LOAN AGREEMENT
Dated as of June 30, 1997
Between
THIRD HORIZON GROUP LIMITED PARTNERSHIP
and HGL OUTLET ASSOCIATES,
as Borrower
AND
XXXXXX BROTHERS REALTY CORPORATION,
as Lender
TABLE OF CONTENTS
Page
I. DEFINITIONS; PRINCIPLES OF CONSTRUCTION
Section 1.1 Definitions
Section 1.2 Principles of Construction
II. GENERAL TERMS
Section 2.1 Loan Commitment; Disbursement to Borrower
2.1.1 The Loan
2.1.2 Disbursement to Borrower
2.1.3 The Note
2.1.4 Advances
Section 2.2 Use of Proceeds
Section 2.3 Loan Repayment and Prepayment
2.3.1 Repayment
2.3.2 Mandatory Prepayments
2.3.3 Voluntary Prepayment of the Loan
Section 2.4 Release of Properties
2.4.1 Release of All the Properties
2.4.2 Release of Individual Properties
2.4.3 Release on Payment in Full
Section 2.5 Interest
2.5.1 Generally
2.5.2 Determination of Interest Rate
2.5.3 Default Rate; Post-Maturity Interest
Section 2.6 Payments and Computations
2.6.1 Making of Payments
2.6.2 Computations
2.6.3 Late Payment Charge
Section 2.7 Substitution and Addition of Properties
III. CONDITIONS PRECEDENT
Section 3.1 Conditions Precedent to Closing
Section 3.2 Conditions Precedent to Subsequent Advances
Section 3.3 Conditions Precedent to Future Funding of Initial Loan
Section 3.4 Conditions Precedent to Advances
IV. REPRESENTATIONS AND WARRANTIES
Section 4.1 Borrower Representations
Section 4.2 Survival of Representations, Future Representations
V. AFFIRMATIVE COVENANTS
Section 5.1 Borrower and Guarantor Covenants
Section 5.2 Borrower's Financial Covenants
VI. NEGATIVE COVENANTS
Section 6.1 Borrower's and Guarantor's Negative Covenants
VII. CASUALTY; CONDEMNATION; ESCROWS
Section 7.1 Insurance; Casualty and Condemnation
7.1.1 Insurance
7.1.2 Condemnation
7.1.3 Restoration
Section 7.2 Required Repairs; Required Repair Funds
7.2.1 Required Repairs; Deposits
7.2.2 Failure to Perform Required Repairs
Section 7.3 Tax and Insurance Escrow Fund
7.3.1 Tax and Insurance Escrow Fund
7.3.2 Grant of Security Interest
7.3.3 Application of Tax and Insurance Escrow Fund
Section 7.4 Capital Expenditures and Capital Expenditures Reserve
7.4.1 Capital Expenditures Reserve Fund
7.4.2 Grant of Security Interest
7.4.3 Disbursements from Capital Expenditures Reserve Account
7.4.4 Balance in the Capital Expenditures Reserve Account
Section 7.5 Ground Lease Escrow Fund
Section 7.6 Intentionally Deleted
VIII. DEFAULTS
Section 8.1 Event of Default
Section 8.2 Remedies
Section 8.3 Remedies Cumulative
IX. SPECIAL PROVISIONS
Section 9.1 Sale of Notes and Securitization
Section 9.2 Securitization Indemnification
Section 9.3 Rating Surveillance
Section 9.4 Intentionally Deleted
Section 9.5 Michigan City
Section 9.6 Servicer
Section 9.7 Gilroy V
Section 9.8 Guarantor
X. MISCELLANEOUS
Section 10.1 Survival
Section 10.2 Lender's Discretion
Section 10.3 Governing Law
Section 10.4 Modification, Waiver in Writing
Section 10.5 Delay Not a Waiver
Section 10.6 Notices
Section 10.7 Trial by Jury
Section 10.8 Headings
Section 10.9 Severability
Section 10.10 Waiver of Notice
Section 10.11 Remedies of Borrower
Section 10.12 Expenses; Indemnity
Section 10.13 Exhibits and Schedules Incorporated
Section 10.14 No Joint Venture or Partnership; No Third Party
Beneficiaries
Section 10.15 Publicity
Section 10.16 Cross-Default; Cross-Collateralization; Waiver of
Marshalling of Assets
Section 10.17 Waiver of Counterclaim
Section 10.18 Conflict; Construction of Documents; Reliance
Section 10.19 Brokers and Financial Advisors
Section 10.20 Prior Agreements
Section 10.21 Counterparts
Section 10.22 Extensions
Section 10.23 Guarantor Waivers
Section 10.24 Assignment of Loan
SCHEDULES
Schedule I - List of Properties and Allocated Loan Amounts and
Square Footage
Schedule II - Required Repairs
Schedule III - Notice of Borrowing
Schedule IV - Litigation
Schedule V - Ground Leases
Schedule VI - Form of Estoppel Certificate
Schedule VII - Form of Subordination, Nondisturbance and
Attornment
Agreement
Schedule VIII - Agreed Upon Procedures Letter
Schedule IX - Debt Service Coverage Ratio and Minimum Coverage
Format
and Distribution Format for Covenant Compliance Certificates
Schedule X - Tenant Improvements and Leasing Commissions at
Norton Shores
Schedule XI - Compliance Issues
Schedule XII - Unsecured Indebtedness To Tenants
Schedule XIII - Unsecured Capital Indebtedness
Schedule XIV - Leasing or Equipment Financing Agreements
Schedule XV - Michigan City and Xxx Tenant Improvement and
Leasing Commission Description
Schedule XVI - Physical Conditions and Environmental Reports
Schedule XVII - Insolvency Opinion
Schedule XVIII - Michigan City Action Plan
Schedule XIX - Carveout Properties
LOAN AGREEMENT
THIS LOAN AGREEMENT, dated as of June 30, 1997 (this "Agreement"), between
HGL OUTLET ASSOCIATES, a Delaware general partnership having its principal
place of business at 0000 Xxxxx Xxxxx, Xxxxxx Xxxxxx, Xxxxxxxx 00000
("Gilroy V Borrower"), and THIRD HORIZON GROUP LIMITED PARTNERSHIP, a
Delaware limited partnership, having its principal place of business at
0000 Xxxxx Xxxxx, Xxxxxx Xxxxxx, Xxxxxxxx 00000 ("Horizon Borrower"; Gilroy
V Borrower and Horizon Borrower sometimes hereinafter jointly and severally
referred to as "Borrower") and XXXXXX BROTHERS REALTY CORPORATION, a
Delaware corporation, having an address at Three World Financial Center,
New York, New York 10281 ("Lender"). Guarantor (hereinafter defined) is
executing this document for the purposes herein set forth as it relates to
Guarantor and shall be considered a party hereto.
All capitalized terms used herein shall have the respective meanings set
forth in Article I hereof.
W I T N E S S E T H :
WHEREAS, Borrower desires to obtain from Lender, and Lender is willing to
make to Borrower, a loan in the principal amount of up to THREE HUNDRED ONE
MILLION AND NO/100 DOLLARS ($301,000,000) (the "Loan") pursuant to the
terms and provisions set forth in this Agreement and the other Loan
Documents; and
WHEREAS, a portion of the Loan in an amount of up to $294,200,000 will be
advanced to Horizon Borrower and a portion of the Loan in the amount of
$6,800,000 will be advanced to Gilroy V Borrower;
NOW, THEREFORE, in consideration of the making of the Loan by Lender and
the covenants, agreements, representations and warranties set forth in this
Agreement, the parties hereto hereby covenant, agree, represent and warrant
as follows:
I. DEFINITIONS; PRINCIPLES OF CONSTRUCTION
Section 1.1 Definitions.
For all purposes of this Agreement, except as otherwise expressly required
or unless the context clearly indicates a contrary intent:
"Additional Property" shall have the meaning set forth in Section 2.7
hereof.
"Affiliate" shall mean, as to any Person, any other Person that, directly
or indirectly, is in control of, is controlled by or is under common
control with such Person or is a director or officer of such Person or of
an Affiliate of such Person.
"Allocated Loan Amount" shall initially mean with respect to each
Individual Property the amount shown opposite the name of the Individual
Property on Schedule I attached hereto provided, however, that (a) the
Allocated Loan Amount with respect to Gilroy I and II shall be treated as
zero until an advance of the Loan is made with respect thereto pursuant to
Section 2.1.4(b)(i) hereof and, if such advance is made with respect to
Gilroy I and II which is less than $38,500,000, the amount of such advance
shall be deemed the Allocated Loan Amount with respect to Gilroy I and II,
(b) the Allocated Loan Amount with respect to Gilroy III and IV includes an
amount equal to $600,000 which is a portion of the up to $1,000,000 which
may be advanced pursuant to Section 2.1.4(b)(ii) hereof and, if an amount
more or less than $600,000 is advanced pursuant to Section 2.1.4(b)(ii)
hereof, the Allocated Loan Amount for Gilroy III and IV will be adjusted
accordingly and (c) the Allocated Loan Amount with respect to Lakeshore
Marketplace at Holland Individual Property shall be treated as zero until
an advance of the Loan with respect thereto is made on the Closing Date or
pursuant to Section 2.1.4(b)(iii) hereof. If an Additional Property or a
Substitute Property is added pursuant to Section 2.7 hereof, the term
Allocated Loan Amount as to each Individual Property with respect to that
portion of the Loan then outstanding shall be as determined by Lender in
its sole and absolute discretion. If an advance of the Second Loan is made
hereunder, the amount of such advance shall be allocated among the
Individual Properties as determined by Lender in its sole and absolute
discretion and the Allocated Loan Amounts shall be revised accordingly.
"ALTA" shall mean American Land Title Association, or any successor
thereto.
"Annual Budget" shall mean the operating budget, including all planned
capital expenditures, for all the Properties prepared and adopted by
Borrower for the applicable Fiscal Year or other period.
"Applicable Interest Rate" shall have the meaning specified in Section
2.5.2(a).
"Assignment of Leases" shall mean, with respect to each Individual
Property, that certain first priority Assignment of Leases and Rents, dated
as of the date hereof, from Borrower, as assignor, to Lender, as assignee,
assigning to Lender all of Borrower's interest in and to the Leases and
Rents of such Individual Property as security for the Loan, as the same may
be amended, restated, replaced, supplemented or otherwise modified from
time to time and, additionally, as to Gilroy V (the Individual Property
shown in Schedule I as item number 3), that certain second priority
Assignment of Leases and Rents, dated as of the date hereof, which secures
the Gilroy V Guarantee from Gilroy V Borrower, as assignor, to Lender, as
assignee, assigning to Lender all of Gilroy V Borrower's interest in and to
the Leases and Rents of Gilroy V as security for the Gilroy V Guarantee, as
the same may be amended, restated, replaced, supplemented or otherwise
modified from time to time. Any assignment of leases and rents delivered
pursuant to Section 2.7 hereof shall be included within this definition.
"Assignment of Management Agreement" shall mean any Assignment of
Management Agreement hereafter executed by Borrower in favor of Lender with
respect to the Loan as required hereby.
"Assignments of Leases" shall mean, collectively all of the Assignment of
Leases encumbering the Properties.
"Award" shall have the meaning set forth in Section 7.1.2.
"Basic Carrying Costs" shall mean, with respect to an Individual Property,
the sum of the following costs associated with such Individual Property for
the relevant Fiscal Year or payment period: (i) real property taxes with
respect to such Individual Property, (ii) insurance premiums with respect
to such Individual Property and (iii) rental payments due under each Ground
Lease.
"Borrower" shall mean collectively Gilroy V Borrower and Horizon Borrower,
together with their successors and assigns.
"Breakage Costs" shall have the meaning set forth in Section 2.5.2(h).
"Business Day" shall mean any day other than a Saturday, Sunday or any
other day on which Lender or national banks in New York are not open for
business.
"Capital Expenditures" for any period shall mean the amount expended for
items capitalized under GAAP (including expenditures for building
improvements or major repairs, leasing commissions and tenant
improvements).
"Capital Expenditures Reserve Account" shall have the meaning set forth in
Section 7.4.1.
"Capital Expenditures Reserve Fund" shall have the meaning set forth in
Section 7.4.1.
"Capital Expenditures Reserve Monthly Deposit" shall have the meaning set
forth in Section 7.4.1.
"Carveout Properties" shall have the meaning set forth in Section 4.1 (ii).
"Casualty/Condemnation Involuntary Prepayment" shall have the meaning set
forth in Section 2.3.2.
"Casualty Consultant" shall have the meaning set forth in Section
7.1.3(b)(iii).
"Casualty Retainage" shall have the meaning set forth in Section
7.1.3(b)(iv).
"Closing Date" shall mean the date of the funding of the initial advance of
a portion of the proceeds of the Loan.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and as it
may be further amended from time to time, any successor statutes thereto,
and applicable U.S. Department of Treasury regulations issued pursuant
thereto in temporary or final form.
"Condemnation Proceeds" shall have the meaning set forth in Section
7.1.3(b).
"CPI" shall mean the Consumer Price Index as published by the Bureau of
Labor Statistics of the U.S. Department of Labor, All Items for Urban Wage
Earners and Clerical Workers or any appropriate successor or substitute
index.
"Debt" shall mean the outstanding principal amount set forth in, and
evidenced by, the Note together with all interest accrued and unpaid
thereon and all other sums due to Lender in respect of the Loan under the
Note, this Agreement, the Mortgages or any other Loan Document.
"Debt Service" shall mean, with respect to any particular period of time,
scheduled principal and interest payments under the Note.
"Debt Service Coverage Ratio" shall mean, on any calculation date, a ratio
in which the numerator is the Net Operating Income for the twelve month
period ending on the last day of the calendar month immediately preceding
such calculation date as set forth in the statements required hereunder
less the sum of (i) assumed management fees equal to 4% of Gross Income
from Operations for such period (or with respect to any Individual Property
having a manager, the actual management fees relating thereto, if greater),
(ii) capital expenditure reserves and reserves for tenant improvement costs
and leasing commissions in an amount equal to $.80 per square foot per
annum for the square footage of the Improvements, or actual amounts
incurred for capital expenditures, tenant improvement costs and leasing
commissions incurred in such period, whichever is greater, provided,
however, that the following items shall not be included in such actual
amounts: (x) initial base building construction costs for initial
construction or expansion of Improvements, (y) the costs of first
generation (that is, with respect to the first tenants to occupy a space)
tenant improvements and leasing commissions incurred prior to December 31,
1997 at Berkshire Outlet Center at Xxx and Lighthouse Place at Michigan
City and (z) tenant improvements and leasing commissions incurred prior to
December 31, 1997 with respect to the next leasing of certain square feet
at Lakeshore Marketplace at Norton Shores, as shown in Schedule X hereof,
but not greater than the amounts shown on Schedule X, (iii) the cost of any
interest rate caps that are in place with respect to the Loan amortized
over the life of the cap in a manner reasonably acceptable to Lender, and
(iv) the amount of ground rent under any Ground Lease (to the extent not
otherwise accounted for in calculating Net Operating Income) and the
denominator is the aggregate amount of principal and interest that would
have been due and payable on the Note during such period based upon the
principal balance of the Note outstanding on the calculation date and at an
assumed constant rate of ten percent (10%) per annum or at the Applicable
Interest Rate in effect on the calculation date (after taking into account
any interest rate cap contracts with respect to the Loan which are in place
for such period), whichever is higher for such period, or such other debt
service calculation expressly set forth in this Agreement. The formatting
of the calculation of Debt Service Coverage Ratio shall be as set forth in
Schedule IX hereof. For the purposes of this definition, capital
expenditures, tenant improvement costs and leasing commissions shall be
deemed incurred when first booked to Borrower's accounts as required by
GAAP.
"Default" shall mean the occurrence of any event hereunder or under any
other Loan Document which, but for the giving of notice or passage of time,
or both, would be an Event of Default.
"Default Rate" shall have the meaning set forth in the Note.
"Disclosure Document" shall have the meaning set forth in Section 9.2(a).
"Environmental Indemnity" shall mean those certain Environmental Indemnity
Agreements, dated as of the date hereof, executed by Borrower in
connection with the Loan for the benefit of Lender. Any environmental
indemnity delivered pursuant to Section 2.7 hereof shall be included within
this definition.
"ERISA" shall have the meaning set forth in Section 6.1(k).
"Eurodollar Loan" shall mean each portion of the outstanding principal
amount of the Loan at such time as interest thereon accrues at a rate of
interest based upon LIBOR.
"Event of Default" shall have the meaning set forth in Section 8.1(a).
"Exchange Act" shall have the meaning set forth in Section 9.2(a).
"Financial Covenants" shall have the meaning set forth in Section 3.2(e)(1)
hereof.
"First Note" shall mean, collectively, that certain note made by Horizon
Borrower to Lender in the original principal amount of $244,200,000 and
that certain note made by Gilroy V Borrower to Lender in the original
principal amount of $6,800,000, each dated the date hereof and together
totaling $251,000,000, as the same may be amended, restated, replaced,
supplemented or otherwise modified form time to time.
"Fiscal Year" shall mean each twelve month period commencing on January 1
and ending on December 31 during each year of the term of the Loan.
"Foreign Taxes" shall have the meaning set forth in Section 2.5.2(e).
"GAAP" shall mean generally accepted accounting principles in the United
States of America as of the date of the applicable financial report.
"Gilroy V Guarantee" shall mean that certain guarantee given by Gilroy V
Borrower to Lender secured by that certain second priority mortgage given
by Gilroy V Borrower to Lender encumbering Gilroy V.
"Governmental Authority" shall mean any court, board, agency, commission,
office or authority of any nature whatsoever for any governmental xxxx
(xxxxxxx, xxxxx, xxxxxx, xxxxxxxx, xxxxxxxxx, xxxx or otherwise) whether
now or hereafter in existence.
"Gross Income from Operations" shall mean all income, calculated on an
accrual basis by Borrower in accordance with GAAP (but after adjustments,
if any, necessary to reverse GAAP straightline rental income adjustments)
based upon operating statements and other information delivered to Lender
by Borrower, derived from the ownership and operation of the Properties
from whatever source, including, but not limited to, all rent (including
expense reimbursement), utility charges, escalations, service fees or
charges, license fees, parking fees, rent concessions or credits, and any
business interruption insurance proceeds but excluding any income relating
to a receivable which is more than 60 days past due, any forfeited security
deposits, rent , sales, use and occupancy or other taxes on receipts
required to be accounted for by Borrower to any government or governmental
agency, refunds and uncollectible accounts, sales of furniture, fixtures
and equipment, proceeds of casualty insurance and condemnation awards.
Gross income shall not be diminished as a result of the Mortgages or the
creation of any intervening estate or interest in the Properties or any
part thereof.
"Ground Lease" shall mean collectively the ground leases identified in
Schedule V hereof as the same are modified from time to time with the
consent of Lender and any ground lease with respect to a Substitute
Property or an Additional Property pursuant to Section 2.7 hereof.
"Ground Lease Escrow Fund" shall have the meaning set forth in Section 7.5
hereof.
"Group" shall have the meaning set forth in Section 5.2 hereof.
"Guarantor" shall mean collectively Horizon/Xxxx and Horizon Group.
"Horizon/Xxxx" shall mean Horizon/Xxxx Outlet Centers Limited Partnership,
a Delaware limited partnership.
"Horizon Group" shall mean Horizon Group, Inc., a Michigan corporation and
the general partner of Horizon/Xxxx.
"Improvements" shall have the meaning set forth in the related Mortgage
with respect to each Individual Property.
"Income Taxes" shall mean, for any period, the federal, state and local
income taxes payable by the partners of the Borrower with respect to the
Borrower's taxable income for such period.
"Independent Director" shall have the meaning set forth in Section
4.1(ee)(xvii).
"Individual Property" shall mean Borrower's fee and/or leasehold interest
in each parcel of real property and the improvements thereon owned by
Borrower encumbered by a Mortgage, together with all rights pertaining to
such property and improvements, as more particularly described in the
Granting Clauses of such Mortgages and referred to therein as the
"Property". The name of each Individual Property for purposes of this
Agreement is set forth in Schedule I and shall be treated as a defined term
herein. Upon the substitution of a Substitute Property, the term
"Individual Property" shall include the Substitute Property and shall
exclude any Individual Property released in exchange therefor. Upon the
addition of an Additional Property, the Additional Property shall be
treated as an Individual Property. The square footage shown on Schedule I
shall be deemed the square footage or gross leaseable square footage, as
the case may be, as used herein with respect to the Improvements located on
each of the Individual Properties.
"Initial Advance" shall mean Lender's initial advance or advances of
proceeds of the Loan in the aggregate amount, subject to Section
2.1.4(b)(iii) hereof, of Two Hundred Eleven Million Five Hundred Thousand
and No/100 Dollars ($211,500,000) which will be evidenced by the First Note
and shall not include any additional advances of the Loan even if funded on
the Closing Date.
"Initial Loan" shall mean the first $251,000,000 of the Loan which is
funded and evidenced by the First Note. Advances made on the Closing Date
and advances made pursuant to Section 2.1.4(b) hereof shall be part of the
Initial Loan.
"Insolvency Opinion" shall have the meaning set forth in Section
4.1(ee)(xix).
"Insurance Premiums" shall have the meaning set forth in Section 7.1.1(b)
hereof.
"Insurance Proceeds" shall have the meaning set forth in Section 7.1.3(b).
"Interest Period" shall mean with respect to any Eurodollar Loan and
subject to availability, the period during which interest at LIBOR,
determined as provided in this Agreement, shall be applicable to the Loan;
provided, however, that (i) the initial Interest Period with respect to
that portion of the Loan funded on the Closing Date shall be the period
commencing on the Closing Date through and including July 31, 1997; (ii)
after such initial Interest Period, each Interest Period with respect to
that portion of the Loan funded on the Closing Date shall be one (1) month
commencing on the first Working Day of each calendar month and ending on
the day prior to the first Working Day of the next calendar month; (iii)
the initial Interest Period for any subsequent advance of the Initial Loan
and each advance of the Second Loan shall be the period from and including
the date of such advance through and including the day prior to the
commencement of the next succeeding Interest Period relating to that
portion of the Initial Loan funded on the Closing Date; (iv) after such
initial Interest Period for any subsequent advance of the Initial Loan and
each advance of the Second Loan, each Interest Period shall correspond to
the Interest Periods with respect to that portion of the Loan funded on the
Closing Date; (v) in no event shall any such period extend beyond the
Maturity Date and the final Interest Period whenever commenced shall be
deemed to end on the Maturity Date; and (vi) for purposes of determining
the availability of an Interest Period in respect of a Eurodollar Loan,
such Interest Period shall be deemed available if Lender is offered a rate
as provided in the definition of LIBOR set forth herein.
"Lease" shall mean any lease, or, to the extent of the interest therein of
Borrower, any sublease or subsublease, letting, license, concession or
other agreement (whether written or oral and whether now or hereafter in
effect) pursuant to which any person is granted a possessory interest in,
or right to use or occupy all or any portion of any space in any Individual
Property of Borrower, and every modification, amendment or other agreement
relating to such lease, sublease, subsublease, or other agreement entered
into in connection with such lease, sublease, subsublease, or other
agreement and every guarantee of the performance and observance of the
covenants, conditions and agreements to be performed and observed by the
other party thereto.
"Lease Guaranty" shall have the meaning set forth in Section 5.1(r).
"Legal Requirements" shall mean, with respect to each Individual Property,
all federal, state, county, municipal and other governmental statutes,
laws, rules, orders, regulations, ordinances, judgments, decrees and
injunctions of Governmental Authorities affecting such Individual Property
or any part thereof or the construction, use, alteration or operation
thereof, or any part thereof, whether now or hereafter enacted and in
force, and all permits, licenses and authorizations and regulations
relating thereto, and all covenants, agreements, restrictions and
encumbrances contained in any instruments, either of record or known to
Borrower, at any time in force affecting such Individual Property or any
part thereof, including, without limitation, any which may (i) require
repairs, modifications or alterations in or to such Individual Property or
any part thereof, or (ii) in any way limit the use and enjoyment thereof.
"Xxxxxx" shall have the meaning set forth in Section 9.2(b).
"Xxxxxx Group" shall have the meaning set forth in Section 9.2(b).
"Lender" shall mean Xxxxxx Brothers Realty Corporation, together with its
successors and assigns.
"Liabilities" shall have the meaning set forth in Section 9.2(b).
"LIBOR" shall mean, with respect to each Interest Period, the rate per
annum equal to the quotient of (a) the rate reported on the date two (2)
Working Days prior to the beginning of such Interest Period as of 11:00
a.m., London, England time, on Telerate Access Service Page 3750 (British
Bankers Association Settlement Rate) as the London Interbank Offered Rate
for U.S. Dollar deposits having a term equal to the Interest Period term of
one month (whether or not any amount of the Loan subject thereto will be
outstanding for less than one month) and in an amount comparable to the
amount of the Loan in question to be outstanding during such Interest
Period (or, if said Telerate Access Service Page shall cease to be publicly
available, as reported by the Reuters Screen LIBO Page, and if said Reuters
Screen Page shall cease to be publicly available, then as reported by any
publicly available source of similar market data selected by Lender in
Lender's sole discretion, exercised in good faith, that accurately reflects
such London Interbank Offered Rate) divided by (b) a number equal to 1.00
minus the aggregate (without duplication) of the rates (expressed as a
decimal) of reserve requirements applicable to Lender current on the date
two (2) Working Days prior to the beginning of such Interest Period
(including, without limitation, basic, supplemental, marginal and emergency
reserves) under any regulations of any Governmental Authority as now and
from time to time hereafter in effect, dealing with reserve requirements
prescribed for eurocurrency funding (currently referred to as "Eurocurrency
liabilities" in Regulation D of the Board of Governors of the Federal
Reserve System) maintained by a member bank of such system. For purposes
of this Agreement, the amount of any Eurodollar Loan to be outstanding
during each related Interest Period shall be the related portion of the
principal balance of the Loan bearing interest at a rate of interest based
upon LIBOR at 11:00 a.m., London, England time, on the date two (2) Working
Days prior to the beginning of the related Interest Period, less (1) the
amount, if any, which Borrower has elected to voluntarily prepay and which
is to be applied in reduction of such portion of the principal balance of
the Loan after such Working Day and prior to the expiration of the Interest
Period immediately preceding such related Interest Period pursuant to a
proper and timely irrevocable notice given in accordance with the
provisions of Section 2.3.3 and (2) the amount of any Casualty/Condemnation
Involuntary Prepayment during the Interest Period immediately preceding
such related Interest Period, but which is not to be applied in reduction
of the principal balance of the Loan until the date commencing such related
Interest Period.
"Licenses" shall have the meaning set forth in Section 4.1(v).
"Lien" shall mean, with respect to each Individual Property, any mortgage,
deed of trust, lien, pledge, hypothecation, assignment, security interest,
or any other encumbrance, charge or transfer of, on or affecting the
related Individual Property or any portion thereof or Borrower, or any
interest therein, including, without limitation, any conditional sale or
other title retention agreement, any financing lease having substantially
the same economic effect as any of the foregoing, the filing of any
financing statement, and mechanic's, materialmen's and other similar liens
and encumbrances.
"Loan" shall mean, collectively, the Initial Loan and the Second Loan.
"Loan Documents" shall mean, collectively, this Agreement, the Note, the
Mortgage and Assignment of Leases encumbering each Individual Property, the
Environmental Indemnity, the Assignment of Management Agreement for each
Individual Property as and when delivered, UCC financing statements and any
other document executed by Borrower or its Affiliates in favor of Lender
pertaining to the Properties as well as all other documents executed and/or
delivered by Borrower or its Affiliates in favor of Lender in connection
with the Loan including, without limitation, any and all guarantees issued
in connection therewith.
"Management Agreement" shall mean, with respect to any Individual Property,
the management agreement entered into by and between Borrower and the
Manager, now or in the future, and approved by Lender, pursuant to which
the Manager is to provide management and other services with respect to
said Individual Property.
"Management Fee" shall mean the management fee payable pursuant to the
Management Agreement with respect to any Individual Property.
"Manager" shall mean any manager of the Properties reasonably acceptable to
Lender.
"Material Adverse Effect" shall mean a material adverse effect upon
Borrower or Guarantor or any of the Properties, or the business,
properties, other assets, operations or condition (financial or otherwise)
of Borrower or Guarantor or both.
"Material Lease" shall have the meaning specified in Section 5.1(r).
"Maturity Date" shall mean July 1, 1999 or, if extended pursuant to Section
10.22, January 1, 2000 or such other date on which the final payment of
principal of the Note becomes due and payable as therein or herein
provided, whether at a stated maturity, by declaration of acceleration, or
otherwise.
"Mortgage" shall mean, with respect to each Individual Property, that
certain first priority Mortgage and Security Agreement, Deed of Trust and
Security Agreement or Deed to Secure Debt and Security Agreement, dated the
date hereof, whether fee, leasehold or fee and leasehold, executed and
delivered by one or more of the entities constituting Borrower as security
for the Loan made to Borrower and encumbering such Individual Property and,
as to those encumbered by a Ground Lease, the leasehold estate therein, as
the same may be amended, restated, replaced, supplemented or otherwise
modified from time to time and, additionally, as to Gilroy V, the second
priority Deed of Trust and Security Agreement, dated the date hereof, which
secures the Gilroy V Guarantee, executed and delivered by Gilroy V Borrower
and encumbering Gilroy V, as the same may be amended, restated, replaced,
supplemented or otherwise modified from time to time. Any mortgage, deed
of trust or deed to secure debt delivered pursuant to Section 2.7 hereof
shall be included within this definition.
"Mortgages" shall mean, collectively, all of the Mortgages encumbering the
Properties.
"Net Operating Income" means the amount obtained by subtracting Operating
Expenses from Gross Income from Operations.
"Net Proceeds" shall have the meaning set forth in Section 7.1.3(b).
