LOAN AGREEMENT
Dated as of March 11, 1998
Between
FAC MORTGAGE LLC,
as Borrower
AND
NOMURA ASSET CAPITAL CORPORATION,
as Lender
TABLE OF CONTENTS
Page
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I. DEFINITIONS; PRINCIPLES OF CONSTRUCTION..................................................................1
1.1 Specific Definitions............................................................................1
1.2 Index of Other Definitions......................................................................9
1.3 Principles of Construction.....................................................................10
II. GENERAL.................................................................................................10
2.1 The Loan.......................................................................................10
2.2 Interest; Monthly Payments.....................................................................11
2.2.1 Generally.........................................................................11
2.2.2 Accrued Interest..................................................................11
2.2.3 Property Cash Flow Allocation.....................................................11
2.2.4 Default Rate......................................................................12
2.3 Loan Repayment and Defeasance..................................................................12
2.3.1 Repayment.........................................................................12
2.3.2 Mandatory Prepayments.............................................................12
2.3.3 Voluntary Defeasance of the Note..................................................13
2.4 Release of Property............................................................................15
2.4.1 Release on Defeasance.............................................................15
2.4.3 Release on Payment in Full........................................................16
2.4.4 Substitution of Properties.....................................................................16
2.5 Payments and Computations......................................................................18
2.5.1 Making of Payments................................................................18
2.5.2 Computations......................................................................18
2.5.3 Late Payment Charge...............................................................18
2.6 Structuring Fee................................................................................18
2.7 Special Prepayment Compensation................................................................18
III. CASH MANAGEMENT; ESCROWS AND RESERVES...................................................................19
3.1 Cash Management Arrangements...................................................................19
3.2 Required Repairs; Required Repair Funds........................................................19
3.2.1 Required Repairs: Deposits........................................................19
3.2.2 Release of Required Repair Funds..................................................20
3.3 Tax and Insurance Escrow Fund..................................................................20
3.4 Capital Reserve Fund...........................................................................21
3.4.1 Capital Reserve Fund..............................................................21
3.4.2 Payment of Capital Expenses.......................................................21
3.5 Rollover Reserve Fund..........................................................................21
3.5.1 Rollover Reserve Fund.............................................................21
3.5.2 Payment of Leasing Expenses.......................................................22
3.6 Payment of Approved Operating Expenses.........................................................22
3.7 Security Deposits..............................................................................23
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3.8 Grant of Security Interest; Application of Funds...............................................23
IV. REPRESENTATIONS AND WARRANTIES..........................................................................24
4.1 Borrower Representations.......................................................................24
4.1.1 Organization; Special Purpose.....................................................24
4.1.2 Proceedings; Enforceability.......................................................24
4.1.3 No Conflicts......................................................................24
4.1.4 Litigation........................................................................24
4.1.5 Agreements........................................................................25
4.1.6 Title.............................................................................25
4.1.7 Survey............................................................................25
4.1.8 No Bankruptcy Filing..............................................................25
4.1.9 Full and Accurate Disclosure......................................................25
4.1.10 No Plan Assets....................................................................25
4.1.11 Compliance........................................................................25
4.1.12 Contracts.........................................................................26
4.1.13 Financial Information.............................................................26
4.1.14 Condemnation......................................................................26
4.1.15 Federal Reserve Regulations.......................................................26
4.1.16 Utilities and Public Access.......................................................26
4.1.17 Not a Foreign Person..............................................................27
4.1.18 Separate Lots.....................................................................27
4.1.19 Assessments.......................................................................27
4.1.20 Enforceability....................................................................27
4.1.21 Insurance.........................................................................27
4.1.22 Use of Property; Licenses.........................................................27
4.1.23 Flood Zone........................................................................27
4.1.24 Physical Condition................................................................27
4.1.25 Encroachments.....................................................................27
4.1.26 Leases............................................................................28
4.1.27 Filing and Recording Taxes........................................................28
4.1.28 Investment Company Act............................................................28
4.1.29 Fraudulent Transfer...............................................................28
4.1.30 Ownership of Borrower.............................................................29
4.1.31 Management Agreement..............................................................29
4.1.32 Hazardous Substances...................................................................29
4.1.33 Ground Lease............................................................................30
4.1.34 Out-Parcels.............................................................................30
4.2 Survival of Representations....................................................................30
V. AFFIRMATIVE COVENANTS...................................................................................30
5.1 Existence......................................................................................30
5.2 Taxes and Other Charges........................................................................30
5.3 Repairs; Maintenance and Compliance............................................................31
5.4 Litigation.....................................................................................31
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5.5 Performance of Other Agreements................................................................31
5.6 Notice of Default..............................................................................31
5.7 Cooperate in Legal Proceedings.................................................................31
5.8 Further Assurances.............................................................................31
5.9 Financial Reporting............................................................................32
5.9.1 Bookkeeping.......................................................................32
5.9.2 Annual Reports....................................................................32
5.9.3 Monthly Reports...................................................................32
5.9.4 Other Reports.....................................................................33
5.9.5 Annual Budget.....................................................................33
5.9.6 Breach............................................................................33
5.10 Environmental Matters..........................................................................33
5.10.1 Hazardous Substances..............................................................33
5.10.2 Environmental Monitoring.......................................................................34
5.11 Title to the Properties........................................................................35
5.12 Estoppel Statement.............................................................................35
5.13 Principal Place of Business....................................................................35
5.14 Property Management............................................................................35
5.14.1 Management Agreement..............................................................35
5.14.2 Termination of Manager............................................................35
5.15 Special Purpose Bankruptcy Remote Entity.......................................................35
5.16 Assumptions in Non-Consolidation Opinion.......................................................37
5.17 Expenses.......................................................................................37
5.18 Indemnity......................................................................................38
VI. NEGATIVE COVENANTS .....................................................................................39
6.1 Management Agreement...........................................................................39
6.2 Liens..........................................................................................39
6.3 Dissolution....................................................................................39
6.4 Change In Business.............................................................................39
6.5 Debt Cancellation..............................................................................39
6.6 Assets.........................................................................................39
6.7 Transfers......................................................................................40
6.8 Debt...........................................................................................40
6.9 Assignment of Rights...........................................................................40
6.10 Operation of the Properties....................................................................40
VII. INSURANCE; CASUALTY; AND CONDEMNATION...................................................................40
7.1 Insurance......................................................................................40
7.1.1 Coverage..........................................................................40
7.1.2 Policies..........................................................................42
7.2 Casualty.......................................................................................42
7.2.1 Notice; Restoration...............................................................43
7.2.2 Settlement of Proceeds............................................................43
7.3 Condemnation. ................................................................................43
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7.3.1 Notice; Restoration...............................................................43
7.3.2 Collection of Award...............................................................43
7.4 Application of Proceeds or Award...............................................................44
7.4.1 Application to Restoration........................................................44
7.4.2 Application to Debt...............................................................44
7.4.3 Procedure for Application to Restoration..........................................45
VIII. DEFAULTS................................................................................................45
8.1 Events of Default..............................................................................45
8.2 Remedies.......................................................................................47
8.2.1 Acceleration......................................................................47
8.2.2 Remedies Cumulative...............................................................47
8.2.3 Severance.........................................................................48
8.2.4 Delay.............................................................................48
IX. SPECIAL PROVISIONS......................................................................................48
9.1 Sale of Note and Securitization................................................................48
9.1.1 Cooperation.......................................................................48
9.1.2 Use of Information................................................................49
9.1.3 Borrower Obligations Regarding Disclosure Documents...............................50
9.1.4 Borrower Indemnity Regarding Filings..............................................51
9.1.5 Indemnification Procedure.........................................................51
9.1.6 Contribution......................................................................51
9.1.7 Rating Surveillance...............................................................52
X. MISCELLANEOUS...........................................................................................52
10.1 Exculpation....................................................................................52
10.2 Notices........................................................................................53
10.3 Brokers and Financial Advisors.................................................................54
10.4 Retention of Servicer..........................................................................54
10.5 Survival.......................................................................................54
10.6 Lender's Discretion............................................................................54
10.7 Governing Law..................................................................................55
10.8 Modification, Waiver in Writing................................................................56
10.9 Delay Not a Waiver.............................................................................56
10.10 Trial by Jury..................................................................................56
10.11 Headings.......................................................................................56
10.12 Severability...................................................................................56
10.13 Preferences....................................................................................57
10.14 Waiver of Notice...............................................................................57
10.15 Remedies of Borrower...........................................................................57
10.16 Prior Agreements...............................................................................57
10.17 Offsets, Counterclaims and Defenses............................................................57
10.18 Publicity......................................................................................58
10.19 No Usury.......................................................................................58
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10.20 Conflict; Construction of Documents............................................................58
10.21 No Third Party Beneficiaries...................................................................58
10.22 Cross Default; Cross Collateralization.........................................................58
SCHEDULES
Schedule 1 - List of Properties
Schedule 2 - Matters Regarding Representations
Schedule 3 - Rent Rolls
Schedule 4 - Required Repairs
Schedule 5 - Existing Anchor Leases
Schedule 6 - Eligible Out-Parcels
Schedule 7 - Form of Rent Roll
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LOAN AGREEMENT
LOAN AGREEMENT dated as of March 11, 1998 between FAC MORTGAGE LLC, a
Delaware limited liability company (together with its permitted successors and
assigns, "Borrower"), and NOMURA ASSET CAPITAL CORPORATION, a Delaware
corporation (together with its successors and assigns, "Lender").
I. DEFINITIONS; PRINCIPLES OF CONSTRUCTION
I.1 Specific Definitions. The following terms have the meanings set forth
below:
"Affiliate": 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.
"Allocated Loan Amount": With respect to each Property, as of any date of
determination, the product of (i) the then unpaid Principal multiplied by (ii)
an amount, expressed as a percentage, computed by dividing (A) the Net Operating
Income attributable to such Property, by (B) the Net Operating Income
attributable to the Properties.
"Anchor Leases": the leases listed on Schedule 5 hereto and any comparable
major leases of space in Properties that the Lender hereafter reasonably
determines to be anchor leases.
"Approved Capital Expenses": Capital Expenses incurred by Borrower which
(i) are included in the approved Capital Budget for the Current Month or (ii)
have been reasonably approved by Lender.
"Approved Leasing Expenses": expenses incurred in leasing space at a
Property pursuant to Leases entered into in accordance with the Loan Documents,
including brokerage commissions, tenant improvements and other inducements
(including cash and landlord work), which expenses (i) are (A) specifically
approved by Lender in connection with approving the applicable Lease, which
approvals shall not be unreasonably withheld or delayed, (B) incurred in the
ordinary course of business and on market terms and conditions in connection
with Leases which do not require Lender's approval under the Loan Documents, or
(C) otherwise approved by Lender, which approval shall not be unreasonably
withheld or delayed, and (ii) are substantiated by executed Lease documents and
brokerage agreements.
"Approved Operating Expenses": Operating Expenses incurred by Borrower
which (i) are included in the approved Operating Budget for the Current Month,
(ii) are for electric, gas, oil, water, sewer or other utility service to a
Property or (iii) have been approved by Lender.
"Business Day": any day other than a Saturday, Sunday or any other day on
which national banks in New York are not open for business.
"Capital Expenses": expenses that are required under GAAP to be
capitalized.
"Code": the Internal Revenue Code of 1986, as amended, any successor
statutes thereto, and applicable U.S. Department of Treasury regulations issued
pursuant thereto in temporary or final form.
"Control": with respect to any Person, either (i) ownership directly or
through other entities of more than 50% of all beneficial equity interest in
such Person, or (ii) the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person,
through the ownership of voting securities, by contract or otherwise.
"Current Month": as of any date of determination, the then current calendar
month.
"Debt": the unpaid Principal, all interest accrued and unpaid thereon, the
Yield Maintenance Premium and all other sums due to Lender in respect of the
Loan, or under any Loan Document.
"Debt Service": with respect to any particular period, scheduled Principal
and interest payments under the Note in such period.
"Debt Service Coverage Ratio": as of any date, the ratio of (i) the Net
Operating Income for the 12-month period ending with the most recently completed
calendar month to (ii) the Debt Service (exclusive of any payments due under the
Defeased Note, if any) with respect to such period.
"Default": the occurrence of any event under any Loan Document which, with
the giving of notice or passage of time, or both, would be an Event of Default.
"Default Rate": a rate per annum equal to the lesser of (i) the maximum
rate permitted by applicable law, or (ii) 5% above the Interest Rate or the
Revised Interest Rate, as applicable, compounded monthly.
"Defeasance Deposit": an amount equal to the sum of (i) an amount
sufficient to purchase U.S. Obligations which provide payments that will meet
the Scheduled Defeasance Payments, (ii) any costs and expenses incurred or to be
incurred in the purchase of such U.S. Obligations and (iii) any revenue,
documentary stamp or intangible taxes or any other tax or charge due in
connection with the transfer of the Note, the creation of the Defeased Note and
the Undefeased Note, if applicable, any transfer of the Defeased Note or
otherwise required to accomplish the agreements of Sections 2.3 and 2.4.
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"Deposit Bank": a bank or other depository selected by Lender in its sole
discretion, which holds and disburses Funds and other deposits required
hereunder.
"Eligible Account": (i) an account maintained with a federal or state
chartered depository institution or trust company whose (x) commercial paper,
short-term debt obligations or other short-term deposits are rated at least A-1
by the applicable Rating Agencies if the deposits in such account are to be held
in such account for 30 days or less or (y) long-term unsecured debt obligations
are rated at least AA- by the applicable Rating Agencies if the deposits in such
account are to be held in such account for more than 30 days; or (ii) a
segregated trust account maintained with the trust department of a federal or
state chartered depository institution or trust company acting in its fiduciary
capacity which institution or trust company is subject to regulations regarding
fiduciary funds on deposit substantially similar to 12 C.F.R. ss. 9.10(b); or
(iii) an account otherwise acceptable to the applicable Rating Agencies, as
confirmed in writing that such account would not, in and of itself, result in a
downgrade, qualification or withdrawal of the then current ratings assigned to
any Security.
"Eligible Out-Parcels": the unimproved separate out-parcels that are part
of the Properties, which are listed on Schedule 6 hereto.
"Fiscal Year": each twelve month period commencing on January 1 and ending
on December 31 during each year of the Term.
"GAAP": generally accepted accounting principles in the United States of
America as of the date of the applicable financial report.
"Governmental Authority": any court, board, agency, commission, office or
authority of any nature whatsoever for any governmental xxxx (xxxxxxx, xxxxx,
xxxxxx, xxxxxxxx, xxxxxxxxx, xxxx or otherwise) now or hereafter in existence.
"Ground Lease": the Consolidated, Amended and Restated Lease Agreement
dated as of December 1, 1996 between The Boaz Downtown Development Authority and
the Borrower's predecessor in interest, covering the Leased Property, as amended
by that certain First Amendment to Consolidated, Amended and Restated Lease
Agreement dated as of January 28, 1998, as it may further be modified and
amended from time to time in accordance herewith.
"Independent Director": an individual reasonably satisfactory to Lender who
shall not have been at the time of such individual's appointment as a director,
and may not have been at any time during the preceding five years (i) a
shareholder of, or an officer or employee of, Borrower or any of its
shareholders, subsidiaries or Affiliates, (ii) a customer of, or supplier to,
Borrower or any of its shareholders, subsidiaries or Affiliates, (iii) a Person
Controlling any such shareholder, supplier or customer, or (iv) a member of the
immediate family of any such shareholder, officer, employee, supplier or
customer or of any other director of the Managing Member.
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"Interest Period": the period from the date hereof through the first day
thereafter that is the tenth day of a calendar month, and each period thereafter
from the eleventh day of a calendar month through the tenth day of the following
calendar month; except that the Interest Period, if any, that would otherwise
commence before and end after the Maturity Date shall end on the Maturity Date.
"Interest Rate": a rate of interest equal to 9.10% per annum.
"Leased Property": the Property located in Boaz, Alabama.
"Legal Requirements": statutes, laws, rules, orders, regulations,
ordinances, judgments, decrees and injunctions of Governmental Authorities
affecting all or part of each Property or the construction, use, alteration or
operation thereof, whether now or hereafter enacted and in force (unless
"grandfathered"), and all permits, licenses and authorizations and regulations
relating thereto, and all covenants, agreements, restrictions and encumbrances
contained in any instrument, either of record or known to Borrower, at any time
in force affecting all or part of each Property, including any that may (i)
require repairs, modifications or alterations in or to all or part of each
Property, or (ii) in any way limit the use and enjoyment thereof.
"Lien": any mortgage, deed of trust, lien, pledge, hypothecation,
assignment, security interest or any other encumbrance, charge or transfer of,
on or affecting all or part of each Property or any interest therein, or in
Borrower, including 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 Documents": this Agreement and all other documents, agreements and
instruments evidencing, securing or delivered to Lender in connection with the
Loan, including the following, each of which is dated as of the date hereof: (i)
Note made by Borrower to Lender in the principal amount of the Loan (the
"Note"), (ii) each Mortgage, Assignment of Leases and Rents and Security
Agreement made by Borrower in favor of Lender or Deed of Trust or similar
instrument (collectively the "Mortgages"), which covers the Properties, (iii)
each Assignment of Leases and Rents from Borrower to Lender (collectively the
"Assignments of Leases"), and (iv) each Assignment of Agreements from Borrower
to Lender (collectively the "Assignments of Agreements"), as each of the
foregoing may be (and each of the foregoing defined terms shall refer to such
documents as they may be) amended, restated, replaced, supplemented or otherwise
modified from time to time.
"Major Leases": each of the Leases at the Properties to which (i) VF
Factory Outlet, Inc. and (ii) Carolina Pottery is a party.
"Major Lease Rollover Date": the expiration date of each of the Major
Leases, or
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such earlier date on which any of the Major Leases may terminate.
"Management Agreement": the management agreement dated the date hereof
between Borrower and Manager, pursuant to which Manager is to manage each
Property.
"Management Fee": the fee payable to Manager under the Management
Agreement.
"Manager": FAC Properties, L.P., a Delaware limited partnership.
"Managing Member": FAC Mortgage Formation, Inc., a Delaware corporation.
"Maturity Date": the date on which the final payment of principal of the
Note (or the Defeased Note, if applicable) becomes due and payable as therein
provided, whether at the Stated Maturity Date, by declaration of acceleration,
or otherwise.
"NACC": Nomura Asset Capital Corporation, a Delaware corporation.
"Net Operating Income": for any period, all Operating Income during such
period minus all Operating Expenses during such period; determined by audit or
in accordance with other agreed-upon procedures determined by Lender; provided
that, in determining Net Operating Income, (i) Operating Expenses shall be
adjusted to reflect (A) a normalized allowance for Lease rollovers based on the
rent roll for each Property and then current market conditions, including costs
for downtime, tenant improvements and leasing commissions, (B) a reserve for
capital expenditures equal to at least $0.15 per square foot of rentable space
per annum, exclusive of square footage attributable to Anchor Leases, and (C) a
vacancy allowance at the market vacancy rate (but not less than 5%) if actual
vacancy is less than such market rate (or less than 5%), and (ii) Operating
Income shall be adjusted (A) to exclude Rents from temporary or month-to-month
tenants or tenants operating under bankruptcy protection, (B) to xxxx any
above-market Leases to market Rent, (C) to include the annualized base rent for
executed leases with tenants in occupancy which are open for business and
actually paying rent for at least three months, and (D) to reflect any Rent
adjustments or cancellation options in any Leases; and provided further, that
Net Operating Income shall not include payments to be received in respect of
U.S. Obligations purchased in connection with a Defeasance. All adjustments to
determine Net Operating Income shall be made in a consistent manner throughout
the Term and shall be subject to Lender's approval, in its reasonable discretion
after due diligence.
