount shall be counted more
than once), in each case to the extent of the amounts on deposit therein
after withdrawal therefrom of all amounts payable pursuant to clause (a)(iv)
above (except that the Servicer may in no event withdraw any such amounts
from the Basic Carrying Costs Sub-Account):
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(A) to pay to Persons entitled thereto any sums deposited in
error in the Central Account;
(B) to pay to itself the Servicing Fee for the related
Distribution Date from funds on deposit in the Debt Service Payment
Sub-Account;
(C) to pay or reimburse the Servicer, the Fiscal Agent, the
Trustee and the Depositor for any other amounts reimbursable pursuant to
the terms of the Mortgage Loan and not previously paid or reimbursed
pursuant to subsection (iv) above, including all Advances and interest
thereon at the Advance Rate;
(D) to pay (or set aside for eventual payment) any and all
taxes imposed on the Trust REMIC by federal or state governmental
authorities to the extent such taxes have not been paid pursuant to
Article X;
(E) following the appointment of a Successor Manager, to pay
to the Successor Manager the Management Fee;
(F) to make payment to the Trustee, for deposit into
the Certificate Account, of all funds on deposit in the Debt
Service Payment Sub-Account and the Curtailment Reserve Sub-Account
(excluding any Default Rate Interest) remaining after giving effect
to any withdrawals therefrom pursuant to clause (a)(iv) and any
withdrawals therefrom pursuant to this clause (a)(v) of this
Section 3.04;
(G) to make payment to the Trustee, for deposit into
the Default Interest Account, of all funds on deposit in the Debt
Service Payment Sub-Account representing payments on the Mortgage
Note applied to Default Rate Interest during the related
Interest Accrual Period less amounts thereof retained by the
Servicer for payment of accrued and unpaid interest on P&I
Advances. Notwithstanding any other provisions in this Agreement,
Default Rate Interest paid under the Mortgage Note shall be
applied by the Servicer only to the payment of interest on P&I
Advances or for transfer to the Default Interest Account; and
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(H) to clear and terminate the Central Account pursuant to
Section 9.01.
Amounts withdrawn from the Central Account to make the payments
set forth in clauses (a)(v)(B) through (a)(v)(F) above shall be withdrawn,
first from amounts allocated to the Debt Service Payment Sub-Account, second,
after the Balloon Anticipated Repayment Date, from amounts allocated to the
Curtailment Reserve Sub-Account to the extent funds on deposit therein are
made available to make payments on the Mortgage Loan Principal Balance
and other amounts payable on the Mortgage Note after the Mortgage
Loan Principal Balance has been reduced to zero, or are required to be made
so available pursuant to Section 5.11 of each Mortgage and, third, from
any other amounts on deposit in the Central Account including amounts
allocated to any Sub-Account (other than the Basic Carrying Costs
Sub-Account) at the discretion of the Servicer but, in the case of this
clause third, only to the extent funds withdrawn pursuant to clauses first
and second above, plus any P&I Advance to be made as of the close of business
on the related Servicer Advance Date with respect to such Payment Date, are
less than the Required Debt Service Payment for the related Payment Date.
The Servicer shall keep and maintain separate accounting, on a
Mortgaged-Property-by-Mortgaged-Property basis, for the purpose of justifying
any withdrawal from the Central Account and determining any shortfall or
overpayment of any amounts due from or on behalf of each Mortgagor or each
Mortgaged Property. All Advances shall be repaid in the order in which
originally advanced, and Advances owed to any prior Servicer shall be repaid in
full, with interest, prior to the repayment of Advances made by the successor
Servicer.
(b)(i) If a Mortgage Loan Event of Default occurs, the Servicer
shall establish the Servicer Collection Account. The Servicer Collection Account
shall at all times be an Eligible Account and shall relate solely to the
Certificates, and funds in the Servicer Collection Account shall not be
commingled with any other moneys. The Servicer shall take all required action to
assure that the Trustee shall have the right to withdraw funds
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from such account if the Servicer fails to make a timely withdrawal required
pursuant to the terms of this Agreement. The Servicer shall notify the Trustee
and the Depositor in writing of the location and account number of the Servicer
Collection Account and shall not change such location or account number until
prior written notice of the new location or account number has been delivered to
the Trustee and the Depositor. The Servicer Collection Account and all funds on
deposit therein shall be part of the Trust Fund and the Trust REMIC. The
Servicer shall deposit into the Servicer Collection Account on the Business Day
following receipt the following amounts received by it:
(A) all Liquidation Proceeds net of applicable Servicing
Fees;
(B) all amounts received by it as rental income on any
Foreclosed Property; and
(C) all amounts required to be deposited by the Servicer
pursuant to Sections 3.06(a) and 3.06(b).
(ii) The Servicer shall make withdrawals from the Servicer Collection
Account only for the following purposes and to the extent withdrawals of the
same amounts have not previously been made from the Central Account:
(A) to withdraw amounts deposited therein in error and to pay
such amounts to the Persons entitled thereto;
(B) to make payment to the Trustee, for deposit into the
Certificate Account, of all funds on deposit in the Servicer Collection
Account remaining after giving effect to any withdrawals therefrom
pursuant to clauses (A), (C), (D) and (E) of this Section 3.04(b)(ii);
(C) in the event that a Special Servicer has been appointed
hereunder, to pay to the Special Servicer the Special Servicing Fee (to
the extent not paid pursuant to Section 3.04(a)(iv)(D));
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(D) to pay itself or the Special Servicer, as the case may be,
any Modification Fees and Liquidation Fees owed to it (to the extent not
paid pursuant to Section 3.04(a)(iv)(F)) and to reimburse itself or the
Special Servicer, as the case may be, from Liquidation Proceeds with
respect to a Mortgaged Property for Liquidation Expenses or other expenses
of disposing of such Mortgaged Property, including interest thereon at the
Advance Rate, incurred in connection with such Mortgaged Property;
(E) to pay or reimburse the Servicer, the Fiscal Agent, the
Trustee and the Depositor for any other amounts reimbursable pursuant to
the terms of the Mortgage Loan and not previously paid or reimbursed
pursuant to Section 3.04(a), including all Advances and interest thereon
at the Advance Rate; and
(F) to clear and terminate the Servicer Collection Account
pursuant to Section 9.01.
Funds in the Servicer Collection Account may be invested by the
Servicer in Permitted Investments maturing or redeemable no later than the
Business Day preceding the Distribution Date upon which such amounts are to be
distributed. All income and gain (net of any losses) shall be held in such
account for distribution to the Servicer pursuant to Section 3.12. The Trustee
shall not be liable for any losses incurred on such Permitted Investments.
(c) On or before the Closing Date, the Trustee shall establish the
Certificate Account. The Certificate Account shall at all times be an Eligible
Account and shall relate solely to the Certificates, and the Paying Agent and
the Trustee shall have the exclusive right to withdraw funds therefrom. The
Certificate Account shall be part of both the Trust REMIC and the Trust Fund.
The Trustee shall deposit into the Certificate Account, on the Business Day
received, all moneys remitted by the Servicer pursuant to Section 3.04(a)(v)(F)
(other than collections on the Mortgage Loan in respect of Default Rate
Interest) and Section 3.04(b)(ii)(B) on each Servicer Advance Date all Advances
with respect to the related Distribution Date. The Paying Agent and
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Trustee shall make withdrawals from the Certificate Account only for the
following purposes:
(i) to withdraw amounts deposited in the Certificate Account
in error and pay such amounts to the Persons entitled thereto;
(ii) to pay to itself the Trustee Fee for the related
Distribution Date to the extent not remitted to it by the Servicer
pursuant to Section 8.05;
(iii) to reimburse the Trustee for the cost of any
Nondisqualification Opinion reimbursable pursuant to this Agreement as a
Trust Fund expense and not previously reimbursed;
(iv) to make distributions to the Certificateholders pursuant
to Section 4.01 (other than in respect of Default Rate Interest); and
(v) to clear and terminate the Certificate Account pursuant to
Section 9.01.
Funds in the Certificate Account shall be retained therein by the
Trustee and shall not be invested.
(d) On or before the Closing Date, the Trustee shall establish the
Default Interest Account. The Default Interest Account shall at all times be an
Eligible Account and shall relate solely to the Regular Certificates, and the
Trustee shall have the exclusive right to withdraw funds therefrom. The Default
Interest Account shall be an asset of the Trust Fund but not of the Trust REMIC.
The Trustee shall deposit into the Default Interest Account, on the Business Day
received, all moneys remitted from the Debt Service Payment Sub-Account by the
Servicer pursuant to Section 3.04(a)(v)(G), representing Default Rate Interest
payable under the Mortgage Loan less amounts retained by the Servicer for
payment of accrued and unpaid interest on P&I Advances. The Trustee shall make
withdrawals from the Default Interest Account only for the following purposes:
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(i) to withdraw amounts deposited in the Default Interest
Account in error and to pay such amounts to the Person entitled thereto;
and
(ii) to make distributions to the holders of Regular
Certificates pursuant to Section 4.01(b).
Funds in the Default Interest Account shall be retained therein by the
Trustee and shall not be invested.
(e) On or before the Closing Date, the Servicer shall establish the
Rent Accounts pursuant to the Mortgages. Funds in each Rent Account shall be
transferred to the Central Account in accordance with the terms of the
Mortgages. The Rent Accounts shall relate solely to the Certificates issued by
the Trust Fund hereunder, and funds in the Rent Accounts shall not be commingled
with any other moneys. The Servicer shall take all required action to assure
that the Trustee shall have the right to withdraw funds from the Rent Accounts
if the Servicer fails to cause timely transfers to be made from the Rent
Accounts to the Central Account pursuant to the terms of the Mortgages. The
Servicer shall notify the Trustee and the Depositor in writing of the location
and account number of the Rent Accounts and shall not change such location or
account number until prior written notice of the new location or account number
has been delivered to the Trustee and the Depositor. Neither the Rent Accounts
nor any funds on deposit therein shall be part of the Trust Fund or
the Trust REMIC. The rights of the Trustee under the Loan Documents with respect
to funds on deposit in the Rent Accounts shall not be part of the Trust REMIC
but shall be part of the Trust Fund.
(f) The foregoing requirements for deposit in the Central Account
(including the Debt Service Payment Sub-Account therein), the Servicer
Collection Account, the Certificate Account and the Default Interest Account
shall be exclusive, it being understood and agreed that, without limiting the
generality of the foregoing, payments in the nature of charges for beneficiary
statements, demand fees and other similar charges payable by the Mortgagors need
not be deposited by the Servicer in the Servicer Collection Account, the
Certificate Account or the Default Interest Account. All funds deposited by the
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Servicer in the Central Account (including the Debt Service Payment Sub-Account
therein), the Servicer Collection Account, the Certificate Account or the
Default Interest Account shall be held in trust for the benefit of the
Mortgagors or the Certificateholders, as their interests may appear, until
disbursed or withdrawn in accordance herewith or in accordance with each
Mortgage. Except as expressly permitted or required hereunder, the Servicer
shall not sell, transfer or assign to any Person any interest (including any
security interest) in amounts credited or to be credited to the Central Account
(including the Debt Service Payment Sub-Account therein), the Servicer
Collection Account, the Certificate Account or the Default Interest Account, or
take any action towards that end, and shall maintain such amounts free of all
liens, claims and encumbrances of any nature (other than liens created pursuant
to this Agreement and the Loan Documents).
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Section 3.05. Collection of Impositions, etc.; Escrow Account.
(a) If under the terms of the Loan Documents the Servicer shall be required
to establish escrow or impound accounts in addition to the Basic Carrying
Costs Sub-Account and any other fund or account expressly created under the
Mortgages, the Servicer shall, in addition to the Central Account, and
pursuant to any Sub-Servicing Agreement with a Sub-Servicer, the Sub-Servicer
will be required to, establish and maintain one or more custodial accounts,
each of which shall be an Eligible Account, or an account designated by the
Mortgagor if the Mortgage Loan so requires (each, an "Escrow Account") and
shall deposit therein any collections of amounts received with respect to
costs due for the account of the Mortgagor and in respect of which such account
was established. Subject to the terms of the Mortgage Note and the
Mortgages and further subject to applicable law, any funds in any Escrow
Account shall be invested in Permitted Investments that mature prior to the
date on which payments have to be made out of the related Escrow Account and
any such Permitted Investment shall not be sold or disposed of prior to its
maturity. Withdrawals from any Escrow Account may be made (to the extent
permitted by the Loan Documents) only (i) to effect timely payment of such
costs in connection with the Mortgage Loan, (ii) to reimburse the
Servicer or a Sub-Servicer out of related collections for advances with
respect to such costs, (iii) to refund to the Mortgagor any sums determined to
be overages, (iv) to pay interest, if any, owed to Mortgagor on such accounts
to the extent required by law or the Mortgage Loan or (v) to clear and
terminate such Escrow Accounts on the termination of this Agreement.
(b) The Servicer shall maintain accurate records with respect to
each Mortgaged Property reflecting the status of Basic Carrying Costs and other
similar items that are or may become a lien thereon and the status of
insurance premiums payable in respect of Required Insurance Policies, and, if
applicable, ground rent, payable in respect thereof. The Servicer shall
obtain, from time to time, all bills for the payment of such items (including
renewal premiums). The Servicer shall effect payment of all such bills prior
to the applicable penalty or termination date, employing for such purpose
amounts available in any account established for such purpose under either
Mortgage or in the Escrow Account as allowed under the terms of the Deed
of Trust
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Loan. If such bills are not paid either by the Mortgagors or from amounts on
deposit in any such account, as the case may be, the Servicer shall advance from
its own funds amounts payable with respect to all such items related to any
Mortgaged Property when and as the same shall become due and payable, which
advance shall constitute a Carrying Costs Advance. Nothing in this Section shall
be deemed to require the Servicer to make a Nonrecoverable Advance.
Section 3.06. Maintenance of Insurance and Errors and Omissions and
Fidelity Coverage. (a) The Servicer shall cause to be maintained for each
Mortgaged Property all insurance required by the terms of each Mortgage in the
amounts set forth therein. The Servicer shall also cause all such insurance to
be maintained on any Foreclosed Property. Pursuant to Section 3.04, any amounts
collected by the Servicer under any such policies (other than amounts to be
applied to the restoration or repair of the related Mortgaged Property or
Foreclosed Property or amounts released to the related Mortgagor in accordance
with the terms of the related Mortgage) shall be deposited in the Central
Account (or the Servicer Collection Account, in the case of amounts collected
under policies covering Foreclosed Property). All costs for premiums for
insurance coverage obtained by the Servicer shall be reimbursable to the
Servicer as a Carrying Costs Advance. All policies required hereunder shall be
endorsed with standard mortgagee clauses with loss payable to the Trustee and to
the Servicer for the benefit of the Trustee, and shall provide for at least 30
days' prior written notice of any cancellation, reduction in amount or material
change in coverage to the Trustee and the Servicer. The Servicer shall not
interfere with the Mortgagors' freedom of choice in selecting either its
insurance carrier or agent; provided, however, that if permitted by applicable
State law, as applicable, the Servicer shall not accept any such insurance
policies from insurance companies unless such companies, at the time of
selection of such companies and at the time of renewal of such insurance
policies, are acceptable under Accepted Servicing Practices and the Mortgages.
Nothing in this Section shall be deemed to require the Servicer to make a
Nonrecoverable Advance.
(b) In the event that the Servicer shall obtain and maintain a
blanket policy insuring against hazard losses on all
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of the Mortgaged Properties with an insurer (i) that is rated by A.M Best
Company A+:X or higher and (ii) (A) the claims paying ability of which has been
rated at least "AA" by the Rating Agency or (B) the use of which would not, in
and of itself, cause a downgrade, qualification or withdrawal of the then
current ratings assigned to any Class of Regular Certificates, the Servicer
shall conclusively be deemed to have satisfied its obligations as set forth in
Section 3.06(a), it being understood and agreed that such policy may contain a
deductible clause, in which case the Servicer shall, in the event a policy
complying with Section 3.06(a) shall not have been maintained on the related
Mortgaged Property and a loss shall occur that would have been covered by such
policy, deposit in the Servicer Collection Account out of its own funds the
amount not otherwise payable under the blanket policy because such deductible
clause is in excess of the deductible clause contained in a policy obtained
under Section 3.06(a). Any such deposit by the Servicer shall be made on the
Servicer Advance Date preceding the Distribution Date upon which the proceeds
represented by such deposit are required to be distributed to
Certificateholders. In connection with its activities as administrator and
servicer of the Mortgage Loan, the Servicer agrees to present, on behalf of
itself, the Trustee and Certificateholders, claims under any such blanket
policy.
(c) The Servicer (or, if a subsidiary of the Servicer is acting as
Sub-Servicer, such Sub-Servicer) shall obtain and maintain at its own expense,
and keep in full force and effect throughout the term of this Agreement, a
blanket fidelity bond and an errors and omissions insurance policy covering its
officers and employees and other persons acting on its behalf in connection with
its activities under this Agreement. Such insurance shall be maintained with an
insurer (A) the claims paying ability of which has been rated at least "AA" by
the Rating Agency or (B) the use of which would not, in and of itself, cause a
downgrade, qualification or withdrawal of the then current ratings assigned to
any Class of Regular Certificates. The amount of coverage shall be at least
equal to the coverage that is required by FNMA or FHLMC, whichever is greater,
with respect to the Servicer or the Sub-Servicer if the Servicer or the
Sub-Servicer were servicing and administering the Mortgage Loan for FNMA or
FHLMC in addition to other mortgage loans then being serviced and administered
by the Servicer. In
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the event that any such bond or policy ceases to be in effect, the Servicer
shall obtain a comparable replacement bond or policy. Coverage of the Servicer
under a policy or bond that is obtained by an Affiliate of the Servicer and that
provides the coverage and continues for the term required by this Section shall
satisfy the requirements of this Section. No provision of this Section requiring
such fidelity bond and errors and omissions insurance shall diminish or relieve
the Servicer from its duties and obligations as set forth in this Agreement. The
Servicer shall deliver or cause to be delivered to the Trustee, upon its
reasonable request, a certificate of insurance from the surety, insurer or
insurance broker and Servicer covenants that it will not terminate or materially
modify any such bond or policy without 30 days' prior written notice to the
Trustee. Notwithstanding the foregoing, the Servicer shall be entitled to
provide self insurance with respect to its obligation to maintain the blanket
fidelity bond and, only so long as the long-term unsecured debt obligations of
the Servicer are rated at least "AA" by the Rating Agency, the Servicer shall be
entitled to provide self-insurance with respect to its obligation to maintain an
errors and omissions insurance policy.
Section 3.07. "Due-on-Sale" Clauses; Assumption Agreements. (a) To
the extent the Mortgage Loan contains enforceable "due-on-sale" or
"due-on-encumbrance" clauses, the Servicer shall enforce such clauses upon
receipt of knowledge by a Servicing Officer of any such sale or encumbrance.
(b) Notwithstanding the foregoing or any other provision of this
Agreement, the Servicer shall not be deemed to be in default, breach or any
other violation of its obligations hereunder by reason of any conveyance by a
Mortgagor of the related Mortgaged Property or any assumption of the Mortgage
Loan by operation of law which the Servicer in good faith determines it may be
restricted by law from preventing.
(c) If the "due-on-sale" or "due-on-encumbrance" clause will not be
exercised pursuant to Section 3.07(a) above, the Servicer shall make reasonable
efforts to enter into an assumption and modification agreement with the Person
to whom the related Mortgaged Property has been or is about to be conveyed,
pursuant to which such Person becomes liable under the Mortgage
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Note, and, unless prohibited by applicable state law, the related Mortgagor
remains liable thereon. If the continued liability of such Mortgagor is
prohibited by applicable state law, the Servicer is hereby authorized to enter
into a substitution of liability agreement with such Person pursuant to which
such Mortgagor is released from liability and such Person is substituted as
mortgagor with respect to such Mortgaged Property and becomes liable under the
Mortgage Note.
Section 3.08. Realization Upon Mortgaged Properties. (a) The
Servicer shall, consistent with Accepted Servicing Practices and the
provisions of each Mortgage, and in the name of and on behalf of the
Trustee, promptly and diligently exercise the Trustee's remedies under such
Mortgage upon the occurrence of a Mortgage Loan Event of Default
thereunder, as permitted under such Mortgage. Notwithstanding the
foregoing, the Servicer shall promptly commence foreclosure following the
Scheduled Loan Maturity Date, unless prior to that time the term of the
Mortgage Loan has been extended with approval of Certificateholders holding
100% of the Voting Rights and the Servicer has received a Nondisqualification
Opinion with respect to such extension. In connection with such foreclosure
or other conversion, the Servicer shall follow such practices and procedures
as it shall deem necessary or advisable and as shall be normal and usual in
its general commercial mortgage loan servicing activities for third parties
and as are consistent with Accepted Servicing Practices. The foregoing is
subject to the provision that the Servicer shall be required to make a
Carrying Costs Advance to restore property damaged by an Uninsured Cause only
if the Servicer determines that such restoration will increase the
Liquidation Proceeds to the Certificateholders after reimbursement to itself
for such expenses and such Carrying Costs Advance would not be a
Nonrecoverable Advance. The Servicer shall advance all other costs and
expenses incurred by it in any such proceedings as a Carrying Costs Advance.
(b) Notwithstanding the foregoing, the Servicer shall not acquire
for the benefit of the Trust Fund any personal property pursuant to this Section
3.08 unless either:
(i) such personal property is incidental to real property
(within the meaning of Section 856(e)(1) of the
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Code) so acquired by the Servicer for the benefit of the Trust Fund; or
(ii) the Servicer shall have requested and received a
Nondisqualification Opinion, the cost of which shall be advanced as a
Carrying Costs Advance, with respect to the holding of such property.
(c) The Servicer shall not, on behalf of the Trust Fund, obtain
title to either Mortgaged Property as a result or in lieu of foreclosure or
otherwise, and shall not otherwise acquire possession of, or take any other
action with respect to, such Mortgaged Property, if, as a result of any such
action, the Trustee, on behalf of the Trust Fund, would be considered to hold
title to, to be a "mortgagee-in-possession" of, or to be an "owner" or
"operator" of such Mortgaged Property within the meaning of CERCLA or any
applicable comparable federal, state or local law, or a "discharger" or
"responsible party" thereunder, unless the Servicer has also previously
determined in accordance with Accepted Servicing Practices, based on a report
prepared by an Independent Person who regularly conducts environmental site
assessments in accordance with the standards of FNMA for environmental
assessments, that:
(i) such Mortgaged Property is in compliance with applicable
Environmental Laws or, if not, that taking such actions as are necessary
to bring such Mortgaged Property in compliance therewith is reasonably
likely to produce a greater recovery on a present value basis than not
taking such actions; and
(ii) such report has identified no circumstances present at such
Mortgaged Property relating to the use, management or disposal of any
Hazardous Materials, hazardous substances, hazardous wastes or
petroleum-based materials for which investigation, testing, monitoring,
containment, clean-up or remediation could be required under any federal,
state or local law or regulation, or that, if any such conditions exist,
taking such actions with respect to the affected Mortgaged Property is
reasonably likely to produce a greater recovery on a present value basis
than not taking such actions.
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If the Servicer has so determined based on satisfaction of the
criteria in this Section 3.08(c) that it would be in the best economic interest
of the Trust Fund to take any such actions, the Servicer shall notify the
Trustee in writing setting forth in reasonable detail the reasons for its
determination, and the Trustee, in turn, shall send a copy of such report to the
Certificateholders and the Rating Agency notifying them of their right to object
to such proposed action. Such proposed action shall be taken unless the Trustee
shall have received and delivered to the Servicer, within 30 days after the
Trustee shall have sent such report to the Certificateholders, written
instructions from the Holders evidencing, in the aggregate, at least a majority
of the Voting Rights of the Regular Certificates, directing the Servicer not to
take such action. If the Servicer determines that taking such actions as are
necessary to bring the Mortgaged Properties into compliance with applicable
environmental laws, or taking such actions with respect to the containment,
clean-up, removal or remediation of hazardous substances, hazardous materials,
hazardous wastes, or petroleumbased materials affecting the Mortgaged
Properties, is not reasonably likely to produce a greater recovery on a present
value basis than not taking such actions, the Servicer shall notify the Trustee
in writing setting forth in reasonable detail the reasons for its determination
and any action that it determines to take, and the Trustee, in turn, shall
notify the Certificateholders of their right to give contrary direction;
provided, however, that the Servicer will not be obligated to advance from its
own funds the cost of any such compliance, containment, clean-up or remediation.
The Servicer shall take such alternative action as it deems to be in the best
economic interests of the Trust Fund, consistent with Accepted Servicing
Practices, including, without limitation, releasing the lien of the Mortgages
with respect to the Mortgaged Properties, unless the Trustee has received and
delivered to the Servicer within 30 days after such notification to the
Certificateholders, contrary directions from the Certificateholders evidencing,
in the aggregate, at least a majority of the Voting Rights.
(d) The environmental site assessments contemplated by Section
3.08(c) shall be prepared by any Independent Person who regularly conducts
environmental site assessments for purchasers
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of comparable properties, as determined by the Servicer in a manner consistent
with Accepted Servicing Practices. The cost of preparation of any environmental
assessment shall be advanced by the Servicer as a Carrying Costs Advance,
subject to the provisions of Section 3.18(d).
(e) If the Servicer determines, pursuant to Section 3.08(c), that
taking such actions as are necessary to bring any Mortgaged Property into
compliance with applicable Environmental Laws or taking such actions with
respect to the containment, clean-up, removal or remediation of Hazardous
Materials, hazardous substances, hazardous wastes or petroleum-based
materials affecting any such Mortgaged Property is not reasonably likely to
produce a greater recovery on a present value basis than not taking such
actions, and the Trustee has not received contrary directions from
Certificateholders as set forth in the last paragraph of Section 3.08(c),
then the Servicer shall take such action as it deems to be in the best
economic interests of the Trust Fund, including without limitation releasing
the lien of the Mortgage with respect to the affected Mortgaged Property.
Section 3.09. Trustee to Cooperate; Release of Items in Mortgage
File. From time to time and as appropriate for the servicing or
foreclosure of any Mortgaged Property, the Trustee shall, upon request of the
Servicer and delivery to the Trustee of a trust receipt in the form of
Exhibit I hereto executed by a Servicing Officer, release or cause to be
released any items from the Mortgage File to the Servicer. The Trustee,
upon receipt of written instructions executed by a Servicing Officer and
satisfactory to the Trustee, shall execute such documents furnished to it as
shall be necessary to the prosecution of any such proceedings. Such trust
receipt shall obligate the Servicer to return such items to the Trustee when
the need therefor by the Servicer no longer exists.
Section 3.10. Title and Management of Foreclosed Property. (a) In
the event that title to any Mortgaged Property is acquired by the Servicer for
the benefit of Certificateholders in foreclosure or by deed in lieu of
foreclosure or otherwise, the deed or certificate of sale shall be taken in the
name of the Trustee, or its nominee, on behalf of the Certificateholders. The
Servicer shall consult with counsel to determine when an
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Acquisition Date shall be deemed to occur under the REMIC Provisions with
respect to any Mortgaged Property and shall notify the Trustee in writing of the
date so determined. The Servicer, on behalf of the Trust Fund, shall sell any
Foreclosed Property as expeditiously as possible, but in all events within the
time period and subject to the conditions set forth in Section 10.02. Subject to
Section 10.02, the Servicer shall manage, conserve, protect and operate each
Foreclosed Property for the Certificateholders solely for the purpose of its
prompt disposition and sale, including acting as or appointing a Successor
Manager. In connection with such management, the Successor Manager shall be
entitled to the related Management Fee solely from the Trust Fund. The Servicer
shall not be liable for the acts or omissions of the Successor Manager.
(b) If the Trust Fund acquires any Foreclosed Property, the Servicer
shall have full power and authority, subject only to the specific requirements
and prohibitions of this Agreement and Accepted Servicing Practices, to do any
and all things in connection therewith for the benefit of the Trust Fund, all on
such terms and for such period as the Servicer deems to be in the best interest
of Certificateholders, and shall pay from funds on deposit in the Servicer
Collection Account or, to the extent such funds are insufficient, shall advance
as a Carrying Costs Advance:
(i) all insurance premiums due and payable in respect of such
Foreclosed Property;
(ii) all Impositions in respect of such Foreclosed Property
that could result or have resulted in the imposition of a lien thereon;
(iii) all ground rental payments, if applicable, with respect
to the Foreclosed Property; and
(iv) all costs and expenses necessary to maintain such
Foreclosed Property,
if, but only if, such advance would not be a Nonrecoverable Advance.
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(c) The Servicer, in the name of the Trustee, may contract with any
Successor Manager for the operation and management of any Foreclosed Property,
provided that no such contract shall impose individual liability on the Trustee
or the Servicer, and provided further that:
(i) the terms and conditions of any such contract shall not be
inconsistent herewith (including those set forth in the definition of
Management Fee);
(ii) any such contract shall require, or be administered to
require, that the Successor Manager (A) pay from revenues of the
Foreclosed Property all Operating Expenses incurred in connection with the
operation and management of the Foreclosed Property and (B) deposit on a
daily basis all Net Operating Income into the Servicer Collection Account;
(iii) none of the provisions of this Section 3.10(c) relating to
any such contract or to actions taken by any such Successor Manager shall
be deemed to relieve the Servicer of any of its duties and obligations to
the Trustee on behalf of Certificateholders with respect to the operation
and management of any such Foreclosed Property; and
(iv) the Servicer shall be obligated with respect thereto to the
same extent as if it alone were performing all duties and obligations in
connection with the operation and management of such Foreclosed Property.
The Servicer in the name of the Trustee on behalf of the Trust Fund shall be
entitled to enter into an agreement with any Successor Manager performing
services for it related to its duties and obligations hereunder for
indemnification of the Servicer by such Successor Manager, and nothing in this
Agreement shall be deemed to limit or modify such indemnification. All
Management Fees shall be an expense of the Trust Fund subject to reimbursement
pursuant to Section 3.04(a)(v)(E). The Servicer agrees to monitor the
performance of the Successor Manager and to enforce the obligations of the
Successor Manager on behalf of the Trustee in accordance with Accepted Servicing
Practices.
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Expenses incurred by the Servicer in connection herewith shall qualify as
Carrying Costs Advances. The Successor Manager shall not be deemed to be a
subservicer or agent of the Servicer. The agreement with the Successor Manager
may also provide for the indemnification of the Successor Manager by the Trust
Fund for any losses, claims or expenses suffered or incurred by the Successor
Manager other than such losses, claims or expenses resulting from the willful
misfeasance, bad faith or negligence of the Successor Manager.
Section 3.11. Sale of Foreclosed Properties. (a) At the time of
acquisition of any Foreclosed Property by the Trust Fund, the Servicer, as a
Carrying Costs Advance, shall on behalf of the Trust Fund obtain an appraisal of
the Foreclosed Property from an Appraiser approved by the Trustee in order to
determine the fair market value of the Foreclosed Property, shall provide copies
of such appraisal to the Trustee, the Depositor and the Rating Agency. The
Servicer may offer to sell to any Person any Foreclosed Property, if and when
the Servicer determines, consistent with Accepted Servicing Practices, and the
Trustee, consistent with Section 9.01, agrees, that such a sale would be in the
best economic interests of the Trust Fund, but shall, in any event, so offer to
sell any Foreclosed Property no later than the time determined by the Servicer
to be sufficient to result in the sale of such Foreclosed Property on or prior
to the date specified in Section 10.02. The Servicer shall give the Trustee
not less than five days' prior notice of its intention to sell any Foreclosed
Property and shall accept the highest bid received from any Person (which Person
shall certify in its bid as to whether it is an Interested Person) for any
Foreclosed Property in an amount at least equal to the sum of:
(i) the Allocated Loan Amount with respect to the related
Mortgaged Property; and
(ii) all unpaid interest accrued thereon at the highest
Component Rate in effect from time to time through the date of sale with
respect to each Component.
In the absence of any such bid, the Servicer shall take the following actions,
so long as, in each case, such actions taken by the Servicer are consistent with
Accepted Servicing Practices,
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the Servicer shall accept the highest cash bid received from any Person that is
not less than the fair market value of the Foreclosed Property as set forth in
the appraisal obtained under this Section. In the absence of any such bid, the
Servicer shall offer the Foreclosed Property for sale to any Person other than
an Interested Person, in the discretion of the Servicer in accordance with
Accepted Servicing Practices, and shall accept the highest cash bid received
therefor. If no such bid is received, any Interested Person may resubmit its
original bid (or a new bid), and the Servicer shall accept the highest
outstanding cash bid, regardless of from whom received. No Interested Person
shall be obligated to submit a bid to purchase any Foreclosed Property, and
notwithstanding anything to the contrary herein, neither the Trustee, in its
individual capacity, nor any of its Affiliates may bid for or purchase any
Foreclosed Property pursuant hereto.
(b) In determining the fair market value of the Foreclosed Property,
the Appraiser shall take into account, as applicable, among other factors, the
financial standing of the tenants of the Foreclosed Property, the physical
condition of the Foreclosed Property, the state of the local economy and the
Trust Fund's obligation to dispose of any Foreclosed Property within the time
period specified in Section 10.02.
(c) Subject to the provisions of Sections 3.10 and 10.02, the
Servicer shall act on behalf of the Trust Fund in negotiating and taking any
other action necessary or appropriate in connection with the sale of any
Foreclosed Property, including the collection of all amounts payable in
connection therewith. Any sale of any Foreclosed Property shall be without
warranty by, or recourse to, the Trustee, the Depositor, the Servicer, the Trust
Fund, the Certificateholders or any other Person and if consummated in
accordance with the terms of this Agreement, none of the Servicer, the Depositor
or the Trustee shall have any liability to any Certificateholder with respect to
the purchase price thereof. The Trustee and the Servicer shall not be liable for
any losses incurred on such Permitted Investments.
(d) The proceeds of any sale effected pursuant to Section 3.11(c),
after deducting the expenses incurred in
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connection therewith, shall be deposited as Net Proceeds in the Servicer
Collection Account.
Section 3.12. Servicing Compensation. (a) On the Payment Date of
each month, commencing in January 1997, the Servicer shall be entitled to
retain from payments made on the Mortgage Loan (or from Liquidation
Proceeds), as servicing compensation, its Servicing Fee for the related
Distribution Date. Additional servicing compensation in the form of
Modification Fees, interest on Advances, Special Servicing Fees, Liquidation
Fees, assumption fees (to the extent paid by the related Mortgagor or assuming
party) and other similar charges and the investment earnings on amounts in
the Servicer Collection Account shall be paid to the Servicer (to the extent
not paid to or retained by a Sub-Servicer). Late Charges shall be paid to the
Servicer pursuant to Section 4.01. The Servicer shall be required to pay all
expenses incurred by it in connection with its servicing activities hereunder
(including, but not limited to, the fees and expenses of any Sub-Servicer
required to be paid by the Servicer pursuant to any Sub-Servicing Agreement,
premiums for the blanket hazard insurance policy and, if applicable, the
blanket fidelity bond and errors and omissions policy required by Section
3.06) and shall not be entitled to reimbursement therefor except as
specifically provided in this Agreement or the Loan Documents. With respect
to any liquidation of the Mortgaged Properties by the Servicer or any sale or
disposition of the Mortgage Loan by the Servicer following a Deed of
Trust Loan Event of Default, the Servicer will receive a "Liquidation Fee"
equal to the product of (i) the net proceeds received on the Mortgaged
Properties or the Mortgage Loan in connection with such liquidation,
sale or disposition and (ii)(a) 0.50% if such liquidation, sale or
disposition occurs within twelve months after the date on which the Mortgage
Loan has been accelerated and (b) 0.25% if such liquidation, sale or
disposition occurs following the end of such twelve-month period.
(b) No transfer, sale, pledge or other disposition of the Servicer's
right to receive all or any portion of the Servicing Fee or any Special
Servicing Fee, Modification Fee or Liquidation Fee shall be made, and any such
attempted transfer, sale, pledge or other disposition shall be void, unless such
transfer is made to a successor servicer in connection with the
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assumption by such successor servicer of the Servicer's duties hereunder
pursuant to Section 7.04 and all (and not a portion) of the Servicing Fees,
Special Servicing Fees, Modification Fees and Liquidation Fees are transferred
to such successor servicer.
Section 3.13. Reports to the Trustee; Rent Account, Central Account
and Servicer Collection Account Statements. (a) Not later than 15 days after
each Distribution Date, the Servicer shall forward to the Manager, the Rating
Agency, the Depositor and the Trustee, and the Trustee upon request shall
forward to the Initial Purchasers and the Depositor a statement, certified by a
Servicing Officer, setting forth the status of the Rent Accounts, the Central
Account and the Servicer Collection Account and of any funds or accounts
established under the Mortgages as of the close of business on the Business Day
immediately preceding such Distribution Date showing, for the period covered by
such statement, (i) the aggregate of deposits into and withdrawals from each
Rent Account, (ii) the aggregate of deposits into and withdrawals from the
Central Account, the Debt Service Payment Sub-Account and any other Sub-Account
for each category specified in Sections 3.04(a)(iii), (iv) and (v) and the
aggregate of deposits into and withdrawals from the Central Account (and the
Sub-Accounts therein) in accordance with the Mortgages and (iii) the aggregate
of deposits into and withdrawals from the Servicer Collection Account. Copies of
such statement provided by the Servicer to the Trustee shall be provided by the
Trustee to Certificateholders and to any Beneficial Owner of Certificates upon
written request to the Trustee, in each case, free of charge. The Trustee shall
not be liable for its failure to forward such statement to the extent it has not
received such statement from the Servicer in a timely manner.
(b) No later than five Business Days prior to any Distribution
Date, if the Mortgagors have provided notice of an optional principal
prepayment of all or a portion of the Mortgage Loan, the Servicer shall
deliver to the Trustee and the Rating Agency by electronic transmission (or
such other medium as to which the Servicer and the Trustee may agree from
time to time) a report which shall contain all information then in the
Servicer's possession required to be delivered by the Servicer in Section
3.13(c).
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(c) Not later than 10:00 a.m., New York time, two Business Days
prior to each Distribution Date, the Servicer shall deliver to the Trustee, in
electronic media and hard copy, a report setting forth the amount of funds to be
remitted to the Trustee on the Business Day preceding each Distribution Date and
all other final information required to be provided to the Trustee to enable it
to prepare the statement to Certificateholders described in Section 4.02 and any
other related information as the Trustee may reasonably require substantially in
the form of Exhibit K. The Trustee may conclusively rely on information provided
by the Servicer and shall have no obligation to recompute, recalculate, or
verify the accuracy of such information. The Servicer shall also provide such
information in writing and computer readable magnetic tape or diskette upon
written request in writing to the Initial Purchasers or the Rating Agency.
(d) After a Mortgage Loan Event of Default, the Servicer shall
(i) furnish to the Trustee the originals of all agreements entered into by
the Servicer in the name of the Trustee relating to the Mortgage Loan, (ii)
advise the Trustee in writing of any event or circumstance materially
affecting the related Turst Property or the interests of the
Certificateholders therein, and (iii) furnish, and request the Manager or any
Successor Manager, as applicable, to furnish, to the Trustee such other
reports with respect to such Mortgaged Property, its condition, tenants, and
the income resulting therefrom as the Trustee may reasonably request in
writing to the extent available to the Servicer.
Section 3.14. Annual Statement as to Compliance. The Servicer will
deliver to the Trustee, the Initial Purchasers, the Rating Agency and the
Depositor on or before March 31 of each year beginning March 31, 1997, an
Officer's Certificate stating as to each signer thereof that (a) a review of the
activities of the Servicer or Depositor, as the case may be (and, in the case of
any such Officer's Certificate required to be delivered hereunder by the
Servicer, of the Servicer's performance under this Agreement), during the
preceding calendar year (or since the Closing Date in the case of the first such
Officer's Certificate), has been made under such officer's supervision; (b)
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in the case of any such Officer's Certificate required to be delivered hereunder
by the Servicer, to the best of such officer's knowledge, based on such review,
the Servicer has fulfilled all of its obligations under this Agreement
throughout such period, or if there has been a default in the fulfillment of any
such obligations, specifying each such default known to such officer and the
nature and status thereof; and (c) whether the Servicer or the Depositor, as the
case may be, has received any notice regarding qualification or challenging the
status of the Trust REMIC as a REMIC from the IRS or any other governmental
agency or body. Copies of such statements provided to the Trustee by the
Servicer and Depositor shall also be provided by the Trustee to the Manager, the
Initial Purchasers and to any Certificateholder or any Beneficial Owner of
Certificates upon written request to the Trustee.
Section 3.15. Annual Independent Public Accountants' Servicing
Report. On or before March 31 of each year beginning March 31, 1997, the
Servicer, at its expense, shall cause a firm of independent public
accountants that is a member of the American Institute of Certified Public
Accountants to furnish a statement to the Trustee, the Depositor, the Initial
Purchasers and the Rating Agency to the effect that such firm has examined
certain documents and records relating to the servicing of the Mortgage
Loan for the preceding calendar year (or since the Closing Date in the case
of the first such statement) and that, on the basis of such examination
conducted substantially in compliance with generally accepted auditing
standards and the Uniform Single Attestation Program for Mortgage
Bankers or the Audit Program for Mortgages serviced for FHLMC, such firm is
of the opinion that such servicing during such period has been conducted in
compliance with this Agreement except for such exceptions that, in the
opinion of such firm, generally accepted auditing standards and the Uniform
Single Attestation Program for Mortgage Bankers or the Audit Program for
Mortgages serviced for FHLMC requires it to report, in which case such
exceptions shall be set forth in such statement. Copies of such statement
provided to the Trustee by the Servicer shall be also provided by the Trustee
to Certificateholders or any Beneficial Owner of Certificates upon written
request to the Trustee.
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Section 3.16. Access to Certain Documentation Regarding the
Mortgage Loan. Upon reasonable advance notice, the Servicer shall provide
reasonable access during its normal business hours at its offices to the
Trustee and the Rating Agency to any information in its possession relating
to its servicing of the Mortgage Loan and, to each Certificateholder
that is a savings and loan association, bank or insurance company, such
reports, information and documentation regarding the Mortgage Loan as
are sufficient to permit such Certificateholder, the Office of Thrift
Supervision, the FDIC, the supervisory agents and the examiners of any such
entity to comply with applicable regulations of the Office of Thrift
Supervision or other regulatory authorities with respect to investment in the
Certificates or, in the case of the Trustee and the Rating Agency, as it may
reasonably request.
The Servicer shall provide any inquiring savings and loan
association, bank or insurance company desiring to purchase a Certificate, or a
beneficial ownership therein, at the reasonable request of such association,
bank or insurance company, to the extent reasonably available to the Servicer,
the specific information as requested; provided that, the institution making
such request agrees to pay the Servicer's reasonable fees and out-of-pocket
expenses incurred by the Servicer in connection therewith.
Section 3.17. Inspections. The Servicer shall, at its expense,
inspect or cause to be inspected each Mortgaged Property, once each year and
shall furnish the Trustee and the Rating Agency with a copy of the related
inspection report promptly upon completion thereof. If, based on information
required to be supplied by the Mortgagors within 60 days after the end of
each of the first three quarters of each calendar year and within 120 days
after the end of each calendar year, the Debt Service Coverage for the
preceding twelve-month period is less than 125%, or if the Mortgagors fail to
pay any sums due under the Mortgage Note or the Mortgages on or before
their due date and such failure is not remedied within five days, or if an
inspection is otherwise warranted in accordance with Accepted Servicing
Practices, the Mortgaged Properties shall be inspected by the Servicer as
soon as practicable at the expense of the Mortgagors (or, if not paid
thereby, at the expense of the Trust
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Fund). The cost of any such additional inspection shall constitute a Carrying
Costs Advance, and the Servicer shall furnish the Rating Agency with a copy
of the additional inspection report promptly upon completion thereof.
Section 3.18. Advances. (a) P&I Advances shall be made pursuant
to Section 3.25. All Carrying Costs Advances shall be made in a timely manner
as necessary and in accordance with Accepted Servicing Practices.
(b) It is understood that the obligation of the Servicer to make
such Advances is mandatory, subject to the limitations set forth in this
Agreement, and shall continue to apply after any modification of the Mortgage
Loan pursuant to Section 3.03 hereof, beyond the Scheduled Loan
Maturity Date if a payment default shall have occurred on such date, and
through any court-appointed stay period or similar payment delay resulting
from any insolvency of the Mortgagors or related bankruptcy, notwithstanding
any other provision of this Agreement, other than the requirement of
recoverability, and shall continue, subject to the requirement of
recoverability until the earlier of (i) the date on which the Regular
Certificates are retired and (ii) the date on which the Mortgaged Properties
have been completely liquidated; provided, however, that the obligations of
the Servicer to make Advances hereunder are limited to providing a liquidity
facility with respect to the Mortgage Loan and making certain advances
with respect to the preservation of the Mortgaged Properties as expressly set
forth in this Agreement and do not constitute insurance or any similar credit
enhancement with respect to the Mortgage Loan or the Regular
Certificates and in no event shall the Servicer be required to advance any
Nonrecoverable Advance. Upon the Servicer's failure to make any required
Advance, the Trustee shall be required to do so, and if the Trustee fails to
make such Advance, the Fiscal Agent shall be required to do so, except to the
extent the Trustee or the Fiscal Agent, as applicable, determines such
Advance to be a Nonrecoverable Advance.
(c) Interest on each Advance shall accrue for each day that such
Advance is outstanding at the Advance Rate for such day on the basis of a year
of 360 days consisting of twelve 30-day months. The Servicer (or, if applicable,
the Trustee or the
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Fiscal Agent) shall be entitled to reimbursement for Advances (including
Nonrecoverable Advances) and interest thereon at the Advance Rate by
retaining amounts paid on the Mortgage Loan or other collections or
recoveries with respect to the Mortgage Loan (including Loss Proceeds
and Net Proceeds and withdrawals from any of the Sub-Accounts, other than the
Basic Carrying Costs SubAccount). Such rights of reimbursement shall be
senior to the rights of Certificateholders to receive any amounts recovered
with respect to the Mortgage Loan.
(d) Subject to Section 3.18(f), the Servicer shall be obligated
to make an Advance only to the extent that the Servicer has determined, in
its good faith judgment, that such Advance, together with interest thereon at
the Advance Rate, would not constitute a Nonrecoverable Advance if made. The
determination by the Servicer that it has made a Nonrecoverable Advance or
that any proposed Advance, if made, would constitute a Nonrecoverable
Advance, shall be evidenced by a certificate of a Servicing Officer,
delivered on or before the related Servicer Advance Date in the case of a P&I
Advance or on or before the following Servicer Advance Date in the case of
any other Advance, to the Trustee and the Rating Agency, and detailing the
reasons for such determination, which Certificate in each case shall be
accompanied by copies of an appraisal of each of the Mortgaged Properties
performed within the preceding 12 months by an Appraiser in accordance with
MAI standards and methodologies and, if such reports are to be used by the
Servicer to determine that any Advance would be nonrecoverable, any
engineers' reports, environmental surveys or other information relevant
thereto which support such determination by the Servicer. The costs of any
such appraisals, reports or surveys used by the Servicer in making the
determination that an Advance is or would be a Nonrecoverable Advance shall
qualify as Carrying Costs Advances. In determining whether an Advance with
respect to the Mortgage Loan will be recoverable, the Servicer shall
take into account amounts that may be realized from Loss Proceeds and Net
Proceeds on all of the Mortgaged Properties. The Servicer's good faith
determination as to the recoverability of an Advance shall be conclusive and
binding on the Certificateholders and the Trustee.
(e) None of the Servicer, the Trustee or the Fiscal Agent is
obligated to advance or pay (i) any principal amount due
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under the Mortgage Loan other than scheduled principal payments then due
and unpaid, (ii) any loss due to an Uninsured Cause or not otherwise covered
by insurance, (iii) any loss with respect to defects in the title to either
of the Mortgaged Properties, (iv) any amounts to pay the cost of capital
improvements to the Mortgaged Properties other than those to preserve,
restore and protect the Mortgaged Properties, (v) any amounts required to
cure any failure of the Mortgaged Properties to comply with any environmental
laws, or to investigate, test, monitor, contain, clean up or remedy an
environmental condition present at the Mortgaged Properties or (vi) any
Prepayment Premiums, Additional Interest or Default Rate Interest or (vii)
any other payments not specified in this Agreement.
(f)(i) In the event that a P&I Advance has been made by the
Servicer, the Trustee or the Fiscal Agent, the Servicer shall make
reasonable efforts to obtain from an Appraiser (the "Original Appraiser")
an appraisal of the Mortgaged Properties (the "Original Appraisal") within
45 days following the date on which such P&I Advance was made. Such
Original Appraisal shall be based upon an assumed sale of the Mortgaged
Properties within the immediately succeeding 24 months; provided that no
P&I Advance Appraisal shall be so required if an appraisal satisfying the
requirements of this sentence and the immediately preceding sentence had
previously been obtained within the prior six months before the first
Original Appraisal was required to be performed or, thereafter, within the
prior twelve months. The obligation of the Servicer, the Trustee and the
Fiscal Agent to make P&I Advances shall continue at least until the P&I
Advance Appraisal is obtained. The cost of any Original Appraisal shall be
advanced by the Servicer as a Carrying Costs Advance. The Servicer shall
be required to determine, within 10 days after obtaining such P&I Advance
Appraisal, whether an Appraisal Reduction Amount exists with respect to
the Mortgage Loan. If the Servicer determines that an Appraisal
Reduction Amount exists, then, with respect to the Distribution Date
immediately following the date of such determination and with respect to
each subsequent Distribution Date for so long as such Appraisal Reduction
Amount exists, any P&I Advance otherwise payable to a Class of Class B,
Class C or Class D Certificates to which all or
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a portion of such Appraisal Reduction Amount has been allocated shall be
reduced by the product of (i) the portion of such Appraisal Reduction
Amount allocated to such Class divided by the outstanding Certificate
Principal Balance of such Class and (ii) the P&I Advance otherwise
applicable to such Class. For purposes of determining P&I Advances to be
made on each Distribution Date, the aggregate Appraisal Reduction Amount
shall be allocated on such Distribution Date, first, to the outstanding
principal balance of the Class D Certificates, then to the outstanding
principal balance of the Class C Certificates, and then to the outstanding
principal balance of the Class B Certificates. Prior to each Servicer
Advance Date, the Trustee shall furnish the Servicer with any information
regarding the Certificates reasonably requested by the Servicer to enable
it to determine the P&I Advance for each Class of Certificates pursuant to
this Section 3.18(f).
(ii) The Certificateholders of any Classes as to which an Appraisal
Reduction Amount has been allocated shall be entitled, by a majority of
the aggregate Voting Rights represented by such Classes, to commission a
second appraisal (the "Second Appraisal") of the Mortgaged Properties, to
be performed by an Appraiser (the "Second Appraiser") meeting the same
requirements as the Original Appraiser. The cost of any Second Appraisal
shall be borne by such Classes. If the appraised value of the Mortgaged
Properties determined by the Second Appraisal is within 10% of the
appraised value of the Mortgaged Properties determined by the Original
Appraisal, the determination of the Original Appraisal shall govern. If
the values determined by the Original Appraisal and the Second Appraisal
are more than 10% apart, the Original Appraiser and the Second Appraiser
shall select a third Appraiser (the "Third Appraiser") meeting the same
requirements as the Original Appraiser and the Second Appraiser. The Third
Appraiser shall perform a third appraisal (the "Third Appraisal") to
determine the value of the Mortgaged Properties and shall present its
determination to the Servicer. The cost of any Third Appraisal shall be
borne by the Trust Fund. The Servicer shall compare the appraised values
in the three P&I Advance Appraisals, discard the
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value furthest from the other two, and average the two remaining values.
The resulting average shall constitute the appraised value of the
Mortgaged Properties for purposes of re-computing the P&I Advance to be
made on the Regular Certificates. The Servicer shall be entitled to rely
on any Original Appraisal, Second Appraisal or Third Appraisal performed
pursuant to this Section 3.18(f) without independent investigation or
verification in respect thereof.
(iii) A determination by the Servicer that an Appraisal Reduction
Amount will reduce the amount of a P&I Advance to the Class B, Class C or
Class D Certificates shall bar any future P&I Advance with respect to such
Class to the extent of such reduction. If, after having determined an
Appraisal Reduction Amount pursuant to a P&I Advance Appraisal (which is
not superseded by another P&I Appraisal in the following twelve months),
the Servicer nevertheless makes a P&I Advance that it is not permitted to
make to any Class of Class B, Class C or Class D Certificates, the
Servicer's right to reimbursement for such P&I Advance and interest
thereon shall be subordinate to the rights of Certificateholders of each
senior Class of Regular Certificates to be paid all related Certificate
Rate Interest and the entire Certificate Principal Balance of such Class,
but prior to the rights of Certificateholders holding the Regular
Certificates that received such prohibited P&I Advance, and of each Class
junior thereto, to receive any amounts in respect of the Mortgaged
Properties.
Section 3.19. Reports of Foreclosures of Mortgaged Property. Not
later than January 31 of each year, beginning in 1997, the Servicer
shall make the reports of foreclosures and abandonments of any
Mortgaged Property required by Section 6050J of the Code and the
reports of discharges of indebtedness income in respect of the Mortgage
Loan required by Section 6050P of the Code and shall send a copy of
such reports to the Trustee.
Section 3.20. Realization on Collateral Security Instruments. In
connection with the enforcement of the rights of the Trustee and the
Servicer nder the Mortgage Note and the Mortgages in, to and under any
of the Collateral Security
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Instruments (other than the Assignments of Leases and Rents and Security
Deposits), the Servicer and the Trustee shall consult with counsel to determine
how best to enforce such rights in a manner consistent with the REMIC Provisions
and shall not, based on a Nondisqualification Opinion, take any action that
could result in the failure of the Trust REMIC to qualify as a REMIC while any
Regular Certificates are outstanding, unless such action has been approved by a
vote of 100% of each Class of Certificateholders.
Section 3.21. Preparation of Tax Returns and Other Reports. (a)
Subject to Section 10.01, the Trustee shall prepare or cause to be prepared on
behalf of the Trust REMIC, in reliance upon the information, if any, furnished
by the Servicer in accordance with this Agreement, and shall sign and file, at
the expense of the Trust Fund payable from the Central Account, federal income
tax and information returns and Virginia, New York, Georgia and Illinois income
tax and information returns, if required, or such other returns as to the actual
knowledge of one of its Responsible Officers may be required by Applicable State
Law relating to the Trust REMIC. The Trustee shall forward to the Depositor and
the Servicer copies of such federal and state income tax and information returns
and of quarterly and annual REMIC tax returns and such other information within
the control of the Trustee as the Depositor may reasonably request in writing.
Moreover, the Trustee shall (i) forward to each Certificateholder such forms and
furnish such information within the control of the Trustee or Servicer as are
required by the Code to be furnished to them, (ii) prepare and file annual
reports required by the applicable state authorities, and (iii) prepare and
disseminate to Certificateholders Forms 1099 (or otherwise furnish information
within the control of the Trustee) to the extent required by applicable law.
Each of the Servicer and the Depositor (but not the Trust Fund) shall indemnify
the Trustee for any liability of or assessment against the Trustee and any
expenses incurred in connection with such liability or assessment (including
attorneys' fees) resulting from any error in any tax or information return
resulting from errors in the information provided by the Servicer and the
Depositor, respectively caused by the Servicer's or the Depositor's own
negligence, bad faith or willful misconduct. The Trustee shall indemnify the
Servicer, the Depositor and the Trust Fund for any
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liability of or assessment against the Servicer, the Depositor or the Trust Fund
and any expenses incurred in connection with such liability or assessment
(including attorneys' fees) resulting from any error in any of such tax or
information returns resulting from errors in the preparation of such returns by
the Trustee caused by its own negligence, bad faith or willful misconduct. Any
such indemnification described in this Section 3.21(a) shall survive the
termination of this Agreement.
(b) The Trustee shall prepare, sign and file with the IRS, on
behalf of the Trust REMIC, an application for a taxpayer identification
number for the Trust REMIC on IRS Form SS-4. The Trustee, upon receipt from
the IRS of the Notice of Taxpayer Identification Number Assigned, shall
promptly forward a copy of such notice to the Servicer and the Depositor. The
Trustee shall prepare and file Form 8811 on behalf of the Trust REMIC and
shall designate an appropriate Person to respond to inquiries by or on behalf
of Certificateholders for original issue discount and related information in
accordance with applicable provisions of the Code.
Section 3.22. Administration of the Mortgage Loan. (a) The
Servicer shall review the insurance policies or certificates of insurance
required to be delivered by the Mortgagors pursuant to Section 3.06 of the
related Mortgage to determine compliance with such Section.
(b) The Servicer shall, on behalf of the Trustee, take all
actions reasonable and necessary to enforce the rights of the Trustee as
assignee under each of the Collateral Security Instruments pursuant to the
Assignments of Collateral Security Instruments. Without in any way limiting
the foregoing, the Servicer shall, on behalf of the Trustee, perform all the
acts and assume and carry out all of the duties assigned to the Trustee under
each Mortgage. The Servicer shall take all actions as reasonable and
necessary to enforce the rights of the Trustee on behalf of the
Certificateholders under the Mortgages as referenced herein under Section
2.02(b).
Section 3.23. [Intentionally left blank]
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Section 3.24. Appointment of Special Servicer. Within fifteen
Business Days of the occurrence of a Mortgage Loan Event of Default with
respect to a Mortgaged Property, the Servicer shall appoint a special servicer
(the "Special Servicer"), which may be itself (or which shall be itself, if
AMRESCO Management, Inc. is the Servicer); provided that, the appointment of
any Person (excluding the Servicer) to act as Special Servicer shall be
subject to the Rating Agency's then-current rating of each Class of Regular
Certificates not being reduced or withdrawn as a result thereof (as evidenced
by a letter of such effect from the Rating Agency delivered to the Trustee).
During the period of time that the Mortgaged Properties are being serviced by
the Special Servicer, the Special Servicer shall be entitled to monthly
servicing compensation equal to one-twelfth of the product of (i) 0.10% per
annum and (ii) the outstanding principal balance of the Mortgage Loan
(the "Special Servicing Fee"). Such Special Servicing Fee shall be payable on
each Payment Date in addition to the Servicing Fee out of the Central Account
as provided in Section 3.04(a)(iv) or the Servicer Collection Account as
provided in Section 3.04(b)(ii). The Special Servicer shall have all the
rights and remedies of the Servicer with respect to the Mortgaged Properties.
The decision to continue to use or terminate a Special Servicer with respect
to the Mortgaged Properties is in the sole discretion of the Servicer. All
expenses incurred by the Special Servicer relating to the Mortgaged
Properties are immediately reimbursable to the Special Servicer from any
funds in the Central Account, the Sub-Accounts or otherwise from the Mortgagor.
Section 3.25. Advance Procedures. (a) On the Payment Date
immediately preceding the related Distribution Date, the Servicer shall
determine whether and to what extent the Mortgagor has failed to make any
payment of principal or any interest in respect of scheduled installments of
principal and interest that were due on the Payment Date and whether such
deficiencies, if advanced by the Servicer, would be a Nonrecoverable Advance.
(b) On or before 2 p.m., Chicago time, on the Servicer Advance Date,
the Servicer shall make any required P&I Advance by depositing in the
Certificate Account the amount, if any, by which the amount on deposit in the
Debt Service Payment SubAccount on the Business Day immediately preceding the
Servicer
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Advance Date is less than the Monthly Payment for the related Payment Date less
the portion of any such amount that the Servicer determines, in its good faith
judgment, would, if advanced, constitute a Nonrecoverable Advance.
(c) In the event that the Servicer fails to make a required P&I
Advance on or before 2 p.m., Chicago time, on the Servicer Advance Date, the
Trustee shall on or before 4 p.m., Chicago time, on such Servicer Advance Date
provide to the Servicer, with a copy to the Fiscal Agent, by telecopy, written
notice of such failure and the amount of such failure and that continuance of
such failure until the close of business on such Business Day will be an Event
of Default. If the Servicer fails to make such P&I Advance by 4 p.m., Chicago
time, on such Servicer Advance Date, the Trustee, as successor Servicer, shall
deposit the amount of such P&I Advance in the Certificate Account by 6 p.m.,
Chicago time, on such Servicer Advance Date. The Trustee shall be entitled to
reimbursement for such P&I Advance from the same sources as the Servicer would
have been entitled to be reimbursed had the Servicer made such P&I Advance (and
with priority over amounts then or thereafter reimbursable to the Servicer). If
the Trustee fails to make such P&I Advance by 6 p.m., Chicago time, on such
Servicer Advance Date, the Fiscal Agent shall make such P&I Advance on the
immediately following Distribution Date before the Paying Agent is required to
make distributions under Section 4.01 on such Distribution Date and, in such
event, shall be entitled to the same reimbursement as the Trustee or Servicer.
Notwithstanding the foregoing obligations of the Trustee and the Fiscal Agent to
make any P&I Advance required to have been made by the Servicer but not so made,
the Trustee and the Fiscal Agent shall have the same right as the Servicer under
Sections 3.18(d) and 3.18(e) to determine that such P&I Advance, if made, would
constitute, or any P&I Advance theretofore made constitutes, a Nonrecoverable
Advance, and the right to refuse to make such a Nonrecoverable Advance and to
reimbursement of any such Nonrecoverable Advance (to the extent made) with
interest thereon at the Advance Rate. Upon making any P&I Advance, the
provisions of Section 3.18(f)(iii) shall apply to the Trustee and the Fiscal
Agent to the same extent as the Servicer.
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(d) In the event that the Servicer fails to fulfill its obligations
hereunder to make any P&I Advances, the Trustee shall perform such obligations
as provided in paragraph (c) above, and, with respect to any such P&I Advance
made by the Trustee, the Trustee shall succeed to all of the Servicer's rights
with respect to Advances hereunder, including, without limitation, the
Servicer's rights of reimbursement and rights to make the determination that an
Advance is a Nonrecoverable Advance, in accordance with the provisions of
Section 3.18(d) and 3.18(e) hereof (without regard to any impairment of any such
rights of reimbursement caused by such Servicer's default in its obligations
hereunder); provided, however, that if Advances made by both the Trustee and the
Servicer shall at any time be outstanding, or any amounts of interest thereon
shall be accrued and unpaid, all amounts available to repay such Advances and
interest hereunder shall be applied entirely to the Advances outstanding to the
Trustee, until such Advances shall have been repaid in full, together with all
amounts of interest accrued thereon, before any repayment to the Servicer. The
Trustee shall be entitled to conclusively rely on any Officer's Certificate
regarding a Nonrecoverable Advance in connection with making any Advances
hereunder.
(e) In the event that the Trustee fails to fulfill its obligations
hereunder to make any P&I Advances following the failure of the Servicer to make
a P&I Advance, the Fiscal Agent shall perform such obligations within one
Business Day following such failure by the Servicer and on the same day of such
Trustee failure, and, with respect to any such P&I Advance made by the Fiscal
Agent, the Fiscal Agent shall succeed to all of the Trustee's rights with
respect to any such P&I Advance hereunder, including, without limitation, the
Trustee's rights of reimbursement and rights to make the determination that an
Advance is a Nonrecoverable Advance, in accordance with the provisions of
Section 3.18(d) and 3.18(e) hereof. Upon making any P&I Advance, the provisions
of Section 3.18(f) shall apply to the Fiscal Agent to the same extent as the
Servicer. The Fiscal Agent shall be entitled to conclusively rely on any
Responsible Officer's Certificate regarding a Nonrecoverable Advance in
connection with making any Advances hereunder. The making of a P&I Advance by
the Fiscal Agent shall cure the Trustee's failure to make such advance.
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ARTICLE FOUR
PAYMENTS AND STATEMENTS TO CERTIFICATEHOLDERS
Section 4.01. Distributions. (a) On each Distribution Date, the
Paying Agent shall make distributions to Certificateholders in the following
order of priority from funds on deposit in the Certificate Account, the amount
of such distributions to be determined by the Trustee on the basis of
information provided by the Servicer pursuant to its report to the Trustee
pursuant to Section 3.13(c):
(i) to the extent of the Available Distribution Amount:
(A) to the Class A Certificates, interest at the Class A
Certificate Interest Rate on the Class A Certificate Principal
Balance for the related Interest Accrual Period, together with any
related Unpaid Certificate Interest Shortfall for such Distribution
Date;
(B) to the Class A Certificates, in respect of principal of
such Class, all scheduled payments of principal due or past due on
the A Component of the Mortgage Loan on the related Payment
Date, until the Certificate Principal Balance of the Class A
Certificates is reduced to zero;
(C) to the Class B Certificates, interest at the Class B
Certificate Interest Rate on the Class B Certificate Principal
Balance for such Interest Accrual Period, together with any related
Unpaid Certificate Interest Shortfall for such Distribution Date;
(D) to the Class B Certificates, in respect of principal of
such Class, all scheduled payments of principal due or past due on
the B Component of the Mortgage Loan on such Payment Date,
until the Certificate Principal Balance of the Class B Certificates
is reduced to zero;
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(E) to the Class C Certificates, interest at the Class C
Certificate Interest Rate on the Class C Certificate Principal
Balance for such Interest Accrual Period, together with any
related Unpaid Certificate Interest Shortfall for such Distribution
Date;
(F) to the Class C Certificates, in respect of principal of
such Class, all scheduled payments of principal due or past due on
the C Component of the Mortgage Loan on such Payment Date,
until the Certificate Principal Balance of the Class C Certificates
is reduced to zero;
(G) to the Class D Certificates, interest at the Class D
Certificate Interest Rate on the Class D Certificate Principal
Balance for such Interest Accrual Period, together with any related
Unpaid Certificate Interest Shortfall for such Distribution Date;
(H) to the Class D Certificates, in respect of principal of
such Class, all scheduled payments of principal due or past due on
the D Component of the Mortgage Loan on such Payment Date,
until the Certificate Principal Balance of the Class D Certificates
is reduced to zero;
provided that no portion of such Available Distribution Amount
representing Unscheduled Payments, Prepayment Premiums or the Excess Cash
Flow Amount shall be distributed pursuant to this clause (i);
(ii) to the extent of that portion of such Available Distribution
Amount that represents, without duplication, the sum of (x) all
Unscheduled Payments, if any, received by such Payment Date, (y) the
Voluntary Prepayment Premium Amount, if any, for such Distribution Date
and (z) on each Distribution Date after the Balloon Anticipated Repayment
Date, the Excess Cash Flow Amount:
(A) to the Class A Certificates, interest at the Class A
Certificate Interest Rate on the Class A Certificate Principal
Balance for such Interest Accrual
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Period, to the extent unpaid, together with any related Unpaid
Certificate Interest Shortfall for such Distribution Date;
(B) to the Class A Certificates, (x) in respect of principal
of such Class, until the Certificate Principal Balance of such Class
has been reduced to zero and (y) in the case of any Voluntary
Prepayments distributed to such Class pursuant to this subclause
(B), a share of any such Voluntary Prepayment Premium Amount, to the
extent provided in Section 4.01(c);
(C) to the Class B Certificates, interest at the Class B
Certificate Interest Rate on the Class B Certificate Principal
Balance for such Interest Accrual Period, to the extent unpaid,
together with any related Unpaid Certificate Interest Shortfall for
such Distribution Date;
(D) to the Class B Certificates, (x) in respect of principal
of such Class, until the Certificate Principal Balance of such Class
has been reduced to zero and (y) in the case of any Voluntary
Prepayments distributed to such Class pursuant to this subclause
(D), a share of any such Voluntary Prepayment Premium Amount, to the
extent provided in Section 4.01(c);
(E) to the Class C Certificates, interest at the Class C
Certificate Interest Rate on the Class C Certificate Principal
Balance for such Interest Accrual Period, to the extent unpaid,
together with any related Unpaid Certificate Interest Shortfall for
such Distribution Date;
(F) to the Class C Certificates, (x) in respect of principal
of such Class, until the Certificate Principal Balance of such Class
has been reduced to zero and (y) in the case of any Voluntary
Prepayments distributed to such Class pursuant to this subclause
(F), a share of any such Voluntary Prepayment Premium Amount, to the
extent provided in Section 4.01(c);
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(G) to the Class D Certificates, interest at the Class D
Certificate Interest Rate on the Class D Certificate Principal
Balance for such Interest Accrual Period, to the extent unpaid,
together with any related Unpaid Certificate Interest Shortfall for
such Distribution Date; and
(H) to the Class D Certificates, (x) in respect of principal
of such Class, until the Certificate Principal Balance of such Class
has been reduced to zero and (y) in the case of any Voluntary
Prepayments distributed to such Class pursuant to this subclause
(H), a share of any such Voluntary Prepayment Premium Amount, to the
extent provided in Section 4.01(c);
(iii) after the Certificate Principal Balance of all of the Regular
Certificates has been reduced to zero, sequentially, to the Class A
Certificates, the Class B Certificates, the Class C Certificates and the
Class D Certificates, in that order, to the extent of any remaining
portion of such Available Distribution Amount after the distributions in
clauses (i) and (ii) of this Section 4.01(a), applied to pay to each such
Class the sum of the amount of Additional Interest with respect thereto
and the related Unpaid Additional Interest Shortfall for such Distribution
Date;
(iv) after the Certificate Principal Balance of all of the Regular
Certificates has been reduced to zero, and all Additional Interest and
Unpaid Additional Interest Shortfalls have been paid to the Regular
Certificates, sequentially, to the Class A Certificates, the Class B
Certificates, the Class C Certificates and the Class D Certificates, in
that order, to the extent of any remaining portion of such Available
Distribution Amount after the distributions in clauses (i), (ii) and (iii)
of this Section 4.01(a), applied to pay all unpaid Prepayment Premiums
payable to such Classes (other than those payable pursuant to clause
(a)(ii) above in connection with Voluntary Prepayments);
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(v) after the Certificate Principal Balance of all of the Regular
Certificates has been reduced to zero, and all Additional Interest and
Unpaid Additional Interest Shortfalls have been paid to the Regular
Certificates, and all unpaid Prepayment Premiums payable to the Regular
Certificates have been paid thereto, to the Servicer, to the extent of any
remaining portion of such Available Distribution Amount, applied to pay
accrued and unpaid Late Charges (and any other amounts owed to the
Servicer not theretofore paid to the Servicer); and
(vi) to the Class R Certificates, the balance, if any, of such
Available Distribution Amount.
