Law Offices
SHEFSKY & FROELICH LTD.
444 NORTH MICHIGAN AVENUE
CHICAGO, ILLINOIS 60611
-------------
TELEPHONE (312) 527-4000
FACSIMILE (312) 527-5921
Jane O. Negronida IN REPLY REFER TO:
(312) 836-4117 23344-02-01
October 7, 1998
VIA EDGAR TRANSMISSION
Securities and Exchange Commission
Office of Filings, Information and
Consumer Services
Judiciary Plaza Office Building
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Inland Real Estate Corporation (the "Company")
File No. 333-45233
Ladies and Gentlemen:
The following electronic transmission of Post-Effective
Amendment No. 2 to the Company's Registration Statement on Form
S-11 is being filed, on behalf of the Company pursuant to Rules
402 and 309 promulgated under the Securities Act of 1933, as
amended.
Upon completion of your review of the filing, please contact
me with any questions or comments.
Very truly yours,
SHEFSKY & FROELICH LTD.
/S/ Jane O. Negronida
Jane O. Negonida
JON/tsr
Enclosures
cc: Mr. Robert Plesnarski
364056
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LOAN AGREEMENT
Dated as of September 25, 1998
Between
INLAND REAL ESTATE LB I LLC,
as Borrower
and
LEHMAN BROTHERS HOLDINGS INC.,
DOING BUSINESS AS LEHMAN CAPITAL,
A DIVISION OF LEHMAN BROTHERS HOLDINGS INC.
as Lender
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<PAGE>
TABLE OF CONTENTS
Page
I. DEFINITIONS; PRINCIPLES OF CONSTRUCTION ............................. 1
Section 1.1 Definitions ............................................. 1
Section 1.2 Principles of Construction .............................. 17
II. GENERAL TERMS ...................................................... 18
Section 2.1 Loan Commitment; Disbursement to Borrower ................ 18
2.1.1 The Loan .................................................... 18
2.1.2 Disbursement to Borrower .................................. 18
2.1.3 The Note, Mongages and Loan Documents ....................... 18
2.1.4 Use of Proceeds ........................................... 18
Section 2.2 Interest; Loan Payments; Late Payment Charge ............ 18
2.2.1 Interest Generally ........................................ 18
2.2.2 Interest Calculation ...................................... 18
2.2.3 Payment Before Anticipated Repayment Date ................. 18
2.2.4 Payments After Anticipated Repayment Date .................. 19
2.2.5 Payment on Maturity Date ................................... 19
2.2.6 Payments after Default ..................................... 19
2.2.7. Late Payment Charge ....................................... 20
2.2.8 Usury Savings .............................................. 20
Section 2.3 Prepayments .............................................. 20
2.3.1 Voluntary Prepayments ...................................... 20
2.3.2 Mandatory Prepayments ...................................... 20
2.3.3 Prepayments After Default .................................. 21
Section 2.4 Defeasance .............................................. 21
2.4.1 Voluntary Defeasance ........................................ 21
2.4.2 Successor Borrower .......................................... 23
Section 2.5 Release of Property ..................................... 23
2.5.1 Release of all Properties .................................. 23
2.5.2 Release of Individual Property ............................. 24
2.5.3 Release on Payment in Full ................................ 24
Section 2.6 Manner of Making Payments; Cash Management .............. 25
2.6.1 Deposits into Lockbox Account .............................. 25
2.6.2 Making of Payments .......................................... 25
2.6.3 Payments Received in the Lockbox Account ................... 25
2.6.4 No Deductions, etc .......................................... 26
Section 2.7 Property Substitutions .................................. 26
2.7.1 Substitution of Property ................................... 26
III. CONDITIONS PRECEDENT .............................................. 34
Section 3.1 Conditions Precedent to Closing ....................... 34
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3.1.1 Representations and Warranties; Compliance
with Conditions ............................................ 34
3.1.2 Loan Agreement and Note .................................. 34
3.1.3 Delivery of Loan Documents; Title Insurance; Reports;
Leases, etc ................................................ 34
3.1.4 Related Documents ......................................... 36
3.1.5 Delivery of Organizational Documents ...................... 36
3.1.6 Opinions of Borrower's Counsel ............................ 36
3.1.7 Budgets ................................................... 36
3.1.8 Basic Carrying Costs ....................................... 36
3.1.9 Completion of Proceedings ................................. 36
3.1.10 Payments ................................................. 36
3.1.11 Tenant Estoppels ......................................... 36
3.1.12 Transaction Costs ......................................... 37
3.1.13 Material Adverse Change ................................... 37
3.1.14 Leases and Rent Roll ..................................... 37
3.1.15 Subordination and Attornment ............................ 37
3.1.16 Tax Lot ................................................... 37
3.1.17 Physical Conditions Reports ............................... 37
3.1.18 Management Agreement .................................... 38
3.1.19 Appraisal .............................................. 38
3.1.20 Financial Statements ..................................... 38
3.1.21 Further Documents ......................................... 38
IV. REPRESENTATIONS AND WARRANTlliS ..................................... 38
Section 4.1 Borrower Representations ................................ 38
4.1.1 Organization ............................................. 38
4.1.2 Proceedings ............................................. 38
4.1.3 No Conflicts ............................................. 39
4.1.4 Litigation ................................................. 39
4.1.5 Agreements ............................................... 39
4.1.6 Title ..................................................... 39
4.1.7 No Bankruptcy Filing ...................................... 40
4.1.8 Full and Accurate Disclosure ............................... 40
4.1.9 No Plan Assets ............................................. 40
4.1.10 Compliance .............................................. 40
4.1.11 Financial Information ..................................... 41
4.1.12 Condemnation .............................................. 41
4.1.13 Federal Reserve Regulations ............................... 41
4.1.14 Utilities and Public Access ............................... 41
4.1.15 Not a Foreign Person .................................... 41
4.1.16 Separate Lots ............................................ 41
4.1.17 Assessments ............................................... 42
4.1.18 Enforceability ........................................... 42
4.1.19 No Prior Assignment ....................................... 42
4.1.20 Insurance ................................................. 42
4.1.21 Use of Property ............................................ 42
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4.1.22 Certificate of Occupancy; Licenses.......................... 42
4.1.23 Flood Zone.................................................. 42
4.1.24 Physical Condition.......................................... 43
4.1.25 Boundaries ................................................. 43
4.1.26 Leases...................................................... 43
4.1.27 Survey ..................................................... 44
4.1.28 Loan to Value .............................................. 44
4.1.29 Filing and Recording Taxes ................................ 44
4.1.31 Management Agreement ...................................... 48
4.1.33 No Change in Facts or Circumstances; Disclosure ............ 48
Section 4.2 Survival of Representations............................... 48
V. BORROWER COVENANTS .................................................. 48
Section 5.1 Affirmative Covenants ................................... 48
5.1.1 Existence; Compliance with Legal Requirements; Insurance ... 49
5.1.2 Taxes and Other Charges .................................... 49
5.1.3 Litigation ................................................. 50
5.1.4 Access to Properties ....................................... 50
5.1.5 Notice of Default........................................... 50
5.1.6 Cooperate in Legal Proceedings.............................. 50
5.1.7 Perform Loan Documents ..................................... 50
5.1.8 Insurance Benefits.......................................... 50
5.1.9 Further Assurances ......................................... 51
5.1.10 Supplemental Mortgage Affidavits ........................... 51
5.1.11 Financial Reporting ........................................ 51
5.1.12 Business and Operations..................................... 54
5.1.13 Title to the Properties..................................... 54
5.1.14 Costs of Enforcement ....................................... 54
5.1.15 Estoppel Statement ......................................... 54
5.1.16 Loan Proceeds............................................... 55
5.1.17 Performance by Borrower..................................... 55
5.1.18 Confirmation of Representations ............................ 55
5.1.19 No Joint Assessment ........................................ 55
5.1.20 Leasing Matters............................................. 55
5.1.21 Alterations ................................................ 56
5.1.22 Principal Place of Business ................................ 57
5.1.23 O&M Agreement .............................................. 57
5.1.24 Other Agreement............................................. 57
Section 5.2 Negative Covenants ....................................... 57
5.2.1 Operation of Property ...................................... 58
5.2.2 Liens....................................................... 58
5.2.3 Dissolution ................................................ 58
5.2.4 Change In Business ......................................... 58
5.2.5 Debt Cancellation .......................................... 58
5.2.6 Affiliate Transactions...................................... 59
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5.2.7 Zoning ..................................................... 59
5.2.8 Assets .................................................... 59
5.2.9 Debt ....................................................... 59
5.2.10 No Joint Assessment ....................................... 59
5.2.11 Principal Place of Business ............................... 59
5.2.12 ERISA .................................................... 59
5.2.13 Transfers ................................................. 60
VI. INSURANCE: CASUALTY; CONDEMNATION; REQUIRED REPAIRS 62
Section 6.1 Insurance ............................................... 62
Section 6.2 Casualty ................................................ 65
Section 6.3 Condemnation ............................................ 65
Section 6.4 Restoration ............................................. 66
VII. RESERVE FUNDS ...................................................... 70
Section 7.1 Required Repair Funds .................................. 70
7.1.1 Deposits .................................................... 70
7.1.2 Release of Required Repair Funds ............................ 70
Section 7.2 Tax and Insurance Escrow Fund ............................ 71
Section 7.3 Replacements and Replacement Reserve .................... 72
7.3.1 Replacement Reserve Fund ................................... 72
7.3.2 Disbursements from Replacement Reserve Account ............. 73
7.3.3 Performance of Replacements ............................... 74
7.3.4 Failure to Make Replacements .............................. 76
7.3.5 Balance in the Replacement Reserve Account ................. 77
7.3.6 Indemnification ........................................... 77
Section 7.4 Rollover Reserve ....................................... 77
7.4.1 Deposits to Rollover Reserve Fund ......................... 77
7.4.2 Withdrawal of Rollover Reserve Funds ...................... 78
7.4.3 Failure to Perform ........................................ 78
Section 7.5 Intentionally Deleted ................................... 78
Section 7.6 Intentionally Deleted .................................. 78
Section 7.7 Reserve Funds, Generally ................................. 78
VIII. DEFAULTS ......................................................... 79
Section 8.1 Event of Default ......................................... 79
Section 8.2 Remedies ................................................ 81
Section 8.3 Remedies Cumulative; Waivers ............................. 82
IX. SPECIAL PROVISIONS ................................................ 83
Section 9.1 Sale of Notes and Securitization ........................ 83
Section 9.2 Securitization ......................................... 84
Section 9.3 Rating Surveillance ..................................... 84
Section 9.4 Exculpation ............................................. 84
Section 9.5 Termination of Manager .................................. 86
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Section 9.6 Servicer ................................................ 86
X MISCELLANEOUS ......................................................... 86
Section 10.1 Survival ............................................. 86
Section 10.2 Lender's Discretion .................................. 86
Section 10.3 Governing Law ......................................... 87
Section 10.4 Modification, Waiver in Writing ........................ 88
Section 10.5 Delay Not a Waiver ..................................... 88
Section 10.6 Notices ............................................... 89
Section 10.7 Trial by Jury ......................................... 90
Section 10.8 Headings ............................................... 90
Section 10.9 Severability .......................................... 90
Section 10.10 Preferences ........................................... 90
Section 10.11 Waiver of Notice ...................................... 91
Section 10.12 Remedies of Borrower ................................. 91
Section 10.13 Expenses; Indemnity ................................. 91
Section 10.14 Schedules Incorporated ............................... 92
Section 10.15 Offsets, Counterclaims and Defenses .................. 92
Section 10.16 No Joint Venture or Partnership; ..................... 93
Section 10.17 Publicity ............................................. 93
Section 10.18 Cross-Default; Cross-Collateralization; ................ 94
Section 10.19 Waiver of Counterclaim ............................... 94
Section 10.20 Conflict; Construction of Documents; Reliance........... 95
Section 10.21 Brokers and Financial Advisors ........................ 95
Section 10.22 Prior Agreements ...................................... 95
Section 10.23 Transfer of Loan ...................................... 96
SCHEDULES
Schedule I - Properties - Release Amounts
Schedule II - Rent Roll
Schedule III - Required Repairs - Deadlines for Completion
Schedule IV - Properties with Special Flood Hazards
Schedule V - Properties with Improvements lying outside of boundaries
Schedule VI - Affiliate Agreements
Schedule VII - Certain Properties affected by Section 4.1.22
Schedule VIII - Form of Environmental Indemnity
Schedule IX - Replacement Reserve Fund Amounts
Schedule X - Other Contract Funds Agreements
Schedule XI - Form of O&M Agreement
<PAGE>
LOAN AGREEMENT
THIS LOAN AGREEMENT, dated as of September 25th, 1998 (as amended,
restated, replaced, supplemented or otherwise from time to time, this
"Agreement"), between LEHMAN BROTHERS HOLDINGS INC., a Delaware corporation,
doing business as LEHMAN CAPITAL, A DIVISION OF LEHMAN BROTHERS HOLDINGS INC.,
having an address at Three World Financial Center, New York, New York 10285
("Lender") and INLAND REAL ESTATE LB I LLC, a Delaware limited liability
company, having an address at 2901 Butterfield Road, Oak Brook, Illinois 60523
("Borrower").
WITNESSETH
WHEREAS, Borrower desires to obtain the Loan (as hereinafter defined) from
Lender: and
WHEREAS, Lender is willing to make the Loan to Borrower, subject to
and in accordance with the terms of this Agreement and the other Loan Documents
(as hereinafter defined).
NOW, THEREFORE, in consideration of the making of the Loan by Lender and
the covenants, agreements, representations and warranties set forth in this
Agreement, the parties hereto hereby covenant, agree, represent and warrant as
follows:
I. DEFINITIONS; PRINCIPLES OF CONSTRUCTION
Section 1.1 Definitions.
For all purposes of this Agreement, except as otherwise expressly required
or unless the context clearly indicates a contrary intent:
"Accrued Interest" shall have the meaning set forth in Section 2.2.4.
"Adjusted Release Amount" shall mean, for each Individual Property, one
hundred twenty-five percent (125 %) of the Release Amount for such Individual
Property.
"Affiliate" shall mean, as to any Person, any other Person that, directly
or indirectly, is in control of, is controlled by or is under common control
with such Person or is a director or officer of such Person or of an Affiliate
of such Person.
"Agent" shall mean any Eligible Institution selected by Lender from time to
time to act as Agent under the Cash Management Agreement.
"ALTA" shall mean American Land Title Association, or any successor
thereto.
<PAGE>
"Annual Budget" shall mean the operating budget, including all planned
capital expenditures, for the Properties prepared by Borrower for the applicable
Fiscal Year or other period.
"Unanticipated Repayment Date" shall mean October 1, 2008.
"Applicable Interest Rate" shall mean (a) from the date hereof through but
not including the Anticipated Repayment Date, the Regular Interest Rate and (b)
from and after the Anticipated Repayment Date through and including the date the
Loan is paid in full, the Matured Performing Rate.
"Approved Annual Budget" shall have the meaning set forth in Section
5.1.11(d).
"Assignment of Leases" shall mean, with respect to each Individual
Property, that certain first priority Assignment of Leases and Rents, dated as
of the date hereof, from Borrower, as assignor, to Lender, as assignee,
assigning to Lender all of Borrower's interest in and to the Leases and Rents of
such Individual Property as security for the Loan, as the same may be amended,
restated, replaced, supplemented or otherwise modified from time to time.
"Assignment of Management Agreement" shall mean that certain Assignment of
Management Agreement and Subordination of Management Fees dated the date hereof
among Lender, Borrower and Manager, as the same may amended, restated, replaced,
supplemented or otherwise modified from time to time.
"Award" shall mean any compensation paid by any Governmental Authority in
connection with a Condemnation in respect of all or any part of any Individual
Property.
"Basic Carrying Costs" shall mean, with respect to each Individual
Property, the sum of the following costs associated with such Individual
Property for the relevant Fiscal Year or payment period: (i) Taxes and (ii)
Insurance Premiums.
"Borrower" shall mean Inland Real Estate LB I LLC, together with its
permitted successors and assigns.
"Business Day" shall mean any day other than a Saturday, Sunday or any
other day on which national banks in New York, New York are not open for
business.
"Capital Expenditures" shall mean, for any period, the amount expended for
items capitalized under GAAP (including expenditures for building improvements
or major repairs. leasing commissions and tenant improvements).
"Cash Expenses" shall mean, for any period, the operating expenses for the
operation of the Properties as set forth in an Approved Annual Budget to the
extent that such
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expenses are actually incurred by Borrower minus any payments into the Tax and
Insurance Escrow Fund.
"Cash Management Agreement" shall mean that certain Cash Management
Agreement dated the date hereof by and among Borrower, Manager, Agent and
Lender, as the same may be amended, restated, replaced, supplemented or
otherwise modified from time to time, relating to funds deposited in the Lockbox
Account.
"Casualty" shall have the meaning specified in Section 6.2 hereof.
"Casualty Consultant" shall have the meaning set forth in Section
6.4(b)(iii) hereof.
"Casualty Retainage" shall have the meaning set forth in Section 6.4(b)(iv)
hereof.
"Closing Date" shall mean the date of the funding of the Loan.
"Closing Date DSCR" shall mean the Debt Service Coverage Ratio on the date
hereof which is equal to 2.89:1.
"Code" shall mean the Internal Revenue Code of 1986, as amended, as it may
be further amended from time to time, and any successor statutes thereto, and
applicable U.S. Department of Treasury regulations issued pursuant thereto in
temporary or final form.
"Condemnation" shall mean a temporary or permanent taking by any
Governmental Authority as the result or in lieu or in anticipation of the
exercise of the right of condemnation or eminent domain, of all or any part of
any Individual Property, or any interest therein or right accruing thereto,
including any right of access thereto or any change of grade affecting such
Individual Property or any part thereof.
"Debt" shall mean the outstanding principal amount set forth in, and
evidenced by, this Agreement and the Note together with all interest accrued and
unpaid thereon and all other sums (including the Yield Maintenance Premium) due
to Lender in respect of the Loan under the Note, this Agreement, the Mortgages
or any other Loan Document.
"Debt Service" shall mean, with respect to any particular period of time,
scheduled principal and/or interest payments under the Note.
"Debt Service Coverage Ratio" shall mean a ratio for the applicable period
in which:
(a) the numerator is the Net Operating Income (excluding interest on
credit accounts) for such period as set forth in the statements required
hereunder, without deduction for (i) actual management fees incurred in
connection with the operation of the Properties, (ii) amounts paid to
the
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Reserve Funds, less (A) management fees equal to the greater of (1)
assumed management fees of four percent (4%) of Gross Income from
Operations or (2) the actual management fees incurred, and (B) assumed
Replacement Reserve Fund contributions equal to the amount set forth on
Schedule IX per square foot of gross leaseable area at the Properties;
and
(b) the denominator is the aggregate amount of principal and/or interest
due and payable on the Note or, in the event a Defeasance Event has
occurred, the Undefeased Note, for such period.
"Default" shall mean the occurrence of any event hereunder or under any
other Loan Document which, but for the giving of notice or passage of time, or
both, would be an Event of Default.
"Default Rate" shall mean, with respect to the Loan, a rate per annum equal
to the lesser of (a) the maximum rate permitted by applicable law, or (b) three
percent (3%) above the Applicable Interest Rate.
"Defeasance Date" shall have the meaning set forth in Section 2.4.1(a)(i)
hereof.
"Defeasance Deposit" shall mean an amount equal to the remaining
principal amount of the Note or the Defeased Note, as applicable, the Yield
Maintenance Premium, any costs and expenses incurred or to be incurred in the
purchase of U.S. Obligations necessary to meet the Scheduled Defeasance Payments
and any revenue, documentary stamp or intangible taxes or any other tax or
charge due in connection with the transfer of the Note or the Defeased Note, as
applicable, the creation of the Defeased Note and the Undefeased Note, if
applicable, or otherwise required to accomplish the agreements of Sections 2.3
and 2.4 hereof.
"Defeasance Event" shall have the meaning set forth in Section 2.4.1(a)
hereof.
"Defeased Note" shall have the meaning set forth in Section 2.4.1(a)(v)
hereof.
"Disclosure Document" shall have the meaning set forth in Section 9.2(a)
hereof.
Eligible Account" shall mean a separate and identifiable account from all
other funds held by the holding institution that is either (a) an account or
accounts maintained with a federal or state-chartered depository institution or
trust company which complies with the definition of Eligible Institution or (b)
a segregated trust account or accounts maintained with a federal or state
chartered depository institution or trust company acting in its fiduciary
capacity which, in the case of a state chartered depository institution or trust
company, is subject to regulations substantially similar to 12 C.F.R. 9.10(b),
having in either case a combined capital and surplus of at least $50,000,000 and
subject to supervision or examination
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by federal and state authority. An Eligible Account will not be evidenced by a
certificate of deposit, passbook or other instrument.
"Eligible Institution" shall mean a depository institution or trust company
insured by the Federal Deposit Insurance Corporation the short term unsecured
debt obligations or commercial paper of which are rated at least A-1 by Standard
& Poor's Ratings Group, P-1 by Moody's Investors Service, Inc., D-1 by Duff &
Phelps Credit Rating Co. and F-1 + by Fitch IBCA, Inc. in the case of accounts
in which funds are held for 30 days or less (or, in the case of accounts in
which funds are held for more than 30 days, the long term unsecured debt
obligations of which are rated at least "AA" by Fitch, Duff and S&P and "Aa" by
Moody's).
"Environmental Indemnity" shall mean that certain Environmental Indemnity
Agreement executed by Borrower in connection with the Loan for the benefit of
Lender, as the same may be amended, restated, replaced, supplemented or
otherwise modified from time to time or if not executed on the Closing Date, in
the form attached hereto as Schedule VIII.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"Event of Default" shall have the meaning set forth in Section 8. l(a)
hereof.
"Exchange Act" shall have the meaning set forth in Section 9.2(a) hereof.
"Extraordinary Expense" shall have the meaning set forth in Section 5.1.1
l(e) hereof.
"Fiscal Year" shall mean each twelve (12) month period commencing on
January 1 and ending on December 31 during each year of the term of the Loan.
"GAAP" shall mean generally accepted accounting principles in the United
States of America as of the date of the applicable financial report.
"Governmental Authority" shall mean any court, board, agency, commission,
office or other authority of any nature whatsoever for any governmental unit
(federal, state, county, district, municipal, city or otherwise) whether now
or hereafter in existence.
"Gross Income from Operations" shall mean all income as reported on the
financial statements delivered by Borrower in accordance with this Agreement,
computed in accordance with GAAP, derived from the ownership and operation of
the Properties from whatever source, including, but not limited to, Rents,
utility charges, escalations, forfeited security deposits, interest on credit
accounts, service fees or charges, license fees, parking fees, rent concessions
or credits, and other required pass-throughs but excluding sales, use and
occupancy or other taxes on receipts required to be accounted for by Borrower to
any Governmental Authority, refunds and uncollectible accounts, sales of
furniture, fixtures and equipment, Insurance Proceeds (other than business
interruption or other loss of income insurance), Awards, unforfeited security
deposits, utility and other similar deposits and any
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disbursements to Borrower from the Reserve Funds. Gross income shall not be
diminished as a result of the Mortgages or the creation of any intervening
estate or interest in the Properties or any part thereof.
"Improvements" shall have the meaning set forth in the granting clause of
the related Mortgage with respect to each Individual Property.
"Indebtedness" of a Person, at a particular date, means the sum (without
duplication) at such date of (a) indebtedness or liability for borrowed money;
(b) obligations evidenced by bonds, debentures, notes, or other similar
instruments; (c) obligations for the deferred purchase price of property or
services (including trade obligations); (d) obligations under letters of credit;
(e) obligations under acceptance facilities; (f) all guaranties, endorsements
(other than for collection or deposit in the ordinary course of business) and
other contingent obligations to purchase, to provide funds for payment, to
supply funds, to invest in any Person or entity, or otherwise to assure a
creditor against loss; and (g) obligations secured by any Liens, whether or not
the obligations have been assumed.
"Independent Director" shall have the meaning set forth in Section
4.1.30(p).
"Individual Property" shall mean each parcel of real property, the
Improvements thereon and all personal property owned by Borrower and encumbered
by a Mortgage, together with all rights pertaining to such property and
Improvements, as more particularly described in the Granting Clauses of each
Mortgage and referred to therein as the "Property" .
"Insolvency Opinion" shall mean that certain opinion letter delivered by
Levenfeld, Eisenberg, Janger & Glassberg in connection with the Loan.
"Insurance Premiums" shall have the meaning set forth in Section 6.1(b)
hereof.
"Insurance Proceeds" shall have the meaning set forth in Section 6.4(b)
hereof.
"Lease" shall mean any lease, sublease or subsublease, letting, license,
concession or other agreement (whether written or oral and whether now or
hereafter in effect) pursuant to which any Person is granted a possessory
interest in, or right to use or occupy all or any portion of any space in any
Individual Property of Borrower, and every modification, amendment or other
agreement relating to such lease, sublease, subsublease, or other agreement
entered into in connection with such lease, sublease, subsublease, or other
agreement and every guarantee of the performance and observance of the
covenants, conditions and agreements to be performed and observed by the other
party thereto.
"Legal Requirements" shall mean, with respect to each Individual Property,
all federal, state, county, municipal and other governmental statutes, laws,
rules, orders, regulations, ordinances, judgments, decrees and injunctions of
Governmental Authorities
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affecting such Individual Property or any part thereof, or the construction,
use, alteration or operation thereof, or any part thereof, whether now or
hereafter enacted and in force, and all permits, licenses and au horizations and
regulations relating thereto, and all covenants, agreements, restrictions and
encumbrances contained in any instruments, either of record or known to
Borrower, at any time in force affecting such Individual Property or any part
thereof, including, without limitation, any which may (a) require repairs,
modifications or alterations in or to such Individual Property or any part
thereof, or (b) in any way limit the use and enjoyment thereof.
"Lehman" shall have the meaning set forth in Section 9.2(b) hereof.
"Lehman Group" shall have the meaning set forth in Section 9.2(b) hereof.
"Lender" shall mean Lehman Brothers Holdings Inc., together with its
successors and assigns.
"Liabilities" shall have the meaning set forth in Section 9.2(b) hereof.
"Licenses" shall have the meaning set forth in Section 4.1.22 hereof.
"Lien" shall mean, with respect to each Individual Property, any mortgage,
deed of trust, lien, pledge, hypothecation, assignment, security interest, or
any other encumbrance, charge or transfer of, on or affecting Borrower, the
related Individual Property, any portion thereof or any interest therein,
including, without limitation, any conditional sale or other title retention
agreement, any financing lease having substantially the same economic effect as
any of the foregoing, the filing of any financing statement, and mechanic's,
materialmen's and other similar liens and encumbrances.
"Loan" shall mean the loan made by Lender to Borrower pursuant to this
Agreement.
"Loan Documents" shall mean, collectively, this Agreement, the Note, the
Mortgages, the Assignments of Leases, the Environmental Indemnity, [the O&M
Agreement], the Subordination of Management Agreement, the Cash Management
Agreement and all other documents executed and/or delivered in connection with
the Loan.
"Lockbox Event" shall have the meaning set forth in Section 2.6.1 hereof.
"Lockbox Account" shall mean the account, if any, specified in the Cash
Management Agreement for deposit of Rents and other receipts from the Property.
"Management Agreement" shall mean, with respect to each Individual
Property, the management agreement entered into by and between Borrower and the
Manager, pursuant to which the Manager is to provide management and other
services with respect to such Individual Property.
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"Manager" shall mean Inland Commercial Property Management, Inc.
"Matured Performing Rate" shall mean a rate per annum equal to the greater
of (i) the Regular Interest Rate plus five percentage points (5%) or (ii) the
Treasury Rate plus five percentage points (5%).
"Maturity Date" shall mean October 1, 2033, or such other date on which the
final payment of principal of the Note becomes due and payable as therein or
herein provided, whether at such stated maturity date, by declaration of
acceleration, or otherwise.
"Maximum Legal Rate" shall mean the maximum nonusurious interest rate, if
any, that at any time or from time to time may be contracted for, taken,
reserved, charged or received on the indebtedness evidenced by the Note and as
provided for herein or the other Loan Documents, under the laws of such state or
states whose laws are held by any court of competent jurisdiction to govern the
interest rate provisions of the Loan.
"Monthly Debt Service Payment Amount" shall mean an amount equal to
$182,000.00.
"Mortgage" shall mean, with respect to each Individual Property, that
certain first priority Mortgage, Assignment of Leases and Rents and Security
Agreement, dated the date hereof, executed and delivered by Borrower as security
for the Loan and encumbering such Individual Property, as the same may be
amended, restated, replaced, supplemented or otherwise modified from time to
time.
"Net Cash Flow" for any period shall mean the amount obtained by
subtracting Operating Expenses and Capital Expenditures for such period from
Gross Income from Operations for such period.
"Net Cash Flow After Debt Service" for any period shall mean the amount
obtained by subtracting Debt Service for such period from Net Cash Flow for such
period.
"Net Cash Flow Schedule" shall have the meaning set forth in Section 5.1 .
l l (b) hereof.
"Net Operating Income" means the amount obtained by subtracting Operating
Expenses from Gross Income from Operations.
"Net Proceeds" shall have the meaning set forth in Section 6.4(b) hereof.
"Net Proceeds Deficiency" shall have the meaning set forth in Section
6.4(b)(vi) hereof.
"Note" shall mean that certain note of even date herewith in the principal
amount of Fifty-Four Million Six Hundred Thousand and No/100 Dollars
($54,600,000.00), made by Borrower in favor of Lender, as the same may be
amended, restated, replaced,
-8-
supplemented or otherwise modified from time to time including any
Defeased
Note and Undefeased Note that may exist from time to time.
"O&M Agreement" shall mean an Operations and Maintenance Agreement
between
Borrower and Lender in the form annexed hereto as Schedule XI.
"Officers' Certificate" shall mean a certificate delivered to Lender
by
Borrower which is signed by an authorized senior officer of the sole
member of
Borrower.
"Operating Expenses" shall mean the total of all expenditures,
computed in
accordance with GAAP, of whatever kind relating to the operation,
maintenance
and management of the Properties that are incurred on a regular monthly or
other
periodic basis, including without limitation, utilities, ordinary repairs
and
maintenance, insurance, license fees, property taxes and assessments,
advertising expenses, management fees, payroll and related taxes, computer
processing charges, operational equipment or other lease payments as
approved by
Lender, and other similar costs, but excluding depreciation, Debt Service,
Capital Expenditures and contributions to the Reserve Funds.
"Other Charges" shall mean all ground rents, maintenance charges,
impositions other than Taxes, and any other charges, including, without
limitation, vault charges and license fees for the use of vaults, chutes
and
similar areas adjoining any Individual Property, now or hereafter levied
or
assessed or imposed against such Individual Property or any part thereof.
"Other Contract Funds" shall mean any payment due to Borrower under
any
of the agreements described on Schedule X.
"Payment Date" shall mean the first (1st) day of each calendar month
during
the term of the Loan or, if such day is not a Business Day, the
immediately
succeeding Business Day.
"Permitted Encumbrances" shall mean, with respect to an Individual
Property, collectively, (a) the Liens and security interests created by
the Loan
Documents, (b) all Liens, encumbrances and other matters disclosed in the
Title
Insurance Policies relating to such Individual Property or any part
thereof, (c)
Liens, if any, for Taxes imposed by any Governmental Authority not yet due
or
delinquent, and (d) such other title and survey exceptions as Lender has
approved or may approve in writing in Lender's sole discretion, which
Permitted
Encumbrances in the aggregate do not materially adversely affect the value
or
use of such Individual Property or Borrower's ability to repay the Loan.
"Permitted Investments" shall mean any one or more of the following
obligations or securities acquired at a purchase price of not greater than
par,
including those issued by Servicer, the trustee under any Securitization
or any
of their respective Affiliates, payable on demand or having a maturity
date not
later than the Business Day immediately prior to the first Monthly Payment
Date
following the date of acquiring such investment and meeting one of the
appropriate standards set forth below:
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<PAGE>
(i) obligations of, or obligations fully guaranteed as to payment of
principal and interest by, the United States or any agency or
instrumentality
thereof provided such obligations are backed by the full faith and credit
of the
United States of America including, without limitation, obligations of:
the U.S.
Treasury (all direct or fully guaranteed obligations), the Farmers Home
Administration (certificates of beneficial ownership), the General
Services
Administration (participation certificates), the U.S. Maritime
Administration
(guaranteed Title XI financing), the Small Business Administration
(guaranteed
participation certificates and guaranteed pool certificates), the U.S.
Department of Housing and Urban Development (local authority bonds) and
the
Washington Metropolitan Area Transit Authority (guaranteed transit bonds);
provided, however, that the investments described in this clause must (A)
have a
predetermined fixed dollar of principal due at maturity that cannot vary
or
change, (B) if rated by S&P, must not have an "r" highlighter affixed to
their
rating, (C) if such investments have a variable rate of interest, such
interest
rate must be tied to a single interest rate index plus a fixed spread (if
any)
and must move proportionately with that index, and (D) such investments
must not
be subject to liquidation prior to their maturity;
(ii) Federal Housing Administration debentures;
(iii) obligations of the following United States government sponsored
agencies: Federal Home Loan Mortgage Corp. (debt obligations), the Farm
Credit
System (consolidated systemwide bonds and notes), the Federal Home Loan
Banks
(consolidated debt obligations), the Federal National Mortgage Association
(debt
obligations), the Student Loan Marketing Association (debt obligations),
the
Financing Corp. (debt obligations), and the Resolution Funding Corp. (debt
obligations); provided, however, that the investments described in this
clause
must (A) have a predetermined fixed dollar of principal due at maturity
hat
cannot vary or change, (B) if rated by S&P, must not have an "r"
highlighter
affixed to their rating, (C) if such investments have a variable rate of
interest, such interest rate must be tied to a single interest rate index
plus a
fixed spread (if any) and must move proportionately with that index, and
(D)
such investments must not be subject to liquidation prior to their
maturity;
(iv) federal funds, unsecured certificates of deposit, time
(v) deposits,bankers' acceptances and repurchase agreements with
(vi) maturities of not more than
365 days of any bank, the short term obligations of which at all times are
rated
in the highest short term rating category by each Rating Agency (or, if
not
rated by all Rating Agencies, rated by at least one Rating Agency in the
highest
short term rating category and otherwise acceptable to each other Rating
Agency,
as confirmed in writing that such investment would not, in and of itself,
result
in a downgrade, qualification or withdrawal of the initial, or, if higher,
then
current ratings assigned to the Securities); provided, however, that the
investments described in this clause must (A) have a predetermined fixed
dollar
of principal due at maturity that cannot vary or change, (B) if rated by
S&P,
just not have an "r" highlighter affixed to their rating, (C) if such
investments have a variable rate of interest, such interest rate must be
tied to
a single interest rate index plus a fixed spread (if any) and must move
proportionately with that index, and (D) such investments must not be
subject to
liquidation prior to their maturity;
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<PAGE>
(v) fully Federal Deposit Insurance Corporation-insured demand and
(vi) 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 at all times are rated in the highest
short term
rating category by each Rating Agency (or, if not rated by all Rating
Agencies,
rated by at least one Rating Agency in the highest short term rating
category
and otherwise acceptable to each other Rating Agency, as confirmed in
writing
that such investment would not, in and of itself, result in a downgrade,
qualification or withdrawal of the initial, or, if higher, then current
ratings
assigned to the Securities); provided, however, that the investments
described
in this clause must (A) have a predetermined fixed dollar of principal due
at
maturity that cannot vary or change, (B) if rated by S&P, must not have an
"r" highlighter affixed to their rating, (C) if such investments have a
variable
rate of interest, such interest rate must be tied to a single interest
rate
index plus a fixed spread (if any) and must move proportionately with that
index, and (D) such investments must not be subject to liquidation prior
to
their maturity;
(vii) debt obligations with maturities of not more than 365 days and
(viii) at all
times rated by each Rating Agency (or, if not rated by all Rating
Agencies,
rated by at least one Rating Agency and otherwise acceptable to each other
Rating Agency, as confirmed in writing that such investment would not, in
and of
itself, result in a downgrade, qualification or withdrawal of the initial,
or,
if higher, then current ratings assigned to the Securities) in its highest
long-term unsecured rating category; provided, however, that the
investments
described in this clause must (A) have a predetermined fixed dollar of
principal
due at maturity that cannot vary or change, (B) if rated by S&P, must not
have
an "r" highlighter affixed to their rating, (C) if such investments have a
variable rate of interest, such interest rate must be tied to a single
interest
rate index plus a fixed spread (if any) and must move proportionately with
that
index, and (D) such investments must not be subject to liquidation prior
to
their maturity;
(vii) commercial paper (including both non-interest-bearing discount
obligations and interest-bearing obligations payable on demand or on a
specified
date not more than one year after the date of issuance thereof) with
maturities
of not more than 365 days and that at all times is rated by each Rating
Agency
(or, if not rated by all Rating Agencies, rated by at least one Rating
Agency
and otherwise acceptable to each other Rating Agency, as confirmed in
writing
that such investment would not, in and of itself, result in a downgrade,
qualification or withdrawal of the initial, or, if higher, then current
ratings
assigned to the Securities) in its highest short-term unsecured debt
rating;
provided, however, that the investments described in this clause must (A)
have a
predetermined fixed dollar of principal due at maturity that cannot vary
or
change, (B) if rated by S&P, must not have an "r" highlighter affixed to
their
rating, (C) if such investments have a variable rate of interest, such
interest
rate must be tied to a single interest rate index plus a fixed spread (if
any)
and must move proportionately with that index, and (D) such investments
must not
be subject to liquidation prior to their maturity;
(ix) units of taxable money market funds or mutual funds, which
(x) funds are
regulated investment companies, seek to maintain a constant net asset
value per
share and
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<PAGE>
invest solely in obligations backed by the full faith and credit of the
United
States, which funds have the highest rating available from each Rating
Agency
(or, if not rated by all Rating Agencies, rated by at least one Rating
Agency
and otherwise acceptable to each other Rating Agency, as confirmed in
writing
that such investment would not, in and of itself, result in a downgrade,
qualification or withdrawal of the initial, or, if higher, then current
ratings
assigned to the Securities) for money market funds or mutual funds; and
(ix) any other security, obligation or investment which has been
approved
as a Permitted Investment in writing by (a) Lender and (b) each Rating
Agency,
as evidenced by a written confirmation that the designation of such
security,
obligation or investment as a Permitted Investment will not, in and of
itself,
result in a downgrade, qualification or withdrawal of the initial, or, if
higher, then current ratings assigned to the Securities by such Rating
Agency;
provided, however, that no obligation or security shall be a Permitted
Investment if (A) such obligation or security evidences a right to receive
only
interest payments or (B) the right to receive principal and interest
payments on
such obligation or security are derived from an underlying investment that
provides a yield to maturity in excess of 120% of the yield to maturity at
par
of such underlying investment.
"Permitted Release Date" shall mean the date that is the earlier of
(a)
three (3) years from the Closing Date or (b) two (2) years from the
"startup
day" within the meaning of Section 860G(a)(9) of the Code of the REMIC
Trust.
"Person" shall mean any individual, corporation, partnership, joint
venture, limited liability company, 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.
"Personal Property" shall have the meaning set forth in the granting
clause
of the Mortgage with respect to each Individual Property.
"Physical Conditions Report" shall mean, with respect to each
Individual
Property, a report prepared by a company satisfactory to Lender regarding
the
physical condition of such Individual Property, satisfactory in form and
substance to Lender in its sole discretion, which report shall, among
other
things, (a) confirm that such Individual Property and its use complies, in
all
material respects, with all applicable Legal Requirements (including,
without
limitation, zoning, subdivision and building laws) and (b) include a copy
of a
final certificate of occupancy with respect to all Improvements on such
Individual Property.
"Policies" shall have the meaning specified in Section 6.1(b) hereof.
"Properties" shall mean, collectively, each and every Individual
Property
which is subject to the terms of this Agreement.
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<PAGE>
"Provided Information" shall have the meaning set forth in Section
9.1(a)
hereof.
"Qualifying Manager" shall mean a reputable and experienced
management
organization reasonably satisfactory to Lender possessing experience in
managing
properties similar in size, scope and value of the Properties, provided
that
Borrower shall have obtained prior written confirmation from the Rating
Agency
that management of the Properties by such entity will not cause a
downgrading,
withdrawal or qualification of the then current rating of the securities
issued
pursuant to the Securitization.
"Rating Agencies" shall mean each of Standard & Poor's Ratings Group,
a
division of McGraw-Hill, Inc., Moody's Investors Service, Inc., Duff &
Phelps
Credit Rating Co. and Fitch IBCA, Inc., or any other nationally-recognized
statistical rating agency which has been approved by Lender.
"Rating Surveillance Charge" shall have the meaning set forth in
Section
9.3 hereof.
"Registration Statement" shall have the meaning set forth in Section
9.2(b)
hereof.
"Regular Interest Rate" shall mean Six and 36/100 (6.36%) percent per
annum.
"REIT" shall mean Inland Real Estate Corporation, a Maryland
corporation.
"Release Amount" shall mean for an Individual Property the amount set
forth
on Schedule I hereto.
"REMIC Trust" shall mean a "real estate mortgage investment conduit"
within
the meaning of Section 860D of the Code that holds the Note.
"Rents" shall mean, with respect to each Individual Property, all
rents,
rent equivalents, moneys payable as damages or in lieu of rent or rent
equivalents, royalties (including, without limitation, all oil and gas or
other
mineral royalties and bonuses), income, receivables, receipts, revenues,
deposits (including, without limitation, security, utility and other
deposits),
accounts, cash, issues, profits, charges for services rendered, and other
consideration of whatever form or nature received by or paid to or for the
account of or benefit of Borrower or its agents or employees from any and
all
sources arising from or attributable to the Individual Property, and
proceeds,
if any, from business interruption or other loss of income insurance,
including
the Other Contract Funds.
"Replacement Reserve Account" shall have the meaning set forth in
Section 7.3.1
hereof.
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<PAGE>
"Replacement Reserve Fund" shall have the meaning set forth in
Section
7.3.1 hereof.