"Officers' Certificate": a certificate delivered to Lender by Borrower
which is signed by a senior executive officer of the Managing Member.
"Operating Expenses": for any period, all expenditures by or on behalf of
Borrower as and to the extent required to be expensed or allowed to be expensed
and in fact expensed under GAAP during such period in connection with the
ownership, operation, maintenance, repair or leasing of each Property, including
(i) Management Fees (or if self-
5
managed, the actual cost of managing the Property); Insurance Premiums; bank
charges; expenses for accounting, advertising, marketing, architectural
services, utilities, extermination, cleaning, trash removal, window washing,
landscaping and security; and reasonable and necessary legal expenses incurred
in connection with the operation of each Property; (ii) Taxes and Other Charges
(excluding fines, penalties, interest or Taxes or Other Charges payable by
reason of Borrower's failure to pay an imposition timely); (iii) wages,
benefits, payroll taxes, uniforms, insurance costs and all other related
expenses for employees of Borrower or its Affiliates engaged in the repair,
operation or maintenance of each Property; and (iv) the cost of routine interior
and exterior maintenance, repairs and minor alterations; provided that Operating
Expenses will not include Debt Service, Capital Expenses, non-cash items such as
depreciation and amortization or any extraordinary one-time expenditures not
considered operating expenses under GAAP.
"Operating Income": for any period, all regular on-going revenues actually
received by Borrower from the operation of each Property during such period,
including (i) Rents (including base rents, percentage rents, common area
maintenance charges and property tax, insurance and utility recoveries from
tenants), (ii) all other amounts received which in accordance with GAAP are
required to be or are included in Borrower's annual financial statements as
operating income of each Property and (iii) proceeds from business interruption
insurance and rental loss insurance; provided, that Operating Income will not
include (1) income from non-recurring income sources, (2) advance Rents or other
payments, (3) deposits or escrows, (4) any income otherwise includable in
Operating Income but paid to a Person other than Borrower, (5) proceeds of
Casualty insurance or Condemnation Awards or (6) income from a sale, financing
or other capital transaction.
"Optional Prepayment Date": March 11, 2013.
"Other Charges": all ground rents, maintenance charges, impositions other
than Taxes, and any other charges, including vault charges and license fees for
the use of vaults, chutes and similar areas adjoining each Property, now or
hereafter levied or assessed or imposed against each Property or any part
thereof.
"Payment Date": the 11th day of each calendar month or, if in any month the
11th day is not a Business Day, then the Payment Date for such month shall be
the first Business Day thereafter.
"Permitted Encumbrances": (a) the Liens created by the Loan Documents, (b)
all Liens and other matters disclosed in the Title Insurance Policy, (c) Liens,
if any, for Taxes or Other Charges not yet payable or delinquent, and (d) such
other title and survey exceptions as Lender approves in writing in Lender's sole
discretion.
"Permitted Investments": any of a list of low-risk, liquid, short term
investment alternatives designated from time to time by Lender in its sole
discretion (which may be based, among other things, on standards applied by the
Rating Agencies).
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"Permitted Transfers": (i) a Lease (or an amendment, extension,
modification, waiver or renewal thereof) entered into in accordance with the
Loan Documents, (ii) a Special Transfer, (iii) a Transfer of a membership
interest in Borrower by a member other than the Managing Member, a direct or
indirect interest in a member of Borrower or stock in the Managing Member if
either (A) such Transfer would not cause the transferee to acquire Control of
Borrower or the Managing Member or to increase its direct or indirect interest
in Borrower or its stock in the Managing Member to an amount which equals or
exceeds 49%, or (B) Borrower shall have delivered (or caused to be delivered)
(1) to Lender, written confirmation from the applicable Rating Agencies that
such Transfer will not cause a qualification, withdrawal or downgrading of the
ratings in effect immediately prior to such Transfer for the Securities then
outstanding and (2) to Lender and the applicable Rating Agencies, a substantive
non-consolidation opinion with respect to Borrower in form and substance
satisfactory to Lender and the applicable Rating Agencies or (iv)
notwithstanding anything to the contrary contained in clause (iii) above, a
transfer of stock in FAC Realty Trust, Inc. to (x) Prometheus Southeast Retail
LLC, an Affiliate of Lazard Freres Real Estate Investors, LLC ("Lazard"), (y)
Lazard or (z) any other Affiliate of Lazard.
"Person": any individual, corporation, partnership, limited liability
company, joint venture, estate, trust, unincorporated association, any federal,
state, county or municipal government or any bureau, department or agency
thereof and any fiduciary acting in such capacity on behalf of any of the
foregoing.
"Pooling and Servicing Agreement": the Servicing Agreement entered into
with the Servicer in connection with any Securitization.
"Properties": collectively, the parcels of real property and improvements
thereon owned by Borrower (and shall also mean Borrower's leasehold interest
therein in the case of the Leased Property) and encumbered by the Mortgages
(including any Substitute Property), together with all rights pertaining to each
such property and improvements, as more particularly described in the Granting
Clauses of the Mortgages and referred to therein as the "Mortgaged Property". A
List of the Properties (other than the Substitute Property(ies)) is set forth in
Schedule 1.
"Rating Agency": each of Standard & Poor's Ratings Group, a division of
XxXxxx-Xxxx, Inc., Xxxxx'x Investors Service, Inc., Duff & Xxxxxx Credit Rating
Co. and Fitch Investors Service, Inc. or any other nationally-recognized
statistical rating agency which has been approved by Lender.
"Related Person": with respect to any specified Person, any other Person
that is an Affiliate of the specified Person or any limited partner of the
specified Person (if such Person is a limited partnership) or any shareholder of
the specified Person (if such Person is a corporation).
"Release": any satisfaction, release, assignment instrument, deed of
reconveyance
7
or similar instrument or instruments, each in recordable form and otherwise in
form reasonably satisfactory to Borrower, but without any representation or
warranty of Lender necessary to release any Property (or portion thereof) from
the Lien of all applicable Loan Documents
"Release Amount": (i) for each of the Special Release Properties, the
product of the Allocated Loan Amount for such Property and one hundred fifteen
percent (115%), (ii) for the Property located in Smithfield, North Carolina, the
product of the Allocated Loan Amount for such Property and one thirty five
percent (135%), (iii) for each other Property, the product of the Allocated Loan
Amount for such Property and one hundred twenty-five percent (125%) and (iv)
notwithstanding the foregoing, with respect to any mandatory prepayment made
pursuant to Section 2.3.2, the Allocated Loan Amount for the applicable
Property.
"Release Date": the earlier of (i) three years after the date hereof and
(b) two years from the "start-up day" (within the meaning of Section 860G(a)(9)
of the Code) of the REMIC Trust.
"REMIC": a "real estate mortgage investment conduit" within the meaning of
Section 860D of the Code.
"REMIC Trust": a REMIC that holds the Note.
"Revised Interest Rate": the per annum rate of interest that is the greater
of (i) the Interest Rate plus 5% and (ii) the Treasury Rate on the Optional
Prepayment Date plus 6.85%.
"Servicer": the entity appointed by Lender to service the Loan or its
successor in interest, or if any successor servicer is appointed pursuant to the
Pooling and Servicing Agreement, such successor servicer.
"Special Release Properties": the Properties located in (i) Nebraska City,
Nebraska, (ii) Lebanon, Missouri, (iii) Graceville, Florida, (iv) Story City,
Iowa and (v) Sulphur Springs, Texas.
"Special Transfer": the sale or transfer of the Properties after a
Securitization by the original Borrower and the assumption in writing by the
purchaser of all of the obligations of Borrower under the Loan Documents;
provided Lender shall have received evidence in writing from the applicable
Rating Agencies to the effect that such a sale or transfer and assumption will
not result in a qualification, withdrawal or downgrading of the ratings in
effect immediately prior to such sale for the Securities then outstanding.
"State": any state in which a Property is located.
"Stated Maturity Date": March 11, 2028.
8
"Taxes": all real estate and personal property taxes, assessments, water
rates or sewer rents, now or hereafter levied or assessed or imposed against all
or part of each Property.
"Term": the entire term of this Agreement, which shall expire upon
repayment in full of the Debt and full performance of each and every obligation
to be performed by Borrower pursuant to the Loan Documents.
"Title Insurance Policy": a mortgagee title insurance policy, in form
acceptable to Lender, issued with respect to each Property and insuring the lien
of each Mortgage.
"Transfer": any sale, conveyance, transfer, Lease (including any amendment,
extension, modification, waiver or renewal thereof), assignment, mortgage,
pledge, grant of a security interest or hypothecation, whether by law or
otherwise, of or in (i) all or part of any Property (including any legal or
beneficial direct or indirect interest therein), (ii) any direct or indirect
interest in Borrower, or (iii) any stock in the Managing Member.
"Treasury Rate": as of the Optional Prepayment Date, the linear
interpolation of the bond equivalent yields as reported in Federal Reserve
Statistical Release H.15-Selected Interest Rates under the heading "U.S.
Government Securities/Treasury Constant Maturities" for the week ending prior to
the Optional Prepayment Date of U.S. Treasury constant maturities with maturity
dates (one longer and one shorter) most nearly approximating the remaining term
of the Note as of the Optional Prepayment Date.
"UCC": the Uniform Commercial Code as in effect in the applicable State.
"U.S. Obligation": direct non-callable obligations of the United States of
America.
"Yield Maintenance Premium": the amount (if any) which, when added to the
unpaid Principal or the principal amount of the Defeased Note, as applicable,
will be sufficient to purchase U.S. Obligations providing the required Scheduled
Defeasance Payments.
I.2 Index of Other Definitions. The following terms are defined in the
sections or Loan Documents indicated below:
"Accrued Interest" - 2.2.2
"Annual Budget" - 5.9.5
"Award" - 7.3.2
"Capital Budget" - 5.9.5
"Capital Reserve Fund" - 3.4.1
"Casualty" - 7.2.1
"Casualty/Condemnation Prepayment" - 2.3.2
"Clearing Accounts" - 3.1
"Clearing Banks" - 3.1
9
"Condemnation" - 7.3.1
"Defeasance" - 2.3.3
"Defeasance Date" - 2.3.3
"Defeased Note" - 2.3.3
"Disclosure Document" - 9.1.2
"Environmental Laws" - 4.1.32
"Equipment" - Mortgage
"Event of Default" - 8.1
"Exchange Act" - 9.1.2
"Funds" - 3.8
"Hazardous Substances" - 4.1.32
"Improvements" - Mortgage
"Insurance Premiums" - 7.1.2
"Insured Casualty" - 7.2.2
"Leases" - Mortgage
"Lender's Consultant" - 5.10.1
"Liabilities" - 9.1.3
"Licenses" - 4.1.22
"Loan" - 2.1
"Lockbox Event" - 3.1
"Lockbox Termination" - 3.1
"Monthly Debt Service Payment Amount"- 2.2.1
"Nomura" - 9.1.2
"Nomura Group" - 9.1.2
"Operating Budget" - 5.9.5
"Policies" - 7.1.2
"Premium" - 2.1
"Principal" - 2.1
"Proceeds" - 7.2.2
"Provided Information" - 9.1
"Registration Statement" - 9.1.3
"Remedial Work" - 5.10.2
"Rents" - Mortgage
"Required Records" - 5.9.6
"Required Repair Fund" - 3.2.1
"Required Repairs" - 3.2.1
"Restoration" - 7.4.1
"Rollover Reserve Fund" - 3.5.1
"Scheduled Defeasance Payments" - 2.3.3
"Securities" - 9.1
"Securities Act" - 9.1.2
"Securitization" - 9.1
"Security Agreement" - 2.3.3
"Special Purpose Bankruptcy Remote Entity" - 5.15
"Subaccounts" - 3.1
10
"Substitute Property" - 2.4.4
"Successor Borrower" - 2.3.3
"Tax and Insurance Escrow Fund" - 3.3
"Undefeased Note" - 2.3.3
"Underwriter Group" - 9.1.2
I.3 Principles of Construction. Unless otherwise specified, (i) all
references to sections and schedules are to those in this Agreement, (ii) the
words "hereof," "herein" and "hereunder" and words of similar import refer to
this Agreement as a whole and not to any particular provision, (iii) all
definitions are equally applicable to the singular and plural forms of the terms
defined, (iv) the word "including" means "including but not limited to," and (v)
accounting terms not specifically defined herein shall be construed in
accordance with GAAP.
II. GENERAL
II.1 The Loan. Lender is making a loan (the "Loan") to Borrower on the date
hereof, in the aggregate original principal amount (the "Principal") of
$67,174,650, which shall mature on the Stated Maturity Date. To induce Borrower
to agree to the Interest Rate, Lender is paying to Borrower on the date hereof
an interest rate buy-up premium (the "Premium") in the amount of $7,825,351.
Borrower acknowledges receipt of the Loan and the Premium in the aggregate
amount of $75,000,000, the proceeds of which are being and shall be used solely
to (i) repay and discharge any existing loans relating to the Properties, (ii)
fund the Tax and Insurance Escrow Fund and the Required Repair Fund, and (iii)
pay approved costs and expenses incurred in connection with the Loan. No amount
repaid in respect of the Loan may be reborrowed.
II.2 Interest; Monthly Payments.
II.2.1 Generally. (a) From the date hereof to but not including the
Optional Prepayment Date, Borrower shall pay interest on the unpaid Principal at
the Interest Rate. From and after the Optional Prepayment Date, interest on the
unpaid Principal shall accrue at the Revised Interest Rate and be payable as
provided in Sections 2.2.2 and 2.2.3(b).
(b) On April 11, 1998 and each Payment Date thereafter through and
including the Maturity Date, the Principal and interest thereon at the Interest
Rate shall be payable in equal monthly installments of $545,342.88 (the "Monthly
Debt Service Payment Amount"); which is based on the Interest Rate and a
360-month amortization schedule. The Monthly Debt Service Payment Amount due on
any Payment Date shall first be applied to the payment of interest accrued from
the 11th day of the month preceding the Payment Date through the 10th day of the
month in which the Payment Date occurs, notwithstanding that the Payment Date
may not have been the 11th day of such month because the 11th day of such month
is not a Business Day. The remainder of such Monthly Debt Service Payment Amount
shall be applied to the reduction of the unpaid Principal.
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II.2.2 Accrued Interest. From and after the Optional Prepayment Date, all
interest accruing in respect of the unpaid Principal in excess of the Interest
Rate ("Accrued Interest") shall, to the extent not paid, be deferred, be added
to the Debt each month and, to the extent permitted by applicable law, accrue
interest at the Revised Interest Rate, compounded monthly. All Accrued Interest
shall be due and payable on the Maturity Date.
II.2.3 Property Cash Flow Allocation. (a) Commencing on April 11, 1998 and
continuing on each Payment Date thereafter through and including the Optional
Prepayment Date, except during the continuance of an Event of Default, any Rents
received by Borrower (and, after a Lockbox Event, Rents deposited into the
Deposit Account) during the immediately preceding Interest Period shall be
applied as follows in the following order of priority: (i) First, to make
required payments to the Tax and Insurance Escrow Fund; (ii) Second, to Lender
to pay the Monthly Debt Service Payment Amount (plus, if applicable, interest at
the Default Rate); (iii) Third, to make required payments to the Capital Reserve
Fund; (iv) Fourth, to make required payments to the Rollover Reserve Fund; (v)
Fifth, after a Lockbox Event (unless and until a Lockbox Termination occurs),
payments for Approved Operating Expenses; and (vi) Lastly, payments to Borrower
of any excess amounts.
(b) Commencing on the first Payment Date after the Optional Prepayment Date
and continuing on each Payment Date thereafter until the entire Debt has been
paid in full, except during the continuance of an Event of Default, any Rents
deposited into the Deposit Account (or otherwise received by Borrower) during
the immediately preceding Interest Period shall be applied by Lender as follows
in the following order of priority: (i) First, to make required payments to the
Tax and Insurance Escrow Fund; (ii) Second, to Lender to pay the Monthly Debt
Service Payment Amount (plus, if applicable, interest at the Default Rate);
(iii) Third, to make required payments to the Capital Reserve Fund; (iv) Fourth,
to make required payments to the Rollover Reserve Fund; (v) Fifth, payments for
Approved Operating Expenses; (vi) Sixth, payments to Lender to prepay the unpaid
Principal until paid in full; (vii) Seventh, payments to Lender to be applied
against Accrued Interest and interest accrued thereon; and (viii) Lastly,
payments to Borrower of any excess amounts.
(c) The failure of Borrower to make all of the payments required under
clauses (i) through (v) of Section 2.2.3(a) or (b) in full on each Payment Date
shall constitute a Default under this Agreement. However, the failure of
Borrower to prepay any unpaid Principal or to pay any Accrued Interest under
clause (vi) or (vii) of Section 2.2.3(b) on a Payment Date as a result of
insufficient Rents for such payment shall not constitute a Default hereunder.
All Accrued Interest shall nonetheless be due and payable on the Maturity Date.
(d) During the continuance of an Event of Default, Lender may, in its sole
discretion, permit the application of Rents in the order of priority set forth
in Section 2.2.3(b) or any other order, and to any portion or portions of the
Debt, as Lender shall determine.
II.2.4 Default Rate. After the occurrence and during the continuance of an
Event of Default, the entire unpaid Principal shall bear interest at the Default
Rate, and shall be
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payable upon demand from time to time, to the extent permitted by applicable
law. Payment or acceptance of interest at the Default Rate is not a permitted
alternative to timely payment and shall not constitute a waiver of any Default
or Event of Default or an amendment to this Agreement or any other Loan Document
and shall not otherwise prejudice or limit any rights or remedies of Lender.
II.3 Loan Repayment and Defeasance.
II.3.1 Repayment. Borrower shall repay any unpaid Principal in full on the
Maturity Date, together with interest thereon to (but excluding) the date of
repayment. Other than as set forth in Sections 2.3.2 and 2.3.3 below, Borrower
shall have no right to prepay all or any portion of the Principal before the
third Payment Date immediately preceding the Optional Prepayment Date. From and
after the third Payment Date immediately preceding the Optional Prepayment Date,
the Principal may be prepaid in whole or in part without penalty or premium.
II.3.2 Mandatory Prepayments. The Loan is subject to mandatory prepayment,
without premium or penalty, in certain instances of Insured Casualty or
Condemnation (each a "Casualty/Condemnation Prepayment"), in the manner and to
the extent set forth in Section 7.4.2. Each Casualty/Condemnation Prepayment
shall be made on a Payment Date and include all accrued and unpaid interest on
the Principal prepaid up to but not including such Payment Date or, if not paid
on a Payment Date, include interest that would have accrued on the Principal
prepaid to but not including the next Payment Date.