(b) On each Distribution Date, the Paying Agent shall withdraw the
Default Interest Distribution Amount from the Default Interest Account and
distribute it among the Regular Certificates, pro rata, based on the Closing
Date Fractional Interest of each Class of Regular Certificates. The
distributions of any such Default Interest Distribution Amount shall not result
in a reduction in the Certificate Principal Balance of any Class of Certificates
as to which such distribution is made and shall not be counted toward unpaid
interest on such Class accrued at the related Certificate Interest Rate or
Adjusted Certificate Interest Rate.
(c) The Voluntary Prepayment Premium Amount for any Distribution
Date shall be distributed to Holders of the Regular Certificates pursuant to
Section 4.01(a)(ii) in the same proportions in which the Regular Certificates
actually receive distributions, pursuant to clauses (B), (D), (F) and (H) of
Section 4.01(a)(ii), of the Voluntary Prepayment Amount for such Distribution
Date. No distribution of any Prepayment Premium shall result in a reduction in
the Certificate Principal Balance of any Class of Certificates as to which such
distribution is made or be counted toward accrued and unpaid interest on such
Class.
(d) Distributions on each Distribution Date shall be made to each
Certificateholder of record on the related Record Date (other than as provided
in Section 9.01 respecting the final distribution), by check mailed to such
Certificateholder at the
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address appearing in the Certificate Register, or upon written request by a
Certificateholder holding Certificates of any Class exceeding $5,000,000 initial
Certificate Principal Balance delivered at least five Business Days prior to the
related Record Date, by wire transfer to a bank account maintained in the United
States, or by such other means of payment as such Certificateholder and the
Paying Agent shall agree. Distributions on each Class of Certificates shall be
made pro rata among all Holders of Certificates of such Class based on each such
Holder's Percentage Interest.
Section 4.02. Statements to Certificateholders. The Trustee shall
prepare, or cause to be prepared, and mail not later than each Distribution Date
to the Depositor, the Servicer, the Rating Agency, the Manager, the Initial
Purchasers and each Certificateholder of each Class and, upon written request to
the Trustee, Beneficial Owners of the Regular Certificates a statement (the
"Monthly Statement") in respect of such Distribution Date setting forth to the
extent applicable to such Class:
(a) the amount of the distribution from the Certificate
Account allocable to principal, separately identifying the aggregate
amount of any Unscheduled Payments and any Voluntary Prepayments, Loss
Proceeds and Net Proceeds included therein and specifying the source
thereof;
(b) the aggregate amount of the distribution from the
Certificate Account and the Default Interest Account allocable to interest
for each Class, separately identifying the amount paid in respect of (w)
interest at the applicable Certificate Interest Rates, (x) the amount of
any Additional Interest, (y) any Unpaid Additional Interest Shortfalls and
(z) any Default Rate Interest;
(c) the aggregate amount of the distribution from the
Certificate Account allocable to Prepayment Premiums;
(d) if the distribution to the Certificateholders of any Class
in respect of scheduled principal and interest at the applicable
Certificate Interest Rate is less than the full amount thereof that would
be distributable to such Holders if there were a sufficient Available
Distribution
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Amount, the amount of such shortfall for each Class and the allocation
thereof between interest and principal;
(e) separately identified, the amount of accrued and unpaid
Additional Interest and Default Rate Interest, if any, for each Class of
Regular Certificates;
(f) the amount of any P&I Advance by the Servicer, the
Trustee or the Fiscal Agent included in the amounts distributed to the
Certificateholders;
(g) the Class A, Class B, Class C and Class D Certificate
Principal Balances after giving effect to the distribution of principal
on the Certificates on such Distribution Date;
(h) the Mortgage Loan Principal Balance and the
Allocated Loan Amount for each of the Mortgaged Properties for such
Distribution Date;
(i) identification of any Mortgage Loan Event of
Default or any Event of Default under this Agreement, as of the close
of business on the last day of the immediately preceding calendar month;
(j) the Class A, Class B, Class C and Class D Percentages for
the following Distribution Date;
(k) the amount of servicing compensation paid to the Servicer
and any Special Servicer with respect to such Distribution Date,
including the Servicing Fee, the Special Servicing Fee, any Liquidation
Fee, any Modification Fee and any Late Charges and other Mortgagor charges
retained by, or payable to, the Servicer pursuant to this Agreement; and
(l) the amount in each of the Sub-Accounts established
pursuant to Section 5.02 of each Mortgage;
(m) The aggregate Adjusted NOI for the Mortgaged Properties
during the preceding twelve-month period, and the current Debt Service
Coverage for the Mortgage Loan. For purposes of each Monthly
Statement, these items shall be
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calculated by the Servicer using the scheduled debt service payments
applicable to the Mortgage Loan during the succeeding twelve-month
period;
(n) if a P&I Advance Appraisal has been completed by an
Appraiser with respect to any Foreclosed Property and is available to the
Servicer or has otherwise been completed by or at the direction of the
Servicer in accordance with MAI standards and methodologies, the appraised
value of such Foreclosed Property as of the date of any such P&I Advance
Appraisal (and the Servicer shall also provide the Rating Agency with a
copy of all such appraisals); and
(o) any material modifications, waivers or amendments of any
of the terms of the Mortgage Loan.
Each amount set forth pursuant to clauses (a) through (f) above will
be expressed as a dollar amount per $1,000 of original principal amount of each
Class of Certificates.
Each report to Certificateholders will indicate whether and to what
extent, to the actual knowledge of a Responsible Officer of the Trustee, there
exist material deviations in the servicing procedures from those specified in
this Agreement. The Servicer shall provide the Trustee the information needed in
clauses (a), (b), (c), (e), (f), (h), (i), (k), (l), (m), (n) and (o) above to
the extent such information relates to the Mortgage Loan or the Mortgaged
Properties, and the Trustee's obligation to furnish such information to others
as set forth herein is contingent upon its receipt of such information from the
Servicer. To the extent the information required to be furnished by the Servicer
is based on information required to be provided by the Mortgagors, the
Servicer's obligation to furnish such information to the Trustee is contingent
on the receipt of such information from the Mortgagors. The Servicer shall be
entitled to rely on information supplied by the Mortgagors without independent
verification to the extent such reliance is consistent with Accepted Servicing
Practices. The Trustee shall be entitled to rely on information supplied by the
Servicer without independent verification. The Trustee shall furnish the Rating
Agency with any other reports the Rating Agency shall
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reasonably request to the extent the Trustee has or can obtain the requested
information without unreasonable effort or expense.
Within 60 days following the end of the first three quarters of each
calendar year and on an annual basis, and within 120 days following the end of
the calendar year, the Mortgagors are required to forward by mail to the
Servicer, the Trustee, the Depositor, the Initial Purchasers, the Rating Agency
and the Manager a report summarizing the operating performance of the Mortgaged
Properties, including in such report the net operating income for the Mortgaged
Properties, the rent roll, each tenant's total sales and sales per square foot,
to the extent reported by tenants under the terms of the Leases, the
cost-of-occupancy reports, the average and period-end occupancy rate of the
Mortgaged Properties (by gross leasable area and in-line space) and the current
Debt Service Coverage for the quarter just completed and year-to-date, and each
as compared to the preceding year. The report made with respect to the fourth
quarter of any year will be based upon the audited financial statements of the
Mortgagors for that year. Upon the written request of a Beneficial Owner of a
Certificate, the Trustee shall provide such reports to such Owner at the expense
of the Trust Fund. The Trustee shall not be liable for its failure to deliver
such report to the extent such failure is a result of the Servicer's failure to
deliver such report to the Trustee in a timely manner.
Within 60 days following the end of each calendar year, the Trustee
shall prepare, or cause to be prepared, and mail to each Person who at any time
during the calendar year was a Certificateholder (i) a statement containing the
aggregate information set forth in subclauses (a) and (b) above for such
calendar year or applicable portion thereof during which such person was a
Certificateholder and (ii) such other customary information as the Trustee deems
necessary or desirable for Certificateholders to prepare their federal, state
and local income tax returns. Such obligation of the Trustee shall be
deemed to have been satisfied to the extent that substantially comparable
information shall be provided by the Trustee pursuant to any requirements of the
Code.
Section 4.03. Reports by each Mortgagors. The Depositor will cause
each Mortgagor to covenant (a) to file with
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the Trustee within 15 days after such Mortgagor is required to file the same
with the Commission, copies of the annual reports and of the information,
documents, and other reports (or copies of such portions of any of the foregoing
as the Commission may from time to time by rules and regulations prescribe)
which such Mortgagor may be required to file with the Commission pursuant to
Section 13 or 15(d) of the Exchange Act;
(b) to file with the Trustee and the Commission, in accordance with
rules and regulations prescribed from time to time by the Commission, such
additional information, documents, and reports with respect to compliance by
such Mortgagor with the conditions and covenants provided for in this Agreement
as may be required from time to time by such rules and regulations; and
(c) to furnish the Trustee and the Rating Agency, on or before March
31 of each calendar year commencing 1997, a brief certificate from the principal
executive officer, principal financial officer or principal accounting officer
of any entity directly or indirectly serving as the general partner of such
Mortgagor as to his or her knowledge of such Mortgagor's compliance with all
conditions and covenants under this Agreement. For purposes of this Section
4.03(c) such compliance shall be determined without regard to any period of
grace or requirement of notice provided under this Agreement.
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ARTICLE FIVE
THE CERTIFICATES
Section 5.01. The Certificates. (a) The following table sets forth
the Class designations, Certificate Interest Rate and original Certificate
Principal Balances for each Class of Certificates comprising the interests in
the Trust Fund created hereunder:
Original
Certificate
Designation Certificate Interest Rate Balances
- ----------- ------------------------- --------
Class A Class A Certificate Interest Rate $212,000,000
Class B Class B Certificate Interest Rate $ 27,000,000
Class C Class C Certificate Interest Rate $ 15,000,000
Class D Class D Certificate Interest Rate $ 30,000,000
Class R(1)
In addition, following the Balloon Anticipated Repayment Date, each
Class of Regular Certificates shall begin to accrue interest at the related
Adjusted Certificate Rate. Holders of the Regular Certificates shall be entitled
to receive distributions of Default Rate Interest (net of amounts thereof
applied to repay interest on P&I Advances) paid on the Mortgage Note and
deposited in the Default Interest Account.
The Class A, Class B, Class C, Class D and Class R Certificates
shall be issued in registered form in substantially the respective forms set
forth as Exhibits A, B, C, D and E hereto. The Class A, Class B, Class C and
Class D Certificates shall be issuable in minimum denominations of $100,000 and
in integral multiples of $1 in excess thereof. The Class R Certificates shall be
issuable in Percentage Interests evidencing, in the aggregate, a 100.00%
Percentage Interest.
- ----------
(1) The Class R Certificates do not have a Certificate Interest Rate or a
Certificate Balance.
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On the Closing Date, the Certificates aggregating the initial
Certificate Principal Balances and Percentage Interests shall be executed and
delivered by the Certificate Registrar in such names and authorized
denominations as the Depositor shall direct in writing, and authenticated by the
Trustee, all as provided herein. The Certificates shall be executed by manual or
facsimile signatures on behalf of the Certificate Registrar by an authorized
officer. Certificates bearing the manual or facsimile signatures of individuals
who were, at the time when such signatures were affixed, authorized to sign on
behalf of the Certificate Registrar, shall bind the Trust Fund, notwithstanding
that such individuals or any of them have ceased to be so authorized prior to
the authentication and delivery of such Certificates or did not hold such
offices on the date of such Certificates. Each Certificate shall, on original
issue, be authenticated by the Trustee or the Authenticating Agent upon the
order of the Depositor upon delivery to the Trustee of the Mortgage File
described in Section 2.01. No Certificate shall be entitled to any benefit under
this Agreement or be valid for any purpose unless there appears on such
Certificate a certificate of authentication substantially in the form provided
for herein executed by an authorized officer of the Trustee or the
Authenticating Agent by manual signature, and such certification upon any
Certificate shall be conclusive evidence, and the only evidence, that such
Certificate has been duly authenticated and delivered hereunder. The
Certificates executed by the Certificate Registrar and authenticated and
delivered by the Trustee or the Authenticating Agent to or upon the order of the
Depositor on the Closing Date shall be dated the Closing Date. All other
Certificates that are authenticated after the Closing Date shall be dated the
date of their authentication.
Until such time as definitive fully registered certificates
("Definitive Certificates") are issued pursuant to Section 5.07, each Book-Entry
Certificate shall bear the following legend:
"Unless this certificate is presented by an authorized
representative of [the Depository] to the Trustee or its agent for registration
of transfer, exchange or payment, and any certificate issued is registered in
the name of [the Depository]
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or in such other name as requested by an authorized representative of [the
Depository] (and any payment is made to [the Depository] or to such other entity
as is requested by an authorized representative of [the Depository or its
nominee]), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR
TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, [the
Depository], has an interest herein."
(b) Upon original issuance, the Book-Entry Certificates shall be
issued in the form of one or more typewritten certificates, to be delivered to
The Depository Trust Company, the initial Depository, by, or on behalf of, the
Depositor. Such Certificates shall initially be registered on the Certificate
Register in the name of the nominee of The Depository Trust Company, and no
Beneficial Owner will receive a definitive certificate representing such
Beneficial Owner's interest in the Book-Entry Certificates, except as provided
in Section 5.07.
Unless and until Definitive Certificates have been issued to
Beneficial Owners pursuant to Section 5.07:
(i) the provisions of this Section 5.01(b) shall be in full
force and effect;
(ii) the Depositor, the Servicer, the Certificate Registrar
and the Trustee may deal with the related Depository for all purposes
(including the making of distributions on the Book-Entry Certificates and
the taking of actions by the Holders of Book-Entry Certificates) as the
authorized representative of the Beneficial Owners;
(iii) to the extent that the provisions of this Section
5.01(b) conflict with any other provisions of this Agreement, the
provisions of this Section 5.01(b) shall control; and
(iv) the rights of Beneficial Owners shall be exercised only
through such Depository and shall be limited to those established by law,
the rules, regulations and procedures of such Depository and agreements
between such Beneficial Owners and the Depository and/or the Depository
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Participants, and all references in this Agreement to actions by
Certificateholders shall, with respect to the Book-Entry Certificates,
refer to actions taken by such Depository upon instructions from the
Depository Participants, and all references in this Agreement to
distributions, notices, reports and statements to Certificateholders
shall, with respect to the Book-Entry Certificates, refer to
distributions, notices, reports and statements to such Depository or its
nominee, as registered holder of the Book-Entry Certificates, as the case
may be, for distribution to Beneficial Owners in accordance with the
procedures of such Depository.
For purposes of any provision of this Agreement requiring or
permitting actions with the consent of, or at the direction of, Holders of
Certificates evidencing specified Voting Rights, such direction or consent shall
be given by Beneficial Owners having the requisite Voting Rights, acting through
the related Depository, as authorized representative of Beneficial Owners.
Unless and until Definitive Certificates have been issued to
Beneficial Owners pursuant to Section 5.07, the reports or statements referred
to in Section 4.02 shall be furnished by the Trustee only to the related
Depository, which shall be solely responsible for furnishing copies thereof to
Beneficial Owners; provided, that the Trustee shall furnish such reports to any
person identifying himself or herself as a Beneficial Owner who makes a written
request for such reports.
Section 5.02. Registration of Transfer and Exchange of Certificates.
(a) The Certificate Registrar shall cause to be maintained in accordance with
the provisions of Section 5.05 a Certificate Register in which, subject to such
reasonable regulations as it may prescribe, the Trustee shall provide for the
registration of Certificates and of transfers and exchanges of Certificates as
herein provided. The Trustee shall preserve in as current a form as is
reasonably practicable the most recent list available to it of the names and
addresses of the Certificateholders. The Trustee is hereby initially appointed
Certificate Registrar for the purpose of registering transfers and exchanges of
Certificates as herein provided. The office of
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the Certificate Registrar is located at the address of the Trustee set forth in
Section 11.04.
(b) No registration of transfer of any Certificate shall be made
unless (i) such transfer is made pursuant to an effective registration statement
under the Securities Act or (ii) (A) such transfer is made pursuant to Rule 144A
under the Securities Act or another exemption from the registration requirements
of the Securities Act and (B) either (x) the Certificate Registrar is notified
by any such transferee that such Certificate shall be registered in the name of
the Depository or its nominee and shall be held by such transferee in book-entry
form through the Depository or (y) the Certificate Registrar shall have received
a Representation Letter substantially in the form of Exhibit F hereto with
respect to such transfer made pursuant to such other exemption or, with respect
to any transfer made by the Initial Purchasers pursuant to Rule 144A, a copy of
a letter on file with the Initial Purchasers indicating the status of the
transferee as a "Qualified Institutional Buyer" under Rule 144A. Pursuant to
clause (B) above, if an election is made to hold a certificate in book-entry
form, the Certificate shall be registered in the name of a nominee designated by
the Depository (and may be aggregated as to denominations with other
Certificates of the same Class held by the Depository). With regard to
certificates held in book-entry form, (i) the Trustee may for all purposes
(including the making of distributions due on the Certificates) deal with the
Depository as the authorized representative of the Beneficial Owners with
respect to such Certificates for purposes of exercising the rights of Holders
thereunder; (ii) the rights of Beneficial Owners with respect to such
Certificates shall be limited to those established by law and agreements between
such Beneficial Owners and the Depository and Depository Participants; (iii)
requests and directions from, and votes of, the Depository as Holder shall not
be deemed inconsistent if they are made with respect to different Beneficial
Owners; (iv) the Trustee may establish a reasonable record date in connection
with solicitations of consents from or voting by Holders and give notice to the
Depository of such record date; and (v) without the consent of the Depositor and
the Trustee, no such Certificate may be transferred by the Depository except to
a successor Depository that agrees to hold such Certificate for the account of
the
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Beneficial Owners or except upon the election of the Beneficial Owner thereof or
a subsequent transferee to hold such Certificate in physical form. Neither the
Trustee nor the Certificate Registrar shall have any responsibility to monitor
or restrict the transfer of beneficial ownership in any Certificate an interest
in which is transferable through the facilities of a Depository.
In the event The Depository Trust Company resigns or is removed as
Depository, the Depositor may appoint a successor Depository. If no successor
Depository has been appointed within 30 days of the effective date of the
Depository's resignation or removal, each Beneficial Owner shall be entitled to
physical Certificates representing the Certificates it beneficially owns.
(c) Notwithstanding anything to the contrary contained herein, in no
event shall a Class B, Class C, Class D or Class R Certificate be transferred
unless the Depositor and the Certificate Registrar shall have received either
(i) a representation from the transferee of such Certificate acceptable to and
in form and substance satisfactory to the Depositor and the Certificate
Registrar (in the event such Certificate is a Class R Certificate, such
requirement is satisfied only by the Certificate Registrar's receipt of a
representation letter from the transferee), to the effect that such transferee
is not an employee benefit plan subject to Section 406 of ERISA or a plan
subject to Section 4975 of the Code, nor a Person acting on behalf of any such
plan or (ii) an Opinion of Counsel (which may be internal counsel) from the
prospective transferee of such Certificate reasonably satisfactory to the
Depositor and the Certificate Registrar to the effect that any such transfer (a)
will not result in a prohibited transaction under ERISA or the Code and (b) will
not result in the assets of the Trust Fund being "plan assets" for purposes of
ERISA. Any such Opinion of Counsel shall be obtained at the expense of the
prospective transferor or transferee, and not at the expense of the Depositor,
the Servicer, the Trustee or the Certificate Registrar, and shall be delivered
to the Depositor, the Trustee and the Certificate Registrar prior to or
contemporaneously with any such transfer. Neither the Trustee nor the
Certificate Registrar will have a duty to monitor or restrict the transfer of
beneficial ownership of any Certificate transferred through the
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facilities of the Depository. Until the issuance of Definitive Certificates, the
representation in clause (i) of this Section 5.02(c) shall be deemed to have
been made to the Certificate Registrar by the purchaser's or transferee's
acceptance of a Class B, Class C or Class D Certificate, respectively.
Notwithstanding anything else to the contrary herein, any purported transfer of
a Class B, Class C, Class D, or Class R Certificate to or on behalf of an
employee benefit plan subject to ERISA or to the Code without the delivery to
the Certificate Registrar of an Opinion of Counsel satisfactory to the
Certificate Registrar as described above shall be void and of no effect.
To the extent permitted under applicable law (including, but not
limited to, ERISA), the Certificate Registrar shall be under no liability to any
Person for any registration of transfer of any Certificate that is in fact not
permitted by this Section 5.02(c) or for making any payments due on such
Certificate to the Holder thereof or taking any other action with respect to
such Holder under the provisions of this Agreement so long as the transfer was
registered by the Certificate Registrar in accordance with the foregoing
requirements.
(d) Notwithstanding anything to the contrary contained in this
Agreement, no Class R Certificate or any Percentage Interest therein may be
owned, pledged or transferred, directly or indirectly, by or to a Disqualified
Organization. Prior to and as a condition of the registration of any transfer,
sale or other disposition of a Class R Certificate or any Percentage Interest
therein, the proposed transferee shall deliver to the Certificate Registrar an
affidavit in substantially the form attached hereto as Exhibit G representing
and warranting that such transferee is neither a Disqualified Organization nor
an agent or nominee acting on behalf of a Disqualified Organization (any such
transferee, a "Permitted Transferee"). In addition, the Certificate Registrar
may (but shall have no obligation to) require, prior to and as a condition of
any such transfer, the delivery by the proposed transferee of an Opinion of
Counsel, satisfactory in form and substance to the Certificate Registrar, that
such proposed transferee or, if the proposed transferee is an agent or nominee,
the proposed beneficial owner, is not a Disqualified Organization.
Notwithstanding the registration in
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the Certificate Register of any transfer, sale or other disposition of a Class R
Certificate or any Percentage Interest therein to a Disqualified Organization or
an agent or nominee acting on behalf of a Disqualified Organization, such
registration shall be deemed to be of no legal force or effect whatsoever and
such Disqualified Organization (or such agent or nominee) shall not be deemed to
be a Certificateholder for any purpose hereunder, including, but not limited to,
the receipt of distributions on such Class R Certificate. The Certificate
Registrar shall not be under any liability to any person for any registration of
transfer of a Class R Certificate to a Disqualified Organization or for the
maturity of any payments due on such Class R Certificate to the Holder thereof
or for taking any other action with respect to such Holder under the provisions
of the Agreement so long as the transfer was effected in accordance with this
Section 5.02(d), unless the Certificate Registrar shall have actual knowledge at
the time of such transfer or the time of such payment or other action that the
transferee is a Disqualified Organization (or an agent or nominee thereof). The
Certificate Registrar shall be entitled to recover from any Holder of a Class R
Certificate or any Percentage Interest therein that was, at the time it became a
Holder or at any subsequent time it became a Disqualified Organization (or an
agent or nominee thereof), all payments made on such Class R Certificate at and
after either such times (and all costs and expenses, including but not limited
to attorneys' fees, incurred in connection therewith). Any payment (not
including any such costs and expenses) so recovered by the Certificate Registrar
shall be paid and delivered to the last preceding Holder of such Class R
Certificate or Percentage Interest therein. Any Percentage Interest in a Class R
Certificate shall be a pro rata individual interest.
In addition to the foregoing restrictions on transfer of a Class R
Certificate or any Percentage Interest therein, the Certificate Registrar shall
not register the transfer of a Class R Certificate unless it has received a
transferee letter in the form attached as Exhibit H, it has received written
evidence satisfactory to the Certificate Registrar that the transferor has paid
or provided for payment of all taxes (including all accrued taxes on excess
inclusion income) accrued on such Class R Certificate in accordance with the
provisions set forth in Sec-
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tion 10.01(j), which written evidence shall include a copy of the applicable
Forms 1066Q (or other applicable form prescribed by the IRS), to the extent that
any such form has been filed, evidencing the amount of excess inclusion income
for the periods during which the transferor held such Class R Certificate or any
Percentage Interest therein. Upon satisfaction of the foregoing requirements,
the Certificate Registrar shall register the Class R Certificate in the name of
the transferee on whose behalf the transferee letter is completed and delivered
(and not in the name of any nominee thereof) unless the Certificate Registrar
shall have actual knowledge that any information contained in any letter or
affidavit supplied in connection with such proposed transfer is false.
If any purported transferee shall become a registered Holder of a
Class R Certificate in violation of the provisions of this Section 5.02(d), then
upon receipt of written notice to the Certificate Registrar that the
registration of transfer of such Class R Certificate was not in fact permitted
by this Section 5.02(d), the last preceding Permitted Transferee shall be
restored to all rights as Holder thereof retroactive to the date of such
registration of transfer of such Class R Certificate. The Certificate Registrar
shall be under no liability to any Person for any registration of transfer of a
Class R Certificate that is in fact not permitted by this Section 5.02(d), for
making any payment due on such Certificate to the registered Holder thereof or
for taking any other action with respect to such Holder under the provisions of
this Agreement so long as the transfer was registered upon receipt of the
affidavit and the transferee letter described in this Section 5.02(d).
Each Holder of a Class R Certificate or any Percentage Interest
therein, by such Holder's acceptance thereof, shall be deemed for all purposes
to have consented to the provisions of this Section.
Each Class R Certificate shall bear a legend describing the
restrictions on transferability set forth in this Section 5.02(d).
(e) Every Certificate presented or surrendered for registration of
transfer or exchange shall (if so required by the
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Certificate Registrar or the Trustee) be duly endorsed by, or be accompanied by
a written instrument of transfer in form satisfactory to the Certificate
Registrar duly executed by, the Holder thereof or its attorney duly authorized
in writing. Subject to Sections 5.02(b), (c) and (d) above, upon surrender for
registration of transfer of any Certificate at the Corporate Trust Office or any
office or agency of the Trustee maintained for such purpose pursuant to Section
5.05, the Certificate Registrar shall execute and the Trustee or the
Authenticating Agent shall authenticate and deliver, in the name of the
designated transferee or transferees, one or more new Certificates of a like
aggregate Percentage Interest of the same Class. At the option of the
Certificateholders, Certificates may be exchanged for other Certificates of a
like aggregate Percentage Interest of the same Class upon surrender of the
Certificates to be exchanged at any such office or agency. Whenever any
Certificates are so surrendered for exchange, the Certificate Registrar shall
execute and the Trustee or the Authenticating Agent shall authenticate, date and
deliver the Certificates that the Certificateholder making the exchange is
entitled to receive.
(f) No service charge shall be made to a Certificateholder for any
registration of transfer or exchange of Certificates, but the Certificate
Registrar may require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any registration of
transfer or exchange of Certificates.
(g) All Certificates surrendered for registration of transfer or
exchange shall be cancelled by the Certificate Registrar or the Trustee in
accordance with their standard procedures.
(h) The Certificate Registrar (unless the Trustee is acting as
Certificate Registrar) will provide to the Trustee as requested an updated copy
of the Certificate Register.
Section 5.03. Mutilated, Destroyed, Lost or Stolen Certificates. If
(a) any mutilated Certificate is surrendered to the Trustee or the Certificate
Registrar, or the Trustee or the Certificate Registrar receives evidence to its
satisfaction of
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the destruction, loss or theft of any Certificate and (b) there is delivered to
the Certificate Registrar and the Trustee such security or indemnity as may be
required by them to save each of them harmless, then, in the absence of notice
to the Certificate Registrar or the Trustee that such Certificate has been
acquired by a bona fide purchaser, the Certificate Registrar shall execute and
the Trustee or the Authenticating Agent shall authenticate and deliver in
exchange for or in lieu of any such mutilated, destroyed, lost or stolen
Certificate, a new Certificate of like tenor and Percentage Interest in the same
Class. Upon the issuance of any new Certificate under this Section, the Trustee
or the Certificate Registrar may require the payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in relation
thereto and any other expenses (including the fees and expenses of the Trustee
and the Certificate Registrar) connected therewith. Any replacement Certificate
issued pursuant to this Section shall constitute complete and indefeasible
evidence of ownership in the Trust Fund, as if originally issued, whether or not
the mutilated, lost, stolen or destroyed Certificate shall be found at any time.
Section 5.04. Persons Deemed Owners. Prior to the due presentation
of a Certificate for registration of transfer, the Servicer, the Trustee, the
Paying Agent, the Certificate Registrar and any agent of any of them may treat
the Person in whose name any Certificate is registered as the owner of such
Certificate for the purpose of receiving distributions pursuant to Section 4.01,
and for all other purposes whatsoever, and none of the Servicer, the Trustee,
the Paying Agent, the Certificate Registrar or any agent of any of them shall be
affected by notice to the contrary.
Section 5.05. Maintenance of Office or Agency. The Trustee will
maintain or cause to be maintained at its expense an office or offices or agency
or agencies where Certificates may be surrendered for registration of transfer
or exchange and presented for final distribution and where notices and demands
to or upon the Trustee in respect of the Certificates and this Agreement may be
served. The Trustee initially appoints the Certificate Registrar designated in
Section 5.02 for transfer and exchange of Certificates and designates the office
described in Section 5.02 as its office for purposes of receipt of such
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notices and demands. The Trustee will give prompt written notice to the
Certificateholders of any change in the location of the Certificate Register or
any such office of agency.
Section 5.06. Appointment of Paying Agent. The Trustee shall cause
such Paying Agent to execute and deliver to the Trustee an instrument in which
such Paying Agent shall agree with the Trustee that such Paying Agent will hold
all sums held by it for the payment to Certificateholders in trust for the
benefit of Certificateholders and the Trustee in the Certificate Account until
such sums have been paid to the Certificateholders and otherwise agree to be
bound by the terms of this Agreement applicable to it. All funds in the
Certificate Account shall be paid to Certificateholders on each Distribution
Date in accordance with the terms of this Agreement. Any Paying Agent shall be
either a bank or trust company or otherwise authorized under law to exercise
corporate trust powers and shall, if other than the Trustee, have a rating of at
least "AA" by the Rating Agency or be an entity whose appointment would not, in
and of itself, cause a downgrade, qualification or withdrawal of the then
current ratings assigned to any Class of Regular Certificates, as evidenced by a
written confirmation from the Rating Agency. The Trustee shall serve as the
initial Paying Agent. The Paying Agent, if other than the Trustee, shall give
the Trustee notice of any default in any payment due with respect to the
Certificates.
Section 5.07. Definitive Certificates. If (i)(A) the Depository advises
the Depositor and the Trustee in writing that the Depository is no longer
willing or able properly to discharge its responsibilities as depository with
respect to the Book-Entry Certificates and (B) and the Depositor fails to
appoint a successor Depository within 90 days, the Trustee shall notify the
Beneficial Owners, through the Depository, of the occurrence of such event and
of the availability of Definitive Certificates to Beneficial Owners requesting
the same. In such instance, an owner of a beneficial interest in a Book-Entry
Certificate will be entitled to physical delivery in definitive form of Regular
Certificates of the applicable Class represented by such BookEntry Certificate
equal in principal amount to such beneficial interest and to have such Regular
Certificates of the applicable Class registered in its name. Upon surrender to
the Trustee by
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the Depository of the Certificates held of record by its nominee, accompanied by
re-registration instructions and directions to execute and authenticate new
Certificates from the Depository, the Trustee shall execute and authenticate
Definitive Certificates for delivery at its Corporate Trust Office. Regular
Certificates so issued in definitive form will be issued in minimum
denominations of $100,000 and integral multiples of $1 in excess thereof as the
Depository, pursuant to instructions from its participants or otherwise, shall
direct. The Depositor shall arrange for, and will bear all costs of, the
printing and issuance of such Definitive Certificates. Neither the Depositor nor
the Trustee shall be liable for any delay in delivery of such instructions by
the Depository and may conclusively rely on, and shall be protected in relying
on, such instructions by the Depository. Any distribution made pursuant to
Section 4.01 to Holders of Definitive Certificates shall be made in accordance
with the payment procedures set forth in Section 4.01(d).
Section 5.08. Access to List of Certificateholders' Names and
Addresses. If the Trustee is not the Certificate Registrar, and the Trustee at
any time requests the Certificate Registrar in writing to provide a list of the
names and addresses of Certificateholders of the Trust Fund, the Certificate
Registrar shall furnish to the Trustee monthly not more than five days after
each Record Date, as of such Record Date, or at such other times as the Trustee
may request in writing within 15 days after receipt of such request, a list, in
such form and as of such date as the Trustee may reasonably require, containing
all the information in the possession or control of the Certificate Registrar,
as to the names and addresses of the Certificateholders and the amount of the
Certificates held by such Certificateholders. If three or more
Certificateholders (i) request such information in writing from the Trustee,
(ii) state that such Certificateholders desire to communicate with other
Certificateholders with respect to their rights under this Agreement or under
the Certificates and (iii) provide a copy of the communication which such
Certificateholders propose to transmit, then the Trustee shall, within ten
Business Days after the receipt of such request, afford such Certificateholders
access during normal business hours to the most recent Record Date list of the
Certificateholders held by the Trustee, if any. If such Record Date list is as
of a date more than 90 days prior
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to the date of receipt of such Certificateholders' request, the Trustee shall
promptly request from the Certificate Registrar a current list and shall afford
such Certificateholders access to such list promptly upon its receipt by the
Trustee. The expense of providing any such information requested by such
Certificateholders shall be borne by such Certificateholders and shall not be
borne by the Trustee or the Certificate Registrar. Each Certificateholder, by
receiving and holding a Certificate, agrees that neither the Certificate
Registrar nor the Trustee shall be held accountable by reason of the disclosure
of any such information as to the list of the Certificateholders hereunder,
regardless of the source from which such information was derived.
Section 5.09. Notices to Depository. Whenever notice or other
communication to the Holders of Book-Entry Certificates is required under this
Agreement, unless and until Definitive Certificates shall have been issued to
Beneficial Owners pursuant to Section 5.07, the Trustee shall give any such
notice or other communication to the Depository.
Section 5.10. Certificates Owned by the Mortgagors and Depositor
Deemed Not Outstanding. In determining whether the Certificateholders of the
requisite aggregate Voting Rights or principal balance have given or concurred
in any request, demand, authorization, direction, consent or waiver under this
Agreement, Certificates that are owned or held by or for the account of the
Mortgagors and Depositor or by any Affiliate of any of the foregoing shall be
disregarded and deemed not to be outstanding for the purpose of any such
determination; provided that for the purpose of determining whether the Trustee
shall be protected in relying on any such request, demand, authorization,
direction, consent or waiver, only if a Responsible Officer of the Trustee has
actual knowledge that certain Certificates are so owned shall such Certificates
be so disregarded. Upon request of the Trustee, the Depositor shall furnish to
the Trustee promptly an Officer's Certificate listing and identifying all
Certificates, if any, known by the Depositor to be owned or held by or for the
account of any of the above-described persons; and the Trustee
shall be entitled to accept such Officer's Certificates as conclusive evidence
of the facts set forth therein and of the fact that all Certificates not listed
therein are outstanding for the purpose of any such determination.
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ARTICLE SIX
THE DEPOSITOR AND THE SERVICER
Section 6.01. Liabilities of the Depositor and the Servicer.
The Depositor and the Servicer shall each be liable in accordance
herewith only to the extent of the obligations specifically and respectively
imposed upon and undertaken by the Depositor and the Servicer herein. By way
of illustration and not limitation, the Depositor is not liable for the
servicing and administration of the Mortgage Loan, nor is it obligated
by Section 7.01 or any other provision of this Agreement to assume any
obligations of the Servicer or to appoint a designee to assume such
obligations, nor is it liable for any other obligations hereunder that it
may, but is not obligated to, assume unless it elects to assume such
obligation in accordance herewith.
Section 6.02. Merger or Consolidation of the Depositor or the
Servicer. The Depositor and the Servicer will each do or cause to be done all
things necessary to preserve and keep in full force and effect their
respective existences, rights and franchises (charter and statutory) and will
each obtain and preserve their respective qualifications to do business as a
foreign corporation in each jurisdiction in which such qualification is or
shall be necessary to protect the validity and enforceability of this
Agreement, or of the Mortgage Loan and to perform their respective
duties under this Agreement.
Any Person into which the Depositor or the Servicer may be merged or
consolidated, or any Person resulting from any merger or consolidation to which
the Depositor or the Servicer shall be a party, or any Person succeeding to the
business of the Depositor or the Servicer, shall be the successor of the
Depositor or the Servicer, as the case may be, hereunder, and shall be deemed to
have assumed all of the liabilities and obligations of the Depositor or the
Servicer hereunder, as applicable, without the execution or filing of any paper
or any further act on the part of any of the parties hereto, anything herein to
the contrary notwithstanding; provided, however, that
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(i) the successor or surviving Person to the Servicer shall be obligated to
service the Mortgage Loan in accordance with Accepted Servicing
Practices and (ii) such successor or surviving Person would not cause the
then current rating on any Class of the Regular Certificates to be lowered or
withdrawn by the Rating Agency.
Section 6.03. Limitation on Liability of the Depositor, the Servicer
and Others. (a) Neither the Depositor, the Servicer nor any of the directors,
officers, employees or agents of the Depositor or the Servicer shall be under
any liability to the Certificateholders for any action taken or for refraining
from taking any action in good faith pursuant to this Agreement, or for errors
in judgment; provided, however, that this provision shall not protect the
Depositor or the Servicer against any liability arising out of the breach of any
representations or warranties made by it herein or protect the Depositor or the
Servicer or any such person from any liability which would otherwise be imposed
by reasons of willful misfeasance, bad faith or negligence in the performance of
their respective duties or by reason of reckless disregard of their respective
obligations and duties hereunder. The Depositor, the Servicer and any director,
officer, employee or agent of the Depositor or the Servicer may rely in good
faith on any document of any kind prima facie properly executed and submitted by
any Person respecting any matters arising hereunder. The Depositor, the Servicer
and any director, officer, employee or agent of the Depositor or the Servicer
shall be indemnified by the Trust Fund and held harmless against any loss,
liability or unanticipated expense relating to this Agreement or the
Certificates, other than any loss, liability or expense incurred by reason of
willful misfeasance, bad faith or negligence in the performance of their
respective duties hereunder or by reason of reckless disregard of obligations
and duties hereunder. Neither the Depositor nor the Servicer shall be under any
obligation to appear in, prosecute or defend any legal action that is not
incidental to their duties hereunder and which in its opinion may involve it in
any expense or liability; provided, however, that either the Depositor or the
Servicer may in its discretion undertake any such action that it may deem
necessary or desirable in respect of this Agreement and the rights and duties of
the parties hereto and interests of the Certificateholders hereunder. In such
event, the legal expenses
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and costs of such action and any liability resulting therefrom shall be
expenses, costs and liabilities of the Trust Fund, and the Depositor or the
Servicer shall be entitled to be reimbursed therefor out of amounts on deposit
in the Central Account or the Certificate Account as provided by Section 3.04
hereof.
(b) Each of the Paying Agent (in such capacity), the Certificate
Registrar (in such capacity), the Authenticating Agent (in such capacity) and
the Servicer, respectively, agree, with respect to their own actions and
omissions and those of their respective agents (but, not with respect to the
actions or omissions of any other Person), to indemnify the Depositor, the
Trustee, and the Trust Fund, and hold them harmless against any and all claims,
losses, penalties, fines, forfeitures, legal fees and related costs, judgments,
and any other costs, liabilities, fees and expenses that the Depositor and/or
the Trustee and/or the Trust Fund may sustain in connection with this Agreement
related to the willful misconduct, bad faith and/or negligence by such
indemnifying party or its agents, in the performance of duties by the
indemnifying party or its agents hereunder or by reason of reckless disregard of
obligations and duties by the indemnifying party or its agents, as the case may
be, except that the Servicer shall not be liable for losses (i) that arise from
events occurring or conditions existing prior to the date of this Agreement; or
(ii) which were known to the Mortgagors, the Depositor or the Trustee but not
disclosed to the Servicer and as to which an employee or agent of the Servicer
performing the duties of the Servicer hereunder did not otherwise have knowledge
or as to which such persons would not, but for their negligence, bad faith or
misfeasance, have had knowledge; (iii) which are caused by the Servicer's
inability to perform because of the unavailability of funds in the Trust Fund or
because any Advance would be a Nonrecoverable Advance; or (iv) that arise as a
result of any action or inaction taken by the Servicer in accordance with the
express recommendation or at the direction of the Trustee or the
Certificateholders; provided, that such indemnity is limited to direct damages
and shall not cover consequential damages. The Depositor and the Trustee shall
immediately notify the Paying Agent, the Certificate Registrar, the
Authenticating Agent or the Servicer, as the case may be, if a claim is made by
a third party with respect to this Agreement or the Mortgage Loan entitling
the Depositor, the Trustee or the Trust Fund to
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indemnification hereunder, whereupon the Paying Agent, the Certificate
Registrar, the Authenticating Agent or the Servicer, as the case may be, shall
assume the defense of any such claim (with counsel reasonably satisfactory to
the Depositor and the Trustee, as the case may be) and pay all expenses in
connection therewith, including counsel fees, and promptly pay, discharge and
satisfy any judgment or decree which may be entered against it or them in
respect of such claim. Any failure to so notify the Paying Agent, the
Certificate Registrar, the Authenticating Agent or the Servicer, as the case may
be, shall not affect any rights the Depositor, the Trustee or the Trust Fund may
have to indemnification under this Agreement or otherwise except to the extent
any such party is damaged by such delay. Such indemnity obligation shall survive
the termination of the Paying Agent, the Certificate Registrar, the
Authenticating Agent and the Servicer hereunder and the termination of this
Agreement.
(c) The Depositor shall defend, indemnify and hold harmless the
Trustee, its Affiliates, officers, directors, agents and employees against any
and all claims, losses, penalties, fines, forfeitures, legal fees and related
costs, judgments and any other costs, fees and expenses that the Trustee or its
Affiliates' officers, directors, agents, employees and Control Persons may
sustain in connection with lawsuits brought by the Mortgagors or third parties
based upon (a) actions taken by the Trustee pursuant to or in furtherance of,
this Agreement or (b) inaccurate or erroneous information contained in reports
or other documents prepared or furnished by other persons which are not
Affiliates of the Trustee, as the case may be, except to the extent that the
Trustee or its Affiliates obtain actual knowledge of such inaccuracy or error
and fail to use diligent efforts to remedy the same or to notify the Depositor;
provided, however, that in no event shall Servicer or the Trustee be indemnified
or held harmless under this Section 6.03(c) with respect to consequential
damages or from its own negligent actions or omissions or its willful
misconduct.
Section 6.04. Servicer Not to Resign. Subject to the provisions of
Section 6.02, the Servicer shall not resign from its obligations and duties
hereby imposed on it except (i) upon determination that performance of its
duties hereunder is no longer permissible under applicable law or is in material
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conflict by reason of applicable law with any other activities carried on by it,
the other activities of the Servicer so causing such a conflict being of a type
and nature carried on by it at the date of this Agreement, or (ii) upon the
withdrawal by Servicer from the business of servicing commercial mortgage loans
for third parties. Any such determination permitting the resignation of the
Servicer shall, in the case of clause (i), be evidenced by an Opinion of Counsel
to such effect delivered to the Trustee and the Depositor. Circumstances
permitting the resignation of the Servicer under clause (ii) shall be evidenced
by certificate from a Servicing Officer confirming such withdrawal. No
resignation by the Servicer under this Agreement shall become effective until
the Trustee, in accordance with Section 7.04 hereof, or a successor servicer
shall have assumed the Servicer's responsibilities and obligations hereunder. No
person other than the Trustee shall be appointed a successor servicer if such
appointment would cause a downgrade, qualification or withdrawal by the Rating
Agency of its then-current rating of any Class of Regular Certificates.
Section 6.05. Rights of the Depositor in Respect of the Servicer.
The Servicer shall afford the Depositor, upon reasonable notice, during normal
business hours access to all records, including those in electronic form,
maintained by the Servicer in respect of its rights and obligations hereunder
and access to officers of the Servicer responsible for such obligations. Upon
request, the Servicer shall furnish the Depositor and the Trustee with most
recent routinely publicly available financial statements of the Servicer's
parent, AMRESCO, INC. The Depositor may, but is not obligated to, enforce the
obligations of the Servicer hereunder and may, but is not obligated to, perform,
or cause a designee to perform, any defaulted obligation of the Servicer
hereunder which the Servicer has failed to cure and exercise the rights of the
Servicer hereunder. In the event the Depositor undertakes any such action it
shall be indemnified by the Trust Fund in accordance with the standard set forth
in Section 6.03. The Servicer shall not be relieved of any of its obligations
hereunder by virtue of such performance by the Depositor. The Depositor shall
not have any responsibility or liability for any action or failure to act by the
Servicer and is not obligated to supervise the performance of the Servicer under
this Agreement or otherwise.
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ARTICLE SEVEN
DEFAULT
Section 7.01. Events of Default. "Event of Default," wherever used
herein, means any one of the following events (whatever reason for such Event of
Default and whether it shall be voluntary or involuntary or be effected by
operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(a) any failure by the Servicer to deposit amounts in the
Servicer Collection Account, the Certificate Account, the Default Interest
Account, or, to the extent required pursuant to Section 3.04(a)(iii), the
Central Account, in the amount and manner provided for herein so as to
enable the Paying Agent to distribute or cause to be distributed to the
Certificateholders of any Class any payment required to be made under the
terms of the Certificates and this Agreement that continues unremedied for
a period of one day after the date upon which written notice of such
failure, requiring the same to be remedied, shall have been given to the
Servicer by the Trustee, the Paying Agent or the Depositor, or to the
Servicer and the Trustee or the Paying Agent by Certificateholders
evidencing, in the aggregate, not less than 25% of the Voting Rights of
the Regular Certificates;
(b) any failure on the part of the Servicer duly to observe or
perform in any material respect any other of the covenants or agreements
of the Servicer in this Agreement, which failure continues unremedied for
a period of 30 days (except that such number of days shall be 15 in the
case of a failure to pay the premium for any Required Insurance Policy)
after the date on which written notice of such failure, requiring the same
to be remedied, shall have been given to the Servicer by the Trustee, or
to the Servicer and the Trustee by Certificateholders evidencing, in the
aggregate, not less than 25% of the Voting Rights of the Regular
Certificates;
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(c) a representation or warranty of the Servicer set forth in
this Agreement shall prove to be incorrect as of the time made in any
respect that materially and adversely affects the interests of the
Certificateholders, and the circumstances or condition in respect of which
such representation or warranty was incorrect shall not have been
eliminated or cured within 30 days after the date on which written notice
thereof shall have been given to the Servicer by the Trustee or by the
Depositor, or to the Servicer and the Trustee by Certificateholders
evidencing, in the aggregate, not less than 25% of the Voting Rights of
the Regular Certificates;
(d) the entry of a decree or order of a court or agency or
supervisory authority having jurisdiction in the premises for the
appointment of a conservator, receiver or liquidator in any insolvency,
readjustment of debt, marshalling of assets and liabilities or similar
proceedings against the Servicer, or for the winding-up or liquidation of
the Servicer's affairs, and such decree or order remains unstayed and in
effect for a period of 30 days;
(e) the consent by the Servicer to the appointment of a
conservator or receiver or liquidator or liquidating committee in any
insolvency, readjustment of debt, marshalling of assets and liabilities,
voluntary liquidation or similar proceedings of or relating to the
Servicer or of or relating to all or substantially all of its property;
(f) the Servicer shall admit in writing its inability to pay its
debts generally as they become due, file a petition to take advantage of
any applicable insolvency or reorganization statute, make an assignment
for the benefit of its creditors or voluntarily suspend payment of its
obligations;
(g) any failure of the Servicer to make any Advance from its own
funds when required to do so pursuant to this Agreement; or
(h) either (A) the Rating Agency shall lower or withdraw the
outstanding rating of any Class of the Regular
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Certificates solely because the existing or prospective financial
condition or mortgage loan servicing capability of the Servicer is
insufficient to maintain such outstanding rating or (B) the Rating Agency
shall provide notice that failure to replace the Servicer will result in a
lowering or withdrawal of the outstanding rating on any Class of Regular
Certificates.
If an Event of Default shall occur, then, so long as such Event of Default
shall not have been remedied, either (A) the Trustee may, or (B) upon the
written direction of the holders of Certificates evidencing, in the aggregate,
not less than 25% of the Voting Rights of the Regular Certificates, the Trustee
shall, by notice in writing to the Servicer (with a copy to the Rating Agency),
terminate all of the rights and obligations of the Servicer under this
Agreement, other than rights and obligations accrued prior to such termination,
and in and to the Mortgage Loan and the proceeds thereof. In the case of an
Event of Default relating to the Servicer under clauses (d), (e) or (f) above,
the Trustee will immediately succeed to the duties and obligations of the
Servicer (including the obligations with respect to the making of any required
Advance which has not been made as of such date). Upon any termination of the
Servicer or appointment of a successor to the Servicer, the Trustee shall, as
soon as practicable, give written notice thereof to the Certificateholders.
The Trustee shall appoint a successor Servicer selected by the Trustee and
approved by Certificateholders holding in the aggregate not less than 662/3% of
the Voting Rights of the Regular Certificates. The Servicer will receive any
amounts owed to it under this Agreement (other than unpermitted P&I Advances
described in Section 3.18(f)(iii)) through the date of its termination prior to
the recovery by the successor Servicer of any amounts owed to it hereunder. The
Servicer agrees that it will promptly (and in any event no later than five
Business Days subsequent to such notice) provide the successor Servicer with all
documents and records, including those in electronic form, requested by it to
enable it to assume the predecessor Servicer's obligations hereunder, and to
cooperate with the successor Servicer in effecting the termination of the
Servicer's responsibilities and rights hereunder, including without
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limitation, the transfer within one Business Day to the successor Servicer
or its duly appointed agent for administration by it of all cash received by
the predecessor Servicer under the Mortgage Loan and which shall at the time
have been or should have been credited by the predecessor Servicer to the
Rent Accounts, the Central Account, the Servicer Collection Account, the
Escrow Account, the Default Interest Account and the Certificate Account or
that thereafter is received with respect to the Mortgage Loan (provided,
however, that notwithstanding anything to the contrary in this Section 7.01,
the Servicer shall continue to be entitled to receive all amounts accrued or
owing to it under this Agreement on or prior to the date of such termination,
whether in respect of Advances, unpaid Servicing Fees, Modification Fees,
Liquidation Fees and Special Servicing Fees and interest thereon at the
Advance Rate or otherwise, less any sums owed the Trust Fund or otherwise in
accordance with the terms hereof). The Trustee shall not be deemed to have
breached any obligations hereunder as a result of a failure to make or delay
in making any distribution as and when required hereunder caused by the
failure of the Servicer to remit any amounts received by it or to deliver any
documents held by it with respect to the Mortgage Loan. All reasonable costs
and expenses (including attorneys' fees) incurred by the Trustee, the
Depositor or the Certificateholders in connection with the appointment of a
successor Servicer, including but not limited to, transferring the Deed of
Trust File to the successor Servicer and, if applicable, amending this
Agreement to reflect such succession as Servicer pursuant to this Section
7.01 shall be paid by the predecessor Servicer upon presentation of
reasonable documentation of such costs and expenses to the Trustee. For so
long as any amounts have not been paid to the predecessor Servicer, any
successor Servicer shall deliver to the predecessor Servicer on each
Distribution Date the following information: (i) any analysis made since the
then most recent Distribution Date as to whether any Advances are
Nonrecoverable Advances; (ii) any appraisals received since the last
Distribution Date; (iii) any environmental or engineering reports with
respect to the Mortgaged Property received since the last Distribution Date;
(iv) any reports or notices distributed to Certificateholders, the Initial
Purchasers or the Rating Agency; or (v) any other information reasonably
requested by such predecessor Servicer. If such amounts are not paid to the
Trustee by the predecessor Servicer within 30 days following delivery of
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an invoice therefor by the Trustee to such predecessor servicer, the Trustee
shall be reimbursed for such sums by the Trust Fund from amounts on deposit in
the Central Account, which reimbursement shall not diminish the obligation of
such predecessor servicer to pay such amounts to the Trust Fund.
If a Mortgage Loan Event of Default shall occur, the actions of Trustee
and Servicer with respect to the foreclosure upon the Mortgaged Property
shall be governed by Section 3.08 hereof. The occurrence of a Mortgage Loan
Event of Default shall not effect an acceleration of the Certificate
Principal Balance, and the rights of Certificateholders to receive
distributions shall continue to be governed by Section 4.01 hereof.
If a Responsible Officer of the Trustee shall obtain knowledge of any
Event of Default hereunder, the Trustee shall immediately notify the Servicer of
the occurrence of such Event of Default. Upon the occurrence of any Event of
Default hereunder known to a Responsible Officer of the Trustee, the Trustee
shall give the Rating Agency written notice of the occurrence thereof.
On or after the receipt by the Servicer of written notice of
termination, all authority and power of the Servicer under this Agreement,
whether with respect to the Certificates or the Mortgage Loan (other
than its capacity, if any, as Holder of a Certificate) or otherwise, shall
pass to and be vested in the Trustee pursuant to and under this Section 7.01.
Section 7.02. Remedies of Trustee. During the continuance of any
Event of Default, so long as such Event of Default shall not have been remedied,
the Trustee, in addition to the rights specified in Section 7.01, shall have the
right, in its own name as a trustee of an express trust, to take all actions now
or hereafter available at law, in equity or by statute to enforce its rights and
remedies and to protect the interests, and enforce the rights and remedies, of
the Certificateholders (including the institution and prosecution of all
judicial, administrative and other proceedings and the filing of proofs of
claim, debt and other papers in connection therewith). Except as otherwise
expressly provided in this Agreement, no remedy provided for by this Agreement
shall be exclusive of any other remedy, and each and every remedy shall be
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cumulative and in addition to any other remedy, and no delay or omission to
exercise any right or remedy shall impair any such right or remedy or shall be
deemed to be a waiver of any such right or remedy with respect to any Event of
Default.
Section 7.03. Directions by Certificateholders and Duties of Trustee
During Event of Default. During the continuance of any Event of Default, Holders
of Certificates evidencing, in the aggregate, not less than 25% of the Voting
Rights of the Certificates, may direct the time, method and place for conducting
any proceeding for any remedy available to the Trustee, or for exercising any
trust or power conferred upon the Trustee under this Agreement; provided,
however, that the Trustee shall be under no obligation to pursue any such remedy
or to exercise any of the trusts or powers vested in it by this Agreement
(including, without limitation, (i) conducting or defending any administrative
action or litigation hereunder or in relation hereto, and (ii) terminating the
Servicer or any successor servicer hereunder) at the request, order or direction
of any of the Certificateholders, unless such Certificateholders shall have
offered to the Trustee security or indemnification satisfactory to the Trustee
against the costs, expenses and liabilities which may be incurred therein or
thereby and, provided, further, that the Trustee shall have the right to decline
to follow any such direction if the Trustee, in accordance with an Opinion of
Counsel, determines that the action or proceeding so directed may not lawfully
be taken or if the Trustee in good faith determines that the action or
proceeding so directed would involve it in personal liability or be unjustly
prejudicial to the non-assenting Certificateholders. In the event that the
Trustee receives instructions or directions from two groups of Holders of
Certificates, each group evidencing not less than 25% of the Voting Rights of
Certificates, the Trustee shall follow the instructions or directions of the
group with the greater percentage of Voting Rights, subject to provisions in the
preceding sentence.
Section 7.04. Trustee to Act; Appointment of Successor. (a) On and
after the time the Servicer receives a notice of termination pursuant to Section
7.01 or the Trustee receives the resignation of the Servicer in accordance with
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clause (i) of the first sentence of Section 6.04 accompanied by an Opinion of
Counsel pursuant to Section 6.04, the Trustee shall be the successor in all
respects to the Servicer in its capacity as servicer under this Agreement and
the transactions set forth or provided for herein and shall have all the rights
and powers and be subject to all the responsibilities, duties and liabilities
relating thereto placed on the Servicer that have accrued after such termination
other than those responsibilities, duties and liabilities of the Servicer
arising under Section 2.03; provided, however, that any failure to perform such
duties or responsibilities caused by the Servicer's failure to comply with
Section 7.01 shall not be considered a default by the Trustee hereunder. In its
capacity as such successor, the Trustee shall have the same limitation of
liability herein granted to the Servicer. As compensation for serving as the
successor to the Servicer, the Trustee shall be entitled to such compensation as
the Servicer would have been entitled to hereunder if no such notice of
termination or resignation had been given, including, without limitation, the
Servicing Fee, the Special Servicing Fee and the Liquidation Fee and the
Modification Fee. Notwithstanding anything contained herein, the Trustee may, if
it is unwilling to so act, or shall, if it is unable to so act, appoint, or
petition a court of competent jurisdiction to appoint, as the successor to the
Servicer hereunder in the assumption of all or any part of the responsibilities,
duties or liabilities of the Servicer hereunder, any established finance
institution or mortgage loan servicing institution whose appointment would not
result in a downgrade, qualification or withdrawal by the Rating Agency of its
then-current rating of any Class of Regular Certificates; provided, however,
that until such appointment and assumption, the Trustee, or the Servicer in the
case of its resignation pursuant to clause (ii) of the first sentence of Section
6.04, will continue to perform the servicing obligations pursuant to this
Agreement to the extent set forth above. In the case of the resignation of the
Servicer pursuant to clause (ii) of the first sentence of Section 6.04, the
Trustee shall appoint any institution meeting the foregoing requirements
selected by the Servicer and reasonably acceptable to the Trustee. In connection
with any such appointment and assumption, the Trustee may make such arrangements
for the compensation of such successor as it and such successor shall agree;
provided, however, that no such
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compensation shall be in excess of that permitted the Servicer hereunder. The
Trustee, the Depositor, the Servicer and such successor shall take such action,
consistent with this Agreement, as shall be necessary to effectuate any such
succession. Neither the Trustee nor any successor servicer shall be deemed to be
in default of any of its obligations under this Section 7.04 if and to the
extent that such default arises from failure of the Servicer to timely provide
all applicable books, records and other documents necessary to effectuate the
sale, transfer or assignment of servicing rights to the Trustee or a successor
servicer in accordance with this Section 7.04.
(b) Any successor to the Servicer, including the Trustee, as servicer
hereunder shall during the term of its service as servicer maintain in force (i)
a policy or policies of insurance covering errors and omissions in the
performance of its obligations as servicer hereunder and (ii) a fidelity bond in
respect of its officers, employees and agents to the same extent required of the
predecessor Servicer pursuant to Section 3.06(c).
(c) Notwithstanding any other provision of this Agreement, no Person shall
be appointed as a successor servicer if such appointment would adversely affect
the then current rating of any Class of the Regular Certificates as evidenced in
writing by the Rating Agency.
Section 7.05. Notification to Certificateholders. (a) Upon any
termination of the Servicer or appointment of a successor to the Servicer, in
each case as provided herein, the Trustee shall as soon as practicable give
written notice thereof to the Rating Agency and to the Certificateholders at
their respective addresses appearing in the Certificate Register.
(b) Any notification to Certificateholders of an Event of Default shall
advise the Certificateholders of their rights pursuant to item (B) of the second
paragraph of Section 7.01, if applicable.
Section 7.06. Waiver of Past Events of Default. The Holders of
Certificates evidencing, in the aggregate, not less than a majority of the
Voting Rights of the Certificates may, on behalf of all Holders of Certificates,
waive any Event of Default
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hereunder and its consequences; provided, that in the absence of (i) written
instructions from all Certificateholders and (ii) the reimbursement to the
Trustee and the Fiscal Agent of all costs and expenses (including attorneys'
fees) incurred by the Trustee and the Fiscal Agent in connection with such Event
of Default, the Trustee shall not waive any Event of Default (a) consisting of
the failure to remit to the Trustee any principal of or interest on, or other
amounts due under, the Mortgage Note and received by the Servicer, or the
failure of the Servicer to make any required Advance hereunder or (b) in respect
of a covenant or provision hereunder that under Article Eleven hereof cannot be
modified or amended without the consent of such Certificateholder. Upon any such
waiver of a past default, such default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been remedied for every
purpose of this Agreement. No such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
Section 7.07. Action upon Certain Failures of the Servicer and upon
the Occurrence of an Event of Default. In the event that a Responsible Officer
of the Trustee learns of any failure of the Servicer specified in Section
7.01(a) or (b) that would become an Event of Default if the Servicer, upon
receipt of notice of such failure, does not remedy the same, the Trustee may,
but need not if the Trustee deems it not in the Certificateholders' best
interest, give notice thereof to the Servicer. For all purposes of this
Agreement, in the absence of actual knowledge by a Responsible Officer of the
Trustee, the Trustee shall not be deemed to have knowledge of any facts or
circumstances that constitute, or with notice and/or the passage of time would
constitute an Event of Default, or of any Event of Default.
Section 7.08. Limitations on Suits by Certificateholders. No
Certificateholder shall have any right by virtue or by availing of any provision
hereof to institute any action or proceeding at law or in equity or in
bankruptcy or otherwise upon or under or with respect to the Trust, or for the
appointment of a trustee, receiver, liquidator, custodian or other similar
official or for any other remedy thereunder, unless: (i) such Certificateholder
previously has notified the Trustee in writing of an Event of Default and of the
continuance
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thereof, as provided herein; (ii) the Certificateholders representing in the
aggregate not less than 25% of the Voting Rights have requested in writing that
the Trustee institute such action or proceedings in its own name as trustee
hereunder; (iii) such Certificateholders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request; and (iv) the Trustee for 60 days after its receipt
of such notice, request and offer of indemnity has failed to institute any such
action or proceedings, it being understood and intended, and being expressly
covenanted by each Certificateholder with every other Certificateholder and the
Trustee, that no one or more Certificateholders shall have any right in any
manner whatever to affect, disturb or prejudice the rights of any other
Certificateholder or to obtain or seek to obtain priority over or preference to
any other Certificateholder or to enforce any right hereunder or under the
Certificates, except in the manner provided herein and therein and for the
equal, ratable and common benefit of all Certificateholders, subject to the
priorities among Classes of Certificates set forth in this Agreement. For the
protection and enforcement of the provisions of this Section 7.08, each and
every Certificateholder and the Trustee shall be entitled to such relief as can
be given either at law or in equity.
Section 7.09. Unconditional Right of Certificateholders to Receive
Distributions and to Institute Certain Suits. Notwithstanding any other
provision in this Agreement or any Certificate issued pursuant hereto, the right
of any Certificateholder to receive distributions on such Certificate pursuant
to Article Four on or after the respective due dates set forth herein, or, to
institute suit for the enforcement of any such distribution on or after such
respective dates as provided herein, or therein shall not be impaired or
affected without the consent of such Certificateholder.
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ARTICLE EIGHT
CONCERNING THE TRUSTEE AND FISCAL AGENT
Section 8.01. Duties of Trustee. The Trustee, prior to the
occurrence of an Event of Default and after the curing or waiver of all Events
of Default that may have occurred, undertakes with respect to the Trust Fund to
perform such duties and only such duties as are specifically set forth in this
Agreement. The Depositor shall not be obligated to monitor or supervise the
performance by the Trustee of its duties hereunder. In case an Event of Default
has occurred (which has not been cured or waived), the Trustee, subject to the
provisions of Sections 7.01, 7.03, 7.04 and 7.07, shall exercise such of the
rights and powers vested in it by this Agreement, and use the same degree of
care and skill in their exercise as a prudent person would exercise or use under
the circumstances in the conduct of such person's own affairs. Any permissive
right of the Trustee set forth in this Agreement shall not be construed as a
duty.
The Trustee, upon receipt of all resolutions, certificates, statements,
opinions, reports, documents, orders or other instruments furnished to the
Trustee that are specifically required to be furnished pursuant to any provision
of this Agreement shall examine them to determine whether they conform to the
requirements of this Agreement; provided, however, that the Trustee shall not be
responsible for the accuracy or content of any resolution, certificate,
statement, opinion, report, document, order or other instrument furnished by the
Servicer, Mortgagors or any other person hereunder. If any such instrument is
found on its face not to conform to the requirements of this Agreement in a
material manner, the Trustee shall take such action as it deems appropriate to
have the instrument corrected, and if the instrument is not corrected to the
Trustee's reasonable satisfaction, the Trustee shall provide notice thereof to
the Certificateholders.
No provision of this Agreement shall be construed to relieve the Trustee
from liability for its own negligent action, its own negligent failure to act or
its own misconduct, its negligent failure to perform its obligations in
compliance with this
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Agreement, or any liability which would be imposed by reason of its willful
misfeasance or bad faith; provided, however, that:
(a) Prior to the occurrence of an Event of Default, and after the
curing of all such Events of Default which may have occurred, the duties and
obligations of the Trustee shall be determined solely by the express provisions
of this Agreement, the Trustee shall not be liable except for the performance of
such duties and obligations as are specifically set forth in this Agreement, no
implied covenants or obligations shall be read into this Agreement against the
Trustee and the Trustee may conclusively rely, as to the truth of the statements
and the correctness of the opinions expressed therein, upon any certificates or
opinions furnished to the Trustee and conforming to the requirements of this
Agreement which it reasonably believed in good faith to be genuine and to have
been duly executed by the proper authorities respecting any matters arising
hereunder;
(b) none of the Trustee, the Fiscal Agent or any of their respective
directors, officers, employees, agents employees, agents or Control Persons
shall be personally liable for an error of judgment made in good faith by a
Responsible Officer of the Trustee; and
(c) none of the Trustee, the Fiscal Agent or any of their respective
directors, officers, employees, agents employees, agents or Control Persons
shall be personally liable with respect to any action taken, suffered or omitted
to be taken by it in good faith in accordance with this Agreement or at the
direction of Holders of Certificates evidencing, in the aggregate, not less than
25% of the Voting Rights of the Certificates, relating to the time, method and
place of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee, under this Agreement;
and
(d) the Trustee shall not be charged with knowledge of any failure
by the Servicer to comply with the obligations of the Servicer referred to in
Section 7.01 or any other act or circumstance upon the occurrence of which the
Trustee may be required to take action unless a Responsible Officer of the
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Trustee obtains actual knowledge of such failure, act, or circumstance or the
Trustee receives written notice of such failure from the Servicer, the Depositor
or Holders of the Certificates evidencing, in the aggregate, not less than 25%
of the Voting Rights of the Certificates; and
(e) the execution by the Trustee of any forms or plans of
liquidation in connection with the Trust Fund shall not constitute a
representation by the Trustee as to the adequacy of such form or plan of
liquidation other than that such plan of liquidation meets the requirements
outlined in Sections 9.01 and 9.02; and
(f) the Trustee and the Fiscal Agent shall not be under any
obligation to appear in, prosecute or defend any legal action which is not
incidental to their respective duties as Trustee and Fiscal Agent in accordance
with this Agreement. In such event, all legal expense of such action shall be
expenses and costs of the Trust Fund and the Trustee and the Fiscal Agent shall
be entitled to be reimbursed therefor from the Central Account pursuant to
Section 3.04(a)(iv).
None of the provisions contained in this Agreement shall in any
event (i) require the Trustee or the Fiscal Agent to expend or risk its own
funds or otherwise incur personal financial liability in the performance of any
of its duties as Trustee or as Fiscal Agent hereunder or in the exercise of any
of its rights or powers as Trustee or as Fiscal Agent hereunder if the Trustee
or the Fiscal Agent has reasonable grounds for believing that repayment of such
funds or adequate indemnity against such risk or liability is not reasonably
assured to it, or (ii) to perform, or be responsible for the manner of
performance of, any of the obligations of the Servicer under this Agreement,
except during such time, if any, as the Trustee shall be the successor to, and
be vested with the rights, duties, powers and privileges of, the Servicer in
accordance with the terms of this Agreement (other than investments made with
the Trustee in its commercial capacity). Subject to any express requirement of
this Agreement and until such time as the Trustee shall be the successor to the
Servicer and without otherwise limiting the generality of this Section, the
Trustee shall have no duty (A) to see to any recording, filing, or depositing of
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this Agreement or any agreement referred to herein or any financing statement or
continuation statement evidencing a security interest, or to see to the
maintenance of any such recording or filing or depositing or to any rerecording,
refiling or redepositing of any thereof, (B) to see to any insurance, (C)
subject to Section 3.21 and Article Ten, to see to the payment or discharge of
any tax, assessment, or other governmental charge or any lien or encumbrance of
any kind owing with respect to, assessed or levied against, any part of the
Trust Fund, (D) to confirm or verify the contents of any reports or certificates
of any Servicer delivered to the Trustee pursuant to this Agreement believed by
the Trustee to be genuine and to have been signed or presented by the proper
party or parties. Notwithstanding anything contained herein, the Trustee shall
not be responsible and shall have no liability in connection with the duties
assumed by the Paying Agent, the Authenticating Agent and the Certificate
Registrar hereunder, unless the Trustee is acting in any such capacity
hereunder; provided further that in any such capacity the Trustee shall have all
of the rights, protections and indemnities provided to it as Trustee hereunder.