"Net Proceeds Deficiency" shall have the meaning set forth in Section
7.1.3(b)(vi).
"Note" shall mean, collectively, the First Note and the Second Note, made
by Borrower in favor of Lender, as the same may be amended, restated,
replaced, supplemented or otherwise modified from time to time.
"Officer's Certificate" shall mean a certificate delivered to Lender by
Borrower which is signed by the chief executive officer, chief operating
officer, chief financial officer, treasurer or an executive vice president
of Horizon Group, as general partner of Horizon/Xxxx, being the managing
member of the general partner of Horizon Borrower which also is a general
partner of Gilroy V Borrower.
"Operating Expenses" shall mean, for any period, expenses incurred by or on
behalf of Borrower and required to be expensed under GAAP during such
period (but after adjustments, if any, necessary to reverse GAAP
straightline rental expense adjustments) for or in connection with the
ownership, operation and maintenance of the Properties paid to Persons that
are not Affiliates of Borrower and, to the extent provided in (h) below,
paid to Affiliates of Borrower; provided that Operating Expenses shall not
include (a) the cost of repairs, additions, alterations, improvements,
leasing and brokerage commissions and other costs (including financing
costs) to the extent same are required to be capitalized in accordance with
GAAP, (b) any fees or expenses payable to the Manager, (c) depreciation,
amortization and other non-cash charges, (d) principal and interest
payments on the Loan, (e) any income or capital gains taxes payable upon
the income or capital gains of Borrower or its partners, (f) extraordinary
non-recurring expenses incurred in connection with the ownership, operation
and maintenance of the Properties, (g) Borrower's overhead, entity and
audit expenses and (h) costs, fees or expenses paid to persons that are
Affiliates of Borrower other than those costs, fees and expenses which
would be an Operating Expense if expended by Borrower to Persons that are
not Affiliates of Borrower.
"Other Charges" shall mean all ground rents, maintenance charges,
impositions other than Taxes, and any other charges, including, without
limitation, vault charges and license fees for the use of vaults, chutes
and similar areas adjoining the Properties, now or hereafter levied or
assessed or imposed against the Properties or any part thereof.
"Outside Closing Date" shall have the meaning set forth in Section
2.1.4(b).
"Permitted Encumbrances" shall mean, with respect to an Individual
Property, collectively, (a) the Liens and security interests created by the
Loan Documents; (b) all Liens, encumbrances and other matters disclosed in
the Title Insurance Policies relating to such Individual Property or any
part thereof; (c) Liens, if any, for Taxes imposed by any Governmental
Authority not yet due or delinquent; (d) such other title and survey
exceptions as Lender has approved or may approve in writing in Lender's
sole discretion; (e) equipment leases or purchase money financings
permitted by Section 4.1(ee)(iv) hereof; (f) mechanics' and materialmen's
Liens deleted from the exceptions to, or affirmatively insured against
collection with respect to, the Individual Properties under the Title
Insurance Policies; (g) any and all governmental, public utility and
private restrictions, covenants, reservations, easements, licenses or other
agreements of an immaterial nature which may hereafter be granted by
Borrower and which do not materially and adversely affect (x) the
marketability of title to the Individual Property, (y) the fair market
value thereof, or (z) the use or operation thereof as of the Closing Date
(or with respect to a Substitute Property or an Additional Property, as of
the date of substitution or addition, as the case may be); (h) Taxes and
mechanic and materialmen's Liens which are being contested and are
expressly permitted to remain as Liens pursuant to the Loan Documents but
only for the period so permitted; and (i) rights of existing and future
tenants, as tenants only, pursuant to Leases which exist on the date hereof
or which Borrower is permitted to enter into under the Loan Documents
hereafter.
"Person" shall mean 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.
"Personal Property" shall have the meaning set forth in the Mortgage with
respect to each Individual Property.
"Policies" and "Policy" shall have the meaning specified in Section
7.1.1(b).
"Prepayment Date" shall have the meaning set forth in Section 2.3.3(a).
"Prime Rate" shall mean the annual rate of interest publicly announced by
Citibank, N.A. in New York, New York, as its base rate, as such rate shall
change from time to time. If Citibank, N.A. ceases to announce a base
rate, Prime Rate shall mean the rate of interest published in The Wall
Street Journal from time to time as the "Prime Rate". If more than one
"Prime Rate" is published in The Wall Street Journal for a day, the average
of such "Prime Rates" shall be used, and such average shall be rounded up
to the nearest one-eighth of one percent (0.125%). If The Wall Street
Journal ceases to publish the "Prime Rate", the Lender shall select an
equivalent publication that publishes such "Prime Rate", and if such "Prime
Rates" are no longer generally published or are limited, regulated or
administered by a governmental or quasigovernmental body, then Lender shall
select a comparable interest rate index.
"Prime Rate Loan" shall mean any portion of the outstanding principal of
the Loan at such time as interest thereon accrues at a rate of interest
based upon the Prime Rate.
"Properties" shall mean, collectively, all of the Individual Properties
which are subject to the terms of this Agreement.
"Property Required Repairs" shall have the meaning set forth in Section
7.2.1.
"Provided Information" shall have the meaning set forth in Section 9.1(a).
"Rating Agency" shall mean 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.
"Registration Statement" shall have the meaning set forth in Section
9.2(b).
"Release Amount" shall mean for an Individual Property which may be
released pursuant to Section 2.4 hereof 125% of the Allocated Loan Amount
for such Individual Property immediately prior to such release except that
such 125% shall be deemed to be 115% for each of Manufacturers Marketplace
at Holland, Dry Ridge Outlet Center, Manufacturers Marketplace at Port
Huron and Manufacturers Marketplace at Traverse City if such Individual
Properties are the subject of a sale for which the release is needed.
"Rentable Space Percentage" shall have the meaning set forth in Section
7.1.3(b)(i)(C).
"Rents" shall have the meaning set forth in the Mortgage with respect to
each Individual Property.
"Restoration" shall have the meaning set forth in Section 7.1.1(g).
"Scheduled Payment Date" shall mean the first day of each calendar month
during the term of the Loan or, if such day is not a Working Day, the next
succeeding Working Day.
"Second Loan" shall mean the amount to be funded pursuant to Section
2.1.4(c) hereof and evidenced by the Second Note.
"Second Note" shall mean that certain note made by Horizon Borrower to
Lender in the original principal amount of $50,000,000 dated the date
hereof as the same may be amended, restated, replaced, supplemented or
otherwise modified form time to time.
"Secondary Market Transaction" shall mean any transaction in which the
Lender (i) sells the Loan, the Note and the other Loan Documents to one or
more investors as a whole loan, (ii) participates all or a portion of the
Loan to one or more investors, (iii) deposits all or a portion of the Loan,
the Mortgages, the Note and other Loan Documents with a trust, which trust
may sell certificates to investors evidencing an ownership interest in the
trust assets, or (iv) otherwise sells the Loan or interest therein or
portion thereof to investors directly or indirectly.
"Securities" shall have the meaning set forth in Section 9.1.
"Securities Act" shall have the meaning set forth in Section 9.2(a).
"Securitization" shall have the meaning set forth in Section 9.1.
"Servicer" shall have the meaning set forth in Section 9.6.
"Servicing Agreement" shall have the meaning set forth in Section 9.6.
"Severed Loan Documents" shall have the meaning set forth in Section
8.2(c).
"State" shall mean, with respect to an Individual Property, the State or
Commonwealth in which such Individual Property or any part thereof is
located.
"Subsequent Advance" shall have the meaning set forth in Section 2.1.4(c).
"Subsequent Advance Closing Date" shall mean the date of the funding of any
subsequent advance of a portion of the proceeds of the Loan pursuant to
Section 2.1.4.
"Subsequent Advance Request" shall have the meaning set forth in Section
2.1.4(c).
"Substitute Property" shall have the meaning set forth in Section 2.7.
"Substituted Property" shall have the meaning set forth in Section 2.7.
"Survey" shall mean a survey of the Individual Property in question
prepared by a surveyor licensed in the State and satisfactory to Lender and
the company or companies issuing the Title Insurance Policies, and
containing a certification of such surveyor satisfactory to Lender.
"Tax and Insurance Escrow Fund" shall have the meaning set forth in Section
7.3.1.
"Taxes" shall mean all real estate and personal property taxes,
assessments, water rates or sewer rents, now or hereafter levied or
assessed or imposed against any of the Properties or part thereof.
"Threshold Amount" shall have the meaning set forth in Section 5.1(s)
"Title Insurance Policy" shall mean, with respect to each Individual
Property, an ALTA mortgagee title insurance policy (or the closest
equivalent issued in any respective State) in the form (acceptable to
Lender) issued with respect to such Individual Property and insuring the
lien of the Mortgage encumbering such Individual Property.
"UCC" or "Uniform Commercial Code" shall mean the Uniform Commercial Code
as in effect in the applicable State in which an Individual Property is
located.
"Underwriter Group" shall have the meaning set forth in Section 9.2(b).
"U.S. Obligations" shall mean direct non-callable obligations of the United
States of America.
"Voluntary Prepayment" shall have the meaning set forth in Section 2.3.1.
"Working Day" shall mean any day on which dealings in foreign currencies
and exchange are carried on in London, England and in New York, New York.
Section 1.2 Principles of Construction.
All references to sections, schedules and exhibits are to sections,
schedules and exhibits in or to this Agreement unless otherwise specified.
Unless otherwise specified, the words "hereof," "herein" and "hereunder"
and words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement.
Unless otherwise specified, all meanings attributed to defined terms herein
shall be equally applicable to both the singular and plural forms of the
terms so defined.
II. GENERAL TERMS
Section 2.1 Loan Commitment; Disbursement to Borrower.
2.1.1 The Loan. Subject to and upon the terms and conditions set forth
herein, Lender hereby agrees to make the Initial Loan to Borrower on or
after the Closing Date pursuant to Sections 2.1.4, 3.1 and 3.3 hereof, in
the principal amount of Two Hundred Fifty One Million and No/100 Dollars
($251,000,000). Subject to and upon the terms and conditions set forth
herein, Lender hereby agrees to make the Second Loan to Borrower on or
after the Closing Date pursuant to Sections 2.1.4 and 3.2 hereof, in the
principal amount of Fifty Million and No/100 Dollars ($50,000,000); the
entire Second Loan will be advanced to Horizon Borrower. The Loan shall
mature on the Maturity Date. The Initial Advance will be funded as
follows: $204,700,000 to Horizon Borrower and $6,800,000 to Gilroy V
Borrower; the balance of the Initial Loan in an amount up to $39,500,000
will be advanced to Horizon Borrower pursuant to Sections 2.1.4 and 3.3
hereof. Borrower hereby agrees to accept the Initial Advance of the
Initial Loan on the Closing Date, subject to and upon the terms and
conditions set forth herein.
2.1.2 Disbursement to Borrower. Borrower may request and receive only
three borrowings hereunder in respect of the Initial Loan and up to five
borrowings of the Second Loan pursuant to Sections 2.1.4 and 3.2 below; any
subsequent advances of portions thereof and any amount borrowed and repaid
hereunder in respect of the Loan may not be reborrowed. Borrower shall, on
the Closing Date, receive the Initial Advance, subject to the direction
given by Borrower as to the application of Loan proceeds to pay certain
closing costs in accordance with the provisions of this Agreement.
Borrower shall, on any Subsequent Advance Closing Date, receive the related
Subsequent Advance, subject to the direction given by Borrower as to the
application of Loan proceeds to pay certain closing costs and to fund the
Tax and Insurance Escrow Fund and the Ground Escrow Fund (if applicable) in
accordance with the provisions of this Agreement. Under no circumstances
will any disbursement of the Loan be made if a notice is delivered to
Lender under any applicable law which has the effect of limiting the Debt
secured by the Mortgages with same priority as is shown in the Title
Insurance Policies.
2.1.3 The Note. The Loan shall be evidenced by the Note of Borrower, in
the original principal amount of the Loan. The Note shall bear interest as
provided in Section 2.5 and shall be subject to repayment as provided in
Section 2.3. The Note shall be entitled to the benefits of this Agreement
and shall be secured by the Mortgages, the Assignments of Leases and the
other Loan Documents. The First Note shall evidence the Initial Loan. The
Second Note shall evidence the Second Loan. Each of the Initial Loan and
the Second Loan shall be pari passu in all respects.
2.1.4 Advances. (a) Lender shall make, and Borrower shall accept, the
Initial Advance subject to and upon the conditions and terms contained
herein including, without limitation, the conditions contained in Section
3.1. hereof.
(b) (i) In addition to the Initial Advance, Horizon Borrower may
request and receive an advance of up to $38,500,000 in order to acquire
Gilroy I and II, provided, however, that there shall be only one advance of
this portion of the Initial Loan and if Horizon Borrower requests and is
advanced less than $38,500,000, no further fundings of the Initial Loan
shall be made and provided further, however, that Horizon Borrower shall
have satisfied each of the conditions contained in Section 3.3 hereof.
Lender shall not be obligated to make such advance after January 31, 1998.
Borrower may submit to Lender, at any time after the Closing Date and not
later than January 1, 1998, a written request (in the form attached hereto
as Schedule III) for up to $38,500,000 in form and substance reasonably
acceptable to Lender setting forth the fact that Borrower has or is about
to acquire title to Gilroy I and II and shall set forth the proposed date
of advancement which date shall be a Business Day and shall be no less than
thirty (30) days subsequent to the date on which such request is received
by Lender. If an advance with respect to such Individual Property is not
made by January 31, 1998, Lender's obligation to fund same shall expire and
the amount of the Loan and the Initial Loan shall be reduced accordingly.
The obligation to make the advance of the Initial Loan set forth in this
subsection (b)(i) shall be the obligation of the holder or holders of the
First Note and not the obligation of the holder of the Second Note. No
offset, defense, counterclaim or other set-off shall be available to
Borrower against its obligations under the Second Note and the other Lien
Documents by reason of the failure of the holder or holders of the First
Note to make any such advance.
(ii) In addition to the Initial Advance, Horizon Borrower may also
request and receive an advance of up to $1,000,000 (the amount of such
funding to be in Lender's sole and absolute discretion) in order for
Horizon Borrower and/or its Affiliates to acquire 100% of the fee and
leasehold interests in Gilroy V, provided, however, that there shall be
only one advance of this portion of the Initial Loan and if Horizon
Borrower requests and is advanced less than $1,000,000, no further fundings
under this subparagraph (ii) shall be made and provided further, however,
that Horizon Borrower shall have satisfied each of the conditions contained
in Section 3.3 hereof. Lender shall not be obligated to make such advance
after January 31, 1998. Borrower may submit to Lender, at any time after
the Closing Date and not later than January 1, 1998, a written request (in
the form attached hereto as Schedule III) for up to $1,000,000 in form and
substance reasonably acceptable to Lender setting forth the fact that
Borrower has or is about to acquire title to Gilroy V and shall set forth
the proposed date of advancement which date shall be a Business Day. If an
advance with respect to such Individual Property is not made by January 31,
1998, Lender's obligation to fund same shall expire and the amount of the
Loan and the Initial Loan shall be reduced accordingly.
The obligation to make the advance of the Initial Loan set forth in this
subsection (b)(ii) shall be the obligation of the holder or holders of the
First Note and not the obligation of the holder of the Second Note. No
offset, defense, counterclaim or other set-off shall be available to
Borrower against its obligations under the Second Note and the other Lien
Documents by reason of the failure of the holder or holders of the First
Note to make any such advance.
(iii) The portion of the Initial Advance to be made to Horizon Borrower
includes an anticipated advance of $3,300,000 (which is the Allocated Loan
Amount with respect to Lakeshore Marketplace at Holland, Michigan) with
respect to such Individual Property. However, if title to same is not
acceptable to Lender on the Closing Date, Lender reserves the right not to
fund $3,300,000 of the Initial Advance until title is satisfactory to
Lender in all respects and all other conditions precedent set forth herein
with respect to the Loan are satisfied and provided any such advance is
made, if at all, by July 31, 1997. If an advance with respect to such
Individual Property is not made by July 31, 1997, Lender's obligation to
fund such $3,300,000 shall expire and the amount of the Loan and the
Initial Loan shall be reduced accordingly.
The obligation to make the advance of the Initial Loan set forth in this
subsection (b)(iii) shall be the obligation of the holder or holders of the
First Note and not the obligation of the holder of the Second Note. No
offset, defense, counterclaim or other set-off shall be available to
Borrower against its obligations under the Second Note and the other Lien
Documents by reason of the failure of the holder or holders of the First
Note to make any such advance.
(c) In addition to the Initial Advance and the advances contemplated by
Section 2.1.4(b) above, Horizon Borrower may request and receive not more
than five (5) subsequent advances of a portion of the proceeds of the Loan
not previously advanced (each, a "Subsequent Advance"); provided, however,
that (1) the amount of any Subsequent Advance shall be at least $10,000,000
and (2) Borrower shall have satisfied each of the conditions contained in
Section 3.2. Lender shall not be obligated to make a Subsequent Advance
after June 30, 1999 (the "Outside Closing Date"). Horizon Borrower may
submit to Lender, at any time after the Closing Date and not later than
five (5) days prior to the Outside Closing Date, a written request for a
Subsequent Advance in the form attached hereto as Schedule III (each such
request being hereinafter referred to as a "Subsequent Advance Request").
Each Subsequent Advance Request shall, among other things, set forth the
proposed Subsequent Advance Closing Date with respect to the Subsequent
Advance requested, which Subsequent Advance Closing Date shall be a
Business Day and shall be no less than five (5) days subsequent to the date
on which the Subsequent Advance Request is received by Lender.
The obligation to make any Subsequent Advance shall be the obligation of
the holder or holders of the Second Note and shall not be the obligation of
the holder of the First Note. No offset, defense, counterclaim or other
set-off shall be available to Borrower against its obligations under the
First Note and the other Loan Documents by reason of the failure of the
holder or holders of the Second Note to make any Subsequent Advance
hereunder.
(d) Xxxxxx Brothers Realty Corporation (or Xxxxxx Brothers Holdings,
Inc. if it is the assignee of the Loan) shall continue to be obligated to
make the Loan advances even if the First or Second Note are transferred or
a Securitization occurs to the extent Lender is required to fund hereunder
and to the extent the holder of the First Note or the Second Note, as the
case may be, does not fund same.
Section 2.2 Use of Proceeds.
Borrower shall use the proceeds of the Loan disbursed to it pursuant to
this Agreement to (a) repay and discharge any existing loans relating to
the Properties, (b) pay all past-due Basic Carrying Costs, if any, in
respect of the Properties, (c) fund the Tax and Insurance Escrow Fund (if
applicable) and the Ground Lease Escrow Fund (if applicable), (d) pay costs
and expenses incurred in connection with the Closing of the Loan, as
approved by Lender, (e) fund any working capital requirements of the
Properties, and (f) for any other purpose determined by Borrower
(including, without limitation, distributions to the Borrower's partners,
subject to the limitations contained herein).
Section 2.3 Loan Repayment and Prepayment.
2.3.1 Repayment. Borrower shall repay any outstanding principal
indebtedness of the Loan in full on the Maturity Date, together with
interest thereon to (but excluding) the date of repayment. The Borrower on
any Scheduled Payment Date shall have the right to prepay all or any
portion of the Loan without penalty (the "Voluntary Prepayment") provided
the conditions precedent contained in Section 2.3.3 herein are satisfied by
Borrower. Any prepayments of the principal portion of the Loan made while
no Event of Default shall exist shall be applied against all the notes
constituting the Note prorata in accordance with their original face
amounts to the extent possible; after the unpaid principal balance of any
such note is paid in full, any prepayments of the principal portion of the
Loan shall be applied prorata in accordance with the then outstanding
principal balances thereof. Any payments made to Lender during the period
of any Event of Default or any other amounts to be applied by Lender during
such a period shall be applied by Lender in any order as it shall determine
to any of the Borrower's obligations under any of the Loan Documents but
any such application shall not reinstate the Loan and shall be deemed made
without prejudice to the Lender exercising its rights and remedies under
the Loan Documents.
2.3.2 Mandatory Prepayments. The Loan is subject to mandatory prepayment
in certain instances of Casualty and Condemnation (each a
"Casualty/Condemnation Involuntary Prepayment"), in the manner and to the
extent set forth in Section 7.1.3 hereof. Each Casualty/Condemnation
Involuntary Prepayment shall be made on a Scheduled Payment Date and
include all accrued and unpaid interest up to but not including such
Scheduled Payment Date or, if not paid on a Scheduled Payment Date, include
interest that would have accrued on such prepayment through the next
regularly Scheduled Payment Date.
2.3.3 Voluntary Prepayment of the Loan. (a) Each Voluntary Prepayment of
the Loan by the Borrower shall be subject to the satisfaction of the
following conditions precedent:
(i) Borrower shall provide not less than ten (10) Business Days
prior written notice to Lender specifying a regularly Scheduled Payment
Date (the "Prepayment Date") on which the Voluntary Prepayment is to occur.
Such notice shall indicate the principal amount of the Note to be prepaid;
(ii) Borrower shall pay to Lender all accrued and unpaid
interest on the principal balance of the Note to but not including the
Prepayment Date. If for any reason the Prepayment Date is not a regularly
Scheduled Payment Date, the Borrower shall also pay interest that would
have accrued on such Voluntary Prepayment through the next regularly
Scheduled Payment Date;
(iii) Borrower shall pay to Lender all other sums, not including
scheduled interest or principal payments, due under the Note, this
Agreement, the Mortgages, and the other Loan Documents, including, without
limitation, any Foreign Taxes and Breakage Costs;
(iv) Borrower shall deliver such other certificates, documents
or instruments as Lender may reasonably request; and
(v) Borrower shall pay all reasonable out-of-pocket costs and
expenses of Lender incurred in connection with the Voluntary Prepayment,
including any costs and expenses associated with a release of one or more
Liens as provided in Section 2.4 hereof as well as reasonable attorneys'
fees and expenses.
Section 2.4 Release of Properties. 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 any Lien of any Mortgage on any of the Properties.
2.4.1 Release of All the Properties. (a) If the Borrower has elected to
prepay the entire Note and all amounts required to be paid to Lender
pursuant to the Loan Documents, all of the Properties shall be released
from the Liens of their respective Mortgages and of all other Loan
Documents upon such prepayment.
(b) In connection with the release of the Liens, the Borrower
shall submit to Lender, not less than ten (10) Business Days prior to the
Prepayment Date, a release of Lien (and related Loan Documents) for each
Individual Property for execution by Lender. Such release shall be in a
form appropriate in each jurisdiction in which an Individual Property is
located and satisfactory to Lender in its reasonable discretion.
2.4.2 Release of Individual Properties. Borrower on one or more
occasions may obtain (i) the individual 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 Individual Property (other than those expressly stated to survive),
upon satisfaction of each of the following conditions:
(a) No Event of Default shall then exist.
(b) The requirements of Section 2.3.3 have been satisfied.
(c) Borrower shall submit to Lender, not less than ten (10)
Business Days prior to the date of such release, a release of Lien (and
related Loan Documents) for such Individual Property for execution by
Lender. Such release shall be in a form appropriate in each jurisdiction
in which the Individual Property is located and satisfactory to Lender in
its reasonable discretion. In addition, Borrower shall provide all other
documentation Lender reasonably requires to be delivered by Borrower in
connection with such release including, without limitation, evidence
satisfactory to Lender that such release 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); affirmative coverage (reasonably satisfactory to Lender) to all
Title Insurance Policies covering Individual Properties remaining after
such release to such effect shall be satisfactory for this purpose.
(d) After giving effect to such release, the Debt Service
Coverage Ratio for all of the Properties then remaining subject to the
Liens of the Mortgages calculated with respect to the twelve (12) full
calendar months immediately preceding the release of the Individual
Property and projected with respect to the twelve (12) full calendar months
immediately following the release of the Individual Property shall be equal
to the greater of (i) 1.55 to 1 and (ii) the Debt Service Coverage Ratio
required at such time pursuant to Section 5.2(a) hereof.
(e) Payment of principal under the Loan equal to the aggregate
Release Amounts for the Individual Properties to be released. If principal
had previously been prepaid, the amount of Release Amount for the release
being sought shall be equal to the sum of all Release Amounts for all
Individual Properties previously released and for all Individual Properties
for which a release is being sought less the principal amount theretofore
prepaid. The Release Amounts are to be applied against principal and will
be deemed a Voluntary Prepayment.
(f) No more than one-third (1/3) of the Individual Properties
can be released in total during the term of the Loan. For the purposes of
this Section 2.4.3, all Individual Properties with the designation of
Gilroy shall be treated as one Individual Property.
(g) Notwithstanding the foregoing, no phases of the Outlet at
Gilroy, Lighthouse Place at Michigan City, Silverthorne Factory Stores,
Berkshire Outlet Center at Xxx or Tulare Factory Stores Individual
Properties may be released without Lender's consent (Individual Properties
1, 2, 3, 4, 5, 7 and 9 on Schedule I).
(h) All phases of each Individual Property must be released
jointly, if at all.
2.4.3. Release on Payment in Full. Lender shall, upon the written request
and at the expense of Borrower, upon payment in full of all principal and
interest on the Loan and all other amounts due and payable under the Loan
Documents in accordance with the terms and provisions of the Note and this
Loan Agreement, release the Liens of the Mortgages (and related Loan
Documents) not theretofore released.
Section 2.5 Interest.
2.5.1 Generally. Interest on the Loan and the Note shall accrue at the
Applicable Interest Rate and shall be calculated in accordance with Section
2.6.2. Interest on the Loan shall be paid in arrears in monthly
installments on or before the first Working Day of each calendar month up
to and including the first Working Day of the calendar month immediately
preceding the Maturity Date; each of such payments to be calculated at the
Applicable Interest Rate. The outstanding principal balance of the Loan
together with all accrued and unpaid interest thereon shall be due and
payable on the Maturity Date. All amounts due under the Note shall be
payable without setoff, counterclaim or any other deduction whatsoever.
2.5.2 Determination of Interest Rate.
(a) The rate or rates at which the outstanding principal amount of the
Loan bears interest from time to time shall be referred to as the
"Applicable Interest Rate". The Applicable Interest Rate applicable to the
Loan shall be: (i) one hundred seventy-five basis points (1.75%) above
LIBOR with respect to the applicable Interest Period for a Eurodollar Loan
for any amount of the Initial Loan and (ii) two hundred twenty-five basis
points (2.25%) above LIBOR with respect to the applicable Interest Period
for a Eurodollar Loan for any amount of the Second Loan or (iii) the Prime
Rate plus 75 basis points (.75%) with respect to the Initial Loan and plus
125 basis points (1.25%) with respect to the Second Loan, for a Prime Rate
Loan if the Loan is converted to a Prime Rate Loan pursuant to the
provisions of Section 2.5.2(c) or (f). The parties agree that the
Applicable Interest Rate for the period from the Closing Date through July
31, 1997 with respect to all amounts funded on the Closing Date is 7.4375%
percent per annum.
(b) Interest shall be charged and payable on the outstanding principal
amount of the Loan at a rate per annum equal to the Applicable Interest
Rate, but in no event to exceed the maximum rate permitted under applicable
law. Subject to the terms and conditions of this Section 2.5.2, the Loan
shall be a Eurodollar Loan and Borrower shall pay interest on the
outstanding principal amount of the Loan at LIBOR plus the applicable
spread set forth in Section 2.5.2(a). Any change in the rate of interest
hereunder due to a change in the Applicable Interest Rate shall become
effective as of the opening of business on the first day on which such
change in the Applicable Interest Rate shall become effective. Each
determination by Lender of the Applicable Interest Rate shall be conclusive
and binding for all purposes, absent manifest error.
(c) (i) In the event that Lender shall have determined (which
determination shall be conclusive and binding upon Borrower absent manifest
error) that by reason of circumstances affecting the interbank eurodollar
market, adequate and reasonable means do not exist for ascertaining LIBOR
then Lender shall forthwith give notice by telephone of such determination,
confirmed in writing, to Borrower at least one (1) day prior to the last
day of the related Interest Period. If such notice is given, the related
outstanding Eurodollar Loan shall be converted, on the last day of the then
current Interest Period with respect thereto, to a Prime Rate Loan. Until
such notice has been withdrawn by Lender, no further Eurodollar Loans shall
be made nor shall Borrower have the right to convert a Prime Rate Loan to a
Eurodollar Loan.
(ii) In the event that Lender shall have determined (which
determination shall be conclusive and binding upon Borrower absent manifest
error) that the scheduled Maturity Date will occur prior to the last day of
the next scheduled Interest Period, then the related outstanding Eurodollar
Loan, without notice to Borrower, shall be automatically converted to a
Prime Rate Loan on the last day of the then current Interest Period with
respect thereto.
(d) If, pursuant to the terms of this Agreement, any portion of the
Loan has been converted to a Prime Rate Loan and Lender shall determine
(which determination shall be conclusive and binding upon Borrower absent
manifest error) that the event(s) or circumstance(s) which resulted in such
conversion shall no longer be applicable, Lender shall give notice thereof
to Borrower, and the outstanding balance of the Loan shall be converted to
a Eurodollar Loan as of the first Working Day of the next succeeding
calendar month. Notwithstanding any provision of this Agreement to the
contrary, in no event shall Borrower have the right to elect to convert a
Eurodollar Loan to a Prime Rate Loan.
(e) With respect to a Eurodollar Loan, all payments made by Borrower
hereunder shall be made free and clear of, and without reduction for or on
account of, income, stamp or other taxes, levies, imposts, duties, charges,
fees, deductions, reserves or withholdings imposed, levied, collected,
withheld or assessed by any Governmental Authority, which are imposed,
enacted or become effective after the date hereof (such non-excluded taxes
being referred to collectively as "Foreign Taxes"), excluding income and
franchise taxes of the United States of America or any political
subdivision or taxing authority thereof or therein (including Puerto Rico).