II.3.3 Voluntary Defeasance of the Note. (a) Subject to the terms and
conditions set forth in this Section 2.3.3, Borrower may defease all or any
portion of the Principal (hereinafter, a "Defeasance"); provided, that no such
Defeasance may occur prior to the Release Date or from and after the Optional
Prepayment Date. Each Defeasance shall be subject, in each case, to the
satisfaction of the following conditions precedent:
(i) Borrower shall provide not less than 30 days prior notice to
Lender specifying a Payment Date (the "Defeasance Date") on which the
Defeasance is to occur. Such notice shall indicate the Principal to be
defeased.
(ii) Borrower shall pay to Lender (A) all accrued and unpaid interest
on the unpaid Principal to but not including the Defeasance Date, (B) all
other sums, not including scheduled interest or Principal payments, then
due under the Loan Documents, (C) the required Defeasance Deposit for such
Defeasance, and (D) all reasonable costs and expenses of Lender incurred in
the Defeasance, including any costs and expenses associated with a release
of Lien as provided in Section 2.4 and reasonable attorney's fees and
expenses. If for any reason the Defeasance Date is not a Payment Date,
Borrower shall also pay interest that would have accrued on the Note to but
not including the next Payment Date.
(iii) No Event of Default shall exist.
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(iv) If only a portion of the unpaid Principal is the subject of the
Defeasance, Borrower shall execute and deliver all necessary documents to
amend and restate the Note and issue two substitute notes: one having a
principal balance equal to the defeased portion of the original Note (the
"Defeased Note") and the other having a principal balance equal to the
undefeased portion of the original Note (the "Undefeased Note") and the
original Note shall be returned to Borrower. The Defeased Note and
Undefeased Note shall have terms identical to the terms of the Note, except
for the principal balance, the Monthly Debt Service Payment Amount (which
amount will be prorated with the relative principal amounts) and the
collateral referred to in such notes. A Defeased Note cannot be the subject
of any further Defeasance.
(v) Borrower shall execute and deliver a security agreement, in 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 this Section 2.3.3 (the "Security Agreement").
(vi) Borrower shall deliver (A) an opinion of counsel for Borrower in
form satisfactory to Lender in its sole discretion stating, among other
things, that (1) Lender has a perfected first priority security interest in
the Defeasance Deposit and the U.S. Obligations delivered by Borrower and
(2) such U.S. Obligations have been validly assigned to the REMIC Trust,
(B) if required by the applicable Rating Agencies, a non-consolidation
opinion with respect to the Successor Borrower in form and substance
satisfactory to Lender and the applicable Rating Agencies, (C) an Officer's
Certificate certifying that the requirements set forth in this Section
2.3.3(a) have been satisfied, (D) a certificate from an independent
certified public accountant certifying that the amounts of the U.S.
Obligations comply with all of the requirements of this Agreement, and (E)
such other certificates, documents or instruments as Lender may reasonably
request.
(vii) Lender shall receive evidence in writing from the applicable
Rating Agencies to the effect that such Defeasance will not result in a
qualification, withdrawal or downgrading of the ratings in effect
immediately prior to such Defeasance for the Securities then outstanding.
(b) In connection with each Defeasance, 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 purchases, if made by Lender, shall be made
by Lender on an arms-length basis at then prevailing market rates) which provide
payments on or prior to, but as close as possible to, all successive Payment
Dates after the Defeasance Date through and including the Optional Prepayment
Date, for the entire unpaid Principal in the case of a Defeasance, or for the
principal amount of the Defeased Note, in the case of a Defeasance for only a
portion of the unpaid Principal (including, on the Optional Prepayment Date, the
unpaid Principal of either the Note or the Defeased Note), and in amounts equal
to the scheduled payments due on such dates under the Note or the Defeased Note,
as applicable (the "Scheduled Defeasance Payments"). Borrower, pursuant to the
Security Agreement or other appropriate document, shall irrevocably authorize
and direct that the payments received from the U.S. Obligations be made directly
to
14
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
2.3.3(b) and satisfy Borrower's obligations under Section 2.3 shall be remitted
to Borrower. Any amounts received in respect of the U.S. Obligations in excess
of the amounts necessary to make monthly payments pursuant to Section 2.2 shall
be retained by Lender until payment in full of the Debt, at which time, the same
shall be remitted to Borrower. Semi-annual payments in respect of U.S.
Obligations shall be applied to payments under the Note or the Defeased Note, as
applicable, as the same become due thereunder.
(c) If requested by Borrower in connection with any Defeasance under this
Section 2.3.3, NACC shall establish or designate a successor entity (the
"Successor Borrower") 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. The
obligation of NACC to establish or designate a Successor Borrower shall be
retained by NACC notwithstanding the sale or transfer of this Agreement unless
such obligation is specifically assumed by the transferee. Such Successor
Borrower shall assume the obligations under the Note or the Defeased Note, as
applicable, and the Security Agreement, and Borrower shall be relieved of its
obligations thereunder. 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 in accordance with this Section 2.3.3,
but Borrower shall pay all costs and expenses incurred by Lender, including
Lender's reasonable attorneys' fees and expenses, incurred in connection
therewith.
II.4 Release of Property. Except as set forth in this Section 2.4, 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
the Lien of a Mortgage on any Property.
II.4.1 Release on Defeasance. If Borrower has elected to defease the Note
in its entirety, and the requirements of Section 2.3.3 have been satisfied, the
Properties shall be released from the Liens of the Mortgages, and the U.S.
Obligations pledged pursuant to the Security Agreement shall be the sole source
of collateral securing the Debt. In connection with such release, Borrower shall
submit to Lender, not less than 20 days prior to the Defeasance Date, a form of
release for execution by Lender appropriate in the applicable State and
satisfactory to Lender in its sole discretion, and all other documentation
Lender reasonably requires to be delivered by Borrower, together with an
Officer's Certificate certifying that such documentation (i) is in compliance
with all Legal Requirements, and (ii) will effect such release in accordance
with the terms of this Agreement.
II.4.2 Release of Individual Properties. Borrower on one or more occasions
may obtain (i) the release of an individual Property from the Lien of the
Mortgage thereon (and related Loan Documents) and (ii) the release of Borrower's
obligations under the Loan Documents with respect to such Property (other than
those expressly stated to survive), upon
15
satisfaction of each of the following conditions:
(a) Either, (i) in connection with a Defeasance of the Note under Section
2.3.3, (x) the principal balance of the Defeased Note shall equal or exceed the
Release Amount and (y) the requirements of Section 2.3.3 shall have been
satisfied or (ii) in connection with a substitution of Properties under Section
2.4.4, (x) the Debt Service Coverage Ratio and the Net Operating Income (for the
immediately preceding 12-month period) for the Substitute Property(ies)
replacing the individual Property(ies) to be released shall equal or exceed 115%
of the Debt Service Coverage Ratio and Net Operating Income (for the immediately
preceding 12-month period) of such individual Property(ies) as of the date
hereof and as of the date immediately preceding the substitution and (y) the
requirements of Section 2.4.4 shall have been satisfied. For purposes of this
Section 2.4.2(a), the determination of the Debt Service Coverage Ratio for an
individual Property shall be calculated on the basis of the Principal
attributable thereto, prorated in the same proportion that its Allocated Loan
Amount bears to the aggregate original principal balance of the Loan.
(b) Borrower shall submit to Lender, not less than twenty (20) days prior
to the date of such release, a release of Lien (and related Loan Documents) for
such Property (for execution by Lender) in a form appropriate in the
jurisdiction in which such Property is located and satisfactory to Lender in its
reasonable discretion, and all other documentation Lender 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).
(c) With respect to any release of an individual Property, after giving
effect to such release, the Debt Service Coverage Ratio for all of the
Properties then remaining subject to the Liens of the Mortgage shall be equal to
the greater of (i) the Debt Service Coverage Ratio on the date hereof and (ii)
the Debt Service Coverage Ratio on the date of the release of such Property.
(d) Upon the release of an individual Property, any amounts previously
deposited by Borrower into any Fund with respect to such released Property shall
be returned to Borrower.
II.4.3 Release on Payment in Full. Lender shall, upon the written request
and at the expense of Borrower, upon payment in full of the Debt in accordance
herewith, release the Liens of the Mortgages if not theretofore released.
II.4.4 Substitution of Properties. (a) Subject to the terms and conditions
set forth in Section 2.4.2 and this Section 2.4.4, Borrower may obtain a release
of Lender's Lien against one or more individual Properties by substituting
therefor other property(ies) (a "Substitute Property"), provided that such
substitution of Properties shall not be allowed more
16
than once per year during the Term. Any such substitution shall be subject, in
each case, to the satisfaction of the following conditions precedent:
(i) Lender shall have received any due diligence materials reasonably
requested by Lender with respect to the Substitute Property(ies) and the
same are satisfactory to Lender in all respects.
(ii) The Substitute Property(ies) are satisfactory to Lender in all
respects in Lender's sole discretion (after Lender's due diligence
investigation).
(iii) After giving effect to the substitution, the overall Debt
Service Coverage Ratio for the Loan is not less than the overall Debt
Service Coverage Ratio for the Loan as of the date hereof and as of the
date immediately preceding the substitution.
(iv) Lender shall have received evidence in writing from the
applicable Rating Agencies to the effect that such substitution will not
result in a qualification, withdrawal or downgrading of the ratings in
effect immediately prior to such substitution for the Securities issued in
connection with the Securitization which are then outstanding.
(v) If required by the applicable Rating Agencies, Borrower shall also
deliver or cause to be delivered a non-consolidation opinion with respect
to the Borrower in form and substance satisfactory to Lender and the
applicable Rating Agencies.
(vi) No Event of Default shall exist.
(vii) Lender shall have received from Borrower fully executed and
acknowledged counterparts of Mortgages, the Assignment of Leases and the
Assignments of Agreements relating to each of the Substitute Properties and
evidence that counterparts of the Mortgages and Assignment of Leases have
been delivered to the title company for recording, in the reasonable
judgment of Lender, so as to effectively create upon such recording valid
and enforceable Liens upon such Substitute Properties, of the requisite
priority, in favor of Lender (or such other trustee as may be required or
desired under local law), subject only to the Permitted Encumbrances and
such other Liens as are permitted pursuant to the Loan Documents.
(viii) Lender shall have received with respect to each Substitute
Property (A) a Title Insurance Policy and evidence that all premiums in
respect of such Title Insurance Policy has been paid, (B) an "ALTA Survey"
satisfactory to Lender, (C) valid certificates of insurance for the
policies of insurance required hereunder and evidence of the payment of all
premiums payable for the existing policy period which period shall not be
less than one month in advance, (D) an environmental report reasonably
satisfactory to Lender indicating that there are no hazardous materials
present at the Substitute Property and no environmental condition affecting
the Substitute Property requiring remediation, (E) an engineering report
17
reasonably satisfactory to Lender, (F) an appraisal reasonably satisfactory
to Lender, and (G) one of the following, in form and substance reasonably
satisfactory to Lender: (i) letters or other evidence 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) a zoning opinion letter.
(ix) Borrower shall deliver an opinion of counsel for Borrower in form
and substance satisfactory to Lender and the applicable Rating Agencies
stating, among other things, that the substitution does not violate the
rules applicable to a REMIC.
(x) Borrower shall deliver an Officer's Certificate certifying that
the requirements set forth in this Section 2.4.4 and Section 2.4.2 have
been satisfied.
(xi) Borrower shall deliver such other certificates, documents or
instruments as Lender may reasonably request.
(xii) Borrower shall pay all reasonable costs and expenses of Lender
incurred in connection with the substitution.
(b) Notwithstanding anything to the contrary contained in this Section
2.4.4, upon the substantial completion of the proposed expansion of the Property
located in Smithfield, North Carolina, subject to the satisfaction of the
conditions contained above, Borrower may obtain a release of Lender's Lien
against any two of the Special Release Properties, and the completed expansion
of the Property located in Smithfield, North Carolina shall be deemed the
Substitute Property for such released Property(ies) for all purposes contained
herein.
II.5 Payments and Computations.
II.5.1 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
11:00 a.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 that is not a Business Day, such payment shall be made on the first Business
Day thereafter.
II.5.2 Computations. Interest payable hereunder or under the Note shall be
computed on the basis of the actual number of days elapsed and a 360-day year.
II.5.3 Late Payment Charge. If any Principal, interest or other sum due
under any Loan Document is not paid by Borrower on the date on which it is due,
Borrower shall pay to Lender upon demand an amount equal to the lesser of 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. Such amount shall be secured by the Loan Documents.
18
II.6 Structuring Fee. On the date hereof, Borrower shall pay to Lender a
structuring fee of $187,500.
II.7 Special Prepayment Compensation. If the Loan is prepaid in whole or in
part prior to the Optional Prepayment Date in circumstances where, pursuant to
the applicable provisions of the Loan Documents (such as, for example, Section
7.4.2 in certain events), no Yield Maintenance Premium is due (i.e., without a
Defeasance pursuant to Section 2.3.3), then Borrower shall nevertheless pay to
Lender (in addition to the prepaid Principal and accrued interest), as a refund
of the unearned portion of the Premium, an amount (a "Premium Refund") equal to
the Relevant Percentage of (i) the Hypothetical Principal minus (ii) the unpaid
Principal (before accounting for such prepayment). For purposes of the
foregoing, (x) the "Relevant Percentage" shall mean the percentage of the unpaid
Principal that is being so prepaid, and (y) the "Hypothetical Principal" shall
mean the principal balance of the Loan that would be outstanding on the date of
such prepayment immediately prior to such prepayment (after taking into account
the amount and timing of all payments actually made by Borrower on account of
the Loan prior to such date, including any partial prepayments of Principal and
Premium Refunds actually made by Borrower prior to such date) if the original
Principal had been $75,000,000 (rather than $67,174,650), the Interest Rate had
been 7.73% (rather than 9.10%), the constant monthly payment due and payable on
each Payment Date was an amount that would fully amortize the Loan over 338 such
monthly payments (rather than 360), and all other terms of the Loan were
otherwise the same as set forth in the Loan Documents.
III. CASH MANAGEMENT; ESCROWS AND RESERVES
III.1 Cash Management Arrangements. All Rents shall be transmitted directly
by tenants of each Property into one or more accounts (the "Clearing Accounts")
maintained by Borrower but controlled by Lender at one or more local banks
selected by Borrower (the "Clearing Banks"). All Rents received by Borrower or
Manager shall be deposited into a Clearing Account within two Business Days of
receipt. Funds deposited into the Clearing Accounts shall be swept by the
Clearing Banks on a daily basis into Borrower's operating account at a Clearing
Bank, unless a Lockbox Event shall have occurred; in which event, until a
Lockbox Termination, such funds shall be swept by the Clearing Banks on a daily
basis into an account at the Deposit Bank controlled by Lender (a "Deposit
Account") and applied and disbursed in accordance with this Agreement and,
pending such application and disbursement, will be invested in Permitted
Investments selected by Borrower, with any earnings thereon accruing for the
benefit of Borrower. Within 15 days after Lender's request following a Lockbox
Event, Borrower shall enter into one or more deposit account agreements among
Borrower, Lender and the Deposit Bank, in Lender's then current form, providing
for the receipt and disbursement of Rents by the Deposit Bank in accordance
herewith. The Deposit Account and all subaccounts thereof shall at all times be
Eligible Accounts (such subaccounts, and any other accounts or subaccounts at
the Deposit Bank, other than the Deposit Account, are referred to herein as
"Subaccounts"). A "Lockbox Event" shall mean (i) either (A) the occurrence of
the Optional Prepayment Date or (B) the occurrence of either (x) an Event of
Default, or (y) the
19
failure of the Properties to maintain a Debt Service Coverage Ratio of at least
1.15, which shall be measured quarterly, and (ii) the giving by Lender to the
Clearing Banks of notice of such occurrence. "Lockbox Termination" shall mean
the giving by Lender to the Clearing Banks of notice that such sweeping of funds
into the Deposit Account may cease, which notice Lender shall only be required
to give if (1) the Optional Prepayment Date shall not yet have occurred and (2)
for one year after a Lockbox Event of the type described in the foregoing clause
(x), no Event of Default shall occur and, as of the end of such one-year period,
the Debt Service Coverage Ratio is at least equal to 1.15.
III.2 Required Repairs; Required Repair Funds.
III.2.1 Required Repairs: Deposits. Borrower shall perform and complete
each item of the repairs at the Properties described on Schedule 4 (the
"Required Repairs") on or before the deadline for such item set forth on
Schedule 4. On the date hereof, Borrower shall deposit with Lender the amount
set forth on Schedule 4 (the "Required Repair Fund").
III.2.2 Release of Required Repair Funds. Lender shall disburse amounts out
of the Required Repair Fund to Borrower within 30 days after the delivery by
Borrower to Lender of a request therefor, accompanied by the following items,
provided that 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: (i) an
Officer's Certificate (A) certifying that all Required Repairs have been
completed in a good and workmanlike manner, (B) identifying each Person that
supplied materials or labor in connection with the Required Repairs and (C)
stating that each such Person has been or, upon receipt of the requested
disbursement, will be paid in full, (ii) with respect to any Required Repair,
the cost of which equals or exceeds $10,000, copies of appropriate Lien waivers
or other evidence of payment satisfactory to Lender, (iii) at Lender's option, a
title search for the applicable Property indicating that it is free from all
Liens not previously approved by Lender, and (iv) such other evidence as Lender
shall reasonably request that the Required Repairs at the applicable Property
have been completed and paid for.
III.3 Tax and Insurance Escrow Fund. Borrower shall pay to Lender on each
Payment Date (i) one-twelfth of the Taxes that Lender estimates will be payable
during the next 12 months in order to accumulate with Lender sufficient funds to
pay all such Taxes at least 30 days prior to their respective due dates, and
(ii) 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 30 days prior to the expiration of the Policies (the
amounts paid under the foregoing clauses (i) and (ii), less disbursements
thereof pursuant hereto, being called the "Tax and Insurance Escrow Fund").
Lender will apply the Tax and Insurance Escrow Fund to payments of Taxes and
Insurance Premiums required to be made by Borrower pursuant to Sections 5.2 and
7.1, or to promptly reimburse Borrower for such amounts upon presentation of
evidence of payment and an Officer's Certificate in form and substance
satisfactory to Lender; subject, however, to Borrower's right to contest Taxes
in accordance with Section 5.2 In making any payment relating to the Tax and
Insurance Escrow Fund, Lender may do so according to any
20
xxxx, statement or estimate procured from the appropriate public office (with
respect to Taxes) or insurer or agent (with respect to Insurance Premiums),
without inquiry into the accuracy of such xxxx, statement or estimate or into
the validity of any tax, assessment, sale, forfeiture, tax lien or title or
claim thereof. Lender will use all reasonable efforts to make payments on time
and before a penally attaches, if adequate funds then exist. Lender will pay any
penalties assessed if, due to its negligence, it fails to make payments on time
if adequate funds then exist. If the amount of the Tax and Insurance Escrow Fund
shall exceed the amounts next coming due for Taxes and Insurance Premiums
pursuant to Sections 5.2 and 7.1, Lender shall return any excess to Borrower. If
at any time Lender determines that the Tax and Insurance Escrow Fund is not or
will not be sufficient to pay the Taxes or Insurance Premiums next coming due,
Lender shall notify Borrower of such determination (which notice shall be
accompanied with reasonable documentation supporting 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 30 days prior to
delinquency of the Taxes and/or expiration of the Policies, as the case may be.