Section 8.02. Certain Matters Affecting Trustee and Fiscal Agent.
(a) Except as otherwise provided in Section 8.01:
(i) the Trustee and the Fiscal Agent may request and rely upon
and shall be protected in acting or refraining from acting upon any
resolution, Officer's Certificate, certificate of auditors or any other
certificate, statement, instrument, opinion, report, notice, request,
consent, order, approval, bond or other paper or document believed by it
to be genuine and to have been signed or presented by the proper party or
parties;
(ii) the Trustee and the Fiscal Agent may consult with counsel
and any Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken or suffered or omitted by it
hereunder in good faith and in accordance with such Opinion of Counsel;
(iii) neither the Trustee nor the Fiscal Agent shall be under
any obligation to exercise any of the trusts or powers vested in it by
this Agreement or to institute,
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conduct or defend any litigation hereunder or in relation hereto at the
request, order or direction of any of the Certificateholders, pursuant to
the provisions of this Agreement, unless such Certificateholders shall
have offered to the Trustee and the Fiscal Agent reasonable security or
indemnity against the costs, expenses and liabilities, including
reasonable legal fees, which may be incurred therein or thereby; provided,
except in those cases in which the Trustee is required by the terms of
this Agreement to follow the directions of a requisite number or
percentage of Certificateholders, nothing contained herein shall relieve
the Trustee of the obligation, upon the occurrence of an Event of Default
(which has not been cured or waived), to exercise such of the rights and
powers vested in it by this Agreement, and to use the same degree of care
and skill in their exercise as a prudent person would exercise or use
under the circumstances in the conduct of such person's own affairs. The
Trustee's and the Fiscal Agent's reasonable costs and expenses (including
attorneys' fees) in connection with the foregoing shall be paid by the
requesting Certificateholders;
(iv) neither the Trustee nor the Fiscal Agent nor any of their
respective directors, officers, employees, agents or Control Persons shall
be personally liable for any action reasonably taken, suffered or omitted
by it in good faith and reasonably believed by it to be authorized or
within the discretion or rights or powers conferred upon it by this
Agreement;
(v) prior to the occurrence of an Event of Default hereunder and
after the curing or waiver of all Events of Default that may have
occurred, the Trustee shall not be bound to ascertain or inquire as to the
performance or observance of any of the terms, conditions, covenants or
agreements herein (except as specifically required by this Agreement) or
to make any investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion, report, notice,
request, consent, order, approval, bond, or other paper or document,
unless requested in writing so to do by Holders of Certificates
evidencing, in the aggregate, not less than 25% of the
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Voting Rights of the Certificates; provided, however, that if the payment
within a reasonable time to the Trustee of the costs, expenses or
liabilities likely to be incurred by it in the making of such
investigation is, in the opinion of the Trustee, not reasonably assured to
the Trustee by the security afforded to it by the terms of this Agreement,
the Trustee may require reasonable indemnity against such costs, expenses
or liabilities as a condition to taking any such action. The reasonable
expense of every such investigation shall be paid by the Trust Fund in the
event that such investigation relates to an Event of Default, if an Event
of Default shall have occurred and is continuing, and otherwise by the
Certificateholders requesting the investigation;
(vi) the Trustee and the Fiscal Agent may execute any of the
trusts or powers hereunder or perform any duties hereunder either directly
or by or through agents or attorneys and shall not be liable for the
actions or omissions of any such agents or attorneys selected with due
care or the actions or omissions of the Servicer (except during the time
it is acting as Servicer), or any sub-servicer or the actions or omissions
of the Depositor;
(vii) neither the Trustee nor the Fiscal Agent shall be required
to give any bond or surety in respect of the execution of the Trust
created hereby or the powers granted hereunder;
(viii) the right of the Trustee to perform any discretionary act
enumerated in this Agreement shall not be construed as a duty, and the
Trustee shall not be answerable for other than its negligence, bad faith
or willful misconduct in the performance of such act; and
(ix) neither the Trustee nor the Fiscal Agent shall be liable
for any loss on any investment of funds made by it pursuant to the terms
of this Agreement (other than investments made with the Trustee in its
commercial capacity).
(b) Following the Closing Date, the Trustee shall not accept any
contribution of assets to the Trust Fund not
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specifically contemplated by this Agreement unless the Trustee shall have
received a Nondisqualification Opinion at the expense of the Person desiring to
contribute such assets with respect to such contribution.
(c) All rights of action under this Agreement or under any of the
Certificates, enforceable by the Trustee, may be enforced by it without the
possession of any of the Certificates, or the production thereof at the trial or
other proceeding relating thereto, and any such suit, action or proceeding
instituted by the Trustee shall be brought in its name for the benefit of all
the Holders of such Certificates, subject to the provisions of this Agreement.
Section 8.03. Trustee and Fiscal Agent Not Liable for
Certificates or the Mortgage Loan. The recitals contained herein and in
the Certificates (other than the authentication and execution of the
Certificates) shall be taken as the statements of the Depositor or the
Servicer, as the case may be, and neither the Trustee nor the Fiscal Agent
assumes any responsibility for their correctness. The Trustee and the Fiscal
Agent make no representations as to the validity or sufficiency of this
Agreement, the Certificates or the Mortgage Loan or related documents
(including any documents comprising parts of the Mortgage File), except
as expressly set forth herein. The Trustee and the Fiscal Agent shall not be
liable for any action or failure of any action by the Depositor or the
Servicer hereunder. The Trustee and the Fiscal Agent shall at no time have
any responsibility or liability for or with respect to the legality, validity
or enforceability of the Mortgages or the Mortgage Loan, or the
perfection and priority of the Mortgages or the maintenance of any such
perfection and priority, or for or with respect to the efficacy of the Trust
Fund or its ability to generate the payments to be distributed to
Certificateholders under this Agreement, including, without limitation, the
existence, condition and ownership of any Mortgaged Property; the existence and
enforceability of any hazard insurance thereon; the validity of the
assignment of the Mortgage Loan to the Trust Fund; the performance or
enforcement of the Mortgage Loan (other than if the Trustee shall assume
the duties of the Servicer pursuant to Section 7.02); the compliance by the
Depositor, the Mortgagors or the Servicer with any warranty or representation
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made under this Agreement or in any related document or the accuracy of any
such warranty or representation made under this Agreement or in any related
document prior to the Trustee's receipt of notice or other discovery of any
noncompliance therewith or any breach thereof; any investment of monies by or
at the direction of the Servicer or any loss resulting therefrom (other than
investments made with the Trustee in its commercial capacity); the failure of
the Servicer or any Sub-Servicer to act or perform any duties required of it
hereunder; or any action by the Trustee taken at the instruction of the
Servicer (other than if the Trustee shall assume the duties of the Servicer
pursuant to Section 7.02); provided, however, that the foregoing shall not
relieve each of the Trustee or Fiscal Agent of its obligations to perform its
duties under this Agreement. Except with respect to a claim based on the
failure of the Trustee or Fiscal Agent to perform their duties under this
Agreement or based on the Trustee's or the Fiscal Agent's negligent action,
negligent failure to act or willful misconduct (or other such standard of
care as may be provided herein with respect to any particular matter), no
recourse shall be had for any claim based on any provisions of this
Agreement, the Certificates, or the Mortgage Loan or assignment thereof
against the Trustee in its individual capacity or the Fiscal Agent, each of
the Trustee and the Fiscal Agent shall not have any personal obligation,
liability or duty whatsoever to any Certificateholder or any other Person
with respect to any such claim, and any such claim shall be asserted solely
against the Trust Fund or any indemnitor who shall furnish indemnity as
provided in this Agreement. The Trustee and Fiscal Agent shall have no
responsibility for filing any financing or continuation statements in any
public office at any time or to otherwise perfect or maintain the perfection
of any security interest or lien granted to it hereunder or to prepare or
file any Securities and Exchange Commission filing for the Trust Fund or to
record this Agreement (unless the Trustee shall have become the successor
Servicer). The Trustee and Fiscal Agent shall not be accountable for the use
or application by the Depositor of any of the Regular Certificates or of the
proceeds of such Certificates or for the use or application of any funds paid
to the Depositor in respect of the transfer and assignment of the Deed of
Trust Loan.
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Neither the Trustee or the Fiscal Agent, by reason of the action or
inaction of a responsible officer or officers of the Trustee or the Fiscal
Agent, nor any of their respective directors, officers, employees, agents or
Control Persons shall be under any liability to the Trust Fund or the
Certificateholders for any action taken or for refraining from the taking of any
action in good faith pursuant to this Agreement, or for errors in judgment;
provided, however, that this provision shall not protect the Trustee or any such
person against any liability which would otherwise be imposed by reason of
willful misconduct, bad faith, negligence in the performance of duties or
negligent failure to act. The Trustee, Fiscal Agent and any director, officer,
employee, agent and Control Person of the Trustee and the Fiscal Agent shall be
indemnified by amounts on deposit in the Central Account, and held harmless
against any loss, liability or expense incurred in connection with or related to
the Trustee's or Fiscal Agent's performance of their duties under this Agreement
(including, without limitation, performance under Section 8.01 hereof). The
indemnification provided hereunder shall survive the resignation or removal of
the Trustee or Fiscal Agent and the termination of this Agreement. Anything
herein to the contrary notwithstanding, the Trustee shall be responsible for the
acts or failures to act of the Servicer during the time it is serving as
Servicer to the same extent that the Servicer would be liable for its acts or
failure to act under this Agreement.
Section 8.04. Trustee or Fiscal Agent May Own Certificates. Each of
the Trustee and the Fiscal Agent in its individual or any other capacity may
become the owner or pledgee of Certificates with the same rights as it would
have if it were not the Trustee or Fiscal Agent.
Section 8.05. Trustee's Fees and Expenses. The Servicer shall pay
the Trustee Fee out of the Servicing Fee. To the extent the Trustee Fee is not
paid by the Servicer, the Trustee shall be entitled to pay itself pursuant to
Section 3.04(c)(ii) out of funds on deposit in the Certificate Account. The
Servicer shall pay or reimburse the Trustee from funds on deposit in the Central
Account upon the Trustee's request for all reasonable expenses, disbursements
and advances incurred or made by the Trustee (other than in the normal course of
the business
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of the Trustee) in its capacity as Trustee hereunder in the performance of
its duties, in accordance with any of the provisions of this Agreement
(including the reasonable fees and expenses of its counsel and of all Persons
not regularly in its employ) except any such expense, disbursement or advance
as may arise from its negligence or bad faith or which is expressly the
responsibility of a Certificateholder or Certificateholders hereunder, all of
which payments and reimbursements are to be made by the Servicer by
withdrawing amounts on deposit in the Central Account pursuant to Section
3.04 hereof to the extent permitted by the Loan Documents. The Trustee shall
provide the Servicer with an invoice, on or prior to each Payment Date,
setting forth the actual expenses incurred in connection with the performance
of its duties hereunder for which it seeks payment or reimbursement on the
next withdrawal from the Central Account pursuant to Section 3.04 hereof,
provided, however, that the failure by the Trustee to provide such invoice
shall not constitute a waiver of its right to reimbursement of such claims.
Notwithstanding the first sentence of this Section 8.05, the Servicer will
not be obligated to pay any successor trustee any fee in excess of the amount
paid to the Trustee on the Closing Date. Any such excess fee (as well as any
excess fee required to be paid to a successor servicer) shall be payable out
of payments made by the Mortgagors on the Mortgage Loan. The obligations
of the Servicer under this Section 8.05 shall survive termination of the
initial Servicer and payment of the Certificates and shall extend to any
co-trustee or separate trustee appointed pursuant to this Article Eight.
Section 8.06. Eligibility Requirements for Trustee and Successor
Fiscal Agent. The Trustee hereunder shall not be an Affiliate of the Manager,
the Mortgagors, the Depositor or the Servicer (unless the Trustee succeeds to
the obligations of the Servicer pursuant to Article Seven) and shall at all
times be a corporation or association organized and doing business under the
laws of any State, the United States of America, or the District of Columbia,
authorized under such laws to exercise corporate trust powers, having a combined
capital and surplus of at least $100,000,000 (or shall be a member of a bank
holding system, the aggregate combined capital and surplus of which is at least
$100,000,000, and shall be subject to supervision or examination by Federal,
State, or District of Columbia authority and which,
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as confirmed by the Rating Agency, will not adversely affect the then current
rating of any Class of the Regular Certificates. If such corporation or
association publishes reports of condition at least annually, pursuant to law or
to the requirements of the aforesaid supervising or examining authority, then
for the purposes of this Section the combined capital and surplus of such
corporation or association shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. The
Trustee or Fiscal Agent hereunder must at all times be an institution whose
long-term senior unsecured debt is rated not less than "AA" by the Rating Agency
or whose appointment would not, in and of itself, cause a downgrade,
qualification or withdrawal of the then current ratings assigned to any Class of
Regular Certificates by the Rating Agency, as evidenced by a written
confirmation to such effect from the Rating Agency. In case at any time the
Trustee shall cease to be eligible in accordance with the provisions of this
Section, the Trustee shall resign immediately in the manner and with the effect
specified in Section 8.07. The appointment of any successor Fiscal Agent shall
not be permitted to cause a downgrade, qualification or withdrawal of the then
current ratings assigned to any Class of Regular Certificates, as evidenced by a
written confirmation to such effect from the Rating Agency.
Section 8.07. Resignation and Removal of Trustee and Fiscal Agent.
The Trustee may at any time resign and be discharged from the trusts hereby
created by giving written notice of resignation to the Depositor, the Servicer,
the Certificate Registrar (if other than the Trustee), and the Rating Agency and
by mailing notice of resignation by first class mail, postage prepaid, to the
Certificateholders at their addresses appearing on the Certificate Register, not
less than 60 days before the date specified in such notice when, subject to
Section 8.08, such resignation is to take effect, provided that a successor
trustee meeting the qualifications set forth in Section 8.06 must have been
appointed by the Depositor in accordance with Section 8.08 and must have
accepted such appointment before such resignation can take effect, and provided
further that the appointment of such successor trustee would not cause a
downgrade, qualification or withdrawal by the Rating Agency of its then-current
rating of any Class of Regular Certificates. If
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no successor trustee has accepted appointment within 30 days after such notice
of resignation is given, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor trustee.
If at any time any of the following occur: (x) the Trustee shall cease to
be eligible in accordance with the provisions of Section 8.06 and shall fail to
resign after written request for the Trustee's resignation by the Depositor or
the Servicer; or (y) if at any time the Trustee and Fiscal Agent shall become
incapable of acting, or shall be adjudged a bankrupt or insolvent, or a receiver
of the Trustee or Fiscal Agent or of any of their property shall be appointed,
or any public officer shall take charge or control of the Trustee or Fiscal
Agent or of their property or affairs for the purpose of rehabilitation,
conservation or liquidation; then, in any such case, the Depositor or the
Servicer may remove the Trustee or Fiscal Agent and appoint a successor Trustee
or successor Fiscal Agent by written instrument, in duplicate, executed by any
duly authorized officer or Servicing Officer of the Depositor or the Servicer,
as applicable, one copy of which instrument shall be delivered to the Trustee or
Fiscal Agent so removed and one copy to the successor Trustee or successor
Fiscal Agent (with a copy to the Depositor and the Servicer). Except as
otherwise provided in the following paragraph, Holders of Certificates
evidencing, in the aggregate, not less than 66-2/3% of the Voting Rights of the
Certificates, may at any time remove the Trustee and the Fiscal Agent and
appoint a successor trustee by written instrument or instruments, in triplicate,
signed by such Holders or their attorneys-in-fact duly authorized, one complete
set of which instrument or instruments shall be delivered to the Depositor (with
a copy to the Servicer), one complete set to the Trustee and the Fiscal Agent so
removed and one complete set to the successor so appointed. Notice of any
removal of the Trustee and the Fiscal Agent and acceptance of appointment by the
successor trustee shall be given to the Rating Agency by the successor trustee.
Additionally, (i) if the Fiscal Agent or the Trustee fails to remit to the
Certificateholders, the Paying Agent or the Trustee any payment required to be
made or remitted by it under the terms of this Agreement, (ii) if the Trustee or
the Paying
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Agent fails to duly observe or perform in any material respect any other of the
covenants or agreements on the part of such Person contained in the Certificates
or this Agreement, which failure shall continue unremedied for a period of 30
days (except that such number of days shall be 15 in the case of a failure to
pay the premium for any Required Insurance Policy) after the date on which
written notice of such failure shall have been given to the Person required to
observe or perform such covenants or agreements by the Depositor or the Trustee,
or, if such Person is the Trustee, to the Trustee by the Certificateholders
evidencing, in the aggregate, not less than 25% of the Voting Rights of the
Regular Certificates, or (iii) the Trustee or the Fiscal Agent fails to make any
Advance required to be made from its own funds when required pursuant to Section
3.25(c), then in each such case, holders of Certificates evidencing, in the
aggregate, not less than 25% of the Voting Rights of the Certificates, may at
any time remove the Trustee, the Fiscal Agent or the Paying Agent, as
applicable, in accordance with the last two sentences of the preceding
paragraph.
Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section shall not
become effective until acceptance of the appointment by the successor trustee as
provided in Section 8.08 and unless the appointment of such successor trustee
would not cause a downgrade, qualification or withdrawal by the Rating Agency of
the then-current rating of any Class of Regular Certificates. Any resignation or
removal of the Trustee shall cause the simultaneous resignation or removal of
the Fiscal Agent.
Section 8.08. Successor Trustee and Fiscal Agent. Any successor
Trustee or Fiscal Agent appointed as provided in Section 8.07 shall execute,
acknowledge and deliver to the Depositor, the Servicer and to its predecessor
trustee or fiscal agent an instrument accepting such appointment hereunder and
thereupon the resignation or removal of the predecessor Trustee or Fiscal Agent
shall become effective and such successor Trustee or Fiscal Agent, without any
further act, deed or conveyance, shall become fully vested with all the rights,
powers, duties and obligations of its predecessor hereunder, with the like
effect as if originally named as trustee herein. The predecessor Trustee
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or Fiscal Agent shall deliver or cause to be delivered to the successor
Trustee or Fiscal Agent the Mortgage File and related documents and
statements held by it hereunder, and the Depositor, the Servicer and the
predecessor Trustee or Fiscal Agent shall execute and deliver such
instruments and do such other things as may reasonably be required for more
fully and certainly vesting and confirming in the successor trustee all such
rights, powers, duties, and obligations.
No successor trustee or fiscal agent shall accept appointment as provided
in this Section unless at the time of such acceptance such successor trustee or
fiscal agent shall be eligible under the provisions of Section 8.06 and its
appointment shall not adversely affect the then current rating of any Class of
the Regular Certificates.
Upon acceptance of appointment by a successor trustee or fiscal agent as
provided in this Section, the successor trustee or fiscal agent shall mail
notice of the succession of such trustee hereunder to all Holders of
Certificates at their addresses as shown in the Certificate Register and the
Rating Agency. If the successor Trustee or Fiscal Agent fails to mail such
notice within 10 days after acceptance of appointment by the successor Trustee
or Fiscal Agent, the Servicer shall cause such notice to be mailed at the
expense of the successor Trustee or Fiscal Agent.
Section 8.09. Merger or Consolidation of Trustee and of Fiscal
Agent. Any Person into which the Trustee may be merged or converted or with
which it may be consolidated or any Person resulting from any merger, conversion
or consolidation to which the Trustee shall be a party, or any Person succeeding
to all or substantially all of the corporate trust business of the Trustee,
shall be the successor of the Trustee hereunder, provided that such Person shall
be eligible under the provisions of Section 8.06, without the execution or
filing of any paper or further act on the part of any of the parties hereto,
anything herein to the contrary notwithstanding. Any Person into which the
Fiscal Agent may be merged or converted or with which it may be consolidated or
any corporation or bank resulting from any merger, conversion or consolidation
to which the Fiscal Agent shall be a party, or any corporation or banking
association succeeding to all or
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substantially all of the corporate trust business of the Fiscal Agent, shall be
the successor of the Fiscal Agent hereunder, provided that such corporation or
banking association shall be eligible under the provisions of Section 8.06,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto, anything herein to the contrary notwithstanding.
Section 8.10. Appointment of Co-Trustee or Separate Trustee;
Appointment of Fiscal Agent. (a) At any time or times, for the purpose of
meeting any legal requirements of any jurisdiction in which any part of the
Mortgaged Property of the Trust may at the time be located or in which any
action of the Trustee may be required to be performed or taken, the Trustee, the
Depositor or the Holders of Certificates evidencing, in the aggregate, more than
a majority of the Voting Rights, by an instrument in writing signed by it or
them, may appoint one or more individuals or corporations to act as separate
trustee or separate trustees or co-trustee, acting jointly with the Trustee, of
all or any part of such Mortgaged Property, to the full extent that local law
makes it necessary for such separate trustee or separate trustees or co-trustee
acting jointly with the Trustee to act.
(b) The Trustee, and at the request of the Trustee, the Mortgagors
shall execute, acknowledge and deliver all such instruments as may be required
by the legal requirements of any jurisdiction or by any such separate trustee or
separate trustees or co-trustee for the purpose of more fully confirming such
title, rights or duties to such separate trustee or separate trustees or
co-trustee. Upon the acceptance in writing of such appointment by any such
separate trustee or separate trustees or co-trustee, it, he, she or they shall
be vested with such title to the Mortgaged Property or any part thereof, and
with such rights, powers, duties and obligations as shall be specified in the
instrument of appointment, and such rights, powers, duties and obligations shall
be conferred or imposed upon and exercised or performed by the Trustee, or the
Trustee and such separate trustee or separate trustees or co-trustees jointly
with the Trustee subject to all the terms of this Agreement, except to the
extent that under any law of any jurisdiction in which any particular act or
acts are to be performed the Trustee shall be
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incompetent or unqualified to perform such act or acts, in which event such
rights, powers, duties and obligations shall be exercised and performed by such
separate trustee or separate trustees or co-trustee, as the case may be. Any
separate trustee or separate trustees or co-trustee may, at any time by an
instrument in writing, constitute the Trustee its attorney-in-fact and agent
with full power and authority to do all acts and things and to exercise all
discretion on its behalf and in its, her or his name. In any case any such
separate trustee or co-trustee shall die, become incapable of acting, resign or
be removed, the title to the Mortgaged Property and all assets, property,
rights, powers, obligations and duties of such separate trustee or co-trustee
shall, so far as permitted by law, vest in and be exercised by the Trustee,
without the appointment of a successor to such separate trustee or co-trustee
unless and until a successor is appointed.
(c) All provisions of this Agreement which are for the benefit of
the Trustee shall extend to and apply to each separate trustee or co-trustee
appointed pursuant to the foregoing provisions of this Section 8.10.
(d) Every additional trustee and separate trustee hereunder shall,
to the extent permitted by law, be appointed and act and the Trustee shall act,
subject to the following provisions and conditions: (i) all powers, duties,
obligations and rights conferred upon the Trustee in respect of the receipt,
custody, investment and payment of moneys shall be exercised solely by the
Trustee; (ii) all other rights, powers, duties and obligations conferred or
imposed upon the Trustee shall be conferred or imposed and exercised or
performed by the Trustee and such additional trustee or trustees and separate
trustee or trustees jointly except to the extent that under any law of any
jurisdiction in which any particular act or acts are to be performed, the
Trustee shall be incompetent or unqualified to perform such act or acts, in
which event such rights, powers, duties and obligations (including the holding
of title to the Mortgaged Property in any such jurisdiction) shall be exercised
and performed by such additional trustee or trustees or separate trustee or
trustees; (iii) no power hereby given to, or exercisable by, any such additional
trustee or
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separate trustee shall be exercised hereunder by such additional trustee or
separate trustee except jointly with, or with the consent of, the Trustee; and
(iv) no trustee hereunder shall be personally liable by reason of any act or
omission of any other trustee hereunder. If at any time the Trustee shall deem
it no longer necessary or prudent in order to conform to any such law, the
Trustee shall execute and deliver all instruments and agreements necessary or
proper to remove any additional trustee or separate trustee.
(e) Any request, approval or consent in writing by Trustee to any
additional trustee or separate trustee shall be sufficient warrant to such
additional trustee or separate trustee, as the case may be, to take such action
as may be so requested, approved or consented to.
(f) Notwithstanding any other provision of this Section 8.10, the
powers of any additional trustee or separate trustee shall not exceed those of
the Trustee hereunder.
Section 8.11. Appointment of Authenticating Agent. (a) At any time
when any of the Certificates remain outstanding, the Trustee may appoint an
Authenticating Agent or Agents which shall be authorized to act on behalf of the
Trustee to authenticate Certificates, and Certificates so authenticated shall be
entitled to the benefits of this Agreement and shall be valid and obligatory for
all purposes as if authenticated by the Trustee hereunder. Wherever reference is
made in this Agreement to the authentication and delivery of Certificates by the
Trustee or the Trustee's certificate of authentication, such reference shall be
deemed to include authentication and delivery on behalf of the Trustee by an
Authenticating Agent and a certificate of authentication executed on behalf of
the Trustee by an Authenticating Agent. Each Authenticating Agent shall be
acceptable to the Servicer and shall at all times be a corporation or
association organized and doing business under the laws of the United States of
America, any State thereof or the District of Columbia, authorized under such
laws to act as Authenticating Agent, having a combined capital and surplus of
not less than $15,000,000, authorized under such laws to do trust business and
subject to supervision or examination by federal or state authorities. If such
Authenticating Agent publishes reports of condition at least annually, pursuant
to law or to the requirements of said supervising or examining authority, then
for
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the purposes of this Section, the combined capital and surplus of such
Authenticating Agent shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. If at any time an
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, such Authenticating Agent shall resign immediately
in the manner and with the effect specified in this Section. The initial
Authenticating Agent shall be the Trustee.
(b) Any Person into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any Person resulting from any
merger, conversion or consolidation to which such Authenticating Agent shall be
a party, or any Person succeeding to the corporate agency business of an
Authenticating Agent, shall continue to be an Authenticating Agent, provided
such Person shall be otherwise eligible under this Section, without the
execution or filing of any paper or any further act on the part of the Trustee
or the Authenticating Agent.
(c) An Authenticating Agent may resign at any time by giving at
least 30 days' advance written notice thereof to the Trustee, the Servicer and
the Depositor. The Trustee may at any time terminate the agency of an
Authenticating Agent by giving written notice thereof to such Authenticating
Agent, the Servicer and the Depositor. Upon receiving such a notice of
resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section 8.11, the Trustee may appoint a successor
Authenticating Agent which shall be acceptable to the Servicer and the Depositor
and shall mail written notice of such appointment by first-class mail, postage
prepaid to all Certificateholders as their names and addresses appear in the
Certificate Register. Any successor Authenticating Agent upon acceptance of its
appointment hereunder shall become vested with all the rights, powers and duties
of its predecessor hereunder, with like effect as if originally named as
Authenticating Agent herein. No successor Authenticating Agent shall be
appointed unless eligible under the provisions of this Section. Any reasonable
compensation paid to an Authenticating Agent for its services under this Section
shall be a reimbursable expense pursuant to Section 8.05 if paid by the Trustee.
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Section 8.12. Fiscal Agent Appointed; Concerning the Fiscal Agent.
(a) The Trustee hereby appoints ABN AMRO Bank N.V. as the initial Fiscal Agent
hereunder for the purposes of exercising and performing the obligations and
duties imposed upon the Fiscal Agent by Section 3.25(c) of this Agreement.
(b) The Fiscal Agent undertakes to perform such duties and only such
duties as are specifically set forth in Section 3.25(c) of this Agreement.
(c) No provision of this Agreement shall be construed to relieve the
Fiscal Agent from liability for its own negligence, bad faith or willful
misfeasance; provided, however, that (i) the duties and obligations of the
Fiscal Agent shall be determined solely by the express provisions of Section
3.25(c) of this Agreement, the Fiscal Agent shall not be liable except for the
performance of such duties and obligations, no implied covenants or obligations
shall be read into this Agreement against the Fiscal Agent and, in the absence
of bad faith on the part of the Fiscal Agent, the Fiscal Agent may conclusively
rely, as to the truth and correctness of the statements or conclusions expressed
therein, upon any resolutions, certificates, statements, opinions, reports,
documents, orders or other instruments furnished to the Fiscal Agent by the
Depositor or any Servicer and which on their face do not contradict the
requirements of this Agreement, and (ii) the provisions of clauses (b) and (c)
of Section 8.01 shall apply to the Fiscal Agent.
(d) The Fiscal Agent also shall have the benefit of provisions of
clauses (i), (ii), (iii) (other than the proviso thereto), (iv), (v) (other than
the proviso thereto) and (vi), (vii) and (ix) of Section 8.02(a) of this
Agreement.
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ARTICLE NINE
TERMINATION
Section 9.01. Termination. (a) Subject to Section 9.02, the
respective obligations and responsibilities of the Servicer, the Depositor,
the Paying Agent, the Fiscal Agent and the Trustee created hereby (other than
the obligation of the Trustee to make certain payments to Certificateholders
after the Final Distribution Date and other than the indemnification
obligations of the parties hereto) shall terminate upon the last action
required to be taken by the Trustee on the Final Distribution Date pursuant
to this Article Nine following the later of (i) the final payment on the Deed
of Trust Loan and (ii) the liquidation of the last Foreclosed Property, if
any, remaining in the Trust Fund; provided, however, that in no event shall
the trust created hereby continue beyond the earlier of (i) the expiration of
twenty-one years from the death of the last survivor of the descendants of
Joseph P. Kennedy, the late ambassador of the United States to the Court of
St. James's, living on the date hereof and (ii) the latest possible maturity
date set forth in Section 10.01(c).
(b) Notice of any termination, specifying the Final Distribution
Date (which shall be a date that would otherwise be a Distribution Date) upon
which the Certificateholders of any Class may surrender their Certificates to
the Trustee for payment of the final distribution and cancellation, shall be
given promptly by the Paying Agent by letter to the Rating Agency and the
Certificateholders preceding such final distribution and shall specify (A) the
Final Distribution Date upon which final payment of the Certificates will be
made upon presentation and surrender of Certificates at the office or agency of
the Trustee therein designated, (B) the amount of any such final payment and (C)
that the Record Date otherwise applicable to such Distribution Date is not
applicable, payments being made only upon presentation and surrender of the
Certificates at the office or agency of the Trustee therein specified.
(c) Upon presentation and surrender of the Certificates, the Paying
Agent shall cause to be distributed to Certificateholders on the Final
Distribution Date the Available
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Distribution Amount for such Final Distribution Date in accordance with Section
4.01. Upon any such distribution that would result in the surrender of all
Certificates, the Paying Agent shall terminate, or request the Servicer to
terminate, the Rent Accounts, the Central Account, the Servicer Collection
Account, the Certificate Account, the Default Interest Account and any other
account or fund maintained with respect to the Certificates, subject to the
Paying Agent's obligation hereunder to hold all amounts payable to
Certificateholders in trust without interest pending such payment.
(d) In the event that all of the Certificateholders required to
surrender their Certificates shall not surrender their Certificates for final
payment and cancellation on or before the Final Distribution Date, the Paying
Agent shall on such date cause all funds in the Certificate Account not
distributed in the final distribution to Certificateholders to be withdrawn from
the Certificate Account and credited to the remaining Certificateholders by
depositing such funds in a separate trust account held uninvested for the
benefit of such Certificateholders who failed to surrender their Certificates
and the Paying Agent shall give a second written notice to the remaining
Certificateholders to surrender their Certificates for cancellation and receive
the final distribution with respect thereto. If within one year after the second
notice all the Certificates required to be surrendered shall not have been
surrendered for cancellation, the Trustee may take appropriate steps, or may
appoint an agent to take appropriate steps, to contact the remaining
Certificateholders concerning surrender of their Certificates, and the cost
thereof shall be paid out of the funds on deposit in such trust account. If the
remaining Certificateholders do not surrender their Certificates for
cancellation and receipt of the final distribution with respect thereto within
two years after the Final Distribution Date, the Paying Agent shall pay the
amount of such unclaimed final distribution to the Class R Certificateholder and
no other Certificateholders shall have any further claim to such amounts.
Section 9.02. Additional Termination Requirements. (a) In connection
with any termination pursuant to Section 9.01, the Trust Fund shall be
terminated in accordance with the following additional requirements, unless the
Trustee has been
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furnished with an Opinion of Counsel to the effect that the failure of the Trust
Fund to comply with the requirements of this Section 9.02 will not (i) result in
the imposition of taxes on "prohibited transactions" of the Trust Fund as
defined in Section 860F of the Code, or (ii) cause the Trust REMIC to fail to
qualify as a REMIC or cause the Grantor Trust to be treated as a taxable
mortgage pool at any time that any Regular Certificate is outstanding:
(i) Within 89 days prior to the Final Distribution Date set
forth in the notice given by the Paying Agent under Section 9.01, the
Trustee shall prepare and adopt a plan of complete liquidation of the
Trust REMIC, which in an Opinion of Counsel obtained by the Trustee at the
expense of the Trust Fund, meets the requirements of a qualified
liquidation under the REMIC Provisions;
(ii) At or after the time of adoption of such a plan of complete
liquidation and at or prior to the Final Distribution Date, the Trustee or
the Servicer on behalf of the Trustee, shall sell any remaining assets of
the Trust Fund;
(iii) At the time of making the final payment on the
Certificates other than the Class R Certificates, the Paying Agent shall
distribute or credit, or cause to be distributed or credited, to the
Holder of the Class R Certificate all cash on hand after such final
payment (other than cash retained to meet claims), and the Trust Fund
shall terminate at that time; and
(iv) In no event may the final payment on the Certificates
(except to the extent permitted in Section 9.01 with respect to
Certificateholders who fail to surrender their Certificates) be made after
the 89th day from the date on which the plan of complete liquidation is
adopted.
(b) By acceptance of a Class R Certificate, each Holder thereof
hereby authorizes the Trustee to adopt such a plan of complete liquidation upon
the written request of the Servicer and to take such other action in connection
therewith as may be
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reasonably requested by the Servicer, which authorization shall be binding upon
all successor Class R Certificateholders.
Section 9.03. Trusts Irrevocable. Except as expressly provided
herein, all trusts created hereby are irrevocable.
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ARTICLE TEN
REMIC ADMINISTRATION
Section 10.01. REMIC Administration. (a) The parties intend that the
Trust REMIC shall constitute, and that the affairs of the Trust REMIC shall be
conducted so as to qualify it as, a REMIC, and the provisions hereof shall be
interpreted consistently with this intention.
(b) An election will be made by the Trustee on behalf of the Trust
Fund to treat the segregated pool of assets consisting of the Mortgage Note
(other than the right to receive Default Rate Interest with respect thereto),
the Mortgages, the other Loan Documents, the Servicer Collection Account and the
Certificate Account as a REMIC under the Code (the "Trust REMIC"). Such election
will be made on Form 1066 or other appropriate federal tax or information return
for the taxable year ending on the last day of the calendar year in which the
Certificates are issued. For purposes of such election, the Class A, Class B,
Class C and Class D Certificates shall be designated as representing, in part,
beneficial interests in the "regular interests" in the Trust REMIC, and the
Class R Certificates shall be designated as the "residual interest" in the Trust
REMIC.
(c) The Closing Date is hereby designated as the "Startup Day" of
the Trust REMIC within the meaning of Section 860G(a)(9) of the Code. The
"latest possible maturity date" of the Regular Certificates for purposes of
Section 860G(a)(9) of the Code is December 20, 2029.
(d) Except as provided in Section 3.21, the Trustee shall pay
without any right of reimbursement the ordinary and usual expenses in connection
with the preparation, filing and mailing of tax information reports and returns
that are incurred by it in the ordinary course of its business, but
extraordinary or unusual expenses, costs or liabilities incurred in connection
with its tax-related duties under this Agreement, including without limitation
any expenses, costs or liabilities associated with audits or any administrative
or judicial proceedings with respect to the Trust REMIC that involve the IRS or
state tax
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authorities, shall be expenses of the Holder of the Class R Certificate to be
reimbursed to the Trustee by such Holder or, if not reimbursed by such Holder
within 45 days after invoice, from the Central Account.
(e) Subject to Section 3.21, the Trustee shall prepare and file all
of the Trust REMIC's federal, state and local income or franchise or other tax
and information returns as the Trust REMIC's direct representative. Except as
provided in Sections 3.21 and 10.01(d), the expenses of preparing and filing
such returns shall be borne by the Trustee. Each of the Servicer and the
Depositor shall provide on a timely basis to the Trustee or its designee such
information with respect to the Trust REMIC as is in its possession, which the
Servicer has received or prepared by virtue of its activities as Servicer
hereunder and is reasonably requested by the Trustee to enable it to perform its
obligations under this subsection, and the Trustee shall be entitled to rely on
such information in the performance of its obligations hereunder.
(f) Subject to Section 3.21, the Trustee shall perform on behalf of
the Trust REMIC all reporting and other tax compliance duties that are the
responsibility of the Trust REMIC under the Code, REMIC Provisions, or other
compliance guidance issued by the Internal Revenue Service or any New York,
Illinois or Virginia taxing authority. Among its other duties, the Trustee shall
provide (i) to the Internal Revenue Service or other Persons (including, but not
limited to, the transferor of a Class R Certificate, to a Disqualified
Organization or to an agent that has acquired a Class R Certificate on behalf of
a Disqualified Organization) such information as is necessary for the
application of any tax relating to the transfer of a Class R Certificate to any
Disqualified Organization and (ii) to the Certificateholders such information or
reports as are required by the Code or REMIC Provisions. Each of the Depositor
and the Servicer shall provide on a timely basis (and in no event later than 10
days after the Trustee's request) to the Trustee or its designee such
information with respect to the Trust REMIC as is in its possession and
reasonably requested in writing by the Trustee to enable it to perform its
obligations under this subsection.
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(g) The Holder of the largest Percentage Interest of the Class R
Certificates shall be the Trust REMIC's Tax Matters Person. The duties of the
Tax Matters Person for the Trust REMIC are hereby delegated to the Trustee, and
each Class R Certificateholder, by acceptance of its Class R Certificate,
agrees, on behalf of itself and all successor holders of such Class R
Certificate, to such delegation to the Trustee as their agent and attorney in
fact. The Trustee shall take whatever action is necessary for the signing of
such documents and designation of a Tax Matters Person, including the
designation of such Class R Certificateholder.
(h) The Trustee, the Holders of the Class R Certificates and the
Servicer shall perform their obligations under this Agreement and the REMIC
Provisions in a manner consistent with the status of the Trust REMIC as a REMIC
or, as appropriate, adopt a plan of complete liquidation.
(i) The Trustee, the Holders of the Class R Certificates and the
Servicer shall not take any action or cause the Trust REMIC to take any action,
within their respective control and the scope of their specific respective
duties under this Agreement that, under the REMIC Provisions, could (i) endanger
the status of the Trust REMIC as a REMIC or (ii) result in the imposition of a
tax upon the Trust REMIC (including but not limited to the tax on prohibited
transactions as defined in Code Section 860F(a)(2) and the tax on prohibited
contributions as defined in Code Section 860G(d)) unless the Trustee has
received a Nondisqualification Opinion (at the expense of the party seeking to
take such action or of the Trust Fund if taken for the benefit of the
Certificateholders) with respect to such action.
(j) The Holders of the Class R Certificates shall pay when due any
and all federal, state and local taxes imposed on the Trust REMIC or its assets
or transactions, including, without limitation, "prohibited transaction" taxes,
as defined in Section 860F of the Code, any tax on contributions imposed by
Section 860G(d) of the Code, and any tax on "net income from foreclosure
property" as defined in Section 860G(c) of the Code. If the Class R Certificates
are owned by more than one Holder, such Holders shall pay their pro rata share
of the foregoing taxes.
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To the extent that such Trust REMIC taxes are not paid by the Class R
Certificateholders, the Trustee shall pay any remaining Trust REMIC taxes out of
current or future amounts otherwise distributable to the Holders of the Class R
Certificates or, if no such amounts are available, out of other amounts held by
the Servicer in the Central Account pursuant to Section 3.04.
(k) The Trustee and, to the extent that records are maintained by
the Servicer in the normal course of its businesses, the Servicer, shall, for
federal income tax purposes, maintain books and records with respect to the
Trust REMIC and the Grantor Trust on a calendar year and on an accrual basis.
The books and records must be sufficient concerning the nature and amount of the
Trust Fund's investments to show that the Trust REMIC has complied with the
REMIC Provisions and that the Trust REMIC and the Grantor Trust have at all
times, for federal income tax purposes, accounted for items of income and
ownership of assets of the Trust Fund in a manner that respects the separate
existence of the two entities.
(l) Neither the Trustee nor the Servicer shall enter into any
arrangement by which the Trust REMIC will receive a fee or other compensation
for services.
(m) In order to enable the Trustee to perform its duties as set
forth herein, the Depositor shall provide, or cause to be provided, to the
Trustee within 10 days after the Closing Date all information or data that the
Trustee reasonably determines to be relevant for tax purposes on the valuations
and offering prices of the Certificates, including, without limitation, the
yield, issue prices, pricing prepayment assumption and projected cash flows of
the Regular Certificates and the Class R Certificates, as applicable, and the
projected cash flows on the Mortgage Loan. Thereafter, the Depositor shall
provide to the Trustee, promptly upon request therefor, any such additional
information or data that the Trustee, may, from time to time, reasonably request
in order to enable the Trustee to perform its duties as set forth herein. The
Trustee is hereby directed to use any and all such information or data provided
by the Depositor in the preparation of all federal, state and local income or
franchise or other tax and information returns and reports for the Trust REMIC
to Certificateholders as required
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herein. The Depositor hereby indemnifies the Trustee for any losses,
liabilities, damages, claims or expenses of the Trustee arising from any errors
or miscalculations of the Trustee pursuant to this Section that result from any
failure of the Depositor to provide, or to cause to be provided, accurate
information or data to the Trustee (but not resulting from the methodology
employed by the Trustee) on a timely basis and such indemnifications shall
survive the termination of this Agreement.
The Trustee agrees that all such information or data so obtained by
it are to be regarded as confidential information and agrees that it shall use
its best reasonable efforts to retain in confidence, and shall ensure that its
officers, employees and representatives retain in confidence, and shall not
disclose, without the prior written consent of the Depositor, any or all of such
information or data, or make any use whatsoever (other than for the purposes
contemplated by this Agreement) of any such information or data without the
prior written consent of the Depositor, unless such information is generally
available to the public (other than as a result of a breach of this Section
10.01(m)) or is required by law or applicable regulations to be disclosed.
Section 10.02. Foreclosed Property. (a) Notwithstanding any other
provision of this Agreement, the Servicer, acting on behalf of the Trustee
hereunder, shall not rent, lease, or otherwise earn income on behalf of the
Trust Fund with respect to the Foreclosed Property which might cause the
Foreclosed Property to fail to qualify as "foreclosure property" within the
meaning of Section 860G(a)(8) of the Code or result in the receipt by the Trust
REMIC of any "income from nonpermitted assets" within the meaning of Section
860F(a)(2) of the Code or any "net income from foreclosure property" which is
subject to tax under the REMIC Provisions unless the Trustee and Servicer have
been furnished with an Opinion of Counsel (at the Trust Fund's expense) to the
effect that under the REMIC Provisions, any income generated for the Trust REMIC
by the Foreclosed Property in the manner contemplated would not result in the
imposition of a tax upon the Trust REMIC. The Trustee and Servicer shall be
entitled to rely on such opinion and neither shall have liability hereunder for
adopting any course of action consistent with such opinion.
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Without limiting the generality of the foregoing, neither the
Servicer nor the Trustee shall, to the extent within its power:
(i) permit the Trust Fund to enter into, renew or extend any New
Lease with respect to the Foreclosed Property, if the New Lease by its
terms will give rise to any income that does not constitute Rents from
Real Property;
(ii) permit any amount to be received or accrued under any New
Lease other than amounts that will constitute Rents from Real Property;
(iii) authorize or permit any construction on the Foreclosed
Property, other than the completion of a building or other improvement
thereon, and then only if more than ten percent of the construction of
such building or other improvement was completed before default on the
Mortgage Loan became imminent, all within the meaning of Section
856(e)(4)(B) of the Code; or
(iv) Directly Operate, or allow any other Person to Directly
Operate, any Foreclosed Property on any date more than 90 days after its
acquisition date unless, in any such case, the Servicer has requested and
received an Opinion of Counsel at the Trust Fund's expense to the effect
that such action will not cause such Foreclosed Property to fail to
qualify as "foreclosure property" within the meaning of Section 860G(a)(8)
of the Code at any time that it is held by the Trust REMIC, in which case
the Servicer may take such actions as are specified in such Opinion of
Counsel.
(b) The Servicer, acting on behalf of the Trustee hereunder, shall
make reasonable efforts to sell the Foreclosed Property for its fair market
value in accordance with Section 3.11. In any event, however, the Trustee, or
the Servicer, acting on behalf of the Trustee hereunder, may in its discretion
request an extension of time from the IRS at least 61 days prior to the
expiration of the two-year period beginning on the date such Foreclosed Property
was acquired and shall dispose of such
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Foreclosed Property within two years of its acquisition by the Trust Fund unless
the Trustee or the Servicer, on behalf of the Trustee, is entitled to an
extension of time (an "Extension") to sell such Foreclosed Property without
causing such property to cease to qualify as "foreclosure property" within the
meaning of Code Section 860G(a)(8), with the expenses of obtaining any such
extension of time being advanced by the Servicer as a Carrying Costs Advance. If
the Trustee or the Servicer, on behalf of the Trustee, has received such an
Extension, then the Trustee, the Servicer, acting on behalf of the Trustee
hereunder, shall continue to attempt to sell the Foreclosed Property for its
fair market value for such period longer than two years as such Extension
permits (the "Extended Period"). If the Trustee or the Servicer, on behalf of
the Trustee, has not received such an Extension and the Servicer, acting on
behalf of the Trustee hereunder, is unable to sell the Foreclosed Property
within the two year period or if the Trustee or the Servicer, acting on behalf
of the Trustee hereunder, has received such an Extension, and the Servicer,
acting on behalf of the Trustee hereunder, is unable to sell the Foreclosed
Property within the Extended Period, the Servicer shall, before the end of the
two-year period or the Extended Period, as the case may be, auction the
Foreclosed Property to the highest bidder (which may be the Trustee in its
corporate capacity or the Servicer on behalf of itself, in each case to the
extent of amounts owed to it under this Agreement) in accordance with Accepted
Servicing Practices.
(c) Within 30 days of the sale of a Foreclosed Property, the
Servicer shall provide to the Trustee a statement of accounting for the
Foreclosed Property, including without limitation, (i) the date the Mortgaged
Property was acquired in foreclosure or by deed in lieu of foreclosure, (ii) the
date of disposition of such Foreclosed Property, (iii) the gross sale price and
related selling and other expenses, (iv) accrued interest calculated from the
date of acquisition to the disposition date, and (v) such other information as
the Trustee may reasonably request.
Section 10.03. Modifications of Mortgage Loan. Notwithstanding
anything to the contrary in this Agreement, neither the Trustee nor the Servicer
shall permit any modification of, or take any action with respect to, the
Mortgage Loan or any
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Component (including the interest rate, the principal balance, the
amortization schedule, or any other term affecting the amount or timing of
payments on the Mortgage Loan) that would result in an exchange within
the meaning of Section 1001 of the Code unless (i) the Trustee and the
Servicer have received a Nondisqualification Opinion or a ruling from the IRS
(at the expense of the party making the request of the Servicer or the
Trustee to modify the Mortgage Loan) to the same effect as a
Nondisqualification Opinion with respect to such modification or (ii) such
modification meets the requirements set forth in the second sentence of
Section 3.03.
Section 10.04. Prohibited Transactions and Activities. The Servicer,
on behalf of the Trustee, shall not permit the sale, disposition or substitution
of the Mortgage Loan or the substitution of a property for the Mortgaged
Property (except in a disposition pursuant to (i) the bankruptcy or insolvency
of the Mortgagors or (ii) the termination of the Trust REMIC in a "qualified
liquidation" as defined in Section 860F(a)(4) of the Code), nor acquire any
assets for the Trust REMIC (other than Foreclosed Property), nor sell or dispose
of any investments in the Certificate Account for gain, nor accept any
contributions to the Trust REMIC (other than a cash contribution during the
three-month period beginning on the Startup Day), unless it has received an
Opinion of Counsel (at the expense of the Person requesting it to take such
action) to the effect that such disposition, acquisition, substitution, or
acceptance will not (a) affect adversely the status of the Trust REMIC as a
REMIC or of the Certificates, other than the Class R Certificate, as the regular
interests therein or (b) cause the Trust REMIC to be subject to a tax on
"prohibited transactions" or "prohibited contributions" pursuant to the REMIC
Provisions. Nothing in this Section 10.04 shall be construed to authorize the
Servicer or the Trustee to take any action not otherwise authorized by this
Agreement.
Section 10.05. Indemnification with Respect to Certain Taxes and
Loss of REMIC Status. (a) In the event that the Trust REMIC fails to qualify as
a REMIC, loses its status as a REMIC, or incurs state or local taxes, or a tax
as a result of a prohibited transaction or contribution or the receipt of "net
income from foreclosure property" subject to taxation under the
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REMIC Provisions due to the willful misfeasance, bad faith or negligent
performance by the Trustee of its duties and obligations specifically set forth
herein, or by reason of the Trustee's reckless disregard of its obligations and
duties thereunder, the Trustee shall indemnify the Trust Fund against any and
all losses, claims, damages, liabilities or expenses ("Losses") resulting
therefrom; provided, however, that the Trustee shall not be liable for any such
Losses attributable to the action or inaction of the Servicer, the Depositor or
the Holders of the Class R Certificates nor for any such Losses resulting from
misinformation provided by the Servicer, the Depositor or the Holders of the
Class R Certificates on which the Trustee has relied. The foregoing shall not be
deemed to limit or restrict the rights and remedies of successor Holders of the
Class R Certificates at law or in equity. Such indemnity shall be limited to
direct Losses and shall not extend to consequential damages.
(b) In the event that the Trust REMIC fails to qualify as a REMIC,
loses its status as a REMIC, or incurs state or local taxes, or a tax as a
result of a prohibited transaction or contribution or the receipt of "net income
from foreclosure property" subject to taxation under the REMIC Provisions due to
directly and solely the willful misfeasance, bad faith or negligent performance
of the Servicer in the performance of its duties and obligations set forth
herein, or by reason of the Servicer's reckless disregard of its obligations and
duties thereunder, the Servicer shall indemnify the Trust Fund against any and
all Losses resulting therefrom; provided, however, that the Servicer shall not
be liable for any such Losses attributable to the action or inaction of the
Trustee, the Depositor or the Holders of the Class R Certificates nor for any
such Losses resulting from misinformation provided by the Trustee, the Depositor
or the Holders of the Class R Certificates on which the Servicer has relied. The
foregoing shall not be deemed to limit or restrict the rights and remedies of
any successor Holders of the Class R Certificates at law or in equity. Such
indemnity shall be limited to direct Losses and shall not extend to
consequential damages.
Section 10.06. Grantor Trust Reporting. The parties intend that the
Grantor Trust shall constitute, and that the
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affairs of the Grantor Trust be conducted so as to qualify as, a "grantor trust"
under the Grantor Trust Provisions, and the provisions hereof shall be
interpreted consistently with this intention. In furtherance of such intention,
the Trustee shall furnish or cause to be furnished to holders of Regular
Certificates, and shall file or cause to be filed with the IRS together with
Form 1041 or such other form as may be applicable, a report setting forth their
applicable share of Default Rate Interest at the times and in the manner
required by the Code.
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ARTICLE ELEVEN
MISCELLANEOUS PROVISIONS
Section 11.01. Amendment. (a) This Agreement may be amended from
time to time by the mutual agreement of the Depositor, the Servicer, the Trustee
and the Fiscal Agent, without the consent of any of the Certificateholders, (i)
to cure any ambiguity, (ii) to correct or supplement any provision(s) herein
which may be inconsistent with any other provision(s) herein, (iii) to maintain
the qualification of the Trust REMIC as a REMIC, or (iv) to make any other
provisions with respect to matters or questions arising under this Agreement,
provided that such action shall not adversely affect in any material respect the
interests of any Certificateholder without the consent of each Certificateholder
adversely affected thereby in the case of an amendment pursuant to clauses (i),
(ii) or (iv) of this sentence or adversely affect the status of the Trust REMIC
as a REMIC or the Grantor Trust as a grantor trust (under the Grantor Trust
Provisions). Prior to entering into any amendment without the consent of Holders
pursuant to this paragraph, the Trustee shall require an Opinion of Counsel (in
the case of clauses (i), (ii) and (iii), at the expense of the Depositor, and
otherwise at the expense of the party requesting such amendment) to the effect
that such amendment is permitted under this paragraph. The Rating Agency shall
be given prior notice of any material amendment to this Agreement pursuant to
this Section 11.01(a). Any amendment of this Agreement pursuant to this Section
11.01(a) shall be deemed not to adversely affect in any material respect the
interests of any Certificateholder if the Trustee receives written confirmation
from the Rating Agency that such amendment will not cause the Rating Agency to
reduce or withdraw the then current rating assigned to any Class of the Regular
Certificates (and any opinion requested by the Trustee in connection with any
such amendment may rely expressly on such confirmation as the basis therefor).
(b) This Agreement may be amended from time to time by the
Depositor, the Servicer, the Trustee and the Fiscal Agent with the written
consent of the Holders of Certificates evidencing, in the aggregate, not less
than 66 2/3% of the Voting Rights of the Certificates for the purpose of adding
any
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provisions to or changing in any manner or eliminating any of the provisions
of this Agreement or of modifying in any manner the rights of the Holders of
the Certificates; provided, however, that no such amendment shall (i) reduce
in any manner the amount of or delay the timing of payments received on or
with respect to the Mortgage Loan that are required to be distributed
with respect to any Regular Certificate, or change the manner in which such
payments are required to be distributed, without the consent of the Holder of
such Certificate, (ii) adversely affect in any material respect the interests
of the Holders of a Class of the Certificates in a manner other than as set
forth in (i) above without the consent of the Holders of such Class
evidencing, in the aggregate, not less than 100% of the Voting Rights of such
Class, (iii) reduce the aforesaid percentages of Voting Rights of the
Certificates, the Holders of which are required to consent to any such
amendment without the consent of 100% of the Certificateholders of the
affected Class, (iv) alter the obligations of the Servicer to make an Advance
or alter the servicing standards set forth herein, or (v) amend any
provisions hereof relating to the administration of the Trust REMIC as a
REMIC without the consent of the Class R Certificateholders. The Rating
Agency shall be given prior notice of any amendment to this Agreement
pursuant to this Section 11.01(b).
It shall not be necessary for the consent of Certificateholders
under this Section to approve the particular form of any proposed amendment, but
it shall be sufficient if such consent shall approve the substance thereof. The
manner of obtaining such consents and of evidencing the authorization of the
execution thereof by Certificateholders shall be subject to such reasonable
regulations as the Trustee may prescribe.
Notwithstanding any contrary provisions of this Agreement, the
Trustee shall not consent to any amendment to this Agreement pursuant to this
Section 11.01(b) unless it shall have first been furnished with an Opinion of
Counsel to the effect that such amendment is authorized hereunder and will not
cause the Trust Fund to fail to qualify as a REMIC or cause the Grantor Trust to
fail to qualify as a grantor trust under the Grantor Trust Provisions at any
time that any Certificates are outstanding.
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(c) Promptly after the execution of any amendment to this Agreement,
the Trustee shall furnish written notification of the substance of such
amendment to each Certificateholder and the Rating Agency.
(d) In the event that neither Depositor nor any successor thereto is
in existence, any amendment under this Section shall be effected with the
consent of the Servicer, the Trustee, and the Fiscal Agent, and, to the extent
required hereby, the Certificateholders.
Section 11.02. Recordation of Agreement. This Agreement (or an
abstract hereof, if acceptable by the applicable recording office) is subject to
recordation in all appropriate public offices for real property records in all
the counties or other comparable jurisdictions in which any or all of the
properties subject to the Mortgages are situated, and in any other appropriate
public recording office or elsewhere, such recordation to be effected by the
Servicer at the expense of the Trust Fund upon its receipt of an Opinion of
Counsel to the effect that such recordation materially and beneficially affects
the interests of the Certificateholders.
For the purpose of facilitating the recordation of this Agreement as
herein provided and for other purposes, this Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts shall
be deemed to be an original, and such counterparts shall constitute but one and
the same instrument.
Section 11.03. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE SUBSTANTIVE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN THE STATE OF NEW YORK AND
THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HERETO AND THE
CERTIFICATEHOLDERS SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 11.04. Notices. All demands, notices and communications to
any party hereunder shall be in writing, U.S. mail, fax and overnight mail
service and shall be deemed to have been duly given when delivered to (i) in the
case of the Depositor, c/o The Mills Corporation, 1300 Wilson Boulevard,
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Suite 400, Arlington, Virginia 22209, (ii) in the case of the Servicer, AMRESCO
Management, Inc., 235 Peachtree Street, Suite 900 Atlanta, GA 30303;, Attention:
Legal Counsel; and (iii) in the case of the Trustee, LaSalle National Bank, 135
South LaSalle Street, Suite 1740, Chicago, Illinois 60674-4107, Asset-Backed
Securities Trust Services Group-Potomac/Gurnee Mills Securitization; (iv) in the
case of the Fiscal Agent, ABN AMRO Bank N.V. 135 South LaSalle Street, Suite
1740, Chicago, Illinois 60674-4107; Attn: Group-Potomac/Gurnee Mills
Securitization; (v) in the case of the Manager, Management Associates Limited
Partnership, 1300 Wilson Boulevard, Suite 400, Arlington, Virginia 22209; or in
each case such other address as may hereafter be furnished to the other parties
hereto in writing. Any notice required or permitted to be mailed to a
Certificateholder shall be given by first class mail, postage prepaid, at the
address of such Holder as shown in the Certificate Register. Any notice mailed
to a Certificateholder within the time prescribed in this Agreement shall be
conclusively presumed to have been duly given, whether or not the addressee
receives such notice. The Trustee shall furnish copies of all notices given or
received by it hereunder to CS First Boston Corporation, Eleven Madison Avenue,
New York, New York 10010, Attention: Robert K. Vahradian; and Merrill Lynch &
Co., World Financial Center, North Tower, New York, New York 10281-1310,
Attention: Lawrence Miller.
Section 11.05. Notices to the Rating Agency. The Servicer shall
deliver written notice of the following events to Fitch Investors Service, L.P.,
One State Street Plaza, New York, New York 10004, Attn: Commercial Mortgage
Surveillance, promptly following the occurrence thereof, of any of the following
events: a material amendment to any documents included in the Trust Fund; any
Event of Default; any change in or the termination of the Trustee; the removal,
merger or consolidation of the Servicer or any successor Servicer as servicer;
the result of any inspection (whether structural, environmental or otherwise) of
the Mortgaged Property, and final payment to Certificateholders. In addition,
the Trustee shall deliver copies of the following documents to the Rating Agency
at the time such documents are required to be delivered pursuant to this
Agreement: monthly reports to Certificateholders pursuant to Section 4.02,
annual Servicer's compliance report pursuant to Section 3.14, annual report of
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independent accountants pursuant to Section 3.15 and copies of any
notifications received by any Mortgagor pursuant to Section 16.01(h) of the
related Mortgage. The Servicer and Trustee also shall furnish such other
information regarding the Trust Fund as may be reasonably requested by the
Rating Agency to the extent such party has or can obtain such information
without unreasonable effort or expense. The Trustee shall furnish copies of
all notices given or received by it hereunder to CS First Boston Corporation,
Eleven Madison Avenue, New York, New York 10010, Attention: Robert K.
Vahradian; and Merrill Lynch & Co., World Financial Center, North Tower, New
York, New York 10281-1310, Attention: Lawrence Miller. Notwithstanding the
foregoing, the failure to deliver such notices and copies shall not
constitute an Event of Default under this Agreement, and the Trustee shall
not be liable for the failure to deliver any report hereunder if such report
is to be furnished to the Trustee by another Person and such Person has
failed to furnish such report to the Trustee in a timely manner. Any
confirmation of the rating by the Rating Agency required hereunder shall be
in writing.
Section 11.06. Streit Act. Any provisions required to be contained
in this Agreement by Section 126 of Article 4-A of the New York Real Property
Law are hereby incorporated herein, and such provisions shall be in addition to
those conferred or imposed by this Agreement; provided, however, that to the
extent that such Section 126 shall not have any effect, and if said Section 126
should at any time be repealed or cease to apply to this Agreement, or be
construed by judicial decision to be inapplicable, said Section 126 shall cease
to have any further effect upon the provisions of this Agreement. In case of a
conflict between the provisions of this Agreement and any mandatory provisions
of Article 4-A of the New York Real Property Law, such mandatory provisions of
said Article 4-A shall prevail, provided that if said Article 4-A shall not
apply to this Agreement, should at any time be repealed, or cease to apply to
this Agreement, or be construed by judicial decision to be inapplicable, such
mandatory provisions of such Article 4-A shall cease to have any further effect
upon the provisions of this Agreement.
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Section 11.07. Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions or
terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement or of the Certificates
or the rights of the Holders thereof.
Section 11.08. Limitation on Rights of Certificateholders. The death
or incapacity of any Certificateholder shall not operate to terminate this
Agreement or the Trust Fund or entitle such Certificateholder's legal
representatives or heirs to claim an accounting or take any action or commence
any proceeding in any court for a partition or winding-up of the Trust Fund, or
otherwise affect the rights, obligations and liabilities of the parties hereto
or any of them.
Except as otherwise expressly provided herein, no Certificateholder,
solely by virtue of its status as a Certificateholder, shall have any right to
vote (except as provided herein) or in any manner otherwise control the
operation and management of the Trust Fund or the obligations of the parties
hereto, nor shall anything herein set forth or contained in the terms of the
Certificates be construed so as to constitute the Certificateholders from time
to time as partners or members of an association, nor shall any
Certificateholder be under any liability to any third party by reason of any
action taken by the parties to this Agreement pursuant to any provision hereof.
No Certificateholder, solely by virtue of its status as a
certificateholder, shall have any right by virtue or by availing of any
provision of this Agreement to institute any suit, action or proceeding in
equity or at law upon or under or with respect to this Agreement unless such
Holder previously shall have given to the Trustee a written notice of an Event
of Default and of the continuance thereof, as hereinbefore provided, and unless
also Holders of Certificates of any Class affected thereby evidencing, as to
such Class, Percentage Interests aggregating not less than 25% shall have made
written request upon the Trustee to institute such action, suit or proceeding in
its own name as Trustee hereunder and shall have offered to the Trustee
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such reasonable indemnity as it may require against the costs, expenses and
liabilities to be incurred therein or thereby, and the Trustee, for 60 days
after its receipt of such notice, request and offer of indemnity, shall have
neglected or refused to institute any such action, suit or proceeding; it being
understood and intended, and being expressly covenanted by each
Certificateholder with every other Certificateholder of the same Class and the
Trustee, that no one or more Holders of Certificates shall have any right in any
manner whatever by virtue or by availing of any provision of this Agreement to
affect, disturb or prejudice the rights of the Holders of any other of such
Certificates of the same Class, or to obtain or seek to obtain priority over or
preference to any other such Holder, or to enforce any right under this
Agreement, except in the manner herein provided and for the benefit of all
Certificateholders of the same Class. For the protection and enforcement of the
provisions of this Section, each and every Certificateholder and the Trustee
shall be entitled to such relief as can be given either at law or in equity.
Section 11.09. Certificates Nonassessable and Fully Paid. It is the
intention of the Depositor that Certificateholders shall not be personally
liable for obligations of the Trust Fund, that the interests in the Trust Fund
represented by the Certificates shall be nonassessable for any reason
whatsoever, and that the Certificates, upon due authentication thereof by the
Trustee pursuant to this Agreement, are and shall be deemed fully paid.
Section 11.10. Reproduction of Documents. This Agreement and all
documents relating thereto, including, without limitation, (i) consents, waivers
and modifications which may hereafter be executed, (ii) documents received by
any party at the closing, and (iii) financial statements, certificates and other
information previously or hereafter furnished, may be reproduced by any
photographic, photostatic, microfilm, microcard, miniature photographic or other
similar process. The parties agree that any such reproduction shall be
admissible in evidence as the original itself in any judicial or administrative
proceeding, whether or not the original is in existence and whether or not such
reproduction was made by a party in the regular course of business, and that any
enlargement, facsimile
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or further reproduction of such reproduction shall likewise be admissible in
evidence.
Section 11.11. No Partnership. Nothing herein contained shall be
deemed or construed to create a partnership or joint venture between the parties
hereto and the services of the Servicer shall be rendered as an independent
contractor and not as agent for the Trustee or the Depositor.
Section 11.12. Actions of Certificateholders. (a) Any request,
demand, authorization, direction, notice, consent, waiver or other action
provided by this Agreement to be given or taken by Certificateholders may be
embodied in and evidenced by one or more instruments of substantially similar
tenor signed by such Certificateholders in person or by agent duly appointed in
writing; and except as herein otherwise expressly provided, such action shall
become effective when such instrument or instruments are delivered to the
Trustee and, where required, to the Depositor or the Servicer. Proof of
execution of any such instrument or of a writing appointing any such agent shall
be sufficient for any purpose of this Agreement and conclusive in favor of the
Trustee, the Depositor and the Servicer, if made in the manner provided in this
Section.
(b) The fact and date of the execution by any Certificateholder of
any such instrument or writing may be proved in any reasonable manner which the
Trustee deems sufficient.
(c) Any request, demand, authorization, direction, notice, consent,
waiver, or other act by a Certificateholder shall bind every Holder of every
Certificate issued upon the registration of transfer thereof or in exchange
therefor or in lieu thereof, in respect of anything done or omitted to be done
by the Trustee, the Depositor or the Servicer in reliance thereon, whether or
not notation of such action is made upon such Certificate.
(d) The Trustee may require additional proof of any matter referred
to in this Section 11.12 as it shall deem reasonably necessary.
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Section 11.13. Successors and Assigns. The rights and obligations of
any party hereto shall not be assigned (except pursuant to Sections 6.02 or 8.09
hereof) by such party without the prior written consent of the other parties
hereto. This Agreement shall inure to the benefit of and be binding upon the
Depositor, the Servicer, the Fiscal Agent and the Trustee and their respective
permitted successors and assigns.
Section 11.14. Officer's Certificates and Opinions of Counsel;
Statements to Be Contained Therein. Upon any application or demand by the
Depositor or Mortgagors to the Trustee, or the Servicer on behalf of the
Trustee, to take any action, the Depositor or Mortgagors shall furnish to the
Trustee (i) an Officer's Certificate stating that all conditions precedent, if
any, provided for in this Agreement relating to the proposed action have been
complied with and that the proposed action is in conformity with the
requirements of this Agreement, and (ii) an Opinion of Counsel stating that in
the opinion of such counsel all such conditions precedent, if any, have been
complied with, except that in the case of any such application or demand as to
which the furnishing of such documents is specifically required by any provision
of this Agreement relating to such particular application or demand, no
additional certificate or opinion need be furnished.
Each certificate or opinion required by this Agreement and delivered to
the Trustee with respect to compliance with a condition or covenant provided for
in this Agreement, except for the certificates of compliance required by Section
4.03(c) and Section 3.14, shall include (i) a statement that the person making
such certificate or opinion has read such covenant or condition, (ii) a brief
statement as to the nature and scope of the examination or investigation upon
which the statements or opinions contained in such certificate or opinion are
based, (iii) a statement that, in the opinion of such person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with, and (iv) a statement as to whether or not, in the opinion of such
person, such condition or covenant has been complied with.
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Any certificate, statement or opinion of counsel may be based, insofar as
it relates to factual matters, on information which is in the possession of the
Depositor or Mortgagors, upon the certificate, statement or opinion of or
representations by one or more officers, or managers or general partners of the
Depositor or Mortgagors unless such counsel knows that the certificate,
statement or opinion or representations with respect to the matters upon which
his certificate, statement or opinion may be based as aforesaid are erroneous,
or in the exercise of reasonable care should know that the same are erroneous.
Any certificate, statement or opinion of an officer, manager or general
partner of the Depositor or Mortgagors or of counsel thereto may be based,
insofar as it relates to accounting matters, upon a certificate or opinion of or
representations by an accountant or firm of accountants employed by the
Depositor or Mortgagors unless such certifying Person or counsel, as the case
may be, knows that the certificate or opinion or representations with respect to
the accounting matters upon which his certificate, statement or opinion may be
based as aforesaid are erroneous, or in the exercise of reasonable care should
know that the same are erroneous.
Any certificate or opinion of any independent firm of public accountants
filed with the Trustee shall contain a statement that such firm is independent.
Section 11.15. Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be deemed to be an original, and all
of which together shall constitute one and the same instrument.