"Replacement Reserve Monthly Deposit" shall have the meaning set
forth in
Section 7.3.1 hereof.
"Replacements" shall have the meaning set forth in Section 7.3.1(a)
hereof.
"Required Repair Account" shall have the meaning set forth in Section
7.1.1
hereof.
"Required Repair Fund" shall have the meaning set forth in Section
7.1.1
hereof.
"Required Repairs" shall have the meaning set forth in Section 7.1.1
hereof.
"Reserve Funds" shall mean the Tax and Insurance Escrow Fund, the
Replacement Reserve Fund, the Rollover Reserve Fund, the Required Repair
Fund,
or any other escrow fund established by the Loan Documents.
"Restoration" shall have the meaning set forth in Section 6.2 hereof.
"Rollover Reserve Account" shall have the meaning set forth in
Section
7.4.1 hereof.
"Rollover Reserve Fund" shall have the meaning set forth in Section
7.4.1
hereof.
"Scheduled Defeasance Payments" shall have the meaning set forth in
Section
2.4.1(b) hereof.
"Securities" shall have the meaning set forth in Section 9.1 hereof.
"Securities Act" shall have the meaning set forth in Section 9.2(a)
hereof.
"Securitization" shall have the meaning set forth in Section 9.1
hereof.
"Security Agreement" shall have the meaning set forth in Section
2.4.1(a)(vi) hereof.
"Servicer" shall have the meaning set forth in Section 9.6 hereof.
"Servicing Agreement" shall have the meaning set forth in Section 9.6
hereof. "Severed Loan Documents" shall have the meaning set forth in
Section
8.2(c) hereof.
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<PAGE>
"Single Purpose Entity" shall mean a Person, other than an
individual, which at
all times since its formation: (i) has been a duly formed and existing
limited
partnership or corporation, as the case may be; (ii) has been duly
qualified in
each jurisdiction in which such qualification was at such time necessary
for the
conduct of its business; (iii) has complied with the provisions of its
organizational documents and the laws of its jurisdiction of formation in
all
respects; (iv) has observed all customary formalities regarding its
partnership,
corporate, or limited liability company existence, as the case may be; (v)
subject to the provisions of Section 4.1.30 has accurately maintained its
financial statements, accounting records and other partnership, limited
liability company or corporate documents separate from those of any other
Person; (vi) has not commingled its assets or funds with those of any
other
Person; (vii) has accurately maintained its own bank accounts, payroll and
books
and accounts separate from those of any other Person; (viii) has paid its
own
liabilities from its own separate assets; (ix) has identified itself in
all
dealings with the public, under its own name and as a separate and
distinct
entity; (x) subject to the provisions of Section 4.1.30, has not
identified
itself as being a division or a part of any other Person; (xi) has not
identified any other Person as being a division or a part of such Person;
(xii)
has been adequately capitalized in light of its contemplated business
operations; (xiii) has not assumed, guaranteed or become obligated for the
liabilities of any other Person (except in connection with the endorsement
of
negotiable instruments in the ordinary course of business) or held out its
credit as being available to satisfy the obligations of any other Person;
(xiv)
has not acquired obligations or securities of any other Person; (xv) has
not
made loans or advances to any other Person; (xvi) has not entered into and
was
not a party to any transaction with any Affiliate of such Person, except
in the
ordinary course of business and on terms which are no less favorable to
such
Person than would be obtained in a comparable arm's-length transaction
with an
unrelated third party; (xvii) has conducted its own business in its own
name;
(xviii) has paid the salaries of its own employees and maintained a
sufficient
number of employees in light of its contemplated business operations;
(xix) has
allocated fairly and reasonably any overhead for shared office space; (xx)
has
used separate stationery, invoices and check; (xxi) has not pledged its
assets
for the benefit of any other entity or made any loans or advances to any
person
or entity; (xxii) has not engaged in a non-exempt prohibited transaction
described in Section 406 of ERISA or Section 4975 of the Internal Revenue
Code;
(xxiii) has not acquired obligations or securities of its partners or
Affiliates; (xxiv) has corrected any known misunderstanding regarding its
separate identity; (xxv) if a corporation, has at all times an Independent
Director; (xxvi) if a limited partnership or limited liability company,
has at
all times a general partner or managing member, as the case may be, that
is a
Single Purpose Entity with an Independent Director; (xxvii) with respect
to
Borrower, has not engaged, directly or indirectly, in any business other
than the ownership, management, leasing, construction, development,
financing, operation and maintenance of the Properties (and such
activities
incidental thereto); with respect to SPC Party, has not engaged in any
business
or activity other than the ownership of its interest in Borrower and such
activities as are directly related to its acting as the SPC Party of
Borrower;
(xxviii) with respect to Borrower, has not acquired or owned any material
assets
other than the Properties and such incidental personal property as may be
necessary for the operation of the Properties; with respect to SPC Party,
has
not acquired or owned any material assets other than its ownership
interest in
Borrower and such incidental personal property as may be
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<PAGE>
necessary in connection therewith; (xxix) has not incurred, created or
assumed
any Additional Indebtedness; (xxx) has not made advances or loans to any
Persons
or entities; (xxxi) guarantee any obligation of any Person, or pledge any
assets
of Borrower or SPC Party on behalf of any Person; (xxxii) has not
voluntarily
filed a petition for bankruptcy, reorganization, assignment for the
benefit of
creditors or similar proceeding; (xxxiii) has not merged into or
consolidated
with any Person, except as permitted pursuant to Section 2.13 hereof;
(xxxiv)
has not voluntarily dissolved, terminated or liquidated, in whole or in
part;
(xxxv) has conducted its business so that the assumptions made with
respect to
Borrower and SPC Party in that certain Insolvency Opinion dated the date
hereof
in connection with the Loan shall be true and correct in all respects.
"SPC Party" shall have the meaning set forth in Section 4.1.30(o)
hereof.
"State" shall mean, with respect to an Individual Property, the State
or
Commonwealth in which such Individual Property or any part thereof is
located.
"Substitute Property" shall have the meaning set forth in Section
2.7.1
hereof.
"Substitute Release Amount" shall have the meaning set forth in
Section
2.7.1(vii) hereof.
"Substituted Property" shall have the meaning set forth in Section
2.7.1
hereof.
"Substitution Conditions" shall mean that the Release Amount of each
Individual Property which is the subject of a substitution, when
aggregated with
the Release Amounts of all other Individual Properties which were
previously, or
are simultaneously therewith, the subject of a substitution, does not
exceed
one-third (33.333%) of the original principal balance of the Loan.
"Successor Borrower" shall have the meaning set forth in Section
2.4.2
hereof.
"Survey" shall mean a survey of the Individual Property in question
prepared by a surveyor licensed in the State and satisfactory to Lender
and the
company or companies issuing the Title Insurance Policies, and containing
a
certification of such surveyor satisfactory to Lender.
"Tax and Insurance Escrow Fund" shall have the meaning set forth in
Section
7.2.1 hereof regardless of whether the funds held therein are held by
Lender for
the payment of Taxes or Insurance Premiums or both.
"Taxes" shall mean all real estate and personal property taxes,
assessments, water rates or sewer rents, now or hereafter levied or
assessed or
imposed against any Individual Property or part thereof.
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<PAGE>
"Title Insurance Policies" shall mean, with respect to each
Individual
Property, an ALTA mortgagee title insurance policy in the form (acceptable
to
Lender) (or, if an Individual Property is in a State which does not permit
the
issuance of such ALTA policy, such form as shall be permitted in such
State and
acceptable to Lender) issued with respect to such Individual Property and
insuring the lien of the Mortgage encumbering such Individual Property.
"Transferee" shall have the meaning set forth in Section 5.2.13
hereof.
"Treasury Rate" shall mean, as of the Anticipated Repayment Date, the
yield, calculated by linear interpolation (rounded to the nearest one-
thousandth
of one percent (i.e., 0.001%) of the yields of noncallable United States
Treasury
obligations with terms (one longer and one shorter) most nearly
approximately
the period from such date of determination to the Maturity Date, as
determined
by Lender on the basis of Federal Reserve Statistical Release H. 15-
Selected
Interest Rates under the heading U.S. Governmental Security/Treasury
Constant
Maturities, or other recognized source of financial market information
selected
by Lender.
"UCC" or "Uniform Commercial Code" shall mean the Uniform Commercial
Code
as in effect in the applicable State in which an Individual Property is
located.
"Undefeased Note" shall have the meaning set forth in Section
2.4.1(a)(v)
hereof.
"Underwriter Group" shall have the meaning set forth in Section
9.2(b)
hereof.
"U.S. Obligations" shall mean direct non-callable obligations of the
United
States of America.
"Yield Maintenance Premium" shall mean the amount (if any) which,
when
added to the remaining principal amount of the Note or the principal
amount of a
Defeased Note, as applicable, will be sufficient to purchase U.S.
Obligations
providing the required Scheduled Defeasance Payments.
Section 1.2 Principles of Construction.
All references to sections and schedules are to sections and
schedules in
or to this Agreement unless otherwise specified. All uses of the word
"including" shall mean "including, without limitation" unless the context
shall
indicate otherwise. Unless otherwise specified, the words "hereof,"
"herein" and
"hereunder" and words of similar import when used in this Agreement shall
refer
to this Agreement as a whole and not to any particular provision of this
Agreement. Unless otherwise specified, all meanings attributed to defined
terms
herein shall be equally applicable to both the singular and plural forms
of the
terms so defined.
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<PAGE>
II. GENERAL TERMS
Section 2.1 Loan Commitment: Disbursement to Borrower.
2.1.1 The Loan. Subject to and upon the terms and conditions set
forth
herein, Lender hereby agrees to make and Borrower hereby agrees to accept
the
Loan on the Closing Date.
2.1.2 Disbursement to Borrower. Borrower may request and receive only
one
borrowing hereunder in respect of the Loan and any amount borrowed and
repaid
hereunder in respect of the Loan may not be reborrowed.
2.1.3 The Note, Mortgages and Loan Documents. The Loan shall be
evidenced
by the Note and secured by the Mortgages, the Assignments of Leases and
the
other Loan Documents.
2.1.4 Use of Proceeds. Borrower shall use the proceeds of the Loan to
(a)
repay and discharge any existing loans relating to the Properties, (b) pay
all
past-due Basic Carrying Costs, if any, in respect of the Properties, (c)
make
deposits into the Reserve Funds on the Closing Date in the amounts
provided
herein, (d) pay costs and expenses incurred in connection with the Closing
of
the Loan, as approved by Lender, (e) fund any working capital requirements
of
the Properties, and (f) distribute the balance, if any, to Borrower.
Section 2.2 Interest: Loan Payments; Late Payment Charge.
2.2.1 Interest Generally. Interest on the outstanding principal
balance of
the Loan shall accrue from the Closing Date to but excluding the Maturity
Date
at the Applicable Interest Rate.
2.2.2 Interest Calculation. Interest on the outstanding principal
balance
of the Loan shall be calculated by multiplying (a) the actual number of
days
elapsed in the period for which the calculation is being made by (b) a
daily
rate based on a three hundred sixty (360) day year by (c) the outstanding
principal balance of the Loan.
2.2.3 Payment Before Anticipated Repayment Date. Borrower shall pay
to
Lender (a) on the first Payment Date following the Closing Date, an amount
equal
to interest only on the outstanding principal balance of the Loan from the
Closing Date up to but not including such Payment Date and (b) on each
Payment
Date thereafter up to but not including the Anticipated Repayment Date, an
amount equal to the interest on the outstanding principal amount of the
Loan for
the prior calendar month, calculated as set forth herein, which payments
shall
be applied to accrued and unpaid interest at the Applicable Interest Rate.
2.2.4 Payments After Anticipated Repayment Date. Borrower shall pay
to
Lender on each Payment Date commencing on the Anticipated Repayment Date
(a) an
amount equal to the sum of the interest that would have accrued on the
outstanding principal balance of the Loan at the Regular Interest Rate
plus the
Monthly Debt Service Payment Amount, such
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payment to be applied to interest that would have accrued on the
outstanding
principal balance of the Loan (without adjustment for Accrued Interest) at
the
Regular Interest Rate and the balance applied to reduce the principal
outstanding balance of the Loan and (b) an amount equal to the Net Cash
Flow
after Debt Service for the preceding month less contributions to the
Reserve
Funds, such payment to be applied in accordance with the terms of the Cash
Management Agreement. Interest accrued at the Matured Performing Rate and
not
paid pursuant to the preceding sentence ("Accrued Interest"), shall be
added to
the outstanding principal balance of the Loan and shall earn interest at
the
Applicable Interest Rate, to the extent permitted by law.
2.2.5 Payment on Maturity Date. Borrower shall pay to Lender on the
Maturity Date the outstanding principal balance of the Loan, all accrued
and
unpaid interest (including without limitation the Accrued Interest) and
all
other amounts due hereunder and under the Note, the Mortgages and other
the Loan
Documents.
2.2.6 Payments after Default. Upon the occurrence and during the
continuance of an Event of Default, (a) interest on the outstanding
principal
balance of the Loan and, to the extent permitted by law, overdue interest
and
other amounts due in respect of the Loan, shall accrue at the Default
Rate,
calculated from the date such payment was due without regard to any grace
or
cure periods contained herein and (b) Lender shall be entitled to receive
and
Borrower shall pay to Lender on each Payment Date an amount equal to the
Net
Cash Flow After Debt Service for the prior month, such amount to be
applied by
Lender to the payment of the Debt in such order as Lender shall determine
in its
sole discretion, including, without limitation, alternating applications
thereof
between interest and principal. Interest at the Default Rate and Net Cash
Flow
After Debt Service shall both be computed from the occurrence of the Event
of
Default until the actual receipt and collection of the Debt (or that
portion
thereof that is then due). To the extent permitted by applicable law,
interest
at the Default Rate shall be added to the Debt, shall itself accrue
interest at
the same rate as the Loan and shall be secured by the Mortgages. This
paragraph
shall not be construed as an agreement or privilege to extend the date of
the
payment of the Debt, nor as a waiver of any other right or remedy accruing
to
Lender by reason of the occurrence of any Event of Default; the acceptance
of
any payment of Net Cash Flow After Debt Service shall not be deemed to
cure or
constitute a waiver of any Event of Default; and Lender retains its rights
under
this Note to accelerate and to continue to demand payment of the Debt upon
the
happening of any Event of Default, despite any payment of Net Cash Flow
After
Debt Service.
2.2.7. Late Payment Charge. If any principal, interest or any other
sums
due under the Loan Documents is not paid by Borrower on or prior to the
date on
which it is due, Borrower shall pay to Lender upon demand an amount equal
to the
lesser of five percent (5%) of such unpaid sum or the maximum amount
permitted
by applicable law in order to defray the expense incurred by Lender in
handling
and processing such delinquent payment and to compensate Lender for the
loss of
the use of such delinquent payment. Any such amount shall be secured by
the
Mortgages and the other Loan Documents to the extent permitted by
applicable
law.
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2.2.8 Usury Savings. This Agreement and the Note are subject to the
express
condition that at no time shall Borrower be obligated or required to pay
interest on the principal balance of the Loan at a rate which could
subject
Lender to either civil or criminal liability as a result of being in
excess of
the Maximum Legal Rate. If, by the terms of this Agreement or the other
Loan
Documents, Borrower is at any time required or obligated to pay interest
on the
principal balance due hereunder at a rate in excess of the Maximum Legal
Rate,
the Applicable Interest Rate or the Default Rate, as the case may be,
shall be
deemed to be immediately reduced to the Maximum Legal Rate and all
previous
payments in excess of the Maximum Legal Rate shall be deemed to have been
payments in reduction of principal and not on account of the interest due
hereunder. All sums paid or agreed to be paid to Lender for the use,
forbearance, or detention of the sums due under the Loan, shall, to the
extent
permitted by applicable law, be amortized, prorated, allocated, and spread
throughout the full stated term of the Loan until payment in full so that
the
rate or amount of interest on account of the Loan does not exceed the
Maximum
Legal Rate of interest from time to time in effect and applicable to the
Loan
for so long as the Loan is outstanding.
Section 2.3 Prepayments.
2.3.1 Voluntary Prepayments. Except as otherwise provided herein,
Borrower
shall not have the right to prepay the Loan in whole or in part prior to
the
Anticipated Repayment Date. On any Payment Date commencing on June 1, 2008
and
on any Payment Date thereafter, Borrower may, at its option, prepay the
Debt in
whole or in part without payment of the Yield Maintenance Premium.
Borrower
shall give prior written notice to Lender or Borrower's intention to
prepay the
Debt as aforesaid not less than thirty (30) days prior to date of such
prepayment. Any partial prepayment shall be applied to the last payments
of
principal due under the Loan.
2.3.2 Mandatory Prepayments. On each date on which Borrower actually
receives any Net Proceeds, if Lender is not obligated to make such Net
Proceeds
available to Borrower for the restoration of any Individual Property,
Borrower
shall prepay the outstanding principal balance of the Note in an amount
equal to
one hundred percent (100%) of such Net Proceeds. No Yield Maintenance
Premium or
Defeasance Deposit shall be due in connection with any prepayment made
pursuant
to this Section 2.3.2. Any partial prepayment under this Section shall be
applied to the last payments of principal due under the Loan.
2.3.3 Prepayments After Default. If, prior to the Anticipated
Repayment
Date and following an Event of Default, payment of all or any part of the
Debt
is tendered by Borrower or otherwise recovered by Lender, such tender or
recovery shall be deemed a voluntary prepayment by Borrower in violation
of the
prohibition against prepayment set forth in Section 2.3.1 and Borrower
shall
pay, in addition to the Debt, an amount equal to the Yield Maintenance
Premium
that would be required if a Defeasance Event had occurred in an amount
equal to
the outstanding principal amount of the Loan to be satisfied or prepaid.
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Section 2.4 Defeasance.
2.4.1 Voluntary Defeasance. (a) Provided no Event of Default shall
then
exist, Borrower shall have the right on any Payment Date after the
Permitted
Release Date and prior to the Anticipated Repayment Date to voluntarily
defease
all or any portion of the Loan by and upon satisfaction of the following
conditions (such event being a "Defeasance Event"):
(i) Borrower shall provide not less than thirty (30) days prior
(ii) written
notice to Lender specifying the Payment Date (the "Defeasance Date") on
which
the Defeasance Event and the principal amount of the Loan to be defeased;
(iii) Borrower shall pay to Lender all accrued and unpaid interest
(iv) on the
outstanding principal balance of the Loan to and including the Defeasance
Date;
(iii) Borrower shall pay to Lender all other sums, not including
(iv) scheduled
interest or principal payments, then due under the Note, this Agreement,
the
Mortgages, and the other Loan Documents;
(v) Borrower shall deliver to Lender the Defeasance Deposit
(vi) applicable to
the Defeasance Event;
(v) In the event only a portion of the Loan is the subject of the
Defeasance Event, Borrower shall prepare all necessary documents to modify
this
Agreement and to amend and restate the Note and issue two substitute
notes, one
note having a principal balance equal to the defeased portion of the
original
Note and a Maturity Date equal to the Anticipated Repayment Date (the
"Defeased
Notes) and the other note having a principal balance equal to the
undefeased
portion of the Note (the "Undefeased Note"). The Defeased Note and
Undefeased
Note shall otherwise have terms identical to the Note, except that a
Defeased
Note cannot be the subject of any further Defeasance Event;
(vii) Borrower shall execute and deliver a security agreement, in
(viii) form and
substance satisfactory to Lender, creating a first priority lien on the
Defeasance Deposit and the U.S. Obligations purchased with the Defeasance
Deposit in accordance with the provisions of this Section 2.4 (the
"Security
Agreement");
(vii) Borrower shall deliver an opinion of counsel for Borrower in
(viii) form
reasonably satisfactory to Lender stating, among other things, that
Borrower has
legally and validly transferred and assigned the U.S. Obligations and all
obligations, rights and duties under and to the Note or Defeased Note (as
applicable) to the Successor Borrower, that Lender has a perfected first
priority security interest in the Defeasance Deposit and the U.S.
Obligations
delivered by Borrower and that any REMIC Trust formed pursuant to a
Securitization will not fail to maintain its status as a "real estate
mortgage
investment conduit" within the meaning of Section 860D of the Code as a
result
of such Defeasance Event;
(ix) Borrower shall deliver confirmation in writing from the
(x) applicable
Rating Agencies to the effect that such release will not result in a
downgrading, withdrawal or
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qualification of the respective ratings in effect immediately prior to
such
Defeasance Event for the Securities issued in connection with the
Securitization
which are then outstanding. If required by the applicable Rating Agencies,
Borrower shall also deliver or cause to be delivered a non-consolidation
opinion
with respect to the Successor Borrower in form and substance satisfactory
to
Lender and the applicable Rating Agencies;
(ix) Borrower shall deliver an Officer's Certificate certifying
(x) that the
requirements set forth in this Section 2.4.1(a) have been satisfied;
(x) Borrower shall deliver a certificate of Borrower's independent
certified public accountant certifying that the U.S. Obligations purchased
with
the Defeasance Deposit generate monthly amounts equal to or greater than
the
Scheduled Defeasance Payments;
(xi) Borrower shall deliver such other certificates, documents or
instruments as Lender may reasonably request; and
(xi) Borrower shall pay all costs and expenses of Lender incurred
(xii) in
connection with the Defeasance Event, including any costs and expenses
associated with a release of the Lien of the related Mortgage as provided
in
Section 2.5 hereof as well as reasonable attorneys' fees and expenses.
(b) In connection with each Defeasance Event, Borrower hereby
appoints Lender as its agent and attorney-in-fact for the purpose of using
the
Defeasance Deposit to purchase U.S. Obligations which provide payments on
or
prior to, but as close as possible to, all successive scheduled payment
dates
after the Defeasance Date upon which interest and principal payments are
required under the Note, in the case of a Defeasance Event for the entire
outstanding principal balance of the Loan, or the Defeased Note, in the
case of
a Defeasance Event for only a portion of the outstanding principal balance
of
the Loan, as applicable, and in amounts equal to the scheduled payments
due on
such dates under the Note or the Defeased Note, as applicable, (including
without limitation scheduled payments of principal, interest, servicing
fees (if
any), the Rating Surveillance Charge and any other amounts due under the
Loan
Documents on such dates) and assuming such Note or Defeased Note is
prepaid in
full on the Anticipated Repayment Date (the "Scheduled Defeasance
Payments").
Borrower, pursuant to the Security Agreement or other appropriate
document,
shall authorize and direct that the payments received from the U.S.
Obligations
may be made directly to the Lockbox Account (if a Lockbox Account had
theretofore been established pursuant to the terms hereof or otherwise as
directed by Lender) and applied to satisfy the obligations of Borrower
under the
Note or the Defeased Note, as applicable. Any portion of the Defeasance
Deposit
in excess of the amount necessary to purchase the U.S. Obligations
required by
this Section 2.4 and satisfy Borrower's other obligations under this
Section 2.4
and Section 2.5 shall be remitted to Borrower.
2.4.2 Successor Borrower. In connection with any Defeasance Event,
Borrower
may, or at the request of Lender shall, establish or designate a successor
entity (the "Successor Borrower") which shall be a single purpose
bankruptcy
remote entity with an
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<PAGE>
Independent Director approved by Lender, and Borrower shall transfer and
assign
all obligations, rights and duties under and to the Note or the Defeased
Note,
as applicable, together with the pledged U.S. Obligations to such
Successor
Borrower. Such Successor Borrower shall assume the obligations under the
Note or
the Defeased Note, as applicable, subject to the provisions of Section 9.4
hereof, and the Security Agreement and Borrower shall be relieved of its
obligations under such documents. Borrower shall pay $1,000 to any such
Successor Borrower as consideration for assuming the obligations under the
Note
or the Defeased Note, as applicable, and the Security Agreement.
Notwithstanding
anything in this Agreement to the contrary, no other assumption fee shall
be
payable upon a transfer of the Note or the Defeased Note, as applicable,
in
accordance with this Section 2.4.2, but Borrower shall pay all costs and
expenses incurred by Lender, including Lender's reasonable attorneys' fees
and
expenses, incurred in connection therewith.
Section 2.5 Release of Property. Except as set forth in this Section
2.5, no
repayment, prepayment or defeasance of all or any portion of the Note
shall
cause, give rise to a right to require, or otherwise result in, the
release of
any Lien of any Mortgage on any Individual Property.
2.5.1 Release of all Properties.
(a) If Borrower has elected to defease the entire Loan and the
(b) requirements
of Section 2.4 and this Section 2.5 have been satisfied, all of the
Properties
shall be released from the Liens of their respective Mortgage and the U.S.
Obligations, pledged pursuant to the Security Agreement, shall be the sole
source of collateral securing the Note.
(c) In connection with the release of the Mortgages, Borrower shall
(d) submit
to Lender, not less than fifteen (15) days prior to the Defeasance Date, a
release of Lien (and related Loan Documents) for each Individual Property
for
execution by Lender. Such release shall be in a form appropriate in each
jurisdiction in which an Individual Property is located and satisfactory
to
Lender in its sole discretion. In addition, Borrower shall provide all
other
documentation Lender reasonably requires to be delivered by Borrower in
connection with such release, together with an Officer's Certificate
certifying
that such documentation (i) is in compliance with all Legal Requirements,
and
(ii) will effect such releases in accordance with the terms of this
Agreement.
2.5.2 Release of Individual Property. If Borrower has elected to
defease a
portion of the Loan and the requirements of Section 2.4 and this Section
2.5 have
been satisfied, Borrower may obtain the release of an Individual Property
from
the Lien of the Mortgage thereon (and related Loan Documents) and the
release of
Borrower's obligations under the Loan Documents with respect to such
Individual
Property (other than those expressly stated to survive), upon the
satisfaction
of each of the following conditions:
(a) The principal balance of the Defeased Note shall equal or exceed
(b) the
Adjusted Release Amount for the applicable Individual Property; provided,
however, if the undefeased portion of the Loan at the time a release is
requested is less than the Adjusted
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Release Amount, the Defeased Note shall equal the remaining undefeased
portion
of the Loan at the time of release;
(c) Borrower shall submit to Lender, not less than fifteen (15) days
(d) prior
to the date of such release, a release of Lien (and related Loan
Documents) for
such Individual Property for execution by Lender. Such release shall be in
a
form appropriate in each jurisdiction in which the Individual Property is
located and satisfactory to Lender in its sole discretion. In addition,
Borrower
shall provide all other documentation Lender reasonably requires to be
delivered
by Borrower in connection with such release, together with an Officer's
Certificate certifying that such documentation (i) is in compliance with
all
Legal Requirements, (ii) will effect such release in accordance with the
terms
of this Agreement, and (iii) will not impair or otherwise adversely affect
the
Liens, security interests and other rights of Lender under the Loan
Documents
not being released (or as to the parties to the Loan Documents and
Properties
subject to the Loan Documents not being released); and
(c) After giving effect to such release, the Debt Service Coverage
Ratio
for the Properties then remaining subject to the Liens of the Mortgages
shall be
equal to the greater of (i) the Closing Date DSCR, and (ii) the Debt
Service
Coverage Ratio for all of the then remaining Properties (including the
Individual Property to be released and taking into account the Debt
evidenced by
the Defeased Note in question) for the twelve (12) full calendar months
immediately preceding the release of the Individual Property.
2.5.3 Release on Payment in Full. Lender shall, upon the written
request
and at the expense of Borrower, upon payment in full of all principal and
interest on the Loan and all other amounts due and payable under the Loan
Documents in accordance with the terms and provisions of the Note and this
Loan
Agreement, release the Lien of the Mortgage on each Individual Property
not
theretofore released.
Section 2.6 Manner of Making Payments; Cash Management.
2.6.1 Deposits into Lockbox Account. In the event that (a) the Debt
Service
Coverage Ratio shall at any time be less than 1.50:1 for a twelve (12)
month
period or (b) the Loan is not paid in full on or prior to the Anticipated
Repayment Date (each event described in clauses (a) and (b) hereof is a
"Lockbox
Event"), Borrower shall cause all Rents from the Properties to be
deposited into
the Lockbox Account in accordance with the Cash Management Agreement, and
Borrower shall, and shall cause Manager to, deliver irrevocable written
instructions to all Tenants under Leases to deliver all Rents payable
thereunder
directly to the Lockbox Account and Borrower shall cause the holder of the
Lockbox Account to execute and deliver to Lender the agreement in the form
annexed to the Cash Management Agreement as Exhibit C. In the event that
either
Borrower or Manager receives any amounts constituting Rents or other
revenue of
any kind from the Properties, including but not limited to the Other
Contract
Funds, after establishment of the Lockbox Account, Borrower shall, or
shall
cause Manager to, deposit said amounts into the Lockbox Account not later
than
the second Business Day after receipt thereof. Disbursements from the
Lockbox
Account will be made in accordance with the terms and conditions of this
Agreement and the Cash Management
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<PAGE>
Agreement. Lender shall have sole dominion and control over the Lockbox
Account
and, except as set forth in the Cash Management Agreement, Borrower shall
have
no rights to make withdrawals therefrom. In the event that, prior to the
Anticipated Repayment Date, the Lockbox Account is established as set
forth in
clause (a) of the first sentence of this Section 2.6.1, Lender shall
release the
Lockbox Account provided that Borrower establishes to the reasonable
satisfaction of Lender that the Debt Service Coverage Ratio is in excess
of
1.50:1 for three (3) consecutive calendar quarters; provided, however, in
the
event that Lender has released the Lockbox Account, and the Debt Service
Coverage Ratio again is at any time less than 1.50:1 for three (3)
consecutive
calendar quarters, the Lockbox Account shall be reestablished under the
same
terms as set forth herein except that Lender shall not be obligated to
release
the Lockbox Account unless the Debt Service Coverage Ratio thereafter is
in
excess of 1.50:1 for three (3) consecutive calendar quarters. Thereafter,
in the
event that the Debt Service Coverage Ratio again less than 1.5:1 for three
(3)
consecutive calendar quarters, the Lockbox Account shall be permanently
re-established.
2.6.2 Making of Payments. Each payment by Borrower hereunder or under
the
Note shall be made in funds settled through the New York Clearing House
Interbank Payments System or other funds immediately available to Lender
by 1:00
p.m., New York City time, on the date such payment is due, to Lender by
deposit
to such account as Lender may designate by written notice to Borrower.
Whenever
any payment hereunder or under the Note shall be stated to be due on a day
which
is not a Business Day, such payment shall be made on the next succeeding
Business Day.
2.6.3 Payments Received in the Lockbox Account. Notwithstanding
anything to
the contrary contained in this Agreement or the other Loan Documents, and
provided no Event of Default has occurred and is continuing, Borrower's
obligations with respect to the payment due pursuant to Section 2.2.3 and
Section 2.2.4 and amounts due for the Reserve Funds shall be deemed
satisfied to
the extent sufficient amounts are deposited in the Lockbox Account to
satisfy
such obligations on the dates each such payment is required, regardless of
whether any of such amounts are so applied by Lender.
2.6.4 No Deductions, etc. All payments made by Borrower hereunder or
under
the Note or the other Loan Documents shall be made irrespective of, and
without
any deduction for, any setoff, defense or counterclaims.
Section 2.7 Property Substitutions.
2.7.1 Substitution of Property. Notwithstanding the provisions of
Section 2.5
hereof, subject to the terms and conditions set forth in this Section 2.7,
Borrower may obtain a release of the Lien of a Mortgage (and the related
Loan
Documents) encumbering an Individual Property (a "Substituted Property")
by
substituting therefor another shopping center property acquired by
Borrower
(individually, a "Substitute Property" and collectively, the "Substitute
Property"), provided that (a) the Substitution Conditions are satisfied
with
respect to Substitute Property, (b) no such substitution may occur after
the
Anticipated
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<PAGE>
Repayment Date and (c) such substitution shall be subject to the
satisfaction of
the following conditions precedent:
(i) Lender shall have received a copy of a deed conveying all
(ii) of
Borrower's right, title and interest in and to the
Substituted
Property to an entity other than Borrower and the SPC Party
and a
letter from Borrower countersigned by a title insurance
company
acknowledging receipt of such deed and agreeing to record
such
deed in the real estate records of the appropriate
recording
office in which the Substituted Property is located.
(iii) Lender shall have received an appraisal of each of the
(iv) Substitute
Property and the Substituted Property, each dated no more
than
sixty (60) days prior to the substitution by an appraiser
acceptable to the Rating Agencies, indicating an appraised
value
of the Substitute Property that is not less than the
greater of
(a) the value of the Substituted Property as set forth in
(b) the
appraisal delivered to Lender at the time of the
encumbrance of
the Substituted Property by the related Mortgage or (b) the
value
of the Substituted Property on the date of substitution.
(iii) After giving effect to the substitution, the Debt Service
(iv) Coverage
Ratio for the Loan for all of the Properties (including the
Substitute Property but excluding the Substituted Property)
is
not less than the greater of (a) the Closing Date DSCR or
(b) the
Debt Service Coverage Ratio for the Loan for each of the
Properties (including the Substituted Property but
excluding the
Substitute Property) as of the date immediately preceding
the
substitution.
(v) The Net Operating Income for the Substitute Property does
(vi) not
show a downward trend over three (3) consecutive years
prior to
the date of substitution or, with respect to a Substitute
Property for which information regarding the Net Operating
Income
of such Substitute Property for the three (3) years
immediately
prior to the date of substitution cannot be obtained by
Borrower
after Borrower's exercise of diligent efforts, the Net
Operating
Income shall not show a downward trend for such period of
Time
immediately prior to the date of substitution as may be
determined from the information regarding such Net
Operating
Income available.
(v) The Net Operating Income and Debt Service Coverage Ratio
(vi) (for
(vii) the
twelve (12) month period immediately preceding the
substitution)
for the Substitute Property is not less than the Net
Operating
Income and Debt Service Coverage Ratio (for the twelve (12)
month
period immediately preceding the substitution) for the
related
Substituted Property. For purposes of this clause (v), the
Debt
Service Coverage Ratio with respect to a Substitute
Property or a
Substituted Property shall be calculated
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<PAGE>
using the Net Operating Income with respect to such
Substitute
Property or the Substituted Property, as applicable, and
the
principal and interest due and payable on the Note with
respect
to the related Pro Rata Release Amount for the Substitute
Property immediately after the substitution or the Pro Rata
Release Amount for the Substituted Property immediately
prior to
the substitution, as applicable.
(vii) Lender shall have received confirmation in writing from the
(viii) Rating
Agencies to the effect that such substitution will not
result in
a withdrawal, qualification or downgrade of the respective
ratings in effect immediately prior to such substitution
for the
Securities issued in connection with the Securitization
that are
then outstanding.
(vii) No Default or Event of Default shall have occurred and be
continuing and Borrower shall be in compliance in all
material respects
with all terms and conditions set forth in this Agreement
and in each
Loan Document on Borrower's part to be observed or
performed.
Lender shall have received a certificate from Borrower
confirming
the foregoing, stating that the representations and
warranties of
Borrower contained in this Agreement and the other Loan
Documents
are true and correct in all material respects on and as of
the
date of the substitution with respect to Borrower, the
Substituted Property and the Substitute Property, such
certificate to be in form and substance satisfactory to the
Rating Agencies.
(ix) Borrower shall have executed, acknowledged and delivered to
(x) Lender
(A) a Mortgage, an Assignment of Leases and two UCC
(B) Financing
Statements with respect to the Substitute Property,
together with
a letter from Borrower countersigned by a title insurance
company
acknowledging receipt of such Mortgage, Assignment of
Leases and
UCC-1 Financing Statements and agreeing to record or file,
as
applicable, such Mortgage, Assignment of Leases and Rents
and one
of the UCC-1 Financing Statements in the real estate
records for
the county in which the Substitute Property is located and
to
file one of the UCC-1 Financing Statement in the office of
the
Secretary of State of the state in which the Substitute
Property
is located, so as to effectively create upon such recording
and
filing valid and enforceable Liens upon the Substitute
Property,
of the requisite priority, in favor of Lender (or such
other
trustee as may be required under local law), subject only
to the
Permitted Encumbrances and such other Liens as are
permitted
pursuant to the Loan Documents and (B) and an Environmental
Indemnity with respect to the Substitute Property. The
Mortgage,
Assignment of Leases, UCC-1 Financing Statements shall be
the
same in form and substance as the counterparts of such
documents
executed and delivered with respect to the related
Substituted
Property subject to modifications reflecting the Substitute
Property as the Individual Property that is the subject of
such
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documents and such modifications reflecting the laws of the
state
in which the Substitute Property is located as shall be
recommended by the counsel admitted to practice in such
state and
delivering the opinion as to the enforceability of such
documents
required pursuant to clause (xiv) below. The Mortgage
encumbering
the Substitute Property shall secure all amounts evidenced
by the
Note, provided that in the event that the jurisdiction in
which
the Substitute Property is located imposes a mortgage
recording,
intangibles or similar tax and does not permit the
allocation of
indebtedness for the purpose of determining the amount of
such
tax payable, the principal amount secured by such Mortgage
shall
be equal to one hundred fifty percent (150%) of the amount
of the
Loan allocated to the Substitute Property. The amount of
the Loan
allocated to, and the Release Amount of, the Substitute
Property
(such amount being hereinafter referred to as the
"Substitute
Release Amount") shall equal the Release Amount of the
related
Substituted Property.
(viii) Lender shall have received (A) any "tie-in" or similar
(ix) endorsement
to each Title Insurance Policy insuring the Lien of an
existing
Mortgage as of the date of the substitution available with
respect to the Title Insurance Policy insuring the Lien of
the
Mortgage with respect to the Substitute Property and (B) a
Title
Insurance Policy (or a marked, signed and reedited
commitment to
issue such Title Insurance Policy) insuring the Lien of the
Mortgage encumbering the Substitute Property, issued by the
title
company that issued the Title Insurance Policies insuring
the
Lien of the existing Mortgages and dated as of the
date of the substitution, with reinsurance and direct
access
agreements that replace such agreements issued in
connection with
the Title Insurance Policy insuring the Lien of the
Mortgage
encumbering the Substituted Property. The Title Insurance
Policy
issued with respect to the Substitute Property shall (1)
provide
coverage in the amount of the Substitute Release Amount if
the
"tie-in" or similar endorsement described above is
available or,
if such endorsement is not available, in an amount equal to
one
hundred fifty percent (150%) of the Substitute Release
Amount,
(2) insure Lender that the relevant Mortgage creates a
valid
first lien on the Substitute Property encumbered thereby,
free
and clear of all exceptions from coverage other than
Permitted
Encumbrances and standard exceptions and exclusions from
coverage
(as modified by the terms of any endorsements), (3) contain
such
endorsements and affirmative coverages as are contained in
the
Title Insurance Policies insuring the Liens of the existing
Mortgages, and (4) name Lender as the insured. Lender also
shall
have received copies of paid receipts shoving that all
premiums
in respect of such endorsements and Title Insurance
Policies have
been paid.
(x) Lender shall have received a title survey for each
Substitute Property, certified to the title company and
Lender
and their successors and assigns,
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<PAGE>
in the same form and having the same content as the
certification
of the Survey of the Substituted Property prepared by a
professional land surveyor licensed in the state in which
the
Substitute Property is located and acceptable to the Rating
Agencies in accordance with the 1992 Minimum Standard
Detail
Requirements for ALTA/ACSM Land Title Surveys. Such survey
shall
reflect the same legal description contained in the Title
Insurance Policy relating to such Substitute Property. The
surveyor's seal shall be affixed to each survey and each
survey
shall certify that the surveyed property is not located in
a
"one-hundred-year flood hazard area."
(xi) Lender shall have received valid certificates of insurance
indicating that the requirements for the policies of
insurance
required for an Individual Property hereunder have been
satisfied
with respect to the Substitute Property and evidence of the
payment of all premiums payable for the existing policy
period.
(xi) Lender shall have received a Phase I environmental report
(xii) and, if
recommended under the Phase I environmental report, a Phase
II
environmental report, which conclude that the Substitute
Property
does not contain any Hazardous Substance (as defined in the
Mortgage) and is not subject to any risk of contamination
from
any off-site Hazardous Substance. If any such report
discloses
the presence of any Hazardous Substance or the risk of
contamination from any off-site Hazardous Substance, and
such
report requires or recommends remediation, such report
shall
include an estimate of the cost of any related remediation,
and
Borrower shall deposit with Lender an amount equal to one
hundred
fifty percent (150%) of such estimated cost, which deposit
shall
constitute additional security for the Loan and shall be
released
to Borrower upon the delivery to Lender of (A) an update to
such
report indicating that there is no longer any Hazardous
Substance
on the Substitute Property for which such amount was
deposited
with Lender or any danger of contamination from any off-
site
Hazardous Substance that has not been fully remediated and
(B)
paid receipts indicating that the costs of all such
remediation
work have been paid; provided, however, in the event that
said
report recommends no remediation, then no such deposit will
be
required.
(xiii) Borrower shall deliver or cause to be delivered to Lender
(xiv) (A)
updates certified by Borrower of all organizational
documentation
related to Borrower and/or the formation, structure,
existence,
good standing and/or qualification to do business delivered
to
Lender in connection with the Closing Date; (B) good
standing
certificates, certificates of qualification to do business
in the
jurisdiction in which the Substitute Property is located
(if
required in such jurisdiction) and (C) resolutions of the
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<PAGE>
member of Borrower authorizing the substitution and any
actions
taken in connection with such substitution.