If any Foreign Taxes are required to be withheld from any amounts payable
to Lender hereunder, the amounts so payable to Lender shall be increased to
the extent necessary to yield to Lender (after payment of all Foreign
Taxes) interest or any such other amounts payable hereunder at the rate or
in the amounts specified hereunder. Whenever any Foreign Tax is payable
pursuant to applicable law by Borrower, as promptly as possible thereafter,
Borrower shall send to Lender an original official receipt, if available,
or certified copy thereof showing payment of such Foreign Tax. Borrower
hereby indemnifies Lender for any incremental taxes, interest or penalties
that may become payable by Lender which may result from any failure by
Borrower to pay any such Foreign Tax when due to the appropriate taxing
authority or any failure by Borrower to remit to Lender the required
receipts or other required documentary evidence.
(f) If any requirement of law or any change therein or in the
interpretation or application thereof, shall hereafter make it unlawful for
Lender to make or maintain a Eurodollar Loan as contemplated hereunder, (i)
any outstanding Eurodollar Loan shall be converted automatically to a Prime
Rate Loan on the next succeeding Scheduled Payment Date or within such
earlier period as required by law and (ii) all future advances of the Loan
shall thereafter be Prime Rate Loans. Borrower hereby agrees promptly to
pay Lender, upon demand, any additional amounts necessary to compensate
Lender for any costs incurred by Lender in making any conversion in
accordance with this Agreement, including, without limitation, any interest
or fees payable by Lender to lenders of funds obtained by it in order to
make or maintain the Eurodollar Loan hereunder. Lender's notice of such
costs, as certified to Borrower, shall be conclusive absent manifest error.
(g) In the event that any change in any requirement of law or in the
interpretation or application thereof, or compliance by Lender with any
request or directive (whether or not having the force of law) hereafter
issued from any central bank or other Governmental Authority:
(i) shall hereafter impose, modify or hold applicable any reserve, special
deposit, compulsory loan or similar requirement against assets held by, or
deposits or other liabilities in or for the account of, advances or loans
by, or other credit extended by, or any other acquisition of funds by, any
office of Lender which is not otherwise included in the determination of
LIBOR hereunder;
(ii) shall hereafter have the effect of reducing the rate of return on
Lender's capital as a consequence of its obligations hereunder to a level
below that which Lender could have achieved but for such adoption, change
or compliance (taking into consideration Lender's policies with respect to
capital adequacy) by any amount deemed by Lender to be material; or
(iii) shall hereafter impose on Lender any other condition and the result
of any of the foregoing is to increase the cost to Lender of making,
renewing or maintaining loans or extensions of credit or to reduce any
amount receivable hereunder;
then, in any such case, Borrower shall promptly pay Lender, upon demand,
any additional amounts necessary to compensate Lender for such additional
cost or reduced amount receivable which Lender deems to be material as
determined by Lender (except to the extent such additional amount has
already been taken into account by the application of clause (b) of the
definition of LIBOR set forth in Section 1.1). If Lender becomes entitled
to claim any additional amounts pursuant to this Section 2.5.2(g), Lender
shall provide Borrower with not less than ninety (90) days written notice
specifying in reasonable detail the event by reason of which it has become
so entitled and the additional amount required to fully compensate Lender
for such additional cost or reduced amount. A certificate as to any
additional costs or amounts payable pursuant to the foregoing sentence
submitted by Lender to Borrower shall be conclusive in the absence of
manifest error. This provision shall survive payment of the Note and the
satisfaction of all other obligations of Borrower under this Agreement and
the Loan Documents.
(h) Borrower agrees to indemnify Lender and to hold Lender harmless
from any loss or expense which Lender sustains or incurs as a consequence
of (i) any default by Borrower in payment of the principal of or interest
on a Eurodollar Loan, including, without limitation, any such loss or
expense arising from interest or fees payable by Lender to lenders of funds
obtained by it in order to maintain a Eurodollar Loan hereunder, (ii) any
prepayment (whether voluntary or mandatory) of the Eurodollar Loan on a day
that (A) is not the Scheduled Payment Date immediately following the last
day of an Interest Period with respect thereto or (B) is the Scheduled
Payment Date immediately following the last day of an Interest Period with
respect thereto if Borrower did not give the prior written notice of such
prepayment required pursuant to the terms of this Agreement, including,
without limitation, such loss or expense arising from interest or fees
payable by Lender to lenders of funds obtained by it in order to maintain
the Eurodollar Loan hereunder and (iii) the conversion (for any reason
whatsoever, whether voluntary or involuntary) of the Applicable Interest
Rate from LIBOR plus the applicable spread to the Prime Rate plus the
applicable spread with respect to any portion of the outstanding principal
amount of the Loan then bearing interest at LIBOR plus the applicable
spread on a date other than the Scheduled Payment Date immediately
following the last day of an applicable Interest Period, including, without
limitation, such loss or expenses arising from interest or fees payable by
Lender to lenders of funds obtained by it in order to maintain a Eurodollar
Loan hereunder (the amounts referred to in clauses (i), (ii) and (iii) are
herein referred to collectively as the "Breakage Costs"). This provision
shall survive payment of the Note in full and the satisfaction of all other
obligations of Borrower under this Agreement and the other Loan Documents.
(i) Lender shall not be entitled to claim compensation pursuant to this
Section 2.5.2 for any Foreign Taxes, increased cost or reduction in amounts
received or receivable hereunder, or any reduced rate of return, which was
incurred or which accrued more than the earlier of (i) ninety (90) days
before the date Lender notified Borrower of the change in law or other
circumstance on which such claim of compensation is based and delivered to
Borrower a written statement setting forth in reasonable detail the basis
for calculating the additional amounts owed to Lender under this Section
2.5.2, which statement shall be conclusive and binding upon all parties
hereto absent manifest error or (ii) any earlier date provided that Lender
notified Borrower of such change in law or circumstance and delivered the
written statement referenced in clause (i) within ninety (90) days after
Lender received written notice of such change in law or circumstance.
(j) Lender will use reasonable efforts (consistent with legal and
regulatory restrictions) to maintain the availability of the Eurodollar
Loan and to avoid or reduce any increased or additional costs payable by
Borrower under this Section 2.5.2, including, if requested by Borrower, a
transfer or assignment of the Loan to a branch, office or Affiliate of
Lender in another jurisdiction, or a redesignation of its lending office
with respect to the Loan, in order to maintain the availability of the
Eurodollar Loan or to avoid or reduce such increased or additional costs,
provided that the transfer or assignment or redesignation (i) would not
result in any additional costs, expenses or risk to Lender that are not
reimbursed by Borrower and (ii) would not be disadvantageous in any other
material respect to Lender as determined by Lender in its reasonable
discretion.
2.5.3 Default Rate; Post-Maturity Interest. Upon the occurrence of an
Event of Default, Lender shall be entitled to receive and Borrower shall
pay to Lender interest on the entire outstanding principal balance of the
Note and any other amounts due at the Default Rate, provided, however, with
respect to an Event of Default relating to the late payment of interest
under the Note, interest on the Loan shall accrue at the Default Rate on a
retroactive basis from and after the date that said late payment was due
(that is, without regard to the grace period provided for such Event of
Default). Interest at the Default Rate shall be computed from the
occurrence of the Event of Default until the earlier of the date upon which
all Events of Default are cured or the date of Lender's actual receipt and
collection of the Debt (or that portion thereof that is then due).
Interest at the Default Rate shall be added to the Debt and shall be
secured by the Mortgages. This subsection, however, shall not be construed
as an agreement or privilege to extend the date of the payment of the Debt,
nor as a waiver of any other right or remedy accruing to Lender by reason
of the occurrence of any Event of Default.
Section 2.6 Payments and Computations.
2.6.1 Making of Payments. Whenever any payment hereunder or under the
Note shall be stated to be due on a day which is not a Working Day, such
payment in the amount due on such non-Working Day shall be paid on the
immediately succeeding Working Day.
2.6.2 Computations. Interest payable hereunder or under the Note by
Borrower shall be computed on the basis of the actual number of days
elapsed in a 360-day year, unless such calculation would result in a
usurious rate, in which case interest shall be calculated on the per annum
basis of a year of three hundred sixty-five (365) or three hundred
sixty-six (366) days, as the case may be.
2.6.3 Late Payment Charge. If any principal is not paid by Borrower on
the date on which it is due or if any interest or any other sums due under
the Loan Documents is not paid by Borrower within two (2) Business Days
after the date on which it is due, Borrower shall pay to Lender upon demand
an amount equal to the lesser of five percent (5%) of such unpaid sum or
the maximum amount permitted by applicable law in order to defray the
expense incurred by Lender in handling and processing such delinquent
payment and to compensate Lender for the loss of the use of such delinquent
payment. Any such amount shall be secured by the Mortgages and the other
Loan Documents.
Section 2.7 Substitution and Addition of Properties. No substitution
of Individual Properties and no addition of other properties as Individual
Properties is available without the express written consent of Lender,
which Lender may withhold for any or no reason and in its sole and absolute
discretion. Subject to the immediately preceding sentence hereof, (a)
Borrower may request Lender to release the Lien of a Mortgage (and the
related Loan Documents) encumbering an Individual Property (a "Substituted
Property") in exchange for Borrower substituting therefor another factory
outlet or shopping center property acquired by the Horizon Borrower
(individually, a "Substitute Property" and collectively, the "Substitute
Properties") and (b) Borrower may request that other properties (each an
"Additional Property") be included in the term Individual Property. Upon
Lender's approval, which will include a revision of the Allocated Loan
Amount for each Individual Property to remain an Individual Property, a
designation of the Allocated Loan Amount for each Substitute and Additional
Property and a re-establishment of the number and identity of Individual
Properties that may be released pursuant to Sections 2.4.2(f) and (g)
hereof (each in the sole discretion of Lender), then as a condition
precedent to such transaction, Borrower shall execute and cause to be
executed and delivered all documents and provide all reports, due diligence
documentation, title insurance policies and surveys and other items
required by Lender. Whether or not such a transaction occurs, Borrower
shall pay all Lender's costs and expenses in connection therewith
(including, without limitation, Lender's attorneys' fees and costs). No
substitution or addition will be accomplished unless and until all Lender's
requirements in connection therewith have been fulfilled. The term "Ground
Lease" will be deemed amended to include any ground lease relating to the
Substitute Property or Additional Property permitted to be included by
Lender pursuant to the first sentence of this Section 2.7.
III. CONDITIONS PRECEDENT
Section 3.1 Conditions Precedent to Closing.
The obligation of Lender to make the Loan hereunder is subject to the
fulfillment by Borrower or waiver by Lender of the following conditions
precedent no later than the Closing Date and, with respect to a Subsequent
Advance, on the Subsequent Advance Closing Date and, with respect to any
other advances of the Initial Loan, on the date of such advance:
(a) Representations and Warranties; Compliance with Conditions. The
representations and warranties of Borrower contained in this Agreement and
the other Loan Documents shall be true and correct in all material respects
on and as of the Closing Date and, as to a Subsequent Advance, on and as of
the Subsequent Advance Closing Date and, with respect to the final advance
of the Initial Loan, on the date of funding same with the same effect as if
made on and as of such date, and no Default or an Event of Default shall
have occurred and be continuing; and Borrower shall be in compliance in all
material respects with all terms and conditions set forth in this Agreement
and in each other Loan Document on its part to be observed or performed.
(b) Loan Agreement and Note. Lender shall have received the original
of this Agreement and the Note, in each case, duly executed and delivered
on behalf of Borrower (and with respect to this Agreement joined in by the
Guarantor).
(c) Delivery of Loan Documents; Title Insurance; Reports; Leases.
(i) Mortgages, Assignments of Leases, Assignments of
Agreements. Lender shall have received from Borrower fully executed and
acknowledged counterparts of the Mortgages, the Assignments of Leases and
UCC financing statements relating to each of the Properties and evidence
that counterparts of the Mortgages, Assignments of Leases and UCC financing
statements 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 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. Lender shall have also received from Borrower fully executed
counterparts of the Environmental Indemnity.
(ii) Title Insurance. Lender shall have received Title
Insurance Policies issued by a title company acceptable to Lender and dated
as of the Closing Date, with reinsurance and direct access agreements
acceptable to Lender. Such Title Insurance Policies shall (A) provide
coverage in amounts satisfactory to Lender, (B) insure Lender that the
relevant Mortgage creates a valid lien on the Individual Property
encumbered thereby of the requisite priority, free and clear of all
exceptions from coverage other than Permitted Encumbrances and standard
exceptions and exclusions from coverage (as modified by the terms of any
endorsements), (C) contain such endorsements and affirmative coverages as
Lender may reasonably request, and (D) name Lender as the insured. The
Title Insurance Policies shall be assignable. Lender also shall have
received evidence that all premiums in respect of such Title Insurance
Policies have been paid.
(iii) Survey. Lender shall have received a current title survey
for each Individual Property, certified to the title company and Lender and
their successors and assigns, in form and content satisfactory to Lender
and prepared by a professional and properly licensed land surveyor
satisfactory to Lender in accordance with the 1992 Minimum Standard Detail
Requirements for ALTA/ACSM Land Title Surveys. The survey should meet the
classification of an "Urban Survey" and the following additional items from
the list of "Optional Survey Responsibilities and Specifications" (Table A)
should be added to each survey: 2, 3, 4, 6, 8, 9, 10, 11 and 13. Such
survey shall reflect the same legal description contained in the Title
Insurance Policies relating to such Individual Property referred to in
clause (ii) above and shall include, among other things, a metes and bounds
description of the real property comprising part of such Individual
Property reasonably satisfactory to Lender. The surveyor's seal shall be
affixed to each survey and the surveyor shall provide a certification for
each survey in form and substance acceptable to Lender.
(iv) Insurance. Lender shall have received valid certificates
of insurance for the policies of insurance required hereunder, satisfactory
to Lender in its sole discretion, and evidence of the payment of all
premiums payable for the existing policy period.
(v) Environmental Reports. Lender shall have received a Phase
I environmental report and, if applicable, a Phase II environmental report,
in respect of each Individual Property, in each case satisfactory in form
and substance to Lender in its sole discretion.
(vi) Zoning; Building Codes. With respect to each Individual
Property, Lender shall have received, at Lender's option, (A) (1) letters
or other evidence with respect to each Individual Property from the
appropriate municipal authorities (or other Persons) concerning applicable
zoning and building laws, (2) an ALTA 3.1 zoning endorsement for the
applicable Title Insurance Policy, and (3) a zoning opinion letter, in
substance reasonably satisfactory to Lender and (B) a final certificate of
occupancy with respect to all Improvements on each Individual Property.
(vii) Encumbrances. Borrower shall have taken or caused to be
taken such actions in such a manner so that Lender has a valid and
perfected Lien of the requisite priority as of the Closing Date with
respect to each Mortgage in the applicable Individual Property, subject
only to applicable Permitted Encumbrances and such other Liens as are
permitted pursuant to the Loan Documents, and Lender shall have received
satisfactory evidence thereof.
(d) Related Documents. Each additional document not specifically
referenced herein, but relating to the transactions contemplated herein,
shall have been duly authorized, executed and delivered by all parties
thereto and Lender shall have received and approved certified copies
thereof.
(e) Delivery of Organizational Documents. On or before the Closing
Date, Borrower shall deliver or cause to be delivered to Lender copies
certified by Borrower of all organizational documentation related to
Borrower and its constituent entities (including, without limitation,
Horizon/Xxxx and Horizon Group) and/or the formation, structure, existence,
good standing and/or qualification to do business, as Lender may request in
its sole discretion, including, without limitation, good standing
certificates, qualifications to do business in the appropriate
jurisdictions, resolutions authorizing the entering into of the Loan and
incumbency certificates as may be requested by Lender.
(f) Opinions of Borrower's and Guarantor's Counsel. Lender shall have
received opinions of Borrower's and Guarantor's counsel, which counsel
shall be reasonably acceptable to Lender, (i) with respect to
non-consolidation, true sale or true contribution, and fraudulent transfer
issues, and (ii) with respect to due execution, authority, enforceability
of the Loan Documents, usury and such other matters as Lender may require,
all such opinions in form, scope and substance customary for rated
transactions and satisfactory to Lender and Lender's counsel in their sole
discretion.
(g) Budgets. Borrower shall have delivered the Annual Budget for the
current Fiscal Year.
(h) Basic Carrying Costs. Borrower shall have paid all Basic Carrying
Costs relating to each of the Properties which are in arrears, including
without limitation, (i) accrued but unpaid insurance premiums relating to
each of the Properties, (ii) currently due Taxes (including any in arrears)
relating to each of the Properties, and (iii) currently due Other Charges
relating to each of the Properties, which amounts shall be funded with
proceeds of the Loan.
(i) Completion of Proceedings. All corporate and other proceedings
taken or to be taken in connection with the transactions contemplated by
this Agreement and other Loan Documents and all documents incidental
thereto shall be satisfactory in form and substance to Lender, and Lender
shall have received all such counterpart originals or certified copies of
such documents as Lender may reasonably request.
(j) Payments. All payments, deposits or escrows required to be made or
established by Borrower under this Agreement, the Note and the other Loan
Documents on or before the Closing Date shall have been paid.
(k) [INTENTIONALLY DELETED]
(l) Compliance with Law. Lender shall be satisfied that the Properties
and their use comply, in all material respects, with all applicable Legal
Requirements, including, without limitation, zoning, subdivision, building
and environmental laws.
(m) Transaction Costs. Borrower shall have paid or reimbursed Lender
for all costs and expenses incurred by Lender in connection with the
origination of the Loan, including, without limitation, all fees and
disbursements of Lender's counsel, all out-of-pocket costs and expenses
incurred in connection with the performance of due diligence with respect
to the Loan and all title insurance premiums and recording and filing fees.
(n) Origination and Underwriting Fee. Lender shall have received an
origination fee for structuring and placement services with respect to the
Loan in the amount of .625% of the aggregate Loan amount (which fee shall
be paid, as to any advance hereunder, as and when each such advance is
made) and $127,500 as an underwriting fee with respect to the Properties.
(o) Financial Information. Lender shall have received (i) consolidated
financial statements with respect to Horizon Group audited by one of the
"Big Six" accounting firms for the fiscal years ending in 1995 and 1996 and
unaudited financial statements for the first quarter of 1997, (ii)
unaudited consolidated financial statements with respect to the Properties
for 1995, 1996 and the first quarter of the fiscal year ending in 1997 and
(iii) unaudited consolidated financial statements indicating income and
expenses with respect to the Properties as of the Closing Date, all such
financial statements shall include a break-down of income and expenses with
respect to each Individual Property and be otherwise in form and substance
satisfactory to Lender in its sole discretion. Lender shall have received
detailed operating budgets (including capital expenditures for each
Individual Property for the 1997 calendar year), in form and substance
satisfactory to Lender.
(p) Material Adverse Change. There shall have been no material adverse
change in the financial condition or business condition or outlook of
Borrower, Horizon Group or Horizon/Xxxx, or any Individual Property since
the date of Horizon Group's most recent financial statement delivered to
Lender. The income and expenses of each Individual Property, the occupancy
leases thereof, and all other features of the transaction shall be as
represented to Lender without material adverse change. Borrower,
Horizon/Xxxx and Horizon Group shall not be the subject of any bankruptcy,
reorganization, or insolvency proceeding, nor shall there be any pending
action or other proceeding with any tenant at any Property which has not
been dismissed with prejudice (except as set forth on Schedule IV attached
hereto), which bankruptcy, reorganization, insolvency proceeding or other
action or proceeding (including, however, for this purpose those shown on
Schedule IV hereof) shall involve a tenant or tenants the loss of whose
rents, individually or in the aggregate, would have a material adverse
effect on Borrower, Horizon/Xxxx and Horizon Group, as determined by
Lender.
(q) Underlying Asset Documentation. Lender shall have received a copy
of each deed conveying each Individual Property to Borrower, each of which
shall be satisfactory in form and substance to Lender in its sole
discretion.
(r) Estoppel Certificates. Borrower shall have delivered to Lender
estoppel certificates from (i) any existing tenants constituting tenants
under Material Leases at each Individual Property and (ii) existing tenants
inclusive to those described in clause (i) that lease no less than seventy
percent (70%) of the gross leaseable area at each Individual Property, all
such estoppel certificates in the form attached hereto as Schedule VI and
in substance satisfactory to Lender.
(s) Leases and Rent Roll. Lender shall have received certified copies
of all material leases (including equipment leases) and subleases affecting
the Properties. Lender shall have received a current certified rent roll
of each Individual Property, satisfactory in form and substance to Lender.
(t) Subordination. Lender shall have received appropriate instruments
acceptable to Lender in the form attached hereto as Schedule VII
subordinating all Leases affecting the Properties designated by Lender to
the Mortgage, except such Leases as Lender may specifically require to be
superior to the Mortgage and such Leases that contain self-executing
subordination provisions acceptable to Lender.
(u) [INTENTIONALLY DELETED]
(v) Licenses and Permits. Lender shall have received copies of all
regulatory approvals, authorizations, licenses and permits necessary for
Borrower's use and operation of each Individual Property, each issued in
the name of Borrower and satisfactory in form and substance to Lender.
(w) Utilities; Tax Lot. Lender shall have received evidence that all
utility services and parking required for each Individual Property are
available and adequate and that each Individual Property constitutes a
separate tax lot, which evidence shall be satisfactory in form and
substance to Lender.
(x) Physical Conditions Reports. Lender shall have received physical
conditions reports with respect to each Individual Property prepared by an
engineering firm approved by Lender, which reports shall be satisfactory in
form and substance to Lender.
(y) Management Agreement. Lender shall have received a certified copy
of any Management Agreement which exists with respect to each Individual
Property satisfactory in form and substance to Lender, and Borrower and
Manager shall have executed and delivered to Lender an Assignment of
Management Agreement with respect to each such Management Agreement.
(z) Credit Reports. Lender shall have received such credit reports,
references and other due diligence materials with respect to Borrower,
Borrower's general partner, Guarantor and Manager as Lender shall request,
such credit reports, references and other due diligence reports to be in
form and substance satisfactory to Lender.
(aa) Further Documents. Lender or its counsel shall have received such
other and further approvals, opinions, documents and information as Lender
or its counsel may have reasonably requested.
Section 3.2 Conditions Precedent to Subsequent Advances.
The obligation of Lender to make any Subsequent Advance hereunder is
subject to the fulfillment by Borrower or waiver by Lender of the following
conditions precedent no later than the Subsequent Advance Closing Date with
respect to such Subsequent Advance or such other date as set forth below:
(a) Subsequent Advance Request. Lender shall have received a
Subsequent Advance Request in accordance with Section 2.1.4(b) accompanied
by a completed borrowing request in the form of Schedule III hereof.
(b) Defaults. No Default or Event of Default shall have occurred and
be continuing and Borrower shall be in compliance in all material respects
with all terms and conditions set forth in this Agreement and in each Loan
Document on Borrower's and Guarantor's part to be observed or performed.
Lender shall have received a certificate from Borrower and Guarantor
confirming the foregoing, and indicating the use of such Subsequent
Advance, such delivered certificate to be in form and substance reasonably
satisfactory to Lender.
(c) Date. The Subsequent Advance is requested by Borrower prior to
June 26, 1999.
(d) Title.
(1) [INTENTIONALLY DELETED]
(2) A Title Insurance Policy pending disbursement endorsement
is provided to Lender increasing the amount of the coverage of the overall
"tie-in" for the Title Insurance Policies by the amount of the Subsequent
Advance and re-dating the policy the date of the Subsequent Advance and
showing no matters other than those shown on the Closing Date, Permitted
Encumbrances or others approved by Lender.
(e) Financial Covenants.
(1) The Borrower certifies to the Lender that the special
financial covenants (the "Financial Covenants") detailed in Section 5.2
herein are true and correct (taking into account the Subsequent Advance as
funded) and supplies Lender with the Debt Service Coverage Ratio and
Minimum Coverage Formats shown on Schedule IX hereof so indicating.
(2) The accuracy of the Financial Covenants is verified by an
agreed-upon procedures letter prepared by a "Big-Six" accounting firm
reasonably acceptable to the Lender in the form of Schedule VIII hereof.
(f) Debt Service Coverage Ratio.
(1) The Debt Service Coverage Ratio shall be at least 1.55 to 1
on the Subsequent Advance Closing Date (taking into account the Subsequent
Advances as funded) but not less than that required by Section 5.2(a)
(taking into account the Subsequent Advance as funded) if greater.
(g) Origination Fee/Costs and Expenses
(1) The origination fee required by Section 3.1(n) shall be
paid.
(2) All Lender's costs and expenses (including, without
limitation, Lender's legal and other costs) shall be paid.
Section 3.3 Conditions Precedent to Future Funding of Initial Loan.
The obligation of Lender to make the second and third funding of the
Initial Loan is subject to the fulfillment by Borrower or waiver by Lender
of the following conditions precedent not later than the date established
in Borrower's notice of a request for funding of same:
(a) The fulfillment of the conditions precedent to Subsequent Advances
set forth in Section 3.2(a), (b), (e) and (g) above except references to
Subsequent Advances therein shall mean the future funding of the Initial
Loan in question.
(b) A Title Insurance Policy with respect to Gilroy I and II (as to the
fundings under Section 2.1.4(b)(i)) and Gilroy V (as to fundings under
Section 2.1.4(b)(ii)) and Holland, Michigan (as to fundings under Section
2.1.4(b)(iii)) shall be supplied to Lender indicating that Horizon Borrower
(or, with respect to Gilroy V, Horizon Borrower and/or its Affiliate) has
good, marketable and insurable fee title to Gilroy I and II or Gilroy V or
Holland, Michigan, as the case may be, which Title Insurance Policy shall
be subject to such matters as are acceptable to Lender in all respects
utilizing the same criteria utilized in analyzing the Title Insurance
Policies delivered with respect to the other Individual Properties.
(c) A Title Insurance Policy pending disbursement endorsement is
provided to Lender increasing the amount of the overall tie-in coverage of
the Title Insurance Policy previously delivered by the amount of the
advance in question and redating each policy the date of funding of the
advance and showing no matters other than those shown on the Closing Date,
Permitted Encumbrances or matters otherwise approved by Lender.
(d) All other conditions to funding as set forth in Section 3.1 hereof
are complied with as of the funding date, including, without limitation,
with respect to Gilroy I and II, Gilroy V and Holland, Michigan, as the
case may be, as an Individual Property.
Section 3.4 Conditions Precedent to Advances.
All conditions precedent to advances of proceeds of the Loan set forth in
Sections 3.1, 3.2 and 3.3 are solely for the benefit of Lender and any of
such conditions may be waived by Lender in its sole discretion
IV. REPRESENTATIONS AND WARRANTIES
Section 4.1 Borrower Representations.
Borrower and Guarantor, jointly and severally represent and warrant as of
the date hereof and as of the Closing Date and as of each Subsequent
Advance Closing Date and as of the date of funding of the remaining portion
of the Initial Loan which was not funded on the Closing Date that:
(a) Organization. Borrower and Guarantor have been duly organized and
are validly existing and in good standing with requisite power and
authority to own their properties and to transact the businesses in which
they are now engaged. Borrower and Guarantor are duly qualified to do
business and are in good standing in each jurisdiction where they are
required to be so qualified in connection with their properties, businesses
and operations. Borrower and Guarantor possess all rights, licenses,
permits and authorizations, governmental or otherwise, necessary to entitle
them to own their properties and to transact the businesses in which they
are now engaged, and the sole business of Borrower is the ownership,
management and operation of the Properties.
(b) Proceedings. Borrower and Guarantor have taken all necessary
action to authorize the execution, delivery and performance of this
Agreement and the other Loan Documents. This Agreement and such other Loan
Documents have been duly executed and delivered by or on behalf of Borrower
and Guarantor (as the case may be) and constitute legal, valid and binding
obligations of Borrower and Guarantor (as the case may be) enforceable
against Borrower and Guarantor (as the case may be) in accordance with
their respective terms, subject to applicable bankruptcy, insolvency and
similar laws affecting rights of creditors generally, and subject, as to
enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law).
(c) No Conflicts. The execution, delivery and performance of this
Agreement and the other Loan Documents by Borrower and Guarantor (as the
case may be) will not conflict with or result in a breach of any of the
terms or provisions of, or constitute a default under, or result in the
creation or imposition of any lien, charge or encumbrance (other than
pursuant to the Loan Documents) upon any of the property or assets of
Borrower or Guarantor pursuant to the terms of any indenture, mortgage,
deed of trust, loan agreement, partnership agreement or other agreement or
instrument to which Borrower or Guarantor is a party or by which any of
Borrower's or Guarantor's property or assets is subject, nor will such
action result in any violation of the provisions of any statute or any
order, rule or regulation of any court or governmental agency or body
having jurisdiction over Borrower or Guarantor or any of Borrower's or
Guarantor's properties or assets, and any consent, approval, authorization,
order, registration or qualification of or with any court or any such
regulatory authority or other governmental agency or body required for the
execution, delivery and performance by Borrower and Guarantor (as the case
may be) of this Agreement or any other Loan Documents has been obtained and
is in full force and effect.
(d) Litigation. Except as otherwise set forth on Schedule IV hereto,
there are no actions, suits or proceedings at law or in equity by or before
any Governmental Authority or other agency now pending or, to their
knowledge, threatened against or affecting Borrower or Guarantor or any of
the Properties which, if determined against Borrower or Guarantor or any of
the Properties, might result in a Material Adverse Effect.
(e) Agreements. Borrower and Guarantor are not a party to any
agreement or instrument or subject to any restriction which is reasonably
likely to have a Material Adverse Effect. Neither Borrower nor Guarantor
is in default in any material respect in the performance, observance or
fulfillment of any of the obligations, covenants or conditions contained in
any agreement or instrument to which it is a party or by which they or any
of their Properties are bound which is reasonably likely to have a Material
Adverse Effect.