III.4 Capital Reserve Fund.
III.4.1 Capital Reserve Fund. Borrower shall pay to Lender on each Payment
Date (in addition to other payments required hereunder) an amount equal to
one-twelfth of the product obtained by multiplying $0.15 by the aggregate number
of rentable square feet of space in the Property (such payments, less
disbursements thereof pursuant hereto, being called the "Capital Reserve Fund").
If the amount of the Capital Reserve Fund shall exceed the amounts due for
Approved Capital Expenses pursuant to the terms hereof, Lender shall, in its
discretion, return any excess to Borrower or, if future Capital Reserve Fund
payments are then required, credit such excess against such future payments.
III.4.2 Payment of Capital Expenses. From time to time (but not more often
than once per month), Lender shall disburse funds held in the Capital Reserve
Fund to Borrower, within 15 days after the delivery by Borrower to Lender of a
request therefor, in increments of at least $1,000 provided (i) no Event of
Default shall have occurred and be continuing; (ii) such disbursement is for a
Capital Expense (provided that during the continuance of a Lockbox Event, such
disbursement shall only be for an Approved Capital Expense); (iii) Lender shall,
within such 15 day period, have (if it desires) verified (by an inspection,
which during the continuance of an Event of Default or a Lockbox Event, shall be
conducted at Borrower's expense) performance of the work associated with such
Capital Expense or Approved Capital Expense, as the case may be; and (iv) the
request for disbursement is accompanied by (A) an Officer's Certificate
certifying (v) the amount of funds to be disbursed, (w) that such funds will be
used to pay Capital Expenses or Approved Capital Expenses, as the case may be,
and a description thereof, (x) that all outstanding trade payables (other than
those to be paid from the requested disbursement or those otherwise permitted to
be outstanding under Section 6.8) have been paid in full, (y) that the same has
not been the subject of a previous disbursement, and (z) that all previous
disbursements have been used to pay the previously identified Capital Expenses
or Approved Capital Expenses, as the case may be, and (B) reasonably detailed
documentation as to the amount, necessity and purpose therefor.
21
III.5 Rollover Reserve Fund.
III.5.1 Rollover Reserve Fund. Borrower shall pay to Lender on each Payment
Date until the Major Lease Rollover Date, the sum of $35,000 (in addition to
other payments required hereunder) (such payments, less disbursements thereof
pursuant hereto, being called the "Rollover Reserve Fund"). Without limiting
Lender's rights hereunder, if any sums in the Rollover Reserve Fund are applied
to payment of Approved Leasing Expenses, Borrower shall make deposits into the
Rollover Reserve Fund on each Payment Date in an amount from time to time
determined by Lender to be the minimum monthly amount necessary to be deposited
such that, after taking into account all payments from the Rollover Reserve
Fund, the amount on deposit in the Rollover Reserve Fund on the Major Lease
Rollover Date shall be not less than $2,000,000. Borrower shall also deposit
into the Rollover Reserve Fund all payments received from tenants in connection
with the early termination or cancellation of any of the Major Leases. Lender
will apply such payments to payment of Approved Leasing Expenses pursuant to the
terms hereof. If the amount of the Rollover Reserve Fund shall exceed the
amounts due for Approved Leasing Expenses pursuant to the terms hereof, Lender
shall return any excess to Borrower. If Lender determines in its reasonable
judgment that the amount of the Rollover Reserve Fund will be insufficient to
pay the amounts due or to become due for Approved Leasing Expenses, Lender may
adjust the monthly amounts required to be deposited into the Rollover Reserve
Fund upon 30 days' notice to Borrower. Alternatively, Lender may in its
discretion determine that the amount of the Rollover Reserve Fund will exceed
the amounts due or to become due for Approved Leasing Expenses, in which case
Lender may reduce the monthly amounts to be deposited therein. In determining
whether (i) to reduce the monthly amounts to be deposited into the Rollover
Reserve Fund or (ii) to return any excess to Borrower, Lender shall take into
account any extensions of the originally scheduled expiration dates of the Major
Leases. For any Major Lease which is extended beyond the Major Lease Rollover
Date applicable thereto, Lender will either return to Borrower that portion of
the Rollover Reserve Fund corresponding to such Major Lease or reduce the
monthly amount required to be deposited into the Rollover Reserve Fund which
corresponds to such Major Lease.
III.5.2 Payment of Leasing Expenses. From time to time (but not more than
once per month) Lender shall disburse funds held in the Rollover Reserve Fund to
Borrower, within 10 days after the delivery by Borrower to Lender of a request
therefor, in increments of at least $1,000, provided (i) no Event of Default
shall have occurred and be continuing; (ii) such disbursement is for an Approved
Leasing Expense; (iii) Lender shall have (if it desires) verified (by an
inspection conducted at Borrower's expense) performance of any construction work
associated with such Approved Leasing Expense; and (iv) the request for
disbursement is accompanied by (A) an Officer's Certificate certifying (v) the
amount of funds to be disbursed, (w) that such funds will be used only to pay
(or reimburse Borrower for) Approved Leasing Expenses and a description thereof,
(x) that all outstanding trade payables (other than those to be paid from the
requested disbursement or those otherwise permitted to be outstanding under
Section 6.8) have been paid in full, (y) that the same has not been the subject
of a previous disbursement, and (z) that all previous disbursements have been
used only to pay (or reimburse Borrower for) the previously identified Approved
Leasing Expenses, and (B) reasonably detailed supporting documentation as to the
amount, necessity and purpose therefor.
22
III.5.3 Release of Rollover Reserve Fund. Lender shall return any funds
held in the Rollover Reserve Fund to Borrower if (i) FAC Realty Trust, Inc.
receives a credit rating by one of the Rating Agencies of "BBB-" or better and
(ii) Lender receives a guaranty of payment, in form and substance satisfactory
to Lender, from FAC Properties, L.P. guaranteeing the payment and performance of
Borrower's obligations under Section 3.5.1 hereof.
III.6 Payment of Approved Operating Expenses. From time to time after the
occurrence of a Lockbox Event and prior to a Lockbox Termination (but not more
than once per month) Lender shall disburse funds held in the Operating Expense
Subaccount to Borrower, provided (i) no Event of Default shall have occurred and
be continuing; (ii) such disbursement is for an Approved Operating Expense; and
(iii) such disbursement is requested by Borrower in writing, accompanied by (A)
an Officer's Certificate certifying (v) the amount of funds to be disbursed, (w)
that such funds will be used to pay Approved Operating Expenses and a
description thereof, (x) that all outstanding trade payables (other than those
to be paid from the requested disbursement or those otherwise permitted to be
outstanding under Section 6.8) have been paid in full, (y) that the same has not
been the subject of a previous disbursement, and (z) that all previous
disbursements have been or will be used to pay the previously identified
Approved Operating Expenses, and (B) reasonably detailed documentation as to the
amount, necessity and purpose therefor. Subject to satisfaction of the preceding
conditions, if Lender receives from Borrower a valid request for a disbursement
for payment of Approved Operating Expenses for the then Current Month at least
five Business Days prior to the Payment Date occurring in such Current Month,
then the disbursement in respect of such Approved Operating Expenses shall be
made to Borrower on such Payment Date. If Borrower shall fail to validly request
a disbursement for payment of Approved Operating Expenses for the then Current
Month at least five Business Days prior to the Payment Date in such Current
Month, then Lender shall retain in the Operating Expense Subaccount an amount
equal to the anticipated Operating Expenses for the then Current Month as set
forth in the approved Operating Budget for such month, and Lender shall, subject
to satisfaction of the preceding conditions, disburse the same to Borrower five
Business Days after Lender receives a valid request therefor. Upon a Lockbox
Termination, Lender shall return to Borrower any funds held by it in the
Operating Expense Subaccount.
III.7 Security Deposits. Security deposits under Leases shall not be
commingled with any other funds of Borrower, and, if cash, shall be deposited by
Borrower at a bank reasonably satisfactory to Lender. After the occurrence of a
Lockbox Event, and prior to a Lockbox Termination, Borrower shall, upon Lender's
request, if permitted by applicable Legal Requirements, turn over to Lender the
security deposits (and any interest theretofore earned thereon) under Leases, to
be held by Lender subject to the terms of the Leases. Upon a Lockbox
Termination, Lender shall return to Borrower such security deposits.
Any letter of credit or other instrument that Borrower receives in lieu of
a cash security deposit shall (i) be maintained in full force and effect in the
full amount unless replaced by a cash deposit as hereinabove described, (ii) if
the letter of credit exceeds $150,000, be issued by an institution reasonably
satisfactory to Lender, (iii) if permitted pursuant to any Legal
23
Requirements and if the letter of credit exceeds $150,000, name Lender as payee
or mortgagee thereunder (or at Lender's option, be fully assignable to Lender)
and (iv) in all respects, comply with any applicable Legal Requirements and
otherwise be reasonably satisfactory to Lender. Borrower shall, upon request,
provide Lender with evidence reasonably satisfactory to Lender of Borrower's
compliance with the foregoing.
III.8 Grant of Security Interest; Application of Funds. As security for
payment of the Debt and the performance by Borrower of all other terms,
conditions and provisions of the Loan Documents, Borrower hereby pledges and
assigns to Lender, and grants to Lender a security interest in, all Borrower's
right, title and interest in and to the Required Repair Fund, the Tax and
Insurance Escrow Fund, the Capital Reserve Fund and the Rollover Reserve Fund
(collectively, the "Funds"). Borrower shall not, without obtaining the prior
written consent of Lender, further pledge, assign or grant any security interest
in any Fund, or permit any Lien to attach thereto, or any levy to be made
thereon, or any UCC-l Financing Statements, except those naming Lender as the
secured party, to be filed with respect thereto. This Agreement is, among other
things, intended by the parties to be a security agreement for purposes of the
UCC. Upon the occurrence and during the continuance of an Event of Default,
Lender may apply any sums in any Fund to the payment of the Debt and/or to the
payment of Required Repairs, Taxes, Insurance Premiums, Capital Expenses,
Approved Leasing Expenses and/or Operating Expenses, in any order in its sole
discretion. No Fund shall constitute a trust fund and may be commingled with
other monies held by Lender. Sums in each Fund shall be held by Lender in a
Subaccount and invested in Permitted Investments. Earnings or interest, if any,
on each Fund shall become part of such Fund and shall be disbursed as provided
herein for such Fund. Lender shall not be liable for any loss sustained on the
investment of any funds constituting any Fund, except for Lender's gross
negligence or wilful misconduct. Amounts disbursed to Borrower under Sections
3.2 through 3.7 shall be used by Borrower solely to pay the expenses for which
such disbursement is requested.
IV. REPRESENTATIONS AND WARRANTIES
IV.1 Borrower Representations. Borrower represents and warrants as of the
date hereof that, except to the extent (if any) disclosed on Schedule 2 with
reference to a specific subsection of this Section 4.1:
IV.1.1 Organization; Special Purpose. Borrower has been duly organized and
is validly existing and in good standing, with requisite power and authority,
and all rights, licenses, permits and authorizations, governmental or otherwise,
necessary to own its properties and to transact the business 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, business and operations. Borrower is a Special Purpose Bankruptcy
Remote Entity, and the sole business of Borrower is the ownership, management
and operation of the Properties.
IV.1.2 Proceedings; Enforceability. Borrower has taken all necessary action
to
24
authorize the execution, delivery and performance of the Loan Documents. The
Loan Documents have been duly executed and delivered by Borrower and constitute
legal, valid and binding obligations of Borrower enforceable against Borrower in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency and similar laws affecting rights of creditors generally, and general
principles of equity.
IV.1.3 No Conflicts. The execution, delivery and performance of the 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 (other than pursuant to the Loan Documents) upon any
of the property of Borrower pursuant to the terms of, any agreement or
instrument to which Borrower is a party or by which its property is subject,
nor, to Borrower's knowledge, will such action result in any violation of the
provisions of any statute or any order, rule or regulation of any Governmental
Authority having jurisdiction over Borrower or any of its properties. Borrower's
rights under the Licenses and the Management Agreement will not be adversely
affected by the execution and delivery of the Loan Documents, Borrower's
performance thereunder or the recordation of the Mortgages. Any consent,
approval, authorization, order, registration or qualification of or with any
Governmental Authority required for the execution, delivery and performance by
any Borrower of the Loan Documents has been obtained and is in full force and
effect.
IV.1.4 Litigation. There are no actions, suits or proceedings at law or in
equity by or before any Governmental Authority now pending or, to Borrower's
knowledge, threatened against or affecting Borrower or any Property, which, if
determined against Borrower or any such Property, might materially adversely
affect the condition (financial or otherwise) or business of Borrower or the
condition or ownership of such Property.
IV.1.5 Agreements. To Borrower's knowledge, Borrower is not a party to any
agreement or instrument or subject to any restriction which might materially
adversely affect Borrower or any Property, or Borrower's business, properties,
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 Permitted Encumbrance or any other agreement or instrument to
which it is a party or by which it or any Property is bound.
IV.1.6 Title. Borrower has good and indefeasible title in fee to the real
property comprising part of each Property and good and valid leasehold interest
in the Leased Property, and good title to the balance of each such Property,
free and clear of all Liens except the Permitted Encumbrances. The Mortgages,
when properly recorded in the appropriate records, together with any UCC
financing statements required to be filed in connection therewith, will create
(i) a valid, perfected first priority lien on each such Property and (ii)
perfected security interests in and to, and perfected collateral assignments of,
all personalty included in the Property (including the Leases), all in
accordance with the terms thereof, in each case subject only to any applicable
Permitted Encumbrances. To Borrower's knowledge, the Permitted Encumbrances do
not materially adversely affect the value or use of any Property, or Borrower's
ability to repay the
25
Loan. There are no claims for payment for work, labor or materials affecting any
Property which are or may become a Lien prior to, or of equal priority with, the
Liens created by the Loan Documents.
IV.1.7 Survey. To Borrower's knowledge, the survey for each Property
delivered to Lender does not fail to reflect any matter which could materially
adversely affect such Property or the title thereto.
IV.1.8 No Bankruptcy Filing. Borrower is not contemplating either the
filing of a petition by it under any state or federal bankruptcy or insolvency
law or the liquidation of all or a major portion of its property, and Borrower
has no knowledge of any Person contemplating the filing of any such petition
against it.
IV.1.9 Full and Accurate Disclosure. No statement of fact made by Borrower
in any Loan Documents contains any untrue statement of a material fact or omits
to state any material fact necessary to make statements contained therein not
misleading. There is no material fact presently known to Borrower that has not
been disclosed to Lender which materially adversely affects, or, as far as
Borrower can foresee, might materially adversely affect, any Property or the
business, operations or condition (financial or otherwise) of Borrower.
IV.1.10 No Plan Assets. Borrower is not an "employee 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.
IV.1.11 Compliance. Borrower and each Property and the use thereof comply
in all material respects with all applicable Legal Requirements. To Borrower's
knowledge, Borrower is not in default or violation of any order, writ,
injunction, decree or demand of any Governmental Authority, the violation of
which might materially adversely affect the condition (financial or otherwise)
or business of Borrower. To Borrower's knowledge, there has not been and shall
never be committed by Borrower any act or omission affording any Governmental
Authority the right of forfeiture as against any Property or any part thereof or
any monies paid in performance of Borrower's obligations under any Loan
Document.
IV.1.12 Contracts. There are no service, maintenance or repair contracts
affecting any Property that are not terminable on one month's notice or less
without cause and without penalty or premium. All service, maintenance or repair
contracts affecting each Property have been entered into at arms-length in the
ordinary course of Borrower's business and provide for the payment of fees in
amounts and upon terms comparable to existing market rates.
IV.1.13 Financial Information. All financial data, including 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 by
an independent certified public accounting firm, have been prepared in
26
accordance with GAAP consistently applied throughout the periods covered, except
as disclosed therein. Borrower has no contingent liabilities, liabilities for
delinquent 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 Property or the
operation thereof, except as referred to or reflected in such 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.
IV.1.14 Condemnation. No Condemnation or other proceeding has been
commenced or, to Borrower's knowledge, is contemplated with respect to all or
part of any Property or for the relocation of roadways providing access to any
Property.
IV.1.15 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 that would be inconsistent with such
Regulation U or for any purpose prohibited by Legal Requirements or any Loan
Document.
IV.1.16 Utilities and Public Access. To Borrower's knowledge, each Property
has rights of access to public ways and is served by water, sewer, sanitary
sewer and storm drain facilities adequate to service it for its intended uses.
To Borrower's knowledge, all public utilities necessary or convenient to the
full use and enjoyment of each Property are located in the public right-of-way
abutting such Property, and all such utilities are connected so as to serve such
Property without passing over other property. To Borrower's knowledge, all roads
necessary for the use of each Property for its current purpose have been
completed and dedicated to public use and accepted by all Governmental
Authorities.
IV.1.17 Not a Foreign Person. Borrower is not a "foreign person" within the
meaning ofss. 1445(f)(3) of the Code.
IV.1.18 Separate Lots. Each parcel comprising each Property is a separate
tax lot and is not a portion of any other tax lot that is not a part of such
Property.
IV.1.19 Assessments. There are no pending or proposed special or other
assessments for public improvements or otherwise affecting any Property, or any
contemplated improvements to any Property that may result in such special or
other assessments.
IV.1.20 Enforceability. The Loan Documents are not subject to, and Borrower
has not asserted, any right of rescission, claims of set-off, counterclaim or
defense, including the defense of usury. No exercise of any of the terms of the
Loan Documents, or any right thereunder, will render any Loan Document
unenforceable.
IV.1.21 Insurance. Borrower has obtained and has delivered to Lender
27
insurance policies reflecting the insurance coverages, amounts and other
requirements set forth in this Agreement.
IV.1.22 Use of Property; Licenses. Each Property is used exclusively as a
shopping center, other than the Property located in Cary, North Carolina, which
has an appurtenant office use, and other appurtenant and related uses. To
Borrower's knowledge, all certifications, permits, licenses and approvals,
including certificates of completion and occupancy permits and any applicable
liquor licenses required for the legal use, occupancy and operation of each
Property (collectively, the "Licenses"), have been obtained and are in full
force and effect. The use being made of each Property is in conformity with the
certificate of occupancy issued for such Property.
IV.1.23 Flood Zone. None of the Improvements on any Property is located in
an area as identified by the Federal Emergency Management Agency as an area
having special flood hazards.
IV.1.24 Physical Condition. To Borrower's knowledge, each Property,
including all Improvements, parking facilities, systems, Equipment and
landscaping, are in good condition, order and repair in all material respects;
there exists no structural or other material defect or damages to any Property,
whether latent or otherwise. Borrower has not received notice from any insurance
company or bonding company of any defect or inadequacy in any Property, or any
part thereof, which would adversely affect its insurability or cause the
imposition of extraordinary premiums or charges thereon or any termination of
any policy of insurance or bond.
IV.1.25 Encroachments. To Borrower's knowledge, all of the improvements
included in determining the appraised value of each Property lie wholly within
the boundaries and building restriction lines of such Property, and no
improvement on an adjoining property encroaches upon any Property, and no
easement or other encumbrance upon any Property encroaches upon any of the
Improvements, so as to materially affect the value or marketability of any
Property, except those insured against by a Title Insurance Policy.