(xv) Lender shall have received the following opinions of
(xvi) Borrower's
counsel: (A) an opinion or opinions of counsel admitted to
practice
under the laws of the state in which the Substitute
Property is
located stating that the Loan Documents delivered with
respect to
the Substitute Property pursuant to clause (viii) above are
valid
and enforceable in accordance with their terms, subject to
the
laws applicable to creditors' rights and equitable
principles,
and that Borrower is qualified to do business and in good
standing under the laws of the jurisdiction where the
Substitute
Property is located or that Borrower is not required by
applicable law to qualify to do business in such
jurisdiction;
(C) an opinion of Richards, Layton & Finger or such other
(D) counsel
acceptable to the Rating Agencies stating that the Loan
Documents
delivered with respect to the Substitute Property pursuant
to
clause (viii) above were duly authorized, executed and
delivered
by Borrower and that the execution and delivery of such
Loan
Documents and the performance by Borrower of its
obligations
thereunder will not cause a breach of, or a default under,
any
agreement, document or instrument to which Borrower is a
party to
which it or its properties are bound; (C) an opinion of
counsel
or other evidence acceptable to the Rating Agencies stating
that
subjecting the Substitute Property to the Lien of the
related
Mortgage and the execution and delivery of the related Loan
Documents does not and will not affect or impair the
ability of
Lender to enforce its remedies under all of the Loan
Documents or
to realize the benefits of the cross-collateralization
provided
for thereunder; and (E) an opinion of counsel acceptable to
the
Rating Agencies that the substitution does not constitute a
"significant modification" of the Loan under Section 1001
of the
Code or otherwise cause a tax to be imposed on a
"prohibited
transaction" by any REMIC Trust.
(xv) Borrower shall have paid all Basic Carrying Costs relating
(xvi) to the
Properties and the Substitute Property, including without
limitation, (i) accrued but unpaid insurance premiums
relating to
the Properties and the Substitute Property, (ii) currently
due
and payable Taxes (including any in arrears) relating to
the
Properties and the Substitute Property and (iii) currently
due
Other Charges relating to the Properties and Substitute
Property.
(xvii) Borrower shall have paid or reimbursed Lender for all costs
(xviii) and
expenses incurred by Lender (including, without limitation,
reasonable attorneys fees and disbursements) in connection
with
the substitution and Borrower shall have paid all recording
charges, filing fees, taxes or other expenses (including,
without
limitation, mortgage and intangibles taxes and
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<PAGE>
documentary stamp taxes) payable in connection with the
substitution. Borrower shall have paid all costs and
expenses of
the Rating Agencies incurred in connection with the
substitution.
(xvii) Lender shall have received annual operating statements and
occupancy statements for the Substitute Property for the
most
recently completed fiscal year and a current operating
statement
for the Substituted Property, each certified to Lender as
being
true and correct and a certificate from Borrower certifying
that
there has been no adverse change in the financial condition
of
the Substitute Property since the date of such operating
statements.
(xix) Borrower shall have delivered to Lender estoppel
(xx) certificates from
any existing tenants (A) constituting anchor tenants at the
Substitute Property, (B) leasing an entire building at the
Substitute Property, (C) whose rent equals or exceeds ten
(10%)
percent of the Gross Income from Operations relating to the
Substitute Property or (D) that, disregarding the area
leased by
those described in clauses (A), (B) and (C), lease no less
than
sixty percent (60%) of the remaining gross leasable area at
the
Substitute Property. All such estoppel certificates shall
indicate
that (1) the subject lease is a valid and binding
obligation of
the tenant thereunder, (2) to the knowledge of such tenant,
there
are no defaults under such lease on the part of the
landlord or
tenant thereunder, (3) the tenant thereunder has no defense
or
offset to the payment of rent under such leases, (4) no
rent
under such lease has been paid more than one (1) month in
advance, (5) the tenant thereunder has no option or right
of
first refusal under such lease to purchase all or any
portion of
the Substitute Property and (6) all tenant improvement work
required under such lease has been completed and the tenant
under
such lease is in actual occupancy of its leased premises.
If an
estoppel certificate indicates that all tenant improvement
work
required under the subject lease has not yet been
completed,
Borrower shall, if required by the Rating Agencies, deliver
to
Lender financial statements indicating that Borrower has
Adequate
funds to pay all costs related to such tenant improvement
work as
required under such lease.
(xix) Lender shall have received copies of all tenant leases and
(xx) any
ground leases affecting the Substitute Property certified
by
Borrower as being true and correct. Lender shall have
received a
current rent roll of the Substitute Property certified by
Borrower as being true and correct.
(xxi) Lender shall have received subordination, nondisturbance
(xxii) and
attornment agreements with respect to all of the Leases
affecting
the Substitute Property other than such Leases that are, by
their
terms, subordinate to the Mortgage with respect to the
Substitute
Property and, if the law of the
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<PAGE>
State where the Substitute Property is located allows the
tenant
under the Lease in question to treat such Lease as
terminated in
the event of sale by foreclosure or power of sale, provide
for
attornment to a subsequent owner in the case of sale by
foreclosure or power of sale.
(xxi) Lender shall have received an endorsement to the Title
(xxii) Insurance
Policy insuring the Lien of the Mortgage encumbering the
Substitute Property insuring that the Substitute Property
constitutes a separate tax lot or, if such an endorsement
is not
available in the state in which the Substitute Property is
located, a letter from the title insurance company issuing
such
Title Insurance Policy stating that the Substitute Policy
constitutes a separate tax lot.
(xxiii) Lender shall have received a Physical Conditions Report
(xxiv) with
respect to the Substitute Property stating that the
Substitute
Property and its use comply in all material respects with
all
applicable Legal Requirements (including, without
limitation,
zoning, subdivision and building laws) and that the
Substitute
Property is in good condition and repair and free of damage
or
waste. If compliance with any Legal Requirements are not
addressed by the Physical Conditions Report, such
compliance shall
be confirmed by delivery to Lender by one of the following:
a
letter from the municipality in which such Property is
located,
or a certificate of a surveyor that is licensed in the
state in
which the Substitute Property is located (with respect to
zoning
and subdivision laws), or an ALTA 3.1 zoning endorsement to
the
Title Insurance Policy delivered pursuant to clause (ix)
above
(with respect to zoning laws) or a subdivision endorsement
to the
Title Insurance Policy delivered pursuant to clause (ix)
above
(with respect to subdivision laws). If the Physical
Conditions
Report recommends that any repairs be made with respect to
the
Substitute Property, such Physical Conditions Report shall
include
an estimate of the cost of such recommended repairs and
Borrower
shall deposit with Lender an amount equal to one hundred
twenty-five percent (125%) of such estimated cost, which
deposit
shall constitute additional security for the Loan and shall
be
released to Borrower upon the delivery to Lender of (A) an
update
to such Physical Conditions Report or a letter from the
engineer
that prepared such Physical Conditions Report indicating
that the
recommended repairs were completed in good and workmanlike
manner
and (B) paid receipts indicating that the costs of all such
repairs have been paid.
(xxiii) Lender shall have received a certified copy of an agreement
terminating the Management Agreement as to the Substituted
Property and a certified copy of the Management Agreement
for the
Substitute Property and Manager shall have executed and
delivered
to Lender an amendment to the Assignment of Management
Agreement
pertaining to the
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<PAGE>
Management Agreement for the Substitute Property, of which
shall
be in the same form as delivered by the parties thereto on
the
date hereof.
(xxv) Lender shall have received such other and further
(xxvi) approvals,
opinions, documents and information in connection with the
substitution as the Rating Agencies may have requested.
(xxv) Lender shall have received copies of all contracts and
(xxvi) agreements
relating to the leasing and operation of the Substitute
Property
(other than the Management Agreement) together with a
certification of Borrower attached to each such contract or
agreement certifying that the attached copy is a true and
correct
copy of such contract or agreement and all amendments
thereto.
(xxvii) Borrower shall submit to Lender, not less than fifteen (15)
(xxviii) days
prior to the date of such substitution, a release of Lien
(and
related Loan Documents) for the Substituted Property for
execution by Lender. Such release shall be in a form
appropriate
for the jurisdiction in which the Substituted Property is
located. Borrower shall deliver an Officer's Certificate
certifying that the requirements set forth in this Section
2.7.1
have been satisfied.
Upon the satisfaction of the foregoing conditions precedent, Lender will
release
its Lien from the Substituted Property to be released and the Substitute
Property shall be deemed to be an Individual Property for purposes of this
Agreement and the Substitute Release Amount with respect to such
Substitute
Property shall be deemed to be the Release Amount with respect to such
Substitute Property for all purposes hereunder.
III. CONDITIONS PRECEDENT
Section 3.1 Conditions Precedent to Closing.
The obligation of Lender to make the Loan hereunder is subject to the
fulfillment by Borrower or waiver by Lender of the following conditions
precedent no later than the Closing Date:
3.1.1 Representations and Warranties; Compliance with Conditions. The
representations and warranties of Borrower contained in this Agreement and
the
other Loan Documents shall be true and correct in all material respects on
and
as of the Closing Date with the same effect as if made on and as of such
date,
and no Default or an Event of Default shall have occurred and be
continuing; and
Borrower shall be in compliance in all material respects with all terms
and
conditions set forth in this Agreement and in each other Loan Document on
its
part to be observed or performed.
3.1.2 Loan Agreement and Note. Lender shall have received a copy of
this
Agreement and the Note, in each case, duly executed and delivered on
behalf of
Borrower.
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<PAGE>
3.1.3 Delivery of Loan Documents; Title Insurance; Reports; Leases,
etc.
(a) Mortgages, Assignments of Leases and other Loan Documents.
(b) Lender
(c) shall
have received from Borrower fully executed and acknowledged counterparts
of the
Mortgages and the Assignments of Leases and evidence that counterparts of
the
Mortgages and Assignments of Leases have been delivered to the title for
recording, in the reasonable judgment of Lender, so as to effectively
create
upon such recording valid and enforceable Liens upon each Individual
Property,
of the requisite priority, in favor of Lender (or such trustee as may be
required under local law), subject only to the Permitted Encumbrances and
such
other Liens as are permitted pursuant to the Loan Documents. Lender shall
have
also received from Borrower fully executed counterparts of the Cash
Management
Agreement, and Assignment of Management Agreement.
(c) Title Insurance. Lender shall have received Title Insurance
(d) Policies
issued by a title company acceptable to Lender and dated as of the Closing
Date,
with reinsurance and direct access agreements acceptable to Lender. Such
Title
Insurance Policies shall (i) provide coverage in amounts equal to the
Release
Amount for the applicable Property together with a "tie-in" or similar
endorsement, (ii) insure Lender that the relevant Mortgage creates a valid
lien
on the applicable Individual Property encumbered thereby of the requisite
priority, free and clear of all exceptions from coverage other than
Permitted
Encumbrances and standard exceptions and exclusions from coverage (as
modified
by the terms of any endorsements), (iii) contain such endorsements and
affirmative coverages as Lender may reasonably request, and (iv) name
Lender,
its successors and assigns, as the insured. The Title Insurance Policies
shall
be assignable. Lender also shall have received evidence that all premiums
in
respect of such Title Insurance Policies have been paid.
(d) Survey. Lender shall have received a title survey for each
(e) Individual
Property, certified to the title company and Lender and their successors
and
assigns, in form and content satisfactory to Lender and prepared by a
professional and properly licensed land surveyor satisfactory to Lender in
accordance with the 1992 Minimum Standard Detail Requirements for
ALTA/ACSM Land
Title Surveys. The surveys shall meet the classification of an "Urban
Survey"
and the following additional items from the list of "Optional Survey
Responsibilities and Specifications" (Table A) should be added to each
survey:
2, 3, 4, 6, 8, 9, 10, 11 and 13. Each such survey shall reflect the same
legal
description contained in the Title Insurance Policies relating to such
Individual Property referred to in clause (ii) above and shall include,
among
other things, a legal description of the real property comprising part of
such
Individual Property reasonably satisfactory to Lender. The surveyor's seal
shall
be affixed to each survey and the surveyor shall provide a certification
for
each survey in form and substance acceptable to Lender.
(e) Insurance. Lender shall have received valid
(f) certificates of
(g) insurance for
the policies of insurance required hereunder, satisfactory to Lender in
its sole
discretion, and evidence of the payment of all premiums payable for the
existing
policy period.
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<PAGE>
(f) Environmental Reports. Lender shall have received an
(g) environmental
report in respect of each Individual Property, in each case reasonably
satisfactory to Lender.
(e) Zoning. With respect to each Individual Property, Lender shall
(f) have
received, at Lender's option, (i) letters or other evidence with respect
to each
Individual Property from the appropriate municipal authorities (or other
Persons) concerning applicable zoning and building laws, (ii) an ALTA 3.1
zoning
endorsement for the applicable Title Insurance Policy or (iii) other
evidence of
zoning compliance, in each case in substance reasonably satisfactory to
Lender.
(g) Encumbrances. Borrower shall have taken or caused to be taken
(h) such
actions in such a manner so that Lender has a valid and perfected first
Lien as
of the Closing Date with respect to each Mortgage on the applicable
Individual
Property, subject only to applicable Permitted Encumbrances and such other
Liens
as are permitted pursuant to the Loan Documents, and Lender shall have
received
satisfactory evidence thereof.
3.1.4 Related Documents. Each additional document not specifically
referenced herein, but relating to the transactions contemplated herein,
shall
have been duly authorized, executed and delivered by all parties thereto
and
Lender shall have received and approved certified copies thereof.
3.1.5 Delivery of Organizational Documents. On or before the Closing
Date,
Borrower shall deliver or cause to be delivered to Lender copies certified
by
Borrower of all organizational documentation related to Borrower and/or
the
formation, structure, existence, good standing and/or qualification to do
business, as Lender may request in its sole discretion, including, without
limitation, good standing certificates, qualifications to do business in
the
appropriate jurisdictions, resolutions authorizing the entering into of
the Loan
and incumbency certificates as may be requested by Lender.
3.1.6 Opinions of Borrower's Counsel. Lender shall have received
opinions
of Borrower's counsel (a) with respect to non-consolidation issues, and
(b) with
respect to due execution, authority, enforceability of the Loan Documents
and
such other matters as Lender may reasonably require, all such opinions in
form,
scope and substance reasonably satisfactory to Lender and Lender's counsel
in
their reasonable discretion.
3.1.7 Budgets. Borrower shall have delivered, and Lender shall have
approved, the Annual Budget for the current Fiscal Year.
3.1.8 Basic Carrying Costs. Borrower shall have paid all Basic
Carrying
Costs relating to the Properties which are in arrears, including without
limitation, (a) accrued but unpaid insurance premiums relating to the
Properties, (b) currently due and payable Taxes (including any in arrears)
relating to the Properties, and (c) currently due Other Charges relating
to the
Properties, which amounts shall be funded with proceeds of the Loan.
3.1.9 Completion of Proceedings. All organizational proceedings taken
or to
be taken in connection with the transactions contemplated by this
Agreement and
other Loan
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Documents and all documents incidental thereto shall be reasonably
satisfactory in form and substance to Lender, and Lender shall have
received all such counterpart originals or certified copies of such
documents as Lender may reasonably request.
3.1.10 Payments. All payments, deposits or escrows required to be made or
established by Borrower under this Agreement, the Note and the other Loan
Documents on or before the Closing Date shall have been paid.
3.1.11 Tenant Estoppels. Lender shall have received an executed tenant
estoppel letter, which shall be in form and substance satisfactory to
Lender, from (a) each tenant identified by Lender as an "anchor tenant" of
any Individual Property, (b) each tenant leasing an entire building at any
Individual Property, (c) each tenant paying base rent in an amount equal to
or exceeding five percent (5%) of the Gross Income from Operations from the
applicable Individual Property occupied by such tenant and (d) disregarding
the area leased by those described in clauses (a), (b) and (c), lessees of
not less than seventy-five percent (75%) of the remaining gross leasable
area of each Individual Property; provided, however, in the event that
Borrower exercises reasonable commercial efforts to deliver such estoppels
certificates to Lender, Lender agrees that the failure or inability of
Borrower to deliver to Lender the estoppels required hereby shall be waived
by Lender.
3.1.12 Transaction Costs. Borrower shall have paid or reimbursed Lender
for all title insurance premiums, recording and filing fees, costs of
environmental reports, Physical Conditions Reports, appraisals and other
reports, the fees and costs of Lender's counsel and all other third party
out-of-pocket expenses incurred in connection with the origination of the
Loan.
3.1.13 Material Adverse Change. There shall have been no material adverse
change in the financial condition or business condition of Borrower or the
Properties since the date of the most recent financial statements delivered
to Lender. The income and expenses of the Properties, the occupancy leases
thereof, and all other features of the transaction shall be as represented
to Lender without material adverse change. Neither Borrower nor any of its
constituent Persons shall be the subject of any bankruptcy, reorganization,
or insolvency proceeding.
3.1.14 Leases and Rent Roll. Lender shall have received copies of all
tenant leases, certified copies of any tenant leases as requested by Lender
and certified copies of all ground leases affecting the Properties. Lender
shall have received a current certified rent roll of the Properties,
reasonably satisfactory in form and substance to Lender.
3.1.15 Subordination and Attornment. Lender shall have received
appropriate instruments acceptable to Lender subordinating all of the
Leases affecting the Properties designated by Lender to the Mortgage.
Lender shall have received an agreement to attorn to Lender satisfactory to
Lender from any tenant under a Lease that does not provide for such
attornment by its terms.
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3.1.16 Tax Lot. Lender shall have received evidence that each Individual
Property constitutes one (1) or more separate tax lots, which evidence
shall be reasonably satisfactory in form and substance to Lender.
3.1.17 Physical Conditions Reports. Lender shall have received Physical
Conditions Reports with respect to each Individual Property, which reports
shall be reasonably satisfactory in form and substance to Lender.
3.1.18 Management Agreement. Lender shall have received a certified copy
of the Management Agreement with respect to the Properties which shall be
satisfactory in form and substance to Lender.
3.1.19 Appraisal. Lender shall have received an appraisal of each
Individual Property, which shall be satisfactory in form and substance to
Lender.
3.1.20 Financial Statements. Lender shall have received a balance sheet
with respect to each Individual Property for the two most recent Fiscal
Years and statements of income and statements of cash flows with respect to
each Individual Property for the three most recent Fiscal Years, each in
form and substance reasonably satisfactory to Lender.
3.1.21 Further Documents. Lender or its counsel shall have received such
other and further approvals, opinions, documents and information as Lender
or its counsel may have reasonably requested including the Loan Documents
in form and substance reasonably satisfactory to Lender and its counsel.
IV. REPRESENTATIONS AND WARRANTIES
Section 4.1 Borrower Representations.
Borrower represents and warrants as of the date hereof and as of the
Closing Date that:
4.1.1 Organization. Borrower has been duly organized and is validly
existing and in good standing with requisite power and authority to own its
properties and to transact the businesses in which it is now engaged.
Borrower is duly qualified to do business and is in good standing in each
jurisdiction where it is required to be so qualified in connection with its
properties, businesses and operations. Borrower possesses all rights,
licenses, permits and authorizations, governmental or otherwise, necessary
to entitle it to own its properties and to transact the businesses in which
it is now engaged, and the sole business of Borrower is the ownership,
management and operation of the Properties.
4.1.2 Proceedings. Borrower has taken all necessary action to authorize the
execution, delivery and performance of this Agreement and the other Loan
Documents. This Agreement and such other Loan Documents have been duly
executed and delivered by or on behalf of Borrower and constitute legal,
valid and binding obligations of Borrower enforceable against Borrower in
accordance with their respective terms, subject only to applicable
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<PAGE>
bankruptcy, insolvency and similar laws affecting rights of creditors
generally, and subject, as to enforceability, to general principles of
equity (regardless of whether enforcement is sought in a proceeding in
equity or at law).
4.1.3 No Conflicts. The execution, delivery and performance of this
Agreement and the other Loan Documents by Borrower will not conflict with
or result in a breach of any of the terms or provisions of, or constitute a
default under, or result in the creation or imposition of any lien, charge
or encumbrance (other than pursuant to the Loan Documents) upon any of the
property or assets of Borrower pursuant to the terms of any indenture,
mortgage, deed of trust, loan agreement, partnership agreement or other
agreement or instrument to which Borrower is a party or by which any of
Borrower's property or assets is subject, nor will such action result in
any violation of the provisions of any statute or any order, rule or
regulation of any court or governmental agency or body having jurisdiction
over Borrower or any of Borrower's properties or assets, and any consent,
approval, authorization, order, registration or qualification of or with
any court or any such regulatory authority or other governmental agency or
body required for the execution, delivery and performance by Borrower of
this Agreement or any other Loan Documents has been obtained and is in full
force and effect.
4.1.4 Litigation. To Borrower's knowledge, there are no actions, suits or
proceedings at law or in equity by or before any governmental Authority or
other agency now pending or threatened against or affecting Borrower or any
Individual Property, which actions, suits or proceedings, if determined
against Borrower or any Individual Property, might materially adversely
affect the condition (financial or otherwise) or business of Borrower or
the condition or ownership of any Individual Property.
4.1.5 Agreements. Except such instruments and agreements set forth as
Permitted Exceptions in the Title Insurance Policies, Borrower is not a
party to any agreement or instrument or subject to any restriction which
might materially and adversely affect Borrower or any Individual Property,
or Borrower's business, properties or assets, operations or condition,
financial or otherwise. To Borrower's knowledge, Borrower is not in default
in any material respect in the performance, observance or fulfillment of
any of the obligations, covenants or conditions contained in any agreement
or instrument to
which it is a party or by which Borrower or any of the Properties are
bound. Borrower has no material financial obligation under any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to
which Borrower is a party or by which Borrower or the Properties is
otherwise bound, other than (a) obligations incurred in the ordinary course
of the operation of the Properties and (b) obligations under the Loan
Documents.
4.1.6 Title. Borrower has good, marketable and insurable fee simple title
to the real property comprising part of each Individual Property and good
title to the balance of such Individual Property, free and clear of all
Liens whatsoever except the Permitted Encumbrances, such other Liens as are
permitted pursuant to the Loan Documents and the Liens created by the Loan
Documents. Each Mortgage, when properly recorded in the appropriate
records, together with any Uniform Commercial Code financing statements
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required to be filed in connection therewith, will create (a) a valid,
perfected lien on the applicable Individual Property, subject only to
Permitted Encumbrances and the Liens created by the Loan Documents and (b)
perfected security interests in and to, and perfected collateral
assignments of, all personally (including the Leases), all in accordance
with the terms thereof, in each case subject only to any applicable
Permitted Encumbrances, such other Liens as are permitted pursuant to the
Loan Documents and the Liens created by the Loan Documents. There are no
claims for payment for work, labor or materials affecting the Properties
which are due and unpaid under the contracts pursuant to which such work or
labor was performed or materials provided which are or may become a lien
prior to, or of equal priority with, the Liens created by the Loan
Documents.
4.1.7 No Bankruptcy Filing. Neither Borrower nor any of its constituent
Persons are contemplating either the filing of a petition by it under any
state or federal bankruptcy or insolvency laws or the liquidation of all or
a major portion of Borrower's assets or property, and Borrower has no
knowledge of any Person contemplating the filing of any such petition
against it or such constituent Persons.
4.1.8 Full and Accurate Disclosure. To Borrower's knowledge, no statement
of fact made by Borrower in this Agreement or in any of the other Loan
Documents contains any untrue statement of a material fact or omits to
state any material fact necessary to make statements contained herein or
therein not misleading. There is no material fact presently known to
Borrower which has not been disclosed to Lender which adversely affects,
nor as far as Borrower can foresee, might adversely affect, any Individual
Property or the business, operations or condition (financial or otherwise)
of Borrower.
4.1.9 No Plan Assets. Borrower is not an Aemployee benefit plan," as
defined in Section 3(3) of ERISA, subject to Title I of ERISA, and none of
the assets of Borrower constitutes or will constitute "plan assets" of one
or more such plans within the meaning of 29 C.F.R. Section 2510.3-101. In
addition, (a) Borrower is not a "governmental plan" within the meaning of
Section 3(32) of ERISA and (b) transactions by or with Borrower are not
subject to state statutes regulating investment of, and fiduciary
obligations with respect to, governmental plans similar to the provisions
of Section 406 of ERISA or Section of the Code currently in effect, which
prohibit or otherwise restrict the transactions contemplated by this Loan
Agreement.
4.1.10 Compliance. To Borrower's knowledge, Borrower and the Properties
and the use thereof comply in all material respects with all applicable
Legal Requirements, including, without limitation, building and zoning
ordinances and codes. Borrower is not in default or violation of any order,
writ, injunction, decree or demand of any Governmental Authority. There has
not been committed by Borrower or, to Borrower's knowledge, any other
Person in occupancy of or involved with the operation or use of the
Properties any act or omission affording the federal government or any
other Governmental Authority the right of forfeiture as against any
Individual Property or any part thereof or any monies paid in performance
of Borrower's obligations under any of the Loan Documents.
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4.1.11 Financial Information. All financial data, including, without
limitation, the statements of cash flow and income and operating expense,
that have been delivered to Lender in respect of the Properties (i) are
true, complete and correct in all material respects, (ii) accurately
represent the financial condition of the Properties as of the date of such
reports, and (iii) to the extent prepared or audited by an independent
certified public accounting firm, have been prepared in accordance with
GAAP throughout the periods covered, except as disclosed therein. Borrower
does not have any contingent liabilities, liabilities for taxes, unusual
forward or long-term commitments or unrealized or anticipated losses from
any unfavorable commitments that are known to Borrower and reasonably
likely to have a materially adverse effect on any Individual Property or
the operation thereof as retail shopping centers, except as referred to or
reflected in said financial statements. Since the date of such financial
statements, there has been no materially adverse change in the financial
condition, operations or business of Borrower from that set forth in said
financial statements.
4.1.12 Condemnation. No Condemnation or other proceeding has been
commenced or, to Borrower's knowledge, is contemplated with respect to all
or any portion of any Individual Property or for the relocation of roadways
providing access to any Individual Property.
4.1.13 Federal Reserve Regulations. No part of the proceeds of the Loan
will be used for the purpose of purchasing or acquiring any "margin stock"
within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System or for any other purpose which would be inconsistent with
such Regulation U or any other Regulations of such Board of Governors, or
for any purposes prohibited by Legal Requirements or by the terms and
conditions of this Agreement or the other Loan Documents.
4.1.14 Utilities and Public Access. Each Individual Property has rights of
access to public ways and is served by water, sewer, sanitary sewer and
storm drain facilities adequate to service such Individual Property for its
respective intended uses. All public utilities necessary or convenient to
the full use and enjoyment of each Individual Property are located either
in the public right-of-way abutting such Individual Property (which are
connected so as to serve such Individual Property without passing over
other property) or in recorded easements serving such Individual Property
and such easements are set forth in and insured by the Title Insurance
Policies. All roads necessary for the use of each Individual Property for
their current respective purposes have been completed and dedicated to
public use and accepted by all Governmental Authorities.
4.1.15 Not a Foreign Person. Borrower is not a "foreign person" within the
meaning of Section 1445(f)(3) of the Code.
4.1.16 Separate Lots. Each Individual Property is comprised of one (1) or
more parcels which constitute a separate tax lot or lots and does not
constitute a portion of any other tax lot not a part of such Individual
Property.
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4.1.17 Assessments. There are no pending, or to Borrower's knowledge,
proposed special or other assessments for public improvements or otherwise
affecting any Individual Property, nor are there any contemplated
improvements to any Individual Property that may result in such special or
other assessments.
4.1.18 Enforceability. The Loan Documents are not subject to any right of
rescission, set-off, counterclaim or defense by Borrower, including the
defense of usury, nor would the operation of any of the terms of the Loan
Documents, or the exercise of any right thereunder, render the Loan
Documents unenforceable, and Borrower has not asserted any right of
rescission, set-off, counterclaim or defense with respect thereto.
4.1.19 No Prior Assignment. There are no prior assignments of the Leases
or any portion of the Rents by Borrower or any of its predecessors in
interest, given as collateral security which are presently outstanding.
4.1.20 Insurance. Borrower has obtained and has delivered to Lender
certified copies of all insurance policies reflecting the insurance
coverages, amounts and other requirements set forth in this Agreement. No
claims have been made under any such policy, and no Person, including
Borrower, has done, by act or omission, anything which would impair the
coverage of any such policy.
4.1.21 Use of Property. Each Individual Property is used exclusively for
retail purposes and other appurtenant and related uses.
4.1.22 Certificate of Occupancy; Licenses. Except as to the Properties
described on Schedule VII regarding which the following representation is
made at Borrower's knowledge, all certifications, permits, licenses and
approvals, including without limitation, certificates of completion and
occupancy permits required for the legal use, occupancy and operation of
each Individual Property as a retail shopping center (collectively, the
"Licenses"), have been obtained and are in full force and effect. Borrower
shall keep and maintain all licenses necessary for the operation of each
Individual Property as a retail shopping center. To Borrower's knowledge,
the use being made of each Individual Property is in conformity with the
certificate of occupancy issued for such Individual Property.
4.1.23 Flood Zone. Except as disclosed on Schedule IV, none of the
Improvements on any Individual Property are located in an area as
identified by the Federal Emergency Management Agency as an area having
special flood hazards.
4.1.24 Physical Condition. Except as disclosed in the Physical Conditions
Reports delivered to Lender in connecting with this Loan, to Borrower's
knowledge, each Individual Property, including, without limitation, all
buildings, improvements, parking facilities, sidewalks, storm drainage
systems, roofs, plumbing systems, HVAC systems, fire protection systems,
electrical systems, equipment, elevators, exterior sidings and doors,
landscaping, irrigation systems and all structural components, are in good
condition, order and repair in all material respects; there exists no
structural or other material defects or damages in any
Individual Property,
whether latent or otherwise, and Borrower has not received notice
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from any insurance company or bonding company of any defects or
inadequacies in any Individual Property, or any part thereof, which would
adversely affect the insurability of the same or cause the imposition of
extraordinary premiums or charges thereon or of any termination or
threatened termination of any policy of insurance or bond.
4.1.25 Boundaries. Except as disclosed on Schedule V, all of the
improvements which were included in determining the appraised value of each
Individual Property lie wholly within the boundaries and building
restriction lines of such Individual Property, and no improvements on
adjoining properties encroach upon such Individual Property,
and no easements or other encumbrances upon the applicable Individual
Property encroach upon any of the improvements, so as to affect the value
or marketability of the applicable Individual Property except those which
are insured against by title insurance.
4.1.26 Leases. The Properties are not subject to any Leases other than the
Leases described in Schedule II attached hereto and made a part hereof. No
Person has any possessory interest in any Individual Property or right to
occupy the same except under and pursuant to the provisions of the Leases.
The current Leases are in full force and effect and to Borrower's
knowledge, there are no defaults thereunder by either party and there are
no conditions that, with the passage of time or the giving of notice, or
both, would constitute defaults thereunder. No Rent (including security
deposits) has been paid more than one (1) month in advance of its due date.
All work to be performed by Borrower under each Lease has been performed as
required and has been accepted by the applicable tenant, and any payments,
free rent, partial rent, rebate of rent or other payments, credits,
allowances or abatements required to be given by Borrower to any tenant has
already been received by such tenant. There has been no prior sale,
transfer or assignment, hypothecation or pledge of any Lease or of the
Rents received therein which is outstanding. To Borrower's knowledge,
nontenant listed on Schedule II has assigned its Lease or sublet all or any
portion of the premises demised thereby, no such tenant holds its leased
premises under assignment or sublease, nor does anyone except such tenant
and its employees occupy such leased premises. No tenant under any Lease
has a right or option pursuant to such Lease or otherwise to purchase all
or any part of the leased premises or the building of which the leased
premises are a part. Except as set forth in Schedule II, no tenant under
any Lease has any right or option for additional space in the Improvements
except as set forth in Schedule II. No hazardous wastes or toxic
substances, as defined by applicable federal, state or local statutes,
rules and regulations, have been disposed, stored or treated by any tenant
under any Lease on or about the leased premises nor does Borrower have any
knowledge of any tenant's intention to use its leased premises for any
activity which, directly or indirectly, involves the use, generation,
treatment, storage, disposal or transportation of any petroleum product or
any toxic or hazardous chemical, material, substance or waste, except in
either event, incompliance with applicable federal, state or local statues,
rules and regulations.
4.1.27 Survey. The Survey for each Individual Property delivered to Lender
in connection with this Agreement has been prepared in accordance with the
provisions of Section 3.1.3(c) hereof, and does not fail to reflect any
material matter affecting such Individual Property or the title thereto.
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4.1.28 Loan to Value. The maximum principal amount of the Loan does not
exceed one hundred twenty-five percent (125%) of the fair market value of
the Properties as set forth on the appraisals of the Properties delivered
to Lender.
4.1.29 Filing and Recording Taxes. All transfer taxes, deed stamps,
intangible taxes or other amounts in the nature of transfer taxes required
to be paid by any Person under applicable Legal Requirements currently in
effect in connection with the transfer of the Properties to Borrower have
been paid or are simultaneously being paid. All mortgage, mortgage
recording, stamp, intangible or other similar tax required to be paid by
any Person under applicable Legal Requirements currently in effect in
connection with the execution, delivery, recordation, filing, registration,
perfection or enforcement of any of the Loan Documents, including, without
limitation, the Mortgages, been paid, and, undercurrent Legal Requirements,
each of the Mortgages is enforceable in accordance with their respective
terms by Lender (or any subsequent holder thereof).
4.1.30 Single Purpose Entity/Separateness. Borrower represents, warrants
and covenants as follows:
(a) The purpose for which Borrower is organized is and shall
be limited solely to (I) owning, holding, selling, leasing, transferring,
exchanging, operating and managing the Properties, (ii) entering into this
Loan Agreement with Lender, (iii) refinancing the Properties in connection
with a permitted repayment of the Loan and (iv) transacting any and all
lawful business for which a Borrower may be organized under its
constitutive law that is incident, necessary and appropriate to accomplish
the foregoing.
(b) Borrower does not own and will not own any asset or property other
than (i) the Properties, and (ii) incidental personal property necessary
for and used or to be used in connection with the ownership or operation of
the Properties.
(c) Borrower will not engage in any business other than the ownership,
management and operation of the Properties.
(d) Borrower will not enter into any contract or agreement with any
Affiliate of Borrower, any constituent party of Borrower, any owner of
Borrower, any guarantors of the obligations of Borrower or any Affiliate of
any constituent party, owner or guarantor (collectively, the "Related
Parties"), except upon terms and conditions that are intrinsically fair,
commercially reasonable and substantially similar to those that would be
available on an arms-length basis with third parties not so affiliated with
Borrower or such Related Parties.
(e) Borrower has not incurred and will not incur any Indebtedness other
than (i) the Loan, and (ii) trade and operational debt incurred in the
ordinary course of business with trade creditors (which amount excludes
Taxes and costs incurred in connection with a Casualty and/or Condemnation)
in amounts as are normal and reasonable under the circumstances, provided
such debt is not evidenced by a note
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and is not in excess of sixty (60) days past due and does not exceed
$2,000,000.00 in the aggregate. No Indebtedness other than the Debt may be
secured (senior, subordinate or pari passu) by the Properties.
(f) Borrower has not made and will not make any loans or advances to any
Person and shall not acquire obligations or securities of any Related
Party.
(g) Borrower is and will remain solvent and Borrower will pay its debts and
liabilities (including, as applicable, shared personnel and overhead
expenses) from its assets as the same shall become due.
(h) Borrower has done or caused to be done and will do all things necessary
to observe organizational formalities and preserve its existence, and
Borrower will not, nor will Borrower permit any Related Party to, amend,
modify or otherwise change the partnership certificate, partnership
agreement, articles of incorporation and bylaws, operating agreement, trust
or other organizational documents of Borrower or such Related Party without
the prior written consent of Lender.
(I) Borrower will maintain all of its books, records, financial statements
and bank accounts separate from those of any other Person and Borrower's
assets will not be listed as assets on the financial statement of any other
Person; provided, however, that Borrower's assets may be included in a
consolidated financial statement of its parent companies if inclusion on
such a consolidated statement is required to comply with the
requirements of generally accepted accounting principles ("GAAP"), but only
if (i) such consolidated financial statements shall contain a footnote to
the effect that Borrower's assets are owned by Borrower and that they are
being included on the financial statement of its parent solely to comply
with the requirements of GAAP, and (ii) such assets shall be listed on
Borrower's own separate balance sheet. Borrower will file its own tax
returns; provided, however, that Borrower's assets may be included in a
consolidated tax return of its parent companies if inclusion on such a
consolidated tax return is required to comply with the requirement of GAAP
or any other applicable law. Borrower shall maintain its books, records,
resolutions and agreements as official records.
(j) Neither Borrower nor any Related Party will seek the dissolution,
winding up, liquidation, consolidation or merger in whole or in part, or
the sale of material assets of Borrower.
(k) If Borrower is a limited partnership or a limited liability company, at
least one general partner or member, or if Borrower is a general
partnership at least two general partners (each, an "SPC Party") shall be a
corporation whose sole asset is its interest in Borrower and each such SPC
Party will at all times comply, and will cause Borrower to comply, with
each of the representations, warranties, and covenants contained in this
Section 4.1.30 as if such representation, warranty or covenant was made
directly by such SPC Party. Upon the withdrawal or
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the disassociation of the SPC Party from Borrower, Borrower shall
immediately appoint a new member whose articles of incorporation are
substantially similar to those of the SPC Party and deliver a new
Insolvency Opinion to the Rating Agency or Rating Agencies, as applicable,
with respect to the new SPC Party and its equity owners.
(1) Borrower shall at all times cause there to be at least one duly
appointed member of the board of directors (an "Independent Director") of
Borrower (if a corporation) or of each SPC Party (if Borrower is a limited
partnership or a limited liability company) reasonably satisfactory to
Lender who is not at the time of initial appointment and has not been at
any time during the preceding five (5) years: (i) a stockholder, director,
officer, employee, partner, attorney or counsel of Borrower or such SPC
Party or any Affiliate of either of them; (ii) a customer, supplier or
other Person who derives more than 10% of its purchases or revenues from
its activities with Borrower or such SPC Party or any Affiliate of either
of them; (iii) a Person controlling or under common control with any such
stockholder, partner, customer, supplier or other Person; or (iv) a member
of the immediate family of any such stockholder, director, officer,
employee, partner, customer, supplier or other Person. (As used herein, the
term "control" means the possession, directly or indirectly, of the power
to direct or cause the direction of management, policies or activities of a
Person, whether through ownership of voting securities, by contract or
otherwise.)
(m) Borrower shall not cause or permit the board of directors of an SPC
Party to take any action which, under the terms of any certificate of
incorporation, by-laws or any voting trust agreement with respect to any
common stock, requires the vote of any SPC Party unless at the time of such
action there shall be at least one member who is an Independent Director.
(n) So long as the Loan is outstanding, Borrower and the SPC Party shall
each:
1. at all times hold itself out to the public as a legal entity separate
from any other Person and not identify itself as a division of any other
person or entity;
2. not commingle its assets with assets of any other Person and hold
all of its assets in its own name;
3. conduct its business in its own name;
4. pay its own liabilities and expenses only out of its own funds;
5. maintain an arm's length relationship with its Affiliates and enter
into transactions with Affiliates only on a commercially reasonable basis;
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6. pay the salary of its own employees, if any, from its own funds;
7. not hold out its credit as being available to satisfy the obligations
of others;
8. allocate fairly and reasonably any overhead for shared office space
and services performed by any employees of an Affiliate;
9. use separate stationery, invoices and checks bearing its own name;
10. not pledge its assets for the benefit of any other Person;
11. correct any known misunderstanding regarding its separate identity;
12. maintain adequate capital and a sufficient number of employees in
light of its contemplated business operations;
13. not guarantee any obligation of any Person, including any Affiliate;
14. not make or permit to remain outstanding any loan or advance to, or
own or acquire any stock or securities of, any Person;
15. form, acquire or hold any subsidiary (whether corporate; partnership,
limited liability company or other).
(o) Borrower warrants and represents that it has reviewed the Insolvency
Opinion and all assumptions contained therein are true and that it shall
conduct its business so that the assumptions made with respect to Borrower
and any other person in the Insolvency Opinion shall remain true and
correct in all respects.
4.1.31 Management Agreement. The Management Agreement is in full force and
effect and, to Borrower's knowledge, there is no default thereunder by any
party thereto and no event has occurred that, with the passage of time
and/or the giving of notice would constitute a default thereunder.
4.1.32 Illegal Activity. To Borrower's knowledge, no portion of any
Individual Property has been or will be purchased with proceeds of any
illegal activity.
4.1.33 No Change in Facts or Circumstances: Disclosure. All information
submitted by Borrower to Lender and in all financial statements, rent
rolls, reports, certificates
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and other documents submitted in connection with the Loan or in
satisfaction of the terms thereof and all statements of fact made by
Borrower in this Agreement or in any other Loan Document, are accurate,
complete and correct in all material respects. There has been no material
adverse change in any condition, fact, circumstance or event that would
make any such information inaccurate, incomplete or otherwise misleading in
any material respect or that otherwise materially and adversely affects or
might materially and adversely affect the Properties or the business
operations or the financial condition of Borrower. Borrower has disclosed
to Lender all material facts and has not failed to disclose any material
fact that could cause any representation or warranty made herein to be
materially misleading.
Section 4.2 Survival of Representations.
Borrower agrees that all of the representations and warranties of Borrower
set forth in Section 4.1 and elsewhere in this Agreement and in the other
Loan Documents shall survive for so long as any amount remains owing to
Lender under this Agreement or any of the other Loan Documents by Borrower.
All representations, warranties, covenants and agreements made in this
Agreement or in the other Loan Documents by Borrower shall be deemed to
have been relied upon by Lender notwithstanding any investigation
heretofore or hereafter made by Lender or on its behalf.
V. BORROWER COVENANTS
Section 5.1 Affirmative Covenants.
From the date hereof and until payment and performance in full of all
obligations of Borrower under the Loan Documents or the earlier release of
the Liens of all Mortgages encumbering the Properties (and all related
obligations) in accordance with the terms of this Agreement and the other
Loan Documents, Borrower hereby covenants and agrees with Lender that:
5.1.1 Existence; Compliance with Legal Requirements: Insurance. Borrower
shall do or cause to be done all things necessary to preserve, renew and
keep in full force and effect its existence, rights, licenses, permits and
franchises and comply with all Legal Requirements applicable to it and the
Properties. There shall never be committed by Borrower or any other Person
in occupancy of or involved with the operation or use of the Properties any
act or omission affording the federal government or any state or local
government the right of forfeiture as against any Individual Property or
any part thereof or any monies paid in performance of Borrower's
obligations under any of the Loan Documents. Borrower hereby covenants and
agrees not to commit, permit or suffer to exist any act or omission
affording such right of forfeiture. Borrower shall at all times maintain,
preserve and protect all franchises and trade names and preserve all the
remainder of its property used or useful in the conduct of its business and
shall keep the Properties in good working order and repair, and from time
to time make, or cause to be made, all reasonably necessary repairs,
renewals, replacements, betterments and improvements thereto, all as more
fully provided in the Mortgages. Borrower shall keep the Properties insured
at all times by financially sound
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and reputable insurers, to such extent and against such risks, and maintain
liability and such other insurance, as is more fully provided in this
Agreement.