(f) Title. Borrower has good, marketable and insurable fee title to
and a leasehold estate in the real property comprising part of the
Properties as shown in the Title Insurance Policies and good, marketable
and insurable title to a leasehold estate in the balance of such Properties
as shown in the Title Insurance Policies, free and clear of all Liens
whatsoever except the Permitted Encumbrances, such other Liens as are
permitted pursuant to the Loan Documents and the Liens created by the Loan
Documents. Each Mortgage intended to encumber any of the Properties, when
properly recorded in the appropriate records, together with any Uniform
Commercial Code financing statements required to be filed in connection
therewith, will create (i) a valid, perfected first lien on the applicable
Individual Property, subject only to Permitted Encumbrances and the Liens
created by the Loan Documents and (ii) perfected security interests in and
to, and perfected collateral assignments of, all personalty (including the
Leases), all in accordance with the terms thereof, in each case subject
only to any applicable Permitted Encumbrances, such other Liens as are
permitted pursuant to the Loan Documents and the Liens created by the Loan
Documents. The Permitted Encumbrances do not materially and adversely
affect the value of or the use of any Individual Property or Borrower's
ability to repay the Loan. There are no claims for payment for work, labor
or materials affecting any Individual Property which are or may become a
lien prior to, or of equal priority with, the Liens created by the Loan
Documents except for liens which have been insured against by the Title
Insurance Policies in a manner acceptable to Lender.
(g) No Bankruptcy Filing. Neither Borrower nor Guarantor nor any
entity Affiliates of either is contemplating either the filing of a
petition by it under any state or federal bankruptcy or insolvency laws or
the liquidation of all or a major portion of its assets or property, and
Borrower and Guarantor have no knowledge of any Person contemplating the
filing of any such petition against them or such entity Affiliates.
(h) Full and Accurate Disclosure. To Borrower's and Guarantor's
knowledge, no statement of fact made by Borrower in this Agreement or in
any of the other Loan Documents contains any untrue statement of a material
fact or omits to state any material fact necessary to make statements
contained herein or therein not misleading. There is no material fact
presently known to Borrower or Guarantor which has not been disclosed to
Lender which materially adversely affects, nor as far as Borrower and
Guarantor can foresee, might materially adversely affect, any of the
Properties or the business, operations or condition (financial or
otherwise) of Borrower or Guarantor.
(i) No Plan Assets. Neither Borrower nor Guarantor is 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 or Guarantor constitutes or will
constitute "plan assets" of one or more such plans within the meaning of 29
C.F.R. Section 2510.3-101. In addition, (i) neither Borrower nor Guarantor
is a "governmental plan" within the meaning of Section 3(32) of ERISA and
(ii) transactions by or with Borrower and/or Guarantor are not subject to
state statutes regulating investments of, and fiduciary obligations with
respect to, governmental plans.
(j) Compliance. Except for matters set forth in any environmental or
physical conditions reports procured by Lender in connection with the Loan
(all such reports are shown on Schedule XVI hereof), Borrower and each of
the Properties and the use thereof comply in all material respects with all
applicable Legal Requirements, including, without limitation, building,
subdivision and zoning ordinances and codes except as set forth in Schedule
XI hereof. To the Borrower's and Guarantor's knowledge, neither Borrower
nor Guarantor is in default or violation of any order, writ, injunction,
decree or demand of any Governmental Authority, the violation of which is
reasonably likely to materially adversely affect the condition (financial
or otherwise) or business of Borrower. There has not been committed by
Borrower or, to Borrower's or Guarantor's knowledge, any other person in
occupancy of or involved with the operation or use of the Properties any
act or omission affording the federal government or any state or local
government the right of forfeiture as against any of the Properties or any
part thereof or any monies paid in performance of Borrower's obligations
under any of the Loan Documents. Borrower hereby covenants and agrees not
to commit, permit or suffer to exist any act or omission affording such
right of forfeiture.
(k) Financial Information. All financial data, including, without
limitation, the statements of cash flow and income and operating expense,
that have been delivered by Borrower, Guarantor or their Affiliates 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 accordance with GAAP consistently applied throughout the
periods covered, except as disclosed therein. Neither Borrower nor
Guarantor has any contingent liabilities, liabilities for taxes, unusual
forward or long-term commitments or unrealized or anticipated losses from
any unfavorable commitments that are known to Borrower and Guarantor and
reasonably likely to have a materially adverse effect on the Properties or
the operation thereof as a factory outlet/retail shopping center, except as
referred to or reflected in said financial statements. Since the date of
such financial statements, there has been no materially adverse change in
the financial condition, operations or business of Borrower or Guarantor
from that set forth in said financial statements.
(l) Condemnation. No Condemnation or other proceeding has been
commenced or, to Borrower's best knowledge, is contemplated with respect to
all or any portion of any of the Properties or for the relocation of
roadways providing access to any of the Properties.
(m) Federal Reserve Regulations. No part of the proceeds of the Loan
will be used for the purpose of purchasing or acquiring any "margin stock"
within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System or for any other purpose which would be inconsistent with
such Regulation U or any other Regulations of such Board of Governors, or
for any purposes prohibited by Legal Requirements or by the terms and
conditions of this Agreement or the other Loan Documents.
(n) Utilities and Public Access. Each Individual Property has rights
of access to public ways and is served by water, sewer, sanitary sewer and
storm drain facilities adequate to service such Individual Property for its
respective intended uses. All public utilities necessary or convenient to
the full current use and enjoyment of each Individual Property are located
either in the public right-of-way abutting such Individual Property (which
are connected so as to serve such Individual Property without passing over
other property) or in recorded easements serving such Individual Property
and such easements are set forth in the Title Insurance Policies. All
roads necessary for the use of each Individual Property for its current
respective purpose have been completed and dedicated to public use and
accepted by all Governmental Authorities.
(o) Not a Foreign Person. Neither Borrower nor Guarantor is a "foreign
person" within the meaning of o 1445(f)(3) of the Code.
(p) Separate Lots. Each Individual Property is comprised of one (1) or
more parcels which constitute separate tax lots and does not constitute a
portion of any other tax lot not a part of such Individual Property.
(q) Assessments. Except as set forth in the Title Insurance Policies,
there are no pending or, to Borrower's knowledge proposed, special or other
assessments for public improvements or otherwise affecting any of the
Properties, nor are there any contemplated improvements to any of the
Properties that may result in such special or other assessments.
(r) Enforceability. The Loan Documents are not subject to any right of
rescission, set-off, counterclaim or defense by Borrower, including the
defense of usury, nor would the operation of any of the terms of the Loan
Documents, or the exercise of any right thereunder, render the Loan
Documents unenforceable, and Borrower has not asserted any right of
rescission, set-off, counterclaim or defense with respect thereto.
(s) No Prior Assignment. There are no prior assignments of the Leases
or any portion of the Rents due and payable or to become due and payable
which are presently outstanding.
(t) Insurance. Borrower has obtained and has delivered to Lender
certified copies of all insurance policies reflecting insurance coverages,
amounts and other requirements as set forth in this Agreement.
(u) Use of Properties. Each of the Properties is used exclusively for
factory outlet/retail shopping center purposes and other appurtenant and
related uses.
(v) Certificate of Occupancy; Licenses. All certifications, permits,
licenses and approvals, including without limitation, certificates of
completion and occupancy permits required for the legal use, occupancy and
operation of each of the Properties (collectively, the "Licenses"), have
been obtained and are in full force and effect. The Borrower shall keep
and maintain all licenses necessary for the operation of each of the
Properties. The use being made of each Individual Property is in
conformity in all material respects with the certificate of occupancy
issued for such Individual Property.
(w) Flood Zone. Except as shown on the Surveys, none of the
Improvements on any of the Properties are located in an area as identified
by the Federal Emergency Management Agency as an area having special flood
hazards.
(x) Physical Condition. Except as disclosed in any physical conditions
reports shown on Schedule XVI hereof and delivered to Lender in connection
with the Loan, each of the Properties, including, without limitation, all
buildings, improvements, parking facilities, sidewalks, storm drainage
systems, roofs, plumbing systems, HVAC systems, fire protection systems,
electrical systems, equipment, elevators, exterior sidings and doors,
landscaping, irrigation systems and all structural components, are in good
working condition, order and repair in all material respects; there exists
no structural or other material defects or damages in any of the
Properties, whether latent or otherwise, and Borrower has not received
notice from any insurance company or bonding company of any defects or
inadequacies in any of the Properties, or any part thereof, which would
adversely affect the insurability of the same or cause the imposition of
extraordinary premiums or charges thereon or of any termination or
threatened termination of any policy of insurance or bond.
(y) Boundaries. Except for encroachments which are immaterial as to
value and marketability as shown on the surveys delivered to Lender by
Borrower, all of the improvements which were included in determining the
appraised value of each Individual Property lie wholly within the
boundaries and building restriction lines of such Individual Property, and
no improvements on adjoining properties encroach upon such Individual
Property, and no easements or other encumbrances upon the applicable
Individual Property encroach upon any of the improvements, so as to affect
the value or marketability of the applicable Individual Property except
those which are insured against by title insurance.
(z) Leases. The Properties are not subject to any Leases other than
the Leases described in the rent rolls delivered to Lender in connection
with this Agreement. No person has any possessory interest in any of the
Properties or right to occupy the same except under and pursuant to the
provisions of the Leases. The current Leases are in full force and effect
and, to Borrower's knowledge and except as disclosed in the certified rent
rolls delivered to Lender as of the date hereof, there are no defaults
thereunder by either party and there are no conditions that, with the
passage of time or the giving of notice, or both, would constitute defaults
thereunder. Borrower is the sole owner of the entire lessor's interest in
the Leases. None of the Rents reserved in the Leases have been assigned or
otherwise pledged or hypothecated other than pursuant to the Loan
Documents. None of the Rents have been collected for more than one (1)
month in advance of when due under the applicable Lease. The premises
demised under the Leases have been completed and the tenants under the
Leases have accepted the same and have taken possession of the same on a
rent-paying basis other than those tenants under Leases for which premises
are being constructed or renovated as a condition to occupancy and other
than those matters described in the certified rent rolls delivered by
Borrower to Lender as of the date hereof. To Borrower's knowledge, there
exist no offsets or defenses to the payment of any portion of the Rents.
No Lease contains an option to purchase, right of first refusal to
purchase, or any other similar provision. No Person has any possessory
interest in, or right to occupy any portion of any of the Properties except
under and pursuant to a Lease or pursuant to an easement or agreement
reflected in the Title Insurance Policies. Each Lease which provides for
annual rental payments constituting five (5%) percent or more of the Net
Operating Income with respect to an Individual Property for the 1996
calendar year (taking into account the Leases of any Affiliates of the
tenant under the Lease in question or any other Leases of that tenant) is
subordinate to the applicable Mortgage either pursuant to its terms or a
subordination agreement.
(aa) Survey. To Borrower's knowledge, the Survey for each of the
Properties delivered to Lender in connection with this Agreement has been
prepared in accordance with the provisions of Section 3.1(c)(iii) hereof,
and does not fail to reflect any material survey matter affecting any of
the Properties or the title thereto.
(bb) REIT Status. Horizon Group is a qualified real estate investment
trust ("REIT") under all applicable laws, Horizon/Xxxx is a partnership
under federal income tax laws and all other Affiliates of Horizon Group, to
the extent required to maintain Horizon Group's REIT status, are qualified
REIT subsidiaries under all applicable laws.
(cc) Filing and Recording Taxes. Borrower shall pay or cause to be paid
all transfer taxes, deed stamps, intangible taxes or other amounts in the
nature of transfer taxes required to be paid by any Person under applicable
Legal Requirements currently in effect in connection with the transfer of
the Properties to Borrower. Borrower shall pay or cause to be paid all
mortgage, mortgage recording, stamp, intangible or other similar tax
required to be paid by any Person under applicable Legal Requirements
currently in effect in connection with the execution, delivery,
recordation, filing, registration, perfection or enforcement of any of the
Loan Documents, including, without limitation, the Mortgages encumbering
the Properties. Under current Legal Requirements, the Mortgages
encumbering the Properties are enforceable in accordance with their
respective terms by Lender (or any subsequent holder thereof).
(dd) Investment Company Act; Other Regulations. Neither Borrower nor
Guarantor is an "investment company," within the meaning of, or that is
required to register under, the Investment Company Act of 1940, as amended,
nor is Borrower a company "controlled" by an "investment company" under
such act as amended, except with respect to an investment company that (i)
controls Borrower, (ii) is required to register under such act as amended
and (iii) has so registered, which regulation is in good standing.
(ee) Single-Purpose. Borrower hereby represents and warrants to, and
covenants with, Lender that as of the date hereof and until such time as
the Debt shall be paid in full:
(i) Borrower does not own and will not own any asset or
property other than (A) the Properties, (B) cash or cash equivalents
(whether invested or not) and (C) incidental personal property necessary
for the ownership or operation of the Properties.
(ii) Borrower will not engage in any business other than the
ownership, management and operation of the Properties and Borrower will
conduct and operate its business substantially as presently conducted and
operated.
(iii) Borrower will not enter into any contract or agreement with
any Affiliate of Borrower, any constituent partner of Borrower or any
Affiliate of any constituent partner, except upon terms and conditions that
are intrinsically fair and substantially similar to those that would be
available on an arm's-length basis with third parties other than any such
party.
(iv) Borrower has not incurred and shall not incur any
indebtedness, secured or unsecured, direct or indirect, absolute or
contingent (including guaranteeing any obligation), other than (A) the
Debt; (B) unsecured trade payables not evidenced by a note customarily
satisfied within sixty (60) days; (C) unsecured indebtedness not evidenced
by a note payable or reimbursable to a tenant under a Lease on account of
work performed or costs incurred by such tenant in connection with its
occupancy of space at an Individual Property pursuant to the Lease,
including costs for tenant improvement work; (D) unsecured indebtedness
relating solely to the financing of capital improvements, tenant
improvements or building equipment related to the Properties and costs
associated with such indebtedness, and (i) which in the aggregate does not
exceed an amount equal to five percent (5%) of the outstanding principal
amount of the Loan at any time, (ii) the proceeds of which are not
distributed to Borrower or any direct beneficial owner of an interest in
Borrower, but are instead used to fund directly the costs of items
described above, (iii) which is evidenced by a note, lease or other written
agreement having terms (other than the interest rate and repayment terms)
no less favorable to Borrower than the terms of the Loan, (iv) the terms of
which shall require that the principal amount of such indebtedness be
repaid from Net Operating Income prior to any distributions to any direct
beneficial owner of an interest in Borrower (other than for income,
franchise, or other taxes imposed on Borrower for the privilege of doing
business in the jurisdictions in which the Property is located) and (v) is
subject to a subordination and standstill agreement satisfactory in form
and substance to Lender and (E) indebtedness relating to the leasing or
financing of equipment at the Properties not in excess of $50,000 per
Individual Property plus reasonable leasing costs of trolleys utilized at
such Individual Property (and which may be secured by such equipment so
financed or leased). Items C, D and E (as to item E, only as it relates to
items in excess of $50,000 for each Individual Property, exclusive of
trolleys) above as they exist on the date hereof are shown on Schedules
XII, XIII and XIV hereof. No indebtedness other than the Debt may be
secured (subordinate or pari passu) by the Properties. Notwithstanding the
foregoing, Borrower, Horizon/Xxxx and Horizon Group may incur any
indebtedness for borrowed money which is unsecured (or secured by property
other than the Properties) provided, however, that the aggregate of such
indebtedness and the indebtedness incurred under C, D and E above, does not
exceed $15,000,000 more than the indebtedness for borrowed money which is
outstanding on the date hereof (which $15,000,000 figure shall be reduced
for the purposes of this paragraph by the dollar amount of all liens for
mechanic and materialmen claims which now or hereafter exist with respect
to the Properties whether or not insured over by the Title Insurance
Policies); if this limit (such limit being referred to as the "Permitted
Loans") is exceeded, the same shall be deemed an Event of Default
hereunder. Refinancings of indebtedness which exists on the date hereof
(or reborrowings of existing indebtedness that is paid down after the date
hereof under an existing revolving loan arrangement) shall not be
restricted provided such refinancing does not increase the amount of
indebtedness being refinanced, security for such debt cannot relate in any
way to the collateral given to Lender by Borrower in connection with the
Loan and such refinancing has been negotiated on a bona fide arm's length
basis ("Permitted Refinancings"). Horizon/Xxxx is the owner of an interest
in partnerships or other entities which own property in Bellport, New York;
the owners of such property shall not incur any borrowings secured thereby
(except for the current construction loan with Xxxxx Fargo Bank) which
provide for the personal liability of all or any portion of the Group in
excess of 25% of such borrowings and, in any event all indebtedness with
respect to such property shall not exceed $29,000,000 in the aggregate (and
the amount up to $29,000,000 will not be taken into account for the
purposes of this paragraph) (such indebtedness up to $29,000,000 is
hereinafter called the "Bellport Indebtedness").
(v) Borrower has not made and will not make any loans or
advances to any third party (including any Affiliate or constituent
partner), and shall not acquire obligations or securities of its
Affiliates.
(vi) Borrower is and will remain solvent and Borrower will pay
its debts and liabilities (including, as applicable, shared personnel
employment and overhead expenses) from its assets as the same shall become
due.
(vii) Borrower has done or caused to be done and will do all
things necessary to observe partnership formalities and preserve its
existence, and Borrower will not, nor will Borrower permit any constituent
partner to amend, modify or otherwise change the partnership certificate,
partnership agreement, articles of incorporation and bylaws, trust or other
organizational documents of Borrower or such constituent partner without
the prior written consent of Lender.
(viii) Borrower will maintain books, records, financial statements
and bank accounts separate from those of its Affiliates and any constituent
partner and Borrower will file its own tax returns. Borrower shall
maintain its books, records, resolutions and agreements as official
records.
(ix) Each of Gilroy V Borrower and Horizon Borrower will be, and
at all times will hold itself out to the public as, a legal entity separate
and distinct from any other entity (including any Affiliate of Borrower or
any constituent partner of Borrower), shall correct any known
misunderstanding regarding its status as a separate entity, shall conduct
business in its own name, shall not identify itself or any of its
Affiliates as a division or part of the other and shall maintain and
utilize separate stationery, invoices and checks.
(x) Borrower is adequately capitalized 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) Neither Borrower nor any constituent partner will seek or
effect the liquidation, dissolution, winding up, consolidation or merger,
in whole or in part, of Borrower.
(xii) Borrower will not commingle the funds and other assets of
Borrower with those of any Affiliate or constituent partner or any other
Person.
(xiii) Borrower has 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 Affiliate or constituent partner or
any other Person.
(xiv) Borrower does not and will not hold itself out to be
responsible for the debts or obligations of any other Person.
(xv) As to Horizon Borrower which is a limited partnership, the
general partner is a limited liability company (which has as a member a
corporation whose sole asset is its interest in such limited liability
company and cash or cash equivalents) whose sole asset is its interest in
Borrower, a note receivable in the amount of $20,000 payable by Third HGI,
Inc., and cash or cash equivalents, and the general partner will at all
times comply (to the extent reasonably applicable thereto), and will cause
Borrower to comply, with each of the representations, warranties, and
covenants contained in this Section 4.1(ee) as if such representation,
warranty or covenant was made directly by such general partner.
(xvi) Intentionally Deleted.
(xvii) Borrower shall at all times cause there to be at least one
(1) duly appointed member of the board of directors (an "Independent
Director") of Third HGI, Inc., which shall at all times be one of the two
members of the general partner of Borrower, reasonably satisfactory to
Lender who shall not have been at the time of each such individual's
appointment, and may not have been at any time during the preceding five
(5) years (A) a shareholder of, or an officer, director, partner or
employee of, Borrower or any of its shareholders, subsidiaries or
Affiliates, (B) a customer of, or supplier to, Borrower or any of its
shareholders, subsidiaries or Affiliates, (C) a Person controlling or under
common control with any such shareholder, partner supplier or customer, or
(D) a member of the immediate family of any such shareholder, officer,
director, partner, employee, supplier or customer. As used herein, the
term "control" means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of a
Person, whether through ownership of voting securities, by contract or
otherwise.
(xviii) Borrower shall cause the board of directors of Third HGI,
Inc. not to take any action which, under the terms of any certificate of
incorporation, by-laws or any voting trust agreement with respect to any
common stock of Third HGI, Inc. or under the operating agreement of the
general partner of Borrower or under the limited partnership agreement of
Borrower, requires a vote of the board of directors of Third HGI, Inc.
unless at the time of such action there shall be at least one (1) member
who is an Independent Director who votes in favor of such action as
required by any of such organizational documents.
(xix) Borrower shall conduct its business so that the assumptions
made with respect to Borrower in that certain opinion letter dated the date
hereof (the "Insolvency Opinion") delivered by Xxxxxxx & Xxxxx in
connection with the Loan, as shown on Schedule XVII hereof, shall be true
and correct in all material respects.
(ff) No Change in Facts or Circumstances; Disclosure. All information
submitted by Borrower and Guarantor to Lender and in all financial
statements, rent rolls, reports, certificates and other documents submitted
in connection with the Loan or in satisfaction of the terms thereof, are
accurate, complete and correct in all respects. There has been no material
adverse change in any condition, fact, circumstance or event that would
make any such information inaccurate, incomplete or otherwise misleading.
Borrower and Guarantor have disclosed to Lender all material facts and has
not failed to disclose any material fact that could cause any
representation or warranty made herein to be materially misleading.
(gg) Illegal Activity. No portion of any Individual Property has been
or will be purchased with proceeds of any illegal activity.
(hh) Ground Lease. Borrower hereby represents and warrants to Lender
the following with respect to each Ground Lease:
(i) Recording; Modification. A memorandum of the Ground Lease
has been duly recorded, the Ground Lease permits the interest of the
Borrower to be encumbered by a mortgage, the landlord under the Ground
Lease, to the extent required thereby, has approved and consented to the
encumbrance of the Individual Property by the applicable Mortgage and a
complete and correct description of each Ground Lease, including all
amendments, modifications or supplements thereto, is set forth on Schedule
V. The Ground Lease may not be canceled, terminated, surrendered or
amended without the prior written consent of Lender.
(ii) No Liens. Except for the Permitted Encumbrances, to
Borrower's knowledge the Borrower's interest in the Ground Lease is not
subject to any liens or encumbrances superior to, or of equal priority
with, the Mortgage other than the landlord's related fee interest.
(iii) Ground Lease Assignable. The Borrower's interest in the
Ground Lease is assignable to the Lender, and by Lender and its successors
and assigns, upon notice to, but without the consent of, the Landlord (or,
if any such consent is required, it has been obtained prior to the Closing
Date).
(iv) Default. As of the Closing Date, the Ground Lease is in
full force and effect and, to Borrower's knowledge, no default has occurred
under the Ground Lease and there is no existing condition which, but for
the passage of time or the giving of notice, could result in a default
under the terms of the Ground Lease.
(v) Notice. The Ground Lease requires the Landlord thereunder
to give notice of any default by the Borrower to the Lender. The Ground
Lease, or an estoppel letter received by the Lender from the Landlord,
further provides that notice of termination given under the Ground Lease is
not effective against the Lender unless a copy of the notice has been
delivered to the Lender in the manner described in the Ground Lease.
(vi) Cure. The Lender is permitted the opportunity (including,
where necessary, sufficient time to gain possession of the interest of the
Borrower under the Ground Lease) to cure any default under the Ground
Lease, which is curable after the receipt of notice of any default before
the Landlord thereunder may terminate the Ground Lease.
(vii) Term. The Ground Lease has a term which extends not less
than forty (40) years beyond the Maturity Date of the Loan (except for the
Ground Lease on the Silverthorne additional parking area which extends to
October 1, 2026).
(viii) New Lease. The Ground Lease requires the Landlord to enter
into a new lease upon termination of the Ground Lease for any reason,
including rejection of the Ground Lease in a bankruptcy proceeding.
(ix) Insurance Proceeds. Under the terms of the Ground Lease
and the related Mortgage, taken together, any related insurance and
condemnation proceeds will be applied either to the repair or restoration
of all or part of the applicable Individual Property, with the Lender
having the right to hold and disburse the proceeds as the repair or
restoration progresses, or to the payment of the outstanding principal
balance of the Loan together with any accrued interest thereon.
(ii)(y) Except as shown on Schedule XIX hereto (the "Carveout
Properties") Borrower or its entity Affiliates do not own, lease, have an
option to purchase or lease and do not have any other interest in any real
property which lies within a five (5) mile radius of any Individual
Property and (z) there are no facilities, utilities or rights in, on or
associated with the Carveout Properties which is either legally or
functionally necessary or desirable for the use, operation and maintenance
of the Properties unless covered by adequate recorded and insured easements
benefiting the Individual Property.
(jj) The square footage of the Improvements on the Individual
Properties as shown on Schedule I hereto is true and correct and the gross
leaseable area of all improvements owned or leased by Borrower and its
entity Affiliates as of June 30, 1997 is 9,788,597 square feet.
(kk) Within one year from the date hereof, Borrower shall fully
implement the environmental action plan for the Lighthouse Place at
Michigan City, Indiana Individual Property as shown on Schedule XVIII.
(ll) The costs of all tenant improvements and leasing
commissions incurred through June 30, 1997 with respect to Berkshire Outlet
Center at Xxx, Massachusetts and Lighthouse Place at Michigan City Phase VI
is shown on Schedule XV hereto.
Section 4.2 Survival of Representations, Future Representations.
Borrower and Guarantor agree that all of the representations and warranties
of Borrower and Guarantor set forth in Section 4.1 and elsewhere in this
Agreement and in the other Loan Documents shall survive for so long as the
context thereof requires but at least as long as any amount remains owing
to Lender under this Agreement or any of the other Loan Documents by
Borrower. All representations, warranties, covenants and agreements made
in this Agreement or in the other Loan Documents by Borrower and Guarantor
shall be deemed to have been relied upon by Lender notwithstanding any
investigation heretofore or hereafter made by Lender or on its behalf.
Any representations and warranties in Section 4.1 which relate to matters
to be performed after the Closing Date shall be treated as covenants for
the purpose of any grace or cure periods provided in Section 8.1 hereof.
V. AFFIRMATIVE COVENANTS
Section 5.1 Borrower and Guarantor Covenants.
From the date hereof and until payment and performance in full of all
obligations of Borrower under the Loan Documents or the earlier release of
the Liens of all Mortgages encumbering the Properties (and all related
obligations) in accordance with the terms of this Agreement and the other
Loan Documents, Borrower and Guarantor hereby covenant and agree with
Lender that:
(a) Existence; Compliance with Legal Requirements; Insurance. Borrower
and Guarantor shall do or cause to be done all things necessary to
preserve, renew and keep in full force and effect their existence, rights,
licenses, permits and franchises and comply with all Legal Requirements
applicable to them and their Properties, including, without limitation, as
to Horizon Group, to maintain Horizon Group's status as a qualified REIT
under applicable law. Each Borrower and each Guarantor shall maintain its
existing organizational structure (for example, as a limited partnership, a
corporation, etc., as the case may be). Borrower shall at all times
maintain, preserve and protect all of its property used or necessary in the
conduct of its business and shall keep all of the Properties in good
working order and repair, and from time to time make, or cause to be made,
all reasonably necessary repairs, renewals, replacements, betterments and
improvements thereto, all as more fully provided in the Mortgages
encumbering such Properties. Borrower shall keep each of the Properties
insured at all times by financially sound and reputable insurers, to such
extent and against such risks, and maintain liability and such other
insurance, as is more fully provided in this Agreement.
(b) Taxes and Other Charges. Borrower shall pay all Taxes and Other
Charges now or hereafter levied or assessed or imposed against the
Properties or any part thereof as the same become due and payable.
Borrower will deliver to Lender, promptly upon Lender's request, receipts
for payment or other evidence satisfactory to Lender that the Taxes and
Other Charges have been so paid or are not then delinquent. Borrower shall
not suffer and shall promptly cause to be paid and discharged any lien or
charge whatsoever which may be or become a lien or charge against any of
the Properties, and shall promptly pay for all utility services provided to
the Properties. Borrower shall furnish to Lender receipts for the payment
of the Taxes and the Other Charges prior to the date the same shall become
delinquent. After prior written notice to Lender, Borrower, at its own
expense, may contest by appropriate legal proceeding, promptly initiated
and conducted in good faith and with due diligence, the amount or validity
or application in whole or in part of any Taxes or Other Charges, provided
that (i) no Event of Default has occurred and remains uncured, (ii)
Borrower is permitted to do so under the provisions of any mortgage or deed
of trust affecting any of the Properties, (iii) such proceeding shall not
be prohibited under and shall be conducted in accordance with the
provisions of any other material instrument to which Borrower is subject
and shall not constitute a default thereunder and such proceeding shall be
conducted in accordance with all applicable statutes, laws and ordinances,
(iv) no Individual Property nor any part thereof or interest therein will
be in danger of being sold, forfeited, terminated, canceled or lost, and
(v) Borrower shall promptly upon final determination thereof pay the amount
of any such Taxes or Other Charges, together with all costs, interest and
penalties which may be payable in connection therewith. In addition, if
the Taxes or Other Charges are not paid in full when the Borrower commences
such contest, then the following shall apply: (A) such proceeding shall
suspend the collection of Taxes or Other Charges from the applicable
Individual Property, and (B) Borrower shall have furnished such security as
may be required in the proceeding, or as may be requested by Lender, to
insure the payment of any such Taxes or Other Charges, together with all
interest and penalties thereon. Lender may pay over any such cash deposit
or part thereof held by Lender to the claimant entitled thereto at any time
when, in the judgment of Lender, the entitlement of such claimant is
established.