IV.1.26 Leases. Attached hereto as Schedule 3 is a true, correct and
complete rent roll for each Property (the "Rent Roll"), which includes all
Leases affecting each Property. Except as set forth in Schedule 3: (i) each
Lease is in full force and effect; (ii) the tenants under the Leases have
accepted possession of and are in occupancy of all of their respective demised
premises, have commenced the payment of rent under such Leases, and, to
Borrower's knowledge, there are no material offsets, claims or defenses to the
enforcement thereof; (iii) all rents due and payable under the Leases have been
paid and no portion thereof has been paid for any period more than 30 days in
advance; (iv) the rent payable under each Lease is the amount of fixed rent set
forth in the Rent Roll, and, to Borrower's knowledge, there is no claim or basis
for a claim by the tenant thereunder for an adjustment to the rent; (v) no
tenant has made any claim against the landlord under the Leases which remains
outstanding, and to Borrower's knowledge, (a) there are no defaults on the part
of the landlord under any Lease, and (b) no event has occurred which, with the
giving of notice or passage of time, or both, would
28
constitute such a default; (vi) to Borrower's knowledge, there is no present
material default by the tenant under any Lease; and (vii) Borrower does not hold
any security deposits under the Leases. None of the Leases contains any option
to purchase or right of first refusal to purchase the Property or any part
thereof. Neither the Leases nor the Rents have been assigned or pledged except
to Lender, and no other Person has any interest therein except the tenants or
subtenants thereunder.
IV.1.27 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 in connection with the
transfer of the Properties to Borrower have been paid. All mortgage, mortgage
recording, stamp, intangible or other similar taxes required to be paid by any
Person under applicable Legal Requirements in connection with the execution,
delivery, recordation, filing, registration, perfection or enforcement of any of
the Loan Documents have been paid.
IV.1.28 Investment Company Act. Borrower is not (i) an "investment company"
or a company "controlled" by an "investment company," within the meaning of the
Investment Company Act of 1940, as amended; (ii) a "holding company" or a
"subsidiary company" of a "holding company" or an "affiliate" of either a
"holding company" or a "subsidiary company" within the meaning of the Public
Utility Holding Company Act of 1935, as amended; or (iii) subject to any other
federal or state law or regulation which purports to restrict or regulate its
ability to borrow money.
IV.1.29 Fraudulent Transfer. Borrower has not entered into the Loan or any
Loan Document with the actual intent to hinder, delay, or defraud any creditor,
and Borrower has received reasonably equivalent value in exchange for its
obligations under the Loan Documents. Giving effect to the transactions
contemplated by the Loan Documents, the fair saleable value of Borrower's assets
exceeds and will, immediately following the execution and delivery of the Loan
Documents, exceed Borrower's total liabilities, including subordinated,
unliquidated, disputed or contingent liabilities. The fair saleable value of
Borrower's assets is and will, immediately following the execution and delivery
of the Loan Documents, be greater than Borrower's probable liabilities,
including the maximum amount of its contingent liabilities or its debts as such
debts become absolute and matured. Borrower's assets do not and, immediately
following the execution and delivery of the Loan Documents will not, constitute
unreasonably small capital to carry out its business as conducted or as proposed
to be conducted. Borrower does not intend to, and does not believe that it will,
incur debts and liabilities (including contingent liabilities and other
commitments) beyond its ability to pay such debts as they mature (taking into
account the timing and amounts to be payable on or in respect of obligations of
Borrower).
IV.1.30 Ownership of Borrower. The sole managing member of Borrower is the
Managing Member. FAC Realty Trust, Inc. is the owner of all of the issued and
outstanding capital stock of the Managing Member, all of which capital stock has
been validly issued and fully paid and is nonassessable. The only other member
of Borrower is FAC
29
Properties, L.P. The stock of the Managing Member and the membership interests
in Borrower are owned free and clear of all Liens, warrants, options and rights
to purchase. Borrower has no obligation to any Person to purchase, repurchase or
issue any ownership interest in it.
IV.1.31 Management Agreement. The Management Agreement is in full force and
effect. There is no default, breach or violation existing thereunder, and no
event has occurred (other than payments due but not yet delinquent) that, with
the passage of time or the giving of notice, or both, would constitute a
default, breach or violation thereunder, by either party thereto.
IV.1.32 Hazardous Substances. To the best of Borrower's knowledge and
except as disclosed to Lender in reports furnished to Lender, (i) no Property is
in violation of any Legal Requirement pertaining to or imposing liability or
standards of conduct concerning environmental regulation, contamination or
clean-up, including the Comprehensive Environmental Response, Compensation and
Liability Act, the Resource Conservation and Recovery Act, the Emergency
Planning and Community Right-to-Know Act of 1986, the Hazardous Substances
Transportation Act, the Solid Waste Disposal Act, the Clean Water Act, the Clean
Air Act, the Toxic Substance Control Act, the Safe Drinking Water Act, the
Occupational Safety and Health Act, any state super-lien and environmental
clean-up statutes and all amendments to and regulations in respect of the
foregoing laws (collectively, "Environmental Laws"); (ii) no Property is subject
to any private or governmental Lien or judicial or administrative notice or
action or inquiry, investigation or claim relating to hazardous, toxic,
dangerous and/or regulated substances, wastes, materials, raw materials which
include hazardous constituents, pollutants or contaminants, including asbestos,
asbestos containing materials, petroleum, tremolite, anthlophylite, actinolite,
polychlorinated biphenyls and any other substances or materials which are
included under or regulated by Environmental Laws or which are considered by
scientific opinion to be otherwise dangerous in terms of the health, safety and
welfare of humans (collectively, "Hazardous Substances"); (iii) no Hazardous
Substances are or have been (including the period prior to Borrower's
acquisition of a Property), discharged, generated, treated, disposed of or
stored on, incorporated in, or removed or transported from any Property other
than in compliance with all Environmental Laws; (iv) no Hazardous Substances are
present in, on or under any nearby real property which could migrate to or
otherwise affect any Property; and (v) no underground storage tanks exist on any
Property.
IV.1.33 Ground Lease. The Ground Lease is in full force and effect and has
not been modified or amended. There are no defaults under the Ground Lease and
no event has occurred, which with the passage of time, the giving of notice, or
both, would constitute a default under the Ground Lease. All rents, additional
rents and other sums due and payable under the Ground Lease have been paid in
full. Neither Borrower nor the landlord under the Ground Lease has commenced any
action or given or received any notice for the purpose of terminating the Ground
Lease.
IV.1.34 Out-Parcels. None of the Eligible Out-Parcels (which has not been
released pursuant to Section 6.7) generates any revenue or income.
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IV.2 Survival of Representations. All of the representations and warranties
in Section 4.1 and elsewhere in the Loan Documents (i) shall survive for so long
as any portion of the Debt remains owing to Lender and (ii) shall be deemed to
have been relied upon by Lender notwithstanding any investigation heretofore or
hereafter made by Lender or on its behalf.
V. AFFIRMATIVE COVENANTS
Until the earlier to occur of the end of the Term or the Defeasance of the
entire unpaid Principal, Borrower hereby covenants and agrees with Lender that:
V.1 Existence. Borrower shall (i) do or cause to be done all things
necessary to preserve, renew and keep in full force and effect its existence,
rights, and franchises, (ii) continue to engage in the business presently
conducted by it, (iii) obtain and maintain all Licenses, and (iv) qualify to do
business and remain in good standing under the laws of each jurisdiction, in
each case as and to the extent required for the ownership, maintenance,
management and operation of each Property.
V.2 Taxes and Other Charges. Borrower shall pay all Taxes and Other Charges
as the same become due and payable, and deliver to Lender receipts for payment
or other evidence satisfactory to Lender that the Taxes and Other Charges have
been so paid no later than 15 days before they would be delinquent if not paid
(provided, however, that Borrower need not furnish such receipts for payment of
Taxes paid by Lender pursuant to Section 3.3). Borrower shall not suffer and
shall promptly cause to be paid and discharged any Lien against any Property,
and shall promptly pay for all utility services provided to any Property. After
prior 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 of any Taxes or Other Charges,
provided that (i) no Default or Event of Default has occurred and remains
uncured, (ii) such proceeding shall suspend the collection of the Taxes or Other
Charges, (iii) 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, (iv) no part of or
interest in such Property will be in danger of being sold, forfeited,
terminated, canceled or lost, (v) Borrower shall have furnished 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, and (vi) Borrower shall promptly upon final
determination thereof pay the amount of such Taxes or Other Charges, together
with all costs, interest and penalties. 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 judgment of Lender, the entitlement of such claimant is
established.
V.3 Repairs; Maintenance and Compliance. Borrower shall cause each Property
to be maintained in good condition and repair and shall not remove, demolish or
materially alter the Improvements or Equipment (except for normal replacement of
the Equipment) without the prior written consent of Lender; provided, however,
that Lender's
31
consent shall not be unreasonably withheld if in Lender's reasonable judgment
any such alteration (or erection of new buildings, structures or building
additions) will not materially interfere with the operation of the applicable
Property or diminish the overall value thereof. Borrower shall promptly comply
with all Legal Requirements and cure properly any violation of a Legal
Requirement within 30 days after Borrower receives notice of such violation.
Borrower shall promptly repair, replace or rebuild any part of any Property that
becomes damaged, worn or dilapidated and shall complete and pay for any
Improvements at any time in the process of construction or repair.
V.4 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 Property.
V.5 Performance of Other Agreements. Borrower shall observe and perform
each and every term to be observed or performed by it pursuant to the terms of
any agreement or recorded instrument affecting or pertaining to each Property.
V.6 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.
V.7 Cooperate in Legal Proceedings. Borrower shall cooperate fully with
Lender with respect to, and permit Lender, at its option, to participate in, any
proceedings before any Governmental Authority which may in any way affect the
rights of Lender under any Loan Document.
V.8 Further Assurances. Borrower shall, at Borrower's sole cost and
expense, (i) furnish to Lender all instruments, documents, boundary surveys,
"as-built" surveys, certificates, plans and specifications, appraisals, title
and other insurance reports and agreements, reasonably requested by Lender; (ii)
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 Debt, as Lender may reasonably require; and (iii) 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 the Loan Documents, as Lender shall reasonably require from time to
time.
V.9 Financial Reporting.
V.9.1 Bookkeeping. Borrower shall keep on a Fiscal Year basis, in
accordance with GAAP, proper and accurate books, records and accounts reflecting
all of the financial affairs of Borrower and all items of income and expense and
any services, equipment or furnishings provided in connection with the operation
of each Property, whether such income or expense is
32
realized by Borrower or by any other Person, except lessees under Leases who are
not Affiliates of Borrower. Lender shall have the right from time to time during
normal business hours upon reasonable notice to examine such books, records and
accounts at the office of Borrower or other Person maintaining them, and to make
such copies or extracts thereof as Lender shall desire. After an Event of
Default, Borrower shall pay any costs incurred by Lender to examine Borrower's
accounting records, as Lender shall determine to be necessary or appropriate in
the protection of Lender's interest.
V.9.2 Annual Reports. Borrower shall furnish to Lender annually, (i) within
45 days after each Fiscal Year, unaudited financial statements of Borrower, and
(ii) within 90 days after each Fiscal Year, a complete copy of Borrower's annual
financial statements audited by a nationally recognized accounting firm or
another independent certified public accountant reasonably acceptable to Lender,
in accordance with GAAP, and containing balance sheets and statements of profit
and loss for Borrower and the Properties in such detail as Lender may request.
Each such statement (x) shall set forth the financial condition and the income
and expenses for the Properties for the immediately preceding calendar year,
including statements of annual Net Operating Income, and (y) shall be
accompanied by an Officer's Certificate certifying (1) that such statement
presents fairly the financial condition of the Properties and has been prepared
in accordance with GAAP and (2) whether there exists a Default or Event of
Default, and if so, the nature thereof, the period of time it has existed and
the action then being taken to remedy it.
V.9.3 Monthly Reports. Borrower shall furnish to Lender within 20 days
after the end of each calendar month the following items, accompanied by an
Officer's Certificate certifying 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 in accordance with GAAP (subject to
normal year-end adjustments) as applicable: (i) monthly and year-to-date
operating statements, noting Net Operating Income and other information
necessary and sufficient under GAAP to fairly represent the financial position
and results of operation of the Properties during such calendar month, all in
form satisfactory to Lender; (ii) a balance sheet for each such month; (iii) a
comparison of the budgeted income and expenses and the actual income and
expenses for each month and year-to-date for the Properties, together with a
detailed explanation of any variances of 10% or more between budgeted and actual
amounts for such period and year-to-date; (iv) a statement of the actual Capital
Expenses made by Borrower during each calendar quarter as of the last day of
such calendar quarter; (v) a calculation reflecting the annual Debt Service
Coverage Ratio as of the last day of such calendar month; (vi) a statement that
Borrower has not incurred any indebtedness other than indebtedness permitted
hereunder; and (vii) occupancy rates, rent rolls (substantially in the form
attached hereto as Schedule 7) and a delinquency report for the Property.
V.9.4 Other Reports. Borrower shall furnish to Lender, within ten Business
Days after request, such further detailed information with respect to the
operation of any of the Properties and the financial affairs of Borrower as may
be reasonably requested by Lender or any applicable Rating Agency.
33
V.9.5 Annual Budget. Borrower shall prepare and submit (or shall cause
Manager to prepare and submit) to Lender (i) prior to the occurrence of a
Lockbox Event, by December 31 of each year during the Term, a proposed pro forma
budget for the Property for the succeeding Fiscal Year (the "Annual Budget"),
and, promptly after preparation thereof, any revisions to such Annual Budget and
(ii) within 30 days after the occurrence of a Lockbox Event and thereafter by
November 30 of each year during the Term (until a Lockbox Termination occurs),
for approval by Lender, which approval shall not be unreasonably withheld or
delayed, the Annual Budget, and, promptly after preparation thereof, any
revisions to such Annual Budget. Lender's failure to approve or disapprove any
Annual Budget (where Lender's approval thereof is required) within 30 days after
Lender's receipt thereof shall be deemed to constitute Lender's approval
thereof. The Annual Budget shall consist of (i) an operating expense budget (the
"Operating Budget") showing, on a month-by-month basis, in reasonable detail,
each line item of the Borrower's anticipated Operating Income and Operating
Expenses (on a cash and accrual basis), including amounts required to establish,
maintain and/or increase reserves, and (ii) a Capital Expense budget (the
"Capital Budget") showing, on a month-by-month basis, in reasonable detail, each
line item of anticipated Capital Expenses. The approved Annual Budget for the
period commencing on the date hereof and ending on December 31, 1998 has been
submitted to and approved by Lender.
V.9.6 Breach. If, prior to a Securitization, Borrower fails to provide to
Lender or its designee any of the financial statements, certificates, reports or
information (the "Required Records") required by this Section 5.9 within 30 days
after the date upon which such Required Record is due, Borrower shall pay to
Lender, at Lender's option and in its sole discretion, an amount equal to $5,000
for each Required Record that is not delivered; provided Lender has given
Borrower at least 15 days prior notice of such failure.
V.10 Environmental Matters.
V.10.1 Hazardous Substances. So long as Borrower owns or is in possession
of the Properties, Borrower (i) shall keep the Properties free from Hazardous
Substances and in compliance in all material respects with all Environmental
Laws, (ii) shall promptly notify Lender if Borrower shall become aware that (A)
any Hazardous Substance is on or near any Property, (B) any Property is in
direct or indirect violation of any Environmental Laws or (C) any condition on
or near any Property shall pose a threat to the health, safety or welfare of
humans, (iii) shall remove such Hazardous Substances and/or cure such violations
and/or remove such threats, as applicable, as required by law (or as shall be
required by Lender in the case of removal which is not required by law, but in
response to the opinion of a licensed hydrogeologist, licensed environmental
engineer or other qualified consultant engaged by Lender ("Lender's
Consultant")), promptly after Borrower becomes aware of same, at Borrower's sole
expense and (iv) shall comply with all of the recommendations contained in the
environmental report delivered to Lender in connection with the origination of
the Loan. Nothing herein shall prevent Borrower from recovering such expenses
from any other party that may be liable for such removal or cure.
34
V.10.2 Environmental Monitoring. Borrower shall give prompt written notice
to Lender of (i) any proceeding or inquiry by any party with respect to the
presence of any Hazardous Substance on, under, from or about any Property, (ii)
all claims made or threatened by any third party against Borrower or any
Property relating to any loss or injury resulting from any Hazardous Substance,
and (iii) Borrower's discovery of any occurrence or condition on any real
property adjoining or in the vicinity of any Property that could cause such
Property to be subject to any investigation or cleanup pursuant to any
Environmental Law. Borrower shall permit Lender to join and participate in, as a
party if it so elects, any legal proceedings or actions initiated with respect
to the Property in connection with any Environmental Law or Hazardous Substance,
and Borrower shall pay all reasonable attorneys' fees and disbursements incurred
by Lender in connection therewith. Upon an Event of Default or if Lender has
reason to suspect the presence of Hazardous Substances on, in or near any
Property, upon Lender's request, Borrower shall provide an inspection or audit
of any Property prepared by a licensed hydrogeologist, licensed environmental
engineer or qualified environmental consulting firm approved by Lender
indicating the presence or absence of Hazardous Substances on, in or near such
Property. The cost and expense of such audit or inspection shall be paid by
Borrower not more frequently than once every five calendar years after the
occurrence of a Securitization, unless Lender, in its good faith judgment,
determines that reasonable cause exists for the performance of an environmental
inspection or audit of such Property, in which case such inspections or audits
shall be at Borrower's sole expense. If Borrower fails to provide any such
inspection or audit within 45 days after such request, Lender may order same,
and Borrower hereby grants to Lender and its employees and agents access to each
Property and a license to undertake such inspection or audit. The cost of such
inspection or audit may be added to the Debt and shall bear interest thereafter
at the Default Rate until paid. If any environmental site assessment report
prepared in connection with such inspection or audit recommends that an
operations and maintenance plan be implemented for any Hazardous Substance,
Borrower shall cause such operations and maintenance plan to be prepared and
implemented at its expense upon request of Lender. In the event that any
investigation, site monitoring, containment, cleanup, removal, restoration or
other work of any kind is reasonably necessary or desirable under an applicable
Environmental Law ("Remedial Work"), Borrower shall commence all such Remedial
Work within 30 days after written demand by Lender for performance thereof (or
such shorter period of time as may be required under applicable law).
Thereafter, Borrower shall diligently prosecute to completion all such Remedial
Work. All Remedial Work shall be performed by contractors approved in advance by
Lender, and under the supervision of a consulting engineer approved by Lender.
All costs of such Remedial Work shall be paid by Borrower, including Lender's
reasonable attorneys' fees and disbursements incurred in connection with the
monitoring or review of such Remedial Work. Borrower will not install or permit
to be installed on any Property any underground storage tank.
V.11 Title to the Properties. Borrower will warrant and defend the title to
each Property, and the validity and priority of the Liens of the Mortgages,
subject only to Permitted Encumbrances, against the claims of all Persons.