5.1.2 Taxes and Other Charges. Borrower shall pay or caused to be paid all
Taxes and Other Charges now or hereafter levied or assessed or imposed
against the Properties or any part thereof as the same become due and
payable; provided, however, Borrower's obligation to directly pay to the
appropriate taxing authority Taxes shall be suspended for so long as
Borrower complies with the terms and provisions of Section 7.3 hereof.
Borrower will deliver to Lender receipts for payment or other evidence
satisfactory to Lender that the Taxes and Other Charges have been so paid
or are not then delinquent no later than ten (10) days prior to the date on
which the Taxes and/or Other Charges would otherwise be delinquent if not
paid. Borrower shall furnish to Lender receipts for the payment of the
Taxes and the Other Charges prior to the date the same shall become
delinquent (provided, however, that Borrower is not required to furnish
such receipts for payment of Taxes in the event that such Taxes have been
paid by Lender pursuant to Section 7.3 hereof). Borrower shall not suffer
and shall promptly cause to be paid and discharged any Lien or charge
whatsoever which may be or become a Lien or charge against the Properties,
and shall promptly pay for all utility services provided to the Properties.
After prior written notice to Lender, Borrower, at its own expense, may
contest by appropriate legal proceeding, promptly initiated and conducted
in good faith and with due diligence, the amount or validity or application
in whole or in part of any Taxes or Other Charges, provided that (i)
Borrower is permitted to do so under the provisions of any mortgage or deed
of trust superior in lien to the applicable Mortgage; (ii) such proceeding
shall be permitted under and be conducted in accordance with the provisions
of any other instrument to which Borrower is subject and shall not
constitute a default thereunder and such proceeding shall be conducted in
accordance with all applicable statutes, laws and ordinances; (iii) no
Individual Property nor any part thereof or interest therein will be in
danger of being sold, forfeited, terminated, canceled or lost; (iv)
Borrower shall promptly upon final determination thereof pay the amount of
any such Taxes or Other Charges, together with all costs, interest and
penalties which may be payable in connection therewith; (v) such proceeding
shall suspend the collection of such contested Taxes or Other Charges from
the applicable Individual Property; and (vi) Borrower shall furnish such
security as may be required in the proceeding, or as may be reasonably
requested by Lender, to insure the payment of any such Taxes or Other
Charges, together with all interest and penalties thereon. Lender may pay
over any such cash deposit or part thereof held by Lender to the claimant
entitled thereto at any time when, in the reasonable judgment of Lender,
the entitlement of such claimant is established.
5.1.3 Litigation. Borrower shall give prompt written notice to Lender of
any litigation or governmental proceedings pending or threatened against
Borrower which might materially adversely affect Borrower's condition
(financial or otherwise) or business or any Individual Property.
5.1.4 Access to Properties. Borrower shall permit agents, representatives
and employees of Lender to inspect the Properties or any part thereof at
reasonable hours upon reasonable advance notice.
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5.1.5 Notice of Default. Borrower shall promptly advise Lender of any
material adverse change in Borrower's condition, financial or otherwise, or
of the occurrence of any Default or Event of Default of which Borrower has
knowledge.
5.1.6 Cooperate in Legal Proceedings. Borrower shall cooperate fully with
Lender with respect to any proceedings before any court, board or other
Governmental Authority which may in any way affect the rights of Lender
hereunder or any rights obtained by Lender under any of the other Loan
Documents and, in connection therewith, permit Lender, at its election, to
participate in any such proceedings.
5.1.7 Perform Loan Documents. Borrower shall observe, perform and satisfy
all the terms, provisions, covenants and conditions of, and shall pay when
due all costs, fees and expenses to the extent required under the Loan
Documents executed and delivered by, or applicable to, Borrower.
5.1.8 Insurance Benefits. Borrower shall cooperate with Lender in obtaining
for Lender the benefits of any Insurance Proceeds lawfully or equitably
payable in connection with any Individual Property, and Lender shall be
reimbursed for any expenses incurred in connection therewith (including
attorneys' fees and disbursements, and the payment by Borrower of the
expense of an appraisal on behalf of Lender in case of a fire or other
casualty affecting any Individual Property or any part thereof) out of such
Insurance Proceeds.
5.1.9 Further Assurances. Borrower shall, at Borrower's sole cost and
expense:
(a) furnish to Lender all instruments, documents, boundary surveys, footing
or foundation surveys, certificates, plans and specifications, appraisals,
title and other insurance reports and agreements, and each and every other
document, certificate, agreement and instrument required to be furnished by
Borrower pursuant to the terms of the Loan Documents or reasonably
requested by Lender in connection therewith;
(b) execute and deliver to Lender such documents, instruments,
certificates, assignments and other writings, and do such other acts
necessary or desirable, to evidence, preserve and/or protect the collateral
at any time securing or intended to secure the obligations of Borrower
under the Loan Documents, as Lender may reasonably require; and
(c) do and execute all and such further lawful and reasonable acts,
conveyances and assurances for the better and more effective carrying out
of the intents and purposes of this Agreement and the other Loan Documents,
as Lender shall reasonably require from time to time.
5.1.10 Supplemental Mortgage Affidavits. As of the date hereof, Borrower
represents that it has paid all state, county and municipal recording and
all other taxes imposed upon the execution and recordation of the
Mortgages. If at any time Lender reasonably determines, based on applicable
law, that Lender is not being afforded the maximum amount of security
available from any one or more of the Properties as a direct or indirect
result of
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applicable taxes not having been paid with respect to any Individual
Property, Borrower agrees that Borrower will execute, acknowledge and
deliver to Lender, immediately upon Lender's request, supplemental
affidavits increasing the amount of the Debt attributable to any such
Individual Property (as set forth as the Release Amount on Schedule I
annexed hereto) for which all applicable taxes have been paid to an amount
reasonably determined by Lender to be equal to the lesser of (a) the
greater of the fair market value of the applicable Individual Property (i)
as of the date hereof and (ii) as of the date such supplemental affidavits
are to be delivered to Lender, and (b) the amount of the Debt attributable
to any such Individual Property (as set forth as the Release Amount on
Schedule I annexed hereto), and Borrower shall, on demand, pay any
additional taxes.
5.1.11 Financial Reporting.
(a) Borrower will keep and maintain or will cause to be kept and maintained
on a Fiscal Year basis, in accordance with GAAP (or such other accounting
basis acceptable to Lender), proper and accurate books, records and
accounts reflecting all of the financial affairs of Borrower and all items
of income and expense in connection with the operation on an individual
basis of the Properties. Lender shall have the right from time to time at
all times during normal business hours upon reasonable notice to examine
such books, records and accounts at the office of Borrower or other Person
maintaining such books, records and accounts and to make such copies or
extracts thereof as Lender shall desire. After the occurrence of an Event
of Default, Borrower shall pay any costs and expenses incurred by Lender to
examine Borrower's accounting records with respect to the Properties, as
Lender shall determine to be necessary or appropriate in the protection of
Lender's interest.
(b) Borrower will furnish to Lender annually, within ninety (90) days
following the end of each Fiscal Year of Borrower, a complete copy of
Borrower's annual financial statements audited by a "Big Five" accounting
firm or other independent certified public accountant acceptable to Lender
in accordance with GAAP (or such other accounting basis acceptable to
Lender) covering the Properties on a combined basis as well as each
Individual Property for such Fiscal Year and containing statements of
profit and loss for Borrower and the Properties and a balance sheet for
Borrower. Such statements shall set forth the financial condition and the
results of operations for the Properties for such Fiscal Year, and shall
include, but not be limited to, amounts representing annual Net Cash Flow,
Net Operating Income, Gross Income from Operations and Operating Expenses.
Borrower's annual financial statements shall be accompanied by (i) a
comparison of the budgeted income and expenses and the actual income and
expenses for the prior Fiscal Year, (ii) a certificate executed by the
chief financial officer of Borrower or the member of Borrower, as
applicable, stating that each such annual financial statement presents
fairly the financial condition and the results of operations of Borrower
and the Properties being reported upon and has been prepared in accordance
with GAAP, (iii) an unqualified opinion of a "Big Five" accounting firm or
other independent certified public accountant reasonably acceptable to
Lender, (iv) a certified rent roll containing current rent, lease
expiration dates and the square footage occupied by each tenant; (v) a
schedule audited by such independent certified public accountant
reconciling Net Operating Income to Net Cash Flow (the "Net Cash Flow
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<PAGE>
Schedule"), which shall itemize all adjustments made to Net Operating
Income to arrive at Net Cash Flow deemed material by such independent
certified public accountant. Together with Borrower's annual financial
statements, Borrower shall furnish to Lender an Officer's Certificate
certifying as of the date thereof whether there exists an event or
circumstance which constitutes a Default or Event of Default under the Loan
Documents executed and delivered by, or applicable to, Borrower, and if
such Default or Event of Default exists, the nature thereof, the period of
time it has existed and the action then being taken to remedy the same.
(c) Borrower will furnish, or cause to be furnished, to Lender on or before
twenty (20) days after the end of each calendar quarterly the following
items, accompanied by a certificate of the chief financial officer of
Borrower or the member of Borrower, as applicable, stating that such items
are true, correct, accurate, and complete and fairly present the financial
condition and results of the operations of Borrower and the Properties on a
combined basis as well as each Individual Property (subject to normal year-
end adjustments) as applicable: (i) a rent roll for the subject month
accompanied by an Officer's Certificate with respect thereto; (ii)
quarterly and year-to-date operating statements (including Capital
Expenditures) prepared for each calendar quarter, noting Net Operating
Income, Gross Income from Operations, and Operating Expenses (not including
any contributions to the Replacement Reserve Fund and the Rollover Reserve
Fund), and other information necessary and sufficient to fairly represent
the financial position and results of operation of the Properties during
such calendar month, and containing a comparison of budgeted income and
expenses and the actual income and expenses together with a detailed
explanation of any variances of five percent (5%) or more between budgeted
and actual amounts for such periods, all in form satisfactory to Lender;
(iii) a calculation reflecting the annual Debt Service Coverage Ratio for
the immediately preceding twelve (12) month period as of the last day of
such month accompanied by an Officer's Certificate with respect thereto;
and (iv) a Net Cash Flow Schedule. In addition, such certificate shall also
be accompanied by a certificate of the chief financial officer of Borrower
or the member of Borrower stating that the representations and warranties
of Borrower set forth in Section 4.1.30(iv) are true and correct as of the
date of such certificate.
(d) For the partial year period commencing on the date hereof, and for each
Fiscal Year thereafter, Borrower shall submit to Lender an Annual Budget
not later than thirty (30) days after the commencement of such period or
Fiscal Year in form reasonably satisfactory to Lender. The Annual Budget
submitted for the Fiscal Year in which the Anticipated Repayment Date
occurs, and for each Fiscal Year thereafter, shall be subject to Lender's
written approval (each such Annual Budget, an "Approved Annual Budget"). In
the event that Lender objects to a proposed Annual Budget submitted by
Borrower, Lender shall advise Borrower of such objections within fifteen
(15) days after receipt thereof (and deliver to Borrower a reasonably
detailed description of such objections) and Borrower shall promptly revise
such Annual Budget and resubmit the same to Lender. Lender shall advise
Borrower of any objections to such revised Annual Budget within ten (10)
days after receipt thereof (and deliver to Borrower a reasonably detailed
description of such objections) and Borrower shall promptly revise the same
in accordance with the process described in this
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subsection until Lender approves the Annual Budget. Until such time that
Lender approves a proposed Annual Budget, the most recently Approved Annual
Budget shall apply; provided that, such Approved Annual Budget shall be
adjusted to reflect actual increases in real estate taxes, insurance
premiums and utilities expenses.
(e) In the event that, after the Anticipated Repayment Date, Borrower must
incur an extraordinary operating expense or capital expense not set forth
in the Approved Annual Budget (each an "Extraordinary Expense"), then
Borrower shall promptly deliver to Lender a reasonably detailed explanation
of such proposed Extraordinary Expense for Lender's approval.
(f) Borrower shall furnish to Lender, within ten (10) Business Days after
request (or as soon thereafter as may be reasonably possible), such further
detailed information with respect to the operation of any Individual
Property and the financial affairs of Borrower as may be reasonably
requested by Lender.
(g) Any reports, statements or other information required to be delivered
under this Agreement shall be delivered (i) in paper form, (ii) on a
diskette, and (iii) if requested by Lender and within the capabilities of
Borrower's data systems without change or modification thereto, in
electronic form and prepared using a Microsoft Word for Windows or
WordPerfect for Windows files (which files may be prepared using a
spreadsheet program and saved as word processing files).
5.1.12 Business and Operations. Borrower will continue to engage in the
businesses presently conducted by it as and to the extent the same are
necessary for the ownership, maintenance, management and operation of the
Properties. Borrower will qualify to do business and will remain in good
standing under the laws of each jurisdiction as and to the extent the same
are required for the ownership, maintenance, management and operation of
the Properties.
5.1.13 Title to the Properties. Borrower will warrant and defend (a) the
title to each Individual Property and every part thereof, subject only to
Liens permitted hereunder (including Permitted Encumbrances) and (b) the
validity and priority of the Liens of the Mortgages and the Assignments of
Leases on the Properties, subject only to Liens permitted hereunder
(including Permitted Encumbrances), in each case against the claims of all
Persons whomsoever. Borrower shall reimburse Lender for any losses, costs,
damages or expenses (including reasonable attorneys' fees and court costs)
incurred by Lender if an interest in any Individual Property, other than as
permitted hereunder, is claimed by another Person.
5.1.14 Costs of Enforcement. In the event (a) that any Mortgage encumbering
any Individual Property is foreclosed in whole or in part or that any such
Mortgage is put into the hands of an attorney for collection, suit, action
or foreclosure, (b) of the foreclosure of any mortgage prior to or
subsequent to any Mortgage encumbering any Individual Property in which
proceeding Lender is made a party, or (c) of the bankruptcy, insolvency,
rehabilitation or other similar proceeding in respect of Borrower or any of
its constituent Persons or an
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assignment by Borrower or any of its constituent Persons for the benefit of
its creditors, Borrower, its successors or assigns, shall be chargeable
with and agrees to pay all costs of collection and defense, including
attorneys' fees and costs, incurred by Lender or Borrower in connection
therewith and in connection with any appellate proceeding or post-judgment
action involved therein, together with all required service or use taxes.
5.1.15 Estoppel Statement. (a) After request by Lender, Borrower shall
within ten (10) days furnish Lender with a statement, duly acknowledged and
certified, setting forth (i) the amount of the original principal amount of
the Note, (ii) the unpaid principal amount of the Note, (iii) the
Applicable Interest Rate of the Note, (iv) the date installments of
interest and/or principal were last paid, (v) any offsets or defenses to
the payment of the Debt, if any, and (vi) that the Note, this Agreement,
the Mortgages and the other Loan Documents are valid, legal and binding
obligations and have not been modified or if modified, giving particulars
of such modification.
(b) Borrower shall use commercially reasonable efforts to deliver to Lender
upon request, tenant estoppel certificates from each commercial tenant
leasing space at the Properties in form and substance reasonably
satisfactory to Lender provided that Borrower shall not be required to
deliver such certificates more frequently than one (1) time in any calendar
year.
(c) Within thirty (30) days of request by Borrower, Lender shall deliver to
Borrower a statement setting forth the items described at (a)(i),(ii),
(iii) and (iv) of this Section 5.1. 15.
5.1.16 Loan Proceeds. Borrower shall use the proceeds of the Loan received
by it on the Closing Date only for the purposes set forth in Section 2.1.4.
5.1.17 Performance by Borrower. Borrower shall in a timely manner observe,
perform and fulfill each and every covenant,
term and provision of each Loan Document executed and delivered by, or
applicable to, Borrower, and shall not enter into or otherwise suffer or
permit any amendment, waiver, supplement, termination or other modification
of any Loan Document executed and delivered by, or applicable to, Borrower
without the prior written consent of Lender.
5.1.18 Confirmation of Representations. Borrower shall deliver, in
connection with any Securitization, (a) one or more Officer's Certificates
certifying as to the accuracy of all representations made by Borrower in
the Loan Documents as of the date of the closing of such Securitization,
and (b) certificates of the relevant Governmental Authorities in all
relevant jurisdictions indicating the good standing and qualification of
Borrower and its member as of the date of the Securitization.
5.1.19 No Joint Assessment. Borrower shall not suffer, permit or initiate
the joint assessment of any Individual Property (a) with any other real
property constituting a tax lot separate from such Individual Property, and
(b)which constitutes real property with any portion of such Individual
Property which may be deemed to constitute personal property, or
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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
such real property portion of the Individual Property.
5.1.20 I.easing Matters. Any Leases with respect to an Individual Property
written after the date hereof, for more than 10,000 square feet shall be
approved by Lender, which approval shall not be unreasonably withheld,
conditioned or delayed more than fifteen (15) days after request for
approval thereof has been made by Borrower. In the event that Lender fails
to respond to a request for approval made by Borrower for more than fifteen
(15) days after receipt thereof, the Lease which is the subject of said
request shall be deemed approved. Upon request, Borrower shall furnish
Lender with executed copies of all Leases. All renewals of Leases and all
proposed Leases shall provide for rental rates comparable to existing local
market rates. All proposed Leases shall be on commercially reasonable terms
and shall not contain any terms which would materially affect Lender's
rights under the Loan Documents. All Leases executed after the date hereof
shall provide that they are subordinate to the Mortgage encumbering the
applicable Individual Property and that the lessee agrees to attorn to
Lender or any purchaser at a sale by foreclosure or power of sale. Borrower
(i) shall observe and perform the obligations imposed upon the lessor under
the Leases in a commercially reasonable manner; (ii) shall enforce and may
amend or terminate the terms, covenants and conditions contained in the
Leases upon the part of the lessee thereunder to be observed or performed
in a commercially reasonable manner and in a manner not to impair the value
of the Individual Property involved except that no termination by Borrower
or acceptance of surrender by a tenant of any Leases shall be permitted
unless by reason of a tenant default and then only in a commercially
reasonable manner to preserve and protect the Individual Property provided,
however, that no such termination or surrender of any Lease covering more
than 10,000 square feet will be permitted without the written consent of
Lender which consent shall not be unreasonably withheld, conditioned or
delayed more than fifteen (15) days after request thereof has been made by
Borrower; (iii) shall not collect any of the rents more than one (1) month
in advance (other than security deposits); (iv)shall not execute any other
assignment of lessor's interest in the Leases or the Rents (except as
contemplated by the Loan Documents); (v) shall not alter, modify or change
the terms of the Leases in a manner inconsistent with the provisions of the
Loan Documents; and (vi) shall execute and deliver at the request of Lender
all such further assurances, confirmations and assignments in connection
with the Leases as Lender shall from time to time reasonably require.
Notwithstanding the foregoing, Borrower may, without the prior written
consent of Lender, terminate any Lease which demises less than 10,000
rentable square feet under any of the following circumstances: (i) the
tenant under said Lease is in default beyond any applicable grace and cure
period, and Borrower has the right to terminate such Lease; (ii) such
termination is permitted by the terms of the Lease in question and Borrower
has secured an obligation from a third party to lease the space occupied by
the permit under the Lease to be terminated at a rental equal to or higher
than the rental due under the Lease to be terminated; and (iii) if the
tenant under the Lease to be terminated, has executed a right under said
Lease to terminate its lease upon payment of a termination fee to Borrower,
and has in fact terminated its lease and paid said fee, Borrower may accept
said termination.
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<PAGE>
5.1.21 Alterations. Borrower shall obtain Lender's prior written
consent to any alterations to any Improvements, which consent shall not be
unreasonably withheld or delayed except with respect to alterations that
may have a material adverse effect on Borrower's financial condition, the
value of the applicable Individual Property or the Net Operating Income.
Notwithstanding the foregoing, Lender's consent shall not be required in
connection with any alterations that will not have a material adverse
effect on Borrower's financial condition, the value of the applicable
Individual Property or the Net Operating Income, provided that such
alterations are made in connection with (a) tenant improvement work
performed pursuant to the terms of any Lease executed on or before the date
hereof, (b) tenant improvement work performed pursuant to the terms and
provisions of a Lease and not adversely affecting any structural component
of any Improvements, any utility or HVAC system contained in any
Improvements or the exterior of any building constituting a part of any
Improvements, (c) alterations performed in connection with the restoration
of an Individual Property after the occurrence of a casualty in accordance
with the terms and provisions of this Agreement or (d) any alteration which
costs less than $100,000 in the aggregate for all components thereof which
constitute such alteration. If the total unpaid amounts due and payable
with respect to alterations to the Improvements at any Individual Property
(other than such amounts to be paid or reimbursed by tenants under the
Leases) shall at any time exceed five (5%) percent of the Release Amount
(the "Threshold Amount"),Borrower shall promptly deliver to Lender as
security for the payment of such amounts and as additional security for
Borrower's obligations under the Loan Documents any of the following: (A)
cash, (B) U.S. Obligations, (C) other securities having a rating acceptable
to Lender and that the applicable Rating Agencies have confirmed in writing
will not, in and of itself, result in a downgrade, withdrawal or
qualification of the initial, or, if higher, then current ratings assigned
in connection with any Securitization, or (D) a completion bond or letter
of credit issued by a financial institution having a rating by Standard &
Poor's Ratings Group of not less than A-1 + if the term of such bond or
letter of credit is no longer than three (3) months or, if such term is in
excess of three (3) months, issued by a financial institution having a
rating that is acceptable to Lender and that the applicable Rating Agencies
have confirmed in writing will not, in and of itself, result in a down
grade, withdrawal or qualification of the initial, or, if higher, then
current ratings assigned in connection with any Securitization. Such
security shall be in an amount equal to the excess of the total unpaid
amounts with respect to alterations to the Improvements on the applicable
Individual Property (other than such amounts to be paid or reimbursed by
tenants under the Leases) over the Threshold Amount and, if cash, may be
applied from time to time, at the option of Borrower, to pay for such
alterations. At the option of Lender, following the occurrence of an Event
of Default, Lender may terminate any of the alterations and use the deposit
to restore the applicable Individual Property to the extent necessary to
prevent any material adverse effect on the value of such Individual
Property.
5.1.22 Principal Place of Business. Borrower shall not change its principal
place of business set forth on the first page of this Agreement without
first giving Lender thirty (30) days prior written notice.
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5.1.23 O&M Agreement. Borrower will maintain in conformity with all
applicable laws, rules and regulations any asbestos-containing materials
located in any of the Properties and will upon fifteen (15) days written
request of Lender, execute and deliver to Lender the O&M Agreement.
5.1.24 Other Agreements. Borrower will enforce and preserve all of its
rights, remedies, causes of action under that certain agreement regarding
the Property known as Western Howard Shopping Center with Mobil Oil
Corporation regarding potential site contamination.
Section 5.2 Negative Covenants.
From the date hereof until payment and performance in full of all
obligations of Borrower under the Loan Documents or the earlier release of
the Liens of all Mortgages encumbering the Properties in accordance with
the terms of this Agreement and the other Loan Documents, Borrower
covenants and agrees with Lender that it will not do, directly or
indirectly, any of the following:
5.2.1 Operation of Property. Borrower shall not, without the prior consent
of Lender, terminate the Management Agreement or otherwise replace the
Manager or enter into any other management agreement with respect to any
Individual Property unless the Manager is in default thereunder beyond any
applicable grace or cure period, in which event no consent by Lender shall
be required. Lender agrees that its consent will not be unreasonably
withheld, delayed or conditioned provided that the Person chosen by
Borrower as there placement Manager is a Qualifying Manager and provided
further that Borrower shall deliver an acceptable non-consolidation opinion
covering such replacement Manager if such Person was not covered by a prior
non-consolidation delivered to Lender.
5.2.2 Liens Borrower shall not, without the prior written consent of
Lender, create, incur, assume or suffer to exist any Lien on any portion of
any Individual Property or permit any such action to be taken, except:
(I) Permitted Encumbrances;
(ii) Liens created by or permitted pursuant to the Loan Documents; and
(iii) Liens for Taxes or Other Charges not yet due.
5.2.3 Dissolution. Borrower shall not (a) engage in any dissolution,
liquidation or consolidation or merger with or into any other business
entity, (b) engage in any business activity not related to the ownership
and operation of the Properties, (c) transfer, lease or sell, in one
transaction or any combination of transactions, the assets or all or
substantially all of the properties or assets of Borrower except to the
extent permitted by the Loan Documents, (d) modify, amend, waive or
terminate its organizational documents or its qualification and good
standing in any jurisdiction or (e) cause the SPC Party to (i) dissolve,
wind up or liquidate or take any action, or omit to take an action, as a
result of which the SPC
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Party would be dissolved, wound up or liquidated in whole or in part, or
(ii) amend, modify, waive or terminate the certificate of incorporation or
bylaws of the SPC Party, in each case, without obtaining the prior written
consent of Lender or Lender's designee.
5.2.4 Change In Business. Borrower shall not enter into any line of
business other than the ownership and operation of the Properties, or make
any material change in the scope or nature of its business objectives,
purposes or operations, or undertake or participate in activities other
than the continuance of its present business.
5.2.5 Debt Cancellation. Borrower shall not cancel or otherwise forgive or
release any claim or debt (other than termination of Leases in accordance
herewith) owed to Borrower by any Person, except for adequate consideration
and in the ordinary course of Borrower's business.
5.2.6 Affiliate Transactions. Borrower shall not enter into, or be a party
to, any transaction with an Affiliate of Borrower or any of the partners of
Borrower except in the ordinary course of business and on terms which are
fully disclosed to Lender in advance and are no less favorable to Borrower
or such Affiliate than would be obtained in a comparable arm's-length
transaction with an unrelated third party. Lender hereby acknowledges
disclosure of the agreements described on Schedule VI between Borrower and
an Affiliate of Borrower.
5.2.7 Zoning. Borrower shall not initiate or consent to any zoning
reclassification of any portion of any Individual Property or seek any
variance under any existing zoning ordinance or use or permit the use of
any portion of any Individual Property in any manner that could result in
such use becoming a non-conforming use under any zoning ordinance or any
other applicable land use law, rule or regulation, without the prior
consent of Lender.
5.2.8 Assets. Borrower shall not purchase or own any properties other than
the Properties.
5.2.9 Debt. Borrower shall not create, incur or assume any Indebtedness
other than the Debt except to the extent expressly permitted hereby.
5.2.10 No Joint Assessment. Borrower shall not suffer, permit or initiate
the joint assessment of any Individual Property with (a) any other real
property constituting a tax lot separate from such Individual Property, or
(b) any portion of such Individual 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 such Individual Property.
5.2.11 Principal Place of Business. Borrower shall not change its principal
place of business set forth on the first page of this Agreement without
first giving Lender thirty (30) days prior written notice.
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5.2.12 ERISA. (a) Borrower shall not engage in any transaction which would
cause any obligation, or action taken or to be taken, hereunder (or the
exercise by Lender of any of its rights under the Note, this Agreement or
the other Loan Documents) to be a non-exempt (under a statutory or
administrative class exemption) prohibited transaction under ERISA.
(b) Borrower further covenants and agrees to deliver to Lender such
certifications or other evidence from time to time throughout the term of
the Loan, as requested by Lender in its sole discretion, that (A) Borrower
is not and does not maintain an "employee benefit plan" as defined in
Section 3(3) of ERISA, which is subject to Title I of ERISA, or a
"governmental plan" within the meaning of Section 3(3) of ERISA; (B)
Borrower is not subject to state statutes regulating investments and
fiduciary obligations with respect to governmental plans; and (C) one or
more of the following circumstances is true:
(i) Equity interests in Borrower are publicly offered securities, within
the meaning of 29 C.F.R. Section 2510.3-101(b)(2);
(ii) Less than twenty-five percent (25%) of each outstanding class of
equity interests in Borrower are held by "benefit plan investors" within
the meaning of 29 C.F.R. Section 2510.3-101(f)(2); or
(iii) Borrower qualifies as an "operating company" or a "real estate
operating Company" within the meaning of 29 C.F.R. Section 2510.3-101(c) or
(e).
5.2.13 Transfers. Unless such action is permitted by the provisions of this
Section 5.2.13, Borrower will not (i) sell, assign, convey, transfer or
otherwise dispose of legal or beneficial interests in all or any of the
Properties or any part thereof, (ii) permit any owner, directly or
indirectly, of a beneficial ownership interest in the Properties, to
transfer such interest, whether by transfer of stock or other beneficial
interest in Borrower or any entity, or otherwise, (iii) incur Indebtedness,
(iv) mortgage, hypothecate or otherwise encumber or grant a security
interest in all or any of the Properties or any part thereof, (v) sell,
assign, convey, transfer, mortgage, encumber, grant a security interest in,
or otherwise dispose of any legal or beneficial ownership interest in
Borrower, or permit any owner of a legal or beneficial interest in Borrower
to do the same, or (vi) file a declaration of condominium with respect to
the Properties (any of the foregoing transactions, a "Transfer").
(a) Lender shall not unreasonably withhold its consent to a Transfer all
of the Properties or any part thereof provided that the following
conditions are satisfied:
(1) all of the Properties shall be beneficially owned by a Single Purpose
Entity which at the time of such transfer will be in compliance with the
covenants contained in Section 5.1.1 and the representations contained in
4.1.30 hereof and which has assumed in writing (subject to the terms of
Section 9.4 hereof) and agreed to comply with all the terms, covenants and
conditions set forth in this Loan Agreement and the other Loan
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Documents, expressly including the covenants contained in
Section 5.1.1 and the representations contained in 4.1.30 hereof;
(2) such Single Purpose Entity shall be, or shall be "controlled" by, the
REIT, The Inland Group, Inc. or a wholly-owned subsidiary of The Inland
Group, Inc. ("control" meaning, for purposes of this clause (2) and Section
5.2.13), primary responsibility to make all material decisions with respect
to the operation, management, financing and disposition of the Property,
directly or indirectly, whether through ownership of voting securities or
other beneficial interests, by contract or otherwise, rather than a
beneficial ownership requirements, and without being compromised by the
fact that responsibility for such day to-day operating and management
functions as are ordinarily handled by a property manager or leasing
activities have been delegated by such controlling Person pursuant to an
agreement in writing); provided, however, that in the event of a
Securitization, the requirements of this paragraph (2) shall not apply to
the extent that the Rating Agencies confirm in writing that non-compliance
with such requirements will not cause a downgrading, withdrawal or
qualification of the then current rating of any securities issued pursuant
to such Securitization.
(3) if Manager does not act as manager of the Properties, then the manager
of the Properties must be a Qualifying Manager;
(4) no Event of Default shall have occurred and be continuing;
(5) Borrower has caused counsel to render a non-consolidation opinion
which may be relied upon by the holder of the Note, the Ratings Agencies
and their respective counsel, agents and representatives with respect to
the proposed transactions, including the transferee, which opinion shall be
reasonably acceptable to Lender; and
(6) Borrower shall have paid the reasonable and customary third-party
expenses (including attorney's fees and disbursements) actually incurred by
Lender in connection with such Transfer.
(b) Notwithstanding anything herein to the contrary, so long as Inland Real
Estate LB I Corp., a Delaware corporation (the member of Borrower),
continues to be wholly owned, directly or indirectly, by the REIT and
Borrower continues to own the Property, the sale, exchange, assignment,
conveyance, transfer, encumbrance or issuance of, or grant of a security
interest in, publicly registered securities issued by and representing
interests with respect to the REIT shall not be deemed a Transfer for
purposes of this Section 5.2.13,
(c) Lender shall not unreasonably withhold its consent to Transfers of
direct or indirect beneficial ownership interests in Borrower so long as
the Rating Agency confirms in writing that such proposed transaction will
not cause a downgrading, withdrawal or
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qualification of the then current rating of the securities issued pursuant
to the Securitization and provided, however, any Transfer of more than a
49% director or indirect interest in Borrower shall be continued upon
Borrower delivering to Lender an acceptable non-consolidation opinion
concerning Borrower, the new transferee and their respective owners.
(d) Borrower without the consent of Lender may grant easements,
restrictions, covenants, reservations and rights of way in the ordinary
course of business for water and sewer lines, telephone and telegraph
lines, electric lines and other utilities or for other similar purposes,
provided that no transfer, conveyance or encumbrance shall materially
impair the utility and operation of the Property or materially adversely
affect the value of the applicable Individual Property or the Net Operating
Income of the applicable Individual Property. If Borrower shall receive any
consideration in connection with any of said described transfers or
conveyances, Borrower shall have the right to use any such proceeds in
connection with any alterations performed in connection therewith, or
required thereby. In connection with any transfer, conveyance or
encumbrance permitted above, the Lender shall execute and deliver any
instrument reasonably necessary or appropriate to evidence its consent to
said action or to subordinate the Lien of the Mortgage to such easements,
restrictions, covenants, reservations and rights of way or other similar
grants upon receipt by the Lender of: (A) a copy of the instrument of
transfer; and (B) an Officer's Certificate stating with respect to any
transfer described above, that such transfer does not materially impair the
utility and operation of the applicable Individual Property or materially
reduce the value of the applicable Individual Property or the Net Operating
Income of the applicable Individual Property.
VI. INSURANCE; CASUALTY; CONDEMNATION: REQUIRED REPAIRS
Section 6.1 Insurance.
(a) Borrower shall obtain and maintain, or cause to be maintained,
insurance for Borrower and the Properties providing at least the following
coverages:
(i) comprehensive all risk insurance on the Improvements and the Personal
Property, including contingent liability from Operation of Building Laws
Demolition Costs and Increased Cost of Construction Endorsements, in each
case (A) in an amount equal to one hundred percent (100%) of the "Full
Replacement Cost," which for purposes of this Agreement shall mean actual
replacement value (exclusive of costs of excavations, foundations,
underground utilities and footings) with a waiver of depreciation, but the
amount shall in no event be less than the outstanding principal balance of
the Loan; (B)containing an agreed amount endorsement with respect to the
Improvements and Personal Property waiving all co-insurance provisions; (C)
providing for no deductible in excess of Ten Thousand and No/100 Dollars
($10,000) for all such insurance coverage; and (D) containing an "Ordinance
or Law Coverage" or "Enforcement" endorsement if any of the Improvements or
the use of the Individual Property shall at any time constitute legal non-
conforming structures or uses. In addition, Borrower shall obtain: (y) if
any portion of the Improvements is currently or at any time in the future
located in a federally designated "special flood hazard area", flood hazard
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insurance in an amount equal to the lesser of (1) the outstanding
principal balance of the Note or (2) the maximum amount of such insurance
available under the National Flood Insurance Act of 1968, the Flood
Disaster Protection Act of 1973 or the National Flood Insurance Reform Act
of 1994, as each may be amended or such greater amount as Lender shall
require; and (z) earthquake insurance in amounts and in form and substance
satisfactory to Lender in the event the Individual Property is located in
an area with a high degree of seismic activity, provided that the
insurance pursuant to clauses (y) and (z) hereof shall be on terms
consistent with the comprehensive all risk insurance policy required under
this subsection (i).
(ii) commercial general liability insurance against claims for
personal injury, bodily injury, death or property damage occurring upon,
in or about the Individual Property, such insurance (A) to be on the so-
called "occurrence" form with a combined limit, including umbrella
coverage, of not less than Twenty Six Million and No/100 Dollars
($26,000,000);(B) to continue at not less than the aforesaid limit until
required to be changed by Lender in writing by reason of changed economic
conditions making such protection inadequate; and (C) to cover at least
the following hazards: (1) premises and operations; (2) products and
completed operations on an "if any" basis; (3) independent contractors;
(4) blanket contractual liability for all legal contracts; and (5)
contractual liability covering the indemnities contained in Article 9 of
the Mortgages to the extent the same is available;
(iii) business income insurance (A) with loss payable to Lender; (B)
covering all risks required to be covered by the insurance provided for in
subsection (i) above; (C) containing an extended period of indemnity
endorsement which provides that after the physical loss to the
Improvements and Personal Property has been repaired, the continued loss
of income will be insured until such income either returns to the same
level it was at prior to the loss, or the expiration of twenty-four (24)
months from the date that the applicable Individual Property is repaired
or replaced and operations are resumed, whichever first occurs, and
notwithstanding that the policy may expire prior to the end of such
period; and (D) in an amount equal to one hundred percent (100%) of the
projected gross income from each Individual Property for a period of
twenty-four (24) months from the date that such Individual Property is
repaired or replaced and operations are resumed. The amount of such
business income insurance shall be determined prior to the date hereof and
at least once each year thereafter based on Borrower's reasonable estimate
of the gross income from each Individual Property for the succeeding
twenty-four (24) month period. All proceeds payable to Lender pursuant to
this subsection shall be held by Lender and shall be applied to the
obligations secured by the Loan Documents from time to time due and
payable hereunder and under the Note; provided, however, that nothing
herein contained shall be deemed to relieve Borrower of its obligations to
pay the obligations secured by the Loan Documents on the respective dates
of payment provided for in the Note and the other Loan Documents except to
the extent such amounts are actually paid out of the proceeds of such
business income insurance;
(iv) at all times during which structural construction, repairs or
alterations are being made with respect to the Improvements, and only if
the Individual Property coverage form does not otherwise apply, (A)
owner's contingent or protective liability insurance covering claims not
covered by or under the terms or provisions of the
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above mentioned commercial general liability insurance policy; and (B) the
insurance provided for in subsection (i) above written in a so-called
builder's risk completed value form (1) on a non-reporting basis, (2)
against all risks insured against pursuant to subsection (i) above, (3)
including permission to occupy the Individual Property, and (4) with an
agreed amount endorsement waiving co-insurance provisions;
(v) workers' compensation, subject to the statutory limits of the
State;
(vi) comprehensive boiler and machinery insurance, If applicable, in
amounts as shall be reasonably required by Lender on terms consistent with
the commercial property insurance policy required under subsection (i)
above:
(vii) umbrella liability insurance in an amount not less than Twenty
Five Million and No/100 Dollars ($25,000,000) per occurrence on terms
consistent with the commercial general liability insurance policy required
under subsection (ii) above; and
(viii) upon sixty (60) days' written notice, such other reasonable
insurance and in such reasonable amounts as Lender from time to time may
reasonably request against such other insurable hazards which at the time
are commonly insured against for property similar to the Individual
Property located in or around the region in which the Individual Property
is located.
(b) All insurance provided for in Section 6. l(a) shall be obtained
under valid and enforceable policies (collectively, the "Policies" or in
the singular, the "Policy"), and shall be subject to the approval of
Lender as to insurance companies, amounts, deductibles, loss payees and
insureds. The Policies shall be issued by financially sound and
responsible insurance companies authorized to do business in the State and
having a claims paying ability rating of "AA" or better by at least two
(2) of the Rating Agencies one of which shall be Standard & Poor's Ratings
Group. The Policies described in Section 6.1 (other than those strictly
limited to liability protection) shall designate Lender as loss payee. Not
less than ten (10) days prior to the expiration dates of the Policies
theretofore furnished to Lender, certificates of insurance evidencing the
Policies accompanied by evidence satisfactory to Lender of payment of the
premiums due thereunder (the "Insurance Premiums"), shall be delivered by
Borrower to Lender.
(c) Any blanket insurance Policy shall specifically allocate to the
Individual Property the amount of coverage from time to time required
hereunder and shall otherwise provide the same protection as would a
separate Policy insuring only the Properties in compliance with the
provisions of Section 6.1(a).
(d) All Policies of insurance provided for or contemplated by Section
6.l(a), except for the Policy referenced in Section 6.1(a)(v), shall name
Borrower, or the Tenant, as the insured and Lender as the additional
insured, as its interests may appear, and in the case of property damage,
boiler and machinery, flood and earthquake insurance, shall contain a so-
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<PAGE>
called New York standard non-contributing mortgagee clause in favor of
Lender providing that the loss thereunder shall be payable to Lender.
(e) All Policies of insurance provided for in Section 6.1(a)(v) shall
contain clauses or endorsements to the effect that:
(i) no act or negligence of Borrower, or anyone acting for Borrower,
or of any Tenant or other occupant, or failure to comply with the
provisions of any Policy, which might otherwise result in a forfeiture of
the insurance or any part thereof, shall in any way affect the validity
or enforceability of the
insurance insofar as Lender is concerned;
(ii) the Policy shall not be materially changed (other than to
increase the coverage provided thereby) or canceled without at least
thirty (30) days' written notice to Lender and any other party named
therein as an additional insured;
(iii) the issuers thereof shall give written notice to Lender if the
Policy has not been renewed fifteen (15) days prior to its expiration; and
(iv) Lender shall not be liable for any Insurance Premiums thereon or
subject to any assessments thereunder.
(f) If at any time Lender is not in receipt of written evidence that
all insurance required hereunder is in full force and effect, Lender shall
have the right, without notice to Borrower, to take such action as Lender
deems necessary to protect its interest in the Properties, including,
without limitation, the obtaining of such insurance coverage as Lender in
its sole discretion deems appropriate. All premiums incurred by Lender in
connection with such action or in obtaining such insurance and keeping it
in effect shall be paid by Borrower to Lender upon demand and, until paid,
shall be secured by the Mortgages and shall bear interest at the Default
Rate.
Section 6.2 Casualty. If the Individual Property shall be damaged or
destroyed, in whole or in part, by fire or other casualty (a "Casualty"),
Borrower shall give to Lender prompt notice of any such damage reasonably
estimated by Borrower to cost more than One Hundred Thousand ($100,000)
Dollars to repair and shall promptly commence and diligently prosecute the
completion of the repair and restoration of the Individual Property as
nearly as possible to the condition the Individual Property was in
immediately prior to such fire or other casualty, with such alterations as
may be reasonably approved by Lender (a "Restoration") and otherwise in
accordance with Section 6.4. Borrower shall pay all costs of such
Restoration whether or not such costs are covered by insurance. Lender
may, but shall not be obligated to make proof of loss if not made promptly
by Borrower.