Section 11.16. Rule 144A Information. For so long as any of the
Certificates are "restricted securities" within the meaning of Rule 144A under
the Securities Act, the Trustee agrees to provide to any Certificateholder and
to any prospective purchaser of Certificates designated by such a
Certificateholder, upon the request of such Certificateholder or prospective
purchaser, any information prepared by the Trustee or the Servicer that may be
required to be provided to such holder or prospective purchaser to satisfy the
condition set forth in Rule 144A(d)(4) under the Securities Act. Any recipient
of informa-
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tion provided pursuant to this Section 11.16 shall agree that such information
shall not be disclosed or used for any purpose other than the evaluation of the
Certificates by the prospective purchaser.
* * * * * * * * *
177
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IN WITNESS WHEREOF, the parties hereto have caused their names
to be signed hereto by their respective officers thereunto duly authorized, all
as of the day and year first above written.
POTOMAC GURNEE FINANCE CORP.,
as Depositor
By _________________________________
Name:
Title:
AMRESCO MANAGEMENT, INC.,
as Servicer
By _________________________________
Name:
Title:
LASALLE NATIONAL BANK,
as Trustee
By _________________________________
Name:
Title:
ABN AMRO BANK N.V.,
as Fiscal Agent
By _________________________________
Name:
178
<PAGE>
Title:
179
<PAGE>
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On this ______ day of December, 1996, before me personally appeared
_____________, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person who executed the within instrument as an
officer of Potomac Gurnee Finance Corp. and acknowledged to me that s/he
executed it.
___________________________
NOTARY PUBLIC
NOTARIAL SEAL
180
<PAGE>
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On this ______ day of December, 1996, before me personally appeared
_____________, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person who executed the within instrument as an
officer of AMRESCO Management, Inc. and acknowledged to me that s/he executed
it.
___________________________
NOTARY PUBLIC
NOTARIAL SEAL
181
<PAGE>
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On this ______ day of December, 1996, before me personally appeared
_____________, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person who executed the within instrument as an
officer of LaSalle National Bank and acknowledged to me that s/he executed it.
___________________________
NOTARY PUBLIC
NOTARIAL SEAL
182
<PAGE>
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On this ______ day of December, 1996, before me personally appeared
_____________, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person who executed the within instrument as an
officer of ABN AMRO Bank N.V. and acknowledged to me that s/he executed it.
___________________________
NOTARY PUBLIC
NOTARIAL SEAL
183
<PAGE>
EXHIBIT A
FORM OF CLASS A CERTIFICATE
THIS CERTIFICATE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION
EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND THIS CERTIFICATE MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS CERTIFICATE IS HEREBY
NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF
SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.
THE HOLDER OF THIS CERTIFICATE AGREES FOR THE BENEFIT OF THE DEPOSITOR THAT (i)
SUCH CERTIFICATE MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (a)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (b) TO
A PERSON WHO THE SELLER REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER"
(AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, OR (c) PURSUANT TO AN EXEMPTION FROM REGISTRATION
UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), IN EACH
CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION, (ii) THE HOLDER WILL, AND
EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THIS
CERTIFICATE OF THE RESALE RESTRICTIONS SET FORTH IN (i) ABOVE, AND (iii) THE
CERTIFICATE REGISTRAR FOR THE OFFERED CERTIFICATES WILL NOT BE REQUIRED TO
ACCEPT THIS CERTIFICATE FOR REGISTRATION OF TRANSFER, EXCEPT UPON PRESENTATION
OF EVIDENCE SATISFACTORY TO THE TRUSTEE AND THE CERTIFICATE REGISTRAR THAT THE
RESTRICTIONS ON TRANSFER SET FORTH IN (i) ABOVE HAVE BEEN COMPLIED WITH.
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN POTOMAC
GURNEE FINANCE CORP., THE SERVICER, THE TRUSTEE OR THE FISCAL AGENT REFERRED TO
BELOW OR ANY OF THEIR AFFILIATES. NEITHER THIS CERTIFICATE NOR THE UNDERLYING
MORTGAGE LOAN IS GUARANTEED OR INSURED BY POTOMAC GURNEE FINANCE CORP. OR BY ANY
OF ITS AFFILIATES OR BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY OR BY ANY
OTHER PERSON OR ENTITY.
A-1
<PAGE>
[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUSTEE OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS BOTH
(i) A BENEFICIAL INTEREST IN A "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE
INVESTMENT CONDUIT" AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G
AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") AND (ii)
A BENEFICIAL OWNERSHIP INTEREST IN A "GRANTOR TRUST" (AS THAT TERM IS DEFINED IN
SUBPART E, PART 1 OF SUBCHAPTER J, CHAPTER 1 OF SUBTITLE A OF THE CODE).
POTOMAC GURNEE FINANCE CORP.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
POTOMAC GURNEE FINANCE CORP., as Depositor
evidencing a percentage beneficial interest in all distributions allocable
to the Class A Certificates with respect to a Trust Fund consisting
primarily of a single mortgage loan with an initial principal balance of
approximately $284,000,000 (the "Deed of Trust Loan"), secured by two
cross-collateralized, cross-defaulted first priority liens on
substantially all of the properties known as Potomac Mills, a
value-oriented, super-regional shopping mall located in Dale City,
Virginia and Gurnee Mills, a value-oriented, super-regional shopping mall
located in Gurnee, Illinois.
CERTIFICATE NUMBER: INITIAL PRINCIPAL BALANCE
A-2
<PAGE>
OF THIS CERTIFICATE:
$___________________
DATE OF TRUST AND INITIAL CLASS A CERTIFICATE
SERVICING AGREEMENT: PRINCIPAL BALANCE:
December 1, 1996 $212,000,000
FIRST DISTRIBUTION DATE: CUSIP NUMBER: 737688 AA 9
January 21, 1997
THIS CERTIFIES THAT [CEDE & CO.] is the registered owner of a
Percentage Interest evidenced by this Certificate (obtained by dividing the
denomination of this Certificate by the aggregate of the denominations of all
Class A Certificates) in certain monthly distributions with respect to a Trust
Fund consisting primarily of the Deed of Trust Loan deposited by Potomac Gurnee
Finance Corp. (the "Depositor"). The Trust Fund was created pursuant to a Trust
and Servicing Agreement, dated as specified above (the "Agreement"), among the
Depositor, AMRESCO Management, Inc., as servicer (the "Servicer"), LaSalle
National Bank, as trustee (the "Trustee"), and ABN AMRO Bank N.V., as fiscal
agent (the "Fiscal Agent"), a summary of certain of the pertinent provisions of
which is set forth below. To the extent not defined herein, the capitalized
terms used herein have the meanings assigned to them in the Agreement.
This Certificate is one of a duly authorized issue of Certificates,
designated as Potomac Gurnee Finance Corp., Commercial Deed of Trust
Pass-ThroughCertificates, Class A (the "Class A Certificates"), Class B (the
"Class B Certificates"), Class C (the "Class C Certificates"), Class D (the
"Class D Certificates") and Class R (the "Class R Certificates" and together
with the Class A, Class B, Class C and Class D Certificates, the
"Certificates"), and is issued under and is subject to the terms, provisions
and conditions of the Agreement, to which Agreement the Holder of this
Certificate by virtue of the acceptance hereof assents and by which such Holder
is bound. The Class R Certificates are subordinate to each Class of Regular
Certificates in right of payment, the Class D Certificates are subordinate to
the Class C, Class B and Class A Certificates in right of payment, the Class
C Certificates are
A-3
<PAGE>
subordinate to the Class B and Class A Certificates in right of payment and the
Class B Certificates are subordinate to the Class A Certificates in right of
payment, each to the extent described in the Agreement.
During each Interest Accrual Period until the Balloon Anticipated
Repayment Date, interest on the Class A Certificate will accrue at a rate per
annum (the "Class A Certificate Rate") equal to 6.8870%. During each Interest
Accrual Period after the Balloon Anticipated Repayment Date, interest on the
Class A Certificate will accrue at a rate per annum (the "Class A Adjusted
Certificate Rate") equal to 8.8870%. Interest on the Class A Certificates will
be computed for each Interest Accrual Period on the basis of a year of 360 days
composed of twelve 30-day months. Pursuant to the terms of the Agreement, the
Trustee or its designated paying agent will distribute from funds in the
Certificate Account on the 20th day of each month or, if such 20th day is not a
Business Day, the first Business Day immediately following (the "Distribution
Date"), commencing on January 21, 1997, to the Person in whose name this
Certificate is registered at the close of business on the last Business Day of
the calendar month immediately preceding the month in which such Distribution
Date occurs (the "Record Date"), payments of principal and interest on this
Certificate in the amounts and in the priorities set forth in the Agreement for
such Distribution Date.
Upon the occurrence and during the continuance of a Deed of Trust
LoanEvent of Default, the rate of interest to be paid on the entire principal
balance of each Component of the Deed of Trust Loan will be increased by 4% per
annum in excess of the interest rate on such Component at the time of such Deed
of Trust Loan Event of Default (such excess interest, "Default Rate
Interest"), until such Deed of Trust Loan Event of Default has been cured, by
payment or otherwise. Default Rate Interest paid on the Deed of Trust Loan, net
of amounts thereof applied by the Servicer to reimburse interest on P&I
Advances, will be passed through on the Class A Certificates in the manner,
and to the extent, provided in the Agreement but will not be payable on such
Certificates until the principal balance of each Class of Regular Certificates
has been reduced to zero.
A-4
<PAGE>
Optional prepayments of principal with respect to the A Component of
the Deed of Trust Note are not permitted in whole or in part for the first
three years of the Deed of Trust Loan term. Thereafter, subject to certain
conditions described in the Agreement, optional prepayments of principal of
the Deed of Trust Loan are permitted in whole or in part, provided that any
such prepayment made prior to the date that is six months prior to the Balloon
Anticipated Repayment Date is accompanied by a Prepayment Premium equal to the
greater of (x) a Yield Maintenance Premium (as described in the Agreement)
and (y) one percent (1%) of that portion of the Deed of Trust Loan principal
balance to be prepaid. Such optional payments of principal and premium, if any,
will be distributed on the next succeeding Distribution Date in the manner set
forth in the Agreement. Prepayment Premiums are also payable in the case of
all other prepayments on the Deed of Trust Loan, whether voluntary or
involuntary, except for prepayments from Loss Proceeds required by the terms of
the Mortgages and except for prepayments made on or after the date that is six
months prior to the Balloon Anticipated Repayment Date.
Distributions on this Certificate will be made on each Distribution
Date by the Trustee or its designated paying agent either by check mailed to the
address of the Holder hereof, as such name and address shall appear on the
Certificate Register, or, upon written request, containing all necessary wiring
instructions, by a Holder hereof holding in excess of $5,000,000 in initial
Certificate Principal Balance, delivered at least five Business Days prior to
the related Record Date, by wire transfer in immediately available funds to the
account of such Holder maintained at a bank in the United States, or if this
Certificate is held by a Clearing Agency, by wire transfer in immediately
available funds to a bank account maintained in the United States, or by such
other means of payment as the Holder hereof and the Paying Agent shall agree
upon. Notwithstanding the above, the final distribution on this Certificate will
be made after due notice by the Trustee of the pendency of such distribution and
only upon presentation and surrender of this Certificate at the office or agency
appointed by the Trustee for that purpose and specified in such notice of final
distribution.
The Depositor intends to cause an election to be made to treat
certain assets in the Trust Fund as a real estate
A-5
<PAGE>
mortgage investment conduit ("REMIC"). The Class A Certificates, Class B
Certificates, Class C Certificates and Class D Certificates will constitute, in
part, beneficial interests in the "regular interests" in the REMIC and the Class
R Certificate will constitute the "residual interest" in the REMIC. The Class A
Certificates, Class B Certificates, Class C Certificates and Class D
Certificates will also constitute beneficial interests in a grantor trust
consisting of that part of the Trust Fund representing the Default Rate Interest
and the Default Interest Account. Each Holder of this Certificate, by acceptance
hereof, and each beneficial owner of this Certificate, agrees to treat, and to
take no action inconsistent with the treatment of, this Certificate in
accordance with this paragraph for purposes of federal income taxes, state and
local income and franchise taxes and other taxes imposed on or measured by
income.
The Trustee will cause to be kept at the Corporate Trust Office or
at the office of its designated agent, a Certificate Register in which, subject
to such reasonable regulations as it may prescribe, the Trustee will provide for
the registration of the Certificates and of transfers and exchanges of the
Certificates. Upon surrender for registration of transfer of any Certificate at
any office or agency of the Trustee maintained for such purposes, the Trustee or
a designated Authenticating Agent will, subject to the limitations set forth in
the Agreement, authenticate and deliver, in the name of the designated
transferee or transferees, a Certificate of a like Class and aggregate
Percentage Interest and dated the date of authentication.
No service charge will be made for any transfer or exchange of the
Certificate, but the Trustee or its designated agent may require payment of a
sum sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer or exchange of the Certificate. The Servicer, the
Trustee, the Paying Agent and the Certificate Registrar may treat the person in
whose name any Certificate is registered as the owner of such Certificate and
the Percentage Interest in the Trust Fund evidenced thereby for the purpose of
receiving distributions pursuant to the Agreement and for all other purposes
whatsoever, and neither the Servicer nor the Trustee,
A-6
<PAGE>
the Paying Agent and the Certificate Registrar will be affected by notice to the
contrary.
The Agreement may be amended from time to time by the Depositor, the
Servicer, the Trustee and the Fiscal Agent, without the consent of any of the
Certificateholders, (i) to cure any ambiguity, (ii) to correct or supplement any
provisions therein which may be inconsistent with any other provisions therein,
(iii) to maintain the qualification of the Trust REMIC as a REMIC or to maintain
the qualification of the Grantor Trust as a Grantor Trust (under the Grantor
Trust Provisions), or (iv) to make any other provisions with respect to matters
or questions arising under the Agreement, provided that such action shall not
adversely affect in any material respect the interests of any Holder without the
consent of each Holder adversely affected thereby in the case of an amendment
pursuant to (i), (ii) or (iv) or adversely affect the status of the Trust REMIC
as a REMIC or the status of the Grantor Trust as a Grantor Trust (under the
Grantor Trust Provisions).
The Agreement may also be amended from time to time by the
Depositor, the Servicer, the Trustee and the Fiscal Agent with the consent of
Certificateholders evidencing, in the aggregate, not less than 66-2/3% of the
Voting Rights of the Certificates, for the purpose of adding any provisions to
or changing in any manner or eliminating any of the provisions of the Agreement
or of modifying in any manner the rights of Certificateholders; provided,
however, that no such amendment shall (i) reduce in any manner the amount of,
delay the timing of, or change the manner in which payments received on or with
respect to the Deed of Trust Loan are required to be distributed in respect of
any Certificate without the consent of the Holder of such Certificate, (ii)
adversely affect in any material respect the interests of the Holders of a
Class of the Certificates in a manner other than as set forth in (i) above
without the consent of the Certificateholders of such Class evidencing, in the
aggregate, not less than 100% of the Voting Rights of the Certificates of such
Class, (iii) reduce the aforesaid percentages of the Certificates, the Holders
of which are required to consent to any such amendment without the consent of
100% of the Certificateholders of the affected Class, (iv) alter the
obligations of the Servicer to make an Advance or alter the
A-7
<PAGE>
servicing standards set forth in the Agreement, or (v) amend any provisions of
the Agreement relating to the administration of the Trust REMIC as a REMIC
without the consent of the Class R Certificateholders.
The respective obligations and responsibilities of the Servicer, the
Depositor, the Paying Agent, the Trustee and the Fiscal Agent created under the
Agreement (other than the obligation of the Trustee or its designated paying
agent to make certain payments to Certificateholders after the Final
Distribution Date) shall terminate upon the last action required to be taken by
the Trustee or its designated paying agent on the Final Distribution Date
pursuant to Article X of the Agreement upon the later of (i) the final payment
on the Deed of Trust Loan or (ii) the liquidation of the Foreclosed Property;
provided, however, that in no event shall the trust created pursuant to the
terms of the Agreement continue beyond the expiration of twenty-one years from
the death of the last survivor of the descendants of Joseph P. Kennedy, the late
ambassador of the United States to the Court of St. James's, living on the date
hereof.
THIS CERTIFICATE AND THE AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH, AND BE GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK.
Unless the certificate of authentication hereon has been executed by
the Trustee or by its designated Authenticating Agent, by manual signature, this
Certificate shall not be entitled to any benefit under the Agreement or be valid
for any purpose.
A-8
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Class A Certificate
to be duly executed.
LASALLE NATIONAL BANK, as
Trustee
By:________________________
Name:
Title:
Dated __________ ____, 199__
CERTIFICATE OF AUTHENTICATION
THIS IS ONE OF THE CLASS A CERTIFICATES REFERRED TO IN THE
WITHIN-MENTIONED AGREEMENT.
LASALLE NATIONAL BANK,
as Authenticating Agent
By: _________________________
Authorized Signatory
A-9
<PAGE>
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto
________________________________________________________________________________
(Please Print or Typewrite Name and Address of Assignee)
________________________________________________________________________________
the undivided interest in the Trust Fund evidenced by the within Certificate,
and all rights thereunder, and hereby authorizes the transfer of registration of
such interest to the assignee on the Certificate Register.
I further direct the Trustee to issue a new Certificate of the same Class and of
a like Certificate Principal Balance and undivided interest in the Trust Fund to
the above-named assignee and to deliver such certificate to the following
address
________________________________________________________________________________
Date: _____________________ ______________________________________
Signature by or on behalf of
assignor (signature must be
signed as registered)
(PLEASE INSERT SOCIAL SECURITY* OR U.S. TAXPAYER IDENTIFICATION
NUMBER OF ASSIGNEE)
____________________________
____________________________
(Signature Guaranteed)
A-10
<PAGE>
(*This information, which is voluntary, is being requested to ensure that the
assignee will not be subject to backup withholding under Section 3406 of the
Code.)
A-11
<PAGE>
EXHIBIT B
FORM OF CLASS B CERTIFICATE
THIS CERTIFICATE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION
EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND THIS CERTIFICATE MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS CERTIFICATE IS HEREBY
NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF
SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.
THE HOLDER OF THIS CERTIFICATE AGREES FOR THE BENEFIT OF THE DEPOSITOR THAT (i)
SUCH CERTIFICATE MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (a)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (b) TO
A PERSON WHO THE SELLER REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER"
(AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, OR (c) PURSUANT TO AN EXEMPTION FROM REGISTRATION
UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), IN EACH
CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION, (ii) THE HOLDER WILL, AND
EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THIS
CERTIFICATE OF THE RESALE RESTRICTIONS SET FORTH IN (i) ABOVE, AND (iii) THE
CERTIFICATE REGISTRAR FOR THE OFFERED CERTIFICATES WILL NOT BE REQUIRED TO
ACCEPT THIS CERTIFICATE FOR REGISTRATION OF TRANSFER, EXCEPT UPON PRESENTATION
OF EVIDENCE SATISFACTORY TO THE TRUSTEE AND THE CERTIFICATE REGISTRAR THAT THE
RESTRICTIONS ON TRANSFER SET FORTH IN (i) ABOVE HAVE BEEN COMPLIED WITH.
EITHER (i) THE HOLDER OF THIS CERTIFICATE IS NOT AN EMPLOYEE BENEFIT OR OTHER
PLAN THAT IS SUBJECT TO THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS
AMENDED ("ERISA"), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED (THE "CODE"), AND THE FUNDS APPLIED TO THE PURCHASE OF THIS CERTIFICATE
DO NOT INCLUDE THE "PLAN ASSETS" OF ANY SUCH PLAN OR
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<PAGE>
(ii) THE PURCHASE OF THIS CERTIFICATE BY THE HOLDER WILL NOT CONSTITUTE OR
RESULT IN A NON-EXEMPT PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR
SECTION 4975 OF THE CODE.
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN POTOMAC
GURNEE FINANCE CORP., THE SERVICER, THE TRUSTEE OR THE FISCAL AGENT REFERRED TO
BELOW OR ANY OF THEIR AFFILIATES. NEITHER THIS CERTIFICATE NOR THE UNDERLYING
MORTGAGE LOAN IS GUARANTEED OR INSURED BY POTOMAC GURNEE FINANCE CORP. OR BY ANY
OF ITS AFFILIATES OR BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY OR BY ANY
OTHER PERSON OR ENTITY.
THIS CERTIFICATE IS SUBORDINATE TO THE CLASS A CERTIFICATES TO THE EXTENT
DESCRIBED IN THE TRUST AND SERVICING AGREEMENT REFERRED TO HEREIN.
[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUSTEE OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS BOTH
(i) A BENEFICIAL INTEREST IN A "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE
INVESTMENT CONDUIT" AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G
AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") AND (ii)
A BENEFICIAL OWNERSHIP INTEREST IN A "GRANTOR TRUST" (AS THAT TERM IS DEFINED IN
SUBPART E, PART 1 OF SUBCHAPTER J, CHAPTER 1 OF SUBTITLE A OF THE CODE).
POTOMAC GURNEE FINANCE CORP.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
POTOMAC GURNEE FINANCE CORP., as Depositor
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<PAGE>
evidencing a percentage beneficial interest in all distributions allocable
to the Class B Certificates with respect to a Trust Fund consisting
primarily of a single mortgage loan with an initial principal balance of
approximately $284,000,000 (the "Deed of Trust Loan"), secured by two
cross-collateralized, cross-defaulted first priority liens on
substantially all of the properties known as Potomac Mills, a
value-oriented, super-regional shopping mall located in Dale City,
Virginia and Gurnee Mills, a value-oriented, super-regional shopping mall
located in Gurnee, Illinois.
B-3
<PAGE>
CERTIFICATE NUMBER: INITIAL PRINCIPAL BALANCE
OF THIS CERTIFICATE:
$________________________
DATE OF TRUST AND INITIAL CLASS B CERTIFICATE
SERVICING AGREEMENT: PRINCIPAL BALANCE:
December 1, 1996 $27,000,000
FIRST DISTRIBUTION DATE: CUSIP NUMBER: 737688 AB 7
January 21, 1997
THIS CERTIFIES THAT [CEDE & CO.] is the registered owner of a
Percentage Interest evidenced by this Certificate (obtained by dividing the
denomination of this Certificate by the aggregate of the denominations of all
Class B Certificates) in certain monthly distributions with respect to a Trust
Fund consisting primarily of the Deed of Trust Loan deposited by Potomac Gurnee
Finance Corp. (the "Depositor"). The Trust Fund was created pursuant to a Trust
and Servicing Agreement, dated as specified above (the "Agreement"), among the
Depositor, AMRESCO Management, Inc., as servicer (the "Servicer"), LaSalle
National Bank, as trustee (the "Trustee"), and ABN AMRO Bank N.V., as fiscal
agent (the "Fiscal Agent"), a summary of certain of the pertinent provisions of
which is set forth below. To the extent not defined herein, the capitalized
terms used herein have the meanings assigned to them in the Agreement.
This Certificate is one of a duly authorized issue of Certificates,
designated as Potomac Gurnee Finance Corp., Commercial Deed of Trust
Pass-Through Certificates, Class A (the "Class A Certificates"), Class B
(the "Class B Certificates"), Class C (the "Class C Certificates"), Class D
(the "Class D Certificates") and Class R (the "Class R Certificates" and
together with the Class A, Class B, Class C and Class D Certificates, the
"Certificates"), and is issued under and is subject to the terms, provisions
and conditions of the Agreement, to which Agreement the Holder of this
Certificate by virtue of the acceptance hereof assents and by which such Holder
is bound. The Class R Certificates are subordinate to each Class of Regular
Certificates in right of payment, the Class D Certificates are subordinate to
the Class C, Class B and Class A
B-4
<PAGE>
Certificates in right of payment, the Class C Certificates are subordinate to
the Class B and Class A Certificates in right of payment and the Class B
Certificates are subordinate to the Class A Certificates in right of payment,
each to the extent described in the Agreement.
During each Interest Accrual Period until the Balloon Anticipated
Repayment Date, interest on the Class B Certificate will accrue at a rate per
annum (the "Class B Certificate Rate") equal to 7.0030%. During each Interest
Accrual Period after the Balloon Anticipated Repayment Date, interest on the
Class B Certificate will accrue at a rate per annum (the "Class B Adjusted
Certificate Rate") equal to 9.0030%. Interest on the Class B Certificates will
be computed for each Interest Accrual Period on the basis of a year of 360 days
composed of twelve 30-day months. Pursuant to the terms of the Agreement, the
Trustee or its designated paying agent will distribute from funds in the
Certificate Account on the 20th day of each month or, if such 20th day is not a
Business Day, the first Business Day immediately following (the "Distribution
Date"), commencing on January 21, 1997, to the Person in whose name this
Certificate is registered at the close of business on the last Business Day of
the calendar month immediately preceding the month in which such Distribution
Date occurs (the "Record Date"), payments of principal and interest on this
Certificate in the amounts and in the priorities set forth in the Agreement for
such Distribution Date.
Upon the occurrence and during the continuance of a Deed of Trust
Loan Event of Default, the rate of interest to be paid on the entire principal
balance of each Component of the Deed of Trust Loan will be increased by 4% per
annum in excess of the interest rate on such Component at the time of such
Deed of Trust Loan Event of Default (such excess interest, "Default Rate
Interest"), until such Deed of Trust Loan Event of Default has been cured, by
payment or otherwise. Default Rate Interest paid on the Deed of Trust Loan,
net of amounts thereof applied by the Servicer to reimburse interest on P&I
Advances, will be passed through on the Class B Certificates in the manner,
and to the extent, provided in the Agreement but will not be payable on such
Certificates until the principal balance of each Class of Regular Certificates
has been reduced to zero.
B-5
<PAGE>
Optional prepayments of principal with respect to the B Component
of the Deed of Trust Note are not permitted in whole or in part for the first
three years of the Deed of Trust Loan term. Thereafter, subject to certain
conditions described in the Agreement, optional prepayments of principal of
the Deed of Trust Loan are permitted in whole or in part, provided that any
such prepayment made prior to the date that is six months prior to the Balloon
Anticipated Repayment Date is accompanied by a Prepayment Premium equal to
the greater of (x) a Yield Maintenance Premium (as described in the Agreement)
and (y) one percent (1%) of that portion of the Deed of Trust Loan principal
balance to be prepaid. Such optional payments of principal and premium, if any,
will be distributed on the next succeeding Distribution Date in the manner set
forth in the Agreement. Prepayment Premiums are also payable in the case of
all other prepayments on the Deed of Trust Loan, whether voluntary or
involuntary, except for prepayments from Loss Proceeds required by the terms
of the Mortgages and except for prepayments made on or after the date that is
six months prior to the Balloon Anticipated Repayment Date.
Distributions on this Certificate will be made on each Distribution
Date by the Trustee or its designated paying agent either by check mailed to the
address of the Holder hereof, as such name address shall appear on the
Certificate Register, or, upon written request, containing all necessary wiring
instructions, by a Holder hereof holding in excess of $5,000,000 in initial
Certificate Principal Balance, delivered at least five Business Days prior to
the related Record Date, by wire transfer in immediately available funds to the
account of such Holder maintained at a bank in the United States, or if this
Certificate is held by a Clearing Agency, by wire transfer in immediately
available funds to a bank account maintained in the United States, or by such
other means of payment as the Holder hereof and the Paying Agent shall agree
upon. Notwithstanding the above, the final distribution on this Certificate will
be made after due notice by the Trustee of the pendency of such distribution and
only upon presentation and surrender of this Certificate at the office or agency
appointed by the Trustee for that purpose and specified in such notice of final
distribution.
B-6
<PAGE>
The Depositor intends to cause an election to be made to treat
certain assets in the Trust Fund as a real estate mortgage investment conduit
("REMIC"). The Class A Certificates, Class B Certificates, Class C Certificates
and Class D Certificates will constitute, in part, beneficial interests in the
"regular interests" in the REMIC and the Class R Certificate will constitute the
"residual interest" in the REMIC. The Class A Certificates, Class B
Certificates, Class C Certificates and Class D Certificates will also constitute
beneficial interests in a grantor trust consisting of that part of the Trust
Fund representing the Default Rate Interest and the Default Interest Account.
Each Holder of this Certificate, by acceptance hereof, and each beneficial owner
of this Certificate, agrees to treat, and to take no action inconsistent with
the treatment of, this Certificate in accordance with this paragraph for
purposes of federal income taxes, state and local income and franchise taxes and
other taxes imposed on or measured by income.
The Trustee will cause to be kept at the Corporate Trust Office or
at the office of its designated agent, a Certificate Register in which, subject
to such reasonable regulations as it may prescribe, the Trustee will provide for
the registration of the Certificates and of transfers and exchanges of the
Certificates. Upon surrender for registration of transfer of any Certificate at
any office or agency of the Trustee maintained for such purposes, the Trustee or
a designated Authenticating Agent will, subject to the limitations set forth in
the Agreement, authenticate and deliver, in the name of the designated
transferee or transferees, a Certificate of a like Class and aggregate
Percentage Interest and dated the date of authentication.
No service charge will be made for any transfer or exchange of the
Certificate, but the Trustee or its designated agent may require payment of a
sum sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer or exchange of the Certificate. The Servicer, the
Trustee, the Paying Agent and the Certificate Registrar may treat the person in
whose name any Certificate is registered as the owner of such Certificate and
the Percentage Interest in the Trust Fund evidenced thereby for the purpose of
receiving distributions pursuant to the Agreement and for all other
B-7
<PAGE>
purposes whatsoever, and neither the Servicer nor the Trustee, the Paying Agent
and the Certificate Registrar will be affected by notice to the contrary.
The Agreement may be amended from time to time by the Depositor, the
Servicer, the Trustee and the Fiscal Agent, without the consent of any of the
Certificateholders, (i) to cure any ambiguity, (ii) to correct or supplement any
provisions therein which may be inconsistent with any other provisions therein,
(iii) to maintain the qualification of the Trust REMIC as a REMIC or to maintain
the qualification of the Grantor Trust as a Grantor Trust (under the Grantor
Trust Provisions), or (iv) to make any other provisions with respect to matters
or questions arising under the Agreement, provided that such action shall not
adversely affect in any material respect the interests of any Holder without the
consent of each Holder adversely affected thereby in the case of an amendment
pursuant to (i), (ii) or (iv) or adversely affect the status of the Trust REMIC
as a REMIC or the status of the Grantor Trust as a Grantor Trust (under the
Grantor Trust Provisions).
The Agreement may also be amended from time to time by the
Depositor, the Servicer, the Trustee and the Fiscal Agent, with the consent of
Certificateholders evidencing, in the aggregate, not less than 66-2/3% of the
Voting Rights of the Certificates, for the purpose of adding any provisions to
or changing in any manner or eliminating any of the provisions of the Agreement
or of modifying in any manner the rights of Certificateholders; provided,
however, that no such amendment shall (i) reduce in any manner the amount of,
delay the timing of, or change the manner in which payments received on or with
respect to the Deed of Trust Loan are required to be distributed in respect of
any Certificate without the consent of the Holder of such Certificate: (ii)
adversely affect in any material respect the interests of the Holders of a
Class of the Certificates in a manner other than as set forth in (i) above
without the consent of the Certificateholders of such Class evidencing, in
the aggregate, not less than 100% of the Voting Rights of the Certificates of
such Class, (iii) reduce the aforesaid percentages of the Certificates, the
Holders of which are required to consent to any such amendment without the
consent of 100% of the Certificateholders of the affected Class, (iv) alter
B-8
<PAGE>
the obligations of the Servicer to make an Advance or alter the servicing
standards set forth in the Agreement, or (v) amend any provisions of the
Agreement relating to the administration of the Trust REMIC as a REMIC without
the consent of the Class R Certificateholders.
The respective obligations and responsibilities of the Servicer, the
Depositor, the Paying Agent, the Trustee and the Fiscal Agent created under the
Agreement (other than the obligation of the Trustee or its designated paying
agent to make certain payments to Certificateholders after the Final
Distribution Date) shall terminate upon the last action required to be taken by
the Trustee or its designated paying agent on the Final Distribution Date
pursuant to Article X of the Agreement upon the later of (i) the final payment
on the Deed of Trust Loan or (ii) the liquidation of the Foreclosed Property;
provided, however, that in no event shall the trust created pursuant to the
terms of the Agreement continue beyond the expiration of twenty-one years from
the death of the last survivor of the descendants of Joseph P. Kennedy, the late
ambassador of the United States to the Court of St. James's, living on the date
hereof.
THIS CERTIFICATE AND THE AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH, AND BE GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK.
Unless the certificate of authentication hereon has been executed by
the Trustee or by its designated Authenticating Agent, by manual signature, this
Certificate shall not be entitled to any benefit under the Agreement or be valid
for any purpose.
B-9
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Class B Certificate
to be duly executed.
LASALLE NATIONAL BANK, as
Trustee
By: ______________________________
Name:
Title:
Dated: _________ ___, 199__
CERTIFICATE OF AUTHENTICATION
THIS IS ONE OF THE CLASS B CERTIFICATES REFERRED TO IN THE
WITHIN-MENTIONED AGREEMENT.
LASALLE NATIONAL BANK,
as Authenticating Agent
By: ______________________________
Authorized Signatory
B-10
<PAGE>
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto
________________________________________________________________________________
(Please Print or Typewrite Name and Address of Assignee)
________________________________________________________________________________
the undivided interest in the Trust Fund evidenced by the within Certificate,
and all rights thereunder, and hereby authorizes the transfer of registration of
such interest to the assignee on the Certificate Register.
I further direct the Trustee to issue a new Certificate of the same Class and of
a like Certificate Principal Balance and undivided interest in the Trust Fund to
the above-named assignee and to deliver such certificate to the following
address
________________________________________________________________________________
Date: _____________________ ______________________________________
Signature by or on behalf of
assignor (signature must be
signed as registered)
(PLEASE INSERT SOCIAL SECURITY* OR U.S. TAXPAYER IDENTIFICATION
NUMBER OF ASSIGNEE)
___________________________
___________________________
(Signature Guaranteed)
B-11
<PAGE>
(*This information, which is voluntary, is being requested to ensure that the
assignee will not be subject to backup withholding under Section 3406 of the
Code.)
B-12
<PAGE>
EXHIBIT C
FORM OF CLASS C CERTIFICATE
THIS CERTIFICATE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION
EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND THIS CERTIFICATE MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS CERTIFICATE IS HEREBY
NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF
SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.
THE HOLDER OF THIS CERTIFICATE AGREES FOR THE BENEFIT OF THE DEPOSITOR THAT (i)
SUCH CERTIFICATE MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (a)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (b) TO
A PERSON WHO THE SELLER REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER"
(AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, OR (c) PURSUANT TO AN EXEMPTION FROM REGISTRATION
UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), IN EACH
CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION, (ii) THE HOLDER WILL, AND
EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THIS
CERTIFICATE OF THE RESALE RESTRICTIONS SET FORTH IN (i) ABOVE, AND (iii) THE
CERTIFICATE REGISTRAR FOR THE OFFERED CERTIFICATES WILL NOT BE REQUIRED TO
ACCEPT THIS CERTIFICATE FOR REGISTRATION OF TRANSFER, EXCEPT UPON PRESENTATION
OF EVIDENCE SATISFACTORY TO THE TRUSTEE AND THE CERTIFICATE REGISTRAR THAT THE
RESTRICTIONS ON TRANSFER SET FORTH IN (i) ABOVE HAVE BEEN COMPLIED WITH.
EITHER (i) THE HOLDER OF THIS CERTIFICATE IS NOT AN EMPLOYEE BENEFIT OR OTHER
PLAN THAT IS SUBJECT TO THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS
AMENDED ("ERISA"), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED (THE "CODE"), AND THE FUNDS APPLIED TO THE PURCHASE OF THIS CERTIFICATE
DO NOT INCLUDE THE "PLAN ASSETS" OF ANY SUCH PLAN OR
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<PAGE>
(ii) THE PURCHASE OF THIS CERTIFICATE BY THE HOLDER WILL NOT CONSTITUTE OR
RESULT IN A NON-EXEMPT PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR
SECTION 4975 OF THE CODE.
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN POTOMAC
GURNEE FINANCE CORP., THE SERVICER, THE TRUSTEE OR THE FISCAL AGENT REFERRED TO
BELOW OR ANY OF THEIR AFFILIATES. NEITHER THIS CERTIFICATE NOR THE UNDERLYING
MORTGAGE LOAN IS GUARANTEED OR INSURED BY POTOMAC GURNEE FINANCE CORP. OR BY ANY
OF ITS AFFILIATES OR BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY OR BY ANY
OTHER PERSON OR ENTITY.
THIS CERTIFICATE IS SUBORDINATE TO THE CLASS A AND CLASS B CERTIFICATES TO THE
EXTENT DESCRIBED IN THE TRUST AND SERVICING AGREEMENT REFERRED TO HEREIN.
[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUSTEE OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS BOTH
(i) A BENEFICIAL INTEREST IN A "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE
INVESTMENT CONDUIT" AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G
AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") AND (ii)
A BENEFICIAL OWNERSHIP INTEREST IN A "GRANTOR TRUST" (AS THAT TERM IS DEFINED IN
SUBPART E, PART 1 OF SUBCHAPTER J, CHAPTER 1 OF SUBTITLE A OF THE CODE).
POTOMAC GURNEE FINANCE CORP.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
POTOMAC GURNEE FINANCE CORP., as Depositor
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<PAGE>
evidencing a percentage beneficial interest in all distributions allocable
to the Class C Certificates with respect to a Trust Fund consisting
primarily of a single mortgage loan with an initial principal balance of
approximately $284,000,000 (the "Mortgage Loan"), secured by two
cross-collateralized, cross-defaulted first priority liens on
substantially all of the properties known as Potomac Mills, a
value-oriented, super-regional shopping mall located in Dale City,
Virginia and Gurnee Mills, a value-oriented, super-regional shopping mall
located in Gurnee, Illinois.
C-3
<PAGE>
CERTIFICATE NUMBER: INITIAL PRINCIPAL BALANCE
OF THIS CERTIFICATE:
$________________________
DATE OF TRUST AND INITIAL CLASS C CERTIFICATE
SERVICING AGREEMENT: PRINCIPAL BALANCE:
December 1, 1996 $15,000,000
FIRST DISTRIBUTION DATE: CUSIP NUMBER: 737688 AC 5
January 21, 1997
THIS CERTIFIES THAT [CEDE & CO.] is the registered owner of a
Percentage Interest evidenced by this Certificate (obtained by dividing the
denomination of this Certificate by the aggregate of the denominations of all
Class C Certificates) in certain monthly distributions with respect to a Trust
Fund consisting primarily of the Mortgage Loan deposited by Potomac Gurnee
Finance Corp. (the "Depositor"). The Trust Fund was created pursuant to a Trust
and Servicing Agreement, dated as specified above (the "Agreement"), among the
Depositor, AMRESCO Management, Inc., as servicer (the "Servicer"), LaSalle
National Bank, as trustee (the "Trustee"), and ABN AMRO Bank N.V., as fiscal
agent (the "Fiscal Agent"), a summary of certain of the pertinent provisions of
which is set forth below. To the extent not defined herein, the capitalized
terms used herein have the meanings assigned to them in the Agreement.
This Certificate is one of a duly authorized issue of
Certificates, designated as Potomac Gurnee Finance Corp., Commercial Deed of
Trust Pass-Through Certificates, Class A (the "Class A Certificates"), Class
B (the "Class B Certificates"), Class C (the "Class C Certificates"), Class D
(the "Class D Certificates") and Class R (the "Class R Certificates" and
together with the Class A, Class B, Class C and Class D Certificates, the
"Certificates"), and is issued under and is subject to the terms, provisions
and conditions of the Agreement, to which Agreement the Holder of this
Certificate by virtue of the acceptance hereof assents and by which such
Holder is bound. The Class R Certificates are subordinate to each Class of
Regular Certificates in right of payment, the Class D Certificates are
subordinate to the Class C, Class B and Class A
C-4
<PAGE>
Certificates in right of payment, the Class C Certificates are subordinate to
the Class B and Class A Certificates in right of payment and the Class B
Certificates are subordinate to the Class A Certificates in right of payment,
each to the extent described in the Agreement.
During each Interest Accrual Period until the Balloon Anticipated
Repayment Date, interest on the Class C Certificate will accrue at a rate per
annum (the "Class C Certificate Rate") equal to 7.2170%. During each Interest
Accrual Period after the Balloon Anticipated Repayment Date, interest on the
Class C Certificate will accrue at a rate per annum (the "Class C Adjusted
Certificate Rate") equal to 9.2170%. Interest on the Class C Certificates will
be computed for each Interest Accrual Period on the basis of a year of 360 days
composed of twelve 30-day months. Pursuant to the terms of the Agreement, the
Trustee or its designated paying agent will distribute from funds in the
Certificate Account on the 20th day of each month or, if such 20th day is not a
Business Day, the first Business Day immediately following (the "Distribution
Date"), commencing on January 21, 1997, to the Person in whose name this
Certificate is registered at the close of business on the last Business Day of
the calendar month immediately preceding the month in which such Distribution
Date occurs (the "Record Date"), payments of principal and interest on this
Certificate in the amounts and in the priorities set forth in the Agreement for
such Distribution Date.
Upon the occurrence and during the continuance of a Mortgage
Loan Event of Default, the rate of interest to be paid on the entire
principal balance of each Component of the Mortgage Loan will be
increased by 4% per annum in excess of the interest rate on such Component at
the time of such Mortgage Loan Event of Default (such excess interest,
"Default Rate Interest"), until such Mortgage Loan Event of Default has
been cured, by payment or otherwise. Default Rate Interest paid on the Deed
of Trust Loan, net of amounts thereof applied by the Servicer to reimburse
interest on P&I Advances, will be passed through on the Class C Certificates
in the manner, and to the extent, provided in the Agreement but will not be
payable on such Certificates until the principal balance of each Class of
Regular Certificates has been reduced to zero.
C-5
<PAGE>
Optional prepayments of principal with respect to the C Component
of the Mortgage Note are not permitted in whole or in part for the first
three years of the Mortgage Loan term. Thereafter, subject to certain
conditions described in the Agreement, optional prepayments of principal of
the Mortgage Loan are permitted in whole or in part, provided that any
such prepayment made prior to the date that is six months prior to the
Balloon Anticipated Repayment Date is accompanied by a Prepayment Premium
equal to the greater of (x) a Yield Maintenance Premium (as described in the
Agreement) and (y) one percent (1%) of that portion of the Mortgage Loan
principal balance to be prepaid. Such optional payments of principal and
premium, if any, will be distributed on the next succeeding Distribution Date
in the manner set forth in the Agreement. Prepayment Premiums are also
payable in the case of all other prepayments on the Mortgage Loan,
whether voluntary or involuntary, except for prepayments from Loss Proceeds
required by the terms of the Mortgages and except for prepayments made on or
after the date that is six months prior to the Balloon Anticipated Repayment
Date.
Distributions on this Certificate will be made on each Distribution
Date by the Trustee or its designated paying agent either by check mailed to the
address of the Holder hereof, as such name and address shall appear on the
Certificate Register, or, upon written request, containing all necessary wiring
instructions, by a Holder hereof holding in excess of $5,000,000 in initial
Certificate Principal Balance, delivered at least five Business Days prior to
the related Record Date, by wire transfer in immediately available funds to the
account of such Holder maintained at a bank in the United States, or if this
Certificate is held by a Clearing Agency, by wire transfer in immediately
available funds to a bank account maintained in the United States, or by such
other means of payment as the Holder hereof and the Paying Agent shall agree
upon. Notwithstanding the above, the final distribution on this Certificate will
be made after due notice by the Trustee of the pendency of such distribution and
only upon presentation and surrender of this Certificate at the office or agency
appointed by the Trustee for that purpose and specified in such notice of final
distribution.
C-6
<PAGE>
The Depositor intends to cause an election to be made to treat
certain assets in the Trust Fund as a real estate mortgage investment conduit
("REMIC"). The Class A Certificates, Class B Certificates, Class C Certificates
and Class D Certificates will constitute, in part, beneficial interests in the
"regular interests" in the REMIC and the Class R Certificate will constitute the
"residual interest" in the REMIC. The Class A Certificates, Class B
Certificates, Class C Certificates and Class D Certificates will also constitute
beneficial interests in a grantor trust consisting of that part of the Trust
Fund representing the Default Rate Interest and the Default Interest Account.
Each Holder of this Certificate, by acceptance hereof, and each beneficial owner
of this Certificate, agrees to treat, and to take no action inconsistent with
the treatment of, this Certificate in accordance with this paragraph for
purposes of federal income taxes, state and local income and franchise taxes and
other taxes imposed on or measured by income.
The Trustee will cause to be kept at the Corporate Trust Office or
at the office of its designated agent, a Certificate Register in which, subject
to such reasonable regulations as it may prescribe, the Trustee will provide for
the registration of the Certificates and of transfers and exchanges of the
Certificates. Upon surrender for registration of transfer of any Certificate at
any office or agency of the Trustee maintained for such purposes, the Trustee or
a designated Authenticating Agent will, subject to the limitations set forth in
the Agreement, authenticate and deliver, in the name of the designated
transferee or transferees, a Certificate of a like Class and aggregate
Percentage Interest and dated the date of authentication.
No service charge will be made for any transfer or exchange of the
Certificate, but the Trustee or its designated agent may require payment of a
sum sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer or exchange of the Certificate. The Servicer, the
Trustee, the Paying Agent and the Certificate Registrar may treat the person in
whose name any Certificate is registered as the owner of such Certificate and
the Percentage Interest in the Trust Fund evidenced thereby for the purpose of
receiving distributions pursuant to the Agreement and for all other
C-7
<PAGE>
purposes whatsoever, and neither the Servicer nor the Trustee, the Paying Agent
and the Certificate Registrar will be affected by notice to the contrary.
The Agreement may be amended from time to time by the Depositor, the
Servicer, the Trustee and the Fiscal Agent, without the consent of any of the
Certificateholders, (i) to cure any ambiguity, (ii) to correct or supplement any
provisions therein which may be inconsistent with any other provisions therein,
(iii) to maintain the qualification of the Trust REMIC as a REMIC or to maintain
the qualification of the Grantor Trust as a Grantor Trust (under the Grantor
Trust Provisions), or (iv) to make any other provisions with respect to matters
or questions arising under the Agreement, provided that such action shall not
adversely affect in any material respect the interests of any Holder without the
consent of each Holder adversely affected thereby in the case of an amendment
pursuant to (i), (ii) or (iv) or adversely affect the status of the Trust REMIC
as a REMIC or the status of the Grantor Trust as a Grantor Trust (under the
Grantor Trust Provisions).
The Agreement may also be amended from time to time by the
Depositor, the Servicer, the Trustee and the Fiscal Agent with the consent of
Certificateholders evidencing, in the aggregate, not less than 66-2/3% of the
Voting Rights of the Certificates, for the purpose of adding any provisions
to or changing in any manner or eliminating any of the provisions of the
Agreement or of modifying in any manner the rights of Certificateholders;
provided, however, that no such amendment shall (i) reduce in any manner the
amount of, delay the timing of, or change the manner in which payments
received on or with respect to the Mortgage Loan are required to be
distributed in respect of any Certificate without the consent of the Holder
of such Certificate; (ii) adversely affect in any material respect the
interests of the Holders of a Class of the Certificates in a manner other
than as set forth in (i) above without the consent of the Certificateholders
of such Class evidencing, in the aggregate, not less than 100% of the Voting
Rights of the Certificates of such Class, (iii) reduce the aforesaid
percentages of the Certificates, the Holders of which are required to consent
to any such amendment without the consent of 100% of the Certificateholders
of the affected Class, (iv) alter
C-8
<PAGE>
the obligations of the Servicer to make an Advance or alter the servicing
standards set forth in the Agreement, or (v) amend any provisions of the
Agreement relating to the administration of the Trust REMIC as a REMIC without
the consent of the Class R Certificateholders.
The respective obligations and responsibilities of the Servicer, the
Depositor, the Paying Agent, the Trustee and the Fiscal Agent created under the
Agreement (other than the obligation of the Trustee or its designated paying
agent to make certain payments to Certificateholders after the Final
Distribution Date) shall terminate upon the last action required to be taken by
the Trustee or its designated paying agent on the Final Distribution Date
pursuant to Article X of the Agreement upon the later of (ii) the final payment
on the Mortgage Loan or (ii) the liquidation of the Foreclosed Property;
provided, however, that in no event shall the trust created pursuant to the
terms of the Agreement continue beyond the expiration of twenty-one years from
the death of the last survivor of the descendants of Joseph P. Kennedy, the late
ambassador of the United States to the Court of St. James's, living on the date
hereof.
THIS CERTIFICATE AND THE AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH, AND BE GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK.
Unless the certificate of authentication hereon has been executed by
the Trustee or by its designated Authenticating Agent, by manual signature, this
Certificate shall not be entitled to any benefit under the Agreement or be valid
for any purpose.
C-9
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Class C Certificate
to be duly executed.
LASALLE NATIONAL BANK, as
Trustee
By:_______________________________
Name:
Title:
Dated _________ ___, 199__
CERTIFICATE OF AUTHENTICATION
THIS IS ONE OF THE CLASS C CERTIFICATES REFERRED TO IN THE
WITHIN-MENTIONED AGREEMENT.
LASALLE NATIONAL BANK,
as Authenticating Agent
By: _________________________
Authorized Signatory
C-10
<PAGE>
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns
and transfers unto
________________________________________________________________________________
(Please Print or Typewrite Name and Address of Assignee)
________________________________________________________________________________
the undivided interest in the Trust Fund evidenced by the within Certificate,
and all rights thereunder, and hereby authorizes the transfer of registration of
such interest to the assignee on the Certificate Register.
I further direct the Trustee to issue a new Certificate of the same Class and of
alike Certificate Principal Balance and undivided interest in the Trust Fund to
the above-named assignee and to deliver such certificate to the following
address
________________________________________________________________________________
Date: _____________________ ______________________________________
Signature by or on behalf of
assignor (signature must be
signed as registered)
(PLEASE INSERT SOCIAL SECURITY* OR U.S. TAXPAYER IDENTIFICATION
NUMBER OF ASSIGNEE)
______________________________
______________________________
(Signature Guaranteed)
C-11
<PAGE>
(*This information, which is voluntary, is being requested to ensure that the
assignee will not be subject to backup withholding under Section 3406 of the
Code.)
C-12
<PAGE>
EXHIBIT D
FORM OF CLASS D CERTIFICATE
THIS CERTIFICATE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION
EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND THIS CERTIFICATE MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS CERTIFICATE IS HEREBY
NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF
SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.
THE HOLDER OF THIS CERTIFICATE AGREES FOR THE BENEFIT OF THE DEPOSITOR THAT (i)
SUCH CERTIFICATE MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (a)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (b) TO
A PERSON WHO THE SELLER REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER"
(AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, OR (c) PURSUANT TO AN EXEMPTION FROM REGISTRATION
UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), IN EACH
CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION, (ii) THE HOLDER WILL, AND
EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THIS
CERTIFICATE OF THE RESALE RESTRICTIONS SET FORTH IN (i) ABOVE, AND (iii) THE
CERTIFICATE REGISTRAR FOR THE OFFERED CERTIFICATES WILL NOT BE REQUIRED TO
ACCEPT THIS CERTIFICATE FOR REGISTRATION OF TRANSFER, EXCEPT UPON PRESENTATION
OF EVIDENCE SATISFACTORY TO THE TRUSTEE AND THE CERTIFICATE REGISTRAR THAT THE
RESTRICTIONS ON TRANSFER SET FORTH IN (i) ABOVE HAVE BEEN COMPLIED WITH.
EITHER (i) THE HOLDER OF THIS CERTIFICATE IS NOT AN EMPLOYEE BENEFIT OR OTHER
PLAN THAT IS SUBJECT TO THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS
AMENDED ("ERISA"), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED (THE "CODE"), AND THE FUNDS APPLIED TO THE PURCHASE OF THIS CERTIFICATE
DO NOT INCLUDE THE "PLAN ASSETS" OF ANY SUCH PLAN OR
D-1
<PAGE>
(ii) THE PURCHASE OF THIS CERTIFICATE BY THE HOLDER WILL NOT CONSTITUTE OR
RESULT IN A NON-EXEMPT PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR
SECTION 4975 OF THE CODE.
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN POTOMAC
GURNEE FINANCE CORP., THE SERVICER, THE TRUSTEE OR THE FISCAL AGENT REFERRED TO
BELOW OR ANY OF THEIR AFFILIATES. NEITHER THIS CERTIFICATE NOR THE UNDERLYING
MORTGAGE LOAN IS GUARANTEED OR INSURED BY POTOMAC GURNEE FINANCE CORP. OR BY ANY
OF ITS AFFILIATES OR BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY OR BY ANY
OTHER PERSON OR ENTITY.
UNLESS THIS CERTIFICATE IS SUBORDINATE TO THE CLASS A, CLASS B AND CLASS C
CERTIFICATES TO THE EXTENT DESCRIBED IN THE TRUST AND SERVICING AGREEMENT
REFERRED TO HEREIN.
[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUSTEE OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS BOTH
(i) A BENEFICIAL INTEREST IN A "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE
INVESTMENT CONDUIT" AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G
AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") AND (ii)
A BENEFICIAL OWNERSHIP INTEREST IN A "GRANTOR TRUST" (AS THAT TERM IS DEFINED IN
SUBPART E, PART 1 OF SUBCHAPTER J, CHAPTER 1 OF SUBTITLE A OF THE CODE).
POTOMAC GURNEE FINANCE CORP.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
POTOMAC GURNEE FINANCE CORP., as Depositor
D-2
<PAGE>
evidencing a percentage beneficial interest in all distributions allocable
to the Class D Certificates with respect to a Trust Fund consisting
primarily of a single mortgage loan with an initial principal balance of
approximately $284,000,000 (the "Mortgage Loan"), secured by two
cross-collateralized, cross-defaulted first priority liens on
substantially all of the properties known as Potomac Mills, a
value-oriented, super-regional shopping mall located in Dale City,
Virginia and Gurnee Mills, a value-oriented, super-regional shopping mall
located in Gurnee, Illinois.
D-3
<PAGE>
CERTIFICATE NUMBER: INITIAL PRINCIPAL BALANCE
D-1 OF THIS CERTIFICATE:
$30,000,000
DATE OF TRUST AND INITIAL CLASS D CERTIFICATE
SERVICING AGREEMENT: PRINCIPAL BALANCE:
December 1, 1996 $30,000,000
FIRST DISTRIBUTION DATE: CUSIP NUMBER: 737688 AD 3
January 21, 1997
THIS CERTIFIES THAT [CEDE & CO.] is the registered owner of a
Percentage Interest evidenced by this Certificate (obtained by dividing the
denomination of this Certificate by the aggregate of the denominations of all
Class D Certificates) in certain monthly distributions with respect to a Trust
Fund consisting primarily of the Mortgage Loan deposited by Potomac Gurnee
Finance Corp. (the "Depositor"). The Trust Fund was created pursuant to a Trust
and Servicing Agreement, dated as specified above (the "Agreement"), among the
Depositor, AMRESCO Management, Inc., as servicer (the "Servicer"), LaSalle
National Bank, as trustee (the "Trustee"), and ABN AMRO Bank N.V., as fiscal
agent (the "Fiscal Agent"), a summary of certain of the pertinent provisions of
which is set forth below. To the extent not defined herein, the capitalized
terms used herein have the meanings assigned to them in the Agreement.
This Certificate is one of a duly authorized issue of
Certificates, designated as Potomac Gurnee Finance Corp., Commercial Deed of
Trust Pass-Through Certificates, Class A (the "Class A Certificates"), Class
B (the "Class B Certificates"), Class C (the "Class C Certificates"), Class D
(the "Class D Certificates") and Class R (the "Class R Certificates" and
together with the Class A, Class B, Class C and Class D Certificates, the
"Certificates"), and is issued under and is subject to the terms, provisions
and conditions of the Agreement, to which Agreement the Holder of this
Certificate by virtue of the acceptance hereof assents and by which such
Holder is bound. The Class R Certificates are subordinate to each Class of
Regular Certificates in right of payment, the Class D Certificates are
subordinate to the Class C, Class B and Class A Certificates in right of
payment, the Class C Certificates are
D-4
<PAGE>
subordinate to the Class B and Class A Certificates in right of payment and the
Class B Certificates are subordinate to the Class A Certificates in right of
payment, each to the extent described in the Agreement.
During each Interest Accrual Period until the Balloon Anticipated
Repayment Date, interest on the Class D Certificate will accrue at a rate per
annum (the "Class D Certificate Rate") equal to 7.6830%. During each Interest
Accrual Period after the Balloon Anticipated Repayment Date, interest on the
Class D Certificate will accrue at a rate per annum (the "Class D Adjusted
Certificate Rate") equal to 9.6830%. Interest on the Class D Certificates will
be computed for each Interest Accrual Period on the basis of a year of 360 days
composed of twelve 30-day months. Pursuant to the terms of the Agreement, the
Trustee or its designated paying agent will distribute from funds in the
Certificate Account on the 20th day of each month or, if such 20th day is not a
Business Day, the first Business Day immediately following (the "Distribution
Date"), commencing on January 21, 1997, to the Person in whose name this
Certificate is registered at the close of business on the last Business Day of
the calendar month immediately preceding the month in which such Distribution
Date occurs (the "Record Date"), payments of principal and interest on this
Certificate in the amounts and in the priorities set forth in the Agreement for
such Distribution Date.
Upon the occurrence and during the continuance of a Mortgage
Loan Event of Default, the rate of interest to be paid on the entire
principal balance of each Component of the Mortgage Loan will be
increased by 4% per annum in excess of the interest rate on such Component at
the time of such Mortgage Loan Event of Default (such excess interest,
"Default Rate Interest"), until such Mortgage Loan Event of Default has
been cured, by payment or otherwise. Default Rate Interest paid on the Deed
of Trust Loan, net of amounts thereof applied by the Servicer to reimburse
interest on P&I Advances, will be passed through on the Class D Certificates
in the manner, and to the extent, provided in the Agreement but will not be
payable on such Certificates until the principal balance of each Class of
Regular Certificates has been reduced to zero.
D-5
<PAGE>
Optional prepayments of principal with respect to the D Component
of the Mortgage Note are not permitted in whole or in part for the first
three years of the Mortgage Loan term. Thereafter, subject to certain
conditions described in the Agreement, optional prepayments of principal of
the Mortgage Loan are permitted in whole or in part, provided that any
such prepayment made prior to the date that is six months prior to the
Balloon Anticipated Repayment Date is accompanied by a Prepayment Premium
equal to the greater of (x) a Yield Maintenance Premium (as described in the
Agreement) and (y) one percent (1%) of that portion of the Mortgage Loan
principal balance to be prepaid. Such optional payments of principal and
premium, if any, will be distributed on the next succeeding Distribution Date
in the manner set forth in the Agreement. Prepayment Premiums are also
payable in the case of all other prepayments on the Mortgage Loan,
whether voluntary or involuntary, except for prepayments from Loss Proceeds
required by the terms of the Mortgages and except for prepayments made on or
after the date that is six months prior to the Balloon Anticipated Repayment
Date.
Distributions on this Certificate will be made on each Distribution
Date by the Trustee or its designated paying agent either by check mailed to the
address of the Holder hereof, as such name and address shall appear on the
Certificate Register, or, upon written request, containing all necessary wiring
instructions, by a Holder hereof holding in excess of $5,000,000 in initial
Certificate Principal Balance, delivered at least five Business Days prior to
the related Record Date, by wire transfer in immediately available funds to the
account of such Holder maintained at a bank in the United States, or if this
Certificate is held by a Clearing Agency, by wire transfer in immediately
available funds to a bank account maintained in the United States, or by such
other means of payment as the Holder hereof and the Paying Agent shall agree
upon. Notwithstanding the above, the final distribution on this Certificate will
be made after due notice by the Trustee of the pendency of such distribution and
only upon presentation and surrender of this Certificate at the office or agency
appointed by the Trustee for that purpose and specified in such notice of final
distribution.
The Depositor intends to cause an election to be made to treat
certain assets in the Trust Fund as a real estate
D-6
<PAGE>
mortgage investment conduit ("REMIC"). The Class A Certificates, Class B
Certificates, Class C Certificates and Class D Certificates will constitute, in
part, beneficial interests in the "regular interests" in the REMIC and the Class
R Certificate will constitute the "residual interest" in the REMIC. The Class A
Certificates, Class B Certificates, Class C Certificates and Class D
Certificates will also constitute beneficial interests in a grantor trust
consisting of that part of the Trust Fund representing the Default Rate Interest
and the Default Interest Account. Each Holder of this Certificate, by acceptance
hereof, and each beneficial owner of this Certificate, agrees to treat, and to
take no action inconsistent with the treatment of, this Certificate in
accordance with this paragraph for purposes of federal income taxes, state and
local income and franchise taxes and other taxes imposed on or measured by
income.
The Trustee will cause to be kept at the Corporate Trust Office or
at the office of its designated agent, a Certificate Register in which, subject
to such reasonable regulations as it may prescribe, the Trustee will provide for
the registration of the Certificates and of transfers and exchanges of the
Certificates. Upon surrender for registration of transfer of any Certificate at
any office or agency of the Trustee maintained for such purposes, the Trustee or
a designated Authenticating Agent will, subject to the limitations set forth in
the Agreement, authenticate and deliver, in the name of the designated
transferee or transferees, a Certificate of a like Class and aggregate
Percentage Interest and dated the date of authentication.
No service charge will be made for any transfer or exchange of the
Certificate, but the Trustee or its designated agent may require payment of a
sum sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer or exchange of the Certificate. The Servicer, the
Trustee, the Paying Agent and the Certificate Registrar may treat the person in
whose name any Certificate is registered as the owner of such Certificate and
the Percentage Interest in the Trust Fund evidenced thereby for the purpose of
receiving distributions pursuant to the Agreement and for all other purposes
whatsoever, and neither the Servicer nor the Trustee,
D-7
<PAGE>
the Paying Agent and the Certificate Registrar will be affected by notice to the
contrary.
The Agreement may be amended from time to time by the Depositor, the
Servicer, the Trustee and the Fiscal Agent, without the consent of any of the
Certificateholders, (i) to cure any ambiguity, (ii) to correct or supplement any
provisions therein which may be inconsistent with any other provisions therein,
(iii) to maintain the qualification of the Trust REMIC as a REMIC or to maintain
the qualification of the Grantor Trust as a Grantor Trust (under the Grantor
Trust Provisions), or (iv) to make any other provisions with respect to matters
or questions arising under the Agreement, provided that such action shall not
adversely affect in any material respect the interests of any Holder without the
consent of each Holder adversely affected thereby in the case of an amendment
pursuant to (i), (ii) or (iv) or adversely affect the status of the Trust REMIC
as a REMIC or the status of the Grantor Trust as a Grantor Trust (under the
Grantor Trust Provisions).
The Agreement may also be amended from time to time by the
Depositor, the Servicer, the Trustee and the Fiscal Agent with the consent of
Certificateholders evidencing, in the aggregate, not less than 66-2/3% of the
Voting Rights of the Certificates, for the purpose of adding any provisions
to or changing in any manner or eliminating any of the provisions of the
Agreement or of modifying in any manner the rights of Certificateholders;
provided, however, that no such amendment shall (i) reduce in any manner the
amount of, delay the timing of, or change the manner in which payments
received on or with respect to the Mortgage Loan are required to be
distributed in respect of any Certificate without the consent of the Holder
of such Certificate; (ii) adversely affect in any material respect the
interests of the Holders of a Class of the Certificates in a manner other
than as set forth in (i) above without the consent of the Certificateholders
of such Class evidencing, in the aggregate, not less than 100% of the Voting
Rights of the Certificates of such Class, (iii) reduce the aforesaid
percentages of the Certificates, the Holders of which are required to consent
to any such amendment without the consent of 100% of the Certificateholders
of the affected Class, (iv) alter the obligations of the Servicer to make an
Advance or alter the
D-8
<PAGE>
servicing standards set forth in the Agreement, or (v) amend any provisions of
the Agreement relating to the administration of the Trust REMIC as a REMIC
without the consent of the Class R Certificateholders.
The respective obligations and responsibilities of the Servicer, the
Depositor, the Paying Agent, the Trustee and the Fiscal Agent created under the
Agreement (other than the obligation of the Trustee or its designated paying
agent to make certain payments to Certificateholders after the Final
Distribution Date) shall terminate upon the last action required to be taken by
the Trustee or its designated paying agent on the Final Distribution Date
pursuant to Article X of the Agreement upon the later of (i) the final payment
on the Mortgage Loan or (ii) the liquidation of the Foreclosed Property;
provided, however, that in no event shall the trust created pursuant to the
terms of the Agreement continue beyond the expiration of twenty-one years from
the death of the last survivor of the descendants of Joseph P. Kennedy, the late
ambassador of the United States to the Court of St. James's, living on the date
hereof.
THIS CERTIFICATE AND THE AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH, AND BE GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK.
Unless the certificate of authentication hereon has been executed by
the Trustee or by its designated Authenticating Agent, by manual signature, this
Certificate shall not be entitled to any benefit under the Agreement or be valid
for any purpose.
D-9
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Class D Certificate
to be duly executed.
LASALLE NATIONAL BANK, as
Trustee
By:______________________________
Name:
Title:
Dated: ___________ ___, 199__
CERTIFICATE OF AUTHENTICATION
THIS IS ONE OF THE CLASS D CERTIFICATES REFERRED TO IN THE
WITHIN-MENTIONED AGREEMENT.
LASALLE NATIONAL BANK, as
Authenticating Agent
By: _________________________
Authorized Signatory
D-10
<PAGE>
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto
________________________________________________________________________________
(Please Print or Typewrite Name and Address of Assignee)
________________________________________________________________________________
the undivided interest in the Trust Fund evidenced by the within Certificate,
and all rights thereunder, and hereby authorizes the transfer of registration of
such interest to the assignee on the Certificate Register.
I further direct the Trustee to issue a new Certificate of the same Class and of
a like Certificate Principal Balance and undivided interest in the Trust Fund to
the above-named assignee and to deliver such certificate to the following
address
________________________________________________________________________________
Date:________________________ ______________________________________
Signature by or on behalf of
assignor (signature must be
signed as registered)
(PLEASE INSERT SOCIAL SECURITY* OR U.S. TAXPAYER IDENTIFICATION NUMBER OF
ASSIGNEE)
_____________________________
_____________________________
(Signature Guaranteed)
D-11
<PAGE>
(*This information, which is voluntary, is being requested to ensure that the
assignee will not be subject to backup withholding under Section 3406 of the
Code.)
D-12
<PAGE>
EXHIBIT E
FORM OF CLASS R CERTIFICATE
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN POTOMAC
GURNEE FINANCE CORP., THE SERVICER, THE TRUSTEE OR THE FISCAL AGENT REFERRED TO
BELOW OR ANY OF THEIR AFFILIATES. NEITHER THIS CERTIFICATE NOR THE UNDERLYING
MORTGAGE LOAN IS GUARANTEED OR INSURED BY POTOMAC GURNEE FINANCE CORP. OR BY ANY
OF ITS AFFILIATES OR BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY OR BY ANY
OTHER PERSON OR ENTITY.
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A "RESIDUAL
INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT" AS THOSE TERMS ARE
DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF
1986 (THE "CODE").
THIS CLASS R CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE RESOLD OR
TRANSFERRED UNLESS IT IS REGISTERED PURSUANT TO SUCH ACT OR LAWS OR IS SOLD OR
TRANSFERRED IN TRANSACTIONS WHICH ARE EXEMPT FROM REGISTRATION UNDER SUCH ACT OR
UNDER APPLICABLE STATE LAW AND IS TRANSFERRED IN ACCORDANCE WITH THE PROVISIONS
OF SECTION 5.02 OF THE TRUST AND SERVICING AGREEMENT REFERRED TO HEREIN.
EITHER (i) THE HOLDER OF THIS CERTIFICATE IS NOT AN EMPLOYEE BENEFIT OR OTHER
PLAN THAT IS SUBJECT TO THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS
AMENDED ("ERISA"), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED (THE "CODE"), AND THE FUNDS APPLIED TO THE PURCHASE OF THIS CERTIFICATE
DO NOT INCLUDE THE "PLAN ASSETS" OF ANY SUCH PLAN OR (ii) THE PURCHASE OF THIS
CERTIFICATE BY THE HOLDER WILL NOT CONSTITUTE OR RESULT IN A NON-EXEMPT
PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE.