V.12 Estoppel Statement. After request by Lender, Borrower shall within
fifteen days furnish Lender with a statement, duly acknowledged and certified,
setting forth (i) the unpaid Principal, (ii) the Interest Rate, (iii) the date
installments of interest and/or Principal
35
were last paid, (iv) any offsets or defenses to the payment of the Debt, and (v)
that the Loan Documents are valid, legal and binding obligations and have not
been modified or if modified, giving particulars of such modification. After
request by Lender (but no more frequently than once in any year), Borrower shall
furnish to Lender (x) within ten days, a certificate reaffirming all
representations and warranties of Borrower set forth in the Loan Documents as of
the date requested by Lender or, to the extent of any changes to any such
representations and warranties, so stating such changes, and (y) within 30 days,
tenant estoppel certificates from each tenant at each Property in form and
substance reasonably satisfactory to Lender.
V.13 Principal Place of Business. Borrower shall not change its principal
place of business without first giving Lender 30 days' prior notice.
V.14 Property Management.
V.14.1 Management Agreement. Subject to Section 5.14.2, Borrower shall (i)
cause each Property to be operated pursuant to the Management Agreement; (ii)
promptly perform and observe all of the covenants required to be performed and
observed by it under the Management Agreement and do all things necessary to
preserve and to keep unimpaired its material rights thereunder; (iii) promptly
notify Lender of any default under the Management Agreement of which it is
aware; (iv) promptly deliver to Lender a copy of each financial statement,
business plan, capital expenditure plan, and property improvement plan and any
other notice, report and estimate received by Borrower under the Management
Agreement; and (v) promptly enforce the performance and observance of all of the
covenants required to be performed and observed by Manager under the Management
Agreement.
V.14.2 Termination of Manager. If an Event of Default shall be continuing,
Borrower shall, at the request of Lender, terminate the Management Agreement and
replace the Manager (or insert a manager, if the Properties are then
self-managed) with a manager approved by Lender on terms and conditions
satisfactory to Lender.
V.15 Special Purpose Bankruptcy Remote Entity. Borrower shall continue to
be a Special Purpose Bankruptcy Remote Entity. A "Special Purpose Bankruptcy
Remote Entity" means a corporation, limited partnership or limited liability
company which at all times since its formation and at all times thereafter (i)
was and is organized solely for the purpose of (A) owning the Properties or (B)
acting as a general partner of the limited partnership that owns the Properties
or member of the limited liability company that owns the Properties, (ii) has
not engaged and will not engage in any business unrelated to (A) the ownership
of the Properties, (B) acting as general partner of the limited partnership that
owns the Properties or (C) acting as a member of the limited liability company
that owns the Properties, as applicable, (iii) has not had and will not have any
assets other than those related to the Properties or its partnership or member
interest in the limited partnership or limited liability company that owns the
Properties, as applicable, (iv) has not engaged, sought or consented to and will
not engage in, seek or consent to any dissolution, winding up, liquidation,
consolidation, merger, asset sale, transfer of partnership or membership
interests (if such entity is a general partner in a limited partnership or a
member in a limited liability company), or amendment of its limited partnership
agreement,
36
articles of incorporation, articles of organization, certificate of formation or
operating agreement (as applicable), (v) if such entity is a limited
partnership, has, as its only general partners, Special Purpose Bankruptcy
Remote Entities that are corporations, (vi) if such entity is a corporation, has
at least one Independent Director, and has not caused or allowed and will not
cause or allow the board of directors of such entity to take any action
requiring the unanimous affirmative vote of 100% of the members of its board of
directors unless an Independent Director shall have participated in such vote,
(vii) if such entity is a limited liability company, has at least one member
that is a Special Purpose Bankruptcy Remote Entity that is a corporation and
such corporation is the managing member of such limited liability company,
(viii) if such entity is a limited liability company, has articles of
organization, a certificate of formation and/or an operating agreement, as
applicable, providing that (A) such entity may dissolve only upon the bankruptcy
of the managing member, (B) the vote of a majority-in-interest of the remaining
members is sufficient to continue the life of the limited liability company in
the event of such bankruptcy of the managing member and (C) if the vote of a
majority-in-interest of the remaining members to continue the life of the
limited liability company following the bankruptcy of the managing member is not
obtained, the limited liability company may not liquidate any Property without
the consent of the applicable Rating Agencies for as long as the Loan is
outstanding, (ix) without the unanimous consent of all of its partners,
directors or members, as applicable, shall not (A) file a bankruptcy or
insolvency petition or otherwise institute insolvency proceedings with respect
to itself or to any other entity in which it has a direct or indirect legal or
beneficial ownership interest, (B) dissolve, liquidate, consolidate, merge, or
sell all or substantially all of its assets or the assets of any other entity in
which it has a direct or indirect legal or beneficial ownership interest, (C)
engage in any other business activity, or amend its organizational documents,
(x) is and will remain solvent and is maintaining and will maintain adequate
capital for the normal obligations reasonably foreseeable in a business of its
size and character and in light of its contemplated business operations, (xi)
has not failed and will not fail to correct any known misunderstanding regarding
the separate identity of such entity, (xii) has maintained and will maintain its
accounts, books and records separate from any other Person and will file its own
tax returns, (xiii) has maintained and will maintain its books, records,
resolutions and agreements as official records, (xiv) will not commingle its
funds or assets with those of any other Person, (xv) will hold its assets in its
own name, (xvi) will conduct its business in its name, (xvii) will maintain its
financial statements, accounting records and other entity documents separate
from any other Person, (xviii) will pay its own liabilities, including the
salaries of its own employees, out of its own funds and assets, (xix) will
observe all partnership, corporate or limited liability company formalities, as
applicable, (xx) has maintained and will maintain an arm's-length relationship
with its Affiliates, (xxi) has no indebtedness other than the Loan and
liabilities in the ordinary course of business relating to the ownership and
operation of the Properties; (xxii) has not and will not assume or guarantee or
become obligated for the debts of any other Person or hold out its credit as
being available to satisfy the obligations of any other Person except for the
Loan and the liabilities permitted pursuant to this Agreement, (xxiii) has not
and will not acquire obligations or securities of its partners, members or
shareholders, (xxiv) has allocated and will allocate fairly and reasonably any
overhead for shared office space and uses separate stationery, invoices and
checks, (xxv) except in connection with the Loan has not pledged and will not
pledge its assets for the benefit of any other Person, (xxvi) has held itself
out and identified itself and will hold itself out and identify itself as a
separate and distinct entity under its own name and
37
not as a division or part of any other Person, (xxvii) has maintained and will
maintain its assets in such a manner that it will not be costly or difficult to
segregate, ascertain or identify its individual assets from those of any other
Person, (xxviii) has not made and will not make loans to any Person, (xxix) has
not identified and will not identify its partners, members or shareholders, or
any Affiliate of any of them, as a division or part of it, (xxx) has not entered
into or been a party to, and will not enter into or be a party to, any
transaction with its partners, members, shareholders or Affiliates except in the
ordinary course of its business and on terms which are intrinsically fair and
are no less favorable to it than would be obtained in a comparable arm's-length
transaction with an unrelated third party, (xxxi) has no obligation to indemnify
its partners, officers, directors or members, as the case may be, or has such an
obligation that is fully subordinated to the Debt and will not constitute a
claim against it in the event that cash flow in excess of the amount required to
pay the Debt is insufficient to pay such obligation, and (xxxii) if such entity
is a corporation, it is required to consider the interests of its creditors in
connection with all corporate actions.
V.16 Assumptions in Non-Consolidation Opinion. Borrower and the Managing
Member shall conduct their business so that the assumptions made as to
themselves in that certain substantive non-consolidation opinion letter dated as
of the date hereof, delivered by Borrower's counsel in connection with the Loan,
shall be true and correct in all respects.
V.17 Expenses. Borrower shall reimburse Lender upon receipt of notice 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 the Loan Documents and the consummation
of the transactions contemplated thereby and all the costs of furnishing all
opinions by counsel for Borrower; (ii) Borrower's and Lender's ongoing
performance under and compliance with the Loan Documents, including confirming
compliance with environmental and insurance requirements; (iii) the negotiation,
preparation, execution, delivery and administration of any consents, amendments,
waivers or other modifications of or under any Loan Document and any other
documents or matters requested by Lender; (iv) filing and recording of any Loan
Documents; (v) title insurance, surveys, inspections and appraisals; (vi)
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, the Loan Documents, the
Properties, or any other security given for the Loan; and (vii) enforcing any
obligations of or collecting any payments due from Borrower under any Loan
Document or with respect to the Properties or in connection with any refinancing
or restructuring of the Loan in the nature of a "work-out", or any insolvency or
bankruptcy proceedings. Any costs and expenses due and payable to Lender
hereunder which are not paid by Borrower within ten days after demand may be
paid from any amounts in the Deposit Account, with notice thereof to Borrower.
The obligations and liabilities of Borrower under this Section 5.17 shall
survive the Term and the exercise by Lender of any of its rights or remedies
under the Loan Documents, including the acquisition of the Properties by
foreclosure or a conveyance in lieu of foreclosure.
V.18 Indemnity. Borrower shall indemnify 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 the
38
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 (collectively, the "Indemnified
Liabilities") in any manner, relating to or arising out of or by reason of the
Loan, including: (i) any breach by Borrower of its obligations under, or any
material misrepresentation by Borrower contained in, any Loan Document; (ii) the
use or intended use of the proceeds of the Loan; (iii) any information provided
by or on behalf of Borrower, or contained in any documentation approved by
Borrower; (iv) ownership of the Mortgages, the Properties or any interest
therein, or receipt of any Rents; (v) any accident, injury to or death of
persons or loss of or damage to property occurring in, on or about the Property
or on the adjoining sidewalks, curbs, adjacent property or adjacent parking
areas, streets or ways; (vi) any use, nonuse or condition in, on or about any
Property or on adjoining sidewalks, curbs, adjacent property or adjacent parking
areas, streets or ways; (vii) performance of any labor or services or the
furnishing of any materials or other property in respect of any Property; (viii)
the presence, disposal, escape, seepage, leakage, spillage, discharge, emission,
release, or threatened release of any Hazardous Substance on, from or affecting
any Property; (ix) any personal injury (including wrongful death) or property
damage (real or personal) arising out of or related to such Hazardous Substance;
(x) any lawsuit brought or threatened, settlement reached, or government order
relating to such Hazardous Substance; (xi) any violation of the Environmental
Laws, which is based upon or in any way related to such Hazardous Substance,
including, without limitation, the costs and expenses of any Remedial Work,
attorney and consultant fees and disbursements, investigation and laboratory
fees, court costs, and litigation expenses; (xii) any failure of any Property to
comply with any Legal Requirement; (xiii) any claim by brokers, finders or
similar persons claiming to be entitled to a commission in connection with any
Lease or other transaction involving any Property or any part thereof under any
Legal Requirement, or any liability asserted against Lender with respect thereto
(unless such broker, finder or similar person was engaged by Lender pursuant to
its rights under the Loan Documents); and (xiv) the claims of any lessee of any
portion of any Property or any person acting through or under any lessee or
otherwise arising under or as a consequence of any Lease; 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 and hold harmless set forth in the preceding sentence may be
unenforceable because it violates any law or public policy, Borrower shall
contribute 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. Any amounts payable to Lender by reason of the application
of this paragraph shall become immediately due and payable and shall bear
interest at the Default Rate from the date loss or damage is sustained by Lender
until paid. The obligations and liabilities of Borrower under this Section 5.18
shall survive the Term and the exercise by Lender of any of its rights or
remedies under the Loan Documents, including the acquisition of the Properties
by foreclosure or a conveyance in lieu of foreclosure.
VI. NEGATIVE COVENANTS
Until the earlier to occur of the end of the Term or the Defeasance of the
entire unpaid Principal, Borrower covenants and agrees with Lender that it will
not, directly or
39
indirectly:
VI.1 Management Agreement. Without Lender's prior consent: (i) surrender,
terminate or cancel the Management Agreement or otherwise replace the Manager or
enter into any other management agreement (except pursuant to Section 5.14.2);
(ii) suffer or permit the ownership, management or control of the Manager to be
transferred to a Person other than an Affiliate of Borrower; (iii) reduce or
consent to the reduction of the term of the Management Agreement; (iv) increase
or consent to the increase of the amount of any charges under the Management
Agreement; or (v) otherwise modify, change, supplement, alter or amend in any
material respect, or waive or release any of its rights and remedies under, the
Management Agreement; or (vi) suffer or permit the occurrence and continuance of
a default beyond any applicable cure period under the Management Agreement (or
any successor management agreement) if such default permits the Manager to
terminate the Management Agreement (or such successor management agreement);
VI.2 Liens. Without Lender's prior consent, create, incur, assume, permit
or suffer to exist any mechanic's, materialmen's or other Lien on any portion of
any Property or legal or beneficial ownership interest in Borrower, except
Permitted Encumbrances, unless such Lien is bonded or discharged within 30 days
after Borrower first receives notice of such Lien;
VI.3 Dissolution. Dissolve, terminate, liquidate, merge with or consolidate
into another Person;
VI.4 Change In Business. 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;
VI.5 Debt Cancellation. Cancel or otherwise forgive or release any claim or
debt owed to Borrower by any Person, except for adequate consideration and in
the ordinary course of Borrower's business in its reasonable judgment;
VI.6 Assets. Purchase or own any property other than the Properties;
VI.7 Transfers. Make, suffer or permit the occurrence of any Transfer other
than a Permitted Transfer. Notwithstanding the foregoing, Borrower shall have
the right, from time to time, to convey, free and clear of the Lien of the Loan
Documents, without payment of a Release Amount, one or more of the Eligible
Out-Parcels, in a bona-fide, arms-length sale or ground lease of such Eligible
Out-Parcel(s) to a purchaser that is not a Related Person of Borrower (a "Third
Party Sale"), and the Lender shall execute, acknowledge and deliver a Release of
any such Eligible Out-Parcel being so sold and conveyed within ten Business Days
after receipt of Borrower's written request for such Release; provided (i) such
request shall refer to this Section, identify such Eligible Out-Parcel and be
accompanied by a counterpart of such Release in form for execution by the
Lender, (ii) no Default shall have occurred and be
40
continuing as of the date of such request and Borrower shall have delivered to
the Lender an Officer's Certificate confirming such fact and certifying that
such sale qualifies as a Third-Party Sale, (iii) no Default shall have occurred
and be continuing as of the date of such Release, and (iv) Lender shall have
received such assurance as it shall reasonably require that the portion of the
Property not being conveyed will not be adversely affected by such conveyance
(including, without limitation, assurance that such Property will constitute a
separate legal parcel and tax lot, in compliance with all zoning and other legal
requirements, with undiminished legal access to public roads, and will not be
affected by any Liens that are not Permitted Encumbrances).
VI.8 Debt. Create, incur or assume any indebtedness other than the Debt and
unsecured trade debt incurred in the ordinary course of business and not past
due;
VI.9 Assignment of Rights. Without Lender's prior consent, attempt to
assign Borrower's rights or interest under any Loan Document in contravention of
any Loan Document; or
VI.10 Operation of the Properties. Cease to operate the Properties as
shopping centers, or in the case of the Property located in Cary, North
Carolina, a shopping center with appurtenant office use, or terminate such
business for any reason whatsoever, (other than temporary cessation in
connection with renovations to any Property), unless any such Property has been
released or substituted hereunder.
VII. INSURANCE; CASUALTY; AND CONDEMNATION
VII.1 Insurance.
VII.1.1 Coverage. Borrower, at its sole cost, for the mutual benefit of
Borrower and Lender, shall obtain and maintain during the Term the following
policies of insurance with respect to each Property:
(a) Property insurance insuring against loss or damage by standard,
"all-risk" perils, which shall (i) be in an amount equal to the greatest of
(A) the then full replacement cost of such Property without deduction for
physical depreciation, (B) the Allocated Loan Amount for the applicable
Property, and (C) such amount as is necessary so that the insurer would not
deem Borrower a co-insurer under such policies, (ii) have deductibles no
greater than $25,000 per occurrence, (iii) be paid annually in advance and
(iv) contain a "Replacement Cost Endorsement" with a waiver of
depreciation.
(b) Flood insurance if any part of the Property is located in an area
identified by the Federal Emergency Management Agency as an area having
special flood hazards and in which flood insurance has been made available
under the National Flood Insurance Program, in an amount at least equal to
the full replacement cost of the applicable Property or the maximum limit
of coverage available with respect to the Property under such program,
whichever is less.
41
(c) Commercial general public liability insurance, including broad
form property damage, blanket contractual and personal injuries (including
death resulting therefrom) coverages and containing minimum limits per
occurrence of $1,000,000 and $2,000,000 in the aggregate for any policy
year; together with at least $10,000,000 excess and/or umbrella liability
insurance for any and all claims, including all legal liability imposed
upon Borrower and all court costs and attorneys' fees incurred in
connection with the ownership, operation and maintenance of each Property.
(d) Rental loss and/or business interruption insurance in an amount
equal to the estimated Rents for the next succeeding 12-month period. The
amount of such insurance shall be increased from time to time during the
Term as and when the estimated or actual Rents increase.
(e) Insurance against loss or damage from (i) leakage of sprinkler
systems and (ii) explosion of steam boilers, air conditioning equipment,
high pressure piping, machinery and equipment, pressure vessels or similar
apparatus now or hereafter installed in any of the Improvements (without
exclusion for explosions), in an amount at least equal to $2,000,000 for
each Property.
(f) Worker's compensation insurance with respect to any employees of
Borrower, as required by any Legal Requirement.
(g) During any period of repair or restoration, builder's "all-risk"
insurance in an amount equal to not less than the full insurable value of
the Improvements on the applicable Property, against such risks (including
fire and extended coverage and collapse of the Improvements to agreed
limits) as Lender may request, in form and substance acceptable to Lender.
(h) Coverage to compensate for the cost of demolition and the
increased cost of construction in an amount satisfactory to Lender.
(i) Such other insurance (including earthquake insurance and hurricane
insurance) as may from time to time be reasonably required by Lender in
order to protect its interests against other insurable hazards which at the
time are commonly insured against and generally available in the case of
premises similarly situated, due regard being given to the height and the
type of structures and its location, construction, use and occupancy.