Section 6.3 Condemnation. Borrower shall promptly give Lender notice of
the actual or threatened commencement of any proceeding for the
Condemnation of any Individual Property and shall deliver to Lender copies
of any and all papers served in connection with such proceedings. Lender
may participate in any such proceedings, and Borrower shall from time to
time deliver to Lender all instruments requested by it to permit
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<PAGE>
such participation. Borrower shall, at its expense, diligently prosecute
any such proceedings, and shall consult with Lender, its attorneys and
experts, and cooperate with them in the carrying on or defense of any such
proceedings. Notwithstanding any taking by any public or quasi-public
authority through Condemnation or otherwise (including but not limited to
any transfer made in lieu of or in anticipation of the exercise of such
taking), Borrower shall continue to pay the Debt at the time and in the
manner provided for its payment in the Note and in this Agreement and the
Debt shall not be reduced until any Award shall have been actually
received and applied by Lender, after the deduction of expenses of
collection, to the reduction or discharge of the Debt. Lender shall not be
limited to the interest paid on the Award by the condemning authority but
shall be entitled to receive out of the Award interest at the rate or
rates provided herein or in the Note. If any Individual Property or any
portion thereof is taken by a condemning authority, Borrower shall
promptly commence and diligently prosecute the Restoration of the
applicable Individual Property and otherwise comply with the provisions of
Section 6.4. If any Individual Property is sold, through foreclosure or
otherwise, prior to the receipt by Lender of the Award, Lender shall have
the right, whether or not a deficiency judgment on the Note shall have
been sought, recovered or denied, to receive the Award, or a portion
thereof sufficient to pay the Debt.
Section 6.4 Restoration. The following provisions shall apply in
connection with the Restoration of any Individual Property:
(a) If the Net Proceeds shall be less than Five Hundred Thousand and
No/100 Dollars ($500,000) and the costs of completing the Restoration
shall be less than Five Hundred Thousand and No/100 Dollars ($500,000),
the Net Proceeds will be disbursed by Lender to Borrower upon receipt,
provided that all of the conditions set forth in Section 6.4(b)(i) are met
and Borrower delivers to Lender a written undertaking to expeditiously
commence and to satisfactorily complete with due diligence the Restoration
in accordance with the terms of this Agreement.
(b) If the Net Proceeds are equal to or greater than Five Hundred
Thousand and No/100 Dollars ($500,000) or the costs of completing the
Restoration is equal to or greater than Five Hundred Thousand and No/lOO
Dollars ($500,000) Lender shall make the Net Proceeds available for the
Restoration in accordance with the provisions of this Section 6.4. The
term "Net Proceeds" for purposes of this Section 6.4 shall mean: (i) the
net amount of all insurance proceeds received by Lender pursuant to
Section 6.1 (a)(i), (iv), (vi) and (ix) as a result of such damage or
destruction, after deduction of its reasonable costs and expenses
(including, but not limited to, reasonable counsel fees), if any, in
collecting same ("Insurance Proceeds"), or (ii) the net amount of the
Award, after deduction of its reasonable costs and expenses (including,
but not limited to, reasonable counsel fees), if any, in collecting same
("Condemnation Proceeds"), whichever the case may be.
(i) The Net Proceeds shall be made available to Borrower for
Restoration provided that each of the following conditions are met:
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<PAGE>
(A) no Event of Default shall have occurred and be continuing;
(B) (1) in the event the Net Proceeds are Insurance Proceeds, less
than twenty-five percent (25%) of the total floor area of the Improvements
on the Individual Property has been damaged, destroyed or rendered
unusable as a result of such fire or other casualty or (2) in the event
the Net Proceeds are Condemnation Proceeds, less than ten percent (10%) of
the land constituting the Individual Property is taken, and such land is
located along the perimeter or periphery of the Individual Property, and
no portion of the Improvements is located on such land;
(C) Leases demising in the aggregate a percentage amount equal to or
greater than the Rentable Space Percentage of the total rentable space in
the Individual Property which has been demised under executed and
delivered Leases in effect as of the date of the occurrence of such fire
or other casualty or taking, whichever the case may be, shall remain in
full force and effect during and after the completion if the Restoration,
notwithstanding the occurrence of any such fire or other casualty or
taking, whichever the case may be, and will make all necessary repairs and
restorations thereto at their sole cost and expense. The term "Rentable
Space Percentage" shall mean (1) in the event the Net Proceeds are
Insurance Proceeds, a percentage amount equal to five percent (5%) and (2)
in the event the Net Proceeds are Condemnation Proceeds, a percentage
amount equal to five percent (5%);
(D) Borrower shall commence the Restoration as soon as reasonably
practicable (but in no event later than ninety (90) days after such damage
or destruction or taking, whichever the case may be, occurs) and shall
diligently pursue the same to satisfactory completion;
(E) Lender shall be satisfied that any operating deficits, including
all scheduled payments of principal and interest under the Note, which
will be incurred with respect to the Individual Property as a result of
the occurrence of any such fire or other casualty or taking, whichever the
case may be, will be covered out of (1) the Net Proceeds, (2) the
insurance coverage referred to in Section 6.1(a)(iii), if applicable, or
(3) by other funds of Borrower;
(F) Lender shall be satisfied that the Restoration will be completed
on or before the earliest to occur of (1) the Maturity Date, (2) the
earliest date required for such completion under the terms of any Leases,
(3) such time as may be required under applicable zoning law, ordinance,
rule or regulation in order to repair and restore the applicable
Individual Property to the condition it was in immediately prior to such
fire or other casualty or to as nearly as possible the condition it was in
immediately prior to such taking, as
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<PAGE>
applicable or (4) the expiration of the insurance coverage referred to in
Section 6.1(a)(iii);
(G) the Individual Property and the use thereof after the Restoration
will be in compliance with and permitted under all applicable zoning laws,
ordinances, rules and regulations;
(H) the Restoration shall be done and completed by Borrower in an
expeditious and diligent fashion and in compliance with all applicable
governmental laws, rules and regulations (including, without limitation,
all applicable environmental laws); and
(I) such fire or other casualty or taking, as applicable, does not
result in the loss of access to the Individual Property or the related
Improvements.
(ii) The Net Proceeds shall be held by Lender in an interest-bearing
account and, until disbursed in accordance with the provisions of this
Section 6.4(b), shall constitute additional security for the Debt and
other obligations under the Loan Documents. The Net Proceeds shall be
disbursed by Lender to, or as directed by, Borrower from time to time
during the course of the Restoration, upon receipt of evidence
satisfactory to Lender that (A) all materials installed and work and labor
performed to be paid for out of the requested disbursement in connection
with the Restoration have been performed, and (B) there exist no notices
of pendency, stop orders, mechanic's or materialman's liens or notices of
intention to file same, or any other liens or encumbrances of any nature
whatsoever on the Individual Property which have not either been fully
bonded to the satisfaction of Lender and discharged of record or in the
alternative fully insured to the satisfaction of Lender by the title
company issuing the Title Insurance Policy.
(iii) All plans and specifications required in connection with the
Restoration shall be subject to prior review and acceptance in all
respects by Lender and by an independent consulting engineer selected by
Lender (the "Casualty Consultant"), such review and acceptance not to be
unreasonably withheld or delayed. Lender shall have the use of the plans
and specifications and all permits, licenses and approvals required or
obtained in connection with the Restoration. The identity of the
contractors, subcontractors and materialmen engaged in the Restoration, as
well as the contracts under which they have been engaged, shall be subject
to prior review and acceptance by Lender and the Casualty Consultant, such
review and acceptance not to be unreasonably withheld or delayed. All
costs and expenses incurred by Lender in connection with making the Net
Proceeds available for the Restoration including, without limitation,
reasonable counsel fees and disbursements and the Casualty Consultant's
fees, shall be paid by Borrower
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<PAGE>
(iv) In no event shall Lender be obligated to make disbursements of
the Net Proceeds in excess of an amount equal to the costs actually
incurred from time to time for work in place as part of the Restoration,
as certified by the Casualty Consultant, mink Casualty Retainage. The term
"Casualty Retainage" shall mean an amount equal to ten percent (10%) of
the costs actually incurred for work in place as part of the Restoration,
as certified by the Casualty Consultant, until the Restoration has been
completed. The Casualty Retainage shall in no event, and notwithstanding
anything to the contrary set forth above in this Section 6.4(b), be less
than the amount actually held back by Borrower from contractors,
subcontractors and materialmen engaged in the Restoration. The Casualty
Retainage shall not be released until the Casualty Consultant certifies to
Lender that the Restoration has been completed in accordance with the
provisions of this Section 6.4(b) and that all approvals necessary for the
re-occupancy and use of the Individual Property have been obtained from
all appropriate governmental and quasi-governmental authorities, and
Lender receives evidence satisfactory to Lender that the costs of the
Restoration have been paid in full or will be paid in full out of the
Casualty Retainage; provided, however, that Lender will release the
portion of the Casualty Retainage being held with respect to any
contractor, subcontractor or materialman engaged in the Restoration as of
the date upon which the Casualty Consultant certifies to Lender that the
contractor, subcontractor or materialman has satisfactorily completed all
work and has supplied all materials in accordance with the provisions of
the contractor's, subcontractor's or materialman's contract, the
contractor, subcontractor or materialman delivers the lien waivers and
evidence of payment in full of all sums due to the contractor,
subcontractor or materialman as may be reasonably requested by Lender or
by the title company issuing the Title Insurance Policy, and Lender
receives an endorsement to the Title Insurance Policy insuring the
continued priority of the lien of the related Mortgage and evidence of
payment of any premium payable for such endorsement. If required by
Lender, the release of any such portion of the Casualty Retainage shall be
approved by the surety company, if any, which has issued a payment or
performance bond with respect to the contractor, subcontractor or
materialman.
(v) Lender shall not be obligated to make disbursements of the Net
Proceeds more frequently than once every calendar month.
(vi) If at any time the Net Proceeds or the undisbursed balance
thereof shall not, in the reasonable opinion of Lender in consultation
with the Casualty Consultant, be sufficient to pay in full the balance of
the costs which are estimated by the Casualty Consultant to be incurred in
connection with the completion of the Restoration, Borrower shall deposit
the deficiency (the "Net Proceeds Deficiency") with Lender before any
further disbursement of the Net Proceeds shall be made. The Net Proceeds
Deficiency deposited with Lender shall be held by Lender and shall be
disbursed for costs actually incurred in connection with the Restoration
on the same conditions applicable to the disbursement of the Net Proceeds,
and until so disbursed pursuant to this Section 6.4(b) shall constitute
additional security for the Debt and other obligations under the Loan
Documents.
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<PAGE>
(vii) The excess, if any, of the Net Proceeds and the remaining
balance, if any, of the Net Proceeds Deficiency deposited with Lender
after the Casualty Consultant certifies to Lender that the Restoration has
been completed in accordance with the provisions of this Section 6.4(b),
and the receipt by Lender of evidence satisfactory to Lender that all
costs incurred in connection with the Restoration have been paid in full,
shall be remitted by Lender to Borrower, provided no Event of Default
shall have occurred and shall be continuing under the Note, this Agreement
or any of the other Loan Documents.
(c) All Net Proceeds not required (i) to be made available for the
Restoration or (ii) to be returned to Borrower as excess Net Proceeds
pursuant to Section 6.4(b)(vii) may be retained and applied by Lender
toward the payment of the Debt whether or not then due and payable in such
order, priority and proportions as Lender in its sole discretion shall
deem proper, or, at the discretion of Lender, the same may be paid, either
in whole or in part, to Borrower for such purposes as Lender shall
designate, in its discretion.
(d) In the event of foreclosure of the Mortgage with respect to the
Individual Property, or other transfer of title to the Individual Property
in extinguishment in whole or in part of the Debt all right, title and
interest of Borrower in and to the Policies that are not blanket Policies
then in force concerning the Individual Property and all proceeds payable
thereunder shall thereupon vest in the purchaser at such foreclosure or
Lender or other transferee in the event of such other transfer of title.
VII. RESERVE FUNDS
Section 7.1 Required Repair Funds
7.1.1 Deposits. Borrower shall perform the repairs at the Properties,
as more particularly set forth on Schedule III hereto (such repairs
hereinafter referred to as "Required Repairs"). Borrower shall complete
the Required Repairs on or before the required deadline for each repair as
set forth on Schedule TTI. It shall be an Event of Default under this
Agreement if (i) Borrower does not complete the Required Repairs at each
Individual Property by the required deadline for each repair as set forth
on Schedule m, and (ii) Borrower does not satisfy each condition contained
in Section 7.1.2 hereof. Upon the occurrence of such an Event of Default,
Lender, at its option, may withdraw all Required Repair Funds from the
Required Repair Account and Lender may apply such funds either to
completion of the Required Repairs at one or more of the Properties or
toward payment of the Debt in such order, proportion and priority as
Lender may determine in its sole discretion. Lender's right to withdraw
and apply Required Repair Funds shall be in addition to all other rights
and remedies provided to Lender under this Agreement and the other Loan
Documents. On the Closing Date, Borrower shall deposit with Lender the
amount for each Individual Property set forth on such Schedule m hereto to
perform the Required Repairs for such Individual Property. Amounts so
deposited with Lender shall be held by Lender in an interest bearing
account. Amounts so deposited shall hereinafter be referred to as
Borrower's "Required
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Repair Fund" and the account in which such amounts are held shall
hereinafter be referred to as Borrower's "Required Repair Account".
7.1.2 Release of Required Repair Funds. Lender shall disburse to
Borrower the Required Repair Funds from the Required Repair Account from
time to time upon satisfaction by Borrower of each of the following
conditions: (i) Borrower shall submit a written request for payment to
Lender at least fifteen (15) days prior to the date on which Borrower
requests such payment be made and specifies the Required Repairs to be
paid, (ii) on the date such request is received by Lender and on the date
such payment is to be made, no Default or Event of Default shall exist and
remain uncured, (iii) Lender shall have received a certificate from
Borrower (A) stating that all Required Repairs at the applicable
Individual Property to be funded by the requested disbursement have been
completed in good and workmanlike manner and in accordance with all
applicable federal, state and local laws, rules and regulations, such
certificate to be accompanied by a copy of any license, permit or other
approval by any Governmental Authority required to commence and/or
complete the Required Repairs, (B) identifying each Person that supplied
materials or labor in connection with the Required Repairs performed at
such Individual Property to be funded by the requested disbursement under
a contract in excess of $50,000, and (C) stating that each Person who has
supplied materials or labor in connection with the Required Repairs to be
funded by the requested disbursement has been paid in full or will be paid
in full upon such disbursement, such certificate to be accompanied by lien
waivers or other evidence of payment satisfactory to Lender, (iv) at
Lender's option, a title search for such Individual Property indicating
that such Individual Property is free from all liens, claims and other
encumbrances not previously approved by Lender, and (v) Lender shall have
received such other evidence as Lender shall reasonably request that the
Required Repairs at such Individual Property to be funded by the requested
disbursement have been completed and are paid for or will be paid upon
such disbursement to Borrower. Lender shall not be required to make
disbursements from the Required Repair Account with respect to all
Individual Properties more than once each calendar month and such
disbursement shall be made only upon satisfaction of each condition
contained in this Section 7.1.2.
Section 7.2 Tax and Insurance Escrow Fund
Borrower shall pay to Lender on each Payment Date (a) one-twelfth of
the Taxes that Lender estimates will be payable during the next ensuing
twelve (12) months in order to accumulate with Lender sufficient funds to
pay all such Taxes at least thirty (30) days prior to their respective due
dates and (b) one-twelfth of the Insurance Premiums that Lender estimates
will be payable for the renewal of the coverage afforded by the Policies
upon the expiration thereof in order to accumulate with Lender sufficient
funds to pay all such Insurance Premiums at least thirty (30) days prior
to the expiration of the Policies, (said amounts in (a) and (b) above are
hereinafter called the "Tax and Insurance Escrow Fund"). The Tax and
Insurance Escrow Fund and the payments of interest or principal or both,
payable pursuant to the Note, shall be added together and shall be paid as
an aggregate sum by Borrower to Lender. Lender will apply the Tax and
Insurance Escrow Fund to payments of Taxes and Insurance Premiums required
to be made by Borrower pursuant to this Agreement
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and under the Mortgages. In making any payment relating to the Tax and
Insurance Escrow Fund, Lender may do so according to any bill, statement
or estimate procured from the appropriate public office (with respect to
Taxes) or insurer or agent (with respect to Insurance Premiums) or from
Borrower without inquiry into the accuracy of such bill, statement or
estimate or into the validity of any tax, assessment, sale, forfeiture,
tax lien or title or claim thereof. If the amount of the Tax and Insurance
Escrow Fund shall exceed the amounts due for Taxes and Insurance Premiums,
Lender shall, in its sole discretion, return any excess to Borrower or
credit such excess against future payments to be made to the Tax and
Insurance Escrow Fund. The Tax and Insurance Escrow Fund shall be held by
Lender in an interest bearing account and shall at Lender's option be held
in Eligible Account at an Eligible Institution. Any interest earned on
said account shall be held in said account and credited toward future
deposits to the Tax and Insurance Escrow Fund. Any amount remaining in the
Tax and Insurance Escrow Fund after the Debt has been paid in full shall
be returned to Borrower. In allocating such excess, Lender may deal with
the Person shown on the records of Lender to be the owner of the
Properties. If at any time Lender reasonably determines that the Tax and
Insurance Escrow Fund is not or will not be sufficient to pay Taxes or
Insurance Premiums by the dates set forth above, Lender shall notify
Borrower of such determination and Borrower shall increase its monthly
payments to Lender by the amount that Lender estimates is sufficient to
make up the deficiency at least thirty (30) days prior to delinquency of
the Taxes or Insurance Premiums. Notwithstanding anything to the contrary
hereinbefore contained, in the event that Borrower provides evidence
satisfactory to Lender that each of the Properties are insured under a
"blanket" policy which is acceptable to Lender and which otherwise
satisfies the requirements of this Agreement, Lender will waive the
requirement set forth herein for Borrower to make deposits into the Tax
and Insurance Escrow Fund for the payment of Insurance Premiums due on
such "blanket" policy of insurance, provided, however, Lender expressly
reserves the right to require Borrower to make deposits to the Tax and
Insurance Escrow Fund for the payment of Insurance Premiums if at any time
any of the Properties are not insured under a "blanket" insurance policy
which satisfies the requirements of this Agreement. Notwit'nstanding the
foregoing so long as Kmart Corporation pays t'ne Taxes due pursuant to its
lease for the Property identified as "Bergen Plaza," Lender agrees to
waive the Borrower's obligation to deposit the amount of Taxes paid by
Kmart.
Section 7.3 eplacements and Replacement Reserve.
7.3.1 eplacement Reserve Fund. Borrower shall pay to Lender, on each
Payment Date during the existence of the Lockbox Account and on each
Payment Date athereafter, one twelfth of the amount (the "Replacement
Reserve Monthly Deposit") reasonably estimated by Lender in its sole
discretion to be due for replacements and repairs required to be made to
the Properties during the calendar year (collectively, the
"Replacements"). Amounts so deposited shall hereinafter be referred to as
Borrower's "Replacement Reserve Fund" and the account in which such
amounts are held shall hereinafter be referred to as Borrower's
"Replacement Reserve Account". Lender may reassess its estimate of the
amount necessary for the Replacement Reserve Fund from time to time, and
may increase the monthly amounts required to be deposited into the
Replacement Reserve Fund upon thirty (30) days notice to Borrower if
Lender determines in its reasonable
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discretion that an increase is necessary to maintain the proper
maintenance and operation of the Properties. Any amount held in the
Replacement Reserve Account and allocated for an Individual Property shall
be retained by Lender in an interest-bearing account, or at the option of
Lender in an Eligible Account at an Eligible Institution and credited
toward the future Replacement Reserves Monthly Deposits required by Lender
hereunder in the event such Individual Property is released from the Lien
of its related Mortgage in accordance with Section 2.5 hereof. In the
event Lender is obligated to release the Lockbox Account as set forth in
Section 2.6.1, then in that event Borrower shall not have the obligation
to make further payments of the Replacement Reserve Monthly Deposit for
the period of time that the Lockbox Account is not effective, provided
however any amounts theretofore deposited in the Replacement Reserve
Account shall be disbursed by Lender as set forth in Section 7.3.2.
.3.2 Disbursements from Replacement Reserve Account. (a) Lender shall
make disbursements from the Replacement Reserve Account to pay Borrower
only for the costs of the Replacements. Lender shall not be obligated to
make disbursements from the Replacement Reserve Account to reimburse
Borrower for the costs of routine maintenance to an Individual Property or
for costs which are to be reimbursed from the Required Repair Fund.
b) ender shall, upon written request from Borrower and satisfaction
of the requirements set forth in this Section 7.3.2, disburse to Borrower
amounts from the Replacement Reserve Account necessary to pay for the
actual approved costs of Replacements or to reimburse Borrower therefor,
upon completion of such Replacements (or, upon partial completion in the
case of Replacements made pursuant to Section 7.3.2(f)) as determined by
Lender. In no event shall Lender be obligated to disburse funds from the
Replacement Reserve Account if a Default or an Event of Default exists.
c) ach request for disbursement from the Replacement Reserve Account
shall be in a form specified or approved by Lender and shall specify (i)
the specific Replacements for which the disbursement is requested, (ii)
the quantity and price of each item purchased, if the Replacement includes
the purchase or replacement of specific items, (iii) the price of all
materials (grouped by type or category) used in any Replacement other than
the purchase or replacement of specific items, and (iv) the cost of all
contracted labor or other services applicable to each Replacement for
which such request for disbursement is made. With each request Borrower
shall certify that all Replacements have been made in accordance with all
applicable Legal Requirements of any Governmental Authority having
jurisdiction over the applicable Individual Property to which the
Replacements are being provided. Each request for disbursement shall
include copies of invoices for all items or materials purchased and all
contracted labor or services provided. Except as provided in Section
7.3.2(e), each request for disbursement from the Replacement Reserve
Account shall be made only aRer completion of the Replacement for which
disbursement is requested. Borrower shall provide Lender evidence of
completion satisfactory to Lender in its reasonable judgment.
(d) Borrower shall pay all invoices in connection with the
Replacements with respect to which a disbursement is requested prior to
submitting such request for
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disbursement from the Replacement Reserve Account or, at the request of
Borrower, Lender will issue joint checks, payable to Borrower and the
contractor, supplier, materialman, mechanic, subcontractor or other party
to whom payment is due in connection with a Replacement. In the case of
payments made by joint check, Lender may require a waiver of lien from
each Person receiving payment prior to Lender's disbursement from the
Replacement Reserve Account. In addition, as a condition to any
disbursement, Lender may require Borrower to obtain lien waivers from each
contractor, supplier, materialman, mechanic or subcontractor who receives
payment in an amount equal to or greater than $100,000 for completion of
its work or delivery of its materials. Any lien waiver delivered hereunder
shall conform to the requirements of applicable law and shall cover all
work performed and materials supplied (including equipment and fixtures)
for the applicable Individual Property by that contractor, supplier,
subcontractor, mechanic or materialman through the date covered by the
current reimbursement request (or, in the event that payment to such
contractor, supplier, subcontractor, mechanic or materialmen is to be made
by a joint check, the release of lien shall be effective through the date
covered by the previous release of funds request).
e) f (i) the cost of a Replacement exceeds $100,000, (ii) the
contractor performing such Replacement requires periodic payments pursuant
to terms of a written contract, and (iii) Lender has approved in writing
in advance such periodic payments, a request for reimbursement from the
Replacement Reserve Account may be made after completion of a portion of
the work under such contract, provided (A) such contract requires payment
upon completion of such portion of the work, (B) the materials for which
the request is made are on site at the applicable Individual Property and
are properly secured or have been installed in such Individual Property,
(C) all other conditions in this agreement for disbursement have been
satisfied, (D) funds remaining in the Replacement Reserve Account are, in
Lender's judgment, sufficient to complete such Replacement and other
Replacements when required, and (E) if required by Lender, each contractor
or subcontractor receiving payments under such contract shall provide a
waiver of lien with respect to amounts which have been paid to that
contractor or subcontractor.
(f) Borrower shall not make a request for disbursement from the
Replacement Reserve Account more frequently than once in any calendar
month and (except in connection with the final disbursement) the total
cost of all Replacements in any request shall not be less than $5,000.00.
7.3.3 Performance of Replacements. (a) Borrower shall make
Replacements when required in order to keep each Individual Property in
condition and repair consistent with other first class, full service
retail properties in the same market segment in the metropolitan area in
which the respective Individual Property is located, and to keep each
Individual Property or any portion thereof from deteriorating. Borrower
shall complete all Replacements in a good and workmanlike manner as soon
as practicable following the commencement of making each such Replacement.
(b) Lender reserves the right, at its option, to approve all
contracts or work orders with materialism, mechanics, suppliers,
subcontractors, contractors or other parties
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providing labor or materials under contracts for an amount in excess of
$100,000 in connection with the Replacements. Upon Lender's request,
Borrower shall assign any contract or subcontract to Lender.
(c) In the event Lender determines in its reasonable discretion that
any Replacement is not being performed in a workmanlike or timely manner
or that any Replacement has not been completed in a workmanlike or timely
manner, and such failure continues to exist for more than thirty (30) days
after notice from Lender to Borrower, Lender shall have the option to
withhold disbursement for such unsatisfactory Replacement and to proceed
under existing contracts or to contract with third parties to complete
such Replacement and to apply the Replacement Reserve Fund toward the
labor and materials necessary to complete such Replacement, without
providing any prior notice to Borrower and to exercise any and all other
remedies available to Lender upon an Event of Default hereunder.
(d) In order to facilitate Lender's completion or making of the
Replacements pursuant to Section7.3.3(c) above, Borrower grants Lender the
right to enter onto any Individual Property and perform any and all work
and labor necessary to complete or make the Replacements and/or employ
watchmen to protect such Individual Property from damage. All sums so
expended by Lender, to the extent not from the Replacement Reserve Fund,
shall be deemed to have been advanced under the Loan to Borrower and
secured by the Mortgages. For this purpose Borrower constitutes and
appoints Lender its true and lawful attorney-in-fact with full power of
substitution to complete or undertake the Replacements in the name of
Borrower. Such power of attorney shall be deemed to be a power coupled
with an interest and cannot be revoked but shall only be effective
following an Event of Default. Borrower empowers said attorney-in-fact as
follows: (i) to use any funds in the Replacement Reserve Account for the
purpose of making or completing the Replacements; (ii) to make such
additions, changes and corrections to the Replacements as shall be
necessary or desirable to complete the Replacements; (iii) to employ such
contractors, subcontractors, agents, architects and inspectors as shall be
required for such purposes; (iv) to pay, settle or compromise all existing
bills and claims which are or may become Liens against any Individual
Property, or as may be necessary or desirable for the completion of the
Replacements, or for clearance of title; (v) to execute all applications
and certificates in the name of Borrower which may be required by any of
the contract documents; (vi) to prosecute and defend all actions or
proceedings in connection with any Individual Property or the
rehabilitation and repair of any Individual Property; and (vii) to do any
and every act which Borrower might do in its own behalf to fulfill the
terms of this Agreement.
(e) Nothing in this Section7.3.3 shall: (i) make Lender responsible
for making or completing the Replacements; (ii) require Lender to expend
funds in addition to the Replacement Reserve Fund to make or complete any
Replacement; (iii) obligate Lender to proceed with the Replacements; or
(iv) obligate Lender to demand from Borrower additional sums to make or
complete any Replacement.
(f) Borrower shall permit Lender and Lender's agents and
representatives (including, without limitation, Lender's engineer,
architect, or inspector) or third parties
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making Replacements pursuant to this Section 7.3.3 to enter onto each
Individual Property during normal business hours (subject to the rights of
tenants under their Leases) to inspect the progress of any Replacements
and all materials being used in connection therewith, to examine all plans
and shop drawings relating to such Replacements which are or may be kept
at each Individual Property, and to complete any Replacements made
pursuant to this Section 7.3.3. Borrower shall cause all contractors and
subcontractors to cooperate with Lender or Lender's representatives or
such other persons described above in connection with inspections
described in this Section 7.3.4(f) or the completion of Replacements
pursuant to this Section 7.3.3.
(g) Lender may require an inspection of the Individual Property at
Borrower's expense prior to making a monthly disbursement in excess of
$10,000 from the Replacement Reserve Account in order to verify completion
of the Replacements for which reimbursement is sought. Lender may require
that such inspection be conducted by an appropriate independent qualified
professional selected by Lender and/or may require a copy of a certificate
of completion by an independent qualified professional acceptable to
Lender prior to the disbursement of any amounts from the Replacement
Reserve Account. Borrower shall pay the expense of the inspection as
required hereunder, whether such inspection is conducted by Lender or by
an independent qualified professional.
(h) The Replacements and all materials, equipment, fixtures, or any other
item comprising a part of any Replacement shall be constructed, installed
or completed, as applicable, free and clear of all mechanic's,
materialman's or other liens (except for those Liens existing on the date
of this Agreement which have been approved in writing by Lender).
(i) Before each disbursement from the Replacement Reserve Account,
Lender may require Borrower to provide Lender with a search of title to
the applicable Individual Property effective to the date of the
disbursement, which search shows that no mechanic's or materialmen's liens
or other liens of any nature have been placed against the applicable
Individual Property since the date of recordation of the related Mortgage
and that title to such Individual Property is free and clear of all Liens
(other than the lien of the related Mortgage and any other Liens
previously approved in writing by Lender, if any).
(j) All Replacements shall comply with all applicable Legal
Requirements of all Governmental Authorities having jurisdiction over the
applicable Individual Property and applicable insurance requirements
including, without limitation, applicable building codes, special use
permits, environmental regulations, and requirements of insurance
underwriters.
(k) In addition to any insurance required under the Loan Documents,
Borrower shall provide or cause to be provided workmen's compensation
insurance, builder's risk, and public liability insurance and other
insurance to the extent required under applicable law in connection with a
particular Replacement. All such policies shall be in form and amount
reasonably satisfactory to Lender. All such policies which can be endorsed
with standard mortgagee clauses making loss payable to Lender or its
assigns shall be so endorsed. Certified copies of such policies shall be
delivered to Lender.
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7.3.4 Failure to Make Replacements. (a) It shall be an Event of Default
under this Agreement if Borrower fails to comply with any provision of
this Section 7.3 and such failure is not cured within thirty (30) days
after notice from Lender, provided, however, if such failure is not
capable of being cured within said thirty (30) day period, then provided
that Borrower commences action to complete such cure and thereafter
diligently proceeds to complete such cure. Upon the occurrence of such an
Event of Default, Lender may use the Replacement Reserve Fund (or any
portion thereof) for any purpose, including but not limited to completion
of the Replacements as provided in Section 7.3.3, or for any other repair
or replacement to any Individual Property or toward payment of the Debt in
such order, proportion and priority as Lender may determine in its sole
discretion. Lender's right to withdraw and apply the Replacement Reserve
Funds shall be in addition to all other rights and remedies provided to
Lender under this Agreement and the other Loan Documents.
(b) Nothing in this Agreement shall obligate Lender to apply all or
any portion of the Replacement Reserve Fund on account of an Event of
Default to payment of the Debt or in any specific order or priority.
7.3.5 Balance in the Replacement Reserve Account. The insufficiency of
any balance in the Replacement Reserve Account shall not relieve Borrower
from its obligation to fulfill all preservation and maintenance covenants
in the Loan Documents.
7.3.6 Indemnification. Borrower shall indemnify Lender and hold
Lender harmless from and against any and all actions, suits, claims,
demands, liabilities, losses, damages, obligations and costs and expenses
(including litigation costs and reasonable attorneys fees and expenses)
arising from or in any way connected with the performance of the
Replacements. Borrower shall assign to Lender all rights and claims
Borrower may have against all persons or entities supplying labor or
materials in connection with the Replacements; provided, however, that
Lender may not pursue any such right or claim unless an Event of Default
has occurred and remains uncured.
Section 7.4 Rollover Reserve.
7.4.1 Deposits to Rollover Reserve Fund. Borrower shall pay to Lender
on each Payment Date during the existence of the Lockbox Account, and on
each Payment Date thereafter, the sum of $17,339.17, which amounts shall
be deposited with and held by Lender for tenant improvement and leasing
commission obligations incurred following the date hereof. Amounts so
deposited shall hereinafter be referred to as the "Rollover Reserve Fund"
and the account to which such amounts are held shall hereinafter be
referred to as the "Rollover Reserve Account". In the event Lender is
obligated to release the Lockbox Account as set forth in Section 2.6.1,
then in that event Borrower shall not have the obligation to make further
payments to the Roller Reserve Fund for the period of time that the
Lockbox Account is not effective, provided however any amounts theretofore
deposited in the Rollover Reserve Account shall be disbursed by Lender as
set forth in Section 7.4.2.
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7.4.2 Withdrawal of Rollover Reserve Funds Lender shall make
disbursements from the Rollover Escrow Fund for tenant improvement and
leasing commission obligations incurred by Borrower. All such expenses
shall be approved by Lender in its reasonable discretion. Lender shall
make disbursements as requested by Borrower on a quarterly basis in
increments of no less than $5,000.00 upon delivery by Borrower of Lender's
standard form of draw request accompanied by copies of invoices for the
amounts requested and, if required by Lender, lien waivers and releases
from all parties furnishing materials andior services in connection with
the requested payment. Lender may require an inspection of the Properties
at Borrower's expense prior to making a quarterly disbursement in order to
verify completion of improvements for which reimbursement is sought. All
earnings or interest on the Rollover Escrow Fund shall be and become part
of such Rollover Escrow Fund and shall be disbursed as provided in this
Section 7.4.
7.4.3 Failure to Perform. It shall be an Event of Default under this
Agreement if Borrower does not satisfy each obligation and condition
contained in this Section 7.4. Upon the occurrence of such an Event of
Default, Lender, at its option, may withdraw all Rollover Reserve Funds
(including interest thereon) from the Rollover Reserve Account and Lender
may apply such funds either to tenant improvement and leasing commission
obligations or toward payment of the Debt in such order, proportion and
priority as Lender may determine in its sole discretion. Lender's rights
to withdraw and apply Rollover Reserve Funds shall be in addition to all
other rights and remedies provided to Lender under this Loan Agreement and
the other Loan Documents.
Section 7.5 Intentionally Deleted.
Section 7.6 Intentionally Deleted.
Section 7.7 Reserve Funds. Generally.
7.7.1 Borrower grants to Lender a first-priority perfected security
interest in each of the Reserve Funds and any and all monies now or
hereafter deposited in each Reserve Fund as additional security for
payment of the Debt.Until expended or applied in accordance herewith, the
Reserve Funds shall constitute additional security for the Debt.
7.7.2 Upon the occurrence of an Event of Default, Lender may, in
addition to any and all other rights and remedies available to Lender,
apply any sums then present in any or all of the Reserve Funds to the
payment of the Debt in any order in its sole discretion.
7.7.3 The Reserve Funds shall not constitute trust funds and may be
commingled with other monies held by Lender.
7.7.4 The Reserve Funds shall be held in interest bearing accounts
and all earnings or interest on a Reserve Fund shall be added to and
become a part of such Reserve Fund and shall be disbursed in the same
manner as other monies deposited in such Reserve Fund, except that
earnings or interest on the Tax and Insurance Escrow Fund shall not be
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added to or become a part thereof and shall be the sole property of and
shall be paid to Lender.
7.7.5 Borrower shall not, without obtaining Me prior written consent of
Lender, further pledge, assign or grant any security interest in any
Reserve Fund or the monies deposited therein or permit any lien or
encumbrance to attach thereto, or any levy to be made thereon, or any WCC-
1 Financing Statements, except those naming Lender as the secured party,
to be filed with respect thereto.
7.7.6 Lender shall not be liable for any loss sustained on the investment
of any funds constituting the Replacement Reserve Fund unless occasioned
by the gross negligence or willful misconduct of Lender.
VIII. DEFAULTS
Section 8.1 Event of Default.
(a) Each of the following events shall constitute an event of default
hereunder (an "Event of Default"):
(i) if any portion of the Debt is not paid when due;
(ii) if any of the Taxes or Other Charges are not paid prior to the date
when the
same become delinquent;
(iii) if the Policies are not kept in full force and effect, or if
certified copies of the
Policies are not delivered to Lender within ten (10) days of request;
(iv) if Borrower transfers or encumbers any portion of the Properties
without
Lender's priorwritten consent or otherwise violates the provisions of
Section 5.2.13 of this Loan Agreement;
(v) if any material representation or warranty made by Borrower herein
or in any
other Loan Document, or in any report, certificate, financial statement or
other instrument, agreement or document furnished to Lender shall have
been false or misleading in any material respect as of the date the
representation or warranty was made;
(vi) if Borrower or any guarantor under any guaranty issued in connection
with the Loan
shall make an assignment for the benefit of creditors;
(vii) if a receiver, liquidator or trustee shall be appointed for
Borrower or any
guarantor under any guarantee issued in connection with the Loan or if
Borrower or such guarantor shall be adjudicated a bankrupt or insolvent,
or if any petition for bankruptcy, reorganization or arrangement pursuant
to federal bankruptcy law, or any similar federal or state law, shall be
filed by or against, consented to, or acquiesced in by, Borrower or such
guarantor, or if any proceeding for the dissolution or liquidation of
Borrower or such
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guarantor shall be instituted; provided, However, if such appointment,
adjudication, petition or proceeding was involuntary and not consented to
by Borrower or such guarantor, upon the same not being discharged, stayed
or dismissed within one hundred eighty (180) days;
(viii) if Borrower attempts to assign its rights under this Agreement
or any of the other Loan Documents or any interest herein or therein in
contravention of the Loan Documents;
(ix) if Borrower breaches any of its respective negative covenants
contained in Section 5.2 or any covenant contained in Section 4.1.30
hereof;
(x) with respect to any term, covenant or provision set forth herein
which specifically contains a notice requirement or grace period, if
Borrower shall be in default under such term, covenant or condition after
the giving of such notice or the expiration of such grace period;
(xi) if any of the assumptions contained in the Insolvency Opinion,
or in any other "non-consolidation. opinion delivered to Lender in
connection with the Loan, or in any other "non-consolidation" delivered
subsequent to the closing of the Loan, is or shall become untrue in any
material respect;
(xii) if Borrower shall continue to be in Default under any of the
other terms, covenants or conditions of this Agreement not specified in
subsections (i) to (xi) above, for ten (10) days after notice to Borrower
from Lender, in the case of any Default which can be cured by the payment
of a sum of money, or for thirty (30) days after notice from Lender in the
case of any other Default; provided, however, that if such non-monetary
Default is susceptible of cure but cannot reasonably be cured within such
30~ay period and provided further that Borrower shall have commenced to
cure such Default within such 30-day period and thereafter diligently and
expeditiously proceeds to cure the same, such 30-day period shall be
extended for such time as is reasonably necessary for Borrower in the
exercise of due diligence to cure such Default, such additional period not
to exceed one hundred eighty (180) days; or
(xiii) if there shall be default under any of the other Loan
Documents beyond any applicable cure periods contained in such documents,
whether as to Borrower or any Individual Property, or if any other such
event shall occur or condition shall exist, if the effect of such event or
condition is to accelerate the maturity of any portion of the Debt or to
permit Lender to accelerate the maturity of all or any portion of the
Debt;
(b) Upon the occurrence of an Event of Default (other than an Event
of Default described in clauses (vi), (vii) or (viii) above) and at any
time thereafter Lender may, in addition to any other rights or remedies
available to it pursuant to this Agreement and the other Loan Documents or
at law or in equity, Lender may take such action, without notice or
demand, that Lender deems advisable to protect and enforce its rights
against Borrower and in and to all or any Individual Property, including,
without limitation, declaring the Debt to be immediately due and payable,
and Lender may enforce or avail itself of any or all rights or
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remedies provided in the Loan Documents against Borrower and any or all of
the Properties, including, without limitation, all rights or remedies
available at law or in equity; and upon any Event of Default described in
clauses (vi), (vii) or (viii) above, the Debt and all other obligations of
Borrower hereunder and under the other Loan Documents shall immediately
and automatically become due and payable, without notice or demand, and
Borrower hereby expressly waives any such notice or demand, anything
contained herein or in any other Loan Document to the contrary
notwithstanding.
Section 8.2 Remedies.
(a) Upon the occurrence of an Event of Default, all or any one or
more of the rights, powers, privileges and other remedies available to
Lender against Borrower under this Agreement or any of the other Loan
Documents executed and delivered by, or applicable to, Borrower or at law
or in equity may be exercised by Lender at any time and from time to time,
whether or not all or any of the Debt shall be declared due and payable,
and whether or not Lender shall have commenced any foreclosure proceeding
or other action for the enforcement of its rights and remedies under any
of the Loan Documents with respect to all or any Individual Property. Any
such actions taken by Lender shall be cumulative and concurrent and may be
pursued independently, singly, successively, together or otherwise, at
such time and in such order as Lender may determine in its sole
discretion, to the fullest extent permitted by law, without impairing or
otherwise affecting the other rights and remedies of Lender permitted by
law, equity or contract or as set forth herein or in the other Loan
Documents. Without limiting the generality of the foregoing, Borrower
agrees that if an Event of Default is continuing (i) Lender is not subject
to any "one action" or "election of remedies" law or rule, and (ii) all
liens and other rights, remedies or privileges provided to Lender shall
remain in full force and effect until Lender has exhausted all of its
remedies against the Properties and each Mortgage has been foreclosed,
sold and/or otherwise realized upon in satisfaction of the Debt or the
Debt has been paid in full.