ANY SALE, TRANSFER OR OTHER DISPOSITION OF THIS CLASS R CERTIFICATE MAY BE MADE
ONLY IF THE PROPOSED TRANSFEREE PROVIDES A TRANSFER AFFIDAVIT TO THE TRUSTEE TO
THE EFFECT THAT (1) SUCH TRANSFEREE AGREES TO BE BOUND BY THE TERMS OF THE
AGREEMENT AND
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ALL RESTRICTIONS SET FORTH ON THE FACE HEREOF, (2) SUCH TRANSFEREE IS NOT EITHER
(A) THE UNITED STATES, ANY STATE OR POLITICAL SUBDIVISION THEREOF, ANY FOREIGN
GOVERNMENT, ANY INTERNATIONAL ORGANIZATION, OR ANY AGENCY OR INSTRUMENTALITY OF
ANY OF THE FOREGOING, (B) ANY ORGANIZATION (OTHER THAN A COOPERATIVE DESCRIBED
IN SECTION 521 OF THE CODE) THAT IS EXEMPT FROM THE TAX IMPOSED BY CHAPTER 1 OF
THE CODE UNLESS SUCH ORGANIZATION IS SUBJECT TO THE TAX IMPOSED BY SECTION 511
OF THE CODE, (C) ANY ORGANIZATION DESCRIBED IN SECTION 1381(a)(2)(C) OF THE CODE
OR (D) ANY OTHER ENTITY DESIGNATED A "DISQUALIFIED ORGANIZATION" BY RELEVANT
LEGISLATION AMENDING THE REMIC PROVISIONS AND IN EFFECT AT OR PROPOSED TO BE
EFFECTIVE AS OF THE TIME OF DETERMINATION (ANY SUCH PERSON DESCRIBED IN THE
FOREGOING CLAUSES (A), (B), (C) OR (D) BEING HEREINAFTER REFERRED TO AS A
"DISQUALIFIED ORGANIZATION"), (3) NO PURPOSE OF SUCH TRANSFER IS TO IMPEDE THE
ASSESSMENT OR COLLECTION OF TAX AND (4) SUCH TRANSFEREE SATISFIES CERTAIN
ADDITIONAL CONDITIONS RELATING TO THE FINANCIAL CONDITION OF SUCH TRANSFEREE.
NOTWITHSTANDING THE REGISTRATION IN THE CERTIFICATE REGISTER OF ANY TRANSFER,
SALE OR OTHER DISPOSITION OF THIS CLASS R CERTIFICATE TO A DISQUALIFIED
ORGANIZATION OR TO ANY OTHER PROHIBITED TRANSFEREE AS PROVIDED IN THE AGREEMENT,
SUCH REGISTRATION SHALL BE DEEMED TO BE OF NO LEGAL FORCE OR EFFECT WHATSOEVER
AND SUCH PERSON SHALL NOT BE DEEMED TO BE A CERTIFICATEHOLDER FOR ANY PURPOSE
HEREUNDER, INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF DISTRIBUTIONS ON THIS
CERTIFICATE. THE HOLDER OF THE CLASS R CERTIFICATE BY ACCEPTANCE OF THIS
CERTIFICATE SHALL BE DEEMED TO HAVE CONSENTED TO THE PROVISIONS OF THIS
PARAGRAPH.
POTOMAC GURNEE FINANCE CORP.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
POTOMAC GURNEE FINANCE CORP., as Depositor
evidencing a percentage beneficial interest in all distributions allocable
to the Class R Certificate with respect to a Trust Fund consisting
primarily of a single mortgage loan with an initial principal balance of
approximately $284,000,000 ("the Deed of Trust Loan"), secured by two
cross-collateralized, cross-defaulted first priority liens on
substantially all of the properties known as
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Potomac Mills, a value-oriented, super-regional shopping mall located in
Dale City, Virginia and Gurnee Mills, a value-oriented, super-regional
shopping mall located in Gurnee, Illinois.
CERTIFICATE NUMBER:
DATE OF TRUST AND
SERVICING AGREEMENT:
December 1, 1996
FIRST DISTRIBUTION DATE:
January 21, 1997
THIS CERTIFIES THAT ________________________________ is the
registered owner of a beneficial interest in certain monthly distributions
with respect to a Deed of Trust Loan (the "Deed of Trust Loan") in an initial
principal balance of $284,000,000 secured by two cross-collateralized,
cross-defaulted first priority liens on substantially all of the properties
known as Potomac Mills, a value-oriented, super-regional shopping mall
located in Dale City, Virginia, and Gurnee Mills, a value-oriented,
super-regional shopping mall located in Gurnee, Illinois. The Trust Fund was
created pursuant to a Trust and Servicing Agreement, dated as specified above
(the "Agreement"), among the Depositor, AMRESCO Management, Inc. as servicer
(the "Servicer"), LaSalle National Bank, as trustee (the "Trustee"), and ABN
AMRO Bank N.V., as fiscal agent (the "Fiscal Agent"), a summary of certain of
the pertinent provisions of which is set forth below. To the extent not
defined herein, the capitalized terms used herein have the meanings assigned
to them in the Agreement.
This Certificate is one of a duly authorized issue of
Certificates, designated as Potomac Gurnee Finance Corp., Commercial Deed of
Trust Pass-Through Certificates, Class A (the "Class A Certificates"), Class
B (the "Class B Certificates"), Class C (the "Class C Certificates"), Class D
(the "Class D Certificates"), and Class R (the "Class R Certificates" and
together with the Class A, Class B, Class C and Class D Certificates, the
"Certificates"), and is issued under and is subject to the terms, provisions
and conditions of the Agreement,
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to which Agreement the Holder of this Certificate by virtue of the acceptance
hereof assents and by which such Holder is bound. The Class R Certificates are
subordinate to each Class of Regular Certificates in right of payment, the Class
D Certificates are subordinate to the Class C, Class B and Class A Certificates
in right of payment, the Class C Certificates are subordinate to the Class B and
Class A Certificates in right of payment and the Class B Certificates are
subordinate to the Class A Certificates in right of payment, each to the extent
described in the Agreement, and subject to the right of the Mortgagors to
designate the Class of Offered Certificates to which Optional Principal Payments
shall be applied.
The Class R Certificate has no interest rate or principal balance.
Pursuant to the terms of the Agreement, the Trustee or its designated paying
agent will distribute from funds in the Certificate Account on the 20th day of
each month or, if such 20th day is not a Business Day, the first Business Day
immediately following (the "Distribution Date"), after the Certificate Principal
Balance of each of the Class A Certificates, Class B Certificates, Class C
Certificates and Class D Certificates have been reduced to zero and the Holders
of each of the Class A Certificates, Class B Certificates, Class C Certificates
and Class D Certificates have received all amounts payable to them under the
Agreement, to the Person in whose name this Certificate is registered at the
close of business on the last Business Day of the calendar month immediately
preceding the month in which such Distribution Date occurs, an amount equal to
the balance, if any, of the Available Distribution Amount for such Distribution
Date.
The final distribution on this Certificate will be made after due
notice by the Trustee or its designated paying agent of the pendency of such
distribution and only upon presentation and surrender of this Certificate at the
office or agency appointed by the Trustee for that purpose and specified in such
notice of final distribution.
The Depositor intends to cause an election to be made to treat
certain assets in the Trust Fund as a real estate mortgage investment conduit
("REMIC"). The Class A Certificates, Class B Certificates, Class C Certificates
and Class D
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Certificates will constitute, in part, beneficial interests in the "regular
interests" in the REMIC and the Class R Certificates will constitute the
"residual interest" in the REMIC.
The Trustee will cause to be kept at the Corporate Trust Office or
at the office of its designated agent, a Certificate Register in which, subject
to such reasonable regulations as it may prescribe, the Trustee will provide for
the registration of the Certificates and of transfers and exchanges of the
Certificates. Upon surrender for registration of transfer of any Certificate at
any office or agency of the Trustee maintained for such purposes, the Trustee or
a designated Authenticating Agent will, subject to the limitations set forth in
the Agreement, authenticate and deliver, in the name of the designated
transferee or transferees, a Certificate of a like Class and aggregate
Percentage Interest and dated the date of authentication.
No service charge will be made for any transfer or exchange of the
Certificate, but the Trustee or its designated agent may require payment of a
sum sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer or exchange of the Certificate. Prior to the due
presentation of a Certificate for registration of transfer, the Depositor, the
Servicer and the Trustee may treat the person in whose name any Certificate is
registered as the owner of such Certificate and the Percentage Interest in the
Trust Fund evidenced thereby for the purpose of receiving distributions pursuant
to the Agreement and for all other purposes whatsoever, and neither the
Depositor, nor the Servicer nor the Trustee will be affected by notice to the
contrary.
No transfer of the Class R Certificate will be made unless such
transfer is exempt from the registration requirements of the Securities Act of
1933, as amended, and any applicable state securities laws or is made pursuant
to an effective registration statement under said Act or laws. The Certificate
Registrar or the Depositor may require an opinion of counsel acceptable to and
in form and substance satisfactory to the Depositor and the Certificate
Registrar that such transfer is exempt (describing the applicable exemption and
the basis therefor) from the registration requirements of the Securities
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<PAGE>
Act of 1933, as amended, and from any applicable securities statute of any
state, and the transferee shall execute an investment letter and an affidavit in
the respective forms described by the Agreement.
The Agreement may be amended from time to time by the Depositor, the
Servicer, the Trustee and the Fiscal Agent, without the consent of any of the
Certificateholders, (i) to cure any ambiguity, (ii) to correct or supplement any
provisions therein which may be inconsistent with any other provisions therein,
(iii) to maintain the qualification of the Trust REMIC as a REMIC or to maintain
the qualification of the Grantor Trust as a Grantor Trust (under the Grantor
Trust Provisions), or (iv) to make any other provisions with respect to matters
or questions arising under the Agreement, provided that such action shall not
adversely affect in any material respect the interests of any Holder without the
consent of each Holder adversely affected thereby in the case of an amendment
pursuant to (i), (ii) or (iv) or adversely affect that status of the Trust REMIC
as a REMIC or the status of the Grantor Trust as a Grantor Trust (under the
Grantor Trust Provisions).
The Agreement may also be amended from time to time by the
Depositor, the Servicer, the Trustee and the Fiscal Agent with the consent of
Certificateholders evidencing, in the aggregate, not less than 66-2/3% of the
Voting Rights of the Certificates, for the purpose of adding any provisions
to or changing in any manner or eliminating any of the provisions of the
Agreement or of modifying in any manner the rights of Certificateholders;
provided, however, that no such amendment shall (i) reduce in any manner the
amount of, delay the timing of, or change the manner in which payments
received on or with respect to the Deed of Trust Loan are required to be
distributed in respect of any Certificate without the consent of the Holder
of such Certificate; (ii) adversely affect in any material respect the
interests of the Holders of a Class of the Certificates in a manner other
than as set forth in (i) above without the consent of the Certificateholders
of such Class evidencing, in the aggregate, not less than 100% of the Voting
Rights of the Certificates of such Class, (iii) reduce the aforesaid
percentages of the Certificates, the Holders of which are required to consent
to any such amendment without the consent of
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100% of the Certificateholders of the affected Class, (iv) alter the obligations
of the Servicer to make an Advance or alter the servicing standards set forth in
the Agreement, or (v) amend any provisions of the Agreement relating to the
administration of the Trust REMIC as a REMIC without the consent of the Class R
Certificateholders.
The respective obligations and responsibilities of the Servicer, the
Depositor, the Paying Agent, the Trustee and the Fiscal Agent created under the
Agreement (other than the obligation of the Trustee or its designated paying
agent to make certain payments to Certificateholders after the Final
Distribution Date) shall terminate upon the last action required to be taken by
the Trustee or its designated paying agent on the Final Distribution Date
pursuant to Article X of the Agreement upon the later of (i) the final payment
on the Deed of Trust Loan or (ii) the liquidation of the Foreclosed Property;
provided, however, that in no event shall the trust created pursuant to the
terms of the Agreement continue beyond the expiration of twenty-one years from
the death of the last survivor of the descendants of Joseph P. Kennedy, the late
ambassador of the United States to the Court of St. James's, living on the date
hereof.
THIS CERTIFICATE AND THE AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH, AND BE GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK.
Unless the certificate of authentication hereon has been executed by
the Trustee or by its designated Authenticating Agent, by manual signature, this
Certificate shall not be entitled to any benefit under the Agreement or be valid
for any purpose.
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<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Class R Certificate
to be duly executed.
LASALLE NATIONAL BANK, as
Trustee
By:___________________________
Name:
Title:
Dated: ____________ ___, 199___
CERTIFICATE OF AUTHENTICATION
THIS IS ONE OF THE CLASS R CERTIFICATES REFERRED TO IN THE
WITHIN-MENTIONED AGREEMENT.
LASALLE NATIONAL BANK, as
Authenticating Agent
By: _________________________
Authorized Signatory
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<PAGE>
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto
________________________________________________________________________________
(Please Print or Typewrite Name and Address of Assignee)
________________________________________________________________________________
the undivided interest in the Trust Fund evidenced by the within Certificate,
and all rights thereunder, and hereby authorizes the transfer of registration of
such interest to the assignee on the Certificate Register.
I further direct the Trustee to issue a new Certificate of the same Class and
undivided interest in the Trust Fund to the above-named assignee and to deliver
such Certificate to the following address
________________________________________________________________________________
Date:________________________ ______________________________________
Signature by or on behalf of
assignor (signature must be
signed as registered)
(PLEASE INSERT SOCIAL SECURITY* OR U.S. TAXPAYER IDENTIFICATION NUMBER OF
ASSIGNEE)
_____________________________
_____________________________
(Signature Guaranteed)
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<PAGE>
(*This information, which is voluntary, is being requested to ensure that the
assignee will not be subject to backup withholding under Section 3406 of the
Code.)
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EXHIBIT F
"QUALIFIED INSTITUTIONAL BUYER" RULE 144A
REPRESENTATION LETTER
Description of Certificate, including number:
POTOMAC GURNEE FINANCE CORP., COMMERCIAL
MORTGAGE PASS-THROUGH CERTIFICATES
1. The undersigned transferee (the "Buyer") warrants and represents
to, and covenants with, the Trustee and the Trust Fund as follows:
a. The Buyer understands that the Certificates have not been
registered under the Securities Act of 1933, as amended (the "1933
Act"), or the securities laws of any state.
b. The Buyer is acquiring the Certificates for investment for
its own account only and not for any other person.
c. The Buyer considers itself a substantial, sophisticated
institutional investor having such knowledge and experience in
financial and business matters that it is capable of evaluating the
merits and risks of investment in the Certificates.
d. The Buyer has been furnished with all information regarding
the Certificates that it has requested from the Trustee or the Trust
Fund.
e. Neither the Buyer nor anyone acting on its behalf has
offered, transferred, pledged, sold or otherwise disposed of the
Certificates, any interest in the Certificates or any other similar
security to, or solicited any offer to buy or accept a transfer,
pledge or other disposition of the Certificates, any interest in the
Certificates or any other similar security from, or otherwise
approached or negotiated with respect to
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the Certificates, any interest in the Certificates or any other
similar security with, any person in any manner, or made any general
solicitation by means of general advertising or in any other manner,
or taken any other action, that would constitute a distribution of
the Certificates under the 1933 Act or that would render the
disposition of the Certificates a violation of Section 5 of the 1933
Act or require registration pursuant thereto, nor will it act, nor
has it authorized or will it authorize any person to act, in such
manner with respect to the Certificates.
f. The Buyer is a "qualified institutional buyer" as that term
is defined in Rule 144A under the 1933 Act and has completed either
of the forms of certification to that effect attached hereto as
Annex 1 or Annex 2. The Buyer is aware that the sale of it is being
made in reliance on Rule 144A. The Buyer is acquiring the
Certificates for its own account or for the account of a qualified
institutional buyer, understands that such Certificates may be
resold, pledged or transferred only (i) to a person reasonably
believed to be a qualified institutional buyer that purchases for
its own account or for the account of a qualified institutional
buyer to whom notice is given that the resale, pledge or transfer is
being made in reliance on Rule 144A, or (ii) pursuant to another
exemption from registration under the 1933 Act.
2. With respect to the Class B, Class C or Class D Certificates,
either (a) the Buyer warrants and represents to, and covenants with, the Trustee
and the Trust Fund that the Buyer is not, and is not purchasing directly or
indirectly on behalf of, a "benefit plan investor" (within the meaning of
Department of Labor Regulation 29 C.F.R. ss. 2510.3-101) or (b) the Buyer has
furnished the Certificate Registrar with an Opinion of Counsel to the effect
that registration or transfer of any Certificates to any such benefit plan
investor, or to any Person acting on behalf of such an investor would not
constitute or result in a non-exempt prohibited transaction under Section 406 of
the Employee Retirement Income Security Act of 1974, as amended, or Section 4975
of the Internal Revenue Code of 1986, as amended.
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<PAGE>
3. If the Buyer is requesting that the Certificates being acquired
by it be registered in the name of a nominee on its behalf, the name of such
nominee is set forth below, and the Buyer has caused the form of Nominee
Acknowledgment, below, to be completed.
Name of Nominee, if any:
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<PAGE>
IN WITNESS WHEREOF, each of the parties has executed this document
as of the date set forth below.
________________________
Print Name of Buyer
By: ____________________
Name:
Title:
Date: __________________
Taxpayer Identification:
No._____________________
Nominee Acknowledgement
The undersigned as nominee for the Buyer referred to above does
hereby acknowledge and agree that Certificates being registered in its name
pursuant to the foregoing letter are and will be held by it solely for the
account of such Buyer and for no one else.
________________________
Nominee
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<PAGE>
ANNEX 1 TO EXHIBIT F
QUALIFIED INSTITUTIONAL BUYER STATUS UNDER RULE 144A
[For Buyers Other Than Registered Investment Companies]
The Undersigned hereby certifies as follows in connection with the
Rule 144A Investment Representation to which this Certification is attached:
1. As indicated below, the undersigned is the President, Chief
Financial Officer, Senior Vice President or other executive officer of the
Buyer.
2. In connection with purchases by the Buyer, the Buyer is a
"qualified institutional buyer" as that term is defined in Rule 144A ("Rule
144A") under the Securities Act of 1933, as amended, because (i) the Buyer owned
and/or invested on a discretionary basis $_________ (1) in securities (except
for the excluded securities referred to below) as of the end of the Buyer's most
recent fiscal year (such amount being calculated in accordance with Rule 144A)
and (ii) the Buyer satisfies the criteria in the category marked below.
--- Corporation, etc. The Buyer is a corporation (other than a
bank, savings and loan association or similar institution),
Massachusetts or similar business trust, partnership, or
charitable organization described in Section 501(c)(3) of the
Internal Revenue Code.
--- Bank. The Buyer (a) is a national bank or banking institution
organized under the laws of any State,
- --------
(1) Buyer must own and/or invest on a discretionary basis at least
$100,000,000 in securities unless Buyer is a dealer, and, in that case,
Buyer must own and/or invest on a discretionary basis at least $10,000,000
in securities.
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<PAGE>
territory or the District of Columbia, the business of which
is substantially confined to banking and is supervised by the
State or territorial banking commission or similar official or
is a foreign bank or equivalent institution, and (b) has an
audited net worth of at least $25,000,000 as demonstrated in
its latest annual financial statements, a copy of which is
attached hereto.
--- Savings and Loan. The Buyer (a) is a savings and loan
association, building and loan association, cooperative bank,
homestead association or similar institution, which is
supervised and examined by a State or Federal authority having
supervision over any such institutions or is a foreign savings
and loan association or equivalent institution and (b) has an
audited net worth of at least $25,000,000 demonstrated in its
latest annual financial statements a copy of which is attached
hereto.
--- Broker-dealer. Buyer is a dealer registered pursuant to
Section 15 of the Securities Exchange Act of 1934, as amended.
--- Insurance Company. The Buyer is an insurance company whose
primary and predominant business activity is the writing of
insurance or the reinsuring of risks underwritten by insurance
companies and which is subject to supervision by the insurance
commissioner or a similar official or agency of a State,
territory or the District of Columbia.
--- State or Local Plan. The Buyer is a plan established and
maintained by a State, its political subdivisions, or any
agency or instrumentally of the State or its political
subdivisions, for the benefit of its employees.
--- ERISA Plan. The Buyer is an employee benefit plan within the
meaning of Title I of the Employee
F-6
<PAGE>
Retirement Income Security Act of 1974, as amended.
--- Investment Adviser. The Buyer is an investment adviser
registered under the Investment Advisers Act of 1940, as
amended.
--- Small Business Investment Company. The Buyer is a small
business investment company licensed by the U.S. Small
Business Administration under Section 301(c) or (d) of the
Small Business Investment Act of 1958.
--- Business Development Company. The Buyer is a business
development company as defined in Section 202(a) (22) of the
Investment Advisors Act of 1940.
--- Trust Fund. The Buyer is a trust fund whose trustee is a bank
or trust company and whose participants are exclusively State
or Local Plans or ERISA Plans as defined above, and no
participant of the Buyer is an individual retirement account
or an H.R. 10 (Keogh) plan.
3. The term "securities" as used herein does not include (i)
securities of issuers that are affiliated with the Buyer, (ii) securities that
are part of an unsold allotment to or subscription by the Buyer, if the Buyer is
a dealer, (iii) bank deposit notes and certificates of deposit, (iv) loan
participations, (v) repurchase agreements, (vi) securities owned but subject to
a repurchase agreement and (vii) currency, interest rate and commodity swaps.
4. For purposes of determining the aggregate amount of securities
owned and/or invested on a discretionary basis by the Buyer, the Buyer used the
cost of such securities to the Buyer and did not include any of the securities
referred to in the preceding paragraph, except (i) where the Buyer reports its
securities holdings in its financial statements on the basis of their market
value, and (ii) no current information with respect to the cost of those
securities has been published. If clause
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<PAGE>
(ii) in the preceding sentence applies, the securities may be valued at market.
Further, in determining such aggregate amount, the Buyer may have included
securities owned by subsidiaries of the Buyer, but only if such subsidiaries are
consolidated with the Buyer in its financial statements prepared in accordance
with generally accepted accounting principles and if the investments of such
subsidiaries are managed under the Buyer's direction. However, such securities
were not included if the Buyer is a majority-owned, consolidated subsidiary of
another enterprise and the Buyer is not itself a reporting company under the
Securities Exchange Act of 1934, as amended.
5. The Buyer acknowledges that it is familiar with Rule 144A and
understands that the Seller to it and other parties related to the Certificates
are relying and will continue to rely on the statements made herein because one
or more sales to the Buyer may be in reliance on Rule 144A
Will the Buyer be purchasing the Rule 144A
securities
____ ____ only for the Buyer's own account?
Yes No
6. If the answer to the foregoing question is "no", the Buyer agrees
that, in connection with any purchase of securities sold to the Buyer for the
account of a third party (including any separate account) in reliance on Rule
144A, the Buyer will only purchase for the account of a third party that at the
time is a "qualified institutional buyer" within the meaning of Rule 144A. In
addition, the Buyer agrees that the Buyer will not purchase securities for a
third party unless the Buyer has obtained a current representation letter from
such third party or taken other appropriate steps contemplated by Rule 144A to
conclude that such third party independently meets the definition of "qualified
institutional buyer" set forth in Rule 144A.
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<PAGE>
7. The Buyer will notify each of the parties to which this
certification is made of any changes in the information and conclusions herein.
Until such notice is given, the Buyer's purchase of Certificates will constitute
a reaffirmation of this certification as of the date of each purchase. In
addition, if the Buyer is a bank or savings and loan as provided above, the
Buyer agrees that it will furnish to such parties updated annual financial
statements promptly after they become available.
_________________________
Print Name of Buyer
By: _____________________
Name:
Title:
Date: ___________________
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<PAGE>
ANNEX 2 TO EXHIBIT F
QUALIFIED INSTITUTIONAL BUYER STATUS UNDER RULE 144A
[Buyers That Are Registered Investment companies]
The undersigned hereby certifies as follows in connection with the
Rule 144A Investment Representation to which this Certification is attached:
1. As indicated below, the undersigned is the President, Chief
Financial Officer, or Senior Vice President of the Buyer or, if the buyer is
a"qualified institutional buyer" as that term is defined in Rule 144A ("Rule
144") under the Securities Act of 1933, as amended, because Buyer is part of a
Family of Investment Companies (as defined below), is an officer of the related
investment adviser (the "Adviser").
2. In connection with purchases by the Buyer, the Buyer is a
"qualified institutional buyer" as defined in Rule 144A because (i) the Buyer is
an investment company registered under the Investment Company Act of 1940, and
(ii) as marked below, the Buyer alone, or the Buyer's Family of Investment
Companies, owned at least $100,000,000 in securities (other than the excluded
securities referred to below) as of the end of the Buyer's most recent fiscal
year. For purposes of determining the amount of securities owned by the Buyer or
the Buyer's Family of Investment Companies, the cost of such securities was
used, except (i) where the Buyer or the Buyer's Family of Investment Companies
reports its securities holdings in its financial statements on the basis of
their market value, and (ii) no current information with respect to the costs of
those securities has been published. If clause (ii) in the preceding sentence
applies, the securities may be valued at market.
--- The Buyer owned $________ in securities (other than the
excluded securities referred to below) as of the end of the
Buyer's most recent fiscal year (such amount being calculated
in accordance with Rule 144A).
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<PAGE>
--- The Buyer is part of a Family of Investment Companies which
owned in the aggregate $_______ in securities (other than the
excluded securities referred to below) as of the end of the
Buyer's most recent fiscal year (such amount being calculated
in accordance with Rule 144A).
3. The term "Family of Investment Companies" as used herein means
two or more registered investment companies (or series thereof) that have the
same investment adviser or investment advisers that are affiliated (by virtue of
being majority owned subsidiaries of the same parent or because one investment
adviser is a majority owned subsidiary of the other).
4. The term "securities" as used herein does not include (i)
securities of issuers that are affiliated with the Buyer or are a part of the
Buyer's Family of Investment Companies, (ii) bank deposit notes and certificates
of deposit, (iii) loan participations, (iv) repurchase agreements, (v)
securities owned but subject to a repurchase agreement and (vi) currency,
interest rate and commodity swaps.
5. The Buyer is familiar with Rule 144A and understands that the
parties listed on the Rule 144A Transferee Certificate to which this
certification relates are relying and will continue to rely on the statements
made herein because one or more sales to the Buyer will be in reliance on Rule
144A. In addition, the Buyer will only purchase for the Buyer' sown account.
6. Until the date of purchase of the Certificates, the undersigned
will notify the parties listed in the "Qualified Institutional Buyer" Rule 144A
Representation Letter to which this certification relates of any changes in the
information and conclusions herein. Until such notice is given, the Buyer's
purchase of the Certificates will constitute a reaffirmation of this
certification by the undersigned as of the date of such purchase.
F-11
<PAGE>
_________________________
Print Name of Buyer
By: _____________________
Name:
Title:
Date: ___________________
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<PAGE>
EXHIBIT G
CLASS R AFFIDAVIT PURSUANT TO SECTION 860E(e)
OF THE INTERNAL REVENUE CODE OF 1986
Re: Potomac Gurnee Finance Corp., Commercial
Mortgage Pass-Through Certificates
STATE OF )
) ss.:
COUNTY OF )
I, _____________________, under penalties of perjury, declare that, to the
best of my knowledge and belief, the following representations are true and,
being first sworn, I depose and say:
1. I am the _________________ of ____________________ (the "Investor"),
whose taxpayer identification number is _______________, on behalf of which
entity I have the authority to make this affidavit.
2. The Investor is acquiring a ____% Percentage Interest in the Class R
Certificates. The Class R Certificates represent an interest in a portion of
the Trust Fund established by Potomac Gurnee Finance Corp. (the "Depositor")
and in which the Depositor's Commercial Mortgage Pass-Through
Certificates represent a beneficial ownership interest. A real estate
mortgage investment conduit ("REMIC") election has been made for certain
assets of the Trust Fund under Section 860D of the Internal Revenue Code of
1986, as amended (the "Code").
3. No purpose of the acquisition of the Class R Certificates by the
Investor is to avoid or impede the assessment or collection of federal income
tax.
4. The Investor is not a "Disqualified Organization" (as defined below)
and is not acquiring the Class R Certificates for the account of, or as agent or
nominee of, or with a view to the transfer of direct or indirect record or
beneficial ownership to,
G-1
<PAGE>
a Disqualified Organization. For the purposes hereof, a Disqualified
Organization is any of the following: (i) the United States, any State or
political sub-division thereof, any foreign government, any international
organization, or any agency or instrumentality of any of the foregoing; (ii) any
organization (other than a Farmer's Cooperative as defined in Section 521 of the
Code) that is exempt from federal income taxation (including taxation under the
unrelated business taxable income provisions of Section 511 of the Code); (iii)
any rural telephone or electrical service cooperative described in Section
1381(a)(2)(C) of the Code or (iv) any other entity designated as a Disqualified
Organization by relevant legislation amending the REMIC Provisions and in effect
at or proposed to be effective as of the time of the determination.
5. The Investor acknowledges that Section 860E(e) of the Code imposes a
substantial tax on the transferor or, in certain circumstances, on an agent for
the transferee, with respect to any transfer of any interest in any Class R
Certificates to a Disqualified Organization.
6. The Investor is a "U.S. Person" as that term is defined in the
Transferee's Letter of even date herewith, and the Investor is the beneficial
owner of the Class R Certificates, and is not holding the Class R Certificates
as nominee for any other person.
7. The following information of the Investor is true and correct:
Address:______________________________________________; contact for tax matters
____________________________; phone number ____________________; form of
organization of Investor ________________________; and acquisition date
__________________.
8. Capitalized terms used herein without definition shall have the
meanings assigned such terms in the Trust and Servicing Agreement dated as of
December 1, 1996 among the Depositor, AMRESCO Management, Inc., as Servicer,
LaSalle National Bank, as Trustee, and ABN AMRO Bank N.V., as Fiscal Agent.
G-2
<PAGE>
IN WITNESS WHEREOF, the Investor has caused this instrument to be duly
executed on its behalf, by its ____________________ and its seal to be hereunto
attached, this ______ day of _______________, _____.
[Name of Investor]
By: __________________________
Name:
Title:
Personally appeared before me ____________________________, known or
proved to me to be the same person who executed the foregoing instrument and to
be a ____________________ of the Investor, and acknowledged to me that he
executed the same as his free act and deed and as the free act and deed of the
Investor.
Subscribed and sworn before me
this ____ day of _______________, ______
________________________________
Notary Public
My commission expires the _____ day
of ___________________, _____.
G-3
<PAGE>
EXHIBIT H
TRANSFEREE'S LETTER
[DATE]
Potomac Gurnee Finance Corp.
1300 Wilson Boulevard, Suite 400
Arlington, Virginia 22209
LaSalle National Bank
135 South LaSalle Street, Suite 1740
Chicago, Illinois 60674-4107
Ladies and Gentlemen:
We propose to purchase a ____% Percentage Interest in the Class R
Certificates issued under the Trust and Servicing Agreement, dated as of
December 1, 1996 (the "Trust and Servicing Agreement"), among Potomac Gurnee
Finance Corp., as Depositor, AMRESCO Management, Inc., as Servicer, LaSalle
National Bank, as Trustee, and ABN AMRO Bank N.V., as Fiscal Agent. Capitalized
terms used but not defined herein shall have the meanings set forth in the Trust
and Servicing Agreement. We are delivering this letter pursuant to Section
5.02(d) of the Trust and Servicing Agreement.
1. We certify that on the date hereof we have simultaneously
herewith delivered to you an affidavit certifying, among other things, that (i)
we are not a Disqualified Organization and (ii) we are not purchasing such Class
R Certificates on behalf of a Disqualified Organization. We understand that any
breach by us of this certification may cause us to be liable for a tax imposed
upon transfers to Disqualified Organizations.
2. We acknowledge that we will be the beneficial owner of the Class
R Certificates and that the Class R Certificates will be registered in our name
and not in the name of a nominee.
H-1
<PAGE>
3. We certify that no purpose of our purchase of the Class R
Certificates is to avoid or impede the assessment or collection of tax.
4. We represent that:
(a) We understand that the Class R Certificates represent, for
federal income tax purposes, a "residual interest" in a "real estate mortgage
investment conduit" under the Internal Revenue Code of 1986, as amended (the
"Code");
(b) We understand that as the holder of the Class R
Certificates we will be required to take into account, in determining our
taxable income, our pro rata percentage interest of the taxable income of the
Trust REMIC in accordance with all applicable provisions of the Code.
(c) We understand that we may incur tax liabilities in excess
of any cash flows generated by the Class R Certificates and we intend to pay
taxes associated with holding the Class R Certificates as they become due.
5. We understand that if, notwithstanding the transfer restrictions,
the Class R Certificates are in fact transferred to a Disqualified Organization,
a tax may be imposed on the transferor of the Class R Certificates. We agree
that any breach by us of these representations shall render such transfer of the
Class R Certificates by us absolutely null and void and shall cause no rights in
the Class R Certificates to vest in the transferee.
6. The sale to us and our purchase of the Class R Certificates
constitutes a sale for tax and all other purposes and each party thereto has
received due and adequate consideration. In our view, the transaction represents
fair value, representing the results of arm's-length negotiations and taking
into account our analysis of the tax and other consequences of investment in the
Class R Certificates.
7. We expect that the purchase of the Class R Certificates, together
with the receipt of the price, if any,
H-2
<PAGE>
therefor will be economically neutral or profitable to us overall, after all
related expenses (including taxes) have been paid and based on conservative
assumptions with respect to discount rates, prepayments and other factors
necessary to evaluate profitability.
8. We are a citizen or resident of the United States, a corporation,
partnership or other entity created or organized in or under the laws of the
United States or any political subdivision thereof, or an estate or trust that
is subject to U.S. federal income tax regardless of the source of its income. We
are duly organized and validly existing under the jurisdiction of our
organization. We are neither bankrupt nor insolvent nor do we have reason to
believe that we will become bankrupt or insolvent. We have conducted and are
conducting our business so as to comply in all material respects with all
applicable statutes and regulations. The person executing and delivering this
letter on our behalf is duly authorized to do so, the execution and delivery by
us of this letter and the consummation of the transaction on the terms set forth
herein are within our corporate power and, upon such execution and delivery,
this letter will constitute our legal, valid and binding obligation, enforceable
against us in accordance with its terms, subject, as to the enforcement of
remedies, to applicable bankruptcy, reorganization, insolvency, moratorium and
other laws affecting the rights of creditors generally and to general principles
of equity and the discretion of the court (regardless of whether enforcement of
such remedies is considered in a proceeding in equity or at law).
9. Neither the execution and delivery by us of this letter, nor the
compliance by us with the provisions hereof, nor the consummation by us of the
transactions as set forth herein, will (i) conflict with or result in a breach
of, or constitute a default or result in the acceleration of any obligation
under, our articles or by-laws or after giving effect to the consents or the
taking of the actions contemplated by clause (ii) of this subparagraph, any of
the provisions of any law, governmental rule, regulation, judgment, decree or
order binding on us or our properties, or any of the provisions of any indenture
or mortgage or any other contract or instrument to which we are a party or by
which we or any of our properties is bound, or (ii) require the
H-3
<PAGE>
consent of or notice to or any filing with, any person, entity or governmental
body, which has not been obtained or made by us.
10. We anticipate being a profit-making entity on an ongoing basis.
11. We have filed all required federal and state income tax returns
and have paid all federal and state income taxes due; we intend to file and pay
all such returns and taxes in the future.
12. We agree that in the event that at some future time we wish to
transfer the Class R Certificates, we will transfer the Class R Certificates
only to a transferee that:
(i) is not a Disqualified Organization and is not
purchasing such Class R Certificates on behalf of a Disqualified
Organization, and
(ii) has delivered to the Certificate Registrar a transferee
letter in the form of Exhibit H to the Trust and Servicing Agreement and
an affidavit in the form of Exhibit G to the Trust and Servicing Agreement
and, if requested by the Certificate Registrar, an opinion of counsel (in
form acceptable to the Certificate Registrar), that the proposed transfer
will not cause the Class R Certificates to be held by a Disqualified
Organization.
13. We are knowledgeable and experienced in financial, business and
tax matters generally and, in particular, with respect to the investment risks
and tax consequences of REMIC residuals that provide little or no cash flow and
are capable of evaluating the merits and risks of an investment in the Class R
Certificates; we are able to bear the economic risks of an investment in the
Class R Certificates.
14. In addition, we acknowledge that the Certificate Registrar will
not register the transfer of the Class R Certificates to a transferee that is a
non-U.S. Person.
15. We are acquiring the Class R Certificates for our own account
for the purpose of investment and not with a view to
H-4
<PAGE>
or for sale in connection with any distribution thereof, subject nevertheless to
any requirement of law that the disposition of our property shall at all times
be and remain within our control.
16. We will comply with all applicable federal and state securities
laws in connection with any subsequent resale by us of the Class R Certificates.
17. We understand that none of the Depositor, CS First Boston
Corporation, Merrill Lynch, Pierce, Fenner & Smith, the Servicer, the Trustee or
the Fiscal Agent is required to register the Class R Certificates under the
Securities Act of 1933.
18. We are either not a plan that is subject to the Department of
Labor regulation set forth in 29 C.F.R. Section 2510.3-101 or we have provided
to LaSalle National Bank, as Certificate Registrar, an Opinion of Counsel as
described in Section 5.02(c)(ii) of the Trust and Servicing Agreement.
19. "U.S. Person" shall mean a citizen or resident of the United
States, a corporation, partnership or other entity created or organized in or
under the laws of the United States or any political subdivision thereof, or an
estate or trust that is subject to U.S. federal income tax regardless of the
source of its income.
20. We hereby designate the Trustee as our fiduciary to perform the
duties of the Tax Matters Person for the Trust REMIC.
Very truly yours,
[Name of Transferee]
By: _________________________
Name:
Title:
H-5
<PAGE>
EXHIBIT I
FORM OF TRUST RECEIPT
[Date]
LaSalle National Bank
135 South LaSalle Street, Suite 1740
Chicago, Illinois 60674-4107
Attention:
Re: Potomac Gurnee Finance Corp., Commercial
Mortgage Pass-Through Certificates
Ladies and Gentlemen:
In connection with the administration of the Mortgage Loan held by
you as Trustee under the Trust and Servicing Agreement dated as of December
1, 1996 among Potomac Gurnee Finance Corp., as Depositor, AMRESCO Management,
Inc., as Servicer, LaSalle National Bank, as Trustee, and ABN AMRO Bank N.V.,
as Fiscal Agent (the "Agreement"), the undersigned, as Servicer under the
Agreement, requests the release, and acknowledges receipt, of the portion of
the Mortgage File held by you as Trustee relating to the Turst Property
for the reason indicated below.
REASON FOR REQUESTING DOCUMENTS:
_____ 1. Required for foreclosure or servicing.
Items requested:_________________________________________________
Upon our return of all of the above documents to you as Trustee, please
acknowledge your receipt by signing in the space indicated below, and returning
this form.
____________________________, DOCUMENTS RETURNED TO TRUSTEE
as Servicer
By:_________________________ By:___________________________
Name: Name:
I-1
<PAGE>
Title: Title:
Date:_______________________ Date:_________________________
I-2
<PAGE>
EXHIBIT J
[Intentionally left blank]
J-1
<PAGE>
EXHIBIT K
POTOMAC GURNEE FINANCE CORP.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERVICER REMITTANCE REPORT
<TABLE>
<CAPTION>
[Date]
Component A Component B Component C Component D Total
<S> <C> <C> <C> <C> <C>
1. Principal
a) Beginning Scheduled Balance $[ ] $[ ] $[ ] $[ ] $[ ]
b) Ending Scheduled Balance [ ] [ ] [ ] [ ] [ ]
c) Scheduled Principal Payments [ ] [ ] [ ] [ ] [ ]
d) Unscheduled Payments [ ] [ ] [ ] [ ] [ ]
e) Balloon Payments [ ] [ ] [ ] [ ] [ ]
f) Net Liquidation Proceeds [ ] [ ] [ ] [ ] [ ]
g) Principal Prepayments [ ] [ ] [ ] [ ] [ ]
2. Interest
a) Scheduled Interest Payments [ ] [ ] [ ] [ ] [ ]
b) Additional Interest [ ] [ ] [ ] [ ] [ ]
c) Unpaid Additional Interest [ ] [ ] [ ] [ ] [ ]
Shortfalls
d) Default Rate Interest [ ] [ ] [ ] [ ] [ ]
e) Interest on P&I Advance [ ] [ ] [ ] [ ] [ ]
3. Prepayment Premiums
4. Principal and Interest Advance
a) By the Servicer [ ] [ ] [ ] [ ] [ ]
b) By the Trustee [ ] [ ] [ ] [ ] [ ]
5. Servicing Compensation
a) Servicer Fees [ ] [ ] [ ] [ ] [ ]
b) Trustee Fees [ ] [ ] [ ] [ ] [ ]
c) Special Servicer Fees [ ] [ ] [ ] [ ] [ ]
d) Liquidation Fees [ ] [ ] [ ] [ ] [ ]
e) Modification Fees [ ] [ ] [ ] [ ] [ ]
f) Late Charges [ ] [ ] [ ] [ ] [ ]
g) Other Mortgagor Fees [ ] [ ] [ ] [ ] [ ]
6. Net Available Distribution $[ ] $[ ] $[ ] $[ ] $[ ]
Amount
7. Principal Balance and Number of
Loans
a) Mortgage Loan Principal [ ] [ ] [ ] [ ] [ ]
Balance
[ ] [ ]
b) Default Mortgage Loans
1) Number of Loans [ ] [ ] [ ] [ ] [ ]
2) Principal Balance [ ] [ ] [ ] [ ] [ ]
c) Foreclosed Mortgage Loans
1) Number of Loans [ ] [ ] [ ] [ ] [ ]
2) Principal Balance [ ] [ ] [ ] [ ] [ ]
3) Book Value [ ] [ ] [ ] [ ] [ ]
8. Class Percentages [ ]% [ ]% [ ]% [ ]% [ ]%
Based upon Ending Scheduled
Balances
9. *NOI for preceding 12 months [ ] [ ] [ ] [ ] [ ]
10. Current Debt Service Coverage [ ] [ ] [ ] [ ] [ ]
Ratio
</TABLE>
K-1
<PAGE>
THE INFORMATION IN THIS REMITTANCE REPORT IS TAKEN FROM RECORDS OF OR
AVAILABLE TO AMRESCO MANAGEMENT, INC. AND IS BELIEVED BY AMRESCO TO BE
CORRECT IN ALL MATERIAL RESPECTS, BUT NO REPRESENTATION OR WARRANTY
IS MADE WITH RESPECT THERETO.
K-2
<PAGE>
Allocated Loan Amount per Property
Addendum to Remittance Report
[Date]
Initial Allocated Loan Amt. (Gurnee) $[ ]
Total Debt $[ ]
% allocation [ ]%
Total Adjustment $[ ]
Gurnee Mills adjustment $[ ]
Ending Allocated Loan Amt (Gurnee) $[ ]
Initial Allocated Loan Amt. $[ ]
(Potomac)
Total Debt $[ ]
% allocation [ ]%
Total Adjustment $[ ]
Gurnee Mills adjustment $[ ]
Ending Allocated Loan Amt $[ ]
(Potomac)
Total Adjusted Debt $[ ]
K-3
<PAGE>
Sub Account Balances
Addendum to Remittance Report
[Date]
Balances as of [Date]
Basic Carrying Costs Account [ ]
Debt Service Account [ ]
Replacement Reserve Account [ ]
------
[ ]
K-4
<PAGE>
AMRESCO MANAGEMENT, INC.
POTOMAC GURNEE FINANCE CORP.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
COLLECTION ACCOUNT STATEMENT
FOR THE PERIOD: [DATE] THROUGH [DATE]
ACCOUNT #
BEGINNING BALANCE AT [DATE] $[ ]
DEPOSITS
MONTHLY PAYMENTS RECEIVED
(A) PRINCIPAL [ ]
(B) INTEREST [ ]
LOAN LEVEL UNAPPLIED FUNDS [ ]
PRINCIPAL PREPAYMENTS [ ]
CURTAILMENTS [ ]
LIQUIDATION PROCEEDS [ ]
CONDEMNATION PROCEEDS [ ]
PREPAYMENT PREMIUMS [ ]
P&I ADVANCES [ ]
LATE/ASSUMPTION FEES/OTHER FEES [ ]
NET INCOME [ ]
INVESTMENT LOSSES [ ]
INVESTMENT EARNINGS [ ]
TOTAL DEPOSITS: [ ]
WITHDRAWALS
DISTRIBUTION WIRE [ ]
TRUSTEE FEE [ ]
REVERSAL OF PAYMENT [ ]
EXPENSES OF TRUST [ ]
REIMBURSEMENT OF SERVICING ADVANCES [ ]
REIMBURSEMENT OF P&I ADVANCES [ ]
MASTER SERVICING FEES [ ]
WITHDRAWAL OF LATE/ASSUMPTION/OTHER FEES [ ]
WITHDRAWAL OF INVESTMENT EARNINGS [ ]
TOTAL WITHDRAWALS: [ ]
ENDING BALANCE AT [DATE] $[ ]
BALANCE FROM BANK STATEMENT $[ ]
VARIANCE $[ ]
EXPLANATION OF VARIANCE
K-5
<PAGE>
EXHIBIT L
SCHEDULE OF REQUIRED INSURANCE POLICIES
K-6
<PAGE>
EXHIBIT 10.57
================================================================================
================================================================================
CREDIT AGREEMENT
among
THE MILLS CORPORATION,
THE MILLS LIMITED PARTNERSHIP,
as Borrower,
SAWGRASS MILLS PHASE II LIMITED PARTNERSHIP,
SUNRISE MILLS (MLP) LIMITED PARTNERSHIP
and
CS FIRST BOSTON MORTGAGE CAPITAL CORP.,
as Lender
dated as of October 28, 1996
================================================================================
================================================================================
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
SECTION 1.1. Defined Terms.................................................. 1
ARTICLE II
LOANS; TERM OF COMMITMENT; EXPIRATION
SECTION 2.1. The Revolving Loans; Term of Commitment........................ 15
SECTION 2.2. Minimum Amount of each Borrowing............................... 17
SECTION 2.3. Procedure for Borrowing........................................ 17
SECTION 2.4. Revolving Note................................................. 17
SECTION 2.5. Interest....................................................... 17
SECTION 2.6. Fees........................................................... 18
SECTION 2.7. Reduction of Commitment; Voluntary Termination
of Unutilized Commitment..................................... 19
SECTION 2.8. Payments; Termination of Commitment............................ 19
SECTION 2.9. Use of Proceeds................................................ 19
SECTION 2.10. Illegality..................................................... 19
SECTION 2.11. Requirements of Law............................................ 20
SECTION 2.12. Taxes.......................................................... 21
ARTICLE III
PREPAYMENTS; REPAYMENTS
SECTION 3.1. Voluntary Prepayments.......................................... 22
SECTION 3.2. Mandatory Repayments and Commitment Reductions................. 22
ARTICLE IV
CONDITIONS OF LENDING
SECTION 4.1. Conditions Precedent to Making Initial Revolving Loans......... 24
SECTION 4.2. Conditions Precedent to Each Loan.............................. 26
ARTICLE V
REPRESENTATIONS AND WARRANTIES
SECTION 5.1. Status and Standing............................................ 27
SECTION 5.2. Power and Authority............................................ 27
SECTION 5.3. Enforceable Obligations........................................ 27
SECTION 5.4. No Violation of Agreements; Compliance with Law................ 28
SECTION 5.5. No Litigation.................................................. 28
SECTION 5.6. Taxes and Claims............................................... 28
SECTION 5.7. Employee Benefit Plans......................................... 29
SECTION 5.8. No Event of Default............................................ 30
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<PAGE>
Page
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SECTION 5.9. Financial Statements.......................................... 30
SECTION 5.10. Environmental Laws, Etc....................................... 30
SECTION 5.11. No Adverse Conditions......................................... 31
SECTION 5.12. Solvency...................................................... 31
SECTION 5.13. Margin Stock.................................................. 31
SECTION 5.14. No Investment Company......................................... 31
SECTION 5.15. Security Interests............................................ 31
SECTION 5.16. Properties.................................................... 32
SECTION 5.17. Partnership Agreements........................................ 32
SECTION 5.18. Subsidiary Partnerships....................................... 32
SECTION 5.19. Debt.......................................................... 32
SECTION 5.20. Accuracy of Information....................................... 32
SECTION 5.21. Business Plans................................................ 32
ARTICLE VI
AFFIRMATIVE COVENANTS
SECTION 6.1. Financial Statements and Other Information.................... 33
SECTION 6.2. Taxes and Claims.............................................. 34
SECTION 6.3. Maintenance of Property; Insurance............................ 34
SECTION 6.4. Books and Records............................................. 35
SECTION 6.5. Inspection.................................................... 36
SECTION 6.6. Pay Debt and Perform Other Covenants.......................... 36
SECTION 6.7. Compliance With Laws.......................................... 36
SECTION 6.8. Conduct of Business and Maintenance of Existence.............. 37
SECTION 6.9. Notice of Certain Events...................................... 37
SECTION 6.10. Environmental Laws, Etc....................................... 37
SECTION 6.11. ERISA......................................................... 38
SECTION 6.12. Maintain Security Interest.................................... 39
SECTION 6.13. Compliance with Partnership Agreements........................ 39
SECTION 6.14. Further Assurances............................................ 39
ARTICLE VII
NEGATIVE COVENANTS
SECTION 7.1. Liens......................................................... 39
SECTION 7.2. Restrictions on Distributions................................. 40
SECTION 7.3. Debt.......................................................... 40
SECTION 7.4. Merger, Consolidation, Sale or Transfers of Assets............ 40
SECTION 7.5. Contingent Obligations........................................ 41
SECTION 7.6. Investments................................................... 41
SECTION 7.7. Intercompany Debt............................................. 41
SECTION 7.8. Transactions with Affiliates.................................. 41
SECTION 7.9. Events of Default............................................. 41
SECTION 7.10. Use of Proceeds............................................... 42
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<PAGE>
Page
----
SECTION 7.11. Accounting Changes............................................ 42
SECTION 7.12. Financial Covenants........................................... 42
ARTICLE VIII
DEFAULTS AND REMEDIES
SECTION 8.1. Events of Default............................................. 42
SECTION 8.2. Consequences of an Event of Default........................... 44
ARTICLE IX
AGENT
SECTION 9.1. Appointment................................................... 44
SECTION 9.2. Nature of Duties.............................................. 45
SECTION 9.3. Lack of Reliance on the Agent................................. 45
SECTION 9.4. Intentionally Omitted......................................... 45
SECTION 9.5. Reliance...................................................... 46
SECTION 9.6. Indemnification............................................... 46
SECTION 9.7. The Lender in its Individual Capacity......................... 46
SECTION 9.8. Holders....................................................... 46
SECTION 9.9. Resignation by the Agent...................................... 46
ARTICLE X
MISCELLANEOUS
SECTION 10.1. Collection Costs.............................................. 47
SECTION 10.2. No Waiver..................................................... 47
SECTION 10.3. GOVERNING LAW................................................. 47
SECTION 10.4. Notices....................................................... 48
SECTION 10.5. Costs and Expenses; Indemnity................................. 49
SECTION 10.6. Fees Nonrefundable; Payments in U.S. Currency; Computations... 50
SECTION 10.7. WAIVER OF JURY TRIAL AND SETOFF............................... 50
SECTION 10.8. Captions...................................................... 50
SECTION 10.9. Lien; Set-off................................................. 50
SECTION 10.10. Security...................................................... 51
SECTION 10.11. JURISDICTION; SERVICE OF PROCESS.............................. 51
SECTION 10.12. Benefit of Agreement; Assignments............................. 51
SECTION 10.13. Amendment or Waiver, etc...................................... 53
SECTION 10.14. Counterparts.................................................. 54
SECTION 10.15. Severability.................................................. 54
- iii -
<PAGE>
Page
----
SCHEDULE 1 Community Centers
SCHEDULE 5.1(b) Subsidiary Partnerships
SCHEDULE 5.16 Real Estate Assets
SCHEDULE 5.17 Partnership Agreements
SCHEDULE 5.18 Borrower's Interests in Subsidiary Partnerships
SCHEDULE 5.19 Existing Debt
SCHEDULE 6.1 Form of Income Statements
EXHIBIT A Form of Revolving Note
EXHIBIT B-1 Form of General Pledge and Security Agreement
EXHIBIT B-2 Form of Intercompany Pledge and Security Agreement
EXHIBIT C Form of Notice of Borrowing
EXHIBIT D Form of Opinion of Counsel to the Borrower
EXHIBIT E Form of Assignment and Assumption Agreement
- iv -
<PAGE>
CREDIT AGREEMENT, dated as of October 28, 1996, among THE MILLS
CORPORATION, a Delaware corporation (together with its successors and
assigns, the "REIT"), THE MILLS LIMITED PARTNERSHIP, a Delaware limited
partnership (together with its successors and assigns, the "Borrower"),
SAWGRASS MILLS PHASE II LIMITED PARTNERSHIP, a Delaware limited partnership
(together with its successors and assigns, "Sawgrass"), SUNRISE MILLS (MLP)
LIMITED PARTNERSHIP, a District of Columbia limited partnership (together
with its successors and assigns, "Sunrise," and together with Sawgrass, the
"Subsidiary Partnerships" and each, a "Subsidiary Partnership") and CS FIRST
BOSTON MORTGAGE CAPITAL CORP. (together with its successors and assigns,
the "Lender").
W I T N E S S E T H :
WHEREAS, subject to and upon the terms and conditions set forth
herein, the Lender is willing to make available to the Borrower the credit
facility provided for herein;
NOW THEREFORE, on the basis of the premises, agreements and
covenants herein contained and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Defined Terms. As used in this Agreement, the following
terms shall have the following meanings (such meanings to be equally applicable
to both the singular and plural forms of the terms defined):
"Acquired Debt" shall mean Debt of a Person (i) existing at the time
such Person becomes an Affiliated Entity and/or (ii) assumed in connection with
the acquisition of any assets from such Person, in each case, other than Debt
incurred in connection with, or in contemplation of, such Person becoming an
Affiliated Entity or such acquisition. Acquired Debt shall be deemed to be
incurred on the date of such acquisition of assets from any Person or the date
any Person becomes an Affiliated Entity.
"Affiliate" shall mean, with respect to any Person, any other Person
(i) directly or indirectly controlling (including, but not limited to, all
directors, officers, members and partners of such Person), controlled by, or
under direct or indirect common control with, such Person or (ii) that directly
or indirectly owns more than 5% of any class of the voting securities or capital
stock of or equity or partnership interests in such Person. A Person shall be
deemed to control another Person if such Person possesses, directly or
indirectly, the power to direct or cause the direction of the management and
policies of such other Person, whether through the ownership of voting
securities, as an officer, director, member, general or limited partner of such
Person, by contract or otherwise.
<PAGE>
"Affiliated Entity" shall mean any Person in which the REIT, the
Borrower or any of the Consolidated Subsidiaries owns or holds, directly or
indirectly, a Capital Interest.
"Agreement" shall mean this Credit Agreement, as modified,
supplemented or amended from time to time.
"Allocated Affiliate Debt" shall mean the allocation of any
Affiliated Entity's Debt to any entity comprising the Company, determined on a
consolidated basis, such allocation to be based on the (i) the total Debt of
such Affiliated Entity multiplied by (ii) the sum of the equity required to be
contributed by such entity (whether classified as a capital contribution or a
loan) to such Affiliated Entity divided by the entire equity contribution
required to be contributed by all parties to such Affiliated Entity (whether
classified as a capital contribution or a loan).
"Annual Service Charge" shall mean for any 12-month period the
interest expense (exclusive of non-cash amortization) of the Company calculated
in accordance with GAAP, consistently applied, and any late charges applicable
thereto payable by the Company plus the aggregate amount of recurring principal
amortization payable by the Company in respect of all Debt of the Company.
"Applicable Margin" shall mean 300 basis points.
"Asset Sale" shall mean any sale, transfer, or other disposition by
the Company to any Person other than an entity comprising the Company of all or
any portion of any Real Estate Asset or any interest therein.
"Authorized Representative" shall mean, with respect to any Person,
the president, the chief financial officer, chief accounting officer and any
other officer of such Person designated as such from time to time in a written
notice to the Lender, accompanied by an incumbency certificate with specimen
signature included.
"Bank" shall mean any bank, trust company or financial institution
having a debt rating of (i) at least Baa-1 or the equivalent thereof from
Moody's or (ii) at least BBB+ or the equivalent thereof from S&P.
"Borrower" shall have the meaning provided in the first paragraph of
this Agreement.
"Borrowing" shall mean the obligation of the Lender to the Borrower
to make any Revolving Loan.
"Breakage Costs" shall mean any actual out-of-pocket losses, costs
or expenses incurred by the Lender as a result of any payment of the principal
amount of the Revolving
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Loans under this Agreement or under the Revolving Note made by the Borrower to
the Lender (other than on the last day of an Interest Period) by reason of
liquidation or redeployment of deposits or other funds acquired by the Lender to
fund or maintain such principal amount.
"Business Day" shall mean (i) for all purposes other than as covered
by clause (ii) below, any day except Saturday, Sunday and any day which shall be
in New York City a legal holiday or a day on which banking institutions are
authorized or required by law or other government action to close, and (ii) with
respect to all determinations in connection with calculating LIBOR, and payments
of principal and interest on, the Revolving Loans, any day which is a Business
Day described in clause (i) above and which is also a day on which commercial
banks are open for international business (including dealing with Dollar
deposits) in London.
"Capital Expenditures" shall mean, with respect to any Person, all
expenditures by such Person which should be capitalized in accordance with GAAP,
including without limitation all such expenditures with respect to fixed or
capital assets (including, without limitation, expenditures for maintenance and
repairs which should be capitalized in accordance with GAAP) and, without
duplication, the amount of all Capitalized Lease Obligations incurred by such
Person.
"Capital Interest" shall mean, with respect to (i) any corporation,
common stock or preferred stock which is not redeemable by the issuer thereof,
and any and all shares or other equivalents (however designated) of any other
corporate stock, of such corporation and (ii) any partnership, limited liability
company, trust or other entity, partnership interests, whether general, special
or limited, in such partnership, membership interests or any equity interest in
such trust or other entity.
"Capitalized Lease Obligations" of any Person shall mean all rental
obligations which, under GAAP, are or will be required to be capitalized on the
books of such Person, in each case taken at the amount thereof accounted for as
debt in accordance with GAAP.
"Cash Equivalents" shall mean (i) the securities issued or directly
and fully guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States or America is pledged in support thereof) having maturities of not more
than six months from the date of acquisition, (ii) U.S. dollar denominated time
deposits, certificates of deposit and bankers acceptances of (x) Credit Suisse
or (y) any bank whose short-term commercial paper rating from S&P is at least
A-1 or the equivalent thereof (any such bank or Credit Suisse, an "Approved
Bank"), in each case with maturities of not more than six months from the date
of acquisition, (iii) commercial paper issued by any Approved Bank or by the
parent company of any Approved Bank and commercial paper issued by, or
guaranteed by, any industrial or financial company with a short-term commercial
paper rating of at least A-1 or the equivalent thereof by S&P or at least P-1 or
the equivalent thereof by Moody's, or guaranteed by any industrial company with
a long term
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<PAGE>
unsecured debt rating of at least A or A2, or the equivalent of each thereof,
from S&P or Moody's, as the case may be, and in each case maturing within six
months after the date of acquisition, (iv) marketable direct obligations issued
by any state of the United States of America or any political subdivision of any
such state or any public instrumentality thereof maturing within six months from
the date of acquisition thereof, and at the time of acquisition, having one of
the two highest ratings obtainable from either S&P or Moody's and (v)
investments in money market funds substantially all the assets of which are
comprised of securities of the types described in clauses (i) through (iv)
above.
"Cash Proceeds" shall mean, with respect to any Asset Sale, the
aggregate cash payments (including any cash received by way of deferred payment
pursuant to a note receivable issued in connection with such Asset Sale, but
only as and when so received under such note receivable) received from such
Asset Sale.
"Change of Control" shall mean an occurrence in which (i) in the
case of the Borrower, at any time during the continuance of this Agreement, the
REIT shall cease to have the ability, directly or indirectly, through the
ownership of any Capital Interest, or by contract, to direct the conduct of the
day to day business activities of the Borrower without any other Person having
any veto rights in respect thereof or shall mortgage, pledge, hypothecate or
otherwise encumber its Capital Interest in the Borrower, (ii) in the case of any
of the Consolidated Subsidiaries, the Borrower shall assign, transfer, sell,
mortgage, pledge, hypothecate or otherwise dispose of any or all of its Capital
Interest in such Consolidated Subsidiary other than the Collateral under this
Agreement to this Lender or (iii) the REIT shall cease to qualify as a real
estate investment trust pursuant to the Code or shares of stock thereof shall
cease to be publicly traded.
"Code" shall mean the Internal Revenue Code of 1986, and all rules
and regulations promulgated pursuant thereto, as the same may have been or may
be amended or supplemented from time to time.
"Collateral" shall mean all property (whether real or personal) with
respect to which any security interest has been granted (or purported to be
granted) pursuant to any Security Document, including without limitation, all
"Collateral" under, and as defined in, the Pledge and Security Agreements.
"Commitment" shall mean, as of any date of calculation, Forty
Million Dollars ($40,000,000) or such lower amount to which said Commitment
shall have been reduced from time to time pursuant to Sections 2.7 and 3.2
hereof.
"Community Centers" shall mean those eleven community shopping
centers set forth on Schedule 1 owned by the Borrower or in which the Borrower
has a Capital Interest.
"Company" shall mean the REIT, the Borrower and its Consolidated
Subsidiaries.
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"Consolidated Debt" shall mean, at any time, all Debt of all of the
entities comprising the Company as would be required to be reflected on the
liability side of a balance sheet as prepared in accordance with GAAP and as
determined on a consolidated basis, including, in any event whether or not shown
on such balance sheet, all Revolving Loans, Allocated Affiliate Debt of all
entities comprising the Company and all Acquired Debt of the Company.
"Consolidated Income Available For Debt Service" shall mean, for any
period, Funds Available For Distribution, if any, plus the sum of (a) the Annual
Service Charge and (b) interest income earned by and paid to the Company less
(c) fee income earned by and paid to the Company and less (d) cash proceeds
received by the Company from land and other such non-income producing property
sales for such period and which are not classified as Funds From Operations.
"Consolidated Service Charge Coverage Ratio" means for any period
the ratio of (i) Consolidated Income Available For Debt Service for such period
to (ii) the Annual Service Charge for such period.
"Consolidated Subsidiary" shall mean, as to any Person, any
corporation, partnership, association, joint venture or any other entity whose
financial information would in accordance with GAAP be consolidated with that of
the Borrower and which, by definition, includes any Subsidiary Partnership.
"Contingent Obligation" shall mean, as to any Person, any obligation
of such Person guaranteeing or intended to guarantee any Debt, leases, dividends
or other obligations ("primary obligations") of any other Person (the "primary
obligor") in any manner, whether directly or indirectly, including, without
limitation, any obligation of such Person, whether or not contingent, (i) to
purchase any such primary obligation or any property constituting direct or
indirect security therefor, (ii) to advance or supply funds (x) for the purchase
or payment of any such primary obligation or (y) to maintain working capital or
equity capital of the primary obligor or otherwise to maintain the net worth or
solvency of the primary obligor, (iii) to purchase property, securities or
services primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment of such primary
obligation, (iv) as a result of such Person being a general partner of the other
Person, unless the underlying obligation is expressly made non-recourse as to
such general partner or (v) otherwise to assure or hold harmless the holder of
such primary obligation against loss in respect thereof; provided, however, that
the term Contingent Obligation shall not include endorsements of instruments for
deposit or collection in the ordinary course of business. The amount of any
Contingent Obligation shall be deemed to be an amount equal to the stated or
determinable amount of the primary obligation in respect of which such
Contingent Obligation is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof (assuming such Person is
required to perform thereunder) as determined by such Person in good faith.
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"Credit Party" shall mean the REIT, the Borrower and each Subsidiary
Partnership.
"Debt" shall mean, as to any Person, without duplication or
double-counting, (i) all debt (including principal, interest, fees and charges)
of such Person for borrowed money or for the deferred purchase price of
property, (ii) the maximum amount available to be drawn under all letters of
credit issued for the account of such Person and all unpaid drawings in respect
of such letters of credit, (iii) all Debt of the types described in clauses (i),
(ii), (iv), (v), (vi), (vii) or (viii) of this definition secured by any Lien on
any property owned by such Person, whether or not such Debt has been assumed by
such Person, (iv) the aggregate amount required to be capitalized under leases
under which such Person is the lessee, (v) all obligations of such Person to pay
a specified purchase price for goods or services, whether or not delivered or
accepted, i.e., take-or-pay and similar obligations, (vi) all Contingent
Obligations of such Person (except in the case of any entity comprising the
Company, if and to the extent that such Contingent Obligations are permitted
pursuant to Section 7.5 hereof), (vii) all obligations under any Interest Rate
Protection Agreement or Other Hedging Agreement or under any similar type of
agreement, (viii) all other financial obligations and liabilities that in
accordance with GAAP would be reflected as a liability on the balance sheet of
such Person, (ix) all obligations of such Person to repurchase property sold by
such Person under repurchase agreements entered into by such Person and (x) in
the case of any entity comprising the Company, all Allocated Affiliated Debt,
provided that the definition of "Debt" shall not include normal and customary
trade accounts payable due and payable within 120 days from the date of invoice.
"Distribution" with respect to any Person shall mean that such
Person has declared or paid a dividend or returned any equity capital or repaid
any loan to its stockholders, members or partners or authorized or made any
other distribution, payment or delivery of property (other than common stock,
membership interests or partnership interests of such Person) or cash to its
stockholders, members or partners as such, or redeemed, retired, purchased or
otherwise acquired, directly or indirectly, for a consideration any shares of
any class of its capital stock, membership interests or any partnership
interests outstanding on or after the Effective Date (or any options or warrants
issued by such Person with respect to its capital stock, membership interests or
partnership interests), or set aside any funds for any of the foregoing
purposes, or shall have permitted any of its Subsidiaries to purchase or
otherwise acquire for a consideration any shares of any class of the capital
stock, membership interests or any partnership interests of such Person
outstanding on or after the Effective Date (or any options or warrants issued by
such Person with respect to its capital stock, membership interests or
partnership interests). Without limiting the foregoing, "Distributions" with
respect to any Person shall also include all payments made or required to be
made by such Person with respect to any stock appreciation rights, plans, equity
incentive or achievement plans or any similar plans or setting aside of any
funds for the foregoing purposes.
"Dollars" and "$" shall mean dollars in lawful currency of the
United States of America.
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<PAGE>
"Effective Date" shall mean October 28, 1996, provided that on or
before such date (i) counterparts of this Agreement, the Revolving Note, and the
Security Documents shall have been executed and delivered by the parties hereto
and thereto and received by the Lender and (ii) the conditions precedent set
forth in Article IV hereof shall have been satisfied or waived in writing by the
Lender.
"Environmental Claims" shall mean any and all administrative,
regulatory or judicial actions, suits, demands, demand letters, directives,
claims, liens, notices of noncompliance or violation, investigations or
proceedings relating in any way to any Environmental Law or any permit issued,
or any approval given, under any such Environmental Law (hereafter, "Claims"),
including, without limitation, (a) any and all Claims by governmental or
regulatory authorities for enforcement, cleanup, removal, response, remedial or
other actions or damages pursuant to any applicable Environmental Law and (b)
any and all Claims by any governmental agency seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief in connection
with alleged injury or threat of injury to health, safety or the environment due
to the presence of Hazardous Materials.
"Environmental Law" shall mean any applicable Federal, state,
foreign or local statute, law, rule, regulation, ordinance, code, guideline,
written policy and rule of common law now or hereafter in effect and in each
case as amended and any judicial or administrative interpretation thereof,
including any judicial or administrative order, consent decree or judgment,
relating to the environment, employee health and safety or Hazardous Materials,
including, without limitation, CERCLA; RCRA; the Federal Water Pollution
Control Act, 33 U.S.C. Section 1251 et seq.; the Toxic Substances Control Act,
15 U.S.C. Section 2601 et seq.; the Clear Air Act, 42 U.S.C. Section 7401 et
seq.; the Safe Drinking Water Act, 42 U.S.C. Section 3803 et seq.; the Oil
Pollution Act of 1990, 33 U.S.C. Section 2701 et seq.; the Emergency Planning
and the Community Right-to-Know Act of 1986, 42 U.S.C. Section 11001 et seq.;
the Hazardous Material Transportation Act, 49 U.S.C. Section 1801 et seq. and
the Occupational Safety and Health Act, 29 U.S.C. Section 651 et seq. (to the
extent it regulates occupational exposure to Hazardous Materials); and any
state and local or foreign counterparts or equivalents, in each case as amended
from time to time.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974 and all rules and regulations promulgated pursuant thereto, as the same may
be amended or supplemented from time to time.
"ERISA Affiliate" shall mean each person (as defined in Section 3(9)
of ERISA) which together with the REIT, the Borrower or any of their respective
Subsidiaries would be deemed to be a "single employer" (i) within the meaning of
Section 414(b), (c), (m) or (o) of the Code or (ii) as a result of the REIT, the
Borrower or any of their respective Subsidiaries being or having been a general
partner of such person.
"Event of Default" shall mean any of the events, acts or conditions
specified in Section 8.1 hereof.
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<PAGE>
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended (or any similar successor federal statute), and the rules and
regulations thereunder, as the same are in effect from time to time.
"Existing Debt" shall have the meaning ascribed to such term in
Section 5.19 hereof.
"Existing Properties" shall mean any one of the following properties
as a whole: Franklin Mills located in Philadelphia, Pennsylvania ("Franklin
Mills"), Gurnee Mills located in Gurnee, Illinois ("Gurnee Mills"), Ontario
Mills located in Ontario, California ("Ontario Mills"), Potomac Mills located in
Woodbridge, Virginia ("Potomac Mills"), Sawgrass Mills located in Sunrise,
Florida ("Sawgrass Mills") or any of the Community Centers.