VII.1.2 Policies. All policies of insurance (the "Policies") required
pursuant to Section 7.1.1 shall (i) be issued by companies approved by Lender
and licensed to do business in the applicable State, with a claims paying
ability rating of "AA" or better by Standard & Poor's Ratings Group; (ii) name
Lender and its successors and/or assigns as their interest may appear as the
mortgagee (in the case of property insurance) or an additional insured (in the
case of liability insurance); (iii) contain (in the case of property insurance)
a Non-Contributory Standard Lender Clause and a Lender's Loss Payable
Endorsement, or their equivalents, naming
42
Lender as the person to which all payments made by such insurance company shall
be paid; (iv) contain a waiver of subrogation against Lender; (v) be assigned
and duplicate originals thereof delivered to Lender; (vi) contain such
provisions as Lender deems reasonably necessary or desirable to protect its
interest, including endorsements providing that neither Borrower, Lender nor any
other party shall be a co-insurer under the Policies and that Lender shall
receive at least 30 days' prior written notice of any modification, reduction or
cancellation of any of the Policies; and (vii) be satisfactory in form and
substance to Lender and approved by Lender as to amounts, form, risk coverage,
deductibles, loss payees and insureds. Borrower shall pay the premiums for such
Policies (the "Insurance Premiums") as the same become due and payable and
furnish to Lender evidence of the renewal of each of the Policies together with
(unless such Insurance Premiums have been paid by Lender pursuant to Section
3.3) receipts for or other evidence of the payment of the Insurance Premiums
reasonably satisfactory to Lender. If Borrower does not furnish such evidence
and receipts at least 30 days prior to the expiration of any expiring Policy,
then Lender, after 10 days notice to Borrower, may, but shall not be obligated
to, procure such insurance and pay the Insurance Premiums therefor, and Borrower
agrees to reimburse Lender for the cost of such Insurance Premiums promptly on
demand. Borrower shall deliver to Lender a certified copy of each Policy within
30 days after its effective date. Within 30 days after request by Lender,
Borrower shall obtain such increases in the amounts of coverage required
hereunder as may be reasonably requested by Lender, taking into consideration
changes in the value of money over time, changes in liability laws, changes in
prudent customs and practices, and the like. The insurance required hereunder
may, at the option of Borrower, be effected by blanket or umbrella policies
issued to Borrower and its affiliates covering the Properties and properties
owned by such affiliates, provided that the policies otherwise comply with the
provisions hereof and specifically allocate to each Property the coverages
required hereby, without possibility of reduction or coinsurance by reason of,
or damage to, another premises named therein, and if the insurance required
hereunder shall be effected by any such blanket or umbrella policies, Borrower
shall furnish to Lender certified copies or duplicate originals of such policies
in place of the originals, with schedules thereto attached showing the amount of
insurance afforded by such policies applicable to each Property, and in
addition, within thirty (30) days after the filing thereof with any insurance
ratemaking body, copies of the schedule of all improvements affected by any such
blanket or umbrella policy of insurance.
VII.2 Casualty.
VII.2.1 Notice; Restoration. If any Property is damaged or destroyed, in
whole or in part, by fire or other casualty (a "Casualty"), Borrower shall give
prompt notice thereof to Lender; provided, however, that no such notice shall be
required where the loss or damage is $50,000 or less and no Event of Default
shall have occurred and be continuing. Following the occurrence of a Casualty,
Borrower, regardless of whether insurance proceeds are available, shall promptly
proceed to restore, repair, replace or rebuild the affected Property in
accordance with Legal Requirements to be of at least equal value and of
substantially the same character as prior to such damage or destruction.
VII.2.2 Settlement of Proceeds. In the event of a Casualty covered by any
43
of the Policies (an "Insured Casualty") where the loss does not exceed $50,000,
Borrower may settle and adjust any claim without the consent of Lender; provided
such adjustment is carried out in a competent and timely manner; and Borrower is
hereby authorized to collect and receipt for the insurance proceeds (the
"Proceeds"). In the event of an Insured Casualty where the loss equals or
exceeds $50,000, Lender and Borrower shall jointly, so long as no Event of
Default exists, settle and adjust any claim and agree with the insurer(s) on the
amount to be paid on the loss, and the Proceeds shall be due and payable solely
to Lender and held by Lender in the Casualty/Condemnation Subaccount and
disbursed in accordance herewith. The expenses incurred by Lender in the
adjustment and collection of the Proceeds shall become part of the Debt and
shall be reimbursed by Borrower to Lender upon demand.
VII.3 Condemnation.
VII.3.1 Notice; Restoration. Borrower shall promptly give Lender notice of
the actual or threatened commencement of any condemnation or eminent domain
proceeding affecting any Property (a "Condemnation") and shall deliver to Lender
copies of any and all papers served in connection with such Condemnation.
Following the occurrence of a Condemnation, Borrower, regardless of whether an
Award is available, shall promptly proceed to restore, repair, replace or
rebuild the affected Property in accordance with Legal Requirements to the
extent practicable to be of at least equal value and of substantially the same
character as prior to such Condemnation.
VII.3.2 Collection of Award. Lender may participate in any Condemnation
proceeding to collect, receive and retain any award or payment in respect of a
Condemnation (an "Award") and to make any compromise or settlement in connection
with such Condemnation and Borrower will deliver to Lender all instruments
requested by Lender to permit such participation. Notwithstanding any
Condemnation (or any transfer made in lieu of or in anticipation of such a
Condemnation), Borrower shall continue to pay the Debt at the time and in the
manner provided for in the Loan Documents, and the Debt shall not be reduced
unless and until any Award shall have been actually received and applied by
Lender to expenses of collecting the Award and to 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 in the Note. If the affected Property is sold, through
foreclosure or otherwise, prior to the receipt by Lender of such Award, Lender
shall have the right, whether or not a deficiency judgment on the Note shall be
recoverable or shall have been sought, recovered or denied, to receive all or a
portion of the Award sufficient to pay the Debt. Borrower shall cause any Award
that is payable to Borrower to be paid directly to Lender. Lender shall hold
such Award in the Casualty/Condemnation Subaccount and disburse such Award in
accordance with the terms hereof.
VII.4 Application of Proceeds or Award.
VII.4.1 Application to Restoration. In the event of an Insured Casualty or
Condemnation where (i) the loss is in an aggregate amount less than the greater
of $500,000 or
44
25% of the fair market value of the affected Property as reasonably determined
by Lender, (ii) in the reasonable judgment of Lender, the Property can be
restored within six months, and prior to the Stated Maturity Date and the
expiration of the business interruption insurance with respect thereto, to an
economic unit not less valuable and not less useful than the same was prior to
the Insured Casualty or Condemnation, and after such restoration will adequately
secure the outstanding balance of the Allocated Loan Amount for such Property,
and (iii) no Default or Event of Default shall have occurred and be then
continuing, then the Proceeds or the Award, as the case may be (after
reimbursement of any expenses incurred by Lender), shall be applied to reimburse
Borrower for the cost of restoring, repairing, replacing or rebuilding the
affected Property (the "Restoration"), in the manner set forth herein. Borrower
shall commence and diligently prosecute such Restoration; provided that (i)
Borrower shall pay (and if required by Lender, Borrower shall deposit with
Lender in advance) all costs of such Restoration in excess of the net amount of
the Proceeds or the Award made available pursuant to the terms hereof; and (ii)
Lender shall have received evidence reasonably satisfactory to it that, during
the period of the Restoration, the Rents will be at least equal to the sum of
the Operating Expenses and Debt Service, as reasonably determined by Lender.
VII.4.2 Application to Debt. Except as provided in Section 7.4.1, the
Proceeds and any Award may, at the option of Lender in its sole discretion, be
applied to the payment of the Debt (and at Borrower's option, shall be applied
towards the Release Amount for the applicable Property) or applied to reimburse
Borrower for the cost of any Restoration, in the manner set forth in Section
7.4.3. Any such application to the Debt shall be in an amount up to the Release
Amount for the affected Property together with an additional amount equal to the
Yield Maintenance Premium, if any, that would be required under Section 2.3.3 if
a Defeasance Deposit were to be made by Borrower with respect to a Defeased Note
in the amount of the Proceeds or Award applied to the Debt. Notwithstanding the
foregoing, if the Proceeds or the Award are not in excess of the Release Amount
for the affected Property, then such application of the Proceeds or the Award to
the Debt shall be subject to Section 2.7, but shall otherwise be without any
prepayment consideration, unless an Event of Default has occurred and is
continuing at the time the Proceeds are received from the insurance company or
the Award is received from the condemning authority, as the case may be, in
which event Borrower shall be required to pay to Lender the Yield Maintenance
Premium applicable thereto. After any such application to the Debt, the unpaid
Principal shall be reamortized over the remaining term thereof and the Allocated
Loan Amount for the affected Property shall be reduced by the Principal
reduction resulting from such application.
VII.4.3 Procedure for Application to Restoration. If Borrower is entitled
to reimbursement out of the Proceeds or an Award held by Lender, or if Lender
determines to make Proceeds or an Award available to Borrower, such Proceeds or
Award shall be disbursed from time to time from the Casualty/Condemnation
Subaccount upon Lender being furnished with (i) evidence satisfactory to it of
the estimated cost of completion of the Restoration, (ii) funds or, at Lender's
option, assurances satisfactory to Lender that such funds are available,
sufficient in addition to the Proceeds or Award to complete the proposed
Restoration, (iii) such architect's certificates, waivers of lien, contractor's
sworn statements, title insurance endorsements, bonds, plats of survey and such
other evidences of cost, payment and performance
45
as Lender may reasonably require and approve, and (iv) all plans and
specifications for such Restoration, such plans and specifications to be
approved by Lender prior to commencement of any work, such approval not to be
unreasonably withheld or delayed. No payment made prior to the final completion
of the Restoration shall exceed 90% of the value of the work performed from time
to time; funds other than the Proceeds or Award shall be disbursed prior to
disbursement of such Proceeds or Award; and at all times, the undisbursed
balance of such Proceeds or Award remaining in the hands of Lender, together
with funds deposited for that purpose or irrevocably committed to the
satisfaction of Lender by or on behalf of Borrower for that purpose, shall be at
least sufficient in the reasonable judgment of Lender to pay for the cost of
completion of the Restoration, free and clear of all Liens or claims for Lien.
Any surplus that remains out of the Proceeds held by Lender after payment of
such costs of Restoration shall be paid to Borrower. Any surplus that remains
out of the Award received by Lender after payment of such costs of Restoration
shall, in the sole and absolute discretion of Lender, be retained by Lender and
applied to payment of the Debt or returned to Borrower.
VIII. DEFAULTS
VIII.1 Events of Default. Each of the following events shall constitute an
"Event of Default":
(a) any portion of the Debt is not paid when due;
(b) Borrower shall fail to pay when due any deposit into any Fund;
(c) any of the Taxes or Other Charges are not paid when due (unless
sufficient funds are in the Taxes component of the Tax and Insurance Escrow
Fund on the applicable date), subject to Borrower's right to contest Taxes
in accordance with Section 5.2;
(d) the Policies are not kept in full force and effect, or are not
delivered to Lender upon request;
(e) a Transfer other than a Permitted Transfer occurs;
(f) any representation or warranty made by Borrower in any Loan
Document or in any report, certificate, financial statement or other
instrument, agreement or document furnished by Borrower in connection with
any Loan Document, shall be false or misleading in any material respect as
of the date the representation or warranty was made;
(g) Borrower shall make an assignment for the benefit of creditors, or
shall generally not be paying its debts as they become due;
(h) a receiver, liquidator or trustee shall be appointed for Borrower;
or Borrower shall be adjudicated a bankrupt or insolvent; or any petition
for bankruptcy, reorganization or arrangement pursuant to federal
bankruptcy law, or any similar federal
46
or state law, shall be filed by or against, consented to, or acquiesced in
by, Borrower; or any proceeding for the dissolution or liquidation of
Borrower shall be instituted; provided, however, if such appointment,
adjudication, petition or proceeding was involuntary and not consented to
by Borrower, only upon the same not being discharged, stayed or dismissed
within 90 days;
(i) Borrower breaches any negative covenant contained in Section 6 or
any covenant contained in Section 5.15;
(j) Borrower shall be in default under any other mortgage or security
agreement covering any part of any Property whether it be superior or
junior in Lien to the Mortgage encumbering such Property, beyond any
applicable notice and grace period contained therein;
(k) except as permitted hereunder, the actual or threatened
alteration, improvement, demolition or removal of any of the Improvements
without the prior consent of Lender;
(l) an Event of Default as defined or described in any other Loan
Document occurs; or any other event shall occur or condition shall exist,
if the effect of such event or condition is to accelerate or to permit
Lender to accelerate the maturity of any portion of the Debt;
(m) Borrower shall be in default under any term, covenant or provision
set forth herein of in any other Loan Document which specifically contains
a notice requirement or grace period and such notice has been given and
such grace period has expired;
(n) any of the assumptions contained in any substantive
non-consolidation opinion, delivered to Lender by Borrower's counsel in
connection with the Loan or otherwise hereunder, were not true and correct
as of the date of such opinion or thereafter became untrue or incorrect;
(o) Borrower shall fail to pay when due (and beyond any applicable
grace period) any rent, additional rent or other charge payable under the
Ground Lease; or Borrower shall default in the observance or performance of
any other term, covenant or condition of the Ground Lease and such default
is not cured prior to the expiration of any applicable grace period
provided therein; or any event shall occur that would cause the Ground
Lease to terminate without notice or action by the landlord thereunder or
would entitle such landlord to terminate the Ground Lease and the term
thereof by giving notice to Borrower; or the leasehold estate created by
the Ground Lease shall be surrendered or the Ground Lease shall be
terminated or cancelled for any reason or under any circumstance whatsoever
(other than as provided in Sections 3.8 and 3.9 of the Ground Lease); or
any term of the Ground Lease shall be modified or supplemented without
Lender's consent; or Borrower shall fail or neglect to pursue diligently
all actions
47
necessary to exercise any renewal rights pursuant to the Ground Lease; or
(p) Borrower shall continue to be in Default under any of the other
terms, covenants or conditions of this Agreement or any other Loan Document
not specified in subsections (a) through (o) above, for ten 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 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-day period, and 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 an additional period of time as is reasonably necessary for
Borrower in the exercise of due diligence to cure such Default, such
additional period not to exceed 90 days.
VIII.2 Remedies.
VIII.2.1 Acceleration. Upon the occurrence of an Event of Default (other
than an Event of Default described in paragraph (g) or (h) of Section 8.1) and
at any time thereafter, in addition to any other rights or remedies available to
it pursuant to the 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 the Properties, including
declaring the Debt to be immediately due and payable; and upon any Event of
Default described in paragraph (g) or (h) of Section 8.1, the Debt shall
immediately and automatically become due and payable, without notice or demand,
and Borrower hereby expressly waives any such notice or demand, anything
contained in any Loan Document to the contrary notwithstanding.
VIII.2.2 Remedies Cumulative. 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 the Loan Documents 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. 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 in the
Loan Documents. Without limiting the generality of the foregoing, Borrower
agrees that if an Event of Default is continuing, (i) to the extent permitted by
applicable law, 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, each Mortgage has been
foreclosed, each Property has been sold and/or otherwise realized upon in
satisfaction of the Debt or the Debt has been paid in full. To the extent
permitted by applicable law, nothing contained in any Loan Document shall be
construed as requiring Lender to resort to
48
any portion of any Property for the satisfaction of any of the Debt in
preference or priority to any other portion, and Lender may seek satisfaction
out of each such Property or any part thereof, in its absolute discretion.
VIII.2.3 Severance. 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 in such denominations as Lender shall determine in
its sole discretion for purposes of evidencing and enforcing its rights and
remedies. 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 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 such severance, Borrower
ratifying all that such attorney shall do by virtue thereof.
VIII.2.4 Delay. 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 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 shall not be construed to be a waiver of any
subsequent Default or Event of Default or to impair any remedy, right or power
consequent thereon.
IX. SPECIAL PROVISIONS
IX.1 Sale of Note and Securitization.
IX.1.1 Cooperation. At Lender's request (to the extent not already required
to be provided by Borrower under this Agreement), Borrower shall use reasonable
efforts to satisfy the market standards to which Lender 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 participation therein or the first
successful securitization (such sale and/or securitization, the
"Securitization") of rated single or multi-class securities (the "Securities")
secured by or evidencing ownership interests in the Note and the Mortgages.
Without limiting the generality of the foregoing, Borrower shall:
(a) (i) provide such financial and other information with respect to the
Properties, Borrower and its Affiliates, Manager and any tenants of the
Properties, (ii) provide business plans and budgets relating to the Properties
and (iii) 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
Lender or the Rating Agencies or as may be necessary or appropriate in
connection with the Securitization (the items provided to Lender pursuant to
this paragraph (a) being called the "Provided Information"), together, if
customary, with appropriate verification of and/or consents to the Provided
49
Information through letters of auditors or opinions of counsel of independent
attorneys acceptable to Lender and the Rating Agencies;
(b) at Borrower's expense, cause counsel to render opinions as to
non-consolidation, fraudulent conveyance, true sale and true contribution and
any other opinion customary in securitization transactions with respect to the
Properties, Borrower and its Affiliates, which counsel and opinions shall be
reasonably satisfactory to Lender and the Rating Agencies;
(c) make such representations and warranties as of the closing date of the
Securitization with respect to the Properties, Borrower and the Loan Documents
as are customarily provided in securitization transactions and as may be
reasonably requested by Lender or the Rating Agencies and consistent with the
facts covered by such representations and warranties as they exist on the date
thereof, including the representations and warranties made in the Loan
Documents;
(d) provide current certificates of good standing and qualification with
respect to Borrower from appropriate Governmental Authorities; and
(e) execute such amendments to the Loan Documents and Borrower's
organizational documents, enter into a lock-box or similar arrangement with
respect to the Rents and establish and fund such reserve funds (including
reserve funds for deferred maintenance and capital improvements) as may be
requested by Lender or the Rating Agencies or otherwise to effect the
Securitization, provided that nothing contained in this subsection (e) shall
result in a material economic change in the transaction.
All reasonable third party costs and expenses incurred by Lender in connection
with Borrower's complying with requests made under this Section 9.1 shall be
paid by Borrower up to a maximum amount equal to .10% of the original Principal,
which Borrower shall deposit with Lender on the date hereof.
IX.1.2 Use of Information. Borrower understands that certain of the
Provided Information and the Required Records may be included in disclosure
documents in connection with the Securitization, including a prospectus 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 shall cooperate with Lender in updating the Provided
Information or Required Records for inclusion or summary in the Disclosure
Document by providing all current information pertaining to Borrower and the
Properties necessary to keep the Disclosure Document accurate and complete in
all material respects with respect to such matters.
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IX.1.3 Borrower Obligations Regarding Disclosure Documents. In connection
with a preliminary and a final private placement or prospectus, as applicable,
Borrower agrees:
(a) if requested by Lender, to certify in writing that Borrower has
carefully examined those portions of such memorandum or prospectus, as
applicable, pertaining to Borrower, the Property and the Loan, including
applicable portions of the sections entitled "Special Considerations",
"Description of the Mortgages", "Description of the Mortgage Loans and Mortgaged
Properties", "The Manager", "The Borrower" and "Certain Legal Aspects of the
Mortgage Loan", and such sections (and any other sections reasonably requested
and pertaining to Borrower, the Properties or the Loan) do not contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements made, in the light of the circumstances under
which they were made, not misleading;
(b) to indemnify Lender and the Affiliates of Nomura Securities
International, Inc. ("Nomura"), that have filed the registration statement
relating to the Securitization (the "Registration Statement"), each of its
directors, each of its officers who have signed the Registration Statement and
each person or entity who controls Nomura within the meaning of Section 15 of
the Securities Act or Section 30 of the Exchange Act of 1933, as amended
(collectively, the "Nomura Group"), and Nomura, each of its directors and each
person who controls Nomura, within the meaning of Section 15 of the Securities
Act and Section 20 of the Exchange Act (collectively, the "Underwriter Group")
for any losses, claims, damages or liabilities (the "Liabilities") to which
Lender, the Nomura Group or the Underwriter Group may become subject insofar as
the Liabilities arise out of or are based upon any untrue statement of any
material fact contained in the applicable portions of such sections of such
memorandum, prospectus or Registration Statement applicable to Borrower, the
Properties or the Loan, or arise out of or are based upon the omission to state
therein a material fact required to be stated in the applicable portions of such
sections or necessary in order to make the statements in the applicable portions
of such sections or in light of the circumstances under which they were made,
not misleading; and
(c) to reimburse Lender and Nomura for any legal or other expenses
reasonably incurred by Lender and Nomura in connection with investigating or
defending the Liabilities.