(b) With respect to Borrower and the Properties, nothing contained
herein or in any other Loan Document shall be construed as requiring
Lender to resort to any Individual Property for the satisfaction of any of
the Debt in preference or priority to any other Individual Property, and
Lender may seek satisfaction out of all of the Properties or any part
thereof, in its absolute discretion in respect of the Debt. In addition,
Lender shall have the right from time to time to partially foreclose the
Mortgages in any manner and for any amounts secured by the Mortgages then
due and payable as determined by Lender in its sole discretion including,
without limitation, the following circumstances: (i) in the event Borrower
defaults beyond any applicable grace period in the payment of one or more
scheduled payments of principal and interest, Lender may foreclose one or
more of the Mortgages to recover such delinquent payments, or (ii) in the
event Lender elects to accelerate less than the entire outstanding
principal balance of the Loan, Lender may foreclose one or more of the
Mortgages to recover so much of the principal balance of the Loan as
Lender may accelerate and such other sums secured by one or more of the
Mortgages as Lender may elect. Notwithstanding one or more partial
foreclosures, the Properties shall remain subject to the Mortgages to
secure payment of sums secured by the Mortgages and not previously
recovered.
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(c) Lender shall have the right from time to time to sever the Note
and the other Loan Documents into one or more separate notes, mortgages
and other security documents (the "Severed Loan Documents") in such
denominations as Lender shall determine in its sole discretion for
purposes of evidencing and enforcing its rights and remedies provided
hereunder. Borrower shall execute and deliver to Lender from time to time,
promptly after the request of Lender, a severance agreement and such other
documents as Lender shall request in order to effect the severance
described in the preceding sentence, all in form and substance reasonably
satisfactory to Lender. Borrower hereby absolutely and irrevocably
appoints Lender following the occurrence of an Event of Default as its
true and lawful attorney, coupled with an interest, in its name and stead
to make and execute all documents necessary or desirable to effect the
aforesaid severance, Borrower ratifying all that its said attorney shall
do by virtue thereof; provided, however, Lender shall not make or execute
any such documents under such power until three (3) days after notice has
been given to Borrower by Lender of Lender's intent to exercise its rights
under such power. Borrower shall not be obligated to pay any costs or
expenses incurred in connection with the preparation, execution, recording
or filing of the Severed Loan Documents, and the Severed Loan Documents
shall not contain any representations, warranties or covenants not
contained in the Loan Documents and any such representations and
warranties contained in the Severed Loan Documents will be given by
Borrower only as of the Closing Date.
Section 8.3 Remedies Cumulative; Waivers.
The rights, powers and remedies of Lender under this Agreement shall be
cumulative and not exclusive of any other right, power or remedy which
Lender may have against Borrower pursuant to this Agreement or the other
Loan Documents, or existing at law or in equity or otherwise. Lender's
rights, powers and remedies may be pursued singly, concurrently or
otherwise, at such time and in such order as Lender may determine in
Lender's sole discretion. No delay or omission to exercise any remedy,
right or power accruing upon an Event of Default shall impair any such
remedy, right or power or shall be construed as a waiver thereof, but any
such remedy, right or power may be exercised from time to time and as
often as may be deemed expedient. A waiver of one Default or Event of
Default with respect to Borrower shall not be construed to be a waiver of
any subsequent Default or Event of Default by Borrower or to impair any
remedy, right or power consequent thereon.
IX. SPECIAL PROVISIONS
Section 9.1 Sale of Notes and Securitization.
At the request of the holder of the Note and, to the extent not already
required to be provided by Borrower under this Agreement, Borrower shall
cooperate with Lender to allow Lender to satisfy the market standards to
which the holder of the Note customarily adheres or which may be
reasonably required in the marketplace or by the Rating Agencies in
connection with the sale of the Note or participations therein or the
first successful securitization (such sale and/or securitization, the
"Securitization") of rated single or multi
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<PAGE>
class securities (the "Securities-) secured by or evidencing ownership
interests in the Note and the Mortgages. In this regard Borrower shall:
(a) (i) provide such financial and other information with respect to
the Properties, Borrower and the Manager, (ii) provide budgets relating to
the Properties and (iii) to perform or permit or cause to be performed or
permitted such site inspection, appraisals, market studies, environmental
reviews and reports (Phase I's and, if appropriate, Phase II's),
engineering reports and other due diligence investigations of the
Properties, as may be reasonably requested by the holder of the Note or
the Rating Agencies or as may be necessary or appropriate in connection
with the Securitization (the "Provided Information"), together, if
customary, with appropriate verification and/or consents of the Provided
Information through letters of auditors or opinions of counsel of
independent attorneys acceptable to Lender and the Rating Agencies;
(b) cause counsel to render opinions, which may be relied upon by the
holder of the Note, the Rating Agencies and their respective counsel,
agents and representatives, as to non-consolidation, fraudulent
conveyance, and true sale and/or lease or any other opinion customary in
Securitization transactions, which counsel and opinions shall be
reasonably satisfactory to the holder of the Note and the Rating Agencies;
(c) Take such representations and warranties as of the closing date
of the Securitization with respect to the Properties, Borrower, and the
Loan Documents as are consistent with the representations and warranties
made in the Loan Documents; and
(d) execute such amendments to the Loan Documents and organizational
documents as may be requested by the holder of the Note or the Rating
Agencies or otherwise to effect the Securitization; provided, however,
that Borrower shall not be required to modify or amend any Loan Document
if such modification or amendment would (i) change the interest rate, the
stated maturity or the amortization of principal set forth in the Note, or
(ii) modify or amend any other material economic term of the Loan.
All reasonable out-of-pocket third party costs and expenses incurred by
Borrower in connection with complying with requests made under this
Section 9.1 shall be paid by Lender.
Section 9.2 Securitization.
Borrower understands that certain of the Provided Information may be
included in disclosure documents in connection with the Securitization,
including, without limitation, a prospectus, prospectus supplement or
private placement memorandum (each, a "Disclosure Document") and may also
be included in filings with the Securities and Exchange Commission
pursuant to the Securities Act of 1933, as amended (the "Securities Act"),
or the Securities and Exchange Act of 1934, as amended (the "Exchange
Act"), or provided or made available to investors or prospective investors
in the Securities, the Rating Agencies, and service providers relating to
the Securitization. In the event that the Disclosure Document is required
to be revised prior to the sale of all Securities, Borrower will cooperate
with the holder of the
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<PAGE>
Note in updating the Disclosure Document by providing all current
information necessary to keep the Disclosure Document accurate and
complete in all material respects.
Section 9.3 Rating Surveillance.
Lender, at its option, may retain the Rating Agencies to provide rating
surveillance services on any certificates issued in a Securitization. Such
rating surveillance will be at the expense of Lender (the "Rating
Surveillance Charge").
Section 9.4 Exculpation.
Subject to the qualifications below, Lender shall not enforce the
liability and obligation of Borrower to perform and observe the
obligations contained in the Note, this Agreement, the Mortgages or the
other Loan Documents by any action or proceeding wherein a money judgment
shall be sought against Borrower, except that Lender may bring a
foreclosure action, an action for specific performance or any other
appropriate action or proceeding to enable Lender to enforce and realize
upon its interest under the Note, this Agreement, the Mortgages and the
other Loan Documents, or in the Properties, the Rents following an Event
of Default, or any other collateral given to Lender pursuant to the Loan
Documents; provided, however, that, except as specifically provided
herein, any judgment in any such action or proceeding shall be enforceable
against Borrower only to the extent of Borrower's interest in the
Properties, in the Rents following an Event of Default and in any other
collateral given to Lender, and Lender, by accepting the Note, this
Agreement, the Mortgages and the other Loan Documents, agrees that it
shall not sue for, seek or demand any deficiency judgment against Borrower
in any such action or proceeding under or by reason of or under or in
connection with the Note, this Agreement, the Mortgages or the other Loan
Documents. The provisions of this section shall not, however, (a)
constitute a waiver, release or impairment of any obligation evidenced or
secured by any of the Loan Documents; (b) impair the right of Lender to
name Borrower as a party defendant in any action or suit for foreclosure
and sale under any of the Mortgages; (c) affect the validity or
enforceability of or any guaranty made in connection with the Loan or any
of the rights and remedies of Lender thereunder; (d) impair the right of
Lender to obtain the appointment of a receiver; (e) impair the enforcement
of any of the Assignments of Leases following an Event of Default; (f)
constitute a prohibition against Lender commencing any other appropriate
action or proceeding in order for Lender to exercise its remedies against
all of the Properties; or (g) constitute a waiver of the right of Lender
to enforce the liability and obligation of Borrower, by money judgment or
otherwise, to the extent of any loss, damage, cost, expense, liability,
claim or other obligation incurred by Lender (including attorneys' fees
and costs reasonably incurred) arising Out of or in connection with the
following:
(i) fraud or intentional misrepresentation by Borrower or any guarantor
in connection with the Loan;
(ii) the-gross negligence or willful misconduct of Borrower;
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<PAGE>
(iii) the breach of any representation, warranty, covenant or
indemnification provision in the Environmental Indemnity or in the
Mortgages concerning environmental laws, hazardous substances and asbestos
and any indemnification of Lender with respect thereto in either document;
(iv) the removal or disposal of any portion of the Properties after an
Event of Default;
(v) the misapplication or conversion by Borrower of (A) any insurance
proceeds paid by reason of any loss, damage or destruction to the
Properties which are not applied by Borrower in accordance with this Loan
Agreement, (B) any awards or other amounts received in connection with the
condemnation of all or a portion of the Properties which are not applied
by Borrower in accordance with this Loan Agreement, or (C) any Rents
following an Event of Default;
(vi) failure to pay charges for labor or materials or other charges that
can create liens on any portion of the Properties; and
(vii) any security deposits, advance deposits or any other deposits
collected with respect to the Properties which are not delivered to Lender
upon a foreclosure of the Properties or action in lieu thereof, except to
the extent any such security deposits were applied in accordance with the
terms and conditions of any of the Leases prior to the occurrence of the
Event of Default that gave rise to such foreclosure or action in lieu
thereof.
Notwithstanding anything to the contrary in this Agreement, the Note or
any of the Loan Documents, (A) Lender shall not be deemed to have waived
any right which Lender may have under Section 506(a), 506(b), llll(b) or
any other provisions of the U.S. Bankruptcy Code to file a claim for the
full amount of the Debt secured by the Mortgages or to require that all
collateral shall continue to secure all of the Debt owing to Lender in
accordance with the Loan Documents, and (B) the Debt shall be fully
recourse to Borrower in the event that the first full monthly payment of
principal and interest under the Note is not paid when due.
Section 9.5 Termination of Manager.
If (a) the amounts evidenced by the Note have been accelerated pursuant
to Section 8.1(b) hereof, (b) at the Anticipated Repayment Date, the Debt
is not repaid in full, (c) the Manager shall become insolvent, or (d) the
Manager is in default under the terms of the Management Agreement beyond
any applicable grace or cure period, Borrower shall, at the request of
Lender, terminate the Management Agreement and replace the Manager with a
manager reasonably approved by Lender on terms and conditions reasonably
satisfactory to Lender, it being understood and agreed that the management
fee for such replacement manager shall not exceed then prevailing market
rates.
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<PAGE>
Section 9.6 Servicer.
At the option of Lender, the Loan may be serviced by a servicer/trustee
(the "Servicer") selected by Lender and Lender may delegate all or any
portion of its responsibilities under this Agreement and the other Loan
Documents to the Servicer pursuant to a servicing agreement (the
"Servicing Agreement") between Lender and Servicer. Lender shall be
responsible for any set-up fees or any other costs relating to or arising
under the Servicing Agreement
X. MISCELLANEOUS.
Section 10.1 Survival.
This Agreement and all covenants, agreements, representations and
warranties made herein and in the certificates delivered pursuant hereto
shall survive the making by Lender of the Loan and the execution and
delivery to Lender of the Note, and shall continue in full force and
effect so long as all or any of the Debt is outstanding and unpaid unless
a longer period is expressly set forth herein or in the other Loan
Documents. Whenever in this Agreement any of the parties hereto is
referred to, such reference shall be deemed to include the legal
representatives, successors and assigns of such party. All covenants,
promises and agreements in this Agreement, by or on behalf of Borrower,
shall inure to the benefit of the legal representatives, successors and
assigns of Lender.
Section 10.2 Lender's Discretion.
Whenever pursuant to this Agreement, Lender exercises any right given
to it to approve or disapprove, or any arrangement or term is to be
satisfactory to Lender, the decision of Lender to approve or disapprove or
to decide whether arrangements or terms are satisfactory or not
satisfactory shall (except as is otherwise specifically herein provided)
be in the sole discretion of Lender and shall be final and conclusive.
Section 10.3 Governing Law.
(A) THIS AGREEMENT WAS NEGOTIATED IN THE STATE OF NEW YORK, THE LOAN
WAS MADE BY LENDER AND ACCEPTED BY BORROWER IN THE STATE OF NEW YORK, AND
THE PROCEEDS OF THE NOTE DELIVERED PURSUANT HERETO WERE DISBURSED FROM THE
STATE OF NEW YORK, WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL
RELATIONSHIP TO THE PARTIES AND TO THE UNDERLYING TRANSACTION EMBODIED
HEREBY, AND IN ALL RESPECTS, INCLUDING, WITHOUT LIMITING Tm; GENERALITY OF
THE FOREGOING, MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS
AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE
TO CONTRACTS MADE AND PERFORMED IN SUCH STATE
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<PAGE>
(WITHOUT REGARD TO PRINCIPLES OF CONFLICT LAWS) AND ANY APPLICABLE LAW OF
THE UNITED STATES OF AMERICA, EXCEPT THAT AT ALL TIMES THE PROVISIONS FOR
THE CREATION, PERFECTION, AND ENFORCEMENT OF THE LIENS AND SECURITY
INTERESTS CREATED PURSUANT HERETO AND PURSUANT TO THE OTHER LOAN DOCUMENTS
SHALL BE GOVERNED BY AND CONSTRUED ACCORDING TO THE LAW OF THE STATE IN
WHICH THE APPLICABLE INDIVIDUAL PROPERTY IS LOCATED, IT BEING UNDERSTOOD
THAT, TO Tom; EXTENT PERMITTED BY THE LAW OF SUCH STATE, 'l'0; LAW OF THE
STATE OF NEW YORK SHALL GOVERN THE CONSTRUCTION, VALIDITY AND
ENFORCEABILITY OF ALL LOAN DOCUMENTS AND ALL OF THE OBLIGATIONS ARISING
HEREUNDER OR THEREUNDER. TO THE FULLEST EXTENT PERMITTED BY LAW, BORROWER
HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY CLAIM TO ASSERT THAT THE
LAW OF ANY OTHER JURISDICTION GOVERNS THIS
AGREEMENT AND THE NOTE, AND THIS AGREEMENT AND THE NOTE SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK PURSUANT
TO SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.
(B) ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST LENDER OR BORROWER
ARISING OUT OF OR RELATING TO THIS AGREEMENT MAY AT LENDER'S OPTION BE
INSTITUTED IN ANY FEDERAL OR STATE COURT IN THE CITY OF NEW YORK, COUNTY
OF NEW YORK, PURSUANT TO SECTION 5-1402 OF THE NEW YORK GENERAL
OBLIGATIONS LAW AND BORROWER WAIVES ANY OBJECTIONS WHICH IT MAY NOW OR
HEREAFTER HAVE BASED ON VENUE AND/OR FORUM NON CONVENIENS OF ANY SUCH
SUIT, ACTION OR PROCEEDING, AND BORROWER HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION OR PROCEEDING. BORROWER
DOES HEREBY DESIGNATE AND APPOINT:
CT CORPORATION SYSTEMS
1633 BROADWAY
NEW YORK, NEW YORK 10019
AS ITS AUTHORIZED AGENT TO ACCEPT AND ACKNOWLEDGE ON ITS BEHALF SERVICE OF
ANY AND ALL PROCESS WHICH MAY BE SERVED IN ANY SUCH SUIT, ACTION OR
PROCEEDING IN ANY FEDERAL OR STATE COURT IN NEW YORK, NEW YORK, AND AGREES
THAT SERVICE OF PROCESS UPON SAID AGENT AT SAID ADDRESS AND WRITTEN NOTICE
OF SAID SERVICE MAILED OR DELIVERED TO BORROWER IN THE MANNER PROVIDED
HEREIN SHALL BE DEEMED IN EVERY RESPECT El't'~CTIVE SERVICE OF PROCESS
UPON BORROWER IN ANY SUCH SUIT, ACTION OR PROCEEDING IN THE STATE OF NEW
YORK. BORROWER (I) SHALL GIVE
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<PAGE>
PROMPT NOTICE TO LENDER OF ANY CHANGED ADDRESS OF ITS AUTHORIZED AGENT
HEREUNDER, (II) MAY AT ANY TIME AND FROM TIME TO TECHIE A SUBSTITUTE
AUTHORIZED AGENT WITH AN OFFICE IN NEW YORK, NEW YORK (WHICH SUBSTITUTE
AGENT AND OFFICE SHALL BE DESIGNATED AS THE PERSON AND ADDRESS FOR SERVICE
OF PROCESS), AND (III) SHALL PROMPTLY DESIGNATE SUCH A SUBSTITUTE IF ITS
AUTHORIZED AGENT CEASES TO HAVE AN OF FICE IN NEW YORK, NEW YORK OR IS
DISSOLVED WITHOUT LEAVING A SUCCESSOR.
Sction 10.4 Modification. Waiver in Writing.
No modification, amendment, extension, discharge, termination or waiver
of any provision of this Agreement, or of the Note, or of any other Loan
Document, nor consent to any departure by Borrower therefrom, shall in any
event be effective unless the same shall be in a writing signed by the
party against whom enforcement is sought, and then such waiver or consent
shall be effective only in the specific instance, and for the purpose, for
which given. Except as otherwise expressly provided herein, no notice to,
or demand on Borrower, shall entitle Borrower to any other or future
notice or demand in the same, similar or other circumstances.
Section 10.5 Delay Not a Waiver.
Neither any failure nor any delay on the part of Lender in insisting upon
strict performance of any term, condition, covenant or agreement, or
exercising any right, power, remedy or privilege hereunder, or under the
Note or under any other Loan Document, or any other instrument given as
security therefor, shall operate as or constitute a waiver thereof, nor
shall a single or partial exercise thereof preclude any other future
exercise, or the exercise of any other right, power, remedy or privilege.
In particular, and not by way of limitation, by accepting payment after
the due date of any amount payable under this Agreement, the Note or any
other Loan Document, Lender shall not be deemed to have waived any right
either to require prompt payment when due of all other amounts due under
this Agreement, the Note or the other Loan Documents, or to declare a
default for failure to effect prompt payment of any such other amount.
Section 10.6 Notices.
All notices, consents, approvals and requests required or permitted
hereunder or under any other Loan Document shall be given in writing and
shall be effective for all purposes if hand delivered or sent by (a)
certified or registered United States mail, postage prepaid, return
receipt requested or (b) expedited prepaid delivery service, either
commercial or United States Postal Service, with proof of attempted
delivery, and by telecopier (with answer back acknowledged), addressed as
follows (or at such other address and Person as shall be designated from
time to time by any party hereto, as the case may be, in a written notice
to the other parties hereto in the manner provided for in this Section):
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<PAGE>
If to Lender: Lehman Brothers Holdings Inc.,
Three World Financial Center, 12th Floor
Commercial Mortgage Surveillance Group
New York, New York 10285
Attention: Larry Kravetz
Facsimile No. 526-8679
with a copy to: Cadwalader, Wickersham & Taft
100 Maiden T one
New York, New York 10038
Attention: Fredric Altschuler, Esq.
Facsimile No. (212) 504-6666
If to Borrower: Inland Real Estate LB I LLC
2901 Butterfield Road
Oak Brook, IL 60523
Attention: Raymond Petersen
Facsimile No. (630) 2184900
with a copy to: The Inland Group
2901 Butterfield Road
Oak Brook, IL 60523
Attention: Gary Pechter, Esq.
Facsimile No. (630) 2184900
A notice shall be deemed to have been given: in the case of hand delivery,
at the time of delivery; in the case of registered or certified mail, when
delivered or the first attempted delivery on a Business Day; or in the
case of expedited prepaid delivery and telecopy, upon the first attempted
delivery on a Business Day.
Section 10.7 Trial by Jury.
BORROWER HEREBY AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE
TRIABLE OF RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO
THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO
THE LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN
CONNECTION THEREVVITH. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN
KNOWINGLY AND VOLUNTARILY BY BORROWER, AND IS INTENDED TO ENCOMPASS
INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO VV~CH THE RIGHT TO A TRIAL
BY JURY WOULD OTHERWISE ACCRUE. LENDER IS HEREBY AUTHORIZED TO FILE A COPY
OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER
BY BORROWER.
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<PAGE>
Section 10.8 Heading.
The Article and/or Section headings and the Table of Contents in this
Agreement are included herein for convenience of reference only and shall
not constitute a part of this Agreement for any other purpose.
Section 10.9 Severability.
Wherever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Agreement.
Section 10.10 Preferences.
Lender shall have the continuing and exclusive right to apply or
reverse and reapply any and all payments by Borrower to any portion of the
obligations of Borrower hereunder. To the extent Borrower makes a payment
or payments to Lender, which payment or proceeds or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set
aside or required to be repaid to a trustee, receiver or any other party
under any bankruptcy law, state or federal law, common law or equitable
cause, then, to the extent of such payment or proceeds received, the
obligations hereunder or part thereof intended to be satisfied shall be
revived and continue in full force and effect, as if such payment or
proceeds had not been received by Lender.
Section 10.11 Waiver of Notice.
Borrower shall not be entitled to any notices of any nature whatsoever
from Lender except with respect to matters for which this Agreement or the
other Loan Documents specifically and expressly provide for the giving of
notice by Lender to Borrower and except with respect to matters for which
Borrower is not, pursuant to applicable Legal Requirements, permitted to
waive the giving of notice. Borrower hereby expressly waives the right to
receive any notice from Lender with respect to any matter for which this
Agreement or the other Loan Documents do not specifically and expressly
provide for the giving of notice by Lender to Borrower.
Section 10.12 Remedies of Borrower.
In the event that a claim or adjudication is made that Lender or its
agents have acted unreasonably or unreasonably delayed acting in any case
where by law or under this Agreement or the other Loan Documents, Lender
or such agent, as the case may be, has an obligation to act reasonably or
promptly, Borrower agrees that neither Lender nor its agents shall be
liable for any monetary damages, and Borrower's sole remedies shall be
limited to commencing an action seeking injunctive relief or declaratory
judgment. The parties hereto
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<PAGE>
agree that any action or proceeding to determine whether Lender has acted
reasonably shall be determined by an action seeking declaratory judgment.
Section 10.13 Expenses: Indemnity.
(a) Borrower covenants and agrees to pay or, if Borrower fails to
pay, to reimburse, Lender upon receipt of written notice from Lender for
all reasonable costs and expenses (including reasonable attorneys' fees
and disbursements) incurred by Lender in connection with (i) the
preparation, negotiation, execution and delivery of this Agreement and the
other Loan Documents and the consDation of the transactions contemplated
hereby and thereby and all the costs of furnishing all opinions by counsel
for Borrower (including without limitation any opinions requested by
Lender as to any legal matters arising under this Agreement or the other
Loan Documents with respect to the Properties); (ii) Borrower's ongoing
performance of and compliance with Borrower's respective agreements and
covenants contained in this Agreement and the other Loan Documents on its
part to be performed or complied with after the Closing Date, including,
without limitation, confirming compliance with environmental and insurance
requirements; (iii) Lender's ongoing performance and compliance with all
agreements and conditions contained in this Agreement and the other Loan
Documents on its part to be performed or complied with after the Closing
Date; (iv) the negotiation, preparation, execution, delivery and
administration of any consents, amendments, waivers or other modifications
to this Agreement and the other Loan Documents and any other documents or
matters reasonably requested by Lender; (v) securing Borrower's compliance
with any requests made pursuant to the provisions of this Agreement; (vi)
the filing and recording fees and expenses, title insurance and reasonable
fees and expenses of counsel for providing to Lender all required legal
opinions, and other similar expenses incurred in creating and perfecting
the Liens in favor of Lender pursuant to this Agreement and the other Loan
Documents; (vii) enforcing or preserving any rights, in response to third
party claims or the prosecuting or defending of any action or proceeding
or other litigation, in each case against, under or affecting Borrower,
this Agreement, the other Loan Documents, the Properties, or any other
security given for the Loan; and (viii) enforcing any obligations of or
collecting any payments due from Borrower under this Agreement, the other
Loan Documents or with respect to the Properties or in connection with any
refinancing or restructuring of the credit arrangements provided under
this Agreement in the nature of a "work-out" or of any insolvency or
bankruptcy proceedings; provided, however, that Borrower shall not be
liable for the payment of any such costs and expenses to the extent the
same arise by reason of the gross negligence, illegal acts, fraud or
willful misconduct of Lender. Any cost and expenses due and payable to
Lender may be paid from any amounts in the Lockbox Account.
(b) Borrower shall indemnify, defend and hold harmless Lender from
and against any and all other liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims, costs, expenses and
disbursements of any kind or nature whatsoever (including, without
limitation, the reasonable fees and disbursements of counsel for Lender in
connection with any investigative, administrative or judicial proceeding
commenced or threatened, whether or not Lender shall be designated a party
thereto), that may be imposed on, incurred by, or asserted against Lender
in any manner relating to or arising out of (i) any breach by
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Borrower of its obligations under, or any material misrepresentation by
Borrower contained in, this
Agreement or the other Loan Documents, or (ii) the use or intended use
of the proceeds of the Loan
(collectively, the "Indemnified Liabilities"); provided, however, that
Borrower shall not have any obligation
to Lender hereunder to the extent that such Indemnified Liabilities
arise from the gross negligence, illegal
acts, fraud or willful misconduct of Lender. To the extent that the
undertaking to indemnify, defend and
hold harmless set forth in the preceding sentence may be unenforceable
because it violates any law or
public policy, Borrower shall pay the maximum portion that it is
permitted to pay and satisfy under
applicable law to the payment and satisfaction of all Indemnified
Liabilities incurred by Lender.
Section 10.14 Schedules Incorporated.
The Schedules annexed hereto are hereby incorporated herein as a part
of this Agreement with the
same effect as if set forth in the body hereof.
Section 10.15 Offsets, Counterclaims and Defenses.
Any assignee of Lender's interest in and to this Agreement, the Note
and the other Loan
Documents shall take the same free and clear of all offsets,
counterclaims or defenses which are unrelated
to such documents which Borrower may otherwise have against any assignor
of such documents, and no
such unrelated counterclaim or defense shall be interposed or asserted
by Borrower in any action or
proceeding brought by any such assignee upon such documents and any such
right to interpose or assert
any such unrelated offset, counterclaim or defense in any such action or
proceeding is hereby expressly
waived by Borrower.
Section 10.16 No Joint Venture or Partnership; No Third Party
Beneficiaries.
(a) Borrower and Lender intend that the relationships created
(b) hereunder and under the other Loan
Documents be solely that of borrower and lender. Nothing herein or
therein is intended to create a joint
venture, partnership, tenancy-in-common, or joint tenancy relationship
between Borrower and Lender nor
to grant Lender any interest in the Properties other than that of
mortgagee, beneficiary or lender.
(c) This Agreement and the other Loan Documents are solely for the
(d) benefit of Lender and
Borrower and nothing contained in this Agreement or the other Loan
Documents shall be deemed to confer
upon anyone other than Lender and Borrower any right to insist upon or
to enforce the performance or observance of
any of the obligations contained herein or therein. All conditions to
the obligations of Lender to make the
Loan hereunder are imposed solely and exclusively for the benefit of
Lender and no other Person shall
have standing to require satisfaction of such conditions in accordance
with their terms or be entitled to
assume that Lender will refuse to make the Loan in the absence of strict
compliance with any or all thereof
and no other Person shall under any circumstances be deemed to be a
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<PAGE>
beneficiary of such conditions, any or all of which may be freely
waived in whole or in part by Lender if,
in Lender's sole discretion, Lender deems it advisable or desirable to
do so.
Section 10.17 Publicity.
All news releases, publicity or advertising by Borrower or their
Affiliates through any media
intended to reach the general public which refers to the Loan Documents
or the financing evidenced by the
Loan Documents, to Lender, Lehman, or any of their Affiliates shall be
subject to the prior written approval
of Lender. All news releases, publicity or advertising by Lender through
any media intended to reach the
general public which refers solely to the Borrower or to the Loan made
by the Lender to the Borrower shall
be subject to the prior written approval of Borrower, provided however,
the foregoing shall not apply to
Provided Information included in disclosure documents in connection with
a Securitization.
Section 10.18 Cross-Default; Cross-Collateralization; Waiver of
Marshalling of Assets.
(a) Borrower acknowledges that Lender has made the Loan to Borrower
(b) upon the security of its
collective interest in the Properties and in reliance upon the aggregate
of the Properties taken together
being of greater value as collateral security than the sum of each
individual Property taken separately.
Borrower agrees that the Mortgages are and will be cross-collateralized
and cross-defaulted with each other
so that (i) an Event of Default under any of the Mortgages shall
constitute an Event of Default under each
of the other Mortgages which secure the Note; (ii) an Event of Default
under the Note or this Loan
Agreement shall constitute an Event of Default under each Mortgage; and
(iii) each Mortgage shall
constitute security for the Note as if a single blanket lien were placed
on all of the Properties as security for
the Note.
(c) To the fullest extent permitted by law, Borrower, for itself
(d) and
(e) its successors and assigns,
waives all rights to a marshalling of the assets of Borrower, Borrower's
partners and others with interests in
Borrower, and of the Properties, or to a sale in inverse order of
alienation in the event of foreclosure of all
or any of the Mortgages, and agrees not to assert any right under any
laws pertaining to the marshalling of
assets, the sale in inverse order of alienation, homestead exemption,
the administration of estates of
decedents, or any other matters whatsoever to defeat, reduce or affect
the right of Lender under the Loan
Documents to a sale of the Properties for the collection of the Debt
without any prior or different resort for
collection or of the right of Lender to the payment of the Debt out of
the net proceeds of the Properties in
preference to every other claimant whatsoever. In addition, Borrower,
for itself and its successors and
assigns, waives in the event of foreclosure of any or all of the
Mortgages, any equitable right otherwise
available to Borrower which would require the separate sale of the
Properties or require Lender to exhaust
its remedies against any Individual Property or any combination of the
Properties before proceeding
against any other Individual Property or combination of Properties; and
further in the event of such
foreclosure Borrower does hereby expressly consents to and authorizes,
at the option of Lender, the
foreclosure and sale either separately or together of any combination of
the Properties.
-91-
-<PAGE>
Section 10.19 Waiver of Counterclaim.
Borrower hereby waives the right to assert a counterclaim, other than
a compulsory counterclaim,
in any action or proceeding brought against it by Lender or its agents.
Section 10.20 Conflict: Construction of Documents: Reliance.
In the event of any conflict between the provisions of this Loan
Agreement and any of the other
Loan Documents, the provisions of this Loan Agreement shall control. The
parties hereto acknowledge that
they were represented by competent counsel in connection with the
negotiation, drafting and execution of
the Loan Documents and that such Loan Documents shall not be subject to
the principle of construing their
meaning against the party which drafted same. Borrower acknowledges
that, with respect to the Loan,
Borrower shall rely solely on its own judgment and advisors in entering
into the Loan without relying in
any manner on any statements, representations or recommendations of
Lender or any parent, subsidiary or
Affiliate of Lender. Lender shall not be subject to any limitation
whatsoever in the exercise of any rights or
remedies available to it under any of the Loan Documents or any other
agreements or instruments which
govern the Loan by virtue of the ownership by it or any parent,
subsidiary or Affiliate of Lender of any
equity interest any of them may acquire in Borrower, and Borrower hereby
irrevocably waives the right to
raise any defense or take any action on the basis of the foregoing with
respect to Lender's exercise of any
such rights or remedies. Borrower acknowledges that Lender engages in
the business of real estate
financings and other real estate transactions and investments which may
be viewed as adverse to or
competitive with the business of Borrower or its Affiliates.
Section 10.21 Brokers and Financial Advisors.
Borrower hereby represents that it has dealt with no financial
advisors, brokers, underwriters,
placement agents, agents or finders in connection with the transactions
contemplated by this Agreement.
Borrower hereby agrees to indemnify, defend and hold Lender harmless
from and against any and all
claims, liabilities, costs and expenses of any kind (including Lender's
attorneys' fees and expenses) in any
way relating to or arising from a claim by any Person that such Person
acted on behalf of Borrower or
Lender in connection with the transactions contemplated herein. The
provisions of this Section 10.21 shall
survive the expiration and termination of this Agreement and the payment
of the Debt.
Section 10.22 Prior Agreements.
This Agreement and the other Loan Documents contain the entire
agreement of the parties hereto
and thereto in respect of the transactions contemplated hereby and
thereby, and all prior agreements or
understandings among or between such parties, whether oral or written,
including, without limitation, the
Commitment Letter dated July 29, 1998 (as amended) between Borrower and
Lehman Brothers Holdings
Inc. are superseded by the terms of this Agreement and the other Loan
Documents and unless specifically
set forth in a writing
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<PAGE>
contemporaneous herewith the terms, conditions and provisions of such
prior agreement do not survive
execution of this Agreement.
Section 10.23 Transfer of Loan.
In the event that Lender transfers the Loan, Borrower shall continue
to make payments at the
place set forth in the Note until such time that Borrower is notified in
writing by Lender that payments are
to be made at another place.
-93-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Loan
Agreement to be duly
executed by their duly authorized representatives, all as of the day and
year first above written.
INLAND REAL ESTATE LB I LLC,
a Delaware limited liability company
By: INLAND REAL ESTATE LB I
CORPORATION, a Delaware
corporation, its member
By: /s/ MARK ZALATORIS
------------------------------------
Name: Mark Zalatoris
Title: Vice President
LEHMAN BROTHERS HOLDINGS INC.,
DOING BUSINESS AS LEHMAN CAPITAL,
A DIVISION OF LEHMAN BROTHERS
HOLDINGS INC.
By: /s/ LARRY J. KRAVETZ
------------------------------------
Name: Larry J. Kravetz
Title: Authorized Signatory
Schedules Omitted
PROMISSORY NOTE
$54,600,000.00 New York, New York
September 25, 1998
FOR VALUE RECEIVED INLAND REAL ESTATE LB I LLC, a Delaware limited
liability company, as maker, having its principal place of business at 2901
Butterfield Road, Oak Brook, Illinois 60523 ("Borrower"), hereby unconditionally
promises to pay to the order of LEHMAN BROTHERS HOLDINGS INC., a Delaware
corporation, doing business as LEHMAN CAPITAL, A DIVISION OF LEHMAN BROTHERS
HOLDINGS INC., as payee, having an address at Three World Financial Center, New
York, New York 10285 ("Lender"), or at such other place as the holder hereof may
from time to time designate in writing, the principal sum of FIFTY-FOUR MILLION
SIX HUNDRED THOUSAND AND NO/100 DOLLARS ($54,600,000.00), in lawful money of the
United States of America with interest thereon to be computed from the date of
this Note at the Applicable Interest Rate, and to be paid in accordance with the
terms of this Note and that certain Loan Agreement dated as of September 25,
1998 between Borrower and Lender (the "Loan Agreement"). All capitalized terms
not defined herein shall have the respective meanings set forth in the Loan
Agreement.
ARTICLE 1: PAYMENT TERMS
Borrower agrees to pay the principal sum of this Note and interest on the
unpaid principal sum of this Note from time to time outstanding at the rates and
at the times specified in the Loan Agreement and the outstanding balance of the
principal sum of this Note and all accrued and unpaid interest thereon shall be
due and payable on the Maturity Date.
ARTICLE 2: DEFAULT AND ACCELERATION
The Debt shall without notice become immediately due and payable at the
option of Lender if any payment required in this Note is not paid on or prior to
the date when due or if not paid on the Maturity Date or on the happening of any
other Event of Default.
ARTICLE 3: LOAN DOCUMENTS
This Note is secured by the Mortgage and the other Loan Documents. All of
the terms, covenants and conditions contained in the Loan Agreement, the
Mortgage and the other Loan Documents are hereby made part of this Note to the
same extent and with the same force as if they were fully set forth herein. In
the event of a conflict or inconsistency between the terms of this Note and the
Loan Agreement, the terms and provisions of the Loan Agreement shall govern.
<PAGE>
ARTICLE 4: SAVINGS CLAUSE
Notwithstanding anything to the contrary, (a) all agreements and
communications between Borrower and Lender are hereby and shall automatically be
limited so that, after taking into account all amounts deemed interest, the
interest contracted for, charged or received by Lender shall never exceed the
maximum lawful rate or amount, (b) in calculating whether any interest exceeds
the lawful maximum, all such interest shall be amortized, prorated, allocated
and spread over the full amount and term of all principal indebtedness of
Borrower to Lender, and (c) if through any contingency or event, Lender receives
or is deemed to receive interest in excess of the lawful maximum, any such
excess shall be deemed to have been applied toward payment of the principal of
any and all then outstanding indebtedness of Borrower to Lender, or if there is
no such indebtedness, shall immediately be returned to Borrower.
ARTICLE 5: NO ORAL CHANGE
This Note may not be modified, amended, waived, extended, changed,
discharged or terminated orally or by any act or failure to act on the part of
Borrower or Lender, but only by an agreement in writing signed by the party
against whom enforcement of any modification, amendment, waiver, extension,
change, discharge or termination is sought.
ARTICLE 6: WAIVERS
Borrower and all others who may become liable for the payment of all or any
part of the Debt do hereby severally waive presentment and demand for payment,
notice of dishonor, notice of intention to accelerate, notice of acceleration,
protest and notice of protest and non-payment and all other notices of any kind.
No release of any security for the Debt or extension of time for payment of this
Note or any installment hereof, and no alteration, amendment or waiver of any
provision of this Note, the Loan Agreement or the other Loan Documents made by
agreement between Lender or any other Person shall release, modify, amend,
waive, extend, change, discharge, terminate or affect the liability of Borrower,
and any other Person who may become liable for the payment of all or any part of
the Debt, under this Note, the Loan Agreement or the other Loan Documents. No
notice to or demand on Borrower shall be deemed to be a waiver of the obligation
of Borrower or of the right of Lender to take further action without further
notice or demand as provided for in this Note, the Loan Agreement or the other
Loan Documents. If Borrower is a partnership, the agreements iherein contained
shall remain in force and applicable, notwithstanding any changes in the
individuals comprising the partnership, and the term"Borrower,"as used herein,
shall include any alternate or successor partnership, but any predecessor
partnership and their partners shall not thereby be released from any liability.
If Borrower is a corporation, the agreements contained herein shall remain in
full force and applicable notwithstanding any changes in the shareholders
comprising, or the officers and directors relating to, the corporation, and the
term "Borrower" as used herein, shall include any alternative or successor
corporation, but any predecessor corporation shall not be relieved of liability
hereunder. (Nothing in the foregoing sentence shall be construed as a consent
to, or a waiver of, any prohibition or restriction on
-2 -
<PAGE>
transfers of interests in such partnership which may be set forth in the Loan
Agreement, the Mortgage or any other Loan Document.)
ARTICLE 7: TRANSFER
Upon the transfer of this Note, Borrower hereby waiving notice of any such
transfer except as provided in the Loan Agreement, Lender may deliver all the
collateral mortgaged, granted, pledged or assigned pursuant to the Loan
Documents, or any part thereof, to the transferee who shall thereupon become
vested with all the rights herein or under applicable law given to Lender with
respect thereto, and Lender shall from that date forward forever be relieved and
fully discharged from any liability or responsibility in the matter; but Lender
shall retain all rights hereby given to it with respect to any liabilities and
the collateral not so transferred.
ARTICLE 8: EXCULPATION
The provisions of Section 9.4 of the Loan Agreement are hereby incorporated
by reference into this Note to the same extent and with the same force as if
fully set forth herein.
ARTICLE 9: GOVERNING LAW
(A) THIS NOTE WAS NEGOTIATED IN THE STATE OF NEW YORK, AND MADE BY BORROWER
AND ACCEPTED BY LENDER IN THE STATE OF NEW YORK, AND THE PROCEEDS OF THIS NOTE
WERE DISBURSED FROM THE STATE OF NEW YORK, WHICH STATE THE PARTIES AGREE HAS A
SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND TO THE UNDERLYING TRANSACTION
EMBODIED HEREBY, AND IN ALL RESPECTS, INCLUDING, WITHOUT LIMITING THE GENERALITY
OF THE FOREGOING, MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS NOTE
AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE
AND PERFORMED IN SUCH STATE (WITHOUT REGARD TO PRINCIPLES OF CONFLICT LAWS) AND
ANY APPLICABLE LAW OF THE UNITED STATES OF AMERICA. TO THE FULLEST EXTENT
PERMITTED BY LAW, BORROWER HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY
CLAIM TO ASSERT THAT THE LAW OF ANY OTHER JURISDICTION GOVERNS THIS NOTE AND
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK PURSUANT TO SECTION 5- 1401 OF THE NEW YORK GENERAL
OBLIGATIONS LAW.
(B) ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST LENDER OR BORROWER ARISING
OUT OF OR RELATING TO THIS NOTE MAY AT LENDER'S OPTION BE INSTITUTED IN ANY
FEDERAL OR STATE COURT IN THE CITY OF NEW YORK, COUNTY OF NEW YORK, PURSUANT
-3-
<PAGE>
TO SECTION 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW, AND BORROWER WAIVES
ANY OBJECTIONS WHICH IT MAY NOW OR HEREAFTER HAVE BASED ON VENUE AND/OR FORUM
NON CONVENIENS OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND BORROWER HEREBY
IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION OR
PROCEEDING. BORROWER DOES HEREBY DESIGNATE AND APPOINT:
CT CORPORATION SYSTEMS
1633 BROADWAY
NEW YORK, NEW YORK 10019
AS ITS AUTHORIZED AGENT TO ACCEPT AND ACKNOWLEDGE ON ITS BEHALF SERVICE OF ANY
AND ALL PROCESS WHICH MAY BE SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING IN
ANY FEDERAL OR STATE COURT IN NEW YORK, NEW YORK, AND AGREES THAT SERVICE OF
PROCESS UPON SAID AGENT AT SAID ADDRESS AND WRITTEN NOTICE OF SAID SERVICE
MAILED OR DELIVERED TO BORROWER IN THE MANNER PROVIDED HEREIN SHALL BE DEEMED IN
EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON BORROWER IN ANY SUCH SUIT,
ACTION OR PROCEEDING IN THE STATE OF NEW YORK. BORROWER (I) SHALL GIVE PROMPT
NOTICE TO LENDER OF ANY CHANGED ADDRESS OF ITS AUTHORIZED AGENT HEREUNDER, (II)
MAY AT ANY TIME AND FROM TIME TO TIME DESIGNATE A SUBSTITUTE AUTHORIZED AGENT
WITH AN OFFICE IN NEW YORK, NEW YORK (WHICH SUBSTITUTE AGENT AND OFFICE SHALL BE
DESIGNATED AS THE PERSON AND ADDRESS FOR SERVICE OF PROCESS), AND (III) SHALL
PROMPTLY DESIGNATE SUCH A SUBSTITUTE IF ITS AUTHORIZED AGENT CEASES TO HAVE AN
OFFICE IN NEW YORK, NEW YORK OR IS DISSOLVED WITHOUT LEAVING A SUCCESSOR.