"Fees" shall mean the Structuring Advisory Fee, the Unused Line Fee
and, if applicable, the Renewal Fee.
"Filing Entity" shall have the meaning ascribed to such term in
Section 6.1 hereof.
"Franklin Bank" shall mean the Franklin National Bank of Washington,
D.C.
"Future Properties" shall mean all real estate owned or leased by
any entity comprising the Company and any Affiliated Entity, excluding the
Existing Properties and the Company's office space occupied exclusively by the
Company.
"Funds Available For Distribution" shall mean Funds From Operations
for each fiscal quarter as stated in the REIT's most recent quarterly 10-Q and
annual 10-K statements, plus (i) non-cash loan cost expenses and general
furniture, fixture and equipment expenses, plus (ii) land and other non-income
producing property sales not recognized as Funds From Operations, less (iii)
specialty store tenant improvements made to bring space to standard leasable
build-out and non-revenue enhancing capital expenditures, less (iv) straight
line minimum rent adjustments.
"Funds From Operations" shall mean net income (or loss) (computed in
accordance with GAAP), excluding gains (or losses) from debt restructuring and
sales of property (other than undepreciated property incidental to the main
business of a real estate investment trust), plus depreciation and amortization
of real estate assets, and after adjustments for unconsolidated partnerships and
joint ventures.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time.
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<PAGE>
"General Pledge and Security Agreement" shall mean a pledge and
security agreement, substantially in the form of EXHIBIT B-1 hereto, entered
into by the Borrower in favor of the Lender, as the same may be amended or
supplemented from time to time.
"Governmental Authority" shall mean any nation or government, any
state or other political subdivision thereof and any agency, entity or officer
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to any government, and any corporation or other
entity owned or controlled by any of the foregoing.
"Hazardous Materials" shall mean and include, without limitation,
gasoline, petroleum, petroleum products, explosives, radioactive materials,
radon, hazardous materials, hazardous wastes, hazardous or toxic substances,
polychlorinated biphenyls or related or similar materials, asbestos or any
material containing asbestos, or any other substance or material as may be
defined as a hazardous or toxic substance, or exposure to which is prohibited,
limited or regulated, by any Federal, state or local environmental law,
ordinance, rule or regulation.
"Initial Borrowing Date" shall mean the date occurring on or after
the Effective Date on which the initial Borrowing of Revolving Loans occurs
pursuant to Section 2.1.
"Initial Maturity Date" shall have the meaning ascribed to such term
in the definition of "Maturity Date" herein.
"Initial Term" shall mean the period from and including the
Effective Date to and excluding the second anniversary of the Effective Date.
"Intercompany Debt" shall mean, at any time, any Debt owed by any
Non-consolidated Subsidiary to any entity comprising the Company.
"Intercompany Note" shall have the meaning ascribed to such term in
Section 7.7 hereof.
"Intercompany Pledge and Security Agreement" shall mean a pledge and
security agreement, substantially in the form of EXHIBIT B-2 hereto, with
respect to any Intercompany Debt and entered into by each Credit Party in favor
of the Lender, as the same may be amended or supplemented from time to time.
"Interest Period" shall mean the period comprising each calendar
month occurring prior to Maturity; provided, however, that:
(i) an Interest Period shall be for a period shorter than a calendar
month if the Initial Borrowing Date occurs on a day other than the first day of
a calendar month, in which case it shall be for a period commencing on the
Initial Borrowing Date and ending on the last day of the calendar month in which
such Initial Borrowing Date occurs; and
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(ii) an Interest Period shall be for a period shorter than a
calendar month if the Maturity occurs on a day other than the last day of a
calendar month, in which case it shall be for a period commencing on the first
day of a calendar month (or, if applicable, the Initial Borrowing Date) and
ending on the Maturity.
"Interest Rate Protection Agreement" shall mean any interest rate
swap agreement, interest rate cap agreement, interest rate collar agreement,
interest rate hedging agreement, interest rate floor agreement or other similar
agreement or arrangement.
"Investment" in any Person shall mean any loan, advance, or
extension of credit to or for the account of, any guaranty, endorsement,
including loans to employees, (other than for collection in the ordinary course
of business which are not overdue) or other direct or indirect contingent
liability in connection with the obligations, Capital Interests or dividends or
other distributions of, any ownership, purchase or acquisition of any assets,
business, Capital Interest, obligations or securities of, or any other interest
in or capital contribution to, such Person.
"Lending Bank" shall mean any Bank assigned any portion of the
Lender's Revolving Loans and Commitment pursuant to Section 10.12 of this
Agreement.
"LIBOR" shall mean the rate for the applicable Interest Period
published one (1) Business Day prior to the first day of such Interest Period in
the Wall Street Journal for notes maturing thirty (30) days after issuance under
the caption "Money Rates, London Interbank Offered Rates," (or, if no longer
published by The Wall Street Journal, then as published by any publication of
major circulation, or as disseminated by any major news service, in each case
such source being selected by the Lender in its sole discretion).
"Lien" shall mean any mortgage, pledge, hypothecation, assignment,
lien (statutory or other), charge, deposit arrangement, encumbrance or security
interest of any nature or kind whatsoever, or the interest of a vendor or lessor
under any conditional sale agreement, capital lease, any financing or similar
statement or notice filed under the UCC or other title retention agreement.
"Loan Documents" shall mean this Agreement and, after the execution
and delivery thereof pursuant to the terms of this Agreement, the Revolving
Note, the Pledge and Security Agreements and all other documents or certificates
executed and delivered in connection herewith and therewith.
"Margin Stock" has the meaning specified in Regulation U.
"Material Adverse Effect" shall mean, with respect to an event,
action or condition affecting any entity comprising the Company, its Affiliated
Entities or any of their respective properties or revenues, an event, action or
condition that would (i) materially and
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adversely affect the validity or enforceability of, or the authority of any
entity comprising the Company to perform its respective obligations under, any
of the Loan Documents, or (ii) materially adversely affect the business,
operations, assets or condition (financial or otherwise) of the Company taken as
a whole or (iii) materially adversely affect the value of the Collateral.
"Maturity" shall mean the date any Revolving Loan shall become due
and payable, whether on demand, at maturity, by acceleration, by notice of
intention to prepay or otherwise.
"Maturity Date" shall mean the earlier of October 31, 1998 (the
"Initial Maturity Date") (or, if renewed pursuant to Section 2.1, the last day
of the Renewal Term) or the date on which the Revolving Loans shall, together
with all interest accrued thereon and all other amounts owed to the Lender, have
been repaid in full and the Commitment is terminated by the Lender in accordance
with the terms hereof or by the Borrower in accordance with Section 2.7 hereof.
"Mills Properties" shall mean any one of the following
value-oriented super-regional malls as a whole: Franklin Mills, Gurnee Mills,
Ontario Mills, Potomac Mills and Sawgrass Mills, and any other value-oriented
super-regional malls owned from time to time by the Borrower or in which the
Borrower has a Capital Interest on or after the Effective Date.
"Moody's" shall mean Moody's Investors Service, Inc.
"Net Cash Proceeds" shall mean, with respect to any Asset Sale, the
Cash Proceeds resulting therefrom net of (x) cash expenses of sale paid to
unaffiliated third parties (including, without limitation, local transfer taxes,
brokerage and attorneys' fees, if any) and (y) payment of principal, premium and
interest on Debt (other than the Revolving Loans) repaid as a result of such
Asset Sale.
"Non-consolidated Subsidiary" shall mean any corporation,
partnership, association, joint venture or any other entity affiliated with the
Borrower, or any Subsidiary of the Borrower, other than a Consolidated
Subsidiary.
"Notice of Borrowing" shall have the meaning ascribed to such term
in Section 2.3 hereof.
"Obligations" shall mean all debt, obligations and liabilities owing
to the Lender incurred under or related to this Agreement or any other Loan
Document, including, without limitation, interest, principal, premiums, fees,
expenses, indemnification, or otherwise whether such debt, obligations or
liabilities are direct or indirect, secured or unsecured, joint or several,
absolute or contingent, due or to become due, whether for payment or
performance, now existing or hereafter arising.
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"Other Hedging Agreement" shall mean any foreign exchange contracts,
currency swap agreements, commodity agreements or other similar agreements or
arrangement designed to protect against the fluctuations in currency values.
"Partnership Agreement" shall mean each partnership agreement or
other document (including any formation agreement) creating the Borrower or any
of the Consolidated Subsidiaries, as the case may be.
"Person" or "person" shall mean any individual, partnership, firm,
corporation, company, association, joint venture, trust or other entity, or any
Governmental Authority.
"Pledge and Security Agreements" shall mean (i) the General Pledge
and Security Agreement and (ii) the Intercompany Pledge and Security Agreement.
"Plan" shall mean, at any particular time, any employee benefit plan
as defined in Section 3(3) of ERISA and in respect of which the Borrower or any
ERISA Affiliate is an "employer" as defined in Section 3(5) of ERISA.
"Prime Rate" shall mean 100 basis points in excess of the rate of
interest per annum as established by The Chase Manhattan Bank or its successor
(the "Reference Bank") in New York, New York from time to time as its prime or
base lending rate, and shall be effective on the day that the Reference Bank
establishes such change, which rate, the Borrower acknowledges, may or may not
be the Reference Bank's lowest rate. If the Reference Bank shall abolish or
abandon the practice of establishing its prime or base lending rate or if such
rate shall not be ascertainable, the Lender shall designate by notice to the
Borrower the floating commercial loan interest rate of Citibank, N.A. or its
successor established from time to time as its prime or base lending rate, to be
the Prime Rate hereunder.
"Prohibited Transaction" shall have the meaning set forth in Section
406 of ERISA or Code Section 4975.
"Property" shall mean in respect of any Person, all types of real,
personal or mixed property and all types of tangible or intangible property
owned or leased by such Person.
"RCRA" shall mean the Resource Conservation and Recovery Act, as the
same may be amended from time to time, 42 U.S.C. ss. 6901 et seq.
"Real Estate Assets" means the Existing Properties (including
without limitation the Mills Properties and the Community Centers) and the
Future Properties.
"Recovery Event" shall mean the receipt by the REIT, the Borrower or
any of the Consolidated Subsidiaries of any cash insurance proceeds (other than
from business interruption insurance) or condemnation award payable (i) by
reason of theft, loss, physical destruction,
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<PAGE>
damage or taking or any other similar event with respect to any Real Estate
Asset or property or assets of the REIT, the Borrower or any of the Consolidated
Subsidiaries and (ii) under any policy of insurance required to be maintained
under Section 6.3.
"Regulation D" shall mean Regulation D of the Board of Governors of
the Federal Reserve System as from time to time in effect and any successor to
all or a portion thereof establishing reserve requirements.
"Regulation G" shall mean Regulation G of the Board of Governors of
the Federal Reserve System as from time to time in effect and any successor to
all or a portion thereof.
"Regulation T" shall mean Regulation T of the Board of Governors of
the Federal Reserve System as from time to time in effect and any successor to
all or a portion thereof.
"Regulation U" shall mean Regulation U of the Board of Governors of
the Federal Reserve System as from time to time in effect and any successor to
all or a portion thereof.
"Regulation X" shall mean Regulation X of the Board of Governors of
the Federal Reserve System as from time to time in effect and any successor to
all or a portion thereof.
"REIT" shall have the meaning ascribed to such term in the first
paragraph of this Agreement.
"REIT Common Shares" shall mean the issued and outstanding shares of
Common Stock, par value $.01 per share, of the REIT.
"Release" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, disposing or
migration into the environment.
"Renewal Fee" shall have the meaning ascribed to such term in
Section 2.6 hereof.
"Renewal Election" shall have the meaning ascribed to such term in
Section 2.1 hereof.
"Renewal Election Date" shall mean July 1, 1998.
"Renewal Term" shall mean the one-year period commencing on the
second anniversary of the Effective Date.
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"Required Banks" shall mean Lending Banks whose portion in interest
of the Commitment or the outstanding Revolving Loans represent an amount greater
than 50% in interest of the Commitment or total outstanding Revolving Loans.
"Requirement of Law" means as to any Person, the certificate of
incorporation and by-laws or other organizational or governing documents of such
Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject.
"Revolving Loan" shall have the meaning ascribed to such term in
Section 2.1 hereof.
"Revolving Note" shall mean the promissory note of the Borrower
payable to the Lender, substantially in the form of EXHIBIT A hereto, evidencing
the aggregate debt of the Borrower to the Lender resulting from the Revolving
Loans.
"S&P" shall mean Standard & Poor's Ratings Group.
"SEC" shall mean the Securities and Exchange Commission, or any
other federal agency at the time administering the Securities Act of 1933, as
amended.
"Security Documents" shall mean the Pledge and Security Agreements.
"Solvent" shall have the meaning ascribed to such term in Section
5.13 hereof.
"Structuring Advisory Fee" shall mean a fee equal to 1.5% of the
Commitment payable by the Borrower to the Lender on or before the Effective
Date.
"Subsidiary" or "Subsidiaries" shall mean, as to any Person, (i) any
corporation more than 50% of whose stock of any class or classes having by the
terms thereof ordinary voting power to elect a majority of the directors of such
corporation (irrespective of whether or not at the time stock of any class or
classes of such corporation shall have or might have voting power by reason of
the happening of any contingency) is at the time owned by such Person and/or one
or more Subsidiaries of such Person and (ii) any partnership, association, joint
venture or other entity in which such Person and/or one or more Subsidiaries of
such Person has more than a 50% equity interest at the time.
"Subsidiary Partnership" shall have the meaning ascribed to such
term in the first paragraph of this Agreement.
"Taxes" shall have the meaning ascribed to such term in Section 2.12
hereof.
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"Termination Date" shall mean the date on which the Commitment is
terminated pursuant to Section 2.1, 2.7, 2.8, 2.10 or 8.2 hereof or otherwise
hereunder.
"UCC" shall mean, with respect to any jurisdiction, the Uniform
Commercial Code as then in effect in that jurisdiction. References to terms
defined in the UCC shall mean such terms in the UCC as in effect in the State of
New York.
"Units" shall mean the partnership units in the Borrower.
"Unmatured Default" shall mean any event or condition which, with
notice or the passage of time or both, would constitute an Event of Default.
"Unused Line Fee" shall have the meaning ascribed to such term in
Section 2.6 hereof.
"Value" shall mean (i) in the case of the Existing Properties (other
than Ontario Mills), the value equal to the sum of the (A) property operating
income (calculated substantially in accordance with Schedule 6.1) of the
Existing Properties for the most recent four calendar quarters less an imputed
management fee of 4.5% of annual minimum plus percentage rent (or such greater
actual fee pursuant to an agreement for a term exceeding six months or not
cancellable on less than or equal to 30 days' notice) less an imputed annual
capital expenditure and tenant improvement reserve of $.75 per square foot of
the gross leasable area of each such Existing Property divided by (B) a
capitalization rate of 9%; and (ii) in the case of the Future Properties, the
value of such Future Properties wholly owned or leased by any entity comprising
the Company shall equal such Future Property's development cost (as reasonably
approved by the Lender) and (iii) the value to the entities comprising the
Company of Future Properties wholly owned or leased by any Affiliated Entity and
Ontario Mills shall equal the equity contributed (whether classified as a
capital contribution or a loan) by such entities plus the Allocated Affiliate
Debt attributable to such Affiliated Entity.
"WARN" shall mean the Worker Adjustment Retraining and Notification
Act as same may be amended or supplemented from time to time and all rules and
regulations promulgated pursuant thereto.
ARTICLE II
LOANS; TERM OF COMMITMENT; EXPIRATION
SECTION 2.1. The Revolving Loans; Term of Commitment. (a) The
Revolving Loans. Subject to the terms and conditions herein set forth, the
Lender agrees, at any time and from time to time on any Business Day on and
after the Effective Date and prior to the Maturity Date, to make a revolving
loan or revolving loans (each, a "Revolving Loan" and, collectively, the
"Revolving Loans") to the Borrower, which Revolving Loans (i) may be repaid and
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reborrowed in accordance with the provisions hereof, and (ii) shall not exceed
at any time after giving effect thereto, that aggregate outstanding principal
amount which equals the Commitment at such time.
(b) Expiration of Commitment. Subject to the other provisions of
this Section 2.1, the Commitment shall terminate automatically on the Maturity
Date, unless the Commitment has been previously terminated in accordance with
Sections 2.7, 2.8, 2.10 or 8.2 hereof or otherwise hereunder.
(c) Renewal Terms. So long as there shall then exist no Unmatured
Default or Event of Default, the Borrower may elect to renew the Commitment (the
"Renewal Election") by giving to the Lender written notice on or before the
Renewal Election Date, which notice shall indicate that the Borrower elects to
have the Commitment renewed for the Renewal Term commencing upon the expiration
of the Initial Term, provided that on or before the Initial Maturity Date, the
Borrower pays the Renewal Fee to the Lender and that on the Initial Maturity
Date there shall exist no Unmatured Default or Event of Default.
(d) Events of Default. Notwithstanding the foregoing provisions of
this Section 2.1, upon the occurrence of an Unmatured Default or an Event of
Default, the provisions of Article VIII hereof shall apply, and the Lender may
take any action permitted thereunder.
(e) Survival, Release and Reinstatement of Obligations. (i) No event
shall release, terminate or limit the rights or remedies of the Lender or any
obligations of the Borrower or any other Person under this Agreement or any
other Loan Document, and such rights and remedies and such obligations shall
survive until the Borrower has fully paid and performed all of its respective
Obligations hereunder and thereunder in full.
(ii) Upon termination or expiration of the Commitment and upon
payment of the Obligations, the obligations of the Borrower to the Lender,
except as otherwise provided herein, shall be deemed terminated; provided, that
all of the provisions of this Agreement and the other Loan Documents (other than
the obligation to advance any Revolving Loan) shall continue to be effective or
shall be reinstated (excluding the Unused Line Fee), as the case may be, if any
payment hereunder or in connection with any of the Loan Documents at any time is
rescinded or otherwise must be returned as a result of the bankruptcy,
insolvency or reorganization of the Borrower or otherwise, all as if such
payment had not been made. No termination or expiration of the Commitment shall
affect any obligations or liabilities of the Borrower to the Lender arising out
of acts, events or circumstances taken, occurring or existing prior to such
termination. Upon such payment in full of the Obligations, the Lender shall
cancel the Revolving Note and return same duly cancelled to the Borrower. The
provisions of Section 10.5 shall survive the termination of this Agreement.
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SECTION 2.2. Minimum Amount of each Borrowing. The aggregate
principal amount of each Borrowing of Revolving Loans shall not be less than
$2,000,000 and, if greater, shall be a whole multiple of $1,000,000.
Notwithstanding the foregoing, if at any time the unused portion of the
Commitment is less than $2,000,000, then the minimum aggregate amount of
Borrowing at such time shall be equal to the amount of such unused portion of
the Commitment.
SECTION 2.3. Procedure for Borrowing. Each Revolving Loan shall be
made upon receipt by the Lender of an irrevocable written notice from the
Borrower (which notice must be received by the Lender prior to 1:00 P.M., New
York City time) at least five (5) Business Days prior to the requested borrowing
date. Each such notice (a "Notice of Borrowing") shall be substantially in the
form of EXHIBIT C hereto and shall specify in each case: (i) the amount to be
borrowed and (ii) the requested borrowing date, which shall be a Business Day.
Subject to the other terms, provisions and conditions of this
Agreement, on the date requested in such notice, the Lender shall make available
to the Borrower, in immediately available funds, the proceeds of the requested
Revolving Loan.
SECTION 2.4. Revolving Note. The Revolving Loans shall be evidenced
by the Revolving Note, dated the Effective Date, and representing the obligation
of the Borrower to pay, on the Maturity Date, the lesser of (i) the Commitment
or (ii) the aggregate principal amount of the Revolving Loans from time to time
outstanding from the Lender, together with interest thereon. The Lender is
hereby authorized to endorse the date and amount of each Revolving Loan, and
each payment or repayment of principal thereof on the schedule (including
additional pages thereto added by the Lender as required) annexed to and
constituting a part of each Revolving Note, which endorsement shall constitute
prima facia evidence of the accuracy of the information so endorsed, absent
manifest error, and the Lender hereby agrees to provide the Borrower, with a
copy of each endorsement; provided, that the failure of the Lender to insert any
such date or amount or other information on such schedule or the failure of the
Lender to provide the Borrower with a copy of any endorsement shall not in any
manner affect the obligation of the Borrower to repay the aggregate amount of
the Revolving Loans in accordance with the terms of this Agreement.
SECTION 2.5. Interest.
(a) Except to the extent otherwise prohibited by applicable law, the
Revolving Note until repaid in full shall bear interest on the aggregate
outstanding principal balance of the Revolving Loans at a rate per annum equal
to the sum of the Applicable Margin plus LIBOR. Such rate of interest shall be
computed on the basis of a 360-day year for the actual number of days elapsed.
Interest shall accrue during each Interest Period, from and including the first
day of such Interest Period to and including the last day of such Interest
Period. All accrued and unpaid interest under this Section 2.5 shall be payable
monthly, in arrears, on the first day of
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the succeeding calendar month; provided, however, that upon the occurrence or
during the continuance of an Event of Default, the Borrower shall pay interest
on the aggregate principal balance of Revolving Loans, on demand, at a rate per
annum equal at all times to five percent (5%) per annum above the rate of
interest otherwise payable.
(b) If at any time the Lender shall determine in good faith (which
determination shall be conclusive and binding upon the Borrower absent manifest
error) that (w) U.S. dollar deposits in an amount equal to the aggregate
principal balance of Revolving Loans are not generally available at such time in
the London interbank Eurodollar market, (x) reasonable means do not exist for
ascertaining LIBOR, (y) LIBOR plus the Applicable Margin on the aggregate
principal balance of Revolving Loans would be in excess of the maximum interest
rate which the Borrower may lawfully pay or (z) the Lender may not apply a
LIBOR-based rate of interest to the aggregate principal balance of Revolving
Loans, or fund any portion thereof bearing interest at LIBOR in the London
interbank Eurodollar market, in accordance with applicable laws, regulations and
legal requirements, then the Lender so long as such prohibition is in effect
shall notify the Borrower, and the aggregate principal balance of Revolving
Loans shall bear interest at the Prime Rate.
(c) If due to any change of law, regulation or requirement the
Lender shall be legally prohibited from applying LIBOR plus the Applicable
Margin then in effect under the Revolving Note in accordance with applicable
laws, regulations and requirements, then the rate of interest based upon LIBOR
plus the Applicable Margin shall automatically be converted to the Prime Rate if
and for so long as such law, regulation or requirement is applicable, in which
event the Borrower shall, at its option, either commence and continue to pay the
Prime Rate or prepay the aggregate principal balance of Revolving Loans
including all interest accrued and unpaid thereon, all Breakage Costs (if any)
relating to or arising from such prepayment, in each case on the earlier of (x)
the last day of the Interest Period with respect thereto or (y) the date on
which it becomes unlawful for the Lender to charge a rate of interest based upon
LIBOR. The Borrower agrees to pay to the Lender, within five (5) days after
demand by the Lender, all costs and expenses incurred by the Lender as a result
of such change of law directly attributable to this Agreement or the Revolving
Note. This statement as to the amount of such Breakage Cost, or additional
interest, costs and expenses furnished to the Borrower by the Lender shall be
conclusive and binding upon the Borrower, absent manifest error.
(d) The Borrower agrees that each good faith determination of the
Prime Rate shall be made by the Lender and shall be conclusive and binding upon
the Borrower absent manifest error. The Borrower further acknowledges that the
Prime Rate merely serves as a basis upon which effective rates of interest are
calculated for loans making reference thereto and that such Prime Rate may not
be the lowest or best rate at which interest is calculated or credit is
extended.
SECTION 2.6. Fees. The Borrower shall pay to the Lender (i) an
unused line fee (the "Unused Line Fee") at the rate of .25% per annum, from and
after the Effective Date
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through and including the date on which all of the Revolving Loans are repaid,
on the aggregate of the average daily unused portion of the Commitment (as same
may be reduced pursuant to the express terms hereof), such Unused Line Fee shall
be due and payable quarterly in arrears on the last Business Day of each March,
June, September and December and on the Maturity Date or such earlier date upon
which the Commitment is terminated, and (ii) in the event that the Borrower
elects to renew the Commitment pursuant to Section 2.1(c) hereof, a renewal fee
(the "Renewal Fee") equal to 0.50% per annum of the Commitment, such Renewal Fee
to be paid to the Lender on or before the Initial Maturity Date.
SECTION 2.7. Reduction of Commitment; Voluntary Termination of
Unutilized Commitment. (a) The Borrower shall have the right at any time from
time to time, upon at least three (3) Business Days' prior written notice to the
Lender, without premium or penalty, to terminate in whole or permanently reduce
ratably in part the unused portions of the Commitment; provided, that each
partial reduction shall be in the aggregate amount of not less than $1,000,000
or an integral multiple of $1,000,000 in excess thereof.
SECTION 2.8. Payments; Termination of Commitment. (a) All payments
required to be made to the Lender hereunder shall be made, without set-off or
counterclaim, not later than 11:00 a.m., prevailing New York City time, on the
date due, in same day or immediately available Dollars, to such account as the
Lender shall specify from time to time by notice to the respective Borrower.
Funds received after that time shall be deemed to have been received by the
Lender on the following Business Day.
(b) Unless earlier paid in accordance with the terms of this
Agreement, the Borrower shall repay to the Lender the entire unpaid principal
amount of the Revolving Loans together with all accrued but unpaid interest to
such date on Maturity and all other amounts to the Lender hereunder or under any
other Loan Document, and the Commitment shall terminate in its entirety on such
date.
(c) If any payment under this Article II becomes due and payable on
a day which is not a Business Day, the payment thereof shall be extended to the
next succeeding Business Day.
SECTION 2.9. Use of Proceeds. The proceeds of the Revolving Loans
shall, unless otherwise agreed in writing by the Lender and the Borrower, be
used by the Borrower (i) to repay any Existing Debt of the Company approved by
the Lender, (ii) to develop and make improvements to the Mills Properties and
(iii) for general working capital purposes.
SECTION 2.10. Illegality. In the event that the Lender shall have
determined in good faith that the adoption of any applicable law, rule or
regulation, or any change therein, or any change in the interpretation or
administration thereof by any central bank or Governmental Authority charged
with the interpretation or administration thereof, or compliance by the Lender
with any request or directive of any such central bank or Governmental Authority
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shall make it unlawful for the Lender to make, maintain or fund all or any of
the Revolving Loans, the Lender shall so notify the Borrower. Upon the giving of
any such notice to the Borrower, (i) the Commitment shall be terminated as to
the portion of the Revolving Loans which are unlawful and (ii) the Borrower
shall prepay in full such portion of the Revolving Loans, together with accrued
interest thereon any other amounts which may be due to the Lender under this
Agreement on or before ten (10) Business Days following such notice to the
Borrower unless the law, rule or regulation, as the case may be, making such
Revolving Loans unlawful shall be rescinded, modified or amended thereby making
such Revolving Loans lawful prior to the expiration of such period.
SECTION 2.11. Requirements of Law. (a) In the event that any change
in any Requirement of Law or in the interpretation or application thereof or
compliance by the Lender with any request or directive from any central bank or
other Governmental Authority issued or effective after the date hereof:
(i) does or shall subject the Lender to any Taxes (as hereinafter
defined) of any kind whatsoever with respect to this Agreement, the
Revolving Note or any other Loan Document, or changes the basis of
taxation of payments to the Lender of principal, the Fees, interest
or any other amount payable hereunder (except for changes in the
rate of tax on the overall gross or net income of the Lender (or
franchise tax in lieu thereof));
(ii) does or shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against
assets held by, or deposits or other liabilities in or for the
account of, advances or loans by, or other credit extended by, or
any other acquisition of funds by, any office of the Lender; or
(iii) does or shall impose on the Lender any other material and
adverse condition;
and the result of any of the foregoing is to increase the cost to the Lender, by
any amount which the Lender reasonably deems to be material, of making, renewing
or maintaining advances or extensions of credit or to reduce any amount
receivable hereunder, in each case, in respect of all or any of the Revolving
Loans, then, in any such case, the Borrower shall (x) promptly pay the Lender
without duplication, upon its demand, any additional amounts necessary to
compensate the Lender for such additional cost or reduced amount receivable or
(y) within ten (10) Business Days after notice from the Lender of such increased
costs, repay the principal amount of Revolving Loans outstanding as of the date
of such repayment together with all interest accrued thereon, Fees and any other
amounts owing hereunder or under any other Loan Document. If the Lender becomes
entitled to claim any additional amounts pursuant to this Section 2.11, the
Lender shall notify the Borrower of the event by reason of which it has become
so entitled. A certificate as to any additional amounts payable pursuant to the
foregoing
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sentence submitted by the Lender to the Borrower shall be conclusive in the
absence of manifest error.
(b) In the event that the Lender shall have determined in good faith
that the adoption of any law, rule, regulation or guideline regarding capital
adequacy, or any change therein or in the interpretation or application thereof
or compliance by the Lender or any corporation controlling the Lender with any
request or directive regarding capital adequacy (whether or not having the force
of law) from any central bank or Governmental Authority issued or effective
after the date hereof, including, without limitation, the issuance of any final
rule, regulation or guideline, does or shall have the effect of reducing the
rate of return on the Lender's or such corporation's capital as a consequence of
its obligations hereunder to a level below that which the Lender or such
corporation could have achieved but for such adoption, change or compliance
(taking into consideration the Lender's or such corporation's policies with
respect to capital adequacy) by an amount deemed by the Lender to be material,
then from time to time, after submission by the Lender to the Borrower of a
written request therefor, the Borrower shall (x) pay to the Lender without
duplication such additional amount or amounts as will compensate the Lender or
such corporation for such reduction or (y) within ten (10) Business Days after
notice from the Lender of such increased costs, repay the principal amount of
the Revolving Loans outstanding as of the date of such repayment together with
all interest accrued thereon, Fees and any other amounts owing hereunder or
under any other Loan Document. The provision of this Section 2.11 shall survive
the termination of this Agreement and the Commitment.
SECTION 2.12. Taxes. (a) All payments made by the Borrower under
this Agreement and the Revolving Note shall be made free and clear of, and
without deduction or withholding for or on account of, any present or future
income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions
or withholdings, now or hereafter imposed, levied, collected, withheld or
assessed by any Governmental Authority, excluding gross or net income taxes (and
franchise taxes or other taxes imposed in lieu of net income taxes) imposed on
the Lender as a result of a present, former or future connection between the
jurisdiction of the government or taxing authority imposing such tax and the
Lender or any political subdivision or taxing authority thereof or therein (all
such non-excluded taxes, levies, imposts, duties, charges, fees, deductions and
withholdings being hereinafter called "Taxes"). If any Taxes are required to be
withheld by the Borrower from any amounts payable to the Lender hereunder, under
the Revolving Note or any other Loan Document, the amounts so payable to the
Lender shall be increased to the extent necessary to yield to the Lender (after
payment of all such Taxes) the full amount due hereunder together with interest
and any other amounts payable hereunder at the rates or in the amounts specified
in this Agreement, the Revolving Note or any other Loan Document. The Borrower
shall pay all Taxes required to be paid by it and whenever any such Taxes are
payable as promptly as possible and thereafter the Borrower shall send to the
Lender for its own account a certified copy of an original official receipt
received by the Borrower showing payment thereof. If the Borrower fails to pay
any Taxes when due to the appropriate taxing authority or fail to remit to the
Lender the required receipts or other required
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documentary evidence, the Borrower shall indemnify the Lender for any
incremental taxes, interest or penalties that may become payable by the Lender
as a result of any such failure. At the request of the Borrower and solely at
the Borrower's expense, the Lender shall use reasonable efforts to contest the
payment of such Taxes that the Borrower believes were not correctly or legally
asserted. If the Lender receives a refund in respect of any Taxes for which the
Borrower has made payment hereunder, the Lender shall repay such refund to the
Borrower. The agreements in this Section 2.12 shall survive the termination of
this Agreement and the repayment of the Revolving Note.
(b) In the event that the Borrower has actual knowledge that it is
required to, or there arises in the Borrower's reasonable opinion a substantial
likelihood that the Borrower will be required to, pay an increased amount or
otherwise indemnify the Lender for or on account of any withholding of United
States Federal income tax pursuant to Section 2.12(a) above, the Borrower will
promptly notify the Lender of the nature of such withholding, and shall furnish
such information to the Lender, with respect to such withholding as the Lender
may reasonably request. In the event of any knowledge or opinion of the Borrower
described in the preceding sentence, the Borrower and the Lender shall consult
in good faith to determine what may be required to avoid or reduce the
withholding tax, and shall each use reasonable efforts to avoid or reduce such
withholding tax.
ARTICLE III
PREPAYMENTS; REPAYMENTS
SECTION 3.1. Voluntary Prepayments. The Borrower shall have the
right, upon at least three (3) Business Days' prior written notice to the
Lender, to prepay the Revolving Loans made to it, without premium or penalty, in
whole or in part at any time and from time to time; provided that each
prepayment shall be in an aggregate amount of not less than $2,000,000, unless
the aggregate outstanding principal balance of the Revolving Loans is less than
$2,000,000. Notwithstanding anything contained herein to the contrary, in the
event of any prepayment or other payment of the principal amount of the
Revolving Loans in any manner other than upon the expiration of an Interest
Period, the Borrower shall pay to the Lender (i) accrued interest to the date of
such prepayment or payment, as the case may be, on the portion of the principal
balance of the Revolving Loans being prepaid or paid and (ii) any and all costs
incurred by the Lender in connection with such prepayment or payment, as the
case may be, including, but not limited to, the Breakage Costs (if applicable).
SECTION 3.2. Mandatory Repayments and Commitment Reductions. (a) On
any day on which the aggregate outstanding principal amount of Revolving Loans
exceeds the Commitment as then in effect, the Borrower shall repay the principal
of Revolving Loans in an aggregate amount equal to such excess.
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(b) On each date on and after the Effective Date upon which any
entity comprising the Company receives or is entitled to receive its
proportionate share of any proceeds from the refinancing by any entity
comprising the Company or any Affiliated Entity of any of the Real Estate
Assets, the Borrower shall repay (i) the principal of outstanding Revolving
Loans and/or (ii) any Debt secured by any of the Existing Properties in an
amount equal to 100% of the cash proceeds of such refinancing which such entity
receives or (if such funds are available) is entitled to receive after the
repayment of any Debt secured by such Real Estate Asset (net of financing fees
and other reasonable out-of-pocket costs paid to unaffiliated third parties
associated therewith), and the Commitment shall be reduced dollar-for-dollar by
the amount of any repayment required to be made pursuant to clause (i) of this
subparagraph. Notwithstanding the foregoing: (1) the owner of Ontario Mills may
return to the Borrower up to $5,000,000 of its proportionate share of any
proceeds from the next refinancing of any Debt secured by Ontario Mills and the
Borrower shall have no obligation to apply such proceeds to the repayment of
principal of outstanding Revolving Loans; and (2) the owner of Franklin Mills
may return to the Borrower or any other entity comprising the Company an amount
equal to such entity's proportionate share of any proceeds from the refinancing
of any Debt secured by Franklin Mills but not exceeding the amount, if any,
contributed as capital by such entity to the owner of Franklin Mills to reduce
the Existing Debt secured by Franklin Mills, it being agreed that in order to
obtain the benefit of this clause (2) such capital shall be derived solely from
the proceeds of the issuance of Capital Interests by either the Borrower and/or
the REIT.
(c) On each date on and after the Effective Date upon which any
entity comprising the Company receives or (if such funds are available) is
entitled to receive Cash Proceeds from any Asset Sale of or relating to an
Existing Property (other than a sale of (x) peripheral vacant land pads or (y)
one anchor store pad per annum or up to three (3) anchor pads at Ontario Mills,
provided that the proceeds of such Ontario Mills anchor pads are applied to the
cost of Capital Expenditures at Ontario Mills or to repay Debt secured by
Ontario Mills), the Borrower shall repay (i) the principal of outstanding
Revolving Loans and/or (ii) any Debt secured by any of the Existing Properties
in an amount equal to 100% of the Net Cash Proceeds, and the Commitment shall be
reduced dollar-for-dollar by the amount of any repayment required to be made
pursuant to clause (i) of this subparagraph.
(d) Within 15 days following each date on and after the Effective
Date upon which any entity comprising the Company receives or (if such funds are
available) is entitled to receive any proceeds from any Recovery Event, the
Borrower shall repay (i) the principal of the outstanding Revolving Loans and/or
(ii) any Debt secured by any of the Existing Properties in an amount equal to
100% of the remaining proceeds of such Recovery Event after being applied in
accordance with the terms of any mortgage, deed of trust or other security
instrument, held by a non-Affiliate of any entity comprising the Company,
securing the Debt on the applicable Real Estate Asset (net of costs of
collection incurred in connection with such Recovery Event and, so long as no
Unmatured Default or Event of Default then exists, to any repair and restoration
costs), and the Commitment shall be reduced dollar-for-dollar by the amount of
any repayment required to be made pursuant to clause (i) of this subparagraph.
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ARTICLE IV
CONDITIONS OF LENDING
SECTION 4.1. Conditions Precedent to Making Initial Revolving Loans.
(a) The obligation of the Lender to make Revolving Loans on the Initial
Borrowing Date is subject to the condition precedent that the Lender shall have
received (unless otherwise specifically agreed in writing) on or before the
Initial Borrowing Date the following, each dated such day (unless otherwise
indicated), in form and substance satisfactory to the Lender:
(i) The Revolving Note executed by the Borrower to the order of the
Lender;
(ii) A copy of each of the Partnership Agreements governing the
Borrower and each Subsidiary Partnership, including all amendments thereto,
certified by a general partner of the Borrower and of each Subsidiary
Partnership, as the case may be, as of a date within fifteen (15) days of the
Effective Date;
(iii) A copy of the certificate or articles of incorporation and the
by-laws of each general partner of the Borrower and of each Subsidiary
Partnership, each document certified as of a date within fifteen (15) days prior
to the Effective Date by the Secretary of State of the jurisdiction of
incorporation of each such general partner, together with (1) certificates of
such official attesting to the good standing of each such general partner and
(2) certified copies of the resolutions of the board of directors of each such
general partner approving this Agreement, the other Loan Documents and all
documents evidencing other necessary partnership or corporate action and
governmental approvals, if any, with respect to this Agreement and the other
Loan Documents.
(iv) Certificates signed on behalf of the Borrower and each
Subsidiary Partnership, as the case may be, by its respective general partner,
dated the Initial Borrowing Date (the statements made in such certificate shall
be true, to the certifying officer's knowledge, on and as of the Initial
Borrowing Date), certifying as to (1) the absence of any amendments to the
Partnership Agreement of the Borrower or of any Subsidiary Partnership since the
Effective Date, (2) a certificate of such partnerships as partnerships organized
under the laws of the jurisdiction of their respective organization, and the
absence of any proceeding for the liquidation of the Borrower or any Subsidiary
Partnership, (3) the truth of the representations and warranties contained in
the Loan Documents as though made on and as of the Initial Borrowing Date and
(4) the absence of any event occurring and continuing, or resulting from the
initial Borrowing, that constitutes an Event of Default;
(v) The Pledge and Security Agreements dated the Effective Date,
duly executed and, if requested, acknowledged, and in each case in form and
substance satisfactory to the Lender, together with, in the case of the General
Pledge and Security Agreement, (if the partnership interests therein are
evidenced by certificates) certificates evidencing the Borrower's
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partnership interest in each Subsidiary Partnership, which certificates shall be
accompanied by undated powers duly executed in blank and in any event undated
assignments of such partnership interests duly executed in blank for use solely
upon the due exercise of the Lender's remedies thereunder, and, in the case of
the Intercompany Pledge and Security Agreement, the Intercompany Notes
applicable thereto, if any, and each Pledge and Security Agreement shall be in
full force and effect;
(vi) UCC Financing Statements in respect of the Collateral duly
filed in each jurisdiction as may be necessary or, in the opinion of the Lender,
desirable to perfect the security interests intended to be created by the Pledge
and Security Agreements in the Borrower's limited partnership interest in each
Subsidiary Partnership, all Intercompany Debt and the other Collateral
thereunder required by the Lender;
(vii) Certificates of the Secretary or an Assistant Secretary of the
REIT certifying the names and true signatures of the officers of the REIT
authorized to execute the Loan Documents and the other documents to be delivered
hereunder;
(viii) All other corporate and partnership documents, instruments
and agreements in connection with the transactions contemplated by this
Agreement and the other Loan Documents reasonably satisfactory in form and
substance to the Lender, and the Lender shall have received all information and
copies of all documents and papers, including records of corporate proceedings,
governmental approvals, good standing certificates and bring-down telegrams, if
any, which the Lender reasonably may have requested in connection therewith,
such documents and papers where appropriate to be certified by proper corporate,
partnership or governmental authorities;
(ix) An opinion of Rudnick & Wolfe, counsel to the Borrower,
substantially in the form of EXHIBIT D hereto and as to such other matters as
the Lender may reasonably request;
(x) Certificates of insurance complying with the requirements of
Section 6.3, for the business and properties of each entity comprising the
Company, and in scope, form and substance satisfactory to the Lender, including
by naming the Lender as an additional insured and/or loss payee, as the case may
be, and stating that such insurance shall not be cancelled or revised without at
least thirty (30) days' prior written notice by the respective insurer to the
Lender; and
(xi) Payment by the Borrower of (i) the Structuring Advisory Fee to
the Lender and (ii) the fees and disbursements owed by the Lender to the
Lender's counsel in connection with the preparation, negotiation and execution
of this Agreement and the other Loan Documents, the review of all materials and
documents pertaining hereto and the perfection of all security interests of the
Lender in the Collateral and all other out-of-pocket expenses of the Lender.
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SECTION 4.2. Conditions Precedent to Each Loan. (a) The obligation
of the Lender to make any Borrowing (including the initial Borrowing) shall be
subject to the further conditions precedent that on the date of each such
Borrowing (x) the following statements shall be true and (y) the Lender shall
have received a certificate signed by an Authorized Representative of the
Borrower, dated the date of such Borrowing, stating that:
(i) The representations and warranties contained in Article V are
true and correct in all material respects on and as of the date of such
Borrowing, before and after giving effect to such Borrowing and to the
application of the proceeds therefrom, as though made on and as of such date;
and
(ii) To the best of the Borrower's knowledge, no event has occurred
and is continuing, or would result from such Borrowing or from the application
of the proceeds therefrom, which constitutes an Event of Default or would
constitute an Event of Default but for the requirement that notice be given or
time elapsed or both.
(b) The Initial Borrowing Date shall have occurred.
(c) The Lender has received such other approvals, opinions,
appraisals or documents as the Lender may reasonably request.
(d) Each of the giving of the applicable Notice of Borrowing and the
acceptance by the Borrower of the proceeds of any Borrowing shall constitute a
representation and warranty by the Borrower that on the date of such Borrowing
the statements set forth in paragraphs (i) and (ii) above are true.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
In order to induce the Lender to enter into this Agreement and the
other Loan Documents and to make the Revolving Loans, each of the REIT, the
Borrower and each Subsidiary Partnership makes the following representations,
warranties and agreements, all of which shall survive the execution and delivery
of this Agreement and the Revolving Note and the making of the Revolving Loans,
with the occurrence of the Effective Date and the incurrence of each Revolving
Loan on or after the Effective Date being deemed to constitute in all material
respects a representation and warranty that the matters specified in this
Article V are true and correct in all material respects on and as of the
Effective Date and on the date of each such Revolving Loan (it being understood
and agreed that any representation or warranty which by its terms is made as of
a specified date shall be required to be true and correct in all material
respects only as of such specified date).
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SECTION 5.1. Status and Standing. (a) Each of the REIT, the Borrower
and each Subsidiary Partnership (i) is a duly formed and validly existing
corporation or limited partnership, as the case may be, in good standing under
the laws of the jurisdiction of its formation and (ii) is duly qualified and is
authorized to do business and is in good standing in each jurisdiction where the
ownership, leasing or operation of its property or the conduct of its business
requires such qualification;
(b) Schedule 5.1(b) to this Agreement states (i) the name of each
Subsidiary Partnership, its jurisdiction of formation and the percentage of its
partnership interests and other Capital Interests owned therein by the Borrower
and each other Subsidiary Partnership, and (ii) the name of each of the
Borrower's Affiliated Entities (other than its Subsidiaries) and the nature of
the affiliation. Each of such Subsidiary Partnership is a duly formed and
validly existing limited partnership or other entity and in good standing under
the laws of its jurisdiction of organization, and is duly licensed and qualified
and in good standing in each jurisdiction where the failure to be duly formed
and to qualify as such would have a Material Adverse Effect. The Borrower has
good title to all of the partnership interests or other Capital Interests it
purports to own of each Subsidiary Partnership, free and clear in each case of
any Lien or other adverse interest or claim; and
(c) Each of the entities comprising the Company has the corporate,
partnership or company power, authority and legal right to own, or lease and
enjoy undisturbed, the assets of its business and engage in its business as now
conducted and presently proposes to conduct.
SECTION 5.2. Power and Authority. The Borrower has the partnership
power, authority and legal right to enter into and execute, deliver, carry out
the terms of, and perform this Agreement, the Revolving Note, to make the
Borrowings, and each of the other entities comprising the Company has the
corporate, partnership or company power, authority and legal right to execute,
deliver and carry out the terms of the Loan Documents to which it is a party,
and to incur the obligations provided for herein and therein, all of which have
been duly authorized by all proper and necessary corporate, partnership or
company action and are in full compliance with their respective organizational
documents. No consent or approval of, or other action by, any partners, any
Governmental Authority or any other Person, which has not already been obtained,
is required to authorize, or is required in connection with the execution,
delivery and performance of, this Agreement, the Revolving Note or any of the
other Loan Documents, or is required as a condition to the validity or
enforceability of this Agreement, the Revolving Note or any of the other Loan
Documents and any other document entered into or furnished pursuant hereto.
SECTION 5.3. Enforceable Obligations. Each Loan Document to which it
is a party, and each other agreement or undertaking executed by each entity
comprising the Company and delivered to the Lender pursuant to Section 4.1 and
4.2 hereof, constitutes the legal, valid and binding obligation of each such
entity, enforceable against such entity in accordance with its respective terms,
except to the extent that the enforceability thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws generally affecting creditors' rights and by equitable principles
(regardless of whether enforcement is sought in equity or at law) and there are
no actions, suits or proceedings pending or, to the
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knowledge of such entity, threatened against, or affecting, such entity or any
of its respective officers calling into question the legality, validity or
enforceability of any thereof.
SECTION 5.4. No Violation of Agreements; Compliance with Law. No
entity comprising the Company is in default under any loan agreement, indenture,
mortgage, mortgage deed, deed of trust, agreement or other instrument to which
it is a party or by which it or any of its properties may be bound, which
default would constitute a Material Adverse Effect. Neither the execution and
delivery of the Loan Documents nor any of the instruments and documents to be
delivered by any entity comprising the Company pursuant to this Agreement or the
other Loan Documents, nor the consummation of the transactions herein and
therein contemplated, nor compliance with the provisions hereof or thereof will,
to the best of the Borrower's knowledge, violate any law or regulation, or any
order or decree of any court or governmental instrumentality, or will, to the
best of the Borrower's knowledge, conflict with, or result in the breach of, or
constitute a default under, any indenture, mortgage, mortgage deed, deed of
trust, agreement or other instrument to which such entity is a party or by which
any such entity may be bound, or result in the creation or imposition of any
Lien upon any of the properties thereof in violation of this Agreement, or
violate any provision of the formation documents of, or any provisions relating
to Capital Interests in, any entity comprising the Company, which violation,
conflict, breach, default, creation or imposition would result in a Material
Adverse Effect.
SECTION 5.5. No Litigation. There are no actions, suits or
proceedings pending or threatened against or affecting any entity comprising the
Company or any of its respective officers or directors before any court,
arbitrator or governmental or administrative body or agency that, if adversely
determined, might reasonably have a Material Adverse Effect. No injunction,
writ, restraining order or other order of any nature adverse to any entity
comprising the Company or the conduct of its business or inconsistent with the
due consummation of such transactions has been issued by any Governmental
Authority which if issued would constitute a Material Adverse Effect with
respect to such entity. To the best of the Borrower's knowledge, no entity
comprising the Company is in default under any applicable statute, rule, order,
decree or regulation of any court, arbitrator or governmental or administrative
body or agency having jurisdiction over such entity, which default would
constitute a Material Adverse Effect in respect of such entity.
SECTION 5.6. Taxes and Claims. Each entity comprising the Company
and each Affiliated Entity has filed or caused to be filed all federal, state
and local tax returns and reports that are required to be filed and has paid or
discharged or caused to be paid or discharged all taxes shown to be due and
payable on said returns or on any assessments made against it or any Affiliated
Entity or against any of its or any Affiliated Entity's income, profits or
property and all other taxes, fees or charges imposed on it or any Affiliated
Entity or any of its or any Affiliated Entity's income, profits and property by
any Governmental Authority (other than those the amount or validity of which are
currently being contested diligently in good faith by appropriate proceedings
(except in cases in which there is an unsecured risk of forfeiture of any of the
Real Estate Assets) and in respect of which adequate reserves in conformity with
GAAP have been provided on the books of each entity comprising the Company); and
no tax Liens have been filed and no claims are being asserted with respect to
any such taxes, fees or
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other charges. Each entity comprising the Company has paid and discharged all
lawful claims for labor, material, supplies and anything else that might or
could, if unpaid, become a Lien on any of its or any Affiliated Entity's
properties (other than those the amount or validity of which are currently being
contested diligently in good faith by appropriate proceedings (except in cases
in which there is an unsecured risk of forfeiture of any of the Real Estate
Assets) and in respect of which adequate reserves in conformity with GAAP have
been provided on the books of each entity comprising the Company).
SECTION 5.7. Employee Benefit Plans. (a) None of the Plans
maintained by any entity comprising the Company, any Affiliated Entity or any
ERISA Affiliate at any time or the trusts created thereunder has engaged in a
Prohibited Transaction that could subject any such Plan or trust to a material
tax or penalty on Prohibited Transactions imposed under Code Section 4975 or
ERISA Sections 502(i) or 502(1);
(b) The consummation of the transactions contemplated by this
Agreement does not involve any Prohibited Transaction which could subject any
entity comprising the Company, any Affiliated Entity or any ERISA Affiliate to
any material liability, tax or penalty imposed under Code Section 4975 or ERISA
Sections 502(i) or 502(1);
(c) No entity comprising the Company or any Affiliated Entity or
ERISA Affiliate contributes to or maintains, or has since 1974 contributed or
maintained, any employee pension benefit plan within the meaning of Section 3(2)
of ERISA, including any employee pension benefit plan subject to Title IV of
ERISA or subject to the funding requirements of Section 412 of the Code;
(d) All Plans of any entity comprising the Company, any Affiliated
Entity and any ERISA Affiliate have at all times been operated and maintained in
compliance with ERISA and the applicable provisions of the Code (including, but
not limited to, Code Section 105). All Plans of any entity comprising the
Company, any Affiliated Entity and each ERISA Affiliate have complied with, and
are in compliance with, Code Section 4980B and Treasury Regulations (whether
proposed or final) relating thereto. No Plan of any entity comprising the
Company, any Affiliated Entity or any ERISA Affiliate provides benefits to
retired employees of such entity or such ERISA Affiliate, except to the extent
required under Code Section 4980B and Treasury Regulations (whether proposed or
final) relating thereto;
(e) To the best of the Borrower's knowledge, no entity comprising
the Company or any Affiliated Entity or ERISA Affiliate has individually or in
the aggregate taken actions or undergone events which would cause liability to
arise under WARN or regulations issued thereunder, or any applicable state law
regarding employee terminations, mass layoffs or plant closings, and no entity
comprising the Company or any Affiliated Entity or ERISA Affiliate is aware of
the existence of any such actions or events; and
(f) Each entity comprising the Company and each Affiliated Entity
and ERISA Affiliate have made all contributions required to be made under each
Plan as of the date of this Agreement.
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SECTION 5.8. No Event of Default. To the best of the Borrower's
knowledge, no Event of Default has occurred and is continuing and no condition
which with notice or lapse of time, or both, would constitute an Unmatured
Default or an Event of Default has occurred and is continuing.
SECTION 5.9. Financial Statements. (a) The Borrower has heretofore
furnished to the Lender the consolidated financial statements of the Borrower
for and as of the year ended December 31, 1995, as examined and reported on by a
firm of independent certified public accountants of recognized national standing
reasonably acceptable to the Lender, and the consolidated financial statements
of the Borrower for and as of the end of the six month period ending June 30,
1996, as certified by the chief financial officer of the Borrower. Such
financial statements (in the case of the statements as of June 30, 1996,
including the notes thereto) present fairly, in all material respects, the
financial condition of the Borrower as of the end of such fiscal year and as of
the end of such period and the results of their operations and the cash flows
for the fiscal year and months then ended, all in conformity with GAAP applied
on a basis consistent with that of the preceding fiscal year. Since June 30,
1996, there has been no change having a Material Adverse Effect on the
condition, financial or otherwise, of the Borrower thereof.
(b) All financial statements concerning the Borrower which will
hereafter be furnished by the Borrower to the Lender pursuant to this Agreement,
will be prepared in accordance with GAAP consistently applied throughout the
periods involved (except as disclosed therein and, in the case of interim
financial statements, non-material recurring year-end audit adjustments and the
absence of footnotes) and will present fairly the financial condition of the
corporations or partnerships covered thereby as at the dates thereof and the
results of their operations for the periods then ended. Except to the extent
reflected or reserved against in such financial statements, neither the Borrower
nor any of its Subsidiaries will have any material liabilities or obligations of
any nature, whether due or to become due, of a type that would be required in
accordance with GAAP to be reflected or reserved against in such financial
statements.
SECTION 5.10. Environmental Laws, Etc. (a) Each entity comprising
the Company and, to the best of its knowledge, each Affiliated Entity is in
compliance with all applicable Environmental Laws and the requirements of any
permits issued under such Environmental Laws. There are no pending or threatened
Environmental Claims against any entity comprising the Company or, to the best
of its knowledge, any Affiliated Entity or any of the Real Estate Assets owned
or operated by any such Person. There are no facts, circumstances, conditions or
occurrences on any of the Real Estate Assets owned or operated by any entity
comprising the Company or, to the best of its knowledge, any Affiliated Entity
that could reasonably be expected (i) to form the basis of an Environmental
Claim against any entity comprising the Company or, to the best of its
knowledge, any Affiliated Entity or any such Real Estate Asset or (ii) to cause
any such Real Estate Asset to be subject to any restrictions on the ownership,
occupancy, use or transferability of such Real Estate Asset by any entity
comprising the Company, or to the best of its knowledge, or any Affiliated
Entity under any applicable Environmental Law.
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(b) Hazardous Materials have not at any time been generated, used,
treated or stored on, or transported to or from, any of the Real Estate Assets
owned or operated by any entity comprising the Company or, to the best of its
knowledge, any Affiliated Entity where such generation, use, treatment or
storage has violated any Environmental Law unless appropriate remediation
thereof has been or is being undertaken. Hazardous Materials have not at any
time been Released on or from any of the Real Estate Assets owned or operated by
any entity comprising the Company or, to the best of its knowledge, any
Affiliated Entity where such Release has violated any applicable Environmental
Law unless appropriate remediation thereof has been or is being undertaken. To
the best of the knowledge of each entity comprising the Company, there are no
underground storage tanks or surface impoundments located on, under or within
any of the Real Estate Assets that are not in compliance with all Environmental
Laws.
SECTION 5.11. No Adverse Conditions. Neither the business of any
entity comprising the Company or, to the best of its knowledge, any Affiliated
Entity nor any Real Estate Asset are affected by any fire, explosion, accident,
eminent domain, strike, lockout or other labor dispute, drought, storm, hail,
earthquake, embargo, act of God or of the public enemy or other casualty (which
is not covered by insurance or in the process of repair) which has resulted in
or may reasonably be expected to result in a Material Adverse Effect.
SECTION 5.12. Solvency. The Borrower on a consolidated basis is and
after the consummation of the transactions contemplated by the Loan Documents
and receipt and application by the Borrower of its Borrowings in accordance with
the terms of this Agreement will be, Solvent. For the purposes of this Agreement
"Solvent" shall mean, with respect to any Person, that the value of the assets
of such Person is, on the date of determination, greater than the total amount
of liabilities and that as of such date such Person is able to pay all
liabilities of such Person as they mature.
SECTION 5.13. Margin Stock. No entity comprising the Company or any
Affiliated Entity is engaged in the business of extending credit for the purpose
of purchasing or carrying Margin Stock, and no proceeds of any Borrowing will be
used to purchase or carry any Margin Stock or extend credit to others for the
purpose of purchasing or carrying any Margin Stock. No proceeds of any Borrowing
will be used to acquire any equity security of a class that is registered
pursuant to Section 12 of the Exchange Act. No incurrence of any Revolving Loan
will violate or be inconsistent with the provisions of Regulation G, T, U or X
of the Board of Governors of the Federal Reserve System.
SECTION 5.14. No Investment Company. Neither the Borrower nor any
Subsidiary of the Borrower is an "investment company", or an "affiliate person"
of, or "promoter" or "principal underwriter" for, an "investment company," as
such terms are defined in the Investment Company Act of 1940, as amended.
Neither the making of any Borrowing nor the application of the proceeds or
repayment thereof by the Borrower, nor the consummation of the other
transactions contemplated hereby will violate any provision of such Act or any
rule, regulation or order of the SEC thereunder.
SECTION 5.15. Security Interests. The security interests created in
favor of the Lender under the Pledge and Security Agreements constitute first
priority perfected security
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interests in the Collateral, subject to no security interests or other adverse
interests or claims of any other Person.
SECTION 5.16. Properties. The owner of each Real Estate Asset has
good and marketable title to each Real Estate Asset from time to time owned by
it. Schedule 5.16 contains a true and complete list of all Real Estate Assets
owned on the Effective Date and accurately sets forth, with respect to each Real
Estate Asset, the direct owner thereof, the percentage of the Borrower's or any
Consolidated Subsidiary's Capital Interest therein and an accurate description
of the Real Estate Asset.
SECTION 5.17. Partnership Agreements. Schedule 5.17 contains a true
and complete list of all Partnership Agreements.
SECTION 5.18. Subsidiary Partnerships. With respect to each
Subsidiary Partnership, the Borrower is a limited partner with the percentage of
the Borrower's interest therein as set forth on Schedule 5.18. With respect to
each Affiliated Entity, the entity comprising the Company is a general or
limited partner or member thereof with the percentage of such entity's interest
therein as set forth on Schedule 5.18.
SECTION 5.19. Debt. Schedule 5.19 sets forth a true and complete
list of all Debt of the Company as of the Initial Borrowing Date and which is to
remain outstanding after giving effect thereto (excluding the Revolving Loans,
the "Existing Debt"), in each case showing the aggregate principal amount
thereof and the name of the respective borrower and any entity which directly or
indirectly guaranteed such debt.
SECTION 5.20. Accuracy of Information. All information, exhibits and
reports furnished in writing by or on behalf of any Credit Party or made
available to the Lender, relating to the condition (financial or otherwise),
operations, business, properties or performance of the Company or otherwise in
connection with the transactions contemplated by the Loan Documents were, when
furnished and taken as a whole, true and correct in all material respects, and
the information, exhibits and reports, taken as a whole, do not contain any
untrue statement of a material fact and do not omit to state a material fact
necessary to make the statements contained therein not misleading as of the date
when furnished and in light of the circumstances when made.
SECTION 5.21. Business Plans. With respect to all business plans and
other forecasts and projections furnished by or on behalf of any Credit Party
and made available to the Lender relating to the condition (financial or
otherwise), operations, business, properties or performance of the Company, to
the best of the Borrower's knowledge, as of the date of such plans, forecasts
and projections: (i) there have occurred no material events known to the
Borrower that would render such plans, forecasts or projections, at and as of
the time prepared, materially misleading and (ii) all assumptions made in such
plans, forecasts and projections were reasonable under the circumstances when
made.
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ARTICLE VI
AFFIRMATIVE COVENANTS
Each of the REIT, the Borrower and each Subsidiary Partnership
covenants and agrees, to the extent applicable to each, that, until the
Revolving Note together with interest thereon, Fees and all other Obligations
under this Agreement and the other Loan Documents, are indefeasibly and
irrevocably paid in full and the Commitment is terminated, each entity
comprising the Company shall (unless otherwise specifically agreed in writing by
the Lender):
SECTION 6.1. Financial Statements and Other Information. Furnish to
the Lender:
(a) as soon as practicable and in any event within 10 days
after each of the respective dates on which the REIT (or any entity
comprising the Company) or any Affiliated Entity (each, a "Filing
Entity") is required to file any document pursuant to Sections 13(a)
or 15(d) of the Exchange Act commencing with the fiscal year and
quarter ending December 31, 1996, copies of the annual and quarterly
reports that any such Filing Entity is required to file pursuant to
such Sections 13(a) or 15(d). In the event that any such Filing
Entity which is not required or is no longer required to file
reports pursuant to Sections 13(a) or 15(d) of the Exchange Act, (i)
the REIT (or any entity comprising the Company) will transmit to the
Lender copies of annual and quarterly reports of the REIT (or any
entity comprising the Company) or any Affiliated Entity no longer
required to file any document pursuant to the Exchange Act
containing financial and other information comparable to that which
such entity or Affiliated Entity would have been required to file
with the SEC if it were subject to Section 13(a) or 15(d) of the
Exchange Act, with such transmissions and filings to be made in the
manner and within the times set forth above;
(b) no later than five (5) days following the submission
thereof by any entity comprising the Company or any Affiliated
Entity to the board of directors of the REIT, budgets for any such
entity comprising the Company, any such Affiliated Entity and for
the Real Estate Assets, in form satisfactory to the Lender
(including budgeted statements of income and sources and uses of
cash and balance sheets);
(c) accompanying the reports provided pursuant to paragraph
(a) of this Section 6.1, a certificate signed by an Authorized
Representative of each entity comprising the Company stating (i)
that (s)he has reviewed this Agreement, (ii) that a review of the
activities of each such entity during such period has been made
under his or her immediate supervision with a view to determining
whether any such entity has observed, performed and fulfilled all of
its respective obligations under this Agreement, (iii) that, to the
best of his/her knowledge, such review showed that there existed
during such period no Unmatured Default or Event of Default, or if
any such Unmatured Default or Event of Default existed, specifying
the nature thereof, the period of existence thereof and what action
such
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entity proposed to take, or has taken, with respect thereto and (iv)
that, to the best of his/her knowledge, each such entity is in
compliance with all terms, conditions and provisions of this
Agreement and all other Loan Documents to which it is a party
together with a schedule in form satisfactory to the Lender of the
computations used by such Authorized Representative in determining
as at the end of such period, compliance with the covenants
contained in Section 7.12 hereof, it being understood that the
Authorized Representative shall have no personal liability under
said certificate if made and prepared in good faith based on his/her
knowledge at the time of preparation thereof;
(d) (in addition to any documents furnished to the Lender
pursuant to paragraph (a) of this Section 6.1) promptly upon the
issuance or filing thereof, copies of all financial information and
proxy materials of any entity comprising the Company and of any
Affiliated Entity with the SEC or successor agency;
(e) as soon as practicable and in any event within fifty-five
(55) days after the end of each fiscal quarter or one hundred (100)
days after each fiscal year end, as the case may be, quarterly and
year-to-date operating statement income detail for all Existing
Properties and Future Properties substantially in the form of
Schedule 6.1 hereto; and
(f) such other information (financial or otherwise) respecting
the business, operations and special condition of each entity
comprising the Company and each Affiliated Entity as the Lender from
time to time may reasonably request.
SECTION 6.2. Taxes and Claims. Each of the REIT, the Borrower and
each Subsidiary Partnership will pay and discharge or cause to be paid and
discharged, and the REIT and the Borrower will cause each of its Subsidiaries
and, to the extent that it is empowered to do so, each Affiliated Entity to pay
and discharge, (i) all taxes, assessments and governmental charges upon or
against them or upon their respective income, profits, properties or assets
prior to the date on which penalties attach thereto, unless and to the extent
that the amount, applicability or validity of any such charge is being contested
diligently in good faith by appropriate proceedings (except in cases in which
there is an unsecured risk of forfeiture of any of the Real Estate Assets), and
(ii) all lawful claims, whether for labor, materials, supplies, services or
anything else that might or could, if unpaid, become a Lien or charge upon the
properties or assets of any entity comprising the Company or any Affiliated
Entity, which Lien would not be permitted under this Agreement, unless and to
the extent such claims are being contested diligently in good faith by
appropriate proceedings (except in cases in which there is an unsecured risk of
forfeiture of any of the Real Estate Assets) and accounted for in conformity
with GAAP.
SECTION 6.3. Maintenance of Property; Insurance. (a) Schedule 6.3
sets forth a true and complete listing of all insurance maintained by each
entity comprising the Company on the Initial Borrowing Date. Each of the REIT,
the Borrower and each Subsidiary Partnership will, and the REIT and the Borrower
will cause each of its Subsidiaries and, to the extent it is empowered to do so,
each Affiliated Entity to, (i) maintain and keep all property necessary in
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its business in good working order and condition (ordinary wear and tear
excepted), (ii) maintain property insurance with financially sound and reputable
insurance companies on all insurable Property owned by any Affiliated Entity and
any entity comprising the Company and on all Real Estate Assets and other
property on which any entity comprising the Company or such Affiliated Entity
holds a mortgage, Lien or other encumbrance, for the replacement cost thereof
against such risks as applicable per property location, (iii) maintain public
liability insurance with financially sound and reputable insurance companies,
(iv) maintain workers' compensation insurance with financially sound and
reputable insurance companies as statutorily required by each applicable locale,
and (v) furnish to the Lender, upon written request, full information as to all
insurance carried; all of such insurance in such amounts and coverage as are
customarily maintained by owners and mortgagees of similar businesses and as
approved by the Lender. In addition to the requirements of the immediately
preceding sentence, each of the REIT, the Borrower and each Subsidiary
Partnership will, and the REIT and the Borrower will cause each of its
Subsidiaries and, to the extent that it is empowered to do so, each Affiliated
Entity to, at all times cause insurance of the types described in Schedule 6.3
to be maintained with the same scope of coverage as that described in Schedule
6.3 at levels which are at least as great as the respective amount described
opposite the respective type of insurance on Schedule 6.3 to the extent
available at commercially reasonable rates.
(b) If requested by the Lender and to the extent obtainable, all
policies or certificates with respect to such insurance referred to in paragraph
(a) above (and any other insurance maintained by each entity comprising the
Company or any Affiliated Entity) (i) shall state that such insurance policies
shall not be cancelled without at least 30 days' written notice thereof by the
respective insurer to the Lender, (ii) shall provide that the respective
insurers irrevocably waive any and all rights of subrogation with respect to the
Lender, (iii) shall, except in the case of public liability insurance and
workers' compensation insurance, provide that any losses shall be payable
notwithstanding (A) any act or neglect of any entity comprising the Company or
any Affiliated Entity, (B) the occupation or use of any property for purposes
more hazardous than those permitted by the terms of the respective policy, (C)
any foreclosure or other proceeding relating to the insured properties or (D)
any change in the title to or ownership be deposited with the Lender.
(c) If any entity comprising the Company or any Affiliated Entity to
which this Section 6.3 applies shall fail to maintain insurance in accordance
herewith, the Lender shall have the right (but shall be under no obligation) to
procure such insurance and the Borrower agrees to reimburse the Lender on demand
for all costs and expenses of procuring such insurance, and such costs and
expenses shall be deemed Obligations hereunder.
SECTION 6.4. Books and Records. Each of the REIT, the Borrower and
each Subsidiary Partnership will, and the REIT and the Borrower will cause, each
of its Subsidiaries and, to the extent it is empowered to do so, each Affiliated
Entity to, maintain at all times true and complete books, records and accounts
in which true, complete and correct entries shall be made of its transactions in
accordance with GAAP and in compliance with the regulations of any governmental
regulatory body having jurisdiction over each of them.
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SECTION 6.5. Inspection. Each of the REIT, the Borrower and each
Subsidiary Partnership will, and the REIT and the Borrower will cause each of
its Subsidiaries and, to the extent it is empowered to do so, each Affiliated
Entity to, allow the Lender or such professionals, including, without
limitation, auditors or other Persons as the Lender may designate, to visit and
inspect any of their respective offices and each of the Real Estate Assets and
to examine each of their respective books of account and other records and
files, to make copies thereof, to review and evaluate the Collateral and to
discuss the affairs, business, finances and accounts of each entity comprising
the Company and each Affiliated Entity with each of their respective officers
and employees, which visit and inspection is limited to one visit and inspection
per year, provided that if an Event of Default has occurred and is continuing,
then such visits and inspections may be at such reasonable times and as often as
the Lender may request. Such inspections are solely for the protection of the
Lender and for the purposes of audit and valuation of Collateral and no action
or inaction by the Lender shall constitute any representation by the Lender that
any entity comprising the Company or any Affiliated Entity is in compliance with
the terms of this Agreement or waiver of any provision hereof. All of the
Lender's expenses incurred in connection with each such inspection, including,
without limitation, the reasonable fees and expenses of any Person designated by
the Lender to conduct or assist in such inspections, or for which the Lender
becomes obligated, shall be payable by the Borrower to the Lender upon demand.