(c) Litigation. Borrower and Guarantor shall give prompt written
notice to Lender of any litigation or governmental proceedings pending or
threatened in writing against Borrower and Guarantor which is reasonably
likely to have a Material Adverse Effect (for the purpose of this notice
requirement, any litigation or proceeding which involves a claim of, or may
result in liability to Borrower and/or Guarantor in excess of, $500,000
shall be deemed to have a Material Adverse Effect).
(d) Access to Premises. Borrower shall permit agents, representatives
and employees of Lender to inspect any of the Properties or any part
thereof at reasonable hours upon reasonable advance notice, subject,
however to the rights of tenants under Leases and provided that such
inspections shall not unreasonably interfere with the operations or the
tenants, occupants and guests of such Properties.
(e) Notice of Default. Borrower or Guarantor (as the case may be)
shall promptly advise Lender of any material adverse change in Borrower's
or Guarantor's condition, financial or otherwise, or of the occurrence of
any Default or Event of Default of which Borrower or Guarantor has
knowledge.
(f) Cooperate in Legal Proceedings. Except with respect to any claim
by Borrower against Lender, Borrower and Guarantor shall cooperate fully
with Lender with respect to any proceedings before any court, board or
other Governmental Authority which may in any way affect the rights of
Lender hereunder or any rights obtained by Lender under any of the other
Loan Documents and, in connection therewith, permit Lender, at its
election, to participate in any such proceedings.
(g) Perform Loan Documents. Borrower or Guarantor (as the case may be)
shall observe, perform and satisfy all the terms, provisions, covenants and
conditions of, and shall pay when due all costs, fees and expenses to the
extent required under the Loan Documents executed and delivered by, or
applicable to, Borrower or Guarantor (as the case may be).
(h) Insurance Benefits. Borrower shall cooperate with Lender in
obtaining for Lender the benefits of any Insurance Proceeds lawfully or
equitably payable in connection with any of the Properties, and Lender
shall be reimbursed for any expenses reasonably incurred in connection
therewith (including attorneys' fees and disbursements, and the payment by
Borrower of the expense of an appraisal on behalf of Lender in case of a
fire or other casualty affecting any of the Properties or any part thereof)
out of such Insurance Proceeds, all as more specifically provided in
Article VII below.
(i) Further Assurances; Supplemental Mortgage Affidavits. Borrower
shall, at Borrower's sole cost and expense:
(i) furnish to Lender all instruments, documents, boundary
surveys, footing or foundation surveys, certificates, plans and
specifications, appraisals, title and other insurance reports and
agreements, and each and every other document, certificate, agreement and
instrument required to be furnished by Borrower pursuant to the terms of
the Loan Documents or reasonably requested by Lender in connection
therewith;
(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 obligations of Borrower
under the Loan Documents, 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 this Agreement and the other Loan
Documents, as Lender shall reasonably require from time to time.
(j) Borrower shall pay by the date required by Legal Requirements all
state, county and municipal recording, intangible and other taxes imposed
upon the execution and/or recordation of the Mortgages encumbering each of
the Properties or upon either the execution or delivery of the Note. If at
any time Lender determines, based on applicable law, that Lender is not
being afforded the maximum amount of security available from any one or
more of the Properties as a direct or indirect result of applicable taxes
not having been paid with respect to any such Properties, Borrower agrees
that Borrower will execute, acknowledge and deliver to Lender, immediately
upon Lender's request, supplemental affidavits or other appropriate
documents or instruments increasing the amount of the Debt attributable to
any such Individual Property (as set forth on Schedule I annexed hereto) to
an amount determined by Lender to be equal to the lesser of (i) the greater
of the fair market value of the applicable Individual Property (A) as of
the date hereof and (B) as of the date such supplemental documents are to
be delivered to Lender, and (ii) the amount of the Debt attributable to any
such Individual Property (as set forth on Schedule I annexed hereto), and
Borrower shall, on demand, pay any additional taxes.
(k) Financial Reporting.
(i) Borrower and Guarantor shall keep adequate books and
records of account in accordance with GAAP, or in accordance with other
methods acceptable to Lender in its sole discretion, consistently applied
and furnish to Lender, in electronic, paper or other form acceptable to
Lender, the following:
(A) quarterly income statements and sales per square
foot (to the extent provided by tenants) per tenant analysis for each
Individual Property together with a property balance sheet (excluding cash,
accounts receivables and accounts payable balances) for such quarter,
prepared and certified by Borrower in the form required by Lender,
detailing the Gross Income From Operations received, the Operating Expenses
incurred and the Net Operating Income before and after debt service
(principal and interest) and major capital improvements for that quarter
and containing appropriate year to date information, and containing a
comparison for such quarter with the Annual Budget delivered pursuant to
clause (F), within forty-five (45) days after the end of each calendar
quarter;
(B) certified updated rent rolls signed and dated by
Borrower, detailing the names of all tenants of the Properties, the portion
of Improvements on the Properties occupied by each tenant, the base rent
and any other charges payable under each Lease and the term of each Lease,
including the expiration date, and any other information as is reasonably
required by Lender, within forty-five (45) days after the end of each
fiscal quarter;
(C) annual income statement and sales per square foot
(to the extent provided by tenants) per tenant analysis for each Individual
Property detailing the Gross Income From Operations received, total
Operating Expenses incurred, total Net Operating Income, total cost of all
capital improvements, total debt service and total cash flow, and the
security deposits held in connection with any Lease, and including a
break-down of such Gross Income From Operations, Operating Expenses, Net
Operating Income, costs, cash flow and security deposits with respect to
each Individual Property, to be certified by Borrower, within ninety (90)
days after each calendar year-end;
(D) quarterly consolidated unaudited balance sheet and
income statement of Borrower and Horizon Group in the form reasonably
required by Lender within forty-five (45) days after the end of each
calendar quarter of Borrower;
(E) an annual consolidated balance sheet and income
statement of Horizon Group in the form reasonably required by Lender,
audited by a "Big Six" accounting firm, within ninety (90) days after each
calendar year-end;
(F) an Annual Budget presented on a monthly basis
consistent with the monthly and annual income statements described above
for the Property, including cash flow projections for the upcoming year,
and all proposed capital replacements and improvements at least fifteen
(15) days prior to the start of each calendar year prior to the Maturity
Date;
(G) quarterly certification by Borrower, in the form
reasonably required by Lender, of the Debt Service Coverage Ratio and
Financial Covenants contained herein (which certificates shall include Debt
Service Coverage Ratio and Minimum Coverage as required by Section 5.2, in
the form of Schedule IX hereto), within forty-five (45) days after the end
of each calendar quarter;
(H) quarterly verification by a "Big Six" Accounting
firm, in the form required by the agreed upon procedures letter attached
hereto as Schedule VIII, of the Debt Service Coverage Ratio and other
Financial Covenants contained in Section 5.2 hereof within forty-five (45)
days after the end of such calendar quarter;
(I) Upon reasonable request from Lender, Borrower shall furnish
to Lender an accounting of all security deposits held in connection with
any Lease, including the name and identification number of the accounts in
which such security deposits are held, the name and address of the
financial institutions in which such security deposits are held and the
name of the Person to contact at such financial institution, along with any
authority or release necessary for Lender to obtain information regarding
such accounts directly from such financial institutions; and
(J) Borrower shall furnish Lender with such other additional
financial or management information as may, from time to time, be
reasonably required by Lender in form and substance satisfactory to Lender.
(l) Business and Operations. Borrower and Guarantor will continue to
engage in the businesses presently conducted by it as and to the extent the
same are necessary for the ownership, maintenance, management and operation
of each of the Properties. Borrower and its general partner will qualify
to do business and will remain in good standing under the laws of each
jurisdiction as and to the extent the same are required for the ownership,
maintenance, management and operation of each of the Properties.
(m) Title to the Properties. Borrower will warrant and defend (i) the
title to each of the Properties and every part thereof, subject only to
Liens permitted hereunder (including Permitted Encumbrances), and (ii) the
validity and priority of the Liens of the Mortgages and the Assignments of
Leases on the Properties, subject only to Liens permitted hereunder
(including Permitted Encumbrances), in each case against the claims of all
Persons whomsoever. Borrower shall reimburse Lender for any losses, costs,
damages or expenses (including reasonable attorneys' fees and court costs)
incurred by Lender if an interest in any of the Properties, other than as
permitted hereunder, is claimed by another Person.
(n) Costs of Enforcement. In the event (i) that any Mortgage
encumbering any of the Properties is foreclosed in whole or in part or that
any such Mortgage is put into the hands of an attorney for collection,
suit, action or foreclosure, (ii) of the foreclosure of any mortgage prior
to or subsequent to any Mortgage encumbering any of the Properties in which
proceeding Lender is made a party, or (iii) of the bankruptcy, insolvency,
rehabilitation or other similar proceeding in respect of Borrower,
Guarantor or their Affiliates or an assignment by Borrower, Guarantor or
their Affiliates for the benefit of their creditors, Borrower, its
successors or assigns, shall be chargeable with and agrees to pay all costs
of collection and defense, including reasonable attorneys' fees in
connection therewith and in connection with any appellate proceeding or
post-judgment action involved therein, which shall be due and payable
together with all required service or use taxes.
(o) Estoppel Statement. (i) After request by Lender, Borrower shall
within ten (10) Business Days furnish Lender with a statement, duly
acknowledged and certified, setting forth (A) the amount of the original
principal amount of the Loan, (B) the unpaid principal amount of the Loan,
(C) the Applicable Interest Rate, (D) the date installments of interest
and/or principal were last paid, (E) any known offsets or defenses to the
payment of the Debt, if any, and (F) that the Note, this Agreement, the
Mortgages and the other Loan Documents are valid, legal and binding
obligations and have not been modified or if modified, giving particulars
of such modification. If requested by Borrower, Lender shall provide
Borrower with a statement of the principal balance of the Note and the date
through which interest has been paid.
(ii) Borrower shall deliver to Lender upon request (not more
than twice each calendar year, but not counting the delivery in connection
with the closing of the Loan) tenant estoppel certificates from (i) any
existing tenants constituting tenants under Material Leases at each
Individual Property and (ii) existing tenants inclusive of those described
in clause (i) that lease in the aggregate no less than seventy percent
(70%) of the gross leaseable area at each Individual Property, all such
tenant estoppel certificates in form and substance satisfactory to Lender.
(p) Loan Proceeds. Borrower shall use the proceeds of the Loan
received by it on the Closing Date only for the purposes set forth in
Section 2.2.
(q) Ground Lease. Borrower shall in a timely manner observe, perform
and fulfill each and every covenant, term and provision of the Ground Lease
in accordance with the terms thereof and within all applicable grace or
cure periods therein provided and will perform all of its obligations with
respect thereto as set forth in the Mortgages.
(r) Leasing Matters. Except as otherwise consented to by Lender, all
Leases hereafter entered into shall be written on the standard form of
lease which shall have been approved by Lender in its reasonable
discretion. Upon request, Borrower shall furnish Lender with executed
copies of all Leases. No material changes may be made to the
Lender-approved standard lease without the prior written consent of Lender,
provided, however, that changes in such form may be made in the course of
negotiation of non-Material Lease without obtaining Lender's consent. In
addition, all renewals of Leases and all proposed leases shall provide for
rental rates and terms comparable to existing local market rates and terms
and shall be arms-length transactions with bona fide, independent third
party tenants. Lender reserves the right to notify Borrower of its desire
to have the right to approve any renewals of Leases and all proposed
leases, both as to form and content, for tenancies (when taken together
with other leases by the same tenant or its Affiliates at the same
Individual Property) which exceed 8,000 square feet or where the base
annual rental thereunder shall exceed ten percent (10%) of the aggregate
annual base rent then payable at the Individual Property involved (herein,
a "Material Lease") in which event, no such lease or renewal shall be
entered into without the consent of Lender, which consent shall not be
unreasonably withheld provided, however, if Lender does not respond to a
request for approval within five (5) Business Days from the date Lender
receives the request with a full copy of the Lease, such Lease shall be
deemed approved. All Leases shall provide that they are subordinate to the
Mortgage with respect to the related Individual Property and that the
tenant agrees to attorn to Lender. Borrower (i) shall observe and perform
all the obligations imposed upon the landlord under the Leases so long as
the tenant is not in default thereunder beyond any applicable notice and
grace period; (ii) shall promptly send copies to Lender of all notices of
default which Borrower shall send or receive thereunder; (iii) shall
enforce all of the terms, covenants and conditions contained in the Leases
upon the part of the lessee thereunder to be observed or performed, short
of termination thereof; Borrower may terminate, however, any non-Material
Lease as the result of a default by lessee thereunder; (iv) shall not
collect any of the Rents more than one (1) month in advance of when due
under the applicable Lease; and (v) shall not execute any other assignment
of the lessor's interest in the Leases or the Rents. In addition, with
respect to any Material Lease, Borrower shall not, without the prior
written consent of Lender, which consent shall not be unreasonably
withheld, (A) alter, modify or change the terms of the Leases (except,
failure of Lender to respond to a request with respect thereto, within five
Business Days after receipt of such request, will be deemed approved), or
cancel or terminate the Leases or accept a surrender thereof or convey or
transfer or suffer or permit a conveyance or transfer of the Land or of any
interest therein so as to effect a merger of the estates and rights of, or
a termination or diminution of the obligations of, lessees thereunder, (B)
alter, modify or change the terms of any guaranty, letter of credit or
other credit support with respect to the Leases (a "Lease Guaranty") or
cancel or terminate such Lease Guaranty, or (C) consent to any assignment
of or subletting under the Leases not in accordance with their terms.
(s) Alterations. Borrower shall obtain Lender's prior written consent
to any alterations to any Improvements on any Individual Property that may
have a material adverse effect on Borrower's financial condition (except
for tenant improvement work required under Leases), the value of such
Individual Property or the Net Operating Income with respect to such
Individual Property. If the total unpaid amounts due and payable with
respect to alterations to the Improvements on the Properties (other than
such amounts to be paid or reimbursed by tenants under the Leases and other
than with respect to ongoing improvements to Michigan City, Indiana and
Lee, Massachusetts) shall at any time exceed five percent (5%) of the
outstanding principal balance of the Loan (the "Threshold Amount"),
Borrower shall promptly deliver to Lender as security for the payment of
such amounts and as additional security for Borrower's obligations under
the Loan Documents, (i) cash, (ii) U.S. Obligations, (iii) other securities
having a rating acceptable to Lender and that the applicable Rating
Agencies have confirmed in writing will not, in and of itself, result in a
downgrade, withdrawal or qualification of the initial, or, if higher, then
current ratings assigned in connection with any Securitization or (iv) a
completion bond or letter of credit issued by a financial institution
having a rating by Standard & Poor's Ratings Group of not less than A-1+ if
the term of such bond or letter of credit is no longer than three (3)
months or, if such term is in excess of three (3) months, issued by a
financial institution having a rating that is acceptable to Lender and that
the applicable Rating Agencies have confirmed in writing will not, in and
of itself, result in a downgrade, withdrawal or qualification of the
initial, or, if higher, then current ratings assigned in connection with
any Securitization. Such security shall be in an amount equal to the
excess of the total unpaid amounts with respect to alterations to the
Improvements on the Properties (other than such amounts to be paid or
reimbursed by tenants under the Leases) over the Threshold Amount and may
be reduced from time to time by the cost estimated by Lender to terminate
any of the alterations and restore the related Individual Property to the
extent necessary to prevent any material adverse effect on the value of
such Individual Property. Security will be refunded to the extent it
exceeds such excess, at the request of Borrower, provided no Event of
Default exists hereunder.
(t) Submission of Budgets. (a) For the partial year period commencing
on the Closing Date, and for each Fiscal Year thereafter, the Borrower
shall submit to Lender the Annual Budget not later than forty-five (45)
days prior to the commencement of such period or Fiscal Year. Such Annual
Budget shall set forth in reasonable detail budgeted monthly operating
income and monthly operating capital and monthly operating and other
expenses for the Properties, including all planned capital expenditures in
respect of the Properties for such period or Fiscal Year. Each such Annual
Budget submitted shall hereinafter be referred to as an "Annual Budget".
(b) In the event that the Borrower must incur an operating
expense or capital expense not set forth in the Annual Budget which is in
excess of $100,000 (each an "Extraordinary Expense"), then the Borrower
shall promptly deliver to Lender a reasonably detailed explanation of such
Extraordinary Expense.
Section 5.2 Borrower's Financial Covenants. Any inconsistency between
the provisions of this Section 5.2 and those of Article IV, Section 5.1 and
Article VI shall be governed by the provisions of this Section 5.2.
Borrower and Guarantor hereby covenant and agree as follows:
(a) Borrower and Guarantor shall cause the Debt Service Coverage Ratio
for all Properties in the aggregate to at all times equal or exceed the
following amounts corresponding to, and as of, the last date of each
calendar quarter (for example, the Debt Service Coverage Ratio for the
twelve month period ending September 30, 1997 shall be at least 1.35:1):@@
Calendar Quarter
Debt Service Coverage Ratio
requirement as of the last day
in corresponding calendar quarter
3 Q 1997
1.35:1
4 Q 1997
1.40:1
1 Q 1998
1.50:1
2 Q 1998
1.55:1
3 Q 1998
1.60:1
4 Q 1998 and thereafter
1.65:1
(b) Borrower and Guarantor shall cause Horizon Group, Horizon/Xxxx,
Borrower and any Affiliate (other than a natural person) of any of them
(collectively, the "Group") to utilize all net proceeds (that is, the debt
amount or the preferred stock equity price less the reasonable and
customary costs and expenses of issuance of same) derived from the issuance
of any debt (other than Permitted Loans, Permitted Refinancings and
Bellport Indebtedness as set forth in Section 4.1(ee)(iv) hereof) or the
issuance of any preferred stock equity to reduce the Loan and all such net
proceeds shall be paid to Lender upon the funding of same.
(c) Borrower and Guarantor shall cause the Minimum Coverage to exist at
all times from and after the last day of the third calendar quarter of
1997. The term "Coverage" on any date (the "Calculation Date") shall mean
the quotient resulting from the division of (A) Adjusted Cash Flow for the
twelve calendar month period immediately preceding the Calculation Date
(the "trailing twelve month period") by (B) the sum of the greater of (i)
all payments on all mortgage and other indebtedness of the Group
(including, without limitation, an allocable portion of indebtedness of any
partnership, joint venture or other entity in which the Group has an
interest, which allocable portion (for the purposes of this Section 5.2
only, the "allocable portion") shall be based on the percentage economic
ownership interest of the Group in the entity involved or, if guaranteed by
any member of the Group for a greater amount, such greater amount) due
within the twelve month period immediately following such trailing twelve
month period provided, however, if indebtedness matures during such
twelve-month period, the sum of all installments due on such indebtedness
prior to such maturity will be divided by the number of months to which
such installments relate with such quotient being multiplied by 12, with
such product being the aggregate of indebtedness payments deemed due as to
such maturing indebtedness for the calculation in this subsection required,
or (ii) ten percent (10%) of the unpaid principal balance of all such
mortgage and other indebtedness of the Group existing on the Calculation
Date; and the term "Minimum Coverage" shall mean a Coverage that equals or
exceeds the following numbers corresponding to, and as of, the last date of
each calendar quarter (for example, the Minimum Coverage for the twelve
month period ending March 31, 1998 shall be at least 1.40):
@@
Calendar Quarter
Minimum Coverage required as of the
last day in corresponding Calendar Quarter
3 Q 97
1.35
4 Q 97
1.35
1 Q 98
1.40
2 Q 98
1.45
3 Q 98 and thereafter
1.50
@@"Adjusted Cash Flow" shall mean, with respect to the Group, earnings
before interest, taxes, depreciation and amortization ("EBITDA"), all
calculated in accordance with GAAP, (w) adjusted for all gains and/or
losses on asset sales and debt restructuring, (x) less minimum Capital
Expenditure assuming $1.00 per gross leaseable square foot per annum for
all real estate properties owned by the Group (including, without
limitation, the allocable portion of the square footage of any improvements
owned by any partnership, joint venture or other entity in which the Group
has an interest), (y) adjustments necessary to reverse GAAP straightline
rental income and rental expense adjustments included in the calculation of
the EBITDA and (z) less amortization costs related to interest rate
protection contracts and rate buydowns.
(d) Borrower shall cause Horizon/Xxxx to declare its dividends and
distributions no more than once in each calendar quarter, which dividends
and distributions declared in any such calendar quarter, together with
those declared in the three immediately preceding calendar quarters, shall
not exceed the greater of (a) 100% of Adjusted Funds From Operations for
the previous twelve month period or (b) the amount necessary to maintain
Horizon Group's tax status as a real estate investment trust under the then
current United States Internal Revenue Code, provided however, no dividend
or distribution may be declared with respect to any quarter in excess of
$.35 per partnership unit without the prior written approval of Lender.
"Adjusted Funds From Operations" shall mean net income before minority
interest (computed in accordance with GAAP excluding 1) gains or losses
from debt restructuring or the sale of the real estate and certain other
one-time charges 2) depreciation of real estate; and 3) amortization other
than the amortization of deferred financing cost and adjustments for
unconsolidated partnerships and joint ventures (FFO as defined by National
Association of Real Estate Investment Trusts in March 1995), then further
adjusted to a) eliminate the effect of straight-line rental income and
expense and b) deduct normalized capital expenditures of $.90 associated
with leasing, tenant improvements and non-revenue enhancing upkeep of
properties.
(e) Horizon Group shall remain the sole general partner of Horizon/Xxxx
and Horizon Group shall not engage in any other business activities other
than acting as the general partner of Horizon/Xxxx. Horizon/Xxxx shall
continue to maintain the same economic and voting interest in the Horizon
Borrower as exists on the date hereof and the Horizon Borrower shall
maintain the same or greater economic and voting interests in the Gilroy V
Borrower as exists on the date hereof.
(f) No change in accounting policies of the Group from that in
existence on December 31, 1996 shall be made without prior written
notification to Lender in which case Lender may require a change to the
method of calculations to be made with respect to subparagraphs (c) and (d)
of this Section 5.2 to give such calculations substantially the same
economic effect, which change or changes in method will be deemed effective
upon notice from Lender to Borrower.
VI. NEGATIVE COVENANTS
Section 6.1 Borrower's and Guarantor's Negative Covenants.
From the date hereof until payment and performance in full of all
obligations of Borrower and Guarantor under the Loan Documents or the
earlier release of the Liens of all Mortgages encumbering each of the
Properties in accordance with the terms of this Agreement and the other
Loan Documents, Borrower and Guarantor covenant and agree with Lender as to
the following:
(a) Operation of Properties. Borrower shall not, without the prior
consent of Lender (which consent shall not be unreasonably withheld),
terminate any Management Agreement relating to any Individual Property or
otherwise replace the Manager or enter into any other management agreements
with respect to any of the Properties. Borrower shall not enter into any
new management agreement nor otherwise replace the Manager unless the
Manager enters into Lender's then standard form of assignment of management
agreement and subordination of management fees prior to the effectiveness
of such new agreement and/or replacement.
(b) Liens. Borrower shall not, without the prior written consent of
Lender, create, incur, assume or suffer to exist any Lien on any portion of
any of the Properties or permit any such action to be taken, except:
(i) Permitted Encumbrances;
(ii) Liens created by or permitted pursuant to the Loan
Documents;
(iii) Liens for Taxes, or Other Charges not yet due and payable.
(c) Dissolution. Borrower and Guarantor shall not dissolve, terminate,
liquidate, merge with or consolidate into another Person.
(d) Change In Business. Borrower shall not enter into any line of
business other than the ownership and operation of the Properties, and
Borrower and Guarantor shall not 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 their present
business.
(e) Debt Cancellation. Borrower and Guarantor shall not cancel or
otherwise forgive or release any material claim or debt owed to Borrower
and Guarantor by any Person, except for adequate consideration and in the
ordinary course of their respective business.
(f) Affiliate Transactions. Borrower shall not enter into, or be a
party to, any transaction with an Affiliate of Borrower or any of the
partners of Borrower except in the ordinary course of business and on terms
which are fully disclosed to Lender in advance and are no less favorable to
Borrower or such Affiliate than would be obtained in a comparable
arm's-length transaction with an unrelated third party, and, if the amount
to be paid to its Affiliate pursuant to the transaction is greater than
$50,000, then only the terms which are fully disclosed to Lender in
advance.
(g) Zoning. Borrower shall not initiate or consent to any zoning
reclassification of any portion of any of the Properties or seek any
variance under any existing zoning ordinance or use or permit the use of
any portion of any of the Properties in any manner that could result in
such use becoming a non-conforming use under any zoning ordinance or any
other applicable land use law, rule or regulation, without the prior
consent of Lender. If under applicable zoning provisions the use of all or
any portion of any of the Properties is or shall become a nonconforming
use, Borrower shall not cause or permit the nonconforming use to be
discontinued or abandoned without the prior written consent of Lender.
(h) Assets. Borrower shall not purchase or own any properties other
than the Properties, incidental personal property necessary for the
ownership or operation of the Properties, and cash or cash equivalents
(whether or not invested).
(i) No Joint Assessment. Borrower shall not suffer, permit or initiate
the joint assessment of any Individual Property (i) with any other real
property constituting a tax lot separate from such Individual Property, and
(ii) with any portion of such Individual Property which may be deemed to
constitute personal property, or any other procedure whereby the lien of
any taxes which may be levied against such personal property shall be
assessed or levied or charged to such Individual Property.
(j) Principal Place of Business. Borrower and Guarantor shall not
change its principal place of business set forth on the first page of this
Agreement without first giving Lender thirty (30) days prior written
notice.
(k) ERISA. (i) Borrower and Guarantor shall not engage in any
transaction which would cause any obligation, or action taken or to be
taken, hereunder (or the exercise by Lender of any of its rights under the
Note, this Agreement or the other Loan Documents) to be a non-exempt (under
a statutory or administrative class exemption) prohibited transaction under
the Employee Retirement Income Security Act of 1974, as amended ("ERISA").
(ii) Borrower and Guarantor further covenants and agrees to
deliver to Lender such certifications or other evidence from time to time
throughout the term of the Loan, as requested by Lender in its sole
discretion, that (A) Borrower and Guarantor are not an "employee benefit
plan" as defined in Section 3(3) of ERISA, which is subject to Title I of
ERISA, or a "governmental plan" within the meaning of Section 3(3) of
ERISA; (B) Borrower and Guarantor are not subject to state statutes
regulating investments and fiduciary obligations with respect to
governmental plans; and (C) one or more of the following circumstances is
true:
(1) Equity interests in Borrower and Guarantor are publicly offered
securities, within the meaning of 29 C.F.R. o2510.3-101(b)(2);
(2) Less than twenty-five percent (25%) of each outstanding class of
equity interests in Borrower and Guarantor are held by "benefit plan
investors" within the meaning of 29 C.F.R. o2510.3-101(f)(2); or
(3) Borrower qualifies as an "operating company" or a "real estate
operating company" within the meaning of 29 C.F.R. o2510.3-101(c) or (e) or
an investment company registered under The Investment Company Act of 1940.
(l) Liens. Borrower and Guarantor shall not permit to occur loss with
respect to any Individual Property by reason of any Lien on an Individual
Property whether or not insured over by the title company issuing the Title
Insurance Policies.
VII. CASUALTY; CONDEMNATION; ESCROWS
Section 7.1 Insurance; Casualty and Condemnation.