ARTICLE 10: NOTICES
All notices or other written communications hereunder shall be delivered in
accordance with Section 10.6 of the Loan Agreement.
-4-
<PAGE>
IN WITNESS WHEREOF, Borrower has executed this instrument the day and year
first above written.
INLAND REAL ESTATE LB I LLC,
a Delaware limited liability company
By: INLAND REAL ESTATE LB I
CORPORATION, a Delaware
corporation, its member
By: /s/ Mark Zalatoris
----------------------------------
Name: Mark Zalatoris
Title: Vice President
<PAGE>
LEHMAN BROTHERS HOLDINGS INC.
D/B/A LEHMAN CAPITAL, A DIVISION
OF LEHMAN BROTHERS HOLDINGS INC.
Three World Financial Center
200 Vesey Street
New York, New York 10285
EXTENDED RATE LOCK AGREEMENT
August 10, 1998
Mr. Raymond Peterson
President
Inland Mortgage Corporation
2901 Butterfield Road
Oak Brook, Illinois 60523
Re: Property commonly known as Inland Portfolio of 12 Retail
Properties (the "Property")
Dear Mr. Peterson:
Reference is made to that certain Commitment Letter (the
"Commitment") dated July 29, 1998 between you or an affiliate ("Borrower")
and Lehman Brothers Holdings Inc. d/b/a Lehman Capital, a division of
Lehman Brothers Holdings Inc. ("Lender"), as the same may have been
amended by amendments executed by Lender prior to the date hereof. All
capitalized terms not defined herein shall have the meanings ascribed to
them in the Commitment.
This letter agreement (this "Agreement") has been entered into for
the purposes of establishing the procedures for determining the Rate, Loan
Amount and Commitment Fee referred to in the Commitment. This letter shall
constitute the Extended Rate Lock Agreement referred to in the Commitment.
Section One. Rate Lock Deposit - (a) Simultaneously with the
execution hereof, Borrower shall provide to Leader its certified check,
bank check or wire transfer of immediately available funds to the account
designated on the signature page hereof (the "Account") in an amount equal
to the Rate Lock Deposit described on Schedule I attached hereto and by
this reference made a part hereof (the "Rate Lock Deposit"). Borrower
shall, within one (1) Business Day of Lender's request made at any time
following (i) the first time that the Treasury Yield has decreased by the
First Decrease Amount (as described on Schedule 1) or more (as determined
by Lender) from the Treasury Yield at the time of the determination of the
Rate and the Loan Amount (the "First Decrease" and (ii) each subsequent
time that the Treasury Yield has decreased by
the Additional Decrease Amount (as described on Schedule 1) or more (as
determined by Lender) after the First Decrease (and regardless of whether at the
time of any such request or on the date any such payment is due the Treasury
Yield shall have thereafter increased above such decreased amounts), wire
transfer the Additional Rate Lock Deposit Amount (as described in Schedule 1)
in
immediately available funds to the Account as an additional Rate Lock Deposit
hereunder. All references herein to the Rate Lock Deposit shall be deemed to
include all such additional Rate Lock Deposits. The Rate Lock Deposit shall be
hold by Lender in accordance with the terms hereof.
(b) If the Loan has not closed prior to the sixtieth (60th) day following
determination of the Rate, Borrower shall pay to Lender a per diem Rate Lock
Fee
(as described on Schedule 1), which Rate Lock Fee shall (i) accrue and be
earned
on said sixtieth (60th ) day and each day thereafter, through and including the
earlier to occur of the termination of the Commitment or the closing of the
Loan, and (ii) be paid weekly, in advance, on said sixtieth (60th) day and on
the corresponding day of each succeeding week thereafter, through and including
the earlier to occur of the termination of the Commitment or the closing of the
Loan. To the extent that any portion of a Rate Lock Fee payment is unearned at
closing, such unearned portion shall be credited to Borrower at closing,
provided, however, that if the Commitment is terminated, except through default
of lender all Rate Lock Fee payments, whether earned or unearned, shall become
non-refundable to Borrower and be retained by Lender. The provisions of this
subsection (b) shall not be deemed to imply that the, term of the Commitment is
extended beyond the expiration date set forth therein.
(c) Borrower's failure to make required Rate Lock Deposits or Rate Lock
Fee
payments in accordance with the foregoing shall result in a termination of the
Commitment and this Agreement.
(d) In determining the applicable Treasury Yield, Lender shall use "on
the
run" pricing.
Section Two. Determination of Fixed Rate and Loan Amount, (a) Upon
satisfaction of the conditions set forth in the Commitment for Rate Lock, the
Rate and the Loan Amount shall be determined in accordance with the procedures
set forth in this Section Two.
(b) Borrower may, from time to time after 9:00 am. and before 4:00 p.m.
New
York City time on any Business Day that it is also a day on which the Chicago
Board of Trade is open, request Lender to provide to Borrower quotes over the
telephone of the Rate and (subject to Section Three hereof) the Loan Amount.
Quotes of the Rate shall be determined on the basis of the Treasury Yield, as
determined by Lender, plus the Applicable Spread. Quotes of the Loan Amount
shall not be in excess of the Loan Amount set forth in the Commitment.
(c) If Borrower wishes to establish the Rate and the Loan Amount on the
basis of any such quote, Borrower shall orally confirm its acceptance at the
time of such quote, complete the form of Determination Notice attached hereto
as
Schedule 2 by properly filling in the blanks set forth therein
with the Rate and
Loan Amount quoted by Lender and the date of such quote, execute such form in
the appropriate space provided therein and transmit via facsimile such form to
Lender at the facsimile number of Lender set forth on the signature page hereof
on the same day as such
2
quote, Borrower acknowledges that (i) Lender shall not be bound by any quotes
provided to Borrower with respect to the Rate and the Loan Amount unless a
Determination Notice has been Properly completed, signed and returned by
Borrower to Lender in accordance with the preceding sentence and (ii) Borrower
shall be bound by determinations of the Rate and Loan Amount made by Lender in
good faith on the basis of Borrower's oral acceptance of any such quotes,
notwithstanding Borrower's failure or refusal to complete and/or execute the
Determination Notice in accordance with the terms of this Section 2(c), if
Lender has entered into an interest rate hedging transaction (the "Hedge") on
the basis of such oral acceptance.
(d) The Determination Notice shall be in the following form and shall be
delivered to Lender (to the attention of the "Attention Party" designated on
Schedule 1) via facsimile transmission at Lender's facsimile number
set forth on
the signature page hereof.
(e) Notwithstanding anything contained herein or in the Commitment to the
contrary, once the Rate and the Loan Amount are determined in accordance with
the foregoing, no portion of the Rate Lock Deposit shall be refundable to
Borrower under any circumstances, except in the event the Loan closes prior to
the termination of the Commitment, in which care the entire Rate Lock Deposit
(less any amounts thereof applied by Leader in accordance with Section 3(b))
shall be refunded to Borrower. Under no circumstances shall the
Rate Lock Fee be
refunded to Borrower.
Section Three. Effect on Commitment. (a) Borrower
acknowledges that, except
to the extent set forth on Schedule 1, Lender's execution and
submission of this
Agreement to Borrower, Borrower's execution of this Agreement and acceptance of
the terms hereof, or Lender's acceptance of the Rate Lock Deposits or Rate Lock
Fee payments shall not constitute a modification,. extension, ratification or
(if expired) reinstitution of the Commitment. Borrower acknowledges and agrees
that Lender may determine the Rate and the Loan Amount pursuant to the terms
hereof notwithstanding (i) Lender's failure to receive (in form satisfactory
to Lender) the environmental report, engineering report or appraisal referred
to in the Commitment (if any), (ii) Lender's or Lender's Counsel failure to
commence and/or conclude their due diligence investigations described in the
Commitment (including, but not limited to, those related to Lender's
determination of sustainable net operating income or value of the Property) or
to agree upon any definitive documentation with respect to the Loan, or (iii)
Borrower's satisfaction of any of the conditions to closing set forth in the
Commitment, and that none of the aforementioned items shall be deemed to have
been waived, received or satisfied by virtue of Lender's determination of the
Rate and Loan Amount hereunder. Without limitation to the foregoing, Borrower
acknowledges that the Loan Amount determined in accordance with the terms
hereof shall be subject to reduction following Lender's determination of the
value of the Property and/or Lender's final determination of sustainable net
operating income, after adjustment for applicable reserves to the extent
necessary to satisfy the Maximum Loan to Value Percentage (if any) or the
Minimum Debt Service Coverage Ratio set forth in the Commitment.
(b) In the event the Loan Amount finally determined by Lender is less than
the Loan Amount determined in accordance with Section Two hereof, Lender shall
have the right at any time prior to the closing of the Loan (i) to terminate
such portion of the Hedge as Lender shall determine
3
to be unnecessary for such reduced Loan Amount and (ii) to apply any portion of
the Rate Lock Deposit to the payment of any loss, cost, damage or expense which
Lender may suffer as the result of such termination.
Section Four. Indemnification. If the Loan shall not close in accordance
with the requirements of the Commitment, Borrower shall indemnify Lender from
and against all loss, cost, damage, or expense incurred by Lender in connection
with the maintenance or termination (as of any date determined
by Lender) of any
Hedge entered into by Lender.
Section Five. Notices. Except as set forth herein with respect to
Determination Notices, all notices, requests, and other communications to any
party hereunder shall be in writing and shall be given to such party at its
address or facsimile number set forth on the signature page hereof. Each such
notice, request, or other communication shall be effective (i) when delivered
personally, (ii) if given by facsimile, when such facsimile is transmitted to
the telecopier number specified in this Section Five, (iii) if given by
certified or registered mail, return receipt requested, 72 hours after such
communication is deposited in the mails with first-class postage prepaid,
addressed as aforesaid, (iv) by Federal Express or other nationally recognized
overnight delivery service, on the next Business Day after such
communication is
deposited with such delivery service, or (v) if given by any other means, when
delivered at the address specified in this Section Five. All notices sent by
facsimile transmission shall be conclusively determined to have
been provided if
(a) a confirmation report of such transmission is retained by the sender, (b)
such confirmation report does not indicate a malfunction
in transmission and (c)
a copy of such notice is mailed to the intended recipient by certified mail,
return receipt requested, Federal Express or other recognized overnight courier
within one Business Day of its facsimile transmission,
Section Six. Miscellaneous. This Agreement shall constitute the entire
agreement of the parties with respect to the subject matter hereof and shall
supersede all prior agreements, correspondence and other materials relating to
such subject matter. This Agreement may only be modified by a
written instrument
signed by Lender and Borrower.
Section Seven. Counterparts. This Agreement may be executed in any number
of counterparts and by the different parties hereto on separate counterparts,
each of which when so executed and delivered shall be an original, but all of
which shall together constitute one and the same instrument.
4
Kindly indicate your acceptance of the above terms by signing in the space
provided below.
Very truly yours,
LEHMAN BROTHERS HOLDINGS INC.,
D/B/A LEHMAN CAPITAL, A DIVISION OF
LEHMAN BROTHERS HOLDINGS INC.
By: /s/ Larry Kravetz
Name: Larry Kravetz
Title: SVP
Lender' s Facsimile Number
(212) 528-6014
Lender's Account for Wire Transfers:
Citibank N.A.
ABA. No. 021000089
Account No. 40615501
Attention: Arlene Knight
Re: Inland Portfolio of 12 Retail Properties
Acknowledged and Agreed to:
Inland Real Estate Corporation
By: /s/ Roberta S. Matlin
Name: Roberta S. Matlin
Title: Vice President
Borrower's Facsimile Number:
(630) 218-4961
5
SCHEDULE 1
Rate Lock Deposit: $1,246,000
First Decrease Amount: 40 basis points
Additional Decrease Amount: 15 basis points
Additional Rate Lock
Deposit Amount: $600,000
Attention Party: Larry Kravetz
Rate Lock Fee: $75.00 per million per day, payable in weekly installments.
SCHEDULE 2
DETERMINATION NOTICE
VIA FACSIMILE TO (212) 529-6014
LEHMAN BROTHERS HOLDINGS INC.
LEHMAN CAPITAL. A DIVISION
OF LEHMAN BROTHERS HOLDINGS INC.
Three World Financial Center
200 Vesey Street
New York, New York 10285
Attention: Larry Kravetz
Re: Extended Rate Lock Agreement for Inland Portfolio of 12 Retail
Properties
Gentlemen:
Reference is made to the above referenced Extended Rate Lock
Agreement. All
capitalized terms shall have the meanings described therein. This shall confirm
our agreement that the Rate Lock Amount and the Rate shall be in the following
amounts:
Rate Lock Amount: $62,000,000
Rate: 6.36 %
Date of Determination: 8/11/98
Very truly yours,
Inland Real Estate Corporation
By: /s/ Roberta S. Matlin
Name: Roberta S. Matlin
Title: Vice President
CERTIFICATE OF FORMATION
OF
INLAND REAL ESTATE LB I LLC
This Certificate of Formation of INLAND REAL ESTATE LB I LLC, dated
as of September 21, 1998, is being duly executed and filed by Samuel A.
Orticelli, as an authorized person, to form a limited liability company
under the Delaware Limited Liability Company Act (6 Del.C. 18-101, et.
seq.)
FIRST. The name of the limited liability company formed hereby is
INLAND REAL ESTATE LB I LLC.
SECOND. The address of the registered office of the LLC in the State
of Delaware is c/o Corporation Trust Center, 1209 Orange Street, in the
City of Wilmington, County of New Castle, Delaware 19801.
THIRD. The address of the registered agent for service of process on
the LLC in the State of Delaware is c/o Corporation Trust Center, 1209
Orange Street, in the City of Wilmington, County of New Castle, Delaware
19801. The name of its registered agent at such address is The
Corporation Trust Company.
IN WITNESS WHEREOF, the undersigned has executed this Certificate
of Formation as of the date first above written.
/s/ Samuel A. Orticelli
Name: Samuel A. Orticelli
Authorized Person Asst. Secretary
LIMITED LIABILITY COMPANY AGREEMENT
OF
INLAND REAL ESTATE LB I LLC
This Limited Liability Company Agreement (together with the
schedules attached hereto, this "Agreement") of Inland Real Estate
LB I LLC (the "Company"), is entered into by Inland Real Estate
LB I Corporation, as the sole member (the "Initial Member").
Capitalized terms used herein and not otherwise defined have the
meanings set forth on Schedule A hereto.
The Initial Member, by execution of this Agreement, (i) hereby
forms the Company as a limited liability company pursuant to and
in accordance with the Delaware Limited Liability Company Act (6
Del.C. 18-101, et seq.), as amended from time to time (the
"Act"), and (ii) hereby agrees as follows:
1. Name.
The name of the limited liability company hereby created is
Inland Real Estate LB I LLC.
2. Principal Business Office.
The principal business office of the Company shall be located
at 2901 Butterfield Road, Oak Brook, IL 60523, or such other
location as may hereafter be determined by the Member.
3. Registered Office.
The address of the registered office of the Company in the
State of Delaware is c/o The Corporation Trust Company,
Corporation Trust Center, 1209 Orange Street, Wilmington, New
Castle County, Delaware 19801.
4. Registered Agent.
The name and address of the registered agent of the Company
for service of process on the Company in the State of Delaware is
The Corporation Trust Company, Corporation Trust Center, 1209
Orange Street, New Castle County, Wilmington, Delaware 19801.
5. Members.
a. The name and the mailing address of the Initial
Member is set forth on Schedule B attached hereto.
b. Subject to Section 9(b), the Member may act by
written consent.
6. Certificates.
Samuel A. Orticelli, as an "authorized person" within
the meaning of the Act, has executed, delivered and filed the
Certificate of Formation with the Secretary of State of the State
of Delaware. Upon the filing of the Certificate of Formation with
the Secretary of State of the State of Delaware, his powers as an
"authorized person" ceased, and the Member thereupon became the
designated "authorized person" and shall continue as the
designated "authorized person" within the meaning of the Act. The
Member shall execute, deliver and file any other certificates (and
any amendments and/or restatements thereof) necessary for the
Company to qualify to do business in Minnesota, Wisconsin, Indiana
and Illinois and in any other jurisdiction in which the Company
may wish to conduct business.
7. Purposes.
Subject to Section 9(b), the purposes of the Company are to
engage in the following activities:
a. to acquire, own, hold, administer, service, manage,
sell and otherwise deal with the Properties;
b. to issue, authorize and deliver the Note and other
Basic Documents;
c. to execute, deliver and perform the Basic Documents;
d. to do such other things and carry on any other
activities which are necessary, convenient or incidental to any of
the foregoing purposes.
8. Powers.
Subject to Section 9(b), the Company shall have and exercise
all powers necessary, convenient or incidental to accomplish its
purposes as set forth in Section 7 conferred upon limited
liability companies formed pursuant to the Act.
9. Management.
a. Member(s). Subject to Section 9(b), the business
and affairs of the Company shall be managed by or under the
direction of the Member. Subject to Section 9(b), the Member has
the authority to bind the Company.
b. Limitations on the Company's Activities.
(i) This Section 9(b) is being adopted in order to
comply with certain provisions required in order to qualify the
Company as a "special purpose entity" for the purpose of the
Indebtedness. So long as any portion of the Indebtedness is
outstanding the provisions of this Section 9(b) shall supercede
and control any other provision hereof to the contrary.
(ii) The Member shall not, so long as any
Indebtedness is outstanding, amend, alter, change or repeal
Sections 7, 8, 9, 20, 21, 22, 24, 26 or 30 of this Agreement
without consent of Lender, or after a securitization of the Loan,
only upon (a) confirmation from each Rating Agency that such
action would not result in the qualification, withdrawal or
downgrade of any securities rating assigned in such
securitization, and (b) Lender's consent to such action.
(iii) Notwithstanding any other provision of this
Agreement and any provision of law that otherwise so empowers the
Company or the Member, so long as any Indebtedness is outstanding,
neither the Company nor the Member shall be authorized or
empowered, nor shall they permit the Company without the prior
written consent of the Member including the unanimous consent of
the board of directors of the Member, to institute proceedings to
have the Company be adjudicated bankrupt or insolvent, or consent
to the institution of bankruptcy or insolvency proceedings against
the Company or file a petition seeking, or consent to,
reorganization or relief with respect to the Company under any
applicable federal or state law relating to bankruptcy, or consent
to the appointment of a receiver, liquidator, assignee, trustee,
sequestrator (or other similar official) of the Company or a
substantial part of its property, or make any assignment for the
benefit of creditors of the Company, or admit in writing the
Company's inability to pay its debts generally as they become due,
or, to the fullest extent permitted by law, take action in
furtherance of any such action, or dissolve or liquidate the
Company, or consolidate or merge the Company with or into any
Person, or sell all or substantially all of the assets of the
Company.
(iv) Unless otherwise provided in the Loan
Agreement, so long as any Indebtedness is outstanding, the Member
shall cause the Company to do or cause to be done all things
necessary to preserve and keep in full force and effect its
existence, rights (charter and statutory) and franchises. The
Member also shall cause the Company to:
(1) maintain its own separate books and
records and bank accounts;
(2) at all times hold itself out to the
public as a legal entity separate from the Member and any other
Person and not identify itself as a division of any other person
or entity;
(3) observe all limited liability company or
other formalities;
(4) file its own tax returns provided,
however, that Company's assets may be included in a consolidated
tax return of its parent companies if inclusion on such a
consolidated tax return is required to comply with the requirement
of generally accepted accounting principles ("GAAP") or any other
applicable law. Company shall maintain its books, records,
resolutions and agreements as official records.
(5) not commingle its assets with assets of
any other Person and hold all of its assets in its own name;
(6) conduct its business in its own name;
(7) maintain all of its books, records,
financial statements and bank accounts separate from those of any
other person and Company's assets will not be listed as assets on
the financial statement of any other person; provided, however,
that Company's assets may be included in a consolidated financial
statement of its parent companies if inclusion on such a
consolidated statements is required to comply with the
requirements of GAAP, but only if (i) such consolidated
financial statements shall contain a footnote to the effect that
Company's assets are owned by Company and that they are being
included on the financial statement of its parent solely to comply
with the requirements of GAAP, and (ii) such assets shall be
listed on Company's own separate balance sheet.
(8) pay its own liabilities and expenses
only out of its own funds;
(9) maintain an arm's length relationship
with its Affiliates and its Member and enter into transactions
with Affiliates only on a commercially reasonable basis;
(10) pay the salaries of its own employees,
if any, from its own funds.
(11) not hold out its credit as being
available to satisfy the obligations of others;
(12) allocate fairly and reasonably any
overhead for shared office space and services performed by any
employee of an Affiliate;
(13) use separate stationery, invoices and
checks bearing its own name;
(14) not pledge its assets for the benefit of
any other Person;
(15) correct any known misunderstanding
regarding its separate identity;
(16) maintain adequate capital and a
sufficient number of employees in light of its contemplated
business operations;
(17) not acquire any obligations or
securities of its Affiliates, including the Member; and
(18) not make loans to any other person or
entity or to buy or hold evidence of indebtedness issued by any
other person.
(v) So long as any Indebtedness is outstanding,
the Member shall not cause or permit the Company to:
(1) guarantee any obligation of any Person,
including any Affiliate;
(2) engage, directly or indirectly, in any
business other than that arising out of the issuance of the
Indebtedness or the actions required or permitted to be performed
under Section 7, the Loan Agreement or this Section 9(b);
(3) incur, create or assume any indebtedness
other than the Indebtedness or as otherwise expressly permitted
under the Loan Agreement;
(4) make or permit to remain outstanding any
loan or advance to, or own or acquire any stock or securities of,
any Person;
(5) engage in any dissolution, liquidation,
consolidation, merger, asset sale or transfer of ownership
interests other than such activities as are expressly permitted
pursuant to any provision of the Loan Agreement; or
(6) form, acquire or hold any subsidiary
(whether corporate, partnership, limited liability company or
other).
10. INTENTIONALLY OMITTED
11. INTENTIONALLY OMITTED
12. Limited Liability.
Except as otherwise expressly provided by the Act, the debts,
obligations and liabilities of the Company, whether arising in
contract, tort or otherwise, shall be the debts, obligations and
liabilities solely of the Company, and no Member shall be
obligated personally for any such debt, obligation or liability of
the Company solely by reason of being a Member of the Company.
13. Capital Contributions.
The Initial Member is deemed admitted as the Member of the
Company upon the execution and delivery of this Agreement. The
Initial Member has contributed the amount of cash to the Company
listed on Schedule B attached hereto.
14. Additional Contributions.
The Initial Member is not required to make any additional
capital contribution to the Company. However, a Member may make
additional capital contributions to the Company at any time upon
the written consent of such Member. To the extent that the Member
makes an additional capital contribution to the Company, the
Member shall revise Schedule B of this Agreement. The provisions
of this Agreement, including this Section 14, are intended solely
to benefit the Member and, to the fullest extent permitted by law,
shall not be construed as conferring any benefit upon any creditor
of the Company (and no such creditor of the Company shall be a
third-party beneficiary of this Agreement) and no Member shall
have any duty or obligation to any creditor of the Company to make
any contribution to the Company or to issue any call for capital
pursuant to this Agreement.
15. Allocation of Profits and Losses.
The Company's profits and losses shall be allocated to the
Member.
16. Distributions.
Distributions shall be made at the times and in the
aggregate amounts determined by the Member. Notwithstanding any
provision to the contrary contained in this Agreement, the Company
shall not be required to make a distribution to any Member on
account of its interest in the Company if such distribution would
violate Section 18-607 of the Act or any other applicable law or
the Basic Documents.
17. Books and Records.
The Member shall keep or cause to be kept complete and
accurate books of account and records with respect to the
Company's business. The books of the Company shall at all times
be maintained by the Member. Each Member, if more than one, and
its duly authorized representatives shall have the right to
examine the Company books, records and documents during normal
business hours. The Company shall not have the right to keep
confidential from the Member any information which would otherwise
be permitted to keep confidential from the Member pursuant to
Section 18-305(c) of the Act. The Company's books of account
shall be kept using the method of accounting determined by the
Member. The Company's independent auditor shall be an independent
public accounting firm selected by the Member.
18. Reports.
a. Within 60 days after the end of each fiscal quarter,
the Member shall cause to be prepared an unaudited report setting
forth as of the end of such fiscal quarter:
(i) unless such quarter is the last fiscal
quarter, a balance sheet of the Company; and
(ii) unless such quarter is the last fiscal
quarter, an income statement of the Company for such fiscal
quarter.
b. The Member shall cause to be prepared within 90 days
after the end of each fiscal year, an audited or unaudited report
setting forth as of the end of such fiscal year:
(i) a balance sheet of the Company;
(ii) an income statement of the Company for such
fiscal year; and
(iii) a statement of such Member's capital
account.
c. The Member shall, after the end of each fiscal year,
use reasonable efforts to cause the Company's independent
accountants to prepare and transmit to each Member as promptly as
such tax information as may be reasonably necessary to enable such
Member to prepare its federal, state and local income tax returns
relating to such fiscal year.
19. INTENTIONALLY OMITTED.
20. Exculpation and Indemnification.
a. No Member, employee or agent of the Company and no
director, officer, employee, representative, agent or Affiliate of
the Member (collectively, the "Covered Persons") shall be liable
to the Company or any other Person who has an interest in or claim
against the Company for any loss, damage or claim incurred by
reason of any act or omission performed or omitted by such Covered
Person in good faith on behalf of the Company and in a manner
reasonably believed to be within the scope of the authority
conferred on such Covered Person by this Agreement, except that a
Covered Person shall be liable for any such loss, damage or claim
incurred by reason of such Covered Person's gross negligence or
willful misconduct.
b. To the fullest extent permitted by applicable law, a
Covered Person shall be entitled to indemnification from the
Company for any loss, damage or claim incurred by such Covered
Person by reason of any act or omission performed or omitted by
such Covered Person in good faith on behalf of the Company and in
a manner reasonably believed to be within the scope of the
authority conferred on such Covered Person by this Agreement,
except that no Covered Person shall be entitled to be indemnified
in respect of any loss, damage or claim incurred by such Covered
Person by reason of such Covered Person's gross negligence or
willful misconduct with respect to such acts or omissions;
provided, however, that any indemnity under this Section 20 shall
be provided out of and to the extent of Company assets only, and
no Member shall have personal liability on account thereof.
c. To the fullest extent permitted by applicable law,
expenses (including legal fees) incurred by a Covered Person
defending any claim, demand, action, suit or proceeding shall,
from time to time, be advanced by the Company prior to the final
disposition of such claim, demand, action, suit or proceeding upon
receipt by the Company of an undertaking by or on behalf of the
Covered Person to repay such amount if it shall be determined that
the Covered Person is not entitled to be indemnified as authorized
in this Section 20.
d. A Covered Person shall be fully protected in relying
in good faith upon the records of the Company and upon such
information, opinions, reports or statements presented to the
Company by any Person as to matters the Covered Person reasonably
believes are within such other Person's professional or expert
competence and who has been selected with reasonable care by or on
behalf of the Company, including information, opinions, reports or
statements as to the value and amount of the assets, liabilities,
or any other facts pertinent to the existence and amount of assets
from which distributions to the Member might properly be paid.
e. To the extent that, at law or in equity, a Covered
Person has duties (including fiduciary duties) and liabilities
relating thereto to the Company or to any other Covered Person, a
Covered Person acting under this Agreement shall not be liable to
the Company or to any other Covered Person for its good faith
reliance on the provisions of this Agreement or any approval or
authorization granted by the Company or any other Covered Person.
The provisions of this Agreement, to the extent that they restrict
the duties and liabilities of a Covered Person otherwise existing
at law or in equity, are agreed by the Member to replace such
other duties and liabilities of such Covered Person.
f. The foregoing provisions of this Section 20 shall
survive any termination of this Agreement.
21. Assignments. Without the prior written consent of
Lender, neither Company nor its Member, except as permitted under
the Loan Agreement, shall:
(i) directly or indirectly sell, transfer, convey,
mortgage, pledge, or assign the Properties, any part thereof or
any interest therein (including any ownership interest in Company
or Member,
(ii) further encumber, alienate, grant a lien or
grant any other interest in the Properties or any part thereof
(including any ownership interest in Company and the Member)
whether voluntarily or involuntarily, or
(iii) enter into any easement or other agreement
granting rights in or restricting the use or development of the
Properties.
If the Member transfers all of its limited liability company
interest in the Company pursuant to this Section 21, the
transferee shall be admitted to the Company as a member of the
Company upon its execution of an instrument signifying its
agreement to be bound by the terms and conditions of this
Agreement, which instrument may be a counterpart signature page to
this Agreement. Such admission shall be deemed effective
immediately prior to the transfer, and, immediately following such
admission, the transferor Member shall cease to be a member of the
Company. Notwithstanding anything in this Agreement to the
contrary, any successor to a Member by merger or consolidation in
compliance with the Basic Documents shall, without further act, be
a Member hereunder, and such merger or consolidation shall not
constitute an assignment for purposes of this Agreement.
22. Resignation.
So long as any Indebtedness is outstanding, the Initial
Member may not resign unless consistent with the transfer and
substitution provisions of the Loan Agreement. A Member (other
than the Initial Member) may resign from the Company with the
written consent of the Initial Member. If a Member is permitted
to resign pursuant to this Section 22, an additional member of the
Company shall be admitted to the Company upon its execution of an
instrument signifying its agreement to be bound by the terms and
conditions of this Agreement, which instrument may be a
counterpart signature page to this Agreement. Such admission
shall be deemed effective immediately prior to the resignation,
and, immediately following such admission, the resigning Member
shall cease to be a member of the Company.
23. INTENTIONALLY OMITTED
24. Dissolution.
a. Subject to Section 9(b), the Company shall be
dissolved, and its affairs shall be wound up upon the first to
occur of the following: (i) the retirement, resignation or
dissolution of the Member or the occurrence of any other event
which terminates the continued membership of the Member in the
Company unless the business of the Company is continued in a
manner permitted by the Act or (ii) the entry of a decree of
judicial dissolution under Section 18-802 of the Act.
b. Notwithstanding any other provision to the contrary,
the Bankruptcy of the Member shall not cause the Member to cease
to be a member of the Company and upon the occurrence of such an
event, the business of the Company shall continue without
dissolution. Notwithstanding any other provision of this
Agreement, the Member waives any right it might have under Section
18-801(b) of the Act to agree in writing to dissolve the Company
upon the Bankruptcy of the Member or the occurrence of an event
that causes a Member to cease to be a member of the Company.
c. In the event of dissolution, the Company shall
conduct only such activities as are necessary to wind up its
affairs (including the sale of the assets of the Company in an
orderly manner), and the assets of the Company shall be applied in
the manner, and in the order of priority, set forth in Section 18-
804 of the Act.
25. Waiver of Partition; Nature of Interest.
Except as otherwise expressly provided in this Agreement, to
the fullest extent permitted by law, each Member hereby
irrevocably waives any right or power that such Member might have
to cause the Company or any of its assets to be partitioned, to
cause the appointment of a receiver for all or any portion of the
assets of the Company, to compel any sale of all or any portion of
the assets of the Company pursuant to any applicable law or to
file a complaint or to institute any proceeding at law or in
equity to cause the dissolution, liquidation, winding up or
termination of the Company. No Member shall have any interest in
any specific assets of the Company, and no Member shall have the
status of a creditor with respect to any distribution pursuant to
Section 16 hereof. The interest of the Member in the Company is
personal property.
26. Benefits of Agreement; No Third-Party Rights.
None of the provisions of this Agreement shall be for the
benefit of or enforceable by any creditor of the Company or by any
creditor of any Member. Nothing in this Agreement shall be deemed
to create any right in any Person (other than Covered Persons) not
a party hereto, and this Agreement shall not be construed in any
respect to be a contract in whole or in part for the benefit of
any third Person.
27. Severability of Provisions.
Each provision of this Agreement shall be considered
severable and if for any reason any provision or provisions herein
are determined to be invalid, unenforceable or illegal under any
existing or future law, such invalidity, unenforceability or
illegality shall not impair the operation of or affect those
portions of this Agreement which are valid, enforceable and legal.
28. Entire Agreement.
This Agreement constitutes the entire agreement of the
parties with respect to the subject matter hereof.
29. Governing Law.
This Agreement shall be governed by and construed under the
laws of the State of Delaware (without regard to conflict of laws
principles), all rights and remedies being governed by said laws.
30. Amendments.
Subject to Section 9(b), this Agreement may not be modified,
altered, supplemented or amended except pursuant to a written
agreement executed and delivered by the Member.
31. Counterparts.
This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original of this Agreement and
all of which together shall constitute one and the same
instrument.
32. Notices.
Any notices required to be delivered hereunder shall be in
writing and personally delivered, mailed or sent by telecopy,
electronic mail, or other similar form of rapid transmission, and
shall be deemed to have been duly given upon receipt (a) in the
case of the Company, to the Company at its address in Section 2,
(b) in the case of a Member, to such Member at its address as
listed on Schedule B attached hereto and (c) in the case of either
of the foregoing, at such other address as may be designated by
written notice to the other party.
33. Enforcement by Board of Directors of Member
Notwithstanding any other provision of this Agreement, the
Member agrees that this Agreement, including, without limitation,
Sections 7, 8, 9, 10, 20, 21, 22, 24, 26, 30 or this Section 33,
constitutes a legal, valid and binding agreement of the Member,
and is enforceable against the Member by each member of the board
of directors of the Member (including the Independent Director of
the board), in accordance with its terms. Notwithstanding, any
other provision of this Agreement, the Independent Director of the
Member is an intended beneficiary of the Agreement.
IN WITNESS WHEREOF, the undersigned, intending to be legally
bound hereby, has duly executed this Agreement as of the ____ day
of September, 1998.
MEMBER:
INLAND REAL ESTATE LB I
CORPORATION, a Delaware corporation
By: /s/ Gary Pechter
Name: Gary Pechter
Title: Assistant Secretary
IN WITNESS WHEREOF, the Company hereby agrees to be bound by
this Agreement and hereby becomes a party thereto, this ________
day of September, 1998.
INLAND REAL ESTATE LB I
CORPORATION, a Delaware corporation
By: /s/ Gary Pechter
Name: Gary Pechter
Title: Assistant Secretary
SCHEDULE A
Definitions
A. Definitions
When used in this Agreement, the following terms not otherwise
defined herein have the following meanings:
"Act" has the meaning set forth in the preamble to this Agreement.
"Affiliate" means, with respect to any Person, any other Person
directly or indirectly Controlling or Controlled by or under
direct or indirect common Control with such Person.
"Agreement" means this Limited Liability Company Agreement of the
Company, together with the schedules attached hereto, as amended,
restated or supplemented form time to time.
"Bankruptcy" means, with respect to any Person, if such Person (i)
makes an assignment for the benefit of creditors, (ii) files a
voluntary petition in bankruptcy, (iii) is adjudged as bankrupt or
insolvent, or has entered against it an order for relief, in any
bankruptcy or insolvency proceeding, (iv) files a petition or
answer seeking for itself any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar
relief under any statute, law or regulation, (v) files an answer
or other pleading admitting or failing to contest the material
allegations of a petition filed against it in any proceeding of
this nature, (vi) seeks, consents to or acquiesces in the
appointment of a trustee, receivor or liquidator of the Person or
of all or any substantial part of its properties, or (vii) if 120
days after the commencement of any proceeding against the Person
seeking reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any statute, law
or regulation, if the proceeding has not been dismissed, or if
within 90 days after the appointment without such Person's consent
or acquiescence of a trustee, receiver or liquidator of such
Person or of all or any substantial part of its properties, the
appointment is not vacated or stayed, or within 90 days after the
expiration of any such stay, the appointment is not vacated.
"Basic Documents" means Loan Agreement, Promissory Note, Mortgage
and Security Agreement, Assignment of Leases and Rents, Assignment
of Management Agreement and Subordination of Management Fees,
Environmental Indemnity Agreement, and Cash Management Agreement
and any other Loan Documents executed by the Company in favor of
the Lender.
"Certificate of Formation" means the Certificate of Formation of
the Company filed with the Secretary of State of the State of
Delaware on September _______, 1998, as amended or amended and
restated from time to time.
"Collateral" has the meaning assigned to that term in the Loan
Agreement.
"Company" means Inland Real Estate LB I LLC, a Delaware limited
liability company.
"Control" means the possession, directly or indirectly, or the
power to direct or cause the direction of the management or
policies of a Person, whether through the ownership of voting
securities or general partnership or managing member interests, by
contract or otherwise. "Controlling" and "Controlled" shall have
correlative meanings. Without limiting the generality of the
foregoing, a Person shall be deemed to Control any other Person in
which it owns, directly or indirectly, a majority of the ownership
interests.
"Covered Persons" has the meaning set forth in Section 20a.
"Indebtedness" means the obligations of the Company arising under
the Note.
"Initial Member" means Inland Real Estate LB I Corporation, as the
sole member of the Company.
"Loan Agreement" means that certain Loan Agreement by and between
the Company and Secore Financial Corporation.
"Member" means the Initial Member and includes any Person admitted
as an additional member of the Company or a substitute member of
the Company pursuant to the provisions of this Agreement.
"Note" shall mean that certain note made by Company in favor of
Secore Financial Corporation, as the same may be amended,
restated, replaced, supplemented, or otherwise modified from time
to time, including any Defeased Note and Undefeased Note that may
exist from time to time.
"Note Trustee" means the note trustee as appointed by Secore
Financial Corporation.
"Officer's Certificate" has the meaning assigned to that term in
the Loan Agreement.
"Properties" means those properties listed on Schedule C.
"Person" means any individual, corporation, partnership, joint
venture, limited liability company, limited liability partnership,
association, joint-stock company, trust, unincorporated
organization, or other organization, whether or not a legal
entity, and any governmental authority.
"Rating Agency" has the meaning assigned to that term in the Loan
Agreement.
"Rating Agency Condition" means, with respect to any action that
each of the Rating Agencies shall have notified the Lender in
writing that such action will not result in a reduction,
qualification, or withdrawal of the then current rating by such
Rating Agency of any Series or Class of the Notes.
B. Rules of Construction
Definitions in this Agreement apply equally to both the singular
and plural forms of the defined terms. The words "include" and
"including" shall be deemed to be followed by the phrase "without
limitation." The terms "herein," "hereof" and "hereunder" and
other words of similar import refer to this Agreement as a whole
and not to any particular Section, paragraph or subdivision. The
Section titles appear as a matter of convenience only and shall
not affect the interpretation of this Agreement. All Section,
paragraph, clause, Exhibit or Schedule references not attributed
to a particular document shall be references to such parts of this
Agreement.
SCHEDULE B
Member(s)
Agreed Value of Percentage
Name Mailing Address Capital Contribution Interest
Inland Real Estate 2901 Butterfield Rd.
LB I Corporation Oak Brook, IL 60523 100%
SCHEDULE C
List of the Properties
LAKE PARK PLAZA SHOPPING CENTER
4301 Franklin Street, Route 421
Michigan City, Indiana
ST. JAMES CROSSING SHOPPING CENTER
800-844 E. Ogden Avenue
Westmont, Illinois
HOMEWOOD PLAZA SHOPPING CENTER
17510 S. Halsted
Homewood, Illinois
HIGH POINT CENTRE SHOPPING CENTER
7475 Mineral Pointe Road
Madison, Wisconsin
CHESTNUT COURT SHOPPING CENTER
7511 Lemont Road
Darien, Illinois
OAK FOREST COMMONS SHOPPING CENTER
NE corner of 159th and Central Avenue
Oak Forest, Illinois
NAPER WEST PLAZA SHOPPING CENTER
510-618 S. Route 59
Naperville, Illinois
BERGEN PLAZA SHOPPING CENTER
7101 10th Street North
Oakdale, Minnesota
WAUCONDA SHOPPING CENTER
612-620 N. Liberty Street (Route 176)
Wauconda, Illinois
WISNER/MILWAUKEE PLAZA SHOPPING CENTER
2847-2865 N. Milwaukee Avenue
Chicago, Illinois
WESTERN HOWARD SHOPPING CENTER
2341-57 West Howard Street
Chicago, Illinois
ELMHURST CITY CENTRE
Lot 2: 149 N. York Road
Lot 4: One City Centre
Elmhurst, Illinois
CERTIFICATE OF INCORPORATION
OF
INLAND REAL ESTATE LB I CORPORATION
1. The name of the corporation is: Inland Real Estate LB I
Corporation.
2. The address of its registered office in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of its registered agent
at such address is The Corporation Trust Company.
3. The nature of the business or purposes to be conducted or promoted
is to act as the sole member of Inland Real Estate LB I LLC
("Inland LLC") and to limit Inland LLC's activities to (i) the
owning, holding, selling, leasing, transferring, exchanging,
operating and managing of the Properties listed on Schedule A
attached hereto, (ii) entering into the Loan Agreement ("Loan
Agreement") by and between Inland LLC, as Borrower, and Secore
Financial Corporation, as Lender ("Lender"), for issuance of a loan
(the "Loan") by Lender to Borrower secured by the Properties, (iii)
refinancing the Properties in connection with a permitted repayment
of the Loan as described in the Loan Agreement, and (iv)
transacting any and all lawful business for which a corporation may
be organized under its constitutive laws that is incidental,
necessary and appropriate to accomplish the foregoing.