SECTION 6.6. Pay Debt and Perform Other Covenants. The Borrower will
make full and timely payments of the principal of and interest on the Revolving
Note, and timely pay all other amounts (including without limitation all Fees
and expenses) owed by the Borrower to the Lender, whether now existing or
hereafter arising, and each of the REIT, the Borrower, each Subsidiary
Partnership will, and the REIT and the Borrower will, to the extent it is
empowered to do so, cause each of its Subsidiaries and each Affiliated Entity
to, duly perform all of the Obligations under the Loan Documents to which it is
a party and duly comply with all the terms and covenants contained in each of
the instruments and documents furnished in connection with or pursuant to this
Agreement or the other Loan Documents to which it is a party, all at the times
and places and in the manner set forth therein and perform and comply with all
of its obligations under the terms of each mortgage, indenture, security
agreement, loan agreement or other material agreement to which it is a party,
except where such non-performances or non-compliances under any agreement (other
than this Agreement and the other Loan Documents) could not, individually or in
the aggregate, reasonably be expected to result in or have a Material Adverse
Effect.
SECTION 6.7. Compliance With Laws. Each of the REIT, the Borrower
and each Subsidiary Partnership will, and the REIT and the Borrower will cause
each of its Subsidiaries and, to the extent it is empowered to do so, each
Affiliated Entity to comply with all applicable laws and regulations, including
but not limited to, federal, state and local laws and regulations relating to
consumer lending, disclosure, collection and licensing, where the failure so to
comply would have a Material Adverse Effect (other than those the validity of
which are being contested diligently in good faith by appropriate proceedings
(except in cases in which there is an unsecured risk of forfeiture of any of the
Real Estate Assets) and accounted for in conformity with GAAP).
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SECTION 6.8. Conduct of Business and Maintenance of Existence.
Each entity comprising the Company will continue to engage in business of the
same type as now conducted by it and will not enter, directly or indirectly,
into any other business other than primarily the development, operation, leasing
and management of value-oriented super-regional malls and community shopping
centers and services incidental to the foregoing without the prior written
approval of the Lender, and will preserve, renew and keep in full force and
effect its partnership, corporate or company existence, as the case may be, and
take all reasonable action to maintain all rights, privileges and franchises
necessary or desirable in the normal conduct of its business; provided, however,
that any such entity comprising the Company shall not be required to preserve
any right or franchise if the Lender determines, in its sole discretion, that
the preservation thereof is no longer desirable in the conduct of the business
of any such entity, and that the loss thereof is not disadvantageous in any
material respect to the Lender.
SECTION 6.9. Notice of Certain Events. The Borrower promptly, but in
no event later than five (5) Business Days after obtaining knowledge thereof,
shall give written notice to the Lender of:
(i) any litigation, including arbitrations which is required
to be reported to the auditors thereof and any investigations or
proceedings before any Governmental Authority brought against any
entity comprising the Company or any Affiliated Entity;
(ii) any written notice of a violation received by any entity
comprising the Company or any Affiliated Entity from any
Governmental Authority that, if such violation were established,
might have a Material Adverse Effect;
(iii) any attachments, judgments, liens, levies or orders,
aggregating more than $750,000 that may be placed on or against any
entity comprising the Company or any Affiliated Entity or the
Collateral or any Real Estate Asset;
(iv) any Unmatured Default or Event of Default, specifying the
nature and extent thereof;
(v) any other matter that has or causes or may have or cause a
Material Adverse Effect; and
(vi) the creation by any entity comprising the Company or any
Affiliated Entity of any Subsidiary thereof, any change in the name
or organizational form of any entity comprising the Company or any
Affiliated Entity or any change in the location of the chief
executive office of the Borrower or the Subsidiary Partnerships.
SECTION 6.10. Environmental Laws, Etc. (a) Each of the REIT, the
Borrower and each Subsidiary Partnership will comply, and the REIT and the
Borrower will cause each of its Subsidiaries and, to the extent it is empowered
to do so, each Affiliated Entity to comply, with all Environmental Laws
applicable to the ownership or use of any of the Real
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Estate Assets and will promptly pay or cause to be paid all costs and expenses
incurred in connection with such compliance, and will keep or cause to be kept
all such Real Estate Assets free and clear of any Liens imposed pursuant to such
Environmental Laws. Neither any entity comprising the Company nor any Affiliated
Entity will generate, use, treat, store, release or dispose of, or permit the
generation, use, treatment, storage, release or disposal of Hazardous Materials
on any Real Estate Asset or transport or permit the transportation of Hazardous
Materials to or from any such Real Estate Asset except for Hazardous Materials
used or stored at any such Real Estate Asset in compliance with all applicable
Environmental Laws and used in connection with the operation, use and
maintenance of any such Real Estate Asset.
(b) At the written reasonable request of the Lender, which request
shall specify in detail the basis therefor, at any time and from time to time,
each entity comprising the Company will, and each such entity will cause each
Affiliated Entity to, provide, at its own expense an environmental site
assessment report concerning any Real Estate Asset prepared by an environmental
consulting firm approved by the Lender, indicating the presence or absence of
Hazardous Materials and the potential cost of any removal or remedial action in
connection with any Hazardous Materials at such Real Estate Asset. If any such
party fails to provide the same within 120 days after such request was made, the
Lender may order the same, and each such entity comprising the Company shall
grant and hereby grants, and each such entity will cause each Affiliated Entity
to grant, to the extent that it is legally and contractually able to do so, to
the Lender and its agent access to such Real Estate Asset and specifically, to
the extent that it is legally and contractually able to do so, grants the Lender
an irrevocable non-exclusive license, subject to the rights of tenants, to
undertake such an assessment, all at such party's expense.
SECTION 6.11. ERISA. (a) Each entity comprising the Company and each
ERISA Affiliate will, and each such entity will cause each Affiliated Entity to,
deliver to the Lender, promptly upon becoming aware of the occurrence thereof,
notice that (i) a Prohibited Transaction with respect to any Plan has occurred
which could result in a material liability, tax or penalty to such entity or
such ERISA Affiliate under Code Section 4975 or ERISA Sections 502(i) or 502(l),
which notice shall specify the nature thereof and the proposed response thereto
and (ii) any entity comprising the Company, any Affiliated Entity or each ERISA
Affiliate has received notice of examination, investigation or claim issued by
the Internal Revenue Service or the Department of Labor with respect to a Plan
of such entity or such ERISA Affiliate, with a notice to the Lender including a
copy of such notice.
(b) Each entity comprising the Company and each ERISA Affiliate
will, and each such entity will cause each Affiliated Entity to, operate and
maintain each Plan in compliance with ERISA and all applicable provisions of the
Code.
(c) Each entity comprising the Company and each ERISA Affiliate
will, and each such entity will cause each Affiliated Entity to, deliver to the
Lender promptly after becoming aware of events or occurrences giving rise to any
liability of such entity or such ERISA Affiliate under WARN or similar
applicable state law, notice of the existence of such liability and the amount
thereof.
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SECTION 6.12. Maintain Security Interest. Each Credit Party shall
maintain perfected, first priority security interests in the Collateral in favor
of the Lender in accordance with the terms of the Pledge and Security
Agreements, free and clear of all Liens and adverse interests and claims.
SECTION 6.13. Compliance with Partnership Agreements. Each of the
Borrower and each Subsidiary Partnership will conduct its business in a manner
which complies with the requirements of, and all agreements contained in, each
of their respective Partnership Agreements and the REIT will conduct its
business in a manner which complies with the requirements of, and all provisions
contained in, its organizational documents.
SECTION 6.14. Further Assurances. Upon the request of the Lender,
each of the Credit Parties shall duly execute and deliver, or cause to be duly
executed and delivered, to the Lender (without cost to the Lender) such further
instruments and do and cause to be done such further acts as may be reasonably
necessary or proper in the reasonable opinion of the Lender to carry out more
effectually the provisions and purposes of this Agreement and the other Loan
Documents.
ARTICLE VII
NEGATIVE COVENANTS
Each of the REIT, the Borrower and each Subsidiary Partnership
covenants and agrees that, until the Revolving Note together with interest
thereon, Fees and all other Obligations under this Agreement and all other Loan
Documents, are indefeasibly and irrevocably paid in full and the Commitment is
terminated, none of the REIT, the Borrower, with respect to itself and its
Subsidiaries, nor any Subsidiary Partnership shall (unless otherwise
specifically agreed in writing by the Lender):
SECTION 7.1. Liens. No entity comprising the Company shall create,
incur or permit to exist against any of its properties or assets (real or
personal, tangible or intangible) any mortgage or other lien or encumbrance
other than: (i) Liens in existence as of the date of the audited financial
statements furnished to the Lender prior to the execution of this Agreement;
(ii) Liens securing taxes, assessments or governmental charges or levies, or the
claims or demands of materialmen, mechanics, carriers, workmen, repairmen,
warehousemen, landlords and other like Persons in respect of obligations not
overdue or which are being contested in good faith and for which adequate
reserves are being maintained in accordance with GAAP; (iii) other Liens
(including pledges or deposits in accordance with workers' compensation laws),
incidental to the conduct of the business or the ownership of its property and
assets, that are not incurred in connection with the borrowing of money,
guarantees or the obtaining of advances or credit, and that in the aggregate do
not detract materially from the value of its property or assets, or impair the
use thereof in the operation of its business materially; (iv) Liens created by
any entity comprising the Company on any of the Real Estate Assets so long as
there is no recourse to any entity comprising the Company in respect of any Debt
or other obligations secured by such Liens other than solely against such Real
Estate Assets, or any proceeds in respect of any thereof unless in compliance
with Section 7.5 hereof; (v) Liens securing any Debt permitted under
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Section 7.3 of the Agreement; and (vi) other Liens which are expressly
subordinate to any Obligations outstanding under this Agreement which Liens have
been created, incurred or permitted with the prior written consent of the
Lender.
SECTION 7.2. Restrictions on Distributions. No entity comprising the
Company shall declare or pay or permit to declare or pay any Distributions
except that, so long as there shall exist no Unmatured Default of a monetary
nature or Event of Default (both before and after giving effect to the payment
thereof), each entity comprising the Company may pay Distributions to any Person
in an aggregate amount not to exceed an amount equal to (i) during the Initial
Term, 105% of the Funds Available For Distribution and (ii) during the Renewal
Term, 100% of the Funds Available For Distribution, in each case, for the
12-month period ending on the last day of the fiscal quarter preceding the date
that such Distribution is declared.
SECTION 7.3. Debt. No entity comprising the Company shall create,
incur, assume or permit to exist any Debt other than: (i) Debt created pursuant
to this Agreement and the other Loan Documents; (ii) Existing Debt and any Debt
incurred to refinance or repay any Existing Debt (as same may be refinanced);
(iii) any Debt secured by a first mortgage, deed of trust or other security
instrument covering any Real Estate Asset, provided that in the case of any such
Debt covering the portion of Sawgrass Mills now owned by the Subsidiary
Partnerships the aggregate amount of such Debt shall not exceed $172,000,000;
(iv) an existing cash collateralized loan with Franklin Bank in an aggregate
principal amount not exceeding $2,400,000; (v) a fixture loan currently being
negotiated with Franklin Bank in an aggregate principal amount not exceeding
$1,500,000, which loan shall be amortized over a period no longer than four
years from the date of the initial borrowing thereunder and on terms otherwise
satisfactory to the Lender; (vi) an unsecured line of credit to be extended by
Franklin Bank, the proceeds of which are to be used solely for working capital
and general corporate purposes, provided that and so long as immediately
following the incurrence thereof the aggregate outstanding principal amount of
such line of credit shall not exceed $3,000,000 and such line of credit shall be
subordinate to the Debt created pursuant to this Agreement and the other Loan
Documents; (vii) non-collateralized letters of credit obtained in connection
with the acquisition, development or redevelopment of Existing Properties or
Future Properties and which in the aggregate do not exceed $2,000,000 at any one
time; and (viii) normal and customary trade accounts payable due and payable
within 120 days thereof.
SECTION 7.4. Merger, Consolidation, Sale or Transfers of Assets. No
entity comprising the Company shall (a) merge or consolidate with any other
Person unless such Person is wholly-owned or controlled, directly or indirectly,
by the Borrower, (b) sell, master or ground lease or otherwise convey any of the
Mills Properties (or any portion of or interest in any Mills Property) or any of
their respective Capital Interests therein, as the case may be, or all or
substantially all of the assets of any entity comprising the Company (excluding
(i), in the case of Future Properties and Phase III of Sawgrass Mills, the sale
of vacant parcels, such as the sale of peripheral parcels and anchor pads for
sale to retail users, or, in the case of all Existing Properties, up to one
anchor pad sale per year and (ii) the sale of any Community Centers, the
proceeds of which are applied in accordance with Section 3.2 hereof) or (c)
permit a Change in Control, without obtaining, in each instance, the prior
written consent of the Lender. Notwithstanding anything contained herein to the
contrary, additional Units in the
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Borrower may be issued to Kan Am US, Inc. or other investors, and additional
shares in the REIT may be issued, so long as, in either case, such issuance of
additional Units or shares shall not result during the Initial Term or Renewal
Term in a reduction of the ability of the REIT to control the affairs of the
Borrower or in a change in control of the board of directors of the REIT. Clause
(b) above shall not be construed to prohibit the creation of normal and ordinary
easements or the conveyance of minor vacant parcels of land for road widenings
or public purposes.
SECTION 7.5. Contingent Obligations. No entity comprising the
Company shall incur any Contingent Obligation, except for joint and several or
joint guarantees entered into by any entity comprising the Company with Simon
Property Group Inc., Taubman Realty Group L.P. and other entities acceptable to
Lender in its sole discretion in connection with the acquisition of land or
construction or term financing for any of the Mills Properties, provided that
the aggregate amount of the obligations guaranteed (excluding any Allocated
Affiliated Debt included in such guaranteed obligations) does not exceed
$250,000,000.
SECTION 7.6. Investments. No entity comprising the Company shall
make any Investment that could have a Material Adverse Effect on the Company in
the Lender's reasonable judgment, other than: (i) Investments made on or prior
to the Initial Borrowing Date (provided that any additional Investments made
with respect thereto shall be permitted only if independently justified under
the other provisions of this Section 7.6); (ii) Investments received by the REIT
or the Borrower, as the case may be, as consideration for the sale or issuance
of shares or the Units, as the case may be, in accordance with Section 7.4;
(iii) Capital Interests in the Borrower, the REIT and their respective
Subsidiaries and the Affiliated Entities; (iv) normal cash management operations
in the ordinary course of the Company's business; or (v) Investments in Real
Estate Assets consistent with the business of the Company.
SECTION 7.7. Intercompany Debt. No Intercompany Debt may be
evidenced by a promissory note (an "Intercompany Note") unless such Intercompany
Note is endorsed and delivered to the Lender pursuant to and in accordance with
the terms of the Intercompany Pledge and Security Agreement.
SECTION 7.8. Transactions with Affiliates. No entity comprising the
Company shall (a) become a party to any transaction with any Affiliate or
Affiliated Entity other than in the ordinary course of business on arm's-length
terms, (b) make, or commit to make, any payments to any Subsidiary, any
Affiliate or any Affiliated Entity on other than commercially reasonable terms
or (c) permit, or make or enter into any contract or other agreement for the
payment of any management or other similar fee to any Affiliate or Affiliated
Entity except on terms that would be consistent with terms entered into with
unaffiliated third parties, unless, in any of the foregoing events any of the
items in (a), (b) or (c) is on terms or on a basis more favorable to an entity
comprising the Company than to such Affiliate or Affiliated Entity.
SECTION 7.9. Events of Default. No entity comprising the Company
shall permit any default or event of default to occur under any note or loan
agreement pursuant to the terms of any of which moneys are payable by any entity
comprising the Company; or permit any default or event of default to occur under
any lease, mortgage, contract for deed, security
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agreement or other contractual obligation binding upon any entity comprising the
Company, which default or event of default would constitute a Material Adverse
Effect.
SECTION 7.10. Use of Proceeds. No entity comprising the Company
shall permit amounts borrowed under the Commitment to be used other than as
permitted by Section 2.9 herein.
SECTION 7.11. Accounting Changes. No entity comprising the Company
shall make any change in any accounting treatment or financial reporting
practices except as required or permitted by GAAP as in effect from time to
time.
SECTION 7.12. Financial Covenants. (a) The Consolidated Debt (A)
shall not exceed at any time 75% of the sum of (i) the Value of the Real Estate
Assets as of the last Business Day of the most recently ended calendar quarter
plus (ii) the purchase price of any Real Estate Asset and mortgage receivable
acquired by any entity comprising the Company since the end of the most recently
ended calendar quarter plus (iii) the amount of any securities offering and Debt
proceeds received (to the extent that such proceeds were not used to acquire any
Real Estate Assets or mortgage receivable or used to reduce Debt) by the Company
since the end of the most recently ended calendar quarter; and (B) shall not
exceed at any time 65% of the sum of (i) the aggregate fair market value of the
outstanding REIT Common Shares assuming the exchange of all of the Units for
REIT Common Shares plus (ii) the aggregate principal amount of the Consolidated
Debt.
(b) The Consolidated Service Charge Coverage Ratio for the
calendar quarter most recently ended shall not be less than 1.70:1.
ARTICLE VIII
DEFAULTS AND REMEDIES
SECTION 8.1. Events of Default. An "Event of Default" shall mean the
occurrence or existence of one or more of the following events or conditions
(whatever the reason for such Event of Default and whether such occurrence or
existence shall be voluntary or involuntary or come about or be effected by
operation of law or pursuant to or in compliance with any judgment, decree or
order of any court or any order, rule or regulation of any governmental body):
(a) the Borrower shall fail to pay to the Lender the principal
of any Revolving Loan when due;
(b) the Borrower shall fail to pay to the Lender interest,
Fees or other amounts due under the Loan Documents or the Revolving
Note when due and such failure with respect to interest, Fees or
other amounts shall continue unremedied for more than two (2)
Business Days after notice thereof has been given to the Borrower
with respect to the first occurrence and three (3) Business Days
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with respect to each occurrence thereafter (it being understood that
after the first occurrence no notice whatsoever is required);
(c) any representation or warranty made by any Credit Party
herein or in any other Loan Document or any certificate furnished
pursuant hereto shall prove to have been inaccurate in any material
and adverse respect when made provided, that, in the event that any
such representation or warranty proves to have been incorrect but
was made unintentionally by the respective Credit Party, then such
Credit Party shall not be in default if the Credit Party corrects or
cures such inaccuracy to the satisfaction of the Lender, in its
reasonable discretion, within thirty (30) days after notice thereof
has been given to such Credit Party;
(d) any Credit Party shall fail to perform or observe (i) any
term, covenant or agreement contained in this Agreement or in any
other Loan Document on its part to be performed or observed and such
failure shall continue unremedied for thirty (30) days after notice
thereof has been given to such Credit Party; provided, however, that
if such failure is of such nature that it cannot be cured in such
thirty (30) day period, then such Credit Party shall not be in
default so long as such Credit Party immediately commences to cure
such default and diligently proceeds with steps required to effect a
cure within a period of time reasonable under the circumstances, but
in any event not to exceed ninety (90) days in the aggregate or (ii)
any term, covenant or agreement contained in Section 7;
(e) the occurrence of any default or event of default pursuant
to any of the Security Documents, and such default or event of
default shall continue unremedied on the expiration of the grace
period applicable thereto, if any, as specified in such Security
Documents;
(f) any default (after notice of such default by the
applicable lender, if required to be given by such lender, and the
failure to cure such default prior to the expiration of any
applicable grace period) on any Debt of any entity comprising the
Company or any Affiliated Entity of a principal amount exceeding
$10,000,000, the existence of which would permit the acceleration of
such Debt;
(g) if any court or administrative agency enters a final,
nonappealable order against any entity comprising the Company or any
Affiliated Entity requiring such entity or such Affiliated Entity to
divest itself of any of its assets or requiring the payment of money
which order is not discharged, vacated or set aside within sixty
(60) days of its date and the amount owing on such final judgment
either singly or in combination with other judgments against any
entity comprising the Company or any Affiliated Entity exceeds
$7,500,000;
(h) any entity comprising the Company or any Affiliated
Entity, shall (i) apply for or consent to the appointment of a
receiver, trustee, or liquidator of itself, or of all or
substantially all of its assets, (ii) be unable, or admit in writing
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its inability to pay its debts as they become due, (iii) be
adjudicated a bankrupt or insolvent or any proceeding shall be
instituted against any entity comprising the Company or any
Affiliated Entity seeking liquidation, winding-up, reorganization
under any law relating to bankruptcy or (iv) file a voluntary
petition in bankruptcy or a petition or any corporate action shall
be taken by any entity comprising the Company or any Affiliated
Entity for the purpose of effecting any of the foregoing;
(i) any entity comprising the Company or any Affiliated Entity
shall permit or suffer to exist any Prohibited Transaction; or
(j) the occurrence of a Change of Control.
SECTION 8.2. Consequences of an Event of Default. If an Event of
Default shall occur and be continuing, the Lender may (but the same shall not be
deemed to be by way of limitation), by notice to the Borrower, (i) declare the
Commitment terminated, whereupon the same shall immediately terminate; (ii)
declare the Revolving Note, all interest thereon, Fees and other amounts payable
under this Agreement or any other Loan Document and all other Obligations of the
Borrower, hereunder or under the Revolving Note or any other Loan Document to be
immediately due and payable, whereupon the same shall become and be immediately
due and payable, without presentment, demand, protest or further notice of any
kind, all of which are hereby expressly waived by the Borrower and an action
therefor shall immediately accrue; (iii) set off amounts in any accounts of the
Borrower under the dominion and control of the Lender and apply such amounts to
the Obligations of the Borrower hereunder and in the other Loan Documents;
and/or (iv) exercise any and all of its remedies under the Pledge and Security
Agreements; provided, that in the event of an actual or deemed entry of an order
for relief with respect to the Borrower under the Federal Bankruptcy Code, (A)
the obligation of the Lender to make any Borrowing shall automatically be
terminated and (B) the Revolving Note, all such interest and all such amounts
shall automatically become and be due and payable, without presentment, demand,
protest or any notice of any kind, all of which are hereby expressly waived by
the Borrower. In addition, if an Event of Default occurs, the Lender may
exercise all rights and remedies which the Lender may have hereunder, under any
other Loan Document, at law (including but not limited to the Uniform Commercial
Code), in equity or otherwise. All such remedies shall be cumulative and not
exclusive.
ARTICLE IX
AGENT
SECTION 9.1. Appointment. In the event that the Lender elects to
assign or sell participations to any Lending Bank pursuant to Section 10.12
hereof, then such Lending Bank or Lending Banks (if more than one) shall
designate the Lender (and the Lender alone without any co-agent(s)) to act as
its or their agent in connection with this Agreement or with the other Loan
Documents. Each Lending Bank hereby irrevocably authorizes, and each holder of
any Revolving Note by the acceptance of such Revolving Note shall be deemed
irrevocably to authorize, the Lender as its agent to take such action on its
behalf under the provisions of this
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Agreement, the other Loan Documents and any other instruments and agreements
referred to herein or therein and to exercise such powers and to perform such
duties hereunder and thereunder as are specifically delegated to or required of
the Lender as its agent by the terms hereof and thereof and such other powers as
are reasonably incidental thereto. The Lender in its capacity as agent may
perform any of its duties hereunder by or through its respective officers,
directors, agents, employees or affiliates.
SECTION 9.2. Nature of Duties. The Lender in its capacity as agent
shall not have any duties or responsibilities except those expressly set forth
in this Agreement and the Security Documents. Neither the Lender in its capacity
as agent nor any of its respective officers, directors, agents, employees or
affiliates shall be liable for any action taken or omitted by it or them
hereunder or under any other Loan Document or in connection herewith or
therewith, unless caused by its or their gross negligence or willful misconduct.
The duties of the Lender in its capacity as agent shall be mechanical and
administrative in nature; the Lender in its capacity as agent shall not have by
reason of this Agreement or any other Loan Document a fiduciary relationship in
respect of any Lending Bank or the holder of any Revolving Note; and nothing in
this Agreement or any other Loan Document, expressed or implied, is intended to
or shall be so construed as to impose upon the agent any obligations in respect
of this Agreement or any other Loan Document except as expressly set forth
herein or therein.
SECTION 9.3. Lack of Reliance on the Agent. Independently and
without reliance upon the Lender in its capacity as agent, each Lending Bank and
the holder of each Revolving Note, to the extent it deems appropriate, has made
and shall continue to make (x) its own independent investigation of the
financial condition and affairs of each entity comprising the Company and each
Affiliated Entity in connection with the making and the continuance of the
Revolving Loans and the taking or not taking of any action in connection
herewith and (y) its own appraisal of the creditworthiness of each entity
comprising the Company and each Affiliated Entity and, except as expressly
provided in this Agreement, the Lender in its capacity as agent shall not have
any duty or responsibility, either initially or on a continuing basis, to
provide any Lending Bank or the holder of any Revolving Note with any credit or
other information with respect thereto, whether coming into its possession
before the making of the Revolving Loans or at any time or times thereafter.
Neither Lender in its capacity as agent nor any of its affiliates nor any of
their respective officers, directors, agents or employees shall be responsible
to any Lending Bank or the holder of any Revolving Note for, or be required or
have any duty to ascertain, inquire or verify the accuracy of, (i) any recitals,
statements, information, representations or warranties herein or in any
document, certificate or other writing delivered in connection herewith, (ii)
the execution, effectiveness, genuineness, validity, enforceability, perfection,
collectibility, priority or sufficiency of this Agreement or any other Loan
Document, (iii) the financial condition of any entity comprising the Company or
any Affiliated Entity, (iv) the performance or observance of any of the terms,
provisions or conditions of this Agreement or any other Loan Document, (v) the
satisfaction of any of the conditions precedent set forth in Article IV, or (vi)
the existence or possible existence of any Unmatured Default or Event of
Default.
SECTION 9.4. Intentionally Omitted
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<PAGE>
SECTION 9.5. Reliance. The Lender in its capacity as agent shall be
entitled to rely, and shall be fully protected (and shall have no liability to
any person other than the Borrower if applicable) in relying, upon any note,
writing, resolution, notice, statement, certificate, telex, teletype or
telecopier message, cablegram, radiogram, order or other document or telephone
message signed, sent or made by any Person that the agent believed to be the
proper Person, and, with respect to all legal matters pertaining to this
Agreement and any other Loan Document and its duties hereunder and thereunder,
upon advice of counsel selected by the Lender in its capacity as agent.
SECTION 9.6. Indemnification. To the extent that the Lender in its
capacity as agent is not reimbursed and indemnified by the Borrower, the Lending
Banks will reimburse and indemnify the Lender in its capacity as agent, in
proportion to their respective "percentages" as used in determining the Required
Banks, for and against any and all liabilities, obligations, losses, damages,
penalties, claims, actions, judgments, costs, expenses or disbursements of
whatsoever kind or nature which may be imposed on, asserted against or incurred
by the Lender in its capacity as agent in performing its respective duties
hereunder or under any other Loan Document, in any way relating to or arising
out of this Agreement or any other Loan Document; provided that no Lending Bank
shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from the gross negligence or willful misconduct of the Lender in its
capacity as agent.
SECTION 9.7. The Lender in its Individual Capacity. With respect to
its obligation to make Revolving Loans under this Agreement, the Lender shall
have the rights and powers specified herein for the Lender and may exercise the
same rights and powers as though it were not performing the duties specified
herein in its capacity as agent; and the term "Lending Banks," "Required Banks,"
"holders of Revolving Notes" or any similar terms shall, unless the context
clearly otherwise indicates, include the Lender in its individual capacity. The
Lender may accept deposits from, lend money to, and generally engage in any kind
of banking, trust or other business with any Credit Party or any Affiliate of
any Credit Party as if they were not performing the duties specified herein in
its capacity as agent, and may accept fees and other consideration from any
Credit Party for services in connection with this Agreement and otherwise
without having to account for the same to the Lending Banks.
SECTION 9.8. Holders. The Lender in its capacity as agent may deem
and treat the payee of any Revolving Note as the owner thereof for all purposes
hereof unless and until a written notice of the assignment, transfer or
endorsement thereof, as the case may be, shall have been filed with the Lender
in its capacity as agent. Any request, authority or consent of any Person who,
at the time of making such request or giving such authority or consent, is the
holder of any Revolving Note shall be conclusive and binding on any subsequent
holder, transferee, assignee or indorsee, as the case may be, of such Revolving
Note or of any Revolving Note or Revolving Notes issued in exchange therefor.
SECTION 9.9. Resignation by the Agent. (a) The Lender may not
without the Borrower's consent resign from the performance of any of its
functions and duties under this Article and/or under the other Loan Documents at
any time by giving 15 Business Days' prior
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<PAGE>
written notice to the Lending Banks. Such resignation shall take effect upon the
appointment of a successor agent pursuant to clauses (b) and (c) below or as
otherwise provided below.
(b) Upon any such notice of resignation pursuant to Section 9.9(a)
hereof, the Required Banks shall appoint a successor agent hereunder or
thereunder which shall be a commercial bank or trust company reasonably
acceptable to the Borrower.
(c) If a successor agent shall not have been so appointed within
such 15 Business Day period, the Lender in its capacity as agent, with the
consent of the Borrower (which consent will not be unreasonably withheld or
delayed), shall then appoint a commercial bank or trust company as successor
agent who shall serve as agent hereunder until such time, if any, as the
Required Banks appoint a successor agent as provided above.
(d) If no successor agent has been appointed pursuant to clause (b)
or (c) above by the 20th Business Day after the date such notice of resignation
was given by the Lender as agent, the Lender's resignation shall become
effective and the Lending Banks shall thereafter perform all the duties of the
agent hereunder and/or under any other Loan Document until such time, if any, as
the Required Banks appoint a successor agent as provided above.
ARTICLE X
MISCELLANEOUS
SECTION 10.1. Collection Costs. In the event that the Lender, for
itself or in its capacity as agent for the Lending Banks, shall retain or engage
an attorney or attorneys to collect or enforce or protect its interests with
respect to this Agreement, any of the other Loan Documents, or any instrument or
document delivered pursuant to this Agreement or the other Loan Document,
including, without limitation, each of the documents referred to in Article IV
hereof, or to protect the rights of any holder or holders with respect thereto,
the Borrower shall pay, within 10 days after demand therefor, all of the
reasonable costs and expenses of such collection, enforcement or protection,
including reasonable attorneys' fees and disbursements (of the Lender and the
Lending Banks), and the Lender, for itself or in its capacity as agent for the
Lending Banks, may take judgment for all such amounts, in addition to all other
amounts due hereunder.
SECTION 10.2. No Waiver. No course of dealing or delay or failure by
the Lender or any Lending Bank in exercising any right, power or privilege under
any Loan Document shall affect any other right or future exercise thereof.
SECTION 10.3. GOVERNING LAW. THIS AGREEMENT, THE REVOLVING NOTE AND
THE OTHER LOAN DOCUMENTS AND THE RIGHTS AND THE DUTIES OF THE PARTIES HEREUNDER
AND THEREUNDER AND WITH RESPECT TO INTEREST, SHALL BE GOVERNED BY, AND CONSTRUED
AND ENFORCED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, WITHOUT
REGARD TO CONFLICT OF LAWS PRINCIPLES.
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<PAGE>
SECTION 10.4. Notices. Unless otherwise agreed, all notices,
requests and demands to or upon the respective parties hereto to be effective
shall be in writing (including by telecopy) and, unless otherwise expressly
provided herein, shall be deemed to have been duly given or made when delivered
by hand, or 3 days after being sent by certified mail, return receipt requested,
postage prepaid or upon delivery or rejection by overnight courier, expense
prepaid, or, in the case of telecopy notice, when received, addressed as follows
or to such other address as may be hereafter notified by the respective parties
hereto:
(i) the REIT:
c/o The Mills Corporation
1300 Wilson Boulevard
Arlington, Virginia 22209
Attention: Thomas E. Frost, Esq.
Tel: (703) 526-5000
Fax: (703) 526-5125
(ii) the Borrower:
c/o The Mills Corporation
1300 Wilson Boulevard
Arlington, Virginia 22209
Attention: Thomas E. Frost, Esq.
Tel: (703) 526-5000
Fax: (703) 526-5125
with a copy to:
Rudnick & Wolfe
203 North LaSalle Street
Suite 1800
Chicago, Illinois 60601-1293
Attention: Robert Goldman, Esq.
Tel: (312) 368-4000
Fax: (312) 236-7516
(iii) each Subsidiary Partnership:
c/o The Mills Corporation
1300 Wilson Boulevard
Arlington, Virginia 22209
Attention: Thomas E. Frost, Esq.
Tel: (703) 526-5000
Fax: (703) 526-5125
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<PAGE>
(iv) the Lender:
CS First Boston Mortgage Capital Corp.
55 East 52nd Street, 32nd Floor
New York, New York 10055
Attn: Mr. Robert K. Vahradian
Tel: (212) 909-2178
Fax: (212) 755-5681
with a copy to:
Kramer, Levin, Naftalis & Frankel
919 Third Avenue
New York, NY 10022
Attention: Mark S. Fawer, Esq.
Tel: (212) 715-9372
Fax: (212) 715-8000
SECTION 10.5. Costs and Expenses; Indemnity. (a) The Borrower agrees
to pay on demand all out-of-pocket costs and expenses (including attorneys' fees
and disbursements of counsel to the Lender) incurred by the Lender in connection
with the preparation, execution, delivery, filing, recording, administration,
modification, restatement or amendment of this Agreement, the other Loan
Documents and all instruments and documents delivered pursuant to this Agreement
or the other Loan Documents (including any waivers or consents that may be
requested by the Borrower) including, without limitation, each of the documents
referred to in Article IV hereof, all present and future stamp, documentary,
excise and other similar taxes with respect to the foregoing matters, all costs
and expenses (including attorney's fees and disbursements of counsel to the
Lender) of the Lender in connection with the enforcement of this Agreement and
the other Loan Documents, all reasonable out-of-pocket costs and expenses, if
any, in connection with the enforcement (whether in the context of a civil
action, adversary proceeding, workout or otherwise) of this Agreement, the other
Loan Documents, and such other instruments and documents, including, without
limitation, reasonable attorneys' fees and disbursements, audit charges,
appraisal fees, search fees and filing fees, examination, travel, lodging and
meal expenses and all reasonable out-of-pocket costs and expenses (including,
without limitation, reasonable attorneys' fees and disbursements) of the Lender
in connection with the other Loan Documents.
(b) The Borrower further agrees to indemnify and save harmless the
Lender (and, in the event of a syndication or participation, each Lending Bank),
their respective officers, directors, employees, attorneys, agents,
attorneys-in-fact and Affiliates from and against any and all actions, causes of
action, suits, investigations, proceedings, losses, liabilities and damages and
expenses (including, without limitation, attorneys' fees and disbursements) in
connection therewith, whether or not such Person is a party to any such
proceeding, action, suit, or investigation (herein called the "Indemnified
Liabilities") incurred by the Lender or any of its officers, directors,
employees, attorneys, agents, attorneys-in-fact or Affiliates as a result of, or
arising out of or relating to any of the transactions contemplated hereby or by
the other Loan
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<PAGE>
Documents, or any requested amendments, waivers or consents thereto (whether or
not such are given or become effective) or the administration or preservation
and protection of the Lender's or such Lending Bank's rights or remedies under
this Agreement or any other Loan Document, except for any Indemnified
Liabilities arising on account of the gross negligence or willful misconduct of
the Lender or such Lending Bank or the Lender's or such Lending Bank's failure
to substantially comply with the terms hereof in all material respects;
provided, however, that, if and to the extent such agreement to indemnify may be
unenforceable for any reason, the Borrower shall make the maximum contribution
to the payment and satisfaction of each of the Indemnified Liabilities which
shall be permissible under applicable law. This provision shall survive the
termination of the Commitments and this Agreement.
SECTION 10.6. Fees Nonrefundable; Payments in U.S. Currency;
Computations. (a) All fees required to be paid pursuant to this Agreement and
any other Loan Document shall be paid as required herein and therein. All fees
(including without limitation the Fees) under this Agreement or the other Loan
Documents are non-refundable under all circumstances. All payments (including
prepayments) by the Borrower to the Lender, shall be made to the Lender in
lawful currency of the United States and in immediately available funds without
setoff or counterclaim at the office designated by the Lender.
(b) All computations of interest shall be made by the Lender on the
basis of a year of 360 days, in each case for the actual number of days
(including the first day but excluding the last day) occurring in the period for
which such interest is paid. Each determination by the Lender of an interest
rate hereunder shall be conclusive and binding for all purposes, absent manifest
error.
SECTION 10.7. WAIVER OF JURY TRIAL AND SETOFF. EACH OF THE CREDIT
PARTIES HEREBY KNOWINGLY AND VOLUNTARILY WAIVES TRIAL BY JURY IN ANY LITIGATION
IN ANY COURT WITH RESPECT TO ANY LITIGATION BASED HEREON OR ARISING OUT OF,
UNDER OR IN CONNECTION WITH (I) THIS AGREEMENT, THE REVOLVING NOTE, THE OTHER
LOAN DOCUMENTS OR ANY INSTRUMENT OR DOCUMENT DELIVERED PURSUANT TO THIS
AGREEMENT, THE REVOLVING NOTE, OR THE OTHER LOAN DOCUMENTS, (II) ANY OF THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY OR (III) ANY COURSE OF CONDUCT OR
STATEMENTS OR ACTIONS OF ANY PARTY HERETO IN CONNECTION HEREWITH OR THEREWITH OR
IN CONNECTION WITH THE VALIDITY, PROTECTION, INTERPRETATION, COLLECTION OR
ENFORCEMENT THEREOF OR ANY OTHER CLAIM OR DISPUTE HOWSOEVER ARISING HEREUNDER.
SECTION 10.8. Captions. The captions of the various sections and
paragraphs of this Agreement have been inserted only for the purpose of
convenience; such captions are not a part of this Agreement and shall not be
deemed in any manner to modify, explain, enlarge or restrict any of the
provisions of this Agreement.
SECTION 10.9. Lien; Set-off. The Borrower hereby grants to the
Lender (for itself and in its capacity as agent for the Lending Banks) a
continuing lien for Debt to the Lender
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<PAGE>
and the Lending Banks upon any and all of the Borrower's moneys, securities and
other property and the proceeds thereof, now or hereafter held or received by or
in transit to, the Lender (for itself and in its capacity as agent for the
Lending Banks) or any of its agents from or for it, whether for safekeeping,
custody, pledge, transmission, collection or otherwise, and also upon any and
all deposits (general or special) and credits with, and any and all claims
against, the Lender or any Lending Bank, at any time existing in connection with
this Agreement or any other Loan Document. Upon the occurrence of any Event of
Default, the Lender and each Lending Bank is hereby authorized at any time and
from time to time to setoff, appropriate and apply any or all items hereinabove
referred to against all Debt to the Lender and each Lending Bank under this
Agreement, the Revolving Note or any other Loan Document, and whether now
existing or hereafter arising. Notwithstanding the foregoing, no Lending Bank
(other than the Lender on behalf of the Lending Banks) shall exercise any right
of setoff that it may otherwise have under applicable law without the consent of
the Required Banks, it being understood, however, that this sentence is for the
sole benefit of the Lending Banks. The Lender agrees to endeavor to notify the
Borrower no later than three (3) Business Days after any such set-off and
application is made by the Lender; provided, that the failure to give such
notice shall not affect the validity of such set-off and application.
SECTION 10.10. Security. As security for the payment of any and all
sums owing under the Revolving Note, and all other Obligations of the Borrower
hereunder and under the other Loan Documents, the Borrower shall execute and
deliver the General Pledge and Security Agreement and the Borrower and each
other Credit Party shall execute and deliver the Intercompany Pledge and
Security Agreement and the Borrower and each other Credit Party shall execute
and cause to be properly filed in all pertinent jurisdictions the financing
statements relating to the Collateral.
SECTION 10.11. JURISDICTION; SERVICE OF PROCESS. EACH PARTY TO THIS
AGREEMENT HEREBY IRREVOCABLY CONSENTS TO THE JURISDICTION OF THE COURTS OF THE
STATE OF NEW YORK, COUNTY OF NEW YORK AND OF ANY FEDERAL COURT LOCATED IN THE
SOUTHERN DISTRICT OF NEW YORK, AND AGREES THAT VENUE IN EACH OF SUCH COURTS IS
PROPER IN CONNECTION WITH ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT, THE OTHER LOAN DOCUMENTS OR ANY DOCUMENT OR INSTRUMENT DELIVERED
PURSUANT TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS. NOTHING HEREIN SHALL
AFFECT THE RIGHT OF THE LENDER, ANY LENDING BANK OR ANY HOLDER OF THE REVOLVING
NOTE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL
PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY CREDIT PARTY IN ANY OTHER
JURISDICTION.
SECTION 10.12. Benefit of Agreement; Assignments. (a) This Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, and all subsequent holders of the Revolving
Note, except that the obligation of the Lender or any Lending Bank to make
Borrowings hereunder shall not inure to the benefit of any successors or assigns
of the Borrower. The Lender may assign its rights and delegate its
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<PAGE>
obligations under this Agreement, in each case in full or in part, and further
may assign or sell participations in all or any part of any Revolving Loans to
any Bank, in which event (i) in the case of an assignment, upon written notice
thereof by the Lender to the Borrower, the assignee shall have, to the extent of
such assignment (unless otherwise provided therein), the same rights and
benefits as it would have had if it were the Lender hereunder and (ii) in the
case of a participation, the participant shall not have any duties under this
Agreement or any other Loan Document (the participant's rights and duties in
respect of such participation to be those set forth in the agreement executed by
the Lender in favor of the participant relating thereto); provided, that,
although any Lending Bank may transfer, assign or grant participations in its
rights hereunder, such Lending Bank may not transfer or assign all or any
portion of its commitments hereunder except as provided in Section 10.12(b)
hereof and the transferee, assignee or participant, as the case may be, shall
not constitute a "Lending Bank" hereunder and, provided further, that no Lending
Bank shall transfer or grant any participation under which the participant shall
have any rights to approve any amendment to or waiver of this Agreement or any
other Loan Document except to the extent such amendment or waiver would (x)
extend the final scheduled maturity of any Revolving Loan or Revolving Note in
which such participant is participating, or reduce the rate or extend the time
of payment of interest or Fees thereon (except in connection with a waiver of
applicability of any post-default increase in interest rates) or reduce the
principal amount thereof, or increase the amount of the participant's
participation over the amount thereof then in effect (it being understood that a
waiver of any Unmatured Default or Event of Default or of a mandatory reduction
in the Commitment shall not constitute a change in the terms of such
participation, and that an increase in the Commitment or any Revolving Loan
shall be permitted without the consent of any participant if the participant's
participation is not increased as a result thereof), (y) consent to the
assignment or transfer by the Borrower of any of its rights and obligations
under this Agreement or (z) release or subordinate any material portion of the
Collateral under any of the Pledge and Security Agreements (except as expressly
provided in the Loan Documents) supporting the Obligations hereunder in which
such participant is participating. In the case of any such participation, the
participant shall not have any rights under this Agreement or any of the other
Loan Documents (the participant's rights against such Lending Bank in respect of
such participation to be those set forth in the agreement executed by such
Lending Bank in favor of the participant relating thereto) and all amounts
payable by the Borrower hereunder shall be determined as if such Lending Bank
had not sold such participation.
(b) Notwithstanding the foregoing, any Lending Bank (or any Lending
Bank together with one or more other Lending Banks) may (x) assign all or a
portion of its commitment (and related outstanding Obligations hereunder) to its
parent company and/or any Affiliate of such Lending Bank or (y) assign all or,
if less than all, a portion equal to at least $5,000,000 in the aggregate for
the assigning Lending Bank or assigning Lending Banks, of such commitment
hereunder to one or more transferees as approved by the Lender in its capacity
as agent.
(c) In any event, each assignee shall become a party to this
Agreement as a Lending Bank only upon execution of an Assignment and Assumption
Agreement substantially in the form of EXHIBIT F hereto, provided that, (i) new
Revolving Notes will be issued, at the Borrower's expense, to such new Lending
Bank and to the assigning Lending Bank upon the
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<PAGE>
request of such new Lending Bank or assigning Lending Bank, such new Revolving
Notes to be in conformity with the requirements of Section 2.4 (with appropriate
modifications) to the extent needed to reflect the revised commitments of such
Lending Banks (and, if applicable, the Lender), (ii) the consent of the Lender
shall be required in connection with any such assignment pursuant to clause (y)
of Section 10.12(b) hereof (which consent shall not be unreasonably withheld)
and (iii) the Lender, in its capacity as agent, shall receive at the time of
each such assignment, from the assigning or assignee Lending Bank, the payment
of a non-refundable assignment fee of $3,500.00, and provided further, that such
transfer or assignment shall not be effective until recorded by the Lender in
its capacity as agent on its register as required by customary banking practice.
To the extent of any assignment pursuant to Section 10.12(b), the assigning
Lending Bank (or the Lender if an assignor) shall be relieved of its obligations
hereunder with respect to its assigned commitments. At the time of each
assignment pursuant to Section 10.12(b) hereof to a Person which is not already
a Lending Bank hereunder and which is not a United States person (as such term
is defined in Section 7701(a)(30) of the Code) for Federal income tax purposes,
the respective assignee Lending Bank shall provide to the Borrower and the
Lender in its capacity as agent the appropriate Internal Revenue Service forms.
The Lender may furnish any information concerning the Borrower, in the
possession of the Lender from time to time, to assignees and participants
(including prospective assignees and participants) and to any Lending Bank,
including, without limitation, the financial statements of each entity
comprising the Company and each Affiliated Entity, any and all documentation
relating to the Loan Documents and the results of the Lender's examination of
the operations, books and records of each entity comprising the Company and each
Affiliated Entity.
(d) Nothing in this Agreement shall prevent or prohibit any Lending
Bank from pledging its Revolving Loans and Revolving Notes hereunder to a
Federal Reserve Bank in support of borrowings made by such Lending Bank from
such Federal Reserve Bank.
(e) Notwithstanding anything contained to the contrary, provided
that there shall then exist no Event of Default, the Lender may not assign its
rights and delegate its obligations under this Agreement to an extent greater
than 80% of the Commitment and the Revolving Loans.
SECTION 10.13. Amendment or Waiver, etc. (a) Neither this Agreement
nor any other Loan Document nor any terms hereof or thereof may be modified,
changed, waived, discharged or terminated unless such modification, change,
waiver, discharge or termination is in writing signed by the Authorized
Representative on behalf of each Credit Party and the Lender, and the same shall
then be effective only for the period and on the conditions and for the specific
instances and purposes specified in such writing provided that no such
modification, change, waiver, discharge or termination shall, without the
consent of the Lender, or, if there is any Lending Bank, each Lending Bank (with
Obligations being directly affected thereby in the case of following clause
(i)), (i) extend the final scheduled maturity of any Revolving Loan or the
Revolving Note, or reduce the rate or extend the time of payment of interest
thereon or Fees or reduce the principal amount thereof (except to the extent
repaid in cash), (ii) release or subordinate any material portion of the
Collateral under any of the Pledge and Security Agreements (except as expressly
provided in the Loan Documents), (iii) amend, modify or waive any provision of
this Section 10.13, (iv) reduce the percentage specified in the definition of
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Required Banks (it being understood that, with the consent of the Required
Banks, additional extensions of credit pursuant to this Agreement may be
included in the determination of the Required Banks on substantially the same
basis as the Commitment) or (v) consent to the assignment or transfer by the
Borrower of any of its rights and obligations under this Agreement; provided
further, that no such modification, change, waiver, discharge or termination
shall (x) increase the commitment of any Lending Bank hereunder over the amount
thereof then in effect without the consent of such Lending Bank, (y) without the
consent of the Lender, in its capacity as agent, amend, modify or waive any
provision of Section 9 or any other provision herein as same relates to the
rights and obligations of the Lender in its capacity as agent or (z) without the
consent of the Required Banks, alter the required application of any prepayments
or repayments (or Commitment reduction) pursuant to Article III (although the
Required Banks may waive, in whole or in part, any such prepayment, repayment or
Commitment reduction).
SECTION 10.14. Counterparts. This Agreement may be executed by the
parties hereto individually or in any combination, in one or more counterparts,
each of which shall be an original and all of which shall together constitute
one and the same agreement.
SECTION 10.15. Severability. Any provision of this Agreement
prohibited by the laws of any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition, or modified to conform with such
laws, without invalidating the remaining provisions of this Agreement, and any
such prohibition in any jurisdiction shall not invalidate such provisions in any
other jurisdiction.
THIS AGREEMENT CONTAINS A WAIVER OF TRIAL BY JURY. SEE SECTION 10.7
HEREOF.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective officers thereunto duly authorized as of
the day and year first above written.
THE MILLS CORPORATION
By: ______________________________________________
Name: Thomas E. Frost
Title: Senior Vice President
BORROWER:
THE MILLS LIMITED PARTNERSHIP
By: THE MILLS CORPORATION,
its General Partner
By: ________________________________________
Name: Thomas E. Frost
Title: Senior Vice President
SAWGRASS MILLS PHASE II LIMITED
PARTNERSHIP
By: SAWGRASS MILLS PHASE II, LLC,
its General Partner
By: THE MILLS LIMITED PARTNERSHIP,
its Manger
By: THE MILLS CORPORATION,
its General Partner
By: ________________________________________
Name: Thomas E. Frost
Title: Senior Vice President
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SUNRISE MILLS (MLP) LIMITED
PARTNERSHIP
By: SUNRISE MILLS, L.L.C.,
its Managing General Partner
By: WESTERN SAWGRASS MILLS CORP.,
its Manager
By: ______________________________________________
Name: Thomas E. Frost
Title: Senior Vice President
LENDER:
CS FIRST BOSTON MORTGAGE CAPITAL CORP.
By: ______________________________________________
Name:
Title:
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SCHEDULE 1
Community Centers
<PAGE>
SCHEDULE 5.1(b)
Consolidated Subsidiaries
<PAGE>
SCHEDULE 5.16
Real Estate Assets
<PAGE>
SCHEDULE 5.17
Partnership Agreements
<PAGE>
SCHEDULE 5.18
Borrower's Interests in Subsidiary Partnerships
Percentage Interest Held By
Name of Partnership Jurisdiction of Formation The Mills Limited Partnership
- ------------------- ------------------------- -----------------------------
Sunrise Mills (MLP) District of Columbia 98.0202% Limited Partner
Limited Partnership
Sawgrass Mills Delaware .98% Limited Partner
Phase II Limited
Partnership
<PAGE>
SCHEDULE 5.19
Existing Debt
<PAGE>
SCHEDULE 6.1
Form of Income Statements
<PAGE>
SCHEDULE 6.3
Insurance
<PAGE>
EXHIBIT 10.58
EXHIBIT B-1
GENERAL PLEDGE AND SECURITY AGREEMENT
PLEDGE AND SECURITY AGREEMENT, dated as of October 28, 1996 (as
amended, modified or supplemented from time to time, this "Agreement"), made
by THE MILLS LIMITED PARTNERSHIP, a Delaware limited partnership (the
"Pledgor"), in favor of CS FIRST BOSTON MORTGAGE CAPITAL CORP. a
Delaware corporation (the "Pledgee"). Except as otherwise defined herein, all
capitalized terms used herein and defined in the Credit Agreement (as defined
below) shall be used herein as therein defined.
W I T N E S S E T H :
WHEREAS, The Mills Corporation, the Pledgor, Sawgrass Mills Phase II
Limited Partnership ("Sawgrass"), Sunrise Mills (MLP) Limited Partnership
("Sunrise", and together with Sawgrass, the "Subsidiary Partnerships" and each,
a "Subsidiary Partnership") have entered into a Credit Agreement, dated as of
October 28, 1996, providing for the making of Revolving Loans to the Pledgor as
contemplated therein (as amended, modified or supplemented from time to time,
the "Credit Agreement");
WHEREAS, it is a condition precedent to the extensions of credit
under the Credit Agreement that the Pledgor shall have executed and delivered to
the Pledgee this Agreement; and
WHEREAS, the Pledgor desires to execute this Agreement to satisfy
the conditions described in the preceding paragraph;
NOW, THEREFORE. in consideration of the benefits accruing to the
Pledgor, the receipt and sufficiency of which are hereby acknowledged, the
Pledgor hereby makes the following representations and warranties to the Pledgee
and hereby covenants and agrees with the Pledgee as follows:
1. SECURITY FOR OBLIGATIONS. This Agreement is made by the Pledgor
to secure:
(i) the full and prompt payment when due (whether at the stated
maturity, by acceleration or otherwise) of all obligations and liabilities
(including, without limitation, the principal of and interest on the
Revolving Note issued by, and Revolving Loans made to, the Pledgor under
the Credit Agreement, and all indemnities, Fees, expenses and interest
thereon or owed thereunder) of the Pledgor to the Lender, whether now
existing or hereafter incurred under, arising out of or in connection with
the Credit Agreement and the other Loan Documents and the due performance
and compliance by the Pledgor
<PAGE>
with all of the terms, conditions and agreements contained in the Credit
Agreement and such other Loan Documents;
(ii) any and all sums advanced by the Pledgee, pursuant to the
Credit Agreement and the other Loan Documents, in order to preserve the
Collateral (as hereinafter defined) or preserve its security interest in
the Collateral;
(iii) in the event of any proceeding for the collection or
enforcement of any obligations or liabilities referred to in clauses (i)
and (ii) above, upon the occurrence and during the continuance of an Event
of Default (such term, as used in this Agreement, shall mean any Event of
Default under, and as defined in, the Credit Agreement, and shall in any
event include, without limitation, any payment default (after the
expiration of any applicable grace period) on any of the Obligations (as
hereinafter defined)) shall have occurred and be continuing, the
reasonable expenses of retaking, holding, preparing for sale or lease,
selling or otherwise disposing of or realizing on the Collateral, or of
any exercise by the Pledgee of its rights hereunder, together with
reasonable attorneys' fees and court costs; and
(iv) all amounts paid by any Indemnitee (as defined in Section 11
hereof) as to which such Indemnitee has the right to reimbursement under
Section 11 of this Agreement;
all such obligations, liabilities, sums and expenses set forth in clauses (i)
through (v) of this Section 1 being herein collectively called the
"Obligations".
2. DEFINITION OF PARTNERSHIP INTERESTS, ETC. As used herein the term
"Partnership Interests" shall mean the entire limited partnership interest at
any time owned by the Pledgor in each of the Subsidiary Partnerships, including,
but not limited to, the Pledgor's capital account, its interest as a limited
partner in the net cash flow, net profit and net loss, and items of income,
gain, loss, deduction and credit of each Subsidiary Partnership, its interest in
all distributions made or to be made by each Subsidiary Partnership to the
Pledgor and all of the other economic rights, titles and interests of the
Pledgor as a limited partner of each Subsidiary Partnership, whether set forth
in the partnership agreement of each Subsidiary Partnership, by separate
agreement or otherwise. The Pledgor represents and warrants that on the date
hereof (i) the Partnership Interests held by the Pledgor consists of those
partnership interests as described in Annex A hereto; (ii) such Partnership
Interests constitute that percentage of the entire partnership limited interest
of each Subsidiary Partnership as is set forth in Annex A hereto; and (iii) the
Pledgor owns no other Partnership Interests.
3. GRANT OF SECURITY INTEREST
3.1 Pledge. (a) To secure the Obligations of the Pledgor and for the
purposes set forth in Section 1 hereof, each Pledgor hereby pledges and grants
to the Pledgee a first priority continuing security interest in the Pledgor's
Partnership Interest in each Subsidiary Partnership and all of the Pledgor's
right, title and interest in each Subsidiary Partnership including, without
limitation, the following, and as part of such grant and pledge, hereby
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transfers and assigns to the Pledgee for collateral purposes all of the
following, whether now existing or hereafter acquired (the Pledgor's Partnership
Interest in each Subsidiary Partnership and the following are hereinafter
collectively referred to as the "Collateral"):
(i) all the capital thereof and its interest in all profits, losses,
Partnership Assets (as defined below) and other distributions to which the
Pledgor shall at any time be entitled in respect of such Partnership
Interest;
(ii) all other payments due or to become due to the Pledgor in
respect of such Partnership Interest, whether under any Partnership
Agreement or otherwise, whether as contractual obligations, damages,
insurance proceeds or otherwise;
(iii) all of its claims, rights, powers, privileges, authority,
options, security interest, liens and remedies, if any, under any
Partnership Agreement or at law or otherwise in respect of such
Partnership Interest;
(iv) all present and future claims, if any, of the Pledgor against
any Subsidiary Partnership for moneys loaned or advanced, for services
rendered or otherwise;
(v) all of the Pledgor's rights under any Partnership Agreement or
at law to exercise and enforce every right, power, remedy, authority,
option and privilege of the Pledgor relating to such Partnership Interest,
including any power to terminate, cancel or modify any Partnership
Agreement, to execute any instruments and to take any and all other action
on behalf of and in the name of the Pledgor in respect of such Partnership
Interest and any Subsidiary Partnership, to make determinations, to
exercise any election (including, but not limited to, election of
remedies) or option or to give or receive any notice, consent, amendment,
waiver or approval under such Partnership Agreement, together with full
power and authority to demand, receive, enforce, collect, or receipt for
any of the foregoing or for any Partnership Asset, to enforce or execute
any checks or other instruments or orders, to file any claims and to take
any action in connection with any of the foregoing (with all of the
foregoing rights only to be exercisable upon the occurrence and during the
continuance of an Event of Default);
(vi) all other property hereafter delivered in substitution for or
in addition to any of the foregoing, all certificates and instruments
representing or evidencing such other property and all cash, securities,
interest, dividends, rights and other property at any time and from time
to time received, receivable or otherwise distributed in respect of or in
exchange for any or all thereof; and
(vii) to the extent not otherwise included, all Proceeds (as
hereinafter defined) of any or all of the foregoing.
(b) As used herein, the term "Partnership Assets" shall mean all
assets, whether tangible or intangible and whether real, personal or mixed
(including, without limitation all partnership capital and interests in other
partnerships), at any time owned or represented by any Partnership Interest. As
used herein, the term "Proceeds" shall mean all "proceeds" as such
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term is defined in Section 9-306 (1) of the New York UCC. As used herein, the
term "Partnership Agreements" shall mean collectively (i) the Sawgrass Mills
Phase II Agreement of Limited Partnership dated November 30, 1993, and any
modifications previously or hereafter made thereto, and (ii) the Sunrise Mills
(MLP) Agreement of Limited Partnership dated October 21, 1986, and any
modifications previously or hereafter made thereto.
3.2 Subsequently Acquired Partnership Interests. If the Pledgor
shall acquire (by purchase, distribution or otherwise) any additional
Partnership Interest in any Subsidiary Partnership at any time or from time to
time after the date hereof, the Pledgor shall forthwith pledge such Partnership
Interest as security with the Pledgee hereunder and, to the extent such
Partnership Interest is certificated, deliver to the Pledgee certificates
therefor, accompanied by such instruments of transfer as are acceptable to the
Pledgee, and shall promptly thereafter deliver to the Pledgee a certificate
executed by any Authorized Representative of the Pledgor describing such
Partnership Interest and certifying that the same has been duly pledged with the
Pledgee hereunder.
3.3 Uncertificated Partnership Interests. Notwithstanding anything
to the contrary contained in Section 3.2 hereof, to the extent any Partnership
Interest (whether now owned or hereafter acquired) is uncertificated, the
Pledgor shall promptly notify the Pledgee thereof, and shall promptly take all
actions required to perfect the security interest of the Pledgee under
applicable law (including, in any event, under the provisions of Articles 8 and
9 of the New York UCC). The Pledgor further agrees to take such actions as the
Pledgee reasonably deems necessary or desirable to effect the foregoing and to
permit the Pledgee to exercise any of its rights and remedies hereunder, and
agrees to provide an opinion of counsel reasonably satisfactory to the Pledgee
with respect to any such pledge of uncertificated Partnership Interests promptly
upon the reasonable request of the Pledgee.
4. APPOINTMENT OF SUB-AGENTS. The Pledgee shall have the right to
appoint one or more sub-agents for the purpose of retaining physical possession
of the Collateral if it shall be held in certificated form, which may be held
(in the discretion of the Pledgee) in the name of the Pledgor, endorsed or
assigned in blank or in favor of the Pledgee or any nominee or nominees of the
Pledgee or a sub-agent appointed by the Pledgee. The Pledgee agrees to promptly
notify the Pledgor after the appointment of any sub-agent; provided, however,
that the failure to give such notice shall not affect the validity of such
appointment.
5. VOTING, ETC., WHILE NO EVENT OF DEFAULT. Unless and until an
Event of Default shall have occurred and be continuing, the Pledgor may exercise
any voting, consent, administration, management and other rights and remedies
under any Partnership Agreement or otherwise with respect to the Partnership
Interests of the Pledgor without the Pledgee's prior written consent unless the
consent or vote involves a matter described in Section 5.1(a)(vi) of each
Partnership Agreement, in which case such consent or vote shall not be exercised
without the Pledgee's prior written consent, provided that the Pledgee shall
respond to any request for its consent within the number of days of the
applicable time period set forth in Section 5.1 of the Partnership Agreement
after a notice containing such request is given to the Pledgee, failing which
the Pledgee's consent shall be deemed given. Notwithstanding the foregoing, all
rights of the Pledgor to vote and to give consents, waivers and ratifications
shall
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cease on the occurrence or continuance of an Event of Default, and Section 7
hereof shall become applicable.
6. DIVIDENDS AND OTHER DISTRIBUTIONS. Unless an Event of Default
shall have occurred and be continuing, all Distributions payable in respect of
the Partnership Interests shall be paid to the Pledgor. The Pledgee shall be
entitled to receive directly, and to retain as part of the Collateral:
(i) all other property (other than cash) paid or distributed by way
of dividend, distribution or otherwise in respect of the Partnership
Interests; and
(ii) all other property (including cash) which may be paid in
respect of the Collateral by reason of any consolidation, merger,
conveyance of assets, liquidation or similar partnership reorganization.
7. REMEDIES IN CASE OF EVENT OF DEFAULT. In case an Event of Default
shall have occurred and be continuing, the Pledgee shall be entitled to exercise
all of the rights, powers and remedies (whether vested in it by this Agreement
or by any Loan Document or by law) for the protection and enforcement of its
rights in respect of the Collateral, and the Pledgee shall be entitled, without
limitation, to exercise the following rights, which the Pledgor hereby agrees to
be commercially reasonable remedies:
(i) to receive all amounts payable in respect of the Collateral
payable to the Pledgor under Section 6 hereof;
(ii) to assign or transfer all or any part of the Partnership
Interests into the Pledgee's name or the name of its nominee or nominees
after the exercise of its right of sale pursuant to the UCC;
(iii) to vote all or any part of the Partnership Interests (whether
or not transferred into the name of the Pledgee) and give all consents,
waivers and ratifications in respect of the Collateral and otherwise act
with respect thereto as though it were the outright owner thereof after
the exercise of its rights pursuant to the UCC; and
(iv) at any time or from time to time to sell, assign and deliver,
or grant options to purchase, all or any part of the Collateral, or any
interest therein, at any public or private sale, held pursuant to the UCC;
provided that at least 10 days' prior notice of the time and place of any
such sale shall be given to the Pledgor. The Pledgor hereby waives and
releases to the fullest extent permitted by law any right or equity of
redemption with respect to the Collateral, whether before or after sale
hereunder, and all rights, if any, of marshalling the Collateral and any
other security for the Obligations or otherwise. At any such sale, unless
prohibited by applicable law, the Pledgee may bid for and purchase all or
any part of the Collateral so sold free from any such right or equity of
redemption. The Pledgee shall not be liable for failure to collect or
realize upon any or all of the Collateral or for any delay in so doing nor
shall the Pledgee be under any obligation to take any action whatsoever
with regard thereto.
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8. REMEDIES, ETC., CUMULATIVE. Each right, power and remedy of the
Pledgee provided for in this Agreement or any other Loan Document or now or
hereafter existing at law or in equity or by statute shall be cumulative and
concurrent and shall be in addition to every other such right, power or remedy.
The exercise or beginning of the exercise by the Pledgee of any one or more of
the rights, powers or remedies provided for in this Agreement or any other Loan
Document or now or hereafter existing at law or in equity or by statute or
otherwise shall not preclude the simultaneous or later exercise by the Pledgee
of all such other rights, powers or remedies, and no failure or delay on the
part of the Pledgee to exercise any such right, power or remedy shall operate as
a waiver thereof.
9. APPLICATION OF PROCEEDS. (a) All Proceeds including all moneys
collected by the Pledgee upon any sale or other disposition of the Collateral
pursuant to the terms of this Agreement, together with all other moneys received
by the Pledgee hereunder, shall be applied as follows:
(i) first, to the payment of all amounts owing the Lender of
the type described in clauses (ii) and (iii) of the definition of
"Obligations";
(ii) second, to the extent Proceeds remain after the
application pursuant to the preceding clause (i), an amount equal to
the outstanding Primary Obligations (as hereinafter defined) shall
be paid to the Pledgee as provided in Section 9(c) hereof;
(iii) third, to the extent Proceeds remain after the
application pursuant to the preceding clauses (i) and (ii), an
amount equal to the outstanding Secondary Obligations shall be paid
to the Pledgee as provided in Section 9(c) hereof; and
(iv) fourth, to the extent Proceeds remain after the
application pursuant to the preceding clauses (i) through (iii),
inclusive, and following the termination of this Agreement pursuant
to Section 13 hereof, to the Pledgor or to whomever may be lawfully
entitled to receive such surplus.
(b) For purposes of this Agreement (x) "Primary Obligations" shall
mean all principal of, and interest on, all Loans and all Fees and (y)
"Secondary Obligations" shall mean all Obligations other than Primary
Obligations.
(c) All payments required to be made hereunder shall be made
directly to the Pledgee.
(d) It is understood and agreed that the Pledgor shall remain liable
to the extent of any deficiency between the amount of the Proceeds of the
Collateral hereunder and the aggregate amount of the Obligations owed under the
Credit Agreement and the other Loan Documents.
10. PURCHASERS OF COLLATERAL. Upon any sale of the Collateral by the
Pledgee hereunder (whether by virtue of the power of sale herein granted,
pursuant to
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judicial process or otherwise), the receipt of the Pledgee or the officer making
the sale shall be a sufficient discharge to the purchaser or purchasers of the
Collateral so sold, and such purchaser or purchasers shall not be obligated to
see to the application of any part of the purchase money paid over to the
Pledgee or such officer or be answerable in any way for the misapplication or
nonapplication thereof.
11. INDEMNITY. (a) The Pledgor agrees to indemnify, reimburse and
hold the Pledgee and its successors, assigns, employees, agents and servants
(hereinafter in this Section 11 referred to individually as an "Indemnitee," and
collectively as the "Indemnitees") harmless from any and all liabilities,
obligations, damages, injuries, penalties, claims, demands, actions, suits,
judgments and any and all costs, expenses or disbursements (including reasonable
attorneys' fees and expenses) (for the purposes of this Section 11 the foregoing
are collectively called "expenses") of whatsoever kind and nature imposed on,
asserted against or incurred by any of the Indemnitees in any way relating to or
arising out of this Agreement, any Loan Document or any other document executed
in connection herewith and therewith or the enforcement of any of the terms of,
or the preservation of any rights under any thereof, or in any way relating to
or arising out of the ownership, control, acceptance, possession, condition,
sale or other disposition, or use of the Collateral; provided that no Indemnitee
shall be indemnified pursuant to this Section 11(a) for expenses to the extent
caused by the gross negligence or willful misconduct of such Indemnitee or for
its failure to perform its obligations under the Credit Agreement. The Pledgor
agrees that upon written notice by any Indemnitee of the assertion of such a
liability, obligation, damage, injury, penalty, claim, demand, action, suit or
judgment, the Pledgor shall to the extent requested to do so assume full
responsibility for the defense thereof. Each Indemnitee agrees to use its best
efforts to promptly notify the Pledgor of any such assertion of which such
Indemnitee has knowledge.
(b) Without limiting the application of Section 11(a) hereof, the
Pledgor agrees to pay or reimburse the Pledgee for any and all reasonable fees,
costs and expenses of whatever kind or nature incurred in connection with the
creation, preservation or protection of the Pledgee's Liens on, and security
interest in, the Collateral, including, without limitation, all fees and taxes
in connection with the recording or filing of instruments and documents in
public offices, payment or discharge of any taxes or Liens upon or in respect of
the Collateral, and all other reasonable fees, costs and expenses in connection
with protecting, maintaining or preserving the Collateral and the Pledgee's
interest therein, whether through judicial proceedings or otherwise, or in
defending or prosecuting any actions, suits or proceedings arising out of or
relating to the Collateral.
(c) If and to the extent that the obligations of the Pledgor under
this Section 11 are unenforceable for any reason, the Pledgor hereby agrees to
make the maximum contribution to the payment and satisfaction of such
obligations which is permissible under applicable law.