Borrower's Liability under clause (a) or (b) above shall be limited solely to
Liabilities arising out of or based upon any such untrue statement or omission
made therein in reliance upon and in conformity with information furnished to
Lender by or on behalf of Borrower in connection with the preparation of those
portions of the Disclosure Document pertaining to Borrower, the Properties or
the Loan or in connection with the underwriting of the debt, including financial
statements of Borrower, operating statements, rent rolls, environmental site
assessment reports and property condition reports with respect to the
Properties. The foregoing indemnity will be in addition to any liability which
Borrower may otherwise have.
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IX.1.4 Borrower Indemnity Regarding Filings. In connection with filings
under the Exchange Act, Borrower agrees to (i) indemnify Lender, the Nomura
Group and the Underwriter Group for any Liabilities to which Lender, the Nomura
Group or the Underwriter Group may become subject insofar as the Liabilities
arise out of or are based upon the omission or alleged omission to state in the
Provided Information or Required Records a material fact required to be stated
in the Provided Information or Required Records in order to make the statements
in the Provided Information or Required Records, in light of the circumstances
under which they were made not misleading and (ii) reimburse Lender or Nomura
for any legal or other expenses reasonably incurred by Lender and Nomura in
connection with defending or investigating the Liabilities.
IX.1.5 Indemnification Procedure. Promptly after receipt by an indemnified
party under Section 9.1.3 or 9.1.4 of notice of the commencement of any action
for which a claim for indemnification is to be made against Borrower, such
indemnified party shall notify Borrower in writing of such commencement, but the
omission to so notify the Borrower will not relieve Borrower from any liability
that it may have to any indemnified party hereunder except to the extent that
failure to notify causes prejudice to Borrower. In the event that any action is
brought against any indemnified party, and it notifies Borrower of the
commencement thereof, Borrower will be entitled, jointly with any other
indemnifying party, to participate therein and, to the extent that it (or they)
may elect by written notice delivered to the indemnified party promptly after
receiving the aforesaid notice of commencement, to assume the defense thereof
with counsel satisfactory to such indemnified party. After notice from Borrower
to such indemnified party under this Section 9.1.5, Borrower shall not be
responsible for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation; provided, however, if the defendants in any such action
include both Borrower and an indemnified party, and any indemnified party shall
have reasonably concluded that there are any legal defenses available to it
and/or other indemnified parties that are different from or additional to those
available to Borrower, then the indemnified party or parties shall have the
right to select separate counsel to assert such legal defenses and to otherwise
participate in the defense of such action on behalf of such indemnified party or
parties. Borrower shall not be liable for the expenses of more than one separate
counsel unless there are legal defenses available to it that are different from
or additional to those available to another indemnified party.
IX.1.6 Contribution. In order to provide for just and equitable
contribution in circumstances in which the indemnity agreement provided for in
Section 9.1.3 or 9.1.4 is for any reason held to be unenforceable by an
indemnified party in respect of any Liabilities (or action in respect thereof)
referred to therein which would otherwise be indemnifiable under Section 9.1.3
or 9.1.4, Borrower shall contribute to the amount paid or payable by the
indemnified party as a result of such Liabilities (or action in respect
thereof); provided, however, that no Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person not guilty of such fraudulent
misrepresentation. In determining the amount of contribution to which the
respective parties are entitled, the following factors shall be considered: (i)
the Nomura Group's and Borrower's relative knowledge and access to information
concerning the matter with respect to which the claim was asserted; (ii) the
opportunity to correct and prevent any statement or omission; and (iii) any
other equitable
52
considerations appropriate in the circumstances. Lender and Borrower hereby
agree that it may not be equitable if the amount of such contribution were
determined by pro rata or per capita allocation.
IX.1.7 Rating Surveillance. Lender will retain the Rating Agencies to
provide rating surveillance services on Securities. The pro rata share of such
rating surveillance will be at the expense of Borrower, subject to the
limitation on Borrower's costs contained in the last paragraph of Section 9.1.1.
X. MISCELLANEOUS
X.1 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 Loan Documents against Borrower or any of its
officers, directors, employees, partners, members or shareholders ("Borrower's
Constituents"), by any action or proceeding wherein a money judgment shall be
sought, 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 security interests under the Loan
Documents, or in the Properties, the Rents or any other collateral given by or
on behalf of Borrower to Lender pursuant to the Loan Documents; provided,
however, that, except as specifically provided in this Section 10.1, 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 and in
any other collateral given by or on behalf of Borrower to Lender, and Lender
agrees that it shall not xxx for, seek or demand any deficiency judgment against
(i) Borrower, (ii) the property of any of Borrower's Constituents, or (iii) the
property of any of the officers, directors, employees, partners, members or
shareholders of any of Borrower's Constituents, in any such action or proceeding
under or by reason of or under or in connection with any Loan Document. The
provisions of this section shall not, however, (i) constitute a waiver, release
or impairment of any obligation evidenced or secured by any Loan Document; (ii)
impair the right of Lender to name Borrower as a party defendant in any action
or suit for foreclosure and sale under the Mortgages; (iii) affect the validity
or enforceability of any guaranty made in connection with the Loan or any of the
rights and remedies of Lender thereunder; (iv) impair the right of Lender to
obtain the appointment of a receiver; (v) impair the enforcement of the
Assignment of Leases as against Borrower's interest in the Properties or the
Rents; (vi) constitute a prohibition against Lender to commence any other
appropriate action or proceeding in order for Lender to fully realize the
security granted by the Mortgages or to exercise its remedies against the
Properties; or (vii) 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:
(a) fraud or intentional misrepresentation by Borrower or any
guarantor in connection with the Loan;
(b) the willful misconduct of Borrower;
53
(c) the breach of any representation, warranty, covenant or
indemnification in any Loan Document concerning Environmental Laws or
Hazardous Substances, including Sections 4.1.32 and 5.10, and clauses
(viii) through (xi) of Section 5.18;
(d) the removal or disposal of any portion of any Property after an
Event of Default, which removal or disposal is prohibited under the Loan
Documents;
(e) the misappropriation or conversion by Borrower of (x) any Proceeds
paid by reason of any Insured Casualty, (y) any Award received in
connection with a Condemnation, or (z) any Rents during the continuance of
an Event of Default, which are not deposited into the Deposit Account;
(f) failure to pay charges for labor or materials or other charges
that can create Liens on any portion of any Property unless such charges
are the subject of a bona fide dispute in which Borrower is contesting the
amount or validity thereof;
(g) any security deposits collected with respect to any Property which
are not delivered to Lender upon a foreclosure of 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;
(h) Borrower's indemnifications of Lender set forth in Sections 9.1.3
and 9.1.4; and
(i) Borrower's indemnification of Lender set forth in Section 24 of
each of the Mortgages.
provided, however, that notwithstanding anything to the contrary contained
in this clause (vii), Lender agrees that it shall not xxx for, seek or demand
any judgment against (i) the property of any of Borrower's Constituents, or (ii)
the property of any of the officers, directors, employees, partners, members or
shareholders of any of Borrower's Constituents, in any such action or proceeding
under or by reason of or under or in connection with any Loan Document.
Notwithstanding anything to the contrary in this Agreement or any of the Loan
Documents, Lender shall not be deemed to have waived any right which Lender may
have under Section 506(a), 506(b), 1111(b) or any other provisions of the U.S.
Bankruptcy Code to file a claim for the full amount of the Debt or to require
that all collateral shall continue to secure all of the Debt in accordance with
the Loan Documents.
X.2 Notices. All notices, consents, approvals and requests required or
permitted hereunder or under any other Loan Document (a "notice") shall be given
in writing and shall be effective for all purposes if hand delivered or sent (i)
by certified or registered United
54
States mail, postage prepaid, or (ii) by (A) expedited prepaid delivery service,
either commercial or United States Postal Service, with proof of attempted
delivery, and (B) telecopier (with answer back acknowledged), in any case
addressed as follows (or to such other address or Person as a party shall
designate from time to time by notice to the other party): If to Lender: Nomura
Asset Capital Corporation, Two World Xxxxxxxxx Xxxxxx, Xxxxxxxx X, Xxx Xxxx, Xxx
Xxxx 00000, Attention: Xxxxxx XxXxxx, Telecopier (000) 000-0000, with copies to
: Nomura Asset Capital Corporation, Two World Xxxxxxxxx Xxxxxx, Xxxxxxxx X, Xxx
Xxxx, Xxx Xxxx 00000, Attention: Xxxxx Xxxx, Telecopier (000) 000-0000 and Xxxx,
Scholer, Fierman, Xxxx & Handler, LLP, 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000, Attention: Xxxxxxx Xxxxxxx, Telecopier: (000) 000-0000; if to Borrower:
c/o FAC Realty Trust, Inc., 00000 Xxxxxxx Xxxxxxx, Xxxx, Xxxxx Xxxxxxxx 00000,
Attention: President, Telecopier (000) 000-0000, with copies to: FAC Realty
Trust, Inc.,11000 Xxxxxxx Xxxxxxx, Xxxx, Xxxxx Xxxxxxxx 00000, Attention: Chief
Financial Officer and another copy sent to Attention: General Counsel at the
same address, Telecopier (000) 000-0000, and with a copy to: Xxxxx, Xxxxx &
Xxxxx, 0000 Xxxxxxxxxxxx Xxxxxx, X.X., Xxxxxxxxxx, X.X. 00000, Attention: Xxxxx
X. Xxxxxxx, Telecopier: (000) 000-0000. 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 (but not in the case of telecopy) on a Business
Day.
X.3 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 Loan. Borrower and Lender hereby agree
to indemnify and hold the other harmless from and against any and all claims,
liabilities, costs and expenses of any kind in any way relating to or arising
from a claim by any Person that such Person acted on behalf of the indemnifying
party in connection with the transactions contemplated herein. The provisions of
this Section 10.3 shall survive the expiration and termination of this Agreement
and the repayment of the Debt.
X.4 Retention of Servicer. Lender reserves the right to retain the Servicer
to act as its agent hereunder with such powers as are specifically delegated to
the Servicer by Lender, whether pursuant to the terms of this Agreement, the
Pooling and Servicing Agreement, the Deposit Account Agreement or otherwise,
together with such other powers as are reasonably incidental thereto. Borrower
shall pay any reasonable fees and expenses of the Servicer in connection with a
Defeasance, release of the Property, assumption or modification of the Loan or
enforcement of the Loan Documents.
X.5 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 unpaid. All Borrower's covenants and agreements in this
Agreement shall inure to the benefit of the respective legal representatives,
successors and assigns of Lender.
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X.6 Lender's Discretion. Whenever pursuant to this Agreement or any other
Loan Document, 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.
X.7 Governing Law. (a) THIS AGREEMENT WAS NEGOTIATED IN THE STATE OF NEW
YORK, AND 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 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 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 CREATED PURSUANT TO THE LOAN DOCUMENTS SHALL BE
GOVERNED BY AND CONSTRUED ACCORDING TO THE LAW OF THE STATE IN WHICH THE
APPLICABLE PROPERTY IS LOCATED, IT BEING UNDERSTOOD THAT, TO THE FULLEST EXTENT
PERMITTED BY THE LAW OF SUCH STATE, THE LAW OF THE STATE OF NEW YORK SHALL
GOVERN THE VALIDITY AND THE ENFORCEABILITY OF ALL LOAN DOCUMENTS AND THE DEBT.
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 ss. 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 SHALL BE INSTITUTED IN ANY FEDERAL OR STATE
COURT IN NEW YORK, NEW YORK, PURSUANT TO ss. 5-1402 OF THE NEW YORK GENERAL
OBLIGATIONS LAW, AND BORROWER WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF VENUE 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 XXXXX, XXXXX &
XXXXX, AT 0000 XXXXXXXX, XXX XXXX, XXX XXXX, ATTENTION: REAL ESTATE GROUP,
MANAGING PARTNER, 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
56
YORK, AND AGREES THAT SERVICE OF PROCESS UPON SAID AGENT AT SAID ADDRESS AND
WRITTEN NOTICE OF SAID SERVICE OF BORROWER 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 OFFICE SHALL BE DESIGNATED AS THE 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.
X.8 Modification, Waiver in Writing. No modification, amendment, extension,
discharge, termination or waiver of any provision of this Agreement 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.
X.9 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 any other Loan Document, 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 any 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 the Loan Documents, or to declare a Default for failure to
effect prompt payment of any such other amount.
X.10 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 THEREWITH. 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 WHICH 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.
57
X.11 Headings. The Section headings and 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.
X.12 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.
X.13 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 Debt. To the extent Borrower makes a payment to Lender, or Lender receives
proceeds of any collateral, which is in whole or part 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 are required to be repaid by Lender, the Debt 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.
X.14 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 any other Loan Document specifically and expressly provides 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. Except as prohibited by law, Borrower hereby
expressly waives the right to receive any notice from Lender with respect to any
matter for which no Loan Document specifically and expressly provides for the
giving of notice by Lender to Borrower.
X.15 Remedies of Borrower. In the event that a claim or adjudication is
made that Lender or its agent, including Servicer, has acted unreasonably or
unreasonably delayed acting in any case where by law or under any Loan Document,
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, including
Servicer, shall be liable for any monetary damages, and Borrower's sole remedy
shall be to commence an action seeking injunctive relief or declaratory
judgment. Any action or proceeding to determine whether Lender has acted
reasonably shall be determined by an action seeking declaratory judgment.
X.16 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 among or
between such parties, whether oral or written, are superseded by the terms of
this Agreement and the other Loan Documents.
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X.17 Offsets, Counterclaims and Defenses. 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, including Servicer. Any
assignee of Lender's interest in and to the Loan Documents shall take the same
free and clear of all offsets, counterclaims or defenses that are unrelated to
the Loan Documents which Borrower may otherwise have against any assignor of
such documents, and no such unrelated offset, 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.
X.18 Publicity. All news releases, publicity or advertising by Borrower or
its Affiliates through any media intended to reach the general public, which
refers to the Loan Documents, the Loan, Lender, Nomura, the Loan purchaser, the
Servicer or the trustee in a Securitization, shall be subject to the prior
written approval of Lender.
X.19 No Usury. Borrower and Lender intend at all times to comply with
applicable state law or applicable United States federal law (to the extent that
it permits Lender to contract for, charge, take, reserve or receive a greater
amount of interest than under state law) and that this Section 10.19 shall
control every other agreement in the Loan Documents. If the applicable law
(state or federal) is ever judicially interpreted so as to render usurious any
amount called for under the Note or any other Loan Document, or contracted for,
charged, taken, reserved or received with respect to the Debt, or if Lender's
exercise of the option to accelerate the maturity of the Loan of any prepayment
by Borrower results in Borrower having paid any interest in excess of that
permitted by applicable law, then it is Borrower's and Lender's express intent
that all excess amounts theretofore collected by Lender shall be credited
against the unpaid Principal and all other Debt (or, if the Debt has been or
would thereby be paid in full, refunded to Borrower), and the provisions of the
Loan Documents immediately be deemed reformed and the amounts thereafter
collectible thereunder reduced, without the necessity of the execution of any
new document, so as to comply with the applicable law, but so as to permit the
recovery of the fullest amount otherwise called for thereunder. All sums paid or
agreed to be paid to Lender for the use, forbearance or detention of 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 Debt does not
exceed the maximum lawful rate from time to time in effect and applicable to the
Debt for so loan as the Debt is outstanding. Notwithstanding anything to the
contrary contained in any Loan Document, it is not the intention of Lender to
accelerate the maturity of any interest that has not accrued at the time of such
acceleration or to collect unearned interest at the time of such acceleration.
X.20 Conflict; Construction of Documents. In the event of any conflict
between the provisions of this Agreement and any of the other Loan Documents,
the provisions of this Agreement shall control. The parties hereto acknowledge
that they were represented by counsel in connection with the negotiation and
drafting of the Loan Documents and that the Loan Documents shall not be subject
to the principle of construing their meaning against the party that
59
drafted them.
X.21 No Third Party Beneficiaries. The Loan Documents are solely for the
benefit of Lender and the Borrower and nothing contained in any Loan Document
shall be deemed to confer upon anyone other than the Lender and the Borrower any
right to insist upon or to enforce the performance or observance of any of the
obligations contained therein.
X.22 Cross Default; Cross Collateralization. Borrower acknowledges that
Lender has made the Loan to Borrower 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 the
Properties 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 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.
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IN WITNESS WHEREOF, the parties hereto have caused this Loan Agreement to
be duly executed under seal by their duly authorized representatives, all as of
the day and year first above written.
FAC MORTGAGE LLC, a Delaware limited liability
company (SEAL)
By: FAC Mortgage Formation, Inc., a Delaware
corporation, its managing member
By: _________________________
Name: Xxxxx X. Xxxxxxxxxx
Title: Vice President
ATTEST:
By: ______________________
Name: Xxxxxxx X. Xxxxx, III
Title: Assistant Secretary
[CORPORATE SEAL]
NOMURA ASSET CAPITAL CORPORATION
By:_______________________________________
Name:
Title:
ATTEST:
By: ______________________
Name:
Title:_________ Secretary
[CORPORATE SEAL]
61
SCHEDULE 1
List of Properties
Owned Properties
1. Branson, MO - Factory Shoppes at Branson Xxxxxxx, 0000 Xxxxxx Xxxx,
Xxxxxxx, XX 00000
2. Georgetown, KY- Factory Stores of America, 000 Xxxxxx Xxxxxx Xxxxx,
Xxxxxxxxxx, XX 00000
3. Graceville, FL - Factory Stores of America, 000 Xxxx Xxxxxx, Xxxxxxxxxx, XX
00000
4. Lebanon, MO - Factory Stores of America, 0000 Xxxxxxxxxx Xxxxx, Xxxxxxx, XX
00000
5. Cary, NC - McGreggor Village Shopping Center, 000 Xxxxxxxxx Xxxxx, Xxxx, XX
00000
6. Nebraska City, NE - Factory Stores of America, 000 Xxxxxxxx Xxxxx Xxx,
Xxxxxxxx Xxxx, XX 00000
7. Raleigh, NC - North Ridge Shopping Center, 0000 Xxxxx xx xxx Xxxxx Xxxx,
Xxxxxxx, XX 00000
8. Smithfield, NC - Factory Stores of America, 0000 Xxxxxxxxxx Xxxx Xxxxx,
Xxxxxxxxxx, XX 00000
9. Story City, IA - Factory Stores of America, 000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx
Xxxx, XX 00000
10. Sulphur Springs, TX - Factory Stores of America, 000 Xxxxx Xxxx, Xxxxxxx
Xxxxxxx, XX 00000
Ground Leased Property
11. Boaz, AL - Factory Stores of America, 000 Xxxxxx Xxxxxx, Xxxx, XX 00000
1-1
SCHEDULE 2
Matters Regarding Representations
2-1
SCHEDULE 3
Rent Rolls
(See Attached)
3-1
SCHEDULE 4
Required Repairs
(See Attached)
4-1
SCHEDULE 5
Anchor Leases
(See Attached)
5-1
SCHEDULE 6
Eligible Out-Parcels
(See Attached)
6-1
SCHEDULE 7
Form of Rent Roll
(See Attached)
7-1