4. The total number of shares of stock which the corporation shall
have authority to issue is:
Three thousand (3,000); all of which shall be common stock and all
of such shares of common stock shall be $.01 par value.
5. The name and mailing address of each incorporator is as follows:
NAME MAILING ADDRESS
Gary Pechter 2901 Butterfield Road
Oak Brook, IL 60523
Attn: Law Department
The powers of the incorporator shall terminate upon the filing of
the Certificate of Incorporation.
The name and mailing address of each person who is to serve as a
director until the first annual meeting of the stockholders or
until their successors are elected and qualified, is as follows:
NAME MAILING ADDRESS
G. Joseph Cosenza 2901 Butterfield Rd., Oak Brook, IL 60523
Robert D. Parks 2901 Butterfield Rd., Oak Brook, IL 60523
Joel G. Herter 2100 Clearwater Dr., Oak Brook, IL 60523
Heidi N. Lawton 2100 Clearwater Dr., Oak Brook, IL 60532
Roland W. Burris 180 N. LaSalle St., Chicago, IL 60601
Mark Ferrucci (Independent Dir.) Corporation Trust Center, 1209 Orange St.
Wilmington, DE 19801
6. The corporation is to have perpetual existence.
7. In furtherance and not in limitation of the powers conferred by
statute, the board of directors is expressly authorized:
To make, alter or repeal the by-laws of the corporation.
To set apart out of any of the funds of the corporation available for
dividends a reserve or reserves for any proper purpose and to abolish
any such reserve in the manner in which it was created.
When and as authorized by the stockholders in accordance with law and
in compliance with the documents executed and delivered in connection
with the Loan to sell, lease or exchange all or substantially all of
the property and assets of the corporation, or any interests therein,
including its good will and its corporate franchises, upon such terms
and conditions and for such consideration, which may consist in whole
or in part of money or property including shares of stock in, and/or
other securities of, any other corporation or corporations, as its
board of directors shall deem expedient and for the best interests of
the corporation.
8. Election of directors need not be by written ballot unless the by-
laws of the corporation shall so provide.
Meetings of stockholders may be held within or without the State of
Delaware, as the by-laws may provide. The books of the corporation
may be kept (subject to any provision contained in the statutes)
outside the State of Delaware at such place or places as may be
designated from time to time by the board of directors or in the by-
laws of the corporation.
9. The corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights
conferred upon stockholders herein are granted subject to this
reservation.
10. A director of the corporation shall not be personally liable to the
corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director except for liability (i) for any breach
of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii)
under Section 174 of the Delaware General Corporation Law, or (iv)
for any transaction from which the director derived any improper
personal benefit.
11. Notwithstanding anything to the contrary contained herein and so long
as the Loan remains outstanding, the following provisions shall
apply:
(a) The corporation will not cause, direct or permit Inland LLC to amend,
modify or otherwise change its limited liability company agreement
("Operating Agreement") without the prior written consent of the
Lender or, after the securitization of the Loan, only if Inland LLC
receives confirmation from each of the applicable rating agencies
that such amendment would not result in the qualification, withdrawal
or downgrade of any security ratings.
(b) The corporation will not cause any amendment, modification or other
change in its Certificate of Incorporation or By-Laws without the
prior written consent of Lender or, after the securitization of the
Loan, only if Inland LLC receives confirmation from each of the
applicable rating agencies that such amendment would not result in
the qualification, withdrawal or downgrade of any securities ratings.
(c) The corporation will cause Inland LLC to comply with the requirements
of its Operating Agreement including the limitations set forth in
Section 9(b) of the Operating Agreement.
(d) The corporation will not seek the dissolution, winding up,
liquidation, consolidation or merger in whole or in part or the sale
of the material assets of Inland LLC. To the fullest extent
permitted by law, the corporation is prohibited from engaging in any
dissolution, liquidation, consolidation, merger or sale of assets for
so long as the Loan is outstanding, and from causing Inland LLC or
the corporation to do any of the foregoing for as long as the Loan is
outstanding.
(e) The corporation will at all times cause there to be at least one duly
appointed independent member of the board of directors (an
"Independent Director"). For purposes hereof the Independent
Director is not and has not been at any time during the preceding
five (5) years:
(i) a stockholder, member, director, officer, employee, partner,
attorney or counsel of this Corporation or Inland LLC or any
affiliate of either of them;
(ii) a customer, supplier or otherwise derives more than 10% of its
purchases or revenues from its activities from Inland LLC or this
Corporation or an affiliate of either of them;
(iii) a Person, as defined in the Loan Agreement, controlling or
under common control with any stockholders, partner, member,
customer, supplier or other Person;
(iv) A member of the immediate family of any stockholder, director,
officer, employee, partner, customer, supplier or other Person. (As
used herein, the term "control" means the possession, directly or
indirectly, or the power to direct or cause the direction of
management, policies or activities of a Person, whether through
ownership of voting securities by contract or otherwise); or
(v) The corporation shall maintain an Independent Director for the
entire time that the Loan is outstanding; provided the vote of the
Independent Director shall not be required in any circumstance which
does not require the unanimous written consent of the entire Board of
Directors. The unanimous consent of all of the Board members,
including the vote of the Independent Director, is specifically
required for the corporation, and for the corporation to cause Inland
LLC to, institute proceedings to have Inland LLC be adjudicated
bankrupt or insolvent, or consent to the institution of bankruptcy or
insolvency proceedings against Inland LLC or file a petition seeking,
or consent to reorganization or relief with respect to Inland LLC
under any applicable federal or state law relating to bankruptcy, or
consent to the appointment of a receiver, liquidator, assignee,
trustee, sequestrator (or other similar official) of Inland LLC or a
substantial part of its property, or make any assignment for the
benefit of creditors of Inland LLC, or admit in writing Inland LLC's
inability to pay their debts generally as they become due, or, to the
fullest extent permitted by law, take action in furtherance of any
such action, or dissolve or liquidate Inland LLC, or consolidate or
merge Inland LLC with or into any Person (other than a Permitted
Transfer as defined in the Loan Agreement) or sell all or
substantially all of the assets of Inland LLC (except as expressly
permitted in the Loan Agreement).
(f) The corporation shall cause the Inland LLC to at all times comply
with Section 9(b) of the Operating Agreement.
(g) The corporation is prohibited from incurring indebtedness, except as
it is liable for the Inland LLC's indebtedness in its capacity as a
member of the Inland LLC.
(h) The corporation's ability to enter into transactions with affiliates
is limited only to transactions on an arm's length basis and on
commercially reasonable terms.
(i) The corporation is required to continue serving in the capacity of a
member of Inland LLC so long as the Loan is outstanding.
(j) The corporation covenants on its own behalf, and will cause Inland
LLC:
(i) To maintain books and records separate from any other person or
entity;
(ii) To maintain its bank accounts separate from any other person or
entity;
(iii) Not to commingle its assets with those of any other person or
entity and to hold all of its assets in its own name;
(iv) To conduct its own business in its own name;
(v) To maintain all of its books, records, financial statments and
bank accounts separate from those of any other person and the
corporation's assets will not be listed as assets on the financial
statement of any other person; provided, however, that the
corporation's assets may be included in a consolidated financial
statement of its parent companies if inclusion on such a consolidated
statement is required to comply with the requirements of generally
acceptable accounting principals ("GAAP"), but only if (i) such
consolidated financial statements shall contain a footnote to the
effect that the corporation's assets are owned by the corporation and
that they are being included on the financial statement of its parent
solely to comply with the requirements of GAAP, and (ii) such assets
shall be listed on the corporation's own separate balance sheet;
(vi) To file its own tax returns provided, however, that Inland LLC's
assets may be included in a consolidated tax return of its parent
companies if inclusion on such a consolidated tax return is required
to comply with the requirement of GAAP or any other applicable law.
The corporation shall maintain its books, records, resolutions and
agreements as official records.
(vii) To pay its own liabilities and expenses only out of its own
funds;
(viii) To observe all corporate and other organizational formalities;
(ix) To maintain an arm's length relationship with its affiliates and
to enter into transactions with affiliates only on a commercially
reasonable basis;
(x) To pay the salaries of its own employees from its own funds;
(xi) To maintain a sufficient number of employees in light of its
contemplated business operations;
(xii) Not to guarantee or become obligated for the debts of any other
entity or person (except to the extent it is liable for the Inland
LLC's obligations due to its capacity as a member);
(xiii) Not to hold out its credit as being available to satisfy the
obligations of any other person or entity;
(xiv) Not to acquire the obligations or securities of its affiliates
or owners, including partners, members or shareholders, as
appropriate;
(xv) Not to make loans to any other person or entity or to buy or
hold evidence of indebtedness issued by any other person or entity
(except for cash and investment-grade securities);
(xvi) To allocate fairly and reasonably any overhead expenses that
are shared with an affiliate, including paying for office space and
services performed by an employee of an affiliate;
(xvii) To use separate stationery, invoices, and checks bearing its
own name;
(xviii) Not to pledge its assets for the benefit of any other person
or entity;
(xix) To hold itself out as a separate indentity;
(xx) To correct any known misunderstanding regarding its separate
identity;
(xxi) Not to identify itself as a division of any other person or
entity; and
(xxii) To maintain adequate capital in light of its contemplated
business operations.
THE UNDERSIGNED, being the incorporator hereinbefore named, for the purpose
of forming a corporation pursuant to the General Corporation Law of the State
of Delaware, does make this Certificate, hereby declaring and certifying that
this is its act and deed and the facts herein stated are true, and accordingly
it has executed this Certificate of Incorporation this 18th day of September,
1998.
By: /s/ Gary Pechter
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
* * * * *
INLAND REAL ESTATE LB I CORPORATION, a corporation organized and
existing under and by virtue of the General Corporation Law of the State
of Delaware, DOES HEREBY CERTIFY:
FIRST: That by the unanimous written consent of the Board of
Directors of INLAND REAL ESTATE LB I CORPORATION resolutions were duly
adopted setting forth a proposed amendment to the Certificate of
Incorporation of said corporation, declaring said amendment to be
advisable and calling for the consent of the sole shareholder of said
corporation thereto. The resolution setting forth the proposed
amendment is as follows:
RESOLVED, that the Certificate of Incorporation of this corporation
be amended by changing the Lender described in Article 3 from Secore
Financial Corporation to Lehman Brothers Holdings, Inc.
FURTHER RESOLVED, that the Certificate of Incorporation of this
corporation be amended by attaching Schedule A hereto which Schedule
includes the Properties described in Article 3.
SECOND: That thereafter, the sole shareholder of the corporation
consented to the amendment in writing.
THIRD: That said amendment is duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, said INLAND REAL ESTATE LB I CORPORATION. has
caused this certificate to be signed by Gary Pechter, its Assistant
Secretary, this 29th day of September, 1998.
INLAND REAL ESTATE LB I CORPORATION,
By: /s/ Gary Pechter
Its: Assistant Secretary
SCHEDULE A
List of Properties
LAKE PARK PLAZA SHOPPING CENTER
4301 Franklin Street, Route 421, Michigan City, IN
ST. JAMES CROSSING SHOPPING CENTER
800-844 E. Ogden Avenue, Westmont, IL
HOMEWOOD PLAZA SHOPPING CENTER
17510 S. Halsted, Homewood, IL
HIGH POINT CENTRE SHOPPING CENTER
7475 Mineral Pointe Road, Madison, WI
CHESTNUT COURT SHOPPING CENTER
7511 Lemont Road, Darien, IL
OAK FOREST COMMONS SHOPPING CENTER
NE corner of 159th and Central Avenue, Oak Forest, IL
NAPER WEST PLAZA SHOPPING CENTER
510-618 S. Route 59, Naperville, IL
BERGEN PLAZA SHOPPING CENTER
7101 10th Street North, Oakdale, MN
WAUCONDA SHOPPING CENTER
612-620 N. Liberty St. (Route 176), Wauconda, IL
WISNER/MILWAUKEE PLAZA SHOPPING CENTER
2847-2865 N. Milwaukee Avenue, Chicago, IL
WESTERN HOWARD SHOPPING CENTER
2341-57 West Howard Street, Chicago, IL
ELMHURST CITY CENTRE
Lot 2: 149 N. York Rd.; Lot 4: One City Centre, Elmhurst, IL
BY-LAWS
OF
INLAND REAL ESTATE LB I CORPORATION
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office of the corporation in
the State of Delaware is the Corporation Trust Center, 1209
Orange Street in the
City of Wilmington, County of New Castle.
SECTION 2. OFFICES. The corporation may also have offices at such
other places
both within and without the State of Delaware as the board of
directors may from
time to time determine or as the business of the corporation may require.
ARTICLE II
SHAREHOLDERS
SECTION 1. GENERAL. The corporation has been formed as a "qualified REIT
subsidiary" and as such 100% of the shares of stock of the corporation are and
shall be throughout the existence of the corporation owned by a single
shareholder that operates as a real estate investment trust (commonly
known as a
REIT), specifically Inland Real Estate Corporation, a Maryland corporation
("IREC"). Accordingly, any action required to be taken by shareholders under
the General Corporation Law of the State of Delaware (the "Business Corporation
Act") may be taken without a meeting and without a vote, if a writing setting
forth the action of the sole shareholder shall be signed by an officer of IREC.
SECTION 2. ANNUAL MEETING. For so long as IREC is the sole shareholder of the
corporation, an annual meeting of the sole shareholder shall be
held on the same
date as the annual meeting for IREC, which shall be not less than 30 days after
delivery of the annual report to shareholders of IREC, but within six months
after the end of each fiscal year of IREC. The annual meeting
shall be held for
the purpose of appointing directors and for the transaction of any other
business as may come before the meeting. If the annual meeting is not held by
oversight or otherwise, a special meeting shall be held as soon as practical,
and any business transacted at that meeting shall be as valid as if transacted
at the annual meeting.
SECTION 3. SPECIAL MEETINGS. Special meetings of the sole shareholder may be
called either by the president, by a majority of the board of directors or by a
majority of the Independent Directors (as such term is defined in the Articles
of Incorporation, as amended, of IREC) and shall be called by an officer of the
Company upon written request of IREC.
SECTION 4. PLACE OF MEETING. The board of directors may
designate any place as
the place of meeting for any annual meeting or for any special
meeting called by
the board of directors. If no designation is made, or if a special meeting is
otherwise called, the place of meeting shall be at 2901 Butterfield Road, Oak
Brook, Illinois 60523.
ARTICLE III
DIRECTORS
SECTION l. GENERAL POWERS. The business of the corporation shall be managed
by and under the direction of its board of directors.
SECTION 2. NUMBER, TENURE AND QUALIFICATIONS. The number of directors of the
corporation shall be not less than three nor more than nine, a
majority of which
shall at all times be Independent Directors (as such term is defined in the
Articles of Incorporation, as amended, of IREC). Each director shall hold
office until the next annual meeting of the sole shareholder, or until such
director's successor shall have been appointed and qualified. Directors need
not be residents of Delaware nor shareholders of the corporation.
The number of
directors may be increased or decreased from time to time by a written
resolution of the sole shareholder. No decrease shall have the effect of
shortening the term of any incumbent director. Appointment of a director shall
not of itself create contract rights. At all times that the loan
by and between
Secore Financial Corporation, as Lender, and Inland Real Estate LB I LLC, as
Borrower, remains outstanding, one of the board of directors shall be an
Independent Director as defined in the Certificate of Incorporation (such
Independent Director being referred to herein as the "SFC Independent
Director").
SECTION 3. RESIGNATIONS AND REMOVAL. Any director may resign at any time by
giving written notice to the chairman of the board or the president. The sole
shareholder may remove any Director (except for the SFC Independent Director)
with or without cause in the manner provided in the Articles of
Incorporation of
the Corporation ("Articles").
SECTION 4. MEETINGS. Meetings of the board of directors may be
called by or at
the request of the chairman of the board, the president or a majority of the
directors. The person or persons authorized to call meetings of the board of
directors may fix any place as the place for holding any meeting of the board
of directors called by them.
SECTION 5. BUSINESS OF MEETINGS. Except as otherwise expressly provided in
these By-Laws, any and all business may be transacted at any meeting of the
board of directors.
SECTION 6. NOTICE OF MEETINGS. Notice of any meeting shall be given to each
director at his principal place of business (i) at least two days previous
thereto if delivered by messenger, overnight courier or facsimile; or (ii) at
least five days previous thereto if mailed. The attendance of a
director at any
meeting shall constitute a waiver of notice of such meeting, except where a
director attends a meeting for the express purpose of objecting to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the board of directors need be specified in the
notice or waiver of notice of such meeting.
SECTION 7. ATTENDANCE BY TELEPHONE. Directors may participate in meetings of
the board of directors by means of a conference telephone or similar
communications equipment by means of which all directors participating in the
meeting can hear and speak to one another, and such participation shall
constitute presence in person at the meeting.
SECTION 8. QUORUM AND MANNER OF ACTING. A majority of the number
of directors,
including a majority of the Independent Directors, shall constitute a
quorum for
transaction of business at any meeting of the board of directors,
and the act of
a majority of the directors present at any meeting at which a quorum is present
shall be the act of the board. If less than a majority of such directors are
present at said meeting, a majority of the directors present may adjourn the
meeting from time to time without further notice.
SECTION 9. INDEPENDENT DIRECTOR ACTION REQUIRED. Notwithstanding anything
herein to the contrary or set forth in the Articles, a majority of the
Independent Directors must approve all matters required to be approved by a
majority of such independent Directors of IREC pursuant to the By-Laws of IREC.
SECTION 10. ACTION WITHOUT A MEETING. Any action which could be taken at a
meeting of the board of directors may be taken without a meeting if all of the
directors consent to the action in writing, and the writing or writings are
filed with the minutes of proceedings of the board.
SECTION 11. FILLING OF VACANCIES. Any vacancy on the board of
directors caused
by death, resignation or incapacity of a director or by an increase in the
number of directors shall be filled by a majority of the remaining directors
although such majority may be less than a quorum. Any vacancy on the board of
directors created as a result of the removal of a director by the sole
shareholder of the corporation shall be filled by action of the sole
shareholder. Any director may resign at any time upon written notice to the
board of directors. Such resignation shall be effective when the notice is
given unless the notice specifies a future date. Any director except the SFC
Independent Director may be removed with or without cause, by the sole
shareholder of the corporation.
SECTION 12. COMPENSATION. The board of directors shall have authority to fix
the compensation of directors, unless otherwise provided in the Articles.
SECTION 13. PRESIDING OFFICER. The presiding officer at any meeting of the
board of directors shall be the chairman of the board, or in his absence, any
other director elected chairman by vote of a majority of the directors present
at the meeting.
SECTION 14. COMMITTEES. The board of directors, by resolution passed by a
majority of the directors and recorded in the minutes of the corporation, may
designate one or more committees and the members thereof, provided
that at least
a majority of the members of each committee are Independent Directors. The
board may designate one or more directors as alternate members of any
committee,
who may replace any absent or disqualified member at any meeting of the
committee. The board may increase or decrease committee membership, remove a
committee member and appoint members to fill vacancies in a committee. Any
committee of the board shall make such reports as required by the board
available to the entire board for review and any necessary action by the board.
Any such committee, to the extent provided in the resolution of the board of
directors designating such committee, shall have and may exercise only the
powers and authority granted to it by of the board of directors. Any such
committee shall have such name as may be determined from time to time by
resolution adopted by the board of directors.
SECTION 15. RELIANCE. Each director, officer, employee and agent of the
corporation shall, in the performance of his duties with respect to the
corporation, be fully justified and protected with regard to any act or failure
to act in reliance in good faith upon the books of account or other records of
the corporation and upon such information, opinions, reports or statements
presented to the corporation or upon an opinion of counsel or upon reports made
to the corporation by any of its officers or employees, or by the Advisor,
accountants, appraisers or other experts or consultants selected by
the board or
officers of the corporation, regardless of whether such counsel or expert may
also be a director.
SECTION 16. LIMITATION OF PERSONAL LIABILITY. A director's
personal liability
for monetary damages to the corporation or its shareholders is
hereby eliminated
for breach of fiduciary duty, provided however that this Section shall not
eliminate or limit the liability of a director (i) for any breach of the
director's duty of loyalty to the corporation or its shareholders,
(ii) for acts
or omissions not in good faith or that involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Business Corporation
Act, or (iv) for any transaction from which the director derived an improper
personal benefit.
ARTICLE IV
OFFICERS
SECTION l. NUMBER. The officers of the corporation shall be a chairman of the
board, the president, one or more vice presidents, the secretary, the treasurer
and such assistant secretaries and assistant treasurers or any other
officers as
may be elected or appointed by the board of directors. Any two or more offices
may be held by the same person.
SECTION 2. ELECTION AND TERM OF OFFICE. The officers of the corporation shall
be elected by the board of directors at their first meeting and thereafter at
any subsequent meeting and shall hold their offices for such term as determined
by the board. Each officer shall hold office until such officer's successor
shall have been duly elected and shall have qualified or until such officer's
death or disability, or until such officer shall resign or shall have been
removed in the manner hereinafter provided. Election of an officer
shall not of
itself create contract rights.
SECTION 3. REMOVAL AND RESIGNATION. Any officer may be removed,
either with or
without cause, at any time by the board of directors.
Any officer may resign at
any time by giving notice to the corporation. Any such resignation shall take
effect at the date of the receipt of such notice or at any later time specified
therein.
SECTION 4. VACANCIES. A vacancy in any office because of death, resignation,
or removal or any other cause may be filled for the unexpired portion of the
term by the board.
SECTION 5. CHAIRMAN OF THE BOARD. The chairman of the board of the
corporation
shall be the chief executive officer of the corporation. The chairman of the
board shall preside at all meetings of the board of directors, and at all
stockholders' meetings, whether annual or special, at which he is present and
shall exercise such other powers and perform such other duties as the board of
directors may from time to time assign to him or as may be prescribed by these
By-Laws. Except in those instances in which the authority to execute is
expressly delegated to another officer or agent of the corporation, or a
different mode of execution is expressly prescribed by the board of
directors or
these By-Laws, he may execute for the corporation certificates for its shares
and any contracts, deeds, mortgages, bonds or other instruments which the board
of directors have authorized to be executed, and he may accomplish such
execution either under or without the seal of the corporation, or either
individually or with the secretary, any assistant secretary or any
other officer
thereunto authorized by the board of directors, according to the
requirements of
the form of the instrument or applicable law.
SECTION 6. THE PRESIDENT. The president shall be the chief operating officer
of the corporation. Subject to the direction and control of the board of
directors, the president shall be in charge of the business of the
corporation;
shall see that the resolutions and directions of the board of directors are
carried into effect except in those instances in which that responsibility is
specifically assigned to some other person by the board of directors; and, in
general, shall discharge all duties incident to the office of president and
such other duties as may be prescribed by the board of directors from time to
time. Except in those instances in which the authority to execute is expressly
delegated to another officer or agent of the corporation, or a
different mode of
execution is expressly prescribed by the board of directors, the president may
execute for the corporation certificates for its shares, and any contracts,
deeds, notes, mortgages, bonds, guarantees or other instruments which the board
of directors has authorized to be executed, and he may accomplish
such execution
either under or without the seal of the corporation and either individually or
with the secretary, any assistant secretary, or any other officer thereunto
authorized by the board of directors, according to the requirements of the form
of the instrument. The president may vote all securities which the corporation
is entitled to vote except as and to the extent such authority shall be vested
in a different officer or agent of the corporation by the board of directors.
SECTION 7. THE VICE-PRESIDENTS. In the event of the election of a vice-
president, the vice-president (or in the event there be more than one vice-
president, each of the vice-presidents) shall assist the president in the
discharge of the president's duties as the president may direct and shall
perform such other duties as from time to time may be assigned to the vice-
president by the president or by the board of directors. In the absence of the
president or in the event of the president's inability or refusal to act, the
vice-president (or in the event there be more than one vice-president, the vice-
presidents in the order designated by the board of directors, or by the
president if the board of directors has not made such a designation, or in the
absence of any designation, then in the order of seniority of tenure as vice-
president) shall perform the duties of the president, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
president. Except in those instances in which the authority to execute is
expressly delegated to another officer or agent of the corporation or a
different mode of execution is expressly prescribed by the board of
directors or
these by-laws, the vice-president (or each of them if there are more than one)
may execute for the corporation certificates for its shares and any contracts,
deeds, notes, mortgages, bonds, guarantees or other instruments which the board
of directors has authorized to be executed, and may accomplish such execution
either under or without the seal of the corporation and either individually or
with the secretary, any assistant secretary, or any other officer thereunto
authorized by the board of directors, according to the requirements of the form
of the instrument.
SECTION 8. THE TREASURER. In the event of the election of a treasurer, the
treasurer shall be the principal accounting and financial officer of the
corporation. The treasurer shall: (a) have charge of and be responsible for
the maintenance of the books of account for the corporation; (b) have
charge and
custody of all funds and securities of the corporation and for the receipt and
disbursement thereof; and (c) perform all the duties incident to the office of
treasurer and such other duties as from time to time may be assigned the
treasurer by the president or by the board of directors. If required by the
board of directors, the treasurer shall give a bond for the faithful discharge
of the treasurer's duties in such sum and with such surety or sureties as the
board of directors may determine. The premium for such bond shall be paid
for by
the corporation.
SECTION 9. THE SECRETARY. In the event of the election of a secretary, the
secretary shall: (a) maintain the corporation's minutes and
resolutions in one
or more books provided for that purpose; (b) see that all notices are
duly given
in accordance with the provisions of these by-laws or as required by
law; (c) be
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custodian of the corporate records and of the seal of the corporation, if any;
(d) keep a register of the post-office address of each shareholder which shall
be furnished to the secretary by such shareholder; (e) sign with the chairman of
the board or the president, or a vice-president, or any other officer thereunto
authorized by the board of directors, certificates for shares of the
corporation, the issue of which shall have been authorized by the board of
directors, and any contracts, deeds, notes, mortgages, bonds, guarantees or
other instruments which the board of directors has authorized to be executed,
according to the requirements of the form of the instrument, except when a
different mode of execution is expressly prescribed by the board of directors or
these by-laws; (f) have general charge of the stock transfer books of the
corporation; and (g) perform all duties incident to the office of secretary and
such other duties as from time to time may be assigned to the secretary by the
president or by the board of directors.
SECTION 10. ASSISTANT TREASURERS AND ASSISTANT SECRETARIES. In the event of
the election of an assistant treasurer or assistant secretaries, they shall
perform such duties as shall be assigned to them by the board of directors.
When the secretary is unavailable, any assistant secretary may sign with the
president, or a vice-president, or any other officer thereunto authorized by the
board of directors, any contracts, deeds, notes, mortgages, bonds, guarantees or
other instruments which the board of directors has authorized to be executed,
according to the requirements of the form of the instrument, except when a
different mode of execution is expressly prescribed by the board of directors or
these by-laws. The assistant treasurer shall, if required by the board of
directors, give bonds for the faithful discharge of their duties in such sums
and with such sureties as the board of directors shall determine and the premium
for such bond shall be paid for by the corporation.
SECTION 11. COMPENSATION. The compensation of the officers shall be fixed from
time to time by the board of directors and no officer shall be prevented from
receiving such salary by reason of the fact that such officer is also a director
of the corporation.
ARTICLE V
CONTRACTS, LOANS AND GUARANTEES
SECTION l. CONTRACTS. The board of directors may authorize any officer or
officers, agent or agents, to enter into any contract or execute and deliver any
instrument in the name of and on behalf of the corporation, and such authority
may be general or confined to specific instances.
SECTION 2. LOANS. No loans shall be contracted on behalf of the corporation
and no evidences of indebtedness shall be issued in its name unless authorized
by a resolution of the board of directors. Such authority may be general or
confined to specific instances.
SECTION 3. CHECKS, DRAFTS, ETC. All checks, drafts or other orders for the
payment of money, notes or other evidences of indebtedness issued in the name of
the corporation shall be signed by such officer or officers or agent or agents
of the corporation and in such manner as shall from time to time be determined
by resolution of the board of directors.
SECTION 4. DEPOSITS. All funds of the corporation not otherwise employed shall
be deposited from time to time to the credit of the corporation in such banks,
trust companies or other depositaries as the board of directors may select.
ARTICLE VI
SHARES AND THEIR TRANSFER
SECTION l. SHARES REPRESENTED BY CERTIFICATES. Shares of the corporation shall
be represented by certificates.
Certificates representing shares of the corporation shall be signed by the
appropriate officers and may be sealed with the seal or a facsimile of the seal,
if any, of the corporation.
The name of the sole shareholder, the number of shares held and the date on
which the shares were issued shall be entered on the books of the corporation.
The person in whose name shares stand on the books of the corporation shall be
deemed the owner thereof for all purposes as regards the corporation.
SECTION 2. TRANSFERS OF SHARES. Shares of the corporation are not
transferable.
ARTICLE VII
FISCAL YEAR
The fiscal year of the corporation shall be January 1 - December 31.
ARTICLE VIII
DISTRIBUTIONS
The board of directors may authorize, and the corporation may make,
distributions to its shareholders, subject to any restrictions in the articles
of incorporation or as provided by law.
ARTICLE IX
SEAL
The corporate seal, if any, shall have inscribed thereon the name of the
corporation and the words "Corporate Seal" followed by the state of
incorporation. The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or in any other manner reproduced, provided that the
affixing of the corporate seal to an instrument shall not give the instrument
additional force or effect, or change the construction thereof, and the use of
the corporate seal is not mandatory.
ARTICLE X
NOTICE
SECTION 1. Whenever, under the provisions of the Business Corporation Act, the
articles of incorporation or these by-laws, notice is required to be given to
any director or shareholder, such notice may be given in writing, by mail,
addressed to such director or shareholder at such director's or shareholder's
address as it appears in the records of the corporation, with postage prepaid,
and notice shall be deemed given at the time when the same shall be deposited in
the United States mail. Notice to directors and shareholders may also be given
by personal delivery or overnight courier and shall be deemed given the next
business day after deposit with the courier or upon delivery when personally
served. Notice may also be given by facsimile transmission or other electronic
means to the director or shareholder at such director's or shareholder's number
as it appears in the records of the corporation and shall be deemed personally
served at the time shown on the printed confirmation of transmission thereof
produced by the transmitting device immediately following such transmission.
SECTION 2. Whenever, under the provisions of the Business Corporation Act, the
articles of incorporation or these by-laws, notice is required to be given to
any director or shareholder, a waiver thereof in writing, signed by the person
or persons entitled to such notice, whether before or after the time stated
therein, shall be deemed equivalent to the giving of such notice. Attendance at
any meeting shall constitute waiver of notice thereof unless the person at the
meeting objects to the holding of the meeting because proper notice was not
given.
ARTICLE XI
INDEMNIFICATION OF OFFICERS,
DIRECTORS, EMPLOYEES AND AGENTS
SECTION 1. INDEMNIFICATION RIGHTS IN A CIVIL OR CRIMINAL ACTION. The
corporation may indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit, proceeding
or investigation, whether civil, criminal, investigative or administrative, and
whether external or internal to the corporation (other than an action or suit
brought by or in the right of the corporation), by reason of the fact that such
person is or was a director, officer, employee, trustee or committee member of
the corporation, or that, such person is or was serving at the request of the
corporation as a director, officer, employee, trustee, committee member or agent
of another entity, including without limitation a corporation, partnership,
joint venture, trust or other enterprise against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or proceeding, or
any appeal therein, if such person acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
corporation, and with respect to any criminal action or proceeding, had no
reasonable cause to believe such conduct was unlawful. The termination of any
action, suit or proceeding whether by judgment, order, settlement, conviction,
or upon a plea of nolo contendere or its equivalent shall not, of itself, create
a presumption that the person did not act in good faith and in a manner which he
or she reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, that such
person had reasonable cause to believe that his or her conduct was unlawful.
SECTION 2. INDEMNIFICATION RIGHTS IN A DERIVATIVE ACTION. The corporation may
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit brought by or in the
right of the corporation to procure a judgment in its favor by reason of the
fact that he or she is or was a director, officer, employee or trustee of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee, trustee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by such person in
connection with the defense, settlement or appeal of such action or suit if such
person acted in good faith and in a manner such person reasonably believed to be
in or not opposed to the best interests of the corporation, except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable for gross negligence or
willful misconduct in the performance of his or her duty to the corporation
unless and only to the extent that the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the court
shall deem proper.
SECTION 3. DETERMINATION OF RIGHT OF INDEMNIFICATION. Any indemnification
under Section 1 or 2 (unless ordered by a court) shall be made by the
corporation only as authorized in the specific case upon a determination that
the indemnification of the person in question is proper in the circumstances
because that person has met the applicable standards of conduct set forth in
Sections 1 or 2, as the case may be, of this Article. Such determination shall
be made (i) by the board by a majority vote of a quorum consisting of directors
who were not parties to such action, suit or proceeding, or (ii) if such a
quorum is not obtainable, or, even if obtainable, if a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion, or
(iii) by a two-thirds (2/3) vote of the shareholders. If either the board of
directors or independent legal counsel make the determination that
indemnification is proper, written notice of such determination shall be sent to
the shareholders within ten days.
SECTION 4. INDEMNIFICATION AGAINST EXPENSES OF SUCCESSFUL PARTY. To the extent
that any person referred to in Sections 1 and 2 of this Article has been
successful on the merits or otherwise in defense of any action, suit, proceeding
or investigation, or any appeal or in defense of any claim, issue or matter
therein, or on appeal from any such proceeding, action, suit, claim or matter,
such person shall be indemnified against all expenses (including attorney's
fees) incurred in connection therewith.
SECTION 5. ADVANCES OF EXPENSES. Expenses incurred in any action, suit,
proceeding or investigation or any appeal therefrom may be paid by the
corporation in advance of the final disposition of such matter, as authorized by
the board of directors in the specific matter, upon receipt of an acceptable
undertaking by or on behalf of such person to repay such amount, unless it shall
ultimately be determined, as provided herein, that such person is entitled to
indemnification. If the board of directors authorizes advancing expenses,
written notice of such authorization shall be sent to the shareholders within
ten days.
SECTION 6. OTHER RIGHTS AND REMEDIES. The indemnification provided by this
Article shall not be deemed exclusive of, and shall not affect, any other rights
to which any person seeking indemnification may be entitled under any law, by-
law, charter provision, agreement, vote of shareholders or disinterested
directors or otherwise, both as to action in his or her official capacity and as
to action in another capacity while holding such office, and shall continue as
to a person who has ceased to occupy any of the positions mentioned in Sections
1 and 2 of this Article for which such person is seeking indemnification and
shall inure to the benefit of the heirs, executors and administrators of such a
person.
SECTION 7. INSURANCE. The corporation may purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or trustee of
the corporation or who is or was serving at the request of the corporation as a
director, officer, employee, trustee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against such person and incurred by him or her in any such capacity, or
arising out of his or her status as such, whether or not the corporation would
have the power to indemnify such person against such liability under the
provisions of this Article. Such insurance may include "tail" coverage for
periods after termination of service in such capacity or after liquidation,
merger, consolidation or other change in the corporation.
SECTION 8. CONSTITUENT CORPORATIONS. For the purposes of this Article,
references to "the corporation" shall include, in addition to the surviving
corporation, any merging corporation (including any corporation having merged
with a merging corporation) absorbed in a merger which, if its separate
existence had continued, would have had the power and authority to indemnify its
directors, officers, employees, or trustees so that any person who was a
director, officer, employee or trustee of such merging corporation or was
serving at the request of such merging corporation as a director, officer,
employee, or trustee of another corporation, partnership, joint venture, trust
or other enterprise shall stand in the same position under the provisions of
this Section with respect to the surviving corporation as such person would have
with respect to such merging corporation if its separate existence had
continued.
SECTION 9. OTHER ENTERPRISES, FINES, AND SERVING AT CORPORATION'S REQUEST. For
purposes of this Article, references to "other enterprise" in Sections 1 and 8
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to any employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as director, officer, employee, trustee or agent of the corporation
which imposes duties on, or involves services by such person with respect to any
employee benefit plan, its participants, or beneficiaries; and a person who
acted in good faith and in a manner he or she reasonably believed to be in the
interest of the participants and beneficiaries of an employee benefit plan shall
be deemed to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this Article.
SECTION 10. MAINTENANCE OF DEFENSE BY THE CORPORATION. The corporation may, at
its cost and expense, defend with counsel of the corporation's choice or
approval, any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding or
investigation, whether civil, criminal or administrative, and whether external
or internal to the corporation by reason of the fact that he or she is or was
acting in any capacity described in Sections 1 and 2 of this Article if he or
she acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation and with respect to any
criminal action or proceeding, had no reasonable cause to believe such conduct
was unlawful.
SECTION 11. SAVINGS CLAUSE. If this Article or any portion thereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each person entitled to indemnification
as to expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement with respect to any action, suit, appeal, proceeding or
investigation, whether civil, criminal or administrative, and whether internal
or external, including a grand jury proceeding or an action or suit brought by
or in the right of the corporation, to the fullest extent permitted by any
applicable portion of this Article that shall not have been invalidated, or by
any other applicable law.
ARTICLE XII
AMENDMENTS
Unless the power to adopt, alter, amend or repeal these by-laws is reserved to
the shareholders by the articles of incorporation, these by-laws may be
adopted, altered, amended or repealed by the shareholders or by the board of
directors, but no by-law adopted by the shareholders may be altered, amended or
repealed by the board of directors if these by-laws so provide. These by-laws
may contain any provisions for the regulation and management of the affairs of
the corporation not inconsistent with the Business Corporation Act or the
articles of incorporation.
</TABLE>
UNANIMOUS CONSENT OF THE
BOARD OF DIRECTORS OF INLAND REAL ESTATE LB I CORPORATION
The undersigned, being all of the Directors of Inland Real Estate
LB I Corporation, a Delaware corporation (the "Corporation"), do
hereby adopt the following resolutions:
WHEREAS, Lehman Brothers Holdings Inc., doing business as Lehman
Capital, a division of Lehman Brothers Holdings Inc. ("Lender"),
proposes to make a loan ( the "Loan") to Inland Real Estate LB I
LLC ("Borrower") in the principal amount of approximately
$62,000,000.00 or such other amount as is acceptable to the
officer executing the Loan Documents to be secured by, among
other things, a first mortgage lien on the properties located on
Exhibit A attached hereto and made a part hereof;
WHEREAS, the Corporation is the sole member of the Borrower;
WHEREAS, Gary Pechter, counsel to the Corporation, has reported to
the undersigned that he has reviewed (i) a proposed form of Loan
Agreement ("Agreement") pursuant to which the Loan is being made,
(ii) a proposed form of the Promissory Note (the "Note")
evidencing the Loan, and (iii) proposed forms of the other Loan
Documents (as defined in the Agreement);
NOW, THEREFORE, it is resolved that the President, any Vice
President or the Treasurer of the Corporation is authorized,
directed and empowered in the name and on behalf of the
Corporation, in its own capacity and on behalf of the Borrower,
to take such action and execute such documents as may be required
from time to time in connection with the Loan, including, but not
limited to the execution of the Loan Documents to which the
Corporation or the Borrower are a party, upon presentation by Gary
Pechter;
FURTHER RESOLVED, Patricia A. Challenger and Mark Zalatoris are
each hereby specially appointed as Vice Presidents of the
Corporation for the sole and exclusive purpose of executing on
behalf of the Corporation, in its own capacity and on behalf of
the Borrower, the Agreement, the Note and the other Loan
Documents;
FURTHER RESOLVED, Gary Pechter is hereby specially appointed
Assistant Secretary of the Corporation for the sole and exclusive
purpose of attesting the signature of other officers to the
Corporation and to execute certificates as he may deem necessary
and appropriate to effect the purpose and intent of the foregoing
resolutions;
FURTHER RESOLVED, that the President, any Vice President or the
Treasurer of the Corporation, and Gary Pechter, as counsel and
Assistant Secretary for the Corporation, are each hereby
authorized, directed and empowered, in the name and on behalf of
the Corporation, in its own capacity and on behalf of the
Borrower, to execute and deliver any and all other agreements,
certificates and documents which they shall deem necessary or
appropriate to effect the purpose and intent of the foregoing
resolutions; and
FURTHER RESOLVED, that all acts and deeds heretofore done by any
director or officer of the Corporation for and on behalf of the
Corporation, in its own capacity and on behalf of the Borrower, in
entering into, executing, acknowledging or attesting any
arrangements, agreements, instruments or documents in carrying out
the terms and intentions of the foregoing resolutions are hereby
ratified, approved and confirmed.
Dated: September 25, 1998
/s/ Robert D. Parks
/s/ G. Joseph Cosenza
/s/ Heidi N. Lawton
/s/ Roland W. Burris
/s/ Joel G. Herter
/s/ Mark A. Ferucci
Being the Sole Directors of the
Corporation
EXHIBIT A
Lake Park Plaza Shopping Center, Michigan City, IN
St. James Crossing Shopping Center, Westmont, IL
Homewood Plaza Shopping Center, Homewood, IL
High Point Centre Shopping Center, Madison, WI
Chestnut Court Shopping Center, Darien, IL
Oak Forest Commons Shopping Center, Oak Forest, IL
Naper West Plaza Shopping Center, Naperville, IL
Bergen Plaza Shopping Center, Oakdale, Minnesota
Wauconda Shopping Center, Wauconda, Illinois
Wisner/Milwaukee Plaza Shopping Center, Chicago, IL
Western Howard Shopping Center, Chicago, IL
Elmhurst City Centre, Elmhurst, IL
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 100313588
<SECURITIES> 0
<RECEIVABLES> 8600822
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 111073612
<PP&E> 452913777
<DEPRECIATION> 10684417
<TOTAL-ASSETS> 554753305
<CURRENT-LIABILITIES> 20928416
<BONDS> 0
0
0
<COMMON> 418237
<OTHER-SE> 365833870
<TOTAL-LIABILITY-AND-EQUITY> 554753305
<SALES> 0
<TOTAL-REVENUES> 30513396
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 16049824
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5331747
<INCOME-PRETAX> 9131825
<INCOME-TAX> 0
<INCOME-CONTINUING> 9131825
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9131825
<EPS-PRIMARY> .27
<EPS-DILUTED> .27
</TABLE>