12. FURTHER ASSURANCES. The Pledgor agrees that it will join with
the Pledgee in executing and at the Pledgor's own expense, file and refile under
the UCC of any jurisdiction such financing statements, continuation statements
and other documents in such offices as the Pledgee may reasonably deem necessary
or appropriate and wherever required or
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<PAGE>
permitted by law in order to perfect and preserve the Pledgee's security
interest in the Collateral and hereby authorizes the Pledgee to file financing
statements and amendments thereto relative to all or any part of the Collateral
without the signature of the Pledgor where permitted by law, and agrees to do
such further acts and things and to execute and deliver to the Pledgee such
additional conveyances, assignments, agreements and instruments as the Pledgee
may reasonably require or deem advisable to carry into effect the purposes of
this Agreement or to further assure and confirm unto the Pledgee its rights,
powers and remedies hereunder.
13. TRANSFER BY PLEDGOR. The Pledgor will not sell or otherwise
dispose of, grant any option with respect to, or mortgage, pledge or otherwise
encumber any of the Collateral or any interest therein (except pursuant to this
Agreement and as permitted by the other Loan Documents).
14. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PLEDGOR. The
Pledgor represents, warrants and covenants that: (i) it is the legal, record and
beneficial owner of, and has good and marketable title to, all Partnership
Interests and other Collateral pledged by it hereunder, or in which it has
granted a security interest pursuant hereto, subject to no pledge, lien,
mortgage, hypothecation, security interest, charge, option or other encumbrance
whatsoever, except the liens and security interests created by this Agreement;
(ii) it has full partnership power, authority and legal right to pledge and
grant a security interest in all the Collateral pledged and assigned by it
pursuant to this Agreement; (iii) this Agreement has been duly authorized,
executed and delivered by the Pledgor and constitutes the legal, valid and
binding obligation of the Pledgor enforceable in accordance with its terms,
except to the extent that the enforceability hereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and by equitable principles (regardless of
whether enforcement is sought in equity or at law); (iv) except as have been
obtained or made, no consent of any other party (including, without limitation,
any member or creditor of the Pledgor or any of its Subsidiaries) and no
consent, license, permit, approval or authorization of, exemption by, notice or
report to, or registration, filing or declaration with, any governmental
authority is required to be obtained by the Pledgor in connection with the
execution, delivery or performance of this Agreement; (v) to the best of the
Pledgor's knowledge, the execution, delivery and performance of this Agreement
by the Pledgor does not violate any provision of any applicable law or
regulation or of any order, judgment, writ, award or decree of any court
arbitrator or governmental authority, domestic or foreign, or of any Partnership
Agreement or the partnership agreement of the Pledgor or of any partnership
units or securities issued by the Pledgor or any of its Subsidiaries, or of any
mortgage, indenture, lease, deed of trust, agreement (including any partnership
agreement of any Subsidiary Partnership), instrument or undertaking to which the
Pledgor or any of its Subsidiaries is a party or which purports to be binding
upon the Pledgor or any of its Subsidiaries or upon any of their respective
assets and will not result in the creation or imposition of (or the obligation
to create or impose) any lien or encumbrance on any of the assets of the Pledgor
or any of its Subsidiaries except as contemplated by this Agreement; (vi) all
Partnership Interests have been validly acquired and are fully paid for and
validly pledged hereunder; (vii) the Pledgor has given true and accurate copies
of the partnership agreement of the Pledgor to the Pledgee and the Pledgor will
not amend or modify, or permit the amendment or modification of, such
partnership agreement except as disclosed to the Pledgee; (viii) to the
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best of its knowledge, the Pledgee is not in default of any of its obligations
under such partnership agreement; (ix) this Agreement creates (after all steps
required under Article 8 of the UCC have been taken) in favor of the Pledgee a
legal, valid and enforceable security interest in all right, title and interest
of the Pledgor in the Collateral owned by the Pledgor on any date on which this
representation and warranty is made or deemed made, which security interest
shall, (A) upon delivery to the Pledgee of any certificates evidencing equity
interests in a Subsidiary Partnership, (B) upon the filing of appropriate
financing statements under the UCC in respect of any Subsidiary Partnership's
partnership interest that is not represented by a certificate and (C) upon the
taking of all steps required under Article 8 of the UCC (which delivery filings
and/or steps have been done and remain in full force and effect as to the
Collateral owned by the Pledgor on any date on which this representation and
warranty is made or deemed made), constitute a fully perfected first lien on,
and security interest in, all right, title and interest of the Pledgor in all of
such Collateral, subject to no security interests of any other Person; (x) there
are no currently effective financing statements under the UCC covering any
property which is now or hereafter may be included in the Collateral except
financing statements filed or to be filed in favor of the Pledgee as secured
party; and (xi) the chief executive office and principal place of business of
the Pledgor and the sole location where the records of the Pledgor with respect
to the Collateral are kept are located at 1300 Wilson Boulevard, Arlington,
Virginia 22209 and the Pledgor shall not move its chief executive office,
principal place of business or such location of records except upon notice to
the Pledgee and after compliance with the terms of the Credit Agreement. The
Pledgor covenants and agrees that it will defend the Pledgee's right, title and
security interest in and to the Collateral and the Proceeds thereto against the
claims and demands of all persons whomsoever.
15. PLEDGOR'S OBLIGATIONS ABSOLUTE, ETC. The obligations of the
Pledgor under this Agreement shall be absolute and unconditional and shall
remain in full force and effect without regard to, and shall not be released,
suspended. discharged, terminated or otherwise affected by, any circumstance or
occurrence whatsoever, including, without limitation: (i) any renewal,
extension, amendment or modification of or addition or supplement to or deletion
from any Loan Document or any other instrument or agreement referred to therein,
or any assignment or transfer of any thereof; (ii) any waiver, consent,
extension, indulgence or other action or inaction under or in respect of any
such Loan Document or other agreement or instrument or this Agreement; (iii) any
furnishing of any additional security to the Pledgee or its assignee or any
acceptance thereof or any release of any security by the Pledgee or its
assignee; (iv) any limitation on any party's liability or obligations under any
such instrument or agreement or any invalidity or unenforceability, in whole or
in part, of any such instrument or agreement or any term thereof; or (v) any
bankruptcy, insolvency, reorganization, composition, adjustment. dissolution,
liquidation or other like proceeding relating to the Pledgor, any Subsidiary of
the Pledgor, or any action taken with respect to this Agreement by any trustee
or receiver, or by any court, in any such proceeding, whether or not the Pledgor
shall have notice or knowledge of any of the foregoing.
16. REGISTRATION, ETC. (a) If at any time when the Pledgee shall
determine to exercise its right to sell all or any part of the Partnership
Interests pursuant to Section 7 hereof, such Partnership Interests or the part
thereof to be sold shall not, for any reason whatsoever, be effectively
registered under the Securities Act, as then in effect, the
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Pledgee may, in its sole and absolute discretion, sell such Partnership
Interests or part thereof by private sale in such manner and under such
circumstances as the Pledgee may reasonably deem necessary or advisable in order
that such sale may legally be effected without such registration; provided, that
at least 10 days' prior notice of the time and place of any such sale shall be
given to the Pledgor. Without limiting the generality of the foregoing, in any
such event the Pledgee, in its sole and absolute discretion and subject to
compliance with any applicable securities laws and the UCC: (i) may proceed to
make such private sale notwithstanding that a registration statement for the
purpose of registering such Partnership Interests or part thereof shall have
been filed under such Securities Act; (ii) may approach and negotiate with a
single possible purchaser to effect such sale; and (iii) may restrict such sale
to a purchaser who will represent and agree that such purchaser is purchasing
for its own account, for investment, and not with a view to the distribution or
sale of such Partnership Interests or part thereof. In the event of any such
sale, the Pledgee shall incur no responsibility or liability for selling all or
any part of the Partnership Interests at a price which the Pledgee, in its sole
and absolute discretion, may in good faith deem reasonable under the
circumstances, notwithstanding the possibility that a substantially higher price
might be realized if the sale were deferred until after registration as
aforesaid.
17. TERMINATION, RELEASE. (a) After the Termination Date (as defined
below), this Agreement shall terminate (provided that all indemnities set forth
herein including, without limitation, in Section 11 hereof shall survive any
such termination) and the Pledgee, at the request and expense of the Pledgor,
will promptly execute and deliver to the Pledgor a proper instrument or
instruments acknowledging the satisfaction and termination of this Agreement,
and will duly assign, transfer and deliver to the Pledgor (without recourse and
without any representation or warranty) such of the Collateral as may be in the
possession of the Pledgee and as has not theretofore been sold or otherwise
applied or released pursuant to this Agreement. As used in this Agreement,
"Termination Date" shall mean the date upon which the Commitment has been
terminated, the Revolving Note together with interest thereon, Fees and all
other Obligations then owing under the Credit Agreement and all other Loan
Documents have been indefeasibly and irrevocably repaid in full.
(b) In the event that any part of the Collateral is sold or released
by the Lender and the proceeds of such sale or sales or from such release are
applied in accordance with the provisions of the Credit Agreement, to the extent
required to be so applied, the Pledgee, at the request and expense of the
Pledgor, will duly assign, transfer and deliver to the Pledgor (without recourse
and without any representation or warranty) such of the Collateral as is then
being (or has been) so sold or released and as may be in the possession of the
Pledgee and has not theretofore been released pursuant to this Agreement.
(c) At any time that the Pledgor desires that Collateral be released
as provided in the foregoing sub-section (a) or (b), it shall deliver to the
Pledgee a certificate signed by an Authorized Representative of the Pledgor
stating that the release of the respective Collateral is permitted pursuant to
such subsection (a) or (b).
18. NOTICES, ETC. Unless otherwise agreed, all notices, requests and
demands to or upon the respective parties hereto to be effective shall be in
writing (including
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by telecopy) and, unless otherwise expressly provided herein, shall be deemed to
have been duly given or made when delivered by hand, or 3 days after being sent
by certified mail, return receipt requested, postage prepaid or upon delivery or
rejection by overnight courier, expense prepaid, or, in the case of telecopy
notice, when received, addressed as follows or to such other address as may be
hereafter notified by the respective parties hereto:
(a) the Pledgor:
c/o The Mills Corporation
1300 Wilson Boulevard
Arlington, Virginia 22209
Attention: Thomas E. Frost, Esq.
Tel: (703) 526-5000
Fax: (703) 526-5125
with a copy to:
Rudnick & Wolfe
203 North LaSalle Street
Suite 1800
Chicago, Illinois 60601-1293
Attention: Robert Goldman, Esq.
Tel: (312) 368-4000
Fax: (312) 236-7516
(b) the Pledgee:
CS First Boston Mortgage Capital Corp.
55 East 52nd Street, 32nd Floor
New York, New York 10055
Attn: Mr. Robert K. Vahradian
Tel: (212) 909-2178
Fax: (212) 755-5681
with a copy to:
Kramer, Levin, Naftalis & Frankel
919 Third Avenue
New York, NY 10022
Attention: Mark S. Fawer, Esq.
Tel: (212) 715-9372
Fax: (212) 715-8000
19. WAIVER; AMENDMENT. None of the terms and conditions of this
Agreement may be changed, waived, modified or varied in any manner whatsoever
unless in writing duly signed by the parties hereto.
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<PAGE>
20. PLEDGEE NOT BOUND. (a) Nothing herein shall be construed to make
the Pledgee liable as a general partner or limited partner of any Subsidiary
Partnership and the Pledgee by virtue of this Agreement or otherwise (except as
referred to in the following sentence) shall not have any of the duties,
obligations or liabilities of a general partner or limited partner of any
Subsidiary Partnership. The parties hereto expressly agree that, unless the
Pledgee shall become the absolute owner of a Partnership Interest pursuant
hereto, this Agreement shall not be construed as creating a partnership or joint
venture between the Pledgee and the Pledgor.
(b) Except as provided in the last sentence of paragraph (a) of this
Section 20, the Pledgee, by accepting this Agreement, did not intend to become a
general partner or limited partner of any Subsidiary Partnership or otherwise be
deemed to be a co-venturer with respect to the Pledgor or any Subsidiary
Partnership either before or after an Event of Default shall have occurred but
prior to the time the Pledgee becomes the absolute owner of the Partnership
Interest therein. The Pledgee shall have only those powers set forth herein and
shall assume none of the duties, obligations or liabilities of a general partner
or limited partner of any Subsidiary Partnership or of the Pledgor prior to the
date that it becomes an absolute owner of the Partnership Interest therein.
(c) The Pledgee shall not be obligated to perform or discharge any
obligation of the Pledgor as a result of the collateral assignment hereby
effected.
(d) The acceptance by the Pledgee of this Agreement, with all the
rights, powers, privileges and authority so created, shall not at any time or in
any event obligate the Pledgee to appear in or defend any action or proceeding
relating to the Collateral to which it is not a party, or to take any action
hereunder or thereunder, or to expend any money or incur any expenses or perform
or discharge any obligation, duty or liability under the Collateral.
21. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
successors and assigns of the Pledgor (although the Pledgor may not assign its
rights and obligations hereunder) and shall inure to the benefit of and be
enforceable by the Pledgee and its successors and assigns. The Pledgee may
assign its rights and delegate its obligations under this Agreement, in each
case in full or in part, to a bank, financial institution or other entity, in
which event, upon written notice thereof by the Pledgee to the Pledgor, the
assignee shall have, to the extent of such assignment (unless otherwise provided
therein), the same rights and benefits as it would have had if it were the
Pledgee hereunder. The Pledgee may furnish any information concerning the
Pledgor, in the possession of the Pledgee from time to time, to assignees
(including prospective assignees), including, without limitation, any and all
documentation relating to the Partnership Interests and the results of the
Pledgee's examination of the operations, books and records of each Subsidiary
Partnership.
22. GOVERNING LAW. (a) THIS AGREEMENT SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK
WITHOUT REGARD TO CONFLICT OF LAWS EXCEPT FOR THE CHOICE OF LAW PROVISIONS OF
THE NEW YORK UCC.
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<PAGE>
(b) EACH PARTY TO THIS AGREEMENT HEREBY IRREVOCABLY CONSENTS TO THE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, COUNTY OF NEW YORK AND OF
ANY FEDERAL COURT LOCATED IN THE SOUTHERN DISTRICT OF NEW YORK, AND AGREES THAT
VENUE IN EACH OF SUCH COURTS IS PROPER IN CONNECTION WITH ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY DOCUMENT OR
INSTRUMENT DELIVERED PURSUANT TO THIS AGREEMENT. NOTHING HEREIN SHALL AFFECT THE
RIGHT OF THE PLEDGEE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO
COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE PLEDGOR IN ANY OTHER
PROPER JURISDICTION.
(c) WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
KNOWINGLY AND VOLUNTARILY WAIVES TRIAL BY JURY IN ANY LITIGATION IN ANY COURT
WITH RESPECT TO (I) ANY LITIGATION BASED HEREON OR ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS AGREEMENT OR ANY INSTRUMENT OR DOCUMENT DELIVERED PURSUANT
TO THIS AGREEMENT, (II) ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY
OR (III) ANY COURSE OF CONDUCT OR STATEMENTS OR ACTIONS OF ANY PARTY HERETO IN
CONNECTION HEREWITH OR THEREWITH OR IN CONNECTION WITH THE VALIDITY, PROTECTION,
INTERPRETATION, COLLECTION OR ENFORCEMENT THEREOF OR ANY OTHER CLAIM OR DISPUTE
HOWSOEVER ARISING, BETWEEN THE PLEDGOR AND THE LENDER.
23. COUNTERPARTS. This Agreement may be executed by the parties
hereto individually or in any combination, in one or more counterparts, each of
which shall be an original and all of which shall together constitute one and
the same agreement.
24. SEVERABILITY. Any provision of this Agreement prohibited by the
laws of any jurisdiction shall, as to such jurisdiction, be ineffective to the
extent of such prohibition, or modified to conform with such laws, without
invalidating the remaining provisions of this Agreement, and any such
prohibition in any jurisdiction shall not invalidate such provisions in any
other jurisdiction.
25. RECOURSE. This Agreement is made with full recourse to the
Pledgor (including. without limitation, with full recourse to all assets of the
Pledgor) and pursuant to and upon the representations, warranties, covenants and
the agreements on the part of the Pledgor contained herein, in the Loan
Documents and otherwise in writing in connection herewith or therewith.
[Remainder of Page Intentionally Left Blank]
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<PAGE>
IN WITNESS WHEREOF, the Pledgor and the Pledgee have caused this
Agreement to be executed by their respective officers thereunto duly authorized
as of the day and year first above written.
THE MILLS LIMITED PARTNERSHIP
By: THE MILLS CORPORATION,
its General Partner
By: _____________________________,
Name: Thomas E. Frost
Title: Senior Vice President
CS FIRST BOSTON MORTGAGE CAPITAL CORP.
By:__________________________________
Name:
Title:
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<PAGE>
ANNEX A
to
GENERAL PLEDGE AND
SECURITY AGREEMENT
LIST OF PARTNERSHIP INTERESTS
Name of Partnership Type of Interest Percentage Interest
------------------- ---------------- -------------------
1. Sunrise Mills (MLP) Limited Limited 98.0202%
Partnership
2. Sawgrass Mills Phase II Limited 98%
Limited Partnership
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<PAGE>
ANNEX B
to
GENERAL PLEDGE AND
SECURITY AGREEMENT
FORM OF PARTNERSHIP NOTICE
[Letterhead of Pledgor]
[Date]
TO: [Name of Subsidiary Partnership]
Notice is hereby given that, pursuant to the General Pledge and
Security Agreement (a true and correct copy of which is attached hereto),
dated as of October __, 1996 (as amended, modified or supplemented from time
to time in accordance with the terms thereof, the "Pledge Agreement"),
between THE MILLS LIMITED PARTNERSHIP (the "Pledgor"), and CS FIRST BOSTON
MORTGAGE CAPITAL CORP., as Pledgee (the "Pledgee"), the Pledgor has
pledged and assigned to the Pledgee, and granted to the Pledgee a continuing
security interest in, all right, title and interest of the Pledgor, whether
now existing or hereafter arising or acquired, as a limited partner in
[NAME OF SUBSIDIARY PARTNERSHIP] (the "Partnership"), and in, to and under
the [TITLE OF APPLICABLE PARTNERSHIP AGREEMENT] (the "Partnership
Agreement"), including, without limitation:
(i) all the capital of the Partnership and the Pledgor's interest in
all profits, losses, Partnership Assets (as defined in the Pledge
Agreement) and other distributions to which the Pledgor shall at any time
be entitled in respect of such partnership interest;
(ii) all other payments due or to become due to the Pledgor in
respect of such partnership interest, whether under the Partnership
Agreement or otherwise, whether as contractual obligations, damages,
insurance proceeds or otherwise;
(iii) all of its claims, rights, powers, privileges, authority,
options, security interest, liens and remedies, if any, under the
Partnership Agreement or at law or otherwise in respect of such
partnership interest;
(iv) all present and future claims, if any, of the Pledgor against
the Partnership for moneys loaned or advanced, for services rendered or
otherwise;
(v) all of the Pledgor's rights under the Partnership Agreement or
at law to exercise and enforce every right, power, remedy, authority,
option and privilege of the Pledgor relating to the partnership interest,
including any power to terminate, cancel or modify the Partnership
Agreement, to execute any instruments and to take any and all other action
on behalf of and in the name of the Pledgor in respect of the Partnership
- 16 -
<PAGE>
Interest and the Partnership, to make determinations, to exercise any
election (including, but not limited, election of remedies) or option or
to give or receive any notice, consent, amendment, waiver or approval,
together with full power and authority to demand, receive, enforce,
collect or receipt for any of me foregoing or for any Partnership Asset,
to enforce or execute any checks, or other instruments or orders, to file
any claims and to take any action in connection with any of the foregoing;
(vi) all other property hereafter delivered in substitution for or
in addition to any of the foregoing, all certificates and instruments
representing or evidencing such other property and all cash, securities,
interest, dividends, rights and other property at any time and from time
to time received, receivable or otherwise distributed in respect of or in
exchange for any or all thereof; and
(vii) to the extent not otherwise included, all Proceeds of any or
all of the foregoing.
The Pledgor hereby requests the Partnership to indicate the
Partnership's acceptance of this Notice and consent to and confirmation of its
terms and provisions by signing a copy hereof where indicated on the attached
page and returning the same to the Pledgee.
THE MILLS LIMITED PARTNERSHIP
By: THE MILLS CORPORATION,
its General Partner
By:_______________________________
Title:
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<PAGE>
ANNEX C
to
GENERAL PLEDGE AND
SECURITY AGREEMENT
FORM OF ACKNOWLEDGMENT
[NAME OF SUBSIDIARY PARTNERSHIP] (the "Partnership") hereby
acknowledges receipt of a copy of the assignment by THE MILLS LIMITED
PARTNERSHIP (the "Pledgor") of its interest under the [TITLE OF APPLICABLE
PARTNERSHIP AGREEMENT] (the "Partnership Agreement") pursuant to the terms of
the General Pledge and Security Agreement, dated as of October __, 1996 (as
amended, modified or supplemented from time to time in accordance with the terms
thereof, the "Pledge Agreement"), among the Pledgor, and CS FIRST BOSTON
DEED OF TRUST CORP., as Pledgee (the "Pledgee").
Dated:_____________ __, 199_
[NAME OF SUBSIDIARY PARTNERSHIP]
By___________________________________
Title
- 18 -
<PAGE>
EXHIBIT 10.59
EXHIBIT B-2
INTERCOMPANY PLEDGE AND SECURITY AGREEMENT
PLEDGE AND SECURITY AGREEMENT, dated as of October 28, 1996 (as
amended, modified or supplemented from time to time, this "Agreement"), made
by each of the undersigned (each a "Pledgor" and, together, the "Pledgors") ,
in favor of CS FIRST BOSTON MORTGAGE CAPITAL CORP. a Delaware
corporation (together with any successor pledgee, the "Pledgee"). Except as
otherwise defined herein, all capitalized terms used herein and defined in
the Credit Agreement (as defined below) shall be used herein as therein
defined.
W I T N E S S E T H :
WHEREAS, The Mills Corporation, The Mills Limited Partnership (the
"Borrower"), Sawgrass Mills Phase II Limited Partnership ("Sawgrass"), Sunrise
Mills (MLP) Limited Partnership ("Sunrise", and together with Sawgrass, the
"Subsidiary Partnerships" and each, a "Subsidiary Partnership") have entered
into a Credit Agreement with the Pledgee, dated as of October 28, 1996,
providing for the making of Revolving Loans to each Pledgor as contemplated
therein (as amended, modified or supplemented from time to time, the "Credit
Agreement");
WHEREAS, each Pledgor may have made, has made or makes loans to
certain Non-consolidated Subsidiaries;
WHEREAS, it is a condition precedent to the making of the Revolving
Loans under the Credit Agreement that each Pledgor shall have executed and
delivered this Agreement with respect to any Intercompany Debt (as defined the
Credit Agreement); and
WHEREAS, each Pledgor will obtain benefits from the incurrence of
Revolving Loans under the Credit Agreement and, accordingly, each Pledgor
desires to enter into this Agreement in order to satisfy the conditions
described in the preceding paragraph;
NOW, THEREFORE. in consideration of the benefits accruing to each
Pledgor, the receipt and sufficiency of which are hereby acknowledged, each
Pledgor hereby makes the following representations and warranties to the Pledgee
and hereby covenants and agrees with the Pledgee as follows:
1. SECURITY FOR OBLIGATIONS. This Agreement is made by each Pledgor
to secure:
(i) the full and prompt payment when due (whether at the stated
maturity, by acceleration or otherwise) of all obligations and liabilities
(including, without limitation,
<PAGE>
the principal of and interest on the Revolving Note issued by, and
Revolving Loans made to, each Pledgor under the Credit Agreement, and all
indemnities, Fees, expenses and interest thereon or owed thereunder) of
each Pledgor to the Pledgee, whether now existing or hereafter incurred
under, arising out of or in connection with the Credit Agreement and the
other Loan Documents and the due performance and compliance by each
Pledgor with all of the terms, conditions and agreements contained in the
Credit Agreement and such other Loan Documents;
(ii) any and all sums advanced by the Pledgee in order to preserve
the Collateral (as hereinafter defined) or preserve its security interest
in the Collateral;
(iii) in the event of any proceeding for the collection or
enforcement of any obligations or liabilities referred to in clauses (i)
and (ii) above, upon the occurrence and during the continuance of an Event
of Default (such term, as used in this Agreement, shall mean any Event of
Default under, and as defined in, the Credit Agreement, and shall in any
event include, without limitation, any payment default (after the
expiration of any applicable grace period) on any of the Obligations (as
hereinafter defined)) shall have occurred and be continuing, the
reasonable expenses of retaking, holding, preparing for sale or lease,
selling or otherwise disposing of or realizing on the Collateral, or of
any exercise by the Pledgee of its rights hereunder, together with
reasonable attorneys' fees and court costs; and
(iv) all amounts paid by any Indemnitee (as defined in Section 11
hereof) as to which such Indemnitee has the right to reimbursement under
Section 11 of this Agreement;
all such obligations, liabilities, sums and expenses set forth in clauses (i)
through (v) of this Section 1 being herein collectively called the
"Obligations".
2. DEFINITION OF NOTES, ETC. As used herein the term "Notes" shall
mean all Intercompany Notes, if any, from time to time issued to, or held by
each Pledgor.
3. GRANT OF SECURITY INTEREST
3.1 Pledge. (a) To secure the Obligations of each Pledgor and for
the purposes set forth in Section 1 hereof, each Pledgor hereby pledges and
grants to the Pledgee a first priority continuing security interest in the
Intercompany Debt, and as part of such grant and pledge, hereby transfers and
assigns to the Pledgee all of the following, whether now existing or hereafter
acquired (the "Collateral"), with respect to the Intercompany Debt including,
without limitation:
(i) all the principal thereof and any interest payments and other
distributions to which each Pledgor shall at any time be entitled in
respect of such Intercompany Debt;
(ii) all other payments due or to become due to each Pledgor in
respect of such Intercompany Debt;
- 2 -
<PAGE>
(iii) all of its claims, rights, powers, privileges, authority,
options, security interest, liens and remedies, if any, under any
Intercompany Debt or at law or otherwise in respect of such Notes;
(iv) all of each Pledgor's rights under any Note or at law to
exercise and enforce every right, power, remedy, authority, option and
privilege of each Pledgor relating to such Intercompany Debt, including
any power to terminate, cancel or modify the terms of any Intercompany
Debt, to execute any instruments and to take any and all other action on
behalf of and in the name of each Pledgor in respect of such Intercompany
Debt, to make determinations, to exercise any election (including, but not
limited to, election of remedies) or option or to give or receive any
notice, consent, amendment, waiver or approval, together with full power
and authority to demand, receive, enforce, collect, or receipt for any of
the foregoing, to enforce or execute any checks or other instruments or
orders, to file any claims and to take any action in connection with any
of the foregoing (with all of the foregoing rights only to be exercisable
upon the occurrence and during the continuance of an Event of Default);
and
(v) to the extent not otherwise included, all Proceeds (as
hereinafter defined) of any or all of the foregoing.
(b) As used herein, the term "Proceeds" shall mean all "proceeds" as
such term is defined in Section 9-306 (1) of the New York UCC.
3.2 Subsequently Acquired Intercompany Debt. If any Pledgor shall
acquire (by purchase, distribution or otherwise) any additional Intercompany
Debt at any time or from time to time after the date hereof, each Pledgor shall
forthwith pledge such Intercompany Debt as security with the Pledgee hereunder
and if evidenced by a Note or Notes deliver same to the Pledgee, duly endorsed
to the order of the Pledgee in blank and accompanied by such instruments of
transfer as are reasonably acceptable to the Pledgee, and shall promptly
thereafter deliver to the Pledgee a certificate executed by any Authorized
Representative of each Pledgor describing such Notes and certifying that the
same has been duly pledged with the Pledgee hereunder.
3.3 Notes. To the extent any Note (whether now owned or hereafter
acquired) is executed and delivered in favor of each Pledgor to evidence any
Intercompany Debt, the relevant Pledgor shall promptly notify the Pledgee
thereof, and shall promptly take all actions required to perfect the security
interest of the Pledgee under applicable law (including, in any event, under the
provisions of Articles 8 and 9 of the New York UCC), including without
limitation the delivery of the Note to the Pledgee, endorsed in blank, and
accompanied by such instruments of transfer as are acceptable to the Pledgee.
Each Pledgor further agrees to take such actions as the Pledgee deems necessary
or desirable to effect the foregoing and to permit the Pledgee to exercise any
of its rights and remedies hereunder.
4. APPOINTMENT OF SUB-AGENTS. The Pledgee shall have the right to
appoint one or more sub-agents for the purpose of retaining physical possession
of the Collateral, which may be held (in the discretion of the Pledgee) in the
name of each Pledgor,
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<PAGE>
endorsed or assigned in blank or in favor of the Pledgee or any nominee or
nominees of the Pledgee or a sub-agent appointed by the Pledgee. The Pledgee
agrees to promptly notify each Pledgor after the appointment of any sub-agent;
provided, however, that the failure to give such notice shall not affect the
validity of such appointment.
5. RIGHTS AND REMEDIES, ETC., WHILE NO EVENT OF DEFAULT. Unless and
until an Event of Default shall have occurred and be continuing, each Pledgor
may exercise any rights and remedies under any Intercompany Debt or otherwise
with respect to the Intercompany Debt of each Pledgor without the Pledgee's
prior written consent, to the extent that such vote cast or consent, waiver or
ratification given or other action taken would not violate or be inconsistent in
any material respect with any of the terms of this Agreement or any other Loan
Document, and would not have the effect of materially impairing the position or
interests of the Pledgee or the value of the Intercompany Debt. All such rights
and remedies of each Pledgor with respect to each Intercompany Debt shall cease
in case an Event of Default shall occur and be continuing, and Section 7 hereof
shall become applicable.
6. INTEREST, ETC. Unless an Event of Default shall have occurred and
be continuing, all interest payable and other payments made in respect of the
Intercompany Debt shall be paid to each Pledgor. The Pledgee shall be entitled
to receive directly, and to retain as part of the Collateral, all other property
(other than cash) paid or distributed by way of interest or otherwise in respect
of the Intercompany Debt.
7. REMEDIES IN CASE OF EVENT OF DEFAULT. In case an Event of Default
shall have occurred and be continuing, the Pledgee shall be entitled to exercise
all of the rights, powers and remedies (whether vested in it by this Agreement
or by any Loan Document or by law) for the protection and enforcement of its
rights in respect of the Collateral, and the Pledgee shall be entitled, without
limitation, to exercise the following rights, which each Pledgor hereby agrees
to be commercially reasonable remedies:
(i) to receive all amounts payable in respect of the Collateral
payable to each Pledgor under Section 6 hereof;
(ii) to accelerate any Intercompany Debt which may be accelerated in
accordance with its terms, and take any other lawful action to collect
upon any Intercompany Debt (including, without limitation, to make any
demand for payment thereon);
(iii) to give all consents, waivers and ratifications in respect of
the Collateral and otherwise act with respect thereto as though it were
the outright owner thereof; and
(iv) at any time or from time to time to sell, assign and deliver,
or grant options to purchase, all or any part of the Collateral, or any
interest therein, at any public or private sale, without demand of
performance, advertisement or notice of intention to sell after the
exercise of its remedies under the UCC; provided that at least 10 days'
prior notice of the time and place of any such sale shall be given to each
Pledgor. Each Pledgor hereby waives and releases to the fullest extent
permitted by law
- 4 -
<PAGE>
any right or equity of redemption with respect to the Collateral, whether
before or after sale hereunder, and all rights, if any, of marshalling the
Collateral and any other security for the Obligations or otherwise. At any
such sale, unless prohibited by applicable law, the Pledgee may bid for
and purchase all or any part of the Collateral so sold free from any such
right or equity of redemption. The Pledgee shall not be liable for failure
to collect or realize upon any or all of the Collateral or for any delay
in so doing nor shall the Pledgee be under any obligation to take any
action whatsoever with regard thereto.
8. REMEDIES, ETC., CUMULATIVE. Each right, power and remedy of the
Pledgee provided for in this Agreement or any other Loan Document or now or
hereafter existing at law or in equity or by statute shall be cumulative and
concurrent and shall be in addition to every other such right, power or remedy.
The exercise or beginning of the exercise by the Pledgee of any one or more of
the rights, powers or remedies provided for in this Agreement or any other Loan
Document or now or hereafter existing at law or in equity or by statute or
otherwise shall not preclude the simultaneous or later exercise by the Pledgee
of all such other rights, powers or remedies, and no failure or delay on the
part of the Pledgee to exercise any such right, power or remedy shall operate as
a waiver thereof.
9. APPLICATION OF PROCEEDS. (a) All Proceeds including all moneys
collected by the Pledgee upon any disposition of the Collateral pursuant to the
terms of this Agreement, together with all other moneys received by the Pledgee
hereunder, shall be applied as follows:
(i) first, to the payment of all amounts owing the Lender of
the type described in clauses (ii) and (iii) of Section 1 hereof
(the definition of "Obligations");
(ii) second, to the extent Proceeds remain after the
application pursuant to the preceding clause (i), an amount equal to
the outstanding Primary Obligations (as hereinafter defined) shall
be paid to the Pledgee as provided in Section 9(c) hereof;
(iii) third, to the extent Proceeds remain after the
application pursuant to the preceding clauses (i) and (ii), an
amount equal to the outstanding Secondary Obligations shall be paid
to the Pledgee as provided in Section 9(c) hereof; and
(iv) fourth, to the extent Proceeds remain after the
application pursuant to the preceding clauses (i) through (iii),
inclusive, and following the termination of this Agreement pursuant
to Section 16 hereof, to each Pledgor or to whomever may be lawfully
entitled to receive such surplus.
(b) For purposes of this Agreement (x) "Primary Obligations" shall
mean all principal of, and interest on, all Loans and all Fees and (y)
"Secondary Obligations" shall mean all Obligations other than Primary
Obligations.
- 5 -
<PAGE>
(c) All payments required to be made hereunder shall be made
directly to the Pledgee.
(d) It is understood and agreed that each Pledgor shall remain
liable to the extent of any deficiency between the amount of the Proceeds of the
Collateral hereunder and the aggregate amount of the Obligations.
10. PURCHASERS OF COLLATERAL. Upon any sale of the Collateral by the
Pledgee hereunder (whether by virtue of the power of sale herein granted,
pursuant to judicial process or otherwise), the receipt of the Pledgee or the
officer making the sale shall be a sufficient discharge to the purchaser or
purchasers of the Collateral so sold, and such purchaser or purchasers shall not
be obligated to see to the application of any part of the purchase money paid
over to the Pledgee or such officer or be answerable in any way for the
misapplication or nonapplication thereof.
11. INDEMNITY. (a) Each Pledgor agrees to indemnify, reimburse and
hold the Pledgee and its successors, assigns, employees, agents and servants
(hereinafter in this Section 11 referred to individually as an "Indemnitee," and
collectively as the "Indemnitees") harmless from any and all liabilities,
obligations, damages, injuries, penalties, claims, demands, actions, suits,
judgments and any and all costs, expenses or disbursements (including reasonable
attorneys' fees and expenses) (for the purposes of this Section 11 the foregoing
are collectively called "expenses") of whatsoever kind and nature imposed on,
asserted against or incurred by any of the Indemnitees in any way relating to or
arising out of this Agreement, any Loan Document or any other document executed
in connection herewith and therewith or the enforcement of any of the terms of,
or the preservation of any rights under any thereof, or in any way relating to
or arising out of the ownership, control, acceptance, possession, condition,
sale or other disposition, or use of the Collateral; provided that no Indemnitee
shall be indemnified pursuant to this Section 11(a) for expenses to the extent
caused by the gross negligence or willful misconduct of such Indemnitee or
failure to comply with the obligations of the Pledgee hereunder and under the
Credit Agreement. Each Pledgor agrees that upon written notice by any Indemnitee
of the assertion of such a liability, obligation, damage, injury, penalty,
claim, demand, action, suit or judgment, each Pledgor shall to the extent
requested to do so assume full responsibility for the defense thereof. Each
Indemnitee agrees to use its best efforts to promptly notify each Pledgor of any
such assertion of which such Indemnitee has knowledge.
(b) Without limiting the application of Section 11(a) hereof, each
Pledgor agrees to pay or reimburse the Pledgee for any and all reasonable fees,
costs and expenses of whatever kind or nature incurred in connection with the
creation, preservation or protection of the Pledgee's Liens on, and security
interest in, the Collateral, including, without limitation, all fees and taxes
in connection with the recording or filing of instruments and documents in
public offices, payment or discharge of any taxes or Liens upon or in respect of
the Collateral, and all other fees, costs and expenses in connection with
protecting, maintaining or preserving the Collateral and the Pledgee's interest
therein, whether through judicial proceedings or otherwise, or in defending or
prosecuting any actions, suits or proceedings arising out of or relating to the
Collateral.
- 6 -
<PAGE>
(c) If and to the extent that the obligations of each Pledgor under
this Section 11 are unenforceable for any reason, each Pledgor hereby agrees to
make the maximum contribution to the payment and satisfaction of such
obligations which is permissible under applicable law.
12. FURTHER ASSURANCES. Each Pledgor agrees that it will join with
the Pledgee in executing and at each Pledgor's own expense, file and refile
under the UCC of any jurisdiction such financing statements, continuation
statements and other documents in such offices as the Pledgee may deem necessary
or appropriate and wherever required or permitted by law in order to perfect and
preserve the Pledgee's security interest in the Collateral and hereby authorizes
the Pledgee to file financing statements and amendments thereto relative to all
or any part of the Collateral without the signature of each Pledgor where
permitted by law, and agrees to do such further acts and things and to execute
and deliver to the Pledgee such additional conveyances, assignments, agreements
and instruments as the Pledgee may reasonably require or deem advisable to carry
into effect the purposes of this Agreement or to further assure and confirm unto
the Pledgee its rights, powers and remedies hereunder.
13. TRANSFER BY PLEDGOR. Each Pledgor will not sell or otherwise
dispose of, grant any option with respect to, or mortgage, pledge or otherwise
encumber any of the Collateral or any interest therein (except pursuant to this
Agreement and as permitted by the Loan Documents).
14. REPRESENTATIONS, WARRANTIES AND COVENANTS OF EACH PLEDGOR. Each
Pledgor represents, warrants and covenants that: (i) it is the legal, record and
beneficial owner of, and has good and marketable title to, all Collateral
pledged by it hereunder, or in which it has granted a security interest pursuant
hereto, subject to no pledge, lien, mortgage, hypothecation, security interest,
charge, option or other encumbrance whatsoever, except the liens and security
interests created by this Agreement; (ii) it has full power (whether
partnership, corporate, company or otherwise), authority and legal right to
pledge and grant a security interest in all the Collateral pledged and assigned
by it pursuant to this Agreement; (iii) this Agreement has been duly authorized,
executed and delivered by such Pledgor and constitutes the legal, valid and
binding obligation of such Pledgor enforceable in accordance with its terms,
except to the extent that the enforceability hereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and by equitable principles (regardless of
whether enforcement is sought in equity or at law); (iv) except as have been
obtained or made, no consent of any other party and no consent, license, permit,
approval or authorization of, exemption by, notice or report to, or
registration, filing or declaration with, any governmental authority is required
to be obtained by such Pledgor in connection with the execution, delivery or
performance of this Agreement; (v) to the best knowledge of such Pledgor, the
execution, delivery and performance of this Agreement by such Pledgor does not
violate any provision of any applicable law or regulation or of any order,
judgment, writ, award or decree of any court arbitrator or governmental
authority, domestic or foreign, or of the partnership agreement, operating
agreement, bylaws or equivalent (generally, a "Business Agreement") of such
Pledgor or of any partnership units, membership units, securities or equivalent
issued by such Pledgor or any of its Subsidiaries, or of any mortgage,
indenture, lease, deed of trust, agreement (including any Business Agreement of
any Subsidiary
- 7 -
<PAGE>
of such Pledgor), instrument or undertaking to which such Pledgor or any of its
Subsidiaries is a party or which purports to be binding upon such Pledgor or any
of its Subsidiaries or upon any of their respective assets and will not result
in the creation or imposition of (or the obligation to create or impose) any
lien or encumbrance on any of the assets of such Pledgor or any of its
Subsidiaries except as contemplated by this Agreement; (vi) all Intercompany
Debt has been validly acquired and validly pledged hereunder; (vii) to the best
knowledge of such Pledgor, such Pledgor is not in default of any of its
obligations under such Business Agreement; (viii) this Agreement creates (after
all steps required under Article 8 of the UCC have been taken) in favor of the
Pledgee a legal, valid and enforceable security interest in all right, title and
interest of such Pledgor in the Collateral owned by such Pledgor on any date on
which this representation and warranty is made or deemed made, which security
interest shall, upon the taking of all steps required under Article 8 of the UCC
(which delivery filings and/or steps have been done and remain in full force and
effect as to the Collateral owned by such Pledgor on any date on which this
representation and warranty is made or deemed made), constitute a fully
perfected first lien on, and security interest in, all right, title and interest
of such Pledgor in all of such Collateral, subject to no security interests of
any other Person; (ix) there are no currently effective financing statements
under the UCC covering any property which is now or hereafter may be included in
the Collateral except financing statements filed or to be filed in favor of the
Pledgee as secured party; and (x) the chief executive office and principal place
of business of such Pledgor and the sole location where the records of such
Pledgor with respect to the Collateral are kept are located at 1300 Wilson
Boulevard, Arlington, Virginia 22209 and such Pledgor shall not move its chief
executive office, principal place of business or such location of records prior
written notice to the Pledgor and in compliance with the terms of the Credit
Agreement. Each Pledgor covenants and agrees that it will defend the Pledgee's
right, title and security interest in and to the Collateral and the Proceeds
thereto against the claims and demands of all persons whomsoever.
15. PLEDGORS' OBLIGATIONS ABSOLUTE, ETC. The obligations of each
Pledgor under this Agreement shall be absolute and unconditional and shall
remain in full force and effect without regard to, and shall not be released,
suspended. discharged, terminated or otherwise affected by, any circumstance or
occurrence whatsoever, including, without limitation: (i) any renewal,
extension, amendment or modification of or addition or supplement to or deletion
from any Loan Document or any other instrument or agreement referred to therein,
or any assignment or transfer of any thereof; (ii) any waiver, consent.
extension, indulgence or other action or inaction under or in respect of any
such Loan Document or other agreement or instrument or this Agreement; (iii) any
furnishing of any additional security to the Pledgee or its assignee or any
acceptance thereof or any release of any security by the Pledgee or its
assignee; (iv) any limitation on any party's liability or obligations under any
such instrument or agreement or any invalidity or unenforceability, in whole or
in part, of any such instrument or agreement or any term thereof; or (v) any
bankruptcy, insolvency, reorganization, composition, adjustment. dissolution,
liquidation or other like proceeding relating to each Pledgor, any Subsidiary of
each Pledgor, or any action taken with respect to this Agreement by any trustee
or receiver, or by any court, in any such proceeding, whether or not each
Pledgor shall have notice or knowledge of any of the foregoing.
- 8 -
<PAGE>
16. TERMINATION, RELEASE. (a) After the Termination Date (as defined
below), this Agreement shall terminate (provided that all indemnities set forth
herein including, without limitation, in Section 11 hereof shall survive any
such termination) and the Pledgee, at the request and expense of each Pledgor,
will promptly execute and deliver to each Pledgor a proper instrument or
instruments acknowledging the satisfaction and termination of this Agreement,
and will duly assign, transfer and deliver to each Pledgor (without recourse and
without any representation or warranty) such of the Collateral as may be in the
possession of the Pledgee and as has not theretofore been sold or otherwise
applied or released pursuant to this Agreement. As used in this Agreement,
"Termination Date" shall mean the date upon which the Commitment has been
terminated, the Revolving Note together with interest thereon, Fees and all
other Obligations then owing under the Credit Agreement and all other Loan
Documents have been indefeasibly and irrevocably repaid in full.
(b) In the event that any part of the Collateral is sold or released
by the Pledgee and the proceeds of such sale or sales or from such release are
applied in accordance with the provisions of the Credit Agreement, to the extent
required to be so applied, the Pledgee, at the request and expense of each
Pledgor, will duly assign, transfer and deliver to each Pledgor (without
recourse and without any representation or warranty) such of the Collateral as
is then being (or has been) so sold or released and as may be in the possession
of the Pledgee and has not theretofore been released pursuant to this Agreement.
(c) At any time that each Pledgor desires that Collateral be
released as provided in the foregoing sub-section (a) or (b), it shall deliver
to the Pledgee a certificate signed by an Authorized Representative of each
Pledgor stating that the release of the respective Collateral is permitted
pursuant to such subsection (a) or (b).
17. NOTICES, ETC. Unless otherwise agreed, all notices, requests and
demands to or upon the respective parties hereto to be effective shall be in
writing (including by telecopy) and, unless otherwise expressly provided herein,
shall be deemed to have been duly given or made when delivered by hand, or 3
days after being sent by certified mail, return receipt requested, postage
prepaid or upon delivery or rejection by overnight courier, expense prepaid, or,
in the case of telecopy notice, when received, addressed as follows or to such
other address as may be hereafter notified by the respective parties hereto:
(a) each Pledgor:
c/o The Mills Corporation
1300 Wilson Boulevard
Arlington, Virginia 22209
Attention: Thomas E. Frost, Esq.
Tel: (703) 526-5000
Fax: (703) 526-5125
- 9 -
<PAGE>
with a copy to:
Rudnick & Wolfe
203 North LaSalle Street
Suite 1800
Chicago, Illinois 60601-1293
Attention: Robert Goldman, Esq.
Tel: (312) 368-4000
Fax: (312) 236-7516
(b) the Pledgee:
CS First Boston Mortgage Capital Corp.
55 East 52nd Street, 32nd Floor
New York, New York 10055
Attn: Mr. Robert K. Vahradian
Tel: (212) 909-2178
Fax: (212) 755-5681
with a copy to:
Kramer, Levin, Naftalis & Frankel
919 Third Avenue
New York, NY 10022
Attention: Mark S. Fawer, Esq.
Tel: (212) 715-9372
Fax: (212) 715-8000
18. WAIVER; AMENDMENT. None of the terms and conditions of this
Agreement may be changed, waived, modified or varied in any manner whatsoever
unless in writing duly signed by the parties hereto.
19. PLEDGEE NOT BOUND. (a) The Pledgee shall not be obligated to
perform or discharge any obligation of each Pledgor as a result of the
collateral assignment hereby effected.
(b) The acceptance by the Pledgee of this Agreement, with all the
rights, powers, privileges and authority so created, shall not at any time or in
any event obligate the Pledgee to appear in or defend any action or proceeding
relating to the Collateral to which it is not a party, or to take any action
hereunder or thereunder, or to expend any money or incur any expenses or perform
or discharge any obligation, duty or liability under the Collateral.
20. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
successors and assigns of each Pledgor (although each Pledgor may not assign its
rights and obligations hereunder) and shall inure to the benefit of and be
enforceable by the Pledgee and its successors and assigns. The Pledgee may
assign its rights and delegate its obligations under
- 10 -
<PAGE>
this Agreement, in each case in full or in part, to a bank, financial
institution or other entity, in which event, upon written notice thereof by the
Pledgee to each Pledgor, the assignee shall have, to the extent of such
assignment (unless otherwise provided therein), the same rights and benefits as
it would have had if it were the Pledgee hereunder. The Pledgee may furnish any
information concerning each Pledgor, in the possession of the Pledgee from time
to time, to assignees (including prospective assignees), including, without
limitation, any and all documentation relating to the Intercompany Debt and the
results of the Pledgee's examination of the operations, books and records of
each Subsidiary of each Pledgor.
21. GOVERNING LAW. (a) THIS AGREEMENT SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK
WITHOUT REGARD TO CONFLICT OF LAWS EXCEPT FOR THE CHOICE OF LAW PROVISIONS OF
THE NEW YORK UCC.
(b) EACH PARTY TO THIS AGREEMENT HEREBY IRREVOCABLY CONSENTS TO THE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, COUNTY OF NEW YORK AND OF
ANY FEDERAL COURT LOCATED IN THE SOUTHERN DISTRICT OF NEW YORK, AND AGREES THAT
VENUE IN EACH OF SUCH COURTS IS PROPER IN CONNECTION WITH ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY DOCUMENT OR
INSTRUMENT DELIVERED PURSUANT TO THIS AGREEMENT. NOTHING HEREIN SHALL AFFECT THE
RIGHT OF THE PLEDGEE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO
COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST EACH PLEDGOR IN ANY
OTHER REASONABLE JURISDICTION.
(c) WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
KNOWINGLY AND VOLUNTARILY WAIVES TRIAL BY JURY IN ANY LITIGATION IN ANY COURT
WITH RESPECT TO ANY LITIGATION BASED HEREON OR ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS AGREEMENT OR ANY INSTRUMENT OR DOCUMENT DELIVERED PURSUANT
TO THIS AGREEMENT, (II) ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY
OR (III) ANY COURSE OF CONDUCT OR STATEMENTS OR ACTIONS OF ANY PARTY HERETO IN
CONNECTION HEREWITH OR THEREWITH OR IN CONNECTION WITH THE VALIDITY, PROTECTION,
INTERPRETATION, COLLECTION OR ENFORCEMENT THEREOF OR ANY OTHER CLAIM OR DISPUTE
HOWSOEVER ARISING, BETWEEN THE PLEDGOR AND THE PLEDGEE.
22. COUNTERPARTS. This Agreement may be executed by the parties
hereto individually or in any combination, in one or more counterparts, each of
which shall be an original and all of which shall together constitute one and
the same agreement.
23. SEVERABILITY. Any provision of this Agreement prohibited by the
laws of any jurisdiction shall, as to such jurisdiction, be ineffective to the
extent of such prohibition, or modified to conform with such laws, without
invalidating the remaining provisions of this
- 11 -
<PAGE>
Agreement, and any such prohibition in any jurisdiction shall not invalidate
such provisions in any other jurisdiction.
24. RECOURSE. This Agreement is made with full recourse to each
Pledgor (including. without limitation, with full recourse to all assets of each
Pledgor) and pursuant to and upon the representations, warranties, covenants and
the agreements on the part of each Pledgor contained herein, in the Loan
Documents and otherwise in writing in connection herewith or therewith.
IN WITNESS WHEREOF, each Pledgor and the Pledgee have caused this
Agreement to be executed by their respective officers thereunto duly authorized
as of the day and year first above written.
CS FIRST BOSTON MORTGAGE CAPITAL CORP.
By:__________________________________
Name:
Title:
THE MILLS LIMITED PARTNERSHIP
By: THE MILLS CORPORATION,
its General Partner
By:__________________________________
Name: Thomas E. Frost
Title: Senior Vice President
THE MILLS CORPORATION
By:__________________________________
Name: Thomas E. Frost
Title: Senior Vice President
- 12 -
<PAGE>
SUNRISE MILLS (MLP) LIMITED PARTNERSHIP
By: SUNRISE MILLS L.L.C.,
its General Partner
By: WESTERN SAWGRASS MILLS CORP.,
its Manager
By:__________________________________
Name: Thomas E. Frost
Title: Senior Vice President
SAWGRASS MILLS PHASE II LIMITED PARTNERSHIP
By: SAWGRASS MILLS PHASE II, LLC,
its General Partner
By: THE MILLS LIMITED PARTNERSHIP,
its General Manager
By: THE MILLS CORPORATION,
its General Partner
By:__________________________________
Name: Thomas E. Frost
Title: Senior Vice President
- 13 -
<PAGE>
EXHIBIT 10.60
ASSIGNMENT OF PARTNERSHIP INTEREST
ASSIGNMENT OF PARTNERSHIP INTEREST (this "Assignment") dated as of the
28th day of October, 1996 from THE MILLS LIMITED PARTNERSHIP, a Delaware limited
partnership (together with its successors and assigns, "Assignor") to CS FIRST
BOSTON MORTGAGE CAPITAL CORP. (together with its successors and assigns,
"Assignee").
1. Assignment. Assignor hereby assigns, transfers and conveys to
Assignee all right, title and interest in and to the 98.0202% limited
partnership interest (the "Units") in Sunrise Mills (MLP) Limited Partnership
(the "Partnership"), a District of Columbia limited partnership established
pursuant to that certain Agreement of Limited Partnership dated as of October
21, 1986 as amended (the "Partnership Agreement"), standing in the name of
Assignor on the books of the Partnership and all rights, claims, suits, causes
of action (whether known or unknown) of Assignor in any way based upon, arising
out of or related to the Units, the Partnership and/or the Partnership Agreement
(including, without limitation, the right to receive all distributions in
respect of such Units whether in respect of the period prior to or after the
date hereof) (collectively, together with the Units, the "Assigned Rights").
2. Power of Attorney. Assignor hereby irrevocably constitutes and
appoints Assignee as its true and lawful attorney-in-fact (with full power of
substitution) with respect to all matters relating to the Assigned Rights (and
any portion thereof) and authorizes Assignee, in Assignor's name, place and
stead, to do all things necessary or desirable in connection with the Assigned
Rights (and any portion thereof) (including, without limitation, to act, vote,
elect and to demand, sue for, compromise and recover all sums of money and other
property which now are, or may hereafter become due and payable for, or on
account of the Assigned Rights (or any portion thereof)) and hereby grants
Assignee full authority and an irrevocable proxy to, in Assignor's name, place
and stead, execute, acknowledge, deliver, endorse, swear to, file and record
agreements, certificates, documents and instruments in connection with same.
Assignor hereby agrees that (i) the irrevocable power of attorney and proxy
granted herein is coupled with an interest and (ii) notwithstanding anything to
the contrary contained herein, the powers granted to Assignee herein are
discretionary in nature and exercisable at the sole option of Assignee and that
the Assignee shall have no obligation whatsoever to prove, demand or take any
action with respect to the Assigned Rights (or any portion thereof).
3. Subsequent Payments, Notices and Distributions. Assignor hereby
agrees that in the event it shall receive any payment or other distribution in
respect of, or any notice, consent, proxy or other document relating to, the
Assigned Rights it shall hold same in trust on behalf of Assignee, such payment,
notice or other distribution shall be the property of Assignee not subject to
any set-off, claim or recoupment and shall not be within the estate of, or
constitute property of, Assignor (as each of such terms are used in connection
with the Bankruptcy Code or otherwise) and Assignor shall deliver same to
Assignee as promptly as possible (but in no event later than 2 business days)
following receipt thereof by Assignor. Assignor hereby directs the Partnership
to send and deliver all such notices, proxies, consents, payments and
distributions directly to Assignee.
<PAGE>
4. GOVERNING LAW. THIS ASSIGNMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE
TO THE PRINCIPLES OF CONFLICTS OF LAW THEREOF. EACH PARTY HEREBY IRREVOCABLY
CONSENTS TO THE JURISDICTION OF THE UNITED STATES COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK AND THE COURTS OF THE STATE OF NEW YORK LOCATED IN THE
STATE AND CITY OF NEW YORK IN ANY ACTION ARISING FROM OR RELATED TO THIS
ASSIGNMENT OF ANY OTHER ASSIGNMENT OR DOCUMENT DELIVERED IN CONNECTION WITH THIS
ASSIGNMENT, AND ALSO HEREBY IRREVOCABLY WAIVES ANY DEFENSE OF IMPROPER VENUE,
FORUM NON CONVENIENS OR LACK OF PERSONAL JURISDICTION TO ANY SUCH ACTION BROUGHT
IN THOSE COURTS. EACH PARTY HEREBY IRREVOCABLY CONSENTS TO THE SERVICE BY
CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, TO BE SENT TO ITS
ADDRESS LISTED BELOW ITS SIGNATURE HEREUNDER.
5. Severability. If any provision of this Assignment shall be held
invalid by a court of competent jurisdiction, the remainder of this Assignment
shall not be affected thereby and shall remain in full force and effect.
6. Headings. The headings contained in this Assignment are for the
purpose of reference and shall not be used to interpret or to modify the
provisions of this Assignment.
IN WITNESS WHEREOF, the parties hereto have this Assignment on the
day and year first above written.
THE MILLS LIMITED
PARTNERSHIP (as Assignor)
By: THE MILLS CORPORATION,
its General Partner
By: ____________________________
Name: Thomas E. Frost
Title: Senior Vice President
- 2 -
<PAGE>
GENERAL PARTNER'S CONSENT
The undersigned General Partner of Sawgrass Mills Phase II Limited
Partnership (the "Partnership") hereby consents to and accepts the foregoing
Assignment of Partnership Interest between The Mills Limited Partnership and
CS First Boston Mortgage Capital Corp. (the "Assignment") and further
admits CS First Boston Mortgage Capital Corp. or its designee as a
substituted Limited Partner of the Partnership, subject to all the terms and
conditions of the Partnership Agreement (as defined in the Assignment) as now
in effect or hereafter amended, for and on behalf of the Partnership,
pursuant to the provisions of the Partnership Agreement, as of this ___ day
of _________, 199_.
SAWGRASS MILLS PHASE II LIMITED
PARTNERSHIP
By: SAWGRASS MILLS PHASE II, LLC,
its General Partner
By: THE MILLS LIMITED PARTNERSHIP,
its Manager
By: THE MILLS CORPORATION,
its General Partner
By:________________________________
Name: Thomas E. Frost
Title: Senior Vice President
- 3 -
<PAGE>
EXHIBIT 10.61
THE MILLS LIMITED PARTNERSHIP
REVOLVING NOTE
- --$40,000,000.00-- New York, New York
October 28, 1996
FOR VALUE RECEIVED, the undersigned, THE MILLS LIMITED PARTNERSHIP, a
Delaware limited partnership (together with its successors and assigns, the
"Borrower"), hereby unconditionally promises to pay on the Maturity Date or
sooner Maturity, as each such term is defined in the Credit Agreement among The
Mills Corporation, the Borrower, Sawgrass Mills Phase II Limited Partnership,
Sunrise Mills (MLP) Limited Partnership, and the Lender, (as hereinafter
defined) dated as of October 28, 1996 (as same may be hereafter modified or
amended, the "Agreement"), to the order of CS FIRST BOSTON MORTGAGE CAPITAL
CORP. (together with its successors and assigns, the "Lender") at its office
located at 55 East 52nd Street, New York, New York 10055, in lawful money of the
United States of America and in immediately available funds, an amount equal to
the lesser of (a) FORTY MILLION DOLLARS ($40,000,000.00) or (b) the aggregate
unpaid principal amount of all Revolving Loans (as defined in the Agreement)
made by the Lender under the Agreement. The Borrower further promises to pay
interest in like money on the unpaid principal balance of, and, in certain
cases, on the unpaid interest due on, this Revolving Note from time to time
outstanding at the rate and times and computed in the manner provided in the
Agreement, but in no event in excess of the maximum rate of interest permitted
under applicable law.
All Revolving Loans made by the Lender pursuant to the Credit Agreement
and all payments of the principal thereof shall be endorsed by the holder of
this Revolving Note on the schedule annexed hereto (including any additional
pages such holder may add to such schedule), which endorsement shall constitute
prima facie evidence of the accuracy of the information so endorsed; provided,
that the failure of the holder of this Revolving Note to insert any date or
amount or other information on such schedule shall not in any manner affect the
obligation of the Borrower to repay such Revolving Loans in accordance with the
terms of the Agreement.
This Revolving Note is the Revolving Note referred to in the Agreement, is
secured to the extent provided in the Agreement and the Security Documents, and
is entitled to the benefits thereof. The Borrower shall make when due any and
all payments and prepayments on this Revolving Note required under the
Agreement. Reference is herein made to the Agreement for the rights of the
holder to accelerate the unpaid balance hereof prior to maturity and all other
obligations of the Borrower. In case an Event of Default (as defined in the
Agreement) shall occur and be continuing, the principal of and accrued interest
on this Revolving Note may be declared to be due and payable in the manner and
with the effect provided in the Agreement.
<PAGE>
The Borrower hereby waives diligence, demand, presentment, protest and
notice of any kind, release, surrender or substitution of security, or
forbearance or other indulgence, without notice, except as provided in the
Agreement.
This Revolving Note may not be changed, modified or terminated orally, but
only by an agreement in writing signed by the parties hereto.
Capitalized terms used herein and not otherwise defined shall have the
respective meanings ascribed to them in the Agreement.
IN THE EVENT OF ANY LITIGATION WITH RESPECT TO THIS REVOLVING NOTE, THE
BORROWER KNOWINGLY AND VOLUNTARILY WAIVES (TO THE EXTENT PERMITTED BY APPLICABLE
LAW) THE RIGHT TO A TRIAL BY JURY AND THE DEFENSES OF FORUM NON CONVENIENS AND
IMPROPER VENUE. THE BORROWER HEREBY IRREVOCABLY CONSENTS TO THE NON-EXCLUSIVE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND OF ANY FEDERAL COURT
LOCATED IN THE CITY OF NEW YORK IN CONNECTION WITH ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS REVOLVING NOTE. THIS REVOLVING NOTE SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS AND SHALL BE BINDING UPON THE
SUCCESSORS AND ASSIGNS OF THE BORROWER AND INURE TO THE BENEFIT OF THE LENDER
AND ITS SUCCESSORS AND ASSIGNS.
If any item or provision of this Revolving Note shall be held invalid,
illegal or unenforceable, the validity of all other terms and provisions herein
shall in no way be affected thereby.
IN WITNESS WHEREOF, the Borrower has executed and delivered this Revolving
Note on the date first above written.
THE MILLS LIMITED PARTNERSHIP
By: THE MILLS CORPORATION,
its General Partner
By:________________________________
Name: Thomas E. Frost
Title: Senior Vice President
<PAGE>
Grid Schedule
Attached to and made part of the Revolving Note, dated October __, 1996,
by The Mills Limited Partnership to the order of CS First Boston Mortgage
Capital Corp. (the "Lender"), pursuant to the Credit Agreement, dated as
of October __, 1996, among The Mills Corporation, the Borrower, Sawgrass
Mills Phase II Limited Partnership, Sunrise Mills (MLP) Limited
Partnership and the Lender
Amount Amount Unpaid Name of
of Repaid or Principal Person Making
Date Borrowing Prepaid Balance Notation
---- --------- ------- ------- --------
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
<PAGE>
EXHIBIT 11 - STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
------------------------------------------------------------
YEAR ENDED DECEMBER 31,
1996 1995 1994
--------------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Primary
Average share outstanding 16,907 16,906 16,906
Net effect of dilutive stock options -
based on the treasury stock method
using average market price 102 -- --
------ ------ ------
Total $17,009 $16,906 $16,906
------ ------- -------
------ ------- -------
Net income $ 8,181 $ 7,618 $ 965
------ ------- -------
------ ------- -------
Per share amount $ 0.48 $ 0.45 $ 0.06
------ ------- -------
------ ------- -------
<PAGE>
EXHIBIT 21.1
LIST OF SUBSIDIARIES OF REGISTRANT
A. SUBSIDIARIES OF THE MILLS CORPORATION
<TABLE>
<CAPTION>
Name State of Fictitious
Formation & Business Names
Qualification
<S> <C> <C>
Potomac Gurnee Finance Corp. Delaware N/A
Potomac Mills Finance Corp. Delaware N/A
The Mills GP, Inc. Delaware N/A
District of Columbia
Florida
South Carolina
Virginia
Washington Potomac Partners Delaware N/A
Corp. Virginia
The Mills Limited Partnership Delaware
Arizona Chandler Mills Limited
Partnership
California Delaware Mills Limited
Partnership
District of Columbia
Florida The Mills Limited
Partnership of Delaware
Georgia
Illinois
Maryland
New Jersey
Ohio
Pennsylvania Delaware Mills Limited
Partnership
South Carolina
Texas The Delaware Mills
Limited Partnership
Virginia
</TABLE>
1
<PAGE>
<TABLE>
<S> <C> <C>
MillsServices Corp. Delaware
California
District of Columbia
Florida
New Jersey
Ohio MillsServices Corp. of
Ohio
Virginia MillsServices Corp. of
Virginia
</TABLE>
B. SUBSIDIARIES OF THE MILLS LIMITED PARTNERSHIP
<TABLE>
<CAPTION>
Name State of Fictitious
Formation & Business Names
Qualification
<S> <C> <C>
Arizona Mills, L.L.C. Delaware N/A
Arizona
Michigan
Coopers Crossing Associates New Jersey N/A
(MLP) Limited Partnership
Coopers Crossing L.L.C. Delaware N/A
New Jersey
Crosswinds Center Associates of District of Columbia N/A
St. Petersburg (MLP) L.P. Florida
Crosswinds L.L.C. Delaware N/A
District of Columbia
Florida
Echo Hills Center Associates Virginia N/A
(MLP) Limited Partnership
Fashion Center Associates of Illinois N/A
Illinois No. 1 (MLP) Limited
Partnership
Fashion Center L.L.C. Delaware N/A
Illinois
Fashion Place Associates, Delaware N/A
L.L.C. South Carolina
</TABLE>
2
<PAGE>
<TABLE>
<S> <C> <C>
Fashion Place Associates South Carolina N/A
Limited Partnership
Franklin Mills Associates District of Columbia N/A
Limited Partnership Pennsylvania
Franklin Mills Residual District of Columbia N/A
Associates Limited Partnership Pennsylvania
Germantown Development Maryland N/A
Associates (MLP) Limited
Partnership
Germantown Development Delaware N/A
Associates L.L.C. Maryland
Gurnee Mills (MLP) Limited Illinois N/A
Partnership
Gurnee Mills L.L.C. Delaware N/A
Illinois
Gurnee Mills II L.L.C. Delaware N/A
Illinois
Virginia
Gwinnett L.L.C. Delaware N/A
Georgia
Gwinnett Marketfair Associates Georgia N/A
Limited Partnership
Hunt Club Road Properties Illinois N/A
Associates Limited Partnership
Mainstreet Retail Limited Delaware N/A
Partnership Arizona
California
Florida
Illinois
Maryland
Ohio
Pennsylvania
South Carolina
Texas
Virginia
</TABLE>
3
<PAGE>
<TABLE>
<S> <C> <C>
Management Associates Limited Delaware N/A
Partnership Florida
Georgia
Illinois
Maryland
New Jersey
Ohio
Pennsylvania
South Carolina
Virginia
Meadowlands Mills L.L.C. Delaware N/A
New Jersey
Mills Management L.L.C. Delaware N/A
Florida
Illinois
Maryland
Ohio
South Carolina
Montgomery Village Associates Maryland N/A
(MLP) Limited Partnership
Montgomery Village Associates Delaware N/A
L.L.C. Maryland Maryland Montgomery
Village Associates
L.L.C.
Montgomery Village Ground Maryland N/A
(MLP) Limited Partnership
Montgomery Village Ground Delaware
L.L.C. Maryland Montgomery Village
Ground L.L.C.
Mount Prospect Plaza (MLP) Illinois N/A
Limited Partnership
Mount Prospect Plaza L.L.C. Delaware N/A
Illinois
Potomac Mills L.L.C. Delaware N/A
Virginia
Potomac Mills Limited Virginia N/A
Partnership
</TABLE>
4
<PAGE>
<TABLE>
<S> <C> <C>
Sawgrass Finance L.L.C. Delaware N/A
Sawgrass Mills Phase II Limited Delaware N/A
Partnership Florida
Sawgrass Mills Phase II L.L.C. Delaware N/A
Florida
Sunrise Mills (MLP) Limited District of Columbia N/A
Partnership Florida
Sunrise Mills L.L.C. Delaware N/A
District of Columbia
Florida Sunrise Mills of Sunrise
L.L.C.
West Falls Church L.L.C. Delaware N/A
Virginia
Four "J" Development Delaware N/A
Company, Ltd. Texas
</TABLE>
C. SUBSIDIARIES OF MILLSSERVICES CORP.
<TABLE>
<CAPTION>
Name State of Fictitious
Formation & Business Names
Qualification
<S> <C> <C>
Potomac Title Services, Inc. Florida N/A
Premises Providers, Inc. Maryland N/A
Arizona
California
District of Columbia
Florida
Illinois
Ohio
Pennsylvania
Texas
Virginia
Wisconsin
MillsServices Corp. of Delaware N/A
Grapevine, Inc. Texas
</TABLE>
5
<PAGE>
<TABLE>
<S> <C> <C>
WSM South Florida Corp. Florida N/A
District of Columbia
</TABLE>
6
<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT AUDITIORS
We consent to the incorporation by reference in the Registration Statements
(Form S-3 No.33-98362, Form S-3 No. 333-03205, Form S-3 No.333-03596, and
Form S-3 No.333-13363) of The Mills Corporation and in the related
Prospectuses of our report dated February 21, 1997, with respect to the
consolidated financial statements and schedule of The Mills Corporation and
the combined financial statements of The Mills Entities included in this
Annual Report (Form 10-K) for the year ended December 31, 1996.
ERNST & YOUNG LLP
Washington, D.C.
March 7, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 6327
<SECURITIES> 0
<RECEIVABLES> 26,332
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 849,110
<DEPRECIATION> (179,658)
<TOTAL-ASSETS> 862,624
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 169
<OTHER-SE> 89,331
<TOTAL-LIABILITY-AND-EQUITY> 862,624
<SALES> 0
<TOTAL-REVENUES> 158,760
<CGS> 0
<TOTAL-COSTS> 141,108
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 45,885
<INCOME-PRETAX> 16,085
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> (5301)
<CHANGES> 0
<NET-INCOME> 8,181
<EPS-PRIMARY> 1.23
<EPS-DILUTED> 0
</TABLE>