7.1.1 Insurance.
(a) Borrower shall obtain and maintain, or cause to be maintained,
insurance for Borrower and each of the Properties providing at least the
following coverages:
(i) comprehensive all risk insurance on the Improvements and the
Personal Property, including contingent liability from Operation of
Building Laws, Demolition Costs and Increased Cost of Construction
Endorsements, in each case (A) in an amount equal to one hundred percent
(100%) of the "Full Replacement Cost," which for purposes of this Agreement
shall mean actual replacement value (exclusive of costs of excavations,
foundations, underground utilities and footings) with a waiver of
depreciation, but the amount shall in no event be less than the outstanding
principal balance of the Loan; (B) containing an agreed amount endorsement
with respect to the Improvements and Personal Property waiving all
co-insurance provisions; (C) providing for no deductible in excess of Five
Percent (5%) of the Net Operating Income at the Closing Date; and (D)
containing an "Ordinance or Law Coverage" or "Enforcement" endorsement if
any of the Improvements or the use of the Individual Property shall at any
time constitute legal non-conforming structures or uses. In addition,
Borrower shall obtain (y) flood hazard if any portion of the Improvements
is currently or at any time in the future located in a federally designated
"special flood hazard area", flood hazard insurance in an amount equal to
the lesser of (1) the outstanding principal balance of the Note or (2) the
maximum amount of such insurance available under the National Flood
Insurance Act of 1968, the Flood Disaster Protection Act of 1973 or the
National Flood Insurance Reform Act of 1994, as each may be amended or such
greater amount as Lender shall require; and (z) earthquake insurance in
amounts and in form and substance satisfactory to Lender in the event the
Individual Property is located in an area with a high degree of seismic
activity, provided that the insurance pursuant to clauses (y) and (z)
hereof shall be on terms consistent with the comprehensive all risk
insurance policy required under this subsection (i);
(ii) commercial general liability insurance against claims for personal
injury, bodily injury, death or property damage occurring upon, in or about
the Individual Property, such insurance (A) to be on the so-called
"occurrence" form with a combined limit, including umbrella coverage, of
not less than Three Million and No/100 Dollars ($3,000,000) or, if any of
the Improvements contain elevators, Five Million and No/100 Dollars
($5,000,000); (B) to continue at not less than the aforesaid limit until
required to be changed by Lender in writing by reason of changed economic
conditions making such protection inadequate; and (C) to cover at least the
following hazards: (1) premises and operations; (2) products and completed
operations on an "if any" basis; (3) independent contractors; (4) blanket
contractual liability for all legal contracts; and (5) contractual
liability covering the indemnities contained in Article 9 of the Mortgages
to the extent the same is available;
(iii) business income insurance (A) with loss payable to Lender; (B)
covering all risks required to be covered by the insurance provided for in
subsection (i) above; (C) providing coverage from the date of loss and
containing an extended period of indemnity endorsement which provides that
after the physical loss to the Improvements and Personal Property has been
repaired, the continued loss of income will be insured until such income
either returns to the same level it was at prior to the loss, or the
expiration of twelve (12) months from the date that the Property is
repaired or replaced and operations are resumed, whichever first occurs,
and notwithstanding that the policy may expire prior to the end of such
period; and (D) in an amount equal to one hundred percent (100%) of the
projected gross income from the Individual Property for a period of twelve
(12) months from the date that the Individual Property is repaired or
replaced and operations are resumed. The amount of such business income
insurance shall be determined prior to the date hereof and at least once
each year thereafter based on Borrower's reasonable estimate of the gross
income from the Property for the succeeding twelve (12) month period. All
proceeds payable to Lender pursuant to this subsection shall be held, at
Lender's option, by Lender and shall be applied to the obligations secured
by the Loan Documents from time to time due and payable hereunder and under
the Note; provided, however, that such proceeds shall be spread over the
period for which paid and shall be applied as so spread against such
obligations when due and, if any excess of such spread amount exists after
such application and provided no Event of Default then exists, such excess
will be remitted to Borrower; and provided further, however, that nothing
herein contained shall be deemed to relieve Borrower of its obligations to
pay the obligations secured by the Loan Documents on the respective dates
of payment provided for in the Note and the other Loan Documents except to
the extent such amounts are actually paid out of the proceeds of such
business income insurance;
(iv) at all times during which structural construction, repairs or
alterations are being made with respect to the Improvements, and only if
the Individual Property coverage form does not otherwise apply, (A) owner's
contingent or protective liability insurance covering claims not covered by
or under the terms or provisions of the above mentioned commercial general
liability insurance policy; and (B) the insurance provided for in
subsection (i) above written in a so-called builder's risk completed value
form (1) on a non-reporting basis, (2) against all risks insured against
pursuant to subsection (i) above, (3) including permission to occupy the
Individual Property, and (4) with an agreed amount endorsement waiving
co-insurance provisions;
(v) workers' compensation, subject to the statutory limits of the state
in which the Individual Property is located, and employer's liability
insurance with a limit of at least One Million and No/100 Dollars
($1,000,000) per accident and per disease per employee, and One Million and
No/100 Dollars ($1,000,000) for disease aggregate in respect of any work or
operations on or about the Individual Property, or in connection with the
Individual Property or its operation (if applicable);
(vi) comprehensive boiler and machinery insurance, if applicable, in
amounts as shall be reasonably required by Lender on terms consistent with
the commercial property insurance policy required under subsection (i)
above;
(vii) umbrella liability insurance in an amount not less than Ten Million
and No/100 Dollars ($10,000,000) per occurrence on terms consistent with
the commercial general liability insurance policy required under subsection
(ii) above;
(viii) motor vehicle liability coverage for all owned and non-owned
vehicles, including rented and leased vehicles containing minimum limits
per occurrence, including umbrella coverage, of Five Million and No/100
Dollars ($5,000,000); and
(ix) upon sixty (60) days' written notice, such other reasonable
insurance and in such reasonable amounts as Lender from time to time may
reasonably request against such other insurable hazards, including
earthquake, which at the time are commonly insured against for property
similar to the Individual Property located in or around the region in which
the Individual Property is located.
(b) All insurance provided for in Section 7.1.1(a) shall be obtained
under valid and enforceable policies (collectively, the "Policies" or in
the singular, the "Policy"), and shall be subject to the approval of Lender
as to insurance companies, amounts, deductibles, loss payees and insureds.
The Policies shall be issued by financially sound and responsible insurance
companies authorized to do business in the state in which the Property is
located and having a claims paying ability rating of "AA" or better by at
least two (2) of the Rating Agencies one of which shall be Standard &
Poor's Ratings Group if Standard & Poor's Ratings Group is one of the
Rating Agencies issuing a rating in connection with the Securitization
Transaction. The Policies described in Section 7.1.1 shall designate Lender
as loss payee. Not less than ten (10) days prior to the expiration dates
of the Policies theretofore furnished to Lender, certificates of insurance
evidencing the Policies accompanied by evidence satisfactory to Lender of
payment of the premiums due thereunder (the "Insurance Premiums"), shall be
delivered by Borrower to Lender.
(c) Any blanket insurance Policy shall specifically allocate to the
Individual Property the amount of coverage from time to time required
hereunder and shall otherwise provide the same protection as would a
separate Policy insuring only the Property in compliance with the
provisions of Section 7.1.1(a).
(d) All Policies of insurance provided for or contemplated by Section
7.1.1(a), except for the Policy referenced in Section 7.1.1(a)(v), shall
name Borrower as the insured and Lender as the additional insured, as its
interests may appear, and in the case of property damage, boiler and
machinery, flood and earthquake insurance, shall contain a so-called New
York standard non-contributing mortgagee clause in favor of Lender
providing that the loss thereunder shall be payable to Lender.
(e) All Policies of insurance provided for in Section 7.1.1(a) shall
contain clauses or endorsements to the effect that:
(i) no act or negligence of Borrower, or anyone acting for Borrower, or
of any tenant under any Lease or other occupant, or failure to comply with
the provisions of any Policy which might otherwise result in a forfeiture
of the insurance or any part thereof, shall in any way affect the validity
or enforceability of the insurance insofar as Lender is concerned;
(ii) the Policy shall not be materially changed (other than to increase
the coverage provided thereby) or canceled without at least thirty (30)
days' written notice to Lender and any other party named therein as an
additional insured; and
(iii) each Policy shall provide that the issuers thereof shall give
written notice to Lender if the Policy has not been renewed fifteen (15)
days prior to its expiration; and
(iv) Lender shall not be liable for any Insurance Premiums thereon or
subject to any assessments thereunder.
(f) If at any time Lender is not in receipt of written evidence that
all insurance required hereunder is in full force and effect, Lender shall
have the right, without notice to Borrower, to take such action as Lender
deems necessary to protect its interest in the Property, including, without
limitation, the obtaining of such insurance coverage as Lender in its sole
discretion deems appropriate, and all premiums incurred by Lender in
connection with such action or in obtaining such insurance and keeping it
in effect shall be paid by Borrower to Lender upon demand and until paid
shall be secured by the Mortgages and shall bear interest at the Default
Rate.
(g) If the Individual Property shall be damaged or destroyed, in whole
or in part, by fire or other casualty, Borrower shall give prompt notice of
such damage to Lender and shall promptly commence and diligently prosecute
the completion of the repair and restoration of the Individual Property as
nearly as possible to the condition the Individual Property was in
immediately prior to such fire or other casualty, with such alterations as
may be reasonably approved by Lender (a "Restoration") and otherwise in
accordance with Section 7.1.3. Borrower shall pay all costs of such
Restoration whether or not such costs are covered by insurance, provided,
however, that the provisions of Section 7.1.3 shall apply. Lender may, but
shall not be obligated to make proof of loss if not made promptly by
Borrower;
(h) In the event of foreclosure of the Mortgage with respect to the
Individual Property, or other transfer of title to the Individual Property
in extinguishment in whole or in part of the Debt all right, title and
interest of Borrower in and to such policies then in force concerning the
Individual Property and all proceeds payable thereunder shall thereupon
vest in the purchaser at such foreclosure or Lender or other transferee in
the event of such other transfer of title.
7.1.2 Condemnation. Borrower shall promptly give Lender notice of the
actual or threatened commencement of any condemnation or eminent domain
proceeding affecting any of the Properties and shall deliver to Lender
copies of any and all papers served in connection with such proceedings.
Lender may participate in any such proceedings, and Borrower shall from
time to time deliver to Lender all instruments requested by it to permit
such participation. Borrower shall, at its expense, diligently prosecute
any such proceedings, and shall consult with Lender, its attorneys and
experts, and cooperate with them in the carrying on or defense of any such
proceedings. Notwithstanding any taking by any public or quasi-public
authority through eminent domain or otherwise (including but not limited to
any transfer made in lieu of or in anticipation of the exercise of such
taking), Borrower shall continue to pay the Debt at the time and in the
manner provided for its payment in the Note and in this Agreement and the
Debt shall not be reduced until any award or payment therefor (an "Award")
shall have been actually received and applied by Lender, after the
deduction of expenses of collection, to the reduction or discharge of the
Debt. Lender shall not be limited to the interest paid on the Award by the
condemning authority but shall be entitled to receive out of the award
interest at the Applicable Interest Rate or the Default Rate, as then
applicable to the Debt. If the Property or any portion thereof is taken by
a condemning authority, Borrower shall promptly commence and diligently
prosecute the Restoration of the Property and otherwise comply with the
provisions of Section 7.1.3. If the Property is sold, through foreclosure
or otherwise, prior to the receipt by Lender of the Award, Lender shall
have the right, whether or not a deficiency judgment on the Note shall have
been sought, recovered or denied, to receive the Award, or a portion
thereof sufficient to pay the Debt.
7.1.3 Restoration. The following provisions shall apply in connection
with the Restoration of any Individual Property:
(a) If the Net Proceeds shall be less than Five Hundred Thousand and
No/100 Dollars ($500,000) and the costs of completing the Restoration shall
be less than Five Hundred Thousand and No/100 Dollars ($500,000), the Net
Proceeds will be disbursed by Lender to Borrower upon receipt, provided
that all of the conditions set forth in Section 7.1.3(b)(i) are met and
Borrower delivers to Lender a written undertaking to expeditiously commence
and to satisfactorily complete with due diligence the Restoration in
accordance with the terms of this Agreement.
(b) If the Net Proceeds are equal to or greater than Five Hundred
Thousand and No/100 Dollars ($500,000) or the costs of completing the
Restoration is equal to or greater than Five Hundred Thousand and No/100
Dollars ($500,000) Lender shall make the Net Proceeds available for the
Restoration in accordance with the provisions of this Section 7.1.3. The
term "Net Proceeds" for purposes of this Section 7.1.3 shall mean: (i) the
net amount of all insurance proceeds received by Lender pursuant to Section
7.1.1 (a)(i), (iv), (vi) and (vii) as a result of such damage or
destruction, after deduction of its reasonable costs and expenses
(including, but not limited to, reasonable counsel fees), if any, in
collecting same ("Insurance Proceeds"), or (ii) the net amount of the
Award, after deduction of its reasonable costs and expenses (including, but
not limited to, reasonable counsel fees), if any, in collecting same
("Condemnation Proceeds"), whichever the case may be.
(i) The Net Proceeds shall be made available to Borrower for
Restoration provided that each of the following conditions are met:
(A) no Event of Default shall have occurred and be continuing;
(B) (1) in the event the Net Proceeds are Insurance Proceeds, less than
twenty-five percent (25%) of the total floor area of the Improvements on
the Individual Property has been damaged, destroyed or rendered unusable as
a result of such fire or other casualty or (2) in the event the Net
Proceeds are Condemnation Proceeds, less than ten (10%) of the land
constituting the Individual Property is taken, and such land is located
along the perimeter or periphery of the Individual Property, and no portion
of the Improvements is located in such land;
(C) Leases demising in the aggregate a percentage amount equal to or
greater than the Rentable Space Percentage of the total rentable space in
the Individual Property which has been demised under executed and delivered
Leases in effect as of the date of the occurrence of such fire or other
casualty or taking, whichever the case may be, shall remain in full force
and effect during and after the completion of the Restoration,
notwithstanding the occurrence of any such fire or other casualty or
taking, whichever the case may be. The term "Rentable Space Percentage"
shall mean (1) in the event the Net Proceeds are Insurance Proceeds, a
percentage amount equal to seventy-five percent (75%) and (2) in the event
the Net Proceeds are Condemnation Proceeds, a percentage amount equal to
ninety percent (90%);
(D) Borrower shall commence the Restoration as soon as reasonably
practicable (but in no event later than sixty (60) days after such damage
or destruction or taking, whichever the case may be, occurs) and shall
diligently pursue the same to satisfactory completion;
(E) Lender shall be satisfied that any operating deficits, including
all scheduled payments of principal and interest under the Note and the
Applicable Interest Rate, which will be incurred with respect to the
Individual Property as a result of the occurrence of any such fire or other
casualty or taking, whichever the case may be, will be covered out of (1)
the Net Proceeds, (2) the insurance coverage referred to in Section
7.1.1(a)(iii), if applicable, or (3) rentals or other funds of Borrower;
(F) Lender shall be satisfied that the Restoration will be completed on
or before the earliest to occur of (1) the Maturity Date, (2) the earliest
date required for such completion under the terms of any Leases which are
required in accordance with the provisions of this Section 7.1.3(b) to
remain in effect subsequent to the occurrence of such fire or other
casualty or taking, whichever the case may be, and the completion of the
Restoration, (3) such time as may be required under applicable zoning law,
ordinance, rule or regulation in order to repair and restore the Property
to the condition it was in immediately prior to such fire or other casualty
or to as nearly as possible the condition it was in immediately prior to
such taking, as applicable or (4) the expiration of the insurance coverage
referred to in Section 7.1.3(b);
(G) the Individual Property and the use thereof after the Restoration
will be in compliance with and permitted under all applicable zoning laws,
ordinances, rules and regulations;
(H) the Restoration shall be done and completed by Borrower in an
expeditious and diligent fashion and in compliance with all applicable
governmental laws, rules and regulations (including, without limitation,
all applicable environmental laws); and
(I) such fire or other casualty or taking, as applicable, does not
result in the loss of access to the Individual Property or the related
Improvements.
(ii) The Net Proceeds shall be held by Lender in an interest-bearing
account and, until disbursed in accordance with the provisions of this
Section 7.1.3(b), shall constitute additional security for the Debt and
other obligations under the Loan Documents. The Net Proceeds shall be
disbursed by Lender to, or as directed by, Borrower from time to time
during the course of the Restoration, upon receipt of evidence satisfactory
to Lender that (A) all materials installed and work and labor performed
(except to the extent that they are to be paid for out of the requested
disbursement) in connection with the Restoration have been paid for in
full, and (B) there exist no notices of pendency, stop orders, mechanic's
or materialman's liens or notices of intention to file same, or any other
liens or encumbrances of any nature whatsoever on the Individual Property
arising out of the Restoration which have not either been fully bonded to
the satisfaction of Lender and discharged of record or in the alternative
fully insured to the satisfaction of Lender by the title company issuing
the Title Insurance Policy.
(iii) All plans and specifications required in connection with the
Restoration shall be subject to prior review and acceptance in all respects
by Lender and by an independent consulting engineer selected by Lender (the
"Casualty Consultant"), which acceptance shall not be unreasonably
withheld. Lender shall have the use of the plans and specifications and
all permits, licenses and approvals required or obtained in connection with
the Restoration. The identity of the contractors, subcontractors and
materialmen engaged in the Restoration, as well as the contracts under
which they have been engaged, shall be subject to prior review and
acceptance by Lender and the Casualty Consultant (which shall not be
unreasonably withheld). All reasonable costs and expenses incurred by
Lender in connection with making the Net Proceeds available for the
Restoration including, without limitation, reasonable counsel fees and
disbursements and the Casualty Consultant's fees, shall be paid by
Borrower.
(iv) In no event shall Lender be obligated to make disbursements of the
Net Proceeds in excess of an amount equal to the costs actually incurred
from time to time for work in place as part of the Restoration, as
certified by the Casualty Consultant, minus the Casualty Retainage. The
term "Casualty Retainage" shall mean an amount equal to ten percent (10%)
of the costs actually incurred for work in place as part of the
Restoration, as certified by the Casualty Consultant, until the Restoration
has been completed. The Casualty Retainage shall in no event, and
notwithstanding anything to the contrary set forth above in this Section
7.1.3(b), be less than the amount actually held back by Borrower from
contractors, subcontractors and materialmen engaged in the Restoration.
The Casualty Retainage shall not be released until the Casualty Consultant
certifies to Lender that the Restoration has been completed in accordance
with the provisions of this Section 7.1.3(b) and that all approvals
necessary for the re-occupancy and use of the Individual Property have been
obtained from all appropriate governmental and quasi-governmental
authorities, and Lender receives evidence satisfactory to Lender that the
costs of the Restoration have been paid in full or will be paid in full out
of the Casualty Retainage; provided, however, that Lender will release the
portion of the Casualty Retainage being held with respect to any
contractor, subcontractor or materialman engaged in the Restoration as of
the date upon which the Casualty Consultant certifies to Lender that the
contractor, subcontractor or materialman has satisfactorily completed all
work and has supplied all materials in accordance with the provisions of
the contractor's, subcontractor's or materialman's contract, the
contractor, subcontractor or materialman delivers the lien waivers and
evidence of payment in full of all sums due to the contractor,
subcontractor or materialman as may be reasonably requested by Lender or by
the title company issuing the Title Insurance Policy, and Lender receives
an endorsement to the Title Insurance Policy insuring the continued
priority of the lien of the related Mortgage and evidence of payment of any
premium payable for such endorsement. If required by Lender, the release
of any such portion of the Casualty Retainage shall be approved by the
surety company, if any, which has issued a payment or performance bond with
respect to the contractor, subcontractor or materialman.
(v) Lender shall not be obligated to make disbursements of the Net
Proceeds more frequently than once every calendar month.
(vi) If at any time the Net Proceeds or the undisbursed balance thereof
shall not, in the opinion of Lender, be sufficient to pay in full the
balance of the costs which are estimated by the Casualty Consultant to be
incurred in connection with the completion of the Restoration, Borrower
shall deposit the deficiency (the "Net Proceeds Deficiency") with Lender
before any further disbursement of the Net Proceeds shall be made. The Net
Proceeds Deficiency deposited with Lender shall be held by Lender and shall
be disbursed for costs actually incurred in connection with the Restoration
on the same conditions applicable to the disbursement of the Net Proceeds,
and until so disbursed pursuant to this Section 7.1.3(b) shall constitute
additional security for the Debt and other obligations under the Loan
Documents.
(vii) The excess, if any, of the Net Proceeds and the remaining balance,
if any, of the Net Proceeds Deficiency deposited with Lender after the
Casualty Consultant certifies to Lender that the Restoration has been
completed in accordance with the provisions of this Section 7.1.3(b), and
the receipt by Lender of evidence satisfactory to Lender that all costs
incurred in connection with the Restoration have been paid in full, shall
be remitted by Lender to Borrower, provided no Event of Default shall have
occurred and shall be continuing under the Note, this Agreement or any of
the other Loan Documents.
(c) All Net Proceeds not required (i) to be made available for the
Restoration or (ii) to be returned to Borrower as excess Net Proceeds
pursuant to Section 7.1.3(b)(vii) may be retained and applied by Lender
toward the payment of the Debt whether or not then due and payable in such
order, priority and proportions as Lender in its discretion shall deem
proper or, at the discretion of Lender, the same may be paid, either in
whole or in part, to Borrower for such purposes as Lender shall designate,
in its discretion.
Section 7.2 Required Repairs.
7.2.1 Required Repairs; Deposits. Borrower shall perform the repairs at
the Properties, as more particularly set forth on Schedule II hereto and as
described in the physical inspection reports delivered to Lender in
connection with the Loan which are shown on Schedule XVI hereof (such
repairs hereinafter referred to as "Property Required Repairs"). Borrower
shall complete each of the Property Required Repairs on or before June 30,
1998.
7.2.2 Failure to Perform Required Repairs. It shall be an Event of
Default under this Agreement if (i) Borrower does not substantially
complete the Property Required Repairs at each Individual Property by the
required deadline for each repair as set forth on Schedule II, and (ii)
Borrower does not provide certification, and other evidence to Lender's
satisfaction, of lien free completion of same to Lender by such required
deadline. The following shall constitute evidence satisfactory to Lender:
(i) a certification from a licensed contractor, engineer or architect that
the Property Required Repairs have been substantially completed in a good
and workmanlike manner in accordance with all Legal Requirements listing
all contractors who have performed such repairs and indicating which
repairs were performed by them, and (ii) evidence of payment for same by
proper final lien waivers executed by all contractors listed on the
foregoing certification with respect to the repairs performed by them.
Section 7.3 Tax and Insurance Escrow Fund.
7.3.1 Tax and Insurance Escrow Fund. Subject to the last sentence of
this Section 7.3.1, Borrower shall pay to Lender on or before the first day
of each calendar month (i) one-twelfth of the Taxes that Lender estimates
will be payable during the next ensuing twelve (12) months in order to
accumulate with Lender sufficient funds to pay all such Taxes at least ten
(10) 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 with respect to all of the Properties
upon the expiration thereof in order to accumulate with Lender sufficient
funds to pay all such Insurance Premiums at least thirty (30) days prior to
the expiration of the Policies (said amounts in (i) and (ii) above
hereinafter called the "Tax and Insurance Escrow Fund"). The Tax and
Insurance Escrow Fund and the payments of interest or principal or both,
payable pursuant to the Note, shall be added together and shall be paid as
an aggregate sum by Borrower to Lender. Lender will apply the Tax and
Insurance Escrow Fund to payments of Taxes and Insurance Premiums required
to be made by Borrower pursuant to Section 5.1 and Section 7.1 hereof and
under the Mortgages. In making any payment relating to the Tax and
Insurance Escrow Fund, Lender may do so according to any 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 (subject to Borrower's right to contest Taxes herein
described). If the amount of the Tax and Insurance Escrow Fund shall
exceed the amounts due for Taxes and Insurance Premiums pursuant to Section
5.1 and Section 7.1 hereof, Lender shall, in its sole discretion, return
any excess to Borrower or credit such excess against future payments to be
made to the Tax and Insurance Escrow Fund. Any amount remaining in the Tax
and Insurance Escrow Fund after the Debt has been paid in full shall be
returned to Borrower. In allocating such excess, Lender may deal with the
Person shown on the records of Lender to be the owner of the Properties.
If at any time Lender reasonably determines that the Tax and Insurance
Escrow Fund is not or will not be sufficient to pay the items set forth in
clauses (i) and (ii) above, Lender shall notify Borrower of such
determination and Borrower shall increase its monthly payments to Lender by
the amount that Lender estimates is sufficient to make up the deficiency at
least ten (10) days prior to delinquency of the Taxes and/or thirty (30)
days prior to expiration of the Policies, as the case may be.
Notwithstanding the foregoing, Borrower shall not be required to make the
foregoing deposits to the Tax and Insurance Escrow Fund to Lender unless an
Event of Default exists hereunder and notice to make such payments is given
by Lender to Borrower; however, nothing herein shall relieve Borrower from
fulfilling its other obligations hereunder.
7.3.2 Grant of Security Interest. Borrower hereby pledges, assigns and
grants a security interest to Lender, as security for payment of all sums
due under the Loan and the performance of all other terms, conditions and
provisions of the Loan Documents and this Agreement on Borrower's part to
be paid and performed, of all Borrower's right, title and interest in and
to the Tax and Insurance Escrow Fund. Borrower shall not, without
obtaining the prior written consent of Lender, further pledge, assign or
grant any security interest in the Tax and Insurance Escrow Fund or permit
any lien or encumbrance to attach thereto, or any levy to be made thereon,
or any UCC-1 Financing Statements, except those naming Lender as the
secured party, to be filed with respect thereto.
7.3.3 Application of Tax and Insurance Escrow Fund. Until expended or
applied as above provided, any amounts in the Tax and Insurance Escrow Fund
shall constitute additional security for the Debt. Upon the occurrence of
an Event of Default, Lender may apply any sums then present in the Tax and
Insurance Escrow Fund to the payment of the following items in any order in
its sole discretion: (i) Taxes and Other Charges; (ii) Insurance Premiums;
(iii) interest on the unpaid principal balance of the Note; (iv)
amortization of the unpaid principal balance of the Note; or (v) all other
sums payable pursuant to this Agreement and the other Loan Documents.
Section 7.4 Capital Expenditures and Capital Expenditures Reserve.
7.4.1 Capital Expenditures Reserve Fund. On each date that a regularly
scheduled payment of interest is due under the Note, Borrower shall deposit
into an account established by Borrower a monthly deposit equal to 6.7
cents per square foot of Improvements (the "Capital Expenditures Reserve
Monthly Deposit"). Amounts so deposited shall hereinafter be referred to
as Borrower's "Capital Expenditures Reserve Fund" and the account in which
such amounts are held shall hereinafter be referred to as Borrower's
"Capital Expenditures Reserve Account". The amount in the Capital
Expenditures Reserve Account shall be held separately by Borrower and not
be commingled with other monies. Lender may reassess its estimate of the
amount necessary for the Capital Expenditures Reserve Fund from time to
time and may increase the monthly amounts required to be deposited into the
Capital Expenditures Reserve Fund by thirty (30) days notice to Borrower if
it determines in its reasonable discretion that an increase is necessary to
maintain the proper maintenance and operation of the Properties. Any
amount held in the Capital Expenditures Reserve Account and allocated for
an Individual Property shall be retained by Borrower and credited toward
the future Capital Expenditures Reserves Monthly Deposits required by
Lender hereunder in the event such Individual Property is released from the
Lien of its related Mortgage in accordance with Section 2.4 hereof.
7.4.2 Grant of Security Interest. Borrower hereby pledges, assigns and
grants a security interest to Lender, as security for payment of all sums
due under the Loan and the performance of all other terms, conditions and
provisions to be paid and performed, of all Borrower's right, title and
interest in and to the Capital Expenditures Reserve Fund and the Capital
Expenditures Reserve Account. Borrower shall not, without obtaining the
prior written consent of Lender, further pledge, assign or grant any
security interest in the Capital Expenditures Reserve Fund or the Capital
Expenditures Reserve Account or permit any lien or encumbrance to attach
thereto, or any levy to be made thereon, or any UCC-1 Financing Statements,
except those naming Lender as the secured party, to be filed with respect
thereto. Upon the occurrence of an Event of Default, Lender may require
Borrower to deliver the Capital Expenditure Reserve Fund to Lender and
Borrower shall do so within five (5) Business Days of receipt of notice
from Lender and Lender may apply any sums then present in the Capital
Expenditures Reserve Fund to the payment of the Debt in any order in its
sole discretion. Until expended or applied as above provided, the Capital
Expenditures Reserve Fund shall constitute additional security for the
Debt.
7.4.3 Disbursements from Capital Expenditures Reserve Account. (a)
Borrower shall make disbursements from the Capital Expenditures Reserve
Account only to reimburse Borrower for Capital Expenditures or to pay
directly for same. Borrower shall not make disbursements from the Capital
Expenditures Reserve Account to reimburse Borrower or to pay for the costs
of routine maintenance to an Individual Property or for any other purpose
other than for Capital Expenditures.
(b) In no event shall Borrower disburse funds from the Capital
Expenditures Reserve Account if a Default or an Event of Default exists
without the express consent of Lender.
7.4.4 Balance in the Capital Expenditures Reserve Account. The
insufficiency of any balance in the Capital Expenditures Reserve Account
shall not relieve Borrower from its obligation to fulfill all preservation
and maintenance covenants in the Loan Documents.
Section 7.5 Ground Lease Escrow Fund.
Subject to the last sentence of this Section 7.5, Borrower shall pay to
Lender, together with the scheduled payment of principal and interest under
the Loan each month, an amount that is estimated by Lender to be due and
payable by Borrower under the Ground Lease for all rent and any and all
other charges which may be due by Borrower under the Ground Lease in order
to accumulate with Lender sufficient funds to pay all sums payable under
the Ground Lease at least ten (10) Business Days prior to the dates due
(said amounts, hereinafter called the "Ground Lease Escrow Fund"). The
Ground Lease Escrow Fund is for the purpose of paying all sums due under
the Ground Lease. Upon Borrower's failure to pay any rent or other charges
due under the Ground Lease, Lender may, in its discretion, apply any
amounts held in the Ground Lease Escrow Fund to the payment of such rent or
other charges; provided however, that the provisions of this Section 7.5
shall not be deemed to create any obligation on the part of Lender to pay
any such rent or other charges from amounts on deposit in the Ground Lease
Escrow Fund. Borrower hereby pledges, assigns and grants a security
interest to Lender, as security for payment of all sums due under the Loan
and the performance of all other terms, conditions and provisions to be
paid and performed, of all Borrower's right, title and interest in and to
the Ground Lease Escrow Fund. Borrower shall not, without obtaining the
prior written consent of Lender, further pledge, assign or grant any
security interest in the Ground Lease Escrow Fund or permit any lien or
encumbrance to attach thereto, or any levy to be made thereon, or any UCC-1
Financing Statements, except those naming Lender as the secured party, to
be filed with respect thereto. Upon the occurrence of an Event of Default,
Lender may apply any sums then present in the Ground Lease Escrow Fund to
the payment of the Debt in any order in its sole discretion. Until
expended or applied as above provided, the Ground Lease Escrow Fund shall
constitute additional security for the Debt. Notwithstanding the
foregoing, the Borrower shall not be required to make monthly deposits to
the Ground Lease Escrow Fund so long as on the Closing Date and for the
remainder of the Term, the Borrower has deposited and maintains in the
Ground Lease Escrow Fund sufficient amounts for the payment of six (6)
months of rent and any and all other charges under the Ground Lease. Such
initial deposit may be increased by Lender in the amount Lender deems is
necessary in its reasonable discretion based on any increases in the rent
due under the Ground Lease. Notwithstanding the foregoing, Borrower shall
not be required to make the foregoing deposits to the Ground Lease Escrow
Fund to Lender unless an Event of Default exists hereunder and notice to
make such payments is given by Lender to Borrower; however, nothing herein
shall relieve Borrower from fulfilling its other obligations hereunder.
Section 7.6 Intentionally Deleted.
VIII. DEFAULTS
Section 8.1 Event of Default.
(a) Each of the following events shall constitute an event of default
hereunder (an "Event of Default"):
(i) if any portion of the Debt other than interest is not paid
when due or if any portion of the interest due on the Debt is not paid
within two (2) Business Days after the same is due;
(ii) if any of the Taxes or Other Charges are not paid when the
same are due and payable (unless being contested strictly in accordance
with the Loan Documents);
(iii) if the Policies are not kept in full force and effect;
(iv) except as permitted herein or in the Mortgages, if Borrower
transfers or encumbers (except for Permitted Encumbrances) any portion of
the Properties without Lender's prior written consent;
(v) if any representation or warranty made by Borrower, the
Guarantor or any general partner of Borrower herein or in any other Loan
Document, or in any report, certificate, financial statement or other
instrument, agreement or document furnished to Lender shall have been false
or misleading in any material respect as of the date the representation or
warranty was made provided, however, if the misrepresentation or breach of
warranty was not intentional and does not have a Material Adverse Effect,
Borrower shall have thirty days to cure same after it receives knowledge of
same;
(vi) if Borrower or Guarantor shall make an assignment for the
benefit of creditors;
(vii) if a receiver, liquidator or trustee shall be appointed for
Borrower or Guarantor or any general partner of Borrower or if Borrower or
Guarantor or any general partner of Borrower shall be adjudicated a
bankrupt or insolvent, or if any petition for bankruptcy, reorganization or
arrangement pursuant to federal bankruptcy law, or any similar federal or
state law, shall be filed by or against, consented to, or acquiesced in by,
Borrower, Guarantor or any general partner of Borrower, or if any
proceeding for the dissolution or liquidation of Borrower, Guarantor or any
general partner of Borrower shall be instituted; provided, however, if such
appointment, adjudication, petition or proceeding was involuntary and not
consented to by Borrower, Guarantor or any general partner of Borrower,
upon the same not being discharged, stayed or dismissed within ninety (90)
days;
(viii) if Borrower attempts to assign its rights under this
Agreement or any of the other Loan Documents or any interest herein or
therein in contravention of the Loan Documents;
(ix) if Borrower or Guarantor breaches any of its respective
negative covenants contained in Section 6.1 or any covenant contained in
Sections 4.1 (ee) or (kk) hereof;
(x) with respect to any term, covenant or provision set forth
herein which specifically contains a notice requirement or grace period, if
Borrower or Guarantor shall be in default under such term, covenant or
condition after the giving of such notice or the expiration of such grace
period;
(xi) if any of the assumptions contained in the Insolvency
Opinion delivered to Lender in connection with the Loan, or in any other
"non-consolidation" opinion delivered subsequent to the closing of the
Loan, is or shall become untrue in any material respect;
(xii) if Borrower shall sell, develop, lease, option to sell,
develop or lease or otherwise transfer or convey any interest in the
Carveout Properties other than those at Norton Shores shown with an
asterisk on Schedule XIX, without the express written consent of Lender;
(xiii) if a default on the part of Borrower shall have occurred
under the Ground Lease and continued beyond any applicable notice and grace
period or if an Event of Default under a Mortgage encumbering a Ground
Lease occurs with respect to the Ground Lease as contained therein;
(xiv) if any of the following events occur: the merger or
consolidation of Horizon Group Inc. with any other Person; any significant
change of executive management of Horizon Group, Inc. without the prior
written consent of Lender, including, without limitation, any change in the
identity of, or vacancy in the position of, the chairman, chief financial
officer or chief executive officer of Horizon Group Inc. (provided,
however, if a Default hereunder occurs by reason of the death or incapacity
or resignation of an individual, no Event of Default shall be deemed to
occur by reason thereof for up to sixty (60) days from such event, but only
if Lender is satisfied in its sole discretion with Horizon Group, Inc.'s
attempt at replacement and provided further, however, the appointment of
any person as the next chief financial officer of Horizon Group, Inc. after
the date hereof is hereby approved); any change of more than 50% in the
aggregate of the Board of Directors of Horizon Group Inc.; any new
investment in the ownership of Horizon Group, Inc. which has the effect of
placing thirty percent (30%) or more of the economic or voting control of
Horizon Group, Inc. in the hands of any Person and its Affiliates; and a
failure of any Financial Covenants contained herein;
(xv) if Borrower shall continue to be in Default under any of
the other terms, covenants or conditions of this Agreement not specified in
subsections (i) to (xiv) above, for ten (10) days after notice to Borrower
from Lender, in the case of any Default which can be cured by the payment
of a sum of money, or for thirty (30) days after notice from Lender in the
case of any other Default; provided, however, that if such non-monetary
Default is susceptible of cure but cannot reasonably be cured within such
30-day period and provided further that Borrower shall have commenced to
cure such Default within such 30-day period and thereafter diligently and
expeditiously proceeds to cure the same, such 30-day period shall be
extended for such time as is reasonably necessary for Borrower in the
exercise of due diligence to cure such Default, such additional period not
to exceed sixty days (60);
(xvi) if there shall be default under any of the other Loan
Documents beyond any applicable cure periods contained in such documents,
whether as to Borrower, Guarantor or any of the Properties.
(xvii) if Borrower does not perform all of its obligations under
that certain post closing letter of even date herewith between Borrower and
Lender within the time periods provided therein.
(b) Upon the occurrence of an Event of Default (other than an Event of
Default described in clauses (vi), (vii) or (viii) above) and at any time
thereafter Lender may, in addition to any other rights or remedies
available to it pursuant to this Agreement and the other Loan Documents or
at law or in equity, take such action, without notice or demand, that
Lender deems advisable to protect and enforce its rights against Borrower
and/or Guarantor and in and to all or any of the Properties, including,
without limitation, declaring the Debt to be immediately due and payable,
and Lender may enforce or avail itself of any or all rights or remedies
provided in the Loan Documents against Borrower and any or all of the
Properties, including, without limitation, all rights or remedies available
at law or in equity; and upon any Event of Default described in clauses
(vi), (vii) or (viii) above, the Debt and all other obligations of Borrower
hereunder and under the other Loan Documents shall immediately and
automatically become due and payable, without notice or demand, and
Borrower hereby expressly waives any such notice or demand, anything
contained herein or in any other Loan Document to the contrary
notwithstanding.
Section 8.2 Remedies.
(a) Upon the occurrence of an Event of Default, all or any one or more
of the rights, powers, privileges and other remedies available to Lender
against Borrower and/or Guarantor under this Agreement or any of the other
Loan Documents executed and delivered by, or applicable to, Borrower or at
law or in equity may be exercised by Lender at any time and from time to
time, whether or not all or any of the Debt shall be declared due and
payable, and whether or not Lender shall have commenced any foreclosure
proceeding or other action for the enforcement of its rights and remedies
under any of the Loan Documents with respect to all or any of the
Properties. Any such actions taken by Lender shall be cumulative and
concurrent and may be pursued independently, singly, successively, together
or otherwise, at such time and in such order as Lender may determine in its
sole discretion, to the fullest extent permitted by law, without impairing
or otherwise affecting the other rights and remedies of Lender permitted by
law, equity or contract or as set forth herein or in the other Loan
Documents. Without limiting the generality of the foregoing, Borrower
agrees that, to the extent permitted by applicable law, if an Event of
Default is continuing (i) Lender is not subject to any "one action" or
"election of remedies" law or rule, (ii) all liens and other rights,
remedies or privileges provided to Lender shall remain in full force and
effect until Lender has exhausted all of its remedies against the
Properties and each Mortgage has been foreclosed, sold and/or otherwise
realized upon in satisfaction of the Debt or the Debt has been paid in
full, and (iii) Borrower hereby waives any and all rights it may have by
statute to assert that Lender is not entitled to any additional recovery
from the Properties because Lender has not claimed a deficiency with the
time prescribed by such statute or otherwise failed to meet the procedural
requirement for claiming a deficiency judgment.
(b) With respect to Borrower and the Properties, nothing contained
herein or in any other Loan Document shall be construed as requiring Lender
to resort to any Individual Property for the satisfaction of any of the
Debt in preference or priority to any other Individual Property, and Lender
may seek satisfaction out of all of the Properties or any part thereof, in
its absolute discretion in respect of the Debt. In addition, Lender shall
have the right from time to time, to the extent permitted by applicable
law, to partially foreclose the Mortgages in any manner and for any amounts
secured by the Mortgages then due and payable as determined by Lender in
its sole discretion including, without limitation, the following
circumstances: (i) in the event Borrower defaults beyond any applicable
grace period in the payment of one or more scheduled payments of principal
and interest, Lender may foreclose one or more of the Mortgages to recover
such delinquent payments, or (ii) in the event Lender elects to accelerate
less than the entire outstanding principal balance of the Loan, Lender may
foreclose one or more of the Mortgages to recover so much of the principal
balance of the Loan as Lender may accelerate and such other sums secured by
one or more of the Mortgages as Lender may elect. Notwithstanding one or
more partial foreclosures, the Properties shall remain subject to the
Mortgages to secure payment of sums secured by the Mortgages and not
previously recovered.
(c) Following an Event of Default, Lender shall have the right from
time to time, to the extent permitted by applicable law, to sever the Note
and the other Loan Documents into one or more separate notes, mortgages and
other security documents (the "Severed Loan Documents") in such
denominations as Lender shall determine in its sole discretion for purposes
of evidencing and enforcing its rights and remedies provided hereunder.
Borrower shall execute and deliver to Lender from time to time, promptly
after the request of Lender, a severance agreement and such other documents
as Lender shall request in order to effect the severance described in the
preceding sentence, all in form and substance reasonably satisfactory to
Lender. Borrower hereby absolutely and irrevocably appoints Lender as its
true and lawful attorney, coupled with an interest, in its name and stead
to make and execute all documents necessary or desirable to effect the
aforesaid severance, Borrower ratifying all that its said attorney shall do
by virtue thereof; provided, however, Lender shall not make or execute any
such documents under such power until three (3) days after notice has been
given to Borrower by Lender of Lender's intent to exercise its rights under
such power. Except as may be required in connection with a Secondary
Market Transaction or as otherwise provided herein, (i) Borrower shall not
be obligated to pay any costs or expenses incurred in connection with the
preparation, execution, recording or filing of the Severed Loan Documents,
and (ii) the Severed Loan Documents shall not contain any representations,
warranties or covenants not contained in the Loan Documents and any such
representations and warranties contained in the Severed Loan Documents will
be given by Borrower only as of the Closing Date.
Section 8.3 Remedies Cumulative.
The rights, powers and remedies of Lender under this Agreement shall be
cumulative and not exclusive of any other right, power or remedy which
Lender may have against Borrower pursuant to this Agreement or the other
Loan Documents, or existing at law or in equity or otherwise. Lender's
rights, powers and remedies may be pursued singly, concurrently or
otherwise, at such time and in such order as Lender may determine in
Lender's sole discretion. No delay or omission to exercise any remedy,
right or power accruing upon an Event of Default shall impair any such
remedy, right or power or shall be construed as a waiver thereof, but any
such remedy, right or power may be exercised from time to time and as often
as may be deemed expedient. A waiver of one Default or Event of Default
with respect to Borrower shall not be construed to be a waiver of any
subsequent Default or Event of Default by Borrower or to impair any remedy,
right or power consequent thereon.
IX. SPECIAL PROVISIONS
Section 9.1 Sale of Notes and Securitization.
Lender shall have the right to sell, assign or otherwise transfer the Loan
or any portion thereof or interest therein held by Lender without the
consent of Borrower or the satisfaction of any other requirement with
respect to Borrower. Lender shall have the right to split the Loan
obligations, all collateral for the Loan obligations and all the Loan
Documents to make a single asset loan or a pool or pools of loans with
appropriate collateral attributable thereto. At the request of the holder
of the Note and, to the extent not already required to be provided by
Borrower under this Agreement, Borrower agrees to cooperate with all
reasonable requests of Lender to satisfy the market standards to which the
holder of the Note customarily adheres or which may be reasonably required
in the marketplace or by the Rating Agencies in connection with the sale of
the Note or participation therein or the first successful Securitization
and any other device determined by Lender to be useful in placement of any
portion of the Loan (such sale, splitting, 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, including, without limitation, to:
(a) (i) provide such financial and other information with respect
to the Properties, the Borrower, the Guarantor and the Manager including,
without limitation, estoppels from tenants under Leases, (ii) provide
Annual Budgets relating to the Properties and (iii) to perform or permit or
cause to be performed or permitted such site inspection, appraisals, market
studies, environmental reviews and reports (Phase I reports and, if
appropriate, Phase II reports), engineering or property condition reports
and other due diligence investigations of the Properties, as may be
reasonably requested by the holder of the Note or the Rating Agencies or as
may be necessary or appropriate in connection with the Securitization (the
"Provided Information"), together, if customary, with appropriate
verification and/or consents of the Provided Information through letters of
auditors or opinions of counsel of independent attorneys acceptable to the
Lender and the Rating Agencies;
(b) at Borrower's expense, cause counsel to render opinions as to
non-consolidation, fraudulent conveyance, and true sale or any other
opinion customary in securitization transactions with respect to the
Properties and Borrower and its Affiliates, which counsel and opinions
shall be reasonably satisfactory to the holder of the Note and the Rating
Agencies;
(c) make such representations and warranties and agree to perform such
covenants 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 the
holder of the Note 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; and
(d) execute such amendments to the Loan Documents and organizational
documents, enter into a lockbox or similar arrangement with respect to the
Rents and establish and fund such reserve funds (including, without
limitation, a Tax and Insurance Escrow Fund (without regard to whether an
Event of Default exists), a Capital Expenditure Reserve Fund to be held by
Lender or its successor, a Ground Lease Escrow Fund (without regard to
whether an Event of Default exists), a rollover escrow fund for replacement
Tenants and a fund for deferred maintenance and capital improvements) as
may be requested by the holder of the Note or the Rating Agencies or
otherwise to effect the Securitization; provided, however, that the
Borrower shall not be required to modify or amend any Loan Document if such
modification or amendment would (i) change the interest rate, the stated
maturity or the amortization of principal set forth in the Note, or (ii)
modify or amend any other material economic term of the Loan.
Notwithstanding the foregoing, Lender may elect to change the Maturity to a
later date in connection with the Securitization and Borrower shall execute
such amendments to the Loan Documents as Lender shall determine are
necessary to reflect such change.
All reasonable third party costs and expenses incurred by Lender in
connection with the Securitization or other sale or transfer of the Loan
shall be paid by Borrower.
Section 9.2 Securitization Indemnification.
(a) Borrower understands that certain of the Provided Information and
the books and records delivered to Lender pursuant to Section 5.1(k) may be
included in disclosure documents in connection with the Securitization,
including, without limitation, 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, the Borrower will cooperate with the holder of the Note in
updating the Disclosure Document by providing all current information
necessary to keep the Disclosure Document accurate and complete in all
material respects.
(b) Borrower and Guarantor agree to provide in connection with each of
(i) a preliminary and a private placement memorandum or (ii) a preliminary
and final prospectus, as applicable, an indemnification certificate (A)
certifying that Borrower has carefully examined the provisions of such
memorandum or prospectus, as applicable, pertaining to Borrower, Guarantor,
the Properties and/or the Loan including without limitation, the sections
entitled "Special Considerations," "Description of the Mortgages,"
"Description of the Mortgage Loans and Mortgaged Properties," "The
Manager," "The Borrower", "the Guarantors" and "Certain Legal Aspects of
the Mortgage Loan," and such sections (and any other sections reasonably
requested) do not contain any untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements made, in
the light of the circumstances under which they were made, not misleading,
(B) indemnifying Lender (and for purposes of this Section 9.2, Lender
hereunder shall include its officers, directors and employees), the
Affiliate of Xxxxxx Brothers, Inc. ("Xxxxxx") that has 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 the
Affiliate within the meaning of Section 15 of the Securities Act or Section
20 of the Exchange Act (collectively, the "Xxxxxx Group"), and Xxxxxx, each
of its directors and each person who controls Xxxxxx 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 Xxxxxx Group or the
Underwriter Group may become subject insofar as the Liabilities are a
direct result of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in such sections or are a direct
result of or are based upon the omission or alleged omission to state
therein a material fact required to be stated in such sections or necessary
in order to make the statements in such sections or in light of the
circumstances under which they were made, not misleading (provided that
Borrower shall have had an opportunity to review and approve the relevant
provisions of the memorandum or prospectus and provided further that
Borrower shall have no obligation with respect to information unrelated to
Borrower, Guarantor, the Properties and/or the Loan) and (C) agreeing to
reimburse Lender, the Xxxxxx Group and the Underwriter Group for any legal
or other expenses reasonably incurred by Lender and Xxxxxx in connection
with investigating or defending the Liabilities; provided, however, that
Borrower will be liable in any such case under clauses (B) or (C) above
only to the extent that any such loss claim, damage or liability arises out
of or is 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 the memorandum
or prospectus or in connection with the underwriting of the debt,
including, without limitation, financial statements of Borrower, operating
statements, rent rolls, environmental site assessment reports and property
condition reports with respect to the Properties. Borrower shall not
indemnify Lender from any Liabilities as a result of the inclusion of any
erroneous or misleading information in the memorandum or prospectus, or the
omission of material information from the memorandum or prospectus,
pertaining to Borrower, the Properties or any aspect of the Loan, if
Borrower or its counsel shall have previously indicated to Lender or its
counsel the erroneous or misleading nature of such information or the
omissions of material information, as the case may be. Borrower shall not
indemnify Lender from any Liabilities incurred as a result of the inclusion
of any erroneous or misleading information in the memorandum or prospectus,
or the omissions of material information from the memorandum or prospectus,
unrelated to Borrower, the Guarantor, the Properties or any aspect of the
loan. This indemnity agreement will be in addition to any liability which
Borrower may otherwise have.
(c) In connection with filings under the Exchange Act, Borrower and
Guarantor agrees to indemnify (i) Lender, the Xxxxxx Group and the
Underwriter Group for Liabilities to which Lender, the Xxxxxx 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 in any of the records and/or reports required
pursuant to the financial reporting requirements of Section 5.1(k) hereof
(the "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, the
Xxxxxx Group or the Underwriter Group for any legal or other expenses
reasonably incurred by Lender, the Xxxxxx Group or the Underwriter Group in
connection with defending or investigating the Liabilities.
(d) Xxxxxx agrees to indemnify and hold harmless Borrower, each of its
directors and each person who controls Borrower within the meaning of
Section 15 of the Securities Act (the "Borrower Group") against any and all
losses, claims, damages or liabilities, joint or several, to which such
group may become subject, under the Securities Act or otherwise, and will
reimburse such group for any legal or other expenses reasonably incurred by
such group in connection with investigating or defending any such loss,
claim, damage, liability or action, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in a Disclosure Document or arise out of or are based upon the
omission or the alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading, but only
to the extent that such untrue statement or alleged untrue statement or
omission or alleged omission relates to information that does not
accurately reflect Provided Information.
(e) Promptly after receipt by an indemnified party under this Section
9.2 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying
party under this Section 9.2, notify the indemnifying party in writing of
the commencement thereof, but the omission to so notify the indemnifying
party will not relieve the indemnifying party from any liability which the
indemnifying party may have to any indemnified party hereunder except to
the extent that failure to notify causes prejudice to the indemnifying
party. In the event that any action is brought against any indemnified
party, and it notifies the indemnifying party of the commencement thereof,
the indemnifying party will be entitled, jointly with any other
indemnifying party, to participate therein and, to the extent that it (or
they) may elect by written notice delivered to the indemnified party
promptly after receiving the aforesaid notice from such indemnified party,
to assume the defense thereof with counsel satisfactory to such indemnified
party. After notice from the indemnifying party to such indemnified party
under this Section 9.2, the indemnifying party shall 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 the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there are any legal
defenses available to it and/or other indemnified parties that are
different from or additional to those available to the indemnifying party,
the indemnified party or parties shall have the right to select separate
counsel to assert such legal defenses and to otherwise participate in the
defense of such action on behalf of such indemnified party or parties. The
indemnifying party shall not be liable for the expenses of more than one
separate counsel unless an indemnified party shall have reasonably
concluded that there may be legal defenses available to it that are
different from or additional to those available to another indemnified
party.
(f) In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement provided for in Section
9.2(b), (c) or (d) is for any reason held to be unenforceable by an
indemnified party in respect of any losses, claims, damages or liabilities
(or action in respect thereof) referred to therein which would otherwise be
indemnifiable under Section 9.2(b), (c) or (d), the indemnifying party
shall contribute to the amount paid or payable by the indemnified party as
a result of such losses, claims, damages or liabilities (or action in
respect thereof); provided, however, that no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities
Act) shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation. In determining the amount of
contribution to which the respective parties are entitled, the following
factors shall be considered: (i) Xxxxxx'x and Borrower's relative knowledge
and access to information concerning the matter with respect to which claim
was asserted; (ii) the opportunity to correct and prevent any statement or
omission; and (iii) any other equitable considerations appropriate in the
circumstances. Xxxxxx and Borrower hereby agree that it would not be
equitable if the amount of such contribution were determined by pro rata or
per capita allocation.
(g) The liabilities and obligations of both Borrower and Lender under
this Section 9.2 shall survive the termination of this Agreement and the
satisfaction and discharge of the Debt.
Section 9.3 Rating Surveillance.
The Borrower will cooperate with Lender to retain the Rating Agencies to
provide rating surveillance services on any certificates issued in a
Securitization. Such rating surveillance will be at the expense of Lender.
Section 9.4 Intentionally Deleted.
Section 9.5 Michigan City..
In conformity with the other provisions of this Article 9 and not
in lieu or replacement thereof, the Lender shall have the right from time
to time to request Borrower to segregate the Individual Property known as
Michigan City, Indiana from the remainder of the Properties in any manner
Lender requires including, without limitation, the requirement that a
separate loan allocable to such Individual Property in the Allocated Loan
Amount for such property may be established, the proceeds of which will be
utilized to pay down the Loan. Such separate loan secured by the Michigan
City Individual Property may or may not be cross-defaulted and
cross-collaterized with the Loan and the other Properties and may or may
not be the subject of a Securitization, provided, however, that the
economic terms of the separate loan shall be in the aggregate the same as
provided herein. Borrower and Guarantor agree to cooperate with all
reasonable requests of Lender to satisfy its requirements with respect
thereto including, without limitation, performance of all its obligations
under Sections 9.1, 9.2 and 9.3 hereof.
The Lender reserves a similar right with respect to all or any portion of
the Properties and in so doing to reallocate the Allocated Loan Amounts in
a manner determined by Lender, and Borrower and Guarantor agree to
cooperate with respect thereto in the same manner as set forth in the last
sentence of the immediately preceding paragraph hereof.
Section 9.6 Servicer.
At the option of Lender, the Loan may be serviced by a servicer and one or
more special services (collectively, the "Servicer") selected by Lender and
Lender may delegate all or any portion of its responsibilities under this
Agreement and the other Loan Documents to the Servicer pursuant to one or
more servicing agreements (collectively, the "Servicing Agreement") between
Lender and Servicer.
Section 9.7 Gilroy X.
Xxxxxx V Borrower has executed this document for all purposes as Borrower
hereunder, provided, however, that all representations, warranties and
covenants made by Gilroy V Borrower shall be treated as being made as they
relate solely to Gilroy V and that portion of the Loan evidenced by the
note Gilroy V Borrower has signed. Notwithstanding the foregoing, Gilroy V
Borrower recognizes that the Loan is a fully cross-defaulted and
cross-collateralized Loan as set forth in Section 10.16 hereof such that a
misrepresentation or a breech of warranty or covenant made by Horizon
Borrower or Guarantor with respect to the Properties and other matters
contained herein including, without limitation, Gilroy V, will have the
same effect on Gilroy V and its Individual Property with respect to the
Defaults and Events of Default as if made by Gilroy V Borrower directly.
Section 9.8 Guarantor.
Guarantor is executing this Agreement for the purposes specifically set
forth herein. Notwithstanding this fact, nothing herein contained shall be
deemed to limit or restrict its liability under its guarantee of the Loan
and its guarantee of all of Borrower's obligations under the Loan
Documents.
X. MISCELLANEOUS
Section 10.1 Survival.
This Agreement and all covenants, agreements, representations and
warranties made herein and in the certificates delivered pursuant hereto
shall survive the making by Lender of the Loan and the execution and
delivery to Lender of the Note, and shall continue in full force and effect
so long as all or any of the Debt is outstanding and unpaid unless a longer
period is expressly set forth herein or in the other Loan Documents.
Whenever in this Agreement any of the parties hereto is referred to, such
reference shall be deemed to include the legal representatives, successors
and assigns of such party. All covenants, promises and agreements in this
Agreement, by or on behalf of Borrower, shall inure to the benefit of the
legal representatives, successors and assigns of Lender.
Section 10.2 Lender's Discretion.
Whenever pursuant to this Agreement or any other Loan Agreement, Lender
exercises any right given to it to approve or disapprove, or any
arrangement or term is to be satisfactory to Lender, the decision of Lender
to approve or disapprove or to decide whether arrangements or terms are
satisfactory or not satisfactory shall (except as is otherwise specifically
herein provided) be in the sole discretion of Lender and shall be final and
conclusive.
Section 10.3 Governing Law.
(A) THIS AGREEMENT WAS NEGOTIATED IN THE STATE OF NEW YORK, 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, WITHOUT LIMITING THE GENERALITY OF THE FOREGOING,
MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT AND THE
OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS
MADE AND PERFORMED IN SUCH STATE (WITHOUT REGARD TO PRINCIPLES OF CONFLICT
LAWS) AND ANY APPLICABLE LAW OF THE UNITED STATES OF AMERICA, EXCEPT THAT
AT ALL TIMES THE PROVISIONS FOR THE CREATION, PERFECTION, AND ENFORCEMENT
OF THE LIENS AND SECURITY INTERESTS CREATED PURSUANT HERETO AND PURSUANT TO
THE OTHER LOAN DOCUMENTS WITH RESPECT TO THE REAL PROPERTY SHALL BE
GOVERNED BY AND CONSTRUED ACCORDING TO THE LAW OF THE STATE IN WHICH THE
APPLICABLE INDIVIDUAL PROPERTY IS LOCATED, IT BEING UNDERSTOOD THAT, TO THE
FULLEST EXTENT PERMITTED BY THE LAW OF SUCH STATE, THE LAW OF THE STATE OF
NEW YORK SHALL GOVERN THE CONSTRUCTION, VALIDITY AND ENFORCEABILITY OF ALL
LOAN DOCUMENTS AND ALL OF THE OBLIGATIONS ARISING HEREUNDER OR THEREUNDER.
TO THE FULLEST EXTENT PERMITTED BY LAW, BORROWER HEREBY UNCONDITIONALLY AND
IRREVOCABLY WAIVES ANY CLAIM TO ASSERT THAT THE LAW OF ANY OTHER
JURISDICTION GOVERNS THIS AGREEMENT AND THE NOTE, AND THIS AGREEMENT AND
THE NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK PURSUANT TO SECTION 5-1401 OF THE NEW YORK GENERAL
OBLIGATIONS LAW.
(B) ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST LENDER OR BORROWER
ARISING OUT OF OR RELATING TO THIS AGREEMENT MAY AT LENDER'S OPTION BE
INSTITUTED IN ANY FEDERAL OR STATE COURT IN XXX XXXX XX XXX XXXX, XXXXXX XX
XXX XXXX, PURSUANT TO SECTION 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS
LAW, AND BORROWER WAIVES ANY OBJECTIONS WHICH IT MAY NOW OR HEREAFTER HAVE
BASED ON VENUE AND/OR FORUM NON CONVENIENS OF ANY SUCH SUIT, ACTION OR
PROCEEDING, AND BORROWER HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF
ANY SUCH COURT IN ANY SUIT, ACTION OR PROCEEDING. BORROWER DOES HEREBY
DESIGNATE AND APPOINT LEXIS DOCUMENT SERVICES, INC., 000 XXXXXXXXXX XXXXXX,
0XX XXXXX, XXXXXX, XXX XXXX 00000 AS ITS AUTHORIZED AGENT TO ACCEPT AND
ACKNOWLEDGE ON ITS BEHALF SERVICE OF ANY AND ALL PROCESS WHICH MAY BE
SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING IN ANY FEDERAL OR STATE COURT
IN NEW YORK, NEW YORK, AND AGREES THAT SERVICE OF PROCESS UPON SAID AGENT
AT SAID ADDRESS AND WRITTEN NOTICE OF SAID SERVICE MAILED OR DELIVERED TO
BORROWER IN THE MANNER PROVIDED HEREIN SHALL BE DEEMED IN EVERY RESPECT
EFFECTIVE SERVICE OF PROCESS UPON BORROWER, IN ANY SUCH SUIT, ACTION OR
PROCEEDING IN THE STATE OF NEW YORK. BORROWER (I) SHALL GIVE PROMPT NOTICE
TO LENDER OF ANY CHANGED ADDRESS OF ITS AUTHORIZED AGENT HEREUNDER, (II)
MAY AT ANY TIME AND FROM TIME TO TIME DESIGNATE A SUBSTITUTE AUTHORIZED
AGENT WITH AN OFFICE IN NEW YORK, NEW YORK (WHICH SUBSTITUTE AGENT AND
OFFICE SHALL BE DESIGNATED AS THE PERSON AND ADDRESS FOR SERVICE OF
PROCESS), AND (III) SHALL PROMPTLY DESIGNATE SUCH A SUBSTITUTE IF ITS
AUTHORIZED AGENT CEASES TO HAVE AN OFFICE IN NEW YORK, NEW YORK OR IS
DISSOLVED WITHOUT LEAVING A SUCCESSOR.
Section 10.4 Modification, Waiver in Writing.
No modification, amendment, extension, discharge, termination or waiver of
any provision of this Agreement, or of the Note, or of any other Loan
Document, nor consent to any departure by Borrower therefrom, shall in any
event be effective unless the same shall be in a writing signed by the
party against whom enforcement is sought, and then such waiver or consent
shall be effective only in the specific instance, and for the purpose, for
which given. Except as otherwise expressly provided herein, no notice to,
or demand on Borrower, shall entitle Borrower to any other or future notice
or demand in the same, similar or other circumstances.
Section 10.5 Delay Not a Waiver.
Neither any failure nor any delay on the part of Lender in insisting upon
strict performance of any term, condition, covenant or agreement, or
exercising any right, power, remedy or privilege hereunder, or under the
Note or under any other Loan Document, or any other instrument given as
security therefor, shall operate as or constitute a waiver thereof, nor
shall a single or partial exercise thereof preclude any other future
exercise, or the exercise of any other right, power, remedy or privilege.
In particular, and not by way of limitation, by accepting payment after the
due date of any amount payable under this Agreement, the Note or any other
Loan Document, Lender shall not be deemed to have waived any right either
to require prompt payment when due of all other amounts due under this
Agreement, the Note or the other Loan Documents, or to declare a default
for failure to effect prompt payment of any such other amount.
Section 10.6 Notices.
All notices or other written communications hereunder or under any other
Loan Document shall be deemed to have been properly given, if in writing
(i) upon delivery, if delivered in person or by facsimile transmission with
receipt acknowledged by the recipient thereof, (ii) one (1) Business Day
(defined below) after having been deposited for overnight delivery with any
reputable overnight courier service, or (iii) three (3) Business Days after
having been deposited in any post office or mail depository regularly
maintained by the U.S. Postal Service and sent by registered or certified
mail, postage prepaid, return receipt requested, addressed as follows:
If to Borrower: c/o Horizon/Xxxx Outlet
Centers Limited Partnership
0000 Xxxxx Xxxxx
Xxxxxx Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx Xxxxx
Facsimile No. 000-000-0000
With a copy to: Xxxxxxx & Xxxxx
000 Xxxxx XxXxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx Xxxxxxxx, Esq.
Facsimile No. 000-000-0000
If to Lender: Xxxxxx Brothers Realty Corporation
Three World Financial Center
New York, New York 10281
Attention: Xxxxxxx Xxxxxx
Facsimile No. (000) 000-0000
With a copy to: Xxxxxxxx Philips
000 Xxxxxxxxx Xxxxxx Xxxxxx
Xxxxxxx Xxxxx Xxx
Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxx Xxxxxxxxxx
Facsimile No. (000) 000-0000
or addressed as such party may from time to time designate by written
notice to the other parties.
Either party by notice to the other may designate additional or different
addresses for subsequent notices or communications.
Section 10.7 Trial by Jury.
BORROWER, GUARANTOR AND LENDER HEREBY AGREE 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, GUARANTOR AND LENDER, AND IS
INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH
THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE. ALL PARTIES HERETO
ARE HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS
CONCLUSIVE EVIDENCE OF THIS WAIVER, BY BORROWER.
Section 10.8 Headings.
The Article and/or Section headings and the Table of Contents in this
Agreement are included herein for convenience of reference only and shall
not constitute a part of this Agreement for any other purpose.
Section 10.9 Severability.
Wherever possible, each provision of this Agreement shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Agreement shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
Section 10.10 Waiver of Notice.
Borrower and Guarantor shall not be entitled to, and hereby expressly waive
the right to receive, any notices of any nature whatsoever from Lender
except with respect to matters for which this Agreement or the other Loan
Documents specifically and expressly provide for the giving of notice by
Lender to Borrower and except with respect to matters for which Borrower is
not, pursuant to applicable Legal Requirements, permitted to waive the
giving of notice.
Section 10.11 Remedies of Borrower.
In the event that a claim or adjudication is made that Lender or its agents
have acted unreasonably or unreasonably delayed acting in any case where by
law or under this Agreement or the other Loan Documents, Lender or such
agent, as the case may be, has an obligation to act reasonably or promptly,
Borrower and Guarantor agree that neither Lender nor its agents shall be
liable for any monetary damages, and Borrower's and Guarantor's sole
remedies shall be limited to commencing an action seeking injunctive relief
or declaratory judgment. The parties hereto agree that any action or
proceeding to determine whether Lender has acted reasonably shall be
determined by an action seeking declaratory judgment.
Section 10.12 Expenses; Indemnity.
(a) Borrower covenants and agrees to pay, or if Borrower fails to pay to
reimburse, Lender upon receipt of written notice from Lender for all costs
and expenses (including reasonable attorneys' fees and disbursements)
incurred by Lender in connection with (i) the preparation, negotiation,
execution and delivery of this Agreement and the other Loan Documents and
the consummation of the transactions contemplated hereby and thereby
(Lender's outside legal expenses in connection with the foregoing shall
equal $325,000 as to fees and $25,000 as to costs and disbursements with
respect to all matters performed through the Closing Date and normal post
Closing Date clean up items but such limitation shall not apply to other
legal expenses, for example, in connection with a securitization, a
Subsequent Advance, the second advance of the Initial Loan, enforcement
actions, the matters contained in the post closing letter of even date
herewith between Borrower and Lender or a substitution or addition of
properties); (ii) Borrower's ongoing performance of and compliance with
Borrower's agreements and covenants contained in this Agreement and the
other Loan Documents on its part to be performed or complied with after the
Closing Date, including, without limitation, confirming compliance with
environmental and insurance requirements; (iii) Lender's ongoing
performance and compliance with all agreements and conditions contained in
this Agreement and the other Loan Documents on its part to be performed or
complied with after the Closing Date; (iv) the negotiation, preparation,
execution, delivery and administration of any consents, amendments, waivers
or other modifications to this Agreement and the other Loan Documents and
any other documents or matters requested by Lender; (v) the filing and
recording fees and expenses, title insurance premiums and reasonable fees
and expenses of counsel for providing to Lender all required legal
opinions, and other similar expenses incurred in creating, perfecting and
insuring the Liens in favor of Lender pursuant to this Agreement and the
other Loan Documents; (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, this Agreement, the other 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 this Agreement, the
other Loan Documents or with respect to the Properties or in connection
with any refinancing or restructuring of the credit arrangements provided
under this Agreement in the nature of a "work-out" or of any insolvency or
bankruptcy proceedings; provided, however, that Borrower shall not be
liable for the payment of any such costs and expenses to the extent the
same arise by reason of the gross negligence, illegal acts, fraud or
willful misconduct of Lender.
(b) Borrower shall indemnify, defend and hold harmless Lender from and
against any and all other liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims, costs, expenses and
disbursements of any kind or nature whatsoever (including, without
limitation, the reasonable fees and disbursements of counsel for Lender in
connection with any investigative, administrative or judicial proceeding
commenced or threatened, whether or not Lender shall be designated a party
thereto), that may be imposed on, incurred by, or asserted against Lender
in any manner relating to or arising out of (i) any breach by Borrower of
its obligations under, or any material misrepresentation by Borrower
contained in, this Agreement or the other Loan Documents, or (ii) the use
or intended use of the proceeds of the Loan (collectively, the "Indemnified
Liabilities"); provided, however, that Borrower shall not have any
obligation to Lender hereunder to the extent that such Indemnified
Liabilities arise from the gross negligence, illegal acts, fraud or willful
misconduct of Lender.
Section 10.13 Exhibits and Schedules Incorporated.
The Exhibits and Schedules annexed hereto are hereby incorporated herein as
a part of this Agreement with the same effect as if set forth in the body
hereof.
Section 10.14 No Joint Venture or Partnership;
No Third Party Beneficiaries.
(a) Borrower, Guarantor and Lender intend that the relationships
created hereunder and under the other Loan Documents be solely that of
borrower, guarantor and lender. Nothing herein or therein is intended to
create a joint venture, partnership, tenancy-in-common, or joint tenancy
relationship between Borrower and Lender or between Guarantor and Lender
nor to grant Lender any interest in the Properties other than that of
mortgagee or lender.
(b) This Agreement and the other Loan Documents are solely for the
benefit of Lender and the Borrower and nothing contained in this Agreement
or the other Loan Documents 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 herein or
therein. All conditions to the obligations of Lender to make the Loan
hereunder are imposed solely and exclusively for the benefit of Lender and
no other Person shall have standing to require satisfaction of such
conditions in accordance with their terms or be entitled to assume that
Lender will refuse to make the Loan in the absence of strict compliance
with any or all thereof and no other Person shall under any circumstances
be deemed to be a beneficiary of such conditions, any or all of which may
be freely waived in whole or in part by Lender if, in Lender's sole
discretion, Lender deems it advisable or desirable to do so.
Section 10.15 Publicity.
All news releases, publicity or advertising by Borrower or their Affiliates
through any media intended to reach the general public which refers to the
Loan Documents or the financing evidenced by the Loan Documents, to the
Lender, Xxxxxx, or any of their Affiliates shall be subject to the prior
written approval of Lender.
Section 10.16 Cross-Default; Cross-Collateralization;
Waiver of Marshalling of Assets.
(a) The Borrower acknowledges that Lender has made the Loan to the
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. The Borrower agrees that the Mortgages are and will be
cross-collateralized and cross-defaulted with each other so that (i) an
Event of Default under any of the Mortgages shall constitute an Event of
Default under each of the other Mortgages which secure the Note; (ii) an
Event of Default under the Note or this Loan Agreement shall constitute an
Event of Default under each Mortgage; and (iii) each Mortgage shall
constitute security for the Note as if a single blanket lien were placed on
all of the Properties as security for the Note, except that the Gilroy V
Mortgages shall only constitute security for the Gilroy V Note and the
Gilroy V Guarantee.
(b) To the fullest extent permitted by law, Borrower, for itself and
its successors and assigns, waives all rights to a marshalling of the
assets of Borrower, Borrower's partners and others with interests in
Borrower, and of the Properties, or to a sale in inverse order of
alienation in the event of foreclosure of all or any of the Mortgages, and
agrees not to assert any right under any laws pertaining to the marshalling
of assets, the sale in inverse order of alienation, homestead exemption,
the administration of estates of decedents, or any other matters whatsoever
to defeat, reduce or affect the right of Lender under the Loan Documents to
a sale of the Properties for the collection of the Debt without any prior
or different resort for collection or of the right of Lender to the payment
of the Debt out of the net proceeds of the Properties in preference to
every other claimant whatsoever. In addition, Borrower, for itself and its
successors and assigns, waives (to the extent permitted by law) in the
event of foreclosure of any or all of the Mortgages, any equitable right
otherwise available to the Borrower which would require the separate sale
of the Properties or require Lender to exhaust its remedies against any
Individual Property or any combination of the Properties before proceeding
against any other Individual Property or combination of Properties; and
further in the event of such foreclosure the Borrower does hereby expressly
consents to and authorizes, at the option of the Lender, the foreclosure
and sale either separately or together of any combination of the
Properties.
Section 10.17 Waiver of Counterclaim.
Borrower and Guarantor hereby waive the right to assert a counterclaim,
other than a compulsory counterclaim, in any action or proceeding brought
against them by Lender or its agents. Any non-compulsory counterclaim may
be brought by separate action, subject, however, to the provisions of
Section 10.11 hereof.
Section 10.18 Conflict; Construction of Documents; Reliance.
In the event of any conflict between the provisions of this Loan Agreement
and any of the other Loan Documents, the provisions of this Loan Agreement
shall control. The parties hereto acknowledge that they were represented
by competent counsel in connection with the negotiation, drafting and
execution of the Loan Documents and that such Loan Documents shall not be
subject to the principle of construing their meaning against the party
which drafted same. Borrower and Guarantor acknowledge that, with respect
to the Loan, and Borrower and Guarantor shall rely solely on their own
judgment and advisors without relying in any manner on any statements,
representations or recommendations of Lender or any parent, subsidiary or
affiliate of Lender. Lender shall not be subject to any limitation
whatsoever in the exercise of any rights or remedies available to it under
any of the Loan Documents or any other agreements or instruments which
govern the Loan by virtue of the ownership by it or any parent, subsidiary
or affiliate of Lender of any equity interest any of them may acquire in
Borrower or Guarantor, and Borrower and Guarantor hereby irrevocably waive
the right to raise any defense or take any action on the basis of the
foregoing with respect to Lender's exercise of any such rights or remedies.
Borrower acknowledges that Lender engages in the business of real estate
financings and other real estate transactions and investments which may be
viewed as adverse to or competitive with the business of the Borrower or
its Affiliates.
Section 10.19 Brokers and Financial Advisors.
Borrower hereby represents that it has dealt with no financial advisors,
brokers, underwriters, placement agents, agents or finders in connection
with the transactions contemplated by this Agreement. Borrower 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 10.19 shall survive
the expiration and termination of this Agreement and the payment of the
Debt.
Section 10.20 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.
Section 10.21 Counterparts.
This Agreement may be executed in any number of counterparts, each of which
counterparts shall be deemed an original instrument and all of which
together shall constitute one and the same instrument.
Section 10.22 Extensions.
The Maturity Date of the Loan may be extended, at the sole option and
discretion of Lender, for six (6) months (the "Extension"), upon : (i) the
request for Extension by Borrower made at least sixty (60), but not more
than ninety (90) days prior to the Maturity Date; (ii) the approval of the
Extension by Lender in its sole and absolute discretion; and (iii) the
payment of an extension fee by Borrower to Lender in an amount equal to
0.50% of the then outstanding principal amount of the Loan.
Section 10.23 Guarantor Waivers.
To the extent permitted by applicable law, Guarantor and, to the extent any
obligation of the Borrower under the Loan Documents or any other document
executed and/or delivered in connection therewith shall be treated for any
purposes as a guarantee of obligations of another (including, without
limitation, the other Borrower), each party constituting Borrower hereby
agrees as follows (for the purposes of the following provisions of this
Section 10.23, the "Guarantor" shall include the term "Borrower" to the
extent Borrower is treated for any purpose as a guarantor as applicable):
(a) This Section 10.23 shall be effective as a waiver of, and Guarantor
hereby expressly waives, any and all rights to which Guarantor may
otherwise have been entitled under any suretyship laws in effect from time
to time, including any rights pursuant to Rule 31 of the Texas Rules of
Civil Procedure, Section 17.001 of the Texas Civil Practice and Remedies
Code, and Chapter 34 of the Texas Business and Commerce Code.
(b) IT IS SPECIFICALLY INTENDED BY GUARANTOR AND LENDER THAT ALL
INDEMNITY OBLIGATIONS AND LIABILITIES ASSUMED BY THE GUARANTOR HEREUNDER OR
UNDER ANY GUARANTEE BE WITHOUT LIMIT AND WITHOUT REGARD TO THE CAUSE OR
CAUSES THEREOF (INCLUDING PREEXISTING CONDITIONS), STRICT LIABILITY, OR THE
NEGLIGENCE OF ANY PARTY OR PARTIES (INCLUDING LENDER) WHETHER SUCH
NEGLIGENCE BE SOLE, JOINT OR CONCURRENT, ACTIVE OR PASSIVE, THE PARTIES
SPECIFICALLY INTEND THAT LENDER IS TO BE INDEMNIFIED AGAINST LENDER'S OWN
NEGLIGENCE.
(c) IN ACCORDANCE WITH CALIFORNIA CIVIL CODE SECTION 2856:
(I) GUARANTOR WAIVES ALL RIGHTS OF SUBROGATION, REIMBURSEMENT,
INDEMNIFICATION, CONTRIBUTION AND ANY OTHER RIGHTS AND DEFENSES THAT ARE OR
MAY BECOME AVAILABLE TO GUARANTOR OR OTHER SURETY BY REASON OF CALIFORNIA
CIVIL CODE SECTIONS 2787 TO 2855 INCLUSIVE, OR OTHERWISE.
(II) GUARANTOR WAIVES ALL RIGHTS AND DEFENSES THAT GUARANTOR MAY HAVE
BECAUSE BORROWER'S DEBT IS SECURED BY REAL PROPERTY. THIS MEANS, AMONG
OTHER THINGS:
(Y) LENDER MAY COLLECT FROM GUARANTOR WITHOUT FIRST FORECLOSING ON ANY
REAL OR PERSONAL PROPERTY COLLATERAL PLEDGED BY THE BORROWER.
(Z) IF LENDER FORECLOSES ON ANY REAL PROPERTY COLLATERAL PLEDGED BY THE
BORROWER;
(A) THE AMOUNT OF THE DEBT MAY BE REDUCED ONLY BY THE PRICE FOR WHICH
THE COLLATERAL IS SOLD AT THE FORECLOSURE SALE, EVEN IF THE COLLATERAL IS
WORTH MORE THAN THE SALE PRICE.
(B) LENDER MAY COLLECT FROM GUARANTOR EVEN IF THE LENDER, BY
FORECLOSING ON THE REAL PROPERTY COLLATERAL, HAS DESTROYED ANY RIGHT
GUARANTOR MAY HAVE TO COLLECT FROM THE BORROWER.
THIS IS AN UNCONDITIONAL AND IRREVOCABLE WAIVER OF ANY RIGHTS AND DEFENSES
THE GUARANTOR MAY HAVE BECAUSE THE BORROWER'S DEBT IS SECURED BY REAL
PROPERTY. THESE RIGHTS AND DEFENSES INCLUDE, BUT ARE NOT LIMITED TO, ANY
RIGHTS OR DEFENSES BASED UPON SECTION 580a, 580b, 580d, OR 726 OF THE
CALIFORNIA CODE OF CIVIL PROCEDURE.
(III) GUARANTOR WAIVES ALL RIGHTS AND DEFENSES ARISING OUT OF AN ELECTION
OF REMEDIES BY LENDER, EVEN THOUGH THAT ELECTION OF REMEDIES, SUCH AS A
NONJUDICIAL FORECLOSURE WITH RESPECT TO SECURITY FOR A GUARANTEED
OBLIGATION, HAS DESTROYED THE GUARANTOR'S RIGHTS OF SUBROGATION AND
REIMBURSEMENT AGAINST THE BORROWER BY THE OPERATION OF SECTION 580d OF THE
CALIFORNIA CODE OF CIVIL PROCEDURE OR OTHERWISE.
(d) Nothing contained in this Section 10.23 shall in any way be deemed to
affect the provisions of Section 10.3 hereof.
Section 10.24 Assignment of Loan.
Borrrower and Guarantor recognize and acknowledge that Xxxxxx Brothers
Realty Corporation intends to promptly assign its interest in the Loan and
all Loan Documents to Xxxxxx Brothers Holdings, Inc., a Delaware
corporation, d/b/a Xxxxxx Capital, a Division of Xxxxxx Brothers Holdings,
Inc. and, upon such transfer, all rights, remedies and obligations of
Xxxxxx Brothers Realty Corporation hereunder shall become the sole rights,
remedies and obligations of Xxxxxx Brothers Holdings, Inc. Although
consent to the foregoing is unnecessary, Borrower and Guarantor formally
hereby consent thereto.
IN WITNESS WHEREOF, the parties hereto have caused this Loan Agreement to
be duly executed by their duly authorized representatives, all as of the
day and year first above written.
THIRD HORIZON GROUP LIMITED
PARTNERSHIP, a Delaware limited
partnership
By: Third HGI, L.L.C., a Delaware limited
liability company, its general partner
By: Horizon/Xxxx Outlet Centers Limited
Partnership, a Delaware limited
partnership, its managing member
By: Horizon Group, Inc., a Michigan
corporation, its general partner
By:/s/ Xxxxxx Doran_____
Name: Xxxxxx Xxxxx
Its: Vice President
HGL OUTLET ASSOCIATES,
a Delaware limited partnership
By: Third Horizon Group Limited Partnership, a
Delaware limited partnership, its general
partner
By: Third HGI, L.L.C.,
a Delaware limited
liability company,
its general partner
By: Horizon/Xxxx Outlet Centers
Limited Partnership,
a Delaware limited partnership,
its managing member
By: Horizon Group, Inc.,
a Michigan corporation, its
general partner
By:/s/ Xxxxxx Doran__
Name: Xxxxxx Xxxxx
Its: Vice President
XXXXXX BROTHERS REALTY
CORPORATION, a Delaware
corporation
By:/s/ Xxxxxxx X. Mikulich_
Name: Xxxxxxx X. Xxxxxxxx
Title: President
THE UNDERSIGNED ARE JOINING IN THE EXECUTION OF THIS LOAN AGREEMENT FOR THE
PURPOSES INDICATED HEREIN
HORIZON GROUP, INC.,
a Michigan corporation
By:/s/ Xxxxxx Doran_
Name: Xxxxxx Xxxxx
Title: Vice President
HORIZON/XXXX OUTLET CENTERS
LIMITED PARTNERSHIP,
a Delaware
limited partnership
By: Horizon Group, Inc.,
a Michigan
corporation
By:/s/ Xxxxxx Doran_
Name: Xxxxxx Xxxxx
Title: Vice President
SCHEDULE I
LIST OF PROPERTIES AND ALLOCATED
LOAN AMOUNTS AND SQUARE FOOTAGE
Property
Allocated Loan Amount
Square Footage
1. Phases I & II of Outlet at Gilroy, California (Santa Xxxxx County)
$38,500,000
202,795
2. Phases III & IV of Outlet at Gilroy, California (Santa Xxxxx County)
$21,100,000
304,824
3. Phase V of Outlet at Gilroy, California (Santa Xxxxx County)
$ 6,800,000
69,080
4. Tulare Factory Shops at Tulare, California (Tulare County)
$ 7,600,000
132,232
5. Silverthorne Factory Stores at Silverthorne, Colorado (Summit County)
$25,300,000
257.470
6. Xxxxxxx Outlet Center at Calhoun, Georgia (Xxxxxx County)
$15,300,000
254.270
7. Lighthouse Place at Michigan City, Indiana (La Porte County)
$39,600,000
490,915
8. Dry Ridge Outlet Center at Dry Ridge, Kentucky (Grant County)
$ 1,600,000
117,980
9. Berkshire Outlet Center at Lee, Massachusetts (Berkshire County)
$20,700,000
224,571
10. Lakeshore Marketplace at Norton Shore, Michigan (Muskegon County)
$ 9,000,000
356,803
11. Lakeshore Marketplace at Holland, Michigan (Ottawa County)
$ 3,300,000
185,769
12. Manufacturers Marketplace at Monroe, Michigan (Monroe County)
$ 8,600,000
257,559
13. Manufacturers Marketplace at Port Huron, Michigan (St. Clair County)
$ 3,200,000
161,210
14. Manufacturers Marketplace at Traverse City, Michigan (Grand Traverse
County)
$ 2,600,000
147,455
15. Xxxxxxx Xxxxxxx xx Xxxxxxx, Xxxxxxxxx (Xxxxxx County)
$ 8,500,000
188,060
16. Warrenton Outlet Center at Warrenton, Missouri (Xxxxxx County)
$10,800,000
200,365
17. Horizon Outlet Center at Laughlin, Nevada (Xxxxx County)
$14,100,000
258,312
18. Georgian Place at Somerset, Pennsylvania (Somerset County)
$ 4,100,000
199,962
19. Sealy Outlet Center at Sealy, Texas (Austin County)
$ 9,900,000
191,865
SCHEDULE II
REQUIRED REPAIRS
See attached
SCHEDULE III
NOTICE OF BORROWING
[BORROWER]
_______________________, 19___
____________________________
____________________________
____________________________
____________________________
Attention: ___________________
Ladies and Gentlemen:
We refer to that certain Loan Agreement dated as of ___________________
between us and you (the "Loan Agreement"). This certificate is delivered
to you pursuant to [Section 2.1.4(b)] [Section 2.1.4(c)] of the Loan
Agreement as one of the inducements for an advance in the amount of
$____________, which will bring the total unpaid balance of the [First
Note] [Second Note] to $____________. All capitalized terms used herein
shall have the same meanings herein as they have in the Loan Agreement.
In order to induce you to make this advance, we hereby represent and
certify as follows:
1. No Default or Event of Default has occurred and is continuing under
the Loan Agreement, Note, Mortgages or any other Loan Documents or would
result from the proposed advance or would result from the application of
the proceeds therefrom.
2. Each of the representations and warranties set forth in the Loan
Agreement, the Note, the Mortgages and all other Loan Documents are true
and correct as of the date hereof (other than such representations and
warranties that by their terms refer to a date other than the date of this
advance).
3. All provisions of the Loan Agreement, the Note, the Mortgages and
all other Loan Documents will be satisfied after giving effect to the
advance hereby requested, including, without limitation, compliance with
the Financial Covenants.
The undersigned hereby notifies you (a) that the date of the advance shall
be ________________; and (b) the proceeds of the Advance shall be utilized
for _______________.
[BORROWER]
By: ____________________________
Name:
Title:
SCHEDULE IV
LITIGATION
NONE
SCHEDULE V
GROUND LEASES
See Attached
SCHEDULE VI
FORM OF ESTOPPEL CERTIFICATE
See Attached
SCHEDULE VII
FORM OF SUBORDINATION, NONDISTURBANCE
AND ATTORNMENT AGREEMENT
See Attached
SCHEDULE VIII
AGREED UPON PROCEDURES LETTER
See Attached
SCHEDULE IX
DEBT SERVICE COVERAGE RATIO FORMAT AND
MINIMUM COVERAGE FORMAT AND DISTRIBUTION
FORMAT FOR COVENANT COMPLIANCE CERTIFICATES
Debt Service Coverage Ratio (Section 5.2(a))
Line
1.
Gross Income from Operations
1.________________
2.
Operating Expenses
2.________________
3.
Net Operating Income (1-2)
3.________________
4.
Management Fee (1 x .04)
4.________________
5.
Capital Expenditures, TIs and Leasing Commissions
A. Square footage of the
Improvements ___ X $0.80 = ____
B. Actual capital expenditures
less exceptions
Greater of A and B
5._________________
6.
A. Cost of interest rate cap or other
hedging product purchased with
regard to this financing.
A. ________________
B. Term of the Cap/Hedge (years)
B. ________________
A/B
6. ________________
7.
Ground rent not included with NOI
7. ________________
8.
Numerator [3-(4+5+6+7)]=
8. ________________
9.
Outstanding balance under the Note
9. ________________
10.
Greater of Applicable Interest Rate or 10%
10. _______________
11.
Debt Service (Denominator) [9 x 10]
11. _______________
12.
Debt Service Coverage Ratio [8/11]
12. _______________
13.
Must be greater than or equal to the following through the last day of
calendar quarter:
Calendar Quarter DSCR
3Q97 1.35:1
4Q97 1.40:1
1Q98 1.50:1
2Q98 1.55:1
3Q98 1.60:1
4Q98 and thereafter 1.65:1
Minimum Coverage (Section 5.2(c))
Line
1.
EBITDA computed in accordance with GAAP
1. _____________
2.
All gains and/or losses on asset sales +
debt restructuring
2. _____________
3.
Total Portfolio square footage x $1.00
3. _____________
4.
Reversal of Straight-line Adjustments
4. _____________
5.
Amortization related to interest rate protection contracts and rate
buydowns
5. _____________
6.
Adjusted Cash Flow [1-(2+3+4+5)]
6. _____________
7.
Denominator
A. All actual payments on all mortgages and
other indebtedness = A_________
B. Unpaid principal balance on all mortgages and other
indebtedness
_____ x 10% = B ____________
Greater of A and B
7. ______________
8.
Minimum Coverage [6/7]
8. ______________
8 must be greater than or equal to the following through the last day of
calendar quarter:
Calendar Quarter Minimum Coverage
3Q97 1.35
4Q97 1.35
1Q98 1.40
2Q98 1.45
3Q98 and thereafter 1.50
Distributions (Section 5.2(d))
1.
Adjusted Funds From Operations
1. _____________
2.
Distributions
A. Number of partnership units
outstanding at record date
A _____________
B. Distribution declared per
partnership unit
B. _____________
[A x B]
2. _____________
2 must be less than or equal to 1, unless the amount necessary to maintain
Horizon Group's tax status as a REIT is equal to the amount of the
distribution.
SCHEDULE X
TENANT IMPROVEMENTS AND LEASING COMMISSIONS
AT NORTON SHORES
1. 50,000 S.F. (former Witmark space) @ $10
500,000
2. remaining unleased space
Unit S.F.
#0250 4,000
#0275 3,584
#0600 3,800
#0650 2,885
#0950 6,250
#1050 6,015
#1150 15,214
Total 41,748 @ $10
417,480
3. Old Navy 15,000 S.F. @ $25
375,000
GRAND TOTAL
$1,292,480
SCHEDULE XI
COMPLIANCE ISSUES
See Attached
SCHEDULE XII
UNSECURED INDEBTEDNESS TO TENANTS
See Attached
SCHEDULE XIII
UNSECURED CAPITAL INDEBTEDNESS
NONE
SCHEDULE XIV
LEASING OR EQUIPMENT FINANCING AGREEMENTS
1. Display sign for Laughlin, Nevada property.
[NONE OTHERS]
SCHEDULE XV
MICHIGAN CITY AND XXX TENANT
IMPROVEMENT AND LEASING
COMMISSION DESCRIPTION
See Attached
SCHEDULE XVI
PHYSICAL CONDITIONS AND ENVIRONMENTAL REPORTS
See Attached
SCHEDULE XVII
INSOLVENCY OPINION
See Attached
SCHEDULE XVIII
MICHIGAN CITY ACTION PLAN
See Attached
SCHEDULE XIX
CARVEOUT PROPERTIES
See Attached
1
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XXX I-2
SCH I-1
SCH II-1
SCH III-2
SCH III-1
Schedule IX-1
SCH IV-1
Schedule IX-1
SCH V-1
Schedule XX-0
XXX XX-0
Xxxxxxxx XX-0
SCH VII-1
Schedule IX-2
SCH VIII-1
SCH IX-1
SCH X-1
SCH XI-1
SCH XII-1
SCH XIII-1
SCH XIV-1
SCH XV-1
SCH XVI-1
SCH XVII-1
SCH XVIII-1
SCH XIX-1
